Republic of the Philippines

SUPREME COURT
Manila

EN BANC

A.C. No. 9872               January 28, 2014

NATIVIDAD P. NAVARRO and HILDA S. PRESBITERO, Complainants, 

vs.
ATTY. IVAN M. SOLIDUM, JR., Respondent.

DECISION

PER CURIAM:

This case originated from a complaint for disbarment, dated 26 May 2008, filed by Natividad P. Navarro (Navarro)
and Hilda S. Presbitero (Presbitero) against Atty. Ivan M. Solidum, Jr. (respondent) before the Integrated Bar of the
Philippines Commission on Bar Discipline (IBP-CBD).

From the Report, dated 1July 2009, of the IBP-CBD, we gathered the following facts of the case:

On 4 April 2006, respondent signed a retainer agreement with Presbitero to follow up the release of the payment for
the latter’s 2.7-hectare property located in Bacolod which was the subject of a Voluntary Offer to Sell (VOS) to the
Department of Agrarian Reform (DAR). The agreement also included the payment of the debts of Presbitero’s late
husband to the Philippine National Bank (PNB), the sale of the retained areas of the property, and the collection of
the rentals due for the retained areas from their occupants. It appeared that the DAR was supposed to pay
₱700,000 for the property but it was mortgaged by Presbitero and her late husband to PNB for ₱1,200,000.
Presbitero alleged that PNB’s claim had already prescribed, and she engaged the services of respondent to
represent her in the matter. Respondent proposed the filing of a case for quieting of title against PNB. Respondent
and Presbitero agreed to an attorney’s fee of 10% of the proceeds from the VOS or the sale of the property, with the
expenses to be advanced by Presbitero but deductible from respondent’s fees. Respondent received ₱50,000 from
Presbitero, supposedly for the expenses of the case, but nothing came out of it.

In May 2006, Presbitero’s daughter, Ma. Theresa P. Yulo (Yulo), also engaged respondent’s services to handle the
registration of her 18.85-hectare lot located in Nasud-ong, Caradio-an, Himamaylan, Negros. Yulo convinced her
sister, Navarro, to finance the expenses for the registration of the property. Respondent undertook to register the
property in consideration of 30% of the value of the property once it is registered. Respondent obtained ₱200,000
from Navarro for the registration expenses. Navarro later learned that the registration decree over the property was
already issued in the name of one Teodoro Yulo. Navarro alleged that she would not have spent for the registration
of the property if respondent only apprised her of the real situation of the property.

On 25 May 2006, respondent obtained a loan of ₱1,000,000 from Navarro to finance his sugar trading business.
Respondent and Navarro executed a Memorandum of Agreement (MOA) and agreed that the loan (a) shall be for a
period of one year; (b) shall earn interest at the rate of 10% per month; and (c) shall be secured by a real estate
mortgage over a property located in Barangay Alijis, Bacolod City, covered by Transfer Certificate of Title No.
304688. They also agreed that respondent shall issue postdated checks to cover the principal amount of the loan as
well as the interest thereon. Respondent delivered the checks to Navarro, drawn against an account in Metrobank,
Bacolod City Branch, and signed them in the presence of Navarro.

In June 2006, respondent obtained an additional loan of ₱1,000,000 from Navarro, covered by a second MOA with
the same terms and conditions as the first MOA. Respondent sent Navarro, through a messenger, postdated checks
drawn against an account in Bank of Commerce, Bacolod City Branch. Respondent likewise discussed with Navarro
about securing a "Tolling Agreement" with Victorias Milling Company, Inc. but no agreement was signed.

At the same time, respondent obtained a loan of ₱1,000,000 from Presbitero covered by a third MOA, except that
the real estate mortgage was over a 263-square-meter property located in Barangay Taculing, Bacolod City.
Respondent sent Presbitero postdated checks drawn against an account in Metrobank, Bacolod City Branch.

Presbitero was dissatisfied with the value of the 263-square-meter property mortgaged under the third MOA, and
respondent promised to execute a real estate mortgage over a 1,000-square-meter parcel of land adjacent to the
4,000-square-meter property he mortgaged to Navarro.

However, respondent did not execute a deed for the additional security.

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Respondent paid the loan interest for the first few months. He was able to pay complainants a total of ₱900,000.
Thereafter, he failed to pay either the principal amount or the interest thereon. In September 2006, the checks
issued by respondent to complainants could no longer be negotiated because the accounts against which they were
drawn were already closed. When complainants called respondent’s attention, he promised to pay the agreed
interest for September and October 2006 but asked for a reduction of the interest to 7% for the succeeding months.

In November 2006, respondent withdrew as counsel for Yulo. On the other hand, Presbitero terminated the services
of respondent as counsel. Complainants then filed petitions for the judicial foreclosure of the mortgages executed by
respondent in their favor. Respondent countered that the 10% monthly interest on the loan was usurious and illegal.
Complainants also filed cases for estafa and violation of Batas Pambansa Blg. 22 against respondent.

Complainants alleged that respondent induced them to grant him loans by offering very high interest rates. He also
prepared and signed the checks which turned out to be drawn against his son’s accounts. Complainants further
alleged that respondent deceived them regarding the identity and value of the property he mortgaged because he
showed them a different property from that which he owned. Presbitero further alleged that respondent mortgaged
his 263-square-meter property to her for ₱1,000,000 but he later sold it for only ₱150,000.

Respondent, for his defense, alleged that he was engaged in sugar and realty business and that it was Yulo who
convinced Presbitero and Navarro to extend him loans. Yulo also assured him that Presbitero would help him with
the refining of raw sugar through Victorias Milling Company, Inc. Respondent alleged that Navarro fixed the interest
rate and he agreed because he needed the money. He alleged that their business transactions were secured by
real estate mortgages and covered by postdated checks. Respondent denied that the property he mortgaged to
Presbitero was less than the value of the loan. He also denied that he sold the property because the sale was
actually rescinded. Respondent claimed that the property he mortgaged to Navarro was valuable and it was actually
worth more than ₱8,000,000.

Respondent alleged that he was able to pay complainants when business was good but he was unable to continue
paying when the price of sugar went down and when the business with Victorias Milling Company, Inc. did not push
through because Presbitero did not help him. Respondent also denied that he was hiding from complainants.

Respondent further alleged that it was Yulo who owed him ₱530,000 as interest due for September to December
2005. He denied making any false representations. He claimed that complainants were aware that he could no
longer open a current account and they were the ones who proposed that his wife and son issue the checks.
Respondent further alleged that he already started with the titling of Yulo’s lot but his services were terminated
before it could be completed.

A supplemental complaint was filed charging respondent with accepting cases while under suspension. In response,
respondent alleged that he accepted Presbitero’s case in February 2006 and learned of his suspension only in May
2006.

After conducting a hearing and considering the position papers submitted by the parties, the IBP-CBD found that
respondent violated the Code of Professional Responsibility.

The IBP-CBD found that respondent borrowed ₱2,000,000 from Navarro and ₱1,000,000 from Presbitero which he
failed to pay in accordance with the MOAs he executed. The IBP-CBD found that based on the documents
presented by the parties, respondent did not act in good faith in obtaining the loans. The IBP-CBD found that
respondent either promised or agreed to pay the very high interest rates of the loans although he knew them to be
exorbitant in accordance with jurisprudence. Respondent likewise failed to deny that he misled Navarro and her
husband regarding the identity of the property mortgaged to them. Respondent also mortgaged a property to
Presbitero for ₱1,000,000 but documents showed that its value was only ₱300,000. Documents also showed that he
sold that property for only ₱150,000. Respondent conspired with Yulo to secure loans by promising her a 10%
commission and later claimed that they agreed that Yulo would "ride" on the loan by borrowing ₱300,000 from the
amount he obtained from Navarro and Presbitero. Respondent could not explain how he lost all the money he
borrowed in three months except for his claim that the price of sugar went down.

The IBP-CBD found that respondent misled Navarro and Presbitero regarding the issuance of the postdated checks,
and there was nothing in the records that would show that he informed them that it would be his wife or son who
would issue the checks. The IBP-CBD also found that respondent had not been transparent in liquidating the money
he received in connection with Presbitero’s VOS with DAR. He was also negligent in his accounting regarding the
registration of Yulo’s property which was financed by Navarro.

The IBP-CBD found that respondent was guilty of violating Rule 1.01 of the Code of Professional Responsibility for
committing the following acts:

(1) signing drawn checks against the account of his son as if they were from his own account;

(2) misrepresenting to Navarro the identity of the lot he mortgaged to her;

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 (3) misrepresenting to Presbitero the true value of the 263-square-meter lot he mortgaged to her;

(4) conspiring with Yulo to obtain the loans from complainants;

(5) agreeing or promising to pay 10% interest on his loans although he knew that it was exorbitant; and

(6) failing to pay his loans because the checks he issued were dishonored as the accounts were already
closed.

The IBP-CBD also found that respondent violated Canon 16 and Rule 16.01 of the Code of Professional
Responsibility when he failed to properly account for the various funds he received from complainants.

In addition, the IBP-CBD found that respondent violated Rule 16.04 of the Code of Professional Responsibility which
prohibits borrowing money from a client unless the client’s interest is fully protected or the client is given
independent advice.

On the matter of practicing law while under suspension, the IBP-CBD found that the records were not clear whether
the notice of suspension respondent received on 29 May 2006 was the report and recommendation of the IBP-CBD
or the final decision of this Court. The IBP-CBD likewise found that there was insufficient evidence to prove that
respondent mishandled his cases.

The IBP-CBD recommended that respondent be meted the penalty of disbarment.

In Resolution No. XIX-2011-267 dated 14 May 2011, the IBP Board of Governors adopted and approved the
recommendation of the IBP-CBD with modification by reducing the recommended penalty from disbarment to
suspension from the practice of law for two years. The IBP Board of Governors likewise ordered respondent to
return the amount of his unpaid obligation to complainants.

Complainants filed a motion for reconsideration, praying that the penalty of disbarment be instead imposed upon
respondent.

The only issue in this case is whether respondent violated the Code of Professional Responsibility.

The records show that respondent violated at least four provisions of the Code of Professional Responsibility.

Rule 1.01 of the Code of Professional Responsibility provides:

Rule 1.01. - A lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct.

With respect to his client, Presbitero, it was established that respondent agreed to pay a high interest rate on the
loan he obtained from her. He drafted the MOA. Yet, when he could no longer pay his loan, he sought to nullify the
same MOA he drafted on the ground that the interest rate was unconscionable. It was also established that
respondent mortgaged a 263-square-meter property to Presbitero for ₱1,000,000 but he later sold the property for
only ₱150,000, showing that he deceived his client as to the real value of the mortgaged property. Respondent’s
allegation that the sale was eventually rescinded did not distract from the fact that he did not apprise Presbitero as
to the real value of the property.

Respondent failed to refute that the checks he issued to his client Presbitero and to Navarro belonged to his son,
Ivan Garcia Solidum III whose name is similar to his name. He only claimed that complainants knew that he could
no longer open a current bank account, and that they even suggested that his wife or son issue the checks for him.
However, we are inclined to agree with the IBP-CBD’s finding that he made complainants believe that the account
belonged to him. In fact, respondent signed in the presence of Navarro the first batch of checks he issued to
Navarro. Respondent sent the second batch of checks to Navarro and the third batch of checks to Presbitero
through a messenger, and complainants believed that the checks belonged to accounts in respondent’s name.

It is clear that respondent violated Rule 1.01 of the Code of Professional Responsibility. We have ruled that conduct,
as used in the Rule, is not confined to the performance of a lawyer’s professional duties.  A lawyer may be
1

disciplined for misconduct committed either in his professional or private capacity.  The test is whether his conduct
2

shows him to be wanting in moral character, honesty, probity, and good demeanor, or whether it renders him
unworthy to continue as an officer of the court.
3

In this case, the loan agreements with Navarro were done in respondent’s private capacity. Although Navarro
financed the registration of Yulo’s lot, respondent and Navarro had no lawyer-client relationship. However,
respondent was Presbitero’s counsel at the time she granted him a loan. It was established that respondent misled
Presbitero on the value of the property he mortgaged as a collateral for his loan from her. To appease Presbitero,

3
respondent even made a Deed of Undertaking that he would give her another 1,000-square-meter lot as additional
collateral but he failed to do so.

Clearly, respondent is guilty of engaging in dishonest and deceitful conduct, both in his professional capacity with
respect to his client, Presbitero, and in his private capacity with respect to complainant Navarro. Both Presbitero and
Navarro allowed respondent to draft the terms of the loan agreements. Respondent drafted the MOAs knowing that
the interest rates were exorbitant. Later, using his knowledge of the law, he assailed the validity of the same MOAs
he prepared. He issued checks that were drawn from his son’s account whose name was similar to his without
informing complainants. Further, there is nothing in the records that will show that respondent paid or undertook to
pay the loans he obtained from complainants.

Canon 16 and Rule 16.01 of the Code of Professional Responsibility provide:

CANON 16. - A LAWYER SHALL HOLD IN TRUST ALL MONEYS AND PROPERTIES OF HIS CLIENT THAT MAY
COME INTO HIS POSSESSION.

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

The fiduciary nature of the relationship between the counsel and his client imposes on the lawyer the duty to
account for the money or property collected or received for or from his client.  We agree with the IBP-CBD that
4

respondent failed to fulfill this duty. In this case, the IBP-CBD pointed out that respondent received various amounts
from complainants but he could not account for all of them.

Navarro, who financed the registration of Yulo’s 18.85-hectare lot, claimed that respondent received ₱265,000 from
her. Respondent countered that ₱105,000 was paid for real estate taxes but he could not present any receipt to
prove his claim. Respondent also claimed that he paid ₱70,000 to the surveyor but the receipt was only for ₱15,000.
Respondent claimed that he paid ₱50,000 for filing fee, publication fee, and other expenses but again, he could not
substantiate his claims with any receipt. As pointed out by the IBP-CBD, respondent had been less than diligent in
accounting for the funds he received from Navarro for the registration of Yulo’s property.

Unfortunately, the records are not clear whether respondent rendered an accounting to Yulo who had since passed
away.

As regards Presbitero, it was established during the clarificatory hearing that respondent received ₱50,000 from
Presbitero. As the IBP-CBD pointed out, the records do not show how respondent spent the funds because he was
not transparent in liquidating the money he received from Presbitero.

Clearly, respondent had been negligent in properly accounting for the money he received from his client,
Presbitero. Indeed, his failure to return the excess money in his possession gives rise to the presumption that he
1âwphi1

has misappropriated it for his own use to the prejudice of, and in violation of the trust reposed in him by, the client. 5

Rule 16.04 of the Code of Professional Responsibility provides:

Rule 16.04. - A lawyer shall not borrow money from his client unless the client’s interests are fully protected by the
nature of the case or by independent advice. Neither shall a lawyer lend money to a client except, when in the
interest of justice, he has to advance necessary expenses in a legal matter he is handling for the client.

Here, respondent does not deny that he borrowed ₱1,000,000 from his client Presbitero. At the time he secured the
loan, respondent was already the retained counsel of Presbitero.

While respondent’s loan from Presbitero was secured by a MOA, postdated checks and real estate mortgage, it
turned out that respondent misrepresented the value of the property he mortgaged and that the checks he issued
were not drawn from his account but from that of his son. Respondent eventually questioned the terms of the MOA
that he himself prepared on the ground that the interest rate imposed on his loan was unconscionable. Finally, the
checks issued by respondent to Presbitero were dishonored because the accounts were already closed. The
interest of his client, Presbitero, as lender in this case, was not fully protected. Respondent violated Rule 16.04 of
the Code of Professional Responsibility, which presumes that the client is disadvantaged by the lawyer’s ability to
use all the legal maneuverings to renege on his obligation.  In his dealings with his client Presbitero, respondent
6

took advantage of his knowledge of the law as well as the trust and confidence reposed in him by his client.

We modify the recommendation of the IBP Board of Governors imposing on respondent the penalty of suspension
from the practice of law for two years. Given the facts of the case, we see no reason to deviate from the
recommendation of the IBP-CBD imposing on respondent the penalty of disbarment. Respondent failed to live up to
the high standard of morality, honesty, integrity, and fair dealing required of him as a member of the legal
profession.  Instead, respondent employed his knowledge and skill of the law and took advantage of his client to
7

secure undue gains for himself  that warrants his removal from the practice of law. Likewise, we cannot sustain the
8

4
IBP Board of Governors’ recommendation ordering respondent to return his unpaid obligation to complainants,
except for advances for the expenses he received from his client, Presbitero, that were not accounted at all. In
disciplinary proceedings against lawyers, the only issue is whether the officer of the court is still fit to be allowed to
continue as a member of the Bar.  Our only concern is the determination of respondent’s administrative liability.
9 10

Our findings have no material bearing on other judicial action which the parties may choose to file against each
other.  Nevertheless, when a lawyer receives money from a client for a particular purpose involving the client-
11

attorney relationship, he is bound to render an accounting to the client showing that the money was spent for that
particular purpose.  If the lawyer does not use the money for the intended purpose, he must immediately return the
12

money to his client.  Respondent was given an opportunity to render an accounting, and he failed. He must return
13

the full amount of the advances given him by Presbitero, amounting to ₱50,000.

WHEREFORE, the Court finds Atty. Ivan M. Solidum, Jr. GUILTY of violating Rule 1.01, Canon 16, Rule 16.01, and
Rule 16.04 of the Code of Professional Responsibility. Accordingly, the Court DISBARS him from the practice of law
effective immediately upon his receipt of this Decision.

Atty. Solidum is ORDERED to return the advances he received from Hilda S. Presbitero, amounting to ₱50,000, and
to submit to the Office of the Bar Confidant his compliance with this order within thirty days from finality of this
Decision.

Let copies of this Decision be furnished the Office of the Bar Confidant, the Integrated Bar of the Philippines for
distribution to all its chapters, and the Office of the Court Administrator for dissemination to all courts all over the
country. Let a copy of this Decision be attached to the personal records of respondent.

SO ORDERED.

5
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. P-13-3171               January 28, 2014

(formerly A.M. OCA IPI No. 11-11-116-MeTC)

RE: HABITUAL TARDINESS OF CESARE. SALES, CASH CLERK III, METROPOLITAN TRIAL COURT, OFFICE
OF THE CLERK OF COURT, MANILA.

DECISION

PER CURIAM:

A Report  submitted by the Leave Division, Office of the Court Administrator (OCA) dated October 19, 2011 shows
1

that respondent Cesar E. Sales, Cash Clerk III, Office of the Clerk of Court, Metropolitan Trial Court, Manila, had
always been tardy in going to the office for the months of January to September 2011, as follows:

January - 20 times

February - 14 times

March - 10 times

April - 13 times

May - 17 times

June - 13 times

July - 15 times

August - 11 times

September - 12 times

In the 21 working days of January 2011, Sales’ Daily Time Records (DTRs) show that he was tardy 20 times and
came on time only once, on January 3, 2011 at 8:00 a.m. In February, he arrived on time only on the 15th, 23rd, and
25th, and was on sick leave on the 8th, 9th, and 28th. In March, he had 10 incidents of tardiness, and applied for
sick leave on the 7th and was on forced leave on the 14th to 18th. In April, he came on time only on the 7th and was
late 13 times. He was also on sick leave for five days, on the 5th and on the 26th up to the 29th. During the month of
May, he was tardy on all the days he went to the office and was on sick leave for five days. In June, he reported on
time only on the 6th and was on sick leave on the 7th up to the 10th, and on the 17th and 27th. He was tardy on the
days he reported to the office during the month of July and went on sick leave six times on different dates. In
August, he was tardy during the days he went to the office. He was also on sick leave for 7 days and was on
vacation leave for three days. During the month of September, there were 21 working days but he reported to the
office only 12 times and was tardy on all these days. He was on sick leave for six days and on vacation leave for
three days. On the days he was on leave, he indicated in his DTRs "sick leave applied," "vacation leave applied" or
"forced leave applied." However, it was not shown whether his applications have been approved by his superiors. 2

In a 1st Indorsement dated November 21, 2011, the OCA required Sales to comment on the charge of habitual
tardiness. 3

In his comment  dated January 17, 2012, Sales admitted his frequent tardiness in going to the office. Although he
4

was aware that he could be dismissed from the service anytime because of his habitual tardiness, he continued to
report for work late in the hope that the Court would be lenient and would give him the chance to continue serving
the Judiciary. He claimed that the thought of losing his job had greatly affected his health. He expressed deep
remorse and sought the liberal treatment of the Court in considering his violations.

In an Agenda Report  dated May 21, 2013, the OCA recommended that –
5

6
 (1) The Report dated 19 October 2011 x x x of the Leave Division, Office of Administrative Services, Office
of the Court Administrator, be RE-DOCKETED as a regular administrative matter against Mr. Cesar E. Sales
x x x for habitual tardiness; and

(2) x x x Sales be FOUND GUILTY of habitual tardiness and accordingly DISMISSED from the service with
forfeiture of retirement benefits except accrued leave credits, and with prejudice to reemployment in any
branch or instrumentality of the government, including government-owned or controlled corporations. 6

All government officials and employees are required to render not less than eight hours of work per day for five days
a week, or a total of 40 hours of work per week, exclusive of time for lunch. Generally, these hours are from eight
o’clock in the morning to five o’clock in the afternoon, with lunch break between 12 noon and one o’clock in the
afternoon.7 Under CSC Memorandum Circular No. 04, s. 1991, an officer or employee shall be considered
habitually tardy if he is late for work, regardless of the number of minutes, ten (10) times a month for at least two (2)
months in a semester, or at least two (2) consecutive months during the year. 8

In the case of Sales, he had continuously incurred tardiness during the months of January to September 2011 for
more than 10 times each month, except during the month of March when he only came in late 10 times.

This is the third time that Sales has been charged of habitual tardiness. The OCA Report  shows that he has
9

previously been penalized for habitual tardiness. He was reprimanded in A.M. No. P-08-2499, suspended for 30
days without pay in A.M. No. P-05-2049, and suspended for 3 months without pay in A.M. No. P-11-3022. Despite
previous warnings that a repetition of the same offense would be dealt with more severely, Sales failed to mend his
ways.

Sales’ DTRs show that he is not only habitually tardy but also habitually absent from office. An officer or employee in
the civil service shall be considered habitually absent if he incurs unauthorized absences exceeding the allowable
2.5 days monthly leave credit under the leave law for at least three (3) months in a semester, or at least (3)
consecutive months during the year.

Sales’ absences for the months of January to September 2011 exceeded the allowable 2.5 days monthly leave
credit. For every month during this period, he was absent for more than 2.5 days. Although he indicated in his DTRs
"sick leave applied," "vacation leave applied" and "forced leave applied," he failed to submit proof that his
applications for leave had been approved by the proper authorities.

Under Memorandum Circular No. 04, s. 1991, of the Civil Service Commission and reiterated by the Court in
Administrative Circular No. 14-2002,  dated March 18, 2002, the taking and the approval of leave of absence follow
10

a formal process, – an application for leave must be duly approved by the authorized officer. 11

Section 52, Rule IV of CSC Memorandum Circular No. 19, s. 1999, classifies frequent unauthorized absences and
tardiness in reporting for duty as grave offenses, punishable by suspension of six (6) months and one (1) day to one
(1) year for the first offense and dismissal from the service for the second offense.

In the determination of the penalties to be imposed, mitigating, aggravating and alternative circumstances attendant
to the commission of the crime shall be considered. 12

In the present case, we do not find any circumstance that would mitigate Sales’ liability.  True, Sales has been in the
1âwphi1

Judiciary for almost 17 years, but length of service, as a factor in determining the imposable penalty in
administrative cases, is a double-edged sword.  It is not a circumstance that, once invoked, will automatically be
13

considered as a mitigating in favor of the party invoking it.  While it can sometimes help mitigate the penalty, it can
14

also justify a more serious sanction.  Length of service, in other words, is an alternative circumstance. This is clear
15

from Section 53 of the Uniform Rules on Administrative Cases in the Civil Service, which amended the Omnibus
Civil Service Rules and Regulations dated 27 December 1991. The title and opening paragraph of Section 53
provides that the attendant circumstances enumerated therein may either be considered as mitigating, aggravating
or alternative circumstances by the disciplining body.

Having been repeatedly warned that a repetition of the same or similar offense of habitual tardiness shall be dealt
with more severely, his length of service cannot mitigate the gravity of his offense or the penalty he deserves.

"By reason of the nature and functions of their office, officials and employees of the Judiciary must be role models in
the faithful observance of the constitutional canon that public office is a public trust."  Pursuant to this dictum, the
16

Court issued Memorandum Circular No. 49-2003, dated December 1, 2003, reminding all government officials and
employees to be accountable at all times to the people and exercise utmost responsibility, integrity, loyalty and
efficiency. They must give every minute of their prescribed official time in the service to the public and must work for
every centavo paid to them by the government. "This duty calls for the observance of prescribed office hours and
the efficient use of official time for public service, if only to recompense the government, and ultimately, the people
who shoulder the cost of maintaining the judiciary. Thus, to inspire public respect for the justice system, court

7
officials and employees should at all times strictly observe official time. As punctuality is a virtue, absenteeism and
tardiness are impermissible." 17

WHEREFORE, the Court finds respondent Cesar E. Sales, Cash Clerk III, Office of the Clerk of Court, Metropolitan
Trial Court, Manila, GUILTY of habitual tardiness and habitual absenteeism. He is hereby ordered DISMISSED from
the service, with forfeiture of all benefits, except accrued leave credits (if any), and with prejudice to re-employment
in any government branch or instrumentality, including government-owned or controlled corporations.

SO ORDERED.

8
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 196231               January 28, 2014

EMILIO A. GONZALES III, Petitioner, 

vs.
OFFICE OF THE PRESIDENT OF THE PHILIPPINES, ACTING THROUGH AND REPRESENTED BY
EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR., SENIOR DEPUTY EXECUTIVE SECRETARY JOSE
AMOR M. AMORANDO, OFFICER-IN-CHARGE - OFFICE OF THE DEPUTY EXECUTIVE SECRETARY FOR
LEGAL AFFAIRS, ATTY. RONALDO A. GERON, DIR. ROWENA TURINGAN-SANCHEZ, AND ATTY. CARLITO
D. CATAYONG, Respondents.

x-----------------------x

G.R. No. 196232

WENDELL BARRERAS-SULIT Petitioner, 
vs.
ATTY. PAQUITO N. OCHOA, JR., IN HIS CAP A CITY AS EXECUTIVE SECRETARY, OFFICE OF THE
PRESIDENT, ATTY. DENNIS F. ORTIZ, ATTY. CARLO D. SULAY AND ATTY. FROILAN D. MONTALBAN, JR.,
IN THEIR CAPACITIES AS CHAIRMAN AND MEMBERS OF OFFICE OF MALACANANG LEGAL
AFFAIRS,Respondents.

DECISION

BRION, J.:

We resolve the Office of the President's (OP 's) motion for reconsideration of our September 4, 2012 Decision which 1

ruled on the petitions filed by Deputy Ombudsman Emilio Gonzales III and Special Prosecutor Wendell Barreras-
Sulit. Their petitions challenged the constitutionality of Section 8(2) of Republic Act (RA) No. 6770.2

In the challenged Decision, the Court upheld the constitutionality of Section 8(2) of RA No. 6770 and ruled that the
President has disciplinary jurisdiction over a Deputy Ombudsman and a Special Prosecutor. The Court, however,
reversed the OP ruling that: (i) found Gonzales guilty of Gross Neglect of Duty and Grave Misconduct constituting
betrayal of public trust; and (ii) imposed on him the penalty of dismissal.

Sulit, who had not then been dismissed and who simply sought to restrain the disciplinary proceedings against her,
solely questioned the jurisdiction of the OP to subject her to disciplinary proceedings. The Court affirmed the
continuation of the proceedings against her after upholding the constitutionality of Section 8(2) of RA No. 6770.

The fallo of our assailed Decision reads:

WHEREFORE, in G.R. No. 196231, the decision of the Office of the President in OP Case No. 1 O-J-460 is
REVERSED and SET ASIDE. Petitioner Emilio A. Gonzales III is ordered REINSTATED with payment of
backwages corresponding to the period of suspension effective immediately, even as the Office of the Ombudsman
is directed to proceed with the investigation in connection with the above case against petitioner. In G.R. No.
196232, We AFFIRM the continuation of OP-DC Case No. ll-B-003 against Special Prosecutor Wendell Barreras-
Sulit for alleged acts and omissions tantamount to culpable violation of the Constitution and a betrayal of public
trust, in accordance with Section 8(2) of the Ombudsman Act of 1989. 3

In view of the Court’s ruling, the OP filed the present motion for reconsideration through the Office of the Solicitor
General (OSG).

We briefly narrate the facts that preceded the filing of the petitions and the present motion for reconsideration.

I. ANTECEDENTS

A. Gonzales’ petition (G.R. No. 196231)

a. Factual antecedents

9
On May 26, 2008, Christian Kalaw filed separate charges with the Philippine National Police Internal Affairs Service
(PNP-IAS) and with the Manila City Prosecutor’s Office against Manila Police District Senior Inspector Rolando
Mendoza and four others (Mendoza, et al.) for robbery, grave threat, robbery extortion and physical injury.4

On May 29, 2008, Police Senior Superintendent Atty. Clarence Guinto filed an administrative charge for grave
misconduct with the National Police Commission (NAPOLCOM) PNP-NCRPO against Mendoza, et al. based on the
same allegations made by Kalaw before the PNP-IAS. 5

On July 2, 2008, Gonzales, Deputy Ombudsman for Military and Other Law Enforcement Officers (MOLEO),
directed the NAPOLCOM to turn over the records of Mendoza’s case to his office. The Office of the Regional
Director of the NAPOLCOM duly complied on July 24, 2008.  Mendoza, et al. filed their position papers with
6

Gonzales, in compliance with his Order. 7

Pending Gonzales’ action on Mendoza, et al.’s case (on August 26, 2008), the Office of the City Prosecutor of
Manila City dismissed Kalaw’s complaint against Mendoza, et al. for his failure to substantiate his
allegations.  Similarly, on October 17, 2008, the PNP-IAS recommended the dismissal without prejudice of the
8

administrative case against Mendoza, et al. for Kalaw’s failure to prosecute. 9

On February 16, 2009, after preparing a draft decision on Mendoza, et al.’s case, Gonzales forwarded the entire
records to the Office of then Ombudsman Merceditas Gutierrez for her review.  In his draft decision, Gonzales found
10

Mendoza, et al. guilty of grave misconduct and imposed on them the penalty of dismissal from the service. 11

Mendoza, et al. received a copy of the Ombudsman’s decision that approved Gonzales’ recommendation on
October 30, 2009. Mendoza, et al. filed a motion for reconsideration  on November 5, 2009, followed by a
12

Supplement to the Motion for Reconsideration. 13

On December 10, 2009, the MOLEO-Records Section forwarded Mendoza, et al.’s case records to the Criminal
Investigation, Prosecution and Administrative Bureau-MOLEO. On December 14, 2009, the case was assigned to
Graft Investigation and Prosecution Officer (GIPO) Dennis Garcia for review and recommendation. 14

GIPO Garcia released a draft order  to his immediate superior, Director Eulogio S. Cecilio, for appropriate action on
15

April 5, 2010. Dir. Cecilio signed and forwarded the draft order to Gonzales’ office on April 27, 2010. Gonzales
reviewed the draft and endorsed the order, together with the case records, on May 6, 2010 for the final approval by
the Ombudsman. 16

On August 23, 2010, pending final action by the Ombudsman on Mendoza, et al.’s case, Mendoza hijacked a tourist
bus and held the 21 foreign tourists and the four Filipino tour assistants on board as hostages. While the
government exerted earnest attempts to peacefully resolve the hostage-taking, it ended tragically, resulting in the
deaths of Mendoza and several others on board the hijacked bus.

In the aftermath, President Benigno C. Aquino III directed the Department of Justice and the Department of Interior
and Local Government to conduct a joint thorough investigation of the incident. The two departments issued Joint
Department Order No. 01-2010, creating an Incident Investigation and Review Committee (IIRC).

In its September 16, 2010 First Report, the IIRC found the Ombudsman and Gonzales accountable for their "gross
negligence and grave misconduct in handling the case against Mendoza."  The IIRC stated that the Ombudsman
17

and Gonzales’ failure to promptly resolve Mendoza’s motion for reconsideration, "without justification and despite
repeated pleas" xxx "precipitated the desperate resort to hostage-taking."  The IIRC recommended the referral of its
18

findings to the OP for further determination of possible administrative offenses and for the initiation of the proper
administrative proceedings.19

Accordingly, on October 15, 2010, Gonzales was formally charged before the OP for Gross Neglect of Duty and/or
Inefficiency in the Performance of Official Duty and for Misconduct in Office. 20

b. The OP ruling

On March 31, 2011, the OP found Gonzales guilty as charged and dismissed him from the service. According to the
21

OP, "the inordinate and unjustified delay in the resolution of [Mendoza’s] Motion for Reconsideration [‘that spanned
for nine (9) long months’] xxx amounted to gross neglect of duty" and "constituted a flagrant disregard of the Office
of the Ombudsman’s own Rules of Procedure." 22

c. The Petition

Gonzales posited in his petition that the OP has no administrative disciplinary jurisdiction over a Deputy
Ombudsman. Under Section 21 of RA No. 6770, it is the Ombudsman who exercises administrative disciplinary
jurisdiction over the Deputy Ombudsman.

10
On the merits, Gonzales argued that his office received the draft order from GIPO Garcia on April 27, 2010. On May
6, 2010, he completed his review of the draft, approved it, and transmitted it to the Office of the Ombudsman for final
approval. Since the draft order on Mendoza’s motion for reconsideration had to undergo different levels of
preparation, review and approval, the period it took to resolve the motion could not be unjustified, since he himself
acted on the draft order only within nine (9) calendars days from his receipt of the order. 23

B. Sulit’s petition (G.R. No. 196232)

In April 2005, the Office of the Ombudsman charged Major General Carlos F. Garcia and several others, before the
Sandiganbayan, with plunder and money laundering. On May 7, 2007, Garcia filed an Urgent Petition for Bail which
the prosecution opposed. The Sandiganbayan denied Garcia's urgent petition for bail on January 7, 2010, in view of
the strength of the prosecution’s evidence against Garcia.

On February 25, 2010, the Office of the Ombudsman, through Sulit and her prosecutorial staff, entered into a plea
bargaining agreement (Agreement) with Garcia.  Garcia thereby agreed to: (i) withdraw his plea of not guilty to the
24

charge of plunder and enter a plea of guilty to the lesser offense of indirect bribery; and (ii) withdraw his plea of not
guilty to the charge of money laundering and enter a guilty plea to the lesser offense of facilitating money
laundering. In exchange, he would convey to the government his ownership, rights and other interests over the real
and personal properties enumerated in the Agreement and the bank deposits alleged in the information. 25

The Sandiganbayan approved the Agreement on May 4, 2010  based on the parties’ submitted Joint Motion for
26

Approval. 27

The apparent one-sidedness of the Agreement drew public outrage and prompted the Committee on Justice of the
House of Representatives to conduct an investigation. After public hearings, the Committee found that Sulit, her
deputies and assistants committed culpable violations of the Constitution and betrayal of public trust – grounds for
removal under Section 8(2) of RA No. 6770. The Committee recommended to the President the dismissal from the
28

service of Sulit and the filing of appropriate charges against her deputies and assistants before the appropriate
government office.

Accordingly, the OP initiated an administrative disciplinary proceeding against Sulit.  On March 24, 2011, Sulit filed
29

her Written Explanation, questioning the OP’s jurisdiction.  The question of jurisdiction notwithstanding, the OP set
30

the case for preliminary investigation on April 15, 2011, prompting Sulit to seek relief from this Court.

II. COURT’S RULING

On motion for reconsideration and further reflection, the Court votes to grant Gonzales’ petition and to declare
Section 8(2) of RA No. 6770 unconstitutional with respect to the Office of the Ombudsman. (As the full explanation
of the Court’s vote describes below, this conclusion does not apply to Sulit as the grant of independence is solely
with respect to the Office of the Ombudsman which does not include the Office of the Special Prosecutor under the
Constitution. The prevailing ruling on this latter point is embodied in the Concurring and Dissenting Opinion of J.
Marvic Mario Victor Leonen).

A. Preliminary considerations:

a. Absence of motion for reconsideration on the part of the petitioners

At the outset, the Court notes that Gonzales and Sulit did not file a motion for reconsideration of the Court’s
September 4, 2012 Decision; only the OP, through the OSG, moved for the reconsideration of our ruling reinstating
Gonzales.

This omission, however, poses no obstacle for the Court’s review of its ruling on the whole case since a serious
constitutional question has been raised and is one of the underlying bases for the validity or invalidity of the
presidential action. If the President does not have any constitutional authority to discipline a Deputy Ombudsman
and/or a Special Prosecutor in the first place, then any ruling on the legal correctness of the OP’s decision on the
merits will be an empty one.

In other words, since the validity of the OP’s decision on the merits of the dismissal is inextricably anchored on the
final and correct ruling on the constitutional issue, the whole case – including the constitutional issue – remains alive
for the Court’s consideration on motion for reconsideration.

b. The justiciability of the constitutional

issue raised in the petitions

11
We clarify, too, that the issue of whether a Deputy Ombudsman may be subjected to the administrative disciplinary
jurisdiction of the President (concurrently with that of the Ombudsman) is a justiciable – not a political – question. A
justiciable question is one which is inherently susceptible of being decided on grounds recognized by law,  as where
31

the court finds that there are constitutionally-imposed limits on the exercise of the powers conferred on a political
branch of the government. 32

In resolving the petitions, we do not inquire into the wisdom of the Congress’ choice to grant concurrent disciplinary
authority to the President. Our inquiry is limited to whether such statutory grant violates the Constitution, particularly
whether Section 8(2) of RA No. 6770 violates the core constitutional principle of the independence of the Office of
the Ombudsman as expressed in Section 5, Art. XI of the Constitution.

To be sure, neither the Executive nor the Legislative can create the power that Section 8(2) of RA No. 6770 grants
where the Constitution confers none. When exercised authority is drawn from a vacuum, more so when the authority
runs counter to a core constitutional principle and constitutional intents, the Court is duty-bound to intervene under
the powers and duties granted and imposed on it by Article VIII of the Constitution.

B. The Deputy Ombudsman: Constitutional Issue

a. The Philippine Ombudsman

Prior to the 1973 Constitution, past presidents established several Ombudsman-like agencies to serve as the
people's medium for airing grievances and for direct redress against abuses and misconduct in the government.
Ultimately, however, these agencies failed to fully realize their objective for lack of the political independence
necessary for the effective performance of their function as government critic. 33

It was under the 1973 Constitution that the Office of the Ombudsman became a constitutionally-mandated office to
give it political independence and adequate powers to enforce its mandate. Pursuant to the 1973 Constitution,
President Ferdinand Marcos enacted Presidential Decree (PD) No. 1487, as amended by PD No. 1607 and PD No.
1630, creating the Office of the Ombudsman to be known as Tanodbayan. It was tasked principally to investigate,
on complaint or motu proprio, any administrative act of any administrative agency, including any government-owned
or controlled corporation. When the Office of the Tanodbayan was reorganized in 1979, the powers previously
vested in the Special Prosecutor were transferred to the Tanodbayan himself. He was given the exclusive authority
to conduct preliminary investigation of all cases cognizable by the Sandiganbayan, file the corresponding
information, and control the prosecution of these cases. 34

With the advent of the 1987 Constitution, a new Office of the Ombudsman was created by constitutional fiat. Unlike
in the 1973 Constitution, its independence was expressly and constitutionally guaranteed. Its objectives are to
enforce the state policy in Section 27, Article II  and the standard of accountability in public service under Section 1,
35

Article XI of the 1987 Constitution. These provisions read:

Section 27. The State shall maintain honesty and integrity in the public service and take positive and effective
measures against graft and corruption.

Section 1. Public office is a public trust. Public officers and employees must, at all times, be accountable to the
people, serve them with utmost responsibility, integrity, loyalty, and efficiency; act with patriotism and justice, and
lead modest lives.

Under Section 12, Article XI of the 1987 Constitution, the Office of the Ombudsman is envisioned to be the
"protector of the people" against the inept, abusive, and corrupt in the Government, to function essentially as a
complaints and action bureau.  This constitutional vision of a Philippine Ombudsman practically intends to make the
36

Ombudsman an authority to directly check and guard against the ills, abuses and excesses of the bureaucracy.
Pursuant to Section 13(8), Article XI of the 1987 Constitution, Congress enacted RA No. 6770 to enable it to further
realize the vision of the Constitution. Section 21 of RA No. 6770 provides:

Section 21. Official Subject to Disciplinary Authority; Exceptions. — The Office of the Ombudsman shall have
disciplinary authority over all elective and appointive officials of the Government and its subdivisions,
instrumentalities and agencies, including Members of the Cabinet, local government, government-owned or
controlled corporations and their subsidiaries, except over officials who may be removed only by impeachment or
over Members of Congress, and the Judiciary. [emphasis ours, italics supplied]

As the Ombudsman is expected to be an "activist watchman,"  the Court has upheld its actions, although not
37

squarely falling under the broad powers granted it by the Constitution and by RA No. 6770, if these actions are
reasonably in line with its official function and consistent with the law and the Constitution.38

The Ombudsman’s broad investigative and disciplinary powers include all acts of malfeasance, misfeasance, and
nonfeasance of all public officials, including Members of the Cabinet and key Executive officers, during their tenure.

12
To support these broad powers, the Constitution saw it fit to insulate the Office of the Ombudsman from the
pressures and influence of officialdom and partisan politics and from fear of external reprisal by making it an
"independent" office. Section 5,

Article XI of the Constitution expressed this intent, as follows:

Section 5. There is hereby created the independent Office of the Ombudsman, composed of the Ombudsman to be
known as Tanodbayan, one overall Deputy and at least one Deputy each for Luzon, Visayas, and Mindanao. A
separate Deputy for the military establishment may likewise be appointed. [emphasis ours]

Given the scope of its disciplinary authority, the Office of the Ombudsman is a very powerful government
constitutional agency that is considered "a notch above other grievance-handling investigative bodies."  It has
39

powers, both constitutional and statutory, that are commensurate with its daunting task of enforcing accountability of
public officers.
40

b. "Independence" of constitutional bodies vis-a-vis the Ombudsman’s independence

Under the Constitution, several constitutional bodies have been expressly labeled as "independent." The extent of
41

the independence enjoyed by these constitutional bodies however varies and is to be interpreted with two significant
considerations in mind: first, the functions performed or the powers involved in a given case; and second,
consistency of any allowable interference to these powers and functions, with the principle of checks and balances.

Notably, the independence enjoyed by the Office of the Ombudsman and by the Constitutional Commissions shares
certain characteristics – they do not owe their existence to any act of Congress, but are created by the Constitution
itself; additionally, they all enjoy fiscal autonomy. In general terms, the framers of the Constitution intended that
these "independent" bodies be insulated from political pressure to the extent that the absence of "independence"
would result in the impairment of their core functions.

In Bengzon v. Drilon,  involving the fiscal autonomy of the Judiciary, we ruled against the interference that the
42

President may bring and maintained that the independence and the flexibility of the Judiciary, the Constitutional
Commissions and the Office of the Ombudsman are crucial to our legal system.

The Judiciary, the Constitutional Commissions, and the Ombudsman must have the independence and flexibility
needed in the discharge of their constitutional duties. The imposition of restrictions and constraints on the manner
the independent constitutional offices allocate and utilize the funds appropriated for their operations is anathema to
fiscal autonomy and violative not only the express mandate of the Constitution but especially as regards the
Supreme Court, of the independence and separation of powers upon which the entire fabric of our constitutional
system is based.

The constitutional deliberations explain the Constitutional Commissions’ need for independence. In the deliberations
of the 1973 Constitution, the delegates amended the 1935 Constitution by providing for a constitutionally-created
Civil Service Commission, instead of one created by law, on the premise that the effectivity of this body is
dependent on its freedom from the tentacles of politics.  In a similar manner, the deliberations of the 1987
43

Constitution on the Commission on Audit highlighted the developments in the past Constitutions geared towards
insulating the Commission on Audit from political pressure. 44

Notably, the Constitution also created an "independent" Commission on Human Rights, although it enjoys a lesser
degree of independence since it is not granted fiscal autonomy in the manner fiscal autonomy is granted to the
constitutional commissions. The lack of fiscal autonomy notwithstanding, the framers of the 1987 Constitution clearly
expressed their desire to keep the Commission independent from the executive branch and other political leaders:

MR. MONSOD. We see the merits of the arguments of Commissioner Rodrigo. If we explain to him our concept, he
can advise us on how to reconcile his position with ours. The position of the committee is that we need a body that
would be able to work and cooperate with the executive because the Commissioner is right. Many of the services
needed by this commission would need not only the cooperation of the executive branch of the government but also
of the judicial branch of government. This is going to be a permanent constitutional commission over time. We also
want a commission to function even under the worst circumstance when the executive may not be very cooperative.
However, the question in our mind is: Can it still function during that time? Hence, we are willing to accept
suggestions from Commissioner Rodrigo on how to reconcile this. We realize the need for coordination and
cooperation. We also would like to build in some safeguards that it will not be rendered useless by an uncooperative
executive.

xxxx

MR. GARCIA. xxx Very often, when international commissions or organizations on human rights go to a country, the
most credible organizations are independent human rights bodies. Very often these are private organizations, many

13
of which are prosecuted, such as those we find in many countries in Latin America. In fact, what we are proposing is
an independent body on human rights, which would provide governments with credibility precisely because it is
independent of the present administration. Whatever it says on the human rights situation will be credible because it
is not subject to pressure or control from the present political leadership.

Secondly, we all know how political fortunes come and go. Those who are in power yesterday are in opposition
today and those who are in power today may be in the opposition tomorrow. Therefore, if we have a Commission on
Human Rights that would investigate and make sure that the rights of each one is protected, then we shall have a
body that could stand up to any power, to defend the rights of individuals against arrest, unfair trial, and so on.
45

These deliberative considerations abundantly show that the independent constitutional commissions have been
consistently intended by the framers to be independent from executive control or supervision or any form of political
influence. At least insofar as these bodies are concerned, jurisprudence is not scarce on how the "independence"
granted to these bodies prevents presidential interference.

In Brillantes, Jr. v. Yorac,  we emphasized that the Constitutional Commissions, which have been characterized
46

under the Constitution as "independent," are not under the control of the President, even if they discharge functions
that are executive in nature. The Court declared as unconstitutional the President’s act of temporarily appointing the
respondent in that case as Acting Chairman of the Comelec "however well-meaning"  it might have been.
47

In Bautista v. Senator Salonga,  the Court categorically stated that the tenure of the commissioners of the
48

independent Commission on Human Rights could not be placed under the discretionary power of the President:

Indeed, the Court finds it extremely difficult to conceptualize how an office conceived and created by the
Constitution to be independent – as the Commission on Human Rights – and vested with the delicate and vital
functions of investigating violations of human rights, pinpointing responsibility and recommending sanctions as well
as remedial measures therefor, can truly function with independence and effectiveness, when the tenure in office of
its Chairman and Members is made dependent on the pleasure of the President. Executive Order No. 163-A, being
antithetical to the constitutional mandate of independence for the Commission on Human Rights has to be declared
unconstitutional.

Again, in Atty. Macalintal v. Comelec,  the Court considered even the mere review of the rules of the Commission
49

on Elections by Congress a "trampling" of the constitutional mandate of independence of this body. Obviously, the
mere review of rules places considerably less pressure on a constitutional body than the Executive’s power to
discipline and remove key officials of the Office of the Ombudsman, yet the Court struck down the law as
unconstitutional.

The kind of independence enjoyed by the Office of the Ombudsman certainly cannot be inferior – but is similar in
degree and kind – to the independence similarly guaranteed by the Constitution to the Constitutional Commissions
since all these offices fill the political interstices of a republican democracy that are crucial to its existence and
proper functioning.50

c. Section 8(2) of RA No. 6770

vesting disciplinary authority
in the President over the
Deputy Ombudsman violates
the independence of the Office
of the Ombudsman and is thus
unconstitutional

Our discussions, particularly the Court’s expressed caution against presidential interference with the constitutional
commissions, on one hand, and those expressed by the framers of the 1987 Constitution, on the other, in protecting
the independence of the Constitutional Commissions, speak for themselves as overwhelming reasons to invalidate
Section 8(2) of RA No. 6770 for violating the independence of the Office of the Ombudsman.

In more concrete terms, we rule that subjecting the Deputy Ombudsman to discipline and removal by the President,
whose own alter egos and officials in the Executive Department are subject to the Ombudsman’s disciplinary
authority, cannot but seriously place at risk the independence of the Office of the Ombudsman itself. The Office of
the Ombudsman, by express constitutional mandate, includes its key officials, all of them tasked to support the
Ombudsman in carrying out her mandate. Unfortunately, intrusion upon the constitutionally-granted independence is
what Section 8(2) of RA No. 6770 exactly did. By so doing, the law directly collided not only with the independence
that the Constitution guarantees to the Office of the Ombudsman, but inevitably with the principle of checks and
balances that the creation of an Ombudsman office seeks to revitalize.

What is true for the Ombudsman must be equally and necessarily true for her Deputies who act as agents of the
Ombudsman in the performance of their duties. The Ombudsman can hardly be expected to place her complete
trust in her subordinate officials who are not as independent as she is, if only because they are subject to pressures
14
and controls external to her Office. This need for complete trust is true in an ideal setting and truer still in a young
democracy like the Philippines where graft and corruption is still a major problem for the government. For these
reasons, Section 8(2) of RA No. 6770 (providing that the President may remove a Deputy Ombudsman) should be
declared void.

The deliberations of the Constitutional Commission on the independence of the Ombudsman fully support this
position. Commissioner Florenz Regalado of the Constitutional Commission expressed his apprehension that any
form of presidential control over the Office of the Ombudsman would diminish its independence.  The following
51

exchanges between Commissioners Blas Ople and Christian Monsod further reveal the constitutional intent to keep
the Office of the Ombudsman independent from the President:

MR. OPLE. xxx

May I direct a question to the Committee? xxx [W]ill the Committee consider later an amendment xxx, by way of
designating the office of the Ombudsman as a constitutional arm for good government, efficiency of the public
service and the integrity of the President of the Philippines, instead of creating another agency in a kind of
administrative limbo which would be accountable to no one on the pretext that it is a constitutional body?

MR. MONSOD. The Committee discussed that during our committee deliberations and when we prepared the
report, it was the opinion of the Committee — and I believe it still is — that it may not contribute to the effectiveness
of this office of the Ombudsman precisely because many of the culprits in inefficiency, injustice and impropriety are
in the executive department. Therefore, as we saw the wrong implementation of the Tanodbayan which was under
the tremendous influence of the President, it was an ineffectual body and was reduced to the function of a special
fiscal. The whole purpose of our proposal is precisely to separate those functions and to produce a vehicle that will
give true meaning to the concept of Ombudsman. Therefore, we regret that we cannot accept the proposition. 52

The statements made by Commissioner Monsod emphasized a very logical principle: the Executive power to
remove and discipline key officials of the Office of the Ombudsman, or to exercise any power over them, would
result in an absurd situation wherein the Office of the Ombudsman is given the duty to adjudicate on the integrity
and competence of the very persons who can remove or suspend its members. Equally relevant is the impression
that would be given to the public if the rule were otherwise. A complainant with a grievance against a high-ranking
official of the Executive, who appears to enjoy the President’s favor, would be discouraged from approaching the
Ombudsman with his complaint; the complainant’s impression (even if misplaced), that the Ombudsman would be
susceptible to political pressure, cannot be avoided. To be sure, such an impression would erode the constitutional
intent of creating an Office of the Ombudsman as champion of the people against corruption and bureaucracy.

d. The mutual-protection argument for

crafting Section 8(2)of RA No. 6770

In crafting Section 8(2) of RA No. 6770, Congress apparently addressed the concern that a lack of an external
check against the Deputy Ombudsman would result in mutual protection between the Ombudsman and her
Deputies.

While the preceding discussion already suffices to address this concern, it should be added that this concern stands
on shaky grounds since it ignores the existing checks and balances already in place. On the one hand, the
Ombudsman’s Deputies cannot protect the Ombudsman because she is subject to the impeachment power of
Congress. On the other hand, the Ombudsman’s attempt to cover up the misdeeds of her Deputies can be
questioned before the Court on appeal or certiorari. The same attempt can likewise subject her to impeachment.

The judicial recourse available is only consistent with the nature of the Supreme Court as a non-political
independent body mandated by the Constitution to settle judicial and quasi-judicial disputes, whose judges and
employees are not subject to the disciplinary authority of the Ombudsman and whose neutrality would be less
questionable. The Members of the Court themselves may be subjected to the impeachment power of Congress.

In these lights, the appeal, if any, of the mutual protection argument becomes distinctly implausible. At the same
time, the Court remains consistent with its established rulings - that the independence granted to the Constitutional
Commissions bars any undue interference from either the Executive or Congress – and is in full accord with
constitutional intent.

e. Congress’ power determines the

manner and causes for the removal
of non-impeachable officers is not a
carte blanch authority

Under Section 2, Article XI of the 1987 Constitution,  Congress is empowered to determine the modes of removal
53

from office of all public officers and employees except the President, the Vice-President, the Members of the

15
Supreme Court, the Members of the Constitutional Commissions, and the Ombudsman, who are all impeachable
officials.

The intent of the framers of the Constitution in providing that "[a]ll other public officers and employees may be
removed from office as provided by law, but not by impeachment" in the second sentence of Section 2, Article XI is
to prevent Congress from extending the more stringent rule of "removal only by impeachment" to favored public
officers.  Understandably so, impeachment is the most difficult and cumbersome mode of removing a public officer
54

from office. It is, by its nature, a sui generis politico-legal process  that signals the need for a judicious and careful
55

handling as shown by the process required to initiate the proceeding;  the one-year limitation or bar for its
56

initiation;  the limited grounds for impeachment;  the defined instrumentality given the power to try impeachment
57 58

cases;  and the number of votes required for a finding of guilt.  All these argue against the extension of this removal
59 60

mechanism beyond those mentioned in the Constitution.

On the practical side, our nation has witnessed the complications and problems an impeachment proceeding
entails, thus justifying its limited application only to the officials occupying the highest echelons of responsibility in
our government. To name a few, some of the negative practical effects of impeachment are: it stalls legislative work;
it is an expensive process in terms of the cost of prosecution alone; and, more importantly, it is inherently divisive of
the nation.  Thus, in a cost-benefit analysis of adopting impeachment as a mechanism, limiting Congress’ power to
61

otherwise legislate on the matter is far more advantageous to the country.

It is in these lights that the second sentence in Section 2, Article XI of the 1987 Constitution should be read.
Contrary to the implied view of the minority, in no way can this provision be regarded as blanket authority for
Congress to provide for any ground of removal it deems fit. While the manner and cause of removal are left to
congressional determination, this must still be consistent with constitutional guarantees and principles, namely: the
right to procedural and substantive due process; the constitutional guarantee of security of tenure; the principle of
separation of powers; and the principle of checks and balances. 62

In short, the authority granted by the Constitution to Congress to provide for the manner and cause of removal of all
other public officers and employees does not mean that Congress can ignore the basic principles and precepts
established by the Constitution.

In the same manner, the congressional determination of the identity of the disciplinary authority is not a blanket
authority for Congress to repose it on whomsoever Congress chooses without running afoul of the independence
enjoyed by the Office of the Ombudsman and without disrupting the delicate check and balance mechanism under
the Constitution. Properly viewed from this perspective, the core constitutional principle of independence is
observed and any possible absurdity resulting from a contrary interpretation is avoided. In other words, while the
Constitution itself vested Congress with the power to determine the manner and cause of removal of all non-
impeachable officials, this power must be interpreted consistent with the core constitutional principle of
independence of the Office of the Ombudsman. Our observation in Macalintal v. Comelec  is apt:63

The ambit of legislative power under Article VI of the Constitution is circumscribed by other constitutional provisions.
One such provision is Section 1 of Article IX-A of the 1987 Constitution ordaining that constitutional commissions
such as the COMELEC shall be "independent."

While one may argue that the grounds for impeachment under Section 8(2) of RA No. 6770 is intended as a
measure of protection for the Deputy Ombudsman and Special Prosecutor – since these grounds are not intended
to cover all kinds of official wrongdoing and plain errors of judgment - this argument seriously overlooks the erosion
of the independence of the Office of the Ombudsman that it creates. The mere fact that a statutorily-created sword
of Damocles hangs over the Deputy Ombudsman’s head, by itself, opens up all the channels for external pressures
and influence of officialdom and partisan politics. The fear of external reprisal from the very office he is to check for
excesses and abuses defeats the very purpose of granting independence to the Office of the Ombudsman.

That a judicial remedy is available (to set aside dismissals that do not conform to the high standard required in
determining whether a Deputy Ombudsman committed an impeachable offense) and that the President’s power of
removal is limited to specified grounds are dismally inadequate when balanced with the constitutional principle of
independence. The mere filing of an administrative case against the Deputy Ombudsman and the Special
Prosecutor before the OP can already result in their suspension and can interrupt the performance of their functions,
in violation of Section 12, Article XI of the Constitution. With only one term allowed under Section 11, a Deputy
Ombudsman or Special Prosecutor, if removable by the President, can be reduced to the very same ineffective
Office of the Ombudsman that the framers had foreseen and carefully tried to avoid by making these offices
independent constitutional bodies.

At any rate, even assuming that the OP has disciplinary authority over the Deputy Ombudsman, its decision finding
Gonzales guilty of Gross Neglect of Duty and Grave Misconduct constituting betrayal of public trust is patently
erroneous. The OP’s decision perfectly illustrates why the requirement of impeachment-grounds in Section 8(2) of
RA No. 6770 cannot be considered, even at a minimum, a measure of protection of the independence of the Office
of the Ombudsman.

16
C. The Deputy Ombudsman: The Dismissal Issue

a. The Office of the President’s

finding of gross negligence
has no legal and factual leg to
stand on

The OP’s decision found Gonzales guilty of Gross Neglect of Duty and of Grave Misconduct. The assailed Decision
of the OP reads:

Upon consideration of the First Report, the evidence and allegations of respondent Deputy Ombudsman himself,
and other documentary evidence gathered, this Office finds that the inordinate and unjustified delay in the resolution
of Captain Mendoza’s Motion for Reconsideration timely filed on 5 November 2009 xxx amounted to gross neglect
of duty and/or inefficiency in the performance of official duty. 64

b. No gross neglect of duty or inefficiency

Let us again briefly recall the facts.

1. November 5, 2009 - Mendoza filed a Motion for Reconsideration of the decision of the
Ombudsman,  which was followed by a Supplement to the Motion for Reconsideration;
65 66

2. December 14, 2009  - GIPO Garcia, who was assigned to review these motions and make his
67

recommendation for the appropriate action, received the records of the case;

3. April 5, 2010 – GIPO Garcia released a draft order to be reviewed by his immediate superior, Dir. Cecilio; 68

4. April 27, 2010 – Dir. Cecilio signed and forwarded to Gonzales this draft order; 69

5. May 6, 2010 (or nine days after the records were forwarded to Gonzales) – Gonzales endorsed the draft
order for the final approval of the Ombudsman. 70

Clearly, when Mendoza hijacked the tourist bus on August 23, 2010, the records of the case were already pending
before Ombudsman Gutierrez.

Gross negligence refers to negligence characterized by the want of even the slightest care, acting or omitting to act
in a situation where there is a duty to act, not inadvertently but willfully and intentionally, with a conscious
indifference to consequences insofar as other persons may be affected. In the case of public officials, there is gross
negligence when a breach of duty is flagrant and palpable. 71

Gonzales cannot be guilty of gross neglect of duty and/or inefficiency since he acted on the case forwarded to him
within nine days. In finding Gonzales guilty, the OP  relied on Section 8, Rule III of Administrative Order No. 7 (or
72

the Rules of Procedure of the Office of the Ombudsman, series of 1990, as amended) in ruling that Gonzales should
have acted on Mendoza’s Motion for Reconsideration within five days:

Section 8. Motion for reconsideration or reinvestigation: Grounds – Whenever allowable, a motion for
reconsideration or reinvestigation may only be entertained if filed within ten (10) days from receipt of the decision or
order by the party on the basis of any of the following grounds:

a) New evidence had been discovered which materially affects the order, directive or decision;

b) Grave errors of facts or laws or serious irregularities have been committed prejudicial to the interest of the
movant.

Only one motion for reconsideration or reinvestigation shall be allowed, and the Hearing Officer shall resolve the
same within five (5) days from the date of submission for resolution. [emphasis and underscore ours]

Even if we consider this provision to be mandatory, the period it requires cannot apply to Gonzales since he is a
Deputy Ombudsman whose obligation is to review the case; he is not simply a Hearing Officer tasked with the initial
resolution of the motion. In Section 6 of Administrative Order No. 7 on the resolution of the case and submission of
the proposed decision, the period for resolving the case does not cover the period within which it should be
reviewed:

Section 6. Rendition of decision. – Not later than thirty (30) days after the case is declared submitted for resolution,
the Hearing Officer shall submit a proposed decision containing his findings and recommendation for the approval of

17
the Ombudsman. Said proposed decision shall be reviewed by the Directors, Assistant Ombudsmen and Deputy
Ombudsmen concerned. With respect to low ranking public officials, the Deputy Ombudsman concerned shall be
the approving authority. Upon approval, copies thereof shall be served upon the parties and the head of the office or
agency of which the respondent is an official or employee for his information and compliance with the appropriate
directive contained therein. [italics and emphases supplied]

Thus, the OP’s ruling that Gonzales had been grossly negligent for taking nine days, instead of five days, to review
a case was totally baseless.

c. No actionable failure to supervise subordinates

The OP’s claims that Gonzales could have supervised his subordinates to promptly act on Mendoza’s motion and
apprised the Tanodbayan of the urgency of resolving the same are similarly groundless.

The Office of the Ombudsman is not a corner office in our bureaucracy. It handles numerous cases that involve the
potential loss of employment of many other public employees. We cannot conclusively state, as the OP appears to
suggest, that Mendoza’s case should have been prioritized over other similar cases.

The Court has already taken judicial notice of the steady stream of cases reaching the Office of the
Ombudsman.  This consideration certainly militates against the OSG’s observation that there was "a grossly
73

inordinate and inexcusable delay"  on the part of Gonzales.

74

Equally important, the constitutional guarantee of "speedy disposition of cases" before, among others, quasi-judicial
bodies,  like the Office of the Ombudsman, is itself a relative concept.  Thus, the delay, if any, must be measured in
75 76

this objective constitutional sense. Unfortunately, because of the very statutory grounds relied upon by the OP in
dismissing Gonzales, the political and, perhaps, "practical" considerations got the better of what is legal and
constitutional.

The facts do not show that Gonzales’ subordinates had in any way been grossly negligent in their work. While GIPO
Garcia reviewed the case and drafted the order for more than three months, it is noteworthy that he had not drafted
the initial decision and, therefore, had to review the case for the first time.  Even the Ombudsman herself could not
77

be faulted for acting on a case within four months, given the amount of cases that her office handles.

The point is that these are not inordinately long periods for the work involved: examination of the records, research
on the pertinent laws and jurisprudence, and exercise of legal judgment and discretion. If this Court rules that these
periods per se constitute gross neglect of duty, the Ombudsman’s constitutional mandate to prosecute all the erring
officials of this country would be subjected to an unreasonable and overwhelming constraint. Similarly, if the Court
rules that these periods per se constitute gross neglect of duty, then we must be prepared to reconcile this with the
established concept of the right of speedy disposition of cases – something the Court may be hard put to justify.

d. No undue interest

The OP also found Gonzales guilty of showing undue interest in Mendoza’s case by having the case endorsed to
the Office of the Ombudsman and by resolving it against Mendoza on the basis of the unverified complaint-affidavit
of the alleged victim, Kalaw.

The fact that Gonzales had Mendoza’s case endorsed to his office lies within his mandate, even if it were based
merely on the request of the alleged victim’s father. The Constitution empowers the Ombudsman and her Deputies
to act promptly on complaints filed in any form or manner against any public official or employee of the
government.  This provision is echoed by Section 13 of RA No. 6770,  and by Section 3, Rule III of Administrative
78 79

Order No. 7, series of 1990, as amended. 80

Moreover, Gonzales and his subordinates did not resolve the complaint only on the basis of the unverified affidavit
of Kalaw. Based on the prosecution officer’s recommendations, the finding of guilt on the part of Mendoza, et al. was
based on their admissions as well. Mendoza, et al. admitted that they had arrested Kalaw based on two traffic
violations and allowed him to stay the whole night until the following morning in the police precinct. The next
morning, Kalaw was allowed to leave the precinct despite his failure to show a valid license and based merely on his
promise to return with the proper documents.  These admissions led Gonzales and his staff to conclude that
81

Mendoza, et al. irregularly acted in apprehending Kalaw, since the proper procedure for the apprehension of traffic
violators would be to give them a ticket and to file a case, when appropriate. 82

Lastly, we cannot deduce undue interest simply because Gonzales’ decision differs from the decision of the PNP-
IAS (which dismissed the complaint against Mendoza). To be sure, we cannot tie the hands of any judicial or quasi-
judicial body by ruling that it should always concur with the decisions of other judicial or quasi-judicial bodies which
may have also taken cognizance of the case. To do so in the case of a Deputy Ombudsman would be repugnant to

18
the independence that our Constitution has specifically granted to this office and would nullify the very purpose for
which it was created.

e. Penalty of dismissal totally

incommensurate with established facts

Given the lack of factual basis for the charges against Gonzales, the penalty of removal imposed by the OP
necessarily suffers grave infirmity. Basic strictures of fair play dictate that we can only be held liable for our own
misdeeds; we can be made to account only for lapses in our responsibilities. It is notable that of all the officers, it
was Gonzales who took the least time — nine days — followed by Cecilio, who took 21 days; Garcia — the writer of
the draft — took less than four months, and the Ombudsman, less than four months until the kidnapping incident
rendered Mendoza’s motion moot.

In these lights, the decision of the OP is clearly and patently wrong. This conclusion, however, does not preclude the
Ombudsman from looking into any other possible administrative liability of Gonzales under existing Civil Service
laws, rules and regulations.

D. The Special Prosecutor: The Constitutional Issue

The 1987 Constitution created a new, independent Office of the Ombudsman. The existing Tanodbayan at the
time  became the Office of the Special Prosecutor under the 1987 Constitution. While the composition of the
83

independent Office of the Ombudsman under the 1987 Constitution does not textually include the Special
Prosecutor, the weight of the foregoing discussions on the unconstitutionality of Section 8(2) of RA No. 6770 should
equally apply to the

Special Prosecutor on the basis of the legislative history of the Office of the Ombudsman as expounded in
jurisprudence.

Under the 1973 Constitution,  the legislature was mandated to create the Office of the Ombudsman, known as the
84

Tanodbayan, with investigative and prosecutorial powers. Accordingly, on June 11, 1978, President Ferdinand
Marcos enacted PD No. 1487. 85

Under PD No. 1486,  however, the "Chief Special Prosecutor" (CSP) was given the "exclusive authority" to conduct
86

preliminary investigation and to prosecute cases that are within the jurisdiction of the Sandiganbayan.  PD No. 1486
87

expressly gave the Secretary of Justice the power of control and supervision over the Special
Prosecutor.  Consistent with this grant of power, the law also authorized the Secretary of Justice to appoint or detail
88

to the Office of the CSP "any officer or employee of Department of Justice or any Bureau or Office under the
executive supervision thereof" to assist the Office of the CSP.

In December 1978, PD No. 1607  practically gave back to the Tanodbayan the powers taken away from it by the
89

Office of the CSP. The law "created in the Office of the Tanodbayan an Office of the Chief Special Prosecutor"
under the Tanodbayan’s control,  with the exclusive authority to conduct preliminary investigation and prosecute all
90

cases cognizable by the Sandiganbayan. Unlike the earlier decree, the law also empowered the Tanodbayan to
appoint Special Investigators and subordinate personnel and/or to detail to the Office of the CSP any public officer
or employees who "shall be under the supervision and control of the Chief Special Prosecutor."  In 1979, PD No.
91

1630 further amended the earlier decrees by transferring the powers previously vested in the Special Prosecutor
directly to the Tanodbayan himself. 92

This was the state of the law at the time the 1987 Constitution was ratified. Under the 1987 Constitution, an
"independent Office of the Ombudsman" is created.  The existing Tanodbayan is made the Office of the Special
93

Prosecutor, "who shall continue to function and exercise its powers as now  or hereafter may be provided by law."
94 95

Other than the Ombudsman’s Deputies, the Ombudsman shall appoint all other officials and employees of the Office
of the Ombudsman.  Section 13(8), Article XI of the 1987 Constitution provides that the Ombudsman may exercise
96

"such other powers or perform such functions or duties as may be provided by law." Pursuant to this constitutional
command, Congress enacted RA No. 6770 to provide for the functional and structural organization of the Office of
the Ombudsman and the extent of its disciplinary authority.

In terms of composition, Section 3 of RA No. 6770 defines the composition of the Office of the Ombudsman,
including in this Office not only the offices of the several Deputy Ombudsmen but the Office of the Special
Prosecutor as well. In terms of appointment, the law gave the President the authority to appoint the Ombudsman,
his Deputies and the Special Prosecutor, from a list of nominees prepared by the Judicial and Bar Council. In case
of vacancy in these positions, the law requires that the vacancy be filled within three (3) months from occurrence. 97

The law also imposes on the Special Prosecutor the same qualifications it imposes on the Ombudsman
himself/herself and his/her deputies.  Their terms of office,  prohibitions and qualifications,  rank and salary are
98 99 100

19
likewise the same.  The requirement on disclosure  is imposed on the Ombudsman, the Deputies and the Special
101 102

Prosecutor as well. In case of vacancy in the Office of the Ombudsman, the Overall Deputy cannot assume the role
of Acting Ombudsman; the President may designate any of the Deputies or the Special Prosecutor as Acting
Ombudsman.  The power of the Ombudsman and his or her deputies to require other government agencies to
103

render assistance to the Office of the Ombudsman is likewise enjoyed by the Special Prosecutor. 104

Given this legislative history, the present overall legal structure of the Office of the Ombudsman, both under the
1987 Constitution and RA No. 6770, militates against an interpretation that would insulate the Deputy Ombudsman
from the disciplinary authority of the OP and yet expose the Special Prosecutor to the same ills that a grant of
independence to the Office of the Ombudsman was designed for.

Congress recognized the importance of the Special Prosecutor as a necessary adjunct of the Ombudsman, aside
from his or her deputies, by making the Office of the Special Prosecutor an organic component of the Office of the
Ombudsman and by granting the Ombudsman control and supervision over that office.  This power of control and
105

supervision includes vesting the Office of the Ombudsman with the power to assign duties to the Special Prosecutor
as he/she may deem fit.  Thus, by constitutional design, the Special Prosecutor is by no means an ordinary
1âwphi1

subordinate but one who effectively and directly aids the Ombudsman in the exercise of his/her duties, which
include investigation and prosecution of officials in the Executive Department.

Under Section 11(4) of RA No. 6770, the Special Prosecutor handles the prosecution of criminal cases within the
jurisdiction of the Sandiganbayan and this prosecutorial authority includes high-ranking executive officials. For
emphasis, subjecting the Special Prosecutor to disciplinary and removal powers of the President, whose own alter
egos and officials in the Executive Department are subject to the prosecutorial authority of the Special Prosecutor,
would seriously place the independence of the Office of the Ombudsman itself at risk.

Thus, even if the Office of the Special Prosecutor is not expressly made part of the composition of the Office of the
Ombudsman, the role it performs as an organic component of that Office militates against a differential treatment
between the Ombudsman’s Deputies, on one hand, and the Special Prosecutor himself, on the other. What is true
for the Ombudsman must be equally true, not only for her Deputies but, also for other lesser officials of that Office
who act directly as agents of the Ombudsman herself in the performance of her duties.

In Acop v. Office of the Ombudsman,  the Court was confronted with an argument that, at bottom, the Office of the
106

Special Prosecutor is not a subordinate agency of the Office of the Ombudsman and is, in fact, separate and distinct
from the latter. In debunking that argument, the Court said:

Firstly, the petitioners misconstrue Commissioner Romulo's statement as authority to advocate that the intent of the
framers of the 1987 Constitution was to place the Office of the Special Prosecutor under the Office of the President.
Xxx

In the second place, Section 7 of Article XI expressly provides that the then existing Tanodbayan, to be henceforth
known as the Office of the Special Prosecutor, "shall continue to function and exercise its powers as now or
hereafter may be provided by law, except those conferred on the Office of the Ombudsman created under this
Constitution." The underscored phrase evidently refers to the Tanodbayan's powers under P.D. No. 1630 or
subsequent amendatory legislation. It follows then that Congress may remove any of the Tanodbayan's/Special
Prosecutor's powers under P.D. N0. 1630 or grant it other powers, except those powers conferred by the
Constitution on the Office of the Ombudsman.

Pursuing the present line of reasoning, when one considers that by express mandate of paragraph 8, Section 13,
Article XI of the Constitution, the Ombudsman may "exercise such other powers or perform functions or duties as
may be provided by law," it is indubitable then that Congress has the power to place the Office of the Special
Prosecutor under the Office of the Ombudsman. 107

Thus, under the present Constitution, there is every reason to treat the Special Prosecutor to be at par with the
Ombudsman's deputies, at least insofar as an extraneous disciplinary authority is concerned, and must also enjoy
the same grant of independence under the Constitution.

III. SUMMARY OF VOTING

In the voting held on January 28, 2014, by a vote of 8-7,  the Court resolved to reverse its September 4, 2012
108

Decision insofar as petitioner Gonzales is concerned (G.R. No. 196231). We declared Section 8(2) of RA No. 6770
unconstitutional by granting disciplinary jurisdiction to the President over a Deputy Ombudsman, in violation of the
independence of the Office of the Ombudsman.

However, by another vote of 8-7,  the Court resolved to maintain the validity of Section 8(2) of RA No. 6770 insofar
109

as Sulit is concerned. The Court did not consider the Office of the Special Prosecutor to be constitutionally within the
Office of the Ombudsman and is, hence, not entitled to the independence the latter enjoys under the Constitution.

20
WHEREFORE, premises considered, the Court resolves to declare Section 8(2) UNCONSTITUTIONAL. This ruling
renders any further ruling on the dismissal of Deputy Ombudsman Emilio Gonzales III unnecessary, but is without
prejudice to the power of the Ombudsman to conduct an administrative investigation, if warranted, into the possible
administrative liability of Deputy Ombudsman Emilio Gonzales III under pertinent Civil Service laws, rules and
regulations.

SO ORDERED.

CONCURRING AND DISSENTING OPINION

LEONEN, J.:

I vote to dismiss the motion for partial reconsideration.  However, the constitutional challenge to Section 8,
1

Pai:agraph (2) of Republic Act No. 6770  or the Ombudsman Act insofar as the Deputy Ombudsman is concerned
2

should succeed.

On August 23, 2010, dismissed Manila Police District Police Senior Inspector (Captain). Rolando del Rosario
Mendoza took hostage a Hong Kong tour group with three families, two couples, a mother and daughter, and a tour
leader at the Quirino Grandstand.  Apparently, he was driven to despondency by many causes. This included his
3

frustration with a case  pending against him at the Office of the Ombudsman. In a decision  dated February 16,
4 5

2009, the Office of the Ombudsman found Mendoza and four others liable for grave misconduct. This led to
Mendoza’s dismissal from the Philippine National Police as well as the forfeiture of his retirement benefits.

The Ombudsman exercised jurisdiction over this case by virtue of a letter which was issued motu proprio by
petitioner, Emilio Gonzales III, to endorse the pending case to his office for administrative adjudication.  This was
6

despite the fact that the same case against Rolando Mendoza was already "dismissed by the Manila City
Prosecutors Office for lack of probable cause and by the [Philippine National Police–National Capital Region]
Internal Affairs Service for failure of the complainant to submit evidence and prosecute the case." 7

According to the Office of the President, petitioner Gonzales did not state a reason for the endorsement of the case
to the Office of the Ombudsman.  The Office of the President also found that the Office of the Deputy Ombudsman
8

made Atty. Clarence V. Guinto of the Philippine National Police-Criminal Investigation and Detection Group-National
Capital Region serve as the nominal complainant in the case against Mendoza.  Atty. Guinto did not even summon
9

or compel Christian Kalaw, the original complainant in the case against Mendoza, to affirm his complaint-
affidavit before the Ombudsman or require Kalaw to "submit any position paper as required."
10 11

At one point during the hostage-taking incident, Manila City Vice Mayor Francisco "Isko" Moreno interceded. He was
already at the Office of the Ombudsman when he asked Mendoza if there was someone there that he wanted to talk
to. Mendoza was very thankful to Vice Mayor Moreno and requested if he could talk to a certain Director Gonzales
of the Office of the Ombudsman.

Mendoza spoke to Deputy Ombudsman Gonzales. After some time, Mendoza was heard shouting and uttering
invectives: "Putang ina mo, humihingi ka pa ng ₱150,000 para sa kaso ko, kung may mamamatay dito kasalanan
mo lahat! (You son of a bitch, you are asking for ₱150,000 for my case, if anyone dies here it’s all your fault!)." 12

Moreno overheard Gonzales say, "O wala akong alam diyan (I don’t know anything about that)." 13

Emilio Gonzales III could have betrayed the public trust.

The Office of the President acted on what it saw as substantial evidence that Deputy Ombudsman Gonzales
delayed acting on the motion for reconsideration  of the late Rolando Mendoza and that Gonzales asked for
14

₱150,000.00 to decide on the case. This was also the finding of the Incident Investigation and Review
Committee created after the hostage-taking incident.
15

The duties of the Ombudsman and Deputy Ombudsman are provided for in Article XI, Section 13 of the 1987
Constitution.  These include the duty to direct any public official or employee of the government to perform and
16

expedite any act or duty required by law, or to stop, prevent, and correct any abuse or impropriety in the
performance of duties.  Certainly, it would be betrayal of public trust in the highest order when a Deputy
17

Ombudsman himself committed actions that he is constitutionally mandated to curtail.

This case came to this court through a petition for certiorari  filed by Emilio Gonzales III (docketed as G.R. No.
18

196231) alleging grave abuse of discretion on the part of the Office of the President for its decision  dated March
19

31, 2011. This was consolidated with G.R. No. 196232, a petition for certiorari and prohibition  filed by Wendell
20

Barreras-Sulit against the Order  of the Office of the Executive Secretary.
21

21
The other case consolidated with the case of Emilio Gonzalez III involves an order issued by the Office of the
Executive Secretary to petitioner Special Prosecutor Wendell Barreras-Sulit. The order required her to submit a
written explanation why no disciplinary action should be taken against her, based on her role in securing a plea
bargaining agreement in favor of Major Carlos P. Garcia.

Major Carlos P. Garcia was accused of embezzling millions of pesos and dollars as well as amassing properties in
violation of the Plunder Law. The Committee on Justice of the House of Representatives found that petitioner
Barreras-Sulit committed acts that were tantamount to culpable violation of the Constitution and betrayal of public
trust. Hence, a case docketed as OP-DC-Case No. 11-B-003 was filed by the Office of the President against
petitioner Barreras-Sulit and was set for preliminary investigation.

Both cases were consolidated because they raised the issue of the constitutionality of Section 8, Paragraph (2) of
Republic Act No. 6770 or the Ombudsman Act. Petitioners questioned the constitutionality of this provision, which
states that the Office of the President may remove the Deputy Ombudsman and Special Prosecutor from office on
the grounds of removal of the Ombudsman and after due process.

The initial voting of this court on whether Gonzales could be found liable for betrayal of the public trust was 14-0. All
the Justices then agreed that there was no substantial basis to support the finding of the Office of the President. On
the constitutionality of Section 8, Paragraph (2) of the Ombudsman Act, the vote was evenly split. Seven voted to
declare the provision unconstitutional. The other seven voted to uphold. Thus, in its September 4, 2012
decision, this court denied the challenge to the constitutionality of Section 8, Paragraph (2) of the Ombudsman Act
22

and ordered the reinstatement of Gonzales and the continuation of the proceedings against Barreras-Sulit.  This 23

court then granted Gonzales’ petition for certiorari,  insofar as it reversed the public respondent Office of the
24

President’s decision in OP Case No. 10-J-460.

The Office of the Solicitor General then filed a motion for partial Reconsideration  dated October 10, 2012 of the
25

September 4, 2012 decision of this court. As its sole ground for allowance, the motionfor partial reconsideration
raised that the Office of the President did not gravely abuse its discretion when it found "petitioner Gonzales guilty of
betrayal of public trust and imposed upon him the penalty of dismissal from office." 26

In my view, the motion for partial reconsideration raises three issues that require discussion.

The first issue is whether the constitutionality of Section 8, Paragraph (2) of the Ombudsman Act was reopened
even if this was not raised in the actual motion for partial reconsideration of the Office of the Solicitor General.

The second issue is whether Section 8, Paragraph (2) of the Ombudsman Act is constitutional.

The third issue is whether the actions of petitioner Emilio Gonzales III constitute betrayal of public trust and warrant
his dismissal from his position, assuming that Section 8, Paragraph (2) of the Ombudsman Act is constitutional.

The motion for partial reconsideration reopens the entire case. These cases cannot be fully resolved unless the
question of the constitutionality of Section 8, Paragraph (2) of the Ombudsman Act is again decided by this court.
The question whether petitioner Gonzales is guilty of betrayal of public trust also involves the matter as to whether
that ground exists at all.

This means that we are constrained to address the constitutional issue as to whether it is the Office of the President
that can constitutionally exercise disciplinary powers over the Deputy Ombudsman.

This court is a court of general jurisdiction. It has the ability to determine the scope of the issues it can decide on in
order to fulfill its constitutional duty to exercise its judicial power. This power must be fully exercised to achieve the
ends of justice.

Judicial power includes determining the constitutionality of the actions of a branch of government. In Luz Farms v.
Secretary of the Department of Agrarian Reform,  this court held:
27

It has been established that this Court will assume jurisdiction over a constitutional question only if it is shown that
the essential requisites of a judicial inquiry into such a question are first satisfied. Thus, there must be an actual
case or controversy involving a conflict of legal rights susceptible of judicial determination, the constitutional
question must have been opportunely raised by the proper party, and the resolution of the question is unavoidably
necessary to the decision of the case itself x x x.

However, despite the inhibitions pressing upon the Court when confronted with constitutional issues, it will not
hesitate to declare a law or act invalid when it is convinced that this must be done. x x x Blandishment is as
ineffectual as intimidation, for all the awesome power of the Congress and Executive, the Court will not hesitate "to

22
make the hammer fall heavily," where the acts of these departments, or of any official, betray the people's will as
expressed in the Constitution x x x.

Thus, where the legislature or the executive acts beyond the scope of its constitutional powers, it becomes the duty
of the judiciary to declare what the other branches of the government had assumed to do, as void. This is the
essence of judicial power conferred by the Constitution "(I)n one Supreme Court and in such lower courts as may be
established by law" (Art. VIII, Section 1 of the 1935 Constitution; Article X, Section I of the 1973 Constitution and
which was adopted as part of the Freedom Constitution, and Article VIII, Section 1 of the 1987 Constitution) and
which power this Court has exercised in many instances. (Citations omitted) 28

The constitutional challenge must be squarely addressed and threshed out in its entirety because the
constitutionality of the law itself is the very lis mota of the case. In People v. Vera,  this court first presented the idea
29

of lis mota:

It is a well-settled rule that the constitutionality of an act of the legislature will not be determined by the courts unless
that question is properly raised and presented in appropriate cases and is necessary to a determination of the case;
i.e., the issue of constitutionality must be the very lis mota presented. (McGirr vs. Hamilton and Abreu [1915], 30
Phil., 563, 568; 6 R. C. L., pp. 76, 77; 12 C. J., pp. 780-782, 783.) 30

In line with the doctrine of Vera, this court’s disposition of the case depends on a final determination of the
constitutionality of Section 8, Paragraph (2) of Republic Act No. 6770 or the Ombudsman Act.

While it appears that the constitutionality of the Ombudsman Act was not raised in the motion for partial
reconsideration, no final determination can be made without addressing the constitutional point.

Any determination of petitioner Gonzales’ liability by this court is contingent on the constitutionality of Section 8,
Paragraph (2) of the Ombudsman Act. This is the basis of the putative disciplinary authority vested in the Office of
the President over the Deputy Ombudsman and the Office of the Special Prosecutor. If this provision is
unconstitutional, then no valid action on this case can emanate from the Office of the President.

We cannot be made to issue an incomplete ruling simply because the motion for reconsideration was partial. We are
a full court with full powers with a whole duty to determine when the Constitution is violated.

In Juco v. Heirs of Tomas Siy Chung Fu,  this court elaborated on the effect of a motion for reconsideration:
31

A motion for reconsideration has the effect of suspending the statutory period after which an order, decision, or
judgment, in connection with which said motion was filed, becomes final. In effect, such motion for reconsideration
has prevented the decision from attaining finality. 32

This case can be adjudicated in its entirety because the September 4, 2012 decision of this court has not yet
achieved finality.

II

When the Judiciary is asked to ascertain constitutional limitations or invalidate the acts of a co-equal body such as
the Executive, what it puts forward is the supremacy of the Constitution. Since its inception, the Philippine
Constitution has always provided for a structured and evolving system of separation of powers and checks and
balances. The landmark case of Angara v. Electoral Commission  served as the jurisprudential benchmark for this
33

system:

The separation of powers is a fundamental principle in our system of government. It obtains not through express
provision but by actual division in our Constitution. Each department of the government has exclusive cognizance of
matters within its jurisdiction, and is supreme within its own sphere. But it does not follow from the fact that the three
powers are to be kept separate and distinct that the Constitution intended them to be absolutely unrestrained and
independent of each other. The Constitution has provided for an elaborate system of checks and balances to secure
coordination in the workings of the various departments of the government. 34

The principle of checks and balances and the principle of the separation of powers are not limited to the interaction
of the powers of the Executive, Legislative, and the Judiciary. The principle of checks and balances, as well as
separation of powers, also applies to the interaction of the three branches of government with the other
constitutional organs, particularly the Constitutional Commissions as well as the Office of the Ombudsman. Angara
itself was an elaborate examination of the relationship of the three branches with the Electoral Commission, which
this court in Angara ruled was, indeed, an independent constitutional organ.

The principle of checks and balances allows constitutionally enshrined bodies or organs and governmental
departments to correct mistakes and prevent excesses done by other branches. It also ensures a degree of

23
cooperation while being clear as to what acts may constitute undue encroachments upon another branch’s or
organ’s constitutional duties.

Section 8, Paragraph (2) of Republic Act No. 6770 provides:

Section 8. Removal; Filling of Vacancy. —

xxxx

(2) A Deputy, or the Special Prosecutor, may be removed from office by the President for any of the grounds
provided for the removal of the Ombudsman, and after due process.

In order to determine whether it can pass a constitutional challenge in view of the facts arising from these
consolidated cases, we should start first with textual reference. That is, we should check all the relevant and
applicable provisions of the Constitution.

Article XI, Section 5 of the 1987 Constitution reads:

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

In relation to this provision, the Ombudsman is among the officials enumerated in Article XI, Section 2 as those who
can be removed from office only through impeachment.

The President, the Vice-President, the Members of the Supreme Court, the Members of the Constitutional
Commissions, and the Ombudsman may be removed from office on impeachment for, and conviction of, culpable
violation of the Constitution, treason, bribery, graft and corruption, other high crimes, or betrayal of public trust. All
other public officers and employees may be removed from office as provided by law, but not by impeachment.
(Emphasis supplied)

The phrase "as provided by law" is the apparent basis for the enactment of Section 8, Paragraph (2) of Republic Act
No. 6770 or the Ombudsman Act. In my view, this provision cannot be taken in isolation. Any interpretation of this
phrase should not deny the "independent" nature of the Office of the Ombudsman as provided in Article XI, Section
5 of the Constitution. The Constitution should be read as a whole document in a manner that will give effect to all its
parts.35

I agree with the positions of Justice Brion and Justice Abad in their dissenting opinions on the September 4, 2012
decision that the independence of the Office of the Ombudsman is of such a fundamental and unequivocal nature.
This independence is essential to carry out the functions and duties of the Office of the Ombudsman. I agree with
their position that since those in the executive branch are also subject to the disciplinary authority of the Office of the
Ombudsman, providing the Office of the President with the power to remove would be an impediment to the
fundamental independence of the Ombudsman.

We cannot allow a circumvention of the separation of powers by construing Article XI, Section 2 of the Constitution
as delegating plenary and unbounded power to Congress. The exclusive power of the Ombudsman to discipline her
own ranks is fundamental to the independence of her office.

The Constitution’s intention to make the independence of the Office of the Ombudsman greater than any other office
can also be inferred from the authority and the process of appointment of the officers constituting that office. Hence,
Article XI, Section 9 of the Constitution provides:

Section 9. The Ombudsman and his Deputies shall be appointed by the President from a list of at least six nominees
prepared by the Judicial and Bar Council, and from a list of three nominees for every vacancy thereafter. Such
appointments shall require no confirmation. All vacancies shall be filled within three months after they occur. 36

The President is granted the power to appoint but only from a list of nominees vetted by the Judicial and Bar
Council. Furthermore, the President needs to exercise that power to appoint within three months from the vacancy
of either the Ombudsman or any of her Deputies.

Furthermore, the Constitution provides in Section 6 of the same Article:

Section 6. The officials and employees of the Office of the Ombudsman, other than the Deputies, shall be appointed
by the Ombudsman, according to the Civil Service Law. 37

This is similar to the provisions for Constitutional Commissions. Article IX, Section 4 of the Constitution provides:
24
Section 4. The Constitutional Commissions shall appoint their officials and employees in accordance with law. 38

It is clear that there is a different treatment of the Deputies of the Ombudsman from all the other staff of the Office of
the Ombudsman.

The Ombudsman is assisted by the Deputy Ombudsman. There are several deputies for Luzon, Visayas, Mindanao,
and the military. All these deputies take their direction from the Ombudsman. By constitutional fiat, they cannot take
direction from any other constitutional officer. It is difficult to imagine how the independence of the Ombudsman can
be preserved when the President has concurring powers to remove her deputies.

Furthermore, it is not difficult to imagine that the President and Congress can negate the elaborate process of
appointing a Deputy Ombudsman simply by using their alleged power of removal. While this may not have been the
situation in this case, the possibility exists especially when we consider that the Ombudsman does have jurisdiction
also to investigate both the executive and legislative branches. The real fear of the deputies can hobble the Office of
the Ombudsman.

During the deliberations of this case, a question was raised as to whether the President can have the authority to
discipline non-impeachable officers and employees of Constitutional Commissions and the Office of the
Ombudsman when the law so provides. This court’s construction of constitutional provisions should be framed only
by the actual controversies presented by the facts of the case at bar. The issue in this case is only about the power
of the President to remove the Deputy Ombudsman and the Special Prosecutor for causes provided by law. It does
not involve the power of the President to remove any other civil servant appointed by the Ombudsman.

In its September 4, 2012 decision, this court cited Hon. Hagad v. Hon. Gozodadole  and Office of the Ombudsman
39

v. Delijero, Jr.  to show that the Office of the President has concurrent disciplinary jurisdiction with the Office of the
40

Ombudsman. These cases, however, are not applicable. Hon. Hagad involved prosecution and discipline of the
Mayor and Vice Mayor as well as a member of the Sangguniang Panlungsod of Mandaue City. The Constitution
puts local governments within the general supervision of the President.  They are, therefore, also within the
41

authority of the Office of the President to discipline.

In Office of the Ombudsman v. Delijero, Jr., there was a law, namely, Republic Act No. 4670, which provided a
separate set of procedural requirements for administrative proceedings involving public school teachers. Thus, this
court held that it would have been more prudent for the Office of the Ombudsman to refer the case to the
Department of Education. Public school teachers do not enjoy the constitutional independence similar to that of the
Office of the Ombudsman.

In his concurring opinion on the September 4, 2012 decision, Justice Carpio presents the view that the
independence of the Office of the Ombudsman does not mean that it is insulated from all governmental scrutiny.
According to Justice Carpio, Congress has the power to legislate the officials that may be subject to dismissal and
disciplinary action, if the Constitution allows. He cites the records of the Constitutional Commissions, particularly that
of Commissioner Regalado, who sought the amendment to include the sentence, "ALL OTHER PUBLIC OFFICERS
AND EMPLOYEES MAY BE REMOVED FROM OFFICE AS PROVIDED BY LAW BUT NOT BY IMPEACHMENT,"
under Article XI, Section 2. Thus, Congress has the plenary power to provide for the officials that may be removed
and the manner by which they are to be removed as well.

I agree with Justice Carpio that the Office of the Ombudsman is also constitutionally accountable. I cannot agree,
however, that this accountability can be extracted by allowing her deputies to be answerable to two principals: the
Ombudsman and the President, even if this dual accountability is provided by law.

Reliance on the debates of the framers of the 1987 Constitution is not the only source for determining the meaning
of the text of the Constitution.  Resorting to the debates and proceedings of the constitutional convention shows us
42

the views and standpoints of individual members of the convention.  It does not show how the sovereign people
43

read the Constitution at the time of ratification. The discussion of those that drafted the present Constitution is
advisory.  The text of the Constitution should be read by one guided by, but not limited to, the debates that
44

happened when it was drafted and ratified. It should also be read in the light of the needs of present times while
being sensitive and addressing precedents existing in our jurisprudence.

The mention in the records of the Constitutional Commission of the phrase "as provided by law" cannot serve as the
sole yardstick by which a definitive interpretation of the constitutional provision or its effects is to be determined. "As
provided by law" with respect to the Deputy Ombudsman may, at best, only provide for the standards under which
the Ombudsman may exercise her power of removal. Unless the Constitution does not intend true operational
independence, the clause cannot be interpreted to mean that Congress has plenary authority to lodge disciplinary
power on any other organ other than the Ombudsman.

I also agree with the concurring opinion of Justice Carpio on the September 4, 2012 decision of this court that there
are different degrees of independence among the offices enumerated by the Constitution. Congress is empowered

25
to determine through subsequent legislation the standards and legislative parameters of the independence of
certain constitutional offices.

The 1987 Constitution provides two distinct types of independence as defined in its provisions. The first type of
independence is constitutionally enshrined. This means that it can neither be subject to any interference by other
branches of government nor can Congress pass laws that abridge or impair its fundamental independence. This
independence is of such a degree and nature that the very essence of the constitutional body provides for a
definitive barrier against legislative or executive intervention. This is the type of independence enjoyed by the
Constitutional Commissions,  the Office of the Ombudsman,  and – to a certain extent – the Commission on Human
45 46

Rights.47

The second type of independence refers to the Constitution itself allowing Congress to define the functions that will
ensure the independence of specific government offices or agencies. For instance, unlike the provisions with
respect to the Ombudsman, the Constitution provides that the National Economic Development Authority  and the48

Central Bank  will be created and further defined by law.

49

III

The treatment of the Office of the Special Prosecutor is, however, different. In my view, the Office of the Special
Prosecutor may by law be removed by the President. This is what Section 8, Paragraph (2) of the Ombudsman Act
provides.

This conclusion can be seen simply by examining the provisions of Article XI of the Constitution. There are two
constitutional organs created: the Office of the Ombudsman and the Tanodbayan, which is the current Office of the
Special Prosecutor:

Section 5. There is hereby created the independent Office of the Ombudsman, composed of the Ombudsman to be
known as Tanodbayan, one overall Deputy and at least one Deputy each for Luzon, Visayas, and Mindanao. A
separate Deputy for the military establishment may likewise be appointed.

Section 6. The officials and employees of the Office of the Ombudsman, other than the Deputies, shall be appointed
by the Ombudsman, according to the Civil Service Law.

Section 7. The existing Tanodbayan shall hereafter be known as the Office of the Special Prosecutor. It shall
continue to function and exercise its powers as now or hereafter may be provided by law, except those conferred on
the Office of the Ombudsman created under this Constitution. (Emphasis provided)

Section 5 of Article XI provides that the composition of the Office of the Ombudsman includes the Office of the
Ombudsman, the overall Deputy Ombudsman for Luzon, Visayas, and Mindanao as well as a separate Deputy for
the military establishment. Section 6 of Article XI states that the other officials and employees of the Office of the
Ombudsman, outside of the Deputies, shall be appointed by the Ombudsman in accordance with the Civil Service
Law. Section 7 of Article XI provides that what was then known as the Tanodbayan shall now be known as the
Office of the Special Prosecutor. It is allowed to exercise its powers as provided by law except those explicitly
provided for in the 1987 Constitution.

Section 7 even distinguishes between all the other officials and employees of the Ombudsman and that of the Office
of the Special Prosecutor.

The Office of the Ombudsman’s powers are more proactive than the prosecutorial powers of the Office of the
Special Prosecutor. This can be seen in the enumeration of her powers in the Constitution. Thus, in Article XI,
Section 13:

Sec.13. The Office of the Ombudsman shall have the following powers, functions, and duties:

(1) Investigate on its own, or on complaint by any person, any act or omission of any public official,
employee, office or agency, when such act or omission appears to be illegal, unjust, improper, or inefficient.

(2) Direct, upon complaint or at its own instance, any public official or employee of the Government, or any
subdivision, agency or instrumentality thereof, as well as of any government-owned or controlled corporation
with original charter, to perform and expedite any act or duty required by law, or to stop, prevent, and correct
any abuse or impropriety in the performance of duties.

(3) Direct the officer concerned to take appropriate action against a public official or employee at fault, and
recommend his removal, suspension, demotion, fine, censure, or prosecution, and ensure compliance
therewith.

26
 (4) Direct the officer concerned, in any appropriate case, and subject to such limitations as may be provided
by law, to furnish it with copies of documents relating to contracts and transactions entered into by this office
involving the disbursement or use of public funds or properties, and report any irregularity to the
Commission on Audit for appropriate action.

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

(6) Publicize matters covered by its investigation when circumstances so warrant and with due prudence.

(7) Determine the causes of inefficiency, red tape, mismanagement, fraud, and corruption in the
Government and make recommendations for their elimination and the observance of high standards of
ethics and efficiency.

(8) Promulgate its rules and procedure and exercise such other powers or perform such functions or duties
as may be provided by law.

By clear constitutional design, the Tanodbayan or the Office of the Special Prosecutor is separate from the Office of
the Ombudsman. Section 7 is explicit on this point, in that the Office of the Special Prosecutor is allowed to exercise
its powers, except for those conferred on the Office of the Ombudsman. While the Office of the Special Prosecutor
is not automatically a part of the Office of the Ombudsman, there is, however, no reason that Congress and the
President may, by law and in their political wisdom, attach the Office of the Special Prosecutor with the Office of the
Ombudsman. There is also no constitutional prohibition for the Office of the Special Prosecutor to be functionally
separate from the Office of the Ombudsman. This is a matter to be addressed by the political departments. This may
also be viewed as a check of both Congress and the President on the powers of the Ombudsman.

By clear provision of the Constitution, it is only the Office of the Ombudsman, which includes her Deputies, that is
endowed with constitutional independence. The inclusion of the Office of the Special Prosecutor with the Office of
the Ombudsman in Section 3 of Republic Act No. 6770 does not ipso facto mean that the Office of the Special
Prosecutor must be afforded the same levels of constitutional independence as that of the Ombudsman and the
Deputy Ombudsman. The law simply defines how the Office of the Special Prosecutor is attached and, therefore,
coordinated with the Office of the Ombudsman.

Thus, the provision of Section 8, Paragraph (2) of Republic Act No. 6770 which provides for the power of the
President to remove the Special Prosecutor is valid and constitutional.

IV

This opinion should not be seen as a sweeping dismissal or acquittal of the liability of petitioner Gonzales due to the
unconstitutionality of Section 8, Paragraph (2) of the Ombudsman Act as far as the Office of the Deputy
Ombudsman is concerned. Petitioner Gonzales must still be held accountable for his actions. His actions as
described in the report and in the decision of the Office of the President are troubling. There is need to continue the
investigation so that the public may finally find closure concerning these incidents.

Understandably, the Office of the President wanted to act with due and deliberate dispatch on this case based on a
provision of law which it interpreted to be valid and constitutional. It acted with the best of motives. But grand
intentions cannot replace constitutional design. Even "daang matuwid'' requires that the right course of action must
be effectively and efficiently done in the right way.

I vote to declare that Section 8, Paragraph (2) of the Ombudsman Act, insofar as the Deputy Ombudsma is
subjected to the disciplinary power of the Office of the President, is unconstitutional. Petitioner Gonzales may,
however, still be subject to investigation and discipline by the Ombudsman herself. I also vote that, given the facts,
there was substantial evidence of betrayal of public trust on the part of petitioner Gonzales.

ACCORDINGLY, the motion for partial reconsideration should be denied.

27
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. P-05-2051               January 21, 2014

OFFICE OF THE COURT ADMINISTRATOR, Complainant, 

vs.
ATTY. MONA LISA A. BUENCAMINO, Clerk of Court IV, DAVIDE. MANIQUIS, Clerk of Court III, and CIELITO
M. MAPUE, Sheriff III, all of the Office of the Clerk of Court, Metropolitan Trial Court, Caloocan
City,Respondents.

x-----------------------x

A.M. No. 05-4-118-MeTC

RE: REPORT ON THE FINANCIAL AUDIT CONDUCTED IN THE METROPOLITAN TRIAL COURT, OFFICE OF
THE CLERK OF COURT, CALOOCAN CITY

DECISION

PER CURIAM:

This administrative matter originated from the financial audit conducted by the Office of the Court Administrator
(OCA) on the books of accounts of the Metropolitan Trial Court of Caloocan City (MeTC Caloocan City). The audit
covered the financial transactions of David E. Maniquis (Maniquis), former Officer-in-Charge, Clerk of Court III, from
January 1993 to 4 June 1996, and that of his successor Atty. Mona Lisa A. Buencamino (Atty. Buencamino), Clerk
of Court IV, from 5 June 1996 up to the audit dates.

The findings of the audit team are summarized as follows:

1) As of 31 December 2003 (cut-off date), the Judiciary Development Fund (JDF) had a cash shortage of
₱20,917.93, the Clerk of Court General Fund (GF) had a shortage of ₱1,574.30, and the Special Allowance
for the Judiciary Fund (SAJ) had a shortage of ₱238.00. Of these cash shortages, Maniquis was
accountable for ₱9,425.93 in the JDF and ₱352.50 in the GF, while Atty. Buencamino was accountable for
₱11,492.00 in the JDF, ₱1,221.80 in the GF and ₱238.00 in the SAJ. In January 2004, Atty. Buencamino
settled her accountabilities in the JDF and SAJ, leaving a balance of ₱1,221.80 in the GF.

2) The MeTC Caloocan City had unwithdrawn fiduciary funds deposited with the Caloocan City Treasurer’s
Office (CCTO) amounting to ₱858,666.97 as of May 1992. Prior to May 1992, there was no fiduciary fund
account with the Land Bank of the Philippines (LBP) and the depository agency was the CCTO.

3) There were undocumented fiduciary fund withdrawals in the amount of ₱492,220.00,  broken down as
1

follows: a) ₱90,500.00 was due to lack of documents; b) ₱202,720.00 as Atty. Buencamino’s undocumented
withdrawals; and c) ₱289,500.00 as Maniquis’ undocumented withdrawals.

4) Cielito M. Mapue (Mapue), then Clerk III, withdrew several confiscated bonds amounting to ₱10,100.00,
which she converted to her personal use. Also, Mapue intentionally withdrew confiscated bonds twice. The
first withdrawal, amounting to ₱48,000.00, was converted to her personal use, while the second withdrawal
was deposited to the JDF account. Upon order by the audit team, Mapue restituted a total of ₱58,100.00 on
30 January 2004 and 11 February 2004.

In her letter dated 10 March 2004,  Mapue admitted that she misappropriated the amount of ₱58,100.00 to
2

defray her personal expenses. She further admitted that she started to misuse judicial funds from November
1996 until 2000, during Atty. Buencamino’s term.

5) There was neither a list or summary of confiscated bonds with deposit slips nor proof of remittance and
official receipts presented for audit, as required under the check list of documents and reports for audit.
Upon being directed by the audit team, Atty. Buencamino submitted a report, albeit incomplete.

28
 6) Official receipts were not issued for the withdrawn interest amounting to ₱769,316.84 from October 1992
to December 2000, although this amount was remitted to the GF and JDF. Furthermore, the audit team also
noted an unauthorized or overdrawn amount of interest collection amounting to ₱6,598.53.

In a Resolution dated 3 August 2005, the Court, upon recommendation of the audit team and the OCA, resolved to:

(a) DIRECT Atty. Mona Lisa A. Buencamino within ten (10) days from notice to: (1) RESTITUTE the
shortages incurred in the Clerk of Court General Fund amounting to ₱1,221.80; (2) SUBMIT documents
relative to undocumented fiduciary fund withdrawals in the amount of ₱202,720.00, and in case of her failure
to do so, she should restitute the said amount; (3) EXPLAIN why no administrative sanction shall be
imposed upon her for her failure to exercise close supervision over Ms. Cielito M. Mapue which resulted in
the misappropriation of judiciary funds amounting to ₱58,100.00; and (4) WITHDRAW all fiduciary fund
deposits with the City Treasurer’s Office and DEPOSIT the same to the Court’s fiduciary fund account with
the Land Bank of the Philippines;

(b) DIRECT former Officer-in-Charge Mr. David E. Maniqui[s] within ten (10) days from notice to: (1)
RESTITUTE the shortages incurred in the Judiciary Development Fund and the Clerk of Court General Fund
in the amounts of ₱9,425.93 and ₱352.50, respectively, or a total of ₱9,778.43; and (2) SUBMIT documents
relative to undocumented fiduciary fund withdrawals in the amount of ₱289,500.00, and in case of his failure
to do so, he should restitute the said amount;

(c) DOCKET the subject report of the Financial Audit conducted in the Metropolitan Trial Court-OCC,
Caloocan City as a regular administrative matter against Clerk III Ms. Cielito M. Mapue and that appropriate
administrative disciplinary proceedings be instituted against her immediately;

(d) DIRECT the Legal Office to file appropriate criminal charges against Cielito M. Mapue; and

(e) ISSUE a Hold Departure Order, effective immediately, against Clerk III Cielito M. Mapue to prevent her
from leaving the country.  (Boldfacing and italicization in the original)
3

In her letter-compliance dated 8 August 2006,  Atty. Buencamino denied the shortage of ₱1,221.80 in the GF. Atty.
4

Buencamino attached the letter of Cashier I Rowena Ruiz (Ruiz) explaining that the alleged shortage was due to the
erroneous posting by Ruiz and the clerk in the OCA. Nevertheless, the amount of ₱1,221.80 was deposited in the
LBP. Regarding the undocumented fiduciary fund withdrawals, Atty. Buencamino submitted the documents relating
to them. On her failure to supervise Mapue, Atty. Buencamino explained that Administrative Officer II Aida Sabater
(Sabater) was assigned to audit, monitor and supervise the Administrative Support Unit, which included Mapue.
Mapue was assigned to prepare checks relative to the withdrawal of bonds and rental deposits, and to release the
checks to the claimants. Atty. Buencamino alleged that she instructed Sabater to maintain a separate book on
withdrawals of fiduciary fund to monitor withdrawals of bonds and to prevent double claims by claimants. Later on,
she discovered that Sabater delegated the said task to Mapue. Atty. Buencamino claimed that as a newly appointed
clerk of court, she had little knowledge of the Administrative or Collection Unit. She explained that the Manual for
Clerks of Court is insufficient and she blamed the Court for the lack of an orientation seminar to newly appointed
clerks of court. Finally, Atty. Buencamino insisted that she did not touch a single cent in the collections of fiduciary
funds, and Mapue was able to encash the checks on her own.

As for the fiduciary fund deposits with the CCTO, Atty. Buencamino alleged that she demanded a refund of the
amount, but City Accountant Edna Centeno required her to submit the official receipts indicated in the List of
Unwithdrawn Fiduciary Fund for the period August 1988 to May 1992.

In his letter-compliance dated 8 August 2006,  Maniquis alleged that Ofelia Camara (Camara), the retired Officer-in-
5

Charge in the Accounting Section, was responsible for the shortages in the JDF and the GF. Maniquis demanded
restitution from Camara, but she did not reply. Maniquis also submitted the documents relative to the fiduciary fund
withdrawals, but he stated that he could no longer find the documents for the amount of ₱3,000.00 despite due
efforts. Thus, Maniquis requested the Court to deduct the shortages amounting to a total of ₱12,778.23  from his
6

monthly salary. In his letter dated 18 January 2007,  Maniquis alleged that he already paid ₱12,862.43  for the
7 8

shortages, despite the fact that the person primarily accountable was Camara.

In a Resolution dated 19 November 2007, the Court resolved to:

1. CONVERT the report on the financial audit in OCC, MeTC, Caloocan City, into an administrative matter
against Atty. Mona Lisa A. Buencamino, Clerk of Court IV, and Mr. David E. Maniquis, Clerk of Court III, and
INCLUDE Atty. Buencamino and Mr. Maniquis as respondents in the docketed administrative matter against
Cielito Mapue, A. M. No. P-05-2051;

2. DIRECT Atty. Buencamino to (a) SUBMIT to the City Treasurer’s Office of Caloocan City, the official
receipts indicated in the [L]ist of Unwithdrawn Fiduciary Funds for the period August 1988 to May 1992 in
order that the fiduciary funds still deposited with the said office could be withdrawn and deposited to the
29
 Land Bank of the Philippines, and (b) properly MONITOR the collection, deposit and withdrawal of judiciary
funds to prevent commission of similar irregularities in the future; and

3. REQUIRE respondents Cielito del Mundo Mapue, Atty. Mona Lisa A. Buencamino and David E. Maniquis
to MANIFEST to this Court whether they are willing to submit this matter for resolution on the basis of the
pleadings on record, within ten (10) days from notice. 9

(Boldfacing in the original)

On 9 January 2008, Mapue manifested her willingness to submit the administrative matter for resolution;
emphasized that she already restituted the amount of ₱58,100.00; and asked for forgiveness for her wrongdoings.
On 11 January 2008, Maniquis likewise manifested his willingness to submit the matter for resolution.

In an Addendum dated 14 January 2008,  Atty. Buencamino reiterated her explanation in her letter-compliance.
10

Regarding the fiduciary fund deposits with the CCTO, she alleged that she partially submitted the official receipts
enabling her to withdraw a total of ₱362,750.84 fiduciary funds from the CCTO. On 8 September 2009, Atty.
Buencamino submitted the lists of official receipts and the Certification issued by the City Accountant that the
amount of ₱369,702.84 was already withdrawn from the CCTO.  In a letter dated 8 March 2011,  Atty. Buencamino
11 12

stated that a total of ₱448,785.79 was already deposited to the LBP fiduciary fund account. She further alleged that
her office was still exerting efforts to locate other official receipts from the five branches of the MeTC Caloocan City.
In another letter dated 16 May 2012,  Atty. Buencamino informed the Court that: (a) an amount of ₱323,489.60 was
13

refunded by the CCTO; (b) another amount of ₱64,195.44 was withdrawn, but still waiting for CCTO Certification;
and (c) out of the ₱858,666.97 initial fiduciary funds deposited with the CCTO, a total of ₱836,470.83 was already
withdrawn from the CCTO and deposited with the LBP fiduciary fund account.

In its Memorandum dated 18 February 2013, the OCA recommended that:

a) ATTY. MONA LISA A. BUENCAMINO, Clerk of Court IV, Office of the Clerk of Court be found liable for
Simple Neglect of Duty and be SUSPENDED from office for six (6) months effective immediately, with a
STERN WARNING that a repetition of the same or similar offense shall be dealt with more severely; and she
be REQUIRED to inform the Court whether she has fully complied with its directive to withdraw all fiduciary
fund deposits with the City Treasurer’s Office and deposit the same to the Court’s fiduciary fund account
with the Land Bank of the Philippines and to submit the necessary documents in relation thereto;

b) DAVID E. MANIQUIS, Clerk of Court III, Office of the Clerk of Court, be found liable for Simple Neglect of
Duty; however, considering that this is his first offense, that he be SUSPENDED from office for one (1)
month and 1 day effective immediately, with a STERN WARNING that a repetition of the same or similar
offense shall be dealt with more severely;

c) CIELITO DEL MUNDO MAPUE, Sheriff III, Office of the Clerk of Court, be found Guilty of Serious
Dishonesty and be meted the penalty of DISMISSAL from the service with forfeiture of all retirement benefits
except leave credits and disqualification for re-employment in any government office including government-
owned or controlled corporations; and

d) The Office of the Court Administrator be DIRECTED to file the appropriate criminal action against
respondent CIELITO DEL MUNDO MAPUE, Sheriff III, Office of the Clerk of Court.  (Boldfacing in the
14

original)

The Court adopts the findings and recommendations of the OCA.

The Constitution mandates that a public office is a public trust and that all public officers must be accountable to the
people, and serve them with responsibility, integrity, loyalty and efficiency.  The demand for moral uprightness is
15

more pronounced for members and personnel of the judiciary who are involved in the dispensation of justice.  As 16

front liners in the administration of justice, court personnel should live up to the strictest standards of honesty and
integrity in the public service.
17

In the present case, Mapue’s admission, in her sworn statement, of misappropriating court funds shows her blatant
disregard of the principles of public office she had sworn to uphold. As found by the OCA, her restitution of the total
amount did not exonerate or mitigate her liability, as this was done after the discovery of the misappropriation.
Furthermore, Mapue already deprived the Court of the interest otherwise earned had the confiscated bonds been
deposited in the GF or JDF. In Office of the Court Administrator v. Besa,  the Court found respondent therein liable
18

for dishonesty and dismissed her from the service due to her own admission that she misappropriated the fiduciary
funds for her personal use. Gross dishonesty is a grave offense and merits the penalty of dismissal even for the first
offense.19

Mapue’s admission of liability, however, does not exculpate Atty. Buencamino from her own negligence. 1âwphi1

30
A clerk of court has general administrative supervision over all the personnel of the court.  The administrative
20

functions of a clerk of court are as vital to the prompt and proper administration of justice as his judicial duties.  As 21

custodian of court funds and revenues, the clerk of court is primarily accountable for all funds that are collected for
the court, whether personally received by him or by a duly appointed cashier who is under his supervision and
control. 22

In the present case, we find Atty. Buencamino remiss in the performance of her duties as clerk of court. Atty.
Buencamino failed to supervise Mapue and to properly manage the court funds entrusted to her, enabling Mapue to
misappropriate part of the funds. Atty. Buencamino’s attempt to pass on the responsibility to her subordinate,
Sabater, is misplaced. As found by the OCA, Atty. Buencamino cannot wash her hands of Mapue’s misappropriation
as she even recommended Mapue for promotion to Sheriff III after Mapue’s admission.  Neither can she blame the
23

Court for her lack of knowledge of the financial duties of a clerk of court. It is incumbent upon Atty. Buencamino, as
clerk of court, to be diligent and competent in the performance of her duties, including the safekeeping of funds and
collections because that is essential to an orderly administration of justice.

Accordingly, Atty. Buencamino’s failure to properly supervise and manage the financial transactions in her court
constitutes simple neglect of duty.  Simple neglect of duty is the failure to give attention to a task, or the disregard of
24

a duty due to carelessness or indifference.  It is a less grave offense punishable by suspension for one month and
25

one day to six months for the first offense.  In Report on the Financial Audit Conducted on the
26

Books of Account of Sonia L. Dy and Atty. Graciano D. Cuanico, Jr., RTC, Catarman, Northern Samar,  a six-month 27

suspension was imposed for neglect of duty leading to the defalcation of court funds and the consequent loss of
income from the interest of such funds. Hence, we adopt the same penalty in this case.

As to Maniquis, being the former Officer-in-Charge of the Office of the Clerk of Court, he bore the same
responsibilities and was expected to serve with the same commitment and efficiency as a duly-appointed Clerk of
Court.  Thus, like Atty. Buencamino, he must be held liable for any loss or shortage of the funds entrusted to him by
1âwphi1

virtue of his office. Considering that this is Maniquis’ first offense, we adopt the recommendation of the OCA as to
the penalty.

We reiterate that the conduct of all court personnel is circumscribed with the heavy burden of responsibility.  The 28

Court will not countenance any conduct, act or omission on the part of those involved in the administration of justice
which violates the norm of public accountability and diminishes the faith of the people in the Judiciary. 29

WHEREFORE, we find respondent Atty. Mona Lisa A. Buencamino, Clerk of Court IV, Metropolitan Trial Court of
Caloocan City, GUILTY of simple neglect of duty, and SUSPEND her from office for six (6) months effective upon
finality of this Decision. She is STERNLY WARNED that a repetition of the same or a similar offense shall be dealt
with more severely. Atty. Buencamino is further required to inform the Court whether she has fully complied with its
directive to withdraw all fiduciary fund deposits with the City Treasurer’s Office and to deposit the same to the
Court’s fiduciary fund account with the Land Bank of the Philippines.

We also find respondent David E. Maniquis, Clerk of Court III, Metropolitan Trial Court of Caloocan City, GUILTY of
simple neglect of duty, and SUSPEND him from office for one (1) month and one (1) day effective upon finality of
this Decision. He is STERNLY WARNED that a repetition of the same or a similar offense shall be dealt with more
severely.

We further find respondent Cielito M. Mapue, Sheriff III, Metropolitan Trial Court of Caloocan City, GUILTY of
serious dishonesty, and DISMISS her from the service effective upon finality of this Decision, with forfeiture of all
benefits due her, except accrued leave credits, and disqualification from appointment to any public office including
government-owned or controlled corporations.

The Office of the Court Administrator is further DIRECTED to file the appropriate criminal action against Cielito M.
Mapue and to update its audit until the present.

SO ORDERED.

31
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. P-13-3141               January 21, 2014

[Formerly OCA LP.I. No. 08-2875-P]

ATTY. RHEA R. ALCANTARA-AQUINO, Complainant, 

vs.
MYLENE H. DELA CRUZ, Clerk III, Office of the Clerk of Court, Regional Trial Court, Santa Cruz,
Laguna,Respondent.

DECISION

PER CURIAM:

Before us is a Complaint  dated June 23, 2008 filed by Atty. Rhea R. Alcantara-Aquino, Assistant Clerk of Court,
1

Office of the Clerk of Court (OCC), Regional Trial Court (RTC), Santa Cruz, Laguna, against Mylene H. Dela Cruz,
Clerk III, of the same office, for Grave Misconduct.

The facts, as culled from the records, follow:

On May 29, 2008, complainant alleged that Mrs. Emerita B. Moises, Municipal Civil Registrar of Nagcarlan, Laguna,
went to her office to verify the veracity of the documents in SP. Proc. Case No. SC-2268, entitled Petition for
Correction of Entry in the Marriage Contract filed by Ms. Bella Coronado Igamen, who was then requesting a copy of
her annotated marriage contract from the Municipal Civil Registrar's Office. The documents included the
Order dated May 4, 2007 issued by Judge Jaime C. Blancafor of Branch 26, RTC, Santa Cruz, Laguna, which was
2

certified as a true copy by complainant Atty. Aquino and the Certificate of Finality  dated May 22, 2007 signed by
3

complainant Atty. Aquino.

Upon verification from the records of the OCC, complainant Atty. Aquino discovered that said petition for correction
of entry in the marriage contract with case number SP Proc. Case No. SC-2268, was inexistent and that the same
case number pertained to another case. This fact was attested to by Atty. Arturo R. Trinidad, Clerk of Court VI,
OCC, RTC, Santa Cruz, Laguna, in his Certification  dated May 26, 2008.
4

Upon further scrutiny, complainant Atty. Aquino alleged that the purported Order dated May 4, 2007 of Judge
Blancaflor, the Certification dated May 25, 2007 that the said order was a true copy of the original, and the
Certificate of Finality dated May 22, 2007 were all spurious and her signature and that of Judge Blancaflor
appearing therein were forged. Complainant recalled that she never encountered any petition of that nature during
her stint as Branch Clerk of Court of Branch 26, RTC, Santa Cruz, Laguna. Thus, it was impossible for her and
Judge Blancaflor to have issued said documents. Aside from her allegation, complainant submitted the Affidavit
dated June 23, 2008 of Mrs. Isabelita B. Cadelina, the then Civil Docket Clerk of Branch 26, RTC, Santa Cruz,
Laguna, attesting that no such Petition for Correction of Entry in the Marriage Contract was received by their court.

Complainant further pointed out that the rubber stamp used by the forger to stamp the words "certified true copy" in
the questioned order was different from the official rubber stamp for the certified true xerox copy being used by the
court.

On June 4, 2008, a conference was held with Judge Blancaflor, Clerk of Court Atty. Trinidad, Jr., Municipal Civil
Registrar Moises and Ms. Igamen, the alleged petitioner of SP Proc. Case No. SC-2268, in attendance. During the
said conference, Ms. Igamen positively pointed to respondent Dela Cruz as the one who met her in court after being
referred to her by Mr. Laudemer F. San Juan (San Juan), the Municipal Civil Registrar of Santa Cruz, Laguna, which
led to the discovery of the fraudulent scheme perpetrated by respondent.

Complainant further claimed that there was another set of copies of the spurious order of Judge Blancaflor and
certificate of finality of complainant, this time certified as true copies by respondent Dela Cruz herself. When
confronted about this, respondent admitted that she indeed certified the same upon the request of San Juan and
she even issued a handwritten note dated May 29, 2008 which reads: "Na wala akong kinalaman sa lahat nang
naging conflict sa petition ni Bella Igamen dahil pinakiusapan lang ako ni Mr. Laudemer San Juan." 5

32
Complainant was convinced that despite the knowledge that the documents were spurious and bore the forged
signatures of complainant and Judge Blancaflor, respondent Dela Cruz authenticated the same, leading to the
anomalous annotation of the spurious order in the certificate of marriage of Ms. Igamen.

Complainant added that in view of the above discovery, other documents purporting to be court-issued documents
emerged indicating respondent Dela Cruz and her cohorts, namely, San Juan, then Municipal Civil Registrar of
Santa Cruz, Laguna and a certain Ms. Apolonia B. Gamara, then Municipal Civil Registrar of Nagcarlan, Laguna, as
the culprits. Complainant informed the Court that she had already filed a complaint before the National Bureau of
Investigation (NBI) and had requested Judge Blancaflor to issue a Memorandum to the Local Civil Registries within
his territorial jurisdiction regarding the matter in order to prevent similar occurrences in the future. She stated that
she planned to eventually file a criminal case for falsification against respondent Dela Cruz and her cohorts.

On July 4, 2008, the OCA directed respondent Dela Cruz to submit her comment on the complaint against her. 6

In a Resolution  dated August 3, 2009, the Court, upon the recommendation of the OCA, resolved to direct
7

respondent Dela Cruz to show cause why she should not be administratively dealt with for failing to submit her
comment despite the two (2) directives from the Court

Administrator, and to submit the required comment within ten (10) days from notice, failing which, necessary action
shall be taken against her and a decision on the administrative complaint shall be rendered on the basis of the
records on hand. The copy of the resolution sent to respondent Dela Cruz was returned unserved with the postal
carrier's notation on the envelope "RTC-Unknown." Thus, the Court issued a Resolution  dated November 23, 2009
8

requiring complainant to inform the Court of the complete and present address of respondent.

In her Compliance and Manifestation  dated January 27, 2010, complainant Atty. Aquino provided the Court with the
9

complete address of respondent. In the same compliance and manifestation, complainant informed the Court that
the NBI had referred its findings of Estafa thru Falsification of Public Documents against herein respondent Dela
Cruz, Municipal Civil Registrar San Juan and Ms. Gamara to the Provincial Prosecutor’s Office (PPO) for preliminary
investigation.
10

On August 22, 2011, the Court dispensed with the submission of the comment of respondent Dela Cruz, considering
that the copies of the Show Cause Resolution dated August 3, 2009, which required the latter to submit her
comment on the complaint sent to her at her address on record and to the new address provided by the
complainant, were returned unserved. 11

Further, the Court required the parties to manifest their willingness to submit the case for decision on the basis of
the pleadings/records already filed and submitted. On December 7, 2011, for failure of both parties to submit their
respective manifestations, the Court deemed the case submitted for resolution based on the pleadings and records
already filed.
12

Meanwhile, respondent Dela Cruz tendered her resignation effective June 2, 2008. On October 20, 2008, the Court
accepted her resignation effective June 2, 2008, but without prejudice to the proceedings of the instant
administrative case.

On August 22, 2012, the Court referred the instant complaint to the OCA for evaluation, report and
recommendation. 13

On July 1, 2013, in compliance with the Court's directive, the OCA, in a Memorandum,  recommended the following:
14

(1) the instant case against respondent MYLENE H. DELA CRUZ, former Clerk III. Office of the Clerk of
Court, Regional Trial Court, Santa Cruz, Laguna, be RE-DOCKETED as regular administrative matter; and

(2) respondent MYLENE H. DELA CRUZ be found guilty of grave misconduct and, in lieu of DISMISSAL
FROM THE SERVICE which can no longer be imposed upon her because of her resignation, be ORDERED
to pay a FINE of Forty Thousand Pesos (₱40,000.00) with forfeiture of all her benefits, except accrued leave
credits and disqualification from reemployment in any branch, agency or instrumentality of the government,
including government-owned and controlled corporations. The fine of ₱40,000.00 shall be deducted from her
accrued leave credits which, as computed by the Financial Management Office, is more than sufficient to
cover said amount. 15

RULING

The Code of Conduct and Ethical Standards for Public Officials and Employees, Republic Act 6713, enunciates the
State's policy of promoting a high standard of ethics and utmost responsibility in the public service. And no other
office in the government service exacts a greater demand for moral righteousness and uprightness from an
employee than in the judiciary. 16

33
Every employee of the judiciary should be an example of integrity, uprightness and honesty. The Supreme Court
has repeatedly emphasized that the conduct of court personnel, from the presiding judge to the lowliest clerk, must
always be beyond reproach and must be circumscribed with the heavy burden of responsibility as to let them be free
from any suspicion that may taint the judiciary. The Court condemns and would never countenance any conduct, act
or omission on the part of all those involved in the administration of justice which would violate the norm of public
accountability and diminish or even just tend to diminish the faith of the people in the judiciary.

In the instant case, there is no question that respondent Dela Cruz miserably failed to live up to these exacting
standards. The records speak for themselves: (1) Dela Cruz knew that there were no existing records that could
have served as the basis for the issuance of the disputed certificate; (2) authenticating documents was neither part
of Dela Cruz's duties nor was she authorized to authenticate documents; (3) Dela Cruz, despite knowledge that she
was not authorized to authenticate, admitted having authenticated the questioned order and issued the certificate of
finality in SP Proc. Case No. SC-2268 allegedly upon the request of Municipal Civil Registrar San Juan; and (4)
Dela Cruz refused to face the charges against her, in disregard of the Court's directives. Clearly, these facts and
evidence, coupled with respondent's admission, sufficiently establish her culpability.

A certificate is a written assurance, or official representation, that some act has or has not been done, or some
event occurred, or some legal formality has been complied with. To certify is to attest the truthfulness of the
document. Without the records to verify the truthfulness and authenticity of a document, no certification should be
issued. This is basic.  Dela Cruz should know that when she certified the questioned order, she did so under the
17

seal of the court. Thus, when the decision she certified turned out to be spurious and non-existent, she undoubtedly
compromised the Judiciary and jeopardized the integrity of the court. Respondent’s acts betray her complicity, if not
participation, in acts that were irregular and violative of ethics and procedure, causing damage not only to the
complainant but also to the public.
18

The inculpatory acts committed by respondent are so grave as to call for the most severe administrative penalty.
Dishonesty and grave misconduct, both being in the nature of a grave offense, carry the extreme penalty of
dismissal from service with forfeiture of retirement benefits, except accrued leave credits, and perpetual
disqualification for re-employment in the government service. This penalty is in accordance with Sections 52 and 58
of the Revised Uniform Rules on Administrative Cases in the Civil Service. In spite of her earlier resignation, the
same accessory penalty shall be imposed upon her in addition to a fine of ₱40,000.00 which shall be deducted from
her accrued leave credits.

WHEREFORE, the Court finds respondent MYLENE H. DELA CRUZ, then Clerk III, Office of the Clerk of Court,
Regional Trial Court of Santa Cruz, Laguna, GUILTY of GROSS MISCONDUCT and DISHONESTY. Since she had
resigned from the service, she is instead FINED in the amount of Forty Thousand (₱40,000.00) Pesos, with
forfeiture of all retirement benefits and privileges, except accrued leave credits, if any, and with prejudice to re-
employment in any branch or instrumentality of the government, including government-owned or controlled
corporations.

The Provincial Prosecutor of the Province of Laguna is hereby ORDERED to inform the Court of the status of the
criminal case of estafa thru falsification of public documents filed against Mylene H. Dela Cruz, Apolonia B. Gamara
and Laudemer F. San Juan, within ten (10) days from receipt hereof.

Likewise, the incumbent Municipal Mayor of Santa Cruz, Laguna is hereby REQUESTED to determine if there is
basis for the filing of an administrative complaint, if none has yet been filed, against Laudemer F. San Juan and
other employees who may have participated in this illegal scheme.

Let a copy of this decision be attached to respondent's personnel records in this Court.

SO ORDERED.

34
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.C. No. 5581               January 14, 2014

ROSE BUNAGAN-BANSIG, Complainant, 
vs.
ATTY. ROGELIO JUAN A. CELERA, Respondent.

DECISION

PER CURIAM:

Before us is a Petition for Disbarment  dated January 8, 2002 filed by complainant Rose Bunagan-Bansig (Bansig)
1

against respondent Atty. Rogelio Juan A. Celera (respondent) for Gross Immoral Conduct.

In her complaint, Bansig narrated that, on May 8, 1997, respondent and Gracemarie R. Bunagan (Bunagan),
entered into a contract of marriage, as evidenced by a certified xerox copy of the certificate of marriage issued by
the City Civil Registry of Manila.  Bansig is the sister of Gracemarie R. Bunagan, legal wife of respondent.
2

However, notwithstanding respondent's marriage with Bunagan, respondent contracted another marriage on
January 8, 1998 with a certain Ma. Cielo Paz Torres Alba (Alba), as evidenced by a certified xerox copy of the
certificate of marriage issued by the City Registration Officer of San Juan, Manila.
3

Bansig stressed that the marriage between respondent and Bunagan was still valid and in full legal existence when
he contracted his second marriage with Alba, and that the first marriage had never been annulled or rendered void
by any lawful authority.

Bansig alleged that respondent’s act of contracting marriage with Alba, while his marriage is still subsisting,
constitutes grossly immoral and conduct unbecoming of a member of the Bar, which renders him unfit to continue
his membership in the Bar.

In a Resolution  dated February 18, 2002, the Court resolved to require respondent to file a comment on the instant
4

complaint.

Respondent failed to submit his comment on the complaint, despite receipt of the copy of the Court's Resolution, as
evidenced by Registry Return Receipt No. 30639. Thus, the Court, in a Resolution  dated March 17, 2003, resolved
5

to require respondent to show cause why he should not be disciplinarily dealt with or held in contempt for failing to
file his comment on the complaint against him. 6

On December 10, 2002, Bansig filed an Omnibus Ex Parte Motion  praying that respondent's failure to file his
7

comment on the complaint be deemed as a waiver to file the same, and that the case be submitted for disposition.

On May 4, 2003, in a Motion, respondent claimed that while it appeared that an administrative case was filed
against him, he did not know the nature or cause thereof since other than Bansig's Omnibus Motion, he received no
other pleading or any processes of this Court. Respondent, however, countered that Bansig's Omnibus Motion was
merely a ploy to frighten him and his wife from pursuing the criminal complaints for falsification of public documents
they filed against Bansig and her husband. He also explained that he was able to obtain a copy of the Court's Show
Cause Order only when he visited his brother who is occupying their former residence at 59-B Aguho St., Project 3,
Quezon City. Respondent further averred that he also received a copy of Bansig's Omnibus Motion when the same
was sent to his law office address.

Respondent pointed out that having been the family's erstwhile counsel and her younger sister's husband, Bansig
knew his law office address, but she failed to send a copy of the complaint to him. Respondent suspected that
Bansig was trying to mislead him in order to prevent him from defending himself. He added that Bansig has an
unpaid obligation amounting to ₱2,000,000.00 to his wife which triggered a sibling rivalry. He further claimed that he
and his wife received death threats from unknown persons; thus, he transferred to at least two (2) new residences,
i.e., in Sampaloc, Manila and Angeles City. He then prayed that he be furnished a copy of the complaint and be
given time to file his answer to the complaint.

35
In a Resolution  dated July 7, 2003, the Court resolved to (a) require Bansig to furnish respondent with a copy of the
8

administrative complaint and to submit proof of such service; and (b) require respondent to file a comment on the
complaint against him.

In compliance, Bansig submitted an Affidavit of Mailing to show proof that a copy of the administrative complaint
was furnished to respondent at his given address which is No. 238 Mayflower St., Ninoy Aquino Subdivision,
Angeles City, as evidenced by Registry Receipt No. 2167. 9

On March 17, 2004, considering that respondent failed anew to file his comment despite receipt of the complaint,
the Court resolved to require respondent to show cause why he should not be disciplinarily dealt with or held in
contempt for such failure.10

On June 3, 2004, respondent, in his Explanation,  reiterated that he has yet to receive a copy of the complaint. He
11

claimed that Bansig probably had not complied with the Court's Order, otherwise, he would have received the same
already. He requested anew that Bansig be directed to furnish him a copy of the complaint.

Again, on August 25, 2004, the Court granted respondent's prayer that he be furnished a copy of the complaint, and
required Bansig to furnish a copy of the complaint to respondent. 12

On October 1, 2004, Bansig, in her Manifestation,  lamented the dilatory tactics allegedly undertaken by respondent
13

in what was supposedly a simple matter of receipt of complaint. Bansig asserted that the Court should sanction
respondent for his deliberate and willful act to frustrate the actions of the Court. She attached a copy of the
complaint and submitted an Affidavit of Mailing stating that again a copy of the complaint was mailed at
respondent's residential address in Angeles City as shown by Registry Receipt No. 3582.

On May 16, 2005, the Court anew issued a Show Cause Order to respondent as to why he should not be
disciplinarily dealt with or held in contempt for failure to comply with the Resolution dated July 7, 2003 despite
service of copy of the complaint by registered mail. 14

On August 1, 2005, the Court noted the returned and unserved copy of the Show Cause Order dated May 16, 2005
sent to respondent at 238 Mayflower St., Ninoy Aquino Subd. under Registry Receipt No. 55621, with notation
"RTS-Moved." It likewise required Bansig to submit the correct and present address of respondent. 15

On September 12, 2005, Bansig manifested that respondent had consistently indicated in his correspondence with
the Court No. 238 Mayflower St., Ninoy Aquino Subdivision, Angeles City as his residential address. However, all
notices served upon him on said address were returned with a note "moved" by the mail server. Bansig averred that
in Civil Case No. 59353, pending before the Regional Trial Court (RTC), Branch 1, Tuguegarao City, respondent
entered his appearance as counsel with mailing address to be at "Unit 8, Halili Complex, 922 Aurora Blvd., Cubao,
Quezon City." 16

On February 13, 2006, the Court resolved to resend a copy of the Show Cause Order dated May 16, 2005 to
respondent at his new address at Unit 8, Halili Complex, 922 Aurora Blvd., Cubao, Quezon City. 17

On June 30, 2008, due to respondent's failure to comply with the Show Cause Order dated May 16, 2005, for failure
to file his comment on this administrative complaint as required in the Resolution dated July 7, 2003, the Court
resolved to: (a) IMPOSE upon Atty. Celera a FINE of ₱1,000.00 payable to the court, or a penalty of imprisonment
of five (5) days if said fine is not paid, and (b) REQUIRE Atty. Celera to COMPLY with the Resolution dated July 7,
2003 by filing the comment required thereon. 18

In a Resolution  dated January 27, 2010, it appearing that respondent failed to comply with the Court's Resolutions
19

dated June 30, 2008 and July 7, 2003, the Court resolved to: (1) DISPENSE with the filing by respondent of his
comment on the complaint; (2) ORDER the arrest of Atty. Celera; and (3) DIRECT the Director of the National
Bureau of Investigation (NBI) to (a) ARREST and DETAIN Atty. Celera for non-compliance with the Resolution
dated June 30, 2008; and (b) SUBMIT a report of compliance with the Resolution. The Court likewise resolved to
REFER the complaint to the Integrated Bar of the Philippines for investigation, report and recommendation. 20

However, the Return of Warrant  dated March 24, 2010, submitted by Atty. Frayn M. Banawa, Investigation Agent II,
21

Anti-Graft Division of the NBI, showed that respondent cannot be located because neither Halili Complex nor No.
922 Aurora Blvd., at Cubao, Quezon City cannot be located. During surveillance, it appeared that the given address,
i.e., No. 922 Aurora Blvd., Cubao, Quezon City was a vacant lot with debris of a demolished building. Considering
that the given address cannot be found or located and there were no leads to determine respondent's whereabouts,
the warrant of arrest cannot be enforced.

The Integrated Bar of the Philippines, meanwhile, in compliance with the Court's Resolution, reported that as per
their records, the address of respondent is at No. 41 Hoover St., Valley View Royale Subd., Taytay, Rizal.

36
Respondent likewise failed to appear before the mandatory conference and hearings set by the Integrated Bar of
the Philippines, Commission on Bar Discipline (IBP-CBD), despite several notices. Thus, in an Order dated August
4, 2010, Commissioner Rebecca Villanueva-Maala, of the IBP-CBD, declared respondent to be in default and the
case was submitted for report and recommendation. The Order of Default was received by respondent as evidenced
by a registry return receipt. However, respondent failed to take any action on the matter.

On January 3, 2011, the IBP-CBD, in its Report and Recommendation, recommended that respondent Atty. Celera
be suspended for a period of two (2) years from the practice of law.

RULING

A disbarment case is sui generis for it is neither purely civil nor purely criminal, but is rather an investigation by the
court into the conduct of its officers.  The issue to be determined is whether respondent is still fit to continue to be
22

an officer of the court in the dispensation of justice. Hence, an administrative proceeding for disbarment continues
despite the desistance of a complainant, or failure of the complainant to prosecute the same, or in this case, the
failure of respondent to answer the charges against him despite numerous notices.

In administrative proceedings, the complainant has the burden of proving, by substantial evidence, the allegations in
the complaint. Substantial evidence has been defined as such relevant evidence as a reasonable mind might accept
as adequate to support a conclusion. For the Court to exercise its disciplinary powers, the case against the
respondent must be established by clear, convincing and satisfactory proof. Considering the serious consequence
of the disbarment or suspension of a member of the Bar, this Court has consistently held that clear preponderant
evidence is necessary to justify the imposition of the administrative penalty. 23

In the instant case, there is a preponderance of evidence that respondent contracted a second marriage despite the
existence of his first marriage. The first marriage, as evidenced by the certified xerox copy of the Certificate of
Marriage issued on October 3, 2001 by the City Civil Registry of Manila, Gloria C. Pagdilao, states that respondent
Rogelio Juan A. Celera contracted marriage on May, 8, 1997 with Gracemarie R. Bunagan at the Church of Saint
Augustine, Intramuros, Manila; the second marriage, however, as evidenced by the certified xerox copy of the
Certificate of Marriage issued on October 4, 2001 by the City Civil Registry of San Juan, Manila, states that
respondent Rogelio Juan A. Celera contracted marriage on January 8, 1998 with Ma. Cielo Paz Torres Alba at the
Mary the Queen Church, Madison St., Greenhills, San Juan, Metro Manila.

Bansig submitted certified xerox copies of the marriage certificates to prove that respondent entered into a second
marriage while the latter’s first marriage was still subsisting. We note that the second marriage apparently took place
barely a year from his first marriage to Bunagan which is indicative that indeed the first marriage was still subsisting
at the time respondent contracted the second marriage with Alba.

The certified xerox copies of the marriage contracts, issued by a public officer in custody thereof, are admissible as
the best evidence of their contents, as provided for under Section 7 of Rule 130 of the Rules of Court, to wit:

Sec. 7. Evidence admissible when original document is a public record. – When the original of a document is in the
custody of a public officer or is recorded in a public office, its contents may be proved by a certified copy issued by
the public officer in custody thereof.

Moreover, the certified xerox copies of the marriage certificates, other than being admissible in evidence, also
clearly indicate that respondent contracted the second marriage while the first marriage is subsisting. By itself, the
certified xerox copies of the marriage certificates would already have been sufficient to establish the existence of
two marriages entered into by respondent. The certified xerox copies should be accorded the full faith and credence
given to public documents. For purposes of this disbarment proceeding, these Marriage Certificates bearing the
name of respondent are competent and convincing evidence to prove that he committed bigamy, which renders him
unfit to continue as a member of the Bar. 24

The Code of Professional Responsibility provides:

Rule 1.01- A lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct.

Canon 7- A lawyer shall at all times uphold the integrity and dignity of the legal profession, and support the activities
of the Integrated Bar.

Rule 7.03- A lawyer shall not engage in conduct that adversely reflects on his fitness to practice law, nor should he,
whether in public or private life, behave in a scandalous manner to the discredit of the legal profession.

Respondent exhibited a deplorable lack of that degree of morality required of him as a member of the Bar. He made
a mockery of marriage, a sacred institution demanding respect and dignity. His act of contracting a second marriage

37
while his first marriage is subsisting constituted grossly immoral conduct and are grounds for disbarment under
Section 27, Rule 138 of the Revised Rules of Court. 25

This case cannot be fully resolved, however, without addressing rather respondent’s defiant stance against the
Court as demonstrated by his repetitive disregard of its Resolution requiring him to file his comment on the
complaint. This case has dragged on since 2002. In the span of more than 10 years, the Court has issued
numerous directives for respondent's compliance, but respondent seemed to have preselected only those he will
take notice of and the rest he will just ignore. The Court has issued several resolutions directing respondent to
comment on the complaint against him, yet, to this day, he has not submitted any answer thereto. He claimed to
have not received a copy of the complaint, thus, his failure to comment on the complaint against him. Ironically,
however, whenever it is a show cause order, none of them have escaped respondent's attention. Even assuming
that indeed the copies of the complaint had not reached him, he cannot, however, feign ignorance that there is a
complaint against him that is pending before this Court which he could have easily obtained a copy had he wanted
to.

The Court has been very tolerant in dealing with respondent's nonchalant attitude towards this case;
accommodating respondent's endless requests, manifestations and prayers to be given a copy of the complaint.
The Court, as well as Bansig, as evidenced by numerous affidavits of service, have relentlessly tried to reach
respondent for more than a decade; sending copies of the Court's Resolutions and complaint to different locations -
both office and residential addresses of respondent. However, despite earnest efforts of the Court to reach
respondent, the latter, however conveniently offers a mere excuse of failure to receive the complaint. When said
excuse seemed no longer feasible, respondent just disappeared. In a manner of speaking, respondent’s acts were
deliberate, maneuvering the liberality of the Court in order to delay the disposition of the case and to evade the
consequences of his actions. Ultimately, what is apparent is respondent’s deplorable disregard of the judicial
process which this Court cannot countenance.

Clearly, respondent's acts constitute willful disobedience of the lawful orders of this Court, which under Section 27,
Rule 138 of the Rules of Court is in itself alone a sufficient cause for suspension or disbarment. Respondent’s
cavalier attitude in repeatedly ignoring the orders of the Supreme Court constitutes utter disrespect to the judicial
institution. Respondent’s conduct indicates a high degree of irresponsibility. We have repeatedly held that a Court’s
Resolution is "not to be construed as a mere request, nor should it be complied with partially, inadequately, or
selectively." Respondent’s obstinate refusal to comply with the Court’s orders "not only betrays a recalcitrant flaw in
his character; it also underscores his disrespect of the Court's lawful orders which is only too deserving of reproof."26

Section 27, Rule 138 of the Rules of Court provides:

Sec. 27. Disbarment or suspension of attorneys by Supreme Court grounds therefor. - A member of the bar may be
disbarred or suspended from his office as attorney by the Supreme Court for any deceit, malpractice, or other gross
misconduct in such office, grossly immoral conduct, or by reason of his conviction of a crime involving moral
turpitude or for any violation of the oath which he is required to take before admission to practice, or for a willful
disobedience of any lawful order of a superior court, or for corruptly or willfully appearing as an attorney for a party
to a case without authority to do so. The practice of soliciting cases for the purpose of gain, either personally or
through paid agents or brokers, constitutes malpractice.

Considering respondent's propensity to disregard not only the laws of the land but also the lawful orders of the
Court, it only shows him to be wanting in moral character, honesty, probity and good demeanor. He is, thus,
unworthy to continue as an officer of the court.

IN VIEW OF ALL THE FOREGOING, we find respondent ATTY. ROGELIO JUAN A. CELERA, guilty of grossly
immoral conduct and willful disobedience of lawful orders rendering him unworthy of continuing membership in the
legal profession. He is thus ordered DISBARRED from the practice of law and his name stricken of the Roll of
Attorneys, effective immediately.1âwphi1

Let copies of this Decision be furnished the Office of the Bar Confidant, which shall forthwith record it in the personal
file of respondent. All the Courts of the Philippines and the Integrated Bar of the Philippines shall disseminate copies
thereof to all its Chapters.

SO ORDERED.

38
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

A.M. No. MTJ-14-1842               February 24, 2014

[Formerly OCA IPI No. 12-2491-MTJ]

REX M. TUPAL, Complainant, 
vs.
JUDGE REMEGIO V. ROJO, Branch 5, Municipal Trial Court in Cities (MTCC), Bacolod City, Negros
Occidental, Respondent.

RESOLUTION

LEONEN, J.:

Municipal trial court judges cannot notarize affidavits of cohabitation of parties whose marriage they will solemnize.

Rex M. Tupal filed with the Office of the Court Administrator a complaint against Judge Remegio V. Rojo for
violating the Code of Judicial Conduct and for gross ignorance of the law. 1

Judge Remegio V. Rojo presides Municipal Trial Court in Cities, Branch 5, Bacolod City, Negros Occidental. Judge
Rojo allegedly solemnized marriages without the required marriage license. He instead notarized affidavits of
cohabitation  and issued them to the contracting parties.  He notarized these affidavits on the day of the parties’
2 3

marriage.  These "package marriages" are allegedly common in Bacolod City.

4 5

Rex annexed to his complaint-affidavit nine affidavits of cohabitation all notarized by Judge Rojo. All affidavits were
notarized on the day of the contracting parties’ marriages.  The affidavits contained the following jurat:
6

SUBSCRIBED AND SWORN to before me this [date] at Bacolod City, Philippines.

(sgd.)
HON. REMEGIO V. ROJO
Judge 7

For notarizing affidavits of cohabitation of parties whose marriage he solemnized, Judge Rojo allegedly violated
Circular No. 1-90 dated February 26, 1990.  Circular No. 1-90 allows municipal trial court judges to act as notaries
8

public ex officio and notarize documents only if connected with their official functions and duties. Rex argues that
affidavits of cohabitation are not connected with a judge’s official functions and duties as solemnizing officer.  Thus,
9

Judge Rojo cannot notarize ex officio affidavits of cohabitation of parties whose marriage he solemnized.

Also, according to Rex, Judge Rojo allegedly violated the 2004 Rules on Notarial Practice. Judge Rojo notarized
affidavits of cohabitation without affixing his judicial seal on the affidavits. He also did not require the parties to
present their competent pieces of evidence of identity as required by law.

These omissions allegedly constituted gross ignorance of the law as notarial rules "[are] x x x simple and
elementary to ignore." 10

Judge Rojo commented on the complaint.  He argued that Rex was only harassing him. Rex is the father of Frialyn
11

Tupal. Frialyn has a pending perjury case in Branch 5 for allegedly making false statements in her affidavit of
cohabitation. Rex only filed a complaint against Judge Rojo to delay Frialyn’s case. 12

Judge Rojo did not deny notarizing the affidavits of cohabitation. He argued that notarizing affidavits of cohabitation
was connected with his official functions and duties as a judge.  The Guidelines on the Solemnization of Marriage
13

by the Members of the Judiciary  does not prohibit judges from notarizing affidavits of cohabitation of parties whose
14

marriage they will solemnize.  Thus, Judge Rojo did not violate Circular No. 1-90.
15

39
Judge Rojo also argued that he did not violate the 2004 Rules on Notarial Practice. He is a judge, not a notary
public. Thus, he was not required to affix a notarial seal on the affidavits he notarized. 16

Also, Judge Rojo argued that he need not notarize the affidavits with the parties presenting their competent pieces
of evidence of identity. Since he interviewed the parties as to the contents of their affidavits, he personally knew
them to be the same persons who executed the affidavit.  The parties’ identities are "unquestionable."
17 18

Judge Rojo alleged that other judges in Bacolod City and Talisay City also notarized affidavits of cohabitation of
parties whose marriage they solemnized.  He pleaded "not to make him [complainant Tupal’s] doormat, punching
19

bag and chopping block"  since other judges also notarized affidavits of cohabitation.
20

In its report dated July 30, 2013, the Office of the Court Administrator found that Judge Rojo violated Circular No. 1-
90. The Office of the Court Administrator recommended that Judge Rojo be fined ₱9,000.00 and sternly warned that
repeating the same offense will be dealt with more severely.

The Office of the Court Administrator ruled that affidavits of cohabitation are documents not connected with
municipal trial court judges’ official functions and duties. Under the Guidelines on the Solemnization of Marriage by
the Members of the Judiciary,  a judge’s duty is to personally examine the allegations in the affidavit of cohabitation
21

before performing the marriage ceremony.  Nothing in the Guidelines authorizes judges to notarize affidavits of
22

cohabitation of parties whose marriage they will solemnize.

Since Judge Rojo notarized without authority nine affidavits of cohabitation, the Office of the Court Administrator
recommended a fine of ₱1,000.00 per affidavit of cohabitation notarized. 23

The issue is whether Judge Rojo is guilty of violating the New Code of Judicial Conduct and of gross ignorance of
the law.

This court finds Judge Rojo guilty of violating the New Code of Judicial Conduct and of gross ignorance of the law.
Judge Rojo violated Circular No. 1-90 and the 2004 Rules on Notarial Practice.

Municipal trial court and municipal circuit trial court judges may act as notaries public. However, they may do so only
in their ex officio capacities. They may notarize documents, contracts, and other conveyances only in the exercise of
their official functions and duties. Circular No. 1-90 dated February 26, 1990 provides:

Municipal trial court (MTC) and municipal circuit trial court (MCTC) judges are empowered to perform the function of
notaries public ex officio under Section 76 of Republic Act No. 296, as amended (otherwise known as the Judiciary
Act of 1948) and Section 242 of the Revised Administrative Code. But the Court hereby lays down the following
qualifications on the scope of this power:

MTC and MCTC judges may act as notaries public ex officio in the notarization of documents connected only with
the exercise of their official functions and duties x x x. They may not, as notaries public ex officio, undertake the
preparation and acknowledgment of private documents, contracts and other acts of conveyances which bear no
direct relation to the performance of their functions as judges. The 1989 Code of Judicial Conduct not only enjoins
judges to regulate their extra-judicial activities in order to minimize the risk of conflict with their judicial duties, but
also prohibits them from engaging in the private practice of law (Canon 5 and Rule 5.07).

They may also act as notaries public ex officio only if lawyers or notaries public are lacking in their courts’ territorial
jurisdiction. They must certify as to the lack of lawyers or notaries public when notarizing documents ex officio:

However, the Court, taking judicial notice of the fact that there are still municipalities which have neither lawyers nor
notaries public, rules that MTC and MCTC judges assigned to municipalities or circuits with no lawyers or notaries
public may, in the capacity as notaries public ex officio, perform any act within the competency of a regular notary
public, provided that: (1) all notarial fees charged be for the account of the Government and turned over to the
municipal treasurer (Lapena, Jr. vs. Marcos, Adm. Matter No. 1969-MJ, June 29, 1982, 114 SCRA 572); and, (2)
certification be made in the notarized documents attesting to the lack of any lawyer or notary public in such
municipality or circuit.
24

Judge Rojo notarized affidavits of cohabitation, which were documents not connected with the exercise of his official
functions and duties as solemnizing officer. He also notarized affidavits of cohabitation without certifying that
lawyers or notaries public were lacking in his court’s territorial jurisdiction. Thus, Judge Rojo violated Circular No. 1-
90.

Before performing the marriage ceremony, the judge must personally interview the contracting parties and examine
the requirements they submitted.  The parties must have complied with all the essential and formal requisites of
25

marriage. Among these formal requisites is a marriage license. 26

40
A marriage license is issued by the local civil registrar to parties who have all the qualifications and none of the legal
disqualifications to contract marriage.  Before performing the marriage ceremony, the judge must personally
27

examine the marriage license presented. 28

If the contracting parties have cohabited as husband and wife for at least five years and have no legal impediment
to marry, they are exempt from the marriage license requirement.  Instead, the parties must present an affidavit of
29

cohabitation sworn to before any person authorized by law to administer oaths.  The judge, as solemnizing officer,
30

must personally examine the affidavit of cohabitation as to the parties having lived together as husband and wife for
at least five years and the absence of any legal impediment to marry each other.  The judge must also execute a
31

sworn statement that he personally ascertained the parties’ qualifications to marry and found no legal impediment to
the marriage.  Article 34 of the Family Code of the Philippines provides:
32

Art. 34. No license shall be necessary for the marriage of a man and a woman who have lived together as husband
and wife for at least five years and without any legal impediment to marry each other. The contracting parties shall
state the foregoing facts in an affidavit before any person authorized by law to administer oaths. The solemnizing
officer shall also state under oath that he ascertained the qualifications of the contracting parties and found no legal
impediment to the marriage.

Section 5 of the Guidelines on the Solemnization of Marriage by the Members of the Judiciary also provides:

Sec. 5. Other duties of solemnizing officer before the solemnization of the marriage in legal ratification of
cohabitation. — In the case of a marriage effecting legal ratification of cohabitation, the solemnizing officer shall (a)
personally interview the contracting parties to determine their qualifications to marry; (b) personally examine the
affidavit of the contracting parties as to the fact of having lived together as husband and wife for at least five [5]
years and the absence of any legal impediments to marry each other; and (c) execute a sworn statement showing
compliance with (a) and (b) and that the solemnizing officer found no legal impediment to the marriage.

Based on law and the Guidelines on the Solemnization of Marriage by the Members of the Judiciary, the person
who notarizes the contracting parties’ affidavit of cohabitation cannot be the judge who will solemnize the parties’
marriage.

As a solemnizing officer, the judge’s only duty involving the affidavit of cohabitation is to examine whether the
parties have indeed lived together for at least five years without legal impediment to marry. The Guidelines does not
state that the judge can notarize the parties’ affidavit of cohabitation.

Thus, affidavits of cohabitation are documents not connected with the judge’s official function and duty to solemnize
marriages. Notarizing affidavits of cohabitation is inconsistent with the duty to examine the parties’ requirements for
marriage. If the solemnizing officer notarized the affidavit of cohabitation, he cannot objectively examine and review
the affidavit’s statements before performing the marriage ceremony. Should there be any irregularity or false
statements in the affidavit of cohabitation he notarized, he cannot be expected to admit that he solemnized the
marriage despite the irregularity or false allegation.

Thus, judges cannot notarize the affidavits of cohabitation of the parties whose marriage they will solemnize.
Affidavits of cohabitation are documents not connected with their official function and duty to solemnize marriages.

Judge Rojo admitted that he notarized affidavits of cohabitation of parties "on the same day [he solemnized their
marriages]."  He notarized documents not connected with his official function and duty to solemnize marriages.
33

Thus, Judge Rojo violated Circular No. 1-90.

Judge Rojo argued that the Guidelines on the Solemnization of Marriage by the Members of the Judiciary does not
expressly prohibit judges from notarizing affidavits of cohabitation. Thus, he cannot be prohibited from notarizing
affidavits of cohabitation.

To accept Judge Rojo’s argument will render the solemnizing officer’s duties to examine the affidavit of cohabitation
and to issue a sworn statement that the requirements have been complied with redundant. As discussed, a judge
cannot objectively examine a document he himself notarized. Article 34 of the Family Code and the Guidelines on
the Solemnization of Marriage by the Members of the Judiciary assume that "the person authorized by law to
administer oaths" who notarizes the affidavit of cohabitation and the "solemnizing officer" who performs the
marriage ceremony are two different persons.

Judge Rojo argued that Circular No. 1-90 only prohibits municipal trial court judges from notarizing "private
documents x x x [bearing] no direct relation to the performance of their functions as judges."  Since a marriage
34

license is a public document, its "counterpart," the affidavit of cohabitation, is also a public document. Thus, when
he notarizes an affidavit of cohabitation, he notarizes a public document. He did not violate Circular No. 1-90.

41
An affidavit of cohabitation remains a private document until notarized. Notarization converts a private document
into a public document, "[rendering the document] admissible in court without further proof of its authenticity."  The
35

affidavit of cohabitation, even if it serves a "public purpose," remains a private document until notarized.

Thus, when Judge Rojo notarized the affidavits of cohabitation, he notarized nine private documents. As discussed,
affidavits of cohabitation are not connected with a judge’s official duty to solemnize marriages. Judge Rojo violated
Circular No. 1-90.

Judge Rojo argued that Circular No. 1-90’s purpose is to "eliminate competition between judges and private lawyers
in transacting legal conveyancing business."  He cited Borre v. Judge Moya  where this court found City Judge
36 37

Arcilla guilty of violating Circular No. 1-90 for notarizing a deed of sale. Judge Rojo argued that when he notarized
the affidavits of cohabitation, he did "not compete with private law practitioners or regular notaries in transacting
legal conveyancing business."  Thus, he did not violate Circular No. 1-90.
38

In Borre, Judge Arcilla notarized a deed of sale. This is the context in which this court stated that "[judges] should
not compete with private [lawyers] or regular notaries in transacting legal conveyancing business." 39

At any rate, Circular No. 1-90’s purpose is not limited to documents used to transact "legal conveyancing business."
So long as a judge notarizes a document not connected with his official functions and duties, he violates Circular
No. 1-90.

Thus, in Mayor Quiñones v. Judge Lopez, Jr.,  this court fined Judge Lopez for notarizing a certificate of candidacy.
40

In Ellert v. Judge Galapon, Jr.,  this court fined Judge Galapon for notarizing the verification page of an answer filed
41

with the Department of Agrarian Reform Adjudication Board. The documents involved in these cases were not used
to transact "legal conveyancing business." Nevertheless, this court found Judge Lopez and Judge Galapon guilty of
violating Circular No. 1-90.

Since Judge Rojo notarized affidavits of cohabitation, which were not connected with his official function and duty to
solemnize marriages, he violated Circular No. 1-90.

Also, Judge Rojo notarized affidavits of cohabitation without certifying that lawyers or notaries public are lacking in
Bacolod City. Failure to certify that lawyers or notaries public are lacking in the municipality or circuit of the judge’s
court constitutes violation of Circular No. 1-90. 42

That other judges have notarized affidavits of cohabitation of parties whose marriages they solemnized does not
make the practice legal. Violations of laws are not excused by practice to the contrary. 43

All told, Judge Rojo violated Circular No. 1-90.

Judge Rojo also violated the 2004 Rules on Notarial Practice. Rule IV, Section 2, paragraph (b) of the 2004 Rules
on Notarial Practice prohibits a notary public from notarizing documents if the signatory is not personally known to
him. Otherwise, the notary public must require the signatory to present a competent evidence of identity:

SEC. 2. Prohibitions. – x x x x

(b) A person shall not perform a notarial act if the person involved as signatory to the instrument or document -

(1) is not in the notary's presence personally at the time of the notarization; and

(2) is not personally known to the notary public or otherwise identified by the notary public through
competent evidence of identity as defined by these Rules.

A competent evidence of identity guarantees that the person appearing before the notary public is the signatory to
the instrument or document to be notarized. If the notary public does not personally know the signatory, he must
require the signatory to present a competent evidence of identity.

In all the nine affidavits of cohabitation Judge Rojo notarized, he only stated that the parties subscribed and swore
to their affidavits before him. Judge Rojo did not state that the parties were personally known to him or that the
parties presented their competent pieces of evidence of identity. Thus, Judge Rojo violated the 2004 Rules on
Notarial Practice.

Judge Rojo argued that he personally knew the parties to the affidavits of cohabitation. They personally appeared
before him to subscribe to their affidavits of cohabitation. He also interviewed them on their qualifications to contract
marriage. Thus, the parties to the affidavit of cohabitation need not present their competent pieces of evidence of
identity.
44

42
That the parties appeared before Judge Rojo and that he interviewed them do not make the parties personally
known to him. The parties are supposed to appear in person to subscribe to their affidavits. To personally know the
parties, the notary public must at least be acquainted with them.  Interviewing the contracting parties does not make
45

the parties personally known to the notary public.

For violating Circular No. 1-90 and the 2004 Rules on Notarial Practice nine times, Judge Rojo is guilty of gross
ignorance of the law.

Judge Rojo argued that he notarized the affidavits of cohabitation in good faith. He cited Santos v. Judge
How where this court held that "[g]ood faith and absence of malice, corrupt motives or improper considerations x x
46

x" were defenses against gross ignorance of the law charges. His good faith in notarizing affidavits of cohabitation
47

should not hold him administratively liable.

However, this court also held in Santos that "good faith in situations of fallible discretion [inheres] only within the
parameters of tolerable judgment x x x."  Good faith "does not apply where the issues are so simple and the
48

applicable legal principles evident and basic as to be beyond possible margins of error." 49

Circular No. 1-90 requires judges to certify that lawyers or notaries public are lacking in their courts’ territorial
jurisdiction before notarizing documents. The 2004 Rules on Notarial Practice requires notaries public to personally
know the signatory to the document they will notarize or require the signatory to present a competent evidence of
identity. These are basic legal principles and procedure Judge Rojo violated. Failure to comply with these basic
requirements nine times is not good faith.

Under the New Code of Judicial Conduct on integrity,  "[j]udges shall ensure that not only is their conduct above
50

reproach, but that it is perceived to be so in the view of a reasonable observer."  If the law involved is basic,
51

ignorance constitutes "lack of integrity."  Violating basic legal principles and procedure nine times is gross ignorance
52

of the law.

