Statutory Construction Cases – Finals

Compiled by: Teodoro R. Llanes II

CONTENTS

Siozon v. People | G.R. No. 202692 | November 12, 2014 ...................................................................... 2

Honorable Monetary Board et al v. Philippine Veterans Bank | G.R. No. 189571 | January 21, 2015 .... 9
DENR v. UPCI | G.R. No. 212081 | February 23, 2015 ............................................................................ 14
DOH v. Philip Morris Manufacturing | G.R. No. 202943 | March 25, 2015 ............................................ 21
Consino v. People & Nealiga | G.R. No. 200465 | April 20, 2015 ........................................................... 27
Davao Water District v. Aranuez, et al | G.R. No. 194192 | June 16, 2015 ............................................ 37
SEC v. Laigo | G.R. No. 188639 | September 2, 2015 ............................................................................. 47
Paredes v. Feed The Children Philippines | G.R. No. 184397 | September 9, 2015 ............................... 60
 Siozon v. People | G.R. No. 202692 | November 12, 2014

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 202692 November 12, 2014

EDMUND SYDECO y SIONZON, Petitioner,

vs.
PEOPLE OF THE PHILIPPINES, Respondent.

DECISION

VELASCO, JR., J.:

Assailed and sought to be set aside in this petition for review under Rule 45 are the December 28, 2011
Decision1 and July 18, 2012 Resolution2 of the Court of Appeals (CA) in CA-G.R. CR No. 33567. The
assailed issuances affirmed the decision3 of the Regional Trial Court (RTC) of Manila, Branch 12, in
Criminal Case Nos. 09-270107-08 which, in turn, affirmed that of the Metropolitan Trial Court (MeTC) in
Manila adjudging petitioner Edmund Sydeco (Sydeco) guilty of drunk driving and resisting arrest.4

The factual backdrop:

On July 20, 2006, separate Informations, one for Violation of Section 56(f) of Republic Act No. (RA)
41365 and another, for Violation of Article 151 of the Revised Penal Code (RPC)6 were filed against
petitioner Sydeco with the MeTC in Manila and eventually raffled to Branch 14 of that court. The accusatory
portions of the interrelated informations, docketed as Crim. Case No. 052527-CN for the first offense and
Crim. Case No. 052528-CN for the second, respectively read:

1. Crim. Case No. 052527-CN

That on or about June 11, 2006, in the City of Manila, Philippines, the said accused, being then the driver
and owner of a car, did then and there willfully and unlawfully, drive, manage and operate the same along
Roxas Blvd. cor. Quirino Avenue, Malate, in said city, while under the influence of liquor, in violation of
Section 56(f) of Republic Act 4136.

Contrary to law.

2. Crim. Case No. 052528-CN

That on or about June 11, 2006, in the City of Manila, Philippines, the said accused, did then and there
willfully and unlawfully resist and disobey P/INSP Manuel Aguilar, SPO2 Virgilio Paulino, SPO4 Efren
Bodino and PO3 Benedict Cruz III, bonafide member of the Philippine National Police, Malate Police
Station-9, duly qualified and appointed, and while in the actual performance of their official duties as such
police officers, by then and there resisting, shoving and pushing, the hands of said officers while the latter
was placing him under arrest for violation of Article 151 of the Revised Penal Code.

Contrary to law.

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By Order of September 19, 2006, the MeTC classified the cases as falling under, thus to be governed by,
the Rule on Summary Procedure.

When arraigned, petitioner, as accused, pleaded "Not Guilty" to both charges.

During the trial of the two consolidated cases, the prosecution presented in evidence the oral testimonies
of SPO4 Efren Bodino (Bodino),7 PO2 Emanuelle Parungao8 and Ms. Laura Delos Santos,9 plus the
documents each identified while in the witness box, among which was Exh. "A", with sub-markings, the
Joint Affidavit of Arrest10 executed by SPO2 Bodino and two other police officers. The defense’s witnesses,
on the other hand, consisted of Sydeco himself, his wife, Mildred, and Joenilo Pano.

The prosecution’s version of the incident, as summarized in and/or as may be deduced from, the CA
decision now on appeal is as follows:

On or about June 11, 2006, P/Insp. Manuel Aguilar (Aguilar), SPO4 Bodino, PO3 Benedict Cruz III and
another officer were manning a checkpoint established along Roxas Boulevard corner Quirino Ave., Malate,
Manila when, from about twenty (20) meters away, they spotted a swerving red Ford Ranger pick up with
plate number XAE-988. Petitioner was behind the wheel. The team members, all inuniform, flagged the
vehicle down and asked the petitioner to alightfrom the vehicle so he could take a rest at the police station
situated nearby,before he resumes driving.11 Petitioner, who the policemen claimed was smelling of liquor,
denied being drunk and insisted he could manage to drive. Then in a raised voice, petitioner started talking
rudely to the policemen and in fact yelled at P/Insp. Aguilar blurting: "P…g ina mo, bakit mo ako hinuhuli."
Atthat remark, P/Insp. Aguilar, who earlier pointed out to petitioner that his team had seen him swerving
and driving under the influence of liquor, proceeded to arrestpetitioner who put up resistance. Despite
petitioner’s efforts to parry the hold on him, the police eventually succeeded in subduing him who was then
brought to the Ospital ng Maynila where he was examined and found to be positive of alcoholic breath per
the Medical Certificate issuedby that hospital, marked as Exh. "F". Petitioner was then turned over to the
Malate Police Station for disposition.12 Petitioner, on the other hand, claimed tobe a victim in the incident in
question, adding in this regard that he has in fact filed criminal charges for physical injuries, robbery and
arbitrary detention against P/Insp. Aguilar et al. In his Counter-Affidavit13 and his Complaint-
Affidavit14 appended thereto, petitioner averred that, in the early morning of June 12, 2006, he together with
Joenilo Pano and Josie Villanueva, cook and waitress, respectively, in his restaurant located along
Macapagal Ave., Pasay City, were on the way home from on board his pick-up when signaled to stop by
police officers at the area immediately referred to above. Their flashlights trained on the inside of the vehicle
and its occupants, the policemen then asked the petitioner to open the vehicle’s door and alight for a body
and vehicle search, a directive he refused to heed owing to a previous extortion experience. Instead, he
opened the vehicle window, uttering, "plain view lang boss, plain view lang." Obviously irked by this remark,
one of the policemen, P/Insp. Aguilar, as it turnedout, then told the petitioner that he was drunk, pointing to
three cases of empty beer bottles in the trunk of the vehicle. Petitioner’s explanation about being sober and
that the empty bottles adverted to came from his restaurant was ignored as P/Insp. Aguilar suddenly boxed
him (petitioner) on the mouth and poked a gun at his head, at the same time blurting, "P…g ina mo gusto
mo tapusin na kita dito marami ka pang sinasabi." The officers then pulled the petitioner out of the driver’s
seat and pushed him into the police mobile car, whereupon he, petitioner, asked his companions to call up
his wife. The policemen then brought petitioner to the Ospital ng Maynila where they succeeded in securing
a medical certificate under the signature of one Dr. Harvey Balucating depicting petitioner as positive of
alcoholic breath, although he refused to be examined and no alcohol breath examination was conducted.
He was thereafter detained from 3:00 a.m.of June 12, 2006 and released in the afternoon of June 13, 2006.
Before his release, however, he was allowed to undergo actual medical examination where the resulting
medical certificate indicated that he has sustained physical injuries but negative for alcohol breath. Ten
days later, petitioner filed his Complaint-Affidavit against Dr. Balucating, P/Insp. Aguilar and the other police
officers.

Petitioner also stated in his counter-affidavit that, under Sec. 29 of R.A. 4136, or the Land Transportation
and Traffic Code, the procedure for dealing with a traffic violation is not to place the erring driver under
arrest, but to confiscate his driver’s license.

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On June 26, 2009, the MeTC rendered judgment finding petitioner guilty as charged, disposing as follows:

WHEREFORE, premises considered, the prosecution having established the guilt of the accused beyond
reasonable doubt, his conviction of the offenses charges is hereby pronounced. Accordingly, he is
sentenced to:

1. Pay a fine of two hundred fifty pesos (₱250.00) for Criminal Case No. 052527-CN; and

2. Suffer imprisonment of straight penalty of three (3) months and pay a fine of two hundred fifty
pesos (₱250.00) for Criminal Case No. 052528-CN.

For lack of basis, no civil liability is adjudged.

The Branch Clerk of Court is directed to certify to the Land Transportation Office the result of this case,
stating further the data required under Section 5815 of Republic Act 4136.

Therefrom, petitioner appealed to the RTC on the main submissions that the MeTC erred in: 1) according
credit to the medical certificate issued by Dr. Balucating, although the records custodian of Ospital ng
Maynila was presented to testify thereon instead of the issuing physician, and 2) upholding the veracity of
the joint affidavit of arrest of P/INSP Manuel Aguilar, SPO4 Efren Bodino, and PO3 Benedict Cruz III,
considering that only SPO4 Bodino appeared in court to testify.

By Decision16 dated February 22, 2010, the RTC affirmed the conviction of the petitioner, addressing the
first issue thus raised in the appeal in the following wise: Dr. Balucating’s failure to testify relative to
petitioner’s alcoholic breath, as indicatedin the medical certificate, is not fatal as such testimony would only
serve to corroborate the testimony on the matter of SPO4 Bodino, noting thatunder the Rules of
Court,17 observations of the police officers regarding the petitioner’s behavior would suffice to support the
conclusion of the latter’s drunken state on the day he was apprehended.18

Apropos the second issue, the RTC pointed out that the prosecution has the discretion as to how many
witnesses it needs to present before the trial court, the positive testimony of a single credible witness as to
the guilt of the accused being reasonable enough to warrant a conviction. The RTC cited established
jurisprudence19 enunciating the rule that preponderance is not necessarily with the greatest number as
"[W]itnesses are to be weighed, not numbered." Following the denial by the RTC of his motion for
reconsideration, petitioner went to the CA on a petition for review, the recourse docketed as CA-G.R. CR
No. 33567. By a Decision dated December 28, 2011, as would be reiterated in a Resolution of July 18,
2012, the appellatecourt affirmed that of the RTC, thus:

WHEREFORE, the petition is DENIED. The assailed Decision dated February 22, 2010 of the RTC, Manila,
Branch 12, is AFFIRMED.

SO ORDERED.

Hence, this petition on the following stated issues:

I. The CA erred in upholding the presumption of regularity in the performance of duties by the police
officers; and

II. The CA erred in giving weight to the Medical Certificate issued by Dr. Harvey Balucating, in the
absence of his testimony before the Court.

The petition is meritorious.

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Prefatory, the rule according great weight, even finality at times, to the trial court’s findings of fact does hold
sway when, as here, it appears in the record that facts and circumstancesof weight and substance have
been overlooked, misapprehended or misapplied in a case under appeal.20 Corollary, it is basic that an
appeal in criminal prosecutions throws the whole case wide open for review, inclusive of the matter of
credibility and appreciation of evidence.21` Peace officers and traffic enforcers,like other public officials and
employees are bound to discharge their duties with prudence, caution and attention, which careful men
usually exercise in the management of their own affairs.22

In the case at bar, the men manning the checkpoint in the subject area and during the period material
appearednot to have performed their duties as required by law, or at least fell short of the norm expected
of peace officers. They spotted the petitioner’s purported swerving vehicle. They then signaled him to stop
which he obeyed. But they did not demand the presentation of the driver’s license orissue any ticket or
similar citation paper for traffic violation as required under the particular premises by Sec. 29 of RA 4136,
which specifically provides:

SECTION 29. Confiscation of Driver’s License. – Law enforcement and peace officers of other agencies
duly deputized by the Director shall, in apprehending a driver for any violation of this Act or any regulations
issued pursuant thereto, or of local traffic rules and regulations x x x confiscate the license ofthe driver
concerned and issue a receipt prescribed and issuedby the Bureau therefor which shall authorize the driver
to operate a motor vehicle for a period not exceeding seventy-two hours from the time and date of issue of
said receipt. The period so fixed in the receipt shall not be extended, and shall become invalid thereafter.x
x x (Emphasis added.) Instead of requiring the vehicle’s occupants to answer one or two routinary questions
out of respectto what the Court has, in Abenes v. Court of Appeals,23 adverted to as the motorists’ right of
"free passage without [intrusive] interruption," P/Insp. Aguilar, et al. engaged petitioner in what appears to
be an unnecessary conversation and when utterances were made doubtless not to their liking, they ordered
the latter to step out of the vehicle, concluding after seeing three (3) empty cases of beer at the trunk of the
vehicle that petitioner was driving under the influence of alcohol. Then petitioner went on with his "plain
view search" line. The remark apparently pissed the police officers off no end as one of them immediately
lashed at petitioner and his companions as "mga lasing" (drunk) and to get out of the vehicle, an
incongruous response to an otherwise reasonable plea. Defense witness, Joenilo Pano, graphically
described this particular event in his sinumpaang salaysay, as follows:

x x x matapos kami huminto ay naglapitan sa amin ang mga pulis, nag flash light sa loob ng sasakyan at
sa aming mga mukha.

x x x isang pulis ang nag-utos sa aminna kami ay magsi-baba at buksan ang pintuan ng nasabing sasakyan.

x x x dahil doon sinabi ni Kuya sa mga pulis, na hindi pwede iyon at pinigilan niya ako at ang aking kasama
kong waitress na bumaba.

x x x iginiit ni Kuya sa mga pulisang salitang "PLAIN VIEW LANG BOSS, PLAIN VIEW LANG" pero iyon
ayhindi nila pinansin. Sa halip as isang pulis ang nagsabi na "MGA LASING KAYO HETO MAY CASE PA
KAYO NG BEER".

x x x habang nagpapaliwanag si Kuya, isang pulis ang biglang kumuha ng susi ng sasakyan habang ang
isang pulis ang biglang sumuntok sa bibig ni Kuya, nagbunot ng baril at tinutukan sa ulo si Kuya.

x x x dahil doon ay nagmakaawa ako na wag barilin si Kuya subalit ako rin ay tinutukan ng baril. x x x na
matapos suntukin si Kuya aypinagtulungan siya ng mga pulis na ilabas sa sasakyan at nang mailabas
siyaay pinagtulakan siya ng mga pulis sa gilid ng kalsada habang hawak ang kanilang baril. 24

Pano’s above account ironicallyfinds in a way collaboration from the arresting officers themselves who
admitted that they originally had no intention to search the vehicle in question nor subject its occupants to
a body search. The officers wrote in their aforementioned joint affidavit:

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 xxxx

That we arrested the suspect, Edmund Sydeco y Siozon x x x for violation of RA 4136 (Driving under the
influence of liquor), and violation of Article 151 of the RPC (Resisting Arrest) x x x committed on or about
3:30A.M., June 11, 2006 along x x x Malate, Manila. x x x He began to raise his voice and converse with
us rudely without considering that we are in uniform, on duty and performing our job. P/INSP Manuel Aguilar
pointed out that we saw him swerving and driving under the influence of liquor that was why we are inviting
him to our police station in which our intention was to make him rest for a moment before he continue to
drive. x x x (Emphasis added.)

In fine, at the time of his apprehension, or when he was signaled to stop, to be precise, petitioner has not
committed any crime or suspected of having committed one. "Swerving," as ordinarily understood,refers to
a movement wherein a vehicle shifts from a lane to another or to turn aside from a direct course of action
or movement.25 The act may become punishable when there is a sign indicating that swerving is prohibited
or where swerving partakes the nature ofreckless driving, a concept defined under RA 4136, as:

SECTION 48. Reckless Driving. – Noperson shall operate a motor vehicle on any highway recklessly or
without reasonable caution considering the width, traffic, grades, crossing, curvatures, visibility and other
conditions of the highway and the conditions of the atmosphere and weather, or so as to endanger the
property or the safetyor rights of any person or so as to cause excessive or unreasonable damage to the
highway.

Swerving is not necessarily indicative of imprudent behavior let alone constitutive of reckless driving. To
constitute the offense of reckless driving, the act must be something more than a mere negligence in the
operation of a motor vehicle, and a willful and wantondisregard of the consequences is required. 26 Nothing
in the records indicate that the area was a "no swerving or overtaking zone." Moreover, the swerving
incident, if this be the case, occurred at around 3:00 a.m. when the streets are usually clear of moving
vehicles and human traffic, and the danger to life, limb and property to third persons is minimal. When the
police officers stopped the petitioner’s car, they did not issue any ticket for swerving as required under
Section 29 of RA 4136. Instead, they inspected the vehicle, ordered the petitioner and his companions to
step down of their pick up and concluded that the petitioner was then drunk mainly because of the cases
of beer found at the trunk of the vehicle. On re-direct examination, SPO4 Bodino testified:

Q: On that particular date, time and place … what exactly prompted you to arrest the accused (sic) the
charged in for Viol. of Section 56(f) of R.A. 4136?

A: Noong mag check-up kami, naamoynamin na amoy alak siya at yung sasakyan ay hindi maganda ang
takbo.

Q: Now you stated in your affidavit of arrest Mr. Witness that you spotted the vehicle of the accused
swerving, is that correct?

A: Yes, sir.

Q. Is that also the reason why you apprehended him?

A: Yes, sir.

Q: And what happened after Mr. Witness, when you approached the vehicle of the accused?

A: The accused was in a loud voice. He was asking, "Bakit daw siya pinahihinto?"

xxxx

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Q: How do you describe the resistance Mr. Witness?

A: He refused to ride with usgoing to the hospital, Your Honor.

x x x x27

Going over the records, it is fairly clear that what triggered the confrontational stand-off between the police
team, on one hand, and petitioner on the other, was the latter’s refusal to get off of the vehicle for a body
and vehicle search juxtaposed by his insistence on a plain view search only. Petitioner’s twin gestures
cannot plausibly be considered as resisting a lawful order.28 He may have sounded boorish or spoken
crudely at that time, but none of this would make him a criminal. It remains to stress that the petitioner has
not, when flagged down, committed a crime or performed an overt act warranting a reasonable inference
of criminal activity. He did not try to avoid the road block established. He came to a full stop when so
required to stop. The two key elements of resistance and serious disobedience punished under Art. 151 of
the RPC are: (1) That a person in authority or his agent is engaged in the performance of official duty or
gives a lawful order to the offender; and (2) That the offender resists or seriously disobeys such person or
his agent.29

There can be no quibble that P/Insp. Aguilar and his apprehending team are persons in authority or agents
of a person in authority manning a legal checkpoint. But surely petitioner’s act of exercising one’s right
against unreasonable searches30 to be conducted in the middle of the night cannot, in context, be equated
to disobedience let alone resisting a lawful order in contemplation of Art. 151 of the RPC. As has often been
said, albeit expressed differently and under dissimilar circumstances, the vitality of democracy lies not in
the rights it guarantees, but in the courage of the people to assert and use them whenever they are ignored
or worse infringed.31 Moreover, there is, to stress, nothing in RA 4136 that authorized the checkpoint-
manning policemen to order petitioner and his companions to get out of the vehicle for a vehicle and body
search. And it bears to emphasize that there was no reasonable suspicion of the occurrence of a crime that
would allow what jurisprudence refers to as a "stop and frisk" action. As SPO4 Bodino no less testified, the
only reason why they asked petitioner to get out of the vehicle was not because he has committed a crime,
but because of their intention toinvite him to Station 9 so he could rest before he resumes driving. But
instead of a tactful invitation, the apprehending officers, in an act indicative of overstepping of their duties,
dragged the petitioner out of the vehicle and, in the process of subduing him, pointed a gun and punched
him on the face. None of the police officers, to note, categorically denied the petitioner’s allegation
aboutbeing physically hurt before being brought to the Ospital ng Maynila to be tested for intoxication. What
the policemen claimed was that it took the three (3) of them to subdue the fifty-five year old petitioner. Both
actions were done in excess of their authority granted under RA 4136. They relied on the medical certificate
issued by Dr. Balucating attesting that petitioner showed no physical injuries. The medical certificate was
in fact challenged not only because the petitioner insisted at every turn that he was not examined, but also
because Dr. Balucating failed to testify as to its content. Ms. Delos Santos, the medical record custodian
ofthe Ospital ng Maynila, testified, but only to attest that the hospital has a record of the certificate. The trial
court, in its decision, merely stated:

At the outset, the records of the case show that the same were not testified upon by the doctor who issued
it. Instead, the Records Custodian of the Ospital ng Maynila was presented by the Prosecution to testify
on the said documents.

However, although the doctor who examined the accused was unable to testify to affirm the contents of the
Medical Certificate he issued (re: that he was found to have an alcoholic breath), this court finds that the
observation of herein private complainants as to the accused’s behavior and condition after the incident
was sufficient.

Under Section 50 of Rule 130 of the Revised Rules of evidence:

The opinion of a witness for which proper basis is given, may be received in evidence regarding x x x

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The witness may also testify on his impressions of the emotion, behavior, condition or appearance of a
person Under Section 15 of the Revised Rules on Summary Procedure, "at the trial, the affidavits submitted
by the parties shall constitute the direct testimonies of the witnesses who executed the same."32

In sum, the MeTC, as echoed by RTC and CA later, did not rely on the medical certificate Dr. Balucating
issued on June 12, 2006 as to petitioner’s intoxicated state, as the former was not able to testify as to its
contents, but on the testimony of SPO4Bodino, on the assumption that he and his fellow police officers
were acting in the regular performance of their duties. It cannot be emphasized enough that smelling of
liquor/alcohol and be under the influence of liquor are differing concepts. Corollarily, it is difficult to
determine with legally acceptable certainty whether a person is drunk in contemplation of Sec. 56(f) of RA
4136 penalizing the act of driving under the influence of alcohol. The legal situation has of course changed
with the approval in May 2013 of the Anti-Drunk and Drugged Driving Act of 2013 (RA 10586) which also
penalizes driving under the influence of alcohol (DUIA),33 a term defined under its Sec. 3(e) as the "act of
operating a motor vehicle while the driver’s blood alcohol concentration level has, after being subjected to
a breath analyzer test reached the level of intoxication as established jointly by the [DOH], the NAPOLCOM]
and the [DOTC]. And under Sec. 3(g) of the IRR of RA 10586, a driver of a private motor vehicle with gross
vehicle weight not exceeding 4,500 kilograms who has BAC [blood alcohol concentration] of 0.05% or
higher shall be conclusive proof that said driver isdriving under the influence of alcohol. Viewed from the
prism of RA 10586, petitioner cannot plausibly be convicted of driving under the influence of alcohol for this
obvious reason: he had not been tested beyond reasonable doubt, let alone conclusively, for reaching
during the period material the threshold level of intoxication set under the law for DUIA, i.e., a BAC of 0.05%
or over. Under Art. 22 of the RPC,34 penal laws shall be given retroactive insofar asthey are favorable to
the accused. Section 19 of RA 10586 expressly modified Sec. 56(f) of RA 4136. Verily, even by force of
Art. 22 ofthe RPC in relation to Sec. 3(e) of RA 10586 alone, petitioner could very well be acquitted for the
charge of driving under the influence of alcohol, even if the supposed inculpatory act occurred in 2006.

Parenthetically, the Office of the City Prosecutor of Manila, per its Resolution 35 of November 21, 2006
found, on the strength of another physical examination from the same Ospital ng Maynila conducted by Dr.
Devega on the petitioner on the same day,June 12, but later hour, probable cause for slight physical injuries
against P/Insp. Aguilar et al. That finding to be sure tends to indicate that the police indeed man handled
the petitioner and belied, or at least cancelled out, the purported Dr. Balucating’s finding as to petitioner’s
true state.

The Court must underscore at this juncture that the petitioner, after the unfortunate incident, lost no time
incommencing the appropriate criminal charges against the police officers and Dr. Balucating, whomhe
accused of issuing Exh. "F" even without examining him. The element of immediacy in the filing lends
credence to petitioner’s profession of innocence, particularly of the charge of disobeying lawful order or
resisting arrest. Certainly not to be overlooked is the fact that petitioner,in so filing his complaint, could not
have possibly been inspired by improper motive, the police officers being complete strangers to him and
vice versa. Withal, unless he had a legitimate grievance, it is difficult to accept the notion that petitioner
would expose himself to harm’s way by filing a harassment criminal suit against policemen.

Conviction must come only after it survives the test of reason.36 It is thus required that every circumstance
favoring one’s innocence be duly taken into account.37 Given the deviation of the police officers from the
standard and usual procedure in dealing with traffic violation by perceived drivers under the influence of
alcoholand executing an arrest, the blind reliance and simplistic invocation by the trial court and the CA on
the presumption of regularity in the conduct of police duty is clearly misplaced. As stressed in People v.
Ambrosio,38 the presumption of regularity is merely just that, a presumption disputable by contrary proof
and which when challenged by the evidence cannot be regarded as binding truth. And to be sure, this
presumption alone cannot preponderate over the presumption of innocence that prevails if not overcome
by proof that obliterates all doubts as to the offender’s culpability. In the present case, the absence of
conclusive proof being under the influence of liquor while driving coupled with the forceful manner the police
yanked petitioner out of his vehicle argues against or at least cast doubt on the finding of guilt for drunken
driving and resisting arrest.

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In case of doubt as to the moral certainty of culpability, the balance tips in favor of innocence or at least
infavor of the milderform of criminal liability. This is as it should be. For, it is basic, almost elementary, that
the burden of proving the guiltof an accused lies on the prosecution which must rely on the strength of its
evidence and noton the weakness of the defense.

WHEREFORE, in light of all the foregoing, the appealed Decision and Resolution of the Court of Appeals
in CA-G.R. CR No. 33567 are hereby REVERSED and SET ASI:OE. Petitioner is hereby acquitted of the
crimes charged in Criminal Case No. 052527-CN and Criminal Case No. 052528-CN.

