Republic of the Philippines first; a thermos bottle and a Ray-O-Vac hunter lantern for second; and
SUPREME COURT an Everready Magnet-lite flashlight with batteries and a screwdriver set
Manila
EN BANC
G.R. No. L-19650 September 29, 1966
CALTEX (PHILIPPINES), INC., petitioner-appellee,
vs.
ENRICO PALOMAR, in his capacity as THE POSTMASTER
GENERAL, respondent-appellant.
Office of the Solicitor General for respondent and appellant.
Ross, Selph and Carrascoso for petitioner and appellee.
CASTRO, J.:
In the year 1960 the Caltex (Philippines) Inc. (hereinafter referred to as
Caltex) conceived and laid the groundwork for a promotional scheme
calculated to drum up patronage for its oil products. Denominated
"Caltex Hooded Pump Contest", it calls for participants therein to
estimate the actual number of liters a hooded gas pump at each Caltex
station will dispense during a specified period. Employees of the Caltex
(Philippines) Inc., its dealers and its advertising agency, and their
immediate families excepted, participation is to be open
indiscriminately to all "motor vehicle owners and/or licensed drivers".
For the privilege to participate, no fee or consideration is required to be
paid, no purchase of Caltex products required to be made. Entry forms
are to be made available upon request at each Caltex station where a
sealed can will be provided for the deposit of accomplished entry stubs.
A three-staged winner selection system is envisioned. At the station
level, called "Dealer Contest", the contestant whose estimate is closest
to the actual number of liters dispensed by the hooded pump thereat is
to be awarded the first prize; the next closest, the second; and the next,
the third. Prizes at this level consist of a 3-burner kerosene stove for
for third. The first-prize winner in each station will then be qualified to
join in the "Regional Contest" in seven different regions. The winning
stubs of the qualified contestants in each region will be deposited in a
sealed can from which the first-prize, second-prize and third-prize
winners of that region will be drawn. The regional first-prize winners
will be entitled to make a three-day all-expenses-paid round trip to
Manila, accompanied by their respective Caltex dealers, in order to take
part in the "National Contest". The regional second-prize and third-prize
winners will receive cash prizes of P500 and P300, respectively. At the
national level, the stubs of the seven regional first-prize winners will be
placed inside a sealed can from which the drawing for the final first-
prize, second-prize and third-prize winners will be made. Cash prizes in
store for winners at this final stage are: P3,000 for first; P2,000 for
second; Pl,500 for third; and P650 as consolation prize for each of the
remaining four participants.
Foreseeing the extensive use of the mails not only as amongst the media
for publicizing the contest but also for the transmission of
communications relative thereto, representations were made by Caltex
with the postal authorities for the contest to be cleared in advance for
mailing, having in view sections 1954(a), 1982 and 1983 of the Revised
Administrative Code, the pertinent provisions of which read as follows:
SECTION 1954. Absolutely non-mailable matter. — No matter
belonging to any of the following classes, whether sealed as first-class
matter or not, shall be imported into the Philippines through the mails,
or to be deposited in or carried by the mails of the Philippines, or be
delivered to its addressee by any officer or employee of the Bureau of
Posts:
Written or printed matter in any form advertising, describing, or in any
manner pertaining to, or conveying or purporting to convey any
information concerning any lottery, gift enterprise, or similar scheme
depending in whole or in part upon lot or chance, or any scheme,
device, or enterprise for obtaining any money or property of any kind by
means of false or fraudulent pretenses, representations, or promises.
"SECTION 1982. Fraud orders.—Upon satisfactory evidence that any
person or company is engaged in conducting any lottery, gift enterprise,
or scheme for the distribution of money, or of any real or personal
property by lot, chance, or drawing of any kind, or that any person or
company is conducting any scheme, device, or enterprise for obtaining
money or property of any kind through the mails by means of false or
fraudulent pretenses, representations, or promises, the Director of Posts
may instruct any postmaster or other officer or employee of the Bureau
to return to the person, depositing the same in the mails, with the word
"fraudulent" plainly written or stamped upon the outside cover thereof,
any mail matter of whatever class mailed by or addressed to such person
or company or the representative or agent of such person or company.
SECTION 1983. Deprivation of use of money order system and
telegraphic transfer service.—The Director of Posts may, upon
evidence satisfactory to him that any person or company is engaged in
conducting any lottery, gift enterprise or scheme for the distribution of
money, or of any real or personal property by lot, chance, or drawing of
any kind, or that any person or company is conducting any scheme,
device, or enterprise for obtaining money or property of any kind
through the mails by means of false or fraudulent pretenses,
representations, or promise, forbid the issue or payment by any
postmaster of any postal money order or telegraphic transfer to said
person or company or to the agent of any such person or company,
whether such agent is acting as an individual or as a firm, bank,
corporation, or association of any kind, and may provide by regulation
for the return to the remitters of the sums named in money orders or
telegraphic transfers drawn in favor of such person or company or its
agent.
The overtures were later formalized in a letter to the Postmaster
General, dated October 31, 1960, in which the Caltex, thru counsel,
enclosed a copy of the contest rules and endeavored to justify its
position that the contest does not violate the anti-lottery provisions of
the Postal Law. Unimpressed, the then Acting Postmaster General
opined that the scheme falls within the purview of the provisions
aforesaid and declined to grant the requested clearance. In its counsel's
letter of December 7, 1960, Caltex sought a reconsideration of the
foregoing stand, stressing that there being involved no consideration in
the part of any contestant, the contest was not, under controlling
authorities, condemnable as a lottery. Relying, however, on an opinion
rendered by the Secretary of Justice on an unrelated case seven years
before (Opinion 217, Series of 1953), the Postmaster General
maintained his view that the contest involves consideration, or that, if it
does not, it is nevertheless a "gift enterprise" which is equally banned by
the Postal Law, and in his letter of December 10, 1960 not only denied
the use of the mails for purposes of the proposed contest but as well
threatened that if the contest was conducted, "a fraud order will have to
be issued against it (Caltex) and all its representatives".
Caltex thereupon invoked judicial intervention by filing the present
petition for declaratory relief against Postmaster General Enrico
Palomar, praying "that judgment be rendered declaring its 'Caltex
Hooded Pump Contest' not to be violative of the Postal Law, and
ordering respondent to allow petitioner the use of the mails to bring the
contest to the attention of the public". After issues were joined and upon
the respective memoranda of the parties, the trial court rendered
judgment as follows:
In view of the foregoing considerations, the Court holds that the
proposed 'Caltex Hooded Pump Contest' announced to be conducted by
the petitioner under the rules marked as Annex B of the petitioner does
not violate the Postal Law and the respondent has no right to bar the
public distribution of said rules by the mails.
The respondent appealed.
The parties are now before us, arrayed against each other upon two
basic issues: first, whether the petition states a sufficient cause of action
for declaratory relief; and second, whether the proposed "Caltex Hooded
Pump Contest" violates the Postal Law. We shall take these up in
seriatim.
1. By express mandate of section 1 of Rule 66 of the old Rules of Court,
which was the applicable legal basis for the remedy at the time it was
invoked, declaratory relief is available to any person "whose rights are
affected by a statute . . . to determine any question of construction or
validity arising under the . . . statute and for a declaration of his rights
thereunder" (now section 1, Rule 64, Revised Rules of Court). In
amplification, this Court, conformably to established jurisprudence on
the matter, laid down certain conditions sine qua non therefor, to wit:
(1) there must be a justiciable controversy; (2) the controversy must be
between persons whose interests are adverse; (3) the party seeking
declaratory relief must have a legal interest in the controversy; and (4)
the issue involved must be ripe for judicial determination (Tolentino vs.
The Board of Accountancy, et al., G.R. No. L-3062, September 28,
1951; Delumen, et al. vs. Republic of the Philippines, 50 O.G., No. 2,
pp. 576, 578-579; Edades vs. Edades, et al., G.R. No. L-8964, July 31,
1956). The gravamen of the appellant's stand being that the petition
herein states no sufficient cause of action for declaratory relief, our duty
is to assay the factual bases thereof upon the foregoing crucible.
As we look in retrospect at the incidents that generated the present
controversy, a number of significant points stand out in bold relief. The
appellee (Caltex), as a business enterprise of some consequence,
concededly has the unquestioned right to exploit every legitimate
means, and to avail of all appropriate media to advertise and stimulate
increased patronage for its products. In contrast, the appellant, as the
authority charged with the enforcement of the Postal Law, admittedly
has the power and the duty to suppress transgressions thereof —
particularly thru the issuance of fraud orders, under Sections 1982 and
1983 of the Revised Administrative Code, against legally non-mailable
schemes. Obviously pursuing its right aforesaid, the appellee laid out
plans for the sales promotion scheme hereinbefore detailed. To forestall
possible difficulties in the dissemination of information thereon thru the
mails, amongst other media, it was found expedient to request the
appellant for an advance clearance therefor. However, likewise by virtue
of his jurisdiction in the premises and construing the pertinent
provisions of the Postal Law, the appellant saw a violation thereof in the
proposed scheme and accordingly declined the request. A point of
difference as to the correct construction to be given to the applicable
statute was thus reached. Communications in which the parties
expounded on their respective theories were exchanged. The confidence
with which the appellee insisted upon its position was matched only by
the obstinacy with which the appellant stood his ground. And this
impasse was climaxed by the appellant's open warning to the appellee
that if the proposed contest was "conducted, a fraud order will have to
be issued against it and all its representatives."
Against this backdrop, the stage was indeed set for the remedy prayed
for. The appellee's insistent assertion of its claim to the use of the mails
for its proposed contest, and the challenge thereto and consequent denial
by the appellant of the privilege demanded, undoubtedly spawned a live
controversy. The justiciability of the dispute cannot be gainsaid. There is
an active antagonistic assertion of a legal right on one side and a denial
thereof on the other, concerning a real — not a mere theoretical —
question or issue. The contenders are as real as their interests are
substantial. To the appellee, the uncertainty occasioned by the
divergence of views on the issue of construction hampers or disturbs its
freedom to enhance its business. To the appellant, the suppression of the
appellee's proposed contest believed to transgress a law he has sworn to
uphold and enforce is an unavoidable duty. With the appellee's bent to
hold the contest and the appellant's threat to issue a fraud order therefor
if carried out, the contenders are confronted by the ominous shadow of
an imminent and inevitable litigation unless their differences are settled
and stabilized by a tranquilizing declaration (Pablo y Sen, et al. vs.
Republic of the Philippines, G.R. No. L-6868, April 30, 1955). And,
contrary to the insinuation of the appellant, the time is long past when it
can rightly be said that merely the appellee's "desires are thwarted by its
own doubts, or by the fears of others" — which admittedly does not
confer a cause of action. Doubt, if any there was, has ripened into a
justiciable controversy when, as in the case at bar, it was translated into
a positive claim of right which is actually contested (III Moran,
Comments on the Rules of Court, 1963 ed., pp. 132-133, citing:
Woodward vs. Fox West Coast Theaters, 36 Ariz., 251, 284 Pac. 350).
We cannot hospitably entertain the appellant's pretense that there is here
no question of construction because the said appellant "simply applied
the clear provisions of the law to a given set of facts as embodied in the
rules of the contest", hence, there is no room for declaratory relief. The
infirmity of this pose lies in the fact that it proceeds from the
assumption that, if the circumstances here presented, the construction of
the legal provisions can be divorced from the matter of their application
to the appellee's contest. This is not feasible. Construction, verily, is the
art or process of discovering and expounding the meaning and intention
of the authors of the law with respect to its application to a given case,
where that intention is rendered doubtful, amongst others, by reason of
the fact that the given case is not explicitly provided for in the
law (Black, Interpretation of Laws, p. 1). This is precisely the case here.
Whether or not the scheme proposed by the appellee is within the
coverage of the prohibitive provisions of the Postal Law inescapably
requires an inquiry into the intended meaning of the words used therein.
To our mind, this is as much a question of construction or interpretation
as any other.
Nor is it accurate to say, as the appellant intimates, that a
pronouncement on the matter at hand can amount to nothing more than
an advisory opinion the handing down of which is anathema to a
declaratory relief action. Of course, no breach of the Postal Law has as
yet been committed. Yet, the disagreement over the construction thereof
is no longer nebulous or contingent. It has taken a fixed and final shape,
presenting clearly defined legal issues susceptible of immediate
resolution. With the battle lines drawn, in a manner of speaking, the
propriety — nay, the necessity — of setting the dispute at rest before it
accumulates the asperity distemper, animosity, passion and violence of a
full-blown battle which looms ahead (III Moran, Comments on the
Rules of Court, 1963 ed., p. 132 and cases cited), cannot but be
conceded. Paraphrasing the language in Zeitlin vs. Arnebergh 59 Cal.,
2d., 901, 31 Cal. Rptr., 800, 383 P. 2d., 152, cited in 22 Am. Jur., 2d., p.
869, to deny declaratory relief to the appellee in the situation into which
it has been cast, would be to force it to choose between undesirable
alternatives. If it cannot obtain a final and definitive pronouncement as
to whether the anti-lottery provisions of the Postal Law apply to its
proposed contest, it would be faced with these choices: If it launches the
contest and uses the mails for purposes thereof, it not only incurs the
risk, but is also actually threatened with the certain imposition, of a
fraud order with its concomitant stigma which may attach even if the
appellee will eventually be vindicated; if it abandons the contest, it
becomes a self-appointed censor, or permits the appellant to put into
effect a virtual fiat of previous censorship which is constitutionally
unwarranted. As we weigh these considerations in one equation and in
the spirit of liberality with which the Rules of Court are to be
interpreted in order to promote their object (section 1, Rule 1, Revised
Rules of Court) — which, in the instant case, is to settle, and afford
relief from uncertainty and insecurity with respect to, rights and duties
under a law — we can see in the present case any imposition upon our
jurisdiction or any futility or prematurity in our intervention.
The appellant, we apprehend, underrates the force and binding effect of
the ruling we hand down in this case if he believes that it will not have
the final and pacifying function that a declaratory judgment is calculated
to subserve. At the very least, the appellant will be bound. But more
than this, he obviously overlooks that in this jurisdiction, "Judicial
decisions applying or interpreting the law shall form a part of the legal
system" (Article 8, Civil Code of the Philippines). In effect, judicial
decisions assume the same authority as the statute itself and, until
authoritatively abandoned, necessarily become, to the extent that they
are applicable, the criteria which must control the actuations not only of
those called upon to abide thereby but also of those in duty bound to
enforce obedience thereto. Accordingly, we entertain no misgivings that
our resolution of this case will terminate the controversy at hand.
It is not amiss to point out at this juncture that the conclusion we have
herein just reached is not without precedent. In Liberty Calendar Co. vs.
Cohen, 19 N.J., 399, 117 A. 2d., 487, where a corporation engaged in
promotional advertising was advised by the county prosecutor that its
proposed sales promotion plan had the characteristics of a lottery, and
that if such sales promotion were conducted, the corporation would be
subject to criminal prosecution, it was held that the corporation was
entitled to maintain a declaratory relief action against the county
prosecutor to determine the legality of its sales promotion plan. In pari
materia, see also: Bunis vs. Conway, 17 App. Div. 2d., 207, 234 N.Y.S.
2d., 435; Zeitlin vs. Arnebergh, supra; Thrillo, Inc. vs. Scott, 15 N.J.
Super. 124, 82 A. 2d., 903.
In fine, we hold that the appellee has made out a case for declaratory
relief.
2. The Postal Law, chapter 52 of the Revised Administrative Code,
using almost identical terminology in sections 1954(a), 1982 and 1983
thereof, supra, condemns as absolutely non-mailable, and empowers the
Postmaster General to issue fraud orders against, or otherwise deny the
use of the facilities of the postal service to, any information concerning
"any lottery, gift enterprise, or scheme for the distribution of money, or
of any real or personal property by lot, chance, or drawing of any kind".
Upon these words hinges the resolution of the second issue posed in this
appeal.
Happily, this is not an altogether untrodden judicial path. As early as in
1922, in "El Debate", Inc. vs. Topacio, 44 Phil., 278, 283-284, which
significantly dwelt on the power of the postal authorities under the
abovementioned provisions of the Postal Law, this Court declared that
— Nowhere in the said rules is any requirement that any fee be paid, any
While countless definitions of lottery have been attempted, the
authoritative one for this jurisdiction is that of the United States
Supreme Court, in analogous cases having to do with the power of the
United States Postmaster General, viz.: The term "lottery" extends to all
schemes for the distribution of prizes by chance, such as policy playing,
gift exhibitions, prize concerts, raffles at fairs, etc., and various forms of
gambling. The three essential elements of a lottery are: First,
consideration; second, prize; and third, chance. (Horner vs. States
[1892], 147 U.S. 449; Public Clearing House vs. Coyne [1903], 194
U.S., 497; U.S. vs. Filart and Singson [1915], 30 Phil., 80; U.S. vs.
Olsen and Marker [1917], 36 Phil., 395; U.S. vs. Baguio [1919], 39
Phil., 962; Valhalla Hotel Construction Company vs. Carmona, p.
233, ante.)
Unanimity there is in all quarters, and we agree, that the elements of
prize and chance are too obvious in the disputed scheme to be the
subject of contention. Consequently as the appellant himself concedes,
the field of inquiry is narrowed down to the existence of the element of
consideration therein. Respecting this matter, our task is considerably
lightened inasmuch as in the same case just cited, this Court has laid
down a definitive yard-stick in the following terms —
In respect to the last element of consideration, the law does not
condemn the gratuitous distribution of property by chance, if no
consideration is derived directly or indirectly from the party receiving
the chance, but does condemn as criminal schemes in which a valuable
consideration of some kind is paid directly or indirectly for the chance
to draw a prize.
Reverting to the rules of the proposed contest, we are struck by the
clarity of the language in which the invitation to participate therein is
couched. Thus —
No puzzles, no rhymes? You don't need wrappers, labels or boxtops?
You don't have to buy anything? Simply estimate the actual number of
liter the Caltex gas pump with the hood at your favorite Caltex dealer
will dispense from — to —, and win valuable prizes . . . ." .
merchandise be bought, any service be rendered, or any value
whatsoever be given for the privilege to participate. A prospective
contestant has but to go to a Caltex station, request for the entry form
which is available on demand, and accomplish and submit the same for
the drawing of the winner. Viewed from all angles or turned inside out,
the contest fails to exhibit any discernible consideration which would
brand it as a lottery. Indeed, even as we head the stern injunction, "look
beyond the fair exterior, to the substance, in order to unmask the real
element and pernicious tendencies which the law is seeking to prevent"
("El Debate", Inc. vs. Topacio, supra, p. 291), we find none. In our
appraisal, the scheme does not only appear to be, but actually is, a
gratuitous distribution of property by chance.
There is no point to the appellant's insistence that non-Caltex customers
who may buy Caltex products simply to win a prize would actually be
indirectly paying a consideration for the privilege to join the contest.
Perhaps this would be tenable if the purchase of any Caltex product or
the use of any Caltex service were a pre-requisite to participation. But it
is not. A contestant, it hardly needs reiterating, does not have to buy
anything or to give anything of value.1awphîl.nèt
Off-tangent, too, is the suggestion that the scheme, being admittedly for
sales promotion, would naturally benefit the sponsor in the way of
increased patronage by those who will be encouraged to prefer Caltex
products "if only to get the chance to draw a prize by securing entry
blanks". The required element of consideration does not consist of the
benefit derived by the proponent of the contest. The true test, as laid
down in People vs. Cardas, 28 P. 2d., 99, 137 Cal. App. (Supp.) 788, is
whether the participant pays a valuable consideration for the chance,
and not whether those conducting the enterprise receive something of
value in return for the distribution of the prize. Perspective properly
oriented, the standpoint of the contestant is all that matters, not that of
the sponsor. The following, culled from Corpus Juris Secundum, should
set the matter at rest:
The fact that the holder of the drawing expects thereby to receive, or in
fact does receive, some benefit in the way of patronage or otherwise, as
a result of the drawing; does not supply the element of
consideration. Griffith Amusement Co. vs. Morgan, Tex. Civ. App., 98
S.W., 2d., 844" (54 C.J.S., p. 849).
Thus enlightened, we join the trial court in declaring that the "Caltex
Hooded Pump Contest" proposed by the appellee is not a lottery that
may be administratively and adversely dealt with under the Postal Law.
But it may be asked: Is it not at least a "gift enterprise, or scheme for the
distribution of money, or of any real or personal property by lot, chance,
or drawing of any kind", which is equally prescribed? Incidentally,
while the appellant's brief appears to have concentrated on the issue of
consideration, this aspect of the case cannot be avoided if the remedy
here invoked is to achieve its tranquilizing effect as an instrument of
both curative and preventive justice. Recalling that the appellant's action
was predicated, amongst other bases, upon Opinion 217, Series 1953, of
the Secretary of Justice, which opined in effect that a scheme, though
not a lottery for want of consideration, may nevertheless be a gift
enterprise in which that element is not essential, the determination of
whether or not the proposed contest — wanting in consideration as we
have found it to be — is a prohibited gift enterprise, cannot be passed
over sub silencio.
While an all-embracing concept of the term "gift enterprise" is yet to be
spelled out in explicit words, there appears to be a consensus among
lexicographers and standard authorities that the term is commonly
applied to a sporting artifice of under which goods are sold for their
market value but by way of inducement each purchaser is given a
chance to win a prize (54 C.J.S., 850; 34 Am. Jur., 654; Black, Law
Dictionary, 4th ed., p. 817; Ballantine, Law Dictionary with
Pronunciations, 2nd ed., p. 55; Retail Section of Chamber of Commerce
of Plattsmouth vs. Kieck, 257 N.W., 493, 128 Neb. 13; Barker vs. State,
193 S.E., 605, 56 Ga. App., 705; Bell vs. State, 37 Tenn. 507, 509, 5
Sneed, 507, 509). As thus conceived, the term clearly cannot embrace
the scheme at bar. As already noted, there is no sale of anything to
which the chance offered is attached as an inducement to the purchaser.
The contest is open to all qualified contestants irrespective of whether or
not they buy the appellee's products.
Going a step farther, however, and assuming that the appellee's contest
can be encompassed within the broadest sweep that the term "gift
enterprise" is capable of being extended, we think that the appellant's
pose will gain no added comfort. As stated in the opinion relied upon,
rulings there are indeed holding that a gift enterprise involving an award
by chance, even in default of the element of consideration necessary to
constitute a lottery, is prohibited (E.g.: Crimes vs. States, 235 Ala 192,
178 So. 73; Russell vs. Equitable Loan & Sec. Co., 129 Ga. 154, 58
S.E., 88; State ex rel. Stafford vs. Fox-Great Falls Theater Corporation,
132 P. 2d., 689, 694, 698, 114 Mont. 52). But this is only one side of the
coin. Equally impressive authorities declare that, like a lottery, a gift
enterprise comes within the prohibitive statutes only if it exhibits the
tripartite elements of prize, chance and consideration (E.g.: Bills vs.
People, 157 P. 2d., 139, 142, 113 Colo., 326; D'Orio vs. Jacobs, 275 P.
563, 565, 151 Wash., 297; People vs. Psallis, 12 N.Y.S., 2d., 796; City
and County of Denver vs. Frueauff, 88 P., 389, 394, 39 Colo., 20, 7
L.R.A., N.S., 1131, 12 Ann. Cas., 521; 54 C.J.S., 851, citing: Barker vs.
State, 193 S.E., 605, 607, 56 Ga. App., 705; 18 Words and Phrases,
perm. ed., pp. 590-594). The apparent conflict of opinions is explained
by the fact that the specific statutory provisions relied upon are not
identical. In some cases, as pointed out in 54 C.J.S., 851, the terms
"lottery" and "gift enterprise" are used interchangeably (Bills vs.
People, supra); in others, the necessity for the element of consideration
or chance has been specifically eliminated by statute. (54 C.J.S., 351-
352, citing Barker vs. State, supra; State ex rel. Stafford vs. Fox-Great
Falls Theater Corporation, supra). The lesson that we derive from this
state of the pertinent jurisprudence is, therefore, that every case must be
resolved upon the particular phraseology of the applicable statutory
provision.
Taking this cue, we note that in the Postal Law, the term in question is
used in association with the word "lottery". With the meaning of lottery
settled, and consonant to the well-known principle of legal
hermeneutics noscitur a sociis — which Opinion 217 aforesaid also
relied upon although only insofar as the element of chance is concerned
— it is only logical that the term under a construction should be
accorded no other meaning than that which is consistent with the nature
of the word associated therewith. Hence, if lottery is prohibited only if it
involves a consideration, so also must the term "gift enterprise" be so
construed. Significantly, there is not in the law the slightest indicium of
any intent to eliminate that element of consideration from the "gift
enterprise" therein included.
contest here in question, we rule that the appellee may not be denied the
use of the mails for purposes thereof.
Recapitulating, we hold that the petition herein states a sufficient cause
of action for declaratory relief, and that the "Caltex Hooded Pump
Contest" as described in the rules submitted by the appellee does not
transgress the provisions of the Postal Law.
ACCORDINGLY, the judgment appealed from is affirmed. No costs.
Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal,
Bengzon, J.P., Zaldivar and Sanchez, JJ.,