This court may impose the following sanctions for gross ignorance of the law or procedure, it being a serious
charge: 53

a. dismissal from the service with forfeiture of benefits, except accrued leave credits, and disqualification
from reinstatement or appointment to any public office, including government-owned or controlled
corporations;54

b. suspension from office without salary and other benefits for more than three (3) but not exceeding six (6)
months;  or
55

c. A fine of more than ₱20,000.00 but not exceeding ₱40,000.00. 56

This court does not condone violations of law. Judges have been dismissed from the service for gross ignorance of
the law. However, Judge Rojo may have been misled by other judges’ practice of notarizing affidavits of cohabitation
in Bacolod City and Talisay City. Thus, this court finds suspension from office without salary and other benefits for
six (6) months sufficient sanction.

Trial court judges are advised to strictly comply with the requirements of the law.  They should act with caution with
1âwphi1

respect to affidavits of cohabitation. Similar breach of the ethical requirements as in this case will be dealt with
strictly.

WHEREFORE, Judge Remegio V. Rojo, Presiding Judge of the Municipal Trial Court in Cities, Branch 5, Bacolod
City, Negros Occidental is SUSPENDED FROM OFFICE without salary and other benefits for SIX (6) MONTHS. His
suspension is effective upon service on him of a copy of this resolution.

SERVE copies of this resolution to all municipal trial courts in Bacolod City and Talisay City.

SO ORDERED.

43
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 172302               February 18, 2014

PRYCE CORPORATION, Petitioner, 
vs.
CHINA BANKING CORPORATION, Respondent.

RESOLUTION

LEONEN, J.:

This case resolves conflicting decisions between two divisions. Only one may serve as res judicata or a bar for the
other to proceed. This case also settles the doctrine as to whether a hearing is needed prior to the issuance of a
stay order in corporate rehabilitation proceedings.

The present case originated from a petition for corporate rehabilitation filed by petitioner Pryce Corporation on July
9, 2004 with the Regional Trial Court of Makati, Branch 138. 1

The rehabilitation court found the petition sufficient in form and substance and issued a stay order on July 13, 2004
appointing Gener T. Mendoza as rehabilitation receiver. 2

On September 13, 2004, the rehabilitation court gave due course to the petition and directed the rehabilitation
receiver to evaluate and give recommendations on petitioner Pryce Corporation’s proposed rehabilitation plan
attached to its petition.
3

The rehabilitation receiver did not approve this plan and submitted instead an amended rehabilitation plan, which
the rehabilitation court approved by order dated January 17, 2005.  In its disposition, the court found petitioner Pryce
4

Corporation "eligible to be placed in a state of corporate rehabilitation."  The disposition likewise identified the assets
5

to be held and disposed of by petitioner Pryce Corporation and the manner by which its liabilities shall be paid and
liquidated.
6

On February 23, 2005, respondent China Banking Corporation elevated the case to the Court of Appeals. Its petition
questioned the January 17, 2005 order that included the following terms:

1. The indebtedness to China Banking Corporation and Bank of the Philippine Islands as well as the long
term commercial papers will be paid through a dacion en pago of developed real estate assets of the
petitioner.

xxxx

4. All accrued penalties are waived[.]

5. Interests shall accrue only up to July 13, 2004, the date of issuance of the stay order[.]

6. No interest will accrue during the pendency of petitioner’s corporate rehabilitation[.]

7. Dollar-denominated loans will be converted to Philippine Pesos on the date of the issuance of this Order
using the reference rate of the Philippine Dealing System as of this date. 7

Respondent China Banking Corporation contended that the rehabilitation plan’s approval impaired the obligations of
contracts. It argued that neither the provisions of Presidential Decree No. 902-A nor the Interim Rules of Procedure
on Corporate Rehabilitation (Interim Rules) empowered commercial courts "to render without force and effect valid

44
contractual stipulations."  Moreover, the plan’s approval authorizing dacion en pago of petitioner Pryce Corporation’s
8

properties without respondent China Banking Corporation’s consent not only violated "mutuality of contract and due
process, but [was] also antithetical to the avowed policies of the state to maintain a competitive financial system." 9

The Bank of the Philippine Islands (BPI), another creditor of petitioner Pryce Corporation, filed a separate petition
with the Court of Appeals assailing the same order by the rehabilitation court. BPI called the attention of the court "to
the non-impairment clause and the mutuality of contracts purportedly ran roughshod by the [approved rehabilitation
plan]."
10

On July 28, 2005, the Court of Appeals Seventh (7th) Division  granted respondent China Banking Corporation's
11

petition, and reversed and set aside the rehabilitation court’s: (1) July 13, 2004 stay order that also appointed Gener
T. Mendoza as rehabilitation receiver; (2) September 13, 2004 order giving due course to the petition and directing
the rehabilitation receiver to evaluate and give recommendations on petitioner Pryce Corporation’s proposed
rehabilitation plan; and (3) January 17, 2005 order finding petitioner Pryce Corporation eligible to be placed in a
state of corporate rehabilitation, identifying assets to be disposed of, and determining the manner of liquidation to
pay the liabilities.
12

With respect to BPI’s separate appeal, the Court of Appeals First (1st) Division  granted its petition initially and set
13

aside the January 17, 2005 order of the rehabilitation court in its decision dated May 3, 2006.  On reconsideration,
14

the court issued a resolution dated May 23, 2007 setting aside its original decision and dismissing the petition.  BPI
15

elevated the case to this court, docketed as G.R. No. 180316. By resolution dated January 30, 2008, the First (1st)
Division of this court denied the petition.16 By resolution dated April 28, 2008, this court denied reconsideration with
finality.
17

Meanwhile, petitioner Pryce Corporation also appealed to this court assailing the July 28, 2005 decision of the Court
of Appeals Seventh (7th) Division granting respondent China Banking Corporation’s petition as well as the
resolution denying its motion for reconsideration.

In the decision dated February 4, 2008,  the First (1st) Division of this court denied its petition with the dispositive
18

portion as follows:

WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 88479 is
AFFIRMED with the modification discussed above. Let the records of this case be REMANDED to the RTC, Branch
138, Makati City, sitting as Commercial Court, for further proceedings with dispatch to determine the merits of the
petition for rehabilitation. No costs.
19

Petitioner Pryce Corporation filed an omnibus motion for (1) reconsideration or (2) partial reconsideration and (3)
referral to the court En Banc dated February 29, 2008. Respondent China Banking Corporation also filed a motion
for reconsideration on even date, praying that the February 4, 2008 decision be set aside and reconsidered only
insofar as it ordered the remand of the case for further proceedings "to determine whether petitioner's financial
condition is serious and whether there is clear and imminent danger that it will lose its corporate assets." 20

By resolution dated June 16, 2008, this court denied with finality the separate motions for reconsideration filed by
the parties.

On September 10, 2008, petitioner Pryce Corporation filed a second motion for reconsideration praying that the
Court of Appeals’ decision dated February 4, 2008 be set aside.

The First Division of this court referred this case to the En Banc en consulta by resolution dated June 22, 2009. The 21

court En Banc, in its resolution dated April 13, 2010, resolved to accept this case. 22

On July 30, 2013, petitioner Pryce Corporation and respondent China Banking Corporation, through their respective
counsel, filed a joint manifestation and motion to suspend proceedings. The parties requested this court to defer its
ruling on petitioner Pryce Corporation’s second motion for reconsideration "so as to enable the parties to work out a
mutually acceptable arrangement." 23

By resolution dated August 6, 2013, this court granted the motion but only for two (2) months. The registry receipts
showed that counsel for respondent China Banking Corporation and counsel for petitioner Pryce Corporation
received their copies of this resolution on September 5, 2013. 24

More than two months had lapsed since September 5, 2013, but no agreement was filed by the parties. Thus, we
proceed to rule on petitioner Pryce Corporation’s second motion for reconsideration.

This motion raises two grounds.

45
First, petitioner Pryce Corporation argues that the issue on the validity of the rehabilitation court orders is now res
judicata. Petitioner Pryce Corporation submits that the ruling in BPI v. Pryce Corporation docketed as G.R. No.
180316 contradicts the present case, and it has rendered the issue on the validity and regularity of the rehabilitation
court orders as res judicata. 25

Second, petitioner Pryce Corporation contends that Rule 4, Section 6 of the Interim Rules of Procedure on
Corporate Rehabilitation  does not require the rehabilitation court to hold a hearing before issuing a stay order.
26

Considering that the Interim Rules was promulgated later than Rizal Commercial Banking Corp. v. IAC  that 27

enunciated the "serious situations" test,  petitioner Pryce Corporation argues that the test has effectively been
28

abandoned by the "sufficiency in form and substance test" under the Interim Rules. 29

The present second motion for reconsideration involves the following issues:

I. WHETHER THE ISSUE ON THE VALIDITY OF THE REHABILITATION ORDER DATED JANUARY 17,
2005 IS NOW RES JUDICATA IN LIGHT OF BPI V. PRYCE CORPORATION DOCKETED AS G.R. NO.
180316;

II. WHETHER THE REHABILITATION COURT IS REQUIRED TO HOLD A HEARING TO COMPLY WITH
THE "SERIOUS SITUATIONS" TEST LAID DOWN IN THE CASE OF RIZAL COMMERCIAL BANKING
CORP. V. IAC BEFORE ISSUING A STAY ORDER.

We proceed to discuss the first issue.

BPI v. Pryce Corporation docketed as G.R. No. 180316 rendered the issue on the validity of the rehabilitation court’s
January 17, 2005 order approving the amended rehabilitation plan as res judicata.

In BPI v. Pryce Corporation, the Court of Appeals set aside initially the January 17, 2005 order of the rehabilitation
court.  On reconsideration, the court set aside its original decision and dismissed the petition.  On appeal, this court
30 31

denied the petition filed by BPI with finality. An entry of judgment was made for BPI v. Pryce Corporation on June 2,
2008.  In effect, this court upheld the January 17, 2005 order of the rehabilitation court.
32

According to the doctrine of res judicata, "a final judgment or decree on the merits by a court of competent
jurisdiction is conclusive of the rights of the parties or their privies in all later suits on all points and matters
determined in the former suit." 33

The elements for res judicata to apply are as follows: (a) the former judgment was final; (b) the court that rendered it
had jurisdiction over the subject matter and the parties; (c) the judgment was based on the merits; and (d) between
the first and the second actions, there was an identity of parties, subject matters, and causes of action. 34

Res judicata embraces two concepts: (1) bar by prior judgment  and (2) conclusiveness of judgment.
35 36

Bar by prior judgment exists "when, as between the first case where the judgment was rendered and the second
case that is sought to be barred, there is identity of parties, subject matter, and causes of action." 37

On the other hand, the concept of conclusiveness of judgment finds application "when a fact or question has been
squarely put in issue, judicially passed upon, and adjudged in a former suit by a court of competent
jurisdiction." This principle only needs identity of parties and issues to apply.
38 39

The elements of res judicata through bar by prior judgment are present in this case.

On the element of identity of parties, res judicata does not require absolute identity of parties as substantial identity
is enough.  Substantial identity of parties exists "when there is a community of interest between a party in the first
40

case and a party in the second case, even if the latter was not impleaded in the first case."  Parties that represent
41

the same interests in two petitions are, thus, considered substantial identity of parties for purposes of res
judicata. Definitely, one test to determine substantial identity of interest would be to see whether the success or
42

failure of one party materially affects the other.

In the present case, respondent China Banking Corporation and BPI are creditors of petitioner Pryce Corporation
and are both questioning the rehabilitation court’s approval of the amended rehabilitation plan. Thus, there is
substantial identity of parties since they are litigating for the same matter and in the same capacity as creditors of
petitioner Pryce Corporation.

There is no question that both cases deal with the subject matter of petitioner Pryce Corporation’s rehabilitation. The
element of identity of causes of action also exists.

46
In separate appeals, respondent China Banking Corporation and BPI questioned the same January 17, 2005 order
of the rehabilitation court before the Court of Appeals.

Since the January 17, 2005 order approving the amended rehabilitation plan was affirmed and made final in G.R.
No. 180316, this plan binds all creditors, including respondent China Banking Corporation.

In any case, the Interim Rules or the rules in effect at the time the petition for corporate rehabilitation was filed in
2004 adopts the cram-down principle which "consists of two things: (i) approval despite opposition and (ii) binding
effect of the approved plan x x x." 43

First, the Interim Rules allows the rehabilitation court  to "approve a rehabilitation plan even over the opposition of
44

creditors holding a majority of the total liabilities of the debtor if, in its judgment, the rehabilitation of the debtor is
feasible and the opposition of the creditors is manifestly unreasonable." 45

Second, it also provides that upon approval by the court, the rehabilitation plan and its provisions "shall be binding
upon the debtor and all persons who may be affected by it, including the creditors, whether or not such persons
have participated in the proceedings or opposed the plan or whether or not their claims have been scheduled." 46

Thus, the January 17, 2005 order approving the amended rehabilitation plan, now final and executory resulting from
the resolution of BPI v. Pryce Corporation docketed as G.R. No. 180316, binds all creditors including respondent
China Banking Corporation.

This judgment in BPI v. Pryce Corporation covers necessarily the rehabilitation court’s September 13, 2004 order
giving due course to the petition. The general rule precluding relitigation of issues extends to questions implied
necessarily in the final judgment, viz:

The general rule precluding the relitigation of material facts or questions which were in issue and adjudicated in
former action are commonly applied to all matters essentially connected with the subject matter of the litigation.
Thus, it extends to questions necessarily implied in the final judgment, although no specific finding may have been
made in reference thereto and although such matters were directly referred to in the pleadings and were not actually
or formally presented. x x x. 47

The dispositive portion of the Court of Appeals’ decision in BPI v. Pryce Corporation, reversed on reconsideration,
only mentioned the January 17, 2005 order of the rehabilitation court approving the amended rehabilitation plan.
Nevertheless, the affirmation of its validity necessarily included the September 13, 2004 order as this earlier order
gave due course to the petition and directed the rehabilitation receiver to evaluate and give recommendations on
the rehabilitation plan proposed by petitioner. 48

In res judicata, the primacy given to the first case is related to the principle of immutability of final judgments
essential to an effective and efficient administration of justice, viz:

x x x [W]ell-settled is the principle that a decision that has acquired finality becomes immutable and unalterable and
may no longer be modified in any respect even if the modification is meant to correct erroneous conclusions of fact
or law and whether it will be made by the court that rendered it or by the highest court of the land.

The reason for this is that litigation must end and terminate sometime and somewhere, and it is essential to an
effective and efficient administration of justice that, once a judgment has become final, the winning party be not
deprived of the fruits of the verdict. Courts must guard against any scheme calculated to bring about that result and
must frown upon any attempt to prolong the controversies.

The only exceptions to the general rule are the correction of clerical errors, the so-called nunc pro tunc entries which
cause no prejudice to any party, void judgments, and whenever circumstances transpire after the finality of the
decision rendering its execution unjust and inequitable.  (Emphasis provided)
49

Generally, the later case is the one abated applying the maxim qui prior est tempore, potior est jure (he who is
before in time is the better in right; priority in time gives preference in law).  However, there are limitations to this
50

rule as discussed in Victronics Computers, Inc. v. Regional Trial Court, Branch 63, Makati: 51

In our jurisdiction, the law itself does not specifically require that the pending action which would hold in abatement
the other must be a pending prior action. Thus, in Teodoro vs. Mirasol, this Court observed:

It is to be noted that the Rules do not require as a ground for dismissal of a complaint that there is a prior pending
action. They provide that there is a pending action, not a pending prior action. The fact that the unlawful detainer
suit was of a later date is no bar to the dismissal of the present action. We find, therefore, no error in the ruling of the
court a quo that plaintiff's action should be dismissed on the ground of the pendency of another more appropriate
action between the same parties and for the same cause.

47
In Roa-Magsaysay vs. Magsaysay, wherein it was the first case which was abated, this Court ruled:

In any event, since We are not really dealing with jurisdiction but mainly with venue, considering both courts
concerned do have jurisdiction over the causes of action of the parties herein against each other, the better rule in
the event of conflict between two courts of concurrent jurisdiction as in the present case, is to allow the litigation to
be tried and decided by the court which, under the circumstances obtaining in the controversy, would, in the mind of
this Court, be in a better position to serve the interests of justice, considering the nature of the controversy, the
comparative accessibility of the court to the parties, having in view their peculiar positions and capabilities, and other
similar factors. Without in any manner casting doubt as to the capacity of the Court of First Instance of Zambales to
adjudicate properly cases involving domestic relations, it is easy to see that the Juvenile and Domestic Relations
Court of Quezon City which was created in order to give specialized attention to family problems, armed as it is with
adequate and corresponding facilities not available to ordinary courts of first instance, would be able to attend to the
matters here in dispute with a little more degree of expertise and experience, resulting in better service to the
interests of justice. A reading of the causes of action alleged by the contending spouses and a consideration of their
nature, cannot but convince Us that, since anyway, there is an available Domestic Court that can legally take
cognizance of such family issues, it is better that said Domestic Court be the one chosen to settle the same as the
facts and the law may warrant.

We made the same pronouncement in Ramos vs. Peralta:

Finally, the rule on litis pendentia does not require that the later case should yield to the earlier case. What is
required merely is that there be another pending action, not a prior pending action. Considering the broader scope
of inquiry involved in Civil Case No. 4102 and the location of the property involved, no error was committed by the
lower court in deferring to the Bataan court's jurisdiction.

An analysis of these cases unravels the ratio for the rejection of the priority-in-time rule and establishes the criteria
to determine which action should be upheld and which is to be abated. In Teodoro, this Court used the criterion of
the more appropriate action. We ruled therein that the unlawful detainer case, which was filed later, was the more
appropriate action because the earlier case — for specific performance or declaratory relief — filed by the lessee
(Teodoro) in the Court of First Instance (CFI) to seek the extension of the lease for another two (2) years or the
fixing of a longer term for it, was "prompted by a desire on plaintiff's part to anticipate the action for unlawful
detainer, the probability of which was apparent from the letter of the defendant to the plaintiff advising the latter that
the contract of lease expired on October 1, 1954." The real issue between the parties therein was whether or not the
lessee should be allowed to continue occupying the leased premises under a contract the terms of which were also
the subject matter of the unlawful detainer case. Consonant with the doctrine laid down in Pue vs. Gonzales and Lim
Si vs. Lim, the right of the lessee to occupy the land leased against the lessor should be decided under Rule 70 of
the Rules of Court; the fact that the unlawful detainer case was filed later then of no moment. Thus, the latter was
the more appropriate action.

xxxx

In Roa-Magsaysay[,] the criterion used was the consideration of the interest of justice. In applying this standard,
what was asked was which court would be "in a better position to serve the interests of justice," taking into account
(a) the nature of the controversy, (b) the comparative accessibility of the court to the parties and (c) other similar
factors. While such a test was enunciated therein, this Court relied on its constitutional authority to change venue to
avoid a miscarriage of justice.

It is interesting to note that in common law, as earlier adverted to, and pursuant to the Teodoro vs. Mirasol case, the
bona fides or good faith of the parties is a crucial element. In the former, the second case shall not be abated if not
brought to harass or vex; in the latter, the first case shall be abated if it is merely an anticipatory action or, more
appropriately, an anticipatory defense against an expected suit — a clever move to steal the march from the
aggrieved party.  (Emphasis provided and citations omitted)
52

None of these situations are present in the facts of this instant suit. In any case, it is the better part of wisdom in
protecting the creditors if the corporation is rehabilitated.

We now proceed to the second issue on whether the rehabilitation court is required to hold a hearing to comply with
the "serious situations" test laid down in Rizal Commercial Banking Corp. v. IAC before issuing a stay order.

The rehabilitation court complied with the Interim Rules in its order dated July 13, 2004 on the issuance of a stay
order and appointment of Gener T. Mendoza as rehabilitation receiver. 53

The 1999 Rizal Commercial Banking Corp. v. IAC  case provides for the "serious situations" test in that the
54

suspension of claims is counted only upon the appointment of a rehabilitation receiver,  and certain situations
55

serious in nature must be shown to exist before one is appointed, viz:

48
Furthermore, as relevantly pointed out in the dissenting opinion, a petition for rehabilitation does not always result in
the appointment of a receiver or the creation of a management committee. The SEC has to initially determine
whether such appointment is appropriate and necessary under the circumstances. Under Paragraph (d), Section 6
of Presidential Decree No. 902-A, certain situations must be shown to exist before a management committee may
be created or appointed, such as:

1. when there is imminent danger of dissipation, loss, wastage or destruction of assets or other properties;
or

2. when there is paralization of business operations of such corporations or entities which may be prejudicial
to the interest of minority stockholders, parties-litigants or to the general public.

On the other hand, receivers may be appointed whenever:

1. necessary in order to preserve the rights of the parties-litigants; and/or

2. protect the interest of the investing public and creditors. (Section 6 [c], P.D. 902-A.)

These situations are rather serious in nature, requiring the appointment of a management committee or a receiver to
preserve the existing assets and property of the corporation in order to protect the interests of its investors and
creditors. Thus, in such situations, suspension of actions for claims against a corporation as provided in Paragraph
(c) of Section 6, of Presidential Decree No. 902-A is necessary, and here we borrow the words of the late Justice
Medialdea, "so as not to render the SEC management Committee irrelevant and inutile and to give it unhampered
‘rescue efforts’ over the distressed firm" (Rollo, p. 265)."

Otherwise, when such circumstances are not obtaining or when the SEC finds no such imminent danger of losing
the corporate assets, a management committee or rehabilitation receiver need not be appointed and suspension of
actions for claims may not be ordered by the SEC. When the SEC does not deem it necessary to appoint a receiver
or to create a management committee, it may be assumed, that there are sufficient assets to sustain the
rehabilitation plan, and that the creditors and investors are amply protected. 56

However, this case had been promulgated prior to the effectivity of the Interim Rules that took effect on December
15, 2000.

Section 6 of the Interim Rules states explicitly that "[i]f the court finds the petition to be sufficient in form and
substance, it shall, not later than five (5) days from the filing of the petition, issue an Order (a) appointing a
Rehabilitation Receiver and fixing his bond; (b) staying enforcement of all claims x x x." 57

Compliant with the rules, the July 13, 2004 stay order was issued not later than five (5) days from the filing of the
petition on July 9, 2004 after the rehabilitation court found the petition sufficient in form and substance.

We agree that when a petition filed by a debtor "alleges all the material facts and includes all the documents
required by Rule 4-2 [of the Interim Rules],"  it is sufficient in form and substance.
58

Nowhere in the Interim Rules does it require a comprehensive discussion in the stay order on the court’s findings of
sufficiency in form and substance.

The stay order and appointment of a rehabilitation receiver dated July 13, 2004 is an "extraordinary, preliminary, ex
parte remed[y]."  The effectivity period of a stay order is only "from the date of its issuance until dismissal of the
59

petition or termination of the rehabilitation proceedings."  It is not a final disposition of the case. It is an interlocutory
60

order defined as one that "does not finally dispose of the case, and does not end the Court’s task of adjudicating the
parties’ contentions and determining their rights and liabilities as regards each other, but obviously indicates that
other things remain to be done by the Court." 61

Thus, it is not covered by the requirement under the Constitution that a decision must include a discussion of the
facts and laws on which it is based. 62

Neither does the Interim Rules require a hearing before the issuance of a stay order. What it requires is an initial
hearing before it can give due course to  or dismiss  a petition.
63 64

Nevertheless, while the Interim Rules does not require the holding of a hearing before the issuance of a stay order,
neither does it prohibit the holding of one. Thus, the trial court has ample discretion to call a hearing when it is not
confident that the allegations in the petition are sufficient in form and substance, for so long as this hearing is held
within the five (5)-day period from the filing of the petition — the period within which a stay order may issue as
provided in the Interim Rules.

49
One of the important objectives of the Interim Rules is "to promote a speedy disposition of corporate rehabilitation
cases[,] x x x apparent from the strict time frames, the non-adversarial nature of the proceedings, and the prohibition
of certain kinds of pleadings."  It is in light of this objective that a court with basis to issue a stay order must do so
65

not later than five (5) days from the date the petition was filed. 66

Moreover, according to the November 17, 2000 memorandum submitted by the Supreme Court Committee on the
Interim Rules of Procedure on Corporate Rehabilitation:

The Proposed Rules remove the concept of the Interim Receiver and replace it with a rehabilitation receiver. This is
to justify the immediate issuance of the stay order because under Presidential Decree No. 902-A, as amended, the
suspension of actions takes effect only upon appointment of the rehabilitation receiver.  (Emphasis provided)
67

Even without this court going into the procedural issues, addressing the substantive merits of the case will yield the
same result.

Respondent China Banking Corporation mainly argues the violation of the constitutional proscription against
impairment of contractual obligations  in that neither the provisions of Pres. Dec. No. 902-A as amended nor the
68

Interim Rules empower commercial courts "to render without force and effect valid contractual stipulations." 69

The non-impairment clause first appeared in the United States Constitution as a safeguard against the issuance of
worthless paper money that disturbed economic stability after the American Revolution.  This constitutional
70

provision was designed to promote commercial stability.  At its core is "a prohibition of state interference with
71

debtor-creditor relationships." 72

This clause first became operative in the Philippines through the Philippine Bill of 1902, the fifth paragraph of
Section 5 which states "[t]hat no law impairing the obligation of contracts shall be enacted." It was consistently
adopted in subsequent Philippine fundamental laws, namely, the Jones Law of 1916,73 the 1935 Constitution,  the 74

1973 Constitution,  and the present Constitution.

75 76

Nevertheless, this court has brushed aside invocations of the non-impairment clause to give way to a valid exercise
of police power  and afford protection to labor.
77 78

In Pacific Wide Realty and Development Corporation v. Puerto Azul Land, Inc.  which similarly involved corporate
79

rehabilitation, this court found no merit in Pacific Wide’s invocation of the non-impairment clause, explaining as
follows:

We also find no merit in PWRDC’s contention that there is a violation of the impairment clause. Section 10, Article III
of the Constitution mandates that no law impairing the obligations of contract shall be passed. This case does not
involve a law or an executive issuance declaring the modification of the contract among debtor PALI, its creditors
and its accommodation mortgagors. Thus, the non-impairment clause may not be invoked. Furthermore, as held in
Oposa v. Factoran, Jr. even assuming that the same may be invoked, the non-impairment clause must yield to the
police power of the State. Property rights and contractual rights are not absolute. The constitutional guaranty of non-
impairment of obligations is limited by the exercise of the police power of the State for the common good of the
general public.

Successful rehabilitation of a distressed corporation will benefit its debtors, creditors, employees, and the economy
in general. The court may approve a rehabilitation plan even over the opposition of creditors holding a majority of
the total liabilities of the debtor if, in its judgment, the rehabilitation of the debtor is feasible and the opposition of the
creditors is manifestly unreasonable. The rehabilitation plan, once approved, is binding upon the debtor and all
persons who may be affected by it, including the creditors, whether or not such persons have participated in the
proceedings or have opposed the plan or whether or not their claims have been scheduled. 80

Corporate rehabilitation is one of many statutorily provided remedies for businesses that experience a downturn.
Rather than leave the various creditors unprotected, legislation now provides for an orderly procedure of equitably
and fairly addressing their concerns. Corporate rehabilitation allows a court-supervised process to rejuvenate a
corporation. Its twin, insolvency, provides for a system of liquidation and a procedure of equitably settling various
debts owed by an individual or a business. It provides a corporation’s owners a sound chance to re-engage the
market, hopefully with more vigor and enlightened services, having learned from a painful experience.

Necessarily, a business in the red and about to incur tremendous losses may not be able to pay all its creditors.
Rather than leave it to the strongest or most resourceful amongst all of them, the state steps in to equitably
distribute the corporation’s limited resources.

The cram-down principle adopted by the Interim Rules does, in effect, dilute contracts. When it permits the approval
of a rehabilitation plan even over the opposition of creditors,  or when it imposes a binding effect of the approved
81

50
plan on all parties including those who did not participate in the proceedings,  the burden of loss is shifted to the
82

creditors to allow the corporation to rehabilitate itself from insolvency.

Rather than let struggling corporations slip and vanish, the better option is to allow commercial courts to come in
and apply the process for corporate rehabilitation.

This option is preferred so as to avoid what Garrett Hardin called the Tragedy of Commons. Here, Hardin submits
that "coercive government regulation is necessary to prevent the degradation of common-pool resources [since]
individual resource appropriators receive the full benefit of their use and bear only a share of their cost."  By
83

analogy to the game theory, this is the prisoner’s dilemma: "Since no individual has the right to control or exclude
others, each appropriator has a very high discount rate [with] little incentive to efficiently manage the resource in
order to guarantee future use."  Thus, the cure is an exogenous policy to equitably distribute scarce resources. This
84

will incentivize future creditors to continue lending, resulting in something productive rather than resulting in nothing.

In fact, these corporations exist within a market. The General Theory of Second Best holds that "correction for one
market imperfection will not necessarily be efficiency-enhancing unless [there is also] simultaneous [correction] for
all other market imperfections."  The correction of one market imperfection may adversely affect market efficiency
85

elsewhere, for instance, "a contract rule that corrects for an imperfection in the market for consensual agreements
may [at the same time] induce welfare losses elsewhere."  This theory is one justification for the passing of
86

corporate rehabilitation laws allowing the suspension of payments so that corporations can get back on their feet.

As in all markets, the environment is never guaranteed. There are always risks.  Contracts are indeed sacred as the
1avvphi1

law between the parties. However, these contracts exist within a society where nothing is risk-free, and the
government is constantly being called to attend to the realities of the times.

Corporate rehabilitation is preferred for addressing social costs.  Allowing the corporation room to get back on its
1âwphi1

feet will retain if not increase employment opportunities for the market as a whole. Indirectly, the services offered by
the corporation will also benefit the market as "[t]he fundamental impulse that sets and keeps the capitalist engine in
motion comes from [the constant entry of] new consumers’ goods, the new methods of production or transportation,
the new markets, [and] the new forms of industrial organization that capitalist enterprise creates." 87

As a final note, this is not the first time this court was made to review two separate petitions appealed from two
conflicting decisions, rendered by two divisions of the Court of Appeals, and originating from the same case. In
Serrano v. Ambassador Hotel, Inc.,  we ordered the Court of Appeals to adopt immediately a more efficient system
88

in its Internal Rules to avoid situations as this.

In this instance, it is fortunate that this court had the opportunity to correct the situation and prevent conflicting
judgments from reaching impending finality with the referral to the En Banc.

We reiterate the need for our courts to be "constantly vigilant in extending their judicial gaze to cases related to the
matters submitted for their resolution"  as to "ensure against judicial confusion and [any] seeming conflict in the
89

judiciary’s decisions."90

WHEREFORE, petitioner Pryce Corporation's motion is GRANTED. This court's February 4, 2008 decision is
RECONSIDERED and SET ASIDE.

SO ORDERED.

51
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 203335               February 11, 2014

JOSE JESUS M. DISINI, JR., ROWENA S. DISINI, LIANNE IVY P. MEDINA, JANETTE TORAL and ERNESTO
SONIDO, JR., Petitioners, 
vs.
THE SECRETARY OF JUSTICE, THE SECRETARY OF THE DEPARTMENT OF THE INTERIOR AND LOCAL
GOVERNMENT, THE EXECUTIVE DIRECTOR OF THE INFORMATION AND COMMUNICATIONS
TECHNOLOGY OFFICE, THE CHIEF OF THE PHILIPPINE NATIONAL POLICE and THE DIRECTOR OF THE
NATIONAL BUREAU OF INVESTIGATION, Respondents.

x-----------------------x

G.R. No. 203299

LOUIS "BAROK" C. BIRAOGO, Petitioner, 

vs.
NATIONAL BUREAU OF INVESTIGATION and PHILIPPINE NATIONAL POLICE, Respondents.

x-----------------------x

G.R. No. 203306

ALAB NG MAMAMAHAYAG (ALAM), HUKUMAN NG MAMAMAYAN MOVEMENT, INC., JERRY S. YAP,

BERTENI "TOTO" CAUSING, HERNANI Q. CUARE, PERCY LAPID, TRACY CABRERA, RONALDO E. RENTA,
CIRILO P. SABARRE, JR., DERVIN CASTRO, ET AL., Petitioners, 
vs.
OFFICE OF THE PRESIDENT, represented by President Benigno Simeon Aquino III, SENATE OF THE
PHILIPPINES, and HOUSE OF REPRESENTATIVES, Respondents.

x-----------------------x

G.R. No. 203359

SENATOR TEOFISTO DL GUINGONA III, Petitioner, 

vs.
EXECUTIVE SECRETARY, THE SECRETARY OF JUSTICE, THE SECRETARY OF THE DEPARTMENT OF
INTERIOR AND LOCAL GOVERNMENT, THE CHIEF OF THE PHILIPPINE NATIONAL POLICE, and DIRECTOR
OF THE NATIONAL BUREAU OF INVESTIGATION, Respondents.

x-----------------------x

G.R. No. 203378

ALEXANDER ADONIS, ELLEN TORDESILLAS, MA. GISELA ORDENES-CASCOLAN, H. HARRY L. ROQUE,

JR., ROMEL R. BAGARES, and GILBERT T. ANDRES, Petitioners, 
vs.
THE EXECUTIVE SECRETARY, THE DEPARTMENT OF BUDGET AND MANAGEMENT, THE DEPARTMENT
OF JUSTICE, THE DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT, THE NATIONAL BUREAU
OF INVESTIGATION, THE PHILIPPINE NATIONAL POLICE, AND THE INFORMATION AND
COMMUNICATIONS TECHNOLOGY OFFICE-DEPARTMENT OF SCIENCE AND TECHNOLOGY, Respondents.

52
x-----------------------x

G.R. No. 203391

HON. RAYMOND V. PALATINO, HON. ANTONIO TINIO, VENCER MARI CRISOSTOMO OF ANAKBAYAN, MA.
KATHERINE ELONA OF THE PHILIPPINE COLLEGIAN, ISABELLE THERESE BAGUISI OF THE NATIONAL
UNION OF STUDENTS OF THE PHILIPPINES, ET AL., Petitioners, 
vs.
PAQUITO N. OCHOA, JR., in his capacity as Executive Secretary and alter-ego of President Benigno Simeon
Aquino III, LEILA DE LIMA in her capacity as Secretary of Justice, Respondents.

x-----------------------x

G.R. No. 203407

BAGONG ALYANSANG MAKABAYAN SECRETARY GENERAL RENATO M. REYES, JR., National Artist
BIENVENIDO L. LUMBERA, Chairperson of Concerned Artists of the Philippines, ELMER C. LABOG,
Chairperson of Kilusang Mayo Uno, CRISTINA E. PALABAY, Secretary General of Karapatan, FERDINAND
R. GAITE, Chairperson of COURAGE, JOEL B. MAGLUNSOD, Vice President of Anakpawis Party-List, LANA
R. LINABAN, Secretary General Gabriela Women's Party, ADOLFO ARES P. GUTIERREZ, and JULIUS
GARCIA MATIBAG, Petitioners, 
vs.
BENIGNO SIMEON C. AQUINO III, President of the Republic of the Philippines, PAQUITO N. OCHOA, JR.,
Executive Secretary, SENATE OF THE PHILIPPINES, represented by SENATE PRESIDENT JUAN PONCE
ENRILE, HOUSE OF REPRESENTATIVES, represented by SPEAKER FELICIANO BELMONTE, JR., LEILA DE
LIMA, Secretary of the Department of Justice, LOUIS NAPOLEON C. CASAMBRE, Executive Director of the
Information and Communications Technology Office, NONNATUS CAESAR R. ROJAS, Director of the
National Bureau of Investigation, D/GEN. NICANOR A. BARTOLOME, Chief of the Philippine National Police,
MANUEL A. ROXAS II, Secretary of the Department of the Interior and Local Government, Respondents.

x-----------------------x

G.R. No. 203440

MELENCIO S. STA. MARIA, SEDFREY M. CANDELARIA, AMPARITA STA. MARIA, RAY PAOLO J.
SANTIAGO, GILBERT V. SEMBRANO, and RYAN JEREMIAH D. QUAN (all of the Ateneo Human Rights
Center),Petitioners, 
vs.
HONORABLE PAQUITO OCHOA in his capacity as Executive Secretary, HONORABLE LEILA DE LIMA in her
capacity as Secretary of Justice, HONORABLE MANUEL ROXAS in his capacity as Secretary of the
Department of Interior and Local Government, The CHIEF of the Philippine National Police, The DIRECTOR
of the National Bureau of Investigation (all of the Executive Department of Government), Respondents.

x-----------------------x

G.R. No. 203453

NATIONAL UNION OF JOURNALISTS OF THE PHILIPPINES (NUJP), PHILIPPINE PRESS INSTITUTE (PPI),
CENTER FOR MEDIA FREEDOM AND RESPONSIBILITY, ROWENA CARRANZA PARAAN, MELINDA
QUINTOS-DE JESUS, JOSEPH ALWYN ALBURO, ARIEL SEBELLINO AND THE PETITIONERS IN THE e-
PETITION http://www.nujp.org/no-to-ra10175/, Petitioners, 
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF JUSTICE, THE SECRETARY OF THE INTERIOR AND
LOCAL GOVERNMENT, THE SECRETARY OF BUDGET AND MANAGEMENT, THE DIRECTOR GENERAL OF
THE PHILIPPINE NATIONAL POLICE, THE DIRECTOR OF THE NATIONAL BUREAU OF INVESTIGATION,
THE CYBERCRIME INVESTIGATION AND COORDINATING CENTER, AND ALL AGENCIES AND
INSTRUMENTALITIES OF GOVERNMENT AND ALL PERSONS ACTING UNDER THEIR INSTRUCTIONS,
ORDERS, DIRECTION IN RELATION TO THE IMPLEMENTATION OF REPUBLIC ACT NO.
10175, Respondents.

x-----------------------x

G.R. No. 203454

PAUL CORNELIUS T. CASTILLO & RYAN D. ANDRES, Petitioners, 

vs.

53
THE HON. SECRETARY OF JUSTICE THE HON. SECRETARY OF INTERIOR AND LOCAL
GOVERNMENT,Respondents.

x-----------------------x

G.R. No. 203469

ANTHONY IAN M. CRUZ; MARCELO R. LANDICHO; BENJAMIN NOEL A. ESPINA; MARCK RONALD C.
RIMORIN; JULIUS D. ROCAS; OLIVER RICHARD V. ROBILLO; AARON ERICK A. LOZADA; GERARD ADRIAN
P. MAGNAYE; JOSE REGINALD A. RAMOS; MA. ROSARIO T. JUAN; BRENDALYN P. RAMIREZ; MAUREEN
A. HERMITANIO; KRISTINE JOY S. REMENTILLA; MARICEL O. GRAY; JULIUS IVAN F. CABIGON;
BENRALPH S. YU; CEBU BLOGGERS SOCIETY, INC. PRESIDENT RUBEN B. LICERA, JR; and PINOY
EXPAT/OFW BLOG AWARDS, INC. COORDINATOR PEDRO E. RAHON; Petitioners, 
vs.
HIS EXCELLENCY BENIGNO S. AQUINO III, in his capacity as President of the Republic of the Philippines;
SENATE OF THE PHILIPPINES, represented by HON. JUAN PONCE ENRILE, in his capacity as Senate
President; HOUSE OF REPRESENTATIVES, represented by FELICIANO R. BELMONTE, JR., in his capacity
as Speaker of the House of Representatives; HON. PAQUITO N. OCHOA, JR., in his capacity as Executive
Secretary; HON. LEILA M. DE LIMA, in her capacity as Secretary of Justice; HON. LOUIS NAPOLEON C.
CASAMBRE, in his capacity as Executive Director, Information and Communications Technology Office;
HON. NONNATUS CAESAR R. ROJAS, in his capacity as Director, National Bureau of Investigation; and
P/DGEN. NICANOR A. BARTOLOME, in his capacity as Chief, Philippine National Police, Respondents.

x-----------------------x

G.R. No. 203501

PHILIPPINE BAR ASSOCIATION, INC., Petitioner, 

vs.
HIS EXCELLENCY BENIGNO S. AQUINO III, in his official capacity as President of the Republic of the
Philippines; HON. PAQUITO N. OCHOA, JR., in his official capacity as Executive Secretary; HON. LEILA M.
DE LIMA, in her official capacity as Secretary of Justice; LOUIS NAPOLEON C. CASAMBRE, in his official
capacity as Executive Director, Information and Communications Technology Office; NONNATUS CAESAR
R. ROJAS, in his official capacity as Director of the National Bureau of Investigation; and DIRECTOR
GENERAL NICANOR A. BARTOLOME, in his official capacity as Chief of the Philippine National
Police,Respondents.

x-----------------------x

G.R. No. 203509

BAYAN MUNA REPRESENTATIVE NERI J. COLMENARES, Petitioner, 

vs.
THE EXECUTIVE SECRETARY PAQUITO OCHOA, JR., Respondent.

x-----------------------x

G.R. No. 203515

NATIONAL PRESS CLUB OF THE PHILIPPINES, INC. represented by BENNY D. ANTIPORDA in his capacity
as President and in his personal capacity, Petitioner, 
vs.
OFFICE OF THE PRESIDENT, PRES. BENIGNO SIMEON AQUINO III, DEPARTMENT OF JUSTICE,
DEPARTMENT OF INTERIOR AND LOCAL GOVERNMENT, PHILIPPINE NATIONAL POLICE, NATIONAL
BUREAU OF INVESTIGATION, DEPARTMENT OF BUDGET AND MANAGEMENT AND ALL OTHER
GOVERNMENT INSTRUMENTALITIES WHO HAVE HANDS IN THE PASSAGE AND/OR IMPLEMENTATION OF
REPUBLIC ACT 10175, Respondents.

x-----------------------x

G.R. No. 203518

PHILIPPINE INTERNET FREEDOM ALLIANCE, composed of DAKILA-PHILIPPINE COLLECTIVE FOR

MODERN HEROISM, represented by Leni Velasco, PARTIDO LAKAS NG MASA, represented by Cesar S.
Melencio, FRANCIS EUSTON R. ACERO, MARLON ANTHONY ROMASANTA TONSON, TEODORO A.
CASIÑO, NOEMI LARDIZABAL-DADO, IMELDA ORALES, JAMES MATTHEW B. MIRAFLOR, JUAN G.M.

54
RAGRAGIO, MARIA FATIMA A. VILLENA, MEDARDO M. MANRIQUE, JR., LAUREN DADO, MARCO VITTORIA
TOBIAS SUMAYAO, IRENE CHIA, ERASTUS NOEL T. DELIZO, CRISTINA SARAH E. OSORIO, ROMEO
FACTOLERIN, NAOMI L. TUPAS, KENNETH KENG, ANA ALEXANDRA C. CASTRO, Petitioners, 
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF JUSTICE, THE SECRETARY OF INTERIOR AND
LOCAL GOVERNMENT, THE SECRETARY OF SCIENCE AND TECHNOLOGY, THE EXECUTIVE DIRECTOR
OF THE INFORMATION TECHNOLOGY OFFICE, THE DIRECTOR OF THE NATIONAL BUREAU OF
INVESTIGATION, THE CHIEF, PHILIPPINE NATIONAL POLICE, THE HEAD OF THE DOJ OFFICE OF
CYBERCRIME, and THE OTHER MEMBERS OF THE CYBERCRIME INVESTIGATION AND COORDINATING
CENTER, Respondents.

DECISION

ABAD, J.:

These consolidated petitions seek to declare several provisions of Republic Act (R.A.) 10175, the Cybercrime
Prevention Act of 2012, unconstitutional and void.

The Facts and the Case

The cybercrime law aims to regulate access to and use of the cyberspace. Using his laptop or computer, a person
can connect to the internet, a system that links him to other computers and enable him, among other things, to:

1. Access virtual libraries and encyclopedias for all kinds of information that he needs for research, study,
amusement, upliftment, or pure curiosity;

2. Post billboard-like notices or messages, including pictures and videos, for the general public or for special
audiences like associates, classmates, or friends and read postings from them;

3. Advertise and promote goods or services and make purchases and payments;

4. Inquire and do business with institutional entities like government agencies, banks, stock exchanges,
trade houses, credit card companies, public utilities, hospitals, and schools; and

5. Communicate in writing or by voice with any person through his e-mail address or telephone.

This is cyberspace, a system that accommodates millions and billions of simultaneous and ongoing individual
accesses to and uses of the internet. The cyberspace is a boon to the need of the current generation for greater
information and facility of communication. But all is not well with the system since it could not filter out a number of
persons of ill will who would want to use cyberspace technology for mischiefs and crimes. One of them can, for
instance, avail himself of the system to unjustly ruin the reputation of another or bully the latter by posting
defamatory statements against him that people can read.

And because linking with the internet opens up a user to communications from others, the ill-motivated can use the
cyberspace for committing theft by hacking into or surreptitiously accessing his bank account or credit card or
defrauding him through false representations. The wicked can use the cyberspace, too, for illicit trafficking in sex or
for exposing to pornography guileless children who have access to the internet. For this reason, the government has
a legitimate right to regulate the use of cyberspace and contain and punish wrongdoings.

Notably, there are also those who would want, like vandals, to wreak or cause havoc to the computer systems and
networks of indispensable or highly useful institutions as well as to the laptop or computer programs and memories
of innocent individuals. They accomplish this by sending electronic viruses or virtual dynamites that destroy those
computer systems, networks, programs, and memories. The government certainly has the duty and the right to
prevent these tomfooleries from happening and punish their perpetrators, hence the Cybercrime Prevention Act.

But petitioners claim that the means adopted by the cybercrime law for regulating undesirable cyberspace activities
violate certain of their constitutional rights. The government of course asserts that the law merely seeks to
reasonably put order into cyberspace activities, punish wrongdoings, and prevent hurtful attacks on the system.

Pending hearing and adjudication of the issues presented in these cases, on February 5, 2013 the Court extended
the original 120-day temporary restraining order (TRO) that it earlier issued on October 9, 2012, enjoining
respondent government agencies from implementing the cybercrime law until further orders.

The Issues Presented

55
Petitioners challenge the constitutionality of the following provisions of the cybercrime law that regard certain acts as
crimes and impose penalties for their commission as well as provisions that would enable the government to track
down and penalize violators. These provisions are:

a. Section 4(a)(1) on Illegal Access;

b. Section 4(a)(3) on Data Interference;

c. Section 4(a)(6) on Cyber-squatting;

d. Section 4(b)(3) on Identity Theft;

e. Section 4(c)(1) on Cybersex;

f. Section 4(c)(2) on Child Pornography;

g. Section 4(c)(3) on Unsolicited Commercial Communications;

h. Section 4(c)(4) on Libel;

i. Section 5 on Aiding or Abetting and Attempt in the Commission of Cybercrimes;

j. Section 6 on the Penalty of One Degree Higher;

k. Section 7 on the Prosecution under both the Revised Penal Code (RPC) and R.A. 10175;

l. Section 8 on Penalties;

m. Section 12 on Real-Time Collection of Traffic Data;

n. Section 13 on Preservation of Computer Data;

o. Section 14 on Disclosure of Computer Data;

p. Section 15 on Search, Seizure and Examination of Computer Data;

q. Section 17 on Destruction of Computer Data;

r. Section 19 on Restricting or Blocking Access to Computer Data;

s. Section 20 on Obstruction of Justice;

t. Section 24 on Cybercrime Investigation and Coordinating Center (CICC); and

u. Section 26(a) on CICC’s Powers and Functions.

Some petitioners also raise the constitutionality of related Articles 353, 354, 361, and 362 of the RPC on the crime
of libel.

The Rulings of the Court

Section 4(a)(1)

Section 4(a)(1) provides:

Section 4. Cybercrime Offenses. – The following acts constitute the offense of cybercrime punishable under this Act:

(a) Offenses against the confidentiality, integrity and availability of computer data and systems:

(1) Illegal Access. – The access to the whole or any part of a computer system without right.

Petitioners contend that Section 4(a)(1) fails to meet the strict scrutiny standard required of laws that interfere with
the fundamental rights of the people and should thus be struck down.

56
The Court has in a way found the strict scrutiny standard, an American constitutional construct,  useful in
1

determining the constitutionality of laws that tend to target a class of things or persons. According to this standard, a
legislative classification that impermissibly interferes with the exercise of fundamental right or operates to the
peculiar class disadvantage of a suspect class is presumed unconstitutional. The burden is on the government to
prove that the classification is necessary to achieve a compelling state interest and that it is the least restrictive
means to protect such interest.  Later, the strict scrutiny standard was used to assess the validity of laws dealing
2

with the regulation of speech, gender, or race as well as other fundamental rights, as expansion from its earlier
applications to equal protection. 3

In the cases before it, the Court finds nothing in Section 4(a)(1) that calls for the application of the strict scrutiny
standard since no fundamental freedom, like speech, is involved in punishing what is essentially a condemnable act
– accessing the computer system of another without right. It is a universally condemned conduct. 4

Petitioners of course fear that this section will jeopardize the work of ethical hackers, professionals who employ
tools and techniques used by criminal hackers but would neither damage the target systems nor steal information.
Ethical hackers evaluate the target system’s security and report back to the owners the vulnerabilities they found in
it and give instructions for how these can be remedied. Ethical hackers are the equivalent of independent auditors
who come into an organization to verify its bookkeeping records. 5

Besides, a client’s engagement of an ethical hacker requires an agreement between them as to the extent of the
search, the methods to be used, and the systems to be tested. This is referred to as the "get out of jail free
card." Since the ethical hacker does his job with prior permission from the client, such permission would insulate him
6

from the coverage of Section 4(a)(1).

Section 4(a)(3) of the Cybercrime Law

Section 4(a)(3) provides:

Section 4. Cybercrime Offenses. – The following acts constitute the offense of cybercrime punishable under this Act:

(a) Offenses against the confidentiality, integrity and availability of computer data and systems:

xxxx

(3) Data Interference. – The intentional or reckless alteration, damaging, deletion or deterioration of computer data,
electronic document, or electronic data message, without right, including the introduction or transmission of viruses.

Petitioners claim that Section 4(a)(3) suffers from overbreadth in that, while it seeks to discourage data interference,
it intrudes into the area of protected speech and expression, creating a chilling and deterrent effect on these
guaranteed freedoms.

Under the overbreadth doctrine, a proper governmental purpose, constitutionally subject to state regulation, may not
be achieved by means that unnecessarily sweep its subject broadly, thereby invading the area of protected
freedoms.  But Section 4(a)(3) does not encroach on these freedoms at all. It simply punishes what essentially is a
7

form of vandalism,  the act of willfully destroying without right the things that belong to others, in this case their
8

computer data, electronic document, or electronic data message. Such act has no connection to guaranteed
freedoms. There is no freedom to destroy other people’s computer systems and private documents.

All penal laws, like the cybercrime law, have of course an inherent chilling effect, an in terrorem effect  or the fear of
9

possible prosecution that hangs on the heads of citizens who are minded to step beyond the boundaries of what is
proper. But to prevent the State from legislating criminal laws because they instill such kind of fear is to render the
state powerless in addressing and penalizing socially harmful conduct.  Here, the chilling effect that results in
10

paralysis is an illusion since Section 4(a)(3) clearly describes the evil that it seeks to punish and creates no
tendency to intimidate the free exercise of one’s constitutional rights.

Besides, the overbreadth challenge places on petitioners the heavy burden of proving that under no set of
circumstances will Section 4(a)(3) be valid.  Petitioner has failed to discharge this burden.
11

Section 4(a)(6) of the Cybercrime Law

Section 4(a)(6) provides:

Section 4. Cybercrime Offenses. – The following acts constitute the offense of cybercrime punishable under this Act:

(a) Offenses against the confidentiality, integrity and availability of computer data and systems:

57
 xxxx

(6) Cyber-squatting. – The acquisition of domain name over the internet in bad faith to profit, mislead, destroy the
reputation, and deprive others from registering the same, if such a domain name is:

(i) Similar, identical, or confusingly similar to an existing trademark registered with the appropriate
government agency at the time of the domain name registration;

(ii) Identical or in any way similar with the name of a person other than the registrant, in case of a personal
name; and

(iii) Acquired without right or with intellectual property interests in it.

Petitioners claim that Section 4(a)(6) or cyber-squatting violates the equal protection clause  in that, not being
12

narrowly tailored, it will cause a user using his real name to suffer the same fate as those who use aliases or take
the name of another in satire, parody, or any other literary device. For example, supposing there exists a well known
billionaire-philanthropist named "Julio Gandolfo," the law would punish for cyber-squatting both the person who
registers such name because he claims it to be his pseudo-name and another who registers the name because it
happens to be his real name. Petitioners claim that, considering the substantial distinction between the two, the law
should recognize the difference.

But there is no real difference whether he uses "Julio Gandolfo" which happens to be his real name or use it as a
pseudo-name for it is the evil purpose for which he uses the name that the law condemns. The law is reasonable in
penalizing him for acquiring the domain name in bad faith to profit, mislead, destroy reputation, or deprive others
who are not ill-motivated of the rightful opportunity of registering the same. The challenge to the constitutionality of
Section 4(a)(6) on ground of denial of equal protection is baseless.

Section 4(b)(3) of the Cybercrime Law

Section 4(b)(3) provides:

Section 4. Cybercrime Offenses. – The following acts constitute the offense of cybercrime punishable under this Act:

xxxx

b) Computer-related Offenses:

xxxx

(3) Computer-related Identity Theft. – The intentional acquisition, use, misuse, transfer, possession, alteration, or
deletion of identifying information belonging to another, whether natural or juridical, without right: Provided: that if no
damage has yet been caused, the penalty imposable shall be one (1) degree lower.

Petitioners claim that Section 4(b)(3) violates the constitutional rights to due process and to privacy and
correspondence, and transgresses the freedom of the press.

The right to privacy, or the right to be let alone, was institutionalized in the 1987 Constitution as a facet of the right
protected by the guarantee against unreasonable searches and seizures.  But the Court acknowledged its existence
13

as early as 1968 in Morfe v. Mutuc,  it ruled that the right to privacy exists independently of its identification with
14

liberty; it is in itself fully deserving of constitutional protection.

Relevant to any discussion of the right to privacy is the concept known as the "Zones of Privacy." The Court
explained in "In the Matter of the Petition for Issuance of Writ of Habeas Corpus of Sabio v. Senator Gordon"  the 15

relevance of these zones to the right to privacy:

Zones of privacy are recognized and protected in our laws. Within these zones, any form of intrusion is
impermissible unless excused by law and in accordance with customary legal process. The meticulous regard we
accord to these zones arises not only from our conviction that the right to privacy is a "constitutional right" and "the
right most valued by civilized men," but also from our adherence to the Universal Declaration of Human Rights
which mandates that, "no one shall be subjected to arbitrary interference with his privacy" and "everyone has the
right to the protection of the law against such interference or attacks."

Two constitutional guarantees create these zones of privacy: (a) the right against unreasonable searches  and 16

seizures, which is the basis of the right to be let alone, and (b) the right to privacy of communication and
correspondence.  In assessing the challenge that the State has impermissibly intruded into these zones of privacy,
17

58
a court must determine whether a person has exhibited a reasonable expectation of privacy and, if so, whether that
expectation has been violated by unreasonable government intrusion. 18

The usual identifying information regarding a person includes his name, his citizenship, his residence address, his
contact number, his place and date of birth, the name of his spouse if any, his occupation, and similar data.  The
19

law punishes those who acquire or use such identifying information without right, implicitly to cause damage.
Petitioners simply fail to show how government effort to curb computer-related identity theft violates the right to
privacy and correspondence as well as the right to due process of law.

Also, the charge of invalidity of this section based on the overbreadth doctrine will not hold water since the specific
conducts proscribed do not intrude into guaranteed freedoms like speech. Clearly, what this section regulates are
specific actions: the acquisition, use, misuse or deletion of personal identifying data of another. There is no
fundamental right to acquire another’s personal data.

Further, petitioners fear that Section 4(b)(3) violates the freedom of the press in that journalists would be hindered
from accessing the unrestricted user account of a person in the news to secure information about him that could be
published. But this is not the essence of identity theft that the law seeks to prohibit and punish. Evidently, the theft of
identity information must be intended for an illegitimate purpose. Moreover, acquiring and disseminating information
made public by the user himself cannot be regarded as a form of theft.

The Court has defined intent to gain as an internal act which can be established through the overt acts of the
offender, and it may be presumed from the furtive taking of useful property pertaining to another, unless special
circumstances reveal a different intent on the part of the perpetrator.  As such, the press, whether in quest of news
20

reporting or social investigation, has nothing to fear since a special circumstance is present to negate intent to gain
which is required by this Section.

Section 4(c)(1) of the Cybercrime Law

Section 4(c)(1) provides:

Sec. 4. Cybercrime Offenses.– The following acts constitute the offense of cybercrime punishable under this Act:

xxxx

(c) Content-related Offenses:

(1) Cybersex.– The willful engagement, maintenance, control, or operation, directly or indirectly, of any lascivious
exhibition of sexual organs or sexual activity, with the aid of a computer system, for favor or consideration.

Petitioners claim that the above violates the freedom of expression clause of the Constitution.  They express fear
21

that private communications of sexual character between husband and wife or consenting adults, which are not
regarded as crimes under the penal code, would now be regarded as crimes when done "for favor" in cyberspace. In
common usage, the term "favor" includes "gracious kindness," "a special privilege or right granted or conceded," or
"a token of love (as a ribbon) usually worn conspicuously."  This meaning given to the term "favor" embraces
22

socially tolerated trysts. The law as written would invite law enforcement agencies into the bedrooms of married
couples or consenting individuals.

But the deliberations of the Bicameral Committee of Congress on this section of the Cybercrime Prevention Act give
a proper perspective on the issue. These deliberations show a lack of intent to penalize a "private showing x x x
between and among two private persons x x x although that may be a form of obscenity to some."  The 23

understanding of those who drew up the cybercrime law is that the element of "engaging in a business" is necessary
to constitute the illegal cybersex.  The Act actually seeks to punish cyber prostitution, white slave trade, and
24

pornography for favor and consideration. This includes interactive prostitution and pornography, i.e., by webcam. 25

The subject of Section 4(c)(1)—lascivious exhibition of sexual organs or sexual activity—is not novel. Article 201 of
the RPC punishes "obscene publications and exhibitions and indecent shows." The Anti-Trafficking in Persons Act
of 2003 penalizes those who "maintain or hire a person to engage in prostitution or pornography."  The law defines
26

prostitution as any act, transaction, scheme, or design involving the use of a person by another, for sexual
intercourse or lascivious conduct in exchange for money, profit, or any other consideration. 27

The case of Nogales v. People28 shows the extent to which the State can regulate materials that serve no other
purpose than satisfy the market for violence, lust, or pornography.  The Court weighed the property rights of
29

individuals against the public welfare. Private property, if containing pornographic materials, may be forfeited and
destroyed. Likewise, engaging in sexual acts privately through internet connection, perceived by some as a right,
has to be balanced with the mandate of the State to eradicate white slavery and the exploitation of women.

59
In any event, consenting adults are protected by the wealth of jurisprudence delineating the bounds of
obscenity. The Court will not declare Section 4(c)(1) unconstitutional where it stands a construction that makes it
30

apply only to persons engaged in the business of maintaining, controlling, or operating, directly or indirectly, the
lascivious exhibition of sexual organs or sexual activity with the aid of a computer system as Congress has
intended.

Section 4(c)(2) of the Cybercrime Law

Section 4(c)(2) provides:

Sec. 4. Cybercrime Offenses. – The following acts constitute the offense of cybercrime punishable under this Act:

xxxx

(c) Content-related Offenses:

xxxx

(2) Child Pornography. — The unlawful or prohibited acts defined and punishable by Republic Act No. 9775 or the
Anti-Child Pornography Act of 2009, committed through a computer system: Provided, That the penalty to be
imposed shall be (1) one degree higher than that provided for in Republic Act No. 9775.

It seems that the above merely expands the scope of the Anti-Child Pornography Act of 2009  (ACPA) to cover
31

identical activities in cyberspace. In theory, nothing prevents the government from invoking the ACPA when
prosecuting persons who commit child pornography using a computer system. Actually, ACPA’s definition of child
pornography already embraces the use of "electronic, mechanical, digital, optical, magnetic or any other means."
Notably, no one has questioned this ACPA provision.

Of course, the law makes the penalty higher by one degree when the crime is committed in cyberspace. But no one
can complain since the intensity or duration of penalty is a legislative prerogative and there is rational basis for such
higher penalty.  The potential for uncontrolled proliferation of a particular piece of child pornography when uploaded
32

in the cyberspace is incalculable.

Petitioners point out that the provision of ACPA that makes it unlawful for any person to "produce, direct,
manufacture or create any form of child pornography"  clearly relates to the prosecution of persons who aid and
33

abet the core offenses that ACPA seeks to punish.  Petitioners are wary that a person who merely doodles on paper
34

and imagines a sexual abuse of a 16-year-old is not criminally liable for producing child pornography but one who
formulates the idea on his laptop would be. Further, if the author bounces off his ideas on Twitter, anyone who
replies to the tweet could be considered aiding and abetting a cybercrime.

The question of aiding and abetting the offense by simply commenting on it will be discussed elsewhere below. For
now the Court must hold that the constitutionality of Section 4(c)(2) is not successfully challenged.

Section 4(c)(3) of the Cybercrime Law

Section 4(c)(3) provides:

Sec. 4. Cybercrime Offenses. – The following acts constitute the offense of cybercrime punishable under this Act:

xxxx

(c) Content-related Offenses:

xxxx

(3) Unsolicited Commercial Communications. – The transmission of commercial electronic communication with the
use of computer system which seeks to advertise, sell, or offer for sale products and services are prohibited unless:

(i) There is prior affirmative consent from the recipient; or

(ii) The primary intent of the communication is for service and/or administrative announcements from the
sender to its existing users, subscribers or customers; or

(iii) The following conditions are present:

60
 (aa) The commercial electronic communication contains a simple, valid, and reliable way for the
recipient to reject receipt of further commercial electronic messages (opt-out) from the same source;

(bb) The commercial electronic communication does not purposely disguise the source of the
electronic message; and

(cc) The commercial electronic communication does not purposely include misleading information in
any part of the message in order to induce the recipients to read the message.

The above penalizes the transmission of unsolicited commercial communications, also known as "spam." The term
"spam" surfaced in early internet chat rooms and interactive fantasy games. One who repeats the same sentence or
comment was said to be making a "spam." The term referred to a Monty Python’s Flying Circus scene in which
actors would keep saying "Spam, Spam, Spam, and Spam" when reading options from a menu. 35

The Government, represented by the Solicitor General, points out that unsolicited commercial communications or
spams are a nuisance that wastes the storage and network capacities of internet service providers, reduces the
efficiency of commerce and technology, and interferes with the owner’s peaceful enjoyment of his property.
Transmitting spams amounts to trespass to one’s privacy since the person sending out spams enters the recipient’s
domain without prior permission. The OSG contends that commercial speech enjoys less protection in law.

But, firstly, the government presents no basis for holding that unsolicited electronic ads reduce the "efficiency of
computers." Secondly, people, before the arrival of the age of computers, have already been receiving such
unsolicited ads by mail. These have never been outlawed as nuisance since people might have interest in such ads.
What matters is that the recipient has the option of not opening or reading these mail ads. That is true with spams.
Their recipients always have the option to delete or not to read them.

To prohibit the transmission of unsolicited ads would deny a person the right to read his emails, even unsolicited
commercial ads addressed to him. Commercial speech is a separate category of speech which is not accorded the
same level of protection as that given to other constitutionally guaranteed forms of expression but is nonetheless
entitled to protection.  The State cannot rob him of this right without violating the constitutionally guaranteed
36

freedom of expression. Unsolicited advertisements are legitimate forms of expression.

Articles 353, 354, and 355 of the Penal Code

Section 4(c)(4) of the Cyber Crime Law

Petitioners dispute the constitutionality of both the penal code provisions on libel as well as Section 4(c)(4) of the
Cybercrime Prevention Act on cyberlibel.

The RPC provisions on libel read:

Art. 353. Definition of libel. — A libel is public and malicious imputation of a crime, or of a vice or defect, real or
imaginary, or any act, omission, condition, status, or circumstance tending to cause the dishonor, discredit, or
contempt of a natural or juridical person, or to blacken the memory of one who is dead.

Art. 354. Requirement for publicity. — Every defamatory imputation is presumed to be malicious, even if it be true, if
no good intention and justifiable motive for making it is shown, except in the following cases:

1. A private communication made by any person to another in the performance of any legal, moral or social
duty; and

2. A fair and true report, made in good faith, without any comments or remarks, of any judicial, legislative or
other official proceedings which are not of confidential nature, or of any statement, report or speech
delivered in said proceedings, or of any other act performed by public officers in the exercise of their
functions.

Art. 355. Libel means by writings or similar means. — A libel committed by means of writing, printing, lithography,
engraving, radio, phonograph, painting, theatrical exhibition, cinematographic exhibition, or any similar means, shall
be punished by prision correccional in its minimum and medium periods or a fine ranging from 200 to 6,000 pesos,
or both, in addition to the civil action which may be brought by the offended party.

The libel provision of the cybercrime law, on the other hand, merely incorporates to form part of it the provisions of
the RPC on libel. Thus Section 4(c)(4) reads:

Sec. 4. Cybercrime Offenses. — The following acts constitute the offense of cybercrime punishable under this Act:

61
 xxxx

(c) Content-related Offenses:

xxxx

(4) Libel. — The unlawful or prohibited acts of libel as defined in Article 355 of the Revised Penal Code, as
amended, committed through a computer system or any other similar means which may be devised in the future.

Petitioners lament that libel provisions of the penal code  and, in effect, the libel provisions of the cybercrime law
37

carry with them the requirement of "presumed malice" even when the latest jurisprudence already replaces it with
the higher standard of "actual malice" as a basis for conviction.  Petitioners argue that inferring "presumed malice"
38

from the accused’s defamatory statement by virtue of Article 354 of the penal code infringes on his constitutionally
guaranteed freedom of expression.

Petitioners would go further. They contend that the laws on libel should be stricken down as unconstitutional for
otherwise good jurisprudence requiring "actual malice" could easily be overturned as the Court has done in Fermin
v. People  even where the offended parties happened to be public figures.
39

The elements of libel are: (a) the allegation of a discreditable act or condition concerning another; (b) publication of
the charge; (c) identity of the person defamed; and (d) existence of malice. 40

There is "actual malice" or malice in fact  when the offender makes the defamatory statement with the knowledge
41

that it is false or with reckless disregard of whether it was false or not.  The reckless disregard standard used here
42

requires a high degree of awareness of probable falsity. There must be sufficient evidence to permit the conclusion
that the accused in fact entertained serious doubts as to the truth of the statement he published. Gross or even
extreme negligence is not sufficient to establish actual malice.43

The prosecution bears the burden of proving the presence of actual malice in instances where such element is
required to establish guilt. The defense of absence of actual malice, even when the statement turns out to be false,
is available where the offended party is a public official or a public figure, as in the cases of Vasquez (a barangay
official) and Borjal (the Executive Director, First National Conference on Land Transportation). Since the penal code
and implicitly, the cybercrime law, mainly target libel against private persons, the Court recognizes that these laws
imply a stricter standard of "malice" to convict the author of a defamatory statement where the offended party is a
public figure. Society’s interest and the maintenance of good government demand a full discussion of public affairs. 44

Parenthetically, the Court cannot accept the proposition that its ruling in Fermin disregarded the higher standard of
actual malice or malice in fact when it found Cristinelli Fermin guilty of committing libel against complainants who
were public figures. Actually, the Court found the presence of malice in fact in that case. Thus:

It can be gleaned from her testimony that petitioner had the motive to make defamatory imputations against
complainants. Thus, petitioner cannot, by simply making a general denial, convince us that there was no malice on
her part. Verily, not only was there malice in law, the article being malicious in itself, but there was also malice in
fact, as there was motive to talk ill against complainants during the electoral campaign. (Emphasis ours)

Indeed, the Court took into account the relatively wide leeway given to utterances against public figures in the above
case, cinema and television personalities, when it modified the penalty of imprisonment to just a fine of ₱6,000.00.

But, where the offended party is a private individual, the prosecution need not prove the presence of malice. The
law explicitly presumes its existence (malice in law) from the defamatory character of the assailed statement.  For
45

his defense, the accused must show that he has a justifiable reason for the defamatory statement even if it was in
fact true.
46

Petitioners peddle the view that both the penal code and the Cybercrime Prevention Act violate the country’s
obligations under the International Covenant of Civil and Political Rights (ICCPR). They point out that in Adonis v.
Republic of the Philippines,  the United Nations Human Rights Committee (UNHRC) cited its General Comment 34
47

to the effect that penal defamation laws should include the defense of truth.

But General Comment 34 does not say that the truth of the defamatory statement should constitute an all-
encompassing defense. As it happens, Article 361 recognizes truth as a defense but under the condition that the
accused has been prompted in making the statement by good motives and for justifiable ends. Thus:

Art. 361. Proof of the truth. — In every criminal prosecution for libel, the truth may be given in evidence to the court
and if it appears that the matter charged as libelous is true, and, moreover, that it was published with good motives
and for justifiable ends, the defendants shall be acquitted.

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Proof of the truth of an imputation of an act or omission not constituting a crime shall not be admitted, unless the
imputation shall have been made against Government employees with respect to facts related to the discharge of
their official duties.

In such cases if the defendant proves the truth of the imputation made by him, he shall be acquitted.

Besides, the UNHRC did not actually enjoin the Philippines, as petitioners urge, to decriminalize libel. It simply
suggested that defamation laws be crafted with care to ensure that they do not stifle freedom of expression. Indeed,
48

the ICCPR states that although everyone should enjoy freedom of expression, its exercise carries with it special
duties and responsibilities. Free speech is not absolute. It is subject to certain restrictions, as may be necessary and
as may be provided by law. 49

The Court agrees with the Solicitor General that libel is not a constitutionally protected speech and that the
government has an obligation to protect private individuals from defamation. Indeed, cyberlibel is actually not a new
crime since Article 353, in relation to Article 355 of the penal code, already punishes it. In effect, Section 4(c)(4)
above merely affirms that online defamation constitutes "similar means" for committing libel.

But the Court’s acquiescence goes only insofar as the cybercrime law penalizes the author of the libelous statement
or article. Cyberlibel brings with it certain intricacies, unheard of when the penal code provisions on libel were
enacted. The culture associated with internet media is distinct from that of print.

The internet is characterized as encouraging a freewheeling, anything-goes writing style.  In a sense, they are a
50

world apart in terms of quickness of the reader’s reaction to defamatory statements posted in cyberspace, facilitated
by one-click reply options offered by the networking site as well as by the speed with which such reactions are
disseminated down the line to other internet users. Whether these reactions to defamatory statement posted on the
internet constitute aiding and abetting libel, acts that Section 5 of the cybercrime law punishes, is another matter
that the Court will deal with next in relation to Section 5 of the law.

Section 5 of the Cybercrime Law

Section 5 provides:

Sec. 5. Other Offenses. — The following acts shall also constitute an offense:

(a) Aiding or Abetting in the Commission of Cybercrime. – Any person who willfully abets or aids in the
commission of any of the offenses enumerated in this Act shall be held liable.

(b) Attempt in the Commission of Cybercrime. — Any person who willfully attempts to commit any of the
offenses enumerated in this Act shall be held liable.

Petitioners assail the constitutionality of Section 5 that renders criminally liable any person who willfully abets or aids
in the commission or attempts to commit any of the offenses enumerated as cybercrimes. It suffers from
overbreadth, creating a chilling and deterrent effect on protected expression.

The Solicitor General contends, however, that the current body of jurisprudence and laws on aiding and abetting
sufficiently protects the freedom of expression of "netizens," the multitude that avail themselves of the services of
the internet. He points out that existing laws and jurisprudence sufficiently delineate the meaning of "aiding or
abetting" a crime as to protect the innocent. The Solicitor General argues that plain, ordinary, and common usage is
at times sufficient to guide law enforcement agencies in enforcing the law.  The legislature is not required to define
51

every single word contained in the laws they craft.

Aiding or abetting has of course well-defined meaning and application in existing laws. When a person aids or abets
another in destroying a forest,  smuggling merchandise into the country,  or interfering in the peaceful picketing of
52 53

laborers,  his action is essentially physical and so is susceptible to easy assessment as criminal in character. These
54

forms of aiding or abetting lend themselves to the tests of common sense and human experience.

But, when it comes to certain cybercrimes, the waters are muddier and the line of sight is somewhat blurred. The
idea of "aiding or abetting" wrongdoings online threatens the heretofore popular and unchallenged dogmas of
cyberspace use.

According to the 2011 Southeast Asia Digital Consumer Report, 33% of Filipinos have accessed the internet within
a year, translating to about 31 million users.  Based on a recent survey, the Philippines ranks 6th in the top 10 most
55

engaged countries for social networking.  Social networking sites build social relations among people who, for
56

example, share interests, activities, backgrounds, or real-life connections. 57

63
Two of the most popular of these sites are Facebook and Twitter. As of late 2012, 1.2 billion people with shared
interests use Facebook to get in touch.  Users register at this site, create a personal profile or an open book of who
58

they are, add other users as friends, and exchange messages, including automatic notifications when they update
their profile.  A user can post a statement, a photo, or a video on Facebook, which can be made visible to anyone,
59

depending on the user’s privacy settings.

If the post is made available to the public, meaning to everyone and not only to his friends, anyone on Facebook
can react to the posting, clicking any of several buttons of preferences on the program’s screen such as "Like,"
"Comment," or "Share." "Like" signifies that the reader likes the posting while "Comment" enables him to post online
his feelings or views about the same, such as "This is great!" When a Facebook user "Shares" a posting, the original
"posting" will appear on his own Facebook profile, consequently making it visible to his down-line Facebook Friends.

Twitter, on the other hand, is an internet social networking and microblogging service that enables its users to send
and read short text-based messages of up to 140 characters. These are known as "Tweets." Microblogging is the
practice of posting small pieces of digital content—which could be in the form of text, pictures, links, short videos, or
other media—on the internet. Instead of friends, a Twitter user has "Followers," those who subscribe to this
particular user’s posts, enabling them to read the same, and "Following," those whom this particular user is
subscribed to, enabling him to read their posts. Like Facebook, a Twitter user can make his tweets available only to
his Followers, or to the general public. If a post is available to the public, any Twitter user can "Retweet" a given
posting. Retweeting is just reposting or republishing another person’s tweet without the need of copying and pasting
it.

In the cyberworld, there are many actors: a) the blogger who originates the assailed statement; b) the blog service
provider like Yahoo; c) the internet service provider like PLDT, Smart, Globe, or Sun; d) the internet café that may
have provided the computer used for posting the blog; e) the person who makes a favorable comment on the blog;
and f) the person who posts a link to the blog site.  Now, suppose Maria (a blogger) maintains a blog on
60

WordPress.com (blog service provider). She needs the internet to access her blog so she subscribes to Sun
Broadband (Internet Service Provider).

One day, Maria posts on her internet account the statement that a certain married public official has an illicit affair
with a movie star. Linda, one of Maria’s friends who sees this post, comments online, "Yes, this is so true! They are
so immoral." Maria’s original post is then multiplied by her friends and the latter’s friends, and down the line to
friends of friends almost ad infinitum. Nena, who is a stranger to both Maria and Linda, comes across this blog, finds
it interesting and so shares the link to this apparently defamatory blog on her Twitter account. Nena’s "Followers"
then "Retweet" the link to that blog site.

Pamela, a Twitter user, stumbles upon a random person’s "Retweet" of Nena’s original tweet and posts this on her
Facebook account. Immediately, Pamela’s Facebook Friends start Liking and making Comments on the assailed
posting. A lot of them even press the Share button, resulting in the further spread of the original posting into tens,
hundreds, thousands, and greater postings.

The question is: are online postings such as "Liking" an openly defamatory statement, "Commenting" on it, or
"Sharing" it with others, to be regarded as "aiding or abetting?" In libel in the physical world, if Nestor places on the
office bulletin board a small poster that says, "Armand is a thief!," he could certainly be charged with libel. If Roger,
seeing the poster, writes on it, "I like this!," that could not be libel since he did not author the poster. If Arthur,
passing by and noticing the poster, writes on it, "Correct!," would that be libel? No, for he merely expresses
agreement with the statement on the poster. He still is not its author. Besides, it is not clear if aiding or abetting libel
in the physical world is a crime.

But suppose Nestor posts the blog, "Armand is a thief!" on a social networking site. Would a reader and his Friends
or Followers, availing themselves of any of the "Like," "Comment," and "Share" reactions, be guilty of aiding or
abetting libel? And, in the complex world of cyberspace expressions of thoughts, when will one be liable for aiding or
abetting cybercrimes? Where is the venue of the crime?

Except for the original author of the assailed statement, the rest (those who pressed Like, Comment and Share) are
essentially knee-jerk sentiments of readers who may think little or haphazardly of their response to the original
posting. Will they be liable for aiding or abetting? And, considering the inherent impossibility of joining hundreds or
thousands of responding "Friends" or "Followers" in the criminal charge to be filed in court, who will make a choice
as to who should go to jail for the outbreak of the challenged posting?

The old parameters for enforcing the traditional form of libel would be a square peg in a round hole when applied to
cyberspace libel. Unless the legislature crafts a cyber libel law that takes into account its unique circumstances and
culture, such law will tend to create a chilling effect on the millions that use this new medium of communication in
violation of their constitutionally-guaranteed right to freedom of expression.

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The United States Supreme Court faced the same issue in Reno v. American Civil Liberties Union,  a case involving
61

the constitutionality of the Communications Decency Act of 1996. The law prohibited (1) the knowing transmission,
by means of a telecommunications device, of

"obscene or indecent" communications to any recipient under 18 years of age; and (2) the knowing use of an
interactive computer service to send to a specific person or persons under 18 years of age or to display in a manner
available to a person under 18 years of age communications that, in context, depict or describe, in terms "patently
offensive" as measured by contemporary community standards, sexual or excretory activities or organs.

Those who challenged the Act claim that the law violated the First Amendment’s guarantee of freedom of speech for
being overbroad. The U.S. Supreme Court agreed and ruled:

The vagueness of the Communications Decency Act of 1996 (CDA), 47 U.S.C.S. §223, is a matter of special
concern for two reasons. First, the CDA is a content-based regulation of speech. The vagueness of such a
regulation raises special U.S. Const. amend. I concerns because of its obvious chilling effect on free speech.
Second, the CDA is a criminal statute. In addition to the opprobrium and stigma of a criminal conviction, the CDA
threatens violators with penalties including up to two years in prison for each act of violation. The severity of criminal
sanctions may well cause speakers to remain silent rather than communicate even arguably unlawful words, ideas,
and images. As a practical matter, this increased deterrent effect, coupled with the risk of discriminatory
enforcement of vague regulations, poses greater U.S. Const. amend. I concerns than those implicated by certain
civil regulations.

xxxx

The Communications Decency Act of 1996 (CDA), 47 U.S.C.S. § 223, presents a great threat of censoring speech
that, in fact, falls outside the statute's scope. Given the vague contours of the coverage of the statute, it
unquestionably silences some speakers whose messages would be entitled to constitutional protection. That danger
provides further reason for insisting that the statute not be overly broad. The CDA’s burden on protected speech
cannot be justified if it could be avoided by a more carefully drafted statute. (Emphasis ours)

Libel in the cyberspace can of course stain a person’s image with just one click of the mouse. Scurrilous statements
can spread and travel fast across the globe like bad news. Moreover, cyberlibel often goes hand in hand with
cyberbullying that oppresses the victim, his relatives, and friends, evoking from mild to disastrous reactions. Still, a
governmental purpose, which seeks to regulate the use of this cyberspace communication technology to protect a
person’s reputation and peace of mind, cannot adopt means that will unnecessarily and broadly sweep, invading the
area of protected freedoms. 62

If such means are adopted, self-inhibition borne of fear of what sinister predicaments await internet users will
suppress otherwise robust discussion of public issues. Democracy will be threatened and with it, all liberties. Penal
laws should provide reasonably clear guidelines for law enforcement officials and triers of facts to prevent arbitrary
and discriminatory enforcement.  The terms "aiding or abetting" constitute broad sweep that generates chilling effect
63

on those who express themselves through cyberspace posts, comments, and other messages.  Hence, Section 5 of
64

the cybercrime law that punishes "aiding or abetting" libel on the cyberspace is a nullity.

When a penal statute encroaches upon the freedom of speech, a facial challenge grounded on the void-for-
vagueness doctrine is acceptable. The inapplicability of the doctrine must be carefully delineated. As Justice Antonio
T. Carpio explained in his dissent in Romualdez v. Commission on Elections,  "we must view these statements of
65

the Court on the inapplicability of the overbreadth and vagueness doctrines to penal statutes as appropriate only
insofar as these doctrines are used to mount ‘facial’ challenges to penal statutes not involving free speech."

In an "as applied" challenge, the petitioner who claims a violation of his constitutional right can raise any
constitutional ground – absence of due process, lack of fair notice, lack of ascertainable standards, overbreadth, or
vagueness. Here, one can challenge the constitutionality of a statute only if he asserts a violation of his own rights. It
prohibits one from assailing the constitutionality of the statute based solely on the violation of the rights of third
persons not before the court. This rule is also known as the prohibition against third-party standing. 66

But this rule admits of exceptions. A petitioner may for instance mount a "facial" challenge to the constitutionality of
a statute even if he claims no violation of his own rights under the assailed statute where it involves free speech on
grounds of overbreadth or vagueness of the statute.

The rationale for this exception is to counter the "chilling effect" on protected speech that comes from statutes
violating free speech. A person who does not know whether his speech constitutes a crime under an overbroad or
vague law may simply restrain himself from speaking in order to avoid being charged of a crime. The overbroad or
vague law thus chills him into silence.67

As already stated, the cyberspace is an incomparable, pervasive medium of communication. It is inevitable that any
government threat of punishment regarding certain uses of the medium creates a chilling effect on the
65
constitutionally-protected freedom of expression of the great masses that use it. In this case, the particularly
complex web of interaction on social media websites would give law enforcers such latitude that they could
arbitrarily or selectively enforce the law.

Who is to decide when to prosecute persons who boost the visibility of a posting on the internet by liking it? Netizens
are not given "fair notice" or warning as to what is criminal conduct and what is lawful conduct. When a case is filed,
how will the court ascertain whether or not one netizen’s comment aided and abetted a cybercrime while another
comment did not?

Of course, if the "Comment" does not merely react to the original posting but creates an altogether new defamatory
story against Armand like "He beats his wife and children," then that should be considered an original posting
published on the internet. Both the penal code and the cybercrime law clearly punish authors of defamatory
publications. Make no mistake, libel destroys reputations that society values. Allowed to cascade in the internet, it
will destroy relationships and, under certain circumstances, will generate enmity and tension between social or
economic groups, races, or religions, exacerbating existing tension in their relationships.

In regard to the crime that targets child pornography, when "Google procures, stores, and indexes child
pornography and facilitates the completion of transactions involving the dissemination of child pornography," does
this make Google and its users aiders and abettors in the commission of child pornography crimes?  Byars 68

highlights a feature in the American law on child pornography that the Cybercrimes law lacks—the exemption of a
provider or notably a plain user of interactive computer service from civil liability for child pornography as follows:

No provider or user of an interactive computer service shall be treated as the publisher or speaker of any
information provided by another information content provider and cannot be held civilly liable for any action
voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be
obscene...whether or not such material is constitutionally protected. 69

When a person replies to a Tweet containing child pornography, he effectively republishes it whether wittingly or
unwittingly. Does this make him a willing accomplice to the distribution of child pornography? When a user
downloads the Facebook mobile application, the user may give consent to Facebook to access his contact details.
In this way, certain information is forwarded to third parties and unsolicited commercial communication could be
disseminated on the basis of this information.  As the source of this information, is the user aiding the distribution of
70

this communication? The legislature needs to address this clearly to relieve users of annoying fear of possible
criminal prosecution.

Section 5 with respect to Section 4(c)(4) is unconstitutional. Its vagueness raises apprehension on the part of
internet users because of its obvious chilling effect on the freedom of expression, especially since the crime of
aiding or abetting ensnares all the actors in the cyberspace front in a fuzzy way. What is more, as the petitioners
point out, formal crimes such as libel are not punishable unless consummated.  In the absence of legislation tracing
71

the interaction of netizens and their level of responsibility such as in other countries, Section 5, in relation to Section
4(c)(4) on Libel, Section 4(c)(3) on Unsolicited Commercial Communications, and Section 4(c)(2) on Child
Pornography, cannot stand scrutiny.

But the crime of aiding or abetting the commission of cybercrimes under Section 5 should be permitted to apply to
Section 4(a)(1) on Illegal Access, Section 4(a)(2) on Illegal Interception, Section 4(a)(3) on Data Interference,
Section 4(a)(4) on System Interference, Section 4(a)(5) on Misuse of Devices, Section 4(a)(6) on Cyber-squatting,
Section 4(b)(1) on Computer-related Forgery, Section 4(b)(2) on Computer-related Fraud, Section 4(b)(3) on
Computer-related Identity Theft, and Section 4(c)(1) on Cybersex. None of these offenses borders on the exercise
of the freedom of expression.

The crime of willfully attempting to commit any of these offenses is for the same reason not objectionable. A hacker
may for instance have done all that is necessary to illegally access another party’s computer system but the security
employed by the system’s lawful owner could frustrate his effort. Another hacker may have gained access to
usernames and passwords of others but fail to use these because the system supervisor is alerted.  If Section 5 that
72

punishes any person who willfully attempts to commit this specific offense is not upheld, the owner of the username
and password could not file a complaint against him for attempted hacking. But this is not right. The hacker should
not be freed from liability simply because of the vigilance of a lawful owner or his supervisor.

Petitioners of course claim that Section 5 lacks positive limits and could cover the innocent.  While this may be true
73

with respect to cybercrimes that tend to sneak past the area of free expression, any attempt to commit the other acts
specified in Section 4(a)(1), Section 4(a)(2), Section 4(a)(3), Section 4(a)(4), Section 4(a)(5), Section 4(a)(6),
Section 4(b)(1), Section 4(b)(2), Section 4(b)(3), and Section 4(c)(1) as well as the actors aiding and abetting the
commission of such acts can be identified with some reasonable certainty through adroit tracking of their works.
Absent concrete proof of the same, the innocent will of course be spared.

Section 6 of the Cybercrime Law

66
Section 6 provides:

Sec. 6. All crimes defined and penalized by the Revised Penal Code, as amended, and special laws, if committed
by, through and with the use of information and communications technologies shall be covered by the relevant
provisions of this Act: Provided, That the penalty to be imposed shall be one (1) degree higher than that provided for
by the Revised Penal Code, as amended, and special laws, as the case may be.

Section 6 merely makes commission of existing crimes through the internet a qualifying circumstance. As the
Solicitor General points out, there exists a substantial distinction between crimes committed through the use of
information and communications technology and similar crimes committed using other means. In using the
technology in question, the offender often evades identification and is able to reach far more victims or cause
greater harm. The distinction, therefore, creates a basis for higher penalties for cybercrimes.

Section 7 of the Cybercrime Law

Section 7 provides:

Sec. 7. Liability under Other Laws. — A prosecution under this Act shall be without prejudice to any liability for
violation of any provision of the Revised Penal Code, as amended, or special laws.

The Solicitor General points out that Section 7 merely expresses the settled doctrine that a single set of acts may be
prosecuted and penalized simultaneously under two laws, a special law and the Revised Penal Code. When two
different laws define two crimes, prior jeopardy as to one does not bar 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.  With the exception of the crimes of online libel and online child pornography, the Court would rather leave
74

the determination of the correct application of Section 7 to actual cases.

Online libel is different. There should be no question that if the published material on print, said to be libelous, is
again posted online or vice versa, that identical material cannot be the subject of two separate libels. The two
offenses, one a violation of Article 353 of the Revised Penal Code and the other a violation of Section 4(c)(4) of R.A.
10175 involve essentially the same elements and are in fact one and the same offense. Indeed, the OSG itself
claims that online libel under Section 4(c)(4) is not a new crime but is one already punished under Article 353.
Section 4(c)(4) merely establishes the computer system as another means of publication.  Charging the offender
75

under both laws would be a blatant violation of the proscription against double jeopardy. 76

The same is true with child pornography committed online. Section 4(c)(2) merely expands the ACPA’s scope so as
to include identical activities in cyberspace. As previously discussed, ACPA’s definition of child pornography in fact
already covers the use of "electronic, mechanical, digital, optical, magnetic or any other means." Thus, charging the
offender under both Section 4(c)(2) and ACPA would likewise be tantamount to a violation of the constitutional
prohibition against double jeopardy.

Section 8 of the Cybercrime Law

Section 8 provides:

Sec. 8. Penalties. — Any person found guilty of any of the punishable acts enumerated in Sections 4(a) and 4(b) of
this Act shall be punished with imprisonment of prision mayor or a fine of at least Two hundred thousand pesos
(Ph₱200,000.00) up to a maximum amount commensurate to the damage incurred or both.

Any person found guilty of the punishable act under Section 4(a)(5) shall be punished with imprisonment of prision
mayor or a fine of not more than Five hundred thousand pesos (Ph₱500,000.00) or both.

If punishable acts in Section 4(a) are committed against critical infrastructure, the penalty of reclusion temporal or a
fine of at least Five hundred thousand pesos (Ph₱500,000.00) up to maximum amount commensurate to the
damage incurred or both, shall be imposed.

Any person found guilty of any of the punishable acts enumerated in Section 4(c)(1) of this Act shall be punished
with imprisonment of prision mayor or a fine of at least Two hundred thousand pesos (Ph₱200,000.00) but not
exceeding One million pesos (Ph₱1,000,000.00) or both.

Any person found guilty of any of the punishable acts enumerated in Section 4(c)(2) of this Act shall be punished
with the penalties as enumerated in Republic Act No. 9775 or the "Anti-Child Pornography Act of 2009:" Provided,
That the penalty to be imposed shall be one (1) degree higher than that provided for in Republic Act No. 9775, if
committed through a computer system.

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Any person found guilty of any of the punishable acts enumerated in Section 4(c)(3) shall be punished with
imprisonment of arresto mayor or a fine of at least Fifty thousand pesos (Ph₱50,000.00) but not exceeding Two
hundred fifty thousand pesos (Ph₱250,000.00) or both.

Any person found guilty of any of the punishable acts enumerated in Section 5 shall be punished with imprisonment
one (1) degree lower than that of the prescribed penalty for the offense or a fine of at least One hundred thousand
pesos (Ph₱100,000.00) but not exceeding Five hundred thousand pesos (Ph₱500,000.00) or both.

Section 8 provides for the penalties for the following crimes: Sections 4(a) on Offenses Against the Confidentiality,
Integrity and Availability of Computer Data and Systems; 4(b) on Computer-related Offenses; 4(a)(5) on Misuse of
Devices; when the crime punishable under 4(a) is committed against critical infrastructure; 4(c)(1) on Cybersex; 4(c)
(2) on Child Pornography; 4(c)(3) on Unsolicited Commercial Communications; and Section 5 on Aiding or Abetting,
and Attempt in the Commission of Cybercrime.

The matter of fixing penalties for the commission of crimes is as a rule a legislative prerogative. Here the legislature
prescribed a measure of severe penalties for what it regards as deleterious cybercrimes. They appear proportionate
to the evil sought to be punished. The power to determine penalties for offenses is not diluted or improperly wielded
simply because at some prior time the act or omission was but an element of another offense or might just have
been connected with another crime.  Judges and magistrates can only interpret and apply them and have no
77

authority to modify or revise their range as determined by the legislative department.

The courts should not encroach on this prerogative of the lawmaking body. 78

Section 12 of the Cybercrime Law

Section 12 provides:

Sec. 12. Real-Time Collection of Traffic Data. — Law enforcement authorities, with due cause, shall be authorized
to collect or record by technical or electronic means traffic data in real-time associated with specified
communications transmitted by means of a computer system.

Traffic data refer only to the communication’s origin, destination, route, time, date, size, duration, or type of
underlying service, but not content, nor identities.

All other data to be collected or seized or disclosed will require a court warrant.

Service providers are required to cooperate and assist law enforcement authorities in the collection or recording of
the above-stated information.

The court warrant required under this section shall only be issued or granted upon written application and the
examination under oath or affirmation of the applicant and the witnesses he may produce and the showing: (1) that
there are reasonable grounds to believe that any of the crimes enumerated hereinabove has been committed, or is
being committed, or is about to be committed; (2) that there are reasonable grounds to believe that evidence that
will be obtained is essential to the conviction of any person for, or to the solution of, or to the prevention of, any such
crimes; and (3) that there are no other means readily available for obtaining such evidence.

Petitioners assail the grant to law enforcement agencies of the power to collect or record traffic data in real time as
tending to curtail civil liberties or provide opportunities for official abuse. They claim that data showing where digital
messages come from, what kind they are, and where they are destined need not be incriminating to their senders or
recipients before they are to be protected. Petitioners invoke the right of every individual to privacy and to be
protected from government snooping into the messages or information that they send to one another.

The first question is whether or not Section 12 has a proper governmental purpose since a law may require the
disclosure of matters normally considered private but then only upon showing that such requirement has a rational
relation to the purpose of the law,  that there is a compelling State interest behind the law, and that the provision
79

itself is narrowly drawn.  In assessing regulations affecting privacy rights, courts should balance the legitimate
80

concerns of the State against constitutional guarantees. 81

Undoubtedly, the State has a compelling interest in enacting the cybercrime law for there is a need to put order to
the tremendous activities in cyberspace for public good.  To do this, it is within the realm of reason that the
82

government should be able to monitor traffic data to enhance its ability to combat all sorts of cybercrimes.

Chapter IV of the cybercrime law, of which the collection or recording of traffic data is a part, aims to provide law
enforcement authorities with the power they need for spotting, preventing, and investigating crimes committed in
cyberspace. Crime-fighting is a state business. Indeed, as Chief Justice Sereno points out, the Budapest
Convention on Cybercrimes requires signatory countries to adopt legislative measures to empower state authorities

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to collect or record "traffic data, in real time, associated with specified communications."  And this is precisely what
83

Section 12 does. It empowers law enforcement agencies in this country to collect or record such data.

But is not evidence of yesterday’s traffic data, like the scene of the crime after it has been committed, adequate for
fighting cybercrimes and, therefore, real-time data is superfluous for that purpose? Evidently, it is not. Those who
commit the crimes of accessing a computer system without right,  transmitting viruses,  lasciviously exhibiting
84 85

sexual organs or sexual activity for favor or consideration;  and producing child pornography  could easily evade
86 87

detection and prosecution by simply moving the physical location of their computers or laptops from day to day. In
this digital age, the wicked can commit cybercrimes from virtually anywhere: from internet cafés, from kindred places
that provide free internet services, and from unregistered mobile internet connectors. Criminals using cellphones
under pre-paid arrangements and with unregistered SIM cards do not have listed addresses and can neither be
located nor identified. There are many ways the cyber criminals can quickly erase their tracks. Those who peddle
child pornography could use relays of computers to mislead law enforcement authorities regarding their places of
operations. Evidently, it is only real-time traffic data collection or recording and a subsequent recourse to court-
issued search and seizure warrant that can succeed in ferreting them out.

Petitioners of course point out that the provisions of Section 12 are too broad and do not provide ample safeguards
against crossing legal boundaries and invading the people’s right to privacy. The concern is understandable.
Indeed, the Court recognizes in Morfe v. Mutuc  that certain constitutional guarantees work together to create zones
88

of privacy wherein governmental powers may not intrude, and that there exists an independent constitutional right of
privacy. Such right to be left alone has been regarded as the beginning of all freedoms. 89

But that right is not unqualified. In Whalen v. Roe,  the United States Supreme Court classified privacy into two
90

categories: decisional privacy and informational privacy. Decisional privacy involves the right to independence in
making certain important decisions, while informational privacy refers to the interest in avoiding disclosure of
personal matters. It is the latter right—the right to informational privacy—that those who oppose government
collection or recording of traffic data in real-time seek to protect.

Informational privacy has two aspects: the right not to have private information disclosed, and the right to live freely
without surveillance and intrusion.  In determining whether or not a matter is entitled to the right to privacy, this
91

Court has laid down a two-fold test. The first is a subjective test, where one claiming the right must have an actual or
legitimate expectation of privacy over a certain matter. The second is an objective test, where his or her expectation
of privacy must be one society is prepared to accept as objectively reasonable. 92

Since the validity of the cybercrime law is being challenged, not in relation to its application to a particular person or
group, petitioners’ challenge to Section 12 applies to all information and communications technology (ICT) users,
meaning the large segment of the population who use all sorts of electronic devices to communicate with one
another. Consequently, the expectation of privacy is to be measured from the general public’s point of view. Without
reasonable expectation of privacy, the right to it would have no basis in fact.

As the Solicitor General points out, an ordinary ICT user who courses his communication through a service provider,
must of necessity disclose to the latter, a third person, the traffic data needed for connecting him to the recipient ICT
user. For example, an ICT user who writes a text message intended for another ICT user must furnish his service
provider with his cellphone number and the cellphone number of his recipient, accompanying the message sent. It is
this information that creates the traffic data. Transmitting communications is akin to putting a letter in an envelope
properly addressed, sealing it closed, and sending it through the postal service. Those who post letters have no
expectations that no one will read the information appearing outside the envelope.

Computer data—messages of all kinds—travel across the internet in packets and in a way that may be likened to
parcels of letters or things that are sent through the posts. When data is sent from any one source, the content is
broken up into packets and around each of these packets is a wrapper or header. This header contains the traffic
data: information that tells computers where the packet originated, what kind of data is in the packet (SMS, voice
call, video, internet chat messages, email, online browsing data, etc.), where the packet is going, and how the
packet fits together with other packets.  The difference is that traffic data sent through the internet at times across
93

the ocean do not disclose the actual names and addresses (residential or office) of the sender and the recipient,
only their coded internet protocol (IP) addresses. The packets travel from one computer system to another where
their contents are pieced back together.

Section 12 does not permit law enforcement authorities to look into the contents of the messages and uncover the
identities of the sender and the recipient.

For example, when one calls to speak to another through his cellphone, the service provider’s communication’s
system will put his voice message into packets and send them to the other person’s cellphone where they are
refitted together and heard. The latter’s spoken reply is sent to the caller in the same way. To be connected by the
service provider, the sender reveals his cellphone number to the service provider when he puts his call through. He
also reveals the cellphone number to the person he calls. The other ways of communicating electronically follow the
same basic pattern.

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In Smith v. Maryland,  cited by the Solicitor General, the United States Supreme Court reasoned that telephone
94

users in the ‘70s must realize that they necessarily convey phone numbers to the telephone company in order to
complete a call. That Court ruled that even if there is an expectation that phone numbers one dials should remain
private, such expectation is not one that society is prepared to recognize as reasonable.

In much the same way, ICT users must know that they cannot communicate or exchange data with one another
over cyberspace except through some service providers to whom they must submit certain traffic data that are
needed for a successful cyberspace communication. The conveyance of this data takes them out of the private
sphere, making the expectation to privacy in regard to them an expectation that society is not prepared to recognize
as reasonable.

The Court, however, agrees with Justices Carpio and Brion that when seemingly random bits of traffic data are
gathered in bulk, pooled together, and analyzed, they reveal patterns of activities which can then be used to create
profiles of the persons under surveillance. With enough traffic data, analysts may be able to determine a person’s
close associations, religious views, political affiliations, even sexual preferences. Such information is likely beyond
what the public may expect to be disclosed, and clearly falls within matters protected by the right to privacy. But has
the procedure that Section 12 of the law provides been drawn narrowly enough to protect individual rights?

Section 12 empowers law enforcement authorities, "with due cause," to collect or record by technical or electronic
means traffic data in real-time. Petitioners point out that the phrase "due cause" has no precedent in law or
jurisprudence and that whether there is due cause or not is left to the discretion of the police. Replying to this, the
Solicitor General asserts that Congress is not required to define the meaning of every word it uses in drafting the
law.

Indeed, courts are able to save vague provisions of law through statutory construction. But the cybercrime law,
dealing with a novel situation, fails to hint at the meaning it intends for the phrase "due cause." The Solicitor General
suggests that "due cause" should mean "just reason or motive" and "adherence to a lawful procedure." But the
Court cannot draw this meaning since Section 12 does not even bother to relate the collection of data to the
probable commission of a particular crime. It just says, "with due cause," thus justifying a general gathering of data.
It is akin to the use of a general search warrant that the Constitution prohibits.

Due cause is also not descriptive of the purpose for which data collection will be used. Will the law enforcement
agencies use the traffic data to identify the perpetrator of a cyber attack? Or will it be used to build up a case against
an identified suspect? Can the data be used to prevent cybercrimes from happening?

The authority that Section 12 gives law enforcement agencies is too sweeping and lacks restraint. While it says that
traffic data collection should not disclose identities or content data, such restraint is but an illusion. Admittedly,
nothing can prevent law enforcement agencies holding these data in their hands from looking into the identity of
their sender or receiver and what the data contains. This will unnecessarily expose the citizenry to leaked
information or, worse, to extortion from certain bad elements in these agencies.

Section 12, of course, limits the collection of traffic data to those "associated with specified communications." But
this supposed limitation is no limitation at all since, evidently, it is the law enforcement agencies that would specify
the target communications. The power is virtually limitless, enabling law enforcement authorities to engage in
"fishing expedition," choosing whatever specified communication they want. This evidently threatens the right of
individuals to privacy.

The Solicitor General points out that Section 12 needs to authorize collection of traffic data "in real time" because it
is not possible to get a court warrant that would authorize the search of what is akin to a "moving vehicle." But
warrantless search is associated with a police officer’s determination of probable cause that a crime has been
committed, that there is no opportunity for getting a warrant, and that unless the search is immediately carried out,
the thing to be searched stands to be removed. These preconditions are not provided in Section 12.

The Solicitor General is honest enough to admit that Section 12 provides minimal protection to internet users and
that the procedure envisioned by the law could be better served by providing for more robust safeguards. His bare
assurance that law enforcement authorities will not abuse the provisions of Section 12 is of course not enough. The
grant of the power to track cyberspace communications in real time and determine their sources and destinations
must be narrowly drawn to preclude abuses. 95

Petitioners also ask that the Court strike down Section 12 for being violative of the void-for-vagueness doctrine and
the overbreadth doctrine. These doctrines however, have been consistently held by this Court to apply only to free
speech cases. But Section 12 on its own neither regulates nor punishes any type of speech. Therefore, such
analysis is unnecessary.

This Court is mindful that advances in technology allow the government and kindred institutions to monitor
individuals and place them under surveillance in ways that have previously been impractical or even impossible. "All
the forces of a technological age x x x operate to narrow the area of privacy and facilitate intrusions into it. In
70
modern terms, the capacity to maintain and support this enclave of private life marks the difference between a
democratic and a totalitarian society."  The Court must ensure that laws seeking to take advantage of these
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technologies be written with specificity and definiteness as to ensure respect for the rights that the Constitution
guarantees.

Section 13 of the Cybercrime Law

Section 13 provides:

Sec. 13. Preservation of Computer Data. — The integrity of traffic data and subscriber information relating to
communication services provided by a service provider shall be preserved for a minimum period of six (6) months
from the date of the transaction. Content data shall be similarly preserved for six (6) months from the date of receipt
of the order from law enforcement authorities requiring its preservation.

Law enforcement authorities may order a one-time extension for another six (6) months: Provided, That once
computer data preserved, transmitted or stored by a service provider is used as evidence in a case, the mere
furnishing to such service provider of the transmittal document to the Office of the Prosecutor shall be deemed a
notification to preserve the computer data until the termination of the case.

The service provider ordered to preserve computer data shall keep confidential the order and its compliance.

Petitioners in G.R. 203391  claim that Section 13 constitutes an undue deprivation of the right to property. They
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liken the data preservation order that law enforcement authorities are to issue as a form of garnishment of personal
property in civil forfeiture proceedings. Such order prevents internet users from accessing and disposing of traffic
data that essentially belong to them.

No doubt, the contents of materials sent or received through the internet belong to their authors or recipients and
are to be considered private communications. But it is not clear that a service provider has an obligation to
indefinitely keep a copy of the same as they pass its system for the benefit of users. By virtue of Section 13,
however, the law now requires service providers to keep traffic data and subscriber information relating to
communication services for at least six months from the date of the transaction and those relating to content data for
at least six months from receipt of the order for their preservation.

Actually, the user ought to have kept a copy of that data when it crossed his computer if he was so minded. The
service provider has never assumed responsibility for their loss or deletion while in its keep.

At any rate, as the Solicitor General correctly points out, the data that service providers preserve on orders of law
enforcement authorities are not made inaccessible to users by reason of the issuance of such orders. The process
of preserving data will not unduly hamper the normal transmission or use of the same.

Section 14 of the Cybercrime Law

Section 14 provides:

Sec. 14. Disclosure of Computer Data. — Law enforcement authorities, upon securing a court warrant, shall issue
an order requiring any person or service provider to disclose or submit subscriber’s information, traffic data or
relevant data in his/its possession or control within seventy-two (72) hours from receipt of the order in relation to a
valid complaint officially docketed and assigned for investigation and the disclosure is necessary and relevant for
the purpose of investigation.

The process envisioned in Section 14 is being likened to the issuance of a subpoena. Petitioners’ objection is that
the issuance of subpoenas is a judicial function. But it is well-settled that the power to issue subpoenas is not
exclusively a judicial function. Executive agencies have the power to issue subpoena as an adjunct of their
investigatory powers. 98

Besides, what Section 14 envisions is merely the enforcement of a duly issued court warrant, a function usually
lodged in the hands of law enforcers to enable them to carry out their executive functions. The prescribed procedure
for disclosure would not constitute an unlawful search or seizure nor would it violate the privacy of communications
and correspondence. Disclosure can be made only after judicial intervention.

Section 15 of the Cybercrime Law

Section 15 provides:

Sec. 15. Search, Seizure and Examination of Computer Data. — Where a search and seizure warrant is properly
issued, the law enforcement authorities shall likewise have the following powers and duties.
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Within the time period specified in the warrant, to conduct interception, as defined in this Act, and:

(a) To secure a computer system or a computer data storage medium;

(b) To make and retain a copy of those computer data secured;

(c) To maintain the integrity of the relevant stored computer data;

(d) To conduct forensic analysis or examination of the computer data storage medium; and

(e) To render inaccessible or remove those computer data in the accessed computer or computer and
communications network.

Pursuant thereof, the law enforcement authorities may order any person who has knowledge about the functioning
of the computer system and the measures to protect and preserve the computer data therein to provide, as is
reasonable, the necessary information, to enable the undertaking of the search, seizure and examination.

Law enforcement authorities may request for an extension of time to complete the examination of the computer data
storage medium and to make a return thereon but in no case for a period longer than thirty (30) days from date of
approval by the court.

Petitioners challenge Section 15 on the assumption that it will supplant established search and seizure procedures.
On its face, however, Section 15 merely enumerates the duties of law enforcement authorities that would ensure the
proper collection, preservation, and use of computer system or data that have been seized by virtue of a court
warrant. The exercise of these duties do not pose any threat on the rights of the person from whom they were taken.
Section 15 does not appear to supersede existing search and seizure rules but merely supplements them.

Section 17 of the Cybercrime Law

Section 17 provides:

Sec. 17. Destruction of Computer Data. — Upon expiration of the periods as provided in Sections 13 and 15, service
providers and law enforcement authorities, as the case may be, shall immediately and completely destroy the
computer data subject of a preservation and examination.

Section 17 would have the computer data, previous subject of preservation or examination, destroyed or deleted
upon the lapse of the prescribed period. The Solicitor General justifies this as necessary to clear up the service
provider’s storage systems and prevent overload. It would also ensure that investigations are quickly concluded.

Petitioners claim that such destruction of computer data subject of previous preservation or examination violates the
user’s right against deprivation of property without due process of law. But, as already stated, it is unclear that the
user has a demandable right to require the service provider to have that copy of the data saved indefinitely for him
in its storage system. If he wanted them preserved, he should have saved them in his computer when he generated
the data or received it. He could also request the service provider for a copy before it is deleted.

Section 19 of the Cybercrime Law

Section 19 empowers the Department of Justice to restrict or block access to computer data:

Sec. 19. Restricting or Blocking Access to Computer Data.— When a computer data is prima facie found to be in
violation of the provisions of this Act, the DOJ shall issue an order to restrict or block access to such computer data.

Petitioners contest Section 19 in that it stifles freedom of expression and violates the right against unreasonable
searches and seizures. The Solicitor General concedes that this provision may be unconstitutional. But since laws
enjoy a presumption of constitutionality, the Court must satisfy itself that Section 19 indeed violates the freedom and
right mentioned.

Computer data  may refer to entire programs or lines of code, including malware, as well as files that contain texts,
99

images, audio, or video recordings. Without having to go into a lengthy discussion of property rights in the digital
space, it is indisputable that computer data, produced or created by their writers or authors may constitute personal
property. Consequently, they are protected from unreasonable searches and seizures, whether while stored in their
personal computers or in the service provider’s systems.

Section 2, Article III of the 1987 Constitution provides that the right to be secure in one’s papers and effects against
unreasonable searches and seizures of whatever nature and for any purpose shall be inviolable. Further, it states

72
that no search warrant shall issue except upon probable cause to be determined personally by the judge. Here, the
Government, in effect, seizes and places the computer data under its control and disposition without a warrant. The
Department of Justice order cannot substitute for judicial search warrant.

The content of the computer data can also constitute speech. In such a case, Section 19 operates as a restriction
on the freedom of expression over cyberspace. Certainly not all forms of speech are protected. Legislature may,
within constitutional bounds, declare certain kinds of expression as illegal. But for an executive officer to seize
content alleged to be unprotected without any judicial warrant, it is not enough for him to be of the opinion that such
content violates some law, for to do so would make him judge, jury, and executioner all rolled into one. 100

Not only does Section 19 preclude any judicial intervention, but it also disregards jurisprudential guidelines
established to determine the validity of restrictions on speech. Restraints on free speech are generally evaluated on
one of or a combination of three tests: the dangerous tendency doctrine, the balancing of interest test, and the clear
and present danger rule.  Section 19, however, merely requires that the data to be blocked be found prima facie in
101

violation of any provision of the cybercrime law. Taking Section 6 into consideration, this can actually be made to
apply in relation to any penal provision. It does not take into consideration any of the three tests mentioned above.

The Court is therefore compelled to strike down Section 19 for being violative of the constitutional guarantees to
freedom of expression and against unreasonable searches and seizures.

Section 20 of the Cybercrime Law

Section 20 provides:

Sec. 20. Noncompliance. — Failure to comply with the provisions of Chapter IV hereof specifically the orders from
law enforcement authorities shall be punished as a violation of Presidential Decree No. 1829 with imprisonment of
prision correctional in its maximum period or a fine of One hundred thousand pesos (Php100,000.00) or both, for
each and every noncompliance with an order issued by law enforcement authorities.

Petitioners challenge Section 20, alleging that it is a bill of attainder. The argument is that the mere failure to comply
constitutes a legislative finding of guilt, without regard to situations where non-compliance would be reasonable or
valid.

But since the non-compliance would be punished as a violation of Presidential Decree (P.D.) 1829,  Section 20
102

necessarily incorporates elements of the offense which are defined therein. If Congress had intended for Section 20
to constitute an offense in and of itself, it would not have had to make reference to any other statue or provision.

P.D. 1829 states:

Section 1. The penalty of prision correccional in its maximum period, or a fine ranging from 1,000 to 6,000 pesos, or
both, shall be imposed upon any person who knowingly or willfully obstructs, impedes, frustrates or delays the
apprehension of suspects and the investigation and prosecution of criminal cases by committing any of the following
acts:

x x x.

Thus, the act of non-compliance, for it to be punishable, must still be done "knowingly or willfully." There must still be
a judicial determination of guilt, during which, as the Solicitor General assumes, defense and justifications for non-
compliance may be raised. Thus, Section 20 is valid insofar as it applies to the provisions of Chapter IV which are
not struck down by the Court.

Sections 24 and 26(a) of the Cybercrime Law

Sections 24 and 26(a) provide:

Sec. 24. Cybercrime Investigation and Coordinating Center.– There is hereby created, within thirty (30) days from
the effectivity of this Act, an inter-agency body to be known as the Cybercrime Investigation and Coordinating
Center (CICC), under the administrative supervision of the Office of the President, for policy coordination among
concerned agencies and for the formulation and enforcement of the national cybersecurity plan.

Sec. 26. Powers and Functions.– The CICC shall have the following powers and functions:

(a) To formulate a national cybersecurity plan and extend immediate assistance of real time commission of
cybercrime offenses through a computer emergency response team (CERT); x x x.

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Petitioners mainly contend that Congress invalidly delegated its power when it gave the Cybercrime Investigation
and Coordinating Center (CICC) the power to formulate a national cybersecurity plan without any sufficient
standards or parameters for it to follow.

In order to determine whether there is undue delegation of legislative power, the Court has adopted two tests: the
completeness test and the sufficient standard test. Under the first test, the law must be complete in all its terms and
conditions when it leaves the legislature such that when it reaches the delegate, the only thing he will have to do is
to enforce it.  The second test mandates adequate guidelines or limitations in the law to determine the boundaries of
1avvphi1

the delegate’s authority and prevent the delegation from running riot. 103

Here, the cybercrime law is complete in itself when it directed the CICC to formulate and implement a national
cybersecurity plan. Also, contrary to the position of the petitioners, the law gave sufficient standards for the CICC to
follow when it provided a definition of cybersecurity.

Cybersecurity refers to the collection of tools, policies, risk management approaches, actions, training, best
practices, assurance and technologies that can be used to protect cyber environment and organization and user’s
assets.  This definition serves as the parameters within which CICC should work in formulating the cybersecurity
104

plan.

Further, the formulation of the cybersecurity plan is consistent with the policy of the law to "prevent and combat such
[cyber] offenses by facilitating their detection, investigation, and prosecution at both the domestic and international
levels, and by providing arrangements for fast and reliable international cooperation."  This policy is clearly adopted
105

in the interest of law and order, which has been considered as sufficient standard.  Hence, Sections 24 and 26(a)
106

are likewise valid.

WHEREFORE, the Court DECLARES:

1. VOID for being UNCONSTITUTIONAL:

a. Section 4(c)(3) of Republic Act 10175 that penalizes posting of unsolicited commercial communications;

b. Section 12 that authorizes the collection or recording of traffic data in real-time; and

c. Section 19 of the same Act that authorizes the Department of Justice to restrict or block access to
suspected Computer Data.

2. VALID and CONSTITUTIONAL:

a. Section 4(a)(1) that penalizes accessing a computer system without right;

b. Section 4(a)(3) that penalizes data interference, including transmission of viruses;

c. Section 4(a)(6) that penalizes cyber-squatting or acquiring domain name over the internet in bad faith to
the prejudice of others;

d. Section 4(b)(3) that penalizes identity theft or the use or misuse of identifying information belonging to
another;

e. Section 4(c)(1) that penalizes cybersex or the lascivious exhibition of sexual organs or sexual activity for
favor or consideration;

f. Section 4(c)(2) that penalizes the production of child pornography;

g. Section 6 that imposes penalties one degree higher when crimes defined under the Revised Penal Code
are committed with the use of information and communications technologies;

h. Section 8 that prescribes the penalties for cybercrimes;

i. Section 13 that permits law enforcement authorities to require service providers to preserve traffic data
and subscriber information as well as specified content data for six months;

j. Section 14 that authorizes the disclosure of computer data under a court-issued warrant;

k. Section 15 that authorizes the search, seizure, and examination of computer data under a court-issued
warrant;

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 l. Section 17 that authorizes the destruction of previously preserved computer data after the expiration of the
prescribed holding periods;

m. Section 20 that penalizes obstruction of justice in relation to cybercrime investigations;

n. Section 24 that establishes a Cybercrime Investigation and Coordinating Center (CICC);

o. Section 26(a) that defines the CICC’s Powers and Functions; and

p. Articles 353, 354, 361, and 362 of the Revised Penal Code that penalizes libel.

Further, the Court DECLARES:

1. Section 4(c)(4) that penalizes online libel as VALID and CONSTITUTIONAL with respect to the original
author of the post; but VOID and UNCONSTITUTIONAL with respect to others who simply receive the post
and react to it; and

2. Section 5 that penalizes aiding or abetting and attempt in the commission of cybercrimes as VA L I D and
CONSTITUTIONAL only in relation to Section 4(a)(1) on Illegal Access, Section 4(a)(2) on Illegal
Interception, Section 4(a)(3) on Data Interference, Section 4(a)(4) on System

Interference, Section 4(a)(5) on Misuse of Devices, Section 4(a)(6) on Cyber-squatting, Section 4(b)(1) on
Computer-related Forgery, Section 4(b)(2) on Computer-related Fraud, Section 4(b)(3) on Computer-related Identity
Theft, and Section 4(c)(1) on Cybersex; but VOID and UNCONSTITUTIONAL with respect to Sections 4(c)(2) on
Child Pornography, 4(c)(3) on Unsolicited Commercial Communications, and 4(c)(4) on online Libel. 1âwphi1

Lastly, the Court RESOLVES to LEAVE THE DETERMINATION of the correct application of Section 7 that
authorizes prosecution of the offender under both the Revised Penal Code and Republic Act 10175 to actual cases,
WITH THE EXCEPTION of the crimes of:

1. Online libel as to which, charging the offender under both Section 4(c)(4) of Republic Act 10175 and
Article 353 of the Revised Penal Code constitutes a violation of the proscription against double jeopardy; as
well as

2. Child pornography committed online as to which, charging the offender under both Section 4(c)(2) of
Republic Act 10175 and Republic Act 9775 or the Anti-Child Pornography Act of 2009 also constitutes a
violation of the same proscription, and, in respect to these, is VOID and UNCONSTITUTIONAL.

SO ORDERED.

75
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. CA-14-28-P               February 11, 2014

[Formerly OCA IPI No. 13-208-CA-P]

ANACLETO O. VILLAHERMOSA, SR. and JULETO D. VILLAHERMOSA, Complainants, 

vs.
VICTOR M. SARCIA, Executive Assistant IV and EFREN R. RIVAMONTE, Utility Worker, both from the Court
of Appeals, Manila, Respondents.

RESOLUTION

PER CURIAM:

Before this court is an administrative case involving employees of the Court of Appeals, Manila, who "transacted"
with party-litigants with a pending case before the Court of Appeals.

Respondents Victor M. Sarcia, Executive Assistant IV assigned to the Office of Justice De Guia-Salvador, and Efren
R. Rivamonte of the Maintenance and Utility Section, allegedly promised to help complainants Anacleto O.
Villahermosa, Sr. and Juleto Villahermosa in their pending case in the Court of Appeals and guaranteed the
issuance of a temporary restraining order in their favor. 1

Complainants Villahermosa were petitioners of a petition for review with prayer for temporary restraining order
pending before the Court of Appeals.  Sometime during the third week of October 2008, complainants Villahermosa
2

were eating at Diners Restaurant located on Padre Faura Street, Manila.  Respondent Rivamonte allegedly
3

approached them, introduced himself as an employee of the Court of Appeals, and offered to help in their case
pending before the Court of Appeals.  Respondent Rivamonte allegedly undertook to introduce complainants
4

Villahermosa to a certain "Atty. Vic" who could help them with their case.  After they had talked, complainants
5

Villahermosa gave respondent Rivamonte ₱3,000.00. 6

Complainants Villahermosa and respondent Rivamonte allegedly met again, and the former gave an additional
₱2,000.00 to the latter.
7

After several days, respondent Rivamonte introduced complainants Villahermosa to a certain "Atty. Vic" at Valiente
Restaurant in front of the Court of Appeals building.  Complainants Villahermosa testified that "Atty. Vic" was
8

respondent Victor Sarcia.  During this meeting, they allegedly gave respondent Sarcia ₱10,000.00 and respondent
9

Rivamonte ₱5,000.00. 10

To support their claim of close connection with the Court of Appeals, respondents Sarcia and Rivamonte allegedly
showed complainants Villahermosa an advance copy of a resolution issued by the Fourth Division of the Court of
Appeals.  The resolution stated that the petition was dismissed for failure to comply with certain procedural
11

requirements.  Complainants Villahermosa again gave respondents Sarcia and Rivamonte ₱5,000.00 each.  They
12 13

also allegedly gave complainants Villahermosa a list of their "clients" to bolster their representations.
14

On November 28, 2008, respondent Sarcia allegedly provided complainants Villahermosa a compliance with the
procedural requirements, which the latter filed on the same day.  Complainants Villahermosa again gave
15

respondent Sarcia ₱6,500.00. 16

76
Sometime during the first week of December 2008, respondent Sarcia allegedly helped complainants Villahermosa
draft and prepare an amended/supplemental petition for certiorari that would be filed before the Court of
Appeals. Again, complainants Villahermosa gave respondent Sarcia ₱5,000.00.
17 18

During the second week of January 2009, complainants Villahermosa received a notice to vacate from the lower
court. This prompted complainants Villahermosa to inquire from respondent Rivamonte regarding the issuance of
the temporary restraining order prayed for in their petition filed before the Court of Appeals.  Respondent Rivamonte
19

then allegedly advised them to give ₱2,000.00 to a sheriff in Makati City. Complainants Villahermosa gave
respondent Rivamonte another ₱2,000.00. 20

Complainants Villahermosa also alleged that during one of their meetings, respondent Rivamonte demanded a letter
of support from them for the appointment of Justice Andres B. Reyes, Jr. as Supreme Court Justice. 21

On February 16, 2009, complainants Villahermosa received a resolution from the Court of Appeals denying the
application for a temporary restraining order.  They then asked respondent Sarcia about the denial but were told
22

that it was in their favor. 23

Upon the advice of respondent Sarcia, complainants Villahermosa drafted a memorandum.  The draft memorandum
24

was handed to respondent Rivamonte after he had received another ₱500.00 from complainants Villahermosa.
Respondent Sarcia then sent the "final" memorandum to complainants Villahermosa which they filed on March 3,
2009.25

Complainants Villahermosa inquired from the Court of Appeals regarding their prayer for the issuance of a
temporary restraining order.  An employee of the Court of Appeals informed them that their prayer was
26

denied. Sensing that something went wrong with their transaction, complainants Villahermosa filed a joint
27

complaint-affidavit  dated July 10, 2009 against respondents Sarcia and Rivamonte. The complaint-affidavit further
28

alleged that text messages were exchanged between complainants Villahermosa and respondent Sarcia on the
decision on the petition pending before the Court of Appeals. 29

On July 15, 2009, the Assistant Clerk of Court of the Court of Appeals, Manila, directed respondents Sarcia and
Rivamonte to file their counter-affidavits/comments on the joint complaint-affidavit filed by complainants
Villahermosa. 30

In their counter-affidavits, respondents Sarcia and Rivamonte did not deny receiving money from complainants
Villahermosa. However, they alleged that the money was given to them voluntarily for the assistance they rendered
to complainants Villahermosa. 31

Respondent Rivamonte alleged that complainants Villahermosa were the ones who approached him. Also, the
money was given to him as a token of appreciation for helping "them find somebody who could give them sound
legal advice." 32

Moreover, respondent Sarcia alleged that the money was given to him for drafting the amended petition.  The 33

compliance and memorandum were allegedly prepared free of charge.  However, respondent Sarcia denied giving
34

complainants Villahermosa an advance copy of the resolution denying their petition. 35

Respondent Sarcia also admitted sending the text messages to complainants Villahermosa and misrepresenting to
the latter that their alternative prayer was favorably acted upon by the Court of Appeals. However, respondent
Sarcia reasoned that he only sent the text messages to put a stop to complainants Villahermosa’s endless questions
about their case. 36

The Office of the Court Administrator found respondents Sarcia and Rivamonte guilty of grave misconduct and
conduct prejudicial to the best interest of the service. In its report dated September 10, 2013,  it recommended their
37

dismissal from service with forfeiture of all retirement benefits, except accrued leave credits, and with prejudice to
re-employment in any branch or instrumentality of the government, including government-owned or controlled
corporations. 38

After a careful review of the facts of the case and the arguments of the parties, we find the recommendation of the
Office of the Court Administrator in order.

Court personnel, regardless of position or rank, are expected to conduct themselves in accordance with the strict
standards of integrity and morality. Indeed, the "special nature of [court personnel's] duties and responsibilities" is
recognized through the adoption of a separate Code of Conduct especially for them.  The acts of court personnel
39

reflect on the judiciary.  Thus, it is necessary that they uphold the ideals of the judiciary.
40

Respondents Sarcia and Rivamonte knew that complainants Villahermosa had a pending case before the Court of
Appeals. As admitted by respondents Sarcia and Rivamonte, they received money from complainants Villahermosa.

77
The Office of the Court Administrator found that the money was received through extortion from complainants
Villahermosa on the promise of a favorable decision from the Court of Appeals.  Thus, it found respondents Sarcia
41

and Rivamonte guilty of grave misconduct and conduct prejudicial to the best interest of the service. 42

Grave misconduct was defined in Ramos v. Limeta  as a serious transgression of some established and definite
43

rule of action (such as unlawful behavior or gross negligence by the public officer or employee) that tends to
threaten the very existence of the system of administration of justice an official or employee serves. It may manifest
itself in corruption, or in other similar acts, done with the clear intent to violate the law or in flagrant disregard of
established rules.  (Citations omitted)
44

In several cases, this court has held that the court personnel’s act of soliciting or receiving money from litigants
constitutes grave misconduct.  The sole act of receiving money from litigants, whatever the reason may be, is
45

antithesis to being a court employee.

The Code of Conduct for Court Personnel  requires that court personnel avoid conflicts of interest in performing
46

official duties.  It mandates that court personnel should not receive tips or other remunerations for assisting or
47

attending to parties engaged in transactions or involved in actions or proceedings with the judiciary.  "The Court has
48

always stressed that all members of the judiciary should be free from any whiff of impropriety, not only with respect
to their duties in the judicial branch but also to their behavior outside the court as private individuals, in order that
the integrity and good name of the courts of justice shall be preserved."  Court personnel cannot take advantage of
49

the vulnerability of party-litigants.

Grave misconduct merits dismissal.  In some cases, the court exercised its discretion to assess mitigating
50

circumstances such as length of service or the fact that a transgression might be the first offense of respondents.
However, due to the gravity of the acts of respondents Sarcia and Rivamonte, no mitigating circumstances can be
appreciated.

To the dismay of this court, it has received many complaints from party-litigants against court employees extorting
money from them. This court has already heard various reasons given by court employees for receiving money from
party-litigants. Thus, this court has held that money given voluntarily is not a defense.  Alleged good intentions to
51

help party-litigants are self-serving and will not absolve the misconduct committed by court employees. 52

There is no defense in receiving money from party-litigants. The act itself makes court employees guilty of grave
misconduct. They must bear the penalty of dismissal.

Indeed, "[a]s a court employee, [one] should be more circumspect in [one’s] behavior and should [steer] clear of any
situation casting the slightest of doubt on [one’s] conduct."53

We note further the following admitted acts of respondent Sarcia, which merit on their own the penalty of dismissal.

Respondent Sarcia misrepresented himself as a lawyer and drafted pleadings for a party-litigant for a fee.  The 1awp++i1

pleadings were filed in the same court where he is employed. Respondent Sarcia discussed with a party-litigant the
latter's case pending before the Court of Appeals. Worse, respondent Sarcia misrepresented to complainants
Villahermosa the outcome of their case.

These acts of respondent Sarcia constitute dishonesty.

Dishonesty has been defined as "the disposition to lie, cheat, deceive or defraud; untrustworthiness; lack of integrity;
lack of honesty, probity, or integrity in principle; lack of fairness and straightforwardness; disposition to defraud,
deceive or betray." 54

Complainants Villahermosa should have been told that court personnel cannot disclose information regarding a
pending case, which is not yet public. However, respondent Sarcia did not do so and chose to lie and fabricate the
outcome of a case. This, we cannot tolerate.

WHEREFORE, respondents Victor M. Sarcia and Efren R. Rivamonte are found GUILTY of GRAVE
MISCONDUCT. Respondent Victor M. Sarcia is further found GUILTY of SERIOUS DISHONESTY. Respondents
Sarcia and Rivamonte are DISMISSED FROM THE SERVICE with forfeiture of retirement benefits and perpetual
disqualification from holding public office in any branch or instrumentality of the government, including government-
owned or controlled corporations.

Let a copy of this decision be forwarded to the Department of Justice for the filing of the appropriate criminal action,
if warranted.

SO ORDERED.

78
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 176830               February 11, 2014

SATURNINO C. OCAMPO, Petitioner, 
vs.
HON. EPHREM S. ABANDO, in his capacity as Presiding Judge of the Regional Trial Court of Hilongos,
Leyte, Branch 18, CESAR M. MERIN, in. his capacity as Approving Prosecutor and Officer-in-Charge,
ROSULO U. VIVERO, in his capacity as Investigating Prosecutor, RAUL M. GONZALEZ, in his capacity as
Secretary of the Department of Justice, Respondents.

x-----------------------x

G.R. No. 185587

RANDALL B. ECHANIS, Petitioner, 
vs.
HON. THELMA BUNYl-MEDINA, in her capacity as Presiding Judge of the Regional Trial Court of Manila,
Branch 32, HON. EPHREM S. ABANDO, in his capacity as Presiding Judge of the Regional Trial Court of
Hilongos, Leyte, Branch 18, CESAR M. MERIN, in his capacity as Approving Prosecutor and Officer-in-
Charge, ROSULO U. VIVERO, in his capacity as Investigating Prosecutor, RAUL M. GONZALEZ, in his
capacity as Secretary of the Department of Justice, Respondents.

x-----------------------x

G.R. No. 185636

RAFAEL G. BAYLOSIS, Petitioner, 
vs.
HON. THELMA BUNYI-MEDINA, in her capacity as Presiding Judge of the Regional Trial Court of Manila,
Branch 32, HON. EPHREM S. ABANDO, in his capacity as Presiding Judge of the Regional Trial Court of
Hilongos, Leyte, Branch 18, CESAR M. MERIN, in his capacity as Approving Prosecutor and Officer-in-
Charge, ROSULO U. VIVERO, in his capacity as Investigating Prosecutor, RAUL M. GONZALEZ, in his
capacity as Secretary of the Department of Justice, Respondents.

x-----------------------x

G.R. No. 190005

VICENTE P. LADLAD, Petitioner, 
vs.
HON. THELMA BUNYI-MEDINA, in her capacity as Presiding Judge of the Regional Trial Court of Manila,
Branch 32, and the PEOPLE OF THE PHILIPPINES, Respondents.

DECISION

SERENO, CJ.:

79
On 26 August 2006, a mass grave was discovered by elements of the 43rd Infantry Brigade of the Philippine Army
at Sitio Sapang Daco, Barangay Kaulisihan, Inopacan, Leyte.  The mass grave contained skeletal remains of
1

individuals believed to be victims of "Operation Venereal Disease" (Operation VD) launched by members of the
Communist Party of the Philippines/New People’s Army/National Democratic Front of the Philippines
(CPP/NPA/NDFP) to purge their ranks of suspected military informers.

While the doctrine of hierarchy of courts normally precludes a direct invocation of this Court’s jurisdiction, we take
cognizance of these petitions considering that petitioners have chosen to take recourse directly before us and that
the cases are of significant national interest.

Petitioners have raised several issues, but most are too insubstantial to require consideration. Accordingly, in the
exercise of sound judicial discretion and economy, this Court will pass primarily upon the following:

1. Whether petitioners were denied due process during preliminary investigation and in the issuance of the
warrants of arrest.

2. Whether the murder charges against petitioners should be dismissed under the political offense doctrine.

ANTECEDENT FACTS

These are petitions for certiorari and prohibition  seeking the annulment of the orders and resolutions of public
2

respondents with regard to the indictment and issuance of warrants of arrest against petitioners for the crime of
multiple murder.

Police Chief Inspector George L. Almaden (P C/Insp. Almaden) of the Philippine National Police (PNP) Regional
Office 8 and Staff Judge Advocate Captain Allan Tiu (Army Captain Tiu) of the 8th Infantry Division of the Philippine
Army sent 12 undated letters to the Provincial Prosecutor of Leyte through Assistant Provincial Prosecutor Rosulo
U. Vivero (Prosecutor Vivero).  The letters requested appropriate legal action on 12 complaint-affidavits attached
3

therewith accusing 71 named members of the Communist Party of the Philippines/New People’s Army/National
Democratic Front of the Philippines (CPP/NPA/NDFP) of murder, including petitioners herein along with several
other unnamed members.

The letters narrated that on 26 August 2006, elements of the 43rd Infantry Brigade of the Philippine Army
discovered a mass grave site of the CPP/NPA/NDFP at Sitio Sapang Daco, Barangay Kaulisihan, Inopacan,
Leyte. Recovered from the grave site were 67 severely deteriorated skeletal remains believed to be victims of
4

Operation VD. 5

The PNP Scene of the Crime Operation (SOCO) Team based in Regional Office 8 was immediately dispatched to
the mass grave site to conduct crime investigation, and to collect, preserve and analyze the skeletal remains.  Also,
6

from 11-17 September 2006, an investigation team composed of intelligence officers, and medico-legal and DNA
experts, conducted forensic crime analysis and collected from alleged relatives of the victims DNA samples for
matching. 7

The Initial Specialist Report  dated 18 September 2006 issued by the PNP Crime Laboratory in Camp Crame,
8

Quezon City, was inconclusive with regard to the identities of the skeletal remains and even the length of time that
they had been buried. The report recommended the conduct of further tests to confirm the identities of the remains
and the time window of death. 9

However, in a Special Report  dated 2 October 2006, the Case Secretariat of the Regional and National Inter-
10

Agency Legal Action Group (IALAG) came up with the names of ten (10) possible victims after comparison and
examination based on testimonies of relatives and witnesses. 11

The 12 complaint-affidavits were from relatives of the alleged victims of Operation VD. All of them swore that their
relatives had been abducted or last seen with members of the CPP/NPA/NDFP and were never seen again.

They also expressed belief that their relatives’ remains were among those discovered at the mass grave site.

Also attached to the letters were the affidavits of Zacarias Piedad,  Leonardo C. Tanaid, Floro M. Tanaid,
12

Numeriano Beringuel, Glecerio Roluna and Veronica P. Tabara. They narrated that they were former members of
the CPP/NPA/NDFP.  According to them, Operation VD was ordered in 1985 by the CPP/NPA/NDFP Central
13

Committee.  Allegedly, petitioners Saturnino C. Ocampo (Ocampo),  Randall B. Echanis (Echanis),  Rafael G.
14 15 16

Baylosis (Baylosis),  and Vicente P. Ladlad (Ladlad)  were then members of the Central Committee.
17 18

According to these former members, four sub-groups were formed to implement Operation VD, namely, (1) the Intel
Group responsible for gathering information on suspected military spies and civilians who would not support the
movement; (2) the Arresting Group charged with their arrests; (3) the Investigation Group which would subject those

80
arrested to questioning; and (4) the Execution Group or the "cleaners" of those confirmed to be military spies and
civilians who would not support the movement. 19

From 1985 to 1992, at least 100 people had been abducted, hog-tied, tortured and executed by members of the
CPP/NPA/NDF  pursuant to Operation VD.
20 21

On the basis of the 12 letters and their attachments, Prosecutor Vivero issued a subpoena requiring, among others,
petitioners to submit their counter-affidavits and those of their witnesses.  Petitioner Ocampo submitted his counter-
22

affidavit.  Petitioners Echanis  and Baylosis  did not file counter-affidavits because they were allegedly not served
23 24 25

the copy of the complaint and the attached documents or evidence. Counsel of petitioner Ladlad made a formal
entry of appearance on 8 December 2006 during the preliminary investigation.  However, petitioner Ladlad did not
26

file a counter-affidavit because he was allegedly not served a subpoena. 27

In a Resolution  dated 16 February 2007, Prosecutor Vivero recommended the filing of an Information for 15 counts
28

of multiple murder against 54 named members of the CPP/NPA/NDFP, including petitioners herein, for the death of
the following: 1) Juanita Aviola, 2) Concepcion Aragon, 3) Gregorio Eras, 4) Teodoro Recones, Jr., 5) Restituto
Ejoc, 6) Rolando Vasquez, 7) Junior Milyapis, 8) Crispin Dalmacio, 9) Zacarias Casil, 10) Pablo Daniel, 11) Romeo
Tayabas, 12) Domingo Napoles, 13) Ciriaco Daniel, 14) Crispin Prado, and 15) Ereberto Prado. 29

Prosecutor Vivero also recommended that Zacarias Piedad, Leonardo Tanaid, Numeriano Beringuel and Glecerio
Roluna be dropped as respondents and utilized as state witnesses, as their testimonies were vital to the success of
the prosecution.  The Resolution was silent with regard to Veronica Tabara.
30

The Information was filed before the Regional Trial Court (RTC) Hilongos, Leyte, Branch 18 (RTC Hilongos, Leyte)
presided by Judge Ephrem S. Abando (Judge Abando) on 28 February 2007, and docketed as Criminal Case No.
H-1581.  Petitioner Ocampo filed an Ex Parte Motion to Set Case for Clarificatory Hearing dated 5 March 2007 prior
31

to receiving a copy of the Resolution recommending the filing of the Information. 32

On 6 March 2007, Judge Abando issued an Order finding probable cause "in the commission by all mentioned
accused of the crime charged."  He ordered the issuance of warrants of arrest against them with no recommended
33

bail for their temporary liberty. 34

On 16 March 2007, petitioner Ocampo filed before us this special civil action for certiorari and prohibition under Rule
65 of the Rules of Court and docketed as G.R. No. 176830 seeking the annulment of the 6 March 2007 Order of
Judge Abando and the 16 February 2007 Resolution of Prosecutor Vivero.  The petition prayed for the unconditional
35

release of petitioner Ocampo from PNP custody, as well as the issuance of a temporary restraining order/ writ of
preliminary injunction to restrain the conduct of further proceedings during the pendency of the petition.36

Petitioner Ocampo argued that a case for rebellion against him and 44 others (including petitioners Echanis and
Baylosis  and Ladlad ) docketed as Criminal Case No. 06-944 was then pending before the RTC Makati, Branch
37 38

150 (RTC Makati).  Putting forward the political offense doctrine, petitioner Ocampo argues that common crimes,
39

such as murder in this case, are already absorbed by the crime of rebellion when committed as a necessary means,
in connection with and in furtherance of rebellion. 40

We required  the Office of the Solicitor General (OSG) to comment on the petition and the prayer for the issuance of
41

a temporary restraining order/ writ of preliminary injunction, and set  the case for oral arguments on 30 March 2007.
42

The OSG filed its Comment on 27 March 2007. 43

The following were the legal issues discussed by the parties during the oral arguments:

1. Whether the present petition for certiorari and prohibition is the proper remedy of petitioner Ocampo;

2. Assuming it is the proper remedy, whether he was denied due process during preliminary investigation
and in the issuance of the warrant of arrest;

3. Whether the murder charges against him are already included in the rebellion charge against him in the
RTC. 44

Afterwards, the parties were ordered to submit their memoranda within 10 days.  On 3 April 2007, the Court ordered
45

the provisional release of petitioner Ocampo under a ₱100,000 cash bond.   46

Acting on the observation of the Court during the oral arguments that the single Information filed before the RTC
Hilongos, Leyte was defective for charging 15 counts of murder, the prosecution filed a Motion to Admit Amended
Information and New Informations on 11 April 2007.  In an Order dated 27 July 2007, Judge Abando held in
47

abeyance the resolution thereof and effectively suspended the proceedings during the pendency of G.R. No.
176830 before this Court. 48

81
While the proceedings were suspended, petitioner Echanis was arrested on 28 January 2008 by virtue of the
warrant of arrest issued by Judge Abando on 6 March 2007.  On 1 February 2008, petitioners Echanis and Baylosis
49

filed a Motion for Judicial Reinvestigation/ Determination of Probable Cause with Prayer to Dismiss the Case
Outright and Alternative Prayer to Recall/ Suspend Service of Warrant. 50

On 30 April 2008, Judge Abando issued an Order denying the motion.  Petitioners Echanis and Baylosis filed a
51

Motion for Reconsideration  dated 30 May 2008, but before being able to rule thereon, Judge Abando issued an
52

Order dated 12 June 2008 transmitting the records of Criminal Case No. H-1581 to the Office of the Clerk of Court,
RTC Manila.  The Order was issued in compliance with the Resolution dated 23 April 2008 of this Court granting the
53

request of then Secretary of Justice Raul Gonzales to transfer the venue of the case.

The case was re-raffled to RTC Manila, Branch 32 (RTC Manila) presided by Judge Thelma Bunyi-Medina (Judge
Medina) and re-docketed as Criminal Case No. 08-262163.  Petitioner Echanis was transferred to the PNP
54

Custodial Center in Camp Crame, Quezon City. On 12 August 2008, petitioners Echanis and Baylosis filed their
Supplemental Arguments to Motion for Reconsideration. 55

In an Order  dated 27 October 2008, Judge Medina suspended the proceedings of the case pending the resolution
56

of G.R. No. 176830 by this Court.

On 18 December 2008, petitioner Ladlad filed with the RTC Manila a Motion to Quash and/or Dismiss. 57

On 23 December 2008, petitioner Echanis filed before us a special civil action for certiorari and prohibition under
Rule 65 of the Rules of Court seeking the annulment of the 30 April 2008 Order of Judge Abando and the 27
October 2008 Order of Judge Medina.  The petition, docketed as G.R. No. 185587, prayed for the unconditional and
58

immediate release of petitioner Echanis, as well as the issuance of a temporary restraining order/writ of preliminary
injunction to restrain his further incarceration.
59

On 5 January 2009, petitioner Baylosis filed before us a special civil action for certiorari and prohibition under Rule
65 of the Rules of Court also seeking the annulment of the 30 April 2008 Order of Judge Abando and the 27
October 2008 Order of Judge Medina.  The petition, docketed as G.R. No. 185636, prayed for the issuance of a
60

temporary restraining order/ writ of preliminary injunction to restrain the implementation of the warrant of arrest
against petitioner Baylosis.61

The Court consolidated G.R. Nos. 185587 and 185636 on 12 January 2009. 62

On 3 March 2009, the Court ordered the further consolidation of these two cases with G.R. No. 176830.  We 63

required  the OSG to comment on the prayer for petitioner Echanis’s immediate release, to which the OSG did not
64

interpose any objection on these conditions: that the temporary release shall only be for the purpose of his
attendance and participation in the formal peace negotiations between the Government of the Republic of the
Philippines (GRP) and the CPP/NPA/NDFP, set to begin in August 2009; and that his temporary release shall not
exceed six (6) months.  The latter condition was later modified, such that his temporary liberty shall continue for the
65

duration of his actual participation in the peace negotiations. 66

On 11 August 2009, the Court ordered the provisional release of petitioner Echanis under a ₱100,000 cash bond,
for the purpose of his participation in the formal peace negotiations. 67

Meanwhile, the Department of Justice (DOJ) filed its Opposition  to petitioner Ladlad’s motion to quash before the
68

RTC Manila. The trial court conducted a hearing on the motion on 13 February 2009. 69

On 6 May 2009, Judge Medina issued an Order  denying the motion to quash. The motion for reconsideration filed
70

by petitioner Ladlad was also denied on 27 August 2009. 71

On 9 November 2009, petitioner Ladlad filed before us a special civil action for certiorari under Rule 65 of the Rules
of Court seeking the annulment of the 6 May 2009 and 27 August 2009 Orders of Judge Medina.  The petition was
72

docketed as G.R. No. 190005.

On 11 January 2010, we ordered the consolidation of G.R. No. 190005 with G.R. Nos. 176830, 185587 and
185636.  We also required the OSG to file its comment thereon. The OSG submitted its Comment  on 7 May 2010.
73 74

On 27 July 2010, we likewise required the OSG to file its Comment in G.R. Nos. 185636 and 185587.  These 75

Comments were filed by the OSG on 13 December 2010  and on 21 January 2011,  respectively. Petitioners
76 77

Echanis and Baylosis filed their Consolidated Reply  on 7 June 2011.
78

On 2 May 2011, petitioner Ladlad filed an Urgent Motion to Fix Bail.  On 21 July 2011, petitioner Baylosis filed A
79

Motion to Allow Petitioner to Post Bail.  The OSG interposed no objection to the grant of a ₱100,000 cash bail to
80

82
them considering that they were consultants of the NDFP negotiating team, which was then holding negotiations
with the GRP peace panel for the signing of a peace accord. 81

On 17 January 2012, we granted the motions of petitioners Ladlad and Baylosis and fixed their bail in the amount of
₱100,000, subject to the condition that their temporary release shall be limited to the period of their actual
participation in the peace negotiations. 82

Petitioner Ladlad filed his Reply  to the OSG Comment on 18 January 2013.
83

OUR RULING

Petitioners were accorded due

process during preliminary
investigation and in the issuance of
the warrants of arrest.

A. Preliminary Investigation

A preliminary investigation is "not a casual affair."  It is conducted to protect the innocent from the embarrassment,
84

expense and anxiety of a public trial.  While the right to have a preliminary investigation before trial is statutory
85

rather than constitutional, it is a substantive right and a component of due process in the administration of criminal
justice.
86

In the context of a preliminary investigation, the right to due process of law entails the opportunity to be heard.  It
87

serves to accord an opportunity for the presentation of the respondent’s side with regard to the accusation.
Afterwards, the investigating officer shall decide whether the allegations and defenses lead to a reasonable belief
that a crime has been committed, and that it was the respondent who committed it. Otherwise, the investigating
officer is bound to dismiss the complaint.

"The essence of due process is reasonable opportunity to be heard and submit evidence in support of one's
defense."  What is proscribed is lack of opportunity to be heard.  Thus, one who has been afforded a chance to
88 89

present one’s own side of the story cannot claim denial of due process. 90

Petitioners Echanis and Baylosis allege that they did not receive a copy of the complaint and the attached
documents or evidence.  Petitioner Ladlad claims that he was not served a subpoena due to the false address
91

indicated in the 12 undated letters of P C/Insp. Almaden and Army Captain Tiu to Prosecutor Vivero.  Furthermore,
92

even though his counsels filed their formal entry of appearance before the Office of the Prosecutor, petitioner Ladlad
was still not sent a subpoena through his counsels’ addresses.  Thus, they were deprived of the right to file counter-
93

affidavits.

Petitioner Ocampo claims that Prosecutor Vivero, in collusion with P C/Insp. Almaden and Army Captain Tiu,
surreptitiously inserted the Supplemental Affidavit of Zacarias Piedad in the records of the case without furnishing
petitioner Ocampo a copy.  The original affidavit of Zacarias Piedad dated 14 September 2006 stated that a meeting
94

presided by petitioner Ocampo was held in 1984, when the launching of Operation VD was agreed upon. Petitioner 95

Ocampo refuted this claim in his Counter-affidavit dated 22 December 2006 stating that he was in military custody
from October 1976 until his escape in May 1985.  Thereafter, the Supplemental Affidavit of Zacarias Piedad dated
96

12 January 2007 admitted that he made a mistake in his original affidavit, and that the meeting actually took place in
June 1985.  Petitioner Ocampo argues that he was denied the opportunity to reply to the Supplemental Affidavit by
97

not being furnished a copy thereof.

Petitioner Ocampo also claims that he was denied the right to file a motion for reconsideration or to appeal the
Resolution of Prosecutor Vivero, because the latter deliberately delayed the service of the Resolution by 19 days,
effectively denying petitioner Ocampo his right to due process. 98

As to the claim of petitioners Echanis and Baylosis, we quote the pertinent portion of Prosecutor Vivero’s
Resolution, which states:

In connection with the foregoing and pursuant to the Revised Rules of Criminal Procedure[,] the respondents were
issued and served with Subpoena at their last known address for them to submit their counter-affidavits and that of
their witnesses.

Majority of the respondents did not submit their counter-affidavits because they could no longer be found in their last
known address, per return of the subpoenas. On the other hand, Saturnino Ocampo @ Satur, Fides Lim, Maureen
Palejaro and Ruben Manatad submitted their Counter-Affidavits. However, Vicente Ladlad and Jasmin Jerusalem
failed to submit the required Counter Affidavits in spite entry of appearance by their respective counsels. 99

83
Section 3(d), Rule 112 of the Rules of Court, allows Prosecutor Vivero to resolve the complaint based on the
evidence before him if a respondent could not be subpoenaed. As long as efforts to reach a respondent were made,
and he was given an opportunity to present countervailing evidence, the preliminary investigation remains
valid. The rule was put in place in order to foil underhanded attempts of a respondent to delay the prosecution of
100

offenses. 101

In this case, the Resolution stated that efforts were undertaken to serve subpoenas on the named respondents at
their last known addresses. This is sufficient for due process. It was only because a majority of them could no longer
be found at their last known addresses that they were not served copies of the complaint and the attached
documents or evidence.

Petitioner Ladlad claims that his subpoena was sent to the nonexistent address "53 Sct. Rallos St., QC,"  which 102

had never been his address at any time.  In connection with this claim, we take note of the fact that the subpoena
103

to Fides Lim, petitioner Ladlad’s wife,  was sent to the same address, and that she was among those mentioned in
104

the Resolution as having timely submitted their counter-affidavits.

Despite supposedly never receiving a subpoena, petitioner Ladlad’s counsel filed a formal entry of appearance on 8
December 2006.  Prosecutor Vivero had a reason to believe that petitioner Ladlad had received the subpoena and
105

accordingly instructed his counsel to prepare his defense.

Petitioner Ladlad, through his counsel, had every opportunity to secure copies of the complaint after his counsel’s
formal entry of appearance and, thereafter, to participate fully in the preliminary investigation. Instead, he refused to
participate.

We have previously cautioned that "litigants represented by counsel should not expect that all they need to do is sit
back, relax and await the outcome of their case."  Having opted to remain passive during the preliminary
106

investigation, petitioner Ladlad and his counsel cannot now claim a denial of due process, since their failure to file a
counter-affidavit was of their own doing.

Neither do we find any merit in petitioner Ocampo’s allegation of collusion to surreptitiously insert the Supplemental
Affidavit of Zacarias Piedad in the records. There was nothing surreptitious about the Supplemental Affidavit since it
clearly alludes to an earlier affidavit and admits the mistake committed regarding the date of the alleged meeting.
The date of the execution of the Supplemental Affidavit was also clearly stated. Thus, it was clear that it was
executed after petitioner Ocampo had submitted his counter-affidavit. Should the case go to trial, that will provide
petitioner Ocampo with the opportunity to question the execution of Zacarias Piedad’s Supplemental Affidavit.

Neither can we uphold petitioner Ocampo’s contention that he was denied the right to be heard. For him to claim
that he was denied due process by not being furnished a copy of the Supplemental Affidavit of Zacarias Piedad
would imply that the entire case of the prosecution rested on the Supplemental Affidavit. The OSG has asserted that
the indictment of petitioner Ocampo was based on the collective affidavits of several other witnesses  attesting to
107

the allegation that he was a member of the CPP/NPA/NDFP Central Committee, which had ordered the launch of
Operation VD.

As to his claim that he was denied the right to file a motion for reconsideration or to appeal the Resolution of
Prosecutor Vivero due to the 19-day delay in the service of the Resolution, it must be pointed out that the period for
filing a motion for reconsideration or an appeal to the Secretary of Justice is reckoned from the date of receipt of the
resolution of the prosecutor, not from the date of the resolution. This is clear from Section 3 of the 2000 National
Prosecution Service Rule on Appeal:

Sec. 3. Period to appeal. – The appeal shall be taken within fifteen (15) days from receipt of the resolution, or of the
denial of the motion for reconsideration/ reinvestigation if one has been filed within fifteen (15) days from receipt of
the assailed resolution. Only one motion for reconsideration shall be allowed. (Emphasis supplied)

Thus, when petitioner Ocampo received the Resolution of Prosecutor Vivero on 12 March 2007,  the former had
108

until 27 March 2007 within which to file either a motion for reconsideration before the latter or an appeal before the
Secretary of Justice. Instead, petitioner Ocampo chose to file the instant petition for certiorari directly before this
Court on 16 March 2007.

B. Issuance of the Warrants of Arrest

Article III, Section 2 of the Constitution provides that "no search warrant or warrant of arrest shall issue except upon
probable cause to be determined personally by the judge after examination under oath or affirmation of the
complainant and the witnesses he may produce."

Petitioner Ocampo alleges that Judge Abando did not comply with the requirements of the Constitution in finding the
existence of probable cause for the issuance of warrants of arrest against petitioners. 109

84
Probable cause for the issuance of a warrant of arrest has been defined as "such facts and circumstances which
would lead a reasonably discreet and prudent man to believe that an offense has been committed by the person
sought to be arrested."  Although the Constitution provides that probable cause shall be determined by the judge
110

after an examination under oath or an affirmation of the complainant and the witnesses, we have ruled that a
hearing is not necessary for the determination thereof.  In fact, the judge’s personal examination of the complainant
111

and the witnesses is not mandatory and indispensable for determining the aptness of issuing a warrant of arrest. 112

It is enough that the judge personally evaluates the prosecutor’s report and supporting documents showing the
existence of probable cause for the indictment and, on the basis thereof, issue a warrant of arrest; or if, on the basis
of his evaluation, he finds no probable cause, to disregard the prosecutor's resolution and require the submission of
additional affidavits of witnesses to aid him in determining its existence. 113

Petitioners Echanis and Baylosis claim that, had Judge Abando painstakingly examined the records submitted by
Prosecutor Vivero, the judge would have inevitably dismissed the charge against them.  Additionally, petitioner
114

Ocampo alleges that Judge Abando did not point out facts and evidence in the record that were used as bases for
his finding of probable cause to issue a warrant of arrest. 115

The determination of probable cause for the issuance of warrants of arrest against petitioners is addressed to the
sound discretion of Judge Abando as the trial judge.  Further elucidating on the wide latitude given to trial judges in
116

the issuance of warrants of arrest, this Court stated in Sarigumba v. Sandiganbayan  as follows:
117

x x x. The trial court's exercise of its judicial discretion should not, as a general rule, be interfered with in the
absence of grave abuse of discretion. Indeed, certiorari will not lie to cure errors in the trial court's appreciation of
the evidence of the parties, the conclusion of facts it reached based on the said findings, as well as the conclusions
of law. x x x.

Whether or not there is probable cause for the issuance of warrants for the arrest of the accused is a question of
fact based on the allegations in the Informations, the Resolution of the Investigating Prosecutor, including other
documents and/or evidence appended to the Information.

Here, the allegations of petitioners point to factual matters indicated in the affidavits of the complainants and
witnesses as bases for the contention that there was no probable cause for petitioners’ indictment for multiple
murder or for the issuance of warrants for their arrest. As stated above, the trial judge’s appreciation of the evidence
and conclusion of facts based thereon are not interfered with in the absence of grave abuse of discretion. Again, "he
sufficiently complies with the requirement of personal determination if he reviews the [I]nformation and the
documents attached thereto, and on the basis thereof forms a belief that the accused is probably guilty of the crime
with which he is being charged." 118

Judge Abando’s review of the Information and the supporting documents is shown by the following portion of the
judge’s 6 March 2007 Order:

On the evaluation of the Resolution and its Information as submitted and filed by the Provincial Prosecution of Leyte
Province supported by the following documents: Affidavits of Complainants, Sworn Statements of Witnesses and
other pertinent documents issued by the Regional Crime Laboratory Office, PNP, Region VIII and Camp Crame,
Quezon City, pictures of the grave site and skeletal remains, this court has the findings [sic] of probable cause in the
commission by all mentioned accused of the crime charged. 119

At bottom, issues involving the finding of probable cause for an indictment and issuance of a warrant of arrest, as
petitioners are doubtless aware, are primarily questions of fact that are normally not within the purview of a petition
for certiorari,  such as the petitions filed in the instant consolidated cases.
120

The political offense doctrine is not a

ground to dismiss the charge against
petitioners prior to a determination
by the trial court that the murders
were committed in furtherance of
rebellion.

Under the political offense doctrine, "common crimes, perpetrated in furtherance of a political offense, are divested
of their character as "common" offenses and assume the political complexion of the main crime of which they are
mere ingredients, and, consequently, cannot be punished separately from the principal offense, or complexed with
the same, to justify the imposition of a graver penalty." 121

Any ordinary act assumes a different nature by being absorbed in the crime of rebellion.  Thus, when a killing is
122

committed in furtherance of rebellion, the killing is not homicide or murder. Rather, the killing assumes the political
complexion of rebellion as its mere ingredient and must be prosecuted and punished as rebellion alone.

85
However, this is not to say that public prosecutors are obliged to consistently charge respondents with simple
rebellion instead of common crimes. No one disputes the well-entrenched principle in criminal procedure that the
institution of criminal charges, including whom and what to charge, is addressed to the sound discretion of the public
prosecutor.123

But when the political offense doctrine is asserted as a defense in the trial court, it becomes crucial for the court to
determine whether the act of killing was done in furtherance of a political end, and for the political motive of the act
to be conclusively demonstrated. 124

Petitioners aver that the records show that the alleged murders were committed in furtherance of the
CPP/NPA/NDFP rebellion, and that the political motivation behind the alleged murders can be clearly seen from the
charge against the alleged top leaders of the CPP/NPA/NDFP as co-conspirators.

We had already ruled that the burden of demonstrating political motivation must be discharged by the defense,
since motive is a state of mind which only the accused knows.  The proof showing political motivation is adduced
125

during trial where the accused is assured an opportunity to present evidence supporting his defense. It is not for this
Court to determine this factual matter in the instant petitions.

As held in the case of Office of the Provincial Prosecutor of Zamboanga Del Norte v. CA,  if during trial, petitioners
126

are able to show that the alleged murders were indeed committed in furtherance of rebellion, Section 14, Rule 110
of the Rules of Court provides the remedy, to wit:

SECTION 14. Amendment or substitution. — A complaint or information may be amended, in form or in substance,
without leave of court, at any time before the accused enters his plea. After the plea and during the trial, a formal
amendment may only be made with leave of court and when it can be done without causing prejudice to the rights of
the accused.

However, any amendment before plea, which downgrades the nature of the offense charged in or excludes any
accused from the complaint or information, can be made only upon motion by the prosecutor, with notice to the
offended party and with leave of court. The court shall state its reasons in resolving the motion and copies of its
order shall be furnished all parties, especially the offended party. (n)

If it appears at any time before judgment that a mistake has been made in charging the proper offense, the court
shall dismiss the original complaint or information upon the filing of a new one charging the proper offense in
accordance with Section 19, Rule 119, provided the accused shall not be placed in double jeopardy. The court may
require the witnesses to give bail for their appearance at the trial. (Emphasis supplied)

Thus, if it is shown that the proper charge against petitioners should have been simple rebellion, the trial court shall
dismiss the murder charges upon the filing of the Information for simple rebellion, as long as petitioners would not
be placed in double jeopardy.

Section 7, Rule 117 of the Rules of Court, states:

SEC. 7. Former conviction or acquittal; double jeopardy. — When an accused has been convicted or acquitted, or
the case against him dismissed or otherwise terminated without his express consent by a court of competent
jurisdiction, upon a valid complaint or information or other formal charge sufficient in form and substance to sustain
a conviction and after the accused had pleaded to the charge, the conviction or acquittal of the accused or the
dismissal of the case shall be a bar to another prosecution for the offense charged, or for any attempt to commit the
same or frustration thereof, or for any offense which necessarily includes or is necessarily included in the offense
charged in the former complaint or information.

Based on the above provision, double jeopardy only applies when: (1) a first jeopardy attached; (2) it has been
validly terminated; and (3) a second jeopardy is for the same offense as in the first. 127

A first jeopardy attaches only after the accused has been acquitted or convicted, or the case has been dismissed or
otherwise terminated without his express consent, by a competent court in a valid indictment for which the accused
has entered a valid plea during arraignment. 128

To recall, on 12 May 2006, an Information for the crime of rebellion, as defined and penalized under Article 134 in
relation to Article 135 of the Revised Penal Code, docketed as Criminal Case No. 06-944 was filed before the RTC
Makati against petitioners and several others. 129

However, petitioners were never arraigned in Criminal Case No. 06-944.  Even before the indictment for rebellion
1awp++i1

was filed before the RTC Makati, petitioners Ocampo, Echanis and Ladlad had already filed a petition before this
Court to seek the nullification of the Orders of the DOJ denying their motion for the inhibition of the members of the
prosecution panel due to lack of impartiality and independence.  When the indictment was filed, petitioners
130

86
Ocampo, Echanis and Ladlad filed supplemental petitions to enjoin the prosecution of Criminal Case No. 06-
944. We eventually ordered the dismissal of the rebellion case. It is clear then that a first jeopardy never had a
131

chance to attach.

Petitioner Ocampo shall remain on provisional liberty under the ₱100,000 cash bond posted before the Office of the
Clerk of Court. He shall remain on provisional liberty until the termination of the proceedings before the RTC
Manila. 1âwphi1

The OSG has given its conformity to the provisional liberty of petitioners Echanis, Baylosis and Ladlad in view of the
ongoing peace negotiations. Their provisional release from detention under the cash bond of ₱100,000 each shall
continue under the condition that their temporary release shall be limited to the period of their actual participation as
CPP-NDF consultants in the peace negotiations with the government or until the termination of the proceedings
before the RTC Manila, whichever is sooner. It shall be the duty of the government to inform this Court the moment
that peace negotiations are concluded.

WHEREFORE, the instant consolidated petitions are DISMISSED. The RTC of Manila, Branch 32, is hereby
ORDERED to proceed with dispatch with the hearing of Criminal Case No. 08-262163. Petitioner Saturnino C.
Ocampo shall remain on temporary liberty under the same bail granted by this Court until the termination of the
proceedings before the RTC Manila. Petitioners Randall B. Echanis, Rafael G. Baylosis and Vicente P. Ladlad shall
remain on temporary liberty under the same bail granted by this Court until their actual participation as CPP-NDF
consultants in the peace negotiations with the government are concluded or terminated, or until the termination of
the proceedings before the RTC Manila, whichever is sooner.

SO ORDERED.

CONCURRING OPINION

<

p align="justify">"Some say freedom is relative. One mans freedom is another mans bondage. We may have been
in chains, but we weren’t shackled by delusions. Our movements were restrained, but we weren’t tied up by myth.
Our tormentors thought they were free, but they were blinded by falsehood; their senses were deadened by the
mirage of power they clutched and made god And then they were stunned by their own shadows; paralyzed by fear
of the ve1y monsters and demons they fashioned in their heads that stood to devour them at the end of it all.