No pronouncement as to costs.

PRESBITERO J. VELASCO, JR.

Associate Justice

Honorable Monetary Board et al v. Philippine Veterans Bank | G.R. No. 189571 | January 21, 2015

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 189571 January 21, 2015

THE HONORABLE MONETARY BOARD and GAIL U. FULE, Director, Supervision and Examination
Department II, and BANGKO SENTRAL NG PILIPINAS, Petitioners,
vs.
PHILIPPINE VETERANS BANK, Respondent.

DECISION

PERALTA, J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to reverse and
set aside the Decision1 dated June 15, 2009 and Order2 dated August 25, 2009 of the Regional Trial Court
(RTC) of Makati City in Civil Case No. 07-271.

The factual antecedents follow.

Respondent established a pension loan product for bona fide veterans or their surviving spouses, as well
as salary loan product for teachers and low-salaried employees pursuant to its mandate under Republic
Act (RA) Nos. 35183 and 71694 to provide financial assistance to veterans and teachers.

As its clientele usually do not have real estate or security to cover their pension or salary loan, other than
their continuing good health and/or employment, respondent devised a program by charging a premium in
the form of a higher fee known as Credit Redemption Fund(CRF) from said borrowers. Resultantly, Special
Trust Funds were established by respondent for the pension loans of the veteran-borrowers, salary loans
of teachers and low-salaried employees. These trust funds were, in turn, managed by respondent’s Trust
and Investment Department, with respondent as beneficiary. The fees charged against the borrowers were
credited to the respective trust funds, which would beused to fully pay the outstanding obligation of the
borrowers in case of death.

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On April 30, 2002, an examination was conducted by the Supervision and Examination Department (SED)
II of the Bangko Sentral ng Pilipinas (BSP). It found, among other things, that respondent’s collection of
premiums from the proceeds of various salary and pension loans of borrowers to guarantee payment of
outstanding loans violated Section 54 of RA No. 87915 which states that banks shall not directly engage in
insurance business as insurer.

Subsequently, respondent wrote a letter to petitioners justifying the existence of the CRF.

In a letter dated March 17, 2003, the BSP notified respondent about the Insurance Commission’s opinion
that the CRF is a form of insurance. Thus, respondent was requested to discontinue the collection of said
fees.

On February 24, 2004, respondent complied with the BSP’s directive and discontinued the collection of
fees for CRF.

On September 16, 2005, petitioners issued Monetary Board (MB) Resolution No. 1139 directing
respondent’s Trust and Investment Department to return to the borrowers all the balances of the CRF in
the amount of ₱144,713,224.54 as of August31, 2004, and to preserve the records of borrowers who were
deducted CRFs from their loan proceeds pending resolution or ruling of the Office of the General Counsel
of the BSP. Thus, respondent requested reconsideration of said MB Resolution. However, the same was
denied ina letter dated December 5, 2006.

Accordingly, respondent filed a Petition for Declaratory Relief with the RTC of Makati City.

In response, petitioners filed a Motion to Dismiss alleging that the petition for declaratory relief cannot
prosper due to respondent’s prior breach of Section 54 of RA No. 8791.

In an Order6 dated September 24, 2007, the RTC dismissed respondent’s petition for declaratory relief and
held as follows:

Upon a thorough analysis of the allegations of the petition and the documents attached thereto as
annexes,the arguments of both parties in support of their respective position on the incident up for
resolution, the Court finds that an ordinary civil action or other else but certainly not the present action for
declaratory relief, is the proper remedy.

Clearly, as gleaned from the verydocuments attached to the petition, and as correctly pointed out by the
[petitioners], [respondent], as found by the BSP examiners and confirmed by the Monetary Board, violated
Section 54 of RA No. 8791, subject matter of the instant case, by engaging in an insurance activity which
is prohibited by such law. To be precise, the law so provides thus: "SEC. 54. Prohibition to Act as Insurer.
A bank shall not directly engaged (sic) in the business as the insurer."

Hence, the issue of whether or not petitioner violated the foregoing law can only be fittingly resolved thru
an ordinaryaction. For which reason, the Court has no recourse but to put an end to this case.

In view of the foregoing, the Court deems it unnecessary to tackle the other grounds relied upon by
[petitioners] in their motion to dismiss.

WHEREFORE, for reasons afore-stated, the petition is hereby DISMISSED.

SO ORDERED.

Almost a year later, respondent filed a Motion to Admit its Motion for Reconsideration against said order
alleging that it did not receive a copy thereof until September 3, 2008.

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Petitioners opposed said motion on the ground that per Certification of the Philippine Postal Office, an
official copy of the RTC’s Order was duly served and received by respondent on October 17, 2007.

Despite the foregoing, the RTC allowed respondent’s motion for reconsideration and required petitioners
to file their answer.

In a Decision dated June 15, 2009,the RTC of Makati City granted respondent’s petition for declaratory
relief disposing as follows:

WHEREFORE, premises considered, it is hereby DECLARED that [respondent], when it collected

additional fees known as "Credit Redemption Fund (CRF)" from its loan borrowers was not directly engaged
in insurance business as insurer; hence, it did not violate Sec. 54, R.A. 8791, otherwise known as the
"General Banking Law of 2000."

The Monetary Board Resolution No. 1139 dated August 26, 2005 is hereby DECLARED null and void.

SO ORDERED.7

Petitioners filed a motion for reconsideration against said decision, but the same was denied in anOrder
dated August 25, 2009.

Hence, the present petition wherein petitioners raise the following grounds to support their petition:

I.

THE COURT A QUOGRIEVOUSLY ERRED IN TAKING COGNIZANCE OF THE PETITION FOR

DECLARATORY RELIEF DESPITE:

(i) THE FINALITY OF THE BSP MB RESOLUTION: (a) DECLARING RESPONDENT VETERANS
BANK’S CRF SCHEME AS VIOLATIVE OF SECTION 54 OF RA 8791; and (b) DIRECTING
RESPONDENT TO RETURN THE ILLEGAL PROCEEDS THEREOF TO ITS BORROWERS; and

(ii) THE BLATANT IMPROPRIETY OF RESORTING TO SUCH PETITION FOR DECLARATORY

RELIEF, CONSIDERING RESPONDENT VETERANS BANK’S PRIOR BREACH OF THE
MONETARY BOARD RESOLUTION SUBJECT THEREOF [ASSUMING ARGUENDO THAT THE
SUBJECT BSP RESOLUTION HASNOT BECOME FINAL];

II.

THE COURT A QUO’S ORDER, DISMISSING THE PETITION FOR DECLARATORY RELIEF HAS LONG
BECOME FINAL AND EXECUTORY AND MAY NO LONGER BE DISTURBED.

III.

PETITIONERS’ FINDING,THAT RESPONDENT VETERANS BANK IS ENGAGED IN "INSURANCE

BUSINESS," IS IN ACCORD WITH LAW.8

In essence, the issue is whether or not the petition for declaratory relief is proper.

We rule in the negative.

Section 1, Rule 63 of the Rules of Court governs petitions for declaratory relief, viz.:

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SECTION 1. Who may file petition. – Any person interested under a deed, will, contract or other written
instrument, whose rights are affected by a statute, executive order or regulation, ordinance, or any other
governmental regulation may, before breach or violation thereof, bring an action in the appropriate Regional
Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or
duties, thereunder.

Declaratory relief is defined as an action by any person interested in a deed, will, contract or other written
instrument, executive order or resolution, to determine any question of construction or validity arising from
the instrument, executive order or regulation, or statute; and for a declaration of his rights and duties
thereunder. The only issue that may be raised in such a petition is the question of construction or validity
of provisions in an instrument or statute.9 Ergo, the Court, in CJH Development Corporation v. Bureau of
Internal Revenue,10 held that in the same manner that court decisions cannot be the proper subjects of a
petition for declaratory relief, decisions of quasijudicial agencies cannot be subjects of a petition for
declaratory relief for the simple reason that if a party is not agreeable to a decision either on questions of
law or of fact, it may avail of the various remedies provided by the Rules of Court.

In view of the foregoing, the decision of the BSP Monetary Board cannot be a proper subject matter for a
petition for declaratory relief since it was issued by the BSP Monetary Board inthe exercise of its quasi-
judicial powers or functions.

The authority of the petitioners to issue the questioned MB Resolution emanated from its powers under
Section 3711 of RA No. 765312 and Section 6613 of RA No. 879114 to impose, at its discretion, administrative
sanctions, upon any bank for violation of any banking law.

The nature of the BSP Monetary Board as a quasi-judicial agency, and the character of its determination
of whether or not appropriate sanctions may be imposed upon erring banks, as anexercise of quasi-judicial
function, have been recognized by this Court in the case of United Coconut Planters Bank v. E. Ganzon,
Inc.,15 to wit:

A perusal of Section 9(3) of Batas Pambansa Blg. 129, as amended, and Section 1, Rule 43 of the 1997
Rules of Civil Procedure reveals that the BSP Monetary Board is not included among the quasi judicial
agencies explicitly named therein, whose final judgments, orders, resolutions or awards are appealableto
the Court of Appeals. Such omission, however, does not necessarily mean that the Court of Appeals has
no appellate jurisdiction over the judgments, orders, resolutions, or awards of the BSP Monetary Board.

It bears stressing that Section 9(3) of Batas Pambansa Blg. 129, as amended, on the appellate jurisdiction
of the Court of Appeals, generally refers to quasi-judicial agencies, instrumentalities, boards or
commissions. The use of the word "including" in the said provision, prior to the naming of several quasi-
judicial agencies, necessarily conveys the very idea of non-exclusivity of the enumeration. The principle of
expressio unius est exclusio alterius does not apply where other circumstances indicate that the
enumeration was not intended to be exclusive, or where the enumeration is by way of example only.

Similarly, Section 1, Rule 43 of the 1997 Revised Rules of Civil Procedure merely mentions several quasi-
judicial agencies without exclusivity in the phraseology. The enumeration of the agencies therein mentioned
is not exclusive. The introductory phrase "[a]mong these agencies are" preceding the enumeration of
specific quasi-judicial agencies only highlights the fact that the list is not meant to be exclusive or conclusive.
Further, the overture stresses and acknowledges the existence of other quasi-judicial agencies not included
inthe enumeration but should be deemed included.

A quasi-judicial agency or body isan organ of government other than a court and other thana legislature,
which affects the rights of private parties through either adjudication or rule-making. The very definition of
an administrative agency includes itsbeing vested with quasi-judicial powers. The ever increasing variety
of powers and functions given to administrative agencies recognizes the need for the active intervention of
administrative agencies in matters calling for technical knowledge and speed in countless controversies

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which cannot possibly be handled by regular courts. A "quasi-judicial function" is a term which applies to
the action, discretion, etc. of public administrative officers or bodies, who are required to investigate facts,
or ascertain the existence of facts, hold hearings, and draw conclusions from them, as a basis for their
official action and to exercise discretion of a judicial nature.

Undoubtedly, the BSP Monetary Board is a quasi-,judicial agency exercising quasi-,judicial powers or
functions. As aptly observed by the Court of Appeals, the BSP Monetary Board is an independent central
monetary authority and a body corporate with fiscal and administrative autonomy, mandated to provide
policy directions in the areas of money, banking, and credit. It has the power to issue subpoena, to sue for
contempt those refusing to obey the subpoena without justifiable reason, to administer oaths and compel
presentation of books, records and others, needed in its examination, to impose fines and other sanctions
and to issue cease and desist order. Section 37 of Republic Act No. 7653, in particular, explicitly provides
that the BSP Monetary Board shall exercise its discretion in determining whether administrative sanctions
should be imposed on banks and quasi-banks, which necessarily implies that the BSP Monetary Board
must conduct some form of investigation or hearing regarding the same. 16

A priori, having established that the BSP Monetary Board is indeed a quasi-judicial body exercising quasi-
judicial functions, then its decision in MB Resolution No. 1139 cannot be the proper subject of declaratory
relief.

Lastly, also worth noting is the fact that the court a quo's Order dated September 24, 2007, which dismissed
respondent's petition for declaratory relief, had long become final and executory.

To recall, said Order was duly served on and received by respondent on October 1 7, 2007, as evidenced
by the Ce1iification issued by the Philippine Postal Corporation. Almost a year later, however, or on October
15, 2008, respondent moved for reconsideration of the court a quo's Order of dismissal, claiming it received
a copy of said Order only on September 3, 2008. Thus, respondent's self-serving claim should not have
prevailed over the Certification issued by the Philippine Postal Corporation. It was error for the trial court to
ente1iain it for the second time despite the lapse of almost a year before respondent filed its motion for
reconsideration against said Order.

WHEREFORE, premises considered, the instant petition is hereby GRANTED. The Decision dated June
15, 2009 and Order dated August 25, 2009 of the Regional Trial Court of Makati City in Civil Case No. 07-
271 are REVERSED and SET ASIDE. The Order dated September 24, 2007 of the Regional Trial Court of
Makati City is hereby REINSTATED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

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 DENR v. UPCI | G.R. No. 212081 | February 23, 2015

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 212081 February 23, 2015

DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (DENR), Petitioner,

vs.
UNITED PLANNERS CONSULTANTS , INC. (UPCI), Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 is the Decision2 dated March 26, 2014 of the Court of
Appeals (CA) in CA-G.R. SP No. 126458 which dismissed the petition for certiorari filed by petitioner the
Department of Environment and Natural Resources (petitioner).

The Facts

On July 26, 1993, petitioner, through the Land Management Bureau (LMB), entered into an Agreement for
Consultancy Services3 (Consultancy Agreement) with respondent United Planners Consultants, Inc.
(respondent) in connection with the LMB' s Land Resource Management Master Plan Project
(LRMMP).4 Under the Consultancy Agreement, petitioner committed to pay a total contract price of
₱4,337,141.00, based on a predetermined percentage corresponding to the particular stage of work
accomplished.5

In December 1994, respondent completed the work required, which petitioner formally accepted on
December 27, 1994.6 However, petitioner was able to pay only 47% of the total contract price in the amount
of ₱2,038,456.30.7

On October 25, 1994, the Commission on Audit (COA) released the Technical Services Office
Report8 (TSO) finding the contract price of the Agreement to be 84.14% excessive. 9 This notwithstanding,
petitioner, in a letter dated December 10, 1998, acknowledged its liability to respondent in the amount of
₱2,239,479.60 and assured payment at the soonest possible time.10

For failure to pay its obligation under the Consultancy Agreement despite repeated demands, respondent
instituted a Complaint11 against petitioner before the Regional Trial Court of Quezon City, Branch 222
(RTC), docketed as Case No. Q-07-60321.12

Upon motion of respondent, the case was subsequently referred to arbitration pursuant to the arbitration
clause of the Consultancy Agreement,13 which petitioner did not oppose.14 As a result, Atty. Alfredo F.
Tadiar, Architect Armando N. Alli, and Construction Industry Arbitration Commission (CIAC) Accredited
Arbitrator Engr. Ricardo B. San Juan were appointed as members of the Arbitral Tribunal. The court-
referred arbitration was then docketed as Arbitration Case No. A-001.15

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During the preliminary conference, the parties agreed to adopt the CIAC Revised Rules Governing
Construction Arbitration16 (CIAC Rules) to govern the arbitration proceedings. 17 They further agreed to
submit their respective draft decisions in lieu of memoranda of arguments on or before April 21, 2010,
among others.18

On the due date for submission of the draft decisions, however, only respondent complied with the given
deadline,19 while petitioner moved for the deferment of the deadline which it followed with another motion
for extension of time, asking that it be given until May 11, 2010 to submit its draft decision. 20

In an Order21 dated April 30, 2010, the Arbitral Tribunal denied petitioner’s motions and deemed its non-
submission as a waiver, but declared that it would still consider petitioner’s draft decision if submitted before
May 7, 2010, or the expected date of the final award’s promulgation.22 Petitioner filed its draft decision23 only
on May 7, 2010.

The Arbitral Tribunal rendered its Award 24 dated May 7, 2010 (Arbitral Award) in favor of respondent,
directing petitioner to pay the latter the amount of (a) ₱2,285,089.89 representing the unpaid progress
billings, with interest at the rate of 12% per annum from the date of finality of the Arbitral Award upon
confirmation by the RTC until fully paid; (b) ₱2,033,034.59 as accrued interest thereon; (c) ₱500,000.00 as
exemplary damages; and (d) ₱150,000.00 as attorney’s fees.25 It also ordered petitioner to reimburse
respondent its proportionate share in the arbitration costs as agreed upon in the amount of ₱182,119.44. 26

Unconvinced, petitioner filed a motion for reconsideration,27 which the Arbitral Tribunal merely noted without
any action, claiming that it had already lost jurisdiction over the case after it had submitted to the RTC its
Report together with a copy of the Arbitral Award.28

Consequently, petitioner filed before the RTC a Motion for Reconsideration 29 dated May 19, 2010 (May 19,
2010 Motion for Reconsideration)and a Manifestation and Motion30 dated June 1, 2010 (June 1, 2010
Manifestation and Motion), asserting that it was denied the opportunity to be heard when the Arbitral
Tribunal failed to consider its draft decision and merely noted its motion for reconsideration. 31 It also denied
receiving a copy of the Arbitral Award by either electronic or registered mail.32 For its part, respondent filed
an opposition thereto and moved for the confirmation33 of the Arbitral Award in accordance with the Special
Rules of Court on Alternative Dispute Resolution (Special ADR Rules).34

In an Order35 dated March 30, 2011, the RTC merely noted petitioner’s aforesaid motions, finding that
copies of the Arbitral Award appear to have been sent to the parties by the Arbitral Tribunal, including the
OSG, contrary to petitioner’s claim. Onthe other hand, the RTC confirmed the Arbitral Award pursuant to
Rule 11.2 (A)36 of the Special ADR Rules and ordered petitioner to pay respondent the costs of confirming
the award, as prayed for, in the total amount of ₱50,000.00. From this order, petitioner did not file a motion
for reconsideration.

Thus, on June 15, 2011, respondent moved for the issuance of a writ of execution, to which no
comment/opposition was filed by petitioner despite the RTC’s directive therefor. In an Order37 dated
September 12, 2011, the RTC granted respondent’s motion.38

Petitioner moved to quash39 the writ of execution, positing that respondent was not entitled to its monetary
claims. It also claimed that the issuance of said writ was premature since the RTC should have first resolved
its May 19, 2010 Motion for Reconsideration and June 1, 2010 Manifestation and Motion, and not merely
noted them, thereby violating its right to due process.40

The RTC Ruling

In an Order41 dated July 9, 2012, the RTC denied petitioner’s motion to quash.

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It found no merit in petitioner’s contention that it was denied due process, ruling that its May 19, 2010 Motion
for Reconsideration was a prohibited pleading under Section 17.2,42 Rule 17 of the CIAC Rules. It explained
that the available remedy to assail an arbitral award was to file a motion for correction of final award
pursuant to Section 17.143 of the CIAC Rules, and not a motion for reconsideration of the said award
itself.44 On the other hand, the RTC found petitioner’s June 1, 2010 Manifestation and Motion seeking the
resolution of its May 19, 2010 Motion for Reconsideration to be defective for petitioner’s failure to observe
the three day notice rule.45 Having then failed to avail of the remedies attendant to an order of confirmation,
the Arbitral Award had become final and executory.46

On July 12, 2012, petitioner received the RTC’s Order dated July 9, 2012 denying its motion to quash. 47

Dissatisfied, it filed on September 10, 2012a petition for certiorari48 before the CA, docketed as CA-G.R.
SP No. 126458, averring in the main that the RTC acted with grave abuse of discretion in confirming and
ordering the execution of the Arbitral Award.

The CA Ruling

In a Decision49 dated March 26, 2014, the CA dismissed the certiorari petition on two (2) grounds, namely:
(a) the petition essentially assailed the merits of the Arbitral Award which is prohibited under Rule 19.750 of
the Special ADR Rules;51 and (b) the petition was filed out of time, having been filed way beyond 15 days
from notice of the RTC’s July 9, 2012 Order, in violation of Rule 19.28 52 in relation to Rule 19.853 of said
Rules which provide that a special civil action for certiorari must be filed before the CA within 15 days from
notice of the judgment, order, or resolution sought to be annulled or set aside (or until July 27, 2012).
Aggrieved, petitioner filed the instant petition.

The Issue Before the Court

The core issue for the Court’s resolution is whether or not the CA erred in applying the provisions of the
Special ADR Rules, resulting in the dismissal of petitioner’s special civil action for certiorari.

The Court’s Ruling

The petition lacks merit.

I.

Republic Act No. (RA) 9285,54 otherwise known as the Alternative Dispute Resolution Act of 2004,"
institutionalized the use of an Alternative Dispute Resolution System (ADR System) 55 in the Philippines.
The Act, however, was without prejudice to the adoption by the Supreme Court of any ADR system as a
means of achieving speedy and efficient means of resolving cases pending before all courts in the
Philippines.56

Accordingly, A.M. No. 07-11-08-SC was created setting forth the Special Rules of Court on Alternative
Dispute Resolution (referred herein as Special ADR Rules) that shall govern the procedure to be followed
by the courts whenever judicial intervention is sought in ADR proceedings in the specific cases where it is
allowed.57

Rule 1.1 of the Special ADR Rules lists down the instances when the said rules shall apply, namely: "(a)
Relief on the issue of Existence, Validity, or Enforceability of the Arbitration Agreement; (b) Referral to
Alternative Dispute Resolution ("ADR"); (c) Interim Measures of Protection; (d) Appointment of Arbitrator;
(e) Challenge to Appointment of Arbitrator; (f) Termination of Mandate of Arbitrator; (g) Assistance in Taking
Evidence; (h) Confirmation, Correction or Vacation of Award in Domestic Arbitration; (i) Recognition and
Enforcement or Setting Aside of an Award in International Commercial Arbitration; (j) Recognition and

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Enforcement of a Foreign Arbitral Award; (k) Confidentiality/Protective Orders; and (l) Deposit and
Enforcement of Mediated Settlement Agreements."58

Notably, the Special ADR Rules do not automatically govern the arbitration proceedings itself. A pivotal
feature of arbitration as an alternative mode of dispute resolution is that it is a product of party autonomy or
the freedom of the parties to make their own arrangements to resolve their own disputes.59 Thus, Rule 2.3
of the Special ADR Rules explicitly provides that "parties are free to agree on the procedure to be followed
in the conduct of arbitral proceedings. Failing such agreement, the arbitral tribunal may conduct arbitration
in the manner it considers appropriate."60

In the case at bar, the Consultancy Agreement contained an arbitration clause. 61 Hence, respondent, after
it filed its complaint, moved for its referral to arbitration62 which was not objected to by petitioner.63 By its
referral to arbitration, the case fell within the coverage of the Special ADR Rules. However, with respect to
the arbitration proceedings itself, the parties had agreed to adopt the CIAC Rules before the Arbitral
Tribunal in accordance with Rule 2.3 of the Special ADR Rules.

On May 7, 2010, the Arbitral Tribunal rendered the Arbitral Award in favor of respondent. Under Section
17.2, Rule 17 of the CIAC Rules, no motion for reconsideration or new trial may be sought, but any of the
parties may file a motion for correction64 of the final award, which shall interrupt the running of the period
for appeal,65 based on any of the following grounds, to wit: a. an evident miscalculation of figures, a
typographical or arithmetical error;

b. an evident mistake in the description of any party, person, date, amount, thing or property
referred to in the award;

c. where the arbitrators have awarded upon a matter not submitted to them, not affecting the merits
of the decision upon the matter submitted;

d. where the arbitrators have failed or omitted to resolve certain issue/s formulated by the parties
in the Terms of Reference (TOR) and submitted to them for resolution, and

e. where the award is imperfect in a matter of form not affecting the merits of the controversy.

The motion shall be acted upon by the Arbitral Tribunal or the surviving/remaining members. 66

Moreover, the parties may appeal the final award to the CA through a petition for review under Rule43 of
the Rules of Court.67

Records do not show that any of the foregoing remedies were availed of by petitioner. Instead, it filed the
May 19, 2010 Motion for Reconsideration of the Arbitral Award, which was a prohibited pleading under the
Section 17.2,68 Rule 17 of the CIAC Rules, thus rendering the same final and executory.

Accordingly, the case was remanded to the RTC for confirmation proceedings pursuant to Rule 11 of the
Special ADR Rules which requires confirmation by the court of the final arbitral award. This is consistent
with Section 40, Chapter 7 (A) of RA 9285 which similarly requires a judicial confirmation of a domestic
award to make the same enforceable:

SEC. 40. Confirmation of Award.– The confirmation of a domestic arbitral award shall be governed by
Section 2369 of R.A. 876.70

A domestic arbitral award when confirmed shall be enforced in the same manner as final and executory
decisions of the regional trial court.

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The confirmation of a domestic award shall be made by the regional trial court in accordance with the Rules
of Procedure to be promulgated by the Supreme Court.

A CIAC arbitral award need not be confirmed by the regional trial court to be executory as provided under
E.O. No. 1008. (Emphases supplied)

During the confirmation proceedings, petitioners did not oppose the RTC’s confirmation by filing a petition
to vacate the Arbitral Award under Rule 11.2 (D) 71 of the Special ADR Rules. Neither did it seek
reconsideration of the confirmation order in accordance with Rule 19.1 (h) thereof. Instead, petitioner filed
only on September 10, 2012 a special civil action for certiorari before the CA questioning the propriety of
(a) the RTC Order dated September 12, 2011 granting respondent’s motion for issuance of a writ of
execution, and (b) Order dated July 9,2012 denying its motion to quash. Under Rule 19.26 of the Special
ADR Rules, "[w]hen the Regional Trial Court, in making a ruling under the Special ADR Rules, has acted
without or in excess of its jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of
law, a party may file a special civil action for certiorari to annul or set aside a ruling of the Regional Trial
Court." Thus, for failing to avail of the foregoing remedies before resorting to certiorari, the CA correctly
dismissed its petition.