This conclusion firms up in the light of the mischief sought to be

remedied by the law, resort to the determination thereof being an
accepted extrinsic aid in statutory construction. Mail fraud orders, it is Republic of the Philippines
axiomatic, are designed to prevent the use of the mails as a medium for SUPREME COURT
disseminating printed matters which on grounds of public policy are Manila
declared non-mailable. As applied to lotteries, gift enterprises and
similar schemes, justification lies in the recognized necessity to EN BANC
suppress their tendency to inflame the gambling spirit and to corrupt
public morals (Com. vs. Lund, 15 A. 2d., 839, 143 Pa. Super. 208).
Since in gambling it is inherent that something of value be hazarded for
a chance to gain a larger amount, it follows ineluctably that where no G.R. No. L-28463 May 31, 1971
consideration is paid by the contestant to participate, the reason behind
the law can hardly be said to obtain. If, as it has been held — REPUBLIC FLOUR MILLS INC., petitioner,
vs.
Gratuitous distribution of property by lot or chance does not constitute THE COMMISSIONER OF CUSTOMS and THE COURT OF
"lottery", if it is not resorted to as a device to evade the law and no TAX APPEALS, respondents.
consideration is derived, directly or indirectly, from the party receiving
the chance, gambling spirit not being cultivated or stimulated thereby. Agrava & Agrava for petitioner.
City of Roswell vs. Jones, 67 P. 2d., 286, 41 N.M., 258." (25 Words and
Phrases, perm. ed., p. 695, emphasis supplied). Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor
General Pacifico P. de Castro and Solicitor Santiago M. Kapunan for
we find no obstacle in saying the same respecting a gift enterprise. In respondents.
the end, we are persuaded to hold that, under the prohibitive provisions
of the Postal Law which we have heretofore examined, gift enterprises
and similar schemes therein contemplated are condemnable only if, like
lotteries, they involve the element of consideration. Finding none in the FERNANDO, J.:
It is a novel question that this petition for the review of a decision of
respondent Court of Tax Appeals presents. Petitioner Republic Flour
Mills, Inc. would have this Court construe the words "products of the
Philippines" found in Section 2802 of the Tariff and Custom Code1 as
excluding bran (ipa) and pollard (darak) on the ground that, coming as
they do from wheat grain which is imported in the Philippines, they are
merely waste and not the products, which is the flour produced.2 That
way, it would not be liable at all for the wharfage dues assessed under
such section by respondent Commission of Customs. It elevated the
matter to respondent Court, as the construction it would place on the
aforesaid section appears too strained and far remote from the ordinary
meaning of the text, not to mention the policy of the Act. We affirm.
In the decision of respondent Court now sought to be reviewed, after
stating that what was before it was an appeal from a decision of the
Commissioner of Customs holding petitioner liable for the sum of
P7,948.00 as wharfage due the facts were set forth as follows:
"Petitioner, Republic Flour Mills, Inc., is a domestic corporation,
primarily engaged in the manufacture of wheat flour, and produces
pollard (darak) and bran (ipa) in the process of milling. During the
period from December, 1963 to July, 1964, inclusive, petitioner
exported Pollard and/or bran which was loaded from lighters alongside
vessels engaged in foreign trade while anchored near the breakwater
The respondent assessed the petitioner by way of wharfage dues on the
said exportations in the sum of P7,948.00, which assessment was paid
by petitioner under protest."3 The only issue, in the opinion of
respondent Court, is whether or not such collection of wharfage dues
was in accordance with law. The main contention before respondent
Court of petitioner was "that inasmuch as no government or private
wharves or government facilities [were] utilized in exporting the pollard
and/or bran, the collection of wharfage dues is contrary to law." 4 On the
other hand, the stand of respondent Commissioner of Customs was that
petitioner was liable for wharfage dues "upon receipt or discharge of the
exported goods by a vessel engaged in foreign trade regardless of the
non-use of government-owned or private wharves."5 Respondent Court
of Tax Appeals sustained the action taken by the Commissioner of
Customs under the appropriate provision of the Tariff and Customs
Code, relying on our decision in Procter & Gamble Phil.
Manufacturing Corp. v. Commissioner of Customs.6 It did not feel called
upon to answer the question now before us as, in its opinion, petitioner
only called its attention to it for the first time in its memorandum.
Hence, this petition for review. The sole error assigned by petitioner is
that it should not, under its construction of the Act, be liable for
wharfage dues on its exportation of bran and pollard as they are not
"products of the Philippines", coming as they did from wheat grain
which were imported from abroad, and being "merely parts of the wheat
grain milled by Petitioner to produce flour which had become
waste."7 We find, to repeat, such contention unpersuasive and affirm the
decision of respondent Court of Tax Appeals.
1. The language of Section 2802 appears to be quite explicit: "There
shall be levied, collected and paid on all articles imported or brought
into the Philippines, and on products of the Philippines ... exported from
the Philippines, a charge of two pesos per gross metric ton as a fee for
wharfage ...." One category refers to what is imported. The other
mentions products of the Philippines that are exported. Even without
undue scrutiny, it does appear quite obvious that as long as the goods
are produced in the country, they fall within the terms of the above
section. Petitioner appeared to have entertained such a nation. In its
petition for review before respondent Court, it categorically asserted:
"Petitioner is primarily engaged in the manufacture of flour from wheat
grain. In the process of milling the wheat grain into flour, petitioner also
produces 'bran' and 'pollard' which it exports abroad."8 It does take a
certain amount of hair-splitting to exclude from its operation what
petitioner calls "waste" resulting from the production of flour processed
from the wheat grain in petitioner's flour mills in the Philippines. It is
always timely to remember that, as stressed by Justice Moreland: "The
first and fundamental duty of courts, in our judgment, is to apply the
law. Construction and interpretation come only after it has been
demonstrated that application is impossible or inadequate without
them."9 Petitioner ought to have been aware that deference to such a
doctrine precludes an affirmative response to its contention. The law is
clear; it must be obeyed. It is as simple, as that. 10
2. There is need of confining familiar language of a statute to its usual
signification. While statutory construction involves the exercise of
choice, the temptation to roam at will and rely on one's predilections as
to what policy should prevail is to be resisted. The search must be for a
reasonable interpretation. It is best to keep in mind the reminder from
Holmes that "there is no canon against using common sense in
construing laws as saying what obviously means." 11 To paraphrase
Frankfurter, interpolation must be eschewed but evisceration avoided.
Certainly, the utmost effort should be exerted lest the interpretation
arrived at does violence to the statutory language in its total context. It
would be then to ignore what has been stressed time and time again as
to limits of judicial freedom in the construction of statutes to accept
their view advanced by petitioner.
3. Then, again, there is the fundamental postulate in statutory
construction requiring fidelity to the legislative purpose. What Congress
intended is not to be frustrates. Its objective must be carried out. Even if
there be doubt as to the meaning of the language employed, the
interpretation should not be at war with the end sought to be attained.
No undue reflection is needed to show that if through an ingenious
argument, the scope of a statute may be contracted, the probability that
other exceptions may be thought of is not remote. If petitioner were to
prevail, subsequent pleas motivated by the same desire to be excluded
from the operation of the Tariff and Customs Code would likewise be
entitled to sympathetic consideration. It is desirable then that the gates
to such efforts at undue restriction of the coverage of the Act be kept
closed. Otherwise, the end result would be not respect for, but defiance
of, a clear legislative mandate. That kind of approach in statutory
construction has never recommended itself. It does not now. 12
WHEREFORE, the decision of respondent Court of Tax Appeals of
November 27, 1967 is affirmed. With costs against petitioner.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Villamor
and Makasiar, JJ., concur.
Castro, Teehankee and Barredo, JJ., took no part.
Footnotes
1 Section 2802 of the Tariff and Customs Code (1957) reads in full
"Schedule of Dues. — There shall be levied, collected and paid on all
articles imported or brought into the Philippines, and on products of the
Philippines except coal, lumber, creosoted and other pressure treated
materials as well as other minor forest products, cement, guano natural
rock asphalt, the minerals and ores of base metals (e.g., copper, lead,
zinc, iron, chromite manganese, magnesite and steel), and sugar
molasses exported from the Philippines, a charge of two pesos per gross
metric ton as a fee for wharfage: Provided, That in the case of logs, or
flitches twelve inches square or equivalent cross-sectional area, or over,
a charge of sixty centavos per cubic meter shall be collected."
2 According to the petition: "(a) Petitioner is engaged in the
manufacture of flour from wheat grain. It imports the wheat grain from
abroad and mills the same to produce the flour. The wheat grain is not a
product of the Philippines. Properly and technically speaking, the
product of the milling process is the flour produced. (b) In the course of
producing flour, part of the wheat grain be waste in the form of bran and
pollard." Par. 4, p. 2.
3 Decision, Appendix to Petitioner's Brief, pp. 9-10.
4 Ibid., p. 10.
5 Ibid.
6 L-22819, April 27, 1967, 19 SCRA 883. This portion of Justice
Bengzon's opinion was cited in the opinion of respondent Court of Tax
Appeals: "But when a vessel anchors at the Bay and discharges or
unloads its cargo, wharfage dues are forthwith collected. For, as stated,
said dues are assessed against the cargo discharged. This is clear from
the provision of the law under which the assessment is based on the
quantity, weight or measure of the cargo received by the importer and/or
discharged by such vessel. And wharfage dues on the cargo are distinct
from harbor fees or berthing charges on the vessel, so much so that
different sections of the law cover them." At p. 889.
7 Decision, Appendix to Petitioner's Brief, p. 7.
8 Petition for Review before respondent Court of Tax Appeals dated
April 7, 1967, par. 3.
9 Lizarraga Hermanos v. Yap Tico, 24 Phil. 504, 513 (1913).
10 Cf. People v. Mapa, L-22301, Aug. 30, 1967, 20 SCRA 1164; Pacific
Oxygen & Acetylene Co. v. Central Bank, L-21881, March 1, 1968, 22
SCRA 917; Dequito v. Lopez, L-27757, March 28, 1968, 22 SCRA
1352; Padilla v. City of Pasay, L-24039, June 29, 1968, 23 SCRA 1349;
Garcia v. Vasquez, L-26808, March 28, 1969, 27 SCRA 505; La Perla
Cigar & Cigarette Factory v. Capapas, L-27948 & 28001-11, July 31,
1969, 28 SCRA 1085; Mobil Oil Phil., Inc. v. Diocares, L-26371, Sept.
30, 1969, 29 SCRA 656; Luzon Surety Co., Inc. v. De Garcia, L-25659,
Oct. 31, 1969, 30 SCRA 111; Vda. de Macabenta v. Davao Stevedore
Terminal Company, L-27489, April 30, 1970, 32 SCRA 553.
11 Rosehen v. Ward, 279 US 337, 339 (1929).
12 Cf. Ty Sue v. Hord, 12 Phil. 485 (1909; United States v. Toribio, 15
Phil. 85 (1910) ; Riera v. Palmaroli, 40 Phil. 105 (1919); Commissioner
of Customs v. Caltex Phil., Inc., 106 Phil. 829 (1959); Sarcos v. Castillo,
L-29755, Jan. 31, 1969, 26 SCRA 853; Automotive Parts & Equipment
Co., Inc. v. Lingad, L-26406, Oct. 31, 1969, 30 SCRA 248.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-8451 December 20, 1957
THE ROMAN CATHOLIC APOSTOLIC ADMINISTRATOR OF
DAVAO, INC., petitioner,
vs.
THE LAND REGISTRATION COMMISSION and THE
REGISTER OF DEEDS OF DAVAO CITY, respondents.
Teodoro Padilla, for petitioner.
Office of the Solicitor General Ambrosio Padilla, Assistant Solicitor
General Jose G. Bautista and Troadio T. Quianzon, Jr., for respondents.
FELIX, J.:
This is a petition for mandamus filed by the Roman Catholic Apostolic
Administrator of Davao seeking the reversal of a resolution by the Land
Registration Commissioner in L.R.C. Consulta No. 14. The facts of the
case are as follows:
On October 4, 1954, Mateo L. Rodis, a Filipino citizen and resident of
the City of Davao, executed a deed of sale of a parcel of land located in
the same city covered by Transfer Certificate No. 2263, in favor of the
Roman Catholic Apostolic Administrator of Davao Inc., s corporation
sole organized and existing in accordance with Philippine Laws, with
Msgr. Clovis Thibault, a Canadian citizen, as actual incumbent. When
the deed of sale was presented to Register of Deeds of Davao for
registration, the latter.
having in mind a previous resolution of the Fourth Branch of the Court
of First Instance of Manila wherein the Carmelite Nuns of Davao were
made to prepare an affidavit to the effect that 60 per cent of the
members of their corporation were Filipino citizens when they sought to
register in favor of their congregation of deed of donation of a parcel of
land—
required said corporation sole to submit a similar affidavit declaring that
60 per cent of the members thereof were Filipino citizens.
The vendee in the letter dated June 28, 1954, expressed willingness to
submit an affidavit, both not in the same tenor as that made the Progress
of the Carmelite Nuns because the two cases were not similar, for
whereas the congregation of the Carmelite Nuns had five incorporators,
the corporation sole has only one; that according to their articles of
incorporation, the organization of the Carmelite Nuns became the owner
of properties donated to it, whereas the case at bar, the totality of the
Catholic population of Davao would become the owner of the property
bought to be registered.
As the Register of Deeds entertained some doubts as to the
registerability if the document, the matter was referred to the Land
Registration Commissioner en consulta for resolution in accordance
with section 4 of Republic Act No. 1151. Proper hearing on the matter
was conducted by the Commissioner and after the petitioner corporation
had filed its memorandum, a resolution was rendered on September 21,
1954, holding that in view of the provisions of Section 1 and 5 of
Article XIII of the Philippine Constitution, the vendee was not qualified
to acquire private lands in the Philippines in the absence of proof that at
least 60 per centum of the capital, property, or assets of the Roman
Catholic Apostolic Administrator of Davao, Inc., was actually owned or
controlled by Filipino citizens, there being no question that the present
incumbent of the corporation sole was a Canadian citizen. It was also
the opinion of the Land Registration Commissioner that section 159 of
the corporation Law relied upon by the vendee was rendered operative
by the aforementioned provisions of the Constitution with respect to real
estate, unless the precise condition set therein — that at least 60 per cent
of its capital is owned by Filipino citizens — be present, and, therefore,
ordered the Registered Deeds of Davao to deny registration of the deed
of sale in the absence of proof of compliance with such condition.
After the motion to reconsider said resolution was denied, an action
for mandamus was instituted with this Court by said corporation sole,
alleging that under the Corporation Law as well as the settled
jurisprudence on the matter, the deed of sale executed by Mateo L.
Rodis in favor of petitioner is actually a deed of sale in favor of the
Catholic Church which is qualified to acquire private agricultural lands
for the establishment and maintenance of places of worship, and prayed
that judgment be rendered reserving and setting aside the resolution of
the Land Registration Commissioner in question. In its resolution of
November 15, 1954, this Court gave due course to this petition
providing that the procedure prescribed for appeals from the Public
Service Commission of the Securities and Exchange Commissions
(Rule 43), be followed.
Section 5 of Article XIII of the Philippine Constitution reads as follows:
SEC. 5. Save in cases of hereditary succession, no private agricultural
land shall be transferred or assigned except to individuals, corporations,
or associations qualified to acquire or hold lands of the public domain
in the Philippines.
Section 1 of the same Article also provides the following:
SECTION 1. All agricultural, timber, and mineral lands of the public
domain, water, minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, and other natural resources of the Philippines
belong to the State, and their disposition, exploitation, development, or
utilization shall be limited to cititzens of the Philippines, or to
corporations or associations at least sixty per centum of the capital of
which is owned by such citizens, SUBJECT TO ANY EXISTING
RIGHT, grant, lease, or concession AT THE TIME OF THE
INAUGURATION OF THE GOVERNMENT ESTABLISHED
UNDER CONSTITUTION. Natural resources, with the exception of
public agricultural land, shall not be alienated, and no license,
concession, or leases for the exploitation, development, or utilization of
any of the natural resources shall be granted for a period exceeding
twenty-five years, renewable for another twenty-five years, except as to
water rights for irrigation, water supply, fisheries, or industrial uses
other than the development of water power, in which cases other than
the development and limit of the grant.
In virtue of the foregoing mandates of the Constitution, who are
considered "qualified" to acquire and hold agricultural lands in the
Philippines? What is the effect of these constitutional prohibition of the
right of a religious corporation recognized by our Corporation Law and
registered as a corporation sole, to possess, acquire and register real
estates in its name when the Head, Manager, Administrator or actual
incumbent is an alien?
Petitioner consistently maintained that a corporation sole, irrespective of
the citizenship of its incumbent, is not prohibited or disqualified to
acquire and hold real properties. The Corporation Law and the Canon
Law are explicit in their provisions that a corporation sole or "ordinary"
is not the owner of the of the properties that he may acquire but merely
the administrator thereof. The Canon Law also specified that church
temporalities are owned by the Catholic Church as a "moral person" or
by the diocess as minor "moral persons" with the ordinary or bishop as
administrator.
And elaborating on the composition of the Catholic Church in the
Philippines, petitioner explained that as a religious society or
organization, it is made up of 2 elements or divisions — the clergy or
religious members and the faithful or lay members. The 1948 figures of
the Bureau of Census showed that there were 277,551 Catholics in
Davao and aliens residing therein numbered 3,465. Ever granting that
all these foreigners are Catholics, petitioner contends that Filipino
citizens form more than 80 per cent of the entire Catholics population of
that area. As to its clergy and religious composition, counsel for
petitioner presented the Catholic Directory of the Philippines for 1954
(Annex A) which revealed that as of that year, Filipino clergy and
women novices comprise already 60.5 per cent of the group. It was,
therefore, allowed that the constitutional requirement was fully met and
satisfied.
Respondents, on the other hand, averred that although it might be true
that petitioner is not the owner of the land purchased, yet he has control
over the same, with full power to administer, take possession of,
alienate, transfer, encumber, sell or dispose of any or all lands and their
improvements registered in the name of the corporation sole and can
collect, receive, demand or sue for all money or values of any kind that
may be kind that may become due or owing to said corporation, and
vested with authority to enter into agreements with any persons,
concerns or entities in connection with said real properties, or in other
words, actually exercising all rights of ownership over the properties. It
was their stand that the theory that properties registered in the name of
the corporation sole are held in true for the benefit of the Catholic
population of a place, as of Davao in the case at bar should be sustained
because a conglomeration of persons cannot just be pointed out as the
cestui que trust or recipient of the benefits from the property allegedly
administered in their behalf. Neither can it be said that the mass of
people referred to as such beneficiary exercise ant right of ownership
over the same. This set-up, respondents argued, falls short of a trust. The
respondents instead tried to prove that in reality, the beneficiary of
ecclesiastical properties are not members or faithful of the church but
someone else, by quoting a portion a portion of the ought of fidelity
subscribed by a bishop upon his elevation to the episcopacy wherein he
promises to render to the Pontificial Father or his successors an account
of his pastoral office and of all things appertaining to the state of this
church.
Respondents likewise advanced the opinion that in construing the
constitutional provision calling for 60 per cent of Filipino citizenship,
the criterion of the properties or assets thereof.
In solving the problem thus submitted to our consideration, We can say
the following: A corporation sole is a special form of corporation
usually associated with the clergy. Conceived and introduced into the
common law by sheer necessity, this legal creation which was referred
to as "that unhappy freak of English law" was designed to facilitate the
exercise of the functions of ownership carried on by the clerics for and
on behalf of the church which was regarded as the property owner (See I
Couvier's Law Dictionary, p. 682-683).
A corporation sole consists of one person only, and his successors (who
will always be one at a time), in some particular station, who are
incorporated by law in order to give them some legal capacities and
advantages, particularly that of perpetuity, which in their natural persons
they could not have had. In this sense, the king is a sole corporation; so
is a bishop, or dens, distinct from their several chapters (Reid vs. Barry,
93 Fla. 849, 112 So. 846).
The provisions of our Corporation law on religious corporations are
illuminating and sustain the stand of petitioner. Section 154 thereof
provides:
SEC. 154. — For the administration of the temporalities of any religious
denomination, society or church and the management of the estates and
the properties thereof, it shall be lawful for the bishop, chief priest, or
presiding either of any such religious denomination, society or church to
become a corporation sole, unless inconsistent wit the rules, regulations
or discipline of his religious denomination, society or church or
forbidden by competent authority thereof.
See also the pertinent provisions of the succeeding sections of the same
Corporation Law copied hereunder:
SEC. 155. In order to become a corporation sole the bishop, chief priest,
or presiding elder of any religious denomination, society or church must
file with the Securities and Exchange Commissioner articles of
incorporation setting forth the following facts:
xxx xxx xxx.
(3) That as such bishop, chief priest, or presiding elder he is charged
with the administration of the temporalities and the management of the
estates and properties of his religious denomination, society, or church
within its territorial jurisdiction, describing it;
xxx xxx xxx.
(As amended by Commonwealth Act No. 287).
SEC. 157. From and after the filing with the Securities and Exchange
Commissioner of the said articles of incorporation, which verified by
affidavit or affirmation as aforesaid and accompanied by the copy of the
commission, certificate of election, or letters of appointment of the
bishop, chief priest, or presiding elder, duly certified as prescribed in the
section immediately preceding such the bishop, chief priest, or presiding
elder, as the case may be, shall become a corporation sole and all
temporalities, estates, and properties the religious denomination,
society, or church therefore administered or managed by him as such
bishop, chief priest, or presiding elder, shall be held in trust by him as a
corporation sole, for the use, purpose, behalf, and sole benefit of his
religious denomination, society, or church, including hospitals, schools,
colleges, orphan, asylums, parsonages, and cemeteries thereof. For the
filing of such articles of incorporation, the Securities and Exchange
Commissioner shall collect twenty-five pesos. (As amended by
Commonwealth Act. No. 287); and.
SEC. 163. The right to administer all temporalities and all property held
or owned by a religious order or society, or by the diocese, synod, or
district organization of any religious denomination or church shall, on
its incorporation, pass to the corporation and shall be held in trust for
the use, purpose behalf, and benefit of the religious society, or order so
incorporated or of the church of which the diocese, or district
organization is an organized and constituent part.
The Cannon Law contains similar provisions regarding the duties of the
corporation sole or ordinary as administrator of the church properties, as
follows:
Al Ordinario local pertenence vigilar diligentemente sobre
la administracion de todos los bienes eclesiasticos que se hallan en su
territorio y no estuvieren sustraidos de su jurisdiccion, salvs las
prescriciones legitimas que le concedan mas aamplios derechos.
Teniendo en cuenta los derechos y las legitimas costumbres y
circunstancias, procuraran los Ordinarios regular todo lo concerniente a
la administracion de los bienes eclesciasticos, dando las oportunas
instucciones particularles dentro del narco del derecho comun. (Title
XXVIII, Codigo de Derecho Canonico, Lib. III, Canon 1519).1
That leaves no room for doubt that the bishops or archbishops, as the
case may be, as corporation's sole are merely administrators of the
church properties that come to their possession, in which they hold in
trust for the church. It can also be said that while it is true that church
properties could be administered by a natural persons, problems
regarding succession to said properties can not be avoided to rise upon
his death. Through this legal fiction, however, church properties
acquired by the incumbent of a corporation sole pass, by operation of
law, upon his death not his personal heirs but to his successor in office.
It could be seen, therefore, that a corporation sole is created not only to
administer the temporalities of the church or religious society where he
belongs but also to hold and transmit the same to his successor in said
office. If the ownership or title to the properties do not pass to the
administrators, who are the owners of church properties?.
Bouscaren and Elis, S.J., authorities on cannon law, on their treatise
comment:
In matters regarding property belonging to the Universal Church and to
the Apostolic See, the Supreme Pontiff exercises his office of supreme
administrator through the Roman Curia; in matters regarding other
church property, through the administrators of the individual moral
persons in the Church according to that norms, laid down in the Code of
Cannon Law. This does not mean, however, that the Roman Pontiff is
the owner of all the church property; but merely that he is the supreme
guardian (Bouscaren and Ellis, Cannon Law, A Text and Commentary,
p. 764).
and this Court, citing Campes y Pulido, Legislacion y Jurisprudencia
Canonica, ruled in the case of Trinidad vs. Roman Catholic Archbishop
of Manila, 63 Phil. 881, that:
The second question to be decided is in whom the ownership of the
properties constituting the endowment of the ecclesiastical or collative
chaplaincies is vested.
Canonists entertain different opinions as to the persons in whom the
ownership of the ecclesiastical properties is vested, with respect to
which we shall, for our purpose, confine ourselves to stating with
Donoso that, while many doctors cited by Fagnano believe that it
resides in the Roman Pontiff as Head of the Universal Church, it is more
probable that ownership, strictly speaking, does not reside in the latter,
and, consequently, ecclesiastical properties are owned by the churches,
institutions and canonically established private corporations to which
said properties have been donated.
Considering that nowhere can We find any provision conferring
ownership of church properties on the Pope although he appears to be
the supreme administrator or guardian of his flock, nor on the
corporation sole or heads of dioceses as they are admittedly
mere administrators of said properties, ownership of these temporalities
logically fall and develop upon the church, diocese or congregation
acquiring the same. Although this question of ownership of
ecclesiastical properties has off and on been mentioned in several
decisions of the Court yet in no instance was the subject of citizenship
of this religious society been passed upon.
We are not unaware of the opinion expressed by the late Justice Perfecto
in his dissent in the case of Agustines vs. Court of First Instance of
Bulacan, 80 Phil. 565, to the effect that "the Roman Catholic
Archbishop of Manila is only a branch of a universal church by the
Pope, with permanent residence in Rome, Italy". There is no question
that the Roman Catholic Church existing in the Philippines is a tributary
and part of the international religious organization, for the word
"Roman" clearly expresses its unity with and recognizes the authority of
the Pope in Rome. However, lest We become hasty in drawing
conclusions, We have to analyze and take note of the nature of the
government established in the Vatican City, of which it was said:
GOVERNMENT. In the Roman Catholic Church supreme authority and
jurisdiction over clergy and laity alike as held by the pope who (since
the Middle Ages) is elected by the cardinals assembled in conclave, and
holds office until his death or legitimate abdication. . . While the pope is
obviously independent of the laws made, and the officials appointed, by
himself or his predecessors, he usually exercises his administrative
authority according to the code of canon law and through the
congregations, tribunals and offices of the Curia Romana. In their
respective territories (called generally dioceses) and over their
respective subjects, the patriarchs, metropolitans or archbishops and
bishops exercise a jurisdiction which is called ordinary (as attached by
law to an office given to a person. . . (Collier's Encyclopedia, Vol. 17, p.
93).
While it is true and We have to concede that in the profession of their
faith, the Roman Pontiff is the supreme head; that in the religious
matters, in the exercise of their belief, the Catholic congregation of the
faithful throughout the world seeks the guidance and direction of their
Spiritual Father in the Vatican, yet it cannot be said that there is a
merger of personalities resultant therein. Neither can it be said that the
political and civil rights of the faithful, inherent or acquired under the
laws of their country, are affected by that relationship with the Pope.
The fact that the Roman Catholic Church in almost every country
springs from that society that saw its beginning in Europe and the fact
that the clergy of this faith derive their authorities and receive orders
from the Holy See do not give or bestow the citizenship of the Pope
upon these branches. Citizenship is a political right which cannot be
acquired by a sort of "radiation". We have to realize that although there
is a fraternity among all the catholic countries and the dioceses therein
all over the globe, the universality that the word "catholic" implies,
merely characterize their faith, a uniformity in the practice and the
interpretation of their dogma and in the exercise of their belief, but
certainly they are separate and independent from one another in
jurisdiction, governed by different laws under which they are
incorporated, and entirely independent on the others in the management
and ownership of their temporalities. To allow theory that the Roman
Catholic Churches all over the world follow the citizenship of their
Supreme Head, the Pontifical Father, would lead to the absurdity of
finding the citizens of a country who embrace the Catholic faith and
become members of that religious society, likewise citizens of the
Vatican or of Italy. And this is more so if We consider that the Pope
himself may be an Italian or national of any other country of the world.
The same thing be said with regard to the nationality or citizenship of
the corporation sole created under the laws of the Philippines, which is
not altered by the change of citizenship of the incumbent bishops or
head of said corporation sole.
We must therefore, declare that although a branch of the Universal
Roman Catholic Apostolic Church, every Roman Catholic Church in
different countries, if it exercises its mission and is lawfully
incorporated in accordance with the laws of the country where it is
located, is considered an entity or person with all the rights and
privileges granted to such artificial being under the laws of that country,
separate and distinct from the personality of the Roman Pontiff or the
Holy See, without prejudice to its religious relations with the latter
which are governed by the Canon Law or their rules and regulations.
We certainly are conscious of the fact that whatever conclusion We may
draw on this matter will have a far reaching influence, nor can We
overlook the pages of history that arouse indignation and criticisms
against church landholdings. This nurtured feeling that snowbailed into
a strong nationalistic sentiment manifested itself when the provisions on
natural to be embodied in the Philippine Constitution were framed, but
all that has been said on this regard referred more particularly to
landholdings of religious corporations known as "Friar Estates" which
have already bee acquired by our government, and not to properties held
by corporations sole which, We repeat, are properties held in trust for
the benefit of the faithful residing within its territorial jurisdiction.
Though that same feeling probably precipitated and influenced to a
large extent the doctrine laid down in the celebrated Krivenco decision,
We have to take this matter in the light of legal provisions and
jurisprudence actually obtaining, irrespective of sentiments.
The question now left for our determination is whether the Universal
Roman Catholic Apostolic Church in the Philippines, or better still, the
corporation sole named the Roman Catholic Apostolic Administrator of
Davao, Inc., is qualified to acquire private agricultural lands in the
Philippines pursuant to the provisions of Article XIII of the
Constitution.
We see from sections 1 and 5 of said Article quoted before, that only
persons or corporations qualified to acquire hold lands of the public
domain in the Philippines may acquire or be assigned and hold private
agricultural lands. Consequently, the decisive factor in the present
controversy hinges on the proposition or whether or not the petitioner in
this case can acquire agricultural lands of the public domain.
From the data secured from the Securities and Exchange Commission,
We find that the Roman Catholic Bishop of Zamboanga was
incorporated (as a corporation sole) in September, 1912, principally to
administer its temporalities and manage its properties. Probably due to
the ravages of the last war, its articles of incorporation
were reconstructed in the Securities and Exchange Commission on
April 8, 1948. At first, this corporation sole administered all the
temporalities of the church existing or located in the island of
Mindanao. Later on, however, new dioceses were formed and new
corporations sole were created to correspond with the territorial
jurisdiction of the new dioceses, one of them being petitioner herein, the
Roman Catholic Apostolic Administrator of Davao, Inc., which was
registered with the Securities and Exchange Commission on September
12, 1950, and succeeded in the administrative for all the "temporalities"
of the Roman Catholic Church existing in Davao.
According to our Corporation Law, Public Act No. 1549, approved April
1, 1906, a corporation sole.
is organized and composed of a single individual, the head of any
religious society or church, for the ADMINISTRATION of the
temporalities of such society or church. By "temporalities" is meant
estate and properties not used exclusively for religious worship. The
successor in office of such religious head or chief priest incorporated as
a corporation sole shall become the corporation sole on ascension to
office, and shall be permitted to transact business as such on filing with
the Securities and Exchange Commission a copy of his commission,
certificate of election or letter of appointment duly certified by any
notary public or clerk of court of record (Guevara's The Philippine
Corporation Law, p. 223).
The Corporation Law also contains the following provisions:
SECTION 159. Any corporation sole may purchase and hold real estate
and personal; property for its church, charitable, benevolent, or
educational purposes, and may receive bequests or gifts of such
purposes. Such corporation may mortgage or sell real property held by it
upon obtaining an order for that purpose from the Court of First
Instance of the province in which the property is situated; but before
making the order proof must be made to the satisfaction of the Court
that notice of the application for leave to mortgage or sell has been
given by publication or otherwise in such manner and for such time as
said Court or the Judge thereof may have directed, and that it is to the
interest of the corporation that leave to mortgage or sell must be made
by petition, duly verified by the bishop, chief priest, or presiding elder
acting as corporation sole, and may be opposed by any member of the
religious denomination, society or church represented by the corporation
sole: Provided, however, That in cases where the rules, regulations, and
discipline of the religious denomination, society or church concerned
represented by such corporation sole regulate the methods of acquiring,
holding, selling and mortgaging real estate and personal property, such
rules, regulations, and discipline shall control and the intervention of the
Courts shall not be necessary.
It can, therefore, be noticed that the power of a corporation sole to
purchase real property, like the power exercised in the case at bar, it is
not restricted although the power to sell or mortgage sometimes is,
depending upon the rules, regulations, and discipline of the church
concerned represented by said corporation sole. If corporations sole can
purchase and sell real estate for its church, charitable, benevolent, or
educational purposes, can they register said real properties? As provided
by law, lands held in trust for specific purposes me be subject of
registration (section 69, Act 496), and the capacity of a corporation sole,
like petitioner herein, to register lands belonging to it is acknowledged,
and title thereto may be issued in its name (Bishop of Nueva Segovia vs.
Insular Government, 26 Phil. 300-1913). Indeed it is absurd that while
the corporations sole that might be in need of acquiring lands for the
erection of temples where the faithful can pray, or schools and
cemeteries which they are expressly authorized by law to acquire in
connection with the propagation of the Roman Catholic Apostolic faith
or in furtherance of their freedom of religion they could not register said
properties in their name. As professor Javier J. Nepomuceno very well
says "Man in his search for the immortal and imponderable, has, even
before the dawn of recorded history, erected temples to the Unknown
God, and there is no doubt that he will continue to do so for all time to
come, as long as he continues 'imploring the aid of Divine Providence'"
(Nepomuceno's Corporation Sole, VI Ateneo Law Journal, No. 1, p. 41,
September, 1956). Under the circumstances of this case, We might
safely state that even before the establishment of the Philippine
Commonwealth and of the Republic of the Philippines every
corporation sole then organized and registered had by express provision
of law the necessary power and qualification to purchase in its name
private lands located in the territory in which it exercised its functions
or ministry and for which it was created, independently of the
nationality of its incumbent unique and single member and head, the
bishop of the dioceses. It can be also maintained without fear of being
gainsaid that the Roman Catholic Apostolic Church in the Philippines
has no nationality and that the framers of the Constitution, as will be
hereunder explained, did not have in mind the religious corporations
sole when they provided that 60 per centum of the capital thereof be
owned by Filipino citizens.
There could be no controversy as to the fact that a duly registered
corporation sole is an artificial being having the right of succession and
the power, attributes, and properties expressly authorized by law or
incident to its existence (section 1, Corporation Law). In outlining the
general powers of a corporation. Public Act. No. 1459 provides among
others:
SEC. 13. Every corporation has the power:
(5) To purchase, hold, convey, sell, lease, lot, mortgage, encumber, and
otherwise deal with such real and personal property as the purpose for
which the corporation was formed may permit, and the transaction of
the lawful business of the corporation may reasonably and necessarily
require, unless otherwise prescribed in this Act: . . .
In implementation of the same and specially made applicable to a form
of corporation recognized by the same law, Section 159 aforequoted
expressly allowed the corporation sole to purchase and hold real as well
as personal properties necessary for the promotion of the objects for
which said corporation sole is created. Respondent Land Registration
Commissioner, however, maintained that since the Philippine
Constitution is a later enactment than public Act No. 1459, the
provisions of Section 159 in amplification of Section 13 thereof, as
regard real properties, should be considered repealed by the former.
There is a reason to believe that when the specific provision of the
Constitution invoked by respondent Commissioner was under
consideration, the framers of the same did not have in mind or
overlooked this particular form of corporation. It is undeniable that the
naturalization and conservation of our national resources was one of the
dominating objectives of the Convention and in drafting the present
Article XII of the Constitution, the delegates were goaded by the desire
(1) to insure their conservation for Filipino posterity; (2) to serve as an
instrument of national defense, helping prevent the extension into the
country of foreign control through peaceful economic penetration; and
(3) to prevent making the Philippines a source of international conflicts
with the consequent danger to its internal security and independence
(See The Framing of the Philippine Constitution by Professor Jose M.
Aruego, a Delegate to the Constitutional Convention, Vol. II. P. 592-
604). In the same book Delegate Aruego, explaining the reason behind
the first consideration, wrote:
At the time of the framing of Philippine Constitution, Filipino capital
had been to be rather shy. Filipinos hesitated s a general rule to invest a
considerable sum of their capital for the development, exploitation and
utilization of the natural resources of the country. They had not as yet
been so used to corporate as the peoples of the west. This general
apathy, the delegates knew, would mean the retardation of the
development of the natural resources, unless foreign capital would be
encouraged to come and help in that development. They knew that the
naturalization of the natural resources would certainly not encourage
the INVESTMENT OF FOREIGN CAPITAL into them. But there was a
general feeling in the Convention that it was better to have such a
development retarded or even postpone together until such time when
the Filipinos would be ready and willing to undertake it rather than
permit the natural resources to be placed under the ownership or control
of foreigners in order that they might be immediately be developed,
with the Filipinos of the future serving not as owners but utmost as
tenants or workers under foreign masters. By all means, the delegates
believed, the natural resources should be conserved for Filipino
posterity.
It could be distilled from the foregoing that the farmers of the
Constitution intended said provisions as barrier for foreigners or
corporations financed by such foreigners to acquire, exploit and develop
our natural resources, saving these undeveloped wealth for our people to
clear and enrich when they are already prepared and capable of doing
so. But that is not the case of corporations sole in the Philippines, for,
We repeat, they are mere administrators of the "temporalities" or
properties titled in their name and for the benefit of the members of their
respective religion composed of an overwhelming majority of Filipinos.
No mention nor allusion whatsoever is made in the Constitution as to
the prohibition against or the liability of the Roman Catholic Church in
the Philippines to acquire and hold agricultural lands. Although there
were some discussions on landholdings, they were mostly confined in
the inclusion of the provision allowing the Government to break big
landed estates to put an end to absentee landlordism.
But let us suppose, for the sake of argument, that the above referred to
inhibitory clause of Section 1 of Article XIII of the constitution does
have bearing on the petitioner's case; even so the clause requiring that at
least 60 per centum of the capital of the corporation be owned by
Filipinos is subordinated to the petitioner's aforesaid right already
existing at the time of the inauguration of the Commonwealth and the
Republic of the Philippines. In the language of Mr. Justice Jose P.
Laurel (a delegate to the Constitutional Convention), in his concurring
opinion of the case of Gold Creek mining Corporation, petitioner vs.
Eulogio Rodriguez, Secretary of Agriculture and Commerce, and
Quirico Abadilla, Director of the Bureau of Mines, respondent, 66 Phil.
259:
The saving clause in the section involved of the Constitution was
originally embodied in the report submitted by the Committee on
Naturalization and Preservation of Land and Other Natural Resources to
the Constitutional Convention on September 17, 1954. It was later
inserted in the first draft of the Constitution as section 13 of Article XIII
thereof, and finally incorporated as we find it now. Slight have been the
changes undergone by the proviso from the time when it comes out of
the committee until it was finally adopted. When first submitted and as
inserted to the first draft of the Constitution it reads: 'subject to any
right, grant, lease, or concession existing in respect thereto on the date
of the adoption of the Constitution'. As finally adopted, the proviso
reads: 'subject to any existing right, grant, lease, or concession at the
time of the inauguration of the Government established under this
Constitution'. This recognition is not mere graciousness but springs
form the just character of the government established. The framers of
the Constitution were not obscured by the rhetoric of democracy or
swayed to hostility by an intense spirit of nationalism. They well knew
that conservation of our natural resources did not mean destruction or
annihilation of acquired property rights. Withal, they erected a
government neither episodic nor stationary but well-nigh conservative
in the protection of property rights. This notwithstanding nationalistic
and socialistic traits discoverable upon even a sudden dip into a variety
of the provisions embodied in the instrument.
The writer of this decision wishes to state at this juncture that during the
deliberation of this case he submitted to the consideration of the Court
the question that may be termed the "vested right saving clause"
contained in Section 1, Article XII of the Constitution, but some of the
members of this Court either did not agree with the theory of the writer,
or were not ready to take a definite stand on the particular point I am
now to discuss deferring our ruling on such debatable question for a
better occasion, inasmuch as the determination thereof is not absolutely
necessary for the solution of the problem involved in this case. In his
desire to face the issues squarely, the writer will endeavor, at least as a
disgression, to explain and develop his theory, not as a lucubration of
the Court, but of his own, for he deems it better and convenient to go
over the cycle of reasons that are linked to one another and that step by
step lead Us to conclude as We do in the dispositive part of this
decision.
It will be noticed that Section 1 of Article XIII of the Constitution
provides, among other things, that "all agricultural lands of the public
domain and their disposition shall be limited to citizens of the
Philippines or to corporations at least 60 per centum of the capital of
which is owned by such citizens, SUBJECT TO ANY EXISTING
RIGHT AT THE TIME OF THE INAUGURATION OF THE
GOVERNMENT ESTABLISHED UNDER THIS CONSTITUTION."
As recounted by Mr. Justice Laurel in the aforementioned case of Gold
Creek Mining Corporation vs. Rodriguez et al., 66 Phil. 259, "this
recognition (in the clause already quoted), is not mere graciousness but
springs from the just character of the government established. The
farmers of the Constitution were not obscured by the rhetoric of
democracy or swayed to hostility by an intense spirit of nationalism.
They well knew that conservation of our natural resources did not mean
destruction or annihilation of ACQUIRED PROPERTY RIGHTS".
But respondents' counsel may argue that the preexisting right of
acquisition of public or private lands by a corporation which does not
fulfill this 60 per cent requisite, refers to purchases of the Constitution
and not to later transactions. This argument would imply that even
assuming that petitioner had at the time of the enactment of the
Constitution the right to purchase real property or right could not be
exercised after the effectivity of our Constitution, because said power or
right of corporations sole, like the herein petitioner, conferred in virtue
of the aforequoted provisions of the Corporation Law, could no longer
be exercised in view of the requisite therein prescribed that at least 60
per centum of the capital of the corporation had to be Filipino. It has
been shown before that: (1) the corporation sole, unlike the ordinary
corporations which are formed by no less than 5 incorporators, is
composed of only one persons, usually the head or bishop of the
diocese, a unit which is not subject to expansion for the purpose of
determining any percentage whatsoever; (2) the corporation sole is only
the administrator and not the owner of the temporalities located in the
territory comprised by said corporation sole; (3) such temporalities are
administered for and on behalf of the faithful residing in the diocese or
territory of the corporation sole; and (4) the latter, as such, has no
nationality and the citizenship of the incumbent Ordinary has nothing to
do with the operation, management or administration of the corporation
sole, nor effects the citizenship of the faithful connected with their
respective dioceses or corporation sole.
In view of these peculiarities of the corporation sole, it would seem
obvious that when the specific provision of the Constitution invoked by
respondent Commissioner (section 1, Art. XIII), was under
consideration, the framers of the same did not have in mind or
overlooked this particular form of corporation. If this were so, as the
facts and circumstances already indicated tend to prove it to be so, then
the inescapable conclusion would be that this requirement of at least 60
per cent of Filipino capital was never intended to apply to corporations
sole, and the existence or not a vested right becomes unquestionably
immaterial.
But let us assumed that the questioned proviso is material. yet We might
say that a reading of said Section 1 will show that it does not refer to
any actual acquisition of land up to the right, qualification or power to
acquire and hold private real property. The population of the
Philippines, Catholic to a high percentage, is ever increasing. In the
practice of religion of their faithful the corporation sole may be in need
of more temples where to pray, more schools where the children of the
congregation could be taught in the principles of their religion, more
hospitals where their sick could be treated, more hallow or consecrated
grounds or cemeteries where Catholics could be buried, many more than
those actually existing at the time of the enactment of our Constitution.
This being the case, could it be logically maintained that because the
corporation sole which, by express provision of law, has the power to
hold and acquire real estate and personal property of its churches,
charitable benevolent, or educational purposes (section 159, Corporation
Law) it has to stop its growth and restrain its necessities just because the
corporation sole is a non-stock corporation composed of only one
person who in his unity does not admit of any percentage, especially
when that person is not the owner but merely an administrator of the
temporalities of the corporation sole? The writer leaves the answer to
whoever may read and consider this portion of the decision.
Anyway, as stated before, this question is not a decisive factor in
disposing the case, for even if We were to disregard such saving clause
of the Constitution, which reads: subject to any existing right, grant,
etc., at the same time of the inauguration of the Government established
under this Constitution, yet We would have, under the evidence on
record, sufficient grounds to uphold petitioner's contention on this
matter.
In this case of the Register of Deeds of Rizal vs. Ung Sui Si
Temple, 2 G.R. No. L-6776, promulgated May 21, 1955, wherein this
question was considered from a different angle, this Court through Mr.
Justice J.B.L. Reyes, said:
The fact that the appellant religious organization has no capital stock
does not suffice to escape the Constitutional inhibition, since it is
admitted that its members are of foreign nationality. The purpose of the
sixty per centum requirement is obviously to ensure that corporation or
associations allowed to acquire agricultural land or to exploit natural
resources shall be controlled by Filipinos; and the spirit of the
Constitution demands that in the absence of capital stock, the
controlling membership should be composed of Filipino citizens.
In that case respondent-appellant Ung Siu Si Temple was not a
corporation sole but a corporation aggregate, i.e., an unregistered
organization operating through 3 trustees, all of Chinese nationality, and
that is why this Court laid down the doctrine just quoted. With regard to
petitioner, which likewise is a non-stock corporation, the case is
different, because it is a registered corporation sole, evidently of no
nationality and registered mainly to administer the temporalities and
manage the properties belonging to the faithful of said church residing
in Davao. But even if we were to go over the record to inquire into the
composing membership to determine whether the citizenship
requirement is satisfied or not, we would find undeniable proof that the
members of the Roman Catholic Apostolic faith within the territory of
Davao are predominantly Filipino citizens. As indicated before,
petitioner has presented evidence to establish that the clergy and lay
members of this religion fully covers the percentage of Filipino citizens
required by the Constitution. These facts are not controverted by
respondents and our conclusion in this point is sensibly obvious.
Dissenting Opinion—Discussed. — After having developed our theory
in the case and arrived at the findings and conclusions already expressed
in this decision. We now deem it proper to analyze and delve into the
basic foundation on which the dissenting opinion stands up. Being
aware of the transcendental and far-reaching effects that Our ruling on
the matter might have, this case was thoroughly considered from all
points of view, the Court sparing no effort to solve the delicate problems
involved herein.
At the deliberations had to attain this end, two ways were open to a
prompt dispatch of the case: (1) the reversal of the doctrine We laid
down in the celebrated Krivenko case by excluding urban lots and
properties from the group of the term "private agricultural lands" use in
this section 5, Article XIII of the Constitution; and (2) by driving Our
reasons to a point that might indirectly cause the appointment of
Filipino bishops or Ordinary to head the corporations sole created to
administer the temporalities of the Roman Catholic Church in the
Philippines. With regard to the first way, a great majority of the
members of this Court were not yet prepared nor agreeable to follow
that course, for reasons that are obvious. As to the second way, it seems
to be misleading because the nationality of the head of a diocese
constituted as a corporation sole has no material bearing on the
functions of the latter, which are limited to the administration of the
temporalities of the Roman Catholic Apostolic Church in the
Philippines.
Upon going over the grounds on which the dissenting opinion is based,
it may be noticed that its author lingered on the outskirts of the issues,
thus throwing the main points in controversy out of focus. Of course We
fully agree, as stated by Professor Aruego, that the framers of our
Constitution had at heart to insure the conservation of the natural
resources of Our motherland of Filipino posterity; to serve them as an
instrument of national defense, helping prevent the extension into the
country of foreign control through peaceful economic penetration; and
to prevent making the Philippines a source of international conflicts
with the consequent danger to its internal security and independence.
But all these precautions adopted by the Delegates to Our Constitutional
Assembly could have not been intended for or directed against cases
like the one at bar. The emphasis and wonderings on the statement that
once the capacity of a corporation sole to acquire private agricultural
lands is admitted there will be no limit to the areas that it may hold and
that this will pave the way for the "revival or revitalization of religious
landholdings that proved so troublesome in our past", cannot even
furnish the "penumbra" of a threat to the future of the Filipino people. In
the first place, the right of Filipino citizens, including those of foreign
extraction, and Philippine corporations, to acquire private lands is not
subject to any restriction or limit as to quantity or area, and We certainly
do not see any wrong in that. The right of Filipino citizens and
corporations to acquire public agricultural lands is already limited by
law. In the second place, corporations sole cannot be considered as
aliens because they have no nationality at all. Corporations sole are,
under the law, mere administrators of the temporalities of the Roman
Catholic Church in the Philippines. In the third place, every corporation,
be it aggregate or sole, is only entitled to purchase, convey, sell, lease,
let, mortgage, encumber and otherwise deal with real properties when it
is pursuant to or in consonance with the purposes for which the
corporation was formed, and when the transactions of the lawful
business of the corporation reasonably and necessarily require such
dealing — section 13-(5) of the Corporation Law, Public Act No. 1459
— and considering these provisions in conjunction with Section 159 of
the same law which provides that a corporation sole may only "purchase
and hold real estate and personal properties for its church, charitable,
benevolent or educational purposes", the above mentioned fear of
revitalization of religious landholdings in the Philippines is absolutely
dispelled. The fact that the law thus expressly authorizes the
corporations sole to receive bequests or gifts of real properties (which
were the main source that the friars had to acquire their big haciendas
during the Spanish regime), is a clear indication that the requisite that
bequests or gifts of real estate be for charitable, benevolent, or
educational purposes, was, in the opinion of the legislators, considered
sufficient and adequate protection against the revitalization of religious
landholdings.
Finally, and as previously stated, We have reason to believe that when
the Delegates to the Constitutional Convention drafted and approved
Article XIII of the Constitution they do not have in mind the corporation
sole. We come to this finding because the Constitutional Assembly,
composed as it was by a great number of eminent lawyers and jurists,
was like any other legislative body empowered to enact either the
Constitution of the country or any public statute, presumed to know the
conditions existing as to particular subject matter when it enacted a
statute (Board of Commerce of Orange Country vs. Bain, 92 S.E. 176;
N. C. 377).
Immemorial customs are presumed to have been always in the mind of
the Legislature in enacting legislation. (In re Kruger's Estate, 121 A.
109; 277 P. 326).
The Legislative is presumed to have a knowledge of the state of the law
on the subjects upon which it legislates. (Clover Valley Land and Stock
Co. vs. Lamb et al., 187, p. 723,726.)
The Court in construing a statute, will assume that the legislature acted
with full knowledge of the prior legislation on the subject and its
construction by the courts. (Johns vs. Town of Sheridan, 89 N. E. 899,
44 Ind. App. 620.).
The Legislature is presumed to have been familiar with the subject with
which it was dealing . . . . (Landers vs. Commonwealth, 101 S. E. 778,
781.).
The Legislature is presumed to know principles of statutory
construction. (People vs. Lowell, 230 N. W. 202, 250 Mich. 349,
followed in P. vs. Woodworth, 230 N.W. 211, 250 Mich. 436.).
It is not to be presumed that a provision was inserted in a constitution or
statute without reason, or that a result was intended inconsistent with the
judgment of men of common sense guided by reason" (Mitchell vs.
Lawden, 123 N.E. 566, 288 Ill. 326.) See City of Decatur vs. German,
142 N. E. 252, 310 Ill. 591, and may other authorities that can be cited
in support hereof.
Consequently, the Constitutional Assembly must have known:
1. That a corporation sole is organized by and composed of a single
individual, the head of any religious society or church operating within
the zone, area or jurisdiction covered by said corporation sole (Article
155, Public Act No. 1459);
2. That a corporation sole is a non-stock corporation;
3. That the Ordinary ( the corporation sole proper) does not own the
temporalities which he merely administers;
4. That under the law the nationality of said Ordinary or of any
administrator has absolutely no bearing on the nationality of the person
desiring to acquire real property in the Philippines by purchase or other
lawful means other than by hereditary succession, who according to the
Constitution must be a Filipino (sections 1 and 5, Article XIII).
5. That section 159 of the Corporation Law expressly authorized the
corporation sole to purchase and holdreal estate for its church,
charitable, benevolent or educational purposes, and to receive bequests
or gifts for such purposes;
6. That in approving our Magna Carta the Delegates to the
Constitutional Convention, almost all of whom were Roman Catholics,
could not have intended to curtail the propagation of the Roman
Catholic faith or the expansion of the activities of their church, knowing
pretty well that with the growth of our population more places of
worship, more schools where our youth could be taught and trained;
more hallow grounds where to bury our dead would be needed in the
course of time.
Long before the enactment of our Constitution the law authorized the
corporations sole even to receive bequests or gifts of real estates and
this Court could not, without any clear and specific provision of the
Constitution, declare that any real property donated, let as say this year,
could no longer be registered in the name of the corporation sole to
which it was conveyed. That would be an absurdity that should not
receive our sanction on the pretext that corporations sole which have no
nationality and are non-stock corporations composed of only one person
in the capacity of administrator, have to establish first that at least sixty
per centum of their capital belong to Filipino citizens. The new Civil
Code even provides:
ART. 10. — In case of doubt in the interpretation or application of
laws, it is presumed that the lawmaking body intended right and justice
to prevail.
Moreover, under the laws of the Philippines, the administrator of the
properties of a Filipino can acquire, in the name of the latter, private
lands without any limitation whatsoever, and that is so because the
properties thus acquired are not for and would not belong to the
administrator but to the Filipino whom he represents. But the dissenting
Justice inquires: If the Ordinary is only the administrator, for whom
does he administer? And who can alter or overrule his acts? We will
forthwith proceed to answer these questions. The corporations sole by
reason of their peculiar constitution and form of operation have no
designed owner of its temporalities, although by the terms of the law it
can be safely implied that the Ordinary holds them in trust for the
benefit of the Roman Catholic faithful to their respective locality or
diocese. Borrowing the very words of the law, We may say that the
temporalities of every corporation sole are held in trust for the use,
purpose, behalf and benefit of the religious society, or order so
incorporated or of the church to which the diocese, synod, or district
organization is an organized and constituent part (section 163 of the
Corporation Law).
In connection with the powers of the Ordinary over the temporalities of
the corporation sole, let us see now what is the meaning and scope of
the word "control". According to the Merriam-Webster's New
International Dictionary, 2nd ed., p. 580, on of the acceptations of the
word "control" is:
4. To exercise restraining or directing influence over; to dominate;
regulate; hence, to hold from action; to curb; subject; also, Obs. — to
overpower.
SYN: restrain, rule, govern, guide, direct; check, subdue.
It is true that under section 159 of the Corporation Law, the intervention
of the courts is not necessary, to mortgageor sell real property held by
the corporation sole where the rules, regulations and discipline of the
religious denomination, society or church concerned presented by such
corporation sole regulates the methods of acquiring, holding, selling and
mortgaging real estate, and that the Roman Catholic faithful residing in
the jurisdiction of the corporation sole has no say either in the manner of
acquiring or of selling real property. It may be also admitted that the
faithful of the diocese cannot govern or overrule the acts of the
Ordinary, but all this does not mean that the latter can administer the
temporalities of the corporation sole without check or restraint. We must
not forget that when a corporation sole is incorporated under Philippine
laws, the head and only member thereof subjects himself to the
jurisdiction of the Philippine courts of justice and these tribunals can
thus entertain grievances arising out of or with respect to the
temporalities of the church which came into the possession of the
corporation sole as administrator. It may be alleged that the courts
cannot intervene as to the matters of doctrine or teachings of the Roman
Catholic Church. That is correct, but the courts may step in, at the
instance of the faithful for whom the temporalities are being held in
trust, to check undue exercise by the corporation sole of its power as
administrator to insure that they are used for the purpose or purposes for
which the corporation sole was created.
American authorities have these to say:
It has been held that the courts have jurisdiction over an action brought
by persons claiming to be members of a church, who allege a wrongful
and fraudulent diversion of the church property to uses foreign to the
purposes of the church, since no ecclesiastical question is involved and
equity will protect from wrongful diversion of the property (Hendryx vs.
Peoples United Church, 42 Wash. 336, 4 L.R.A. — n.s. — 1154).
The courts of the State have no general jurisdiction and control over the
officers of such corporations in respect to the performance of their
official duties; but as in respect to the property which they hold for the
corporation, they stand in position of TRUSTEES and the courts may
exercise the same supervision as in other cases of trust (Ramsey vs.
Hicks, 174 Ind. 428, 91 N.E. 344, 92 N.E. 164, 30 L.R.A. — n.s. —
665; Hendryx vs. Peoples United Church, supra.).
Courts of the state do not interfere with the administration of church
rules or discipline unless civil rights become involved and which must
be protected (Morris St., Baptist Church vs. Dart, 67 S.C. 338, 45 S.E.
753, and others). (All cited in Vol. II, Cooley's Constitutional
Limitations, p. 960-964.).
If the Constitutional Assembly was aware of all the facts above
enumerated and of the provisions of law relative to existing conditions
as to management and operation of corporations sole in the Philippines,
and if, on the other hand, almost all of the Delegates thereto embraced
the Roman Catholic faith, can it be imagined even for an instant that
when Article XIII of the Constitution was approved the framers thereof
intended to prevent or curtail from then on the acquisition sole, either by
purchase or donation, of real properties that they might need for the
propagation of the faith and for there religious and Christian activities
such as the moral education of the youth, the care, attention and
treatment of the sick and the burial of the dead of the Roman Catholic
faithful residing in the jurisdiction of the respective corporations sole?
The mere indulgence in said thought would impress upon Us a feeling
of apprehension and absurdity. And that is precisely the leit motiv that
permeates the whole fabric of the dissenting opinion.
It seems from the foregoing that the main problem We are confronted
with in this appeal, hinges around the necessity of a proper and adequate
interpretation of sections 1 and 5 of Article XIII of the Constitution. Let
Us then be guided by the principles of statutory construction laid down
by the authorities on the matter:
The most important single factor in determining the intention of the
people from whom the constitution emanated is the language in which it
is expressed. The words employed are to be taken in their natural sense,
except that legal or technical terms are to be given their technical
meaning. The imperfections of language as a vehicle for conveying
meanings result in ambiguities that must be resolved by result to
extraneous aids for discovering the intent of the framers. Among the
more important of these are a consideration of the history of the times
when the provision was adopted and of the purposes aimed at in its
adoption. The debates of constitutional convention, contemporaneous
construction, and practical construction by the legislative and executive
departments, especially if long continued, may be resorted to resolve,
but not to create, ambiguities. . . . Consideration of the consequences
flowing from alternative constructions of doubtful provisions constitutes
an important interpretative device. . . . The purposes of many of the
broadly phrased constitutional limitations were the promotion of
policies that do not lend themselves to definite and specific formulation.
The courts have had to define those policies and have often drawn on
natural law and natural rights theories in doing so. The interpretation of
constitutions tends to respond to changing conceptions of political and
social values. The extent to which these extraneous aids affect the
judicial construction of constitutions cannot be formulated in precise
rules, but their influence cannot be ignored in describing the essentials
of the process (Rottschaeffer on Constitutional Law, 1939 ed., p. 18-19).
There are times that when even the literal expression of legislation may
be inconsistent with the general objectives of policy behind it, and on
the basis of equity or spirit of the statute the courts rationalize a
restricted meaning of the latter. A restricted interpretation is usually
applied where the effect of literal interpretation will make for injustice
and absurdity or, in the words of one court, the language must be so
unreasonable 'as to shock general common sense'. (Vol. 3, Sutherland on
Statutory Construction, 3rd ed., 150.).
A constitution is not intended to be a limitation on the development of a
country nor an obstruction to its progress and foreign relations (Moscow
Fire Ins. Co. of Moscow, Russia vs. Bank of New York and Trust Co.,
294 N. Y. S.648; 56 N.E. 2d. 745, 293 N.Y. 749).
Although the meaning or principles of a constitution remain fixed and
unchanged from the time of its adoption, a constitution must be
construed as if intended to stand for a great length of time, and it is
progressive and not static. Accordingly, it should not receive too narrow
or literal an interpretation but rather the meaning given it should be
applied in such manner as to meet new or changed conditions as they
arise (U.S. vs. Lassic, 313 U.S. 299, 85 L. Ed., 1368).
Effect should be given to the purpose indicated by a fair interpretation
of the language used and that construction which effectuates, rather than
that which destroys a plain intent or purpose of a constitutional
provision, is not only favored but will be adopted (State ex rel.
Randolph Country vs. Walden, 206 S.W. 2d 979).
It is quite generally held that in arriving at the intent and purpose the
construction should be broad or liberal or equitable, as the better method
of ascertaining that intent, rather than technical (Great Southern Life
Ins. Co. vs. City of Austin, 243 S.W. 778).
All these authorities uphold our conviction that the framers of the
Constitution had not in mind the corporations sole, nor intended to
apply them the provisions of section 1 and 5 of said Article XIII when
they passed and approved the same. And if it were so as We think it is,
herein petitioner, the Roman Catholic Apostolic Administrator of
Davao, Inc., could not be deprived of the right to acquire by purchase or
donation real properties for charitable, benevolent and educational
purposes, nor of the right to register the same in its name with the
Register of Deeds of Davao, an indispensable requisite prescribed by
the Land Registration Act for lands covered by the Torrens system.
We leave as the last theme for discussion the much debated question
above referred to as "the vested right saving clause" contained in section
1, Article XIII of the Constitution. The dissenting Justice hurls upon the
personal opinion expressed on the matter by the writer of the decision
the most pointed darts of his severe criticism. We think, however, that
this strong dissent should have been spared, because as clearly indicated
before, some members of this Court either did not agree with the theory
of the writer or were not ready to take a definite stand on that particular
point, so that there being no majority opinion thereon there was no need
of any dissension therefrom. But as the criticism has been made the
writer deems it necessary to say a few words of explanation.
The writer fully agrees with the dissenting Justice that ordinarily "a
capacity to acquire (property) in futuro, is not in itself a vested or
existing property right that the Constitution protects from impairment.
For a property right to be vested (or acquired) there must be a transition
from the potential or contingent to the actual, and the proprietary
interest must have attached to a thing; it must have become 'fixed and
established'" (Balboa vs. Farrales, 51 Phil. 498). But the case at bar has
to be considered as an exception to the rule because among the rights
granted by section 159 of the Corporation Law was the right to receive
bequests or gifts of real properties for charitable, benevolent and
educational purposes. And this right to receive such bequests or gifts
(which implies donations in futuro), is not a mere potentiality that could
be impaired without any specific provision in the Constitution to that
effect, especially when the impairment would disturbingly affect the
propagation of the religious faith of the immense majority of the
Filipino people and the curtailment of the activities of their Church.
That is why the writer gave us a basis of his contention what Professor
Aruego said in his book "The Framing of the Philippine Constitution"
and the enlightening opinion of Mr. Justice Jose P. Laurel, another
Delegate to the Constitutional Convention, in his concurring opinion in
the case of Goldcreek Mining Co. vs. Eulogio Rodriguez et al., 66 Phil.
259. Anyway the majority of the Court did not deem necessary to pass
upon said "vested right saving clause" for the final determination of this
case.
JUDGMENT
Wherefore, the resolution of the respondent Land Registration
Commission of September 21, 1954, holding that in view of the
provisions of sections 1 and 5 of Article XIII of the Philippine
Constitution the vendee (petitioner) is not qualified to acquire lands in
the Philippines in the absence of proof that at least 60 per centum of the
capital, properties or assets of the Roman Catholic Apostolic
Administrator of Davao, Inc. is actually owned or controlled by Filipino
citizens, and denying the registration of the deed of sale in the absence
of proof of compliance with such requisite, is hereby reversed.
Consequently, the respondent Register of Deeds of the City of Davao is
ordered to register the deed of sale executed by Mateo L. Rodis in favor
of the Roman Catholic Apostolic Administrator of Davao, Inc., which is
the subject of the present litigation. No pronouncement is made as to
costs. It is so ordered.
Bautista Angelo and Endencia, JJ., concur.
Paras, C.J., and Bengzon, J., concur in the result.
LABRADOR, J., concurring:
The case at bar squarely present this important legal question: Has the
bishop or ordinary of the Roman Catholic Church who is not a Filipino
citizen, as corporation sole, the right to register land, belonging to the
Church over which he presides, in view of the Krivenko decision? Mr.
Justice Felix sustains the affirmative view while Mr. Justice J. B. L.
Reyes, the negative. As the undersigned understands it, the reason given
for this last view is that the constitutional provision prohibiting land
ownership by foreigners also extends to control because this lies within
the scope and purpose of the prohibition.
To our way of thinking, the question at issue depends for its resolution
upon another, namely, who is the owner of the land or property of the
Church sought to be registered? Under the Canon Law the parish and
the diocese have the right to acquire and own property.
SEC. 1. La Iglesia catolica y la Sede Apostolica, libre e
independientemente de la potestad civil, tiene derecho innato de
adquirir, retener y administrar bienes temporales para el logro de sus
propios fines.
SEC. 2. Tambien las iglesias particulares y demas personas morales
erigidas por la autoridad eclesiastica en persona juridica, tienen derecho,
a tenor de los sagrados canones, de adquirir, retener y administrar bienes
temporales. (Canon 1495) (Codigo de Derecho Canonico por Miguelez-
Alonzo-Cabreros, 4a ed., p. 562.).
The Canon Law further states that Church property belongs to the non-
collegiate moral person called the parish, or to the diocese.
In canon law the ownership of ecclesiastical goods belongs to each
separate juridical person in the Church (C. 1499). The property of St.
John's Church does not belong to the Pope, the bishop, the pastor, or
even to the people of the parish. It belongs to the non-collegiate moral
person called the parish, which has been lawfully erected. It is not like a
stock company. The civil law does not recognize this canonical
principle; it insists on an act of civil incorporation or some other legal
device. (Ready Answers in Canon Law by Rev. P.J. Lydon, DD., 3rd ed.,
1948, p. 576.).
Parish. 3. A portion or subdivision of a diocese committed to the
spiritual jurisdiction or care of a priest or minister, called rector or
pastor. In the Protestant Episcopal Church, it is a territorial division
usually following civil bounds, as those of a town. In the Roman
Catholic Church, it is usually territorial, but whenever, as in some parts
of the United States there are different rites and languages, the
boundaries and jurisdiction are determined by right or language; as, a
Ruthenian or Polish parish. "5. The inhabitants or members of a parish,
collectively.
Diocese. 3. Eccl. The circuit or extent of a bishop's jurisdiction; the
district in which a bishop has authority. (Webster's New International
Dictionary).
We are aware of the fact that some writers believe that ownership of
ecclesiastical properties resides in the Roman Catholic Pontiff as Head
of the Universal Church, but the better opinion seems to be that they do
belong to the parishes and diocese as above indicated.
Canonists entertain different opinions as to the person in whom the
ownership of the ecclesiastical properties is vested, with respect to
which we shall, for our purpose, confine ourselves to stating with
Donoso that, while many doctors cited by Fagnano believe that it
resides in the Roman Pontiff as Head of the Universal Church, it is more
probable that ownership, strictly speaking, does not reside in the latter
and, consequently, ecclesiastical properties are owned by the churches,
institutions and canonically established private corporations to which
said properties have been donated. (3 Campos y Pulido, Legislacion y
Jurisprudencia Canonica, P. 420, cited in Trinidad vs. Roman Catholic
Archbishop of Manila, 63 Phil., 881, 888-889.).
The property in question, therefore, appears to belong to the parish or
the diocese of Davao. But the Roman Catholics of Davao are not
organized as a juridical person, either under the Canon law or under the
Civil Law. Neither is there any provision in either for their organization
as a juridical person. Registration of the property in the name of the
Roman Catholics of Davao is, therefore, impossible.
As under the Civil Law, however, the organization of parishes and
dioceses as juridical persons is not expressly provided for, the
corporation law has set up the fiction known as the "corporation sole."
It tolerates the corporation sole wherever and as long as the state law
does not permit the legal incorporation of the parish or diocese. The
bishop officially is the legal owner. (Ready Answers in Canon
Law, supra, p. 577.) .
and authorizes it to purchase and hold real estate for the Church.
SEC. 159. Any corporation sole may purchase and hold real estate and
personal property for its church, charitable, benevolent, or educational
purposes, and may receive bequests or gifts for such purposes. Such
corporation may mortgage or sell real property held by it upon obtaining
an order for that purpose from the Court of First Instance of the
province in which the property is situated; but before making the order
proof must be made to the satisfaction of the court that notice of the
application for leave to mortgage or sell has been given by publication
or otherwise in such manner and for such time as said court or the judge
thereof may have directed, and that it is to the interest of the corporation
that leave to mortgage or sell should be granted. The application for
leave to mortgage or sell must be made by petition, duly verified by the
bishop, chief priest, or presiding elder, acting as corporation sole, and
may be opposed by any member of the religious denomination, society,
or church represented by the corporation sole: Provided, however, That
in cases when the rules, regulations and discipline of the religious
denomination, society or church concerned represented by such
corporation sole regulate the methods of acquiring, holding, selling, and
mortgaging real estate and personal property, such rules, regulations,
and discipline shall control and the intervention of the courts shall not
be necessary. (The Corporation Law.)
And in accordance with the above section, temporalities of the Church
or of parish or a diocese are allowed to be registered in the name of the
corporation sole for purposes of administration and in trust for the real
owners.
The mere fact that the Corporation Law authorizes the corporation sole
to acquire and hold real estate or other property does not make the latter
the real owner thereof, as his tenure of Church property is merely for the
purposes of administration. As stated above, the bishop is only the legal
(technical) owner or trustee, the parish or diocese being the beneficial
owner, or cestui que trust.
Having arrived at the conclusion that the property in question belongs
actually either to the parish or to the dioceses of Davao, the next
question that possess for solution is, In case of said property, whose
nationality must be considered for the purpose of determining the
applicability of the constitutional provision limiting ownership of land
to Filipinos, that of the bishop or chief priest who registers as
corporation sole, or that of the constituents of the parish or diocese who
are the beneficial owners of the land? We believe that of a latter must be
considered, and not that of the priest clothed with the corporate fiction
and denominated as the corporation sole. The corporation sole is a mere
contrivance to enable a church to acquire, own and manage properties
belonging to the church. It is only a means to an end. The constitutional
provision could not have been meant to apply to the means through
which and by which property may be owned or acquired, but to the
ultimate owner of the property. Hence, the citizenship of the priest
forming the corporation sole should be no impediment if the parish or
diocese which owns the property is qualified to own and possess the
property.
We can take judicial notice of the fact that a great majority of the
constituents of the parish or diocese of Davao are Roman Catholics. The
affidavit demanded is therefore, a mere formality.
The dissenting opinion sustains the proposition that control, not actual
ownership, is the factor that determines whether the constitutional
prohibition against alien ownership of lands should or should not apply.
We may assume the correctness of the proposition that the Holy See
exercises control cannot be real and actual but merely theoretical. In any
case, the constitutional prohibition is limited by its terms to ownership
and ownership alone. And should the corporation sole abuse its powers
and authority in relation to the administration or disposal of the property
contrary to the wishes of the constituents of the parish or the diocese,
the act may always be questioned as ultra vires.
We agree, therefore, with the reversal of the order.
Montemayor and Reyes, A., JJ., concur.
REYES, J.B.L., dissenting:
I regret not being able to assent to the opinion of Mr. Justice Felix. The
decision of the Supreme Court in this case will be of far reaching
results, for once the capacity of corporations sole to acquire public and
private agricultural lands is admitted, there will be no limit to the areas
they may hold until the Legislature implements section 3 of Article XIII
of the Constitution, empowering it to set a limit to the size of private
agricultural land that may be held; and even then it can only be
done without prejudice to rights acquired prior to the enactment of such
law. In other words, even if a limitative law is adopted, it will not affect
the landholdings acquired before the law become effective, no matter
how vast the estate should be.
The Constitutional restrictions to the acquisition of agricultural land are
well known:
SECTION 1. All agricultural, timber, and mineral lands of the public
domain, waters, minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, and other natural resources of the Philippines
belong to the State, and their disposition, exploitation, development, or
utilization shall be limited to citizens of the Philippines, or to
corporations or associations at least sixty per centum of the capital of
which is owned by such citizens, subject to any existing right, grant,
lease, or concession at the time of the inauguration of the Government
established under this Constitution. Natural resources, with the
exception of public agricultural land, shall not be alienated, and no
license, concession, or lease for the exploitation, development, or
utilization of any of the natural resources shall be granted for a period
exceeding twenty-five years, renewable for another twenty-five years,
except as to water rights for irrigation, water supply fisheries, or
industrial uses other than the development of water power, in which
cases beneficial use may be the measure and the limit of the grant.
(Article XII, Constitution of the Phil.).
SEC. 5. Save in cases of hereditary succession, no private agricultural
land shall be transferred or assigned except to individuals, corporations,
or associations qualified to acquire or hold lands of the public domain in
the Philippines. (Art. XII, Constitution of the Phil.).
In requiring corporations or associations to have sixty per cent (60%) of
their capital owned by Filipino citizens, the constitution manifestly
disregarded the corporate fiction, i.e., the juridical personality of such
corporations or associations. It went behind the corporate entity and
looked at the natural persons that composed it, and demanded that a
clear majority in interest (60%) should be Filipino. To me this was done
to ensure that the control of its properties (not merely the beneficial
ownership thereof) remained in Filipino hands. (Aruego, Framing of the
Constitution, Vol. 2. pp. 604, 606.) .
The nationalization of the natural resources of the country was intended
(1) to insure their conservation for Filipino posterity; (2) to serve as an
instrument of national defense, helping prevent the extension into the
country of foreign control through peaceful economic penetration; and
(3) to prevent making the Philippines a source of international conflicts
with the consequent danger to its internal security and
independence. . . .
The convention permitted aliens to acquire an interest in the natural
resources of the country and in private agricultural lands as component
elements of corporations or associations. The maximum limit of interest
that they could hold in a corporation or association would be only
forty per centum of the capital. Accordingly the control of the
corporation or association would remain in Filipino hands.
In its report the committee on nationalization and preservation of lands
and other natural resources recommended that the maximum limit of
interest that aliens could hold in a corporation or association should be
only twenty-five per centum of the capital. The purpose of the
committee was to enable Filipino-controlled corporations or
associations, if necessary, to interest aliens to join their technical or
managerial staff by giving them a part interest in the same. The sub-
committee of seven embodied this recommendation in the first draft of
the Constitution; but in the revised article on General Provisions, it
raised the amount to forty per centum. (emphasis supplied.)
It was in recognition of this basic rule that we held in Register of Deeds
vs. Ung Siu Si Temple, 51 Off. Gaz. p. 2866, that if the association had
no capital, its controlling membership must be composed of Filipinos.
Because ownership divorced from control is not true ownership.
From these premises it can be deduced that the preliminary question to
be decide by the court is the following: what and who exercises the
power of control in the corporation sole known as "The Roman Catholic
Apostolic Administrator of Davao, Inc."?.
Under section 155 of the Corporation Law, the bishop, or other religious
head, as corporation sole, is "charged with the administration of the
temporalities of his church." It becomes then pertinent to inquire: if he
is only an administrator, for whom does he administer? And who can
alter or overrule his acts?
If his acts as administrator can not be overridden, or altered, except by
himself, then obviously the control of the corporation and its
temporalities is in the bishop himself, and he must be a Filipino citizen.
If, on the other hand, the final say as to management, exploitation,
encumbrance or disposition of the temporalities resides in another
individual or body of individuals, then the control resides there. To
possess constitutional capacity to acquire agricultural land or other
natural resources, that body making the final decision for the
corporation must have at least 60 per cent Filipino membership.
By this test, the body of members professing the Catholic faith in the
diocese of Davao does not constitute the controlling membership. For
under the rules of the Roman Catholic Church the faithful can not
control the acts of the Ordinary; they cannot override his decision, just
as they do not elect or remove him. Only his hierarchical superiors can
do that; the control is from above, not from below. Hence, the fact that
90 per cent (or even 100 per cent) of the faithful in the diocese should
be composed of Filipino citizens is totally devoid of significance from
the standpoint of the constitutional restrictions in question (see Codex,
Canons 1518 and 1530, paragraph 1, No. 3).
Moreover, I do not think that the body of Catholic faithful in the Davao
diocese can be taken, for the purpose here under consideration, as the
Church represented by the Ordinary of Davao. That body does not
constitute an entity or unit separate and apart from the rest of the faithful
throughout the world that compose the Roman Catholic Church that has
always claimed ecumenical (universal) character. There is nom Catholic
Church of Davao district and independent of the Catholic Church of
Manila, Lipa or Rome. All those professing Catholic faith are members
of only one single church or religious group. Thus the Iglesia Filipina
Independiente is not part of the Catholic Church, precisely because of
its independence.
If, the, the Catholic Church of Davao is part and parcel of the universal
Catholic Church, it can not be considered separate and apart from it in
this case. And if considered with it, obviously the condition of 60 per
cent Filipino membership is not satisfied when all the Catholic faithful
in the world are taken into account.
The unity and singleness of the various diocese of the church appears
expressly recognized in section 163 of the Corporation Law, which
provides that the corporation (sole) shall hold the temporalities, not for
the diocese; but for the benefit "of the church of which the diocese — is
an organized or constituent part."
SEC. 163. The right to administer all temporalities and all property held
or owned by a religious order or society, or by the diocese synod, or
district organization of any religious denomination or church shall, on
its incorporation, pass to the corporation and shall be held in trust for
the use purpose, behalf, and benefit of the religious society or order so
incorporated or of the church of which the diocese, synod, or district
organization is an organized and constituent part.
So that, even from the standpoint of beneficial ownership, the dioceses
of Davao can not be viewed as a group legally isolated from the
Catholic Church as a whole.
Nor does court control over the acts of the corporation sole constitute a
guarantee of Filipino control that would satisfy the purposes of the
constitution, for the reason that under section 159 (last proviso) of the
Corporation law, the court intervention is dispensed with where the rules
and discipline of the church already regulate the acquisition and
disposition of real estate and personal property.
Provided however, that in cases where the rules, regulations and
discipline of the religious denomination, society, or church concerned
represented by such corporation sole regulate the methods of acquiring,
holding, selling, and mortgaging real estate and personal property, such
rules, regulations, and discipline shall control and the intervention of the
courts shall not be necessary. (emphasis supplied.)
It is argued that a distinction must be drawn between the lands to be
devoted to purely religious purposes and the lands held in ordinary
ownership. But where in the Constitution is such a distinction drawn?
Under it, capacity to acquire agricultural land for the erection of a
church is capacity to acquire agricultural lands for any lawful purpose,
whether it be for convents or schools or seminaries or haciendas for
their support or land to be held solely for enjoyment of the revenue.
Once the capacity to acquire is granted, the way is paved for the
revitalization of religious landholdings that proved so troublesome in
our past. I cannot conceive that the Constitution intended to revive
them.
It is also argued that, before the Constitution was adopted, the
corporations sole had, by express statute, the right to acquire
agricultural land; and that the Constitution was not intended to destroy
such "acquired property rights." If followed, the argument destroys the
constitutional restrictions. All aliens had a capacity to acquire
agricultural land before the Constitution came into effect, because no
prohibition existed previously. Must their right to acquire and hold
agricultural land be conceded in spite of the Constitution?.
That the law should have expressly conferred capacity to acquire land
upon corporations sole was not due any special predilection for them; it
was exclusively due to the principle that corporation, as artificial
entities, have no inherent rights, but only those granted by the
sovereign. Unless conferred, the corporate right would not exist.
Furthermore, a capacity to acquire in futuro, is not in itself a vested
existing property right that the Constitution protects from impairment.
For a property right to be vested (or acquired) there must be a transition
from the potential, or contingent, to the actual, and the proprietary
interest must have attached to a thing, it must have become "fixed or
established "(Balboa vs. Farrales, 51 Phil. 498). If mere potentialities
cannot be impaired, then the law would become unchangeable, for every
variation in it will reduce some one's legal ability to do or not to do.
Already in Benguet Consolidated vs. Pineda, 3 52 Off. Gaz. 1961, we
have ruled that no one has a vested right in statutory privileges or
exemptions. And in the concurring opinion in Gold Creek Mining Corp.
vs. Rodriguez, 66 Phil. 259 (cited by Justice Felix), Mr. Justice Laurel
squarely declared that "contingency or expectation is neither property
right." (cas. cit., p. 269.) Finally, the point is also made that the
Ordinary, as religious corporation sole, has no citizenship, and is not an
alien. The answer is that under the Constitution of the Republic, it is not
enough that the acquirer of agricultural land be not an alien; he must be
a Filipino or controlled by Filipinos.
Wherefore, I am constrained to conclude:
(1) That the capacity of religious corporations sole to acquire
agricultural land depends upon 60 per cent Filipino membership of the
group or body exercising control of the corporation;lawphi1.net
(2) That if control of any such corporation should be vested in a single
person, then such person must be a Filipino citizen;1awphi1.net
(3) That in the absence of evidence on these points, the order appealed
from, denying registration of the conveyance, should be affirmed.
Concepcion, J., concur.
Footnotes
1 Translation. — Unless by lawful provisions more ample rights are
conferred upon him, to the local Ordinary pertains the duty to exercise
diligence in the administration of all the ecclesiastical properties located
within the territory and to avoid their removal from his jurisdiction.
Taking into account the rights and the legitimate customs and
circumstances, every Ordinary shall endeavor to regulate everything
concerning the administration of the ecclesiastical properties and shall
give, within the bonds of Common Law, timely and particular
instructions therefor.
2 97 Phil., 58.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-10520 February 28, 1957
LORENZO M. TAÑADA and DIOSDADO
MACAPAGAL, petitioners,
vs.
MARIANO JESUS CUENCO, FRANCISCO A. DELGADO,
ALFREDO CRUZ, CATALINA CAYETANO, MANUEL
SERAPIO, PLACIDO REYES, and FERNANDO HIPOLITO in his
capacity as cashier and disbursing officer,respondents.
Tañada, Teehankee and Macapagal for petitioners.
Office of the Solicitor General Ambrosio Padilla and Solicitor Troadio
T. Quiazon, Jr. for respondents.
CONCEPCION, J.:
Petitioner Lorenzo M. Tañada is a member of the Senate of the
Philippines, and President of the Citizens Party, whereas petitioner
Diosdado Macapagal, a member of the House of Representatives of the
Philippines, was one of the official candidates of the Liberal Party for
the Senate, at the General elections held in November, 1955, in which
Pacita Madrigal Warns, Lorenzo Sumulong, Quintin Paredes, Francisco
Rodrigo, Pedro Sabido, Claro M. Recto, Domocao Alonto and Decoroso
Rosales, were proclaimed elected. Subsequently, the elections of this
Senators-elect-who eventually assumed their respective seats in the
Senate-was contested by petitioner Macapagal, together with Camilo
Osias, Geronima Pecson, Macario Peralta, Enrique Magalona, Pio
Pedrosa and William Chiongbian-who had, also, run for the Senate, in
said election-in Senate Electoral Case No. 4, now pending before the
Senate Electoral Tribunal. .
The Senate, in its session of February 22, 1956, upon nomination of
Senator Cipriano Primicias, on behalf of the Nacionalista Party, chose
Senators Jose P. Laurel, Fernando Lopez and Cipriano Primicias, as
members of the Senate Electoral Tribunal. Upon nomination of
petitioner Senator Tañada, on behalf of the Citizens Party, said petitioner
was next chosen by the Senate as member of said Tribunal. Then, upon
nomination of Senator Primicias on behalf of the Committee on Rules
of the Senate, and over the objections of Senators Tañada and
Sumulong, the Senate choose respondents Senators Mariano J. Cuenco
and Francisco A. Delgado as members of the same Electoral Tribunal.
Subsequently, the Chairman of the latter appointed: (1) Alfredo Cruz
and Catalina Cayetano, as technical assistant and private secretary,
respectively, to Senator Cuenco, as supposed member of the Senate
Electoral Tribunal, upon his recommendation of said respondent; and
(2) Manuel Serapio and Placido Reyes, as technical assistant and private
secretary, respectively to Senator Delgado, as supposed member of said
Electoral Tribunal, and upon his recommendation.
Soon, thereafter, Senator Lorenzo M. Tañada and Congressman
Diosdado Macapagal instituted the case at bar against Senators Cuenco
and Delgado, and said Alfredo Cruz, Catalina Cayetano, Manuel
Serapio and Placido Reyes, as well as Fernando Hipolito, in his capacity
as Cashier and Disbursing Officer of the Senate Electoral Tribunal.
Petitioners allege that on February 22, 1956, as well as at present, the
Senate consists of 23 Senators who belong to the Nacionalista Party, and
one (1) Senator-namely, petitioner, Lorenzo M. Tañada-belonging to the
Citizens Party; that the Committee on Rules for the Senate, in
nominating Senators Cuenco and Delgado, and the Senate, in choosing
these respondents, as members of the Senate Electoral Tribunal, had
"acted absolutely without power or color of authority and in clear
violation .. of Article VI, Section 11 of the Constitution"; that "in
assuming membership in the Senate Electoral Tribunal, by taking the
corresponding oath of office therefor", said respondents had "acted
absolutely without color of appointment or authority and are unlawfully,
and in violation of the Constitution, usurping, intruding into and
exercising the powers of members of the Senate Electoral Tribunal";
that, consequently, the appointments of respondents, Cruz, Cayetano,
Serapio and Reyes, as technical assistants and private secretaries to
Senators Cuenco and Delgado-who caused said appointments to be
made-as members of the Senate Electoral Tribunal, are unlawful and
void; and that Senators Cuenco and Delgado "are threatening and are
about to take cognizance of Electoral Case No. 4 of the Senate Electoral
Tribunal, as alleged members thereof, in nullification of the rights of
petitioner Lorenzo M. Tañada, both as a Senator belonging to the
Citizens Party and as representative of the Citizens Party in the Senate
Electoral Tribunal, and in deprivation of the constitutional rights of
petitioner Diosdado Macapagal and his co-protestants to have their
election protest tried and decided-by an Electoral Tribunal composed of
not more than three (3) senators chosen by the Senate upon nomination
of the party having the largest number of votes in the Senate and not
more than the (3) Senators upon nomination of the Party having the
second largest number of votes therein, together, three (3) Justice of the
Supreme Court to be designated by the Chief Justice, instead of by an
Electoral Tribunal packed with five members belonging to the
Nacionalista Party, which is the rival party of the Liberal Party, to which
the Petitioner Diosdado Macapagal and his co-protestants in Electoral
Case No. 4 belong, the said five (5) Nacionalista Senators having been
nominated and chosen in the manner alleged.. hereinabove.".
Petitioners pray that:.
"1. Upon petitioners' filing of bond in such amount as may be
determined by this Honorable Court, a writ of preliminary injunction be
immediately issued directed to respondents Mariano J. Cuenco,
Francisco A. Delgado, Alfredo Cruz, Catalina Cayetano, Manuel
Serapio and Placido Reyes, restraining them from continuing to usurp,
intrude into and/ or hold or exercise the said public offices respectively
being occupied by them in the Senate Electoral Tribunal, and to
respondent Fernando Hipolito restraining him from paying the salaries
of respondent Alfredo Cruz, Catalina Cayetano, Manuel Serapio and
Placido Reyes, pending this action.
"2. After hearing, judgment be rendered ousting respondent Mariano J.
Cuenco Francisco A. Delgado, Alfredo Cruz, Catalina Cayetano,
Manuel Serapio and Placido Reyes from the aforementioned public
offices in the Senate Electoral Tribunal and that they be altogether
excluded therefrom and making the Preliminary injunction permanent,
with costs against the respondents.".
Respondents have admitted the main allegations of fact in the petition,
except insofar as it questions the legality, and validity of the election of
respondents Senators Cuenco and Delgado, as members of the Senate
Electoral Tribunal, and of the appointment of respondent Alfredo Cruz,
Catalina Cayetano, Manuel Serapio and Placido Reyes as technical
assistants and private secretaries to said respondents Senators.
Respondents, likewise, allege, by way of special and affirmative
defenses, that: (a) this Court is without power, authority of jurisdiction
to direct or control the action of the Senate in choosing the members of
the Electoral Tribunal; and (b) that the petition states no cause of action,
because "petitioner Tañada has exhausted his right to nominate after he
nominated himself and refused to nominate two (2) more Senators",
because said petitioner is in estoppel, and because the present action is
not the proper remedy. .
I. Respondents assail our jurisdiction to entertain the petition, upon the
ground that the power to choose six (6) Senators as members of the
Senate Electoral Tribunal has been expressly conferred by the
Constitution upon the Senate, despite the fact that the draft submitted to
the constitutional convention gave to the respective political parties the
right to elect their respective representatives in the Electoral
Commission provided for in the original Constitution of the Philippines,
and that the only remedy available to petitioners herein "is not in the
judicial forum", but "to bring the matter to the bar of public opinion.".
We cannot agree with the conclusion drawn by respondents from the
foregoing facts. To begin with, unlike the cases of Alejandrino vs.
Quezon (46 Phil., 83) and Vera vs. Avelino (77 Phil., 192)-relied upon
by the respondents this is not an action against the Senate, and it does
not seek to compel the latter, either directly or indirectly, to allow the
petitioners to perform their duties as members of said House. Although
the Constitution provides that the Senate shall choose six (6) Senators to
be members of the Senate Electoral Tribunal, the latter is part neither of
Congress nor of the Senate. (Angara vs. Electoral Commission, 63 Phil.,
139, Suanes vs. Chief Accountant, 81 Phil., 818; 46 Off. Gaz., 462.).
Secondly, although the Senate has, under the Constitution, the exclusive
power to choose the Senators who shall form part of the Senate
Electoral Tribunal, the fundamental law has prescribed the manner in
which the authority shall be exercised. As the author of a very
enlightening study on judicial self-limitation has aptly put it:.
"The courts are called upon to say, on the one hand, by whom certain
powers shall be exercised, and on the other hand, to determine whether
the powers possessed have been validly exercised. In performing the
latter function, they do not encroach upon the powers of a coordinate
branch of the, government, since the determination of the validity of an
act is not the same, thing as the performance of the act. In the one case
we are seeking to ascertain upon whom devolves the duty of the
particular service. In the other case we are merely seeking to determine
whether the Constitution has been violated by anything done or attented
by either an executive official or the legislative." (Judicial Self-
Limitation by Finkelstein, pp. 221, 224, 244, Harvard Law Review, Vol.
39; emphasis supplied,).
The case of Suanes vs. Chief Accountant (supra) cited by respondent
refutes their own pretense. This Court exercised its jurisdiction over said
case and decided the same on the merits thereof, despite the fact that it
involved an inquiry into the powers of the Senate and its President over
the Senate Electoral Tribunal and the personnel thereof. .
Again, under the Constitution, "the legislative power" is vested
exclusively in the Congress of the Philippines. Yet, this does not detract
from the power of the courts to pass upon the constitutionality of acts of
Congress 1 And, since judicial power includes the authority to inquire
into the legality of statutes enacted by the two Houses of Congress, and
approved by the Executive, there can be no reason why the validity of
an act of one of said Houses, like that of any other branch of the
Government, may not be determined in the proper actions. Thus, in the
exercise of the so-called "judicial supremacy", this Court declared that a
resolution of the defunct National Assembly could not bar the exercise
of the powers of the former Electoral Commission under the original
Constitution. 2 (Angara vs. Electoral Commission, supra), and annulled
certain acts of the Executive 3 as incompatible with the fundamental
law.
In fact, whenever the conflicting claims of the parties to a litigation
cannot properly be settled without inquiring into the validity of an act of
Congress or of either House thereof, the courts have, not only
jurisdiction to pass upon said issue, but, also, the duty to do so, which
cannot be evaded without violating the fundamental law and paving the
way to its eventual destruction. 4.
Neither are the cases of Mabanag vs. Lopez Vito (78 Phil., 1) and Cabili
vs. Francisco (88 Phil., 654), likewise, invoked by respondents, in point.
In the Mabanag case, it was held that the courts could not review the
finding of the Senate to the effect that the members thereof who had
been suspended by said House should not be considered in determining
whether the votes cast therein, in favor of a resolution proposing an
amendment to the Constitution, sufficed to satisfy the requirements of
the latter, such question being a political one. The weight of this
decision, as a precedent, has been weakened, however, by our
resolutions in Avelino vs. Cuenco (83 Phil., 17), in which this Court
proceeded to determine the number essential to constitute a quorum in
the Senate. Besides, the case at bar does not hinge on the number of
votes needed for a particular act of said body. The issue before us is
whether the Senate-after acknowledging that the Citizens Party is the
party, having the second largest number of votes in the Senate, to which
party the Constitution gives the right to nominate three (3) Senators for
the Senate electoral Tribunal-could validly choose therefor two (2)
Nacionalista Senators, upon nomination by the floor leader of the
Nacionalista Party in the Senate, Senator Primicias claiming to act on
behalf of the Committee on Rules for the Senate.
The issue in the Cabili case was whether we could review a resolution
of the Senate reorganizing its representation in the Commission on
Appointments. This was decided in the negative, upon the authority of
Alejandrino vs. Quezon (supra) and Vera vs. Avelino (supra), the main
purpose of the petition being "to force upon the Senate the reinstatement
of Senator Magalona in the Commission on Appointments," one-half
(1/2) of the members of which is to be elected by each House on the
basis of proportional representation of the political parties therein.
Hence, the issue depended mainly on the determination of the political
alignment of the members of the Senate at the time of said
reorganization and of the necessity or advisability of effecting said
reorganization, which is a political question. We are not called upon, in
the case at bar, to pass upon an identical or similar question, it being
conceded, impliedly, but clearly, that the Citizens Party is the party with
the second largest number of votes in the Senate. The issue, therefore, is
whether a right vested by the Constitution in the Citizens Party may
validly be exercised, either by the Nacionalista Party, or by the
Committee on Rules for the Senate, over the objection of said Citizens
Party.
xxx xxx xxx
The only ground upon which respondents' objection to the jurisdiction
of this Court and their theory to the effect that the proper remedy for
petitioners herein is, not the present action, but an appeal to public
opinion, could possibly be entertained is, therefore, whether the case at
bar raises merely a political question, not one justiciable in nature.
In this connection, respondents assert in their answer that "the remedy
of petitioners is not in the judicial forum, but, to use petitioner, Tañada's
own words, to bring the matter to the bar of public opinion' (p. 81,
Discussion on the Creation of the Senate Electoral Tribunal, February
21, 1956)." This allegation may give the impression that said petitioner
had declared, on the floor of the Senate, that his only relief against the
acts complained of in the petition is to take up the issue before the
people- which is not a fact. During the discussions in the Senate, in the
course of the organization of the Senate Electoral Tribunal, on February
21, 1956, Senator Tañada was asked what remedies he would suggest if
he nominated two (2) Nacionialista Senators and the latter declined the,
nomination. Senator Tañada replied:.
"There are two remedies that occur to my mind right now, Mr. Senator;
one is the remedy open to all of us that if we feel aggrieved and there is
no recourse in the court of justice, we can appeal to public opinion.
Another remedy is an action in the Supreme Court. Of course, as
Senator Rodriguez, our President here, has said one day; "If you take
this matter to the Supreme Court, you will lose, because until now the
Supreme Court has always ruled against any action that would
constitute interference in the business of anybody pertaining to the
Senate. The theory of separation of powers will be upheld by the
Supreme Court." But that learned opinion of Senator Rodriguez, our
President, notwithstanding, I may take the case to the Supreme Court if
my right herein is not respected. I may lose, Mr. President, but who has
not lost in the Supreme Court? I may lose because of the theory of the
separation of powers, but that does not mean, Mr. President, that what
has been done here is pursuant to the provision of the Constitution."
(Congressional Record, Vol. III, p. 339; emphasis supplied.).
This statement did not refer to the nomination, by Senator Primicias,
and the election, by the Senate, of Senators Cuenco and Delgado as
members of said Tribunal. Indeed, said nomination and election took
place the day after the aforementioned statement of Senator Tañada was
made. At any rate, the latter announced that he might "take the case to
the Supreme Court if my right here is not respected.".
As already adverted to, the objection to our jurisdiction hinges on the
question whether the issue before us is political or not. In this
connection, Willoughby lucidly states:.
"Elsewhere in this treatise the well-known and well-established
principle is considered that it is not within the province of the courts to
pass judgment upon the policy of legislative or executive action. Where,
therefore, discretionary powers are granted by the Constitution or by
statute, the manner in which those powers are exercised is not subject to
judicial review. The courts, therefore, concern themselves only with the
question as to the existence and extent of these discretionary powers.
"As distinguished from the judicial, the legislative and executive
departments are spoken of as the political departments of government
because in very many cases their action is necessarily dictated by
considerations of public or political policy. These considerations of
public or political policy of course will not permit the legislature to
violate constitutional provisions, or the executive to exercise authority
not granted him by the Constitution or by, statute, but, within these
limits, they do permit the departments, separately or together, to
recognize that a certain set of facts exists or that a given status exists,
and these determinations, together with the consequences that flow
therefrom, may not be traversed in the courts." (Willoughby on the
Constitution of the United States, Vol. 3, p. 1326; emphasis supplied.).
To the same effect is the language used in Corpus Juris Secundum, from
which we quote:.
"It is well-settled doctrine that political questions are not within the
province of the judiciary, except to the extent that power to deal with
such questions has been conferred upon the courts by express
constitutional or statutory provisions.
"It is not easy, however, to define the phrase `political question', nor to
determine what matters, fall within its scope. It is frequently used to
designate all questions that lie outside the scope of the judicial
questions, which under the constitution, are to be decided by the people
in their sovereign capacity, or in regard to which full discretionary
authority has been delegated to the legislative or executive branch of the
government." (16 C.J.S., 413; see, also Geauga Lake Improvement
Ass'n. vs. Lozier, 182 N. E. 491, 125 Ohio St. 565; Sevilla vs, Elizalde,
112 F. 2d 29, 72 App. D. C., 108; emphasis supplied.).
Thus, it has been repeatedly held that the question whether certain
amendments to the Constitution are invalid for non-compliance with the
procedure therein prescribed, is not a political one and may be settled by
the Courts. 5 .
In the case of In re McConaughy (119 N.W. 408), the nature of political
question was considered carefully. The Court said:.
"At the threshold of the case we are met with the assertion that the
questions involved are political, and not judicial. If this is correct, the
court has no jurisdiction as the certificate of the state canvassing board
would then be final, regardless of the actual vote upon the amendment.
The question thus raised is a fundamental one; but it has been so often
decided contrary to the view contended for by the Attorney General that
it would seem to be finally settled.
xxx xxx x x x.
" .. What is generally meant, when it is, said that a question is political,
and not judicial, is that it is a matter which, is to be exercised by the
people in their primary political capacity, or that it has been specifically
delegated to some other department or particular officer of the
government, with discretionary power to act. See State vs. Cunningham,
81 Wis. 497, 51 L. R. A. 561; In Re Gunn, 50 Kan. 155; 32 Pac. 470,
948, 19 L. R. A. 519; Green vs. Mills, 69 Fed. 852, 16, C. C. A. 516, 30
L. R. A. 90; Fletcher vs. Tuttle, 151 Ill. 41, 37 N. E. 683, 25 L. R. A.
143, 42 Am. St. Rep. 220. Thus the Legislature may in its discretion
determine whether it will pass a law or submit a proposed constitutional
amendment to the people. The courts have no judicial control over such
matters, not merely because they involve political question, but because
they are matters which the people have by the Constitution delegated to
the Legislature. The Governor may exercise the powers delegated to
him, free from judicial control, so long as he observes the laws and acts
within the limits of the power conferred. His discretionary acts cannot
be controllable, not primarily because they are of a political nature, but
because the Constitution and laws have placed the particular matter
under his control. But every officer under a constitutional government
must act according to law and subject him to the restraining and
controlling power of the people, acting through the courts, as well as
through the executive or the Legislature. One department is just as
representative as the other, and the judiciary is the department which is
charged with the special duty of determining the limitations which the
law places upon all official action. The recognition of this principle,
unknown except in Great Britain and America, is necessary, to the end
that the government may be one of laws and not men'-words which
Webster said were the greatest contained in any written constitutional
document." (pp. 411, 417; emphasis supplied.).
In short, the term "political question" connotes, in legal parlance, what it
means in ordinary parlance, namely, a question of policy. In other
words, in the language of Corpus Juris Secundum (supra), it refers to
"those questions which, under the Constitution, are to be decided by the
people in their sovereign capacity, or in regard to which full
discretionary authority has been delegated to the Legislature or
executive branch of the Government." It is concerned with issues
dependent upon the wisdom, not legality, of a particular measure.
Such is not the nature of the question for determination in the present
case. Here, we are called upon to decide whether the election of
Senators Cuenco and Delgado, by the Senate, as members of the Senate
Electoral Tribunal, upon nomination by Senator Primicias-a member
and spokesman of the party having the largest number of votes in the
Senate-on behalf of its Committee on Rules, contravenes the
constitutional mandate that said members of the Senate Electoral
Tribunal shall be chosen "upon nomination .. of the party having the
second largest number of votes" in the Senate, and hence, is null and
void. This is not a political question. The Senate is not clothed with "full
discretionary authority" in the choice of members of the Senate
Electoral Tribunal. The exercise of its power thereon is subject to
constitutional limitations which are claimed to be mandatory in nature.
It is clearly within the legitimate prove of the judicial department to
pass upon the validity the proceedings in connection therewith.
".. whether an election of public officers has been in accordance with
law is for the judiciary. Moreover, where the legislative department has
by statute prescribed election procedure in a given situation, the
judiciary may determine whether a particular election has been in
conformity with such statute, and, particularly, whether such statute has
been applied in a way to deny or transgress on the constitutional or
statutory rights .." (16 C.J.S., 439; emphasis supplied.).
It is, therefore, our opinion that we have, not only jurisdiction, but, also,
the duty, to consider and determine the principal issue raised by the
parties herein.
II. Is the election of Senators Cuenco and Delgado, by the Senate, as
members of the Electoral Tribunal, valid and lawful?.
Section 11 of Article VI of the Constitution, reads:.
"The Senate and the House of Representatives shall each have an
Electoral Tribunal which shall be the sole judge of all contests relating
to the election, returns, and qualifications of their respective Members.
Each Electoral Tribunal shall be composed of nine Members, three of
whom shall be Justices of the Supreme Court to be designated by the
Chief Justice, and the remaining six shall be Members of the Senate or
of the House of Representatives, as the case may be, who shall be
chosen by each House, three upon nomination of the party having the
largest number of votes and three of the party having the second largest
number of votes therein. The Senior Justice in each Electoral Tribunal
shall be its Chairman." (Emphasis supplied.).
It appears that on February 22, 1956, as well as at present, the Senate of
the Philippines consists of twenty three (23) members of the
Nacionalista Party and one (1) member of the Citizens Party, namely,
Senator Tañada, who is, also, the president of said party. In the session
of the Senate held on February 21, 1956, Senator Sabido moved that
Senator Tañada, "the President of the Citizens Party, be given the
privilege to nominate .. three (3) members" of the Senate Electoral
Tribunal (Congressional Record for the Senate, Vol. III, pp. 328-329),
referring to those who, according to the provision above-quoted, should
be nominated by "the party having the second largest number of votes"
in the Senate. Senator Tañada objected formally to this motion upon the-
ground: (a) that the right to nominate said members of the Senate
Electoral Tribunal belongs, not to the Nacionalista Party of which
Senator Sabido and the other Senators are members-but to the Citizens
Party, as the one having the second largest number of votes in the
Senate, so that, being devoid of authority to nominate the
aforementioned members of said Tribunal, the Nacionalista Party cannot
give it to the Citizens Party, which, already, has such authority, pursuant
to the Constitution; and (b) that Senator Sabido's motion would compel
Senator Tañada to nominate three (3) Senators to said Tribunal, although
as representative of the minority party in the Senate he has "the right to
nominate one, two or three to the Electoral Tribunal," in his discretion.
Senator Tañada further stated that he reserved the right to determine
how many he would nominate, after hearing the reasons of Senator
Sabido in support of his motion. After some discussion, in which
Senators Primicias, Cea, Lim, Sumulong, Zulueta, and Rodrigo took
part, the Senate adjourned until the next morning, February 22, 1956
(Do., do, pp. 329, 330, 332-333, 336, 338, 339, 343).
Then, said issues were debated upon more extensively, with Senator
Sumulong, not only seconding the opposition of Senator Tañada, but,
also, maintaining that "Senator Tañada should nominate only one"
member of the Senate, namely, himself, he being the only Senator who
belongs to the minority party in said House (Do., do., pp. 360-364, 369).
Thus, a new issue was raised - whether or not one who does not belong
to said party may be nominated by its spokesman, Senator Tañada - on
which Senators Paredes, Pelaez, Rosales and Laurel, as well as the other
Senators already mentioned, expressed their views (Do., do., pp. 345,
349, 350, 354, 358, 364, 375). Although the deliberations of the Senate
consumed the whole morning and afternoon of February 22, 1956, a
satisfactory solution of the question before the Senate appeared to be
remote. So, at 7:40 p.m., the meeting was suspended, on motion of
Senator Laurel, with a view to seeking a compromise formula (Do., do.,
pp. 377). When session was resumed at 8:10 p.m., Senator Sabido
withdrew his motion above referred to. Thereupon, Senator Primicias,
on behalf of the Nacionalista Party, nominated, and the Senate elected,
Senators Laurel, Lopez and Primicias, as members of the Senate
Electoral Tribunal. Subsequently, Senator Tañada stated:.
"On behalf of the Citizens Party, the minority party in this Body, I
nominate the only Citizens Party member in this Body, and that is
Senator Lorenzo M. Tañada.".
Without an objection, this nomination was approved by the House.
Then, Senator Primicias stood up and said:.
"Now, Mr. President, in order to comply with the provision in the
Constitution, the Committee on Rules of the Senate-and I am now
making this proposal not on behalf of the Nacionalista Party but on
behalf of the Committee on Rules of the Senate-I nominate two other
members to complete the membership of the Tribunal: Senators
Delgado and Cuenco.".
What took place thereafter appears in the following quotations from the
Congressional Record for the Senate.
"SENATOR TAÑADA. Mr. President.
"EL PRESIDENTE INTERINO. Caballero de Quezon.
"SENATOR TAÑADA. I would like to record my opposition to the
nominations of the last two named gentlemen, Senators Delgado and
Cuenco, not because I don't believe that they do not deserve to be
appointed to the tribunal but because of my sincere and firm conviction
that these additional nominations are not sanctioned by the Constitution.
The Constitution only permits the Nacionalista Party or the party having
the largest number of votes to nominate three.
"SENATOR SUMULONG. Mr. President.
"EL PRESIDENTE INTERINO. Caballero de Rizal.
"SENATOR SUMULONG. For the reasons that I have stated a few
moments ago when I took the floor, I also wish to record my objection
to the last nominations, to the nomination of two additional NP's to the
Electoral Tribunal.
"EL PRESIDENTE INTERINO. Esta dispuesto el Senado a votar?
(Varios Senadores: Si.) Los que esten conformes con la nominacion
hecha por el Presidente del Comite de Reglamentos a favor de los
Senadores Delgado y Cuenco para ser miembros del Tribunal Electoral,
digan, si. (Varios Senadores: Si.) Los que no lo esten digan, no
(Silencio.) Queda aprobada." (Congressional Record for the Senate, Vol.
III, p. 377; emphasis supplied.).
Petitioners maintain that said nomination and election of Senators
Cuenco and Delgado-who belong to the Nacionalista Party-as members
of the Senate Electoral Tribunal, are null and void and have been made
without power or color of authority, for, after the nomination by said
party, and the election by the Senate, of Senators Laurel, Lopez and
Primicias, as members of said Tribunal, the other Senators, who shall be
members thereof, must necessarily be nominated by the party having the
second largest number of votes in the Senate, and such party is,
admittedly, the Citizens Party, to which Senator Tañada belongs and
which he represents.
Respondents allege, however, that the constitutional mandate to the
effect that "each Electoral Tribunal shall be compose of nine (9)
members," six (6) of whom "shall be members of the Senate or of the
House of Representatives, as the case may be", is mandatory; that when-
after the nomination of three (3) Senators by the majority party, and
their election by the Senate, as members of the Senate Electoral
Tribunal-Senator Tañada nominated himself only, on behalf of the
minority party, he thereby "waived his right to no two more Senators;"
that, when Senator Primicias nominated Senators Cuenco and Delgado,
and these respondents were chosen by the Senate, as members of the
Senate Electoral Tribunal, Said Senator Primicias and the Senate merely
complied with the aforementioned provision of the fundamental law,
relative to the number of members of the Senate Electoral Tribunal; and,
that, accordingly, Senators Cuenco and Delgado are de jure members of
said body, and the appointment of their co-respondents, Alfredo Cruz,
Catalina Cayetano, Manuel Serapio and Placido Reyes is valid and
lawful.
At the outset, it will be recalled that the proceedings the organization of
the Senate Electoral Tribunal began with a motion of Senator Sabido to
the effect that "the distinguished gentleman from Quezon, the President
of the Citizens Party, be given the privilege to nominate the three
Members" of said Tribunal. Senator Primicias inquired why the movant
had used the word "privilege". Senator Sabido explained that the present
composition of the Senate had created a condition or situation which
was not anticipated by the framers of our Constitution; that although
Senator Tañada formed part of the Nacionalista Party before the end of
1955, he subsequently parted ways with" said party; and that Senator
Tañada "is the distinguished president of the Citizens Party," which
"approximates the situation desired by the framers of the Constitution"
(Congressional Record for the Senate Vol. III, pp. 329-330). Then
Senator Lim intervened, stating:.
"At present Senator Tañada is considered as forming the only minority
or the one that has the second largest number of votes in the existing
Senate, is not that right? And if this is so, he should be given this as a
matter of right, not as a matter of privilege. .. I don't believe that we
should be allowed to grant this authority to Senator Tañada only as a
privilege but we must grant it as a matter of right." (Id., id., p. 32;
emphasis supplied.).
Similarly, Senator Sumulong maintained that "Senator Tañada, as
Citizens Party Senator, has the right and not a mere privilege to
nominate," adding that:.
".. the question is whether we have a party here having the second
largest number of votes, and it is clear in my mind that there is such a
party, and that is the Citizens Party to which the gentleman from
Quezon belongs. .. We have to bear in mind, .. that when Senator Tañada
was included in the Nacionalista Party ticket in 1953, it was by virtue of
a coalition or an alliance between the Citizens Party and the
Nacionalista Party at that time, and I maintain that when Senator Tañada
as head of the Citizens Party entered into a coalition with the
Nacionalista Party, he did not thereby become a Nacionalista because
that was a mere coalition, not a fusion. When the Citizens Party entered
into a mere coalition, that party did not lose its personality as a party
separate and distinct from the, Nacionalista Party. And we should also
remember that the certificate of candidacy filed by Senator Tañada in
the 1953 election was one to the effect that he belonged to the Citizens
Party .." (Id., id., p. 360; emphasis supplied.).
The debate was closed by Senator Laurel, who remarked, referring to
Senator Tañada:.
"..there is no doubt that he does not belong to the majority in the first
place, and that, therefore, he belongs to the minority. And whether we
like it or not, that is the reality of the actual situation-that he is not a
Nacionalista now, that he is the head and the representative of the
Citizens Party. I think that on equitable ground and from the point of
view of public opinion, his situation .. approximates or approaches what
is within the spirit of that Constitution. .. and from the point of view of
the spirit of the Constitution it would be a good thing if we grant the
opportunity to Senator Tañada to help us in the organization of this
Electoral Tribunal (Id., id., p. 376; emphasis supplied.).
The foregoing statements and the fact that, thereafter, Senator Sabido
withdrew his motion to grant Senator Tañada the "privilege" to
nominate, and said petitioner actually nominated himself "on behalf of
the Citizens Party, the minority party in this Body"-not only without
any, objection whatsoever, but, also, with the approval of the Senate-
leave no room for doubt that the Senate-leave no room for doubt that the
Senate has regarded the Citizens Party, represented by Senator Tañada,
as the party having the second largest number of votes in said House.
Referring, now, to the contention of respondents herein, their main
argument in support of the mandatory character of the constitutional
provision relative to the number of members of the Senate Electoral
Tribunal is that the word "shall", therein used, is imperative in nature
and that this is borne out by an opinion of the Secretary of Justice dated
February 1, 1939, pertinent parts of which are quoted at the footnote. 6.
Regardless of the respect due its author, as a distinguished citizen and
public official, said opinion has little, if any, weight in the solution of
the question before this Court, for the practical construction of a
Constitution is of little, if any, unless it has been uniform .." 6a Again,
"as a general rule, it is only in cases of substantial doubt and ambiguity
that the doctrine of contemporaneous or practical construction has any
application". As a consequence, "where the meaning of a constitutional
provision is clear, a contemporaneous or practical executive
interpretation thereof is entitled to no weight, and will not be allowed to
distort or in any way change its natural meaning." The reason is that
"the application of the doctrine of contemporaneous construction is
more restricted as applied to the interpretation of constitutional
provisions than when applied to statutory provisions", and that, "except
as to matters committed by the Constitution, itself to the discretion of
some other department, contemporary or practical construction is not
necessarily binding upon the courts, even in a doubtful case." Hence, "if
in the judgment of the court, such construction is erroneous and its
further application is not made imperative by any paramount
considerations of public policy, it may he rejected." (16 C. J. S., 71-72;
emphasis supplied.) 6b.
The aforemention opinion of the Secretary of Justice is not backed up
by a, "uniform" application of the view therein adopted, so essential to
give thereto the weight accorded by the rules on contemporaneous
constructions. Moreover, said opinion tends to change the natural
meaning of section 11 of Article VI of the Constitution, which is clear.
What is more, there is not the slightest doubt in our mind that the
purpose and spirit of said provisions do not warrant said change and that
the rejection of the latter is demanded by paramount considerations of
public policy. .
The flaw in the position taken in said opinion and by respondent herein
is that, while, it relies upon the compulsory nature of the word "shall",
as regards the number of members of the Electoral Tribunals, it ignores
the fact that the same term is used with respect to the method prescribed
for their election, and that both form part of a single sentence and must
be considered, therefore, as integral portions of one and the same
thought. Indeed, respondents have not even tried to show and we cannot
conceive-why "shall" must be deemed mandatory insofar as the number
of members of each Electoral Tribunal, and should be considered
directory as regards the procedure for their selection. More important
still, the history of section 11 of Article VI of the Constitution and the
records of the Convention, refute respondents' pretense, and back up the
theory of petitioners herein.
Commenting on the frame of mind of the delegates to the Constitutional
Convention, when they faced the task of providing for the adjudication
of contests relating to the election, returns and qualifications of
members of the Legislative Department, Dr. Jose M. Aruego, a member
of said Convention, says:.
"The experience of the Filipino people under the provisions of the
organic laws which left to the lawmaking body the determination of the
elections, returns, and qualifications of its members was not altogether
satisfactory. There were many complaints against the lack of political
justice in this determination; for in a great number of cases, party
interests controlled and dictated the decisions. The undue delay in the
dispatch of election contests for legislative seats, the irregularities that
characterized the proceedings in some of them, and the very apparent
injection of partisanship in the determination of a great number of the
cases were decried by a great number of the people as well as by the
organs of public opinion.
"The faith of the people in the uprightness of the lawmaking body in the
performance of this function assigned to it in the organic laws was by no
means great. In fact so blatant was the lack of political justice in the
decisions that there was, gradually built up a camp of thought in the
Philippines inclined to leave to the courts the determination of election
contests, following the practice in some countries, like England and
Canada.
"Such were the conditions of things at the time of the meeting of the
convention." (The Framing of the Philippine Constitution by Aruego,
Vol. 1, pp. 257-258; emphasis supplied.).
This view is shared by distinguished members of the Senate. Thus, in its
session of February 22, 1956, Senator Sumulong declared:.
".. when you leave it to either House to decide election protests
involving its own members, that is virtually placing the majority party
in a position to dictate the decision in those election cases, because each
House will be composed of a majority and a minority, and when you
make each House the judge of every election protest involving any
member of that House, you place the majority in a position to dominate
and dictate the decision in the case and result was, there were so many
abuses, there were so main injustices: committed by the majority at the
expense and to the prejudice of the minority protestants. Statements
have been made here that justice was done even under the old system,
like that case involving Senator Mabanag, when he almost became a
victim of the majority when he had an election case, and it was only
through the intervention of President Quezon that he was saved from
becoming the victim of majority injustices.
"It is true that justice had sometimes prevailed under the old system, but
the record will show that those cases were few and they were the rare
exceptions. The overwhelming majority of election protests decided
under the old system was that the majority being then in a position to
dictate the, decision in the election protest, was tempted to commit as it
did commit many abuses and injustices." (Congressional Record for the
Senate, Vol. 111, p. 361; emphasis supplied.).
Senator Paredes, a veteran legislator and former Speaker of the House
of Representatives, said:.
".. what was intended in the creation of the electoral tribunal was to
create a sort of collegiate court composed of nine members: Three of
them belonging to the party having the largest number of votes, and
three from the party having the second largest number votes so that
these members may represent the party, and the members of said party
who will sit before the electoral tribunal as protestees. For when it
comes to a party, Mr. President, there ground to believe that decisions
will be made along party lines." (Congressional Record for the Senate,
Vol. III, p. 351; emphasis supplied.).
Senator Laurel, who played an important role in the framing of our
Constitution, expressed himself as follows:.
"Now, with reference to the protests or contests, relating to the election,
the returns and the qualifications of the members of the legislative
bodies, I heard it said here correctly that there was a time when that was
given to the corresponding chamber of the legislative department. So
the election, returns and qualifications of the members, of the Congress
or legislative body was entrusted to that body itself as the exclusive
body to determine the election, returns and qualifications of its
members. There was some doubt also expressed as to whether that
should continue or not, and the greatest argument in favor of the
retention of that provision was the fact that was, among other things, the
system obtaining in the United States under the Federal Constitution of
the United States, and there was no reason why that power or that right
vested in the legislative body should not be retained. But it was thought
that would make the determination of this contest, of this election
protest, purely political as has been observed in the past."
(Congressional Record for the Senate, Vol. III, p. 376; emphasis
supplied.).
It is interesting to note that not one of the members of the Senate
contested the accuracy of the views thus expressed.
Referring particularly to the philosophy underlying the constitutional
provision quoted above, Dr. Aruego states:.
"The defense of the Electoral Commission was based primarily upon the
hope and belief that the abolition of Party line because of the equal
representation in this body of the majority and the minority parties of
the National Assembly and the intervention of some members of the
Supreme Court who, under the proposed constitutional provision, would
also be members of the same, would insure greater political justice in
the determination of election contests for seats in the National Assembly
than there would be if the power had been lodged in the lawmaking
body itself. Delegate Francisco summarized the arguments for the
creation of the Electoral Commission in the following words:.
"I understand that from the time that this question is placed in the hands
of members not only of the majority party but also of the minority party,
there is already a condition, a factor which would make protests decided
in a non-partisan manner. We know from experience that many times in
the many protests tried in the House or in the Senate, it was impossible
to prevent the factor of party from getting in. From the moment that it is
required that not only the majority but also the minority should
intervene in these questions, we have already enough guarantee that
there would be no tyranny on the part of the majority.
`But there is another more detail which is the one which satisfies me
most, and that is the intervention of three justices. So that with this
intervention of three justices if there would be any question as to the
justice applied by the majority or the minority, if there would be any
fundamental disagreement, or if there would be nothing but questions
purely of party in which the members of the majority as well as those of
the minority should wish to take lightly a protest because the protestant
belongs to one of said parties, we have in this case, as a check upon the
two parties, the actuations of the three justices. In the last analysis, what
is really applied in the determination of electoral cases brought before
the tribunals of justice or before the House of Representatives or the
Senate? Well, it is nothing more than the law and the doctrine of the
Supreme Court. If that is the case, there will be greater skill in the
application of the laws and in the application of doctrines to electoral
matters having as we shall have three justices who will act impartially in
these electoral questions.
`I wish to call the attention of my distinguished colleagues to the fact
that in electoral protests it is impossible to set aside party interests.
Hence, the best guarantee, I repeat, for the administration of justice to
the parties, for the fact that the laws will not be applied rightfully or
incorrectly as well as for the fact that the doctrines of the Supreme
Court will be applied rightfully, the best guarantee which we shall have,
I repeat, is the intervention of the three justices. And with the formation
of the Electoral Commission, I say again, the protestants as well as the
protestees could remain tranquil in the certainty that they will receive
the justice that they really deserve. If we eliminate from this precept the
intervention of the party of the minority and that of the three justices,
then we shall be placing protests exclusively in the hands of the party in
power. And I understand, gentlemen, that in practice that has not given
good results. Many have criticized, many have complained against, the
tyranny of the majority in electoral cases .. I repeat that the best
guarantee the fact that these questions will be judged not only by three
members of the majority but also by three members of the minority,
with the additional guarantee of the impartial judgment of three justices
of the Supreme Court." (The Framing of the Philippine Constitution by
Aruego, Vol. I, pp. 261-263; emphasis supplied.).
The foregoing was corroborated by Senator Laurel. Speaking for this
Court, in Angara vs. Electoral Commission (63 Phil., 139), he asserted:.
"The members of the Constitutional Convention who framed our
fundamental law were in their majority-men mature in years and
experience. To be sure, many of them were familiar with the history and
political development of other countries of the world. When, therefore
they deemed it wise to create an Electoral Commission as a
constitutional organ and invested with the exclusive function of passing
upon and determining the election, returns and qualifications of the
members of the National Assembly, they must have done so not only in
the light of their own experience but also having in view the experience
of other enlightened peoples of the world. The creation of the Electoral
Commission was designed to remedy certain evils of which the framers
of our Constitution were cognizant. Notwithstanding the vigorous
opposition of some members of the Convention to its creation, the plan,
as hereinabove stated, was approved by that body by a vote of 98
against 58. All that can be said now is that, upon the approval of the
Constitution, the creation of the Electoral Commission is the expression
of the wisdom `ultimate justice of the people'. (Abraham Lincoln, First
Inaugural Address, March 4, 1861.).
"From the deliberations of our Constitutional Convention it is evident
that the purpose was to transfer in its totality all the powers previously
exercised by the legislature in matters pertaining to contested elections
of its members, to an independent and impartial tribunal. It was not so
much the knowledge and appreciation of contemporary constitutional
precedents, however, as the long felt need of determining legislative
contests devoid of partisan considerations which prompted the people
acting through their delegates to the Convention, to provide for this
body known as the Electoral Commission. With this end in view, a
composite body in which both the majority and minority parties are
equally represented to off-set partisan influence in its deliberations was
created, and further endowed with judicial temper by including in its
membership three justices of the Supreme Court," (Pp. 174-175.) 7.
As a matter of fact, during the deliberations of the convention,
Delegates Conejero and Roxas said:.
"El Sr. CONEJERO. Antes de votarse la enmienda, quisiera pedir
informacion del Subcomite de Siete.
"El Sr. PRESIDENTE. Que dice el Comite?" El Sr. ROXAS. Con
mucho gusto. "El Sr. CONEJERO. Tal como esta el draft., dando tres
miembrosala mayoria, y otros t?-es a la minyoryia y atros a la Corte
Suprerma, no cree su Senoria que este equivale pricticamente a dejar el
asunto a los miembros del Tribunal Supremo?.
"El Sr. ROXAS. Si y no. Creemos que si el tribunal a la Comision esta
cotistuido en esa forma, tanto los miembros de la mayoria como los de
la minoria asi como los miembros de la Corte Saprema consideration la
cuestion sobre la base de sus meritos, sabiendo que el partidismo no es
suficiente para dar el triunbo.
"El Sr. CONEJERO. Cree Su Senoria que en un caso como ese,
podriamos hacer que tanto los de la mayoria como los de la minoria
prescindieran del partidisrno?.
"El Sr. ROXAS. Creo que si, porque el partidismo no les daria el
triunfo." (Angara vs. Electoral Commission, supra, pp. 168-169;
emphasis supplied.).
It is clear from the foregoing that the main objective of the framers of
our Constitution in providing for the establishment, first, of an Electoral
Commission, 8 and then 9 of one Electoral Tribunal for each House of
Congress, was to insure the exercise of judicial impartiality in the
disposition of election contests affecting members of the lawmaking
body. To achieve this purpose, two devices were resorted to, namely: (a)
the party having the largest number of votes, and the party having the
second largest number of votes, in the National Assembly or in each
House of Congress, were given the same number of representatives in
the Electoral Commission or Tribunal, so that they may realize that
partisan considerations could not control the adjudication of said cases,
and thus be induced to act with greater impartiality; and (b) the Supreme
Court was given in said body the same number of representatives as
each one of said political parties, so that the influence of the former may
be decisive and endow said Commission or Tribunal with judicial
temper.
This is obvious from the very language of the constitutional provision
under consideration. In fact, Senator Sabido-who had moved to grant to
Senator Tañada the privilege" to make the nominations on behalf of
party having the second largest number of votes in the Senate-agrees
with it. As Senator Sumulong inquired:.
"..I suppose Your Honor will agree with me that the framers of the
Constitution precisely thought of creating this Electoral Tribunal so as
to prevent the majority from ever having a preponderant majority in the
Tribunal." (Congressional Record for the Senate, Vol. III, p. 330;
emphasis supplied.).
Senator Sabido replied:.
"That is so, .." (Id., p. 330.).
Upon further interpretation, Senator Sabido said:.
".. the purpose of the creation of the Electoral Tribunal and of its
composition is to maintain a balance between the two parties and make
the members of the Supreme Court the controlling power so to speak of
the Electoral Tribunal or hold the balance of power. That is the ideal
situation." (Congressional Record for the Senate, Vol. III, p. 349;
emphasis supplied.).
Senator Sumulong opined along the same line. His words were: .
"..The intention is that when the three from the majority and the three
from the minority become members of the Tribunal it is hoped that they
will become aware of their judicial functions, not to protect the
protestants or the protegees. It is hoped that they will act as judges
because to decide election cases is a judicial function. But the framers
of, the Constitution besides being learned were men of experience. They
knew that even Senators like us are not angels, that we are human
beings, that if we should be chosen to go to the Electoral Tribunal no
one can say that we will entirely be free from partisan influence to favor
our party, so that in, case that hope that the three from the majority and
the three from the minority who will act as Judges should result in
disappointment, in case they do not act as judges but they go there and
vote along party liner, still there is the guarantee that they will offset
each other and the result will be that the deciding vote will reside in the
hands of the three Justices who have no partisan motives to favor either
the protestees or the protestants. In other words, the whole idea is to
prevent the majority from controlling and dictating the decisions of the
Tribunal and to make sure that the decisive vote will be wielded by the
Congressmen or Senators who are members the Tribunal but will be
wielded by the Justices who, by virtue of their judicial offices, will have
no partisan motives to serve, either protestants, or protestees. That is my
understanding of the intention of the framers of the Constitution when
they decided to create the Electoral Tribunal.
xxx xxx x x x.
"My idea is that the intention of the framers of the constitution in
creating the Electoral Tribunal is to insure impartially and independence
in its decision, and that is sought to be done by never allowing the
majority party to control the Tribunal, and secondly by seeing to it that
the decisive vote in the Tribunal will be left in the hands of persons who
have no partisan interest or motive to favor either protestant or
protestee." (Congressional Record for the Senate, Vol. III, pp. 362-363,
365-366; emphasis supplied.).
So important in the "balance of powers" between the two political
parties in the Electoral Tribunals, that several members of the Senate
questioned the right of the party having the second largest number of
votes in the Senate and, hence, of Senator Tañada, as representative of
the Citizens Party-to nominate for the Senate Electoral Tribunal any
Senator not belonging to said party. Senators Lim, Sabido, Cea and
Paredes maintained that the spirit of the Constitution would be violated
if the nominees to the Electoral Tribunals did not belong to the parties
respectively making the nominations. 10.
It is not necessary, for the purpose of this decision, to determine whether
the parties having the largest, and the second largest, number of votes in
each House may nominate, to the Electoral Tribunals, those members of
Congress who do not belong to the party nominating them. It is patent,
however, that the most vital feature of the Electoral Tribunals is the
equal representation of said parties therein, and the resulting equilibrium
to be maintained by the Justices of the Supreme Court as members of
said Tribunals. In the words of the members of the present Senate, said
feature reflects the "intent" "purpose", and "spirit of the Constitution",
pursuant to which the Senate Electoral Tribunal should be organized
(Congressional Record for the Senate, pp. 330, 337, 348-9, 350, 351,
355, 358, 362-3, 364, 370, 376).
Now then, it is well settled that "the purpose of all rules or maxims as to
the construction or interpretation of statutes is to discover the true
intention of the law" (82 C. J. S., 526) and that.
"As a general rule of statutory construction, the spirit or intention of a
statute prevails over the letter thereof, and whatever is within the spirit
of statute is within the statute although it is not within the letter, while
that which is within the letter, but not within the spirit of a statute, is not
within the statute; but, where the law is free and clear from ambiguity,
the letter of it is not to be disregarded on the pretext of pursuing its
spirit." (82 C. J. S., 613.).
"There is no universal rule or absolute test by which directory
provisions in a statute may in all circumstances be distinguished from
those which are mandatory. However, in the determination of this
question, as of every other question of statutory construction, the prime
object is to ascertain the legislative intent. The legislative intent must be
obtained front all the surrounding circumstances, and the determination
does not depend on the form of the statute. Consideration must be given
to the entire statute, its nature, its object, and the consequences which
would result from construing it one way or the other, and the statute
must be construed in connection with other related statutes. Words of
permissive character may be given a mandatory significance in order to
effect the legislative intent, and, when the terms of a statute are such
that they cannot be made effective to the extent of giving each and all of
them some reasonable operation, without construing the statute as
mandatory, such construction should be given; .. On the other hand, the
language of a statute, however mandatory in form, may be deemed
directory whenever legislative purpose can best be carried out by such
construction, and the legislative intent does not require a mandatory
construction; but the construction of mandatory words as directory
should not be lightly adopted and never where it would in fact make a
new law instead of that passed by the legislature. .. Whether a statute is
mandatory or directory depends on whether the thing directed to be
done is of the essence of the thing required, or is a mere matter of form,
and what is a matter of essence can often be determined only by judicial
construction. Accordingly, when a particular provision of a statute
relates to some immaterial matter, as to which compliance with the
statute is a matter of convenience rather than substance, or where the
directions of a statute are given merely with a view to the proper,
orderly, and prompt conduct of business, it is generally regarded as
directory, unless followed by words of absolute prohibition; and a
statute is regarded as directory were no substantial rights depend on it,
no injury can result from ignoring it, and the purpose of the legislative
can be accomplished in a manner other than that prescribed, with
substantially the same result. On the other hand, a provision relating to
the essence of the thing to be done, that is, to matters of substance, is
mandatory, and when a fair interpretation of a statute, which directs acts
or proceedings to be done in a certain way shows that the legislature
intended a compliance with such provision to be essential to the validity
of the act or proceeding, or when same antecedent and pre-requisite
conditions must exist prior to the exercise of power, or must be
performed before certain other powers can be exercise, the statute must
be regarded as mandatory. (Id., pp. 869-874.) (See also, Words and
Phrases, Vol. 26, pp. 463-467; emphasis supplied.).
What has been said above, relative to the conditions antecedent to, and
concomitant with, the adoption of section 11 of Article VI of the
Constitution, reveals clearly that its framers intended to prevent the
majority party from controlling the Electoral Tribunals, and that the
structure thereof is founded upon the equilibrium between the majority
and the minority parties therein, with the Justices of the Supreme Court,
who are members of said Tribunals, holding the resulting balance of
power. The procedure prescribed in said provision for the selection of
members of the Electoral Tribunals is vital to the role they are called
upon to play. it constitutes the essence of said Tribunals. Hence,
compliance with said procedure is mandatory, and acts performed in
violation thereof are null and void. 11.
It is true that the application of the foregoing criterion would limit the
membership of the Senate Electoral Tribunal, in the case at bar, to seven
(7), instead of nine (9), members; but, it is conceded that the present
composition of the Senate was not foreseen by the framers of our
Constitution (Congressional Record for the Senate, Vol. III, pp. 329,
342, 349, 354, 359, 375). Furthermore, the spirit of the law prevails over
its letter, and the solution herein adopted maintains the spirit of the
Constitution, for partisan considerations can not be decisive in a tribunal
consisting of three (3) Justices of the Supreme Court, three (3) members
nominated by the majority party and either one (1) or two (2) members
nominated by the party having the second largest number of votes in the
House concerned.
Upon the other hand, what would be the result of respondents'
contention if upheld? Owing to the fact that the Citizens Party 12 has
only one member in the Upper House, Senator Tañada felt he should
nominate, for the Senate Electoral Tribunal, only said member of the
Citizens Party. The same is, thus, numerically handicapped, vis-a-vis the
majority party, in said Tribunal. Obviously, Senator Tañada did not
nominate other two Senators, because, otherwise, he would worsen the
already disadvantageous position, therein, of the Citizens Party. Indeed,
by the aforementioned nomination and election of Senators Cuenco and
Delgado, if the same were sanctioned, the Nacionalista Party would
have five (5) members in the Senate Electoral Tribunal, as against one
(1) member of the Citizens Party and three members of the Supreme
Court. With the absolute majority thereby attained by the majority party
in said Tribunal, the philosophy underlying the same would be entirely
upset. The equilibrium between the political parties therein would be
destroyed. What is worst, the decisive moderating role of the Justices of
the Supreme Court would be wiped out, and, in lieu thereof, the door
would be thrown wide open for the predominance of political
considerations in the determination of election protests pending before
said Tribunal, which is precisely what the fathers of our Constitution
earnestly strove to forestall. 13.
This does not imply that the honesty, integrity or impartiality of
Senators Cuenco and Delgado are being questioned. As a matter of fact,
when Senator Tañada objected to their nomination, he explicitly made
of record that his opposition was based, not upon their character, but
upon the principle involved. When the election of members of Congress
to the Electoral Tribunal is made dependent upon the nomination of the
political parties above referred to, the Constitution thereby indicates its
reliance upon the method of selection thus established, regardless of the
individual qualities of those chosen therefor. Considering the wealth of
experience of the delegatesto the Convention, as lawyers of great note,
as veteran politicians and as leaders in other fields of endeavor, they
could not, and did not, ignore the fact that the Constitution must limit
itself to giving general patterns or norms of action. In connection,
particularly, with the composition of the Electoral Tribunals, they
believed that, even the most well meaning individuals often find it
difficult to shake off the bias and prejudice created by political
antagonisms and to resist the demands of political exigencies, the
pressure of which is bound to increase in proportion to the degree of
predominance of the party from which it comes. As above stated, this
was confirmed by distinguished members of the present Senate. (See pp.
25-28, 33, 34, supra.).
In connection with the argument of the former Secretary of Justice to
the effect that when "there is no minority party represented in the
Assembly, the necessity for such a check by the minority disappears",
the following observations of the petitioners herein are worthy of
notice:.
" Under the interpretation espoused by the respondents, the very frauds
or terrorism committed by a party would establish the legal basis for the
final destruction of minority parties in the Congress at least. Let us
suppose, for example, that in the Senate, the 15 or 16 senators with
unexpired terms belong to the party A. In the senatorial elections to fill
the remaining 8 seats, all the 8 candidates of party A are proclaimed
elected through alleged fraud and/or terrorism. (The ouster of not less
than 3 senators-elect in the elections held since liberation attests to the
reality of election frauds and terrorism in our country.) There being no
senator or only one senator belonging to the minority, who would sit in
judgment on the election candidates of the minority parties? According
to the contention of the respondents, it would be a Senate Electoral
Tribunal made up of three Supreme Court Justices and 5 or 6 members
of the same party A accused of fraud and terrorism. Most respectfully,
we pray this Honorable Court to reject an interpretation that would
make of a democratic constitution the very instrument by which a
corrupt and ruthless party could entrench itself in power the legislature
and thus destroy democracy in the Philippines.
xxx xxx x x x.
".. When there are no electoral protests filed by the Minority party, or
when the only electoral protests filed are by candidates of the majority
against members-elect of the same majority party, there might be no
objection to the statement. But if electoral protests are filed by
candidates of the minority party, it is at this point that a need for a check
on the majority party is greatest, and contrary to the observation made
in the above-quoted opinion, such a cheek is a function that cannot be
successfully exercised by the 3 Justices of the Supreme Court, for the
obvious and simple reason that they could easily be outvoted by the 6
members of the majority party in the Tribunal.
xxx xxx x x x.
"In the case of the cited opinion of Secretary Abad Santos rendered in
1939, it, did not appear that there were minority party candidates who
were adversely affected by the ruling of the Secretary of Justice and
who could have brought a test case to court." (Emphasis supplied.).
The defenses of waiver and estoppel set up against petitioner Tañada are
untenable. Although "an individual may waive constitutional provisions
intended for his benefit", particularly those meant for the protection of
his property, and, sometimes, even those tending "to secure his personal
liberty", the power to waive does not exist when "public policy or public
morals" are involved. (11 Am. Jur. 765; I Cooley's Constitutional
Limitations, pp. 368-371). The procedure outlined in the Constitution
for the organization, of the Electoral Tribunals was adopted in response
to the demands of the common weal, and it has been held that where a
statute is founded on public policy, those to whom it applies should not
be permitted to waive its provisions" (82 C. J. S., 874). Besides, there
can be no waiver without an intent to such effect, which Senator Tañada
did not have. Again, the alleged waiver or exhaustion of his rights does
not justify the exercise thereof by a person or party, other than that to
which it is vested exclusively by the Constitution.
The rule estoppel is that "whenever a party has, by his declaration, act
or omissions, intentionally and deliberately led another to believe a
particular thing true, and to act upon such belief, he cannot, in a
litigation arising out of such declaration, act or omission, be permitted
to falsify it" (Rule 69, sec. 68 [a], Rules of Court). In the case at bar,
petitioner Senator Tañada did not lead the Senate to believe that Senator
Primicias could nominate Senators Cuenco and Delgado. On the
contrary, said petitioner repeatedly asserted that his was the exclusive
right to make the nomination. He, likewise, specifically contested said
nomination of Senators Cuenco and Delgado. Again, the rule on
estoppel applies to questions of fact, not of law, about the truth of which
the other party is ignorant (see Moran's Comments on the Rules of
Court, Vol. 3, pp. 490, 495). Such is not the nature of the situation that
confronted Senator Tañada and the other members of the Senate. Lastly,
the case of Zandueta vs. De la Costa (66 Phil., 615), cited by
respondents, is not in point. Judge Zandueta assumed office by virtue of
an appointment, the legality of which he later on assailed. In the case at
bar, the nomination and election of Senator Tañada as member of the
Senate Electoral Tribunal was separate, distinct and independent from
the nomination and election of Senators Cuenco and Delgado.
In view of the foregoing, we hold that the Senate may not elect, as
members of the Senate Electoral Tribunal, those Senators who have not
been nominated by the political parties specified in the Constitution;
that the party having the largest number of votes in the Senate may
nominate not more than three (3) members thereof to said Electoral
Tribunal; that the party having the second largest number of votes in the
Senate has the exclusive right to nominate the other three (3) Senators
who shall sit as members in the Electoral Tribunal; that neither these
three (3) Senators, nor any of them, may be nominated by a person or
party other than the one having the second largest number of votes in
the Senate or its representative therein; that the Committee on Rules for
the Senate has no standing to validly make such nomination and that the
nomination of Senators Cuenco and Delgado by Senator Primicias, and
the election of said respondents by the Senate, as members of said
Tribunal, are null and void ab initio.
As regards respondents Alfredo Cruz, Catalina Cayetano, Manuel
Serapio and Placido Reyes, we are not prepared to hold, however, that
their appointments were null and void. Although recommended by
Senators Cuenco and Delgado, who are not lawful members of the
Senate Electoral Tribunal, they were appointed by its Chairman,
presumably, with the consent of the majority of the de jure members of
said body 14 or, pursuant to the Rules thereof. At any rate, as held in
Suanes vs. Chief Accountant (supra), the election of its personnel is an
internal matter falling within the jurisdiction and control of said body,
and there is every reason to believe that it will, hereafter take
appropriate measures, in relation to the four (4) respondents
abovementioned, conformably with the spirit of the Constitution and of,
the decision in the case at bar.
Wherefore, judgment is hereby rendered declaring that, respondents
Senators Mariano Jesus Cuenco and Francisco A. Delgado have not
been duly elected as Members of the Senate Electoral Tribunal, that they
are not entitled to act as such and that they should be, as they are hereby,
enjoined from exercising the powers and duties of Members of said
Electoral Tribunal and from acting in such capacity in connection with
Senate Electoral Case No. 4 thereof. With the qualification stated above,
the petition is dismissed, as regards respondents Alfredo Cruz, Catalina
Cayetano, Manuel Serapio and Placido Reyes. Without special
pronouncement as to costs. It is so ordered.
Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Reyes,
J.B.L., and Felix, JJ., concur.
Paras, C.J., dissenting:.
In 1939, Section (4) of Article VI of the Philippine Constitution
provided that "There shall be an Electoral Commission composed of
three Justices of the Supreme Court designated by the Chief Justice, and
of six members chosen by the National Assembly, three of whom shall
be nominated by the party having the largest number of votes, and three
by the party having the second largest number of votes therein." As all
the members of the National Assembly then belonged to the
Nacionalista Party and a belief arose that it was impossible to comply
with the constitutional requirement that three members of the Electoral
Commission should be nominated by the party having the second largest
number of votes, the opinion of the Secretary of Justice was sought on
the proper interpretation of the constitutional provision involved.
Secretary of Justice Jose A. Santos accordingly rendered the following
opinion:.
"Sir:.
"I have the honor to acknowledge the receipt of your letter of January
24, 1939, thru the office of His Excellency, the President, in which you
request my opinion as `to the proper interpretation of the following
provision of Section (4) of Article VI of the Philippine Constitution':.
`There shall be an Electoral Commission composed of three Justices of
the Supreme Court designated by the Chief Justice, and of six members
chosen by the National Assembly, three of whom shall be nominated by
the party having the largest number of votes, and three by the party
having the second largest number of votes therein.'.
"You state that `as all the members of the present National Assembly
belong to the Nacionalista Party, it is impossible to comply with the last
part of the provision which requires that three members shall be
nominated by the party having the second largest number of votes in the
Assembly.'.
"The main features of the constitutional provision in question are: (1)
that there shall be an Electoral Commission composed of three Justices
of the Supreme Court designated by the Chief Justice, and of six
members chosen by the National Assembly; and that (2) of the six
members to be chosen by the National Assembly, three shall be
nominated by the party having the largest number of votes and three by
the party having the second largest number of votes.
"Examining the history of the constitutional provision, I find that in the
first two drafts it was provided that the Electoral Commission shall be
composed of `three members elected by the members of the party
having the largest number of vote three elected by the members of the
party having the second largest number of votes, and three justices of
the Supreme Court ..(Aruego, The Framing of the Phil. Const., pp. 260-
261). But as finally adopted by the Convention, the Constitution
explicitly states that there shall be `six members chosen by the National
Assembly, three of whom shall be nominated by the party having the
largest number of votes, an and three by the party having the second
largest number of votes' (Aruego, The Framing of the Phil. Const., pp.
271-272).
"From the foregoing changes in the phraseology of the provision, it is
evident that the intention of the framers of our Constitution was that
there should invariably be six members from the National Assembly. It
was also intended to create a non-partisan body to decide any partisan
contest that may be brought before the Commission. The primary object
was to avoid decision based chiefly if not exclusively on partisan
considerations.
"The procedure or manner of nomination cannot possibly affect the
constitutional mandate that the Assembly is entitled to six members in
the Electoral Commission. When for lack of a minority representation in
the Assembly the power to nominate three minority members cannot be
exercised, it logically follows that the only party the Assembly may
nominate three others, otherwise the explicit mandate of the
Constitution that there shall be six members from the National
Assembly would be nullified.
"In other words, fluctuations in the total membership of the Commission
were not and could not have been intended. We cannot say that the
Commission should have nine members during one legislative term and
six members during the next. Constitutional provisions must always
have a consistent application. The membership of the Commission is
intended to be fixed and not variable and is not dependent upon the
existence or non-existence of one or more parties in the Assembly.
"`A cardinal rule in dealing with Constitutions is that they should
receive a consistent and uniform interpretation, so they shall not be
taken to mean one thing at one time and another thing at another time,
even though the circumstances may have so changed as to make a
different rule after desirable (11 Am. Jur. 659).
"It is undisputed of course that the primary purpose of the Convention in
giving representation to the minority party in the Electoral Commission
was to safeguard the rights of the minority party and to protect their
interests, especially when the election of any member of the minority
party is protested. The basic philosophy behind the constitutional
provision was to enable the minority party to act as a check on the
majority in the Electoral Commission, with the members of the
Supreme Court as the balancing factor. Inasmuch, however, as there is
no minority party represented in the Assembly, the necessity for such a
check by the minority party disappears. It is a function that is expected
to be exercised by the three Justices of the Supreme Court.
"To summarize, considering the plain terms of the constitutional
provision in question, the changes that it has undergone since it was first
introduced until finally adopted by the convertion, as well as, the
considerations that must have inspired the Constitutional Convention in
adopting it as it is, I have come to the conclusion that the Electoral
Commission should be composed of nine members, three from the
Supreme Court and six chosen by the National Assembly to be
nominated by the party in power, there being no other party entitled to
such nomination.".
Pursuant to the foregoing opinion of February 1, 1939, the Electoral
Commission was formally organized, with six members of the National
Assembly all belonging to the same party and three Justices of the
Supreme Court. Constitutional amendments were introduced and duly
adopted in 1940, and the Electoral Commission was replaced by an
Electoral Tribunal for each house of Congress. It is now provided that
"Each Electoral Tribunal shall be composed of nine Members, three of
whom shall be Justices of the Supreme Court to be designated by the
Chief Justice, and the remaining six shall be Members of the Senate or
of the House of Representatives, as the case may be, who shall be
chosen by each house, three upon nomination of the party having the
largest number of votes and three of the party having the second largest
number of votes therein. The senior Justice in each Electoral Tribunal
shall be its Chairman." (Article VI, Section 11, of the Constitution.).
If there was any doubt on the matter, the same was removed by the
amendment of 1940 the framers of which may be assumed to have been
fully aware of the one-party composition of the former National
Assembly which gave rise to the abovequoted opinion of the Secretary
of Justice. When instead of wording the amendment in such a form as to
nullify said opinion, Section 11 of Article VI of the Constitution not
only did not substantially depart from the original constitutional
provision but also positively and expressly ordains that "Each Electoral
Tribunal shall be composed of nine Members," the intent has become
clear and mandatory that at all times the Electoral Tribunal shall have
nine Members regardless of whether or not two parties make up each
house of Congress.
It is very significant that while the party having the second largest
number of votes is allowed to nominate three Members of the Senate or
of the House of Representatives, it is not required that the nominees
should belong to the same party. Considering further that the six
Members are chosen by each house, and not by the party or parties, the
conclusion is inescapable that party affiliation is neither controlling nor
necessary.
Under the theory of the petitioners, even if there were sufficient
Members belonging to the party having the second largest of votes, the
latter may nominate less than three or none at all; and the Chief Justice
may similarly designate less than three Justices. If not absurd, would
frustrate the purpose of having an ideal number in the composition of
the Electoral Tribunal and guarding against the possibility of deadlocks.
It would not be accurate to argue that the Members of the Electoral
Tribunal other than the Justices of the Supreme Court would naturally
vote along purely partisan lines, checked or fiscalized only by the votes
of the Justices; otherwise membership in the Tribunal may well be
limited to the Justices of the Supreme Court and so others who are not
Members of the Senate or of the House of Representatives. Upon the
other hand, he framers of the Constitution-not insensitive to some such
argument-still had reposed their faith and confidence in the
independence, integrity and uprightness of the Members of each House
who are to sit in the Electoral Tribunals and thereby expected them, as
does everybody, to decide jointly with the Justices of the Supreme Court
election contests exclusively upon their merits.
In view of the failure or unwillingness of Senator Lorenzo M. Tañada of
the Citizens Party, the party having the second largest number of votes
in the Senate, to nominate two other Members of the Electoral Tribunal,
the Senate was justified, in obedience to the constitutional mandate, to
choose-as it did-said two Members.
I vote to dismiss the petition.
Endencia, J., concurs.
LABRADOR, J., dissenting:.
I dissent and herewith proceed to explain my reasons therefor.
The constitutional provision, in pursuance of which Senators Cuenco
and Delgado were elected by the Senate members of the Senate
Electoral Tribunal is as follows:.
"The Senate and the House of Representatives shall each have an
Electoral Tribunal which shall be the sole judge of all contests relating
to the election, returns, and qualifications of their respective Members.
Each Electoral Tribunal shall be composed of nine Members, three of
whom shall be Justices of the Supreme Court to be designated by the
Chief Justice, and the remaining six shall be Members of the Senate or
of the House of Representatives, as the case may be, who shall be
chosen by each House, three upon nomination of the party having the
largest number of votes and three of the party having the second largest
number of votes therein. The Senior Justice in each Electoral Tribunal
shall be its Chairman." (Section II, Article VI of the Constitution.).
I hold that the above provision, just as any other constitutional
provision, is mandatory in character and that this character is true not
only of the provision that nine members shall compose the tribunal but
also that which defines the manner in which the members shall be
chosen. Such a holding is in accord with well-settled rules of statutory
construction.
"As a general proposition, there is greater likelihood that constitutional
provisions will be given mandatory effect than is true of any other class
of organic law. Indeed, such a construction accords with the generally
acknowledged import of constitutional fiat; that its character is such as
to require absolute compliance in all cases without exception. And the
very principles of our institutions, involving as they do concepts of
constitutional supremacy, are such as to form reasonable grounds for a
presumption that the framers of a constitution intended that just such
efficacy be given to it .." (Sec. 5807, Sutherland Statutory Construction,
Vol. 3, p.84.).
The majority helds that as Senator Tañada, the only member of the
Senate who does not belong to the Nacionalista Party, has refused to
exercise the constitutional privilege afforded him to nominate the two
other members the Senate may not elect said two other members. And
the reason given for this ruling is the presumed intention of the
constitutional provision to safeguard the interests of the minority. This
holding is subject to the following fundamental objections. In the first
Place, it renders nugatory the provision which fixes the membership of
the Senate Electoral Tribunal at nine, a provision which is admittedly a
mandatory provision. In the second place, it denies to the Senate the
power that the constitutional provision expressly grants it, i. e., that of
electing the members of the Electoral Tribunal so in effect this right or
prerogative is lodged, as a consequence of the refusal of the minority
member to nominate, in the hands of said member of the minority,
contrary to the constitutional provision. In the third place, it would
make the supposedly procedural provision, the process of nomination
lodged in the minority party in the Senate, superior to and paramount
over the power of election, which is in the whole Senate itself. So by the
ruling of the majority, a procedural provision overrides a substantive
one and renders nugatory the other more important mandatory provision
that the Electoral Tribunal shall be composed of nine members. In the
fourth place, the majority decision has by interpretation inserted a
provision in the Constitution, which the Constitutional Convention
alone had the power to introduce, namely, a proviso to the effect that if
the minority fails or refuses to exercise its privilege to nominate all the
three members, the membership of the Electoral Tribunal shall thereby
be correspondingly reduced. This arrogation of power by us is not
justified by any rule of law or reason.
I consider the opinion of the Senate that the refusal of Senator Tañada to
nominate the two other members must be construed as a waiver of a
mere privilege, more in consonance not only with the constitutional
provision as a whole, but with the dictates of reason. The above
principle (of waiver) furnishes the remedy by which two parts of the
constitutional provision, that which fixes membership at nine and that
which outlines the procedure in which said membership of nine may be
elected, can be reconciled. Well known is the legal principle that
provisions which in their application may nullify each other should be
reconciled to make them both effective, if the reconciliation can be
effected by the application of other legal principles. The reconciliation
is brought about in this case by the principle of waiver.
While I agree with the majority that it is the duty of this Court to step in,
when a constitutional mandate is ignored, to enforce said mandate even
as against the other coordinate departments, this is not the occasion for
it to do so, for to say the least it does not clearly appear that the form
and manner in which the Senate exercised its expressly recognized
power to elect its members to the Senate Electoral Tribunal has been
clearly violative of the constitutional mandate.
_Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä_.
1 Casanovas vs. Hord, 8 Phil., 125; Omo vs. Insular Gov't., 11 Phil., 67;
Weigall vs. Shuster, 11 Phil., 340; Barrameda vs. Moir, 25 Phil., 44;
Hamilton vs. McGirr, 30 Phil., 563; Compania Gral. de Tabacos vs.
Board of Public Utility Commissioners, 34 Phil., 136; Central Capiz vs.
Ramirez, 40 Phil., 883; Concepcion vs. Paredes, 42 Phil 599; McDaniel
vs. Apacible, 42 Phil., 749; U. S. vs. Ang Tan Ho, 43 Phil., 1; People vs.
Pomar, 46 Phil., 440. Agcaoili vs. Saguitan, 48 Phil., 676; Gov't. vs.
Springer, 50 Phil., 259; Gov't. us. Agoncillo, 50 Phil., 348; Gov't. vs. El
Hogar Filipino, 50 Phil, 399; Manila Electric vs. Pasay Transp., 57 Phil.,
600; Angara vs. Electoral Commission, supra; People vs. Vera, 65 Phil.,
56; Vargas vs. Rilloraza, 45 Off. Gaz., 3847; Endencia vs. David, 49
Off. Gaz., A822; Rutter vs. Esteban, 49 Off. Gaz., 1807; Comm.
investment vs. Garcia, 49 Off. Gaz., 1801; Marbury vs. Madison, 1
Cranch 137; Ex Parte Garland, 4 Wall. 333; Hepburn vs. Griswold, 8
Wall. 603; Knox vs. Lee, 12 Wall. 457; Civil Rights Cases [U. S. vs. M.
Stanley; U. S. vs. M. Ryan, U. S. vs. S. Nichols; U. S. vs. Singleton;
Robinson vs. and Charleston Railroad Co.], 109 U. S. 3 Pollock vs.
Farmers' Loan and Trust Co. 157 U. S. 429, 158 U. S. 601; Fairbanks
vs. U. S., 181 U. S. 286.
2 Which, insofar as pertinent to the issues in the case at bar, is
substantially identical to each of the Electoral Tribunals under the
Constitution as amended.
3 Araneta vs. Dinglasan, Barredo vs. Commission on Elections, and
Rodriguez vs. Teasurer of the Philippines, 84 Phil., 368, 45 Off. Gaz.,
4411, 4457; Nacionalista Party vs. Bautista, 85 Phil., 101, 47 Off. Gaz.,
2356; Lacson vs. Romero, 84 Phil., 740, 47 Off. Gaz., 1778; De los
Santos vs. Mallare, 87 Phil., 289, 48 Off. Gaz., 1787; Lacson vs. Roque,
92 Phil., 456, 49 Off. Gaz., 93; Jover Ledesma vs. Borra, 93 Phil., 506,
49 Off. Gaz., 2765; Ramos vs. Avelino, 97 Phil., 844, 51 Off. Gaz.,
5607.
_Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä_ 4 supplied).
"From the very nature of the American system of government with
Constitutions prescribing the jurisdiction and powers of each of the
three branches of government, it has devolved on the judiciary to
determine whether the acts of the other two departments are in harmony
with the fundamental law. All the departments are of the government are
unquestionably entitled and compelled to judge of the Constitution for
themselves; but, in doing so, they act under the obligations imposed in
the instrument, and in the order of time pointed out by it. When the,
judiciary has once spoken, if the acts of the other two departments are
held to be unauthorized or despotic, in violation of the Constitution or
the vested rights of the citizen, they cease to be operative or binding.
xxx xxx x x x.
"Since the Constitution is intended for the observance of the judiciary as
well as the other departments of government and the judges are sworn to
support its provisions, the court are not at liberty to overlook or
disregard its commands. It is their duty in authorized proceedings to
give effect to the existing Constitution and to obey all constitutional
provisions irrespective of their opinion as to the wisdom of such
provisions.
"In accordance with principles which are basic, the rule is fixed that the
duty in a proper case to declare a law unconstitutional cannot be
declined and must be performed in accordance with the deliberate
judgment of the tribunal before which the validity of the enactment is
directly drawn into question. When it is clear that a statute transgresses
the authority vested in the legislature by the Constitution, it is the duty
of the courts to declare the act unconstitutional cause they cannot shrink
from it without violating their oaths of office. This duty of the courts to
maintain the Constitution as the fundamental law of the state is
imperative and unceasing; and, as Chief Justice Marshal said, whenever
a statute is in violation of the fundamental law, the courts must so
adjudge and thereby give effect to the Constitution. Any other course
would lead to the destruction of the Constitution. Since the question as
to the constitutionality of a statute is a judicial matter, the courts will not
decline the exercise of jurisdiction upon the suggestion that action might
be taken by political agencies in disregard of the judgment of the
judicial tribunals." (11 Am. Jur., pp. 712-713, 713-715; emphasis
5 Rich vs. Board of Canvassers, 59 N. W. 183; State vs. McBride, 29
Am. Dec. 636; Collier vs. Frierson, 24 Ala. 100; State vs. Swift, 69 Ind.
505; State vs. Timme, 11 N.W. 785; Prohibition and Amendment Cases,
24 Kan. 700; Kadderly vs. Portland, 74 Pac. 710; Koehler vs. Hill, 14 N.
W. 738; State vs. Brockhart, 84 S. W. 1064; University vs. Melver, 72
N. C. 76; Westinghausen vs. People, 6 N.W. 641; State vs. Powell, 27
South, 927; Bott vs. Wurtz, 43 Atl. 744; Rice vs. Palmer, 96 S. W. 396;
State vs. Tooker, 37 Pac. 840.
6 "The procedure or manner of nomination cannot possibly affect the,
constitutional mandate that the Assembly is entitled to six in the
Electoral Commission. When for lack of a minority representation in the
Assembly the power to nominate three minority members cannot be
exercised, it logically follows that the only party in the Assembly may
nominate three others, otherwise the explicit mandate of the
Constitution that there shall be six members from the National
Assembly would be nullified.
"In other words, fluctuations in the total membership of the Commission
were not and could have been intended; We cannot say that the
Commission should have nine members during one legislative term and
six members during the next. Constitutional provisions must always
have a consistent application. The membership of the Commission is
intended to be fixed and not variable and is not dependent upon the
existence or non-existence of one or more parties in the Assembly.
`A cardinal rule in dealing with Constitutions is that they should receive
a consistent and uniform interpretation, so they shall not be taken to
mean one thing at one time and another thing at another time, even
though the circumstance may have so changed as to make a different
rule seem desirable (11 Am. Jur. 659).'.
"It is undisputed of course that the primary purpose of the Convention in
giving representation to the minority party in the Electoral Commission
was to safeguard the rights of the minority party and to protect their
interests, especially when the election of any member of the minority
party is protected. The basic philosophy behind the constitutional
provision was to enable the minority party to act as a check on the
majority of the Electoral Commission, with the members of the
Supreme Court as the balancing factor. Inasmuch, however, as there is
no minority party represented in the Assembly, the necessity for such a
check by the minority party disappears. It is a function that is expected
to be exercised by the three Justices of the Supreme Court.
"To summarize, considering the plain terms of the constitutional
provision in question, the changes that it has undergone since it was first
introduced until finally adopted by the Convention, as well as the
considerations that must have inspired the Constitutional Convention in
adopting it as it is, I have come to the conclusion that the Electoral
Commission should be composed of nine members, three from the
Supreme Court and six chosen by the National Assembly to be
nominated by the party in power, there being no other party entitled to
such nomination." Annex A to the Answers pp. 2-3.
6a Since 1939, when said opinion was rendered, the question therein
raised has not been taken up or discussed, until the events leading to the
case at bar (in February 1956).
6b "Thus, in Suanes vs. Chief Accountant (supra)-in which the
respondents maintained that the Electoral Commission formed part of
the National Assembly, citing in support thereof the principle of
contemporaneous and practical construction-this Court deemed it
unnecessary to refute the same in order to adopt the opposite view.
7 Senator Laurel reiterated this view on the floor of the Senate, on
February 22. 1956, in the following language:.
"And hence this provision that we find in the Constitution, three to
represent, in the manner prescribed in the Constitution, the party that
received the highest number of votes, meaning the majority party which
is the Nacionalista Party now, and three to represent the party receiving
the next highest number of votes therein, meaning the minority party,
the party receiving the next highest number of votes. But there was a
great deal of opinion that it would be better if this political organization,
so far as the legislative department is concerned, could be tempered by a
sort of a judicial reflection which could be done by drafting three, as to
each Electoral Tribunal, from the Supreme Court. And that, I think, was
the reason because a great majority of the delegates to the constitutional
convention accepted that principle. That is why we have nine members
in each electoral tribunal, in the House and in the Senate. And one
reason that I remember then and I am speaking from memory, Mr.
President, was that it is likely that the three members representing a
party would naturally favor the protestants or protestees, and so on. So it
would be better that even on that hypothesis or on that supposition it
would be better, in case they annul each other because three votes in
favor or three votes against, depending on the party of the protestants or
the protestees, that the Supreme Court decide the case because then it
would be a judicial decision in reality. Another reason is founded on the
theory that the Justices of the Supreme Court are supposed to be beyond
influence, although that may not be true. But having reached the highest
judicial position of the land, these persons would likely act impartially."
(Congressional Record for the Senate Vol. III, p. 376.).
8 When the legislative power was vested in a unicameral body, known
as the National Assembly.
9 Upon the substitution of the National Assembly by a bicameral
Congress, consisting of the Senate and the House of Representatives.
10 Senator Lim said:.
"But in the spirit, Your Honor can see very well that those three should
belong to the party having the second largest number of votes, precisely,
as Your Honor said, to maintain equilibrium because partisan
considerations naturally enter into the mind and heart of a senator
belonging to a particular party. Although grammatically, I agree with
Your Honor, Your Honor can see that the spirit of the provision of the
Constitution is clear that the three must come from the party having the
highest number of votes and the other three nominated must belong to
the party having the second highest number of votes. Your Honor can
see the point. If we allow Your Honor to back up your argument that
equilibrium should be maintained, because partisan considerations enter
when one is with the majority party, and that no party should prevail,
Your Honor should also have to consider that the spirit of the
Constitution is precisely to obviate that to the extent that the only three
can be nominated from the party having the largest number of votes and
three from the party having the second largest number of votes."
(Congressional Record of the Senate, Vol. Ill, p, 337; emphasis
supplied.).
_Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä_.
The statement of Senator Sabido was:.
".. the purpose of the creation of the Electoral Tribunal and of its
composition is to maintain a balance between the two parties and make
the members of the Supreme Court the controlling power so to speak of
the Electoral Tribunal or hold the balance of power. That is the ideal
situation.".
xxx xxx x x x.
".. I said that the ideal composition in the contemplation of the framers
of the Constitution is that those participating in the electoral tribunal
shall belong to the members of the party who are before the electoral
tribunal either as protestants or protestees, in order to insure impartiality
in the proceeding and justice in the decision that may be finally
rendered." (Congressional Record for the Senate, Vol. III, pp. 349, 352;
emphasis supplied.).
_Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä__Ä
__Ä_.
Senator Cea declared:.
".. the original purpose of the Constitution is to nominate only members
of the two major parties in the Senate in the Electoral Tribunal."
(Congressional Record for the Senate, Vol. III, p. 350; emphasis
supplied.).
The words of Senator Paredes were:.
".. what was intended in the creation of the electoral tribunal was to
create a sort of collegiate court composed of nine members three of
them belonging to the party having largest number of votes, and three
from, the party having the second largest number of votes so that these
members my represent the party, and the members of said party who
will sit before the electoral tribunal as protestees. For when it comes to a
party, Mr. President, there is ground to believe that decisions will be
made along party lines." (Congressional Record for the Senate, Vol. III,
p. 351; emphasis supplied.).
11 The need of adopting this view is demanded, not only by the factors
already adverted to, but, also, by the fact that constitutional provisions,
unlike statutory enactments, are presumed to be mandatory, "unless the
contrary is unmistakably manifest." The pertinent rule of statutory
construction is set forth in the American Jurisprudence as follows:.
"In the interpretation of Constitutions, questions frequently arise as to
whether particular sections are mandatory or directory. The courts
usually hesitate to declare that a constitutional provision is directory
merely in view of the tendency of the legislature to disregard provisions
which are not said to be mandatory. Accordingly, it is the general rule to
regard constitutional provisions as mandatory, and not to leave any
direction to the will of a legislature to obey or to disregard them. This
presumption as to mandatory quality is usually followed unless it is
unmistakably manifest that the provisions are intended to be merely
directory. The analogous rules distinguishing mandatory and directory
statutes are of little value in this connection and are rarely applied in
passing upon the provisions of a Constitution.
"So strong is the inclination in favor of giving obligatory force to the
terms of the organic law that it has even been said that neither by the
courts nor by any other department of the government may any
provision of the Constitution be regarded as merely directory, but that
each and everyone of its provisions should be treated as imperative and
mandatory, without reference to the rules and distinguishing between
the directory and the mandatory statutes." (II Am. Jur. 686-687;
emphasis supplied.).
12 Which admittedly, has the second largest number of votes in the
Senate.
13 In Angara vs. Electoral Commission (supra, 169) Senator, then
Justice, Laurel, speaking for this Court, recalled that:.
"In the same session of December 4, 1934, Delegate Cruz (C.) sought to
amend the draft by reducing the representation of the minority party and
the Supreme Court in the Electoral Commission to two members each,
so as to accord more representation to the majority party. The
Convention rejected this amendment by a vote of seventy-six (76)
against forty-six (46), thus maintaining the non-partisan character of the
commission."(emphasis supplied.).
Needless to say, what the Constitutional Convention thus precluded
from being done by direct action or grant of authority in the Charter of
our Republic should not receive judicial sanction, when done by
resolution of one House of Congress, a mere creature of said charter.
14 Namely, the other two (2) Justices of the Supreme Court and
Senators Laurel, Lopez and Primicias, or a total of six (6) members of
the Tribunal.
SECOND DIVISION
[G.R. No. L-9669. January 31, 1956.]
NICANOR G. SALAYSAY, Acting Municipal Mayor of San Juan del Monte,
Rizal, Petitioner, vs. HONORABLE FRED RUIZ CASTRO, Executive
Secretary, Office of the President of the Philippines, HONORABLE
WENCESLAO PASCUAL, Provincial Governor of Rizal, and DOCTOR
BRAULIO STO. DOMINGO, Respondents.
DECISION
MONTEMAYOR, J.:
The facts in this case are not disputed. Briefly stated, they are as follows. Engracio
E. Santos is the duly elected Municipal Mayor of San Juan del Monte, Rizal, and
the Petitioner Nicanor G. Salaysay is the duly elected Vice-Mayor. In the month of
September, 1955 and for some time prior thereto, Santos was under suspension
from his office due to administrative charges filed against him and
so Petitioner Salaysay acted as Mayor under section 2195 of the Revised
Administrative Code providing that in case of temporary disability of the Mayor
such as absence, etc., his duties shall be discharged by the Vice-Mayor. On
September 8, 1955, while acting as Mayor, Salaysay filed his certificate of
candidacy for the same office of Mayor.
Interpreting said action of Salaysay in running for the office of Mayor as an
automatic resignation from his office of Vice-Mayor under the provisions of
section 27 of the Revised Election Code, as a consequence of which he no longer
had authority to continue acting as Mayor, the Office of the President of the
Philippines on September 12, 1955 designated Braulio Sto. Domingo acting
Municipal Vice-Mayor of San Juan del Monte, Rizal. On the same date Salaysay
was advised by Respondent Provincial Governor Wenceslao Pascual of Rizal that
in view of his (Salaysay’s) automatic cessation as Vice-Mayor due to his having
filed his certificate of candidacy for the office of Mayor, and in view of the
appointment of Sto. Domingo, as acting Vice-Mayor by the President of the
Philippines, and because he Pascual) had directed Sto. Domingo to assume the
office of Mayor during the suspension of Mayor Santos, he (Salaysay) should turn
over the office of Mayor to Sto. Domingo. On September 13, 1955, Salaysay was
also advised by Executive Secretary Fred Ruiz Castro to turn over the office of
Mayor to Sto. Domingo immediately, otherwise he might be prosecuted for
violation of Article 237 of the Revised Penal Code for prolonging performance of
duties.
Salaysay refused to turn over the office of Mayor to Sto. Domingo and brought
this action of Prohibition with preliminary injunction against Executive Secretary
Castro, Governor Pascual and Sto. Domingo, to declare invalid, illegal and
unauthorized the designation of Sto. Domingo as acting Vice-Mayor of San Juan
del Monte as well as his designation by Governor Pascual to assume the office of
Mayor during the suspension of Mayor Santos; chan roblesvirtualawlibraryto
order Respondents to desist and refrain from molesting, interfering or in any way
preventing Petitioner from performing his duties as acting Municipal Mayor and
prohibiting Sto. Domingo from performing or attempting to perform any of those
powers and duties belonging to Petitioner. Acting upon a prayer contained in the
petition, we issued a writ of preliminary injunction.
Petitioner contends that his case does not come under section 27 of the Election
Code for the reason that when he filed his certificate of candidacy for the office of
Mayor, he was actually holding said office. The Respondents, however, maintain
that the office Petitioner was actually holding when he filed his certificate of
candidacy for the office of Mayor was that of Vice-Mayor, the one to which he had
been duly elected; chan roblesvirtualawlibrarythat he was not actually holding the
office of Mayor but merely discharging the duties thereof and was merely acting
as Mayor during the temporary disability of the regular incumbent.
Elaborating, Respondents claim that a Vice-Mayor acting as Mayor merely
discharges the duties of the office but does not exercise the powers thereof; chan
roblesvirtualawlibrarythat his tenure is provisional, lasting only during the
temporary disability of the regular incumbent. Petitioner counters with the
argument that a Vice-Mayor acting as Mayor does not only discharge the duties of
the office of Mayor but also exercises the powers thereof; chan
roblesvirtualawlibraryand that while acting as Mayor, he actually holds the office
of Mayor for all legal purposes.
It is clear that Petitioner’s stand is taken from the point of view of his acting as
Mayor and not of his office of Vice-Mayor, while Respondents’ position is taken
from the point of view of Petitioneractually holding the office of Vice-Mayor
though incidentally and temporarily discharging the duties of the office of Mayor.
We have given the case considerable study and thought because we find no
precedents to aid and guide us. The parties have ably adduced pertinent and
extensive citations and arguments not only at the original hearing but also at the
re-hearing. As to whether a Vice- Mayor acting as Mayor may be regarded as
actually holding the office of Mayor, there are plausible arguments and good
reasons for either side. We are inclined to agree with Petitioner that one acting as
Mayor not only discharges the duties of the office but also exercises the powers of
said office, and that in one sense and literally, he may legitimately be considered
as actually holding the office of Mayor. But there is also force and logic in the
argument of Respondents that inasmuch as a Vice-Mayor takes over the duties of
the Mayor only temporarily and in an acting capacity, he may not be regarded as
actually holding the office, because the duly elected Mayor incumbent though
actually under temporary disability such as suspension, illness or absence (section
2195, Revised Administrative Code) could and should be considered as retaining
his right to the office of Mayor and actually holding the same; chan
roblesvirtualawlibraryotherwise there would be a situation where two officials at
the same time would be having a right to the same office and actually holding the
same. In view of the possible uncertainty and doubt as to whether or not a Vice-
Mayor by acting as Mayor can be regarded as actually holding said office of
Mayor, we have to go back and resort to the legislative proceedings had,
particularly the discussions and interpellations in both houses of Congress leading
to the enactment of section 27 of the Revised Election Code, with a view to
ascertaining the intention of that body. After all, in interpreting a law, the primary
consideration is the ascertainment of the intent and the purpose of the legislature
promulgating the same.
“Statute law is the will of the legislature; chan roblesvirtualawlibraryand the
object of all judicial interpretation of it is to determine what intention is conveyed,
either expressly or by implication, by the language used, so far as it is necessary
for determining whether the particular case or state of facts presented to the
interpreter falls within it.” (Black, Handbook on the Construction and
Interpretation of the Laws, 2nd ed., p. 11.)
HISTORY OR BACKGROUND OF SECTION 27
REVISED ELECTION CODE
Before the enactment of section 27 of the Revised Election Code, the law in force
covering the point or question in controversy was section 2, Commonwealth Act
No. 666. Its burden was to allow an elective provincial, municipal, or city official
such as Mayor, running for the same office to continue in office until the
expiration of his term. The legislative intention as we see it was to favor re-
election of the incumbent by allowing him to continue in his office and use the
prerogatives and influence thereof in his campaign for re- election and to avoid a
break in or interruption of his incumbency during his current term and provide for
continuity thereof with the next term of office if re-elected.
But section 2, Commonwealth Act No. 666 had reference only to provincial and
municipal officials duly elected to their offices and who were occupying the same
by reason of said election at the time that they filed their certificates of candidacy
for the same position. It did not include officials who hold or occupy elective
provincial and municipal offices not by election but by appointment. We quote
section 2, Commonwealth Act No. 666:chanroblesvirtuallawlibrary
“Any elective provincial, municipal or city official running for an office other than
the one for which he has been lastly elected, shall be considered resigned from his
once from the moment of the filing of his certificate of candidacy.”
However, this was exactly the situation facing the Legislature in the year 1947
after the late President Roxas had assumed office as President and before the
elections coming up that year. The last national elections for provincial and
municipal officials were held in 1940, those elected therein to serve up to
December, 1943. Because of the war and the occupation by the Japanese, no
elections for provincial and municipal officials could be held in 1943. Those
elected in 1940 could not hold-over beyond 1943 after the expiration of their term
of office because according to the views of the Executive department as later
confirmed by this Court in the case of Topacio Nueno vs. Angeles, 76 Phil., 12,
through Commonwealth Act No. 357, Congress had intended to suppress the
doctrine or rule of hold- over. So, those provincial and municipal officials elected
in 1940 ceased in 1943 and their offices became vacant, and this was the situation
when after liberation, President Osmeña took over as Chief Executive. He filled
these vacant positions by appointment. When President Roxas was elected in 1946
and assumed office in 1947 he replaced many of these Osmeña appointees with his
own men. Naturally, his Liberal Party followers wanted to extend to these
appointees the same privilege of office retention thereto given by section 2,
Commonwealth Act No. 666 to local elective officials. It could not be done
because section 2, Commonwealth Act No. 666 had reference only to officials who
had been elected. So, it was decided by President Roxas and his party to amend
said section 2, Commonwealth Act No. 666 by substituting the phrase “which he is
actually holding”, for the phrase “for which he has been lastly elected” found in
section 2 of Commonwealth Act No. 666. The amendment is now found in section
27 of the Revised Election Code which we quote
below:chanroblesvirtuallawlibrary
“SEC. 27. Candidate holding office. — Any elective provincial, municipal, or city
official running for an office, other than the one which he is actually holding, shall
be considered resigned from his office from the moment of the filing of his
certificate of candidacy.”
The purpose of the Legislature in making the amendment, in our opinion, was to
give the benefit or privilege of retaining office not only to those who have been
elected thereto but also to those who have been appointed; chan
roblesvirtualawlibrarystated differently, to extend the privilege and benefit to the
regular incumbents having the right and title to the office either by election or by
appointment. There can be no doubt, in our opinion, about this intention. We have
carefully examined the proceedings in both Houses of the Legislature. The
minority Nacionalista members of Congress bitterly attacked this amendment,
realizing that it was partisan legislation intended to favor those officials appointed
by President Roxas; chan roblesvirtualawlibrarybut despite their opposition the
amendment was passed.
LEGISLATIVE INTENT
We repeat that the purpose of the Legislature in enacting section 27 of the Revised
Election Code was to allow an official to continue occupying an elective
provincial, municipal or city office to which he had been appointed or elected,
while campaigning for his election as long as he runs for the same office. He may
keep said office continuously without any break, through the elections and up to
the expiration of the term of the office. By continuing in office, the office holder
was allowed and expected to use the prerogatives, authority and influence of his
office in his campaign for his election or re-election to the office he was holding.
Another intention of the Legislature as we have hitherto adverted to was to
provide for continuity of his incumbency so that there would be no interruption or
break, which would happen if he were required to resign because of his filing his
certificate of candidacy. Bearing this intention of the Legislature in this regard in
mind, can it be said that a Vice-Mayor like the Petitioner herein, merely acting as
Mayor because of the temporary disability of the regular incumbent, comes under
the provision and exception of section 27 of the Election Code? The answer must
necessarily be in the negative. A Vice Mayor acts as Mayor only in a temporary,
provisional capacity. This tenure is indefinite, uncertain and precarious. He may
act for a few days, for a week or a month or even longer. But surely there,
ordinarily, is no assurance or expectation that he could continue acting as Mayor,
long, indefinitely, through the elections and up to the end of the term of the office
because the temporary disability of the regular, incumbent Mayor may end any
time and he may resume his duties.
VICE-MAYOR ACTING AS MAYOR, OUTSIDE
LEGAL CONTEMPLATION
The case of a Vice-Mayor acting as Mayor could not have been within the
contemplation and the intent of the Legislature because as we have already stated,
that lawmaking body or at least the majority thereof intended to give the benefits
and the privilege of section 27 to those officials holding their offices by their own
right and by a valid title either by election or by appointment, permanently
continuously and up to the end of the term of the office, not to an official neither
elected nor appointed to that office but merely acting provisionally in said office
because of the temporary disability of the regular incumbent. In drafting and
enacting section 27, how could the Legislature have possibly had in mind a Vice-
Mayor acting as Mayor, and include him in its scope, and accord him the benefits
of retaining the office of Mayor and utilizing its authority and influence in his
election campaign, when his tenure in the office of Mayor is so uncertain,
indefinite and precarious that there may be no opportunity or occasion for him to
enjoy said benefits, and how could Congress have contemplated his continuing in
the office in which he is acting, when the very idea of continuity is necessarily in
conflict and incompatible with the uncertainty, precariousness and temporary
character of his tenure in the office of Mayor?
“ACTUALLY HOLDING OFFICE” EQUIVALENT
TO “INCUMBENT”
All these doubts about the meaning and application of the phrase “actually holding
office” could perhaps have been avoided had the intention of this Legislature been
phrased differently. It could perhaps have more happily used the term “incumbent”
to refer to those provincial and municipal officials who were holding office either
by election or by appointment, and so had a legal title and right thereto. As a
matter of fact, this term “incumbent” was actually used by Congressman Laurel in
explaining the idea of the committee that drafted this amendment to section 2,
Commonwealth Act No. 666, of which committee he was the Chairman. The
deliberations of the lower House as quoted by the very counsel for Petitioner reads
as follows:chanroblesvirtuallawlibrary
“Mr. ROY. What must be the reason, then, Mr. Chairman of the Committee for
deleting the words ‘has been lastly elected’?
“Mr. LAUREL. The idea is to cover the present incumbents of the local offices.”
(II Congressional Record 1143.)
In this connection, a happier phraseology of another portion of section 27 could
have been used for purposes of precision. For instance, the first part of said section
reads thus:chanroblesvirtuallawlibrary “Any elective provincial, municipal or city
official running for an office”, and yet as we have already said, the Legislature
intended said section to refer to officials who were appointed by President Roxas
to fill vacancies in provincial, municipal and city elective offices. In other words,
those officials were not really elected or elective officials but they were officials
occupying or holding local elective offices by appointment. All this goes to show
that we should not and cannot always be bound by the phraseology or literal
meaning of a law or statute but at times may interpret, nay, even disregard loose or
inaccurate wording in order to arrive at the real meaning and spirit of a statute
intended and breathed into it by the law-making body.
MEANING OF PHRASE “RESIGNED FROM HIS OFFICE”
Section 27 of Republic Act No. 180 in providing that a local elective official
running for an office other than the one he is actually holding, is considered
resigned from his office, must necessarily refer to an office which said official can
resign, or from which he could be considered resigned, even against his will. For
instance, an incumbent Mayor running for the office of Provincial Governor must
be considered as having resigned from his office of Mayor. He must resign
voluntarily or be compelled to resign. It has to be an office which is subject to
resignation by the one occupying it. Can we say this of a Vice-Mayor acting as
Mayor? Can he or could he resign from the office of Mayor or could he be made to
resign therefrom No. As long as he holds the office of Vice-Mayor to which he has
a right and legal title, he, cannot resign or be made to resign from the office of
Mayor because the law itself requires that as Vice- Mayor he must act as Mayor
during the temporary disability of the regular or incumbent Mayor. If he cannot
voluntarily resign the office of Mayor in which he is acting temporarily, or could
not be made to resign therefrom, then the provision of section 27 of the Code
about resignation, to him, would be useless, futile and a dead letter. In interpreting
a law, we should always avoid a construction that would have this result, for it
would violate the fundamental rule that every legislative act should be interpreted
in order to give force and effect to every provision thereof because the Legislature
is not presumed to have done a useless act.
“A statute is a solemn enactment of the state acting through its legislature and it
must be assumed that this process achieve result. It cannot be presumed that the
legislature would do a futile thing.” (Sutherland, Statutory Construction, Vol. 2, p.
237.)
EXAMPLE
To emphasize and illustrate this inapplicability of section 27 to a Vice-Mayor
acting as Mayor, let us consider an example. A Vice-Mayor while acting as Mayor
files his certificate of candidacy for the office of Vice-Mayor. In other words, he
wants to run for re-election. The Provincial Governor, especially if belonging to a
different political party wants to keep him out of the office of Mayor, especially
during the electoral campaign, and instead have his party man, the councilor who
obtained the highest number of votes in the last elections, act as Mayor (section
2195, Revised Administrative Code). So, he hastens to the Municipal building and
enters the Mayor’s office where the Vice-Mayor has installed himself. Using the
same argument of herein Petitioner, he tells the Vice-Mayor that inasmuch as
while acting as Mayor, he was “actually holding” said office of Mayor, and
because while thus holding it, he filed his certificate of candidacy for Vice-Mayor
which is a different office, he must be considered resigned from the office of
Mayor; chan roblesvirtualawlibraryand he even asks him to leave the Mayor’s
room and office. The Vice-Mayor, a law abiding citizen acquiesces and obeys, he
reluctantly, leaves and abandons the office of the Mayor and repairs to his own
room as Vice-Mayor. But he has a happy inspiration and remembers the law
(section 2195, Revised Administrative Code); chan roblesvirtualawlibraryhe
rushes back to the office of the Mayor and tells the Governor and the authorities
that he is still the Vice-Mayor because when he filed his certificate of candidacy
for Vice-Mayor, he was also actually holding said office, and so did not lose
it; chan roblesvirtualawlibrarythat as such Vice-Mayor, he can act and must act as
Mayor during the temporary disability of the incumbent, because he cannot resign
and no one can make him resign from the office of Mayor; chan
roblesvirtualawlibraryand he defies the Governor to oust him from the office and
room of the Mayor. The Governor is helpless for the Vice-Mayor is right, that is, if
we apply section 27 of the Election Code to him. This possible, undesirable and
anomalous situation is another reason why section 27 may not be applied to the
case of a Vice-Mayor acting as Mayor.
In the above given example, the Governor might contend that when the Vice-
Mayor filed his certificate of candidacy for Mayor, he was actually holding only
the office of Mayor and not that of Vice-Mayor and so he lost his office of Vice-
Mayor. But that contention of the Governor is untenable. Even counsel for
herein Petitioner in his memorandum admits that a Vice-Mayor while acting as
Mayor, also actually holds his office of Vice-Mayor. And it has to be that way. A
Vice-Mayor acting as Mayor does not cease to be Vice-Mayor. In fact, that is his
real, principal and basic office or function. Acting as Mayor is only an incident, an
accessory. Let him cease holding the office of Vice-Mayor even for an instant, and
he automatically also ceases acting as Mayor. Furthermore, a Vice-Mayor has
administrative duties to perform. He is an ex-officio member of the Municipal
Council and he is in charge of the barrio or district where the town offices are
located (section 2204, Revised Administrative Code). While acting as Mayor he
may not say that he ceases to hold the office of Vice- Mayor and so cannot look
after the needs of the residents of his district and present them to the town council.
ANOTHER EXAMPLE
The regular incumbent Mayor files his certificate of candidacy for the same office
of Mayor. Then he goes on leave of absence or falls sick and the Vice-Mayor acts
in his place, and while thus acting he also files his certificate of candidacy for the
same office of Mayor. Then the Vice-Mayor also goes on leave or falls sick or is
suspended, and because the regular Mayor is still unable to return to office, under
section 2195 of the Revised Administrative Code, the councilor who at the last
general elections received the highest number of votes, acts as Mayor and while
thus acting he also files his certificate of candidacy for the office of Mayor. The
Vice-Mayor also campaigns for the same post of Mayor claiming like the
herein Petitioner that he did not lose his office of Vice-Mayor because he filed his
certificate of candidacy while acting as Mayor and thus was actually holding the
office of Mayor. Using the same argument, the councilor who had previously acted
as Mayor also campaigns for his election to the same post of Mayor while keeping
his position as councilor. Thus we would have this singular situation of three
municipal officials occupying three separate and distinct offices, running for the
same office of Mayor, yet keeping their different respective offices, and strangely
enough two of those offices (Vice- Mayor and Councilor) are different from the
office of Mayor they are running for. Could that situation have been contemplated
by the Legislature in enacting section 27 of the Revised Election Code? We do not
think so, and yet that would happen if the contention of the Petitioner about the
meaning of “actually holding office” is to prevail.
CONGRESS CONTEMPLATED ONLY ONE OFFICE
ACTUALLY HELD
Another argument against the contention that a Vice-Mayor acting as Mayor
actually holds the office of Mayor, occurs to us. For purposes of ready reference
we again quote section 27 in its entirety:chanroblesvirtuallawlibrary
“SEC. 27. Candidate holdings office. — Any elective provincial, municipal, or
city official running for an office, other than the one which he is actually holding,
shall be considered resigned from his office from the moment of the filing of his
certificate of candidacy.”
It will readily be noticed from the quoted section, especially the words underlined
by us that the Legislature contemplated only one office, not two or more. To us,
this is significant as well as important. As we have previously stated, there is no
question that a Vice-Mayor acting as Mayor still holds the office of Vice-
Mayor. Petitioner himself admits this in his written argument and even contends
that there is nothing wrong or illegal in an official holding two offices at the same
time provided there is no incompatibility between them. If the Legislature believed
that a Vice-Mayor acting as Mayor actually holds the office of Mayor and that he
would thus be actually holding two offices, then it would have provided in section
27 for offices in the plural instead of employing the words office, his office, and
the one which it used in the singular. Besides this clear expression of legislative
intent for only one office being actually held and to be resigned from, to say that
the Vice-Mayor when acting as Mayor is actually holding two offices would create
confusion and uncertainty because we would not know which office he would be
considered resigned from.
TWO OFFICIALS “ACTUALLY HOLDING” THE SAME
ELECTIVE OFFICE
We have already said that a Mayor under temporary disability continues to be
Mayor (Gamalinda vs. Yap * No. L-6121, May 30, 1953) and actually holds the
office despite his temporary disability to discharge the duties of the office; chan
roblesvirtualawlibraryhe receives full salary corresponding to his office, which
payment may not be legal if he were not actually holding the office, while the
Vice-Mayor acting as Mayor does not receive said salary but is paid only a sum
equivalent to it (section 2187, Revised Administrative Code). Now, if a Mayor
under temporary disability actually holds the office of Mayor and the Vice- Mayor
acting as Mayor, according to his claim is also actually holding the office of
Mayor, then we would have the anomalous and embarrassing situation of two
officials actually holding the very same local elective office. Considered from this
view point, and to avoid the anomaly, it is to us clear that the Vice-Mayor should
not be regarded as holding the office of Mayor but merely acting for the regular
incumbent, a duty or right as an incident to his office of Vice-Mayor and not as an
independent right or absolute title to the office by reason of election or
appointment.
ACTING MAYOR AND ACTING AS MAYOR, DISTINGUISHED
Petitioner claims that he is the acting Mayor. Respondents insist that Petitioner is
merely acting as Mayor. It is pertinent and profitable, at least in the present case,
to make a distinction between an Acting Mayor and a Vice-Mayor acting as
Mayor. When a vacancy occurs in the office of Mayor, the Provincial Governor
under section 21(a) or the President under section 21(b), (d) and (e) of the Election
Code appoints or designates an Acting Mayor. In that case the person designated
or appointed becomes the Mayor and actually holds the office for the unexpired
term of the office (section 21 [f]) because when he was appointed there was no
regular incumbent to the office. However, when a Vice-Mayor acts as Mayor, there
is no vacancy in the post of Mayor. There is a regular incumbent Mayor only that
the latter is under temporary disability. So, strictly and correctly speaking, the
Vice-Mayor may not be considered Acting Mayor. He is only acting as Mayor
temporarily, provisionally and during the temporary disability of the regular
incumbent. He is not the incumbent. In baseball parlance, Petitioner is only a
“pinch hitter”, — pinch hitting for, say, the pitcher in an emergency. As a mere
pinch hitter his name does not grace the regular line up, he is not the pitcher, does
not hold the position of pitcher, neither does he receive all the benefits and
privileges of the regular pitcher.
Ordinarily, this apparently fine and subtle distinction would seem unimportant and
unnecessary. When a Vice-Mayor acts as Mayor we usually call him Mayor or
Acting Mayor and deal with him as though he were the regular incumbent; chan
roblesvirtualawlibrarybut there are times and occasions like the present when it is
necessary to make these distinction and use correct and precise language in order
to determine whether or not under section 27 of the Election Code a Vice-Mayor
acting as Mayor like the Petitioner herein comes within the phrase “actually
holding office” used in that section.
EXCEPTION TO BE CONSTRUED STRICTLY
Section 26 of the Revised Election Code provides that every person holding an
appointive office shall ipso facto cease in his office on the date he files his
certificate of candidacy. Then we have section 27 of the same Code as well as
section 2 of Commonwealth Act No. 666 which it amended, both providing that
local elective officials running for office shall be considered resigned from their
posts, except when they run for the same office they are occupying or holding. It is
evident that the general rule is that all Government officials running for office
must resign. The authority or privilege to keep one’s office when running for the
same office is the exception. It is a settled rule of statutory construction that an
exception or a proviso must be strictly construed specially when considered in an
attempt to ascertain the legislative intent.
“Exceptions, as a general rule, should be strictly, but reasonably construed; chan
roblesvirtualawlibrarythey extend only so far as their language fairly warrants, and
all doubts should be resolved in favor of the general provision rather than the
exception. Where a general rule is established by statute with exceptions, the court
will not curtail the former nor add to the latter by implication, and it is a general
rule that an express exception excludes all others, although it is always proper in
determining the applicability of this rule, to inquire whether, in the particular case,
it accords with reason and justicecralaw .” (Francisco, Statutory Construction, p.
304, citing 69 C.J., section 643, pp. 1092-1093; chan roblesvirtualawlibraryItalics
supplied.)
“As in all other cases, a proviso should be interpreted consistently with the
legislative intent. Where the proviso itself must be considered. In an attempt to
determine the intent of the Legislature, it should be strictly construed. This is true
because the legislative purpose set forth in the general enactment expresses the
legislative policy and only those subjects expressly exempted by the proviso
should be freed from the operation of the statute. (Sutherland, Statutory
Construction, 3rd ed., Vol. 2, pp. 471-472.)
Applying this rule, inasmuch as Petitioner herein claimed the right to retain his
office under the exception above referred to, said claim must have to be judged
strictly, — whether or not his mere acting in the office of Mayor may be legally
interpreted as actually holding the same so as to come within the exception. As we
have already observed, literally and generally speaking, since he is discharging the
duties and exercising the powers of the office of Mayor he might be regarded as
actually holding the office; chan roblesvirtualawlibrarybut strictly speaking and
considering the purpose and intention of the Legislature behind section 27 of the
Revised Election Code, he may not and cannot legitimately be considered as
actually holding the office of Mayor.
RETENTION OF OFFICE
We have, heretofore discussed the case as regards the resignation of an office
holder from his office by reason of his running for an office different from it; chan
roblesvirtualawlibraryand our conclusion is that it must be an office that he can or
may resign or be considered resigned from; chan roblesvirtualawlibraryand that
the office of Mayor is not such an office from the stand point of a Vice-Mayor. Let
us now consider the case from the point of view of retaining his office because he
is running for the same office, namely — retention of his office. As we have
already said, the Legislature intended to allow an office holder and incumbent to
retain his office provided that he runs for the same. In other words, he is supposed
to retain the office before and throughout the elections and up to the expiration of
the term of the office, without interruption. Can a Vice-Mayor acting as Mayor be
allowed or expected to retain the office of Mayor ? The incumbent Mayor running
for the same office can and has a right to keep and retain said office up to the end
of his term. But a Vice-Mayor merely acting as Mayor and running for said office
of Mayor, may not and cannot be expected to keep the office up to the end of the
term, even assuming that by acting as Mayor he is actually holding the office of
Mayor, for the simple reason that his holding of the same is temporary, provisional
and precarious and may end any time when the incumbent Mayor returns to duty.
Naturally, his temporary holding of the office of Mayor cannot be the retention or
right to keep the office intended by the Legislature in section 27 of Republic Act
No. 180. So that, neither from the point of view of resignation from the office of
Mayor nor the standpoint of retention of said office, may a Vice-Mayor acting as
Mayor, like herein Petitioner, come within the provisions and meaning of section
27 of the Election Code, particularly the exception in it.
SUPPOSED DISCRIMINATION AGAINST VICE-MAYOR
ACTING AS MAYOR
During the hearing and oral argument of this case, the suggestion was made, which
suggestion was also used as an argument during the deliberations among the
members of this Tribunal, that to include in section 27 particularly the phrase
“actually holding office” one who has been appointed as acting official such as
Acting Mayor and at the same time exclude a Vice-Mayor who acts as Mayor,
would be discriminating against an official (Vice-Mayor) who by statutory
provision and sanction is required to act as Mayor, and give more importance to
one merely appointed to said office. We fail to see any discrimination for the
reason that an appointee to the office of Mayor fills a vacancy and serves until the
end of the term of the office, whereas a Vice-Mayor acting as Mayor fills no
vacancy because there is none and he serves only temporarily until the disability
of the incumbent, such as suspension, absence, illness, etc. is removed. Now, if a
vacancy is created in the office of Mayor by removal, resignation, death or
cessation of the incumbent, then the Vice-Mayor automatically fills the vacancy,
becomes Mayor (section 2195, Revised Administrative Code), and serves until the
end of the term (section 21[f], Revised Election Code). That is the time when he
may invoke section 27 because he would then be actually holding the office of
Mayor.
CONCLUSION
In conclusion, we believe and hold that a Vice-Mayor acting as Mayor does not
“actually hold the office” of Mayor within the meaning of section 27 of Republic
Act No. 180; chan roblesvirtualawlibrarythat a Vice-Mayor who files his
certificate of candidacy for the office of Mayor, even while acting as Mayor, is
considered resigned from the office of Vice-Mayor for the reason that is the only
office that he “actually holds” within the contemplation of section 27 of the
Revised Election Code and the office he is running for (Mayor) is naturally other
than the one he is actually holding (Vice-Mayor); chan roblesvirtualawlibraryand
that having ceased to be a Vice- Mayor, he automatically lost all right to act as
Mayor.
A word of explanation. This decision should have been promulgated long before
now. In truth, this Tribunal was anxious and determined to decide this case before
the last November elections, at least before the newly elected local officials
assumed office. However, after long, careful deliberations the court was
deadlocked, the vote standing five to five. The rehearing ordered by us as decreed
by law failed to break the deadlock. It was only when the new addition to the
membership of the Tribunal, Mr. Justice Endencia studied the case, weighed the
arguments and considered the authorities on either side, that the tie vote could be
broken. He voted for and signed the present opinion which now becomes the
majority opinion.
The question involved in the present case may in a way be regarded as moot. Just
the same, we doomed it advisable to proceed with its final determination, even
elaborate on the discussion of its different aspects, by reason of its importance and
for the information and guidance of local elective officials, and perchance so that
the Legislature, apprised of the judicial interpretation and meaning given to
section 27 of the Revised Election Code, may be in a better position to decide
whether to continue and leave it as it stands on the statute books, or amend or
change it before the next general elections.
In view of the foregoing, the petition for prohibition is denied, with costs. The writ
of preliminary injunction heretofore issued is hereby dissolved.
Padilla, Jugo, Labrador and Endencia, JJ., concur.
Separate Opinions
REYES, A., J., concurring:chanroblesvirtuallawlibrary
The chief function of statutory construction is to ascertain the intention of the
lawmaker and, that intention has been ascertained, to give effect thereto. By
reference to legislative record Mr. Justice Montemayor has, I think, arrived at the
true legislative intent and has therefore fashioned his opinion 50 as to give effect
to that intent. I readily subscribe to that opinion as the correct judicial solution to
the present controversy.
REYES, J. B. L., J., dissenting:chanroblesvirtuallawlibrary
I fully concur with the dissenting opinion of Mr. Justice Concepcion, but would
only add that I fail to see how the majority can hold that the vice-mayor, acting as
mayor, cannot be considered resigned from the mayoralty, because “it has to be an
office which is subject to resignation by the one occupying it.” That conclusion
would only be true if the law required the candidate to resign voluntarily from his
office. But the law does not require him to resign; chan roblesvirtualawlibraryit
considers him resigned, treats him as if he had resigned; chan
roblesvirtualawlibraryand that is altogether a different thing. In order that an
official can be considered resigned all that is needed is that the office be one that
he could forfeit or loss. And the mayoralty is certainly an office that can be lost or
forfeited by Petitioner, even if he could not resign from it. The trouble, I suppose,
is that the structure of our language is such that (as semanticists have pointed out)
it enables us not only to use words about realities but also to use words about
words.
And it is precisely because the law here involved decrees a forfeiture that
restrictive interpretation becomes imperative and doubts should be resolved
against the Petitioner’s forfeiting his office.
CONCEPCION, J., dissenting:chanroblesvirtuallawlibrary
This case hinges on the interpretation of section 27 of Republic Act No. 180
(Revised Election Code), reading:chanroblesvirtuallawlibrary
“Any elective provincial, municipal, or city official running for an office, other
than the one which he is actually holding, shall be considered resigned from his
office from the moment of the filing of his certificate of candidacy.” (Italics
supplied.)
The main issue is whether Petitioner Nicanor G. Salaysay is “actually holding” the
office of municipal mayor of San Juan del Monte, Province of Rizal.
ORDINARY AND LEGAL MEANING OF THE PHRASE
“ACTUALLY HOLDING”
“Actual” implies
“Real, in opposition to constructive or speculative, something ‘existing in act.’
State vs. Wells, 31 Conn. 213; chan roblesvirtualawlibraryreal as opposed to
nominal; chan roblesvirtualawlibraryAstor vs. Merritt, 111 U. S. 202, 4 Sup. Ct.
413, 28 L. Ed. 401.’ (Bouvier’s Law Dictionary, 8th ed., p. 130.) (Italics supplied.)
“That which exists in fact, a reality.” (Webster’s New International Dictionary, 2nd
ed., p. 27.) (Italics supplied.)
According to Ballantine Law Dictionary (1948 ed., p.
28):chanroblesvirtuallawlibrary
“That which is actual is something real, or actually existing, as opposed to
something merely possible, or to something which is presumptive or constructive.
See Steen vs. Modern Woodmen of America, 296, 111, 104, 17 A. L. R. 406, 412,
129 N. E. Rep. 546.” (Italics supplied.)
Hence, “actually” means “in act or fact; chan roblesvirtualawlibraryin reality; chan
roblesvirtualawlibrarytruly as, he was actually there.” (Funk & Wagnalls, New
Standard Dictionary, 1952 ed., p. 31.) In other words, actually “is opposed to
seemingly, pretendedly, or feignedly as actually engaged in farming means really,
truly, in fact. (In re Strawbridge & Mays, 39 Ala. 367)” (Bouvier’s Law
Dictionary, 3rd ed., p. 130.)
Upon the other hand, to “hold” is “to possess; chan roblesvirtualawlibraryto
occupy; chan roblesvirtualawlibraryto be in possession and administration of; chan
roblesvirtualawlibraryas to hold office.” (Black’s Law Dictionary, p. 897.)
Consequently, to “actually hold” is to possess in fact or in reality, that is to say,
physically or materially.
A public office, however, “is the right, authority and duty, created and conferred
by law, by which for a given period either fixed by law or induring at the pleasure
of the creating power, an individual is invested with some portion of the sovereign
functions of the government, to be exercised by him for the benefit of the public.”
(Mechem, Public Officers, section 1.) Being intangible, it is incapable of physical
or material occupation. As a consequence, the actually holding of an office is
determined by its physical, external or tangible manifestations, namely, the
exercise of the powers and performance of the duties appurtenant thereto. For this
reason, it has been held that:chanroblesvirtuallawlibrary
“Actually holds office — within statute regulating tax commission’s salaries,
means discharge of duties after due appointment and qualification. (Acts 1923, p.
14, section 1; chan roblesvirtualawlibraryp 184, section 85.)” (Words and Phrases,
Vol. 2, p. 266) (Italics supplied.)
“‘Actually holds office’ means the discharge of the duties thereof after due
appointment and qualification, as required by law, subject to removal at the will of
the appointing power. Touart vs. State ex rel. Callaghan, 173 Ala. 453, 56 So.
211; chan roblesvirtualawlibraryWilliams, Judge vs. Schwarz, 197 Ala. 40, 72 So.
330, Ann. Cas. 1918D, 869; chan roblesvirtualawlibraryNolen’s case, 118 Ala.
154, 24 So. 251.” (Brussel vs. Brandon, 136 So. 577.) (Italics supplied.)
In the case at bar, it is not disputed that, being the vice-mayor of San Juan del
Monte, Rizal, Petitioner Salaysay is, and has been, discharging the duties of
mayor of said municipality, since the suspension of its mayor, Engracio E. Santos.
Consequently, the former is “actually holding” the office of the mayor.
PETITIONER DISCHARGES ALL OF THE DUTIES AND
HAS ALL THE POWERS OF THE MAYOR
Although maintaining that Petitioner merely performs said duties, without the
powers vested in said office, the Solicitor General has been unable to name a
single power of the mayor which may not be legally exercised by the vice-mayor,
during the former’s suspension. That Petitionerpossesses all the powers attached
to the office of the mayor is conceded in the very opinion of the majority. Indeed,
in the case of Eraña vs. Vergel de Dios (47 Off. Gaz., 2303, 2307), it was held that
appointments “or other official acts made by the Undersecretary of Health when
acting as Department Head, have the same efficacy and legal effect as the acts of
the regular incumbent,” who was then absent. Inasmuch as Petitioner is clothed
with all the duties and powers of the municipal mayor of San Juan del Monte,
Rizal, — and this by operation of law (section 2196, Revised Administrative
Code) — we cannot escape the conclusion that he is “actually holding” said office.
PETITIONER IS THE “ACTING MAYOR”
In fact, while performing said duties and exercising said powers, Petitioner “acts
as mayor”, or is the “acting mayor.” This is admitted (1) in the majority opinion,
which states that Petitioner had filed his certificate of candidacy for the office of
the mayor while “acting as mayor” (pp. 1, 2, 8 and 16); chan
roblesvirtualawlibraryand (2) in the very letter of the Provincial Governor of Rizal
(Annex C), to Petitioner herein, advising him of the appointment
of Respondent Sto. Domingo as Acting Municipal Vice-Mayor, which letter is
addressed to said Petitioner as “Acting Municipal Mayor.” This is in conformity
with our view, in Eraña vs. Vergel de Dios (supra), to the effect that the
Undersecretary of Health who, during the absence of the Secretary of Health,
performs the duties of the latter — pursuant to section 79 of the Revised
Administrative Code — is the “Acting Secretary” of Health, and that his acts, as