. . . Our eventual freedom was truly memorable. The process of unchaining was both literal and symbolic, and not
without drama and fanfare. We weren’t released all at once, but one or two at a time. Ka Ranel and myself were
freed at the same time – around December of 1988. ‘Free at last!’ we declared, grinning from ear to ear. We were
guided through some underbrush, after it we came upon a clearing where the rest of the former captives were
waiting. We were greeted with applause. Tearful hugs, handshakes, up-heres, singing, merry-making, even role-
playing. Rage and retribution will have to wait. The moment was a celebration."

Robert Francis Garcia

"To Suffer Thy Comrades:

How the Revolution Decimated Its Own" 24 (2001)

LEONEN, J.:

Dissent affirms the dissenter’s belief in how human dignity should be shaped. It assumes difference with the status
quo. It is this assertion that provides depth and dynamism in our democracy.

However, indignities masquerading as dissent or even brought about by misguided assessments of what is
pragmatic do not deserve any legal protection. Such acts cease to become political. These are simply inhuman.

Acts which debase humanity even by the most organized and ardent dissenters do not even deserve the label of
rebellion.

I concur with the Chief Justice that this case should be remanded so that the court can properly examine the
evidence raised by the defense. I write this separate opinion in the interest of judicial economy. Should it be shown
that there are acts committed in violation of Republic Act No. 9851, otherwise known as the Philippine Act on
Crimes Against International Humanitarian Law, Genocide and Other Crimes Against Humanity, these acts could
not be absorbed in the crime of rebellion.

87
 I

For our decision are consolidated petitions for certiorari and prohibition that pray for the declaration of several
Informations and Warrants of Arrests as void. The Informations and Warrants were issued for the crime of multiple
murder. Petitioners assert that they have a pending criminal charge of rebellion  and that the acts raised in their
1

petitions should be dismissed because they are deemed to be affected by the political offense doctrine. The political
offense doctrine states that certain crimes, such as murder, are already absorbed by the charge of rebellion when
committed as a necessary means and in connection with or in furtherance of rebellion.

I agree that this case should be remanded because there has been no evidence yet to prove that the acts imputed
to the petitioners actually happened or are attributable to them. Judicial economy, however, requires that we state
that there are certain acts which have been committed on the occasion of a rebellion which should no longer be
absorbed in that crime.

Acts committed in violation of Republic Act No. 9851, even in the context of armed conflicts of a non-international
character and in view of the declarations of the Communist Party of the Philippines and the National Democratic
Front, cannot be deemed to be acts in connection with or in furtherance of rebellion.

II

We survey the evolution of the political offense doctrine to provide better context.

As early as 1903, this court distinguished common crimes from crimes committed in furtherance of a political
objective. In United States v. Lardizabal,  the accused, Commanding Officer of Filipino insurgents, ordered the
2

execution of an American prisoner before retreating from the enemy. We said in this case that the accused’s act
falls under the Amnesty Proclamation of 1902, thus:

x x x [the execution] was not an isolated act such as a "political offense committed during the insurrection pursuant
to orders issued by the civil or military insurrectionary authorities," but was a measure which, whether necessary or
not, was inherent in the military operations for the preservation of the troops commanded by him and of which he
was the supreme officer on that island. It was an act which, while from the standpoint of military law might be
regarded as one of cruelty, was at the same time one depending absolutely upon the discretion of an officer in
charge of a command for securing the safety of the troops under his control and constitutes no other offense than
that of sedition, within which term the war itself is included by the letter and spirit of the proclamation.  (Emphasis
3

provided)

In United States. v. Pacheco,  two men selling English dictionaries within the Dagupan area were abruptly abducted
4

and killed by the accused and his men. Witnesses testified that it was presumed by the accused that the salesmen
were American spies because the dictionaries being sold were written in English. This court observed:

It does not appear from the record that the aggressors were impelled to kill the deceased by any motive other than
that the latter were suspected of being spies and, therefore, traitors to the revolutionary party to which the
defendants belonged. From the foregoing statement of facts, it may therefore be said that the two murders
prosecuted herein were of a political character and the result of internal political hatreds between Filipinos, the
defendants having been insurgents opposed to the constituted government.

The case has to do with two crimes for which, under the penal law, the severest punishment has always been
inflicted. However, considering the circumstances under which these crimes were committed and the fact that the
sovereign power in these Islands, in view of the extraordinary and radical disturbance which, during the period
following the year 1896, prevailed in and convulsed this country, and prompted by the dictates of humanity and
public policy, has deemed it advisable to blot out even the shadow of a certain class of offenses, decreeing full
pardon and amnesty to their authors—an act of elevated statesmanship and timely generosity, more political than
judicial in its nature, intended to mitigate the severity of the law—it is incumbent upon us, in deciding this case, to
conform our judgment to the requirements and conditions of the decree so promulgated.  (Emphasis provided)
5

Then in the landmark case of People v. Hernandez,  this court defined the term, political offense:
6

In short, political crimes are those directly aimed against the political order, as well as such common crimes as may
be committed to achieve a political purpose. The decisive factor is the intent or motive. If a crime usually regarded
as common, like homicide, is perpetrated for the purpose of removing from the allegiance "to the Government the
territory of the Philippines Islands or any part thereof." then said offense becomes stripped of its "common"
complexion, inasmuch as, being part and parcel of the crime of rebellion, the former acquires the political character
of the latter.  (Emphasis provided)
7

This court in Hernandez first clarified whether common crimes such as murder, arson, and other similar crimes are
to be complexed with the main crimes in the Revised Penal Code. Thus:

88
x x x national, as well as international, laws and jurisprudence overwhelmingly favor the proposition that common
crimes, perpetrated in furtherance of a political offense, are divested of their character as "common" offenses and
assume the political complexion of the main crime of which they are mere ingredients, and, consequently, cannot be
punished separately from the principal offense, or complexed with the same, to justify the imposition of a graver
penalty.  (Emphasis provided)
8

Article 48 of the Revised Penal Code covering complex crimes provides:

Art. 48. Penalty for complex crimes. — When a single act constitutes two or more grave or less grave felonies, or
when an offense is a necessary means for committing the other, the penalty for the most serious crime shall be
imposed, the same to be applied in its maximum period.

The Hernandez ruling was then affirmed by this court in subsequent cases, such as Enrile v. Salazar.  It is worthy to
9

note, however, that in "affirming" the doctrine in Hernandez, this court in Enrile said:

It may be that in the light of contemporary events, the act of rebellion has lost that quintessentially quixotic quality
that justifies the relative leniency with which it is regarded and punished by law, that present-day rebels are less
impelled by love of country than by lust for power and have become no better than mere terrorists to whom nothing,
not even the sanctity of human life, is allowed to stand in the way of their ambitions. Nothing so underscores this
aberration as the rash of seemingly senseless killings, bombings, kidnappings and assorted mayhem so much in the
news these days, as often perpetrated against innocent civilians as against the military, but by and large attributable
to, or even claimed by so-called rebels to be part of, an ongoing rebellion.

It is enough to give anyone pause—and the Court is no exception—that not even the crowded streets of our capital
City seem safe from such unsettling violence that is disruptive of the public peace and stymies every effort at
national economic recovery. There is an apparent need to restructure the law on rebellion, either to raise the penalty
therefor or to clearly define and delimit the other offenses to be considered as absorbed thereby, so that it cannot be
conveniently utilized as the umbrella for every sort of illegal activity undertaken in its name. The Court has no power
to effect such change, for it can only interpret the law as it stands at any given time, and what is needed lies beyond
interpretation. Hopefully, Congress will perceive the need for promptly seizing the initiative in this matter, which is
properly within its province.  (Emphasis provided)
10

However, other cases declined to rule that all other crimes charged in the Information are absorbed under alleged
political offenses.  In Misolas v. Panga,  this court ruled:
11 12

Neither would the doctrines enunciated by the Court in Hernandez and Geronimo, [sic] and People v. Rodriguez
[107 Phil. 659] save the day for petitioner.

In Hernandez, the accused were charged with the complex crime of rebellion with murder, arson and robbery while
in Geronimo, the information was for the complex crime of rebellion with murder, robbery and kidnapping. In those
two cases[,] the Court held that aforestated common crimes cannot be complexed with rebellion as these crimes
constituted the means of committing the crime of rebellion. These common crimes constituted the acts of "engaging
in war" and "committing serious violence" which are essential elements of the crime of rebellion [See Arts. 134-135,
Revised Penal Code] and, hence, are deemed absorbed in the crime of rebellion. Consequently, the accused can
be held liable only for the single crime of rebellion.

On the other hand, in Rodriguez, the Court ruled that since the accused had already been charged with rebellion, he
can no longer be charged for illegal possession of firearms for the same act of unauthorized possession of firearm
on which the charge of rebellion was based, as said act constituted the very means for the commission of rebellion.
Thus, the illegal possession of the firearm was deemed absorbed in the crime of rebellion.

However, in the present case, petitioner is being charged specifically for the qualified offense of illegal possession of
firearms and ammunition under P.D. 1866. HE IS NOT BEING CHARGED WITH THE COMPLEX CRIME OF
SUBVERSION WITH ILLEGAL POSSESSION OF FIREARMS. NEITHER IS HE BEING SEPARATELY CHARGED
FOR SUBVERSION AND FOR ILLEGAL POSSESSION OF FIREARMS. Thus, the rulings of the Court in
Hernandez, Geronimo and Rodriquez find no application in this case.  (Emphasis in the original)
13

In Baylosis v. Chavez, Jr.,  this court held that:

14

x x x The Code allows, for example, separate prosecutions for either murder or rebellion, although not for both
where the indictment alleges that the former has been committed in furtherance of or in connection with the latter.
Surely, whether people are killed or injured in connection with a rebellion, or not, the deaths or injuries of the victims
are no less real, and the grief of the victims' families no less poignant.

Moreover, it certainly is within the power of the legislature to determine what acts or omissions other than those set
out in the Revised Penal Code or other existing statutes are to be condemned as separate, individual crimes and

89
what penalties should be attached thereto. The power is not diluted or improperly wielded simply because at some
prior time the act or omission was but an element or ingredient of another offense, or might usually have been
connected with another crime.

The interdict laid in Hernandez, Enrile and the other cases cited is against attempts to complex rebellion with the so
called "common" crimes committed in furtherance, or in the course, thereof; this, on the authority alone of the first
sentence of Article 48 of the Revised Penal Code. Stated otherwise, the ratio of said cases is that Article 48 cannot
be invoked as the basis for charging and prosecuting the complex crime of rebellion with murder, etc., for the
purpose of obtaining imposition of the penalty for the more serious offense in its maximum period (in accordance
with said Art. 48). Said cases did not—indeed they could not and were never meant to—proscribe the legislative
authority from validly enacting statutes that would define and punish, as offenses sui generis crimes which, in the
context of Hernandez, et al. may be viewed as a complex of rebellion with other offenses. There is no constitutional
prohibition against this, and the Court never said there was. What the Court stated in said cases about rebellion
"absorbing" common crimes committed in its course or furtherance must be viewed in light of the fact that at the time
they were decided, there were no penal provisions defining and punishing, as specific offenses, crimes like murder,
etc. committed in the course or as part of a rebellion. This is no longer true, as far as the present case is concerned,
and there being no question that PD 1866 was a valid exercise of the former President's legislative
powers. (Emphasis provided)
15

It is not our intention to wipe out the history of and the policy behind the political offense doctrine. What this
separate opinion seeks to accomplish is to qualify the conditions for the application of the doctrine and remove any
blanket application whenever political objectives are alleged. The remnants of armed conflict continue. Sooner or
later, with a victor that emerges or even with the success of peace negotiations with insurgent groups, some form of
transitional justice may need to reckon with different types of crimes committed on the occasion of these armed
uprisings. Certainly, crimes that run afoul the basic human dignity of persons must not be tolerated. This is in line
with the recent developments in national and international law. 16

III

International humanitarian law  (IHL) is the body of international law that regulates the conduct of armed conflicts,
17

whether of an international or non-international character. This body of law seeks to limit the effects of the conflict on
individuals.  The 1949 Geneva Conventions and its Additional Protocols are the main instruments that govern
18

IHL.  Nevertheless, IHL and the rules and principles contained in the Geneva Conventions are largely regarded in
19

the international sphere as having the character of general or customary international law given the fundamental
nature of the rules and "because they constitute intransgressible principles of international customary law." 20

In the Philippines, Republic Act No. 9851 was enacted in view of its policy to "[renounce] war x x x, [adopt] the
generally accepted principles of international law as part of the law of the land and [adhere] to a policy of peace,
equality, justice, freedom, cooperation and amity with all nations."  Accordingly, "[t]he most serious crimes of
21

concern to the international community as a whole must not go unpunished and their effective prosecution must be
ensured by taking measures at the national level, in order to put an end to impunity for the perpetrators of these
crimes and thus contribute to the prevention of such crimes, it being the duty of every State to exercise its criminal
jurisdiction over those responsible for international crimes." 22

Armed conflict in the law is defined as:

x x x any use of force or armed violence between States or a protracted armed violence between governmental
authorities and organized armed groups or between such groups within a State: Provided, That such force or armed
violence gives rise, or may give rise, to a situation to which the Geneva Conventions of 12 August 1949, including
their common Article 3, apply. Armed conflict may be international, that is, between two (2) or more States, including
belligerent occupation; or non-international, that is, between governmental authorities and organized armed groups
or between such groups within a State. It does not cover internal disturbances or tensions such as riots, isolated and
sporadic acts of violence or other acts of a similar nature.  (Emphasis provided)
23

Article 3 common to the 1949 Geneva Conventions and Additional Protocol II  are the foundation of the applicable
24

rules in a non-international or internal armed conflict. Common Article 3, which has attained a customary law
character,  prescribes a minimum standard to be applied to persons who are not actively taking part in an internal
25

armed conflict. Common Article 3 provides:

In the case of armed conflict not of an international character occurring in the territory of one of the High Contracting
Parties, each Party to the conflict shall be bound to apply, as a minimum, the following provisions:

1) Persons taking no active part in the hostilities, including members of armed forces who have laid down their arms
and those placed hors de combat by sickness, wounds, detention, or any other cause, shall in all circumstances be
treated humanely, without any adverse distinction founded on race, colour, religion or faith, sex, birth or wealth, or
any other similar criteria.

90
To this end, the following acts are and shall remain prohibited at any time and in any place whatsoever with respect
to the above-mentioned persons:

a) violence to life and person, in particular murder of all kinds, mutilation, cruel treatment and torture;

b) taking of hostages;

c) outrages upon personal dignity, in particular humiliating and degrading treatment;

d) the passing of sentences and the carrying out of executions without previous judgment pronounced by a
regularly constituted court, affording all the judicial guarantees which are recognized as indispensable by
civilized peoples.

2) The wounded and sick shall be collected and cared for.

This portion of the provision is substantially reproduced in Section 4, paragraph (b) of Republic Act No. 9851, which
provides:

In case of a non-international armed conflict, serious violations of common Article 3 to the four (4) Geneva
Conventions of 12 August 1949, namely, any of the following acts committed against persons taking no active part
in the hostilities, including members of the armed forces who have laid down their arms and those placed hors de
combat by sickness, wounds, detention or any other cause:

(1) Violence to life and person, in particular, willful killings, mutilation, cruel treatment and torture;

(2) Committing outrages upon personal dignity, in particular, humiliating and degrading treatment;

(3) Taking of hostages; and

(4) The passing of sentences and the carrying out of executions without previous judgment pronounced by a
regularly constituted court, affording all judicial guarantees which are generally recognized as indispensable.

Additional Protocol II supplements Common Article 3 in terms of the rules applicable to internal armed
conflict. Additional Protocol II specifies: 1) the guarantees afforded to persons involved in the internal armed
26

conflict; and 2) the obligations of the parties to the internal armed conflict. These rights and duties are seen in
Articles 4 to 6, to wit:

Article 4 — Fundamental guarantees

1. All persons who do not take a direct part or who have ceased to take part in hostilities, whether or not
their liberty has been restricted, are entitled to respect for their person, honour and convictions and religious
practices. They shall in all circumstances be treated humanely, without any adverse distinction. It is
prohibited to order that there shall be no survivors.

2. Without prejudice to the generality of the foregoing, the following acts against the persons referred to in
paragraph 1 are and shall remain prohibited at any time and in any place whatsoever:

a) violence to the life, health and physical or mental well-being of persons, in particular murder as
well as cruel treatment such as torture, mutilation or any form of corporal punishment;

b) collective punishments;

c) taking of hostages;

d) acts of terrorism;

e) outrages upon personal dignity, in particular humiliating and degrading treatment, rape, enforced
prostitution and any form of indecent assault;

f) slavery and the slave trade in all their forms;

g) pillage;

h) threats to commit any of the foregoing acts.

91
 xxxx

Article 5 — Persons whose liberty has been restricted

1. In addition to the provisions of Article 4, the following provisions shall be respected as a minimum with
regard to persons deprived of their liberty for reasons related to the armed conflict, whether they are
interned or detained:

a) the wounded and the sick shall be treated in accordance with Article 7;

b) the persons referred to in this paragraph shall, to the same extent as the local civilian population,
be provided with food and drinking water and be afforded safeguards as regards health and hygiene
and protection against the rigours of the climate and the dangers of the armed conflict;

c) they shall be allowed to receive individual or collective relief;

d) they shall be allowed to practice their religion and, if requested and appropriate, to receive
spiritual assistance from persons, such as chaplains, performing religious functions;

e) they shall, if made to work, have the benefit of working conditions and safeguards similar to those
enjoyed by the local civilian population.

2. Those who are responsible for the internment or detention of the persons referred to in paragraph 1 shall
also, within the limits of their capabilities, respect the following provisions relating to such persons:

a) except when men and women of a family are accommodated together, women shall be held in
quarters separated from those of men and shall be under the immediate supervision of women;

b) they shall be allowed to send and receive letters and cards, the number of which may be limited
by competent authority if it deems necessary;

c) places of internment and detention shall not be located close to the combat zone. The persons
referred to in paragraph 1 shall be evacuated when the places where they are interned or detained
become particularly exposed to danger arising out of the armed conflict, if their evacuation can be
carried out under adequate conditions of safety;

d) they shall have the benefit of medical examinations;

e) their physical or mental health and integrity shall not be endangered by any unjustified act or
omission. Accordingly, it is prohibited to subject the persons described in this Article to any medical
procedure which is not indicated by the state of health of the person concerned, and which is not
consistent with the generally accepted medical standards applied to free persons under similar
medical circumstances.

3. Persons who are not covered by paragraph 1 but whose liberty has been restricted in any way
whatsoever for reasons related to the armed conflict shall be treated humanely in accordance with Article 4
and with paragraphs 1 a), c) and d), and 2 b) of this Article.

4. If it is decided to release persons deprived of their liberty, necessary measures to ensure their safety shall
be taken by those so deciding.

Article 6 — Penal prosecutions

This Article applies to the prosecution and punishment of criminal offences related to the armed conflict.

No sentence shall be passed and no penalty shall be executed on a person found guilty of an offence except
pursuant to a conviction pronounced by a court offering the essential guarantees of independence and impartiality.
In particular:

a) the procedure shall provide for an accused to be informed without delay of the particulars of the offence
alleged against him and shall afford the accused before and during his trial all necessary rights and means
of defence;

b) no one shall be convicted of an offence except on the basis of individual penal responsibility;

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 c) no one shall be held guilty of any criminal offence on account of any act or omission which did not
constitute a criminal offence, under the law, at the time when it was committed; nor shall a heavier penalty
be imposed than that which was applicable at the time when the criminal offence was committed; if, after the
commission of the offence, provision is made by law for the imposition of a lighter penalty, the offender shall
benefit thereby;

d) anyone charged with an offence is presumed innocent until proved guilty according to law;

e) anyone charged with an offence shall have the right to be tried in his presence;

f) no one shall be compelled to testify against himself or to confess guilt.

A convicted person shall be advised on conviction of his judicial and other remedies and of the time-limits within
which they may be exercised.

The death penalty shall not be pronounced on persons who were under the age of eighteen years at the time of the
offence and shall not be carried out on pregnant women or mothers of young children.

At the end of hostilities, the authorities in power shall endeavour to grant the broadest possible amnesty to persons
who have participated in the armed conflict, or those deprived of their liberty for reasons related to the armed
conflict, whether they are interned or detained. (Emphasis provided)

Furthermore, protection for the civilian population is expressly provided for in Additional Protocol II:

Article 13 — Protection of the civilian population

The civilian population and individual civilians shall enjoy general protection against the dangers arising from military
operations. To give effect to this protection, the following rules shall be observed in all circumstances.

The civilian population as such, as well as individual civilians, shall not be the object of attack. Acts or threats of
violence the primary purpose of which is to spread terror among the civilian population are prohibited.

Civilians shall enjoy the protection afforded by this Part, unless and for such time as they take a direct part in
hostilities.

Some have asserted that Common Article 3 of the Geneva Conventions belongs to the body of jus cogens
norms. Jus cogens norms under the Vienna Convention of Law of the Treaties are "norm[s] accepted and
27

recognized by the international community of States as a whole as [norms] from which no derogation is permitted
and which can be modified only by a subsequent norm of general international law having the same character." 28

The principles embedded in Common Article 3 have been held to apply even to international armed conflict, thus,
depicting a universal character.

It lays down fundamental standards which are applicable at all times, in all circumstances and to all States and from
which no derogation at any time is permitted. As was stated, it "sets forth a minimum core of mandatory rules [and],
reflects the fundamental humanitarian principles which underlie international humanitarian law as a whole, and upon
which the Geneva Conventions in their entirety are based. These principles, the object of which is the respect for the
dignity of the human person, developed as a result of centuries of warfare and had already become customary law
at the time of the adoption of the Geneva Conventions because they reflect the most universally recognized
humanitarian principles."  (Emphasis provided)
29

Hence, non-observance of the minimum standard provided for in Common Article 3 triggers a violation of well-
accepted principles of international law.

In a similar vein, there exist international human rights laws or IHRL (not necessarily belonging to international
humanitarian law) that are of jus cogens nature. Thus:

There is a consensus x x x about the jus cogens nature of a number of prohibitions formulated in international
human rights law x x x. These include at a minimum the prohibition of aggression, slavery and the slave trade,
genocide x x x, racial discrimination, apartheid and torture x x x, as well as basic rules of international humanitarian
law applicable in armed conflict, and the right to self-determination.  (Emphasis provided)
30

International humanitarian law and international human rights law are two sets of regimes in international law.  The 1awp++i1

two regimes have been compared and contrasted with each other, to wit:

93
The two sets of rules certainly have a different history and often a different field of application, both ratione personae
and ratione temporis. Human rights thus apply to all people and humanitarian law applies to certain groups of
persons (for example, to the wounded, to prisoners o[f] war, to civilians) and, furthermore, humanitarian law applies
only in times of armed conflict. On the other hand, ‘human rights’ and ‘humanitarian law’ regulate, ratione materiae,
similar rights at least insofar that they all intend to increase the protection of individuals, alleviate pain and suffering
and secure the minimum standard of persons in various situations.  (Emphasis in the original)
31

Thus, all persons are protected in both times of war and peace. The protection accorded by human rights laws does
not cease to apply when armed conflict ensues.  Still, some "human rights" are allowed to be derogated in times of
32

"emergency which threatens the life of the nation."  Nevertheless, provisions on the right to life, prohibition from
33

torture, inhuman and degrading treatment, and slavery remain free from any derogation whatsoever, having
acquired a jus cogens character. 34

We do not need to go further to determine whether these norms form part of "generally accepted principles of
international law" to determine whether they are "part of the law of the land."  At minimum, they have been
35

incorporated through statutory provisions.

Rep. Act No. 9851 defines and provides for the penalties of crimes against humanity, serious violations of IHL,
genocide, and other crimes against humanity.  This law provides for the non-prescription of the prosecution of and
36

execution of sentences imposed with regard to the crimes defined in the Act.  It also provides for the jurisdiction of
37

the Regional Trial Court over the crimes defined in the Act. 38

These crimes are, therefore, separate from or independent from the crime of rebellion even if they occur on the
occasion of or argued to be connected with the armed uprisings.

Not only does the statute exist. Relevant to these cases are the Declarations made by the Communist Party of the
Philippines/New People’s Army/National Democratic Front or CPP/NPA/NDF invoking the Geneva Conventions and
its 1977 Additional Protocols.

One of these documents is the Declaration of Adherence to International Humanitarian Law dated August 15, 1991,
whereby the National Democratic Front "formally declare[d] its adherence to international humanitarian law,
especially Article 3 common to the Geneva Conventions as well as Protocol II additional to said conventions, in the
conduct of armed conflict in the Philippines." 39

We may take judicial notice that on July 5, 1996, the National Democratic Front issued the Declaration of
Undertaking to Apply the Geneva Conventions of 1949 and Protocol I of 1977. The National Democratic Front
stated that:

Being a party to the armed conflict, civil war or war of national liberation and authorized by the revolutionary people
and forces to represent them in diplomatic and other international relations in the ongoing peace negotiations with
the GRP, we the National Democratic Front of the Philippines hereby solemnly declare in good faith to undertake to
apply the Geneva Conventions and Protocol I to the armed conflict in accordance with Article 96, paragraph 3 in
relation to Article 1, paragraph 4 of Protocol I.

The NDFP is rightfully and dutifully cognizant that this declaration x x x shall have in relation to the armed conflict
with the GRP, the following effects:

a. the Geneva Conventions and Protocol I are brought into force for the NDFP as a Party to the conflict with
immediate effect;

b. the NDFP assumes the same rights and obligations as those which have been assumed by a High
Contracting Party to the Geneva Conventions and Protocol I; and

c. the Geneva Conventions and this Protocol are equally binding upon all Parties to the conflict.  (Emphasis
40

in the original)

In addition, in the context of peace negotiations, it appears that there is a Comprehensive Agreement on Respect
for Human Rights and International Humanitarian Law (CARHRIHL) executed by the Government of the Republic of
the Philippines (GRP) and the CPP/NPA/NDF. This agreement establishes the recognition of the existence,
protection, and application of human rights and principles of international humanitarian law as well as provides the
following rights and protections to individuals by the CPP/NPA/NDF. The agreement partly provides:

PART III
RESPECT FOR HUMAN RIGHTS

94
Article 1. In the exercise of their inherent rights, the Parties shall adhere to and be bound by the principles and
standards embodied in international instruments on human rights.

Article 2. This Agreement seeks to confront, remedy and prevent the most serious human rights violations in terms
of civil and political rights, as well as to uphold, protect and promote the full scope of human rights and fundamental
freedoms, including:

1. The right to self-determination of the Filipino nation by virtue of which the people should fully and freely determine
their political status, pursue their economic, social and cultural development, and dispose of their natural wealth and
resources for their own welfare and benefit towards genuine national independence, democracy, social justice and
development.

xxxx

3. The right of the victims and their families to seek justice for violations of human rights, including adequate
compensation or indemnification, restitution and rehabilitation, and effective sanctions and guarantees against
repetition and impunity.

4. The right to life, especially against summary executions (salvagings), involuntary disappearances, massacres and
indiscriminate bombardments of communities, and the right not to be subjected to campaigns of incitement to
violence against one’s person.

xxxx

7. The right not to be subjected to physical or mental torture, solitary confinement, rape and sexual abuse, and other
inhuman, cruel or degrading treatment, detention and punishment.

xxxx

9. The right to substantive and procedural due process, to be presumed innocent until proven guilty, and against
self-incrimination.

xxxx

PART IV
RESPECT FOR INTERNATIONAL HUMANITARIAN LAW

Article 1. In the exercise of their inherent rights, the Parties to the armed conflict shall adhere to and be bound by
the generally accepted principles and standards of international humanitarian law.

Article 2. These principles and standards apply to the following persons:

1. civilians or those taking no active part in the hostilities;

2. members of armed forces who have surrendered or laid down their arms;

3. those placed hors de combat by sickness, wounds or any other cause;

4. persons deprived of their liberty for reasons related to the armed conflict; and,

5. relatives and duly authorized representatives of above-named persons.

Article 3. The following acts are and shall remain prohibited at any time and in any place whatsoever with respect to
the persons enumerated in the preceding Article 2:

1. violence to life and person, particularly killing or causing injury, being subjected to physical or mental
torture, mutilation, corporal punishment, cruel or degrading treatment and all acts of violence and reprisals,
including hostage-taking, and acts against the physical well-being, dignity, political convictions and other
human rights;

2. holding anyone responsible for an act that she/he has not committed and punishing anyone without
complying with all the requisites of due process;

3. requiring persons deprived of their liberty for reasons related to the armed conflict to disclose information
other than their identity;

95
 4. desecration of the remains of those who have died in the course of the armed conflict or while under
detention, and breach of duty to tender immediately such remains to their families or to give them decent
burial;

5. failure to report the identity, personal condition and circumstances of a person deprived of his/her liberty
for reasons related to the armed conflict to the Parties to enable them to perform their duties and
responsibilities under this Agreement and under international humanitarian law;

x x x x (Emphasis provided)

The CARHRIHL has provided a clear list of rights and duties that the parties must observe in recognizing the
application of human rights and international humanitarian laws. The CPP/NPA/NDF, parties to an ongoing armed
conflict and to which petitioners allegedly belong, are required to observe, at the minimum, the humane treatment of
persons involved in the conflict, whether hors de combat or a civilian.

In all these instruments, even spies are accorded protection under Common Article 3 of the Geneva Conventions.
Common Article 3 and Additional Protocol II are broad enough to secure fundamental guarantees to persons not
granted prisoner of war or civilian status, such as protection from summary execution and right to fair trial.  These
41

fundamental guarantees are also found in Article 75, in relation to Articles 45 and 46 of Additional Protocol I.  Spies
42

and civilians suspected of being spies are also accorded protection under Rep. Act No. 9851.

IV

Concomitantly, persons committing crimes against humanity or serious violations of international humanitarian law,
international human rights laws, and Rep. Act No. 9851 must not be allowed to hide behind a doctrine crafted to
recognize the different nature of armed uprisings as a result of political dissent. The contemporary view is that these
can never be considered as acts in furtherance of armed conflict no matter what the motive. Incidentally, this is the
view also apparently shared by the CPP/NPA/NDF and major insurgent groups that are part of the present
government’s peace process.

We, therefore, should nuance our interpretation of what will constitute rebellion.

The rebel, in his or her effort to assert a better view of humanity, cannot negate himself or herself. Torture and
summary execution of enemies or allies are never acts of courage. They demean those who sacrificed and those
who gave their lives so that others may live justly and enjoy the blessings of more meaningful freedoms.

Torture and summary execution — in any context — are shameful, naked brutal acts of those who may have simply
been transformed into desperate cowards. Those who may have suffered or may have died because of these acts
deserve better than to be told that they did so in the hands of a rebel.

ACCORDINGLY, I concur that these petitions be dismissed and the Regional Trial Courts be directed to hear the
cases with due and deliberate dispatch taking these views into consideration should the evidence so warrant.

96
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. P-13-3126               February 4, 2014

(Formerly A.M. OCA IPI No. 09-3273-P)

VERONICA F. GALINDEZ, Complainant, 
vs.
ZOSIMA SUSBILLA-DE VERA, Respondent.

DECISION

PER CURIAM:

A court stenographer who defrauded a litigant by soliciting money to supposedly facilitate a legal proceeding in the
court is guilty of the most serious administrative offense of grave misconduct. Her dismissal from the service is fully
warranted.

Antecedents

This administrative case stemmed from the complaint-affidavit dated October 12, 2009 filed by Veronica F. Galindez
(Galindez) against Court Stenographer Zosima Susbilla-De Vera (Susbilla-De Vera) of the Regional Trial Court,
Branch 72, in Olongapo City.

In her complaint-affidavit,  Galindez averred that sometime in July 2008, she had approached Susbilla-De Vera, her
1

school batchmate and a court employee, to inquire where any petition for the adoption of her nephew and niece had
already been filed, pending, or approved by the Family Court, as she was interested in filing such a petition herself;
that after several follow-ups, Susbilla-De Vera had reported to her that she could not locate any adoption petition
involving the intended adoptees in the Family Court; that Susbilla-De Vera had then volunteered that she could
handle the adoption process for her by coordinating with a lawyer, and that she could help in the fast-tracking of the
petition; that Susbilla-De Vera had even boasted that it would take only three months for the entire process, and that
there would be no need to follow up or to hire a lawyer to handle the petition; that Susbilla-De Vera had told her that
the cost for the adoption process would be ₱130,000.00, half of which should be paid as down payment; that
Susbilla-De Vera had followed up with her on the proposal; that because she could raise only ₱20,000.00 as down
payment, Susbilla-De Vera had told her that the ₱20,000.00 would be acceptable, and that she would just talk to a
certain Atty. Nini, the handling lawyer; that she had paid the ₱20,000.00 to Susbilla-De Vera; that after a week,
Susbilla-De Vera · had called her to ask for the balance of the down payment; that she had willingly given the
balance on two separate occasions, the first the amount of ₱30,000.00 and the second the amount of ₱15,000.00 a
week later; that Susbilla-De Vera had handed her a receipt for the full amount of ₱65,000.00, with the assurance
that everything would be handled well, and she had made follow-ups on the progress of the adoption proceedings,
and Susbilla-De Vera had informed her that publication had already been done but that there would be other papers
that needed to be located; that because of her refusal to divulge the name of the lawyer she had visited Susbilla-De
Vera's office to ask the latter to facilitate a meeting with the engaged counsel; that Susbilla-De Vera had instead
brought her to the Family Court (Branch 73) to look into the logbook to find out if the previous adoption had been in
fact completely processed; that by the actuations of Susbilla-De Vera had given her cause to doubt, and she had
then gone to the Farinas Law Office herself to inquire on the status of the adoption petition; that the legal secretary
of the law office had told her that the adoption had already been completed with her brother as the petitioner; that
97
because of that information, she had demanded from Susbilla-De Vera to return the money but Susbilla-De Vera
had replied that the money had been delivered to the lawyer; that she had offered to personally see the lawyer
about the return of the down payment, but Susbilla-De Vera had insisted to do it herself; that after a few days,
Susbilla-De Vera had informed her that the lawyer would be returning the money in two installments; and that she
had not received any reimbursement by Susbilla-De Vera as of the filing of the complaint-affdiavit. 2

On October 26, 2009, acting on the administrative complaint, the Office of the Court Administrator (OCA) directed
Susbilla-De Vera to submit her comment within ten days from receipt. 3

When the OCA did not receive her comment thereafter, it sent another directive dated January 22, 2010 to Susbilla-
De Vera for her to comply with the previous order to submit her comment. 4

Upon the recommendation of Court Administrator Jose Midas P Marquez, the Court directed Susbilla-De Vera to
submit her comment within five days with a warning that the Court would decide the administrative complaint on the
basis of the record; and to show cause within ten days why she should not be held administratively liable for not
complying with the two directives from the OCA. 5

But Susbilla-De Vera still did not comply with the order for her to submit her comment. Hence, the Court deemed the
case submitted for decision based on the records on file; and referred it to the OCA for evaluation, report, and
recommendation. 6

Findings and Recommendations of the OCA

In the memorandum dated September 12, 2011,  the OCA rendered its findings, and recommended dismissal from
7

the service as the disciplinary action to be taken against Susbilla-De Vera, to wit:

xxxx

Section 2 of the Code of Conduct for Court Personnel provides that "court personnel shall not solicit or accept any
gift, favor or benefit on any or explicit or implicit understanding that such gift, favor or benefit shall influence their
official functions" while Section 1 thereof provides that "court personnel shall not use their official position to secure
unwarranted benefits, privileges or exemptions for themselves or for others."

In the case at bar, respondent violated these provisions as she took advantage of her official position in receiving
the amount of ₱65,000.00 from Complainant for the alleged hiring of a counsel in the filing of a petition for adoption
which did not materialize as the minors to be adopted were already the subject in a decided adoption case and,
thus, committed grave misconduct. Moreover, she manifested her defiance with the directives of the OCA.

xxxx

Grave Misconduct is punishable by dismissal from the service for the first offense with disqualification from
employment in any government office and forfeiture of benefits, except for accrued leaves under Sec. 52 (A) (3) of
the Revised Uniform Rules on Administrative Cases in the Civil Service and Rule XIV, Section 22 of the Omnibus
Rules Implementing Book V of Executive Order No. 292 and Other Pertinent Civil Service Laws, as amended by
Section 52(A), paragraphs 1 and 3 of Civil Service Commission Memorandum Circular No. 19, Series of 1999.

xxxx

In view of the foregoing, it is respectfully recommended, for approval of this Honorable Court, that:

xxxx

2. For Grave Misconduct and Disrespect and Indifference to this Court's Resolutions, Ms. Zosima R. Susbilla-de
Vera be DISMISSED from the service with forfeiture of all retirement benefits, except accrued leave benefits, and
with perpetual and absolute disqualification from re-employment in any branch or instrumentality of the government,
including government owned or controlled corporations.

Ruling of the Court

We find the findings of the OCA to be substantiated by the evidence on record, and the recommendation of
dismissal from the service to be conformable to the law and pertinent jurisprudence.

Section 1, Article XI of the 1987 Constitution enshrines the principle that a public office is a public trust.  It mandates
1âwphi1

that public officers and employees, who are servants of the people, must at all times be accountable to them, serve
them with utmost responsibility, integrity, loyalty and efficiency, act with patriotism and justice, and lead modest
lives.
98
To enforce this constitutional tenet, the Court has incessantly reminded officials and employees involved in the
administration of justice to faithfully adhere to their mandated duties and responsibilities. Any act of impropriety
-whether committed by the highest judicial official or by the lowest member of the judicial workforce -can greatly
erode the people's confidence in the Judiciary. The image of a court of justice is necessarily mirrored in the conduct
of its personnel. It is the personnel's constant duty, therefore, to maintain the good name and standing of the court
as a true temple of justice. 8

To deserve the trust and confidence of the people, Susbilla-De Vera was expected to have her dealings with the
public to be always sincere and above board. She should not lead others to believe that despite her status as a
minor court employee she had the capacity to influence the outcomes of judicial matters. Her acts and actuations
did not live up to the expectation, for the records unquestionably showed how she had deliberately and fraudulently
misrepresented her ability to assist the complainant in the adoption of her niece and nephew. For one, if there would
be such a case, she could not make such assurance to the complainant because the handling court would
independently and objectively handle and decide the case based on its merits. She was also aware that her
representations to the complainant about no other adoption petition being yet filed in the Family Court, and about
her working together with a lawyer to advance the legal matter for the complainant were both false, for there had
already been another petition for adoption initiated by the complainant's own brother, and there had been no lawyer
working with her to assist the complainant.

Section 2, Canon 1 of the Code of Conduct or Court Personnel has enjoined all court personnel from soliciting or
accepting any gift, favor or benefit based on any or explicit understanding that such gift, favor or benefit shall
influence their official actions. Susbilla-De Vera thus violated her sacred oath as a court employee to serve the
Judiciary with utmost loyalty and to preserve the integrity and reputation of the Judiciary as an institution dispensing
justice to all. Her violation was made worse by her committing it in exchange for easy money. She was thereby
guilty of corruption. She compounded her guilt by disobeying the orders of the Court requiring her to explain herself.

Under the circumstances, she committed grave misconduct, which the Court has described in Velasco v.
Baterbonia  as follows:
9

In grave misconduct, as distinguished from simple misconduct, the elements of corruption, clear intent to violate the
law, or flagrant disregard of established rule must be manifest. Corruption as an element of grave misconduct
consists in the act of an official or employee who unlawfully or wrongfully uses her station or character to procure
some benefit for herself or for another, contrary to the rights of others. x x x

Grave misconduct is punishable by the ultimate penalty of dismissal from the service. This is pursuant to Section 46
A of the Revised Rules on Administrative Cases in the Civil Service Series of 2011 to wit:

Section 46. Classification of Offenses. -Administrative offenses with corresponding penalties are classified into
grave less grave or light depending on their gravity or depravity and effects on the government service.

A The following grave offenses shall be punishable by dismissal from the service:

1. Serious Dishonesty;

2. Gross Neglect of Duty;

3. Grave Misconduct;

xxxx

In Dela Cruz v. Malunao,  we dismissed an erring employee of the R TC in Nueva Vizcaya who had solicited money
10

from litigants in exchange for favorable decisions. For sure the acts of Susbilla-De Vera were of the same nature
and gravity.

WHEREFORE, the Court:

1. FINDS Court Stenographer ZOSIMA SUSBILLA-DE VERA guilty of GROSS MISCONDUCT; and
DISMISSES her from the service effective immediately with prejudice to her re-employment in the
Government including government-owned or -controlled corporations and with forfeiture of all retirement
benefits except accrued leave credits;

2. DIRECTS the Employees Leave Division Office of the Administrative Services to determine the balance of
ZOSIMA SUSBILLA-DE VERA s earned leave credits; and

3. ORDER ZOSIMA SUSBILLA DE VERA to return to complainant Veronica F. Galindez the amount of ₱65
000.00.
99
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No.171496               March 3, 2014

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS
(DPWH), Petitioner, 
vs.
ORTIGAS AND COMPANY LIMITED PARTNERSHIP, Respondents.

DECISION

LEONEN, J.:

Owners whose properties were taken for public use are entitled to just compensation.

This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to nullify and set aside the
Court of Appeals' resolution dated October 14, 2005. The Court of Appeals' resolution dismissed petitioner Republic
of the Philippines' appeal from the decision of the Regional Trial Court granting private respondent Ortigas' petition
for authority to sell. This petition also seeks to nullify the Court of Appeals’ resolution dated February 9, 2006, which
denied petitioner Republic of the Philippines' motion for reconsideration.

Respondent, Ortigas and Company Limited Partnership, is the owner of a parcel of land known as Lot 5-B-2 with an
area of 70,278 square meters in Pasig City. 1

Upon the request of the Department of Public Works and Highways, respondent Ortigas caused the segregation of
its property into five lots and reserved one portion for road widening for the C-5 flyover project.  It designated Lot 5-
2

B-2-A, a 1,445-square-meter portion of its property, for the road widening of Ortigas Avenue.  Respondent Ortigas
3

also caused the annotation of the term "road widening" on its title. The title was then inscribed with an encumbrance
that it was for road widening and subject to Section 50 of Presidential Decree No. 1529 or the Property Registration
Decree. 4

The C-5-Ortigas Avenue flyover was completed in 1999, utilizing only 396 square meters of the 1,445-square-meter
allotment for the project.
5

Consequently, respondent Ortigas further subdivided Lot 5-B-2-A into two lots: Lot 5-B-2-A-1, which was the portion
actually used for road widening, and Lot 5-B-2-A-2, which was the unutilized portion of Lot 5-B-2-A. 6

On February 14, 2001, respondent Ortigas filed with the Regional Trial Court of Pasig a petition for authority to sell
to the government Lot 5-B-2-A-1.  Respondent Ortigas alleged that the Department of Public Works and Highways
7

requested the conveyance of the property for road widening purposes.  The case was raffled to Branch 267.
8 9

In an order dated March 9, 2001,  the Regional Trial Court set the case for hearing on April 27, 2001, giving
10

opportunity to any interested person to appear, oppose, and show cause why respondent Ortigas' petition may not
be granted. In the same order, respondent Ortigas was directed to cause the publication of both the Regional Trial
Court’s order and respondent Ortigas' petition. The trial court also directed the Sheriff to serve copies of its order
and respondent Ortigas' petition to the Office of the Solicitor General, Office of the City Prosecutor, Department of
Public Works and Highways, City Engineer of Pasig, and the Register of Deeds of Pasig.

100
Despite due notice to the public, including the Office of the Solicitor General and the Department of Public Works
and Highways, no one appeared to oppose respondent Ortigas’ petition in the hearing on April 27,
2001. Respondent Ortigas was able to establish the jurisdictional facts of the case and was allowed to present
11

evidence ex parte before the appointed Commissioner, the Branch Clerk of Court, Atty. Edelyn M. Murillo. 12

Respondent Ortigas presented Mr. Romulo Rosete to support its allegations in its petition for authority to sell to the
government.  Rosete was respondent Ortigas' liaison officer who represented respondent Ortigas in government
13

transactions.  He testified that he was aware of respondent Ortigas' ownership of the 70,278-square-meter property
14

in Pasig and its subdivision for the purpose of designating an area for the C-5-Ortigas Avenue flyover project.  He 15

also testified that only 396 square meters of the 1,445-square-meter designated lot was actually utilized after the
road had been finished being constructed in 1999.  This caused respondent Ortigas to further subdivide the
16

designated property into two lots.  Rosete presented a certified true copy of the title of the utilized portion of the lot
17

to prove respondent Ortigas' ownership.  He also alleged that respondent Ortigas was not compensated for the use
18

of its property, and respondent Ortigas was requested by the Department of Public Works and Highways to convey
the utilized property to the government.  Hence, to facilitate the processing of its compensation, respondent Ortigas
19

filed a petition with the Regional Trial Court. 20

Finding merit in respondent Ortigas' petition, the Regional Trial Court issued an order on June 11, 2001, authorizing
the sale of Lot 5-B-2-A-1 to petitioner Republic of the Philippines.21

On June 27, 2001, petitioner Republic of the Philippines, represented by the Office of the Solicitor General, filed an
opposition, alleging that respondent Ortigas' property can only be conveyed by way of donation to the government,
citing Section 50 of Presidential Decree No. 1529, also known as the Property Registration Decree. 22

On June 29, 2001, petitioner Republic of the Philippines filed a motion for reconsideration of the Regional Trial
Court order dated June 11, 2001, reiterating its argument in its opposition. 23

In an order dated October 3, 2001, the Regional Trial Court denied petitioner Republic of the Philippines' motion for
reconsideration. 24

Petitioner Republic of the Philippines filed a notice of appeal on October 24, 2001, which reads:

The REPUBLIC OF THE PHILIPPINES, by counsel, hereby respectfully serves notice of appeal to the Court of
Appeals from this Honorable Court's Order dated October 3, 2001 (copy of which was received by the Office of the
Solicitor General on October 15, 2001) on the ground that said Order is contrary to law and evidence.  (Emphasis
25

supplied)

In its appellant's brief, petitioner Republic of the Philippines argued that the Regional Trial Court erred in granting
respondent Ortigas the authority to sell its property to the government because the lot can only be conveyed by
donation to the government. 26

In a resolution dated October 14, 2005, the Court of Appeals dismissed petitioner Republic of the Philippines’
appeal on the ground that an order or judgment denying a motion for reconsideration is not appealable. 27

Petitioner Republic of the Philippines filed a motion for reconsideration of the Court of Appeals' resolution. In its
motion for reconsideration, petitioner Republic of the Philippines pointed out that its reference in the notice of appeal
to the October 3, 2001 order denying the motion for reconsideration of the trial court’s decision was merely due to
inadvertence. In any case, Rule 37, Section 9 of the Rules of Procedure contemplates as non-appealable only those
orders which are not yet final. The October 3, 2001 order was already final as it confirmed the June 11, 2001
judgment of the court. 28

In its resolution dated February 9, 2006, the Court of Appeals denied the motion for reconsideration on the ground
of lack of jurisdiction. The Court of Appeals noted that even if the order denying the motion for reconsideration was
appealable, the appeal was still dismissible for lack of jurisdiction because petitioner Republic of the Philippines
raised only a question of law. 29

The issues for our consideration are the following: 30

a) Whether the Court of Appeals gravely erred in denying petitioner Republic of the Philippines’ appeal
based on technicalities;

b) Whether the Court of Appeals gravely erred in dismissing the appeal from the trial court order granting
respondent Ortigas authority to sell the land to the Republic of the Philippines.

The Office of the Solicitor General argued that strict application of the rules of procedure overrides substantial
justice, in this case, to the detriment of petitioner Republic of the Philippines. 31

101
On the trial court's grant of authority to respondent Ortigas to sell its property to the government, the Office of the
Solicitor General stated while citing Young v. City of Manila  that respondent Ortigas' subdivision of its land for road
32

widening automatically withdrew the land from the commerce of man.  Further, a piece of land segregated by a
33

private owner for public use may only be conveyed by donation to the government based on Section 50 of
Presidential Decree No. 1529.  "Presently, said land is already being used by the public as part of the ‘widened’
34

road beside the C-5 [flyover] x x x."35

In its comment dated July 25, 2006, respondent Ortigas argued that the Office of the Solicitor General committed a
fatal mistake when it brought by way of appeal the denial of its motion for reconsideration before the Court of
Appeals. 36

This petition lacks merit.

Appeals from the Regional Trial Court to the Court of Appeals under Rule 41 must raise both questions of fact and
law

Section 2 of Rule 50 of the Rules of Court provides that appeals taken from the Regional Trial Court to the Court of
Appeals raising only pure questions of law are not reviewable by the Court of Appeals. In which case, the appeal
shall not be transferred to the appropriate court. Instead, it shall be dismissed outright.

Appeals from the decisions of the Regional Trial Court, raising purely questions of law must, in all cases, be taken to
the Supreme Court on a petition for review on certiorari in accordance with Rule 45.  An appeal by notice of appeal
37

from the decision of the Regional Trial Court in the exercise of its original jurisdiction to the Court of Appeals is
proper if the appellant raises questions of fact or both questions of fact and questions of law. 38

There is a question of law when the appellant raises an issue as to what law shall be applied on a given set of
facts.  Questions of law do "not involve an examination of the probative value of the evidence presented."  Its
39 40

resolution rests solely on the application of a law given the circumstances.  There is a question of fact when the
41

court is required to examine the truth or falsity of the facts presented.  A question of fact "invites a review of the
42

evidence." 43

The sole issue raised by petitioner Republic of the Philippines to the Court of Appeals is whether respondent
Ortigas’ property should be conveyed to it only by donation, in accordance with Section 50 of Presidential Decree
No. 1529. This question involves the interpretation and application of the provision. It does not require the Court of
Appeals to examine the truth or falsity of the facts presented. Neither does it invite a review of the evidence. The
issue raised before the Court of Appeals was, therefore, a question purely of law. The proper mode of appeal is
through a petition for review under Rule 45. Hence, the Court of Appeals did not err in dismissing the appeal on this
ground.

Nevertheless, we take time to emphasize that Rule 41, Section 1, paragraph (a) of the Rules of Court, which
provides that "[n]o appeal may be taken from [a]n order denying a x x x motion for reconsideration," is based on the
implied premise in the same section that the judgment or order does not completely dispose of the case. The
pertinent portion of Rule 41, Section 1 provides:

Section 1. Subject of appeal. – An appeal may be taken from a judgment or final order that completely disposes of
the case, or of a particular matter therein when declared by these Rules to be appealable.

In other words, what Section 1 of Rule 41 prohibits is an appeal taken from an interlocutory order. An interlocutory
order or judgment, unlike a final order or judgment, does "not completely dispose of the case [because it leaves to
the court] something else to be decided upon."  Appeals from interlocutory orders are generally prohibited to
44

prevent delay in the administration of justice and to prevent "undue burden upon the courts." 45

Orders denying motions for reconsideration are not always interlocutory orders. A motion for reconsideration may be
considered a final decision, subject to an appeal, if "it puts an end to a particular matter,"  leaving the court with
46

nothing else to do but to execute the decision.

"An appeal from an order denying a motion for reconsideration of an order of dismissal of a complaint is effectively
an appeal of the order of dismissal itself."  It is an appeal from a final decision or order.
47

The trial court’s order denying petitioner Republic of the Philippines’ motion for reconsideration of the decision
granting respondent Ortigas the authority to sell its property to the government was not an interlocutory order
because it completely disposed of a particular matter. An appeal from it would not cause delay in the administration
of justice. Petitioner Republic of the Philippines’ appeal to the Court of Appeals, however, was properly dismissed
because the former used the wrong mode of appeal.

102
In any event, we resolve the substantive issue on whether respondent Ortigas may not sell and may only donate its
property to the government in accordance with Section 50 of Presidential Decree No. 1529.

Section 50 of Presidential Decree No. 1529 does not apply in a case that is the proper subject of an expropriation
proceeding

Respondent Ortigas may sell its property to the government. It must be compensated because its property was
taken and utilized for public road purposes.

Petitioner Republic of the Philippines insists that the subject property may not be conveyed to the government
through modes other than by donation. It relies on Section 50 of the Property Registration Decree, which provides
that delineated boundaries, streets, passageways, and waterways of a subdivided land may not be closed or
disposed of by the owner except by donation to the government. It reads:

Section 50. Subdivision and consolidation plans. Any owner subdividing a tract of registered land into lots which do
not constitute a subdivision project as defined and provided for under P.D. No. 957, shall file with the Commissioner
of Land Registration or the Bureau of Lands a subdivision plan of such land on which all boundaries, streets,
passageways and waterways, if any, shall be distinctly and accurately delineated.

If a subdivision plan, be it simple or complex, duly approved by the Commissioner of Land Registration or the
Bureau of Lands together with the approved technical descriptions and the corresponding owner’s duplicate
certificate of title is presented for registration, the Register of Deeds shall, without requiring further court approval of
said plan, register the same in accordance with the provisions of the Land Registration Act, as amended: Provided,
however, that the Register of Deeds shall annotate on the new certificate of title covering the street, passageway or
open space, a memorandum to the effect that except by way of donation in favor of the national government,
province, city or municipality, no portion of any street, passageway, waterway or open space so delineated on the
plan shall be closed or otherwise disposed of by the registered owner without the approval of the Court of First
Instance of the province or city in which the land is situated. (Emphasis supplied)

Petitioner Republic of the Philippines’ reliance on Section 50 of the Property Registration Decree is erroneous.
Section 50 contemplates roads and streets in a subdivided property, not public thoroughfares built on a private
property that was taken from an owner for public purpose. A public thoroughfare is not a subdivision road or street.

More importantly, when there is taking of private property for some public purpose, the owner of the property taken
is entitled to be compensated. 48

There is taking when the following elements are present:

1. The government must enter the private property;

2. The entrance into the private property must be indefinite or permanent;

3. There is color of legal authority in the entry into the property;

4. The property is devoted to public use or purpose;

5. The use of property for public use removed from the owner all beneficial enjoyment of the property. 49

All of the above elements are present in this case. Petitioner Republic of the Philippines’ construction of a road — a
permanent structure — on respondent Ortigas’ property for the use of the general public is an obvious permanent
entry on petitioner Republic of the Philippines’ part. Given that the road was constructed for general public use
stamps it with public character, and coursing the entry through the Department of Public Works and Highways gives
it a color of legal authority.

As a result of petitioner Republic of the Philippines’ entry, respondent Ortigas may not enjoy the property as it did
before. It may not anymore use the property for whatever legal purpose it may desire. Neither may it occupy, sell,
lease, and receive its proceeds. It cannot anymore prevent other persons from entering or using the property. In
other words, respondent Ortigas was effectively deprived of all the bundle of rights  attached to ownership of
50

property.

It is true that the lot reserved for road widening, together with five other lots, formed part of a bigger property before
it was subdivided. However, this does not mean that all lots delineated as roads and streets form part of subdivision
roads and streets that are subject to Section 50 of the Property Registration Decree. Subdivision roads and streets
are constructed primarily for the benefit of the owners of the surrounding properties. They are, thus, constructed
primarily for private use — as opposed to delineated road lots taken at the instance of the government for the use
and benefit of the general public.
103
In this case, the lot was reserved for road widening at the instance of petitioner Republic of the Philippines. While
the lot segregated for road widening used to be part of the subdivided lots, the intention to separate it from the
delineated subdivision streets was obvious from the fact that it was located at the fringes of the original lot  —
51

exactly at petitioner Republic of the Philippines’ intended location for the road widening project. Moreover, petitioner
Republic of the Philippines’ intention to take the property for public use was obvious from the completion of the road
widening for the C-5 flyover project and from the fact that the general public was already taking advantage of the
thoroughfare.

Delineated roads and streets, whether part of a subdivision or segregated for public use, remain private and will
remain as such until conveyed to the government by donation or through expropriation proceedings.  An owner may
52

not be forced to donate his or her property even if it has been delineated as road lots because that would partake of
an illegal taking.  He or she may even choose to retain said properties.  If he or she chooses to retain them,
53 54

however, he or she also retains the burden of maintaining them and paying for real estate taxes.

An owner of a subdivision street which was not taken by the government for public use would retain such burden
even if he or she would no longer derive any commercial value from said street. To remedy such burden, he or she
may opt to donate it to the government. In such case, however, the owner may not force the government to
purchase the property. That would be tantamount to allowing the government to take private property to benefit
private individuals. This is not allowed under the Constitution, which requires that taking must be for public use. 55

Further, since the Constitution proscribes taking of private property without just compensation,  any taking must
56

entail a corresponding appropriation for that purpose. Public funds, however, may only be appropriated for public
purpose.  Employment of public funds to benefit a private individual constitutes malversation.  Therefore, private
57 58

subdivision streets not taken for public use may only be donated to the government.

In contrast, when the road or street was delineated upon government request and taken for public use, as in this
case, the government has no choice but to compensate the owner for his or her sacrifice, lest it violates the
constitutional provision against taking without just compensation, thus:

Section 9. Private property shall not be taken for public use without just compensation. 59

As with all laws, Section 50 of the Property Registration Decree cannot be interpreted to mean a license on the part
of the government to disregard constitutionally guaranteed rights.

The right to compensation under Article III, Section 9 of the Constitution was put in place to protect the individual
from and restrain the State’s sovereign power of eminent domain,  which is the government’s power to condemn
60

private properties within its territory for public use or purpose.  This power is inherent and need not be granted by
61

law.  Thus, while the government’s power to take for public purpose is inherent, immense, and broad in scope, it is
62

delimited by the right of an individual to be compensated. In a nutshell, the government may take, but it must pay.

Respondent Ortigas, immediately upon the government’s suggestion that it needed a portion of its property for road
purposes, went so far as to go through the process of annotating on its own title that the property was reserved for
road purposes. Without question, respondent Ortigas allowed the government to construct the road and occupy the
property when it could have compelled the government to resort to expropriation proceedings and ensure that it
would be compensated. Now, the property is being utilized, not for the benefit of respondent Ortigas as a private
entity but by the public. Respondent Ortigas remains uncompensated. Instead of acknowledging respondent
Ortigas’ obliging attitude, however, petitioner Republic of the Philippines refuses to pay, telling instead that the
property must be given to it at no cost. This is unfair.

In the parallel case of Alfonso v. Pasay City  wherein Alfonso was deprived of his property for road purposes, was
63

uncompensated, and was left without any expropriation proceeding undertaken, this court said:

When a citizen, because of this practice loses faith in the government and its readiness and willingness to pay for
what it gets and appropriates, in the future said citizen would not allow the Government to even enter his property
unless condemnation proceedings are first initiated, and the value of the property, as provisionally ascertained by
the Court, is deposited, subject to his disposal. This would mean delay and difficulty for the Government, but all of
its own making. 64

"There is nothing that can more speedily and effectively embitter a citizen and taxpayer against his Government and
alienate his faith in it, than an injustice and unfair dealing like the present case."
65

Title to the subject lot remains under respondent Ortigas’ name. The government is already in possession of the
property but is yet to acquire title to it. To legitimize such possession, petitioner Republic of the Philippines must
acquire the property from respondent Ortigas by instituting expropriation proceedings or through negotiated sale,
which has already been recognized in law as a mode of government acquisition of private property for public
purpose. 66

104
In a negotiated sale, the government offers to acquire for public purpose a private property, and the owner may
accept or reject it. A rejection of the offer, however, would most likely merely result in the commencement of an
expropriation proceeding that would eventually transfer title to the government. Hence, the government's offer to
acquire for public purpose a private property may be considered as an act preparatory to an expropriation
proceeding. Therefore, a private owner's initiative to segregate a property to accommodate government needs
saves the government from a long and arduous expropriation proceeding. This is a commendable act on the part of
the owner. It must be encouraged, not dampened by threats of property deprivation without compensation.

Respondent Ortigas, which merely accommodated petitioner Republic of the Philippines' request, remains
uncompensated for the taking of its property. Respondent Ortigas could have brought action to recover possession
of the property, but it instead chose to sell its property to petitioner Republic of the Philippines. This is both fair and
convenient as the road construction had long been completed, and the road is already being utilized by the public.

Taking of private property without just compensation is a violation of a person's property right.  In situations where
1âwphi1

the government does not take the trouble of initiating an expropriation proceeding, the private owner has the option
to compel payment of the property taken, when justified. The trial court should continue to proceed with this case to
determine just compensation in accordance with law.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED. The trial court is
directed to proceed with the case with due and deliberate dispatch in accordance with this decision.

SO ORDERED.

105
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. P-12-3070               March 11, 2014

[Formerly A.M. OCA IPI No. 10-3327-P]

CIVIL SERVICE COMMISSION, Complainant, 

vs.
NENITA C. LONGOS, Clerk II, Municipal Circuit Trial Court, Del Carmen-Numancia-San Isidro-San Benito,
Surigao del Norte, Respondent.

RESOLUTION

PER CURIAM:

At bench is an administrative case involving respondent Nenita C. Longos, employed as Clerk II of the Municipal
Circuit Trial Court, Del Carmen-Numancia-San Isidro-San Benito, Surigao del Norte. The Office of the Court
Administrator (OCA) found her guilty of dishonesty for allowing another person to take her 1992 Civil Service
Professional Examination. The OCA recommends that respondent be dismissed from the service.

The antecedent facts are as follows:

On 25 October 2002, a letter from a concerned citizen  informed the Civil Service Commission (CSC) of
1

respondent’s spurious eligibility. The letter stated that on 29 November 1992, Longos asked someone else to take
her Civil Service Professional Examination under Examination No. 342620, which fraudulently resulted in her
attainment of an 86.10% rating.

In response, the CSC studied the Personal Data Sheet (PDS),  appointment papers,  and examination records of
2 3

respondent. The latter included her Examinee Attendance Sheet  and Picture-Seat Plan (PSP).  Comparing these
4 5

documents, the CSC found a patent dissimilarity between the pictures pasted in her PDS and in her purported PSP.

In view of this discrepancy, the CSC required Longos to submit sworn counter statements and invited her to a
conference.  But no hearing materialized as respondent failed to appear despite several resettings.  Eventually, the
6 7

CSC formally charged her with the administrative offense of dishonesty. 8

Thereafter, on 21 January 2010, the CSC referred to the OCA this administrative case involving a court employee,
pursuant to Section 6, Article VIII of the Constitution,  and Ampong v. Civil Service Commission.
9 10

In the proceedings before the OCA, the Court Administrator repeatedly required Longos to file a comment, to no
avail.  Consequently, on 5 March 2012, her case was deemed submitted for evaluation, report, and
11

recommendation.

In its Memorandum dated 30 March 2012,  the OCA found Longos guilty of dishonesty. It noticed that the picture
12

appearing in her PDS was different from that pasted in her PSP. Without her filing any answer to explain the
anomaly, the OCA construed the evidence against her as unrefuted. It then recommended her dismissal from the
service with forfeiture of retirement and other benefits except accrued leave credits and with perpetual
disqualification from re-employment in any government-owned or controlled corporation.

RULING OF THE COURT

After a judicious examination of the records, we note and adopt the recommendation of the OCA.

106
As shown by the documents on record, which were uncontested by respondent despite an opportunity to do so, it is
clear that the pictures in her PDS and PSP are starkly different.  Therefore, based on substantial evidence,  this
13 14

Court concludes that she asked another person to take the 1992 Civil Service Professional Examination in her
stead.

It is beyond question that the act of fraudulently securing one’s appointment constitutes dishonesty.  In Office of the
1âwphi1

Court Administrator v. Bermejo,  we squarely ruled thus:

15

Dishonesty is defined as intentionally making a false statement on any material fact, or practicing or attempting to
practice any deception or fraud in securing his examination, appointment or registration. Dishonesty is a serious
offense which reflects a person’s character and exposes the moral decay which virtually destroys his honor, virtue
and integrity. It is a malevolent act that has no place in the judiciary, as no other office in the government service
exacts a greater demand for moral righteousness from an employee than a position in the judiciary. (Emphasis
supplied)

The case of Longos is not one of first impression. In numerous other cases, this Court has dismissed erring
personnel of the judiciary whose civil service eligibility was unscrupulously obtained through the guise of another.

Twelve years ago, in Cruz v. Civil Service Commission,  the CSC and the Court already uncovered this type of
16

mischief by comparing the pictures of civil servants in their PSP and PDS. Civil Service Commission v. Sta. Ana,  In 17

re: Alleged Illegal Acquisition of a Career Service Eligibility by Ma. Aurora P Santos,  and most recently, Civil
18

Service Commission v. Hadji Ali,  also utilized the same modus operandi decried by the Court.
19

This fraudulent act by an aspiring civil servant will not be countenanced by the Court, much more so when
committed by one who seeks to be employed in our fold. After all, credibility undergirds the substance and process
of the rendering of justice.

All public service must be founded on and sustained by character. With the right character, the attitude of judiciary
employees is set in the right direction. It is then of utmost consequence that every employee of the judiciary exhibit
the highest sense of honesty and integrity to preserve the good name and integrity of the courts of justice. 20

In her act of dishonesty, respondent failed to take heed of the Code of Conduct for Court Personnel, which regards
all court personnel as sentinels of justice expected to refrain from any act of impropriety.  Thus, applying the
21

penalties under the Revised Uniform Rules on Administrative Cases in the Civil Service,  we sanction her perfidy by
22

imposing upon her the penalty of dismissal from service with accessory penalties.

WHEREFORE, Nenita C. Longos is hereby found GUILTY of dishonesty. She is DISMISSED from the service with
forfeiture of all her retirement benefits, except the value of her accrued leave credits, if any, and with prejudice to re-
employment in the government or any of its subdivisions, instrumentalities or agencies including government-owned
or controlled corporations. Let a copy of this Decision be attached to her records with this Court.

SO ORDERED.

107
 THIRD DIVISION

March 12, 2014

G.R. No. 193494

LUI ENTERPRISES, INC., Petitioners, 

vs.
ZUELLIG PHARMA CORPORATION and the PHILIPPINE BANK OF COMMUNICATIONS, Respondents.

DECISION

LEONEN, J.:

There should be no inexplicable delay in the filing of a motion to set aside order of default. Even when a motion is
filed within the required period, excusable negligence must be properly alleged and proven.

This is a petition for review on certiorari of the Court of Appeals' decision  dated May 24, 2010 and resoluticm dated
1 2

August 13, 2010 in CA- G.R. CV No. 88023. The Court of Appeals affirmed in toto the Regional

Trial Court of Makati’s decision  dated July 4, 2006.

3

The facts as established from the pleadings of the parties are as follows:

On March 9, 1995, Lui Enterprises, Inc. and Zuellig Pharma Corporation entered into a 10-year contract of
lease over a parcel of land located in Barrio Tigatto, Buhangin, Davao City. The parcel of land was covered by
4

Transfer Certificate of Title No. T-166476 and was registered under Eli L. Lui. 5

On January 10, 2003, Zuellig Pharma received a letter  from the Philippine Bank of Communications. Claiming to be
6

the new owner of the leased property, the bank asked Zuellig Pharma to pay rent directly to it. Attached to the letter
was a copy of Transfer Certificate of Title No. 336962 under the name of the Philippine Bank of
Communications. Transfer Certificate ofTitle No. 336962 was derived fromTransfer Certificate ofTitle No.T-166476.
7 8

Zuellig Pharma promptly informed Lui Enterprises of the Philippine Bank of Communications’ claim. On January 28,
2003, Lui Enterprises wrote to Zuellig Pharma and insisted on its right to collect the leased property’srent.9

Due to the conflicting claims of Lui Enterprises and the Philippine Bank of Communications over the rental
payments, Zuellig Pharma filed a complaint  for interpleader with the Regional Trial Court of Makati. In its complaint,
10

Zuellig Pharma alleged that it already consigned in court P604,024.35 as rental payments. Zuellig Pharma prayed
that it be allowed to consign in court its succeeding monthly rental payments and that Lui Enterprises and the
Philippine Bank of Communications be ordered to litigate their conflicting claims. 11

The Philippine Bank of Communications filed its answer  to the complaint. On the other hand, Lui Enterprises filed a
12

motion to dismiss  on the ground that Zuellig Pharma’s alleged representative did not have authority to file the
13

complaint for interpleader on behalf of the corporation. Under the secretary’s certificate  dated May 6, 2003
14

attached to the complaint, Atty. Ana L.A. Peralta was only authorized to "initiate and represent [Zuellig Pharma] in
the civil proceedings for consignation of rental payments to be filed against Lui Enterprises, Inc. and/or [the
Philippine Bank of Communications]." 15

According to Lui Enterprises, an earlier filed nullification of deed of dation in payment case pending with the
Regional Trial Court of Davao barred the filing of the interpleader case.  Lui Enterprises filed this nullification case
16

against the Philippine Bank of Communications with respect to several properties it dationed to the bank in payment

108
of its obligations. The property leased by Zuellig Pharma was among those allegedly dationed to the Philippine Bank
of Communications. 17

In the nullification of deed of dation in payment case, Lui Enterprises raised the issue of which corporation had the
better right over the rental payments.  Lui Enterprises argued that the same issue was involved in the interpleader
18

case. To avoid possible conflicting decisions of the Davao trial court and the Makati trial court on the same issue,
Lui Enterprises argued that the subsequently filed interpleader case be dismissed.

To support its argument, Lui Enterprises cited a writ of preliminary injunction  dated July 2, 2003 issued by the
19

Regional Trial Court of Davao, ordering Lui Enterprises and the Philippine Bank of Communications "[to maintain]
status quo"  with respect to the rent. By virtue of the writ of preliminary injunction, Lui Enterprises argued that it
20

should continue collecting the rental payments from its lessees until the nullification of deed of dation in payment
case was resolved. The writ of preliminary injunction dated July 2, 2003 reads:

WHEREAS, on June 30, 2003, the Court issued an Order, a portion of which is quoted:

WHEREFORE, PREMISES CONSIDERED, let a Writ of Preliminary Injunction issue, restraining and enjoining [the
Philippine Bank of Communications], its agents or [representative], the Office of the Clerk of Court- Sheriff and all
persons acting on their behalf, from conducting auction sale on the properties of [Lui Enterprises] in EJF-REM Case
No. 6272-03 scheduled on July 3, 2003 at 10:00 a.m. at the Hall of Justice, Ecoland, Davao City, until the final
termination of the case, upon plaintiff [sic] filing of a bond in the amount of P1,000,000.00 to answer for damages
that the enjoined parties may sustain by reason of the injunction if the Court should finally decide that applicant is
not entitled thereto.

WHEREAS, that plaintiff posted a bond of P1,000,000.00 duly approved by this Court.

IT IS HEREBY ORDERED by the undersigned Judge that, until further orders, [the Philippine Bank of
Communications] and all [its] attorneys, representatives, agents and any other persons assisting [the bank], are
directed to restrain from conducting auction sale on the Properties of [Lui Enterprises] in EJF-REM Case No. 6272-
03 scheduled on July 3, 2003 at 10:00 a.m. at the Hall of Justice, Ecoland, Davao City, until the final termination of
the case.21

Zuellig Pharma filed its opposition  to the motion to dismiss. It argued that the motion to dismiss should be denied
22

for having been filed late. Under Rule 16, Section 1 of the 1997 Rules of Civil Procedure, a motion to dismiss should
be filed within the required time given to file an answer to the complaint, which is 15 days from service of summons
on the defendant.  Summons was served on Lui Enterprises on July 4, 2003. It had until July 19, 2003 to file a
23

motion to dismiss, but Lui Enterprises filed the motion only on July23, 2003. 24

As to Lui Enterprises’ claim that the interpleader case was filed without authority, Zuellig Pharma argued that an
action interpleader "is a necessary consequence of the action for consignation."  Zuellig Pharma consigned its
25

rental payments because of "the clearly conflicting claims of [Lui Enterprises] and [the Philippine Bank of
Communications]."  Since Atty. Ana L.A. Peralta was authorized to file a consignation case, this authority
26

necessarily included an authority to file the interpleader case.

Nevertheless, Zuellig Pharma filed in court the secretary’s certificate dated August 28, 2003,  which expressly
27

stated that Atty. Ana L.A. Peralta was authorized to file a consignation and interpleader case on behalf of Zuellig
Pharma. 28

With respect to the nullification of deed of dation in payment case, Zuellig Pharma argued that its pendency did not
bar the filing of the interpleader case. It was not a party to the nullification case.
29

As to the writ of preliminary injunction issued by the Regional Trial Court of Davao, Zuellig Pharma argued that the
writ only pertained to properties owned by Lui Enterprises. Under the writ of preliminary injunction, the Regional Trial
Court of Davao enjoined the July 3, 2003 auction sale of Lui Enterprises’ properties, the proceeds of which were
supposed to satisfy its obligations to the Philippine Bank of Communications. As early as April 21, 2001, however,
the Philippine Bank of Communications already owned the leased property as evidenced by Transfer Certificate of
Title No. 336962. Thus, the writ of preliminary injunction did not apply to the leased property.30

Considering that Lui Enterprises filed its motion to dismiss beyond the 15-day period to file an answer, Zuellig
Pharma moved that Lui Enterprises be declared in default. 31

In its compliance  dated September 15, 2003, the Philippine Bank of Communications "[joined Zuellig Pharma] in
32

moving to declare [Lui Enterprises] in default, and in [moving for] the denial of [Lui Enterprises’] motion to dismiss." 33

109
The Regional Trial Court of Makati found that Lui Enterprises failed to file its motion to dismiss within the
reglementary period. Thus, in its order  dated October 6, 2003, the trial court denied Lui Enterprises’motion to
34

dismiss and declared it in default.35

Lui Enterprises did not move for the reconsideration of the order dated October 6, 2003. Thus, the Makati trial court
heard the interpleader case without Lui Enterprises’participation.

Despite having been declared in default, Lui Enterprises filed the manifestation with prayer  dated April 15, 2004. It
36

manifested that the Regional Trial Court of Davao allegedly issued the order  dated April 1, 2004, ordering all of Lui
37

Enterprises’ lessees to "observe status quo with regard to the rental payments"  and continue remitting their rental
38

payments to Lui Enterprises while the nullification of deed of dation in payment case was being resolved. The order
dated April 1, 2004 of the Regional Trial Court of Davao reads:

ORDER

Posed for Resolution is the Motion for Amendment of Order filed by [Lui Enterprises] on September 23, 2003
seeking for the preservation of status quo on the payment/remittance of rentals to [it] and the disposal/construction
of the properties subject matter of this case.

xxxx

As elsewhere stated, [the Philippine Bank of Communications] did not oppose the instant motion up to the present.
In fact, during the hearing held on March 15, 2004, [the bank’s] counsel manifested in open court that except for the
rentals due from [Zuellig Pharma] which are the subject of a consignation suit before a Makati Court, the other rental
payments are continuously received by [Lui Enterprises].

There being no objection from [the Philippine Bank of Communications], and in order to protect the right of [Lui
Enterprises] respecting the subject of the action during the pendency of this case, this Court, in the exercise of its
discretion hereby grants the motion.

Accordingly, consistent with the order of this Court dated June 30, 2003, the parties are hereby directed to further
observe status quo with regard to the rental payments owing or due from the lessees of the properties subject of the
first set of deeds of dacion and that the defendants are enjoined from disposing of the properties located at Green
Heights Village, Davao City until the case is finally resolved.

With the order dated April 1, 2004 issued by the Regional Trial Court of Davao as basis, Lui Enterprises argued that
Zuellig Pharma must remit its rental payments to it and prayed that the interpleader case be dismissed.

The Regional Trial Court of Makati only noted the manifestation with prayer dated April 15, 2004. 39

It was only on October 21, 2004, or one year after the issuance of the order of default, that Lui Enterprises filed a
motion to set aside order of default  in the Makati trial court on the ground of excusable negligence. Lui Enterprises
40

argued that its failure to file a motion to dismiss on time "was caused by the negligence of [Lui Enterprises’] former
counsel."  This negligence was allegedly excusable because "[Lui Enterprises] was prejudiced and prevented from
41

fairly presenting [its] case."

42

For its allegedly meritorious defense, Lui Enterprises argued that the earlier filed nullification of deed of dation in
payment case barred the filing of the interpleader case. The two actions allegedly involved the same parties and the
same issue of which corporation had the better right over the rental payments. To prevent "the possibility of two
courts x x x rendering conflicting rulings [on the same issue],"  Lui Enterprises argued that the subsequently filed
43

interpleader case be dismissed.

Zuellig Pharma filed its opposition  to the motion to set aside order of default. It argued that a counsel’s failure to file
44

a timely answer was inexcusable negligence which bound his client.

Further, Zuellig Pharma argued that the pending case for nullification of deed of dation in payment "[did] not
preclude [Zuellig Pharma] from seeking the relief prayed for in the [interpleader case]." 45

While the motion to set aside order of default was still pending for resolution, Lui Enterprises filed the manifestation
and motion to dismiss  dated April 21, 2005 in the Makati trial court. It manifested that the Davao trial court issued
46

another order  dated April 18, 2005 in the nullification of deed of dation in payment case. In this order, the Davao
47

trial court directed the Philippine Bank of Communications to inform Zuellig Pharma to pay rent to Lui Enterprises
while the Davao trial court’s order dated April 1, 2004 was subsisting. The order datedApril 18, 2005 of the Davao
trial court reads:

ORDER
110
Plaintiffs move for execution or implementation of the Order dated September 14, 2004. In substance, [Lui
Enterprises] seek[s] to compel the remittance in their favor of the rentals from [Zuellig Pharma], one of the lessees
alluded to in the September 14, 2004 Order whose rental payments "must be remitted to and collected by [Lui
Enterprises]." [The Philippine Bank of Communications] did not submit any opposition.

It appears from the records that sometime in February 2003, after being threatened with a lawsuit coming from [the
Philippine Bank of Communications], [Zuellig Pharma] stopped remitting its rentals to [Lui Enterprises] and instead,
has reportedly deposited the monthly rentals before a Makati court for consignation.

As aptly raised by the plaintiffs, a possible impasse may insist should the Makati Court’s ruling be contrary to or in
conflict with the status quo order issued by this Court. To preclude this spectacle, Zuellig Pharma should accordingly
be advised with the import of the Order dated September 14, 2004, the salient portion of which is quoted:

x x x prior to the institution of the instant case and by agreement of the parties, plaintiffs were given as they did
exercise the right to collect, receive and enjoy rental payments x x x.

Since the April 1, 2004 status quo order was a necessary implement of the writ of preliminary injunction issued on
June 30, 2003, it follows that plaintiff's right to collect and receive rental payments which he enjoyed prior to the
filing of this case, must be respected and protected and maintained until the case is resolved. As such, all rentals
due from the above-enumerated lessees must be remitted to and collectedby the Plaintiffs.

Status quo simply means the last actual peaceable uncontested status that preceded the actual controversy.
(Searth Commodities Corp. v. Court ofAppeals, 207 SCRA 622).

As such, the [Philippine Bank of Communications] [is] hereby directed to forthwith inform [Zuellig Pharma] of the
April 1, 2004 status quo order and the succeeding September 14, 2004 Order, and consequently, for the said lessee
to remit all rentals due from February 23, 2003 and onwards to [Lui Enterprises] in the meanwhile that the status
quo order is subsisting.

In its manifestation and motion to dismiss, Lui Enterprises reiterated its prayer for the dismissal of the interpleader
case to prevent "the possibility of [the Regional Trial Court, Branch 143, Makati City] and [the Regional Trial Court,
Branch 16, Davao City] rendering conflicting rulings [on the same issue of which corporation has the better right to
the rental payments]." 48

Without resolving the motion to set aside order of default, the Makati trial court denied the manifestation with motion
to dismiss dated April 21, 2005 on the ground that Lui Enterprises already lost its standing in court. 49

Lui Enterprises did not file any motion for reconsideration of the denial of the manifestation and motion to dismiss
dated April 21, 2005.

In its decision  dated July 4, 2006, the Regional Trial Court of Makati ruled that Lui Enterprises "[was] barred from
50

any claim in respect of the [rental payments]"  since it was declared in default. Thus, according to the trial court,
51

there was no issue as to which corporation had the better right over the rental payments.  The trial court awarded
52

the total consigned amount of P6,681,327.30 to the Philippine Bank of Communications and ordered Lui Enterprises
to pay Zuellig Pharma P50,000.00 in attorney’s fees. 53

Lui Enterprises appealed to the Court of Appeals. 54

The Court of Appeals found Lui Enterprises’ appellant’s brief insufficient. Under Rule 44, Section 13 of the 1997
Rules of Civil Procedure, an appellant’s brief must contain a subject index, page references to the record, table of
cases, textbooks and statutes cited, and the statement of issues, among others. However, Lui Enterprises’
appellant’s brief did not contain these requirements. 55

As to the denial of Lui Enterprises’ motion to dismiss, the Court of Appeals sustained the trial court. The Court of
Appeals found that Lui Enterprises filed its motion to dismiss four days late. 56

With respect to Lui Enterprises’ motion to set aside order of default, the Court ofAppeals found that Lui Enterprises
failed to show the excusable negligence that prevented it from filing its motion to dismiss on time. On its allegedly
meritorious defense, the Court of Appeals ruled that the nullification of deed of dation in payment case did not bar
the filing of the interpleader case, with Zuellig Pharma not being a party to the nullification case.57

On the award of attorney’s fees, the Court of Appeals sustained the trial court since "Zuellig Pharma x x x was
constrained to file the action for interpleader with consignation inorder to protect its interests x x x."58

Thus, in its decision  promulgated on May 24, 2010, the Court of Appeals dismissed Lui Enterprises’appeal and
59

affirmed in toto the Regional Trial Court of Makati’s decision.

111
Lui Enterprises filed a motion for reconsideration. 60

The Court of Appeals denied Lui Enterprises’ motion for reconsideration in its resolution promulgated on August 13,
2010.  Hence, this petition.
61

In this petition for review on certiorari,  Lui Enterprises argued that the Court of Appeals applied "the rules of
62

procedure strictly"  and dismissed its appeal on technicalities. According to Lui Enterprises, the Court of Appeals
63

should have taken a liberal stance and allowed its appeal despite the lack of subject index, page references to the
record, table of cases, textbooks and statutes cited, and the statement of issues in its appellant’s brief. 64

Lui Enterprises also claimed that the trial court should have set aside the order of default since its failure to file a
motion to dismiss on time was due to excusable negligence. 65

For its allegedly meritorious defense, Lui Enterprises argued that the pending nullification of deed of dation in
payment case barred the filing of the interpleader case.The nullification of deed of dation in payment case and the
interpleader case allegedly involved the same issue of which corporation had the better right to the rent. To avoid
conflicting rulings on the same issue, Lui Enterprises argued that the subsequently filed interpleader case be
dismissed. 66

No attorney’s fees should have been awarded to Zuellig Pharma as argued by Lui Enterprises. Zuellig Pharma filed
the interpleader case despite its knowledge of the nullification of deed of dation in payment case filed in the Davao
trial court where the same issue of which corporation had the better right over the rental payments was being
litigated. Thus, Zuellig Pharma filed the interpleader case in bad faith for which it was not entitled to attorney’s fees. 67

The Philippine Bank of Communications filed its comment  on the petition for review on certiorari. It argued that Lui
68

Enterprises failed to raise any error of law and prayed that we affirm in toto the Court of Appeals’ decision.

For Zuellig Pharma, it manifested that it was adopting the Philippine Bank of Communications’arguments in its
comment. 69

The issues for our resolution are:

I. Whether the Court of Appeals erred in dismissing Lui Enterprises’ appeal for lack of subject index, page
references to the record, table of cases, textbooks and statutes cited, and the statement of issues in Lui
Enterprises’appellant’s brief;

II. Whether the Regional Trial Court of Makati erred in denying Lui Enterprises’motion to set aside order of
default;

III. Whether the annulment of deed of dation in payment pending in the Regional Trial Court of Davao barred
the subsequent filing of the interpleader case in the Regional Trial Court of Makati; and

IV. Whether Zuellig Pharma was entitled to attorney’s fees.

Lui Enterprises’ petition for review on certiorari is without merit. However, we delete the award of attorney’s fees.

Lui Enterprises did not comply with the rules on the contents of the appellant’s brief

Under Rule 50, Section 1, paragraph (f) of the 1997 Rules of Civil Procedure, the Court of Appeals may, on its own
motion or that of the appellee, dismiss an appeal should the appellant’s brief lack specific requirements under Rule
44, Section 13, paragraphs (a), (c), (d), and (f):

Section 1. Grounds for dismissal of appeal. – An appeal may be dismissed by the Court of Appeals, on its own
motion or on that of the appellee, on the following grounds:

xxxx

(f) Absence of specific assignment of errors in the appellant’s brief, or of page references to the record as required
in Section 13, paragraphs (a), (c), (d), and (f) of Rule 44.

These requirements are the subject index of the matter in brief, page references to the record, and a table of cases
alphabetically arranged and with textbooks and statutes cited:

112
Section 13. Contents of the appellant’s brief. – The appellant’s brief shall contain, in the order herein indicated, the
following:

(a) A subject index of the matter in brief with a digest of the arguments and page references, and a table of cases
alphabetically arranged, textbooks and statutes cited with references to the pages where they are cited;

xxxx

(c) Under the heading "Statement of the Case," a clear and concise statement of the nature of the action, a
summary of the proceedings, the appealed rulings and orders of the court, the nature of the controversy, with page
references to the record;

(d) Under the heading "Statement of Facts," a clear and concise statement in a narrative form of the facts admitted
by both parties and of those in controversy, together with the substance of the proof relating thereto in sufficient
detail to make it clearly intelligible, with page references to the record;

xxxx

(f) Under the heading "Argument," the appellant’s arguments on each assignment of error with page references to
the record. The authorities relied upon shall be cited by the page of the report at which the case begins and the
page of the report on which the citation isfound;

xxxx

Lui Enterprises’ appellant’s brief lacked a subject index, page references to the record, and table of cases,
textbooks and statutes cited. Under Rule 50, Section 1 of the 1997 Rules of Civil Procedure, the Court of Appeals
correctly dismissed Lui Enterprises’ appeal.

Except for cases provided in the Constitution,  appeal is a "purely statutory right."  The right to appeal "must be
70 71

exercised in the manner prescribed by law"  and requires strict compliance with the Rules of Court on
72

appeals. Otherwise, the appeal shall be dismissed, and its dismissal shall not be a deprivation of due process of
73

law.

In Mendoza v. United Coconut Planters Bank, Inc.,  this court sustained the Court of Appeals’ dismissal of
74

Mendoza’s appeal. Mendoza’s appellant’s brief lacked a subject index, assignment of errors, and page references
to the record. In De Liano v. Court of Appeals,  this court also sustained the dismissal of De Liano’s appeal. De
75

Liano’s appellant’s brief lacked a subject index, a table of cases and authorities, and page references to the record.

There are exceptions to this rule. In Philippine Coconut Authority v. Corona International, Inc.,  the Philippine
76

Coconut Authority’s appellant’s brief lacked a clear and concise statement of the nature of the action, a summary of
the proceedings, the nature of the judgment, and page references to the record. However, this court found that the
Philippine Coconut Authority substantially complied with the Rules. Its appellant’s brief "apprise[d] [the Court of
Appeals] of the essential facts and nature of the case as well as the issues raised and the laws necessary [to
dispose of the case]."  This court "[deviated] from a rigid enforcement of the rules"  and ordered the Court of
77 78

Appeals to resolve the Philippine Coconut Authority’s appeal.

In Go v. Chaves,  Go’s 17-page appellant’s brief lacked a subject index. However, Go subsequently filed a subject
79

index. This court excused Go’s procedural lapse since the appellant’s brief "[consisted] only of 17 pages which [the
Court of Appeals] may easily peruse to apprise it of [the case] and of the relief sought."  This court ordered the
80

Court of Appeals to resolve Go’s appeal "in the interest of justice." 81

In Philippine Coconut Authority and Go, the appellants substantially complied with the rules on the contents of the
appellant’s brief. Thus, this court excused the appellants’procedural lapses.

In this case, Lui Enterprises did not substantially comply with the rules on the contents of the appellant’s brief. It
admitted that its appellant’s brief lacked the required subject index, page references to the record, and table of
cases, textbooks, and statutes cited. However, it did not even correct its admitted "technical omissions"  by filing an
82

amended appellant’s brief with the required contents.  Thus, this case does not allow a relaxation of the rules. The
83

Court of Appeals did not err in dismissing Lui Enterprises’ appeal.

Rules on appeal "are designed for the proper and prompt disposition of cases before the Court ofAppeals."  With 84

respect to the appellant’s brief, its required contents are designed "to minimize the [Court ofAppeals’] labor in
[examining]the record uponwhich the appeal is heard and determined." 85

The subject index serves as the brief’s table of contents.  Instead of "[thumbing] through the [appellant’s
86

brief]" every time the Court of Appeals Justice encounters an argument or citation, the Justice deciding the case
87

113
only has to refer to the subject index for the argument or citation he or she needs.  This saves the Court ofAppeals
88

time in reviewing the appealed case. Efficiency allows the justices of the appellate court to substantially attend to
this case as well as other cases.

Page references to the record guarantee that the facts stated in the appellant’s brief are supported by the
record. Astatement of fact without a page reference to the record creates the presumption that it is unsupported by
89

the record and, thus, "may be stricken or disregarded altogether." 90

As for the table of cases, textbooks, and statutes cited, this is required so that the Court of Appeals can easily verify
the authorities cited "for accuracy and aptness." 91

Lui Enterprises’ appellant’s brief lacked a subject index, page references to the record, and a table of cases,
textbooks, and statutes cited. These requirements "were designed to assist the appellate court in the
accomplishment of its tasks, and, overall, to enhance the orderly administration of justice."  This court will not 92

disregard rules on appeal "in the guise of liberal construction."  For this court to liberally construe the Rules, the
93

party must substantially comply with the Rules and correct its procedural lapses.  Lui Enterprises failed to remedy
94

these errors.

All told, the Court of Appeals did not err in dismissing Lui Enterprises’ appeal. It failed to comply with Rule 44,
Section 13, paragraphs (a), (c), (d), and (f) of the 1997 Rules of Civil Procedure on the required contents of the
appellant’s brief.

II

Lui Enterprises failed to show that its failure to answer the complaint within the required period was due to
excusable negligence

When a defendant is served with summons and a copy of the complaint, he or she is required to answer within 15
days from the day he or she was served with summons.  The defendant may also move to dismiss the complaint
95

"[w]ithin the time for but before filing the answer." 96

Fifteen days is sufficient time for a defendant to answer with good defenses against the plaintiff’s allegations in the
complaint. Thus, a defendant who fails to answer within 15 days from service of summons either presents no
defenses against the plaintiff’s allegations in the complaint or was prevented from filing his or her answer within the
required period due to fraud, accident, mistake or excusable negligence. 97

In either case, the court may declare the defendant in default on plaintiff’s motion and notice to defendant.  The 98

court shall then try the case until judgment without defendant’s participation  and grant the plaintiff such relief as his
99

or her complaint may warrant. 100

A defendant declared in default loses his or her standing in court.  He or she is "deprived of the right to take part in
101

the trial and forfeits his [or her] rights as a party litigant,"  has no right "to present evidence [supporting his or her]
102

allegations,"  and has no right to "control the proceedings [or] cross-examine witnesses."  Moreover, he or she
103 104

"has no right to expect that [the court] would [act] upon [his or her pleadings]"  or that he or she "may
105

[oppose]motions filed against him [or her]." 106

However, the defendant declared in default "does not [waive] all of [his or her] rights."  He or she still has the right
107

to "receive notice of subsequent proceedings."  Also, the plaintiff must still present evidence supporting his or her
108

allegations "despite the default of [the defendant]." 109

Default, therefore, is not meant to punish the defendant but to enforce the prompt filing of the answer to the
complaint. For a defendant without good defenses, default saves him or her "the embarrassment of openly
appearing to defend the indefensible."  As this court explained in Gochangco v. The Court of First Instance of
110

Negros Occidental, Branch

IV:
111

It does make sense for a defendant without defenses, and who accepts the correctness of the specific relief prayed
for in the complaint, to forego the filing of the answer or any sort of intervention in the action at all. For even if he did
intervene, the result would be the same: since he would be unable to establish any good defense, having none in
fact, judgment would inevitably go against him. And this would be an acceptable result, if not being in his power to
alter or prevent it, provided that the judgment did not go beyond or differ from the specific relief stated in the
complaint. x x x.  (Emphasis in the original)
112

On the other hand, for a defendant with good defenses, "it would be unnatural for him [or her] not to set x x x up [his
or her defenses] properly and timely."  Thus, "it must be presumed that some insuperable cause prevented him [or
113

114
her] from [answering the complaint]."  In which case, his or her proper remedy depends on when he or she
114

discovered the default and whether the default judgment was already rendered by the trial court.

After notice of the declaration of default but before the court renders the default judgment, the defendant may file,
under oath, a motion to set aside order of default. The defendant must properly show that his or her failure to
answer was due to fraud, accident,  mistake  or excusable negligence.  The defendant must also have a
115 116 117

meritorious defense. Rule 9, Section 3, paragraph (b) of the1997 Rules of Civil Procedure provides:

Section 3. Default; declaration of. – x x x x

(b) Relief from order of default. – A party declared in default may at any time after notice thereof and before
judgment file a motion under oath to set aside the order of default upon proper showing that his failure to answer
was due to fraud, accident, mistake or excusable negligence and that he has a meritorious defense. In such case,
the order of default may be set aside on such terms and conditions as the judge may impose in the interest of
justice.

If the defendant discovers his or her default after judgment but prior to the judgment becoming final and executory,
he or she may file a motion for new trial under Rule 37, Section 1, paragraph (a) of the 1997 Rules of Civil
Procedure.  If he or she discovers his or her default after the judgment has become final and executory, a petition
118

for relief from judgment under Rule 38, Section 1 of the 1997 Rules of Civil Procedure may be filed. 119

Appeal is also available to the defendant declared in default. He or she may appeal the judgment for being contrary
to the evidence or to the law under Rule 41, Section 2 of the 1997 Rules of Civil Procedure.  He or she may do so
120

even if he or she did not file a petition to set aside order of default. 121

A petition for certiorari may also be filed if the trial court declared the defendant in default with grave abuse of
discretion.122

The remedies of the motion to set aside order of default, motion for new trial, and petition for relief from judgment
are mutually exclusive, not alternative or cumulative. This is to compel defendants to remedy their default at the
earliest possible opportunity. Depending on when the default was discovered and whether a default judgment was
already rendered, a defendant declared in default may avail of onlyone of the three remedies.

Thus, if a defendant discovers his or her default before the trial court renders judgment, he or she shall file a motion
to set aside order of default. If this motion to set aside order of default is denied, the defendant declared in default
cannot await the rendition of judgment, and he or she cannot file a motion for new trial before the judgment
becomes final and executory, or a petition for relief from judgment after the judgment becomes final and executory.

Also, the remedies against default become narrower and narrower as the trial nears judgment. The defendant
enjoys the most liberality from this court with a motion to set aside order of default, as he or she has no default
judgment to contend with, and he or she has the whole period before judgment to remedy his or her default.

With a motion for new trial, the defendant must file the motion within the period for taking an appeal  or within 15
123

days from notice of the default judgment. Although a default judgment has already been rendered, the filing of the
motion for new trial tolls the reglementary period of appeal, and the default judgment cannot be executed against
the defendant.

A petition for relief from judgment is filed after the default judgment has become final and executory. Thus, the filing
of the petition for relief from judgment does not stay the execution of the default judgment unless a writ of
preliminary injunction is issued pending the petition’s resolution.124

Upon the grant of a motion to set aside order of default, motion for new trial, or a petition for relief from judgment,
the defendant is given the chance to present his or her evidence against that of plaintiff’s. With an appeal, however,
the defendant has no right to present evidence on his or her behalf and can only appeal the judgment for being
contrary to plaintiff’s evidence or the law.

Similar to an appeal, a petition for certiorari does not allow the defendant to present evidence on his or her behalf.
The defendant can only argue that the trial court committed grave abuse of discretion in declaring him or her in
default.

Thus, should a defendant prefer to present evidence on his or her behalf, he or she must file either a motion to set
aside order of default, motion for new trial, or a petition for relief from judgment.

In this case, Lui Enterprises had discovered its default before the Regional Trial Court of Makati rendered judgment.
Thus, it timely filed a motion to set aside order of default, raising the ground of excusable negligence.

115
Excusable negligence is "one which ordinary diligence and prudence could not have guarded against."  The 125

circumstances should be properly alleged and proved. In this case, we find that Lui Enterprises’ failure to answer
within the required period is inexcusable.

Lui Enterprises’ counsel filed its motion to dismiss four days late. It did not immediately take steps to remedy its
default and took one year from discovery of default to file a motion to set aside order of default. In its motion to set
aside order of default, Lui Enterprises only "conveniently blamed its x x x counsel [for the late filing of the
answer]" without offering any excuse for the late filing. This is not excusable negligence under Rule 9, Section 3,
126

paragraph (b)  of the 1997 Rules of Civil Procedure. Thus, the Regional Trial Court of Makati did not err in refusing
127

to set aside the order of default.

Lui Enterprises argued that the Regional Trial Court of Makati should have been liberal in setting aside its order of
default. After it had been declared in default, Lui Enterprises filed several manifestations informing the Makati trial
court of the earlier filed nullification of deed of dation in payment case which barred the filing of the interpleader
case. Lui Enterprises’ president, Eli L. Lui, and counsel even flew in from Davao to Makati to "formally [manifest
that] a [similar] action between [Lui Enterprises] and [the Philippine Bank of Communications]"  was already
128

pending in the Regional Trial Court of Davao. However, the trial court did not recognize Lui Enterprises’standing
incourt.

The general rule is that courts should proceed with deciding cases on the merits and set aside orders of default as
default judgments are "frowned upon."  As much as possible, cases should be decided with both parties "given
129

every chance to fight their case fairly and in the open, without resort to technicality."130

However, the basic requirements of Rule 9, Section 3, paragraph (b) of the 1997 Rules of Civil Procedure must first
be complied with.  The defendant’s motion to set aside order of default must satisfy three conditions. First is the
131

time element. The defendant must challenge the default order before judgment. Second, the defendant must have
been prevented from filing his answer due to fraud, accident, mistake or excusable negligence. Third, he must have
a meritorious defense. As this court held in SSS v. Hon. Chaves: 132

Procedural rules are not to be disregarded or dismissed simply because their non-observance may have resulted in
prejudice to a party’s substantive rights. Like all rules[,] they are to be followed, except only when for the most
persuasive of reasons they may be relaxed to relieve a litigant of an injustice not commensurate with the degree of
his thoughtlessness in not complying with the procedure prescribed. x x x. 133

As discussed, Lui Enterprises never explained why its counsel failed to file the motion to dismiss on time. It just
argued that courts should be liberal in setting aside orders of default. Even assuming that it had a meritorious
defense and that its representative and counsel had to fly in from Davao to Makati to personally appear and
manifest in court its meritorious defense, Lui Enterprises must first show that its failure to answer was due to fraud,
accident, mistake or excusable negligence. This Lui Enterprises did not do.

Lui Enterprises argued that Zuellig Pharma filed the interpleader case to compel Lui Enterprises and the Philippine
Bank of Communications to litigate their claims. Thus, "[d]eclaring the other claimant in default would ironically
defeat the very purpose of the suit."  The RegionalTrial Court of Makati should not have declared Lui Enterprises in
134

default.

Under Rule 62, Section 1 of the 1997 Rules of Civil Procedure, a person may file a special civil action for
interpleader if conflicting claims are made against him or her over a subject matter in which he or she has no
interest. The action is brought against the claimants to compel them to litigate their conflicting claims among
themselves. Rule 62, Section 1 of the 1997 Rules of Civil Procedure provides:

Section 1. When interpleader proper. – Whenever conflicting claims upon the same subject matter are or may be
made against a person who claims no interest whatever in the subject matter, or an interest which in whole or in part
is not disputed bythe claimants, he may bring an action against the conflicting claimants to compel them to
interplead and litigate their several claims among themselves.

An interpleader complaint may be filed by a lessee against those who have conflicting claims over the rent due for
the property leased.  This remedy is for the lessee to protect him or her from "double vexation in respect of one
135

liability."  He or she may file the interpleader case to extinguish his or her obligation to pay rent, remove him or her
136

from the adverse claimants’dispute, and compel the parties with conflicting claims to litigate among themselves.

In this case, Zuellig Pharma filed the interpleader case to extinguish its obligation to pay rent. Its purpose in filing the
interpleader case "was not defeated"  when the Makati trial court declared Lui Enterprises in default.
137

At any rate, an adverse claimant in an interpleader case may be declared in default. Under Rule 62, Section 5 of the
1997 Rules of Civil Procedure, a claimant who fails to answer within the required period may, on motion, be
declared in default. The consequence of the default is that the court may "render judgment barring [the defaulted

116
claimant] from any claim in respect to the subject matter."  The Rules would not have allowed claimants in
138

interpleader cases to be declared in default if it would "ironically defeat the very purpose of the suit." 139

The Regional Trial Court of Makati declared Lui Enterprises in default when it failed to answer the complaint within
the required period. Lui Enterprises filed a motion to set aside order of default without an acceptable excuse why its
counsel failed to answer the complaint. It failed to prove the excusable negligence. Thus, the Makati trial court did
not err in refusing to set aside the order of default.

III

The nullification of deed in dation in payment case did not bar the filing of the interpleader case. Litis
pendentia is not present in this case.

Lui Enterprises allegedly filed for nullification of deed of dation in payment with the Regional Trial Court of Davao. It
sought to nullify the deed of dation in payment through which the Philippine Bank of Communications acquired title
over the leased property. Lui Enterprises argued that this pending nullification case barred the Regional Trial Court
of Makati from hearing the interpleader case. Since the interpleader case was filed subsequently to the nullification
case, the interpleader case should be dismissed.

Under Rule 16, Section 1, paragraph (e) of the 1997 Rules of Civil Procedure, a motion to dismiss may be filed on
the ground of litis pendentia:

Section 1. Grounds. – Within the time for but before filing the answer to the complaint or pleading asserting a claim,
a motion to dismiss may be made on any of the following grounds:

xxxx

(e)That there is another action pending between the same parties for the same cause;

xxxx

Litis pendentia is Latin for "a pending suit."  It exists when "another action is pending between the same parties for
140

the same cause of actionx x x."  The subsequent action is "unnecessary and vexatious"  and is instituted to
141 142

"harass the respondent [in the subsequent action]." 143

The requisites of litis pendentia are:

(1)Identity of parties or at least such as represent the same interest in both actions;

(2)Identity of rights asserted and reliefs prayed for, the reliefs being founded on the same facts; and

(3)The identity in the two cases should be such that the judgment that may be rendered in one would,
regardless of which party is successful, amount to res judicata in the other. 144

All of the requisites must be present.  Absent one requisite, there is no litis pendentia.
145 146

In this case, there is no litis pendentia since there is no identity of parties in the nullification of deed of dation in
payment case and the interpleader case. Zuellig Pharma is not a party to the nullification case filed in the Davao trial
court.

There is also no identity of rights asserted and reliefs prayed for. Lui Enterprises filed the first case to nullify the
deed of dation in payment it executed in favor of the Philippine Bank of Communications. Zuellig Pharma
subsequently filed the interpleader case to consign in court the rental payments and extinguish its obligation as
lessee. The interpleader case was necessary and was not instituted to harass either Lui Enterprises or the
Philippine Bank of Communications.

Thus, the pending nullification case did not bar the filing of the interpleader case.

Lui Enterprises cited Progressive Development Corporation, Inc. v. Court of Appeals  as authority to set aside the
147

subsequently filed interpleader case. In this cited case, petitioner Progressive Development Corporation, Inc.
entered into a lease contract with Westin Seafood Market, Inc. The latter failed to pay rent. Thus, Progressive
Development Corporation, Inc. repossessed the leased premises, inventoried the movable properties inside the
leased premises, and scheduled the public sale of the inventoried properties as they agreed upon in their lease
contract.

117
Westin Seafood Market, Inc. filed for forcible entry with damages against Progressive Development Corporation,
Inc. It subsequently filed an action for damages against Progressive Development Corporation for its "forcible
takeover of the leased premises." 148

This court ordered the subsequently filed action for damages dismissed as the pending forcible entry with damages
case barred the subsequently filed damages case.

Progressive Development Corporation, Inc. does not apply in this case. The action for forcible entry with damages
and the subsequent action for damages were filed by the same plaintiff against the same defendant. There is
identity of parties in both cases.

In this case, the nullification of deed of dation in payment case was filed by Lui Enterprises against the Philippine
Bank of Communications. The interpleader case was filed by Zuellig Pharma against Lui Enterprises and the
Philippine Bank of Communications. A different plaintiff filed the interpleader case against Lui Enterprises and the
Philippine Bank of Communications. Thus, there is no identity of parties, and the first requisite of litis pendentia is
absent.

As discussed, Lui Enterprises filed the nullification of deed of dation in payment to recover ownership of the leased
premises. Zuellig Pharma filed the interpleader case to extinguish its obligation to pay rent.There is no identity of
reliefs prayed for, and the second requisite of litis pendentia is absent.

Since two requisites of litis pendentia are absent, the nullification of deed of dation in payment case did not bar the
filing of the interpleader case.

Lui Enterprises alleged that the Regional Trial Court of Davao issued a writ of preliminary injunction against the
Regional Trial Court of Makati. The Regional Trial Court of Davao allegedly enjoined the Regional Trial Court of
Makati from taking cognizance of the interpleader case. Lui Enterprises argued that the Regional Trial Court of
Makati "should have respected the orders issued by the Regional Trial Court of Davao."  Lui Enterprises cited
149

Compania General de Tabacos de Filipinas v. Court of Appeals  where this court allegedly held:
150

x x x [T]he issuance of the said writ by the RTC ofAgoo, La Union not only seeks to enjoin Branch 9 of the RTC of
Manila from proceeding with the foreclosure case but also has the effect of pre-empting the latter’s orders. x x x. 151

Compania General de Tabacos de Filipinas is not an authority for the claim that a court can issue a writ of
preliminary injunction against a co- equal court.  The cited sentence was taken out of context. In Compania General
1âwphi1

de Tabacos de Filipinas, this court held that the Regional Trial Court ofAgoo had no power to issue a writ of
preliminary injunction against the Regional Trial Court of Manila.  Acourt cannot enjoin the proceedings of a co-
152

equal court.

Thus, when this court said that the Regional Trial Court of Agoo’s writ of preliminary injunction "not only seeks to
enjoin x x x [the Regional Trial Court of Manila] from proceeding with the foreclosure case but also has the effect of
pre-empting the latter’s orders,"  this court followed with "[t]his we cannot countenance."
153 154

At any rate, the Regional Trial Court of Davao’s order datedApril 18, 2005 was not a writ of preliminary injunction. It
was a mere order directing the Philippine Bank of Communications to inform Zuellig Pharma to pay rent to Lui
Enterprises while the status quo order between Lui Enterprises and the Philippine Bank of Communications was
subsisting. The Regional Trial Court of Davao did not enjoin the proceedings before the Regional Trial Court of
Makati.The order datedApril 18, 2005 provides:

As such, [the Philippine Bank of Communications] [is] hereby directed to forthwith inform Zuellig Pharma Corp., of
the April 1, 2004 status quo order and the succeeding September 14, 2004 Order, and consequently, for the said
lessee to remit all rentals due from February 23, 2003 and onwards to plaintiff Lui Enterprises, Inc., in the
meanwhile that the status quo order is subsisting. 155

Thus, the Regional Trial Court of Davao did not enjoin the Regional Trial Court of Makati fromhearing the
interpleader case.

All told, the trial court did not err in proceeding with the interpleader case. The nullification of deed of dation in
payment case pending with the Regional Trial Court of Davao did not bar the filing of the interpleader case with the
RegionalTrial Court of Makati.

IV

The Court of Appeals erred in awarding attorney’s fees

118
In its ordinary sense, attorney’s fees "represent the reasonable compensation [a client pays his or her lawyer] [for
legal service rendered]."  In its extraordinary sense, attorney’s fees "[are] awarded x x x as indemnity for damages
156

[the losing party pays the prevailingparty]." 157

The award of attorney’s fees is the exception rather than the rule.  It is not awarded to the prevailing party "as a
158

matter of course."  Under Article 2208 of the Civil Code, attorney’s fees cannot be recovered in the absence of
159

stipulation, except under specific circumstances:

(1)When exemplary damages are awarded;

(2)When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest;

(3)In criminal cases of malicious prosecution against the plaintiff;

(4)In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5)Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid,
just and demandable claim;

(6)In actions for legal support;

(7)In actions for the recovery of wages of household helpers, laborers and skilled workers;

(8)In actions for indemnity under workmen’s compensation and employer’s liability laws;

(9)In a separate civil action to recover civil liability arising froma crime;

(10)When at least double judicial costs are awarded;

(11)In any other case where the court deems it just and equitable that attorney's fees and expenses of
litigation should be recovered. 160

Even if a party is "compelled to litigate with third persons or to incur expenses to protect his [or her]
rights," attorney's fees will not be awarded if no bad faith "could be reflected in a party's persistence in a case."
161 162

To award attorney's fees, the court must have "factual, legal, [and] equitable justification."  The court must state the
163

award's basis in its decision. These rules are based on the policy that "no premium should be placed.on the right to
164

litigate."
165

In this case, the Court of Appeals awarded attorney's fees as "[Zuellig Pharma] was compelled to litigate with third
persons or to incur expenses to protect [its] interest[s]."  This is not a compelling reason to award attorney's fees.
166

That Zuellig Pharma had to file an interpleader case to consign its rental payments did not mean that Lui
Enterprises was in bad faith in insisting that rental payments be paid to it. Thus, the Court. of Appeals erred in
awarding attorney's fees to Zuellig Pharma.

All told, the Court of Appeals' award of P50,000.00 as attorney's fees must be deleted.

WHEREFORE, in view of the foregoing, the petition for review on certiorari is DENIED. The Court of Appeals'
decision and resolution in CA- G.R. CV No. 88023 are AFFIRMED with MODIFICATION. The award of PS0,000.00
attorney's fees to Zuellig Pharma Corporation is DELETED.

SO ORDERED.

119
 THIRD DIVISION

March 12, 2014

G.R. No. 171482

ASHMOR M. TESORO, PEDRO ANG and GREGORIO SHARP, Petitioners, 

vs.
METRO MANILA RETREADERS, INC. (BANDAG) and/or NORTHERN LUZON RETREADERS, INC. (BANDAG)
and/or POWER TIRE AND RUBBER CORP. (BANDAG), Respondent.

DECISION

ABAD, J.:

This case concerns the effect on the status of employment of employees who entered into a Service Franchise
Agreement with their employer.

The Facts and the Case

On various dates between 1991 and 1998, petitioners Ashmor M. Tesoro, Pedro Ang, and Gregorio Sharp used to
work as salesmen for respondents Metro Manila Retreaders, Inc., Northern Luzon Retreaders, Inc., or Power Tire
and Rubber Corporation, apparently sister companies, collectively called "Bandag." Bandag offered repair and
retread services for used tires. In 1998, however, Bandag developed a franchising scheme that would enable others
to operate tire and retreading businesses using its trade name and service system.

Petitioners quit their jobs as salesmen and entered into separate Service Franchise Agreements (SFAs) with
Bandag for the operation of their respective franchises. Under the SFAs, Bandag would provide funding support to
the petitioners subject to a regular or periodic liquidation of their revolving funds. The expenses out of these funds
would be deducted from petitioners’ sales to determine their incomes.

At first, petitioners managed and operated their respective franchises without any problem. After a length of time,
however, they began to default on their obligations to submit periodic liquidations of their operational expenses in
relation to the revolving funds Bandag provided them. Consequently, Bandag terminated their respective SFA.

Aggrieved, petitioners filed a complaint for constructive dismissal, non-payment of wages, incentive pay, 13th month
pay and damages against Bandag with the National Labor Relations Commission (NLRC). Petitioners contend that,
notwithstanding the execution of the SFAs, they remained to be Bandag’s employees, the SFAs being but a
circumvention of their status as regular employees.

For its part, Bandag pointed out that petitioners freely resigned from their employment and decided to avail
themselves of the opportunity to be independent entrepreneurs under the franchise scheme that Bandag had. Thus,
no employer-employee relationship existed between petitioners and Bandag.

On March 14, 2003 the Labor Arbiter rendered a Decision, dismissing the complaint on the ground that no
employer-employee relationship existed between Bandag and petitioners. Upon petitioners’ appeal to the NLRC the
latter affirmed on June 30, 2003 the Labor Arbiter’s Decision. It also denied petitioners’ motion for reconsideration.
Undaunted, petitioners filed a petition for certiorari under Rule 65 with the Court of Appeals (CA) ascribing grave
abuse of discretion. On July 29, 2005 the CA rendered a Decision,  dismissing the petition for lack of merit. It also
1

denied their motion for reconsideration on February 7, 2006.

120
 Issue of the Case

The only issue presented in this case is whether or not petitioners remained to be Bandag’s salesmen under the
franchise scheme it entered into with them.

Ruling of the Court

Franchising is a business method of expansion that allows an individual or group of individuals to market a product
or a service and to use of the patent, trademark, trade name and the systems prescribed by the owner.  In this case,
2

Bandag’s SFAs created on their faces an arrangement that gave petitioners the privilege to operate and maintain
Bandag branches in the way of franchises, providing tire repair and retreading services, with petitioners earning
profits based on the performance of their branches.

The question is: did petitioners remain to be Bandag’s employees after they began operating those branches? The
tests for determining employer- employee relationship are: (a) the selection and engagement of the employee; (b)
the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee with
respect to the means and methods by which the work is to be accomplished. The last is called the "control test," the
most important element. 3

When petitioners agreed to operate Bandag’s franchise branches in different parts of the country, they knew that
this substantially changed their former relationships. They were to cease working as Bandag’s salesmen, the
positions they occupied before they ventured into running separate Bandag branches. They were to cease receiving
salaries or commissions. Their incomes were to depend on the profits they made. Yet, petitioners did not then
complain of constructive dismissal. They took their chances, ran their branches, Gregorio Sharp in La Union for
several months and Ashmor Tesoro in Baguio and Pedro Ang in Pangasinan for over a year. Clearly, their belated
claim of constructive dismissal is quite hollow.

It is pointed out that Bandag continued, like an employer, to exercise control over petitioners’ work. It points out that
Bandag: (a) retained the right to adjust the price rates of products and services; (b) imposed minimum processed
tire requirement (MPR); (c) reviewed and regulated credit applications; and (d) retained the power to suspend
petitioners’ services for failure to meet service standards.

But uniformity in prices, quality of services, and good business practices are the essence of all franchises. A
franchisee will damage the franchisor’s business if he sells at different prices, renders different or inferior services,
or engages in bad business practices. These business constraints are needed to maintain collective responsibility
for faultless and reliable service to the same class of customers for the same prices.

This is not the "control" contemplated in employer-employee relationships. Control in such relationships addresses
the details of day to day work like assigning the particular task that has to be done, monitoring the way tasks are
done and their results, and determining the time during which the employee must report for work or accomplish his
assigned task.

Franchising involves the use of an established business expertise, trademark, knowledge, and training. As such, the
franchisee is required to follow a certain established system. Accordingly, the franchisors may impose guidelines
that somehow restrict the petitioners’ conduct which do not necessarily indicate "control." The important factor to
consider is still the element of control over how the work itself is done, not just its end result.
4

The Court held, in Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc.,  that, results-wise, the insurance
5

company, as principal, can impose production quotas upon its independent agents and determine how many
individual agents, with specific territories, such independent agents ought to employ to achieve the company’s
objectives. These are management policy decisions that the labor law element of control cannot reach. Petitioners’
commitment to abide by Bandag’s policy decisions and implementing rules, as franchisees does not make them its
employees.

Petitioners cannot use the revolving funds feature of the SFAs as evidence of their employer-employee relationship
with Bandag.  These funds do not represent wages. They are more in the nature of capital advances for operations
1âwphi1

that Bandag conceptualized to attract prospective franchisees. Petitioners’ incomes depended on the profits they
make, controlled by their individual abilities to increase sales and reduce operating costs.

The Labor Arbiter, the NLRC, and the CA, are unanimous that petitioners were no longer "route salesmen, bringing
previously ordered supplies and goods to dealers, taking back returned items, collecting payments, remitting them,
etc. They were themselves then the dealers, getting their own supply and bringing these to their own customers and
sub- dealers, if any."

121
The rule in labor cases is that the findings of fact of quasi-judicial bodies, like the NLRC, are to be accorded with
respect, even finality, if supported by substantial evidence. This is particularly true when passed upon and upheld by
the CA. 6

WHEREFORE, the i:-'stant petition is DENIED. The Decision dated July 29, 2005 and Resolution dated February 7,
2006 of the Court of Appeals in CA-G.R. SP 82447 are AFFIRMED.

SO ORDERED.

DISSENTING OPINION

LEONEN, J.:

I dissent.

I disagree with the majority in holding that petitioners ceased to be private respondents' employees on account of
the service franchise agreements they entered into. The rulings of the National Labor Relations Commission (NLRC)
and of the Labor Arbiter have been made with such disregard of material evidence amounting to an evasion of their
positive duty to render judgment after only a meticulous consideration of the circumstances of a case. As such, the
Court of Appeals is in error for sustaining the Labor Arbiter and the NLRC.

I vote to grant the present petition and to reverse and set aside the assailed decision dated July 29, 2005 and the
assailed resolution dated February 7, 2006 of the Court of Appeals.

The July 29, 2005 decision of the Court of Appeals affirmed in toto the June 30, 2003 and November 28, 2003
resolutions of the National Labor Relations Commission. The resolutions of the NLRC, in tum, upheld the February
26, 2003 decision of Labor Arbiter Monroe C. Tabingan in NLRC RAB-CAR Case No. 11-0588-01, which dismissed
petitioners' complaint (for illegal/constructive dismissal) for lack of merit.

The February 7, 2006 resolution of the Court of Appeals denied petitioners' motion for reconsideration.

Petitioners Ashmor Tesoro, Pedro Ang, and Gregorio Sharp were all employed as sales representatives/salesmen
of respondents Metro Manila Retreaders, Inc. and/or Northern Luzon Retreaders, Inc. and/or Power Tire and
Rubber Corporation (referred here collectively and interchangeably as

"Bandag").  Petitioners commenced employment with Bandag on various dates: July 1997 for Tesoro; August 1991
1

for Ang; and June 3, 1998 for Sharp.  Respondent Bandag is in the business of tire repairs and providing retreading
2

services. 3

On various dates in 1999 and 2000, petitioners entered into separate Service Franchise Agreements or SFAs with
Bandag. These SFAs provided for the terms and conditions of Bandag’s grant of service franchises to petitioners.
Under the SFAs, petitioners were considered as Bandag’s appointed service franchisees within defined
territories. From the records, there was no indication that in the period in which petitioners supposedly transitioned
4

from being employees to franchisees, petitioners underwent procedures which customarily attend the termination of
one’s employment, e.g., clearance, turnover of equipment, settlement of obligations, and receipt of final pay.

Bandag effectively financed petitioners’ franchise operations. Per Section 4.1 of the SFA, Bandag was to provide
petitioners with revolving funds. These revolving funds, as defined in Section 4.1 of the SFA consisted of a
franchisee’s operating fund and take-home fund.

In its position paper, Bandag emphasized that the revolving funds were subject to periodic liquidation. The value of
the revolving funds was to be deducted from petitioners’ sales; the difference constituting petitioners’ income as
franchisees.  Bandag asserted that despite a series of reminders, warnings, and even threats of legal action,
5

petitioners failed to liquidate their revolving funds and, instead, kept the payments of their clients for themselves.
This led Bandag to consider the SFAs ipso facto terminated per the Service Franchise Manual’s provisions on
kiting, unremitted collections, and other related offenses. Bandag then initiated collection suits against petitioners.
6

In their complaint, petitioners claimed that despite the execution of the SFAs, they continued to be regular
employees of Bandag because Bandag remained in control of the manner and method by which petitioners carried
out their franchise operations.  Petitioners added that they never ceased to receive monthly salaries, albeit these
7

were "converted x x x into revolving funds" under the SFAs.  Petitioners theorized that the SFAs were nothing more
8

than Bandag’s means to disguise its employer-employee relationship with petitioners and to circumvent the requisite
security of tenure by making it appear that petitioners were no longer employees but mere franchisees. 9

To support their assertion that Bandag exercised control over the manner and method by which they carried out
their franchise operations, petitioners pointed to provisions in the SFAs which: (1) prohibited the sale of competitor
122
products; (2) designated defined areas of operations; (3) required petitioners to submit reports; (4) required
petitioners to meet volume requirements; (5) provided petitioners with service vehicles; and (6) required the use of
uniforms 10

As it is their position that they were constructively dismissed, petitioners claimed that they were entitled to
reinstatement with full backwages, on top of their wage differentials and other (unpaid) benefits. In lieu of
reinstatement, petitioners sought the award of separation pay. 11

While admitting that petitioners used to be their sales personnel, Bandag claimed that petitioners either resigned or
retired from the service. It alleged that petitioners became their service franchisees under a scheme that would allow
employees to own and operate their own tire repair and retreading businesses.  It also emphasized that it validly
12

terminated the SFAs as petitioners failed to properly liquidate their revolving funds.

In his decision, Labor Arbiter Monroe C. Tabingan dismissed petitioners’ complaint for lack of merit. He noted that
there was no longer any employer-employee relationship between petitioners and Bandag since petitioners ceased
to be route salesmen but became dealers themselves who procured their own supplies and provided services to
their own customers.  Labor Arbiter Tabingan held that petitioners could not have been constructively dismissed as
13

they had either voluntarily resigned or availed of Bandag’s early retirement package  and had become independent
14

franchisees when they entered into the SFAs.  Labor Arbiter Tabingan also emphasized that petitioners were
15

enjoying the status of franchise holders two (2) years prior to the filing of their complaint. 16

Aggrieved, petitioners appealed Labor Arbiter Tabingan’s decision to the NLRC. In a resolution dated June 30,
2003, the NLRC denied petitioners’ appeal. The NLRC agreed with Labor Arbiter Tabingan’s findings that there was
no employer-employee relationship between the parties as petitioners themselves severed their employment when
they voluntarily entered into the SFAs. The NLRC noted that Bandag did not exercise control over how petitioners
operated their independent franchises – Bandag having merely provided guidelines which were necessary both to
protect petitioners and to ensure the viability of its own enterprise.  In a resolution dated November 28, 2003, the
17

NLRC denied petitioners’ motion for reconsideration.

Petitioners then filed with the Court of Appeals a petition for certiorari under Rule 65, alleging grave abuse of
discretion on the part of the NLRC in upholding the decision of the Labor Arbiter. Acting on the petition, the Court of
Appeals, in a resolution dated March 26, 2004, directed Bandag to file a comment. However, Bandag failed to file its
comment.

In the Court of Appeals’ assailed decision dated July 29, 2005, the Court of Appeals dismissed the petition for
certiorari and agreed with the findings of Labor Arbiter Tabingan and of the NLRC that petitioners were independent
businesspersons dealing in the products and services of Bandag.  The Court of Appeals held that the issue raised
18

by petitioners on the existence of an employer-employee relationship was fundamentally factual and beyond its
power to review since the findings of the NLRC were in accordance with those of the Labor Arbiter. Nonetheless, the
Court of Appeals reviewed the records of the case and concluded that no employer-employee relationship existed
between the parties because petitioners never disputed Bandag’s allegation that they voluntarily severed
employment ties with Bandag.  In the assailed resolution dated November 28, 2003, the Court of Appeals denied
19

petitioners’ motion for reconsideration.

Thereafter, petitioners filed the present petition before this court assigning as errors:

1. the Court of Appeals’ having issued a ruling that is adverse to them despite the allegations in the petition
for certiorari having been (supposedly) deemed admitted and uncontroverted since Bandag failed to file its
comment in compliance with the Court of Appeals’ March 26, 2004 resolution;

2. the Court of Appeals’ failure to appreciate the SFAs as a means to circumvent security of tenure, despite
the SFAs’ illegality and invalidity for neither having been notarized nor registered with the Securities and
Exchange Commission (SEC) or with any other government agency; and

3. the Court of Appeals’ having sustained the findings of the NLRC and of Labor Arbiter Tabingan that no
employeremployee relationship existed between petitioners and Bandag despite Bandag’s having
(supposedly) exercised control and supervision over petitioners’ work. 20

Apart from the three errors specifically assigned by petitioners, they also claim that: (1) they could not have been
franchise holders because they are not corporations; (2) neither could they have been independent contractors
because they had no substantial capital.  As to the manner by which they were "dismissed", petitioners also claim
21

that they were not afforded an opportunity to be heard. 22

On June 8, 2006, Bandag filed its opposition to the present petition.  In it, Bandag argued that the Court of Appeals
23

correctly upheld the factual findings of the NLRC despite the lack of opposition from it.  It also claimed that the
24

complaint for illegal dismissal was filed by petitioners merely as leverage for the collection cases filed by Bandag
against petitioners. It added that petitioners attempted to have these collection cases suspended on the ground of
123
the prejudicial question supposedly posed by the present (labor) case.  Bandag likewise noted that petitioners had
25

operated the franchises for at least two (2) years and that it was only upon Bandag’s filing of its collection cases that
petitioners pursued the present (labor) case. 26

Per the averments in the petition, for resolution are the following issues:

1. Whether the allegations in the petition for certiorari (which was filed with the Court of Appeals) were
deemed admitted and uncontroverted because of Bandag’s failure to file its comment;

2. Whether the SFAs are invalid for neither having been notarized nor registered with the SEC (or other
appropriate government agency) or for having natural persons, as opposed to corporations, as franchisees;

3. Whether there existed an employer-employee relationship between petitioners and Bandag,

notwithstanding the execution of the SFAs; and

4. If an employer-employee relationship existed between petitioners and Bandag, whether petitioners were
dismissed in accordance with the requirements of substantive and procedural due process.

Bandag’s failure to file a

comment was not fatal to its
cause and did not ipso facto
render petitioners’ allegations
admitted and uncontroverted

Petitioners make much of Bandag’s failure to heed the Court of Appeals’ March 26, 2004 resolution requiring
Bandag to file its comment to the petition for certiorari which petitioners filed before the Court of Appeals.
Specifically, petitioners point to "Rule 9, Section 11 [sic] of the Rules of Court which supplements the NLRC Rules,
which provides that an allegation which is not specifically denied is deemed admitted."  Petitioners, without citing
27

any specific legal basis, further appeal to the "settled policy of this Honorable Court that x x x all matters not
included x x x are deemed waived,"  and how, as a result of Bandag’s failure to file a comment, "private
28

respondents had waived whatever defenses they have and therefore the allegations and arguments of petitioners
were deemed admitted and uncontroverted." 29

In the first place, there is no such provision as "Rule 9, Section 11" in the Rules of Court (Rules). Rule 9 is
comprised of all of three (3) sections. It is true that Rule 9, Section 1 of the Rules provides that "[d]efenses and
objections not pleaded either in a motion to dismiss or in the answer are deemed waived." But, precisely, Rule 9,
Section 1 of the Rules refers to a motion to dismiss or an answer, not to a comment to a Rule 65 petition. Petitioners
use the words "comment,"  "answer,"  and "memorandum"  interchangeably. With this, petitioners mistakenly
30 31 32

suggest that the rules applicable to one are applicable to the others. Indeed, petitioners’ indiscriminate recourse to
Rule 9 of the Rules reveals petitioners’ failure to appreciate the specificity of the rules governing a petition for
certiorari under Rule 65 of the Rules of Court.

Each of the remedies in the Rules is designed for a specific purpose and is calibrated to signal to a judge and to the
other party a genre of issues that may be touched and the most efficient procedure to deal with them. Counsels of
parties are supposed to guide their clients. Sadly, in this case, counsel for petitioners seems to have obfuscated the
issues with her lack of understanding of the Rules of Court.

A petition for certiorari under Rule 65 is a special civil action. As such, while it is also governed by the general
provisions of the Rules of Court which are applicable to ordinary civil actions, the specific rules prescribed for it take
precedence. It follows, therefore, that while a petition for certiorari under Rule 65 is an original action (as opposed to
an appeal) for which a pleading filed by the adverse party in response to the petition is proper, the specific rules
governing responsive pleadings in Rule 65 petitions take precedence over the rules applicable to ordinary civil
actions.

Rule 65, Section 6 provides:

Section 6. Order to comment.-

xxx

In petitions for certiorari before the Supreme Court and the Court of Appeals, the provisions of section 2, Rule 56,
shall be observed. Before giving due course thereto, the court may require the respondents to file their comment to,
and not a motion to dismiss, the petition. Thereafter, the court may require the filing of a reply and such other
responsive or other pleadings as it may deem necessary and proper. (Emphasis supplied)

Further, Rule 65, Section 8 (as amended by A.M. No. 07-7-12-SC) provides:

124
Section 8. Proceedings after comment is filed.—After the comment or other pleadings required by the court are
filed, or the time for the filing thereof has expired, the court may hear the case or require the parties to submit
memoranda. If, after such hearing or filing of memoranda or upon the expiration of the period for filing, the court
finds that the allegations of the petition are true, it shall render judgment for such relief to which the petitioner is
entitled.

However, the court may dismiss the petition if it finds the same patently without merit or prosecuted manifestly for
delay, or if the questions raised therein are too unsubstantial to require consideration. In such event, the court may
award in favor of the respondent treble costs solidarily against the petitioner and counsel, in addition to subjecting
counsel to administrative sanctions under Rules 139 and 139-B of the Rules of Court.

The Court may impose motu proprio, based on res ipsa loquitur, other disciplinary sanctions or measures on erring
lawyers for patently dilatory and unmeritorious petitions for certiorari.

(Emphasis supplied)

It is clear from Rule 65, Sections 6 and 8 that a comment is not, in all cases, imperative and that the respondent’s
failure to file a comment is not necessarily fatal to its cause. Section 6 establishes that the need for a comment rests
on the sound discretion of the court. A respondent’s noncompliance neither automatically entails its admission of all
the averments made in the petition nor the rendition of a decision adverse to it. Section 8 allows the case to proceed
even after the period for the filing of a comment has lapsed without the respondent having filed a comment. Even
after the lapse of such period, the court may still entertain the parties’ memoranda or set the case for hearing and,
thereafter, render its decision.

Accordingly, petitioners’ insinuation that all the allegations in their petition were deemed admitted and
uncontroverted must fail. Again, it betrays a fundamental lack of understanding of the nature and purpose of a Rule
65 special civil action.

Judicial review of decisions of

the National Labor Relations
Commission: Procedural
Parameters

At this juncture, it is crucial to clarify the procedural context in which this review is being made. This procedural
context defines the parameters of what is permissible in this review.

As established in St. Martin Funeral Home v. NLRC,  while judicial review of a decision of the NLRC is permitted,
33

such review is by way of a petition for certiorari (i.e., special civil action for certiorari) under Rule 65 of the Rules of
Court, rather than by way of an appeal. Moreover, even as this court has concurrent jurisdiction with the Court of
Appeals as regards petitions for certiorari, such petitions (after the NLRC’s denial of a motion for reconsideration)
are filed with the Court of Appeals, rather than directly with this court, consistent with the principle of hierarchy of
courts. From an adverse ruling of the Court of Appeals, a party may then come to this court by way of a petition
for review on certiorari (i.e., appeal by certiorari) under Rule 45 of the Rules of Court. 34

As explained in Odango v. NLRC,  a special civil action for certiorari is an extraordinary remedy which is allowed
35

"only and restrictively in truly exceptional cases."  The remedy of a writ of certiorari may be availed of only when
36

there is no appeal or any plain, speedy and adequate remedy in the ordinary course of law. Nevertheless, this
requirement has been relaxed in cases where what is at stake is public welfare and the advancement of public
policy.
37

Moreover, when availing of such a remedy, a party is not at liberty to assail an adverse ruling on grounds of such
party’s own choosing. A petition for certiorari is "confined to issues of jurisdiction or grave abuse of discretion."  Its
38

sole office is "the correction of errors of jurisdiction including the commission of grave abuse of discretion amounting
to lack or excess of jurisdiction."
39

A petition for certiorari under Rule 65 is an original action. It is independent of the action from which the assailed
ruling arose. In contrast, a petition for review on certiorari under Rule 45 is a mode of appeal. It is, therefore, a
continuation of the case subject of the appeal. Being such a continuation, it cannot go beyond the issues which
were properly the subject of the original action from which it arose.

With these premises, two points must be underscored with respect to reviews of decisions of the NLRC. First, when
a decision of the NLRC is elevated to the Court of Appeals, what is involved is not an appeal but an entirely
independent action where the matter for resolution is limited to issues of jurisdiction or grave abuse of discretion.
Second, any subsequent elevation to this court of an adverse decision of the Court of Appeals, being by way of an
appeal (i.e, continuation) of the independent action originally lodged with the Court of Appeals is, itself, limited to the
issue which was properly taken up in the Court of Appeals, that is, jurisdiction or grave abuse of discretion.

125
In this regard, both the Court of Appeals and this court are to be guided by the established standard as to what
constitutes grave abuse of discretion:

By grave abuse of discretion is meant capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction. Mere abuse of discretion is not enough. It must be grave abuse of discretion as when the power is
exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and
so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at
all in contemplation of law.
40

That the adverse ruling of the Court of Appeals in a petition for certiorari under Rule 65 is elevated to this court via a
petition for review on certiorari under Rule 45 bears significantly on the manner by which this court shall treat
findings of fact. As a general rule, it becomes improper for this court to consider factual issues.

This is for two reasons. First, since the appeal is an offshoot of a Rule 65 petition, as this court explained
in Odango, a petition for certiorari assailing a ruling of the NLRC "does not include correction of the NLRC’s
evaluation of the evidence or of its factual findings. Such findings are generally accorded not only respect but also
finality."  Second, since the appeal is being made via a Rule 45 petition, it is elementary that "[a]s a rule, only
41

questions of law, not questions of fact, may be raised in a Petition for Review on Certiorari under Rule 45." 42

Nevertheless, there are exceptions which will allow this court to overturn the factual findings with which it is
confronted. For one, to the extent that petitioner in a Rule 65 petition can show that "the tribunal acted capriciously
and whimsically or in total disregard of evidence material to the controversy,"  the assailed Court of Appeals ruling
43

(in the Rule 65 proceedings) will be reversed and the factual findings on which it rests may be rejected. Moreover,
there are the following recognized exceptions:

1. When the conclusion is a finding grounded entirely on speculation, surmises, and conjectures;

2. When the inference made is manifestly mistaken, absurd or impossible;

3. Where there is a grave abuse of discretion;

4. When the judgment is based on a misapprehension of facts;

5. When the findings of fact are conflicting;

6. When the Court of Appeals, in making its findings, went beyond the issues of the case and the same is
contrary to the admissions of both appellant and appellee;

7. When the findings are contrary to those of the trial court;

8. When the findings of fact are conclusions without citation of specific evidence on which they are based;

9. When the facts set forth in the petition as well as in the petitioners' main and reply briefs are not disputed
by the respondents; and

10. When the findings of fact of the Court of Appeals are premised on the supposed absence of evidence
and contradicted by the evidence on record. 44

Given these considerations, it must be emphasized that what is involved in the present petition is a matter of
public welfare and public policy. It is settled that relations pertaining to labor and employment are impressed with
public interest. They are deemed matters of public policy which weigh heavily on public welfare. Article 1700 of the
Civil Code is clear on this point:

Article 1700. The relations between capital and labor are not merely contractual. They are so impressed with
public interest that labor contracts must yield to the common good. Therefore, such contracts are subject to
the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working
conditions, hours of labor and similar subjects. (Emphasis supplied)

Moreover, the present petition raises the novel issue of a franchise agreement being utilized to disguise an
employer-employee relationship and to circumvent the requirement of security of tenure. This court must avail of this
opportunity to scrutinize what is assailed to be an innovative and ingenious way of undermining a person’s livelihood
as well as the safeguard which our laws have placed to protect such source of livelihood — security of tenure.
Needless to say, contracts designed to circumvent the legal requirement of security of tenure run afoul of our laws
and of public policy.

They are detrimental to the public welfare.

126
In making a determination of the extent to which the franchise arrangement between petitioners and Bandag is a
circumvention of security of tenure, emphasis must be given to the primacy of the provisions of the contract entered
into by the parties. While Bandag questioned petitioners’ motives in filing their complaint, such motives are
extraneous to the issue of whether the franchise arrangement, as spelled out in and carried out under the SFAs,
circumvented security of tenure.

From a careful review of the facts of this case, as borne by the records, and from a thorough consideration of the
arguments of the parties, it will be culled that the rulings of the NLRC and of the Labor Arbiter have been made with
such disregard of material evidence. Properly considered in their totality, the evidence points to the SFAs as a
means to conceal Bandag’s employer-employee relationship with respondents as well as to subvert their security of
tenure. The inferences and conclusions drawn by the NLRC and by the Labor Arbiter are unsupported by an
exacting and critical scrutiny of the evidence — chiefly the SFAs — and are, thus, manifestly mistaken. As such, the
NLRC and the Labor Arbiter committed such gross errors amounting to an evasion of their positive duty to render
judgment after only a meticulous consideration of the circumstances of a case.

The Labor Arbiter, in concluding that petitioners ceased to be route salesmen, failed to realize that petitioners were
actually still performing the same roles and functions. There has not even been a distinguishable demarcation of the
supposed end of their employment as typified by procedures customarily attending resignation and/or retirement, or
otherwise signifying the end of an employer-employee relationship (such as clearance procedures, settlements of
obligations, and final payments or benefits). That the SFAs had been in effect for about two (2) years when
petitioners filed their complaint is of no consequence. It proves nothing more than the fact of such duration and does
not at all support the conclusion that petitioners’ employment ceased, and, more so, that such cessation was out of
petitioners’ own volition.

The NLRC’s conclusion that Bandag merely provided guidelines and did not exercise control over petitioners is not
supported by a meticulous and thorough review of the SFAs. A proper reading of the SFA provisions reveals that
petitioners were not independent businessmen but remained under the employ of Bandag. The NLRC was even all
too willing to lend validity to SFAs, not noticing that the SFA (as submitted to this court) was not even signed by the
parties.

As such, the Court of Appeals is in error for sustaining the Labor Arbiter and the NLRC. The Court of Appeals’
finding that the Labor Arbiter and the NLRC did not commit grave abuse of discretion was unwarranted. The Court
of Appeals’ conclusions are borne by the same misapprehension of facts initiated by the Labor Arbiter and the
NLRC.

The SFAs’ validity is not

diminished by their nonnotarization
and nonregistration
nor by the fact that the franchisees
under it are natural persons

The Service Franchise Agreement or SFA attached to the present petition (as Annex "D-1") is not signed, whether
by a representative of Bandag or by the franchisee. While not specifically raised by petitioners as an issue, this
detail, along with other observations (as will be laid out and explained subsequently), raises questions about the
regularity of the circumstances surrounding the execution of the SFAs and should weigh heavily on this court’s
appreciation and ultimate disposition of the present petition.

Likewise, it must be reiterated that there has not been a distinguishable delineation of the supposed end of
petitioners’ employment through procedures which, in the normal course of things, are customary to resignation
and/or retirement. The regular process would have been for petitioners to properly end their employment through
these procedures and, after which, enter into new contracts with the former employer which is now a franchisor.
Absent these procedures, it appears that the SFAs did not really signal the start of a significantly new relationship.
That the parties did not even bother to sign the SFAs only buttresses this. For that matter, even if the parties had
signed copies, the fact that they never submitted these signed copies to this court (as in fact the only copy available
for our perusal is an unsigned SFA) only shows the devaluing with which the SFAs are looked at, not only by the
parties in general, but more so by Bandag.

These circumstances, by themselves, would have resolved this case. But, even going beyond these, and embarking
on a more thorough scrutiny of the other facts and the relevant contractual provisions, there is only greater certainty
that the franchise agreement between petitioners and Bandag is, in fact, a subterfuge for compliance with legal
requirements.

Turning however to the specific issues raised by petitioners, neither notarization nor registration is decisive of the
validity of the Service Franchise Agreements.

In Bernardo v. Ramos,  this court had the occasion to explain the significance of notarization:
45

127
Notarization converts a private document into a public document thus making that document admissible in evidence
without further proof of its authenticity. A notarial document is by law entitled to full faith and credit upon its face. 46

Also, in Ruiz, Sr. v. Court of Appeals,  this court emphasized that:

47

Documents acknowledged before notaries public are public documents and public documents are admissible in
evidence without necessity of preliminary proof as to their authenticity and due execution. They have in their favor
the presumption of regularity, and to contradict the same, there must be evidence that is clear, convincing and more
than merely preponderant. 48

As is clear from the cited authorities, the import of notarization rests, not on the validity they lend to private
documents, but on bolstering the reliability and evidentiary weight of such documents. Thus, notarization may be
relied upon only with respect to the authenticity and due execution of a document but not with respect to its intrinsic
validity. It is, therefore, inconsequential, with respect to the validity of the SFAs between the parties, that they have
not been notarized.

Neither is the SFAs’ non-registration with the Securities and Exchange Commission (or with another government
agency) fatal to the validity of the SFAs.

To begin with, petitioners’ understanding of "franchise" is erroneous.

In arguing against the validity of the SFAs, petitioners rely on the definitions of "franchise" from two sources: first,
Francisco B. Moreno’s Philippine Law Dictionary which (as cited by petitioners) defines ‘franchise’ as "[a] special
privilege conferred by governmental authority";  and second, this court’s pronouncement in Del Mar v. Philippine
49

Amusement and Gaming Corporation,  which defines ‘franchise’ as "a special privilege conferred upon a
50

corporation or individual by a government duly empowered legally to grant it."  On the basis of these, petitioners
51

conclude that "[w]hether it is a corporate franchise, general franchise, primary franchise, secondary franchise,
special franchise, it means ‘the franchise to exist as a corporation.’" 52

Petitioners’ reasoning is erroneous: first, the definitions they cited are idiosyncratic and restrictive and are not
appropriate to the facts of this case; second, it does not even follow from the definitions they cited that a franchise
must necessarily and exclusively mean "the franchise to exist as a corporation." Petitioners are insisting upon this
court a myopic understanding of ‘franchise’ which is clearly not within the ballpark of what the parties may have
intended. It is this erroneous reasoning that cultivates the equally erroneous conclusion that just because the
Securities and Exchange Commission has "jurisdiction and supervision over all corporations, partnerships or
associations who are the grantees or primary franchises and/or a license or permit issued by the Government" then, 53

the SFAs, referring, as they do, to ‘franchises’, must be registered with the SEC.

A distinction must be made between franchise as bestowed by government, as against franchise as the right or
license granted by a franchisor company to a "related company."  It is the latter which is involved in the present
54

case.

Franchise, as bestowed by government, refers to "a privilege conferred by government authority, which does not
belong to citizens of the country generally as a matter of common right."  Further, a franchise bestowed by
55

government may be either of two kinds: (1) a general or primary franchise or (2) a special or secondary franchise.
As this court explained in National Power Corporation v. City of Cabanatuan: 56

[A general or primary franchise] relates to the right to exist as a corporation, by virtue of duly approved articles of
incorporation, or a charter pursuant to a special law creating the corporation. The right under a primary or general
franchise is vested in the individuals who compose the corporation and not in the corporation itself. On the other
hand, [a special or secondary franchise] refers to the right or privileges conferred upon an existing corporation such
as the right to use the streets of a municipality to lay pipes of tracks, erect poles or string wires.
57

On the other hand, franchise as granted by a franchisor company to a related company refers to "the right or license
granted to an individual or group to market a company’s goods or services in a particular territory."  It is a widely
58

recognized commercial practice or means of doing business. In the United States, the Federal Trade Commission
defines franchising as:

x x x any continuing commercial relationship or arrangement, whatever it may be called, in which the terms of the
offer or contract specify, or the franchise seller promises or represents, orally or in writing, that:

(1) The franchisee will obtain the right to operate a business that is identified or associated with the
franchisor’s trademark, or to offer, sell, or distribute goods, services, or commodities that are identified or
associated with the franchisor’s trademark;

128
 (2) The franchisor will exert or has authority to exert a significant degree of control over the franchisee’s
method of operation, or provide significant assistance in the franchisee’s method of operation; and

(3) As a condition of obtaining or commencing operation of the franchise, the franchisee makes a required
payment or commits to make a required payment to the franchisor or its affiliate. 59

Through a franchise agreement, parties enter into a commercial arrangement whereby the franchisee (i.e., related
company) is given the right by the franchisor to engage in the franchisor’s business, while using the franchisor’s
trademark/s and/or tradename and capitalizing on the franchisor’s goodwill, subject to compliance with standards
and guidelines established by the franchisor. In these arrangements, it is recognized that benefits will inure to both
parties: to the franchisee by relieving itself of the need to establish an enterprise from scratch and by enabling it to
utilize the goodwill established by the franchisor; and to the franchisor by enabling it to enlarge its market and
multiply its capacity while minimizing costs.

In this case, what is involved is a franchise as granted by a franchisor company to a related company. The
SFAs ostensibly allow petitioners themselves to engage in the business of tire repairs and providing retreading
services. This, they shall do under the name and marks of, as well as in conformity with the guidelines and
standards established by, Bandag. The SFAs avowedly devise an arrangement whereby petitioners are to operate
outlets providing tire repair and retreading services which are identified by the name and marks of Bandag. On the
part of Bandag, the SFAs enable it to expand its business, reaching more clients through outlets which act as
frontline units.

"Franchise," in this case, simply means dealership. It has nothing to do with the definitions insisted upon by
petitioners. The business of providing tire repairs and retreading services does not entail an extraordinary privilege,
which must be specially conferred or sanctioned by government. Tire repairs and retreading services, while certainly
beneficial to Bandag’s and petitioners’ clientele, do not entail public interest such that engaging in them becomes
impossible unless specially sanctioned by the government.

To disregard the distinction — between franchise as bestowed by government, as against franchise as a right or
license granted by a franchisor company to a related company — and to insist on the application of the former to the
present case is to insist on an absurd interpretation which will lead to unjust and unreasonable consequences.
Indeed, petitioners’ call for this court to vest its imprimatur on their reasoning is, effectively, a call to invalidate, in
one fell swoop, all commercial arrangements configured along the lines of the franchise business model because of
non-registration with the Securities and Exchange Commission.

Republic Act No. 8799, otherwise known as the Securities Regulation Code (SRC), in spelling out the jurisdiction of
the Securities and Exchange Commission is clear. Such jurisdiction is qualified and extends only to "all
corporations, partnerships or associations who are the grantees of primary franchises and/or a license or permit
issued by the Government."  At no point does the statutory recital of the Securities and Exchange Commission’s
60

jurisdiction claim to cover dealerships between a franchisor and a related company or franchisee.

There is simply no need to register the SFAs with the Securities and Exchange Commission. The SFAs do not
purport to create a corporation, a partnership or any other artificial being which requires legal fiat in order that it may
juridically exist and be capacitated for rights and obligations. Being a means to effectuate a business model, neither
do the SFAs involve securities which, per the state policy articulated in Section 2 of the SRC, necessitate full and
fair disclosure to "enabl[e] the public to make an informed investment decision"  and for which registration is
61

necessary as "[t]he principal device to ferret out the truth."

62

Parenthetically, that a franchise need not be registered with the Securities and Exchange Commission does not
mean that franchises are not subject to appropriate regulation (e.g., by the Department of Trade and Industry,
Intellectual Property Office, and other agencies). In any case, the records are bereft of any indication that these
have been complied with.

Having clarified the concept of ‘franchise,’ petitioners’ assertion that the SFAs are invalid because it makes
franchisees out of natural persons, rather than corporations, must also fail. As will be gleaned from the discussion
in National Power Corporation v. City of Cabanatuan,  the question of the person/s upon whom the franchise is
63

vested is material when what is involved is a franchise bestowed by government; that is, in distinguishing between a
primary or general franchise, on the one hand, and a special or secondary franchise, on the other. Here, since what
is involved is a franchise granted by a franchisor to a franchisee, it is of no consequence that the franchisees are
natural persons. Simply, natural persons could, just as easily as juridical persons, "market a company’s goods or
services in a particular territory."
64

Despite the execution of the

SFAs, there continued to be
an employer-employee
relationship between
petitioners and Bandag
129
As clarified in Aklan v. San Miguel Corporation,  "the existence of an employer-employee relationship is ultimately a
65

question of fact and the findings by the Labor Arbiter and the NLRC on that score shall be accorded not only respect
but even finality when supported by ample evidence." 66

Given this and the earlier discussed procedural parameters of a judicial review of decisions of the NLRC, it will be
noted that the Court of Appeals, the NLRC, and the Labor Arbiter uniformly ruled that no employer-employee
relationship existed between the parties at the time of the filing of petitioners’ complaint.

In the decisions and resolutions rendered by the Court of Appeals, the NLRC and the Labor Arbiter, it was
consistently held that petitioners voluntarily applied for SFAs with Bandag.  The Court of Appeals and the NLRC
67

likewise sustained the Labor Arbiter’s conclusion that petitioners’ entry into the SFAs effectively changed the
relationship between petitioners and Bandag; that is, that petitioners were no longer employees but engaged in their
own enterprises.

These findings notwithstanding, petitioners contend that an employer-employee relationship must have continued to
exist. They anchor this contention on Bandag’s supposedly having continued to exercise control over the manner
and method by which they carried out their franchise operations. Specifically, petitioners point to provisions in the
SFAs which: (1) prohibited the sale of competitor products; (2) designated defined areas of operations; (3) required
petitioners to submit reports; (4) required petitioners to meet volume requirements; (5) provided petitioners with
service vehicles; and (6) required the use of uniforms,  as representing such degree of control as would validate the
68

existence of an employer-employee relationship.

In addition to Bandag’s continuing control over their operations, petitioners claim that they continued to receive
salaries, albeit denominated as "revolving funds". Petitioners also add that they did not have sufficient capital to
embark on their own enterprise and that all capital and equipment were provided by Bandag.

To determine the existence of an employer-employee relationship, the following four-fold test is generally  applied:
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1. the selection and engagement of the employee;

2. the payment of wages;

3. the power of dismissal; and

4. the employer’s power to control the employee with respect to the means and methods by which the work
for which the latter is engaged is to be accomplished. 70

Of these, it is the fourth or the ‘control test’ — "where the person for whom the services are performed reserves the
right to control not only the end to be achieved, but also the manner and means to be used in reaching that end" — 71

which assumes primacy. The ‘control test’ is the most important element in determining the existence of an
employer-employee relationship. 72

However, not every manner of control establishes an employer-employee relationship. As this court noted in Insular
Life Assurance Co., Ltd., v. NLRC: 73

Logically, [a] line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that control
or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second, which address both the result and
the means used to achieve it. 74

A franchise agreement is typified by two features: (1) collaboration and (2) a shared interest (i.e., risk) in the
success or failure, the gains or losses, of the enterprise. These features indicate that a franchisee is himself
engaged in a business concern, albeit in association with another (i.e., the franchisor). It is these features which,
despite the presence of some degree of control by the franchisor, negate the existence of an employer-employee
relationship.

Since a franchise arrangement is designed to serve the business interests of both the franchisor and the franchisee,
it is but natural that parameters be established to ensure the viability of the shared enterprise — that is, to ensure
the attainment of mutually desired results. Moreover, as it is the franchisee which effectively involves itself with the
pre-established enterprise of the franchisor — the benefits it enjoys precisely being that it is relieved of the need to
establish an enterprise from scratch and/or that it is able to utilize the goodwill established by the franchisor — it is a
matter of course that the franchisee’s activities be in line with standards established by the franchisor.

Conversely, where an arrangement purporting to be a franchise agreement does not cater to the mutual interests of
the franchisor and the franchisee — as collaborating entrepreneurs — and instead reveals a lopsided relation that

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funnels gains only to the supposed franchisor, courts must decline from recognizing it as a valid franchise
agreement. Where a supposed franchise agreement fails to clearly manifest that a franchisee is pursuing its own
business concern, and shows, instead, that it is an artifice to conceal and circumvent safeguards established by law
— such as security of tenure — courts must refuse to sanction such an illicit and iniquitous arrangement. Indeed,
tribunals must take caution lest they be reduced to a rubberstamp that validates unlawful undertakings.

In this case, while the Court of Appeals, the NLRC, and the Labor Arbiter uniformly ruled that no employer-employee
relationship existed between the parties at the time of the filing of petitioners’ complaint, such determination is
manifestly mistaken and based on a misapprehension of facts. The rulings of the Court of Appeals, the NLRC, and
the Labor Arbiter must, thus, be reversed.

The complete text of the substantive provisions of the Service Franchise Agreements  reads:
75

IT IS AGREED:

1. APPOINTMENT

COMPANY hereby appoints FRANCHISEE, and FRANCHISEE hereby accepts the appointment, as service
franchisee for Sarman- Bandag retreads in Baguio City. ("Territory")

2. TERRITORY

2.1 The Territory shall not be exclusive to FRANCHISEE. COMPANY reserves the right to maintain
its Area Sales Representatives (ASR) in the Territory or grant a service franchise therein to other
ASRs if, in its sole discretion, the Territory will be better served by more than one (I) ASR or service
franchisee.

2.2 FRANCHISEE may likewise solicit and serve accounts beyond the Territory (''Extra territory");
provided that, the account in the Extra-territory is not served by another ASR or service franchise.
The Territory may be extended to include the Extraterritory if, in COMPANY's sole discretion,
FRANCHISEE has the aptitude for responsibility over a greater area.

3. CUSTOMERS

3.1 FRANCHISEE's customers in the Territory while still an ASR of COMPANY shall comprise
FRANCHISEE’s initial list of accounts. The list shall be updated regularly to include new accounts
solicited by FRANCHISEE.

3.2 A customer shall be credited to FRANCHISEE's account on a "first- come-first-serve" basis, that
is, a customer shall be included in the list of accounts of the first FRANCHISEE to solicit a paid order
for COMPANY's services or products.

3.3 Accounts in FRANCHISEE's list shall be exclusive to FRANCHISEE, unless (i) in COMPANY's
sole discretion, FRANCHISEE's service to his account/s does not meet the service standard
required in the current Company Manual; or (ii) FRANCHISEE is suspended for failure to observe
the credit policies set forth in the current Company Manual; or (iii) the account is reclassified by
COMPANY as a lost account, i.e., a customer who, in the immediately preceding six (6) months, did
not procure any service or obtain any product from COMPANY. COMPANY shall notify
FRANCHISEE in writing of the foregoing, and the account may be solicited by other ASRs or service
franchisees.

4. COMPANY SUPPORT FOR FRANCHISEE

4.1 COMPANY shall advance to FRANCHISEE his revolving fund for the first three (3) months of
operations. The revolving fund consists of FRANCHISEE's take-home fund (approximately
equivalent to the salary, allowance, commission and incentives of an ASR) and operating fund (for
gasoline, repairs and maintenance and other miscellaneous expenses).

4.2 COMPANY shall provide FRANCHISEE a service vehicle through the Bandag Vehicle
Acquisition Plan ("BVAP").

4.3 COMPANY shall haul the tires from FRANCHISEE's sales office to the processing plant and
back.

4.4 COMPANY shall conduct year-round training and development programs and seminars for
service franchisees.
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 4.5 COMPANY shall provide receipts, invoices and other forms, including: (i) selling kits and
testimonials; (ii) information and updates regarding Sarman-Bandag products; (iii) information and
market intelligence on competing products; and (iv) processed tire updates, customer updates, credit
information, etc.

5. MINIMUM REQUIREMENTS

5.1 To remain in good standing, FRANCHISEE shall comply with the monthly minimum processed
tire requirement (MPR) set forth in the current Company Manual. As long as FRANCHISEE complies
with the MPR, FRANCHISEE need not satisfy the ideal tire mix of sixty percent (60%) truck tire and
forty percent (40%) light truck.

5.2 Upon FRANCHISEE's failure to meet the MPR for three (3) consecutive months, COMPANY
may, at its sole option, terminate this Agreement effective upon receipt of written notice thereof by
FRANCHISEE, without prejudice to the rights and obligations accrued as of date thereof.

6. PRICES AND CHARGES

FRANCHISEE's charges for products and services, inclusive of freight and handling, shall conform to the
rates prescribed by COMPANY set forth in the current Company NY reserves the right to adjust the rates
without prior notice.

7. FRANCHISE DISCOUNTS AND REBATES

7.1 COMPANY shall give FRANCHISEE a franchise discount based on FRANCHISEE's total
equivalent points for processed tires for the past month. The schedule of franchise dis in the current
Company Manual.

7.2 The rebate is computed as follows:

FRANCHISEE shall receive his rebates for the month, net of all amounts due to COMPANY from
FRANCHISEE, on the fifteenth day of the month following.

8. CREDIT TERMS AND LIMITS

8.1 COMPANY shall review and approve customers' credit applications recommended by
FRANCHISEE. However, COMPANY's approval of customer's credit application shall not relieve
FRANCHISEE of his obligations under this Agreement.

8.2 FRANCHISEE shall only render service or sell products on credit to customers with COMPANY-
approved credit applications. FRANCHISEE shall also abide by the credit terms and limits approved
by COMPANY and observe the credit policies set forth in the current Company Manual.

9. OTHER PROVISIONS

9.1 FRANCHISEE shall render service to customers in accordance with the standards and
specifications set forth in the current Company Manual.

9.2 During the term of this Agreement, FRANCHISEE shall not, directly or indirectly, sell, distribute,
promote or solicit orders for the sale of services or products which compete with the services and
products of COMPANY, whether for his own account or on behalf of third parties, without the prior
written approval of COMPANY.

9.3 This Agreement shall not be construed to establish an employer-employee relationship between
(i) COMPANY and FRANCHISEE; or (ii) COMPANY and FRANCHISEE's employees, if any.

9.4 FRANCHISEE shall hold COMPANY free and harmless from liability for (i) unpaid wages and
benefits of FRANCHISEE's employees, if any; (ii) loss or damage to the property of, or death or
injury to, third parties caused by the acts or omissions of FRANCHISEE or his employees, if any; (iii)
noncompliance with any law, rule or regulation of the government or any of its subdivisions or
agencies; or (iv) non-payment of any tax, fee or assessment.

9.5 FRANCHISEE shall not make any warranties to its customers other than the warranties stated
herein, that is, that SARMANBANDAG retreads, repairs, tread transfers and slightly used treads
shall be free from defects in workmanship and materials for the life of the tread; there is no warranty

132
 on the casing. FRANCHISEE shall hold COMPANY free and harmless from liability for breach of
warranty not expressly allowed herein.

9.6 FRANCHISEE acknowledges COMPANY's ownership of the trademark and service mark
"Sarman-Bandag".

9.7 FRANCHISEE shall attend, participate in and successfully complete the training and
development programs conducted by COMPANY.

9.8 FRANCHISEE shall wear uniforms prescribed by COMPANY and carry calling cards setting forth
the complete company name, address and telephone numbers.

9.9 True and accurate books of account shall be maintained in accordance with generally accepted
accounting principles and the procedures prescribed by COMPANY. The books of account shall be
available for inspection by COMPANY at all times during regular business hours.

9.10 FRANCHISEE shall submit [monthly/quarterly] financial reports in the form prescribed by
COMPANY.

9.11 COMPANY shall have the right to enter and inspect FRANCHISEE's sales offices to (i)
ascertain FRANCHISEE's compliance with his obligations under this Agreement; and (ii) evaluate
FRANCHISEE's performance.

10. BOND

10.1 FRANCHIISEE shall post a surety bond from a reputable company acceptable to COMPANY or
a cash bond in such amount equivalent to FRANCHISEE's accounts receivable during his last month
as ASR to guarantee the faithful performance of his obligations and the duties and responsibilities
set forth herein.

10.2 FRANCHISEE shall, within thirty (30) days from receipt of written notice, pay to COMPANY
such amounts sufficient to replenish the cash bond.

10.3 COMPANY may, at its discretion, increase the amount of the bond by mere written notice.
FRANCHISEE shall pay to COMPANY the increase in the amount of the cash bond or cause the
increase in the surety bond within thirty (30) days from receipt of notice.

10.4 Should FRANCHISEE fail to replenish the cash bond or deposit the amount of the increase in
the cash bond, the amount due shall bear interest of two percent (2%) per month or fraction thereof
until paid in full as and by way of penalty, without prejudice to other remedies available to
COMPANY under the law and this Agreement. In the case of the surety bond, FRANCHISEE shall
pay COMPANY a penalty of _____ PESOS (₱____) for every [day/week/month] of delay in effecting
the increase in the surety bond, without prejudice to other remedies available to COMPANY under
the law and this Agreement.

10.5 The bond shall be effective for the term of this Agreement. The cash bond shall be refunded to
FRANCHISEE within fifteen (15) days from date of expiration or termination of this Agreement, less
any charges thereto.

11. TERM AND TERMINATION; RENEWAL

11.1 This Agreement shall be effective for a period of one (1) year, commencing on January 1, 2001.
Renewal shall be at the option of COMPANY based on its evaluation of FRANCHISEE's
performance.

11.2 Except as otherwise provided, FRANCHISEE shall have thirty (30) days from receipt of written
notice to cure a breach or default in the performance of any term or condit ent or the Company
Manual to the satisfaction of COMPANY, otherwise, the notice shall be deemed effective, and this
Agreement shall terminate forthwith. In either case, FRANCHISEE shall be liable to pay damages.

11.3 In case of fraud committed by FRANCHISEE, COMPANY shall have the right to terminate this
Agreement effective upon receipt of written notice thereof by FRANCHISEE. COMPANY shall be
entitled to liquidated damages of twenty five percent (25%) of the amount involved but in no case
less than Fifty Thousand Pesos (₱50,000.00), without prejudice to other remedies available to
COMPANY under the law and this Agreement.

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 11.4 Within thirty (30) days from the expiration or termination of this Agreement, FRANCHISEE
shall, without need of demand, settle his outstanding obligations to COMPANY. Should
FRANCHISEE fail to settle his outstanding obligations on due date, COMPANY shall be entitled to a
late payment surcharge of two percent (2%) of the outstanding obligations and interest on the total
amount of two percent (2%) per month or fraction thereof until paid in full, without prejudice to other
remedies available to COMPANY under the law and this Agreement.

11.5 Upon expiration or termination of this Agreement, FRANCHISEE shall (i) cease to use the
trademark and service mark of COMPANY in any form or manner and (ii) within fifteen (15) days,
return to COMPANY all forms and material provided by COMPANY to, or otherwise in the
possession of, FRANCHISEE, including copies made thereof.

11.6 The expiration or termination of this Agreement shall be without prejudice to any rights or
obligations accrued as of date thereof.