II.

Note that the special civil action for certiorari described in Rule 19.26 above may be filed to annul or set
aside the following orders of the Regional Trial Court.

a. Holding that the arbitration agreement is in existent, invalid or unenforceable;

b. Reversing the arbitral tribunal’s preliminary determination upholding its jurisdiction;

c. Denying the request to refer the dispute to arbitration;

d. Granting or refusing an interim relief;

e. Denying a petition for the appointment of an arbitrator;

f. Confirming, vacating or correcting a domestic arbitral award;

g. Suspending the proceedings to set aside an international commercial arbitral award and referring
the case back to the arbitral tribunal;

h. Allowing a party to enforce an international commercial arbitral award pending appeal;

i. Adjourning or deferring a ruling on whether to set aside, recognize and or enforce an international
commercial arbitral award;

j. Allowing a party to enforce a foreign arbitral award pending appeal; and

k. Denying a petition for assistance in taking evidence. (Emphasis supplied)

Further, Rule 19.772 of the Special ADR Rules precludes a party to an arbitration from filing a petition for
certiorari questioning the merits of an arbitral award.

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If so falling under the above-stated enumeration, Rule 19.28 of the Special ADR Rules provide that said
certiorari petition should be filed "with the [CA] within fifteen (15) days from notice of the judgment, order
or resolution sought to be annulled or set aside. No extension of time to file the petition shall be allowed."

In this case, petitioner asserts that its petition is not covered by the Special ADR Rules (particularly, Rule
19.28 on the 15-day reglementary period to file a petition for certiorari) but by Rule 65 of the Rules of Court
(particularly, Section 4 thereof on the 60-day reglementary period to file a petition for certiorari), which it
claimed to have suppletory application in arbitration proceedings since the Special ADR Rules do not
explicitly provide for a procedure on execution. The position is untenable.

Execution is fittingly called the fruit and end of suit and the life of the law. A judgment, if left unexecuted,
would be nothing but an empty victory for the prevailing party.73

While it appears that the Special ADR Rules remain silent on the procedure for the execution of a confirmed
arbitral award, it is the Court’s considered view that the Rules’ procedural mechanisms cover not only
aspects of confirmation but necessarily extend to a confirmed award’s execution in light of the doctrine of
necessary implication which states that every statutory grant of power, right or privilege is deemed to
include all incidental power, right or privilege. In Atienza v. Villarosa,74 the doctrine was explained, thus:

No statute can be enacted that can provide all the details involved in its application. There is always an
omission that may not meet a particular situation. What is thought, at the time of enactment, to be an all
embracing legislation may be inadequate to provide for the unfolding of events of the future. So-called gaps
in the law develop as the law is enforced. One of the rules of statutory construction used to fill in the gap is
the doctrine of necessary implication. The doctrine states that what is implied in a statute is as much a part
thereof as that which is expressed. Every statute is understood, by implication, to contain all such provisions
as may be necessary to effectuate its object and purpose, or to make effective rights, powers, privileges or
jurisdiction which it grants, including all such collateral and subsidiary consequences as may be fairly and
logically inferred from its terms. Ex necessitate legis. And every statutory grant of power, right or privilege
is deemed to include all incidental power, right or privilege. This is so because the greater includes the
lesser, expressed in the maxim, in eo plus sit, simper inest et minus.75 (Emphases supplied)

As the Court sees it, execution is but a necessary incident to the Court’s confirmation of an arbitral award.
To construe it otherwise would result in an absurd situation whereby the confirming court previously
applying the Special ADR Rules in its confirmation of the arbitral award would later shift to the regular Rules
of Procedure come execution. Irrefragably, a court’s power to confirm a judgment award under the Special
ADR Rules should be deemed to include the power to order its execution for such is but a collateral and
subsidiary consequence that may be fairly and logically inferred from the statutory grant to regional trial
courts of the power to confirm domestic arbitral awards.

All the more is such interpretation warranted under the principle of ratio legis est anima which provides that
a statute must be read according to its spirit or intent,76 for what is within the spirit is within the statute
although it is not within its letter, and that which is within the letter but not within the spirit is not within the
statute.77 Accordingly, since the Special ADR Rules are intended to achieve speedy and efficient resolution
of disputes and curb a litigious culture,78 every interpretation thereof should be made consistent with these
objectives.

Thus, with these principles in mind, the Court so concludes that the Special ADR Rules, as far as
practicable, should be made to apply not only to the proceedings on confirmation but also to the confirmed
award’s execution.

Further, let it be clarified that – contrary to petitioner’s stance – resort to the Rules of Court even in a
suppletory capacity is not allowed. Rule 22.1 of the Special ADR Rules explicitly provides that "[t]he
provisions of the Rules of Court that are applicable to the proceedings enumerated in Rule 1.1 of these
Special ADR Rules have either been included and incorporated in these Special ADR Rules or specifically

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referred to herein."79 Besides, Rule 1.13 thereof provides that "[i]n situations where no specific rule is
provided under the Special ADR Rules, the court shall resolve such matter summarily and be guided by the
spirit and intent of the Special ADR Rules and the ADR Laws."

As above-mentioned, the petition for certiorari permitted under the Special ADR Rules must be filed within
a period of fifteen (15) days from notice of the judgment, order or resolution sought to be annulled or set
aside.80 Hence, since petitioner’s filing of its certiorari petition in CA-G.R. SP No. 126458 was made nearly
two months after its receipt of the RTC’s Order dated July 9, 2012,or on September 10, 2012,81 said petition
was clearly dismissible.82

III.

Discounting the above-discussed procedural considerations, the Court still finds that the certiorari petition
had no merit.

Indeed, petitioner cannot be said to have been denied due process as the records undeniably show that it
was accorded ample opportunity to ventilate its position. There was clearly nothing out of line when the
Arbitral Tribunal denied petitioner’s motions for extension to file its submissions having failed to show a
valid reason to justify the same or in rendering the Arbitral Award sans petitioner’s draft decision which was
filed only on the day of the scheduled promulgation of final award on May 7, 2010.83 The touchstone of due
process is basically the opportunity to be heard. Having been given such opportunity, petitioner should only
blame itself for its own procedural blunder.

On this score, the petition for certiorari in CA-G.R. SP No. 126458 was likewise properly dismissed.

IV.

Nevertheless, while the Court sanctions the dismissal by the CA of the petition for certiorari due to
procedural infirmities, there is a need to explicate the matter of execution of the confirmed Arbitral Award
against the petitioner, a government agency, in the light of Presidential Decree No. (PD) 144584 otherwise
known as the "Government Auditing Code of the Philippines." Section 26 of PD 1445 expressly provides
that execution of money judgment against the Government or any of its subdivisions, agencies and
instrumentalities is within the primary jurisdiction of the COA, to wit:

SEC. 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 to 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 or government share, and those for which the government has put up a
counterpart fund or those partly funded by the government. (Emphases supplied)

From the foregoing, the settlement of respondent’s money claim is still subject to the primary jurisdiction of
the COA despite finality of the confirmed arbitral award by the RTC pursuant to the Special ADR
Rules.85 Hence, the respondent has to first seek the approval of the COA of their monetary claim. This
appears to have been complied with by the latter when it filed a "Petition for Enforcement and Payment of
Final and Executory Arbitral Award"86 before the COA. Accordingly, it is now the COA which has the
authority to rule on this latter petition. WHEREFORE, the petition is DENIED. The Decision dated March

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26, 2014 of the Court of Appeals in CA-G.R. SP No. 126458 which dismissed the petition for certiorari filed
by petitioner the Department of Environment and Natural Resources is hereby AFFIRMED.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice

DOH v. Philip Morris Manufacturing | G.R. No. 202943 | March 25, 2015

FIRST DIVISION

March 25, 2015

G.R. No. 202943

THE DEPARTMENT OF HEALTH, represented by SECRETARY ENRIQUE T. ONA, and THE FOOD
AND DRUG ADMINISTRATION (Formerly the Bureau of Food and Drugs), represented by
ASSISTANT SECRETARY OF HEALTH NICOLAS B. LUTERO III, Officer-in-Charge, Petitioners,
vs.
PHILIP MORRIS PHILIPPINES MANUFACTURING, INC, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated August 26, 2011 and the
Resolution3 dated August 3, 2012 rendered by the Court of Appeals (CA) in CA-G.R. SP No. 109493, finding
grave abuse of discretion on the part of petitioners the Department of Health (DOH) and the Food and Drug
Administration (FDA), then known as the Bureau of Food and Drugs (BFAD), for denying respondent Philip
Morris Philippines Manufacturing, Inc.'s (PMPMI) permit applications for its tobacco sales promotions.

The Facts

On November 19, 2008, PMPMI, through the advertising agency PCN Promopro, Inc. (PCN), by virtue of
Article 1164 of Republic Act No. (RA) 73945 or the "Consumer Act of the Philippines," applied for a sales
promotion permit before the BFAD, now the FDA, for its Gear Up Promotional Activity (Gear Up
Promo).6 The application included the mechanics for the promotional activity, as well as relevant materials
and fees.7

With more than fifteen (15) days lapsing without the BFAD formally acting upon the application, PMPMI
then inquired about its status. However, PMPMI was only verbally informed of the existence of a
Memorandum issued by the DOH purportedly prohibiting tobacco companies from conducting any tobacco
promotional activities in the country. On January 8, 2009, PCN requested 8 the BFAD to formally place on
record the lack of any formal action on its Gear Up Promo application.9

Meanwhile, on November 28, 2008, PMPMI, through another advertising agency, Arc Worldwide
Philippines Co. (AWPC), filed another application for a sales promotional permit, this time for its Golden
Stick Promotional Activity (Golden Stick Promo) which the BFAD, however, refused outright, pursuant to a

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directive of the BFAD Director that all permit applications for promotional activities of tobacco companies
will no longer be accepted. Despite inquiries, the BFAD merely advised AWPC to await the formal written
notice regarding its application.10

Eventually, in a letter11 dated January 5, 2009, the BFAD, through Director IV Leticia Barbara B. Gutierrez,
M.S. (Dir. Gutierrez), denied PMPMI’s Gear Up Promo application in accordance with the instructions of
the Undersecretary of Health for Standards and Regulations, directing that as of July 1, 2008,
"all promotions, advertisements and/or sponsorships of tobacco products are already prohibited," based on
the provisions of RA 921112 or the "Tobacco Regulation Act of 2003."13

On January 19, 2009, PMPMI filed an administrative appeal14 before the DOH Secretary, assailing the
BFAD’s denial of its Gear Up Promo application, as well as its refusal to accept the Golden Stick
Promo application. In its appeal, PMPMI maintained that under RA 9211, promotion is not prohibited but
merely restricted, and that while there are specific provisions therein totally banning
tobacco advertising and sponsorships, no similar provision could be found banning promotion.15 It likewise
averred that it had acquired a vested right over the granting of its sales promotional permit applications,
considering that the BFAD has been granting such applications prior to January 5, 2009. Finally, it insisted
that the denial of its promotional permit applications was tantamount to a violation of its right to due process
as well as their right to property.16

The DOH Ruling

In a Consolidated Decision17 dated April 30, 2009, then DOH Secretary Francisco T. Duque III (Sec. Duque)
denied PMPMI’s appeal, as well as all other similar actions filed by other tobacco companies and thereby
affirmed the action of the BFAD denying their sales promotional permit applications, pursuant to the
provisions of RA 9211.18

In denying PMPMI’s and other tobacco companies’ promotional applications, the DOH ruled that the
issuance of permits for sales promotional activities was never a ministerial duty of the BFAD; rather, it was
a discretionary power to be exercised within the confines of the law. Moreover, previous approvals of sales
promotional permit applications made by the BFAD did not create a vested right on the part of the tobacco
companies to have all applications approved.19

The DOH likewise ruled that the intent and purpose of RA 9211 was to completely ban tobacco
advertisements, promotions, and sponsorships, as promotion is inherent in both advertising and
sponsorship. As such, if RA 9211 completely prohibited advertisements and sponsorships, then it is clear
that promotion, which is necessarily included in both activities, is likewise prohibited, explaining further that
the provisions of RA 9211 should not be interpreted in a way as would render them ridiculous or
meaningless.20

Lastly, the DOH cited the Philippines’ obligation to observe the provisions of the Framework Convention on
Tobacco Control (FCTC), an international treaty, which has been duly ratified and adopted by the country
on June 6, 2005.21

Aggrieved, PMPMI elevated the matter to the CA via petition for certiorari and mandamus,22 docketed as
CA G.R. SP No. 109493, ascribing grave abuse of discretion upon the DOH in refusing to grant its sales
promotional permit applications, maintaining, inter alia, that RA 9211 still allows promotion activities
notwithstanding the phase-out of advertising and sponsorship activities after July 1, 2008.

The CA Ruling

In a Decision23 dated August 26, 2011, the CA granted the petition and nullified the Consolidated Decision
of the DOH upon a finding that the provisions of RA 9211 were clear when it
distinguished promotion from advertising and sponsorship, so much so that while the latter two (2) activities

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were completely banned as of July 1, 2008, the same does not hold true with regard to promotion, which
was only restricted. The CA held that the DOH cannot exercise carte blanche authority to deny PMPMI’s
promotional permit applications, adding that "[w]hen the law is clear and free from any doubt or ambiguity,
there is no room for construction or interpretation, only for application."24

Furthermore, it ruled that the DOH is bereft of any authority to enforce the provisions of RA 9211, in view
of the creation of the Inter- Agency Committee–Tobacco (IAC-Tobacco) under Section 29 of the said law,
which shall have the "exclusive power and function to administer and implement the provisions of [RA 9211]
x x x."25 Thus, even though PMPMI originally applied for sales promotional permits under Article 116 in
relation to Article 109 of RA 7394, from which the DOH derives its authority to regulate tobacco sales
promotions, the said provision has already been repealed by Section 39 of RA 9211,26 which states:

Section 39. Repealing Clause. – DOH Administrative Orders No. 10[,] s. 1993 and No. 24[,] s. 2003 are
hereby repealed. Article 94 of Republic Act No. 7394, as amended, otherwise known as the Consumer Act
of the Philippines, is hereby amended.

All other laws, decrees, ordinances, administrative orders, rules and regulations, or any part thereof, which
are inconsistent with this Act are likewise repealed or amended accordingly.

Hence, the CA ruled that the DOH wrongfully arrogated unto itself the authority given to the IAC-Tobacco
to administer and implement the provisions of RA 9211, which includes regulation of tobacco promotions.27

Dissatisfied, the DOH, through the Office of the Solicitor General (OSG), moved for the reconsideration 28 of
the said Decision, which the CA denied in a Resolution29 dated August 3, 2012, hence, this petition.

The Issues Before the Court

The essential issues to be resolved are: (a) whether or not the CA erred in finding that the authority of the
DOH, through the BFAD, to regulate tobacco sales promotions under Article 116 in relation to Article 109
of RA 7394 had already been impliedly repealed by RA 9211, which created the IAC-Tobacco and granted
upon it the exclusive authority to administer and implement the provisions thereof; and (b) whether or not
the CA erred in ascribing grave abuse of discretion upon the DOH when the latter held that RA 9211 has
also completely prohibited tobacco promotions as of July 1, 2008.

The Court’s Ruling

The petition is bereft of merit.

At the core of the present controversy are the pertinent provisions of RA 7394, i.e., Article 116 in relation
to Article 109, to wit:

Article 116. Permit to Conduct Promotion. – No person shall conduct any sales campaigns, including beauty
contest, national in character, sponsored and promoted by manufacturing enterprises without first
securing a permit from the concerned department at least thirty (30) calendar days prior to the
commencement thereof. Unless an objection or denial is received within fifteen (15) days from filing of the
application, the same shall be deemed approved and the promotion campaign or activity may be conducted:
Provided, That any sales promotion campaign using medical prescriptions or any part thereof or attachment
thereto for raffles or a promise of reward shall not be allowed, nor a permit be issued therefor. (Emphasis
supplied)

Article 109. Implementing Agency. – The Department of Trade and Industry shall enforce the provisions of
this Chapter and its implementing rules and regulations: Provided, That with respect to food, drugs,

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cosmetics, devices, and hazardous substances, it shall be enforced by the Department of
Health. (Emphasis and underscoring supplied)

The DOH derives its authority to rule upon applications for sales promotion permits from the above-cited
provisions. On the other hand, Section 29 of RA 9211 creating the IAC-Tobacco provides:

Section 29. Implementing Agency. – An Inter-Agency Committee- Tobacco (IAC-Tobacco), which shall
have the exclusive power and function to administer and implement the provisions of this Act, is
hereby created. The IAC-Tobacco shall be chaired by the Secretary of the Department of Trade and
Industry (DTI) with the Secretary of the Department of Health (DOH) as Vice Chairperson. The IAC-Tobacco
shall have the following as members:

a. Secretary of the Department of Agriculture (DA);

b. Secretary of the Department of Justice (DOJ);

c. Secretary of the Department of Finance (DOF);

d. Secretary of the Department of Environment and Natural Resources (DENR);

e. Secretary of the Department of Science and Technology (DOST);

f. Secretary of the Department of Education (DepEd);

g. Administrator of the National Tobacco Administration (NTA);

h. A representative from the Tobacco Industry to be nominated by the legitimate and recognized
associations of the industry; and

i. A representative from a nongovernment organization (NGO) involved in public health promotion

nominated by DOH in consultation with the concerned NGOs[.]

The Department Secretaries may designate their Undersecretaries as their authorized representative to the
IAC. (Emphasis and underscoring supplied)

It is the CA’s pronouncement that the creation of the IAC-Tobacco effectively and impliedly repealed30 the
above-quoted provisions of RA 7394, thereby removing the authority of the DOH to rule upon applications
for sales promotional permits filed by tobacco companies such as those filed by PMPMI subject of this case.

On the other hand, while the DOH and the BFAD concede that the creation of the IAC-Tobacco expressly
grants upon the IAC-Tobacco the exclusive power and function to administer and implement its provisions,
they nevertheless maintain that RA 9211 did not remove their authority under RA 7394 to regulate
tobacco sales promotions.31 They point out that this much can be deduced from the lack of provisions in
RA 9211 and its implementing rules laying down the procedure for the processing of applications for
tobacco sales promotions permit.32 As such, the DOH, through the BFAD, retains the authority to rule on
PMPMI’s promotional permit applications.

The Court agrees with the CA.

After a meticulous examination of the above-quoted pertinent provisions of RA 7394 and RA 9211, the
Court finds that the latter law impliedly repealed the relevant provisions of the former with respect to the
authority of the DOH to regulate tobacco sales promotions.

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At this point, the Court notes that both laws separately treat "promotion" as one of the activities related to
tobacco: RA 7394 defines "sales promotion" under Article 4 (bm), while RA 9211 speaks
of "promotion" or "tobacco promotion" under Section 4 (l).

"Sales promotion" is defined in Article 4 (bm) of RA 7394, to wit:

Article 4. Definition of Terms. – For purposes of this Act, the term:

xxxx

bm) "Sales Promotion" means techniques intended for broad consumer participation which contain
promises of gain such as prizes, in cash or in kind, as reward for the purchase of a product, security,
service or winning in contest, game, tournament and other similar competitions which involve
determination of winner/s and which utilize mass media or other widespread media of information. It also
means techniques purely intended to increase the sales, patronage and/or goodwill of a
product. (Emphases and underscoring supplied)

Identifying its Gear Up Promo and Golden Stick Promo to be activities that fall under sales promotion as
contemplated in the said provision, PMPMI filed its permit applications under Article 116 of RA 7394 before
the BFAD.

Meanwhile, Section 4 (l) of RA 9211 defines "promotion" as follows:

Section 4. Definition of Terms. – As used in this Act:

xxxx

l. "Promotion" – refers to an event or activity organized by or on behalf of a tobacco manufacturer,

distributor or retailer with the aim of promoting a brand of tobacco product, which event or activity
would not occur but for the support given to it by or on behalf of the tobacco manufacturer, distributor or
retailer. It may also refer to the display of a tobacco product or manufacturer’s name, trademark,
logo, etc. on non-tobacco products. This includes the paid use of tobacco products bearing the brand
names, trademarks, logos, etc. in movies, television and other forms of entertainment. For the purpose
of this Act, promotion shall be understood as tobacco promotion[.] (Emphases and underscoring
supplied)

As adverted to elsewhere, the IAC-Tobacco shall have the exclusive power and function to administer and
implement the provisions of RA 9211, which includes the conduct of regulating promotion.

The Court has judiciously scrutinized the above definitions and finds that there is no substantial difference
between the activities that would fall under the purview of "sales promotion" in RA 7394, as well as those
under "promotion" in RA 9211, as would warrant a delineation in the authority to regulate its conduct. In
fact, the techniques, activities, and methods mentioned in the definition of "sales promotion" can be
subsumed under the more comprehensive and broad scope of "promotion."

In order to fully understand the depth and scope of these marketing activities, the Court finds it necessary
to go beyond the ambit of the definitions provided in our laws.

Outside RA 7394, "sales promotion" refers to activities which make use of "media and non-media marketing
communication for a pre- determined, limited time to increase consumer demand, stimulate market demand
or improve product availability,"33 "to provide added value or incentives to consumers, wholesalers,
retailers, or other organizational customers to stimulate immediate sales" and "product interest, trial, or

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purchase."34 Examples of devices used in "sales promotion" are contests, coupons, freebies, point-of-
purchase displays, premiums, raffle prizes, product samples, sweepstakes, and rebates.35

On the other hand, "promotion" is a term frequently used in marketing which pertains to "raising customer
awareness of a product or brand, generating sales, and creating brand loyalty"36 which utilize the following
subcategories: personal selling, advertising, sales promotion, direct marketing, and publicity.37 The three
basic objectives of promotion are: (1) to present information to consumers as well as others; (2) to increase
demand; and (3) to differentiate a product.38 "Promotion" can be done through various methods, e.g.,
internet advertisements, special events, endorsements, incentives in the purchase of a product like
discounts (i.e., coupons), free items, or contests.39

Consequently, if "sales promotion" is considered as one of the subcategories of "promotion," it is clear,

therefore, that "promotion" necessarily incorporates the activities that fall under "sales promotion."
Considering that the common and fundamental purpose of these marketing strategies is to raise customer
awareness in order to increase consumer demand or sales, drawing a demarcation line between
"promotion" and "sales promotion" as two distinct and separate activities would be unnecessarily stretching
their meanings and, accordingly, sow more confusion. Moreover, the techniques, methods, and devices
through which "sales promotion" are usually accomplished can likewise be considered as activities relating
to "promotion," like raffle contests, which necessarily require prizes and drawing of winners, discounts, and
freebies.

Concomitantly, while the Court acknowledges the attempt of the Department of Justice (DOJ), through its
DOJ Opinion No. 29, series of 2004,40 (DOJ Opinion) to reconcile and harmonize the apparently conflicting
provisions of RA 7394 and RA 9211 in this respect, to the Court’s mind, it is more logical to conclude that
"sales promotion" and "promotion" are actually one and the same. The DOJ, in fact, referred 41 to "product
promotion" in RA 9211 as "promotion per se" which, therefore, can be taken to mean an all-encompassing
activity or marketing strategy which may reasonably and logically include "sales promotion." Besides, the
DOJ Opinion is merely persuasive and not necessarily controlling. 42

Furthermore, the declared policy of RA 9211 where "promotion" is defined includes the institution of "a
balanced policy whereby the use, sale and advertisements of tobacco products shall be regulated in order
to promote a healthful environment and protect the citizens from the hazards of tobacco smoke x x
x."43 Hence, if the IAC-Tobacco was created and expressly given the exclusive authority to implement the
provisions of RA 9211 in accordance with the foregoing State policy, it signifies that it shall also take charge
of the regulation of the use, sale, distribution, and advertisements of tobacco products, as well as all forms
of "promotion" which essentially includes "sales promotion." Therefore, with this regulatory power conferred
upon the IAC-Tobacco by RA 9211, the DOH and the BFAD have been effectively and impliedly divested
of any authority to act upon applications for tobacco sales promotional permit, including PMPMI’s.

Finally, it must be stressed that RA 9211 is a special legislation which exclusively deals with the subject of
tobacco products and related activities. On the other hand, RA 7394 is broader and more general in scope,
and treats of the general welfare and interests of consumers vis-à-vis proper conduct for business and
industry. As such, lex specialis derogat generali. General legislation must give way to special legislation on
the same subject, and generally is so interpreted as to embrace only cases in which the special provisions
are not applicable. In other words, where two statutes are of equal theoretical application to a particular
case, the one specially designed therefore should prevail.44

In fine, the Court agrees with the CA that it is the IAC-Tobacco and not the DOH which has the primary
jurisdiction to regulate sales promotion activities as explained in the foregoing discussion. As such, the
DOH’s ruling, including its construction of RA 9211 (i.e., that it completely banned tobacco
advertisements, promotions, and sponsorships, as promotion is inherent in both advertising and
sponsorship), are declared null and void, which, as a necessary consequence, precludes the Court from
further delving on the same. As it stands, the present applications filed by PMPMI are thus remanded to
the IAC-Tobacco for its appropriate action. Notably, in the proper exercise of its rule-making authority,

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nothing precludes the IAC- Tobacco from designating any of its pilot agencies (which, for instance, may
even be the DOH45 ) to perform its multifarious functions under RA 9211.