such, have “the same efficacy or legal effect” as those of the Secretary of Health.
Now, then, “acting”, according to Ballentine Law Dictionary (p. 19) is
“substituting, taking the place of another officer temporarily, as an acting Judge.”
Since an acting mayor, therefore, temporarily takes the place of the regularly
elected mayor, who, prior thereto, was actually holding said office, it follows that
the same is actually in the possession of, and, hence, “actually holding” the
former, upon the aforementioned substitution.
Said majority opinion states:chanroblesvirtuallawlibrary
“Petitioner claims that he is the acting mayor. Respondents insist that Petitioner is
merely acting as Mayor. It is pertinent and profitable, at least in the present case,
to make a distinction between an Acting Mayor and a Vice-Mayor acting as
Mayor. When a vacancy occurs in the office of Mayor, the Provincial Governor
under section 21 (a) or the President under section 21 (b), (d) and (e) of the
Election Code appoints or designates an Acting Mayor. In that case the person
designated or appointed becomes the Mayor and actually holds the office for the
unexpired term of the office (section 21[f]) because when he was appointed there
was no regular incumbent to the office. However, when a Vice-Mayor acts as
Mayor, there is no vacancy in the post of Mayor. There is a regular incumbent
Mayor only that the latter is under temporary disability. So, strictly and correctly
speaking, the Vice-Mayor may not be considered Acting Mayor. He is only acting
as Mayor temporarily, provisionally and during the temporary disability of the
regular incumbent. He is not the incumbent. In baseball parlance, Petitioner is
only a pinch hitter,’ pinch hitting for, say, the pitcher in an emergency. As a mere
pinch hitter his name does not grace the regular line up, he is not the pitcher, does
not hold the position of pitcher, neither does he receive all the benefits and
privileges of the regular pitcher” (pp. 17-18).
To begin with, when a permanent vacancy occurs in the office of municipal mayor,
under section 21 (b) of Republic Act No. 180, no appointment or designation is
made by the President, for the vice- mayor becomes the mayor. Upon the other
hand, section 21(d) and (e) of said Act provides:chanroblesvirtuallawlibrary
“When a local officer-elect dies before assumption of office, or fails to qualify for
any reason, the President may in his discretion either call a special election or fill
the office by appointment.
“In case a special election has been called and held and shall have resulted in a
failure to elect, the President shall fill the office by appointment.”
The appointments made by the President under either paragraph may be temporary
or permanent in nature. If permanent, the appointee is the mayor, not “acting
mayor.” If temporary, the appointee is an “acting mayor” who, said opinion
impliedly admits, holds actually the office of mayor.
Secondly, there is no legal distinction between the phrases “acting mayor” and
“acting as mayor.” The distinction in these expressions is imposed merely by the
rules of grammar. When availed of as a gerund of the verb “to act,” for the purpose
of indicating the capacity in which an act has been performed, the word “acting”
must be followed by the preposition “as,” which is improper when said word is
used as a noun, to describe the status of an officer. Thus, the Undersecretary of
Health, “acting as” Secretary of Health, during the absence of the latter, is “acting
Secretary of Health.” (Eraña vs. Vergel de Dios, supra.) Similarly, the vice-mayor
“acting as mayor” during the suspension of the mayor, is the “acting mayor,” and,
this is confirmed by the aforementioned letter of the Provincial Governor of Rizal
(Annex C) and by the established practice — referred to in the aforesaid majority
opinion — of addressing the vice-mayor discharging the duties of the Mayor,
either as “Mayor” or as “acting mayor.”
Thirdly, the word “acting,” when preceding the title of an office, simply connotes,
in legal parlance, the temporary nature with which said office is held (Austria vs.
Amante, 45 Off. Gaz., 2829). What is more, it indicates that the “acting” officer is
physically in possession of the office, or actually holding it.
Fourthly, although a “pinch hitter” may not be the “regular pitcher,” when he
pitches or bats, is he not the “actual” pitcher or batter? When he “strikes out” a
batter or connects a “hit”, or commits an “error”, is the “strike out”, “hit”, or
“error” not counted actually, as a real one?
Fifthly, the vice-mayor acting as mayor, during the suspension of the mayor, is in a
better position than a pinch-hitter, who, it is said, does not “receive all the benefits
and privileges of the regular pitcher.” Said acting mayor has all the powers and
duties of the suspended mayor, who, in turn, cannot discharge the functions of his
office or even receive the emoluments attached thereto, until exonerated or
reinstated.
PETITIONER HAS ASSUMED THE OFFICE OF MAYOR
When a vice-mayor discharges the duties of a suspended mayor, the former
“assumes” the office of the latter. This was acknowledged, expressly, in Laxamana
vs. Baltazar (48 Off. Gaz., 3869), and by implication in said case of Eraña vs.
Vergel de Dios (supra). Thus, in the aforementioned communication of the
Provincial Governor of Rizal, Petitioner was informed that Respondent Sto.
Domingo, who has been appointed Acting Vice-Mayor, was to “assume the office
of mayor during the suspension of Mayor Engracio E. Santos”. Considering that to
assume an office is to take possession thereof, it is obvious to us that a vice-mayor
performing the functions of the mayor who has been suspended, actually holds the
office of the latter.
PETITIONER’S POSSESSION OF THE OFFICE OF MAYOR
HAS BEEN RECOGNIZED BY THE EXECUTIVE
DEPARTMENT
Again, said Provincial Governor and the Executive Secretary have directed and
advised Petitioner“to turn over the office of mayor” to Respondent Sto. Domingo,
thus implicitly, but, clearly, conceding that Petitioner herein is the actual holder of
said office. Otherwise, how could he turn it over, even if he wanted to, to
said Respondent?
This is so patent that the majority opinion accepts the fact “that one acting as
mayor not only discharges the duties of the office, but, also exercises the powers
of said office cralaw so that in one sense and literally, he may be legitimately
considered as actually holding the office of the mayor”, and that “when a vice-
mayor acts as mayor we usually call him mayor or acting mayor and deal with him
as though he were the regular incumbent” (p. 18). These views, we believe, must,
however, be qualified. Petitioner is the “actual” holder of the mayor’s office, not
“in one sense and literally,” but in every sense, namely, literally and legally, in
ordinary parlance, as well as from the viewpoint of the law on Public Officers.
Similarly, although Petitioner is not the regular incumbent of the office of mayor,
he is its actual and legal incumbent, for he holds office — and, accordingly, he is
its actual incumbent — pursuant to law, which legalizes his status.
“ACTUAL HOLDING” AND “CONSTRUCTIVE HOLDING
DISTINGUISHED
The issues would, perhaps, be clearer if we considered at closer range, the nature
of a public office, the essence of which is the right, authority and duty, forming
part of the sovereign functions of the government, delegated by operation of law.
Insofar as public officers are concerned, two other elements are material, namely,
(1) title to the office, and (2) authority to exercise its powers and discharge its
duties. The former is usually acquired either by appointment or by popular
election, although, in some instances, it may be secured by legislative enactment.
Thus, by statutory provision, a vice-mayor becomes ipso facto the mayor upon the
death, removal, resignation or permanent disqualification of the regularly elected
mayor (section 21[b], Republic Act No. 180). The latter, in general, exists when
the possessor of the former assumes office. At times, however, the regular
incumbent cannot exercise the functions of his office, as when
he:chanroblesvirtuallawlibrary (1) is ousted by another, who enters upon the
discharge of said functions; chan roblesvirtualawlibraryor (2) absent or becomes
temporarily incapacitated to perform his duties; chan roblesvirtualawlibraryor (3)
is suspended from office by competent authority.
If, in the first case, the person who effected the ouster, and assumed the office in
question, has color of title, which is defective, and the people, unaware of the
defect, submit to, or invoke, his action, supposing him to be the officer he claims
to be, he is legally considered a de facto officer, the one ousted being regarded a
de jure officer. It should be noted that the status of a de facto officer requires the
concurrence of the following conditions, to wit:chanroblesvirtuallawlibrary (a)
there must be a de jure office; chan roblesvirtualawlibrary(b) there must be actual
possession of the office; chan roblesvirtualawlibraryand (c) this must be coupled
with color of title. — In such event, the de facto officer is “actually holding” the
office. The person vested with a valid title thereto, or the de jure officer, is not in
material possession of the office. Hence he is not “actually holding” the same. Yet,
he is deemed to hold the office, in the sense only that there is no vacancy which
may be filled by appointment or election, as the case may be. As a consequence,
the office is held by two individuals, in different
capacities:chanroblesvirtuallawlibrary the de facto officer actually holds the office,
whereas the de jure officer retains possession thereof by legal fiction. This
distinction between the actual and the constructive possession of a public office is
vitally important in the case at bar.
If the office involved in the second and third cases is that of a municipal mayor,
the law (section 2195, Revised administrative Code; chan
roblesvirtualawlibraryLaxamana vs. Baltazar, supra) requires the vice-mayor to
discharge the duties of the mayor. In compliance with such requirement, the vice-
mayor assumes the office of mayor, wields its powers, performs its duties, and, as
a consequence, actually holds said office. The regular incumbent does not exercise
said power or perform said duties, because he cannot do so, owing, in the second
case, to his absence or disability, and, in the third case, to the order of suspension,
which temporarily divests him of said powers and duties. The suspended officer is
legally deprived of the authority to exercise those powers and perform said duties.
Should he do so, in violation of the order of suspension, his acts would be null and
void, for, in the eyes of the law, the mayor is, not he, but the vice-mayor acting as
mayor. In short, said order oust the mayor, for the time being, from physical
possession of the office, thus resulting in its “temporary vacancy” (Laxamana vs.
Baltazar, supra), which is actually filled by the vice- mayor acting as mayor, in
compliance with section 2195 of the Revised Administrative Code. The suspended
mayor merely hold the legal title to the office, and, in this sense, only he is in
constructive possession thereof. His condition is comparable to the holder of the
naked title to a property, the usufruct of which is vested in another, who is in the
material possession and enjoyment of said property. The latter is physically
occupied by the usufructuary, in the same manner as Petitioner is “actually
holding” the office of mayor, unlike the suspended mayor who, though actually
holding the title to the office, does not hold the office itself, except constructively,
or by legal fiction.
AS ACTING MAYOR, PETITIONER RECEIVES THE COMPENSATION FOR
THE OFFICE OF MAYOR
Pursuant to section 2187 of the Revised Administrative Code, “the mayor shall
receive full salary when absent from the municipality” on official business
“or cralaw when he is absent from his office because of illness contracted through
no fault of his own, provided the absence in the latter case does not exceed thirty
days during the year cralaw; chan roblesvirtualawlibraryand if during such
authorized or justified absence the vice-mayor cralaw temporarily discharge the
local duties of the mayor,” said vice-mayor “may receive compensation in an
amount to be fixed by the council cralaw which shall not be in excess of the
salary of the mayor for the same period.” However, section 2192 provides that “a
municipal officer suspended from duty pending an investigation of charges against
him shall receive no pay during such suspension; chan roblesvirtualawlibrarybut
upon subsequent exoneration or reinstatement, the Department Head may order
the payment of the whole or part of the salary accruing during such suspension.”
The vice-mayor, acting as mayor during the suspension of the mayor, “shall
receive compensation equivalent to the salary of the mayor.” (Section 2187,
Revised Administrative Code.)
In line with a practice established as early as 1916 — when the first
Administrative Code was adopted — and followed, then, by the Department of the
Interior, now, by the Division of Local Governments in the Office of the President,
as well as by the Department of Finance and the Office of the Auditor General
(before, the Insular Auditor), said compensation of the vice-mayor, acting as
mayor, in lieu of the suspended mayor, is paid from the appropriation for salary of
the mayor. Should the suspended mayor be eventually exonerated or reinstated
with pay, as provided in section 2192, the municipal council approves a new
appropriation therefor, the original appropriation for salary of the mayor having
been applied to the payment of the emoluments of the acting mayor.
The distinction between the case of a mayor who is absent on official business or
is sick, without his fault, for not more than 1 month a year, and the mayor who is
suspended, as regards the right to compensation — for both the mayor and the
vice-mayor acting in his place — and the appropriation from which payment shall
be made, constitutes another tangible and significant evidence that, when the
mayor is suspended, the vice-mayor, who discharges the duties of the mayor, is
regarded by law as the actual holder of the office of mayor. This conclusion
becomes even more imperative when we consider that, by explicit legal provision,
said vice-mayor may no longer receive his per diems as vice-mayor, for attendance
of the sessions of the council (section 2187, Revised Administrative Code.) Thus,
during his incumbency as “acting mayor”, by which name he comes to be known,
he is more a mayor than a vice-mayor.
In the case of Rodriguez vs. Tan (48 Off. Gaz., 3330), the Petitioner in an election
protest, for the office of Senator, who won said protest, was not allowed to recover
the salary collected by the defeated protestee during the period of his incumbency,
despite the fact that the latter had actually held office merely as a de facto officer.
Surely, Petitioner herein, who had, not only the right, but, also, the duty, to act as
mayor, even if temporarily, has a better status than a de facto officer and, like the
latter, at least, must be considered legally as the actual holder of the office of
mayor.
THE SUSPENDED MAYOR DOES NOT “ACTUALLY” HOLD THE OFFICE
OF MAYOR
As already adverted to, when a mayor is suspended his office becomes temporarily
vacant (Laxamana vs. Baltazar, supra; chan roblesvirtualawlibrarysection 2195,
Revised Administrative Code; chan roblesvirtualawlibrarySection 21[a], Republic
Act No. 180). This fact is absolutely inconsistent with the theory that he actually
holds the office of mayor, during the period of suspension.
Moreover, said mayor may be “reinstated” in office (section 2192, Revised
Administrative Code). This means necessarily that, during said suspension, the
mayor does not actually hold his office, for reinstatement is restoration to a
possession formerly enjoyed, and thereafter lost. Such loss of actual possession is
total. The suspended mayor retains nothing but the naked title - he is completely
stripped of the beneficial enjoyment of the powers appurtenant to the office. The
forfeiture, though temporary, of the official attributes — save as to the naked title
— is such that the suspension ipso facto deprives the mayor even of the right to
compensation. (Section 2192, Revised Administrative Code). What is more, the
emoluments attached to his office become due, by operation of law (section 2187,
do. do.), to the vice-mayor acting as mayor.
THE LEGISLATIVE INTENT
It is urged that the phrase “actually holding”, in section 27 of Republic Act No
180, was meant to refer only to “permanent” incumbents and does not apply to
those holding office in a temporary character. We cannot accept this view, for the
following reasons, to wit:chanroblesvirtuallawlibrary
1. The law is plain, simple and clear. The resignation therein provided is
inapplicable to any elective local official who runs for an office he actually holds.
It does not qualify the nature of said possession, so long as, it is “actual”. It is
irrelevant, therefore, whether the office is held temporarily or permanently.
2. One of the purposes of Congress, it is claimed, in providing that the filing of
the certificate of candidacy shall not operate as a resignation, when a local elective
officer runs for an office he is actually holding, is that:chanroblesvirtuallawlibrary
“By continuing in office the office holder allowed and expected to use the
prerogatives authority and influence of his office in his campaign for his election
or re-election to the office he was holding.
It is obvious, however, that — as the one vested by law with the authority to
exercise the powers and discharge the duties of the mayor — Petitioner is the
person who could carry out said alleged intent of the law-maker. Upon the other
hand, the suspended mayor could not be so, even if he wanted to, for his
suspension prevents him from availing himself, during the election campaign, of
the authority, influence and prerogatives of the office of mayor.
3. Admittedly, if the acting mayor had been appointed by the President, the filing
of his certificate of candidacy for the office of mayor would not operate as a
resignation from said office. Said presidential appointee could have received,
however, either a regular or permanent appointment, or a designation or temporary
appointment. We are unable to find any valid and sufficient reason — and none
has been offered in the majority opinion — why a discrimination should be made
in favor of the person so given, by the Executive, a temporary appointment and
against one, like Petitioner herein, chosen by the law itself, from which the Chief
Magistrate of the land derives his power to make said appointment.
4. The last paragraph of section 2 of Commonwealth Act No 666, the former
election law, reads as follows:chanroblesvirtuallawlibrary
“Any elective provincial, municipal, or city official running for an office, other
than the one for which he has been lastly elected, shall be considered resigned
from his office from the moment of the filing of his certificate of candidacy.”
This provision was amended by section 27 of Republic Act No. 180, which
eliminated the clause “other than the one for which he has been last elected”, and
substituted, in lieu thereof, the words “other than the one which he is actually
holding”. Explaining the purpose of the amendment, in reply to criticisms made by
members of the Senate who belonged to the then minority party, Senator Tirona,
Chairman of the Committee sponsoring the measure on the floor of the Senate and,
in effect, majority spokesman in relation thereto, had the following to
say:chanroblesvirtuallawlibrary
“Precisamente, por el hecho de que una gran mayoria de los gobernadores
provinciales, miembros de la Junta Provincial, alcaldes, vice alcaldes y concejales
municipales, son de nombramiento, queda justificada la disposicion del articulo
27, porque si se aplicara a esos funcionarios la prohibicion de que no pueden ser
candidatos a los cargos que ocupan a menos que dimitan, se produciria un grave
desbarajuste que podria perjudicar la administracion de los asuntos provinciales y
municipales. Por que? Porque el cambio de todos esos funcionarios provinciales
no se podria hacer facilmente, Daria lugar a muchos conflictos de grupos o
facciones; chan roblesvirtualawlibrarya una infinidad de cuestiones.”
Congressional record of the 1st Congress of the Republic, Vol. II, p. 108). (Italics
supplied.)
It is apparent, from the foregoing, that the amendment merely sought to minimize
the number of vacancies resulting from the filing of certificate of candidacy by
persons holding local elective offices. The reason was both administrative and
political. Administrative, because too many vacancies, it was feared, would
gravely disrupt the administration of local governments. Political, because every
vacancy would create the difficult problem of filing the same precisely on the eve
of elections. Indeed, each vacancy is more likely to lead to political discontent
than to political expediency, considering that, for every appointment to fill a
vacancy, there would generally be several disappointed and disillusioned
candidates therefor, who might, as a consequence work against the administration.
5. The journals of Congress contain ample evidence of the fact that, when section
2 of Commonwealth Act No. 666 was amended by section 27 of Republic Act No.
180, the members of both Houses knew that there existed a sizeable number of
local officials holding elective positions by virtue of presidential appointments,
some of which were temporary in nature. Yet, Congress approved the amendment
with the understanding that it would apply equally to the permanent and the
temporary appointees of the executive branch. Obviously, therefore, the phrase
“actually holding”, in said section 27, does not refer solely to “permanent”
officers.
6. Although the aforementioned amendment was bitterly criticized by the
minority members of Congress, by reason of its favorable effects upon said
presidential appointees and upon the political party then in power, nothing was
said in the course of the deliberations of the lawmaking body, to indicate, even if
remotely, the intent to exclude, from the benefits of said amendment, those who
may be actually holding local elective offices by operation of law. Said journals
are absolutely silent on this point.
7. It is argued for the Respondents that section 27 contemplates an office from
which its incumbent could resign, and that it could not apply, therefore, to the
office of mayor, which Petitioner claims to hold actually, for, as vice-mayor acting
as mayor during the suspension of the mayor, said Petitionercannot resign from
the office of mayor. Let us examine carefully said section 27, which, for
convenience, we reproduce once more.
“An elective provincial, municipal, or city official running for an office, other than
the one which he is actually holding, shall be considered resigned from his office
from the moment of the filing of his certificate of candidacy.”
It will be noted that the word “office” is twice used therein; chan
roblesvirtualawlibraryfirstly, in the expression “running for an office, other than
the one which he is actually holding;” and, secondly in the clause “shall be
considered resigned from his office.” Obviously, the latter refers to an office from
which it is possible to resign. Does the former allude to an analogous situation?
We do not think so, for the “office” first mentioned is the one for which the
candidate is running. Moreover, it specifically refers to an office “other than the
one which he is actually holding.” Even if the office actually held by the candidate
were one he could give up by resignation, he could not possibly do so as to the
“other” office, for which he seeks the popular mandate, because he does not hold
that office as yet.
Must the office he is “actually holding” be one from which he could resign, if he
so desired? One can resign from an office to which he had been duly elected or
appointed. If such were the office contemplated in section 27, the same would
have used only the word “holding,” without the qualification “actually,” it being
clear — particularly to the members of Congress, most of whom are lawyers —
that an office may be held materially by one who has not been elected or appointed
thereto, such as the case of a vice-mayor acting as mayor, in compliance with
Article 2195 of the Revised Administrative Code, in view of the suspension of the
mayor.
The situation visualized in section 27 would be more apparent had Petitioner filed
his certificate of candidacy for the office of provincial governor. This being other
than the offices he is actually holding — those of vice-mayor and mayor — he
would be deemed, by operation of said section 27, resigned from “his” office,
namely that of vice-mayor. Having thus relinquished this office, we would,
necessarily, have no more authority to act as mayor. In other words, the office he is
“actually holding” need not be necessarily his office, and this is not unusual under
the Law on Public Office. Otherwise, the word “actually” would be not only
unnecessary, but inconsistent with the alleged purpose of the law.
8. It is next said that, in section 27 of Republic Act No. 180, “Congress
contemplated only one office actually held.” This view is based upon the clause
“an office other than the one which is based upon the clause “an office other than
the one which he is actually holding,” in said provision, with emphasis on the
phrase “the one”. It will be recalled that said clause is only an amendment of the
last paragraph of section 2 of Commonwealth Act No. 666,
reading:chanroblesvirtuallawlibrary
“Any elective provincial, municipal, or city official running for an office, other
than the one for which he has been lastly elected, shall be considered resigned
from his office from the moment of the filing of his certificate of candidacy.”
(Italics supplied.)
In other words, the word “one” was not inserted by Republic Act No. 180. It was
part of said section 2 of Commonwealth Act No. 666, which referred to an elective
local official “running for an office other than the one for which he has been lastly
elected.” Since, normally, a person is elected to only one office, it was only natural
for said section 2 of Commonwealth Act No. 666 to use the word “one”. But, let
us suppose that, during the effectivity of Commonwealth Act No. 666, a law was
passed permitting an individual to run for, and hold, two offices, say, for instance,
the positions of municipal mayor and member of the provincial board, and that
while holding both elective offices, the incumbent should, in a subsequent
election, file his certificate of candidacy for municipal mayor only, would he not
be entitled to continue in office, as mayor and as member of the provincial board,
despite the fact that he is not running for the last office? Obviously, the word
“one” was used in Commonwealth Act No. 666 (section 2) merely because it
assumed that the person concerned had been elected only to one office. This did
not mean, however, that one legally elected to, and holding, two elective offices,
was sought to be excluded from the benefits of said enactment.
Similarly, section 27 of Republic Act No. 180 assumes — in line with the ordinary
course of events — that one discharging the duties of a given office does not hold
any other office, without implying necessarily, that, otherwise, he would be denied
the benefits of said provision. As pointed out in the preceding pages, the purpose
of said provision was to permit an incumbent to remain in office if he did not seek
to change the status quo, such as the case of Petitioner herein.
EXAMPLES ANALYZED
Several examples have been given to illustrate the alleged validity of Respondents’
pretense. Let us analyze said examples:chanroblesvirtuallawlibrary
The first is, substantially, as follows:chanroblesvirtuallawlibrary A vice-mayor,
while acting as mayor, filed his certificate of candidacy for vice-mayor.
Thereupon, the provincial governor, alleging that said candidate is actually holding
the office of mayor and that he is not running for such office, asked him to vacate
it. After giving up, reluctantly, the office of mayor, the vice-mayor, asserts that he
actually holds the office of vice-mayor; chan roblesvirtualawlibrarythat, since he is
running for re-election therefor, he is not deemed resigned as vice-mayor; chan
roblesvirtualawlibraryand that, as vice- mayor, he is entitled to act as mayor. Then,
the assertion is made that “this possible, undesirable and anomalous situation is
another reason why section 27 may not be applied to the case of a vice-mayor,
acting as mayor.” But, why should this situation be undesirable or anomalous ? Is
it not merely a natural and logical consequence of the fact that section 2195 of the
Revised Administrative Code requires the vice-mayor, in the event therein
contemplated, to hold, at the same time, two offices, namely, the office of vice-
mayor and that of mayor? Is the holder of such offices not bound to discharge the
duties of both? Is he, as a consequence, not entitled, logically and by law, to all the
privileges and prerogatives attached to said offices? Is the right to run for election
to an office actually held, without resigning therefrom, not one of such privileges
or prerogatives? Is it not only fair, just and reasonable that the increased
responsibilities of the vice-mayor, acting as mayor, be coupled with a
corresponding increase in his powers, exemptions and immunities?
The second example is couched in the following
language:chanroblesvirtuallawlibrary
“The regular incumbent Mayor files his certificate of candidacy for the same
office of Mayor. Then he goes on leave of absence or falls sick and the Vice-
Mayor acts in his place, and while thus acting he also files his certificate of
candidacy for the same office of Mayor. Then the Vice-Mayor also goes on leave
or falls sick or is suspended, and because the regular Mayor is still unable to return
to office, under section 2195 of the Revised Administrative Code, the councilor
who at the last general elections received the highest number of votes, acts as
Mayor and while thus acting he also files his certificate of candidacy for the office
of Mayor. The Vice-Mayor also campaigns for the same post of Mayor claiming
like the herein Petitioner that he did not lose his office of Vice-Mayor because he
filed his certificate of candidacy while acting as Mayor and thus was actually
holding the office of Mayor. Using the same argument the councilor who had
previously acted as Mayor also campaigns for his election to the same post of
Mayor while keeping his position as councilor. Thus we would have this singular
situation of three municipal officials occupying three separate and distinct offices,
running for the same office of Mayor, yet keeping their different respective offices,
and strangely enough two of those offices (Vice- Mayor and Councilor) are
different from the office of Mayor they are running for. Could that situation have
been contemplated by the Legislature in enacting section 27 of the Revised
Election Code? We do not think so, and yet that would happen if the contention of
the Petitioner about the meaning of “actually holding office” is to prevail.” (pp.
14-15.)
The example is most ingenious, but, to our mind, not in point. In order that the
mayor, the vice-mayor and the municipal councilor alluded to could run for mayor,
without resigning from their respective offices, pursuant to section 27 of Republic
Act No. 180, it would be necessary that each be “actually holding” the office of
mayor. Inasmuch, however, as “actual holding” is equivalent to material or
physical possession, and “possession as a fact cannot be recognized at the same
time in two different personalities, except in cases of co-possession” (Article 538,
Code of Civil Procedure) it follows that it would be necessary to determine which
one, among the officers involved in the example, is “actually holding” the office of
mayor, and that the person declared to be in physical possession of such office
should be the only one not deemed to have resigned in consequence of the filing of
his certificate of candidacy for mayor. Although not indispensable for the
determination of the case at bar, it would seem that said privilege belongs solely to
the officer in fact discharging the duties of the office of mayor, at the time of the
expiration of the statutory period for the filing of certificate of candidacy. Indeed,
until then, the other officers could withdraw the certificates of candidacy already
filed by them, and file other certificates of candidacy for the respective offices
actually held by them at such time, thus avoiding the implicit resignation which
otherwise may result from the application of said section 27.
EXCEPTIONS MUST BE CONSTRUED STRICTLY
The rule of statutory construction to the effect that exceptions must be strictly
construed, has been invoked in favor of Respondents herein. It is claimed that, as a
matter of general rule, a local elective official who runs for an elective office is,
pursuant to section 27 of Republic Act No. 180, deemed to have resigned from his
office from the moment of the filing of his certificate of candidacy; chan
roblesvirtualawlibrarythat such rule does not apply, when he runs for an office
other than the one he is actually holding; chan roblesvirtualawlibraryand that, this
is the exception which should be construed strictly.
The argument is logical, but its major premise is predicated upon the assumption
that said section 27 establishes the general rule. We believe, otherwise. To our
mind, the general rule is that an elective official shall remain in office for the full
term for which he was elected, although he may have filed a certificate of
candidacy. The exception is that he shall be deemed to have resigned from his
office, from the time of the filing of said certificate of candidacy, if (1) he is a
provincial, municipal or city official, and (2) the office for which he runs is other
than the one he is actually holding. If he runs for the office he is actually holding,
the general rule applies — he shall not be deemed to have resigned from his office.
In other words, the provision implying a resignation from the filing of the
certificate of candidacy in the exception, which should be construed strictly.
This interpretation is demanded, not merely by the fact that Republic Act No. 180
is a part of our law on Public Officers, and should be construed jointly with the
latter, but, also, by the fundamental principles underlying the democratic system of
government established in the Philippines. Indeed, petition was chosen by the
direct vote of the people, in whom sovereignty resides. Upon the other hand,
Republic Act No. 180 was passed not by the people themselves, but by their
representatives. The people elected Petitioner herein for a term ending on
December 31, 1955. In the absence of clear, positive and unequivocal provision of
law to the contrary, the member of Congress, as agents of the people, must be
presumed to have intended to respect said direct mandate of their principal.
In the case of a vice-mayor acting as mayor, who runs for mayor, the intention of
Congress to oust him from both offices is far from being patent or incontestible. In
fact, the plain and ordinary meaning of the language used in section 27 of
Republic Act No. 180, in relation to sections 2187, 2192 and 2195 of the Revised
Administrative Code, connotes that Petitioner is actually holding the office of
mayor, for which he ran at the last general elections, and that, accordingly, he shall
not be deemed to have resigned upon the filing of his certificate of candidacy for
said office. Indeed, it is admitted, in the majority opinion, that the letter of said
section 27 favors Petitioner herein - said opinion states that, literally, Petitioner is
actually holding the office of mayor. At any rate, the factors analyzed in the
foregoing pages, the very efforts exerted in said opinion to bolster up the stand
therein taken and the conflicting views among the members of this Court, who are
almost equally divided on the issue under consideration, eloquently demonstrate
that the law upon which Respondents rely is, at least, not free from ambiguities or
doubts. Hence, the same should resolved in favor of Petitioner’s continuance in
office, for the full term for which he was elected.
THE ACTUAL HOLDER OF AN OFFICE HAS PRESUMPTIVELY A BETTER
RIGHT THERETO
Although a public office is not property, in the strict sense of the word, the right to
a given person to hold a particular office partakes of the nature of a property, in
that he cannot be deprived of such right without due process of law, (42 Am. 886-
888; chan roblesvirtualawlibraryState vs. Wadhams, 67 N.W. 64, 64 Minn. 318,
324; chan roblesvirtualawlibraryChristy vs. Kingfisher, 76 P. 135, 1375, 13 Okl.
585; chan roblesvirtualawlibraryHamilton vs. Brennan. 119 N.Y.S. 2d 83 [20 Gen.
Digest p. 364]); chan roblesvirtualawlibrary11 O.S. 1951 Su 572 — Laison vs.
Bunch, 225 P. 2d. 486 (21 Gen. Digest p. 348) — 1953; chan
roblesvirtualawlibraryEmerson vs. Hughes, 90 A. 2d. 910, 117 Vt. 270 [19 Gen.
Digest p. 287 — 1953; chan roblesvirtualawlibraryHanchey vs. State ex rel
Roberts 52 So 2d. 429 [15 Gen. Digest p. 369, 1952]).
A person actually holding an office, pursuant to law, is, therefore, in a condition
analogous to one in physical possession of a property, under claim of ownership.
Pursuant to Article 541 of the Civil Code of the Philippines, such “possessor in the
concept of owner has in his favor the legal presumption that he possesses with a
just title and he cannot be obliged to show or prove it.” He who wishes to recover
the property from its possessor as owner must prove, therefore, a better title
thereto. Similarly, the actual holder of an office, under color of title,
like Petitioner herein, must be respected and protected, in the enjoyment of said
possession, unless the party seeking to eject him therefrom shall establish
satisfactorily that said title is defective and that his (claimant’s) is the legitimate
and stronger title. In other words, doubts must be resolved in favor of the actual
holder of the office.
At any rate, to our mind, the law is patently in favor of Petitioner herein. When he
filed his certificate of candidacy for the office of mayor of San Juan del Monte,
Rizal, he was actually discharging the duties and exercising the powers of said
office. The public and the very Government, as well as the law (section 2187,
Revised Administrative Code), regarded him as the acting mayor of said
municipality. He received the emoluments appurtenant to the office. He had all of
the responsibilities attached thereto, including the civil and criminal liabilities
which would accrue to the regularly elected mayor, in case of nonfeasance,
misfeasance or malfeasance in office.
Upon the other hand, having been suspended as mayor of San Juan del Monte,
Engracio Santos was stripped of his functions as such, he could not, and did not,
discharge the same. He was not entitled to collect the compensation corresponding
to said office, which compensation was paid to herein Petitioner. In other words,
the latter was literally and legally in actual physical possession of the office of
mayor.
Moreover, the language of section 27 of Republic Act No. 180 is too plain, simple
and clear to admit of construction. It is well settled that “where the intention of the
legislature is so apparent from the face of the statute there can be no question as to
the meaning, there is no room for construction.” (People ex rel. Wood vs. Sands,
102 Cal. 12, 36 Pac. 404.)
Again, in ordinary, as well as in legal, parlance, to hold actually an office is to
have physical or legal possession thereof, to occupy the office in fact or really, as
distinguished from, or opposed, to its presumptive or constructive possession. To
declare, therefore, that Engracio Santos — who does not, and cannot, perform the
functions of mayor of San Juan del Monte — not Petitioner herein — who
actually, really, materially and in fact discharges the same — is the persons
“actually holding” said office, does not amount merely to a construction of the
meaning of “actually, holding”, but to giving thereto its opposite meaning, its
exact antithesis. With due respect to the learned view of our distinguished
colleagues to the contrary, we do not feel that judicial power may go that far,
consistently with the principle of separation of powers.
Wherefore, we are of the opinion that the petition should be granted and that the
writ of preliminary injunction, issued upon the institution of this case, should be
made permanent.
Endnotes:chanroblesvirtuallawlibrary
* 93 Phil., 310.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-26100 February 28, 1969
CITY OF BAGUlO, REFORESTATION ADMINISTRATION,
FRANCISCO G. JOAQUIN, SR., FRANCISCO G. JOAQUIN, JR.,
and TERESITA J. BUCHHOLZ petitioners,
vs.
HON. PIO R. MARCOS, Judge of the Court of First Instance of
Baguio,
BELONG LUTES, and the HONORABLE COURT OF
APPEALS, respondents.
1st Assistant City Fiscal Dionisio C. Claridad, Augusto Tobias and
Feria, Feria, Lugtu and La'O for petitioners.
Bernardo C. Ronquillo for respondents.
SANCHEZ, J.:
Petitioners attack the jurisdiction of the Court of First Instance of
Baguio to reopen cadastral proceedings under Republic Act 931. Private
petitioner's specifically question the ruling of the Court of Appeals that
they have no personality to oppose reopening. The three-pronged
contentions of all the petitioners are: (1) the reopening petition was filed
outside the 40-year period next preceding the approval of Republic Act
931; (2) said petition was not published; and (3) private petitioners, as
lessees of the public land in question, have court standing under
Republic Act 931. The facts follow:
On April 12, 1912, the cadastral proceedings sought to be reopened,
Civil Reservation Case No. 1, GLRO Record No. 211, Baguio Townsite,
were instituted by the Director of Lands in the Court of First Instance of
Baguio. It is not disputed that the land here involved (described in Plan
Psu-186187) was amongst those declared public lands by final
decision rendered in that case on November 13, 1922.
On July 25, 1961, respondent Belong Lutes petitioned the cadastral
court to reopen said Civil Reservation Case No. 1 as to the parcel of
land he claims. His prayer was that the land be registered in his name
upon the grounds that: (1) he and his predecessors have been in actual,
open, adverse, peaceful and continuous possession and cultivation of the
land since Spanish times, or before July 26, 1894, paying the taxes
thereon; and (2) his predecessors were illiterate Igorots without personal
notice of the cadastral proceedings aforestated and were not able to file
their claim to the land in question within the statutory period.
On December 18, 1961, private petitioners Francisco G. Joaquin, Sr.,
Francisco G. Joaquin, Jr., and Teresita J. Buchholz registered opposition
to the reopening. Ground: They are tree farm lessees upon agreements
executed by the Bureau of Forestry in their favor for 15,395.65 square
meters on March. 16, 1959, for 12,108 square meters on July 24, 1959,
and for 14,771 square meters on July 17, 1959, respectively.
On May 5, 1962, the City of Baguio likewise opposed reopening.
On May 8, 1962, upon Lutes' opposition, the cadastral court denied
private petitioners' right to intervene in the case because of a final
declaratory relief judgment dated March 9, 1962 in Yaranon vs.
Castrillo [Civil Case 946, Court of First Instance of Baguio] which
declared that such tree farm leases were null and void.
On May 18, 1962, private petitioners moved to reconsider. They averred
that said declaratory relief judgment did not bind them, for they were
not parties to that action.
On September 14, 1962, the cadastral court reversed its own ruling of
May 8, 1962, allowed petitioners to cross-examine the witnesses of
respondent Lutes.
On October 16, 1962, Lutes replied to and moved to dismiss private
petitioners' opposition to his reopening petition. On October 25, 1962,
private petitioners' rejoinder was filed.
On August 5, 1963, the cadastral court dismissed private petitioners'
opposition to the reopening. A motion to reconsider was rejected by the
court on November 5, 1963.
On January 6, 1964, it was the turn of the City of Baguio to lodge a
motion to dismiss the petition to reopen. This motion was adopted as its
own by the Reforestation Administration. They maintained the position
that the declaratory judgment in Civil Case 946 was not binding on
those not parties thereto. Respondent Lutes opposed on February 24,
1964. On April 6, 1964, private petitioners reiterated their motion to
dismiss on jurisdictional grounds.
On September 17, 1964, the court denied for lack of merit the City's
motion as well as the April 6, 1964 motion to dismiss made by private
petitioners.
On November 13, 1964, all the petitioners went to the Court of Appeals
on certiorari, prohibition, and mandamus with preliminary
injunction. 1 They then questioned the cadastral court's jurisdiction over
the petition to reopen and the latter's order of August 5, 1963 dismissing
private petitioners' opposition. The appellate court issued a writ of
preliminary injunction upon a P500-bond.
Then came the judgment of the Court of Appeals of September 30,
1965. The court held that petitioners were not bound by the declaratory
judgment heretofore hated. Nevertheless, the appellate court ruled that
as lessees, private petitioners had no right to oppose the reopening of
the cadastral case. Petitioners moved to reconsider. It was thwarted on
May 6, 1966.
Petitioners now seek redress from this Court. On July 6, 1966,
respondents moved to dismiss the petition before us. On August 5, 1966,
petitioners opposed. On August 12, 1966, we gave due course.
1. Do private petitioners have personality to appear in the reopening
proceedings?
First, to the controlling statute, Republic Act 931, effective June 20,
1953.
The title of the Act reads —
AN ACT TO AUTHORIZE THE FILING IN THE PROPER COURT,
UNDER CERTAIN CONDITIONS, OF CERTAIN CLAIMS OF TITLE
TO PARCELS OF LAND THAT HAVE BEEN DECLARED PUBLIC
LAND, BY VIRTUE OF JUDICIAL DECISIONS RENDERED
WITHIN THE FORTY YEARS NEXT PRECEDING THE APPROVAL
OF THIS ACT.
Section 1 thereof provides —
SECTION 1. All persons claiming title to parcels of land that have been
the object of cadastral proceedings, who at the time of the survey were
in actual possession of the same, but for some justifiable reason had
been unable to file their claim in the proper court during the time limit
established by law, in case such parcels of land, on account of their
failure to file such claims, have been, or are about to be declared land
of the public domain by virtue of judicial proceedings instituted within
the forty years next preceding the approval of this Act, are hereby
granted the right within five years 2 after the date on which this Act
shall take effect, to petition for a reopening of the judicial proceedings
under the provisions of Act Numbered Twenty-two hundred and fifty-
nine, as amended, only with respect to such of said parcels of land as
have not been alienated, reserved, leased, granted, or
otherwise provisionally or permanently disposed of by the Government,
and the competent Court of First Instance, upon receiving such petition,
shall notify the Government through the Solicitor General, and if after
hearing the parties, said court shall find that all conditions herein
established have been complied with, and that all taxes, interests and
penalties thereof have been paid from the time when land tax should
have been collected until the day when the motion is presented, it shall
order said judicial proceedings reopened as if no action has been taken
on such parcels. 3
We concede that in Leyva vs. Jandoc, L-16965, February 28, 1962, a
land registration case where oppositors were "foreshore lessees of
public land", a principle was hammered out that although Section 34,
Land Registration Act, 4"apparently authorizes any person claiming any
kind of interest to file an opposition to an application for registration, ...
nevertheless ... the opposition must be based on a right of dominion or
some other real right independent of, and not at all subordinate to, the
rights of the Government."5 The opposition, according to
the Leyva decision, "must necessarily be predicated upon the property in
question being part of the public domain." Leyva thus pronounced that
"it is incumbent upon the duly authorized representatives of the
Government to represent its interests as well as private claims
intrinsically dependent upon it."
But the Leyva case concerned an ordinary land registration proceeding
under the provisions of the Land Registration Act. Normally and
logically, lessees cannot there present issues of ownership. The case at
bar, however, stands on a different footing. It involves a special statute
R.A. 931, which allows a petition for reopening on lands "about to be
declared" or already "declared land of the public domain" by virtue of
judicial proceedings. Such right, however, is made to
cover limited cases, i.e., "only with respect to such of said parcels of
land as have not been alienated, reserved, leased, granted, or
otherwise provisionally or permanently disposed of by the
6
Government." The lessee's right is thus impliedly recognized by R.A.
931. This statutory phrase steers the present case clear from the impact
of the precept forged by Leyva. So it is, that if the land subject of a
petition to reopen has already been leased by the government, that
petition can no longer prosper.
This was the holding in Director of Land vs. Benitez, L-21368, March
31, 1966. The reopening petition there filed was opposed by the
Director of Lands in behalf of 62 lessees of public land holding
revocable permits issued by the government. We struck down the
petition in that Case because the public land, subject-matter of the
suit, had already been leased by the government to private persons.
Of course, the Benitez ruling came about not by representations of the
lessees alone, but through the Director of Lands. But we may well scale
the heights of injustice or abet violations of R.A. 931 if we entertain the
view that only the Director of Lands 7 can here properly oppose the
reopening petition. Suppose the lands office fails to do so? Will
legitimate lessees be left at the mercy of government officials? Should
the cadastral court close its eyes to the fact of lease that may be proved
by the lessees themselves, and which is enough to bar the reopening
petition? R.A. 931 could not have intended that this situation should
happen. The point is that, with the fact of lease, no question of
ownership need be inquired into pursuant to R.A. 931. From this
standpoint, lessees have sufficient legal interest in the proceedings.
The right of private petitioners to oppose a reopening petition here
becomes the more patent when we take stock of their averment that they
have introduced improvements on the land affected. It would seem to us
that lessees insofar as R.A. 931 is concerned, come within the purview
of those who, according to the Rules of Court, 8 may intervene in an
action. For, they are persons who have "legal interest in the matter in
litigation, or in the success of either of the parties." 9 In the event herein
private petitioners are able to show that they are legitimate lessees, then
their lease will continue. And this because it is sufficient that it be
proven that the land is leased to withdraw it from the operation of
Republic Act 931 and place it beyond the reach of a petition for
reopening. 10
In line with the Court of Appeals' conclusion, not disputed by
respondent Lutes herein, the cadastral court should have ruled on the
validity of private petitioners 'tree farm leases — on the merits. Because
there is need for Lutes' right to reopen and petitioners' right to continue
as lessees to be threshed out in that court.
We, accordingly, hold that private petitioners, who aver that they are
lessees, have the necessary personality to intervene in and oppose
respondent Lutes' petition for reopening.
2. Petitioners next contend that the reopening petition below, filed under
R.A. 931, should have been published in accordance with the Cadastral
Act.
To resolve this contention, we need but refer to a very recent decision of
this Court in De Castro vs. Marcos, supra, involving exactly the same
set of facts bearing upon the question. We there held, after a discussion
of law and jurisprudence, that: "In sum, the subject matter of the petition
for reopening — a parcel of land claimed by respondent Akia — was
already embraced in the cadastral proceedings filed by the Director of
Lands. Consequently, the Baguio cadastral court already acquired
jurisdiction over the said property. The petition, therefore, need not be
published." We find no reason to break away from such conclusion.
Respondent Lutes attached to the record a certified true copy of the
November 13, 1922 decision in the Baguio Townsite Reservation case
to show, amongst others, that the land here involved was part of that
case. Petitioners do not take issue with respondent Lutes on this point of
fact.
We here reiterate our ruling in De Castro, supra, that the power of the
cadastral court below over petitions to reopen, as in this case, is not
jurisdictionally tainted by want of publication.
3. A question of transcendental importance is this: Does the cadastral
court have power to reopen the cadastral proceedings upon the
application of respondent Lutes?
The facts are: The cadastral proceedings sought to be reopened were
instituted on April 12, 1912. Final decision was rendered on November
13, 1922. Lutes filed the petition to reopen on July 25, 1961.
It will be noted that the title of R.A. 931, heretofore transcribed,
authorizes "the filing in the proper court, under certain conditions, of
certain claims of title to parcels of land that have been declared public
land, by virtue of judicial decisions rendered within the forty years next
preceding the approval of this Act." The body of the statute, however, in
its Section 1, speaks of parcels of land that "have been, or are about to
be declared land of the public domain, by virtue of judicial proceedings
instituted within the forty years next preceding the approval of this Act."
There thus appears to be a seeming inconsistency between title and
body.
It must be stressed at this point that R.A. 931 is not under siege on
constitutional grounds. No charge has been made hero or in the courts
below that the statute offends the constitutional injunction that the
subject of legislation must be expressed in the title thereof. Well-
entrenched in constitutional law is the precept that constitutional
questions will not be entertained by courts unless they are "specifically
raised, insisted upon and adequately argued." 11 At any rate it cannot be
seriously disputed that the subject of R.A. 931 is expressed in its title.
This narrows our problem down to one of legal hermeneutics.
Many are the principles evolved in the interpretation of laws. It is thus
not difficult to stray away from the true path of construction, unless we
constantly bear in mind the goal we seek. The office of statutory
interpretation, let us not for a moment forget, is to determine legislative
intent. In the words of a well-known authority, "[t]he true object of all
interpretation is to ascertain the meaning and will of the law-making
body, to the end that it may be enforced." 12 In varying language, "the,
purpose of all rules or maxims" in interpretation "is to discover the true
intention of the law." 13 They "are only valuable when they subserve this
purpose." 14 In fact, "the spirit or intention of a statute prevails over the
letter thereof." 15 A statute "should be construed according to its spirit
and reason, disregarding as far as necessary, the letter of the law." 16 By
this, we do not "correct the act of the Legislature, but rather ... carry out
and give due course to" its true intent. 17
It should be certain by now that when engaged in the task of construing
an obscure expression in the law 18 or where exact or literal rendering of
the words would not carry out the legislative intent, 19 the title thereof
may be resorted to in the ascertainment of congressional will. Reason
therefor is that the title of the law may properly be regarded as an index
of or clue or guide to legislative intention. 20 This is especially true in
this jurisdiction. For the reason that by specific constitutional precept,
"[n]o bill which may be enacted into law shall embrace more than one
subject which shall be expressed in the title of the bill." 21 In such case,
courts "are compelled by the Constitution to consider both the body and
the title in order to arrive at the legislative intention." 22
With the foregoing guideposts on hand, let us go back to the situation
that confronts us. We take another look at the title of R.A. 931, viz: "AN
ACT TO AUTHORIZE THE FILING IN THE PROPER COURT,
UNDER CERTAIN CONDITIONS, OF CERTAIN CLAIMS OF TITLE
TO PARCELS OF LAND THAT HAVE BEEN DECLARED PUBLIC
LAND, BY VIRTUE OF JUDICIAL DECISIONS RENDERED
WITHIN THE FORTY YEARS NEXT PRECEDING THE APPROVAL
OF THIS ACT." Readily to be noted is that the title is not merely
composed of catchwords. 23 It expresses in language clear the very
substance of the law itself. From this, it is easy to see that Congress
intended to give some effect to the title of R.A. 931.
To be carefully noted is that the same imperfection in the language of
R.A. 931 aforesaid — from which surfaces a seeming inconsistency
between the title and the body — attended Commonwealth Act 276, the
present statute's predecessor. That prior law used the very same
language in the body thereof and in its title. We attach meaning to this
circumstance. Had the legislature meant to shake off any legal effects
that the title of the statute might have, it had a chance to do so in the
reenactment of the law. Congress could have altered with great facility
the wording of the title of R.A. 931. The fact is that it did not.
It has been observed that "in modern practice the title is adopted by the
Legislature, more thoroughly read than the act itself, and in many states
is the subject of constitutional regulation." 24 The constitutional in
jurisdiction that the subject of the statute must be expressed in the title
of the bill, breathes the spirit of command because "the Constitution
does not exact of Congress the obligation to read during its deliberations
the entire text of the bill." 25Reliance, therefore, may be placed on the
title of a bill, which, while not an enacting part, no doubt "is in some
sort a part of the act, although only a formal part." 26 These
considerations are all the more valid here because R.A. 931 was passed
without benefit of congressional debate in the House from which it
originated as House Bill 1410, 27 and in the Senate. 28
The title now under scrutiny possesses the strength of clarity and
positiveness. It recites that it authorizes court proceedings of claims to
parcels of land declared public land "by virtue of
judicial decisions rendered within the forty years next preceding the
approval of this Act." That title is written "in capital letters" — by
Congress itself; such kind of a title then "is not to be classed with words
or titles used by compilers of statutes" because "it is the legislature
speaking." 29 Accordingly, it is not hard to come to a deduction that the
phrase last quoted from R.A. 931 — "by virtue of judicial decisions
rendered" — was but inadvertently omitted from the body. Parting from
this premise, there is, at bottom, no contradiction between title and
body. In line with views herein stated, the title belongs to that type of
titles which; should be regarded as part of the rules or provisions
expressed in the body. 30 At the very least, the words "by virtue of
judicial decisions rendered" in the title of the law stand in equal
importance to the phrase in Section 1 thereof, "by virtue of judicial
proceedings instituted."
Given the fact then that there are two phrases to consider the choice of
construction we must give to the statute does not need such reflection.
We lean towards a liberal view. And this, because of the principle long
accepted that remedial legislation should receive the blessings of liberal
construction. 31 And, there should be no quibbling as to the fact that R.A.
931 is a piece of remedial legislation. In essence, it provides a mode of
relief to landowners who, before the Act, had no legal means of
perfecting their titles. This is plainly evident from the explanatory note
thereof, which reads:
This bill is intended to give an opportunity to any person or claimant
who has any interest in any parcel of land which has been declared as
public land in cadastral proceeding for failure of said person or claimant
to present his claim within the time prescribed by law.
There are many meritorious cases wherein claimants to certain parcels
of land have not had the opportunity to answer or appear at the hearing
of cases affecting their claims in the corresponding cadastral
proceedings for lack of sufficient notice or for other reasons and
circumstances which are beyond their control. Under C.A. No. 276, said
persons or claimants have no more legal remedy as the effectivity of
said Act expired in 1940.
This measure seeks to remedy the lack of any existing law within said
persons or claimants with meritorious claims or interests in parcels of
land may seek justice and protection. This bill proposes to give said
persons or claimants their day in court. Approval of this bill is earnestly
requested.
In fine, we say that lingual imperfections in the drafting of a statute
should never be permitted to hamstring judicial search for legislative
intent, which can otherwise be discovered. Legal technicalities should
not abort the beneficent effects intended by legislation.
The sum of all the foregoing is that, as we now view Republic Act 931,
claims of title that may be filed thereunder embrace those parcels of
land that have been declared public land "by virtue of judicial decisions
rendered within the forty years next preceding the approval of this Act."
Therefore, by that statute, the July 25, 1961 petition of respondent
Belong Lutes to reopen Civil Reservation Case No. 1, GLRO Record
No. 211 of the cadastral court of Baguio, the decision on which was
rendered on November 13, 1922, comes within the 40-year
period.lawphi1.nêt
FOR THE REASONS GIVEN, the petition for certiorari is hereby
granted; the cadastral court's orders of August 5, 1963, November 5,
1963 and September 17, 1964 are hereby declared null and void and the
cadastral court is hereby directed to admit petitioners' oppositions and
proceed accordingly. No costs. So ordered.
Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Teehankee and
Barredo, JJ., concur.
Concepcion, C.J., Castro and Capistrano, JJ., took no part..
Footnotes
1 11
City of Baguio, et al., Petitioners, versus Hon. Pio R. Marcos, et al.,
Respondents, CA-G.R. No. 34909-R.
2
Extended until December 31, 1968 by Republic Act 2061, effective
June 13, 1958.
3 13
Emphasis supplied.
4 14
The text of Section 34, Act No. 496, as ammended reads: "Any person
claiming an interest, whether named in the notice or not, may appear
and file an answer on or before the return day, or within such further
time as may be allowed by the court. The answer shall state all the
objections to the application, and shall set forth the interest claimed by
the party filing the same and apply for the remedy desired, and shall be
signed and sworn to by him or by some person in his behalf."
5
See also: Aduan vs. Alba, L-17046, April 25, 1961.
6
Emphasis supplied.
7
On the Director of Lands is primarily lodged the power of executive
control, administration, management, distribution and disposition of
public lands, Director of Lands vs. Lim, 91 Phil. 912; Mari vs.
Secretary, 92 Phil. 410, 414; Kiamko vs. Maceren, 92 Phil. 1057, 1060;
Lubugan vs. Castrillo, 101 Phil. 1229, 1230; Municipality of San Carlos
vs. Morfe, L-17990, July 24, 1962; Jamisola vs. Ballesteros, L-17466,
September 18, 1965; Ganitano vs. Secretary, L-21167, March 31, 1966.
8
Rule 143, Rules of Court, provides: "These rules shall not apply to land
registration, cadastral and election cases, naturalization and insolvency
proceedings, and other cases not herein provided for, except by analogy
or in a suppletory character and whenever practicable and convenient."
Emphasis supplied.
9
Section 2, Rule 12, Rules of Court.
10
See: De Castro vs. Marcos, L-26093, January 27, 1969.
I Tañada and Carreon, Political Law of the Philippines, 1961 ed., P.
412, citing Santiago vs. Far Eastern, 73 Phil. 438 and Phil. Ass'n. of Col
& Univ. vs. Secretary of Education, 51 O.G. 6230.
12
Black, Construction and Interpretation of the Laws, 2nd ed., p. 11.
82 C.J.S., p. 526.
Sedalia vs. Smith, 104 S.W. 15, 19.
15
Tañada vs. Cuenco, L-10520, February 23, 1957, citing 82 C.J.S., p.
613.
16
Lopez & Sons, Inc. vs. Court of Tax Appeals, 100 Phil. 850, 855.
17
Id.
18
C.J.S., p. 731. See: Commissioner of Customs vs. Relunia, L- 11960.
May 29, 1959.
19
Bell vs. New York, 11 N.E. 495, 497, citing Smith vs. People, 47 N.Y.
330: People vs. Davenport 91 N.Y., 574.
20
82 C.J.S., p. 734, See: Pruitt vs. Sebastian Country Cole and Mining
Co., 222 S.W. 2d. 50, 57, citing Reynaldo vs. Holland. 35 Ark. 56.
21
Section 21(1), Article VI, Constitution; emphasis supplied.
22
37 A.L.R., p. 952, citing Joyce vs. Woods, 78 Ky. 386. See also p.
937, referring to O'Connor vs. Nova Scotia Teleph. Co. 22 Can. S.C.
276, reversing 23 N.S. 509.
23
Cf . People vs. Yabut, 58 Phil. 499, 504, which in substance held that
"mere catchwords" cannot control the body of the statute, which is
otherwise unambiguous.
24
Sedalia vs. Smith, supra, at pp. 19-20.
25
Lidasan vs. Commission on Elections, L-28089, October 25, 1967.
26
Sedalia vs. Smith, supra, at p. 20.
27
See: Congressional Record (House of Representatives), vol. II, Second
Congress, Second Regular Session, pp. 1921-1922.
28
See: Congressional Record (Senate), vol. IV; Second Congress, Fourth
Session, pp. 1108-1109.
29
Berger vs. Jackson, 23 So. 2d. 265, 267.
30
See: People vs. Lamphier, 172 N.Y.S. 247, 248-249; Newman vs.
Newman, 91 N.Y.S. 2d. 330, 331.
31
Manila Railroad Co. vs. Attorney General, 20 Phil. 523, 530; Rodrigo
vs. Cantor (unreported), L-4398, May 28, 1952, 91 Phil. 918; Maniego
vs. Castelo, 101 Phil. 293, 296, citing Sibulo vs. Altar, 83 Phil. 513.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-5060 January 26, 1910
THE UNITED STATES, plaintiff-appellee,
vs.
LUIS TORIBIO, defendant-appellant.
Rodriguez & Del Rosario, for appellant.
Attorney-General Villamor, for appellee.
CARSON, J.:
The evidence of record fully sustains the findings of the trial court that
the appellant slaughtered or caused to be slaughtered for human
consumption, the carabao described in the information, without a permit
from the municipal treasure of the municipality wherein it was
slaughtered, in violation of the provisions of sections 30 and 33 of Act
No. 1147, an Act regulating the registration, branding, and slaughter of
large cattle.
It appears that in the town of Carmen, in the Province of Bohol, wherein
the animal was slaughtered there is no municipal slaughterhouse, and
counsel for appellant contends that under such circumstances the
provisions of Act No. 1147 do not prohibit nor penalize the slaughter of
large cattle without a permit of the municipal treasure. Sections 30, 31,
32, and 33 of the Act are as follows:
SEC. 30. No large cattle shall be slaughtered or killed for food at the
municipal slaughterhouse except upon permit secured from the
municipal treasure. Before issuing the permit for the slaughter of large
cattle for human consumption, the municipal treasurer shall require for
branded cattle the production of the original certificate of ownership and
certificates of transfer showing title in the person applying for the
permit, and for unbranded cattle such evidence as may satisfy said
treasurer as to the ownership of the animals for which permit to
slaughter has been requested.
SEC. 31. No permit to slaughter has been carabaos shall be granted by
the municipal treasurer unless such animals are unfit for agricultural
work or for draft purposes, and in no event shall a permit be given to
slaughter for food any animal of any kind which is not fit for human
consumption.
SEC. 32. The municipal treasurer shall keep a record of all permits for
slaughter issued by him, and such record shall show the name and
residence of the owner, and the class, sex, age, brands, knots of radiated
hair commonly know as remolinos or cowlicks, and other marks of
identification of the animal for the slaughter of which permit is issued
and the date on which such permit is issued. Names of owners shall be
alphabetically arranged in the record, together with date of permit.
A copy of the record of permits granted for slaughter shall be forwarded
monthly to the provincial treasurer, who shall file and properly index the
same under the name of the owner, together with date of permit.
SEC. 33. Any person slaughtering or causing to be slaughtered for
human consumption or killing for food at the municipal slaughterhouse
any large cattle except upon permit duly secured from the municipal
treasurer, shall be punished by a fine of not less than ten nor more than
five hundred pesos, Philippine currency, or by imprisonment for not less
than one month nor more than six months, or by both such fine and
imprisonment, in the discretion of the court.
It is contended that the proper construction of the language of these
provisions limits the prohibition contained in section 30 and the penalty
imposed in section 33 to cases (1) of slaughter of large cattle for human
consumption in a municipal slaughter without a permit duly secured
from the municipal treasurer, and (2) cases of killing of large cattle for
food in a municipal slaughterhouse without a permit duly secured from
the municipal treasurer; and it is urged that the municipality of Carmen
not being provided with a municipal slaughterhouse, neither the
prohibition nor the penalty is applicable to cases of slaughter of large
cattle without a permit in that municipality.
We are of opinion, however, that the prohibition contained in section 30
refers (1) to the slaughter of large cattle for human consumption,
anywhere, without a permit duly secured from the municipal treasurer,
and (2) expressly and specifically to the killing for food of large cattle at
a municipal slaughterhouse without such permit; and that the penalty
provided in section 33 applies generally to the slaughter of large cattle
for human consumption, anywhere, without a permit duly secured from
the municipal treasurer, and specifically to the killing for food of large
cattle at a municipal slaughterhouse without such permit.
It may be admitted at once, that the pertinent language of those sections
taken by itself and examined apart from the context fairly admits of two
constructions: one whereby the phrase "at the municipal
slaughterhouse" may be taken as limiting and restricting both the word
"slaughtered" and the words "killed for food" in section 30, and the
words "slaughtering or causing to be slaughtered for human
consumption" and the words "killing for food" in section 33; and the
other whereby the phrase "at the municipal slaughterhouse" may be
taken as limiting and restricting merely the words "killed for food" and
"killing for food" as used in those sections. But upon a reading of the
whole Act, and keeping in mind the manifest and expressed purpose and
object of its enactment, it is very clear that the latter construction is that
which should be adopted.
The Act primarily seeks to protect the "large cattle" of the Philippine
Islands against theft and to make easy the recovery and return of such
cattle to their proper owners when lost, strayed, or stolen. To this end it
provides an elaborate and compulsory system for the separate branding
and registry of ownership of all such cattle throughout the Islands,
whereby owners are enabled readily and easily to establish their title; it
prohibits and invalidates all transfers of large cattle unaccompanied by
certificates of transfer issued by the proper officer in the municipality
where the contract of sale is made; and it provides also for the
disposition of thieves or persons unlawfully in possession, so as to
protect the rights of the true owners. All this, manifestly, in order to
make it difficult for any one but the rightful owner of such cattle to
retain them in his possession or to dispose of them to others. But the
usefulness of this elaborate and compulsory system of identification,
resting as it does on the official registry of the brands and marks on each
separate animal throughout the Islands, would be largely impaired, if
not totally destroyed, if such animals were requiring proof of ownership
and the production of certificates of registry by the person slaughtering
or causing them to be slaughtered, and this especially if the animals
were slaughtered privately or in a clandestine manner outside of a
municipal slaughterhouse. Hence, as it would appear, sections 30 and 33
prohibit and penalize the slaughter for human consumption or killing for
food at a municipal slaughterhouse of such animals without a permit
issued by the municipal treasurer, and section 32 provides for the
keeping of detailed records of all such permits in the office of the
municipal and also of the provincial treasurer.
If, however, the construction be placed on these sections which is
contended for by the appellant, it will readily be seen that all these
carefully worked out provisions for the registry and record of the brands
and marks of identification of all large cattle in the Islands would prove
in large part abortion, since thieves and persons unlawfully in
possession of such cattle, and naturally would, evade the provisions of
the law by slaughtering them outside of municipal slaughterhouses, and
thus enjoy the fruits of their wrongdoing without exposing themselves
to the danger of detection incident to the bringing of the animals to the
public slaughterhouse, where the brands and other identification marks
might be scrutinized and proof of ownership required.
Where the language of a statute is fairly susceptible of two or more
constructions, that construction should be adopted which will most tend
to give effect to the manifest intent of the lawmaker and promote the
object for which the statute was enacted, and a construction should be
rejected which would tend to render abortive other provisions of the
statute and to defeat the object which the legislator sought to attain by
its enactment. We are of opinion, therefore, that sections 30 and 33 of
the Act prohibit and penalize the slaughtering or causing to be
slaughtered for human consumption of large cattle at any place without
the permit provided for in section 30.
It is not essential that an explanation be found for the express
prohibition in these sections of the "killing for food at a municipal
slaughterhouse" of such animals, despite the fact that this prohibition is
clearly included in the general prohibition of the slaughter of such
animals for human consumption anywhere; but it is not improbable that
the requirement for the issue of a permit in such cases was expressly and
specifically mentioned out of superabundance of precaution, and to
avoid all possibility of misunderstanding in the event that some of the
municipalities should be disposed to modify or vary the general
provisions of the law by the passage of local ordinances or regulations
for the control of municipal slaughterhouse.
Similar reasoning applied to the specific provisions of section 31 of the
Act leads to the same conclusion. One of the secondary purposes of the
law, as set out in that section, is to prevent the slaughter for food of
carabaos fit for agricultural and draft purposes, and of all animals unfit
for human consumption. A construction which would limit the
prohibitions and penalties prescribed in the statute to the killing of such
animals in municipal slaughterhouses, leaving unprohibited and
unpenalized their slaughter outside of such establishments, so
manifestly tends to defeat the purpose and object of the legislator, that
unless imperatively demanded by the language of the statute it should be
rejected; and, as we have already indicated, the language of the statute is
clearly susceptible of the construction which we have placed upon it,
which tends to make effective the provisions of this as well as all the
other sections of the Act.
It appears that the defendant did in fact apply for a permit to slaughter
his carabao, and that it was denied him on the ground that the animal
was not unfit "for agricultural work or for draft purposes." Counsel for
appellant contends that the statute, in so far as it undertakes to penalize
the slaughter of carabaos for human consumption as food, without first
obtaining a permit which can not be procured in the event that the
animal is not unfit "for agricultural work or draft purposes," is
unconstitutional and in violation of the terms of section 5 of the
Philippine Bill (Act of Congress, July 1, 1902), which provides that "no
law shall be enacted which shall deprive any person of life, liberty, or
property without due process of law."
It is not quite clear from the argument of counsel whether his contention
is that this provision of the statute constitutes a taking of property for
public use in the exercise of the right of eminent domain without
providing for the compensation of the owners, or that it is an undue and
unauthorized exercise of the police power of the State. But whatever
may be the basis of his contention, we are of opinion, appropriating,
with necessary modifications understood, the language of that great
jurist, Chief Justice Shaw (in the case of Com. vs. Tewksbury, 11 Met.,
55, where the question involved was the constitutionality of a statute
prohibiting and penalizing the taking or carrying away by any person,
including the owner, of any stones, gravel, or sand, from any of the
beaches in the town of Chesea,) that the law in question "is not a taking
of the property for public use, within the meaning of the constitution,
but is a just and legitimate exercise of the power of the legislature to
regulate and restrain such particular use of the property as would be
inconsistent with or injurious to the rights of the public. All property is
acquired and held under the tacit condition that it shall not be so used as
to injure the equal rights of others or greatly impair the public rights and
interest of the community."
It may be conceded that the benificial use and exclusive enjoyment of
the property of all carabao owners in these Islands is to a greater or less
degree interfered with by the provisions of the statute; and that, without
inquiring what quantum of interest thus passes from the owners of such
cattle, it is an interest the deprivation of which detracts from their right
and authority, and in some degree interferes with their exclusive
possession and control of their property, so that if the regulations in
question were enacted for purely private purpose, the statute, in so far as
these regulations are concerned, would be a violation of the provisions
of the Philippine Bill relied on be appellant; but we are satisfied that it is
not such a taking, such an interference with the right and title of the
owners, as is involved in the exercise by the State of the right of
eminent domain, so as to entitle these owners to compensation, and that
it is no more than "a just restrain of an injurious private use of the
property, which the legislature had authority to impose."
In the case of Com. vs. Alger (7 Cush., 53, 84), wherein the doctrine
laid down in Com. vs. Tewksbury (supra) was reviewed and affirmed,
the same eminent jurist who wrote the former opinion, in distinguishing
the exercise of the right of eminent domain from the exercise of the
sovereign police powers of the State, said:
We think it is settled principle, growing out of the nature of well-
ordered civil society, that every holder of property, however absolute
and unqualified may be his title, holds it under the implied liability that
his use of it may be so regulated that is shall not be injurious to the
equal enjoyment of others having an equal right to the enjoyment of
their property, nor injurious to the rights of the community. . . . Rights of
property, like all other social and conventional rights, are subject to such
reasonable limitations in their enjoyment as shall prevent them from
being injurious, and to such reasonable restrain and regulations establish
by law, as the legislature, under the governing and controlling power
vested in them by the constitution, may think necessary and expedient.
This is very different from the right of eminent domain, the right of a
government to take and appropriate private property to public use,
whenever the public exigency requires it; which can be done only on
condition of providing a reasonable compensation therefor. The power
we allude to is rather the police power, the power vested in the
legislature by the constitution, to make, ordain, and establish all manner
of wholesome and reasonable laws, statutes, and ordinances, either with
penalties or without, not repugnant to the constitution, as they shall
judge to be for the good and welfare of the commonwealth, and of the
subjects of the same.
It is much easier to perceive and realize the existence and sources of this
power than to mark its boundaries or prescribe limits to its exercise.
Applying these principles, we are opinion that the restrain placed by the
law on the slaughter for human consumption of carabaos fit for
agricultural work and draft purpose is not an appropriation of property
interests to a "public use," and is not, therefore, within the principle of
the exercise by the State of the right of eminent domain. It is fact a mere
restriction or limitation upon a private use, which the legislature deemed
to be determental to the public welfare. And we think that an
examination of the general provisions of the statute in relation to the
public interest which it seeks to safeguard and the public necessities for
which it provides, leaves no room for doubt that the limitations and
restraints imposed upon the exercise of rights of ownership by the
particular provisions of the statute under consideration were imposed
not for private purposes but, strictly, in the promotion of the "general
welfare" and "the public interest" in the exercise of the sovereign police
power which every State possesses for the general public welfare and
which "reaches to every species of property within the commonwealth."
For several years prior to the enactment of the statute a virulent
contagious or infectious disease had threatened the total extinction of
carabaos in these Islands, in many sections sweeping away seventy,
eighty, and in some cases as much as ninety and even one hundred per
cent of these animals. Agriculture being the principal occupation of the
people, and the carabao being the work animal almost exclusively in use
in the fields as well as for draft purposes, the ravages of the disease with
which they were infected struck an almost vital blow at the material
welfare of the country. large areas of productive land lay waste for
years, and the production of rice, the staple food of the inhabitants of
the Islands, fell off to such an extent that the impoverished people were
compelled to spend many millions of pesos in its importation,
notwithstanding the fact that with sufficient work animals to cultivate
the fields the arable rice lands of the country could easily be made to
produce a supply more that sufficient for its own needs. The drain upon
the resources of the Islands was such that famine soon began to make
itself felt, hope sank in the breast of the people, and in many provinces
the energies of the breadwinners seemed to be paralyzed by the
apparently hopeless struggle for existence with which they were
confronted.
To meet these conditions, large sums of money were expended by the
Government in relieving the immediate needs of the starving people,
three millions of dollars were voted by the Congress of the United
States as a relief or famine fund, public works were undertaken to
furnish employment in the provinces where the need was most pressing,
and every effort made to alleviate the suffering incident to the
widespread failure of the crops throughout the Islands, due in large
measure to the lack of animals fit for agricultural work and draft
purposes.
Such measures, however, could only temporarily relieve the situation,
because in an agricultural community material progress and permanent
prosperity could hardly be hoped for in the absence of the work animals
upon which such a community must necessarily rely for the cultivation
of the fields and the transportation of the products of the fields to
market. Accordingly efforts were made by the Government to increase
the supply of these animals by importation, but, as appears from the
official reports on this subject, hope for the future depended largely on
the conservation of those animals which had been spared from the
ravages of the diseased, and their redistribution throughout the Islands
where the need for them was greatest.
At large expense, the services of experts were employed, with a view to
the discovery and applications of preventive and curative remedies, and
it is hoped that these measures have proved in some degree successful in
protecting the present inadequate supply of large cattle, and that the
gradual increase and redistribution of these animals throughout the
Archipelago, in response to the operation of the laws of supply and
demand, will ultimately results in practically relieving those sections
which suffered most by the loss of their work animals.
As was to be expected under such conditions, the price of carabaos
rapidly increase from the three to five fold or more, and it may fairly be
presumed that even if the conservative measures now adopted prove
entirely successful, the scant supply will keep the price of these animals
at a high figure until the natural increase shall have more nearly
equalized the supply to the demand.
Coincident with and probably intimately connected with this sudden rise
in the price of cattle, the crime of cattle stealing became extremely
prevalent throughout the Islands, necessitating the enactment of a
special law penalizing with the severest penalties the theft of carabaos
and other personal property by roving bands; and it must be assumed
from the legislative authority found that the general welfare of the
Islands necessitated the enactment of special and somewhat burdensome
provisions for the branding and registration of large cattle, and
supervision and restriction of their slaughter for food. It will hardly be
questioned that the provisions of the statute touching the branding and
registration of such cattle, and prohibiting and penalizing the slaughter
of diseased cattle for food were enacted in the due and proper exercise
of the police power of the State; and we are of opinion that, under all the
circumstances, the provision of the statute prohibiting and penalizing
the slaughter for human consumption of carabaos fit for work were in
like manner enacted in the due and proper exercise of that power,
justified by the exigent necessities of existing conditions, and the right
of the State to protect itself against the overwhelming disaster incident
to the further reduction of the supply of animals fit for agricultural work
or draft purposes.
It is, we think, a fact of common knowledge in these Islands, and
disclosed by the official reports and records of the administrative and
legislative departments of the Government, that not merely the material
welfare and future prosperity of this agricultural community were
threatened by the ravages of the disease which swept away the work
animals during the years prior to the enactment of the law under
consideration, but that the very life and existence of the inhabitants of
these Islands as a civilized people would be more or less imperiled by
the continued destruction of large cattle by disease or otherwise.
Confronted by such conditions, there can be no doubt of the right of the
Legislature to adopt reasonable measures for the preservation of work
animals, even to the extent of prohibiting and penalizing what would,
under ordinary conditions, be a perfectly legitimate and proper exercise
of rights of ownership and control of the private property of the citizen.
The police power rests upon necessity and the right of self-protection
and if ever the invasion of private property by police regulation can be
justified, we think that the reasonable restriction placed upon the use of
carabaos by the provision of the law under discussion must be held to be
authorized as a reasonable and proper exercise of that power.
As stated by Mr. Justice Brown in his opinion in the case of Lawton vs.
Steele (152 U.S., 133, 136):
The extent and limits of what is known as the police power have been a
fruitful subject of discussion in the appellate courts of nearly every State
in the Union. It is universally conceded to include everything essential
to the public safely, health, and morals, and to justify the destruction or
abatement, by summary proceedings, of whatever may be regarded as a
public nuisance. Under this power it has been held that the State may
order the destruction of a house falling to decay or otherwise
endangering the lives of passers-by; the demolition of such as are in the
path of a conflagration; the slaughter of diseased cattle; the destruction
of decayed or unwholesome food; the prohibition of wooden buildings
in cities; the regulation of railways and other means of public
conveyance, and of interments in burial grounds; the restriction of
objectionable trades to certain localities; the compulsary vaccination of
children; the confinement of the insane or those afficted with contagious
deceases; the restraint of vagrants, beggars, and habitual drunkards; the
suppression of obscene publications and houses of ill fame; and the
prohibition of gambling houses and places where intoxicating liquors
are sold. Beyond this, however, the State may interfere wherever the
public interests demand it, and in this particular a large discretion is
necessarily vested in the legislature to determine, not only what the
interests of the public require, but what measures are necessary for the
protection of such interests. (Barbier vs. Connolly, 113 U. S., 27;
Kidd vs. Pearson, 128 U. S., 1.) To justify the State in thus interposing
its authority in behalf of the public, it must appear, first, that the
interests of the public generally, as distinguished from those of a
particular class, require such interference; and, second, that the means
are reasonably necessary for the accomplishment of the purpose, and not
unduly oppressive upon individuals. The legislature may not, under the
guise of protecting the public interests, arbitrarily interfere with private
business, or impose unusual and unnecessary restrictions upon lawful
occupations. In other words, its determination as to what is a proper
exercise of its police powers is not final or conclusive, but is subject to
the supervision of the court.
From what has been said, we think it is clear that the enactment of the
provisions of the statute under consideration was required by "the
interests of the public generally, as distinguished from those of a
particular class;" and that the prohibition of the slaughter of carabaos for
human consumption, so long as these animals are fit for agricultural
work or draft purposes was a "reasonably necessary" limitation on
private ownership, to protect the community from the loss of the
services of such animals by their slaughter by improvident owners,
tempted either by greed of momentary gain, or by a desire to enjoy the
luxury of animal food, even when by so doing the productive power of
the community may be measurably and dangerously affected.
Chief Justice Redfield, in Thorpe vs. Rutland & Burlington R. R. Co.
(27 Vt., 140), said (p. 149) that by this "general police power of the
State, persons and property are subjected to all kinds of restraints and
burdens, in order to secure the general comfort, health, and prosperity of
the State; of the perfect right in the legislature to do which no question
ever was, or, upon acknowledge and general principles, ever can be
made, so far as natural persons are concerned."
And Cooley in his "Constitutional Limitations" (6th ed., p. 738) says:
It would be quite impossible to enumerate all the instances in which the
police power is or may be exercised, because the various cases in which
the exercise by one individual of his rights may conflict with a similar
exercise by others, or may be detrimental to the public order or safety,
are infinite in number and in variety. And there are other cases where it
becomes necessary for the public authorities to interfere with the control
by individuals of their property, and even to destroy it, where the
owners themselves have fully observed all their duties to their fellows
and to the State, but where, nevertheless, some controlling public
necessity demands the interference or destruction. A strong instance of
this description is where it becomes necessary to take, use, or destroy
the private property of individuals to prevent the spreading of a fire, the
ravages of a pestilence, the advance of a hostile army, or any other great
public calamity. Here the individual is in no degree in fault, but his
interest must yield to that "necessity" which "knows no law." The
establishment of limits within the denser portions of cities and villages
within which buildings constructed of inflammable materials shall not
be erected or repaired may also, in some cases, be equivalent to a
destruction of private property; but regulations for this purpose have
been sustained notwithstanding this result. Wharf lines may also be
established for the general good, even though they prevent the owners
of water-fronts from building out on soil which constitutes private
property. And, whenever the legislature deem it necessary to the
protection of a harbor to forbid the removal of stones, gravel, or sand
from the beach, they may establish regulations to that effect under
penalties, and make them applicable to the owners of the soil equally
with other persons. Such regulations are only "a just restraint of an
injurious use of property, which the legislature have authority" to
impose.
So a particular use of property may sometimes be forbidden, where, by
a change of circumstances, and without the fault of the power, that
which was once lawful, proper, and unobjectionable has now become a
public nuisance, endangering the public health or the public safety.
Milldams are sometimes destroyed upon this grounds; and churchyards
which prove, in the advance of urban population, to be detrimental to
the public health, or in danger of becoming so, are liable to be closed
against further use for cemetery purposes.
These citations from some of the highest judicial and text-book
authorities in the United States clearly indicate the wide scope and
extent which has there been given to the doctrine us in our opinion that
the provision of the statute in question being a proper exercise of that
power is not in violation of the terms of section 5 of the Philippine Bill,
which provide that "no law shall be enacted which shall deprive any
person of life, liberty, or property without due process of law," a
provision which itself is adopted from the Constitution of the United
States, and is found in substance in the constitution of most if not all of
the States of the Union.
The judgment of conviction and the sentence imposed by the trial court
should be affirmed with the costs of this instance against the appellant.
So ordered.
Arellano, C.J., Torres, Johnson, Moreland and Elliott, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-41106 September 22, 1977
LITEX EMPLOYEES ASSOCIATION, petitioner,
vs.
GEORGE A. EDUVALA, in his capacity as Officer-in-Charge,
BUREAU OF LABOR RELATIONS Departmentof Labor and
FEDERATION OF FREE WORKERS (F.F.W.), respondents.
Esteban M. Mendoza for petitioner.
F. F. Bonifacio, Jr. for respondent FFW.
Acting Solicitor General Hugo E. Gutierrez, Jr., Assistant Solicitor
General Reynato S. Puno and Solicitor Romeo C. de la Cruz for
respondent George A. Eduvala, etc.
FERNANDO, J.:
In this and certiorari and prohibition proceeding, what is sought to be
nullified is an Order of respondent George A. Eduvala, the then Officer-
in-Charge of the Bureau of Labor Relations, requiring that a
memorandumm election be held among the members of the Litex
Employees Association, petioner labor union, to ascertain their wishes
as to their wishes as to their affiliation with respondent Federation of
Free Workers. It is the contention of petitioner Union that there is no
statutory authorization for the holding of such a referendum election.
That is the decisive issue in this comtroversy. In support of the
competence of respondent public official, Article 226 of the Present
Labor Code is cited. It reads thus: "The Bureau of Labor Relations and
the Labor Relations Division in the the regional offices of the Labor
shall have and exclusive authority to act, at their own initiation or upon
request of either or both parties, on all inter-union and intra-union
conflicts, and disputes, grievances of probe arising from or affecting
labor-management relations in all workplaces, whether natural or non-
agricultural, except those arising from the implementation or
interpretation of collective bargaining agreements which shall be the
subject of grievance Procedure and/or voluntary arbitration." 1 The
comment of the then Acting Solicitor General, now Associate Justice of
the Court of Appeal, Hugo E. Gutierrez, Jr., treated as the
answer, 2 maintained that the wording of the above provision sustains
the authority thus challenged. There is considerable persuasiveness to
such a view. It would be an unduly restrictive interpretation them if a
negative answer were Seven to the question posed. It would be
oblivious to the basic end and aim of the pant Labor Code to confer on
the Department of Labor and its bereaus the competence to pass upon
and decide labor controversies and thus minimize judicial intervention.
There is no legal basis for nullifying such order.
This later dispute originated from a petition of respondent Federation of
Free Workers filed with the Bureau of labor Relations against petitioner
labor Union to hold a referendum among the members of the union for
the of determining whether they desired to be affiliated with such
Federation. It was alleged that a "great majority" of the members of the
union desired such affiliaion, but that its President, a certain Johnny de
Leon, was opposed. The contention of petitioner Union acting through
its counsel was that only about 700 out of more than 2,200 employees of
the company had manifested their desire to affliate with the Federation
and that a substantial number of such had since then repudiated their
signatures. It also raised the point that what was sought was a
certification election which was not proper as there was a certified
collective bargaining agreement between the union and the company.
The Compulsory Arbitrator, after a careful study of the pleadings,
reached the conclusion that the truth of the matter could best be
assertained by a referendum election. Respondent as Officer-in-Charge
of the Bureau of labor Relations affirmed. Hence this petition directed
to this Court, as a jurisdictional question is raised.
The petition, as noted at the outset, lacks merit.
1. Article 226 of the New Labor Code cannot be misread to signify that
the authority conferred on the Secretary of labor and the officials of the
Department is limited in character. On the contrary, even a cursory
reading thereof readily yields the conclusion that in the interest of
industrial peace and for the promotion of the salutary constitutional
objectives of social justice and protection to labor, the competence of
the governmental entrusted with supervision over disputes involving
employers and employees as well as "inter-union and intra-union
conflicts," is broad and expensive. Thereby its purpose becomes crystal-
clear. As is quite readily discernible where it concerns the promotion of
social and economy rights, the active participation in the
implementation of the codal objective is entrusted to the executive
department. There is no support for any allegation of jurisdictional
infirmity, considering that the language employed is well-nigh inclusive
with the stress on its "and exclusive authority to act." If it were
otherwise, its policy might be rendered futile. That is to run counter to a WHEREFORE, the petition for certiorari is dismissed. This decision is
basic postulate in the canons of statutory interpretation. Learned Hand immediately executory.
referred to it as the proliferation of purpose. As was emphatecally
asserted by Justice Frankfurter: "The generating consideration is that Barredo, Concepcion Jr. and Santos, JJ., concur.
legislation is more than composition. It is an active instrument of
government which, for purposes of interpretation, means that laws have
ends to be achieved. It is in this connection that Holmes said, 'words are
flexible.' Again it was Holmes, the last judge to give quarter to loose
thinking or vague yearning, who said that 'the general purpose is a more
is a more important aid to the meaning than any rule which grammar or Separate Opinions
formal logic may lay down.' And it was Holmes who chided courts for
being apt to err by sticking too closely to the words of a law when those ANTONIO, J., concurring:
words import a policy that goes beyond them." 3 What is intended by the
framers of code or statute is not to be frustrated. Even on the assumption The respondent public officer has sufficient authority, under the labor
that by some strained or literal reading of the employed, a doubt can be Code, to conduct the referendum aforementioned.
raised as to its scope, the 'immitation should not be at war with the end
sought to be attained. It cannot be denied that if through an ingenious AQUINO, J., concur:
argumentation, limits may be set on a statutory power which should not
be there, there would be a failure to effectuate the statutory purpose and Because the instant case was rendered moot by the 1975 petition of
policy. That kind of approach in statutory construction has never FFW for a certification election among the employees and workers of
recommended itself. 4 Lirag Textile Mills, Inc. If a certification election will be held, a
referendum is not necessary.
2. Nor has petitioner made out a case of grave abuse of since the matter
involved is a dispute as to whether or not the members of petitioner
labor union had decided, contrary to the wishes of its president, to join
respondent Federation. What better way could there be of ascertaining Separate Opinions
the truth there than to hold the referendum election. The guarantee of
fairness as to whether there is accuracy depends on the impartiality and ANTONIO, J., concurring:
neutrality of the Bureau of Labor Relations. There is nothing in
petitioner's submission to indicate that such would not be the case. The respondent public officer has sufficient authority, under the labor
Under such circumstances then, petitioner labor union could not be held Code, to conduct the referendum aforementioned.
to allege that there was an abuse, much less a grave abuse, of the
discretionary authority vested in such office. It suffices to take note of AQUINO, J., concur:
how often this Court, after a careful consideration of the issue involved,
had rejected such a contention in certification cases, analogous, if not Because the instant case was rendered moot by the 1975 petition of
similar in character. Invariably, the imputation that the holding of an FFW for a certification election among the employees and workers of
election for the purpose of determining with exactitude the wishes of the Lirag Textile Mills, Inc. If a certification election will be held, a
employees concerned as amounting to arbitrary exercise exercise of a referendum is not necessary.
power had been rejected. 5
Footnotes
1 Article 226 of the New Labor Code (1974).
2 He was assisted by Assistant Solicitor General Reynato S. Puno and
Solicitor Romeo C. de la Cruz.
3 Frankfurter, Of Law and Men, 59-60 (1965).
4 Cf. Ty Sue v. Hord 12 Phil, 485 (1909); United States v. Toribio, 11-D
Phil. 85 (1910); Riera v. Palmaroli, 40 Phil. 105 (1919): Commissioner
of Customs v. Caltex Phil., Inc., 106 Phil. 829 (1959); Sarcos v. Castillo,
L- 29755, Jan. 31, 1969, 26 SCRA 853; Automotive Parts & Equipment
Co., Inc. v. Lingad, L-26406, Oct. 31, 1969, 30 SCRA 248-1 Lopez v.
Commissioner of Customs, L-28235, Jan. 30,1971, 37 SCRA 327;
Matabuena v. Cervantes, L-28771, March 31, 1971, 38 SCRA 284;
Republic Flour Mills v. Commissioner of Customs, L. 28463, May 31,
1971, 39 SCRA 269; Lozano v. Romero, L-33245, Sept. 30, 1971, 41
SCRA 247; Caltex Filipino Managers and Supervisors Association v.
Court of Industrial Relations, L-30623-33, April 11, 1972, 44 SCRA
350.
5 Cf. United Employees Union v. Gelmart Industries v. Noriel, 67
SCRA 267; Philippine Association of Free Labor Unions v. Bureau of
Labor Relations, 69 SCRA 132 (1976); Federacion Obrera v. Noriel, 72
SCRA 24 (1976); U. E. Automotive Employees and Workers Union-
Trade Unions of the Philippines and Allied Services v. Noriel, 74 SCRA
72 (1976); Philippine Labor Alliance Council v. Bureau of Labor
Relations, L-41288, Jan. 31, 1977; Today's Knitting Free Workers Union
v. Noriel, L-45057, Feb. 28, 1977; Benguet Exploration Miner's 4575,
June 20, 1977; Rowell Labor Union v. Ople, L-42270, July 29, 1977.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-41161 September 10, 1981
FEDERATION OF FREE FARMERS, MELQUIADES BETIOS
CRESENCIANO FERNANDEZ, SANCHO PEREZ and AGATON
POSA petitioners,
vs.
THE HONORABLE COURT OF APPEALS, VICTORIAS
MILLING COMPANY, INC., VICTORIAS MILL DISTRICT
PLANTERS' ASSOCIATION, INC., and ALL SUGARCANE
PLANTERS OF SUGARCANE PLANTATIONS SITUATED IN
THE VICTORIAS MILLING DISTRICT, WHO HAVE AT ONE
TIME OR ANOTHER, SINCE JUNE 22,1952, MILLED THEIR
SUGARCANE IN THE MILL OF VICTORIAS MILLING
COMPANY, INC., respondents.
G.R. No. L-41222 September 10, 1981
VICTORIAS MILLING COMPANY, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, FEDERATION OF
FREE FARMERS, MELQUIADES BETIOS CRESENCIANO
FERNANDEZ, SANCHO PEREZ and AGATON POSA
VICTORIAS MILL DISTRICT PLANTERS' ASSOCIATION,
INC., and, ALL SUGARCANE PLANTERS OF SUGARCANE
PLANTATIONS SITUATED IN THE VICTORIAS MILLING
DISTRICT, respondents.
G.R. No. L-43153 September 10, 1981
PLANTERS, VICTORIAS MILL DISTRICT, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, FEDERATION OF
FREE FARMERS, MELQUIADES BETIOS, CRESENCIANO
FERNANDEZ, SANCHO PEREZ AGATON POSA, and
VICTORIAS MILLING COMPANY, INC., respondents.
G.R. No. L-43369 September 10, 1981
PRIMO SANTOS and ROBERTO H. TIROL, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, FEDERATION OF
FREE FARMERS, MELQUIADES BETIOS CRESENCIANO
FERNANDEZ, SANCHO PEREZ, AGATON POSA and
VICTORIAS MILLING COMPANY, INC., respondents.
BARREDO, J:
Four separate petitions of the respective parties concerned for the
review of the decision of the Court of Appeals in CA G.R. No. 47298-R,
entitled Federation of Free Farmers, et al. vs. Victorias Milling Co., Inc.,
et al. of August 12,1975.
The appellate court held that notwithstanding the provisions of Section
9, in relation to Section 1 of the Sugar Act of 1952, Republic Act 809,
providing that of any increase in the share of the proceeds of milled
sugarcane and derivatives obtained by the planters from the centrals in
any sugar milling district in the Philippines, 60% of said increase shall
correspond to and should be paid by the planters to their respective
laborers, the laborers of the planters affiliated to the Victorias Milling
District who are members of or represented by the Federation of Free
Farmers, one of herein petitioners, have not been fully paid their share
thus provided by law, corresponding to crop years 1955 to 1974, in spite
of clear evidence in the record showing that the increase of 4% in the
share of the Planters, Victorias Milling District, corresponding to all the
years since the enforcement of the aforementioned Act had already been
paid by petitioner Victorias Milling Co., Inc. to said planters. The Court
of Appeals further found that even the shares of the laborers
corresponding to crop years 1952-1955, when by operation of the Act,
the increase was 10%, had not been paid. The appellate court rendered
judgment holding the planters of the district and Victorias Milling Co.,
Inc. jointly and severally liable to the said laborers for all said alleged
unpaid amounts.
All the four parties involved, namely, (1) the FEDERATION, (2) the
PLANTERS, as an association and on behalf of all planters in the
Victorias district, (3) two individual planters (SANTOS and TIROL) as
well as (4) the CENTRAL (VICTORIAS) are now before Us with their
respective opposing positions relative to such decision.
In G. R. No. L-41161, the FEDERATION maintains that (1) the
plantation laborers, its members, have not only not been fully paid the
amounts indisputably due them from crop year 1952-1953 to November
1, 1955, during which period all the parties are agreed that Section I of
Republic Act 809 was fully applicable, but that (2) in 1956,
VICTORIAS and the PLANTERS had entered into an agreement which
they had no legal right to enter into the way they did, (providing for a
64-36 ratio) that is, in a manner that did not conform with the ratio of
sharing between planters and millers specified in the just mentioned
legal provision, (which correspondingly provides for a 70-30 ratio) the
FEDERATION maintaining that after the enactment of Republic Act
809, all planters and millers in all the sugar milling districts in the
Philippines were deprived of the freedom to stipulate any ratio of
sharing of the proceeds of sugarcane milled by the respective centrals,
as well as their derivatives, in any proportion different from, specially if
less for the planters, than that listed in Section 1 of the Act; and (3)
assuming the PLANTERS and VICTORIAS had the legal right to enter
into any such agreement, that the 60% of the increase given to the
PLANTERS under said agreement has not been paid up to now to the
respective laborers of said PLANTERS. In this connection, the
FEDERATION further urges, in this instance, that the Court of Appeals'
decision is correct in holding that under the law on torts, the
PLANTERS and the CENTRAL are jointly and severally liable for the
payment of the amounts thus due them.
In G.R. No. L-41222, the contentions of petitioner VICTORIAS are: (1)
that the evidence incontrovertibly shows that it has already paid in full
to the PLANTERS their respective shares in the proceeds of the
sugarcane and derivatives milled by said central from the moment it was
legally decided and agreed that it should do so, (aside, of course, from
other issues which albeit related thereto may need not be resolved here
anymore, for reasons herein under to be stated) (2) in its initial petitions
in the trial court, the FEDERATION admitted that the laborers have
been given what is due them as far as the 1952-53 to 1954-55 crops are
concerned, and (3) that, even if it were true that the PLANTERS have
not paid their laborers the corresponding share provided for them by
law, the facts and circumstances extant in the records do not factually
and legally justify the holding of the Court of Appeals that the Victorias
Milling Company, Inc. is jointly and severally liable to the laborers for
what the latter's respective planters-employers might have failed or
refused to pay their laborers or which said planters might have
otherwise appropriated unto themselves or absconded. The CENTRAL
also posits that the action as filed below was not founded on torts but on
either an obligation created by contract or by law, under neither of
which it could be liable, and moreover, even if such action might be
deemed based on torts, it has already prescribed, apart from the fact that
since the Federation's pleadings alleged and prayed for payment of the
laborers' share in 1955-56-1973-74 crop years, the Court of Appeals had
no jurisdiction to render judgment concerning the 1952-53-1954-55
crop years, the latter not having been the subject of the allegations and
prayers of the FEDERATION in its pleadings in the trial court and all
evidence regarding said matters outside of the pleaded issues were
properly and opportunely objected to.
In G. R. No. L-43153, the PLANTERS, aside from asserting (1) their
freedom to stipulate with the CENTRAL such ratio of sharing as they
might agree upon, regardless of the ratios specified in Section 1 of the
Sugar Act, (2) insist that their respective laborers have already been
fully paid what is due them, under the law insofar as the 1952-53 to
1954-55 crop years are concerned, thereby impliedly if not directly
admitting that as provided by law, the CENTRAL or VICTORIAS had
already paid them the increase they had agreed upon and (3) that, in any
event, the milling company should reimburse them whatever amounts
they might be adjudged to pay the laborers.
Lastly, in G. R. No. L-43369, planters PRIMO SANTOS and
ROBERTO H. TIROL, who are among the planters in the Victorias
District, complain that the decision of the Court of Appeals ignored their
plea of lack of jurisdiction of the trial court over their persons in spite of
their proven claim that they had not been properly served with
summons, and that the portion of said decision holding them jointly and
severally liable with VICTORIAS and the PLANTERS to the latter's
laborers for the amounts here in question has no factual and legal basis,
considering they were not parties to the pertinent questioned
agreements.
I
In its petition, the FEDERATION assigns the following alleged errors in
the decision under review:
I RESPONDENT THE HONORABLE COURT OF APPEALS erred in
not holding that as contended by the Honorable Secretary of Labor, and,
in effect the Honorable Secretary of Justice, the phrase 'written milling
agreements' in the aforequoted Section I of Republic Act No. 809 has
exclusive reference to written milling agreements still existing upon the
effectivity of the law on June 22, 1952, and, not to those executed
subsequent to said date.
II RESPONDENT THE HONORABLE COURT OF APPEALS erred in
not holding that the purpose and intendment of Republic Act No. 809 is
to exempt from its operation milling districts in which there were still
existing, on June 22, 1952, written milling agreements between the
majority of planters and the millers.
III RESPONDENT THE HONORABLE COURT OF APPEALS erred
in not holding that as contended by the Honorable Secretary of Labor,
and ,in effect, the Honorable Secretary of Justice, the purpose and
intendment of Republic Act No. 809, admittedly pattern after the Rice
Share Tenancy Act, is to firmly fix by law, effective and, therefore, the
legal effect June 22, 1952, the sharing participation among the millers,
the planters and the latter's laborers in the unrefined sugar produced in
districts not exempt, as well as all by-products and derivatives thereof,
and, consequently, to prohibit in said districts written milling
agreements, executed subsequent to said date, providing for sharing
arrangements different from or contrary to the schedule fixed under said
Sections 1 and 9, and, to prevent any form of circumvention thereof.
IV RESPONDENT THE HONORABLE COURT OF APPEALS erred
in holding that in order 'to safeguard, preserve, and maintain the
integrity, viability, and health of an industry so vital to the entire
economy of the country' as sugar industry the lawmakers intended to
place in the hands of the millers and the planters the operation of
Republic Act No. 809 -- i. e. to enable them to stipulate in their written
milling agreements executed subsequent to June 22, 1952 participations
those prescribed in Section 1 thereof
V RESPONDENT THE HONORABLE COURT OF APPEALS erred in
invoking the 'Rules and Regulations to Implement Section 9 of Republic
Act 809 dated February 23,1956, as amended on May 4, 1956 (Exhibit
GGG) to support its conclusion that the lawmakers intended to place in
the hands of the millers and the planters the operation of Republic Act
No. 809 - i. e. to enable them to stipulate in their written milling
agreements executed subsequent to June 22, 1952 participations
different from those prescribed in Section 1 thereof (Pp. 44-45, L-41161
Rec., Vol. 1.)
In its brief here, however, it assigns ten alleged errors thus:
-I-
RESPONDENT COURT ERRED IN DISREGARDING THE
OPINION OF THE HONORABLE SECRETARY OF LABOR AND,
IN EFFECT, OF THE HONORABLE SECRETARY OF JUSTICE,
AND, IN NOT HOLDING THAT THE 'WRITTEN MILLING
AGREEMENTS' CONTEMPLATED IN SECTION I OF REPUBLIC
ACT NO. 809 BY THE FRAMERS THEREOF WERE THOSE LONG-
TERM WRITTEN MILLING AGREEMENTS REFERRED TO IN
THE REPORT OF CHIEF JUSTICE MANUEL V. MORAN, MOST, IF
NOT ALL, OF WHICH HAD EXPIRED AS EARLY AS 1951, AND,
NOT THOSE WHICH THE MILLERS AND THE PLANTERS
MIGHT EXECUTE SUBSEQUENT TO THE DATE THE ACT
WOULD TAKE EFFECT
-II-
RESPONDENT COURT ERRED IN DISREGARDING THE
EXPLANATION MADE BY REPRESENTATIVE CARLOS HILADO,
SPONSOR OF HOUSE BILL NO. 1517, AND, IN NOT HOLDING
THAT, BY INSERTING BEFORE THE TEXT OF SECTION I OF
REPUBLIC ACT NO. 809 THE PHRASE IN THE ABSENCE OF
WRITTEN MILLING AGREEMENTS BETWEEN THE MAJORITY
OF PLANTERS AND THE MILLERS OF SUGARCANE IN ANY
MILLING DISTRICT,' THE FRAMERS OF SAID LAW INTENDED
TO EXEMPT FROM THE OPERATION THEREOF THOSE
MILLING DISTRICTS, IF ANY, WHEREIN THERE WERE STILL
EXISTING, ON THE DATE THE LAW WOULD TAKE EFFECT,
THOSE LONG-TERM WRITTEN MILLING AGREEMENTS
BETWEEN THE MILLERS AND A MAJORITY OF THEIR
ADHERENT PLANTERS PROVIDING FOR SHARING
ARRANGEMENTS; SAID EXEMPTION BEING MERELY A
PRECAUTIONARY MEASURE TO PRECLUDE SAID MILLERS, IF
ANY, FROM CHALLENGING THE LAW AS BEING VIOLATIVE
OF PARAGRAPH 10, SECTION 1, ARTICLE III OF THE OLD
CONSTITUTION
-III-
RESPONDENT COURT ERRED IN DISREGARDING THE
OPINION OF THE HONORABLE SECRETARY OF LABOR AND,
IN EFFECT, OF THE HONORABLE SECRETARY OF JUSTICE,
AND, IN NOT HOLDING THAT IT IS CONTRARY TO THE
PURPOSE AND INTENDMENT OF THE FRAMERS OF REPUBLIC
ACT NO. 809 THAT 'THE OPERATION AND APPLICABILITY OF
THE SUGAR ACT WOULD REST UPON THE AGREEMENT, THE
BILATERAL WILL OF THE CENTRAL AND THE MAJORITY OF
THE PLANTERS OR PERHAPS THEIR COLLUSION, TO THE
EXCLUSION OF AND THE DETRIMENT OF THE LABORERS,
WHOM CONGRESS AS A MEASURE OF LAW AND PUBLIC
POLICY CLEARLY INTENDED TO BENEFIT'
-IV-
RESPONDENT COURT ERRED IN NOT HOLDING THAT WHAT
THE FRAMERS OF REPUBLIC ACT NO. 809 HAD
CONTEMPLATED IN ORDER TO SAFEGUARD, PRESERVE, AND
MAINTAIN THE INTEGRITY, VIABILITY, AND HEALTH OF AN
INDUSTRY SO VITAL TO THE ENTIRE ECONOMY OF THE
COUNTRY AS THE SUGAR INDUSTRY WAS TO PROMOTE
SOCIAL JUSTICE AND PROTECT THE PLANTATION LABORERS
THEREIN BY DETERMINING AND FIXING THE RESPECTIVE
JUST PARTICIPATIONS IN THE BENEFITS FROM SAID
INDUSTRY AMONG THE MILLERS, THE PLANTERS AND THE
PLANTATION LABORERS
-V-
RESPONDENT COURT ERRED IN DISREGARDING THE
OPINION OF THE HONORABLE SECRETARY OF LABOR AND,
IN EFFECT, OF THE HONORABLE SECRETARY OF JUSTICE,
AND, IN NOT HOLDING THAT, EFFECTIVE JUNE 22, 1952 AND
THEREAFTER, EVEN BEYOND CROP MILLING YEAR 1973-1974
AS LONG AS THE ACTUAL PRODUCTION CONTINUES TO
EXCEED ONE MILLION TWO HUNDRED THOUSAND (1,200,000)
PICULS, THE SUGAR PRODUCE IN THE VICTORIAS MILL
DISTRICT, AS WELL AS ALL ITS BY-PRODUCTS AND
DERIVATIVES, SHOULD BE DIVIDED AMONG THE CENTRAL,
THE PLANTERS AND THE LABORERS AS FOLLOWS: THIRTY
(30%) PER CENT FOR THE CENTRAL, SIXTY-FOUR (64%) PER
CENT FOR THE PLANTERS AND SIX (6%) PER CENT FOR THE
LABORERS.
-VI-
RESPONDENT COURT ERRED IN DISREGARDING THE
OPINION OF THE HONORABLE SECRETARY OF LABOR AND,
IN EFFECT, OF THE HONORABLE SECRETARY OF JUSTICE,
THAT THE 'AMICABLE SETTLEMENT-COMPROMISE
AGREEMENT DATED MARCH 5, 1956 (EXHIBITS XXX THRU
XXX-6) IS CONTRARY TO REPUBLIC ACT NO. 809, AND,
THEREFORE, NULL AND VOID AB INITIO
-VII-
RESPONDENT COURT ERRED IN DISREGARDING THE
OPINION OF THE HONORABLE SECRETARY OF LABOR AND,
IN EFFECT, OF THE HONORABLE SECRETARY OF JUSTICE,
THAT 'THE GENERAL COLLECTIVE SUGAR MILLING
CONTRACT (EXHIBITS YYY THRU YYY-7) AND THE
INDIVIDUAL SUGAR MILLING CONTRACTS' (EXHIBITS SSS
THRU SSS-28 AND ZZZ THRU ZZZ-7), IN SO FAR AS THEY
REPRODUCE, CONFIRM AND RATIFY THE 'AMICABLE
SETTLEMENT- COMPROMISE AGREEMENT' DATED MARCH
5,1956 (EXHIBITS XXX THRU XXX-6) AND/OR ARE DERIVED
THEREFROM, ARE CONTRARY TO REPUBLIC ACT NO. 809,
AND, THEREFORE, NULL AND VOID AB INITIO
-VIII-
RESPONDENT COURT ERRED IN NOT ORDERING THE
CENTRAL AND THE PLANTERS, JOINTLY AND SEVERALLY, TO
ACCOUNT AND PAY FOR THE FAIR MARKET VALUE OF THE
SIX (6%) PER CENT SHARE OF THE LABORERS IN THE
PROCEEDS OF THE ANNUAL UNREFINED SUGAR PRODUCE
AS WELL AS ITS BY-PRODUCTS AND DERIVATIVES FOR THE
PERIOD BEGINNING NOVEMBER 1, 1955, WITH LEGAL
INTEREST THEREON COMMENCING FROM OCTOBER 31, 1956
UNTIL FULLY PAID
-IX-
RESPONDENT COURT ERRED IN FAILING TO CONSIDER AND
RESOLVE THE LABORERS' TWENTY-SEVENTH ASSIGNMENT
OF ERROR AND IN NOT IMPOSING UPON THE CENTRAL AND
THE PLANTERS, JOINTLY AND SEVERALLY, THE LIABILITY TO
PAY THE LABORERS BY WAY OF EXEMPLARY DAMAGES, TO
SET AN EXAMPLE FOR THE PUBLIC GOOD, THE SUM
EQUIVALENT TO AT LEAST TWENTY (20%) PER CENT OF ALL
THE AMOUNTS TO WHICH THE LABORERS MAY BE ENTITLED
-X-
RESPONDENT COURT ERRED IN REDUCING THE JOINT AND
SEVERAL LIABILITY OF THE CENTRAL AND THE PLANTERS
FOR CONTINGENT ATTORNEY'S FEES FROM THE STIPULATED
SUM EQUIVALENT TO TWENTY (20%) PER CENT OF ALL THE
AMOUNTS TO WHICH THE LABORERS MAY BE ENTITLED TO
A SUM EQUIVALENT TO TEN (10%) PER CENT THEREOF
On the other hand, VICTORIAS presents in its petition the following
so-called issues of substance and grounds for allowance of its petition:
1. Considering the attendant existence of written milling agreements
between petitioner Vicmico and the planters, which written milling
agreements were held to be legal and valid by the Court of Appeals, is
Republic Act No. 809 applicable in the case at bar?
2. In interpreting the phrase 'under this Act' appearing in Section 9 of
Republic Act No. 809, as embracing written milling agreements
executed subsequent to the effectivity of said law, did not the Court of
Appeals unauthorizedly and unfoundedly indulge in judicial legislation?
3. Assuming arguendo that the phrase 'under this Act' includes
subsequently executed written milling contracts providing for increased
participation on the part of the planters in the amount of 4%, on the
basis of which milling contracts the claim of the FFF et als. to 60% of
said 4% share' is founded, did not the Court of Appeals erroneously
hold, said Court acting contrary to law and to the facts and admissions
of the parties, that petitioner Vicmico is jointly and solidarily liable, on
the ground of tort, with the planters for said 60% of 4%?
4. May petitioner Vicmico be held jointly and solidarily liable for tort
for 60% of the 4% increased participation of the planters as provided for
the latter under the milling contracts, even in the absence of allegations
or evidence of acts constituting tort and notwithstanding the admitted
fact that petitioner Vicmico has, since November 1, 1955, regularly
delivered to the planters, as required by law and contract, said 4%
increase in participation?
5. May respondent Court of Appeals, on the basis of tort, validly hold
petitioner Vicmico jointly and severally liable with the planters (a) for
said 60% of the 4% increase in the planters' participation
notwithstanding the fact that FFF et als. did not proceed on the theory of
tort which had long prescribed, as admitted by FFF et als. but on the
basis of contract or obligations created by law, (b) as well as for alleged
causes of action that accrued subsequent to the filing on November 9,
1962 of the petition of the FFF et als., even in the absence of any
supplemental petition or amendment to the pleadings effected before
judgment?
6. Did not the Court of Appeals gravely abuse its discretion, said abuse
amounting to lack of jurisdiction when it awarded the laborers P
6,399,105.00, plus interest thereon at 6% and P180,769.38, plus interest
thereon at 6%, said awards allegedly representing the share pertaining to
the laborers from June 22, 1952 to October 31, 1955, - (a) in the face of
the laborers' admission that they had received their lawful participation
during said period; (b) in the face of any lack of allegation in the
petition concerning any cause of action relative thereto; (c) in the face
of the Court of Appeals' ruling that the amicable settlement is legal and
valid; and (d) in the face of the undeniable fact that, as per the very
evidence presented by the FFF, et als., Vicmico delivered all the
amounts pertaining to the laborers to the planters, and the laborers
actually received said amounts as demonstrated by Exhibit '23-
Vicmico'?
7. The petition of the FFF, et als. being essentially a suit for accounting,
considering that the amicable settlement and milling agreements are
valid and binding, as held by the Court of Appeals on the basis of facts
found by it, and considering, further, the evidence and admissions of the
parties to the effect that petitioner Vicmico complied with all of its
obligations thereunder, by delivering all of the increased share to the
planters, as required by law and contract, did not the Court of Appeals
manifestly err and grossly abuse its discretion in not taking the
foregoing matters into consideration and nevertheless holding petitioner
Vicmico jointly and severally liable with the planters?
8. In any event, is Republic Act No. 809, otherwise known as the 'Sugar
Act of 1952', constitutional?
9. Is the action filed by the laborers properly brought as a class suit?
10. Did the Court of Agrarian Relations have jurisdiction over the
subject matter of the laborers' suit at the time the same was filed on
November 9,1962?" (Pp 18-22, Rec., G.R. No. L-41222)
and the following assignment of errors:
 I PERIODS WHEN MILLING CONTRACTS EXIST BETWEEN THE
First Assignment of Error
THE COURT OF APPEALS ERRED IN HOLDING THAT REPUBLIC
ACT 809 IS APPLICABLE EVEN IN THE PRESENCE OF WRITTEN
MILLING AGREEMENTS BETWEEN THE CENTRAL AND THE
PLANTERS, SINCE THE PROVISIONS OF SAID ACT AS
CLEARLY STATED IN THE STATUTE ITSELF BECOME
OPERATIVE ONLY 'IN THE ABSENCE' OF WRITTEN MILLING
AGREEMENTS.
II
Second Assignment of Error
THE COURT OF APPEALS ERRED IN CONSTRUING THE
PHRASE UNDER THIS ACT EMBODIED IN SECTION 9 OF
REPUBLIC ACT NO. 809 AS INCLUDING OR EMBRACING
WRITTEN MILLING AGREEMENTS EXECUTED AFTER SAID
ACT TOOK EFFECT ON JUNE 22,1952, IN VIEW OF THE FACT
THAT THE EXPRESS IMPORT OF SAID PHRASE CLEARLY
EXCLUDES WRITTEN MILLING AGREEMENTS AND IN VIEW
OF THE CIRCUMSTANCE THAT THE APPLICABILITY OF
SECTION 9 IS DEPENDENT UPON THE ENFORCEMENT OF
SECTION I OF THE SAME LAW.
III
Third Assignment of Error
THE COURT OF APPEALS ERRED IN HOLDING THAT THE
LEGISLATIVE INTENT AND HISTORY OF REPUBLIC ACT 809
POINT TO NO OTHER CONCLUSION THAN THAT SECTION 9 OF
SAID ACT ALSO EMBRACES WRITTEN MILLING
AGREEMENTS, SINCE THE LEGISLATIVE INTENT AND
HISTORY DEMONSTRATE OTHERWISE AND CLEARLY SHOW
THAT SECTION 9 IS NOT AT ALL APPLICABLE DURING
CENTRAL AND THE PLANTERS.
IV
Fourth Assignment of Error
THE COURT OF APPEALS ERRED IN HOLDING THAT REPUBLIC
ACT 809 IS A PIECE OF SOCIAL LEGISLATION THAT
UNCONDITIONALLY AND EQUALLY GRANTS BENEFITS TO
LABORERS IN THE SUGAR INDUSTRY. SINCE SAID ACT IS
DISCRIMATORY, SAID SELECTIVE OR DISCRIMINATORY
FEATURE BEING MADE MORE MANIFEST BY THE
INTERPRETATION OF THE COURT OF APPEALS AS WELL AS
BY THE AMENDED RULES OF THE DEPARTMENT OF LABOR,
WHICH AMENDED RULES ARE NULL AND VOID AS
CONTRARY TO LAW.
V
Fifth Assignment of Error
ASSUMING ARGUENDO, THAT THE HONORABLE COURT OF
APPEALS CORRECTLY INTERPRETED REPUBLIC ACT 809 AS
APPLICABLE EVEN WHEN THE CENTRAL AND THE PLANTERS
HAVE SUBSEQUENTLY EXECUTED WRITTEN MILLING
AGREEMENTS, AS IN THE CASE AT BAR, THE COURT OF
APPEALS ERRED IN HOLDING PETITIONER VICMICO JOINTLY
AND SEVERALLY LIABLE WITH THE PLANTERS ON THE
BASIS OF TORT FOR 60% OF THE 4% INCREASED
PARTICIPATION OF THE PLANTERS AND FOR AMOUNTS
ALLEGEDLY DUE THE LABORERS FROM JUNE 22,1952 TO
OCTOBER 31,1955, SAID ERROR BEING EVIDENT IN VIEW OF
THE FACT THAT RESPONDENTS FFF ET ALS. DID NOT
PROCEED ON THE THEORY OF TORT BUT ON THE THEORY OF
CONTRACTS OR OBLIGATIONS CREATED BY LAW AND IN
VIEW OF THE FACT THAT SAID WRITTEN MILLING
AGREEMENTS HAVE NOT PROVIDED FOR ANY SOLIDARY
LIABILITY, THE TERMS OF SAID WRITTEN MILLING
AGREEMENTS HAVING, MOREOVER, BEEN FAITHFULLY
COMPLIED WITH BY PETITIONER VICMICO
VI
Sixth Assignment of Error
THERE BEING NO ALLEGATION OR PROOF OF ACTS
CONSTITUTING TORT OR EVEN CONSTITUTING ANY
VIOLATION OF THE WRITTEN MILLING CONTRACTS ON THE
PART OF PETITIONER VICMICO IN CONNECTION WITH THE
LABORERS CLAIM OF 60% OF THE 4% INCREASED
PARTICIPATION OF THE PLANTERS AND THERE BEING,
MOREOVER, NO AMENDED OR SUPPLEMENTAL PLEADINGS
FILED BY FFF ET ALS. INVOLVING ANY CAUSE OF ACTION
BASED ON TORT, THE COURT OF APPEALS ERRED IN
NEVERTHELESS HOLDING PETITIONER VICMICO JOINTLY
AND SEVERALLY LIABLE WITH PLANTERS, ON THE BASIS OF
TORT
VII
Seventh Assignment of Error
THE COURT OF APPEALS ERRED, IN ANY EVENT, IN NOT
HOLDING THAT ANY ACTION BASED ON TORTS HAS LONG
PRESCRIBED.
VIII
Eighth Assignment of Error
IN ANY EVENT, THE COURT OF APPEALS ERRED IN NOT
HOLDING THAT THE PLANTERS WERE THE AGENTS OF THE
LABORERS WHOSE CAUSE OF ACTION, IF ANY, FOR 60% OF
THE 4% INCREASED PARTICIPATION OR FOR THOSE
AMOUNTS PERTAINING TO 'THE PERIOD FROM JUNE 1952 TO
OCTOBER 31, 1955, SOLELY LIES AGAINST SAID PLANTERS AS
THEIR AGENTS. IN VIEW OF THE FACT THAT PETITIONER
VICMICO FAITHFULLY DELIVERED, AS ADMITTED BY THE
PARTIES AND FOUND BY THE HONORABLE COURT, ALL OF
SAID AMOUNTS TO THE PLANTERS WHOSE OBLIGATION, IN
TURN, WAS TO DISTRIBUTE TO THEIR RESPECTIVE
LABORERS THE LATTER'S SHARE.
IX
Ninth Assignment of Error
WITH REFERENCE TO THE AMOUNT OF P6,399,105.00 AND THE
AMOUNT OF P180,769.38, WHICH ACCRUED IN FAVOR OF THE
LABORERS FROM JUNE 22, 1952 TO OCTOBER 31,1955 WHEN
THERE WAS AS YET NO WRITTEN MILLING AGREEMENT, IN
VIEW OF THE FACT THAT THE LABORERS ADMITTED IN
THEIR PETITION THAT THE PLANTERS GAVE THEM THEIR
LAWFUL PARTICIPATION FROM JUNE 22,1952 TO OCTOBER
31,1955 AND THERE BEING, MOREOVER, NO ALLEGATION OF
ANY CAUSE OF ACTION RELATIVE THERETO, THE COURT OF
APPEALS ERRED AND ACTED WITH GRAVE ABUSE OF
DISCRETION WHEN IT HELD PETITIONER VICMICO AND THE
PLANTERS JOINTLY AND SEVERALLY LIABLE VIA TORT FOR
SAID AMOUNTS.
X
Tenth Assignment of Error
HAVING FOUND THE MILLING AGREEMENT AND THE
AMICABLE SETTLEMENT-COMPROMISE AGREEMENT (ASCA)
TO BE VALID, THE COURT OF APPEALS ERRED IN HOLDING
THAT PETITIONER VICMICO AND THE PLANTERS HAD NO
AUTHORITY TO STIPULATE IN SAID ASCA ON THE
DISPOSITION OF THE AMOUNTS PERTAINING TO THE
LABORERS FROM JUNE 22, 1952 TO OCTOBER 31,1955, THE
PLANTERS BEING THE AUTHORIZED AGENTS OF THE
LABORERS BY, AMONG OTHERS, HAVING RECEIVED ALL THE
AMOUNTS DUE THEM, HAVING MOREOVER RATIFIED SAID
ASCA.
 XI
Eleventh Assignment of Error
THE COURT OF APPEALS ERRED IN CONCLUDING THAT THE
LABORERS DID NOT RECEIVE THE AMOUNT OF P6,399,105.00
AND IN HOLDING, ON THE BASIS OF TORT, PETITIONER
VICMICO, JOINTLY AND SEVERALLY LIABLE WITH THE
PLANTERS THEREFOR, EXHIBIT 23-VICMICO CLEARLY
SHOWING ON ITS FACE THAT THE LABORERS ACTUALLY
RECEIVED A TOTAL OF P6,536,741.98 AND THE COURT OF
APPEALS HAVING FOUND THAT ALL AMOUNTS PERTAINING
TO THE LABORERS HAD BEEN RECEIVED BY THE PLANTERS,
THE FOREGOING DEMONSTRATING, AMONG OTHERS, THAT
PETITIONER VICMICO CANNOT BE ACCUSED OF ANY
TORTIOUS ACT.
XII
Twelfth Assignment of Error
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
PETITION OF FFF, ET ALS. IS ESSENTIALLY AN ACTION FOR
ACCOUNTING, SAID ACTION REQUIRING A PRIOR
DETERMINATION OF THE RIGHT TO ACCOUNTING AND THE
ACCOUNTING ITSELF, A SEQUENCE THAT HAS NOT BEEN
ADHERED TO BY THE COURT OF APPEALS WHEN IT ENTERED
A FINAL JUDGMENT FOR UNDETERMINED AND SPECIFIC
AMOUNTS, NOTWITHSTANDING FFF, ET ALS.' ABSENCE OF
ANY RIGHT TO ACCOUNTING AGAINST PETITIONER
VICMICO, THEIR RIGHT, IF ANY, BEING EXCLUSIVELY
AGAINST THE PLANTERS.
XIII
Thirteenth Assignment of Error
IN ANY EVENT, THE COURT OF APPEALS ERRED IN NOT
HOLDING THAT REPUBLIC ACT 809, OTHERWISE KNOWN AS
THE SUGAR ACT OF 1952, IS UNCONSTITUTIONAL.
XIV
Fourteenth Assignment of Error
THE COURT OF APPEALS ERRED IN HOLDING THAT THE
ACTION FFF, ET ALS. HAS BEEN IMPROPERLY BROUGHT AS A
CLASS SUIT.
XV
Fifteenth Assignment of Error
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
COURT OF AGRARIAN RELATIONS HAD NO JURISDICTION
OVER THE SUBJECT MATTER OF THE SUIT AT THE TIME THE
SAME WAS FILED ON NOVEMBER 9, 1962.
XVI
Sixteenth Assignment of Error
THE COURT OF APPEALS ACCORDINGLY ERRED IN NOT
ABSOLVING PETITIONER VICMICO FROM ALL OBLIGATIONS
(A) FOR 60% OF THE 4%, INCREASED PARTICIPATION OF THE
PLANTERS, (B) FOR P 6,399,105.00 AND P 180,768.38, AND (C)
FOR ATTORNEY'S FEES. (A to K of VICTORIAS' Brief)
On its part, as grounds relied upon for the allowance of their petition,
the PLANTERS submit that:
-A-
THE COURT OF APPEALS ERRED IN CONCLUDING THAT,
WHILE THE AGREEMENT BETWEEN THE CENTRAL AND THE
PLANTERS WITH RESPECT TO THE 64-36 SHARING BASIS IS
VALID, YET THERE MUST BE READ INTO IT THE PROVISO
THAT 60% OF THE INCREASE IN THE PARTICIPATION OF THE
PLANTERS SHALL PERTAIN TO THE PLANTATION LABORERS
IN ACCORDANCE WITH SECTION 9 OF REPUBLIC ACT NO. 809,
OTHERWISE KNOWN AS THE SUGAR ACT OF 1952.
-B -
THE COURT OF APPEALS ERRED IN HOLDING PETITIONER
PLANTERS JOINTLY AND SEVERALLY LIABLE, ON THE BASIS
OF TORT WITH CENTRAL NOTWITHSTANDING THE FACT
THAT IT FOUND THE ASCA PERFECTLY VALID AND NOT IN
CIRCUMVENTION OF THE LAW.
-C-
THE COURT OF APPEALS ERRED IN FINDING THAT THE
P4,000,000.00, OF THE P5,186,083.34, PERTAINING TO THE
SHARE OF THE PLANTATION LABORERS WITHIN THE
VICTORIAS MILL DISTRICT FROM JUNE 22,1952 TO OCTOBER
31, 1955, WAS NOT DISTRIBUTED TO THE SAID PLANTATION
LABORERS SIMPLY BECAUSE NEITHER THE CENTRAL, NOR
THE PLANTERS NOR THE SPECIAL COMMITTEE PRESENTED
EVIDENCE AS TO ITS DISTRIBUTION.
-D -
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
RESPONDENTS' PETITION IS NOT PROPER AS A CLASS SUIT.
-E-
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
COURT OF AGRARIAN RELATIONS HAD NO JURISDICTION
OVER THE SUBJECT MATTER OF THE SUIT AT THE TIME THE
SAME WAS FILED BY THE FFF, ET ALS. ON NOVEMBER 9,1962.
-F-
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
COURT OF AGRARIAN RELATIONS HAD NOT ACQUIRED
JURISDICTION OVER THE PERSONS OF THE PLANTERS WHO
WERE SERVED SUMMONS BY PUBLICATION, DUE TO
DEFECTIVE SERVICE OF SUMMONS BY PUBLICATION. (Pp. 33-
34, L-43153 Rec., Vol, 1.)
Petitioners Primo Santos and Roberto H. Tirol formulate their reasons
for their petition for review thus:
1. — The Hon. Court of Appeals failed to resolve a most important
question as to whether or not the lower court had acquired jurisdiction
over the persons of defendants-appellees Primo Santos and Roberto H.
Tirol due to defective service of summons by publication.
2. — The Sugar Act of 1952 (Rep. Act No. 809) may be interpreted as
not to preclude freedom of contract between the majority of the
plantation owners and the central; but the law should not later be
applied only in part as to benefit and favor the Central to the great
prejudice of both the plantation owners and the laborers.
3. — Defendant Primo Santos being a mere LESSEE, not the owner of
"Hda. Kana-an" and NOT having signed any milling contract with the
Victorias Milling Co., he should not be made jointly and severally liable
with the central and the plantation owners for acts and/or contracts in
which he had no part nor intervention whatsoever.
4. — There is no evidence that the individual planters, particularly the
defendants-movants herein had any knowledge of nor intervention in the
custody of the sum of P4,000,000 belonging to the plantation laborers
which was supposedly entrusted to a "Special Committee" of five (5)
members; and, therefore, they (the movants) should not be
adjudged jointly and severally liable for the alleged loss of such amount
and its increments. (Page 7, L- 43369 Rec.)
The foregoing numerous assignments of error supposedly committed by
the Court of Appeals would, if all of them were to be separately
considered, call for a very extended discussion, necessarily making this
opinion tediously long. But We have repeatedly received from all the
parties motions for early resolution of these cases, which although
relatively new in this Court, were indeed started in the Court of
Agrarian Relations, Bacolod Branch, more than eighteen (18) years ago.
And, considering they involve an enormous amount constituting, as it
were, another windfall for the least favored element - the farm laborers -
of the once prosperous sugar industry in Negros Occidental, We will
limit Ourselves to the fundamental and pivotal matters, and thus put
finis as briefly as possible, to this important controversy together with
all hardships its long pendency has entailed for all the parties concerned,
particularly the laborers.
Anyway, going carefully with detailed attention over the numerous
issues raised in the so-called grounds for allowance alleged by the
parties in their respective petitions, it would be readily noted, that most
of them deal with but a few fundamental issues, some of them, already
settled and determined, as a matter of fact, by this Supreme Court, in its
decision in a related case, that of Asociacion de Agricultores de Talisay-
Silay Inc. vs. Talisay-Silay Milling Co., Inc., 88 SCRA 294, and its
resolution of the motion for reconsideration thereof as reported in 89
SCRA 311. Indeed, in its second motion dated July 8,1980 for
promulgation of decision, the FEDERATION acknowledges expressly
that "the constitutionality of the Sugar Act of 1952 as well as the
construction and interpretation thereof" have been set at rest by Us in
said case. In the main, therefore, insofar as such basically similar and
resolved issues are concerned, We shall refer to them here already as
settled juridical premises whenever it should be proper to do so in
resolving the issues in these cases.
II
To set them forth briefly, among the issues in these instant cases, which
this Court has already resolved with finality in the Talisay- Silay case
are the following:
-A-
That Republic Act 809, as a social legislation founded not only on
police power but more importantly on the social welfare mandates of
the Constitution, is undoubtedly constitutional in all its aspects material
and relevant to the instant cases. We deem it would be a fruitless
exercise for Us to rediscuss and belabor that point here. Indeed, We find
the position of the Court of Appeals thereon to be well studied and
discussed and totally correct, being as they are substantially in line with
the pertinent considerations on the same point expressed in Our Talisay-
Silay decision.
-B-
Aside from upholding the constitutionality of Republic Act 809, We
further ruled in Talisay-Silay that the predicate or prerequisite of
absence of milling agreements for the application of Section 1 of the Act
does not refer exclusively to the expiration of the then existing contracts
(those that expired before the approval of the Act) but even to future
failure of centrals and planters to enter into written milling contracts;
that, therefore, there is nothing in the law that excludes the right of said
parties to enter into new contracts, and that in said new contracts, they
could provide for a ratio of sharing different from that stipulated in
Section I of the Act, provided, of course, that any increase of their share
in the proceeds of milling that the PLANTERS would get, 60% thereof
must be paid by them to their respective plantation laborers.
Suffice it, therefore, to refer, insofar as said issues are concerned, to the
decision of the Court of Appeals, which We hereby uphold, and to Our
own discourse thereon as well as Our construction of Section 1 thereof
regarding the freedom of the centrals and the planters to agree on how
they would share the proceeds of the milled sugarcane made in Our
decision of April 3, 1979 and resolution of February 19, 1979 earlier
mentioned above. Covered here by this adoption by reference and,
therefore deemed resolved in line with Talisay-Silay are the following
assignments of error of the parties hereto, an of which We have quoted
at the outset of this opinion:
A. I to V in the FEDERATION's brief in G.R.No.L-41161 in Federation,
etc., et al. vs. Court of Appeals, et al.;
B. Nos. 1, 2 and 8 of its so-called questions of substance and assignment
of errors I, II and IX, of VICTORIAS in G.R. No. L-41222 in Victorias
Milling Co., Inc. vs. Court of Appeals, et al.; and
C. Ground A of the PLANTERS in G.R. No. L-43153 in Planters,
Victorias Milling District vs. Court of Appeals, et al.
as well as the corresponding refutations thereof and counter-
assignments of the respective parties relative to the just-mentioned
assignments of error or grounds for allowance, but none of the points
raised by petitioners in Santos and Tirol vs. Court of Appeals, et al. G.R.
No. L-43369.
III
To facilitate understanding of the resolution of these cases, let it be
recalled that, as is more extensively discussed in the portions of the
decision of the Court of Appeals herein under to be quoted, previous to
the passage of Republic Act 809 or the Sugar Act of 1952, almost all
over the country, and particularly in the sugar milling districts of Negros
Occidental, the centrals practically dominated the economic fate of the
planters and the laborers of the latter. The common prevalent ratio of
sharing of the proceeds of the sugarcane milled by said centrals was
fixed at 40% for the centrals and 60% for the planters, both parties
dealing with and paying their respective laborers at rates which were
considered subnormal, so much so that President Manuel Quezon had to
appoint a committee headed by Chief Justice Manuel Moran to
investigate the economic and social conditions in the whole sugar
industry. As expected, the report recommended more effective measures
to ease the stranglehold of the centrals over the planters, and more
importantly, to ameliorate the conditions of labor, even to the extent of
utilizing police power steps for the purpose, if needed. Hence, the above
mentioned Sugar Act came into being .1
Section 1 thereof provides thus:
SECTION 1 In the absence of written milling agreements between the
majority of planters and the millers of sugar-cane in any milling district
in the Philippines, the unrefined sugar produced in that district from the
milling by any sugar central of the sugar-cane of any sugar-cane planter
or plantation owner as well as all by-products and derivatives thereof,
shall be divided between them as follows:
Sixty per centum for the planter, and forty per centum for the central in
any milling district the maximum actual production of which is not
more than four hundred thousand piculs: Provided, That the provisions
of this section shall not apply to sugar centrals with an actual production
of less than one hundred fifty thousand piculs;
Sixty-two and one-half per centum for the planter, and thirty-seven and
one-half per centum for the central in any milling district the maximum
actual production of which exceeds four hundred thousand piculs but
does not exceed six hundred thousand piculs;
Sixty-five per centum for the planter, and thirty-five per centum for the
central in any milling district the maximum actual production of which
exceeds six hundred thousand piculs but does not exceed nine hundred
thousand piculs;
Sixty-seven and one-half per centum for the planter, and thirty-two and
one-half per centum for the central in any milling district the maximum
actual production of which exceeds nine hundred thousand piculs but
does not exceed one million two hundred thousand piculs;
Seventy per centum for the planter, and thirty per centum for the central
in any milling district the maximum actual production of which exceeds
one million two hundred thousand piculs.
Complementing the above provision, Section 9 thereof provides for a
60/40 partition between the planters and laborers (60% for the laborers
and 40% for the planters) of any increase that the planters might obtain
under the Act. (Sec. 9 is quoted in the portion of the decision of the
Court of Appeals to be quoted on pages 25 and 26 hereof.)
In the wake of such legislation, litigations were started questioning the
constitutionality thereof, and among such cases was Talisay- Silay
which, as already stated, We have already decided. To reiterate, in that
case, We did not only uphold the statute's validity, We also held that the
Act was not intended to deprive the mills and the planters of the right to
divide the proceeds of the milled sugarcane in each district in the
proportion they might agree on, without regard to the ratios specified in
Section 1 of the Act, provided that any increase that the planters might
be given, as expected in consequence of the implicit compulsion of the
law, has to be shared by them with their respective laborers in their
plantations, whether owned or leased by them, in the proportion of 60%
for said laborers and 40% only for them. Nothing in the pleadings and
the briefs of the parties in the instant cases persuades Us to rule
otherwise. In fact, at the request of the FEDERATION, We already had
occasion to go over the main points raised by it here, when they asked
Us to consider in deciding that case their arguments in their brief filed
with the Court of Appeals, copy of which was furnished Us. The
decision of this case must then be predicated fundamentally on the
Talisay-Silay rulings insofar as they may be pertinent here.
We can now, therefore, proceed to discuss the aspects of the cases that
require disquisition and disposal.
IV
To start with, the PLANTERS, VICTORIAS and SANTOS-TIROL
impugn the jurisdiction of the Court of Agrarian Relations, 11th
Regional District, Branch I Bacolod City, in taking cognizance of this
case, with SANTOS and TIROL contending that since this is an
action in personam, service to them by publication is invalid, hence, the
trial court did not acquire jurisdiction over their person; even as
VICTORIAS and PLANTERS maintain that not all the planters'
members have been properly summoned, considering that some of them
were served summons only also by publication.
We are not going to tarry long on these two points of jurisdiction. We
are sufficiently convinced that, by and large, Sections 1 and 7 of
Republic Act 1267, which created the Court of Agrarian Relations,
providing that:
SEC. 1. Creation. — For the enforcement of all laws and regulations
governing the relation of capital and labor on all agricultural lands
under any system of cultivation, there is hereby created a court of
Agrarian Relations, which shall be under the executive supervision of
the Department of Justice.
xxx xxx xxx
SEC. 7. Jurisdiction of the Court. - The Court shall have original and
exclusive jurisdiction over the entire Philippines, to consider and
investigate, decide and settle all questions, matters, controversies, or
disputes involving all those relationships established by law which
determine the varying rights of those persons in the cultivation and use
of agricultural land where one of the parties works the land; Provided,
however, that cases pending in the Court of Industrial Relations upon
approval of the Act which are within the jurisdiction of the Court of
Agrarian Relations, shall be transferred to, and the proceedings therein
continued in, the latter court.
and which was the law at the time of the filing of the FEDERATION's
suit on November 10, 1962, contemplated the transfer from the Court of
Industrial Relations, established under Commonwealth Act No. 3, to the
Court of Agrarian Relations of all controversies of whatever nature
involving agricultural laborers, particularly those referring to the
employer-employee relationship with their respective employers, which
naturally include the sugar planters and their plantation workers. (Santos
vs. C.I.R., 3 SCRA 759.) Hence, it cannot be said that the trial court, the
Court of Agrarian Relations of Bacolod City, had no jurisdiction to take
cognizance of the vital petition that spawned the instant cases before Us.
V
Also, considering the number of laborers involved herein, We hold that
it cannot be seriously argued that the trial court erred in holding that the
laborers and/or the FEDERATION had properly initiated their action as
a class suit, it being a matter of common knowledge that "the subject
matter of the controversy (herein) is one of common or general interest
to persons - (so) numerous that it is impracticable to bring them all
before the court," and after all, it appears that "the parties actually
before (the trial court were) sufficiently numerous and representative, so
that all interests concerned (were) sufficiently protected." (Sec. 12, Rule
3.)
Anent the plaint of the PLANTERS that since not all the 422 individual
planters named respondents in the amended petition filed below were
personally or by proper substitute form of service served with summons,
the court did not acquire jurisdiction over the persons of all the planters
concerned, suffice it to say that the record shows that at the hearing of
December 14, 1967 in the court below, there was the following
clarification of the PLANTERS' appearance:
Atty. SOTO:
Attys. Sanicas and Soto appearing for Planters' Association.
ATTY. SABIO
Do I understand that Attys. Soto, Banzon and Associates represent the
members of the Victorias Mill District Planters' Association, Inc.?
ATTY. SOTO:
Those planters who are respondents in this case as well as planters
which (sic) are not duly represented by counsel, who are not present in
court. (t.s.n. pp. 5-6)
We understand this manifestation to mean that Atty. Soto assumed
representation presumably with due authority of all the planters in the
district. In any event, the filing of the FEDERATION's petition must
have been well known or was of public knowledge in the Victorias
milling district and We believe that all the rest of the planters not here
mentioned by name were as much concerned as the latter and may be
deemed to have felt that all of them would eventually have the same
fate. Besides, it is Our impression that the interests of all the planters
concerned cannot be better presented and defended than by how the
PLANTERS have done in these cases before Us now. In view whereof,
We consider it rather superfluous to cite any authorities for a holding, as
We do hold, that the persons of all the planters in the Victorias Mill
District had been properly placed within the jurisdiction of the trial
court. (Aguilos vs. Sepulveda, 53 SCRA 269.)
Moreover, the issues of jurisdiction just discussed may be considered as
resolved by the provisions of the law reorganizing the Courts of
Agrarian Relations, under which technical rules have hardly any force
or applicability, and considering that the acquisition of jurisdiction over
the persons of defendants is an adjective matter, this significant
modification of the procedural rules in the Court of Agrarian Relations
from which these cases originated may be given retroactive effect. (See
Presidential Decree 946, Sec. 16.)
VI
Coming now to the real meat of the problem before Us, which is the
question of how much money the laborers belonging to the
FEDERATION should be paid by the PLANTERS and/or VICTORIAS,
corresponding to all the years from the passage of Republic Act 809 up
to November 1974 (which is the year both parties seemingly are agreed
the factual premises of further controversy among them came to an end
due to shortage of production), it should be helpful for a deeper insight
into the issues between the parties to quote pertinent portions of the
decision of the Court of Appeals. According to said court:
Section 9 of the Sugar Act provides as follows:
SECTION 9. In addition to the benefits granted by the Minimum Wage
Law, the proceeds of any increase in the participation granted the
planters under this Act and above their present share shall be divided
between the planter and his laborer in the plantation in the following
proportion:
Sixty per centum of the increased participation for the laborers and forty
per centum for the planters. The distribution of the share corresponding
to the laborers shall be made under the supervision of the Department of
Labor.
The benefits granted to laborers in sugar plantations under this Act and
in the Minimum Wage Law shall not in any way be diminished by such
labor contracts known as "by the piece", "by the volume, "by the area",
or by any other system of "pakyaw", the Secretary of Labor being
hereby authorized to issue the necessary orders for the enforcement of
this provision.
The petition in the lower court alleged that, while pursuant to Section 9
of the Act. as above quoted, "respondents PLANTERS gave to
petitioners LABORERS the latter's participation in the sugar production
as well as in the by-products and derivatives thereof and continued to
give the same until November 1, 1955", they "ceased to do so until the
present ," (par. 10, petition). It likewise charged that 'with evident intent
to evade compliance with said Act and to the grave prejudice of the
laborers, some of the respondents PLANTERS and respondent
CENTRAL prepared and executed a General Collective Sugar Milling
Contract sometime in March, 1956', (par. 11, petition) the substance of
which is discussed, supra. Appellants forthwith prayed for a judgment:
declaring the applicability to the Victorias Mill District of the sharing
participation prescribed by the Act, starting with the 1955-1956 crop
year; ordering Central and/or Planters to pay Appellants' lawful share in
the production beginning the crop year 1955- 1956, plus legal interests
thereon; awarding exemplary damages in an amount that the Court may
deem sufficient; and granting attorney's fees of 20% of whatever
amount the Appellants might be entitled to.
Denying material allegations of the petition, respondent Central, in its
answer, claims in substance that petitioners did not have any cause of
action against it since it had existing written milling agreements with
respondent Planters, and Republic Act 809 is applicable only in the
absence of written milling agreements. As special defenses, it advanced
the propositions that the lower court had no jurisdiction over the
subject-matter of the action at the time of the filing thereof prior to the
effectivity of the Land Reform Code; that Republic Act 809 is
unconstitutional; that appellant Federation of Free Farmers has no legal
authority and capacity to intervene in the action; and that the action was
not proper for a class suit. It likewise filed a counterclaim for attorney's
fees in the amount of P 20,000.00, alleging that the action instituted
against it was clearly unfounded.
On their part, respondent Planters, in answers filed singly or in groups,
substantially echoed Central's defenses, adding, however, that should
judgment be rendered against them, they should be entitled to
reimbursement from Central.
Assuming jurisdiction over the action, recognizing the personality of the
respondent Federation of Free Farmers, and considering the case as
proper for a class suit, the lower court, after hearing, relying principally
on the interpretation of Section 1 of Republic Act 809 that the law
applies only in the absence of written milling agreements, dismissed the
petition, having found that written milling agreements do exist between
respondent Central and respondent Planters, the dispositive portion of
the decision, dated December 14, 1970, reading as follows:
IN VIEW OF THE FOREGOING PREMISES, judgment is hereby
rendered, dismissing this case as it is hereby ordered DISMISSED,
without pronouncement as to cost.
The matter now before this Court is the appeal taken by the petitioners
from the decision referred to. Respondents Central and Planters did not
interpose any appeal
In their appeal, appellants ventilate twenty-eight assignments of error
(pp. 67 to 77, Appellant's Brief). These, however, may be reduced to the
following issues, namely:
First: Whether, as held by the lower court, the existence of written
milling agreements between Central and Planters (Exhibits XXX thru
XXX-6; YYY thru YYY-7, and SSS thru SSS-28 and ZZZ thru ZZZ-7)
renders inapplicable the operation of Republic Act 809;
Second: Whether, as appellants' claim these milling agreements have
been entered into in circumvention of Republic Act 809 and are, for that
reason, void ab initio; and
Third; Whether, Central and Planters misappropriated money belonging
to appellants amounting to million of pesos.
We find substantial merit in the appeal. On the basis of the historical
facts bearing upon the case, we find the decision of the lower court in
error.
For, historically, the facts that triggered the enactment of Republic Act
809 and the case at bar are as follows:
In 1918, 1919, and 1920, Central and Planters executed 30-year milling
agreements under which the former was to receive 40% and the latter
60% of the proceeds of sugarcane produced and milled in the Victorias
Mill District in Negros Occidental. As early as the 1930's, however,
agitations were already made to increase the participation of the
Planters. Planters sought to justify their demands upon the claims that
there was too great a disparity in profits in favor of Central and that the
increase was necessary to improve the condition of their plantation
laborers.
The situation in the sugar industry at the time was such that on February
23, 1938, President Manuel L. Quezon appointed Chief Justice Moran
of the Supreme Court as Special Investigator to study the 'alleged
inequitable distribution of sugar resulting from the milling of sugarcane
between the centrals and the plantations, with a view to ameliorating the
condition of the planters' laborers'. On April 30, 1939, Justice Moran, in
his report, verified the disparity and observed that unless the
participation of the planters were increased, they could not be made to
ameliorate the condition of their plantation laborers.
Moran's investigations were followed up by similar ones conducted by
the National Sugar Board created by President Quezon under Executive
Orders Nos. 157 and 168, and the Board's findings confirmed those of
Justice Moran's according to its report of August 2,1939.
On June 7, 1940, Commonwealth Act No. 567 took effect. Noting the
great disparity in the proportion of benefits "being received from the
industry by each of its component elements", it declared it to be a
'national policy to obtain a re-adjustment of the benefits derived from
the sugar industry by the component elements thereof — the mill the
landowner, the planters of the sugarcane, and the laborers in the factory
and the field.'
The years during World War Il may have momentarily stilled and
agitations for the increase, but during the Second Congress of the
Republic the same were resumed with vigor. Four bills were filed, three
in the House and one in the Senate, all entitled "An Act To Regulate the
Relations between Planters and Millers of Sugarcane". After a series of
amendments, the Senate version (SB No. 138) was finally sent to
President Quirino who, however, vetoed the same on grounds, among
others, "that the bill contains no provisions granting to the laborers a
share in the increased participation of the planters nor does it expressly
require the latter to improve the lot of their laborers".
On January 15, 1951, House Bill No. 1517 (which ultimately became
Republic Act No. 809) entitled 'An Act To Regulate the Relations
Among Persons Engaged in the Sugar Industry', was introduced to
remedy the presidential objections to the vetoed SB No. 138. The
remedy introduced by HB No. 1517 was in the form of its Section 10
(which was amended later to become Section 9 of Republic Act 809)
providing, in essence, that 60% of any increase in participation granted
to planters under the Act 'above their present share' should go to their
plantation laborers.
In the meantime, Planters, on the one hand, and Central, on the other,
were locked in a tug-of-war, the former continuing the demand for
increase, the latter insisting in refusing to grant any. Meanwhile, a new
element had entered into the dimensions of the controversy: the Planters
now contended that new written milling agreements should be
concluded because their 30-year contracts with Central had already
expired. Central countered with the argument that its contracts were still
in force although the 30-year period may already have run out, because
6 years had to be excluded from the computation of the 30-year period
for the reason that during 4 of the 6 years, the mills were not in
operation because of the Japanese occupation, and during the last 2
years of the 6, the mills had to be reconstructed and rehabilitated so that
the mills were not in operation either. As the conflict continued
unresolved, with Central adamant in its position not to offer any
increase in Planters' participation the expiration of the preferential
treatment of sugar in the American market was fast approaching:
beginning July 4, 1954, graduated customs duties were going to be
taxed on Philippine sugar. There was therefore, in the language of
Section 1 of the sugar bills deliberated on in Congress on May 9, 1950,
a need 'to insure the maximum utilization of the benefits of preferential
treatment for the Philippine sugar in the American market for the few
remaining years.
The need for increasing the planters' participation, the approaching
expiry date of the preferential treatment of Philippine sugar in the
American market, the impasse between Central and Planters despite the
termination or near termination of their 30- year written milling
contracts, and the need for Congress to step in and pass a sugar law,
found expression in the 'Explanatory Note' of House Bill No. 1517
introduced on January 15, 1951, thus:
The necessity for increasing the share of the planters and the laborers in
the income derived from the sugar industry for its stabilization is not a
new question but an admitted fact even before the outbreak of World
War II.
On February 23, 1938, President Quezon appointed Justice Manuel V.
Moran to make a study of the distribution of sugar resulting from the
milling of sugarcane between the centrals and the planters with a view
to ameliorating the condition of the planters "laborers", and after an
exhaustive investigation covering several months, Justice Moran filed
his report on April 30, 1939, recommending the increase in the
participation of sugar planters, even in violation of existing milling
contracts, contending that such a law is constitutional as a valid exercise
of the police power of the state. The National Sugar Board created by
Executive Orders Nos. 157 and 168, which made another investigation
of the sugar industry, in its report to the President of the Philippines on
August 2, 1939, confirmed practically the findings of Justice Moran.
Five crop years after liberation find the Philippine sugar industry still
behind its production allotment. In the meantime, only three more years
of preferential treatment in the American market remain.
Serious as the situation is, it is further aggravated by the fact that a
determined struggle continues between millers and planters. Most of the
milling contracts are due to expire next year, if they have not already
done so. Recently, a serious crisis faced the industry when planters of
the Victorias-Manapla district with a quota of 1,711,235.11 piculs
declared a sit-down strike, refusing to mill their canes due to the
obstinate refusal of the central to discuss terms for a new milling
contract. It is feared that with this antecedent, the disagreement between
the millers and planters will lead to more serious disruption of the
industry and ultimately to a complete paralization of production. The
dispute as to the ownership of the sugar quota has already reached our
Courts.
It is therefore believed that national interest requires that Congress
should take immediate steps to save or promote an industry, which is not
only a source of livelihood for many millions of Filipinos but is also one
of our most important dollar producing industries. Our country can ill
afford to waste time in long-drawn out disagreements and litigations
between millers and planters with only three more years of free
American trade under the terms of the PhilippineTrade Act of 1946.
The present bill seeks to avoid fatal controversies in the sugar industry
by determining the respective share of millers and sugar cane planters in
the absence of milling agreements, on the pattern set by the Rice Share
Tenancy Act, the constitutionality of which has been already upheld and
on the basis of the declarations of emergency and national interest made
in Act No. 4166. Commonwealth Act No. 567, and Republic Act No.
279.
This bill is also in harmony with the recommendation of the Bell Report
for the improvement of the living condition of the laboring class by
providing higher wages therefor. This bill does not violate existing
milling agreements between planters and millers of sugar-cane as its
provisions are only applicable in the absence of such milling contracts.'
Notwithstanding the facts faithfully reflected in the aforequoted
'Explanatory Note' to HB 1517, Central and Planters still had not
entered into new written milling contracts, and there were no prospects
that such contracts would soon be entered into. In fact, on June 16,
1952, Planters went to court in Civil Case No. 16815 filed with the
Manila Court of First Instance praying that a judgment be rendered
declaring their 30-year written milling agreements with Central
terminated.
Under this air of extreme uncertainty and necessity, Congress approved
HB 1517 to become law as Republic Act 809 on June 22, 1952.
Under this law, Planters claimed, the Victorias Mill District fell in the
category of districts producing, 1,200,000 piculs or more. By
prescription of its Section 1, Central would have a share of 30% and
Planters, 70%. Since, before June 22, 1952, Planters had a participation
of only 60% while Central had 40% , and since, under their contention,
their 30-year milling contracts had already expired. Planters demanded
that Central, pursuant to the new law, give them an increase equivalent
to 10% over their previous 60% participation.
On July 1, 1952, however, Central replied to Planters (Exhibit N-14):
We refer to your letter of June 25, 1952.
We reiterate our opinion that our milling contracts have not yet expired,
and that we are under no obligation to deliver to the planters the
increased participation of 70% provided in the Sugar Act of 1952.
On the other hand, there is pending in the Court of First Instance of
Manila (Case No. 16815), the action instituted by you against our
Company for a declaratory judgment as to whether or not our milling
contracts have already expired.
In view of the foregoing, we suggest matters be held in abeyance until
final judgment is rendered in the said case No. 16815.
Notwithstanding this reply, Central beginning June 22, 19,52. set
aside a "reserve" of 10% as a precautionary measure to take care of
Planters' demand just in case it had to glue that 10% increase.Central,
however, did not actually give it to. Planters; it merely set it aside for
future disposition, "because", explained Central's treasurer-comptroller,
"apparently there was no milling contract at that time and the company
was afraid to incur liability under Republic Act 809 and therefore the
company set aside every year 10%" (tsn., August 14, 1969, p. 6).
On April 19, 1954, Central filed an action (Exhibits H to H- 12) against
Planters in Civil Case No. 22577 asking the Manila Court of First
Instance to declare Republic Act 809 unconstitutional.
In the meantime, on March 19, 1953, the Manila Court of First Instance,
in Civil Case No. 16815 brought by Planters (Exhibits F thru F-22)
decided that the 30-year milling contracts had indeed expired in 1951, at
the latest, or before June 22, 1952. On appeal, this decision was
affirmed by the Supreme Court in G. R. No. L- 6648 dated July 25,
1955 (Exhibits G-1 thru G-6).
On December 14, 1955, some 20 months after filing Civil Case No.
22577, Central filed a motion (Exhibit U) alleging that negotiations
were in progress for the amicable settlement of its differences with
Planters. On February 25, 1956, similar motions (Exhibit V) were filed
by both Central and Planters manifesting to the court that such
negotiations were going on and that there was probability that they
would reach an amicable settlement.
On March 5, 1956, Central and Planters executed the controversial
'Amicable Settlement-Compromise Agreement' (Exhibits XXX thru
XXX-6).
On April 23, 1956, Central and Planters filed a manifestation (Exhibit
Y) to the effect that they had already compromised and settled their
differences, but that the execution by the majority of Planters of their
new individual sugar milling contracts had not yet been completed, and
that as soon as this was done, Central would ask for the dismissal of
Civil Case No. 22577.
On May 2, 1956, three persons, planters themselves (the spouses Jose V.
Coruña and Jesusa Rodriquez, and Felipe L. Lacson), filed a "Motion
for Intervention" (Exhibits Z thru Z-19) in which they attacked the
"Amicable Settlement-Compromise Agreement" (referred to hereafter as
ASCA for convenience), as a circumvention and violation of Republic
Act 809 because it eliminates the share of the laborers, from November
1, 1955 to October 31, 1974.
On May 5, 1956, the Secretary of Labor filed a manifestation (Exhibits
AA thru AA-1) adopting the allegations of the three planters' motion for
intervention, and assailing the ASCA as being contrary to law because it
totally deprives the plantation laborers of the benefits granted them by
Republic Act 809 for the period commencing November 1, 1955 up to
the end of the 1973-1974 crop milling season, and because, with respect
to the period from June 22, 1952 to October 31, 1955, their share is not
being disposed of in accordance with the provisions of republic A ct
809.
On May 28, 1956, another group of 6 laborers filed a motion (Exhibits
BB thru BB-17) with the court, likewise attacking the ASCA as a
'device by which the petitioner and a majority of the planters seek to
circumvent the provisions of the Sugar Act of 1952, and conniving and
confabulating together thereby denying to labor its just rights granted
them by the said law'.
On June 4, 1956, almost three months to the day from the execution of
the ASCA on March 5, 1956, Central filed with the court, in Civil Case
No. 22577, a 'Petition for Provisional Dismissal' (Exhibit FF-2).
On June 8, 1956, the 3 planters earlier referred to file an opposition
(Exhibits II thru II-3) to the petition for provisional dismissal.
On the same date, June 8, 1956, the Secretary of Labor filed a similar
opposition (Exhibits JJ thru JJ-10), assailing the ASCA sharing of the
sugar between Planters and Central at 64% and 36%, respectively, with
nothing going to the plantation laborers, as being contrary to Section 1
of Republic Act 809 which had increased Planters' participation from
60% to 70%, representing an increase of 10% and to Section 9 of the
Act which grants the plantation laborers a participation of 60% of such
10% increase.
On June 22, 1956, the Manila Court of First Instance denied the motions
for intervention and dismissed Civil Case No. 22577, without prejudice,
from which denial and dismissal (Exhibits KK thru KK-6) the Secretary
of Labor, the three planters, and the six laborers referred to above, took
an appeal to the Supreme Court. In G. R. No. L-11218 (Exhibit UU-1)
the Supreme Court dismissed the appeal on November 5, 1956.
As is readily evident from the foregoing recital of facts, the major bone
of contention between the appellants, on the one hand, and the
appellees, on the other, consists in the "Amicable Settlement-
Compromise Agreement" (Exhibits XXX thru XXX-6, hereafter
referred to as the ASCA for convenience) executed on March 5, 1956 by
Central, on the one hand, and Planters, on the other, and reproduced in
substance in the "General Collective Sugar Milling Contract" (Exhibits
YYY thru YYY-7) and the 'Individual Sugar Milling Contracts'
(Exhibits SSS thru SSS-28 and ZZZ thru ZZZ-7). For a deeper insight
into the conflicts that divide the parties to this case, the ASCA is
hereunder reproduced in full as follows:
AMICABLE SETTLEMENT-COMPROMISE
AGREEMENT
This document, executed by
VICTORIAS MILLING COMPANY, INC., a corporation organized and
existing under the laws of the Philippines, and domiciled in the City of
Manila (hereinafter referred to as the 'COMPANY') represented herein
by its President, Carlos L. Locsin, of age, Philippine citizen, married,
and resident of the Province of Negros Occidental. as Party of the First
Part.
-and-
VICENTE F. GUSTILO, JESUS SUAREZ, SIMON DE PAULA,
FERNANDO J. GONZAGA and JOSE GASTON, of age, Philippine
citizens, married, and residents of the Province of Negros Occidental,
and duly authorized to execute this document by the sugarcane planters
affiliated with the COMPANY, (hereinafter referred to as the
'PLANTERS') as Party of the Second Part;
WITNESSETH: That
WHEREAS, long before the war in 1941 the COMPANY and NORTH
NEGROS SUGAR CO., INC., (a domestic corporation, domiciled in the
City of Manila, whose obligations were assumed by the COMPANY)
and several sugarcane planters in Manapla, Cadiz and Victorias, Negros
Occidental, entered into, and executed, sugar milling contracts which
have already expired;
WHEREAS, on June 22,1952, Republic Act 809 was passed;
WHEREAS, prior to June 22, 1952, the sugar manufactured by the
Party of the First Part from the sugarcane delivered to it by the planters
affiliated with the COMPANY was divided between the COMPANY
and the PLANTERS on a 40-60 basis, respectively, pursuant to the
aforementioned sugar milling contracts;
WHEREAS, after the passage of said Republic Act 809 the PLANTERS
made a demand on the COMPANY for a division of the sugar and by-
products manufactured by the COMPANY from the sugarcane delivered
to it by the PLANTERS from and after said date, June 22, 1952, on a
basis of 70-30, for the PLANTERS and the COMPANY, respectively,
under the provisions of said Republic Act 809;
WHEREAS, the COMPANY denied said demand made by the
PLANTERS;
WHEREAS, the COMPANY has heretofore filed a petition in the Court
of first Instance of Manila for a declaratory judgment declaring
Republic Act 809 unconstitutional and invalid, and for other relief,
which petition was opposed by the PLANTERS
WHEREAS pending the determination of the action or petition above-
mentioned, the COMPANY, as an accounting precautionary measure,
has, since the enactment of Republic Act 809, annually set aside a
reserve corresponding to the disputed TEN PERCENT (10%) increase
in participation demanded by the planters under said Republic Act 809;
WHEREAS , the COMPANY and the PLANTERS desire to avoid a
prolonged litigation and amicably settle and compromise their
differences, and enter into, and execute new sugar milling contracts
WHEREAS, a "Special Committee" herein accepted and recognized by
the Party of the First part, has been created by the PLANTERS for the
purpose of effectuating the present amicable settlement and
compromise, which 'Special Committee' is composed of the five (5)
sugarcane planters hereinabove mentioned, executing this agreement as
"Party of the Second Part",
NOW, THEREFORE, the COMPANY and the PLANTERS affiliated
with it, the latter being represented herein by the Party of the Second
Part, hereby agree to amicably settle and compromise, and do hereby
amicably settle and compromise, all their differences, as follows:
(l) The PLANTERS shall execute the "General Collective Sugar Milling
Contract" as well as supplemental new individual sugar milling
contracts, effective November 1, 1955, the sugar and by-products
manufactured by the COMPANY from the sugarcane delivered to it by
the PLANTERS to be divided between them, SIXTY-FOUR PER
CENT (64%) for the PLANTERS and THIRTY SIX PER CENT (36%)
for the COMPANY;
As to the sugar and molasses manufactured by the COMPANY from
June 22, 1952 (the date of the passage of Republic Act 809), to October
31, 1955, (the end of the COMPANY's fiscal year), the COMPANY
suggested to divide the same on a 65-35 basis, SIXTY-FIVE PER
CENT (65%) for the PLANTERS and THIRTY- FIVE PER CENT
(35%) for the COMPANY, as part of a 65-35 milling contract to begin
June 16, 1952, and to end with the 1973-1974 crop milling year, on the
same basis of participation. But as the COMPANY and the PLANTERS
failed to reach an agreement thereon the COMPANY agrees to reduce
its share or participation to 30, in favor of the PLANTERS, for the said
period of June 22, 1952-October 31, 1955, and the PLANTERS, in turn
agree to reduce their share or participation to 64, in favor of the
COMPANY, for the period commencing November 1, 1955, to the end of
the 1973-1974 crop milling season, that is, October 31, 1974, and the
COMPANY, upon all the PLANTERS affiliated with it executing their
new individual milling contracts shall pay them the total value of the
reserve referred to in the seventh "WHEREAS' clause now amounting to
P 8,643,472.24, as follows:
(a) The Party of the Second Part shall set aside Sixty Per Cent (60%) of
the said sum of P8,643,472-24 as received by them to be held in trust
for the benefit of their laborers that may be entitled thereto because
some of them have already died and their heirs are unknown while a
great number of them are hard to locate and Identify, the Party of the
Second Part, shall dispose of the said Sixty Per Cent (60%) of the sum
of P8,643,472,24 as received by them as follows:
(b) The Party of the Second Part shall invest P4,000,000.00 of the
P5,186,083.34, w``hich is Sixty Per Cent (60%) of the said sum of
P8,643,472.24, in 40,000 voting and transferable shares of capital stock
of the COMPANY of the par value of P 100.00 per share which shall be
issued in four (4) blocks of 10,000 shares per block by the COMPANY
to the Party of the Second Part upon effectivity, of this agreement as
provided in Clause (2) hereof, it being understood that the issuance of
such shares does not involve an increase in the present authorized
capitalization of the COMPANY.
The above-mentioned 40,000 shares of the capital stock of the
COMPANY will enable the laborers/planters to become part owners of
the COMPANY but if within the period of eighteen (18) months, but not
earlier than six (6) months, from and after date of delivery of the said
40,000 shares by the COMPANY to the Party of the Second Part, the
Party of the Second Part should desire to have the value of the said
40,000 shares to wit, P4,000,000 00, or such portions thereof in blocks
of 10,000 shares at P1,000,000.00 per block, paid in cash, the
COMPANY will pay in cash to the Party of the Second Part or its
successors the said value of the said 4O,000 shares or of such blocks of
10,000 shares per block, as the Party of the Second Part may decide to
have converted into cash as to such blocks of 10,000 shares per block,
that the Party of the Second Part may retain such shares may be
retained by the PLANTERS for their own account upon their payment to
the Party of the Second Part or its successors of the value thereof of P
l,000,000.00 per block. The COMPANY shall have a period of Thirty
(30) days after receipt of written request of the Party of the Second Part
within which to make such cash payment of the value of the shares.
The balance of P l,186,083.34 shall be distributed under the supervision
of the Secretary of Labor among the present laborers of the party of the
Second Part who were already laborers of the PLANTERS during the
period comprised between June 22, 1952 (the date of the passage of
Republic Act 809) and October 31, 1955 (the end of the COMPANY's
fiscal year);
(ii) As to the sum of P 3,457,388.90, which is the Forty Per Cent (40%)
of the P8,643,472.24, the Party of the Second Part shall distribute this
amount among the PLANTERS in proportion to the sugar milled for
them by the COMPANY during the aforementioned period of June 22,
1952, to October 31. 1955.
(b) As to the manner of delivery of the cash involved in the foregoing
transaction amounting to P 4,643,472.24, a "General Collective Sugar
Milling Contract" has heretofore been prepared for the signature of the
PLANTERS affiliated with the COMPANY signing the said "General
Collective Sugar Milling Contract", the COMPANY shall pay and
deliver to the Party of the Second Part at least fifty per cent (50%) of the
said cash balance of P4,643,472.24 or that portion thereof
corresponding to the said majority of the PLANTERS affiliated with the
COMPANY who have already signed the said "General Collective
Sugar Milling Contract", and the remaining fifty per cent (50%) or
remainder thereof will be paid, one half upon the execution of their new
individual sugar milling contracts, and the other half upon the
registration thereof in the Office of the Register of Deeds for the
Province of Negros Occidental;
(c) It is understood, as part of this settlement agreement, that the block
of the COMPANY's common shares mentioned in sub- paragraph (i)
and all its earnings shall constitute a trust fund to be dedicated to the
amelioration of the plantation laborers of the PLANTERS in the
Victorias-Manapla-Cadiz milling district Said trust fund shall be
administered by the Party of the Second Part for the benefit of the
PLANTERS' laborers under the supervision of the Secretary of Labor
and in accordance with the trust laws of the Philippines. Should the trust
fund be liquidated by order of the Court of justice or in the manner
provided for in paragraph (1) (a) (i) then the PLANTERS shall have the
first option from the trustees, and the COMPANY the second option
from the trustees and or from the planters themselves to buy said
Victorias Milling Co., Inc, shares in blocks of 10,000 shares at their
value of P 1,000,000.00 per block. And in case both the Party of the
First Part and Party of the Second Part refuse to exercise their right, then
said block of VMC shares may be sold in. the open market'
(2) This agreement will become effective if and when the majority of
the planters affiliated with the Party of the First Part have signed the
said "General Collective Sugar Milling Contract".
Executed at Victorias, Negros Occidental, this 5th day of March, 1957.
VICTORIAS MILLING CO., INC.
By:
 (Sgd.) CARLOS L. LOCSIN court's judgment, the Court went on to say that appellants (meaning the
CARLOS L. LOCSIN laborers represented by the FEDERATION) ventilate twenty-eight
President assignment of errors giving rise, in that Court's view to the three issues
(Party of the First Part) it enumerated. (supra) The point We want to clarify as early as at this
juncture is that it is at once evident that technically, the second and third
(Sgd.) VICENTE F. GUSTILO issues referred to cannot be deemed to contemplate any question beyond
VICENTE F. GUSTILO those raised in the petition, namely, the non-payment of the laborers'
share in the proceeds of production after November 1, 1955. Whatever,
(Sgd.) JESUSSUAREZ therefore, might have been covered by the FEDERATION's twenty eight
JESUS SUAREZ assignment of errors in respect to matters before November 1, 1955
were obviously new matter, and could be resolved by the Appellate
(Sgd.) SIMON DE PAULA Court only if evidence thereon were received by the trial court without
SIMON DE PAULA objection of the adverse parties seasonably as if the same were tried
with by agreement of all the parties.
(Sgd.) FERNANDO J. GONZAGA
FERNANDO J. GONZAGA We have to make this early elucidation and setting of the proper
perspective of the issues, because, as will be seen later, one of the
(Sgd.) JOSE GASTON decisive considerations We will dwell on will be whether or not the
JOSE GASTON Appellate Court legally acquired authority to act on said new matter
(Party of Second Part) and/or whether or not it resolved the issues of fact and law relative
thereto in accordance with the evidence and the law. Hereunder is how
(Decision of CA, pp. 177-198, Rollo of L-41161) the Court of Appeals resolved the three issues that it held came out from
the assignment of errors of appellant Federation.
VII
VII
Before proceeding any further, and in order to place in proper
perspective the matters covered by the numerous assignment of errors The appellate court resolved the three issues it enumerated as follows:
presented by the parties for Our resolution, We believe We must
underscore at this point that as may be readily noted in the portion of the Regarding the first issue, the Court held:
decision under review We have just quoted, the Court of Appeals
summed up the allegations of the petition (and presumably the amended We agree that millers and planters may indeed enter into written milling
one) filed with the trial court and stated unqualifiedly the premises that, agreements stipulating participations different from those prescribed in
per its own petition the Federation admitted that the laborers' share in Section 1 of the Sugar Act. This conclusion is justified by the language
the 1952-53 to 1954-55, the PLANTERS gave to petitioners LABORERS of Section I itself which declares that -
the latters' participation in the sugar production as well as in the by-
products and' derivatives thereof and continued to give the same until In the absence of written milling agreements between the majority of the
November 1, 1955, etc. (Italics Ours) Then the Court proceeded to state planters and the millers of sugarcane in any milling district in the
the defense of the defendants PLANTERS and CENTRAL or Philippines, the unrefined sugar produced in that district . . . . shall be
VICTORIAS. And after quoting the dispositive portion of the trial divided between them.
in the proportions established therein. The phrase "in the absence of
clearly" indicates that the division of the sugar between the millers and
the planters in accordance with the schedule of participations
mentioned, has to be complied with only during periods when millers
and planters are bound by no written milling agreements, and need not
govern the sharing system of the contracting parties who have entered
into such agreements.
That this is the real intendment of the law can hardly be shrouded in
doubt. For the law is not merely social in that it means to uplift the
wretched condition of the laborers in the country's sugarcane
plantations; it is also economic in that the law is calculated to safeguard,
preserve, and maintain the integrity, viability, and health of an industry
so vital to the entire economy of the country. When the sugar bill (which
ultimately became Republic Act 809) was being debated in Congress in
1950, 1951, and 1952, one of the urgent reasons advanced by its
sponsors in pleading for the expeditious passage of the measure was the
fact that in a year or so the preferential treatment of Philippine sugar in
the American market was expiring, and it was imperative that the
situation in the sugar industry be stabilized as quickly as possible by the
passage of the bill in order to take advantage of the remaining few years
of such preferential treatment. The provisions of the law authorizing the
take-over by the government of centrals which refuse to mill or of
plantations which neglect to plant, indicate the concern of the industry
to the over-all posture of the national economy. The respective
participations of the millers and the planters cannot, therefore, be
regulated, at all times, by the same proportions established in Section I
of the law. On the contrary, such participations should be understood as
subordinated, at all times, to the superior interests of the industry as a
whole. No one, least of all the very people involved in the industry -
millers, planters, and laborers - has a right, so to speak, "to kill the
goose that lay the golden eggs." Particularly when production costs are
so high and sales are so low, sacrifice on the part of everyone is in order.
In such cases, millers and planters should be able to adjust their
respective participations in response to the economic realities obtaining
in the industry, that is, stipulate in their written milling agreements
participations lower or higher than those prescribed in Section 1 of the
law.
Fears may be expressed, as a result of the conclusion we have reached,
that millers and planters may be thrown back into the same situation that
the Sugar Act was passed to remedy that is, a situation where the weak
planters would be continually demanding an increase in their
participation and the strong millers would persist in refusing to grant the
increase, the same stalemate, in the same impasse that characterized the
relations between Central and Planters before the Act became law and
which, in fact, precipitated the enactment of the law in 1952. Such fears,
however, may not be seriously entertained. A continuing period of no
contract would result in a definite disadvantage to the centrals. Section 1
provides summary increases dictated by Section I would continue to
accrue in favor of the planters. For reasons of sheer self-interest,
therefore, the centrals would thus be compelled to negotiate written
contracts with the planters.
In such a situation, the planters, understandably would not be in too
great hurry. If, however, they must write new contracts with the millers,
there is hardly any doubt that, after enjoying the increases as decreed in
Section I of the law in the absence of written milling agreements they
would not yield to less in negotiating new milling agreements with the
millers. Proof of this is the fact, in the instant case, that Planters,
enjoying a 4% increase in their participation by virtue of Section 1 when
they had no milling agreements with Central, did not settle for less when
they finally executed the ASCA with Central on March 5, 1956.
But we disagree with appellees when they assert that plantation laborers
have no right to any share in any increase in planters' participation
where such increase is granted not "under this Act " (a phrase used in
Section 9 of the law) but by contract, as in the case of the ASCA of
March 5, 1956. The argument loses sight of the fact that the Sugar Act
of 1952 is, by and large, a piece of social legislation intended to grant
increases in the planters' participation for the primary purpose of
enabling the planters to improve the lot of their plantation laborers.
Thus, in 1938, when President Manuel L. Quezon appointed Chief
Justice Moran to study the "alleged inequitable distribution of sugar
resulting from the milling of Sugarcane between the centrals and the
plantation", the study was undertaken with a view to "ameliorating the
condition of the planters" laborers. When Justice Moran finally
submitted his report on April 30, 1939, he came up with the conclusion
that unless the participation of the planters was increased, they could not
be made to 'ameliorate the condition of their plantation laborers.
The Court then went into an extended discussion of practically the same
considerations discussed by Us in Talisay-Silay, hence We will not
quote them anymore. As We did in Talisay-Silay, the Court concluded:
In keeping with this spirit, the Department of Labor has made a correct
interpretation of the scope and extent of the applicability of Republic
Act 809 in respect to the benefits of plantation laborers, in issuing the
'Rules and Regulations to implement Section 9 of Republic Act 809
(Exhibit GGG), dated February 23, 1956, as amended on May 4,1956,
providing:
SECTION 1. The benefits granted to laborers under the Act shall apply
to all laborers of sugar plantations in any milling district wherein the
planters' sharehas increased in accordance with the schedule of
participations established in Section 1 of said Act, due either to the
absence or expiration of written milling agreements between the
majority of the planters and their respective millers or under subsequent
milling agreements executed after the date of effectivity of the Act.
It is clear from the foregoing provisions of the "Rules and Regulations",
that the benefits to which the plantation laborers are entitled refer to the
increases in planters' participation granted either under Section 1 of the
law (in the absence of written milling agreements on the date said law
became effective, June 22, 1952) or under any subsequent contracts
executed after the date of effectivity of the said Act.
It is likewise clear that such increase is the difference determined, as
basis, either on the lower participation of the planter under the last
milling contract expired immediately prior to June 22, 1952, or on the
lower participation of the planter under a milling contract which,
although subsisting on that date, expired immediately thereafter, in
relation either to the higher participation of the planter under Section 1
of the law (in the absence of a milling contract) or to the higher
participation of the planter under a milling agreement executed
subsequent to June 22, 1952. Thus, provides the 'Rules and Regulations
- having been advanced by the FEDERATION to convince Us to alter
Increase in participation shall mean the difference between the
participation of the planters under Section 1 of the Act or the
participation of the planters in any milling agreement subsequent to the
effectivity of the Act, and the participation of said planters under the
milling contract subsisting at the date of the effectivity of the Act, or in
the absence thereof, under the last milling contract immediately prior to
the enactment of said Act.'
Consequently, we hold that, since, as the facts of this case show, under
their milling contracts which expired before June 22, 1952, Planters had
a participation of 60%, while Central had 40%, and since, under the
ASCA executed between them on March 5, 1956, but made retroactive
to November 1, 1955, Planters have a participation of 64% while
Central has 36%, with such participations to run and remain in force
until October 31, 1974, Planters enjoy a 4% increase in participation
under the said ASCA. Pursuant to Section 9 of Republic Act 809, the
plantation laborers, or appellants herein, are entitled to a share of 60%
of such 4% increase during the entire period of the 19-year term of the
ASCA.
In the light of all the foregoing, we hold, in disposing of the first issue
herein discussed, that the existence of milling agreements does not
necessarily render Republic Act 809 inapplicable or inoperative as to the
contracting parties but the Act remains applicable and operative in all
cases where the milling agreements, executed subsequent to June 22,
1952, provide any increase in planters' participation, as the term
'increase in participation 'is defined herein.
Accordingly, the ASCA and the other derivative sugar milling contracts
are hereby declared modified so as to be caused to be read thereinto a
provision granting the plantation laborers, or the appellants herein, 60%
of the 4% increase in planters' participation stipulated therein,
commencing from November 1, 1955 to October 31, 1974. They should
likewise be entitled to legal interest for the same period.
As already stated earlier in this opinion, the above ruling of the Court of
Appeals conforms with Our decision in Talisay-Silay ,which We here
reaffirm for the purposes of these cases, no new and cogent reasons
Our view. As We have earlier indicated, in the latest motions filed by it
for early resolution of these cases, it is quite apparent that the
FEDERATION is more or less resigned to accept Our Talisay-Silay
rulings.
- VIII -
Anent the second issue, the Court discoursed thus:
We shall now take up the second issue under which appellants claim
that the ASCA of March 5, 1956 (Exhibits XXX thru XXX-6), and
derivative contracts, the 'General Collective Sugar Milling Contract'
(Exhibits YYY thru YYY-7) and the 'Individual Sugar Milling Contract'
(Exhibits SSS thru SSS-28 and ZZZ thru ZZZ-7) executed by Central,
on the one hand, and Planters, on the other, have been entered into in
circumvention of Republic Act 809 and are, for that reason, void ab
initio.
In their twelfth assignment of error (appellants' brief, pp. 265-278),
appellants argue that while appellees are free to enter into written
milling agreements subsequent to June 22, 1952, the intent of Republic
Act 809 is that the provisions of such agreements 'must be without
prejudice to the sharing arrangement laid down in Sections I and 9 of
the law. In support of this position, they cite the proceedings on the
deliberations of the Senate on House Bill No. 1517 (which ultimately
became Republic Act 809) particularly on what became Section 5 of the
law. In their sixteenth assignment of error (appellants' brief, pp. 292-
306), appellants charge that the motive of the appellees in executing the
milling agreements is 'to have a pretext for evading and circumventing
Sections 1 and 9 of Republic 809 and thereby to be able to appropriate
with impunity the six (6%) per cent share' of appellants in the unrefined
sugar and its derivatives.
We have gone over the arguments of appellants in both assignments of
error but found no evidence of circumvention as appellants have
charged. Under their twelfth assignment of error, it is true that Senator
Zulueta introduced an amendment so as to subject the schedule of
participations under Section 1 of the law to decisions by a proposed
Board of Arbitration to be appointed by the President of the Philippines
'in the event that any central, shall be unable to arrive at a milling
agreement with a majority of the planters affiliated with it, and shall
refuse to mill the sugar cane of such planters in the absence of such
agreement', and that this amendment was voted down on the ground,
strongly advocated by Senator Tañada, that since the bill already fixed
the ratio of participation between the millers and the planters, it would
be wrong to 'open it to further inquiry or arbitration.'
Senator Tañada was correct in taking such position. There was no point
to creating a Board of Arbitration to determine the participations of the
millers and the planters which the bill under discussion had already
fixed as a congressional determination of the matter. But no inference
may be drawn from Senator Tañada's position that the sharing
proportions established under Section 1 of the law may not be deviated
from in contracts executed subsequent to the passage of the law on June
22, 1952. Appellees are correct in their view that indeed if it were the
intention of Congress for the millers and planters to observe no other
sharing arrangements than those established under Section 1, there
would be little point, if at all, entering into any written milling
agreements which cannot stipulate other proportions in the sharing
arrangements than those prescribed under Section 1. In our resolution of
the first issue, we adverted to the fact that Republic Act 809, although
not a revenue-raising measure, is, in addition to being social, also an
economic piece of legislation. It bears repeating in connection with the
issue at hand that Congress could not have intended, by Section 1, to
prevent the millers and planters from agreeing to other sharing
proportions, even at the cost of the preservation of the sugar industry.
We do not believe we need say more.
Under their sixteenth assignment of error, appellants cite the various
acts of Central in resorting to maneuvers to get Planters to execute the
ASCA of March 5, 1956, and the other derivative sugar milling
agreements. Appellants are of the view that they are entitled to 6% of
the sugar proceeds effective June 22, 1952 without contract, as under
Section 1 of the law, or with contract, as under the ASCA, and that the
maneuvers of Central in offering Planters 64%, provided Central got
36%, which the latter finally succeeded in getting the former to agree to
under the ASCA, constitute a circumvention of the law.
Central's tactics may not be exactly moral, but they are standard
operating procedure of businesses - using every possible leverage and
device to bring about the best bargain under given circumstances -- for
profit. The contracts, therefore, which it wrung from Planters are not in
circumvention of the law but in legitimate pursuit of profit -- which is
the end all and be-all of business. That Central, as a result of the ASCA
which appellants claim it (Central) to have 'engineered', got 36% and
Planters 64%, while the plantation laborers got nothing, is no reason
for considering the contract a circumvention of the law which does not
in the first place impose upon it any duty or require of it the
performance of any obligation to yield any part of its participation in
favor of planters laborers. In other words, we do not find in Central's
conduct in the premises anything so odious or so obnoxious as to render
the contracts it has entered into with Planters illegal or repugnant to
public policy. In the course of negotiations, Central acted under the
belief that if it succeeded in writing new written milling agreements, the
agreements could stipulate other proportions in the sharing system than
those established under Section 1 of the law, since in its view, the law
would no longer be applicable the moment such agreements were
entered into. There is evidence that Planters, on their part, at first
recoiled from Central's suggestion that the latter was willing to increase
the former's participation from 60% to 64% provided Planters agreed to
give 36% to Central for the duration of the contract. The sense of
repulsion was understandable, since, under Central's suggestion, the 6%
which the Planters' laborers were to enjoy from June 22, 1952 to
October 31, 1955, would an go to Central during the next 19 years, from
November 1, 1955 to October 31, 1974. But Planters seemed to have
little choice as Central appeared to have all the aces: from June 22,
1952, it had started setting aside a 'reserve' equivalent to 10% of the
annual production, this being the amount of increase which the Planters
had demanded as due to them under Section 1 of the law. Although
Central still insisted, even after the passage of the law on June 22, 1952,
that its 30-year milling contracts with Planters had not yet expired
because of its belief that 4 years of Japanese occupation and 2 years of
rehabilitation of the mills during which the mills were not in operation
should be deducted from the 30- year periods of the contracts, it set
aside this 'reserve' just in case it was finally decided by the courts before
which the issue had been brought by the planters, that its 30-year
contracts had indeed expired as of the date of effectivity of the law. As
of October 31, 1955, this 'reserve' had accumulated to P 8,643,472.24.
Central's suggestion was that this amount of 'reserve' built up during
the period from June 22, 1952, to October 31, 1955, be divided between
Planters and the plantation laborers on the proportion of 40% for the
former and 60% for the latter, the same proportions prescribed by
Section 9 of republic Act 809. With 40% of the 'reserve, Planters would
stand to get P 3,457,388.90, while the plantation laborers, with 60%
would have P 5,186,083.34. These participations in the 'reserve of 40%
for Planters and 60% for the plantation laborers in the 'reserve', would
be equivalent to participations of 4% and 6%, respectively, in the total
annual production within the period from June 22, 1952 to October 31,
1955, Planters' total participation for the period, therefore, would be
64%.
Confronted by an acute need for money and these enticements dangled
before them: 3,457,388.90 in cash (equivalent to 40% of their
participation in the reserve or to 4% in the total annual production) for
the period June 22, 1952 to October 31, 1955, and a similar total
participation of 64% for the next 19 years, that is, from November 1,
1955 to October 31, 1974, coupled by the speculation perhaps that their
4% increase for the 19 years could not be touched by the plantation
laborers because of the argument that Republic Act 809 would no longer
be applicable once written milling agreements were entered into,
Planters found no better alternative than sign, as they did sign, on March
5, 1956, the controversial ASCA and subsequently, the other agreements
reproducing the provisions of the ASCA.
That Planters might not have gotten the better end of the bargain since,
under the ASCA the 6% that would go to their plantation laborers for
the period from June 22, 1952 to October 31, 1.955, would go instead
to Central for the next 19 years, from November 1, 1955 to October 31,
1974, is no evidence of circumvention of Republic Act 809. As we have
said in our resolution of the first issue, the millers and planters may
stipulate in their written milling agreements other sharing proportions
than those prescribed in Section 1 of the law which were so prescribed
only in the absence or because of the absence of written milling
agreements. Central's drive, therefore, to get all the 6% for itself is a
perfectly legitimate one, not a circumvention
Again, fundamentally, the above position of the Court of Appeals is in
accord with Talisay-Silay, except for some apparent inconsistencies
therein, to which We will hereinunder address Ourselves regarding the
conduct of VICTORIAS in entering into the so-called ASCA. It is quite
obvious that the Appellate Court tried very hard to look for some way of
making VICTORIAS somehow liable for whatever might be due the
laborers of the PLANTERS, notwithstanding its categorical finding and
holding that VICTORIAS did nothing more than to obtain as legitimate
a bargain as any sensible businessman or industrialist having an eye for
profit would do.
We see no legal, equitable nor moral reason for such effort, even as We
reaffirm for the purposes of the instant cases, Our ruling in Talisay-Silay
that under no circumstances should the plantation laborers be deprived
of 60% of whatever increase in share their respective planters employers
had obtained from the Central, that is, whether by the application of
Section 1 of the Act when there were not enough written contracts, or,
under the said contracts upon there being a majority of them.
After holding that the ASCA is legal and, what is more, not conceived to
circumvent the law, surprisingly, the Court went into a matter not
alleged in the petitions in the trial court. It proceeded to go into a
disquisition of the effects of the provisions of the ASCA regarding the
manner of paying the. share of the laborers in the 10% increase of the
PLANTERS' share from June 22, 1952 to October 31, 1955. As will be
noted in the earlier quoted provisions of the ASCA, it was stipulated
that the PLANTERS would be paid their: 10% increase, 60% of which
would pertain to the laborers, with the condition, however, that instead
of the PLANTERS receiving the total share of the laborers in cash, only
a portion would be in cash and the balance of Four Million (P 4-M)
Pesos would be in the form of certificates of shares of stock to be issued
to the PLANTERS, who formed a Special Committee or Board of
Trustees for the purpose, expressly in trust for the laborers. The Court
condemned such provisions as entirely beyond the authority of the
PLANTERS and VICTORIAS to stipulate just between them without
the express consent or prior assent of the laborers or the Federation or
even the Secretary (now Minister) of Labor, who, under Section 9 of the
Act, was supposed to supervise "the distribution of the share
corresponding to the laborers. " On such premises, the Court concluded:
In the light of all the foregoing, we hold, in resolution of the second
issue, that, while we do not find appellees to have circumvented
Republic Act 809 in entering into the ASCA and in stipulating a
participation of 64% for Planters and 36% for Central, and for this
reason, declare the ASCA and the other derivative sugar milling
contracts valid, the appellees are jointly and severally liable for tort in
disposing, upon their own accord, and without any authority of the
plantation laborers, of the money of the said laborers in the total amount
of P5,186,083.34, and in thus causing the loss of shares of stock and
their earnings purchased out of the P 4,000,000.00 of such amount.
X
While, as We have said, We are in agreement with the Court of Appeals
in its construction and application of Sections 1 and 9 of Republic Act
809 as discussed above, We cannot, as We will show anon, fully accept
its conclusions as to the pretended liability of the PLANTERS and
VICTORIAS for the amount that the FEDERATION claims the laborers
of the PLANTERS have not been paid as their share of the proceeds of
the crop years 1952- 1953 to 1954-1955 as well as those of the crop
years 1956-1957 to 1973-1974. In passing upon, as We have just quoted,
the second issue formulated by it to resolve the appeal to it of the
Federation, it held the appellees, the PLANTERS (including Primo
Santos and Benjamin Tirol) and VICTORIAS "jointly and severally
liable for tort in disposing, upon their own accord, and without any
authority of the plantation laborers, of the money of the said laborers in
the total amount of P 5,186,083.34 and thus Causing the loss of shares
of stock and their earnings purchased out of P 4,000,000.00 of such
amount." Not only that, the Court of Appeals adjudged the PLANTERS
and VICTORIAS also jointly and severally liable for the 2.4% share of
the laborers in the proceeds, which they maintain they have not
received, of the crop years 1956-57 to 1973-74. Indeed, in the course of
resolving the second issue and in disposing of the third issue, the
Appellate Court found the PLANTERS and VICTORIAS guilty of
misappropriation and conversion of P7,385,950.00 corresponding to the
P4M worth of VICTORIAS shares of stock which under the ASCA was
stipulated to be received by the PLANTERS in trust for the laborers.
Obviously, this particular aspect of these instant cases before Us involve
questions both of fact and of law. To put things in their proper order and
to pin liability for the claim of the laborers on the proper part or parties
it would be best to discuss and dispose of separately the two stages of
sharing and payment in question, namely, (1) that which refers to the
proceeds of the 1952-53 to 1954-55 crop years and (2) that referring to
the proceeds from crop year 1955-56 to crop year 1973-74.
XI
-A-
We will start with what We feel is the stage that involves factual and
legal issues which may be easily and readily determined, which is that
referring to the proceeds of 1955-56 to 1973-74 crop years. Under the
terms of the ASCA, the ratio of sharing between the PLANTERS and
VICTORIAS during that period was to be 64% of said proceeds for the
former and 36% thereof for the latter. As this Supreme Court held in
Talisay-Silay and as held in the decision of the Court of Appeals under
review, We reiterate, it is indubitable that said proportion of sharing is
legal, the ratios fixed in Section 1 of Republic Act 809 notwithstanding.
Although nothing is provided in the ASCA as to the share of the
laborers in the 4% increase the PLANTERS were thus given by
VICTORIAS, which under Talisay-Silay and the decision of the Court
of Appeals ought to be 2.4%, or 60% of said 4%, it is admitted on all
sides that VICTORIAS religiously gave the PLANTERS their full
increase of 4% annually from crop year 1955- 56 to crop year 1973-74
thereby leaving it to the PLANTERS to pay their respective laborers the
said 2.4%.
The FEDERATION claims and the Court of Appeals so found that the
laborers were not paid by their respective planters-employers what is
legally due them. Such being the case, We cannot but affirm the
judgment of the Court of Appeals that the PLANTERS are liable
therefor.
-B-
We cannot, however, share the Appellate Court's holding that
VICTORIAS is jointly and severally liable with the PLANTERS. We
cannot perceive any factual or legal basis for such solidary liability.
From the very beginning of the sugar industry, the centrals have never
had any privity of any kind with the plantation laborers, since they had
their own laborers to take care of. In other words, both the centrals and
the planters have always been the one dealing with their respective
laborers regarding the terms and condition of their employment,
particularly, as to wages. Nowhere in Republic Act 809 can We find
anything that creates any relationship between the laborers of the
planters and the centrals. Under the terms of said Act, the old practice of
the centrals issuing the quedans to the respective PLANTERS for their
share of proceeds of milled sugar per their milling contracts has not
been altered or modified. In other words, the language of the Act does
not in any manner make the central the insurer on behalf of the
plantation laborers that the latter's respectively employers-planters
would pay them their share. Had the legislature intended to make the
central as such insurer, We have no doubt that clear words to such effect
would have been used. Much less is there in the ASCA any provision
making VICTORIAS responsible in any way for the share due the
plantation laborers in the 4% obtained by the PLANTERS under said
agreement.
Section 9 of the Act unequivocally provides that 60% of "the proceeds
of any increase in the participation granted the planters under this Act
and above their present share shall be divided between the planter and
his laborer. Further, the same provision explicitly mandates that the
"distribution of the share corresponding to the laborers shall be made
under the supervision of the Department of Labor." Accordingly, the
only obligation of the centrals, like VICTORIAS, is to give to the
respective planters, like the PLANTERS herein, the planters' share of
the proceeds of the milled sugar in the proportion stipulated in the
milling contract, which would necessarily include the portion of 60%,
pertaining to the laborers. Once this has been done, the central is already
out of the picture, and thereafter, the matter of paying the plantation
laborers of the respective planters becomes the exclusively the concern
of the planters, the laborers and the Department of Labor . Under no
principle of law or equity can We impose on the central - here
VICTORIAS - any liability to the plantation laborers, should any of
their respective planters-employers fail to pay their legal share. After all,
since, under the law, it is the Department of Labor which is the office
directly called upon to supervise such payment, it is but reasonable to
maintain that if any blame is to be fixed for the unfortunate situation of
the unpaid laborers, the same should principally be laid on the planters
and secondarily on the Department of Labor, but surely, never on the
central.
-C-
Moreover, when We consider that according to their own petitions, both
original and amended in the court below, the laborers had not been paid
their share since after the 1954-55 crop year, and their original petition
was filed only in November 1962, We feel inclined to believe that if the
laborers were convinced that they had any kind of cause of action
against VICTORIAS, it is quite unexplainable why it took them
practically more than six years to file their suit. It is just as remarkable
that they did not move even against their very employers, the
PLANTERS, during all that time. In any event, as We have already
stated, We find no legal nor equitable basis for the pretended joint and
several or solidary liability of VICTORIAS with the PLANTERS to the
laborers. Its act of paying the PLANTERS the full 4% increase was not
illegal or contrary to law, for it was in fact in fulfillment of its obligation
both under Our Talisay-Silay ruling and the provisions of the ASCA.
-D-
Incidentally, it may be added, the Rules and Relations to implement
Section 9 of Republic Act 809, "issued by the Secretary of Labor on
February 23, 1956, as amended on May 4, 1956, do provide pertinently
that the laborers' share in the increase in participation accruing to the
planters shall be included in the quedans covering said increase issued
in the planters' name with the following notation on the face of the
quedan sixty per centum (60%) share of laborers in the increase in the
participation of planters under Sugar Act of 1952 included." But absent
any iota of evidence indicating that such was not done, We are under the
law supposed to presume that the regulations have been complied with.
Nowhere in the Federation's unusually lengthy and prolific brief is there
any indication otherwise. And whatever the respective PLANTERS did
after those quedans were issued to them cannot under any concept of
law or equity be imputed to VICTORIAS or to any imaginable
connivance between it and the PLANTERS to prejudice the laborers.
There was nothing that VICTORIAS could conceivably gain in any such
nefarious arrangement to induce it to take the risk of ultimately being
made liable in the manner done by the Court of Appeals.
-E-
It is indeed noteworthy that whereas, as We shall discuss presently, with
regard to the payment of the laborers' share in the proceeds of the 1952-
53 to 1954-55 crop year (60% of 6% out of the 10% provided in Section
1 of Republic Act 809), the Court of Appeals rather extensively argued
and discoursed, with, to be sure, seeming or apparent plausibility what
considerations, in its view, ought to make VICTORIAS, jointly and
severally or solidarily liable with the PLANTERS,2 hardly did said
Court lay down any premise for the following portion of its judgment
now under review:
3. Declaring that the participation of 64% for Planters and 36% for
Central commencing from November 1, 1955 to October 31, 1974, as
stipulated in these written milling agreements, is valid, but that there
should be deemed written into said agreements a stipulation providing
that 60% of Planters '4% increase in participation belongs to appellants
herein for the entire duration of the same period pursuant to Section 9 of
Republic Act 809;
xxx xxx xxx
5. Ordering appellees, jointly and severally, to pay appellants:
(a) The sum equivalent to sixty (60) percent of Planters' increase in
participation of four (4%) percent, beginning November 1, 1955, and
ending October 31, 1974, inclusive, with interests thereon at the legal
rate of 6% per annum until fully paid;" (Pp. 79-80, Annex A,
CENTRAL's Brief)
The only statement or finding or holding We can see in such challenged
decision which might be said to refer to the point under discussion is the
following:
In the light of all the foregoing, we hold, in disposing of the first issue
herein discussed, that the existence of milling agreements does not
necessarily render Republic Act 809 inapplicable or inoperative as to the
contracting parties but the Act remains applicable and operative in all
cases where the milling agreements, executed subsequent to June 22,
1952, provide any increase in planters' participation, as the term
'increase in participation is defined herein.
Accordingly, the ASCA and the other derivative sugar milling contracts
are hereby declared modified so as to be caused to be read thereinto a
provision granting the plantation laborers, or the appellants herein, 60%
of the 4% increase in planters' participation stipulated therein,
commencing from November 1, 1955 to October 31, 1974. They should
likewise be entitled to legal interest for the same period. (Page 49, Id.)
Well and good, but the Appellate Court did not say that with such
construction it had made of the Act, (to be sure, in accord with Talisay-
Silay) it became the obligation of VICTORIAS to see to it that the
respective laborers of the PLANTERS were duly paid their share of
2.4% or 10% of the 4% increase the PLANTERS were given.
The foregoing judgment becomes more incomprehensible when it is
recalled that in its minute analysis of the ASCA insofar as the provisions
thereof stipulating a 64%-36% sharing between the PLANTERS and the
CENTRAL of the proceeds of milled sugar during crop years l955-56 to
1973-74, it found that in so stipulating such ratio of sharing in said
ASCA, there was no evidence at all that on the part of VICTORIAS and
the PLANTERS, for that matter-of any circumvention, and We can add,
even of any intent to circumvent, the provisions of the Section 1 of the
Act. To Our mind, for the Appellate Court to impose upon VICTORIAS
join and several liability with the PLANTERS, in the light of its just
quoted predicates, for the latter's failure to pay their respective laborers
the 2.4% corresponding to said workers, is not only a veritable non
sequitur but an utterly baseless legal conclusion that cannot be allowed
to stand uncorrected. Accordingly, it is Our considered opinion, and We
so hold , that the portion of the judgement of the Court of Appeals just
quoted should be as it is hereby REVERSED, and whatever liability
there exists in favor of the plantation laborers should be pinned
exclusively on the PLANTERS, their respective employers. We must
add though, that it was the Department of Labor's unexplainable
inattention, not to say negligence, in performing its own corresponding
obligations under Section 9 of the act that contributed to a considerable
extent to the said plight that befell the said laborers. 'There was
perceptible lack of sufficient concern and initiative, to say the least, in
the Department's attitude and actuations in the premises. lt may be said
that its vigilance concerning the rights of labor was unhappily not up to
the expectations of the lawmakers when they approved the Act.
XII
With the matter of the liabilities relative to the share of the laborers in
the proceeds of the 1955-56 to 1973-74 crop year thus clarified and
determined, We can now pass to what happened to the participation due
the laborers during the 1952-53 to 1954-55 crop years. Again, this is an
inquiry that involves both issues of fact and of law.
In this connection, let us hearken first to how the Court of Appeals made
its conclusion of fact in respect to P5,185,083.34 that it found to be the
unpaid share of the laborers before the execution of the ASCA:
In resolving the third and last issue set forth above, we have taken note
of appellants' position that Central and Planters are guilty Of
'misappropriation' of the amount of P 5,185,083.34 belonging to them
which accrued during the period from June 22, 1952, to October 31,
1955 as their 60% share of Planters 10% increase in participation
totalling, during the same period, P 8,643,472.24. That will now be
resolved, therefore, is whether or not appellants have, in fact, received
the amount of P 5,185,083.34.
By way of a short flashback, it is to be recalled that the laborers'
P5,185,083.34 was under the ASCA, to be disposed of as follows:
P1,186,083.34 was to be distributed to the laborers, under the
supervision of the Secretary of Labor, and P4,000,000.00 was to be
invested in Central's shares of stock.
It may be pertinent, at this point, to make a brief reference to the
mechanics of this investment. As provided in the ASCA, the
P4,000,000.00 of the P5,185,083.34 belonging to the appellants laborers
was to be invested in 40,000 shares of Central's capital stock (with par
value of P100.00 per share) redeemable after a period of time by
Central. This investment was to be administered by the 'Special
Committee', designated in the ASCA as representative of Planters. On
August 13,1956, pursuant to the ASCA of March 5,1956, Central issued
the 40,000 shares in four certificates of 10,000 shares each, in the
names of five members of the 'Special Committee' or 'Board of Trustees',
to wit: Vicente F. Gustilo, Jesus Suarez, Simon de Paula, Fernando J.
and Jose Gaston, in their capacity as 'trustees' for appellants-laborers.
Three of these five having died, Gustilo and Gaston, with the assistance
of legal counsel of Central, filed a petition for their replacement, with
the Court of First Instance of Negros Occidental (Exhibits JJJJJ-1 thru
JJJJJ-3) resulting in the appointment of three new members: Ysmael
Reinoso, Newton Jison, and Enrique Hinlo (Exhibits JJJJJ-7 thru JJJJJ-
9). Gaston and Gustilo themselves having died, only the three new
members could testify during the hearing of the case in the court below.
Through subpoenas duces tecum (Exhibits IIIIII, KKKKKK and
LLLLLL each of the three was commanded:
... to bring with him the complete record of the Board of Trustees
beginning March 5, 1956, of the sums of P4,000,000.00 and
Pl,186,083.34 referred to in the Amicable Settlement Compromise
Agreement dated March 5, 1956, executed between Victorias Milling
Co., Inc., represented by its President Carlos L. Locsin and, Vicente F.
Gustilo, Jesus Suarez, Simon de Paula, Fernando.
The evidence shows that, except for a small part (P 180,679.38) of the
sum of P 5,185,083.34, the entire P l,186,083.34 was actually paid to the
laborers. Thus, testified witness Felipe de Guia, representative of the
Department of Labor in charge of the distribution:
COURT:
Q. Mr. de Guia, you said that there were some amounts that were not
distributed because some laborers cannot be located; is this the amount
mentioned in this Exh. "23", under the words 'amount of undistributed
of windfall'?
A. Yes, sir, P 180,679.38 (tsn.p.23,Junel8,1970)
Appellants themselves, in their brief, have made the following
observations;
So, it can be assumed without fear of contradiction that the last portion
of the said amount of P l,186,083.34 was delivered, if ever, to
PLANTERS-APPELLANTS-LABORERS after February 18,1957.
(Appellants' Brief, p. 326)
The evidence, however, fails to show that the amount of P 4,000,000.00
(invested in Central's shares of stock pursuant to the ASCA) and its
accruals have ever been received by appellants-laborers.
S. Gonzaga and Jose Gaston, representing the sugarcane planters
affiliated with the Company in connection with Civil Case No. 22577 of
the CFI of Manila.
Testifying on June 17, 1970, Jison, vice-chairman said he could not
bring the documents asked of him because Gaston, as chairman of the
Board of Trustees, had taken custody of all the records; that these
records remained in Gaston's custody up to the time of his death; that
since Gaston's death in 1969, 'we did not have any meeting and
practically we forgot all about it. And he has still all the records so I
cannot bring the records requested of me.' (p. 37, tsn., June 17, 1970).
Hinlo, secretary to the Board of Trustees, could not bring any of the
documents subpoenaed, either, 'because I have resigned already as
Secretary of the Board of Trustees in February, 1970, and the records
are all in the hands of the late Jose Gaston.' (P. 58, tsn., June 18,1970).
Reinoso, treasurer of the Board of Trustees, did not appear at the
hearing set for June 18, 1970, but his lawyer manifested that the only
document he, Reinoso, had, was a copy of the ASCA of March 5, 1956.
For his part, Pfiffner, treasurer-comptroller of Central, testified that
Central had nothing to do with the sale of the 40,000 shares in which the
P4,000,000.00 was invested; that it was the Board of Trustees, which
sold the shares. Thus:
Q. Are you trying to say, Mr. Pfiffner that the amount of 40,000 shares
of stock and their dividend also in stock were sold with the consent only
of the Board of Trustees?
A. Yes, Sir.
Q. ... And the defendant Victorias Milling Co., Inc., had nothing to do
with it?
A. That is correct.'(p.86,tsn.,June 16, 1970).
Appellees claim that witness Felipe de Guia, Chief of the Agricultural
Wage Section of the Department of Labor, had testified on the
distribution to and receipt by appellants-laborers of the principal and
earnings of the P 4,000,000.00 invested in the 40,000 shares. This claim
however, is not borne out by the records in fact, de Guia denied any
knowledge of the whereabouts of the proceeds of the sale and earnings
of the 40,000 shares of stock. (Emphasis Ours)
Testifying on June 18, 1970, as a representative of the Secretary of
Labor, witness de Guia stated: that he had no knowledge of the 40,000
share of stock, and that he did not know about the prices at which the
40,000 shares of stock were sold (p. 14, tsn., June 18, 1970). He further
stated that he did not know about the income in dividends earned by the
40,000 shares of stock (p. 16, tsn., June 18, 1970), although he admitted
having supervised the first distribution of the amount of P l,186,083.36
to appellants-laborers (p. 2 1, tsn., June 18, 1970).
It is clear from the evidence that, after Central issued the 40,000 shares
of stock in the names of the five members of the "Special Committee'" or
"Board of Trustees" representing, vis-a-vis Central ,both Planters and
appellants-laborers, the said 'Special Committee" or "Board of
Trustees" in its capacity as trustee for appellants-laborers, sold these
40,000 shares to various buyers, some of the shares going to Central
and some to Planters, and that proceeds of the sales of these shares
were received by the said "Special Committee" or 'Board of Trustees'
and delivered to Planters for distribution to appellants-laborers. Thus,
'Special Committee' vice-chairman Jison explained:
Q. Would you like to tell this Honorable Court what happened to the
money, whether in cash, check or in terms of shares of stock which was
delivered by the Victorias Milling Co., Inc. to the Board of Trustees?
A. The stock of shares of the Victorias Milling Co., Inc. which was
delivered to the Board of Trustees was sold and liquidated according to
the Amicable Settlement-Compromise Agreement and in such case,
checks were issued to be delivered to the respective laborers under the
supervision of the Department of Labor. So fat the record is concerned,
the Department of labor has all the records.' (pp. 37-38, tsn., June 17,
1970).
Not a shred of evidence, however, has been introduced into the record to
show that the proceeds of the sales of the 40,000 shares of stock and the
increments in cash and stock dividends have been actually delivered to
or received by appellants-laborers. The three surviving members of the
'Special Committee' or 'Board of Trustees', namely Messrs. Ismael
Reinoso Newton Jison, and Enrique Hinlo, who were supposed to be the
guardians or administrators of the P4,000,000.00 invested in Central's
40,000 shares of stock, could not present any document whatsoever
showing or tending to show that the proceeds of the sales were actually
delivered to the Planters concerned and subsequently paid to the
laborers.
Central argues that in the petition of appellants-laborers, no issue has
been raised by the allegations concerning the latter's 6% participation
from June 22, 1952 to October 31, 1955, amounting to P 5,186,083.34.
Neither, it says, have appellants-laborers prayed for any relief in
connection therewith. In fact, it goes on to say, appellants-laborers have
admitted receipt of all amounts due them within the period mentioned,
citing paragraphs 8, 9 and 10 of the petition, thereby estopping
themselves from raising any issue as to such amounts in the instant
appeal.
These arguments are more technical than substantial. It is true enough
that the petition does not categorically state any specific relief desired
with respect to the amount of 15,186,083.34, but it does contain a
general prayer 'for such other relief as may be just and equitable in the
premises'. And this general prayer is broad enough 'to justify extension
of a remedy different from or together with the specific remedy sought.
(Schenker v. Gemperk L-16449, Aug. 31, 1962, 5 SCRA 1042). lt is also
true that paragraph 10 of the petition states -
That pursuant to Sec. 9 of said Act, respondents PLANTERS gave to
petitioners LABORERS the latters' lawful participation in the sugar
production as well as in the by-products and derivatives thereof and
continue to give the same until November 1, 1955, when they ceased to
do so until the present
but appellants-laborers have explained that what they meant by the
quoted paragraph was that their 6% share had actually been set aside
during the period from June 22,1952, to October 31, 1955 (p. 1446,
Appellants' Reply Brier, not that the amounts due were actually
delivered to or received by plaintiffs-appellants-laborers. Besides, no
questions were raised during the trial of this case when the matter of the
investment of the P4,000,000.00 was taken up by counsel of plaintiffs-
appellants-laborers. In fact, counsel of Central agreed that what
happened to the P4,000,000.00 was a proper issue in the case (p. 26,
tsn., April 28, 1970). Furthermore, when Felipe de Guia, Chief
Agricultural Wage Section, Department of Labor, testified as
representative of the Secretary of Labor, on the matter of distribution of
the P1,186,083.34, no objections were raised either by defendants-
appellees. Again, when counsel for plaintiffs-appellants-laborers asked
witness de Guia about the records of the distribution of the amounts of
P1,186,083.34 and the P4,000,000.00 and its dividend earnings, counsel
for Central likewise agreed to the production of whatever records there
were available concerning these amounts (p. 157, tsn., June 16, 1970).
But no records whatsoever were produced until the presentation of the
evidence of the parties was closed.
In effect what has been established by the evidence is that the
P4,000,000.00 together with its earnings in dividends in the total
amount of P3,385,950.00 (p. 66, tsn., June 16, 1970), has not be en
distributed to or received by plaintiffs-appellants-laborers. (Pp. 6574,
Appendix A, Victorias' Brief)
-B-
In their brief filed with Us, the PLANTERS vehemently dispute these
conclusions and argue thus:
THIRD ASSIGNMENT OF ERROR
THAT THE COURT OF APPEALS ERRED IN FINDING AND
CONCLUDING THAT THE SUM OF FOUR MILLION (P
4,000,000.00) PESOS OUT OF THE FIVE MILLION ONE
HUNDRED EIGHTY SIX THOUSAND AND EIGHTY THREE & 34/
(P5.186,083.34) PESOS CONSTITUTING THE 60% SHARE OF THE
LABORERS IN THE 10% INCREASE IN PARTICIPATION OF THE
PLANTERS FROM THE CENTRAL UNDER REPUBLIC ACT NO.
809 FROM JUNE 22, 1952 (THE DATE OF THE EFFECTIVITY OF
SAID ACT) TO OCTOBER 31, 1955 (THE DAY PREVIOUS TO
NOVEMBER 1, 1955 WHICH IS THE EFFECTIVE DATE OF THE
MILLING AGREEMENTS OF THE PLANTERS AND THE
CENTRAL), WAS NOT DISTRIBUTED TO AND RECEIVED BY
THE LABORERS, SUCH FINDINGS BEING BASED ON A
MISAPPREHENSION OF THE SPECIFIC ISSUES INVOLVED IN
THE CASE AND GOES BEYOND THE RANGE OF SUCH ISSUES,
ASIDE FROM BEING CONTRARY TO THE ALLEGATIONS OF
THE ORIGINAL PETITION. AS A COROLLARY, THE COURT OF
APPEALS ERRED IN HOLDING THAT THE PLANTERS AND THE
CENTRAL ARE JOINTLY AND SOLIDARILY LIABLE THEREFOR.
In relation to this assignment of error, the Honorable Court of Appeals
stated thus:
... if it is further considered, as shown in our resolution of the third
issue, that this amount of P 4,000,000.00, along with its accruals, was
never received by the plantation laborers to this day, the unwisdom of
investment, let alone its illegality, is hardly in doubt.'
 (Appendix "A" pp. 75-76).
... and the fact that the laborer's P4,000,000.00 worth of shares and their
earnings have, without any explanation from anyone from the Central
from the Planters. or from the Special Committee, vanished into limbo
without the laborers being able to actually receive any cent of the same.'
(Appendix "A", p. 77)
In effect, what has been established by the evidence is that the
P4,000,000.00, together with its earnings in dividends in the total
amount of P3,385,950.00 (pp. 6, tsn., June 16,1970), has not been
distributed to or received by the plaintiffs-appellants-laborers.
(Appendix "A", p. 91).
For the Purposes of clarification, let us inquire into the question as to
what P4,000,000.00 does the Court of Appeals refer to:
On pages 17 et seq. of the Decision of the Court of Appeals, reference is
made to a document known as the "Amicable Settlement-Compromise
Agreement' and referred to by the Court of Appeals for convenience as
ASCA. This ASCA is quoted in full on pages 18-24 of the Decision.
(Appendix 'A', pp. 25-35).
In said ASCA, which was executed on 5 March 1956, it was stipulated
that from June 22, 1952, when the Sugar Act took effect, to October 31,
1955, the parties recognized that said Sugar Act was applicable.
Consequently, the Planters were entitled to a 70- 30 sharing basis from
the Central, thereby earning a 10% increase in their previous
participation of 60%. This 10% increase amounted to P8,643,472.24.
Of this P8,643,472.24, the Planters were entitled to 40% thereof or
P3,457,388.90 and the laborers were entitled to 60% thereof or to the
amount of P5,186,083.34. Of this latter amount, it was agreed that
P1,186,083.34 was to be distributed by the Planters to their laborers
while the remaining P4,000,000.00 was to be invested by a Special
Committee in shares of stock of the Central.
It is this amount of P4,000,000.00, therefore, that is involved in the
present consideration.
The Court of Appeals held that this amount was not distributed to and
received by the Laborers.
We respectfully and humbly submit that this finding and conclusion of
the Court of Appeals has no basis in law and fact, and is contrary to the
law of evidence and to evidence on records.
Said finding has no basis in law and in act.
Before we proceed, it might be pertinent to inquire into what is being
claimed (their cause of action) by the Laborers in their petition or
complaint.
A simple perusal of the petition will reveal that the Laborers are asking
for their share under the Sugar Act of 1952, from November 1, 1955 to
date. In other words, there is no claim whatsoever in the petition for any
amount corresponding to the period covered from June 22, 1952 to
October 31, 1955.
Thus, the Laborers in their petition dated November 9, 1962 alleged:
That pursuant to Sec. 9 of said act, respondents planters gave
petitioners-laborers the latter's lawful participation in the sugar
production as well as in the by-products and derivatives thereof and
continued to give the same until November 1, 1955 when they ceased to
do so until the present.'
In consonance with their allegations in said paragraph 10 of their
petition dated November 9, 1962, laborers in paragraphs 1 and 2 of their
prayer, prayed that judgment be rendered:
(1) Declaring the applicability of the Victorias Mills District of the
sharing participation prescribed by Republic Act 809 for every crop year
starting with the crop year 1955-56.
(2) Ordering respondent planters and/or respondent Central to account
for and petitioners laborers' lawful share in the sugar produce, as well as
the by-products and derivatives thereof, for every crop year from the
crop year 1955-56, in accordance with Rep. Act No. 809. plus legal
interests thereon computed on the basis of the average market price
during the month in which the sugar was sold;
(See Annex 'C' of the Petitioner's Petition)
Said admission of the laborers in paragraph 10 of their petition dated
November 9, 1962 and in their prayer, to the effect that they have
already received their lawful participation in the sugar production as
well as in the by-products and derivatives thereof from 1952 until
November 1, 1955 was again reiterated in the 'consolidated opposition
to the motion to dismiss', dated February 28, 1963, when they argued
and we quote:
To recapitulate, inasmuch as the present action is not merely for the
recovery of money, but is primarily brought for the enforcement of
Republic Act No. 809 and the declaration of its applicability to the
respondents for the crop year starting with the crop year 1955-56, we
respectfully submit that this Honorable Court has jurisdiction over the
subject matter of the present action. (See Annex 'C' of respondents'
Petition for Review on certiorari by respondent Victorias Milling Co.,
Inc.' (emphasis supplied).
Said allegation in paragraph 10 of the laborers petition dated November
9, 1962 as well as in paragraphs 1 and 2 of the prayer were again
reproduced verbatim in their amended petition dated March 6, 1964,
(See Annex C-1, Central's petition for review on certiorari).
The Honorable Court of Appeals itself found also as a fact that:
... it is also true that paragraph 10 of the petition states-
That pursuant to Sec. 9 of said Act, respondents PLANTERS gave to
petitioners laborers the tatters' lawful participation in the sugar
production as well as in the by-products and derivatives thereof and
continued to give the same until November 1, 1955, when they ceased to
do so until the present;
(Appendix "A", p. 89, Italic supplied)
From the foregoing, it is obvious that the share pertaining to the laborers
covering the period from October 31, 1952 to June 22, 1955 was never
made an issue in the case at bar.
Since the share pertaining to the laborers was never made an issue in the
case at bar for the simple reason that the Laborers have expressly
admitted in their pleadings the receipt of their entire share covering
from October 31, 1932 to June 22, 1955, therefore, the Court of
Appeals, in holding the planters jointly and solidarily liable with the
central for P6,399,105.00 plus 6% interest per annum and P180,768.38
plus 6% per annum all representing the laborers' share pertaining to said
period, gravely abused its discretion said abuse of discretion amounting
to lack of jurisdiction.
It is a well settled principle in procedure that courts of justice have no
jurisdiction or power to decide question not in issue (Limtoco vs. Go
Fay, 80 Phil. 166-176).
Thus in the following cases this court held:
It is a fundamental principle that judgments must conform to both the
pleadings and the proof, and must in accordance with theory of the
action upon which the pleadings were framed and the case was tried;
that a party can no more succeed upon a case proved, but, not alleged
than upon one alleged but not proved (Ramon vs. Ortuzar, 89 Phil. 730,
742). (emphasi supplied)
A judgment going outside the issues and purporting to adjudicate
something upon which the parties were not heard, is not merely
irregular, but extrajudicial and invalid.' Salvante vs. Cruz, 88 Phil. 236,
244; Lazo vs. Republic Surety & Insurance Co., Inc., 31 SCRA 329,
334).
The actuation of the trial court was not legally permissible, especially
because the theory on which it proceeded involved factual
considerations neither touched upon in the pleadings nor made the
subject of evidence at the allegations of the parties of their respective
claims and defenses submitted to the court for trial and judgment.' This
rule has been consistently applied and adhered to by the courts.
Moreover, to award damages in favor of petitioner Miguel Tolentino,
Sr., and against herein private respondents would violate the cardinal
rule that a judgment must conform to and be supported by both the
pleadings and the proofs, and should be in accordance with the theory of
the action on which the pleadings were framed and the case was tried
(Secundum allegata et probata Republic vs. de los Angeles, 41 SCRA
422, 450, Emphasis supplied).
Said findings is contrary to the law on evidence
As previously shown, the Laborers have expressly admitted in their
pleadings the receipt of their entire share covering the period from
October 31, 1952 to June 22, 1955, or all of the P5,186,083.00.
What then is the legal effect of said admission by the Laborers.
Section 2, Rule 129 of the Rules of Court provides:
Judicial admissions. — Admissions made by the parties in their
pleadings, or in the course of the trial or other proceedings do not
require proof and cannot be contradicted unless previously shown to
have been made through palpable mistake.
(Emphasis supplied)
In relation to the foregoing rule, this Honorable Court in the following
cases held:
Soriano is bound by his own petition and by the adjudication of his
claim made in consonance with his prayer. A party cannot trifle with a
court's decision or order which he himself sought with full awareness of
his rights under the premises, by taking it or leaving it at pleasure. The
allegations, statements or admissions contained in a pleading are
conclusive as against the pleader. A party cannot subsequently take a
position contradictory to, or inconsistent with, his pleadings, (Mc Daniel
vs. Apacible, 44 Phil., 448; 49 C.J. 128-134). Specifically, he is not
allowed to ask his money back when the peso value is good, and later
say he wants to keep the land when the peso purchasing power is down.
'Cunanan vs. Amparo, et al., 45 Off. Gaz., 3796, (The Revised Rules of
Court by Francisco Evidence, p. 66).
An admission in a pleading may be made by an express
acknowledgment of some fact or facts set forth in the pleading of the
opposite party, or by a failure to deny or otherwise controvert the truth
of such fact or facts. Thus, facts alleged in the complaint are deemed
admissions of the plaintiff and binding upon him. Facts alleged in the
answer are deemed admissions of the defendant and binding upon him.
And facts stipulated in an agreement Of facts are deemed admissions of
both parties and binding upon them. Facts stated in a motion are deemed
admissions of the movant and binding upon him. The allegations,
statements or admissions in a pleading are conclusive as against the
pleader who cannot subsequently take a position contradictory to, or
inconsistent with his pleadings.' (Cunanan vs. Amparo, 45 O.G. 3796)
(The Revised Rules of Court, Evidence, Francisco, p. 66).
An admission may occur in the complaint as well as in the answer. Thus
where a complaint alleged the amount of the account to be $541.90, and
that there was a balance due, after deducting all payments, of $175.75, it
was held that the plaintiff admitted the payment of $366.15, and that the
defendant was not precluded from insisting upon this admission by
disputing the correctness of the items of the account. (White vs. Smith,
46 N. Y. 418.)
The defendant's allegation in his answer that the plaintiff still owes him
after deducting the value of the goods alleged to have been taken by the
defendant from the plaintiff, if, interpreted in conjunction with the
defendant's counterclaim for the balance resulting, after deducting the
price of said goods, is an express admission of the existence of the
obligation for the value of said goods. (Jurika vs. Castillo, 36 Off. Gaz.,
476.)
Notwithstanding that the law on evidence So declares that such an
admission does not require proof and cannot be contradicted, the Court
of Appeals still gave credence to respondent Laborers' explanation in
their Reply Brief. (Appendix "A", pp. 89-90), which is not evidence at
all. To sustain this finding is to give evidentiary value to an argument in
party's reply brief. This is against all rules of evidence required such test
as to admissibility, competency, relevancy, and materiality and which
can only be accomplished during the trial proper.
The Honorable Court of Appeals, in futile effort to justify its ruling that
the share pertaining to labor covering the period from June 22, 1952 to
October 31, 1955 was not distributed to the laborers despite the
admission made by the laborers in their pleadings that they have already
received their share covering said period, argued that respondents
laborers have explained that what they meant by the quoted paragraph
was that their 60% had actually been set aside during the period from
June 22, 1952 to October 31, 1955, (page 1446, appellants' Reply Brief),
not that the amounts due were actually delivered to or received by
plaintiff appellants laborers. (Appendix 'A', pp. 89-90)
But it should be noted that this contention of the Laborers was raised for
the first time only in their Reply Brief long after the trial of the case. In
other words, it was a second thought of the Laborers brought about in
their Reply Brief, thus amounting to change in theory and a deprivation
of the right of the Planters to be apprised of the real issue for their
defense.
Although it may be true, that under Section 2, Rule 129 of the Rules of
Court by way of exception the Court may in its reasonable discretion
relieve the party from the effects of his admission, yet the same can be
had only upon proper showing that said admission was made thru
palpable mistake. In the instant case the admission made by the
respondent-laborers found in paragraph 10 of their petition as well as
paragraphs 1 and 2 of their prayer was never shown to have been made
thru palpable mistake.
Reading of the explanation of respondent-laborers as appearing in page
1446 of their reply brief relied upon by the Court of Appeals reveals that
the allegations in paragraph 10 of their petition dated November 9, 1962
as well as the amended petition dated March 6, 1964 was never made
thru palpable mistake.
What was explained by respondents-laborers in page 1446 of their reply
brief was the meaning of said paragraph 10. According to the
respondent-laborers what they meant by their allegation in paragraph 10
... .
that pursuant to Sec. 9 of said act, respondent-planters gave petitioners-
laborers the latter's lawful participation in the sugar production as well
as in the by-products and derivatives thereof and continued to give the
same until November 1, 1955 when they ceased to do so until the
present..
is that ...
the 60% of plaintiff-appellant-laborers in the annual 10% increase
participation of the defendant appellees planters had in fact been set
aside pursuant to Section 9 of Republic Act 809 for the duration of the
period beginning June 22, 1952 and ending October 31, 1955.
Since said admissions were never withdrawn, modified or explained or
shown to have been made thru palpable mistake, therefore, Laborers
were never relieved of the effects of their admission which under the
rule on evidence is conclusive upon them.
Suffice it to state their admission in paragraph 10 of their petition being
conclusive as against them which they cannot thereafter contradict
(Cunanan v. Amparo, Supra) established the fact that they already
received their share under the Sugar act of 1952 up to November 1,
1955 and against this fact no argument can prevail.
CONTRA FACTUM NON VALET ARGUMENTUM.
That the record is replete
with evidence showing that
the share of the laborers ATTY. SABIO