12. GENERAL PROVISIONS

12.1 The provisions of the Company Manual and all subsequent amendments thereto are deemed
incorporated herein and made integral parts of this Agreement by reference.

12.2 The information and materials received by FRANCHISEE from COMPANY pursuant to this
Agreement or which otherwise come to the knowledge or possession of FRANCHISEE shall be kept
strictly confidential for the duration of this Agreement and for a period of three (3) years after its
expiration or termination. Confidential information and materials shall be used only for the purpose
for which it was disclosed and shall be disclosed to third parties only with the prior written consent of
COMPANY. However, confidentiality shall not apply to the following: (i) those available from
generally public sources other than as a result of a breach of this Agreement; (ii) those received from
a third party with a lawful right to disclose such information; (iii) those which the parties specifically
agree upon in writing at the time of disclosure as not subject to this provision; (iv) those required by
law to be submitted to government regulatory agencies; and (v) those disclosed under legal
compulsion; provided that, FRANCHISEE shall have previously advised COMPANY thereof and
consulted in good faith as to the scope of disclosure.

12.3 Notices required to be served under this Agreement shall be made in writing and delivered
personally or sent by registered mail or courier service at the address of the party indicated in this
Agreement or to such other address designated by the parties in writing.

12.4 This Agreement or any part hereof shall not be assigned by FRANCHISEE.

12.5 This Agreement may be amended only by the written agreement of the parties through their
duly authorized officers or representatives.

12.6 The failure to take any action or assert any right hereunder shall not be deemed a waiver of
such right in the event of the continuation or repetition of the circumstance giving rise to such right.

12.7 All actions or proceedings arising out of or in connection with this Agreement shall be brought
exclusively before the courts of Pasig City.

A review of the text of the SFAs will lead to the conclusion that Bandag intended to conceal its employer-employee
relationship with petitioners and to undermine petitioners’ security of tenure. The SFAs contain provisions
which, taken in their totality, do not merely establish standards of success or facilitate the achievement of desired
results, but instead indicate such an exacting degree of control by Bandag that petitioners become mere subalterns
whose own means and methods must remain compliant with the conventions imposed by Bandag:

1. Section 6 reserves to Bandag the right to adjust prices and rates "without prior notice." 76

2. Subsection 5.1 requires a franchisee to comply with monthly minimum processed tire requirements
(MPR); otherwise, a franchisee must satisfy "the ideal tire mix of sixty percent (60%) truck tire and forty
percent (40%) light truck."  Subsection 5.2 of the SFA also vests upon Bandag the "sole option" to terminate
77

the SFA upon the franchisee’s failure to meet the minimum processed tire requirement (MPR) for three
consecutive months. 78

3. Section 8 makes compulsory the review by Bandag of all credit applications and restrains the franchisee
to provide services (on credit) only to customers with "[Bandag]-approved credit applications." 79

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 4. Subsection 3.3 enables Bandag, at its "sole discretion" to prevent the franchisee from providing services
to accounts in the latter’s list should it fail to meet the required service standard.
80

Section 5 does not just set productivity targets. Rather, the franchisee is placed in a predicament where, if it fails to
meet the MPR, Bandag substitutes its judgment for what the franchisee may otherwise determine to be the proper
composition of its clientele and/or mix of services performed. Section 8 and Subsection 3.3 similarly inhibit the
composition of the franchisee’s clientele, even going so far as to prohibit the franchisee from doing business with
certain parties. (Worse, Subsection 3.3 places the franchisee on equal footing with and readily replaceable by an
employee of Bandag, i,e., an Area Sales Representative or ASR.) These, taken together with Section 6 of the SFA,
through which the franchisee is able to conduct business only at rates dictated by Bandag, effectively deprive the
supposed franchisee of the opportunity to conduct the business according to its own strategy and acumen. Worse
still, should a franchisee fail to meet the MPR for three (3) consecutive months, Bandag is vested with practically
unrestrained authority to terminate the SFA; that is, to put an end to the franchisee’s operations.

Also, Section 2  of the SFA practically places the franchisee at Bandag’s beck and call. A critical examination of
81

Section 2 of the SFA reveals that it does not merely provide the terms for the territorial extent of a franchisee’s
operations. Section 2 enables Bandag to unilaterally determine who will service a given territory. In so doing,
Bandag has the option to tap the franchisee or call upon its ordinary employees. Section 2 also allows Bandag to
dictate, the geographical extent of the activities of its supposed franchisees. Subsection 2.1 provides that a given
territory shall not be exclusive to a franchisee and that Bandag may maintain its own ASRs, or, at its "sole
discretion," grant another person a service franchise if the territory will be better served by more than one (1)
franchisee. Conversely, Subsection 2.2 allows Bandag to, at its "sole discretion," extend a franchisee’s operations
beyond its initially defined territory. These provisions reduce the franchisees’ supposed territories to nothing more
than empty formalities which Bandag may disregard on its whim.

Also of note are the following: (1) Subsection 4.4  which provides for year-round training and development programs
82

and seminars; (2) Subsection 4.5  which makes Bandag responsible for providing receipts, invoices, and other
83

forms; (3) Subsection 9.8  which requires the use of uniforms and the carrying of calling cards; (4) Subsection
84

9.9  which requires the maintenance of books of account and their being made available for Bandag’s inspection at
85

all times during regular business hours; and (5) Subsection 9.10  which requires the submission of financial reports
86

in the form prescribed by Bandag.

It may be true that these provisions cater to valid, common interests between a franchisor and a franchisee (e.g.,
transparency, compliance with standards and attainment of targets, marketing/branding). However, these provisions
must not be read in isolation. Read in light of the SFA’s other provisions, they support the finding that the SFA
creates a relation that is devised to favor Bandag and to reduce the supposed franchisees to mere deputies doing
Bandag’s bidding.

In this regard, Subsections 9.11 and 11.2 are particularly insightful. Subsection 9.11  obliges the franchisee to allow
87

Bandag to enter and inspect its sales offices to ascertain its compliance with the obligations under the SFA and to
evaluate its performance. Further, Subsection 11.2  gives the franchisee thirty (30) days from receipt of written
88

notice within which to rectify, to Bandag’s satisfaction, a breach or default of the SFA or company manual; otherwise
the SFA is deemed terminated.

The sheer leeway that Subsection 11.2 gives to Bandag for it to terminate its relation with its supposed franchisees
reveals the extent to which an otherwise mutually beneficial commercial association, marked by collaboration and
shared interests, is skewed to favor only Bandag.  It reveals that the standards established in the SFA are intended
1âwphi1

to serve Bandag’s purposes by not just promoting results but in going so far as to restrict the strategies and systems
which the franchisees may use to obtain such results. It reveals that the supposed franchisees are nothing more
than individuals at Bandag’s employ in order that Bandag may satisfy its own business objectives.

Similarly, the SFA provisions on revolving funds indicate that indeed, petitioners continued to receive salaries and
that Bandag advanced the costs incurred by petitioners’ operations. Subsection 4.1 defines the revolving fund as
consisting of the franchisee’s: (1) take-home fund which is "approximately equivalent" to the salary, allowance,
commission, and incentives of an Area Sales Representative (i.e, petitioner’s original designation as employees
before they supposedly became franchisees); and (2) operating fund for gasoline, repairs, and maintenance and
other miscellaneous expenses. Bandag’s continuing assumption of the burden of shouldering petitioners’ operations
indicates that petitioners were not engaged in their own enterprise but were merely in Bandag’s employ. Also, apart
from Bandag’s continuing control over petitioners’ operations, the payment of wages indicates a continuing
employer-employee relationship.

It is of no consequence that Subsection 9.3 of the SFA explicitly provides that "[t]his Agreement shall not be
construed to establish an employer-employee relationship between x x x COMPANY and FRANCHISEE", nor that
Subsection 9.4  seems to affirm the status of the franchisee as an independent entity. It is elementary that the
89

status of employment is defined and prescribed by law and not by what the parties claim. 90

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Petitioners were unjustly and
illegally terminated

To reiterate, relations pertaining to labor and employment are impressed with public interest. Article 1700 of the Civil
Code puts it very clearly: "The relations between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good." As such, contracts designed to
circumvent the legal requirement of security of tenure run afoul of our laws and of public policy. They are detrimental
to the public welfare.

Article 1306 of the Civil Code provides that while the parties to a contract are free to establish such stipulations,
clauses, terms, and conditions as they may deem convenient, such stipulations, clauses, terms, and conditions must
not be contrary to law, morals, good customs, public order or public policy. Further, Article 1409 of the Civil Code
identifies as inexistent and void from the beginning those contracts whose cause, object or purpose is contrary to
law, morals, good customs, public order or public policy. The SFAs are, therefore, void. They are ineffectual,
whether for purposes of terminating petitioners’ employer-employee relationship with Bandag or for any other
purposes.

It being established that there continued to be an employer-employee relationship between petitioners and Bandag,
it is incumbent upon Bandag to ensure that the termination of petitioners’ employment is in accord with the
requirements of due process. Hence, they can only be dismissed for just or authorized causes as provided in
Articles 282, 283, and 284 of the Labor Code, and after due notice and hearing.

Petitioners were not served with written notices that: (1) specify the ground/s for termination and/or (2) formally
inform them of Bandag’s decision to terminate their employment. Neither were petitioners given an opportunity to
respond to whatever charges or to rebut whatever evidence there may have been against them. While it may be
true, as Bandag claims, that it charged petitioners with failing to properly liquidate their revolving funds, it is not
enough that an employee be charged with wrongdoing. Such "charge must be established in a manner consistent
with due process." 91

Moreover, Bandag’s claim that petitioners committed a wrongdoing is rooted in provisions contained in the void
SFAs. The SFAs, however, do not govern petitioners’ employer-employee relationship with Bandag. It is elementary
that a void contract produces no effect; it does not create, modify or extinguish a juridical relation; it cannot be the
source of rights.
92

As such, (albeit without meaning to make a pronouncement on the factual veracity of and ultimate liability arising
from Bandag’s charges against petitioners for failing to liquidate their revolving funds) even if Bandag attributes
wrongdoing to petitioners for their failure to liquidate their revolving funds, it could not be said that petitioners
committed a wrongdoing in relation to their employment, that is: engaged in serious misconduct in connection with
their employment; willfully disobeyed the lawful orders of their employer (or its representative) in connection with
their employment; grossly and habitually neglected their duties as employees; committed fraud or willful breach of
the trust reposed in them by their employer; or any other analogous (just) cause for their employment to be
terminated. Neither is there any clear indication that petitioners committed a crime against their employer. Thus,
petitioners’ termination from employment could not be said to have been for just cause per Article 282 of the Labor
Code.

So too, there is no indication that petitioners’ employment was terminated because of their having contracted a
disease, or pursuant to the installation of labor-saving devices, out of redundancy, by way of retrenchment to
prevent losses, or as a consequence of the closure or cessation of their employer’s business. Thus, such
termination could not have been for authorized cause.

Having been illegally and unjustly dismissed, petitioners are entitled to full backwages and benefits in the
appropriate amount, reckoned from the time of their termination (i.e., March 31, 2001 for petitioner Ashmor Tesoro;
September 30, 2001 for petitioner Pedro Ang; and September 16, 2001 for petitioner Gregorio Sharp). They are
likewise entitled to appropriate separation pay in the amount of one (1) month’s salary for every year of service
(counted from July 1997, with respect to petitioner Tesoro; August 1991 with respect to petitioner Ang; and June 3,
1998 with respect to petitioner Sharp), with a fraction of a year of at least six (6) months being counted as one (1)
whole year.

Moreover, "[m]oral damages are awarded in termination cases where the employee’s dismissal was attended by
bad faith, malice or fraud, or where it constitutes an act oppressive to labor, or where it was done in a manner
contrary to morals, good customs or public policy."  In this case,
93

Bandag crafted a novel, inventive way of circumventing the requirement of security of tenure, thereby running afoul
of public policy and acting in a manner that is patently oppressive to petitioners. As such, petitioners are entitled to
moral damages. For the same reasons and, more specifically, to provide an "example or correction for the public
good" as against innovative schemes that circumvent legally established standards and requirements, petitioners
are likewise entitled to exemplary damages.
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Having been compelled to litigate to seek reliefs for their having been illegally and unjustly dismissed, petitioners are
likewise entitled to attorney's fees in the amount of ten percent (10%) of the total monetary award. 94

ACCORDINGLY, I vote to GRANT the petition for review on certiorari. The assailed decision dated July 29, 2005
and the assailed resolution dated February 7, 2006 of the Court of Appeals in CA-G.R. SP No. 82447 which
affirmed in toto the June 30, 2003 and November 28, 2003 resolutions of the National Labor Relations Commission
(NLRC) and the February 26, 2003 decision of Labor Arbiter Monroe C. Tabingan in NLRC RAB-CAR Case No. 11-
0588-01 must be REVERSED and SET ASIDE.

Moreover, respondents must pay petitioners: (1) full backwages and other benefits in the apptopriate amount; (2)
separation pay in the appropriate amount; (3) moral damages; (4) exemplary damages; and (5) attorney's fees.

EN BANC

March 18, 2014

A.C. No. 3405

JULIETA B. NARAG, Complainant, 
vs.
ATTY. DOMINADOR M. NARAG, Respondent.

RESOLUTION

PER CURIAM:

Before this Court is a "Petition for Readmission" to the practice of law filed by Dominador M. Narag (Respondent).

On November 13, 1989, Julieta B. Narag (Julieta) filed an administrative complaint for disbarment against her
husband, herein respondent, whom she accused of having violated Rule 1.01  in relation to Canons 1  and 6  of the
1 2 3

Code of Professional Responsibility. She claimed that the respondent, who was then a college instructor in St. Louis
College of Tuguegarao and a member of the Sangguniang Panlalawigan of Cagayan, maintained an amorous
relationship with a certain Gina Espita (Gina) – a 17-year old first year college student. Julieta further claimed that
the respondent had already abandoned her and their children to live with Gina. The respondent denied the charge
against him, claiming that the allegations set forth by Julieta were mere fabrications; that Julieta was just extremely
jealous, which made her concoct stories against him.

On June 29, 1998, the Court rendered a Decision, which directed the disbarment of the respondent. The Court
opined that the respondent committed an act of gross immorality when he abandoned his family in order to live with
Gina. The Court pointed out that the respondent had breached the high and exacting moral standards set for
members of the legal profession.

A Motion for the Re-opening of the Administrative Investigation, or in the Alternative, Reconsideration of the
Decision was filed by the respondent on August 25, 1998. He averred that he was denied due process of law during
the administrative investigation as he was allegedly unjustly disallowed to testify in his behalf and adduce additional
vital documentary evidence. Finding no substantial arguments to warrant the reversal of the questioned decision,
the Court denied the motion with finality in the Resolution dated September 22, 1998.

On November 29, 2013, the respondent filed the instant petition for reinstatement to the Bar. The respondent
alleged that he has expressed extreme repentance and remorse to his wife and their children for his misgivings. He
claimed that his wife Julieta and their children had already forgiven him on June 10, 2010 at their residence in
Tuguegarao City. The respondent presented an undated affidavit prepared by his son, Dominador, Jr., purportedly
attesting to the truth of the respondent’s claim.

The respondent averred that he has been disbarred for 15 years already and that he has been punished enough.
He alleged that he is already 80 years old, weak and wracked with debilitating osteo-arthritic pains. That he has very
limited mobility due to his arthritis and his right knee injury.

He further claimed that he enlisted in the Philippine Air Force Reserve Command where he now holds the rank of
Lieutenant Colonel; that as member of the Reserve Command, he enlisted in various rescue, relief and recovery
137
missions. The respondent likewise submitted the various recommendations, testimonials and affidavits in support of
his petition for readmission. 4

"Whether the applicant shall be reinstated in the Roll of Attorneys rests to a great extent on the sound discretion of
the Court. The action will depend on whether or not the Court decides that the public interest in the orderly and
impartial administration of justice will continue to be preserved even with the applicant’s reentry as a counselor at
law. The applicant must, like a candidate for admission to the bar, satisfy the Court that he is a person of good moral
character, a fit and proper person to practice law. The Court will take into consideration the applicant’s character
and standing prior to the disbarment, the nature and character of the charge/s for which he was disbarred, his
conduct subsequent to the disbarment, and the time that has elapsed between the disbarment and the application
for reinstatement." 5

The extreme penalty of disbarment was meted on the respondent on account of his having committed a grossly
immoral conduct, i.e., abandoning his wife and children to live with his much younger paramour. Indeed, nothing
could be more reprehensible than betraying one’s own family in order to satisfy an irrational and insatiable desire to
be with another woman. The respondent’s act was plainly selfish and clearly evinces his inappropriateness to be
part of the noble legal profession.

More than 15 years after being disbarred, the respondent now professes that he had already repented and
expressed remorse over the perfidy that he had brought upon his wife and their children. That such repentance and
remorse, the respondent asserts, together with the long years that he had endured his penalty, is now sufficient to
enable him to be readmitted to the practice of law.

The respondent's pleas, however, are mere words that are hollow and bereft of any substance. The Court, in
deciding whether the respondent should indeed be readmitted to the practice of law, must be convinced that he had
indeed been reformed; that he had already rid himself of any grossly immoral act which would make him inept for
the practice of law. However, it appears that the respondent, while still legally married to Julieta, is still living with his
paramour - the woman for whose sake he abandoned his family. This only proves to show that the respondent has
not yet learned from his prior misgivings.

That he was supposedly forgiven by his wife and their children would likewise not be sufficient ground to grant
respondent's plea.  It is noted that only his son, Dominador, Jr., signed the affidavit which was supposed to
1âwphi1

evidence the forgiveness bestowed upon the respondent. Thus, with regard to Julieta and the six other children of
the respondent, the claim that they had likewise forgiven the respondent is hearsay. In any case, that the family of
the respondent had forgiven him does not discount the fact that he is still committing a grossly immoral conduct; he
is still living with a woman other than his wife.

Likewise, that the respondent executed a holographic will wherein he bequeaths all his properties to his wife and
their children is quite immaterial and would not be demonstrative that he had indeed changed his ways. Verily,
nothing would stop the respondent from later on executing another last will and testament of a different tenor once
he had been readmitted to the legal profession.

In fine, the Court is not convinced that the respondent had shown remorse over his transgressions and that he had
already changed his ways as would merit his reinstatement to the legal, profession. Time and again the Court has
stressed that the practice of law is not a right but a privilege. It is enjoyed only by those who continue to display
unassailable character.

WHEREFORE, in view of the foregoing premises, the Petition for Reinstatement to the Bar filed by Dominador M.
Narag is hereby DENIED.

DISSENTING OPINION

LEONEN, J.:

"But mercy is above this sceptred sway; It is enthroned in the hearts of kings, It is an attribute to God himself; And
earthly power doth then show likest God's When mercy seasons justice. "

-William Shakespeare, The Merchant of

Venice (Act IV, Scene I)

Mercy tempers justice. It is mercy that assures that our institutions are cloaked with humane compassion
strengthening courts with a mantle of respect and legitimacy.

I disagree with my esteemed colleagues that Dominador M. Narag's plea for judicial clemency (in the form of a
petition for readmission to the practice of law) should be denied. He has been disbarred and unable to practice his
chosen profession for 15 years. He presents an affidavit to support his claim that his wife and children have forgiven

138
him. He alleges that during the time that he was unable to practice, he volunteered his time and services to the
community especially those who were affected by disasters.

Dominador M. Narag is also already 80 years old.

He has suffered enough. I vote to grant his petition and, thus, allow him judicial clemency.

Clemency is not unprecedented.

In Bernardo v. Atty. Mejia,  this court disbarred Atty. Ismael F. Mejia for misappropriating and converting funds,
1

falsifying documents, and issuing insufficiently funded checks. Fifteen years after his disbarment, then 71-year-old
Atty. Mejia filed a petition for readmission to the practice of law, "begging for [this court's] forgiveness."  According to
2

Atty. Mejia, "he ha[d] long repented·and xx x ha[d] suffered enough"  and that readmission to the practice of law
3

would "redeem the indignity that [his children had] suffered due to his disbarment." 4

This court readmitted Atty. Mejia to the practice of law, taking into account Atty. Mejia's rehabilitation and that he
was "already of advanced years."  This court said: x x x While the age of the petitioner and the length of time during
5

which he has endured the ignominy of disbarment are not the sole measure in allowing a petition for reinstatement,
the Court takes cognizance of the rehabilitation of Mejia. Since his disbarment in 1992, no other transgression has
been attributed to him, and he has shown remorse. Obviously, he has learned his lesson from this experience, and
his punishment has lasted long enough. Thus, while the Court is ever mindful of its duty to discipline its erring
officers, it also knows how to show compassion when the penalty imposed has already served its purpose. After all,
penalties, such as disbarment, are imposed not to punish but to correct off enders. 6

In In Re: Quinciano D. Vailoces,  this court disbarred Atty. Vailoces for acknowledging the execution· of a forged last
7

will and testament. Twenty-one years after his disbarment, then 69-year-old Atty. Vailoces filed a petition for
readmission to the practice of law, "[pledging] with all his honor xx x [that] he will surely and consistently conduct
himself honestly, uprightly and worthily."  With favorable endorsements from the Integrated Bar of_ the Philippines,
8

testimonials from the provincial governor of Negros Oriental, and municipal and barrio officials of Bindoy, Negros
Oriental of his "active participation in civic and social undertakings in [his] community,"  this court readmitted Atty.
9

Vailoces to the practice of law.

In In Re: Atty. Tranquilino Rovero,  this court disbarred Atty. Rovero after he had been found guilty of smuggling
10

under Section 2703 of the Revised Administrative Code.  Twenty-eight years after his disbarment, then 71 years-old
11

Atty. Rovero filed a petition for readmission to the practice of law, "[asking] humbly and earnestly of the Court to
[reinstate him] in the Roll of Attorneys 'before crossing the bar to the great beyond."  To prove his "moral
12

rehabilitation and reformation,"  he involved himself in civic and educational organizations and "held high positions
13

of trust in commercial establishments."  With testimonials of his good conduct from members of his community and
14

an absolute and unconditional pardon for his crime granted by President Ramon Magsaysay,  this court readmitted
15

Atty. Rovero to the practice of law. According to this court, Atty. Rovero "ha[d] been sufficiently punished and
disciplined."
16

In this case, 80-year-old Dominador M. Narag filed his petition for readmission to the .practice of law 15 years after
his disbarment. In his petition for readmission, he expressed remorse and asked for complainant Julieta's and their
children's forgiveness. He annexed to his petition a copy of an affidavit executed by his son, Dominador, Jr.,
attesting that complainant Julieta and their children had forgiven him. He also executed a holographic will in favor of
complainant Julieta and their children.

Dominador M. Narag enlisted in the Philippine Air Force Reserve Command and joined in its rescue, relief,
recovery, and other humanitarian missions. He also submitted to this court favorable recommendations,
testimonials, and affidavits attesting to his moral reformation. Among the testimonials given was one from
Archbishop Emeritus Diosdado A. Talamayan of Tuguegarao. In his letter dated November 30, 2011, he testified
that:

Due to my closeness to the couple, I had the opportunity to watch closely their married life. They both worked for the
education of their children. All were happy.  Dr. Narag was a concerned father and a loving husband. He would
1avvphi1

bring his wife along to all important religious, civic, cultural and social events. He made it a point to go with her,
regularly on vacations to other parts of the country.

But an indiscretion on his part led to a broken family. Many times I was called to negotiate, as their spiritual father, in
their family disputes.  The misdeed of Dr. Narag led Mrs. Julieta Narag to file disbarment from Law Practice. On
1âwphi1

June 29, 1998, in an administrative case No. 3405, Dr. Narag was disbarred.

For the past thirteen years, I have been a witness to the remorse, repentance of Dr. Narag.

139
To my joy, on June 10, 2010, acting on the gesture of Dr. Narag to bequeath to Mrs. Julieta Narag and children, all
properties personal or real, all belongings and realizing the sincerity of repentance, Mrs. Narag and children totally
forgave Dr. Dominador Narag.

I sincerely believe Dr. Narag has paid enough for his indiscretion; meantime, for the past thirteen years of
disbarment, he helped the University of Perpetual Help System grow and develop.

As he is in the twilight of his life, now being 78 years and feeling he can still be of service to people, I fully endorse
his humble petition for readmission to the Philippine Bar and the restoration of his name in the Roll of Attorneys with
the Supreme Court. 17

I disagree with the majority that these manifestations are hollow. I also disagree that the affidavit of Dominador M.
Narag's son and the holographic will he presents are not sufficient to prove the forgiveness that has been bestowed
upon him by his family. They are the parties that have been wronged and in so far as the State is concerned, he has
already suffered enough.

This. case does not deal with the question of whether we can impose disciplinary action on acts of immorality by
members of the profession. Had it been at issue, I would think that the forgiveness given by the parties that have
been wronged should have great bearing on our determination. After all, there are limits to the government's
interference into arrangements of intimacies among couples. I fail to grasp the alleged continuing gross immorality
and reprehensiveness committed by a remorseful 80-year-old man who has been forgiven by those he has
emotionally wronged. I do not believe that the law should be read as being too callous and inflexible so as to be
unable to accommodate the unique realities in this case.

What is at issue in this case is whether Dominador M. Narag has suffered enough frqm his acts. This court showed
them compassion and reinstated them as members of the legal profession in many instances where those disbarred
are of old age who suffered "the ignominy of disbarment"  long enough, showed remorse, and conducted
18

themselves beyond reproach after their disbarment.

The legal order has had its pound of flesh from Dominador M. Narag. He has committed a transgression, but we
have exacted enough retribution. The purpose of the penalty has already been achieved. He is in the twilight of his
years when he is at his best to reflect on what his life has been. He is armed by the forgiveness of his family, and he
is visited by remorse. In my view, not granting him the mitigation he asks for is a failure of human compassion.

For these reasons, I vote to grant him his plea and to reinstate him as a lawyer in good standing.

140
 EN BANC

March 18, 2014

A.M. No. 07-9-454-RTC

RE: JUDICIAL AUDIT CONDUCTED IN THE REGIONAL TRIAL COURT, BRANCH 20, CAGAYAN DE ORO
CITY, MISAMIS ORIENTAL.

A.M. No. 05-2-108-RTC

REQUEST OF JUDGE GREGORIO D. PANTANOSAS, JR., REGIONAL TRIAL COURT, BRANCH20,

CAGAYANDE ORO CITY, FOR EXTENSION OF TIME TO DECIDE CRIMINAL CASES NOS. 92-1935 & 26
OTHERS.

DECISION

PERCURIAM:

A Judge who fails to decide cases and related matters within the periods prescribed by law is guilty of gross
inefficiency, and may be punished with dismissal from the service even for the first offense, unless he has been
meanwhile separated from the service, in which instance he may be imposed the stiffest of fines. For falsely
rendering certificates of service to the effect that he did not have any unresolved cases and matters pending in his
court's docket, he is also guilty of dishonesty, another act of gross misconduct, for which he should be sanctioned
with dismissal from the service even for the first offense. But his intervening separation from the service leaves the
only proper penalty to be the forfeiture of his entire retirement benefits, except his earned leaves.

Antecedents

A.M. No. 07-9-454-RTC

From February 21 to February 24, 2005, an Audit Team dispatched by the Office of the Court Administrator (OCA)
conducted a judicial audit of Branch 20 of the Regional Trial Court in Cagayan de Oro City, presided by respondent
Judge Gregorio D. Pantanosas, Jr. The report of the Audit Team revealed that as of the audit dates, Branch 20 had
a total caseload of 599 cases consisting of 256 criminal cases and 343 civil cases. 1

Of the 256 criminal cases, the Audit Team found that: (a) Branch 20 failed to take any action on three criminal cases
from the time of their filing; (b) no further action or setting was taken in 41 criminal cases; (c) 14 criminal cases had
pending incidents already submitted for resolution but remained unresolved despite the lapse of the reglementary
period to resolve; and (d) 28 criminal cases submitted for decision remained unresolved despite the lapse of the
reglementary period to decide.

As to the 343 civil cases, the Audit Team uncovered that: (a) no action was taken on 11 cases from the time of their
filing; (b) no further action or setting was taken in 54 cases for a considerable length of time; (c) 75 cases had
pending incidents that remained unresolved despite the lapse of the reglementary period to resolve; and (d) 56
cases submitted for decision remained unresolved despite the lapse of the reglementary period to decide.

141
The Audit Team discovered that: (a) Branch 20 ordered the forfeiture of the bonds of the accused in 10 criminal
cases; (b) the latest Monthly Report of Cases submitted by Branch 20 to the Court Management Office was that for
January 2004; despite reminders, the Presiding Judge failed to submit the required monthly reports; (c) no
certificates of arraignment were attached to the records of criminal cases where the accused had entered a plea; (d)
the criminal and civil docket books were not updated; and (e) the stenographic notes in Criminal Case No. 4819
entitled People v. Obita. et al., an appealed case for theft, were not transcribed because of the demise of court
stenographer Josephine Casino and the retirement of court stenographer Valerio Piscos of the Municipal Circuit
Trial Court in Jasaan.

Based on the audit report, then Deputy Court Administrator Christopher Lock issued a memorandum directing Judge
Pantanosas, Jr. to: 2

1.Take appropriate action on the cases without any action taken from the time of their filing, as well as those
cases without further setting or action for a considerable length of time;

2.Resolve within the reglementary period the pending incidents in the criminal and civil cases, and submit
copies of the resolutions to the OCAD within 10 days from their resolution;

3.Explain within ten days from notice his failure to resolve the pending incidents in 14 criminal and 75 civil
cases within the reglementary period, and resolve the same and submit copies of the resolutions to the
OCAD within ten days from their resolution;

4.Decide within the reglementary period the civil and criminal cases submitted for decision and submit
copies of the decisions to the OCAD within ten days from their rendition;

5.Explain within ten days from notice his failure to decide within the reglementary period the 28 criminal
cases and 56 civil cases mentioned in the audit report.

6.Take appropriate action on all untranscribed stenographic notes of all cases particularly those submitted
for decision; and

7.Explain within fifteen days from receipt his failure to submit the required Monthly Report of Cases starting
from February 2004 up to April 11, 2005 and submit the same within 30 days from receipt, otherwise, the
Office will Recommend to the Chief Justice the withholding of his salaries pending compliance with the said
administrative circular.

Another memorandum was sent to Atty. Taumaturgo U. Macabinlar, the Branch Clerk of Court of Branch 20,
ordering him to:

1.Apprise the Acting Presiding Judge from time to time of cases submitted for resolution/decision and those
cases that require immediate action;

2.Attach the corresponding Certificate of Arraignment on all criminal case folders where the accused has
entered a plea, duly signed by both the accused and his/her counsel;

3.Order and Supervise the updating of the criminal and civil docket books;

4.Explain within fifteen (15) days from receipt his failure to submit the required Monthly Report of Cases
starting from February 2004 up to the present pursuant to Administrative Circular No. 4-2004 dated 4
February 2004 which states that the Monthly Report of cases must be filed with, or sent by registered mail to
the Supreme Court on or before the tenth (10th) calendar day of the succeeding month and SUBMIT the
same within 30 days from receipt, otherwise, the Office will Recommend to the Chief Justice the withholding
of his salaries pending full compliance with the said administrative circular; and

5.Inform this Court, through the Court Management Office, within fifteen days from receipt whether the
judgment on the bond on the 10 criminal cases mentioned above had been duly executed and submit copies
of the order and writ of execution and report of satisfaction of judgment thereon. 3

Another memorandum was issued directing Jean Hernandez and Jacqueline Astique, Clerks-in-Charge of the
criminal and civil docket books, respectively, to update the entries in their respective docket books and to submit
their compliance within sixty days from notice, with a warning that continued failure to do so would be dealt with
more severely. 4

In his compliance,  to decide or resolve the following reasons:

5

Judge Pantanosas, Jr. explained that he had failed cases within the reglementary period for the
142
 (a) Criminal Case Nos. 948, 1863, 3418 and 1396, and Civil Case Nos. 3673, 3672 and 13 other cases had
incomplete transcripts of stenographic notes (TSN); and the stenographers concerned had already retired
from the service and their whereabouts were unknown;

(b)Criminal Case No. 2208 was an inherited case submitted for decision before then Judge Alejandro Velez;

(c)He was granted an extension of 90 days in 13 criminal cases and 11 civil cases pursuant to the
Resolution promulgated on March 30, 2005 in A.M. No. 05-2-108-RTC; 6

(d)27 civil cases had no Commissioner's Report.

As to the delayed submission of the Monthly Reports of Cases, Judge Pantanosas, Jr. explained that the person in
charge had inadvertently overlooked its timely submission, but that the report was already submitted to the proper
office of the OCA on April 14, 2005. He pleaded for leniency for his delayed resolution of cases due to his heavy
caseload.

Atty. Macabinlar also submitted his compliance,  in which he stated that the delay in the submission of monthly
7

reports of cases had been caused by the difficulty of using the new form; and that he had failed to remind the clerks-
in-charge of the civil and criminal cases to prepare their reports on time due to the volume of work as well as due to
inadvertence. He apologized for the delay and reported the latest action of the court regarding the criminal cases
with forfeited bonds.

Hernandez and Astique did not submit any compliance.

The OCA did not consider the foregoing explanations as sufficient compliance with its directives. Hence, it issued a
second set of memoranda dated May 5, 2006  reiterating the instructions of the first memorandum.
8

In compliance with the second memorandum, Judge Pantanosas, Jr. informed the OCA by letter dated September
1, 2006 that he had rendered his decisions in 18 cases; resolved the pending incidents or motions in 63 cases; and
acted on 52 cases having no further actions or settings after the lapse of a considerable period of time, and on eight
cases with no initial action since the time of filing. 9

In separate letters dated August 15, 2006 and January 12, 2007,  Atty. Macabinlar informed the OCA that: (a) he
10

already apprised Judge Pantanosas, Jr. of the cases submitted for decision, the cases with pending matters or
incidents for resolution, and the cases requiring immediate action;

(b) he already attached the required certificates of arraignment to the records after the accused were arraigned; (c)
he already updated the submission of the Monthly Reports of Cases by submitting such report for the month of
November 2006; and (d) he also submitted the copy of the latest order of the court concerning the list of cases with
forfeited bonds.

Hernandez and Astique submitted their respective letters-compliance dated August 22, 2006 and January 26,
2007,  stating that they had already updated the docket books assigned to them immediately upon receipt of the
11

first memorandum but that they had failed to notify the OCA; and that they apologized for the delay of their
responses. The letters-compliance were supported by certifications dated August 22, 2006 and January 26, 2007
issued by Atty. Macabinlar. 12

Accordingly, the OCA treated the matter concerning Hernandez and Astique as closed and terminated due to their
having complied with its directives.

On February 20, 2007, the OCA issued a third memorandum directing Judge Pantanosas, Jr. and Atty. Macabinlar
to fully comply with the directives of the previous memoranda. 13

Judge Pantanosas, Jr. and Atty. Macabinlar submitted their third compliance.  Nevertheless, Judge Pantanosas, Jr.
14

still did not take appropriate action on a criminal case and on four civil cases with no initial actions from the time of
their filing; to further act in two criminal and 22 civil cases; to resolve motions and incidents in four criminal and 24
civil cases; and to decide 17 criminal and 31 civil cases.

Summarized hereunder are the cases decided, resolved or appropriately acted upon by Judge Pantanosas, Jr., to
wit:
15

Status/St First Complia 2nd Complia 3rd Complia Total no.

age of Memo nce Memo nce Memo nce of cases
Proceedi . 05/02/ 02/20/ which
ngs 04/04/ remain

143
 05 06 07 undecid
ed/
unresolv
ed/
unacted

Submitte 90 16
None 90 18 72 12 60
d for
Decision

Submitte 103 17
None 103 63 40 13 27
d for
Resolutio
n

No further 95 None 95 52 43 12 31
action
setting/
proceedin
g

No initial 14 None 14 8 6 1 5
action
taken

Of the three memoranda requiring Judge Pantanosas, Jr. to comply, he submitted the appropriate compliance only
after receiving the second and third memoranda.

Results/Findings of the Follow-Up Audit

On January 24-26, 2007, the Second Audit Team conducted a follow- up audit, and made the following findings: 18

(a)The total number of cases submitted for decision was reduced from 124 to 115 cases;

(b)The total number of cases with pending matter or incident for resolution was reduced from 106 to 100
cases; and

(c)The total number of cases with no further action/setting/proceeding was reduced from 101 to 100 cases;

(d)39 cases referred to the Branch Clerk of Court for ex parte hearing had no Commissioner's Report. 19

(e)There were five criminal cases that were either in the pre- trial or trial stage, or were already submitted for
decision without conducting an arraignment of the accused. 20

Of the 115 cases that Judge Pantanosas, Jr. left undecided: (a) 60 were found to be submitted for decision by the
First Audit Team; (b) 19 were considered inherited cases; (c) some of the inherited cases had no transcripts of
stenographic notes; and (d) 39 had no Commissioner's Reports. Of the 100 cases with pending matters or incidents
for resolution, the First Audit Team found 25 of them unresolved.

Despite prior directives from the OCA, Judge Pantanosas, Jr. did not take proper action on the cases with
untranscribed stenographic notes, particularly those already submitted for decision.

The Second Audit Team further found that there were more motions or pending incidents that had remained
unresolved despite the lapse of the reglementary period; and that there were more cases that had remained
unacted upon despite the lapse of a considerable length of time. 21

Status after Judge Pantanosas' Resignation

On March 29, 2007, Judge Pantanosas, Jr. filed his certificate of candidacy for the position of Vice Governor of the
Province of Misamis Oriental, and was thereby deemed automatically resigned from the Judiciary. As of the date of

144
his resignation, all of the cases submitted for decision and all of the cases with pending matters or incidents for
resolution were already beyond the reglementary period to decide or resolve.

Clearly, prior to his resignation, Judge Pantanosas, Jr. did not: (a) decide 115 cases; (b) resolve pending matters or
incidents in 100 cases; (c) appropriately act on 100 cases with no further action or setting after the lapse of a
considerable length of time; (d) appropriately act on 45 criminal cases with warrants of arrest but without return of
service; and (e) appropriately act on five criminal cases that had proceeded to pre-trial or trial proper without
conducting an arraignment of the accused. 22

A.M. No. 05-2-108-RTC

On January 20, 2005, or a month prior to the first judicial audit, Judge Pantanosas, Jr. filed in the Office of then
Senior Deputy Court Administrator Zenaida N. Elepafio a request for an extension of 90 days within which to decide
14 criminal cases and 11 civil cases that had been submitted for decision as early as in the period from October
2001 until October 2004.  His request was docketed as Administrative Matter No. 05-2-108-RTC.
23

Pursuant to the OCA's recommendation,  the Court resolved on March 30, 2005 to:
24 25

a)NOTE the said letter of Judge Gregorio D. Pantanosas, Jr.;

b)GRANT Judge Pantanosas, Jr. a period of ninety (90) days from receipt of notice hereof within which to
decide Criminal Cases Nos. 92- 1935, 93-2417, 94-448, 94-936, 95-541, 95-620, 96-114, 96-582, 96-583,
97-585, 97-586, 97-13116, 97-1646, 99-893, 00-973, 99-1003, and Civil Cases Nos. 93-605, 92-009, 00-
051, 20-017, 91-398, 98-553, 98-652, 95- 515, 00-124, 99-557 and 98-266;

c)REMIND Judge Pantanosas, Jr. to state the ground/s for his request for extension of time to decide cases;

d)DIRECT Judge Pantanosas, Jr. to EXPLAIN within ten (10) days from receipt of notice why the
abovementioned cases which have been submitted for decision as early as October 2001 were not resolved
within the reglementary period; and why Criminal Cases Nos. 95-541 and 97-1646 as well as Civil Cases
Nos.98-553 and 00-124 were not reflected in the "List of Cases submitted for decision but not yet decided at
the end of the month";

e)DIRECT Judge Pantanosas, Jr. to SUBMIT to the Court, through the Office of the Court Administrator, a
copy each of his decisions in the aforementioned cases within five (5) days from rendition thereof;

f) DIRECT Atty. Taumaturgo U. Macabinlar, Branch Clerk of Court, Regional Trial Court, Branch 20,
Cagayan de Oro City to EXPLAIN within ten (10) days from receipt of notice why Criminal Cases Nos. 95-
541 and 97-1646 as well as Civil Cases Nos. 98-553 and 00-124 were not reflected in the monthly report of
cases particularly from January 2004 and the prior months, as among the cases yet to be decided.

In his explanation,  Atty. Macabinlar wrote: (a) that in Criminal Case No. 95-541, Branch 20 had issued an order on
26

August 2, 2002  directing the stenographers to transcribe their notes and to attach the transcripts to the records;
27

that it was only on February 20, 2004 when the case was ordered submitted for decision upon the submission of the
stenographic notes; and that the case was reported as submitted for decision only in the monthly report for
February, 2004; (b) that Criminal Case No. 97-1646 was reported as submitted for decision only in the monthly
report of August 30, 2004, because the Private Prosecutor submitted his memorandum only on July 30, 2004;  (c) 28

that Civil Case No. 98-553 was the incorrect docket number of the case pending decision; that the correct docket
number was Civil Case No. 98-533; that Judge Pantanosas, Jr. had erroneously indicated the docket number in his
request for a 90-day extension to resolve several civil and criminal cases; that Civil Case No. 98-533 was included
in the April 2002 monthly report among the cases submitted for decision; and (d) that Civil Case No. 2000-124 was
already reflected in the monthly report as of May, 2003, but was inadvertently reported as Civil Case No. 2000-120;
he would rectify the error in the February 2004 report.

On his part, Atty. Macabinlar begged the indulgence of the Court for his inadvertence in reporting the incorrect
docket numbers, and promised to double-check the docket numbers of all cases reported in the monthly reports in
order to avoid similar mistakes in the future.

In his explanation,  Judge Pantanosas, Jr. stated that he did not resolve the cases submitted for decision because
29

of his heavy case load, which included the cases inherited from the former presiding judge consisting of more than
150 cases submitted for decision.

On June 27, 2005, the Court resolved to refer this administrative matter to the OCA for evaluation, report and
recommendation. 30

145
Pursuant to the OCA's recommendation,  the Court consolidated Administrative Matter No. 05-2-108-RTC with A.M.
31

No. 07-9-454-RTC on November 26, 2007 because the cases subject of Judge Pantanosas, Jr. 's request for
extension to decide were also among the cases subject of the judicial audit and physical inventory conducted on
Branch 20 for the past two years. 32

On February 4, 2008, Atty. Macabinlar submitted to the OCA copies of the Commissioner's Reports  in the 14 cases
33

that had been referred to him for ex parte hearing.  He declared that he no longer needed to submit the
34

Commissioner's Reports in four land registration cases cited in the OCA's directive  because said cases had
35

already been decided.  Thus, he still failed to fully comply with the directive to him, because he did not submit his
36

report on the remaining 21 cases referred to him for ex parte hearing. He apologized for his inadvertence and
explained that he had failed to promptly submit the Commissioner's Reports because the records of the cases had
been placed in the archives after the ex parte hearings.

The OCA's Recommendation

In his memorandum dated August 15, 2007,  Court Administrator Lock recommended as follows:
37 38

1.Judge Gregorio G. Pantanosas, Jr., former Presiding Judge, Regional Trial Court, Branch 20, Cagayan De Oro
City, be found GUILTY of gross inefficiency and gross misconduct and that he be imposed a FINE in an amount
equivalent to the salary and benefits for six (6) months to be deducted from the retirement benefits due him;

xx xx

4.Atty. Taumaturgo U. Macabinlar, Branch Clerk of Court, RTC, Branch 20, Cagayan de Oro City, be:

(a) Found GUILTY of inefficiency and incompetence and that he be imposed a penalty of SUSPENSION
from office for three (3) months with a STERN WARNING that a repetit he future shall be severely dealt with;

(b)DIRECTED to: (1) EXPLAIN in writing within fifteen (15) days from receipt of notice why he failed to
submit the Commissioner's Report in the 39 cases listed under Table 6 above;

(2)to SUBMIT the Commissioner's Report in the 39 cases listed under Table 6 above within thirty
(30) days from receipt of notice and to furnish the Honorable Court through this Office a copy of the
said report, immediately upon his assumption to office after service of suspension;

(c)RELIEVED from being appointed as Commissioner to receive ex- parte evidence until the submission of
all Commissioner's Report in all cases where he was deputized as such.

The OCA found that Judge Pantanosas, Jr.'s failure to decide cases within the reglementary period constituted
gross inefficiency that should be sanctioned; that despite the prior request for extension of time to decide some of
the pending cases, Judge Pantanosas, Jr. still did not resolve them within the extended period; and that Judge
Pantanosas, Jr. also did not take appropriate action to secure the transcripts of stenographic notes in some of the
inherited cases.

Aside from gross inefficiency, the OCA found Judge Pantanosas, Jr. guilty of dishonesty amounting to gross
misconduct for continuing to collect his salary and other benefits based on false certificates of service that did not
reflect the actual number of his undecided cases. A careful reading of his certificates of service  for the months of
39

January 2007 to March 2007, and from February 2006 to December 2006 revealed that he stated therein that he
had only around 37 to 41 undecided cases, when he was aware that he had 60 undecided cases during such
periods of time because he had failed to fully comply with the memoranda of the OCA dated April 4, 2005, May 2,
2006 and February 20, 2007.

The OCA concluded that pursuant to Administrative Circular No. 04- 2004 dated February 4, 2004, the monthly
reports of cases must be filed with or sent by registered mail to the Supreme Court on or before the 1oth calendar
day of the succeeding month; that Atty. Macabinlar had been consistently late in the submission of monthly reports
of cases; that his lapses in the timely submission of monthly reports of cases and his failure to fully implement the
writs of execution of forfeited bonds in some criminal cases had amounted to inefficiency and incompetence in the
performance of his official duties; that under Civil Service Rules, inefficiency and incompetence in the performance
of official duty was a grave offense with an imposable penalty of suspension of six months and one day to one year
for the first offense, and dismissal from the service for the second offense.

However, the OCA considered Atty. Macabinlar's partial compliance with the directives to him, and the fact that this
was his first offense as mitigating; and recommended as penalty his suspension from office for three months with a
stem warning that a repetition of similar acts would be severely dealt with.

146
Due to the Second Audit Team's finding that he had not submitted the Commissioner's Reports in 39 cases where
he had received evidence ex- parte as commissioner (which by then had already been reduced to 21 cases), Atty.
Macabinlar should be required to submit the reports and to explain why he had not submitted them despite the lapse
of a considerable time. In the meantime that he was preparing and completing the submission of all he
Commissioner's Reports, he should not be deputized as commissioner to receive evidence ex parte.

The OCA's Modified Recommendation

On April 11, 2008, Court Administrator Elepafi.o modified the OCA's recommendations, as follows:

1.Judge Gregorio G. Pantanosas, Jr. former Presiding Judge, Regional Trial Court, Branch 20, Cagayan De
Oro City be found Guilty of gross inefficiency and gross misconduct and that he be FINED an amount
equivalent to his salary and benefits (including SAJJ, RATA, JDF and Extraordinary Allowance) for six (6)
months to be deducted from the retirement benefits due him to serve as a strong deterrent to judges who
may wish to thwart the coercive powers of this Court by filing a certificate of candidacy; and

2.Atty. Taumaturgo U. Macabinlar, Branch Clerk of Court, RTC, Branch 20, Cagayan de Oro City, be found
GUILTY of inefficiency and incompetence and FINED the amount of FIFTY THOUSAND PESOS
(P50,000.00) with a STERN WARNING that a repetition of similar act in the future shall be dealt with more
severely. It is likewise recommended that he be RELIEVED from being appointed as Commissioner to
receive ex parte evidence until the submission of Comissioner' s Report in all cases where he was deputized
as such.

Ruling

The Court agrees with the findings of the OCA.

Liability of Judge Pantanosas, Jr.

The speedy disposition of cases in our courts is a primary aim of the Judiciary, so that the ends of justice may not
be compromised and the Judiciary will be true to its commitment to provide litigants their constitutional right to a
speedy trial and a speedy disposition of their cases.  The Code of Judicial Conduct mandates that a judge
40

administers justice impartially and without delay.  Under the New Code of Judicial Conduct for the Philippine
41

Judiciary,  a judge is obliged to perform all judicial duties, including the delivery of reserved decisions, efficiently,
42

fairly and with reasonable promptness.  To comply with his obligation, he must display such interest in his office
43

which stops not at the minimum of the day's labors fixed by law, and which ceases not at the expiration of official
seasons, but which proceeds diligently on holidays and by artificial light and even into vacation periods. Only
thereby can he do his part in the great work of speeding up the administration of justice and rehabilitating the
Judiciary in the estimation of the people.  Any unjustified failure to decide a case within the reglementary period
44

constitutes gross inefficiency that deserves the imposition of the proper administrative sanctions. Hence, decision-
making is his primordial and most important duty as a member of the Bench.

Based on the audit reports of the OCA's Audit Teams, Judge Pantanosas, Jr. did not live up to these tenets.
Accordingly, he was administratively liable for gross inefficiency.

Yet, Judge Pantanosas, Jr. seeks to avoid liability by attributing part of the delay in deciding the pending cases to
the absence of the transcripts of stenographic notes.

The excuse interposed by Judge Pantanosas, Jr. is unacceptable. The Court has ruled in Office of the Court
Administrator v. Judge Aquino  that the incompleteness of the transcripts of stenographic notes was not a valid
45

reason for not deciding cases within the extended period granted by the Court, for, precisely, judges have been
instructed to take notes of the salient portions of their hearings, and to proceed in the preparation of their decisions
without waiting for the transcripts.  To let judges await the transcription of the stenographic notes before they could
46

render their decisions would cause undue delays because judges could then easily find justifications for failing to
comply with the mandatory period to decide cases. Verily, the proper and efficient management of his court is the
responsibility of every presiding judge - he alone is directly responsible for the proper discharge of official functions. 47

Judge Pantanosas, Jr. could not also cite the incompleteness of the TSNs as an excuse for not deciding the cases
inherited from a predecessor judge. This is because it was entirely within his power as the incumbent presiding
judge to compel the stenographic reporters concerned to complete their transcripts, or face sanctions. He could
have also resorted to other ways of seeing to the reproduction of testimonies should the incompleteness ever
prevent the performance of his primary responsibility to resolve the cases. But it is clear to us that he did not exert
his best effort towards that end. Consequently, he had no one else to blame but himself.

Under Rule 140 of the Rules of Court, as amended, undue delay in rendering a decision is classified as a less
serious charge that carries with it the penalty of suspension from office without salary and other benefits for not less

147
than one nor more than three months, or a fine of more than Pl 0,000.00 but not exceeding P20,000.00. However,
the offense of Judge Pantanosas, Jr. did not involve only a single but several unrendered decisions. Hence, his
offense was a compounded one worthy of the highest sanction.

We are much dismayed to uncover that in addition to his gross inefficiency, Judge Pantanosas, Jr. was guilty of a
grave misconduct pursuant to Section 8, Rule 140 of the Rules of Court, as amended,  by submitting false
48

certificates of service in which he certified that he did not have any unresolved cases and matters pending in his
court) docket. Thereby, he defrauded the Government. The certificates of service were not only the means to ensure
his paycheck but were also the instruments by which the Court could fulfill the constitutional mandate of the people's
right to a speedy disposition of cases. His dishonesty - because it badly reflected on his integrity as a member of the
Judiciary and seriously undermined his service to our country and people - merited for him the very high penalty of
suspension without pay for a period of six months, similar to what the Court prescribed for a judge who did not
timely decide an election protest for eight months and submitted false certificates of service, in addition to being
found guilty of habitual absenteeism. 49

This is not the first time that Judge Pantanosas, Jr. is administratively sanctioned. In Uy v. Judge Pantanosas,
Jr., the Court already declared him guilty of gross inefficiency for the undue delay in the resolution of Civil Case No.
50

2002-241,  and fined him Pl0,000.00 with a warning that a repetition of a similar act would be dealt with more
51

severely.

Given all the circumstances, Judge Pantanosas, Jr. was guilty of two grave offenses of compounded gross
inefficiency and dishonesty. With the aggravating circumstance of his having been already severely sanctioned for
the similar offense of failure to decide a case within the reglementary period, the highest penalty is warranted. That
penalty would be dismissal from the service had he still been in the active service. But the filing on March 29, 2007
of his certificate of candidacy to run for public office automatically deemed him resigned from the service.
Accordingly, the Court sanctions him properly by forfeiting all his retirement benefits, except earned leave credits.

Liability of Atty. Macabinlar

The Court adopts the recommendation of the OCA finding Atty. Macabinlar guilty of gross inefficiency and
incompetence. Branch Clerks of Court are officers who perform vital functions in the prompt and efficient
administration of justice. Their office is at the core of the adjudicative and administrative orders, processes and
concerns. One of their most important responsibilities is to conduct monthly physical inventory of cases. It is also
their duty to assist in the proper management of the calendar of the court and in all matters that do not involve
discretion or judgment that is the exclusive province of their judges. As such, they are required to be persons of
competence, honesty and probity, and are not permitted to be lackadaisical on the job. 52

This finding against Atty. Macabinlar serves to underscore the value of a Branch Clerk of Court like him in the
organization of the Regional Trial Courts. Atty. Macabinlar did not tender any satisfactory explanation for his
consistent failure to promptly submit the monthly report of cases, and for his failure to timely accomplish the
Commissioner's Reports in the 39 cases assigned to him for ex parte reception of evidence. He is administratively
liable. He ought to recognize that the great responsibility of ensuring that delays in the disposition of cases be kept
to a minimum rested not only on the judge but also on him as the Branch Clerk of Court. 53

The modified recommendation by then Court Administrator Elepafio for the imposition of a µso,000.00 fine is too
harsh, however, for it would in effect require Atty. Macabinlar to continue rendering service as the Branch Clerk of
Court without compensation until he would have fully paid the fine out of his salary. The fact that the offense was the
first for him is a mitigating circumstance in his favor. As such, his suspension of one month without pay, plus a
severe warning against a repetition, is sufficient.

WHEREFORE, the Court:

1. FINDS Judge GREGORIO D. PANTANOSAS, JR., retired Presiding Judge of Branch 20 of the Regional
Trial Court in Cagayan de Oro City, GUILTY of TWO COUNTS OF GROSS MISCONDUCT; and
DECLARES his retirement benefits FORFEITED, without prejudice to the payment to him of any balance of
his earned leave credits; and

2. PRONOUNCES Atty. TAUMATURGO U. MACABINLAR, Branch Clerk of Court, Branch 20 of the

Regional Trial Court in Cagayan de Oro GUILTY of INEFFICIENCY AND INCOMPETENC him from office
for one month without pay with a STERN WARNING that a repetition of the offense or similar acts shall be
dealt with more severely.

After the service of his suspension, ATTY. MACABINLAR shall submit the Commissioner's Reports respecting the
21 remaining cases enumerated under Table 6 of OCA Memorandum dated April 11, 2008, and to furnish the Office
of the Court Administrator with copies of the Commissioner's Reports immediately upon his re-assumption of office
following the service of his suspension. He shall be disqualified from serving as a Commissioner to receive evidence

148
ex parte until the submission of all Commissioner's Reports in the cases for which he had been so authorized to
receive evidence.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Baguio City

EN BANC

G.R. No. 180016               April 29, 2014

LITO CORPUZ, Petitioner, 
vs.
PEOPLE OF THE PHILIPPINES, Respondent.

DECISION

PERALTA, J.:

This is to resolve the Petition for Review on Certiorari, under Rule 45 of the Rules of Court, dated November 5,
2007, of petitioner Lito Corpuz (petitioner), seeking to reverse and set aside the Decision  dated March 22, 2007 and
1

Resolution  dated September 5, 2007 of the Court of Appeals (CA), which affirmed with modification the
2

Decision  dated July 30, 2004 of the Regional Trial Court (RTC), Branch 46, San Fernando City, finding the
3

petitioner guilty beyond reasonable doubt of the crime of Estafa under Article 315, paragraph (1), sub-paragraph (b)
of the Revised Penal Code.

The antecedent facts follow.

Private complainant Danilo Tangcoy and petitioner met at the Admiral Royale Casino in Olongapo City sometime in
1990. Private complainant was then engaged in the business of lending money to casino players and, upon hearing
that the former had some pieces of jewelry for sale, petitioner approached him on May 2, 1991 at the same casino
and offered to sell the said pieces of jewelry on commission basis. Private complainant agreed, and as a
consequence, he turned over to petitioner the following items: an 18k diamond ring for men; a woman's bracelet;
one (1) men's necklace and another men's bracelet, with an aggregate value of ₱98,000.00, as evidenced by a
receipt of even date. They both agreed that petitioner shall remit the proceeds of the sale, and/or, if unsold, to return
the same items, within a period of 60 days. The period expired without petitioner remitting the proceeds of the sale
or returning the pieces of jewelry. When private complainant was able to meet petitioner, the latter promised the
former that he will pay the value of the said items entrusted to him, but to no avail.

Thus, an Information was filed against petitioner for the crime of estafa, which reads as follows:

That on or about the fifth (5th) day of July 1991, in the City of Olongapo, Philippines, and within the jurisdiction of
this Honorable Court, the above-named accused, after having received from one Danilo Tangcoy, one (1) men's
diamond ring, 18k, worth ₱45,000.00; one (1) three-baht men's bracelet, 22k, worth ₱25,000.00; one (1) two-baht
ladies' bracelet, 22k, worth ₱12,000.00, or in the total amount of Ninety-Eight Thousand Pesos (₱98,000.00),

149
Philippine currency, under expressed obligation on the part of said accused to remit the proceeds of the sale of the
said items or to return the same, if not sold, said accused, once in possession of the said items, with intent to
defraud, and with unfaithfulness and abuse of confidence, and far from complying with his aforestated obligation, did
then and there wilfully, unlawfully and feloniously misappropriate, misapply and convert to his own personal use and
benefit the aforesaid jewelries (sic) or the proceeds of the sale thereof, and despite repeated demands, the accused
failed and refused to return the said items or to remit the amount of Ninety- Eight Thousand Pesos (₱98,000.00),
Philippine currency, to the damage and prejudice of said Danilo Tangcoy in the aforementioned amount.

CONTRARY TO LAW.

On January 28, 1992, petitioner, with the assistance of his counsel, entered a plea of not guilty. Thereafter, trial on
the merits ensued.

The prosecution, to prove the above-stated facts, presented the lone testimony of Danilo Tangcoy. On the other
hand, the defense presented the lone testimony of petitioner, which can be summarized, as follows:

Petitioner and private complainant were collecting agents of Antonio Balajadia, who is engaged in the financing
business of extending loans to Base employees. For every collection made, they earn a commission. Petitioner
denied having transacted any business with private complainant.

However, he admitted obtaining a loan from Balajadia sometime in 1989 for which he was made to sign a blank
receipt. He claimed that the same receipt was then dated May 2, 1991 and used as evidence against him for the
supposed agreement to sell the subject pieces of jewelry, which he did not even see.

After trial, the RTC found petitioner guilty beyond reasonable doubt of the crime charged in the Information. The
dispositive portion of the decision states:

WHEREFORE, finding accused LITO CORPUZ GUILTY beyond reasonable doubt of the felony of Estafa under
Article 315, paragraph one (1), subparagraph (b) of the Revised Penal Code;

there being no offsetting generic aggravating nor ordinary mitigating circumstance/s to vary the penalty imposable;

accordingly, the accused is hereby sentenced to suffer the penalty of deprivation of liberty consisting of an
imprisonment under the Indeterminate Sentence Law of FOUR (4) YEARS AND TWO (2) MONTHS of Prision
Correccional in its medium period AS MINIMUM, to FOURTEEN (14) YEARS AND EIGHT (8) MONTHS of
Reclusion Temporal in its minimum period AS MAXIMUM; to indemnify private complainant Danilo Tangcoy the
amount of ₱98,000.00 as actual damages, and to pay the costs of suit.

SO ORDERED.

The case was elevated to the CA, however, the latter denied the appeal of petitioner and affirmed the decision of
the RTC, thus:

WHEREFORE, the instant appeal is DENIED. The assailed Judgment dated July 30, 2004 of the RTC of San
Fernando City (P), Branch 46, is hereby AFFIRMED with MODIFICATION on the imposable prison term, such that
accused-appellant shall suffer the indeterminate penalty of 4 years and 2 months of prision correccional, as
minimum, to 8 years of prision mayor, as maximum, plus 1 year for each additional ₱10,000.00, or a total of 7 years.
The rest of the decision stands.

SO ORDERED.

Petitioner, after the CA denied his motion for reconsideration, filed with this Court the present petition stating the
following grounds:

A. THE HONORABLE COURT OF APPEALS ERRED IN CONFIRMING THE ADMISSION AND APPRECIATION
BY THE LOWER COURT OF PROSECUTION EVIDENCE, INCLUDING ITS EXHIBITS, WHICH ARE MERE
MACHINE COPIES, AS THIS VIOLATES THE BEST EVIDENCE RULE;

B. THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE LOWER COURT'S FINDING THAT THE
CRIMINAL INFORMATION FOR ESTAFA WAS NOT FATALLY DEFECTIVE ALTHOUGH THE SAME DID NOT
CHARGE THE OFFENSE UNDER ARTICLE 315 (1) (B) OF THE REVISED PENAL CODE IN THAT -

1. THE INFORMATION DID NOT FIX A PERIOD WITHIN WHICH THE SUBJECT [PIECES OF] JEWELRY
SHOULD BE RETURNED, IF UNSOLD, OR THE MONEY TO BE REMITTED, IF SOLD;

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 2. THE DATE OF THE OCCURRENCE OF THE CRIME ALLEGED IN THE INFORMATION AS OF 05
JULY 1991 WAS MATERIALLY DIFFERENT FROM THE ONE TESTIFIED TO BY THE PRIVATE
COMPLAINANT WHICH WAS 02 MAY 1991;

C. THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE LOWER COURT'S FINDING THAT
DEMAND TO RETURN THE SUBJECT [PIECES OF] JEWELRY, IF UNSOLD, OR REMIT THE PROCEEDS, IF
SOLD – AN ELEMENT OF THE OFFENSE – WAS PROVED;

D. THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE LOWER COURT'S FINDING THAT
THE PROSECUTION'S CASE WAS PROVEN BEYOND REASONABLE DOUBT ALTHOUGH -

1. THE PRIVATE COMPLAINANT TESTIFIED ON TWO (2) VERSIONS OF THE INCIDENT;

2. THE VERSION OF THE PETITIONER – ACCUSED IS MORE STRAIGHTFORWARD AND LOGICAL,

CONSISTENT WITH HUMAN EXPERIENCE;

3. THE EQUIPOISE RULE WAS NOT APPRECIATED IN AND APPLIED TO THIS CASE;

4. PENAL STATUTES ARE STRICTLY CONSTRUED AGAINST THE STATE.

In its Comment dated May 5, 2008, the Office of the Solicitor General (OSG) stated the following counter-
arguments:

The exhibits were properly admitted inasmuch as petitioner failed to object to their admissibility.

The information was not defective inasmuch as it sufficiently established the designation of the offense and the acts
complained of.

The prosecution sufficiently established all the elements of the crime charged.

This Court finds the present petition devoid of any merit.

The factual findings of the appellate court generally are conclusive, and carry even more weight when said court
affirms the findings of the trial court, absent any showing that the findings are totally devoid of support in the
records, or that they are so glaringly erroneous as to constitute grave abuse of discretion.  Petitioner is of the
4

opinion that the CA erred in affirming the factual findings of the trial court. He now comes to this Court raising both
procedural and substantive issues.

According to petitioner, the CA erred in affirming the ruling of the trial court, admitting in evidence a receipt dated
May 2, 1991 marked as Exhibit "A" and its submarkings, although the same was merely a photocopy, thus, violating
the best evidence rule. However, the records show that petitioner never objected to the admissibility of the said
evidence at the time it was identified, marked and testified upon in court by private complainant. The CA also
correctly pointed out that petitioner also failed to raise an objection in his Comment to the prosecution's formal offer
of evidence and even admitted having signed the said receipt. The established doctrine is that when a party failed to
interpose a timely objection to evidence at the time they were offered in evidence, such objection shall be
considered as waived. 5

Another procedural issue raised is, as claimed by petitioner, the formally defective Information filed against him. He
contends that the Information does not contain the period when the pieces of jewelry were supposed to be returned
and that the date when the crime occurred was different from the one testified to by private complainant. This
argument is untenable. The CA did not err in finding that the Information was substantially complete and in
reiterating that objections as to the matters of form and substance in the Information cannot be made for the first
time on appeal. It is true that the gravamen of the crime of estafa under Article 315, paragraph 1, subparagraph (b)
of the RPC is the appropriation or conversion of money or property received to the prejudice of the owner  and that
6

the time of occurrence is not a material ingredient of the crime, hence, the exclusion of the period and the wrong
date of the occurrence of the crime, as reflected in the Information, do not make the latter fatally defective. The CA
ruled:

x x x An information is legally viable as long as it distinctly states the statutory designation of the offense and the
acts or omissions constitutive thereof. Then Section 6, Rule 110 of the Rules of Court provides that a complaint or
information is sufficient if it states the name of the accused;

the designation of the offense by the statute; the acts or omissions complained of as constituting the offense; the
name of the offended party; the approximate time of the commission of the offense, and the place wherein the
offense was committed. In the case at bar, a reading of the subject Information shows compliance with the foregoing
rule. That the time of the commission of the offense was stated as " on or about the fifth (5th) day of July, 1991" is
151
not likewise fatal to the prosecution's cause considering that Section 11 of the same Rule requires a statement of
the precise time only when the same is a material ingredient of the offense. The gravamen of the crime of estafa
under Article 315, paragraph 1 (b) of the Revised Penal Code (RPC) is the appropriation or conversion of money or
property received to the prejudice of the offender. Thus, aside from the fact that the date of the commission thereof
is not an essential element of the crime herein charged, the failure of the prosecution to specify the exact date does
not render the Information ipso facto defective. Moreover, the said date is also near the due date within which
accused-appellant should have delivered the proceeds or returned the said [pieces of jewelry] as testified upon by
Tangkoy, hence, there was sufficient compliance with the rules. Accused-appellant, therefore, cannot now be
allowed to claim that he was not properly apprised of the charges proferred against him. 7

It must be remembered that petitioner was convicted of the crime of Estafa under Article 315, paragraph 1 (b) of the
RPC, which reads:

ART. 315. Swindling (estafa). – Any person who shall defraud another by any of the means mentioned hereinbelow.

1. With unfaithfulness or abuse of confidence, namely:

xxxx

(b) By misappropriating or converting, to the prejudice of another, money, goods, or any other personal property
received by the offender in trust or on commission, or for administration, or under any other obligation involving the
duty to make delivery of or to return the same, even though such obligation be totally or partially guaranteed by a
bond; or by denying having received such money, goods, or other property; x x x

The elements of estafa with abuse of confidence are as follows: (a) that money, goods or other personal property is
received by the offender in trust, or on commission, or for administration, or under any other obligation involving the
duty to make delivery of, or to return the same; (b) that there be misappropriation or conversion of such money or
property by the offender or denial on his part of such receipt; (c) that such misappropriation or conversion or denial
is to the prejudice of another; and (d) that there is a demand made by the offended party on the offender. 8

Petitioner argues that the last element, which is, that there is a demand by the offended party on the offender, was
not proved. This Court disagrees. In his testimony, private complainant narrated how he was able to locate petitioner
after almost two (2) months from the time he gave the pieces of jewelry and asked petitioner about the same items
with the latter promising to pay them. Thus:

PROS. MARTINEZ

q Now, Mr. Witness, this was executed on 2 May 1991, and this transaction could have been finished on 5 July
1991, the question is what happens (sic) when the deadline came?

a I went looking for him, sir.

q For whom?

a Lito Corpuz, sir.

q Were you able to look (sic) for him?

a I looked for him for a week, sir.

q Did you know his residence?

a Yes, sir.

q Did you go there?

a Yes, sir.

q Did you find him?

a No, sir.

q Were you able to talk to him since 5 July 1991?

a I talked to him, sir.

152
q How many times?

a Two times, sir.

q What did you talk (sic) to him?

a About the items I gave to (sic) him, sir.

q Referring to Exhibit A-2?

a Yes, sir, and according to him he will take his obligation and I asked him where the items are and he promised me
that he will pay these amount, sir.

q Up to this time that you were here, were you able to collect from him partially or full?

a No, sir. 9

No specific type of proof is required to show that there was demand.  Demand need not even be formal; it may be
10

verbal.  The specific word "demand" need not even be used to show that it has indeed been made upon the person
11

charged, since even a mere query as to the whereabouts of the money [in this case, property], would be tantamount
to a demand.  As expounded in Asejo v. People:
12 13

With regard to the necessity of demand, we agree with the CA that demand under this kind of estafa need not be
formal or written. The appellate court observed that the law is silent with regard to the form of demand in estafa
under Art. 315 1(b), thus:

When the law does not qualify, We should not qualify. Should a written demand be necessary, the law would have
stated so. Otherwise, the word "demand" should be interpreted in its general meaning as to include both written and
oral demand. Thus, the failure of the prosecution to present a written demand as evidence is not fatal.

In Tubb v. People, where the complainant merely verbally inquired about the money entrusted to the accused, we
held that the query was tantamount to a demand, thus:

x x x [T]he law does not require a demand as a condition precedent to the existence of the crime of embezzlement.
It so happens only that failure to account, upon demand for funds or property held in trust, is circumstantial evidence
of misappropriation. The same way, however, be established by other proof, such as that introduced in the case at
bar.14

In view of the foregoing and based on the records, the prosecution was able to prove the existence of all the
elements of the crime. Private complainant gave petitioner the pieces of jewelry in trust, or on commission basis, as
shown in the receipt dated May 2, 1991 with an obligation to sell or return the same within sixty (60) days, if unsold.
There was misappropriation when petitioner failed to remit the proceeds of those pieces of jewelry sold, or if no sale
took place, failed to return the same pieces of jewelry within or after the agreed period despite demand from the
private complainant, to the prejudice of the latter.

Anent the credibility of the prosecution's sole witness, which is questioned by petitioner, the same is unmeritorious.
Settled is the rule that in assessing the credibility of witnesses, this Court gives great respect to the evaluation of the
trial court for it had the unique opportunity to observe the demeanor of witnesses and their deportment on the
witness stand, an opportunity denied the appellate courts, which merely rely on the records of the case.  The15

assessment by the trial court is even conclusive and binding if not tainted with arbitrariness or oversight of some fact
or circumstance of weight and influence, especially when such finding is affirmed by the CA.  Truth is established
16

not by the number of witnesses, but by the quality of their testimonies, for in determining the value and credibility of
evidence, the witnesses are to be weighed not numbered. 17

As regards the penalty, while this Court's Third Division was deliberating on this case, the question of the continued
validity of imposing on persons convicted of crimes involving property came up. The legislature apparently pegged
these penalties to the value of the money and property in 1930 when it enacted the Revised Penal Code. Since the
members of the division reached no unanimity on this question and since the issues are of first impression, they
decided to refer the case to the Court en banc for consideration and resolution. Thus, several amici curiae were
invited at the behest of the Court to give their academic opinions on the matter. Among those that graciously
complied were Dean Jose Manuel Diokno, Dean Sedfrey M. Candelaria, Professor Alfredo F. Tadiar, the Senate
President, and the Speaker of the House of Representatives. The parties were later heard on oral arguments before
the Court en banc, with Atty. Mario L. Bautista appearing as counsel de oficio of the petitioner.

After a thorough consideration of the arguments presented on the matter, this Court finds the following:

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There seems to be a perceived injustice brought about by the range of penalties that the courts continue to impose
on crimes against property committed today, based on the amount of damage measured by the value of money
eighty years ago in 1932. However, this Court cannot modify the said range of penalties because that would
constitute judicial legislation. What the legislature's perceived failure in amending the penalties provided for in the
said crimes cannot be remedied through this Court's decisions, as that would be encroaching upon the power of
another branch of the government. This, however, does not render the whole situation without any remedy. It can be
appropriately presumed that the framers of the Revised Penal Code (RPC) had anticipated this matter by including
Article 5, which reads:

ART. 5. Duty of the court in connection with acts which should be repressed but which are not covered by the law,
and in cases of excessive penalties. - Whenever a court has knowledge of any act which it may deem proper to
repress and which is not punishable by law, it shall render the proper decision, and shall report to the Chief
Executive, through the Department of Justice, the reasons which induce the court to believe that said act should be
made the subject of penal legislation.

In the same way, the court shall submit to the Chief Executive, through the Department of Justice, such statement
as may be deemed proper, without suspending the execution of the sentence, when a strict enforcement of the
provisions of this Code would result in the imposition of a clearly excessive penalty, taking into consideration the
degree of malice and the injury caused by the offense. 18

The first paragraph of the above provision clearly states that for acts bourne out of a case which is not punishable
by law and the court finds it proper to repress, the remedy is to render the proper decision and thereafter, report to
the Chief Executive, through the Department of Justice, the reasons why the same act should be the subject of
penal legislation. The premise here is that a deplorable act is present but is not the subject of any penal legislation,
thus, the court is tasked to inform the Chief Executive of the need to make that act punishable by law through
legislation. The second paragraph is similar to the first except for the situation wherein the act is already punishable
by law but the corresponding penalty is deemed by the court as excessive. The remedy therefore, as in the first
paragraph is not to suspend the execution of the sentence but to submit to the Chief Executive the reasons why the
court considers the said penalty to be non-commensurate with the act committed. Again, the court is tasked to
inform the Chief Executive, this time, of the need for a legislation to provide the proper penalty.

In his book, Commentaries on the Revised Penal Code,  Guillermo B. Guevara opined that in Article 5, the duty of
19

the court is merely to report to the Chief Executive, with a recommendation for an amendment or modification of the
legal provisions which it believes to be harsh. Thus:

This provision is based under the legal maxim "nullum crimen, nulla poena sige lege," that is, that there can exist no
punishable act except those previously and specifically provided for by penal statute.

No matter how reprehensible an act is, if the law-making body does not deem it necessary to prohibit its perpetration
with penal sanction, the Court of justice will be entirely powerless to punish such act.

Under the provisions of this article the Court cannot suspend the execution of a sentence on the ground that the
strict enforcement of the provisions of this Code would cause excessive or harsh penalty. All that the Court could do
in such eventuality is to report the matter to the Chief Executive with a recommendation for an amendment or
modification of the legal provisions which it believes to be harsh.20

Anent the non-suspension of the execution of the sentence, retired Chief Justice Ramon C. Aquino and retired
Associate Justice Carolina C. Griño-Aquino, in their book, The Revised Penal Code,  echoed the above-cited
21

commentary, thus:

The second paragraph of Art. 5 is an application of the humanitarian principle that justice must be tempered with
mercy. Generally, the courts have nothing to do with the wisdom or justness of the penalties fixed by law. "Whether
or not the penalties prescribed by law upon conviction of violations of particular statutes are too severe or are not
severe enough, are questions as to which commentators on the law may fairly differ; but it is the duty of the courts to
enforce the will of the legislator in all cases unless it clearly appears that a given penalty falls within the prohibited
class of excessive fines or cruel and unusual punishment." A petition for clemency should be addressed to the Chief
Executive.22

There is an opinion that the penalties provided for in crimes against property be based on the current inflation rate
or at the ratio of ₱1.00 is equal to ₱100.00 . However, it would be dangerous as this would result in uncertainties, as
opposed to the definite imposition of the penalties. It must be remembered that the economy fluctuates and if the
proposed imposition of the penalties in crimes against property be adopted, the penalties will not cease to change,
thus, making the RPC, a self-amending law. Had the framers of the RPC intended that to be so, it should have
provided the same, instead, it included the earlier cited Article 5 as a remedy. It is also improper to presume why the
present legislature has not made any moves to amend the subject penalties in order to conform with the present
times. For all we know, the legislature intends to retain the same penalties in order to deter the further commission
of those punishable acts which have increased tremendously through the years. In fact, in recent moves of the
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legislature, it is apparent that it aims to broaden the coverage of those who violate penal laws. In the crime of
Plunder, from its original minimum amount of ₱100,000,000.00 plundered, the legislature lowered it to
₱50,000,000.00. In the same way, the legislature lowered the threshold amount upon which the Anti-Money
Laundering Act may apply, from ₱1,000,000.00 to ₱500,000.00.

It is also worth noting that in the crimes of Theft and Estafa, the present penalties do not seem to be excessive
compared to the proposed imposition of their corresponding penalties. In Theft, the provisions state that:

Art. 309. Penalties. — Any person guilty of theft shall be punished by:

1. The penalty of prision mayor in its minimum and medium periods, if the value of the thing stolen is more
than 12,000 pesos but does not exceed 22,000 pesos, but if the value of the thing stolen exceeds the latter
amount the penalty shall be the maximum period of the one prescribed in this paragraph, and one year for
each additional ten thousand pesos, but the total of the penalty which may be imposed shall not exceed
twenty years. In such cases, and in connection with the accessory penalties which may be imposed and for
the purpose of the other provisions of this Code, the penalty shall be termed prision mayor or reclusion
temporal, as the case may be.

2. The penalty of prision correccional in its medium and maximum periods, if the value of the thing stolen is
more than 6,000 pesos but does not exceed 12,000 pesos.

3. The penalty of prision correccional in its minimum and medium periods, if the value of the property stolen
is more than 200 pesos but does not exceed 6,000 pesos.

4. Arresto mayor in its medium period to prision correccional in its minimum period, if the value of the
property stolen is over 50 pesos but does not exceed 200 pesos.

5. Arresto mayor to its full extent, if such value is over 5 pesos but does not exceed 50 pesos.

6. Arresto mayor in its minimum and medium periods, if such value does not exceed 5 pesos.

7. Arresto menor or a fine not exceeding 200 pesos, if the theft is committed under the circumstances
enumerated in paragraph 3 of the next preceding article and the value of the thing stolen does not exceed 5
pesos. If such value exceeds said amount, the provision of any of the five preceding subdivisions shall be
made applicable.

8. Arresto menor in its minimum period or a fine not exceeding 50 pesos, when the value of the thing stolen
is not over 5 pesos, and the offender shall have acted under the impulse of hunger, poverty, or the difficulty
of earning a livelihood for the support of himself or his family.

In a case wherein the value of the thing stolen is ₱6,000.00, the above-provision states that the penalty is prision
correccional in its minimum and medium periods (6 months and 1 day to 4 years and 2 months). Applying the
proposal, if the value of the thing stolen is ₱6,000.00, the penalty is imprisonment of arresto mayor in its medium
period to prision correccional minimum period (2 months and 1 day to 2 years and 4 months). It would seem that
under the present law, the penalty imposed is almost the same as the penalty proposed. In fact, after the application
of the Indeterminate Sentence Law under the existing law, the minimum penalty is still lowered by one degree;
hence, the minimum penalty is arresto mayor in its medium period to maximum period (2 months and 1 day to 6
months), making the offender qualified for pardon or parole after serving the said minimum period and may even
apply for probation. Moreover, under the proposal, the minimum penalty after applying the Indeterminate Sentence
Law is arresto menor in its maximum period to arresto mayor in its minimum period (21 days to 2 months) is not too
far from the minimum period under the existing law. Thus, it would seem that the present penalty imposed under the
law is not at all excessive. The same is also true in the crime of Estafa.23

Moreover, if we apply the ratio of 1:100, as suggested to the value of the thing stolen in the crime of Theft and the
damage caused in the crime of Estafa, the gap between the minimum and the maximum amounts, which is the
basis of determining the proper penalty to be imposed, would be too wide and the penalty imposable would no
longer be commensurate to the act committed and the value of the thing stolen or the damage caused:

I. Article 309, or the penalties for the crime of Theft, the value would be modified but the penalties are not changed:

1. ₱12,000.00 to ₱22,000.00 will become ₱1,200,000.00 to ₱2,200,000.00, punished by prision mayor

minimum to prision mayor medium (6 years and 1 day to 10 years).

2. ₱6,000.00 to ₱12,000.00 will become ₱600,000.00 to ₱1,200,000.00, punished by prision correccional

medium and to prision correccional maximum (2 years, 4 months and 1 day to 6 years). 24

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 3. ₱200.00 to ₱6,000.00 will become ₱20,000.00 to ₱600,000.00, punishable by prision correccional
minimum to prision correccional medium (6 months and 1 day to 4 years and 2 months).

4. ₱50.00 to ₱200.00 will become ₱5,000.00 to ₱20,000.00, punishable by arresto mayor medium to prision
correccional minimum (2 months and 1 day to 2 years and 4 months).

5. ₱5.00 to ₱50.00 will become ₱500.00 to ₱5,000.00, punishable by arresto mayor (1 month and 1 day to 6
months).

6. ₱5.00 will become ₱500.00, punishable by arresto mayor minimum to arresto mayor medium.

x x x x.

II. Article 315, or the penalties for the crime of Estafa, the value would also be modified but the penalties are not
changed, as follows:

1st. ₱12,000.00 to ₱22,000.00, will become ₱1,200,000.00 to ₱2,200,000.00, punishable by prision

correccional maximum to prision mayor minimum (4 years, 2 months and 1 day to 8 years). 25

2nd. ₱6,000.00 to ₱12,000.00 will become ₱600,000.00 to ₱1,200,000.00, punishable by prision

correccional minimum to prision correccional medium (6 months and 1 day to 4 years and 2 months). 26

3rd. ₱200.00 to ₱6,000.00 will become ₱20,000.00 to ₱600,000.00, punishable by arresto mayor maximum
to prision correccional minimum (4 months and 1 day to 2 years and 4 months).

4th. ₱200.00 will become ₱20,000.00, punishable by arresto mayor maximum (4 months and 1 day to 6
months).

An argument raised by Dean Jose Manuel I. Diokno, one of our esteemed amici curiae, is that the incremental
penalty provided under Article 315 of the RPC violates the Equal Protection Clause.

The equal protection clause requires equality among equals, which is determined according to a valid classification.
The test developed by jurisprudence here and yonder is that of reasonableness,  which has four requisites:
27

(1) The classification rests on substantial distinctions;

(2) It is germane to the purposes of the law;

(3) It is not limited to existing conditions only; and

(4) It applies equally to all members of the same class. 28

According to Dean Diokno, the Incremental Penalty Rule (IPR) does not rest on substantial distinctions as
₱10,000.00 may have been substantial in the past, but it is not so today, which violates the first requisite; the IPR
was devised so that those who commit estafa involving higher amounts would receive heavier penalties; however,
this is no longer achieved, because a person who steals ₱142,000.00 would receive the same penalty as someone
who steals hundreds of millions, which violates the second requisite; and, the IPR violates requisite no. 3,
considering that the IPR is limited to existing conditions at the time the law was promulgated, conditions that no
longer exist today.

Assuming that the Court submits to the argument of Dean Diokno and declares the incremental penalty in Article
315 unconstitutional for violating the equal protection clause, what then is the penalty that should be applied in case
the amount of the thing subject matter of the crime exceeds ₱22,000.00? It seems that the proposition poses more
questions than answers, which leads us even more to conclude that the appropriate remedy is to refer these matters
to Congress for them to exercise their inherent power to legislate laws.

Even Dean Diokno was of the opinion that if the Court declares the IPR unconstitutional, the remedy is to go to
Congress. Thus:

xxxx

JUSTICE PERALTA:

Now, your position is to declare that the incremental penalty should be struck down as unconstitutional because it is
absurd.

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DEAN DIOKNO:

Absurd, it violates equal protection, Your Honor, and cruel and unusual punishment.

JUSTICE PERALTA:

Then what will be the penalty that we are going to impose if the amount is more than Twenty-Two Thousand
(₱22,000.00) Pesos.

DEAN DIOKNO:

Well, that would be for Congress to ... if this Court will declare the incremental penalty rule unconstitutional, then
that would ... the void should be filled by Congress.

JUSTICE PERALTA:

But in your presentation, you were fixing the amount at One Hundred Thousand (₱100,000.00) Pesos ...

DEAN DIOKNO:

Well, my presen ... (interrupted)

JUSTICE PERALTA:

For every One Hundred Thousand (₱100,000.00) Pesos in excess of Twenty-Two Thousand (₱22,000.00) Pesos
you were suggesting an additional penalty of one (1) year, did I get you right?

DEAN DIOKNO:

Yes, Your Honor, that is, if the court will take the route of statutory interpretation.

JUSTICE PERALTA:

Ah ...

DEAN DIOKNO:

If the Court will say that they can go beyond the literal wording of the law...

JUSTICE PERALTA:

But if we de ... (interrupted)

DEAN DIOKNO:

....then....

JUSTICE PERALTA:

Ah, yeah. But if we declare the incremental penalty as unsconstitutional, the court cannot fix the amount ...

DEAN DIOKNO:

No, Your Honor.

JUSTICE PERALTA:

... as the equivalent of one, as an incremental penalty in excess of Twenty-Two Thousand (₱22,000.00) Pesos.

DEAN DIOKNO:

No, Your Honor.

JUSTICE PERALTA:
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The Court cannot do that.

DEAN DIOKNO:

Could not be.

JUSTICE PERALTA:

The only remedy is to go to Congress...

DEAN DIOKNO:

Yes, Your Honor.

JUSTICE PERALTA:

... and determine the value or the amount.

DEAN DIOKNO:

Yes, Your Honor.

JUSTICE PERALTA:

That will be equivalent to the incremental penalty of one (1) year in excess of Twenty-Two Thousand (₱22,000.00)
Pesos.

DEAN DIOKNO:

Yes, Your Honor.

JUSTICE PERALTA:

The amount in excess of Twenty-Two Thousand (₱22,000.00) Pesos.

Thank you, Dean.

DEAN DIOKNO:

Thank you.

xxxx 29

Dean Diokno also contends that Article 315 of the Revised Penal Code constitutes cruel and unusual punishment.
Citing Solem v. Helm,  Dean Diokno avers that the United States Federal Supreme Court has expanded the
30

application of a similar Constitutional provision prohibiting cruel and unusual punishment, to the duration of the
penalty, and not just its form. The court therein ruled that three things must be done to decide whether a sentence is
proportional to a specific crime, viz.; (1) Compare the nature and gravity of the offense, and the harshness of the
penalty; (2) Compare the sentences imposed on other criminals in the same jurisdiction, i.e., whether more serious
crimes are subject to the same penalty or to less serious penalties; and (3) Compare the sentences imposed for
commission of the same crime in other jurisdictions.

However, the case of Solem v. Helm cannot be applied in the present case, because in Solem what respondent
therein deemed cruel was the penalty imposed by the state court of South Dakota after it took into account the
latter’s recidivist statute and not the original penalty for uttering a "no account" check. Normally, the maximum
punishment for the crime would have been five years imprisonment and a $5,000.00 fine. Nonetheless, respondent
was sentenced to life imprisonment without the possibility of parole under South Dakota’s recidivist statute because
of his six prior felony convictions. Surely, the factual antecedents of Solem are different from the present
controversy.

With respect to the crime of Qualified Theft, however, it is true that the imposable penalty for the offense is high.
Nevertheless, the rationale for the imposition of a higher penalty against a domestic servant is the fact that in the
commission of the crime, the helper will essentially gravely abuse the trust and confidence reposed upon her by her
employer. After accepting and allowing the helper to be a member of the household, thus entrusting upon such
person the protection and safekeeping of the employer’s loved ones and properties, a subsequent betrayal of that
158
trust is so repulsive as to warrant the necessity of imposing a higher penalty to deter the commission of such
wrongful acts.

There are other crimes where the penalty of fine and/or imprisonment are dependent on the subject matter of the
crime and which, by adopting the proposal, may create serious implications. For example, in the crime of
Malversation, the penalty imposed depends on the amount of the money malversed by the public official, thus:

Art. 217. Malversation of public funds or property; Presumption of malversation. — Any public officer who, by reason
of the duties of his office, is accountable for public funds or property, shall appropriate the same or shall take or
misappropriate or shall consent, through abandonment or negligence, shall permit any other person to take such
public funds, or property, wholly or partially, or shall otherwise be guilty of the misappropriation or malversation of
such funds or property, shall suffer:

1. The penalty of prision correccional in its medium and maximum periods, if the amount involved in the
misappropriation or malversation does not exceed two hundred pesos.

2. The penalty of prision mayor in its minimum and medium periods, if the amount involved is more than two
hundred pesos but does not exceed six thousand pesos.

3. The penalty of prision mayor in its maximum period to reclusion temporal in its minimum period, if the
amount involved is more than six thousand pesos but is less than twelve thousand pesos.

4. The penalty of reclusion temporal, in its medium and maximum periods, if the amount involved is more
than twelve thousand pesos but is less than twenty-two thousand pesos. If the amount exceeds the latter,
the penalty shall be reclusion temporal in its maximum period to reclusion perpetua.

In all cases, persons guilty of malversation shall also suffer the penalty of perpetual special disqualification and a
fine equal to the amount of the funds malversed or equal to the total value of the property embezzled.

The failure of a public officer to have duly forthcoming any public funds or property with which he is chargeable,
upon demand by any duly authorized officer, shall be prima facie evidence that he has put such missing funds or
property to personal use.

The above-provisions contemplate a situation wherein the Government loses money due to the unlawful acts of the
offender. Thus, following the proposal, if the amount malversed is ₱200.00 (under the existing law), the amount now
becomes ₱20,000.00 and the penalty is prision correccional in its medium and maximum periods (2 years 4 months
and 1 day to 6 years). The penalty may not be commensurate to the act of embezzlement of ₱20,000.00 compared
to the acts committed by public officials punishable by a special law, i.e., Republic Act No. 3019 or the Anti-Graft
and Corrupt Practices Act, specifically Section 3,  wherein the injury caused to the government is not generally
31

defined by any monetary amount, the penalty (6 years and 1 month to 15 years)  under the Anti-Graft Law will now
32

become higher. This should not be the case, because in the crime of malversation, the public official takes
advantage of his public position to embezzle the fund or property of the government entrusted to him.

The said inequity is also apparent in the crime of Robbery with force upon things (inhabited or uninhabited) where
the value of the thing unlawfully taken and the act of unlawful entry are the bases of the penalty imposable, and
also, in Malicious Mischief, where the penalty of imprisonment or fine is dependent on the cost of the damage
caused.

In Robbery with force upon things (inhabited or uninhabited), if we increase the value of the thing unlawfully taken,
as proposed in the ponencia, the sole basis of the penalty will now be the value of the thing unlawfully taken and no
longer the element of force employed in entering the premises. It may likewise cause an inequity between the crime
of Qualified Trespass to Dwelling under Article 280, and this kind of robbery because the former is punishable by
prision correccional in its medium and maximum periods (2 years, 4 months and 1 day to 6 years) and a fine not
exceeding ₱1,000.00 (₱100,000.00 now if the ratio is 1:100) where entrance to the premises is with violence or
intimidation, which is the main justification of the penalty. Whereas in the crime of Robbery with force upon things, it
is punished with a penalty of prision mayor (6 years and 1 day to 12 years) if the intruder is unarmed without the
penalty of Fine despite the fact that it is not merely the illegal entry that is the basis of the penalty but likewise the
unlawful taking.

Furthermore, in the crime of Other Mischiefs under Article 329, the highest penalty that can be imposed is arresto
mayor in its medium and maximum periods (2 months and 1 day to 6 months) if the value of the damage caused
exceeds ₱1,000.00, but under the proposal, the value of the damage will now become ₱100,000.00 (1:100), and still
punishable by arresto mayor (1 month and 1 day to 6 months). And, if the value of the damaged property does not
exceed ₱200.00, the penalty is arresto menor or a fine of not less than the value of the damage caused and not
more than ₱200.00, if the amount involved does not exceed ₱200.00 or cannot be estimated. Under the proposal,
₱200.00 will now become ₱20,000.00, which simply means that the fine of ₱200.00 under the existing law will now
become ₱20,000.00. The amount of Fine under this situation will now become excessive and afflictive in nature
159
despite the fact that the offense is categorized as a light felony penalized with a light penalty under Article 26 of the
RPC.  Unless we also amend Article 26 of the RPC, there will be grave implications on the penalty of Fine, but
33

changing the same through Court decision, either expressly or impliedly, may not be legally and constitutionally
feasible.

There are other crimes against property and swindling in the RPC that may also be affected by the proposal, such
as those that impose imprisonment and/or Fine as a penalty based on the value of the damage caused, to wit:
Article 311 (Theft of the property of the National Library and National Museum), Article 312 (Occupation of real
property or usurpation of real rights in property), Article 313 (Altering boundaries or landmarks), Article 316 (Other
forms of swindling), Article 317 (Swindling a minor), Article 318 (Other deceits), Article 328 (Special cases of
malicious mischief) and Article 331 (Destroying or damaging statues, public monuments or paintings). Other crimes
that impose Fine as a penalty will also be affected, such as: Article 213 (Frauds against the public treasury and
similar offenses), Article 215 (Prohibited Transactions),

Article 216 (Possession of prohibited interest by a public officer), Article 218 (Failure of accountable officer to render
accounts), Article 219 (Failure of a responsible public officer to render accounts before leaving the country).

In addition, the proposal will not only affect crimes under the RPC. It will also affect crimes which are punishable by
special penal laws, such as Illegal Logging or Violation of Section 68 of Presidential Decree No. 705, as
amended. The law treats cutting, gathering, collecting and possessing timber or other forest products without
34

license as an offense as grave as and equivalent to the felony of qualified theft.  Under the law, the offender shall
35

be punished with the penalties imposed under Articles 309 and 310  of the Revised Penal Code, which means that
36

the penalty imposable for the offense is, again, based on the value of the timber or forest products involved in the
offense. Now, if we accept the said proposal in the crime of Theft, will this particular crime of Illegal Logging be
amended also in so far as the penalty is concerned because the penalty is dependent on Articles 309 and 310 of the
RPC? The answer is in the negative because the soundness of this particular law is not in question.

With the numerous crimes defined and penalized under the Revised Penal Code and Special Laws, and other
related provisions of these laws affected by the proposal, a thorough study is needed to determine its effectivity and
necessity. There may be some provisions of the law that should be amended; nevertheless, this Court is in no
position to conclude as to the intentions of the framers of the Revised Penal Code by merely making a study of the
applicability of the penalties imposable in the present times. Such is not within the competence of the Court but of
the Legislature which is empowered to conduct public hearings on the matter, consult legal luminaries and who,
after due proceedings, can decide whether or not to amend or to revise the questioned law or other laws, or even
create a new legislation which will adopt to the times.

Admittedly, Congress is aware that there is an urgent need to amend the Revised Penal Code. During the oral
arguments, counsel for the Senate informed the Court that at present, fifty-six (56) bills are now pending in the
Senate seeking to amend the Revised Penal Code,  each one proposing much needed change and updates to
37

archaic laws that were promulgated decades ago when the political, socio-economic, and cultural settings were far
different from today’s conditions.

Verily, the primordial duty of the Court is merely to apply the law in such a way that it shall not usurp legislative
powers by judicial legislation and that in the course of such application or construction, it should not make or
supervise legislation, or under the guise of interpretation, modify, revise, amend, distort, remodel, or rewrite the law,
or give the law a construction which is repugnant to its terms.  The Court should apply the law in a manner that
38

would give effect to their letter and spirit, especially when the law is clear as to its intent and purpose. Succinctly put,
the Court should shy away from encroaching upon the primary function of a co-equal branch of the Government;
otherwise, this would lead to an inexcusable breach of the doctrine of separation of powers by means of judicial
legislation.

Moreover, it is to be noted that civil indemnity is, technically, not a penalty or a Fine; hence, it can be increased by
the Court when appropriate. Article 2206 of the Civil Code provides:

Art. 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand
pesos, even though there may have been mitigating circumstances. In addition:

(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall
be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded by the court,
unless the deceased on account of permanent physical disability not caused by the defendant, had no
earning capacity at the time of his death;

(2) If the deceased was obliged to give support according to the provisions of Article 291, the recipient who
is not an heir called to the decedent's inheritance by the law of testate or intestate succession, may demand
support from the person causing the death, for a period not exceeding five years, the exact duration to be
fixed by the court;

160
 (3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand
moral damages for mental anguish by reason of the death of the deceased.

In our jurisdiction, civil indemnity is awarded to the offended party as a kind of monetary restitution or compensation
to the victim for the damage or infraction that was done to the latter by the accused, which in a sense only covers
the civil aspect. Precisely, it is civil indemnity. Thus, in a crime where a person dies, in addition to the penalty of
imprisonment imposed to the offender, the accused is also ordered to pay the victim a sum of money as restitution.
Clearly, this award of civil indemnity due to the death of the victim could not be contemplated as akin to the value of
a thing that is unlawfully taken which is the basis in the imposition of the proper penalty in certain crimes. Thus, the
reasoning in increasing the value of civil indemnity awarded in some offense cannot be the same reasoning that
would sustain the adoption of the suggested ratio. Also, it is apparent from Article 2206 that the law only imposes a
minimum amount for awards of civil indemnity, which is ₱3,000.00. The law did not provide for a ceiling. Thus,
although the minimum amount for the award cannot be changed, increasing the amount awarded as civil indemnity
can be validly modified and increased when the present circumstance warrants it. Corollarily, moral damages under
Article 2220  of the Civil Code also does not fix the amount of damages that can be awarded. It is discretionary
39

upon the court, depending on the mental anguish or the suffering of the private offended party. The amount of moral
damages can, in relation to civil indemnity, be adjusted so long as it does not exceed the award of civil indemnity.

In addition, some may view the penalty provided by law for the offense committed as tantamount to cruel
punishment. However, all penalties are generally harsh, being punitive in nature. Whether or not they are excessive
or amount to cruel punishment is a matter that should be left to lawmakers. It is the prerogative of the courts to apply
the law, especially when they are clear and not subject to any other interpretation than that which is plainly written.

Similar to the argument of Dean Diokno, one of Justice Antonio Carpio’s opinions is that the incremental penalty
provision should be declared unconstitutional and that the courts should only impose the penalty corresponding to
the amount of ₱22,000.00, regardless if the actual amount involved exceeds ₱22,000.00. As suggested, however,
from now until the law is properly amended by Congress, all crimes of Estafa will no longer be punished by the
appropriate penalty. A conundrum in the regular course of criminal justice would occur when every accused
convicted of the crime of estafa will be meted penalties different from the proper penalty that should be imposed.
Such drastic twist in the application of the law has no legal basis and directly runs counter to what the law provides.

It should be noted that the death penalty was reintroduced in the dispensation of criminal justice by the Ramos
Administration by virtue of Republic Act No. 7659  in December 1993. The said law has been questioned before this
40

Court. There is, arguably, no punishment more cruel than that of death. Yet still, from the time the death penalty was
re-imposed until its lifting in June 2006 by Republic Act No. 9346,  the Court did not impede the imposition of the
41

death penalty on the ground that it is a "cruel punishment" within the purview of Section 19 (1),  Article III of the
42

Constitution. Ultimately, it was through an act of Congress suspending the imposition of the death penalty that led to
its non-imposition and not via the intervention of the Court.

Even if the imposable penalty amounts to cruel punishment, the Court cannot declare the provision of the law from
which the proper penalty emanates unconstitutional in the present action. Not only is it violative of due process,
considering that the State and the concerned parties were not given the opportunity to comment on the subject
matter, it is settled that the constitutionality of a statute cannot be attacked collaterally because constitutionality
issues must be pleaded directly and not collaterally,  more so in the present controversy wherein the issues never
43

touched upon the constitutionality of any of the provisions of the Revised Penal Code.

Besides, it has long been held that the prohibition of cruel and unusual punishments is generally aimed at the form
or character of the punishment rather than its severity in respect of duration or amount, and applies to punishments
which public sentiment has regarded as cruel or obsolete, for instance, those inflicted at the whipping post, or in the
pillory, burning at the stake, breaking on the wheel, disemboweling, and the like. Fine and imprisonment would not
thus be within the prohibition.
44

It takes more than merely being harsh, excessive, out of proportion, or severe for a penalty to be obnoxious to the
Constitution. The fact that the punishment authorized by the statute is severe does not make it cruel and unusual.
Expressed in other terms, it has been held that to come under the ban, the punishment must be "flagrantly and
plainly oppressive," "wholly disproportionate to the nature of the offense as to shock the moral sense of the
community." 45

Cruel as it may be, as discussed above, it is for the Congress to amend the law and adapt it to our modern time.

The solution to the present controversy could not be solved by merely adjusting the questioned monetary values to
the present value of money based only on the current inflation rate. There are other factors and variables that need
to be taken into consideration, researched, and deliberated upon before the said values could be accurately and
properly adjusted. The effects on the society, the injured party, the accused, its socio-economic impact, and the
likes must be painstakingly evaluated and weighed upon in order to arrive at a wholistic change that all of us believe
should be made to our existing law. Dejectedly, the Court is ill-equipped, has no resources, and lacks sufficient
personnel to conduct public hearings and sponsor studies and surveys to validly effect these changes in our

161
Revised Penal Code. This function clearly and appropriately belongs to Congress. Even Professor Tadiar concedes
to this conclusion, to wit:

xxxx

JUSTICE PERALTA:

Yeah, Just one question. You are suggesting that in order to determine the value of Peso you have to take into
consideration several factors.

PROFESSOR TADIAR:

Yes.

JUSTICE PERALTA:

Per capita income.

PROFESSOR TADIAR:

Per capita income.

JUSTICE PERALTA:

Consumer price index.

PROFESSOR TADIAR:

Yeah.

JUSTICE PERALTA:

Inflation ...

PROFESSOR TADIAR:

Yes.

JUSTICE PERALTA:

... and so on. Is the Supreme Court equipped to determine those factors?

PROFESSOR TADIAR:

There are many ways by which the value of the Philippine Peso can be determined utilizing all of those economic
terms.

JUSTICE PERALTA:

Yeah, but ...

PROFESSOR TADIAR:

And I don’t think it is within the power of the Supreme Court to pass upon and peg the value to One Hundred
(₱100.00) Pesos to ...

JUSTICE PERALTA:

Yeah.

PROFESSOR TADIAR:

... One (₱1.00.00) Peso in 1930.

162
JUSTICE PERALTA:

That is legislative in nature.

PROFESSOR TADIAR:

That is my position that the Supreme Court ...

JUSTICE PERALTA:

Yeah, okay.

PROFESSOR TADIAR:

... has no power to utilize the power of judicial review to in order to adjust, to make the adjustment that is a power
that belongs to the legislature.

JUSTICE PERALTA:

Thank you, Professor.

PROFESSOR TADIAR:

Thank you. 46

Finally, the opinion advanced by Chief Justice Maria Lourdes P. A. Sereno echoes the view that the role of the Court
is not merely to dispense justice, but also the active duty to prevent injustice. Thus, in order to prevent injustice in
the present controversy, the Court should not impose an obsolete penalty pegged eighty three years ago, but
consider the proposed ratio of 1:100 as simply compensating for inflation. Furthermore, the Court has in the past
taken into consideration "changed conditions" or "significant changes in circumstances" in its decisions.

Similarly, the Chief Justice is of the view that the Court is not delving into the validity of the substance of a statute.
The issue is no different from the Court’s adjustment of indemnity in crimes against persons, which the Court had
previously adjusted in light of current times, like in the case of People v. Pantoja.  Besides, Article 10 of the Civil
47

Code mandates a presumption that the lawmaking body intended right and justice to prevail.

With due respect to the opinions and proposals advanced by the Chief Justice and my Colleagues, all the proposals
ultimately lead to prohibited judicial legislation. Short of being repetitious and as extensively discussed above, it is
truly beyond the powers of the Court to legislate laws, such immense power belongs to Congress and the Court
should refrain from crossing this clear-cut divide. With regard to civil indemnity, as elucidated before, this refers to
civil liability which is awarded to the offended party as a kind of monetary restitution. It is truly based on the value of
money. The same cannot be said on penalties because, as earlier stated, penalties are not only based on the value
of money, but on several other factors. Further, since the law is silent as to the maximum amount that can be
awarded and only pegged the minimum sum, increasing the amount granted as civil indemnity is not proscribed.
Thus, it can be adjusted in light of current conditions.

Now, with regard to the penalty imposed in the present case, the CA modified the ruling of the RTC. The RTC
imposed the indeterminate penalty of four (4) years and two (2) months of prision correccional in its medium period,
as minimum, to fourteen (14) years and eight (8) months of reclusion temporal in its minimum period, as maximum.
However, the CA imposed the indeterminate penalty of four (4) years and two (2) months of prision correccional, as
minimum, to eight (8) years of prision mayor, as maximum, plus one (1) year for each additional ₱10,000.00, or a
total of seven (7) years.

In computing the penalty for this type of estafa, this Court's ruling in Cosme, Jr. v. People  is highly instructive, thus:
48

With respect to the imposable penalty, Article 315 of the Revised Penal Code provides:

ART. 315 Swindling (estafa). - Any person who shall defraud another by any of the means mentioned hereinbelow
shall be punished by:

1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum period, if the amount
of the fraud is over 12,000 but does not exceed 22,000 pesos, and if such amount exceeds the latter sum, the
penalty provided in this paragraph shall be imposed in its maximum period, adding one year for each additional
10,000 pesos; but the total penalty which may be imposed shall not exceed twenty years. In such case, and in

163
connection with the accessory penalties which may be imposed and for the purpose of the other provisions of this
Code, the penalty shall be termed prision mayor or reclusion temporal, as the case may be.

The penalty prescribed by Article 315 is composed of only two, not three, periods, in which case, Article 65 of the
same Code requires the division of the time included in the penalty into three equal portions of time included in the
penalty prescribed, forming one period of each of the three portions. Applying the latter provisions, the maximum,
medium and minimum periods of the penalty prescribed are:

Maximum - 6 years, 8 months, 21 days to 8 years

Medium - 5 years, 5 months, 11 days to 6 years, 8 months, 20 days

Minimum - 4 years, 2 months, 1 day to 5 years, 5 months, 10 days 49

To compute the maximum period of the prescribed penalty, prisión correccional maximum to prisión mayor minimum
should be divided into three equal portions of time each of which portion shall be deemed to form one period in
accordance with Article 65  of the RPC.  In the present case, the amount involved is ₱98,000.00, which exceeds
50 51

₱22,000.00, thus, the maximum penalty imposable should be within the maximum period of 6 years, 8 months and
21 days to 8 years of prision mayor. Article 315 also states that a period of one year shall be added to the penalty
for every additional ₱10,000.00 defrauded in excess of ₱22,000.00, but in no case shall the total penalty which may
be imposed exceed 20 years.

Considering that the amount of ₱98,000.00 is ₱76,000.00 more than the ₱22,000.00 ceiling set by law, then, adding
one year for each additional ₱10,000.00, the maximum period of 6 years, 8 months and 21 days to 8 years of
prision mayor minimum would be increased by 7 years. Taking the maximum of the prescribed penalty, which is 8
years, plus an additional 7 years, the maximum of the indeterminate penalty is 15 years.

Applying the Indeterminate Sentence Law, since the penalty prescribed by law for the estafa charge against
petitioner is prision correccional maximum to prision mayor minimum, the penalty next lower would then be prision
correccional in its minimum and medium periods.

Thus, the minimum term of the indeterminate sentence should be anywhere from 6 months and 1 day to 4 years
and 2 months.

One final note, the Court should give Congress a chance to perform its primordial duty of lawmaking. The Court
should not pre-empt Congress and usurp its inherent powers of making and enacting laws. While it may be the most
expeditious approach, a short cut by judicial fiat is a dangerous proposition, lest the Court dare trespass on
prohibited judicial legislation.

WHEREFORE, the Petition for Review on Certiorari dated November 5, 2007 of petitioner Lito Corpuz is hereby
DENIED. Consequently, the Decision dated March 22, 2007 and Resolution dated September 5, 2007 of the Court
of Appeals, which affirmed with modification the Decision dated July 30, 2004 of the Regional Trial Court, Branch
46, San Fernando City, finding petitioner guilty beyond reasonable doubt of the crime of Estafa under Article 315,
paragraph (1), sub-paragraph (b) of the Revised Penal Code, are hereby AFFIRMED with MODIFICATION that the
penalty imposed is the indeterminate penalty of imprisonment ranging from THREE (3) YEARS, TWO (2) MONTHS
and ELEVEN DAYS of prision correccional, as minimum, to FIFTEEN (15) YEARS of reclusion temporal as
maximum.

Pursuant to Article 5 of the Revised Penal Code, let a Copy of this Decision be furnished the President of the
Republic of the Philippines, through the Department of Justice.

Also, let a copy of this Decision be furnished the President of the Senate and the Speaker of the House of
Representatives.

SO ORDERED.

CONCURRING AND DISSENTING OPINION

"Since we cannot change reality,

let us change the eyes which see reality."

Nikos Kazantzakis 1

LEONEN, J.:

164
I concur with the ponencia of Justice Diosdado M. Peralta in affirming the conviction of Lito Corpuz. However, I
dissent on the penalty imposed by the majority. I do not agree that it is judicial legislation for us to reconsider the
range of penalties created by Congress in 1932. The range of penalties for the crime of estafa should be
recomputed based on present value.

Our duty is to intepret the law. It is a duty reposed on us by the Constitution. We provide meaning to law's language
and make laws written in a different historical context relevant to present reality. 2

The meanings of the text of the law limited by the facts presented in the cases that come to us are not arbitrarily
determined. We arrive at such meanings as a collegial court aware that we should keep faith in the spirit that the
laws have been promulgated. Our ideal should be that we can reflect the political consensus contained in the words
approved by Congress and the President but always framed by the fundamental principles and values of our
Constitution. Political consensus is not independent of reality. It is there to address that reality.

My sense of the law's spirit is that it is always motivated by what is relevant and what is just under the
circumstances.

Viewed in this way, I must dissent in the penalty imposed upon the accused. The pecuniary values that provided the
basis for the range of penalties for the crime of estafa (swindling) were the values in 1932. It is clear that the gravity
of a crime where someone was defrauded of fifty pesos (₱50.00) of property in 1932 is not the same as the gravity
of the same offense for property worth fifty pesos (₱50.00) in 2014. The purchasing power of the peso has
significantly changed after eight decades, and it is time that we interpret the law the way it should be: to reflect the
relative range of values it had when it was promulgated. In doing so, we are not rewriting the law, just construing
what it actually means.

Of course, every interpretation we make on any provision of law occassioned by actual cases will have their own
share of difficulties when implemented. This is true when we declare law relied upon by many as unconstitutional, or
interpret the provisions of a tax code, or even when we clarify the requirements prescribed by the General
Accounting and Auditing Manual (GAAM). We have always, however, proceeded with the right interpretation and
dealt with the difficulties accordingly.

Definitely, an interpretation of a legal provision more beneficial to an accused or a person who is convicted will have
a retroactive effect. This should be because such interpretation is corrective in nature. This should not present
extremely debilitating difficulties, and we do not have to have special rules. The convicted prisoner could simply file
habeas corpus as a post-conviction remedy whenever he or she would have served more than what would be
required based on our new interpretations. It is also possible for the Department of Justice’s Bureau of Corrections
and Parole and Probation Administration to adopt its own guidelines on the release of prisoners. This difficulty is not
insurmountable.

I disagree that it will be difficult to find the correct present value for the amounts involved. In Heirs of the Spouses
Tria v. Land Bank of the Philippines  and Secretary of the Department of Public Works and Highways v. Spouses
3

Tecson,  we identified the correct formula in our concurring and dissenting opinions. The formula for present value is
4

known and has been relied upon in the business community. Inflation rates may be discovered using the latest
statistics extrapolating for the years when there had been no available values. I agree with the approach of Justice
Roberto A. Abad in his dissenting opinion in approximating the value already so that we do not need to get
unneccessarily entangled in the niceties of the science and art of determining inflation rates.

Even the inflation rate should not present an extraordinarily insurmountable problem even if it should be computed
from 1932. Inflation is only the change in price of the same index from one year to the next. Price index is the
"measure of the average level of prices,"  while inflation is the "rise in the general level of prices."  As long as there
5 6

is a price index, inflation rate can be derived from comparing one year’s price index with another year’s price index.

The most commonly used price index is the Consumer Price Index. The Philippines began recording the Consumer
Price Index in 1948, together with the creation of the Central Bank of the Philippines. 7

However, even before the creation of the Central Bank, the Philippines had been recording other price indices that
could be used to approximate inflation and give a more precise picture of the price level in 1930, the year the
Revised Penal Code was approved. A sectoral price index can be used to substitute the consumer price index. A
dominant sector in the Philippines, agriculture, has a price index which pre-dates World War I and covers the years
1902 until 1946.  Hence, even before the war, for as long as the index compared with one from another is the same
8

index, an inflation rate can be derived.

Law has never been a discipline too autonomous from the other disciplines.  The points of view of those that inhabit
1âwphi1

the world of economics and finance are not strange to lawyers. The eyes through which the law views reality should
not be too parochial and too narrow. Our understanding should instead be open enough to allow us to see more by
borrowing from other disciplines. Doing so enhances rather than weakens judicial rigor.

165
I am not convinced that a ruling that will affect penalties in other crimes where the gravity is measured in pesos will
present difficulties too debilitating so as to amount to being unimplementable. I do not see why courts of law cannot
simply adopt the universally acceptable formula for present value.

An interpretative methodology for penalties is proposed because of the extraordinary lapse of time from the date of
promulgation of the law (1932) to the present. Definitely, we will not be recomputing the penalties for all statutes. I
am of the view that the approach for computing the penalties in this case will only be applicable to statutes that have
been promulgated and have not been amended for no less than the past eight decades. The world was very
different then. A world war intervened. Four different Constitutions with their corresponding amendments were
promulgated and took effect. There are now more types of property than could have been imagined at that time.

I hesitate to agree with Justice Carpio's approach to declare the incremental penalties as unconstitutional only
because it violates the proscription against cruel and unusual punishments. The approach creatively addresses the
unjustness of the present situation but does not have the same elegance of principle that is proposed in the dissent
of Justice Abad. Both lead to pragmatic results, and I think that between these two possibilities, we should lean on
that which is more consistent with the principle of reflecting the spirit of the law when it was promulgated.

A decision that re-computes penalties to account for present value should not be seen as a judgment of the
achievements of Congress. That this was not its priority is a matter that should not concern us. Congress is an
entirely separate and autonomous branch of government, and it would be violative of the constitutional fiat of
separation of powers for us to imply that updating penal statutes should have been its priority.

Regardless, it is this actual case that confronts us. In my view, adjusting penalties to account for the purchasing
power of the peso is entirely within our power. It is not judicial legislation, it is merely interpreting the word "peso" in
these range of penalties. It is quintessentially a judicial activity to interpret. We should not default on this duty. We
cannot wait another century before a just outcome is to be realized.

ACCORDINGLY, I vote to affirm the conviction of the accused. However, I vote that the penalty imposed be two
months of arresto mayor as minimum, to one year and eight months of prision correccional, as maximum, in
accordance with the computation proposed by Justice Roberto Abad in his dissenting opinion.

166
 Republic of the Philippines
SUPREME COURT
Baguio City

THIRD DIVISION

G.R. No. 188832               April 23, 2014

VIVENCIO B. VILLAGRACIA, Petitioner, 
vs.
FIFTH (5th) SHARI'A DISTRICT COURT and ROLDAN E. MALA, represented by his father Hadji Kalam T.
Mala, Respondents.

DECISION

LEONEN, J.:

Shari' a District Courts have no jurisdiction over real actions where one of the parties is not a Muslim.

This is a petition for certiorari with application for issuance of temporary restraining order and/or preliminary
injunction to set aside the Fifth (5th) Shari'a District Court's decision  dated June 11, 2008 and order  dated May 29,
1 2

2009 in SDC Special Proceedings Case No. 07-200.

The facts as established from the pleadings of the parties are as follows:

On February 15, 1996, Roldan E. Mala purchased a 300-square-meter parcel of land located in Poblacion, Parang,
Maguindanao, now Shariff Kabunsuan, from one Ceres Cañete. On March 3, 1996, Transfer Certificate of Title No.
T-15633 covering the parcel of land was issued in Roldan’s name.  At the time of the purchase, Vivencio B.
3

Villagracia occupied the parcel of land. 4

By 2002, Vivencio secured a Katibayan ng Orihinal na Titulo Blg. P-60192 issued by the Land Registration Authority
allegedly covering the same parcel of land. 5

On October 30, 2006, Roldan had the parcel of land surveyed. In a report, Geodetic Engineer Dennis P. Dacup
found that Vivencio occupied the parcel of land covered by Roldan’s certificate of title.6

To settle his conflicting claim with Vivencio, Roldan initiated barangay conciliation proceedings before the Office of
the Barangay Chairman of Poblacion II, Parang, Shariff Kabunsuan. Failing to settle with Vivencio at the barangay
level, Roldan filed an action to recover the possession of the parcel of land with respondent Fifth Shari’a District
Court.7

167
In his petition, Roldan alleged that he is a Filipino Muslim; that he is the registered owner of the lot covered by
Transfer Certificate of Title No. 15633; and that Vivencio occupied his property, depriving him of the right to use,
possess, and enjoy it. He prayed that respondent Fifth Shari’a District Court order Vivencio to vacate his property. 8

Respondent court took cognizance of the case and caused service of summons on Vivencio. However, despite
service of summons, Vivencio failed to file his answer. Thus, Roldan moved that he be allowed to present evidence
ex parte, which motion respondent Fifth Shari’a District Court granted in its order  dated January 30, 2008.
9 10

In its decision  dated June 11, 2008, respondent Fifth Shari’a District Court ruled that Roldan, as registered owner,
11

had the better right to possess the parcel of land. It ordered Vivencio to vacate the property, turn it over to Roldan,
and pay ₱10,000.00 as moderate damages and ₱5,000.00 as attorney’s fees.

On December 15, 2008, respondent Fifth Shari’a Distict Court issued the notice of writ of execution  to Vivencio,
12

giving him 30 days from receipt of the notice to comply with the decision. He received a copy of the notice on
December 16, 2008. 13

On January 13, 2009, Vivencio filed a petition for relief from judgment with prayer for issuance of writ of preliminary
injunction.  In his petition for relief from judgment, Vivencio cited Article 155, paragraph (2) of the Code of Muslim
14

Personal Laws of the Philippines  and argued that Shari’a District Courts may only hear civil actions and
15

proceedings if both parties are Muslims. Considering that he is a Christian, Vivencio argued that respondent Fifth
Shari’a District Court had no jurisdiction to take cognizance of Roldan’s action for recovery of possession of a parcel
of land. He prayed that respondent Fifth Shari’a District Court set aside the decision dated June 11, 2008 on the
ground of mistake. 16

Respondent Fifth Shari’a District Court ruled that Vivencio "intentionally [waived] his right to defend himself."  It 17

noted that he was duly served with summons and had notice of the following: Roldan’s motion to present evidence
ex parte, respondent Fifth Shari’a District Court’s decision dated June 11, 2008, and the writ of execution. However,
Vivencio only went to court "when he lost his right to assail the decision via certiorari." 18

According to respondent Fifth Shari’a District Court, Vivencio cited the wrong provision of law. Article 155,
paragraph (2) of the Code of Muslim Personal Laws of the Philippines refers to the jurisdiction of Shari’a Circuit
Courts, not of Shari’a District Courts.  It ruled that it had jurisdiction over Roldan’s action for recovery of possession.
19

Regardless of Vivencio being a non-Muslim, his rights were not prejudiced since respondent Fifth Shari’a District
Court decided the case applying the provisions of the Civil Code of the Philippines. 20

Thus, in its order  dated May 29, 2009, respondent Fifth Shari’a District Court denied Vivencio’s petition for relief
21

from judgment for lack of merit. It reiterated its order directing the issuance of a writ of execution of the decision
dated June 11, 2008.

Vivencio received a copy of the order denying his petition for relief from judgment on June 17, 2009. 22

On August 6, 2009, Vivencio filed the petition for certiorari with prayer for issuance of temporary restraining order
with this court.23

In his petition for certiorari, Vivencio argued that respondent Fifth Shari’a District Court acted without jurisdiction in
rendering the decision dated June 11, 2008. Under Article 143, paragraph (2)(b) of the Code of Muslim Personal
Laws of the Philippines,  Shari’a District Courts may only take cognizance of real actions where the parties involved
24

are Muslims. Reiterating that he is not a Muslim, Vivencio argued that respondent Fifth Shari’a District Court had no
jurisdiction over the subject matter of Roldan’s action. Thus, all the proceedings before respondent Fifth Shari’a
District Court, including the decision dated June 11, 2008, are void. 25

In the resolution  dated August 19, 2009, this court ordered Roldan to comment on Vivencio’s petition for certiorari.
26

This court subsequently issued a temporary restraining order enjoining the implementation of the writ of execution
against Vivencio. 27

On September 21, 2011, Roldan filed his comment  on the petition for certiorari. He allegedly filed the action for
28

recovery of possession with the Shari’a District Court where "a more speedy disposition of the case would be
obtained":29

1. That SDC Spl. Case No. 07-200 (Quieting of Title…) was duly filed with the Fifth (5th) Shariah District
Court, Cotabato City at the option of herein private respondent (petitioner below) who believed that a more
speedy disposition of the case would be obtained when the action is filed with the Shariah District Court than
in the Regional Trial Courts considering the voluminous pending cases at the Regional Trial Courts[.] 30

On Vivencio’s claim that respondent Fifth Shari’a District Court had no jurisdiction to decide the action for
recovery of possession because he is a non-Muslim, Roldan argued that no provision in the Code of Muslim

168
 Personal Laws of the Philippines prohibited non-Muslims from participating in Shari’a court proceedings,
especially in actions where the Shari’a court applied the provisions of the Civil Code of the Philippines. Thus,
respondent Fifth Shari’a District Court validly took cognizance of his action:

2. That the Shariah District Court is not a court exclusively for muslim litigants. No provision in the Code on
Muslim Personal Laws which expressly prohibits non-muslim to participate in the proceedings in the Shariah
Courts, especially in actions which applies the civil code and not the Code on Muslim Personal Laws;

3. The Shariah District Courts has jurisdiction over action for quieting of title filed by a muslim litigant since
the nature of the action involved mere removal of cloud of doubt upon one’s Certificate of Title. The laws
applied in this case is the Civil Code and other related laws, and not the Code on Muslim Personal Laws[.] 31

Since respondent Fifth Shari’a District Court had jurisdiction to decide the action for recovery of possession,
Roldan argued that the proceedings before it were valid. Respondent Fifth Shari’a District Court acquired
jurisdiction over the person of Vivencio upon service on him of summons. When Vivencio failed to file his
answer, he "effectively waived his right to participate in the proceedings [before the Fifth Shari’a District
Court]"  and he cannot argue that his rights were prejudiced:
32

4. That it is not disputed that herein petitioner (respondent below) was properly served with summons,
notices and other court processes when the SDC Spl. Case No. 07-200 was filed and heard in the Fifth (5th)
Shariah District Court, Cotabato City, but petitioner (respondent below) intentionally or without known
reason, ignore the proceedings;

5. That the main issue in the instant action for certiorari is whether or not herein petitioner (respondent
below) has effectively waived his right to participate in the proceedings below and had lost his right to appeal
via Certiorari; and the issue on whether or not the Fifth (5th) Shariah District Court has jurisdiction over an
action where one of the parties is a non-muslim;

6. That the Fifth (5th) Shariah District Court, Cotabato City acquired jurisdiction over the case and that the
same Court had correctly ruled that herein petitioner (respondent) intentionally waived his right to defend
himself including his right to appeal via certiorari;

7. That it is humbly submitted that when the Shariah District Court took cognizance of an action under its
concurrent jurisdiction with the Regional Trial Court, the law rules applied is not the Code on Muslim
Personal Laws but the Civil Code of the Philippines and the Revised Rules of Procedure, hence the same
would not prejudice the right of herein petitioner (respondent below)[.] 33

In the resolution dated November 21, 2011, this court ordered Vivencio to reply to Roldan’s comment. On February
3, 2012, Vivencio filed his manifestation,  stating that he would no longer file a reply to the comment as he had
34

"exhaustively discussed the issue presented for resolution in [his petition for certiorari]."35

The principal issue for our resolution is whether a Shari’a District Court has jurisdiction over a real action where one
of the parties is not a Muslim.

We also resolve the following issues:

1. Whether a Shari’a District Court may validly hear, try, and decide a real action where one of the parties is
a non-Muslim if the District Court decides the action applying the provisions of the Civil Code of the
Philippines; and

2. Whether a Shari’a District Court may validly hear, try, and decide a real action filed by a Muslim against a
non-Muslim if the non-Muslim defendant was served with summons.

We rule for petitioner Vivencio.

Respondent Fifth Shari’a District

Court had no jurisdiction to hear, try,
and decide Roldan’s action for
recovery of possession

Jurisdiction over the subject matter is "the power to hear and determine cases of the general class to which the
proceedings in question belong."  This power is conferred by law,  which may either be the Constitution or a statute.
36 37

Since subject matter jurisdiction is a matter of law, parties cannot choose, consent to, or agree as to what court or

169
tribunal should decide their disputes.  If a court hears, tries, and decides an action in which it has no jurisdiction, all
38

its proceedings, including the judgment rendered, are void. 39

To determine whether a court has jurisdiction over the subject matter of the action, the material allegations of the
complaint and the character of the relief sought are examined. 40

The law conferring the jurisdiction of Shari’a District Courts is the Code of the Muslim Personal Laws of the
Philippines. Under Article 143 of the Muslim Code, Shari’a District Courts have concurrent original jurisdiction with
"existing civil courts" over real actions not arising from customary contracts  wherein the parties involved are
41

Muslims:

ART 143. Original jurisdiction. – x x x x

(2) Concurrently with existing civil courts, the Shari’a District Court shall have original jurisdiction over:

xxxx

(b) All other personal and real actions not mentioned in paragraph 1(d)  wherein the parties involved are Muslims
42

except those for forcible entry and unlawful detainer, which shall fall under the exclusive original jurisdiction of the
Municipal Circuit Court; and

xxxx

When ownership is acquired over a particular property, the owner has the right to possess and enjoy it.  If the owner
43

is dispossessed of his or her property, he or she has a right of action to recover its possession from the
dispossessor.  When the property involved is real,  such as land, the action to recover it is a real action; otherwise,
44 45 46

the action is a personal action.  In such actions, the parties involved must be Muslims for Shari’a District Courts to
47

validly take cognizance of them.

In this case, the allegations in Roldan’s petition for recovery of possession did not state that Vivencio is a Muslim.
When Vivencio stated in his petition for relief from judgment that he is not a Muslim, Roldan did not dispute this
claim.

When it became apparent that Vivencio is not a Muslim, respondent Fifth Shari’a District Court should have motu
proprio dismissed the case. Under Rule 9, Section 1 of the Rules of Court, if it appears that the court has no
jurisdiction over the subject matter of the action based on the pleadings or the evidence on record, the court shall
dismiss the claim:

Section 1. Defenses and objections not pleaded. – Defenses and objections not pleaded either in a motion to
dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on
record that the court has no jurisdiction over the subject matter, that there is another action pending between the
same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the
court shall dismiss the claim.

Respondent Fifth Shari’a District Court had no authority under the law to decide Roldan’s action because not all of
the parties involved in the action are Muslims. Thus, it had no jurisdiction over Roldan’s action for recovery of
possession. All its proceedings in SDC Special Proceedings Case No. 07-200 are void.

Roldan chose to file his action with the Shari’a District Court, instead of filing the action with the regular courts, to
obtain "a more speedy disposition of the case."  This would have been a valid argument had all the parties involved
48

in this case been Muslims. Under Article 143 of the Muslim Code, the jurisdiction of Shari’a District Courts over real
actions not arising from customary contracts is concurrent with that of existing civil courts. However, this concurrent
jurisdiction over real actions "is applicable solely when both parties are Muslims"  as this court ruled in Tomawis v.
49

Hon. Balindong.  When one of the parties is not a Muslim, the action must be filed before the regular courts.
50

The application of the provisions of the Civil Code of the Philippines by respondent Fifth Shari’a District Court does
not validate the proceedings before the court. Under Article 175 of the Muslim Code, customary contracts are
construed in accordance with Muslim law.  Hence, Shari’a District Courts apply Muslim law when resolving real
51

actions arising from customary contracts.

In real actions not arising from contracts customary to Muslims, there is no reason for Shari’a District Courts to apply
Muslim law. In such real actions, Shari’a District Courts will necessarily apply the laws of general application, which
in this case is the Civil Code of the Philippines, regardless of the court taking cognizance of the action. This is the
reason why the original jurisdiction of Shari’a District Courts over real actions not arising from customary contracts is
concurrent with that of regular courts.

170
However, as discussed, this concurrent jurisdiction arises only if the parties involved are Muslims. Considering that
Vivencio is not a Muslim, respondent Fifth Shari’a District Court had no jurisdiction over Roldan’s action for recovery
of possession of real property. The proceedings before it are void, regardless of the fact that it applied the
provisions of the Civil Code of the Philippines in resolving the action.

True, no provision in the Code of Muslim Personal Laws of the Philippines expressly prohibits non-Muslims from
participating in Shari’a court proceedings. In fact, there are instances when provisions in the Muslim Code apply to
non-Muslims. Under Article 13 of the Muslim Code,  provisions of the Code on marriage and divorce apply to the
52

female party in a marriage solemnized according to Muslim law, even if the female is non-Muslim.  Under Article 93,
53

paragraph (c) of the Muslim Code,  a person of a different religion is disqualified from inheriting from a Muslim
54

decedent.  However, by operation of law and regardless of Muslim law to the contrary, the decedent’s parent or
55

spouse who is a non-Muslim "shall be entitled to one-third of what he or she would have received without such
disqualification."  In these instances, non-Muslims may participate in Shari’a court proceedings.
56 57

Nonetheless, this case does not involve any of the previously cited instances. This case involves an action for
recovery of possession of real property. As a matter of law, Shari’a District Courts may only take cognizance of a
real action "wherein the parties involved are Muslims."  Considering that one of the parties involved in this case is
58

not a Muslim, respondent Fifth Shari’a District Court had no jurisdiction to hear, try, and decide the action for
recovery of possession of real property. The judgment against Vivencio is void for respondent Fifth Shari’a District
Court’s lack of jurisdiction over the subject matter of the action.

That Vivencio raised the issue of lack of jurisdiction over the subject matter only after respondent Fifth Shari’a
District Court had rendered judgment is immaterial. A party may assail the jurisdiction of a court or tribunal over a
subject matter at any stage of the proceedings, even on appeal.  The reason is that "jurisdiction is conferred by law,
59

and lack of it affects the very authority of the court to take cognizance of and to render judgment on the action." 60

In Figueroa v. People of the Philippines,61 Venancio Figueroa was charged with reckless imprudence resulting in
homicide before the Regional Trial Court of Bulacan. The trial court convicted Figueroa as charged. On appeal with
the Court of Appeals, Figueroa raised for the first time the issue of jurisdiction of the Regional Trial Court to decide
the case. Ruling that the Regional Trial Court had no jurisdiction over the crime charged, this court dismissed the
criminal case despite the fact that Figueroa objected to the trial court’s jurisdiction only on appeal.

In Metromedia Times Corporation v. Pastorin,  Johnny Pastorin filed a complaint for constructive dismissal against
62

Metromedia Times Corporation. Metromedia Times Corporation actively participated in the proceedings before the
Labor Arbiter. When the Labor Arbiter ruled against Metromedia Times, it appealed to the National Labor Relations
Commission, arguing for the first time that the Labor Arbiter had no jurisdiction over the complaint. According to
Metromedia Times, the case involved a grievance issue "properly cognizable by the voluntary arbitrator."  This court
63

set aside the decision of the Labor Arbiter on the ground of lack of jurisdiction over the subject matter despite the
fact that the issue of jurisdiction was raised only on appeal.

There are exceptional circumstances when a party may be barred from assailing the jurisdiction of the court to
decide a case. In the 1968 case of Tijam v. Sibonghanoy,  the Spouses Tijam sued the Spouses Sibonghanoy on
64

July 19, 1948 before the Court of First Instance of Cebu to recover ₱1,908.00. At that time, the court with exclusive
original jurisdiction to hear civil actions in which the amount demanded does not exceed ₱2,000.00 was the court of
justices of the peace and municipal courts in chartered cities under Section 88 of the Judiciary Act of 1948.

As prayed for by the Spouses Tijam in their complaint, the Court of First Instance issued a writ of attachment against
the Spouses Sibonghanoy. However, the latter filed a counter-bond issued by Manila Surety and Fidelity Co., Inc.
Thus, the Court of First Instance dissolved the writ of attachment.

After trial, the Court of First Instance decided in favor of the Spouses Tijam. When the writ of execution returned
unsatisfied, the Spouses Tijam moved for the issuance of a writ of execution against Manila Surety and Fidelity Co.,
Inc.’s bond. The Court of First Instance granted the motion. Manila Surety and Fidelity Co., Inc. moved to quash the
writ of execution, which motion the Court of First Instance denied. Thus, the surety company appealed to the Court
of Appeals.

The Court of Appeals sustained the Court of First Instance’s decision. Five days after receiving the Court of
Appeals’ decision, Manila Surety and Fidelity Co., Inc. filed a motion to dismiss, arguing for the first time that the
Court of First Instance had no jurisdiction over the subject matter of the case. The Court of Appeals forwarded the
case to this court for resolution.

This court ruled that the surety company could no longer assail the jurisdiction of the Court of First Instance on the
ground of estoppel by laches. Parties may be barred from assailing the jurisdiction of the court over the subject
matter of the action if it took them an unreasonable and unexplained length of time to object to the court’s
jurisdiction.  This is to discourage the deliberate practice of parties in invoking the jurisdiction of a court to seek
65

affirmative relief, only to repudiate the court’s jurisdiction after failing to obtain the relief sought.  In such cases, the
66

171
court’s lack of jurisdiction over the subject matter is overlooked in favor of the public policy of discouraging such
inequitable and unfair conduct. 67

In Tijam, it took Manila Surety and Fidelity Co., Inc. 15 years before assailing the jurisdiction of the Court of First
Instance. As early as 1948, the surety company became a party to the case when it issued the counter-bond to the
writ of attachment. During trial, it invoked the jurisdiction of the Court of First Instance by seeking several affirmative
reliefs, including a motion to quash the writ of execution. The surety company only assailed the jurisdiction of the
Court of First Instance in 1963 when the Court of Appeals affirmed the lower court’s decision. This court said:

x x x x Were we to sanction such conduct on [Manila Surety and Fidelity, Co. Inc.’s] part, We would in effect be
declaring as useless all the proceedings had in the present case since it was commenced on July 19, 1948 and
compel [the spouses Tijam] to go up their Calvary once more.

The inequity and unfairness of this is not only patent but revolting. 68

After this court had rendered the decision in Tijam, this court observed that the "non-waivability of objection to
jurisdiction"  has been ignored, and the Tijam doctrine has become more the general rule than the exception.
69

In Calimlim v. Ramirez,  this court said:

70

A rule that had been settled by unquestioned acceptance and upheld in decisions so numerous to cite is that the
jurisdiction of a court over the subject-matter of the action is a matter of law and may not be conferred by consent or
agreement of the parties. The lack of jurisdiction of a court may be raised at any stage of the proceedings, even on
appeal. This doctrine has been qualified by recent pronouncements which stemmed principally from the ruling in the
cited case of [Tijam v. Sibonghanoy]. It is to be regretted, however, that the holding in said case had been applied to
situations which were obviously not contemplated therein. x x x. 71

Thus, the court reiterated the "unquestionably accepted"  rule that objections to a court’s jurisdiction over the
72

subject matter may be raised at any stage of the proceedings, even on appeal. This is because jurisdiction over the
subject matter is a "matter of law"  and "may not be conferred by consent or agreement of the parties."
73 74

In Figueroa,  this court ruled that the Tijam doctrine "must be applied with great care;"  otherwise, the doctrine "may
75 76

be a most effective weapon for the accomplishment of injustice": 77

x x x estoppel, being in the nature of a forfeiture, is not favored by law. It is to be applied rarely — only from
necessity, and only in extraordinary circumstances. The doctrine must be applied with great care and the equity
must be strong in its favor. When misapplied, the doctrine of estoppel may be a most effective weapon for the
accomplishment of injustice. x x x a judgment rendered without jurisdiction over the subject matter is void. x x x. No
laches will even attach when the judgment is null and void for want of jurisdiction x x x. 78

In this case, the exceptional circumstances similar to Tijam do not exist. Vivencio never invoked respondent Fifth
Shari’a District Court’s jurisdiction to seek affirmative relief. He filed the petition for relief from judgment precisely to
assail the jurisdiction of respondent Fifth Shari’a District Court over Roldan’s petition for recovery of possession.

Thus, the general rule holds. Vivencio validly assailed the jurisdiction of respondent Fifth Shari’a District Court over
the action for recovery of possession for lack of jurisdiction over the subject matter of Roldan’s action.

II

That respondent Fifth Shari’a

District Court served summons on
petitioner Vivencio did not vest it
with jurisdiction over the person of
petitioner Vivencio

Roldan argued that the proceedings before respondent Shari’a District Court were valid since the latter acquired
jurisdiction over the person of Vivencio. When Vivencio was served with summons, he failed to file his answer and
waived his right to participate in the proceedings before respondent Fifth Shari’a District Court. Since Vivencio
waived his right to participate in the proceedings, he cannot argue that his rights were prejudiced.

Jurisdiction over the person is "the power of [a] court to render a personal judgment or to subject the parties in a
particular action to the judgment and other rulings rendered in the action."  A court acquires jurisdiction over the
79

person of the plaintiff once he or she files the initiatory pleading.  As for the defendant, the court acquires
80

jurisdiction over his or her person either by his or her voluntary appearance in court  or a valid service on him or her
81

of summons. 82

172
Jurisdiction over the person is required in actions in personam  or actions based on a party’s personal
83

liability. Since actions in personam "are directed against specific persons and seek personal judgments,"  it is
84 85

necessary that the parties to the action "are properly impleaded and duly heard or given an opportunity to be
heard."  With respect to the defendant, he or she must have been duly served with summons to be considered
86

properly impleaded; otherwise, the proceedings in personam, including the judgment rendered, are void. 87

On the other hand, jurisdiction over the person is not necessary for a court to validly try and decide actions in
rem. Actions in rem are "directed against the thing or property or status of a person and seek judgments with
88

respect thereto as against the whole world."  In actions in rem, the court trying the case must have jurisdiction over
89

the res, or the thing under litigation, to validly try and decide the case. Jurisdiction over the res is acquired either "by
the seizure of the property under legal process, whereby it is brought into actual custody of the law; or as a result of
the institution of legal proceedings, in which the power of the court is recognized and made effective."  In actions in90

rem, summons must still be served on the defendant but only to satisfy due process requirements. 91

Unlike objections to jurisdiction over the subject matter which may be raised at any stage of the proceedings,
objections to jurisdiction over the person of the defendant must be raised at the earliest possible opportunity;
otherwise, the objection to the court’s jurisdiction over the person of the defendant is deemed waived. Under Rule 9,
Section 1 of the Rules of Court, "defenses and objections not pleaded either in a motion to dismiss or in the answer
are deemed waived."

In this case, Roldan sought to enforce a personal obligation on Vivencio to vacate his property, restore to him the
possession of his property, and pay damages for the unauthorized use of his property.  Thus, Roldan’s action for
92

recovery of possession is an action in personam. As this court explained in Ang Lam v. Rosillosa and Santiago,  an 93

action to recover the title to or possession of a parcel of land "is an action in personam, for it binds a particular
individual only although it concerns the right to a tangible thing."  Also, in Muñoz v. Yabut, Jr.,  this court said that "a
94 95

judgment directing a party to deliver possession of a property to another is in personam. It is binding only against
the parties and their successors-in-interest by title subsequent to the commencement of the action." 96

This action being in personam, service of summons on Vivencio was necessary for respondent Fifth Shari’a District
Court to acquire jurisdiction over Vivencio’s person.

However, as discussed, respondent Fifth Shari’a District Court has no jurisdiction over the subject matter of the
action, with Vivencio not being a Muslim. Therefore, all the proceedings before respondent Shari’a District Court,
including the service of summons on Vivencio, are void.

III

The Shari’a Appellate Court and the

Office of the Jurisconsult in Islamic
law must now be organized to
effectively enforce the Muslim legal
system in the Philippines

We note that Vivencio filed directly with this court his petition for certiorari of respondent Fifth Shari’a District Court’s
decision. Under the judicial system in Republic Act No. 9054,  the Shari’a Appellate Court has exclusive original
97

jurisdiction over petitions for certiorari of decisions of the Shari’a District Courts. He should have filed his petition for
certiorari before the Shari’a Appellate Court.

However, the Shari’a Appellate Court is yet to be organized.  Thus, we call for the organization of the court system
1âwphi1

created under Republic Act No. 9054 to effectively enforce the Muslim legal system in our country. After all, the
Muslim legal system – a legal system complete with its own civil, criminal, commercial, political, international, and
religious laws  – is part of the law of the land,  and Shari’a courts are part of the Philippine judicial system.
98 99 100

Shari’a Circuit Courts and Shari’a District Courts created under the Code of Muslim Personal Laws of the Philippines
shall continue to discharge their duties.  All cases tried in Shari’a Circuit Courts shall be appealable to Shari’a
101

District Courts.[[102]

The Shari’a Appellate Court created under Republic Act No. 9054 shall exercise appellate jurisdiction over all cases
tried in the Shari’a District Courts.  It shall also exercise original jurisdiction over petitions for certiorari, prohibition,
103

mandamus, habeas corpus, and other auxiliary writs and processes in aid of its appellate jurisdiction.  The 104

decisions of the Shari’a Appellate Court shall be final and executory, without prejudice to the original and appellate
jurisdiction of this court.
105

This court held in Tomawis v. Hon. Balindong  that "until such time that the Shari’a Appellate Court shall have been
106

organized,"  decisions of the Shari’a District Court shall be appealable to the Court of Appeals and "shall be
107

referred to a Special Division to be organized in any of the [Court of Appeals] stations preferably composed of
Muslim [Court of Appeals] Justices."  However, considering that To m a w i s was not yet promulgated when
108

173
Vivencio filed his petition for certiorari on August 6, 2009, we take cognizance of Vivencio’s petition for certiorari in
the exercise of our original jurisdiction over petitions for certiorari.
109

Moreover, priority should be given in organizing the Office of the Jurisconsult in Islamic law. A Jurisconsult in Islamic
law or "Mufti" is an officer with authority to render legal opinions or "fatawa"  on any questions relating to Muslim
110

law.  These legal opinions should be based on recognized authorities  and "must be rendered in precise
111 112

accordance with precedent."  In the Philippines where only Muslim personal laws are codified, a legal officer
113

learned in the Qur’an and Hadiths is necessary to assist this court as well as Shari’a court judges in resolving
disputes not involving Muslim personal laws.

All told, Shari’a District Courts have jurisdiction over a real action only when the parties involved are Muslims.
Respondent Fifth Shari’a District Court acted without jurisdiction in taking cognizance of Roldan E. Mala’s action for
recovery of possession considering that Vivencio B. Villagracia is not a Muslim. Accordingly, the proceedings in
SDC Special Proceedings Case No. 07-200, including the judgment rendered, are void.

WHEREFORE, the petition for certiorari is GRANTED. Respondent Fifth Shari’a District Court’s decision dated June
11, 2008 and order dated May 29, 2009 in SDC Special Proceedings Case No. 07-200 are SET ASIDE without
prejudice to the filing of respondent Roldan E. Mala of an action with the proper court.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Baguio City

EN BANC

G.R. No. 203335               April 22, 2014

JOSE JESUS M. DISINI, JR., ROWENA S. DISINI, LIANNE IVY P. MEDINA, JANETTE TORAL and ERNESTO
SONIDO, JR., Petitioners, 
vs.
THE SECRETARY OF JUSTICE, THE SECRETARY OF THE DEPARTMENT OF THE INTERIOR AND LOCAL
GOVERNMENT, THE EXECUTIVE DIRECTOR OF THE INFORMATION AND COMMUNICATIONS
TECHNOLOGY OFFICE, THE CHIEF OF THE PHILIPPINE NATIONAL POLICE and THE DIRECTOR OF THE
NATIONAL BUREAU OF INVESTIGATION, Respondents.

x-----------------------x

G.R. No. 203299

LOUIS "BAROK" C. BIRAOGO, Petitioner, 

vs.
NATIONAL BUREAU OF INVESTIGATION and PHILIPPINE NATIONAL POLICE, Respondents.

x-----------------------x

G.R. No. 203306

ALAB NG MAMAMAHAYAG (ALAM), HUKUMAN NG MAMAMAYAN MOVEMENT, INC., JERRY S. YAP,

BERTENI "TOTO" CAUSING, HERNANI Q. CUARE, PERCY LAPID, TRACY CABRERA, RONALDO E. RENTA,
CIRILO P. SABARRE, JR., DERVIN CASTRO, ET AL., Petitioners, 
vs.
OFFICE OF THE PRESIDENT, represented by President Benigno Simeon Aquino III, SENATE OF THE
PHILIPPINES, and HOUSE OF REPRESENTATIVES, Respondents.

x-----------------------x

G.R. No. 203359

174
SENATOR TEOFISTO DL GUINGONA III, Petitioner, 
vs.
EXECUTIVE SECRETARY, THE SECRETARY OF JUSTICE, THE SECRETARY OFTHE DEPARTMENT OF
INTERIOR AND LOCAL GOVERNMENT, THE CHIEF OF THE PHILIPPINE NATIONAL POLICE, and DIRECTOR
OF THE NATIONAL BUREAU OF INVESTIGATION, Respondents.

x-----------------------x

G.R. No. 203378

ALEXANDER ADONIS, ELLEN TORDESILLAS, MA. GISELA ORDENES-CASCOLAN, H. HARRY L. ROQUE,

JR., ROMEL R. BAGARES, and GILBERT T. ANDRES, Petitioners, 
vs.
THE EXECUTIVE SECRETARY, THE DEPARTMENT OF BUDGET AND MANAGEMENT, THE DEPARTMENT
OF JUSTICE, THE DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT, THE NATIONAL BUREAU
OF INVESTIGATION, THE PHILIPPINE NATIONAL POLICE, AND THE INFORMATION AND
COMMUNICATIONS TECHNOLOGY OFFICE-DEPARTMENT OF SCIENCE AND TECHNOLOGY, Respondents.

x-----------------------x

G.R. No. 203391

HON. RAYMOND V. PALATINO, HON. ANTONIO TINIO, VENCER MARI CRISOSTOMO OF ANAKBAYAN, MA.
KATHERINE ELONA OF THE PHILIPPINE COLLEGIAN, ISABELLE THERESE BAGUISI OF THE NATIONAL
UNION OF STUDENTS OF THE PHILIPPINES, ET AL., Petitioners, 
vs.
PAQUITO N. OCHOA, JR., in his capacity as Executive Secretary and alter-ego of President Benigno Simeon
Aquino III, LEILA DE LIMA in her capacity as Secretary of Justice, Respondents.

x-----------------------x

G.R. No. 203407

BAGONG ALYANSANG MAKABAYAN SECRETARY GENERAL RENATO M. REYES, JR., National Artist
BIENVENIDO L. LUMBERA, Chairperson of Concerned Artists of the Philippines, ELMER C. LABOG,
Chairperson of Kilusang Mayo Uno, CRISTINA E. PALABAY, Secretary General of Karapatan, FERDINAND
R. GAITE, Chairperson of COURAGE, JOEL B. MAGLUNSOD, Vice President of Anakpawis Party-List, LANA
R. LINABAN, Secretary General Gabriela Women’s Party, ADOLFO ARES P. GUTIERREZ, and JULIUS
GARCIA MATIBAG, Petitioners, 
vs.
BENIGNO SIMEON C. AQUINO III, President of the Republic of the Philippines, PAQUITO N. OCHOA, JR.,
Executive Secretary, SENATE OF THE PHILIPPINES, represented by SENATE PRESIDENT JUAN PONCE
ENRILE, HOUSE OF REPRESENTATIVES, represented by SPEAKER FELICIANO BELMONTE, JR., LEILA DE
LIMA, Secretary of the Department of Justice, LOUIS NAPOLEON C. CASAMBRE, Executive Director of the
Information and Communications Technology Office, NONNATUS CAESAR R. ROJAS, Director of the
National Bureau of Investigation, D/GEN. NICANOR A. BARTOLOME, Chief of the Philippine National Police,
MANUEL A. ROXAS II, Secretary of the Department of the Interior and Local Government, Respondents.

x-----------------------x

G.R. No. 203440

MELENCIO S. STA. MARIA, SEDFREY M. CANDELARIA, AMPARITA STA. MARIA, RAY PAOLO J.
SANTIAGO, GILBERT V. SEMBRANO, and RYAN JEREMIAH D. QUAN (all of the Ateneo Human Rights
Center),Petitioners, 
vs.
HONORABLE PAQUITO OCHOA in his capacity as Executive Secretary, HONORABLE LEILA DE LIMA in her
capacity as Secretary of Justice, HONORABLE MANUEL ROXAS in his capacity as Secretary of the
Department of Interior and Local Government, The CHIEF of the Philippine National Police, The DIRECTOR
of the National Bureau of Investigation (all of the Executive Department of Government), Respondents.

x-----------------------x

G.R. No. 203453

175
NATIONAL UNION OF JOURNALISTS OF THE PHILIPPINES (NUJP), PHILIPPINE PRESS INSTITUTE (PPI),
CENTER FOR MEDIA FREEDOM AND RESPONSIBILITY, ROWENA CARRANZA PARAAN, MELINDA
QUINTOS-DE JESUS, JOSEPH ALWYN ALBURO, ARIEL SEBELLINO AND THE PETITIONERS IN THE e-
PETITION http://www.nujp.org/no-to-ra10175/, Petitioners, 
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF JUSTICE, THE SECRETARY OF THE INTERIOR AND
LOCAL GOVERNMENT, THE SECRETARY OF BUDGET AND MANAGEMENT, THE DIRECTOR GENERAL OF
THE PHILIPPINE NATIONAL POLICE, THE DIRECTOR OF THE NATIONAL BUREAU OF INVESTIGATION,
THE CYBERCRIME INVESTIGATION AND COORDINATING CENTER, AND ALL AGENCIES AND
INSTRUMENTALITIES OF GOVERNMENT AND ALL PERSONS ACTING UNDER THEIR INSTRUCTIONS,
ORDERS, DIRECTION IN RELATION TO THE IMPLEMENTATION OF REPUBLIC ACT NO.
10175, Respondents.

x-----------------------x

G.R. No. 203454

PAUL CORNELIUS T. CASTILLO & RYAN D. ANDRES, Petitioners, 

vs.
THE HON. SECRETARY OF JUSTICE, THE HON. SECRETARY OF INTERIOR AND LOCAL
GOVERNMENT,Respondents.

x-----------------------x

G.R. No. 203469

ANTHONY IAN M. CRUZ; MARCELO R. LANDICHO; BENJAMIN NOEL A. ESPINA; MARCK RONALD C.
RIMORIN; JULIUS D. ROCAS; OLIVER RICHARD V. ROBILLO; AARON ERICK A. LOZADA; GERARD ADRIAN
P. MAGNAYE; JOSE REGINALD A. RAMOS; MA. ROSARIO T. JUAN; BRENDALYN P. RAMIREZ; MAUREEN
A. HERMITANIO; KRISTINE JOY S. REMENTILLA; MARICEL O. GRAY; JULIUS IVAN F. CABIGON;
BENRALPH S. YU; CEBU BLOGGERS SOCIETY, INC. PRESIDENT RUBEN B. LICERA, JR; and PINOY
EXPAT/OFW BLOG AWARDS, INC. COORDINATOR PEDRO E. RAHON; Petitioners, 
vs.
HIS EXCELLENCY BENIGNO S. AQUINO III, in his capacity as President of the Republic of the Philippines;
SENATE OF THE PHILIPPINES, represented by HON. JUAN PONCE ENRILE, in his capacity as Senate
President; HOUSE OF REPRESENTATIVES, represented by FELICIANO R. BELMONTE, JR., in his capacity
as Speaker of the House of Representatives; HON. PAQUITO N. OCHOA, JR., in his capacity as Executive
Secretary; HON. LEILA M. DE LIMA, in her capacity as Secretary of Justice; HON. LOUIS NAPOLEON C.
CASAMBRE, in his capacity as Executive Director, Information and Communications Technology Office;
HON. NONNATUS CAESAR R. ROJAS, in his capacity as Director, National Bureau of Investigation; and
P/DGEN. NICANOR A. BARTOLOME, in his capacity as Chief, Philippine National Police, Respondents.

x-----------------------x

G.R. No. 203501

PHILIPPINE BAR ASSOCIATION, INC., Petitioner, 

vs.
HIS EXCELLENCY BENIGNO S. AQUINO III, in his official capacity as President of the Republic of the
Philippines; HON. PAQUITO N. OCHOA, JR., in his official capacity as Executive Secretary; HON. LEILA M.
DE LIMA, in her official capacity as Secretary of Justice; LOUIS NAPOLEON C. CASAMBRE, in his official
capacity as Executive Director, Information and Communications Technology Office; NONNATUS CAESAR
R. ROJAS, in his official capacity as Director of the National Bureau of Investigation; and DIRECTOR
GENERAL NICANOR A. BARTOLOME, in his official capacity as Chief of the Philippine National
Police,Respondents.

x-----------------------x

G.R. No. 203509

BAYAN MUNA REPRESENTATIVE NERI J. COLMENARES, Petitioner, 

vs.
THE EXECUTIVE SECRETARY PAQUITO OCHOA, JR., Respondent.

x-----------------------x

176
G.R. No. 203515

NATIONAL PRESS CLUB OF THE PHILIPPINES, INC. represented by BENNY D. ANTIPORDA in his capacity
as President and in his personal capacity, Petitioner, 
vs.
OFFICE OF THE PRESIDENT, PRES. BENIGNO SIMEON AQUINO III, DEPARTMENT OF JUSTICE,
DEPARTMENT OF INTERIOR AND LOCAL GOVERNMENT, PHILIPPINE NATIONAL POLICE, NATIONAL
BUREAU OF INVESTIGATION, DEPARTMENT OF BUDGET AND MANAGEMENT AND ALL OTHER
GOVERNMENT INSTRUMENTALITIES WHO HAVE HANDS IN THE PASSAGE AND/OR IMPLEMENTATION OF
REPUBLIC ACT 10175, Respondents.

x-----------------------x

G.R. No. 203518

PHILIPPINE INTERNET FREEDOM ALLIANCE, composed of DAKILA- PHILIPPINE COLLECTIVE FOR

MODERN HEROISM, represented by Leni Velasco, PARTIDO LAKAS NG MASA, represented by Cesar S.
Melencio, FRANCIS EUSTON R. ACERO, MARLON ANTHONY ROMASANTA TONSON, TEODORO A.
CASIÑO, NOEMI LARDIZABAL-DADO, IMELDA MORALES, JAMES MATTHEW B. MIRAFLOR, JUAN G.M.
RAGRAGIO, MARIA FATIMA A. VILLENA, MEDARDO M. MANRIQUE, JR., LAUREN DADO, MARCO VITTORIA
TOBIAS SUMAYAO, IRENE CHIA, ERASTUS NOEL T. DELIZO, CRISTINA SARAH E. OSORIO, ROMEO
FACTOLERIN, NAOMI L. TUPAS, KENNETH KENG, ANA ALEXANDRA C. CASTRO, Petitioners, 
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF JUSTICE, THE SECRETARY OF INTERIOR AND
LOCAL GOVERNMENT, THE SECRETARY OF SCIENCE AND TECHNOLOGY, THE EXECUTIVE DIRECTOR
OF THE INFORMATION TECHNOLOGY OFFICE, THE DIRECTOR OF THE NATIONAL BUREAU OF
INVESTIGATION, THE CHIEF, PHILIPPINE NATIONAL POLICE, THE HEAD OF THE DO OFFICE OF
CYBERCRIME, and THE OTHER MEMBERS OF THE CYBERCRIME INVESTIGATION AND COORDINATING
CENTER, Respondents.

RESOLUTION

ABAD, J.:

A number of petitioners seek reconsideration of the Court's February 18, 2014 Decision that declared invalid and
unconstitutional certain provisions of Republic Act 10125 or the Cybercrime Prevention Act of 2012 and upheld the
validity of the others. The respondents, represented by the Office of the Solicitor General, also seek reconsideration
of portions of that decision. After going over their motions, however, the Court sees no substantial arguments from
either side to warrant the reversal of its February 18, 2014 Decision.

The point about the legislative bicameral committee's insertions of certain provisions that were neither in the House
bill nor in the Senate bill is something that the Court is not inclined to investigate since insertions are within the
power of those committees to make so long as the passage of the law complies with the constitutional
requirements.  The Cybercrime Prevention Act went through both houses and they approved it. Any issue
1

concerning alleged non-compliance with the governing rules of both houses regarding committee insertions have to
be internally resolved by each house.

In any event, the Court will briefly address certain aspects of the decision that drew the most objections.

Section 6 of the cybercrime law imposes penalties that are one degree higher when the crimes defined in the
Revised Penal Code and certain special laws are committed with the use of information and communication
technologies (ICT). Some of the petitioners insist that Section 6 is invalid since it produces an unusual chilling effect
on users of cyberspace that would hinder free expression.

Petitioner Bloggers and Netizens for Democracy insist that Section 6 cannot stand in the absence of a definition of
the term "information and communication technology".  But petitioner seems to forget the basic tenet that statutes
2

should not be read in isolation from one another. The parameters of that ICT exist in many other laws. Indeed those
parameters have been used as basis for establishing government systems and classifying evidence.  These along
3

with common usage provide the needed boundary within which the law may be applied.

The Court had ample opportunity to consider the proposition that Section 6 violates the equal protection clause via
the parties’ pleadings, oral arguments, and memoranda. But, as the Decision stressed, the power to fix the penalties
for violations of penal laws, like the cybercrime law, exclusively belongs to Congress.

In any event, Section 6 of the cybercrime law merely makes the commission of existing crimes through the internet a
qualifying circumstance that raises by one degree the penalties corresponding to such crimes. This is not at all

177
arbitrary since a substantial distinction exists between crimes committed through the use of ICT and similar crimes
committed using conventional means.

The United Nations Special Rapporteur,  Frank La Rue, acknowledged the material distinction. He pointed out that
4

"[t]he vast potential and benefits of the Internet are rooted in its unique characteristics, such as its speed, worldwide
reach and relative anonymity." For this reason, while many governments advocate freedom online, they recognize
the necessity to regulate certain aspects of the use of this media to protect the most vulnerable. 5

Not infrequently, certain users of the technology have found means to evade being identified and for this reason
have been emboldened to reach far more victims or cause greater harm or both. It is, therefore, logical for Congress
to consider as aggravating the deliberate use of available ICT by those who ply their wicked trades.

Compared to traditional crimes, cybercrimes are more perverse. In traditional estafa for example, the offender could
reach his victim only at a particular place and a particular time. It is rare that he could consummate his crime without
exposing himself to detection and prosecution. Fraud online, however, crosses national boundaries, generally
depriving its victim of the means to obtain reparation of the wrong done and seek prosecution and punishment of the
absent criminal. Cybercriminals enjoy the advantage of anonymity, like wearing a mask during a heist.

Petitioners share the Chief Justice’s concern for the overall impact of those penalties, being one degree higher than
those imposed on ordinary crimes, including the fact that the prescriptive periods for the equivalent cybercrimes
have become longer. 6

Prescription is not a matter of procedure over which the Court has something to say. Rather, it is substantive law
since it assumes the existence of an authority to punish a wrong, which authority the Constitution vests in Congress
alone. Thus, there is no question that Congress may provide a variety of periods for the prescription of offenses as it
sees fit. What it cannot do is pass a law that extends the periods of prescription to impact crimes committed before
its passage. 7

It is pointed out that the legislative discretion to fix the penalty for crimes is not absolute especially when this
discretion is exercised in violation of the freedom of expression. The increase in the penalty for online libel creates,
according to this view, greater and unusual chilling effect that violates the protection afforded to such freedom.

But what the stiffer penalty for online libel truly targets are those who choose to use this most pervasive of media
without qualms, tearing down the reputation of private individuals who value their names and community standing.
The law does not remotely and could not have any chilling effect on the right of the people to disagree, a most
protected right, the exercise of which does not constitute libel.

The majority of the movants believe that the Court’s decision upholding the constitutionality of Section 4(c)(4), which
penalizes online libel, effectively tramples upon the right to free expression.  But libel is not a protected speech.
1âwphi1

There is no freedom to unjustly destroy the reputation of a decent woman by publicly claiming that she is a paid
prostitute.

As early as 1912, the Court held that libel is a form of expression not protected by the Constitution.  Libel, like
8

obscenity, belongs to those forms of speeches that have never attained Constitutional protection and are
considered outside the realm of protected freedom. As explained by the US Supreme Court in Champlinsky v. New
Hampsire: 9

Allowing the broadest scope to the language and purpose of the Fourteenth Amendment, it is well understood that
the right of free speech is not absolute at all times and under all circumstances. There are certain well-defined and
narrowly limited classes of speech, the prevention and punishment of which have never been thought to raise any
Constitutional problem. These include the lewd and obscene, the profane, the libelous, and the insulting or "fighting"
words – those which, by their very utterance, inflict injury or tend to incite an immediate breach of the peace.

It has been well observed that such utterances are no essential part of any exposition of ideas, and are of such
slight social value as a step to truth that any benefit that may be derived from them is clearly outweighed by the
social interest in order and morality. "Resort to epithets or personal abuse is not in any proper sense communication
of information or opinion safeguarded by the Constitution, and its punishment as a criminal act would raise no
question under that instrument." (Emphasis supplied)

The constitutional guarantee against prior restraint and subsequent punishment, the jurisprudential requirement of
"actual malice," and the legal protection afforded by "privilege communications" all ensure that protected speech
remains to be protected and guarded. As long as the expression or speech falls within the protected sphere, it is the
solemn duty of courts to ensure that the rights of the people are protected.

At bottom, the deepest concerns of the movants seem to be the fact that the government seeks to regulate activities
in the internet at all. For them, the Internet is a place where a everyone should be free to do and say whatever he or

178
she wants. But that is anarchical. Any good thing can be converted to evil use if there are no laws to prohibit such
use. Indeed, both the United States and the Philippines have promulgated laws that regulate the use of and access
to the Internet.
10

The movants argue that Section 4(c)(4) is both vague and overbroad. But, again, online libel is not a new crime. It is
essentially the old crime of libel found in the 1930 Revised Penal Code and transposed to operate in the
cyberspace. Consequently, the mass of jurisprudence that secures the freedom of expression from its reach applies
to online libel. Any apprehended vagueness in its provisions has long been settled by precedents.