WHEREFORE, the petition is DENIED. The Decision dated August 26, 2011 and the Resolution dated
August 3, 2012 of the Court of Appeals in CA-G.R. SP No. 109493 are hereby AFFIRMED with
the MODIFICATION in that the present permit applications filed by respondent Philip Morris Philippines
Manufacturing, Inc. for its tobacco sales promotions are hereby REMANDED to the Inter-Agency
Committee- Tobacco for appropriate action.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice

Consino v. People & Nealiga | G.R. No. 200465 | April 20, 2015

THIRD DIVISION

G.R. No. 200465, April 20, 2015

JOCELYN ASISTIO Y CONSINO, Petitioner, v. PEOPLE OF THE PHILIPPINES AND

MONICA NEALIGA, Respondent.

DECISION

PERALTA, J.:

Assailed in this petition for certiorari under Rule 65 of the Rules of Court are the Court of
Appeals (CA) Decision1 dated August 31, 2011 and its Resolution2 dated January 31, 2012
in CA-G.R. CR No. 32363. The dispositive portion of the Decision reads:

WHEREFORE, premises considered, the assailed Orders dated 14 October 2008 and 12
February 2009 of Branch 40, Regional Trial Court of Manila, in Criminal Case No. 01-
197750, are hereby REVERSED and SET ASIDE. Accordingly, let the records of this case
be REMANDED to Branch 40 of the Regional Trial Court of Manila, for further appropriate
proceedings.

SO ORDERED.3
The factual and procedural antecedents are as follows:

Petitioner Jocelyn Asistio y Consino was charged with violation of Section 46 of the
Cooperative Code of the Philippines (Republic Act No. [RA] 6938). 4 The accusatory portion
of the Information filed against her reads:

That on or about July 27, 1998, in the City of Manila, Philippines, the said accused, being then
the Chairperson and Managing Director of A. Mabini Elementary School Teachers Multi-
Purpose Cooperative, and as such, have a complete control and exclusively manage the entire
business of A. Mabini Elementary School Teachers Multi-Purpose Cooperative, did then and
there willfully, unlawfully and feloniously acquires, in violation of her duty as such and the
confidence reposed on her, personal interest or equity adverse to A. Mabini Elementary School

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Teachers Multi-Purpose Cooperative by then and there entering into a contract with Coca Cola
Products at A. Mabini Elementary School Teachers Multi-Purpose Cooperative in her own
personal capacity when in truth and in fact as the said accused fully well knew, the sale of
Coca-Cola products at A. Mabini Elementary School Teachers Multi-Purpose Cooperative
should have accrued to A. Mabini Elementary School Teachers Multi-Purpose Cooperative to
the damage and prejudice of A. Mabini Elementary School Teachers Multi-Purpose
Cooperative.

CONTRARY TO LAW.5
Upon her arraignment, petitioner entered a plea of "not guilty." Trial on the merits ensued.

The prosecution sought to prove that petitioner, then Chairperson of the A. Mabini Elementary
School Teachers Multi-Purpose Cooperative, had entered into an exclusive dealership
agreement with Coca-Cola Bottlers Philippines, Inc., (Coca Cola) for the sale of softdrink
products at the same school. By virtue of a Memorandum of Agreement between the school
and the Cooperative, Dr. Nora T. Salamanca, the school principal, directed petitioner to submit
her financial reports during her tenure as Chairperson. Instead, petitioner claimed that the
principal had no business and authority to require her to produce financial statements, and
that the said reports had been posted on the school bulletin board.

The school principal then created an audit committee to look into the financial reports of the
Cooperative. The committee was composed of Aurora Catabona (Chairperson), Monica Nealiga
(member), with Noemi Olazo (Chairperson-auditor) and Sylvia Apostol (auditor), who later
executed their respective affidavits in support of the charge against petitioner. Based on the
documents obtained from Coca-Cola, including the records of actual deliveries and sales, and
the financial statements prepared by petitioner, the audit committee found that petitioner
defrauded the Cooperative and its members for three (3) years in the following amounts:
School Year (S.Y.) 1998-1999 - P54,008.00; S.Y. 1999-2000 - P40,503.00; and S.Y. 2000-
2001 - P8,945.00. Despite requests for her to return to the Cooperative the amounts she had
allegedly misappropriated, petitioner failed and refused to do so. Thus, the Cooperative issued
a Board Resolution authorizing the filing of criminal charges against petitioner.

After the presentation and offer of evidence by the prosecution, petitioner moved to dismiss
the case by way of Demurrer to Evidence with prior leave of court. She argued, among other
matters, that the Regional Trial Court (RTC) of Manila, Branch 40, does not have jurisdiction
over the case, as the crime charged (Violation of Section 46 of RA 6938) does not carry with
it a sanction for which she can be held criminally liable.

On October 14, 2008, the RTC dismissed the case for lack of jurisdiction, thus:
Considering that the MeTCs, MTC, MCTCs have exclusive original jurisdiction over all offenses
punishable with imprisonment not exceeding six (6) years irrespective of the amount of fine,
and regardless of other imposable accessory or other penalties, including the civil liability
arising from such offense or predicated thereon, and considering that violation of [Sec] 46 of
R.A. 6938 would be punishable by imprisonment of not less than six (6) months nor more
than one (1) year and a fine of not less than one thousand pesos (P1,000.00), or both at the
discretion of the Court, this Court (RTC) has no jurisdiction to hear and determine the instant
case which properly pertains to the first level courts.cralawred

WHEREFORE, premises considered, this Court finds and holds that it has no jurisdiction over
the offense charged. Accordingly, the instant case is hereby DISMISSED. This Court having
no jurisdiction, further discussions over the defense' allegation that there was a violation of
the principle of primary jurisdiction and that the private complainants used a falsified

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resolution to purposely empower them to file the instant case become moot and academic.

IT IS SO ORDERED.6
On February 12, 2009, the RTC denied for lack of merit the private prosecutor's motion for a
reconsideration of the order of dismissal.7 The RTC held:
Nowhere in said [Sec] 46 of R.A. 6938 does it provide for penal sanctions/liability for violation
of acts or omission prescribed therein. If ever, the liability is only for damages and for double
the profits which otherwise would have accrued to the cooperative. It is a fundamental rule
in law that an act or omission is not a crime unless there is a law making it so and providing
a penalty therefor. Otherwise put, the facts charged in the information do not charge an
offense. And even assuming arguendo that they do constitute an offense, the penalty therefor
is that provided under paragraph 4 of [Section] 124 of R.A. [6938] which is "imprisonment of
not less than six (6) months nor more than one (1) year and a fine of not less than one
thousand pesos (P1,000.00), or both at the discretion of the court," which falls under the
exclusive jurisdiction of the first, not the second level court.

Another factor which strongly militates against the cause of the prosecution is the undisputed
fact that before this case was filed in Court, conciliation/mediation process for the amicable
settlement of the dispute was not availed of by the private complainants who are all members
(directors) of the A. Mabini Elementary School Teachers Multi-Purpose Cooperative in
accordance with the by-laws of the Cooperative and the Cooperative Code itself and the
Guidelines for the Implementation of Conciliation/Mediation of Cooperative dispute (Memo
Circular No. 2007-05, Series of 2007). The dispute involving the parties is certainly a dispute
and issue between and among directors, officers or members of the A. Mabini Elementary
School Teachers Multi-Purpose Cooperative which is governed by the Guidelines.

Prior availment and exhaustion of administrative remedies until the Office of the President as
outlined in the Cooperative Code and in its implementing rules not having been resorted to
by the complainants, the rule on primary jurisdiction was violated and this Court acquired no
jurisdiction to hear and determine the present case. 8
Dissatisfied, the People of the Philippines, represented by the Office of the Solicitor General
(OSG), appealed the order of dismissal to the CA.

On August 31, 2011, the CA rendered a Decision reversing and setting aside the RTC Orders
dated October 14, 2008 and February 12, 2009 and remanded the case records to the RTC
for further proceedings. On January 31, 2012, the CA denied petitioner's motion for
reconsideration of its decision.9

Aggrieved, petitioner filed this petition for certiorari under Rule 65 of the Rules of Court,
raising the following issues:
1. WHETHER IN REVERSING THE REGIONAL TRIAL COURT'S DECISION OF DISMISSAL, HAS
THE HON. COURT OF APPEALS GRAVELY ERRED IN DISREGARDING THE CLEAN,
UNAMBIGUOUS AND CATEGORICAL PROVISION OF PARAGRAPH 4 OF [SECTION] 124 OF RA-
6938 IN REFERENCE TO THE PENAL SANCTION FOR VIOLATION OF [SEC] 46 OF THE
COOPERATIVE [CODE], RA-6938 AND ADOPTING FOR ITS DECISION ONE DERIVED FROM
ITS INTERPRETATION OF A SUPPOSED STATUTORY CONSTRUCTION WHICH
INTERPRETATION, EVEN SUBJECT PETITIONER TO A HIGHER PENALTY OF 5 YEARS TO 10
YRS. WHICH WAS TO JUSTIFY THAT TFIE RTC SHOULD NOT HAVE DISMISSED THE CASE AND
USED IT AS A GROUND TO REVERSE THE DECISION OF THE HON. REGIONAL TRIAL COURT.

2. WHETHER THE HON. COURT OF APPEALS IGNORED THE OTHER GROUNDS ASSIGNED FOR
THE DISMISSAL OF THE CRIMINAL CHARGE OTHER THAN THE VIOLATION OF [SECTION] 46

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OF RA-6938, (COOPERATIVE CODE). THAT THERE WAS A VIOLATION OF THE RULE ON
PRIMARY JURISDICTION - EXHAUSTION OF ADMINISTRATIVE REMEDIES IN THE
COOPERATIVE LEVEL BEFORE GOING TO COURT.

3. WHETHER THE HON. COURT OF APPEALS' ORDER REMANDING THE CASE BACK TO THE
REGIONAL TRIAL COURT FOR FURTHER PROCEEDINGS IGNORED THE RULE THAT DISMISSAL
OF THE CHARGE ON DEMURRER TO EVIDENCE AMOUNTS TO AN ACQUITTAL, AND THE
DISMISSAL IS NOT APPEALABLE.

4. WHETHER REMANDING THE CASE BACK TO THE REGIONAL TRIAL COURT FOR FURTHER
PROCEEDINGS SUBJECT THE PETITIONER-ACCUSED TO DOUBLE JEOPARDY AND TO HIGHER
PENALTY HAS NOT BEEN CONSIDERED.

5. [WHETHER THE RESPONDENT'S CONTENTION THAT A NEW AND AMENDED COOPERATIVE

CODE RA-9520 COULD POSSIBLE APPLY TO THIS CASE AGAINST THE PETITIONER,
VIOLATIVE OF EXPOSE (SIC) FACTO LAW.]10
The petition has no merit.

Prefatorily, the Court notes that petitioner filed a special civil action for certiorari under Rule
65 of the Rules of Court, as amended, instead of an appeal by certiorari under Rule 45, which
the OSG points out as the proper remedy to assail the CA decision.

Petitioner asserts that she filed the petition pursuant to Rule 65, because the assailed CA
decision is tainted with grave abuse of discretion. She posits that the Court ordered the
exclusion of the CA as one of the party respondents, and considered the petition as one filed
under Rule 45, since the focal issue raised in the petition is a question of law calling for an
interpretation of Sections 46 and 124 of RA 6938, in relation to Batas Pambansa (B.P.) Blg.
129, or the Judiciary Reorganization Act of 1980, as amended by RA 7691. She adds that had
she chosen to file an appeal by certiorari, the Court would be faced with the same question
of law.

Petitioner's contentions are untenable.

As a rule, the remedy from a judgment or final order of the CA is appeal via petition for review
under Rule 45 of the Rules of Court. 11 In Mercado v. Court of Appeals,12 the Court had again
stressed the distinction between the remedies provided for under Rule 45 and Rule 65, to wit:
xxx [T]he proper remedy of a party aggrieved by a decision of the Court of Appeals is a
petition for review under Rule 45, which is not identical to a petition for certiorari under Rule
65. Under Rule 45, decisions, final orders or resolutions of the Court of Appeals in any
case, i.e., regardless of the nature of the action or proceedings involved, may be appealed
to us by filing a petition for review, which would be but a continuation of the appellate
process over the original case. On the other hand, a special civil action under Rule 65 is an
independent action based on the specific ground therein provided and, as a general rule,
cannot be availed of as a substitute for the lost remedy of an ordinary appeal, including that
to be taken under Rule 45. xxx.13
In Artistica Ceramica, Inc., v. Ciudad Del Carmen Homeowner's Association, Inc.,14 the Court
explained that one of the requisites of certiorari is that there be no available appeal or any
plain, speedy and adequate remedy. Where an appeal is available, certiorari will not prosper,
even if the ground therefor is grave abuse of discretion. It is also well settled that a party
cannot file a petition both under Rules 45 and 65 of the Rules of Court because said procedural
rules pertain to different remedies and have distinct applications. The remedy of appeal under
Rule 45 and the original action for certiorari under Rule 65 are mutually exclusive and not

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alternative or cumulative. Thus, when petitioner adopts an improper remedy, petition may be
dismissed outright.

However, the Court may set aside technicality for justifiable reasons as when the petition
before it is clearly meritorious and filed on time both under Rules 45 and 65. 15 In accordance
with the liberal spirit which pervades the Rules of Court and in the interest of justice, the
Court may treat the petition as having been filed under Rule 45. Here, no justifiable reasons
were proffered by petitioner for a more liberal interpretation of procedural rules. Although it
was filed on time both under Rules 45 and 65, the petition at bench lacks substantive merit
and raises only questions of law which should have been duly made in a petition for review
on certiorari under Rule 45.16

On the substantive issue of which court has jurisdiction over petitioner's criminal case for
violation of Section 46 (Liability of Directors, Officers and Committee Members) of RA 6938,
the Court affirms the CA ruling that it is the RTC, not the Metropolitan Trial Court (MeTC),
which has jurisdiction over her case.

In criminal cases, the jurisdiction of the court is determined by the averments of the complaint
or Information, in relation to the law prevailing at the time of the filing of the complaint or
Information, and the penalty provided by law for the crime charged at the time of its
commission.17 Section 32 of B.P. Blg. 129, as amended, provides that the MeTC has exclusive
jurisdiction over offenses punishable with imprisonment not exceeding six years, irrespective
of the amount of fine:
Sec. 32. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit
Trial Courts in Criminal Cases. - Except in cases falling within the exclusive original jurisdiction
of Regional Trial Courts and of the Sandiganbayan, the Metropolitan Trial Courts, Municipal
Trial Courts, and Municipal Circuit Trial Courts shall exercise:
xxxx

(2) Exclusive original jurisdiction over all offenses punishable with imprisonment not
exceeding six (6) years irrespective of the amount of fine, and regardless of other
imposable accessory or other penalties, including the civil liability arising from such offenses
or predicated thereon, irrespective of kind, nature, value or amount thereof: Provided,
however, That in offenses involving damage to property through criminal negligence, they
shall have exclusive original jurisdiction thereof. (Emphasis added)
Offenses punishable with imprisonment exceeding six years, irrespective of the amount of
fine, fall under the exclusive original jurisdiction of the RTC, in accordance with Section 20 of
B.P. Blg. 129, as amended:
Section 20. Jurisdiction in criminal cases. — Regional Trial Courts shall exercise exclusive
original jurisdiction in all criminal cases not within the exclusive jurisdiction of any court,
tribunal or body, except those now falling under the exclusive and concurrent jurisdiction of
the Sandiganbayan which shall hereafter be exclusively taken cognizance of by the latter.
Petitioner insists that Section 46 (Liability of Directors, Officers and Committee Members) of
RA 6938 provides only for a civil liability but not a criminal sanction, hence, the MeTC has
jurisdiction over her criminal case which is punishable under paragraph 4 of Section 124:
Section 124. Penal Provisions. - The following acts or omissions affecting cooperatives are
hereby prohibited:
(4) Any violation of any provision of this Code for which no penalty is imposed shall
be punished by imprisonment of not less than six (6) months nor more than one (1)
year and a fine of not less than One thousand pesos (P1,000.00), or both at the discretion of
the court. (Emphasis added)

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Petitioner argues that the provisions of Section 46 (Liability of Directors, Officers and
Committee Members), Section 47 (Compensation) and Section 124 (Penal Provisions) of RA
6938, are plain, unambiguous, and categorical. She submits that statutory construction of
such clear provisions, especially if prejudicial to her rights as an accused and would subject
her to higher penalty, should not be allowed.

On the other hand, the OSG maintains that the RTC has jurisdiction over petitioner's case
pursuant to paragraph 3 of Section 124 of RA 6938:
(3) A director, officer or committee member who violated the provisions of Section
47 (liability of directors, officers and committee members), Section 50 (disloyalty of a
director) and Section 51 (illegal use of confidential information) shall upon conviction suffer
a fine of not less than Five thousand pesos (P5,000.00), or imprisonment of not less than
five (5) years but not more than ten (10) years or both at the court's discretion;
(Emphasis supplied)
The OSG points out that Section "47" in the above-quoted provision is a clerical error because
the "liability of directors, officers and committee members" is undisputedly governed by
Section 46 of RA 6938, while Section 47 thereof deals with the compensation of directors,
officers and employees, to wit:
Section 46. Liability of Directors, Officers and Committee Members. - Directors,
officers and committee members, who willfully and knowingly vote for or assent to patently
unlawful acts or who are guilty of gross negligence or bad faith in directing the affairs of the
cooperative or acquire any personal or pecuniary interest in conflict with their duty as such
directors, officers or committee member shall be liable jointly and severally for all damages
or profits resulting therefrom to the cooperative, members and other persons.

When a director, officer or committee member attempts to acquire or acquires, in violation of

his duty, any interest or equity adverse to the cooperative in respect to any matter which has
been reposed in him in confidence, he shall, as a trustee for the cooperative, be liable for
damages and for double the profits which otherwise would have accrued to the cooperative.

Section 47. Compensation. - (1) In the absence of any provision in the by-laws fixing their
compensation, the directors shall not receive any compensation except for reasonable per
diem: Provided, That any compensation other than per diems may be granted to directors by
a majority vote of the members with voting rights at a regular or special general assembly
meeting specifically called for the purpose: Provided further, that no additional compensation
other than per diems shall be paid during the first year of existence of any cooperative.
The Court sustains the OSG's contention. Petitioner failed to present any compelling reason
to warrant a departure from the exhaustive CA ruling on why the RTC, not the MeTC, has
jurisdiction over her criminal case for violation of Section 46 of RA 6938, thus:
The Court, in order to carry out the obvious intent of the legislature, may correct clerical
errors, mistakes or misprints which, if uncorrected, would render the statute meaningless,
empty or nonsensical or would defeat or impair its intended operation, so long as the meaning
intended is apparent on the face of the whole enactment and no specific provision is
abrogated. To correct the error or mistake is to prevent the nullification of the statute and
give it a meaning and purpose. For it is the duty of the court to give a statute a sensible
construction, one that will effectuate legislative intent and avoid injustice or absurdity. It is
its duty to arrive at the legislative intent and in doing so, it should not adopt an arbitrary rule
under which it must be held without variance or shadow of turning the legislature intended to
make a typographical error, the result of which would be to make nonsense of the act, and
not to carry out the legislative scheme, but to destroy it.

xxxx

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Clearly, the accused-appellee cannot insist that reference to [Sec] 124, paragraph 4, as the
trial court did, is necessary and therefore, warranted the dismissal of the criminal case for
lack of jurisdiction. To reiterate, [Sec] 46 of the Code, entitled "Liability of Directors, Officers,
and Committee Members," provides for violations under which the said officers could be held
liable for, and the corresponding liability for damages and profits from the said violations.
Since the said [section] does not provide for penal sanction, an application of [Sec] 124,
paragraph 3 should follow as the said provision evidently refers to the penal sanction on
erring directors, officers and committee members. It would make no sense if we were to
follow what clearly appears to be a clerical error, that is, applying [Sec] 124, paragraph 4
instead, just because paragraph 3 of the same [section] refers to [Sec] 47, which upon
examination of the Code provides for the "Compensation" of the directors, officers and other
employees of the cooperative.

We, thus, agree with the contention of the People that [Section] 124 (3) should refer to
"[Section] 46 (Liability of Directors, Officers and Committee Members, [Section] 49 (Disloyalty
of a Director) and [Section] 51 (Illegal use of confidential information)." Following this
interpretation, violation of [Sec] 46, therefore, is punishable by a fine of not less than Five
thousand pesos (P5,000.00), or imprisonment of not less than five (5) years but not more
than ten (10) years or both at the court's discretion, which under B.P. Blg. 129, shall be within
the jurisdiction of the RTC.18
It may not be amiss to point out that the clerical error noted by the OSG in Section 124 (3)
of RA 6938 on the liability of directors, officers and committee members, has been recognized
and duly corrected when the legislature enacted RA 9520, entitled "An Act Amending the
Cooperative Code of the Philippines to be known as the Philippine Cooperative Code of 2008."
Pertinent portions of the corrected provision read:
ART. 45. Liability of Directors, Officers and Committee Members. - Directors, officers and
committee members, who are willfully and knowingly vote for or assent to patently unlawful
acts or who are guilty of gross negligence or bad faith in directing the affairs of the cooperative
or acquire any personal or pecuniary interest in conflict with their duty as such directors,
officers or committee members shall be liable jointly and severally for all damages or profits
resulting therefrom to the cooperative, members, and other persons.

xxxx

ART. 140. Penal Provisions. - The following acts or omissions affecting cooperatives are
hereby prohibited:
xxxx

(5) A director, officer or committee member who violated the provisions of Article 45 on the
Liability of Directors, Officers and Committee Members, Article 48 on the Disloyalty of
a Director, and Article 49 on the Illegal Use of Confidential Information shall upon conviction
suffer a fine of not less than Five hundred thousand pesos (P500,000.00) nor more than Five
hundred thousand pesos (P500,000.00) or imprisonment of not less than five (5) years but
not more than ten (10) years or both at the court's discretion; [Emphasis added]
On whether the rule on exhaustion of administrative remedies was violated when the
Cooperative filed a criminal case against petitioner without undergoing conciliation/mediation
proceedings pursuant to the Cooperative Code and the By-laws of the Cooperative, the Court
rules in the negative. Conciliation or mediation is not a pre-requisite to the filing of a criminal
case for violation of RA 6938 against petitioner, because such case is not an intra-cooperative
dispute. As aptly pointed out by the CA:

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Neither can the accused-appellee insist that this is an intra-cooperative dispute and should
have been resolved at the cooperative level. As aptly argued by the People, this is not an
intra-cooperative dispute. Intra-cooperative dispute is a dispute arising between or among
members of the same cooperative. The instant case is a dispute between the Cooperative and
its former chairperson, the accused-appellee. The Board Resolution authorizing the filing of
the criminal complaint by the Board of Directors, for and in behalf of the Cooperative, is proof
that this is not an intra-cooperative dispute, and within the jurisdiction of the regular court.19
Moreover, it is well settled that in criminal cases where the offended party is the State, the
interest of the private complainant or the private offended party is limited to the civil liability,
and her role in the prosecution of the offense is limited to that of a witness for the
prosecution.20 In petitioner's criminal case for violation of Section 46 of RA 6938, the State is
the real offended party, while the Cooperative and its members are mere private complainants
and witnesses whose interests are limited to the civil aspect thereof. Clearly, such criminal
case can hardly be considered an intra-cooperative dispute, as it is not one arising between
or among members of the same cooperative.

On whether the dismissal of the charge against petitioner on demurrer to evidence amounts
to an acquittal, hence, final and unappealable, the Court rules in the negative.

In Gutib v. Court of Appeals,21 the Court stressed that demurrer to the evidence is an
objection by one of the parties in an action, to the effect that the evidence which his adversary
produced is insufficient in point of law, whether true or not, to make out a case or sustain the
issue. The party demurring challenges the sufficiency of the whole evidence to sustain a
verdict. The Court, in passing upon the sufficiency of the evidence raised in a demurrer, is
merely required to ascertain whether there is competent or sufficient evidence to sustain the
indictment or to support a verdict of guilt.

In People v. Sandiganbayan,22 the Court explained the general rule that the grant of a
demurrer to evidence operates as an acquittal and is, thus, final and unappealable, to wit:
The demurrer to evidence in criminal cases, such as the one at bar, is "filed after the
prosecution had rested its case" and when the same is granted, it calls "for an appreciation
of the evidence adduced by the prosecution and its sufficiency to warrant conviction beyond
reasonable doubt, resulting in a dismissal of the case on the merits, tantamount to an
acquittal of the accused." Such dismissal of a criminal case by the grant of demurrer to
evidence may not be appealed, for to do so would be to place the accused in double jeopardy.
The verdict being one of acquittal, the case ends there.23
In this case, however, the RTC granted the demurrer to evidence and dismissed the case not
for insufficiency of evidence, but for lack of jurisdiction over the offense charged. Notably, the
RTC did not decide the case on the merits, let alone resolve the issue of petitioner's guilt or
innocence based on the evidence proffered by the prosecution. This being the case, the
October 14, 2008 RTC Order of dismissal does not operate as an acquittal, hence, may still
be subject to ordinary appeal under Rule 41 of the Rules of Court.24 As aptly noted by the CA:
The accused-appellee is also of a mistaken view that the dismissal of the case against her is
an acquittal. It should be emphasized' that "acquittal is always based on the merits, that is,
the defendant is acquitted because the evidence does not show that the defendant's guilt is
beyond reasonable doubt; but dismissal does not decide the case on the merits or that the
defendant is not guilty. Dismissal terminates the proceeding, either because the court is not
a court of competent jurisdiction, or the evidence does not show that the offense was
committed within the territorial jurisdiction of the court, or the complaint or information is not
valid or sufficient in form and substance, etc."25
On whether the remand of the criminal case to the RTC violated her right against double
jeopardy due to its earlier dismissal on the ground of lack of jurisdiction, the Court rules in

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the negative and upholds the CA in ruling that the dismissal having been granted upon
petitioner's instance, double jeopardy did not attach, thus:

The accused-appellee cannot also contend that she will be placed in double jeopardy upon
this appeal. It must be stressed that the dismissal of the case against her was premised upon
her filing of a demurrer to evidence, and the finding, albeit erroneous, of the trial court that
it is bereft of jurisdiction.