were distributed to them. Q. This distribution covered the period from June 22, 1952 to what
period?
Not only is there an admission by the Laborers of their receipt of the
participation granted them by the Sugar Act up to November 1, 1955, A. To October 3l, 1955.
but the record is replete with evidence showing that there was a
distribution of this amount of P4,000,000.00 and its accruals, from year Q. Will you kindly tell the Court the basis of the distribution of the
to year from a witness presented by the Laborers themselves. amount distributed?

Mr. Felipe de Guia, Chief of Agriculture wage Section of the A. As I understand, this amount was the participation due to the laborers
Department of Labor, a witness for the laborers testified that they made working in that milling district, from June 22, 1952 up to October
a distribution, or supervised the distribution of the participation of labor 31,1955.
covering the period from June 22, 1952 to October 31, 1955, pursuant to
the provision of Section 9, paragraph 2 of the Sugar Act that 'The COURT
distribution of the share corresponding to the laborers shall be made
under the supervision of the Department of Labor.' Thus he testified: Q. June 22 of what year?

xxx xxx xxx A. June 22, 1952 to October 3l, 1955.

Q. Mr. Guia, what steps, if you know the Department of Labor has Proceed.
taken. . . . I withdraw the question.
ATTY. SABIO
Q. As Chief of the Agricultural Wages Section under the Department of
Labor, do you know what steps your section of the Department of Labor Q. Under what law that is due to them? 'A. RA 809, otherwise, known
has taken to implement Section 9 of RA 809, otherwise, known as Sugar as Sugar Act of 1952.
Act of 1952, with the Victorias Milling District, Negros Occidental?
A. By the way, Mr. Guia, what section or Division of the Department of
A. Yes, sir, we have distributed also the supposed share of the laborers Labor is embodied the implementation of RA 809? 'A. The Agricultural
amounting to 6,717,360.00. Wage Section of which I am the Chief.