The parties' other arguments in their respective motions for reconsideration are mere reiterations that the Court
already considered and ruled upon when it promulgated its earlier Decision.

WHEREFORE, the Court DENIES with finality the various motions for reconsideration that both the petitioners and
the respondents, represented by the Office of the Solicitor General, filed for lack of merit.

SO ORDERED.

DISSENTING OPINION

LEONEN, J.:

I reiterate my dissent in this case.

I am also of the view that the seven (7) Motions for Partial Reconsideration  and the Motion for
1

Reconsideration have raised very serious constitutional issues that should merit a second full deliberation by this
2

court. At the very least, we should have required the opposing parties to file their comments on these motions.
Thereafter, a full analytical evaluation of each and every argument should have been done. The members of this
court should have been given enough time to be open and reflect further on the points raised by the parties.

The matters raised by the parties revolve around the cherished right to free expression in the internet age. The brief
resolution issued on behalf of the majority of this court fails to do justice to the far-reaching consequences of our
decision in this case.

It is not enough that we proclaim, as the majority does, that libel is unprotected speech. The ponencia’s example,
i.e. "[t]here is no freedom to unjustly destroy the reputation of a decent woman by publicly claiming that she is a paid
prostitute,"  fails to capture the nuances of criminalizing libel in our jurisprudence and in reality. It is a precarious
3

simplification of the issue inferred from one imagined case. This obfuscation practically neuters the ability of this
court to do incisive analysis in order to provide the necessary protection to speech as it applies to the internet.

The ponencia cites the 1912 case of Worcester v Ocampo  to support its argument. There was no internet in 1912.
4

The jurisprudential analysis of problems relating to speech criticizing public officers and public figures took many
turns since then. 5

The analysis of libel is compounded by the unfortunate confusion by the ponencia of "libelous speech" and "hate
speech" by citing a case decided beyond our jurisdiction, that of Chaplinsky v. New Hampsire.  Chaplinsky was a
6

case decided in 1942 and the words uttered there were "fighting words" within the context of another language and
another culture. This case should have been taken in the context of subsequent declarations from the Supreme
Court of that jurisdiction which asserted that debates on public issues will occasionally be caustic but needs to be
"uninhibited, robust and wide open."  This was the 1964 case of New York Times Co. v. Sullivan.
7 8

Until the promulgation of the main opinion in this case, Ayer Productions Pty. Ltd. v. Capulong  was the controlling
9

case in this jurisdiction, not Chaplinsky v. New Hampshire. Ayer Productions clarified jurisprudence that emerged
since US v. Bustos  and expanded the protection of free speech as against prosecutions for libel for both public
10

officers and public figures. These precedents were unbroken until our decision in this case.

The majority now condones the same 1930s text definition of libel effectively discarding the carefully crafted
exception painstakingly built from the assertion of fundamental rights in this court. This condonation reveals the
legislative blinders to the radically different context of the internet. The text of Section 4(c)(4) of the Cybercrime
Prevention Act of 2012 is a swing towards lesser protection of the primordial right to speech. The position taken by
the majority deserves a second hard look, if only to ensure the constitutional guarantee that our people truly have
freedom of expression as a means to assert their sovereignty and governmental authority in cyberspace.

Further reflection and deliberation is necessary, aided by comments from all the parties to this case, to determine
the effect of such simplified referral to the 1930s provision on libel in a law that seeks to regulate networked and
layered communities in the internet. The lines that distinguish what is private and what is public in cyberspace are
not as clear as in the physical world. Social media creates various interlocking communities of friends and followers.

179
The ponencia’s concept of author and its simplified distinction of those that post and those that "like" posted
comments are not entirely accurate as used in the internet.  A Twitter community of twenty followers should not be
11

likened to a Twitter community of thousands. Conversations limited to a small group should not be considered public
for purposes of libel.

"Public defamation" as a category might not make sense in cyberspace. Unlike various types of media for which our
courts may now be familiar with, entry into various cyberspace communities may require several conscious acts by
the user which may negate the evils that criminal libel is supposed to prevent. For instance, the user agrees to end-
user license agreements (EULA).

The chilling effect on various types of speech with just the possibility of criminal libel prosecution compared with the
consequences of civil liabilities for defamation presents another dimension that have been glossed over by the main
opinion and the resolution on the various motions for reconsideration.  We have to acknowledge the real uses of
12

criminal libel if we are to be consistent to protect speech made to make public officers and government accountable.
Criminal libel has an in terrorem effect that is inconsistent with the contemporary protection of the primordial and
necessary right of expression enshrined in our Constitution. The history and actual use of criminal libel  should be
13

enough for us to take a second look at the main opinion in this case. The review should include a consideration of
the nature of cyberspace as layered communities used to evolve ideas. Such review should result in a declaration of
unconstitutionality of criminal libel in the Revised Penal Code and in the Cybercrime Prevention Act of 2012.

The resolution of these motions for reconsideration does not even consider the arguments raised against the
overbroad concept of "lascivious" in Section 4 (c)(1) or the prohibition of cybersex. This standard is an unacceptable
retreat from our current jurisprudential concepts of obscenity  that produced a refined balance between expression
14

and public rights. This court should seriously take the allegations of vagueness and overbroadness  and the
15

possibility that the leeway given to law enforcers  can actual limit the fundamental rights of privacy and autonomy as
16

well as the freedoms to express sexual intimacies.

Also neglected are the issues raised in relation to section 4 (c)(3) which the Solicitor General characterized as
sufficient and narrowly tailored to meet the public objective of preventing spam while at the same time solicitous of
speech in the form of advertisements.  I view the current provisions as sufficiently narrow and tailored to meet
17

legitimate and compelling state interests. It protects the ordinary internet user against unwarranted intrusions.
Certainly, freedom of expression should not evolve into a fundamental and protected right to badger. The
Cybercrime Prevention Act of 2012 does not prohibit advertising. It simply requires that whoever advertises must be
accountable to the user, not use false identities and allow for opt out mechanisms so that the user will not continue
to receive unwelcome advertising ad nauseum. 18

I agree with the Chief Justice that Section 6 attenuates the penalties unjustifiably. I add that this amounts to a
greater chilling effect when speech in any of its forms (political, commercial or with sexual content) transfers from
physical spaces to the internet. There can be no reason for such additional deterrence: none that would justify the
increase in the penalties. This issue, too, requires better comment from all the parties and a fuller and more
deliberate deliberation from this court.

Further comment from the parties will allow us to fully appreciate the nuances, layers, and dimensions occasioned
by the various platforms in the internet that color the seemingly simple issues involved in this case. We have to be
open to understanding the context of these issues from parties that may have used the internet in a more pervasive
manner and are more familiar with the terrain than the members of this court. Comment from the other parties could
have enlightened us further. We lose nothing with better clarification of context from the parties.

ACCORDINGLY, I vote against the issuance, at this juncture, of a resolution denying, all seven (7) Motions for
Partial Reconsideration and the Motion for Reconsideration for lack of merit. I also vote to REQUIRE all the parties
to comment on the seven (7) Motions for Partial Reconsideration and the Motion for Reconsideration within a non-
extendible period of thirty (30) days from notice.

I maintain the vote I manifested in my Dissenting and Concurring Opinion to the February 18, 2014 decision. Thus, I
vote to declare as unconstitutional for being overbroad and violative of Article III, Section 4 of the Constitution the
following provisions of Republic Act No. 10175 or the Cybercrime Prevention Act of 2012:

(a) The entire Section 19 or the "take down" provision;

(b) The entire Section 4(c)(4) on cyber libel as well as Articles 353, 354, and 355 on libel of the Revised
Penal Code;

(c) The entire Section 4(c)( 1) on cybersex; .

(d) Section 5 as it relates to Sections 4(c)(l) and 4(c)(4);

180
 (e) Section 6 as it increases the penalties to Sections 4(c)(1) and 4(c)(4);

(f) Section 7 as it allows impermissibly countless prosecution of Sections 4(c)(1) and 4(c)(4); and

(g) Section 12 on warrantless real-time traffic data surveillance.

Likewise, I maintain my dissent with the majority's finding that Section 4(c)(3) on Unsolicited Commercial Advertising
is unconstitutional.

Moreover, I maintain my vote to dismiss the rest of the constitutional challenges against the other provisions in
Republic Act No. 10175 as raised in the consolidated petitions for not being justiciable in the absence of an actual
case or controversy.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 203974               April 22, 2014

AURELIO M. UMALI, Petitioner, 
vs.
COMMISSION ON ELECTIONS, JULIUS CESAR V. VERGARA, and THE CITY GOVERNMENT OF
CABANATUAN, Respondents.

x-----------------------x

G.R. No. 204371

J.V. BAUTISTA, Petitioner, 
vs.
COMMISSION ON ELECTIONS, Respondent.

DECISION

VELASCO, JR., J.:

Before the Court is the consolidated case for Petition for Certiorari and Prohibition with prayer for injunctive relief,
docket as G.R. No. 203974, assailing Minute Resolution No. 12-0797  and Minute Resolution No. 12-0925  dated
1 2

September 11, 2012 and October 16, 2012, respectively, both promulgated by public respondent Commission on
Elections (COMELEC), and Petition for Mandamus, docketed G.R. No. 204371, seeking to compel public
respondent to implement the same.

The Facts

On July 11, 2011, the Sangguniang Panglungsod of Cabanatuan City passed Resolution No. 183-2011, requesting
the President to declare the conversion of Cabanatuan City from a component city of the province of Nueva Ecija
into a highly urbanized city (HUC). Acceding to the request, the President issued Presidential Proclamation No. 418,
181
Series of 2012, proclaiming the City of Cabanatuan as an HUC subject to "ratification in a plebiscite by the qualified
voters therein, as provided for in Section 453 of the Local Government Code of 1991."

Respondent COMELEC, acting on the proclamation, issued the assailed Minute Resolution No. 12-0797 which
reads:

WHEREFORE, the Commission RESOLVED, as it hereby RESOLVES, that for purposes of the plebiscite for the
conversion of Cabanatuan City from component city to highly-urbanized city, only those registered residents of
Cabanatuan City should participate in the said plebiscite.

The COMELEC based this resolution on Sec. 453 of the Local Government Code of 1991 (LGC), citing conversion
cases involving Puerto Princesa City in Palawan, Tacloban City in Southern Leyte, and Lapu-Lapu City in Cebu,
where only the residents of the city proposed to be converted were allowed to vote in the corresponding plebiscite.

In due time, petitioner Aurelio M. Umali, Governor of Nueva Ecija, filed a Verified Motion for Reconsideration,
maintaining that the proposed conversion in question will necessarily and directly affect the mother province of
Nueva Ecija. His main argument is that Section 453 of the LGC should be interpreted in conjunction with Sec. 10,
Art. X of the Constitution. He argues that while the conversion in question does not involve the creation of a new or
the dissolution of an existing city, the spirit of the Constitutional provision calls for the people of the local government
unit (LGU) directly affected to vote in a plebiscite whenever there is a material change in their rights and
responsibilities. The phrase "qualified voters therein" used in Sec. 453 of the LGC should then be interpreted to refer
to the qualified voters of the units directly affected by the conversion and not just those in the component city
proposed to be upgraded. Petitioner Umali justified his position by enumerating the various adverse effects of the
Cabanatuan City’s conversion and how it will cause material change not only in the political and economic rights of
the city and its residents but also of the province as a whole.

To the Verified Motion for Reconsideration, private respondent Julius Cesar Vergara, city mayor of Cabanatuan,
interposed an opposition on the ground that Sec. 10, Art. X does not apply to conversions, which is the meat of the
matter. He likewise argues that a specific provision of the LGC, Sec. 453, as couched, allows only the qualified
voters of Cabanatuan City to vote in the plebiscite. Lastly, private respondent pointed out that when Santiago City
was converted in 1994 from a municipality to an independent component city pursuant to Republic Act No. (RA)
7720, the plebiscite held was limited to the registered voters of the then municipality of Santiago.

Following a hearing conducted on October 4, 2012,  the COMELEC En Banc on October 16, 2012, in E.M No. 12-
3

045 (PLEB), by a vote of 5-2  ruled in favor of respondent Vergara through the assailed Minute Resolution 12-0925.
4

The dispositive portion reads:

The Commission, taking into consideration the arguments of counsels including the Reply-memorandum of
Oppositor, after due deliberation, RESOLVED, as it hereby RESOLVES, as follows:

1) To DENY the Motion for Reconsideration of oppositor Governor Aurelio M. Umali; and

2) To SCHEDULE the conduct of Plebiscite for the conversion of Cabanatuan City from component city into
highly-urbanized city with registered residents only of Cabanatuan City to participate in said plebiscite.

Let the Deputy Executive Director for Operations implement this resolution.

SO ORDERED.

Hence, the Petition for Certiorari with prayer for injunctive relief, docketed as G.R. No. 203974, on substantially the
same arguments earlier taken by petitioner Umali before the poll body. On the other hand, public respondent
COMELEC, through the Office of the Solicitor General, maintained in its Comment that Cabanatuan City is merely
being converted from a component city into an HUC and that the political unit directly affected by the conversion will
only be the city itself. It argues that in this instance, no political unit will be created, merged with another, or will be
removed from another LGU, and that no boundaries will be altered. The conversion would merely reinforce the
powers and prerogatives already being exercised by the city, with the political unit’s probable elevation to that of an
HUC as demanded by its compliance with the criteria established under the LGC. Thus, the participation of the
voters of the entire province in the plebiscite will not be necessary.

Private respondent will later manifest that it is adopting the Comment of the COMELEC.

Meanwhile, on October 25, 2012, respondent COMELEC promulgated Resolution No. 9543, which adopted a
calendar of activities and periods of prohibited acts in connection with the conversion of Cabanatuan City into an
HUC. The Resolution set the conduct of the plebiscite on December 1, 2012. Thereafter, a certain Dr. Rodolfo B.
Punzalan filed a Petition for Declaratory Relief which was raffled to the Regional Trial Court (RTC), Branch 40 in
Palayan City. In the said case, Punzalan prayed that Minute Resolution No. 12-0797 be declared unconstitutional,

182
that the trial court decree that all qualified voters of the province of Nueva Ecija be included in the plebiscite, and
that a Temporary Restraining Order (TRO) be issued enjoining public respondent from implementing the questioned
resolution. On October 19, 2012, the RTC granted the prayer for a TRO.

On November 6, 2012, public respondent through Minute Resolution No. 12-0989 suspended the preparations for
the event in view of the TRO issued by the RTC. On November 27, 2012, the plebiscite was once again rescheduled
to give way to the May 13, 2013 national, local and ARMM regional elections as per Resolution No. 9563.

After this development, petitioner J.V. Bautista, on December 3, 2012, filed a case before this Court for Mandamus,
docketed as G.R. No. 204371, praying that public respondent be ordered to schedule the plebiscite either on
December 15 or 22, 2012. Petitioner Bautista argued that since the TRO issued by the RTC has already expired,
the duty of the public respondent to hold the plebiscite has become mandatory and ministerial. Petitioner Bautista
also alleged that the delay in holding the plebiscite is inexcusable given the requirement that it should be held within
a period of 120 days form the date of the President’s declaration.

In its Comment to the Bautista petition, public respondent justified its position by arguing that mandamus will not
issue to enforce a right which is in substantial dispute. With all the legal conflicts surrounding the case, it cannot be
said that there is a clear showing of petitioner Bautista’s entitlement to the relief sought. Respondent COMELEC
likewise relied on Sec. 5 of the Omnibus Election Code to justify the postponements, citing incidents of violence that
ensued in the locality during the plebiscite period.

After the conclusion of the 2013 elections, public respondent issued Resolution No. 1353 scheduling the plebiscite
to January 25, 2014. However, a TRO was issued by this Court on January 15, 2014 in G.R. No. 203974 to suspend
the conduct of the plebiscite for Cabanatuan City’s conversion. Given the intertwining factual milieu of the two
petitions before the Court, both cases were consolidated on March 18, 2014.

The Issue

The bone of contention in the present controversy boils down to whether the qualified registered voters of the entire
province of Nueva Ecija or only those in Cabanatuan City can participate in the plebiscite called for the conversion
of Cabanatuan City from a component city into an HUC.

Resolving the Petition for Certiorari either way will necessarily render the Petition for Mandamus moot and academic
for ultimately, the public respondent will be ordered to hold the plebiscite. The only variation will be as regards its
participants.

The Court’s Ruling

The Petition for Certiorari is meritorious.

Sec. 453 of the LGC should be interpreted in accordance with Sec. 10, Art. X of the Constitution

Petitioner Umali asseverates that Sec. 10, Art. X of the Constitution should be the basis for determining the qualified
voters who will participate in the plebiscite to resolve the issue. Sec. 10, Art. X reads:

Section 10, Article X. – No province, city, municipality, or barangay may be created, divided, merged, abolished, or
its boundary substantially altered, except in accordance with the criteria established in the local government code
and subject to approval by a majority of the votes cast in a plebiscite in the political units directly affected. (emphasis
supplied)

Petitioner Umali elucidates that the phrase "political units directly affected" necessarily encompasses not only
Cabanatuan City but the entire province of Nueva Ecija. Hence, all the registered voters in the province are qualified
to cast their votes in resolving the proposed conversion of Cabanatuan City.

On the other hand, respondents invoke Sec. 453 of the LGC to support their claim that only the City of Cabanatuan
should be allowed to take part in the voting. Sec. 453 states:

Section 453. Duty to Declare Highly Urbanized Status. – It shall be the duty of the President to declare a city as
highly urbanized within thirty (30) days after it shall have met the minimum requirements prescribed in the
immediately preceding Section, upon proper application therefor and ratification in a plebiscite by the qualified
voters therein. (emphasis supplied)

Respondents take the phrase "registered voters therein" in Sec. 453 as referring only to the registered voters in the
city being converted, excluding in the process the voters in the remaining towns and cities of Nueva Ecija.

183
Before proceeding to unravel the seeming conflict between the two provisions, it is but proper that we ascertain first
the relationship between Sec. 10, Art. X of the Constitution and Sec. 453 of the LGC.

First of all, we have to restate the general principle that legislative power cannot be delegated. Nonetheless, the
general rule barring delegation is subject to certain exceptions allowed in the Constitution, namely:

(1) Delegation by Congress to the President of the power to fix "tariff rates, import and export quotas,
tonnage and wharfage dues, and other duties or imposts within the framework of the national development
program of the Government" under Section 28(2) of Article VI of the Constitution; and

(2) Delegation of emergency powers by Congress to the President "to exercise powers necessary and
proper to carry out a declared national policy" in times of war and other national emergency under Section
23(2) of Article VI of the Constitution.

The power to create, divide, merge, abolish or substantially alter boundaries of provinces, cities, municipalities or
barangays, which is pertinent in the case at bar, is essentially legislative in nature.  The framers of the Constitution
5

have, however, allowed for the delegation of such power in Sec. 10, Art. X of the Constitution as long as (1) the
criteria prescribed in the LGC is met and (2) the creation, division, merger, abolition or the substantial alteration of
the boundaries is subject to the approval by a majority vote in a plebiscite.

True enough, Congress delegated such power to the Sangguniang Panlalawigan or Sangguniang Panlungsod to
create barangays pursuant to Sec. 6 of the LGC, which provides:

Section 6. Authority to Create Local Government Units. - A local government unit may be created, divided, merged,
abolished, or its boundaries substantially altered either by law enacted by Congress in the case of a province, city,
municipality, or any other political subdivision, or by ordinance passed by the sangguniang panlalawigan or
sangguniang panlungsod concerned in the case of a barangay located within its territorial jurisdiction, subject to
such limitations and requirements prescribed in this Code." (emphasis supplied)

The guidelines for the exercise of this authority have sufficiently been outlined by the various LGC provisions
detailing the requirements for the creation of barangays , municipalities , cities , and provinces . Moreover,
6 7 8 9

compliance with the plebiscite requirement under the Constitution has also been directed by the LGC under its Sec.
10, which reads:

Section 10. Plebiscite Requirement. – No creation, division, merger, abolition, or substantial alteration of boundaries
of local government units shall take effect unless approved by a majority of the votes cast in a plebiscite called for
the purpose in the political unit or units directly affected." (emphasis supplied)

With the twin criteria of standard and plebiscite satisfied, the delegation to LGUs of the power to create, divide,
merge, abolish or substantially alter boundaries has become a recognized exception to the doctrine of non-
delegation of legislative powers.

Likewise, legislative power was delegated to the President under Sec. 453 of the LGC quoted earlier, which states:

Section 453. Duty to Declare Highly Urbanized Status. – It shall be the duty of the President to declare a city as
highly urbanized within thirty (30) days after it shall have met the minimum requirements prescribed in the
immediately preceding Section, upon proper application therefor and ratification in a plebiscite by the qualified
voters therein.

In this case, the provision merely authorized the President to make a determination on whether or not the
requirements under Sec. 452  of the LGC are complied with. The provision makes it ministerial for the President,
10

upon proper application, to declare a component city as highly urbanized once the minimum requirements, which
are based on certifiable and measurable indices under Sec. 452, are satisfied. The mandatory language "shall" used
in the provision leaves the President with no room for discretion.

In so doing, Sec. 453, in effect, automatically calls for the conduct of a plebiscite for purposes of conversions once
the requirements are met. No further legislation is necessary before the city proposed to be converted becomes
eligible to become an HUC through ratification, as the basis for the delegation of the legislative authority is the very
LGC.

In view of the foregoing considerations, the Court concludes that the source of the delegation of power to the LGUs
under Sec. 6 of the LGC and to the President under Sec. 453 of the same code is none other than Sec. 10, Art. X of
the Constitution.

184
Respondents, however, posit that Sec. 453 of the LGC is actually outside the ambit of Sec. 10, Art. X of the
Constitution, considering that the conversion of a component city to an HUC is not "creation, division, merge,
abolition or substantial alternation of boundaries" encompassed by the said constitutional provision.

This proposition is bereft of merit.

First, the Court’s pronouncement in Miranda vs. Aguirre  is apropos and may be applied by analogy. While Miranda
11

involves the downgrading, instead of upgrading, as here, of an independent component city into a component city,
its application to the case at bar is nonetheless material in ascertaining the proper treatment of conversions. In that
seminal case, the Court held that the downgrading of an independent component city into a component city comes
within the purview of Sec. 10, Art. X of the Constitution.

In Miranda, the rationale behind the afore-quoted constitutional provision and its application to cases of conversion
were discussed thusly:

A close analysis of the said constitutional provision will reveal that the creation, division, merger, abolition or
substantial alteration of boundaries of local government units involve a common denominator - - - material change in
the political and economic rights of the local government units directly affected as well as the people therein. It is
precisely for this reason that the Constitution requires the approval of the people "in the political units directly
affected." It is not difficult to appreciate the rationale of this constitutional requirement. The 1987 Constitution, more
than any of our previous Constitutions, gave more reality to the sovereignty of our people for it was borne out of the
people power in the 1986 EDSA revolution. Its Section 10, Article X addressed the undesirable practice in the past
whereby local government units were created, abolished, merged or divided on the basis of the vagaries of politics
and not of the welfare of the people. Thus, the consent of the people of the local government unit directly affected
was required to serve as a checking mechanism to any exercise of legislative power creating, dividing, abolishing,
merging or altering the boundaries of local government units. It is one instance where the people in their sovereign
capacity decide on a matter that affects them - - - direct democracy of the people as opposed to democracy thru
people’s representatives. This plebiscite requirement is also in accord with the philosophy of the Constitution
granting more autonomy to local government units. 12

It was determined in the case that the changes that will result from the conversion are too substantial that there is a
necessity for the plurality of those that will be affected to approve it. Similar to the enumerated acts in the
constitutional provision, conversions were found to result in material changes in the economic and political rights of
the people and LGUs affected. Given the far-reaching ramifications of converting the status of a city, we held that
the plebiscite requirement under the constitutional provision should equally apply to conversions as well. Thus, RA
8528  was declared unconstitutional in Miranda on the ground that the law downgraded Santiago City in Isabela
13

without submitting it for ratification in a plebiscite, in contravention of Sec. 10, Art. X of the Constitution.

Second, while conversion to an HUC is not explicitly provided in Sec. 10, Art. X of the Constitution we nevertheless
observe that the conversion of a component city into an HUC is substantial alteration of boundaries.

As the phrase implies, "substantial alteration of boundaries" involves and necessarily entails a change in the
geographical configuration of a local government unit or units. However, the phrase "boundaries" should not be
limited to the mere physical one, referring to the metes and bounds of the LGU, but also to its political boundaries. It
also connotes a modification of the demarcation lines between political subdivisions, where the LGU’s exercise of
corporate power ends and that of the other begins. And as a qualifier, the alteration must be "substantial" for it to be
within the ambit of the constitutional provision.

Pertinent is Art. 12(c) of the LGC’s Implementing Rules and Regulations, which reads:

Art. 12. Conversion of a Component City into a Highly Urbanized City. –

xxxx

(c) Effect of Conversion – The conversion of a component city into a highly-urbanized city shall make it independent
of the province where it is geographically located. (emphasis added)

Verily, the upward conversion of a component city, in this case Cabanatuan City, into an HUC will come at a steep
price. It can be gleaned from the above-cited rule that the province will inevitably suffer a corresponding decrease in
territory brought about by Cabanatuan City’s gain of independence. With the city’s newfound autonomy, it will be
free from the oversight powers of the province, which, in effect, reduces the territorial jurisdiction of the latter. What
once formed part of Nueva Ecija will no longer be subject to supervision by the province. In more concrete terms,
Nueva Ecija stands to lose 282.75 sq. km. of its territorial jurisdiction with Cabanatuan City’s severance from its
mother province. This is equivalent to carving out almost 5% of Nueva Ecija’s 5,751.3 sq. km. area. This sufficiently
satisfies the requirement that the alteration be "substantial."

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Needless to stress, the alteration of boundaries would necessarily follow Cabanatuan City’s conversion in the same
way that creations, divisions, mergers, and abolitions generally cannot take place without entailing the alteration.
The enumerated acts, after all, are not mutually exclusive, and more often than not, a combination of these acts
attends the reconfiguration of LGUs.

In light of the foregoing disquisitions, the Court rules that conversion to an HUC is substantial alternation of
boundaries governed by Sec. 10, Art. X and resultantly, said provision applies, governs and prevails over Sec. 453
of the LGC.

Moreover, the rules of statutory construction dictate that a particular provision should be interpreted with the other
relevant provisions in the law The Court finds that it is actually Sec. 10 of the LGC which is undeniably the
applicable provision on the conduct of plebiscites. The title of the provision itself, "Plebiscite Requirement", makes
this obvious. It requires a majority of the votes cast in a plebiscite called for the purpose in the political unit or units
directly affected. On the other hand, Sec. 453 of the LGC, entitled "Duty to Declare Highly Urbanized Status", is only
on the duty to declare a city as highly urbanized. It mandates the Office of the President to make the declaration
after the city has met the requirements under Sec. 452, and upon proper application and ratification in a plebiscite.
The conduct of a plebiscite is then a requirement before a declaration can be made. Thus, the Court finds that Sec.
10 of the LGC prevails over Sec. 453 of the LGC on the plebiscite requirement.

We now take the bull by the horns and resolve the issue whether Sec. 453 of the LGC trenches on Sec. 10, Art. X of
the Constitution.

Hornbook doctrine is that neither the legislative, the executive, nor the judiciary has the power to act beyond the
Constitution’s mandate. The Constitution is supreme; any exercise of power beyond what is circumscribed by the
Constitution is ultra vires and a nullity. As elucidated by former Chief Justice Enrique Fernando in Fernandez v.
Cuerva: 14

Where the assailed legislative or executive act is found by the judiciary to be contrary to the Constitution, it is null
and void. As the new Civil Code puts it: "When the courts declare a law to be inconsistent with the Constitution, the
former shall be void and the latter shall govern." Administrative or executive acts, orders and regulations shall be
valid only when they are not contrary to the laws or the Constitution. The above provision of the civil Code reflects
the orthodox view that an unconstitutional act, whether legislative or executive, is not a law, confers no rights,
imposes no duties, and affords no protection. x x x

Applying this orthodox view, a law should be construed in harmony with and not in violation of the Constitution.  In a15

long line of cases, the cardinal principle of construction established is that a statute should be interpreted to assure
its being in consonance with, rather than repugnant to, any constitutional command or prescription.  If there is doubt
16

or uncertainty as to the meaning of the legislative, if the words or provisions are obscure or if the enactment is fairly
susceptible of two or more constitution, that interpretation which will avoid the effect of unconstitutionality will be
adopted, even though it may be necessary, for this purpose, to disregard the more usual or apparent import of the
language used. 17

Pursuant to established jurisprudence, the phrase "by the qualified voters therein" in Sec. 453 should be construed
in a manner that will avoid conflict with the Constitution. If one takes the plain meaning of the phrase in relation to
the declaration by the President that a city is an HUC, then, Sec. 453 of the LGC will clash with the explicit provision
under Sec. 10, Art. X that the voters in the "political units directly affected" shall participate in the plebiscite. Such
construction should be avoided in view of the supremacy of the Constitution. Thus, the Court treats the phrase "by
the qualified voters therein" in Sec. 453 to mean the qualified voters not only in the city proposed to be converted to
an HUC but also the voters of the political units directly affected by such conversion in order to harmonize Sec. 453
with Sec. 10, Art. X of the Constitution.

The Court finds that respondents are mistaken in construing Sec. 453 in a vacuum. Their interpretation of Sec. 453
of the LGC runs afoul of Sec. 10, Art. X of the Constitution which explicitly requires that all residents in the "political
units directly affected" should be made to vote.

Respondents make much of the plebiscites conducted in connection with the conversion of Puerto Princesa City,
Tacloban City and Lapu-Lapu City where the ratification was made by the registered voters in said cities alone. It is
clear, however, that the issue of who are entitled to vote in said plebiscites was not properly raised or brought up in
an actual controversy. The issue on who will vote in a plebiscite involving a conversion into an HUC is a novel issue,
and this is the first time that the Court is asked to resolve the question. As such, the past plebiscites in the
aforementioned cities have no materiality or relevance to the instant petition. Suffice it to say that conversion of said
cities prior to this judicial declaration will not be affected or prejudiced in any manner following the operative fact
doctrine―that “the actual existence of a statute prior to such a determination is an operative fact and may have
consequences which cannot always be erased by a new judicial declaration.” 18

The entire province of Nueva Ecija will be directly

affected by Cabanatuan City’s conversion
186
After the Court has resolved the seeming irreconcilability of Sec. 10, Art. X of the Constitution and Sec. 453 of the
LGC, it is now time to elucidate the meaning of the phrase "political units directly affected" under Sec. 10, Art. X.

a. "Political units directly affected" defined

In identifying the LGU or LGUs that should be allowed to take part in the plebiscite, what should primarily be
determined is whether or not the unit or units that desire to participate will be "directly affected" by the change. To
interpret the phrase, Tan v. COMELEC  and Padilla v. COMELEC  are worth revisiting.
19 20

We have ruled in Tan, involving the division of Negros Occidental for the creation of the new province of Negros del
Norte, that the LGUs whose boundaries are to be altered and whose economy would be affected are entitled to
participate in the plebiscite. As held:

It can be plainly seen that the aforecited constitutional provision makes it imperative that there be first obtained "the
approval of a majority of votes in the plebiscite in the unit or units affected" whenever a province is created, divided
or merged and there is substantial alteration of the boundaries. It is thus inescapable to conclude that the
boundaries of the existing province of Negros Occidental would necessarily be substantially altered by the division
of its existing boundaries in order that there can be created the proposed new province of Negros del Norte. Plain
and simple logic will demonstrate than that two political units would be affected.

The first would be the parent province of Negros Occidental because its boundaries would be substantially altered.
The other affected entity would be composed of those in the area subtracted from the mother province to constitute
the proposed province of Negros del Norte. 21

xxxx

To form the new province of Negros del Norte no less than three cities and eight municipalities will be subtracted
from the parent province of Negros Occidental. This will result in the removal of approximately 2,768.4 square
kilometers from the land area of an existing province whose boundaries will be consequently substantially altered. It
becomes easy to realize that the consequent effects of the division of the parent province necessarily will affect all
the people living in the separate areas of Negros Occidental and the proposed province of Negros del Norte. The
economy of the parent province as well as that of the new province will be inevitably affected, either for the better or
for the worse. Whatever be the case, either or both of these political groups will be affected and they are, therefore,
the unit or units referred to in Section 3 of Article XI of the Constitution which must be included in the plebiscite
contemplated therein.  (emphasis added)
22

Sec. 3, Art. XI of the 1973 Constitution, as invoked in Tan, states:

SEC. 3. No province, city, municipality or barrio may be created, divided, merged abolished, or its boundary
substantially altered, except in accordance with the criteria established in the local government code, and subject to
the approval by a majority of the votes in a plebiscite in the unit or units affected. (emphasis added)

Despite the change in phraseology compared to what is now Sec. 10, Art. X, we affirmed our ruling in Tan in the
latter case of Padilla. As held, the removal of the phrase "unit or" only served to sustain the earlier finding that what
is contemplated by the phase "political units directly affected" is the plurality of political units which would participate
in the plebiscite. As reflected in the journal of the Constitutional Commission: 23

Mr. Maambong: While we have already approved the deletion of "unit or," I would like to inform the Committee that
under the formulation in the present Local Government Code, the words used are actually "political unit or units."
However, I do not know the implication of the use of these words. Maybe there will be no substantial difference, but I
just want to inform the Committee about this.

Mr. Nolledo: Can we not adhere to the original "unit or units"? Will there be no objection on the part of the two
Gentlemen from the floor?

Mr. Davide: I would object. I precisely asked for the deletion of the words "unit or" because in the plebiscite to be
conducted, it must involve all the units affected. If it is the creation of a barangay plebiscite because it is affected. It
would mean a loss of a territory. (emphasis added)

The same sentiment was shared by the Senate during its deliberations on Senate Bill No. 155––the predecessor of
the LGC––thus:

Senator Guingona. Can we make that clearer by example? Let us assume that a province has municipalities and
there is a merger of two municipalities. Would this therefore mean that the plebiscite will be conducted within the two
merged municipalities and not in the eight other municipalities?

187
Senator Pimentel. The whole province, Mr. President, will be affected, and that is the reason we probably have to
involve the entire province.

Senator Guingona. So the plebiscite will not be held only in the two municipalities which are being merged, but the
entire province will now have to undergo.

Senator Pimentel. I suppose that was the ruling in the Negros del Norte case.

Senator Guingona. Supposing it refers to barangays, will the entire municipality have to vote? There are two
barangays being merged, say, out of 100 barangays. Would the entire municipality have to participate in the
plebiscite?

Senator Pimentel. Yes, Mr. President, because the municipality is affected directly by the merger of two of its
barangay.

Senator Guingona. And, if, out of 100 barangay, 51 are being merged, abolished, whatever, would the rest of the
municipality not participate in the plebiscite?

Senator Pimentel. Do all the 51 barangay that the Gentleman mentioned, Mr. President, belong to one municipality?

Senator Guingona. Yes.

Senator Pimentel. Then it will only involve the municipality where the 51 barangays belong.

Senator Guingona. Yes. So, the entire municipality will now have to undergo a plebiscite.

Senator Pimentel. That is correct, Mr. President.

Senator Guingona. In the earlier example, if it is only a merger of two municipalities, let us say, in a province with 10
municipalities – the entire province – will the other municipalities although not affected also have to participate in the
plebiscite?

Senator Pimentel. Yes. The reason is that the municipalities are within the territorial boundaries of the province
itself, it will have to be altered as a result of the two municipalities that the Gentleman mentioned.24

In the more recent case of Miranda, the interpretation in Tan and Padilla was modified to include not only changes
in economic but also political rights in the criteria for determining whether or not an LGU shall be considered
"directly affected." Nevertheless, the requirement that the plebiscite be participated in by the plurality of political
units directly affected remained.

b. Impact on Economic Rights

To recall, it was held in Miranda that the changes that will result in the downgrading of an LGU from an independent
component city to a component city cannot be categorized as insubstantial, thereby necessitating the conduct of a
plebiscite for its ratification. In a similar fashion, herein petitioner Umali itemized the adverse effects of Cabanatuan
City’s conversion to the province of Nueva Ecija to justify the province’s participation in the plebiscite to be
conducted.

Often raised is that Cabanatuan City’s conversion into an HUC and its severance from Nueva Ecija will result in the
reduction of the Internal Revenue Allotment (IRA) to the province based on Sec. 285 of the LGC. The law states:

Section 285. Allocation to Local Government Units. - The share of local government units in the internal revenue
allotment shall be collected in the following manner:

(a) Provinces - Twenty-three percent (23%);

(b) Cities - Twenty-three percent (23%);

(c) Municipalities - Thirty-four percent (34%); and

(d) Barangays - Twenty percent (20%)

Provided, however, That the share of each province, city, and municipality shall be determined on the basis of the
following formula:

188
 (a) Population - Fifty percent (50%);

(b) Land Area - Twenty-five percent (25%); and

(c) Equal sharing - Twenty-five percent (25%)

In our earlier disquisitions, we have explained that the conversion into an HUC carries the accessory of substantial
alteration of boundaries and that the province of Nueva Ecija will, without a doubt, suffer a reduction in territory
because of the severance of Cabanatuan City. The residents of the city will cease to be political constituencies of
the province, effectively reducing the latter’s population. Taking this decrease in territory and population in
connection with the above formula, it is conceded that Nueva Ecija will indeed suffer a reduction in IRA given the
decrease of its multipliers’ values. As assessed by the Regional Director of the Department of Budget and
Management (DBM) for Region III: 25

Basis for IRA Province of Cabanatuan Province of

Computation Nueva Ecija City Nueva Ecija Net
of Cabanatuan
City

No. of Population 1,843,853 259,267 259,267

CY 2007 Census
Land Area 5,751.33 282.75 5,468.58
(sq. km.)

IRA Share of Actual IRA Estimated IRA Reduction

Nueva Ecija Share share excluding
Cabanatuan
City

Based on ₱800,772,618.45 ₱688,174,751.66 ₱112,597,866.79

Population

Based on Land ₱263,470,472.62 ₱250,517,594.56 P 12,952,878.06

Area

Total ₱125,550,744.85

Clear as crystal is that the province of Nueva Ecija will suffer a substantial reduction of its share in IRA once
Cabanatuan City attains autonomy. In view of the economic impact of Cabanatuan City’s conversion, petitioner
Umali’s contention, that its effect on the province is not only direct but also adverse, deserves merit.

Moreover, his claim that the province will lose shares in provincial taxes imposed in Cabanatuan City is well-
founded. This is based on Sec. 151 of the LGC, which states:

SECTION 151. Scope of Taxing Powers. – Except as otherwise provided in this Code, the city, may levy the taxes,
fees, and charges which the province or municipality may impose: Provided, however, That the taxes, fees and
charges levied and collected by highly urbanized and independent component cities shall accrue to them and
distributed in accordance with the provisions of this Code. (emphasis added)

Once converted, the taxes imposed by the HUC will accrue to itself. Prior to this, the province enjoys the prerogative
to impose and collect taxes such as those on sand, gravel and other quarry resources,  professional taxes,  and
26 27

amusement taxes  over the component city. While, it may be argued that this is not a derogation of the province’s
28

taxing power because it is in no way deprived of its right to collect the mentioned taxes from the rest of its territory,
the conversion will still reduce the province’s taxing jurisdiction, and corollary to this, it will experience a
corresponding decrease in shares in local tax collections. This reduction in both taxing jurisdiction and shares poses
a material and substantial change to the province’s economic rights, warranting its participation in the plebiscite.

To further exemplify the impact of these changes, a perusal of Secs. 452(a) and 461(a) of the LGC is in order, viz:

189
Section 452. Highly Urbanized Cities.

(a) Cities with a minimum population of two hundred thousand (200,000) inhabitants as certified by the
National Statistics Office, and within the latest annual income of at least Fifty Million Pesos (₱50,000,000.00)
based on 1991 constant prices, as certified by the city treasurer, shall be classified as highly urbanized
cities.

Section 461. Requisites for Creation.

(a) A province may be created if it has an average annual income, as certified by the Department of Finance, of not
less than Twenty million pesos (₱20,000,000.00) based on 1991 constant prices and either of the following
requisites:

(i) a contiguous territory of at least two thousand (2,000) square kilometers, as certified by the Lands
Management Bureau; or

(ii) a population of not less than two hundred fifty thousand (250,000) inhabitants as certified by the National
Statistics Office:

Provided, That, the creation thereof shall not reduce the land area, population, and income of the original unit or
units at the time of said creation to less than the minimum requirements prescribed herein.

A component city’s conversion into an HUC and its resultant autonomy from the province is a threat to the latter’s
economic viability. Noteworthy is that the income criterion for a component city to be converted into an HUC is
higher than the income requirement for the creation of a province. The ensuing reduction in income upon separation
would clearly leave a crippling effect on the province’s operations as there would be less funding to finance
infrastructure projects and to defray overhead costs. Moreover, the quality of services being offered by the province
may suffer because of looming austerity measures. These are but a few of the social costs of the decline in the
province’s economic performance, which Nueva Ecija is bound to experience once its most progressive city of
Cabanatuan attains independence.

c. Impact on Political Rights

Aside from the alteration of economic rights, the political rights of Nueva Ecija and those of its residents will also be
affected by Cabanatuan’s conversion into an HUC. Notably, the administrative supervision of the province over the
city will effectively be revoked upon conversion. Secs. 4 and 12, Art. X of the Constitution read:

Sec. 4. The President of the Philippines shall exercise general supervision over local governments. Provinces with
respect to component cities and municipalities, and cities and municipalities with respect to component barangays
shall ensure that the acts of their component units are within the scope of their prescribed powers and functions.

Sec 12. Cities that are highly urbanized, as determined by law, and component cities whose charters prohibit their
voters from voting for provincial elective officials, shall be independent of the province. The voters of component
cities within a province, whose charters contain no such prohibition, shall not be deprived of their right to vote for
elective provincial officials.

Duties, privileges and obligations appertaining to HUCs will attach to Cabanatuan City if it is converted into an HUC.
This includes the right to be outside the general supervision of the province and be under the direct supervision of
the President. An HUC is not subject to provincial oversight because the complex and varied problems in an HUC
due to a bigger population and greater economic activity require greater autonomy.  The provincial government
29

stands to lose the power to ensure that the local government officials of Cabanatuan City act within the scope of its
prescribed powers and functions,  to review executive orders issued by the city mayor, and to approve resolutions
30

and ordinances enacted by the city council.  The province will also be divested of jurisdiction over disciplinary cases
31

concerning the elected city officials of the new HUC, and the appeal process for administrative case decisions
against barangay officials of the city will also be modified accordingly.  Likewise, the registered voters of the city will
32

no longer be entitled to vote for and be voted upon as provincial officials. 33

In cutting the umbilical cord between Cabanatuan City and the province of Nueva Ecija, the city will be separated
from the territorial jurisdiction of the province, as earlier explained. The provincial government will no longer be
responsible for delivering basic services for the city residents’ benefit. Ordinances and resolutions passed by the
provincial council will no longer cover the city. Projects queued by the provincial government to be executed in the
city will also be suspended if not scrapped to prevent the LGU from performing functions outside the bounds of its
territorial jurisdiction, and from expending its limited resources for ventures that do not cater to its constituents.
1âwphi1

In view of these changes in the economic and political rights of the province of Nueva Ecija and its residents, the
entire province certainly stands to be directly affected by the conversion of Cabanatuan City into an HUC. Following

190
the doctrines in Tan and Padilla, all the qualified registered voters of Nueva Ecija should then be allowed to
participate in the plebiscite called for that purpose.

Respondents’ apprehension that requiring the entire province to participate in the plebiscite will set a dangerous
precedent leading to the failure of cities to convert is unfounded. Their fear that provinces will always be expected to
oppose the conversion in order to retain the city’s dependence is speculative at best. In any event, any vote of
disapproval cast by those directly affected by the conversion is a valid exercise of their right to suffrage, and our
democratic processes are designed to uphold the decision of the majority, regardless of the motive behind the vote.
It is unfathomable how the province can be deprived of the opportunity to exercise the right of suffrage in a matter
that is potentially deleterious to its economic viability and could diminish the rights of its constituents. To limit the
plebiscite to only the voters of the areas to be partitioned and seceded from the province is as absurd and illogical
as allowing only the secessionists to vote for the secession that they demanded against the wishes of the majority
and to nullify the basic principle of majority rule.34

WHEREFORE, premises considered, the Petition for Certiorari, docketed as G.R. No. 203974, is hereby
GRANTED. COMELEC Minute Resolution No. 12-0797 dated September 11, 2012 and Minute Resolution No. 12-
0925 dated October 16, 2012 are hereby declared NULL and VOID. Public respondent COMELEC is hereby
enjoined from implementing the said Resolutions. Additionally, COMELEC is hereby ordered to conduct a plebiscite
for the purpose of converting Cabanatuan City into a Highly Urbanized City to be participated in by the qualified
registered voters of Nueva Ecij a within 120 days from the finality of this Decision. The Petition for Mandamus,
docketed as G.R. No. 204371, is hereby DISMISSED.

SO ORDERED.

DISSENTING OPINION

LEONEN, J.:

I am constrained by my view of my judicial duty to express a dissenting opinion to the ponencia of an esteemed
colleague.

The issue raised in this case has not yet been passed upon squarely by this court. At issue is whether the change in
classification of a component city to a highly urbanized city req~ires a plebiscite which includes the voters of the
entire province or only those within the component city. More specifically, we are asked to construe Section 453 of
the Local Government Code in relation to Article X, Section 10 of the Constitution.

Section 453 of the Local Government Code provides:

Section 453. Duty to Declare Highly Urbanized Status. - It shall be the duty of the President to declare a city as
highly urbanized within thirty (30) days after it shall have met the minimum requirements prescribed in the
immediately preceding section, upon proper application therefor and ratification in a plebiscite by the qualified voters
therein.  (Emphasis supplied)
1

Article X, Section 10 of the Constitution states:

Section 10. No province, city, municipality, or barangay may be created, divided, merged, abolished, or its boundary
substantially altered, except in accordance with the criteria established in the local government code and subject to
approval by a majority of the votes cast in a plebiscite in the political units directly affected. (Emphasis supplied)

While this issue is novel for this court, the Commission on Elections and the executive have had their interpretation
of these provisions implemented in a number of cities. Petitioner Governor Aurelio M. Umali proposes that it should
be the entire Province of Nueva Ecija that should be included in the plebiscite while respondent Mayor Julius Cesar
V. Vergara asserts that only the qualified voters of Cabanatuan City should participate in the plebiscite in
accordance with the resolution of the Commission on Elections.

It is granted that any change in the status of Cabanatuan City will have its consequences on the lives of its citizens
and the politics of both the city and the province.

The ponencia relied mainly on Miranda v. Aguirre  to support its contention that the petition should be granted. I will
2

have to disagree with my esteemed colleague. In Miranda v. Aguirre, the issue was the challenge of the
constitutionality of Republic Act No. 8528, which downgraded Santiago City, located in the Province of Isabela, from
an independent component city to a component city without a requirement of a plebiscite. The court ruled that:

It is markworthy that when R.A. No. 7720 upgraded the status of Santiago City from a municipality to an
independent component city, it required the approval of its people thru a plebiscite called for the purpose. There is
neither rhyme nor reason why this plebiscite should not be called to determine the will of the people of Santiago City

191
when R.A. No. 8528 downgrades the status of their city. Indeed, there is more reason to consult the people when a
law substantially diminishes their right. Rule II, Article 6, paragraph (f) (1) of the Implementing Rules and
Regulations of the Local Government Code is in accord with the Constitution when it provides that:

(f) Plebiscite – (1) no creation, conversion, division, merger, abolition, or substantial alteration of boundaries of
LGUs shall take effect unless approved by a majority of the votes cast in a plebiscite called for the purpose in the
LGU or LGUs affected. The plebiscite shall be conducted by the Commission on Elections (COMELEC) within one
hundred twenty (120) days from the effectivity of the law or ordinance prescribing such action, unless said law or
ordinance fixes another date.

The rules cover all conversions, whether upward or downward in character, so long as they result in a material
change in the local government unit directly affected, especially a change in the political and economic rights of its
people.  (Emphasis in the original)
3

That case contained no definitive juridical pronouncement regarding the scope of the plebiscite that is required.

Also cited in the ponencia is Tan v. COMELEC.  Residents questioned the constitutionality of Batas Pambansa Blg.
4

885, which proposed the creation of the new province, the Province of Negros del Norte, from Negros Occidental.
Batas Pambansa No. 885 was nullified because it did not conform with the land area and income requirements of
the old Local Government Code. With regard to the plebiscite, this court stated that:

x x x the more significant and pivotal issue in the present case revolves around in the interpretation and application
in the case at bar of Article XI, Section 3 of the Constitution, which being brief and for convenience, We again quote:

SEC. 3. No province, city, municipality or barrio may be created, divided, merged, abolished, or its boundary
substantially altered, except in accordance with the criteria established in the local government code, and subject to
the approval by a majority of the votes in a plebiscite in the unit or units affected.

It can be plainly seen that the aforecited constitutional provision makes it imperative that there be first obtained "the
approval of a majority of votes in the plebiscite in the unit or units affected" whenever a province is created, divided
or merged and there is substantial alteration of the boundaries. It is thus inescapable to conclude that the
boundaries of the existing province of Negros Occidental would necessarily be substantially altered by the division
of its existing boundaries in order that there can be created the proposed new province of Negros del Norte. Plain
and simple logic will demonstrate then that two political units would be affected. The first would be the parent
province of Negros Occidental because its boundaries would be substantially altered. The other affected entity
would be composed of those in the area subtracted from the mother province to constitute the proposed province of
Negros del Norte. 5

What was involved in Tan was the creation of a new province, Negros del Norte, and not the process of conversion
of a component city into a highly urbanized city.

Padilla, Jr. v. COMELEC  is also cited in the ponencia.  This involved a plebiscite for the creation of the Municipality
6
1âwphi1

of Tulay-Na-Lupa. Again, this case is not applicable because it involved the creation of a new municipality. The
creation of a new municipality is different from the conversion of an already existing component city into a highly
urbanized city.

Governor Umali alleged that the phrase "qualified voters therein" in Section 453 should mean the voters in the whole
province of Nueva Ecija and not only those in Cabanatuan City. 7

On the other hand, Mayor Vergara of Cabanatuan City argues that the same phrase "qualified voters therein" refers
to the qualified voters of the city.  Among others, he pointed out that "only the residents of Cabanatuan City"  will be
8 9

affected because "they will lose their right to vote for provincial officials."
10

In its comment, the Commission on Elections pointed out:

However, qualification must be permitted where, as in this case, the subject city of Cabanatuan is simply being
converted from a component city into a highly urbanized city. In this instance, the political unit directly affected by
the conversion is only Cabanatuan City, which exercises powers and prerogatives it already maintains and enjoys
but which are being reinforced with the political unit’s probable elevation to that of a highly urbanized city as
demanded by its compliance with the criteria established under the Local Government Code. No political unit is
created, merged or removed from another local government unit. No boundaries are being altered or affected. In
fact, contrary to petitioner’s ratiocination, there is no severance from the parent unit, which has long enjoyed the
status of being a component city since its elevation to cityhood on June 16, 1950. 11

192
More in point is the Commission on Elections’ Minute Resolution No. 12-0797, specifically the memorandum of
Commissioner Rene V. Sarmiento, which discussed the rationale for the rule regarding "qualified voters" in cases of
conversion of local government units:

It is respectfully submitted that only those registered residents of Cabanatuan City should participate in the
plebiscite.

First, the primary purpose of the conversion from being a component city to highly urbanized city is
INDEPENDENCE from the province where it is geographically located. A conversion will necessarily affect the
province as it will reduce its income, voters for the provincial elective position, among others. As expected, it would
be detrimental to any petition for conversion from component city to HUC to allow residents of the entire province to
vote in the plebiscite. If we allow this, a scenario will be created wherein all the indicators for the conversion have
been met including the vote of approval of the residents of Cabanatuan City but conversion was not allowed due to
the opposition through votes of the other residents of the province.

It is a general rule of statutory construction that a law should not be so construed as to produce an absurd result.
The law does not intend to be an absurdity or that an absurd consequence shall flow from its enactment. If the
words of the statute are susceptible of more than one meaning, the one that has a logical construction should be
adopted over the one that will produce an absurdity. Statutes should receive a sensible construction, such as will
give effect to the legislative intention and so as to avoid an unjust or an absurd conclusion.

Moreover, under the Implementing Rules and Regulations of the LGC:

(f) Plebiscite – (1) no creation, conversion, division, merger, abolition, or substantial alteration of boundaries of
LGUs shall take effect unless approved by a majority of the votes cast in a plebiscite called for the purpose in the
LGU or LGUs affected. The plebiscite shall be conducted by the Commission on Elections (COMELEC) within one
hundred twenty (120) days from the effectivity of the law or ordinance prescribing such action, unless said law or
ordinance fixes another date.

While the province will be affected by the conversion, it is submitted that the LGU directly, as pertained above, is the
Cabanatuan City and not the province. Even assuming that the IRR contemplates the direct effect on both
Cabanatuan and the province, it must be remembered that the IRR cannot go beyond what is provided in the law
which it seeks to implement.

The Local Government Code provides:

Sec. 452. Highly urbanized cities.

(c) Qualified voters of highly urbanized cities shall remain excluded from voting for elective provincial officials.’

Section 453. Duty to Declare Highly Urbanized Status.

It shall be the duty of the President to declare a city as highly urbanized within 30 days after it shall have met the
minimum requirements prescribed in the immediately preceding Section, upon proper application therefor and
ratification in a plebiscite by the qualified voters therein.

The term qualified voters therein pertains to the voters of the city to be converted as highly urbanized city. ‘Therein’
pertains to the city to be declared as highly urbanized.

Third, previous conversion of component cities to HUCs would show that only those residents of the converted city
were allowed to vote. Example: Puerto Princesa City, Tacloban City and Lapu Lapu City. 12

The Commission on Elections’ position is in line with the position of the executive. Thus, the Implementing Rules of
the Local Government Code, Rule II, Article 12, paragraph (b) provides:

Article 12. Conversion of a Component City Into a Highly-Urbanized City. — (a) Requisites for conversion — A
component city shall not be converted into a highly-urbanized city unless the following requisites are present:

xxxx

(b) Procedure for conversion —

(1) Resolution — The interested component city shall submit to the Office of the President a resolution of its
sanggunian adopted by a majority of all its members in a meeting duly called for the purpose, and approved
and endorsed by the city mayor. Said resolution shall be accompanied by certifications as to income and
population.
193
 (2) Declaration of conversion — Within thirty (30) days from receipt of such resolution, the President shall,
after verifying that the income and population requirements have been met, declare the component city as
highly-urbanized.

(3) Plebiscite — Within one hundred twenty (120) days from the declaration of the President or as specified
in the declaration, the COMELEC shall conduct a plebiscite in the city proposed to be converted. Such
plebiscite shall be preceded by a comprehensive information campaign to be conducted by the COMELEC
with the assistance of national and local government officials, media, NGOs, and other interested parties.

(c) Effect of Conversion —

The conversion of a component city into a highly-urbanized city shall make it independent of the province where it is
geographically located. 13

Cabanatuan City is not the first city to apply for conversion from a component city into a highly urbanized city. In
2007, Lapu-Lapu City in the Province of Cebu held a plebiscite for its conversion. The Commission on Elections
issued Resolution No. 7854  dated April 3, 2007. Section 7 of Resolution No. 7854 states:
14

Sec. 7. Who may vote. – All qualified voters of Lapu-Lapu City duly registered as of the January 8-12, 2007 hearings
of the Election Registration Board (ERB) are entitled to vote in the plebiscite.

The EO of Lapu-Lapu City shall prepare the lists of voters for use in the plebiscite in accordance with Section 11
hereof.15

In 2008, Tacloban City conducted a plebiscite for its conversion from a component city into a highly urbanized city.
The Commission on Elections then issued Resolution No. 8516  dated November 12, 2008. With regard to the
16

qualified voters for the conduct of the plebiscite, Resolution No. 8516 states:

Sec. 7. Who may vote. – All qualified voters of Tacloban City during the October 29, 2007 Barangay and SK
Elections are entitled to vote in the plebiscite.

The EO of Tacloban City shall prepare the lists of voters for use in the plebiscite in accordance with Section 11
hereof.17

The conversion of Cabanatuan City is no different from the conversions of Lapu-Lapu City and Tacloban City. There
is no need to deviate from the settled rule, which is based on law as interpreted by the executive and the
Commission on Elections.

By its very nature, the exercise of judicial review should be attended with a great deal of deference to acts of co-
equal and coordinative constitutional organs. In this case, the legislature provided in Section 453 of the Local
Government Code the plain phrase "ratification on a plebiscite by the qualified voters therein."  The executive
18

implements this provision with the recognition of conversion following a plebiscite involving only the qualified voters
of a component city. The Commission on Elections, equally a constitutional organ tasked with the implementation of
all laws relating to plebiscites, also interprets the statutory provision and the relevant constitutional provision to the
same effect: the plebiscite should include only the qualified voters of a component city.

Our power to strike down an act of co-equal constitutional organs is not unlimited. When we nullify a governmental
act, we are required "to determine whether there has been a grave abuse of discretion amounting to lack or excess
jurisdiction on the part of any branch or instrumentality of the Government." 19

No less than three constitutional organs have interpreted the law and the relevant provision of the Constitution. I am
of the view that our power to strike down that interpretation should not be on the basis of the interpretation we
prefer. Rather, Governor Umali should bear the burden of proving that the interpretation of the law and the
Constitution in the actual controversy it presents is not unreasonable and not attended by any proven clear and
convincing democratic deficit. We should wield the awesome power of judicial review awash with respectful
deference that the other constitutional organs are equally conscious of the mandate of our people through our
Constitution.

The Constitution provides:

Article X, Section 10. No province, city, municipality, or barangay may be created, divided, merged, abolished, or its
boundary substantially altered, except in accordance with the criteria established in the local government code and
subject to approval by a majority of the votes cast in a plebiscite in the political units directly affected. (Emphasis
supplied)

194
This provision applies when a city is "created, divided, merged, abolished or its boundary substantially altered."
Clearly, this does not apply to Cabanatuan City’s quest to have itself elevated to the status of "highly urbanized city"
with all the consequent advantages of that new legal categorization. Arguably, one way to read this provision is to
say that the boundary of the province is substantially altered. I could understand how certain pragmatic political and
economic considerations can support this conclusion to the extent that we can tend to minimize other’s viewpoints.

But that is not what this court should do. Rather, it should uphold principled modalities for reviewing statutes in
relation to constitutional provisions that can serve as a check for our personal preferences. After all, all of us who sit
in this chamber are sentinels of the rule of law and reason. We do not sit to entrench specific political ideologies.

It is reasonable to read the provision of the Constitution in question in the way that Mayor Vergara, the City
Government of Cabanatuan, and the Commission on Elections have proposed consistent with the view of the
legislature, the executive, and the Constitutional Commission. This reading is not attended with arbitrariness or
capriciousness. It is not so abhorrent that it amounts to the kind of grave abuse of discretion that will cause us to
unleash our power to nullify these acts in judicial review.

In my view, this interpretation may be consistent with the constitutional concept of local autonomy and the kind of
local self-determination that could have been envisioned by our people when we ratified the Constitution. After all, it
is realistically possible that provinces that are economically or politically dependent on one progressive component
city will be the obstacle for the continued progress of that city when the latter decides to take advantage of all that a
highly urbanized city will enjoy.

Governor Umali has not discharged his burden enough. I do not find grave abuse of discretion on the part of the
legislature, the executive, and the Commission on Elections. I do not view the past practice that allowed several
component cities to convert into highly urbanized cities as unreasonable in the light of the exact text of the
Constitution. Rather, given the facts of this case, I propose that we adopt the judicial temperament which requires
caution, courtesy, and deference.

Accordingly, I vote to deny the petition.

Republic of the Philippines

SUPREME COURT
Baguio City

EN BANC

G.R. No. 199439               April 22, 2014

CITY OF GENERAL SANTOS, represented by its Mayor, HON. DARLENE MAGNOLIA R. ANTONINO-
CUSTODIO Petitioner, 
vs.
COMMISSION ON AUDIT, Respondent.

DECISION

LEONEN, J.:

In order to be able to deliver more effective and efficient services, the law allows local government units the power
to reorganize. In doing so, they should be given leeway to entice their employees to avail of severance benefits that
the local government can afford. However, local government units may not provide such when it amounts to a
supplementary retirement benefit scheme.

In this special civil action for certiorari,  the city of General Santos asks us to find grave abuse of discretion on the
1

part of the Commission on Audit (COA). On January 20, 2011, respondent Commission on Audit affirmed the
findings of its Legal Services Sector in its Opinion No. 2010-021 declaring Ordinance No. 08, series of 2009, as
illegal. This was reiterated in respondent Commission’s resolution denying the motion for reconsideration dated
October 17, 2011. 2

Ordinance No. 08, series of 2009, was enacted by the city of General Santos on August 13, 2009. It is entitled An
Ordinance Establishing the GenSan Scheme on Early Retirement for Valued Employees Security (GenSan
SERVES). 3

It is important to view this ordinance in its proper context.

195
Then mayor of General Santos City, Pedro B. Acharon, Jr., issued Executive Order No. 40, series of 2008, creating
management teams pursuant to its organization development program. This was patterned after Executive Order
No. 366 dated October 4, 2004 entitled Directing a Strategic Review of the Operations and Organizations of the
Executive Branch and Providing Options and Incentives for Government Employees who may be Affected by the
Rationalization of the Functions and Agencies of the Executive Branch and its implementing rules and regulations. 4

Mayor Pedro B. Acharon, Jr. declared the city’s byword of "Total Quality Service" in his state of the city address in
2005. This was followed by the conduct of a process and practice review for each department, section, and unit of
the local government. The product was an organization development masterplan adopted as Executive Order No.
13, series of 2009. 5

This was followed by Resolution No. 004, series of 2009, requesting for the mayor’s support for GenSan SERVES,
an early retirement program to be proposed to the Sangguniang Panlungsod.

Consequently, Ordinance No. 08, series of 2009, was passed together with its implementing rules and regulations,
designed "to entice those employees who were unproductive due to health reasons to avail of the incentives being
offered therein by way of early retirement package." 6

This contextual background in the passing of Ordinance No. 08, series of 2009, was not contested by respondent
Commission on Audit.

The ordinance, as amended, provides that qualified employees below sixty (60) years of age but not less than fifty
(50) years and sickly employees below fifty (50) years of age but not less than forty (40) years may avail of the
incentives under the program.  In other words, the ordinance "provides for separation benefits for sickly employees
7

who have not yet reached retirement age."  Section 5 of the ordinance states:
8

Section 5. GenSan SERVES Program Incentives On Top of Government Service Insurance System (GSIS) and
PAG-IBIG Benefits – Any personnel qualified and approved to receive the incentives of this program shall be entitled
to whatever retirement benefits the GSIS or PAG-IBIG is granting to a retiring government employee.

Moreover, an eligible employee shall receive an early retirement incentive provided under this program at the rate of
one and one-half (1 1/2) months of the employee’s latest basic salary for every year of service in the City
Government. 9

Also, the ordinance provides:

Section 6. GenSan SERVES Post-Retirement Incentives – Upon availment of early retirement, a qualified employee
shall enjoy the following in addition to the above incentives:

(a) Cash gift of Fifty Thousand Pesos (₱50,000.00) for the sickly employees;

(b) Lifetime free medical consultation at General Santos City Hospital;

(c) Annual aid in the maximum amount of Five Thousand Pesos (₱5,000.00), if admitted at General Santos
City Hospital; and

(d) 14 karat gold ring as a token. 10

As provided, payment would be made in two tranches: 50% paid in January 2010 and the remainder in July
2010. Petitioner city alleged that out of its 1,361 regular employees, 50 employees applied, from which 39
11

employees qualified to avail of the incentives provided by the ordinance.  The first tranche of benefits was released
12

in January 2010. 13

In a letter dated February 10, 2010, the city’s audit team leader, through its supervising auditor, sent a query on the
legality of the ordinance to respondent Commission on Audit’s director for Regional Office No. XII, Cotabato City. 14

In his second indorsement dated March 15, 2010, respondent Commission’s regional director agreed that the grant
lacked legal basis and was contrary to the Government Service Insurance System (GSIS) Act. He forwarded the
matter to respondent Commission’s Office of General Counsel, Legal Services Sector, for a more authoritative
opinion. 15

The Office of General Counsel issued COA-LSS Opinion No. 2010-021 on March 25, 2010. The opinion explained
that Ordinance No. 08, series of 2009, partakes of a supplementary retirement benefit plan. In its view, Section 28,
paragraph (b) of Commonwealth Act No. 186, as amended, prohibits government agencies from establishing
supplementary retirement or pension plans from the time the Government Service Insurance System charter took
effect while those plans already existing when the charter was enacted were declared abolished. 16

196
The opinion discussed that this prohibition was reiterated in Conte v. Commission on Audit.  Laraño v. Commission
17

on Audit,  on the other hand, ruled that an early retirement program should be by virtue of a valid reorganization
18

pursuant to law in order to be valid. The opinion concludes as follows:

In fine, since Ordinance No. 08 is in the nature of an ERP [Early Retirement Program] of the City Government of
General Santos, a law authorizing the same is a requisite for its validity. In the absence, however, of such law, the
nullity of Ordinance No. 08 becomes a necessary consequence.

It is hoped that the foregoing sufficiently answers the instant query. 19

Petitioner city, through then mayor, Pedro B. Acharon, Jr., filed a letter-reconsideration dated June 7, 2010. They
followed through with two letters addressed to respondent Commission’s chairman dated July 26, 2010 and October
6, 2010, respectively, for the reconsideration of COA-LSS Opinion No. 2010-021. 20

Respondent Commission on Audit treated these letters as an appeal. On January 20, 2011, it rendered its decision
denying the appeal and affirming COA-LSS Opinion No. 2010-021.  It also denied reconsideration by resolution
21

dated October 17, 2011.  The dispositive portion of its decision reads:
22

WHEREFORE, premises considered, the instant appeal is hereby DENIED for lack of merit and COA-LSS Opinion
No. 2010-021 dated March 25, 2010 of the OGC, this Commission is hereby AFFIRMED. Accordingly, the ATL of
General Santos City is hereby directed to issue a Notice of Disallowance on the illegal disbursements made under
the Gen[S]san SERVES. 23

Respondent Commission on Audit agreed that Ordinance No. 08, series of 2009, partakes of the nature of a
supplementary retirement benefit plan proscribed by Section 28, paragraph (b) of Commonwealth Act No. 186 as
amended. It also cited Conte v. Commission on Audit  and Laraño v. Commission on Audit.
24 25

In its opinion, respondent Commission on Audit observed that GenSan SERVES was not based on a law passed by
Congress but on ordinances and resolutions passed and approved by the Sangguniang Panlungsod and Executive
Orders by the city mayor.  Moreover, nowhere in Section 76 of Republic Act No. 7160, otherwise known as the
26

Local Government Code, does it provide a specific power for local government units to establish an early retirement
program.

Mayor Acharon, Jr. submitted that other local government units such as Cebu in 2005 and 2008 have adopted their
own early retirement programs. The resolutions of the Sangguniang Panlungsod of Cebu invoked Republic Act No.
6683 dated December 2, 1988, which provided for early retirement and voluntary separation. The questioned
decision mentioned that respondent Commission on Audit would look into this program supposedly adopted by
Cebu.  Assuming Cebu’s invocation of Republic Act No. 6683 was proper, respondent Commission on Audit
27

explained that this has already been amended by Republic Act No. 8291, otherwise known as the GSIS Act of 1997.
Moreover, Section 9 of Republic Act No. 6683  provides for limited application.
28 29

The present petition raises this sole issue:

WHETHER RESPONDENT COMMISSION ON AUDIT COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT

CONSIDERED ORDINANCE NO. 08, SERIES OF 2009, IN THE NATURE OF AN EARLY RETIREMENT
PROGRAM REQUIRING A LAW AUTHORIZING IT FOR ITS VALIDITY

This court has consistently held that findings of administrative agencies are generally respected, unless found to
have been tainted with unfairness that amounted to grave abuse of discretion:

It is the general policy of the Court to sustain the decisions of administrative authorities, especially one which is
constitutionally-created not only on the basis of the doctrine of separation of powers but also for their presumed
expertise in the laws they are entrusted to enforce. Findings of administrative agencies are accorded not only
respect but also finality when the decision and order are not tainted with unfairness or arbitrariness that would
amount to grave abuse of discretion. It is only when the COA has acted without or in excess of jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction, that this Court entertains a petition questioning
its rulings. There is grave abuse of discretion when there is an evasion of a positive duty or a virtual refusal to
perform a duty enjoined by law or to act in contemplation of law as when the judgment rendered is not based on law
and evidence but on caprice, whim and despotism.  (Emphasis supplied, citations omitted)
30

We have ruled that "not every error in the proceedings, or every erroneous conclusion of law or fact, constitutes
grave abuse of discretion."  Grave abuse of discretion has been defined as follows:
31

197
By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction. Mere abuse of discretion is not enough. It must be grave abuse of discretion as when the power is
exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and
so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at
all in contemplation of law. x x x.
32

In Yap v. Commission on Audit,  this court explained that the Commission on Audit has the duty to make its own
33

assessment of the merits of the disallowance and need not be limited to a review of the grounds relied upon by the
auditor of the agency concerned:

x x x we rule that, in resolving cases brought before it on appeal, respondent COA is not required to limit its review
only to the grounds relied upon by a government agency’s auditor with respect to disallowing certain disbursements
of public funds. In consonance with its general audit power, respondent COA is not merely legally permitted, but is
also duty-bound to make its own assessment of the merits of the disallowed disbursement and not simply restrict
itself to reviewing the validity of the ground relied upon by the auditor of the government agency concerned. To hold
otherwise would render COA’s vital constitutional power unduly limited and thereby useless and ineffective. 34

Moreover, Article IX-A, Section 7 of the Constitution provides that "unless otherwise provided by this Constitution or
by law, any decision, order, or ruling of each Commission may be brought to the Supreme Court on certiorari by the
aggrieved party within thirty days from receipt of a copy thereof." Rule 64, Section 2 of the Revised Rules of Civil
Procedure also provides that "a judgment or final order or resolution of the Commission on Elections and the
Commission on Audit may be brought by the aggrieved party to the Supreme Court on certiorari under Rule 65,
except as hereinafter provided."

Thus, we proceed to determine whether respondent Commission on Audit acted with grave abuse of discretion in
affirming the opinion of its Legal Services Sector and finding that the entire Ordinance No. 08, series of 2009,
partakes of the nature of a proscribed supplementary retirement benefit plan.

II

According to petitioner city, GenSan SERVES does not provide for supplementary retirement benefits, and Conte
does not apply. 35

Petitioner city explains that unlike the facts in Conte, Ordinance No. 08, series of 2009, was designed to entice
employees who are unproductive due to health reasons to avail of the incentives by way of an early retirement
package. In essence, the incentives are severance pay. Those who have reached retirement age are disqualified. 36

Petitioner city adds that GenSan SERVES is a one-time offer. It is available only to qualified employees who applied
within two months from the ordinance’s effectivity. In fact, out of its 1,361 regular employees, 50 employees applied.
Out of all that applied, only 39 employees qualified to avail of the incentives provided by the ordinance. 37

These incentives are independent and distinct from the Government Service Insurance System retirement
package. 38

Section 5 of Ordinance No. 08, series of 2009, was amended by Ordinance No. 11, series of 2009, "to exclude
those GSIS and PAG-IBIG benefits the payment[s] of which are passed on [to] the employer."  This was to remove
39

any doubt as to its coverage and applicability and to ensure that no employee will be paid twice.  The amended
40

provision reads:

Section 5. Gen[S]an SERVES Program Incentives On Top of Government Service Insurance System (GSIS) and
PAG-IBIG Benefits – Any personnel qualified and approved to receive the incentives of this program shall be entitled
to whatever retirement benefits the GSIS or PAG-IBIG is granting to a retiring government employee, except those
benefits the payment of which are passed on to the employer. In which case, the benefits granted under this
ordinance shall only be considered as one of the options available to a retiring city employee.

Moreover, an eligible employee shall receive an early retirement incentive provided under this program at the rate of
one and one-half (1 1/2) months of the employee’s latest basic salary for every year of service in the City
Government. (Emphasis supplied)

According to petitioner city, GenSan SERVES is an initial step pursuant to its organization development
masterplan,  which began with the city mayor’s issuance of Executive Order No. 40, series of 2008, creating change
41

management teams. 42

Petitioner city cites Sections 16 and 76 of the Local Government Code as its authority to reorganize. It argues that
these provisions necessarily imply the authority of petitioner city to provide retirement benefits, separation pay, and
other incentives to those affected by the reorganization.43

198
Petitioner city also cites Republic Act No. 6656, otherwise known as An Act to Protect the Security of Tenure of Civil
Service Officers and Employees in the Implementation of Government Reorganization.  According to petitioner city,
44

this not only requires good faith in the implementation of reorganization but mandates the payment of appropriate
separation pay, retirement, and other benefits under existing laws within 90 days from effectivity date of separation. 45

Even President Gloria Macapagal-Arroyo issued Executive Order No. 184 entitled Directing the Reorganization and
Streamlining of the National Development Company on March 10, 2003. In Section 4, it provides for a separation
package anchored on Republic Act No. 6656.  Petitioner city submits that if the President can reorganize in the
46

absence of any law authorizing her to do so and provide compensation based on Republic Act No. 6656, with more
reason that a local government unit can reorganize as its power to reorganize is expressly provided in the Local
Government Code. 47

Respondent Commission on Audit counters that it correctly found Ordinance No. 08, series of 2009, as invalid in the
absence of a law passed by Congress specifically authorizing the enactment of an ordinance granting an early
retirement scheme. 48

Respondent Commission on Audit contends that Sections 16 and 76 of the Local Government Code do not confer
authority upon any local government unit to create a separate or supplementary retirement benefit plan.  As for
49

Republic Act No. 6656, this contemplates situations where a government position has been abolished, or rendered
redundant, or a need to merge, divide or consolidate positions for lawful causes allowed by the Civil Service Law
exists.
50

According to respondent Commission on Audit, petitioner city failed to demonstrate arbitrariness on its part as it
merely observed the proscription under Section 28, paragraph (b) of Commonwealth Act No. 186 when it found the
ordinance a nullity.
51

We agree with respondent Commission on Audit but only insofar as Section 5 of the ordinance is concerned. We
declare Section 6 on post-retirement incentives as valid.

III

The constitutional mandate for local autonomy supports petitioner city’s issuance of Executive Order No. 40, series
of 2008, creating change management teams  as an initial step for its organization development masterplan.
52

Local autonomy also grants local governments the power to streamline and reorganize. This power is inferred from
Section 76 of the Local Government Code on organizational structure and staffing pattern, and Section 16 otherwise
known as the general welfare clause:

Section 76. Organizational Structure and Staffing Pattern. - Every local government unit shall design and implement
its own organizational structure and staffing pattern taking into consideration its service requirements and financial
capability, subject to the minimum standards and guidelines prescribed by the Civil Service Commission.

Section 16. General Welfare. - Every local government unit shall exercise the powers expressly granted, those
necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient and effective
governance, and those which are essential to the promotion of the general welfare. Within their respective territorial
jurisdictions, local government units shall ensure and support, among other things, the preservation and enrichment
of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and
support the development of appropriate and self-reliant scientific and technological capabilities, improve public
morals, enhance economic prosperity and social justice, promote full employment among their residents, maintain
peace and order, and preserve the comfort and convenience of their inhabitants.

Section 5, paragraph (a) of the Local Government Code states that "any provision on a power of a local government
unit shall be liberally interpreted in its favor, and in case of doubt, any question thereon shall be resolved in favor or
devolution of powers x x x."

Section 5, paragraph (c) also provides that "the general welfare provisions in this Code shall be liberally interpreted
to give more powers to local government units in accelerating economic development and upgrading the quality of
life for the people in the community." These rules of interpretation emphasize the policy of local autonomy and the
devolution of powers to the local government units.

Designing and implementing a local government unit’s own "organizational structure and staffing pattern" also
implies the power to revise and reorganize. Without such power, local governments will lose the ability to adjust to
the needs of its constituents. Effective and efficient governmental services especially at the local government level
require rational and deliberate changes planned and executed in good faith from time to time.

199
This was implied in Province of Negros Occidental v. Commissioners, Commission on Audit.  In that case, this court
53

declared as valid the ordinance passed by the province granting and releasing hospitalization and health care
insurance benefits to its officials and employees. This court held that Section 2 of Administrative Order No.
103 requiring the President’s prior approval before the grant of any allowance or benefit is applicable only to offices
54

under the executive branch.  Section 2 does not mention local government units, thus, the prohibition does not
55

apply to them.  This court then referred to the policy of local autonomy as follows:
56

Thus, consistent with the state policy of local autonomy as guaranteed by the 1987 Constitution, under Section 25,
Article II and Section 2, Article X, and the Local Government Code of 1991, we declare that the grant and release of
the hospitalization and health care insurance benefits given to petitioner’s officials and employees were validly
enacted through an ordinance passed by petitioner’s Sangguniang Panlalawigan. 57

Local autonomy allows an interpretation of Sections 76 and 16 as granting petitioner city the authority to create its
organization development program.

Petitioner city’s vision in 2005 of "Total Quality Service" for "the improvement of the quality of services delivered by
the city to the delight of its internal and external customers"  is a matter within its discretion. It then conducted a
58

process and practice review for each and every unit within the city, resulting in the formulation of an organization
development masterplan adopted as Executive Order No. 13, series of 2009. 59

Resolution No. 004, series of 2009, was later passed requesting for the mayor’s support for GenSan SERVES. The
third preambular clause states that in order "to transform the bureaucracy into [an] effective and result[s]-oriented
structure, redounding to improved governance, there is a need to entice employees aged 50-59 years old, to retire
earlier than [age] 65 for them to enjoy their retirement while they are still healthy."  Consequently, Ordinance No.
60

08, series of 2009, was passed creating the GenSan SERVES program.

In Betoy v. The Board of Directors, NAPOCOR,  this court explained that a streamlining of organization for a more
61

efficient system must pass the test of good faith in order to be valid:

A reorganization involves the reduction of personnel, consolidation of offices, or abolition thereof by reason of
economy or redundancy of functions.  It could result in the loss of one's position through removal or abolition of an
62

office. However, for a reorganization for the purpose of economy or to make the bureaucracy more efficient to be
valid, it must pass the test of good faith; otherwise, it is void ab initio.  (Emphasis supplied)
63

There are indicia of bad faith, none of which are present in this case.

Republic Act No. 6656 invoked by petitioner city as authority for the creation of GenSan SERVES, for example,
enumerates situations considered as bad faith when employees are removed as a result of any reorganization:

SECTION 2. No officer or employee in the career service shall be removed except for a valid cause and after due
notice and hearing. A valid cause for removal exists when, pursuant to a bona fide reorganization, a position has
been abolished or rendered redundant or there is a need to merge, divide, or consolidate positions in order to meet
the exigencies of the service, or other lawful causes allowed by the Civil Service Law. The existence of any or some
of the following circumstances may be considered as evidence of bad faith in the removals made as a result of
reorganization, giving rise to a claim for reinstatement or reappointment by an aggrieved party:

a) Where there is a significant increase in the number of positions in the new staffing pattern of the
department or agency concerned;

b) Where an office is abolished and another performing substantially the same functions in created;

c) Where incumbents are replaced by those less qualified in terms of status of appointment, performance
and merit;

d) Where there is a reclassification of offices in the department or agency concerned and the reclassified
offices perform substantially the same functions as the original offices; and

e) Where the removal violates the order of separation provided in Section 3 hereof. (Emphasis supplied)

None of these badges of bad faith exist in this case.

Petitioner city followed the order of priority under Section 4 of its ordinance.  It required applicants to undergo
64

medical examination with the local hospital and considered the hospital chief’s recommendations. 65

Unfortunately, these allegations showing good faith is not enough to declare the program created by petitioner city
as a reorganization that justifies the creation of a retirement benefit plan.
200
Petitioner city alleged that the positions occupied by those who qualified for GenSan SERVES remained vacant, and
it would neither hire replacements nor promote employees earlier than June 30, 2011.  This means the positions left
66

by those who availed of the program will eventually be filled up by others. Their positions were not abolished or
merged with other positions for streamlining in the service.

IV

The assailed decision by respondent Commission on Audit was anchored on Section 28, paragraph (b) of
Commonwealth Act No. 186, otherwise known as the Government Service Insurance Act,  as amended by Republic
67

Act No. 4968.  This proscribes all supplementary retirement or pension plans for government employees:
68

(b) Hereafter no insurance or retirement plan for officers or employees shall be created by any employer. All
supplementary retirement or pension plans heretofore in force in any government office, agency, or instrumentality
or corporation owned and controlled by the government, are hereby declared inoperative or abolished: Provided,
That the rights of those who are already eligible to retire thereunder shall not be affected.

Jurisprudence has discussed the nature and purpose of retirement benefits and pension plans as follows:

Retirement benefits are, after all, a form of reward for an employee’s loyalty and service to the employer, and are
intended to help the employee enjoy the remaining years of his life, lessening the burden of worrying about his
financial support or upkeep. On the other hand, a pension partakes of the nature of "retained wages" of the retiree
for a dual purpose: to entice competent people to enter the government service, and to permit them to retire from
the service with relative security, not only for those who have retained their vigor, but more so for those who have
been incapacitated by illness or accident.  (Emphasis supplied)
69

In Conte v. Commission on Audit,  this court discussed the purpose behind the proscription found in Section 28,
70

paragraph (b), as amended. It was to address the need to prevent the proliferation of inequitous plans:

x x x Sec. 28 (b) as amended by RA 4968 in no uncertain terms bars the creation of any insurance or retirement
plan – other than the GSIS – for government officers and employees, in order to prevent the undue and inequitous
proliferation of such plans. x x x. To ignore this and rule otherwise would be tantamount to permitting every other
government office or agency to put up its own supplementary retirement benefit plan under the guise of such
"financial assistance.71

Section 2 of the ordinance, as amended, defined "applicants" as referring to "qualified employees below sixty (60)
years of age but not less than fifty (50) years and sickly employees below fifty (50) years of age but not less than
forty (40) years old from the effectivity of this Ordinance and shall have rendered service in the City government for
at least 15 years."

This means that even employees other than those who are unproductive due to health reasons may apply under the
ordinance. Albeit last in priority, they may still qualify to avail of the incentives pursuant to Section 4, paragraph (d),
as amended:

Section 4. Prioritization. – The following applicants shall be prioritized in availing the program:

a) First – Employees below sixty (60) years of age but not less than fifty (50) years who are determined by
the Chief of General Santos City Hospital to be qualified to avail of the program;

b) Second – Employees below sixty (60) years of age but not less than fifty (50) years who are under
continuous medication as determined by the Chief of General Santos City Hospital;

c) Third – Employees below fifty (50) years of age but not less than forty (40) years who are determined by
the Chief of General Santos City Hospital to be physically or mentally incapacitated to further continue
rendering service with the City Government and recommended to avail of the program; and

d) Fourth – Employees below sixty (60) years of age but not less than fifty (50) years who are desirous to
avail of the program.

Moreover, Section 3 of the ordinance, as amended, enumerates those who are covered by the program and may
thus apply under the ordinance:

Section 3. Coverage. – GenSan SERVES program covers the following employees of the City Government:

(a) personnel occupying permanent positions;

(b) those who are below sixty (60) years of age but not less than fifty (50) years on the date of application;
201
 (c) those who are below fifty (50) years of age but not less than forty (40) years on the date of application
but confirmed by the Chief of General Santos City Hospital to be sickly and recommended to avail early
retirement; and

(d) those who must have served the City Government of General Santos a minimum of fifteen (15)
continuous years.

Under paragraph (d), employees should have served for a minimum of 15 years to qualify. This requirement is
consistent with the definition of a retirement plan as a form of reward for an employee’s loyalty and service to the
employer. Moreover, pension plans as defined permit employees to retire with relative security, especially for those
who have been incapacitated by illness. 72

Section 5 states that "an eligible employee shall receive an early retirement incentive provided under this program at
the rate of 1 1/2 months of the employee’s latest basic salary for every year of service in the City Government." This
may be more than the amount of annuity provided in Section 11, paragraph (a) of Commonwealth Act No. 186 as
amended,  considering that an applicant must have rendered at least 15 years of service in the city government to
73

qualify.
74

Section 5 refers to an "early retirement incentive," the amount of which is pegged on the beneficiary’s years of
service in the city government. The ordinance provides that only those who have rendered service to the city
government for at least 15 years may apply.  Consequently, this provision falls under the definition of a retirement
75

benefit. Applying the definition in Conte, it is a form of reward for an employee’s loyalty and service to the city
government, and it is intended to help the employee enjoy the remaining years of his or her life by lessening his or
her financial worries.

In any case, those who availed of the GenSan SERVES were separated from the service. Those who are separated
from the service, whether compulsorily for lawful cause,  or voluntarily when incentivized to retire early for
76

streamlining purposes,  should consequently be entitled to a form of separation or severance pay.

77

Petitioner city invoked Republic Act No. 6656, which provides that employees separated from the service as a result
of any reorganization shall be entitled to separation pay, retirement, and other benefits:

Section 9. All officers and employees who are found by the Civil Service Commission to have been separated in
violation of the provisions of this Act, shall be ordered reinstated or reappointed as the case may be without loss of
seniority and shall be entitled to full pay for the period of separation. Unless also separated for cause, all officers
and employees, who have been separated pursuant to reorganization shall, if entitled thereto, be paid the
appropriate separation pay and retirement and other benefits under existing laws within ninety (90) days from the
date of the effectivity of their separation or from the date of the receipt of the resolution of their appeals as the case
may be: Provided, That application for clearance has been filed and no action thereon has been made by the
corresponding department or agency. Those who are not entitled to said benefits shall be paid a separation gratuity
in the amount equivalent to one (1) month salary for every year of service. Such separation pay and retirement
benefits shall have priority of payment out of the savings of the department or agency concerned. (Emphasis
supplied)

Separation or severance pay has been defined as "an allowance usually based on length of service that is payable
to an employee on severance x x x, or as compensation due an employee upon the severance of his employment
status with the employer." 78

Section 6 of the ordinance on post-retirement incentives provides for benefits that are not computed based on years
of service. They are lump sum amounts and healthcare benefits:

Section 6. GenSan SERVES Post-Retirement Incentives – Upon availment of early retirement, a qualified employee
shall enjoy the following in addition to the above incentives:

(e) Cash gift of Fifty Thousand Pesos (₱50,000.00) for the sickly employees;

(f) Lifetime free medical consultation at General Santos City Hospital;

(g) Annual aid in the maximum amount of Five Thousand Pesos (₱5,000.00), if admitted at General Santos
City Hospital; and

(h) 14 karat gold ring as token.

202
The text of the ordinance indicates its purpose of encouraging employees, especially those who are unproductive
due to health reasons, to avail of the program even before they reach the compulsory retirement age. Section 6
provides for a form of severance pay to those who availed of GenSan SERVES, which was executed in good faith.

We should not be misled by the use of the term "retirement" in Section 6 in determining the nature of the benefits it
provides. Labels are not determinative of substantive content. It is the purpose behind these incentives, as read
from the text of the ordinance and as inferred from the effect of the ordinance as applied, which must govern.

The purpose of Section 6 is also different from the benefits proscribed in Conte v. Commission on Audit,  and the
79

nature of its benefits must be taken in the context of its rationale. The benefits provided in Section 6 serve its
purpose of inducing petitioner city’s employees, who are unproductive due to health reasons, to retire early.
Respondent Commission on Audit’s observation that the benefit provided is broader than that provided in Conte v
Commission on Audit fails to take this rationale into consideration. Furthermore, the benefits under GenSan
SERVES were only given to a select few—the sickly and unproductive due to health reasons. Certainly, this negates
the position that the benefits provide for supplementary retirement benefits that augment existing retirement laws.

In Conte v. Commission on Audit  cited by respondent Commission on Audit, this court held that the "financial
80

assistance" option for the difference of benefits under Republic Act No. 660 and Republic Act No. 1616 violated
Section 28, paragraph (b) as amended. Social Security System (SSS) Resolution No. 56 subject of that case
provides in part:

NOW, THEREFORE, BE IT RESOLVED, That all the SSS employees who are simultaneously qualified for
compulsory retirement at age 65 or for optional retirement at a lower age be encouraged to avail for themselves the
life annuity under R.A. 660, as amended; x x x. 81

The fifth preambular clause of Resolution No. 56 also states that "it is the policy of the Social Security Commission
to promote and to protect the interest of all SSS employees, with a view to providing for their well-being during both
their working and retirement years."  The financial assistance provides benefits to all Social Security System
82

employees who are retirable under existing laws and who are qualified to apply. It is available to all present and
future Social Security System employees upon reaching retirement age. 83

Without doubt, this financial assistance of Conte augments the retirement benefits provided under existing laws, in
violation of Section 28, paragraph (b), as amended.

On the other hand, Section 3 of Ordinance No. 08, series of 2009 limits its coverage.  Only qualified employees
1a\^/phi1

below sixty (60) years of age but not less than fifty (50) years and sickly employees below fifty (50) years of age but
not less than forty (40) years from the effectivity of the ordinance, with at least 15 years of service, are considered.
Out of 1,361 regular employees of petitioner city, only 50 employees applied, from which only 39 employees
qualified to avail of the ordinance benefits.  Petitioner city alleged that there was one more applicant who was
84

supposed to qualify, but she had died of acute renal failure secondary to diabetes nephropathy before her
application was acted upon. 85

Furthermore, unlike in Conte, Ordinance No. 08, series of 2009, was a one-time limited offer.  The availment period
86

was only within two months from the ordinance’s effectivity. 87

In any case, petitioner city is authorized by the Local Government Code to approve ordinances to provide for the
care of the sick:

SECTION 458. – Powers, Duties, Functions and Compensation. – (a) The Sangguniang Panlungsod, as the
legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the general
welfare of the city and its inhabitants pursuant to section 16 of this Code and in the proper exercise of the corporate
powers of the city as provided for under section 22 of this Code, and shall:

xxxx

(5) Approve ordinances which shall ensure the efficient and effective delivery of the basic services and facilities as
provided for under Section 17 of this Code, and in addition to said services and facilities, shall:

xxxx

(xiv) Provide for the care of disabled persons, paupers, the aged, the sick, persons of unsound mind, abandoned
minors, juvenile delinquents, drug dependents, abused children and other needy and disadvantaged persons,
particularly children and youth below eighteen (18) years of age; and, subject to availability of funds, establish and
provide for the operation of centers and facilities for said needy and disadvantaged persons[.] (Emphasis supplied)

203
This is also consistent with the constitutional mandate for a comprehensive approach to health development, with
priority for the needs of the sick:

ARTICLE XIII
Social Justice and Human Rights

HEALTH

Section 11. The State shall adopt an integrated and comprehensive approach to health development which shall
endeavor to make essential goods, health and other social services available to all the people at affordable cost.
There shall be priority for the needs of the underprivileged, sick, elderly, disabled, women, and children. The State
shall endeavor to provide free medical care to paupers.

Thus, the cash gift for the sickly employees, lifetime free medical consultation in petitioner city's hospital, and other
similar benefits under Section 6 of the ordinance are valid.

The proscription under Section 28, paragraph (b) of Commonwealth Act No. 186, as amended, does not apply to
Section 6 of the ordinance.  Consequently, the Commission on Audit acted with grave abuse of discretion when it
1âwphi1

declared the entire ordinance void and of no effect.

WHEREFORE, the petition is PARTIALLY GRANTED. The assailed Commission on Audit decision dated January
20, 2011 and resolution dated October 17, 2011 are AFFIRMED with MODIFICATION insofar as Section 6 of
Ordinance No. 08, series of 2009, as amended by Ordinance No. 11, series of 2009, is declared as VALID.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Baguio City

EN BANC

G.R. No. 182894               April 22, 2014

FE FLORO VALINO, Petitioner, 
vs.
ROSARIO D. ADRIANO, FLORANTE D. ADRIANO, RUBEN D. ADRIANO, MARIA TERESA ADRIANO
ONGOCO, VICTORIA ADRIANO BAYONA, and LEAH ANTONETTE D. ADRIANO, Respondents.

DECISION

MENDOZA, J.:

Challenged in this petition is the October 2, 2006 Decision  and the May 9, 2008 Resolution  of the Court of Appeals
1 2

(CA) in CA-G.R. CV No. 61613, which reversed the October 1, 1998 Decision  of the Regional Trial Court, Branch
3

77, Quezon City (RTC) which ruled that petitioner Fe Floro Valino (Valino) was entitled to the remains of the
decedent.

The Facts:

Atty. Adriano Adriano (Atty. Adriano), a partner in the Pelaez Adriano and Gregorio Law Office, married respondent
Rosario Adriano (Rosario) on November 15, 1955. The couple had two (2) sons, Florante and Ruben Adriano; three
(3) daughters, Rosario, Victoria and Maria Teresa; and one (1) adopted daughter, Leah Antonette.

The marriage of Atty. Adriano and Rosario, however, turned sour and they were eventually separated-in-fact. Years
later, Atty. Adriano courted Valino, one of his clients, until they decided to live together as husband and wife.
Despite such arrangement, he continued to provide financial support to Rosario and their children (respondents).

In 1992, Atty. Adriano died of acute emphysema. At that time, Rosario was in the United States spending Christmas
with her children. As none of the family members was around, Valino took it upon herself to shoulder the funeral and
burial expenses for Atty. Adriano. When Rosario learned about the death of her husband, she immediately called
Valino and requested that she delay the interment for a few days but her request was not heeded. The remains of

204
Atty. Adriano were then interred at the mausoleum of the family of Valino at the Manila Memorial Park. Respondents
were not able to attend the interment.

Claiming that they were deprived of the chance to view the remains of Atty. Adriano before he was buried and that
his burial at the Manila Memorial Park was contrary to his wishes, respondents commenced suit against Valino
praying that they be indemnified for actual, moral and exemplary damages and attorney’s fees and that the remains
of Atty. Adriano be exhumed and transferred to the family plot at the Holy Cross Memorial Cemetery in Novaliches,
Quezon City.

In her defense, Valino countered that Rosario and Atty. Adriano had been separated for more than twenty (20)
years before he courted her. Valino claimed that throughout the time they were together, he had introduced her to
his friends and associates as his wife. Although they were living together, Valino admitted that he never forgot his
obligation to support the respondents. She contended that, unlike Rosario, she took good care of Atty. Adriano and
paid for all his medical expenses when he got seriously ill. She also claimed that despite knowing that Atty. Adriano
was in a coma and dying, Rosario still left for the United States. According to Valino, it was Atty. Adriano’s last wish
that his remains be interred in the Valino family mausoleum at the Manila Memorial Park.

Valino further claimed that she had suffered damages as result of the suit brought by respondents. Thus, she
prayed that she be awarded moral and exemplary damages and attorney’s fees.

Decision of the RTC

The RTC dismissed the complaint of respondents for lack of merit as well as the counterclaim of Valino after it found
them to have not been sufficiently proven.

The RTC opined that because Valino lived with Atty. Adriano for a very long time, she knew very well that it was his
wish to be buried at the Manila Memorial Park. Taking into consideration the fact that Rosario left for the United
States at the time that he was fighting his illness, the trial court concluded that Rosario did not show love and care
for him. Considering also that it was Valino who performed all the duties and responsibilities of a wife, the RTC
wrote that it could be reasonably presumed that he wished to be buried in the Valino family mausoleum. 4

In disposing of the case, the RTC noted that the exhumation and the transfer of the body of Atty. Adriano to the
Adriano family plot at the Holy Cross Memorial Cemetery in Novaliches, Quezon City, would not serve any useful
purpose and so he should be spared and respected.  Decision of the CA
5

On appeal, the CA reversed and set aside the RTC decision and directed Valino to have the remains of Atty.
Adriano exhumed at the expense of respondents. It likewise directed respondents, at their expense, to transfer,
transport and inter the remains of the decedent in the family plot at the Holy Cross Memorial Park in Novaliches,
Quezon City.

In reaching said determination, the CA explained that Rosario, being the legal wife, was entitled to the custody of
the remains of her deceased husband. Citing Article 305 of the New Civil Code in relation to Article 199 of the
Family Code, it was the considered view of the appellate court that the law gave the surviving spouse not only the
duty but also the right to make arrangements for the funeral of her husband. For the CA, Rosario was still entitled to
such right on the ground of her subsisting marriage with Atty. Adriano at the time of the latter’s death,
notwithstanding their 30-year separation in fact.

Like the RTC, however, the CA did not award damages in favor of respondents due to the good intentions shown by
Valino in giving the deceased a decent burial when the wife and the family were in the United States. All other
claims for damages were similarly dismissed.

The Sole Issue

The lone legal issue in this petition is who between Rosario and Valino is entitled to the remains of Atty. Adriano.

The Court’s Ruling

Article 305 of the Civil Code, in relation to what is now Article 199  of the Family Code, specifies the persons who
6

have the right and duty to make funeral arrangements for the deceased. Thus:

Art. 305. The duty and the right to make arrangements for the funeral of a relative shall be in accordance with the
order established for support, under Article 294. In case of descendants of the same degree, or of brothers and
sisters, the oldest shall be preferred. In case of ascendants, the paternal shall have a better right. [Emphases
supplied]

205
Art. 199. Whenever two or more persons are obliged to give support, the liability shall devolve upon the following
persons in the order herein provided:

(1) The spouse;

(2) The descendants in the nearest degree;

(3) The ascendants in the nearest degree; and

(4) The brothers and sisters. (294a)

[Emphasis supplied]

Further, Article 308 of the Civil Code provides:

Art. 308. No human remains shall be retained, interred, disposed of or exhumed without the consent of the persons
mentioned in Articles 294 and 305. [Emphases supplied]

In this connection, Section 1103 of the Revised Administrative Code provides:

Section 1103. Persons charged with the duty of burial. – The immediate duty of burying the body of a deceased
person, regardless of the ultimate liability for the expense thereof, shall devolve upon the persons herein below
specified:

(a) If the deceased was a married man or woman, the duty of the burial shall devolve upon the surviving spouse if
he or she possesses sufficient means to pay the necessary expenses;

x x x x. [Emphases supplied]

From the aforecited provisions, it is undeniable that the law simply confines the right and duty to make funeral
arrangements to the members of the family to the exclusion of one’s common law partner. In Tomas Eugenio, Sr. v.
Velez,  a petition for habeas corpus was filed by the brothers and sisters of the late Vitaliana Vargas against her
7

lover, Tomas Eugenio, Sr., alleging that the latter forcibly took her and confined her in his residence. It appearing
that she already died of heart failure due to toxemia of pregnancy, Tomas Eugenio, Sr. sought the dismissal of the
petition for lack of jurisdiction and claimed the right to bury the deceased, as the common-law husband.

In its decision, the Court resolved that the trial court continued to have jurisdiction over the case notwithstanding the
death of Vitaliana Vargas. As to the claim of Tomas Eugenio, Sr. that he should be considered a "spouse" having
the right and duty to make funeral arrangements for his common-law wife, the Court ruled:

x x x Indeed, Philippine Law does not recognize common law marriages. A man and woman not legally married who
cohabit for many years as husband and wife, who represent themselves to the public as husband and wife, and who
are reputed to be husband and wife in the community where they live may be considered legally married in common
law jurisdictions but not in the Philippines.

While it is true that our laws do not just brush aside the fact that such relationships are present in our society, and
that they produce a community of properties and interests which is governed by law, authority exists in case law to
the effect that such form of co-ownership requires that the man and woman living together must not in any way be
incapacitated to contract marriage. In any case, herein petitioner has a subsisting marriage with another woman, a
legal impediment which disqualified him from even legally marrying Vitaliana. In Santero vs. CFI of Cavite, the
Court, thru Mr. Justice Paras, interpreting Art. 188 of the Civil Code (Support of Surviving Spouse and Children
During Liquidation of Inventoried Property) stated: "Be it noted, however, that with respect to 'spouse,' the same
must be the legitimate 'spouse' (not common-law spouses)."

There is a view that under Article 332 of the Revised Penal Code, the term "spouse" embraces common law relation
for purposes of exemption from criminal liability in cases of theft, swindling and malicious mischief committed or
caused mutually by spouses. The Penal Code article, it is said, makes no distinction between a couple whose
cohabitation is sanctioned by a sacrament or legal tie and another who are husband and wife de facto. But this view
cannot even apply to the facts of the case at bar. We hold that the provisions of the Civil Code, unless expressly
providing to the contrary as in Article 144, when referring to a "spouse" contemplate a lawfully wedded spouse.
Petitioner vis-a-vis Vitaliana was not a lawfully-wedded spouse to her; in fact, he was not legally capacitated to
marry her in her lifetime.  [Emphases supplied]
8

As applied to this case, it is clear that the law gives the right and duty to make funeral arrangements to Rosario, she
being the surviving legal wife of Atty. Adriano. The fact that she was living separately from her husband and was in
the United States when he died has no controlling significance. To say that Rosario had, in effect, waived or
206
renounced, expressly or impliedly, her right and duty to make arrangements for the funeral of her deceased
husband is baseless. The right and duty to make funeral arrangements, like any other right, will not be considered
as having been waived or renounced, except upon clear and satisfactory proof of conduct indicative of a free and
voluntary intent to that end.  While there was disaffection between Atty. Adriano and Rosario and their children when
9

he was still alive, the Court also recognizes that human compassion, more often than not, opens the door to mercy
and forgiveness once a family member joins his Creator. Notably, it is an undisputed fact that the respondents
wasted no time in making frantic pleas to Valino for the delay of the interment for a few days so they could attend
the service and view the remains of the deceased. As soon as they came to know about Atty. Adriano’s death in the
morning of December 19, 1992 (December 20, 1992 in the Philippines), the respondents immediately contacted
Valino and the Arlington Memorial Chapel to express their request, but to no avail.

Valino insists that the expressed wishes of the deceased should nevertheless prevail pursuant to Article 307 of the
Civil Code. Valino’s own testimony that it was Atty. Adriano’s wish to be buried in their family plot is being relied
upon heavily. It should be noted, however, that other than Valino’s claim that Atty. Adriano wished to be buried at
the Manila Memorial Park, no other evidence was presented to corroborate such claim. Considering that Rosario
equally claims that Atty. Adriano wished to be buried in the Adriano family plot in Novaliches, it becomes apparent
that the supposed burial wish of Atty. Adriano was unclear and undefinite. Considering this ambiguity as to the true
wishes of the deceased, it is the law that supplies the presumption as to his intent. No presumption can be said to
have been created in Valino’s favor, solely on account of a long-time relationship with Atty. Adriano.

Moreover, it cannot be surmised that just because Rosario was unavailable to bury her husband when she died, she
had already renounced her right to do so. Verily, in the same vein that the right and duty to make funeral
arrangements will not be considered as having been waived or renounced, the right to deprive a legitimate spouse
of her legal right to bury the remains of her deceased husband should not be readily presumed to have been
exercised, except upon clear and satisfactory proof of conduct indicative of a free and voluntary intent of the
deceased to that end. Should there be any doubt as to the true intent of the deceased, the law favors the legitimate
family. Here, Rosario’s keenness to exercise the rights and obligations accorded to the legal wife was even
bolstered by the fact that she was joined by the children in this case.

Even assuming, ex gratia argumenti, that Atty. Adriano truly wished to be buried in the Valino family plot at the
Manila Memorial Park, the result remains the same. Article 307 of the Civil Code provides:

Art. 307. The funeral shall be in accordance with the expressed wishes of the deceased. In the absence of such
expression, his religious beliefs or affiliation shall determine the funeral rites. In case of doubt, the form of the
funeral shall be decided upon by the person obliged to make arrangements for the same, after consulting the other
members of the family.

From its terms, it is apparent that Article 307 simply seeks to prescribe the "form of the funeral rites" that should
govern in the burial of the deceased. As thoroughly explained earlier, the right and duty to make funeral
arrangements reside in the persons specified in Article 305 in relation to Article 199 of the Family Code. Even if
Article 307 were to be interpreted to include the place of burial among those on which the wishes of the deceased
shall be followed, Dr. Arturo M. Tolentino (Dr. Tolentino), an eminent authority on civil law, commented that it is
generally recognized that any inferences as to the wishes of the deceased should be established by some form of
testamentary disposition.  As Article 307 itself provides, the wishes of the deceased must be expressly provided. It
10

cannot be inferred lightly, such as from the circumstance that Atty. Adriano spent his last remaining days with
Valino. It bears stressing once more that other than Valino’s claim that Atty. Adriano wished to be buried at the
Valino family plot, no other evidence was presented to corroborate it.

At any rate, it should be remembered that the wishes of the decedent with respect to his funeral are not absolute. As
Dr. Tolentino further wrote:

The dispositions or wishes of the deceased in relation to his funeral, must not be contrary to law. They must not
violate the legal and reglamentary provisions concerning funerals and the disposition of the remains, whether as
regards the time and manner of disposition, or the place of burial, or the ceremony to be observed.  [Emphases
11

supplied]

In this case, the wishes of the deceased with respect to his funeral are limited by Article 305 of the Civil Code in
relation to Article 199 of the Family Code, and subject the same to those charged with the right and duty to make the
proper arrangements to bury the remains of their loved-one. As aptly explained by the appellate court in its
disquisition:

The testimony of defendant-appellee Fe Floro Valino that it was the oral wish of Atty. Adriano Adriano that he be
interred at the Floro family’s mausoleum at the Manila Memorial Park, must bend to the provisions of the law. Even
assuming arguendo that it was the express wish of the deceased to be interred at the Manila Memorial Park, still,
the law grants the duty and the right to decide what to do with the remains to the wife, in this case, plaintiff-appellant
Rosario D. Adriano, as the surviving spouse, and not to defendant-appellee Fe Floro Valino, who is not even in the
list of those legally preferred, despite the fact that her intentions may have been very commendable. The law does

207
not even consider the emotional fact that husband and wife had, in this case at bench, been separated-in-fact and
had been living apart for more than 30 years. 12

As for Valino’s contention that there is no point in exhuming and transferring the remains of Atty. Adriano, it should
be said that the burial of his remains in a place other than the Adriano family plot in Novaliches runs counter to the
wishes of his family. It does not only violate their right provided by law, but it also disrespects the family because the
remains of the patriarch are buried in the family plot of his live-in partner.

It is generally recognized that the corpse of an individual is outside the commerce of man. However, the law
recognizes that a certain right of possession over the corpse exists, for the purpose of a decent burial, and for the
exclusion of the intrusion by third persons who have no legitimate interest in it. This quasi-property right, arising out
of the duty of those obligated by law to bury their dead, also authorizes them to take possession of the dead body
for purposes of burial to have it remain in its final resting place, or to even transfer it to a proper place where the
memory of the dead may receive the respect of the living. This is a family right. There can be no doubt that persons
having this right may recover the corpse from third persons. 13

All this notwithstanding, the Court finds laudable the acts of Valino in taking care of Atty. Adriano during his final
moments and giving him a proper burial. For her sacrifices, it would indeed be unkind to assess actual or moral
damages against her. As aptly explained by the CA:

The trial court found that there was good faith on the part of defendant-appellee Fe Floro Valino, who, having lived
with Atty. Adriano after he was separated in fact from his wife, lovingly and caringly took care of the well-being of
Atty. Adriano Adriano while he was alive and even took care of his remains when he had died.

On the issue of damages, plaintiffs-appellants are not entitled to actual damages. Defendant-appellee Fe Floro
Valino had all the good intentions in giving the remains of Atty. Adriano a decent burial when the wife and family
were all in the United States and could not attend to his burial. Actual damages are those awarded in satisfaction of,
or in recompense for, loss or injury sustained. To be recoverable, they must not only be capable of proof but must
actually be proven with a reasonable degree of certainty. In this case at bench, there was no iota of evidence
presented to justify award of actual damages.

Plaintiffs-appellants are not also entitled to moral and exemplary damages.  Moral damages may be recovered only
1âwphi1

if the plaintiff is able to satisfactorily prove the existence of the factual basis for the damages and its causal
connection with the acts complained of because moral damages although incapable of pecuniary estimation are
designed not to impose a penalty but to compensate for injury sustained and actual damages suffered. No injury
was caused to plaintiffs-appellants, nor was any intended by anyone in this case. Exemplary damages, on the other
hand, may only be awarded if claimant is able to establish his right to moral, temperate, liquidated or compensatory
damages. Unfortunately, neither of the requirements to sustain an award for either of these damages would appear
to have been adequately established by plaintiffs-appellants.

As regards the award of attorney's fees, it is an accepted doctrine that the award thereof as an item of damages is
the exception rather than the rule, and counsel's fees are not to be awarded every time a party wins a suit. The
power of the court to award attorney's fees under Article 2208 of the New Civil Code demands factual, legal and
equitable justification, without which the award is a conclusion without a premise, its basis being improperly left to
speculation and conjecture. In this case, we have searched but found nothing in plaintiffs-appellants' suit that
justifies the award of attorney's fees.
14

Finally, it should be said that controversies as to who should make arrangements for the funeral of a deceased have
often aggravated the bereavement of the family and disturbed the proper solemnity which should prevail at every
funeral. It is for the purpose of preventing such controversies that the Code Commission saw it best to include the
provisions on "Funerals." 15

WHEREFORE, the petition is DENIED.

SO ORDERED.

DISSENTING OPINION

LEONEN, J.:

We will all die. But what may matter to many of us is how we live and how our life is kept in the memories of those
we leave behind. This case is not about whether a common-law wife has more rights over the corpse of the husband
than the latter's estranged legal spouse. This case is about which between them knows his wishes.

Therefore, I respectfully disagree with the ponencia in denying this petition.

208
I vote to set aside the decision of the Court of Appeals dated October 2, 2006 in CA-G.R. CV No. 61613, which
directs petitioner Fe to have the remains of Atty. Lope Adriano exhumed, and orders respondents to transfer,
transport, and inter, at their expense, the remains of the decedent from Manila Memorial Park to the family plot in
Holy Cross Memorial Park in Novaliches, Quezon City. I vote to sustain the decision dated October 1, 1998, of the
Regional Trial Court of Quezon City, Branch 77 in Civil Case No. Q-93-15288, dismissing respondents' complaint for
damages.

I disagree with the position that in the determination of how Atty. Adriano should be buried, "the law gives the right
and duty to make funeral arrangements to Rosario, she being the surviving legal wife of Atty. Adriano,"  in1

accordance with Article 305  of the Civil Code in relation to Article 199  of the Family Code.
2 3

I am of the opinion that Article 305 should only be considered when, first, the deceased left no explicit instructions
on how he wishes to be interred, and second, when none among the deceased’s surviving relations are willing to
make the funeral arrangements and a conflict arises. In these situations, the conflict must be settled according to the
order of preference stated in Article 199. In any other case, it should be the express wishes of the deceased which
should take precedence.

This view, in fact, is embodied in Article 307 of the Civil Code, which states:

Article 307. The funeral shall be in accordance with the expressed wishes of the deceased. In the absence of such
expression, his religious beliefs or affiliation shall determine the funeral rites. In case of doubt, the form of the
funeral shall be decided upon by the person obliged to make arrangements for the same, after consulting the other
members of the family. (Emphasis supplied)

It is the ponencia’s opinion that the wishes of the deceased contemplated in Article 307 only governs the "form of
the funeral" and that the duty and, more specifically, the right to make arrangements for the funeral remains with the
persons specified in Article 305 in relation to Article 199. It is my submission, however, that Article 307 should be
interpreted to mean that the right to determine one’s funeral, including the right to determine how and where one
wishes to be buried, remains with the deceased, and it is only in the absence of his express wishes, or in the
absence of his religious beliefs and affiliations, or if there is doubt as to his wishes, that other persons may assume
the right to decide the funeral arrangements.

This right, like other rights pointed out by the ponencia,  must not be considered waived or renounced except upon
4

clear and satisfactory proof of conduct indicative of a free and voluntary intent to that end. There is neither indication
nor have there been any allegations that Atty. Adriano did not freely and voluntarily relay his last wishes to his
common-law wife, petitioner Fe. Atty. Adriano, therefore, did not waive his right to determine where he should be
buried, in favor of the persons indicated in Article 305 in relation to Article 199.

Accordingly, it was improper to cite in the ponencia Tomas Eugenio, Sr. v. Judge Velez.  In Eugenio, Tomas
5

Eugenio, Sr. claimed the right to bury his common-law wife, arguing that he should be considered a "spouse" under
Article 305 in relation to Article 199. The assertion led this court to expound on the interpretation of Article 305 in
relation to Article 199 and conclude that:

x x x. Indeed, Philippine Law does not recognize common law marriages. A man and woman not legally married
who cohabit for many years as husband and wife, who represent themselves to the public as husband and wife, and
who are reputed to be husband and wife in the community where they live may be considered legally "married" in
common law jurisdictions but not in the Philippines.

While it is true that our laws do not just brush aside the fact that such relationships are present in our society, and
that they produce a community of properties and interests which is governed by law, authority exists in case law to
the effect that such form of co-ownership requires that the man and woman living together must not in any way be
incapacitated to contract marriage. In any case, herein petitioner has a subsisting marriage with another woman, a
legal impediment which disqualified him from even legally marrying Vitaliana. In Santero vs. CFI of Cavite, the
Court, thru Mr. Justice Paras, interpreting Art. 188 of the Civil Code (Support of Surviving Spouse and Children
During Liquidation of Inventoried Property) stated: "Be it noted however that with respect to 'spouse', the same must
be the legitimate 'spouse' (not common-law spouses…)."

There is a view that under Article 332 of the Revised Penal Code, the term "spouse" embraces common law relation
for purposes of exemption from criminal liability in cases of theft, swindling and malicious mischief committed or
caused mutually by spouses. The Penal Code article, it is said, makes no distinction between a couple whose
cohabitation is sanctioned by a sacrament or legal tie and another who are husband and wife de facto. But this view
cannot even apply to the facts of the case at bar. We hold that the provisions of the Civil Code, unless expressly
providing to the contrary as in Article 144, when referring to a "spouse" contemplate a lawfully wedded spouse.
Petitioner vis-a-vis Vitaliana was not a lawfully-wedded spouse to her; in fact, he was not legally capacitated to
marry her in her lifetime.
6

209
In the present case, petitioner Fe has not asserted that she be considered a "spouse" under Article 305 in relation to
Article 199 with the right and the duty to make funeral arrangements for Atty. Adriano. What she asserts is that she
was Atty. Adriano’s constant companion for a long time who was constantly by his side, showing him the love and
devotion as a wife would have, who took care of him in his final moments and gave him a proper burial. As such,
there is a presumption that she would be in the best position to relay his final wishes.

The trial court in its decision dated October 1, 1998 reached the same conclusion, thus:

Atty. Lope Adriano’s wish was established at the trial and shown in the following testimony of the defendant, to wit:

"ATTY. PIZARRAS:

Madam witness, what was the wish of Atty. Lope Adriano regarding his burial?

WITNESS:

He wanted to be buried at Manila Memorial.

Q: Why do you say that?

A: We have discussed it long before.

Q: When did you first discuss this?

A: The first time we went to Manila Memorial. He wanted that his lawn type lot be upgraded to estate type. He
doesn’t want that people will step on his grave.

Q: What happened to this request if his lawn type lot to be upgraded to estate type?

A: It did not take long. I had it upgraded."

(TSN, May 7, 1997, pp. 4-5; underscoring supplied)

This crucial fact remained unrefuted.

Moreover, considering the very, very long time that the defendant and the deceased lived like husband and wife
prior to his death, it can be reasonably assumed that it is the defendant who really knows the wishes of the
deceased. And it appears that it was the express wish of the deceased that he be interred at the Manila Memorial
Park.7

The ponencia also noted there was "animosity" between Atty. Adriano and respondents when he was still alive. He
and his legal spouse, respondent Rosario, have been separated-in-fact for more than thirty (30) years, and he has
not been in contact with his children, the other respondents, for about the same period of time. They did not even
visit him when he fell ill and was on his deathbed; it was only after he died that they came, asserting their rights to
his remains.

It is unfortunate that the ponencia would rather uphold the wishes of his estranged family rather than give the
deceased his final request. Part of life is the ability to control how one wishes to be memorialized, and such right
should remain with the deceased. It is only when the deceased has not left any express instructions that the right is
given to the persons specified under the law.

Given the circumstances, the remains of Atty. Adriano should remain in the Floro family mausoleum at the Manila
Memorial Park.

The law reaches into much of our lives while we live. It constitutes and frames most of our actions. But at the same
time, the law also grants us the autonomy or the space to define who we are. Upon our death, the law does not
cease to respect our earned autonomy. Rather, it gives space for us to speak through the agency of she who may
have sat at our bedside as we suffered through a lingering illness.

I am of the view that it is that love and caring which should be rewarded with the honor of putting us in that place
where we mark our physical presence for the last time and where we will be eternally remembered.

ACCORDINGLY, the petition should be GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 61613,
reversing the October 1, 1998 decision of the Regional Trial Court, Branch 77, Quezon City, must be SET ASIDE.

210
 Republic of the Philippines
SUPREME COURT
Baguio City

THIRD DIVISION

G.R. No. 197293               April 21, 2014

ALFREDO C. MENDOZA, Petitioner, 
vs.
PEOPLE OF THE PHILIPPINES AND JUNO CARS, INC., Respondents.

DECISION

LEONEN, J.:

While the determination of probable cause to charge a person of a crime is the sole function of the. prosecutor, the
trial court may, in the protection of one's fundamental right to liberty, dismiss the case if, upon a personal
assessment of the evidence, it finds that the evidence does not establish probable cause.

This is a petition for review on certiorari  assailing the Court of Appeals' decision  dated January 14, 2011, which
1 2

reversed the Regional Trial Court's dismissal of the complaint against petitioner Alfredo C. Mendoza for qualified
theft and estafa.

This case stems from a complaint-affidavit filed by Juno Cars, Inc. through its representative, Raul C. Evangelista,
on January 8, 2008 for qualified theft and estafa against Alfredo.3

In the complaint-affidavit, Juno Cars alleged that on June 2, 2007, it hired Alfredo as Trade-In/Used Car Supervisor.
On November 19, 2007, its Dealer/Operator, Rolando Garcia, conducted a partial audit of the used cars and

211
discovered that five (5) cars had been sold and released by Alfredo without Rolando’s or the finance manager’s
permission. 4

The partial audit showed that the buyers of the five cars made payments, but Alfredo failed to remit the payments
totalling ₱886,000.00. It was further alleged that while there were 20 cars under Alfredo’s custody, only 18 were
accounted for. Further investigation revealed that Alfredo failed to turn over the files of a 2001 Hyundai Starex and a
Honda City 1.5 LXI. Juno Cars alleged that taking into account the unremitted amounts and the acquisition cost of
the Honda City, Alfredo pilfered a total amount of ₱1,046,000.00 to its prejudice and damage. 5

In his counter-affidavit, Alfredo raised, among others, Juno Cars’ supposed failure to prove ownership over the five
(5) cars or its right to possess them with the purported unremitted payments. Hence, it could not have suffered
damage. 6

On March 4, 2008, Provincial Prosecutor Rey F. Delgado issued a Resolution  finding probable cause and
7

recommending the filing of an information against Alfredo for qualified theft and estafa.

Alfredo moved for reconsideration, but the motion was denied.  He then filed a petition for review with the
8

Department of Justice on May 16, 2008. 9

While Alfredo’s motion for reconsideration was still pending before the Office of the City Prosecutor of Mandaluyong,
two informations for qualified theft  and estafa  were filed before the Regional Trial Court, Branch 212,
10 11

Mandaluyong City. On March 31, 2008, Alfredo filed a motion for determination of probable cause  before the trial
12

court. On April 28, 2008, he also filed a motion to defer arraignment.

Several clarificatory hearings were scheduled but were not conducted.  On February 4, 2009, the parties agreed to
13

submit all pending incidents, including the clarificatory hearing, for resolution.
14

On March 3, 2009, the trial court, through Presiding Judge Rizalina Capco-Umali, issued an order  dismissing the
15

complaint, stating that:

After conducting an independent assessment of the evidence on record which includes the assailed Resolution
dated 04 March 2008, the court holds that the evidence adduced does not support a finding of probable cause for
the offenses of qualified theft and estafa. x x x.
16

Juno Cars filed a motion for reconsideration, which the trial court denied on July 3, 2009. 17

Juno Cars then filed a petition for certiorari with the Court of Appeals, arguing that the trial court acted without or in
excess of its jurisdiction and with grave abuse of discretion when it dismissed the complaint. It argued that "the
determination of probable cause and the decision whether or not to file a criminal case in court, rightfully belongs to
the public prosecutor." 18

On January 14, 2011, the Court of Appeals rendered a decision,  reversed the trial court, and reinstated the case. In
19

its decision, the appellate court ruled that the trial court acted without or in excess of its jurisdiction "in supplanting
the public prosecutor’s findings of probable cause with her own findings of insufficiency of evidence and lack of
probable cause." 20

Aggrieved, Alfredo filed a petition for review under Rule 45 before this court. In essence, he argued that the trial
court was correct in finding that there was no probable cause as shown by the evidence on record. He argued that
"judicial determination of probable cause is broader than [the] executive determination of probable cause"  and that21

"[i]t is not correct to say that the determination of probable cause is exclusively vested on the prosecutor x x x." 22

In its comment,  Juno Cars argued that Alfredo presented questions, issues, and arguments that were a mere
23

rehash of those already considered and passed upon by the appellate court.

The Office of the Solicitor General, arguing for public respondent, stated in its comment  that the appellate court
24

correctly sustained the public prosecutor in his findings of probable cause against Alfredo. Since there was no
showing of grave abuse of discretion on the part of Prosecutor Rey F. Delgado, the trial court should respect his
determination of probable cause.

In his reply,  Alfredo reiterated that "judicial determination of probable cause[,] while not a superior faculty[,] covers
25

a broader encompassing perspective in the disposition of the issue on the existence of probable cause."  He argued
26

that the findings of the trial court should be accorded greater weight than the appellate court’s. It merely reviewed
the findings of the trial court.

The primordial issue is whether the trial court may dismiss an information filed by the prosecutor on the basis of its
own independent finding of lack of probable cause.
212
Time and again, this court has been confronted with the issue of the difference between the determination of
probable cause by the prosecutor on one hand and the determination of probable cause by the judge on the other.
We examine these two concepts again.

Juno Cars filed a complaint against Alfredo for qualified theft  and estafa under Article 315, fourth paragraph, no.
27

3(c)  of the Revised Penal Code. Since qualified theft is punishable by reclusion perpetua, a preliminary
28

investigation must first be conducted "to determine whether there is sufficient ground to engender a well-founded
belief that a crime has been committed and the respondent is probably guilty thereof, and should be held for trial," in
accordance with Rule 112, Section 1 of the Rules on Criminal Procedure.

At this stage, the conduct of the preliminary investigation and the subsequent determination of the existence of
probable cause lie solely within the discretion of the public prosecutor.  If upon evaluation of the evidence, the
29

prosecutor finds sufficient basis to find probable cause, he or she shall then cause the filing of the information with
the court.

Once the information has been filed, the judge shall then "personally evaluate the resolution of the prosecutor and
its supporting evidence"  to determine whether there is probable cause to issue a warrant of arrest. At this stage, a
30

judicial determination of probable cause exists.

In People v. Castillo and Mejia,  this court has stated:

31

There are two kinds of determination of probable cause: executive and judicial. The executive determination of
probable cause is one made during preliminary investigation. It is a function that properly pertains to the public
prosecutor who is given a broad discretion to determine whether probable cause exists and to charge those whom
he believes to have committed the crime as defined by law and thus should be held for trial. Otherwise stated, such
official has the quasi-judicial authority to determine whether or not a criminal case must be filed in court. Whether or
not that function has been correctly discharged by the public prosecutor, i.e., whether or not he has made a correct
ascertainment of the existence of probable cause in a case, is a matter that the trial court itself does not and may
not be compelled to pass upon.

The judicial determination of probable cause, on the other hand, is one made by the judge to ascertain whether a
warrant of arrest should be issued against the accused. The judge must satisfy himself that based on the evidence
submitted, there is necessity for placing the accused under custody in order not to frustrate the ends of justice. If the
judge finds no probable cause, the judge cannot be forced to issue the arrest warrant. 32

The difference is clear: The executive determination of probable cause concerns itself with whether there is enough
evidence to support an Information being filed. The judicial determination of probable cause, on the other hand,
determines whether a warrant of arrest should be issued. In People v. Inting: 33

x x x Judges and Prosecutors alike should distinguish the preliminary inquiry which determines probable cause for
the issuance of a warrant of arrest from the preliminary investigation proper which ascertains whether the offender
should be held for trial or released. Even if the two inquiries are conducted in the course of one and the same
proceeding, there should be no confusion about the objectives. The determination of probable cause for the warrant
of arrest is made by the Judge. The preliminary investigation proper—whether or not there is reasonable ground to
believe that the accused is guilty of the offense charged and, therefore, whether or not he should be subjected to
the expense, rigors and embarrassment of trial—is the function of the Prosecutor.  (Emphasis supplied)
34

While it is within the trial court’s discretion to make an independent assessment of the evidence on hand, it is only
for the purpose of determining whether a warrant of arrest should be issued. The judge does not act as an appellate
court of the prosecutor and has no capacity to review the prosecutor’s determination of probable cause; rather, the
judge makes a determination of probable cause independent of the prosecutor’s finding.

People v. Court of Appeals and Jonathan Cerbo  discussed the rationale. In that case, Jonathan Cerbo allegedly
35

shot Rosalinda Dy in the presence of his father, Billy Cerbo. An information for murder was filed against Jonathan
Cerbo. The daughter of Rosalinda Dy, as private complainant, executed a complaint-affidavit charging Billy Cerbo
with conspiracy. The prosecutor then filed a motion to amend the information, which was granted by the court. The
information was then amended to include Billy Cerbo as one of the accused, and a warrant of arrest was issued
against him.

Billy Cerbo filed a motion to quash the warrant arguing that it was issued without probable cause. The trial court
granted this motion, recalled the warrant, and dismissed the case against him. The Court of Appeals affirmed this
dismissal. This court, however, reversed the Court of Appeals and ordered the reinstatement of the amended
information against Billy Cerbo, stating that:

In granting this petition, we are not prejudging the criminal case or the guilt or innocence of Private Respondent Billy
Cerbo. We are simply saying that, as a general rule, if the information is valid on its face and there is no showing of
manifest error, grave abuse of discretion or prejudice on the part of the public prosecutor, courts should not dismiss
213
it for ‘want of evidence,’ because evidentiary matters should be presented and heard during the trial. The functions
and duties of both the trial court and the public prosecutor in "the proper scheme of things" in our criminal justice
system should be clearly understood.

The rights of the people from what could sometimes be an "oppressive" exercise of government prosecutorial
powers do need to be protected when circumstances so require. But just as we recognize this need, we also
acknowledge that the State must likewise be accorded due process. Thus, when there is no showing of nefarious
irregularity or manifest error in the performance of a public prosecutor’s duties, courts ought to refrain from
interfering with such lawfully and judicially mandated duties.

In any case, if there was palpable error or grave abuse of discretion in the public prosecutor’s finding of probable
cause, the accused can appeal such finding to the justice secretary and move for the deferment or suspension of
the proceedings until such appeal is resolved.  (Emphasis supplied)
36

In this case, the resolution dated March 4, 2008 of Prosecutor Rey F. Delgado found that the facts and evidence
were "sufficient to warrant the indictment of [petitioner] x x x."  There was nothing in his resolution which showed
37

that he issued it beyond the discretion granted to him by law and jurisprudence.

While the information filed by Prosecutor Delgado was valid, Judge Capco-Umali still had the discretion to make her
own finding of whether probable cause existed to order the arrest of the accused and proceed with trial.

Jurisdiction over an accused is acquired when the warrant of arrest is served. Absent this, the court cannot hold the
accused for arraignment and trial.

Article III, Section 2 of the Constitution states:

The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches
and seizures of whatever nature and for any purpose shall be inviolable, and no search warrant or warrant of arrest
shall issue except upon probable cause to be determined personally by the judge after examination under oath or
affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be
searched and the persons or things to be seized.

The Constitution prohibits the issuance of search warrants or warrants of arrest where the judge has not personally
determined the existence of probable cause. The phrase "upon probable cause to be determined personally by the
judge after examination under oath or affirmation of the complainant and the witnesses he may produce" allows a
determination of probable cause by the judge ex parte.

For this reason, Section 6, paragraph (a) of Rule 112 of the Rules on Criminal Procedure mandates the judge to
"immediately dismiss the case if the evidence on record fails to establish probable cause." Section 6, paragraph (a)
of Rule 112 reads:

Section 6. When warrant of arrest may issue. — (a) By the Regional Trial Court. — Within ten (10) days from the
filing of the complaint or information, the judge shall personally evaluate the resolution of the prosecutor and its
supporting evidence. He may immediately dismiss the case if the evidence on record clearly fails to establish
probable cause. If he finds probable cause, he shall issue a warrant of arrest, or a commitment order if the accused
has already been arrested pursuant to a warrant issued by the judge who conducted the preliminary investigation or
when the complaint or information was filed pursuant to section 7 of this Rule. In case of doubt on the existence of
probable cause, the judge may order the prosecutor to present additional evidence within five (5) days from notice
and the issue must be resolved by the court within thirty (30) days from the filing of the complaint of information.

In People v. Hon. Yadao: 38

Section 6, Rule 112 of the Rules of Court gives the trial court three options upon the filing of the criminal information:
(1) dismiss the case if the evidence on record clearly failed to establish probable cause; (2) issue a warrant of arrest
if it finds probable cause; and (3) order the prosecutor to present additional evidence within five days from notice in
case of doubt as to the existence of probable cause.

But the option to order the prosecutor to present additional evidence is not mandatory.  The court’s first option under
1âwphi1

the above is for it to "immediately dismiss the case if the evidence on record clearly fails to establish probable
cause." That is the situation here: the evidence on record clearly fails to establish probable cause against the
respondents.  (Emphasis supplied)
39

It is also settled that "once a complaint or information is filed in court, any disposition of the case, whether as to its
dismissal or the conviction or the acquittal of the accused, rests in the sound discretion of the court." 40

214
In this case, Judge Capco-Umali made an independent assessment of the evidence on record and concluded that
"the evidence adduced does not support a finding of probable cause for the offenses of qualified theft and
estafa." Specifically, she found that Juno Cars "failed to prove by competent evidence"  that the vehicles alleged to
41 42

have been pilfered by Alfredo were lawfully possessed or owned by them, or that these vehicles were received by
Alfredo, to be able to substantiate the charge of qualified theft. She also found that the complaint "[did] not state with
particularity the exact value of the alleged office files or their valuation purportedly have been removed, concealed
or destroyed by the accused,"  which she found crucial to the prosecution of the crime of estafa under Article 315,
43

fourth paragraph, no. 3(c) of the Revised Penal Code. She also noted that:

x x x As a matter of fact, this court had even ordered that this case be set for clarificatory hearing to clear out
essential matters pertinent to the offense charged and even directed the private complainant to bring documents
relative to the same/payment as well as affidavit of witnesses/buyers with the end view of satisfying itself that indeed
probable cause exists to commit the present case which private complainant failed to do. 44

Accordingly, with the present laws and jurisprudence on the matter, Judge Capco-Umali correctly dismissed the
case against Alfredo.

Although jurisprudence and procedural rules allow it, a judge must always proceed with caution in dismissing cases
due to lack of probable cause, considering the preliminary nature of the evidence before it. It is only when he or she
finds that the evidence on hand absolutely fails to support a finding of probable cause that he or she can dismiss the
case. On the other hand, if a judge finds probable cause, he or she must not hesitate to proceed with arraignment
and trial in order that justice may be served.

WHEREFORE, the petition is GRANTED. The decision dated January 14, 2011 of the Court of Appeals in CA-G.R.
SP. No. 110774 is REVERSED and SET ASIDE. Criminal Case Nos. MC08-11604-05 against Alfredo C. Mendoza
are DISMISSED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 195615               April 21, 2014

BANK OF COMMERCE, Petitioner, 
vs.
RADIO PHILIPPINES NETWORK, INC., INTERCONTINENTAL BROADCASTING CORPORATION, and
BANAHA W BROADCASTING CORPORATION, THRU BOARD OF ADMINISTRATOR, and SHERIFF
BIENVENIDO S. REYES, JR., Sheriff, Regional Trial Court of Quezon City, Branch 98, Respondents.

DECISION

ABAD, J.:

In late 2001 the Traders Royal Bank (TRB) proposed to sell to petitioner Bank of Commerce (Bancommerce) for
₱10.4 billion its banking business consisting of specified assets and liabilities. Bancommerce agreed subject to prior
Bangko Sentral ng Pilipinas' (BSP's) approval of their Purchase and Assumption (P & A) Agreement. On November
8, 2001 the BSP approved that agreement subject to the condition that Bancommerce and TRB would set up an
escrow fund of PSO million with another bank to cover TRB liabilities for contingent claims that may subsequently
be adjudged against it, which liabilities were excluded from the purchase.

Specifically, the BSP Monetary Board Min. No. 58 (MB Res. 58) decided as follows:

1. To approve the revised terms sheet as finalized on September 21, 2001 granting certain incentives pursuant to
Circular No. 237, series of 2000 to serve as a basis for the final Purchase and Assumption (P & A) Agreement
between the Bank of Commerce (BOC) and Traders Royal Bank (TRB); subject to inclusion of the following
provision in the P & A:

215
The parties to the P & A had considered other potential liabilities against TRB, and to address these claims, the
parties have agreed to set up an escrow fund amounting to Fifty Million Pesos (₱50,000,000.00) in cash to be
invested in government securities to answer for any such claim that shall be judicially established, which fund shall
be kept for 15 years in the trust department of any other bank acceptable to the BSP. Any deviation therefrom shall
require prior approval from the Monetary Board.

xxxx

Following the above approval, on November 9, 2001 Bancommerce entered into a P & A Agreement with TRB and
acquired its specified assets and liabilities, excluding liabilities arising from judicial actions which were to be covered
by the BSP-mandated escrow of ₱50 million.

To comply with the BSP mandate, on December 6, 2001 TRB placed ₱50 million in escrow with Metropolitan Bank
and Trust Co. (Metrobank) to answer for those claims and liabilities that were excluded from the P & A Agreement
and remained with TRB. Accordingly, the BSP finally approved such agreement on July 3, 2002.

Shortly after or on October 10, 2002, acting in G.R. 138510, Traders Royal Bank v. Radio Philippines Network
(RPN), Inc., this Court ordered TRB to pay respondents RPN, Intercontinental Broadcasting Corporation, and
Banahaw Broadcasting Corporation (collectively, RPN, et al.) actual damages of ₱9,790,716.87 plus 12% legal
interest and some amounts. Based on this decision, RPN, et al.filed a motion for execution against TRB before the
Regional Trial Court (RTC) of Quezon City. But rather than pursue a levy in execution of the corresponding amounts
on escrow with Metrobank, RPN, et al. filed a Supplemental Motion for Execution  where they described TRB as
1

"now Bank of Commerce" based on the assumption that TRB had been merged into Bancommerce.

On February 20, 2004, having learned of the supplemental application for execution, Bancommerce filed its Special
Appearance with Opposition to the same  questioning the jurisdiction of the RTC over Bancommerce and denying
2

that there was a merger between TRB and Bancommerce. On August 15, 2005 the RTC issued an Order  granting 3

and issuing the writ of execution to cover any and all assets of TRB, "including those subject of the
merger/consolidation in the guise of a Purchase and Sale Agreement with Bank of Commerce, and/or against the
Escrow Fund established by TRB and Bank of Commerce with the Metropolitan Bank and Trust Company."

This prompted Bancommerce to file a petition for certiorari with the Court of Appeals (CA) in CA-G.R. SP 91258
assailing the RTC’s Order. On December 8, 2009 the CA  denied the petition. The CA pointed out that the Decision
4

of the RTC was clear in that Bancommerce was not being made to answer for the liabilities of TRB, but rather the
assets or properties of TRB under its possession and custody. 5

In the same Decision, the CA modified the Decision of the RTC by deleting the phrase that the P & A Agreement
between TRB and Bancommerce is a farce or "a mere tool to effectuate a merger and/or consolidation between
TRB and BANCOM." The CA Decision partly reads:

xxxx

We are not prepared though, unlike the respondent Judge, to declare the PSA between TRB and BANCOM as a
farce or "a mere tool to effectuate a merger and/or consolidation" of the parties to the PSA. There is just a dearth of
conclusive evidence to support such a finding, at least at this point. Consequently, the statement in the dispositive
portion of the assailed August 15, 2005 Order referring to a merger/consolidation between TRB and BANCOM is
deleted.6

xxxx

WHEREFORE, the herein consolidated Petitions are DENIED. The assailed Orders dated August 15, 2005 and
February 22, 2006 of the respondent Judge, are AFFIRMED with the MODIFICATION that the pronouncement of
respondent Judge in the August 15, 2005 Order that the PSA between TRB and BANCOM is a farce or "a mere tool
to effectuate a merger and/or consolidation between TRB and BANCOM" is DELETED.

SO ORDERED. 7

On January 8, 2010 RPN, et al. filed with the RTC a motion to cause the issuance of an alias writ of execution
against Bancommerce based on the CA Decision. The RTC granted  the motion on February 19, 2010 on the
8

premise that the CA Decision allowed it to execute on the assets that Bancommerce acquired from TRB under their
P & A Agreement.

On March 10, 2010 Bancommerce sought reconsideration of the RTC Order considering that the December 8,2009
CA Decision actually declared that no merger existed between TRB and Bancommerce. But, since the RTC had
already issued the alias writ on March 9, 2010 Bancommerce filed on March 16, 2010 a motion to quash the same,
followed by supplemental Motion  on April 29, 2010.
9

216
On August 18, 2010 the RTC issued the assailed Order  denying Bancommerce pleas and, among others, directing
10

the release to the Sheriff of Bancommerce’s "garnished monies and shares of stock or their monetary equivalent"
and for the sheriff to pay 25% of the amount "to the respondents’ counsel representing his attorney’s fees and
₱200,000.00 representing his appearance fees and litigation expenses" and the balance to be paid to the
respondents after deducting court dues.

Aggrieved, Bancommerce immediately elevated the RTC Order to the CA via a petition for certiorari under Rule 65
to assail the Orders dated February 19, 2010 and August 18, 2010. On November 26, 2010 the CA  dismissed the
11

petition outright for the supposed failure of Bancommerce to file a motion for reconsideration of the assailed order.
The CA denied Bancommerce’s motion for reconsideration on February 9, 2011, prompting it to come to this Court.

The issues this case presents are:

1. Whether or not the CA gravely erred in holding that Bancommerce had no valid excuse in failing to file the
required motion for reconsideration of the assailed RTC Order before coming to the CA; and

2. Whether or not the CA gravely erred in failing to rule that the RTC’s Order of execution against
Bancommerce was a nullity because the CA Decision of December 8, 2009 in CA-G.R. SP 91258 held that
TRB had not been merged into Bancommerce as to make the latter liable for TRB’s judgment debts.

Direct filing of the petition for

certiorari by Bancommerce

Section 1, Rule 65 of the Rules of Court provides that a petition for certiorari may only be filed when there is no
plain, speedy, and adequate remedy in the course of law. Since a motion for reconsideration is generally regarded
as a plain, speedy, and adequate remedy, the failure to first take recourse to is usually regarded as fatal omission.

But Bancommerce invoked certain recognized exceptions to the rule.  It had to forego the filing of the required
12

motion for reconsideration of the assailed RTC Order because a) there was an urgent necessity for the CA to
resolve the questions it raised and any further delay would prejudice its interests; b) under the circumstances, a
motion for reconsideration would have been useless; c) Bancommerce had been deprived of its right to due process
when the RTC issued the challenged order ex parte, depriving it of an opportunity to object; and d) the issues raised
were purely of law.

In this case, the records amply show that Bancommerce’s action fell within the recognized exceptions to the need to
file a motion for reconsideration before filing a petition for certiorari.

First. The filing of a motion for reconsideration would be redundant since actually the RTC’s August 18, 2010 Order
amounts to a denial of Bancommerce motion for reconsideration of the February 19, 2010 Order which granted the
application for the issuance of the alias writ.

Significantly, the alias writ of execution itself, the quashal of which was sought by Bancommerce two times (via a
motion to quash the writ and a supplemental motion to quash the writ) derived its existence from the RTC’s
February 19, 2010 Order. Another motion for reconsideration would have been superfluous. The RTC had not
budge on those issues in the preceding incidents. There was no point in repeatedly asking it to reconsider.

Second. An urgent necessity for the immediate resolution of the case by the CA existed because any further delay
would have greatly prejudiced Bancommerce. The Sheriff had been resolute and relentless in trying to execute the
judgment and dispose of the levied assets of Bancommerce. Indeed, on April 22, 2010 the Sheriff started garnishing
Bancommerce’s deposits in other banks, including those in Banco de Oro-Salcedo-Legaspi Branch and in the Bank
of the Philippine Islands Ayala Paseo Branch.

Further, the Sheriff forcibly levied on Bancommerce’s Lipa Branch cash on hand amounting to ₱1,520,000.00 and
deposited the same with the Landbank. He also seized the bank’s computers, printers, and monitors, causing the
temporary cessation of its banking operations in that branch and putting the bank in an unwarranted danger of a
run. Clearly, Bancommerce had valid justifications for skipping the technical requirement of a motion for
reconsideration.

Merger and De Facto Merger

Merger is a re-organization of two or more corporations that results in their consolidating into a single corporation,
which is one of the constituent corporations, one disappearing or dissolving and the other surviving. To put it
another way, merger is the absorption of one or more corporations by another existing corporation, which retains its
identity and takes over the rights, privileges, franchises, properties, claims, liabilities and obligations of the absorbed
corporation(s). The absorbing corporation continues its existence while the life or lives of the other corporation(s) is
or are terminated. 13

217
The Corporation Code requires the following steps for merger or consolidation:

(1) The board of each corporation draws up a plan of merger or consolidation. Such plan must include any
amendment, if necessary, to the articles of incorporation of the surviving corporation, or in case of
consolidation, all the statements required in the articles of incorporation of a corporation.

(2) Submission of plan to stockholders or members of each corporation for approval. A meeting must be
called and at least two (2) weeks’ notice must be sent to all stockholders or members, personally or by
registered mail. A summary of the plan must be attached to the notice. Vote of two-thirds of the members or
of stockholders representing two thirds of the outstanding capital stock will be needed. Appraisal rights,
when proper, must be respected.

(3) Execution of the formal agreement, referred to as the articles of merger o[r] consolidation, by the
corporate officers of each constituent corporation. These take the place of the articles of incorporation of the
consolidated corporation, or amend the articles of incorporation of the surviving corporation.

(4) Submission of said articles of merger or consolidation to the SEC for approval.

(5) If necessary, the SEC shall set a hearing, notifying all corporations concerned at least two weeks before.

(6) Issuance of certificate of merger or consolidation. 14

Indubitably, it is clear that no merger took place between Bancommerce and TRB as the requirements and
procedures for a merger were absent. A merger does not become effective upon the mere agreement of the
constituent corporations.  All the requirements specified in the law must be complied with in order for merger to take
15

effect. Section 79 of the Corporation Code further provides that the merger shall be effective only upon the issuance
by the Securities and Exchange Commission (SEC) of a certificate of merger.

Here, Bancommerce and TRB remained separate corporations with distinct corporate personalities. What happened
is that TRB sold and Bancommerce purchased identified recorded assets of TRB in consideration of
Bancommerce’s assumption of identified recorded liabilities of TRB including booked contingent accounts. There is
no law that prohibits this kind of transaction especially when it is done openly and with appropriate government
approval. Indeed, the dissenting opinions of Justices Jose Catral Mendoza and Marvic Mario Victor F. Leonen are of
the same opinion. In strict sense, no merger or consolidation took place as the records do not show any plan or
articles of merger or consolidation. More importantly, the SEC did not issue any certificate of merger or
consolidation.

The dissenting opinion of Justice Mendoza finds, however, that a "de facto" merger existed between TRB and
Bancommerce considering that (1) the P & A Agreement between them involved substantially all the assets and
liabilities of TRB; (2) in an Ex Parte Petition for Issuance of Writ of Possession filed in a case, Bancommerce
qualified TRB, the petitioner, with the words "now known as Bancommerce;" and (3) the BSP issued a Circular
Letter (series of 2002) advising all banks and non-bank financial intermediaries that the banking activities and
transaction of TRB and Bancommerce were consolidated and that the latter continued the operations of the former.

The idea of a de facto merger came about because, prior to the present Corporation Code, no law authorized the
merger or consolidation of Philippine Corporations, except insurance companies, railway corporations, and public
utilities.  And, except in the case of insurance corporations, no procedure existed for bringing about a merger. Still,
16 17

the Supreme Court held in Reyes v. Blouse,  that authority to merge or consolidate can be derived from Section
18

28½ (now Section 40) of the former Corporation Law which provides, among others, that a corporation may "sell,
exchange, lease or otherwise dispose of all or substantially all of its property and assets" if the board of directors is
so authorized by the affirmative vote of the stockholders holding at least two-thirds of the voting power. The words
"or otherwise dispose of," according to the Supreme Court, is very broad and in a sense, covers a merger or
consolidation.

But the facts in Reyes show that the Board of Directors of the Corporation being dissolved clearly intended to be
merged into the other corporations. Said this Court:

It is apparent that the purpose of the resolution is not to dissolve the [company] but merely to transfer its assets to a
new corporation in exchange for its corporation stock. This intent is clearly deducible from the provision that the
[company] will not be dissolved but will continue existing until its stockholders decide to dissolve the same. This
comes squarely within the purview of Section 28½ of the corporation law which provides, among others, that a
corporation may sell, exchange, lease, or otherwise dispose of all its property and assets, including its good will,
upon such terms and conditions as its Board of Directors may deem expedient when authorized by the affirmative
vote of the shareholders holding at least 2/3 of the voting power. [The phrase] "or otherwise dispose of" is very
broad and in a sense covers a merger or consolidation." 19

218
In his book, Philippine Corporate Law,  Dean Cesar Villanueva explained that under the Corporation Code, "a de
20

facto merger can be pursued by one corporation acquiring all or substantially all of the properties of another
corporation in exchange of shares of stock of the acquiring corporation. The acquiring corporation would end up with
the business enterprise of the target corporation; whereas, the target corporation would end up with basically its
only remaining assets being the shares of stock of the acquiring corporation." (Emphasis supplied)

No de facto merger took place in the present case simply because the TRB owners did not get in exchange for the
bank’s assets and liabilities an equivalent value in Bancommerce shares of stock. Bancommerce and TRB agreed
with BSP approval to exclude from the sale the TRB’s contingent judicial liabilities, including those owing to RPN, et
al.
21

The Bureau of Internal Revenue (BIR) treated the transaction between the two banks purely as a sale of specified
assets and liabilities when it rendered its opinion  on the tax consequences of the transaction given that there is a
22

difference in tax treatment between a sale and a merger or consolidation.

Indubitably, since the transaction between TRB and Bancommerce was neither a merger nor a de facto merger but
a mere "sale of assets with assumption of liabilities," the next question before the Court is whether or not the RTC
could regard Bancommerce as RPN, et al.’s judgment debtor.

It is pointed out that under common law,  if one corporation sells or otherwise transfers all its assets to another
23

corporation, the latter is not liable for the debts and liabilities of the transferor if it has acted in good faith and has
paid adequate consideration for the assets, except: (1) where the purchaser expressly or impliedly agrees to
assume such debts; (2) where the transaction amounts to a consolidation or merger of the corporations; (3) where
the purchasing corporation is merely a continuation of the selling corporation; and (4) where the transaction is
entered into fraudulently in order to escape liability for such debts. 24

But, in the first place, common law has no application in this jurisdiction where existing statutes governing the
situation are in place. Secondly, none of the cited exceptions apply to this case.

1. Bancommerce agreed to assume those liabilities of TRB that are specified in their P & A Agreement. That
agreement specifically excluded TRB’s contingent liabilities that the latter might have arising from pending litigations
in court, including the claims of respondent RPN, et al.

The pertinent provision of the P & A provides:

Article II
CONSIDERATION: ASSUMPTION OF LIABILITIES

In consideration of the sale of identified recorded assets and properties covered by this Agreement,
BANCOMMERCE shall assume identified recorded TRB’s liabilities including booked contingent liabilities as listed
and referred to in its Consolidated Statement of Condition as of August 31, 2001, in the total amount of PESOS:
TEN BILLION FOUR HUNDRED ONE MILLION FOUR HUNDRED THIRTY SIX THOUSAND
(₱10,410,436,000.00), provided that the liabilities so assumed shall not include:

xxxx

2. Items in litigation, both actual and prospective, against TRB which include but not limited to the following:

2.1 Claims of sugar planters for alleged under valuation of sugar export sales x x x;

2.2 Claims of the Republic of the Philippines for peso-denominated certificates supposed to have been
placed by the Marcos family with TRB;

2.3 Other liabilities not included in said Consolidated Statement of Condition; and

2.4 Liabilities accruing after the effectivity date of this Agreement that were not incurred in the ordinary
course of business.  (Underscoring supplied)
25

2. As already pointed out above, the sale did not amount to merger or de facto merger of Bancommerce and TRB
since the elements required of both were not present.

3. The evidence in this case fails to show that Bancommerce was a mere continuation of TRB. TRB retained its
separate and distinct identity after the purchase. Although it subsequently changed its name to Traders Royal
Holding’s, Inc. such change did not result in its dissolution. "The changing of the name of a corporation is no more
than creation of a corporation than the changing of the name of a natural person is the begetting of a natural person.

219
The act, in both cases, would seem to be what the language which we use to designate it imports—a change of
name and not a change of being."  As such, Bancommerce and TRB remained separate corporations.
26

4. To protect contingent claims, the BSP directed Bancommerce and TRB to put up ₱50 million in escrow with
another bank. It was the BSP, not Bancommerce that fixed the amount of the escrow. Consequently, it cannot be
said that the latter bank acted in bad faith with respect to the excluded liabilities. They did not enter into the P & A
Agreement to enable TRB to escape from its liability to creditors with pending court cases.

Further, even without the escrow, TRB continued to be liable to its creditors although under its new name.
Parenthetically, the P & A Agreement shows that Bancommerce acquired greater amount of TRB liabilities than
assets. Article II of the P & A Agreement shows that Bancommerce assumed total liabilities of ₱10,401,436,000.00
while it received total assets of only ₱10,262,154,000.00. This proves the arms length quality of the transaction.

The dissenting opinion of Justice Mendoza cites certain instances indicating the existence of a de facto merger in
this case. One of these is the fact that the P & A Agreement involved substantially all the assets and liabilities of
TRB. But while this is true, such fact alone would not prove the existence of a de facto merger because a
corporation "does not really lose its juridical entity"  on account of such sale. Actually, the law allows a corporation
27

to "sell, lease, exchange, mortgage, pledge or otherwise dispose of all or substantially all of its properties and
assets including its goodwill" to another corporation.  This is not merger because it recognizes the separate
28

existence of the two corporations that transact the sale.

The dissenting opinion of Justice Mendoza claims that another proof of a de facto merger is that in a case,
Bancommerce qualified TRB in its Ex Parte Petition for Issuance of Writ of Possession with the words "now known
as Bancommerce." But paragraph 3 of the Ex Parte Petition shows the context in which such qualification was
made. It reads: 29

3. On November 09, 2001, Bank of Commerce and Traders Royal Bank executed and signed a Purchase and Sale
Agreement. The account of the mortgagor was among those acquired under the agreement. Photocopy of the
agreement is hereto attached as Annex "A."

It is thus clear that the phrase "now known as Bank of Commerce" used in the petition served only to indicate that
Bancommerce is now the former property owner’s creditor that filed the petition for writ of possession as a result of
the P & A Agreement. It does not indicate a merger.

Lastly, the dissenting opinion of Justice Mendoza cited the Circular Letter (series of 2002) issued by the BSP
advising all banks and non-bank financial intermediaries that the banking activities and transaction of TRB and
Bancommerce were consolidated and that the latter continued the operations of the former as an indication of a de
facto merger. The Circular Letter  reads:
30

CIRCULAR LETTER
(series of 2002)

TO: ALL BANK AND NON-BANK

FINANCIAL INTERMEDIARIES

The Securities and Exchange Commission approved on August 15, 2002 the Amendment of the Articles of
Incorporation and By-Laws of Traders Royal Bank on the deletion of the term "banks" and "banking" from the
corporate name and purpose, pursuant to the purchase of assets and assumption of liabilities of Traders Royal
Bank by Bank of Commerce. Accordingly, the bank franchise of Traders Royal Bank has been automatically
revoked and Traders Royal Bank has ceased to operate as a banking entity.

Effective July 3, 2002, the banking activities and transactions of Bank of Commerce and Traders Royal Bank have
been consolidated and the former has carried their operations since then.

For your information and guidance.

(Sgd.)

ALBERTO V. REYES
Deputy Governor

Indeed, what was "consolidated" per the above letter was the banking activities and transactions of Bancommerce
and TRB, not their corporate existence. The BSP did not remotely suggest a merger of the two corporations. What
controls the relationship between those corporations cannot be the BSP letter circular, which had been issued
without their participation, but the terms of their P & A Agreement that the BSP approved through its Monetary
Board.

220
Also, in a letter dated November 2,2005 Atty. Juan De Zuñiga, Jr., Assistant Governor and General Counsel of the
BSP, clarified to the RTC the use of the word "merger" in their January 29, 2003 letter. According to him, the word
"merger" was used "in a very loose sense x x x and merely repeated, for convenience" the term used by the RTC. It 31

further stated that "Atty. Villanueva did not issue any legal pronouncement in the said letter, which is merely
transmittal in nature. Thus it cannot, by any stretch of construction, be considered as binding on the BSP. What is
binding to the BSP is MB Res. 58 referring to the aforementioned transaction between TRB and Bancommerce as a
purchase and assumption agreement." 32

Since there had been no merger, Bancommerce cannot be considered as TRB’s successor-in-interest and against
which the Court’s Decision of October 10, 2002 in G.R. 138510 may been forced. Bancommerce did not hold the
former TRBs assets in trust for it as to subject them to garnishment for the satisfaction of the latter’s liabilities to
RPN, et al. Bancommerce bought and acquired those assets and thus, became their absolute owner.

The CA Decision in
CA-G.R. SP 91258

According to the dissenting opinion of Justice Mendoza, the CA Decision dated December 8, 2009 did not reverse
the RTC’s Order causing the issuance of a writ of execution against Bancommerce to enforce the judgment against
TRB. It also argues that the CA did not find grave abuse of discretion on the RTC’s part when it issued its August
15, 2005 Order granting the issuance of a writ of execution. In fact, it affirmed that order.  Moreover, it argued that
1âwphi1

the CA’s modification of the RTC Order merely deleted an opinion there expressed and not reversed such order.

But it should be the substance of the CA’s modification of the RTC Order that should control, not some technical
flaws that are taken out of context. Clearly, the RTC’s basis for holding Bancommerce liable to TRB was its finding
that TRB had been merged into Bancommerce, making the latter liable for TRB’s debts to RPN, et al. The CA
clearly annulled such finding in its December 8, 2009 Decision in CA-G.R. SP 91258, thus:

WHEREFORE, the herein consolidated Petitions are DENIED. The assailed Orders dated August 15, 2005 and
February 22, 2006 of the respondent Judge, are AFFIRMED with the MODIFICATION that the pronouncement of
respondent Judge in the August 15, 2005 Order that the PSA between TRB and BANCOM is a farce or "a mere tool
to effectuate a merger and/or consolidation between TRB and BANCOM" is DELETED.

SO ORDERED. 33

Thus, the CA was careful in its decision to restrict the enforcement of the writ of execution only to "TRB’s properties
found in Bancommerce’s possession." Indeed, the CA clearly said in its decision that it was not Bancommerce that
the RTC Order was being made to answer for TRB’s judgment credit but "the assets/properties of TRB in the hands
of BANCOM." The CA then went on to state that it is not prepared, unlike the RTC, to declare the P & A Agreement
but a farce or a "mere tool to effectuate a merger and/or consolidation." Thus, the CA deleted the RTC’s reliance on
such supposed merger or consolidation between the two as a basis for its questioned order.

The enforcement, therefore, of the decision in the main case should not include the assets and properties that
Bancommerce acquired from TRB. These have ceased to be assets and properties of TRB under the terms of the
BSP-approved P & A Agreement between them. They are not TRB assets and properties in the possession of
Bancommerce. To make them so would be an unwarranted departure from the CA’s Decision in CA-G.R. SP 91258.

WHEREFORE, the petition is GRANTED. The assailed Resolution of November 26, 2010 and the Resolution of
February 9, 2011 of the Court of Appeals both in CA-G.R. SP 116704 are REVERSED and SET ASIDE.
Accordingly, the assailed Orders dated February 19, 2010 and August 18, 2010, the Alias Writ of Execution dated
March 9, 2010, all issued by the Regional Trial Court and all orders, notices of garnishment/levy, or notices of sale
and any other action emanating from the Orders dated February 19, 2010 and August 18, 2010 in Civil Case Q-89-
3580 are ANNULLED and SET ASIDE. The Temporary Restraining Order issued by this Court on April 13, 2011 is
hereby made PERMANENT.

SO ORDERED.

DISSENTING OPINION

LEONEN, J.:

A corporation which purchases all or substantially all of the assets of another corporation should be liable to satisfy
the execution of a judgment debt against the seller corporation when it impliedly accepts such obligations. The
obligation is impliedly accepted if the purchasing corporation made it appear to third parties that it stepped into the
shoes of the seller corporation. This is especially true in the case of banks that take on the license of a predecessor
bank. This is required by equity to safeguard against fraud of creditors as well as the principle of economy of
judgments.

221
The petition  arises from this court's final and executory decision dated 'October 10, 2002 in Traders Royal Bank v.
1

Radio Philippines Network, Inc., Intercontinental Broadcasting Corporation and Banahaw Broadcasting Corporation,
through the Board of Administrators, and Security Bank and Trust Company, docketed as G.R. No. 138510.

Respondents sought the execution of the judgment claim against petitioner Bancomn1erce with pleading entitled
"Radio Philippines Network, Inc., Intercontinental Broadcasting Corporation and Banahaw Corporation thru Board of
Administrators versus Traders Royal Bank (TRB) [now Bank of Commerce] and Security Bank and Trust
Corporation (SBTC)."  In a pleading for another case involving the rights of Traders Royal Bank, petitioner
2

Bancommerce also qualified Traders Royal Bank with the phrase, "now known as Bancommerce." 3

For its part, petitioner Bancommerce denied the existence of any merger with Traders Royal Bank. It also
questioned the trial court’s jurisdiction over its person.
4

The trial court granted respondents’ motion for execution on August 15, 2005.  It later denied petitioner
5

Bancommerce’s urgent motion for reconsideration, motion to quash alias writ of execution, and supplemental
motion.  The Court of Appeals outrightly dismissed petitioner Bancommerce’s petition for certiorari for failure to file a
6

motion for reconsideration. Hence, the present petition was filed.

Petitioner Bancommerce contends that "[it] was arbitrarily dragged in the execution proceedings"  when respondents
7

named it as Traders Royal Bank’s successor-in-interest. 8

It argues, among others, that "no merger/consolidation has been settled both at the administrative level [Bureau of
Internal Revenue] and at the judicial level." 9

Respondents counter that "petitioner refused to divulge the assets taken and liabilities assumed, even when
subpoenaed, producing the presumption that they are adverse to petitioner if produced x x x."  Moreover, petitioner
10

Bancommerce admitted its obligation when it offered in settlement a real property in Parañaque valued at
₱35,200,000.00. 11

I disagree with the ponencia in its finding that respondents may not enforce the execution of its judgment claim
against petitioner Bancommerce.

When a corporation sells or transfers all of its assets to another, the purchaser corporation is not liable for the debts
of the seller as a general rule.

Article 1311 of the Civil Code provides that "[c]ontracts take effect only between the parties, their assigns and heirs
x x x." This principle of relativity explains the general rule that the purchaser corporation is not liable for the debts of
the seller corporation.  However, before this general rule can apply, we have to first determine whether any of the
12

exceptions are present and have been established.

In 1965, Edward J. Nell Company v. Pacific Farms, Inc.  discussed this rule as follows:
13

Generally where one corporation sells or otherwise transfers all of its assets to another corporation, the latter is not
liable for the debts and liabilities of the transferor, except: (1) where the purchaser expressly or impliedly agrees to
assume such debts; (2) where the transaction amounts to a consolidation or merger of the corporations; (3) where
the purchasing corporation is merely a continuation of the selling corporation; and (4) where the transaction is
entered into fraudulently in order to escape liability for such debts.14

This rule was reiterated in the 2002 case of Philippine National Bank v. Andrada Electric & Engineering
Company and the 2007 case of McLeod v. National Labor Relations Commission  where this court held that "a
15 16

corporation that purchases the assets of another will not be liable for the debts of the selling corporation, provided
the former acted in good faith and paid adequate consideration for such assets, except when any of the following
circumstances is present: (1) where the purchaser expressly or impliedly agrees to assume the debts; x x x." 17

According to the ponencia, this is common law which cannot apply in our jurisdiction, and none of the exceptions
are present in this case. 18

I disagree.

Under the first exception, the purchaser corporation has agreed to assume the seller corporation’s liabilities.