The requisites that must be present for double jeopardy to attach are: (a) a valid complaint
or information; (b) a court of competent jurisdiction; (c) the accused has pleaded to the
charge; and (d) the accused has been convicted or acquitted or the case dismissed or
terminated without the express consent of the accused.

Definitely, there is no double jeopardy in this case as the dismissal was with the accused-
appellee's consent, that is, by moving for the dismissal of the case through a demurrer to
evidence. As correctly argued by the People, where the dismissal was ordered upon or with
express assent of the accused, he is deemed to have waived his protection against doubly
jeopardy. In this case at bar, the dismissal was granted upon motion of petitioners. Double
jeopardy, thus, did not attach.26
The Court also finds no merit in petitioner's new argument that the prosecution of her case
before the RTC for violation of Section 46 of RA 6938 in Criminal Case No. 07-197750 is
barred by res judicata because the MeTC of Manila, Branch 22, in a Resolution 27 dated August
13, 2012, granted her demurrer to evidence and acquitted her in a criminal case for
falsification of private document in Criminal Case No. 370119-20-CR.28 In support of her
flawed argument, petitioner points out that the private complainants [officers and directors
of the Cooperative] and the subject matter [unreported sales profits of Coca-Cola products]
of both cases are the same, and that the case for violation of Section 46 of RA 6938 is actually
and necessarily included in the case for falsification of private documents.

At the outset, res judicata is a doctrine of civil law and thus has no bearing on criminal
proceedings.29 At any rate, petitioner's argument is incidentally related to double jeopardy
which embrace's a prohibition against being tried for any offense which necessarily includes
or is necessarily included in the offense charged in the former complaint or information.

Section 730 of Rule 117 lays down the requisites in order that the defense of double jeopardy
may prosper. There is double jeopardy when the following requisites are present: (1) a first
jeopardy attached prior to the second; (2) the first jeopardy has been validly terminated; and
(3) a second jeopardy is for the same offense as in the first. 31 As to the first requisite, the
first jeopardy attaches only (a) after a valid indictment; (b) before a competent court; (c)
after arraignment; (d) when a valid plea has been entered; and (e) when the accused was
acquitted or convicted, or the case was dismissed or otherwise terminated without his express
consent.32

In this case, there is no dispute that the first and second requisites of double jeopardy are
present in view of the MeTC Resolution33 dated August 13, 2012 which granted petitioner's
demurrer to evidence and acquitted her in a criminal case for falsification of private document
in Criminal Case No. 370119-20-CR. Petitioner's argument dwells on whether the third
requisite of double jeopardy — a second jeopardy is for the same offense as in the first — is
present. Such question of identity or lack of identity of offenses is addressed by examining
the essential elements of each of the two offenses charged, as such elements are set out in
the respective legislative definitions of the offense involved. 34

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Thus, the remaining question to be resolved is whether the offense charged in the information
for Section 46 of RA 6938 necessarily includes or is necessarily included in a crime for
falsification of private document under Article 172 of the Revised Penal Code, as amended
(RPC). The test to determine whether an offense necessarily includes or is necessarily included

in the other is provided under Section 5, Rule .120 of the Rules of Court:
An offense charged necessarily includes the offense proved when some of the essential
elements or ingredients of the former, as alleged in the complaint or information, constitute
the latter. And an offense charged is necessarily included in the offense proved, when the
essential ingredients of the former constitute or form part of those constituting the latter.
After a careful examination of the Informations filed against petitioner for falsification of
private document in Criminal Case No. 370119-20-CR and for violation of Section 46, RA 6938
in Criminal Case No. 01-197750, the Court holds that the first offense for which petitioner
was acquitted does not necessarily include and is not necessarily included in the second
offense.

The Information for falsification of private document, on the one hand, alleged that petitioner,
being then the Chairperson and Managing Director of A. Mabini Elementary School Teachers
Multi-Purpose Cooperative, as part of her duty to prepare financial reports, falsified such
report for the School Year 1999-2000, in relation to the sales profits of Coca-Cola products in
violation of Article 172 (2)35 of the RPC. The elements of falsification of private document
under Article 172, paragraph 2 of the RPC are: (1) that the offender committed any of the
acts of falsification, except those in paragraph 7, Article 171; 36 (2) that the falsification was
committed in any private document; and (3) that the falsification caused damage to a third
party or at least the falsification was committed with intent to cause such damage.

The Information for violation of Section 46 of RA 6938 alleged, on the other hand, that being
then such officer and director of the Cooperative, petitioner willfully acquired personal interest
or equity adverse to it, in violation of her duty and of the confidence reposed upon her, by
entering into a contract with Coca-Cola in her own personal capacity, knowing fully well that
the sales profits of such products should have accrued to the Cooperative. The essential
elements of violation of Section 46 of RA 6938 are (1) that the offender is a director, officer
or committee member; and (2) that the offender willfully and lcnowingly (a) votes for or
assents to patently unlawful acts; (b) is guilty of gross negligence or bad faith in directing the
affairs of the cooperative; or (c) acquires any personal or pecuniary interest in conflict with
their duty as such directors, officers or committee member.

Verily, there is nothing common or similar between the essential elements of the crimes of
falsification of private document under Article 172 (2) of the RPC and that of violation of
Section 46 of RA 6938, as alleged in the Informations filed against petitioner. As neither of
the said crimes can be said to necessarily include or is necessarily included in the other, the
third requisite for double jeopardy to attach—a second jeopardy is for the same offense as in
the first—is, therefore, absent. Not only are their elements different, they also have a distinct
nature, i.e., the former is malum in se, as what makes it a felony is criminal intent on the
part of the offender, while the latter is malum prohibitum, as what makes it a crime is the
special, law enacting it.

Moreover, in People v. Doriguez,37 the Court held:

It is a cardinal rule that the protection against double jeopardy may be invoked only for the
same offense or identical offenses. A simple act may offend against two (or more) entirely
distinct and unrelated provisions of law, and if one provision requires proof of an additional
fact or element which the other does not, an acquittal or conviction or a dismissal of the

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information under one does not bar prosecution under the other. Phrased elsewise, where two
different laws (or articles of the same code) defines two crimes, prior jeopardy as to one of
them is no obstacle to a prosecution of the other, although both offenses arise from the same
fact, if each crime involves some important act which is not an essential element of the
other.38
Since the Informations filed against petitioner were for separate, and distinct offenses as
discussed above—the first against' Article 172 (2) of the Revised Penal Code and the second
against Section 46 of the Cooperative Code (RA 6938)—one cannot be pleaded as a bar to
the other under the rule on double jeopardy. Besides, it is basic in criminal procedure that
an accused may be charged with as many crimes as defined in our penal laws even if these
arose from one incident. Thus, where a single act is directed against one person but said act
constitutes a violation of two or more entirely distinct and unrelated provisions of law, or by
a special law and the Revised Penal Code, as in this case, the prosecution against one is not
an obstacle to the prosecution of the other.39

WHEREFORE, premises considered, the petition is DENIED, and the Court of Appeals
Decision dated August 31, 2011 and its Resolution dated Jan. 31, 2012 in CA-G.R. CR No.
32363, are AFFIRMED.

SO ORDERED.

Davao Water District v. Aranuez, et al | G.R. No. 194192 | June 16, 2015

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 194192 June 16, 2015

DAVAO CITY WATER DISTRICT REPRESENTED BY ITS GENERAL MANAGER, RODORA N.

GAMBOA, Petitioner,
vs.
RODRIGO L. ARANJUEZ, GREGORIO S. CAGULA, CELESTINO A. BONDOC, DANILO L. BUHAY,
PEDRO E. ALCALA, JOSEPH A. VALDEZ, TITO V. SABANGAN, MARCELINO B. ANINO, JUANITO
C. PANSACALA, JOEMARIE B. ALBA, ANTERO M. YMAS, ROLANDO L. LARGO, RENEBOY U.
ESTEBAN, MANUEL B. LIBANG, ROMEORICO A. LLANOS, ARTHUR C. BACHILLER, SOCRATES
V. CORCUERA, ALEJANDRO C. PICHON, GRACIANO A. MONCADA, ROLANDO K. ESCORIAL,
NOEL A. DAGALE, EMILIO S. MOLINA, SHERWIN S. SOLAMO, FULGENCIO I. DYGUAZO,
GUALBERTO S. PAGATPAT, JOSEPH B. ARTAJO, FELIXBERTO Q. OBENZA, FLORANTE A.
FERRAREN, ELSA A. ELORDE, CARLOS P. MORRE, JAMES AQUILINO M. COLOMA, JOAQUIN 0.
CADORNA, JR., LORNA M. MAXINO, ROMULO A. REYES, NOEL G. LEGASPI, ELEANOR R.
LAMOSTE, WELMER E. CRASCO, DELIO T. OLAER, VICENTE R. MASUCOL, IRENEO A. CUBAL,
EDWIN A. DELA PENA, JIMMY A. TROCIO, WILFREDO L. TORREON, ALEJANDRITO M. ALO,
RAUL S. SAGA, JOSELITO P. RICONALLA, TRISEBAL Q. AGUILAR, ARMAN N. LORENZO, SR. and
PEDRO C. GUNTING, Respondents.

RESOLUTION

PEREZ, J.:

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This is a Petition for Review on Certiorari1 of the Decision2 of the Twenty Third Division of the Court of
Appeals in CA-G.R. SP No. 02793- MIN dated 7 October 2010, affirming the 14 January 2009 Resolution
No. 09-0047 rendered by the Civil Service Commission (CSC).

The Facts

Petitioner Davao City Water District(DCWD) is a government-owned and controlled corporation in Davao
City represented by its General Manager Engr. Rodora N. Gamboa (GM Gamboa). The private
respondents, namely, Rodrigo L. Aranjuez, Gregorio S. Cagula, Celestino A. Bondoc, Danilo L.Buhay,
Pedro E. Alcala, Joseph A. Valdez, Tito V. Sabangan,Marcelino B. Anino, Juanito C. Pansacala, Joemarie
B. Alba, Antero M. Ymas, Rolando L. Largo, Reneboy U. Esteban, Manuel B. Libang, Romeorico A. Llanos,
Arthur C. Bachiller, Socrates V. Corcuera, Alejandro C. Pichon, Graciano A . Moncada, Rolando K. Escorial,
Noel A. Dagale, Emilio S. Molina, Sherwin S. Solamo, Fulgencio I. Dyguazo, Gualberto S. Pagatpat, Joseph
B. Artajo, Felixberto Q. Obenza, Florante A. Ferraren, Elsa A. Elorde, Carlos P. Morre, James Aquilino M.
Coloma, Joaquin O. Cadorna, Jr., Lorna M. Maxino, Romulo A. Reyes, Noel G. Legaspi, Eleanor R.
Lamoste, WelmerE. Crasco, Delio T. Olaer, Vicente R. Masucol, Ireneo A. Cubal, Edwin A. dela Peña,
Jimmy A. Trocio, Wilfredo L. Torreon, Alejandrito M.Alo, Raul S. Saga, Joselito P. Riconalla, Trisebal Q.
Aguilar, Arman N. Lorenzo, Sr. and Pedro C. Gunting (Aranjuez, et al.) are officers and members of
Nagkahiusang Mamumuo sa Davao City Water District (NAMADACWAD). They were charged with several
administrative cases due to acts committed during the anniversary celebration of DCWD such as wearing
of t-shirts with inscriptions and posting of bond papers outside the designated places. The inscriptions and
postings bore employees’ grievances.

The records show that as early as 16 May 2007, the members and officers of NAMADACWAD have been
staging pickets in front of the DCWD Office during their lunch breaks to air their grievances about the non-
payment of their Collective Negotiation Agreement (CNA) incentives and their opposition to DCWD’s
privatization and proposed One Hundred Million Peso Loan.

On 31 October 2007, GM Gamboa issued an Office Memorandum addressed to all department managers
concerning the different activities that would take place during DCWD’s then upcoming anniversary
celebration. The Memorandum reads:

Please be informed that the opening activities of our 34th anniversary this coming 09 November 2007 are
the motorcade and the fun run. The assembly area will be at the Victoria Plaza Mall parking, in front of
Cynthia’s Lechon Hauz, 6:00 o’clock in the morning.

In view of this, everybody is expected to be there except only those who are assigned as a skeletal force.
All carpool vehicles are also enjoined to proceed at the said area. The participants are free to wear any
sports attire. Further, you are advised to sign in the attendance sheet provided by the HRD. 3

On 8 November 2007, the officers and members of NAMADACWAD held an Emergency General Assembly
and they agreed to wear NAMADACWAD t-shirts with inscriptions stating, "CNA Incentive Ihatag Na, Dir.
Braganza Pahawa Na!" on the day of the anniversary.4

Came the anniversary, officers and members sported t-shirts with inscriptions "CNA Incentive Ihatag Na,
Dir. Braganza Pahawa Na!" at the beginning of the Fun Run at VictoriaPlaza at around 6:30 in the morning
and continued to wear the same inside the premises of the DCWD office during the office hours. Also, one
of the members of the Board of Directors of NAMADACWAD Gregorio S. Cagula (Cagula), with the help of
some of its members, attached similar inscriptions and posters of employees’ grievances to a post in the
motor pool area, an area not among the officially designated places 5 for posting of grievances as prescribed
by DCWD’s Office Memorandum6 dated 8 February 1996 and pursuant to CSC Memorandum Circular No.
33,7 Series of 1994 (MC No. 33).8

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As a consequence of their actions, GM Gamboa sent a Memorandum dated 14 November 2007 addressed
to the officers and members of NAMADACWAD, requiring them to explain the reasons for the attire they
wore during the anniversary celebration. Through a collective letter dated 19 November 2007, the officers
and members explained that the Memorandum only required the employees to wear any sports attire,
though theirs were with additional inscriptions containing grievances. They countered that the inscriptions
were but manifestations of their constitutional rights of free speech and freedom of expression.9

On 23 November 2007, another Memorandum was sent to the officers of NAMADACWAD requiring them
to explain within 72-hours why they should not be held liable for the actions committed by Cagula.10

Finding prima facie case against them, GM Gamboa filed formal charges against the officers and members
of NAMADACWAD as follow:

1. For DCWD Administrative Case No. 34-2007 against the officials of NAMADACWAD for violation
of Existing Civil Service Law and Rules of Serious Nature defined under Section 46 [12], Book V of
Executive Order No. 292,11 in relation to Rule IV, Section 52 B [4] of the Civil Service Resolution
No. 99193612 dated August 31, 1999 and Civil Service Resolution No. 021316 13 dated October 11,
2002 and MC No. 33 dated October 21, 1994.14

2. For DCWD Administrative Case Nos. 11-2007 to 33-2007 and 35-2007 to 44-2007 involving the
individual members of NAMADACWAD for violation of Existing Civil Service Law and Rules of
Serious Nature defined under Section 46 [12], Book V of Executive Order No. 292, 15 in relation to
Rule IV, Section 52 B [4] of the Civil Service Resolution No. 991936 dated August 31, 1999 and
Civil Service Resolution No. 021316 dated October 11, 2002.

After giving those concerned the opportunity to explain through several hearings and submission
of additional evidence, the Hearing Committee, through the authority given by DCWD to hear the
administrative charges, filed on 14 March 2008 its Consolidated Resolution and Recommendation
finding the officers and members of the NAMADACWAD guilty as charged with penalties ranging
from suspension to dismissal from service with all accessory penalties under the CSC Law and
Rules.16

On 19 March 2008, GM Gamboa issued several Orders17 adopting the recommendation submitted by the
Hearing Committee but modifying some of the corresponding penalties in view of mitigating circumstances
such as first infractionand substantial justice. However, three officials namely Rodrigo L. Aranjuez, Cagula
and Celestino A. Bondoc were penalized with dismissal from the service for the reason that the infraction
was the second administrative offense of serious nature.18

Aggrieved, Aranjuez, et al., filed an Urgent Motion for Reconsideration 19 with Prayer to Suspend the
Immediate Execution of the Orders dated 19 March 2008. The Motion for Reconsideration was thereafter
submitted for resolution after the Hearing Committee waived the filing of a Comment. On 17 April 2008, the
Motion was denied by DCWD.

On 2 May 2008, Aranjuez, et al., filed an appeal before the CSC bringing up, among other issues, the
violation of their constitutional rights to assemble and petition for redress of grievances. 20

In its Comment, DCWD defended the Orders on the basis of Section 6 of CSC Resolution No.
02131621 which provides that the concerted activity like the participation of the officers and employees
during the fun run wearing t-shirts with inscriptions was prohibited because it was done during office hours.
Moreover, the act of Cagula in posting papers with grievances outside the designated areas was a clear
violation of MC No. 33 in relation to 8 February 1996 Office Memorandum. It was submitted that due to
Cagula’s membership in the Board of Directors of NAMADACWAD, the other officers were solidarily
responsible for his actions.22

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CSC Resolution

On 14 January 2009, CSC issued a Resolution23 partly granting the consolidated appeal and held that the
collective act of respondents in wearing t-shirts with grievance inscriptions during office hours was not within
the ambit of the definition of prohibited mass action punishable under CSC Resolution 021316 since there
was no intent to cause work stoppage. However, though not prohibited under the Resolution, the act was
considered as an offense punishable under "Violation of Reasonable Office Rules and Regulations." CSC
further ruled that Cagula’s act of posting of grievances outside the designated areas was a clear violation
of MC No. 33. By reason of Cagula’s position, the other officers of NAMADACWAD were considered as
having agreed and conspired to commit the said act and as such are as liable as Cagula.

On the other hand, and contrary to the assertions of DCWD, the violations committed by the private
respondents are not serious in nature due to the lack of any abusive, vulgar, defamatory or libelous
language. The dispositive portion reads:

WHEREFORE, the Consolidated Appeal filed by Rodrigo L. Aranjuez, et al. is PARTLY GRANTED. The
Orders dated March 19, 2008 issued by the General Manager Rodora N. Gamboa finding appellants guilty
of Violation of Existing Civil Service Law and Rules of Serious Nature (Section 46 [12] Book V of Executive
Order No. 292, in relation to Rule IV, Section 52 B [4] of the CSC Resolution No. 991936 dated August 31,
1999 and CSC Resolution No. 021316 dated October 11, 2002 and CSC MC No. 33 dated October 21,
1994), are hereby MODIFIED. Accordingly, appellants are hereby found liable for Violation of Reasonable
Office Rules and Regulations and are meted the following penalties, to wit:

1. As to members Danilo Buhay, Pedro E. Alcala, Joseph A. Valdez, Tito V. Sabangan, Marcelino
B. Anino, Juanito C. Pansacala, Joemarie B. Alba, Antero M. Ymas, Rolando L. Largo, Reneboy
U. Esteban, Manuel B. Libang, Romeorico A. Llanos, Arthur C. Bachiller, Socrates V. Corcuera,
Alejandro C. Pichon, Graciano A. Moncada, Rolando Escorial, Noel A. Dagale, Emilio S. Molina,
Sherwin S. Solano, Danilo L. Buhay and Fulgencio I. Dyguazo, the penalty of reprimand;

2. As to officers Gualberta S. Pagatpat, Joseph A. Artalo, Felixberto Q. Obenza, Florante A.

Ferraren, Elsa A. Ilorde, Carlos P. Morre, James Aquilino M. Coloma, Joacquin O. Cadorna, Jr.,
Lorna M. Maximo, Romulo A. Reyes, Noel G.Legazpi, Eleanor R. Lamoste, Welmer E. Crasco,
Delio T. Olaer, Vicente R. Masucol, Ireneo Cubal, Rodrigo L. Aranjuez, Gregorio S. Cagula and
Celestino A. Bondoc, the penalty of reprimand and strong warning that a repetition of the same
shall be dealt with severely.

3. As to members Edwin A. dela Peña, Jummy A. Trocio, Wilfredo A. Torreon, Alejandrito M. Alo,
Raul S. Saga, Joselito P. Riconalla, Trisebal Q. Aguilar,Arman L. Lorenzo, Sr. and Pedro C.
Gunting, they are likewise found guilty of the offense of Violation of Reasonable Office Rules and
Regulations but are not meted a penalty considering that they are casual employees whose
renewal of appointments were held in abeyance.24

Aggrieved, DCWD filed a Petition for Review under Rules 43 before the Court of Appeals alleging
procedural and substantive infirmities of the CSC Resolution.

The Court of Appeals’ Decision

In its decision, the Court of Appeals affirmed in toto25 the resolution of CSC.

The appellate court disagreed with the contention of DCWD that there was a violation of any provision of
Resolution No. 021316 in this wise:

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As correctly observed by the Civil Service Commission, the act of respondents in sporting a t-shirt with the
inscription "CNA INCENTIVE IHATAG NA, DIRECTOR BRAGANZA,PAHAWA NA!" during the fun run and
even inside the office premises hardly qualifies as a prohibited concerted mass action under CSC
Resolution No. 021316.

xxxx

To say the least, Section 5 of Resolution No. 01316 provides a specific guideline as to what constitutes a
prohibited concerted activity. A prohibited concerted activity must be one undertaken by government
employees, by themselves or through their association, with the intent of effecting work stoppage or service
disruption, in order to realize their demands or force concessions. In the case at hand, we can readily
observe that respondent’s participation in the fun run, as well as their behavior inside the premises of DCWD
office during the regular working hours of that day indicate a complete absence of any intention on their
part to effect a work stoppage or disturbance. In fact, as attested by both parties, all the respondents
participated with the planned activities and festivities on that day.26

The appellate court was likewise in agreement with the CSC which considered as simple violation of office
rules the posting of banners outside the designated posting areas by Cagula. Also like the CSC, it ruled
that such offense is not punishable with the penalty of dismissal.

The DCWD is now before us still with its basic arguments, though rephrased:

I.

The court a quo failed to rule on the issue whether or not the respondents’ Consolidated Appeal filed before
the CSC was sufficient in form and substance.

II.

The court a quo erred in ruling that the concerted mass action on November 9, 2007 was not prohibited
under Resolution No. 021316.

III.

The court a quo erred in ruling that Resolution No. 021316 and MC No. 33 are considered "reasonable
office rules and regulations" within the purview of Section 52 C [3] of the Uniform Rules on Administrative
Cases.

IV.

The court a quo erred in ruling that respondents’ act of posting white bond papers with union-related
inscriptions on their t-shirts while inside the office premises does not constitute serious violation of Civil
Service Rules but only a violation of Reasonable Office Rules and Regulations, despite the fact that the
said Memorandum Circular No. 33 is a CSC-issued Memorandum and not DCWD-issued Rules.

V.

The court a quo erred in ruling that MC No. 33 was not violated by respondent Gregorio S. Cagula and the
rest of the officials of NAMADACWAD who were charged in DCWD Administrative case No. 34-2007.

VI.

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The court a quo erred in not taking into consideration that respondents Aranjuez, Cagula and Bondoc were
second-time offenders who were previously charged and penalized for violation of MC No. 33, thereby
justifying their dismissal from the service.

VII.

The court a quo erred when it failed to rule on the issue of whether the decisions of a government agency,
acting as Disciplining Authority, in disciplinary cases are immediately executory upon receipt thereof.

The Court's Ruling

The Court finds no merit in the petition.

Prefatorily, DCWD contends that the appeal of Aranjuez, et al., should have been dismissed by the CSC
for non-compliance with Section 46 of CSC Resolution No. 991936, particularly their failure to file a notice
of appeal, their failure to show proof of payment of the appeal fee and the petition’s invalid verification and
certification of non-forum shopping.

We are not persuaded.

Though the appeal before the CSC lacked a notice of appeal as required by CSC Resolution No. 991936
or the Uniform Rules on Administrative Cases in the Civil Service (URACCS),27 the Consolidated
Memorandum filed by the private respondents was enough to be considered as a sufficient compliance with
the rules. The Memorandum delineates the errors asserted against DCWD and the discussions supporting
their arguments. We find merit in the sufficiency of the Memorandum rather than strict compliance in view
of the constitutional right of every employee to security of tenure. A more relevant consideration of public
interest is accorded whenever the merits of a case collide with rigid application of the rules. 28

Further, we find that the Civil Service Commission, the agency directly concerned, the ruling of which was
upheld by the Court of Appeals on review, correctly exercised jurisdiction over respondent’s appeal from
the decision of petitioner DCWD, thereby ruling against, if sub silentio, the argument of petitioner that the
appeal should be dismissed for lack of proof of payment of appeal. The Civil Service Commission and the
Court of Appeals considered the procedural issue raised by petitioner as a surmountable bar to the
resolution of the main issue of respondents’ constitutional right to free expression 29 as amplified with
specificity by their guaranteed right as workers to peaceful concerted activity and their entitlement to
security of tenure.30 The decisions of the Civil Service Commission and the Court of Appeals are squarely
supported by Adalim v. Taniñas31 stating that:

In a number of cases, we upheld the CSC’s decision relaxing its procedural rules to render substantial
justice. The Revised Rules on Administrative Cases in the Civil Service themselves provide that
administrative investigations shall be conducted without strict recourse to the technical rules of procedure
and evidence applicable to judicial proceedings. The case before the CSC involves the security of tenure
of public employees protected by the Constitution. Public interest requires a resolution of the merits of the
appeal instead of dismissing the same based on a rigid application of the CSC Rules of Procedure.
Accordingly, both the CSC and the CA properly allowed respondent employees’ appeal despite procedural
lapses to resolve the issue on the merits.