COURT ATTY. HAGAD

Q. When was that distribution made? CROSS EXAMINATION

A. It was made in the year 1955. Q. How was this amount of P9,612,421.36 distributed?

Proceed.
A. The original amount which is supposed to be distributed is
P5,186,083.36; but on account of converting the 4,000 shares of the
laborers' shares of the stock, it was distributed continuously year to
year. The dividends amounted to more than 1,000,000.00, which is
added to this amount. It was based practically on the 10% increase
participation due to the planters of the Victorias Milling District,
wherein 60% of the 10% increase participation represented the said
amount which was distributed among the laborers of the Victorias
Milling District.
Q So, P5,186,083.36 was 60% Of 10% was the increase participation of
the planters within the Victorias Milling District, for the period from
June 22, 1952 to October 31, 1955; is that right?
A. Yes, sir.
(t.s.n., pp. 17-21, December 15, 1967) Lorenzo C. Caraig; emphasis
supplied).
ATTY. SABIO
Q. Do you have in your possession the record on how this amount of
P1,186,083.34 marked as Exhibits 'XXX' thru XXX-6?
A. Yes, sir.
Q. Would you be able to bring that next time?
A. I think so.
Q. Would you be able or do you have in your possession a record
showing how the amount of P4,000,000.00 marked as Exhibit XXX-10
was disposed of ?
A. Not with the P4,000,000.00 because the distribution of this amount
was made in five releases as per what is stated in the statement as
presented here.
Q. At any rate, my question is: Do you have in your possession the
record of the distribution of the P 4,000,000.00?
A. Yes, sir.
(t.s.n., pp. 143-144, June 16, 1970, L. Caraig; emphasis supplied).
Again:
COURT:
What is the purpose now of Atty. Sabio in presenting those records?
ATTY. SABIO: '
We will show that not only a portion of the amount of P5,186,083.34,
including of course the earnings, was distributed that properly belong to
the laborers.
COURT:
Why not find out from Mr. de Guia the record about the distribution
how much was distributed?
WITNESS:
Atty. Sabio, I just want to clarify your statement the distribution I
personally handled, I want that to be corrected. If you will allow me, sir,
if Mr. Bascug can recall that in our distribution from the first to the
fourth I think each and everyone of them even their members could
really testify to the effect that the distribution was orderly undertaken. I
just want to put that on record. There should be no insinuations, with
due tolerance, being the supervisor of the distribution.
ATTY. SABIO:
We do not make any insinuation. We only want the record. In the
interest of all concerned and in the interest of justice, if the records will
be brought here we hope that the records are not irregular and we
believe if they are regular no responsibility would be incurred by any
official of the Department of Labor.
WITNESS:
Which are you referring to, Atty. Sabio ?
ATTY. SABIO:
Any official of the Department of Labor.
WITNESS:
What charge of irregularity?
ATTY. SABIO:
The distribution of P5,186,083.34.
WITNESS:
In order to facilitate all those records in bringing here, can I request
Atty. Sabio any personnel that can accompany me. Because the records
are so voluminous. For one distribution of one planter there are no less
than 28 pages and there are five distributions. So I am requesting Atty.
Sabio to give me an assistant to come as well as bring the records and I
am willing to bring all those records because I have nothing to hide. It is
also shown that there are those laborers who were not able to receive
and it stated in the undistributed amount.'
(t.s.n., pp. 151-154, June 16, 1970, V. Salvarino emphasis supplied).
On cross examination, this witness further testified thus:
Atty. Hagad
O. My question Mr. de Guia, is this, the figures referred to in Exh. 23.
Victorias Milling Co., Inc. came from the records of your office, is that
correct?
A. Yes, sir.
Q. Exh. 23 mentioned first, second and up to the fifth distribution. What
do you mean by this ?
A. There are distributions undertaken in the Victorias Milling Co., Inc.
The first distribution was stated here is in accordance with the number
that is corresponding to the amount distributed or released for
distribution among the laborers of the Victorias Milling Co., Inc.
Q. By the first distribution, you are referring to the Amicable Settlement
Compromise Agreement the amount of P1,186,083.36 and this
correspond to the same amount indicated in the Amicable Settlement-
Compromise Agreement you also Identified,: is that correct ?
A. I do not know exactly if this figure stated there is correct but I have
to check whether it tallies with it.
Q. Which figures is reflected in Exh. XXX and Exh-XXX-9?
A. There is difference of 2 centavos.
Q. These other distributions that you made, were those also done under
your supervision beginning from the second up to the fifth
distribution')?
A. (Correction, please). I was not the one who made the distribution: I
was only concerned on the first distribution which was supervised.
Q. As first of the team of supervisors, you supervised the actual delivery
of the money to the laborers; is that correct?
A. Yes, sir.
(t.s.n., pp. 20-22, June 18, 1970; Lorenzo Caraig).
Silence of Central Planters,
and Special Committee
According to this Honorable Court, because there was no 'explanation
from anyone from the Central ,from the Planters or from the Special
Committee. (Appendix 'A', p. 77) as to the distribution of this amount of
P4,000,000.00 then the conclusion is that the said amount was never
distributed to the plantation laborers. This conclusion is entirely lacking
in basis. For it has been established in the preceding paragraphs that
according to law (Section 2, Rule 129, Rules of Court), such an
admitted fact does not require proof. If so, what was there to be proved
by the Planters, the Central or the Special Committee as to the
distribution of the said P4,000,000.00 when there is no dispute as to this
fact, the same being admitted in the pleadings.
Not only did this Honorable Court err in finding that the P4,000,000.00
was not distributed to the Plantation laborers, but it also fell into error
when it held that it could order Planters and Central to pay the said
amount to the Laborers even something they did not ask specifically
under the general prayer, especially so because such a relief is
inconsistent with the admission of the respondent laborers that they
were already given their share corresponding to the period from June
22, 1952 to October 31, 1955. While it may be true that a general prayer
is probably broad enough 'to justify extension of a remedy different
from or together with specific remedy sought' a general prayer is no
longer broad enough to justify extension of a remedy which is
INCONSISTENT with the specific allegation in the petition as in the
case at bar. The case of Schenker vs. Gemperk, L-16449, Aug. 31, 1962,
5 SCRA 1042 relied upon by the Court of Appeal cannot, therefore, be
made applicable to the case at bar, for the facts in said case are far
different from the one at bar. In the aforecited case, the remedy
extended is merely different from or together with the specific prayer
sought; in the case at bar, the remedy extended is INCONSISTENT with
the specific allegation and cause of action of respondent laborers'
petition.
The cause of action of the respondent laborers is only for their alleged
share from November 1, 1955 and is further bolstered by paragraph 1 of
their prayer reading thus;
Declaring the applicability of the Victorias Mill District of the sharing
participation prescribed by Republic Act 809 for every crop year
starting with the crop year 1955-56
(EMPHASIS SUPPLIED)
With respect to the investment of the P4,000,000.00 in 40,000 shares of
stock of the Victorias Milling Co., Inc., no prejudice was really caused
to the plantation laborers because these shares of stock remained their
property. It was never claimed by the PLANTERS or by the Special
Committee as theirs. It was only held in trust for them by the Board of
Trustees. (Art. 1448, New Civil Code). This was not only a wise
investment; it also earned a good return, for on the principal of
P4,000,000.00, its stock and cash dividends amounted to about
P3,385,950.00 (p. 50, Decision). (Pp 69-97, PLANTERS' Brief.)
We have carefully scrutinized the foregoing arguments, supported as
they are by the pleadings on record as well as unexpurgated and
unquestioned parts of the transcript of the stenographic notes of the
testimony of the FEDERATION's principal witness, Mr. de Guia, in the
light of the pertinent conclusions of the Court of Appeals, and at this
point, We are already apprehensive that said conclusions can be said to
be supported by such substantial evidence as would preclude this Court
from accepting them as unreviewable by this Court under the general
limitation of this Supreme Court in regard to findings of fact of the
Court of Appeals.
-C-
'This impression of Ours that the Appellate Court's above conclusions
cannot be said to be sufficiently grounded gathers added force when the
following able discussion of the same apparent misapprehension of the
evidence by the Appellate Court in the brief of VICTORIAS' ninth to
eleventh (IX to XI) assignments of error in its brief with Us is taken into
account:
 Ninth Assignment of Error
WITH REFERENCE TO THE AMOUNT OF P6,399,105.00 AND THE
AMOUNT OF P180,769.38, WHICH ACCRUED IN FAVOR OF THE
LABORERS FROM JUNE 22, 1952 to OCTOBER 31, 1955 WHEN
THERE WAS AS YET NO WRITTEN MILLING AGREEMENT, IN
VIEW OF THE FACT THAT THE LABORERS ADMITTED IN
THEIR PETITION THAT THE PLANTERS GAVE THEM THEIR
LAWFUL PARTICIPATION FROM JUNE 22, 1952 TO OCTOBER 31,
1955 AND THERE BEING, MOREOVER, NO ALLEGATION OF
ANY CAUSE OF ACTION RELATIVE THERETO, THE COURT OF
APPEALS ERRED AND ACTED WITH GRAVE ABUSE OF
DISCRETION WHEN IT HELD PETITIONER VICMICO AND THE
PLANTERS JOINTLY AND SEVERALLY LIABLE VIA TORT FOR
SAID AMOUNTS.
Aside from adjudging petitioner VICMICO and the planters jointly and
severally liable for the money equivalent of 60% of the 4% increased
participation of the planters from November 1, 1955 to October 31,
1974, which amount would run to tens of millions of pesos, a judgment
that, as previously discussed, finds no basis in law and in fact, the Court
of Appeals likewise adjudged petitioner VICMICO and the planters
jointly and severally liable for tort for P6,399,105.00 and for
P180,769.38, which sums pertained to the amounts that accrued in favor
of the laborers from June 22, 1952 to October 31, 1955, during which
period there was no milling agreement.
The Court of Appeals, in attempted justification of its aforesaid ruling,
stated that while FFF, et als. admitted in paragraph 10 of their petition
that the 'planters gave to petitioners-laborers the latter's lawful
participation in the sugar production as well as in the by-products or
derivatives thereof and continued giving the same until November 1,
1955' (Par. 10, Petition of FFF et als.), the FFF et als. in their brief filed
before the Court of Appeals, 'explained that what they meant ... was that
their 6% share had actually been set aside during the period from June
22, 1952 to October 31, 1955' (Decision, p. 61). The Court of Appeals
further stated that counsel for petitioner VICMICO allegedly agreed that
what happened to the P4 Million was a proper issue in this case' (ibid.,
p. 62) and that the general prayer of FFF et als. 'for such other relief as
may be just and equitable under the premises is broad enough to justify
extension of a remedy not specifically sought' (ibid., p. 61 ).
Petitioner VICMICO respectfully submits that the justification advanced
by the Court of Appeals is untenable as we shall hereunder discuss and
as shown by the fact that the laborers did actually receive said amounts
(Vide Exh. 23-VICMICO or Annex I of VICMICO's Petition for
Certiorari), as discussed at length in the Tenth Assignment of Error.)
The FFF, et als. did not allege any cause of action in their petition
concerning their share from June 22, 1952 to October 31, 1.955, during
the period when there was as yet no written milling agreement; as a
matter of fact, FFF et als. expressly admitted receipt of their lawful
participation pertaining to said period. (emphasis supplied)
As previously noted, VICMICO and the planters did not have any
written milling Contract from Julie 22, 1952, when Republic Act 809
took effect, until October 31,1955 the last day prior to the written
milling agreements' having become effective. The amounts pertaining to
the planters' laborers representing 60% of the planters' increased
participation, pursuant to the sharing proportion prescribed in Section I
of Republic Act 809, were expressly provided for in the amicable
settlement-compromise agreement ASCA executed between the central
and the planters.
The Court of Appeals, in its Decision (Annex Q to VICMICO'S petition
for Certiorari) declared the foregoing amicable settlement-compromise
agreement or ASCA to be valid and legal and not violative of Republic
Act 809. (Vide, Annex Q, p. 43) pursuant to the amicable settlement-
compromise agreement, the entire share of the planters' laborers was
eventually delivered and distributed to them ,the distribution having
amounted to a grand total of P 6,536,741.98, involving 474,811 laborers
in five (5) distributions. (Vide Exh. 23 VICMICO or Annex I hereof).
FFF et als. expressly admitted receipt of all amounts pertaining to the
laborers during the period June 22, 1952 to October 31, 1955. Thus the
petition of FFF et als., reads in part:
08. That on June 22, 1952, Republic Act No. 809 otherwise known as
the Sugar Act of 1952, was enacted the pertinent provisions of which
are as follows:
xxx xxx xxx
9. That at the time that the said Act went into effect, a majority of
sugarcane planters of the Victorias Mill District had no milling
agreements with respondents CENTRAL.
10. That pursuant to Sec. 9 of said Act, respondent PLANTERS gave to
petitioners LABORERS the latter's lawful participation in the sugar
production as well as in the by-products and derivatives thereof and
continued to give the same until November 1, 1955 when they ceased to
do so until the present;' (Vide Annex A to VICMICO's petition for
certiorari.)
In view of the foregoing express admissions of et als., herein petitioner
VICMICO stated in its answer to the petition that the 'windfall bonuses,
if any, given by the adherent planters to their plantation laborers was the
consequence of the terms of the amicable settlement-compromise
agreement arrived at between respondent central and its adherent
planters within the district in relation to a then pending court case
between them'. (Vide, par. 7 of Annex E to VICMOCO's petition for
Centiorari.) On the part of the planters, they averred that the 'windfall
bonuses that respondent planters herein gave to their plantation
laborers ... are legal and valid and were the result or consequence of the
terms and conditions of the amicable settlement arrived at between the
respondent central and its adherent planters within the district ... (Vide
Annex 'G' to VICMICO's Petition for Certiorari.)
It is obvious that FFF, et als. did not allege any cause of action with
reference to those amounts which accrued in favor of the laborers from
June 22, 1952 to October 31, 1955) as they, in fact, admitted that the
planters gave to petitioners laborers the latter's lawful participation in
the sugar production as well as in the by-products or derivatives thereof
and continued to give the same until November 1, 1955. That FFF et als.
did not allege ally cause of action relative thereto is evident, the
essential elements constituting a cause of action not being present.
There is a cause of action only if certain essential elements are alleged
in the petition. We quote:
A cause of action is an act or omission of one party in violation of the
legal right of the others. Its essential elements are, namely: (1) the
existence of a legal right in the plaintiff, (2) a correlative legal duty in
the defendant, and (3) an act or omission of the defendant in violation of
plaintiff's right with consequential injury or damage to the plaintiff for
which he may maintain an action for the recovery of damages or other
appropriate relief.' (Mathay vs. Consolidated Bank & Trust Co., 58
SCRA 559.)
While FFF et als. alleged that the laborers had the legal right to a certain
percentage share of the sugar produced from June 22, 1952 to October
31, 1955, they did not allege any correlative duty on the part of
petitioner VICMICO to deliver those shares to the laborers, as said
laborers, in fact, expressly admitted that the planters, who had that
exclusive correlative duty under Section 9 of Republic Act 809 had
already delivered to the laborers the latter's lawful participation.
Moreover, insofar as any amounts due the laborers during the period
when there was no milling contract are concerned, the petition of FFF et
als. did not allege any act or omission whatsoever, on the part of
petitioner VICMICO or on the part of the planters in violation of the
laborer's rights. There having been no allegation whatsoever of such a
cause of action, the Court of Appeals acted with grave abuse of
discretion in nevertheless adjudging petitioner VICMICO jointly and
severally liable with the planters for the amounts pertaining to the
laborers during the period June 22, 1952 to October 31, 1955.
FFF et als. could not be permitted to controvert their express admission
and any proof contrary thereto or inconsistent therewith should have
been ignored. (Underlining of emphasis supplied)
It is a fundamental principle that an admission made in a pleading
cannot be controverted by the party making such an admission. We
quote:
Our decisions from Irlanda v. Pitargue, announced in a 1912 decision,
to De Borja v. Vda. de Borja, promulgated in 1972, speak to that effect.
It is a familiar doctrine according to Justice J.B.L. Reyes in Joe's Radio
& Electrical Supply v. Alto Electronics Corp., 'that an admission made
in the pleadings cannot be controverted by the party making such
admission and are conclusive as to him, and that all proofs submitted by
him contrary thereto or inconsistent therewith, should be ignored,
whether objection is interposed by the party or not (Santiago vs. De los
Santos, 61 SCRA 146, 149.)
The explanation given by FFF et als. to the effect that what they meant
by the word 'gave' is that the laborers' share during the period was
merely set aside for said laborers is not only a belated and forced
explanation advanced only at the time FFF et als., filed their reply brief
with the Court of Appeals under date of April 30, 1972, or almost ten
years from the date said parties filed their petition on or about
November 9, 1962, but is also contrary to the ordinary and generally
understood meaning of the word 'gave'. The matter is rather substantial
in the sense that it involves an amount representing millions of pesos
which has not been treated as a cause of action in the petition of FFF et
als., nor has it been specifically mentioned in their prayer. What was
required of the FFF was that they amend their petition, with prior leave
of court, so that petitioner VICMICO as well as the planters could have
directly met the issue. This procedural requirement not having been
complied with by the FFF et als. and the Court of Appeals having
proceeded to decide the case on certain issues not raised by the parties,
said Court of Appeals acted with grave abuse of discretion, (Evangelista
vs. Alto Surety and Insurance Co., Inc., 103 Phil. 40 1).
The Court of Appeals moreover contends (Vide Annex Q to VICMICO's
Petition for Certiorari, p. 61) that while the petition of the FFF et als.,
did not specifically pray for recovery of the amounts pertaining to the
period from June 22, 1952 to October 31, 1955, their general prayer 'for
such other relief as may be just and equitable in the premises' is broad
enough to justify extensions of a remedy different from the specific
amounts sought. While the phrase 'for such other relief as may be just
and equitable in the premises' may embrace all other reliefs not
specifically prayed for, only those reliefs which are alleged or supported
by the allegations in the petition or the complaint can validly be
adjudged. In the absence of any such allegation, as in the case at bar, no
relief other than that justified by the allegations and proof may be
awarded. We quote:
Moreover, to award damages in favor of petitioner Miguel Tolentino,
Sr., and against herein private respondents would violate the cardinal
rule that a judgment must conform to and be supported by both the
pleadings and the proofs, and should be in accordance with the theory of
the action on which the pleadings were framed and the case was tried
(secundum allegata et probata )(Republic vs. De los Angeles, 41 SCRA
422, 450).
xxx xxx xxx
The actuation of the trial court was not legally permissible, especially
because the theory on which it proceeded involved factual
considerations neither touched upon in the pleadings nor made the
subject of evidence at the trial. Rule 6, Section 1, is quite explicit in
providing that 'pleadings are written allegations of the parties of their
respective claims and defenses submitted to the court for trial and
judgment.' This rule has been consistently applied and adhered to by the
courts.
The subject matter of any given case is determined ... by the nature and
character of the pleadings submitted by the parties to the court for trial
and judgment. (Belandres vs. Lopez Sugar Central Mill Co., Inc., 97
Phil. 100, 103).
It is a fundamental principle that judgments must conform to both the
pleadings and the proof, and must be in accordance with the theory of
the action upon which the pleadings were framed and the case was tried;
that party can no more succeed upon a case proved, but not alleged, than
upon one alleged but not proved. (Ramon v. Ortuzar, 89 Phil. 730, 742).
It is a well-known principle in procedure that courts of justice have no
jurisdiction or power to decide a question not in issue. (Lim Toco vs. Go
Fay, 80 Phil. 166).
A judgment going outside the issues and purporting to adjudicate
something upon which the parties were not heard, is not merely
irregular, but extrajudicial and invalid. (Salvante vs. Cruz, 88 Phil. 236,
244).' [Lazo vs. Republic Surety & Insurance Co., Inc. 31 SCRA 329,
334).]
Plaintiffs-appellants FFF et als. sought to bang up matters concerning
the share of the laborers from June 22,1952 to October 3l, 1955 not by
way of recovery thereof, as FFF et als. in fact admitted receipt of
everything due, but merely by way of pursuing their theory that the
amicable settlement-compromise agreement is allegedly null and void
(Emphasis supplied)
When counsel for plaintiffs-appellants propounded questions to Mr. de
Guia concerning the alleged disagreement of the Department of Labor
concerning the procedure adopted in the disposition of the shares of the
laborers, Atty. Ditching, a planter, as counsel for himself and his wife,
objected thereto on the ground that, as per paragraph 10 of their petition,
plaintiffs-appellants admitted receipt of all of the shares up to October
31, 1955.
Q You stated that your Department disagreed with the procedure
adopted by the Victorias Milling Co., Inc. and its planters in the
disposition of the amount of money due the laborers under Republic Act
809; and you also mentioned that you have document in your possession
of the objection of your Department to such procedure; is that right?
ATTY. DITCHING:
We object to that because there is no necessity of bringing that point
because the petition itself admitted that the petitioners received their
participation. lt is here in paragraph 10 of the petition.
COURT:
I believe the objection is tenable because the supposed participation of
the laborers from the 40-60 sharing which was later on increased to 60-
40 according to that amicable settlement.
ATTY. SABIO:
This amicable settlement, Your Honor, we are trying to impugn it. (t.s.n.
pp. 64-66, December 15, 1967).
When counsel for plaintiffs-appellants FFF et als. was reminded that,
pursuant to his petition, FFF et als., had admitted receipt of what was
due them prior to November 1, 1955 and that said counsel could not
introduce evidence which would contradict said admission unless the
petition would first be amended, counsel for plaintiffs-appellants stated
that he was not amending his petition, as his purpose was only to pursue
his theory that the milling contracts were null and void. We quote:
ATTY. TIROL
I think we are trying this case and not to impugn that document,
whereas compañero stated that there is an allegation in the petition that
prior to November 1, 1955, the planters have complied with the law . . .
that is your pleading. Are you going to amend your petition?
ATTY. SABIO:
We are not but paragraph 11 of the petition states: '11. That with evident
intent to evade compliance of said Act and to the grave prejudice of the
laborers, some of respondents PLANTERS and respondent CENTRAL
prepared and executed a General Collective Sugar Milling Contract
sometime in March, 1956; and, that adherence thereto, even as late as
April 29, 1960, was made to retroact to November 1, 1955;' This
contract which we are trying to impugn was not presented to court.
ATTY. HILADO, JR.
We doubt very much if counsel for the plaintiffs can give us reason why
this amicable settlement was not presented by the parties in court. In
that case then, granting that he can so prove his allegation, because the
Victorias Milling Co., Inc. under Par. 10 of the petition, states that up to
October 31, 1955, the laborers received their lawful participation under
RA 809. This milling contract was executed but that was after October,
1955 already. She cannot go against his allegation.
COURT:
Let us go to the question now so the ruling could be issued. ATTY. DITCHING:

ATTY. SABIO: The petitioners admitted that in par. 10 of petition, they have received
their lawful share up to November 1, 1955; so that question is
My question is the matter of document presented by the witness was not immaterial.
asked by me but by Atty. Hilado Jr. So the document was mentioned by
the witness. COURT:

ATTY. HILADO, JR. The question asked is, with reference only to the procedure of the
Department of Labor.
The Rules of Court says that, agreement of the parties could not be
contradicted. ATTY. HILADO, JR.

ATTY. SABIO: Are they not in a position to ascertain all their allegations in the
petition?
We disagree on the qualification of the fact.
COURT:
COURT:
The position of counsel for the plaintiff is that, he is trying to find out
Let us go to the question now. Proceed. his procedure that is being followed. Let the witness answer.

ATTY. SABIO: A. Witness is showing a certain document which for purposes of

You stated during the cross examination by Atty. Hilado Jr. That you
have a document in your possession to show that your office disagreed
with the procedure in the disposition of the money due to the laborer's
share which was made by the Central and the planters; where is that
document now?
ATTY. DITCHING:
Objection. In the pleading, par. 10 of the petition, the petitioners
admitted that they have received their lawful share up to November,
1955
Identification has been marked as Exhibit HHHHHH-5 for the plaintiffs.
It is a Memorandum addressed to the Hon. Secretary of Labor by Mr.
Ruben F. Santos of the Wage Board Division.
COURT:
Q. Why did your Department object to such arrangement of the planters
and Victorias Milling Co., Inc. referring to the disposition of increase
participation?
A . The only objection of our Department as stated in the memorandum
is the conversion of P4,000,000.00 into shares of stock.

COURT: Q. So your objection is in the conversion into share of stock of certain

amount of dividend is that it?
That is not denied.
A Yes, Sir, the memorandum in our office speaks for it .
(t.s.n., pp. 67-72, December 15, 1967).
It is obvious that plaintiffs-appellants were not seeking recovery of what
pertained to them from June 22, 1952 to October 3 1, 1955, not only
because they admitted receipt of their shares corresponding to said
period, but also because Mr. de Guia likewise affirmed the laborers'
receipt of the corresponding share. While, according to Mr. de Guia, the
Department of Labor disagreed merely with reference to the initial
conversion of the P4 Million into VICMICO shares, said VICMICO
shares were subsequently converted into cash and, ultimately,
distributed to the laborers who interposed no disagreements or objection
thereto, Mr. de Guia testified:
Q. Is it not a fact that those shares of stock were sold and proceeds of
your distribution as indicated in your report was up to the 5th
distribution made by your office?
A. Yes, Sir.
Q. And as a matter of fact, with the sale of shares of stock, you realized
that not only the original amount of investment which correspond to the
part of 60% for the laborers but by more than million dividend; is that
right?
A. Yes, Sir.
Q. Is it not a fact that the reason why after October 31, 1955 your office
did not distribute the windfall or bonuses because there had been
milling contracts that were signed by the management and the planters
in the milling district?
A. Yes, Sir.
Q. Was there a report of your office with reference to the 5th
distribution of payments of money?
A. Yes, Sir.
Q. Who gave the money?
A. The planters.
(t.s.n., pp. 35-36, December 15, 1967.)
xxx xxx xxx
Q. And there was no disagreement on that matter, correct ?
A. Yes, Sir.
Q. And there was no complaint from the laborers after the participation;
is that correct?
A. There was none.
Q. So that its distribution was accepted by all, including the laborers
who were the participants in this distribution; correct?
A. There was none.
Q. So that this distribution was accepted by all, including the laborers
who were the participants in this distribution; correct?
A. That is only within the period that is covered by the distribution.
(t.s.n., p. 53, December 15, 1967.)
As a matter of fact, when Mr. de Guia testified that one planter did not
allegedly distribute the share corresponding to his own laborers, Atty.
Ditching, as counsel for himself and his wife, moved to strike out the
answer of the witness on the ground that the laborers, in their petition,
admitted having received all of their shares, and the trial court granted
the motion. We quote from the transcript:
Q. Of the 400 planters adhered to the Victorias Milling District, only
one planter has not distributed the corresponding participation of the
laborers; is that right?
A. Yes, Sir.
ATTY. DITCHING:
I move for the striking out of the answer of the witness, it is admitted by
the petitioners themselves in par. 10 of the petition filed with this court
on November 9, 1962, which says: '10. That pursuant to Sec. 9 of said
Act, respondents PLANTERS gave to petitioners LABORERS the
latter's lawful participation in the sugar production as well as in the by-
products and derivatives thereof and continued to give the same until
November 1, 1955 when they ceased to do so until the present.' So
regarding the distribution, I object to that because there was already an
answer. I move to strike out with respect to the answer because it will
affect us.
COURT:
Strike out that from the record regarding that one planter has not
distributed the participation of the laborers. It is enough that the
Department of Labor have that in the record.
(t.s.n., pp. 48-50, December 16, 1967).
The contention of the Court of Appeals that 'Counsel for central agreed
that whatever happened to the P4,000,000 was a proper issue in this
case' (Annex Q, p. 62) finds no justification. While counsel for
VICMICO made the foregoing remark in the course of an exchange of
manifestations with counsel for FFF et als., said remark should be taken
in the context in which it was uttered. Counsel for FFF et als. was
requesting for records concerning the P4,000,000 invested in VICMICO
shares of stock, and counsel for VICMICO insisted that counsel for FFF
et. als. specify the documents being asked for (tsn, pp. 7 to 32, April 28,
1970). It should be noted moreover that counsel for VICMICO objected
to the presentation of evidence concerning the existence of any alleged
fraud because 'there is no allegation to the effect that complaint and that
should not be brought in the rebuttal because that is improper. (tsn, pp.
14-15, April 28, 1970).
Moreover, the said statement of counsel of VICMICO was meant
merely to emphasize what VICMICO alleged in Par. 7 of its answer to
the petition, which Par. 7 reads as follows:
7. —That, being the mill company, respondent Central does not have
sufficient information so as to be able to admit or deny the truth of the
allegations of paragraph 10 of the petition; and it here further states that
the wind-fall bonuses, if any, given by the adherent planters to their
plantation laborers was the consequence of the terms of the amicable
settlement arrived at between the respondent Central and its adherent
planters within the district in relation to the pending court case between
them.' (Vide, Annex E, Par. 7, thereof, Petition for certiorari of Vicmico)
If there was any issue at an with reference to the P4,000,000 investment
in VICMICO shares, it was not an issue in relation to any cause of
action filed by FFF et als. to recover the proceeds thereof, as FFF. et als.
never made such an allegation and even expressly admitted receipt of
said amount.
X
Tenth Assignment of Error
HAVING FOUND THE MILLING AGREEMENT AND THE
AMICABLE SETTLEMENT-COMPROMISE AGREEMENT (ASCA)
to be valid, THE COURT OF APPEALS ERRED IN HOLDING THAT
PETITIONER VICMICO AND THE PLANTERS HAD NO
AUTHORITY TO STIPULATE IN SAID ASCA ON THE
DISPOSITION OF THE AMOUNTS PERTAINING TO THE
LABORERS FROM JUNE 22,1952 TO OCTOBER 31, 1955, THE
PLANTERS BEING THE AUTHORIZED AGENTS OF THE
LABORERS BY, AMONG OTHERS, HAVING RECEIVED ALL THE
AMOUNTS DUE THEM, HAVING MOREOVER RATIFIED SAID
ASCA.
The ruling by the Court of Appeals to the effect that the milling
agreements and the ASCA are valid renders legally untenable its
conclusion that the parties thereto had no authority to provide for the
disposition of the amounts pertaining to the laborers from June 22,1952
to October 31, 1955.(Emphasis supplied)
The Court of Appeals, after a review of the records, "found no evidence
of circumvention" in the execution of the milling agreements and of the
ASCA 'as appellants (FFF et als.) charged.' (Decision, p. 41, Annex 'Q'
to Vicmico's Petition for Certiorari). It added that the 'contracts,
therefore, which it (Vicmico) wrung from Planters are not in
circumvention of the law but in legitimate pursuit of profit — which is
the end all and be-all of business. That Central (Vicmico), as a result of
the ASCA which appellants (FFF et als.) claim it (Central) to have
'engineered' got 36 % and Planters 64 % while the plantation laborers
got nothing, is no reason for considering the contracts a circumvention
of the law which does not in the first place interpose upon it any duty or
require of it the performance of any obligation to yield any part of its
participation in favor of planters laborers. In other words, we do not find
in Central's conduct anything so odious or so obnoxious as to render the
contracts it has entered into with Planters illegal or repugnant to public
policy.' (Ibid., p. 43). The Court of Appeals, thus, declared 'the ASCA
and the other derivative sugar milling contracts valid.' (Ibid., p. 54)
Notwithstanding its finding and conclusion that the ASCA and its
derivative sugar milling contracts were valid, the Court of Appeals
stated that the Central and the Planters had no authority to provide in the
ASCA for the disposition of the amounts pertaining to the laborers from
June 22, 1952 to October 31, 1955. Thus, the Court of Appeals ruled in
part:
Central and Planters could stipulate whatever they might wish upon the
share (P3,457,388.90) of Planters in the 'reserve how or when such
share would be paid to the latter. After all they were the only contracting
parties in the ASCA. But it was absolutely beyond the power and
competence of either Central or Planters or both Central and Planters to
stipulate upon the share (115,186,083.34) of the plantation laborers in
the 'reserve'. As though the share of the plantation laborers were their
own property, however, both Central and Planters, on March 5, 1956, sat
down in judgment upon the question of its disposition. On that date,
therefore, they both decided, in the ASCA, on how the laborers' share
was to be disposed of. P4,000,000.00 was to be invested in shares of
capital stock of Central, the balance of P1,186,083.34 to be distributed
among the plantation laborers " under the supervision of the Secretary
of Labor". (Decision, pp. 48-49; Vide, Annex "Q" to Vicmico's Petition
for Certiorari.)
The foregoing conclusion of the Court of Appeals is legally inconsistent
with its finding and ruling that the ASCA was legal and valid. A ruling
that a contract is valid presupposes that all the essential elements of a
contract are present, namely: (1) consent of the contracting parties; (2)
object certain which is the subject matter of the contract; and (3) cause
of the obligation which is established. (Art. 1318, Civil Code). Consent
presupposes legal capacity, that is, that the Planters who entered into
said ASCA on behalf of their laborers had been authorized by the latter.
(Tolentino, Civil Code of the Philippines, p. 407 [1956]; cf. Tolentino v.
Paraiso, 34 Phil. 609 [1916]).
In any event the planters were the authorized agents of the respective
laborers, and Vicmico had the right to rely on that authority. (Emphasis
supplied)
Section 9 of Republic Act 809 reads:
In addition to the benefits granted by the Minimum Wage Law, the
proceeds of any increase in the participation granted the planters under
this Act and above their present share shall be divided between the
planter and his laborer in the plantation in the following proportion:
Sixty per centum of the increased participation for the laborers and forty
per centum for the planters. The distribution of the share corresponding
to the laborers shall be made under the supervision of the Department of
Labor.
The benefits granted to laborers in sugar plantations under this Act and
in the Minimum Wage Law shall not in any way be diminished by such
labor contracts known as "by the piece", "by the volume", "by the area",
or by any other system of "pakyaw", the Secretary of Labor being
hereby authorized to issue the necessary orders for the enforcement of
this provision.
The above provision has constituted the planters the agents of their
respective laborers with reference to any share to which they may be
entitled from the increased participation of the planters granted under
the Act. It is an agency created by law (Art. 1317, Civil Code).
Accordingly, when the planters entered into the ASCA with the Central,
they did so, insofar as the share of their laborers was concerned, as
agents of their laborers and no authority was necessary from the
laborers because the planters had, by law, a right to represent them.
Moreover, the planters are the employers of their respective laborers;
they speak for their laborers in matters involving whatever percentage
share the laborers would be entitled to from the increased participation
of the planters granted under Republic Act 809. These laborers were so
numerous (cf. Exh. 23-Vicmico) that only the respective planters who,
under the law, are obliged to prepare their payrolls, knew who they
were. Hence, Vicmico has the right to rely on the representations of the
planters relative to their laborers.
Moreover, the laborers ratified the ASCA by their silence for six (6)
years and by their enjoyment of the benefits accruing
therefrom. (Emphasis supplied)
From November 5, 1956 when this Honorable Court dismissed the
appeal of the laborers in G. R. No. L-11218 up to November 9, 1962
when the petition of FFF, et als. was filed with the trial court, about six
(6) years had elapsed. Within that long period, the laborers never
questioned the validity of the ASCA on the ground that the Central and
the Planters had no authority to provide for the manner of preservation
and distribution of their share corresponding to the period from June 22,
1952 to October 31, 1955 when there was as yet no written milling
contract in the Victorias-Manapla-Cadiz mill district. They never, within
such period, filed any action to nullify the ASCA for lack of consent on
their part, notwithstanding their knowledge thereof, some of the laborers
having intervened in Civil Case No. 22577 (Exh. "H") and in G. R. No.
L-11218, where the question of validity of the ASCA and of the milling
agreement was in issue (Exhs. "VV", "VV-I", "VV-2").
Article 1317 of the Civil Code reads:
... . 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.
By their silence for six (6) years, notwithstanding their knowledge of
the ASCA, the laborers are deemed to have ratified the contract. We
quote:
Nor has Concepcion directly impugned the validity of the obligation
contracted by her mother in her behalf and therefore it may be taken for
granted that she has by her silence ratified the obligation to pay, jointly
with her mother and brothers, the sum her father owed when he died.
(Art. 1313, Civil Code.)' (Fable v. Yulo, 24 Phil. 240, 247 [1913],
emphasis supplied.)
On the contrary, the case comes squarely within the purview of the
provisions of the Civil Code under the subject of Nullity of Contracts
which pertain to ratification. Codal article 1309 provides: 'The action of
nullity is extinguished from the moment the contract may have been
validly ratified.' Article 1311 following provides: 'Ratification may be
either express or implied. It shall be deemed that there is an implied
ratification when a person entitled to avail himself of any ground for the
annulment of the contract should, with knowledge of its existence and
after it has ceased, do anything which necessarily implies an intention to
waive such right.' Finally comes article 1313 which provides:
'Ratification purges the contract of all defects to which it may have been
subject as from the moment it was entered into'. It results, therefore, that
after a contract is validly ratified, no action to annul the same can be
maintained based upon defects relating to its original validity. (Gutierrez
Hermanos vs. Orense [1914], 28 Phil. 571; Vales vs. Villa [1916], 35
Phil. 769.)' [Ten Ah Chan and Kwong Kam Koon vs, Gonzales, No.
28595, October 11, 1928.)
Article 1313 of the Old Civil Code cited by the Supreme Court in the
Fable v. Yulo case quoted above corresponds to Article 1396 of the New
Civil Code, which reads:
Art. 1396. Ratification cleanses the contract from all its defects from the
moment it was constituted (Art. 1313).
When FFF, et als. did file on November 9, 1962 a petition with the trial
court, they also did not question the authority of the Central or the
Planters to provide, in the ASCA, the manner in which their share from
June 22, 1952 to October 31, 1955 would be held and distributed. In
fact, they expressly admitted that the planters gave them their
corresponding participation. We quote paragraph 10 of their petition:
That pursuant to Sec. 9 of said Act, respondents PLANTERS gave
petitioners LABORERS the latters' lawful participation in the sugar
production as well as in the by-products and derivatives thereof and
continued to give the same until November 1, 1955 when they ceased to
do so until the present; ... (Annex "A", Vicmico's Petition).
Moreover, the laborers received the benefits of the ASCA when their
share was distributed to them (Exh. 23-Vicmico; see also Eleventh
Assignment of Error, infra.) Their receipt of such benefits amounted to a
ratification of the authority of the planters to represent them in the
ASCA. (ZamboangaTransportation Co. v. Bachrach Motor Co., 52 Phil
244; Ibanez u. Rodriguez, 47 Phil. 554; Tacalinar v. Corro, 34 Phil. 889;
Emphasis supplied)
XI
Eleventh Assignment of Error
THE COURT OF APPEALS ERRED IN CONCLUDING THAT THE
LABORERS DID NOT RECEIVE THE AMOUNT OF P6,399,105.00
AND IN HOLDING, ON THE BASIS OF TORT, PETITIONER
VICMICO, JOINTLY AND SEVERALLY LIABLE WITH THE
PLANTERS THEREFOR, EXHIBIT 23-VICMICO CLEARLY
SHOWING ON ITS FACE THAT THE LABORERS ACTUALLY
RECEIVED A TOTAL OF P6,536,741.98 AND THE COURT OF
APPEALS HAVING FOUND THAT ALL AMOUNTS PERTAINING
TO THE LABORERS HAD BEEN RECEIVED BY THE PLANTERS.
THE FOREGOING DEMONSTRATING, AMONG OTHERS, THAT
PETITIONER VICMICO CANNOT BE ACCUSED OF ANY
TORTIOUS ACT.
The conclusion of the Court of Appeals to the effect that the laborers
received only Pl,186,083.34 and not the whole amount of
P6,399,105.00 has no basis in fact, the evidence as testified to by a
representative of the Labor Department being to the contrary.
Notwithstanding the express admission in the petition of FFF, et als., to
the effect that the 'Planters gave petitioners (FFF, et als.) the latter's
lawful participation in the sugar production and derivatives thereof and
continued to give the same until November 1, 1955, when they ceased
to do so until the present' (Par. 10, Petition of FFF, et als., filed with the
trial court, Vide Annex "A" to Vicmico's Petition for Certiorari), which
fact, having been admitted, requires no proof and cannot be contradicted
(Rule 129, Sec. 2, Rules of Court; Sta. Ana v. Maliwat, 24 SCRA 1018),
the Court of Appeals made the following unfounded statements:
... if it is further considered, as shown in our resolution of the third
issue, that this amount of P4,000,000.00, along with its accruals was
never received by the plantation laborers to this day, the unwisdom of
the investment, let alone, its illegality, is hardly in doubt.' (p. 52,
Decision, Annex "Q" to Vicmico's Petition for Certiorari).
xxx xxx xxx
... and the fact that the laborers' P4,000,000.00 worth of shares and their
earnings have, without any explanation from anyone from the Central,
from the Planters, or from the Special Committee vanished into limbo
without the laborers being able to actually receive any cent of the same.'
(Idem., p. 53).
xxx xxx xxx
In effect, what has been established by the evidence is that the
P4,000,000.00, together with its earnings in dividends in the total
amount of P3,385,950.00 (p. 6, tsn.. June 16, 1970), has not been Q. When was that distribution made?
distributed to or received by plaintiffs- appellants-laborers. (Idem., p.
62). A. It was made in the year 1995. Proceed.

xxx xxx xxx ATTY. SABIO:

The evidence shows that, except for a small part (P180,679.38) of the
sum of P5,185,083.34, the entire P1,186,083.34 was actually paid to the
laborers ...' (Idem, p. 55; Annex "Q" to Vicmico's Petition for certiorari
xxx xxx xxx
Not a shred of evidence, however, has been introduced into the record to
show that the proceeds of the sales of the 40,000 shares of stock and the
increments in cash and stock dividends have been actually delivered to
or received by appellants-laborers. ... ' (Annex "Q"to Vicmico's Petition
for Certiorari, p. 60).
Q. This distribution covered the period from June 22, 1952 to what
period?
A. To October 31, 1955.
Q. Will you kindly tell the Court the basis of the distribution of the
amount distributed?
A. As I understand, this amount was the participation due to the laborers
working in that milling district, from June 22, 1952 up to October 31,
1955 (Emphasis supplied).

None of the foregoing statements finds any basis in fact and the Court COURT:
of Appeals' unwarranted conclusions constitute a grave abuse of
discretion tantamount to an excess of jurisdiction. (Duran v. Court of Q. June 22 of what year?
Appeals, L-39758, May 7, 1976). Mr. Felipe de Guia testified lengthily
on the point, but the Court of Appeals apparently was oblivious of his A. June 22, 1952 to October 3l, 1955. Proceed.
testimony which established distributions of over P 6,000,000.00 in
favor of the laborers. We quote the testimony of Mr. de Guia: ATTY. SABIO:

Q. Mr. Guia, what steps, if you know the Department of Labor has taken
. . . I withdraw the question.
Q. As Chief of the Agricultural Wages Section under the Department of
Labor, do you know what steps your section of the Department of Labor
has taken to implement Section 9 of RA 809, otherwise, known as Sugar
Act of 1952, with the Victorias Milling District, Negros Occidental?
A. Yes, sir, we have distributed also the supposed share of the
laborers amounting to P6,717,360.00. (emphasis supplied).
Q. Under what law that is due to them?
A. RA 809, otherwise known as Sugar Act of l952.
Q. By the way, Mr. Guia, what Section or Division of the Department of
Labor is embodied the implementation of RA 809?
A. The Agricultural Wage Section of which I am the Chief.
ATTY. HAGAD:

COURT: CROSS EXAMINATION:

Q. How was this amount of P9,612,421.36 distributed?
A. The original amount which is supposed to be distributed is
P5,186,083.36; but on account of converting the 4,000 shares of the
laborers' share of stock, it was distributed continuously year to year. The
dividends amounted to more than Pl,000,000.00 which is added to this
amount. It was based practically on the 10% increase participation due
to the planters of the Victorias Milling District, wherein 60% represent
this said amount; otherwise, 60% of the 10% increase participation
represented the said amount which was distributed among the laborers
of the Victorias Milling District.
Q So, P 5,186,183.36 was 60% of 10% was the increase participation of
the planters within the Victorias Milling District, for the period from
June 22, 1952 to October 31, 1955; is that right?
A. Yes, sir. (pp. 17-21, December 15, 1967, Lorenzo C. Caraig;
emphasis supplied)
xxx xxx xxx
ATTY. SABIO:
Q Do you have in your possession the record on how this amount of
Pl,186,083.34 marked as Exhibits 'XXX' thru XXX-6
A Yes, sir.
Q. Would you be able to bring that next time?
A. I think so.
Q. Would you be able or do you have in your possession a record
showing how this amount of P4,000,000.00 marked as Exhibit XXX-10
was disposed of?
A. Not with the P4,000,000.00 because the distribution of this amount
was made in five releases as per what is stated in the statement as
presented here.
Q. At any rate, my question is: Do you have in your possession the
record of the distribution of the P4,000,000.00?
A. Yes, sir. (pp. 143-144, June 16, 1970, L. Caraig; Emphasis supplied).
COURT:
What is the purpose now of Atty. Sabio in presenting those records?
ATTY. SABIO:
We will show that not only a portion of the amount of P5,186,083.34,
including of course the earnings, was distributed that properly belong to
the laborers.
COURT:
Why not find out from Mr. de Guia the record about the distribution
how much was distributed?
WITNESS:
Atty. Sabio, I just want to clarify your statement the distribution I
personally handled, I want that to be corrected. If you will allow me, sir,
If Mr. Bascug can recall that in our distribution from the first to the
fourth I think each and everyone of them even their members could
really testify to the effect that the distribution was orderly undertaken
just want to put that on record. There should be no insinuations, with
due tolerance, being the supervisor of the distribution.
ATTY. SABIO:
We do not make any insinuation. We only want the record. In the
interest of all concerned and in the interest of justice, if the records will
be brought here we hope that the records are not irregular and we
believe if they are regular no responsibility would be incurred by any
official of the Department of Labor.
WITNESS:
Which are you referring to, Atty. Sabio?
ATTY. SABIO:
Any official of the Department of Labor.
WITNESS:
What charge of irregularity.
ATTY. SABIO:
The distribution of P5.186,083.34.
WITNESS:
In order to facilitate all those records in bringing here, can I request
Atty. Sabio any personnel that can accompany me. Because the records
are so voluminous. For one distribution of one planter there are no less
than 28 pages and there are five distributions. So I am requesting Atty.
Sabio to give me an assistant to come as well as bring the records and I
am willing to bring all those records because I have nothing to hide, It is
also shown that there are those laborers who were not able to receive
and it is stated in the undistributed amount.( t.s.n., pp. 151-154, June 16,
1970, V. Salvarino, italics supplied).
On cross examination, this witness further testified thus:
ATTY. HAGAD:
Q My question Mr. be Guia is this, the figures referred to in Exh. 23
Victorias Milling Co., Inc. came from the records of your office, is that
correct ?
A. Yes sir.
Q. Exh. 23 mentioned first, second and up to the fifth distribution. What
do you mean by this?
A. There are distributions undertaken in the Victorias Milling Co., Inc.
The first distribution as stated here is in accordance with the number
that is corresponding to the amount distributed or release for distribution
among the laborers of the Victorias Milling Co., Inc.
Q. By first distribution you are referring to the Amicable Settlement-
Compromise Agreement the amount of P 1,166,083.36 and this
correspond to the same amount indicated in the Amicable Settlement-
Compromise Agreement you also Identified; is that correct?
A. I do not know exactly if this figure stated there is correct but I have
to check whether it tallies with it.
Q. Which figure is reflected in Exh. XXX and Exh. XXX-9?
A. There is a difference of 2 centavos.
Q These other distributions that you made, were those also done under
your supervision beginning from the second up to the fifth distribution'?
A. (Correction, please). I was not the one who made the distribution; I
was only concerned on the first distribution which was supervised.
Q. As first of the team of supervisors, you supervised the actual delivery
of the money to laborers; is that correct?
A. Yes, sir. (t.s.n., pp. 20-22, June 18, 1970; Lorenzo Caraig).
The above testimony of Mr. de Guia clearly demonstrates that the distributed in favor of the laborers, with only P 18O,679.38 remaining
laborers received their entire share corresponding to the period from undistributed. Exh. '23' reads:
June 22, 1952 to October 31, 1955 when there was as yet no written
milling contract between the Central and the Planters. Republic of the Philippines

Exh. 23-Vicmico which summarizes the amounts received by the Department of Labor
laborers totalling P6,536,741.,98 (except for the sum of P180,679.38)
having been relied upon in part by the Court of Appeals when it BUREAU OF LABOR STANDARDS
required payment of P180,679.38 to the laborers, the whole contents
thereof deserve full credit, namely, that the laborers received the total Manila
amount of P6,536,741.98. (emphasis supplied)
Statement of Windfall Distributions of the
The Court of Appeals, quoting the testimony of Mr. Felipe de Guia,
stated in part: Victorias Milling Districts

The evidence shows that, except for a small part (P 180,679.38) of the Victorias, Negros Occidental
sum of P 5,185,083.34, the entire P 1,186,083.34 was actually paid to
the laborers. Thus, testified witness Felipe de Guia, representative of the As of June 30, 1967
Department of Labor in charge of the distribution:
AMOUNT RELEASED FOR DISTRIBUTION:
COURT:
1st Distribution .........................P1,186.083.36
Q. Mr. de Guia, you said that there were some amounts that were not
distributed because some laborers cannot be located; is this the amount 2nd Distribution ..........................1,841,338.00
mentioned in this 'Exhibit 23', under the words 'amount of undistributed
or wind-fall? 3rd Distribution ..........................1,390,000.00

A. Yes, sir, P180,679.38. (t.s.n., p. 28, June 18, 1970; Annex 'Q' to 4th Distribution ..........................1,100,000.00
Vicmicos Petition for Certiorari, p. 55).
5th Distribution ...........................1,200,000.00 P6,717,421.36
Apparently giving full credit to the foregoing testimony of Mr. de Guia,
the Court of Appeals, in the dispositive part of the decision, ordered the AMOUNT PAID BY DISTRIBUTOR:
Central and the Planters, jointly and severally, to pay the laborers '(1)
the sum of P180,679.38, not distributed to appellants, with interests 1st Distribution ............................P1,162,040.79
thereon at 6% per annum commencing from February 19, 1957, until
fully paid'. (Decision, pp. 68-69; Annex 'Q' to Vicmicos Petition for 2nd Distribution .............................1,815,326.40
Certiorari). But Exh. '23' which was the basis of Mr. de Guia's testimony
to the effect that there was an undistributed amount of P 180,679.38 (t. 3rd Distribution ..............................1,357,067.88
t.s.n., p. 28, June 18, 1970) clearly shows that P6,536,741.98 was
4th Distribution ...............................1,059,895.05
5th Distribution ...............................1,142,411.86 P6,536,741.98
AMOUNT OF UNDISTRIBUTED WINDFALLS BY
DISTRIBUTION:
1st Distribution .................................P 24,042.57
2nd Distribution ...................................26,011.60
3rd Distribution ...................................32,932.12
4th Distribution ....................................40,104.9,5
5th Distribution .....................................57,588.14 P 180,679.38
LABORERS PAID BY DISTRIBUTION:
1st Distribution .....................................96,229
2nd Distribution.................................... 97,170
3rd Distribution .....................................95,411
4th Distribution .....................................93,747
5th Distribution .....................................92,254 474,811
Respectfully submitted:
(Sgd.) ROM J. MALACON
Explaining the distribution appearing in Exhibit '23', Mr. de Guia
testified:
Q. As first of the team of supervisors, you supervised the actual delivery
of the money to the laborers: is that correct ?
A. Yes, sir.
Q. In other words, you went to the haciendas and gathered all the
laborers and gave the corresponding amount to the laborers; is that
correct ?
A. Yes, sir.
Q. And before that distribution, your supervisor inquired if all those
payrolls are prepared by the respective planters concerned; is it not?
A. Yes, sir.
Q. And your obligation is to check the payrolls regarding the names of
the laborers and the amount indicated in the payrolls; is that correct ?
A. Not necessarily check the individual names appearing on the payrolls
but also verify whether the amount released to be distributed tally with
the amount appearing on the payrolls.
Q What about the actual payment of the amount to the laborers, were
you present there?
A. Yes, sir.
Q. So that, in all those distributions reflected in this Exhibit '23' -
Victorias Milling Company' Inc. either you or the member of your team
or any representative of the laborer see to it that the money is delivered
to the laborers concerned; is that correct'?
A. Yes, sir, that is the duty of the supervisor to see to it that the
corresponding amount is actually received by the laborers.
Q. And you keep that record in the course of the distributions; is that
correct?
A. Yes, sir.
Q. If I correctly get, there would be about 20,000 payrolls of the
planters in the haciendas; is that correct'?
A. I can say that there are some planters who have 15 to 50 sheets of
payrolls of the haciendas: so you can just imagine the number of
payrolls of the haciendas.
(T.s.n., pp. 22-25, June is, 19-10).
Since the Court of Appeals relied upon the foregoing Exhibit '23' in its
finding that the sum of P180,679.38 had not been distributed, that
exhibit should not have been segregated in parts with the Court having
chosen that portion which afforded advantage to the laborers and
disregard the other parts which were to the advantage of the Central and
the planters. (cf. inter alia, Orient Insurance Co. vs. Revilla, 54 Phil.
919. where it was held that when a party introduces in evidence part of
the privileged document, he cannot remove the seal of confidentiality as
makes for his advantage and insist that is previleged as to so much as
makes for the advantage of his adversary). The whole contents of Exh.
'23' should therefore be given full weight and credit, namely that
P6,536,741.98 had been actually distributed in favor of the laborers.
(VICTORIA'S Brief, pp. 286-336, G.R. No.
L-41222).
-D-
True it is, as already stated earlier, that in petitions for review of
decisions of the Court of Appeals, well and long settled it is that We are
as a rule bound by its findings or conclusions of fact. In the instant
cases, however, after carefully considering its ratiocination and bases in
finding that the share of the laborers in the proceeds of the 1952-53 to
1954-55 crop years, and after mature study of and searching
deliberation on the arguments and authorities very comprehensively
advanced and cited in the briefs of the PLANTERS and VICTORIAS in
the portions thereof extensively quoted above, We find Ourselves
sufficiently convinced that the clear and unequivocal admission of such
payment in the FEDERATION'S original and amended petitions in the
trial court, if it cannot be deemed strictly binding upon it, is a significant
persuasive factor We have to count with in deciding the particular issue
of fact now under discussion. In our opinion, there is hardly anything in
the FEDERATION'S main and reply briefs cogent enough to convince
Us contrariwise.
We wish to make it clear that in connection with said issue, We have not
overlooked the laudable principles and guidelines that inform both
Republic Act 1257, the charter of the agrarian courts, and Presidential
Decree 946, both of which prod the courts to be as liberal as possible in
disposing of labor cases and to be ever mindful of the constitutional
precept on the promotion of social justice, (Sec. 6, Art. II, Philippine
Constitution of 1973) and of the rather emphatic injunction in the
constitution that "the State shall afford protection to labor. "3 But We
have are of the considered opinion that the secondary force to which the
ordinary rules of procedure and evidence have been relegated by the
aforementioned agrarian court laws do not oblige Us to be unjust and
unfair to employers. After all, in the eyes of all fair-minded men,
injustice to the more affluent and fortunate sectors of society cannot be
less condemnable and reprehensible, and should be avoided as much as
injustice to labor and the poor. It is divinely compassionate no doubt to
afford more in law those who have less in life, but clear injustice to
anyone amounts definitely to injustice to everyone, and all hopes for
judicial redress for wrongdoings would vanish, if the even hand of law,
justice and equity were to be made to favor anyone or any group or level
of society, whoever they maybe. It is verily not an exaggeration to assert
that in a sense, courts that uphold and afford real justice can hold back
and even repel the forces of malcontent and subversion more effectively
and without loss of lives and blood and without destruction or
devastation than the best equipped regiments of soldiers of the army.
Justice, in its real and deepest essence, more than statute law must
always prevail, and the courts are inexorably expected to do justice to
every men at all times. This Supreme Court yields to no one in that
respect. That is its sacred duty and its sworn pledge that will remain
unbroken ruat caelum
-E-
Thus, while We are in agreement with the Court of Appeals in its
construction and application of Sections 1 and 9 of Republic Act 809 as
discussed above, We cannot agree with its conclusions regarding the
pretended liability of the PLANTERS and VICTORIAS for the amount
that the FEDERATION claims the laborers of the PLANTERS have not
been paid as their share of the proceeds of the crop years 1952-53 to
1954-55. In resolving in the manner We have quoted, the second issue
formulated by it relative to the appeal to it of the FEDERATION, it
holds the appellees, the PLANTERS, including petitioners herein Primo
Santos and Benjamin Tirol, and VICTORIAS "jointly and severally
liable for tort in disposing, upon their own accord, and without any
authority of the plantation laborers, of the money of the said laborers in
the total amount of P5,186,083.34 and thus causing the loss of shares of
stock and their earnings purchased out of P4,000,000.00 of such
amount." Indeed, in the course of resolving the second issue and in
disposing of the third issue, the Appellate Court found the PLANTERS
and VICTORIAS guilty of misappropriation and conversion of the
P5,186,083.34 plus the accrual thereof, corresponding to P4 M worth of
VICTORIAS shares of stock which under the ASCA was stipulated to
be received by the PLANTERS in trust for the laborers.
Again, this aspect of these instant cases before Us involve questions
both of fact and of law.
-F-
At this juncture, and referring first to the issues of fact, let it be clear
that We find from the record as found by the Court of Appeals, of the
cash portion of P5,185,083.34 corresponding to the laborers pursuant to
the ASCA, namely, P1,185,083.34, what actually the laborers received
under the supervision of the representative of the Secretary (now
Ministry) of Labor, was short only by P180,679.38 per the testimony of
Mr. Felipe de Guia, the representative of the Department of Labor:
The evidence shows that, except for a small part (P180,679.38) of the
sum of P5,185,083.34, the entire P1,186,083.34 was actually paid to the
laborers. Thus, testified witness Felipe de Guia, representative of the
Department of Labor in charge of the distribution:
COURT:
Q. Mr. de Guia, you said that there were some amounts that were not
distributed because some laborers cannot be located; is this the amount
mentioned in this Exh. '23', under the words 'amount of undistributed or
windfall"?
A. Yes, sir, P180,679.38 (tsn. p. 28, June 18, 1970)
Appellants themselves, in their brief, have made the following
observations:
So, it can be assumed without fear of contradiction that the last portion
of the said amount of P1,186,083.34 was delivered, if ever, to
PLANTERS-APPELLANTS-LABORERS after February 18, 1957.
(Appellants' Brief, p. 326) (VICTORIAS' Brief, pp. 65-66, Appendix
'A', G. R. No. L41222.)
There is no explanation anywhere in the records as to what happened
subsequently to the shortage of P180,679.38, and We, therefore, agree
with the Court of Appeals that judgment should be rendered for the
payment thereof, there being no dispute that the said amount has not
been received by the laborers.
-G-
We find it difficult, however, to subscribe to the finding of the Court of
Appeals that the greater portion of the P5,185,083.34 in cash and in
shares of stock of VICTORIAS was not received by the laborers and
was instead malversed and misappropriated by the PLANTERS and
VICTORIAS.
To start with, We have to state again that the petition that initiated the
instant cases before Us was filed only under date of November 9, 1962
with the Court of Agrarian Relations in Bacolod City, that is to say,
more than six years after the execution of the ASCA on March 5, 1956
and the subsequent payment and transfer of shares pursuant thereto had
been factually accomplished. The inaction of the laborers for such a
long space of time cannot but cast shadows of doubt as to the
truthfulness of their claim, considering particularly the hugeness of the
amount involved, which anyone aggrieved would lose no time to move
to recover, specially if one takes into account the value of the Philippine
peso during said period.
Second, and indeed rather importantly, the said initial petition made no
reference whatsoever to the now pretended non-payment, but, on the
contrary, as well shown and argued by the PLANTERS and
VICTORIAS in the portions of their respective briefs We have quoted
above, such payment was not only admitted in said petition as well as in
the amended one filed in March, 1964, both of which referred
exclusively to the laborers' share in the 1955-56 to 1973-74 crop years
but even in the prayer portions thereof. What is more, as will be
presently discussed, the payment in question appears proven by the
evidence both oral and documentary submitted to the trial court.
Of course, We must say again, as a general rule, in petitions for review
of decisions of the Court of Appeals, this Supreme Court is bound by
the findings of fact of that Court and that We are limited only to any
inquiry as to whether or not its decision predicated on its factual
conclusions is in accordance with law. In these cases at bar, however,
the factual matter of whether or not the laborers had already been paid
their share corresponding to the 1952-53 to 1954-55 crop years is being
laid before Us inextricably intertwined with a question of law arising
from the indisputable fact that in the initial pleadings below what is
manifest is not only that there is an express admission in paragraph 10
of the petition of the laborers "that pursuant to Section 9 of said Act
(R.A. 809), respondent planters gave petitioners-laborers the latter's
lawful participation in the sugar production as well as in the by-products
and derivatives thereof and continued to give the same until November
1, 1955 when they ceased to do so until the present" but even in the
prayer thereof, the FEDERATION confined the remedy it asked for to
the payment of the laborers' share in the proceeds of the crop years after
1954-55 and up to 1973-74. We cannot conceive of a more emphatic
and unequivocal words to convey the admission of the payment here in
question.
We are now asked to rule on the legal effect of such admission in the
light of the other circumstances extent in the record.
In that connection, there appears no alternative for Us than to rule that
as contended by the PLANTERS and VICTORIAS, under the law, even
if liberally applied, such admission should be considered as having
some persuasive force, unless it was made through palpable mistake or
misapprehension of the relevant circumstances. And what makes such
admission more credible is the fact that not one single laborer was
presented at the trial to deny that he had received his due share.
The Court of Appeals has attempted to extricate the laborers from their
lamentable predicament by accepting the explanation of counsel for the
FEDERATION that what the above-quoted paragraph actually was
intended to mean was that VICTORIAS had only reserved the
corresponding amount in the liquidation of the share of the planters in
the proceeds during that period. Quite misleadingly, to be sure, the
FEDERATION argues in its brief that they could not have made such a
factual admission since at the time their petition was prepared and filed,
the money was still with the central. How false such a pretension is can
be readily perceived by merely recalling that the FEDERATION filed its
initial petition below in November of 1962, whereas the record shows
indisputably that the payments and transfer of shares had already been
made more than five years before. And as regards the rather naive
acceptance by the Court of Appeals of the explanation of the
FEDERATION, We hold that it was legally improper to do so, it
appearing that such explanation was made, according to the brief of the
PLANTERS, very much belatedly, only in the FEDERATION'S reply
brief in that court at page 1446 thereof, without any hint as to why it
was not made earlier in the trial court, where it appears that
FEDERATION had even filed an amended petition in 1964. Besides,
there was no allegation of mistake; all that was done was to
unconvincingly attribute a different subjective meaning to a word that is
clear and unmistakable in itself, by explaining that what the pleader
wished to convey by the word "given" was that the corresponding
amount due that laborers had already been placed in reserve by the
central.
The Court of Appeals further tried to sustain the Federation by citing
Section 5 of Rule 10 of the Rules of Court authorizing the courts to
decide cases on the basis of evidence on matters not alleged in the
pleadings. In the first place, the cited rule applies only when the
evidence on which the court would rely is presented without objection
of the adverse party, since they would then correspond to issues "tried
by express and implied consent of the parties." Here, however, the
record shows that the PLANTERS and VICTORIAS vehemently
objected to any evidence touching on the 1952-53 to 1954-55 crop
years, precisely because of the explicit admissions contained in the
plaintiff FEDERATION'S petition. This is not, however, to ignore that
nevertheless, the record shows that somehow both parties did present
evidence touching on such payment. But judging from what such
evidence consisted of, as reproduced in all the briefs before Us, We are
fully satisfied that the findings and conclusions of fact of the Court of
Appeals on the point at issue do not square with such evidence. To cite
just one example, the testimony of the principal witness of the
Federation, Atty. de Guia is more indicative of the complete and full
payment in question than otherwise. For another instance, the ruling of
the Court of Appeals that Exhibit 23 VICMICO is inadmissible because
it is merely secondary evidence is, in Our view, erroneous, considering
not only that the trial court was informed by Mr. de Guia himself that
the original documents are so voluminous as to make it impracticable to
take them to the court, but also that it was precisely on the basis of said
exhibit that that court made the finding of a shortage of P180,679.38 in
the cash payment, not to mention the obvious fact that the same witness
actually made continuous reference to said exhibit while he was
explaining the distribution of the full amount due the laborers. The
contention of the Federation that said exhibit is a worthless piece of
paper is an exaggeration that cannot hold water. In fact, no one pretends
it is a mere fabrication, being part of the records of the Department of
Labor. Of course, it is possible, as Mr. de Guia claimed, that he did not
know of the actual issuance, sale and proceeds of sale of the 40,000
shares of stock, but the fact remains that it was he himself who referred
to said documents with notable degree of certainty, at the start, and it
was only later in his testimony that he disclaimed personal knowledge
of the truth of its contents.
Thirdly, insofar as the joining of issues in regard to the point under
discussion, by the PLANTERS and VICTORIAS, on the one hand, with
the FEDERATION, on the other, in their briefs filed with the Court of
Appeals, it is understandable that the PLANTERS and VICTORIAS had
no alternative than to do so as a matter of defense, even as they
maintained all the time it was not a proper issue and was beyond the
jurisdiction of the Court of Appeals to consider. Moreover, it is quite
obvious that the cited provision is by its very nature and context
applicable only in trial courts and not in the Appellate Courts. 4 What is
more, it bears repeating, there was actually no allegation of mistake
here; all that was done by the FEDERATION was to unconvincingly
attribute to the word "give" another meaning convenient and suitable to
its purposes, casting aside the obvious fact that said word is clear and
unmistakable in itself. Moreover, it appears that said purported
explanation was made only in its reply brief, by way of argument
unsupported by any scintilla of relevant evidence presented in the court
below.
Perhaps, We may emphasize again that We are not unaware that We are
dealing with a review of a decision of the Court of Appeals in an appeal
from a case which originated in the Court of Agrarian Relations in
Bacolod City and that, therefore, We are not supposed to adhere strictly
to the tenets regarding evidence of the Rules of Court, but must be
guided as liberally as possible in favor of the laborers in searching for
the true facts upon which their claim is based, having in view Republic
Act 1257 and Presidential Decree 946 and more imperatively, the
constitutional provisions on social justice and protection to labor. But,
as can be seen, it is indeed in the light of these principles that We have
scrutinized the reasoning and argumentation of the Appellate Court. We
reiterate, at this point, that observing the Rules of Court only
secondarily per mandate of Republic Act 1267 and Presidential Decree
No. 946 does not, in Our considered opinion, preclude the Courts of
Agrarian Relations and the Appellate Courts, from applying long
established principles in judicial fact finding that are founded on reason
and the common sense and experience of mankind. Admissions,
specially if express, have always been universally considered by all
authorized triers of facts as evidence of the highest order. To obviate
their effect as such, there must be potent and cogent considerations that
are as equally convincing to the mind as the compulsive persuasiveness
of a man's statement or declaration against his own interest. In the cases
at bar, We are satisfied, We regret to say, that the FEDERATION has
failed to provide Us with anything but pleas for emotional sympathy to
enable this Court to pay little heed to or much less ignore the persuasive
force of its written formal admission that their members have already
been given and "continue to be given" their due legal share of the
proceeds of 1952-53 to 1954-55 crop years in questionexcept for the
amount of P 180,679.38. lt is Our conclusion from such admission and
the evidence supporting the same, and more particularly from the
absence of contrary evidence duly presented by the FEDERATION at
the trial, that the truth is what said admission expressly declares.
-H-
With the matter of the cash payment thus resolved, We may now turn
Our eyes to the Four Million (P4M) Pesos worth of shares of stock of
VICTORIAS which, under the terms of the ASCA, were stipulated to be
issued to the PLANTERS or their authorized Special Committee or
Board of Trustees in trust for the benefit of the laborers. In regard to this
matter, there are, as We view the situation, two controversial issues to be
settled, namely, first, whether or not, it was proper for the PLANTERS
and VICTORIAS to provide for such manner of payment to the laborers
instead of in cash, and, second, disregarding the matter of such alleged
impropriety, whether or not said shares or the proceeds thereof were
received by the laborers.
For obvious reasons, We have to deal with the second issue ahead of the
other. And in this respect, suffice it to say that the question of whether
or not the proceeds of the VICTORIAS shares of stock corresponding to
them under the ASCA had been actually received by them from their
respective planters has already been resolved by Us above not only as
necessarily included in the binding force of the admission of the
FEDERATION in its original petition and amended petitions below but
as proven by overwhelming evidence overlooked apparently by the
Court of Appeals. To be clearer, contrary to the finding of the Court of
Appeals, We hereby hold that the proceeds of all the P 4M worth of
VICTORIAS shares corresponding to the laborers under the ASCA were
not only received in the form of shares by the PLANTERS from
VICTORIAS but that the proceeds of the sale thereof by the Board of
Trustees, together with their accruals, were actually received by the
laborers from their respective planters-employers. We reiterate that not a
single laborers had testified to the contrary. Additionally, Chairman
Newton Jison testified positively to such effect.
With the foregoing conclusion, it is hardly of any consequence for Us to
discuss what the Court of Appeals, breathing, as it were, with evident
indignation and a stirring sense of reprobation, condemned to be an
unauthorized and improper act of the PLANTERS and VICTORIAS of
planning, so to speak, and agreeing just between the two of them how
the share of the laborers of 6% of the proceeds from 1952 to 1955
should be paid. Inferentially, if not directly, the Appellate Court found
that the payment partly in cash and partly in shares of stock could have
been done and should have been done only upon consultation with and
with the consent or assent of the laborers either thru the FEDERATION
or any of their authorized representative. We can admit that indeed that
would have been most Ideal to do. Actually, however, what happened
was not exactly that way. Just the same, We shall proceed to show that
the laborers were never at the short end of the bargain. The pertinent
portions of the ASCA read as follows:
(a) The Party of the Second Part shall set aside Sixty Per Cent (60%) of
the said sum of P8,643,472.24 as received by them to be held in trust for
the benefit of their laborers that may be entitled thereto because some of
them have already died and their heirs are unknown while a great
number of them are hard to locate and Identify, the Party of the Second
Part, shall dispose of the said Sixty Per Cent (60%) of the sum of
P8,643,472.24 as received by them, as follows:
(1) The Party of the Second Part shall invest P4,000,000.00 of the
P5,186,083.34, which is Sixty Per Cent (60%) of the said sum of
P8,643,472.24, in 40,000 voting and transferable shares of capital stock
of the COMPANY of the par value of P100.00 per share which shall be
issued in four (4) blocks of 10,000 shares per block by the COMPANY
to the Party of the Second Part upon effectivity, of this agreement as
provided in Clause (2) hereof, it being understood that the issuance of
such shares does not involve an increase in the present authorized
capitalization of the COMPANY.
The above-mentioned 40,000 shares of the capital stock of the
COMPANY will enable the laborers/planters to become part owners of
the COMPANY but if within the period of eighteen (18) months, but not
earlier than six (6) months, from and after date of delivery of the said
40,000 shares by the COMPANY to the Party of the Second Part, the
Party of the Second Part should desire to have the value of the said
40,000 shares to wit, P4,000,000.00 or such portions thereof in blocks
of 10,000 shares at Pl,000.00 per block, paid in cash, the COMPANY
will pay in cash to the Party of the Second Party or its successors the
said value of the said 40,000 shares or of such blocks of 10,000 shares
per block, as the Party of the Second Part may decide to have converted
into cash, as to such blocks of 10,000 shares per block, that the Party of
the Second Part may decide within the period above stipulated to retain,
such shares may be retained by the PLANTERS for their own account
upon their payment to the Party of the Second Part or its successors of
the value thereof of P1,000,000.00 per block. The COMPANY shall
have a period of Thirty (30) days after receipt of written request of the
Party of the Second Part within which to make such cash payment of the
value of the shares.
The balance of P1,186,083.34 shall be distributed under the supervision
of the Secretary of Labor among the present laborers of the Party of the
Second Part who were already laborers of the PLANTERS during the
period comprised between June 22, 1952 (the date of the passage of
Republic Act 809) and October 31, 1955 (the end of the COMPANY's
fiscal year);
(ii) As to the sum of P3,457,388.90, which is the Forty Per Cent (40%)
of the P8,643,472.24, the Party of the Second Part shall distribute this
amount among the PLANTERS in proportion to the sugar milled for
them by the COMPANY during the aforementioned period of June 22,
1952, to October 31, 1955.'
(b) As to the manner of delivery of the cash involved in the foregoing
transaction amounting to P4,643,472.24, a 'General Collective Sugar
Milling Contract' has heretofore been prepared for the signature of the
PLANTERS affiliated with the COMPANY signing the said 'General
Collective, Sugar Milling Contract, the Company shall pay and deliver
to the Party of the Second Part at least fifty per cent (50%) of the said
cash balance of P4,643,472.24 or that portion thereof corresponding to
the said majority of the PLANTERS affiliated with the COMPANY who
have already signed the said 'General Collective Sugar Milling
Contract', and the remaining fifty per cent (50%) or remainder thereof
will be paid, one half upon the execution of their new individual sugar
milling contracts, and the other half upon the registration thereof in the
Office of the Register of Deeds for the Province of Negros Occidental;
(c) It is understood, as part of this settlement agreement, that the block
of the COMPANY's common shares mentioned in subparagraph (i)
and all its earnings shall constitute a trust fund to be dedicated to the
amelioration of the plantation laborers of the PLANTERS in the
Victorias-Manapla-Cadiz milling district. Said trust fund shall be
administered by the Party of the Second Part for the benefit of the
PLANTERS' laborers under the supervision of the Secretary of Labor
and in accordance with the trust laws of the Philippines. Should the
trust fund be liquidated by order of the Court of Justice or in the manner
provided for in paragraph (1) (a) (i) then the PLANTERS shall have the
first option from the trustees, and the COMPANY the second option
from the trustees and/or from the planters themselves, to buy said
Victorias Milling Co., Inc., shares in blocks of 10,000 shares at their
value of P1,000,000.00 per block. And in case both the Party of the First
Part and Party of the Second Part refuse to exercise their right, then said
block of VMC shares may be sold in the open market.'
(2) This agreement will become effective if and when the majority of
the planters affiliated with the Party of the First Part have signed the
said 'General Collective Sugar Milling Contract'.
Executed at Victorias, Negros Ocidental this 5th day of March, 1957.
(VICTORIAS' Brief, pp. 26-30, Appendix A, G.R. No. L-41222.)
Thus, it is unmistakably clear that as far as VICTORIAS was concerned,
it agreed to give to the PLANTERS the 10% it has precisely reserved
for that purpose in order to comply with the mandate of the law in the
event its challenge against its constitutionality should fail. And as it
happened, it opted soon enough not to continue pressing that challenge
by extrajudicially entering into a settlement with the PLANTERS. And
as regards the actual implementation of the portion of the agreement
regarding the share of the laborers, apart from the admission of the
FEDERATION, oft repeated earlier; relative to the actual receipt by its
members of their legal share of 1952 to 1955 crop years, We might
relevantly point out that Chairman Jison testified without contradiction
thus:
Q. Would you like to tell this Honorable Court what happened to the
money, whether in cash, check or in terms of shares of stock which was
delivered by the Victorias Milling Co., Inc. to the Board of Trustees?
A. The stock of shares of the Victorias Milling Co.,Inc. which was
delivered to the Board of Trustees was sold and liquidated according to
the Amicable Settlement-Compromise Agreement and in such case,
checks were issued to the respondents planters and also to be delivered
to the respective laborers under the supervision of the Department of
Labor. So far the record is concerned, the Department of Labor has all
the records. (pp. 37-38, tsn., June 17, 1970). (VICTORIAS' Brief,
Appendix A, p. 71, G.R. No. L-41222.)
These, in addition to the testimony to the same effect of Mr. de Guia of
the Department (now Ministry) of Labor lengthily quoted above as parts
of the portions of the briefs of the PLANTERS and VICTORIAS. We
say, to the same effect, because it is Our definite impression that read as
a whole, and evaluated together with Exhibit 23-VICMICO, that
testimony, albeit rather vague, confusing and at some places evasive,
proved sufficiently that what were due the laborers in cash and in shares
of stock (or the proceeds of the sale thereof) had been fully settled under
the supervision of Mr. de Guia and his men not later than 1956 or 1957
in five phases of distribution. True it is that Exhibit 23-VICMICO was
declared inadmissible as secondary evidence by the Court of Appeals,
but what is even more legally accurate is that such ruling is erroneous, if
only because said exhibit was precisely used by Mr. de Guia as basis for
his testimony, and he explained that the pertinent records supporting the
same were so voluminous that it would be impractical to take them to
the court.
Incidentally, We are persuaded it cannot be said that the FEDERATION
or the laborers did not agree to the modality of payment provided for in
the ASCA. If at all they muttered against it, it was only belatedly during
the trial, that is, after they had already received the cash portion therein
provided.
Indeed, We cannot share the view implicit in the decision of the Court of
Appeals that the principal witness regarding the same, Mr. Felipe de
Guia, the representative of the Secretary of Labor, under whose
supervision, Section 9 of the Act requires the payments to the laborers to
be made, was not duly aware of the medium provided in said ASCA that
P4 M of the share due the laborers would not be paid in cash but would
be invested in the form of 40,000 shares of VICTORIAS. As may be
noted from the Appellate Court's decision, the transcript of the
stenographic notes of Mr. de Guia's testimony evidences that he had in
his possession the record of the distribution of the P4 M, although the
said court held such assertion not to be the best evidence. Whether such
ruling is correct or not, it refers only to the actual distribution of the
cash and the shares of stock or the proceeds of the sale thereof, but the
fact that P4 M were to be paid in shares appears indubitably proven. We
are thus of the considered opinion that the findings of fact of the Court
of Appeals inconsistent with Our observations herein do not accord with
conventional knowledge of men and the general experience of the
business world, hence Our authority to modify the same. 5 It is to Us but
natural to assume that said witness, Mr. de Guia, knew or ought to have
known of such medium of settling the laborers' claim because it is to be
presumed that in the regularity of the performances of his duties to
supervise the payment to the laborers, on behalf of the Secretary of
Labor, he had read and did know the pertinent contents of the ASCA
before supervising any payment at all to the laborers. He admitted that
of P1,186,083.34 due in cash to the laborers, the latter were actually
paid under his supervision, the said amount minus P180,679.38. We
cannot suppose that he undertook that task without inquiring into the
whys and wherefores thereof, that is to say, the reasons and details
related to the amount being then paid. How could it have been possible
for him to have supervised the payment of any amount to the laborers
without determining first whether such payment was in full or not or in
faithful compliance with Section 9 of the Republic Act 809? We have no
doubt he must have been told about or even shown the ASCA, which
was the basis for the payment. If it were otherwise, it was his
inescapable duty to inquire. We presume, by mandate of the law, that he
had complied with that duty. More, it is highly improbable that the
FEDERATION did not know that what was due its members was
P5,186,083.34. In truth, there is nothing before Us showing that the
FEDERATION objected at all to the manner of payment provided in the
ASCA when the time for implementation came. As far as the records
before Us indicate, the laborers received under Mr. de Guia's
supervision P1,186,083.34 (minus P180,679.38) without a word of
complaint from anyone, either the FEDERATION or the SECRETARY.
We are, therefore, not disposed to find that the mode of payment agreed
upon in the ASCA was without the conformity or consent, even if
subsequent to its execution, of the laborers and the Secretary of Labor.
We hold that there was such consent.
In this connection, it should be recalled that after Civil Case No. 16815
of the Court of First Instance of Manila, wherein it was held that all the
contracts being insisted upon by VICTORIAS as still existent had
already expired on June 22, 1952, which decision was affirmed by this
Supreme Court in G. R. No. L-6648 on July 25, 1955, in another suit,
Civil Case No. 22577, also in the Court of First Instance of Manila,
wherein the constitutionality of Republic Act 809 was impugned by
VICTORIAS, the validity of ASCA itself was put to question when
VICTORIAS and the PLANTERS submitted to the court their
manifestation on April 23, 1956 that they had come to an extrajudicial
settlement effective upon the signing of the General Collective Sugar
Contract (Exhibits YYY and YYY-7) which was ultimately signed by
majority of the PLANTERS on or before May 31, 1956. The challenge
was made not only by some individual planters, like the Coruñas,
Lacson, Chapa, Valencia, et al., but more importantly also by the
Secretary of labor. However, the intervention of these challengers was
not allowed by the court, and on November 5, 1956, We issued a
resolution in G. R. No. L-11218 dismissing a petition against such
denial.
So, while it is true that the ASCA was questioned as being violative of
Section 1 of the Sugar Act of 1952, the challenge was in
relation alone to the contention of the FEDERATION, the
SECRETARY OF LABOR and some planters that the ratio of sharing
provided for in Section 1 of the Act is unalterable by contract. Insofar as
the manner in which the payment of what is due to the laborers was
concerned, that is, that stipulated in the ASCA, We are impressed
convincingly that the same must have appeared satisfactory to all the
parties concerned. Indeed, if the FEDERATION had felt that the mode
or medium of payment stipulated in the ASCA was prejudicial or in any
way inimical to the interests of its members, why was the cash payment
of P1.8 M plus accepted without, as far as We can see from the records,
any qualification or reservation on its part or on that of the Secretary of
labor. 6 On the contrary, what We note is that the transfer to the
PLANTERS of 40,000 shares of VICTORIAS in trust for the laborers
could have been viewed by the laborers with alacrity, not only because
of the attractively high increment it was supposed to earn for them, but,
what is more, the laborers would become thereby co-owners of the mill.
It is to Us of little, nay insignificant, moment who conceived or
"engineered" the plan, whether VICTORIAS or any other party and
what motivated the same. What cannot be denied is that under normal
standards, no one can perceive therein any prejudice or risk to the
pecuniary interests of the laborers. To speak of it, therefore, as
approximating something immoral or improper, even illegal, for
VICTORIAS to agree to it, as the Appellate Court did, is to
miscomprehend entirely its concept, which under the circumstances then
prevailing appeared to be the most practical and feasible way of meeting
the situation for the convenience and benefit of the laborers themselves,
the PLANTERS and VICTORIAS.
-I-
Having arrived at the conclusion that of the cash portion stipulated in
the ASCA plus the proceeds of the sale of the 40,000 shares of
VICTORIAS stock had already been "given", to use the word of the
FEDERATION itself in its pleadings below, long before the case in the
trial court was initiated, only P180,679.38 of the claim of the laborers
pertaining to the 195253 to 1954-55 crop years remain unpaid, We shall
now dwell on the curious and strange holding of the Court of Appeals
that VICMICO and the PLANTERS are jointly and solidarily liable to
the laborers for the payment of their claims, but only insofar as said P
180,679.38 are concerned.
Referring to the FEDERATION'S position in this respect, that is, the
joint and solidary liability of the PLANTERS and VICTORIAS vis-a-
vis the 1952 to 1955 phase of these cases, We must say that the same
looks more like a dragnet intended to catch both the PLANTERS and
VICTORIAS one way or another. After having admitted in its initial
pleadings with an express assertion that the laborers concerned had
already been "given" what is due them for the period in question, at the
trial, its claim bulged to over P7 M for the 1952-1955 period, albeit it
came out from the evidence that of such claim only P180,679.38 had not
been paid. (According to Mr. de Guia, the corresponding laborers could
not be located. Under the law, however, in such an instance, the money
due the lost laborers goes to be a designated government fund for the
general amelioration of labor and labor conditions in the whole country.)
Actually, We might reiterate, said initial pleadings of the Federation
made no reference at all to the crop years 1952-53 to 1954-55, but was
confined itself to the claim that from 1955-56 crop year to 1973-74, the
laborers were not being paid what is due them under the law, which they
insisted then was 6% of the 10% increase due the PLANTERS. In other
words, the FEDERATION based its original claim on the theory of
obligation created by law, but, of course, in reference only to the 1956
to 1974 crop years nothing of 1952-53 to 1954-55.
However, as may be gleaned from the decision of the Court of Appeals,
in that Court, the FEDERATION shifted to another pose. It claimed,
contrary to its admission in its original and amended petition in the trial
court, that the laborers had not been actually fully paid what is due them
for 1952 to 1955, and notwithstanding their receipt or acceptance,
without any protest or qualification of the cash portion (which turned
out to be short by P180,679.38) provided in the ASCA, it assailed,
rather belatedly, the legality and propriety of that agreement's provision
to the effect that P4 M due them would be paid in 40,000 shares of stock
to be entrusted to a Special Committee or Board of Trustees composed
of five planters, and what is more, it contended vehemently that the
laborers had not received any of said shares or any portion of the
proceeds of the sale thereof. As to the legal aspect of such belated claim,
its basis became no longer an obligation created by law but a liability
imposed according to it by Articles 20 and 21 of the Civil Code. But it
must have also relied on torts, for in its decision, the Court of Appeals
found "the Central (VICTORIAS) and PLANTERS jointly and severally
liable for tort", while citing in another portion of its decision also
Articles 20 and 21 of the Civil Code. We must confess We are perplexed
by such evident confusion of the pertinent juridical concepts in civil law
in such postures of the Court of Appeals and the FEDERATION. The
only legal provision that could impute joint and several or solidarity to
the PLANTERS and VICTORIAS is Article 2194 of the Civil Code
which reads:
ART. 2194. The responsibility of two or more persons who are liable for
a quasi-delict is solidary.
Since in this jurisdiction torts is generally equated with the quasi-delict
or culpa aquiliana or extra-contractualdefined and elucidated in
Chapter 2, Title XVII, comprising of Articles 2176 to 2194 of the Civil
Code, it must have been for this reason, that without mentioning the
codal provisions just referred to, and trying to play safe, as it were, with
its reference to torts in general, the Court of Appeals made its holding
under discussion. Surprisingly, however, it later on cited Articles 20 and
21 of the Civil Code, thereby implying that its reference to torts might
be in relations to these two later articles under Chapter 2 on Human
Relations of Chapter I of the Code. We do not hesitate to hold as We
hereby hold that such a confusion of simple and well-known civil law
concepts is unfortunate, to say the least. There is an obvious mix-up of
the several sources of obligation under existing laws, and one is left
uncertain whether what is being relied on is only one of them or a
combination of them or all of them together, which would naturally be a
veritable juridical and legal abnormality. For the benefit of everyone
concerned, We shall make a brief analysis of each of them that have
been directly or indirectly referred to by the Court of Appeals or the
FEDERATION.
In regard to the FEDERATION'S initial contention about obligation
created by law, undoubtedly, it had in mind Sections 1 and 9 of Republic
Act 809. But since in such initial pleading, the subject matter and cause
of action referred to crop years 1955-56 to 1973- 74, the FEDERATION
is correct in sustaining that the laborers are entitled to a 60% share in
the increase given to the PLANTERS by the CENTRAL. Its only
misconception in such posture is that it assumed that the ratios in
Section I of the Act have to be followed even if there were a majority of
planters with written contracts with VICTORIAS. Under Talisay-Silay
and the decision of the Court of Appeals, that position is untenable.
However, the laborers are nevertheless entitled to 2.4% out of the 4%
increase that pertained to the PLANTERS under the ASCA.
Accordingly, the PLANTERS are liable to their respective laborers for
the 2.4% that indisputably they have not paid since 1955 to 1974.
Obviously, that is an obligation created by law.
But arising as it does from Republic Act 809, the relevant question that
arises is whether such liability of the PLANTERS is joint and several or
solidary. After mature deliberation, considering the peculiar facts of
these cases wherein it appears that the PLANTERS always acted in
concert with one another or as a single unit, We hold that the
PLANTERS as an association, if it is, or all the planters in the Victorias
sugar milling district, whether members or not of such possible
association, and this includes petitioners Santos, as a lessee planter, and
Tirol, are jointly and severally liable for the whole amount due all the
laborers involved in these cases. As regards the pretended liability of
VICTORIAS in this respect, We have already disposed of that matter
earlier above.
Coming now to the matter of torts, the FEDERATION cites from Judge
C. P. Caguioa's Comments and Cases on Civil Law, Vol. I, 1967 ed. to
evidently give the impression that Article 20 of the Civil Code has
adopted or imported into Our jurisdiction the so-called Anglo-American
concept of torts which adds malice to the fault or negligence
contemplated in the quasi-delict or culpa aquiliana or extra-
contractual of our Civil Code. Such citation, We regret to say, does not
reenforce at all the stand of the laborers. 'Truth to tell, with all due
respect to the opinion of Judge Caguioa, a known civilian, Article 20
does not contemplate malice per se. The article reads thus:
ART. 20. Every person who, contrary to law, wilfully or negligently
causes damage to another, shall indemnify the latter for the same.
This article creates a new source of obligation in addition to culpa
aquiliana. While Article 2176 mentions only fault or negligence, as can
be seen, the above-quoted article requires that the person to be held
liable must have acted "contrary to law" unwilfully or negligently
caus(ing) damage to another." If We are to believe the following citation
in VICTORIAS brief:
In order that liability under Article 2176 of the Civil Code will arise the
following requisites must exist: (a) There must be damage or prejudice
which must be proven by the party claiming it; (b) There must be an
unlawful act or omission amounting to fault or negligence; and (c)
There must be a direct causal connection between the damage or
prejudice and the act or omission. (12 Manresa, 640-641; Taylor v.
Manila Electric Co., 16 Phil. 8; Jarencio, Torts and Damages, 1968
Edition, p. 25). (Page 222).
even under culpa aquiliana "there must be an unlawful act or omission"
for any liability to attach.
It is thus clear from the foregoing brief discussion of the juridical
concepts of torts, culpa aquiliana and Article 20 of the Civil Code that
neither the PLANTERS, and much less VICTORIAS, appears to be
guilty of tort in any sense. Accordingly, the holding of the Court of
Appeals that "the Central and PLANTERS are liable in tort" to the
laborers of the former has no factual nor legal basis. In consequence, it
necessarily follows that the joint and several liability imposed by the
Court of Appeals upon VICTORIAS must be, as it is hereby, held to be
erroneous and uncalled for, factually, as shown earlier in Our discussion
of the relationship between the laborers of the PLANTERS and
VICTORIAS, and legally, in the light of what we have just explained is
the only correct legal basis of the laborers' claim, namely, an obligation
arising from law. To reiterate, the law, that is, Republic Act 809, does
not impose upon the centrals, whether expressly or impliedly, any joint
and several liability with the planters for the share which the Act
apportions for the laborers of the planters, since it is the responsibility
exclusively of the planters to pay their laborers after they have been
given by the central what is due them. In other words, the inherent
nature of the obligation of the planters, that of paying their own
laborers, has never been from the inception of the sugar industry up to
the present, solidary with the Centrals. Article 1207 of the Civil Code
provides in this respect thus:
ART. 1207. The concurrence of two or more creditors or two or more
debtors in one and the same obligation does not imply that each one of
the former has a right to demand, or that each one of the latter is bound
to render, entire compliance with the prestation. There is a solidary
liability only when the obligation expressly so states, or when the law or
the nature of the obligation requires solidarity.
In these premises, We cannot see how VICTORIAS may be held jointly
and severally liable with the PLANTERS, contrary to what has been
held by the Court of Appeals.
XIII
The foregoing sufficiently resolve, the first eight (I to VIII) of the ten
(10) assignment of errors of the FEDERATION. We shall now tackle the
remaining two of them.
-A-
In its Assignment of Error IX, the FEDERATION ascribes to the Court
of Appeals the alleged error of not holding VICTORIAS and the
PLANTERS jointly and severally liable for exemplary damages for the
losses that the laborers have suffered because they were not paid their
share of the 1952-53 to 1954-55 crop years production. Needless to say,
as a consequence of Our holding that by their own admission and the
evidence misapprehended, in Our view, by the Court of Appeals, all the
amounts due them for said period have already been paid, except
P180,679.38, We can perceive no legal reason why such claim for
exemplary damages should be awarded. With particular reference to the
P180,679.38 left unpaid in 1955, FEDERATION'S own witness de Guia
explained that the laborers to which the same correspond could not be
located. In the light of such explanation, it would be unfair to even think
of exemplary damages for the non-payment thereof.
-B-
As to the matter of the non-payment by the PLANTERS of the 2.4%
due their laborers, a little clarification may be called for. We feel that the
legal provision mandating such payment may indeed not be readily
understood by or comprehensible to everyone in the same sense it was
construed by this Court in Talisay-Silay and by the Court of Appeals in
its subject decision. For, it is undeniable that Section 9 of Republic Act
809 uses the words "any increase in participation granted the
planters under this Act". (emphasis supplied) Read literally, there could
be a little shade of plausibility in the posture of VICTORIAS and
PLANTERS that only any increase as a result of the application of
Section 1 of the Act is contemplated in its Section 9, and not an increase
by virtue of a written milling contract executed after the effectivity of
the Act, even if those who do so might constitute the majority of the
planters in the district. But, as We postulated in Talisay-Silay, any
increase given to the planters by any central after the passage of the Act
cannot be viewed in any way than that which has been induced or forced
to be done on account of the compulsive effect of the various related
provisions of the Act. Virtually, therefore, any such increase should be
deemed as an "increase — under this Act", since it is a result of its
operation. Understandably, since it is only because of this Court's
construction of the Act rather liberally, to be sure, in favor of labor, We
cannot say that, in the words of Article 2233 of the Civil Code, the
laborers here are entitled to recover exemplary damages "as a matter of
right. " We must consider that per Article 2234, "the plaintiff must show
that he is entitled to moral, temperate or compensatory damages before
the court may consider the question of whether or not exemplary
damages should be awarded." In the instant cases, all relevant
circumstances considered, We fail to see Our way clear to granting any
kind of moral, temperate or compensatory damages to the laborers, and
We are not doing so. In fact and in law, We have no basis to go that far.
Thus, it is pointless to speak of exemplary damages here.
-C-
Lastly, the FEDERATION complains that the Court of Appeals erred in
reducing to 10% the 20% attorney's contingent fees stipulated in the
laborers' contract with their counsel. (Page 307, Laborers' Brief) Every
material point discussed in the brief taken into account, We share the
conclusion of the Appellate Court that the said ten (10%) per centum
award of attorney's fees is just and adequate.
XIV
Insofar as VICTORIAS' petition is concerned, there are only three
assignments of error (VII, VIII and XII) that may not be said to be
squarely resolved in the above opinion.
-A-
VICTORIAS vehemently maintains in its Assignment of Errors No. VII
that nowhere in the course of the proceedings below, starting from the
allegations of both the original and amended petition of the
FEDERATION through the evidence it presented without opportune and
appropriate objection, may there be traced any theory having the
semblance of reliance on the law on torts, whether in the concept
of culpa aquiliana or under Articles 20 and 21 of the Civil Code, the
alleged Anglo-Saxon version, per Judge Caguioa, supra, or, any other
variant thereof. According to VICTORIAS, the alternative bases
perceptible in the FEDERATION'S petitions which ultimately led to the
instant cases before Us now were either an obligation arising from law
(Republic Act, 809) or one that is contractual, the latter being somewhat
vague to Us, since it is in fact premised on the alleged invalidity of the
provisions of the ASCA. And here, it is the position of VICTORIAS that
assuming the cause of action of the FEDERATION could still be legally
convertible in the appellate stage of the proceedings, either in the Court
of Appeals or here, to one of "torts", We should dismiss the
FEDERATION'S petition, the same having been filed in November
1962 or more than four (4) years after the alleged cause of action arose
in 1955 or 1956, citing Article 1146 (2) of the Civil Code.
With the view We have taken of the whole controversy as discussed in
the above opinion, We deem it unnecessary to pass on such seventh
assignment of error of VICTORIAS regarding prescription of an action
on torts, whether We look at it in relation to the 1952-53 to 1954-55
crop years controversy or in connection with the 2.4% claim of the
laborers for crop years 1956 to 1974.
-B-
It is VICTORIAS' posture in its assignment of error No. XII that the real
nature of the action of the laborers in these cases is one for accounting,
hence, as a preliminary matter, We should first determine whether or not
they are entitled to such accounting. Stated otherwise, it looks to Us that
VICTORIAS claim is that it is premature yet at this stage of the
controversy to deal with any sums of money or amounts due the
laborers, there being no showing extant in the record that such
entitlement exists. Again, We hold We do not have to spend more ink
and paper to deal with such contention. Either it is quite clear that the
FEDERATION has sufficiently established the predicate for accounting
insofar as the PLANTERS are concerned or We consider it superfluous
to make any ruling as to the point in question for the purposes of these
cases, since the ultimate result of Our above opinion would virtually not
be different anyway.
-C-
There is one point raised by VICTORIAS which although generally
covered somehow in the above opinion, deserves special mention and
discussion. The central maintains that in the interrelation among the
planters, the plantation laborers and the miller, it has always been the
practice and actually a legal axiom that the central, on the one hand, and
the planter, on the other, whether the latter be a landowner or lessee or
one who just factually plants and delivers his harvest for milling to the
central of the corresponding district under any other arrangement with
the landowner concerned, are the only ones who enter into contractual
relations with each other, and in all the contracts between them, since
the sugar industry began, nothing whatsoever has been provided with
respect to the laborers, either of the miller or the planters, except, in any
event, precisely to make it clear that neither of them would have
anything to do with the terms and conditions of each other's workers or
laborers. We have stated earlier and We reiterate Our view that there is
nothing in Republic Act No. 809 that alters such a long standing factual
and juridical situation.
However, it cannot be denied that under Republic Act 809, for the first
time, outside of enacting the Minimum Wage Law and expressly
extending fringe benefits, like cost-of-living allowances, bonuses, etc. to
the workers in the sugar industry not only in the farms but also in the
mills, the government has never fixed the manner in which the planters
should share the proceeds of milled sugarcane with their respective
plantation laborers. And notably, in Section 9 of the Act, the Congress
made it abundantly specific that what the provision contemplates in the
partition between the planters, on the one hand, and their respective
plantation laborers, on the other, is of "any increase in the participation
granted the planters under this Act and above their present share," which
the provision explicitly mandates "shall be divided between the planter
and his laborer in the plantation (and that) (T)he (said) distribution of
the share corresponding to the laborers shall be made under the
supervision of the Department of Labor."
Such being the case, VICTORIAS suggests the proposition that,
therefore, if somehow the Act creates any link at all between the
plantation laborers and the central, Section 9 itself makes the planter the
agent of his laborers in such relationship and speaks for them and is
responsible to them, as their principal. When, therefore, the PLANTERS
entered into and signed the ASCA, they did so not only for themselves
but for and on behalf of their principal, the laborers, in respect to all
matters concerning the latter. Consequently, VICTORIAS argues that
the plantation laborers are bound by the terms and conditions of the
ASCA as parties thereto, represented by their agent, the PLANTERS.
There may be something in such pose, but rather than go into the
intricacies and complications that evidently would need to be elucidated
and resolved in relation thereto, but which anyway would be
inconsequential as far as the basic views of these cases expressed in Our
above opinion are concerned, We prefer to deal with VICTORIAS'
argument under discussion on some other appropriate occasion when its
resolution should become indispensable, After all, in the cases at bar, it
is already altogether clear, as We have discussed in Our above opinion,
that whatever the plantation laborers are claiming is due them must be
the exclusive responsibility and liability of the PLANTERS jointly and
severally among themselves, to the complete exclusion of VICTORIAS.
XV
All of the assignments of errors of the PLANTERS (I to VI) in their
brief with Us have been resolved in Our opinion above. There is,
however, something they mentioned in their prayer that We might just
as well clear up and dispose of. The PLANTERS pray that they should
not be made liable to their respective laborers for any of the claims
herein involved because they have not "engineered nor pocketed that
which allegedly belong to the laborers as a result of the ASCA, for they
(the PLANTERS) got only what they are entitled to under Republic Act
809", and elsewhere, they suggest that should they be found somehow
liable, VICTORIAS should be adjudged to reimburse them therefor.
We shall not concern Ourselves about the "engineering" that brought
forth the ASCA. The Court of Appeals discussed that matter in detail in
its decision now under review, and its factual conclusions relative
thereto, whether right or wrong, cannot, to Our mind be of pivotal
influence in the ultimate resolution of these cases. In a sense, what
circumstances go into the process of formulating contracts between the
sugar centrals and the planters are matters of public knowledge among
all those duly informed about and concerned with the sugar industry,
and We must assume that whatever comes out of their bargaining cannot
be but their voluntary and mutual agreements, even if, in this
connection, it is but fair to admit that by force of the inherent nature of
the indispensability of the centrals as the last factor of production of the
saleable milled sugar, its superior position is an economic reality
everyone must accept. The Court of Appeals realistically considered the
matter as something that is not illegal (and not exactly immoral), much
less in contravention or circumvention of the Sugar Act, but dictated by
the legitimate exercise of all individuals to make a profitable bargain.
Emphatically, it must be said though, that the PLANTERS were not
entirely helpless, for as We see the scenario that may be flashed out of
Republic Act 809, all that the PLANTERS had to do was to refuse to
sign any contract with VICTORIAS, in which event, the government,
thru a receiver, would have run the mill and the PLANTERS could have
gotten the 10% increase provided in Section I. If they signed, as they
did, a contract, the ASCA, providing for a 36-64% partition, We can
only deduce ineluctably that such was the better option for them under
the circumstances. And since, everyone is presumed to know the law,
for ignorance thereof "excuses no one from compliance therewith ", and
the courts, after all, are not guardians of parties, sui juris, who might get
the shorter end at bargaining tables, We have no alternative but to
conclude that when they signed the ASCA, the PLANTERS were well
aware that of the 4% increase granted therein to them, 60% had to be
paid by them to their respective laborers. Thus, when they plead that
what they got under the ASCA was only what they are entitled to under
the Act, they must not be understood as referring to the whole 4% but
only to 1.6%.
Let it be plainly understood, in this connection, that under Our Talisay-
Silay ruling, the laborers are entitled to no more than 60% of any
increase in any increase in participation their respective planters-
employers might be granted. Beyond that whatever goes to the
PLANTERS and to VICTORIAS, for that matter, are theirs as a matter
of law and right. To speak of "pocketing" by anyone of somebody else's
rightful and lawful share is somehow malicious and entirely
unwarranted.
From the facts extant in the record, and applying the law thereto, it is
the conclusion of this Court that the PLANTERS are inescapably liable
to their respective laborers in the amounts and manner hereinabove set
forth. They should know better than to place the blame on anyone else.
Their respective laborers have been deprived long enough of what is
legally and rightfully theirs. It is unimaginable how said laborers could
have had better lives and living conditions, worthy of their work, had
the PLANTERS been more socially-minded and humanely concerned
about the welfare of those that have made them the "sugar lords" during
better times in Negros Occidental. To make things clearer, the claim for
reimbursement by the PLANTERS is hereby overruled.
XVI
The petition of planters Primo Santos and Roberto Tirol requires no
separate discussion. Their claims that the trial court had no jurisdiction
over their persons and that they should not be held liable for obligations
under a contract they have not signed deserve scant consideration. In
fact, those points are already properly dealt with in the above opinion,
hence all their assignment of errors are hereby held to be untenable.
JUDGMENT
Accordingly, the Court AFFIRMS the judgment of the Court of Appeals
holding that the LABORERS are entitled to the payment of 60% of the
4% increase paid by VICTORIAS to the PLANTERS every crop year,
from crop year 1955-56 to crop year 1973-74, the exact amount thereof
in pesos to be determined by the trial court after a hearing to be held
within thirty (30) days from the finality of this decision, the yearly
amount thus determined to bear the corresponding legal interests up to
the date of payment to the LABORERS, 7 the PLANTERS, including
appellants Primo Santos and Roberto Tirol, are sentenced to pay the said
LABORERS the amount to be so determined, under the supervision of
the Ministry of Labor. In addition, the said PLANTERS shall also pay to
the LABORERS, the sum of P 180,679.38, the balance unpaid of the
latter's share in the 1952- 53 to 1954-55 crop years 8 also with the same
rates of interest and under the same supervision.
The judgment of the Court of Appeals is hereby modified by eliminating
the joint and several or solidary liability of VICTORIAS with the
PLANTERS for the above amounts, the said liability being solely and
exclusively of the PLANTERS. Moreover, contrary to the finding of the
Court of Appeals, the Court finds and holds that per their own
admission in their complaint and the extant evidence, the laborers had
already been paid their share in the 1952-53 to 1954-55 crop years,
except for the P 180,679.38 aforementioned. In all other respects, the
judgment of the Court of Appeals is AFFIRMED insofar as the liability
of the PLANTERS to their laborers are concerned. And We hold that
said liability is joint and several among all the planters in the Victorias
District from 1952 to 1973, provided that in the execution of this
judgment, the primary and priority recourse should be against the
members of the Special Committee or Board of Trustees and secondly,
the PLANTERS, as an association, before they (the planters) are
proceeded against individually.
This estimate is subject to the amount to be determined by the trial
court.
Costs against the PLANTERS also in the same character of liability just
set forth as to their principal liability.
Concepcion, Jr., Fernandez, Guerrero, Abad Santos, De Castro and
Melencio-Herrera, JJ., concur.
Fernando, C.J., concurs in the result.
Teehankee, Aquino, J., took no part.
Makasiar, J., the Court of Appeals should be entirely affirmed.
Footnotes
1 An initial attempt to pass a law referring only to the relationship
between the centrals and the planters was thwarted be a veto by
President Quirino on the ground of unconstitutionality. Subsequently, as
it was finally passed and allowed to be a law without the President's
signature, the Act contained provisions of social character in favor of
labor, which in the Talisay-Silay case. We upheld as justified and
warranted not only be police power but by the more pervasive mandate
of the social justice provisions of the Constitution.
2 In respect to the 1952-53 to 1954-55 crop years, the Court of Appeals
directly imputed connivance to the PLANTERS and VICTORIAS
seemingly because, in its opinion. the payment of P4 M in shares of
stock instead of in cash was prejudicial for at least resulted in prejudice
or loss) to the laborers. But as regards the 1955-56 to 1973-74 crop
years, the ASCA contained no provision other than what Talisay-Silay
and the Court of Appeals held to be legal namely, for VICTORIAS to
share the proceeds of production during said period with the
PLANTERS on a 36-64% basis.
3 Section 9, Art. 11, Id.
4 Section 5, Rule 10
5 Luna vs. Linatoc, 74 Phil. 15.
6 Somewhere in the brief of the laborers, there is an indication that
earlier, the Secretary of Labor voiced his objection to the part payment
in shares of stock, but such objection paled into insignificance when no
protest was made by him, when pursuant to the ASCA, the actual
payment of the cash portion and the issuance of 40,000 shares were
actually made. In fact, there is convincing evidence in the record that
the payment was made under the direct supervision of his authorized
representative, not only of the stipulated cash portion but even of the
proceeds of the sales of the 40,000 shares of stock.
7 The rates of interest should correspondingly be increased in
accordance with the prevailing legal rate of each crop year.
8 Computed on the basis of the shares of the LABORERS' share of 6%
in the 1952-53 to 1954-55 crop years, it may be estimated that with the
2.4% corresponding to them for the crop years 1955-56 to 1973-74,
under this judgment, the LABORERS should receive a total amount in
the neighborhood of Thirty Million (P30 M) Pesos.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-12727 February 29, 1960
MANILA JOCKEY CLUB, INC., petitioner-appellant,
vs.
GAMES AND AMUSEMENTS BOARD, ET AL., respondents-
appellees.
PHILIPPINE RACING CLUB, INC., petitioner-intervenor-appellant.
Lichauco, Picazo and Agcaoili for appellant.
First Assistant Government Corporate Counsel Simeon M. Gopengco
and Attorney Pedro L. Bautista for appellee PCSO.
Assistant Solicitor General Jose P. Alejandro and Solicitor Pacifico P.
de Castro for the other appellees.
Cesar S. de Guzman for appellant.
BARRERA, J.:
This is a petition for declaratory relief filed by petitioner Manila Jockey
Club, Inc., in the Court of First Instance Manila (Civil Case No. 31274),
in which the Philippine Racing Club, Inc., intervened as party in interest
with leave of court, praying that judgment be rendered against
respondents Games and Amusements Board (GAB), Philippine Charity
Sweepstakes Office (PCSO), and Executive Secretary Fortunato de
Leon:
(a) Interpreting Republic Acts Nos. 309 and 1502 in such a manner that The issue is the proper placement of the six (6) additional racing days
the 30 Sundays unreserved for charitable institutions and therefore given to the Philippine Charity Sweepstakes Office, in virtue of
belonging to the private racing clubs under Section 4 of Republic Act Republic Act No. 1502, approved on June 16, 1956.
No. 309 continue to pertain to said private entities, and that the 6
additional sweepstakes races authorized under Republic Act No. 1502 The authorized racing days specifically designated and distributed in
should be held on 6 of the 12 Saturdays not reserved for any private Section 4 of Republic Act No. 309, the basic law on horse racing in the
entity or particular charitable institution under Section 4 of Republic Act Philippines, as later amended by Republic Act No. 983, are as follows:
No. 309, or on any other day of the week besides Sunday, Saturday and
legal holiday;
A. Sundays:
(b) Holding that respondent PCSO does not have the right or power to
appropriate or use the race tracks and equipment of petitioner without
(1) For the Philippine Anti-Tuberculosis
its consent, nor can respondents compel petitioner to so allow such use
Society .................. 12 Sundays
of its race tracks and equipment under pain of having its license
revoked.
(2) For the Philippine Charity Sweepstakes Office
Respondents duly filed their respective answers to said petition and the (PCSO) . 6 Sundays
case was heard. After hearing, the court, on July 5, 1957, rendered a
decision which, in part, reads: (3) For the White Cross,
Inc. ............................................. 4 Sundays
The court does not deem it necessary to rule on the deprivation of
property of the petitioner and the intervenor without due process of law,
(4) For the Grand Derby Race of the Philippine Anti-
as feared by them, because as they have stated, the Philippine Charity
Tuberculosis
Sweepstakes Office is using their premises and equipment under
Society ........................................................ 1 Sunday
separate contracts of lease voluntarily and willingly entered into by the
parties upon payment of a corresponding rental. There is therefore no
deprivation of property without due process of law. Total ................................................................ 23 Sundays

Wherefore, the court is of the opinion and so holds that once a month on (5) For private individuals and entities duly licensed by
a Sunday not reserved for the Anti-Tuberculosis Society, the White the GAB, other Sundays not reserved under this Act, as
Cross and other charitable institutions by Section 4 of Republic Act No. may be determined by the
309, the Philippine Charity Sweepstakes Office is authorized to hold GAB ........................................... 29 Sundays
one regular sweepstakes draw and races, pursuant to Section 9 of
Republic Act No. 1502, thus reducing the number of Sundays which
or 30 for Leap years
may be alloted to private entities by the Games and Amusements Board.
Total for the year .................... 52 Sundays
...

From this judgment, petitioner and intervenor interposed the present or 53 for leap years.
appeal.