This may be based on Article 2047 of the Civil Code such that a nonparty to an existing contract becomes (1) a
guarantor when he voluntarily "binds himself to the creditor to fulfill the obligation of the principal debtor in case the
latter should fail to do so"  or (2) a surety when he "binds himself solidarily with the principal debtor."  Moreover,
19 20

"[s]ubstitution of the person of the debtor may be effected by delegacion [where] the debtor offers, and the creditor

222
(delegatario), accepts a third person who consents to the substitution and assumes the obligation. Thus, the
consent of [all] three persons is necessary." 21

In Caltex (Phils.), Inc. v. PNOC Shipping & Transport Corp.,  Caltex received a final and executory judgment against
22

LUSTEVECO, but the judgment was not satisfied. Caltex later learned that LUSTEVECO and PNOC Shipping and
Transport Corporation (PSTC) entered into an Agreement of Assumption of Obligations. Thus, it sent its demands to
PSTC. This court held that Caltex may recover the judgment debt from PSTC under the terms of the Agreement of
Assumption of Obligations. 23

In the present case, Article II of the Purchase and Sale Agreement  between petitioner Bancommerce and Traders
24

Royal Bank enumerates the liabilities assumed by petitioner Bancommerce and those which are not:

ARTICLE II
CONSIDERATION: ASSUMPTION OF LIABILITIES

In consideration of the sale of identified recorded assets and properties covered by this Agreement,
BANCOMMERCE shall assume identified recorded TRB’s liabilities including booked contingent liabilities as listed
and referred to in its Consolidated Statement of Condition as of August 31, 2001, in the total amount of PESOS:
TEN BILLION FOUR HUNDRED ONE MILLION FOUR HUNDRED THIRTY SIX THOUSAND (10,401,436,000.00),
provided that the liabilities so assumed shall not include:

1. Liability for the payment of compensation, retirement pay, separation benefits and any labor benefit
whatsoever arising from incidental to, or connected with employment in, or rendition of employee services to
TRB, whether permanent, regular, temporary, casual or contractual.

2. Items in litigation, both actual and prospective, against TRB which include but are not limited to the
following:

2.1 [x x x photocopy partly blurred]; particularly the case entitled Lopez, et al. vs. Traders Royal
Bank, et al., docketed as Civil Case No. 00-11178, Bacolod Regional Trial Court, Branch 41 and
Lacson, et al. vs. Benedicto, et al., originally docketed as Civil Case 95-9137, Bacolod Regional Trial
Court, Branch 44 now pending appeal before the Supreme Court under S.C.

G.R. No. 141508, and other related cases which might be filed in connection therewith;

2.2 Claims of the Republic of the Philippines for peso denominated certificates supposed to have
been placed by the Marcos family with TRB;

2.3 Other liabilities not included in said Consolidated Statement of Condition; and

2.4 Liabilities accruing after the effectivity date of this Agreement that were not incurred in the
ordinary course of business. 25

The Court of Appeals found that the lower court judge "acted correctly [in issuing] the subpoena dated October 1,
2004 directing BANCOM to bring to court the list of the assumed identified assets and liabilities of TRB under the
PSA."  However, petitioner Bancommerce did not comply with this directive and filed a motion to quash the
26

subpoena.  While, it is uncertain whether respondents’ claim was explicitly assumed by petitioner Bancommerce
27

under the Purchase and Sale Agreement, the circumstances of this case point to no other conclusion than an
implied assumption of all liabilities by purchaser corporation, petitioner Bancommerce.

Unlike the jurisprudence cited earlier, the present case involves a bank that transferred all or substantially all of its
assets, including its branching licenses, to petitioner Bancommerce — the bank that will now continue its operations
as recognized by the Bangko Sentral ng Pilipinas. 28

The banking industry is imbued with great trust and confidence not only by its clients but by the general
public. When banks make mistakes, the wrongful dishonor of a check for example, this causes "embarrassment if
29

not also financial loss and perhaps even civil and criminal litigation"  on the part of the depositor. Consequently,
30

those in the banking business are heavily regulated, burdened with the highest standards of integrity and
performance.  This court has awarded exemplary damages to plaintiffs who have suffered from the failure of banks
31

to exercise such level of diligence in its affairs, considering that "[t]he business of banking is impressed with public
interest and great reliance is made on the bank’s sworn profession of diligence and meticulousness in giving
irreproachable service." 32

On this note, a purchaser bank which has made it appear to third parties that it has stepped into the shoes of the
seller bank must be deemed to have assumed the debts and liabilities of such seller bank. By presenting itself as

223
the former Traders Royal Bank, petitioner Bancommerce impliedly novated existing contracts of Traders Royal Bank
by admitting to the parties involved and the public in general that it is now the entity to reckon with.

The second exception is on mergers and consolidations.

This court has held that a sale of assets is legally distinct from a merger or consolidation.  Section 76 of the
33

Corporation Code expressly authorizes two or more corporations to merge into a single corporation, which shall be
one of the constituent corporations, or to consolidate into a new single corporation, which shall be the consolidated
corporation. A merger or consolidation "does not become effective upon the mere agreement of the constituent
corporations."  These corporations that seek to merge or consolidate must first comply with the required procedure
34

under the Corporation Code.

One of the legal effects of a merger or consolidation under Section 80 of the Corporation Code is the assumption
ipso jure by the surviving or consolidated corporation of the dissolved corporation’s liabilities:

xxxx

5. The surviving or consolidated corporation shall be responsible and liable for all the liabilities and obligations of
each of the constituent corporations in the same manner as if such surviving or consolidated corporation had itself
incurred such liabilities or obligations; and any pending claim, action or proceeding brought by or against any of
such constituent corporations may be prosecuted by or against the surviving or consolidated corporation. The rights
of creditors or liens upon the property of any of such constituent corporations shall not be impaired by such merger
or consolidation.

Thus, a judgment creditor can no doubt seek payment from the surviving or consolidated corporation if it can prove
that a merger or consolidation has taken place.

The ponencia discussed that no merger took place in this case as the requirements under the Corporation Code
were not met.  In Justice Mendoza’s dissenting opinion, he agreed that "in a strict sense, no merger or consolidation
35

took place."  The Securities and Exchange Commission did not issue any certificate of merger or consolidation in
36

favor of petitioner Bancommerce.  Justice Mendoza then discussed how the Purchase and Sale Agreement
37

involved substantially all of the assets and liabilities of Traders Royal Bank, and the end result "amounted to a
merger of assets where the existence of [Traders Royal Bank] as a banking entity ceased while that of
Bancommerce continued." 38

This brings us to the third exception "where the purchasing corporation is merely a continuation of the selling
corporation." 39

Under Section 40 of the Corporation Code, when the transaction amounts to a sale of "all or substantially all of [the
corporation’s] property and assets,"  the ratificatory vote of the stockholders representing at least two-thirds of the
40

outstanding capital stock is required. This transaction involves a transfer of the entire business enterprise  as no
41

such ratificatory vote is required "if the proceeds of the sale or other disposition of such property and assets [would]
be appropriated for the conduct of its remaining business."  In such transactions, the purchaser corporation is now
42

the one continuing the seller corporation’s original business. Consequently, as far as the selling corporation is
concerned, there is no more business remaining.

This was partly discussed in Caltex (Phils.), Inc. v. PNOC Shipping & Transport Corp.  when this court went on to
43

rule that even without the Agreement of Assumption of Obligations, PSTC is still liable as "[t]he acquisition by the
assignee of all or substantially all of the assets of the assignor necessarily includes the assumption of the assignor’s
liabilities, unless the creditors who did not consent to the transfer choose to rescind the transfer on the ground of
fraud."
44

In the present case, Article III of the Purchase and Sale Agreement provides that petitioner Bancommerce and
Traders Royal Bank shall continue to exist as separate corporations:

ARTICLE III
EFFECTS AND CONSEQUENCES

The effectivity of this Agreement shall have the following effects and consequences:

1) BANCOMMERCE and TRB shall continue to exist as separate corporations with distinct corporate
personalities;

2) With the transfer of its branching licenses to BANCOMMERCE and upon surrender of its commercial
banking license to BSP, TRB shall exist as an ordinary corporation placed outside the supervisory

224
 jurisdiction ofBSP. To this end, TRB shall cause the amendment of its articles and bylaws to delete the
terms "bank" and "banking" from its corporate name and purpose.

3) There shall be no employer-employee relationship between BANCOMMERCE and the personnel and
officers of TRB.45

The ponencia discussed that after the purchase, TRB retained its separate and distinct identity, and "although it
subsequently changed its name to Traders Royal Holding’s Inc., (TRHI), such change did not result in its
dissolution."  It quoted the following statement from Phil. First Insurance Co., Inc. v. Hartigan, et al.,  citing the
46 47

American case, Pacific Bank v. De Ro:

The changing of the name of a corporation is no more [than] the creation of a corporation than the changing of the
name of a natural person is the begetting of a natural person. The act, in both cases, would seem to be what the
language which we use to designate it imports – a change of name, and not a change of being. 48

The case is about an insurance corporation named "The Yek Tong Lin Fire and Marine Insurance Co., Ltd.," which
amended its articles of incorporation changing its name to "Philippine First Insurance Co., Inc."  In a civil case for
49

sum of money filed by Philippine First Insurance Co., Inc., the defendants argued that "they signed said [indemnity]
agreement in favor of the Yek Tong Lin Fire and Marine Insurance Co., Ltd. and not in favor of the plaintiff."  The
50

facts involved only a change of corporate name. The new corporate name indicated that the corporation remained
an insurance company.

The same cannot be said of the facts in the present case.

As seen in Article III, paragraph 2 of the Purchase and Sale Agreement quoted above, Traders Royal Bank
transferred its branching licenses to petitioner Bancommerce and surrendered its commercial banking license to
Bangko Sentral ng Pilipinas. In fact, Bangko Sentral issued a circular letter, series of 2002, "advising all banks and
non-bank financial intermediaries that the banking activities and transactions of TRB and Bancommerce were
consolidated and that the latter continued the operations of the former." 51

Thus, Traders Royal Bank no longer exists as a commercial bank while petitioner Bancommerce to whom Traders
Royal Bank transferred substantially all of its assetsincluding its branching licenses  will continue its operations.
52

While Traders Royal Bank continues to exist as a separate corporation, it is no longer doing its original business of
commercial banking. It is now a holding company,and it is petitioner Bancommerce that is continuing its original
banking business.

Thus, the first and third exceptionsapply to petitioner Bancommerce.

The reason why a purchaser corporation in this type of transaction is made liable may be related to the fourth and
last exception on fraud against creditors of the seller corporation. This was discussed in Caltex (Phils.), Inc. v.
PNOC Shipping & Transport Corp.  as follows:
53

x x x To allow an assignor to transfer all its business, properties and assets without the consent of its creditors and
without requiring the assignee to assume the assignor’s obligations will defraud the creditors. The assignment will
place the assignor’s assets beyond the reach of its creditors.

xxxx

In Oria v. McMicking, the Court enumerated the badges of fraud as follows:

1. The fact that the consideration of the conveyance is fictitious or is inadequate.

2. A transfer made by a debtor after suit has been begun and while it is pending against him.

3. A sale upon credit by an insolvent debtor.

4. Evidence of large indebtedness or complete insolvency.

5. The transfer of all or nearly all of his property by a debtor, especially when he is insolvent or greatly
embarrassed financially.

6. The fact that the transfer is made between father and son, when there are present other of the above
circumstances.

7. The failure of the vendee to take exclusive possession of all the property.  (Emphasis supplied)
54

225
Article 1313 of the Civil Code on the general provisions for contracts clearly states that "[c]reditors are protected in
cases of contracts intended to defraud them."

Since the first and third exceptions have been shown to apply against petitioner Bancommerce, it is liable to pay
respondents. Moreover, this conclusion supports the principle of economy of judgments. A remand will only result in
the parties being left with no more recourse, and it will. prolong this case with its back and forth turn among the
different levels of courts. Parties should be allowed to reasonably expect an end to their suits. Thus, courts must
work toward the efficient and expeditious dispatch of cases filed before it while providing justice for the parties.

It is for these reasons that I vote to deny the petition.

Republic of the Philippines

SUPREME COURT
Baguio City

THIRD DIVISION

G.R. No. 195580               April 21, 2014

NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO MINING AND DEVELOPMENT, INC., and
MCARTHUR MINING, INC., Petitioners, 
vs.
REDMONT CONSOLIDATED MINES CORP., Respondent.

DECISION

VELASCO, JR., J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 filed by Narra Nickel and Mining Development
Corp. (Narra), Tesoro Mining and Development, Inc. (Tesoro), and McArthur Mining Inc. (McArthur), which seeks to
reverse the October 1, 2010 Decision  and the February 15, 2011 Resolution of the Court of Appeals (CA).
1

The Facts

Sometime in December 2006, respondent Redmont Consolidated Mines Corp. (Redmont), a domestic corporation
organized and existing under Philippine laws, took interest in mining and exploring certain areas of the province of
Palawan. After inquiring with the Department of Environment and Natural Resources (DENR), it learned that the
areas where it wanted to undertake exploration and mining activities where already covered by Mineral Production
Sharing Agreement (MPSA) applications of petitioners Narra, Tesoro and McArthur.

Petitioner McArthur, through its predecessor-in-interest Sara Marie Mining, Inc. (SMMI), filed an application for an
MPSA and Exploration Permit (EP) with the Mines and Geo-Sciences Bureau (MGB), Region IV-B, Office of the
Department of Environment and Natural Resources (DENR).
226
Subsequently, SMMI was issued MPSA-AMA-IVB-153 covering an area of over 1,782 hectares in Barangay
Sumbiling, Municipality of Bataraza, Province of Palawan and EPA-IVB-44 which includes an area of 3,720 hectares
in Barangay Malatagao, Bataraza, Palawan. The MPSA and EP were then transferred to Madridejos Mining
Corporation (MMC) and, on November 6, 2006, assigned to petitioner McArthur. 2

Petitioner Narra acquired its MPSA from Alpha Resources and Development Corporation and Patricia Louise Mining
& Development Corporation (PLMDC) which previously filed an application for an MPSA with the MGB, Region IV-B,
DENR on January 6, 1992. Through the said application, the DENR issued MPSA-IV-1-12 covering an area of 3.277
hectares in barangays Calategas and San Isidro, Municipality of Narra, Palawan. Subsequently, PLMDC conveyed,
transferred and/or assigned its rights and interests over the MPSA application in favor of Narra.

Another MPSA application of SMMI was filed with the DENR Region IV-B, labeled as MPSA-AMA-IVB-154 (formerly
EPA-IVB-47) over 3,402 hectares in Barangays Malinao and Princesa Urduja, Municipality of Narra, Province of
Palawan. SMMI subsequently conveyed, transferred and assigned its rights and interest over the said MPSA
application to Tesoro.

On January 2, 2007, Redmont filed before the Panel of Arbitrators (POA) of the DENR three (3) separate petitions
for the denial of petitioners’ applications for MPSA designated as AMA-IVB-153, AMA-IVB-154 and MPSA IV-1-12.

In the petitions, Redmont alleged that at least 60% of the capital stock of McArthur, Tesoro and Narra are owned
and controlled by MBMI Resources, Inc. (MBMI), a 100% Canadian corporation. Redmont reasoned that since
MBMI is a considerable stockholder of petitioners, it was the driving force behind petitioners’ filing of the MPSAs
over the areas covered by applications since it knows that it can only participate in mining activities through
corporations which are deemed Filipino citizens. Redmont argued that given that petitioners’ capital stocks were
mostly owned by MBMI, they were likewise disqualified from engaging in mining activities through MPSAs, which
are reserved only for Filipino citizens.

In their Answers, petitioners averred that they were qualified persons under Section 3(aq) of Republic Act No. (RA)
7942 or the Philippine Mining Act of 1995 which provided:

Sec. 3 Definition of Terms. As used in and for purposes of this Act, the following terms, whether in singular or plural,
shall mean:

xxxx

(aq) "Qualified person" means any citizen of the Philippines with capacity to contract, or a corporation, partnership,
association, or cooperative organized or authorized for the purpose of engaging in mining, with technical and
financial capability to undertake mineral resources development and duly registered in accordance with law at least
sixty per cent (60%) of the capital of which is owned by citizens of the Philippines: Provided, That a legally
organized foreign-owned corporation shall be deemed a qualified person for purposes of granting an exploration
permit, financial or technical assistance agreement or mineral processing permit.

Additionally, they stated that their nationality as applicants is immaterial because they also applied for Financial or
Technical Assistance Agreements (FTAA) denominated as AFTA-IVB-09 for McArthur, AFTA-IVB-08 for Tesoro and
AFTA-IVB-07 for Narra, which are granted to foreign-owned corporations. Nevertheless, they claimed that the issue
on nationality should not be raised since McArthur, Tesoro and Narra are in fact Philippine Nationals as 60% of their
capital is owned by citizens of the Philippines. They asserted that though MBMI owns 40% of the shares of PLMC
(which owns 5,997 shares of Narra),  40% of the shares of MMC (which owns 5,997 shares of McArthur)  and 40%
3 4

of the shares of SLMC (which, in turn, owns 5,997 shares of Tesoro),  the shares of MBMI will not make it the owner
5

of at least 60% of the capital stock of each of petitioners. They added that the best tool used in determining the
nationality of a corporation is the "control test," embodied in Sec. 3 of RA 7042 or the Foreign Investments Act of
1991. They also claimed that the POA of DENR did not have jurisdiction over the issues in Redmont’s petition since
they are not enumerated in Sec. 77 of RA 7942. Finally, they stressed that Redmont has no personality to sue them
because it has no pending claim or application over the areas applied for by petitioners.

On December 14, 2007, the POA issued a Resolution disqualifying petitioners from gaining MPSAs. It held:

[I]t is clearly established that respondents are not qualified applicants to engage in mining activities. On the other
hand, [Redmont] having filed its own applications for an EPA over the areas earlier covered by the MPSA
application of respondents may be considered if and when they are qualified under the law. The violation of the
requirements for the issuance and/or grant of permits over mining areas is clearly established thus, there is reason
to believe that the cancellation and/or revocation of permits already issued under the premises is in order and open
the areas covered to other qualified applicants.

xxxx

227
WHEREFORE, the Panel of Arbitrators finds the Respondents, McArthur Mining Inc., Tesoro Mining and
Development, Inc., and Narra Nickel Mining and Development Corp. as, DISQUALIFIED for being considered as
Foreign Corporations. Their Mineral Production Sharing Agreement (MPSA) are hereby x x x DECLARED NULL
AND VOID. 6

The POA considered petitioners as foreign corporations being "effectively controlled" by MBMI, a 100% Canadian
company and declared their MPSAs null and void. In the same Resolution, it gave due course to Redmont’s EPAs.
Thereafter, on February 7, 2008, the POA issued an Order  denying the Motion for Reconsideration filed by
7

petitioners.

Aggrieved by the Resolution and Order of the POA, McArthur and Tesoro filed a joint Notice of Appeal  and
8

Memorandum of Appeal  with the Mines Adjudication Board (MAB) while Narra separately filed its Notice of
9

Appeal  and Memorandum of Appeal.

10 11

In their respective memorandum, petitioners emphasized that they are qualified persons under the law. Also,
through a letter, they informed the MAB that they had their individual MPSA applications converted to FTAAs.
McArthur’s FTAA was denominated as AFTA-IVB-09  on May 2007, while Tesoro’s MPSA application was
12

converted to AFTA-IVB-08  on May 28, 2007, and Narra’s FTAA was converted to AFTA-IVB-07  on March 30,
13 14

2006.

Pending the resolution of the appeal filed by petitioners with the MAB, Redmont filed a Complaint  with the
15

Securities and Exchange Commission (SEC), seeking the revocation of the certificates for registration of petitioners
on the ground that they are foreign-owned or controlled corporations engaged in mining in violation of Philippine
laws. Thereafter, Redmont filed on September 1, 2008 a Manifestation and Motion to Suspend Proceeding before
the MAB praying for the suspension of the proceedings on the appeals filed by McArthur, Tesoro and Narra.

Subsequently, on September 8, 2008, Redmont filed before the Regional Trial Court of Quezon City, Branch 92
(RTC) a Complaint  for injunction with application for issuance of a temporary restraining order (TRO) and/or writ of
16

preliminary injunction, docketed as Civil Case No. 08-63379. Redmont prayed for the deferral of the MAB
proceedings pending the resolution of the Complaint before the SEC.

But before the RTC can resolve Redmont’s Complaint and applications for injunctive reliefs, the MAB issued an
Order on September 10, 2008, finding the appeal meritorious. It held:

WHEREFORE, in view of the foregoing, the Mines Adjudication Board hereby REVERSES and SETS ASIDE the
Resolution dated 14 December 2007 of the Panel of Arbitrators of Region IV-B (MIMAROPA) in POA-DENR Case
Nos. 2001-01, 2007-02 and 2007-03, and its Order dated 07 February 2008 denying the Motions for
Reconsideration of the Appellants. The Petition filed by Redmont Consolidated Mines Corporation on 02 January
2007 is hereby ordered DISMISSED. 17

Belatedly, on September 16, 2008, the RTC issued an Order  granting Redmont’s application for a TRO and setting
18

the case for hearing the prayer for the issuance of a writ of preliminary injunction on September 19, 2008.

Meanwhile, on September 22, 2008, Redmont filed a Motion for Reconsideration  of the September 10, 2008 Order
19

of the MAB. Subsequently, it filed a Supplemental Motion for Reconsideration  on September 29, 2008.
20

Before the MAB could resolve Redmont’s Motion for Reconsideration and Supplemental Motion for Reconsideration,
Redmont filed before the RTC a Supplemental Complaint  in Civil Case No. 08-63379.
21

On October 6, 2008, the RTC issued an Order  granting the issuance of a writ of preliminary injunction enjoining the
22

MAB from finally disposing of the appeals of petitioners and from resolving Redmont’s Motion for Reconsideration
and Supplement Motion for Reconsideration of the MAB’s September 10, 2008 Resolution.

On July 1, 2009, however, the MAB issued a second Order denying Redmont’s Motion for Reconsideration and
Supplemental Motion for Reconsideration and resolving the appeals filed by petitioners.

Hence, the petition for review filed by Redmont before the CA, assailing the Orders issued by the MAB. On October
1, 2010, the CA rendered a Decision, the dispositive of which reads:

WHEREFORE, the Petition is PARTIALLY GRANTED. The assailed Orders, dated September 10, 2008 and July 1,
2009 of the Mining Adjudication Board are reversed and set aside. The findings of the Panel of Arbitrators of the
Department of Environment and Natural Resources that respondents McArthur, Tesoro and Narra are foreign
corporations is upheld and, therefore, the rejection of their applications for Mineral Product Sharing Agreement
should be recommended to the Secretary of the DENR.

228
With respect to the applications of respondents McArthur, Tesoro and Narra for Financial or Technical Assistance
Agreement (FTAA) or conversion of their MPSA applications to FTAA, the matter for its rejection or approval is left
for determination by the Secretary of the DENR and the President of the Republic of the Philippines.

SO ORDERED. 23

In a Resolution dated February 15, 2011, the CA denied the Motion for Reconsideration filed by petitioners.

After a careful review of the records, the CA found that there was doubt as to the nationality of petitioners when it
realized that petitioners had a common major investor, MBMI, a corporation composed of 100% Canadians.
Pursuant to the first sentence of paragraph 7 of Department of Justice (DOJ) Opinion No. 020, Series of 2005,
adopting the 1967 SEC Rules which implemented the requirement of the Constitution and other laws pertaining to
the exploitation of natural resources, the CA used the "grandfather rule" to determine the nationality of petitioners. It
provided:

Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens
shall be considered as of Philippine nationality, but if the percentage of Filipino ownership in the corporation or
partnership is less than 60%, only the number of shares corresponding to such percentage shall be counted as of
Philippine nationality. Thus, if 100,000 shares are registered in the name of a corporation or partnership at least
60% of the capital stock or capital, respectively, of which belong to Filipino citizens, all of the shares shall be
recorded as owned by Filipinos. But if less than 60%, or say, 50% of the capital stock or capital of the corporation or
partnership, respectively, belongs to Filipino citizens, only 50,000 shares shall be recorded as belonging to
aliens. (emphasis supplied)
24

In determining the nationality of petitioners, the CA looked into their corporate structures and their corresponding
common shareholders. Using the grandfather rule, the CA discovered that MBMI in effect owned majority of the
common stocks of the petitioners as well as at least 60% equity interest of other majority shareholders of petitioners
through joint venture agreements. The CA found that through a "web of corporate layering, it is clear that one
common controlling investor in all mining corporations involved x x x is MBMI."  Thus, it concluded that petitioners
25

McArthur, Tesoro and Narra are also in partnership with, or privies-in-interest of, MBMI.

Furthermore, the CA viewed the conversion of the MPSA applications of petitioners into FTAA applications
suspicious in nature and, as a consequence, it recommended the rejection of petitioners’ MPSA applications by the
Secretary of the DENR.

With regard to the settlement of disputes over rights to mining areas, the CA pointed out that the POA has
jurisdiction over them and that it also has the power to determine the of nationality of petitioners as a prerequisite of
the Constitution prior the conferring of rights to "co-production, joint venture or production-sharing agreements" of
the state to mining rights. However, it also stated that the POA’s jurisdiction is limited only to the resolution of the
dispute and not on the approval or rejection of the MPSAs. It stipulated that only the Secretary of the DENR is
vested with the power to approve or reject applications for MPSA.

Finally, the CA upheld the findings of the POA in its December 14, 2007 Resolution which considered petitioners
McArthur, Tesoro and Narra as foreign corporations. Nevertheless, the CA determined that the POA’s declaration
that the MPSAs of McArthur, Tesoro and Narra are void is highly improper.

While the petition was pending with the CA, Redmont filed with the Office of the President (OP) a petition dated May
7, 2010 seeking the cancellation of petitioners’ FTAAs. The OP rendered a Decision  on April 6, 2011, wherein it
26

canceled and revoked petitioners’ FTAAs for violating and circumventing the "Constitution x x x[,] the Small Scale
Mining Law and Environmental Compliance Certificate as well as Sections 3 and 8 of the Foreign Investment Act
and E.O. 584."  The OP, in affirming the cancellation of the issued FTAAs, agreed with Redmont stating that
27

petitioners committed violations against the abovementioned laws and failed to submit evidence to negate them.
The Decision further quoted the December 14, 2007 Order of the POA focusing on the alleged misrepresentation
and claims made by petitioners of being domestic or Filipino corporations and the admitted continued mining
operation of PMDC using their locally secured Small Scale Mining Permit inside the area earlier applied for an
MPSA application which was eventually transferred to Narra. It also agreed with the POA’s estimation that the filing
of the FTAA applications by petitioners is a clear admission that they are "not capable of conducting a large scale
mining operation and that they need the financial and technical assistance of a foreign entity in their operation, that
is why they sought the participation of MBMI Resources, Inc."  The Decision further quoted:
28

The filing of the FTAA application on June 15, 2007, during the pendency of the case only demonstrate the
violations and lack of qualification of the respondent corporations to engage in mining. The filing of the FTAA
application conversion which is allowed foreign corporation of the earlier MPSA is an admission that indeed the
respondent is not Filipino but rather of foreign nationality who is disqualified under the laws. Corporate documents of
MBMI Resources, Inc. furnished its stockholders in their head office in Canada suggest that they are conducting
operation only through their local counterparts. 29

229
The Motion for Reconsideration of the Decision was further denied by the OP in a Resolution  dated July 6, 2011.
30

Petitioners then filed a Petition for Review on Certiorari of the OP’s Decision and Resolution with the CA, docketed
as CA-G.R. SP No. 120409. In the CA Decision dated February 29, 2012, the CA affirmed the Decision and
Resolution of the OP. Thereafter, petitioners appealed the same CA decision to this Court which is now pending
with a different division.

Thus, the instant petition for review against the October 1, 2010 Decision of the CA. Petitioners put forth the
following errors of the CA:

I.

The Court of Appeals erred when it did not dismiss the case for mootness despite the fact that the subject
matter of the controversy, the MPSA Applications, have already been converted into FTAA applications and
that the same have already been granted.

II.

The Court of Appeals erred when it did not dismiss the case for lack of jurisdiction considering that the Panel
of Arbitrators has no jurisdiction to determine the nationality of Narra, Tesoro and McArthur.

III.

The Court of Appeals erred when it did not dismiss the case on account of Redmont’s willful forum shopping.

IV.

The Court of Appeals’ ruling that Narra, Tesoro and McArthur are foreign corporations based on the
"Grandfather Rule" is contrary to law, particularly the express mandate of the Foreign Investments Act of
1991, as amended, and the FIA Rules.

V.

The Court of Appeals erred when it applied the exceptions to the res inter alios acta rule.

VI.

The Court of Appeals erred when it concluded that the conversion of the MPSA Applications into FTAA
Applications were of "suspicious nature" as the same is based on mere conjectures and surmises without
any shred of evidence to show the same. 31

We find the petition to be without merit.

This case not moot and academic

The claim of petitioners that the CA erred in not rendering the instant case as moot is without merit.

Basically, a case is said to be moot and/or academic when it "ceases to present a justiciable controversy by virtue of
supervening events, so that a declaration thereon would be of no practical use or value."  Thus, the courts
32

"generally decline jurisdiction over the case or dismiss it on the ground of mootness."33

The "mootness" principle, however, does accept certain exceptions and the mere raising of an issue of "mootness"
will not deter the courts from trying a case when there is a valid reason to do so. In David v. Macapagal-Arroyo
(David), the Court provided four instances where courts can decide an otherwise moot case, thus:

1.) There is a grave violation of the Constitution;

2.) The exceptional character of the situation and paramount public interest is involved;

3.) When constitutional issue raised requires formulation of controlling principles to guide the bench, the bar,
and the public; and

4.) The case is capable of repetition yet evading review. 34

All of the exceptions stated above are present in the instant case. We of this Court note that a grave violation of the
Constitution, specifically Section 2 of Article XII, is being committed by a foreign corporation right under our
230
country’s nose through a myriad of corporate layering under different, allegedly, Filipino corporations. The intricate
corporate layering utilized by the Canadian company, MBMI, is of exceptional character and involves paramount
public interest since it undeniably affects the exploitation of our Country’s natural resources. The corresponding
actions of petitioners during the lifetime and existence of the instant case raise questions as what principle is to be
applied to cases with similar issues. No definite ruling on such principle has been pronounced by the Court; hence,
the disposition of the issues or errors in the instant case will serve as a guide "to the bench, the bar and the
public."  Finally, the instant case is capable of repetition yet evading review, since the Canadian company, MBMI,
35

can keep on utilizing dummy Filipino corporations through various schemes of corporate layering and conversion of
applications to skirt the constitutional prohibition against foreign mining in Philippine soil.

Conversion of MPSA applications to FTAA applications

We shall discuss the first error in conjunction with the sixth error presented by petitioners since both involve the
conversion of MPSA applications to FTAA applications. Petitioners propound that the CA erred in ruling against
them since the questioned MPSA applications were already converted into FTAA applications; thus, the issue on the
prohibition relating to MPSA applications of foreign mining corporations is academic. Also, petitioners would want us
to correct the CA’s finding which deemed the aforementioned conversions of applications as suspicious in nature,
since it is based on mere conjectures and surmises and not supported with evidence.

We disagree.

The CA’s analysis of the actions of petitioners after the case was filed against them by respondent is on point. The
changing of applications by petitioners from one type to another just because a case was filed against them, in truth,
would raise not a few sceptics’ eyebrows. What is the reason for such conversion? Did the said conversion not stem
from the case challenging their citizenship and to have the case dismissed against them for being "moot"? It is quite
obvious that it is petitioners’ strategy to have the case dismissed against them for being "moot."

Consider the history of this case and how petitioners responded to every action done by the court or appropriate
government agency: on January 2, 2007, Redmont filed three separate petitions for denial of the MPSA applications
of petitioners before the POA. On June 15, 2007, petitioners filed a conversion of their MPSA applications to FTAAs.
The POA, in its December 14, 2007 Resolution, observed this suspect change of applications while the case was
pending before it and held:

The filing of the Financial or Technical Assistance Agreement application is a clear admission that the respondents
are not capable of conducting a large scale mining operation and that they need the financial and technical
assistance of a foreign entity in their operation that is why they sought the participation of MBMI Resources, Inc. The
participation of MBMI in the corporation only proves the fact that it is the Canadian company that will provide the
finances and the resources to operate the mining areas for the greater benefit and interest of the same and not the
Filipino stockholders who only have a less substantial financial stake in the corporation.

xxxx

x x x The filing of the FTAA application on June 15, 2007, during the pendency of the case only demonstrate the
violations and lack of qualification of the respondent corporations to engage in mining. The filing of the FTAA
application conversion which is allowed foreign corporation of the earlier MPSA is an admission that indeed the
respondent is not Filipino but rather of foreign nationality who is disqualified under the laws. Corporate documents of
MBMI Resources, Inc. furnished its stockholders in their head office in Canada suggest that they are conducting
operation only through their local counterparts.36

On October 1, 2010, the CA rendered a Decision which partially granted the petition, reversing and setting aside the
September 10, 2008 and July 1, 2009 Orders of the MAB. In the said Decision, the CA upheld the findings of the
POA of the DENR that the herein petitioners are in fact foreign corporations thus a recommendation of the rejection
of their MPSA applications were recommended to the Secretary of the DENR. With respect to the FTAA applications
or conversion of the MPSA applications to FTAAs, the CA deferred the matter for the determination of the Secretary
of the DENR and the President of the Republic of the Philippines. 37

In their Motion for Reconsideration dated October 26, 2010, petitioners prayed for the dismissal of the petition
asserting that on April 5, 2010, then President Gloria Macapagal-Arroyo signed and issued in their favor FTAA No.
05-2010-IVB, which rendered the petition moot and academic. However, the CA, in a Resolution dated February 15,
2011 denied their motion for being a mere "rehash of their claims and defenses."  Standing firm on its Decision, the
38

CA affirmed the ruling that petitioners are, in fact, foreign corporations. On April 5, 2011, petitioners elevated the
case to us via a Petition for Review on Certiorari under Rule 45, questioning the Decision of the CA. Interestingly,
the OP rendered a Decision dated April 6, 2011, a day after this petition for review was filed, cancelling and revoking
the FTAAs, quoting the Order of the POA and stating that petitioners are foreign corporations since they needed the
financial strength of MBMI, Inc. in order to conduct large scale mining operations. The OP Decision also based the
cancellation on the misrepresentation of facts and the violation of the "Small Scale Mining Law and Environmental

231
Compliance Certificate as well as Sections 3 and 8 of the Foreign Investment Act and E.O. 584."  On July 6, 2011,
39

the OP issued a Resolution, denying the Motion for Reconsideration filed by the petitioners.

Respondent Redmont, in its Comment dated October 10, 2011, made known to the Court the fact of the OP’s
Decision and Resolution. In their Reply, petitioners chose to ignore the OP Decision and continued to reuse their old
arguments claiming that they were granted FTAAs and, thus, the case was moot. Petitioners filed a Manifestation
and Submission dated October 19, 2012,  wherein they asserted that the present petition is moot since, in a
40

remarkable turn of events, MBMI was able to sell/assign all its shares/interest in the "holding companies" to DMCI
Mining Corporation (DMCI), a Filipino corporation and, in effect, making their respective corporations fully-Filipino
owned.

Again, it is quite evident that petitioners have been trying to have this case dismissed for being "moot." Their final
act, wherein MBMI was able to allegedly sell/assign all its shares and interest in the petitioner "holding companies"
to DMCI, only proves that they were in fact not Filipino corporations from the start. The recent divesting of interest
by MBMI will not change the stand of this Court with respect to the nationality of petitioners prior the suspicious
change in their corporate structures. The new documents filed by petitioners are factual evidence that this Court has
no power to verify.

The only thing clear and proved in this Court is the fact that the OP declared that petitioner corporations have
violated several mining laws and made misrepresentations and falsehood in their applications for FTAA which lead
to the revocation of the said FTAAs, demonstrating that petitioners are not beyond going against or around the law
using shifty actions and strategies. Thus, in this instance, we can say that their claim of mootness is moot in itself
because their defense of conversion of MPSAs to FTAAs has been discredited by the OP Decision.

Grandfather test

The main issue in this case is centered on the issue of petitioners’ nationality, whether Filipino or foreign. In their
previous petitions, they had been adamant in insisting that they were Filipino corporations, until they submitted their
Manifestation and Submission dated October 19, 2012 where they stated the alleged change of corporate
ownership to reflect their Filipino ownership. Thus, there is a need to determine the nationality of petitioner
corporations.

Basically, there are two acknowledged tests in determining the nationality of a corporation: the control test and the
grandfather rule. Paragraph 7 of DOJ Opinion No. 020, Series of 2005, adopting the 1967 SEC Rules which
implemented the requirement of the Constitution and other laws pertaining to the controlling interests in enterprises
engaged in the exploitation of natural resources owned by Filipino citizens, provides:

Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens
shall be considered as of Philippine nationality, but if the percentage of Filipino ownership in the corporation or
partnership is less than 60%, only the number of shares corresponding to such percentage shall be counted as of
Philippine nationality. Thus, if 100,000 shares are registered in the name of a corporation or partnership at least
60% of the capital stock or capital, respectively, of which belong to Filipino citizens, all of the shares shall be
recorded as owned by Filipinos. But if less than 60%, or say, 50% of the capital stock or capital of the corporation or
partnership, respectively, belongs to Filipino citizens, only 50,000 shares shall be counted as owned by Filipinos
and the other 50,000 shall be recorded as belonging to aliens.

The first part of paragraph 7, DOJ Opinion No. 020, stating "shares belonging to corporations or partnerships at
least 60% of the capital of which is owned by Filipino citizens shall be considered as of Philippine nationality,"
pertains to the control test or the liberal rule. On the other hand, the second part of the DOJ Opinion which provides,
"if the percentage of the Filipino ownership in the corporation or partnership is less than 60%, only the number of
shares corresponding to such percentage shall be counted as Philippine nationality," pertains to the stricter, more
stringent grandfather rule.

Prior to this recent change of events, petitioners were constant in advocating the application of the "control test"
under RA 7042, as amended by RA 8179, otherwise known as the Foreign Investments Act (FIA), rather than using
the stricter grandfather rule. The pertinent provision under Sec. 3 of the FIA provides:

SECTION 3. Definitions. - As used in this Act:

a.) The term Philippine national shall mean a citizen of the Philippines; or a domestic partnership or association
wholly owned by the citizens of the Philippines; a corporation organized under the laws of the Philippines of which at
least sixty percent (60%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a
trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine
national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That
were a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC)
registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of
both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the
232
members of the Board of Directors, in order that the corporation shall be considered a Philippine national.
(emphasis supplied)

The grandfather rule, petitioners reasoned, has no leg to stand on in the instant case since the definition of a
"Philippine National" under Sec. 3 of the FIA does not provide for it. They further claim that the grandfather rule "has
been abandoned and is no longer the applicable rule."  They also opined that the last portion of Sec. 3 of the FIA
41

admits the application of a "corporate layering" scheme of corporations. Petitioners claim that the clear and
unambiguous wordings of the statute preclude the court from construing it and prevent the court’s use of discretion
in applying the law. They said that the plain, literal meaning of the statute meant the application of the control test is
obligatory.

We disagree. "Corporate layering" is admittedly allowed by the FIA; but if it is used to circumvent the Constitution
and pertinent laws, then it becomes illegal. Further, the pronouncement of petitioners that the grandfather rule has
already been abandoned must be discredited for lack of basis.

Art. XII, Sec. 2 of the Constitution provides:

Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential
energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State.
With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be under the full control and supervision of the State. The
State may directly undertake such activities, or it may enter into co-production, joint venture or production-sharing
agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned
by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more
than twenty-five years, and under such terms and conditions as may be provided by law.

xxxx

The President may enter into agreements with Foreign-owned corporations involving either technical or financial
assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils
according to the general terms and conditions provided by law, based on real contributions to the economic growth
and general welfare of the country. In such agreements, the State shall promote the development and use of local
scientific and technical resources. (emphasis supplied)

The emphasized portion of Sec. 2 which focuses on the State entering into different types of agreements for the
exploration, development, and utilization of natural resources with entities who are deemed Filipino due to 60
percent ownership of capital is pertinent to this case, since the issues are centered on the utilization of our country’s
natural resources or specifically, mining. Thus, there is a need to ascertain the nationality of petitioners since, as the
Constitution so provides, such agreements are only allowed corporations or associations "at least 60 percent of
such capital is owned by such citizens." The deliberations in the Records of the 1986 Constitutional Commission
shed light on how a citizenship of a corporation will be determined:

Mr. BENNAGEN: Did I hear right that the Chairman’s interpretation of an independent national economy is freedom
from undue foreign control? What is the meaning of undue foreign control?

MR. VILLEGAS: Undue foreign control is foreign control which sacrifices national sovereignty and the welfare of the
Filipino in the economic sphere.

MR. BENNAGEN: Why does it have to be qualified still with the word "undue"? Why not simply freedom from foreign
control? I think that is the meaning of independence, because as phrased, it still allows for foreign control.

MR. VILLEGAS: It will now depend on the interpretation because if, for example, we retain the 60/40 possibility in
the cultivation of natural resources, 40 percent involves some control; not total control, but some control.

MR. BENNAGEN: In any case, I think in due time we will propose some amendments.

MR. VILLEGAS: Yes. But we will be open to improvement of the phraseology.

Mr. BENNAGEN: Yes.

Thank you, Mr. Vice-President.

xxxx

MR. NOLLEDO: In Sections 3, 9 and 15, the Committee stated local or Filipino equity and foreign equity; namely,
60-40 in Section 3, 60-40 in Section 9, and 2/3-1/3 in Section 15.
233
MR. VILLEGAS: That is right.

MR. NOLLEDO: In teaching law, we are always faced with the question: ‘Where do we base the equity requirement,
is it on the authorized capital stock, on the subscribed capital stock, or on the paid-up capital stock of a corporation’?
Will the Committee please enlighten me on this?

MR. VILLEGAS: We have just had a long discussion with the members of the team from the UP Law Center who
provided us with a draft. The phrase that is contained here which we adopted from the UP draft is ‘60 percent of the
voting stock.’

MR. NOLLEDO: That must be based on the subscribed capital stock, because unless declared delinquent, unpaid
capital stock shall be entitled to vote.

MR. VILLEGAS: That is right.

MR. NOLLEDO: Thank you.

With respect to an investment by one corporation in another corporation, say, a corporation with 60-40 percent
equity invests in another corporation which is permitted by the Corporation Code, does the Committee adopt the
grandfather rule?

MR. VILLEGAS: Yes, that is the understanding of the Committee.

MR. NOLLEDO: Therefore, we need additional Filipino capital?

MR. VILLEGAS: Yes.  (emphasis supplied)

42

It is apparent that it is the intention of the framers of the Constitution to apply the grandfather rule in cases where
corporate layering is present.

Elementary in statutory construction is when there is conflict between the Constitution and a statute, the Constitution
will prevail. In this instance, specifically pertaining to the provisions under Art. XII of the Constitution on National
Economy and Patrimony, Sec. 3 of the FIA will have no place of application. As decreed by the honorable framers of
our Constitution, the grandfather rule prevails and must be applied.

Likewise, paragraph 7, DOJ Opinion No. 020, Series of 2005 provides:

The above-quoted SEC Rules provide for the manner of calculating the Filipino interest in a corporation for
purposes, among others, of determining compliance with nationality requirements (the ‘Investee Corporation’). Such
manner of computation is necessary since the shares in the Investee Corporation may be owned both by individual
stockholders (‘Investing Individuals’) and by corporations and partnerships (‘Investing Corporation’). The said rules
thus provide for the determination of nationality depending on the ownership of the Investee Corporation and, in
certain instances, the Investing Corporation.

Under the above-quoted SEC Rules, there are two cases in determining the nationality of the Investee Corporation.
The first case is the ‘liberal rule’, later coined by the SEC as the Control Test in its 30 May 1990 Opinion, and
pertains to the portion in said Paragraph 7 of the 1967 SEC Rules which states, ‘(s)hares belonging to corporations
or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as of Philippine
nationality.’ Under the liberal Control Test, there is no need to further trace the ownership of the 60% (or more)
Filipino stockholdings of the Investing Corporation since a corporation which is at least 60% Filipino-owned is
considered as Filipino.

The second case is the Strict Rule or the Grandfather Rule Proper and pertains to the portion in said Paragraph 7 of
the 1967 SEC Rules which states, "but if the percentage of Filipino ownership in the corporation or partnership is
less than 60%, only the number of shares corresponding to such percentage shall be counted as of Philippine
nationality." Under the Strict Rule or Grandfather Rule Proper, the combined totals in the Investing Corporation and
the Investee Corporation must be traced (i.e., "grandfathered") to determine the total percentage of Filipino
ownership.

Moreover, the ultimate Filipino ownership of the shares must first be traced to the level of the Investing Corporation
and added to the shares directly owned in the Investee Corporation x x x.

xxxx

In other words, based on the said SEC Rule and DOJ Opinion, the Grandfather Rule or the second part of the SEC
Rule applies only when the 60-40 Filipino-foreign equity ownership is in doubt (i.e., in cases where the joint venture
234
corporation with Filipino and foreign stockholders with less than 60% Filipino stockholdings [or 59%] invests in other
joint venture corporation which is either 60-40% Filipino-alien or the 59% less Filipino). Stated differently, where the
60-40 Filipino- foreign equity ownership is not in doubt, the Grandfather Rule will not apply. (emphasis supplied)

After a scrutiny of the evidence extant on record, the Court finds that this case calls for the application of the
grandfather rule since, as ruled by the POA and affirmed by the OP, doubt prevails and persists in the corporate
ownership of petitioners. Also, as found by the CA, doubt is present in the 60-40 Filipino equity ownership of
petitioners Narra, McArthur and Tesoro, since their common investor, the 100% Canadian corporation––MBMI,
funded them. However, petitioners also claim that there is "doubt" only when the stockholdings of Filipinos are less
than 60%. 43

The assertion of petitioners that "doubt" only exists when the stockholdings are less than 60% fails to convince this
Court. DOJ Opinion No. 20, which petitioners quoted in their petition, only made an example of an instance where
"doubt" as to the ownership of the corporation exists. It would be ludicrous to limit the application of the said word
only to the instances where the stockholdings of non-Filipino stockholders are more than 40% of the total
stockholdings in a corporation. The corporations interested in circumventing our laws would clearly strive to have
"60% Filipino Ownership" at face value. It would be senseless for these applying corporations to state in their
respective articles of incorporation that they have less than 60% Filipino stockholders since the applications will be
denied instantly. Thus, various corporate schemes and layerings are utilized to circumvent the application of the
Constitution.

Obviously, the instant case presents a situation which exhibits a scheme employed by stockholders to circumvent
the law, creating a cloud of doubt in the Court’s mind. To determine, therefore, the actual participation, direct or
indirect, of MBMI, the grandfather rule must be used.

McArthur Mining, Inc.

To establish the actual ownership, interest or participation of MBMI in each of petitioners’ corporate structure, they
have to be "grandfathered."

As previously discussed, McArthur acquired its MPSA application from MMC, which acquired its application from
SMMI. McArthur has a capital stock of ten million pesos (PhP 10,000,000) divided into 10,000 common shares at
one thousand pesos (PhP 1,000) per share, subscribed to by the following: 44

Name Nationality Number of Amount Amount Paid

Shares Subscribed

Madridejos Mining Filipino 5,997 PhP 5,997,000.00 PhP 825,000.00

Corporation

MBMI Resources, Canadian 3,998 PhP 3,998,000.0 PhP 1,878,174.60

Inc.

Lauro L. Salazar Filipino 1 PhP 1,000.00 PhP 1,000.00

Fernando B. Filipino 1 PhP 1,000.00 PhP 1,000.00

Esguerra

Manuel A. Agcaoili Filipino 1 PhP 1,000.00 PhP 1,000.00

Michael T. Mason American 1 PhP 1,000.00 PhP 1,000.00

Kenneth Cawkell Canadian 1 PhP 1,000.00 PhP 1,000.00

  Total 10,000 PhP 10,000,000.00 PhP 2,708,174.60

(emphasis supplied)

Interestingly, looking at the corporate structure of MMC, we take note that it has a similar structure and composition
as McArthur. In fact, it would seem that MBMI is also a major investor and "controls"  MBMI and also, similar
45

nominal shareholders were present, i.e. Fernando B. Esguerra (Esguerra), Lauro L. Salazar (Salazar), Michael T.
Mason (Mason) and Kenneth Cawkell (Cawkell):

235
Madridejos Mining Corporation

Name Nationality Number of Amount Amount Paid

Shares Subscribed

Olympic Mines Filipino 6,663 PhP 6,663,000.00 PhP 0

&

Development

Corp.
MBMI Canadian 3,331 PhP 3,331,000.00 PhP 2,803,900.00
Resources,

Inc.
Amanti Limson Filipino 1 PhP 1,000.00 PhP 1,000.00

Fernando B. Filipino 1 PhP 1,000.00 PhP 1,000.00

Esguerra
Lauro Salazar Filipino 1 PhP 1,000.00 PhP 1,000.00

Emmanuel G. Filipino 1 PhP 1,000.00 PhP 1,000.00

Hernando
Michael T. American 1 PhP 1,000.00 PhP 1,000.00
Mason

Kenneth Canadian 1 PhP 1,000.00 PhP 1,000.00

Cawkell

  Total 10,000 PhP 10,000,000.00 PhP 2,809,900.00

(emphasis supplied)

Noticeably, Olympic Mines & Development Corporation (Olympic) did not pay any amount with respect to the
number of shares they subscribed to in the corporation, which is quite absurd since Olympic is the major stockholder
in MMC. MBMI’s 2006 Annual Report sheds light on why Olympic failed to pay any amount with respect to the
number of shares it subscribed to. It states that Olympic entered into joint venture agreements with several
Philippine companies, wherein it holds directly and indirectly a 60% effective equity interest in the Olympic
Properties.  Quoting the said Annual report:
46

On September 9, 2004, the Company and Olympic Mines & Development Corporation ("Olympic") entered into a
series of agreements including a Property Purchase and Development Agreement (the Transaction Documents)
with respect to three nickel laterite properties in Palawan, Philippines (the "Olympic Properties"). The Transaction
Documents effectively establish a joint venture between the Company and Olympic for purposes of developing the
Olympic Properties. The Company holds directly and indirectly an initial 60% interest in the joint venture. Under
certain circumstances and upon achieving certain milestones, the Company may earn up to a 100% interest, subject
to a 2.5% net revenue royalty.  (emphasis supplied)
47

Thus, as demonstrated in this first corporation, McArthur, when it is "grandfathered," company layering was utilized
by MBMI to gain control over McArthur. It is apparent that MBMI has more than 60% or more equity interest in
McArthur, making the latter a foreign corporation.

Tesoro Mining and Development, Inc.

Tesoro, which acquired its MPSA application from SMMI, has a capital stock of ten million pesos (PhP 10,000,000)
divided into ten thousand (10,000) common shares at PhP 1,000 per share, as demonstrated below:

236
[[reference = http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/april2014/195580.pdf]]

Name Nationality Number of Amount Amount Paid

Shares Subscribed

Sara Marie Filipino 5,997 PhP 5,997,000.00 PhP 825,000.00

Mining, Inc.

MBMI Canadian 3,998 PhP 3,998,000.00 PhP 1,878,174.60

Resources, Inc.

Lauro L. Salazar Filipino 1 PhP 1,000.00 PhP 1,000.00

Fernando B. Filipino 1 PhP 1,000.00 PhP 1,000.00

Esguerra

Manuel A. Filipino 1 PhP 1,000.00 PhP 1,000.00

Agcaoili

Michael T. Mason American 1 PhP 1,000.00 PhP 1,000.00

Kenneth Cawkell Canadian 1 PhP 1,000.00 PhP 1,000.00

  Total 10,000 PhP PhP 2,708,174.60

10,000,000.00
(emphasis supplied)

Except for the name "Sara Marie Mining, Inc.," the table above shows exactly the same figures as the corporate
structure of petitioner McArthur, down to the last centavo. All the other shareholders are the same: MBMI, Salazar,
Esguerra, Agcaoili, Mason and Cawkell. The figures under "Nationality," "Number of Shares," "Amount Subscribed,"
and "Amount Paid" are exactly the same. Delving deeper, we scrutinize SMMI’s corporate structure:

Sara Marie Mining, Inc.

[[reference = http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/april2014/195580.pdf]]

Name Nationality Number of Amount Amount Paid

Shares Subscribed

Olympic Mines & Filipino 6,663 PhP 6,663,000.00 PhP 0

Development

Corp.

MBMI Resources, Canadian 3,331 PhP 3,331,000.00 PhP 2,794,000.00

Inc.

Amanti Limson Filipino 1 PhP 1,000.00 PhP 1,000.00

Fernando B. Filipino 1 PhP 1,000.00 PhP 1,000.00

Esguerra

237
Lauro Salazar Filipino 1 PhP 1,000.00 PhP 1,000.00

Emmanuel G. Filipino 1 PhP 1,000.00 PhP 1,000.00

Hernando

Michael T. Mason American 1 PhP 1,000.00 PhP 1,000.00

Kenneth Cawkell Canadian 1 PhP 1,000.00 PhP 1,000.00

  Total 10,000 PhP PhP 2,809,900.00

10,000,000.00
(emphasis supplied)

After subsequently studying SMMI’s corporate structure, it is not farfetched for us to spot the glaring similarity
between SMMI and MMC’s corporate structure. Again, the presence of identical stockholders, namely: Olympic,
MBMI, Amanti Limson (Limson), Esguerra, Salazar, Hernando, Mason and Cawkell. The figures under the headings
"Nationality," "Number of Shares," "Amount Subscribed," and "Amount Paid" are exactly the same except for the
amount paid by MBMI which now reflects the amount of two million seven hundred ninety four thousand pesos (PhP
2,794,000). Oddly, the total value of the amount paid is two million eight hundred nine thousand nine hundred pesos
(PhP 2,809,900).

Accordingly, after "grandfathering" petitioner Tesoro and factoring in Olympic’s participation in SMMI’s corporate
structure, it is clear that MBMI is in control of Tesoro and owns 60% or more equity interest in Tesoro. This makes
petitioner Tesoro a non-Filipino corporation and, thus, disqualifies it to participate in the exploitation, utilization and
development of our natural resources.

Narra Nickel Mining and Development Corporation

Moving on to the last petitioner, Narra, which is the transferee and assignee of PLMDC’s MPSA application, whose
corporate structure’s arrangement is similar to that of the first two petitioners discussed. The capital stock of Narra is
ten million pesos (PhP 10,000,000), which is divided into ten thousand common shares (10,000) at one thousand
pesos (PhP 1,000) per share, shown as follows:

[[reference = http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/april2014/195580.pdf]]

Name Nationality Number of Amount Amount Paid

Shares Subscribed

Patricia Louise Filipino 5,997 PhP 5,997,000.00 PhP 1,677,000.00

Mining &

Development

Corp.

MBMI Canadian 3,998 PhP 3,996,000.00 PhP 1,116,000.00

Resources, Inc.

Higinio C. Filipino 1 PhP 1,000.00 PhP 1,000.00

Mendoza, Jr.

Henry E. Filipino 1 PhP 1,000.00 PhP 1,000.00

Fernandez

Manuel A. Filipino 1 PhP 1,000.00 PhP 1,000.00

238
Agcaoili

Ma. Elena A. Filipino 1 PhP 1,000.00 PhP 1,000.00

Bocalan

Bayani H. Agabin Filipino 1 PhP 1,000.00 PhP 1,000.00

Robert L. American 1 PhP 1,000.00 PhP 1,000.00

McCurdy

Kenneth Cawkell Canadian 1 PhP 1,000.00 PhP 1,000.00

  Total 10,000 PhP PhP 2,800,000.00

10,000,000.00 (emphasis supplied)

Again, MBMI, along with other nominal stockholders, i.e., Mason, Agcaoili and Esguerra, is present in this corporate
structure.

Patricia Louise Mining & Development Corporation

Using the grandfather method, we further look and examine PLMDC’s corporate structure:

Name Nationality Number of Amount Amount Paid

Shares Subscribed

Palawan Alpha South Filipino 6,596 PhP PhP 0

Resources Development 6,596,000.00
Corporation

MBMI Resources, Canadian 3,396 PhP PhP

3,396,000.00 2,796,000.00
Inc.
Higinio C. Mendoza, Jr. Filipino 1 PhP 1,000.00 PhP 1,000.00

Fernando B. Esguerra Filipino 1 PhP 1,000.00 PhP 1,000.00

Henry E. Fernandez Filipino 1 PhP 1,000.00 PhP 1,000.00

Lauro L. Salazar Filipino 1 PhP 1,000.00 PhP 1,000.00

Manuel A. Agcaoili Filipino 1 PhP 1,000.00 PhP 1,000.00

Bayani H. Agabin Filipino 1 PhP 1,000.00 PhP 1,000.00

Michael T. Mason American 1 PhP 1,000.00 PhP 1,000.00

Kenneth Cawkell Canadian 1 PhP 1,000.00 PhP 1,000.00

  Total 10,000 PhP PhP

10,000,000.00 2,708,174.60
(emphasis
supplied)

239
Yet again, the usual players in petitioners’ corporate structures are present. Similarly, the amount of money paid by
the 2nd tier majority stock holder, in this case, Palawan Alpha South Resources and Development Corp. (PASRDC),
is zero.

Studying MBMI’s Summary of Significant Accounting Policies dated October 31, 2005 explains the reason behind
the intricate corporate layering that MBMI immersed itself in:

JOINT VENTURES The Company’s ownership interests in various mining ventures engaged in the acquisition,
exploration and development of mineral properties in the Philippines is described as follows:

(a) Olympic Group

The Philippine companies holding the Olympic Property, and the ownership and interests therein, are as follows:

Olympic- Philippines (the "Olympic Group")

Sara Marie Mining Properties Ltd. ("Sara Marie") 33.3%

Tesoro Mining & Development, Inc. (Tesoro) 60.0%

Pursuant to the Olympic joint venture agreement the Company holds directly and indirectly an effective equity
interest in the Olympic Property of 60.0%. Pursuant to a shareholders’ agreement, the Company exercises joint
control over the companies in the Olympic Group.

(b) Alpha Group

The Philippine companies holding the Alpha Property, and the ownership interests therein, are as follows:

Alpha- Philippines (the "Alpha Group")

Patricia Louise Mining Development Inc. ("Patricia") 34.0%

Narra Nickel Mining & Development Corporation (Narra) 60.4%

Under a joint venture agreement the Company holds directly and indirectly an effective equity interest in the Alpha
Property of 60.4%. Pursuant to a shareholders’ agreement, the Company exercises joint control over the companies
in the Alpha Group.  (emphasis supplied)
48

Concluding from the above-stated facts, it is quite safe to say that petitioners McArthur, Tesoro and Narra are not
Filipino since MBMI, a 100% Canadian corporation, owns 60% or more of their equity interests. Such conclusion is
derived from grandfathering petitioners’ corporate owners, namely: MMI, SMMI and PLMDC. Going further and
adding to the picture, MBMI’s Summary of Significant Accounting Policies statement– –regarding the "joint venture"
agreements that it entered into with the "Olympic" and "Alpha" groups––involves SMMI, Tesoro, PLMDC and Narra.
Noticeably, the ownership of the "layered" corporations boils down to MBMI, Olympic or corporations under the
"Alpha" group wherein MBMI has joint venture agreements with, practically exercising majority control over the
corporations mentioned. In effect, whether looking at the capital structure or the underlying relationships between
and among the corporations, petitioners are NOT Filipino nationals and must be considered foreign since 60% or
more of their capital stocks or equity interests are owned by MBMI.

Application of the res inter alios acta rule

Petitioners question the CA’s use of the exception of the res inter alios acta or the "admission by co-partner or
agent" rule and "admission by privies" under the Rules of Court in the instant case, by pointing out that statements
made by MBMI should not be admitted in this case since it is not a party to the case and that it is not a "partner" of
petitioners.

Secs. 29 and 31, Rule 130 of the Revised Rules of Court provide:

Sec. 29. Admission by co-partner or agent.- The act or declaration of a partner or agent of the party within the scope
of his authority and during the existence of the partnership or agency, may be given in evidence against such party
after the partnership or agency is shown by evidence other than such act or declaration itself. The same rule applies
to the act or declaration of a joint owner, joint debtor, or other person jointly interested with the party.

Sec. 31. Admission by privies.- Where one derives title to property from another, the act, declaration, or omission of
the latter, while holding the title, in relation to the property, is evidence against the former.

240
Petitioners claim that before the above-mentioned Rule can be applied to a case, "the partnership relation must be
shown, and that proof of the fact must be made by evidence other than the admission itself."  Thus, petitioners
49

assert that the CA erred in finding that a partnership relationship exists between them and MBMI because, in fact,
no such partnership exists.

Partnerships vs. joint venture agreements

Petitioners claim that the CA erred in applying Sec. 29, Rule 130 of the Rules by stating that "by entering into a joint
venture, MBMI have a joint interest" with Narra, Tesoro and McArthur. They challenged the conclusion of the CA
which pertains to the close characteristics of

"partnerships" and "joint venture agreements." Further, they asserted that before this particular partnership can be
formed, it should have been formally reduced into writing since the capital involved is more than three thousand
pesos (PhP 3,000). Being that there is no evidence of written agreement to form a partnership between petitioners
and MBMI, no partnership was created.

We disagree.

A partnership is defined as two or more persons who bind themselves to contribute money, property, or industry to a
common fund with the intention of dividing the profits among themselves.  On the other hand, joint ventures have
50

been deemed to be "akin" to partnerships since it is difficult to distinguish between joint ventures and partnerships.
Thus:

[T]he relations of the parties to a joint venture and the nature of their association are so similar and closely akin to a
partnership that it is ordinarily held that their rights, duties, and liabilities are to be tested by rules which are closely
analogous to and substantially the same, if not exactly the same, as those which govern partnership. In fact, it has
been said that the trend in the law has been to blur the distinctions between a partnership and a joint venture, very
little law being found applicable to one that does not apply to the other. 51

Though some claim that partnerships and joint ventures are totally different animals, there are very few rules that
differentiate one from the other; thus, joint ventures are deemed "akin" or similar to a partnership. In fact, in joint
venture agreements, rules and legal incidents governing partnerships are applied. 52

Accordingly, culled from the incidents and records of this case, it can be assumed that the relationships entered
between and among petitioners and MBMI are no simple "joint venture agreements." As a rule, corporations are
prohibited from entering into partnership agreements; consequently, corporations enter into joint venture
agreements with other corporations or partnerships for certain transactions in order to form "pseudo partnerships."

Obviously, as the intricate web of "ventures" entered into by and among petitioners and MBMI was executed to
circumvent the legal prohibition against corporations entering into partnerships, then the relationship created should
be deemed as "partnerships," and the laws on partnership should be applied. Thus, a joint venture agreement
between and among corporations may be seen as similar to partnerships since the elements of partnership are
present.

Considering that the relationships found between petitioners and MBMI are considered to be partnerships, then the
CA is justified in applying Sec. 29, Rule 130 of the Rules by stating that "by entering into a joint venture, MBMI have
a joint interest" with Narra, Tesoro and McArthur.

Panel of Arbitrators’ jurisdiction

We affirm the ruling of the CA in declaring that the POA has jurisdiction over the instant case. The POA has
jurisdiction to settle disputes over rights to mining areas which definitely involve the petitions filed by Redmont
against petitioners Narra, McArthur and Tesoro. Redmont, by filing its petition against petitioners, is asserting the
right of Filipinos over mining areas in the Philippines against alleged foreign-owned mining corporations. Such claim
constitutes a "dispute" found in Sec. 77 of RA 7942:

Within thirty (30) days, after the submission of the case by the parties for the decision, the panel shall have
exclusive and original jurisdiction to hear and decide the following:

(a) Disputes involving rights to mining areas

(b) Disputes involving mineral agreements or permits

We held in Celestial Nickel Mining Exploration Corporation v. Macroasia Corp.: 53

241
The phrase "disputes involving rights to mining areas" refers to any adverse claim, protest, or opposition to an
application for mineral agreement. The POA therefore has the jurisdiction to resolve any adverse claim, protest, or
opposition to a pending application for a mineral agreement filed with the concerned Regional Office of the MGB.
This is clear from Secs. 38 and 41 of the DENR AO 96-40, which provide:

Sec. 38.

xxxx

Within thirty (30) calendar days from the last date of publication/posting/radio announcements, the authorized
officer(s) of the concerned office(s) shall issue a certification(s) that the publication/posting/radio announcement
have been complied with. Any adverse claim, protest, opposition shall be filed directly, within thirty (30) calendar
days from the last date of publication/posting/radio announcement, with the concerned Regional Office or through
any concerned PENRO or CENRO for filing in the concerned Regional Office for purposes of its resolution by the
Panel of Arbitrators pursuant to the provisions of this Act and these implementing rules and regulations. Upon final
resolution of any adverse claim, protest or opposition, the Panel of Arbitrators shall likewise issue a certification to
that effect within five (5) working days from the date of finality of resolution thereof. Where there is no adverse claim,
protest or opposition, the Panel of Arbitrators shall likewise issue a Certification to that effect within five working
days therefrom.

xxxx

No Mineral Agreement shall be approved unless the requirements under this Section are fully complied with and any
adverse claim/protest/opposition is finally resolved by the Panel of Arbitrators.

Sec. 41.

xxxx

Within fifteen (15) working days form the receipt of the Certification issued by the Panel of Arbitrators as provided in
Section 38 hereof, the concerned Regional Director shall initially evaluate the Mineral Agreement applications in
areas outside Mineral reservations. He/She shall thereafter endorse his/her findings to the Bureau for further
evaluation by the Director within fifteen (15) working days from receipt of forwarded documents. Thereafter, the
Director shall endorse the same to the secretary for consideration/approval within fifteen working days from receipt
of such endorsement.

In case of Mineral Agreement applications in areas with Mineral Reservations, within fifteen (15) working days from
receipt of the Certification issued by the Panel of Arbitrators as provided for in Section 38 hereof, the same shall be
evaluated and endorsed by the Director to the Secretary for consideration/approval within fifteen days from receipt
of such endorsement. (emphasis supplied)

It has been made clear from the aforecited provisions that the "disputes involving rights to mining areas" under Sec.
77(a) specifically refer only to those disputes relative to the applications for a mineral agreement or conferment of
mining rights.

The jurisdiction of the POA over adverse claims, protest, or oppositions to a mining right application is further
elucidated by Secs. 219 and 43 of DENR AO 95-936, which read:

Sec. 219. Filing of Adverse Claims/Conflicts/Oppositions.- Notwithstanding the provisions of Sections 28, 43 and 57
above, any adverse claim, protest or opposition specified in said sections may also be filed directly with the Panel of
Arbitrators within the concerned periods for filing such claim, protest or opposition as specified in said Sections.

Sec. 43. Publication/Posting of Mineral Agreement.-

xxxx

The Regional Director or concerned Regional Director shall also cause the posting of the application on the bulletin
boards of the Bureau, concerned Regional office(s) and in the concerned province(s) and municipality(ies), copy
furnished the barangays where the proposed contract area is located once a week for two (2) consecutive weeks in
a language generally understood in the locality. After forty-five (45) days from the last date of publication/posting
has been made and no adverse claim, protest or opposition was filed within the said forty-five (45) days, the
concerned offices shall issue a certification that publication/posting has been made and that no adverse claim,
protest or opposition of whatever nature has been filed. On the other hand, if there be any adverse claim, protest or
opposition, the same shall be filed within forty-five (45) days from the last date of publication/posting, with the
Regional Offices concerned, or through the Department’s Community Environment and Natural Resources Officers
(CENRO) or Provincial Environment and Natural Resources Officers (PENRO), to be filed at the Regional Office for

242
resolution of the Panel of Arbitrators. However previously published valid and subsisting mining claims are
exempted from posted/posting required under this Section.

No mineral agreement shall be approved unless the requirements under this section are fully complied with and any
opposition/adverse claim is dealt with in writing by the Director and resolved by the Panel of Arbitrators. (Emphasis
supplied.)

It has been made clear from the aforecited provisions that the "disputes involving rights to mining areas" under Sec.
77(a) specifically refer only to those disputes relative to the applications for a mineral agreement or conferment of
mining rights.

The jurisdiction of the POA over adverse claims, protest, or oppositions to a mining right application is further
elucidated by Secs. 219 and 43 of DENRO AO 95-936, which reads:

Sec. 219. Filing of Adverse Claims/Conflicts/Oppositions.- Notwithstanding the provisions of Sections 28, 43 and 57
above, any adverse claim, protest or opposition specified in said sections may also be filed directly with the Panel of
Arbitrators within the concerned periods for filing such claim, protest or opposition as specified in said Sections.

Sec. 43. Publication/Posting of Mineral Agreement Application.-

xxxx

The Regional Director or concerned Regional Director shall also cause the posting of the application on the bulletin
boards of the Bureau, concerned Regional office(s) and in the concerned province(s) and municipality(ies), copy
furnished the barangays where the proposed contract area is located once a week for two (2) consecutive weeks in
a language generally understood in the locality. After forty-five (45) days from the last date of publication/posting
has been made and no adverse claim, protest or opposition was filed within the said forty-five (45) days, the
concerned offices shall issue a certification that publication/posting has been made and that no adverse claim,
protest or opposition of whatever nature has been filed. On the other hand, if there be any adverse claim, protest or
opposition, the same shall be filed within forty-five (45) days from the last date of publication/posting, with the
Regional offices concerned, or through the Department’s Community Environment and Natural Resources Officers
(CENRO) or Provincial Environment and Natural Resources Officers (PENRO), to be filed at the Regional Office for
resolution of the Panel of Arbitrators. However, previously published valid and subsisting mining claims are
exempted from posted/posting required under this Section.

No mineral agreement shall be approved unless the requirements under this section are fully complied with and any
opposition/adverse claim is dealt with in writing by the Director and resolved by the Panel of Arbitrators. (Emphasis
supplied.)

These provisions lead us to conclude that the power of the POA to resolve any adverse claim, opposition, or protest
relative to mining rights under Sec. 77(a) of RA 7942 is confined only to adverse claims, conflicts and oppositions
relating to applications for the grant of mineral rights.

POA’s jurisdiction is confined only to resolutions of such adverse claims, conflicts and oppositions and it has no
authority to approve or reject said applications. Such power is vested in the DENR Secretary upon recommendation
of the MGB Director. Clearly, POA’s jurisdiction over "disputes involving rights to mining areas" has nothing to do
with the cancellation of existing mineral agreements. (emphasis ours)

Accordingly, as we enunciated in Celestial, the POA unquestionably has jurisdiction to resolve disputes over MPSA
applications subject of Redmont’s petitions. However, said jurisdiction does not include either the approval or
rejection of the MPSA applications, which is vested only upon the Secretary of the DENR. Thus, the finding of the
POA, with respect to the rejection of petitioners’ MPSA applications being that they are foreign corporation, is valid.

Justice Marvic Mario Victor F. Leonen, in his Dissent, asserts that it is the regular courts, not the POA, that has
jurisdiction over the MPSA applications of petitioners.

This postulation is incorrect.

It is basic that the jurisdiction of the court is determined by the statute in force at the time of the commencement of
the action.54

Sec. 19, Batas Pambansa Blg. 129 or "The Judiciary Reorganization

Act of 1980" reads:

Sec. 19. Jurisdiction in Civil Cases.—Regional Trial Courts shall exercise exclusive original jurisdiction:
243
1. In all civil actions in which the subject of the litigation is incapable of pecuniary estimation.

On the other hand, the jurisdiction of POA is unequivocal from Sec. 77 of RA 7942:

Section 77. Panel of Arbitrators.—

x x x Within thirty (30) days, after the submission of the case by the parties for the decision, the panel shall
have exclusive and original jurisdiction to hear and decide the following:

(c) Disputes involving rights to mining areas

(d) Disputes involving mineral agreements or permits

It is clear that POA has exclusive and original jurisdiction over any and all disputes involving rights to mining areas.
One such dispute is an MPSA application to which an adverse claim, protest or opposition is filed by another
interested applicant.  In the case at bar, the dispute arose or originated from MPSA applications where petitioners
1âwphi1

are asserting their rights to mining areas subject of their respective MPSA applications. Since respondent filed 3
separate petitions for the denial of said applications, then a controversy has developed between the parties and it is
POA’s jurisdiction to resolve said disputes.

Moreover, the jurisdiction of the RTC involves civil actions while what petitioners filed with the DENR Regional
Office or any concerned DENRE or CENRO are MPSA applications. Thus POA has jurisdiction.

Furthermore, the POA has jurisdiction over the MPSA applications under the doctrine of primary jurisdiction. Euro-
med Laboratories v. Province of Batangas  elucidates:
55

The doctrine of primary jurisdiction holds that if a case is such that its determination requires the expertise,
specialized training and knowledge of an administrative body, relief must first be obtained in an administrative
proceeding before resort to the courts is had even if the matter may well be within their proper jurisdiction.

Whatever may be the decision of the POA will eventually reach the court system via a resort to the CA and to this
Court as a last recourse.

Selling of MBMI’s shares to DMCI

As stated before, petitioners’ Manifestation and Submission dated October 19, 2012 would want us to declare the
instant petition moot and academic due to the transfer and conveyance of all the shareholdings and interests of
MBMI to DMCI, a corporation duly organized and existing under Philippine laws and is at least 60% Philippine-
owned.  Petitioners reasoned that they now cannot be considered as foreign-owned; the transfer of their shares
56

supposedly cured the "defect" of their previous nationality. They claimed that their current FTAA contract with the
State should stand since "even wholly-owned foreign corporations can enter into an FTAA with the
State." Petitioners stress that there should no longer be any issue left as regards their qualification to enter into
57

FTAA contracts since they are qualified to engage in mining activities in the Philippines. Thus, whether the
"grandfather rule" or the "control test" is used, the nationalities of petitioners cannot be doubted since it would pass
both tests.

The sale of the MBMI shareholdings to DMCI does not have any bearing in the instant case and said fact should be
disregarded. The manifestation can no longer be considered by us since it is being tackled in G.R. No. 202877
pending before this Court.  Thus, the question of whether petitioners, allegedly a Philippine-owned corporation due
1âwphi1

to the sale of MBMI's shareholdings to DMCI, are allowed to enter into FTAAs with the State is a non-issue in this
case.

In ending, the "control test" is still the prevailing mode of determining whether or not a corporation is a Filipino
corporation, within the ambit of Sec. 2, Art. II of the 1987 Constitution, entitled to undertake the exploration,
development and utilization of the natural resources of the Philippines. When in the mind of the Court there is doubt,
based on the attendant facts and circumstances of the case, in the 60-40 Filipino-equity ownership in the
corporation, then it may apply the "grandfather rule."

WHEREFORE, premises considered, the instant petition is DENIED. The assailed Court of Appeals Decision dated
October 1, 2010 and Resolution dated February 15, 2011 are hereby AFFIRMED.

SO ORDERED.

DISSENTING OPINION

LEONEN, J.:
244
Investments into our economy are deterred by interpretations of law that are not based on solid ground and sound
rationale. Predictability in policy is a very strong factor in determining investor confidence.

The so-called "Grandfather Rule" has no statutory basis. It is the Control Test that governs in determining Filipino
equity in corporations. It is this test that is provided in statute and by our most recent jurisprudence.

Furthermore, the Panel of Arbitrators created by the Philippine Mining Act is not a court of law. It cannot decide
judicial questions with finality. This includes the determination of whether the capital of a corporation is owned or
controlled by Filipino citizens. The Panel of Arbitrators renders arbitral awards. There is no dispute and, therefore,
no competence for arbitration, if one of the parties does not have a mining claim but simply wishes to ask for a
declaration that a corporation is not qualified to hold a mining agreement. Respondent here did not claim a better
right to a mining agreement. By forum shopping through multiple actions, it sought to disqualify petitioners. The
decision of the majority rewards such actions.

In this case, the majority's holding glosses over statutory provisions  and settled jurisprudence.
1 2

Thus, I disagree with the ponencia in relying on the Grandfather Rule. I disagree with the finding that petitioners
Narra Nickel Mining and Development Corp. (Narra), Tesoro Mining and Development, Inc. (Tesoro), and McArthur
Mining, Inc. (McArthur) are not Filipino corporations. Whether they should be qualified to hold Mineral Production
Sharing Agreements (MPSA) should be the subject of proper proceedings in accordance with this opinion. I
disagree that the Panel of Arbitrators (POA) of the Department of Environment and Natural Resources (DENR) has
jurisdiction to disqualify an applicant for mining activities on the ground that it does not have the requisite Filipino
ownership.

Furthermore, respondent Redmont Consolidated Mines Corp. (Redmont) has engaged in blatant forum shopping.
The Court of Appeals  is in error for sustaining the POA. Thus, its findings that Narra, Tesoro, and McArthur are not
3

qualified corporations must be rejected.

To recapitulate, Redmont took interest in undertaking mining activities in the Province of Palawan. Upon inquiry with
the Department of Environment and Natural Resources, it discovered that Narra, Tesoro, and McArthur had
standing MPSA applications for its interested areas. 4

Narra, Tesoro, and McArthur are successors-in-interest of other corporations that have earlier pursued MPSA
applications:

1. Narra intended to succeed Alpha Resources and Development Corporation and Patricia Louise Mining
and Development Corporation (PLMDC), which held the application MPSA-IV-1-12 covering an area of
3,277 hectares in Barangay Calategas and Barangay San Isidro, Narra, Palawan; 5

2. Tesoro intended to succeed Sara Marie Mining, Inc. (SMMI), which held the application MPSA-AMA-IVB-
154 covering an area of 3,402 hectares in Barangay Malinao and Barangay Princess Urduja, Narra,
Palawan; 6

3. McArthur intended to succeed Madridejos Mining Corporation (MMC), which held the application MPSA-
AMA-IVB-153 covering an area of more than 1,782 hectares in Barangay Sumbiling, Bataraza, Palawan and
EPA-IVB-44 which includes a 3,720-hectare area in Barangay Malatagao, Bataraza, Palawan from SMMI. 7

Contending that Narra, Tesoro, and McArthur are corporations whose foreign equity disqualifies them from entering
into MPSAs, Redmont filed with the DENR Panel of Arbitrators (POA) for Region IV-B three (3) separate petitions
for the denial of the MPSA applications of Narra, Tesoro, and McArthur. In these petitions, Redmont asserted that at
least sixty percent (60%) of the capital stock of Narra, Tesoro, and McArthur are owned and controlled by MBMI
Resources, Inc. (MBMI), a corporation wholly owned by Canadians. 8

Narra, Tesoro, and McArthur countered that the POA did not have jurisdiction to rule on Redmont’s petitions per
Section 77 of Republic Act No. 7942, otherwise known as the Philippine Mining Act of 1995 (Mining Act). They also
argued that Redmont did not have personality to sue as it had no pending application of its own over the areas in
which they had pending applications. They contended that whether they were Filipino corporations has become
immaterial as they were already pursuing applications for Financial or Technical Assistance Agreements (FTAA),
which, unlike MPSAs, may be entered into by foreign corporations. They added that, in any case, they were
qualified to enter into MPSAs as 60% of their capital is owned by Filipinos. 9

In a December 14, 2007 resolution,  the POA held that Narra, Tesoro, and McArthur are foreign corporations
10

disqualified from entering into MPSAs. The dispositive portion of this resolution reads:

WHEREFORE, the Panel of Arbitrators finds the Respondents McArthur Mining Inc., Tesoro Mining and
Development, Inc., and Narra Nickel Mining and Development Corp. as, DISQUALIFIED for being considered as

245
Foreign Corporations. Their Mineral Production Sharing Agreement (MPSA) are hereby as [sic], they are
DECLARED NULL AND VOID.

Accordingly, the Exploration Permit Applications of Petitioner Redmont Consolidated Mines Corporation shall be
GIVEN DUE COURSE, subject to compliance with the provisions of the Mining Law and its implementing rules and
regulations.11

Narra, Tesoro, and McArthur then filed appeals before the Mines Adjudication Board (MAB). In a September 10,
2008 order,  the MAB pointed out that "no MPSA has so far been issued in favor of any of the parties";  thus, it
12 13

faulted the POA for still ruling that "[t]heir Mineral Production Sharing Agreement (MPSA) are hereby as [sic], they
are DECLARED NULL AND VOID." 14

The MAB sustained the contention of Narra, Tesoro, and McArthur that "the Panel does not have jurisdiction over
the instant case, and that it should have dismissed the Petition fortwith [sic]."  It emphasized that:
15

[W]hether or not an applicant for an MPSA meets the qualifications imposed by law, more particularly the nationality
requirement, is a matter that is addressed to the sound discretion of the competent body or agency, in this case the
[Securities and Exchange Commission]. In the interest of orderly procedure and administrative efficiency, it is
imperative that the DENR, including the Panel, accord full faith and confidence to the contents of Appellants’ Articles
of Incorporation, which have undergone thorough evaluation and scrutiny by the SEC. Unless the SEC or the courts
promulgate a ruling to the effect that the Appellant corporations are not Filipino corporations, the Board cannot
conclude otherwise. This proposition is borne out by the legal presumptions that official duty has been regularly
performed, and that the law has been obeyed in the preparation and approval of said documents. 16

Redmont then filed with the Court of Appeals a petition for review under Rule 43 of the 1997 Rules on Civil
Procedure. This petition was docketed as CA-G.R. SP No. 109703.

In a decision dated October 1, 2010,  the Court of Appeals, through its Seventh Division, reversed the MAB and
17

sustained the findings of the POA. 18

The Court of Appeals noted that the "pivotal issue before the Court is whether or not respondents McArthur, Tesoro
and Narra are Philippine nationals under Philippine laws, rules and regulations."  Noting that doubt existed as to
19

their foreign equity ownerships, the Court of Appeals, Seventh Division, asserted that such equity ownerships must
be reckoned via the Grandfather Rule.  Ultimately, it ruled that Narra, Tesoro, and McArthur "are not Philippine
20

nationals, hence, their MPSA applications should be recommended for rejection by the Secretary of the DENR." 21

On the matter of the Panel of Arbitrators’ jurisdiction, the Court of Appeals, Seventh Division, referred to this court’s
declarations in Celestial Nickel Mining Exploration Corp. v. Macroasia Corp.  and considered these
22

pronouncements as "clearly support[ing the conclusion] that the POA has jurisdiction to resolve the Petitions filed by
x x x Redmont." 23

The motion for reconsideration of Narra, Tesoro, and McArthur was denied by the Court of Appeals through a
resolution dated February 15, 2011. 24

Hence, this present petition was filed and docketed as G.R. No. 195580.

Apart from these proceedings before the POA, the MAB and the Court of Appeals, Redmont also filed three (3)
separate actions before the Securities and Exchange Commission, the Regional Trial Court of Quezon City, and the
Office of the President:

First action: On August 14, 2008, Redmont filed a complaint for revocation of the certificates of registration of Narra,
Tesoro, and McArthur with the Securities and Exchange Commission (SEC).  This complaint became the subject of
25

another case (G.R. No. 205513), which was consolidated but later de-consolidated with the present petition, G.R.
No. 195580.

In view of this complaint, Redmont filed on September 1, 2008 a manifestation and motion to suspend proceeding[s]
before the MAB. 26

In a letter-resolution dated September 3, 2009, the SEC’s Compliance and Enforcement Department (CED) ruled in
favor of Narra, Tesoro, and McArthur. It applied the Control Test per Section 3 of Republic Act No. 7042, as
amended by Republic Act No. 8179, the Foreign Investments Act (FIA), and held that Narra, Tesoro, and McArthur
as well as their co-respondents in that case satisfied the requisite Filipino equity ownership.  Redmont then filed an
27

appeal with the SEC En Banc.

In a decision dated March 25, 2010,  the SEC En Banc set aside the SEC-CED’s letter-resolution with respect to
28

Narra, Tesoro, and McArthur as the appeal from the MAB’s September 10, 2008 order was then pending with the

246
Court of Appeals, Seventh Division.  The SEC En Banc considered the assertion that Redmont has been engaging
29

in forum shopping:

It is evident from the foregoing that aside from identity of the parties x xx, the issue(s) raised in the CA Case and the
factual foundations thereof x x x are substantially the same as those obtaining the case at bar. Yet, Redmont did not
include this CA Case in the Certification Against Forum Shopping attached to the instant Appeal. 30

However, with respect to the other respondent-appellees in that case (Sara Marie Mining, Inc., Patricia Louise
Mining and Development Corp., Madridejos Mining Corp., Bethlehem Nickel Corp., San Juanico Nickel Corp., and
MBMI Resources Inc.), the complaint was remanded to the SEC-CED for further proceedings with the reminder for it
to "consider every piece already on record and, if necessary, to conduct further investigation in order to ascertain,
consistent with the Grandfather Rule, the true, actual Filipino and foreign participation in each of these five (5)
corporations." 31

Asserting that the SEC En Banc had already made a definite finding that Redmont has been engaging in forum
shopping, Sara Marie Mining, Inc., Patricia Louise Mining and Development Corp., and Madridejos Mining Corp.
filed with the Court of Appeals a petition for review under Rule 43 of the 1997 Rules of Civil Procedure. This petition
was docketed as CA-G.R. SP No. 113523.

In a decision dated May 23, 2012, the Court of Appeals, Former Tenth Division, found that "there was a deliberate
attempt not to disclose the pendency of CA-GR SP No. 109703."  It concluded that "the partial dismissal of the case
32

before the SEC is unwarranted. It should have been dismissed in its entirety and with prejudice to the
complainant."  The dispositive portion of the decision reads:
33

WHEREFORE, the Petition is GRANTED. The Decision dated March 25, 2010 of the Securities and Exchange
Commission En Banc is REVERSED and SET ASIDE. Accordingly, the complaint for revocation filed by Redmont
Consolidated Mines is DISMISSED with prejudice.  (Emphasis supplied)
34

On January 22, 2013, the Court of Appeals, Former Tenth Division, issued a resolution  denying Redmont’s motion
35

for reconsideration.

Aggrieved, Redmont filed the petition for review on certiorari which became the subject of G.R. No. 205513, initially
lodged with this court’s First Division. Through a November 27, 2013 resolution, G.R. No. 205513 was consolidated
with G.R. No. 195580. Subsequently however, this court’s Third Division de-consolidated the two (2) cases.

Second Action: On September 8, 2008, Redmont filed a complaint for injunction (of the MAB proceedings pending
the resolution of the complaint before the SEC) with application for issuance of a temporary restraining order (TRO)
and/or writ of preliminary injunction with the Regional Trial Court, Branch 92, Quezon City.  The Regional Trial Court
36

issued a TRO on September 16, 2008. By then, however, the MAB had already ruled in favor of Narra, Tesoro, and
McArthur. 37

Third Action: On May 7, 2010, Redmont filed with the Office of the President a petition seeking the cancellation of
the financial or technical assistance agreement (FTAA) applications of Narra, Tesoro, and McArthur. In a decision
dated April 6, 2011,  the Office of the President ruled in favor of Redmont. In a resolution dated July 6, 2011,  the
38 39

Office of the President denied the motion for reconsideration of Narra, Tesoro, and McArthur. As noted by the
ponencia, Narra, Tesoro, and McArthur then filed an appeal with the Court of Appeals. As this appeal has been
denied, they filed another appeal with this court, which appeal is pending in another division. 40

The petition for review on certiorari subject of G.R. No. 195580 is an appeal from the Court of Appeals’ October 1,
2010 decision in CA-G.R. SP No. 109703 reversing the MAB and sustaining the POA’s findings that Narra, Tesoro,
and McArthur are foreign corporations disqualified from entering into MPSAs. The petition also questions the
February 15, 2011 resolution of the Court of Appeals denying the motion for reconsideration of Narra, Tesoro, and
McArthur.

To reiterate, G.R. No. 195580 was consolidated with another petition – G.R. No. 205513 – through a resolution of
this court dated November 27, 2013. G.R. No. 205513 is an appeal from the Court of Appeals, Former Tenth
Division’s May 23, 2012 decision and January 22, 2013 resolution in CA-G.R. SP No. 113523. Subsequently
however, G.R. No. 195580 and G.R. No. 205513 were de-consolidated.

Apart from G.R. Nos. 195580 and 205513, a third petition has been filed with this court. This third petition is an
offshoot of the petitions filed by Redmont with the Office of the President seeking the cancellation of the FTAA
applications of Narra, Tesoro, and McArthur.

The main issue in this case relates to the ownership of capital in Narra, Tesoro, and McArthur, i.e., whether they
have satisfied the required Filipino equity ownership so as to be qualified to enter into MPSAs.

247
In addition to this, Narra, Tesoro, and McArthur raise procedural issues: (1) the POA’s jurisdiction over the subject
matter of Redmont’s petitions; (2) the supposed mootness of Redmont’s petitions before the POA considering that
Narra, Tesoro, and McArthur have pursued applications for FTAAs; and (3) Redmont’s supposed engagement in
forum shopping. 41

Governing laws

Mining is an environmentally sensitive activity that entails the exploration, development, and utilization of inalienable
natural resources. It falls within the broad ambit of Article XII, Section 2 as well as other sections of the 1987
Constitution which refers to ancestral domains  and the environment.
42 43

More specifically, Republic Act No. 7942 or the Philippine Mining Act, its implementing rules and regulations, other
administrative issuances as well as jurisprudence govern the application for mining rights among others. Small-scale
mining  is governed by Republic Act No. 7076, the People’s Small-scale Mining Act of 1991. Apart from these, other
44

statutes such as Republic Act No. 8371, the Indigenous Peoples Rights Act of 1997 (IPRA), and Republic Act No.
7160, the Local Government Code (LGC) contain provisions which delimit the conduct of mining activities.

Republic Act No. 7042, as amended by Republic Act No. 8179, the Foreign Investments Act (FIA) is significant with
respect to the participation of foreign investors in nationalized economic activities such as mining. In the 2012
resolution ruling on the motion for reconsideration in Gamboa v. Teves,  this court stated that "The FIA is the basic
45

law governing foreign investments in the Philippines, irrespective of the nature of business and area of investment." 46

Commonwealth Act No. 108, as amended, otherwise known as the Anti-Dummy Law, penalizes those who "allow
[their] name or citizenship to be used for the purpose of evading"  "constitutional or legal provisions requir[ing]
47

Philippine or any other specific citizenship as a requisite for the exercise or enjoyment of a right, franchise or
privilege". 48

Batas Pambansa Blg. 68, the Corporation Code, is the general law that "provide[s] for the formation, organization,
[and] regulation of private corporations."  The conduct of activities relating to securities, such as shares of stock, is
49

regulated by Republic Act No. 8799, the Securities Regulation Code (SRC).

DENR’s Panel of Arbitrators

has no competence over the
petitions filed by Redmont

The DENR Panel of Arbitrators does not have the competence to rule on the issue of whether the ownership of the
capital of the corporations Narra, Tesoro, and McArthur meet the constitutional and statutory requirements. This
alone is ample basis for granting the petition.

Section 77 of the Mining Act provides for the matters falling under the exclusive original jurisdiction of the DENR
Panel of Arbitrators, as follows:

Section 77. Panel of Arbitrators – x x x Within thirty (30) working days, after the submission of the case by the
parties for decision, the panel shall have exclusive and original jurisdiction to hear and decide on the following:

(a) Disputes involving rights to mining areas;

(b) Disputes involving mineral agreements or permit;

(c) Disputes involving surface owners, occupants and claimholders / concessionaires; and

(d) Disputes pending before the Bureau and the Department at the date of the effectivity of this Act.

In 2007, this court’s decision in Celestial Nickel Mining Exploration Corporation v. Macroasia Corp.  construed the
50

phrase "disputes involving rights to mining areas" as referring "to any adverse claim, protest, or opposition to an
application for mineral agreement." 51

Proceeding from this court’s statements in Celestial, the ponencia states:

Accordingly, as We enunciated in Celestial, the POA unquestionably has jurisdiction to resolve disputes over MPSA
applications subject of Redmont’s petitions. However, said jurisdiction does not include either the approval or
rejection of the MPSA applications which is vested only upon the Secretary of the DENR. Thus, the finding of the
POA, with respect to the rejection of the petitioners’ MPSA applications being that they are foreign corporation [sic],
is valid.
52

248
An earlier decision of this court, Gonzales v. Climax Mining Ltd.,  ruled on the jurisdiction of the Panel of Arbitrators
53

as follows:

We now come to the meat of the case which revolves mainly around the question of jurisdiction by the Panel of
Arbitrators: Does the Panel of Arbitrators have jurisdiction over the complaint for declaration of nullity and/or
termination of the subject contracts on the ground of fraud, oppression and violation of the Constitution? This issue
may be distilled into the more basic question of whether the Complaint raises a mining dispute or a judicial question.

A judicial question is a question that is proper for determination by the courts, as opposed to a moot question or one
properly decided by the executive or legislative branch. A judicial question is raised when the determination of the
question involves the exercise of a judicial function; that is, the question involves the determination of what the law
is and what the legal rights of the parties are with respect to the matter in controversy.

On the other hand, a mining dispute is a dispute involving (a) rights to mining areas, (b) mineral agreements,
FTAAs, or permits, and (c) surface owners, occupants and claimholders/concessionaires. Under Republic Act No.
7942 (otherwise known as the Philippine Mining Act of 1995), the Panel of Arbitrators has exclusive and original
jurisdiction to hear and decide these mining disputes. The Court of Appeals, in its questioned decision, correctly
stated that the Panel’s jurisdiction is limited only to those mining disputes which raise questions of fact or matters
requiring the application of technological knowledge and experience.  (Emphasis supplied)
54

Moreover, this court’s decision in Philex Mining Corp. v. Zaldivia,  which was also referred to in Gonzales, explained
55

what "questions of fact" are appropriate for resolution in a mining dispute:

We see nothing in sections 61 and 73 of the Mining Law that indicates a legislative intent to confer real judicial
power upon the Director of Mines. The very terms of section 73 of the Mining Law, as amended by Republic Act No.
4388, in requiring that the adverse claim must "state in full detail the nature, boundaries and extent of the adverse
claim" show that the conflicts to be decided by reason of such adverse claim refer primarily to questions of fact. This
is made even clearer by the explanatory note to House Bill No. 2522, later to become Republic Act 4388, that
"sections 61 and 73 that refer to the overlapping of claims are amended to expedite resolutions of mining conflicts *
* *." The controversies to be submitted and resolved by the Director of Mines under the sections refer therfore [sic]
only to the overlapping of claims and administrative matters incidental thereto.  (Emphasis supplied)
56

The pronouncements in Celestial cited by the ponencia were made to address the assertions of Celestial Nickel and
Mining Corporation (Celestial Nickel) and Blue Ridge Mineral Corporation (Blue Ridge) that the Panel of Arbitrators
had the power to cancel existing mineral agreements pursuant to Section 77 of the Mining Act.  Thus: 57

Clearly, POA’s jurisdiction over "disputes involving rights to mining areas" has nothing to do with the cancellation of
existing mineral agreements. 58

These pronouncements did not undo or abandon the distinction, clarified in Gonzales, between judicial questions
and mining disputes. The former are cognizable by regular courts of justice, while the latter are cognizable by the
DENR Panel of Arbitrators.

As has been repeatedly acknowledged by the ponencia,  the Court of Appeals,  and the Mines Adjudication
59 60

Board,  the present case, and the petitions filed by Redmont before the DENR Panel of Arbitrators boil down to the
61

"pivotal issue x x x [of] whether or not [Narra, Tesoro, and McArthur] are Philippine nationals."

This is a matter that entails a consideration of the law. It is a question that relates to the status of Narra, Tesoro, and
McArthur and the legal rights (or inhibitions) accruing to them on account of their status. This does not entail a
consideration of the specifications of mining arrangements and operations. Thus, the petitions filed by Redmont
before the DENR Panel of Arbitrators relate to judicial questions and not to mining disputes. They relate to matters
which are beyond the jurisdiction of the Panel of Arbitrators.

Furthermore nowhere in Section 77 of the Republic Act No. 7942 is there a grant of jurisdiction to the Panel of
Arbitrators over the determination of the qualification of applicants. The Philippine Mining Act clearly requires the
existence of a "dispute" over a mining area,  a mining agreement,  with a surface owner,  or those pending with the
62 63 64

Bureau or the Department  upon the law’s promulgation. The existence of a "dispute" presupposes that the party
65

bringing the suit has a colorable or putative claim more superior than that of the respondent in the arbitration
proceedings. After all, the Panel of Arbitrators is supposed to provide binding arbitration which should result in a
binding award either in favor of the petitioner or the respondent. Thus, the Panel of Arbitrators is a qualified quasi-
judicial agency. It does not perform all judicial functions in lieu of courts of law.

The petition brought by respondent before the Panel of Arbitrators a quo could not have resulted in any kind of
award in its favor. It was asking for a judicial declaration at first instance of the qualification of the petitioners to hold
mining agreements in accordance with the law. This clearly was beyond the jurisdiction of the Panel of Arbitrators
and eventually also of the Mines Adjudication Board (MAB).

249
The remedy of Redmont should have been either to cause the cancellation of the registration of any of the
petitioners with the Securities and Exchange Commission or to request for a determination of their qualifications with
the Secretary of the Department of Environment and Natural Resources. Should either the Securities and Exchange
Commission (SEC) or the Secretary of Environment and Natural Resources rule against its request, Redmont could
have gone by certiorari to a Regional Trial Court.

Having brought their petitions to an entity without jurisdiction, the petition in this case should be granted.

Mining as a nationalized
economic activity

The determination of who may engage in mining activities is grounded in the 1987 Constitution and the Mining Act.

Article XII, Section 2 of the 1987 Constitution reads:

Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of
potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the
State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be under the full control and supervision of the State. The
State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing
agreements with Filipino citizens, or corporations or associations at least 60 per centum of whose capital is owned
by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more
than twenty-five years, and under such terms and conditions as may be provided by law. In cases of water rights for
irrigation, water supply, fisheries, or industrial uses other than the development of waterpower, beneficial use may
be the measure and limit of the grant.

The State shall protect the nation’s marine wealth in its archipelagic waters, territorial sea, and exclusive economic
zone, and reserve its use and enjoyment exclusively to Filipino citizens.

The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as
cooperative fish farming, with priority to subsistence fishermen and fish workers in rivers, lakes, bays, and lagoons.

The President may enter into agreements with foreign-owned corporations involving either technical or financial
assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils
according to the general terms and conditions provided by law, based on real contributions to the economic growth
and general welfare of the country. In such agreements, the State shall promote the development and use of local
scientific and technical resources.

The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty
days from its execution. (Emphasis supplied)

The requirement for nationalization should always be read in relation to Article II, Section 19 of the Constitution
which reads:

Section 19. The State shall develop a self-reliant and independent national economy effectively controlled by
Filipinos. (Emphasis supplied)

Congress takes part in giving substantive meaning to the phrases "Filipino x x x corporations or associations at least
60 per centum of whose capital is owned by such citizens"  as well as the phrase "effectively controlled by
66

Filipinos".  Like all constitutional text, the meanings of these phrases become more salient in context.
67

Thus, Section 3 (aq) of the Mining Act defines a "qualified person" as follows:

Section 3. Definition of Terms. - As used in and for purposes of this Act, the following terms, whether in singular or
plural, shall mean:

xxxx

(aq) "Qualified person" means any citizen of the Philippines with capacity to contract, or a corporation, partnership,
association, or cooperative organized or authorized for the purpose of engaging in mining, with technical and
financial capability to undertake mineral resources development and duly registered in accordance with law at least
sixty per centum (60%) of the capital of which is owned by citizens of the Philippines: Provided, That a legally
organized foreign-owned corporation shall be deemed a qualified person for purposes of granting an exploration
permit, financial or technical assistance agreement or mineral processing permit. (Emphasis supplied)

In addition, Section 3 (t) defines a "foreign-owned corporation" as follows:

250
(t) "Foreign-owned corporation" means any corporation, partnerships, association, or cooperative duly registered in
accordance with law in which less than fifty per centum (50%) of the capital is owned by Filipino citizens.

Under the Mining Act, nationality requirements are relevant for the following categories of mining contracts and
permits: first, exploration permits (EP); second, mineral agreements (MA); third, financial or technical assistance
agreements (FTAA); and fourth, mineral processing permits (MPP).

In Section 20 of the Mining Act, "[a]n exploration permit grants the right to conduct exploration for all minerals in
specified areas." Section 3 (q) defines exploration as the "searching or prospecting for mineral resources by
geological, geochemical or geophysical surveys, remote sensing, test pitting, trenching, drilling, shaft sinking,
tunneling or any other means for the purpose of determining the existence, extent, quantity and quality thereof and
the feasibility of mining them for profit." DENR Administrative Order No. 2005-15 characterizes an exploration permit
as the "initial mode of entry in mineral exploration." 68

In Section 26 of the Mining Act, "[a] mineral agreement shall grant to the contractor the exclusive right to conduct
mining operations and to extract all mineral resources found in the contract area."

There are three (3) forms of mineral agreements:

1. Mineral production sharing agreement (MPSA) "where the Government grants to the contractor the
exclusive right to conduct mining operations within a contract area and shares in the gross output [with the]
contractor x x x provid[ing] the financing, technology, management and personnel necessary for the
implementation of [the MPSA]"; 69

2. Co-production agreement (CA) "wherein the Government shall provide inputs to the mining operations
other than the mineral resource";  and70

3. Joint-venture agreement (JVA) "where a joint-venture company is organized by the Government and the
contractor with both parties having equity shares. Aside from earnings in equity, the Government shall be
entitled to a share in the gross output". 71

The second paragraph of Section 26 of the Mining Act allows a contractor "to convert his agreement into any of the
modes of mineral agreements or financial or technical assistance agreement x x x."

Section 33 of the Mining Act allows "[a]ny qualified person with technical and financial capability to undertake large-
scale exploration, development, and utilization of mineral resources in the Philippines" through a financial or
technical assistance agreement.

In addition to Exploration Permits, Mineral Agreements, and FTAAs, the Mining Act allows for the grant of mineral
processing permits (MPP) in order to "engage in the processing of minerals."  Section 3 (y) of the Mining Act
72

defines mineral processing as "milling, beneficiation or upgrading of ores or minerals and rocks or by similar means
to convert the same into marketable products."

Applying the definition of a "qualified person" in Section 3 (aq) of the Mining Act, a corporation which intends to
enter into a Mining Agreement must have (1) "technical and financial capability to undertake mineral resources
development" and (2) "duly registered in accordance with law at least sixty per centum (60%) of the capital of which
is owned by citizens of the Philippines".  Clearly, the Department of Environment and Natural Resources, as an
73

administrative body, determines technical and financial capability. The DENR, not the Panel of Arbitrators, is also
mandated to determine whether the corporation is (a) duly registered in accordance with law and (b) at least "sixty
percent of the capital" is "owned by citizens of the Philippines."

Limitations on foreign participation in certain economic activities are not new. Similar, though not identical,
limitations are contained in the 1935 and 1973 Constitutions with respect to the exploration, development, and
utilization of natural resources.

Article XII, Section 1 of the 1935 Constitution provides:

Section 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and
other mineral oils, all forces or potential energy, and other natural resources of the Philippines belong to the State,
and their disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines, or to
corporations or associations at least sixty per centum of the capital of which is owned by such citizens, subject to
any existing right, grant, lease, or concession at the time of the inauguration of the Government established under
this Constitution. Natural resources, with the exception of public agricultural land, shall not be alienated, and no
license, concession, or lease for the exploitation, development, or utilization of any of the natural resources shall be
granted for a period exceeding twenty-five years, except as to water rights for irrigation, water supply, fisheries, or

251
industrial uses other than the development of water power, in which cases beneficial use may be the measure and
the limit of the grant. (Emphasis supplied)

Likewise, Article XIV, Section 9 of the 1973 Constitution states:

Section 9. The disposition, exploration, development, of exploitation, or utilization of any of the natural resources of
the Philippines shall be limited to citizens of the Philippines, or to corporations or association at least sixty per
centum of the capital of which is owned by such citizens. The Batasang Pambansa, in the national interest, may
allow such citizens, corporations, or associations to enter into service contracts for financial, technical,
management, or other forms of assistance with any foreign person or entity for the exploitation, development,
exploitation, or utilization of any of the natural resources. Existing valid and binding service contracts for financial,
the technical, management, or other forms of assistance are hereby recognized as such. (Emphasis supplied)

The rationale for nationalizing the exploration, development, and utilization of natural resources was explained by
this court in Register of Deeds of Rizal v. Ung Siu Si Temple  as follows:
74

The purpose of the sixty per centum requirement is obviously to ensure that corporations or associations allowed to
acquire agricultural land or to exploit natural resources shall be controlled by Filipinos; and the spirit of the
Constitution demands that in the absence of capital stock, the controlling membership should be composed of
Filipino citizens.  (Emphasis supplied)
75

On point are Dean Vicente Sinco’s words, cited with approval by this court in Republic v. Quasha: 76

It should be emphatically stated that the provisions of our Constitution which limit to Filipinos the rights to develop
the natural resources and to operate the public utilities of the Philippines is one of the bulwarks of our national
integrity. The Filipino people decided to include it in our Constitution in order that it may have the stability and
permanency that its importance requires. It is written in our Constitution so that it may neither be the subject of
barter nor be impaired in the give and take of politics. With our natural resources, our sources of power and energy,
our public lands, and our public utilities, the material basis of the nation's existence, in the hands of aliens over
whom the Philippine Government does not have complete control, the Filipinos may soon find themselves deprived
of their patrimony and living as it were, in a house that no longer belongs to them.  (Emphasis supplied)
77

Article XII, Section 2 of the 1987 Constitution ensures the effectivity of the broad economic policy, spelled out in
Article II, Section 19 of the 1987 Constitution, of "a self-reliant and independent national economy effectively
controlled by Filipinos" and the collective aspiration articulated in the 1987 Constitution’s Preamble of "conserv[ing]
and develop[ing] our patrimony."

In this case, Narra, Tesoro, and McArthur are corporations of which a portion of their equity is owned by
corporations and individuals acknowledged to be foreign nationals. Moreover, they have each sought to enter into a
Mineral Production Sharing Agreement (MPSA). This arrangement requires that foreigners own, at most, only 40%
of the capital.

Notwithstanding that they have moved to obtain FTAAs — which are permitted for wholly owned foreign
corporations —Redmont still asserts that Narra, Tesoro, and McArthur are in violation of the nationality requirements
of the 1987 Constitution and of the Mining Act. 78

Narra, Tesoro, and McArthur argue that the Grandfather Rule should not be applied as there is no legal basis for it.
They assert that Section 3 (a) of the Foreign Investments Act (FIA) provides exclusively for the Control Test as the
means for reckoning foreign equity in a corporation and, ultimately, the nationality of a corporation engaged in or
seeking to engage in an activity with nationality restrictions. They fault the Court of Appeals for relying on DOJ
Opinion No. 20, series of 2005, a mere administrative issuance, as opposed to the Foreign Investments Act, a
statute, for applying the Grandfather Rule. 79

Standards for reckoning

foreign equity participation in
nationalized economic
activities

The broad and long-standing nationalization of certain sectors and industries notwithstanding, an apparent
confusion has persisted as to how foreign equity holdings in a corporation engaged in a nationalized economic
activity shall be reckoned. As have been proffered by the myriad cast of parties and adjudicative bodies involved in
this case, there have been two means: the Control Test and the Grandfather Rule.

Paragraph 7 of the 1967 Rules of the Securities and Exchange Commission, dated February 28, 1967, states:

252
Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens
shall be considered as of Philippine nationality, but if the percentage of Filipino ownership in the corporation or
partnership is less than 60%, only the number of shares corresponding to such percentage shall be counted as of
Philippine nationality. Thus, if 100,000 shares are registered in the name of a corporation or partnership at least
60% of the capital stock or capital respectively, of which belong to a Filipino citizens, all of the said shares shall be
recorded as owned by Filipinos. But if less than 60%, or, say, only 50% of the capital stock or capital of the
corporation or partnership, respectively belongs to Filipino citizens, only 50,000 shares shall be counted as owned
by Filipinos and the other 50,000 shares shall be recorded as belonging to aliens. 80

Department of Justice (DOJ) Opinion No. 20, series of 2005, explains that the 1967 SEC Rules provide for the
Control Test and the Grandfather Rule as the means for reckoning foreign and Filipino equity ownership in an
"investee" corporation:

The above-quoted SEC Rules provide for the manner of calculating the Filipino interest in a corporation for
purposes, among others of determining compliance with nationality requirements (the "Investee Corporation"). Such
manner of computation is necessary since the shares of the Investee Corporation may be owned both by individual
stockholders ("Investing Individuals") and by corporations and partnerships ("Investing Corporation"). The
determination of nationality depending on the ownership of the Investee Corporation and in certain instances, the
Investing Corporation.

Under the above-quoted SEC Rules, there are two cases in determining the nationality of the Investee Corporation.
The first case is the ‘liberal rule’, later coined by the SEC as the Control Test in its 30 May 1990 Opinion, and
pertains to the portion in said Paragraph 7 of the 1967 SEC Rules which states, ‘(s)hares belonging to corporations
or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as of Philippine
nationality.’ Under the liberal Control Test, there is no need to further trace the ownership of the 60% (or more)
Filipino stockholdings of the Investing Corporation since a corporation which is at least 60% Filipino-owned is
considered as Filipino.

The second case is the Strict Rule or the Grandfather Rule Proper and pertains to the portion in said Paragraph 7 of
the 1967 SEC Rules which states, ‘but if the percentage of Filipino ownership in the corporation or partnership is
less than 60%, only the number of shares corresponding to such percentage shall be counted as of Philippine
nationality.’ Under the Strict Rule or Grandfather Rule Proper, the combined totals in the Investing Corporation and
the Investee Corporation must be traced (i.e., ‘grandfathered’) to determine the total percentage of Filipino
ownership. 81

DOJ Opinion No. 20, series of 2005, then concluded as follows:

[T]he Grandfather Rule or the second part of the SEC Rule applies only when the 60-40 Filipino-foreign equity
ownership is in doubt (i.e., in cases where the joint venture corporation with Filipino and foreign stockholders with
less than 60% Filipino stockholdings [or 59%] invests in another joint venture corporation which is either 60-40%
Filipino-alien or 59% less Filipino. Stated differently, where the 60-40 Filipino-foreign equity ownership is not in
doubt, the Grandfather Rule will not apply.  (Emphasis supplied)
82

The conclusion that the Grandfather Rule "applies only when the 60-40 Filipino-foreign equity ownership is in
doubt"  is borne by that opinion’s consideration of an earlier DOJ opinion (i.e., DOJ Opinion No. 18, series of 1989).
83

DOJ Opinion No. 20, series of 2005’s quotation of DOJ Opinion No. 18, series of 1989, reads:

x x x. It is quite clear x x x that the "Grandfather Rule", which was evolved and applied by the SEC in several cases,
will not apply in cases where the 60-40 Filipino-alien equity ownership in a particular natural resource corporation is
not in doubt. 84

A full quotation of the same portion of DOJ Opinion No. 18, series of 1989, reveals that the statement quoted above
was made in a very specific context (i.e., a prior DOJ opinion) that necessitated a clarification:

Opinion No. 84, s. 1988 cited in your query is not meant to overrule the aforesaid SEC rule.  There is nothing in said
85

Opinion that precludes the application of the said SEC rule in appropriate cases. It is quite clear from said SEC rule
that the ‘Grandfather Rule’, which was evolved and applied by the SEC in several cases, will not apply in cases
where the 60-40 Filipino-alien equity ownership in a particular natural resource corporation is not in doubt. 86

DOJ Opinion No. 18, series of 1989, addressed the query made by the Chairman of the Securities and Exchange
Commission (SEC) "on whether or not it may give due course to the application for incorporation of Far Southeast
Gold Resources Inc., (FSEGRI) to engage in mining activities in the Philippines in the light of [DOJ] Opinion No. 84,
s. 1988 applying the so-called ‘Grandfather Rule’ x x x." 87

DOJ Opinion No. 84, series of 1988, applied the Grandfather Rule. In doing so, it noted that the DOJ has been
"informed that in the registration of corporations with the [SEC], compliance with the sixty per centum requirement is

253
being monitored with the ‘Grandfather Rule’"  and added that the Grandfather Rule is "applied specifically in cases
88

where the corporation has corporate stockholders with alien stockholdings." 89

Prior to applying the Grandfather Rule to the specific facts subject of the inquiry it addressed, DOJ Opinion No. 84,
series of 1988, first cited the SEC’s application of the Grandfather Rule in a May 30, 1987 opinion rendered by its
Chair, Julio A. Sulit, Jr.
90

This SEC opinion resolved the nationality of the investee corporation, Silahis International Hotel (Silahis). 31% of
Silahis’ capital stock was owned by Filipino stockholders, while 69% was owned by Hotel Properties, Inc. (HPI). HPI,
in turn, was 47% Filipino-owned and 53% alien-owned. Per the Grandfather Rule, the 47% indirect Filipino
stockholding in Silahis through HPI combined with the 31% direct Filipino stockholding in Silahis translated to an
aggregate 63.43% Filipino stockholding in Silahis, in excess of the requisite 60% Filipino stockholding required so
as to be able to engage in a partly nationalized business. 91

In noting that compliance with the 60% requirement has (thus far) been monitored by SEC through the Grandfather
Rule and that the Grandfather Rule has been applied whenever a "corporation has corporate stockholders with alien
stockholdings,"  DOJ Opinion No. 84, series of 1988, gave the impression that the Grandfather Rule is all-
92

encompassing. Hence, the clarification in DOJ Opinion No. 18, series of 1989, that the Grandfather Rule "will not
apply in cases where the 60-40 Filipino-alien equity ownership x x x is not in doubt."  This clarification was affirmed
93

in DOJ Opinion No. 20, series of 2005, albeit rephrased positively as against DOJ Opinion No. 19, series of 1989’s
negative syntax (i.e., "not in doubt"). Thus, DOJ Opinion No. 20, series of 2005, declared, that the Grandfather Rule
"applies only when the 60-40 Filipino-foreign equity ownership is in doubt." 94

Following DOJ Opinion No. 18, series of 1989, the SEC in its May 30, 1990 opinion addressed to Mr. Johnny M.
Araneta stated:

[T]the Commission En Banc, on the basis of the Opinion of the Department of Justice No. 18, S. 1989 dated
January 19, 1989 voted and decided to do away with the strict application/computation of the so-called "Grandfather
Rule" Re: Far Southeast Gold Resources, Inc. (FSEGRI), and instead applied the so-called "Control Test" method
of determining corporate nationality.  (Emphasis supplied)
95

The SEC’s May 30, 1990 opinion related to the ownership of shares in Jericho Mining Corporation (Jericho) which
was then wholly owned by Filipinos. Two (2) corporations wanted to purchase a total of 60% of Jericho’s authorized
capital stock: 40% was to be purchased by Gold Field Asia Limited (GFAL), an Australian corporation, while 20%
was to be purchased by Gold Field Philippines Corporation (GFPC). GFPC was itself partly foreign-owned. It was
60% Filipino-owned, while 40% of its equity was owned by Circular Quay Holdings, an Australian corporation. 96

Applying the Control Test, the SEC’s May 30, 1990 opinion concluded that:

GFPC, which is 60% Filipino owned, is considered a Filipino company. Consequently, its investment in Jericho is
considered that of a Filipino. The 60% Filipino equity requirement therefore would still be met by Jericho.

Considering that under the proposed set-up Jericho's capital stock will be owned by 60% Filipino, it is still qualified
to hold mining claims or rights or enter into mineral production sharing agreements with the Government. 97

Some two years after DOJ Opinion No. 18, series of 2009, Republic Act No. 7042, otherwise known as the Foreign
Investments Act (FIA), was enacted. Section 3 (a) of the Foreign Investments Act defines a "Philippine National" as
follows:

SEC. 3. Definitions. - As used in this Act:

a) the term "Philippine National" shall mean a citizen of the Philippines or a domestic partnership or association
wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at
least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the
Philippines or a corporation organized abroad and registered as doing business in the Philippine under the
Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is
wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits,
where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of
Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities
and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding
and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least
sixty percent (60%) of the members of the Board of Directors of each of both corporations must be citizens of the
Philippines, in order that the corporation shall be considered a Philippine national; (as amended by R.A. 8179).
(Emphasis supplied)

Thus, under the Foreign Investments Act, a "Philippine national" is any of the following:

254
 1. a citizen of the Philippines;

2. a domestic partnership or association wholly owned by citizens of the Philippines;

3. a corporation organized under the laws of the Philippines, of which at least 60% of the capital stock
outstanding and entitled to vote is owned and held by citizens of the Philippines;

4. a corporation organized abroad and registered as doing business in the Philippines under the Corporation
Code, of which 100% of the capital stock outstanding and entitled to vote is wholly owned by Filipinos; or

5. a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a
Philippine national and at least 60% of the fund will accrue to the benefit of Philippine nationals.

The National Economic and Development Authority (NEDA) formulated the implementing rules and regulations
(IRR) of the Foreign Investments Act. Rule I, Section 1 (b) of these IRR reads:

RULE I
DEFINITIONS

SECTION 1. DEFINITION OF TERMS. — For the purposes of these Rules and Regulations:

xxxx

b. Philippine national shall mean a citizen of the Philippines or a domestic partnership or association wholly owned
by the citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty
percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines;
or a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code
of which 100% of the capital stock outstanding and entitled to vote is wholly owned by Filipinos; or a trustee of funds
for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at
least sixty percent (60%) of the fund will accrue to the benefits of the Philippine nationals; Provided, that where a
corporation and its non-Filipino stockholders own stocks in Securities and Exchange Commission (SEC) registered
enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both
corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members
of the Board of Directors of each of both corporation must be citizens of the Philippines, in order that the corporation
shall be considered a Philippine national. The Control Test shall be applied for this purpose.

Compliance with the required Filipino ownership of a corporation shall be determined on the basis of outstanding
capital stock whether fully paid or not, but only such stocks which are generally entitled to vote are considered.

For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough
to meet the required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights is
essential. Thus, stocks, the voting rights of which have been assigned or transferred to aliens cannot be considered
held by Philippine citizens or Philippine nationals.

Individuals or juridical entities not meeting the aforementioned qualifications are considered as non-Philippine
nationals. (Emphasis supplied)

The Foreign Investments Act’s implementing rules and regulations are clear and unequivocal in declaring that the
Control Test shall be applied to determine the nationality of a corporation in which another corporation owns stocks.

From around the time of the issuance of the SEC’s May 30, 1990 opinion addressed to Mr. Johnny M. Araneta
where the SEC stated that it "decided to do away with the strict application/computation of the so-called
‘Grandfather Rule’ x x x, and instead appl[y] the so-called ‘Control Test’",  the SEC "has consistently applied the
98

control test".  This is a matter expressly acknowledged by Justice Presbitero J. Velasco in his dissent in Gamboa v.
99

Teves: 100

It is settled that when the activity or business of a corporation falls within any of the partly nationalized provisions of
the Constitution or a special law, the "control test" must also be applied to determine the nationality of a corporation
on the basis of the nationality of the stockholders who control its equity.

The control test was laid down by the Department of Justice (DOJ) in its Opinion No. 18 dated January 19, 1989. It
determines the nationality of a corporation with alien equity based on the percentage of capital owned by Filipino
citizens. It reads:

Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens
shall be considered as Philippine nationality, but if the percentage of Filipino ownership in the corporation or
255
partnership is less than 60% only the number of shares corresponding to such percentage shall be counted as of
Philippine nationality.

In a catena of opinions, the SEC, "the government agency tasked with the statutory duty to enforce the nationality
requirement prescribed in Section 11, Article XII of the Constitution on the ownership of public utilities," has
consistently applied the control test.

The FIA likewise adheres to the control test. This intent is evident in the May 21, 1991 deliberations of the Bicameral
Conference Committee (Committees on Economic Affairs of the Senate and House of Representatives), to wit:

CHAIRMAN TEVES. x x x. On definition of terms, Ronnie, would you like anything to say here on the definition of
terms of Philippine national?

HON. RONALDO B. ZAMORA. I think we’ve – we have already agreed that we are adopting here the control test.
Wasn’t that the result of the –

CHAIRMAN PATERNO. No. I thought that at the last meeting, I have made it clear that the Senate was not able to
make a decision for or against the grandfather rule and the control test, because we had gone into caucus and we
had voted but later on the agreement was rebutted and so we had to go back to adopting the wording in the present
law which is not clearly, by its language, a control test formulation.

HON. ANGARA. Well, I don’t know. Maybe I was absent, Ting, when that happened but my recollection is that we
went into caucus, we debated [the] pros and cons of the control versus the grandfather rule and by actual vote the
control test bloc won. I don’t know when subsequent rejection took place, but anyway even if the – we are adopting
the present language of the law I think by interpretation, administrative interpretation, while there may be some
differences at the beginning, the current interpretation of this is the control test. It amounts to the control test.

CHAIRMAN TEVES. That’s what I understood, that we could manifest our decision on the control test formula even
if we adopt the wordings here by the Senate version.

xxxx

CHAIRMAN PATERNO. The most we can do is to say that we have explained – is to say that although the House
Panel wanted to adopt language which would make clear that the control test is the guiding philosophy in the
definition of [a] Philippine national, we explained to them the situation in the Senate and said that we would be –
was asked them to adopt the present wording of the law cognizant of the fact that the present administrative
interpretation is the control test interpretation. But, you know, we cannot go beyond that.

MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee. [sic]

MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase "voting stock or controlling
interest."

This intent is even more apparent in the Implementing Rules and Regulations (IRR) of the FIA. In defining a
"Philippine national," Section 1(b) of the IRR of the FIA categorically states that for the purposes of determining the
nationality of a corporation the control test should be applied.

The cardinal rule in the interpretation of laws is to ascertain and give effect to the intention of the legislator.
Therefore, the legislative intent to apply the control test in the determination of nationality must be given
effect. (Emphasis supplied)
101

The Foreign Investments Act and its implementing rules notwithstanding, the Department of Justice, in DOJ Opinion
No. 20, series of 2005, still posited that the Grandfather Rule is still applicable, albeit "only when the 60-40 Filipino-
foreign equity ownership is in doubt." 102

Anchoring itself on DOJ Opinion No. 20, series of 2005, the SEC En Banc found the Grandfather Rule applicable in
its March 25, 2010 decision in Redmont Consolidated Mines Corp. v. McArthur Mining Corp. (subject of the petition
in G.R. No. 205513).  It asserted that there was "doubt" in the compliance with the requisite 60-40 Filipino-foreign
103

equity ownership:

Such doubt, we believe, exists in the instant case because the foreign investor, MBMI, provided practically all the
funds of the remaining appellee-corporations. 104

On December 9, 2010, the SEC Office of the General Counsel (OGC) rendered an opinion (SEC-OGC Opinion No.
10-31) effectively abandoning the Control Test in favor of the Grandfather Rule:

256
We are aware of the Commission's prevailing policy of applying the so-called "Control Test" in determining the
extent of foreign equity in a corporation. Since the 1990s, the Commission En Banc, on the basis of DOJ Opinion
No. 18, series of 1989 dated January 19, 1989, voted and decided to do away with the strict application/computation
of the "Grandfather Rule," and instead applied the "Control Test" method of determining corporate nationality. x x x 105

However, we now opine that the Control Test must not be applied in determining if a corporation satisfies the
Constitution's citizenship requirements in certain areas of activities. x x x.
106

Central to the SEC-OGC’s reasoning is a supposed distinction between Philippine "citizens" and Philippine
"nationals". It emphasized that Article XII, Section 2 of the 1987 Constitution used the term "citizen" (i.e.,
"corporations or associations at least 60 per centum of whose capital is owned by such citizens") and that this
terminology was reiterated in Section 3 (aq) of the Mining Act (i.e., "at least sixty per centum (60%) of the capital of
which is owned by citizens of the Philippines"). 107

It added that the enumeration of who the citizens of the Philippines are in Article III, Section 1 of the 1987
Constitution is exclusive and that "only natural persons are susceptible of citizenship". 108

Finding support in this court’s ruling in the 1966 case of Palting v. San Jose Petroleum,  the SEC-OGC asserted
109

that it was necessary to look into the "citizenship of the individual stockholders, i.e., natural persons of [an] investor-
corporation in order to determine if the [c]onstitutional and statutory restrictions are complied with."  Thus, "if there
110

are layers of intervening corporations x x x we must delve into the citizenship of the individual stockholders of each
corporation."  As the SEC-OGC emphasized, "[t]his is the strict application of the Grandfather Rule."
111 112

Between the Grandfather Rule and the Control Test, the SEC-OGC opined that the framers of the 1987 Constitution
intended to apply the Grandfather Rule and that the Control Test ran counter to their intentions:

Indeed, the framers of the Constitution intended for the "Grandfather Rule" to apply in case a 60%-40% Filipino-
Foreign equity corporation invests in another corporation engaging in an activity where the Constitution restricts
foreign participation. 113

xxxx

The Control Test creates a legal fiction where if 60% of the shares of an investing corporation are owned by
Philippine citizens then all of the shares or 100% of that corporation's shares are considered Filipino owned for
purposes of determining the extent of foreign equity in an investee corporation engaging in an activity restricted to
Philippine citizens. 114

The SEC-OGC reasoned that the invalidity of the Control Test rested on the matter of citizenship:

In other words, Philippine citizenship is being unduly attributed to foreign individuals who own the rest of the shares
in a 60% Filipino equity corporation investing in another corporation. Thus, applying the Control Test effectively
circumvents the Constitutional mandate that corporations engaging in certain activities must be 60% owned by
Filipino citizens. The words of the Constitution clearly provide that we must look at the citizenship of the
individual/natural person who ultimately owns and controls the shares of stocks of the corporation engaging in the
nationalized/partly-nationalized activity. This is what the framers of the constitution intended. In fact, the Mining Act
strictly adheres to the text of the Constitution and does not provide for the application of the Control Test. Indeed,
the application of the Control Test has no constitutional or statutory basis. Its application is only by mere
administrative fiat.  (Emphasis supplied)
115

This court must now put to rest the seeming tension between the Control Test and the Grandfather Rule.

This court’s 1952 ruling in Davis Winship v. Philippine Trust Co.  cited its 1951 ruling in Filipinas Compania de
116

Seguros v. Christern, Huenefeld and Co., Inc.  and stated that "the nationality of a private corporation is determined
117

by the character or citizenship of its controlling stockholders."118

Filipinas Compania de Seguros, for its part, specifically used the term "Control Test" (citing a United States
Supreme Court decision ) in ruling that the respondent in that case, Christern, Huenefeld and Co., Inc. – the
119

majority of the stockholders of which were German subjects – "became an enemy corporation upon the outbreak of
the war."120

Their pronouncements and clear reference to the Control Test notwithstanding, Davis Winship and Filipinas
Compania de Seguros do not pertain to nationalized economic activities but rather to corporations deemed to be of
a belligerent nationality during a time of war.

257
In and of itself, this court’s 1966 decision in Palting had nothing to do with the Control Test and the Grandfather
Rule. Palting, which was relied upon by SEC-OGC in Opinion No. 10-31, was promulgated in 1966, months before
the 1967 SEC Rules and its bifurcated paragraph 7 were adopted.

Likewise, Palting was promulgated before Republic Act No. 5186, the Investments Incentive Act, was adopted in
1967. The Investments Incentive Act was adopted with the declared policy of "accelerat[ing] the sound development
of the national economy in consonance with the principles and objectives of economic nationalism,"  thereby
121

effecting the (1935) Constitution’s nationalization objectives.

It was through the Investments Incentive Act that a definition of a "Philippine national" was established.  This
122

definition has been practically reiterated in Presidential Decree No. 1789, the Omnibus Investments Code of
1981;  Executive Order No. 226, the Omnibus Investments Code of 1987;  and the present Foreign Investments
123 124

Act.125

This court’s 2009 decision in Unchuan v. Lozada  referred to Section 3 (a) of the Foreign Investments Act defining
126

"Philippine national". In so doing, this court may be characterized to have applied the Control Test:

In this case, we find nothing to show that the sale between the sisters Lozada and their nephew Antonio violated the
public policy prohibiting aliens from owning lands in the Philippines. Even as Dr. Lozada advanced the money for
the payment of Antonio’s share, at no point were the lots registered in Dr. Lozada’s name. Nor was it contemplated
that the lots be under his control for they are actually to be included as capital of Damasa Corporation. According to
their agreement, Antonio and Dr. Lozada are to hold 60% and 40% of the shares in said corporation, respectively.
Under Republic Act No. 7042, particularly Section 3, a corporation organized under the laws of the Philippines of
which at least 60% of the capital stock outstanding and entitled to vote is owned and held by citizens of the
Philippines, is considered a Philippine National. As such, the corporation may acquire disposable lands in the
Philippines. Neither did petitioner present proof to belie Antonio’s capacity to pay for the lots subjects of this
case.  (Emphasis supplied)
127

This court’s 2011 decision in Gamboa v. Teves  also pertained to the reckoning of foreign equity ownership in a
128

nationalized economic activity (i.e., public utilities). However, it centered on the definition of the term "capital" which
129

was deemed as referring "only to shares of stock entitled to vote in the election of directors." 130

This court’s 2012 resolution ruling on the motion for reconsideration in Gamboa  referred to the SEC En Banc’s
131

March 25, 2010 decision in Redmont Consolidated Mines Corp. v. McArthur Mining Corp. (subject of G.R. No.
205513), which applied the Grandfather Rule:

This SEC en banc ruling conforms to our 28 June 2011 Decision that the 60-40 ownership requirement in favor of
Filipino citizens in the Constitution to engage in certain economic activities applies not only to voting control of the
corporation, but also to the beneficial ownership of the corporation. 132

However, a reading of the original 2011 decision will reveal that the matter of beneficial ownership was considered
after quoting the implementing rules and regulations of the Foreign Investments Act. The third paragraph of Rule I,
Section 1 (b) of these rules states that "[f]ull beneficial ownership of the stocks, coupled with appropriate voting
rights is essential." It is this same provision of the implementing rules which, in the first paragraph, declares that "the
Control Test shall be applied x x x."

In any case, the 2012 resolution’s reference to the SEC En Banc’s March 25, 2010 decision in Redmont can hardly
be considered as authoritative. It is, at most, obiter dictum. In the first place, Redmont was evidently not the subject
of Gamboa. It is the subject of G.R. No. 205513, which was consolidated, then de-consolidated, with the present
petition. Likewise, the crux of Gamboa was the consideration of the kind/s of shares to which the term "capital"
referred, not the applicability of the Control Test and/or the Grandfather Rule. Moreover, the 2012 resolution
acknowledges that:

[T]he opinions of the SEC en banc, as well as of the DOJ, interpreting the law are neither conclusive nor controlling
and thus, do not bind the Court. It is hornbook doctrine that any interpretation of the law that administrative or quasi-
judicial agencies make is only preliminary, never conclusive on the Court. The power to make a final interpretation of
the law, in this case the term "capital" in Section 11, Article XII of the 1987 Constitution, lies with this Court, not with
any other government entity. 133

The Grandfather Rule is not

enshrined in the Constitution

In ruling that the Grandfather Rule must apply, the ponencia relies on the deliberations of the 1986 Constitutional
Commission. The ponencia states that these discussions "shed light on how a citizenship of a corporation will be
determined." 134

258
The ponencia cites an exchange between Commissioners Bernardo F. Villegas and Jose N. Nolledo: 135

MR. NOLLEDO: In Sections 3, 9 and 15, the Committee stated local or Filipino equity and foreign equity; namely,
60-40 in Section 3, 60-40 in Section 9, and 2/3-1/3 in Section 15.

MR. VILLEGAS: That is right.

MR. NOLLEDO: In teaching law, we are always faced with this question: "Where do we base the equity
requirement, is it on the authorized capital stock, on the subscribed capital stock, or on the paid-up capital stock of a
corporation"? Will the Committee please enlighten me on this?

MR. VILLEGAS: We have just had a long discussion with the members of the team from the UP Law Center who
provided us a draft. The phrase that is contained here which we adopted from the UP draft is "60 percent of voting
stock."

MR. NOLLEDO: That must be based on the subscribed capital stock, because unless declared delinquent, unpaid
capital stock shall be entitled to vote.

MR. VILLEGAS: That is right.

MR. NOLLEDO: Thank you.

With respect to an investment by one corporation in another corporation, say, a corporation with 60-40 percent
equity invests in another corporation which is permitted by the Corporation Code, does the Committee adopt the
Grandfather Rule?

MR. VILLEGAS: Yes, that is the understanding of the Committee.

MR. NOLLEDO: Therefore, we need additional Filipino capital?

MR. VILLEGAS: Yes.  (Emphasis supplied)

136

This court has long settled the interpretative value of the deliberations of the Constitutional Commission. In Civil
Liberties Union v. Executive Secretary,  this court noted:
137

A foolproof yardstick in constitutional construction is the intention underlying the provision under consideration.
Thus, it has been held that the Court in construing a Constitution should bear in mind the object sought to be
accomplished by its adoption, and the evils, if any, sought to be prevented or remedied. A doubtful provision will be
examined in the light of the history of the times, and the condition and circumstances under which the Constitution
was framed. The object is to ascertain the reason which induced the framers of the Constitution to enact the
particular provision and the purpose sought to be accomplished thereby, in order to construe the whole as to make
the words consonant to that reason and calculated to effect that purpose. 138

However, in the same case, this court also said: 139

While it is permissible in this jurisdiction to consult the debates and proceedings of the constitutional convention in
order to arrive at the reason and purpose of the resulting Constitution, resort thereto may be had only when other
guides fail as said proceedings are powerless to vary the terms of the Constitution when the meaning is clear.
Debates in the constitutional convention "are of value as showing the views of the individual members, and as
indicating the reasons for their votes, but they give us no light as to the views of the large majority who did not talk,
much less of the mass of our fellow citizens whose votes at the polls gave that instrument the force of fundamental
law. We think it safer to construe the constitution from what appears upon its face." The proper interpretation
therefore depends more on how it was understood by the people adopting it than in the framers’s understanding
thereof.  (Emphasis supplied)
140

As has been stated:

The meaning of constitutional provisions should be determined from a contemporary reading of the text in relation to
the other provisions of the entire document. We must assume that the authors intended the words to be read by
generations who will have to live with the consequences of the provisions. The authors were not only the members
of the Constitutional Commission but all those who participated in its ratification. Definitely, the ideas and opinions
exchanged by a few of its commissioners should not be presumed to be the opinions of all of them. The result of the
deliberations of the Commission resulted in a specific text, and it is that specific text—and only that text—which we
must read and construe.

259
The preamble establishes that the "sovereign Filipino people" continue to "ordain and promulgate" the Constitution.
The principle that "sovereignty resides in the people and all government authority emanates from them" is not
hollow. Sovereign authority cannot be undermined by the ideas of a few Constitutional Commissioners participating
in a forum in 1986 as against the realities that our people have to face in the present.

There is another, more fundamental, reason why reliance on the discussion of the Constitutional Commissioners
should not be accepted as basis for determining the spirit behind constitutional provisions. The Constitutional
Commissioners were not infallible. Their statements of fact or status or their inferences from such beliefs may be
wrong. x x x. 141

It is true that the records of the Constitutional Commission indicate an affirmative reference to the Grandfather Rule.
However, the quoted exchange fails to indicate a consensus or the general sentiment of the forty- nine (49)
members  of the Constitutional Commission. What it indicates is, at most, an understanding between
142

Commissioners Nolledo and Villegas, albeit with the latter claiming that the same understanding is shared by the
Constitutional Commission’s Committee on National Economy and Patrimony. (Though even then, it is not
established if this understanding is shared by the committee members unanimously, or by a majority of them, or is
advanced by its leadership under the assumption that it may speak for the Committee.)

The 1987 Constitution is silent on the precise means through which foreign equity in a corporation shall be
determined for the purpose of complying with nationalization requirements in each industry. If at all, it militates
against the supposed preference for the Grandfather Rule that, its mention in the Constitutional Commission’s
deliberations notwithstanding, the 1987 Constitution was, ultimately, inarticulate on adopting a specific test or
means.

The 1987 Constitution is categorical in its omission. Its meaning is clear. That is to say, by its silence, it chose to not
manifest a preference. Had there been any such preference, the Constitution could very well have said it.

In 1986, when the Constitution was being drafted, the Grandfather Rule and the Control Test were not novel
concepts. Both tests have been articulated since as far back as 1967. The Foreign Investments Act, while adopted
in 1991, has "predecessor statute[s]"  dating to before 1986. As earlier mentioned, these predecessors also define
143

the term "Philippine national" and in substantially the same manner that Section 3 (a) of the Foreign Investments Act
does.  It is the same definition: This is the same basis for applying the Control Test.
144

It is elementary that the Constitution is not primarily a lawyer’s document.  As the convoluted history of the Control
145

Test and Grandfather Rule shows, even those learned in the law have been in conflict, if not in outright confusion,
as to their application. It is not proper to insist upon the Grandfather Rule as enshrined in the Constitution – and as
manifesting the sovereign people’s will – when the Constitution makes absolutely no mention of it.

In the final analysis, the records of the Constitutional Commission do not bind this court. As Charles P. Curtis, Jr.
said on the role of history in constitutional exegesis:
146

The intention of the framers of the Constitution, even assuming we could discover what it was, when it is not
adequately expressed in the Constitution, that is to say, what they meant when they did not say it, surely that has no
binding force upon us. If we look behind or beyond what they set down in the document, prying into what else they
wrote and what they said, anything we may find is only advisory. They may sit in at our councils. There is no reason
why we should eavesdrop on theirs.  (Emphasis provided)
147

The Control Test is

established by congressional
dictum

The Foreign Investments Act addresses the gap. As this court has acknowledged, "[t]he FIA is the basic law
governing foreign investments in the Philippines, irrespective of the nature of business and area of investment." 148

The Foreign Investments Act applies to nationalized economic activities under the Constitution. Section 8 of the
Foreign Investments Act  provides that there shall be two (2) component lists, A and B, with List A pertaining to "the
149

areas of activities reserved to Philippine nationals by mandate of the Constitution and specific laws."

To reiterate, Section 3 (a) of the Foreign Investments Act defines a "Philippine national" as including "a corporation
organized under the laws of the Philippines of which at least sixty per cent (60%) of the capital stock outstanding
and entitled to vote is owned and held by citizens of the Philippines." This is a definition that is consistent with the
first part of paragraph 7 of the 1967 SEC Rules, which, as proffered by DOJ Opinion No. 20, series of 2005,
articulates the Control Test: "[s]hares belonging to corporations or partnerships at least 60 per cent of the capital of
which is owned by Filipino citizens shall be considered as of Philippine nationality."

260
Moreover, the Foreign Investments Act admits of situations where a corporation invests in another corporation by
owning shares of the latter. Thus, the proviso in Section 3 (a) of the Foreign Investments Act reads:

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

Supplementing this is the last sentence of the first paragraph of Rule I, Section 1 (b) of the implementing rules and
regulations of the Foreign Investments Act: "The Control Test shall be applied for this purpose."

As such, by congressional dictum, which is properly interpreted by administrative rule making, the Control Test must
govern in reckoning foreign equity ownership in corporations engaged in nationalized economic activities. It is
through the Control Test that these corporations’ minimum qualification to engage in nationalized economic
activities adjudged.

DOJ Opinion No. 20, series of

2005, provides a qualifier, not
a mere example

The ponencia states that "this case calls for the application of the grandfather rule since, x x x, doubt prevails and
persists in the corporate ownership of herein petitioners."  This position is borne by the ponencia’s consideration of
150

DOJ Opinion No. 20, series of 2005, which states:

[T]he Grandfather Rule or the second part of the SEC Rule applies only when the 60-40 Filipino-foreign equity
ownership is in doubt (i.e., in cases where the joint venture corporation with Filipino and foreign stockholders with
less than 60% Filipino stockholdings [or 59%] invests in another joint venture corporation which is either 60-40%
Filipino-alien or 59% less Filipino. Stated differently, where the 60-40 Filipino-foreign equity ownership is not in
doubt, the Grandfather Rule will not apply.  (Emphasis supplied)
151

As is clear from the quoted portion of DOJ Opinion No. 20, series of 2005, the phrase "in doubt" is followed by a
qualifying clause: "i.e., in cases where the joint venture corporation with Filipino and foreign stockholders with less
than 60% Filipino stockholdings [or 59%] invests in another joint venture corporation which is either 60-40% Filipino-
alien or 59% less Filipino."

The ponencia states that this clause "only made an example of an instance where ‘doubt’ as to the ownership of a
corporation exists"  and is, thus, not controlling.
152

This construction is erroneous. The abbreviation "i.e." is an acronym for the Latin "id est", which translates to "that
is".  It is used not to cite an example but "to add explanatory information or to state something in different
153

words."  Whatever follows "i.e." is a paraphrasing or an alternative way of stating the word/s that preceded it. The
154

words succeeding "i.e.", therefore, refer to the very conception of the words preceding "i.e.".

Had DOJ Opinion No. 20, series of 2005, intended to cite an example or to make an illustration, it should have
instead used "e.g." This stands for the Latin "exempli gratia", which translates to "for example." 155

Thus, all that DOJ Opinion No. 20, series of 2005, meant was that "doubt" as to Filipino-foreign equity ownership
exists when Filipino stockholdings is less than sixty percent (60%). Indeed, there is no doubt where Filipino
stockholdings amount to at least sixty percent (60%).

Pursuant to Section 3 (a) of the Foreign Investments Act, a corporation is then already deemed to be of Philippine
nationality.

The Control Test serves the

rationale for nationalizing the
exploration, development,
and utilization of natural
resources

The application of the Control Test is by no means antithetical to the avowed policy of a "national economy
effectively controlled by Filipinos."  The Control Test promotes this policy.
156

It is a matter of transitivity  that if Filipino stockholders control a corporation which, in turn, controls another
157

corporation, then the Filipino stockholders control the latter corporation, albeit indirectly or through the former
corporation.

261
An illustration is apt.

Suppose that a corporation, "C", is engaged in a nationalized activity requiring that 60% of its capital be owned by
Filipinos and that this 60% is owned by another corporation, "B", while the remaining 40% is owned by stockholders,
collectively referred to as "Y". Y is composed entirely of foreign nationals. As for B, 60% of its capital is owned by
stockholders collectively referred to as "A", while the remaining 40% is owned by stockholders collectively referred
to as "X". The collective A, is composed entirely of Philippine nationals, while the collective X is composed entirely
of foreign nationals. (N.b., in this illustration, capital is understood to mean "shares of stock entitled to vote in the
election of directors," per the definition in Gamboa ). Thus:
158

By owning 60% of B’s capital, A controls B. Likewise, by owning 60% of C’s capital, B controls C. From this, it
follows, as a matter of transitivity, that A controls C; albeit indirectly, that is, through B.

This "control" holds true regardless of the aggregate foreign capital in B and C. As explained in Gamboa, control by
stockholders is a matter resting on the ability to vote in the election of directors:

Indisputably, one of the rights of a stockholder is the right to participate in the control or management of the
corporation. This is exercised through his vote in the election of directors because it is the board of directors that
controls or manages the corporation. 159

B will not be outvoted by Y in matters relating to C, while A will not be outvoted by X in matters relating to B. Since
all actions taken by B must necessarily be in conformity with the will of A, anything that B does in relation to C is, in
effect, in conformity with the will of A. No amount of aggregating the foreign capital in B and C will enable X to
outvote A, nor Y to outvote B.

In effect, A controls C, through B. Stated otherwise, the collective Filipinos in A, effectively control C, through their
control of B.

To reiterate, "[t]he purpose of the sixty per centum requirement is x x x to ensure that corporations x x x allowed to x
x x exploit natural resources shall be controlled by Filipinos."  The decisive consideration is therefore control rather
160

than plain ownership of capital.

The Grandfather Rule does

not guarantee control and can
undermine the rationale for
nationalization

As against each other, it is the Control Test, rather than the Grandfather Rule, which better serves to ensure that
Philippine nationals control a corporation.

As is illustrated by the SEC’s September 21, 1990 opinion addressed to Carag, Caballes, Jamora, Rodriguez and
Somera Law Offices, the application of the Grandfather Rule does not guarantee control by Filipino stockholders. In
certain instances, the application of the Grandfather Rule actually undermines the rationale (i.e., control) for the
nationalization of certain economic activities.

The SEC’s September 21, 1990 opinion related to the nationality of a proposed corporation. Another corporation,
Indo Phil Textile Mills, Inc. (Indo Phil), intended to subscribe to 70% of the proposed corporation’s capital stock upon
incorporation. The remainder (i.e., 30%) of the proposed corporation’s capital stock would have been subscribed to
by Filipinos. For its part, Indo Phil was owned by foreign stockholders to the extent of 56%. Thus, it was only 44%
Filipino-owned.

Applying the Grandfather Rule, the aggregate Filipino stockholdings in the proposed corporation was computed to
amount to 60.8%. As such, the proposed corporation was deemed to be of Filipino nationality.

A consideration of the same case, with emphasis on the matter of "control" (and therefore in a manner more in
keeping with the rationale for nationalization), should yield a different conclusion.

Considering that there is no indication in the SEC opinion that any of the shares in Indo Phil do not have voting
rights, it must be assumed that all such shares have voting rights. As the foreign stockholdings in Indo Phil amount
to 56%, control of Indo Phil is held by foreign nationals; that is, this 56% can outvote the 44% stockholding of Indo
Phil’s Filipino stockholders. Since control of the proposed corporation will rest on Indo Phil (which is to hold 70% of
its capital), this control would ultimately rest on those who control Indo Phil; that is, its 56% foreign stockholding.

262
Had the Control Test been applied, Indo Phil would have, at the onset, been deemed to have failed to satisfy the
requisite Filipino equity ownership, and its 70% stockholding in the proposed corporation would have been deemed
not held by Philippine nationals. The Control Test would thus have averted an aberrant result where a corporation
ultimately controlled by foreign nationals was deemed to have satisfied the requisite Filipino equity ownership.

The Control Test satisfies the

beneficial ownership
requirement

Apart from control (through voting rights), also significant is "beneficial ownership". In the 2011 decision in
Gamboa,  this court stated:
161

Mere legal title is insufficient to meet the 60 percent Filipino-owned "capital" required in the Constitution. Full
beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights, is
required. The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of
Filipino nationals in accordance with the constitutional mandate. Otherwise, the corporation is "considered as non-
Philippine national[s]."
162

The concept of "beneficial ownership" is not novel. The implementing rules and regulations (amended 2004) of
Republic Act No. 8799, the Securities Regulation Code (SRC), defines "beneficial owner or beneficial ownership" as
follows:

SRC Rule 3 – Definition of Terms Used in the Rules and Regulations

1. As used in the rules and regulations adopted by the Commission under the Code, unless the context otherwise
requires:

A. Beneficial owner or beneficial ownership means any person who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes
the power to vote, or to direct the voting of such security; and/or investment returns or power, which includes
the power to dispose of, or to direct the disposition of such security; provided, however, that a person shall
be deemed to have an indirect beneficial ownership interest in any security which is:

i. held by members of his immediate family sharing the same household;

ii. held by a partnership in which he is a general partner;

iii. held by a corporation of which he is a controlling shareholder; or

iv. subject to any contract, arrangement or understanding which gives him voting power or
investment power with respect to such securities; provided however, that the following persons or
institutions shall not be deemed to be beneficial owners of securities held by them for the benefit of
third parties or in customer or fiduciary accounts in the ordinary course of business, so long as such
shares were acquired by such persons or institutions without the purpose or effect of changing or
influencing control of the issuer:

a. a broker dealer;

b. an investment house registered under the Investment Houses Law;

c. a bank authorized to operate as such by the Bangko Sentral ng Pilipinas;

d. an insurance company subject to the supervision of the Office of the Insurance

Commission;

e. an investment company registered under the Investment Company Act;

f. a pension plan subject to regulation and supervision by the Bureau of Internal Revenue
and/or the Office of the Insurance Commission or relevant authority; and

g. a group in which all of the members are persons specified above.

All securities of the same class beneficially owned by a person, regardless of the form such beneficial ownership
takes, shall be aggregated in calculating the number of shares beneficially owned by such person.

263
A person shall be deemed to be the beneficial owner of a security if that person has the right to acquire beneficial
ownership, within thirty (30) days, including, but not limited to, any right to acquire, through the exercise of any
option, warrant or right; through the conversion of any security; pursuant to the power to revoke a trust, discretionary
account or similar arrangement; or pursuant to automatic termination of a trust, discretionary account or similar
arrangement. (Emphasis supplied)

Thus, there are two (2) ways through which one may be a beneficial owner of securities, such as shares of stock:
first, by having or sharing voting power; and second, by having or sharing investment returns or power. By the
implementing rules’ use of "and/or", either of the two suffices. They are alternative means which may or may not
concur.

Voting power, as discussed previously, ultimately rests on the controlling stockholders of the controlling investor
corporation. To go back to the previous illustration, voting power ultimately rests on A, it having the voting power in
B which, in turn, has the voting power in C.

As to investment returns or power, it is ultimately A which enjoys investment power. It controls B’s investment
decisions – including the disposition of securities held by B – and (again, through B) controls C’s investment
decisions.

Similarly, it is ultimately A which benefits from investment returns generated through C. Any income generated by C
redounds to B’s benefit, that is, through income obtained from C, B gains funds or assets which it can use either to
finance itself in respect of capital and/or operations. This is a direct benefit to B, itself a Philippine national. This is
also an indirect benefit to A, a collectivity of Philippine nationals, as then, its business – B – not only becomes more
viable as a going concern but also becomes equipped to funnel income to A.

Moreover, beneficial ownership need not be direct. A controlling shareholder is deemed the indirect beneficial owner
of securities (e.g., shares) held by a corporation of which he or she is a controlling shareholder. Thus, in the
previous illustration, A, the controlling shareholder of B, is the indirect beneficial owner of the shares in C to the
extent that they are held by

B.

Practical difficulties with the

Grandfather Rule

Per SEC-OGC Opinion No. 10-31, the Grandfather Rule calls for the aggregation of stockholdings on the basis of
the individual stockholders (i.e., natural persons) of every investor corporation. This construction presents practical
problems which, in many circumstances, render the reckoning of foreign equity a futile exercise.

It is a given that a corporation may hold shares in another corporation. Having to reckon equity to that point when
natural persons hold rights to stocks makes it conceivable that stockholdings will have to be traced ad infinitum. The
Grandfather Rule, as conceived in SEC-OGC Opinion No. 10-31, will never be satisfied for as long as there is a
corporation holding the shares of another corporation.

This proposition is rendered even more difficult (and absurd) by how certain corporations are listed and traded in
stock exchanges. In these cases, the ownership of stocks and the fractional composition of a corporation can
change on a daily basis.

Even Palting, which SEC-OGC Opinion No. 10-31 relied upon to justify resort to the Grandfather Rule,
acknowledged these impracticalities and absurdities:

[T]o what extent must the word "indirectly" be carried? Must we trace the ownership or control of these various
corporations ad infinitum for the purpose of determining whether the American ownership-control-requirement is
satisfied? Add to this the admitted fact that the shares of stock of the PANTEPEC and PANCOASTAL which are
allegedly owned or controlled directly by citizens of the United States, are traded in the stock exchange in New York,
and you have a situation where it becomes a practical impossibility to determine at any given time, the citizenship of
the controlling stock required by the law. 163

The Control Test is sustained

by the Mining Act

The Foreign Investments Act’s reckoning of a Philippine national on the basis of control and the requisite application
of the Control Test are reinforced by the Mining Act.

264
Section 3 (aq) of the Mining Act deems as a qualified person (for purposes of a mineral agreement) a "corporation, x
x x at least sixty per centum (60%) of the capital of which is owned by citizens of the Philippines." Insofar as the
controlling equity requirement is concerned, this is practically a restatement of Section 3 (a) of the Foreign
Investments Act. 164

Moreover, Section 3 (t), by defining a "foreign-owned corporation" as a "corporation, x x x in which less than fifty per
centum (50%) of the capital is owned by Filipino citizens" is merely stating Section 3 (aq)’s inverse. Section 3 (t)
remains consistent with the Control Test, for after all, a corporation in which less than half of the capital is owned by
Filipino could not possibly be controlled by Filipinos.

Sixty percent Filipino equity

ownership is indispensable to
be deemed a Philippine
national

But what of corporations in which Filipino equity is greater than 50% but less than 60%?

The Foreign Investments Act is clear. The threshold to qualify as a Philippine national, whether as a stand-alone
corporation or one involving investments from or by other corporation/s, is 60% Filipino equity ownership. Failing
this, a corporation must be deemed to be of foreign nationality.

The necessary implication of Section 3 (a) of the FIA is that anything that fails to breach this 60% threshold is not a
Philippine national. There is no "doubt", as DOJ Opinion No. 20, series of 2005, posits. Any declaration, in the
Mining Act or elsewhere, that a corporation in which Filipino equity ownership is less than 50% is deemed foreign-
owned is merely to articulate – so as to eliminate uncertainty – the natural consequence of Filipinos’ minority
shareholding in a corporation. Ultimately, the positive determination of what makes a Philippine national, per Section
3 (a) of the Foreign Investments Act, is that which controls.

The Grandfather Rule may

be applied as a supplement to
the Control Test

This standard under the Foreign Investments Act is the Control Test. Its application can be nuanced if there is a
clear showing that the context of a case requires it. The Foreign Investments Act’s standard should be applied with
the end of achieving the rationale for nationalization. Thus, sixty percent equity ownership is but a minimum.

This court’s conception of what constitutes control – as articulated in Gamboa – must be deemed integrated into the
Foreign Investment Act’s standard. Bare ownership of 60% of a corporation’s shares would not suffice. What is
necessary is such ownership as will ensure control of a corporation.

In Gamboa, "[f]ull beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the
voting rights, is required."  With this in mind, the Grandfather Rule may be used as a supplement to the Control
165

Test, that is, as a further check to ensure that control and beneficial ownership of a corporation is in fact lodged in
Filipinos.

For instance, Department of Justice Opinion No. 165, series of 1984, identified the following "significant indicators"
or badges of "dummy status":

1. That the foreign investor provides practically all the funds for the joint investment undertaken by Filipino
businessmen and their foreign partner.

2. That the foreign investors undertake to provide practically all the technological support for the joint
venture.

3. That the foreign investors, while being minority stockholders, manage the company and prepare all
economic viability studies.166

In instances where methods are employed to disable Filipinos from exercising control and reaping the economic
benefits of an enterprise, the ostensible control vested by ownership of 60% of a corporation’s capital may be
pierced. Then, the Grandfather Rule allows for a further, more exacting examination of who actually controls and
benefits from holding such capital.

Narra, Tesoro, and McArthur

ostensibly satisfy the
minimum requirement of
60% Filipino equity holding

265
Turning now to Narra, Tesoro, and McArthur, a determination of their qualification to enter into MPSAs requires an
examination of the structures of their respective stockholdings and controlling interests. This examination must
remain consistent with the previously discussed requirements of effective control and beneficial ownership.

Consistent with Gamboa,  this examination of equity structures must likewise focus on "capital" understood as
167

"shares of stock entitled to vote in the election of directors." 168

Proceeding from the findings of the Court of Appeals in its October 1, 2010 decision in CA-G.R. SP No. 109703,  it 169

appears that at least 60% of equities in Narra, Tesoro, and McArthur is owned by Philippine nationals. Per this initial
analysis, Narra, Tesoro, and McArthur ostensibly satisfy the requirements of the Control Test in order that they may
be deemed Filipino corporations.

Attention must be drawn to how these findings fail to indicate which (fractional) portion of these equities consist of
"shares of stock entitled to vote in the election of directors" or, if there is even any such portion of shares which are
not entitled to vote. These findings fail to indicate any distinction between common shares and preferred shares (not
entitled to vote). Absent a basis for reckoning non-voting shares, there is, thus, no basis for diminishing the 60%
Filipino equity holding in Narra, Tesoro, and McArthur and undermining their having ostensibly satisfied the
requirements of the Control Test in order to be deemed Filipino corporations qualified to enter into MPSAs

1. Narra Nickel Mining and Development Corporation

Petitioner Narra Nickel Mining and Development Corporation has P 10 Million in capital stock, divided into 10,000
shares at P 1,000.00 per share, subscribed to as follows: 170

Name Nationality Number of Amount Amount Paid

Shares Subscribed

Patricia Louise Mining and Filipino 5,997 P 5,997,000.00 P

Development Corp. 1,667,000.00

MBMI Resources, Inc. Canadian 3,996 P 3,996,000.00 P

1,116,000.00

Higinio C. Mendoza, Filipino 1 P 1,000.00 P 1,000.00

Jr.
Henry E. Fernandez Filipino 1 P 1,000.00 P 1,000.00

Ma. Elena A. Bocalan Filipino 1 P 1,000.00 P 1,000.00

Michael T. Mason American 1 P 1,000.00 P 1,000.00

Robert L. McCurdy Canadian 1 P 1,000.00 P 1,000.00

Manuel A. Agcaoili Filipino 1 P 1,000.00 P 1,000.00

Bayani H. Agabin Filipino 1 P 1,000.00 P 1,000.00

  Total 10,000 P 10,000,000.00 P

2,800,000.00

Patricia Louise Mining and Development Corporation (PLMDC) also has P 10 Million in capital stock, divided into
10,000 shares at P 1,000.00 per share, subscribed to as follows: 171

Name Nationality Number of Amount Amount Paid

Shares Subscribed

>Palawan Alpha South Filipino 6,596 P 6,596,000.00 P0

266
 Resource Development
Corp.

MBMI Resources, Inc. Canadian 3,396 P 3,396,000.00 P

2,796,000.00

Higinio C. Mendoza, Filipino 1 P 1,000.00 P 1,000.00

Jr.
Fernando B. Esguerra Filipino 1 P 1,000.00 P 1,000.00

Henry E. Fernandez Filipino 1 P 1,000.00 P 1,000.00

Lauro L. Salazar Filipino 1 P 1,000.00 P 1,000.00

Michael T. Mason American 1 P 1,000.00 P 1,000.00

Kenneth Cawkel Canadian 1 P 1,000.00 P 1,000.00

Manuel A. Agcaoili Filipino 1 P 1,000.00 P 1,000.00

Bayani H. Agabin Filipino 1 P 1,000.00 P 1,000.00

  Total 10,000 P 10,000,000.00 P

2,804,000.00

Palawan Alpha South Resource and Development Corporation, a Filipino corporation, along with Higinio C.
Mendoza, Jr., Fernando B. Esguerra, Henry E. Fernandez, Lauro L. Salazar, Manuel A. Agcaoili, and Bayani H.
Agabin, who are all Filipinos, collectively own 6,002 shares in or 60.02% of the capital stock of PLMDC. PLMDC is
thus ostensibly a Filipino corporation (i.e., it is controlled by Philippine nationals who own more than 60% of its
capital as required by Section 3 (a) of the Foreign Investments Act).

PLMDC, along with Higinio C. Mendoza, Jr., Henry E. Fernandez, Ma. Elena A. Bocalan, Manuel A. Agcaoili and
Bayani H. Agabin, who are all Filipinos, collectively own 6,002 shares in or 60.02% of the capital stock of Narra. As
Narra has satisfied the minimum Filipino equity ownership (i.e., 60%) required by Section 3 (a) of the Foreign
Investments Act, it is ostensibly a Filipino corporation. Moreover, as it has satisfied the minimum Filipino equity
ownership (i.e., 60%) required by Section 3 (aq) of the Mining Act to be deemed a qualified person for purposes of
mineral agreements, Narra is ostensibly qualified to enter into an MPSA.

2. Tesoro Mining and Development, Inc.

Petitioner Tesoro Mining and Development, Inc. has P 10 Million in capital stock, divided into 10,000 shares at P
1,000.00 per share, subscribed to as follows: 172

Name Nationality Number of Shares Amount Subscribed Amount Paid

Sara Marie Mining, Inc. Filipino 5,997 P 5,997,000.00 P 825,000.00

MBMI Resources, Inc. Canadian 3,998 P 3,998,000.00 P 1,878,174.60

Lauro L. Salazar Filipino 1 P 1,000.00 P 1,000.00

Fernando B. Esguerra Filipino 1 P 1,000.00 P 1,000.00

Manuel A. Agcaoili Filipino 1 P 1,000.00 P 1,000.00

Michael T. Mason American 1 P 1,000.00 P 1,000.00

267
 Kenneth Cawkel Canadian 1 P 1,000.00 P 1,000.00

  Total 10,000 P 10,000,000.00 P 2,708,174.60

Sara Marie Mining, Inc. (SMMI) also has P 10 Million in capital stock, divided into 10,000 shares at P 1,000.00 per
share, subscribed to as follows: 173

Name Nationality Number of Amount Amount Paid

Shares Subscribed

Olympic Mines and Filipino 6,663 P 6,663,000.00 P0

Development Corp.

MBMI Resources, Inc. Canadian 3,331 P 3,331,000.00 P

2,794,000.00

Amanti Limson Filipino 1 P 1,000.00 P 1,000.00

Fernando B. Esguerra Filipino 1 P 1,000.00 P 1,000.00

Lauro Salazar Filipino 1 P 1,000.00 P 1,000.00

Emmanuel G. Hernando Filipino 1 P 1,000.00 P 1,000.00

Michael T. Mason American 1 P 1,000.00 P 1,000.00

Kenneth Cawkel Canadian 1 P 1,000.00 P 1,000.00

  Total 10,000 P 10,000,000.00 P

2,809,900.00

Olympic Mines and Development Corporation (OMDC), a Filipino corporation, along with Amanti Limson, Fernando
B. Esguerra, Lauro Salazar, and Emmanuel G. Hernando, who are all Filipinos, collectively own 6,667 shares in or
66.67% of the capital stock of SMMI. SMMI is thus ostensibly a Filipino corporation (i.e., it is controlled by Philippine
nationals who own more than 60% of its capital as required by Section 3 (a) of the Foreign Investments Act).

SMMI, along with Lauro L. Salazar, Fernando B. Esguerra, and Manuel A. Agcaoili, who are all Filipinos, collectively
own 6,000 shares in or 60% of the capital stock of Tesoro. As Tesoro has satisfied the minimum Filipino equity
ownership (i.e., 60%) required by Section 3 (a) of the

Foreign Investments Act, it is ostensibly a Filipino corporation. Moreover, as it has satisfied the minimum Filipino
equity ownership (i.e., 60%) required by Section 3 (aq) of the Mining Act to be deemed a qualified person for
purposes of mineral agreements, Tesoro is ostensibly qualified to enter into an MPSA.

3. McArthur Mining Corporation

Petitioner McArthur Mining Corporation has P 10 Million in capital stock, divided into 10,000 shares at P 1,000.00
per share, subscribed to as follows: 174

Name Nationality Number of Amount Amount Paid

Shares Subscribed

Madridejos Mining Corp. Filipino 5,997 P 5,997,000.00 P 825,000.00

268
 MBMI Resources, Inc. Canadian 3,998 P 3,998,000.00 P 1,878,174.60

Lauro L. Salazar Filipino 1 P 1,000.00 P 1,000.00

Fernando B. Esguerra Filipino 1 P 1,000.00 P 1,000.00

Manuel A. Agcaoili Filipino 1 P 1,000.00 P 1,000.00

Michael T. Mason American 1 P 1,000.00 P 1,000.00

Kenneth Cawkel Canadian 1 P 1,000.00 P 1,000.00

  Total 10,000 P 10,000,000.00 P 2,708,174.60

Madridejos Mining Corporation (Madridejos) also has P 10 Million in capital stock, divided into 10,000 shares at p
1,000.00 per shares, subscribed to as follows: 175

Name Nationality Number of Amount Amount Paid

Shares Subscribed

Olympic Mines and Filipino 6,663 P 6,663,000.00 P0

Development Corp.