In Republic of the Philippines v. Court of Appeals,32 this Court pronounced that technical rules of procedure
are not ends in themselves but primarily devised and designed to help in the proper and expedient
dispensation of justice. In appropriate cases, therefore, the rules may have to be so construed liberally as
to meet and advance the cause of substantial justice. While it is desirable that the rules of procedure are
faithfully and even meticulously observed, courts should not be so strict about procedural lapses that do
not really impair the proper administration of justice. If the rules are intended to ensure the orderly conduct

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of litigation, it is because of the higher objective they seek which is the protection of substantive rights of
the parties.33 Substantial justice, in other words must prevail. In Paler,34 We said:

When substantial justice dictates it, procedural rules may be relaxed in order to arrive at a just disposition
of a case. The purpose behind limiting the period of appeal is to avoid unreasonable delay in the
administration of justice and to put an end to controversies. A one-day delay as in this case, does not justify
denial of the appeal where there is absolutely no indication of intent to delay as in this case, does not justify
denial of the appeal where there is absolutely no indication of intent to delay justice on the part of Paler and
the pleading is meritorious on its face.

We rule in favor of the allowance of respondents’ appeal because:

Law and jurisprudence grant to courts the prerogative to relax compliance with procedural rules of even the
most mandatory character, mindful of the duty to reconcile both the need to put an end to litigation speedily
and the parties’ right to an opportunity to be heard.35 (Emphasis supplied)

Quoting again the case of Republic v. Court of Appeals,36 we pointed out that this Court can temper rigid
rules in favor of substantial justice. We find that pronouncement apt and fit to this case. Thereby we are not
detained by the omissions of the respondents in their resort to the CSC, and we thus proceed to the merits
of the petitioners’ submissions.

Lastly, on the form, we find no merit in the contention that Aranjuez was not authorized to sign on behalf of
the other petitioners. Pursuant to Union Resolution No. 015-200837 attached as Annex A to the Appellants’
015-2008 Consolidated Memorandum dated 26 March 2008, the officers and members of NAMDACWAD
gave Aranjuez a general authority to represent the organization in all legal matters to be filed for whatever
purpose it may serve. From the general and broad grant of authority, Aranjuez possessed the specific
authority to sign in behalf of his principal the verification and certification against non-forum shopping
required of the petition.

To the kernel, then.

DCWD primarily contends that CSC and the Court of Appeals erred in ruling that the concerted mass action
on 9 November 2007 is not prohibited under Resolution No. 021316. We disagree. DCWD relies on
Resolution No. 021316, which states:

Section 6. Permissible Concerted Mass Action.– A concerted activity or mass action done outside of
government office hours shall not be deemed a prohibited concerted activity or mass action within the
contemplation of this omnibus rules provided the same shall not occasion or result in the disruption of work
or service.38

DCWD argues that since the concerted or mass action was done within government office hours, such act
was not permissible, therefore prohibited. Otherwise stated, a concerted activity done within the regular
government office hours is automatically a violation of Section 6 of the Resolution.

Notably, however, a prohibited concerted mass action is defined not in Sec. 6 of Resolution No. 021316
but in Sec. 5 thereof. Thus:

Section 5. Definition of Prohibited Concerted Mass Action. - As used in this Omnibus Rules, the phrase
‘‘prohibited concerted activity or mass action’’ shall be understood to refer to any collective activity
undertaken by government employees, by themselves or through their employees organizations, with the
intent of effecting work stoppage or service disruption in order to realize their demands of force concession,
economic or otherwise, from their respective agencies or the government. It shall include mass leaves,
walkouts, pickets and acts of similar nature.39 (Emphasis ours).

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The operative phrases are "any collective activity" and "work stoppage or service disruption." Without the
intent at work stoppage or service disruption, the concerted activity is not prohibited. The time and place of
the activity are not determinative of the prohibition. Whether done within government hours, a concerted
activity is allowed if it is without any intent at work stoppage.

We cannot isolate the provision of Section 6 of the Resolution from definition of prohibited activity in Section
5 thereof. It is erroneous to interpret the provisions in such a way that an act not within the circumstances
as defined under Section 5 can still be regarded as prohibited if done within government hours. To subscribe
to the argument of DCWD would in effect expand the definition provided by Resolution No. 021316 on what
constitutes a prohibited mass action.

It is clear that the collective activity of joining the fun run in t-shirts with inscriptions on CNA incentives was
not to effect work stoppage or disrupt the service. As pointed out by the respondents, they followed the
advice of GM Gamboa "to be there" at the fun run. Respondents joined, and did not disrupt the fun run.
They were in sports attire that they were allowed, nay required, to wear. Else, government employees would
be deprived of their constitutional right to freedom of expression.40 This, then, being the fact, we have to
rule against the findings of both the CSC and Court of Appeals that the wearing of t-shirts with grievance
inscriptions constitutes as a violation of Reasonable Office Rules and Regulations.

First off and as correctly pointed out by the charged officials and members in their 19 November 2007 Reply
Letter to DCWD, they did not violate the 31 October 2007 Office Memorandum issued by GM Gamboa
relating to the proper attire to be worn during the fun run. The Office Memorandum was clear in its order
that the participants are free to wear any sports attire during the event. To reiterate, the t-shirts they wore
fall within the description of "any sports attire" that the Memorandum allowed to be worn.

More importantly we need to refer to GSIS v. Villaviza (GSIS case).41 It was there ruled that the acts of
GSIS employees wearing similarly colored shirts while attending a public hearing inside the GSIS Office,
with clenching of fists and orating against the then President Winston Garcia, were not constitutive of a
prohibited activity but were only an exercise of their constitutional freedom of expression.42 We repeat:

In this case, CSC found that the acts of respondents in going to the GSIS-IU office wearing red shirts to
witness a public hearing do not amount to a concerted activity or mass action proscribed above. CSC even
added that their actuations can be deemed an exercise of their constitutional right to freedom of expression.
The CA found no cogent reason to deviate therefrom.

As defined in Section 5 of CSC Resolution No. 02-1316 which serves to regulate the political rights of those
in the government service, the concerted activity or mass action proscribed must be coupled with the "intent
of effecting work stoppage or service disruption in order to realize their demands of force concession.
"Wearing similarly colored shirts, attending a public hearing at the GSIS-IU office, bringing with them
recording gadgets, clenching their fists, some even badmouthing the guards and PGM Garcia, are acts not
constitutive of an (i) intent to effect work stoppage or service disruption and (ii) for the purpose of realizing
their demands or force concession.

Precisely, the limitations or qualifications found in Section 5 of CSC Resolution No. 02-1316 are there to
temper and focus the application of such prohibition. Not all collective activity or mass undertaking of
government employees is prohibited. Otherwise, we would be totally depriving our brothers and sisters in
the government service of their constitutional right to freedom of expression.43

DCWD also found that Cagula and the rest of the officials violated MC No. 33 in relation to 8 February 1996
Office Memorandum. DCWD also argues that a violation of this circular constitutes as a serious violation of
CSC Rules as the circular is a CSC-issued Memorandum and not just a mere issuance of DCWD.

CSC issued MC No. 33 in recognition of the rights of the government employees to air their grievances
balanced by the delivery of services to the public which should not be prejudiced. MC No. 33 sets down

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rules governing the posting of posters and other similar materials within the premises of government
agencies as follows:

1. All head of agencies are hereby directed to provide specific spaces within their respective
premises, preferably near the bundy clock, at the canteen or places normally frequented by
employees, where employees’ unions/associations could post their posters.

2. x x x.

3. The hanging of posters and streamers shall only be allowed in the designated areas.

4. No poster, placard, streamer or other similar materials containing abusive, vulgar, defamatory or
libelous language shall be allowed.

Pursuant to this mandate, the former General Manager of DCWD issued an office memorandum
designating the bulletin board at the motor pool area below the Office of the Purchasing Division and the
side of the office building beside the guard house where the bundy clock is located as the designated areas
for posting of grievances.44 Clearly, the DCWD Office Memorandum hews close and faithfully to MC No.
33. It is a reasonable rule issued by the heads of the agencies in order to regulate posting of grievances of
the employees.

It is correct to conclude that those who enter government service are subjected to a different degree of
limitation on their freedom to speak their mind; however, it is not tantamount to the relinquishment of their
constitutional right of expression otherwise enjoyed by citizens just by reason of their
employment.45 Unarguably, a citizen who accepts public employment "must accept certain limitations on
his or her freedom." But there are some rights and freedoms so fundamental to liberty that they cannot be
bargained away in a contract for public employment. It is the Court’s responsibility to ensure that citizens
are not deprived of these fundamental rights by virtue of working for the government.46

The GSIS case pronounced:

Government workers, whatever their ranks, have as much right as any person in the land to voice out their
protests against what they believe to be a violation of their rights and interests. Civil Service does not
deprive them of their freedom of expression. It would be unfair to hold that by joining the government
service, the members thereof have renounced or waived this basic liberty. This freedom can be reasonably
regulated only but can never be taken away.47

In simple paraphrase we say, regulation of the freedom of expression is not removal of the constitutional
right.

Apparently, DCWD, not satisfied by the CSC ruling that a violation of the memorandum is punishable with
reprimand, argues that what occurred was a serious violation implying that a higher penalty is warranted.

Under Section 52 (C) (3), Rule IV of Resolution No. 991936,48 violation of reasonable office rules and
regulations is punishable with reprimand on the first offense and suspension ranging from one to thirty days
for the second offense.

In Re: Failure of Various Employees to Register their Time of Arrival and/or Departure from Office in the
Chronolog Machine, the charged court employees were penalized for violation of reasonable office rules
and regulations due to their violation of Supreme Court Administrative Circular No. 36-2001 requiring all
employees to register their daily attendance, in the Chronolog Time Recorder Machine (CTRM) and in the
logbook of their respective offices. Following Resolution No. 991936 that violation of reasonable rules and
regulations is a light offense, the Court penalized its erring employees with the penalty of reprimand.49

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Thus, in line with the civil service rules and jurisprudence, we conclude that a violation of an office
memorandum, which was issued as an internal rule to regulate the area for posting of grievances inside
the office premise, is only a light offense punishable by reprimand.

Rules and regulations are issued to attain harmony, smooth operation, maximize efficiency and productivity,
with the ultimate objective of realizing the functions of particular offices and agencies of the government.50

On the submissions that the decisions of a government agency, acting as Disciplining Authority, are
immediately executory upon receipt thereof, we need merely cite Section 37 of the Resolution No. 991936
which clearly provides that:

Section 37. Finality of Decisions. — A decision rendered by heads of agencies whereby a penalty of
suspension for not more than thirty (30) days or a fine in an amount not exceeding thirty (30) days' salary
is imposed, shall be final and executory. However, if the penalty imposed is suspension exceeding thirty
(30) days, or fine in an amount exceeding thirty (30) days salary, the same shall be final and executory after
the lapse of the reglementary period for filing a motion for reconsideration or an appeal and no such
pleading has been filed.51

As distinguished by the law, if the imposed suspension exceeds thirty days or the fine imposed is in an
amount over thirty-day salary, the decision will only attain finality after the lapse of the reglementary period
in the absence of any motion for reconsideration or appeal. Penalties within the 30-day threshold are
immediately executory penalties.

In this case, the members and officials, except the casual employees who were not meted with penalty as
the renewal of their employment was held in abeyance, were sanctioned with penalties ranging from
suspension of work from one (1) month and one (1) day to dismissal from service. 52 Evidently, the finality
and execution of the judgment did not take place after the lapse of the reglementary period because as
previously discussed, the members and officials were able to file their consolidated appeal in lieu of notice
of appeal.

As clear as the provision on the finality of decisions is Section 42 of Resolution No. 991936 on the effect of
motions for reconsideration. Thus:

Section 42. Effect of Filing. — The filing of a motion for reconsideration within the reglementary period of
fifteen (15) days shall stay the execution of the decision sought to be reconsidered. 53 (Emphasis ours)

The first and fundamental duty of the Court is to apply the law. If the law is clear and free from any doubt
or ambiguity as the quoted provision, there is no room for construction or interpretation. The letter must be
taken to mean exactly what it says and the court has no choice but to see to it that its mandate is obeyed. 54

The ponente appreciates the concurrence of Justice Marvic M.V.F. Leonen. No need was seen, though, to
add to the ruling that the present facts limited.

WHEREFORE, We DENY the petition for review on certiorari. Nonetheless, the decision of the CSC which
was affirmed in toto by the CA is MODIFIED. The finding of administrative liability of and the penalty of
reprimand against the NAMADACWAD members namely Danilo L. Buhay, Pedro E. Alcala, Joseph A.
Valdez, Tito V. Sabangan, Marcelino B. Anino, Juanito C. Pansacala, Joemarie B. Alba, Antero M. Ymas,
Rolando L. Largo, Reneboy U. Esteban, Manuel B. Libang, Romeorico A. Llanos, Arthur C. Bachiller,
Socrates V. Corcuera, Alejandro C. Pichon, Graciano A. Moncada, Rolando K. Escorial, Noel A. Dagale,
Emilio S. Molina, Sherwin S. Solamo, and Fulgencio I. Dyguazo are hereby REVERSED and SET ASIDE.

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The finding of liability against the casual employees namely Edwin A. dela Peña, Jummy A. Trocio, Wilfredo
L. Torreon, Alejandrito M. Alo, Raul S. Saga, Joselito P. Riconalla, Trisebal Q. Aguilar, Arman N. Lorenzo,
Sr. and Pedro C. Gunting is REVERSED and SET ASIDE.

As to officers Gualberto S. Pagatpat, Joseph B. Artajo, Felixberto Q. Obenza, Florante A. Ferraren, Elsa A.
Elorde, Carlos P. Morre, James Aquilino M. Coloma, Joaquin O. Cadorna, Jr., Lorna M. Maxino, Romulo
A. Reyes, Noel G. Legaspi, Eleanor R.Lamoste, Welmer E. Crasco, Delio T. Olaer, Vicente R. Masucol,
Ireneo Cubal, Rodrigo L. Aranjuez, Gregorio S. Cagula and Celestino A. Bondoc, the penalty of reprimand
and strong warning that a repetition of the same shall be dealt with severely is hereby AFFIRMED.

SO ORDERED.

JOSE PORTUGAL PEREZ

Associate Justice

SEC v. Laigo | G.R. No. 188639 | September 2, 2015

September 2, 2015

G.R. No. 188639

SECURITIES AND EXCHANGE COMMISSION, Petitioner,

vs.
HON. REYNALDO M. LAIGO, in his capacity as Presiding Judge of the Regional Trial Court,
National Capital Judicial Region, Makati City, Branch 56, GLICERIA AYAD, SAHLEE DELOS
REYES and ANTONIO P. HUETE, JR., Respondents.

DECISION

MENDOZA, J.:

In this petition for certiorari1under Rule 65 of the Rules of Court, petitioner Securities and Exchange
Commission (SEC), through the Office of the Solicitor General (OSG), assails the June 26, 2009
Order2 (June 26, 2009 Order) issued by respondent Judge Reynaldo M. Laigo (Judge Laigo) of the
Regional Trial Court, Branch 56, Makati City (RTC), in Sp. Proc. No. M-6758,3 a petition for involuntary
insolvency of Legacy Consolidated Plans, Incorporated (Legacy), ordering the inclusion of the trust fund in
its corporate assets to the prejudice of the plan holders.

Factual Antecedents

Republic Act (R.A.) No. 8799, otherwise known as the Securities Regulation Code (SRC), specifically
Section 16 thereof, mandated the Securities and Exchange Commission (SEC) to prescribe rules and
regulations governing the pre-need industry. Pursuant thereto, the SEC issued the corresponding New
Rules on the Registration and Sale of Pre-Need Plans (New Rules)4 to govern the pre-need industry
prior to the enactment of R.A. No. 9829, otherwise known as the Pre-need Code of the Philippines (Pre-
Need Code). It required from the pre-need providers the creation of trust funds as a requirement for
registration.

As defined in Rule 1.9 of the New Rules, " ‘Trust Fund’ means a fund set up from plan holders’ payments,
separate and distinct from the paid-up capital of a registered pre-need company, established with a trustee
under a trust agreement approved by the SEC, to pay for the benefits as provided in the pre-need plan."

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Legacy, being a pre-need provider, complied with the trust fund requirement and entered into a trust
agreement with the Land Bank of the Philippines (LBP).

In mid-2000, the industry collapsed for a range of reasons. Legacy, like the others, was unable to pay its
obligations to the plan holders.

This resulted in Legacy being the subject of a petition for involuntary insolvency filed on February 18, 2009
by private respondents in their capacity as plan holders. Through its manifestation filed in the RTC, Legacy
did not object to the proceedings. Accordingly, it was declared insolvent by the RTC in its Order, 5 dated
April 27, 2009. The trial court also ordered Legacy to submit an inventory of its assets and liabilities pursuant
to Sections 15 and 16 of Act No. 1956,6 otherwise known as the Insolvency Law, the applicable bankruptcy
law at that time.

On May 15, 2009, the RTC ordered the SEC, being the pre-need industry’s regulator, to submit the
documents pertaining to Legacy’s assets and liabilities.

In its Manifestation with Evaluation, dated June 10, 2009, the SEC opposed the inclusion of the trust fund
in the inventory of corporate assets on the ground that to do so would contravene the New Rules which
treated trust funds as principally established for the exclusive purpose of guaranteeing the delivery of
benefits due to the planholders. It was of the position that the inclusion of the trust fund in the insolvent’s
estate and its being opened to claims by non-planholders would contravene the purpose for its
establishment.

On June 26, 2009, despite the opposition of the SEC, Judge Laigo ordered the insolvency Assignee, Gener
T. Mendoza (Assignee) to take possession of the trust fund. Judge Laigo viewed the trust fund as Legacy’s
corporate assets and, for said reason, included it in the insolvent’s estate. Thus:

WHEREFORE, the Court rules as follows:

1. Directing the afore-named banks to report to Assignee, Gener T. Mendoza, whose address is at c/o
GNCA Holdings, Inc., Unit 322, 3/F, LRI design Center, 210 Nicanor Garcia St., Makati City, the total funds
as of today deposited to the insolvent debtor’s respective Trust Funds, within five (5) days from receipt of
this Order.

2. Subject funds can be withdrawn by the Assignee only upon Order of the Court for distribution among the
creditors who have officially filed their valid claims with this Court, and for all the expenses to be incurred
by the Assignee in the course of the discharge of his duties and responsibilities as such Assignee.

3. Stopping the Securities and Exchange Commission (SEC) from further validating the claims of
planholders (now creditors) pertaining to their pre-need plans.

xxx xxx xxx

SO ORDERED.7

The RTC stated that the trust fund could be withdrawn by the Assignee to be used for the expenses he
would incur in the discharge of his functions and to be distributed among the creditors who had officially
filed their valid claims with the court.

The Present Petition

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Intent on protecting the interest of the investing public and securing the trust fund exclusively for the
planholders, the SEC filed "this present recourse directly to this Honorable Court in accordance with Section
5 (1),

Article VIII of the 1987 Constitution for the reason that the matters involve an issue of transcendental
importance to numerous hard-working Filipinos who had invested their lifetime savings and hard-earned
money in Legacy, hoping that through this pre-need company they will be able to fulfill their dreams of
providing a bright future for their children."8

The SEC’s Position

In essence, the SEC contends that Judge Laigo gravely abused his discretion in treating the trust fund as
part of the insolvency estate of Legacy. It argues that the trust fund should redound exclusively to the benefit
of the plan holders, who are the ultimate beneficial owners; that the trust fund is held, managed and
administered by the trustee bank to address and answer the claims against the pre-need company by all
its plan holders and/or beneficiaries; that to consider the said fund as corporate assets is to open the
floodgates to creditors of Legacy other than the plan holders; and that, in issuing the order, Judge Laigo
effectively allowed non-plan holders to reach the trust fund in patent violation of the New Rules established
to protect the pre-need investors.

In its Memorandum,9 the SEC stressed that the setting-up of the trust funds effectively created a
demarcation line between the claims of Plan holders vis-à-vis those of the other creditors of Legacy; that
Legacy’s interest over the trust properties was only by virtue of it being a trustor and not the owner; and
that the SEC was authorized to validate claims of plan holders in the exercise of its power as regulator of
pre-need corporations.

Further, the SEC is of the position that Section 52 of the Pre-Need Code10 should be given retroactive effect
for being procedural in character.

Thus, the SEC raises the following

ISSUES

I.

Whether or not the Trust Funds of Legacy form part of its Corporate Assets.

II.

Whether or not respondent Trial Court Judge committed grave abuse of discretion amounting to
lack or excess of jurisdiction in issuing the herein assailed Order dated June 26, 2009.

III.

Whether or not the claims of planholders are to be treated differently from the claims of other
creditors of Legacy.

IV.

Whether or not Legacy retains ownership over the trust funds assets despite the execution of trust
agreements.

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 V.

Whether or not the insolvency court, presided by respondent Trial Court Judge, has the authority
to enjoin petitioner SEC from further validating the claims of Legacy’s planholders and treating
them as if they are ordinary creditors of Legacy.

VI.

Whether or not the provision of the Pre-need Code regarding liquidation is in the nature of a
procedural law that can be retroactively applied to the case at bar.11

Private Respondents’ position

In their Comment/Opposition,12 the private respondents, Glicera Ayad, Sahlee Delos Reyes and Antonio P.
Huerte, Jr. (private respondents), submit that nothing in the New Rules expressly provided that the trust
fund is excluded from the inventory of corporate assets which is required to be submitted to the insolvency
court; that the SEC’s interference in the insolvency proceedings is incongruous to the legal system; and
that under the provisions of the Insolvency Law, all claims, including those against the trust funds should
be filed in the liquidation proceedings.13 Hence, private respondents assert that no grave abuse of discretion
was committed by Judge Laigo in issuing the June 26, 2009 Order.

The Assignee’s Position

In his separate Comments on Petition14 and Memorandum,15 the Assignee contends that the trust fund
forms part of Legacy’s corporate assets for the following reasons: first, the insolvency court has jurisdiction
over all the claims against the insolvent and the trust fund forms part of the company’s corporate assets. It
cited Abrera v. College Assurance Plan,16 where the Court held that claims arising from pre-need contracts
should not be treated separately from other claims against a pre-need company. As such, the claims over
the trust fund, being claims against Legacy, are necessarily lodged with the insolvency court. Second, the
setting up of the trust fund is a mere scheme to attain an administrative end, that is, the assurance that the
benefits will be delivered under the pre-need contracts.

Considering that Legacy is the debtor as regards such benefits, it is only through it, or through the
insolvency court, that the assets including the trust fund can be distributed to satisfy valid claims.
Third, though the trustee banks hold legal title over the funds, the real parties-in-interest are the preneed
companies as the terms of the trust agreement between Legacy and LBP (as trustee) show this intent.

The Assignee also submits that no law authorized the SEC to interfere in the insolvency proceedings
because its authority under the SRC is only to regulate the sale of pre-need plans and not to regulate the
management of trust funds.

In sum, the Assignee interprets the June 26, 2009 Order in this wise: that the creditors, plan holders or not,
should first line up and file valid claims with the insolvency court and not get entangled in the validation
process of the SEC; and that once the plan holders have qualified, they will be given preference in the
distribution of the trust assets. Moreover, he proposes that if the trust fund assets will not be enough to
satisfy all claims, the plan holders can still join other claimants and participate in the distribution of the other
assets of the pre-need company.17

From the foregoing, the Court is called to determine whether Judge Laigo gravely abused his discretion in:

1. Including the trust properties in the insolvent’s estate; and

2. Prohibiting the SEC from validating the claims filed by the plan holders against the trust fund.

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 The Court’s Ruling

The overarching consideration in the legislative mandate to establish trust funds is the protection of the
interest of the planholders in the investment plans. The SRC provides in no uncertain terms the intent to
make such interests paramount above all else. Thus, it directed the SEC to come up with rules and
regulations to govern not only trust funds but the industry as a whole. Pursuant to its mandate and delegated
authority, the SEC came out with the New Rules, which the Congress later on toughened through the
enactment of the Pre-Need Code, carrying similar protection but far more detailed in scope.

It is in this context that this Court rules to grant the petition filed by the SEC. The Court finds that Judge
Laigo gravely abused his discretion in treating the trust fund as assets that form part of Legacy’s insolvency
estate and in enjoining the SEC’s validation of the planholders’ claims against the trust properties.

The Trust Fund is for the sole benefit

• of the planholders and cannot be used

• to satisfy the claims of other creditors

• of Legacy

Section 30 of the Pre-Need Code clearly provides that the proceeds of trust funds shall redound solely to
the planholders. Section 30 reads:

Trust Fund

SECTION 30. Trust Fund. — To ensure the delivery of the guaranteed benefits and services provided
under a pre-need plan contract, a trust fund per pre-need plan category shall be established. A portion of
the installment payment collected shall be deposited by the pre-need company in the trust fund, the amount
of which will be as determined by the actuary based on the viability study of the pre-need plan approved by
the Commission. Assets in the trust fund shall at all times remain for the sole benefit of the plan
holders. At no time shall any part of the trust fund be used for or diverted to any purpose other than for the
exclusive benefit of the plan holders. In no case shall the trust fund assets be used to satisfy claims
of other creditors of the pre-need company. The provision of any law to the contrary notwithstanding, in
case of insolvency of the pre-need company, the general creditors shall not be entitled to the trust fund.