B. Saturdays:
(1) For the Philippine Anti-Tuberculosis Society ..... 12 Saturdays
(2) For the White Cross, Inc. .......................................
(3) For private Individuals and entities duly licensed by
GAB and as may be determined
it ..................................
(4) For races authorized by the President for charitable,
relief, or civic purposes other than the particular
charitable institutions named above, all other Saturdays
not reserved for the latter ....................
Total ................................................................
C. Legal Holidays: All, except Thursday and Friday of the Holy Week,
July 4th and December 30th, have been reserved for private individuals
and entities duly licensed by the GAB.
As stated, Republic Act No. 1502 increased the sweepstakes draw and
races of the PCSO to twelve, but without specifying the days on which
they are to be run. To accommodate these additional races, the GAB
resolved to reduce the number of Sundays assigned to private
individuals and entities by six. Appellants protested, contending that the
said increased should be taken from the 12 Saturdays reserved to the
President, for charitable, relief, or civic purposes, or should be assigned
to any other day of the week besides Sunday, Saturday, and legal
holiday.
Appellants' contention cannot be sustained. Section 4 Republic Act No.
309, as amended by Republic Act No. 983, by express terms,
specifically reserved 23 Sundays and 16 Saturdays for the Philippine
Anti-Tuberculosis Society, the White Cross, Inc. and the PCSO, and 12
Saturdays to the President for other charitable, relief, or civic purposes.
These days can not be disposed of by the GAB without authority of law.
As to the remaining racing days, the law provides:
SEC. 4. Racing days.—Private individuals and entities duly licensed by
the Commission on Races (now GAB) may hold horse races on Sundays
not reserved under this Act, on twenty-four Saturdays as may be
4 Saturdays determined by the said Commission (GAB), and on legal holidays,
except Thursday and Friday of Holy Week, July fourth, commonly
known as Independence Day, and December thirtieth, commonly known
by as Rizal Day.
24 Saturdays
It is clear from the above-quoted provision that appellants have no
vested right to the unreserved Sundays, or even to the 24 Saturdays
(except, perhaps, on the holidays), because their holding of races on
these days is merely permissive, subject to the licensing and
determination by the GAB. When, therefore, Republic Act No. 1502
12 Saturdays
was enacted increasing by six (6) the sweepstakes draw and races, but
without specifying the days for holding them, the GAB had no
52 Saturdays alternative except to make room for the additional races, as it did, form
among the only available racing days unreserved by any law — the
Sundays on which the private individuals and entities have been
permitted to hold their races, subject to licensing and determination by
the GAB.
It is suggested that the GAB should have chosen any week days or
Saturday afternoons. In the first place, week days are out of the
question. The law does not authorize the holding of horse races with
betting on week days (See Article 198 of the Revised Penal Code).
Secondly, sweepstakes races have always been held on Sundays.
Besides, it is not possible to hold them on Saturday afternoons as, it is
claimed, a whole day is necessary for the mixing of the sweepstakes
balls, the drawing of winning sweepstakes numbers, and the running of
the sweepstakes races. Be that as it may, since the law has given certain
amount of discretion to the GAB in determining and allocating racing
days not specifically reserved, and since the court does not find that a
grave abuse of this discretion has been committed, there seems to be no
reason, legal or otherwise, to set aside the resolution of the GAB.
Furthermore, appellants contend that even granting that the six (6)
additional sweepstakes races should be run on Sundays, yet if they are
held on a club race day, the GAB should only insert them in the club
races and not given the whole day to the PCSO, to the exclusion of
appellants. In support of this contention, the following quotation from
the debate in the House of Representatives before voting on House Bill
No. 5732, which became Republic Act No. 1502, is cited:
Mr. ABELEDA. If there are no more amendments, I move that we vote
on the measure.
Mr. MARCOS. Mr. Speaker, before we proceed to vote on this bill, I
want to make it of record that it is the clear intention of the House to
increase by two the ten regular and special Sweepstakes races making it
all in all, twelve, and that in cases where a sweepstakes race falls in a
club race days the Sweepstakes races should be inserted in the club
race.
Mr. ABELEDA. The gentleman from Ilocos Norte is correct. . . . (t.s.n.,
Proceedings in House of Representatives, Congress, May 17, 1956;
emphasis supplied.)
Appellants cite in their briefs a number of authorities sustaining the
view that in the interpretation of statutes susceptible of widely differing
constructions, legislative debates and explanatory statements by
members of the legislature may be resorted to, to throw light on the
meaning of the words used in the statutes. Upon the other hand, the
appellees, likewise, quote in their briefs other authorities to the effect
that statements made by the individual members of the legislature as to
the meaning of provisions in the bill subsequently enacted into law,
made during the general debate on the bill on the floor of each
legislative house, following its presentation by a standing committee,
are generally held to be in admissable as an aid in construing the statute.
Legislative debates are expressive of the views and motives of
individual members and are not safe guides and, hence, may not be
resorted to in ascertaining the meaning and purpose of the lawmaking
body. It is impossible to determine with certainty what construction was
put upon an act by the members of the legislative body that passed the
bill, by resorting to the speeches of the members thereof. Those who did
not speak, may not have agreed with those who did; and those who
spoke, might differ from each other.1
In view of these conflicting authorities, no appreciable reliance can
safely be placed on any of them. It is to be noted in the specific case
before us, that while Congressmen Marcos and Abeleda were,
admittedly, of the view that the additional sweepstakes races may be
inserted in the club races, still there is nothing in Republic Act No.
1502, as it was finally enacted, which would indicate that such an
understanding on the part of these two members of the Lower House of
Congress were received the sanction or conformity of their colleagues,
for the law is absolutely devoid of any such indication. This is,
therefore, not a case where a doubtful wording is sought to be
interpreted; rather, if we adopt appellants' theory, we would be
supplying something that does not appear in the statute. It is pertinent to
observe here that, as pointed out by one of appellants' own cited
authorities,2 in the interpretation of a legal document, especially a
statute, unlike in the interpretation of an ordinary written document, it is
not enough to obtain information to the intention or meaning of the
author or authors, but also to see whether the intention or meaning has
been expressed in such a way as to give it legal effect and validity. In
short, the purpose of the inquiry, is not only to know what the author
meant by the language he used, but also to see that the language used
sufficiently expresses that meaning. The legal act, so to speak, is made
up of two elements — an internal and an external one; it originates in
intention and is perfected by expression. Failure of the latter may defeat
the former. The following, taken from 59 Corpus Juris 1017, is in the
line with this theory:
The intention of the legislature to which effect must be given is that
expressed in the statute and the courts will not inquire into the motives
which influence the legislature, or individual members, in voting for its
passage; nor indeed as to the intention of the draftsman, or the
legislature, so far as it has been expressed in the act. So, in ascertaining
the meaning of a statute the court will not be governed or influenced by
the views or opinions of any or all members of the legislature or its
legislative committees or any other persons.
Upon the other hand, at the time of the enactment of Republic Act No. Paras, C. J., Bengzon, Labrador, Concepcion, Reyes, J. B. L., Endencia,
1502 in June, 1956, the long, continuous, and uniform practice was that and Gutierrez David, JJ., concur.
all sweepstakes draws and races were held on Sundays and during the
whole day. With this background, when Congress chose not to specify in Footnotes
express terms how the additional sweepstakes draws and races would be
held, it is safe to conclude that it did not intend to disturb the then 1
Sutherland on Statutory Construction, 499-501; Ramos vs. Alvarez 97
prevailing situation and practice. Phil., 844; 51 Off. Gaz. [II] 56087.

"On the principle of contemporaneous exposition, common usage and 2

Vaughan Hawkins, in appendix to Thayer's Preliminary Treatise on
practice under the statute, or a course of conduct indicating a particular Evidence.
undertaking of it, will frequently be of great value in determining its
real meaning, especially where the usage has been acquired in by all
parties concerned and has extended over a long period of time; . . . (59
C. J. 1023). Republic of the Philippines
SUPREME COURT
Likewise, the language of Republic Act No. 1502 in authorizing the Manila
increase, clearly speaks of regular sweepstakes draws and races. If the
intention of Congress were to authorize additional sweepstakes draws EN BANC
only which could, admittedly, be inserted in the club races, the law
would not have included regular races; and since regular sweepstakes G.R. No. L-11988 April 4, 1918
races were specifically authorized, and it would be confusing,
inconvenient, if not impossible to mix these sweepstakes races with the JACINTO MOLINA, plaintiff-appellee,
regular club races all on the same day (and it has never been done vs.
before), the conclusion seems inevitable that the additional sweepstakes JAMES J. RAFFERTY, Collector of Internal Revenue, defendant-
draws and races were intended to be held on a whole day, separate and appellant.
apart from the club races.
Acting Attorney-General Paredes for appellant.
Appellants' contention that to compel them to permit the PCSO to use Araneta & Zaragoza for appellee.
their premises and equipment against their will would constitute
deprivation of property without due process of law, deserves no serious FISHER, J.:
consideration. As the lower court has found, every time the PCSO uses
appellants' premises and equipment, they are paid rentals in accordance After the publication of the decision announced under the date of
with the terms of separate contracts of lease existing between them and February 1st., 1918,1 counsel for appellee presented a petition for a
the PCSO. rehearing. This petition was granted and oral argument of the motion
was permitted. Two of the members of the court, as constituted at the
The decision appealed from, being in consonance with the above time of the argument on the motion for a rehearing, were not present
findings and considerations of this Court, the same is hereby affirmed, when the case was first submitted and did not participate in the original
with costs against the appellants. So ordered. decision.
Upon the facts, as correctly stated in the original majority decision, a
majority of the members of the court as now constituted is in favor of
setting aside the original decision and affirming the judgment of the trial
court.
Plaintiff contends that the fish produced by him are to be regarded as an
"agricultural product" within the meaning of that term as used in
paragraph (c) of section 41 of Act No. 2339 (now section 1460 of the
Administrative Code of 1917), in forced when the disputed tax was
levied, and that he is therefore exempt from the percentage tax on
merchants' sales established by section 40 of Act No. 2339, as amended.
The provision upon which the plaintiff relies reads as follows:
In computing the tax above imposed transactions in the following
commodities shall be excluded: . . . (c) Agricultural products when sold
by the producer or owner of the land where grown, whether in their
original state or not. (Act No. 2339, sec. 41.)
The same exemption, with a slight change in wording, is now embodied
in section 1460 of the Administrative Code, of 1917.
The question of law presented by this appeal, as we view, is not whether
fish in general constitute an agricultural products, but whether fish
produced as were those upon which the tax in question was levied are
an agricultural product.
As stated by judged Cooley in his great work on taxation:
The underlying principle of all construction is that the intent of the
legislature should be sought in the words employed to express it, and
that when found it should be made to govern, . . . . If the words of the
law seem to be of doubtful import, it may then perhaps become
necessary to look beyond them in order to ascertain what was in the
legislative mind at the time the law was enacted; what the circumstances
were, under which the action was taken; what evil, if any, was meant to
be redressed; . . . . And where the law has contemporaneously been put
into operation, and in doing so a construction has necessarily been put
upon it, this construction, especially if followed for some considerable
period, is entitled to great respect, as being very probably a true
expression of the legislative purpose, and is not lightly to be overruled,
although it is not conclusive. (Cooley on Taxation [Vol. 1] 3d. Ed., p.
450.)
The first inquiry, therefore, must relate to the purpose of the Legislative
had in mind in establishing the exemption contained in the clause now
under consideration. It seems reasonable to assume that it was due to the
belief on the part of the law making body that by exempting agricultural
products from this tax the farming industry would be favored and the
development of the resources of the country encouraged. It is a fact, of
which we take judicial cognizance, that there are immense tracts of
public land in this country, at present wholly unproductive, which might
be made fruitful by cultivation, and that large sums of money go abroad
every year for the purchase of food substances which might be grown
here. Every dollar's worth of food which the farmer produces and sells
in these Islands adds directly to the wealth of the country. On the other
hand, in the process of distribution of commodities to the ultimate
consumer, no direct increase in value results solely from their transfer
from one person to another in the course of commercial transactions. It
is fairly to be inferred from the statute that the object and purpose of the
Legislature was, in general terms, to levy the tax in question,
significantly termed the "merchant's tax," upon all persons engaged in
making a profit upon goods produced by others, but to exempt from the
tax all persons directly producing goods from the land. In order to
accomplish this purpose the Legislature, instead of attempting an
enumeration of exempted products, has grouped them all under the
general designation of "agricultural products."
It seems to require no argument to demonstrate that it is just as much to
the public interest to encourage the artificial propagation and growth of
fish as of corn, pork, milk or any other food substance. If the artificial
production of fish is held not to be included within the exemption of the
statute this conclusion must be based upon the inadequacy of the
language used by the Legislature to express its purpose, rather than the
assumption that it was actually intended to exclude producers of
artificially grown fish from the benefits conferred upon producers of
other substances brought into the store of national wealth by the arts of
husbandry and animal industry.
While we have no doubt that the land occupied by the ponds in which
the fish in question are grown is agricultural land within the meaning of
the Acts of Congress and of the Philippine Commission under
consideration in the case of Map vs. Insular Government (10 Phil. Rep.,
175) and others cited in the original majority opinion, it does not seem
to us that this conclusion solves the problem. A man might cultivate the
surface of a tract of land patented to him under the mining law, but the
products of such soil would not for that reason, we apprehend, be any
the less "agricultural products." Conversely, the admission that the land
upon which these fishponds are constructed is not to be classified as
mineral or forest land, does not lead of necessity to the conclusion that
everything produced upon them is for that reason alone to be deemed an
"agricultural product" within the meaning of the statute under
consideration.
"Agriculture" is an English word made upon of Latin words "ager," a
field, and "cultura," cultivation. It is defined by Webster's New
International Dictionary as meaning in its broader sense, "The science
and art of the production of plants and animal useful to man . . ."
In Dillard vs. Webb (55 Ala., 468) it is held that the words "agriculture"
includes "the rearing, feeding and managing of live stock." The same
view was expressed in the case of Binzel vs. Grogan (67 Wis., 147).
Webster defines "product" to be "anything that is produced, whether as
the result of generation, growth, labor, or thought ... ," while "grow" is
defined in the Century Dictionary as meaning "to cause to grow;
cultivate; produce, raise . . .."
While it is true that in a narrow and restricted sense agricultural
products are limited to vegetable substances directly resulting from the
tillage of the soil, it is evident from the definitions quoted that the term
also includes animal which derived their sustenance from vegetable
growths, and are therefore indirectly the product of the land. Thus it has
been held that "The product of the dairy and the product of the poultry
yard, while it does not come directly out of the soil is necessarily
connected with the soil . . . and is therefore farm produce. (District of
Columbia vs. Oyster, 15 D. C., 285.)
In the case of Mayor vs. Davis (6 Watts & Sergeant [Penn. Rep.], 269)
the court said:
Swine horses, meat cattle, sheep, manure, cordwood, hay, vegetables,
fruits, eggs, milk, butter, lard . . . are strictly produce of the farm . . .
Without attempting to further multiply examples, we think it may safely
be asserted that courts and lexicographers are in accord in holding that
the term "agricultural products" is not limited in its meaning to
vegetable growth, but includes everything which serves to satisfy
human needs which is grown upon the land, whether it pertain to the
vegetable kingdom, or to the animal kingdom. It is true that there is no
decision which as yet has held that the fish grown in ponds are an
agricultural product, but that is no reason why we should not so hold if
we find that such fish fall within the scope of the meaning of the term.
Of necessity, the products of land tend constantly to multiply in number
and variety, as population increases and new demands spring up. In
California there are farms devoted to the growth of frogs for the market.
In many places in North America foxes and other animals usually found
wild are reared in confinement for their fur. In Japan land is devoted to
the culture of the silkworm and the growth of the plants necessary for
the food of those insects. Bees are everywhere kept for the wax and
honey into which the land is made to produce by those engaged in these
occupations are "agricultural products" in the same sense in which
poultry, eggs, and butter have been held to be agricultural products.
Now, if the purpose of agriculture, in the broader sense of the term, is to
obtain from the land the products to which it is best adapted and through
which it will yield the greatest return upon the expenditure of a given
amount of labor and capital, can it not be said that it is just as much an
agricultural process to enclose a given area of land with dykes, flood it
with water, grow aquatic plants in it, and feed fish with the plants so
produced as to fence in it and allow poultry to feed upon the plants
naturally or artificially grown upon the surface? In the last analysis the
result is the same — a given area of land produces a certain amount of
food. In the one case it is the flesh of poultry, in the other the flesh of
fish. It has been agreed between the parties that an important article of
diet consumed by fish grown in a pond consists of certain marine plants
which grow from roots which affix themselves to the bottom of the
pond. In a real sense, therefore, the fish are just as truly a product of the
land as are poultry or swine, living upon its vegetable growths, aquatic
or terrestrial. Thus, land may truly be said to produce fish, although it is
true that the producer is not a fisherman. Neither is one who grows
foxes for their pelts a hunter. As contended by counsel, the inquiry is not
whether fish in general constitute an agricultural product, but whether
fish artificially grown and fed in confinement are to be so regarded.
Honey produced by one who devotes his land to apiculture might be so
regarded, even if we were to admit that wild honey gathered in the
forest is not. Pigeons kept in domestication and fed by the owner would
fall within the definition. Wild pigeons obtained by a hunter would not.
Firewood gathered in a natural forest is not an agricultural product, but
firewood cut from bacauan trees planted for that purpose has been held
to be such a product, and its producer exempt from the merchant's tax.
(Mercado vs. Collector of Internal Revenue, 32 Phil. Rep., 271.) Other
comparisons might be made, many of which will be found in the
opinion in which two of the members of the court expressed their
dissent from the original majority opinion, but enough have been given
to make our position clear.
During the many hears that the statute before us has been in existence,
since it first appeared, substantially in its present form, in section 142 of
Act No. 1189, passed in 1904, no attempt has been made, until this case
arose, to construe it as not applying to fish grown in ponds, and much
weight should be given to this long continued administrative
interpretation. The opinion of the Attorney-General, cited by Justice
Malcolm, will be found on examination to have no bearing upon the
present inquiry, as in that case question was, not whether fish grown and
fed in ponds were agricultural products, but whether ". . . fishermen,
shell and pearl gatherers . . ." were liable to the occupation tax. There is
nothing in the opinion to indicate that the word "fishermen" was used to
mean men growing fish in ponds, and it must, therefore, be assumed
that it was used in its proper grammatical sense to designate persons
engaged in catching fish not artificially produced.
The decision in the case of The United States vs. Laxa (36 Phil. Rep.,
670) is not controlling, as the reasoning upon which it is based was not
concurred in by four members of the court. Furthermore, the Laxa case
might be distinguished from the one now under consideration, were it
necessary to do so, in that it has been stipulated in this case that fish
cultivated in ponds subsist largely upon aquatic plants which grow from
roots which attach themselves to the bottom of the pond, and are
therefore in a real sense a product of the land, while in the Laxa case the
evidence was that they subsisted solely upon free floating algae.
We are therefore of the opinion, and so hold, that the decision heretofore
rendered herein must be set aside, and the judgment of the lower court
affirmed. So ordered.
Arellano, C.J., Torres and Johnson, JJ., concur.
Araullo, J., dissents.
Separate Opinions
STREET, J., concurring:
At the original hearing, I became quite firmly convinced, as I supposed,
that the product of a fishery maintained in the manner shown in this case
ought not to be considered an agricultural products, within the meaning
of the provision of the Internal Revenue Law which exempts
agricultural products from the merchant's tax. Upon fuller reflection,
and further consideration of the arguments advanced at the rehearing in
favor of the other contention, I have come to the conclusion that I was
wrong. I therefore take this opportunity to recede from my former
position and to express my conformity with the opinion which now
becomes the opinion of the majority of the court.
My conformity with the opinion first written was based on the
conviction that the term "agricultural products," as used in this statute,
had reference to articles produced by purely agricultural processes,
more especially by the tillage of the fields. As I now view the case, this
conception of the meaning of agricultural is too narrow. It must be
admitted that poultry, eggs, pigs, and other ordinary produce of farm
and country are agricultural products within the meaning of the statute;
and no sufficient reason is discernible for excluding fish produced under
the conditions revealed in this case.

CARSON, J., dissenting:
I dissent.
As I understand them, the contentions of counsel in support of the
motion for a rehearing and reconsideration are substantially identical
with those adduced in briefs and the oral arguments when the case was
originally submitted.
I have heard nothing which would lead me to modify my views or my
vote when the case was decided and the decision promulgated.
MALCOLM, J., dissenting:
This case well illustrates how on the same facts, the same law, and the
same authorities, judges can arrive at diametrically opposed
conclusions.
Take the facts. They are stipulated. The only difference is that possibly
unconsciously, in order to fortify the conclusion, the decision of the
majority on reconsideration would stress the point that an important
article of diet consumed by fish grown in a pond consists of certain
marine plants which grow from roots which affix themselves to the
bottom of the pond, while the original decision as well as the decision in
the Laxa case,1 possibly also in order to fortify their conclusions, would
stress the scientific fact that the food of the bangus includes marine
plants, that these algae are of seven classes, that one of these plants is
rooted, that some of the others are very loosely attached to the ground
but not rooted, and that generally the algae float on the water.
Or take the law. The section in dispute is made up of a few simple
words. In reality, the meaning of the phrase, "agricultural products," is
only to be ascertained. The primary duty of the court is, of course, to
ascertain legislative intention. But here again the two decisions radically
differ. The decision of the majority on reconsideration in a laudable
endeavor to encourage commercial development would make this the
purpose of the law and would follow this idea consistently to the end.
On the other hand, the original decision would start with the same
presumption but finding that to so construe the law would result in
judicial amendment must then necessarily reach a different result; if the
Legislature had intended to exempt all classes of domestic products
which would include fish, it would undoubtedly have done so in plain
language.
Or take the authorities. The Supreme Court of Georgia (Davis vs. Mayor
[1879], 64 Ga., 128) would confine "agricultural products" to the yield
of the soil, as corn, wheat, rye, hay, etc. Possibly this court was right.
The supreme courts Alabama and Wisconsin would go further and
would include as" agricultural products" the rearing, feeding, and
management of live stock. In this construction, these courts may have
been right for, as one example, it is merely a matter of comparative
profit to the farmer whether he markets his corn in the ear or on the hoof
in the shape of swine. The Supreme Court of Pennsylvania
(Mayor vs. Davis [1843], 6 W. S., 269) would go still further and would
include Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 170735 December 17, 2007
IMMACULADA L. GARCIA, petitioner,
vs.
SOCIAL SECURITY COMMISSION LEGAL AND
COLLECTION, SOCIAL SECURITY SYSTEM, respondents.
DECISION
CHICO-NAZARIO, J.:
This is petition for review on Certiorari under Rule 45 of the Rules of
Court is assailing the 2 June 2005 Decision 1and 8 December 2005
Resolution2 both of the Court of Appeals in CA-G.R. SP No. 85923. the
appellate court affirmed the --- Order and --- Resolution both of the
Social Security Commission (SSC) in SSC Case No. 10048, finding
Immaculada L. Garcia (Garcia), the sole surviving director of Impact
Corporation, petitioner herein, liable for unremitted, albeit collected,
SSS contributions.
Petitioner Immaculada L. Garcia, Eduardo de Leon, Ricardo de Leon,
Pacita Fernandez, and Consuelo Villanueva were directors3 of Impact
Corporation. The corporation was engaged in the business of
manufacturing aluminum tube containers and operated two factories.
One was a "slug" foundry-factory located in Cuyapo, Nueva Ecija,
while the other was an Extrusion Plant in Cainta, Metro Manila, which
processed the "slugs" into aluminum collapsible tubes and similar
containers for toothpaste and other related products.
Records show that around 1978, Impact Corporation started
encountering financial problems. By 1980, labor unrest besieged the
corporation.
In March 1983, Impact Corporation filed with the Securities and
Exchange Commission (SEC) a Petition for Suspension of
Payments,4 docketed as SEC Case No. 02423, in which it stated that:
[Impact Corporation] has been and still is engaged in the business of
manufacturing aluminum tube containers x x x.
xxxx
In brief, it is an on-going, viable, and profitable enterprise.
On 8 May 1985, the union of Impact Corporation filed a Notice of
Strike with the Ministry of Labor which was followed by a declaration
of strike on 28 July 1985. Subsequently, the Ministry of Labor certified
the labor dispute for compulsory arbitration to the National Labor
Relations Commission (NLRC) in an Order5 dated 25 August 1985. The
Ministry of Labor, in the same Order, noted the inability of Impact
Corporation to pay wages, 13th month pay, and SSS remittances due to
cash liquidity problems. A portion of the order reads:
On the claims of unpaid wages, unpaid 13th month pay and non-
remittance of loan amortization and SSS premiums, we are for directing
the company to pay the same to the workers and to remit loan
amortizations and SSS premiums previously deducted from their wages
to the Social Security System. Such claims were never contested by the
company both during the hearing below and in our office. In fact, such
claims were admitted by the company although it alleged cash liquidity
as the main reason for such non-payment.
WHEREFORE, the dispute at Impact Corporation is hereby certified to
the National Labor Relations Commission for compulsory arbitration in
accordance with Article 264 (g) of the Labor Code, as amended.
xxxx
The company is directed to pay all the entitled workers unpaid wages,
unpaid 13th month pay and to remit to the Social Security System loan
amortizations and SSS premiums previously deducted from the wages
of the workers.6
On 3 July 1985, the Social Security System (SSS), through its Legal and
Collection Division (LCD), filed a case before the SSC for the
collection of unremitted SSS premium contributions withheld by Impact
Corporation from its employees. The case which impleaded Impact
Corporation as respondent was docketed as SSC Case No. 10048.7
Impact Corporation was compulsorily covered by the SSS as an
employer effective 15 July 1963 and was assigned Employer I.D. No.
03-2745100-21.
In answer to the allegations raised in SSC Case No. 10048, Impact
Corporation, through its then Vice President Ricardo de Leon, explained
in a letter dated 18 July 1985 that it had been confronted with strikes in
1984 and layoffs were effected thereafter. It further argued that
the P402,988.93 is erroneous. It explained among other things, that its
operations had been suspended and that it was waiting for the resolution
on its Petition for Suspension of Payments by the SEC under SEC Case
No. 2423. Despite due notice, the corporation failed to appear at the
hearings. The SSC ordered the investigating team of the SSS to
determine if it can still file its claim for unpaid premium contributions
against the corporation under the Petition for Suspension of Payments.
In the meantime, the Petition for Suspension of Payments was dismissed
which was pending before the SEC in an Order8 dated 12 December
1985. Impact Corporation resumed operations but only for its winding
up and dissolution.9 Due to Impact Corporation’s liability and cash flow
problems, all of its assets, namely, its machineries, equipment, office
furniture and fixtures, were sold to scrap dealers to answer for its arrears
in rentals.
On 1 December 1995, the SSS-LCD filed an amended Petition 10 in SSC
Case No. 10048 wherein the directors of Impact Corporation were
directly impleaded as respondents, namely: Eduardo de Leon, Ricardo
de Leon,11 Pacita Fernandez, Consuelo Villanueva, and petitioner. The
amounts sought to be collected totaled P453,845.78 and P10,856.85 for
the periods August 1980 to December 1984 and August 1981 to July
1984, respectively, and the penalties for late remittance at the rate of 3%
per month from the date the contributions fell due until fully paid
pursuant to Section 22(a) of the Social Security Law, 12 as amended, in
the amounts of P49,941.67 and P2,474,662.82.
Period Unremitted Penalties
Amount (3% Interest Per
Month)
August 1980 to December 1984 P 453,845.78 P49, 941.67
August 1981 to July 1984 P 10,856.85 P2, 474, 662.82
Summonses were not served upon Eduardo de Leon, Pacita Fernandez,
and Consuelo Villanueva, their whereabouts unknown. They were all
later determined to be deceased. On the other hand, due to failure to file
his responsive pleading, Ricardo de Leon was declared in default.
Petitioner filed with the SSC a Motion to Dismiss 13 on grounds of
prescription, lack of cause of action and cessation of business, but the
Motion was denied for lack of merit. 14 In her Answer with
Counterclaim15 dated 20 May 1999, petitioner averred that Impact
Corporation had ceased operations in 1980. In her defense, she insisted
that she was a mere director without managerial functions, and she
ceased to be such in 1982. Even as a stockholder and director of Impact
Corporation, petitioner contended that she cannot be made personally
liable for the corporate obligations of Impact Corporation since her
liability extended only up to the extent of her unpaid subscription, of
which she had none since her subscription was already fully paid. The
petitioner raised the same arguments in her Position Paper. 16
On 23 January 1998, Ricardo de Leon died following the death, too, of
Pacita Fernandez died on 7 February 2000. In an Order dated 11 April
2000, the SSC directed the System to check if Impact Corporation had
leviable properties to which the investigating team of respondent SSS
manifested that the Impact Corporation had already been dissolved and
its assets disposed of.17
In a Resolution dated 28 May 2003, the Social Security Commission
ruled in favor of SSS and declared petitioner liable to pay the
unremitted contributions and penalties, stating the following:
WHEREFORE, premises considered, this Commission finds, and so
holds, that respondents Impact Corporation and/or Immaculada L.
Garcia, as director and responsible officer of the said corporation, is
liable to pay the SSS the amounts of P442,988.93, representing the
unpaid SS contributions of their employees for the period August 1980
to December 1984, not inclusive, and P10,856.85, representing the
balance of the unpaid SS contributions in favor of Donato Campos,
Jaime Mascarenas, Bonifacio Franco and Romeo Fullon for the period
August 1980 to December 1984, not inclusive, as well as the 3% per
month penalty imposed thereon for late payment in the amounts
of P3,194,548.63 and P78,441.33, respectively, computed as of April
30, 2003. This is without prejudice to the right of the SSS to collect the
penalties accruing after April 30, 2003 and to institute other appropriate
actions against the respondent corporation and/or its responsible
officers.
Should the respondents pay their liability for unpaid SSS contributions
within sixty (60) days from receipt of a copy of this Resolution, the 3%
per month penalty for late payment thereof shall be deemed condoned
pursuant to SSC Res. No. 397-S.97, as amended by SSC Res. Nos. 112-
S.98 and 982-S.99, implementing the provision on condonation of
penalty under Section 30 of R.A. No. 8282.
In the event the respondents fail to pay their liabilities within the
aforestated period, let a writ of execution be issued, pursuant to Section
22 (c) [2] of the SS Law, as amended, for the satisfaction of their
liabilities to the SSS.18
Petitioner filed a Motion for Reconsideration 19 of the afore-quoted
Decision but it was denied for lack of merit in an Order20 dated 4 August
2004, thus:
Nowhere in the questioned Resolution dated May 28, 2003 is it stated
that the other directors of the defunct Impact Corporation are absolved
from their contribution and penalty liabilities to the SSS. It is certainly
farthest from the intention of the petitioner SSS or this Commission to
pin the entire liability of Impact Corporation on movant Immaculada L.
Garcia, to the exclusion of the directors of the corporation namely:
Eduardo de Leon, Ricardo de Leon, Pacita Fernandez and Conzuelo
Villanueva, who were all impleaded as parties-respondents in this case.
The case record shows that there was failure of service of summonses
upon respondents Eduardo de Leon, Pacita Fernandez and Conzuelo
Villanueva, who are all deceased, for the reason that their whereabouts
are unknown. Moreover, neither the legal heirs nor the estate of the
defaulted respondent Ricardo de Leon were substituted as parties-
respondents in this case when he died on January 23, 1998. Needless to
state, the Commission did not acquire jurisdiction over the persons or
estates of the other directors of Impact Corporation, hence, it could not
validly render any pronouncement as to their liabilities in this case.
Furthermore, the movant cannot raise in a motion for reconsideration
the defense that she was no longer a director of Impact Corporation in
1982, when she was allegedly eased out by the managing directors of
Impact Corporation as purportedly shown in the Deed of Sale and
Assignment of Shares of Stock dated January 22, 1982. This defense
was neither pleaded in her Motion to Dismiss dated January 17, 1996
nor in her Answer with Counterclaim dated May 18, 1999 and is, thus,
deemed waived pursuant to Section 1, Rule 9 of the 1997 Rules of Civil
Procedure, which has suppletory application to the Revised Rules of
Procedure of the Commission.
Finally, this Commission has already ruled in the Order dated April 27,
1999 that since the original Petition was filed by the SSS on July 3,
1985, and was merely amended on December 1, 1995 to implead the
responsible officers of Impact Corporation, without changing its causes
of action, the same was instituted well within the 20-year prescriptive
period provided under Section 22 (b) of the SS Law, as amended,
considering that the contribution delinquency assessment covered the
period August 1980 to December 1984.
In view thereof, the instant Motion for Reconsideration is hereby denied
for lack of merit.
Petitioner elevated her case to the Court of Appeals via a Petition for
Review. Respondent SSS filed its Comment dated 20 January 2005, and
petitioner submitted her Reply thereto on 4 April 2005.
The Court of Appeals, applying Section 28(f) of the Social Security
Law,21 again ruled against petitioner. It dismissed the petitioner’s
Petition in a Decision dated 2 June 2005, the dispositive portion of
which reads:
WHEREFORE, premises considered, the petition is DISMISSED for
lack of merit. The assailed Resolution dated 28 May 2003 and the Order
dated 4 August 2004 of the Social Security Commission are
AFFIRMED in toto.22
Aggrieved, petitioner filed a Motion for Reconsideration of the
appellate court’s Decision but her Motion was denied in a Resolution
dated 8 December 2005.
Hence, the instant Petition in which petitioner insists that the Court of
Appeals committed grave error in holding her solely liable for the
collected but unremitted SSS premium contributions and the consequent
late penalty payments due thereon. Petitioner anchors her Petition on the
following arguments:
I. SECTION 28(F) OF THE SSS LAW PROVIDES THAT A
MANAGING HEAD, DIRECTOR OR PARTNER IS LIABLE ONLY
FOR THE PENALTIES OF THE EMPLOYER CORPORATION AND
NOT FOR UNPAID SSS CONTRIBUTIONS OF THE EMPLOYER
CORPORATION.
II. UNDER THE SSS LAW, IT IS THE MANAGING HEADS,
DIRECTORS OR PARTNERS WHO SHALL BE LIABLE
TOGETHER WITH THE CORPORATION. IN THIS CASE,
PETITIONER HAS CEASED TO BE A STOCKHOLDER OF
IMPACT CORPORATION IN 1982. EVEN WHILE SHE WAS A
STOCKHOLDER, SHE NEVER PARTICIPATED IN THE DAILY
OPERATIONS OF IMPACT CORPORATION.
III. UNDER SECTION 31 OF THE CORPORATION CODE, ONLY
DIRECTORS, TRUSTEES OR OFFICERS WHO PARTICIPATE IN
UNLAWFUL ACTS OR ARE GUILTY OF GROSS NEGLIGENCE
AND BAD FAITH SHALL BE PERSONALLY LIABLE.
OTHERWISE, BEING A MERE STOCKHOLDER, SHE IS LIABLE
ONLY TO THE EXTENT OF HER SUBSCRIPTION.
IV. IMPACT CORPORATION SUFFERED IRREVERSIBLE
ECONOMIC LOSSES, EVENTS WHICH WERE NEITHER
DESIRED NOR CAUSED BY ANY ACT OF THE PETITIONER.
THUS, BY REASON OF FORTUITOUS EVENTS, THE
PETITIONER SHOULD BE ABSOLVED FROM LIABILITY.
V. RESPONDENT SOCIAL SECURITY SYSTEM FAILED
MISERABLY IN EXERTING EFFORTS TO ACQUIRE
JURISDICTION OVER THE LEVIABLE ASSETS OF IMPACT
CORPORATION, PERSON/S AND/OR ESTATE/S OF THE OTHER
DIRECTORS OR OFFICERS OF IMPACT CORPORATION.
VI. THE HONORABLE COMMISSION SERIOUSLY ERRED IN
NOT RENDERING A JUDGMENT BY DEFAULT AGAINST THE
DIRECTORS UPON WHOM IT ACQUIRED JURISDICTION.
Based on the foregoing, petitioner prays that the Decision dated 2 June
2005 and the Resolution dated 8 December 2005 of the Court of
Appeals be reversed and set aside, and a new one be rendered absolving
her of any and all liabilities under the Social Security Law.
In sum, the core issue to be resolved in this case is whether or not
petitioner, as the only surviving director of Impact Corporation, can be
made solely liable for the corporate obligations of Impact Corporation
pertaining to unremitted SSS premium contributions and penalties
therefore.
As a covered employer under the Social Security Law, it is the
obligation of Impact Corporation under the provisions of Sections 18,
19 and 22 thereof, as amended, to deduct from its duly covered
employee’s monthly salaries their shares as premium contributions and
remit the same to the SSS, together with the employer’s shares of the
contributions to the petitioner, for and in their behalf.
From all indications, the corporation has already been dissolved.
Respondents are now going after petitioner who is the only surviving
director of Impact Corporation.
A cursory review of the alleged grave errors of law committed by the
Court of Appeals above reveals there seems to be no dispute as to the
assessed liability of Impact Corporation for the unremitted SSS
premiums of its employees for the period January 1980 to December
1984.
There is also no dispute as to the fact that the employees’ SSS premium
contributions have been deducted from their salaries by Impact
Corporation.
Petitioner in assailing the Court of Appeals Decision, distinguishes the
penalties from the unremitted or unpaid SSS premium contributions.
She points out that although the appellate court is of the opinion that the
concerned officers of an employer corporation are liable for
the penalties for non-remittance of premiums, it still affirmed the SSC
Resolution holding petitioner liable for the unpaid SSS premium
contributions in addition to the penalties.
Petitioner avers that under the aforesaid provision, the liability does not
include liability for the unremitted SSS premium contributions.
Petitioner’s argument is ridiculous. The interpretation petitioner would
like us to adopt finds no support in law or in jurisprudence. While the
Court of Appeals Decision provided that Section 28(f) refers to the
liabilities pertaining to penalty for the non-remittance of SSS employee
contributions, holding that it is distinct from the amount of the supposed
SSS remittances, petitioner mistakenly concluded that Section 28(f) is
applicable only to penalties and not to the liability of the employer for
the unremitted premium contributions. Clearly, a simplistic
interpretation of the law is untenable. It is a rule in statutory
construction that every part of the statute must be interpreted with
reference to the context, i.e., that every part of the statute must be
considered together with the other parts, and kept subservient to the
general intent of the whole enactment.23 The liability imposed as
contemplated under the foregoing Section 28(f) of the Social Security
Law does not preclude the liability for the unremitted amount. Relevant
to Section 28(f) is Section 22 of the same law.
SEC. 22. Remittance of Contributions. -- (a) The contributions imposed
in the preceding Section shall be remitted to the SSS within the first ten
(10) days of each calendar month following the month for which they
are applicable or within such time as the Commission may prescribe.
Every employer required to deduct and to remit such contributions shall
be liable for their payment and if any contribution is not paid to the SSS
as herein prescribed, he shall pay besides the contribution a penalty
thereon of three percent (3%) per month from the date the contribution
falls due until paid. If deemed expedient and advisable by the
Commission, the collection and remittance of contributions shall be
made quarterly or semi-annually in advance, the contributions payable
by the employees to be advanced by their respective
employers: Provided, That upon separation of an employee, any
contribution so paid in advance but not due shall be credited or refunded
to his employer.
Under Section 22(a), every employer is required to deduct and remit
such contributions penalty refers to the 3% penalty that automatically
attaches to the delayed SSS premium contributions. The spirit, rather
than the letter of a law determines construction of a provision of law. It
is a cardinal rule in statutory construction that in interpreting the
meaning and scope of a term used in the law, a careful review of
the whole law involved, as well as the intendment of the law, must be
made.24 Nowhere in the provision or in the Decision can it be inferred
that the persons liable are absolved from paying the unremitted
premium contributions.
Elementary is the rule that when laws or rules are clear, it is incumbent
upon the judge to apply them regardless of personal belief or
predilections - when the law is unambiguous and unequivocal,
application not interpretation thereof is imperative.25 However, where
the language of a statute is vague and ambiguous, an interpretation
thereof is resorted to. An interpretation thereof is necessary in instances
where a literal interpretation would be either impossible or absurd or
would lead to an injustice. A law is deemed ambiguous when it is
capable of being understood by reasonably well-informed persons in
either of two or more senses.26 The fact that a law admits of different
interpretations is the best evidence that it is vague and ambiguous. 27 In
the instant case, petitioner interprets Section 28(f) of the Social Security
Law as applicable only to penalties and not to the liability of the
employer for the unremitted premium contributions. Respondents
present a more logical interpretation that is consistent with the
provisions as a whole and with the legislative intent behind the Social
Security Law.
This Court cannot be made to accept an interpretation that would defeat
the intent of the law and its legislators.28
Petitioner also challenges the finding of the Court of Appeals that under
Section 28(f) of the Social Security Law, a mere director or officer of an
employer corporation, and not necessarily a "managing" director or
officer, can be held liable for the unpaid SSS premium contributions.
Section 28(f) of the Social Security Law provides the following:
(f) If the act or omission penalized by this Act be committed by an
association, partnership, corporation or any other institution, its
managing head, directors or partners shall be liable to the penalties
provided in this Act for the offense.
This Court agrees in petitioner’s observation that the SSS did not even
deny nor rebut the claim that petitioner was not the "managing head" of
Impact Corporation. However, the Court of Appeals rightly held that
petitioner, as a director of Impact Corporation, is among those officers
covered by Section 28(f) of the Social Security Law.
Petitioner invokes the rule in statutory construction called ejusdem
generic; that is, where general words follow an enumeration of persons
or things, by words of a particular and specific meaning, such general
words are not to be construed in their widest extent, but are to be held as
applying only to persons or things of the same kind or class as those
specifically mentioned. According to petitioner, to be held liable under
Section 28(f) of the Social Security Law, one must be the "managing
head," "managing director," or "managing partner." This Court though
finds no need to resort to statutory construction. Section 28(f) of the
Social Security Law imposes penalty on:
(1) the managing head;
(2) directors; or
(3) partners, for offenses committed by a juridical person
The said provision does not qualify that the director or partner should
likewise be a "managing director" or "managing partner." 29 The law is
clear and unambiguous.
Petitioner nonetheless raises the defense that under Section 31 of the
Corporation Code, only directors, trustees or officers who participate in
unlawful acts or are guilty of gross negligence and bad faith shall be
personally liable, and that being a mere stockholder, she is liable only to
the extent of her subscription.
Section 31 of the Corporation Code, stipulating on the liability of
directors, trustees, or officers, provides:
SEC. 31. Liability of directors, trustees or officers. - Directors or
trustees who willfully and knowingly vote for or assent to patently
unlawful acts of the corporation or who are guilty of gross negligence or
bad faith in directing the affairs of the corporation or acquire any
personal or pecuniary interest in conflict with their duty as such
directors, or trustees shall be liable jointly and severally for all damages
resulting therefrom suffered by the corporation, its stockholders or
members and other persons.
Basic is the rule that a corporation is invested by law with a personality
separate and distinct from that of the persons composing it as well as
from that of any other legal entity to which it may be related. A
corporation is a juridical entity with legal personality separate and
distinct from those acting for and in its behalf and, in general, from the
people comprising it. Following this, the general rule applied is that
obligations incurred by the corporation, acting through its directors,
officers and employees, are its sole liabilities.30 A director, officer, and
employee of a corporation are generally not held personally liable for
obligations incurred by the corporation.
Being a mere fiction of law, however, there are peculiar situations or
valid grounds that can exist to warrant the disregard of its independent
being and the lifting of the corporate veil. This situation might arise
when a corporation is used to evade a just and due obligation or to
justify a wrong, to shield or perpetrate fraud, to carry out other similar
unjustifiable aims or intentions, or as a subterfuge to commit injustice
and so circumvent the law.31 Thus, Section 31 of the Corporation Law
provides:
Taking a cue from the above provision, a corporate director, a trustee or
an officer, may be held solidarily liable with the corporation in the
following instances:
1. When directors and trustees or, in appropriate cases, the officers of
a corporation--
(a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the corporate
affairs;
(c) are guilty of conflict of interest to the prejudice of the corporation,
its stockholders or members, and other persons.
2. When a director or officer has consented to the issuance of watered
stocks or who, having knowledge thereof, did not forthwith file with the
corporate secretary his written objection thereto.
3. When a director, trustee or officer has contractually agreed or
stipulated to hold himself personally and solidarily liable with the
Corporation.
4. When a director, trustee or officer is made, by specific provision of
law, personally liable for his corporate action. 32
The aforesaid provision states:
SEC. 31. Liability of directors, trustees or officers. - Directors or
trustees who willfully and knowingly vote for or assent to patently
unlawful acts of the corporation or who are guilty of gross negligence or
bad faith in directing the affairs of the corporation or acquire any
personal or pecuniary interest in conflict with their duty as such
directors, or trustees shall be liable jointly and severally for all damages
resulting therefrom suffered by the corporation, its stockholders or
members and other persons.
The situation of petitioner, as a director of Impact Corporation when
said corporation failed to remit the SSS premium contributions falls
exactly under the fourth situation. Section 28(f) of the Social Security
Law imposes a civil liability for any act or omission pertaining to the
violation of the Social Security Law, to wit:
(f) If the act or omission penalized by this Act be committed by an
association, partnership, corporation or any other institution, its
managing head, directors or partners shall be liable to the penalties
provided in this Act for the offense.
In fact, criminal actions for violations of the Social Security Law are
also provided under the Revised Penal Code. The Social Security Law
provides, in Section 28 thereof, to wit:
(h) Any employer who, after deducting the monthly contributions or
loan amortizations from his employees’ compensation, fails to remit the
said deductions to the SSS within thirty (30) days from the date they
became due shall be presumed to have misappropriated such
contributions or loan amortizations and shall suffer the penalties
provided in Article Three hundred fifteen of the Revised Penal Code.
(i) Criminal action arising from a violation of the provisions of this Act
may be commenced by the SSS or the employee concerned either under
this Act or in appropriate cases under the Revised Penal Code: x x x.
Respondents would like this Court to apply another exception to the rule
that the persons comprising a corporation are not personally liable for
acts done in the performance of their duties.
The Court of Appeals in the appealed Decision stated:
Anent the unpaid SSS contributions of Impact Corporation’s employees,
the officers of a corporation are liable in behalf of a corporation, which
no longer exists or has ceased operations. Although as a rule, the
officers and members of a corporation are not personally liable for acts
done in performance of their duties, this rule admits of exception, one of
which is when the employer corporation is no longer existing and is
unable to satisfy the judgment in favor of the employee, the officers
should be held liable for acting on behalf of the corporation. Following
the foregoing pronouncement, petitioner, as one of the directors of
Impact Corporation, together with the other directors of the defunct
corporation, are liable for the unpaid SSS contributions of their
employees.33
On the other hand, the SSC, in its Resolution, presented this discussion:
Although as a rule, the officers and members of a corporation are not
personally liable for acts done in the performance of their duties, this
rule admits of exceptions, one of which is when the employer
corporation is no longer existing and is unable to satisfy the judgment in
favor of the employee, the officers should be held liable for acting on
behalf of the corporation. x x x.34
The rationale cited by respondents in the two preceding paragraphs
need not have been applied because the personal liability for the
unremitted SSS premium contributions and the late penalty thereof
attaches to the petitioner as a director of Impact Corporation during the
period the amounts became due and demandable by virtue of a direct
provision of law.
Petitioner’s defense that since Impact Corporation suffered irreversible
economic losses, and by reason of fortuitous events, she should be
absolved from liability, is also untenable. The evidence adduced totally
belies this claim. A reference to the copy of the Petition for Suspension
of Payments filed by Impact Corporation on 18 March 1983 before the
SEC contained an admission that:
"[I]t has been and still is engaged in business" and "has been and still is
engaged in the business of manufacturing aluminum tube containers"
and "in brief, it is an on-going, viable, and profitable enterprise" which
has "sufficient assets" and "actual and potential income-generation
capabilities."
The foregoing document negates petitioner’s assertion and supports the
contention that during the period involved Impact Corporation was still
engaged in business and was an ongoing, viable, profitable enterprise.
In fact, the latest SSS form RIA submitted by Impact Corporation is
dated 7 May 1984. The assessed SSS premium contributions and
penalty are obligations imposed upon Impact Corporation by law, and
should have been remitted to the SSS within the first 10 days of each
calendar month following the month for which they are applicable or
within such time as the SSC prescribes.35
This Court also notes the evident failure on the part of SSS to issue a
judgment in default against Ricardo de Leon, who was the vice-
president and officer of the corporation, upon his non-filing of a
responsive pleading after summons was served on him. As can be
gleaned from Section 11 of the SSS Revised Rules of Procedure, the
Commissioner is mandated to render a decision either granting or
denying the petition. Under the aforesaid provision, if respondent fails
to answer within the time prescribed, the Hearing Commissioner may,
upon motion of petitioner, or motu proprio, declare respondent in
default and proceed to receive petitioner’s evidence ex parte and
thereafter recommend to the Commission either the granting or denial of
the petition as the evidence may warrant.36
On a final note, this Court sees it proper to quote verbatim respondents’
prefatory statement in their Comment:
The Social Security System is a government agency imbued with a
salutary purpose to carry out the policy of the State to establish,
develop, promote and perfect a sound and viable tax exempt social
security system suitable to the needs of the people throughout the
Philippines which shall promote social justice and provide meaningful
protection to members and their beneficiaries against the hazards of
disability, sickness, maternity, old-age, death and other contingencies
resulting in loss of income or financial burden.
The soundness and viability of the funds of the SSS in turn depends on
the contributions of its covered employee and employer members,
which it invests in order to deliver the basic social benefits and
privileges to its members. The entitlement to and amount of benefits and
privileges of the covered members are contribution-based. Both the
soundness and viability of the funds of the SSS as well as the
entitlement and amount of benefits and privileges of its members are
adversely affected to a great extent by the non-remittance of the much-
needed contributions.37
The sympathy of the law on social security is toward its beneficiaries.
This Court will not turn a blind eye on the perpetration of injustice. This
Court cannot and will not allow itself to be made an instrument nor be
privy to any attempt at the perpetration of injustice.
 6
Following the doctrine laid down in Laguna Transportation Co., Inc. v. Id. at 392.
Social Security System,38 this Court rules that although a corporation
7
once formed is conferred a juridical personality separate and distinct Id. at 1-3.
from the persons comprising it, it is but a legal fiction introduced for
purposes of convenience and to subserve the ends of justice. The 8
Id. at 395-400.
concept cannot be extended to a point beyond its reasons and policy, and
when invoked in support of an end subversive of this policy, will be 9
Id. at 192-196.
disregarded by the courts.
10
Id. at 223-233.
WHEREFORE, pursuant to the foregoing, the Decision of the Court of
Appeals dated 2 June 2005 in CA-G.R. SP No. 85923 is 10
Summons were served on Ricardo de Leon; See records, p. 259.
hereby AFFIRMED WITH FINALITY. Petitioner Immaculada L.
Garcia, as sole surviving director of Impact Corporation is 12
SEC. 22. Remittance of Contributions. -- (a) The contribution
hereby ORDERED to pay for the collected and unremitted SSS imposed in the preceding Section shall be remitted to the SSS within the
contributions of Impact Corporation. The case is REMANDED to the first ten (10) days of each calendar month following the month for
SSS for computation of the exact amount and collection thereof. which they are applicable or within such time as the Commission may
prescribe. Every employer required to deduct and to remit such
SO ORDERED. contributions shall be liable for their payment and if any contribution is
not paid to the SSS as herein prescribed, he shall pay besides the
Ynares-Santiago, Chairperson, Austria-Martinez, Nachura, Reyes, contribution a penalty thereon of three percent (3%) per month from the
JJ., concur. date the contribution falls due until paid. If deemed expedient and
advisable by the Commission, the collection and remittance of
contributions shall be made quarterly or semi-annually in advance, the
contributions payable by the employees to be advanced by their
Footnotes respective employers: Provided, That upon separation of an employee,
any contribution so paid in advance but not due shall be credited or
1
Penned by Associate Justice Eugenio S. Labitoria with Associate refunded to his employer.
Justices Eliezer R. De Los Santos and Arturo D. Brion, concurring;
rollo, pp. 32-43. 13
Dated 17 January 1996.
2
Id. at 44. 14
Order issued by the SSC on 27 April 1999; records, pp. 320-325
3
General Information Sheet of Impact Corporation Corporation, as of 15
Records, pp. 336-345.
31 December 1974.
16
Id. at 493-501.
4
Records, pp. 265-283.
17
Order dated 11 April 2000.
5
Id. at 390-393.
18 26
Rollo, pp. 66-67. Del Mar v. Phil. Amusement and Gaming Corp., 400 Phil. 307, 357
(2000).
19
Dated 16 June 2003.
27
Villamor Golf Club v. Pehid, supra note 25; Abello v. Commissioneer
20
Adopted/promulgated by the SSC en banc under its Resolution No. of Internal Revenue, 23 February 2005, 452 SCRA 162, 169; Chartered
474 on 4 August 2004; Penned by Commissioner Aurora R. Arnaez; Bank Employees Association v. Ople, G.R. No. L-44717, 28 August
rollo, pp. 68-69. 1985, 138 SCRA 273, 281.
21 28
SEC. 28. Penal Clause. – x x x. Escosura v. San Miguel Brewery, Inc., 114 Phil. 225 (1962).
29
(e) Whoever fails or refuses to comply with the provisions promulgated Decision, page 8.
by the Commission, shall be punished by a fine of not less than Five
30
thousand pesos (P5,000.00) nor more than Twenty thousand pesos Uichico v. National Labor Relations Commission, 339 Phil. 242, 252
(P20,000.00), or imprisonment for not less than six (6) years and one (1) (1997), citing Santos v. National Labor Relations Commission, 325 Phil.
day nor more than twelve (12) years, or both, at the discretion of the 145, 158 (1996).
court: Provided, That where the violation consists in failure or refusal to
31
register employees or himself, in case of the covered self-employed or Santos v. National Labor Relations Commission, id.
to deduct contributions from employees’ compensation and remit the
same to the SSS, the penalty shall be a fine of not less Five thousand 32
Philex Gold Philippines, Inc. v. Philex Bulawan Supervisors
pesos (P5,000.00) nor more than Twenty thousand pesos (P20,000.00) Union, G.R. No. 149758, 25 August 2005, 468 SCRA 111, 124.
and imprisonment for not less than six (6) years and one (1) day nor
more than twelve (12) years. 33
Rollo, p. 39.

(f) If the act or omission penalized by this Act be committed by an 34

Id. at 66.
association, partnership, corporation or any other institution, its
managing head, directors or partners shall be liable to the penalties 35
"The contributions imposed in the preceding section shall be remitted
provided in this Act for the offense. to the SSS within the first ten (10) days of each calendar month
following the month for which they are applicable or within such time
22
Rollo, pp. 41-42; citations omitted. as the Commission may prescribe..." (Section 22, R. A. No. 8282 – SSS
Law).
23
Paras v. COMELEC, 332 Phil. 56, 64 (1996).
36
Section 11, SSS Rules of Procedure.
24
Alpha Investigation and Security Agency, Inc. v. National Labor
Relations Commission, 339 Phil. 40, 44 (1997). 37
Rollo, pp. 51-52.
25
De Guzman, Jr. v. Sison, 407 Phil. 351, 368-369 (2001), as cited 38
107 Phil. 833 (1960).
in Villamor Golf Club v. Pehid, G.R. No. 166152, 4 December 2005,
472 SCRA 36, 47-48.
as "agricultural products" swine, horses, meat, cattle, sheep, manure,
cord, wood, hay, poultry vegetables, fruit, eggs, milk, butter, and lard,
that is, domestic animals and products of the farm. Possibly, this court
was right. And now the Supreme Court of the Philippine Islands in
granting the motion for reconsideration would go even further and
would include in the term "agricultural products," frogs, foxes, bees,
pigeons, silkworms, silk, honey, and fish. Possibly, this court is right.
Try as I may, for I am gratified to have this decision of the court, I
cannot bring myself to this view. Without giving way to the temptation
to use ironical and facetious language because of this result, let me
merely make the observation that where the limit will reached is beyond
my poor mind to comprehend. Another court could very well instead of
prolonging the examples ad infinitum merely judicially repeal the word
"agricultural" and include everything which would fall under the word
"products."
My views and those of three other members of the court are fully set out
in the first decision. Restatement or reargument will avail nothing.
Suffice it to say that the argument on motion for reconsideration and the
decision of the majority have failed to convince me that fish — or to
accede to the critical suggestion of the majority — that fish produced as
were those upon which the tax in question was levied, are an
agricultural product. The administrative ruling of the Attorney-General,
the decision of this court in United States vs. Laxa ([1917], 36 Phil.,
670), and the original decision in the instant case should not be
overturned by granting this motion.
Footnotes
1
37 Phil. Rep., 545.
MALCOLM, J., dissenting:
1
36 Phil. Rep., 670.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 17122 February 27, 1922
THE UNITED STATES, plaintiff-appellee,
vs.
ANG TANG HO, defendant-appellant.
Williams & Ferrier for appellant.
Acting Attorney-General Tuason for appellee.
JOHNS, J.:
At its special session of 1919, the Philippine Legislature passed Act No.
2868, entitled "An Act penalizing the monopoly and holding of, and
speculation in, palay, rice, and corn under extraordinary circumstances,
regulating the distribution and sale thereof, and authorizing the
Governor-General, with the consent of the Council of State, to issue the
necessary rules and regulations therefor, and making an appropriation
for this purpose," the material provisions of which are as follows:
Section 1. The Governor-General is hereby authorized, whenever, for
any cause, conditions arise resulting in an extraordinary rise in the price
of palay, rice or corn, to issue and promulgate, with the consent of the
Council of State, temporary rules and emergency measures for carrying
out the purpose of this Act, to wit:
(a) To prevent the monopoly and hoarding of, and speculation in, palay,
rice or corn.
(b) To establish and maintain a government control of the distribution or
sale of the commodities referred to or have such distribution or sale
made by the Government itself.
(c) To fix, from time to time the quantities of palay rice, or corn that a
company or individual may acquire, and the maximum sale price that
the industrial or merchant may demand.
(d) . . .
SEC. 2. It shall be unlawful to destroy, limit, prevent or in any other
manner obstruct the production or milling of palay, rice or corn for the
purpose of raising the prices thereof; to corner or hoard said products as
defined in section three of this Act; . . .
Section 3 defines what shall constitute a monopoly or hoarding of palay,
rice or corn within the meaning of this Act, but does not specify the
price of rice or define any basic for fixing the price.
SEC. 4. The violations of any of the provisions of this Act or of the
regulations, orders and decrees promulgated in accordance therewith
shall be punished by a fine of not more than five thousands pesos, or by
imprisonment for not more than two years, or both, in the discretion of
the court: Provided, That in the case of companies or corporations the
manager or administrator shall be criminally liable.
SEC. 7. At any time that the Governor-General, with the consent of the
Council of State, shall consider that the public interest requires the
application of the provisions of this Act, he shall so declare by
proclamation, and any provisions of other laws inconsistent herewith
shall from then on be temporarily suspended.
Upon the cessation of the reasons for which such proclamation was
issued, the Governor-General, with the consent of the Council of State,
shall declare the application of this Act to have likewise terminated, and
all laws temporarily suspended by virtue of the same shall again take
effect, but such termination shall not prevent the prosecution of any
proceedings or cause begun prior to such termination, nor the filing of
any proceedings for an offense committed during the period covered by
the Governor-General's proclamation.
August 1, 1919, the Governor-General issued a proclamation fixing the
price at which rice should be sold.
August 8, 1919, a complaint was filed against the defendant, Ang Tang
Ho, charging him with the sale of rice at an excessive price as follows:
The undersigned accuses Ang Tang Ho of a violation of Executive
Order No. 53 of the Governor-General of the Philippines, dated the 1st
of August, 1919, in relation with the provisions of sections 1, 2 and 4 of
Act No. 2868, committed as follows:
That on or about the 6th day of August, 1919, in the city of Manila,
Philippine Islands, the said Ang Tang Ho, voluntarily, illegally and
criminally sold to Pedro Trinidad, one ganta of rice at the price of eighty
centavos (P.80), which is a price greater than that fixed by Executive
Order No. 53 of the Governor-General of the Philippines, dated the 1st
of August, 1919, under the authority of section 1 of Act No. 2868.
Contrary to law.
Upon this charge, he was tried, found guilty and sentenced to five
months' imprisonment and to pay a fine of P500, from which he
appealed to this court, claiming that the lower court erred in finding
Executive Order No. 53 of 1919, to be of any force and effect, in finding
the accused guilty of the offense charged, and in imposing the sentence.
The official records show that the Act was to take effect on its approval;
that it was approved July 30, 1919; that the Governor-General issued his
proclamation on the 1st of August, 1919; and that the law was first
published on the 13th of August, 1919; and that the proclamation itself
was first published on the 20th of August, 1919.
The question here involves an analysis and construction of Act No.
2868, in so far as it authorizes the Governor-General to fix the price at
which rice should be sold. It will be noted that section 1 authorizes the
Governor-General, with the consent of the Council of State, for any
cause resulting in an extraordinary rise in the price of palay, rice or corn,
to issue and promulgate temporary rules and emergency measures for
carrying out the purposes of the Act. By its very terms, the promulgation
of temporary rules and emergency measures is left to the discretion of
the Governor-General. The Legislature does not undertake to specify or
define under what conditions or for what reasons the Governor-General
shall issue the proclamation, but says that it may be issued "for any
cause," and leaves the question as to what is "any cause" to the
discretion of the Governor-General. The Act also says: "For any cause,
conditions arise resulting in an extraordinary rise in the price of palay,
rice or corn." The Legislature does not specify or define what is "an
extraordinary rise." That is also left to the discretion of the Governor-
General. The Act also says that the Governor-General, "with the consent
of the Council of State," is authorized to issue and promulgate
"temporary rules and emergency measures for carrying out the purposes
of this Act." It does not specify or define what is a temporary rule or an
emergency measure, or how long such temporary rules or emergency
measures shall remain in force and effect, or when they shall take effect.
That is to say, the Legislature itself has not in any manner specified or
defined any basis for the order, but has left it to the sole judgement and
discretion of the Governor-General to say what is or what is not "a
cause," and what is or what is not "an extraordinary rise in the price of
rice," and as to what is a temporary rule or an emergency measure for
the carrying out the purposes of the Act. Under this state of facts, if the
law is valid and the Governor-General issues a proclamation fixing the
minimum price at which rice should be sold, any dealer who, with or
without notice, sells rice at a higher price, is a criminal. There may not
have been any cause, and the price may not have been extraordinary,
and there may not have been an emergency, but, if the Governor-
General found the existence of such facts and issued a proclamation,
and rice is sold at any higher price, the seller commits a crime.
By the organic law of the Philippine Islands and the Constitution of the
United States all powers are vested in the Legislative, Executive and
Judiciary. It is the duty of the Legislature to make the law; of the
Executive to execute the law; and of the Judiciary to construe the law.
The Legislature has no authority to execute or construe the law, the
Executive has no authority to make or construe the law, and the
Judiciary has no power to make or execute the law. Subject to the
Constitution only, the power of each branch is supreme within its own
jurisdiction, and it is for the Judiciary only to say when any Act of the
Legislature is or is not constitutional. Assuming, without deciding, that
the Legislature itself has the power to fix the price at which rice is to be
sold, can it delegate that power to another, and, if so, was that power
legally delegated by Act No. 2868? In other words, does the Act
delegate legislative power to the Governor-General? By the Organic
Law, all Legislative power is vested in the Legislature, and the power
conferred upon the Legislature to make laws cannot be delegated to the
Governor-General, or any one else. The Legislature cannot delegate the
legislative power to enact any law. If Act no 2868 is a law unto itself
and within itself, and it does nothing more than to authorize the
Governor-General to make rules and regulations to carry the law into
effect, then the Legislature itself created the law. There is no delegation
of power and it is valid. On the other hand, if the Act within itself does
not define crime, and is not a law, and some legislative act remains to be
done to make it a law or a crime, the doing of which is vested in the
Governor-General, then the Act is a delegation of legislative power, is
unconstitutional and void.
The Supreme Court of the United States in what is known as
the Granger Cases (94 U.S., 183-187; 24 L. ed., 94), first laid down the
rule:
Railroad companies are engaged in a public employment affecting the
public interest and, under the decision in Munn vs. Ill., ante, 77, are
subject to legislative control as to their rates of fare and freight unless
protected by their charters.
The Illinois statute of Mar. 23, 1874, to establish reasonable maximum
rates of charges for the transportation of freights and passengers on the
different railroads of the State is not void as being repugnant to the
Constitution of the United States or to that of the State.
It was there for the first time held in substance that a railroad was a
public utility, and that, being a public utility, the State had power to
establish reasonable maximum freight and passenger rates. This was
followed by the State of Minnesota in enacting a similar law, providing
for, and empowering, a railroad commission to hear and determine what
was a just and reasonable rate. The constitutionality of this law was
attacked and upheld by the Supreme Court of Minnesota in a learned
and exhaustive opinion by Justice Mitchell, in the case of
State vs. Chicago, Milwaukee & St. Paul ry. Co. (38 Minn., 281), in
which the court held:
Regulations of railway tariffs — Conclusiveness of commission's tariffs.
— Under Laws 1887, c. 10, sec. 8, the determination of the railroad and
warehouse commission as to what are equal and reasonable fares and
rates for the transportation of persons and property by a railway
company is conclusive, and, in proceedings by mandamus to compel
compliance with the tariff of rates recommended and published by them,
no issue can be raised or inquiry had on that question.
Same — constitution — Delegation of power to commission. — The
authority thus given to the commission to determine, in the exercise of
their discretion and judgement, what are equal and reasonable rates, is
not a delegation of legislative power.
It will be noted that the law creating the railroad commission expressly
provides —
That all charges by any common carrier for the transportation of
passengers and property shall be equal and reasonable.
With that as a basis for the law, power is then given to the railroad
commission to investigate all the facts, to hear and determine what is a
just and reasonable rate. Even then that law does not make the violation
of the order of the commission a crime. The only remedy is a civil
proceeding. It was there held —
That the legislative itself has the power to regulate railroad charges is
now too well settled to require either argument or citation of authority.
The difference between the power to say what the law shall be, and the
power to adopt rules and regulations, or to investigate and determine the
facts, in order to carry into effect a law already passed, is apparent. The
true distinction is between the delegation of power to make the law,
which necessarily involves a discretion as to what it shall be, and the
conferring an authority or discretion to be exercised under and in
pursuance of the law.
The legislature enacts that all freights rates and passenger fares should
be just and reasonable. It had the undoubted power to fix these rates at
whatever it deemed equal and reasonable.
They have not delegated to the commission any authority or discretion
as to what the law shall be, — which would not be allowable, — but
have merely conferred upon it an authority and discretion, to be
exercised in the execution of the law, and under and in pursuance of it,
which is entirely permissible. The legislature itself has passed upon the
expediency of the law, and what is shall be. The commission is intrusted
with no authority or discretion upon these questions. It can neither make
nor unmake a single provision of law. It is merely charged with the
administration of the law, and with no other power.
The delegation of legislative power was before the Supreme Court of
Wisconsin in Dowling vs. Lancoshire Ins. Co. (92 Wis., 63). The
opinion says:
"The true distinction is between the delegation of power to make the
law, which necessarily involves a discretion as to what it shall be, and
conferring authority or discretion as to its execution, to be exercised
under and in pursuance of the law. The first cannot be done; to the latter
no valid objection can be made."
The act, in our judgment, wholly fails to provide definitely and clearly
what the standard policy should contain, so that it could be put in use as
a uniform policy required to take the place of all others, without the
determination of the insurance commissioner in respect to maters
involving the exercise of a legislative discretion that could not be
delegated, and without which the act could not possibly be put in use as
an act in confirmity to which all fire insurance policies were required to
be issued.
The result of all the cases on this subject is that a law must be complete,
in all its terms and provisions, when it leaves the legislative branch of
the government, and nothing must be left to the judgement of the
electors or other appointee or delegate of the legislature, so that, in form
and substance, it is a law in all its details in presenti, but which may be
left to take effect in futuro, if necessary, upon the ascertainment of any
prescribed fact or event.
The delegation of legislative power was before the Supreme Court in
United States vs. Grimaud (220 U.S., 506; 55 L. ed., 563), where it was
held that the rules and regulations of the Secretary of Agriculture as to a
trespass on government land in a forest reserve were valid
constitutional. The Act there provided that the Secretary of Agriculture
". . . may make such rules and regulations and establish such service as
will insure the object of such reservations; namely, to regulate their
occupancy and use, and to preserve the forests thereon from
destruction; and any violation of the provisions of this act or such rules
and regulations shall be punished, . . ."
The brief of the United States Solicitor-General says:
In refusing permits to use a forest reservation for stock grazing, except
upon stated terms or in stated ways, the Secretary of Agriculture merely
assert and enforces the proprietary right of the United States over land
which it owns. The regulation of the Secretary, therefore, is not an
exercise of legislative, or even of administrative, power; but is an
ordinary and legitimate refusal of the landowner's authorized agent to
allow person having no right in the land to use it as they will. The right
of proprietary control is altogether different from governmental
authority.
The opinion says:
From the beginning of the government, various acts have been passed
conferring upon executive officers power to make rules and regulations,
— not for the government of their departments, but for administering
the laws which did govern. None of these statutes could confer
legislative power. But when Congress had legislated power. But when
Congress had legislated and indicated its will, it could give to those who
were to act under such general provisions "power to fill up the details"
by the establishment of administrative rules and regulations, the
violation of which could be punished by fine or imprisonment fixed by
Congress, or by penalties fixed by Congress, or measured by the injury
done.
That "Congress cannot delegate legislative power is a principle
universally recognized as vital to the integrity and maintenance of the
system of government ordained by the Constitution."
If, after the passage of the act and the promulgation of the rule, the
defendants drove and grazed their sheep upon the reserve, in violation
of the regulations, they were making an unlawful use of the
government's property. In doing so they thereby made themselves liable
to the penalty imposed by Congress.
The subjects as to which the Secretary can regulate are defined. The
lands are set apart as a forest reserve. He is required to make provisions
to protect them from depredations and from harmful uses. He is
authorized 'to regulate the occupancy and use and to preserve the forests
from destruction.' A violation of reasonable rules regulating the use and
occupancy of the property is made a crime, not by the Secretary, but by
Congress."
The above are leading cases in the United States on the question of
delegating legislative power. It will be noted that in the "Granger
Cases," it was held that a railroad company was a public corporation,
and that a railroad was a public utility, and that, for such reasons, the
legislature had the power to fix and determine just and reasonable rates
for freight and passengers.
The Minnesota case held that, so long as the rates were just and
reasonable, the legislature could delegate the power to ascertain the
facts and determine from the facts what were just and reasonable rates,.
and that in vesting the commission with such power was not a
delegation of legislative power.
The Wisconsin case was a civil action founded upon a "Wisconsin
standard policy of fire insurance," and the court held that "the act, . . .
wholly fails to provide definitely and clearly what the standard policy
should contain, so that it could be put in use as a uniform policy
required to take the place of all others, without the determination of the
insurance commissioner in respect to matters involving the exercise of a
legislative discretion that could not be delegated."
The case of the United States Supreme Court, supra dealt with rules and
regulations which were promulgated by the Secretary of Agriculture for
Government land in the forest reserve.
These decisions hold that the legislative only can enact a law, and that it
cannot delegate it legislative authority.
The line of cleavage between what is and what is not a delegation of
legislative power is pointed out and clearly defined. As the Supreme
Court of Wisconsin says:
That no part of the legislative power can be delegated by the legislature
to any other department of the government, executive or judicial, is a
fundamental principle in constitutional law, essential to the integrity and
maintenance of the system of government established by the
constitution.
Where an act is clothed with all the forms of law, and is complete in and
of itself, it may be provided that it shall become operative only upon
some certain act or event, or, in like manner, that its operation shall be
suspended.
The legislature cannot delegate its power to make a law, but it can make
a law to delegate a power to determine some fact or state of things upon
which the law makes, or intends to make, its own action to depend.
The Village of Little Chute enacted an ordinance which provides:
All saloons in said village shall be closed at 11 o'clock P.M. each day
and remain closed until 5 o'clock on the following morning, unless by
special permission of the president.
Construing it in 136 Wis., 526; 128 A. S. R., 1100, 1 the Supreme Court
of that State says:
We regard the ordinance as void for two reasons; First, because it
attempts to confer arbitrary power upon an executive officer, and allows
him, in executing the ordinance, to make unjust and groundless
discriminations among persons similarly situated; second, because the
power to regulate saloons is a law-making power vested in the village
board, which cannot be delegated. A legislative body cannot delegate to
a mere administrative officer power to make a law, but it can make a
law with provisions that it shall go into effect or be suspended in its
operations upon the ascertainment of a fact or state of facts by an
administrative officer or board. In the present case the ordinance by its
terms gives power to the president to decide arbitrary, and in the
exercise of his own discretion, when a saloon shall close. This is an
attempt to vest legislative discretion in him, and cannot be sustained.
The legal principle involved there is squarely in point here.
It must be conceded that, after the passage of act No. 2868, and before
any rules and regulations were promulgated by the Governor-General, a
dealer in rice could sell it at any price, even at a peso per "ganta," and
that he would not commit a crime, because there would be no law fixing
the price of rice, and the sale of it at any price would not be a crime.
That is to say, in the absence of a proclamation, it was not a crime to sell
rice at any price. Hence, it must follow that, if the defendant committed
a crime, it was because the Governor-General issued the proclamation.
There was no act of the Legislature making it a crime to sell rice at any
price, and without the proclamation, the sale of it at any price was to a
crime.
The Executive order2 provides:
(5) The maximum selling price of palay, rice or corn is hereby fixed, for
the time being as follows:
In Manila —
Palay at P6.75 per sack of 57½ kilos, or 29 centavos per ganta.
Rice at P15 per sack of 57½ kilos, or 63 centavos per ganta.
Corn at P8 per sack of 57½ kilos, or 34 centavos per ganta.
In the provinces producing palay, rice and corn, the maximum price
shall be the Manila price less the cost of transportation from the source
of supply and necessary handling expenses to the place of sale, to be
determined by the provincial treasurers or their deputies.
In provinces, obtaining their supplies from Manila or other producing
provinces, the maximum price shall be the authorized price at the place
of supply or the Manila price as the case may be, plus the transportation
cost, from the place of supply and the necessary handling expenses, to
the place of sale, to be determined by the provincial treasurers or their
deputies.
(6) Provincial treasurers and their deputies are hereby directed to
communicate with, and execute all instructions emanating from the
Director of Commerce and Industry, for the most effective and proper
enforcement of the above regulations in their respective localities.
The law says that the Governor-General may fix "the maximum sale
price that the industrial or merchant may demand." The law is a general
law and not a local or special law.
The proclamation undertakes to fix one price for rice in Manila and
other and different prices in other and different provinces in the
Philippine Islands, and delegates the power to determine the other and
different prices to provincial treasurers and their deputies. Here, then,
you would have a delegation of legislative power to the Governor-
General, and a delegation by him of that power to provincial treasurers
and their deputies, who "are hereby directed to communicate with, and
execute all instructions emanating from the Director of Commerce and
Industry, for the most effective and proper enforcement of the above
regulations in their respective localities." The issuance of the
proclamation by the Governor-General was the exercise of the
delegation of a delegated power, and was even a sub delegation of that
power.
Assuming that it is valid, Act No. 2868 is a general law and does not
authorize the Governor-General to fix one price of rice in Manila and
another price in Iloilo. It only purports to authorize him to fix the price
of rice in the Philippine Islands under a law, which is General and
uniform, and not local or special. Under the terms of the law, the price
of rice fixed in the proclamation must be the same all over the Islands.
There cannot be one price at Manila and another at Iloilo. Again, it is a
mater of common knowledge, and of which this court will take judicial
notice, that there are many kinds of rice with different and
corresponding market values, and that there is a wide range in the price,
which varies with the grade and quality. Act No. 2868 makes no
distinction in price for the grade or quality of the rice, and the
proclamation, upon which the defendant was tried and convicted, fixes
the selling price of rice in Manila "at P15 per sack of 57½ kilos, or 63
centavos per ganta," and is uniform as to all grades of rice, and says
nothing about grade or quality. Again, it will be noted that the law is
confined to palay, rice and corn. They are products of the Philippine
Islands. Hemp, tobacco, coconut, chickens, eggs, and many other things
are also products. Any law which single out palay, rice or corn from the
numerous other products of the Islands is not general or uniform, but is
a local or special law. If such a law is valid, then by the same principle,
the Governor-General could be authorized by proclamation to fix the
price of meat, eggs, chickens, coconut, hemp, and tobacco, or any other
product of the Islands. In the very nature of things, all of that class of
laws should be general and uniform. Otherwise, there would be an
unjust discrimination of property rights, which, under the law, must be
equal and inform. Act No. 2868 is nothing more than a floating law,
which, in the discretion and by a proclamation of the Governor-General,
makes it a floating crime to sell rice at a price in excess of the
proclamation, without regard to grade or quality.
When Act No. 2868 is analyzed, it is the violation of the proclamation
of the Governor-General which constitutes the crime. Without that
proclamation, it was no crime to sell rice at any price. In other words,
the Legislature left it to the sole discretion of the Governor-General to
say what was and what was not "any cause" for enforcing the act, and
what was and what was not "an extraordinary rise in the price of palay,
rice or corn," and under certain undefined conditions to fix the price at
which rice should be sold, without regard to grade or quality, also to say
whether a proclamation should be issued, if so, when, and whether or
not the law should be enforced, how long it should be enforced, and
when the law should be suspended. The Legislature did not specify or
define what was "any cause," or what was "an extraordinary rise in the
price of rice, palay or corn," Neither did it specify or define the
conditions upon which the proclamation should be issued. In the
absence of the proclamation no crime was committed. The alleged sale
was made a crime, if at all, because the Governor-General issued the
proclamation. The act or proclamation does not say anything about the
different grades or qualities of rice, and the defendant is charged with
the sale "of one ganta of rice at the price of eighty centavos (P0.80)
which is a price greater than that fixed by Executive order No. 53."
We are clearly of the opinion and hold that Act No. 2868, in so far as it
undertakes to authorized the Governor-General in his discretion to issue
a proclamation, fixing the price of rice, and to make the sale of rice in
violation of the price of rice, and to make the sale of rice in violation of
the proclamation a crime, is unconstitutional and void.
It may be urged that there was an extraordinary rise in the price of rice
and profiteering, which worked a severe hardship on the poorer classes,
and that an emergency existed, but the question here presented is the
constitutionality of a particular portion of a statute, and none of such
matters is an argument for, or against, its constitutionality.
The Constitution is something solid, permanent an substantial. Its
stability protects the life, liberty and property rights of the rich and the
poor alike, and that protection ought not to change with the wind or any
emergency condition. The fundamental question involved in this case is
the right of the people of the Philippine Islands to be and live under a
republican form of government. We make the broad statement that no
state or nation, living under republican form of government, under the
terms and conditions specified in Act No. 2868, has ever enacted a law
delegating the power to any one, to fix the price at which rice should be
sold. That power can never be delegated under a republican form of
government.
In the fixing of the price at which the defendant should sell his rice, the
law was not dealing with government property. It was dealing with
private property and private rights, which are sacred under the
Constitution. If this law should be sustained, upon the same principle
and for the same reason, the Legislature could authorize the Governor-
General to fix the price of every product or commodity in the Philippine
Islands, and empower him to make it a crime to sell any product at any
other or different price.
It may be said that this was a war measure, and that for such reason the
provision of the Constitution should be suspended. But the Stubborn
fact remains that at all times the judicial power was in full force and
effect, and that while that power was in force and effect, such a
provision of the Constitution could not be, and was not, suspended even
in times of war. It may be claimed that during the war, the United States
Government undertook to, and did, fix the price at which wheat and
flour should be bought and sold, and that is true. There, the United
States had declared war, and at the time was at war with other nations,
and it was a war measure, but it is also true that in doing so, and as a
part of the same act, the United States commandeered all the wheat and
flour, and took possession of it, either actual or constructive, and the
government itself became the owner of the wheat and flour, and fixed
the price to be paid for it. That is not this case. Here the rice sold was
the personal and private property of the defendant, who sold it to one of
his customers. The government had not bought and did not claim to own
the rice, or have any interest in it, and at the time of the alleged sale, it
was the personal, private property of the defendant. It may be that the
law was passed in the interest of the public, but the members of this
court have taken on solemn oath to uphold and defend the Constitution,
and it ought not to be construed to meet the changing winds or
emergency conditions. Again, we say that no state or nation under a
republican form of government ever enacted a law authorizing any
executive, under the conditions states, to fix the price at which a price
person would sell his own rice, and make the broad statement that no
decision of any court, on principle or by analogy, will ever be found
which sustains the constitutionality of the particular portion of Act No.
2868 here in question. By the terms of the Organic Act, subject only to
constitutional limitations, the power to legislate and enact laws is vested
exclusively in the Legislative, which is elected by a direct vote of the
people of the Philippine Islands. As to the question here involved, the
authority of the Governor-General to fix the maximum price at which
palay, rice and corn may be sold in the manner power in violation of the
organic law.
This opinion is confined to the particular question here involved, which
is the right of the Governor-General, upon the terms and conditions
stated in the Act, to fix the price of rice and make it a crime to sell it at a
higher price, and which holds that portions of the Act unconstitutional.
It does not decide or undertake to construe the constitutionality of any
of the remaining portions of the Act.
The judgment of the lower court is reversed, and the defendant
discharged. So ordered.
Araullo, C.J., Johnson, Street and Ostrand, JJ., concur.
Romualdez, J., concurs in the result.
Separate Opinions
MALCOLM, J., concurring:
I concur in the result for reasons which reach both the facts and the law.
In the first place, as to the facts, — one cannot be convicted ex post
facto of a violation of a law and of an executive order issued pursuant to
the law, when the alleged violation thereof occurred on August 6, 1919,
while the Act of the Legislature in question was not published until
August 13, 1919, and the order was not published until August 20, 1919.
In the second place, as to the law, — one cannot be convicted of a
violation of a law or of an order issued pursuant to the law when both
the law and the order fail to set up an ascertainable standard of guilt.
(U.S. vs. Cohen Grocery Company [1921], 255 U.S., 81, holding section
4 of the Federal Food Control Act of August 10, 1917, as amended,
invalid.)
In order that there may not be any misunderstanding of our position, I
would respectfully invite attention to the decision of the United States
Supreme Court in German Alliance Ins. Co. vs. Lewis ([1914, 233 U.S.,
389), concerning the legislative regulation of the prices charged by
business affected with a public interest, and to another decision of the
United States Supreme Court, that of Marshall Field & Co. vs. Clark
([1892], 143 U.S., 649), which adopts as its own the principles laid
down in the case of Locke's Appeal ([1873], 72 Pa. St., 491), namely;
"The Legislature cannot delegate its power to make a law; but it can
make a law to delegate a power to determine some fact or state of things
upon which the law makes, or intends to make, its own action depend.
To deny this would be to stop the wheels of government. There are
many things upon which wise and useful legislation must depend which
cannot be known to the law-making power, and must, therefore, be a
subject of inquiry and determination outside of the halls of legislation."
Avanceña and Villamor, JJ., concur.
Footnotes
1
Village of Little Chute vs. Van Camp.
2
Executive Order No. 53, series of 1919.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
[G.R. No. 112965. January 30, 1997]
PHILIPPINES TODAY, INC., BETTY GO-BELMONTE,
MAXIMO V. SOLIVEN, ARTURO A. BORJAL, and ISAAC G.
BELMONTE petitioners, v. NATIONAL LABOR RELATIONS
COMMISSION and FELIX R. ALEGRE, JR., Respondents.
DECISION
PANGANIBAN, J.:
May a "Memorandum for File" which did not mention the words
"resign" and/or "resignation" nonetheless juridically constitute voluntary
resignation? In answering this question, the Court took into account not
merely the literal meaning of the words and phrases used but, more
importantly, the peculiar circumstances attendant to its writing as well
as antecedent, contemporaneous and subsequent actions, which were
inconsistent with the desire for continued employment of the writer, an
intelligent executive occupying a position of trust in the Philippine
Starand gifted with an unusual writing ability.
These circumstances and actions are explained by this Court in re-
solving this petition for certiorari assailing the Decision 1 of the
National Labor Relations Commission (Second Division) 2 in NLRC
NCR CA 001863-91 entitled "Felix R. Alegre, Jr. vs. Philippines Today,
Inc." promulgated on September 30, 1993, which reversed the decision
of Labor Arbiter Pablo C. Espiritu, Jr., dated May 15; 1991. In a
Resolution dated November 16, 1993, petitioners' motion for
reconsideration was denied. 3chanroblesvirtuallawlibrary
The Facts
The undisputed facts are as follows: Petitioner Philippines Today, Inc.
(PTI) is the owner of the Philippine Star, a daily newspaper of national
and international circulation, while the individual petitioners are officers
and members of the board of directors of PTI, namely, Betty Go-
Belmonte, chairman of the board; Arturo A. Borjal, president; Maximo
V. Soliven, publisher and chairman, editorial board; and Isaac G.
Belmonte, treasurer. Private Respondent Felix R. Alegre, Jr. was
employed by PTI in July 1986 as a senior investigative reporter of
the Philippine Star with a monthly salary of eight thousand pesos
(P8,000.00). He later became chief investigative writer and then
assistant to the publisher. His monthly compensation was
correspondingly increased to ten thousand pesos (P10,000.00).
On October 20, 1988, Respondent Alegre filed a request for a thirty-day
leave of absence effective on the same date, citing the advice of his
personal physician for him to undergo further medical consultations
abroad. 4 Four days later, on October 24, 1988, he wrote a
"Memorandum for File" 5 addressed to Petitioner Betty Go-Belmonte
with copies furnished to members of the board of directors of PTI, the
text of which is reproduced below:
"MEMORANDUM FOR FILE.
FOR : BETTY GO-BELMONTE
Chairman & CEO, The STAR Group of Publications
FROM : FELIX R. ALEGRE, JR.
DATE : 24 October 1988
SUBJECT : HAVING IT ALL
Truth like medicine hurts. But it cures.
The nice little chat we had last Thursday was most revealing. And
certainly disconcerting.
What you had to tell me pained me, of course. But it has helped me just
as much. It enabled me to see things clearly in their right perspectives.
More importantly, it provided me with the answers to the questions that
had long nagged me in my wakeful state.
For quite a time, I got this sinking feeling of being treated like a pariah
of sorts by most of the senior executives around here. The frustration at
my inability to put a finger at such a feeling somehow enhanced the
angst within me. Until our chat. Now all the demons of my anxiety have
been exorcised. And I am left alone to lick the wounds of my betrayal. It
isn't easy, I know. But I shall pull through. Your candor and
demonstrated faith in my person have been most assuaging. And for that
alone, I am most grateful.
It has never occurred to me that, in my acceptance of the invitation from
no less than the publisher himself, to join him at the Philippines Today,
Inc., and the STAR Group of Publications, I was unwittingly signing my
own death warrant as well. The insults he had later on hurled at my
person, the malicious innuendoes he had spread around, casting doubts
on my personal and professional integrity, had mercilessly torn at my
soul, causing metaphysical death.
My credentials as a working journalist, I'd like to believe, got me this
job at the STAR in the first place. And my bylines in the series of
articles in the STAR From Day One of my official affiliation with the
Company, should establish that fact.
I was an investigative reporter at the Manila Times when the publisher By and large, all that I got are the twin demons of a civilized,
offered me to work with him at the STAR in 1986. I was given the unconscionable society: ECONOMIC INJUSTICE and
assignment as senior investigative reporter, then chief investigative PROFESSIONAL SABOTAGE.
writer, until I was given a fancy title of assistant to the publisher.
When push comes to a shove... anything or everything comes crashing
As a corporate guy assisting the publisher in his day-to-day official down. I'M HAVING IT ALL!
functionand this is where I feel very strongly about citing some
specifics of the things I did in this area, to wit: Since I am on leave, I guess I won't be able to see you for a while. I
wish to take this opportunity to express my profound appreciation and
... (omitted are said "specifics" of Respondent Alegre's accomplishments sincere thanks for your genuine con-cren (sic) and honest initiatives to
as assistant to the publisher deemed by this Court as not relevant to the do a good turn on my behalf. You have been most candid and forthright
appreciation of this memorandum in relation to the consideration of the with me. I can't be any less.
petition.)
Thank you for everything. God bless.
As can be gleaned from this recital of some of the "things done" (despite
my distaste for trumpeting one's deeds, but has to be said, to set the Very sincerely,
record straight, in this instance), one can see that I obviously don
different hats at any one time, doing administration and operations (Sgd.) FELIX R. ALEGRE, JR.
functions, apart from my journalistic duties. That I work as a
teamplayer, and trying hard to be good at (sic) it, cannot be denied. copy furnished:

FOR DOING ALL THESE in the best spirit of corporate team- Members-of the Board, Phils. Today, Inc.
upmanship, what did I get in RETURN?
Dr. Ronaldo G. Asuncion
1. A pittance, salary/compensation-wise
Mr. Antonio Roces"
2. Being conveniently bypassed in promotions, pay hikes, and other
perks On December 6, 1988, Respondent Alegre received from Petitioner
Belmonte a letter, 6 as follows:
3. Hindered from active participation in corporate affairs, by shooting at
my ideas that otherwise would have been workable and profitable for "November 9, 1988
the Company and its people (CF. Item 2 of my memo dtd 06 September
88 which had you interested in and supportive of). MR. FELIX ALEGRE

4. Personally and professionally maligned, and accused of being an NPA Dear Jun,
(non-performing asshole, pardon my French).
During our board meeting yesterday, we discussed your letter dated
October 24, 1988, and the Board decided to accept your resignation and
that it would take effect on November 22, 1988 upon expiration of your
one-month leave.
I would like to take this opportunity to say that we were happy to have
had you with the STAR Group of Publications and that we would like to
wish you the best of luck.
God bless. Thank you.
Very truly yours,
BETTY GO BELMONTE
Chairman of the Board
The Philippine Star"
The following day, Respondent Alegre wrote Petitioner Belmonte
expressing surprise over the acceptance of his "resignation" as stated in
the above-quoted letter. His letter 7 partly stated:
"It certainly beats me to be told that my 'resignation' has been accepted,
when in truth and in fact no such move, however implicit it may be, and
no such letter has ever been made from my end.
xxx xxx xxx
I am writing this letter not, certainly, to make any appeal, but simply to
go on record that I did not resign. I filed a leave of absence. Yes. And
that was dully (sic.,) approved. Then I sent you a memorandum for file
expressing my sentiments on certain things, candid statements that came
to b4 (sic) expressed inspired by your candor and sincerity in our last
little chat. Now, if you read that memo to mean resignation, that is your
responsibility. And I am not just about to contest it. x x x"
This was followed by another letter on January 2, 1989, wherein Alegre,
through counsel, 8 reiterated that he never resigned. He accused
petitioners of illegal dismissal as can be perceived allegedly from the
discrimination against him in promotions, benefits and the ploy to oust
him by considering his memorandum as a resignation. He claimed that
as a result, he suffered mental anguish, social humiliation, besmirched
reputation and moral shock. He thus demanded indemnification for "the
material and moral losses he has incurred". He further wrote that he was
not insisting to be taken back after being shown that he was no longer
wanted in the company.
Counsel 9 for petitioners, in a reply on January 19, 1989, explained that
the acceptance of Alegre's resignation was a collective decision of the
board of directors since "nobody in his right mind would write a
memorandum of the sort he wrote and still not resign. To them, the
memorandum was tantamount to a resignation even if Mr. Alegre did
not say so in so much words." With respect to his claim for damages,
petitioners' counsel said, "he has not shown any specific fact or
circumstance that would justify his claim, even remotely." Hence, "the
Star cannot accede to the same."
On May 17, 1989, Respondent Alegre filed a complaint for illegal
dismissal and damages against herein petitioners. 10 The labor arbiter
dismissed said complaint in his decision of May 15, 1991. We quote
significant portions of said decision:
"This office has minutely disected (sic) the letter and while it be said
that nothing therein mentions about resigning from his position as
Assistant to the Publisher, a perusal of the letter as a whole shows that
the intention of the complainant was to resign from his post. The subject
as "Having it all" together with his frustrations and disappointment in
the office coupled with his statement that "when push comes to a shove,
everything comes crushing (sic) down" and that: he is "having it all" and
with his concluding sentence of "Thank you for everything" are (sic)
clear indications that he was in fact resigning.
As a journalist and a writer, complainant need not write his letter of
resignation in black and white. He can do so in many other ways, words
and actions to show his real intention of leaving his job.
xxx xxx xxx
Complainant's subsequent overt acts particularly his failure to report to
his job after the expiration of his leave of absence, his being gainfully
employed with the Office of Senator Laurel (as Chief of Staff) and his
act of clearing and removing his personal files, things and belongings
from his desk prior to his (complainant) knowledge or receipt of the
letter accepting his resignation(,) clearly indicates that complainant was
not terminated from his job but rather he resigned from his job...
xxx xxx xxx
WHEREFORE, premises considered, judgment is hereby rendered
dismissing the complaint for illegal dismissal and damages for lack of
merit, and ordering respondent, Philippines Today, Inc., to pay
complainant the amount of THIRTY THOUSAND (P30,000.00) PESOS
by way of separation pay in the interest of compassionate labor justice
and; dismissing Respondents (sic) counterclaim for damages for lack of
merit. 11
On appeal by Alegre, the above decision was set aside by the NLRC.
Adopting the definition in Black's Law Dictionary (5th Edition) of
resignation as a "formal renouncement or relinquishment of an office,"
it held that herein Respondent Alegre did not resign as there was no
actual act of relinquishment to constitute complete and operative
resignation. According to the NLRC, the request for a leave of absence
by Respondent Alegre meant that he intended to return after the period
of his absence. Such intent was bolstered by his filing of a request for an
extension of his leave. Further, when he received the letter of Petitioner
Belmonte dated November 9, 1988 informing him of the acceptance by
the Board of his resignation, he immediately wrote a letter to Petitioner
Belmonte, expressing in no uncertain terms that he did not resign. These
circumstances led the NLRC to hold that Respondent Alegre was
constructively dismissed without just cause and to order petitioners to
pay him full backwages for three years from the time of dismissal,
separation pay in lieu of reinstatement, moral and exemplary damages
and attorney's fees. 12chanroblesvirtuallawlibrary
Issues
Petitioners argue that the NLRC committed grave abuse of discretion:
1. in finding them guilty of illegally dismissing Respondent Alegre;
2. in awarding Respondent Alegre moral and exemplary damages and
attorney's fees without any factual and legal basis; and,
3. even assuming that Respondent Alegre was illegally dismissed, in
contravening and disregarding this Court's ruling in Alex Ferrer, et al.
vs. NLRC (Second Division) 13 by erroneously computing backwages,
as it did not deduct the amounts earned by Respondent Alegre while he
was admittedly employed in the office of Senator Sotero H. Laurel.
The pivotal question is whether the Memorandum for File of
Respondent Alegre addressed to Petitioner Belmonte constitutes a letter
of resignation.
In construing it so, petitioners advance these arguments: (1) Respondent
Alegre had spoken openly to Petitioner Belmonte of his desire to leave
the Philippine Star; (2) the contents of his memorandum indicate an
intention on his part not to return to his job even if he did not
categorically mention resignation; (3) he never returned to work after
his authorized leave expired and even cleared his desk of his personal
belongings; and, (4) he obtained employment as chief of staff of the
office of Senator Sotero Laurel for which he was paid a higher salary.
Having been led to believe that Alegre wanted to resign and in honestly
perceiving his memorandum as a resignation letter, petitioners cannot be
held liable for moral and exemplary damages because they believe their
action was in accordance with law. Lastly, petitioners contend that, even
assuming they were liable for illegal dismissal, the NLRC, in granting
backwages, should have deducted the amount earned by Alegre from his
subsequent employment.
Private respondent, on the other hand, maintains that he had no intention
of resigning from PTI. He insists that: (1) in writing the memorandum,
he was merely lamenting the work environment at PTI and apprising
Petitioner Belmonte of the situation; (2) a resignation should be
unequivocal in nature; (3) his non-return to work after his original leave
expired is explained by his subsequent request for an extension thereof
due to medical reasons; (4) and the letter of Petitioner Belmonte
obviated any desire for him to return to his work since petitioners
practically terminated his employment. He further contends that
petitioners' tenacious resistance in admitting their mistake bespeaks of
bad faith and shows their real intention to end his services, which
entitles him to moral and exemplary damages. In representation of
public respondent, the Solicitor General supported private respondent's
position.
The Court's Ruling
The petition is meritorious.
Pivotal Issue: Did the Memorandum for File Constitute Voluntary
Resignation?
After a thorough scrutiny of the Memorandum for File of Respondent
Alegre and a careful deliberation on the peculiar circumstances
attendant to its writing and the antecedent, contemporaneous and
subsequent actions of private respondent, we hold that said
memorandum juridically constituted a letter of resignation.
We see merit in the findings and conclusions drawn by the labor arbiter.
They are more in accord with prudence, common sense and sound
judgment. The labor arbiter correctly deduced from Alegre's
memorandum and attendant actuations that he resigned. In contrast, the
NLRC was too strict in its interpretation of what constitutes
"resignation." It adhered literally to the dictionary meaning of the word
without relating it to the peculiarity of the factual circumstances
surrounding the case. Courts and quasi-judicial bodies, in the exercise of
their functions and in making decisions, must not be too dogmatic as to
restrict themselves to literal interpretations of words, phrases and
sentences. A complete and wholistic view must be taken in order to
render a just and equitable judgment.
Incendiary words and sarcastic remarks negate alleged desire to improve
relations
Alegre's choice of words and way of expression betray his allegation
that the memorandum was simply an "opportunity to open the eyes of
(Petitioner) Belmonte to the work environment in petitioners' newspaper
with the end in view of persuading (her) to take a hand at improving
said environment." Apprising his employer (or top-level management)
of his frustrations in his job and differences with his immediate superior
is certainly not done in an abrasive, offensive and disrespectful manner.
A cordial or, at the very least, civil attitude, according due deference to
one's superiors, is still observed, especially among high-ranking
management officers. The Court takes judicial notice of the Filipino
values of pakikisama and paggalang which are not only prevalent
among members of a family and community but within organizations as
well, including work sites. An employee is expected to extend due
respect to management, the employer being the "proverbial hen that lays
the golden egg," 14 so to speak. An aggrieved employee who wants to
unburden himself of his disappointments and frustrations in his job or
relations with his immediate superior would normally approach said
superior directly or otherwise ask some other officer possibly to mediate
and discuss the problem with the end in view of settling their
differences without causing ferocious conflicts. No matter how the
employee dislikes his. employer professionally, and even if he is in a
confrontational disposition, he cannot afford to be disrespectful and dare
to talk with an unguarded tongue and/or with a baleful pen. Here,
respondent Alegre was anything but respectful and polite. His
memorandum is too affrontive, combative and confrontational. It
certainly causes resentment, even when read by an objective reader. His
incendiary words and sarcastic remarks, to quote some:
"For quite a time, I got this sinking feeling of being treated like a pariah
of sorts by most of the senior executives around here. The frustration at
my inability to put a finger at such a feeling somehow enhanced the
angst within me....Now all the demons of my anxiety have been
exorcised. And I am left alone to lick the wounds of my betrayal. x x x
It has never occurred to me that, in my acceptance of the invitation from
no less than the publisher himself, to-join him... I was unwittingly
signing my own death warrant as well. The insults he had later on
hurled at my person, the malicious innuendoes he had spread around
casting doubts on my personal and professional integrity, had
mercilessly torn at my soul, causing metaphysical death."
negate any desire to improve work relations with Petitioner Soliven and
other PTI executives. Such strongly worded letter constituted an act of
"burning his bridges" with the officers of the company.
Seeking relief incompatible withwriting offensive letter
Any management officer, much so an immediate superior, would be
offended, if not enraged, with the insults and innuendoes stated in said
memorandum; more so because the memorandum was not directly
addressed to him but to the chairman and CEO and copy furnished all
other officers and members of the board of directors. Any discerning
mind can perceive that the letter is not simply a recitation of respondent
Alegre's gripes, disappointments, frustrations and heartaches against the
company and its officers particularly Petitioner Soliven, as postulated
by the Solicitor General in his comment. 15 If it were so, why was it not
addressed directly to the person concerned? His memorandum clearly
indicated that his problems involved, or were supposedly caused by
only one person, Mr. Soliven, his immediate superior. But it was not
even addressed to him! How can he expect amends in their relations if
that was all he wanted? The Solicitor General was simply turning a
blind eye to the obvious fact that said memorandum, for all intents and
purposes, was intended, wittingly or unwittingly, to end employment
relations.
Respondent Alegre a well-educated journalist
It should not escape our attention that respondent Alegre is a.
professional journalist and persuasive writer. On top of that, he was a
law graduate. He must have known the drilling effect of his bitter and
sarcastic remarks upon the petitioners and must have intended the same.
Ordinary words are to be construed in their ordinary meaning.
Commonsense dictates that Alegre meant to resign when he wrote the
memorandum. Otherwise, he should have used a more tempered
language and a less confrontational tone. Moreover, he held a position
of evident responsibility requiring the utmost confidence of his
immediate superior. As assistant to the publisher doing, in his very own
words, "administration and operations functions, apart from (my)
journalistic duties," it is apparent that Alegre was not employed simply
for his writing skills. Top management certainly reposed full trust and
confidence in him and placed him in a position of considerable
management influence.
PTI officers of uncommon intelligence and perception
Furthermore, his memorandum was addressed to the chairman and chief
executive officer of PTI and furnished all members of the board of
directors. These officers which include the likes of the late Betty Go-
Belmonte, Maximo V. Soliven and Arturo A. Borjal, long-time and well-
respected journalists acclaimed locally and internationally, are
themselves people of uncommon perception and intellect. They will not
miscomprehend the meaning and intent of Alegre's memorandum,
which was not by any means a simple way of seeking relief but well a
way to get out of the company. What else could he have meant with
these concluding remarks:
"By and large, all that I got are the twin demons of a civilized,
unconscionable society: ECONOMIC INJUSTICE and
PROFESSIONAL SABOTAGE.
When push comes to a shove.... anything or everything comes crashing
down. I'M HAVING IT ALL!"
Respondent Alegre, being a journalist himself and having worked with
them for sometime, knew how his letter would be perceived and
received. Besides, as discussed earlier, Alegre is likewise a well-
educated man of more than average intelligence. The conclusion is
inevitable that he had more than enough sense to anticipate the
consequences and effects of his words and actions. Indeed, what a man
sows, he reaps.
Trust and confidence breached
In addition, respondent Alegre is a highly confidential employee who
holds his job at the pleasure of his employer or, stated otherwise, for as
long as he enjoys the trust and confidence of his employer. Corollarily,
he likewise must repose trust and confidence in his employer or, at the
very least, his immediate superior. But any superior hurled with
invectives from a confidential employee, much more one occupying a
managerial position at the same time, will definitely lose trust and
confidence in the latter. And there can be no way to interpret such letter
other than as a withering of trust and confidence by the employee in his
boss. The use of offensive language can only mean expression of
disloyalty and disrespect. It renders the writer unworthy of the trust and
confidence demanded by his position. It is beyond human nature to
expect two persons with underlying mistrust in each other to continue to
work together effectively, not to say, harmoniously.
Antecedent, Contemporaneous and Subsequent Actions Affirming
Resignation
In addition to his memorandum and the circumstances attendant thereto
which were just discussed, the Court notes some peculiar actions
confirming Alegres' intention to terminate his employment with the Star.
(1) Medical reasons for leave of absence not proved
First, he claims that his leave of absence was due to medical reasons, for
which he was supposed to seek relief abroad. However, the Court
scoured the records but found nothing to show that he actually
underwent any medical check-up. Much less, medical examination
abroad. Nothing really backs up such claim except his bare statements
which, evidentially, are at best self-serving.
(1) Cleared desk of personal belongings
Second, respondent Alegre cleared his desk of his personal belongings
even before he knew of the acceptance of his resignation. 16 Such act
certainly bares his intent to leave his job. Respondent Alegre has not
refuted nor offered any sufficient explanation for this action. We cannot
but-give due credit to the petitioners' contention that such act was
expressive of his intent to resign.
(1) Did not report back to work
Third, respondent Alegre did not return to his job after his authorized
leave of absence expired in November 1988. Although he sent another
letter 17 requesting for an extension of his leave, there is no showing on
record that the same was approved by petitioners. It is standard office
procedure that applications for leave of absence are subject to the
approval of the employer. These are not automatically granted upon
filing. Except to cite in his request "travel log (sic) coupled with advice
of my physician," respondent Alegre has not proven the emergency
nature of the cause/s of his extended leave. Again, we cannot but give
due credence to petitioners' contention that this was another operative
evidence of Alegre's intent to resign.
His non-return to work, though, is not equivalent to abandonment of
work. For in the latter, it is necessary to prove "clear and deliberate
intent" coupled with unjustified. absence and overt acts unerringly
pointing to the fact that the employee simply does not want to work
anymore. 18 In the case at bench, Alegre voluntarily resigned through his
memorandum albeit written in the guise of a grievance letter. The law
and jurisprudence on abandonment have thus no application in the
present case.
(4) Not deprived of chance to return to work
Fourth, if Respondent Alegre had really no intention to resign, he could
have reported back to work. His contention that he was effectively
deprived of any chance to return to his work because of the acceptance
of his purported resignation cannot be sustained. He claims that he
received the notice dated November 9, 1988 only on December 6, 1988.
But this means that for about two weeks after his leave expired, he had
all chances to return to his work. Yet he chose not to. The obvious
reason is that he had actually no intention of doing so.
(5) Alegre expressly manifested intention to resign
Prior to sending his memorandum, Respondent Alegre informed
Petitioner Belmonte of his intention to resign from the Philippine Star.
This is shown by the testimony (cross examination) of the late Mrs.
Belmonte before the labor arbiter on January 13, 1990 as follows:
"ATTY. BORRETA:
And you took that action, meaning the Board acted on this Memo for
File which you considered as his letter of resignation without consulting
or talking with the complainant first?
WITNESS:
The complainant had also applied for leave of absence and he talked
with me that he was leaving for the United States. Actually I remember
he requested a conversation but he did not specify what the conversation
was about, Your Honor. He was telling me that he wanted to leave, has
signed another job. And I told him that is not my prerogative and I am
only Chairman of the Board; and he came upon the recommendation of
our Publisher and he was at that time Assistant to the Publisher; that he
should talk to the Publisher first and I even advised him to patch up
whatever differences he might have. In that conversation, he said
something about leaving and he even said to me that when he leaves, he
would ask his two (2) sons who were working with us to leave too. And
I think I made a comment, and that must be what he was referring to. I
said; oh, but your sons are very hardworking. In fact I said the
Publisher, Max Soliven, told me that 'sana you were as good as your
sons' maybe that was his feeling. That is my way of trying to tell him
that your sons are very hard-working because he said when I leave I am
going to ask them to leave too. Maybe because of that he gave me the
impression that he wanted to leave.
ATTY. BORRETA:
And this happened before he wrote this memo for file on October 24,
1988?
WITNESS:
Yes, sir
ATTY. BORRETA:
And because of that you got the impression that he had the intention to
resign?
WITNESS:
Yes sir" 19chanroblesvirtuallawlibrary
(6) Assumed job in another office
Finally, the most telling of the actions undertaken by Respondent Alegre
which evidently demonstrate his intent to resign was his immediate
employment as chief of staff of the office of then Senator Sotero H.
Laurel, with a much higher compensation at P14,600.00 per month
plus P2,000.00 per month driver's allowance. He admitted in his
testimony before the labor arbiter on November 6, 1989 that he was
employed therein about a year before (the date of his testimony) or
sometime in November 1988. 20 The date coincided with the period of
his leave of absence or immediately thereafter. If he had no intention of
resigning and was on leave for medical reasons as he alleged, why then
did he commence a new job in another office at about the same period?
His assumption of a new job prior to receiving Mrs. Belmonte's letter on
December 6, 1988 is clearly inconsistent with any desire to remain in
employment with PTI. This is particularly evident because both jobs
required full-time work. Moreover, working in a newspaper which
prides in its independence from partisan activities is incompatible with a
concurrent political office held by respondent.
Side Issue: May a Resignation Be Unilaterally Withdrawn?
Having established that Respondent Alegre resigned, we now tackle the
corollary issue of whether he can unilaterally withdraw his resignation.
We hold that he cannot do so.
The case of Intertrod Maritime, Inc. vs. NLRC 21 is in point. The
employee therein who was a ship engineer, while at Port Pylus, Greece,
requested for relief due to "personal reasons." The master of the ship,
who had authority to "sign off" an employee requesting relief, approved
his request but informed the employee that repatriation expenses were
for his account and that he had to give thirty days notice in view of
clause 5 of the employment contract. When the vessel was at Port Said,
Egypt four days later, the master "signed him off" and paid him in cash
all amounts due him less repatriation expenses. On his return to the
Philippines, the employee filed a complaint charging his employer with
breach of employment contract and violation of the National Seamen
Board rules and regulations. He claimed that his request for relief was
only for the sole purpose of enabling him to take care of a fellow
member of the crew who was hospitalized in Greece. Hence, after he
was disallowed from disembarking thereat, the reason no longer existed
and, consequently, he was illegally dismissed when he was forced to
"sign off" in Egypt even as he signified his intention of continuing his
work.
The Court ruled against the employee. It held that resignations, once
accepted, may not be withdrawn without the consent of the employer. If
the employer accepts the withdrawal, the employee retains his job. If the
employer does not, the employee cannot claim illegal dismissal. To say
that an employee who has resigned is illegally dismissed, is to encroach
upon the right of employers to hire persons who will be of service to
them.
Obviously, this is a recognition of the contractual nature of employment
which requires mutuality of consent between the parties. An
employment contract is consensual and voluntary. Hence, if the
employee "finds-himself in a situation where he believes that personal
reasons cannot be sacrificed in favor of the exigency of the service, then
he has no other choice but to disassociate himself from his
employment". 22 If accepted by the employer, the consequent effect of
resignation is severance of the contract of employment.
A resigned employee who desires to take his job back has to re-apply
therefor and he shall have the status of a stranger who cannot
unilaterally demand an appointment. He cannot arrogate unto himself
the same position which he earlier decided to leave. To allow him to do
so would be to deprive the employer of his basic right to choose whom
to employ. Such is tantamount to undue oppression of the employer. It
has been held that an employer is free to regulate, according to his own
discretion and judgment, all aspects of employment including
hiring. 23 The law, in protecting the rights of the laborer, impels neither
the oppression nor self-destruction of the employer. 24
Consistent with our ruling in Intertrod, the resignation of respondent
Alegre after its acceptance by petitioners can no longer be withdrawn
without the consent of the latter. In fairness to the employer, an
employee cannot backtrack on his resignation at his whim and without
the conformity of the former.
The instant case is unlike Molave Tours Corporation vs.
NLRC 25 and People's Security, Inc. vs. NLRC. 26 In Molave, acting on
reports that the employee was on several occasions found drunk within
work premises, the employer required him to explain in writing said
charges. Notwithstanding his explanation and request for a
confrontation with his accusers, the employee was made to sign a
resignation letter. Two months after, he filed a complaint for illegal
dismissal. The labor arbiter, affirmed by the NLRC, found that the
employee was merely forced and intimidated into resigning. The Court
reiterated that resignation must be voluntary on the part of the
employee. It thus ordered the employer to reinstate the employee and
award backwages and other benefits due him since there was no
effective resignation.
Likewise in People's Security, there was a finding of involuntary
resignation. The employees therein who were security guards were not
given assignments by their employer after the latter's security services
contract with Meralco expired. The employees requested for loans to be
deducted from their security bond deposits, which requests were denied
by the employer who insisted that they must turn in their resignations
first before their security bond deposits could be released. Not having
been given new work assignments and being in dire financial need, the
employees submitted their resignation letters. Three months later, they
filed money claims which were later amended to include illegal
dismissal. The employer contended that the employees voluntarily
severed their employment because they turned in their resignation letters
and assumed jobs with another security agency. Again the Court held
that resignation is a voluntary act of the employee. When the employees
were told that they would not be granted loans unless they resigned,
they had no choice since they desperately needed money to meet their
respective families' needs. They were also forced to accept jobs at
another agency as a practical solution to their employment problems
which were caused by the employer's refusal and failure to provide them
with new assignments.
In the case of Indophil vs. NLRC, 27 on the other hand, the employee
voluntarily submitted a resignation letter but later tried to retrieve the
same. He contended though, that he was thereafter prevented by the
company guard from entering the work premises because of his
resignation. He sued for illegal dismissal. His employer claimed
abandonment of work since he was required to report and to explain his
unauthorized absences but did not. In holding that there was no
dismissal, the Court regarded the employer's act of requiring the
employee to report and explain his unauthorized absences as non-
acceptance of the previous resignation of the employee. Thus, the
employer still considered him as its employee in spite of the filed
resignation letter. With respect to the latter's allegation that he was
prevented by the company guard from entering the premises, the Court
chided him for not having inquired into its veracity and for simply
relying on the bare statement of the guard. It said that the employee
should be more vigilant of his rights.
The above three cases are dissimilar to the case at bar. In the first two
cases, there were involuntary resignations while in the third there was
an unaccepted resignation. In the instant case, however, the resignation
was voluntary and it was accepted by the employer. Thus, our grant of
the petition.
Since we find no case of illegal dismissal, we will no longer pass upon
the two other issues raised by petitioners which are mere consequences
of the contrary finding made by the NLRC. Necessarily, there can be no
award of any moral or exemplary damages, backwages and separation
pay.
Epilogue
Both the Constitution and the Labor Code mandate a bias in favor of
labor. Hence, this Court, as a matter of judicial policy, leans backwards
to protect labor and the working class against the machinations and
incursions of their more financially entrenched employers. In the
present case, however, it is obvious to us that private respondent's
memorandum could not have been intended merely to persuade
management to improve the work environment at the Philippine Star.
Rather, it was evidently a recitation of the facts and reasons why
respondent Alegre could no longer continue working under what he
believed were unbearable conditions in the work place. The offensive
language used by a well-educated man endowed with unusual writing
skill could not have been intended merely for the "suggestion box." That
it was addressed and given to persons of uncommon perception
themselves takes the letter out of ordinary employer employee
communications. It is true that there was no direct mention of the word
"resignation." However, the incendiary words employed denote a clear
intent to end the writer's association of trust and confidence with his
superiors and employer. This intent becomes even more manifest when
viewed in light of attendant acts of Alegre, particularly his prolonged
leave of absence, his clearing of his own desk of personal belongings,
his failure to report back to work after the expiration of his approved
leave, his verbal expression of his intent to resign, and most notably, his
assumption of a higher paying job in a political office which was
incompatible with his work at the Star.
In deciding cases, this Court does not matter-of-factly apply and
interpret laws in a vacuum. General principles do not decide specific
cases. Rather, laws are interpreted always in the context of the peculiar
factual situation of each case. Each case has its own flesh and blood and
cannot be decided simply on the basis of isolated clinical classroom
principles. The circumstances of time, place, event, person, and
particularly attendant circumstances and actions before, during and after
the operative fact should all be taken in their totality so that justice can
be rationally and fairly dispensed.
WHEREFORE, premises considered, the petition is GRANTED. The
assailed Decision and Resolution of the NLRC are SET ASIDE. The
temporary restraining order issued by this Court is made
PERMANENT. No costs.
SO ORDERED.
Narvasa, (Chairman), C.J, Davide, Jr., Melo, and Francisco, JJ.,
concur.
 15
Endnotes: Comment of the Solicitor General, p. 6; rollo, pp. 89-
103.
16
Decision of the Labor arbiter, pp. 10-11; rollo pp. 46-
1
Rollo, pp. 21-34. 47.
2
Composed of Commissioner Domingo H. Zapanta, 17
Records, p. 159.
ponente; Commissioners Edna Bonto-Perez and Rogelio
I. Rayala, concurring. 18
Kingsize v. NLRC, 238 SCRA 349, November 24,
1994; Nueva Ecija v. Minister of Labor, 184 SCRA 25,
3
Rollo, p. 36. April 3, 1990, citing Flexo Manufacturing v. NLRC, 135
SCRA 145, February 28, 1985, Penaflor v.NLRC, 120
4
Assailed Decision, p. 2. SCRA 68, January 17, 1983.
5
Records, pp. 40-42. 19
TSN, January 13, 1990, pp. 90-94.
6
Records, p. 28. 20
TSN, November 6, 1989, pp. 5-7.
7
Records, p. 160. 21
198 SCRA 318, June 19, 1991.
8
Attys. Carag, Caballes, Jamora, Rodriguez and Somera; 22
Ibid. citing Dosch v. NLRC, 123 SCRA 296, July 5,
records, pp. 29-30. 1983.
9
Atty. Antonino B. Villano; records, pp. 31-32. 23
See San Miguel Brewery Sales Force Union
(PTGWO) v. Ople, 170 SCRA 25, February 8, 1989;
10
NLRC Case No. 00-05-02317-89. homeowners, supra note 14.
11
Rollo pp. 44, 46 & 48. 24
Supra note 21 citing Philippine Airlines, Inc. v. PAL
Employees Association, 57 SCRA 489, June 28, 1974.
12
Rollo, pp. 31-34.
25
250 SCRA 326, November 24, 1995.
13
224 SCRA 410, July 05, 1993 (not August 13, 1993 as
stated in the petition). 26
226 SCRA 146, September 8, 1993.
14
Homeowners Savings and Loan Association v. NLRC, 27
226 SCRA 723, September 27, 1993.
G.R. No. 97067, September 26, 1996, Justice Regino C.
Hermosisima, Jr., ponente.
 SATURNINO DAVID, as Collector of Internal Revenue, defendant-
appellant.