MBMI Resources, Inc. Canadian 3,331 P 3,331,000.00 P

2,803,900.00

Amanti Limson Filipino 1 P 1,000.00 P 1,000.00

Fernando B. Esguerra Filipino 1 P 1,000.00 P 1,000.00

Lauro Salazar Filipino 1 P 1,000.00 P 1,000.00

Emmanuel G. Hernando Filipino 1 P 1,000.00 P 1,000.00

Michael T. Mason American 1 P 1,000.00 P 1,000.00

Kenneth Cawkel Canadian 1 P 1,000.00 P 1,000.00

  Total 10,000 P 10,000,000.00 P

2,809,900.00

OMDC, a Filipino corporation, combined with Amanti Limson, Fernando B. Esguerra, Lauro Salazar, and Emmanuel
G. Hernando, who are all Filipino, collectively own 6,667 shares in or 66.67% of the capital stock of Madridejos.
Madridejos is thus ostensibly a Filipino corporation (i.e., it is controlled by Philippine nationals who own more than
60% of its capital as required by Section 3 (a) of the Foreign Investments Act).

Madridejos combined with Lauro L. Salazar, Fernando B. Esguerra, and Manuel A. Agcaoili, who are all Filipinos,
collectively own 6,000 shares in or 60% of the capital stock of McArthur. As McArthur has satisfied the minimum
Filipino equity ownership (i.e., 60%) required by Section 3 (a) of the Foreign Investments Act, it is ostensibly a
Filipino corporation. Moreover, as it has satisfied the minimum Filipino equity ownership (i.e., 60%) required by
Section 3 (aq) of the Mining Act to be deemed a qualified person for purposes of mineral agreements, McArthur is
ostensibly qualified to enter into an MPSA.

269
In its October 1, 2010 decision, the Court of Appeals, Seventh Division, made much of a joint venture entered into
by the Canadian Corporation, MBMI Resources Inc. with OMDC.  This joint venture was denominated "Olympic
176

Properties". Per MBMI’s 2006 Annual report, MBMI was noted to hold "directly and indirectly an initial 60% interest
in [Olympic Properties]."  This joint venture, however, does not factor into the respective stockholders’ genealogies
177

of Tesoro and McArthur. It is an independent venture entered into by OMDC with MBMI. It is OMDC, and not
Olympic Properties, which owns shares in Tesoro and McArthur. It is, therefore, of no consequence that MBMI holds
a 60% interest in Olympic Properties.

Having made these observations, it should not be discounted that a more thorough consideration – as has been
intimated in the earlier disquisition regarding how 60% Filipino equity ownership is but a minimum and how the
Grandfather Rule may be applied to further examine actual Filipino ownership – could yield an entirely different
conclusion. In fact, Redmont has asserted that such a situation avails.

However, the contingencies of this case must restrain the court’s consideration of Redmont’s claims. Redmont
sought relief from a body without jurisdiction – the Panel of Arbitrators – and has engaged in blatant forum
shopping. It has taken liberties with and ran amok of rules that define fair play. It is, therefore, bound by its lapses
and indiscretions and must bear the consequences of its imprudence.

Redmont has been engaged in blatant forum shopping

The concept of and rationale against forum shopping was explained by this court in Top Rate Construction and
General Services, Inc. v. Paxton Development Corporation: 178

Forum shopping is committed by a party who institutes two or more suits in different courts, either simultaneously or
successively, in order to ask the courts to rule on the same or related causes or to grant the same or substantially
the same reliefs, on the supposition that one or the other court would make a favorable disposition or increase a
party's chances of obtaining a favorable decision or action. It is an act of malpractice for it trifles with the courts,
abuses their processes, degrades the administration of justice and adds to the already congested court dockets.
What is critical is the vexation brought upon the courts and the litigants by a party who asks different courts to rule
on the same or related causes and grant the same or substantially the same reliefs and in the process creates the
possibility of conflicting decisions being rendered by the different for a upon the same issues, regardless of whether
the court in which one of the suits was brought has no jurisdiction over the action.  (Emphasis supplied)
179

Equally settled is the test for determining forum shopping.  As this court explained in Yap v. Court of Appeals:
1âwphi1
180

To determine whether a party violated the rule against forum shopping, the most important factor to ask is whether
the elements of litis pendentia are present, or whether a final judgment in one case will amount to res judicata in
another; otherwise stated, the test for determining forum shopping is whether in the two (or more) cases pending,
there is identity of parties, rights or causes of action, and reliefs sought. 181

Litis pendentia "refers to that situation wherein another action is pending between the same parties for the same
cause of action, such that the second action becomes unnecessary and vexatious."  It requires the concurrence of
182

three (3) requisites: (1) the identity of parties, or at least such as representing the same interests in both actions; (2)
the identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (3) the identity of
the two cases such that judgment in one, regardless of which party is successful, would amount to res judicata in
the other.183

In turn, prior judgment or res judicata bars a subsequent case when the following requisites concur: (1) the former
judgment is final; (2) it is rendered by a court having jurisdiction over the subject matter and the parties; (3) it is a
judgment or an order on the merits; (4) there is – between the first and the second actions – identity of parties, of
subject matter, and of causes of action. 184

Redmont has taken at least four (4) distinct routes all seeking substantially the same remedy. Stripped of their
verbosity and legalese, Redmont’s petitions before the DENR Panel of Arbitrators, complaint before the Regional
Trial Court, complaint before the Securities and Exchange Commission, and petition before the Office of the
President all seek to prevent Narra, Tesoro, and McArthur as well as their co-respondents and/or co-defendants
from engaging in mining operations. Moreover, these are all grounded on the same cause (i.e., that they are
disqualified from doing so because they fail to satisfy the requisite Filipino equity ownership) and premised on the
same facts or circumstances.

Redmont has created a situation where multiple tribunals must rule on the extent to which the parties adverse to
Redmont have met the requisite Filipino equity ownership. It is certainly possible that conflicting decisions will be
issued by the various tribunals over which Redmont’s various applications for relief have been lodged. It is, thus,
glaring that the very evil sought to be prevented by the rule against forum shopping is being foisted by Redmont.

The consequences of willful forum shopping are clear. Rule 7, Section 5 of the 1997 Rules of Civil Procedure
provides:
270
Section 5. Certification against forum shopping. — The plaintiff or principal party shall certify under oath in the
complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the
same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or
claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present
status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is
pending, he shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or
initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other
initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided,
upon motion and after hearing. The submission of a false certification or non-compliance with any of the
undertakings therein shall constitute indirect contempt of court, without prejudice to the corresponding administrative
and criminal actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping,
the same shall be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a
cause for administrative sanctions. (n)

It strains credulity to accept that Redmont’s actions have not been willful. By filing petitions with the DENR Panel of
Arbitrators, Redmont started the .entire series of events that have culminated in: first, the present petition; second,
the de-consolidated G.R. No. 205513; and third, at least one (1) more petition filed with this court.186

Following the adverse decision of the Panel of Arbitrators, Narra, Tesoro, and McArthur pursued appeals before the
Mines Adjudication Board.· This is all but a logical consequence of the POA's adverse decision. While the appeal
before the MAB was pending, Redmont filed a complaint with the SEC and then filed a complaint with the Regional
Trial Court to enjoin the MAB from proceeding. Redmont seems to have conveniently forgotten that it was its own
actions that gave rise to the proceedings before the MAB in the first place. Moreover, even as all these were
pending and in various stages of ap.peal and/or review, Redmont still filed a petition before the Office of the
President.

Consistent with Rule 7, Section 5 of the 1997 Rules of Civil Procedure, the actions subject of these consolidated
petitions must be dismissed with prejudice.

It should also not escape this court's attention that the vexatious actions of Redmont would not have been possible
were it not for the permissiveness of Redmont's counsels. To reiterate, willful forum shopping leads not only to an
action's dismissal with prejudice but "shall [also] constitute direct contempt, [and is] a cause for administrative
sanctions."  Redmont's counsels should be reminded that the parameters established by judicial (and even
187

administrative) proceedings, such as the rule against forum shopping, are not to be trifled with.

ACCORDINGLY, I vote to GRANT the petition for review on certiorari subject of G.R. No. 195580. The assailed
decision dated October 1, 2010 and the assailed resolution dated February 15, 2011 of the Court of Appeals,
Seventh Division, in CA-G.R. SP No. 109703, which reversed and set aside the September 10, 2008 and July 1,
2009 orders of the Mines Adjudication Board (MAB) should be SET ASIDE AND DECLARED NULL AND VOID. The
September 10, 2008 order of the Mines Adjudication Board dismissing the petitions filed by Redmont Consolidated
Mines with the DENR Panel of Arbitrators must be REINSTATED.

271
 Republic of the Philippines
SUPREME COURT
Baguio City

EN BANC

G.R. No. 204819               April 8, 2014

JAMES M. IMBONG and LOVELY-ANN C. IMBONG, for themselves and in behalf of their minor children,
LUCIA CARLOS IMBONG and BERNADETTE CARLOS IMBONG and MAGNIFICAT CHILD DEVELOPMENT
CENTER, INC., Petitioners, 
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. FLORENCIO B. ABAD, Secretary, Department of
Budget and Management, HON. ENRIQUE T. ONA, Secretary, Department of Health, HON. ARMIN A.
LUISTRO, Secretary, Department of Education, Culture and Sports and HON. MANUELA. ROXAS II,
Secretary, Department of Interior and Local Government, Respondents.

x---------------------------------x

G.R. No. 204934

ALLIANCE FOR THE FAMILY FOUNDATION PHILIPPINES, INC. [ALFI], represented by its President, Maria
Concepcion S. Noche, Spouses Reynaldo S. Luistro & Rosie B . Luistro, Jose S. Sandejas & Elenita S.A.
Sandejas, Arturo M. Gorrez & Marietta C. Gorrez, Salvador S. Mante, Jr. & Hazeleen L. Mante, Rolando M.
Bautista & Maria Felisa S. Bautista, Desiderio Racho & Traquilina Racho, F emand Antonio A. Tansingco &
Carol Anne C. Tansingco for themselves and on behalf of their minor children, Therese Antonette C.
Tansingco, Lorenzo Jose C. Tansingco, Miguel F emando C. Tangsingco, Carlo Josemaria C. Tansingco &
Juan Paolo C. Tansingco, Spouses Mariano V. Araneta & Eileen Z. Araneta for themselves and on behalf of
their minor children, Ramon Carlos Z. Araneta & Maya Angelica Z. Araneta, Spouses Renato C. Castor &
Mildred C. Castor for themselves and on behalf of their minor children, Renz Jeffrey C. Castor, Joseph
Ramil C. Castor, John Paul C. Castor & Raphael C. Castor, Spouses Alexander R. Racho & Zara Z. Racho for
themselves and on behalf of their minor children Margarita Racho, Mikaela Racho, Martin Racho, Mari
Racho & Manolo Racho, Spouses Alfred R. Racho & Francine V. Racho for themselves and on behalf of
their minor children Michael Racho, Mariana Racho, Rafael Racho, Maxi Racho, Chessie Racho & Laura
Racho, Spouses David R. Racho & Armilyn A. Racho for themselves and on behalf of their minor child
Gabriel Racho, Mindy M. Juatas and on behalf of her minor children Elijah Gerald Juatas and Elian Gabriel
Juatas, Salvacion M. Monteiro, Emily R. Laws, Joseph R . Laws & Katrina R. Laws, Petitioners, 
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. ENRIQUE T. ONA, Secretary, Department of
Health, HON. ARMIN A. LUISTRO, Secretary, Department of Education, Culture and Sports, HON. CORAZON
SOLIMAN, Secretary, Department of Social Welfare and Development, HON. MANUELA. ROXAS II,
Secretary, Department of Interior and Local Government, HON. FLORENCIO B. ABAD, Secretary,
Department of Budget and Management, HON. ARSENIO M. BALISACAN, Socio-Economic Planning
Secretary and NEDA Director-General, THE PHILIPPINE COMMISSION ON WOMEN, represented by its
Chairperson, Remedios lgnacio-Rikken, THE PHILIPPINE HEALTH INSURANCE CORPORATION,
represented by its President Eduardo Banzon, THE LEAGUE OF PROVINCES OF THE PHILIPPINES,
represented by its President Alfonso Umali, THE LEAGUE OF CITIES OF THE PHILIPPINES, represented by
its President Oscar Rodriguez, and THE LEAGUE OF MUNICIPALITIES OF THE PHILIPPINES, represented
by its President Donato Marcos,Respondents.

x---------------------------------x

G.R. No. 204957

TASK FORCE FOR FAMILY AND LIFE VISAYAS, INC. and VALERIANO S. AVILA, Petitioners, 
vs.

272
HON. PAQUITO N. OCHOA, JR., Executive Secretary; HON. FLORENCIO B. ABAD, Secretary, Department of
Budget and Management; HON. ENRIQUE T. ONA, Secretary, Department of Education; and HON.
MANUELA. ROXAS II, Secretary, Department of Interior and Local Government, Respondents.

x---------------------------------x

G.R. No. 204988

SERVE LIFE CAGAYAN DE ORO CITY, INC., represented by Dr. Nestor B. Lumicao, M.D., as President and in
his personal capacity, ROSEVALE FOUNDATION INC., represented by Dr. Rodrigo M. Alenton, M.D., as
member of the school board and in his personal capacity, ROSEMARIE R. ALENTON, IMELDA G. IBARRA,
CPA, LOVENIAP. NACES, Phd., ANTHONY G. NAGAC, EARL ANTHONY C. GAMBE and MARLON I.
YAP,Petitioners, 
vs.
OFFICE OF THE PRESIDENT, SENATE OF THE PHILIPPINES, HOUSE OF REPRESENTATIVES, HON.
PAQUITO N. OCHOA, JR., Executive Secretary, HON. FLORENCIO B. ABAD, Secretary, Department of
Budget and Management; HON. ENRIQUE T. ONA, Secretary, Department of Health; HON. ARMIN A.
LUISTRO, Secretary, Department of Education and HON. MANUELA. ROXAS II, Secretary, Department of
Interior and Local Government, Respondents.

x---------------------------------x

G.R. No. 205003

EXPEDITO A. BUGARIN, JR., Petitioner, 

vs.
OFFICE OF THE PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES, HON. SENATE PRESIDENT, HON.
SPEAKER OF THE HOUSE OF REPRESENTATIVES and HON. SOLICITOR GENERAL, Respondents.

x---------------------------------x

G.R. No. 205043

EDUARDO B. OLAGUER and THE CATHOLIC XYBRSPACE APOSTOLATE OF THE PHILIPPINES, Petitioners, 

vs.
DOH SECRETARY ENRIQUE T. ONA, FDA DIRECTOR SUZETTE H. LAZO, DBM SECRETARY FLORENCIO B.
ABAD, DILG SECRETARY MANUELA. ROXAS II, DECS SECRETARY ARMIN A. LUISTRO, Respondents.

x---------------------------------x

G.R. No. 205138

PHILIPPINE ALLIANCE OF XSEMINARIANS, INC. (PAX), herein represented by its National President, Atty.
Ricardo M . Ribo, and in his own behalf, Atty. Lino E.A. Dumas, Romeo B. Almonte, Osmundo C. Orlanes,
Arsenio Z. Menor, Samuel J. Yap, Jaime F. Mateo, Rolly Siguan, Dante E. Magdangal, Michael Eugenio O.
Plana, Bienvenido C. Miguel, Jr., Landrito M. Diokno and Baldomero Falcone, Petitioners, 
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. FLORENCIO B. ABAD, Secretary, Department of
Budget and Management, HON. ENRIQUE T. ONA, Secretary, Department of Health, HON. ARMIN A.
LUISTRO, Secretary, Department of Education, HON. MANUELA. ROXAS II, Secretary, Department of Interior
and Local Government, HON. CORAZON J. SOLIMAN, Secretary, Department of Social Welfare and
Development, HON. ARSENIO BALISACAN, Director-General, National Economic and Development
Authority, HON. SUZETTE H. LAZO, Director-General, Food and Drugs Administration, THE BOARD OF
DIRECTORS, Philippine Health Insurance Corporation, and THE BOARD OF COMMISSIONERS, Philippine
Commission on Women, Respondents.

x---------------------------------x

G.R. No. 205478

REYNALDO J. ECHAVEZ, M.D., JACQUELINE H. KING, M.D., CYNTHIA T. DOMINGO, M.D., AND JOSEPHINE
MILLADO-LUMITAO, M.D., collectively known as Doctors For Life, and ANTHONY PEREZ, MICHAEL
ANTHONY G. MAPA, CARLOS ANTONIO PALAD, WILFREDO JOSE, CLAIRE NAVARRO, ANNA COSIO, and
GABRIEL DY LIACCO collectively known as Filipinos For Life, Petitioners, 
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary; HON. FLORENCIO B. ABAD, Secretary of the

273
Department of Budget and Management; HON. ENRIQUE T. ONA, Secretary of the Department of Health;
HON. ARMIN A. LUISTRO, Secretary of the Department of Education; and HON. MANUELA. ROXAS II,
Secretary of the Department of Interior and Local Government, Respondents.

x---------------------------------x

G.R. No. 205491

SPOUSES FRANCISCO S. TATAD AND MARIA FENNY C. TATAD & ALA F. PAGUIA, for themselves, their
Posterity, and the rest of Filipino posterity, Petitioners, 
vs.
OFFICE OF THE PRESIDENT of the Republic of the Philippines, Respondent.

x---------------------------------x

G.R. No. 205720

PRO-LIFE PHILIPPINES FOUNDATION, Inc., represented by Loma Melegrito, as Executive Director, and in
her personal capacity, JOSELYN B. BASILIO, ROBERT Z. CORTES, ARIEL A. CRISOSTOMO, JEREMY I.
GATDULA, CRISTINA A. MONTES, RAUL ANTONIO A. NIDOY, WINSTON CONRAD B. PADOJINOG, RUFINO
L. POLICARPIO III, Petitioners, 
vs.
OFFICE OF THE PRESIDENT, SENATE OF THE PHILIPPINES, HOUSE OF REPRESENTATIVES, HON.
PAQUITO N. OCHOA, JR., Executive Secretary, HON. FLORENCIO B. ABAD, Secretary, Department of
Budget and Management, HON. ENRIQUE T. ONA, Secretary, Department of Health, HON. ARMIN A.
LUISTRO, Secretary, Department of Education and HON. MANUEL A. ROXAS II, Secretary, Department of
Interior and Local Government, Respondents.

x---------------------------------x

G.R. No. 206355

MILLENNIUM SAINT FOUNDATION, INC., ATTY. RAMON PEDROSA, ATTY. CITA BORROMEO-GARCIA,
STELLAACEDERA, ATTY. BERTENI CATALUNA CAUSING, Petitioners, 
vs.
OFFICE OF THE PRESIDENT, OFFICE OF THE EXECUTIVE SECRETARY, DEPARTMENT OF HEALTH,
DEPARTMENT OF EDUCATION, Respondents.

x---------------------------------x

G.R. No. 207111

JOHN WALTER B. JUAT, MARY M. IMBONG, ANTHONY VICTORIO B. LUMICAO, JOSEPH MARTIN Q.
VERDEJO, ANTONIA EMMA R. ROXAS and LOTA LAT-GUERRERO, Petitioners, 
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. FLORENCIO ABAD, Secretary, Department of
Budget and Management, HON. ENRIQUE T. ONA, Secretary, Department of Health, HON. ARMIN A.
LUISTRO, Secretary, Department of Education, Culture and Sports and HON. MANUEL A. ROXAS II,
Secretary, Department of Interior and Local Government, Respondents.

x---------------------------------x

G.R. No. 207172

COUPLES FOR CHRIST FOUNDATION, INC., SPOUSES JUAN CARLOS ARTADI SARMIENTO AND
FRANCESCA ISABELLE BESINGA-SARMIENTO, AND SPOUSES LUIS FRANCIS A. RODRIGO, JR. and
DEBORAH MARIE VERONICA N. RODRIGO, Petitioners, 
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. FLORENCIO B. ABAD, Secretary, Department of
Budget and Management, HON. ENRIQUE T. ONA, Secretary, Department of Health, HON. ARMIN A.
LUISTRO, Secretary, Department of Education, Culture and Sports and HON. MANUELA. ROXAS II,
Secretary, Department of Interior and Local Government, Respondents.

x---------------------------------x

G.R. No. 207563

274
ALMARIM CENTI TILLAH and ABDULHUSSEIN M. KASHIM, Petitioners, 
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. ENRIQUE T. ONA, Secretary of the Department
of Health, and HON. ARMIN A. LUISTRO,Secretary of the Department of Budget and
Management,Respondents.

DECISION

MENDOZA, J.:

Freedom of religion was accorded preferred status by the framers of our fundamental law. And this Court has
consistently affirmed this preferred status, well aware that it is "designed to protect the broadest possible liberty of
conscience, to allow each man to believe as his conscience directs, to profess his beliefs , and to live as he believes
he ought to live, consistent with the liberty of others and with the common good." 1

To this day, poverty is still a major stumbling block to the nation's emergence as a developed country, leaving our
people beleaguered in a state of hunger, illiteracy and unemployment. While governmental policies have been
geared towards the revitalization of the economy, the bludgeoning dearth in social services remains to be a problem
that concerns not only the poor, but every member of society. The government continues to tread on a trying path to
the realization of its very purpose, that is, the general welfare of the Filipino people and the development of the
country as a whole. The legislative branch, as the main facet of a representative government, endeavors to enact
laws and policies that aim to remedy looming societal woes, while the executive is closed set to fully implement
these measures and bring concrete and substantial solutions within the reach of Juan dela Cruz. Seemingly distant
is the judicial branch, oftentimes regarded as an inert governmental body that merely casts its watchful eyes on
clashing stakeholders until it is called upon to adjudicate. Passive, yet reflexive when called into action, the Judiciary
then willingly embarks on its solemn duty to interpret legislation vis-a-vis the most vital and enduring principle that
holds Philippine society together - the supremacy of the Philippine Constitution.

Nothing has polarized the nation more in recent years than the issues of population growth control, abortion and
contraception. As in every democratic society, diametrically opposed views on the subjects and their perceived
consequences freely circulate in various media. From television debates  to sticker campaigns,  from rallies by
2 3

socio-political activists to mass gatherings organized by members of the clergy  - the clash between the seemingly
4

antithetical ideologies of the religious conservatives and progressive liberals has caused a deep division in every
level of the society. Despite calls to withhold support thereto, however, Republic Act (R.A.) No. 10354, otherwise
known as the Responsible Parenthood and Reproductive Health Act of 2012 (RH Law), was enacted by Congress
on December 21, 2012.

Shortly after the President placed his imprimatur on the said law, challengers from various sectors of society came
knocking on the doors of the Court, beckoning it to wield the sword that strikes down constitutional disobedience.
Aware of the profound and lasting impact that its decision may produce, the Court now faces the iuris controversy,
as presented in fourteen (14) petitions and two (2) petitions- in-intervention, to wit:

(1) Petition for Certiorari and Prohibition,  filed by spouses Attys. James M. Imbong and Lovely Ann C.
5

Imbong, in their personal capacities as citizens, lawyers and taxpayers and on behalf of their minor children;
and the Magnificat Child Leaming Center, Inc., a domestic, privately-owned educational institution (Jmbong);

(2) Petition for Prohibition,  filed by the Alliance for the Family Foundation Philippines, Inc., through its
6

president, Atty. Maria Concepcion S. Noche  and several others  in their personal capacities as citizens and
7 8

on behalf of the generations unborn (ALFI);

(3) Petition for Certiorari,  filed by the Task Force for Family and Life Visayas, Inc., and Valeriano S. Avila, in
9

their capacities as citizens and taxpayers (Task Force Family);

(4) Petition for Certiorari and Prohibition,  filed by Serve Life Cagayan De Oro City, Inc.,  Rosevale
10 11

Foundation, Inc.,  a domestic, privately-owned educational institution, and several others,  in their capacities
12 13

as citizens (Serve Life);

(5) Petition,  filed by Expedito A. Bugarin, Jr. in his capacity as a citizen (Bugarin);
14

(6) Petition for Certiorari and Prohibition,  filed by Eduardo Olaguer and the Catholic Xybrspace Apostolate
15

of the Philippines,  in their capacities as a citizens and taxpayers (Olaguer);

16

(7) Petition for Certiorari and Prohibition,  filed by the Philippine Alliance of Xseminarians Inc.,  and several
17 18

others  in their capacities as citizens and taxpayers (PAX);

19

275
 (8) Petition,  filed by Reynaldo J. Echavez, M.D. and several others,  in their capacities as citizens and
20 21

taxpayers (Echavez);

(9) Petition for Certiorari and Prohibition,  filed by spouses Francisco and Maria Fenny C. Tatad and Atty.
22

Alan F. Paguia, in their capacities as citizens, taxpayers and on behalf of those yet unborn. Atty. Alan F.
Paguia is also proceeding in his capacity as a member of the Bar (Tatad);

(10) Petition for Certiorari and Prohibition,  filed by Pro-Life Philippines Foundation Inc.  and several
23 24

others,  in their capacities as citizens and taxpayers and on behalf of its associates who are members of the
25

Bar (Pro-Life);

(11) Petition for Prohibition,  filed by Millennium Saint Foundation, Inc.,  Attys. Ramon Pedrosa, Cita
26 27

Borromeo-Garcia, Stella Acedera, and Berteni Catalufia Causing, in their capacities as citizens, taxpayers
and members of the Bar (MSF);

(12) Petition for Certiorari and Prohibition,  filed by John Walter B. Juat and several others,  in their
28 29

capacities as citizens (Juat) ;

(13) Petition for Certiorari and Prohibition,  filed by Couples for Christ Foundation, Inc. and several
30

others, in their capacities as citizens (CFC);

31

(14) Petition for Prohibition  filed by Almarim Centi Tillah and Abdulhussein M. Kashim in their capacities as
32

citizens and taxpayers (Tillah); and

(15) Petition-In-Intervention,  filed by Atty. Samson S. Alcantara in his capacity as a citizen and a taxpayer
33

(Alcantara); and

(16) Petition-In-Intervention,  filed by Buhay Hayaang Yumabong (B UHAY) , an accredited political party.
34

A perusal of the foregoing petitions shows that the petitioners are assailing the constitutionality of RH Law on the
following GROUNDS:

• The RH Law violates the right to life of the unborn. According to the petitioners, notwithstanding its
declared policy against abortion, the implementation of the RH Law would authorize the purchase of
hormonal contraceptives, intra-uterine devices and injectables which are abortives, in violation of Section 12,
Article II of the Constitution which guarantees protection of both the life of the mother and the life of the
unborn from conception. 35

• The RH Law violates the right to health and the right to protection against hazardous products. The
petitioners posit that the RH Law provides universal access to contraceptives which are hazardous to one's
health, as it causes cancer and other health problems. 36

• The RH Law violates the right to religious freedom. The petitioners contend that the RH Law violates the
constitutional guarantee respecting religion as it authorizes the use of public funds for the procurement of
contraceptives. For the petitioners, the use of public funds for purposes that are believed to be contrary to
their beliefs is included in the constitutional mandate ensuring religious freedom. 37

It is also contended that the RH Law threatens conscientious objectors of criminal prosecution, imprisonment and
other forms of punishment, as it compels medical practitioners 1] to refer patients who seek advice on reproductive
health programs to other doctors; and 2] to provide full and correct information on reproductive health programs and
service, although it is against their religious beliefs and convictions. 38

In this connection, Section 5 .23 of the Implementing Rules and Regulations of the RH Law (RH-IRR),  provides that
39

skilled health professionals who are public officers such as, but not limited to, Provincial, City, or Municipal Health
Officers, medical officers, medical specialists, rural health physicians, hospital staff nurses, public health nurses, or
rural health midwives, who are specifically charged with the duty to implement these Rules, cannot be considered as
conscientious objectors. 40

It is also argued that the RH Law providing for the formulation of mandatory sex education in schools should not be
allowed as it is an affront to their religious beliefs. 41

While the petit10ners recognize that the guarantee of religious freedom is not absolute, they argue that the RH Law
fails to satisfy the "clear and present danger test" and the "compelling state interest test" to justify the regulation of
the right to free exercise of religion and the right to free speech. 42

276
 • The RH Law violates the constitutional provision on involuntary servitude. According to the petitioners, the
RH Law subjects medical practitioners to involuntary servitude because, to be accredited under the
PhilHealth program, they are compelled to provide forty-eight (48) hours of pro bona services for indigent
women, under threat of criminal prosecution, imprisonment and other forms of punishment. 43

The petitioners explain that since a majority of patients are covered by PhilHealth, a medical practitioner would
effectively be forced to render reproductive health services since the lack of PhilHealth accreditation would mean
that the majority of the public would no longer be able to avail of the practitioners services. 44

• The RH Law violates the right to equal protection of the law. It is claimed that the RH Law discriminates
against the poor as it makes them the primary target of the government program that promotes
contraceptive use. The petitioners argue that, rather than promoting reproductive health among the poor, the
RH Law seeks to introduce contraceptives that would effectively reduce the number of the poor. 45

• The RH Law is "void-for-vagueness" in violation of the due process clause of the Constitution. In imposing
the penalty of imprisonment and/or fine for "any violation," it is vague because it does not define the type of
conduct to be treated as "violation" of the RH Law. 46

In this connection, it is claimed that "Section 7 of the RH Law violates the right to due process by removing from
them (the people) the right to manage their own affairs and to decide what kind of health facility they shall be and
what kind of services they shall offer."  It ignores the management prerogative inherent in corporations for
47

employers to conduct their affairs in accordance with their own discretion and judgment.

• The RH Law violates the right to free speech. To compel a person to explain a full range of family planning
methods is plainly to curtail his right to expound only his own preferred way of family planning. The
petitioners note that although exemption is granted to institutions owned and operated by religious groups,
they are still forced to refer their patients to another healthcare facility willing to perform the service or
procedure. 48

• The RH Law intrudes into the zone of privacy of one's family protected by the Constitution. It is contended
that the RH Law providing for mandatory reproductive health education intrudes upon their constitutional
right to raise their children in accordance with their beliefs.49

It is claimed that, by giving absolute authority to the person who will undergo reproductive health procedure, the RH
Law forsakes any real dialogue between the spouses and impedes the right of spouses to mutually decide on
matters pertaining to the overall well-being of their family. In the same breath, it is also claimed that the parents of a
child who has suffered a miscarriage are deprived of parental authority to determine whether their child should use
contraceptives. 50

• The RH Law violates the constitutional principle of non-delegation of legislative authority. The petitioners
question the delegation by Congress to the FDA of the power to determine whether a product is non-
abortifacient and to be included in the Emergency Drugs List (EDL). 51

• The RH Law violates the one subject/one bill rule provision under Section 26( 1 ), Article VI of the
Constitution. 52

• The RH Law violates Natural Law. 53

• The RH Law violates the principle of Autonomy of Local Government Units (LGUs) and the Autonomous
Region of Muslim Mindanao {ARMM). It is contended that the RH Law, providing for reproductive health
measures at the local government level and the ARMM, infringes upon the powers devolved to LGUs and
the ARMM under the Local Government Code and R.A . No. 9054. 54

Various parties also sought and were granted leave to file their respective comments-in-intervention in defense of
the constitutionality of the RH Law. Aside from the Office of the Solicitor General (OSG) which commented on the
petitions in behalf of the respondents,  Congressman Edcel C. Lagman,  former officials of the Department of
55 56

Health Dr. Esperanza I. Cabral, Jamie Galvez-Tan, and Dr. Alberto G. Romualdez,  the Filipino Catholic Voices for
57

Reproductive Health (C4RH),  Ana Theresa "Risa" Hontiveros,  and Atty. Joan De Venecia  also filed their
58 59 60

respective Comments-in-Intervention in conjunction with several others. On June 4, 2013, Senator Pia Juliana S.
Cayetano was also granted leave to intervene. 61

The respondents, aside from traversing the substantive arguments of the petitioners, pray for the dismissal of the
petitions for the principal reasons that 1] there is no actual case or controversy and, therefore, the issues are not yet
ripe for judicial determination.; 2] some petitioners lack standing to question the RH Law; and 3] the petitions are
essentially petitions for declaratory relief over which the Court has no original jurisdiction.

277
Meanwhile, on March 15, 2013, the RH-IRR for the enforcement of the assailed legislation took effect.

On March 19, 2013, after considering the issues and arguments raised, the Court issued the Status Quo Ante Order
(SQAO), enjoining the effects and implementation of the assailed legislation for a period of one hundred and twenty
(120) days, or until July 17, 2013.62

On May 30, 2013, the Court held a preliminary conference with the counsels of the parties to determine and/or
identify the pertinent issues raised by the parties and the sequence by which these issues were to be discussed in
the oral arguments. On July 9 and 23, 2013, and on August 6, 13, and 27, 2013, the cases were heard on oral
argument. On July 16, 2013, the SQAO was ordered extended until further orders of the Court. 63

Thereafter, the Court directed the parties to submit their respective memoranda within sixty (60) days and, at the
same time posed several questions for their clarification on some contentions of the parties. 64

The Status Quo Ante

(Population, Contraceptive and Reproductive Health Laws

Prior to the RH Law

Long before the incipience of the RH Law, the country has allowed the sale, dispensation and distribution of
contraceptive drugs and devices. As far back as June 18, 1966, the country enacted R.A. No. 4729 entitled "An Act
to Regu,late the Sale, Dispensation, and/or Distribution of Contraceptive Drugs and Devices." Although
contraceptive drugs and devices were allowed, they could not be sold, dispensed or distributed "unless such sale,
dispensation and distribution is by a duly licensed drug store or pharmaceutical company and with the prescription
of a qualified medical practitioner." 65

In addition, R.A. No. 5921,  approved on June 21, 1969, contained provisions relative to "dispensing of
66

abortifacients or anti-conceptional substances and devices." Under Section 37 thereof, it was provided that "no drug
or chemical product or device capable of provoking abortion or preventing conception as classified by the Food and
Drug Administration shall be delivered or sold to any person without a proper prescription by a duly licensed
physician."

On December 11, 1967, the Philippines, adhering to the UN Declaration on Population, which recognized that the
population problem should be considered as the principal element for long-term economic development, enacted
measures that promoted male vasectomy and tubal ligation to mitigate population growth.  Among these measures
67

included R.A. No. 6365, approved on August 16, 1971, entitled "An Act Establishing a National Policy on Population,
Creating the Commission on Population and for Other Purposes. " The law envisioned that "family planning will be
made part of a broad educational program; safe and effective means will be provided to couples desiring to space or
limit family size; mortality and morbidity rates will be further reduced."

To further strengthen R.A. No. 6365, then President Ferdinand E . Marcos issued Presidential Decree. (P.D.) No.
79,  dated December 8, 1972, which, among others, made "family planning a part of a broad educational program,"
68

provided "family planning services as a part of over-all health care," and made "available all acceptable methods of
contraception, except abortion, to all Filipino citizens desirous of spacing, limiting or preventing pregnancies."

Through the years, however, the use of contraceptives and family planning methods evolved from being a
component of demographic management, to one centered on the promotion of public health, particularly,
reproductive health.  Under that policy, the country gave priority to one's right to freely choose the method of family
69

planning to be adopted, in conformity with its adherence to the commitments made in the International Conference
on Population and Development.  Thus, on August 14, 2009, the country enacted R.A. No. 9710 or "The Magna
70

Carta for Women, " which, among others, mandated the State to provide for comprehensive health services and
programs for women, including family planning and sex education. 71

The RH Law

Despite the foregoing legislative measures, the population of the country kept on galloping at an uncontrollable
pace. From a paltry number of just over 27 million Filipinos in 1960, the population of the country reached over 76
million in the year 2000 and over 92 million in 2010.  The executive and the legislative, thus, felt that the measures
72

were still not adequate. To rein in the problem, the RH Law was enacted to provide Filipinos, especially the poor
and the marginalized, access and information to the full range of modem family planning methods, and to ensure
that its objective to provide for the peoples' right to reproductive health be achieved. To make it more effective, the
RH Law made it mandatory for health providers to provide information on the full range of modem family planning
methods, supplies and services, and for schools to provide reproductive health education. To put teeth to it, the RH
Law criminalizes certain acts of refusals to carry out its mandates.

278
Stated differently, the RH Law is an enhancement measure to fortify and make effective the current laws on
contraception, women's health and population control.

Prayer of the Petitioners - Maintain the Status Quo

The petitioners are one in praying that the entire RH Law be declared unconstitutional. Petitioner ALFI, in particular,
argues that the government sponsored contraception program, the very essence of the RH Law, violates the right to
health of women and the sanctity of life, which the State is mandated to protect and promote. Thus, ALFI prays that
"the status quo ante - the situation prior to the passage of the RH Law - must be maintained."  It explains:
73

x x x. The instant Petition does not question contraception and contraceptives per se. As provided under Republic
Act No. 5921 and Republic Act No. 4729, the sale and distribution of contraceptives are prohibited unless dispensed
by a prescription duly licensed by a physician. What the Petitioners find deplorable and repugnant under the RH
Law is the role that the State and its agencies - the entire bureaucracy, from the cabinet secretaries down to the
barangay officials in the remotest areas of the country - is made to play in the implementation of the contraception
program to the fullest extent possible using taxpayers' money. The State then will be the funder and provider of all
forms of family planning methods and the implementer of the program by ensuring the widespread dissemination of,
and universal access to, a full range of family planning methods, devices and supplies. 74

ISSUES

After a scrutiny of the various arguments and contentions of the parties, the Court has synthesized and refined them
to the following principal issues:

I. PROCEDURAL: Whether the Court may exercise its power of judicial review over the controversy.

1] Power of Judicial Review

2] Actual Case or Controversy

3] Facial Challenge

4] Locus Standi

5] Declaratory Relief

6] One Subject/One Title Rule

II. SUBSTANTIVE: Whether the RH law is unconstitutional:

1] Right to Life

2] Right to Health

3] Freedom of Religion and the Right to Free Speech

4] The Family

5] Freedom of Expression and Academic Freedom

6] Due Process

7] Equal Protection

8] Involuntary Servitude

9] Delegation of Authority to the FDA

10] Autonomy of Local Govemments/ARMM

DISCUSSION

Before delving into the constitutionality of the RH Law and its implementing rules, it behooves the Court to resolve
some procedural impediments.

279
I. PROCEDURAL ISSUE: Whether the Court can exercise its power of judicial review over the controversy.

The Power of Judicial Review

In its attempt to persuade the Court to stay its judicial hand, the OSG asserts that it should submit to the legislative
and political wisdom of Congress and respect the compromises made in the crafting of the RH Law, it being "a
product of a majoritarian democratic process"  and "characterized by an inordinate amount of transparency."  The
75 76

OSG posits that the authority of the Court to review social legislation like the RH Law by certiorari is "weak," since
the Constitution vests the discretion to implement the constitutional policies and positive norms with the political
departments, in particular, with Congress.  It further asserts that in view of the Court's ruling in Southern
77

Hemisphere v. Anti-Terrorism Council,  the remedies of certiorari and prohibition utilized by the petitioners are
78

improper to assail the validity of the acts of the legislature.

79

Moreover, the OSG submits that as an "as applied challenge," it cannot prosper considering that the assailed law
has yet to be enforced and applied to the petitioners, and that the government has yet to distribute reproductive
health devices that are abortive. It claims that the RH Law cannot be challenged "on its face" as it is not a speech-
regulating measure. 80

In many cases involving the determination of the constitutionality of the actions of the Executive and the Legislature,
it is often sought that the Court temper its exercise of judicial power and accord due respect to the wisdom of its co-
equal branch on the basis of the principle of separation of powers. To be clear, the separation of powers is a
fundamental principle in our system of government, which obtains not through express provision but by actual
division in our Constitution. Each department of the government has exclusive cognizance of matters within its
jurisdiction and is supreme within its own sphere. 81

Thus, the 1987 Constitution provides that: (a) the legislative power shall be vested in the Congress of the
Philippines;  (b) the executive power shall be vested in the President of the Philippines;  and (c) the judicial power
82 83

shall be vested in one Supreme Court and in such lower courts as may be established by law.  The Constitution has
84

truly blocked out with deft strokes and in bold lines, the allotment of powers among the three branches of
government. 85

In its relationship with its co-equals, the Judiciary recognizes the doctrine of separation of powers which imposes
upon the courts proper restraint, born of the nature of their functions and of their respect for the other branches of
government, in striking down the acts of the Executive or the Legislature as unconstitutional. Verily, the policy is a
harmonious blend of courtesy and caution. 86

It has also long been observed, however, that in times of social disquietude or political instability, the great
landmarks of the Constitution are apt to be forgotten or marred, if not entirely obliterated.  In order to address this,
87

the Constitution impresses upon the Court to respect the acts performed by a co-equal branch done within its
sphere of competence and authority, but at the same time, allows it to cross the line of separation - but only at a
very limited and specific point - to determine whether the acts of the executive and the legislative branches are null
because they were undertaken with grave abuse of discretion.  Thus, while the Court may not pass upon questions
88

of wisdom, justice or expediency of the RH Law, it may do so where an attendant unconstitutionality or grave abuse
of discretion results.  The Court must demonstrate its unflinching commitment to protect those cherished rights and
89

principles embodied in the Constitution.

In this connection, it bears adding that while the scope of judicial power of review may be limited, the Constitution
makes no distinction as to the kind of legislation that may be subject to judicial scrutiny, be it in the form of social
legislation or otherwise. The reason is simple and goes back to the earlier point. The Court may pass upon the
constitutionality of acts of the legislative and the executive branches, since its duty is not to review their collective
wisdom but, rather, to make sure that they have acted in consonance with their respective authorities and rights as
mandated of them by the Constitution. If after said review, the Court finds no constitutional violations of any sort,
then, it has no more authority of proscribing the actions under review.  This is in line with Article VIII, Section 1 of
90

the Constitution which expressly provides:

Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be established
by law.

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.
[Emphases supplied]

As far back as Tanada v. Angara,  the Court has unequivocally declared that certiorari, prohibition and mandamus
91

are appropriate remedies to raise constitutional issues and to review and/or prohibit/nullify, when proper, acts of
legislative and executive officials, as there is no other plain, speedy or adequate remedy in the ordinary course of

280
law. This ruling was later on applied in Macalintal v. COMELEC,  Aldaba v. COMELEC,  Magallona v. Ermita,  and
92 93 94

countless others. In Tanada, the Court wrote:

In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the petition no
doubt raises a justiciable controversy. Where an action of the legislative branch is seriously alleged to have infringed
the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the dispute. "The question
thus posed is judicial rather than political. The duty (to adjudicate) remains to assure that the supremacy of the
Constitution is upheld. " Once a "controversy as to the application or interpretation of constitutional provision is
raised before this Court (as in the instant case), it becomes a legal issue which the Court is bound by constitutional
mandate to decide. [Emphasis supplied]

In the scholarly estimation of former Supreme Court Justice Florentino Feliciano, "judicial review is essential for the
maintenance and enforcement of the separation of powers and the balancing of powers among the three great
departments of government through the definition and maintenance of the boundaries of authority and control
between them. To him, judicial review is the chief, indeed the only, medium of participation - or instrument of
intervention - of the judiciary in that balancing operation.
95

Lest it be misunderstood, it bears emphasizing that the Court does not have the unbridled authority to rule on just
any and every claim of constitutional violation. Jurisprudence is replete with the rule that the power of judicial review
is limited by four exacting requisites, viz : (a) there must be an actual case or controversy; (b) the petitioners must
possess locus standi; (c) the question of constitutionality must be raised at the earliest opportunity; and (d) the issue
of constitutionality must be the lis mota of the case.
96

Actual Case or Controversy

Proponents of the RH Law submit that the subj ect petitions do not present any actual case or controversy because
the RH Law has yet to be implemented.  They claim that the questions raised by the petitions are not yet concrete
97

and ripe for adjudication since no one has been charged with violating any of its provisions and that there is no
showing that any of the petitioners' rights has been adversely affected by its operation.  In short, it is contended that
98

judicial review of the RH Law is premature.

An actual case or controversy means an existing case or controversy that is appropriate or ripe for determination,
not conjectural or anticipatory, lest the decision of the court would amount to an advisory opinion.  The rule is that
99

courts do not sit to adjudicate mere academic questions to satisfy scholarly interest, however intellectually
challenging. The controversy must be justiciable-definite and concrete, touching on the legal relations of parties
having adverse legal interests. In other words, the pleadings must show an active antagonistic assertion of a legal
right, on the one hand, and a denial thereof, on the other; that is, it must concern a real, tangible and not merely a
theoretical question or issue. There ought to be an actual and substantial controversy admitting of specific relief
through a decree conclusive in nature, as distinguished from an opinion advising what the law would be upon a
hypothetical state of facts.
100

Corollary to the requirement of an actual case or controversy is the requirement of ripeness.  A question is ripe for
101

adjudication when the act being challenged has had a direct adverse effect on the individual challenging it. For a
case to be considered ripe for adjudication, it is a prerequisite that something has then been accomplished or
performed by either branch before a court may come into the picture, and the petitioner must allege the existence of
an immediate or threatened injury to himself as a result of the challenged action. He must show that he has
sustained or is immediately in danger of sustaining some direct injury as a result of the act complained of 102

In The Province of North Cotabato v. The Government of the Republic of the Philippines,  where the
103

constitutionality of an unimplemented Memorandum of Agreement on the Ancestral Domain (MOA-AD) was put in
question, it was argued that the Court has no authority to pass upon the issues raised as there was yet no concrete
act performed that could possibly violate the petitioners' and the intervenors' rights. Citing precedents, the Court
ruled that the fact of the law or act in question being not yet effective does not negate ripeness. Concrete acts under
a law are not necessary to render the controversy ripe. Even a singular violation of the Constitution and/or the law is
enough to awaken judicial duty.

In this case, the Court is of the view that an actual case or controversy exists and that the same is ripe for judicial
determination. Considering that the RH Law and its implementing rules have already taken effect and that budgetary
measures to carry out the law have already been passed, it is evident that the subject petitions present a justiciable
controversy. As stated earlier, when an action of the legislative branch is seriously alleged to have infringed the
Constitution, it not only becomes a right, but also a duty of the Judiciary to settle the dispute. 104

Moreover, the petitioners have shown that the case is so because medical practitioners or medical providers are in
danger of being criminally prosecuted under the RH Law for vague violations thereof, particularly public health
officers who are threatened to be dismissed from the service with forfeiture of retirement and other benefits. They
must, at least, be heard on the matter NOW.

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Facial Challenge

The OSG also assails the propriety of the facial challenge lodged by the subject petitions, contending that the RH
Law cannot be challenged "on its face" as it is not a speech regulating measure. 105

The Court is not persuaded.

In United States (US) constitutional law, a facial challenge, also known as a First Amendment Challenge, is one that
is launched to assail the validity of statutes concerning not only protected speech, but also all other rights in the First
Amendment.  These include religious freedom, freedom of the press, and the right of the people to peaceably
106

assemble, and to petition the Government for a redress of grievances.  After all, the fundamental right to religious
107

freedom, freedom of the press and peaceful assembly are but component rights of the right to one's freedom of
expression, as they are modes which one's thoughts are externalized.

In this jurisdiction, the application of doctrines originating from the U.S. has been generally maintained, albeit with
some modifications. While this Court has withheld the application of facial challenges to strictly penal statues,  it
108

has expanded its scope to cover statutes not only regulating free speech, but also those involving religious freedom,
and other fundamental rights.  The underlying reason for this modification is simple. For unlike its counterpart in the
109

U.S., this Court, under its expanded jurisdiction, is mandated by the Fundamental Law not only to settle actual
controversies involving rights which are legally demandable and enforceable, but also to determine whether or not
there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.  Verily, the framers of Our Constitution envisioned a proactive Judiciary, ever
110

vigilant with its duty to maintain the supremacy of the Constitution.

Consequently, considering that the foregoing petitions have seriously alleged that the constitutional human rights to
life, speech and religion and other fundamental rights mentioned above have been violated by the assailed
legislation, the Court has authority to take cognizance of these kindred petitions and to determine if the RH Law can
indeed pass constitutional scrutiny. To dismiss these petitions on the simple expedient that there exist no actual
case or controversy, would diminish this Court as a reactive branch of government, acting only when the
Fundamental Law has been transgressed, to the detriment of the Filipino people.

Locus Standi

The OSG also attacks the legal personality of the petitioners to file their respective petitions. It contends that the "as
applied challenge" lodged by the petitioners cannot prosper as the assailed law has yet to be enforced and applied
against them,  and the government has yet to distribute reproductive health devices that are abortive.
111 112

The petitioners, for their part, invariably invoke the "transcendental importance" doctrine and their status as citizens
and taxpayers in establishing the requisite locus standi.

Locus standi or legal standing is defined as a personal and substantial interest in a case such that the party has
sustained or will sustain direct injury as a result of the challenged governmental act.  It requires a personal stake in
113

the outcome of the controversy as to assure the concrete adverseness which sharpens the presentation of issues
upon which the court so largely depends for illumination of difficult constitutional questions. 114

In relation to locus standi, the "as applied challenge" embodies the rule that one can challenge the constitutionality
of a statute only if he asserts a violation of his own rights. The rule prohibits one from challenging the
constitutionality of the statute grounded on a violation of the rights of third persons not before the court. This rule is
also known as the prohibition against third-party standing. 115

Transcendental Importance

Notwithstanding, the Court leans on the doctrine that "the rule on standing is a matter of procedure, hence, can be
relaxed for non-traditional plaintiffs like ordinary citizens, taxpayers, and legislators when the public interest so
requires, such as when the matter is of transcendental importance, of overreaching significance to society, or of
paramount public interest." 116

In Coconut Oil Refiners Association, Inc. v. Torres,  the Court held that in cases of paramount importance where
117

serious constitutional questions are involved, the standing requirement may be relaxed and a suit may be allowed to
prosper even where there is no direct injury to the party claiming the right of judicial review. In the first Emergency
Powers Cases,  ordinary citizens and taxpayers were allowed to question the constitutionality of several executive
118

orders although they had only an indirect and general interest shared in common with the public.

With these said, even if the constitutionality of the RH Law may not be assailed through an "as-applied challenge,
still, the Court has time and again acted liberally on the locus s tandi requirement. It has accorded certain individuals
standing to sue, not otherwise directly injured or with material interest affected by a Government act, provided a

282
constitutional issue of transcendental importance is invoked. The rule on locus standi is, after all, a procedural
technicality which the Court has, on more than one occasion, waived or relaxed, thus allowing non-traditional
plaintiffs, such as concerned citizens, taxpayers, voters or legislators, to sue in the public interest, albeit they may
not have been directly injured by the operation of a law or any other government act. As held in Jaworski v.
PAGCOR: 119

Granting arguendo that the present action cannot be properly treated as a petition for prohibition, the transcendental
importance of the issues involved in this case warrants that we set aside the technical defects and take primary
jurisdiction over the petition at bar. One cannot deny that the issues raised herein have potentially pervasive
influence on the social and moral well being of this nation, specially the youth; hence, their proper and just
determination is an imperative need. This is in accordance with the well-entrenched principle that rules of procedure
are not inflexible tools designed to hinder or delay, but to facilitate and promote the administration of justice. Their
strict and rigid application, which would result in technicalities that tend to frustrate, rather than promote substantial
justice, must always be eschewed. (Emphasis supplied)

In view of the seriousness, novelty and weight as precedents, not only to the public, but also to the bench and bar,
the issues raised must be resolved for the guidance of all. After all, the RH Law drastically affects the constitutional
provisions on the right to life and health, the freedom of religion and expression and other constitutional rights.
Mindful of all these and the fact that the issues of contraception and reproductive health have already caused deep
division among a broad spectrum of society, the Court entertains no doubt that the petitions raise issues of
transcendental importance warranting immediate court adjudication. More importantly, considering that it is the right
to life of the mother and the unborn which is primarily at issue, the Court need not wait for a life to be taken away
before taking action.

The Court cannot, and should not, exercise judicial restraint at this time when rights enshrined in the Constitution
are being imperilled to be violated. To do so, when the life of either the mother or her child is at stake, would lead to
irreparable consequences.

Declaratory Relief

The respondents also assail the petitions because they are essentially petitions for declaratory relief over which the
Court has no original jurisdiction.  Suffice it to state that most of the petitions are praying for injunctive reliefs and so
120

the Court would just consider them as petitions for prohibition under Rule 65, over which it has original jurisdiction.
Where the case has far-reaching implications and prays for injunctive reliefs, the Court may consider them as
petitions for prohibition under Rule 65. 121

One Subject-One Title

The petitioners also question the constitutionality of the RH Law, claiming that it violates Section 26(1 ), Article VI of
the Constitution,  prescribing the one subject-one title rule. According to them, being one for reproductive health
122

with responsible parenthood, the assailed legislation violates the constitutional standards of due process by
concealing its true intent - to act as a population control measure. 123

To belittle the challenge, the respondents insist that the RH Law is not a birth or population control measure,  and 124

that the concepts of "responsible parenthood" and "reproductive health" are both interrelated as they are
inseparable. 125

Despite efforts to push the RH Law as a reproductive health law, the Court sees it as principally a population control
measure. The corpus of the RH Law is geared towards the reduction of the country's population. While it claims to
save lives and keep our women and children healthy, it also promotes pregnancy-preventing products. As stated
earlier, the RH Law emphasizes the need to provide Filipinos, especially the poor and the marginalized, with access
to information on the full range of modem family planning products and methods. These family planning methods,
natural or modem, however, are clearly geared towards the prevention of pregnancy.

For said reason, the manifest underlying objective of the RH Law is to reduce the number of births in the country.

It cannot be denied that the measure also seeks to provide pre-natal and post-natal care as well. A large portion of
the law, however, covers the dissemination of information and provisions on access to medically-safe, non-
abortifacient, effective, legal, affordable, and quality reproductive health care services, methods, devices, and
supplies, which are all intended to prevent pregnancy.

The Court, thus, agrees with the petitioners' contention that the whole idea of contraception pervades the entire RH
Law. It is, in fact, the central idea of the RH Law.  Indeed, remove the provisions that refer to contraception or are
126

related to it and the RH Law loses its very foundation.  As earlier explained, "the other positive provisions such as
127

skilled birth attendance, maternal care including pre-and post-natal services, prevention and management of
reproductive tract infections including HIV/AIDS are already provided for in the Magna Carta for Women." 128

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Be that as it may, the RH Law does not violate the one subject/one bill rule. In Benjamin E. Cawaling, Jr. v. The
Commission on Elections and Rep. Francis Joseph G Escudero, it was written:

It is well-settled that the "one title-one subject" rule does not require the Congress to employ in the title of the
enactment language of such precision as to mirror, fully index or catalogue all the contents and the minute details
therein. The rule is sufficiently complied with if the title is comprehensive enough as to include the general object
which the statute seeks to effect, and where, as here, the persons interested are informed of the nature, scope and
consequences of the proposed law and its operation. Moreover, this Court has invariably adopted a liberal rather
than technical construction of the rule "so as not to cripple or impede legislation." [Emphases supplied]

In this case, a textual analysis of the various provisions of the law shows that both "reproductive health" and
"responsible parenthood" are interrelated and germane to the overriding objective to control the population growth.
As expressed in the first paragraph of Section 2 of the RH Law:

SEC. 2. Declaration of Policy. - The State recognizes and guarantees the human rights of all persons including their
right to equality and nondiscrimination of these rights, the right to sustainable human development, the right to
health which includes reproductive health, the right to education and information, and the right to choose and make
decisions for themselves in accordance with their religious convictions, ethics, cultural beliefs, and the demands of
responsible parenthood.

The one subject/one title rule expresses the principle that the title of a law must not be "so uncertain that the
average person reading it would not be informed of the purpose of the enactment or put on inquiry as to its contents,
or which is misleading, either in referring to or indicating one subject where another or different one is really
embraced in the act, or in omitting any expression or indication of the real subject or scope of the act." 129

Considering the close intimacy between "reproductive health" and "responsible parenthood" which bears to the
attainment of the goal of achieving "sustainable human development" as stated under its terms, the Court finds no
reason to believe that Congress intentionally sought to deceive the public as to the contents of the assailed
legislation.

II - SUBSTANTIVE ISSUES:

1-The Right to Life

Position of the Petitioners

The petitioners assail the RH Law because it violates the right to life and health of the unborn child under Section
12, Article II of the Constitution. The assailed legislation allowing access to abortifacients/abortives effectively
sanctions abortion. 130

According to the petitioners, despite its express terms prohibiting abortion, Section 4(a) of the RH Law considers
contraceptives that prevent the fertilized ovum to reach and be implanted in the mother's womb as an abortifacient;
thus, sanctioning contraceptives that take effect after fertilization and prior to implantation, contrary to the intent of
the Framers of the Constitution to afford protection to the fertilized ovum which already has life.

They argue that even if Section 9 of the RH Law allows only "non-abortifacient" hormonal contraceptives,
intrauterine devices, injectables and other safe, legal, non-abortifacient and effective family planning products and
supplies, medical research shows that contraceptives use results in abortion as they operate to kill the fertilized
ovum which already has life. 131

As it opposes the initiation of life, which is a fundamental human good, the petitioners assert that the State sanction
of contraceptive use contravenes natural law and is an affront to the dignity of man. 132

Finally, it is contended that since Section 9 of the RH Law requires the Food and Drug Administration (FDA) to
certify that the product or supply is not to be used as an abortifacient, the assailed legislation effectively confirms
that abortifacients are not prohibited. Also considering that the FDA is not the agency that will actually supervise or
administer the use of these products and supplies to prospective patients, there is no way it can truthfully make a
certification that it shall not be used for abortifacient purposes.
133

Position of the Respondents

For their part, the defenders of the RH Law point out that the intent of the Framers of the Constitution was simply the
prohibition of abortion. They contend that the RH Law does not violate the Constitution since the said law
emphasizes that only "non-abortifacient" reproductive health care services, methods, devices products and supplies
shall be made accessible to the public. 134

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According to the OSG, Congress has made a legislative determination that contraceptives are not abortifacients by
enacting the RH Law. As the RH Law was enacted with due consideration to various studies and consultations with
the World Health Organization (WHO) and other experts in the medical field, it is asserted that the Court afford
deference and respect to such a determination and pass judgment only when a particular drug or device is later on
determined as an abortive. 135

For his part, respondent Lagman argues that the constitutional protection of one's right to life is not violated
considering that various studies of the WHO show that life begins from the implantation of the fertilized ovum.
Consequently, he argues that the RH Law is constitutional since the law specifically provides that only
contraceptives that do not prevent the implantation of the fertilized ovum are allowed. 136

The Court's Position

It is a universally accepted principle that every human being enjoys the right to life. 137

Even if not formally established, the right to life, being grounded on natural law, is inherent and, therefore, not a
creation of, or dependent upon a particular law, custom, or belief. It precedes and transcends any authority or the
laws of men.

In this jurisdiction, the right to life is given more than ample protection. Section 1, Article III of the Constitution
provides:

Section 1. No person shall be deprived of life, liberty, or property without due process of law, nor shall any person
be denied the equal protection of the laws.

As expounded earlier, the use of contraceptives and family planning methods in the Philippines is not of recent
vintage. From the enactment of R.A. No. 4729, entitled "An Act To Regulate The Sale, Dispensation, and/or
Distribution of Contraceptive Drugs and Devices "on June 18, 1966, prescribing rules on contraceptive drugs and
devices which prevent fertilization,  to the promotion of male vasectomy and tubal ligation,  and the ratification of
138 139

numerous international agreements, the country has long recognized the need to promote population control
through the use of contraceptives in order to achieve long-term economic development. Through the years,
however, the use of contraceptives and other family planning methods evolved from being a component of
demographic management, to one centered on the promotion of public health, particularly, reproductive health. 140

This has resulted in the enactment of various measures promoting women's rights and health and the overall
promotion of the family's well-being. Thus, aside from R.A. No. 4729, R.A. No. 6365 or "The Population Act of the
Philippines" and R.A. No. 9710, otherwise known as the "The Magna Carta of Women" were legislated.
Notwithstanding this paradigm shift, the Philippine national population program has always been grounded two
cornerstone principles: "principle of no-abortion" and the "principle of non-coercion."  As will be discussed later,
141

these principles are not merely grounded on administrative policy, but rather, originates from the constitutional
protection expressly provided to afford protection to life and guarantee religious freedom.

When Life Begins*

Majority of the Members of the Court are of the position that the question of when life begins is a scientific and
medical issue that should not be decided, at this stage, without proper hearing and evidence. During the
deliberation, however, it was agreed upon that the individual members of the Court could express their own views
on this matter.

In this regard, the ponente, is of the strong view that life begins at fertilization.

In answering the question of when life begins, focus should be made on the particular phrase of Section 12 which
reads:

Section 12. The State recognizes the sanctity of family life and shall protect and strengthen the family as a basic
autonomous social institution. It shall equally protect the life of the mother and the life of the unborn from
conception. The natural and primary right and duty of parents in the rearing of the youth for civic efficiency and the
development of moral character shall receive the support of the Government.

Textually, the Constitution affords protection to the unborn from conception. This is undisputable because before
conception, there is no unborn to speak of. For said reason, it is no surprise that the Constitution is mute as to any
proscription prior to conception or when life begins. The problem has arisen because, amazingly, there are quarters
who have conveniently disregarded the scientific fact that conception is reckoned from fertilization. They are waving
the view that life begins at implantation. Hence, the issue of when life begins.

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In a nutshell, those opposing the RH Law contend that conception is synonymous with "fertilization" of the female
ovum by the male sperm.  On the other side of the spectrum are those who assert that conception refers to the
142

"implantation" of the fertilized ovum in the uterus.

143

Plain and Legal Meaning

It is a canon in statutory construction that the words of the Constitution should be interpreted in their plain and
ordinary meaning. As held in the recent case of Chavez v. Judicial Bar Council: 144

One of the primary and basic rules in statutory construction is that where the words of a statute are clear, plain, and
free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. It is a well-
settled principle of constitutional construction that the language employed in the Constitution must be given their
ordinary meaning except where technical terms are employed. As much as possible, the words of the Constitution
should be understood in the sense they have in common use. What it says according to the text of the provision to
be construed compels acceptance and negates the power of the courts to alter it, based on the postulate that the
framers and the people mean what they say. Verba legis non est recedendum - from the words of a statute there
should be no departure.

The raison d' etre for the rule is essentially two-fold: First, because it is assumed that the words in which
constitutional provisions are couched express the objective sought to be attained; and second, because the
Constitution is not primarily a lawyer's document but essentially that of the people, in whose consciousness it should
ever be present as an important condition for the rule of law to prevail.

In conformity with the above principle, the traditional meaning of the word "conception" which, as described and
defined by all reliable and reputable sources, means that life begins at fertilization.

Webster's Third New International Dictionary describes it as the act of becoming pregnant, formation of a viable
zygote; the fertilization that results in a new entity capable of developing into a being like its parents.
145

Black's Law Dictionary gives legal meaning to the term "conception" as the fecundation of the female ovum by the
male spermatozoon resulting in human life capable of survival and maturation under normal conditions. 146

Even in jurisprudence, an unborn child has already a legal personality. In Continental Steel Manufacturing
Corporation v. Hon. Accredited Voluntary Arbitrator Allan S. Montano,  it was written:
147

Life is not synonymous with civil personality. One need not acquire civil personality first before he/she could die.
Even a child inside the womb already has life. No less than the Constitution recognizes the life of the unborn from
conception, that the State must protect equally with the life of the mother. If the unborn already has life, then the
cessation thereof even prior to the child being delivered, qualifies as death. [Emphases in the original]

In Gonzales v. Carhart,  Justice Anthony Kennedy, writing for the US Supreme Court, said that the State "has
148

respect for human life at all stages in the pregnancy" and "a legitimate and substantial interest in preserving and
promoting fetal life." Invariably, in the decision, the fetus was referred to, or cited, as a baby or a child. 149

Intent of the Framers

Records of the Constitutional Convention also shed light on the intention of the Framers regarding the term
"conception" used in Section 12, Article II of the Constitution. From their deliberations, it clearly refers to the moment
of "fertilization." The records reflect the following:

Rev. Rigos: In Section 9, page 3, there is a sentence which reads:

"The State shall equally protect the life of the mother and the life of the unborn from the moment of conception."

When is the moment of conception?

xxx

Mr. Villegas: As I explained in the sponsorship speech, it is when the ovum is fertilized by the sperm that there is
human life. x x x.
150

xxx

As to why conception is reckoned from fertilization and, as such, the beginning of human life, it was explained:

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Mr. Villegas: I propose to review this issue in a biological manner. The first question that needs to be answered is: Is
the fertilized ovum alive? Biologically categorically says yes, the fertilized ovum is alive. First of all, like all living
organisms, it takes in nutrients which it processes by itself. It begins doing this upon fertilization. Secondly, as it
takes in these nutrients, it grows from within. Thirdly, it multiplies itself at a geometric rate in the continuous process
of cell division. All these processes are vital signs of life. Therefore, there is no question that biologically the
fertilized ovum has life.

The second question: Is it human? Genetics gives an equally categorical "yes." At the moment of conception, the
nuclei of the ovum and the sperm rupture. As this happens 23 chromosomes from the ovum combine with 23
chromosomes of the sperm to form a total of 46 chromosomes. A chromosome count of 46 is found only - and I
repeat, only in human cells. Therefore, the fertilized ovum is human.

Since these questions have been answered affirmatively, we must conclude that if the fertilized ovum is both alive
and human, then, as night follows day, it must be human life. Its nature is human. 151

Why the Constitution used the phrase "from the moment of conception" and not "from the moment of fertilization"
was not because of doubt when human life begins, but rather, because:

Mr. Tingson: x x x x the phrase from the moment of conception" was described by us here before with the scientific
phrase "fertilized ovum" may be beyond the comprehension of some people; we want to use the simpler phrase
"from the moment of conception." 152

Thus, in order to ensure that the fertilized ovum is given ample protection under the Constitution, it was discussed:

Rev. Rigos: Yes, we think that the word "unborn" is sufficient for the purpose of writing a Constitution, without
specifying "from the moment of conception."

Mr. Davide: I would not subscribe to that particular view because according to the Commissioner's own admission,
he would leave it to Congress to define when life begins. So, Congress can define life to begin from six months after
fertilization; and that would really be very, very, dangerous. It is now determined by science that life begins from the
moment of conception. There can be no doubt about it. So we should not give any doubt to Congress, too. 153

Upon further inquiry, it was asked:

Mr. Gascon: Mr. Presiding Officer, I would like to ask a question on that point. Actually, that is one of the questions I
was going to raise during the period of interpellations but it has been expressed already. The provision, as proposed
right now states:

The State shall equally protect the life of the mother and the life of the unborn from the moment of conception.

When it speaks of "from the moment of conception," does this mean when the egg meets the sperm?

Mr. Villegas: Yes, the ovum is fertilized by the sperm.

Mr. Gascon: Therefore that does not leave to Congress the right to determine whether certain contraceptives that
we know today are abortifacient or not because it is a fact that some of the so-called contraceptives deter the
rooting of the ovum in the uterus. If fertilization has already occurred, the next process is for the fertilized ovum to
travel towards the uterus and to take root. What happens with some contraceptives is that they stop the opportunity
for the fertilized ovum to reach the uterus. Therefore, if we take the provision as it is proposed, these so called
contraceptives should be banned.

Mr. Villegas: Yes, if that physical fact is established, then that is what is called abortifacient and, therefore, would be
unconstitutional and should be banned under this provision.

Mr. Gascon: Yes. So my point is that I do not think it is up to Congress to state whether or not these certain
contraceptives are abortifacient. Scientifically and based on the provision as it is now proposed, they are already
considered abortifacient. 154

From the deliberations above-quoted, it is apparent that the Framers of the Constitution emphasized that the State
shall provide equal protection to both the mother and the unborn child from the earliest opportunity of life, that is,
upon fertilization or upon the union of the male sperm and the female ovum. It is also apparent is that the Framers
of the Constitution intended that to prohibit Congress from enacting measures that would allow it determine when
life begins.

Equally apparent, however, is that the Framers of the Constitution did not intend to ban all contraceptives for being
unconstitutional. In fact, Commissioner Bernardo Villegas, spearheading the need to have a constitutional provision
287
on the right to life, recognized that the determination of whether a contraceptive device is an abortifacient is a
question of fact which should be left to the courts to decide on based on established evidence. 155

From the discussions above, contraceptives that kill or destroy the fertilized ovum should be deemed an abortive
and thus prohibited. Conversely, contraceptives that actually prevent the union of the male sperm and the female
ovum, and those that similarly take action prior to fertilization should be deemed non-abortive, and thus,
constitutionally permissible.

As emphasized by the Framers of the Constitution:

x x x           x x x          x x x

Mr. Gascon: xx xx. As I mentioned in my speech on the US bases, I am pro-life, to the point that I would like not only
to protect the life of the unborn, but also the lives of the millions of people in the world by fighting for a nuclear-free
world. I would just like to be assured of the legal and pragmatic implications of the term "protection of the life of the
unborn from the moment of conception." I raised some of these implications this afternoon when I interjected in the
interpellation of Commissioner Regalado. I would like to ask that question again for a categorical answer.

I mentioned that if we institutionalize the term "the life of the unborn from the moment of conception" we are also
actually saying "no," not "maybe," to certain contraceptives which are already being encouraged at this point in time.
Is that the sense of the committee or does it disagree with me?

Mr. Azcuna: No, Mr. Presiding Officer, because contraceptives would be preventive. There is no unborn yet. That is
yet unshaped.

Mr. Gascon: Yes, Mr. Presiding Officer, but I was speaking more about some contraceptives, such as the intra-
uterine device which actually stops the egg which has already been fertilized from taking route to the uterus. So if
we say "from the moment of conception," what really occurs is that some of these contraceptives will have to be
unconstitutionalized.

Mr. Azcuna: Yes, to the extent that it is after the fertilization.

Mr. Gascon: Thank you, Mr. Presiding Officer. 156

The fact that not all contraceptives are prohibited by the 1987 Constitution is even admitted by petitioners during the
oral arguments. There it was conceded that tubal ligation, vasectomy, even condoms are not classified as
abortifacients.157

Atty. Noche:

Before the union of the eggs, egg and the sperm, there is no life yet.

Justice Bersamin:

There is no life.

Atty. Noche:

So, there is no life to be protected.

Justice Bersamin:

To be protected.

Atty. Noche:

Under Section 12, yes.

Justice Bersamin:

So you have no objection to condoms?

Atty. Noche:

Not under Section 12, Article II.

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Justice Bersamin:

Even if there is already information that condoms sometimes have porosity?

Atty. Noche:

Well, yes, Your Honor, there are scientific findings to that effect, Your Honor, but I am discussing here Section 12,
Article II, Your Honor, yes.

Justice Bersamin:

Alright.

Atty. Noche:

And it's not, I have to admit it's not an abortifacient, Your Honor. 158

Medical Meaning

That conception begins at fertilization is not bereft of medical foundation. Mosby s Medical, Nursing, and Allied
Health Dictionary defines conception as "the beginning of pregnancy usually taken to be the instant a spermatozoon
enters an ovum and forms a viable zygote." 159

It describes fertilization as "the union of male and female gametes to form a zygote from which the embryo
develops." 160

The Textbook of Obstetrics (Physiological & Pathological Obstetrics),  used by medical schools in the Philippines,
161

also concludes that human life (human person) begins at the moment of fertilization with the union of the egg and
the sperm resulting in the formation of a new individual, with a unique genetic composition that dictates all
developmental stages that ensue.

Similarly, recent medical research on the matter also reveals that: "Human development begins after the union of
male and female gametes or germ cells during a process known as fertilization (conception). Fertilization is a
sequence of events that begins with the contact of a sperm (spermatozoon) with a secondary oocyte (ovum) and
ends with the fusion of their pronuclei (the haploid nuclei of the sperm and ovum) and the mingling of their
chromosomes to form a new cell. This fertilized ovum, known as a zygote, is a large diploid cell that is the
beginning, or primordium, of a human being." 162

The authors of Human Embryology & Teratology  mirror the same position. They wrote: "Although life is a
163

continuous process, fertilization is a critical landmark because, under ordinary circumstances, a new, genetically
distinct human organism is thereby formed.... The combination of 23 chromosomes present in each pronucleus
results in 46 chromosomes in the zygote. Thus the diploid number is restored and the embryonic genome is formed.
The embryo now exists as a genetic unity."

In support of the RH Bill, The Philippine Medical Association came out with a "Paper on the Reproductive Health Bill
(Responsible Parenthood Bill)" and therein concluded that:

CONCLUSION

The PMA throws its full weight in supporting the RH Bill at the same time that PMA maintains its strong position that
fertilization is sacred because it is at this stage that conception, and thus human life, begins. Human lives are
sacred from the moment of conception, and that destroying those new lives is never licit, no matter what the
purported good outcome would be. In terms of biology and human embryology, a human being begins immediately
at fertilization and after that, there is no point along the continuous line of human embryogenesis where only a
"potential" human being can be posited. Any philosophical, legal, or political conclusion cannot escape this objective
scientific fact.

The scientific evidence supports the conclusion that a zygote is a human organism and that the life of a new human
being commences at a scientifically well defined "moment of conception." This conclusion is objective, consistent
with the factual evidence, and independent of any specific ethical, moral, political, or religious view of human life or
of human embryos. 164

Conclusion: The Moment of Conception is Reckoned from

Fertilization

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In all, whether it be taken from a plain meaning, or understood under medical parlance, and more importantly,
following the intention of the Framers of the Constitution, the undeniable conclusion is that a zygote is a human
organism and that the life of a new human being commences at a scientifically well-defined moment of conception,
that is, upon fertilization.

For the above reasons, the Court cannot subscribe to the theory advocated by Hon. Lagman that life begins at
implantation.  According to him, "fertilization and conception are two distinct and successive stages in the
165

reproductive process. They are not identical and synonymous."  Citing a letter of the WHO, he wrote that "medical
166

authorities confirm that the implantation of the fertilized ovum is the commencement of conception and it is only after
implantation that pregnancy can be medically detected." 167

This theory of implantation as the beginning of life is devoid of any legal or scientific mooring. It does not pertain to
the beginning of life but to the viability of the fetus. The fertilized ovum/zygote is not an inanimate object - it is a
living human being complete with DNA and 46 chromosomes.  Implantation has been conceptualized only for
168

convenience by those who had population control in mind. To adopt it would constitute textual infidelity not only to
the RH Law but also to the Constitution.

Not surprisingly, even the OSG does not support this position.

If such theory would be accepted, it would unnervingly legitimize the utilization of any drug or device that would
prevent the implantation of the fetus at the uterine wall. It would be provocative and further aggravate religious-
based divisiveness.

It would legally permit what the Constitution proscribes - abortion and abortifacients.

The RH Law and Abortion

The clear and unequivocal intent of the Framers of the 1987 Constitution in protecting the life of the unborn from
conception was to prevent the Legislature from enacting a measure legalizing abortion. It was so clear that even the
Court cannot interpret it otherwise. This intent of the Framers was captured in the record of the proceedings of the
1986 Constitutional Commission. Commissioner Bernardo Villegas, the principal proponent of the protection of the
unborn from conception, explained:

The intention .. .is to make sure that there would be no pro-abortion laws ever passed by Congress or any pro-
abortion decision passed by the Supreme Court. 169

A reading of the RH Law would show that it is in line with this intent and actually proscribes abortion. While the
Court has opted not to make any determination, at this stage, when life begins, it finds that the RH Law itself clearly
mandates that protection be afforded from the moment of fertilization. As pointed out by Justice Carpio, the RH Law
is replete with provisions that embody the policy of the law to protect to the fertilized ovum and that it should be
afforded safe travel to the uterus for implantation.170

Moreover, the RH Law recognizes that abortion is a crime under Article 256 of the Revised Penal Code, which
penalizes the destruction or expulsion of the fertilized ovum. Thus:

1] xx x.

Section 4. Definition of Terms. - For the purpose of this Act, the following terms shall be defined as follows:

xxx.

(q) Reproductive health care refers to the access to a full range of methods, facilities, services and supplies that
contribute to reproductive health and well-being by addressing reproductive health-related problems. It also includes
sexual health, the purpose of which is the enhancement of life and personal relations. The elements of reproductive
health care include the following:

xxx.

(3) Proscription of abortion and management of abortion complications;

xxx.

2] xx x.

Section 4. x x x.

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(s) Reproductive health rights refers to the rights of individuals and couples, to decide freely and responsibly
whether or not to have children; the number, spacing and timing of their children; to make other decisions
concerning reproduction, free of discrimination, coercion and violence; to have the information and means to do so;
and to attain the highest standard of sexual health and reproductive health: Provided, however, That reproductive
health rights do not include abortion, and access to abortifacients.

3] xx x.

SEC. 29. Repealing Clause. - Except for prevailing laws against abortion, any law, presidential decree or issuance,
executive order, letter of instruction, administrative order, rule or regulation contrary to or is inconsistent with the
provisions of this Act including Republic Act No. 7392, otherwise known as the Midwifery Act, is hereby repealed,
modified or amended accordingly.

The RH Law and Abortifacients

In carrying out its declared policy, the RH Law is consistent in prohibiting abortifacients. To be clear, Section 4(a) of
the RH Law defines an abortifacient as:

Section 4. Definition of Terms - x x x x

(a) Abortifacient refers to any drug or device that induces abortion or the destruction of a fetus inside the mother's
womb or the prevention of the fertilized ovum to reach and be implanted in the mother's womb upon determination
of the FDA.

As stated above, the RH Law mandates that protection must be afforded from the moment of fertilization. By using
the word " or," the RH Law prohibits not only drugs or devices that prevent implantation, but also those that induce
abortion and those that induce the destruction of a fetus inside the mother's womb. Thus, an abortifacient is any
drug or device that either:

(a) Induces abortion; or

(b) Induces the destruction of a fetus inside the mother's womb; or

(c) Prevents the fertilized ovum to reach and be implanted in the mother's womb, upon determination of the
FDA.

Contrary to the assertions made by the petitioners, the Court finds that the RH Law, consistent with the Constitution,
recognizes that the fertilized ovum already has life and that the State has a bounden duty to protect it. The
conclusion becomes clear because the RH Law, first, prohibits any drug or device that induces abortion (first kind),
which, as discussed exhaustively above, refers to that which induces the killing or the destruction of the fertilized
ovum, and, second, prohibits any drug or device the fertilized ovum to reach and be implanted in the mother's womb
(third kind).

By expressly declaring that any drug or device that prevents the fertilized ovum to reach and be implanted in the
mother's womb is an abortifacient (third kind), the RH Law does not intend to mean at all that life only begins only at
implantation, as Hon. Lagman suggests. It also does not declare either that protection will only be given upon
implantation, as the petitioners likewise suggest. Rather, it recognizes that: one, there is a need to protect the
fertilized ovum which already has life, and two, the fertilized ovum must be protected the moment it becomes
existent - all the way until it reaches and implants in the mother's womb. After all, if life is only recognized and
afforded protection from the moment the fertilized ovum implants - there is nothing to prevent any drug or device
from killing or destroying the fertilized ovum prior to implantation.

From the foregoing, the Court finds that inasmuch as it affords protection to the fertilized ovum, the RH Law does
not sanction abortion. To repeat, it is the Court's position that life begins at fertilization, not at implantation. When a
fertilized ovum is implanted in the uterine wall , its viability is sustained but that instance of implantation is not the
point of beginning of life. It started earlier. And as defined by the RH Law, any drug or device that induces abortion,
that is, which kills or destroys the fertilized ovum or prevents the fertilized ovum to reach and be implanted in the
mother's womb, is an abortifacient.

Proviso Under Section 9 of the RH Law

This notwithstanding, the Court finds that the proviso under Section 9 of the law that "any product or supply included
or to be included in the EDL must have a certification from the FDA that said product and supply is made available
on the condition that it is not to be used as an abortifacient" as empty as it is absurd. The FDA, with all its expertise,
cannot fully attest that a drug or device will not all be used as an abortifacient, since the agency cannot be present
in every instance when the contraceptive product or supply will be used. 171

291
Pursuant to its declared policy of providing access only to safe, legal and non-abortifacient contraceptives, however,
the Court finds that the proviso of Section 9, as worded, should bend to the legislative intent and mean that "any
product or supply included or to be included in the EDL must have a certification from the FDA that said product and
supply is made available on the condition that it cannot be used as abortifacient." Such a construction is consistent
with the proviso under the second paragraph of the same section that provides:

Provided, further, That the foregoing offices shall not purchase or acquire by any means emergency contraceptive
pills, postcoital pills, abortifacients that will be used for such purpose and their other forms or equivalent.

Abortifacients under the RH-IRR

At this juncture, the Court agrees with ALFI that the authors of the RH-IRR gravely abused their office when they
redefined the meaning of abortifacient. The RH Law defines "abortifacient" as follows:

SEC. 4. Definition of Terms. - For the purpose of this Act, the following terms shall be defined as follows:

(a) Abortifacient refers to any drug or device that induces abortion or the destruction of a fetus inside the mother's
womb or the prevention of the fertilized ovum to reach and be implanted in the mother's womb upon determination
of the FDA.

Section 3.0l (a) of the IRR, however, redefines "abortifacient" as:

Section 3.01 For purposes of these Rules, the terms shall be defined as follows:

a) Abortifacient refers to any drug or device that primarily induces abortion or the destruction of a fetus inside the
mother's womb or the prevention of the fertilized ovum to reach and be implanted in the mother's womb upon
determination of the Food and Drug Administration (FDA). [Emphasis supplied]

Again in Section 3.0lG) of the RH-IRR, "contraceptive," is redefined, viz:

j) Contraceptive refers to any safe, legal, effective and scientifically proven modern family planning method, device,
or health product, whether natural or artificial, that prevents pregnancy but does not primarily destroy a fertilized
ovum or prevent a fertilized ovum from being implanted in the mother's womb in doses of its approved indication as
determined by the Food and Drug Administration (FDA).

The above-mentioned section of the RH-IRR allows "contraceptives" and recognizes as "abortifacient" only those
that primarily induce abortion or the destruction of a fetus inside the mother's womb or the prevention of the fertilized
ovum to reach and be implanted in the mother's womb. 172

This cannot be done.

In this regard, the observations of Justice Brion and Justice Del Castillo are well taken. As they pointed out, with the
insertion of the word "primarily," Section 3.0l(a) and G) of the RH-IRR  must be struck down for being ultra vires.
173

Evidently, with the addition of the word "primarily," in Section 3.0l(a) and G) of the RH-IRR is indeed ultra vires. It
contravenes Section 4(a) of the RH Law and should, therefore, be declared invalid. There is danger that the
insertion of the qualifier "primarily" will pave the way for the approval of contraceptives which may harm or destroy
the life of the unborn from conception/fertilization in violation of Article II, Section 12 of the Constitution. With such
qualification in the RH-IRR, it appears to insinuate that a contraceptive will only be considered as an "abortifacient" if
its sole known effect is abortion or, as pertinent here, the prevention of the implantation of the fertilized ovum.

For the same reason, this definition of "contraceptive" would permit the approval of contraceptives which are
actually abortifacients because of their fail-safe mechanism. 174

Also, as discussed earlier, Section 9 calls for the certification by the FDA that these contraceptives cannot act as
abortive. With this, together with the definition of an abortifacient under Section 4 (a) of the RH Law and its declared
policy against abortion, the undeniable conclusion is that contraceptives to be included in the PNDFS and the EDL
will not only be those contraceptives that do not have the primary action of causing abortion or the destruction of a
fetus inside the mother's womb or the prevention of the fertilized ovum to reach and be implanted in the mother's
womb, but also those that do not have the secondary action of acting the same way.

Indeed, consistent with the constitutional policy prohibiting abortion, and in line with the principle that laws should be
construed in a manner that its constitutionality is sustained, the RH Law and its implementing rules must be
consistent with each other in prohibiting abortion. Thus, the word " primarily" in Section 3.0l(a) and G) of the RH-IRR
should be declared void. To uphold the validity of Section 3.0l(a) and G) of the RH-IRR and prohibit only those
contraceptives that have the primary effect of being an abortive would effectively "open the floodgates to the
292
approval of contraceptives which may harm or destroy the life of the unborn from conception/fertilization in violation
of Article II, Section 12 of the Constitution."
175

To repeat and emphasize, in all cases, the "principle of no abortion" embodied in the constitutional protection of life
must be upheld.

2-The Right to Health

The petitioners claim that the RH Law violates the right to health because it requires the inclusion of hormonal
contraceptives, intrauterine devices, injectables and family products and supplies in the National Drug Formulary
and the inclusion of the same in the regular purchase of essential medicines and supplies of all national
hospitals. Citing various studies on the matter, the petitioners posit that the risk of developing breast and cervical
176

cancer is greatly increased in women who use oral contraceptives as compared to women who never use them.
They point out that the risk is decreased when the use of contraceptives is discontinued. Further, it is contended that
the use of combined oral contraceptive pills is associated with a threefold increased risk of venous
thromboembolism, a twofold increased risk of ischematic stroke, and an indeterminate effect on risk of myocardial
infarction.  Given the definition of "reproductive health" and "sexual health" under Sections 4(p)  and (w)  of the
177 178 179

RH Law, the petitioners assert that the assailed legislation only seeks to ensure that women have pleasurable and
satisfying sex lives.
180

The OSG, however, points out that Section 15, Article II of the Constitution is not self-executory, it being a mere
statement of the administration's principle and policy. Even if it were self-executory, the OSG posits that medical
authorities refute the claim that contraceptive pose a danger to the health of women. 181

The Court's Position

A component to the right to life is the constitutional right to health. In this regard, the Constitution is replete with
provisions protecting and promoting the right to health. Section 15, Article II of the Constitution provides:

Section 15. The State shall protect and promote the right to health of the people and instill health consciousness
among them.

A portion of Article XIII also specifically provides for the States' duty to provide for the health of the people, viz:

HEALTH

Section 11. The State shall adopt an integrated and comprehensive approach to health development which shall
endeavor to make essential goods, health and other social services available to all the people at affordable cost.
There shall be priority for the needs of the underprivileged, sick, elderly, disabled, women, and children. The State
shall endeavor to provide free medical care to paupers.

Section 12. The State shall establish and maintain an effective food and drug regulatory system and undertake
appropriate health, manpower development, and research, responsive to the country's health needs and problems.

Section 13. The State shall establish a special agency for disabled person for their rehabilitation, self-development,
and self-reliance, and their integration into the mainstream of society.

Finally, Section 9, Article XVI provides:

Section 9. The State shall protect consumers from trade malpractices and from substandard or hazardous products.

Contrary to the respondent's notion, however, these provisions are self-executing. Unless the provisions clearly
express the contrary, the provisions of the Constitution should be considered self-executory. There is no need for
legislation to implement these self-executing provisions.  In Manila Prince Hotel v. GSIS,  it was stated:
182 183

x x x Hence, unless it is expressly provided that a legislative act is necessary to enforce a constitutional mandate,
the presumption now is that all provisions of the constitution are self-executing. If the constitutional provisions are
treated as requiring legislation instead of self-executing, the legislature would have the power to ignore and
practically nullify the mandate of the fundamental law. This can be cataclysmic. That is why the prevailing view is, as
it has always been, that –

... in case of doubt, the Constitution should be considered self-executing rather than non-self-executing. . . . Unless
the contrary is clearly intended, the provisions of the Constitution should be considered self-executing, as a contrary
rule would give the legislature discretion to determine when, or whether, they shall be effective. These provisions
would be subordinated to the will of the lawmaking body, which could make them entirely meaningless by simply
refusing to pass the needed implementing statute. (Emphases supplied)
293
This notwithstanding, it bears mentioning that the petitioners, particularly ALFI, do not question contraception and
contraceptives per se.  In fact, ALFI prays that the status quo - under R.A. No. 5921 and R.A. No. 4729, the sale
184

and distribution of contraceptives are not prohibited when they are dispensed by a prescription of a duly licensed by
a physician - be maintained. 185

The legislative intent in the enactment of the RH Law in this regard is to leave intact the provisions of R.A. No. 4729.
There is no intention at all to do away with it. It is still a good law and its requirements are still in to be complied with.
Thus, the Court agrees with the observation of respondent Lagman that the effectivity of the RH Law will not lead to
the unmitigated proliferation of contraceptives since the sale, distribution and dispensation of contraceptive drugs
and devices will still require the prescription of a licensed physician. With R.A. No. 4729 in place, there exists
adequate safeguards to ensure the public that only contraceptives that are safe are made available to the public. As
aptly explained by respondent Lagman:

D. Contraceptives cannot be
dispensed and used without
prescription

108. As an added protection to voluntary users of contraceptives, the same cannot be dispensed and used without
prescription.

109. Republic Act No. 4729 or "An Act to Regulate the Sale, Dispensation, and/ or Distribution of Contraceptive
Drugs and Devices" and Republic Act No. 5921 or "An Act Regulating the Practice of Pharmacy and Setting
Standards of Pharmaceutical Education in the Philippines and for Other Purposes" are not repealed by the RH Law
and the provisions of said Acts are not inconsistent with the RH Law.

110. Consequently, the sale, distribution and dispensation of contraceptive drugs and devices are particularly
governed by RA No. 4729 which provides in full:

"Section 1. It shall be unlawful for any person, partnership, or corporation, to sell, dispense or otherwise distribute
whether for or without consideration, any contraceptive drug or device, unless such sale, dispensation or distribution
is by a duly licensed drug store or pharmaceutical company and with the prescription of a qualified medical
practitioner.

"Sec. 2 . For the purpose of this Act:

"(a) "Contraceptive drug" is any medicine, drug, chemical, or portion which is used exclusively for the
purpose of preventing fertilization of the female ovum: and

"(b) "Contraceptive device" is any instrument, device, material, or agent introduced into the female
reproductive system for the primary purpose of preventing conception.

"Sec. 3 Any person, partnership, or corporation, violating the provisions of this Act shall be punished with a fine of
not more than five hundred pesos or an imprisonment of not less than six months or more than one year or both in
the discretion of the Court.

"This Act shall take effect upon its approval.

"Approved: June 18, 1966"

111. Of the same import, but in a general manner, Section 25 of RA No. 5921 provides:

"Section 25. Sale of medicine, pharmaceuticals, drugs and devices. No medicine, pharmaceutical, or drug of
whatever nature and kind or device shall be compounded, dispensed, sold or resold, or otherwise be made
available to the consuming public except through a prescription drugstore or hospital pharmacy, duly established in
accordance with the provisions of this Act.

112. With all of the foregoing safeguards, as provided for in the RH Law and other relevant statutes, the pretension
of the petitioners that the RH Law will lead to the unmitigated proliferation of contraceptives, whether harmful or not,
is completely unwarranted and baseless.  [Emphases in the Original. Underlining supplied.]
186

In Re: Section 10 of the RH Law:

The foregoing safeguards should be read in connection with Section 10 of the RH Law which provides:

SEC. 10. Procurement and Distribution of Family Planning Supplies. - The DOH shall procure, distribute to LGUs
and monitor the usage of family planning supplies for the whole country. The DOH shall coordinate with all
294
appropriate local government bodies to plan and implement this procurement and distribution program. The supply
and budget allotments shall be based on, among others, the current levels and projections of the following:

(a) Number of women of reproductive age and couples who want to space or limit their children;

(b) Contraceptive prevalence rate, by type of method used; and

(c) Cost of family planning supplies.

Provided, That LGUs may implement its own procurement, distribution and monitoring program consistent with the
overall provisions of this Act and the guidelines of the DOH.

Thus, in the distribution by the DOH of contraceptive drugs and devices, it must consider the provisions of R.A. No.
4729, which is still in effect, and ensure that the contraceptives that it will procure shall be from a duly licensed drug
store or pharmaceutical company and that the actual dispensation of these contraceptive drugs and devices will
done following a prescription of a qualified medical practitioner. The distribution of contraceptive drugs and devices
must not be indiscriminately done. The public health must be protected by all possible means. As pointed out by
Justice De Castro, a heavy responsibility and burden are assumed by the government in supplying contraceptive
drugs and devices, for it may be held accountable for any injury, illness or loss of life resulting from or incidental to
their use. 187

At any rate, it bears pointing out that not a single contraceptive has yet been submitted to the FDA pursuant to the
RH Law. It behooves the Court to await its determination which drugs or devices are declared by the FDA as safe, it
being the agency tasked to ensure that food and medicines available to the public are safe for public consumption.
Consequently, the Court finds that, at this point, the attack on the RH Law on this ground is premature. Indeed, the
various kinds of contraceptives must first be measured up to the constitutional yardstick as expounded herein, to be
determined as the case presents itself.

At this point, the Court is of the strong view that Congress cannot legislate that hormonal contraceptives and intra-
uterine devices are safe and non-abortifacient. The first sentence of Section 9 that ordains their inclusion by the
National Drug Formulary in the EDL by using the mandatory "shall" is to be construed as operative only after they
have been tested, evaluated, and approved by the FDA. The FDA, not Congress, has the expertise to determine
whether a particular hormonal contraceptive or intrauterine device is safe and non-abortifacient. The provision of the
third sentence concerning the requirements for the inclusion or removal of a particular family planning supply from
the EDL supports this construction.

Stated differently, the provision in Section 9 covering the inclusion of hormonal contraceptives, intra-uterine devices,
injectables, and other safe, legal, non-abortifacient and effective family planning products and supplies by the
National Drug Formulary in the EDL is not mandatory. There must first be a determination by the FDA that they are
in fact safe, legal, non-abortifacient and effective family planning products and supplies. There can be no
predetermination by Congress that the gamut of contraceptives are "safe, legal, non-abortifacient and effective"
without the proper scientific examination.

3 -Freedom of Religion
and the Right to Free Speech

Position of the Petitioners:

1. On Contraception

While contraceptives and procedures like vasectomy and tubal ligation are not covered by the constitutional
proscription, there are those who, because of their religious education and background, sincerely believe that
contraceptives, whether abortifacient or not, are evil. Some of these are medical practitioners who essentially claim
that their beliefs prohibit not only the use of contraceptives but also the willing participation and cooperation in all
things dealing with contraceptive use. Petitioner PAX explained that "contraception is gravely opposed to marital
chastity, it is contrary to the good of the transmission of life, and to the reciprocal self-giving of the spouses; it harms
true love and denies the sovereign rule of God in the transmission of Human life." 188

The petitioners question the State-sponsored procurement of contraceptives, arguing that the expenditure of their
taxes on contraceptives violates the guarantee of religious freedom since contraceptives contravene their religious
beliefs.
189

2. On Religious Accommodation and

The Duty to Refer

295
Petitioners Imbong and Luat note that while the RH Law attempts to address religious sentiments by making
provisions for a conscientious objector, the constitutional guarantee is nonetheless violated because the law also
imposes upon the conscientious objector the duty to refer the patient seeking reproductive health services to
another medical practitioner who would be able to provide for the patient's needs. For the petitioners, this amounts
to requiring the conscientious objector to cooperate with the very thing he refuses to do without violating his/her
religious beliefs.
190

They further argue that even if the conscientious objector's duty to refer is recognized, the recognition is unduly
limited, because although it allows a conscientious objector in Section 23 (a)(3) the option to refer a patient seeking
reproductive health services and information - no escape is afforded the conscientious objector in Section 23 (a)(l)
and (2), i.e. against a patient seeking reproductive health procedures. They claim that the right of other individuals
to conscientiously object, such as: a) those working in public health facilities referred to in Section 7; b) public
officers involved in the implementation of the law referred to in Section 23(b ); and c) teachers in public schools
referred to in Section 14 of the RH Law, are also not recognize. 191

Petitioner Echavez and the other medical practitioners meanwhile, contend that the requirement to refer the matter
to another health care service provider is still considered a compulsion on those objecting healthcare service
providers. They add that compelling them to do the act against their will violates the Doctrine of Benevolent
Neutrality. Sections 9, 14 and 1 7 of the law are too secular that they tend to disregard the religion of Filipinos.
Authorizing the use of contraceptives with abortive effects, mandatory sex education, mandatory pro-bono
reproductive health services to indigents encroach upon the religious freedom of those upon whom they are
required.192

Petitioner CFC also argues that the requirement for a conscientious objector to refer the person seeking
reproductive health care services to another provider infringes on one's freedom of religion as it forces the objector
to become an unwilling participant in the commission of a serious sin under Catholic teachings. While the right to act
on one's belief may be regulated by the State, the acts prohibited by the RH Law are passive acts which produce
neither harm nor injury to the public.193

Petitioner CFC adds that the RH Law does not show compelling state interest to justify regulation of religious
freedom because it mentions no emergency, risk or threat that endangers state interests. It does not explain how
the rights of the people (to equality, non-discrimination of rights, sustainable human development, health, education,
information, choice and to make decisions according to religious convictions, ethics, cultural beliefs and the
demands of responsible parenthood) are being threatened or are not being met as to justify the impairment of
religious freedom. 194

Finally, the petitioners also question Section 15 of the RH Law requiring would-be couples to attend family planning
and responsible parenthood seminars and to obtain a certificate of compliance. They claim that the provision forces
individuals to participate in the implementation of the RH Law even if it contravenes their religious beliefs.  As the
195

assailed law dangles the threat of penalty of fine and/or imprisonment in case of non-compliance with its provisions,
the petitioners claim that the RH Law forcing them to provide, support and facilitate access and information to
contraception against their beliefs must be struck down as it runs afoul to the constitutional guarantee of religious
freedom.

The Respondents' Positions

The respondents, on the other hand, contend that the RH Law does not provide that a specific mode or type of
contraceptives be used, be it natural or artificial. It neither imposes nor sanctions any religion or belief.  They point
196

out that the RH Law only seeks to serve the public interest by providing accessible, effective and quality
reproductive health services to ensure maternal and child health, in line with the State's duty to bring to reality the
social justice health guarantees of the Constitution,  and that what the law only prohibits are those acts or practices,
197

which deprive others of their right to reproductive health.  They assert that the assailed law only seeks to guarantee
198

informed choice, which is an assurance that no one will be compelled to violate his religion against his free will. 199

The respondents add that by asserting that only natural family planning should be allowed, the petitioners are
effectively going against the constitutional right to religious freedom, the same right they invoked to assail the
constitutionality of the RH Law.  In other words, by seeking the declaration that the RH Law is unconstitutional, the
200

petitioners are asking that the Court recognize only the Catholic Church's sanctioned natural family planning
methods and impose this on the entire citizenry. 201

With respect to the duty to refer, the respondents insist that the same does not violate the constitutional guarantee
of religious freedom, it being a carefully balanced compromise between the interests of the religious objector, on
one hand, who is allowed to keep silent but is required to refer -and that of the citizen who needs access to
information and who has the right to expect that the health care professional in front of her will act professionally.
For the respondents, the concession given by the State under Section 7 and 23(a)(3) is sufficient accommodation to
the right to freely exercise one's religion without unnecessarily infringing on the rights of others.
202

296
Whatever burden is placed on the petitioner's religious freedom is minimal as the duty to refer is limited in duration,
location and impact. 203

Regarding mandatory family planning seminars under Section 15 , the respondents claim that it is a reasonable
regulation providing an opportunity for would-be couples to have access to information regarding parenthood, family
planning, breastfeeding and infant nutrition. It is argued that those who object to any information received on
account of their attendance in the required seminars are not compelled to accept information given to them. They
are completely free to reject any information they do not agree with and retain the freedom to decide on matters of
family life without intervention of the State.
204

For their part, respondents De Venecia et al., dispute the notion that natural family planning is the only method
acceptable to Catholics and the Catholic hierarchy. Citing various studies and surveys on the matter, they highlight
the changing stand of the Catholic Church on contraception throughout the years and note the general acceptance
of the benefits of contraceptives by its followers in planning their families.

The Church and The State

At the outset, it cannot be denied that we all live in a heterogeneous society. It is made up of people of diverse
ethnic, cultural and religious beliefs and backgrounds. History has shown us that our government, in law and in
practice, has allowed these various religious, cultural, social and racial groups to thrive in a single society together.
It has embraced minority groups and is tolerant towards all - the religious people of different sects and the non-
believers. The undisputed fact is that our people generally believe in a deity, whatever they conceived Him to be,
and to whom they call for guidance and enlightenment in crafting our fundamental law. Thus, the preamble of the
present Constitution reads:

We, the sovereign Filipino people, imploring the aid of Almighty God, in order to build a just and humane society,
and establish a Government that shall embody our ideals and aspirations, promote the common good, conserve and
develop our patrimony, and secure to ourselves and our posterity, the blessings of independence and democracy
under the rule of law and a regime of truth, justice, freedom, love, equality, and peace, do ordain and promulgate
this Constitution.

The Filipino people in "imploring the aid of Almighty God " manifested their spirituality innate in our nature and
consciousness as a people, shaped by tradition and historical experience. As this is embodied in the preamble, it
means that the State recognizes with respect the influence of religion in so far as it instills into the mind the purest
principles of morality.  Moreover, in recognition of the contributions of religion to society, the 1935, 1973 and 1987
205

constitutions contain benevolent and accommodating provisions towards religions such as tax exemption of church
property, salary of religious officers in government institutions, and optional religious instructions in public schools.

The Framers, however, felt the need to put up a strong barrier so that the State would not encroach into the affairs
of the church, and vice-versa. The principle of separation of Church and State was, thus, enshrined in Article II,
Section 6 of the 1987 Constitution, viz:

Section 6. The separation of Church and State shall be inviolable.

Verily, the principle of separation of Church and State is based on mutual respect.  Generally, the State cannot
1âwphi1

meddle in the internal affairs of the church, much less question its faith and dogmas or dictate upon it. It cannot
favor one religion and discriminate against another. On the other hand, the church cannot impose its beliefs and
convictions on the State and the rest of the citizenry. It cannot demand that the nation follow its beliefs, even if it
sincerely believes that they are good for the country.

Consistent with the principle that not any one religion should ever be preferred over another, the Constitution in the
above-cited provision utilizes the term "church" in its generic sense, which refers to a temple, a mosque, an iglesia,
or any other house of God which metaphorically symbolizes a religious organization. Thus, the "Church" means the
religious congregations collectively.

Balancing the benefits that religion affords and the need to provide an ample barrier to protect the State from the
pursuit of its secular objectives, the Constitution lays down the following mandate in Article III, Section 5 and Article
VI, Section 29 (2), of the 1987 Constitution:

Section. 5. No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof.
The free exercise and enjoyment of religious profession and worship, without discrimination or preference, shall
forever be allowed. No religious test shall be required for the exercise of civil or political rights.

Section 29.

xxx.

297
No public money or property shall be appropriated, applied, paid, or employed, directly or indirectly, for the use,
benefit, or support of any sect, church, denomination, sectarian institution, or system of religion, or of any priest,
preacher, minister, other religious teacher, or dignitary as such, except when such priest, preacher, minister, or
dignitary is assigned to the armed forces, or to any penal institution, or government orphanage or leprosarium.

In short, the constitutional assurance of religious freedom provides two guarantees: the Establishment Clause and
the Free Exercise Clause.

The establishment clause "principally prohibits the State from sponsoring any religion or favoring any religion as
against other religions. It mandates a strict neutrality in affairs among religious groups."  Essentially, it prohibits the
206

establishment of a state religion and the use of public resources for the support or prohibition of a religion.

On the other hand, the basis of the free exercise clause is the respect for the inviolability of the human
conscience.  Under this part of religious freedom guarantee, the State is prohibited from unduly interfering with the
207

outside manifestations of one's belief and faith.  Explaining the concept of religious freedom, the Court, in
208

Victoriano v. Elizalde Rope Workers Union  wrote:

209

The constitutional provisions not only prohibits legislation for the support of any religious tenets or the modes of
worship of any sect, thus forestalling compulsion by law of the acceptance of any creed or the practice of any form
of worship (U.S. Ballard, 322 U.S. 78, 88 L. ed. 1148, 1153), but also assures the free exercise of one's chosen
form of religion within limits of utmost amplitude. It has been said that the religion clauses of the Constitution are all
designed to protect the broadest possible liberty of conscience, to allow each man to believe as his conscience
directs, to profess his beliefs, and to live as he believes he ought to live, consistent with the liberty of others and with
the common good. Any legislation whose effect or purpose is to impede the observance of one or all religions, or to
discriminate invidiously between the religions, is invalid, even though the burden may be characterized as being
only indirect. (Sherbert v. Verner, 374 U.S. 398, 10 L.ed.2d 965, 83 S. Ct. 1970) But if the state regulates conduct
by enacting, within its power, a general law which has for its purpose and effect to advance the state's secular
goals, the statute is valid despite its indirect burden on religious observance, unless the state can accomplish its
purpose without imposing such burden. (Braunfeld v. Brown, 366 U.S. 599, 6 Led. 2d. 563, 81 S. Ct. 144; McGowan
v. Maryland, 366 U.S. 420, 444-5 and 449).

As expounded in Escritor,

The establishment and free exercise clauses were not designed to serve contradictory purposes. They have a
single goal-to promote freedom of individual religious beliefs and practices. In simplest terms, the free exercise
clause prohibits government from inhibiting religious beliefs with penalties for religious beliefs and practice, while the
establishment clause prohibits government from inhibiting religious belief with rewards for religious beliefs and
practices. In other words, the two religion clauses were intended to deny government the power to use either the
carrot or the stick to influence individual religious beliefs and practices.
210

Corollary to the guarantee of free exercise of one's religion is the principle that the guarantee of religious freedom is
comprised of two parts: the freedom to believe, and the freedom to act on one's belief. The first part is absolute. As
explained in Gerona v. Secretary of Education: 211

The realm of belief and creed is infinite and limitless bounded only by one's imagination and thought. So is the
freedom of belief, including religious belief, limitless and without bounds. One may believe in most anything,
however strange, bizarre and unreasonable the same may appear to others, even heretical when weighed in the
scales of orthodoxy or doctrinal standards. But between the freedom of belief and the exercise of said belief, there is
quite a stretch of road to travel.
212

The second part however, is limited and subject to the awesome power of the State and can be enjoyed only with
proper regard to the rights of others. It is "subject to regulation where the belief is translated into external acts that
affect the public welfare."213

Legislative Acts and the

Free Exercise Clause

Thus, in case of conflict between the free exercise clause and the State, the Court adheres to the doctrine of
benevolent neutrality. This has been clearly decided by the Court in Estrada v. Escritor, (Escritor)  where it was
214

stated "that benevolent neutrality-accommodation, whether mandatory or permissive, is the spirit, intent and
framework underlying the Philippine Constitution."  In the same case, it was further explained that"
215

The benevolent neutrality theory believes that with respect to these governmental actions, accommodation of
religion may be allowed, not to promote the government's favored form of religion, but to allow individuals and
groups to exercise their religion without hindrance. "The purpose of accommodation is to remove a burden on, or

298
facilitate the exercise of, a person's or institution's religion."  "What is sought under the theory of accommodation is
216

not a declaration of unconstitutionality of a facially neutral law, but an exemption from its application or its
'burdensome effect,' whether by the legislature or the courts." 217

In ascertaining the limits of the exercise of religious freedom, the compelling state interest test is proper. Underlying
218

the compelling state interest test is the notion that free exercise is a fundamental right and that laws burdening it
should be subject to strict scrutiny.  In Escritor, it was written:
219

Philippine jurisprudence articulates several tests to determine these limits. Beginning with the first case on the Free
Exercise Clause, American Bible Society, the Court mentioned the "clear and present danger" test but did not
employ it. Nevertheless, this test continued to be cited in subsequent cases on religious liberty. The Gerona case
then pronounced that the test of permissibility of religious freedom is whether it violates the established institutions
of society and law. The Victoriano case mentioned the "immediate and grave danger" test as well as the doctrine
that a law of general applicability may burden religious exercise provided the law is the least restrictive means to
accomplish the goal of the law. The case also used, albeit inappropriately, the "compelling state interest" test. After
Victoriano , German went back to the Gerona rule. Ebralinag then employed the "grave and immediate danger" test
and overruled the Gerona test. The fairly recent case of Iglesia ni Cristo went back to the " clear and present
danger" test in the maiden case of A merican Bible Society. Not surprisingly, all the cases which employed the
"clear and present danger" or "grave and immediate danger" test involved, in one form or another, religious speech
as this test is often used in cases on freedom of expression. On the other hand, the Gerona and German cases set
the rule that religious freedom will not prevail over established institutions of society and law. Gerona, however,
which was the authority cited by German has been overruled by Ebralinag which employed the "grave and
immediate danger" test . Victoriano was the only case that employed the "compelling state interest" test, but as
explained previously, the use of the test was inappropriate to the facts of the case.

The case at bar does not involve speech as in A merican Bible Society, Ebralinag and Iglesia ni Cristo where the
"clear and present danger" and "grave and immediate danger" tests were appropriate as speech has easily
discernible or immediate effects. The Gerona and German doctrine, aside from having been overruled, is not
congruent with the benevolent neutrality approach, thus not appropriate in this jurisdiction. Similar to Victoriano, the
present case involves purely conduct arising from religious belief. The "compelling state interest" test is proper
where conduct is involved for the whole gamut of human conduct has different effects on the state's interests: some
effects may be immediate and short-term while others delayed and far-reaching. A test that would protect the
interests of the state in preventing a substantive evil, whether immediate or delayed, is therefore necessary.
However, not any interest of the state would suffice to prevail over the right to religious freedom as this is a
fundamental right that enjoys a preferred position in the hierarchy of rights - "the most inalienable and sacred of all
human rights", in the words of Jefferson. This right is sacred for an invocation of the Free Exercise Clause is an
appeal to a higher sovereignty. The entire constitutional order of limited government is premised upon an
acknowledgment of such higher sovereignty, thus the Filipinos implore the "aid of Almighty God in order to build a
just and humane society and establish a government." As held in Sherbert, only the gravest abuses, endangering
paramount interests can limit this fundamental right. A mere balancing of interests which balances a right with just a
colorable state interest is therefore not appropriate. Instead, only a compelling interest of the state can prevail over
the fundamental right to religious liberty. The test requires the state to carry a heavy burden, a compelling one, for to
do otherwise would allow the state to batter religion, especially the less powerful ones until they are destroyed. In
determining which shall prevail between the state's interest and religious liberty, reasonableness shall be the guide.
The "compelling state interest" serves the purpose of revering religious liberty while at the same time affording
protection to the paramount interests of the state. This was the test used in Sherbert which involved conduct, i.e.
refusal to work on Saturdays. In the end, the "compelling state interest" test, by upholding the paramount interests of
the state, seeks to protect the very state, without which, religious liberty will not be preserved. [Emphases in the
original. Underlining supplied.]

The Court's Position

In the case at bench, it is not within the province of the Court to determine whether the use of contraceptives or
one's participation in the support of modem reproductive health measures is moral from a religious standpoint or
whether the same is right or wrong according to one's dogma or belief. For the Court has declared that matters
dealing with "faith, practice, doctrine, form of worship, ecclesiastical law, custom and rule of a church ... are
unquestionably ecclesiastical matters which are outside the province of the civil courts."  The jurisdiction of the
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Court extends only to public and secular morality. Whatever pronouncement the Court makes in the case at bench
should be understood only in this realm where it has authority. Stated otherwise, while the Court stands without
authority to rule on ecclesiastical matters, as vanguard of the Constitution, it does have authority to determine
whether the RH Law contravenes the guarantee of religious freedom.

At first blush, it appears that the RH Law recognizes and respects religion and religious beliefs and convictions. It is
replete with assurances the no one can be compelled to violate the tenets of his religion or defy his religious
convictions against his free will. Provisions in the RH Law respecting religious freedom are the following:

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1. The State recognizes and guarantees the human rights of all persons including their right to equality and
nondiscrimination of these rights, the right to sustainable human development, the right to health which includes
reproductive health, the right to education and information, and the right to choose and make decisions for
themselves in accordance with their religious convictions, ethics, cultural beliefs, and the demands of responsible
parenthood. [Section 2, Declaration of Policy]

2 . The State recognizes marriage as an inviolable social institution and the foundation of the family which in turn is
the foundation of the nation. Pursuant thereto, the State shall defend:

(a) The right of spouses to found a family in accordance with their religious convictions and the demands of
responsible parenthood." [Section 2, Declaration of Policy]

3. The State shall promote and provide information and access, without bias, to all methods of family planning,
including effective natural and modern methods which have been proven medically safe, legal, non-abortifacient,
and effective in accordance with scientific and evidence-based medical research standards such as those registered
and approved by the FDA for the poor and marginalized as identified through the NHTS-PR and other government
measures of identifying marginalization: Provided, That the State shall also provide funding support to promote
modern natural methods of family planning, especially the Billings Ovulation Method, consistent with the needs of
acceptors and their religious convictions. [Section 3(e), Declaration of Policy]

4. The State shall promote programs that: (1) enable individuals and couples to have the number of children they
desire with due consideration to the health, particularly of women, and the resources available and affordable to
them and in accordance with existing laws, public morals and their religious convictions. [Section 3CDJ

5. The State shall respect individuals' preferences and choice of family planning methods that are in accordance
with their religious convictions and cultural beliefs, taking into consideration the State's obligations under various
human rights instruments. [Section 3(h)]

6. Active participation by nongovernment organizations (NGOs) , women's and people's organizations, civil society,
faith-based organizations, the religious sector and communities is crucial to ensure that reproductive health and
population and development policies, plans, and programs will address the priority needs of women, the poor, and
the marginalized. [Section 3(i)]

7. Responsible parenthood refers to the will and ability of a parent to respond to the needs and aspirations of the
family and children. It is likewise a shared responsibility between parents to determine and achieve the desired
number of children, spacing and timing of their children according to their own family life aspirations, taking into
account psychological preparedness, health status, sociocultural and economic concerns consistent with their
religious convictions. [Section 4(v)] (Emphases supplied)

While the Constitution prohibits abortion, laws were enacted allowing the use of contraceptives. To some medical
practitioners, however, the whole idea of using contraceptives is an anathema. Consistent with the principle of
benevolent neutrality, their beliefs should be respected.

The Establishment Clause

and Contraceptives

In the same breath that the establishment clause restricts what the government can do with religion, it also limits
what religious sects can or cannot do with the government. They can neither cause the government to adopt their
particular doctrines as policy for everyone, nor can they not cause the government to restrict other groups. To do so,
in simple terms, would cause the State to adhere to a particular religion and, thus, establishing a state religion.

Consequently, the petitioners are misguided in their supposition that the State cannot enhance its population control
program through the RH Law simply because the promotion of contraceptive use is contrary to their religious beliefs.
Indeed, the State is not precluded to pursue its legitimate secular objectives without being dictated upon by the
policies of any one religion. One cannot refuse to pay his taxes simply because it will cloud his conscience. The
demarcation line between Church and State demands that one render unto Caesar the things that are Caesar's and
unto God the things that are God's. 221

The Free Exercise Clause and the Duty to Refer

While the RH Law, in espousing state policy to promote reproductive health manifestly respects diverse religious
beliefs in line with the Non-Establishment Clause, the same conclusion cannot be reached with respect to Sections
7, 23 and 24 thereof. The said provisions commonly mandate that a hospital or a medical practitioner to immediately
refer a person seeking health care and services under the law to another accessible healthcare provider despite
their conscientious objections based on religious or ethical beliefs.

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In a situation where the free exercise of religion is allegedly burdened by government legislation or practice, the
compelling state interest test in line with the Court's espousal of the Doctrine of Benevolent Neutrality in Escritor,
finds application. In this case, the conscientious objector's claim to religious freedom would warrant an exemption
from obligations under the RH Law, unless the government succeeds in demonstrating a more compelling state
interest in the accomplishment of an important secular objective. Necessarily so, the plea of conscientious objectors
for exemption from the RH Law deserves no less than strict scrutiny.

In applying the test, the first inquiry is whether a conscientious objector's right to religious freedom has been
burdened. As in Escritor, there is no doubt that an intense tug-of-war plagues a conscientious objector. One side
coaxes him into obedience to the law and the abandonment of his religious beliefs, while the other entices him to a
clean conscience yet under the pain of penalty. The scenario is an illustration of the predicament of medical
practitioners whose religious beliefs are incongruent with what the RH Law promotes.

The Court is of the view that the obligation to refer imposed by the RH Law violates the religious belief and
conviction of a conscientious objector. Once the medical practitioner, against his will, refers a patient seeking
information on modem reproductive health products, services, procedures and methods, his conscience is
immediately burdened as he has been compelled to perform an act against his beliefs. As Commissioner Joaquin A.
Bernas (Commissioner Bernas) has written, "at the basis of the free exercise clause is the respect for the
inviolability of the human conscience. 222

Though it has been said that the act of referral is an opt-out clause, it is, however, a false compromise because it
makes pro-life health providers complicit in the performance of an act that they find morally repugnant or offensive.
They cannot, in conscience, do indirectly what they cannot do directly. One may not be the principal, but he is
equally guilty if he abets the offensive act by indirect participation.

Moreover, the guarantee of religious freedom is necessarily intertwined with the right to free speech, it being an
externalization of one's thought and conscience. This in turn includes the right to be silent. With the constitutional
guarantee of religious freedom follows the protection that should be afforded to individuals in communicating their
beliefs to others as well as the protection for simply being silent. The Bill of Rights guarantees the liberty of the
individual to utter what is in his mind and the liberty not to utter what is not in his mind.  While the RH Law seeks to
223

provide freedom of choice through informed consent, freedom of choice guarantees the liberty of the religious
conscience and prohibits any degree of compulsion or burden, whether direct or indirect, in the practice of one's
religion.
224

In case of conflict between the religious beliefs and moral convictions of individuals, on one hand, and the interest of
the State, on the other, to provide access and information on reproductive health products, services, procedures
and methods to enable the people to determine the timing, number and spacing of the birth of their children, the
Court is of the strong view that the religious freedom of health providers, whether public or private, should be
accorded primacy. Accordingly, a conscientious objector should be exempt from compliance with the mandates of
the RH Law. If he would be compelled to act contrary to his religious belief and conviction, it would be violative of
"the principle of non-coercion" enshrined in the constitutional right to free exercise of religion.

Interestingly, on April 24, 2013, Scotland's Inner House of the Court of Session, found in the case of Doogan and
Wood v. NHS Greater Glasgow and Clyde Health Board,  that the midwives claiming to be conscientious objectors
225

under the provisions of Scotland's Abortion Act of 1967, could not be required to delegate, supervise or support staff
on their labor ward who were involved in abortions.  The Inner House stated "that if 'participation' were defined
226

according to whether the person was taking part 'directly' or ' indirectly' this would actually mean more complexity
and uncertainty."227

While the said case did not cover the act of referral, the applicable principle was the same - they could not be forced
to assist abortions if it would be against their conscience or will.

Institutional Health Providers

The same holds true with respect to non-maternity specialty hospitals and hospitals owned and operated by a
religious group and health care service providers. Considering that Section 24 of the RH Law penalizes such
institutions should they fail or refuse to comply with their duty to refer under Section 7 and Section 23(a)(3), the
Court deems that it must be struck down for being violative of the freedom of religion. The same applies to Section
23(a)(l) and (a)(2) in relation to Section 24, considering that in the dissemination of information regarding programs
and services and in the performance of reproductive health procedures, the religious freedom of health care service
providers should be respected.

In the case of Islamic Da'wah Council of the Philippines, Inc. v. Office of the Executive Secretary  it was stressed:
228

Freedom of religion was accorded preferred status by the framers of our fundamental law. And this Court has
consistently affirmed this preferred status, well aware that it is "designed to protect the broadest possible liberty of

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conscience, to allow each man to believe as his conscience directs, to profess his beliefs, and to live as he believes
he ought to live, consistent with the liberty of others and with the common good." 10

The Court is not oblivious to the view that penalties provided by law endeavour to ensure compliance. Without set
consequences for either an active violation or mere inaction, a law tends to be toothless and ineffectual.
Nonetheless, when what is bartered for an effective implementation of a law is a constitutionally-protected right the
Court firmly chooses to stamp its disapproval. The punishment of a healthcare service provider, who fails and/or
refuses to refer a patient to another, or who declines to perform reproductive health procedure on a patient because
incompatible religious beliefs, is a clear inhibition of a constitutional guarantee which the Court cannot allow.

The Implementing Rules and Regulation (RH-IRR)

The last paragraph of Section 5.24 of the RH-IRR reads:

Provided, That skilled health professional such as provincial, city or municipal health officers, chiefs of hospital,
head nurses, supervising midwives, among others, who by virtue of their office are specifically charged with the duty
to implement the provisions of the RPRH Act and these Rules, cannot be considered as conscientious objectors.

This is discriminatory and violative of the equal protection clause. The conscientious objection clause should be
equally protective of the religious belief of public health officers. There is no perceptible distinction why they should
not be considered exempt from the mandates of the law. The protection accorded to other conscientious objectors
should equally apply to all medical practitioners without distinction whether they belong to the public or private
sector. After all, the freedom to believe is intrinsic in every individual and the protective robe that guarantees its free
exercise is not taken off even if one acquires employment in the government.

It should be stressed that intellectual liberty occupies a place inferior to none in the hierarchy of human values. The
mind must be free to think what it wills, whether in the secular or religious sphere, to give expression to its beliefs by
oral discourse or through the media and, thus, seek other candid views in occasions or gatherings or in more
permanent aggrupation. Embraced in such concept then are freedom of religion, freedom of speech, of the press,
assembly and petition, and freedom of association. 229

The discriminatory provision is void not only because no such exception is stated in the RH Law itself but also
because it is violative of the equal protection clause in the Constitution. Quoting respondent Lagman, if there is any
conflict between the RH-IRR and the RH Law, the law must prevail.

Justice Mendoza:

I'll go to another point. The RH law .. .in your Comment- in-Intervention on page 52, you mentioned RH Law is
replete with provisions in upholding the freedom of religion and respecting religious convictions. Earlier, you affirmed
this with qualifications. Now, you have read, I presumed you have read the IRR-Implementing Rules and
Regulations of the RH Bill?

Congressman Lagman:

Yes, Your Honor, I have read but I have to admit, it's a long IRR and I have not thoroughly dissected the nuances of
the provisions.

Justice Mendoza:

I will read to you one provision. It's Section 5.24. This I cannot find in the RH Law. But in the IRR it says: " .... skilled
health professionals such as provincial, city or municipal health officers, chief of hospitals, head nurses, supervising
midwives, among others, who by virtue of their office are specifically charged with the duty to implement the
provisions of the RPRH Act and these Rules, cannot be considered as conscientious objectors." Do you agree with
this?

Congressman Lagman:

I will have to go over again the provisions, Your Honor.

Justice Mendoza:

In other words, public health officers in contrast to the private practitioners who can be conscientious objectors,
skilled health professionals cannot be considered conscientious objectors. Do you agree with this? Is this not
against the constitutional right to the religious belief?

Congressman Lagman:
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Your Honor, if there is any conflict between the IRR and the law, the law must prevail. 230

Compelling State Interest

The foregoing discussion then begets the question on whether the respondents, in defense of the subject
provisions, were able to: 1] demonstrate a more compelling state interest to restrain conscientious objectors in their
choice of services to render; and 2] discharge the burden of proof that the obligatory character of the law is the least
intrusive means to achieve the objectives of the law.

Unfortunately, a deep scrutiny of the respondents' submissions proved to be in vain. The OSG was curiously silent
in the establishment of a more compelling state interest that would rationalize the curbing of a conscientious
objector's right not to adhere to an action contrary to his religious convictions. During the oral arguments, the OSG
maintained the same silence and evasion. The Transcripts of the Stenographic Notes disclose the following:

Justice De Castro:

Let's go back to the duty of the conscientious objector to refer. ..

Senior State Solicitor Hilbay:

Yes, Justice.

Justice De Castro:

... which you are discussing awhile ago with Justice Abad. What is the compelling State interest in imposing this
duty to refer to a conscientious objector which refuses to do so because of his religious belief?

Senior State Solicitor Hilbay:

Ahh, Your Honor, ..

Justice De Castro:

What is the compelling State interest to impose this burden?

Senior State Solicitor Hilbay:

In the first place, Your Honor, I don't believe that the standard is a compelling State interest, this is an ordinary
health legislation involving professionals. This is not a free speech matter or a pure free exercise matter. This is a
regulation by the State of the relationship between medical doctors and their patients. 231

Resultantly, the Court finds no compelling state interest which would limit the free exercise clause of the
conscientious objectors, however few in number. Only the prevention of an immediate and grave danger to the
security and welfare of the community can justify the infringement of religious freedom. If the government fails to
show the seriousness and immediacy of the threat, State intrusion is constitutionally unacceptable. 232

Freedom of religion means more than just the freedom to believe. It also means the freedom to act or not to act
according to what one believes. And this freedom is violated when one is compelled to act against one's belief or is
prevented from acting according to one's belief. 233

Apparently, in these cases, there is no immediate danger to the life or health of an individual in the perceived
scenario of the subject provisions. After all, a couple who plans the timing, number and spacing of the birth of their
children refers to a future event that is contingent on whether or not the mother decides to adopt or use the
information, product, method or supply given to her or whether she even decides to become pregnant at all. On the
other hand, the burden placed upon those who object to contraceptive use is immediate and occurs the moment a
patient seeks consultation on reproductive health matters.

Moreover, granting that a compelling interest exists to justify the infringement of the conscientious objector's
religious freedom, the respondents have failed to demonstrate "the gravest abuses, endangering paramount
interests" which could limit or override a person's fundamental right to religious freedom. Also, the respondents have
not presented any government effort exerted to show that the means it takes to achieve its legitimate state objective
is the least intrusive means.  Other than the assertion that the act of referring would only be momentary,
234

considering that the act of referral by a conscientious objector is the very action being contested as violative of
religious freedom, it behooves the respondents to demonstrate that no other means can be undertaken by the State
to achieve its objective without violating the rights of the conscientious objector. The health concerns of women may

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still be addressed by other practitioners who may perform reproductive health-related procedures with open
willingness and motivation. Suffice it to say, a person who is forced to perform an act in utter reluctance deserves
the protection of the Court as the last vanguard of constitutional freedoms.

At any rate, there are other secular steps already taken by the Legislature to ensure that the right to health is
protected. Considering other legislations as they stand now, R.A . No. 4 729 or the Contraceptive Act, R.A. No. 6365
or "The Population Act of the Philippines" and R.A. No. 9710, otherwise known as "The Magna Carta of Women,"
amply cater to the needs of women in relation to health services and programs. The pertinent provision of Magna
Carta on comprehensive health services and programs for women, in fact, reads:

Section 17. Women's Right to Health. - (a) Comprehensive Health Services. - The State shall, at all times, provide
for a comprehensive, culture-sensitive, and gender-responsive health services and programs covering all stages of
a woman's life cycle and which addresses the major causes of women's mortality and morbidity: Provided, That in
the provision for comprehensive health services, due respect shall be accorded to women's religious convictions,
the rights of the spouses to found a family in accordance with their religious convictions, and the demands of
responsible parenthood, and the right of women to protection from hazardous drugs, devices, interventions, and
substances.

Access to the following services shall be ensured:

(1) Maternal care to include pre- and post-natal services to address pregnancy and infant health and
nutrition;

(2) Promotion of breastfeeding;

(3) Responsible, ethical, legal, safe, and effective methods of family planning;

(4) Family and State collaboration in youth sexuality education and health services without prejudice to the
primary right and duty of parents to educate their children;

(5) Prevention and management of reproductive tract infections, including sexually transmitted diseases,
HIV, and AIDS;

(6) Prevention and management of reproductive tract cancers like breast and cervical cancers, and other
gynecological conditions and disorders;

(7) Prevention of abortion and management of pregnancy-related complications;

(8) In cases of violence against women and children, women and children victims and survivors shall be
provided with comprehensive health services that include psychosocial, therapeutic, medical, and legal
interventions and assistance towards healing, recovery, and empowerment;

(9) Prevention and management of infertility and sexual dysfunction pursuant to ethical norms and medical
standards;

(10) Care of the elderly women beyond their child-bearing years; and

(11) Management, treatment, and intervention of mental health problems of women and girls. In addition,
healthy lifestyle activities are encouraged and promoted through programs and projects as strategies in the
prevention of diseases.

(b) Comprehensive Health Information and Education. - The State shall provide women in all sectors with
appropriate, timely, complete, and accurate information and education on all the above-stated aspects of women's
health in government education and training programs, with due regard to the following:

(1) The natural and primary right and duty of parents in the rearing of the youth and the development of
moral character and the right of children to be brought up in an atmosphere of morality and rectitude for the
enrichment and strengthening of character;

(2) The formation of a person's sexuality that affirms human dignity; and

(3) Ethical, legal, safe, and effective family planning methods including fertility awareness.

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As an afterthought, Asst. Solicitor General Hilbay eventually replied that the compelling state interest was "Fifteen
maternal deaths per day, hundreds of thousands of unintended pregnancies, lives changed, x x x."  He, however,
235

failed to substantiate this point by concrete facts and figures from reputable sources.

The undisputed fact, however, is that the World Health Organization reported that the Filipino maternal mortality rate
dropped to 48 percent from 1990 to 2008,   although there was still no RH Law at that time. Despite such
236

revelation, the proponents still insist that such number of maternal deaths constitute a compelling state interest.

Granting that there are still deficiencies and flaws in the delivery of social healthcare programs for Filipino women,
they could not be solved by a measure that puts an unwarrantable stranglehold on religious beliefs in exchange for
blind conformity.

Exception: Life Threatening Cases

All this notwithstanding, the Court properly recognizes a valid exception set forth in the law. While generally
healthcare service providers cannot be forced to render reproductive health care procedures if doing it would
contravene their religious beliefs, an exception must be made in life-threatening cases that require the performance
of emergency procedures. In these situations, the right to life of the mother should be given preference, considering
that a referral by a medical practitioner would amount to a denial of service, resulting to unnecessarily placing the
life of a mother in grave danger. Thus, during the oral arguments, Atty. Liban, representing CFC, manifested: "the
forced referral clause that we are objecting on grounds of violation of freedom of religion does not contemplate an
emergency." 237

In a conflict situation between the life of the mother and the life of a child, the doctor is morally obliged always to try
to save both lives. If, however, it is impossible, the resulting death to one should not be deliberate. Atty. Noche
explained:

Principle of Double-Effect. - May we please remind the principal author of the RH Bill in the House of
Representatives of the principle of double-effect wherein intentional harm on the life of either the mother of the child
is never justified to bring about a "good" effect. In a conflict situation between the life of the child and the life of the
mother, the doctor is morally obliged always to try to save both lives. However, he can act in favor of one (not
necessarily the mother) when it is medically impossible to save both, provided that no direct harm is intended to the
other. If the above principles are observed, the loss of the child's life or the mother's life is not intentional and,
therefore, unavoidable. Hence, the doctor would not be guilty of abortion or murder. The mother is never pitted
against the child because both their lives are equally valuable. 238

Accordingly, if it is necessary to save the life of a mother, procedures endangering the life of the child may be
resorted to even if is against the religious sentiments of the medical practitioner. As quoted above, whatever burden
imposed upon a medical practitioner in this case would have been more than justified considering the life he would
be able to save.

Family Planning Seminars

Anent the requirement imposed under Section 15  as a condition for the issuance of a marriage license, the Court
239

finds the same to be a reasonable exercise of police power by the government. A cursory reading of the assailed
provision bares that the religious freedom of the petitioners is not at all violated. All the law requires is for would-be
spouses to attend a seminar on parenthood, family planning breastfeeding and infant nutrition. It does not even
mandate the type of family planning methods to be included in the seminar, whether they be natural or artificial. As
correctly noted by the OSG, those who receive any information during their attendance in the required seminars are
not compelled to accept the information given to them, are completely free to reject the information they find
unacceptable, and retain the freedom to decide on matters of family life without the intervention of the State.

4-The Family and the Right to Privacy

Petitioner CFC assails the RH Law because Section 23(a) (2) (i) thereof violates the provisions of the Constitution
by intruding into marital privacy and autonomy. It argues that it cultivates disunity and fosters animosity in the family
rather than promote its solidarity and total development. 240

The Court cannot but agree.

The 1987 Constitution is replete with provisions strengthening the family as it is the basic social institution. In fact,
one article, Article XV, is devoted entirely to the family.

ARTICLE XV
THE FAMILY

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Section 1. The State recognizes the Filipino family as the foundation of the nation. Accordingly, it shall strengthen its
solidarity and actively promote its total development.

Section 2. Marriage, as an inviolable social institution, is the foundation of the family and shall be protected by the
State.

Section 3. The State shall defend:

The right of spouses to found a family in accordance with their religious convictions and the demands of responsible
parenthood;

The right of children to assistance, including proper care and nutrition, and special protection from all forms of
neglect, abuse, cruelty, exploitation and other conditions prejudicial to their development;

The right of the family to a family living wage and income; and

The right of families or family assoc1at1ons to participate in the planning and implementation of policies and
programs that affect them.

In this case, the RH Law, in its not-so-hidden desire to control population growth, contains provisions which tend to
wreck the family as a solid social institution. It bars the husband and/or the father from participating in the decision
making process regarding their common future progeny. It likewise deprives the parents of their authority over their
minor daughter simply because she is already a parent or had suffered a miscarriage.

The Family and Spousal Consent

Section 23(a) (2) (i) of the RH Law states:

The following acts are prohibited:

(a) Any health care service provider, whether public or private, who shall: ...

(2) refuse to perform legal and medically-safe reproductive health procedures on any person of legal age on the
ground of lack of consent or authorization of the following persons in the following instances:

(i) Spousal consent in case of married persons: provided, That in case of disagreement, the decision of the one
undergoing the procedures shall prevail. [Emphasis supplied]

The above provision refers to reproductive health procedures like tubal litigation and vasectomy which, by their very
nature, should require mutual consent and decision between the husband and the wife as they affect issues
intimately related to the founding of a family. Section 3, Art. XV of the Constitution espouses that the State shall
defend the "right of the spouses to found a family." One person cannot found a family. The right, therefore, is shared
by both spouses. In the same Section 3, their right "to participate in the planning and implementation of policies and
programs that affect them " is equally recognized.

The RH Law cannot be allowed to infringe upon this mutual decision-making. By giving absolute authority to the
spouse who would undergo a procedure, and barring the other spouse from participating in the decision would drive
a wedge between the husband and wife, possibly result in bitter animosity, and endanger the marriage and the
family, all for the sake of reducing the population. This would be a marked departure from the policy of the State to
protect marriage as an inviolable social institution.
241

Decision-making involving a reproductive health procedure is a private matter which belongs to the couple, not just
one of them. Any decision they would reach would affect their future as a family because the size of the family or the
number of their children significantly matters. The decision whether or not to undergo the procedure belongs
exclusively to, and shared by, both spouses as one cohesive unit as they chart their own destiny. It is a
constitutionally guaranteed private right. Unless it prejudices the State, which has not shown any compelling
interest, the State should see to it that they chart their destiny together as one family.

As highlighted by Justice Leonardo-De Castro, Section 19( c) of R.A. No. 9710, otherwise known as the "Magna
Carta for Women," provides that women shall have equal rights in all matters relating to marriage and family
relations, including the joint decision on the number and spacing of their children. Indeed, responsible parenthood,
as Section 3(v) of the RH Law states, is a shared responsibility between parents. Section 23(a)(2)(i) of the RH Law
should not be allowed to betray the constitutional mandate to protect and strengthen the family by giving to only one
spouse the absolute authority to decide whether to undergo reproductive health procedure. 242

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The right to chart their own destiny together falls within the protected zone of marital privacy and such state
intervention would encroach into the zones of spousal privacy guaranteed by the Constitution. In our jurisdiction, the
right to privacy was first recognized in Marje v. Mutuc,  where the Court, speaking through Chief Justice Fernando,
243

held that "the right to privacy as such is accorded recognition independently of its identification with liberty; in itself, it
is fully deserving of constitutional protection."  Marje adopted the ruling of the US Supreme Court in Griswold v.
244

Connecticut,  where Justice William O. Douglas wrote:

245

We deal with a right of privacy older than the Bill of Rights -older than our political parties, older than our school
system. Marriage is a coming together for better or for worse, hopefully enduring, and intimate to the degree of
being sacred. It is an association that promotes a way of life, not causes; a harmony in living, not political faiths; a
bilateral loyalty, not commercial or social projects. Yet it is an association for as noble a purpose as any involved in
our prior decisions.

Ironically, Griswold invalidated a Connecticut statute which made the use of contraceptives a criminal offense on the
ground of its amounting to an unconstitutional invasion of the right to privacy of married persons. Nevertheless, it
recognized the zone of privacy rightfully enjoyed by couples. Justice Douglas in Grisworld wrote that "specific
guarantees in the Bill of Rights have penumbras, formed by emanations from those guarantees that help give them
life and substance. Various guarantees create zones of privacy." 246

At any rate, in case of conflict between the couple, the courts will decide.

The Family and Parental Consent

Equally deplorable is the debarment of parental consent in cases where the minor, who will be undergoing a
procedure, is already a parent or has had a miscarriage. Section 7 of the RH law provides:

SEC. 7. Access to Family Planning. – x x x.

No person shall be denied information and access to family planning services, whether natural or artificial: Provided,
That minors will not be allowed access to modern methods of family planning without written consent from their
parents or guardian/s except when the minor is already a parent or has had a miscarriage.

There can be no other interpretation of this provision except that when a minor is already a parent or has had a
miscarriage, the parents are excluded from the decision making process of the minor with regard to family planning.
Even if she is not yet emancipated, the parental authority is already cut off just because there is a need to tame
population growth.

It is precisely in such situations when a minor parent needs the comfort, care, advice, and guidance of her own
parents. The State cannot replace her natural mother and father when it comes to providing her needs and comfort.
To say that their consent is no longer relevant is clearly anti-family. It does not promote unity in the family. It is an
affront to the constitutional mandate to protect and strengthen the family as an inviolable social institution.

More alarmingly, it disregards and disobeys the constitutional mandate that "the natural and primary right and duty
of parents in the rearing of the youth for civic efficiency and the development of moral character shall receive the
support of the Government."  In this regard, Commissioner Bernas wrote:
247

The 1987 provision has added the adjective "primary" to modify the right of parents. It imports the assertion that the
right of parents is superior to that of the State.  [Emphases supplied]
248

To insist on a rule that interferes with the right of parents to exercise parental control over their minor-child or the
right of the spouses to mutually decide on matters which very well affect the very purpose of marriage, that is, the
establishment of conjugal and family life, would result in the violation of one's privacy with respect to his family. It
would be dismissive of the unique and strongly-held Filipino tradition of maintaining close family ties and violative of
the recognition that the State affords couples entering into the special contract of marriage to as one unit in forming
the foundation of the family and society.

The State cannot, without a compelling state interest, take over the role of parents in the care and custody of a
minor child, whether or not the latter is already a parent or has had a miscarriage. Only a compelling state interest
can justify a state substitution of their parental authority.

First Exception: Access to Information

Whether with respect to the minor referred to under the exception provided in the second paragraph of Section 7 or
with respect to the consenting spouse under Section 23(a)(2)(i), a distinction must be made. There must be a
differentiation between access to information about family planning services, on one hand, and access to the
reproductive health procedures and modern family planning methods themselves, on the other. Insofar as access to

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information is concerned, the Court finds no constitutional objection to the acquisition of information by the minor
referred to under the exception in the second paragraph of Section 7 that would enable her to take proper care of
her own body and that of her unborn child. After all, Section 12, Article II of the Constitution mandates the State to
protect both the life of the mother as that of the unborn child. Considering that information to enable a person to
make informed decisions is essential in the protection and maintenance of ones' health, access to such information
with respect to reproductive health must be allowed. In this situation, the fear that parents might be deprived of their
parental control is unfounded because they are not prohibited to exercise parental guidance and control over their
minor child and assist her in deciding whether to accept or reject the information received.

Second Exception: Life Threatening Cases

As in the case of the conscientious objector, an exception must be made in life-threatening cases that require the
performance of emergency procedures. In such cases, the life of the minor who has already suffered a miscarriage
and that of the spouse should not be put at grave risk simply for lack of consent. It should be emphasized that no
person should be denied the appropriate medical care urgently needed to preserve the primordial right, that is, the
right to life.

In this connection, the second sentence of Section 23(a)(2)(ii)  should be struck down. By effectively limiting the
249

requirement of parental consent to "only in elective surgical procedures," it denies the parents their right of parental
authority in cases where what is involved are "non-surgical procedures." Save for the two exceptions discussed
above, and in the case of an abused child as provided in the first sentence of Section 23(a)(2)(ii), the parents should
not be deprived of their constitutional right of parental authority. To deny them of this right would be an affront to the
constitutional mandate to protect and strengthen the family.

5 - Academic Freedom

It is asserted that Section 14 of the RH Law, in relation to Section 24 thereof, mandating the teaching of Age-and
Development-Appropriate Reproductive Health Education under threat of fine and/or imprisonment violates the
principle of academic freedom . According to the petitioners, these provisions effectively force educational
institutions to teach reproductive health education even if they believe that the same is not suitable to be taught to
their students.  Citing various studies conducted in the United States and statistical data gathered in the country,
250

the petitioners aver that the prevalence of contraceptives has led to an increase of out-of-wedlock births; divorce
and breakdown of families; the acceptance of abortion and euthanasia; the "feminization of poverty"; the aging of
society; and promotion of promiscuity among the youth. 251

At this point, suffice it to state that any attack on the validity of Section 14 of the RH Law is premature because the
Department of Education, Culture and Sports has yet to formulate a curriculum on age-appropriate reproductive
health education. One can only speculate on the content, manner and medium of instruction that will be used to
educate the adolescents and whether they will contradict the religious beliefs of the petitioners and validate their
apprehensions. Thus, considering the premature nature of this particular issue, the Court declines to rule on its
constitutionality or validity.

At any rate, Section 12, Article II of the 1987 Constitution provides that the natural and primary right and duty of
parents in the rearing of the youth for civic efficiency and development of moral character shall receive the support
of the Government. Like the 1973 Constitution and the 1935 Constitution, the 1987 Constitution affirms the State
recognition of the invaluable role of parents in preparing the youth to become productive members of society.
Notably, it places more importance on the role of parents in the development of their children by recognizing that
said role shall be "primary," that is, that the right of parents in upbringing the youth is superior to that of the State.
252

It is also the inherent right of the State to act as parens patriae to aid parents in the moral development of the youth.
Indeed, the Constitution makes mention of the importance of developing the youth and their important role in nation
building.  Considering that Section 14 provides not only for the age-appropriate-reproductive health education, but
253

also for values formation; the development of knowledge and skills in self-protection against discrimination; sexual
abuse and violence against women and children and other forms of gender based violence and teen pregnancy;
physical, social and emotional changes in adolescents; women's rights and children's rights; responsible teenage
behavior; gender and development; and responsible parenthood, and that Rule 10, Section 11.01 of the RH-IRR
and Section 4(t) of the RH Law itself provides for the teaching of responsible teenage behavior, gender sensitivity
and physical and emotional changes among adolescents - the Court finds that the legal mandate provided under the
assailed provision supplements, rather than supplants, the rights and duties of the parents in the moral development
of their children.

Furthermore, as Section 14 also mandates that the mandatory reproductive health education program shall be
developed in conjunction with parent-teacher-community associations, school officials and other interest groups, it
could very well be said that it will be in line with the religious beliefs of the petitioners. By imposing such a condition,
it becomes apparent that the petitioners' contention that Section 14 violates Article XV, Section 3(1) of the
Constitution is without merit.254

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While the Court notes the possibility that educators might raise their objection to their participation in the
reproductive health education program provided under Section 14 of the RH Law on the ground that the same
violates their religious beliefs, the Court reserves its judgment should an actual case be filed before it.

6 - Due Process

The petitioners contend that the RH Law suffers from vagueness and, thus violates the due process clause of the
Constitution. According to them, Section 23 (a)(l) mentions a "private health service provider" among those who may
be held punishable but does not define who is a "private health care service provider." They argue that confusion
further results since Section 7 only makes reference to a "private health care institution."

The petitioners also point out that Section 7 of the assailed legislation exempts hospitals operated by religious
groups from rendering reproductive health service and modern family planning methods. It is unclear, however, if
these institutions are also exempt from giving reproductive health information under Section 23(a)(l), or from
rendering reproductive health procedures under Section 23(a)(2).

Finally, it is averred that the RH Law punishes the withholding, restricting and providing of incorrect information, but
at the same time fails to define "incorrect information."

The arguments fail to persuade.

A statute or act suffers from the defect of vagueness when it lacks comprehensible standards that men of common
intelligence must necessarily guess its meaning and differ as to its application. It is repugnant to the Constitution in
two respects: (1) it violates due process for failure to accord persons, especially the parties targeted by it, fair notice
of the conduct to avoid; and (2) it leaves law enforcers unbridled discretion in carrying out its provisions and
becomes an arbitrary flexing of the Government muscle.  Moreover, in determining whether the words used in a
255

statute are vague, words must not only be taken in accordance with their plain meaning alone, but also in relation to
other parts of the statute. It is a rule that every part of the statute must be interpreted with reference to the context,
that is, every part of it must be construed together with the other parts and kept subservient to the general intent of
the whole enactment. 256

As correctly noted by the OSG, in determining the definition of "private health care service provider," reference must
be made to Section 4(n) of the RH Law which defines a "public health service provider," viz:

(n) Public health care service provider refers to: (1) public health care institution, which is duly licensed and
accredited and devoted primarily to the maintenance and operation of facilities for health promotion, disease
prevention, diagnosis, treatment and care of individuals suffering from illness, disease, injury, disability or deformity,
or in need of obstetrical or other medical and nursing care; (2) public health care professional, who is a doctor of
medicine, a nurse or a midvvife; (3) public health worker engaged in the delivery of health care services; or (4)
barangay health worker who has undergone training programs under any accredited government and NGO and who
voluntarily renders primarily health care services in the community after having been accredited to function as such
by the local health board in accordance with the guidelines promulgated by the Department of Health (DOH) .

Further, the use of the term "private health care institution" in Section 7 of the law, instead of "private health care
service provider," should not be a cause of confusion for the obvious reason that they are used synonymously.

The Court need not belabor the issue of whether the right to be exempt from being obligated to render reproductive
health service and modem family planning methods, includes exemption from being obligated to give reproductive
health information and to render reproductive health procedures. Clearly, subject to the qualifications and
exemptions earlier discussed, the right to be exempt from being obligated to render reproductive health service and
modem family planning methods, necessarily includes exemption from being obligated to give reproductive health
information and to render reproductive health procedures. The terms "service" and "methods" are broad enough to
include the providing of information and the rendering of medical procedures.

The same can be said with respect to the contention that the RH Law punishes health care service providers who
intentionally withhold, restrict and provide incorrect information regarding reproductive health programs and
services. For ready reference, the assailed provision is hereby quoted as follows:

SEC. 23. Prohibited Acts. - The following acts are prohibited:

(a) Any health care service provider, whether public or private, who shall:

(1) Knowingly withhold information or restrict the dissemination thereof, and/ or intentionally provide incorrect
information regarding programs and services on reproductive health including the right to informed choice and
access to a full range of legal, medically-safe, non-abortifacient and effective family planning methods;

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From its plain meaning, the word "incorrect" here denotes failing to agree with a copy or model or with established
rules; inaccurate, faulty; failing to agree with the requirements of duty, morality or propriety; and failing to coincide
with the truth.   On the other hand, the word "knowingly" means with awareness or deliberateness that is
257

intentional.  Used together in relation to Section 23(a)(l), they connote a sense of malice and ill motive to mislead or
258

misrepresent the public as to the nature and effect of programs and services on reproductive health. Public health
and safety demand that health care service providers give their honest and correct medical information in
accordance with what is acceptable in medical practice. While health care service providers are not barred from
expressing their own personal opinions regarding the programs and services on reproductive health, their right must
be tempered with the need to provide public health and safety. The public deserves no less.

7-Egual Protection

The petitioners also claim that the RH Law violates the equal protection clause under the Constitution as it
discriminates against the poor because it makes them the primary target of the government program that promotes
contraceptive use . They argue that, rather than promoting reproductive health among the poor, the RH Law
introduces contraceptives that would effectively reduce the number of the poor. Their bases are the various
provisions in the RH Law dealing with the poor, especially those mentioned in the guiding principles  and definition
259

of terms  of the law.

260

They add that the exclusion of private educational institutions from the mandatory reproductive health education
program imposed by the RH Law renders it unconstitutional.

In Biraogo v. Philippine Truth Commission,  the Court had the occasion to expound on the concept of equal
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protection. Thus:

One of the basic principles on which this government was founded is that of the equality of right which is embodied
in Section 1, Article III of the 1987 Constitution. The equal protection of the laws is embraced in the concept of due
process, as every unfair discrimination offends the requirements of justice and fair play. It has been embodied in a
separate clause, however, to provide for a more specific guaranty against any form of undue favoritism or hostility
from the government. Arbitrariness in general may be challenged on the basis of the due process clause. But if the
particular act assailed partakes of an unwarranted partiality or prejudice, the sharper weapon to cut it down is the
equal protection clause.

"According to a long line of decisions, equal protection simply requires that all persons or things similarly situated
should be treated alike, both as to rights conferred and responsibilities imposed." It "requires public bodies and inst
itutions to treat similarly situated individuals in a similar manner." "The purpose of the equal protection clause is to
secure every person within a state's jurisdiction against intentional and arbitrary discrimination, whether occasioned
by the express terms of a statue or by its improper execution through the state's duly constituted authorities." "In
other words, the concept of equal justice under the law requires the state to govern impartially, and it may not draw
distinctions between individuals solely on differences that are irrelevant to a legitimate governmental objective."

The equal protection clause is aimed at all official state actions, not just those of the legislature. Its inhibitions cover
all the departments of the government including the political and executive departments, and extend to all actions of
a state denying equal protection of the laws, through whatever agency or whatever guise is taken.

It, however, does not require the universal application of the laws to all persons or things without distinction. What it
simply requires is equality among equals as determined according to a valid classification. Indeed, the equal
protection clause permits classification. Such classification, however, to be valid must pass the test of
reasonableness. The test has four requisites: (1) The classification rests on substantial distinctions; (2) It is germane
to the purpose of the law; (3) It is not limited to existing conditions only; and (4) It applies equally to all members of
the same class. "Superficial differences do not make for a valid classification."

For a classification to meet the requirements of constitutionality, it must include or embrace all persons who
naturally belong to the class. "The classification will be regarded as invalid if all the members of the class are not
similarly treated, both as to rights conferred and obligations imposed. It is not necessary that the classification be
made with absolute symmetry, in the sense that the members of the class should possess the same characteristics
in equal degree. Substantial similarity will suffice; and as long as this is achieved, all those covered by the
classification are to be treated equally. The mere fact that an individual belonging to a class differs from the other
members, as long as that class is substantially distinguishable from all others, does not justify the non-application of
the law to him."

The classification must not be based on existing circumstances only, or so constituted as to preclude addition to the
number included in the class. It must be of such a nature as to embrace all those who may thereafter be in similar
circumstances and conditions. It must not leave out or "underinclude" those that should otherwise fall into a certain
classification. [Emphases supplied; citations excluded]

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To provide that the poor are to be given priority in the government's reproductive health care program is not a
violation of the equal protection clause. In fact, it is pursuant to Section 11, Article XIII of the Constitution which
recognizes the distinct necessity to address the needs of the underprivileged by providing that they be given priority
in addressing the health development of the people. Thus:

Section 11. The State shall adopt an integrated and comprehensive approach to health development which shall
endeavor to make essential goods, health and other social services available to all the people at affordable cost.
There shall be priority for the needs of the underprivileged, sick, elderly, disabled, women, and children. The State
shall endeavor to provide free medical care to paupers.

It should be noted that Section 7 of the RH Law prioritizes poor and marginalized couples who are suffering from
fertility issues and desire to have children. There is, therefore, no merit to the contention that the RH Law only seeks
to target the poor to reduce their number. While the RH Law admits the use of contraceptives, it does not, as
elucidated above, sanction abortion. As Section 3(1) explains, the "promotion and/or stabilization of the population
growth rate is incidental to the advancement of reproductive health."

Moreover, the RH Law does not prescribe the number of children a couple may have and does not impose
conditions upon couples who intend to have children. While the petitioners surmise that the assailed law seeks to
charge couples with the duty to have children only if they would raise them in a truly humane way, a deeper look
into its provisions shows that what the law seeks to do is to simply provide priority to the poor in the implementation
of government programs to promote basic reproductive health care.

With respect to the exclusion of private educational institutions from the mandatory reproductive health education
program under Section 14, suffice it to state that the mere fact that the children of those who are less fortunate
attend public educational institutions does not amount to substantial distinction sufficient to annul the assailed
provision. On the other hand, substantial distinction rests between public educational institutions and private
educational institutions, particularly because there is a need to recognize the academic freedom of private
educational institutions especially with respect to religious instruction and to consider their sensitivity towards the
teaching of reproductive health education.

8-Involuntary Servitude

The petitioners also aver that the RH Law is constitutionally infirm as it violates the constitutional prohibition against
involuntary servitude. They posit that Section 17 of the assailed legislation requiring private and non-government
health care service providers to render forty-eight (48) hours of pro bono reproductive health services, actually
amounts to involuntary servitude because it requires medical practitioners to perform acts against their will. 262

The OSG counters that the rendition of pro bono services envisioned in Section 17 can hardly be considered as
forced labor analogous to slavery, as reproductive health care service providers have the discretion as to the
manner and time of giving pro bono services. Moreover, the OSG points out that the imposition is within the powers
of the government, the accreditation of medical practitioners with PhilHealth being a privilege and not a right.

The point of the OSG is well-taken.

It should first be mentioned that the practice of medicine is undeniably imbued with public interest that it is both a
power and a duty of the State to control and regulate it in order to protect and promote the public welfare. Like the
legal profession, the practice of medicine is not a right but a privileged burdened with conditions as it directly
involves the very lives of the people. A fortiori, this power includes the power of Congress  to prescribe the
263

qualifications for the practice of professions or trades which affect the public welfare, the public health, the public
morals, and the public safety; and to regulate or control such professions or trades, even to the point of revoking
such right altogether.264

Moreover, as some petitioners put it, the notion of involuntary servitude connotes the presence of force, threats,
intimidation or other similar means of coercion and compulsion.  A reading of the assailed provision, however,
265

reveals that it only encourages private and non- government reproductive healthcare service providers to render pro
bono service. Other than non-accreditation with PhilHealth, no penalty is imposed should they choose to do
otherwise. Private and non-government reproductive healthcare service providers also enjoy the liberty to choose
which kind of health service they wish to provide, when, where and how to provide it or whether to provide it all.
Clearly, therefore, no compulsion, force or threat is made upon them to render pro bono service against their will.
While the rendering of such service was made a prerequisite to accreditation with PhilHealth, the Court does not
consider the same to be an unreasonable burden, but rather, a necessary incentive imposed by Congress in the
furtherance of a perceived legitimate state interest.

Consistent with what the Court had earlier discussed, however, it should be emphasized that conscientious
objectors are exempt from this provision as long as their religious beliefs and convictions do not allow them to
render reproductive health service, pro bona or otherwise.

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9-Delegation of Authority to the FDA

The petitioners likewise question the delegation by Congress to the FDA of the power to determine whether or not a
supply or product is to be included in the Essential Drugs List (EDL). 266

The Court finds nothing wrong with the delegation. The FDA does not only have the power but also the competency
to evaluate, register and cover health services and methods. It is the only government entity empowered to render
such services and highly proficient to do so. It should be understood that health services and methods fall under the
gamut of terms that are associated with what is ordinarily understood as "health products."

In this connection, Section 4 of R.A. No. 3 720, as amended by R.A. No. 9711 reads:

SEC. 4. To carry out the provisions of this Act, there is hereby created an office to be called the Food and Drug
Administration (FDA) in the Department of Health (DOH). Said Administration shall be under the Office of the
Secretary and shall have the following functions, powers and duties:

"(a) To administer the effective implementation of this Act and of the rules and regulations issued pursuant
to the same;

"(b) To assume primary jurisdiction in the collection of samples of health products;

"(c) To analyze and inspect health products in connection with the implementation of this Act;

"(d) To establish analytical data to serve as basis for the preparation of health products standards, and to
recommend standards of identity, purity, safety, efficacy, quality and fill of container;

"(e) To issue certificates of compliance with technical requirements to serve as basis for the issuance of
appropriate authorization and spot-check for compliance with regulations regarding operation of
manufacturers, importers, exporters, distributors, wholesalers, drug outlets, and other establishments and
facilities of health products, as determined by the FDA;

"x x x

"(h) To conduct appropriate tests on all applicable health products prior to the issuance of appropriate
authorizations to ensure safety, efficacy, purity, and quality;

"(i) To require all manufacturers, traders, distributors, importers, exporters, wholesalers, retailers,
consumers, and non-consumer users of health products to report to the FDA any incident that reasonably
indicates that said product has caused or contributed to the death, serious illness or serious injury to a
consumer, a patient, or any person;

"(j) To issue cease and desist orders motu propio or upon verified complaint for health products, whether or
not registered with the FDA Provided, That for registered health products, the cease and desist order is valid
for thirty (30) days and may be extended for sixty ( 60) days only after due process has been observed;

"(k) After due process, to order the ban, recall, and/or withdrawal of any health product found to have
caused death, serious illness or serious injury to a consumer or patient, or is found to be imminently
injurious, unsafe, dangerous, or grossly deceptive, and to require all concerned to implement the risk
management plan which is a requirement for the issuance of the appropriate authorization;

x x x.

As can be gleaned from the above, the functions, powers and duties of the FDA are specific to enable the agency to
carry out the mandates of the law. Being the country's premiere and sole agency that ensures the safety of food and
medicines available to the public, the FDA was equipped with the necessary powers and functions to make it
effective. Pursuant to the principle of necessary implication, the mandate by Congress to the FDA to ensure public
health and safety by permitting only food and medicines that are safe includes "service" and "methods." From the
declared policy of the RH Law, it is clear that Congress intended that the public be given only those medicines that
are proven medically safe, legal, non-abortifacient, and effective in accordance with scientific and evidence-based
medical research standards. The philosophy behind the permitted delegation was explained in Echagaray v.
Secretary of Justice,  as follows:
267

The reason is the increasing complexity of the task of the government and the growing inability of the legislature to
cope directly with the many problems demanding its attention. The growth of society has ramified its activities and
created peculiar and sophisticated problems that the legislature cannot be expected reasonably to comprehend.
Specialization even in legislation has become necessary. To many of the problems attendant upon present day
312
undertakings, the legislature may not have the competence, let alone the interest and the time, to provide the
required direct and efficacious, not to say specific solutions.

10- Autonomy of Local Governments and the Autonomous Region

of Muslim Mindanao (ARMM)

As for the autonomy of local governments, the petitioners claim that the RH Law infringes upon the powers devolved
to local government units (LGUs) under Section 17 of the Local Government Code. Said Section 17 vested upon the
LGUs the duties and functions pertaining to the delivery of basic services and facilities, as follows:

SECTION 17. Basic Services and Facilities. –

(a) Local government units shall endeavor to be self-reliant and shall continue exercising the powers and
discharging the duties and functions currently vested upon them. They shall also discharge the functions
and responsibilities of national agencies and offices devolved to them pursuant to this Code. Local
government units shall likewise exercise such other powers and discharge such other functions and
responsibilities as are necessary, appropriate, or incidental to efficient and effective provision of the basic
services and facilities enumerated herein.

(b) Such basic services and facilities include, but are not limited to, x x x.

While the aforementioned provision charges the LGUs to take on the functions and responsibilities that have
already been devolved upon them from the national agencies on the aspect of providing for basic services
and facilities in their respective jurisdictions, paragraph (c) of the same provision provides a categorical
exception of cases involving nationally-funded projects, facilities, programs and services.  Thus:
268

(c) Notwithstanding the provisions of subsection (b) hereof, public works and infrastructure projects and
other facilities, programs and services funded by the National Government under the annual General
Appropriations Act, other special laws, pertinent executive orders, and those wholly or partially funded from
foreign sources, are not covered under this Section, except in those cases where the local government unit
concerned is duly designated as the implementing agency for such projects, facilities, programs and
services. [Emphases supplied]

The essence of this express reservation of power by the national government is that, unless an LGU is particularly
designated as the implementing agency, it has no power over a program for which funding has been provided by the
national government under the annual general appropriations act, even if the program involves the delivery of basic
services within the jurisdiction of the LGU.  A complete relinquishment of central government powers on the matter
269

of providing basic facilities and services cannot be implied as the Local Government Code itself weighs against it. 270

In this case, a reading of the RH Law clearly shows that whether it pertains to the establishment of health care
facilities,  the hiring of skilled health professionals,  or the training of barangay health workers,  it will be the
271 272 273

national government that will provide for the funding of its implementation. Local autonomy is not absolute. The
national government still has the say when it comes to national priority programs which the local government is
called upon to implement like the RH Law.

Moreover, from the use of the word "endeavor," the LG Us are merely encouraged to provide these services. There
is nothing in the wording of the law which can be construed as making the availability of these services mandatory
for the LGUs. For said reason, it cannot be said that the RH Law amounts to an undue encroachment by the
national government upon the autonomy enjoyed by the local governments.