Except for the payment of the cost of benefits or services, the termination values payable to the plan
holders, the insurance premium payments for insurance-funded benefits of memorial life plans and other
costs necessary to ensure the delivery of benefits or services to plan holders, no withdrawal shall be made
from the trust fund unless approved by the Commission. The benefits received by the plan holders shall be
exempt from all taxes and the trust fund shall not be held liable for attachment, garnishment, levy or seizure
by or under any legal or equitable processes except to pay for the debt of the plan holder to the benefit plan
or that arising from criminal liability imposed in a criminal action.

[Emphases Supplied]

The Assignee argues that Legacy has retained a beneficial interest in the trust fund despite the execution
of the trust agreement and that the properties can be the subject of insolvency proceedings. In this regard,
the Assignee calls the Court’s attention to the trust agreement provisions which supposedly refer to the
interest of Legacy in the trust properties, to wit:

The TRUSTEE hereby undertakes to perform the functions and duties of a TRUSTEE provided for in this
Agreement with the utmost good faith, care and prudence required by a fiduciary relation, being

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understood, however, that the COMPANY shall be solely and exclusive (sic) responsible for (1) fulfilling
the servi ferred to in the recital clauses, (ii) the settlement/payment of claims of any person or firm availing
of such services, (iii)compliance with all laws and governmental regulations on pre-need plans, and (iv)
submission of other data or information as may be prescribed by the Commission.

xxx

xxx the Trustee shall from time to time on the written directions of the Company make payments out of the
Trust Fund to the Company. To the extent permitted by law, the Trustee shall be under no liability for any
payment made pursuant to the direction of the Company. Any written direction of the Company shall
constitute a certification that the distribution of payment so directed is one which the Company is authorized
to direct. From time to time and when directed in writing by the Company, the Trustee shall pay monies
from the Trust Fund in amounts equal to the outstanding amount of the Trust Fund at any given time to
defray the Company’s obligations to the Plan holders under its preneed plan contract and provided further
that the company shall be reimbursed by the Trustee from the Trust Fund for whatever amounts it has
advanced to its beneficiaries.18 [Italics supplied]

To the Assignee, these "control" mechanisms are indicative of the interest of Legacy in the enforcement of
the trust fund because the agreement gives it the power to dictate on LBP the fulfilment of the trust, such
as the delivery of monies to it to facilitate the payment to the plan holders.

The Court, however, sees it differently.

In the course of delving into the complex relationships created by the agreement and the existing regulatory
framework, this Court finds that Legacy’s claimed interest in the enforcement of the trust and in the trust
properties is mere apparent than real. Legacy is not a beneficiary.

First, it must be stressed that a person is considered as a beneficiary of a trust if there is a manifest intention
to give such a person the beneficial interest over the trust properties. 19 This is the considered opinion
expressed in the Restatement of the Law of Trust (Restatement)20 which Justice Vicente Abad Santos has
described in his contribution to the Philippine Law Journal as containing the more salient principles,
doctrines and rules on the subject.21 Here, the terms of the trust agreement plainly confer the status of
beneficiary to the plan holders, not to Legacy. In the recital clauses of the said agreement, Legacy bound
itself to provide for the sound, prudent and efficient management and administration of such portion of the
collection "for the benefit and account of the planholders,"22 through LBP (as the trustee).

This categorical declaration doubtless indicates that the intention of the trustor is to make the planholders
the beneficiaries of the trust properties, and not Legacy. It is clear that because the beneficial ownership is
vested in the planholders and the legal ownership in the trustee, LBP, Legacy, as trustor, is left without any
iota of interest in the trust fund. This is consistent with the nature of a trust arrangement, whereby there is
a separation of interests in the subject matter of the trust, the beneficiary having an equitable interest, and
the trustee having an interest which is normally legal interest.23

Second, considering the fact that a mandated pre-need trust is one imbued with public interest, the issue
on who the beneficiary is must be determined on the basis of the entire regulatory framework. Under the
New Rules, it is unmistakable that the beneficial interest over the trust properties is with the planholders.
Rule 16.3 of the New Rules provides that : [n]o withdrawal shall be made from the trust fund except for
paying the benefits such as monetary consideration, the cost of services rendered or property delivered,
trust fees, bank charges and investment expenses in the operation of the trust fund, termination values
payable to the plan holders, annuities, contributions of cancelled plans to the fund and taxes on trust funds.

Rule 17.1 also states that to ensure the liquidity of the trust fund to guarantee the delivery of the benefits
provided for under the plan contract and to obtain sufficient capital growth to meet the growing actuarial

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reserve liabilities, all investments of the trust fund shall be limited to Fixed Income Instruments, Mutual
Funds, Equities, and Real Estate, subject to certain limitations.

Further, Rule 20.1 directs the trustee to exercise due diligence for the protection of the plan holders guided
by sound investment principles in the exclusive management and control over the funds and its right, at
any time, to sell, convert, invest, change, transfer, or otherwise change or dispose of the assets comprising
the funds. All these certainly underscore the importance of the plan holders being recognized as the ultimate
beneficiaries of the SEC-mandated trust.

This consistently runs in accord with the legislative intent laid down in Chapter IV of R.A. No. 8799, or the
SRC, which provides for the establishment of trust funds for the payment of benefits under
such plans. Section 16 of the SRC provides:

SEC. 16. Pre-Need Plans. - No person shall sell or offer for sale to the public any pre-need plan except in
accordance with rules and regulations which the Commission shall prescribe. Such rules shall regulate
the sale of pre-need plans by, among other things, requiring the registration of pre-need plans, licensing
persons involved in the sale of pre-need plans, requiring disclosures to prospective plan holders,
prescribing advertising guidelines, providing for uniform accounting system, reports and record keeping
with respect to such plans, imposing capital, bonding and other financial responsibility, and establishing
trust funds for the payment of benefits under such plans. [Emphasis supplied]

It is clear from Section 16 that the underlying congressional intent is to make the plan holders the exclusive
beneficiaries. It has been said that what is within the spirit is within the law even if it is not within the letter
of the law because the spirit prevails over the letter.24

This will by the legislature was fortified with the enactment of R.A. No. 9829 or the Pre-Need Code in
2009.25 The Congress, because of the chaos confounding the industry at the time, considered it necessary
to provide a stronger legal framework so that no entity could claim that the mandate and delegated authority
of the SEC under the SRC was nebulous. The Pre-Need Code cemented the regulatory framework
governing the preneed industry with precise specifics to ensure that the rights of the pre-need plan holders
would be categorically defined and protected. Similar provisions in the Pre-Need Code are the following:

SECTION 32. Terms and Conditions of a Trust Fund. — A trust fund must be established separately for
each type of pre-need plan with the trust department of a trust company, bank or investment house doing
business in the Philippines. No trust fund shall be established by a pre-need company with an affiliate trust
entity subject to Section 38 hereof.

The trust agreement shall be submitted to the Commission for approval before execution and shall contain
the following salient provisions, among others:

(a) The manner in which the trust fund is to be operated;

(b) Investment powers of the trustee with respect to trust deposits, including the character and kind
of investment;

(c) Auditing and settlement of accounts of the trustee with respect to the trust fund;

(d) Basis upon which the trust fund may be terminated;

(e) Provisions for withdrawals from the trust fund;

(f) That the trustee shall submit to the power of the Commission to examine and verify the trust
fund;

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 (g) An undertaking by the trustee that it shall abide by the rules and regulations of the Commission
with respect to the trust fund; and

(h) An undertaking by the trustee that it shall submit such other data or information as may be
prescribed by the Commission.

SECTION 33. Responsibilities of the Trustee. — The trustee shall:

(a) Administer and manage the trust fund with utmost good faith, care and prudence required by a
fiduciary relationship;

(b) The trustee shall have the exclusive management and control over the funds and the right at
any time to sell, convert, invest, change, transfer or otherwise change or dispose of the assets
comprising the funds within the parameters prescribed by the pre-need company and provided
these parameters are compliant with the Commission's regulations; and

(c) Not use the trust fund to invest in or extend any loan or credit accommodation to the pre-need
company, its directors, officers, stockholders, and related interests as well as to persons or
enterprises controlling, owned or controlled by, or under common control with said company, its
directors, officers, stockholders and related interests except for entities which are direct providers
of pre-need companies.

SECTION 34. Investment of the Trust Fund. — To ensure the liquidity of the trust fund to guarantee the
delivery of the benefits provided for under the plan contract and likewise obtain sufficient capital growth to
meet the growing actuarial reserve liabilities, all investments of the trust fund/s of a pre-need company shall
be limited to the following and subject to limitations, to wit:

(a) Fixed income instruments. — These may be classified into short-term and long-term
instruments. The instrument is shortterm if the maturity period is three hundred sixty-five (365) days
or less. This category includes:

(1) Government securities which shall not be less than ten percent (10%) of the trust fund
amount;

(2) Savings/time deposits and unit investment trust funds maintained with and managed
by a duly authorized bank with satisfactory examination rating as of the last examination
by the BSP;

(3) Commercial papers duly registered with the SEC with a credit rating of "1" for short-
term and "AAA" for longterm based on the rating scale of an accredited Philippine Rating
Agency or its equivalent at the time of investment.

The maximum exposure to long-term commercial papers shall not exceed fifteen percent
(15%) of the total trust fund amount while the exposure to each commercial paper issuer
shall not exceed ten percent (10%) of the allocated amount; and

(4) Direct loans to corporations which are financially stable, profitable for the last three (3)
years and have a good track record of paying their previous loans. These loans shall be
fully secured by a real estate mortgage up to the extent of sixty percent (60%) of the zonal
valuation of the property at the time the loan was granted.

The property shall be covered by a transfer certificate of title registered in the name of the
mortgagor and free from liens and encumbrances. The maximum amount to be allocated for direct

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 loans shall not exceed five percent (5%) of the total trust fund amount while the amount to be
granted to each corporate borrower shall not exceed ten percent (10%) of the amount allocated.

The maximum term of the loan should be no longer than four (4) years.

Direct loans to planholders are exempt from the limitations set forth under this section: Provided,
That such loans to planholders shall not exceed ten percent (10%) of the total trust fund amount.

(b) Equities. — Investments in equities shall be limited to stocks listed on the main board of a local
stock exchange.

Investments in duly registered collective investment instruments such as mutual funds are allowed
hereunder: Provided, That such funds are invested only in fixed income instruments and blue chips
securities, subject to the limitations prescribed by laws, rules and regulations.

These investments shall include stocks issued by companies that are financially stable, actively
traded, possess good track record of growth and have declared dividends for the past three (3)
years. Notwithstanding the prohibition against transactions with directors, officers, stockholders
and related interests, the trustee may invest in equities of companies related to the trustee provided
these companies comply with the foregoing criteria provided in this paragraph for equity
investments.

The amount to be allocated for this purpose shall not exceed thirty percent (30%) of the total trust
fund while the investment in any particular issue shall not exceed ten percent (10%) of the allocated
amount. The investment shall be recorded at the aggregate of the lower of cost or market.

Existing investments which are not in accordance herewith shall be disposed of within three (3)
years from the effectivity of this Act.

(c) Real Estate. — These shall include real estate properties located in strategic areas of cities and
first class municipalities. The transfer certificate of title (TCT) shall be in the name of the seller,
free from liens and encumbrances and shall be transferred in the name of the trustee in trust for
the planholders unless t r/transferor is the pre-need company wherein an annotation to the TCT
relative to the sale/transfer may be allowed. It shall be recorded at acquisition cost.

However, the real estate shall be appraised every three (3) years by a licensed real estate appraiser,
accredited by the Philippine Association of Real Estate Appraisers, to reflect the increase or decrease in
the value of the property. In case the appraisal would result in an increase in the value, only sixty percent
(60%) of the appraisal increase is allowed to be recorded in the books of the trust fund but in case of decline
in value, the entire decline shall be recorded. Appraisal increment should not be used to cover up the
required monthly contribution to the trust fund.

The total recorded value of the real estate investment shall not exceed ten percent (10%) of the total trust
fund amount of the pre-need company. In the event that the existing real estate investment exceeds the
aforesaid limit, the same shall be leveled off to the prescribed limit within three (3) years from the effectivity
of this Code.

Investment of the trust fund, which is not in accordance with the preceding paragraphs, shall not be allowed
unless the prior written approval of the Commission had been secured: Provided, further, That no deposit
or investment in any single entity shall exceed fifteen percent (15%) of the total value of the trust fund:
Provided, finally, That the Commission is authorized to adjust the percentage allocation per category set
forth herein not in excess of two percentage (2%) points upward or downward and no oftener than once
every five (5) years. The first adjustment hereunder may be made no earlier than five (5) years from the

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effectivity of this Act. The pre-need company shall not use the trust fund to extend any loan to or to invest
in its directors, stockholders, officers or its affiliates.

xxx

SECTION 36. Trust Fund Deficiencies. — Upon approval by the Commission of the pre-need reserve
computation submitted in the preceding section, any deficiency in the trust fund, when compared to the
reserve liabilities as reported in the pre-need reserve valuation report, shall be funded by the pre-need
company within sixty (60) days from such approval. Failure to cover the deficiency in an appropriate manner
within the time required shall subject the pre-need company to the payment of a penalty, in addition to other
remedies exercisable by the Commission, as provided for in this Code. Any excess of the trust fund over
the actuarial reserve liabilities may be credited to future deposit requirements.

SECTION 37. Liquidity Reserve. — The trustee shall at all times maintain a liquidity reserve which shall
be sufficient to cover at least fifteen percent (15%) of the trust fund but in no case less than one hundred
twenty-five percent (125%) of the amount of the availing plans for the succeeding year. For this purpose,
the pr pany shall timely submit to the trustee a summary of benefits payable for the succeeding year.

The following shall qualify as investments for the liquidity reserve:

(a) Loans secured by a hold-out on assignment or pledge deposits maintained either with the
trustee or other banks, or of deposit substitute of the trustee itself or mortgage and chattel mortgage
bonds issued by the trustee;

(b) Treasury notes or bills, other government securities or bonds, and such other evidences or
indebtedness or obligations the servicing and repayment of which are fully guaranteed by the
Republic of the Philippines;

(c) Repurchase agreements with any of those mentioned in Item "b" above, as underlying
instruments thereof; and

(d) Savings or time deposits with government-owned banks or commercial banks.

SECTION 38. Trustees. — Upon approval of the Commission or when the Commission requires for the
protection of plan holders, the pre-need company shall entrust the management and administration of the
trust fund to any reputable bank's trust department, trust company or any entity authorized to perform trust
functions in the Philippines: Provided, That no director and/or officer of the pre-need company shall at the
same time serve as director and/or officer of the affiliate or related trust entity: Provided, further, That no
trust fund shall be established by a preneed company with a subsidiary, affiliate or related trust entity.
However, such may be allowed: Provided, That the following conditions are complied with:

(a) A written approval of the Commission has been previously obtained; and

(b) Public disclosure of the affiliation with the trust entity be included in all materials in whatever
form.

The Commission shall have the authority to prescribe appropriate rules that shall ensure that the yield of
the trust fund is maximized, consistent with the requirements of safety and liquidity.

[Italics Supplied]

"Under the principle of legislative approval of administrative interpretation by re-enactment, the re-
enactment of a statute, substantiallyunchanged (as in this case), is persuasive indication of the adoption

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by Congress of a prior executive construction."26 Accordingly, where a statute is susceptible of the meaning
placed upon it by a ruling of the government agency charged with its enforcement and the legislature
thereafter reenacts the provisions without substantial change, such action is to some extent confirmatory
that the ruling carries out the legislative purpose.27

The Court cannot go against that legislative intent for it is the duty of this institution to read what the law
intends. It is a cardinal rule that, in seeking the meaning of the law, the first concern of the judge should be
to discover in its provisions the intent of the lawmaker. Unquestionably, the law should never be interpreted
in such a way as to cause injustice as this is never within the legislative intent. An indispensable part of that
intent, in fact, for we presume the good motives of the legislature, is to render justice.28

To rule that Legacy has retained a beneficial interest in the trust fund is to perpetuate the injustices being
committed against the plan holders and violate not only the spirit of the trust agreement but, more
importantly, the lawmaker’s intent. If indeed Legacy had an interest that could be reached by its creditors
even during insolvency, the plan holders would be prejudiced as they would be forced to share in the assets
that would be distributed pro rata to all creditors, whether plan holders or not. It would contradict the very
purpose for which the trust was mandated by the Congress in the first place.

Third, the perceived interest of Legacy, as touted by the Assignee, has simply no basis. It may appear that
Legacy under the agreement has control over the enforcement of the trust because of its provisions stating
that Legacy shall "solely and exclusive[ly] [be] responsible for fulfilling the services referred to in the recital
clauses and the settlement/payment of claims of any person or firm availing of such services" and that
"[a]ny written direction of the Company [to the trustee] shall constitute a certification that the distribution of
payment so directed is one which the Company is authorized to direct"29 Such provisions, however, cannot
be construed as Legacy having retained a beneficial interest in the trust fund.

To begin with, the aforestated provisions refer solely to the delivery of the proceeds of the trust from LBP
to Legacy and then finally to the beneficiaries. In effect, Legacy merely agreed to facilitate the payment
of the benefits from the trust fund to the intended beneficiaries, acting as a conduit or an agent of
the trustee in the enforcement of the trust agreement. Under the general principles of trust, a
trustee, by the terms of the agreement may be permitted to delegate to agents or to co-trustees or
to other persons the administration of the trust or the performance of act which could not otherwise
be properly delegated.30 Thus, by the terms of the trust, as in this case, a trustee may be authorized or
permit an agent to do acts such as the delivery of the benefits out of the trust fund.

The Court cannot subscribe either to the Assignee’s position that Legacy is a debtor of the planholders
relative to the trust fund. In trust, it is the trustee, and not the trustor, who owes fiduciary duty to the
beneficiary.

The Restatement is clear on this point. Section 170 thereof provides that the "trustee is under a duty to the
beneficiary to administer the trust solely in the interest of the beneficiary."31 Section 182 also states that the
duty of a trustee is to pay income to the beneficiary.32 Thus, LBP is tasked with the fiduciary duty to act for
the benefit of the planholders as to matters within the scope of the relation. 33 Like a debtor, LBP owes the
planholders the amounts due from the trust fund. As to the planholders, as creditors, they can rightfully use
equitable remedies against the trustee for the protection of their interest in the trust fund and, in particular,
their right to demand the payment of what is due them from the fund. Verily, Legacy is out of the picture
and exists only as a representative of the trustee, LBP, with the limited role of facilitating the delivery of the
benefits of the trust fund to the beneficiaries – the planholders. The trust fund should not revert to Legacy,
which has no beneficial interest over it. Not being an asset of Legacy, the trust fund is immune from its
reach and cannot be included by the RTC in the insolvency estate.

In the end, the failure of Judge Laigo to consider the provisions of the SRC, the New Rules and the law on
trusts, that should have warranted the exclusion of the trust fund from the insolvency estate of Legacy,
constituted grave abuse of discretion. In treating the trust fund as forming part of Legacy’s insolvency

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estate, Judge Laigo acted against what was contemplated by law. He turned a blind eye to the will of the
Congress as expressed through the SRC and the Pre-Need Code. In the process, he endangered the
claims of the planholders by allowing the probability that they would be drastically reduced or dissipated.
He should have acted prudently bearing in mind that the establishment of the trust was precisely for the
exclusive benefit of the plan holders.

Enjoining the SEC from validating the

claims against the trust fund is grave
abuse of discretion for the insolvency
court has no authority to order the
reversion of properties that do not
form part of Legacy’s insolvent estate.

The Assignee cited Abrera v. College Assurance Plan34 (Abrera), where the Court held that claims covered
by rehabilitation proceedingsbefore the RTC should include all claims or demands of whatever nature or
character against a debtor or its property. At the heart of the Assignee’s argument is that because the
authority is with the RTC, the SEC has no right to interfere in the insolvency proceedings.

It is an error for the Assignee to assume that the authority of the RTC extends to the claims against the
trust fund. Claims against the trust fund must be distinguished from claims against Legacy. The claims
against the trust fund are directed not against Legacy, but against LBP, the trustee, being the debtor relative
to the trust properties.

The Pre-Need Code is clear on this. It recognizes the distinction between claims against the pre-need
company and those against the trust fund. Section 52 (b) states that liquidation "proceedings in court shall
proceed independently of proceedings in the Commission for the liquidation of claims, and creditors of
the pre-need company shall have no personality whatsoever in the Commission proceedings to
litigate their claims against the trust funds." The reason why claims against the trust funds can proceed
independently of the proceedings in the courts is the fact that the latter is directed against a different person
or entity.

Moreover, the Assignee must be reminded that the issue in Abrera is not similar to the question raised here
by the SEC. In the case at bench, the SEC questions the propriety of including the trust fund in the inventory
of Legacy’s corporate assets.

Jurisdiction over claims filed against

the trust fund

From the effectivity of the Pre-Need Code, it is the Insurance Commission (IC) that "shall have the primary
and exclusive power to adjudicate any and all claims involving pre-need plans."35

The transitory provisions of the Pre-Need Code, however, provide that "[n]otwithstanding any
provision to the contrary, all pending claims, complaints and cases (referring to pre-need contract
and trust claims) filed with the SEC shall be continued in its full and final conclusion."36

The Pre-Need Code recognizes that the jurisdiction over pending claims against the trust funds prior to its
effectivity is vested with the SEC. Such authority can be easily discerned even from the provisions of the
SRC.

Section 4 thereof provides that despite the transfer of jurisdiction37 to the RTC of those matters enumerated
under Section 5 of P.D. No. 902-A,38 the SEC remains authorized to "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 39 to achieve the objectives and purposes of
these laws."40 Relevant thereto is Section 36.5 (b) of the SRC which states that:

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The Commission may, having due regard to the public interest or the protection of investors, regulate,
supervise, examine, suspend or otherwise discontinue such and other similar funds under such rules and
regulations which the Commission may promulgate, and which may include taking custody and
management of the fund itself as well as investments in, and disbursements from, the funds under such
forms of control and supervision by the Commission as it may from time to time require. The authority
granted to the Commission under this subsection shall also apply to all funds established for the protection
of investors (which necessarily includes the trust funds), whether established by the Commission or
otherwise.41

Concomitantly, under the New Rules, the SEC "may, at its discretion, demand for the conversion to cash
or other near cash assets of the investments made by the Trustee to protect the interest of the
Planholders."42

Therefore, even prior to the transfer to the IC of matters pertaining to pre-need plans and trust funds, the
SEC had authority to regulate, manage, and hear all claims involving trust fund assets, if in its discretion,
public interest so required. Accordingly, all claims against the trust funds, which have been pending before
it, are clearly within the SEC’s authority to rule upon.

Pre-Need Code is curative and

remedial in character and,
therefore, can be applied
retroactively

Finally, it must be stressed that the primary protection accorded by the Pre-Need Code to the plan holders
is curative and remedial and, therefore, can be applied retroactively. The rule is that where the provisions
of a statute clarify an existing law and do not contemplate a change in that law, the statute may be given
curative, remedial and retroactive effect.43 To review, curative statutes are those enacted to cure defects,
abridge superfluities, and curb certain evils.44 As stressed by the Court in Fabian v. Desierto, 45

If the rule takes away a vested right, it is not procedural. If the rule creates a right such as the right to
appeal, it may be clarified as a substantive matter; but if it operates as a means of implementing an
existing right then the rule deals merely with procedure.

[Emphasis Supplied]

A reading of the Pre-Need Code immediately shows that its provisions operate merely in furtherance of the
remedy or confirmation of the right of the planholders to exclusively claim against the trust funds as intended
by the legislature. No new substantive right was created or bestowed upon the plan holders. Section 52 of
the Pre-Need Code only echoes and clarifies the SRC’s intent to exclude from the insolvency proceeding
trust fund assets that have been established "exclusively for the benefit of plan holders." It was precisely
enacted to foil the tactic of taking undue advantage of any ambiguities in the New Rules.

Any doubt or reservation in this regard has been dispelled by the Pre- Need Code. Section 57 thereof
provides that "[a]ny pre-need company who, at the time of the effectivity of this Code has been
registered and licensed to sell pre-need plans and similar contracts, shall be considered registered
and licensed under the provision of this Code and its implementing rules and regulations and shall
be subject to and governed by the provisions hereof xxx." Thus, Legacy and all other existing pre-need
companies cannot claim that the provisions of the Pre- Need Code are not applicable to them and to the
claims which accrued prior to the enactment of the said law.

"[I]t has been said that a remedial statute must be so construed as to make it effect the evident purpose for
which it was enacted, so that if the reason of the statute extends to past transactions, as well as to those
in the future, then it will be so applied although the statute does not in terms so direct.. 46 With the Pre-Need

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Code having the attribute of a remedial statute, Legacy and all pre-need providers or their creditors cannot
argue that it cannot be retroactively applied.

Conclusion

In sum, improvidently ordering the inclusion of the trust fund in Legacy's insolvency estate without regard
to the avowed state policy of protecting the consumer of pre-need plans, as laid down in the SRC, the New
Rules, and the Pre-Need Code, constitutes grave abuse of discretion. The R TC should have known, and
ought to know, the overarching consideration the Congress intended in requiring the establishment of trust
funds - to uphold first and foremost the interest of the plan holders.

The Court upholds its duty to protect the ordinary Filipino workers who are seeking a future for their children
through pre-need contracts. Their incredibly long wait is over as this is the moment when their rightful and
exclusive right to the trust funds, created primarily for them, is judicially respected and affirmed.

WHEREFORE, the petition is GRANTED. The June 26, 2009 Order of the Regional Trial Court, Branch 56,
Makati City, is declared NULL and VOID.