Office of the Solicitor General Juan R. Liwag and Solicitor Jose P.

Alejandro for appellant.
Manuel O. Chan for appellees.

MONTEMAYOR, J.:

This is a joint appeal from the decision of the Court of First Instance of
Manila declaring section 13 of Republic Act No. 590 unconstitutional,
and ordering the appellant Saturnino David as Collector of Internal
Revenue to re-fund to Justice Pastor M. Endencia the sum of P1,744.45,
representing the income tax collected on his salary as Associate Justice
of the Court of Appeals in 1951, and to Justice Fernando Jugo the
amount of P2,345.46, representing the income tax collected on his
salary from January 1,1950 to October 19, 1950, as Presiding Justice of
the Court of Appeals, and from October 20, 1950 to December 31,1950,
as Associate Justice of the Supreme Court, without special
pronouncement as to costs.

Because of the similarity of the two cases, involving as they do the same
question of law, they were jointly submitted for determination in the
lower court. Judge Higinio B. Macadaeg presiding, in a rather
exhaustive and well considered decision found and held that under the
doctrine laid down by this Court in the case of Perfecto vs. Meer, 85
Republic of the Philippines Phil., 552, the collection of income taxes from the salaries of Justice
SUPREME COURT Jugo and Justice Endencia was a diminution of their compensation and
Manila therefore was in violation of the Constitution of the Philippines, and so
ordered the refund of said taxes.
EN BANC
We see no profit and necessity in again discussing and considering the
G.R. No. L-6355-56 August 31, 1953 proposition and the arguments pro and cons involved in the case of
Perfecto vs. Meer, supra, which are raised, brought up and presented
PASTOR M. ENDENCIA and FERNANDO JUGO, plaintiffs- here. In that case, we have held despite the ruling enunciated by the
appellees, United States Federal Supreme Court in the case of O 'Malley vs.
vs. Woodrought 307 U. S., 277, that taxing the salary of a judicial officer in
the Philippines is a diminution of such salary and so violates the
Constitution. We shall now confine our-selves to a discussion and
determination of the remaining question of whether or not Republic Act
No. 590, particularly section 13, can justify and legalize the collection
of income tax on the salary of judicial officers.
According to the brief of the Solicitor General on behalf of appellant
Collector of Internal Revenue, our decision in the case of Perfecto vs.
Meer, supra, was not received favorably by Congress, because
immediately after its promulgation, Congress enacted Republic Act No.
590. To bring home his point, the Solicitor General reproduced what he
considers the pertinent discussion in the Lower House of House Bill No.
1127 which became Republic Act No. 590.
For purposes of reference, we are reproducing section 9, Article VIII of
our Constitution:.
SEC. 9. The members of the Supreme Court and all judges of inferior
courts shall hold office during good behavior, until they reach the age of
seventy years, or become incapacitated to discharge the duties of their
office. They shall receive such compensation as may be fixed by
law, which shall not be diminished during their continuance in office.
Until the Congress shall provide otherwise, the Chief Justice of the
Supreme Court shall receive an annual compensation of sixteen
thousand pesos, and each Associate Justice, fifteen thousand pesos.
As already stated construing and applying the above constitutional
provision, we held in the Perfecto case that judicial officers are exempt
from the payment of income tax on their salaries, because the collection
thereof by the Government was a decrease or diminution of their
salaries during their continuance in office, a thing which is expressly
prohibited by the Constitution. Thereafter, according to the Solicitor
General, because Congress did not favorably receive the decision in the
Perfecto case, Congress promulgated Republic Act No. 590, if not to
counteract the ruling in that decision, at least now to authorize and
legalize the collection of income tax on the salaries of judicial officers.
We quote section 13 of Republic Act No. 590:
SEC 13. No salary wherever received by any public officer of the
Republic of the Philippines shall be considered as exempt from the
income tax, payment of which is hereby declared not to be dimunition
of his compensation fixed by the Constitution or by law.
So we have this situation. The Supreme Court in a decision interpreting
the Constitution, particularly section 9, Article VIII, has held that
judicial officers are exempt from payment of income tax on their
salaries, because the collection thereof was a diminution of such
salaries, specifically prohibited by the Constitution. Now comes the
Legislature and in section 13, Republic Act No. 590, says that "no salary
wherever received by any public officer of the Republic (naturally
including a judicial officer) shall be considered as exempt from the
income tax," and proceeds to declare that payment of said income tax is
not a diminution of his compensation. Can the Legislature validly do
this? May the Legislature lawfully declare the collection of income tax
on the salary of a public official, specially a judicial officer, not a
decrease of his salary, after the Supreme Court has found and decided
otherwise? To determine this question, we shall have to go back to the
fundamental principles regarding separation of powers.
Under our system of constitutional government, the Legislative
department is assigned the power to make and enact laws. The
Executive department is charged with the execution of carrying out of
the provisions of said laws. But the interpretation and application of said
laws belong exclusively to the Judicial department. And this authority to
interpret and apply the laws extends to the Constitution. Before the
courts can determine whether a law is constitutional or not, it will have
to interpret and ascertain the meaning not only of said law, but also of
the pertinent portion of the Constitution in order to decide whether there
is a conflict between the two, because if there is, then the law will have
to give way and has to be declared invalid and unconstitutional.
Defining and interpreting the law is a judicial function and the
legislative branch may not limit or restrict the power granted to the
courts by the Constitution. (Bandy vs. Mickelson et al., 44N. W., 2nd
341, 342.)
When it is clear that a statute transgresses the authority vested in the
legislature by the Constitution, it is the duty of the courts to declare the
act unconstitutional because they cannot shrink from it without violating
their oaths of office. This duty of the courts to maintain the Constitution
as the fundamental law of the state is imperative and unceasing; and, as
Chief Justice Marshall said, whenever a statute is in violation of the
fundamental law, the courts must so adjudge and thereby give effect to
the Constitution. Any other course would lead to the destruction of the
Constitution. Since the question as to the constitutionality of a statute is
a judicial matter, the courts will not decline the exercise of jurisdiction
upon the suggestion that action might be taken by political agencies in
disregard of the judgment of the judicial tribunals. (11 Am. Jur., 714-
715.)
Under the American system of constitutional government, among the
most important functions in trusted to the judiciary are the interpreting
of Constitutions and, as a closely connected power, the determination of
whether laws and acts of the legislature are or are not contrary to the
provisions of the Federal and State Constitutions. (11 Am. Jur., 905.).
By legislative fiat as enunciated in section 13, Republic Act NO. 590,
Congress says that taxing the salary of a judicial officer is not a decrease
of compensation. This is a clear example of interpretation or
ascertainment of the meaning of the phrase "which shall not be
diminished during their continuance in office," found in section 9,
Article VIII of the Constitution, referring to the salaries of judicial
officers. This act of interpreting the Constitution or any part thereof by
the Legislature is an invasion of the well-defined and established
province and jurisdiction of the Judiciary.
The rule is recognized elsewhere that the legislature cannot pass any
declaratory act, or act declaratory of what the law was before its
passage, so as to give it any binding weight with the courts. A legislative
definition of a word as used in a statute is not conclusive of its meaning
as used elsewhere; otherwise, the legislature would be usurping a
judicial function in defining a term. (11 Am. Jur., 914, emphasis
supplied)
The legislature cannot, upon passing a law which violates a
constitutional provision, validate it so as to prevent an attack thereon in
the courts, by a declaration that it shall be so construed as not to violate
the constitutional inhibition. (11 Am. Jur., 919, emphasis supplied)
We have already said that the Legislature under our form of government
is assigned the task and the power to make and enact laws, but not to
interpret them. This is more true with regard to the interpretation of the
basic law, the Constitution, which is not within the sphere of the
Legislative department. If the Legislature may declare what a law
means, or what a specific portion of the Constitution means, especially
after the courts have in actual case ascertain its meaning by
interpretation and applied it in a decision, this would surely cause
confusion and instability in judicial processes and court decisions.
Under such a system, a final court determination of a case based on a
judicial interpretation of the law of the Constitution may be undermined
or even annulled by a subsequent and different interpretation of the law
or of the Constitution by the Legislative department. That would be
neither wise nor desirable, besides being clearly violative of the
fundamental, principles of our constitutional system of government,
particularly those governing the separation of powers.
So much for the constitutional aspect of the case. Considering the
practical side thereof, we believe that the collection of income tax on a
salary is an actual and evident diminution thereof. Under the old system
where the in-come tax was paid at the end of the year or sometime
thereafter, the decrease may not be so apparent and clear. All that the
official who had previously received his full salary was called upon to
do, was to fulfill his obligation and to exercise his privilege of paying
his income tax on his salary. His salary fixed by law was received by
him in the amount of said tax comes from his other sources of income,
he may not fully realize the fact that his salary had been decreased in the
amount of said income tax. But under the present system of withholding
the income tax at the source, where the full amount of the income tax
corresponding to his salary is computed in advance and divided into
equal portions corresponding to the number of pay-days during the year
and actually deducted from his salary corresponding to each payday,
said official actually does not receive his salary in full, because the
income tax is deducted therefrom every payday, that is to say, twice a
month. Let us take the case of Justice Endencia. As Associate Justice of
the Court of Appeals, his salary is fixed at p12,000 a year, that is to say,
he should receive P1,000 a month or P500 every payday, — fifteenth
and end of month. In the present case, the amount collected by the
Collector of Internal Revenue on said salary is P1,744.45 for one year.
Divided by twelve (months) we shall have P145.37 a month. And
further dividing it by two paydays will bring it down to P72.685, which
is the income tax deducted form the collected on his salary each half
month. So, if Justice Endencia's salary as a judicial officer were not
exempt from payment of the income tax, instead of receiving P500
every payday, he would be actually receiving P427.31 only, and instead
of receiving P12,000 a year, he would be receiving but P10,255.55. Is it
not therefor clear that every payday, his salary is actually decreased by
P72.685 and every year is decreased by P1,744.45?
Reading the discussion in the lower House in connection with House
Bill No. 1127, which became Republic Act No. 590, it would seem that
one of the main reasons behind the enactment of the law was the feeling
among certain legislators that members of the Supreme Court should not
enjoy any exemption and that as citizens, out of patriotism and love for
their country, they should pay income tax on their salaries. It might be
stated in this connection that the exemption is not enjoyed by the
members of the Supreme Court alone but also by all judicial officers
including Justices of the Court of Appeals and judges of inferior courts.
The exemption also extends to other constitutional officers, like the
President of the Republic, the Auditor General, the members of the
Commission on Elections, and possibly members of the Board of Tax
Appeals, commissioners of the Public Service Commission, and judges
of the Court of Industrial Relations. Compares to the number of all these
officials, that of the Supreme Court Justices is relatively insignificant.
There are more than 990 other judicial officers enjoying the exemption,
including 15 Justices of the Court of Appeals, about 107 Judges of First
Instance, 38 Municipal Judges and about 830 Justices of the Peace. The
reason behind the exemption in the Constitution, as interpreted by the
United States Federal Supreme Court and this Court, is to preserve the
independence of the Judiciary, not only of this High Tribunal but of the
other courts, whose present membership number more than 990 judicial
officials.
The exemption was not primarily intended to benefit judicial officers,
but was grounded on public policy. As said by Justice Van Devanter of
the United States Supreme Court in the case of Evans vs. Gore (253 U.
S., 245):
The primary purpose of the prohibition against diminution was not to
benefit the judges, but, like the clause in respect of tenure, to attract
good and competent men to the bench and to promote that independence
of action and judgment which is essential to the maintenance of the
guaranties, limitations and pervading principles of the Constitution and
to the administration of justice without respect to person and with equal
concern for the poor and the rich. Such being its purpose, it is to be
construed, not as a private grant, but as a limitation imposed in the
public interest; in other words, not restrictively, but in accord with its
spirit and the principle on which it proceeds.
Having in mind the limited number of judicial officers in the Philippines
enjoying this exemption, especially when the great bulk thereof are
justices of the peace, many of them receiving as low as P200 a month,
and considering further the other exemptions allowed by the income tax
law, such as P3,000 for a married person and P600 for each dependent,
the amount of national revenue to be derived from income tax on the
salaries of judicial officers, were if not for the constitutional exemption,
could not be large or substantial. But even if it were otherwise, it should
not affect, much less outweigh the purpose and the considerations that
prompted the establishment of the constitutional exemption. In the same
case of Evans vs. Gore, supra, the Federal Supreme Court declared "that
they (fathers of the Constitution) regarded the independence of the
judges as far as greater importance than any revenue that could come
from taxing their salaries.
When a judicial officer assumed office, he does not exactly ask for
exemption from payment of income tax on his salary, as a privilege . It
is already attached to his office, provided and secured by the
fundamental law, not primarily for his benefit, but based on public
interest, to secure and preserve his independence of judicial thought and
action. When we come to the members of the Supreme Court, this
excemption to them is relatively of short duration. Because of the
limited membership in this High Tribunal, eleven, and due to the high
standards of experience, practice and training required, one generally
enters its portals and comes to join its membership quite late in life, on
the aver-age, around his sixtieth year, and being required to retire at
seventy, assuming that he does not die or become incapacitated earlier,
naturally he is not in a position to receive the benefit of exemption for
long. It is rather to the justices of the peace that the exemption can give
more benefit. They are relatively more numerous, and because of the
meager salary they receive, they can less afford to pay the income tax
on it and its diminution by the amount of the income tax if paid would
be real, substantial and onerous.
Considering exemption in the abstract, there is nothing unusual or
abhorrent in it, as long as it is based on public policy or public interest.
While all other citizens are subject to arrest when charged with the
commission of a crime, members of the Senate and House of
Representatives except in cases of treason, felony and breach of the
peace are exempt from arrest, during their attendance in the session of
the Legislature; and while all other citizens are generally liable for any
speech, remark or statement, oral or written, tending to cause the
dishonor, discredit or contempt of a natural or juridical person or to
blacken the memory of one who is dead, Senators and Congressmen in
making such statements during their sessions are extended immunity
and exemption.
And as to tax exemption, there are not a few citizens who enjoy this
exemption. Persons, natural and juridical, are exempt from taxes on
their lands, buildings and improvements thereon when used exclusively
for educational purposes, even if they derive income therefrom. (Art.
VI, Sec. 22 [3].) Holders of government bonds are exempted from the
payment of taxes on the income or interest they receive therefrom (sec.
29 (b) [4], National Internal Revenue Code as amended by Republic Act
No. 566). Payments or income received by any person residing in the
Philippines under the laws of the United States administered by the
United States Veterans Administration are exempt from taxation.
(Republic Act No. 360). Funds received by officers and enlisted men of
the Philippine Army who served in the Armed Forces of the United
States, allowances earned by virtue of such services corresponding to
the taxable years 1942 to 1945, inclusive, are exempted from income
tax. (Republic Act No. 210). The payment of wages and allowances of
officers and enlisted men of the Army Forces of the Philippines sent to
Korea are also exempted from taxation. (Republic Act No. 35). In other
words, for reasons of public policy and public interest, a citizen may
justifiably by constitutional provision or statute be exempted from his
ordinary obligation of paying taxes on his income. Under the same
public policy and perhaps for the same it not higher considerations, the
framers of the Constitution deemed it wise and necessary to exempt
judicial officers from paying taxes on their salaries so as not to decrease
their compensation, thereby insuring the independence of the Judiciary.
In conclusion we reiterate the doctrine laid down in the case of Perfecto
vs. Meer, supra, to the effect that the collection of income tax on the
salary of a judicial officer is a diminution thereof and so violates the
Constitution. We further hold that the interpretation and application of
the Constitution and of statutes is within the exclusive province and
jurisdiction of the Judicial department, and that in enacting a law, the
Legislature may not legally provide therein that it be interpreted in such
a way that it may not violate a Constitutional prohibition, thereby tying
the hands of the courts in their task of later interpreting said statute,
specially when the interpretation sought and provided in said statute
runs counter to a previous interpretation already given in a case by the
highest court of the land.
In the views of the foregoing considerations, the decision appealed from
is hereby affirmed, with no pronouncement as to costs.
Pablo, Bengzon, Padilla, Tuason, Reyes, and Labrador, JJ., concur.
Separate Opinions
BAUTISTA ANGELO, J., concurring:
Without expressing any opinion on the doctrine laid down by this Court
in the case of Perfecto vs. Meer, G. R. No. L-2314, in view of the part I
had in that case as former Solicitor General, I wish however to state that
I concur in the opinion of the majority to the effect that section 13,
Republic Act No. 590, in so far as it provides that taxing of the salary of
a judicial officer shall be considered "not to be a diminution of his
compensation fixed by the Constitution or by law", constitutes an
invasion of the province and jurisdiction of the judiciary. In this sense, I
am of the opinion that said section is null and void, it being a
transgression of the fundamental principle underlying the separation of Appeal from the judgment of the Municipal Court of Batangas
powers. (provincial capital), Batangas, in Criminal Case No. 889, finding the
accused guilty of the crime of Illegal Possession of Firearm and
Ammunition and sentencing him to suffer an indeterminate penalty
ranging from one (1) year and one (1) day to two (2) years
PARAS, C.J., concurring and dissenting: imprisonment, with the accessories provided by law, which raises in
issue the validity of his conviction based on a retroactive application of
I dissent for the same reasons stated in the dissenting opinion of Mr. Our ruling in People v. Mapa.1
Justice Ozaeta in Perfecto vs. Meer, 85 Phil., 552, in which I concurred.
But I disagree with the majority in ruling that no legislation may The complaint filed against the accused reads:
provide that it be held valid although against a provision of the
Constitution. That on or about 9:00 o'clock, p.m., the 5th day of September, 1964, in
the poblacion, Municipality of Batangas, Province of Batangas,
Philippines, and within the jurisdiction of this Honorable Court, the
above-named accused, a person not authorized by law, did then and
there wilfully, unlawfully and feloniously keep in his possession,
custody and direct control a revolver Cal. .22, RG8 German Made with
Republic of the Philippines one (1) live ammunition and four (4) empty shells without first securing
SUPREME COURT the necessary permit or license to possess the same.
Manila
At the arraignment on September 11, 1964, the accused entered a plea of
SECOND DIVISION not guilty, after which trial was accordingly held.

The accused admitted that on September 5, 1964, he was in possession

G.R. No. L-30061 February 27, 1974
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellees,
vs.
JOSE JABINAL Y CARMEN, defendant-appellant.
Office of the Solicitor General Felix V. Makasiar and Solicitor Antonio
M. Martinez for plaintiff-appellee.
Pedro Panganiban y Tolentino for defendant-appellant.
of the revolver and the ammunition described in the complaint, without
the requisite license or permit. He, however, claimed to be entitled to
exoneration because, although he had no license or permit, he had an
appointment as Secret Agent from the Provincial Governor of Batangas
and an appointment as Confidential Agent from the PC Provincial
Commander, and the said appointments expressly carried with them the
authority to possess and carry the firearm in question.
Indeed, the accused had appointments from the above-mentioned
officials as claimed by him. His appointment from Governor Feliciano
Leviste, dated December 10, 1962, reads:

Reposing special trust and confidence in your civic spirit, and trusting
that you will be an effective agent in the detection of crimes and in the
ANTONIO, J.:p preservation of peace and order in the province of Batangas, especially
with respect to the suppression of trafficking in explosives, jueteng,
illegal cockfighting, cattle rustling, robbery and the detection of
unlicensed firearms, you are hereby appointed a SECRET AGENT of the
undersigned, the appointment to take effect immediately, or as soon as
you have qualified for the position. As such Secret Agent, your duties
shall be those generally of a peace officer and particularly to help in the
preservation of peace and order in this province and to make reports
thereon to me once or twice a month. It should be clearly understood
that any abuse of authority on your part shall be considered sufficient
ground for the automatic cancellation of your appointment and
immediate separation from the service. In accordance with the decision
of the Supreme Court in G.R. No. L-12088 dated December 23, 1959,
you will have the right to bear a firearm, particularly described below,
for use in connection with the performance of your duties.
By virtue hereof, you may qualify and enter upon the performance of
your duties by taking your oath of office and filing the original thereof
with us.
Very truly yours,
(Sgd.) FELICIANO LEVISTE
Provincial Governor
FIREARM AUTHORIZED TO CARRY:
Kind: — ROHM-Revolver
Make: — German
SN: — 64
Cal:— .22
On March 15, 1964, the accused was also appointed by the PC
Provincial Commander of Batangas as Confidential Agent with duties to
furnish information regarding smuggling activities, wanted persons,
loose firearms, subversives and other similar subjects that might affect
the peace and order condition in Batangas province, and in connection
with these duties he was temporarily authorized to possess a ROHM
revolver, Cal. .22 RG-8 SN-64, for his personal protection while in the
performance of his duties.
The accused contended before the court a quo that in view of his above-
mentioned appointments as Secret Agent and Confidential Agent, with
authority to possess the firearm subject matter of the prosecution, he
was entitled to acquittal on the basis of the Supreme Court's decision
in People vs. Macarandang2 and People vs. Lucero.3 The trial court,
while conceding on the basis of the evidence of record the accused had
really been appointed Secret Agent and Confidential Agent by the
Provincial Governor and the PC Provincial Commander of Batangas,
respectively, with authority to possess and carry the firearm described in
the complaint, nevertheless held the accused in its decision dated
December 27, 1968, criminally liable for illegal possession of a firearm
and ammunition on the ground that the rulings of the Supreme Court in
the cases of Macarandang and Lucero were reversed and abandoned
in People vs. Mapa, supra. The court considered as mitigating
circumstances the appointments of the accused as Secret Agent and
Confidential Agent.
Let us advert to Our decisions in People v. Macarandang, supra, People
v. Lucero, supra, and People v. Mapa, supra. In Macarandang, We
reversed the trial court's judgment of conviction against the accused
because it was shown that at the time he was found to possess a certain
firearm and ammunition without license or permit, he had an
appointment from the Provincial Governor as Secret Agent to assist in
the maintenance of peace and order and in the detection of crimes, with
authority to hold and carry the said firearm and ammunition. We
therefore held that while it is true that the Governor has no authority to
issue any firearm license or permit, nevertheless, section 879 of the
Revised Administrative Code provides that "peace officers" are
exempted from the requirements relating to the issuance of license to
possess firearms; and Macarandang's appointment as Secret Agent to
assist in the maintenance of peace and order and detection of crimes,
sufficiently placed him in the category of a "peace officer" equivalent
even to a member of the municipal police who under section 879 of the
Revised Administrative Code are exempted from the requirements
relating to the issuance of license to possess firearms. In Lucero, We
held that under the circumstances of the case, the granting of the
temporary use of the firearm to the accused was a necessary means to
carry out the lawful purpose of the batallion commander to effect the
capture of a Huk leader. In Mapa, expressly abandoning the doctrine
in Macarandang, and by implication, that in Lucero, We sustained the
judgment of conviction on the following ground:
The law is explicit that except as thereafter specifically allowed, "it shall
be unlawful for any person to ... possess any firearm, detached parts of
firearms or ammunition therefor, or any instrument or implement used
or intended to be used in the manufacture of firearms, parts of firearms,
or ammunition." (Sec. 878, as amended by Republic Act No. 4, Revised
Administrative Code.) The next section provides that "firearms and
ammunition regularly and lawfully issued to officers, soldiers, sailors,
or marines [of the Armed Forces of the Philippines], the Philippine
Constabulary, guards in the employment of the Bureau of Prisons,
municipal police, provincial governors, lieutenant governors, provincial
treasurers, municipal treasurers, municipal mayors, and guards of
provincial prisoners and jails," are not covered "when such firearms are
in possession of such officials and public servants for use in the
performance of their official duties." (Sec. 879, Revised Administrative
Code.)
The law cannot be any clearer. No provision is made for a secret agent.
As such he is not exempt. ... .
It will be noted that when appellant was appointed Secret Agent by the
Provincial Government in 1962, and Confidential Agent by the
Provincial Commander in 1964, the prevailing doctrine on the matter
was that laid down by Us in People v. Macarandang (1959) and People
v. Lucero (1958). Our decision in People v. Mapa reversing the
aforesaid doctrine came only in 1967. The sole question in this appeal
is: Should appellant be acquitted on the basis of Our rulings
in Macarandang and Lucero, or should his conviction stand in view of
the complete reversal of the Macarandang and Lucero doctrine
in Mapa? The Solicitor General is of the first view, and he accordingly
recommends reversal of the appealed judgment.
Decisions of this Court, although in themselves not laws, are
nevertheless evidence of what the laws mean, and this is the reason why
under Article 8 of the New Civil Code "Judicial decisions applying or
interpreting the laws or the Constitution shall form a part of the legal
system ... ." The interpretation upon a law by this Court constitutes, in a
way, a part of the law as of the date that law originally passed, since this
Court's construction merely establishes the contemporaneous legislative
intent that law thus construed intends to effectuate. The settled rule
supported by numerous authorities is a restatement of legal maxim
"legis interpretatio legis vim obtinet" — the interpretation placed upon
the written law by a competent court has the force of law. The doctrine
laid down in Lucero and Macarandang was part of the jurisprudence,
hence of the law, of the land, at the time appellant was found in
possession of the firearm in question and when he arraigned by the trial
court. It is true that the doctrine was overruled in the Mapa case in
1967, but when a doctrine of this Court is overruled and a different view
is adopted, the new doctrine should be applied prospectively, and should
not apply to parties who had relied on the old doctrine and acted on the
faith thereof. This is especially true in the construction and application
of criminal laws, where it is necessary that the punishability of an act be
reasonably foreseen for the guidance of society.
It follows, therefore, that considering that appellant conferred his
appointments as Secret Agent and Confidential Agent and authorized to
possess a firearm pursuant to the prevailing doctrine enunciated
in Macarandang and Lucero, under which no criminal liability would
attach to his possession of said firearm in spite of the absence of a
license and permit therefor, appellant must be absolved. Certainly,
appellant may not be punished for an act which at the time it was done
was held not to be punishable.
WHEREFORE, the judgment appealed from is hereby reversed, and
appellant is acquitted, with costs de oficio.
Zaldivar (Chairman), Barredo, Fernandez and Aquino, JJ., concur.
Fernando, J., took no part.
Footnotes
1 L-22301, August 30, 1967, 20 SCRA 1164.
2 106 Phil. (1959), 713.
3 103 Phil. (1958), 500.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. Nos. 24116-17 August 22, 1968
CEBU PORTLAND CEMENT COMPANY, plaintiff-appellant,
vs.
MUNICIPALITY OF NAGA, CEBU, ET AL., defendants-appellees.
Tomas P. Matic, Jr. and Lorenzo R. Mosqueda for plaintiff-appellant.
Fernan, Osmeña and Bellaflor for defendants-appellees.
FERNANDO, J.:
In two separate actions, plaintiff-appellant Cebu Portland Cement
Company sought to test the validity of the distraint and thereafter the
sale at public auction by the principal defendant-appellee, Municipality
of Naga, Cebu, of 100,000 bags of cement for the purpose of satisfying
its alleged deficiency in the payment of the municipal license tax for
1960, municipal license tax for 1961 as well as the penalty, all in the
total sum of P204,300.00. The lower court rendered a joint decision
sustaining the validity of the action taken by defendant-appellee
Municipality of Naga. The case is now before us on appeal. We affirm.
According to the appealed decision: "From all the evidence, mostly
documentary, adduced during the hearing the following facts have been
established. The efforts of the defendant Treasurer to collect from the
plaintiff the municipal license tax imposed by Amended Ordinance No.
21. Series of 1959 on cement factories located within the Municipality
of Naga, Cebu, have met with rebuff time and again. The demands made
on the taxpayer ... have not been entirely successful. Finally, the
defendant Treasurer decided on June 26, 1961 to avail of the Civil
remedies provided for under Section 2304 of the Revised
Administrative Code and gave the plaintiff a period of ten days from
receipt thereof within which to settle the account, computed as
follows ...: Deficiency Municipal License Tax for 1960 — P80,250.00;
Municipal License Tax for 1961 — P90,000.00; and 20% Penalty —
P34,050.00, stating in exasperation, "This is our last recourse as we had
exhausted all efforts for an amicable solution of our problem." "1
It was further shown: "On July 6, 1961, at 11:00 A.M., the defendant
Treasurer notified the Plant Manager of the plaintiff that he was
"distraining 100,000 bags of Apo cement in satisfaction of your
delinquency in municipal license taxes in the total amount of
P204,300.00" ... This notice was received by the acting officer in charge
of the plaintiff's plant, Vicente T. Garaygay, according to his own
admission. At first, he was not in accord with the said letter, asking the
defendant Treasurer for time to study the same, but in the afternoon he
[acknowledged the] distraint ..." 2
As was noted in the decision, the defendant Treasurer in turn "signed the
receipt for goods, articles or effects seized under authority of Section
2304 of the Revised Administrative Code, certifying that he has
constructively distrained on July 6, 1961 from the Cebu Portland
Cement Company at its plant at Tina-an, Naga, Cebu, 100,000 bags of
Apo cement in tanks, and that "the said articles or goods will be sold at
public auction to the highest bidder on July 27, 1961, and the proceeds
thereof will be utilized in part satisfaction of the account of the said
company in municipal licenses and penalties in the total amount of
P204,300.00 due the Municipality of Naga Province of Cebu" ..."3
The lower court likewise found as a fact that on the same day, July 6,
1961, the municipal treasurer posted the notice of sale to the effect that
pursuant to the provisions of Section 2305 of the Revised
Administrative Code, he would sell at public auction for cash to the
highest bidder at the main entrance of the municipal building of the
Municipality of Naga, Province of Cebu, Philippines on the 27th day of
July, 1961, at 9 o'clock in the morning, the property seized and
distrained or levied upon from the Cebu Portland Cement Company in
satisfaction of the municipal license taxes and penalties in the amount of
P204,300.00, specifying that what was to be sold was 100,000 bags of
Apo cement.4 No sale, as thus announced, was held on July 27, 1961. It
was likewise stated in the appealed decision that there was stipulation
by the parties to this effect: "1. The auction sale took place on January
30, 1962, ..."5
In this appeal from the above joint decision, plaintiff-appellant Cebu
Portland Cement Company upholds the view that the distraint of the
100,000 bags of cement as well as the sale at public auction thereafter
made ran counter to the law. As earlier noted, we do not see it that way.
1. On the validity of the distraint — In the first two errors assigned,
plaintiff-appellant submits as illegal the distraint of 100,000 bags of
cement made on July 6, 1961. Its contention is premised on the fact that
in the letter of defendant-appellee dated June 26, 1961, requiring
plaintiff-appellant to settle its account of P204,300.00, it was given a
period of 10 days from receipt within which it could pay, failure to do so
being the occasion for the distraint of its property. It is now alleged that
the 10-day period of grace was not allowed to lapse, the distraint having
taken place on July 6, 1961.
It suffices to answer such a contention by referring to the explicit
language of the law. According to the Revised Administrative Code:
"The remedy by distraint shall proceed as follows: Upon the failure of
the person owing any municipal tax or revenue to pay the same, at the
time required, the municipal treasurer may seize and distrain any
personal property belonging to such person or any property subject to
the tax lien, in sufficient quantity to satisfy the tax or charge in question,
together with any increment thereto incident to delinquency, and the
expenses of the distraint."6
The clear and explicit language of the law leaves no room for doubt.
The municipal treasurer "may seize and distrain any personal property"
of the individual or entity subject to the tax upon failure "to pay the
same, at the time required ..." There was such a failure on the part of
plaintiff-appellant to pay the municipal tax at the time required. The
power of the municipal treasurer in accordance with the above provision
therefore came into play.1äwphï1.ñët
Whatever might have been set forth in the letter of the municipal
treasurer could not change or amend the law it has to be enforced as
written. That was what the lower court did. What was done then cannot
be rightfully looked upon as a failure to abide by what the statutory
provision requires. Time and time again, it has been repeatedly declared
by this Court that where the law speaks in clear and categorical
language, there is no room for interpretation. There is only room for
application. That was what occurred in this case.7
2. On the validity of the auction sale — The validity of the auction sale
held on January 30, 1962 is challenged in the next two errors assigned
as allegedly committed by the lower court. Plaintiff-appellant's
argument is predicated on the fact that it was not until January 16, 1962
that it was notified that the public auction sale was to take place on
January 29, 1962. It is its view that under the Revised Administrative
Code8 the sale of the distrained property cannot take place "less than
twenty days after notice to the owner or possessor of the property
[distrained] ... and the publication or posting of such notice."
Why such a contention could not prosper is explained clearly by the
lower court in the appealed decision. Thus: "With respect to the claim
that the auction sale held on January 30, 1962 pursuant to the distraint
was null and void for being contrary to law because not more than
twenty days have elapsed from the date of notice, it is believed that the
defendant Municipality of Naga and Municipal Treasurer of Naga have
substantially complied with the requirements provided for by Section
2305 of the Revised Administrative Code. From the time that the
plaintiff was first notified of the distraint on July 6, 1961 up to the date
of the sale on January 30, 1962, certainly, more than twenty days have
elapsed. If the sale did not take place, as advertised, on July 27, 1961,
but only on January 30, 1962, it was due to the requests for deferment
made by the plaintiff which unduly delayed the proceedings for
collection of the tax, and the said taxpayer should not be allowed now to
complain that the required period has not yet elapsed when the intention
of the tax collector was already well-publicized for many months." 9 The
reasonableness of the above observation of the lower court cannot be
disputed. Under the circumstances, the allegation that there was no
observance of the twenty-day period hardly carries conviction.
The point is further made that the auction sale took place not on January
29, 1962, as stated in the notice of sale, but on the next day, January 30,
1962. According to plaintiff-appellant: "On this score alone, the sale ...,
was illegal as it was not made on the time stated in the notice." 10
There is no basis to sustain such a plea as the finding of the lower court
is otherwise. Thus: "On January 16, 1962, the defendant Treasurer
informed Garaygay that he would cause the readvertisement for sale at
public auction of the 100,000 bags of Apo cement which were under
constructive distraint ... On January 19, 1962, the said defendant issued
the corresponding notice of sale, which fixed January 30, 1962, at 10:00
A.M., as the date of sale, posting the said notice in public places and
delivering copies thereof to the interested parties in the previous
notice, ... Ultimately, the bidding was conducted on that day, January
30, 1962, with the representatives of the Provincial Auditor and
Provincial Treasurer present. Only two bidders submitted sealed bids.
After the bidding, the defendant-treasurer informed the plaintiff that an
award was given to the winning bidder, ..." 11
This being a direct appeal to us, plaintiff-appellant must be deemed to
have accepted as conclusive what the lower court found as established
by the evidence, only questions of law being brought to us for review. It
is the established rule that when a party appeals directly to this Court, he
is deemed to have waived the right to dispute any finding of fact made
by the court below. 12
WHEREFORE, the decision of the lower court dated 23, 1964, is
affirmed in toto. With costs against plaintiff-appellant.1äwphï1.ñët
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez,
Castro and Angeles, JJ., concur.
Footnotes
1
Decision of July 23, 1964 of the lower court, Record on Appeal, pp.
166- 167.
2
Ibid, pp. 167-168.
3
Ibid, pp. 169-170.
4
Ibid, pp. 170-171.
5
Ibid, p. 172.
6
Section 2304, Act No. 2711 as amended.
7
Cf. Lizarraga Hermanos v. Yap Tico, 24 Phil. 504 (1913); People v.
Mapa, L-22301, August 30, 1967; Pacific Oxygen and Acytelene Co. v.
Central Bank, L-21881, March 1, 1968; Dequito v. Lopez, L-27757,
March 28, 1968.
8
"See. 2305. Proceedings subsequent to seizure. — The officer levying
the distraint shall make or cause to be made an account of the goods or
effects distrained, a copy of which signed by himself shall be left either
with the owner or person from whose possession such goods or effects
were taken, or at the dwelling or place of business of such person and
with some one of suitable age and discretion, to which list shall be
added a statement of the sum demanded and note of the time and place
of sale; and the said officer shall forthwith cause a notification to be
exhibited in not less than two public places in the municipality where
the distraint was made, specifying the time and place of sale and the
articles distrained. The time of sale shall not be less than twenty days
after notice to the owner or possessor of the property as above specified
and the publication or posting of such notice. One place for the posting
of such notice shall be at the office of the mayor of the municipality in
which the property is distrained. At the time and place fixed in such
notice the said officer shall sell the goods, or effects, so distrained, at
public auction, to the highest bidder for cash..." .
9
Decision of the lower court, Record on Appeal, p. 180.
10
Brief for Plaintiff-Appellant, p. 37. AUDITOR GENERAL and the GOVERNMENT SERVICE
INSURANCE SYSTEM, respondents.
11
Decision of July 23, 1964 of the lower court, p. 175.
Crispen D. Baizas and Perfecto V. Fernandez for petitioners.
12
Republic v. Luzon Stevedoring Corp., L-21749, September 29, 1967. Leovigildo Monasterial, Rodolfo R. Magsarili, V. B. Magadia and
See also Perez v. Araneta, L-18414, July 15, 1968 and the cases cited Samson G. Binag for respondent Government Service Insurance System.
therein. Office of the Solicitor General Arturo A. Alafriz and Solicitor Conrado
T. Limcaoco for respondent Auditor General.

SANCHEZ, J.:

The question of power this original action for prohibition presents is

whether or not the Board of Regents of the University of the Philippines
(U.P.) may extend the tenure of a professor beyond the retirement age
by law fixed at 65 years. Respondents answered in the negative.
Petitioners came to this Court.

Petitioner Cristino Jamias started service in U.P. on June 26, 1924. At

the time the present petition was filed in this Court on April 3, 1962, he
was a Professor of English Language and Literature and concurrently
Head of the University Publications Department. His service had been
unquestionably continuous for more than fifteen years before he reached
the age of 65 years on July 20, 1961.

Prior thereto, on June 12, 1961, Dean (now Regent) Tomas S. Fonacier
of the U.P. College of Arts and Sciences — the immediate superior of
Republic of the Philippines Prof. Jamias — having first obtained the latter's consent, wrote U.P.
SUPREME COURT President Vicente G. Sinco with the request that Jamias' service be
Manila extended for one academic year ending April 15, 1962. Fonacier's
reasons were that Prof. Jamias was still quite healthy; that he had been
EN BANC commissioned to write the history of U.P. but had just finished half of
it, i.e., from U.P.'s establishment to the Benton era that he could
G.R. No. L-19617 October 31, 1969 continue to act as Head of the University Publications until the
administration would find someone to take his place; that Dr. Dionisia
UNIVERSITY OF THE PHILIPPINES BOARD OF REGENTS Rola who would take over the courses of Prof. Jamias had been assigned
and CRISTINO JAMIAS, petitioners, to the U.P. College in Baguio; and that the extension would enable the
vs. discipline of English to adjust itself to the teaching of Prof. Jamias'
courses.
On June 20, 1961, President Sinco favorably endorsed Dean Fonacier's
request to the Board of Regents. On July 27, 1961, said board resolved
to approve the extension of Prof. Jamias' services until April 15, 1962.
The present controversy started on December 28, 1961 when Auditor
Alfredo Liboro, the Auditor General's representative at U.P., questioned
the legality of the July 27, 1961 resolution of the Board of Regents just
adverted to. U.P. sought reconsideration by the Auditor General. On
February 1, 1962, Auditor General Pedro M. Gimenez affirmed the U.P.
Auditor's ruling. The Auditor General, citing Opinion 117, dated
September 1, 1961, of the Secretary of Justice, held that the Board of
Regents was without power to extend the services of U.P. professors
beyond the compulsory limit of 65 years.
The Government Service Insurance System (GSIS) joined hands with
the Auditor General. Accordingly, on January 5, 1962, GSIS wrote Prof.
Jamias that his services rendered after the compulsory retirement age
were illegal; and that he (Jamias) was not entitled to compensation. The
GSIS letter to Prof. Jamias concluded: "Thus, if you were paid salary for
services rendered after you became due for compulsory retirement, the
same should be refunded to the University of the Philippines; otherwise,
it will be deducted from the annuity due you under CA 186, as
amended, pursuant to a ruling of the Auditor General in a similar case
and turned over to the University of the Philippines." Prof. Jamias
sought reconsideration. GSIS turned it down.
Then followed the directive of U.P. Auditor Alfredo Liboro that Prof.
Jamias' salary be withheld beginning with the weekly salary due on
March 7, 1962.
It was upon the foregoing backdrop that petitioners U.P. Board of
Regents and Cristino Jamias came to this Court on an original petition
for prohibition against respondents Auditor General and GSIS. They
seek to stop the Auditor General and his men from withholding Prof.
Jamias' salary and to restrain GSIS from deducting any amount from his
five-year lump sum retirement annuity upon retirement on April 16,
1962. We declined to issue the preliminary injunctive writ prayed for in
the petition.
As adverted to at the start of this opinion, the core of the case is this:
May the U.P. Board of Regents extend the tenure of a professor beyond
retirement age?
1. It is undisputed that U.P. employees, including its professors, are
employees of the Government.
The U.P. charter entrusts the university with the duty "to provide
advanced instruction in literature, philosophy, the sciences, and arts, and
to give professional and technical training." 1 This is in line with the
obligation expressly imposed upon the State by the Constitution of the
Philippines.2 Intrinsically valid then is the holding in University of the
Philippines vs. Court of Industrial Relations 107 Phil. 848, 850, that
U.P. performs a "legitimate governmental function, ... is maintained by
the Government, ... declares no dividends, and is, obviously, not a
corporation created for profit but an institution of higher education and
therefore not an industrial or business organization."
As government employees, U.P. professors are compulsorily covered by
the Retirement Law, Commonwealth Act 186, as amended, which
creates a uniform retirement system for all members of the GSIS. It does
not take much thought to come to this conclusion. The applicable
retirement law at the time Prof. Jamias reached retirement age of 65
years on July 20, 1961 was Section 4 (a), Commonwealth Act 186, as
successively amended by Republic Acts 660 (approved June 16, 1951),
1573 (approved June 16, 1956) and 1820 (approved June 22, 1957).
Section 4, as amended by said Acts, then read:
SEC. 4. Scope of application of System. — (a) Membership in the
System shall be compulsory upon all regularly and permanently
appointed employees, including judges of the Courts of First Instance
and those whose tenure of office is fixed or limited by law; upon all
teachers except only those who are substitutes; upon all regular
employees of the Philippine Tuberculosis Society, and upon all regular
officers and enlisted men of the Armed Forces of the Philippines.3
The view that U.P. is definitely governed by Commonwealth Act 186, as
amended, is not without support. A rundown of the genealogy of the law
gives this thesis a lift. Originally, Section 4 of the law (Commonwealth
Act 186, which took effect on November 14, 1936) reads:
Sec. 4. Scope of application of System. — Regular membership in the
system shall be compulsory upon —
xxx xxx xxx
(f) Regular and permanent employees of other Government boards or
agencies, except the University of the Philippines and the Government-
owned or controlled, business corporations; ... .
To be noted is that in the early 1936 statute just quoted, Congress did
expressly exclude U.P. from the operation of the Retirement Law. But
then Section 4 (g) of the same original law gave U.P. the option to join
GSIS, viz.:
(g) ... Provided, That any provincial, city or municipal, government, or
the University of the Philippines or any other corporation owned or
controlled by the Government, shall have the option of joining the
System, and if it so joins, the membership shall be compulsory upon all
its permanent and regular employees, . . .
The option spoken of by the above-quoted provision was taken
advantage of by U.P. when it chose to participate in the GSIS.4
But as the law stood in 1961, the provisions exempting U.P. from GSIS
coverage and granting it the option to join GSIS were eliminated by
Republic Act 660 which took effect on June 16, 1951 and succeeding
acts. Section 4(a) of Republic Act 660 approved June 16, 1951 provided
that:
(a) Membership in the System shall be compulsory upon all regularly
and permanently appointed employees, including those whose tenure of
office is fixed or limited by law; upon all teachers except only those
who are substitutes; and upon all regular officers and enlisted men of
the Armed Forces of the Philippines.5
It makes eminent sense to say that the deletion of the University of the
Philippines from the exception cannot be of de minimis effect. That
omission is not elusive of exact comprehension either. The plain and
natural impact thereof is that U.P. became covered by the System.
Because, the option to join or not to join was left solely and exclusively
to be exercised by "an elective official of the National Government or of
a local government that is a member of the System" — and by no
other.6 The ineluctable conclusion that follows is that since U.P. is not
within the limited limits of the exception, it is a compulsory member of
the System.
2. Let us now take a look at the law decisive of the present question —
the Board of Regents' power to extend appointment of U.P. professors. It
may perhaps be conducive to better analysis if we go into the history of
that law. Initially, the power to extend service was lodged solely with
the President of the Philippines.
Section 12 (c) of Commonwealth Act 186, as amended by Republic Act
660, read as follows:
(c) Retirement shall be automatic and compulsory at the age of sixty-
five years, if he has completed fifteen years of service, and if he has not,
he shall be allowed to continue in the service until he shall have
completed fifteen years unless he is otherwise eligible for disability
retirement. This clause shall not apply to members of the judiciary and
constitutional officers whose tenure of office is guaranteed. Upon
specific approval of the President of the Philippines, an employee may
be allowed to continue to serve after the age of sixty-five years if he
possesses special qualifications and his services are needed. It shall be
the duty of the employer concerned to notify each such employee under
its direction of the date of his automatic separation from the service at
least sixty days in advance thereof.
By Republic Act 728 (approved June 18, 1952) which amended Section
12 (c), that power to extend service was expanded to include the
President of the Senate, the Speaker of the House of Representatives,
and the Chief Justice of the Supreme Court, viz.:
(c) ... Upon specific approval of the President of the Philippines, the
President of the Senate, the Speaker of the House of Representatives, or
the Chief Justice of the Supreme Court, as the case may be, an
employee may be allowed to continue to serve in the Executive,
Legislative, or Judicial Branch of the Government after the age of sixty-
five years if he possesses special qualifications and his services are
needed. ... .
The above provision later became section 12 (e) because Republic Act
1616 (approved May 31, 1957) added paragraphs (b) and (c) to Section
12.
Then came Republic Act 3096, effective June 17, 1961, which displaced
Section 12 (e), thus —
(e) Retirement shall be automatic and compulsory at the age of sixty-
five years, and optional retirement at the age of sixty-three shall be
allowed with lump sum payment of present value of annuity for first
five years, and future annuity to be paid monthly, and other benefits
given to a compulsorily retired member as provided for in Republic Act
Numbered Six hundred sixty, as amended, if he has completed fifteen
years of service and if he has not been separated from the service during
the last three years of service prior to retirement; otherwise he shall be
allowed to continue in the service until he shall have completed the
required length of service unless he is otherwise eligible for disability
retirement. This clause shall not apply to members of the judiciary and
constitutional officers whose tenure of office is guaranteed. It shall be
the duty of the employer concerned to notify each such employee under
its direction of the date of his automatic separation from the service at
least sixty days in advance thereof.
Not escaping notice is that the power to extend service of an employee
beyond retirement age — previously given to the President of the
Philippines, the Senate President, the Speaker, or the Chief Justice —
was expressly deleted from the law. The directive that retirement "shall
be automatic and compulsory" is imperative. The law does not admit of
exception. Such was the legal provision actually in force at the time
Prof. Jamias reached 65 years of age.7
In summary, it may be said that in accordance with Republic Act 660,
retirement was automatically compulsory at age 65 if the employee had
completed 15 years of service; except that upon specific approval by the
President of the Philippines, an employee might be allowed to continue
to serve after the age of 65 years if he possessed special qualifications
and his services were needed. This power given to the President by
Republic Act 660 was granted also by Republic Act 728 to the President
of the Senate, the Speaker of the House of Representatives and the Chief
Justice of the Supreme Court. However, when Republic Act 3096 (the
law here applicable) took effect on June 17, 1961, this grant of power to
extend the service of an employee beyond the age of 65 was eliminated.
Such elimination operates to repeal the eliminated provision.8
There can be no mistake as to this. Both the language of the statute
(Republic Act 3096) and the express legislative intent deleted the power
to grant extension of service. House Bill 1224 which became Republic
Act 3096 specifically wrote off the power of the President of the
Philippines, the President of the Senate, the Speaker of the House of
Representatives, and the Chief Justice of the Supreme Court to extend
services of government employees beyond the age of 65
years.9 Needless it is to deeply explore the underlying rationale of this
particular amendment. The explanatory note is there. It reads in part:
In the course of operations of the Government Service Insurance
System, it has been found that Commonwealth Act No. 186, as
amended, still requires further improvement in order that the life and
retirement insurance provided therein may be more responsive to the
needs of government employees. To attain this end, the following
changes are necessary:
xxx xxx xxx
3. To realize the purpose behind requiring that retirement be compulsory
upon attainment of age 65, the continuance in the service of those who
are already eligible to compulsory retirement should no longer be
allowed.10
Taking stock of the prohibition in Republic Act 3096, the executive
department of the government made the impact of the law — which
bans extension of service after retirement age — clear to its different
agencies. This was when the Office of the President of the Philippines
issued Memorandum Circular 30 dated September 15, 1961 "enjoining
against the continuance in the service of officials and employees beyond
the due date of their automatic and compulsory retirement." That
circular called attention to the fact that Section 12(e) of Commonwealth
Act 186, as amended by Republic Act 3096, "no longer contains the
provisions empowering the President of the Philippines, the President of
the Senate, the Speaker of the House of Representatives, and the Chief
Justice of the Supreme Court to continue an employee in the service in
the Executive, Legislative or Judicial Branch of the Government, as the
case may be, after reaching the automatic and compulsory retirement
age of 65 years." The circular directed strict compliance with the last
portion of said Section 12(e) which makes it a duty on the part of the
employer concerned to notify the employee of the date of his automatic
separation at least 60 days in advance thereof.
Prof. Cristino Jamias reached 65 years of age on July 20, 1961. At that
time, Republic Act 3096 — enacted on June 17, 1961 — was in force.
No power or authority there was then to extend the service of a
government employee beyond 65 years of age. Prohibition to extend is
patent and clear. The retirement of Prof. Jamias became automatic and
compulsory. The Board of Regents is powerless to extend his service
beyond July 20, 1961. And, its resolution now under consideration is
null and void.
3. But petitioners would want to anchor the power of the Board of
Regents to so extend upon Section 6(e) of the U.P. Charter, Act 1870, as
amended, in which the language is —
SEC 6. The Board of Regents shall have the following powers and
duties, in addition to its general powers of administration and the
exercise of the powers of the corporation:
xxx xxx xxx
(e) To appoint, on the recommendation of the President of the
University, professors, instructors, lecturers and other employees of the
University; to fix their compensations, hours of service, and such other
duties and conditions as it may deem proper; to grant to them in its
discretion leave of absence under such regulations as it may promulgate,
any other provisions of law to the contrary notwithstanding, and to
remove them for cause after an investigation and hearing shall have
been had. 11
Petitioners' trenchant claim is that the foregoing gives the Board of
Regents plenary power to deal with all aspects of service or employment
in the university. Their position is that legislative intention there is to
free U.P.'s academicians from control and interference by other bureaus
and offices of the government. They aver that the board is with power to
fix conditions of employment "as it may deem proper."
We are thus required to pit Section 6(e) of the U.P. Charter against
Section 12(e) of the Retirement Law, as amended by Republic Act 3096.
As we do so, we find that the Board of Regents' power to fix conditions
of service "as it may deem proper" is but a general statement. It lacks
that illuminating specific authority to place the Board of Regents
beyond the reach of Republic Act 3096, which in letter and legislative
intent proscribed extension of service. We are hard pressed to
understand how the cited provision in the U.P. Charter could give the
Board of Regents power to extend where none was theretofore granted,
and given the fact that even the President of the Philippines who
previously had that authority was shorn of it by law. Absent an express
congressional direction that the Board of Regents may so extend, we are
unprepared to indulge in unbridled expansive construction and to say
that U.P. is beyond the reach of that positive and unambiguous law,
Commonwealth Act 186, as amended by Republic Act 3096, on the
retirement of government employees which include U.P. professors.
The cited provisions of Act 1870 (the U.P. Charter) must be deemed
restricted or limited by Commonwealth Act 186, as amended by
Republic Act 3096, which makes 65 the automatic and compulsory age
for retirement, the conditions set forth by the law being present. The
Board of Regents was not, by the applicable statute, Republic Act 3096,
singled out as an exception, one with sole authority to grant extension of
service. In fact, even the President of the Philippines, to repeat, was
divested of that power. It is because of this that we would rather adhere,
than depart, from the rule that courts may not introduce exceptions or
conditions by construction from considerations of convenience, public
welfare, or for any other laudable purpose. 12
This should dispose then of petitioners' contention that policy
considerations behind compulsory retirement in the government service
are not applicable to U.P. by the very nature of the conditions of the
service rendered therein — and these conditions are even debatable
— viz.: U.P. faculty members for the most part lead sheltered quiet
lives; that owing to the leisurely pace of academic work the faculty
members normally are spared the rigors of an eight-hour day, their
duties being within their energies as a whole; that they perform their
work with like efficiency as before the age of 65; and that unlike regular
bureaus and offices of the government where old age decreases
efficiency by the very nature of the work, U.P. calls for special services
and qualifications, not necessarily affected by age. On the other side of
the coin, of course, is the thought quite often expressed that no man —
not even one with the learning and wisdom of a 65-year old — is
indispensable. Anyway, whether or not as a rule the university
professors maintain, increase or diminish their efficiency as they reach
65 years, is a consideration which would not give this Court a desirable
approach to the problem before us. Policy that is proper for legislation is
beyond the ambit of court powers. Suffice it to say that these suasions
are best addressed to Congress. Because courts cannot simply melt and
recast a statute.
4. Petitioners next assert that their theory that a retired employee may be
retained in the government beyond 65 years of age finds support from
Section 12(d) of Commonwealth Act 186, as amended. This section
reads:
(d) An employee separated from the service who is receiving an annuity
described under section eleven shall not be eligible again to
appointment to any appointive position or employment under any
'employer' unless the appointing authority determines that he is
possessed of special qualifications and his medical examination has
been approved by the System, in which event he shall not be entitled to
payments of his annuity during the period of his new
employment: Provided, however, That nothing in this Act shall be so
construed as to affect the rights of the annuitant's beneficiary if the
annuitant has been receiving or had elected, and was otherwise entitled
to, a reduced annuity under subsection (a) of section eleven: Provided,
further, That upon the termination of his new appointment, the
payments of the annuity which were discontinued shall be resumed:
And provided, finally, That if the annuitant's salary in his new position
is less than the annuity granted to him under this Act, he shall be entitled
to receive the difference. 13
To be observed is that under the above provision, an employee separated
from the service who is receiving an annuity may be eligible again to
another appointment in the government if the appointing authority
determines that he is possessed of special qualifications and his medical
examination has been approved by the GSIS. This provision of law must
be viewed in the context of other provisions of Commonwealth Act 186
and in accordance with the history of the law.
Section 12(e), as we have seen, expressly exacts automatic and
compulsory retirement at age 65 if the conditions therein stated are met;
that while previous amendments have granted the power of extension of
service of retirable employees to the four top officials of the
government, Republic Act 3096 (the law which here governs)
eliminated such power. To adopt petitioners' view then in reference to
Section 12(d) above-quoted would be to make the provisions of Section
12(e) conflict with those of Section 12(d) of the law. The former would
be rendered nugatory by the latter. This is an effect that should be
avoided. Consistency in statutes is of prime importance. All laws are
presumed to be consistent with each other. In interpreting laws, courts
are hidebound by the rule that theirs is to reconcile and to harmonize;
and, if possible, to avoid inconsistency and repugnancy; to give the laws
a conjoint not discordant effect. As we said in a previous case, 14 "[w]e
have to take the thought conveyed by the statute as a whole; construe
the constituent parts together; ascertain the legislative intent from the
whole act; consider each and every provision thereof in the light of the
general purpose of the statute; and endeavour to make every part
effective, harmonious, sensible."
To harmonize Section 12(d) with Section 12(e) — as it stood amended
by Republic Act 3096 — is to hold that a retired employee who is
receiving annuity from the GSIS may be reappointed to the government
service only if he has not yet reached the age of 65 years. The
prohibition in Section 12(e) against the extension of the service of a
retirable government employee where the conditions for automatic and
compulsory retirement exist is so patent and so clear that it will not
admit of any other construction that would violate legislative intent.
5. Petitioners bring in the concept of academic freedom. Their argument
is that the law as we now interpret it would trench upon the academic
freedom enjoyed by the university as guaranteed by the Constitution.
Petitioners refer to Section 5, Article XIV of the Constitution, which
provides that "[u]niversities established by the State shall enjoy
academic freedom." Petitioners mention the concurring opinion of
Justice Frankfurter, whom Justice Harlan joins, in Sweezy vs. New
Hampshire, 354 U.S. 234, 1 L. Ed. 2d. 1311, 1327, 1332. This
concurring opinion quotes a passage from a report entitled "The Open
Universities in South Africa" where statement was made that academic
freedom of a university consists of four essential freedoms — "to
determine for itself on academic grounds who may teach, what may be
taught, how it shall be taught, and who may be admitted to study."
Petitioners insist that Commonwealth Act 186, as amended, would
trample upon U.P.'s freedom to decide who may teach.
We do not discern in the statute just referred to a meaning violative of
U.P.'s academic freedom. It does not erode the substance of the freedom
in any way. It must be stressed that what we are concerned with here
is retirement, not appointment. We hold that the law here involved is a
reasonable regulation. It is an expression by Congress of sound
judgment on when an employee shall, because of age, stop. The purpose
was summed up in the explanatory note to the bill that "continuance in
the service of those who are already eligible to compulsory retirement
should no longer be allowed."15 That law lays down the rule that at the
age of 65, a person is ripe for retirement. There is no discrimination. All
government employees who are members of the System and similarly
situated are governed thereby. U.P. professors are not exempt therefrom.
Barenblatt vs. U.S.16 is illuminating. It was there held that the academic
freedom of a university has not been violated because the congressional
investigation into communist infiltration into the field of education is
not shown to be directed at controlling what has been taught at the
university. Pertinent is the following passage found in said case: "The
claims of academic freedom cannot be asserted unqualifiedly. The social
interest it embodies is but one of the larger set, within which the interest
in national self-preservation and enlightened and well-informed
lawmaking also prominently appeal. When two major interests collide,
as they do in the present case, neither the one nor the other can claim a
priori supremacy. But it is in the nature of our system of laws that there
must be demonstrable justification for an action by the Government
which endangers or denies the freedom guaranteed by the
Constitution."17
We accordingly, hold that the constitutionally-guaranteed academic
freedom has not been here violated.
6. Having reached the conclusion that the Board of Regents was bereft
of authority to extend Prof. Jamias' tenure for one school year, there
remains for consideration this last question: Is Prof. Jamias to be
compensated during the extended period in which he worked?
The obligation to compensate may not perhaps be fully comprehended
unless we view the case in the environment in which Prof. Jamias'
service was extended.
At the time Prof. Jamias reached 65 years, he was assigned a specific
job, namely, to write the history of the University of the Philippines.
Retirement age caught him half through with this undertaking. There is
the desirability of having Prof. Jamias complete this assignment which
he started. Besides, Prof. Jamias was then the head of the University
Publications. Retirement would create a vacuum. U.P. had yet to find a
qualified fill up. Then, also, Dr. Dionisia Rola, who was to relieve Prof.
Jamias of his teaching courses, was still assigned to Baguio. The
discipline of English had yet to adjust itself to the teaching of the
courses he handled. Again, Prof. Jamias had to stay. The interests of the
students so demanded.
It is in this factual configuration that the university authorities took it
upon themselves to engage the services of Prof. Jamias until the
termination of the school year, which was April 15, 1962. The unique
and peculiar circumstances under which Prof. Jamias' services were
sought, engaged and harnessed anew, sufficiently justified a special
contract of services up to April 15, 1962. This the Board of Regents had
authority to do, even as it had no power to extend his original term. The
questioned resolution must be viewed in this sense. He is thus entitled to
payment of his salary up to the last named date.
Upon the view we take of this case —
(1) We vote to grant the writ of prohibition prayed for by petitioners;
(2) Respondent Auditor General and his representatives are hereby
permanently enjoined from withholding the salary of petitioner Cristino
Jamias corresponding to the extended period of service from July 20,
1961 to April 15, 1962; and, in the event the Auditor General and his
representatives have already done so, they are hereby directed to return
to petitioner Jamias the compensation due the latter for the said period;
and
(3) Respondent Government Service Insurance System is hereby
permanently enjoined from deducting any amount from petitioner
Jamias' five-year retirement annuity; and if said System has already
done so, it is hereby directed to return to petitioner Jamias what it has
already deducted.
No costs allowed. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro,
Fernando, Teehankee and Barredo, JJ.,concur.
Footnotes
1
Section 2, Act 1870.
2
Section 5, Article XIV, Constitution.
3
By Republic Act 4968, which took effect on June 17, 1967, said
Section 4(a) of Commonwealth Act 186 now reads:
(a) Membership in the System shall be compulsory upon all appointive
officers and employees in the executive, legislative, and judicial
branches of the government, including those whose tenure of office is
fixed or limited by the Constitution or by law; upon all regular
employees of the Philippine Tuberculosis Society and the Philippine
National Red Cross, and other employees of the government-owned or
controlled corporations; upon all regular officers and enlisted men of the
Armed Forces of the Philippines; and upon all elective officials
receiving compensation as defined in this Act: Provided, That casual,
substitute, or temporary employees and substitute or temporary teachers
shall be hereby covered for purposes of term insurance for two thousand
seven hundred and fifty pesos if appointed for a period of not less than
two months, the term insurance to be effective in the month next
following the month in which the premium prescribed in Section five
hereof has been paid: And provided, further, That said casual, substitute
or temporary employees and substitute or temporary teachers shall not
be covered by the retirement insurance plan provided for in this
Act: Provided, finally, That the term 'appointive officer and employee'
as used herein shall include those extended permanent appointments and
provisional appointments as used in the civil service law but excluding
those without any kind of civil service eligibility when so required."
4
See: Articles 266-268, Revised Code of the U.P.
5
The deletion of U.P. from the exceptions remained in subsequent
statutes: Republic Act 1573 approved June 16, 1956; and Republic Act
1820, June 22, 1957.
6
See: Section 4(b), Commonwealth Act 186, as amended by Republic
Act 660.
7
The newest amendment to Section 12(e) has been effected by Republic
Act 4968, effective June 2, 1967. Said Section 12(e) as it
is now composed in part reads:
"(e) Retirement shall be automatic and compulsory at the age of sixty-
five years with lump-sum payment of present value of annuity for the
first five years and future annuity to be paid monthly, and other benefits
given to a compulsorily retired member as provided for in Republic Act
 17
Numbered Six hundred and sixty, as amended, if he has completed At p. 1131, footnote 29, quoting the Amicus Brief of the American
fifteen years of service and if he has not been separated from the service Association of University Professors.
during the last three years of service prior to retirement; otherwise he
shall be allowed to continue in the service until he shall have completed
the required length of service, unless he is otherwise eligible for
disability retirement. This paragraph shall not apply to elective officials
and constitutional officers whose tenure of office is guaranteed. Upon
specific approval of the President of the Philippines, the President of the Republic of the Philippines
Senate, the Speaker of the House of Representatives or the Chief Justice SUPREME COURT
of the Supreme Court, as the case may be, an employee may be allowed Manila
to continue to serve in the executive, legislative or judicial branch of the
government after the age of sixty-five years if he possesses special THIRD DIVISION
qualifications and the corresponding Department Secretary certifies in
writing that his service(s) are needed." G.R. No. 158253 March 2, 2007
8
50 Am. Jur. 556-557; Crawford, The Construction of Statutes, 1940 REPUBLIC OF THE PHILIPPINES, represented by the
ed., pp. 621-622; 1 Sutherland, Statutory Construction, Third Ed., pp. DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS,
419- 421. COMMISSION ON AUDIT and THE NATIONAL
TREASURER, Petitioner,
9
See: Congressional Record (House of Representatives), Fourth vs.
Congress, First Regular Session, May 7, 1958, Vol. I, No. 66, p. 2155. CARLITO LACAP, doing business under the name and style
CARWIN CONSTRUCTION AND CONSTRUCTION
10
Id., at p. 2154; emphasis supplied. SUPPLY, Respondent.
11
As successively amended by Act 2759, effective February 23, 1918 DECISION
and Act 3745, effective November 24, 1930.
AUSTRIA-MARTINEZ, J.:
12
50 Am. Jur., 454-455.
Before the Court is a Petition for Review on Certiorari under Rule 45 of
13
As successively amended by Republic Acts 660, effective June 16, the Revised Rules of Court assailing the Decision1 dated April 28, 2003
1951, and 1573, effective June 16, 1956. of the Court of Appeals (CA) in CA-G.R. CV No. 56345 which affirmed
with modification the Decision2 of the Regional Trial Court, Branch 41,
14
Republic vs. Reyes (1966), 17 SCRA 170, 173, citing Crawford, San Fernando, Pampanga (RTC) in Civil Case No. 10538, granting the
Interpretation of Laws, pp. 260-261. complaint for Specific Performance and Damages filed by Carlito Lacap
(respondent) against the Republic of the Philippines (petitioner).
15
Congressional Record, supra, at p. 2154; emphasis supplied.
The factual background of the case is as follows:
16
(1959) 360 U.S. 109, 3 L. Ed. 2d. 1115.
The District Engineer of Pampanga issued and duly published an
"Invitation To Bid" dated January 27, 1992. Respondent, doing business
under the name and style Carwin Construction and Construction Supply
(Carwin Construction), was pre-qualified together with two other
contractors. Since respondent submitted the lowest bid, he was awarded
the contract for the concreting of Sitio 5 Bahay Pare.3 On November 4,
1992, a Contract Agreement was executed by respondent and
petitioner.4 On September 25, 1992, District Engineer Rafael S. Ponio
issued a Notice to Proceed with the concreting
of Sitio 5 Bahay Pare.5 Accordingly, respondent undertook the works,
made advances for the purchase of the materials and payment for labor
costs.6
On October 29, 1992, personnel of the Office of the District Engineer of
San Fernando, Pampanga conducted a final inspection of the project and
found it 100% completed in accordance with the approved plans and
specifications. Accordingly, the Office of the District Engineer issued
Certificates of Final Inspection and Final Acceptance.7
Thereafter, respondent sought to collect payment for the completed
project.8 The DPWH prepared the Disbursement Voucher in favor of
petitioner.9 However, the DPWH withheld payment from respondent
after the District Auditor of the Commission on Audit (COA)
disapproved the final release of funds on the ground that the contractor’s
license of respondent had expired at the time of the execution of the
contract. The District Engineer sought the opinion of the DPWH Legal
Department on whether the contracts of Carwin Construction for
various Mount Pinatubo rehabilitation projects were valid and effective
although its contractor’s license had already expired when the projects
were contracted.10
In a Letter-Reply dated September 1, 1993, Cesar D. Mejia, Director III
of the DPWH Legal Department opined that since Republic Act No.
4566 (R.A. No. 4566), otherwise known as the Contractor’s License
Law, does not provide that a contract entered into after the license has
expired is void and there is no law which expressly prohibits or declares
void such contract, the contract is enforceable and payment may be
paid, without prejudice to any appropriate administrative liability action
that may be imposed on the contractor and the government officials or
employees concerned.11
In a Letter dated July 4, 1994, the District Engineer requested
clarification from the DPWH Legal Department on whether Carwin
Construction should be paid for works accomplished despite an expired
contractor’s license at the time the contracts were executed.12
In a First Indorsement dated July 20, 1994, Cesar D. Mejia, Director III
of the Legal Department, recommended that payment should be made to
Carwin Construction, reiterating his earlier legal opinion.13 Despite such
recommendation for payment, no payment was made to respondent.
Thus, on July 3, 1995, respondent filed the complaint for Specific
Performance and Damages against petitioner before the RTC.14
On September 14, 1995, petitioner, through the Office of the Solicitor
General (OSG), filed a Motion to Dismiss the complaint on the grounds
that the complaint states no cause of action and that the RTC had no
jurisdiction over the nature of the action since respondent did not appeal
to the COA the decision of the District Auditor to disapprove the
claim.15
Following the submission of respondent’s Opposition to Motion to
Dismiss,16 the RTC issued an Order dated March 11, 1996 denying the
Motion to Dismiss.17 The OSG filed a Motion for Reconsideration18 but
it was likewise denied by the RTC in its Order dated May 23, 1996.19
On August 5, 1996, the OSG filed its Answer invoking the defenses of
non-exhaustion of administrative remedies and the doctrine of non-
suability of the State.20
Following trial, the RTC rendered on February 19, 1997 its Decision,
the dispositive portion of which reads as follows:
WHEREFORE, in view of all the foregoing consideration, judgment is
hereby rendered in favor of the plaintiff and against the defendant,
ordering the latter, thru its District Engineer at Sindalan, San Fernando,
Pampanga, to pay the following:
a) ₱457,000.00 – representing the contract for the concreting project of
Sitio 5 road, Bahay Pare, Candaba, Pampanga plus interest at 12% from
demand until fully paid; and
b) The costs of suit.
SO ORDERED.21
The RTC held that petitioner must be required to pay the contract price
since it has accepted the completed project and enjoyed the benefits
thereof; to hold otherwise would be to overrun the long standing and
consistent pronouncement against enriching oneself at the expense of
another.22
Dissatisfied, petitioner filed an appeal with the CA. 23 On April 28, 2003,
the CA rendered its Decision sustaining the Decision of the RTC. It held
that since the case involves the application of the principle of estoppel
against the government which is a purely legal question, then the
principle of exhaustion of administrative remedies does not apply; that
by its actions the government is estopped from questioning the validity
and binding effect of the Contract Agreement with the respondent; that
denial of payment to respondent on purely technical grounds after
successful completion of the project is not countenanced either by
justice or equity.
The CA rendered herein the assailed Decision dated April 28, 2003, the
dispositive portion of which reads:
WHEREFORE, the decision of the lower court is hereby AFFIRMED
with modification in that the interest shall be six percent (6%) per
annum computed from June 21, 1995.
SO ORDERED.24
Hence, the present petition on the following ground:
THE COURT OF APPEALS ERRED IN NOT FINDING THAT
RESPONDENT HAS NO CAUSE OF ACTION AGAINST
PETITIONER, CONSIDERING THAT:
(a) RESPONDENT FAILED TO EXHAUST ADMINISTRATIVE
REMEDIES; AND
(b) IT IS THE COMMISSION ON AUDIT WHICH HAS THE
PRIMARY JURISDICTION TO RESOLVE RESPONDENT’S
MONEY CLAIM AGAINST THE GOVERNMENT.25
Petitioner contends that respondent’s recourse to judicial action was
premature since the proper remedy was to appeal the District Auditor’s
disapproval of payment to the COA, pursuant to Section 48, Presidential
Decree No. 1445 (P.D. No. 1445), otherwise known as the Government
Auditing Code of the Philippines; that the COA has primary jurisdiction
to resolve respondent’s money claim against the government under
Section 2(1),26 Article IX of the 1987 Constitution and Section 26 27 of
P.D. No. 1445; that non-observance of the doctrine of exhaustion of
administrative remedies and the principle of primary jurisdiction results
in a lack of cause of action.
Respondent, on the other hand, in his Memorandum28 limited his
discussion to Civil Code provisions relating to human relations. He
submits that equity demands that he be paid for the work performed;
otherwise, the mandate of the Civil Code provisions relating to human
relations would be rendered nugatory if the State itself is allowed to
ignore and circumvent the standard of behavior it sets for its inhabitants.
The present petition is bereft of merit.
The general rule is that before a party may seek the intervention of the
court, he should first avail of all the means afforded him by
administrative processes.29 The issues which administrative agencies are
authorized to decide should not be summarily taken from them and
submitted to a court without first giving such administrative agency the
opportunity to dispose of the same after due deliberation.30
Corollary to the doctrine of exhaustion of administrative remedies is the
doctrine of primary jurisdiction; that is, courts cannot or will not
determine a controversy involving a question which is within the
jurisdiction of the administrative tribunal prior to the resolution of that
question by the administrative tribunal, where the question demands the
exercise of sound administrative discretion requiring the special
knowledge, experience and services of the administrative tribunal to
determine technical and intricate matters of fact.31
Nonetheless, the doctrine of exhaustion of administrative remedies and
the corollary doctrine of primary jurisdiction, which are based on sound
public policy and practical considerations, are not inflexible rules. There
are many accepted exceptions, such as: (a) where there is estoppel on
the part of the party invoking the doctrine; (b) where the challenged
administrative act is patently illegal, amounting to lack of jurisdiction;
(c) where there is unreasonable delay or official inaction that will
irretrievably prejudice the complainant; (d) where the amount involved
is relatively small so as to make the rule impractical and oppressive; (e)
where the question involved is purely legal and will ultimately have to
be decided by the courts of justice; 32 (f) where judicial intervention is
urgent; (g) when its application may cause great and irreparable
damage; (h) where the controverted acts violate due process; (i) when
the issue of non-exhaustion of administrative remedies has been
rendered moot;33 (j) when there is no other plain, speedy and adequate
remedy; (k) when strong public interest is involved; and, (l) in quo
warranto proceedings.34Exceptions (c) and (e) are applicable to the
present case.
Notwithstanding the legal opinions of the DPWH Legal Department
rendered in 1993 and 1994 that payment to a contractor with an expired
contractor’s license is proper, respondent remained unpaid for the
completed work despite repeated demands. Clearly, there was
unreasonable delay and official inaction to the great prejudice of
respondent.
Furthermore, whether a contractor with an expired license at the time of
the execution of its contract is entitled to be paid for completed projects,
clearly is a pure question of law. It does not involve an examination of
the probative value of the evidence presented by the parties. There is a
question of law when the doubt or difference arises as to what the law is
on a certain state of facts, and not as to the truth or the falsehood of
alleged facts.35 Said question at best could be resolved
only tentatively by the administrative authorities. The final decision on
the matter rests not with them but with the courts of justice. Exhaustion
of administrative remedies does not apply, because nothing of an
administrative nature is to be or can be done. 36 The issue does not
require technical knowledge and experience but one that would involve
the interpretation and application of law.
Thus, while it is undisputed that the District Auditor of the COA
disapproved respondent’s claim against the Government, and, under
Section 4837 of P.D. No. 1445, the administrative remedy available to
respondent is an appeal of the denial of his claim by the District Auditor
to the COA itself, the Court holds that, in view of exceptions (c) and (e)
narrated above, the complaint for specific performance and damages
was not prematurely filed and within the jurisdiction of the RTC to
resolve, despite the failure to exhaust administrative remedies. As the
Court aptly stated in Rocamora v. RTC-Cebu (Branch VIII):38
The plaintiffs were not supposed to hold their breath and wait until the
Commission on Audit and the Ministry of Public Highways had acted
on the claims for compensation for the lands appropriated by the
government. The road had been completed; the Pope had come and
gone; but the plaintiffs had yet to be paid for the properties taken from
them. Given this official indifference, which apparently would continue
indefinitely, the private respondents had to act to assert and protect their
interests.39
On the question of whether a contractor with an expired license is
entitled to be paid for completed projects, Section 35 of R.A. No. 4566
explicitly provides:
SEC. 35. Penalties. Any contractor who, for a price, commission, fee or
wage, submits or attempts to submit a bid to construct, or contracts to or
undertakes to construct, or assumes charge in a supervisory capacity of
a construction work within the purview of this Act, without first
securing a license to engage in the business of contracting in this
country; or who shall present or file the license certificate of another,
give false evidence of any kind to the Board, or any member thereof in
obtaining a certificate or license, impersonate another, or use an expired
or revoked certificate or license, shall be deemed guilty of
misdemeanor, and shall, upon conviction, be sentenced to pay a fine of
not less than five hundred pesos but not more than five thousand pesos.
(Emphasis supplied)
The "plain meaning rule" or verba legis in statutory construction is that
if the statute is clear, plain and free from ambiguity, it must be given its
literal meaning and applied without interpretation. 40 This rule derived
from the maxim Index animi sermo est (speech is the index of intention)
rests on the valid presumption that the words employed by the
legislature in a statute correctly express its intention or will and
preclude the court from construing it differently. The legislature is
presumed to know the meaning of the words, to have used words
advisedly, and to have expressed its intent by use of such words as are
found in the statute.41 Verba legis non est recedendum, or from the
words of a statute there should be no departure.42
The wordings of R.A. No. 4566 are clear. It does not declare, expressly
or impliedly, as void contracts entered into by a contractor whose
license had already expired. Nonetheless, such contractor is liable for
payment of the fine prescribed therein. Thus, respondent should be paid
for the projects he completed. Such payment, however, is without
prejudice to the payment of the fine prescribed under the law.
Government.44 Since respondent had rendered services to the full
satisfaction and acceptance by petitioner, then the former should be
compensated for them. To allow petitioner to acquire the finished
project at no cost would undoubtedly constitute unjust enrichment for
the petitioner to the prejudice of respondent. Such unjust enrichment is
not allowed by law.
WHEREFORE, the present petition is DENIED for lack of merit. The
assailed Decision of the Court of Appeals dated April 28, 2003 in CA-
G.R. CV No. 56345 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

Besides, Article 22 of the Civil Code which embodies the maxim Nemo (On Leave)
ex alterius incommode debet lecupletari (no man ought to be made rich ROMEO J. CALLEJO, SR. MINITA V. CHICO-NAZARIO
out of another’s injury) states: Associate Justice Asscociate Justice

Art. 22. Every person who through an act of performance by another, or ANTONIO EDUARDO B. NACHURA
any other means, acquires or comes into possession of something at the Associate Justice
expense of the latter without just or legal ground, shall return the same
to him. ATT E STAT I O N

This article is part of the chapter of the Civil Code on Human Relations, I attest that the conclusions in the above Decision had been reached in
the provisions of which were formulated as "basic principles to be consultation before the case was assigned to the writer of the opinion of
observed for the rightful relationship between human beings and for the the Court’s Division.
stability of the social order, x x x designed to indicate certain norms that
spring from the fountain of good conscience, x x x guides human CONSUELO YNARES-SANTIAGO
conduct [that] should run as golden threads through society to the end Associate Justice
that law may approach its supreme ideal which is the sway and Chairperson, Third Division
dominance of justice."43 The rules thereon apply equally well to the
 13
C E R T I F I CAT I O N Id.
14
Pursuant to Section 13, Article VIII of the Constitution, and the Division Id. at 1.
Chairperson’s attestation, it is hereby certified that the conclusions in
15
the above Decision had been reached in consultation before the case was Id. at 37.
assigned to the writer of the opinion of the Court’s Division.
16
Id. at 48.
REYNATO S. PUNO
Chief Justice 17
Id. at 50.
18
Id. at 58.

Footnotes 19
Id. at 67.
1
Penned by Associate Justice Rosmari D. Carandang and concurred in 20
Id. at 78.
by Associate Justices Conrado M. Vasquez, Jr. and Mercedes Gozo-
Dadole, CA rollo, p. 167. 21
Id. at 125.
2
Original Records, p. 120. 22
Id. at 124-125.
3
Id. at 7. 23
CA rollo, p. 17.
4
Id. at 8. 24
Id. at 273.
5
Id. at 12. 25
Id. at 33.
6
CA rollo, p. 268. 26
SEC. 2 (1) The Commission on Audit shall have the power, authority,
and duty to examine, audit and settle all accounts pertaining to the
7
Original Records, p. 12-A. revenue and receipts of, and expenditures or uses of funds and property,
owned or held in trust by, or pertaining to, the Government, or any of its
8
Id. at 13. subdivisions, agencies, or instrumentalities, including government-
owned or controlled corporations with original charters, and on a post-
9
Id. at 14. audit basis: (a) constitutional bodies, commission and offices that have
been granted fiscal autonomy under this Constitution; (b) autonomous
10
Id. at 15. state colleges and universities; (c) other government-owned or
controlled corporations and their subsidiaries; and (d) such non-
11
Ibid. governmental entities receiving subsidy or equity, directly or indirectly,
from or through the Government, which are required by law or the
12
Id. at 16.

granting institution to submit to such audit as a condition of subsidy or
equity. However, where the internal control system of the audited
agencies is inadequate, the Commission may adopt such measures,
including temporary or special pre-audit, as are necessary and
appropriate to correct the deficiencies. It shall keep the general accounts
of the Government and for such period as may be provided by law,
preserve the vouchers and other supporting papers pertaining thereto.
27
Section 26. General jurisdiction. – The authority and powers of the
Commission shall extend to and comprehend all matters relating to
auditing procedures, systems and controls, the keeping of the general
accounts of the Government, the preservation of vouchers pertaining
thereto for a period of ten years, the examination and inspection of the
books, records, and papers relating to those accounts; and the audit and
settlement of the accounts of all persons respecting funds or property
received or held by them in an accountable capacity, as well as the
examination, audit, and settlement of all debts and claims of any sort
due from or owing the Government or any of its subdivisions, agencies
and instrumentalities. The said jurisdiction extends to all government-
owned or controlled corporations, including their subsidiaries, and other
self-governing boards, commissions, or agencies of the Government,
and as herein prescribed, including non-governmental entities
subsidized by the government, those funded by donation through the
government, those required to pay levies of government share, and those
which the government has put up a counterpart fund or those partly
funded by the government.
28
Rollo, p. 152.
29
ACWS, Ltd. v. Dumlao, 440 Phil. 787, 801-802 (2002); Zabat v.
Court of Appeals, 393 Phil. 195, 206 (2000).
30
ACWS case, id. at 802.
31
Paloma v. Mora, G.R. No. 157783, September 23, 2005, 470 SCRA
711, 725; Fabia v. Court of Appeals, 437 Phil. 389, 403 (2002).
32
Rocamora v. Regional Trial Court-Cebu (Branch VIII), No. L-65037,
November 23, 1988, 167 SCRA 615, 623.
33
Carale v. Abarintos, 336 Phil. 126, 137 (1997).
34
Castro v. Sec. Gloria, 415 Phil. 645, 651-652 (2001).
35
Castro v. Sec. Gloria case, id. at 652.
36
Espina v. Court of Appeals, 356 Phil. 15, 21 (1998); Prudential Bank
v. Gapultos, G.R. Nos. 41835 & 49293, January 19, 1990, 181 SCRA
159, 168.
37
Section 48. Appeal from the decision of auditors. – Any person
aggrieved by the decision of an auditor of any government agency in the
settlement of account or claim may within six months from receipt of a
copy of the decision appeal in writing to the Commission.
38
Supra note 32.
39
Id. at 624-625.
40
Commissioner of Internal Revenue v. Central Luzon Drug
Corporation, G.R. No. 159647, April 15, 2005, 456 SCRA 414,
443; National Federation of Labor v. National Labor Relations
Commission, 383 Phil. 910, 918 (2000); Ruben E. Agpalo, Statutory
Construction, 2003 Ed., p. 124.
41
Southern Cross Cement Corporation v. Philippine Cement
Manufacturers Corporation, G.R. No. 158540, July 8, 2004, 434 SCRA
65, 93; Republic v. Court of Appeals, 359 Phil. 530, 602 (2000).
42
Enjay, Inc. v. National Labor Relations Commission, 315 Phil. 648,
656 (1995); Globe-Mackay Cable and Radio Corporation v. National
Labor Relations Commission, G.R. No. 82511, March 3, 1992, 206
SCRA 701, 711.
43
Advanced Foundation Construction Systems Corporation v. New
World Properties and Ventures, Inc., G.R. Nos. 143154 & 143177, June
21, 2006, 491 SCRA 557, 578; Security Bank & Trust Co. v. Court of
Appeals, 319 Phil. 312, 317 (1995), citing Report of the Code
Commission, p. 39, cited in Padilla, Ambrosio, Civil Code Annotated,
Vol. 1, 1975.
44
Palma Development Corp. v. Municipality of Malangas, Zamboanga
Del Sur, 459 Phil. 1042, 1050 (2003); Republic v. Court of Appeals, No.
L-31303-04, May 31, 1978, 83 SCRA 453, 480.
Assailed in this petition for review under Rule 45 of the Rules of Court
is the February 12, 2004 decision1 of the Court of Appeals in CA-G.R.
CV No. 76677, which dismissed the appeal filed by petitioner National
Food Authority (NFA) and its April 30, 2004 resolution denying
petitioner’s motion for reconsideration.
The antecedent facts show that on September 17, 1996, respondent
MASADA Security Agency, Inc., entered into a one year 2 contract3 to
provide security services to the various offices, warehouses and
installations of NFA within the scope of the NFA Region I, comprised of
the provinces of Pangasinan, La Union, Abra, Ilocos Sur and Ilocos
Norte. Upon the expiration of said contract, the parties extended the
effectivity thereof on a monthly basis under same terms and condition.4

Meanwhile, the Regional Tripartite Wages and Productivity Board

issued several wage orders mandating increases in the daily wage rate.
Accordingly, respondent requested NFA for a corresponding upward
adjustment in the monthly contract rate consisting of the increases in the
daily minimum wage of the security guards as well as the corresponding
Republic of the Philippines raise in their overtime pay, holiday pay, 13th month pay, holiday and
SUPREME COURT rest day pay. It also claimed increases in Social Security System (SSS)
and Pag-ibig premiums as well as in the administrative costs and
FIRST DIVISION margin. NFA, however, granted the request only with respect to the
increase in the daily wage by multiplying the amount of the mandated
G.R. No. 163448. March 08, 2005 increase by 30 days and denied the same with respect to the adjustments
in the other benefits and remunerations computed on the basis of the
NATIONAL FOOD AUTHORITY (NFA), and JUANITO M. daily wage.
DAVID, in his capacity as Regional Director, NFA Regional Office
No. 1, San Juan, La Union, Petitioners, Respondent sought the intervention of the Office of the Regional
vs. Director, Regional Office No. I, La Union, as Chairman of the Regional
MASADA SECURITY AGENCY, INC., represented by its Acting Tripartite Wages and Productivity Board and the DOLE Secretary
President & General Manager, COL. EDWIN S. ESPEJO through the Executive Director of the National Wages and Productivity
(RET.), Respondents. Commission. Despite the advisory5 of said offices sustaining the claim
of respondent that the increase mandated by Republic Act No. 6727 (RA
DECISION 6727) and the wage orders issued by the RTWPB is not limited to the
daily pay, NFA maintained its stance that it is not liable to pay the
YNARES-SANTIAGO, J.: corresponding adjustments in the wage related benefits of respondent’s
security guards.
On May 4, 2001, respondent filed with the Regional Trial Court of
Quezon, City, Branch 83, a case for recovery of sum of money against
NFA. Docketed as Civil Case No. Q-01-43988, the complaint 6 sought
reimbursement of the following amounts allegedly paid by respondent
to the security guards, to wit: P2,949,302.84, for unpaid wage related
benefits brought about by the effectivity of Wage Order Nos. RB 1-05
and RB CAR-04;7 RB 1-06 and RB CAR-05;8 RB 1-07 and RB CAR-
06;9 and P975,493.04 for additional cost and margin, plus interest. It
also prayed for damages and litigation expenses.10
In its answer with counterclaim,11 NFA denied that respondent paid the
security guards their wage related benefits and that it shouldered the
additional costs and margin arising from the implementation of the
wage orders. It admitted, however, that it heeded respondent’s request
for adjustment only with respect to increase in the minimum wage and
not with respect to the other wage related benefits. NFA argued that
respondent cannot demand an adjustment on said salary related benefits
because it is bound by their contract expressly limiting NFA’s obligation
to pay only the increment in the daily wage.
At the pre-trial, the only issue raised was whether or not respondent is
entitled to recover from NFA the wage related benefits of the security
guards.12
On September 19, 2002, the trial court rendered a decision 13 in favor of
respondent holding that NFA is liable to pay the security guards’ wage
related benefits pursuant to RA 6727, because the basis of the
computation of said benefits, like overtime pay, holiday pay, SSS and
Pag-ibig premium, is the increased minimum wage. It also found NFA
liable for the consequential adjustments in administrative costs and
margin. The trial court absolved defendant Juanito M. David having
been impleaded in his official capacity as Regional Director of NFA
Regional Office No. 1, San Juan, La Union. The dispositive portion
thereof, reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff
MASADA Security Agency, Inc., and against defendant National Food
Authority ordering said defendant to make the corresponding
adjustment in the contract price in accordance with the increment
mandated under the various wage orders, particularly Wage Order Nos.
RBI-05, RBCAR-04, RBI-06, RBCAR-05, RBI-07 and RBCAR-06 and
to pay plaintiff the amounts representing the adjustments in the wage-
related benefits of the security guards and consequential increase in its
administrative cost and margin upon presentment by plaintiff of the
corresponding voucher claims.
Plaintiff’s claims for damages and attorney’s fees and defendants
counterclaim for damages are hereby denied.
Defendant Juanito M. David is hereby absolved from any liability.
SO ORDERED.14
NFA appealed to the Court of Appeals but the same was dismissed on
February 12, 2004. The appellate court held that the proper recourse of
NFA is to file a petition for review under Rule 45 with this Court,
considering that the appeal raised a pure question of law. Nevertheless,
it proceeded to discuss the merits of the case for "purposes of academic
discussion" and eventually sustained the ruling of the trial court that
NFA is under obligation to pay the administrative costs and margin and
the wage related benefits of the respondent’s security guards.15
On April 30, 2004, the Court of Appeals denied NFA’s motion for
reconsideration.16 Hence, the instant petition.
The issue for resolution is whether or not the liability of principals in
service contracts under Section 6 of RA 6727 and the wage orders
issued by the Regional Tripartite Wages and Productivity Board is
limited only to the increment in the minimum wage.
At the outset, it should be noted that the proper remedy of NFA from the
adverse decision of the trial court is a petition for review under Rule 45
directly with this Court because the issue involved a question of law.
However, in the interest of justice we deem it wise to overlook the
procedural technicalities if only to demonstrate that despite the
procedural infirmity, the instant petition is impressed with merit.17
RA 672718 (Wage Rationalization Act), which took effect on July 1,
1989,19 declared it a policy of the State to rationalize the fixing of
minimum wages and to promote productivity-improvement and gain-
sharing measures to ensure a decent standard of living for the workers
and their families; to guarantee the rights of labor to its just share in the
fruits of production; to enhance employment generation in the
countryside through industrial dispersal; and to allow business and
industry reasonable returns on investment, expansion and growth.20
In line with its declared policy, RA 6727, created the National Wages
and Productivity Commission (NWPC),21vested, inter alia, with the
power to prescribe rules and guidelines for the determination of
appropriate minimum wage and productivity measures at the regional,
provincial or industry levels;22 and the Regional Tripartite Wages and
Productivity Boards (RTWPB) which, among others, determine and fix
the minimum wage rates applicable in their respective region,
provinces, or industries therein and issue the corresponding wage
orders, subject to the guidelines issued by the NWPC. 23 Pursuant to its
wage fixing authority, the RTWPB issue wage orders which set the daily
minimum wage rates.24
Payment of the increases in the wage rate of workers is ordinarily
shouldered by the employer. Section 6 of RA 6727, however, expressly
lodged said obligation to the principals or indirect employers in
construction projects and establishments providing security, janitorial
and similar services. Substantially the same provision is incorporated in
the wage orders issued by the RTWPB. 25 Section 6 of RA 6727,
provides:
SEC. 6. In the case of contracts for construction projects and for
security, janitorial and similar services, the prescribed increases in the
wage rates of the workers shall be borne by the principals or clients of
the construction/service contractors and the contract shall be deemed
amended accordingly. In the event, however, that the principal or client
fails to pay the prescribed wage rates, the construction/service
contractor shall be jointly and severally liable with his principal or
client. (Emphasis supplied)
NFA claims that its additional liability under the aforecited provision is
limited only to the payment of the increment in the statutory minimum
wage rate, i.e., the rate for a regular eight (8) hour work day.
The contention is meritorious.
In construing the word "wage" in Section 6 of RA 6727, reference must
be had to Section 4 (a) of the same Act. It states:
SEC. 4. (a) Upon the effectivity of this Act, the statutory minimum
wage rates for all workers and employees in the private sector, whether
agricultural or non-agricultural, shall be increased by twenty-five
pesos (P25) per day … (Emphasis supplied)
The term "wage" as used in Section 6 of RA 6727 pertains to no other
than the "statutory minimum wage" which is defined under the Rules
Implementing RA 6727 as the lowest wage rate fixed by law that an
employer can pay his worker.26 The basis thereof under Section 7 of the
same Rules is the normal working hours, which shall not exceed eight
hours a day. Hence, the prescribed increases or the additional liability to
be borne by the principal under Section 6 of RA 6727 is the increment
or amount added to the remuneration of an employee for an 8-hour
work.
Expresio unius est exclusio alterius. Where a statute, by its terms, is
expressly limited to certain matters, it may not, by interpretation or
construction, be extended to others.27 Since the increase in wage referred
to in Section 6 pertains to the "statutory minimum wage" as defined
herein, principals in service contracts cannot be made to pay the
corresponding wage increase in the overtime pay, night shift differential,
holiday and rest day pay, premium pay and other benefits granted to
workers. While basis of said remuneration and benefits is the statutory
minimum wage, the law cannot be unduly expanded as to include those
not stated in the subject provision.
The settled rule in statutory construction is that if the statute is clear,
plain and free from ambiguity, it must be given its literal meaning and
applied without interpretation. This plain meaning rule or verba
legis derived from the maxim index animi sermo est (speech is the index
of intention) rests on the valid presumption that the words employed by
the legislature in a statute correctly express its intention or will and
preclude the court from construing it differently. The legislature is
presumed to know the meaning of the words, to have used words
advisedly, and to have expressed its intent by use of such words as are
found in the statute. Verba legis non est recedendum, or from the words
of a statute there should be no departure.28
The presumption therefore is that lawmakers are well aware that the
word "wage" as used in Section 6 means the statutory minimum wage.
If their intention was to extend the obligation of principals in service
contracts to the payment of the increment in the other benefits and
remuneration of workers, it would have so expressly specified. In not so
doing, the only logical conclusion is that the legislature intended to limit
the additional obligation imposed on principals in service contracts to
the payment of the increment in the statutory minimum wage.
The general rule is that construction of a statute by an administrative
agency charged with the task of interpreting or applying the same is
entitled to great weight and respect. The Court, however, is not bound to
apply said rule where such executive interpretation, is clearly erroneous,
or when there is no ambiguity in the law interpreted, or when the
language of the words used is clear and plain, as in the case at bar.
Besides, administrative interpretations are at best advisory for it is the
Court that finally determines what the law means.29 Hence, the
interpretation given by the labor agencies in the instant case which went
as far as supplementing what is otherwise not stated in the law cannot
bind this Court.
It is not within the province of this Court to inquire into the wisdom of
the law for indeed, we are bound by the words of the statute. 30 The law
is applied as it is. At any rate, the interest of the employees will not be
adversely affected if the obligation of principals under the subject
provision will be limited to the increase in the statutory minimum wage.
This is so because all remuneration and benefits other than the increased
statutory minimum wage would be shouldered and paid by the employer
or service contractor to the workers concerned. Thus, in the end, all
allowances and benefits as computed under the increased rate mandated
by RA 6727 and the wage orders will be received by the workers.
Moreover, the law secures the welfare of the workers by imposing a
solidary liability on principals and the service contractors. Under the
second sentence of Section 6 of RA 6727, in the event that the principal
or client fails to pay the prescribed wage rates, the service contractor
shall be held solidarily liable with the former. Likewise, Articles 106,
107 and 109 of the Labor Code provides:
ART. 106. Contractor or Subcontractor. – Whenever an employer enters
into contract with another person for the performance of the former’s
work, the employees of the contractor and of the latter’s subcontractor,
if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wage of
his employees in accordance with this Code, the employer shall be
jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the
same manner and extent that he is liable to employees directly employed
by him.
…
ART. 107. Indirect Employer. – The provisions of the immediately
preceding Article shall likewise apply to any person, partnership,
association or corporation which, not being an employer, contracts with
an independent contractor for the performance of any work, task, job or
project.
ART. 109. Solidary Liability. – The provisions of existing laws to the
contrary notwithstanding, every employer or indirect employer shall be
held responsible with his contractor or subcontractor for any violation of
any provision of this Code. For purposes of determining the extent of
their civil liability under this Chapter, they shall be considered as direct
employers.
Based on the foregoing interpretation of Section 6 of RA 6727, the
parties may enter into stipulations increasing the liability of the
principal. So long as the minimum obligation of the principal, i.e.,
payment of the increased statutory minimum wage is complied with, the
Wage Rationalization Act is not violated.
In the instant case, Article IV.4 of the service contract provides:
IV.4. In the event of a legislated increase in the minimum wage of
security guards and/or in the PADPAO rate, the AGENCY may
negotiate for an adjustment in the contract price. Any adjustment shall
be applicable only to the increment, based on published and circulated
rates and not on mere certification.31
In the same vein, paragraph 3 of NFA Memorandum AO-98-03- states:
REVERSED and SET ASIDE. The complaint filed by respondent
MASADA Security Agency, Inc., docketed as Civil Case No. Q-01-
43988, before the Regional Trial Court of Quezon, City, Branch 83, is
ordered DISMISSED.
SO ORDERED.
Davide Jr., C.J., (Chairman), Quisumbing, Carpio and Azcuna, JJ.,
concur.