The Securities and Exchange Commission is directed to process the claims of legitimate plan holders with
dispatch.

SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

Paredes v. Feed The Children Philippines | G.R. No. 184397 | September 9, 2015

September 9, 2015

G.R. No. 184397

ROSALINDA G. PAREDES, Petitioner,

vs.
FEED THE CHILDREN PHILIPPINES, INC. and/or DR. VIRGINIA LAO, HERCULES PARADIANG and
BENJAMIN ESCOBIA, Respondents.

DECISION

PERALTA, J.:

For this Court's resolution is a petition for review on certiorari, dated October 23, 2008, of petitioner
Rosalinda G. Paredes, seeking to reverse and set aside the Decision1 dated March 25, 2008 and
Resolution2 dated August 28, 2008 of the Court of Appeals (CA). The assailed Decision annulled and set
aside the rulings of the National Labor Relations Commission (NLRC) Fourth Division, Cebu City and
affirmed the rulings of the Labor Arbiter (LA), which held that petitioner voluntarily resigned and was not
constructively dismissed.

The antecedents are as follows:

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Respondent Feed the Children Philippines, Inc. (FTCP) is a nonstock, non-profit, and non-government
organization duly incorporated under the Philippine laws in 1989. Its objective is to provide food, clothing,
educational supplies and other necessities of indigent children worldwide. 3 Respondents Dr. Virginia Lao,
Hercules Paradiang and Benjamin Escobia were members of the FTCP Board of Trustees (Board) and
Executive Committee (Execom) of FTCP.4

Petitioner Rosalinda Paredes was FTCP's National Director. Her functions and duties include project
management, fund accessing, income generation, financial management, and administration of the
organization. She also signed all the FTCP checks and approved all requisitions and disbursements of
FTCP funds.5 As per FTCP's By-laws, it was also her duty to execute all resolutions and/or decisions of the
Board.6

Petitioner was first hired by FTCP in 1999 as Country Director. Her contract was renewed several times
until her last contract for the period from October 1, 2004 to September 30, 2007. Her initial salary was
US$1000.00 and then later, she was paid 70,000.00 aside from other benefits and allowances.7

On August 12, 2005, forty-two (42) FTCP employees signed a petition letter addressed to the Board
expressing their complaints against alleged detestable practices of petitioner, to wit: seeking exemption
from policies which she herself had approved; withholding organization funds despite approval of its
release; procuring health insurance for herself without paying her share of the premium; and receiving
additional fees contrary to the terms of her contract.8

The next day, August 13, 2005, the staff of FTCP called Lao to a meeting to submit their petition. They
included Atty. Edgar Chatto, then Chairman of the Board, in the meeting when they realized that it was only
her and Escobia who were present. The group was edgy and demanded for outright solution. However, the
three Board members told them that they should follow a process.9

Petitioner learned from Atty. Chatto that Program Manager Primitivo Fostanes and his co-employees
prepared a petition questioning her leadership and management of FTCP. She filed an administrative
complaint against Fostanes on August 24, 2005, but the same was not acted upon. 10

When the Board convened for a meeting on August 28, 2005, petitioner was not allowed to participate. She
was only allowed to join the meeting after three hours. As ex officio member of the Board and as head of
the secretariat, she was always present in every meeting to discuss her reports, programs and proposals. 11

During the meeting, the Board discussed the animosity between the petitioner and the staff of FTCP and
how they would address the issue since they have inadequate grievance mechanism for issues involving
top management.12 According to Lao, petitioner became combative in issuing memos and filing of
administrative charges.13 Atty. Chatto recounted that when petitioner heard about the protesting senior
management and staff, her initial reaction was to resign but then she asked that the complaints be put in
writing.14 After their discussion, they called the representatives of the complaining staff and petitioner to air
their side.

Consequently, the Board decided that: Acting Board Chair Lao will issue a back-to-work memorandum and
status quo to ensure that all the scheduled tasks be accomplished; there will be a Supervisory Team,
composing of Lao and Escobia, that will draw a definite work plan and be compensated; the Supervisory
Team will not replace the functions of the National Director; and FTCP will hire an independent professional
management and financial auditor.15

Petitioner sent letters to the Board inquiring about the scope of audit. When the Board did not respond, her
lawyers demanded Lao to address petitioner's concerns regarding the management and financial audit and
that the manual of operations be strictly followed.16 In another letter, her lawyers informed individual
respondents that petitioner raised the legality and propriety of the conduct of the audit, thus, they requested

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that they desist from conducting the audit. The letter also indicated that failure to do so would implead them
as respondents in a preliminary injunction case that they would file. 17

While she was at an orientation for local government officials of Surigao del Norte at the Bohol Tropics
Resort on October 24, 2005, petitioner received a phone call from her staff at FTCP that the auditors from
SRD & Co. were already at their office. Lao also called to instruct her that she should meet the auditors and
accommodate them. She refrained from obeying the order and was adamant that she should receive her
requested information first.18

On October 26, 2005, the FTCP management executive committee, headed by petitioner, informed the
Board that they were not afraid of the audit. They wanted due process as provided by the by-laws, manual
of operations, and manual of financial policies and accounting procedures approved by the Board itself.
They also inquired about the meetings and processes of the Execom that they were not aware of. Lastly,
they asked for a dialogue to settle their differences.19

On the same date, petitioner wrote an electronic mail (e-mail) to Dr. Larry Jones, the founder of Feed the
Children International, Inc. and reported that Paradiang and two members of the Board initiated a surprise
and secret audit. She expressed that the management was upset to the manner of conducting the audit.
She also insinuated that Paradiang was always after her despite steering the organization to development.
She intimated that she would legally protect herself should she be illegally dismissed and that they would
seek relief from the harassment by Paradiang.20

The Board resolved to suspend petitioner because of her indifferent attitude and unjustified refusal to submit
to an audit.21 Before it could be implemented, respondent FTCP received her resignation letter.22 In her
resignation letter, she wrote that she can only serve the organization up to December 31, 2005. She found
it no longer tenable to work with the Board since she had differences with majority of the members regarding
resolutions, policies and procedures.23

On October 29, 2005, the Board accepted her resignation with the condition that its effectivity be moved to
November 30, 2005. She was not obliged to report for work and FTCP was willing to pay her salary for the
month of November to aid her while she looked for other employment.24

Petitioner wrote to the members of management and foreign funders informing them that she was no longer
connected with FTCP. She moved out all her belongings and even brought FTCP's documents.25

On November 2, 2005, petitioner filed a Complaint for illegal dismissal, claiming that she was forced to
resign, thus, was constructively dismissed, and impleaded Lao, Paradiang and Escobia in their personal
capacities.26

Upon failure of the parties to settle amicably, the mandatory conference was terminated.

In her position paper, petitioner alleged that she was not included in the Supervisory Team which performed
her functions and issued memorandum directly to her subordinates. She also alleged that she was excluded
from Execom meetings.27

Respondents, on the other hand, claimed that petitioner was signatory to all the bank checks of respondent
FTCP and approved all requisitions and disbursements. She received an excess of US$1,000.00 for her
salary and did not return the same. They alleged that petitioner voluntarily resigned from her position and
removed all her belongings from the FTCP.28

The LA ruled in favor of the respondents, the dispositive portion of the Decision29 reads:

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WHEREFORE, foregoing considered, the case is hereby DISMISSED for lack of merit and judgment is
hereby rendered ordering complainant Rosalinda G. Paredes to pay the following:

1. One Hundred Forty-Three Thousand Six Hundred [F]orty-Six and 73/100 (143,646.73)
representing her accountabilities to respondent FTCP in Philippine Currency;

2. One Thousand Dollars ($1,000.00) to respondent FTCP representing complainant's

accountability in US Currency;

3. Five Hundred Thousand Pesos (500,000.00) each to respondents Dr. Virginia Lao, Benjamin
Escobia and Hercules Paradiang for moral damages;

4. One Million Pesos (1,000,000.00) to respondent FTCP for damages incurred;

5. One Hundred Thousand Pesos (100,000.00) to respondents collectively for exemplary damages;
and

6. Attorney's Fees to 10% of the total award.

SO ORDERED.30

Undaunted, petitioner appealed the decision to the NLRC. In its Decision 31 dated March 28, 2007, the NLRC
reversed and set aside the decision of the LA and ruled in her favor, the dispositive portion of which states:

WHEREFORE, premises considered, the decision of the Labor Arbiter dated 08 November 2006
is REVERSED and SET aside and a new one is entered, to wit:

1. Ordering respondent Feed the Children Philippines, Inc. to pay the complainant of her salaries
and allowances corresponding to the unexpired portion of her contract in the aggregate amount of
One Million Six Hundred Eighty-Five Thousand Nine Hundred and 00/100 (1,685,900.00), broken
down as follows:

a. Salaries corresponding to the unexpired portion of the contract -1,610,000.00

b. Transportation allowances - 29,900.00

c. Representation allowances - 46,000.00

Total -1,685,900.00;

And

2. Ordering respondent Feed the Children Philippines, Inc. to pay complainant of moral damages
in the amount of One Hundred Thousand Pesos (100,000.00); and exemplary damages in the
amount of One Hundred Thousand Pesos (100,000.00).

Respondents Dr. Virginia Lao, Hercules Paradiang and Benjamin Escobia are absolved from any
liability for lack of legal basis.

SO ORDERED.32

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In a Resolution33 dated June 14, 2007, the NLRC dismissed the motion for reconsideration of the
respondents. Thus, respondents filed before the CA a petition for certiorari. The CA ruled for the
respondents. The fallo of said decision reads:

WHEREFORE, the Decision dated March 28, 2007 and the Resolution dated June 14, 2007, of the National
Labor Relations Commission (NLRC), Fourth Division, Cebu City, in NLRC Case No. V- 000074-2007,
are NULLIFIED and a new one rendered as follows:

1. Declaring private respondent to have voluntarily resigned from her employment/consultancy with
FTCP;

2. Directing private respondent to pay FTCP

a. Thirty-four thousand four hundred thirty-eight pesos and 37/100 (P34,438.37) for her
unpaid loans;

b. One hundred nine thousand two hundred eight pesos and 36/100 (109,208.36)
respecting her disbursement and withdrawals from the FTCP Provident Fund.

Costs against private respondent.

SO ORDERED.34

The CA did not find any valid reason to disturb its decision, hence, it denied petitioner’s Motion for
Reconsideration.35

In this recourse, petitioner raises the following issues for this Court's consideration:

I. The CA contravenes the law and jurisprudence when it granted the petition for certiorari that
raised questions factual in nature and when it sweepingly applied the ruling in St. Martin Funeral
Homes to justify its act of delving into the findings of the NLRC which were outside the scope of
extraordinary remedy of certiorari.

II. The CA grossly contradicts the law and jurisprudence on constructive dismissal and ignored,
misunderstood or misinterpreted cogent facts and circumstances which, if considered, would
change the outcome of the case when it ruled that petitioner voluntarily resigned and was not
constructively dismissed.

III. The CA effectively reverses the law and jurisprudence on damages and recognized money
claims in labor cases when it condemned petitioner to pay respondents' claims for damages that
were not duly proven by the latter and that clearly did not arise from an employer-employee
relationship.

IV. The CA violates the Constitution, the law and the prevailing jurisprudence when it resolved the
lingering doubts that remain in the present case, as those arising from evidence and from
interpretation of agreements and writings, against labor.

The present petition is partly meritorious.

It is elementary that this Court is not a trier of facts, and only errors of law are generally reviewed in petitions
for review on certiorari. Judicial review of labor cases does not go beyond the evaluation of the sufficiency
of the evidence upon which its labor officials' findings rest. As such, the findings of facts and conclusion of

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the NLRC are generally accorded not only great weight and respect but even clothed with finality and
deemed binding on this Court as long as they are supported by substantial evidence.36

However, if the factual findings of the LA and the NLRC are conflicting, as in this case, the reviewing court
may delve into the records and examine for itself the questioned findings.37 The exception, rather than the
general rule, applies in the present case since the LA and the CA found facts supporting the conclusion
that petitioner was not constructively dismissed, while the NLRC’s factual findings contradicted the LA’s
findings.

Under this situation, such conflicting factual findings are not binding on us, and we retain the authority to
pass on the evidence presented and draw conclusions therefrom.

After judicious review on the records of the case, this Court deems it proper to disregard the findings of fact
of the NLRC. This Court finds that the NLRC committed grave abuse of discretion when it ruled for the
petitioner without substantial evidence to support its findings of facts and conclusion.

Petitioner, relying in the principle of finality and conclusiveness of the decisions of labor tribunals, faults the
CA for reversing the findings of the NLRC and affirming the factual findings of the LA that she voluntarily
resigned. She averred that the CA erred when it applied the ruling in the case of St. Martin Funeral Homes v.
NLRC38 to justify its inquiring into the findings of the NLRC which was outside the scope of extraordinary
remedy of certiorari. She posited that NLRC's findings cannot be delved into without first declaring the
decision itself to have been issued with grave abuse of discretion.39

Courts generally accord great respect and finality to factual findings of administrative agencies, like labor
tribunals, in the exercise of their quasijudicial function. However, this doctrine espousing comity to
administrative findings of facts are not infallible and cannot preclude the courts from reviewing and, when
proper, disregarding these findings of facts when shown that the administrative body committed grave
abuse of discretion.40

It is settled that in a special civil action for certiorari under Rule 65, the issues are limited to errors of
jurisdiction or grave abuse of discretion. However, in labor cases elevated to it via petition for certiorari, the
CA is empowered to evaluate the materiality and significance of the evidence alleged to have been
capriciously, whimsically, or arbitrarily disregarded by the NLRC in relation to all other evidence on record. 41

The CA can grant this prerogative writ when the factual findings complained of are not supported by the
evidence on record; when it is necessary to prevent a substantial wrong or to do substantial justice; when
the findings of the NLRC contradict those of the LA; and when necessary to arrive at a just decision of the
case.42 To make this finding, the CA necessarily has to view the evidence if only to determine if the NLRC
ruling had basis in evidence.43

Contrary to petitioner's contention, the CA, by express legal mandate and pursuant to its equity jurisdiction,
may review factual findings and evidence of the parties to determine whether the NLRC gravely abused its
discretion in its findings.44 Since this Court finds that the findings of the LA and NLRC contradicting and that
the findings of NLRC are not supported by the evidence on record, we rule that it is within the CA’s power
to review the factual findings of the NLRC. Accordingly, this Court does not find erroneous the course that
the CA took in resolving that petitioner was not constructively dismissed.

This Court, in turn, has the same authority to sift through the factual findings of both the CA and the NLRC
in the event of their conflict.45 This Court, therefore, is not precluded from reviewing the factual issues when
there are conflicting findings by the Labor Arbiter, the NLRC and the Court of Appeals.46

Since petitioner admittedly resigned, it is incumbent upon her to prove that her resignation was involuntary
and that it was actually a case of constructive dismissal with clear, positive and convincing evidence. 47

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Petitioner alleged that she was forced to resign by Lao, Paradiang and Escobia. For her, it was the
overbearing and prejudiced attitude towards her by individual respondents that rendered her continued
employment impossible, unreasonable or unlikely. She maintained that the prevailing working environment
compelled her to disassociate with FTCP. She recounted that the individual respondents deliberately
excluded her from important meetings despite being the chief executive officer and a fixture to all Board
meetings.

Petitioner cited the August 28, 2005 Board meeting and a subsequent Execom meeting where she was
apparently banished as proof of respondents' discrimination. She emphasized in all her pleadings that,
aside from it being provided by the by-laws, she believed that her presence at all Board meetings cannot
be dispensed with since it was through her effort that the Board of Trustees became functional. For her,
she was isolated and singled out. She claimed that these circumstances clearly denoted that the actions of
the respondents were motivated by discrimination and made in bad faith.

Case law holds that constructive dismissal occurs when there is cessation of work because continued
employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank or
diminution in pay or both; or when a clear discrimination, insensibility, or disdain by an employer becomes
unbearable to the employee.48 The test is whether a reasonable person in the employee's position would
have felt compelled to give up his position under the circumstances.49

In this case, petitioner cannot be deemed constructively dismissed. She failed to present clear and positive
evidence that respondent FTCP, through its Board of Trustees, committed acts of discrimination,
insensibility, or disdain towards her which rendered her continued employment unbearable or forced her to
terminate her employment from the respondent. As settled, bare allegations of constructive dismissal, when
uncorroborated by the evidence on record, cannot be given credence. 50

It is highly unlikely and incredible for someone of petitioner’s position and educational attainment to so
easily succumb to individual respondents’ alleged harassment without defending herself. In fact, records
reveal that she wrote directly to Jones when her contract was not to be renewed and whenever she felt
threatened. She vehemently opposed the audit and openly disobeyed the Board when she was not informed
of the scope. She, along with other management staff, questioned the meetings of the Execom that they
were not informed.51 It is also noted that her husband is a lawyer and that she employed lawyers who sent
a series of demand letters to the Board to provide her the details of the audit and even ordered the Board
to desist from pursuing the audit.

There was no urgency for petitioner to submit her resignation letter. In fact, the day before it was given, she
and other management staff requested for a dialogue with the Board to address the issue regarding the
management and financial audit.52 It is, therefore, improbable that her continued employment is rendered
impossible or unreasonable.

Records do not show any demotion in rank or a diminution in pay made against her. Petitioner claimed that
the fact that the Supervisory Team performed her functions and issued memorandum directly to her
subordinates, and her being barred from subsequent Execom meetings constituted constructive dismissal.
However, there was no evidence to corroborate her claim of usurpation. She did not present evidence of
the supposed direct memorandum issued by the Supervisory Team to the staff. Aside from the minutes of
the September 29, 2005 meeting of the Execom, there was no other proof of petitioner's exclusion from
other subsequent Execom meetings.

We find that, apart from her self-serving and uncorroborated allegations, petitioner did not present any
substantial evidence of constructive dismissal. She was not able to present a single witness to corroborate
her claims of harassment by Lao, Paradiang and Escobia.

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Petitioner supported her claim with the minutes of the August 28, 2005 meeting and another minutes of the
meeting of the Execom that she was excluded. She argued that her sudden exclusion from board meetings
despite established practice constituted grave abuse of managerial rights of the respondent FTCP.

We are not persuaded that her exclusion to the meeting constituted discrimination or harassment. A careful
perusal of the minutes would reveal that the Board convened to deliberate on the solution to the apparent
conflict between petitioner and the staff since they have insufficient grievance mechanism for issues
involving top management. She could not fault the Board to not include her in that particular meeting since
she was a party involved and to avoid possible influence that she could have exerted.

Petitioner presented documents like e-mail correspondences with Paradiang about the non-renewal of her
contract earlier in her employment, e-mail correspondences to Jones about harassment towards her and
specifically mentioning Paradiang, demand letters from her and her lawyers, her resignation letter, and the
board resolution accepting her resignation. These do not verify that respondents committed discrimination
or disdain towards her. Hence, her allegations are self-serving and uncorroborated and should not be given
evidentiary weight.

On the other hand, respondent FTCP presented a letter53 dated August 28, 2005 written by petitioner
addressed to the Board wherein she presented her side about the petition of the employees against her.
She also praised the Board for strengthening the organization, for putting valuable policies in the
organization, and for opening the organization to new partnerships.

In another letter54 dated September 6, 2005, she reported that on the same date as the August 28 Board
meeting, she and Fostanes met to discuss concerns and apologized for what happened and other members
of management also apologized and accepted the reconciliation that she extended to them. She also
reported that during the September 5, 2005 General Staff meeting, the issues were discussed, feelings and
sentiments were shared, and concluded with a firm commitment from everyone to rebuild the good name
of FTCP and work together to enhance its system and maintain its integrity.

The letters did not mention nor hinted that petitioner protested about being excluded from the meeting which
she has considered as a hearing against her. It did not even reveal that there was undue prejudice from
individual respondents. Records are bereft of proof that she even attempted to address the Board about
the supposed discrimination or disdain by individual respondents. It is only upon filing of the illegal dismissal
case that she alleged that she felt that she was discriminated against and treated with disdain by
respondents.

Respondents presented an affidavit and a police blotter 55 attesting that some employees who signed in the
August 12 letter-petition were intimidated by the secretary of petitioner’s lawyer-husband to sign a
recantation. She refuted the same by alleging that they could have not known that it was recantation when
it appeared in the blotter that they only saw the page they were made to sign. Respondents also presented
an affidavit56 attesting that petitioner intimidated an employee by telling her that she would file suits against
those who defamed her when the employee refused to recant her signature in the petition against her.

For petitioner, the fact that the effectivity of her resignation was moved to November showed the eagerness
of Lao, Paradiang and Escobia to get rid of her.57

We held that the act of the employer moving the effectivity of the resignation is not an act of harassment.
The 30-day notice requirement for an employee’s resignation is actually for the benefit of the employer who
has the discretion to waive such period. Its purpose is to afford the employer enough time to hire another
employee if needed and to see to it that there is proper turn-over of the tasks which the resigning employee
may be handling.58

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Such rule requiring an employee to stay or complete the 30-day period prior to the effectivity of his
resignation becomes discretionary on the part of management as an employee who intends to resign may
be allowed a shorter period before his resignation becomes effective.59

Thus, the act of respondents moving the effectivity date of petitioner’s resignation to a date earlier than
what she had stated cannot be deemed malicious. This cannot be viewed as an act of harassment but
merely the exercise of respondent's management prerogative. We cannot expect employers to maintain in
their employ employees who intend to resign, just so the latter can have continuous work as they look for
a new source of income.

Petitioner alleged that the CA erred when it ruled that she should pay respondents' claims for damages.
She maintained that they were not duly proven and that they clearly did not arise from an employer-
employee relationship.

This Court held that the "money claims of workers" referred to in Article 21760 of the Labor Code embraces
money claims which arise out of or in connection with the employer-employee relationship, or some aspect
or incident of such relationship.61

Applying the rule of noscitur a sociis in clarifying the scope of Article 217, it is evident that paragraphs 1 to
5 refer to cases or disputes arising out of or in connection with an employer-employee relationship. In other
words, the money claims within the original and exclusive jurisdiction of labor arbiters are those which have
some reasonable causal connection with the employer-employee relationship.62

This claim is distinguished from cases of actions for damages where the employer-employee relationship
is merely incidental and the cause of action proceeds from a different source of obligation. Thus, the regular
courts have jurisdiction where the damages claimed for were based on: tort, malicious prosecution, or
breach of contract, as when the claimant seeks to recover a debt from a former employee or seeks
liquidated damages in the enforcement of a prior employment contract.63

By the designating clause "arising from the employer-employee relations," Article 217 applies with equal
force to the claim of an employer for actual damages against its dismissed employee, where the basis for
the claim arises from or is necessarily connected with the fact of termination, and should be entered as a
counterclaim in the illegal dismissal case.64

In this case, the CA erred in awarding 34,438.37 for petitioner’s unpaid debt to respondents. The claim for
recovery of a debt has no reasonable causal connection with any of the claims provided for in Article 217.
The fact that the transaction happened at the time they were employer and employee did not negate the
civil jurisdiction of trial court. Hence, it is erroneous for the LA and the CA to rule on such claim arising from
a different source of obligation and where the employer-employee relationship was merely incidental.

Likewise, the CA erred in awarding 109,208.36 for the reimbursement of the FTCP Provident Fund allegedly
withdrawn by petitioner. Although it was entered by the respondents in its counterclaim, this claim does not
arise from or is necessarily connected with the fact of termination. It also had no reasonable causal
connection with employer-employee relationship.

Lastly, petitioner maintained that the CA erred when it resolved the lingering doubt in the present case
against labor. She alleged that the CA violated the Constitution, the law, and jurisprudence.

We held that the law and jurisprudence guarantee security of tenure to every employee. However, in
protecting the rights of the workers, the law does not authorize the oppression or self-destruction of the
employer. Social justice does not mean that every labor dispute shall automatically be decided in favor of
labor. Thus, the Constitution and the law equally recognize the employer’s right and prerogative to manage
its operation according to reasonable standards and norms of fair play.65

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It is settled that the law serves to equalize the unequal. The labor force is a special class that is
constitutionally protected because of the inequality between capital and labor. This constitutional protection
presupposes that the labor force is weak. However, the level of protection to labor should vary from case
to case; otherwise, the state might appear to be too paternalistic in affording protection to labor.66 Petitioner
could not expect to have the same level of ardent protection that the laws bestow upon a lowly laborer be
given to her, a high ranking officer of respondent FTCP. As proven, she was considered on equal footing
with her employer and even had the occasion to demand the renewal of her contract by sending an e-mail
to the organization’s founder.67

We cannot subscribe to petitioner's allegation that the CA ruled against labor when it resolved the factual
issues of the case. As discussed, it is well within the powers and jurisdiction of the CA to evaluate the
evidence alleged to have been capriciously, whimsically, or arbitrarily disregarded by the NLRC, or as in
the present case, for considering petitioner's bare allegations without support of substantial evidence. This
Court finds that the CA did not violate the Constitution, the law and jurisprudence. Hence, the resolution of
the doubt as to whether petitioner voluntarily resigned or was constructively dismissed based on the
evidence on record was proper and was not against labor.

WHEREFORE, the petition for review on certiorari, dated October 23, 2008, of petitioner Rosalinda G.
Paredes is hereby PARTLY GRANTED. Accordingly, the ruling of the Court of Appeals in its Decision dated
March 25, 2008, that petitioner was not constructively dismissed, is hereby AFFIRMED. However, the
awards of P34,438.37 and Pl09,208.36 for the unpaid debt of petitioner and reimbursement of the FTCP
Provident Fund, respectively, are hereby SET ASIDE.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

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