3. For purposes of wage adjustments, consider only the rate based on the
wage Order issued by the Regional Tripartite Wage Productivity Board
(RTWPB). Unless otherwise provided in the Wage Order issued by the Footnotes
RTWPB, the wage adjustment shall be limited to the increment in the
1
legislated minimum wage;32 Rollo, p. 35. Penned by Associate Justice Bienvenido L. Reyes and
concurred in by Associate Justices Conrado M. Vasquez, Jr. and Arsenio
The parties therefore acknowledged the application to their contract of J. Magpale.
the wage orders issued by the RTWPB pursuant to RA 6727. There
2
being no assumption by NFA of a greater liability than that mandated by August 1, 1996 to August 1, 1997.
Section 6 of the Act, its obligation is limited to the payment of the
3
increased statutory minimum wage rates which, as admitted by Records, pp. 12-18.
respondent, had already been satisfied by NFA. 33 Under Article 1231 of
4
the Civil Code, one of the modes of extinguishing an obligation is by Contract, II.19, Records, p. 15. See also Memorandum, AO-98-03-005,
payment. Having discharged its obligation to respondent, NFA no longer Records, p. 56.
have a duty that will give rise to a correlative legal right of respondent.
5
The latter’s complaint for collection of remuneration and benefits other Issued by Ricardo S. Martinez, Sr., CESO III, Regional Director,
than the increased minimum wage rate, should therefore be dismissed Records, pp. 30-31; and by Ciriaco A. Lagunzad III, Executive Director,
for lack of cause of action. DOLE, National Wages and Productivity Commission, Records, pp. 37-
38.
The same goes for respondent’s claim for administrative cost and
6
margin. Considering that respondent failed to establish a clear Records, pp. 1-11.
obligation on the part of NFA to pay the same as well as to substantiate
7
the amount thereof with documentary evidence, the claim should be Took effect on March 1, 1997 and May 1, 1997, respectively.
denied. (Comment, Rollo, p. 259).
8
WHEREFORE, the petition is GRANTED. The February 12, 2004 Mandating two-tiered increases in the minimum daily wage effective
decision and the April 30, 2004 resolution of the Court of Appeals March 5, 1998/July 1, 1998 and June 8, 1998/December 18, 1998,
which dismissed petitioner National Food Authority’s appeal and respectively. (Comment, Rollo, pp. 259-260).
motion for reconsideration, respectively, in CA-G.R. CV No. 76677, are
9 22
Took effect on December 1, 1999 and November 8, 1999, respectively. Article 121, Id.
(Comment, Rollo, p. 260).
23
Article 122, Id.
10
Complaint, Records, pp. 9-10.
24
Article 123, Id.
11
Records, pp. 50-53.
25
Section 7 of Wage Order No. RB 1-05, Rollo, p. 299; Section 6 of
12
Pre-trial Order, Records, p. 104. Wage Order No. RB-CAR-04, Rollo, p. 302; Section 7 of Wage Order
No. RB 1-06, Rollo, p. 305; Section 5 of Wage Order No. RB-CAR-
13
Rollo, p. 100. 05, Rollo, pp. 307-308; Section 8 of Wage Order No. RB 1-07, Rollo, p.
312; and Section 6 of Wage Order No. RB-CAR-06, Rollo, p. 334.
14
Id. at 113.
26
Item (o), Definition of Terms.
15
The dispositive portion thereof, reads:
27
Commissioner of Customs v. Court of Tax Appeals, G.R. Nos. 48886-
WHEREFORE, in view of the discussions conveyed above, the instant 88, 21 July 1993, 224 SCRA 665, 670.
appeal is hereby DISMISSED.
28
Enjay, Inc. v. National Labor Relations Commission, 315 Phil. 648,
SO ORDERED. (Rollo, p. 45) 656 (1995), citing Globe-Mackay Cable and Radio
Corporation v. National Labor Relations Commission, G.R. No. 82511,
16
Rollo, pp. 47-48. 3 March 1992, 206 SCRA 701.
29
17
Martillano v. Court of Appeals, G.R. No. 148277, 29 June 2004. Energy Regulatory Board v. Court of Appeals, G.R. No. 113079, 20
April 2001, 357 SCRA 30, 40.
18
An Act to Rationalize Wage Policy Determination by Establishing the
30
Mechanism and Proper Standards Therefor, Amending for the Purpose Commissioner of Internal Revenue v. Manila Star Ferry, Inc., G.R.
Article 99 of, and Incorporating Articles 120, 121, 122, 123, 124, 126 Nos. 31776-78, 21 October 1993, 227 SCRA 317, 322.
and 127 into Presidential Decree No. 442, as amended, Otherwise
31
Known as the Labor Code of the Philippines, Fixing New Wage Rates, Contract, Records, p. 17.
Providing Wage Incentives for Industrial Dispersal to the Countryside,
32
and for Other Purposes. Records, p. 56.
19 33
See UERM-Memorial Medical Center v. National Labor Relations Complaint, Records, p. 3.
Commission, 336 Phil. 66, 68 (1997).
20
Section 2 of RA 6727.
21
Article 120, Labor Code.
THIRD DIVISION
G.R. No. 152609 June 29, 2005
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
AMERICAN EXPRESS INTERNATIONAL, INC. (PHILIPPINE
BRANCH), Respondent.
DECISION
PANGANIBAN, J.:
As a general rule, the value-added tax (VAT) system uses the destination
principle. However, our VAT law itself provides for a clear exception,
under which the supply of service shall be zero-rated when the
following requirements are met: (1) the service is performed in the
Philippines; (2) the service falls under any of the categories provided in
Section 102(b) of the Tax Code; and (3) it is paid for in acceptable
foreign currency that is accounted for in accordance with the regulations
of the Bangko Sentral ng Pilipinas. Since respondent’s services meet
these requirements, they are zero-rated. Petitioner’s Revenue
Regulations that alter or revoke the above requirements are ultra
vires and invalid.
"[Respondent] is a Philippine branch of American Express International,
Inc., a corporation duly organized and existing under and by virtue of
the laws of the State of Delaware, U.S.A., with office in the Philippines
at the Ground Floor, ACE Building, corner Rada and de la Rosa Streets,
Legaspi Village, Makati City. It is a servicing unit of American Express
International, Inc. - Hongkong Branch (Amex-HK) and is engaged
primarily to facilitate the collections of Amex-HK receivables from card
members situated in the Philippines and payment to service
establishments in the Philippines.
"Amex Philippines registered itself with the Bureau of Internal Revenue
(BIR), Revenue District Office No. 47 (East Makati) as a value-added
tax (VAT) taxpayer effective March 1988 and was issued VAT
Registration Certificate No. 088445 bearing VAT Registration No. 32A-
3-004868. For the period January 1, 1997 to December 31, 1997,
[respondent] filed with the BIR its quarterly VAT returns as follows:
Exhibit Period Covered Date Filed
D 1997 1st Qtr. April 18, 1997
F 2nd Qtr. July 21, 1997
G 3rd Qtr. October 2, 1997

The Case H 4th Qtr. January 20, 1998

Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, "On March 23, 1999, however, [respondent] amended the aforesaid
assailing the February 28, 2002 Decision2of the Court of Appeals (CA) returns and declared the following:
in CA-GR SP No. 62727. The assailed Decision disposed as follows:
Output Zero-rated Domestic
"WHEREFORE, premises considered, the petition is Exh 1997 Taxable Sales
VAT Sales Purchases
hereby DISMISSED for lack of merit. The assailed decision of the
I 1st qtr ₱59,597.20 ₱5,959.72 ₱17,513,801.11 ₱6,778,182.30
Court of Tax Appeals (CTA) is AFFIRMED in toto."3
J 2nd qtr 67,517.20 6,751.72 17,937,361.51 9,333,242.90
The Facts K 3rd qtr 51,936.60 5,193.66 19,627,245.36 8,438,357.00

Quoting the CTA, the CA narrated the undisputed facts as follows: L 4th qtr 67,994.30 6,799.43 25,231,225.22 13,080,822.10
Total
₱247,045.30 ₱24,704.53 ₱80,309,633.20 ₱37,630,604.30 ₱
 person engaged in the sale of services. The phrase "sale of services"
means the performance of all kinds of services for others for a fee,
remuneration or consideration, including those performed or rendered
"On April 13, 1999, [respondent] filed with the BIR a letter-request for
by construction and service contractors: stock, real estate, commercial,
the refund of its 1997 excess input taxes in the amount of
customs and immigration brokers; lessors of personal property; lessors
₱3,751,067.04, which amount was arrived at after deducting from its
or distributors of cinematographic films; persons engaged in milling,
total input VAT paid of ₱3,763,060.43 its applied output VAT liabilities
processing, manufacturing or repacking goods for others; and similar
only for the third and fourth quarters of 1997 amounting to ₱5,193.66
services regardless of whether o[r] not the performance thereof calls for
and ₱6,799.43, respectively. [Respondent] cites as basis therefor,
the exercise or use of the physical or mental faculties: Provided That the
Section 110 (B) of the 1997 Tax Code, to state:
following services performed in the Philippines by VAT-registered
persons shall be subject to 0%:
‘Section 110. Tax Credits. -
(1) x x x
xxxxxxxxx
(2) Services other than those mentioned in the preceding subparagraph,
‘(B) Excess Output or Input Tax. - If at the end of any taxable quarter
the consideration is paid for in acceptable foreign currency which is
the output tax exceeds the input tax, the excess shall be paid by the VAT-
remitted inwardly to the Philippines and accounted for in accordance
registered person. If the input tax exceeds the output tax, the excess
with the rules and regulations of the BSP. x x x.’
shall be carried over to the succeeding quarter or quarters. Any input tax
attributable to the purchase of capital goods or to zero-rated sales by a
In addition, [respondent] relied on VAT Ruling No. 080-89, dated April
VAT-registered person may at his option be refunded or credited against
3, 1989, the pertinent portion of which reads as follows:
other internal revenue taxes, subject to the provisions of Section 112.’
‘In Reply, please be informed that, as a VAT registered entity whose
"There being no immediate action on the part of the [petitioner],
service is paid for in acceptable foreign currency which is remitted
[respondent’s] petition was filed on April 15, 1999.
inwardly to the Philippines and accounted for in accordance with the
rules and regulations of the Central [B]ank of the Philippines, your
"In support of its Petition for Review, the following arguments were
service income is automatically zero rated effective January 1, 1998.
raised by [respondent]:
[Section 102(a)(2) of the Tax Code as amended]. 4 For this, there is no
need to file an application for zero-rate.’
A. Export sales by a VAT-registered person, the consideration for which
is paid for in acceptable foreign currency inwardly remitted to the
B. Input taxes on domestic purchases of taxable goods and services
Philippines and accounted for in accordance with existing regulations of
related to zero-rated revenues are available as tax refund in accordance
the Bangko Sentral ng Pilipinas, are subject to [VAT] at zero percent
with Section 106 (now Section 112) of the [Tax Code] and Section 8(a)
(0%). According to [respondent], being a VAT-registered entity, it is
of [Revenue] Regulations [(RR)] No. 5-87, to state:
subject to the VAT imposed under Title IV of the Tax Code, to wit:
‘Section 106. Refunds or tax credits of input tax. -
‘Section 102.(sic) Value-added tax on sale of services.- (a) Rate and
base of tax. - There shall be levied, assessed and collected, a value-
(A) Zero-rated or effectively Zero-rated Sales. - Any VAT-registered
added tax equivalent to 10% percent of gross receipts derived by any
person, except those covered by paragraph (a) above, whose sales are
zero-rated or are effectively zero-rated, may, within two (2) years after
the close of the taxable quarter when such sales were made, apply for
the issuance of tax credit certificate or refund of the input taxes due or
attributable to such sales, to the extent that such input tax has not been
applied against output tax. x x x. [Section 106(a) of the Tax Code]’5
‘Section 8. Zero-rating. - (a) In general. - A zero-rated sale is a taxable
transaction for value-added tax purposes. A sale by a VAT-registered
person of goods and/or services taxed at zero rate shall not result in any
output tax. The input tax on his purchases of goods or services related to
such zero-rated sale shall be available as tax credit or refundable in
accordance with Section 16 of these Regulations. x x x.’ [Section 8(a),
[RR] 5-87].’6
"[Petitioner], in his Answer filed on May 6, 1999, claimed by way of
Special and Affirmative Defenses that:
7. The claim for refund is subject to investigation by the Bureau of
Internal Revenue;
8. Taxes paid and collected are presumed to have been made in
accordance with laws and regulations, hence, not refundable. Claims for
tax refund are construed strictly against the claimant as they partake of
the nature of tax exemption from tax and it is incumbent upon the
[respondent] to prove that it is entitled thereto under the law and he who
claims exemption must be able to justify his claim by the clearest grant
of organic or statu[t]e law. An exemption from the common burden
[cannot] be permitted to exist upon vague implications;
9. Moreover, [respondent] must prove that it has complied with the
governing rules with reference to tax recovery or refund, which are
found in Sections 204(c) and 229 of the Tax Code, as amended, which
are quoted as follows:
‘Section 204. Authority of the Commissioner to Compromise, Abate
and Refund or Credit Taxes. - The Commissioner may - x x x.
(C) Credit or refund taxes erroneously or illegally received or penalties
imposed without authority, refund the value of internal revenue stamps
when they are returned in good condition by the purchaser, and, in his
discretion, redeem or change unused stamps that have been rendered
unfit for use and refund their value upon proof of destruction. No credit
or refund of taxes or penalties shall be allowed unless the taxpayer files
in writing with the Commissioner a claim for credit or refund within
two (2) years after payment of the tax or penalty: Provided,
however, That a return filed with an overpayment shall be considered a
written claim for credit or refund.’
‘Section 229. Recovery of tax erroneously or illegally collected.- No
suit or proceeding shall be maintained in any court for the recovery of
any national internal revenue tax hereafter alleged to have been
erroneously or illegally assessed or collected, or of any penalty claimed
to have been collected without authority, or of any sum alleged to have
been excessively or in any manner wrongfully collected, until a claim
for refund or credit has been duly filed with the Commissioner; but such
suit or proceeding may be maintained, whether or not such tax, penalty
or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be begun (sic) after the
expiration of two (2) years from the date of payment of the tax or
penalty regardless of any supervening cause that may arise after
payment: Provided, however, That the Commissioner may, even without
written claim therefor, refund or credit any tax, where on the face of the
return upon which payment was made, such payment appears clearly to
have been erroneously paid.’
"From the foregoing, the [CTA], through the Presiding Judge Ernesto D.
Acosta rendered a decision7 in favor of the herein respondent holding
that its services are subject to zero-rate pursuant to Section 108(b) of the
Tax Reform Act of 1997 and Section 4.102-2 (b)(2) of Revenue
Regulations 5-96, the decretal portion of which reads as follows:
‘WHEREFORE, in view of all the foregoing, this Court finds the
[petition] meritorious and in accordance with law. Accordingly,
[petitioner] is hereby ORDERED to REFUND to [respondent] the
amount of ₱3,352,406.59 representing the latter’s excess input VAT paid
for the year 1997.’"8
Ruling of the Court of Appeals
In affirming the CTA, the CA held that respondent’s services fell under
the first type enumerated in Section 4.102-2(b)(2) of RR 7-95, as
amended by RR 5-96. More particularly, its "services were not of the
same class or of the same nature as project studies, information, or
engineering and architectural designs" for non-resident foreign clients;
rather, they were "services other than the processing, manufacturing or
repacking of goods for persons doing business outside the Philippines."
The consideration in both types of service, however, was paid for in
acceptable foreign currency and accounted for in accordance with the
rules and regulations of the Bangko Sentral ng Pilipinas.
Furthermore, the CA reasoned that reliance on VAT Ruling No. 040-98
was unwarranted. By requiring that respondent’s services be consumed
abroad in order to be zero-rated, petitioner went beyond the sphere of
interpretation and into that of legislation. Even granting that it is valid,
the ruling cannot be given retroactive effect, for it will be harsh and
oppressive to respondent, which has already relied upon VAT Ruling
No. 080-89 for zero rating.
Hence, this Petition.9
The Issue
Petitioner raises this sole issue for our consideration:
"Whether or not the Court of Appeals committed reversible error in
holding that respondent is entitled to the refund of the amount of
₱3,352,406.59 allegedly representing excess input VAT for the year
1997."10
The Court’s Ruling
The Petition is unmeritorious.
Sole Issue:
Entitlement to Tax Refund
Section 102 of the Tax Code11 provides:
"Sec. 102. Value-added tax on sale of services and use or lease of
properties. -- (a) Rate and base of tax. -- There shall be levied, assessed
and collected, a value-added tax equivalent to ten percent (10%) of
gross receipts derived from the sale or exchange of services x x x.
"The phrase 'sale or exchange of services' means the performance of all
kinds of services in the Philippines for others for a fee, remuneration or
consideration, including those performed or rendered by x x x persons
engaged in milling, processing, manufacturing or repacking goods for
others; x x x services of banks, non-bank financial intermediaries and
finance companies; x x x and similar services regardless of whether or
not the performance thereof calls for the exercise or use of the physical
or mental faculties. The phrase 'sale or exchange of services' shall
likewise include:
xxxxxxxxx
‘(3) The supply of x x x commercial knowledge or information;
‘(4) The supply of any assistance that is ancillary and subsidiary to and
is furnished as a means of enabling the application or enjoyment of x x
x any such knowledge or information as is mentioned in subparagraph
(3);
xxxxxxxxx
‘(6) The supply of technical advice, assistance or services rendered in
connection with technical management or administration of any x x x
commercial undertaking, venture, project or scheme;
xxxxxxxxx
"The term 'gross receipts’ means the total amount of money or its
equivalent representing the contract price, compensation, service fee,
rental or royalty, including the amount charged for materials supplied
with the services and deposits and advanced payments actually or
constructively received during the taxable quarter for the services
performed or to be performed for another person, excluding value-added
tax.
"(b) Transactions subject to zero percent (0%) rate. -- The following
services performed in the Philippines by VAT-registered persons shall be
subject to zero percent (0%) rate[:]
‘(1) Processing, manufacturing or repacking goods for other persons
doing business outside the Philippines which goods are subsequently
exported, where the services are paid for in acceptable foreign currency
and accounted for in accordance with the rules and regulations of the
Bangko Sentral ng Pilipinas (BSP);
‘(2) Services other than those mentioned in the preceding subparagraph,
the consideration for which is paid for in acceptable foreign currency
and accounted for in accordance with the rules and regulations of the
[BSP];’"
xxxxxxxxx
Zero Rating of "Other" Services
The law is very clear. Under the last paragraph quoted above, services
performed by VAT-registered persons in the Philippines (other than the
processing, manufacturing or repacking of goods for persons doing
business outside the Philippines), when paid in acceptable foreign
currency and accounted for in accordance with the rules and regulations
of the BSP, are zero-rated.
Respondent is a VAT-registered person that facilitates the collection and
payment of receivables belonging to its non-resident foreign client, for
which it gets paid in acceptable foreign currency inwardly remitted and
accounted for in conformity with BSP rules and regulations. Certainly,
the service it renders in the Philippines is not in the same category as
"processing, manufacturing or repacking of goods" and should,
therefore, be zero-rated. In reply to a query of respondent, the BIR
opined in VAT Ruling No. 080-89 that the income respondent earned
from its parent company’s regional operating centers (ROCs) was
automatically zero-rated effective January 1, 1988.12
Service has been defined as "the art of doing something useful for a
person or company for a fee"13 or "useful labor or work rendered or to
be rendered by one person to another."14 For facilitating in the
Philippines the collection and payment of receivables belonging to its
Hong Kong-based foreign client, and getting paid for it in duly
accounted acceptable foreign currency, respondent renders service
falling under the category of zero rating. Pursuant to the Tax Code, a
VAT of zero percent should, therefore, be levied upon the supply of that
service.15
The Credit Card System and Its Components
For sure, the ancillary business of facilitating the said collection is
different from the main business of issuing credit cards.16 Under the
credit card system, the credit card company extends credit
accommodations to its card holders for the purchase of goods and
services from its member establishments, to be reimbursed by them later
on upon proper billing. Given the complexities of present-day business
transactions, the components of this system can certainly function as
separate billable services.
Under RA 8484,17 the credit card that is issued by banks18 in general, or
by non-banks in particular, refers to "any card x x x or other credit
device existing for the purpose of obtaining x x x goods x x x or
services x x x on credit;"19and is being used "usually on a revolving
basis."20 This means that the consumer-credit arrangement that exists
between the issuer and the holder of the credit card enables the latter to
procure goods or services "on a continuing basis as long as the
outstanding balance does not exceed a specified limit."21 The card
holder is, therefore, given "the power to obtain present control of goods
or service on a promise to pay for them in the future."22
Business establishments may extend credit sales through the use of the
credit card facilities of a non-bank credit card company to avoid the risk
of uncollectible accounts from their customers. Under this system, the
establishments do not deposit in their bank accounts the credit card
drafts23 that arise from the credit sales. Instead, they merely record their
receivables from the credit card company and periodically send the
drafts evidencing those receivables to the latter.
The credit card company, in turn, sends checks as payment to these
business establishments, but it does not redeem the drafts at full price.
The agreement between them usually provides for discounts to be taken
by the company upon its redemption of the drafts.24 At the end of each
month, it then bills its credit card holders for their respective drafts
redeemed during the previous month. If the holders fail to pay the
amounts owed, the company sustains the loss.25
In the present case, respondent’s role in the consumer credit26 process
described above primarily consists of gathering the bills and credit card
drafts of different service establishments located in the Philippines and
forwarding them to the ROCs outside the country. Servicing the bill is
not the same as billing. For the former type of service alone, respondent
already gets paid.
The parent company -- to which the ROCs and respondent belong --
takes charge not only of redeeming the drafts from the ROCs and
sending the checks to the service establishments, but also of billing the
credit card holders for their respective drafts that it has redeemed. While
it usually imposes finance charges27 upon the holders, none may be
exacted by respondent upon either the ROCs or the card holders.
Branch and Home Office
By designation alone, respondent and the ROCs are operated as
branches. This means that each of them is a unit, "an offshoot, lateral
extension, or division"28 located at some distance from the home
office29 of the parent company; carrying separate inventories; incurring
their own expenses; and generating their respective incomes. Each may
conduct sales operations in any locality as an extension of the principal
office.30
The extent of accounting activity at any of these branches depends upon
company policy,31 but the financial reports of the entire business
enterprise -- the credit card company to which they all belong -- must
always show its financial position, results of operation, and changes in
its financial position as a single unit.32 Reciprocal accounts are
reconciled or eliminated, because they lose all significance when the
branches and home office are viewed as a single entity. 33 In like manner,
intra-company profits or losses must be offset against each other for
accounting purposes.
Contrary to petitioner’s assertion,34 respondent can sell its services to
another branch of the same parent company.35 In fact, the business
concept of a transfer price allows goods and services to be sold between
and among intra-company units at cost or above cost.36 A branch may be
operated as a revenue center, cost center, profit center or investment
center, depending upon the policies and accounting system of its parent
company.37Furthermore, the latter may choose not to make any sale
itself, but merely to function as a control center, where most or all of its
expenses are allocated to any of its branches.38
Gratia argumenti that the sending of drafts and bills by service
establishments to respondent is equivalent to the act of sending them
directly to its parent company abroad, and that the parent company’s
subsequent redemption of these drafts and billings of credit card holders
is also attributable to respondent, then with greater reason should the
service rendered by respondent be zero-rated under our VAT system.
The service partakes of the nature of export sales as applied to
goods,39 especially when rendered in the Philippines by a VAT-registered
person40 that gets paid in acceptable foreign currency accounted for in
accordance with BSP rules and regulations.
VAT Requirements for the Supply of Service
The VAT is a tax on consumption41 "expressed as a percentage of the
value added to goods or services"42purchased by the producer or
taxpayer.43 As an indirect tax44 on services,45 its main object is the
transaction46itself or, more concretely, the performance of all kinds of
services47 conducted in the course of trade or business in the
Philippines.48 These services must be regularly conducted in this
country; undertaken in "pursuit of a commercial or an economic
activity;"49 for a valuable consideration; and not exempt under the Tax
Code, other special laws, or any international agreement.50
Without doubt, the transactions respondent entered into with its Hong
Kong-based client meet all these requirements.
First, respondent regularly renders in the Philippines the service of
facilitating the collection and payment of receivables belonging to a
foreign company that is a clearly separate and distinct entity.
Second, such service is commercial in nature; carried on over a
sustained period of time; on a significant scale; with a reasonable degree
of frequency; and not at random, fortuitous or attenuated.
Third, for this service, respondent definitely receives consideration in
foreign currency that is accounted for in conformity with law.
Finally, respondent is not an entity exempt under any of our laws or
international agreements.
Services Subject to Zero VAT
As a general rule, the VAT system uses the destination principle as a
basis for the jurisdictional reach of the tax. 51Goods and services are
taxed only in the country where they are consumed. Thus, exports are
zero-rated, while imports are taxed.
Confusion in zero rating arises because petitioner equates
the performance of a particular type of service with the consumption of
its output abroad. In the present case, the facilitation of the collection of
receivables is different from the utilization or consumption of the
outcome of such service. While the facilitation is done in the
Philippines, the consumption is not. Respondent renders assistance to its
foreign clients -- the ROCs outside the country -- by receiving the bills
of service establishments located here in the country and forwarding
them to the ROCs abroad. The consumption contemplated by law,
contrary to petitioner’s administrative interpretation, 52 does not imply
that the service be done abroad in order to be zero-rated.
Consumption is "the use of a thing in a way that thereby exhausts
it."53 Applied to services, the term means the performance or "successful
completion of a contractual duty, usually resulting in the performer’s
release from any past or future liability x x x."54 The services rendered
by respondent are performed or successfully completed upon its sending
to its foreign client the drafts and bills it has gathered from service
establishments here. Its services, having been performed in the
Philippines, are therefore also consumed in the Philippines.
Unlike goods, services cannot be physically used in or bound for a
specific place when their destination is determined. Instead, there can
only be a "predetermined end of a course" 55 when determining the
service "location or position x x x for legal purposes."56 Respondent’s
facilitation service has no physical existence, yet takes place upon
rendition, and therefore upon consumption, in the Philippines. Under the
destination principle, as petitioner asserts, such service is subject to VAT
at the rate of 10 percent.
Respondent’s Services Exempt from the Destination Principle
However, the law clearly provides for an exception to the destination
principle; that is, for a zero percent VAT rate for services that
are performed in the Philippines, "paid for in acceptable foreign
currency and accounted for in accordance with the rules and regulations
of the [BSP]."57 Thus, for the supply of service to be zero-rated as an
exception, the law merely requires that first, the service be performed in
the Philippines; second, the service fall under any of the categories in
Section 102(b) of the Tax Code; and, third, it be paid in acceptable
foreign currency accounted for in accordance with BSP rules and
regulations.
Indeed, these three requirements for exemption from the destination
principle are met by respondent. Its facilitation service is performed in
the Philippines. It falls under the second category found in Section
102(b) of the Tax Code, because it is a service other than "processing,
manufacturing or repacking of goods" as mentioned in the provision.
Undisputed is the fact that such service meets the statutory condition
that it be paid in acceptable foreign currency duly accounted for in
accordance with BSP rules. Thus, it should be zero-rated.
Performance of Service versus Product Arising from Performance
Again, contrary to petitioner’s stand, for the cost of respondent’s service
to be zero-rated, it need not be tacked in as part of the cost of goods
exported.58 The law neither imposes such requirement nor associates
services with exported goods. It simply states that
the services performed by VAT-registered persons in the Philippines --
services other than the processing, manufacturing or repacking of goods
for persons doing business outside this country -- if paid in acceptable
foreign currency and accounted for in accordance with the rules and
regulations of the BSP, are zero-rated. The service rendered by
respondent is clearly different from the product that arises from the
rendition of such service. The activity that creates the income must not
be confused with the main business in the course of which that income
is realized.59
Tax Situs of a Zero-Rated Service
The law neither makes a qualification nor adds a condition in
determining the tax situs of a zero-rated service. Under this criterion,
the place where the service is rendered determines the jurisdiction 60 to
impose the VAT.61 Performed in the Philippines, such service is
necessarily subject to its jurisdiction,62 for the State necessarily has to
have "a substantial connection"63 to it, in order to enforce a zero
rate.64 The place of payment is immaterial;65 much less is the place
where the output of the service will be further or ultimately used.
Statutory Construction or Interpretation Unnecessary
As mentioned at the outset, Section 102(b)(2) of the Tax Code is very
clear. Therefore, no statutory construction or interpretation is needed.
Neither can conditions or limitations be introduced where none is
provided for. Rewriting the law is a forbidden ground that only
Congress may tread upon.
The Court may not construe a statute that is free from doubt. 66 "[W]here
the law speaks in clear and categorical language, there is no room for
interpretation. There is only room for application."67 The Court has no
choice but to "see to it that its mandate is obeyed."68
No Qualifications Under RR 5-87
In implementing the VAT provisions of the Tax Code, RR 5-87 provides
for the zero rating of services other than the processing, manufacturing
or repacking of goods -- in general and without qualifications -- when
paid for by the person to whom such services are rendered in acceptable
foreign currency inwardly remitted and duly accounted for in
accordance with the BSP (then Central Bank) regulations. Section 8 of
RR 5-87 states:
"SECTION 8. Zero-rating. -- (a) In general. -- A zero-rated sale is a
taxable transaction for value-added tax purposes. A sale by a VAT-
registered person of goods and/or services taxed at zero rate shall not
result in any output tax. The input tax on his purchases of goods or
services related to such zero-rated sale shall be available as tax credit or
refundable in accordance with Section 16 of these Regulations.
xxxxxxxxx
" (c) Zero-rated sales of services. -- The following services rendered by
VAT-registered persons are zero-rated:
‘(1) Services in connection with the processing, manufacturing or
repacking of goods for persons doing business outside the Philippines,
where such goods are actually shipped out of the Philippines to said
persons or their assignees and the services are paid for in acceptable
foreign currency inwardly remitted and duly accounted for under the
regulations of the Central Bank of the Philippines.
xxxxxxxxx
‘(3) Services performed in the Philippines other than those mentioned in
subparagraph (1) above which are paid for by the person or entity to
whom the service is rendered in acceptable foreign currency inwardly
remitted and duly accounted for in accordance with Central Bank
regulations. Where the contract involves payment in both foreign and
local currency, only the service corresponding to that paid in foreign
currency shall enjoy zero-rating. The portion paid for in local currency
shall be subject to VAT at the rate of 10%.’"
RR 7-95 Broad Enough
RR 7-95, otherwise known as the "Consolidated VAT
Regulations,"69 reiterates the above-quoted provision and further
presents as examples only the services performed in the Philippines by
VAT-registered hotels and other service establishments. Again, the
condition remains that these services must be paid in acceptable foreign
currency inwardly remitted and accounted for in accordance with the
rules and regulations of the BSP. The term "other service
establishments" is obviously broad enough to cover respondent’s
facilitation service. Section 4.102-2 of RR 7-95 provides thus:
"SECTION 4.102-2. Zero-Rating. -- (a) In general. -- A zero-rated sale
by a VAT registered person, which is a taxable transaction for VAT
purposes, shall not result in any output tax. However, the input tax on
his purchases of goods, properties or services related to such zero-rated
sale shall be available as tax credit or refund in accordance with these
regulations.
"(b) Transaction subject to zero-rate. -- The following services
performed in the Philippines by VAT-registered persons shall be subject
to 0%:
‘(1) Processing, manufacturing or repacking goods for other persons
doing business outside the Philippines which goods are subsequently
exported, where the services are paid for in acceptable foreign currency
and accounted for in accordance with the rules and regulations of the
BSP;
‘(2) Services other than those mentioned in the preceding subparagraph,
e.g. those rendered by hotels and other service establishments, the
consideration for which is paid for in acceptable foreign currency and
accounted for in accordance with the rules and regulations of the BSP;’"
xxxxxxxxx
Meaning of "as well as" in RR 5-96
Section 4.102-2(b)(2) of RR 7-95 was subsequently amended by RR 5-
96 to read as follows:
"Section 4.102-2(b)(2) -- ‘Services other than processing,
manufacturing or repacking for other persons doing business outside the
Philippines for goods which are subsequently exported, as well as
services by a resident to a non-resident foreign client such as project
studies, information services, engineering and architectural designs and
other similar services, the consideration for which is paid for in
acceptable foreign currency and accounted for in accordance with the
rules and regulations of the BSP.’"
Aside from the already scopious coverage of services in Section 4.102-
2(b)(2) of RR 7-95, the amendment introduced by RR 5-96 further
enumerates specific services entitled to zero rating. Although
superfluous, these sample services are meant to be merely illustrative. In
this provision, the use of the term "as well as" is not restrictive. As a
prepositional phrase with an adverbial relation to some other word, it
simply means "in addition to, besides, also or too."70
Neither the law nor any of the implementing revenue regulations
aforequoted categorically defines or limits the services that may be sold
or exchanged for a fee, remuneration or consideration. Rather, both
merely enumerate the items of service that fall under the term "sale or
exchange of services."71
Ejusdem Generis
Inapplicable
The canon of statutory construction known as ejusdem generis or "of the
same kind or specie" does not apply to Section 4.102-2(b)(2) of RR 7-
95 as amended by RR 5-96.
First, although the regulatory provision contains an enumeration of
particular or specific words, followed by the general phrase "and other
similar services," such words do not constitute a readily discernible
class and are patently not of the same kind. 72 Project studies involve
investments or marketing; information services focus on data
technology; engineering and architectural designs require creativity.
Aside from calling for the exercise or use of mental faculties or perhaps
producing written technical outputs, no common denominator to the
exclusion of all others characterizes these three services. Nothing sets
them apart from other and similar general services that may involve
advertising, computers, consultancy, health care, management,
messengerial work -- to name only a few.
Second, there is the regulatory intent to give the general phrase "and
other similar services" a broader meaning.73 Clearly, the preceding
phrase "as well as" is not meant to limit the effect of "and other similar
services."
Third, and most important, the statutory provision upon which this
regulation is based is by itself not restrictive. The scope of the word
"services" in Section 102(b)(2) of the Tax Code is broad; it is not
susceptible of narrow interpretation.741avvphi1.zw+
VAT Ruling Nos. 040-98 and 080-89
VAT Ruling No. 040-98 relied upon by petitioner is a less general
interpretation at the administrative level,75rendered by the BIR
commissioner upon request of a taxpayer to clarify certain provisions of
the VAT law. As correctly held by the CA, when this ruling states that
the service must be "destined for consumption outside of the
Philippines"76 in order to qualify for zero rating, it contravenes both the
law and the regulations issued pursuant to it. 77 This portion of VAT
Ruling No. 040-98 is clearly ultra vires and invalid.78
Although "[i]t is widely accepted that the interpretation placed upon a
statute by the executive officers, whose duty is to enforce it, is entitled
to great respect by the courts,"79 this interpretation is not conclusive and
will have to be "ignored if judicially found to be erroneous"80 and
"clearly absurd x x x or improper."81 An administrative issuance that
overrides the law it merely seeks to interpret, instead of remaining
consistent and in harmony with it, will not be countenanced by this
Court.82
In the present case, respondent has relied upon VAT Ruling No. 080-89,
which clearly recognizes its zero rating. Changing this status will
certainly deprive respondent of a refund of the substantial amount of
excess input taxes to which it is entitled.
Again, assuming arguendo that VAT Ruling No. 040-98 revoked VAT
Ruling No. 080-89, such revocation could not be given retroactive effect
if the application of the latter ruling would only be prejudicial to
respondent.83 Section 246 of the Tax Code categorically declares that
"[a]ny revocation x x x of x x x any of the rulings x x x promulgated by
the Commissioner shall not be given retroactive application if the
revocation x x x will be prejudicial to the taxpayers."84
It is also basic in law that "no x x x rule x x x shall be given
retrospective effect85 unless explicitly stated."86 No indication of such
retroactive application to respondent does the Court find in VAT Ruling
No. 040-98. Neither do the exceptions enumerated in Section 24687 of
the Tax Code apply.
Though vested with the power to interpret the provisions of the Tax
Code88 and not bound by predecessors’ acts or rulings, the BIR
commissioner may render a different construction to a statute89 only
if the new interpretation is in congruence with the law. Otherwise, no
amount of interpretation can ever revoke, repeal or modify what the law
says.
"Consumed Abroad" Not Required by Legislature
Interpellations on the subject in the halls of the Senate also reveal a
clear intent on the part of the legislators not to impose the condition of
being "consumed abroad" in order for services performed in the
Philippines by a VAT-registered person to be zero-rated. We quote the
relevant portions of the proceedings:
"Senator Maceda: Going back to Section 102 just for the moment. Will
the Gentleman kindly explain to me - I am referring to the lower part of
the first paragraph with the ‘Provided’. Section 102. ‘Provided that the
following services performed in the Philippines by VAT registered
persons shall be subject to zero percent.’ There are three here. What is
the difference between the three here which is subject to zero percent
and Section 103 which is exempt transactions, to being with?
"Senator Herrera: Mr. President, in the case of processing and
manufacturing or repacking goods for persons doing business outside
the Philippines which are subsequently exported, and where the services
are paid for in acceptable foreign currencies inwardly remitted, this is
considered as subject to 0%. But if these conditions are not complied
with, they are subject to the VAT.
"In the case of No. 2, again, as the Gentleman pointed out, these three
are zero-rated and the other one that he indicated are exempted from the
very beginning. These three enumerations under Section 102 are zero-
rated provided that these conditions indicated in these three paragraphs
are also complied with. If they are not complied with, then they are not
entitled to the zero ratings. Just like in the export of minerals, if these
are not exported, then they cannot qualify under this provision of zero
rating.
"Senator Maceda: Mr. President, just one small item so we can leave
this. Under the proviso, it is required that the following services be
performed in the Philippines.
"Under No. 2, services other than those mentioned above includes, let us
say, manufacturing computers and computer chips or repacking goods
for persons doing business outside the Philippines. Meaning to say, we
ship the goods to them in Chicago or Washington and they send the
payment inwardly to the Philippines in foreign currency, and that is, of
course, zero-rated.lawphil.net
"Now, when we say ‘services other than those mentioned in the
preceding subsection[,’] may I have some examples of these?
"Senator Herrera: Which portion is the Gentleman referring to?
"Senator Maceda: I am referring to the second paragraph, in the same
Section 102. The first paragraph is when one manufactures or packages
something here and he sends it abroad and they pay him, that is covered.
That is clear to me. The second paragraph says ‘Services other than
those mentioned in the preceding subparagraph, the consideration of
which is paid for in acceptable foreign currency…’
"One example I could immediately think of -- I do not know why this
comes to my mind tonight -- is for tourism or escort services. For
example, the services of the tour operator or tour escort -- just a good
name for all kinds of activities -- is made here at the Midtown Ramada
Hotel or at the Philippine Plaza, but the payment is made from outside
and remitted into the country.
"Senator Herrera: What is important here is that these services are paid
in acceptable foreign currency remitted inwardly to the Philippines.
"Senator Maceda: Yes, Mr. President. Like those Japanese tours which
include $50 for the services of a woman or a tourist guide, it is zero-
rated when it is remitted here.
"Senator Herrera: I guess it can be interpreted that way, although this
tourist guide should also be considered as among the professionals. If
they earn more than ₱200,000, they should be covered.
xxxxxxxxx
Senator Maceda: So, the services by Filipino citizens outside the
Philippines are subject to VAT, and I am talking of all services. Do big
contractual engineers in Saudi Arabia pay VAT?
"Senator Herrera: This provision applies to a VAT-registered person.
When he performs services in the Philippines, that is zero-rated.
"Senator Maceda: That is right."90
Legislative Approval By Reenactment
Finally, upon the enactment of RA 8424, which substantially carries
over the particular provisions on zero rating of services under Section
102(b) of the Tax Code, the principle of legislative approval of
administrative interpretation by reenactment clearly obtains. This
principle means that "the reenactment of a statute substantially
unchanged is persuasive indication of the adoption by Congress of a
prior executive construction."91
The legislature is presumed to have reenacted the law with full
ANGELINA SANDOVAL-
knowledge of the contents of the revenue regulations then in force RENATO C. CORONA
GUTIERREZ
regarding the VAT, and to have approved or confirmed them because Associate Justice
Associate Justice
they would carry out the legislative purpose. The particular provisions
of the regulations we have mentioned earlier are, therefore, re-enforced. CONCHITA CARPIO
CANCIO C. GARCIA
"When a statute is susceptible of the meaning placed upon it by a ruling MORALES
Associate Justice
of the government agency charged with its enforcement and the Associate Justice
[l]egislature thereafter [reenacts] the provisions [without] substantial
change, such action is to some extent confirmatory that the ruling
ATT E S TAT I O N
carries out the legislative purpose."92
I attest that the conclusions in the above Decision had been reached in
In sum, having resolved that transactions of respondent are zero-rated,
consultation before the case was assigned to the writer of the opinion of
the Court upholds the former’s entitlement to the refund as determined
the Court’s Division.
by the appellate court. Moreover, there is no conflict between the
decisions of the CTA and CA. This Court respects the findings and
ARTEMIO V. PANGANIBAN
conclusions of a specialized court like the CTA "which, by the nature of
Associate Justice
its functions, is dedicated exclusively to the study and consideration of
Chairman, Third Division
tax cases and has necessarily developed an expertise on the subject."93
C E R T I F I CAT I O N
Furthermore, under a zero-rating scheme, the sale or exchange of a
particular service is completely freed from the VAT, because the seller is
Pursuant to Section 13, Article VIII of the Constitution, and the Division
entitled to recover, by way of a refund or as an input tax credit, the tax
Chairman’s Attestation, it is hereby certified that the conclusions in the
that is included in the cost of purchases attributable to the sale or
above Decision had been reached in consultation before the case was
exchange.94 "[T]he tax paid or withheld is not deducted from the tax
assigned to the writer of the opinion of the Court’s Division.
base."95 Having been applied for within the reglementary
period,96 respondent’s refund is in order.
HILARIO G. DAVIDE, JR.
Chief Justice
WHEREFORE, the Petition is hereby DENIED, and the assailed
Decision AFFIRMED. No pronouncement as to costs.

SO ORDERED. Footnotes
ARTEMIO V. PANGANIBAN 1
Rollo, pp. 8-23.
Associate Justice
Chairman, Third Division 2
Id., pp. 25-39. Fifth Division. Penned by Justice Josefina Guevara-
Salonga, with the concurrence of Justices Godardo A. Jacinto (Division
WE CONCUR: chair) and Eloy R. Bello Jr. (member, now retired).
3
CA Decision, p. 15; rollo, p. 38. Inc. (AEII Philippines), BIR Deputy Commissioner Eufracio D. Santos
wrote that "there is no need to file an application" for zero rating.
4
Outer brackets copied verbatim.
13
Garner (ed. in chief), Black’s Law Dictionary (8th ed., 1999), p. 1399.
5
Ibid.
14
Smith, West’s Law Dictionary (1993), p. 737.
6
Ibid.
15
§99 [now §105] and §102(b)(2) [now §108(B)(2)] of the Tax
7
CTA Decision, pp. 1-15; rollo, pp. 40-54. Penned by then Presiding Code. See footnote 11; and Deoferio Jr. and Mamalateo, The Value
Judge (now Presiding Justice) Ernesto D. Acosta, with the concurrence Added Tax in the Philippines (2000), p. 33.
of then Judges Ramon O. de Veyra and Amancio Q. Saga (both retired).
16
These are unlike some widely used credit cards, such as Visa and
8
CA Decision pp. 2-7; rollo, pp. 26-31. Boldface characters, MasterCard, that are issued by banks. See Meigs and
underscoring and italics copied verbatim. Meigs, Accounting: The Basis for Business Decisions (5th ed., 1982),
pp. 355-356.
9
This case was deemed submitted for decision on July 23, 2003, upon
17
this Court’s receipt of petitioner’s Memorandum, signed by Solicitor This is also known as the "Access Devices Regulation Act of 1998"
General Alfredo L. Benipayo, Assistant Solicitor General Fernanda approved on February 11, 1998.
Lampas Peralta and Associate Solicitor Romeo D. Galzote.
18
Respondent’s Memorandum -- signed by Attys. Rolando V. Medalla Jr., For example, "Visa and MasterCard are complex entities in that they
Ramon G. Songco, and Ma. Elizabeth E. Peralta-Loriega -- was are owned by their member banks, provide network services to their
received by this Court on May 16, 2003. member banks, and provide currency conversion as part of the network
services, but have no contracts with cardholders." Schwartz v. Visa
10
Petitioner’s Memorandum, p. 9; temporary rollo, p. 9. Original in International Corp., 2003 WL 1870370 (Cal. Superior), p. 50, April 7,
upper case. 2003, per Sabraw, J.
11 19
In the case at bar, the applicable Tax Code refers to the National §3(f) of RA 8484.
Internal Revenue Code (NIRC) of 1986 as amended by Executive Order
20
(EO) No. 273 and Republic Act (RA) Nos. 7716 and 8241 dated July Garner (ed. in chief), supra, p. 396.
25, 1987, May 5, 1994, and December 20, 1996, respectively.
21
Ibid.
Today, the Tax Code refers to RA 8424 as amended, otherwise known as
22
the "Tax Reform Act of 1997," which took effect on January 1, 1998 Editorial staff of Prentice-Hall, Inc., Encyclopedic Dictionary of
(Commissioner of Internal Revenue v. CA, 385 Phil. 875, 883, March Business Finance (1960), p. 181.
30, 2000).
23
Credit card drafts are multi-part business forms signed by customers
12
In fact, per VAT Ruling No. 080-89 addressed to Spencer F. Lenhart, who make purchases using credit cards. These forms are similar to
vice-president and general manager of American Express International, checks that are drawn upon the funds of credit card companies rather
than upon the personal bank accounts of customers. Meigs and Meigs, "Indeed, accounting operations x x x are inevitable, and have to be
supra, p. 355. effected in the ordinary course of business, wherever the home office x
x x extends its trade to another land through a branch office x x
24
Id., p. 356. x." Koppel (Philippines), Inc. v. Yatco, 77 Phil. 496, 512, October 10,
1946, per Hilado, J.
25
Id., p. 355.
32
Meigs, Mosich, and Larsen, supra, p. 148.
26
Consumer credit refers to the credit granted "to an individual to
33
facilitate the purchase of consumer goods and services." Garner (ed. in "Reciprocal accounts" are account titles found in the books of
chief), supra, p. 396. accounts of a home office and its branches that may be likened to two
sides of the same coin. When one account -- the Investment in
Also known as personal credit, it "may be extended by means of a Branch account -- is debited by the home office in its own books for a
charge account, an installment sale, or by a personal loan." Editorial particular transaction with a branch, the other account -- the Home
staff of Prentice-Hall, Inc., supra, p. 164. Office account -- is credited by the latter, also in its own books to show
how that transaction affected it. Thus, if reciprocal accounts are offset
27
In general, this term refers to amounts paid on a percentage basis "for against each other at the end of the financial reporting period of the
the privilege of making purchases on a deferred payment basis." Smith, entire business enterprise, an intra-company transfer of assets will show
supra, p. 314. neither an increase nor a decrease in total assets, precisely because the
transferred assets merely changed location from one unit of the same
Under §3(h) of RA 8484, more specifically, these are amounts "to be entity to another; that is, from the home office to any of its branches or
paid by the debtor incident to the extension of credit such as interest or vice versa. In this scenario, there is obviously no change in
discounts, collection fees, credit investigation fees, and other service ownership. See Meigs, Mosich, and Larsen, supra, pp. 144-146, 149-
charges." 150, 165.
34
28
Garner (ed. in chief), supra, p. 199. Petitioner’s Memorandum, p. 27; temporary rollo, p. 27.
35
29
In general, a home office refers to "the use of a residence for business For financial accounting purposes, the parent company in Delaware is
purposes." Smith, supra, p. 389. a single entity composed of its home office, the various ROCs and
respondent.
More specifically, it is the "principal place of business" where the main
office is located as appearing in the corporation’s articles of Though viewed as one, the parent company and respondent are, in law,
incorporation. 5th paragraph, §4.107-1 of RR 7-95, dated December 9, separate and distinct juridical entities. Applying Art. 44 of the Civil
1995. Code, each is a corporation for private interest or purpose to which the
law grants a juridical personality, separate and distinct from that of each
30
4th paragraph, §4.107-1 of RR 7-95, dated December 9, 1995. shareholder. While the former is duly organized and existing under and
by virtue of the laws of Delaware, the latter is registered and operates
31
Meigs, Mosich, and Larsen, Modern Advanced Accounting (2nd ed., under Philippine laws.
1979), p. 145.

"The act of one corporation crediting or debiting the other for certain
items x x x is perfectly compatible with the idea of the domestic entity
being or acting as a mere branch x x x of the parent organization. Such
operations were called for [anyway] by the exigencies or convenience of
the entire business." Koppel (Philippines), Inc. v. Yatco, supra, pp. 511-
512.
36
A "transfer price" is "[t]he price charged by one segment of an
organization for a product or service supplied to another segment of the
same organization x x x." Garner (ed. in chief), supra, p. 1227.
There are three general methods for determining transfer prices; namely,
market-based, cost-based, and negotiated. The method chosen must lead
each sub-unit manager to make optimal decisions for the organization as
a whole, in order to meet the three criteria of goal congruence,
managerial effort, and sub-unit autonomy. Horngren & Foster, Cost
Accounting: A Managerial Emphasis (7th ed., 1991), pp. 855-856 &
860.
37
Under a responsibility accounting system in which the plans and
actions of each responsibility center is measured, a manager may be
held accountable for sales only (of a revenue center); or for expenses
only (of a cost center); or for both revenues and costs (of a profit
center); or for revenues, costs and investments (of an investment
center). Horngren & Foster, id., p. 186.
38
Meigs, Mosich, and Larsen, supra, p. 146.
39
Under §100 of the Tax Code, "export sales" as applied to goods
"means the sale and shipment or exportation of goods from the
Philippines to a foreign country x x x or foreign currency denominated
sales." "Foreign currency denominated sales" refers to "sales to non-
residents of goods assembled or manufactured in the Philippines, for
delivery to residents in the Philippines and paid for in convertible
foreign currency remitted through the banking system in the
Philippines."
40
Commissioner of Internal Revenue v. Cebu Toyo Corp., GR No.
149073, February 16, 2005.
41
Deoferio Jr. and Mamalateo, supra, pp. 33 & 67.
42
Smith, supra, p. 892.
43
See Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc.
v. Tan, 163 SCRA 371, 378-379, June 30, 1988.
44
An indirect tax "is imposed upon goods [before] reaching the
consumer who ultimately pays for it, not as a tax, but as a part of the
purchase price." Maceda v. Macaraig Jr., 223 SCRA 217, 235, June 8,
1993, per Nocon, J.; referring to Paras, Taxation Fundamentals (1966),
pp. 24-25. See Guzman, Crisis Under Arroyo Rages: People Bear the
Brunt, IBON Birdtalk: Economic and Political Briefing, PSSC
Auditorium, PSSC Bldg., Commonwealth Ave., Quezon City, January
13, 2005, p. 14.
45
See Tolentino v. Secretary of Finance, 235 SCRA 630, 657, August
25, 1994, and Tolentino v. Secretary of Finance, 319 Phil. 755, 792 &
797, October 30, 1995.
46
Deoferio Jr. and Mamalateo, supra, pp. 49 & 89.
47
Commissioner of Internal Revenue v. CA, supra, pp. 883-884.
48
2nd paragraph of §102(a) [now 2nd paragraph of §108(A)] of the Tax
Code. See Deoferio Jr. and Mamalateo, supra, pp. 89-90.
49
Commissioner of Internal Revenue v. CA, supra, p. 884, per Pardo, J.
50
Deoferio Jr. and Mamalateo, supra, pp. 81, 82, 91, 92 & 204.
51
Deoferio Jr. and Mamalateo, id., pp. 43 & 93.
52
Per VAT Ruling No. 040-98, relied upon by petitioner. See Petition, p.
9; rollo, p. 16.
53
Garner (ed. in chief), supra, p. 336.
54 69
Id., p. 1173. Contex Corp. v. Commissioner of Internal Revenue, 433 SCRA 376,
387, July 2, 2004.
55
Id., p. 479.
70
Gove (ed. in chief) and the Merriam-Webster editorial staff, Webster’s
56
Id., p. 1421. Third New International Dictionary of the English Language
Unabridged (1976), p. 136.
57
§102(b)(2) of the Tax Code.
71
2nd paragraph of §102(a) [now 2nd paragraph of §108(A)] of the Tax
58
See 5th paragraph of item 1 in the reply portion of VAT Ruling No. Code.
040-98, dated November 23, 1998.
72
See Agpalo, supra, pp. 153-160.
59
See Alexander Howden & Co., Ltd. v. The Collector (Now
73
Commissioner) of Internal Revenue, 121 Phil. 579, 583-584, April 14, Ibid.
1965.
74
See Regalado v. Yulo, 61 Phil. 173, 179, February 15, 1935.
60
"[N]o state may tax anything not within its jurisdiction without
75
violating the due process clause of the [C]onstitution." Manila Gas De Leon, supra, p. 83.
Corp. v. Collector of Internal Revenue, 62 Phil. 895, 900, January 17,
76
1936, per Malcolm, J. See 5th paragraph of item 1 in the reply portion of VAT Ruling No.
040-98, dated November 23, 1998.
61
Deoferio Jr. and Mamalateo, supra, p. 93.
77
CA Decision, p. 11; rollo, p. 34.
62
Alejandro, The Law on Taxation (1966 rev. ed.), p. 33.
78
See Hilado v. Collector of Internal Revenue, 100 Phil. 288, 295,
63
Garner (ed. in chief), supra, p. 1503. October 31, 1956.
64 79
De Leon, The Fundamentals of Taxation (12th ed., 1998), p. 3. Philippine Bank of Communications v. Commissioner of Internal
Revenue, 361 Phil. 916, 929, January 28, 1999, per Quisumbing, J.
65
Deoferio Jr. and Mamalateo, supra, pp. 93.
80
Ibid, (citing People v. Hernandez, 59 Phil. 272, 276, December 22,
66
Agpalo, Statutory Construction (2nd ed., 1990), p. 45. 1933, and Molina v. Rafferty, 37 Phil. 545, 555, February 1, 1918.)
67 81
Cebu Portland Cement Co. v. Municipality of Naga, Cebu, 133 Phil. Commissioner of Internal Revenue v. Central Luzon Drug Corp., GR
695, 699, August 22, 1968, per Fernando, J. (later CJ.). No. 159647, April 15, 2005, p. 26, per Panganiban, J.
68 82
Luzon Surety Co., Inc. v. De Garcia, 30 SCRA 111, 116, October 31, See Commissioner of Internal Revenue v. CA, 240 SCRA 368, 372,
1969, per Fernando, J. (later CJ.). January 20, 1995.
83
See Commissioner of Internal Revenue v. CA, 335 Phil. 219, 226-227,
February 6, 1997 (citing Commissioner of Internal Revenue v.
Telefunken Semiconductor Philippines, Inc., 319 Phil. 523, 530, October
23, 1995; Bank of America NT & SA v. CA, 234 SCRA 302, 306-307,
July 21, 1994; Commissioner of Internal Revenue v. CTA, 195 SCRA
444, 460-461, March 20, 1991; Commissioner of Internal Revenue v.
Mega General Merchandising Corp., 166 SCRA 166, 172, September
30, 1988; Commissioner of Internal Revenue v. Burroughs Ltd., 226
Phil. 236, 240-241, June 19, 1986; and ABS-CBN Broadcasting Corp. v.
CTA, 195 Phil. 33, 41 & 44, October 12, 1981).
84
This section has been retained in RA 8424 as amended, with a slight
modification: "preceding section" was changed to "preceding Sections."
85
The Municipality Government of Pagsanjan, Laguna v. Reyes, 98 Phil.
654, 658, March 23, 1956.
86
Dueñas v. Santos Subdivision Homeowners Association, 431 SCRA
76, 89, June 4, 2004, per Quisumbing, J. (quoting Republic v.
Sandiganbayan, 355 Phil. 181, 198, July 31, 1998, per Panganiban, J.).
See Home Development Mutual Fund v. COA, GR No. 157001, October
19, 2004, per Carpio, J.
87
§246 of the Tax Code provides:
"Non-retroactivity of rulings. -- Any revocation, modification, or
reversal of x x x the rulings x x x promulgated by the Commissioner
shall not be given retroactive application if the revocation, modification,
or reversal will be prejudicial to the taxpayers except in the following
cases: (a) where the taxpayer deliberately misstates or omits material
facts from his return or in any document required of him by the [BIR];
(b) where the facts subsequently gathered by the [BIR] are materially
different from the facts on which the ruling is based; or (c) where the
taxpayer acted in bad faith."
88
1st paragraph of §4 of RA 8424, the Tax Code now in effect.
89
Hilado v. Collector of Internal Revenue, supra, p. 294.
90
Interpellations during the second reading of Committee Report No.
349 on Senate Bill No. 1630 - VAT Refinements, Record of the Senate,
2nd Regular Session (February 21, 1994 to April 20, 1994), Vol. IV, No.
65, Monday, March 21, 1994, pp. 536-537. Italics and boldface copied
verbatim, but underscoring ours. See Journal of the Senate, 2nd Regular
Session (1993-1994), Vol. III, Monday, March 21, 1994, p. 70.
91
ABS-CBN Broadcasting Corp. v. CTA, supra, p. 43, per Melencio-
Herrera, J. (citing Alexander Howden & Co., Ltd. v. Collector of
Internal Revenue, 121 Phil. 579, 587, April 14, 1965, and Biddle v.
Commissioner of Internal Revenue, 302 U.S., 573, 582, 58 S.Ct. 379,
383, January 10, 1938). See In re R. Mcculloch Dick, 38 Phil. 41, 77-78,
April 16, 1918, per Carson, J. (quoting Sutherland, Statutory
Construction, Vol. II, [2nd ed.], sections 403 and 404).
92
Commissioner of Internal Revenue v. Solidbank Corp., 416 SCRA
436, 455, November 25, 2003, per Panganiban, J. (footnoting Alexander
Howden & Co., Ltd. v. The Collector [Now Commissioner] of Internal
Revenue, supra, p. 587, per Bengzon, J.P., J.); the latter case
citing Laxamana v. Baltazar, 92 Phil. 32, 34-35, September 19, 1952,
and Mead Corporation v. Commissioner of Internal Revenue, 116 F.2d.
187, 194, November 29, 1940, per Jones, Circuit J.
93
Commissioner of Internal Revenue v. CA, supra, pp. 885-886,
(citing Commissioner of Internal Revenue v. CA, 204 SCRA 182, 189-
190, November 21, 1991).
94
Commissioner of Internal Revenue v. Cebu Toyo Corp., supra.
§110(B) of the Tax Code.
95
Bank of America NT & SA v. CA, supra, p. 307, per Vitug, J.
96
"x x x within two (2) years after the close of the taxable quarter x x
x," per §106 (now §112) of the Tax Code.

THIRD DIVISION
G.R. No. 137571 September 21, 2000
TUNG CHIN HUI, petitioner,
vs.
RUFUS B. RODRIGUEZ, Commissioner of Immigration; and the
BOARD OF COMMISSIONERS, Bureau of Immigration and
Deportation, respondents.
DECISION
PANGANIBAN, J.:
Provisions that were not reproduced in the 1997 Rules of Civil
Procedure are deemed repealed. Hence, having been omitted from the
1997 Rules, deemed already repealed is Section 18, Rule 41 of the pre-
1997 Rules of Court, which had theretofore provided for a 48-hour
reglementary period within which to appeal habeas corpus cases.
Accordingly, the period for perfecting appeals in said cases and ordinary
civil actions is now uniform -- 15 days from notice of the judgment or
order.
The Case
Before us is a Petition for Certiorari under Rule 65 of the Rules of
Court, assailing the March 2, 1999 Order1 of the Regional Trial Court
(RTC) of Manila (Branch 26) in Special Proceedings No. 98-92014. The
challenged Order reads in full as follows:2
"For resolution is a Motion For Reconsideration filed by petitioner thru
counsel with comment/opposition thereto filed by respondents thru
counsel.
"After careful consideration of the grounds relied upon by both parties,
this Court finds for the respondents. The Notice of Appeal filed by the
respondents is actually fo[r] the Court Decision dated January 7, 1999
and not for [the] Court Order dated January 29, 1999.
"In view of the foregoing, the Motion for Reconsideration filed by
petitioner is hereby DENIED for lack of merit.
"Meanwhile, the Branch Clerk of Court is hereby ordered to
immediately transmit the record of the instant case to the Honorable
Court of Appeals within ten (10) days from today."
The Facts
From the records and the pleadings of the parties, the following facts
appear undisputed.
After obtaining a visa at the Philippine Embassy in Singapore,
petitioner, a "Taiwanese citizen,"3 arrived in this country on November
5, 1998.
On November 15, 1998, he was arrested by several policemen, who
subsequently turned him over to the Bureau of Immigration and
Deportation (BID). Thereafter, on November 25, 1998, the BID Board
of Commissioners, after finding him guilty of possessing a tampered
passport earlier canceled by Taiwanese authorities, ordered his summary
deportation.
On December 11, 1998, petitioner filed before the RTC of Manila a
Petition for Habeas Corpus on the ground that his detention was illegal.
After respondents filed a Return of Writ controverting his claim, the
trial court issued a Decision dated January 7, 1999, granting his Petition
and ordering his release from custody.
On January 11, 1999, respondents filed a Motion for Reconsideration,
which was denied by the trial court in an Order dated January 29, 1999.
Respondents then filed a "[N]otice of [A]ppeal from the judgment of the
Honorable Court in the above-stated case, dated January 29, 1999, a
copy of which was received by the Bureau on February 11, 1999 and
was received by the undersigned counsel on February 15, 1999 x x x." 4 
Dated February 15, 1999, it was received by the RTC on February 16,
1999 at 9:45 a.m.
Petitioner filed an "Opposition," claiming that the Notice had been filed
beyond the 48-hour reglementary period for filing appeals in habeas
corpus cases as prescribed by the pre-1997 Rules of Court. Although
respondents alleged that they had received the said Order on February
15, 1999, petitioner contended that they had in fact received it on
February 11, 1999, "as evidenced by the receipt of the service thereof
and by the Sheriff’s Return."5
In an Order dated February 18, 1999, the RTC rejected petitioner’s
contention and granted due course to the Notice of Appeal.
Petitioner then filed a Motion for Reconsideration, arguing this time that
the Notice should be rejected because it had referred not to the RTC
Decision but to the January 29, 1999 Order denying reconsideration. In
its assailed March 2, 1999 Order, the trial court denied his Motion.
Hence, this Petition raising pure questions of law.6 In a Resolution dated
March 22, 1999, this Court issued a Temporary Restraining Order
"directing the respondents to cease and desist from deporting the
petitioner x x x until further orders."7
The Issues
Petitioner submits the following issues for our consideration:8
"(a) Is the reglementary period to appeal [a] habeas corpus [case] now
15 days from notice of judgment as contended by [the] lower court?
"(b) Is the reglementary period to appeal [a] habeas corpus [case] still
48 hours from notice of judgment as provided for in Section 18, Rule 41
of the Revised Rules of Court? or
"(c) Is the provision of Sec. 1, sub-paragraph (a) of Rule 41 of the 1997
Rules of Civil Procedure -- prohibiting appeal from an Order denying a
motion for reconsideration - mandatory or merely discretionary on the
part of the lower courts?
"(d) Are petitions for writs of habeas corpus already brought down to
the level of ordinary cases despite the fact that in habeas corpus the
liberty of persons illegally detained is involved?"
In the main, the Court will resolve whether the Notice of Appeal was
seasonably filed. In the process, it will determine the applicable
reglementary period for filing an appeal in habeas corpus cases.
The Court’s Ruling
The Petition is not meritorious.
Main Issue: Reglementary Period for Appealing
Habeas Corpus Cases
Petitioner contends that the Notice of Appeal was late because
respondents filed it only on February 16, 1999, five days after they had
received the Order denying the Motion for Reconsideration on February
11, 1999.9 He argues that the reglementary period for filing an appeal is
48 hours, as prescribed in Section 18 of Rule 41 of the pre-1997 Rules
of Court, which reads as follows:
"SEC. 18. Appeal in habeas corpus cases, how taken. - An appeal in
habeas corpus cases shall be perfected by filing with the clerk of court
or the judge who rendered the judgment, within forty-eight (48) hours
from notice of such judgment, a statement that the person making it
appeals therefrom."
The argument is devoid of merit, because the foregoing provision was
omitted from and thereby repealed by the 1997 Revised Rules of Court,
which completely replaced Rules 1 to 71. The well-settled rule of
statutory construction is that provisions of an old law that were not
reproduced in the revision thereof covering the same subject are deemed
repealed and discarded.10 The omission shows the intention of the rule-
making body, the Supreme Court in this case,11 "to abrogate those
provisions of the old laws that are not reproduced in the revised statute
or code."12
Clearly then, the reglementary period for filing an appeal in a habeas
corpus case is now similar to that in ordinary civil actions 13 and is
governed by Section 3, Rule 41 of the 1997 Rules of Court, which
provides:
"SEC. 3. Period of ordinary appeal. -- The appeal shall be taken within
fifteen (15) days from notice of the judgment or final order appealed
from. Where a record on appeal is required, the appellant shall file a
notice of appeal and a record on appeal within thirty (30) days from
notice of the judgment or final order.
"The period of appeal shall be interrupted by a timely motion for new
trial or reconsideration.1âwphi1 No motion for extension of time to file
a motion for new trial or reconsideration shall be allowed."
In this light, the appeal was seasonably filed within the 15-day
reglementary period.
Stare Decisis
Petitioner insists, however, that the "application of Section 18, Rule 41
under the Revised Rules of Court must be maintained under the doctrine
of stare decisis."14 , Thus he urges the Court to apply precedents that
held that the 48-hour period for perfecting an appeal was mandatory and
jurisdictional. He specifically cites Saulo v. Cruz,15Garcia v. Echiverri16  respondents were clearly appealing the January 7, 1999 Decision. Had
and Elepante v. Madayag.17
The principle cited by petitioner is an abbreviated form of the
maxim "Stare decisis, et non quieta movere."18 That is, "When the court
has once laid down a principle of law as applicable to a certain state of
facts, it will adhere to that principle and apply it to all future cases
where the facts are substantially the same." 19 This principle assures
certainty and stability in our legal system. 20 It should be stressed
that stare decisis presupposes that the facts of the precedent and the case
to which it is applied are substantially the same. In this case, there is one
crucial difference. All the incidents of the present controversy occurred
when the 1997 Revised Rules of Court was already in effect. On the
other hand, all the cited precedents had been resolved under the pre-
1997 Rules. Accordingly, stare decisiscannot compel this Court to apply
to the present case the alleged precedents decided during the regime of
the pre-1997 Rules. The cited cases applied a specific provision of the
Rules in effect at the time. But because that provision had already been
repealed when the facts under present consideration occurred, the Court
can no longer rely on those cases. Indeed, to rule otherwise is to bar the
effectivity of the 1997 amendments, which conflict with jurisprudence
decided under an old and repealed rule. Verily, petitioner’s contention
effectively precludes changes and freezes our procedural rules.
Subject of the Notice of Appeal
As earlier observed, the Notice of Appeal referred to the "judgment of
the Honorable Court in the above-stated case, dated January 29, 1999."
Petitioner now argues that the Notice was improper because it referred
to the Order denying respondents’ Motion for Reconsideration, not the
Decision itself which was dated January 7, 1999. He cites Section 1 of
Rule 41 of the 1997 Rules, which provides that an order denying a
motion for a new trial or a reconsideration may not be appealed.21
Respondents, on the other hand, claim that because the Notice of Appeal
contained the word "judgment," their clear intent was to appeal the
Decision.
We agree with respondents. In referring to the trial court’s "judgment,"
they thought otherwise, they would have referred to the "Order." Indeed,
"judgment" is normally synonymous with "decision."22 Furthermore, the
wrong date of the appealed judgment may be attributed merely to
inadvertence. Such error should not, by itself, deprive respondents of
their right to appeal. Time and time again, it has been held that courts
should proceed with caution so as not to deprive a party of this right. 23 
They are encouraged to hear the merits of appealed cases; hence, the
dismissal of an appeal on grounds of technicality is generally frowned
upon.24 Indeed, the postulates of justice and fairness demand that all
litigants be afforded the opportunity for a full disposition of their
disputes, free as much as legally possible from the constraints of
technicalities.25 To rule otherwise is to let technicality triumph over
substantial justice. Indeed, "the real essence of justice does not emanate
from quibblings over patchwork legal technicality."26
Other Matters Solicitor General Carlos N. Ortega, Assistant Solicitor General
Magdangal M. de Leon and Solicitor Procolo M. Olaivar. The Court
Petitioner insists that the Order deporting him is invalid, as he was not resolved to give due course to this case without requiring the
given notice or hearing.27 We reject this argument because it properly submission of memoranda.
pertains to the appeal before the CA, not in these proceedings instituted
7 
merely to determine the timeliness of the Notice of Appeal. Rollo, p. 74.
8 
Likewise, we reject the submission of the Office of the Solicitor General Petition, p. 10; rollo, p. 12.
that the promulgation of the CA Decision resolving the appeal rendered
the present case moot and academic.28 It should be stressed that the 9 
Petition, p. 6; rollo, p. 8. See also Reply, pp. 3-4; rollo, pp. 155-156.
validity of the proceedings before the appellate court ultimately hinges
on the issue before us: whether the Notice of Appeal was seasonably 10 
People v. Binuya, 61 Phil. 208, February 27, 1935;
filed. Joaquin v. Navarro, 81 Phil. 373, August 4, 1948.

WHEREFORE, the Petition is DENIED and the assailed 11 

§ 5 (5), Article Binuya, VIII of the Constitution, provides that the
Order AFFIRMED. The Temporary Restraining Order issued by the Supreme Court has the power to "[p]romulgate rules concerning x x x
Court is hereby immediately LIFTED. No pronouncement as to costs. pleadings, practice, and procedure in all courts x x x."

SO ORDERED. 12 
Agpalo, Statutory Construction, 1990 ed., p. 284. See also 73 Am Jur
2d, Statutes, § 411; 82 C.J.S. Statutes, § 293.
Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.
13 
Regalado, Remedial Law Compendium, 7th revised ed. (1999), p. 514.
14 
Petition, p. 8; rollo, p. 10.
Footnotes
15 
109 Phil. 379, August 31, 1960.
1 
Written by Judge Guillermo L. Loja Sr.
16 
132 SCRA 631, October 23, 1984.
2 
Rollo, p. 17.
17 
196 SCRA 399, April 26, 1991.
3 
Quoted from Petition, p. 2; rollo, p. 4.
18 
"It is best to adhere to decisions and not to disturb questions put at
4 
Rollo, p. 52. rest." R.S. Vasan, Latin Words and Phrases for Lawyers, p. 227.
5 
Opposition to the Notice of Appeal, p. 2; rollo, p. 54. 19 
Republic v. Sandiganbayan, 269 SCRA 316, March 7, 1997, per
Panganiban, J. See also Alura v. CA, 305 SCRA 303, March 25, 1999;
6 
The case was deemed submitted for resolution on August 21, 2000, Tala Realty Services Corporation v. Banco Filipino Savings and
upon receipt by this Court of the petitioner’s Reply signed by Atty. Mortgage Bank, GR No. 137980, June 20, 2000.
Marciano J. Cagatan. Respondents’ Comment was signed by Assistant
20 
See Negros Navigation v. CA, 281 SCRA 534, November 7, 1997.
21 
Petition, pp. 6-7; rollo, pp. 8-9.
22 
Moreno, Philippine Law Dictionary, 2nd ed., pp. 325-326.
23 
Growth Link v. CA, 273 SCRA 419, June 13, 1997. See also
Ramos v. CA, 275 SCRA 167, July 7, 1997.
24 
See Magsaysay Lines et al. v. CA, 260 SCRA 513, August 12,
1996; Director of Lands v. Romamban, 131 SCRA 431, August 28,
1984; Olangco v. CFI, 121 SCRA 338, March 28, 1983.24
25 
Delgado vda. Dela Rosa v. CA, 280 SCRA 444, October 10, 1997.
26 
Frivaldo v. Comelec, 257 SCRA 727, June 28, 1996, per
Panganiban, J.
27 
Reply, p. 5; rollo, p. 157.
28 
Respondents’ Manifestation and Motion, pp. 1-2; rollo, pp. 111-112.
Petitioner avers that he filed a Motion for Reconsideration to the CA
Decision. (Petitioner’s Comment/Opposition to the Manifestation and
Motion, pp. 1-3; rollo, pp. 126-128.)
CEMCO HOLDINGS, INC., Petitioner,
vs.
NATIONAL LIFE INSURANCE COMPANY OF THE
PHILIPPINES, INC., Respondent.
DECISION
CHICO-NAZARIO, J.:
This Petition for Review under Rule 45 of the Rules of Court seeks to
reverse and set aside the 24 October 2005 Decision1 and the 6 March
2006 Resolution2 of the Court of Appeals in CA-G.R. SP No. 88758
which affirmed the judgment3 dated 14 February 2005 of the Securities
and Exchange Commission (SEC) finding that the acquisition of
petitioner Cemco Holdings, Inc. (Cemco) of the shares of stock of
Bacnotan Consolidated Industries, Inc. (BCI) and Atlas Cement
Corporation (ACC) in Union Cement Holdings Corporation (UCHC)
was covered by the Mandatory Offer Rule under Section 19 of Republic
Act No. 8799, otherwise known as the Securities Regulation Code.
The Facts
Union Cement Corporation (UCC), a publicly-listed company, has two
principal stockholders – UCHC, a non-listed company, with shares
amounting to 60.51%, and petitioner Cemco with 17.03%. Majority of
UCHC’s stocks were owned by BCI with 21.31% and ACC with
29.69%. Cemco, on the other hand, owned 9% of UCHC stocks.

In a disclosure letter dated 5 July 2004, BCI informed the Philippine

Republic of the Philippines Stock Exchange (PSE) that it and its subsidiary ACC had passed
SUPREME COURT resolutions to sell to Cemco BCI’s stocks in UCHC equivalent to
Manila 21.31% and ACC’s stocks in UCHC equivalent to 29.69%.

THIRD DIVISION In the PSE Circular for Brokers No. 3146-2004 dated 8 July 2004, it
was stated that as a result of petitioner Cemco’s acquisition of BCI and
G.R. No. 171815 August 7, 2007 ACC’s shares in UCHC, petitioner’s total beneficial ownership, direct
and indirect, in UCC has increased by 36% and amounted to at least
53% of the shares of UCC, to wit4 :
 Particulars Percentage On 19 August 2004, respondent National Life Insurance Company of
Existing shares of Cemco in UCHC 9%
Acquisition by Cemco of BCI’s and ACC’s shares in UCHC 51%
Total stocks of Cemco in UCHC 60%
Percentage of UCHC ownership in UCC 60%
Indirect ownership of Cemco in UCC 36%
Direct ownership of Cemco in UCC 17%
Total ownership of Cemco in UCC 53%
As a consequence of this disclosure, the PSE, in a letter to the SEC
dated 15 July 2004, inquired as to whether the Tender Offer Rule under
Rule 19 of the Implementing Rules of the Securities Regulation Code is
not applicable to the purchase by petitioner of the majority of shares of
UCC.
In a letter dated 16 July 2004, Director Justina Callangan of the SEC’s
Corporate Finance Department responded to the query of the PSE that
while it was the stance of the department that the tender offer rule was
not applicable, the matter must still have to be confirmed by the SEC en
banc.
Thereafter, in a subsequent letter dated 27 July 2004, Director Callangan
confirmed that the SEC en banc had resolved that the Cemco transaction
was not covered by the tender offer rule.
On 28 July 2004, feeling aggrieved by the transaction, respondent
National Life Insurance Company of the Philippines, Inc., a minority
stockholder of UCC, sent a letter to Cemco demanding the latter to
comply with the rule on mandatory tender offer. Cemco, however,
refused.
On 5 August 2004, a Share Purchase Agreement was executed by ACC
and BCI, as sellers, and Cemco, as buyer.
On 12 August 2004, the transaction was consummated and closed.
the Philippines, Inc. filed a complaint with the SEC asking it to reverse
its 27 July 2004 Resolution and to declare the purchase agreement of
Cemco void and praying that the mandatory tender offer rule be applied
to its UCC shares. Impleaded in the complaint were Cemco, UCC,
UCHC, BCI and ACC, which were then required by the SEC to file
their respective comment on the complaint. In their comments, they
were uniform in arguing that the tender offer rule applied only to a
direct acquisition of the shares of the listed company and did not extend
to an indirect acquisition arising from the purchase of the shares of a
holding company of the listed firm.
In a Decision dated 14 February 2005, the SEC ruled in favor of the
respondent by reversing and setting aside its 27 July 2004 Resolution
and directed petitioner Cemco to make a tender offer for UCC shares to
respondent and other holders of UCC shares similar to the class held by
UCHC in accordance with Section 9(E), Rule 19 of the Securities
Regulation Code.
Petitioner filed a petition with the Court of Appeals challenging the
SEC’s jurisdiction to take cognizance of respondent’s complaint and its
authority to require Cemco to make a tender offer for UCC shares, and
arguing that the tender offer rule does not apply, or that the SEC’s re-
interpretation of the rule could not be made to retroactively apply to
Cemco’s purchase of UCHC shares.
The Court of Appeals rendered a decision affirming the ruling of the
SEC. It ruled that the SEC has jurisdiction to render the questioned
decision and, in any event, Cemco was barred by estoppel from
questioning the SEC’s jurisdiction. It, likewise, held that the tender offer
requirement under the Securities Regulation Code and its Implementing
Rules applies to Cemco’s purchase of UCHC stocks. The decretal
portion of the said Decision reads:
IN VIEW OF THE FOREGOING, the assailed decision of the SEC is
AFFIRMED, and the preliminary injunction issued by the Court
LIFTED.5
Cemco filed a motion for reconsideration which was denied by the
Court of Appeals.
Hence, the instant petition.
In its memorandum, petitioner Cemco raises the following issues:
I.
ASSUMING ARGUENDO THAT THE SEC HAS JURISDICTION
OVER NATIONAL LIFE’S COMPLAINT AND THAT THE SEC’S
RE-INTERPRETATION OF THE TENDER OFFER RULE IS
CORRECT, WHETHER OR NOT THAT REINTERPRETATION CAN
BE APPLIED RETROACTIVELY TO CEMCO’S PREJUDICE.
II.
WHETHER OR NOT THE SEC HAS JURISDICTION TO
ADJUDICATE THE DISPUTE BETWEEN THE PARTIES A QUO OR
TO RENDER JUDGMENT REQUIRING CEMCO TO MAKE A
TENDER OFFER FOR UCC SHARES.
III.
WHETHER OR NOT CEMCO’S PURCHASE OF UCHC SHARES IS
SUBJECT TO THE TENDER OFFER REQUIREMENT.
IV.
WHETHER OR NOT THE SEC DECISION, AS AFFIRMED BY THE
CA DECISION, IS AN INCOMPLETE JUDGMENT WHICH
PRODUCED NO EFFECT.6
Simply stated, the following are the issues:
1. Whether or not the SEC has jurisdiction over respondent’s complaint
and to require Cemco to make a tender offer for respondent’s UCC
shares.
2. Whether or not the rule on mandatory tender offer applies to the
indirect acquisition of shares in a listed company, in this case, the
indirect acquisition by Cemco of 36% of UCC, a publicly-listed
company, through its purchase of the shares in UCHC, a non-listed
company.
3. Whether or not the questioned ruling of the SEC can be applied
retroactively to Cemco’s transaction which was consummated under the
authority of the SEC’s prior resolution.
On the first issue, petitioner Cemco contends that while the SEC can
take cognizance of respondent’s complaint on the alleged violation by
petitioner Cemco of the mandatory tender offer requirement under
Section 19 of Republic Act No. 8799, the same statute does not vest the
SEC with jurisdiction to adjudicate and determine the rights and
obligations of the parties since, under the same statute, the SEC’s
authority is purely administrative. Having been vested with purely
administrative authority, the SEC can only impose administrative
sanctions such as the imposition of administrative fines, the suspension
or revocation of registrations with the SEC, and the like. Petitioner
stresses that there is nothing in the statute which authorizes the SEC to
issue orders granting affirmative reliefs. Since the SEC’s order
commanding it to make a tender offer is an affirmative relief fixing the
respective rights and obligations of parties, such order is void.
Petitioner further contends that in the absence of any specific grant of
jurisdiction by Congress, the SEC cannot, by mere administrative
regulation, confer on itself that jurisdiction.
Petitioner’s stance fails to persuade.
In taking cognizance of respondent’s complaint against petitioner and
eventually rendering a judgment which ordered the latter to make a
tender offer, the SEC was acting pursuant to Rule 19(13) of the
Amended Implementing Rules and Regulations of the Securities
Regulation Code, to wit:
13. Violation
If there shall be violation of this Rule by pursuing a purchase of equity
shares of a public company at threshold amounts without the required
tender offer, the Commission, upon complaint, may nullify the said
acquisition and direct the holding of a tender offer. This shall be without
prejudice to the imposition of other sanctions under the Code.
The foregoing rule emanates from the SEC’s power and authority to
regulate, investigate or supervise the activities of persons to ensure
compliance with the Securities Regulation Code, more specifically the
provision on mandatory tender offer under Section 19 thereof.7
Another provision of the statute, which provides the basis of Rule
19(13) of the Amended Implementing Rules and Regulations of the
Securities Regulation Code, is Section 5.1(n), viz:
[T]he Commission shall have, among others, the following powers and
functions:
xxxx
(n) Exercise such other powers as may be provided by law as well as
those which may be implied from, or which are necessary or incidental
to the carrying out of, the express powers granted the Commission to
achieve the objectives and purposes of these laws.
The foregoing provision bestows upon the SEC the general adjudicative
power which is implied from the express powers of the Commission or
which is incidental to, or reasonably necessary to carry out, the
performance of the administrative duties entrusted to it. As a regulatory
agency, it has the incidental power to conduct hearings and render
decisions fixing the rights and obligations of the parties. In fact, to
deprive the SEC of this power would render the agency inutile, because
it would become powerless to regulate and implement the law. As
correctly held by the Court of Appeals:
We are nonetheless convinced that the SEC has the competence to
render the particular decision it made in this case. A definite inference
may be drawn from the provisions of the SRC that the SEC has the
authority not only to investigate complaints of violations of the tender
offer rule, but to adjudicate certain rights and obligations of the
contending parties and grant appropriate reliefs in the exercise of its
regulatory functions under the SRC. Section 5.1 of the SRC allows a
general grant of adjudicative powers to the SEC which may be implied
from or are necessary or incidental to the carrying out of its express
powers to achieve the objectives and purposes of the SRC. We must
bear in mind in interpreting the powers and functions of the SEC that
the law has made the SEC primarily a regulatory body with the
incidental power to conduct administrative hearings and make decisions.
A regulatory body like the SEC may conduct hearings in the exercise of
its regulatory powers, and if the case involves violations or conflicts in
connection with the performance of its regulatory functions, it will have
the duty and authority to resolve the dispute for the best interests of the
public.8
For sure, the SEC has the authority to promulgate rules and regulations,
subject to the limitation that the same are consistent with the declared
policy of the Code. Among them is the protection of the investors and
the minimization, if not total elimination, of fraudulent and
manipulative devises. Thus, Subsection 5.1(g) of the law provides:
Prepare, approve, amend or repeal rules, regulations and orders, and
issue opinions and provide guidance on and supervise compliance with
such rules, regulations and orders.
Also, Section 72 of the Securities Regulation Code reads:
72.1. x x x To effect the provisions and purposes of this Code, the
Commission may issue, amend, and rescind such rules and regulations
and orders necessary or appropriate, x x x.
72.2. The Commission shall promulgate rules and regulations providing
for reporting, disclosure and the prevention of fraudulent, deceptive or
manipulative practices in connection with the purchase by an issuer, by
tender offer or otherwise, of and equity security of a class issued by it
that satisfies the requirements of Subsection 17.2. Such rules and
regulations may require such issuer to provide holders of equity
securities of such dates with such information relating to the reasons for
such purchase, the source of funds, the number of shares to be
purchased, the price to be paid for such securities, the method of
purchase and such additional information as the Commission deems
necessary or appropriate in the public interest or for the protection of
investors, or which the Commission deems to be material to a
determination by holders whether such security should be sold.
The power conferred upon the SEC to promulgate rules and regulations
is a legislative recognition of the complexity and the constantly-
fluctuating nature of the market and the impossibility of foreseeing all
the possible contingencies that cannot be addressed in advance. As
enunciated in Victorias Milling Co., Inc. v. Social Security
Commission9 :
Rules and regulations when promulgated in pursuance of the procedure
or authority conferred upon the administrative agency by law, partake of
the nature of a statute, and compliance therewith may be enforced by a
penal sanction provided in the law. This is so because statutes are
usually couched in general terms, after expressing the policy, purposes,
objectives, remedies and sanctions intended by the legislature. The
details and the manner of carrying out the law are often times left to the
administrative agency entrusted with its enforcement. In this sense, it
has been said that rules and regulations are the product of a delegated
power to create new or additional legal provisions that have the effect of
law.
Moreover, petitioner is barred from questioning the jurisdiction of the
SEC. It must be pointed out that petitioner had participated in all the
proceedings before the SEC and had prayed for affirmative relief. In
fact, petitioner defended the jurisdiction of the SEC in its Comment
dated 15 September 2004, filed with the SEC wherein it asserted:
This Honorable Commission is a highly specialized body created for the
purpose of administering, overseeing, and managing the corporate
industry, share investment and securities market in the Philippines. By
the very nature of its functions, it dedicated to the study and
administration of the corporate and securities laws and has necessarily
developed an expertise on the subject. Based on said functions, the
Honorable Commission is necessarily tasked to issue rulings with
respect to matters involving corporate matters and share acquisitions.
Verily when this Honorable Commission rendered the Ruling that " …
the acquisition of Cemco Holdings of the majority shares of Union
Cement Holdings, Inc., a substantial stockholder of a listed company,
Union Cement Corporation, is not covered by the mandatory tender
offer requirement of the SRC Rule 19," it was well within its powers
and expertise to do so. Such ruling shall be respected, unless there has
been an abuse or improvident exercise of authority.10
Petitioner did not question the jurisdiction of the SEC when it rendered
an opinion favorable to it, such as the 27 July 2004 Resolution, where
the SEC opined that the Cemco transaction was not covered by the
mandatory tender offer rule. It was only when the case was before the
Court of Appeals and after the SEC rendered an unfavorable judgment
against it that petitioner challenged the SEC’s competence. As
articulated in Ceroferr Realty Corporation v. Court of Appeals11 :
While the lack of jurisdiction of a court may be raised at any stage of an
action, nevertheless, the party raising such question may be estopped if
he has actively taken part in the very proceedings which he questions
and he only objects to the court’s jurisdiction because the judgment or
the order subsequently rendered is adverse to him.
On the second issue, petitioner asserts that the mandatory tender offer
rule applies only to direct acquisition of shares in the public company.
This contention is not meritorious.
Tender offer is a publicly announced intention by a person acting alone
or in concert with other persons to acquire equity securities of a public
company.12 A public company is defined as a corporation which is listed
on an exchange, or a corporation with assets exceeding ₱50,000,000.00
and with 200 or more stockholders, at least 200 of them holding not less
than 100 shares of such company.13 Stated differently, a tender offer is
an offer by the acquiring person to stockholders of a public company for
them to tender their shares therein on the terms specified in the
offer.14 Tender offer is in place to protect minority shareholders against
any scheme that dilutes the share value of their investments. It gives the
minority shareholders the chance to exit the company under reasonable
terms, giving them the opportunity to sell their shares at the same price
as those of the majority shareholders.15
Under Section 19 of Republic Act No. 8799, it is stated:
Tender Offers. 19.1. (a) Any person or group of persons acting in
concert who intends to acquire at least fifteen percent (15%) of any
class of any equity security of a listed corporation or of any class of any
equity security of a corporation with assets of at least Fifty million
pesos (₱50,000,000.00) and having two hundred (200) or more
stockholders with at least one hundred (100) shares each or who intends
to acquire at least thirty percent (30%) of such equity over a period of
twelve (12) months shall make a tender offer to stockholders by filing
with the Commission a declaration to that effect; and furnish the issuer,
a statement containing such of the information required in Section 17 of
this Code as the Commission may prescribe. Such person or group of
persons shall publish all requests or invitations for tender, or materials
making a tender offer or requesting or inviting letters of such a security.
Copies of any additional material soliciting or requesting such tender
offers subsequent to the initial solicitation or request shall contain such
information as the Commission may prescribe, and shall be filed with
the Commission and sent to the issuer not later than the time copies of
such materials are first published or sent or given to security holders.
Under existing SEC Rules,16 the 15% and 30% threshold acquisition of
shares under the foregoing provision was increased to thirty-five percent
(35%). It is further provided therein that mandatory tender offer is still
applicable even if the acquisition is less than 35% when the purchase
would result in ownership of over 51% of the total outstanding equity
securities of the public company.17
The SEC and the Court of Appeals ruled that the indirect acquisition by
petitioner of 36% of UCC shares through the acquisition of the non-
listed UCHC shares is covered by the mandatory tender offer rule.
This interpretation given by the SEC and the Court of Appeals must be
sustained.
The rule in this jurisdiction is that the construction given to a statute by
an administrative agency charged with the interpretation and application
of that statute is entitled to great weight by the courts, unless such
construction is clearly shown to be in sharp contrast with the governing
law or statute.18 The rationale for this rule relates not only to the
emergence of the multifarious needs of a modern or modernizing
society and the establishment of diverse administrative agencies for
addressing and satisfying those needs; it also relates to accumulation of
experience and growth of specialized capabilities by the administrative
agency charged with implementing a particular statute.19
The SEC and the Court of Appeals accurately pointed out that the
coverage of the mandatory tender offer rule covers not only direct
acquisition but also indirect acquisition or "any type of acquisition."
This is clear from the discussions of the Bicameral Conference
Committee on the Securities Act of 2000, on 17 July 2000.
SEN. S. OSMEÑA. Eto ang mangyayari diyan, eh. Somebody controls
67% of the Company. Of course, he will pay a premium for the first
67%. Control yan, eh. Eh, kawawa yung mga maiiwan, ang 33%
because the value of the stock market could go down, could go down
after that, because there will (p. 41) be no more market. Wala nang
gustong bumenta. Wala nang… I mean maraming gustong bumenta,
walang gustong bumili kung hindi yung majority owner. And they will
not buy. They already have 67%. They already have control. And this
protects the minority. And we have had a case in Cebu wherein Ayala A
who already owned 40% of Ayala B made an offer for another 40% of
Ayala B without offering the 20%. Kawawa naman yung nakahawak
ngayon ng 20%. Ang baba ng share sa market. But we did not have a
law protecting them at that time.
CHAIRMAN ROCO. So what is it that you want to achieve?
SEN. S. OSMEÑA. That if a certain group achieves a certain amount of
ownership in a corporation, yeah, he is obligated to buy anybody who
wants to sell.
CHAIRMAN ROCO. Pro-rata lang. (p. 42).
xxxx
REP. TEODORO. As long as it reaches 30, ayan na. Any type of
acquisition just as long as it will result in 30… (p.50)… reaches 30,
ayan na. Any type of acquisition just as long as it will result in 30,
general tender, pro-rata.20(Emphasis supplied.)
Petitioner counters that the legislator’s reference to "any type of
acquisition" during the deliberations on the Securities Regulation Code
does not indicate that congress meant to include the "indirect"
acquisition of shares of a public corporation to be covered by the tender
offer rule. Petitioner also avers that it did not directly acquire the shares
in UCC and the incidental benefit of having acquired the control of the
said public company must not be taken against it.
These arguments are not convincing. The legislative intent of Section 19
of the Code is to regulate activities relating to acquisition of control of
the listed company and for the purpose of protecting the minority
stockholders of a listed corporation. Whatever may be the method by
which control of a public company is obtained, either through the direct
purchase of its stocks or through an indirect means, mandatory tender
offer applies. As appropriately held by the Court of Appeals:
The petitioner posits that what it acquired were stocks of UCHC and not
UCC. By happenstance, as a result of the transaction, it became an
indirect owner of UCC. We are constrained, however, to construe
ownership acquisition to mean both direct and indirect. What is decisive
is the determination of the power of control. The legislative intent
behind the tender offer rule makes clear that the type of activity
intended to be regulated is the acquisition of control of the listed
company through the purchase of shares. Control may [be] effected
through a direct and indirect acquisition of stock, and when this takes
place, irrespective of the means, a tender offer must occur. The
bottomline of the law is to give the shareholder of the listed company
the opportunity to decide whether or not to sell in connection with a
transfer of control. x x x.21
As to the third issue, petitioner stresses that the ruling on mandatory
tender offer rule by the SEC and the Court of Appeals should not have
retroactive effect or be made to apply to its purchase of the UCHC
shares as it relied in good faith on the letter dated 27 July 2004 of the
SEC which opined that the proposed acquisition of the UCHC shares
was not covered by the mandatory offer rule.
The argument is not persuasive.
The action of the SEC on the PSE request for opinion on the Cemco
transaction cannot be construed as passing merits or giving approval to
the questioned transaction. As aptly pointed out by the respondent, the
letter dated 27 July 2004 of the SEC was nothing but an approval of the
draft letter prepared by Director Callanga. There was no public hearing
where interested parties could have been heard. Hence, it was not issued
upon a definite and concrete controversy affecting the legal relations of
parties thereby making it a judgment conclusive on all the parties. Said
letter was merely advisory. Jurisprudence has it that an advisory opinion
of an agency may be stricken down if it deviates from the provision of
the statute.22 Since the letter dated 27 July 2004 runs counter to the
Securities Regulation Code, the same may be disregarded as what the
SEC has done in its decision dated 14 February 2005.
Assuming arguendo that the letter dated 27 July 2004 constitutes a
ruling, the same cannot be utilized to determine the rights of the parties.
What is to be applied in the present case is the subsequent ruling of the
SEC dated 14 February 2005 abandoning the opinion embodied in the
letter dated 27 July 2004. In Serrano v. National Labor Relations
Commission,23 an argument was raised similar to the case under
consideration. Private respondent therein argued that the new doctrine
pronounced by the Court should only be applied prospectively. Said
postulation was ignored by the Court when it ruled:
While a judicial interpretation becomes a part of the law as of the date
that law was originally passed, this is subject to the qualification that
when a doctrine of this Court is overruled and a different view is
adopted, and more so when there is a reversal thereof, the new doctrine
should be applied prospectively and should not apply to parties who
relied on the old doctrine and acted in good faith. To hold otherwise
would be to deprive the law of its quality of fairness and justice then, if
there is no recognition of what had transpired prior to such adjudication.
It is apparent that private respondent misconceived the import of the
ruling. The decision in Columbia Pictures does not mean that if a new
rule is laid down in a case, it should not be applied in that case but that
said rule should apply prospectively to cases arising afterwards. Private
respondent’s view of the principle of prospective application of new
judicial doctrines would turn the judicial function into a mere academic
exercise with the result that the doctrine laid down would be no more
than a dictum and would deprive the holding in the case of any force.
Indeed, when the Court formulated the Wenphil doctrine, which we
reversed in this case, the Court did not defer application of the rule laid
down imposing a fine on the employer for failure to give notice in a
case of dismissal for cause. To the contrary, the new rule was applied
right then and there. x x x.
inform and guide the parties on how to proceed with the mandatory
tender offer.
WHEREFORE, the Decision and Resolution of the Court of Appeals
dated 24 October 2005 and 6 March 2006, respectively, affirming the
Decision dated 14 February 2005 of the Securities and Exchange
Commission En Banc, are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice
WE CONCUR:

Lastly, petitioner alleges that the decision of the SEC dated 14 February CONSUELO YNARES-SANTIAGO
2005 is "incomplete and produces no effect." Associate Justice
Chairperson
This contention is baseless.
MA. ALICIA AUSTRIA- ANTONIO EDUARDO B.
The decretal portion of the SEC decision states: MARTINEZ NACHURA
Associate Justice Associate Justice
In view of the foregoing, the letter of the Commission, signed by
Director Justina F. Callangan, dated July 27, 2004, addressed to the ATT E S TAT I O N
Philippine Stock Exchange is hereby REVERSED and SET ASIDE.
Respondent Cemco is hereby directed to make a tender offer for UCC I attest that the conclusions in the above Decision were reached in
shares to complainant and other holders of UCC shares similar to the consultation before the case was assigned to the writer of the opinion of
class held by respondent UCHC, at the highest price it paid for the the Court’s Division.
beneficial ownership in respondent UCC, strictly in accordance with
SRC Rule 19, Section 9(E).24 CONSUELO YNARES-SANTIAGO
Associate Justice
A reading of the above ruling of the SEC reveals that the same is Chairperson, Third Division
complete. It orders the conduct of a mandatory tender offer pursuant to
the procedure provided for under Rule 19(E) of the Amended C E R T I F I CAT I O N
Implementing Rules and Regulations of the Securities Regulation Code
for the highest price paid for the beneficial ownership of UCC shares. Pursuant to Section 13, Article VIII of the Constitution, and the Division
The price, on the basis of the SEC decision, is determinable. Moreover, Chairperson’s Attestation, it is hereby certified that the conclusions in
the implementing rules and regulations of the Code are sufficient to the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
 12
REYNATO S. PUNO The Philippine Securities Regulation Code (Annotated), Rafael A.
Chief Justice Morales (2005 Ed.), p. 153.
13
Id.

Footnotes 14
Id.
1
Penned by Associate Justice Mario L. Guariña III with Associate 15
Securities Regulation Code (Republic Act No. 8799) Annotated with
Justices Rebecca De Guia-Salvador and Arturo G. Tayag, concurring. Implementing Rules and Regulations, Lucila M. Decasa (First Edition,
Rollo, pp. 68-79. 2004) p. 64.
2
Id. at 119. 16
Rule 19(2) of the Amended Implementing Rules and Regulations of
the Securities Regulation Code dated 30 December 2003 states:
3
Id. at 254-264.
2. Mandatory tender offers
4
Id. at 71-72.
A. Any person or group of persons acting in concert, who intends to
5
Id. at 78. acquire thirty-five percent (35%) or more of equity shares in a public
company shall disclose such intention and contemporaneously make a
6
Id. at 576-578. tender offer for the percent sought to all holders of such class, subject to
paragraph (9)(E) of this Rule.
7
Section 5, Subsection 5.1. (d) of the Securities Regulation Code
provides: In the event that the tender offer is oversubscribed, the aggregate
amount of securities to be acquired at the close of such tender offer shall
[T]he Commission shall have, among others, the following powers and be proportionately distributed across both selling shareholder with
functions: whom the acquirer may have been in private negotiations and minority
shareholders.
xxxx
B. Any person or group of persons acting in concert, who intends to
(d) Regulate, investigate or supervise the activities of persons to ensure acquire thirty-five percent (35%) or more of equity shares in a public
compliance. company in one or more transactions within a period of twelve (12)
months, shall be required to make a tender offer to all holders of such
8
Rollo, p. 75. class for the number of shares so acquired within the said period.
9
114 Phil. 555, 558 (1962). C. If any acquisition of even less than thirty-five percent (35%) would
result in ownership of over fifty-one percent (51%) of the total
10
Rollo, pp. 182-183. outstanding equity securities of a public company, the acquirer shall be
required to make a tender offer under this Rule for all the outstanding
11
426 Phil. 522, 530 (2002). equity securities to all remaining stockholders of the said company at a
price supported by a fairness opinion provided by an independent G.R. No. 171815 August 7, 2007
financial advisor or equivalent third party. The acquirer in such a tender
offer shall be required to accept any and all securities thus tendered. CEMCO HOLDINGS, INC., Petitioner,
vs.
17
Id. NATIONAL LIFE INSURANCE COMPANY OF THE
PHILIPPINES, INC., Respondent.
18
Nestle Philippines, Inc. v. Court of Appeals, G.R. No. 86738, 13
November 1991, 203 SCRA 504, 510. DECISION
19
Id. at 510-511. CHICO-NAZARIO, J.:
20
Rollo, pp. 256-257. This Petition for Review under Rule 45 of the Rules of Court seeks to
reverse and set aside the 24 October 2005 Decision1 and the 6 March
21
Id. at 76-77. 2006 Resolution2 of the Court of Appeals in CA-G.R. SP No. 88758
which affirmed the judgment3 dated 14 February 2005 of the Securities
22
San Juan de Dios Hospital Employees Association-AFW v. National and Exchange Commission (SEC) finding that the acquisition of
Labor Relations Commission, 346 Phil. 1003, 1010 (1997). petitioner Cemco Holdings, Inc. (Cemco) of the shares of stock of
Bacnotan Consolidated Industries, Inc. (BCI) and Atlas Cement
23
387 Phil. 345, 357 (2000). Corporation (ACC) in Union Cement Holdings Corporation (UCHC)
was covered by the Mandatory Offer Rule under Section 19 of Republic
24
Rollo, p. 263. Act No. 8799, otherwise known as the Securities Regulation Code.

The Facts

Union Cement Corporation (UCC), a publicly-listed company, has two

principal stockholders – UCHC, a non-listed company, with shares
amounting to 60.51%, and petitioner Cemco with 17.03%. Majority of
UCHC’s stocks were owned by BCI with 21.31% and ACC with
29.69%. Cemco, on the other hand, owned 9% of UCHC stocks.

In a disclosure letter dated 5 July 2004, BCI informed the Philippine

Stock Exchange (PSE) that it and its subsidiary ACC had passed
Republic of the Philippines resolutions to sell to Cemco BCI’s stocks in UCHC equivalent to
SUPREME COURT 21.31% and ACC’s stocks in UCHC equivalent to 29.69%.
Manila
In the PSE Circular for Brokers No. 3146-2004 dated 8 July 2004, it
THIRD DIVISION was stated that as a result of petitioner Cemco’s acquisition of BCI and
ACC’s shares in UCHC, petitioner’s total beneficial ownership, direct
and indirect, in UCC has increased by 36% and amounted to at least On 5 August 2004, a Share Purchase Agreement was executed by ACC
53% of the shares of UCC, to wit4 : and BCI, as sellers, and Cemco, as buyer.

Particulars Percentage On 12 August 2004, the transaction was consummated and closed.
Existing shares of Cemco in UCHC 9%
On 19 August 2004, respondent National Life Insurance Company of
Acquisition by Cemco of BCI’s and ACC’s shares in UCHC 51% the Philippines, Inc. filed a complaint with the SEC asking it to reverse
Total stocks of Cemco in UCHC 60%
its 27 July 2004 Resolution and to declare the purchase agreement of
Cemco void and praying that the mandatory tender offer rule be applied
Percentage of UCHC ownership in UCC 60% to its UCC shares. Impleaded in the complaint were Cemco, UCC,
Indirect ownership of Cemco in UCC 36% UCHC, BCI and ACC, which were then required by the SEC to file
their respective comment on the complaint. In their comments, they
Direct ownership of Cemco in UCC 17% were uniform in arguing that the tender offer rule applied only to a
Total ownership of Cemco in UCC 53% direct acquisition of the shares of the listed company and did not extend
to an indirect acquisition arising from the purchase of the shares of a
As a consequence of this disclosure, the PSE, in a letter to the SEC holding company of the listed firm.
dated 15 July 2004, inquired as to whether the Tender Offer Rule under
Rule 19 of the Implementing Rules of the Securities Regulation Code is In a Decision dated 14 February 2005, the SEC ruled in favor of the
not applicable to the purchase by petitioner of the majority of shares of respondent by reversing and setting aside its 27 July 2004 Resolution
UCC. and directed petitioner Cemco to make a tender offer for UCC shares to
respondent and other holders of UCC shares similar to the class held by
In a letter dated 16 July 2004, Director Justina Callangan of the SEC’s UCHC in accordance with Section 9(E), Rule 19 of the Securities
Corporate Finance Department responded to the query of the PSE that Regulation Code.
while it was the stance of the department that the tender offer rule was
not applicable, the matter must still have to be confirmed by the SEC en Petitioner filed a petition with the Court of Appeals challenging the
banc. SEC’s jurisdiction to take cognizance of respondent’s complaint and its
authority to require Cemco to make a tender offer for UCC shares, and
Thereafter, in a subsequent letter dated 27 July 2004, Director Callangan arguing that the tender offer rule does not apply, or that the SEC’s re-
confirmed that the SEC en banc had resolved that the Cemco transaction interpretation of the rule could not be made to retroactively apply to
was not covered by the tender offer rule. Cemco’s purchase of UCHC shares.

On 28 July 2004, feeling aggrieved by the transaction, respondent
National Life Insurance Company of the Philippines, Inc., a minority
stockholder of UCC, sent a letter to Cemco demanding the latter to
comply with the rule on mandatory tender offer. Cemco, however,
refused.
The Court of Appeals rendered a decision affirming the ruling of the
SEC. It ruled that the SEC has jurisdiction to render the questioned
decision and, in any event, Cemco was barred by estoppel from
questioning the SEC’s jurisdiction. It, likewise, held that the tender offer
requirement under the Securities Regulation Code and its Implementing
Rules applies to Cemco’s purchase of UCHC stocks. The decretal
portion of the said Decision reads:
IN VIEW OF THE FOREGOING, the assailed decision of the SEC is
AFFIRMED, and the preliminary injunction issued by the Court
LIFTED.5
Cemco filed a motion for reconsideration which was denied by the
Court of Appeals.
Hence, the instant petition.
In its memorandum, petitioner Cemco raises the following issues:
I.
ASSUMING ARGUENDO THAT THE SEC HAS JURISDICTION
OVER NATIONAL LIFE’S COMPLAINT AND THAT THE SEC’S
RE-INTERPRETATION OF THE TENDER OFFER RULE IS
CORRECT, WHETHER OR NOT THAT REINTERPRETATION CAN
BE APPLIED RETROACTIVELY TO CEMCO’S PREJUDICE.
II.
WHETHER OR NOT THE SEC HAS JURISDICTION TO
ADJUDICATE THE DISPUTE BETWEEN THE PARTIES A QUO OR
TO RENDER JUDGMENT REQUIRING CEMCO TO MAKE A
TENDER OFFER FOR UCC SHARES.
III.
WHETHER OR NOT CEMCO’S PURCHASE OF UCHC SHARES IS
SUBJECT TO THE TENDER OFFER REQUIREMENT.
IV.
WHETHER OR NOT THE SEC DECISION, AS AFFIRMED BY THE
CA DECISION, IS AN INCOMPLETE JUDGMENT WHICH
PRODUCED NO EFFECT.6
Simply stated, the following are the issues:
1. Whether or not the SEC has jurisdiction over respondent’s complaint
and to require Cemco to make a tender offer for respondent’s UCC
shares.
2. Whether or not the rule on mandatory tender offer applies to the
indirect acquisition of shares in a listed company, in this case, the
indirect acquisition by Cemco of 36% of UCC, a publicly-listed
company, through its purchase of the shares in UCHC, a non-listed
company.
3. Whether or not the questioned ruling of the SEC can be applied
retroactively to Cemco’s transaction which was consummated under the
authority of the SEC’s prior resolution.
On the first issue, petitioner Cemco contends that while the SEC can
take cognizance of respondent’s complaint on the alleged violation by
petitioner Cemco of the mandatory tender offer requirement under
Section 19 of Republic Act No. 8799, the same statute does not vest the
SEC with jurisdiction to adjudicate and determine the rights and
obligations of the parties since, under the same statute, the SEC’s
authority is purely administrative. Having been vested with purely
administrative authority, the SEC can only impose administrative
sanctions such as the imposition of administrative fines, the suspension
or revocation of registrations with the SEC, and the like. Petitioner
stresses that there is nothing in the statute which authorizes the SEC to
issue orders granting affirmative reliefs. Since the SEC’s order
commanding it to make a tender offer is an affirmative relief fixing the
respective rights and obligations of parties, such order is void.
Petitioner further contends that in the absence of any specific grant of
jurisdiction by Congress, the SEC cannot, by mere administrative
regulation, confer on itself that jurisdiction.
Petitioner’s stance fails to persuade.
In taking cognizance of respondent’s complaint against petitioner and
eventually rendering a judgment which ordered the latter to make a
tender offer, the SEC was acting pursuant to Rule 19(13) of the
Amended Implementing Rules and Regulations of the Securities
Regulation Code, to wit:
13. Violation
If there shall be violation of this Rule by pursuing a purchase of equity
shares of a public company at threshold amounts without the required
tender offer, the Commission, upon complaint, may nullify the said
acquisition and direct the holding of a tender offer. This shall be without
prejudice to the imposition of other sanctions under the Code.
The foregoing rule emanates from the SEC’s power and authority to
regulate, investigate or supervise the activities of persons to ensure
compliance with the Securities Regulation Code, more specifically the
provision on mandatory tender offer under Section 19 thereof.7
Another provision of the statute, which provides the basis of Rule
19(13) of the Amended Implementing Rules and Regulations of the
Securities Regulation Code, is Section 5.1(n), viz:
[T]he Commission shall have, among others, the following powers and
functions:
xxxx
(n) Exercise such other powers as may be provided by law as well as
those which may be implied from, or which are necessary or incidental
to the carrying out of, the express powers granted the Commission to
achieve the objectives and purposes of these laws.
The foregoing provision bestows upon the SEC the general adjudicative
power which is implied from the express powers of the Commission or
which is incidental to, or reasonably necessary to carry out, the
performance of the administrative duties entrusted to it. As a regulatory
agency, it has the incidental power to conduct hearings and render
decisions fixing the rights and obligations of the parties. In fact, to
deprive the SEC of this power would render the agency inutile, because
it would become powerless to regulate and implement the law. As
correctly held by the Court of Appeals:
We are nonetheless convinced that the SEC has the competence to
render the particular decision it made in this case. A definite inference
may be drawn from the provisions of the SRC that the SEC has the
authority not only to investigate complaints of violations of the tender
offer rule, but to adjudicate certain rights and obligations of the
contending parties and grant appropriate reliefs in the exercise of its
regulatory functions under the SRC. Section 5.1 of the SRC allows a
general grant of adjudicative powers to the SEC which may be implied
from or are necessary or incidental to the carrying out of its express
powers to achieve the objectives and purposes of the SRC. We must
bear in mind in interpreting the powers and functions of the SEC that
the law has made the SEC primarily a regulatory body with the
incidental power to conduct administrative hearings and make decisions.
A regulatory body like the SEC may conduct hearings in the exercise of
its regulatory powers, and if the case involves violations or conflicts in
connection with the performance of its regulatory functions, it will have
the duty and authority to resolve the dispute for the best interests of the
public.8
For sure, the SEC has the authority to promulgate rules and regulations,
subject to the limitation that the same are consistent with the declared
policy of the Code. Among them is the protection of the investors and
the minimization, if not total elimination, of fraudulent and
manipulative devises. Thus, Subsection 5.1(g) of the law provides:
Prepare, approve, amend or repeal rules, regulations and orders, and
issue opinions and provide guidance on and supervise compliance with
such rules, regulations and orders.
Also, Section 72 of the Securities Regulation Code reads:
72.1. x x x To effect the provisions and purposes of this Code, the
Commission may issue, amend, and rescind such rules and regulations
and orders necessary or appropriate, x x x.
72.2. The Commission shall promulgate rules and regulations providing
for reporting, disclosure and the prevention of fraudulent, deceptive or
manipulative practices in connection with the purchase by an issuer, by
tender offer or otherwise, of and equity security of a class issued by it
that satisfies the requirements of Subsection 17.2. Such rules and
regulations may require such issuer to provide holders of equity
securities of such dates with such information relating to the reasons for
such purchase, the source of funds, the number of shares to be
purchased, the price to be paid for such securities, the method of
purchase and such additional information as the Commission deems
necessary or appropriate in the public interest or for the protection of
investors, or which the Commission deems to be material to a
determination by holders whether such security should be sold.
The power conferred upon the SEC to promulgate rules and regulations
is a legislative recognition of the complexity and the constantly-
fluctuating nature of the market and the impossibility of foreseeing all
the possible contingencies that cannot be addressed in advance. As
enunciated in Victorias Milling Co., Inc. v. Social Security
Commission9 :
Rules and regulations when promulgated in pursuance of the procedure
or authority conferred upon the administrative agency by law, partake of
the nature of a statute, and compliance therewith may be enforced by a
penal sanction provided in the law. This is so because statutes are
usually couched in general terms, after expressing the policy, purposes,
objectives, remedies and sanctions intended by the legislature. The
details and the manner of carrying out the law are often times left to the
administrative agency entrusted with its enforcement. In this sense, it
has been said that rules and regulations are the product of a delegated
power to create new or additional legal provisions that have the effect of
law.
Moreover, petitioner is barred from questioning the jurisdiction of the
SEC. It must be pointed out that petitioner had participated in all the
proceedings before the SEC and had prayed for affirmative relief. In
fact, petitioner defended the jurisdiction of the SEC in its Comment
dated 15 September 2004, filed with the SEC wherein it asserted:
This Honorable Commission is a highly specialized body created for the
purpose of administering, overseeing, and managing the corporate
industry, share investment and securities market in the Philippines. By
the very nature of its functions, it dedicated to the study and
administration of the corporate and securities laws and has necessarily
developed an expertise on the subject. Based on said functions, the
Honorable Commission is necessarily tasked to issue rulings with
respect to matters involving corporate matters and share acquisitions.
Verily when this Honorable Commission rendered the Ruling that " …
the acquisition of Cemco Holdings of the majority shares of Union
Cement Holdings, Inc., a substantial stockholder of a listed company,
Union Cement Corporation, is not covered by the mandatory tender
offer requirement of the SRC Rule 19," it was well within its powers
and expertise to do so. Such ruling shall be respected, unless there has
been an abuse or improvident exercise of authority.10
Petitioner did not question the jurisdiction of the SEC when it rendered
an opinion favorable to it, such as the 27 July 2004 Resolution, where
the SEC opined that the Cemco transaction was not covered by the
mandatory tender offer rule. It was only when the case was before the
Court of Appeals and after the SEC rendered an unfavorable judgment
against it that petitioner challenged the SEC’s competence. As
articulated in Ceroferr Realty Corporation v. Court of Appeals11 :
While the lack of jurisdiction of a court may be raised at any stage of an
action, nevertheless, the party raising such question may be estopped if
he has actively taken part in the very proceedings which he questions
and he only objects to the court’s jurisdiction because the judgment or
the order subsequently rendered is adverse to him.
On the second issue, petitioner asserts that the mandatory tender offer
rule applies only to direct acquisition of shares in the public company.
This contention is not meritorious.
Tender offer is a publicly announced intention by a person acting alone
or in concert with other persons to acquire equity securities of a public
company.12 A public company is defined as a corporation which is listed
on an exchange, or a corporation with assets exceeding ₱50,000,000.00
and with 200 or more stockholders, at least 200 of them holding not less
than 100 shares of such company.13 Stated differently, a tender offer is
an offer by the acquiring person to stockholders of a public company for
them to tender their shares therein on the terms specified in the
offer.14 Tender offer is in place to protect minority shareholders against
any scheme that dilutes the share value of their investments. It gives the
minority shareholders the chance to exit the company under reasonable
terms, giving them the opportunity to sell their shares at the same price
as those of the majority shareholders.15
Under Section 19 of Republic Act No. 8799, it is stated:
Tender Offers. 19.1. (a) Any person or group of persons acting in
concert who intends to acquire at least fifteen percent (15%) of any
class of any equity security of a listed corporation or of any class of any
equity security of a corporation with assets of at least Fifty million
pesos (₱50,000,000.00) and having two hundred (200) or more
stockholders with at least one hundred (100) shares each or who intends
to acquire at least thirty percent (30%) of such equity over a period of
twelve (12) months shall make a tender offer to stockholders by filing
with the Commission a declaration to that effect; and furnish the issuer,
a statement containing such of the information required in Section 17 of
this Code as the Commission may prescribe. Such person or group of
persons shall publish all requests or invitations for tender, or materials
making a tender offer or requesting or inviting letters of such a security.
Copies of any additional material soliciting or requesting such tender
offers subsequent to the initial solicitation or request shall contain such
information as the Commission may prescribe, and shall be filed with
the Commission and sent to the issuer not later than the time copies of
such materials are first published or sent or given to security holders.
Under existing SEC Rules,16 the 15% and 30% threshold acquisition of
shares under the foregoing provision was increased to thirty-five percent
(35%). It is further provided therein that mandatory tender offer is still
applicable even if the acquisition is less than 35% when the purchase
would result in ownership of over 51% of the total outstanding equity
securities of the public company.17
The SEC and the Court of Appeals ruled that the indirect acquisition by
petitioner of 36% of UCC shares through the acquisition of the non-
listed UCHC shares is covered by the mandatory tender offer rule.
This interpretation given by the SEC and the Court of Appeals must be
sustained.
The rule in this jurisdiction is that the construction given to a statute by
an administrative agency charged with the interpretation and application
of that statute is entitled to great weight by the courts, unless such
construction is clearly shown to be in sharp contrast with the governing
law or statute.18 The rationale for this rule relates not only to the
emergence of the multifarious needs of a modern or modernizing
society and the establishment of diverse administrative agencies for
addressing and satisfying those needs; it also relates to accumulation of
experience and growth of specialized capabilities by the administrative
agency charged with implementing a particular statute.19
The SEC and the Court of Appeals accurately pointed out that the
coverage of the mandatory tender offer rule covers not only direct
acquisition but also indirect acquisition or "any type of acquisition."
This is clear from the discussions of the Bicameral Conference
Committee on the Securities Act of 2000, on 17 July 2000.
SEN. S. OSMEÑA. Eto ang mangyayari diyan, eh. Somebody controls
67% of the Company. Of course, he will pay a premium for the first
67%. Control yan, eh. Eh, kawawa yung mga maiiwan, ang 33%
because the value of the stock market could go down, could go down
after that, because there will (p. 41) be no more market. Wala nang
gustong bumenta. Wala nang… I mean maraming gustong bumenta,
walang gustong bumili kung hindi yung majority owner. And they will
not buy. They already have 67%. They already have control. And this
protects the minority. And we have had a case in Cebu wherein Ayala A
who already owned 40% of Ayala B made an offer for another 40% of
Ayala B without offering the 20%. Kawawa naman yung nakahawak
ngayon ng 20%. Ang baba ng share sa market. But we did not have a
law protecting them at that time.
CHAIRMAN ROCO. So what is it that you want to achieve?
SEN. S. OSMEÑA. That if a certain group achieves a certain amount of
ownership in a corporation, yeah, he is obligated to buy anybody who
wants to sell.
CHAIRMAN ROCO. Pro-rata lang. (p. 42).
xxxx
REP. TEODORO. As long as it reaches 30, ayan na. Any type of
acquisition just as long as it will result in 30… (p.50)… reaches 30,
ayan na. Any type of acquisition just as long as it will result in 30,
general tender, pro-rata.20(Emphasis supplied.)
Petitioner counters that the legislator’s reference to "any type of
acquisition" during the deliberations on the Securities Regulation Code
does not indicate that congress meant to include the "indirect"
acquisition of shares of a public corporation to be covered by the tender
offer rule. Petitioner also avers that it did not directly acquire the shares
in UCC and the incidental benefit of having acquired the control of the
said public company must not be taken against it.
These arguments are not convincing. The legislative intent of Section 19
of the Code is to regulate activities relating to acquisition of control of
the listed company and for the purpose of protecting the minority
stockholders of a listed corporation. Whatever may be the method by
which control of a public company is obtained, either through the direct
purchase of its stocks or through an indirect means, mandatory tender
offer applies. As appropriately held by the Court of Appeals:
The petitioner posits that what it acquired were stocks of UCHC and not
UCC. By happenstance, as a result of the transaction, it became an
indirect owner of UCC. We are constrained, however, to construe
ownership acquisition to mean both direct and indirect. What is decisive
is the determination of the power of control. The legislative intent
behind the tender offer rule makes clear that the type of activity
intended to be regulated is the acquisition of control of the listed
company through the purchase of shares. Control may [be] effected
through a direct and indirect acquisition of stock, and when this takes
place, irrespective of the means, a tender offer must occur. The
bottomline of the law is to give the shareholder of the listed company
the opportunity to decide whether or not to sell in connection with a
transfer of control. x x x.21
As to the third issue, petitioner stresses that the ruling on mandatory
tender offer rule by the SEC and the Court of Appeals should not have
retroactive effect or be made to apply to its purchase of the UCHC
shares as it relied in good faith on the letter dated 27 July 2004 of the
SEC which opined that the proposed acquisition of the UCHC shares
was not covered by the mandatory offer rule.
The argument is not persuasive.
The action of the SEC on the PSE request for opinion on the Cemco
transaction cannot be construed as passing merits or giving approval to
the questioned transaction. As aptly pointed out by the respondent, the
letter dated 27 July 2004 of the SEC was nothing but an approval of the
draft letter prepared by Director Callanga. There was no public hearing
where interested parties could have been heard. Hence, it was not issued
upon a definite and concrete controversy affecting the legal relations of
parties thereby making it a judgment conclusive on all the parties. Said
letter was merely advisory. Jurisprudence has it that an advisory opinion
of an agency may be stricken down if it deviates from the provision of
the statute.22 Since the letter dated 27 July 2004 runs counter to the
Securities Regulation Code, the same may be disregarded as what the
SEC has done in its decision dated 14 February 2005.
Assuming arguendo that the letter dated 27 July 2004 constitutes a
ruling, the same cannot be utilized to determine the rights of the parties.
What is to be applied in the present case is the subsequent ruling of the
SEC dated 14 February 2005 abandoning the opinion embodied in the
letter dated 27 July 2004. In Serrano v. National Labor Relations
Commission,23 an argument was raised similar to the case under
consideration. Private respondent therein argued that the new doctrine
pronounced by the Court should only be applied prospectively. Said
postulation was ignored by the Court when it ruled:
While a judicial interpretation becomes a part of the law as of the date
that law was originally passed, this is subject to the qualification that
when a doctrine of this Court is overruled and a different view is
adopted, and more so when there is a reversal thereof, the new doctrine
should be applied prospectively and should not apply to parties who
relied on the old doctrine and acted in good faith. To hold otherwise
would be to deprive the law of its quality of fairness and justice then, if
there is no recognition of what had transpired prior to such adjudication.
It is apparent that private respondent misconceived the import of the
ruling. The decision in Columbia Pictures does not mean that if a new
rule is laid down in a case, it should not be applied in that case but that
said rule should apply prospectively to cases arising afterwards. Private
respondent’s view of the principle of prospective application of new
judicial doctrines would turn the judicial function into a mere academic
exercise with the result that the doctrine laid down would be no more
than a dictum and would deprive the holding in the case of any force.
The price, on the basis of the SEC decision, is determinable. Moreover,
the implementing rules and regulations of the Code are sufficient to
inform and guide the parties on how to proceed with the mandatory
tender offer.
WHEREFORE, the Decision and Resolution of the Court of Appeals
dated 24 October 2005 and 6 March 2006, respectively, affirming the
Decision dated 14 February 2005 of the Securities and Exchange
Commission En Banc, are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.

Indeed, when the Court formulated the Wenphil doctrine, which we MINITA V. CHICO-NAZARIO
reversed in this case, the Court did not defer application of the rule laid Associate Justice
down imposing a fine on the employer for failure to give notice in a
case of dismissal for cause. To the contrary, the new rule was applied WE CONCUR:
right then and there. x x x.
CONSUELO YNARES-SANTIAGO
Lastly, petitioner alleges that the decision of the SEC dated 14 February Associate Justice
2005 is "incomplete and produces no effect." Chairperson

This contention is baseless. MA. ALICIA AUSTRIA- ANTONIO EDUARDO B.

MARTINEZ NACHURA
The decretal portion of the SEC decision states: Associate Justice Associate Justice

In view of the foregoing, the letter of the Commission, signed by ATT E S TAT I O N
Director Justina F. Callangan, dated July 27, 2004, addressed to the
Philippine Stock Exchange is hereby REVERSED and SET ASIDE. I attest that the conclusions in the above Decision were reached in
Respondent Cemco is hereby directed to make a tender offer for UCC consultation before the case was assigned to the writer of the opinion of
shares to complainant and other holders of UCC shares similar to the the Court’s Division.
class held by respondent UCHC, at the highest price it paid for the
beneficial ownership in respondent UCC, strictly in accordance with CONSUELO YNARES-SANTIAGO
SRC Rule 19, Section 9(E).24 Associate Justice
Chairperson, Third Division
A reading of the above ruling of the SEC reveals that the same is
complete. It orders the conduct of a mandatory tender offer pursuant to C E R T I F I CAT I O N
the procedure provided for under Rule 19(E) of the Amended
Implementing Rules and Regulations of the Securities Regulation Code Pursuant to Section 13, Article VIII of the Constitution, and the Division
for the highest price paid for the beneficial ownership of UCC shares. Chairperson’s Attestation, it is hereby certified that the conclusions in
 10
the above Decision were reached in consultation before the case was Rollo, pp. 182-183.
assigned to the writer of the opinion of the Court’s Division.
11
426 Phil. 522, 530 (2002).
REYNATO S. PUNO
12
Chief Justice The Philippine Securities Regulation Code (Annotated), Rafael A.
Morales (2005 Ed.), p. 153.
13
Id.
Footnotes
14
Id.
1
Penned by Associate Justice Mario L. Guariña III with Associate
Justices Rebecca De Guia-Salvador and Arturo G. Tayag, concurring. 15
Securities Regulation Code (Republic Act No. 8799) Annotated with
Rollo, pp. 68-79. Implementing Rules and Regulations, Lucila M. Decasa (First Edition,
2004) p. 64.
2
Id. at 119.
16
Rule 19(2) of the Amended Implementing Rules and Regulations of
3
Id. at 254-264. the Securities Regulation Code dated 30 December 2003 states:
4
Id. at 71-72. 2. Mandatory tender offers
5
Id. at 78. A. Any person or group of persons acting in concert, who intends to
acquire thirty-five percent (35%) or more of equity shares in a public
6
Id. at 576-578. company shall disclose such intention and contemporaneously make a
tender offer for the percent sought to all holders of such class, subject to
7
Section 5, Subsection 5.1. (d) of the Securities Regulation Code paragraph (9)(E) of this Rule.
provides:
In the event that the tender offer is oversubscribed, the aggregate
[T]he Commission shall have, among others, the following powers and amount of securities to be acquired at the close of such tender offer shall
functions: be proportionately distributed across both selling shareholder with
whom the acquirer may have been in private negotiations and minority
xxxx shareholders.

(d) Regulate, investigate or supervise the activities of persons to ensure B. Any person or group of persons acting in concert, who intends to
compliance. acquire thirty-five percent (35%) or more of equity shares in a public
company in one or more transactions within a period of twelve (12)
8
Rollo, p. 75. months, shall be required to make a tender offer to all holders of such
class for the number of shares so acquired within the said period.
9
114 Phil. 555, 558 (1962).
C. If any acquisition of even less than thirty-five percent (35%) would
result in ownership of over fifty-one percent (51%) of the total
outstanding equity securities of a public company, the acquirer shall be
required to make a tender offer under this Rule for all the outstanding
equity securities to all remaining stockholders of the said company at a
price supported by a fairness opinion provided by an independent
financial advisor or equivalent third party. The acquirer in such a tender
offer shall be required to accept any and all securities thus tendered.
17
Id.
18
Nestle Philippines, Inc. v. Court of Appeals, G.R. No. 86738, 13
November 1991, 203 SCRA 504, 510.
19
Id. at 510-511.
20
Rollo, pp. 256-257.
21
Id. at 76-77.
22
San Juan de Dios Hospital Employees Association-AFW v. National
Labor Relations Commission, 346 Phil. 1003, 1010 (1997).
23
387 Phil. 345, 357 (2000).
24
Rollo, p. 263.