The ARMM

The fact that the RH Law does not intrude in the autonomy of local governments can be equally applied to the
ARMM. The RH Law does not infringe upon its autonomy. Moreover, Article III, Sections 6, 10 and 11 of R.A. No.
9054, or the organic act of the ARMM, alluded to by petitioner Tillah to justify the exemption of the operation of the
RH Law in the autonomous region, refer to the policy statements for the guidance of the regional government.
These provisions relied upon by the petitioners simply delineate the powers that may be exercised by the regional
government, which can, in no manner, be characterized as an abdication by the State of its power to enact
legislation that would benefit the general welfare. After all, despite the veritable autonomy granted the ARMM, the
Constitution and the supporting jurisprudence, as they now stand, reject the notion of imperium et imperio in the
relationship between the national and the regional governments.  Except for the express and implied limitations
274

imposed on it by the Constitution, Congress cannot be restricted to exercise its inherent and plenary power to
legislate on all subjects which extends to all matters of general concern or common interest. 275

11 - Natural Law

313
With respect to the argument that the RH Law violates natural law,  suffice it to say that the Court does not duly
276

recognize it as a legal basis for upholding or invalidating a law. Our only guidepost is the Constitution. While every
law enacted by man emanated from what is perceived as natural law, the Court is not obliged to see if a statute,
executive issuance or ordinance is in conformity to it. To begin with, it is not enacted by an acceptable legitimate
body. Moreover, natural laws are mere thoughts and notions on inherent rights espoused by theorists, philosophers
and theologists. The jurists of the philosophical school are interested in the law as an abstraction, rather than in the
actual law of the past or present.  Unless, a natural right has been transformed into a written law, it cannot serve as
277

a basis to strike down a law. In Republic v. Sandiganbayan,  the very case cited by the petitioners, it was explained
278

that the Court is not duty-bound to examine every law or action and whether it conforms with both the Constitution
and natural law. Rather, natural law is to be used sparingly only in the most peculiar of circumstances involving
rights inherent to man where no law is applicable. 279

At any rate, as earlier expounded, the RH Law does not sanction the taking away of life. It does not allow abortion in
any shape or form. It only seeks to enhance the population control program of the government by providing
information and making non-abortifacient contraceptives more readily available to the public, especially to the poor.

Facts and Fallacies

and the Wisdom of the Law

In general, the Court does not find the RH Law as unconstitutional insofar as it seeks to provide access to medically-
safe, non-abortifacient, effective, legal, affordable, and quality reproductive healthcare services, methods, devices,
and supplies. As earlier pointed out, however, the religious freedom of some sectors of society cannot be trampled
upon in pursuit of what the law hopes to achieve. After all, the Constitutional safeguard to religious freedom is a
recognition that man stands accountable to an authority higher than the State.

In conformity with the principle of separation of Church and State, one religious group cannot be allowed to impose
its beliefs on the rest of the society. Philippine modem society leaves enough room for diversity and pluralism. As
such, everyone should be tolerant and open-minded so that peace and harmony may continue to reign as we exist
alongside each other.

As healthful as the intention of the RH Law may be, the idea does not escape the Court that what it seeks to
address is the problem of rising poverty and unemployment in the country. Let it be said that the cause of these
perennial issues is not the large population but the unequal distribution of wealth. Even if population growth is
controlled, poverty will remain as long as the country's wealth remains in the hands of the very few.

At any rate, population control may not be beneficial for the country in the long run. The European and Asian
countries, which embarked on such a program generations ago , are now burdened with ageing populations. The
number of their young workers is dwindling with adverse effects on their economy. These young workers represent
a significant human capital which could have helped them invigorate, innovate and fuel their economy. These
countries are now trying to reverse their programs, but they are still struggling. For one, Singapore, even with
incentives, is failing.

And in this country, the economy is being propped up by remittances from our Overseas Filipino Workers. This is
because we have an ample supply of young able-bodied workers. What would happen if the country would be
weighed down by an ageing population and the fewer younger generation would not be able to support them? This
would be the situation when our total fertility rate would go down below the replacement level of two (2) children per
woman. 280

Indeed, at the present, the country has a population problem, but the State should not use coercive measures (like
the penal provisions of the RH Law against conscientious objectors) to solve it. Nonetheless, the policy of the Court
is non-interference in the wisdom of a law.

x x x. But this Court cannot go beyond what the legislature has laid down. Its duty is to say what the law is as
enacted by the lawmaking body. That is not the same as saying what the law should be or what is the correct rule in
a given set of circumstances. It is not the province of the judiciary to look into the wisdom of the law nor to question
the policies adopted by the legislative branch. Nor is it the business of this Tribunal to remedy every unjust situation
that may arise from the application of a particular law. It is for the legislature to enact remedial legislation if that
would be necessary in the premises. But as always, with apt judicial caution and cold neutrality, the Court must
carry out the delicate function of interpreting the law, guided by the Constitution and existing legislation and mindful
of settled jurisprudence. The Court's function is therefore limited, and accordingly, must confine itself to the judicial
task of saying what the law is, as enacted by the lawmaking body. 281

Be that as it may, it bears reiterating that the RH Law is a mere compilation and enhancement of the prior existing
contraceptive and reproductive health laws, but with coercive measures. Even if the Court decrees the RH Law as
entirely unconstitutional, there will still be the Population Act (R.A. No. 6365), the Contraceptive Act (R.A. No. 4729)
and the reproductive health for women or The Magna Carta of Women (R.A. No. 9710), sans the coercive
314
provisions of the assailed legislation. All the same, the principle of "no-abortion" and "non-coercion" in the adoption
of any family planning method should be maintained.

WHEREFORE, the petitions are PARTIALLY GRANTED. Accordingly, the Court declares R.A. No. 10354 as NOT
UNCONSTITUTIONAL except with respect to the following provisions which are declared UNCONSTITUTIONAL:

1) Section 7 and the corresponding provision in the RH-IRR insofar as they: a) require private health
facilities and non-maternity specialty hospitals and hospitals owned and operated by a religious group to
refer patients, not in an emergency or life-threatening case, as defined under Republic Act No. 8344, to
another health facility which is conveniently accessible; and b) allow minor-parents or minors who have
suffered a miscarriage access to modem methods of family planning without written consent from their
parents or guardian/s;

2) Section 23(a)(l) and the corresponding provision in the RH-IRR, particularly Section 5 .24 thereof, insofar
as they punish any healthcare service provider who fails and or refuses to disseminate information regarding
programs and services on reproductive health regardless of his or her religious beliefs.

3) Section 23(a)(2)(i) and the corresponding provision in the RH-IRR insofar as they allow a married
individual, not in an emergency or life-threatening case, as defined under Republic Act No. 8344, to undergo
reproductive health procedures without the consent of the spouse;

4) Section 23(a)(2)(ii) and the corresponding provision in the RH-IRR insofar as they limit the requirement of
parental consent only to elective surgical procedures.

5) Section 23(a)(3) and the corresponding provision in the RH-IRR, particularly Section 5.24 thereof, insofar
as they punish any healthcare service provider who fails and/or refuses to refer a patient not in an
emergency or life-threatening case, as defined under Republic Act No. 8344, to another health care service
provider within the same facility or one which is conveniently accessible regardless of his or her religious
beliefs;

6) Section 23(b) and the corresponding provision in the RH-IRR, particularly Section 5 .24 thereof, insofar as
they punish any public officer who refuses to support reproductive health programs or shall do any act that
hinders the full implementation of a reproductive health program, regardless of his or her religious beliefs;

7) Section 17 and the corresponding prov1s10n in the RH-IRR regarding the rendering of pro bona
reproductive health service in so far as they affect the conscientious objector in securing PhilHealth
accreditation; and

8) Section 3.0l(a) and Section 3.01 G) of the RH-IRR, which added the qualifier "primarily" in defining
abortifacients and contraceptives, as they are ultra vires and, therefore, null and void for contravening
Section 4(a) of the RH Law and violating Section 12, Article II of the Constitution.

The Status Quo Ante Order issued by the Court on March 19, 2013 as extended by its Order, dated July 16, 2013 ,
is hereby LIFTED, insofar as the provisions of R.A. No. 10354 which have been herein declared as constitutional.

SO ORDERED.

DISSENTING OPINION

"The most important thing we decide

is what not to decide."
Brandeis, J. 1

LEONEN, J.:

The Responsible Parenthood and Reproductive Health Act of 2012 should not be declared unconstitutional in whole
or in any of its parts given the petitions filed in this case.

None of the petitions properly present an "actual case or controversy," which deserves the exercise of our awesome
power of judicial review.  It is our duty not to rule on the abstract and speculative issues barren of actual facts. These
2 3

consolidated petitions, which contain bare allegations, do not provide the proper venue to decide on fundamental
issues. The law in question is needed social legislation.

That we rule on these special civil actions for certiorari and prohibition — which amounts to a pre-enforcement free-
wheeling facial review of the statute and the implementing rules and regulations  — is very bad precedent. The
4

issues are far from justiciable. Petitioners claim in their class suits that they entirely represent a whole religion,  the
5

315
Filipino nation  and, worse, all the unborn.  The intervenors also claim the same representation: Filipinos and
6 7

Catholics.  Many of the petitions also sue the President of the Republic.
8 9

We should apply our rules rigorously and dismiss these cases. The transcendental importance of the issues they
want us to decide will be better served when we wait for the proper cases with the proper parties suffering real,
actual or more imminent injury. There is no showing of an injury so great and so imminent that we cannot wait for
these cases.

Claims relating to the beginning of life, the relationship of conscientious objection and the right to religion, the effects
of contraception, and even the ponencia’s claim that the family is put in danger if one spouse decides when there is
a disagreement between them are best decided within their real contexts so that we will be able to narrowly tailor
the doctrines in our decision.  The danger of ruling on abstract cases is that we foreclose real litigation between real
10

parties.  The danger of an advisory opinion is that we are forced to substitute our own imagination of the facts that
11

can or will happen. In an actual case, there is judicial proof of the real facts that frame our discretion.

The law clearly adopts a policy against abortion and prohibits abortifacients.  The definition of abortifacients is
12

sufficiently broad to cover many moral convictions relating to the beginning of life.  We do not need to decide on
13

these issue barren of actual facts that can sharpen factual and legal positions.

The court cannot make a declaration on the beginning of life. Any declaration on this issue will be fraught with
contradictions. Even the Constitutional Commissioners were not in full agreement; hence, the use of the word
"conception" rather than "fertilized ovum" in Article II, Section 12 of the Constitution.  There were glaring factual
14

inaccuracies peddled during their discussion. 15

Moreover, declaring the beginning of life complicates future constitutional adjudication. This will have real
repercussions on, among others, acceptable medical procedures for ectopic pregnancies,  medical complications as
16

a result of pregnancy resulting from sexual assaults,  and on assisted reproductive technologies.
17 18

The petitions have failed to present clear cases when the provisions for conscientious objection would truly amount
to a violation of religion. They have not distinguished the relationship of conscience and specific religious
dogma. They have not established religious canon that conflict with the general provision of Sections 7, 17 and 23
19

of the law. The comments in intervention  in fact raise serious questions regarding what could be acceptable
20

Catholic doctrine on some issues of contraception and sex as only for procreation.

The majority has decided to nullify portions of the law on the basis of inchoate Catholic doctrine without considering
that the law as phrased would be acceptable to other faiths, consciences and beliefs. Due to the failure of the
petitioners to present actual cases, it cannot be possible to see whether their religious objection can be
accommodated in the application and interpretation of the law rather than nullify the provisions wholesale.

We should tread carefully when what is involved is a religion that is not the minority. Invocations of religious freedom
can be a disguised way of imposing the dominant faith on others. This is especially true in physician-patient
relationships. While the physician may have her or his own religious beliefs, this should not improperly dictate on the
range of services that is wanted and needed by the patient.  Again, there are no actual cases in specific contexts
21

with clear religious beliefs pertaining to accepted dogma of a religion established by the petitions. The proposed
declaration of unconstitutionality of portions of Section 23 is premature and inadvisable. It also amounts to a judicial
amendment of the physician’s oath.

The law breaks the deadlock when there is disagreement between the spouses as to whether to avail of a
reproductive health technology.  The ponencia proposes that this violates the right to family.  This is one
22 23

conclusion. The other is that it allows the couple to have a final decision and not continue with a perennial conflict.
The other possibility here is that the man, who most often is not the one who avails of the reproductive health
technology, dictates on the woman. This will then result in a violation of the requirement of fundamental equality in
Article II, Section 14 of the Constitution.  The majority, in refusing to acknowledge the autonomy of individuals over
24

their own bodies even in the context of marriage, has just strengthened patriarchy and increased the possibility for
spousal abuse.

All the petitions are premature. At worse, the petitions attempt to impose a moral or political belief upon the others
by tempting this court to use its power of judicial review.

This court is not the venue to continue the brooding and vociferous political debate that has already happened and
has resulted in legislation.
25

Constitutional issues normally arise when the right and obligations become doubtful as a result of the
implementation of the statute. This forum does not exist to undermine the democratically deliberated results coming
from the Congress and approved by the President. Again, there is no injury to a fundamental right arising from
concrete facts established with proof. Rather, the pleadings raise grave moral and philosophical issues founded on
facts that have not yet happened. They are the product of speculation by the petitioners.
316
To steeled advocates who have come to believe that their advocacy is the one true moral truth, their repeated view
may seem to them as the only factual possibility. Rabid advocacy of any view will be intolerant of the nuanced reality
that proceeds from conscious and deliberate examination of facts.

This kind of advocacy should not sway us.

Our competence is to decide on legal principle only in concrete controversies. We should jealously and rigorously
protect the principle of justiciability of constitutional challenges. We should preserve our role within the current
constitutional order. We undermine the legitimacy of this court when we participate in rulings in the abstract because
there will always be the strong possibility that we will only tend to mirror our own personal predilections. We should
thus adopt a deferential judicial temperament especially for social legislation.

This law should not be declared as unconstitutional, in whole or in part, on the basis of the consolidated petitions.
The status quo ante order against the Responsible Parenthood and Reproductive Health Act of 2012 or Republic
Act No. 10354 (RH Law) should be lifted immediately.

There should be no further obstacle in having the entire law fully implemented.

No Actual Controversy,

"Facial Review" is Improper

It has never been the constitutional mandate of the Supreme Court to answer all of life’s questions. It is endowed
instead with the solemn duty to determine when it should decline to decide with finality questions that are not legal
and those that are theoretical and speculative. This court’s duty includes its ability to stay its hand when the issues
presented are not justiciable.

The requirement in constitutional adjudication is that we decide only when there is a "case or controversy."  This is
26

clear in the second paragraph of Article VIII, Section 1 of the Constitution, thus:

Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be established
by law.

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess jurisdiction on the part of any branch or instrumentality of the Government. (Emphasis
supplied)

The requirement for a "case" or "controversy" locates the judiciary in the scheme of our constitutional order. It
defines our role and distinguishes this institution from the other constitutional organs.

The ponencia claims that there is an actual case and controversy existing in the present controversy, and it is ripe
for determination.  The ponente reasons that "[c]onsidering that the RH Law and its implementing rules have
27

already taken effect, and considering that the budgetary measures to carry out the law have already been passed, it
is evident that the subject petitions present a justiciable controversy. As stated earlier, when an action of the
legislative branch is seriously alleged to have infringed the Constitution, it not only becomes a right, but also a duty
of the Judiciary to [settle] the dispute."
28

I disagree.

An actual case or controversy is "one which involves a conflict of legal rights, an assertion of opposite legal claims
susceptible of judicial resolution; the case must not be moot or academic or based on extra-legal or other similar
considerations not cognizable by a court of justice."  To be justiciable, the issues presented must be "‘definite and
29

concrete, touching the legal relations of parties having adverse legal interest;’ a real and substantial controversy
admitting of specific relief."  The term justiciability refers to the dual limitation of only considering in an adversarial
30

context the questions presented before courts, and in the process, the courts’ duty to respect its co-equal branches
of government’s powers and prerogatives under the doctrine of separation of powers. 31

There is a case or controversy when there is a real conflict of rights or duties arising from actual facts. These facts,
properly established in court through evidence or judicial notice, provide the natural limitations upon judicial
interpretation of the statute. When it is claimed that a statute is inconsistent with a provision of the Constitution, the
meaning of a constitutional provision will be narrowly drawn.

317
Without the necessary findings of facts, this court is left to speculate leaving justices to grapple within the limitations
of their own life experiences. This provides too much leeway for the imposition of political standpoints or personal
predilections of the majority of this court. This is not what the Constitution contemplates. Rigor in determining
whether controversies brought before us are justiciable avoids the counter majoritarian difficulties attributed to the
judiciary.

Without the existence and proper proof of actual facts, any review of the statute or its implementing rules will be
theoretical and abstract. Courts are not structured to predict facts, acts or events that will still happen. Unlike the
legislature, we do not determine policy. We read law only when we are convinced that there is enough proof of the
real acts or events that raise conflicts of legal rights or duties. Unlike the executive, our participation comes in after
the law has been implemented. Verily, we also do not determine how laws are to be implemented.

The existence of a law or its implementing orders or a budget for its implementation is far from the requirement that
there are acts or events where concrete rights or duties arise. The existence of rules do not substitute for real facts.

Petitioners cite Province of North Cotabato v. Government of the Republic of the Philippines Peace Panel on
Ancestral Domain (GRP)  as basis for asserting that this court can take cognizance of constitutional cases without
32

actual controversies. In that case, this court was asked to rule on the validity of the Memorandum of Agreement on
the Ancestral Domain (MOA-AD) between the GRP and the Moro Islamic Liberation Front (MILF) which included
provisions on the definition of the "Bangsamoro" people; the "Bangsamoro Juridical Entity" (BJE); territory of the
Bangsamoro homeland; the total production sharing between the central government and the BJE relating to natural
resources; and "associative relationship" with the central government. 33

Even in that case, this court acknowledged the requirement of an actual case or controversy in exercising the power
of judicial review.

The power of judicial review is limited to actual cases or controversies. Courts decline to issue advisory opinions or
to resolve hypothetical or feigned problems, or mere academic questions. The limitation of the power of judicial
review to actual cases and controversies defines the role assigned to the judiciary in a tripartite allocation of power,
to assure that the courts will not intrude into areas committed to the other branches of government. 34

This court then ruled that the petitions were ripe for adjudication because of: "[1] the failure of respondents to
consult the local government units or communities affected constitutes a departure by respondents from their
mandate under E.O. No. 3; [2] respondents exceeded their authority by the mere act of guaranteeing amendments
to the Constitution. Any alleged violation of the Constitution by any branch of government is a proper matter for
judicial review."  Citing David v. Macapagal-Arroyo, this court allowed petitioners, petitioners-in-intervention, and
35

intervening respondents’ claims of locus standi due to the paramount public interest or transcendental importance of
the issues involved.

The actual case in Province of North Cotabato was triggered by the process invoked in the negotiation of the
agreement and the claim that it exceeded the authority of the government panel in talks with the Moro Islamic
Liberation Front (MILF). Executive Order No. 3 was already implemented by the acts of the negotiating panel.

The ponencia’s reading of Province of North Cotabato is inaccurate. My esteemed colleague holds:

x x x Citing precedents, the Court ruled that the fact of the law or act in question being not yet effective does not
negate ripeness. Concrete acts under a law are not necessary to render the controversy ripe. Even a singular
violation of the Constitution and/or law is enough to awaken judicial duty.

In this case, the Court is of the view that an actual case or controversy exists and that the same is ripe for judicial
determination. Considering that the RH Law and its implementing rules have already taken effect, and that the
budgetary measures to carry out the law have already been passed, it is evident that the subject petitions present a
justiciable controversy. As stated earlier, when an action of the legislative branch is seriously alleged to have
infringed the Constitution, it not only becomes a right, but also a duty of the Judiciary to settle the
dispute. (Emphasis in the original)
36

Unlike Province of North Cotabato, there is yet no implementation of the RH law. The waiver of justiciability is the
exception. It is not the general rule.  Province of North Cotabato involved a peculiar set of facts that required this
37

court to exercise its power of judicial review. The respondents attempted to put the constitutional question outside
the court’s sphere of judicial review through the performance of acts that rendered a ripening case moot and
academic. 38

In Garcia v. Executive Secretary,  this court was faced with the issue of the constitutionality of Section 19 of
39

Republic Act No. 8479  entitled "An Act Deregulating The Downstream Oil Industry And For Other Purposes." This
40

court held that there was no justiciable controversy in the case as the issue raised went into the policy or wisdom of
the law, thus:

318
Stripped to its core, what petitioner Garcia raises as an issue is the propriety of immediately and fully deregulating
the oil industry. Such determination essentially dwells on the soundness or wisdom of the timing and manner of the
deregulation Congress wants to implement through R.A. No. 8497. Quite clearly, the issue is not for us to resolve;
we cannot rule on when and to what extent deregulation should take place without passing upon the wisdom of the
policy of deregulation that Congress has decided upon. To use the words of Baker v. Carr, the ruling that petitioner
Garcia asks requires "an initial policy determination of a kind clearly for non-judicial discretion"; the branch of
government that was given by the people the full discretionary authority to formulate the policy is the legislative
department.

xxxx

Petitioner Garcia’s thesis readily reveals the political, hence, non-justiciable, nature of his petition; the choice of
undertaking full or partial deregulation is not for this Court to make.41

Then in Atty. Lozano v. Speaker Nograles,  this court reiterated that "[i]n our jurisdiction, the issue of ripeness
42

[which is an aspect of the case or controversy requirement] is generally treated in terms of actual injury to the
plaintiff. Hence, a question is ripe for adjudication when the act being challenged has had a direct adverse effect on
the individual challenging it x x x [or when] an action has already been accomplished or performed by a branch of
government x x x." 43

In Southern Hemisphere Engagement Network, Inc. v. Anti-Terrorism Council,  this court declined to rule on the
44

constitutionality of Republic Act No. 9372 or "An Act to Secure the State and Protect Our People from Terrorism,"
otherwise known as the Human Security Act of 2007. Again, with respect to the requirement of the existence of an
actual case, this court held:

As early as Angara v. Electoral Commission, the Court ruled that the power of judicial review is limited to actual
cases or controversies to be exercised after full opportunity of argument by the parties. Any attempt at abstraction
could only lead to dialectics and barren legal questions and to sterile conclusions unrelated to actualities.

An actual case or controversy means an existing case or controversy that is appropriate or ripe for determination,
not conjectural or anticipatory, lest the decision of the court would amount to an advisory opinion.

Information Technology Foundation of the Philippines v. COMELEC cannot be more emphatic:

"[C]ourts do not sit to adjudicate mere academic questions to satisfy scholarly interest, however intellectually
challenging. The controversy must be justiciable—definite and concrete, touching on the legal relations of parties
having adverse legal interests. In other words, the pleadings must show an active antagonistic assertion of a legal
right, on the one hand, and a denial thereof on the other hand; that is, it must concern a real and not merely a
theoretical question or issue. There ought to be an actual and substantial controversy admitting of specific relief
through a decree conclusive in nature, as distinguished from an opinion advising what the law would be upon a
hypothetical state of facts."

Thus, a petition to declare unconstitutional a law converting the Municipality of Makati into a Highly Urbanized City
was held to be premature as it was tacked on uncertain, contingent events. Similarly, a petition that fails to allege
that an application for a license to operate a radio or television station has been denied or granted by the authorities
does not present a justiciable controversy, and merely wheedles the Court to rule on a hypothetical problem.

The Court dismissed the petition in Philippine Press Institute v. Commission on Elections for failure to cite any
specific affirmative action of the Commission on Elections to implement the assailed resolution. It refused, in Abbas
v. Commission on Elections, to rule on the religious freedom claim of the therein petitioners based merely on a
perceived potential conflict between the provisions of the Muslim Code and those of the national law, there being no
actual controversy between real litigants.

The list of cases denying claims resting on purely hypothetical or anticipatory grounds goes on ad infinitum.

The Court is not unaware that a reasonable certainty of the occurrence of a perceived threat to any constitutional
interest suffices to provide a basis for mounting a constitutional challenge. This, however, is qualified by the
requirement that there must be sufficient facts to enable the Court to intelligently adjudicate the issues.  (Emphasis
45

supplied)

Recently, this court in Corales v. Republic  passed upon the ripeness or prematurity of a petition for prohibition
46

assailing the Audit Observation Memorandum (AOM) issued by the Provincial State Auditor of Laguna against
petitioner as Mayor. We again held that:

x x x this Court can hardly see any actual case or controversy to warrant the exercise of its power of judicial review.
Settled is the rule that for the courts to exercise the power of judicial review, the following must be extant: (1) there

319
must be an actual case calling for the exercise of judicial power; (2) the question must be ripe for adjudication; and
(3) the person challenging must have the "standing." An actual case or controversy involves a conflict of legal rights,
an assertion of opposite legal claims, susceptible of judicial resolution as distinguished from a mere hypothetical or
abstract difference or dispute. There must be a contrariety of legal rights that can be interpreted and enforced on the
basis of existing law and jurisprudence. Closely related thereto is that the question must be ripe for adjudication. A
question is considered ripe for adjudication when the act being challenged has had a direct adverse effect on the
individual challenging it.

xxxx

The requisites of actual case and ripeness are absent in the present case. To repeat, the AOM issued by Andal
merely requested petitioner Corales to comment/reply thereto. Truly, the AOM already contained a recommendation
to issue a Notice of Disallowance; however, no Notice of Disallowance was yet issued. More so, there was no
evidence to show that Andal had already enforced against petitioner Corales the contents of the AOM. x x x. The
action taken by the petitioners to assail the AOM was, indeed, premature and based entirely on surmises,
conjectures and speculations that petitioner Corales would eventually be compelled to reimburse petitioner Dr.
Angeles’ salaries, should the audit investigation confirm the irregularity of such disbursements. 47

The doctrinal character of the requirement of an actual case may also be inferred from the tenor of the reservations
of several members of this court in Province of North Cotabato. 48

Then Justice Chico-Nazario, in voting to grant the motion to dismiss of the Office of Solicitor General and to dismiss
the petitions, pointed out that:

The Court should not feel constrained to rule on the Petitions at bar just because of the great public interest these
cases have generated. We are, after all, a court of law, and not of public opinion. The power of judicial review of this
Court is for settling real and existent dispute, it is not for allaying fears or addressing public clamor. In acting on
supposed abuses by other branches of government, the Court must be careful that it is not committing abuse itself
by ignoring the fundamental principles of constitutional law.

x x x. The Court must accord a co-equal branch of the government nothing less than trust and the presumption of
good faith.

xxxx

Upon the Executive Department falls the indisputably difficult responsibility of diffusing the highly volatile situation in
Mindanao resulting from the continued clashes between the Philippine military and Muslim rebel groups. In
negotiating for peace, the Executive Department should be given enough leeway and should not be prevented from
offering solutions which may be beyond what the present Constitution allows, as long as such solutions are agreed
upon subject to the amendment of the Constitution by completely legal means.  (Emphasis supplied)
49

Justice Velasco in that case emphasized the need to be vigilant in protecting the doctrine of separation of powers
enshrined in our Constitution, hence:

Over and above the foregoing considerations, however, is the matter of separation of powers which would likely be
disturbed should the Court meander into alien territory of the executive and dictate how the final shape of the peace
agreement with the MILF should look like. The system of separation of powers contemplates the division of the
functions of government into its three (3) branches x x x. Consequent to the actual delineation of power, each
branch of government is entitled to be left alone to discharge its duties as it sees fit. Being one such branch, the
judiciary, as Justice Laurel asserted in Planas v. Gil, "will neither direct nor restrain executive [or legislative action]."
Expressed in another perspective, the system of separated powers is designed to restrain one branch from
inappropriate interference in the business, or intruding upon the central prerogatives, of another branch; it is a blend
of courtesy and caution, "a self-executing safeguard against the encroachment or aggrandizement of one branch at
the expense of the other." x x x. The sheer absurdity of the situation where the hands of executive officials, in their
quest for a lasting and honorable peace, are sought to be tied lest they agree to something irreconcilable with the
Constitution, should not be lost on the Court.

Under our constitutional set up, there cannot be any serious dispute that the maintenance of the peace, insuring
domestic tranquility and the suppression of violence are the domain and responsibility of the executive. Now then, if
it be important to restrict the great departments of government to the exercise of their appointed powers, it follows,
as a logical corollary, equally important, that one branch should be left completely independent of the others,
independent not in the sense that the three shall not cooperate in the common end of carrying into effect the
purposes of the constitution, but in the sense that the acts of each shall never be controlled by or subjected to the
influence of either of the branches. 50

Eloquently, Justice Brion in his dissenting opinion in Province of North Cotabato asserted:

320
x x x. Where policy is involved, we are bound by our constitutional duties to leave the question for determination by
those duly designated by the Constitution—the Executive, Congress, or the people in their sovereign capacity.

In the present case, the peace and order problems of Mindanao are essentially matters for the Executive to
address, with possible participation from Congress and the sovereign people as higher levels of policy action arise.
Its search for solutions, in the course of several presidencies, has led the Executive to the peace settlement
process. As has been pointed out repetitively in the pleadings and the oral arguments, the latest move in the
Executive’s quest for peace—the MOA-AD—would have not been a good deal for the country if it had materialized.
This Court, however, seasonably intervened and aborted the planned signing of the agreement. The Executive, for
its part, found it wise and appropriate to fully heed the signals from our initial action and from the public outcry the
MOA-AD generated; it backtracked at the earliest opportunity in a manner consistent with its efforts to avoid or
minimize bloodshed while preserving the peace process. At the moment, the peace and order problem is still with
the Executive where the matter should be; the initiative still lies with that branch of government. The Court’s role,
under the constitutional scheme that we are sworn to uphold, is to allow the initiative to be where the Constitution
says it should be. We cannot and should not interfere unless our action is unavoidably necessary because the
Executive is acting beyond what is allowable, or because it has failed to act in the way it should act, under the
Constitution and our laws.

xxxx

Rather than complicate the issues further with judicial pronouncements that may have unforeseen or unforeseeable
effects on the present fighting and on the solutions already being applied, this Court should exercise restraint as the
fears immediately generated by a signed and concluded MOA-AD have been addressed and essentially laid to rest.
Thus, rather than pro-actively act on areas that now are more executive than judicial, we should act with calibrated
restraint along the lines dictated by the constitutional delineation of powers. Doing so cannot be equated to the
failure of this Court to act as its judicial duty requires; as I mentioned earlier, we have judicially addressed the
concerns posed with positive effects and we shall not hesitate to judicially act in the future, as may be necessary, to
ensure that the integrity of our constitutional and statutory rules and standards are not compromised. If we exercise
restraint at all, it is because the best interests of the nation and our need to show national solidarity at this point so
require, in order that the branch of government in the best position to act can proceed to act.

xxxx

x x x. We can effectively move as we have shown in this MOA-AD affair, but let this move be at the proper time and
while we ourselves observe the limitations the Constitution commonly impose on all branches of government in
delineating their respective roles.51 (Emphasis supplied)

It is true that the present Constitution grants this court with the exercise of judicial review when the case involves the
determination of "grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government."  This new feature of the 1987 Constitution affects our political question doctrine.
52

It does not do away with the requirement of an actual case. The requirement of an actual case is fundamental to the
nature of the judiciary.

No less than Justice Vicente V. Mendoza implied that the rigorous requirement of an actual case or controversy is
determinative of the nature of the judiciary. Thus:

[i]nsistence on the existence of a case or controversy before the judiciary undertakes a review of legislation gives it
the opportunity, denied to the legislature, of seeing the actual operation of the statute as it is applied to actual facts
and thus enables to it to reach sounder judgment. 53

In the recent case of Belgica, et al. v. Executive Secretary, we pointed out: 54

[b]asic in litigation raising constitutional issues is the requirement that there must be an actual case or controversy.
This Court cannot render an advisory opinion. We assume that the Constitution binds all other constitutional
departments, instrumentalities, and organs. We are aware that in the exercise of their various powers, they do
interpret the text of the Constitution in the light of contemporary needs that they should address. A policy that
reduces this Court to an adviser for official acts by the other departments that have not yet been done would
unnecessarily tax our resources. It is inconsistent with our role as final arbiter and adjudicator and weakens the
entire system of the Rule of Law. Our power of judicial review is a duty to make a final and binding construction of
law. This power should generally be reserved when the departments have exhausted any and all acts that would
remedy any perceived violation of right. The rationale that defines the extent of our doctrines laying down
exceptions to our rules on justiciability are clear: Not only should the pleadings show a convincing violation of a
right, but the impact should be shown to be so grave, imminent, and irreparable that any delayed exercise of judicial
review or deference would undermine fundamental principles that should be enjoyed by the party complaining or the
constituents that they legitimately represent.

321
The requirement of an "actual case," thus, means that the case before this Court "involves a conflict of legal rights,
an assertion of opposite legal claims susceptible of judicial resolution;

the case must not be moot or academic based on extra-legal or other similar considerations not cognizable by a
court of justice." Furthermore, "the controversy needs to be definite and concrete, bearing upon the legal relations of
parties who are pitted against each other due to their adverse legal interests." Thus, the adverse position of the
parties must be sufficient enough for the case to be pleaded and for this Court to be able to provide the parties the
proper relief/s prayed for.

The requirement of an ‘actual case’ will ensure that this Court will not issue advisory opinions. It prevents us from
using the immense power of judicial review absent a party that can sufficiently argue from a standpoint with real and
substantial interests.55

Regretfully, the ponencia takes inconsistent positions as to whether the petitions do allege actual cases. On the
issue of the violation of the right to health under Section 9 of the law,  he correctly held that the constitutional
56

challenge is premature:

x x x not a single contraceptive has yet been submitted to the FDA pursuant [to the] RH Law. It [behooves] the Court
to await its determination which drugs or devices are declared by the FDA as safe, it being the agency tasked to
ensure that food and medicines available to the public are safe for public consumption. x x x Indeed, the various
kinds of contraceptives must first be measured up to the constitutional yardstick x x x to be determined as the case
presents itself.  (Emphasis in the original)
57

Moreover, the ponencia also correctly held that a discussion on the constitutionality of Section 14 of the law,
pertaining to the teaching of Age- and Development-Appropriate Reproductive Health Education,  is not yet ripe for
58

determination:

x x x any attack on the validity of Section 14 of the RH Law is premature, as the Department of Education, Culture
and Sports have yet to formulate any curriculum on age-appropriate reproductive health education. At this point, one
can only speculate [on the] contents, manner and medium of instruction that would be used to educate the
adolescents and whether [these] would contradict the religious beliefs of petitioners, and validate their
apprehensions. x x x.

xxxx

While the Court notes the possibility that educators could raise their objection to their participation in the
reproductive health education program provided under Section 14 of the RH Law on the ground that the same
violates their religious beliefs, the Court reserves its judgment should an actual case be filed before it.  (Emphasis in
59

the original)

Unfortunately, the ponencia failed to discuss how several provisions of the RH Law became vulnerable to a facial
attack, whereas other provisions must await an actual case or controversy to pass upon its constitutionality. The
ponencia explained that the:

x x x foregoing petitions have seriously alleged that the constitutional human right to life, speech and religion and
other fundamental rights mentioned above have been violated by the assailed legislation, the Court has authority to
take cognizance of these kindred petitions and determine if the RH Law can indeed pass constitutional scrutiny. 60

I restate, for purposes of emphasis, parts of my disquisition on facial challenges in my dissenting and concurring
opinion in Disini v. Secretary of Justice.  After all, the challenges to this present law and the Cybercrime Prevention
61

Act of 2012 are the public’s reaction to the increasingly liberal but disturbing treatment that we have given on the
issue of rigorous analysis for the justiciability of controversies brought before us.

The invalidation of the statute is either "on its face" or "as applied." The only instance when a facial review of the law
is not only allowed but also essential is "when the provisions in question are so broad that there is a clear and
imminent threat that actually operates or it can be used as a prior restraint of speech." 62

In Cruz v. Secretary of Environment and Natural Resources,  Justice Vicente V. Mendoza explained the difference
63

of an "as applied" challenge from an "on its face" challenge:

The only instance where a facial challenge to a statute is allowed is when it operates in the area of freedom of
expression. In such instance, the overbreadth doctrine permits a party to challenge the validity of a statute even
though as applied to him it is not unconstitutional but it might be if applied to others not before the Court whose
activities are constitutionally protected. Invalidation of the statute "on its face" rather than "as applied" is permitted in
the interest of preventing a "chilling" effect on freedom of expression. But in other cases, even if it is found that a

322
provision of a statute is unconstitutional, courts will decree only partial invalidity unless the invalid portion is so far
inseparable from the rest of the statute that a declaration of partial invalidity is not possible.  (Emphasis supplied)
64

Subsequently, in Estrada v. Sandiganbayan,  Justice Mendoza culled a more extensive rule regarding facial or "on
65

its face" challenges, thus:

[a] facial challenge is allowed to be made to a vague statute and to one which is overbroad because of possible
"chilling effect" upon protected speech. The theory is that "[w]hen statutes regulate or proscribe speech and no
readily apparent construction suggests itself as a vehicle for rehabilitating the statutes in a single prosecution, the
transcendent value to all society of constitutionally protected expression is deemed to justify allowing attacks on
overly broad statutes with no requirement that the person making the attack demonstrate that his own conduct could
not be regulated by a statute drawn with narrow specificity." The possible harm to society in permitting some
unprotected speech to go unpunished is outweighed by the possibility that the protected speech of others may be
deterred and perceived grievances left to fester because of possible inhibitory effects of overly broad statutes.

This rationale does not apply to penal statutes. Criminal statutes have general in terrorem effect resulting from their
very existence, and, if facial challenge is allowed for this reason alone, the State may well be prevented from
enacting laws against socially harmful conduct. In the area of criminal law, the law cannot take chances as in the
area of free speech.

The overbreadth and vagueness doctrines then have special application only to free speech cases. They are inapt
for testing the validity of penal statutes. As the U.S. Supreme Court put it, in an opinion by Chief Justice Rehnquist,
"we have not recognized an ‘overbreadth’ doctrine outside the limited context of the First Amendment." In Broadrick
v. Oklahoma, the Court ruled that "claims of facial overbreadth have been entertained in cases involving statutes
which, by their terms, seek to regulate only spoken words" and, again, that "overbreadth claims, if entertained at all,
have been curtailed when invoked against ordinary criminal laws that are sought to be applied to protected
conduct." For this reason, it has been held that "a facial challenge to a legislative Act is … the most difficult
challenge to mount successfully, since the challenger must establish that no set of circumstances exists under
which the Act would be valid." x x x.

In sum, the doctrines of strict scrutiny, overbreadth, and vagueness are analytical tools developed for testing "on
their faces" statutes in free speech cases or, as they are called in American law, First Amendment cases. They
cannot be made to do service when what is involved is a criminal statute. With respect to such statute, the
established rule is that "one to whom application of a statute is constitutional will not be heard to attack the statute
on the ground that impliedly it might also be taken as applying to other persons or other situations in which its
application might be unconstitutional." x x x.  (Emphasis supplied)
66

Similarly, this court in Prof. David v. Pres. Macapagal-Arroyo  laid down guides when a facial challenge may be
67

properly brought before this court, thus:

First and foremost, the overbreadth doctrine is an analytical tool developed for testing "on their faces" statutes in
free speech cases, also known under the American Law as First Amendment cases.

xxxx

Thus, claims of facial overbreadth are entertained in cases involving statutes which, by their terms, seek to regulate
only "spoken words" and again, that "overbreadth claims, if entertained at all, have been curtailed when invoked
against ordinary criminal laws that are sought to be applied to protected conduct." Here, the incontrovertible fact
remains that PP 1017 pertains to a spectrum of conduct, not free speech, which is manifestly subject to state
regulation.

Second, facial invalidation of laws is considered as "manifestly strong medicine," to be used "sparingly and only as a
last resort," and is "generally disfavored;" The reason for this is obvious. Embedded in the traditional rules governing
constitutional adjudication is the principle that a person to whom a law may be applied will not be heard to challenge
a law on the ground that it may conceivably be applied unconstitutionally to others, i.e., in other situations not before
the Court. A writer and scholar in Constitutional Law explains further:

The most distinctive feature of the overbreadth technique is that it marks an exception to some of the usual rules of
constitutional litigation. Ordinarily, a particular litigant claims that a statute is unconstitutional as applied to him or
her; if the litigant prevails, the courts carve away the unconstitutional aspects of the law by invalidating its improper
applications on a case to case basis. Moreover, challengers to a law are not permitted to raise the rights of third
parties and can only assert their own interests. In overbreadth analysis, those rules give way; challenges are
permitted to raise the rights of third parties; and the court invalidates the entire statute "on its face," not merely "as
applied for" so that the overbroad law becomes unenforceable until a properly authorized court construes it more
narrowly. The factor that motivates courts to depart from the normal adjudicatory rules is the concern with the
"chilling;" deterrent effect of the overbroad statute on third parties not courageous enough to bring suit. The Court
assumes that an overbroad law’s "very existence may cause others not before the court to refrain from
323
constitutionally protected speech or expression." An overbreadth ruling is designed to remove that deterrent effect
on the speech of those third parties.

In other words, a facial challenge using the overbreadth doctrine will require the Court to examine PP 1017 and
pinpoint its flaws and defects, not on the basis of its actual operation to petitioners, but on the assumption or
prediction that its very existence may cause others not before the Court to refrain from constitutionally protected
speech or expression. In Younger v. Harris, it was held that:

[T]he task of analyzing a proposed statute, pinpointing its deficiencies, and requiring correction of these deficiencies
before the statute is put into effect, is rarely if ever an appropriate task for the judiciary. The combination of the
relative remoteness of the controversy, the impact on the legislative process of the relief sought, and above all the
speculative and amorphous nature of the required line-by-line analysis of detailed statutes,...ordinarily results in a
kind of case that is wholly unsatisfactory for deciding constitutional questions, whichever way they might be decided.

And third, a facial challenge on the ground of overbreadth is the most difficult challenge to mount successfully, since
the challenger must establish that there can be no instance when the assailed law may be valid. Here, petitioners
did not even attempt to show whether this situation exists.  (Emphasis in the original)
68

A similar view was adopted by this court in Romualdez v. Hon. Sandiganbayan  and Spouses Romualdez v.
69

Commission on Elections.  Unfortunately, in resolving the motion for reconsideration in Spouses Romualdez v.
70

Commission on Elections,  this court seemed to have expanded the scope of the application of facial challenges.
71

Hence:

x x x. The rule established in our jurisdiction is, only statutes on free speech, religious freedom, and other
fundamental rights may be facially challenged. Under no case may ordinary penal statutes be subjected to a facial
challenge. 72

However, the basic rule was again restated in Southern Hemisphere Engagement Network, Inc. v. Anti-Terrorism
Council:73

Distinguished from an as-applied challenge which considers only extant facts affecting real litigants, a facial
invalidation is an examination of the entire law, pinpointing its flaws and defects, not only on the basis of its actual
operation to the parties, but also on the assumption or prediction that its very existence may cause others not before
the court to refrain from constitutionally protected speech or activities.

Justice Mendoza accurately phrased the subtitle in his concurring opinion that the vagueness and overbreadth
doctrines, as grounds for a facial challenge, are not applicable to penal laws.

A litigant cannot thus successfully mount a facial challenge against a criminal statute on either vagueness or
overbreadth grounds.

The allowance of a facial challenge in free speech cases is justified by the aim to avert the "chilling effect" on
protected speech, the exercise of which should not at all times be abridged.

As reflected earlier, this rationale is inapplicable to plain penal statutes that generally bear an "in terrorem effect" in
deterring socially harmful conduct. In fact, the legislature may even forbid and penalize acts formerly considered
innocent and lawful, so long as it refrains from diminishing or dissuading the exercise of constitutionally protected
rights.

The Court reiterated that there are "critical limitations by which a criminal statute may be challenged" and
"underscored that an ‘on-its-face’ invalidation of penal statutes x x x may not be allowed."

[T]he rule established in our jurisdiction is, only statutes on free speech, religious freedom, and other fundamental
rights may be facially challenged. Under no case may ordinary penal statutes be subjected to a facial challenge.
The rationale is obvious. If a facial challenge to a penal statute is permitted, the prosecution of crimes may be
hampered. No prosecution would be possible. A strong criticism against employing a facial challenge in the case of
penal statutes, if the same is allowed, would effectively go against the grain of the doctrinal requirement of an
existing and concrete controversy before judicial power may be appropriately exercised.

A facial challenge against a penal statute is, at best, amorphous and speculative. It would, essentially, force the
court to consider third parties who are not before it. As I have said in my opposition to the allowance of a facial
challenge to attack penal statutes, such a test will impair the State’s ability to deal with crime. If warranted, there
would be nothing that can hinder an accused from defeating the State’s power to prosecute on a mere showing that,
as applied to third parties, the penal statute is vague or overbroad, notwithstanding that the law is clear as applied to
him.

324
It is settled, on the other hand, that the application of the overbreadth doctrine is limited to a facial kind of challenge
and, owing to the given rationale of a facial challenge, applicable only to free speech cases.

By its nature, the overbreadth doctrine has to necessarily apply a facial type of invalidation in order to plot areas of
protected speech, inevitably almost always under situations not before the court, that are impermissibly swept by the
substantially overbroad regulation. Otherwise stated, a statute cannot be properly analyzed for being substantially
overbroad if the court confines itself only to facts as applied to the litigants.

xxxx

In restricting the overbreadth doctrine to free speech claims, the Court, in at least two cases, observed that the US
Supreme Court has not recognized an overbreadth doctrine outside the limited context of the First Amendment, and
that claims of facial overbreadth have been entertained in cases involving statutes which, by their terms, seek to
regulate only spoken words. In Virginia v. Hicks, it was held that rarely, if ever, will an overbreadth challenge
succeed against a law or regulation that is not specifically addressed to speech or speech-related conduct. Attacks
on overly broad statutes are justified by the "transcendent value to all society of constitutionally protected
expression."  (Emphasis and underscoring in the original)
74

The prevailing doctrine today is that:

a facial challenge only applies to cases where the free speech and its cognates are asserted before the court. While
as a general rule penal statutes cannot be subjected to facial attacks, a provision in a statute can be struck down as
unconstitutional when there is a clear showing that there is an imminent possibility that its broad language will allow
ordinary law enforcement to cause prior restraints of speech and the value of that speech is such that its absence
will be socially irreparable.75

Broken down into its elements, a facial review should only be allowed when:

First, the ground for the challenge of the provision in the statute is that it violates freedom of expression or any of its
cognates;

Second, the language in the statute is impermissibly vague;

Third, the vagueness in the text of the statute in question allows for an interpretation that will allow prior restraints;

Fourth, the "chilling effect" is not simply because the provision is found in a penal statute but because there can be
a clear showing that there are special circumstances which show the imminence that the provision will be invoked
by law enforcers;

Fifth, the application of the provision in question will entail prior restraints; and

Sixth, the value of the speech that will be restrained is such that its absence will be socially irreparable. This will
necessarily mean balancing between the state interests protected by the regulation and the value of the speech
excluded from society. 76

Facial challenges can only be raised on the basis of overbreadth and not on vagueness. Southern Hemisphere
demonstrated how vagueness relates to violations of due process rights, whereas facial challenges are raised on
the basis of overbreadth and limited to the realm of freedom of expression.

None of these petitions justify a facial review of this social legislation. The free exercise of one’s religion may be a
cognate of the freedom of expression. However, the petitions have not properly alleged the religion, the religious
dogma, the actual application of the religious dogma where a repugnancy can be shown. They have also failed to
demonstrate that the violation of the amorphous religious dogmas that they imagine should result in the invalidation
of statutory text rather than simply an adjustment in its interpretation and in its application.

II

No Locus Standi

Besides, the consolidated cases are improper class suits that should be dismissed outright.

A class suit is allowed under the rules  if those who instituted the action are found to be sufficiently numerous and
77

representative of the interests of all those they seek to represent. They must be so numerous that it would be
impractical to bring them all to court or join them as parties. Lastly, a common interest in the controversy raised
must be clearly established. 78

325
These requirements afford protection for all those represented in the class suit considering that this court’s ruling will
be binding on all of them. We should be especially cautious when the class represented by a few in an alleged class
suit is the "entire Filipino Nation" or all the adherents of a particular religion. This court must be convinced that the
interest is so common that there can be no difference in the positions and points of view of all that belong to that
class. Anything less than this standard will be an implied acceptance that in this important adjudication of alleged
constitutional rights, the views of a few can be imposed on the many.

In the 1908 case of Ibañes v. Roman Catholic Church,  13 plaintiffs filed the complaint for themselves and on behalf
79

of the other inhabitants of the town of Ternate against the Roman Catholic Church for the proprietorship of an image
of the Holy Child.  This court held that the action could not be maintained.
80

It sufficiently appears from the record in this case that it is a controversy between the Roman Catholic Church on
one side and the Independent Filipino Church on the other. That it is the purpose of the plaintiffs, if they secure
possession of the image, to place it in the chapel of the Independent Church is also very clear. What number of the
inhabitants of the town (2,460 according to the census) are members of the Roman Catholic Church and what part
are members of the Independent Filipino Church does not appear. But it is very apparent that many of the
inhabitants are opposed to the transfer of the image from the Roman Catholic Church. Under the circumstances, the
thirteen plaintiffs do not fairly represent all of the inhabitants of the town. Their interest and the interests of some of
the others are diametrically opposed. For this reason this action can not be maintained.  (Emphasis supplied)
81

In the 1974 case of Mathay v. Consolidated Bank and Trust Co.,  this court affirmed the dismissal of a complaint
82

captioned as a class suit for failure to comply with the requisite that the parties who filed the class suit must be
sufficiently numerous and representative:

The complaint in the instant case explicitly declared that the plaintiffs-appellants instituted the "present class suit
under Section 12, Rule 3, of the Rules of Court in behalf of CMI subscribing stockholders" but did not state the
number of said CMI subscribing stockholders so that the trial court could not infer, much less make sure as explicitly
required by the statutory provision, that the parties actually before it were sufficiently numerous and representative
in order that all interests concerned might be fully protected, and that it was impracticable to bring such a large
number of parties before the court.

xxxx

Appellants, furthermore, insisted that insufficiency of number in a class suit was not a ground for dismissal of one
action. This Court has, however, said that where it appeared that no sufficient representative parties had been
joined, the dismissal by the trial court of the action, despite the contention by plaintiffs that it was a class suit, was
correct.  (Emphasis supplied)
83

In Re: Request of the Heirs of the Passengers of Doña Paz,  a class suit was filed by 27 named plaintiffs on behalf
84

and in representation of "the approximately 4,000 persons x x x (who also) are all close relatives and legal heirs of
the passengers of the Doña Paz."  This court distinguished class suits  from permissive joinder of parties:
85 86 87

x x x. What makes the situation a proper case for a class suit is the circumstance that there is only one right or
cause of action pertaining or belonging in common to many persons, not separately or severally to distinct
individuals.

xxxx

The other factor that serves to distinguish the rule on class suits from that of permissive joinder of parties is, of
course, the numerousness of parties involved in the former. The rule is that for a class suit to be allowed, it is
needful inter alia that the parties be so numerous that it would be impracticable to bring them all before the court. 88

Finding that the case was improperly brought as a class suit, this court concluded that "it follows that the action may
not be maintained by a representative few in behalf of all the others."  Consequently, this court denied the authority
89

to litigate in the form of a class suit. 90

This ruling was again emphasized in Bulig-Bulig Kita Kamag-anak Association v. Sulpicio Lines, Inc.,  making the
91

ratio decidendi in Re: Request of the Heirs of the Passengers of Doña Paz binding precedent.  These cases have
92

been cited in a more recent jurisprudence in its discussion on the need to sufficiently represent all interests for a
class suit to prosper. 93

MVRS Publications, Inc. et al. v. Islamic Da’wah Council of the Philippines, Inc. et al.  emphasized how adequacy of
94

representation in a class suit is important in fully protecting the interests of those concerned:

In any case, respondents’ lack of cause of action cannot be cured by the filing of a class suit. As correctly pointed
out by Mr. Justice Jose C. Vitug during the deliberations, "an element of a class suit is the adequacy of

326
representation. In determining the question of fair and adequate representation of members of a class, the court
must consider (a) whether the interest of the named party is coextensive with the interest of the other members of
the class; (b) the proportion of those made parties as it so bears to the total membership of the class; and, (c) any
other factor bearing on the ability of the named party to speak for the rest of the class.

The rules require that courts must make sure that the persons intervening should be sufficiently numerous to fully
protect the interests of all concerned. In the present controversy, Islamic Da'wah Council of the Philippines, Inc.,
seeks in effect to assert the interests not only of the Muslims in the Philippines but of the whole Muslim world as
well. Private respondents obviously lack the sufficiency of numbers to represent such a global group; neither have
they been able to demonstrate the identity of their interests with those they seek to represent. Unless it can be
shown that there can be a safe guaranty that those absent will be adequately represented by those present, a class
suit, given its magnitude in this instance, would be unavailing. 95

Class suits require that there is a possibility that those represented can affirm that their interests are properly raised
in a class suit. The general rule must be that they be real and existing. In constitutional adjudication, this court must
approach class suits with caution; otherwise, future generations or an amorphous class will be bound by a ruling
which they did not participate in.

Not all these elements for a proper class suit are present in the petitions filed in these cases.

Petitioners James M. Imbong and Lovely-Ann C. Imbong, for themselves and in behalf of their minor children, Lucia
Carlos Imbong and Bernadette Carlos Imbong, and Magnificat Child Development Center, Inc.  filed their petition
96

"as parents and as a class suit in representation of other parents and individuals similarly situated."  They alleged
97

that they are "Catholics who have deeply-held religious beliefs upon which Faith their conscience is rooted against
complying with the mandates of the Act." 98

Four persons and a juridical entity cannot be considered as sufficiently numerous and representative of the interests
of "all other parents and individuals similarly situated."

Petitioners Alliance for the Family Foundation, Inc. (ALFI), represented by its President, Maria Concepcion S.
Noche, Spouses Reynaldo S. Luistro & Rosie B. Luistro, et al.  invoked Oposa v. Factoran, Jr. in filing their petition
99

"on behalf of all generations of Filipinos yet unborn, who are in danger of being deprived of the right to life by R.A.
No. 10354." 100

The required common interest in the controversy can neither be determined nor proven in this case if those to be
represented are yet to be born.

It is true that in Oposa v. Factoran, Jr.,  intergenerational suits were introduced in our jurisdiction. However, this
101

case must not be abused out of its context. Oposa is a novel case involving an environmental class suit. This
environmental case involved minor petitioners who filed a complaint for the cancellation of all existing timber license
agreements in the country. They were allowed to sue on behalf of future generations on the ground of
"intergenerational responsibility," in relation to the constitutional right to a balanced and healthful ecology.  The102

state of our ecology will certainly affect future generations regardless of ideology, philosophy or standpoints.

On the other hand, those who will only be born in the future may have different views regarding the various policy
approaches on responsible parenthood and reproductive health. Hence, the commonality of the interest that will
justify the presumption that the legal positions will be the same is not present.

In its petition, Task Force for Family and Life Visayas, Inc.  alleged that it is "an association of men and women who
103

have committed themselves to the protection of family and life, sanctity of marriage x x x."  Its members are
104

"Roman Catholics by faith" and are "spread throughout the Visayan region."  The petitioners collectively seek relief
105

"from the impending threat against their children, their respective families and the entire Filipino nation, their
religious freedom and other constitutional rights they foresee and make known in this petition." 106

Petitioners, by no stretch of the imagination, cannot be representative of the interests of "the entire Filipino nation."
Not all Filipinos are Roman Catholics. Not all Filipinos are from the Visayas. Certainly not all Filipinos have a
common interest that will lead to a common point of view on the constitutionality of the various provisions of the RH
law.

Serve Life Cagayan de Oro City, Inc., represented by Dr. Nestor B. Lumicao, M.D. as President and in his personal
capacity, Rosevale Foundation, Inc., represented by Dr. Rodrigo M. Alenton, M.D. as member of the school board
and in his personal capacity, Rosemarie R. Alenton, Imelda G. Ibarra, CPA, Lovenia P. Naces, Ph.D., Anthony G.
Nagac, Earl Anthony C. Gambe, and Marlon I. Yap also filed a petition consolidated with these cases. 107

The individual petitioners alleged they are medical practitioners, members of the bar, educators, and various
professionals who filed this petition "as parents and as a class suit in representation of other parents and individuals

327
similarly situated."  They are "devout and practicing Catholics whose religious beliefs find the mandatory provisions
108

of the RH law obnoxious and unconscionable." 109

The basis for representing Catholics because their religious beliefs find the RH law obnoxious and unconscionable
is not shared by all Catholics. Again, the class is improperly defined and could not withstand judicial scrutiny. Their
views may not be representative of the entire class they seek to represent.

Spouses Francisco S. Tatad and Maria Fenny C. Tatad and Alan F. Paguia alleged that they are representing,
themselves, their posterity, and the rest of Filipino posterity.  They instituted their action "in their capacity as
110

concerned citizens, taxpayers, parents, grandparents, biological ancestors of all their descendants, born and
unborn, conceived or not yet conceived, up to their remotest generation in the future within the context of Filipino
posterity under the 1987 Constitution." 111

Three individual petitioners cannot be considered as sufficiently numerous and representative of the interests "of the
rest of Filipino posterity." There is no showing that future Filipinos will accept their point of view. No one can be
certain of the interest of Filipinos in the future. No one can be certain that even their descendants will agree with
their position.

Consequently, a common interest on the controversy with future Filipinos cannot be established.

In fact, petitioners Couples for Christ Foundation, Inc., et al.  confirmed the existence of divergent opinions on the
112

RH law among Filipinos when it stated that "the Filipino people, of whom majority are Catholics, have a strong
interest in the final resolution of the issues on reproductive health, which has divided the nation for years." 113

Pro-Life Philippines Foundation, Inc., represented by Lorna Melegrito as Executive Director and in her personal
capacity, Joselyn B. Basilio, Robert Z. Cortes, Ariel A. Crisostomo, Jeremy I. Gatdula, Cristina A. Montes, Raul
Antonio A. Nidot, Winston Conrad B. Padojinog, and Rufino L. Policarpio III also filed a petition. 114

The individual petitioners instituted this action "as parents, and as a class suit in representation of other parents and
individuals similarly situated."  They alleged that the RH law is "oppressive, unjust, confiscatory and discriminatory
115

specifically against herein petitioners – as parents, professionals, and faithful of the Catholic Church." 116

Again, there is no showing that these individual petitioners are sufficiently numerous and representative of the
interests of those they seek to represent.

The rationale for the dismissal of actions in these types of class suits is far from merely procedural. Since petitioners
claim representation, the argument that they bring as well as the finality of the judgment that will be rendered will
bind their principals. An improperly brought class suit, therefore, will clearly violate the due process rights of all
those in the class. In these cases, certainly the entire Filipino nation, all the descendants of petitioners, all Catholics,
and all the unborn will be bound even though they would have agreed with respondents or the intervenors.

Being improperly brought as class suits, these petitions should be dismissed.

Besides this infirmity, some of the petitions included the Office of the President as party respondent.  Also on this
117

basis, these petitions should be dismissed.

A sitting president cannot be sued.  This immunity exists during the President’s incumbency only. The purpose is to
118

preserve the dignity of the office that is necessary for its operations as well as to prevent any disruption in the
conduct of official duties and functions.  Without this immunity, a proliferation of suits would derail the focus of the
119

office from addressing the greater needs of the country to attending each and every case filed against the sitting
President, including the petty and harassment suits.

The doctrine of presidential immunity is not a surrender of the right to demand accountability from those who hold
public office such as the President. The Constitution enumerates the grounds when a President may be
impeached.  This immunity is also no longer available to a non-sitting President. After the end of his or her tenure,
120

he or she can be made criminally and civilly liable in the proper case. 121

III
The Right to Life

Petitioners raise the issue of right to life under Article III, Section 1 of the Constitution in relation to the policy of
equal protection of the life of the mother and of the unborn under Article II, Section 12. In this context, the right to life
is viewed as the right to a corporeal existence.

The constitutional right to life has many dimensions. Apart from the protection against harm to one’s corporeal
existence, it can also mean the "right to be left alone". The right to life also congeals the autonomy of an individual
328
to provide meaning to his or her life. In a sense, it allows him or her sufficient space to determine quality of life. A
law that mandates informed choice and proper access for reproductive health technologies should not be presumed
to be a threat to the right to life. It is an affirmative guarantee to assure the protection of human rights.

The threat to corporeal existence

The policy taken by the law against abortion is clear. In the fifth paragraph of Section 2,  the law provides:
122

The State likewise guarantees universal access to medically safe, non-abortifac[i]ent, effective, legal, affordable,
and quality reproductive health care services, methods, devices, supplies which do not prevent the implantation of a
fertilized ovum as determined by the Food and Drug Administration (FDA) and relevant information and education
thereon according to the priority needs of women, children and other underprivileged sectors x x x. (Emphasis
supplied)

Section 3,  paragraph (d) likewise emphasizes the following as a guiding principle of implementation:
123

(d) The provision of ethical and medically safe, legal, accessible, affordable, non-abortifac[i]ent, effective and quality
reproductive health care services and supplies is essential in the promotion of people’s right to health, especially
those of women, the poor and the marginalized, and shall be incorporated as a component of basic health care[.]
(Emphasis supplied)

Then, subparagraph (j) of the same section in this law states:

(j) While this Act recognizes that abortion is illegal and punishable by law, the government shall ensure that all
women needing care for post-abortive complications and all other complications from pregnancy, labor and delivery
and related issues shall be treated and counseled in a humane, nonjudgmental and compassionate manner in
accordance with law and medical ethics[.] (Emphasis supplied)

Section 9  of the law provides:

124

Sec. 9. The Philippine National Drug Formulary System and Family Planning Supplies. – The National Drug
Formulary shall include hormonal contraceptives, intrauterine devices, injectibles and other safe, legal, non-
abortifac[i]ent and effective family planning products and supplies. x x x. (Emphasis supplied)

Section 4, paragraph (a) of Republic Act No. 10354 defines abortifacient as:

(a) Abortifacient refers to any drug or device that induces abortion or the destruction of a fetus inside the mother’s
womb or the prevention of the fertilized ovum to reach and be implanted in the mother’s womb upon determination
of the FDA.

This should have been sufficient to address the contention by petitioners that the law violates the right to life and
that right to life means the right to a corporeal existence.

The ponencia found that the law was "consistent with the Constitution"  because it "prohibits any drug or device that
125

induces abortion"  and because it "prohibits any drug or device [that prevents] the fertilized ovum to reach and be
126

implanted in the mother’s womb." 127

When life begins, not an issue.

However, the court cannot make a declaration of when life begins. Such declaration is not necessary and is a
dictum that will unduly confuse future issues.

First, there is, as yet, no actual controversy that can support our deliberation on this specific issue.

Second, the court cannot rely on the discussion of a few commissioners during the drafting of the constitution by the
Constitutional Commission.

In Civil Liberties Union v. Executive Secretary,  this court noted:

128

A foolproof yardstick in constitutional construction is the intention underlying the provision under consideration.
Thus, it has been held that the Court in construing a Constitution should bear in mind the object sought to be
accomplished by its adoption, and the evils, if any, sought to be prevented or remedied. A doubtful provision will be
examined in the light of the history of the times, and the condition and circumstances under which the Constitution
was framed. The object is to ascertain the reason which induced the framers of the Constitution to enact the

329
particular provision and the purpose sought to be accomplished thereby, in order to construe the whole as to make
the words consonant to that reason and calculated to effect that purpose. 129

However, in the same case, this court also said: 130

While it is permissible in this jurisdiction to consult the debates and proceedings of the constitutional convention in
order to arrive at the reason and purpose of the resulting Constitution, resort thereto may be had only when other
guides fail as said proceedings are powerless to vary the terms of the Constitution when the meaning is clear.
Debates in the constitutional convention "are of value as showing the views of the individual members, and as
indicating the reasons for their votes, but they give us no light as to the views of the large majority who did not talk,
much less of the mass of our fellow citizens whose votes at the polls gave that instrument the force of fundamental
law. We think it safer to construe the constitution from what appears upon its face." The proper interpretation
therefore depends more on how it was understood by the people adopting it than in the framers’s understanding
thereof.  (Emphasis supplied)
131

The meaning of constitutional provisions should be determined from a contemporary reading of the text in relation to
the other provisions of the entire document. We must assume that the authors intended the words to be read by
generations who will have to live with the consequences of the provisions. The authors were not only the members
of the Constitutional Commission but all those who participated in its ratification. Definitely, the ideas and opinions
exchanged by a few of its commissioners should not be presumed to be the opinions of all of them. The result of the
deliberations of the Commission resulted in a specific text, and it is that specific text—and only that text—which we
must read and construe.

The preamble establishes that the "sovereign Filipino people" continue to "ordain and promulgate" the Constitution.
The principle that "sovereignty resides in the people and all government authority emanates from them"  is not132

hollow. Sovereign authority cannot be undermined by the ideas of a few Constitutional Commissioners participating
in a forum in 1986 as against the realities that our people have to face in the present.

There is another, more fundamental, reason why reliance on the discussion of the Constitutional Commissioners
should not be accepted as basis for determining the spirit behind constitutional provisions. The Constitutional
Commissioners were not infallible. Their statements of fact or status or their inferences from such beliefs may be
wrong. This is glaringly true during their discussions of their reasons for supporting the formulation of Article II,
Section 12 of the Constitution. 133

It cannot be contended that the exact moment when life begins was a settled matter for the Constitutional
Commissioners. This is just one reading of their discussions.

For Commissioner Bernas, the reason for extending right to life to a fertilized ovum  was to "prevent the Supreme
134

Court from arriving at a x x x conclusion" similar to Roe v. Wade.  In the process, he explained his ideas on the
135

beginning of life:

FR. BERNAS: x x x The intent of this addition is to preclude the Supreme Court from following the United States
doctrine which does not begin to weigh the life of the unborn against that of the mother until the fetus has reached a
viable stage of development. In American doctrine, during the first six months of pregnancy, the only requirement for
allowing abortion is that it will not be harmful to the mother. It is only after the sixth month that the life of the fetus
begins to be weighed against the life of the mother.

The innovation does not say that from the first moment the sperm and the egg shake hands, human life is already
present, much less does it say that at that moment, a soul is infused; nor does the innovation say that the right to life
of the fertilized ovum must prevail over the life of the mother all the time. All that the innovation says is that from the
moment of fertilization, the ovum should be treated as life whose worth must be weighed against the life of the
woman, not necessarily saying that they are of equal worth. 136

x x x. The Argument in Roe v. Wade is that the important thing is the privacy of the mother’s womb. If she wants to
get rid of that fetus anytime within the first six months, it is allowed provided it can be done safely even if there is no
medical reason for it. That is the only thing contemplated in this. 137

However, despite Fr. Bernas’ statement on the proposed inclusion of "[t]he right to life extends to the fertilized
ovum" in Section 1 of the Bill of Rights, Bishop Bacani stated that human life already existed at the time of
conception:

BISHOP BACANI: The formulation reached by the Committee was "fertilized ovum," to precisely define what we
meant. And it will be brought forward in another committee report that the right to life begins with conception. That is
meant to explain what is understood on the committee report by the word "conception." The Gentleman was asking
whether this is a human person. That is not the assertion yet of this section. But what we do assert is this, that this is
human life already. If I may be allowed to read the results of the report by Fr. Robert Henley, who is also a Jesuit
like Fr. Bernas, it seems they are in all camps. Let me just read this into the record. He says:
330
Specializing as it does in fetal physiology, Georgetown University, probably more than almost any other university, is
aware of the biological facts regarding the beginnings of human life.

From the moment of conception a new biological entity exists. The entity cannot be considered as physically
identical with the mother’s body. To consider the matter broadly, there is no essential difference between an ovum
fertilized within the body and an ovum fertilized outside the parent’s body or rejected in an egg or emerging
undeveloped, as in marsupials, in an external pouch. To destroy this entity is to destroy an existing life. Since this
life entity is clearly within the development of the human species, there is obviously nothing added on a human
being. Its destruction is the destruction of human life. Murder cannot be justified by a legal fiction. 138

Further in the deliberations on this issue, Ms. Felicitas Aquino* propounded some concerns:

MS. AQUINO: Madam President, before the issue on the right to life is lost in the interdebate on the vexing question
of the U.S. bases, I am intervening to settle some matters about the matter of the right to life.

I am very much alarmed by the absolutist claim to morality in the defense of human life, the defense that was raised
by Commissioner Villegas. There is presently a raging debate on the philo-ethical considerations of the origin or the
beginnings of human life that at this moment, I do not think we are in any position to preempt the debate and come
up with a premature conclusion on the matter. There are still pressing questions in my mind, such as: Is the
biological existence of a potentiality for life synonymous with human personality? Is viability synonymous with life?
There are at least a dozen theories that attempt to address themselves to this kind of question. For example, we are
aware of the Thomistic concept of hylomorphism which posits the complementarity of matter and form. The theory
demands that before human life is assumed, the material body demands a certain measure of organization and form
that makes it capable of receiving a soul. It operates on the premise that individuality is the basic premise and the
fundamental criterion for human life and human personality and individuality requires consciousness and self-
reflection.

There is another theory which states that human life begins two to three weeks after conception; that is after the
possibility on the process of twinning the zygote or the recombination of the zygote is finally ruled out. These are
questions that need to be addressed in our Civil Code. For example, in the context of this discussion, Articles 40
and 41 are settled that personality is determined by birth, and that for all purposes favorable to it, a conceived baby
is considered born but subject to the conditions of Article 41 which says that personality is determined by live birth. I
would think that Articles 40 and 41 are not only settled, but are the most practical approach to the raging debate on
the matter of human life. It lays as the criteria for its conclusion the individual biological criteria, with special
emphasis on the physical separation of the fetus from the mother and the requirements of viability.

I am alarmed by the way we tend to preempt this kind of discussion by invoking the claims of the righteousness of
morality. These questions for me are transcendental that we cannot even attempt to address any conclusion on the
matter unless we can address the question without temerity or without bigotry. Besides, the level of human
knowledge on this debate is so severely restricted that to preempt the debate is, I guess, to preempt the
deliberations and finally the possibility of agreement on the diverse theories on the matter. 139

In response, Mr. Villegas dismissed the concerns and declared that the issue of the beginning of life is already
settled.

MR. VILLEGAS: Madam President, it is precisely because this issue is transcendental that we have to make also a
transcendental statement. There is no debate among medical scientists that human life begins at conception, so
that is already a settled question. We are talking about life. As I said, we are not talking about human personality,
neither are we saying that the human person can be decided precisely by law, nor at what time it will have the right
to property and inheritance. The only right that we are protecting is the right to life at its beginning, which medical
science genetics has already confirmed as beginning at conception.  (Emphases supplied)
140

The Constitutional Commission deliberations show that it is not true that the issue of when life begins is already a
settled matter. There are several other opinions on this issue. The Constitutional Commissioners adopted the term
"conception" rather than "fertilized ovum."

New discoveries in reproductive science, particularly the possibility of cloning, provide basis for the possible
significance of viable implantation in the uterus as the "beginning of life and personhood." It is at implantation when
a group of cells gain the potential of progressing into a human being without further intervention. 141

There are others who say that human life is defined by the presence of an active brain.  Without it, there is no
142

human being. 143

Another theory is that human life begins when organs and systems have already been developed and functioning as
a whole, consistent with the idea that death happens upon cessation of organized functions of these organs and
systems.  Zygote and embryonic stages are merely transitional phases.
144 145

331
Others suggest that life begins when there is no more possibility of "twinning." 146

There are also those who do not share the moral value and, therefore, the legal protection that can be given to a
fertilized ovum even assuming that that would be the beginning of life.

During the Constitutional Commission deliberations, Rev. Rigos pointed out the need to "consider the sensibilities of
other religious groups."  He asked:
147

REV. RIGOS: x x x. But like a few people who spoke this morning, I am a bit disturbed by the second sentence:
"The right to life extends to the fertilized ovum."

In discussing this proposed sentence, did the Committee consider the sensibilities of some religious groups which
do not look at the fertilized ovum as having reached that stage that it can be described as human life? 148

Fr. Bernas answered: "Precisely, we used that word to try to avoid the debate on whether or not this is already
human life."149

Later, Rev. Rigos asked if the aim of the clause could not be achieved through legislation. 150

Bishop Bacani stated the reason for his belief why the matter could not be left to legislation. He said:

x x x. We would like to have a constitutional damper already on the assault to human life at its early stages. And we
realized that it can be possible to more easily change x x x easier to change legislation on abortion. Hence, we
would like to be able to prevent those changes in the laws on abortion later. 151

Rev. Rigos pointed out the differing opinions on the commencement of human life. He said that "[i]f we
constitutionalize the beginning of human life at a stage we call fertilized ovum, then we are putting a note of the
finality to the whole debate."  To this, Bishop Bacani said that there were people from other religions who were
152

against abortion. He said:

BISHOP BACANI: I would like to remind Reverend Rigos that when we talk about this, it is not a question of
religious boundaries. In fact, let me just read what is contained in an article given by one of my researchers. It says
that many scholarly Protestant and Jewish leaders are prominent in the pro-light movement – and they are referring
to the anti-abortion movement. I do not want to put this simply on the denominational plain, and it is misleading to
put it at that level.

xxxx

BISHOP BACANI: Because these are people who are not Catholics – who are Jewish, Protestants, even atheists –
but who are against abortion. 153

Rev. Rigos clarified that while Bishop Bacani was correct in describing the Protestant church’s stance against
abortion "on the whole," "x x x there is a big segment in the Protestant church that wishes to make a clear distinction
between what we call abortion and miscarriage." 154

A paper published in the Journal of Medical Ethics written by Cameron and Williamson summarizes various religious
views on life’s beginnings.  It was asserted that "[t]he Bible, the Koran, and the Talmud do not actually say when life
155

begins, although each has been the subject of various interpretations." 156

The traditional Catholic view is that life begins at fertilization.  However, even "[w]ithin the Catholic Church, there
157

are differing views."  Cameron and Williamson mentioned subscription "to theories of ‘delayed’ or ‘mediate’
158

animation" or the infusion of the soul at points after fertilization.  There are also arguments that even distinguished
159

theologians like St. Augustine and St. Thomas claim that a fetus becomes a person only between the 40th to 80th
day from conception and not exactly at fertilization. 160

Similar to the traditional Catholic view, Buddhism, Sikhism, and Hinduism believe that life begins at conception. 161

Some Muslim scholars, according to Cameron and Williamson, believe that a fetus gains soul only in the fourth
month of pregnancy or after 120 days.  Other Muslims believe that a six-day embryo is already entitled to
162

protection.
163

The view that life begins at fertilization was supported during the debates in the Constitutional Commission by the
idea that a fertilized ovum always develops into a human life.

Commissioner Ms. Aquino observed:

332
MS. AQUINO: I cannot. This is very instructive because as the Commissioner will note, even this Commission
cannot settle the question of whether a fertilized egg has the right to life or not.

Those experts in the field of medicine and theology cannot settle this question. It is bad enough for us to pre-empt
this controversial issue by constitutionalizing the ovum; it would be doubly tragic for us to provide for ambiguities
which may even disturb settled jurisprudence. 164

Mr. Nolledo answered:

MR. NOLLEDO: I do not think there is ambiguity because the fertilized egg, in the normal course of events, will be
developed into a human being, a fetus, and as long as the normal course of events is followed. I think that the right
to life exists and the Constitution should recognize that right to life. We do not presume accidents; we do not
presume ambiguities. We presume that as long as it is categorized as a fertilized ovum, it will ripen into human
personality.  (Emphasis supplied)
165

Unfortunately, this may be wrong science.

There are studies that suggest that a fertilized egg, in the normal course of events, does not develop into a human
being. In Benagiano, et al.’s paper entitled Fate of Fertilized Human Oocytes,  it was shown that pre-clinical
166

pregnancy wastage is at least 50%. Some estimate that the chance that pregnancy will proceed to birth may be as
low as about 30%.  Some causes of this wastage are implantation failure, chromosome or genetic abnormality, and
167

similar causes. If normalcy is defined by this percentage, then it is pregnancy wastage that is normal and not
spontaneous development until birth. Based on these, there may be no basis to the presumption that a fertilized
ovum will "ripen into human personality" as Mr. Nolledo suggested.

To highlight the fallibility of the Constitutional Commissioners, one of them argued that a fertilized ovum is human
because it is the only species that has 46 chromosomes. Thus:

MR. VILLEGAS: x x x. Is it human? Genetics gives an equally categorical "yes." At the moment of conception, the
nuclei of the ovum and the sperm rupture. As this happens 23 chromosomes from the ovum combine with 23
chromosomes of the sperm to form a total of 46 chromosomes. A chromosome count of 46 is found only — and I
repeat, only — in human cells. Therefore, the fertilized ovum is human. (Emphasis supplied)

Since these questions have been answered affirmatively, we must conclude that if the fertilized ovum is both alive
and human, then, as night follows day, it must be human life. Its nature is human. 168

MR. VILLEGAS: As I explained in the sponsorship speech, it is when the ovum is fertilized by the sperm that there is
human life. Just to repeat: first, there is obviously life because it starts to nourish itself, it starts to grow as any living
being, and it is human because at the moment of fertilization, the chromosomes that combined in the fertilized ovum
are the chromosomes that are uniquely found in human beings and are not found in any other living
being. (Emphasis supplied)
169

Again, this is factually wrong.

A person who has Down’s Syndrome may have 47 chromosomes.  Most persons who have Turner’s Syndrome are
170

one chromosome short or have 45 chromosomes.  Persons with these conditions are no less human than persons
171

with 46 chromosomes. Meanwhile, there are also known species which have 46 chromosomes other than humans.
A Reeves’ Muntjac, for example, has 46 chromosomes. 172

Then, there was the claim that the instances when there had to be a choice made between the life of the mother
and the life of the zygote, fetus or child were few.

Mr. Villegas asserted:

MR. VILLEGAS: As I stated in my sponsorship speech, 99 percent of the cases indicated that taking care of the
health of the mother is taking care of the child and vice versa. Because of the progress of medical science, the
situations when a moral dilemma exists are very, very few. The intention behind the statement is precisely for the
State to make sure that it protects the life of the pregnant mother. She goes to all sorts of trouble as we have
discussed in the provisions on health. Protecting the life of the mother, giving her all the necessary social services
will protect the child. So it happens only in very, very few instances which we mentioned, like ectopic pregnancies
when the fertilized ovum is implanted outside of the uterus. I repeat, medical science has made the situation very,
very exceptional.

xxxx

333
MR. VILLEGAS: Madam President, as I said in response to the question yesterday of Commissioner Suarez, 99
percent of the cases related to protection of the mother’s health, making sure that she is in the right working
conditions and that she is not subjected to stress, show that there are so many things that can endanger the life of
the unborn because the health of the mother is not sufficiently cared for. This is really a prolife provision which
emphasizes the fact that in most instances, protecting the life of the mother is also protecting the life of the
unborn.  (Emphasis supplied)
173

Taking care of the mother does not always mean taking care of the zygote, fetus or child. There are instances
wherein in order to protect the life of the mother, the zygote, fetus or child may have to be sacrificed.

Implantation of the fertilized egg in areas outside the uterus such as the fallopian tube or ovaries may cause organ
rupture and severe loss of blood. To save the mother’s life, surgical removal  of the fertilized ovum may be
174

necessary.

Pre-eclampsia/eclampsia or hypertension during pregnancy  is associated with increased perinatal mortality.  It
175 176

may also result in other complications such as seizures, hemorrhage, or liver or kidney complications that may be
life-threatening.  It may require premature delivery of the child to prevent further complications or when the life of
177

the mother is already threatened by seizures or other complications. 178

Meanwhile, pregnant persons who have cancer may have to choose between chemotherapy and risking harm to the
developing embryo or fetus in her womb or not undergoing chemotherapy and risking her life. 179

The Department of Health estimated that more than a thousand women died in 2009 for various causes. It is
observed that most of these causes are the same complications that caused a moral dilemma between saving the
mother and saving the child. 180

[[reference = http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/april2014/204819_leonen.pdf]]

MATERIAL MORTALITY: BY MAIN CAUSE

Number, Rate/1000 Livebirths & Percent Distribution

Philippines, 2009

CAUSE Number Rate Percent*

TOTAL 1,599 0.9 100.0

1. Complications related to pregnancy 655 0.4 41.0

occurring in the course of labor,

delivery and puerperium

2. Hypertension complicating 513 0.3 32.1

pregnancy, childbirth and puerperium

3. Postpartum hemorrhage 286 0.2 17.9

4. Pregnancy with abortive outcome 142 0.1 8.9

5. Hemorrhage in early pregnancy 3 0.0 0.2

*Percent share to total number of maternal deaths

In asserting that there are only a few instances of moral dilemma during pregnancy, Mr. Villegas insisted on the
application of the doctrine of double effect. He stated:

MR. VILLEGAS: x x x. And we said that even in those instances, which I consider to be less than one percent of the
situation, there is a moral principle which we referred to as the principle of double effect in which if one has to save
the life of the mother in an operation, it is morally and legally permissible to so operate even if the child will have to
be indirectly sacrificed. There is no murder involved there because one does not intend the death of the child. One
is correcting a medical aberration of the mother.

xxxx

334
MR. VILLEGAS: It is the same principle of double effect. If you are not killing the mother directly, if the operation is
to save the child and there is the indirect effect of the mother’s life being sacrificed, then I think the principle of
double effect also applies. 181

The principle of double effect is traceable to Thomas Aquinas in Summa Theologiae.  It is, therefore, a Christian
182

principle that may or may not be adopted by all of the members of the medical community. There are even some
who recommend its abandonment. 183

A commissioner went on to point out that unwanted children become wanted children in practically all cases. Thus:

BISHOP BACANI: Madam President, may I comment on the unwanted babies. I was reading this little book on a
study of unwanted pregnancies and the interesting thing is this: In practically all cases, unwanted pregnancies
became wanted babies. In fact, there were more unwanted pregnancies that became wanted babies than wanted
pregnancies in the beginning which turned sour. 184

Again, this claim is belied by the fact that there are reportedly, hundreds of children that are abandoned every
year.  Apparently, abandonment and neglect are the most common cases of abuse among children, based on
185

statistics.  Moreover, statistics shows that there is an average of 16% unwanted births, according to the 2008
186

National Demographic and Health Survey. 187

Third, a generalized statement that life begins at fertilization of the ovum misunderstands the present science
relating to the reproduction process.

Reproduction is a complex process whose features we need not tackle absent an actual controversy.

Framing the issue as an issue of right to life or the right to protection of the unborn from conception presupposes a
prior conclusive scientific determination of the point when life commenced. It presupposes a conclusive finding as to
the beginning of the existence of the unborn.

The court cannot declare that life begins at fertilization on the basis of a limited set of sources that may not
constitute the consensus among the scientific community.

For the medical bases for the contention that life begins at fertilization some of the petitioners  cited medical
188

textbooks and expert opinions. However, some respondents and respondents-intervenors, also had their own
scientific textbooks, journals, and health organization statements to support their opposite contentions on the
difference between fertilization and conception, and the importance of viability and clear establishment of pregnancy
in determining life.
189

We can infer from the existence of differing opinions on this issue that reproduction involves a complex process.
Each part of this process provides a viable avenue for contention on the issue of life.

The reproductive process is not always characterized by continuity and spontaneity from fertilization to birth.

Fertilization happens when a single sperm penetrates the ovum or the egg.  The body has a mechanism that
190

prevents "polyspermy" or more than one sperm from penetrating the egg.  Failure of this mechanism may cause
191

issues on the viability of the fertilized egg.

192

Fertilization is possible only as long as both the sperm and the ova remain alive.  Sperm have a lifespan of about
193

three to five days inside a woman’s body,  while an ovum remains capable of fertilization only about a few hours to
194

a day after ovulation.  This means that fertilization can happen only within that specific period of time. No
195

fertilization within this specific period means that both cells will disintegrate and die.

A fertilized egg stays in the fallopian tube for about three to four days.196 It undergoes several cell divisions.  It
197

reaches the uterus usually in its 16- or 32-cell state.  At this point, each cell resulting from the divisions is
198

"totipotent" or may be capable of developing into an individual. 199

A fertilized egg may enter the uterus to undergo further cell division, until it becomes what is known as a blastocyst,
at which stage the cells lose their totipotentiality and start to differentiate.  The fertilized egg may also remain in the
200

fallopian tube or proceed to other organs in the abdomen to undergo the same process.

About a week from ovulation, the fertilized egg starts to implant itself into the uterus  or fallopian tube/other
201

abdominal organs to develop an embryo. The latter case is called ectopic pregnancy. When this happens, the
embryo is not viable and must be surgically removed to prevent maternal hemorrhage.  There are times when no
202

surgical removal is necessary because of spontaneous abortion. 203

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Around the time that the blastocyst starts embedding itself into the uterus, the hormone, chorionic gonadotropin, is
secreted.  This hormone is detectable in the mother’s blood and urine.  Pregnancy is usually determined by
204 205

detecting its presence.  Thus, pregnancy is detected only after several days from fertilization.
206

Studies suggest that fertilization does not always proceed to a detectable pregnancy.  Fertilization can become
207

undetected because the fertilized ovum becomes wastage prior to a finding of pregnancy. 208

Every instance of cell division or differentiation is crucial in the reproductive process. Each step is a possible point of
error. An error, especially when it involves the genes, is a possible cause for termination of the reproductive
process. 209

It is during the first week after fertilization that the greatest losses appear to occur.  A review of literature on the fate
210

of the fertilized egg in the womb estimates that about or at least 50% of fertilized eggs are wasted or "do[es] not
produce a viable offspring." 211

Wastage happens for different and natural reasons, among which are delayed or erroneous implantation and
chromosomal or genetic abnormalities.  Apparently, a delayed implantation of a fertilized egg into the uterus,
212

usually more than 12 days from fertilization, may reduce or eliminate the chance that pregnancy will proceed.  It is 213

suggested that delayed implantation may be caused by delayed production or relatively low concentration of the
chorionic gonadotropin hormone which leads to the degeneration of the corpus luteum.  The corpus luteum 214

produces hormones that are essential to the maintenance of pregnancy especially during the first months.  These 215

hormones are responsible for the thickening of the uterine muscles and the inhibition of uterine motility that will
prevent the expulsion of the fetus from the womb. 216

The huge percentage of losses of pre-implantation zygote provides basis for the argument that viability is a factor to
consider in determining the commencement of life. These losses are not generally regarded as deaths of loved
ones, perhaps because it occurs naturally and without the knowledge of the woman.

Hence, some  put greater emphasis on the importance of implantation on this issue than fertilization.
217

This value is shared by others including the American College of Obstetricians and Gynecologists, Code of Federal
Regulations, and British Medical Association, among others. 218

The reproductive process may also show that a fertilized egg is different from what it may become after individuation
or cell specialization.

One argument against the belief that human existence begins at fertilization emphasizes the totipotency of the pre-
implantation zygote.

David DeGrazia, for example, argues that while fertilization is necessary for a person’s existence, it is not sufficient
to consider it as a person.  At most, the zygote is only a precursor of a person.  It was stressed that several days
219 220

after fertilization, a zygote is not yet uniquely differentiated.  Hence, it can still divide into multiple human beings or
221

fuse with other zygotes to produce a chimera.  This mere possibility, according to DeGrazia belies the position that
222

a zygote is identical with the individual or individuals that result from it.  DeGrazia states:
223

Consider the zygote my parents produced in 1961, leading to my birth in 1962. I am not an identical twin. But that
zygote could have split spontaneously, resulting in identical twins. If it had, presumably I would not have existed,
because it is implausible to identify me with either of the twins in that counterfactual scenario. If that is right, then the
existence of the zygote my parents produced was not sufficient for my existence, from which it follows that I am not
numerically identical to that zygote. The very possibility of twinning belies the claim that we originated at
conception. 224

Further, as argued by DeGrazia, the mere fact that the cells are still subject to differentiation or individuation "belies
the claim that we originated at conception."  Imputing moral or human status to an undifferentiated zygote means
225

that a human (in the form of a zygote) dies every time a zygote multiplies to form two individuals.  DeGrazia doubts 226

that many would accept the imagined implications of giving full moral status to a fertilized ovum: 1) Multiple
pregnancy is a cause for mourning because essentially, a life is given up to produce at least two others; 2) There
should be reason to support investments in research for the prevention of multiple pregnancies. 227

DeGrazia characterizes a zygote as a single cell or "colony of cells"  whose functions are not yet wholly integrated,
228

unlike in a human being. 229

It was also emphasized that the potential to undergo a process that would eventually lead to being a full human
being is not equivalent to being a full human being.  Advancements in technology point to the possibility of cloning
230

from cells other than the sperm and the egg. Yet, this does not elevate the status of each cell as in itself a full
human being.  Thus: 231

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Clearly, the single-cell zygote has the potential to develop in such a way that eventually produces one of us. (Note: I
do not say that the single-cell zygote has the potential to become one of us – a statement that would imply
numerical identity.) But the importance of this potential is dubious. Now that we know that mammals can be cloned
from somatic cells – bodily cells other than sperm, eggs, and their stem-cell precursors – we know that, in principle,
each of millions of cells in your body has the potential to develop into a full human organism. Surely this confers no
particular moral status on your many individual cells; nor does it suggest that each cell is one of us. Once again, a
full complement of DNA is not enough to make one of us. 232

The argument that the use of ordinary body cells does not naturally lead to birth, according to DeGrazia, finds little
weight when statistics of pre-implantation wastage is considered.  Statistics does not support the view that
233

fertilization naturally leads to birth.  A fertilized egg still has to undergo several processes and meet certain
234

conditions before it results to implantation or birth.

Further, there are policy dilemmas resulting from the court’s premature determination of life’s beginnings.

A corollary of the view that life begins at fertilization is that anything that kills or destroys the fertilized egg is
"abortive."

The beginning of life is a question which can be most competently addressed by scientists or ethicists. A Supreme
Court declaration of a scientific truth amidst lack of consensus among members of the proper community is
dangerous in many contexts. One example is the occurrence of ectopic pregnancy.

Ectopic pregnancy occurs when the fertilized egg implants into parts or organs other than the uterus.  Ectopic 235

pregnancy usually occurs in the fallopian tube.  Women who experience ectopic pregnancy must cause the
236

removal of the developing embryo or she risks internal bleeding and death. 237

Ectopic pregnancy can be treated using drugs or surgery depending on the size of the embryo and the status of the
fallopian tube.  Smaller pregnancy and the inexistence of tubal rupture allow treatment through
238

medications. Medications will stop pregnancy growth without the need for removal of the fallopian tube.
239 240

However, there are instances that necessitate surgical removal of the pregnancy, including the fallopian tube, to
prevent harm to the woman. 241

In any case, creating an all encompassing definition of life’s beginnings to "equalize" the protection between the
"unborn" and the mother creates a moral dilemma among the people whether to save the mother from the risk of
life-threatening complications or whether to "save" a fertilized ovum that has no chance of surviving. This is most
especially applicable among those involved such as the mother and the health care professionals.

Following a declaration in the ponencia that life begins at fertilization, the removal of a fertilized egg in an ectopic
pregnancy must necessarily constitute taking of life. All persons involved in such removal must necessarily kill a
fertilized ovum. A mother or a health care professional who chooses to remove the embryo to save the mother risks
being charged or stigmatized for that conduct.

Similarly, such all encompassing declaration is dangerous especially when applied to fertilizations resulting from
sexual assault or rape.

There are conflicting versions of the mechanisms of action of emergency conception. There are publications, for
example, that find that a single dose of the most widely used emergency contraceptive, levonorgestrel (LNG) taken
within five days of unprotected sex would protect a female from unwanted pregnancy by delaying or inhibiting
ovulation.  Petitioners, on the other hand, believe that emergency contraceptives also prevent the implantation of a
242

fertilized ovum into the uterus. They also cite distinguished scientific journals such as the Annals of
Pharmacotherapy. 243

This lack of public consensus coupled with an official declaration from this court that life begins at fertilization could
immobilize a rape victim from immediately obtaining the necessary emergency medication should she wish to
prevent the unwanted pregnancy while there is still time. It may create ethical pressure on the victim to assume the
repercussions of acts that are not her fault.

Insisting on a determination of when life begins also unnecessarily burdens the ethical dilemma for assisted
reproductive technologies.

Assisted reproductive technologies (ART) refer to "all fertility treatments in which both eggs and sperm are handled.
In general, ART procedures involve surgically removing eggs from a woman’s ovaries, combining them with sperm
in the laboratory, and returning them to the woman’s body or donating them to another woman. They do NOT
include treatments in which only sperm are handled (i.e. intrauterine—or artificial—insemination) or procedures in
which a woman takes medicine only to stimulate egg production without the intention of having eggs

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retrieved." Others include among the ART procedures intrauterine insemination, in vitro fertilization, sperm
244

donation, egg donation, and surrogacy or gestational carrier.  I focus on in vitro fertilization.
245

In in vitro fertilization, the ovaries are stimulated to produce multiple eggs.  The produced eggs are retrieved from
246

the woman’s body for insemination.  A sufficient number of healthy embryos are transferred to the woman’s womb
247

after fertilization.  Multiple embryos are sometimes transferred to the womb to increase the chances of pregnancy,
248

in which case, multiple births are likely to happen.  Unused healthy embryos may be frozen for later use or for
249

donation.  Disposal of embryos is also an option for some.

250 251

The ethical dilemma arises with respect to the unused embryos. A conflict of interest is created between the fate of
the mother and the fate of the embryos. If life begins at fertilization, disposal of surplus embryos means disposal of
several human lives. At the same time, a mother or anyone else cannot be forced to conceive a child or donate an
embryo to another.

I believe that when presented with a like but actual case, it should be the parents who should make the choice
whether to use the surplus embryos or to dispose it if allowed by law.

When exactly life begins is not in issue in this case.

We should avoid this issue because this court lacks the competence to determine scientific, ethical or philosophical
truths. Just as it should not easily accept purported truths propounded by parties to support their causes for or
against reproductive health, this court should also not so easily dismiss views as "devoid of any legal or scientific
mooring"  or having been "conceptualized only for convenience by those who had only population control in
252

mind."253

The ponencia emphasizes this court’s statement in Continental Steel v. Hon. Accredited Voluntary Arbiter Allan S.
Montano that "a child inside the womb already has life".  But Continental Steel involves the issue of whether
254

respondent in that case was entitled to death and accident insurance claim after his child had been prematurely
delivered at 38 weeks and immediately died.

At 38 weeks, viability is less an issue compared to a fertilized egg. A fertilized egg will still have to successfully
undergo several processes, cell divisions, implantations, and differentiations for a chance at even developing
recognizable fetal tissues. This court said:

Even a child inside the womb already has life. No less than the Constitution recognizes the life of the unborn from
conception, that the State must protect equally with the life of the mother. If the unborn already has life, then the
cessation thereof even prior to the child being delivered, qualifies as death.  (Emphasis supplied)
255

This court was not making a declaration that a fertilized egg already constitutes a child inside a womb and a
declaration as to when life begins. Applied in the context of that case, this court was merely saying that the 38-week,
prematurely born child was already a child for purposes of the award of the death and accident insurance claim
under the Collective Bargaining Agreement.

IV

Section 9 and Abortifacient Effects

The petitions, having alleged no actual controversy, also furnish no justification to strike down any portion of Section
9 of Republic Act No. 10354 as unconstitutional. This provides:

SEC. 9. The Philippine National Drug Formulary System and Family Planning Supplies. – The National Drug
Formulary shall include hormonal contraceptives, intrauterine devices, injectables and other safe, legal, non-
abortifacient and effective family planning products and supplies. The Philippine National Drug Formulary System
(PNDFS) shall be observed in selecting drugs including family planning supplies that will be included or removed
from the Essential Drugs List (EDL) in accordance with existing practice and in consultation with reputable medical
associations in the Philippines. For the purpose of this Act, any product or supply included or to be included in the
EDL must have a certification from the FDA that said product and supply is made available on the condition that it is
not to be used as an abortifacient.

These products and supplies shall also be included in the regular purchase of essential medicines and supplies of
all national hospitals: Provided, further, That the foregoing offices shall not purchase or acquire by any means
emergency contraceptive pills, postcoital pills, abortifacients that will be used for such purpose and their other forms
or equivalent. (Emphasis supplied)

Petitioners argue that the law violates the right to health because allowing general access to contraceptives by
including them in the national drug formulary and in the supplies of national hospitals means that the citizens are

338
being exposed to several health risks such as different types of cancer, thromboembolytic events, myocardial
infarction, and stroke, among others.

Petitioners point to no specific drug or contraceptive. They produce medical journals which tend to support their
justification and ask this court to accept them as gospel truth. On the other hand, respondents also show journals
that support their claims.

The petitioners misread this provision.

The law specifically grants the Food and Drug Administration (FDA) with the competence to determine the scientific
validity of the allegations of the petitioners. The FDA is mandated to examine each and every drug, contraceptive or
technology vis-a-vis the claims made for or against their inclusion.

I agree with the ponencia in withholding any blanket pronouncement of any contraceptive absent the exercise of the
FDA of its functions under this provision. The FDA is mandated to ensure the safety and quality of drugs released to
the public. 256

Generalizations and exaggerated claims are symptomatic of anguished advocacies. The angst that accompany
desperate attempts to convince often push well-meaning advocates to magnify fears that go beyond the reasonable.

The argument that drugs that may be abused should not be made available to the public is perhaps more
dangerous to public health than a total ban on contraceptives. It is a proposed policy that misunderstands the effect
of any kind of drug on the human body. It is, thus, arbitrary and without reason.

Drugs aim to affect our bodily processes to achieve a desired outcome.  They work by targeting and interacting with
257

cell receptors, enzymes and/or other substances in our body so that the desired change in our chemical processes
and/or physiological functions can be effected. 258

However, our bodies are complex systems. Targeted receptors and/or enzymes may exist in non-target
areas. They may have structural similarities with non-target receptors and/or enzymes. Thus, while drugs in general
259

are designed for a specific purpose, the complexities of our systems allow for a relatively generalized effect. There
are unintended effects that are often called the "side effects."  This is a property that is not exclusive to
260

contraceptive drugs. It is a property of drugs in general.

Aspirin, for example, is advisable for thromboembolic disorders, stroke or for the prevention of cerebrovascular
events.  Abusing the use of aspirin, however, may cause gastrointestinal bleeding.
261 262

Aldomet is a drug usually taken to relieve hypertension.  When abused, its reported side effects include
263

maladjustments affecting the nervous system, blood, and the liver. Among the reported reactions are sedation,
headache, psychic disturbances, hepatitis, and hemolytic anemia. 264

Even drinking too much water may cause hyponatremia, which is the low sodium concentration in the plasma. 265

Side effects are expected with every drug from the weakest to the most potent. Their prescriptions are trade-offs
between all the benefits and risks associated with it. Every drug should be taken to address the ailment but in a way
that minimizes the risk. This is usually why there are proper dosages and time periods to take medicines. This is
also why some medicines are not dispensed without the proper prescription.

Several drugs are not prescribed when there is pregnancy because of the fetal risks associated with them. Among
these are Xenical (orlistat) used as a nutrition pill, Advil and any kind of Ibuprofen (during the third trimester) used to
manage pain, Testim (testosteron) given for endocrine disorders, Flagyl (metronidazole) to manage infection,
Crestor (rosuvastatin) to manage cholesterol, Vistaril (hydroxyzine) usually given for allergic reactions, and many
more. 266

The use of these drugs is appropriately limited so that they cannot have the effect or be used as abortifacients. This
does not mean, however, that they are, per se, abortifacients.

The policy embedded in the law is that the proper use of contraceptives will prevent unwanted pregnancy and,
therefore, also prevent complications related to pregnancy and delivery.  The risks of its usage, when proper and
267

guided, can be relatively low compared to its benefits.  More specifically, the FDA is most competent in examining
268

the scientific and medical basis of the beneficial claims and risks of each and every contraceptive. Drugs may or
may not be included in the Essential Drugs List, based on the FDA’s findings. It is not for this court to jump to
conclusions on the basis of the ad hoc presentations of medical journals from the parties. This finding of fact should
be left to the proper agency. There is an indefinite scope of possible scenarios precisely because there was no
actual case or controversy brought before this court. If applying the law to even one of these possibilities may render

339
it constitutional, then we should not declare it as unconstitutional. The doctrine on the presumption of
constitutionality must prevail when there is no factual basis to invalidate the law.
269

Only safe and effective medicines are included in the drug formulary.

The inclusion of contraceptives in the national drug formulary is not new. The Philippine Drug Formulary: Essential
Medicines List, Volume 7, of 2008 already listed it under "Hormones and Hormone Antagonists." 270

Contraceptives are included, following five pillars designed to make available affordable, safe, and effective drugs to
the public. These pillars are: (1) "the assurance of the safety, efficacy and usefulness of pharmaceutical products
through quality control;" (2) "the promotion of the rational use of drugs by both the health professionals and the
general public;" (3) "the development of self-reliance in the local pharmaceutical industry;" (4) "[t]he tailored or
targeted procurement of drugs by government with the objective of making available to its own clientele, particularly
the lower-income sectors of the society, the best drugs at the lowest possible cost;" and (5) "people
empowerment." 271

One of the steps for inclusion in the drug formulary is to ensure that the drug is of "acceptable safety, proven
efficacy, quality, and purity".  Ensuring that health products are safe, efficient, pure, and of quality is a function of
272

the Food and Drug Administration.  Moreover, Republic Act No. 4729 requires that contraceptive drugs and devices
273

cannot be lawfully dispensed without proper medical prescription.

Conscientious Objector

The ponencia proposes to declare the provision relating to the mandatory referral of a conscientious objector as
unconstitutional because it violates the right to religion. I also disagree.

The sections involved provides:

SEC. 7. Access to Family Planning – All accredited public health facilities shall provide a full range of modern family
planning methods, which shall also include medical consultations, supplies and necessary and reasonable
procedures for poor and marginalized couples having infertility issues who desire to have children: Provided, That
family planning services shall likewise be extended by private health facilities to paying patients with the option to
grant free care and services to indigents, except in the case of non-maternity specialty hospitals and hospitals
owned and operated by a religious group but they have the option to provide such full range of modern family
planning methods: Provided further, That these hospitals shall immediately refer the person seeking such care and
services to another health facility which is conveniently accessible: Provided finally, That the person is not in an
emergency condition or serious case as defined in Republic Act No. 8344.

SEC. 23. Prohibited Acts. – The following acts are prohibited:

(a) Any health care service provider, whether public or private, who shall:

xxxx

(3) Refuse to extend quality health care services and information on account of the person’s marital status, gender,
age, religious convictions, personal circumstances, or nature of work: Provided, That the conscientious objection of
a health care service provider based on his/her ethical or religious beliefs shall be respected; however, the
conscientious objector shall immediately refer the person seeking such care and services to another health care
service provider within the same facility or one which is conveniently accessible: Provided, further, That the person
is not in an emergency condition or serious case as defined in Republic Act No. 8344, which penalizes the refusal of
hospitals and medical clinics to administer appropriate initial medical treatment and support in emergency and
serious cases[.] (Emphasis supplied)

The patient’s rights

Doctors routinely take an oath implying that the primordial consideration in their services is the welfare of their
patients. The form of the Physician’s Oath adopted by the World Medical Association is what is now known as the
Declaration of Geneva, to wit:

At the time of being admitted as a member of the medical profession:

I solemnly pledge to consecrate my life to the service of humanity;

I will give to my teachers the respect and gratitude that is their due;
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I will practice my profession with conscience and dignity;

The health of my patient will be my first consideration;

I will respect the secrets that are confided in me, even after the patient has died;

I will maintain by all means in my power, the honor and the noble traditions of the medical profession;

My colleagues will be my sisters and brothers;

I will not permit considerations of age, disease or disability, creed, ethnic origin, gender, nationality, political
affiliation, race, sexual orientation, social standing or any other factor to intervene between my duty and my patient;

I will maintain the utmost respect for human life;

I will not use my medical knowledge to violate human rights and civil liberties, even under threat;

I make these promises solemnly, freely and upon my honor.  (Emphasis supplied)
274

Many of those who specialize in the ethics of the health profession emphasize the possibility of a health service
provider inordinately abusing conscientious objection over the welfare of the patient. Thus,

Physicians’ rights to refuse to participate in medical procedures that offend their conscience may be incompatible
with patients’ rights to receive lawful, medically indicated treatment. Historically, the goal of medicine has been to
provide care to the sick. The World Medical Association’s modern variant of the Hippocratic Oath, the Declaration of
Geneva, inspires the graduating physician to pledge that, "The health of my patient will be my first consideration".
For many who enter medicine, the commitment to assist their fellow human beings and pursue a path of personal
salvation through this professional calling is religiously inspired. A conflict of interest can arise if the physician’s
religious or other conscientious convictions are in tension with medically indicated procedures. The obvious case is
therapeutic abortion, but analogous cases include contraceptive sterilization and withdrawal of life support from
otherwise viable patients. Physicians who give priority to their own moral and spiritual convictions over their patients’
need and desire for medically indicated care face a conflict that needs resolution.

The ethical conflict can be avoided through mutual accommodation; physicians have the right to decide whom to
treat, and patients have the right to decide from whom they will receive care. Physicians do not have the same
ethical duties to nonpatients as to patients except in emergency circumstances. In all other circumstances,
physicians are at liberty to choose those for whom they will accept the responsibility of care. If there are services
they will not perform, physicians should make the fact known to patients for whom they have accepted responsibility.
Doing so not only saves patients the distress of seeking those services and being turned down, it also saves
physicians from the dilemma of unfulfilled responsibilities to those whose care they have agreed to undertake. This
arrangement is well understood in medicine; physicians who notify prospective patients that they are, for instance,
pediatricians, will not be asked to treat those requiring geriatric care, and geriatricians who do not have to accept
patients seeking pediatric services. More explicit disclosure is required, of course, when prospective patients may
reasonably expect that care will be available from the specialists they approach. Obstetrician-gynecologies who will
not participate in abortion procedures must make that fact clear before forming patient-physician relationships." 275

If the first and primordial consideration is the health of her or his patient, then the beliefs of the service provider even
though founded on faith must accommodate the patient’s right to information. As stated in the Code of Ethics of the
Philippine Medical Association:

ARTICLE II

DUTIES OF PHYSICIANS TO THEIR PATIENTS

Section 5. A physician should exercise good faith and honesty in expressing opinion/s as to the diagnosis,
prognosis, and treatment of a case under his/her care. A physician shall respect the right of the patient to refuse
medical treatment. Timely notice of the worsening of the disease should be given to the patient and/or family. A
physician shall not conceal nor exaggerate the patient’s conditions except when it is to the latter’s best interest. A
physician shall obtain from the patient a voluntary informed consent. In case of unconsciousness or in a state of
mental deficiency the informed consent may be given by a spouse or immediate relatives and in the absence of
both, by the party authorized by an advanced directive of the patient. Informed consent in the case of minor should
be given by the parents or guardian, members of the immediate family that are of legal age. (Emphasis supplied)

If a health care service provider’s religious belief does not allow a certain method of family planning, then that
provider may possibly withhold such information from the patient. In doing so, the patient is unable to give voluntary
informed consent to all possible procedures that are necessary for her or his care.
341
The law, in sections 17 and 23 allow accommodation for full care of the patient by requiring referral. The patient that
seeks health care service from a provider should be able to put his or her trust on the provider that he or she would
be referred to the best possible option. There is nothing in the law which prevents the referring health care provider
from making known the basis of his or her conscientious objection to an available procedure which is otherwise
scientifically and medically safe and effective.

Between the doctor or health care provider on the one hand and the patient on the other, it is the patient’s welfare
and beliefs which should be primordial. It is the patient that needs the care, and the doctor or health care provider
should provide that care in a professional manner.

While providers have a right to their moral beliefs, the right does not allow health-care providers to violate their
professional and legal obligations to the patient. Policies on health-care provider refusals should be carefully crafted
to maximize the rights of individuals to their beliefs without extending this "protection" so far that it prevents patients
from getting the medical care or information they need. 276

The holding of the majority which declares the mandatory referral systems in Section 17 and Section 23, paragraph
(a) (3) as unconstitutional on the basis of the right of religion of the doctor or health care provider implicitly imposes
a religious belief on the patient.

It is in this context that many experts say that:

Religious initiatives to propose, legislate, and enforce laws that protect denial of care or assistance to patients,
(almost invariably women in need), and bar their right of access to lawful health services, are abuses of
conscientious objection clauses that aggravate public divisiveness and bring unjustified criticism toward more
mainstream religious beliefs. Physicians who abuse the right to conscientious objection and fail to refer patients to
non-objecting colleagues are not fulfilling their profession’s covenant with society. 277

We must not assume that situations involving the duty to refer cover information or services that may be
objectionable only to a specific religious group. Neither can we assume, for example, that the situation would always
involve an extreme case such that a patient would seek an abortion.

There are, in fact, many reasons why a patient would seek information or services from a health professional. To be
sure, when we speak of health care services and information under Section 23(3) of the law, we refer to a "full range
of methods, facilities, services and supplies that contribute to reproductive health and well-being." 278

Considering that the law is yet to be implemented, there are no facts from which this court can base its ruling on the
provision. We cannot and must not speculate.

Conscientious objection and religious objection

There is a difference between objections based on one’s conscience and those based on one’s religion. Conscience
appears to be the broader category. Objections based on conscience can be unique to the individual’s
determination of what is right or wrong based on ethics or religion.

Objections based on religion, on the other hand, imply a set of beliefs that are canonical to an institution or a
movement considered as a religion. Others share religious belief. Conscientious objection may also include those
whose bases are unique only to the person claiming the exception. One’s conscience may be shaped by cultural
factors other than religion. It is clear that a conscientious objector provision whose coverage is too broad will allow
too many to raise exception and effectively undermine the purpose sought by the law. 279

The duty to refer is also found in Section 7 of the law:

SEC. 7. Access to Family Planning. – All accredited public health facilities shall provide a full range of modern family
planning methods, which shall also include medical consultations, supplies and necessary and reasonable
procedures for poor and marginal couples having infertility issues who desire to have children: Provided, That family
planning services shall likewise be extended by private health facilities to paying patients with the option to grant
free care and services to indigents, except in the case of non-maternity specialty hospitals and hospitals owned and
operated by a religious group, but they have the option to provide such full range of modern family planning
methods: Provided, further, That these hospitals shall immediately refer the person seeking such care and services
to another health facility which is conveniently accessible: Provided, finally, That the person is not in an emergency
condition or serious case as defined in Republic Act No. 8344.

x x x x (Emphasis supplied)

The same considerations for individual health practitioners should apply to private health institutions. Private health
institutions are duty-bound to prioritize the patient’s welfare and health needs.

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Requirements of a challenge based on religion

The constitutional provision invoked by petitioners provides:

Section 5. No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof. The
free exercise and enjoyment of religious profession and worship, without discrimination or preference, shall forever
be allowed. No religious test shall be required for the exercise of civil or political rights.
280

The provision contains two parts. The first part is the non-establishment clause.  This contains a proscription
281

against the direct or indirect state sponsorship of a religion and is closely related to another fundamental tenet in the
Constitution, which provides:

Section 6. The separation of Church and State shall be inviolable. 282

The second part is the free exercise of religion clause.  The protection to "religious profession and worship" is
283

absolute when it comes to one’s belief or opinion. The balance between compelling state interests and the religious
interest must, however, be struck when the "profession and worship" are expressed in conduct which affect other
individuals, the community or the state. Religious conduct or omissions on the basis of religious faiths are not
absolutely protected.

In Iglesia Ni Cristo v. Court of Appeals,  this court reiterated the rule that:
284

x x x the exercise of religious freedom can be regulated by the State when it will bring about the clear and present
danger of some substantive evil which the State is duty-bound to prevent, i.e., serious detriment to the more
overriding interest of public health, public morals, or public welfare. A laissez faire policy on the exercise of religion
can be seductive to the liberal mind but history counsels the Court against its blind adoption as religion is and
continues to be a volatile area of concern in our country today. Across the sea and in our shore, the bloodiest and
bitterest wars fought by men were caused by irreconcilable religious differences. 285

Then in Estrada v. Escritor,  this court clarified:

286

Although our constitutional history and interpretation mandate benevolent neutrality, benevolent neutrality does not
mean that the Court ought to grant exemptions every time a free exercise claim comes before it. But it does mean
that the Court will not look with hostility or act indifferently towards religious beliefs and practices and that it will
strive to accommodate them when it can within flexible constitutional limits; it does mean that the Court will not
simply dismiss a claim under the Free Exercise Clause because the conduct in question offends a law or the
orthodox view for this precisely is the protection afforded by the religion clauses of the Constitution, i.e., that in the
absence of legislation granting exemption from a law of general applicability, the Court can carve out an exception
when the religion clauses justify it. While the Court cannot adopt a doctrinal formulation that can eliminate the
difficult questions of judgment in determining the degree of burden on religious practice or importance of the state
interest or the sufficiency of the means adopted by the state to pursue its interest, the Court can set a doctrine on
the ideal towards which religious clause jurisprudence should be directed. We here lay down that doctrine that in
Philippine jurisdiction, we adopt that benevolent neutrality approach not only because our constitutional history and
interpretation indubitably show that benevolent neutrality is the launching pad from which the Court should take off
in interpreting religion clause cases. The ideal towards which this approach is directed is the protection of religious
liberty ‘not only for a minority, however small – not only for a majority, however large – but for each of us’ to the
greatest extent possible within flexible constitutional limits. 287

The same case also cited the "Lemon test" which states the rules in determining the constitutionality of laws
challenged for violating the non-establishment of religion clause:

First, the statute must have a secular legislative purpose; second, its primary or principal effect must be one that
neither advances nor inhibits religion; x x x finally, the statute must not foster ‘an excessive entanglement with
religion.
288

However, the application of these standards first requires the existence of an actual case involving (1) a specific
conduct (2) believed to be related to profession or worship (3) in a specific religion.

The basis for invoking the right to religion is not always clear. For instance, there is no single definition of religion.

The common dictionary meaning is that it is "an organized system of beliefs, ceremonies, and rules used to worship
a god or a group of gods."  Another dictionary meaning is that "religion may be defined broadly as the human quest
289

for, experience of, and response to the holy and sacred."  An author in a journal on ethics asserts that "religion is
290

the effective desire to be in right relations to the power manifesting itself in the universe." 291

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In Aglipay v. Ruiz,  this court adopted a bias toward theistic beliefs when it defined religion "as a profession of faith
292

to an active power that binds and elevates man to his Creator x x x."  But there are beliefs commonly understood to
293

be religious which are non-theistic. Courts have grappled with the definition of a religion. 294

But these could not be issues in this case because there are no actual facts upon which we could base our
adjudication.

None of the petitions allege the conduct claimed to be part of "profession or worship". None of the petitions point to
how this specific conduct relates to a belief or teaching of a religion. None of the petitions show how fundamental to
the specific religious faith such conduct is.

In other words, the petitions do not show a specific instance when conscientious objection was availed of as a result
of the exercise of a religion. In this case, we are asked to evaluate whether the provision that accommodates
conscientious objectors would, in the future, with unspecified facts, violate the constitutional provision on religious
exercise.

Thus, it is also not clear in the ponencia whether the provisions on referral by conscientious objectors are declared
unconstitutional for all religions or only for specific ones. This is the natural result for speculative cases. This is
dangerous constitutional precedent. If the declaration is for all religions, then this might just result in a violation of
the non-establishment clause. A dominant majoritarian religion is now aided in imposing its beliefs not only on
patients but also on all those who have different faiths.

Conduct which purport to be religious practice and its relationship to the fundamental tenets of that religion is a
question of fact which cannot be part of our judicial notice. Otherwise, we implicitly establish a religion or manifest a
bias towards one in violation of the clear and absolute separation between church and state.

Contraceptives and Religion

Even the proscription on the use of contraceptives may not clearly be a religious tenet. We do not have the
competence to assume that it is so.

With respect to the Catholic faith, the comment-in-intervention of De Venecia, et al. included a history on the
Catholic Church’s changing and inconsistent position regarding contraceptives, and the notion that every conjugal
act must be for a procreative purpose.

The intervenors asserted that the notion denouncing sex without procreative intent cannot be found in the old or
new testament. During the church’s existence in the first few hundred years, the issue of the church was not on the
purpose of the conjugal act but on the specific methods for contraception as some were associated with
witchcraft.  The idea that requires the procreative purpose for the sexual act was not originally Christian but
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borrowed from pagan Greek Stoics during the early second century:

As James Brundage has pointed out, the immediate source of influence on Christian writers was the pagan Stoics,
whose high ideals for morality challenged the Christians to copy them or even do better. Natural law or the law of
nature was the basis for these ideals. The famous Stoic jurist Ulpian supplied to Christian writers their
understanding of natural law. For Ulpian, natural law consisted in the laws of nature that animals and humans had in
common. Among the domestic animals with which Ulpian was familiar, the female accepted the male only when she
was in heat. So it was the law of nature for humans and animals alike that sexual intercourse should only take place
for breeding.  (Emphasis supplied)
296

The Catholic Church through Pope Paul VI later secretly created a Pontifical Commission for the Study of
Population, Family and Births to recommend whether modern contraceptive methods could be permitted.  The 297

commission’s final report concluded, by two-third votes, that "no natural law proscribed non-reproductive sex and no
doctrinal, scientific, medical, social or other reason existed for the church to continue prohibiting the use of modern
birth control." 298

Despite these findings, two ultraconservative members issued a minority report arguing that "the Vatican’s authority
would be irreparably undermined if it abandoned a position it had adopted hundreds of years earlier." 299

Consequently, Pope Paul VI issued Humanae Vitae reiterating Pope Pius XI’s 1930 encyclical Casti Connubii on
natural law’s proscription against sex without procreative intent.  The commission’s creation and its reports were
300

leaked to the public, resulting in mass protests and defiance within the church. 301

Intervenors quoted at length a detailed account of these events surrounding the Casti Connubii and Humanae Vitae,
thus:

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Nervous prelates in Rome felt that the pill was just an excuse to jettison the Vatican's position on birth control, which
was resented and under siege. The euphoria over new freedoms was part of the social giddiness that characterized
the 1960s, in the church as in the secular world. It was a time of the sexual revolution, feminism, and new attitudes
toward authority. In this atmosphere, the papal pronouncements about natural law were brought under closer
scrutiny by natural reason, and they grew flimsier with every look. There was great fear in the Curia of the Vatican
that this mood would invade the Council Pope John was assembling (as, in fact, it did). The whole matter of birth
control was considered especially endangered, and it would be fought over strenuously in two Roman arenas, one
open and one Secret. The former battle, carried on in the sessions of the Vatican Council, reached a kind of
stalemate in the conciliar decree on the church in the modern world, Gaudiumet et Spes. The other battle, waged in
secret by the Pope's own special commission, led to that commission's stunning defeat by the Pope's own
encyclical Humanae Vitae.  (Emphasis supplied)
302

Humanae Vitae

That Pontifical Commission met five times, at first in the fall of 1963 - six men convening at Louvain. The second
meeting (like all subsequent ones) was in Rome, in the spring of 1964, attended by the thirteen men. The number
was increased to fifteen for a meeting that summer. Up to this point, no one had presumed to recommend altering
the church's teaching on contraception. Things changed at the fourth session, held in the spring of 1965, when the
size of the commission jumped up to fifty- eight, with five women among the thirty-four lay members. An expert
called in for consultation was John T. Noonan, from Notre Dame in Indiana, whose study of the church's changing
positions on usury had won scholarly acclaim. He was working on a similar study of changes in the prohibition of
contraception - a book that would appear just as the commission was disbanded. Noonan opened the members'
eyes to the way that noninfallible papal teaching can develop.

Another eye opener was the result of a questionnaire brought to Rome by the lay couple Pat and Patty Crowley.
They had long been active in the international Christian Family Movement, and they had surveyed their members -
devout Catholics all - on their experience of the rhythm method of contraception. They found it far from natural-
Since a woman's period fluctuates with her health, anxieties, age, and other influences, establishing the actual
infertile period in any cycle required daily charting of her temperature and close comparative reading of calendars -
and even then the results were not Sure. The most conscientious catholics, who followed this nervous procedure
with precision, found that it was not certain - which left them in great fear until the next menstruation (which might
not occur). And in this concentration on the wife's physical conditions, her psychological patterns - of fondness,
need, crises, travel - had to be ignored or repressed. The comments of the couples surveyed made riveting reading
in the commission. A husband, a scholar, wrote:

Rhythm destroys the meaning of sex act; it turns it from a spontaneous expression of spiritual and physical love into
a mere bodily sexual relief; it makes me obsessed with sex throughout the month; it seriously endangers my
chastity; it has a noticeable effect upon my disposition toward my wife and children; it makes necessary my
complete avoidance toward my wife for three weeks at a time. I have watched a magnificent spiritual and physical
union dissipate and, due to rhythm, turn into a tense and mutually damaging relationship. Rhythm seems to be
immoral and deeply unnatural. It seems to be diabolical.

His wife gave her side of the story:

I find myself sullen and resentful of my husband when the time of sexual relations finally arrives. I resent his
necessarily guarded affection during the month and I find I cannot respond suddenly. I find, also, that my
subconscious and unguarded thoughts are inevitably sexual and time consuming. All this in spite of a great
intellectual and emotional companionship and a generally beautiful marriage and home life.

The commission was hearing that rhythm made people obsessed with sex and its mechanics while minority
members at the Council were arguing that rhythm allows people to escape the merely animal urges and enjoy the
serenity of sexuality transcended. The commission was also hearing from doctors that nature, of course, provides
women with their greatest sexual desire at just the fertile time that rhythm marked off bounds.

The combined impact of Noonan's history and the Crowley's empirical findings made the commission members -
good Catholics all, chosen for their loyalty to the church - look honestly at the "natural law" arguments against
contraception and see, with a shock, what flimsy reasoning they had accepted. Sex is for procreation, yes - but all
the time, at each and every act? Eating is for subsistence. But any food or drink beyond that necessary for sheer
subsistence is not considered mortally sinful. In fact, to reduce to that animal compulsion would deny symbolic and
spiritual meanings in shared meals - the birthday party, the champagne victory dinner, the wine at Cana, the
Eucharist itself. Integrity of the act? Is it sinful to be nourished intravenously when that is called for? Does that
violate the integrity of the eating act? The more assembled members looked at the inherited "wisdom" of the church,
the more they saw the questionable roots from which it grew - the fear and hatred of sex, the feeling that pleasure in
it is a biological bribe to guarantee the race's perpetuation, that any use of pleasure beyond that purpose is
shameful. This was not a view derived from scripture or from Christ, but from Seneca and Augustine.

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The commission members, even trained theologians and spiritual counselors who had spent years expounding the
church teachings, felt they were looking at reality for the first time. A cultivated submission to the papacy had been,
for them, a structure of deceit, keeping them from honesty with themselves, letting them live within a lie. To their
shared surprise they found they were not only willing to entertain the idea of the church's changing, but felt that it
had to change on this matter, that the truth, once seen, could no longer be denied. When the nineteen theologians
on the commission, convened for a separate vote, were asked whether church teaching could change on
contraception, twelve said yes, seven no (including John Ford, who had joined the commission at this meeting).

This set off alarm bells in the Vatican. For the next meeting, the last and the longest, from April to June of 1965, the
members of the commission were demoted to "advisers" (periti) and the commission itself was constituted of sixteen
bishops brought in to issue the final report. They would listen to those who had done the actual conferring, and
theirs would be the final verdict. Debate before them would be presided over by Cardinal Ottaviani of the Holy
Office. This bringing in the big guns would have cowed the members in their first sessions. But things had gone too
far for such intimidation now. The Crowleys brought another survey with them to the showdown, this one of 3,000
Catholics - including 290 devout subscribers to the magazine St. Anthony's Messenger - of whom 63 percent said
that rhythm had harmed their marriage and 65 percent said that it did not actually prevent conception, even when
the right procedures were followed exactly (even neurotically). Dr. Albert Gorres spoke of the self- censorship
Catholics had exercised over themselves - something the members recognized in their lives when it was pointed
out. The Jesuit priest Josef Fuchs, who had taught Casti Connubii standards for twenty years, said he was
withdrawing his moral textbook and resigning his teaching post at the Gregorian University in Rome now that he
could no longer uphold what he was asked to profess. The vote of the theologians who were presenting their
findings to the bishops was now fifteen to four against the claim that conception is intrinsically evil. The vote of the
larger group was thirty to five.

Here was a perfect laboratory test of the idea that contraception is against nature, as that can be perceived by
natural reason alone. These people were all educated, even expert. They were Catholics in good standing (they had
been chosen on those grounds). They had been conditioned all their lives to accept the church’s teaching - in fact
they had accepted it in the past. They of all people would entertain the official case with open minds. They had no
malice against church authorities - most of them had devoted much (if not all) of their lives to working with them.
Most had entered the project either agreeing with the papal position or thinking that it was unlikely to change. Now
they found themselves agreeing that change was not only necessary but inevitable. They had trouble imagining how
they had ever thought otherwise. Cardinal Suenens explained how they had been conditioned to have a double
consciousness, to live a lie:

For years theologians have had to come up with arguments on behalf of a doctrine they were not allowed to
contradict. They had an obligation to defend the received doctrine, but my guess is they already had many
hesitations about it inside. As soon as the question was opened up a little, a whole group of moralists arrived at the
position defended by the majority here. . . The bishops defended the classical position, but it was imposed on them
by authority. The bishops didn't study the pros and cons. The received directives, they bowed to them, and they
tried to explain them to their congregations.

As soon as people began to think independently about the matter, the whole structure of deceit crumbled at the
touch. The past position could not be sustained, even among these people picked by the Vatican itself, much less
among Catholics not as committed as these were. And it was absurd to speak of the non-Catholic world as ever
recognizing this "natural law of natural reason."

The need to face the prospect of change was impressed on the people in the commission by the arguments of the
five theologians defending Casti Connubii. They reduced their own case to absurdities. John Ford said that
intercourse is not necessary for marital love: "Conjugal love is above all spiritual (if the love is genuine) and it
requires no specific carnal gesture, much less its repetition in some determined frequency." Ford also liked to say
that, if the teaching on sexual activity only for procreation were changed, people could rnasturbate with impunity. Dr.
Gorres quoted the Melchite Patriarch, Maximos IV, who said in the Council deliberations that priests display a
"celibate psychosis" in the area of sex. ***

The climactic vote of the commission - the one of the sixteen bishops - was nine to three for changing the church's
position on contraception, with three abstentions. An agreement had been reached before the vote was taken to
submit only one report for the commission, but Cardinal Ottaviani and Father Ford, seeing how things were going,
had prepared a document of their own, which would later be misrepresented as an official minority document. There
was only one official document, the sole one voted on by the bishops who had authority to report the body's
findings. (Ottaviani was the one who had brought in these officials, hoping to get the result he wanted. When he
failed to, he ignored his own device.)

The Ford "report", drawn up with Germain Grisez, said that any change was inconceivable. This was not because
there were rational arguments against change: "If we could bring forward arguments which are clear and cogent
based on reason alone, it would not be necessary for our Commission to exist, nor would the present state of affairs
exist in the church." No, the real reason to keep the teaching was that it was the teaching: "The Church could not
have erred though so many centuries, even through one century, by imposing under serious obligations very grave

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burdens the name of Jesus Christ, if Jesus Christ did not actually impose these burdens." As a priest had put it in
earlier debate, if the church sent all those souls to hell, it must keep maintaining that that is where they are.

This was not an argument that made sense, at this point, to the commission - to bishops any more than to the
theologians or lay experts. But it was the one argument that, in the end, mattered to Paul VI. He took advantage of
the so-called "minority report" to say that he could not accept the commission's findings since there had been
disagreement with it. Nine of the twelve bishops, fifteen of the nineteen theologians, and thirty of the thirty-five
nonepiscopal members of the commission were not enough for him. Votes on the decrees in the Council had not
been unanimous either, but he did not call them invalid for that reason. Paul's real concern was with the arguments
that Ottaviani brought to him after the report was submitted. He knew what was worrying the Pope, and could play
on that. F.X. Murphy had observed one thing about Paul's behavior throughout the meetings of the Council:

The Pope was a man obviously torn by doubts, tormented by scruples, haunted by thoughts of perfection, and
above all dominated by an exaggerated concern - some called it an obsession - about the prestige of his office as
Pope. His remarks on this score at times displayed an almost messianic fervor, a note missing in the more sedate
utterances of his predecessors. His innumerable statements on the subject were made on almost every occasion,
from casual week-day audiences of Sunday sermons from the window of his apartment to the most solemn
gatherings in season and out of season. Since it was part of the strategy of the [conciliar] minority to accuse the
majority of disloyalty toward the Holy Father' Paul's constant harping-in inevitably caused the majority to think that
he perhaps did share these misgivings, at least to a certain extent. It was noticed by students of Paul’s remarks that
while he showed an open- mindedness about almost any other subject, on the single theme of the papacy his mind
remained strangely closed to analysis.

Those words were written before Humanae Vitae was issued, but they explain the letter entirely.

The commission members left their work convinced that the pope could no longer uphold a discredited teaching.
When the report was leaked to the press, Catholics around the world took heart at the signs of change. So far from
upsetting their faith, as the Pope feared, it heartened them. What would unsettle their faith was what Paul did next -
issue Humanae Vitae, with its reiteration of Casti Connubii's ban: ('The church, calling men back to the observance
of the natural law, as interpreted by its constant doctrine, teaches that each and every marriage act must remain
open to the transmission of life." Catholics responded with an unparalleled refusal to submit. Polls registered an
instant noncompliance with the encyclical. At a previously scheduled Catholic festival of devout young Germans at
Essen, a resolution that those attending could not obey the encyclical passed through a crowd of four thousand with
only ninety opposing votes. A simultaneous poll among German Catholics at large found that 68 percent of them
thought the Pope was wrong on contraception. Similar findings rolled in from around the world.

What were bishops to do? The encyclical itself had ordered them to explain and enforce the Pope’s decision, along
with all priests:

Be the first to give, in the exercise of your ministry, the example of loyal internal and external obedience to the
teaching authority of the Church. . . it is of the utmost importance, for peace, of consciences and for the unity of the
Christian People, that in the field of morals as well as in that of dogma, all should attend to the magisterium of the
Church, and all should speak the same language.

But for the first time in memory, bishop's statements, while showing respect for the encyclical, told believers they
could act apart from it if they felt bound by conscience to do so. The assembly of bishops in the Netherlands put it
most bluntly: "The assembly considers that the encyclical's total rejection of contraceptive methods is not convincing
on the basis of the arguments put forward." other Episcopal panels were more circumspect, but signaled that they
would not consider those disobedient to the encyclical to be separating themselves from the sacraments. The
Belgian bishops put it this way: "Someone, however, who is competent in the matter under consideration and
capable of forming a personal and well-founded judgment - which necessarily presupposes a sufficient amount of
knowledge - may, after serious examination before God, come to other conclusions on certain points." In other
words: do not treat the Pope's words lightly, but follow your conscience after taking a serious look at them. That was
the position taken by bishops in the United States ("the norms of licit dissent come into play"), Austria, Brazil,
Czechoslovakia, Mexico, [] West Germany, Japan, France, Scandinavia, and Switzerland. The Scandinavian
statement was typical:

Should someone, however, for grave and carefully considered reasons, not feel able to subscribe to the arguments
of the encyclical, he is entitled, as has been constantly acknowledged, to entertain other views than those put
forward in a non-infallible declaration of the Church. No one should, therefore, on account of such diverging
opinions along, be regarded as an inferior Catholic.

The Pope was stunned. He would spend the remaining ten years of his pontificate as if sleepwalking, unable to
understand what had happened to him, why such open dissent was entertained at the very top of the episcopate.
Four years after the publication of Humanae Vitae, when the Pope looked "cautious, nervous, anxious, alarmed," he
deplored the defiance of church teaching in a sermon at Saint Peter's, and this was the only explanation he could
come up with for the defiance: "Through some crack in the temple of God, the smoke of Satan has entered'" He was

347
increasingly melancholy and prone to tears. Had he opened that crack in the temple of God? Even as a nagging
suspicion this was a terrible burden to bear. It explains the atmosphere of darkening tragedy that hung about his
final years. He would not issue another encyclical in all those ten years. He was a prisoner of the Vatican in a way
that went beyond his predecessors' confinement there. He was imprisoned in its structures of deceit. Meanwhile,
Father Ford, who had assisted his fellow Jesuit Gustave Martelet in drawing up Humanae Vitae under Cardinal
Ottaviani's direction, went back to the seminary where he had taught moral theology for years and found that the
Jesuit seminarians their refused to take his classes, since they knew from others in the Order what he had done in
Rome. As a result of what he considered his life's great coup, his teaching career was over.  (Emphasis supplied)
303

Intervenors even alleged that as early as 1999, "nearly 80% of Catholics believed that a person could be a good
Catholic without obeying the church hierarchy’s teaching on birth control."  They, therefore, put in issue whether the
304

views of petitioners who are Catholics represent only a very small minority within the church.

We cannot make any judicial determination to declare the Catholic Church’s position on contraceptives and sex.
This is not the forum to do so and there is no present controversy—no contraceptive and no individual that has
come concretely affected by the law.

This court must avoid entering into unnecessary entanglements with religion. We are apt to do this when, without
proof, we assume the beliefs of one sect or group within a church as definitive of their religion. We must not assume
at the outset that there might be homogeneity of belief and practice; otherwise, we contribute to the State’s
endorsement of various forms of fundamentalism. 305

It is evident from the account quoted above giving the historical context of the contraceptives controversy that the
Catholic church may have several perspectives and positions on the matter. If this is so, then any declaration of
unconstitutionality on the basis of the perceived weaknesses in the way conscientious objectors are accommodated
is premature.

VI

Family

There being no actual case or controversy, the petitions also do not provide justification for this court to declare as
unconstitutional Section 23(2)(i) of the RH Law on spousal consent, and Section 7, paragraph 2 on parental
consent. These provisions read:

SEC 23. Prohibited Acts. – The following acts are prohibited:

(a) Any health care service provider, whether public or private, who shall:

xxxx

(2) Refuse to perform legal and medically-safe reproductive health procedures on any person of legal age on the
ground of lack of consent or authorization of the following persons in the following instances:

(i) Spousal consent in case of married persons: Provided, That in case of disagreement, the decision of the one
undergoing the procedure shall prevail; and

SEC. 7. Access to Family Planning – x x x

No person shall be denied information and access to family planning services, whether natural or artificial: Provided,
That minors will not be allowed access to modern methods of family planning without written consent from their
parents or guardian/s except when the minor is already a parent or has had a miscarriage.

Spousal Consent

According to petitioners Millennium Saint Foundation, Inc., et al., "while both play equal roles in procreation, the
man or the husband is violated of his right of conjugal decisions when it is the woman’s decision that will be followed
whether to avail of contraceptives or not."306

Petitioners Couples for Christ Foundation, Inc., et al. argued that "the [reproductive health] procedure does not
involve only the body of the person undergoing the procedure [as] it affects the future of the family (in terms of its
size or even the presence of children) as well as the relationship between spouses." 307

The ponencia agreed and discussed how "giving absolute authority to the spouse who would undergo a procedure,
and barring the other spouse from participating in the decision would drive a wedge between the husband and wife,
possibly result in bitter animosity, and endanger the marriage and the family, all for the sake of reducing the
348
population."  The ponencia cited the constitutional mandate of the state to defend the "right of spouses to found a
308

family x x x."309

These provisions of Republic Act No. 10354 do not threaten nor violate any right, even the right to family.

Section 23(a)(2)(i) applies to a specific situation: when there is a disagreement between married persons regarding
the performance of a "legal and medically-safe reproductive health procedure."

The general rule encourages married persons to discuss and make a conjugal decision on the matter. They are
caught in a problem when they disagree. This agreement may fester and cause problems within their family.

The disagreement will not be created by the RH Law. It will exist factually regardless of the law. Section 23(a)(2)(i)
of the law becomes available to break this deadlock and privilege the decision of the spouse undergoing the
procedure.

This is logical since the reproductive health procedures involve the body, health and well being of the one
undergoing the procedure.

The marriage may be a social contract but is certainly not a talisman that removes the possibility of power
relationships. Married persons, especially the woman/wife, can still suffer inequality. Married persons may still
experience spousal abuse.

Generally, it will be the woman who will ask to undergo reproductive health procedures. The interpretation of the
majority therefore affects her control over her body. Rather than enhance the zones of autonomy of a person even
in a married state, the interpretation of the majority creates the woman’s body as a zone of contestation that gives
the upper hand to the husband.

The majority derives the right to a family from Article XV and reads it in isolation from all the other provisions of the
Constitution. In my view, these rights should be read in relation to the other provisions.

Article XV reads:

The Family

Section 1. The State recognizes the Filipino family as the foundation of the nation. Accordingly, it shall strengthen its
solidarity and actively promote its total development.

Section 2. Marriage, as an inviolable social institution, is the foundation of the family and shall be protected by the
State.

Section 3. The State shall defend:

(1) The right of spouses to found a family in accordance with their religious convictions and the demands of
responsible parenthood;

(2) The right of children to assistance, including proper care and nutrition, and special protection from all forms of
neglect, abuse, cruelty, exploitation, and other conditions prejudicial to their development;

(3) The right of the family to a family living wage and income; and

(4) The right of families or family associations to participate in the planning and implementation of policies and
programs that affect them.

The ponencia cites Morfe v. Mutuc  on the protected zone of marital privacy. This case is not in point. It does not
310

apply to a conflict between the spouses. It applies in declaring a zone of privacy of spouses vis-à-vis state action.

Citing Griswold v. Connecticut, the court said:

The Griswold case invalidated a Connecticut statute which made the use of contraceptives a criminal offense on the
ground of its amounting to an unconstitutional invasion of the right of privacy of married persons; rightfully it stressed
‘a relationship lying within the zone of privacy created by several fundamental constitutional guarantees’. So it is
likewise in our jurisdiction. The right to privacy as such is accorded recognition independently of its identification with
liberty; in itself, it is fully deserving of constitutional protection. The language of Prof. Emerson is particularly apt:
‘The concept of limited government has always included the idea that governmental powers stop short of certain
intrusions into the personal life of the citizen. This is indeed one of the basic distinctions between absolute and

349
limited government. Ultimate and pervasive control of the individual, in all aspects of his life, is the hallmark of the
absolute state. In contrast, a system of limited government safeguards a private sector, which belongs to the
individual, firmly distinguishing it from the public sector, which the state can control Protection of this private sector –
protection, in other words, of the dignity and integrity of the individual – has become increasingly important as
modern society has developed. All the forces of a technological age – industrialization, urbanization, and
organization – operate to narrow the area of privacy and facilitate intrusions into it. In modern terms, the capacity to
maintain and support this enclave of private life marks the difference between a democratic and a totalitarian
society.’  (Emphasis supplied)
311

This is one view. It did not take into consideration the state’s interest in ensuring human rights and the fundamental
equality of women and men.

The right to a family should be read in relation to several provisions in the Constitution that guarantee the
individual’s control over her or his own person. Thus, Article III, Section 1 of the Constitution states:

Section 1. No person shall be deprived of life, liberty, or property without due process of law, nor shall any person
be denied the equal protection of the laws.

This due process clause implies and congeals a person’s right to life. This includes the individual’s right to existence
as well as her or his right to a quality of life of her or his choosing. The State is not to sanction a program or an act
that deprives the individual of her or his control over her or his life and body. The "equal protection" clause in this
provision ensures that individuals, even those that enter into a married state, do not coexist and suffer under
conditions of marital inequality.

Article II elaborates on the positive obligation of the State to the right to life as embodied in the due process clause
in two sections. Sections 9 and 11 provide:

Section 9. The State shall promote a just and dynamic social order that will ensure the prosperity and independence
of the nation and free the people from poverty through policies that provide adequate social services, promote full
employment, a rising standard of living, and an improved quality of life for all.

Section 11. The State values the dignity of every human person and guarantees full respect for human rights.
(Emphasis supplied)

Section 14 of the same article also improves on the goal of equality of men and women. While section 1 provides for
equal protection of the laws, this section creates a positive duty on the State as follows:

Section 14. The State recognizes the role of women in nation-building, and shall ensure the fundamental equality
before the law of women and men. (Emphasis supplied)

The fundamental equality of women and men, the promotion of an improved quality of life, and the full respect for
human rights do not exist when a spouse is guaranteed control the other spouse’s decisions respecting the latter’s
body.

The autonomy and importance of family should not be privileged over the privacy and autonomy of a person.
Marriage is not bondage that subordinates the humanity of each spouse. No person should be deemed to concede
her or his privacy rights and autonomy upon getting married. 312

By declaring Section 23(a)(2)(i) as unconstitutional, the majority interprets the privacy and autonomy of the family as
also providing insulation of patriarchal or sexist practices from state scrutiny.  This is not what the Constitution
313

intends.

Parental Consent

The ponencia and the majority declared Section 7 of Republic Act No. 10354 unconstitutional for violating the right
to privacy as the provision dispensed with the written parental consent for minors who are already parents or those
who have had a miscarriage to access modern methods of family planning. Justice Reyes in his concurring and
dissenting opinion is also of the view that Section 7 is violative of Article II, Section 12 of the Constitution on the
parents’ natural and primary right and duty to nurture their children.

I disagree with both the ponencia and Justice Reyes’ views.

In declaring its unconstitutionality, the ponencia stated:

Equally deplorable is the debarment of parental consent in cases where the minor, who would be undergoing a
procedure, is already a parent or has had a miscarriage. x x x
350
 xxxx

There can be no other interpretation of this provision except that when a minor is already a parent or has had a
miscarriage, the parents are excluded from the decision making process of the minor with regard to family planning.
Even if she is not yet emancipated, the parental authority is already cut off just because there is a need to tame
population growth.

xxxx

To insist on a rule that interferes with the right of parents to exercise parental control over their minor-child or the
right of the spouses to mutually decide on matters which very well affect the very purpose of marriage, that is, the
establishment of conjugal and family life, would result in the violation of one's privacy with respect to his family. It
would be dismissive of the unique and strongly-held Filipino tradition of maintaining close family ties and violative of
the recognition the State affords couples entering into the special contract of marriage [that they act] as one unit in
forming the foundation of the family and society. 314

Justice Reyes, in striking down the exception to the required written parental consent for minors under Section 7,
paragraph 2, also states:

[t]here exists no substantial distinction as between a minor who is already a parent or has had a miscarriage. There
is no cogent reason to require a written parental consent for a minor who seeks access to modern family planning
methods and dispense with such requirement if the minor is already a parent or has had a miscarriage. Under the
Family Code, all minors, generally, regardless of his/her circumstances, are still covered by the parental authority
exercised by their parents. That a minor who is already a parent or has had a miscarriage does not operate to divest
his/her parents of their parental authority; such circumstances do not emancipate a minor. 315

The ponencia, however, clarified that access to information about family planning must be differentiated from access
to reproductive health methods.  Further, it said that there must be an exception with respect to life-threatening
316

cases. In which case, the minor’s life must be safeguarded regardless of whether there is written parental consent. 317

This provision has an exceptional application – when minors are already parents or when the minor has miscarried
before. The proviso inserted by the legislature should be presumed to be based on a well-founded policy
consideration with regard to the peculiar situation of minors who are already parents or those who have experienced
miscarriages. As I have stressed earlier, it has been the policy of the courts in this jurisdiction to:

x x x avoid ruling on constitutional questions and to presume that the acts of the political departments are valid in
the absence of a clear and unmistakable showing to the contrary. To doubt is to sustain. This presumption is based
on the doctrine of separation of powers which enjoins upon each department a becoming respect for the acts of the
other departments. The theory is that as the joint act of Congress and the President of the Philippines, a law has
been carefully studied and determined to be in accordance with the fundamental law before it was finally enacted. 318

Rather than assume homogenous choices of family relationships on the basis of a speculative belief relating to
"close family ties," the better part of prudence and wisdom from this Court would be to consider a more
cosmopolitarian reality. There are traditional and non-traditional families. Many of these arrangements of family are
the result of free human choices that go through a gamut of emotional conflicts. Teenage pregnancy, like many
other life defining events, do take their toll on family. We cannot speculate—for now—as to how families will deal
with these stresses. We cannot speculate on why these pregnancies happen.

Those of us who have not and can never go through the actual experience of miscarriage by a minor, those of us
who cannot even imagine the pain and stresses of teenage pregnancy, should not proceed to make blanket rules on
what minors could do in relation to their parents. None of us can say that in all cases, all parents can be
understanding and extend sympathy for the minors that are legally under their care. None of us can say that there
are instances when parents would think that the only way to prevent teenage pregnancy is a tongue lashing or
corporeal punishment. We cannot understand reality only from the eyes of how we want it to be.

Only when we are faced with an actual controversy and when we see the complications of a real situation will we be
able to understand and shape a narrowly tailored exception to the current rule. In the meantime, the wisdom of all
the members of the House of Representative, the Senate, and the President have determined that it would be best
to give the minor who is already a parent or has undergone a miscarriage all the leeway to be able to secure all the
reproductive health technologies to prevent her difficulties from happening again. We must stay our hand for now.

VII

Separation of Powers

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Justice del Castillo is of the view that based on our power to "promulgate rules for the protection and enforcement of
constitutional rights" under Article VIII, Section 5(5) of the Constitution, we have the power to issue directives to
administrative bodies as to "the proper rules" that they should promulgate in the exercise of the powers granted to
them.319

He cites Echegaray v. Secretary of Justice,  thus:

320

The 1987 Constitution molded an even stronger and more independent judiciary. Among others, it enhanced the
rule making power of this Court. Its Section 5(5), Article VIII, provides:

x x x           x x x          x x x

"Section 5. The Supreme Court shall have the following powers:

x x x           x x x          x x x

(5) Promulgate rules concerning the protection and enforcement of constitutional rights, pleading, practice and
procedure in all courts, the admission to the practice of law, the Integrated Bar, and legal assistance to the
underprivileged. Such rules shall provide a simplified and inexpensive procedure for the speedy disposition of
cases, shall be uniform for all courts of the same grade, and shall not diminish, increase, or modify substantive
rights. Rules of procedure of special courts and quasi-judicial bodies shall remain effective unless disapproved by
the Supreme Court."

The rule making power of this Court was expanded. This Court for the first time was given the power to promulgate
rules concerning the protection and enforcement of constitutional rights. The Court was also granted for the first time
the power to disapprove rules of procedure of special courts and quasi-judicial bodies. x x x 321

He believes that we have the power to approve or modify such rules or require them to issue rules for the protection
of constitutional rights. He states:

Viewed in light of the broad power of the Court to issue rules for the protection and enforcement of constitutional
rights, the power to disapprove the rules of procedure of quasi-judicial bodies is significant in that it implies the
power of the Court to look into the sufficiency of such rules of procedure insofar as they adequately protect and
enforce constitutional right. Moreover, the power to disapprove the aforesaid rules of procedure necessarily includes
or implies the power to approve or modify such rules or, on the one extreme, require that such rules of procedure be
issued when necessary to protect and enforce constitutional rights. In other words, within and between the broader
power to issue rules for the protection and enforcement of constitutional rights and the narrower power to
disapprove the rules of procedure of quasi-judicial bodies, there exists penumbras of the power that the Court may
exercise in order to protect and enforce constitutional rights.

xxxx

Taken together [with Article VIII, Section 1 of the Constitution], the expanded jurisdiction of the Court and the power
to issue rules for the protection and enforcement of constitutional rights provide the bases for the Court (1) to look
into the sufficiency of safeguards in the implementation of the RH Law insofar as it will adversely affect the right to
life of the unborn, and (2) to issue such orders as are necessary and essential in order to protect and enforce the
constitutional right to life of the unborn. x x x  (Emphasis supplied)
322

For this reason, it is suggested that "x x x the Court x x x issue an order:

(1) directing the FDA to formulate the rules of procedure in the screening, evaluation and approval of all
contraceptives that will be used under the RH Law;

(2) the rules of procedure shall contain the following minimum requirements of due process:

(a) publication, notice and hearing,

(b) the Solicitor General shall be mandated to represent the unborn and the State’s interest in the
protection of the life of the unborn,

(c) interested parties shall be allowed to intervene,

(d) the standard laid down in the Constitution, as adopted under the RH Law, as to what constitute
allowable contraceptives shall be strictly followed, i.e., those which do not harm or destroy the life of
the unborn from conception/fertilization,

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 (e) in weighing the evidence, all reasonable doubts shall be resolved in favour of the right to life of
the unborn from conception/fertilization, and

(f) the other requirements of administrative due process, as summarized in Ang Tibay, shall be
complied with.

The FDA should be directed to submit these rules of procedure within 30 days from receipt of the Court’s decision,
for the Court’s appropriate action. 323

The issue in Echegaray was whether the Supreme Court has jurisdiction to control the execution and enforcement
of its judgment. The discussion on the expanded powers of the Supreme Court in Section 5(5) of Article VIII of the
Constitution was made in this context. It is not to be taken as justification for the Court to usurp powers vested upon
other departments. Thus, after this Court in that case said that "[t]he Court was x x x granted for the first time the
power to disapprove rules of procedure of special courts and quasi-judicial bodies[,]" it continued with the statement:

x x x But most importantly, the 1987 Constitution took away the power of the Congress to repeal, alter, or
supplement rules concerning pleading, practice and procedure. In fine, the power to promulgate rules of pleading,
practice and procedure is no longer shared by this Court with the Congress, more so with the Executive. If the
manifest intent of the 1987 Constitution is to strengthen the independence of the judiciary, it is inutile to urge, as
public respondents do, that this Court has no jurisdiction to control the process of execution of its decisions, a power
conceded to it and which it has exercised since time immemorial.

To be sure, it is too late in the day for public respondents to assail the jurisdiction of this Court to control and
supervise the implementation of its decision in the case at bar. x x x  (Emphasis supplied)
324

This court’s power to "promulgate rules for the protection and enforcement of constitutional rights" as stated in
Article VIII, Section 5(5) of the Constitution must be harmonized with the rest of the provision, which provides:

Section 5. The Supreme Court shall have the following powers:

xxxx

5. Promulgate rules concerning the protection and enforcement of constitutional rights, pleading, practice, and
procedure in all courts, the admission to the practice of law, the integrated bar, and legal assistance to the under-
privileged. Such rules shall provide a simplified and inexpensive procedure for the speedy disposition of cases, shall
be uniform for all courts of the same grade, and shall not diminish, increase, or modify substantive rights. Rules of
procedure of special courts and quasi-judicial bodies shall remain effective unless disapproved by the Supreme
Court. (Emphasis supplied)

The court’s power to issue rules, including rules concerning the protection and enforcement of constitutional rights,
is limited to judicial procedures. We do not have competence to compel the issuance of administrative procedures.
Rules of procedure of quasi-judicial bodies can only be disapproved by the Supreme Court, but not issued, modified
or approved by it.

The Constitution vests the executive power upon the President. He or she, and not the judiciary, exercises the
power of control over all executive departments, bureaus and offices,  including the Food and Drug Administration.
325

The judiciary has no administrative power of control or supervision over the Food and Drug Administration.

Insisting that we can impose, modify or alter rules of the Food and Drug Administration is usurpation of the
executive power of control over administrative agencies. It is a violation of the principle of separation of powers,
which recognizes that "[e]ach department of the government has exclusive cognizance of matters within its
jurisdiction, and is supreme within its own sphere."  The system of checks and balances only allows us to declare,
326

in the exercise of our judicial powers, the Food and Drugs Administration’s acts as violative of the law or as
committed with grave abuse of discretion.  Such power is further limited by the requirement of actual case or
327

controversy. 328

FINAL NOTE

It is not the Supreme Court alone that can give the full substantive meaning of the provisions of the Constitution.
The rules that aid in reshaping social reality as a result of the invocation and interpretation of constitutional
provisions should be the product of the interrelationship of all constitutional organs.

This case presents us with an opportunity to clearly define our role. We have the power to declare the meanings of
constitutional text with finality. That does not necessarily mean that we do not build on the experience of the other
departments and organs of government. We are part of the constitutional design that assures that the sovereign

353
people’s will is vetted in many ways. Deference to the outcome in legislative and executive forums when there is no
"actual case or controversy" is also our constitutional duty.

Judicial deference implies that we accept that constitutional role that assures democratic deliberation to happen in
political forums. It proceeds from an understanding that even as we labor and strive for wisdom, we will never be the
repository of all of it. Our status as members of this court is likewise no blanket license to impose our individual
predilections and preferences. Contrary to an esteemed colleague, our privileges do not include such judicial
license.

The judicial temperament is one that accepts that wisdom is better achieved by the collective interaction of the
constitutional bodies. We have no unbounded license to simply act when we want to. That judicial temperament
ensures the Rule of Law.

The President approved the Responsible Parenthood and Reproductive Health Act of 2012 or Republic Act No.
10354 on December 21, 2012. It now defines the political consensus within Congress and with the President. The
law took five (5) Congresses or not less than thirteen (13) years to complete.  Plenary debates in both the House of
329

Representatives and in the Senate were covered live by public television.

Whole communities were riveted by the debates. Newspaper columnists weighed in with their ideas. Public forums
were filled with heated discussion on the merits and demerits of every provision. Catholic pulpits were used to
express opinion. Various forms of democratic deliberation and debate translated to political positions of legislators.
Many of these positions were informed by their interpretation of the Constitution and the needs of their communities.
This, in turn, formed into the present provisions of this law.

The petitioners come to us after having lost the majority in full democratic deliberation in the halls of Congress. They
ask us to read the provisions of the law and the implementing rules. Without the benefit of an actual controversy
regarding conflicting rights arising from real facts, they ask us to declare various provisions formulated by the
legislature as unconstitutional. In effect, they ask us to continue to reshape the political consensus. In effect, they
ask us to render an advisory opinion, and on that basis, refine the law.

This is not what we do.

Courts act on conflict of rights arising from actual facts and events. We do not resolve moral, philosophical or even
legal issues barren of facts.

Unwanted pregnancies may result in clinical complications and deaths of women during childbirth,  of the fetus
330

while inside the womb  and of infants soon after they are born.  Unwanted pregnancies may be the result of lack of
331 332

knowledge of the consequences of the sexual act, or it could be due to the lack of information and access to safe
and effective reproductive technologies. The law impliedly accepts that the choice of intimate relationships is better
left to the individual and the influences of their culture, their family, and their faiths.

The law acknowledges the differential impact of lack of knowledge and access to reproductive health technologies
between the rich and the poor.  It, therefore, requires that proper information and access be made more available
333

to those who need it. It mandates the government to intervene at least in order to provide the right information and,
when requested and without coercion, provide access.

The law assumes that informed choices provide greater chances for a better quality of life for families. The law
actively intervenes so that government itself can provide these choices so that the quality of life improves. More than
corporeal existence, it hopes to assure human dignity.

I dissent from the majority's position that we can review the law. I dissent more vigorously from the majority's ruling
that some provisions are declared unconstitutional on the basis of speculative facts. In my view, this law needs to be
fully implemented.

Petitioners have come before us driven by their unfailing belief in the moral rightness of their faith and their causes.
Their faith is not to be questioned. Their conviction is solid. But these cases are premature.

But, they are not the only ones who may be affected. They cannot speak for everyone.

There are many burdened mothers who can barely feed their children.

There are mothers who have had to undergo abortion whether intended or unintended because of the unavailability
of information and access to contraception should they have had the right information.

There are mothers who died at childbirth because their pregnancy or their poverty was not their choice.

354
There are impoverished mothers and fathers who helplessly bore the deaths of their children.

They cannot speak. Because of the dominant morality that surround them, many choose not to speak.

All bear their own unspeakable reality. This law may just be the hope that they deserve.

ACCORDINGLY, I vote to DISMISS these petitions. This law, in my view, gives them a chance. It should be
implemented in full.

Republic of the Philippines

SUPREME COURT
Baguio City

THIRD DIVISION

G.R. No. 175540               April 7, 2014

DR. FILOTEO A. ALANO, Petitioner, 

vs.
ZENAIDA MAGUD-LOGMAO, Respondent.

DECISION

PERALTA, J.:

This deals with the Petition for Review on Certiorari under Rule 45 of the Rules of Court praying that the Decision of
1

the Court of Appeals (CA), dated March 31, 2006, adjudging petitioner liable for damages, and the Resolution dated
2

November 22, 2006, denying petitioner's motion for reconsideration thereof, be reversed and set aside.

The CA's narration of facts is accurate, to wit:

Plaintiff-appellee Zenaida Magud-Logmao is the mother of deceased Arnelito Logmao. Defendant-appellant Dr.
Filoteo Alano is the Executive Director of the National Kidney Institute (NKI).

At around 9:50 in the evening of March 1, 1988, Arnelito Logmao, then eighteen (18) years old, was brought to the
East Avenue Medical Center (EAMC) in Quezon City by two sidewalk vendors, who allegedly saw the former fall
from the overpass near the Farmers’ Market in Cubao, Quezon City. The patient’s data sheet identified the patient
as Angelito Lugmoso of Boni Avenue, Mandaluyong. However, the clinical abstract prepared by Dr. Paterno F.
Cabrera, the surgical resident on-duty at the Emergency Room of EAMC, stated that the patient is Angelito
[Logmao].

Dr. Cabrera reported that [Logmao] was drowsy with alcoholic breath, was conscious and coherent; that the skull x-
ray showed no fracture; that at around 4:00 o’clock in the morning of March 2, 1988, [Logmao] developed
generalized seizures and was managed by the neuro-surgery resident on-duty; that the condition of [Logmao]
progressively deteriorated and he was intubated and ambu-bagging support was provided; that admission to the
Intensive Care Unit (ICU) and mechanical ventilator support became necessary, but there was no vacancy at the
ICU and all the ventilator units were being used by other patients; that a resident physician of NKI, who was rotating
at EAMC, suggested that [Logmao] be transferred to NKI; and that after arrangements were made, [Logmao] was
transferred to NKI at 10:10 in the morning.

At the NKI, the name Angelito [Logmao] was recorded as Angelito Lugmoso. Lugmoso was immediately attended to
and given the necessary medical treatment. As Lugmoso had no relatives around, Jennifer B. Misa, Transplant
Coordinator, was asked to locate his family by enlisting police and media assistance. Dr. Enrique T. Ona, Chairman
of the Department of Surgery, observed that the severity of the brain injury of Lugmoso manifested symptoms of
brain death. He requested the Laboratory Section to conduct a tissue typing and tissue cross-matching examination,
so that should Lugmoso expire despite the necessary medical care and management and he would be found to be a
suitable organ donor and his family would consent to organ donation, the organs thus donated could be detached
and transplanted promptly to any compatible beneficiary.

Jennifer Misa verified on the same day, March 2, 1988, from EAMC the identity of Lugmoso and, upon her request,
she was furnished by EAMC a copy of the patient’s date sheet which bears the name Angelito Lugmoso, with
address at Boni Avenue, Mandaluyong. She then contacted several radio and television stations to request for air
time for the purpose of locating the family of Angelito Lugmoso of Boni Avenue, Mandaluyong, who was confined at
NKI for severe head injury after allegedly falling from the Cubao overpass, as well as Police Station No. 5, Eastern
Police District, whose area of jurisdiction includes Boni Avenue, Mandaluyong, for assistance in locating the
relatives of Angelito Lugmoso. Certifications were issued by Channel 4, ABS-CBN and GMA attesting that the
355
request made by the NKI on March 2, 1988 to air its appeal to locate the family and relatives of Angelito Lugmoso of
Boni Avenue, Mandaluyong was accommodated. A Certification was likewise issued by Police Station No. 5,
Eastern Police District, Mandaluyong attesting to the fact that on March 2, 1988, at about 6:00 p.m., Jennifer Misa
requested for assistance to immediately locate the family and relatives of Angelito Lugmoso and that she followed
up her request until March 9, 1988.

On March 3, 1988, at about 7:00 o’clock in the morning, Dr. Ona was informed that Lugmoso had been pronounced
brain dead by Dr. Abdias V. Aquino, a neurologist, and by Dr. Antonio Rafael, a neurosurgeon and attending
physician of Lugmoso, and that a repeat electroencephalogram (EEG) was in progress to confirm the diagnosis of
brain death. Two hours later, Dr. Ona was informed that the EEG recording exhibited a flat tracing, thereby
confirming that Lugmoso was brain dead. Upon learning that Lugmoso was a suitable organ donor and that some
NKI patients awaiting organ donation had blood and tissue types compatible with Lugmoso, Dr. Ona inquired from
Jennifer Misa whether the relatives of Lugmoso had been located so that the necessary consent for organ donation
could be obtained. As the extensive search for the relatives of Lugmoso yielded no positive result and time being of
the essence in the success of organ transplantation, Dr. Ona requested Dr. Filoteo A. Alano, Executive Director of
NKI, to authorize the removal of specific organs from the body of Lugmoso for transplantation purposes. Dr. Ona
likewise instructed Dr. Rose Marie Rosete-Liquete to secure permission for the planned organ retrieval and
transplantation from the Medico-Legal Office of the National Bureau of Investigation (NBI), on the assumption that
the incident which lead to the brain injury and death of Lugmoso was a medico legal case.

On March 3, 1988, Dr. Alano issued to Dr. Ona a Memorandum, which reads as follows:

This is in connection with the use of the human organs or any portion or portions of the human body of the
deceased patient, identified as a certain Mr. Angelito Lugmoso who was brought to the National Kidney Institute on
March 2, 1988 from the East Avenue Medical Center.

As shown by the medical records, the said patient died on March 3, 1988 at 9:10 in the morning due to
craniocerebral injury. Please make certain that your Department has exerted all reasonable efforts to locate the
relatives or next of kin of the said deceased patient such as appeal through the radios and television as well as
through police and other government agencies and that the NBI [Medico-Legal] Section has been notified and is
aware of the case.

If all the above has been complied with, in accordance with the provisions of Republic Act No. 349 as amended and
P.D. 856, permission and/or authority is hereby given to the Department of Surgery to retrieve and remove the
kidneys, pancreas, liver and heart of the said deceased patient and to transplant the said organs to any compatible
patient who maybe in need of said organs to live and survive.

A Certification dated March 10, 1988 was issued by Dr. Maximo Reyes, Medico-Legal Officer of the NBI, stating that
he received a telephone call from Dr. Liquete on March 3, 1988 at 9:15 a.m. regarding the case of Lugmoso, who
was declared brain dead; that despite efforts to locate the latter’s relatives, no one responded; that Dr. Liquete
sought from him a second opinion for organ retrieval for donation purposes even in the absence of consent from the
family of the deceased; and that he verbally agreed to organ retrieval.

At 3:45 in the afternoon of March 3, 1988, a medical team, composed of Dr. Enrique Ona, as principal surgeon, Drs.
Manuel Chua-Chiaco, Jr., Rose Marie Rosete-Liquete, Aurea Ambrosio, Ludivino de Guzman, Mary Litonjua, Jaime
Velasquez, Ricardo Fernando, and Myrna Mendoza, removed the heart, kidneys, pancreas, liver and spleen of
Lugmoso. The medical team then transplanted a kidney and the pancreas of Lugmoso to Lee Tan Hoc and the
other kidney of Lugmoso to Alexis Ambustan. The transplant operation was completed at around 11:00 o’clock in
the evening of March 3, 1988.

On March 4, 1988, Dr. Antonio R. Paraiso, Head of the Cadaver Organ Retrieval Effort (CORE) program of NKI,
made arrangements with La Funeraria Oro for the embalmment of the cadaver of Lugmoso good for a period of
fifteen (15) days to afford NKI more time to continue searching for the relatives of the latter. On the same day,
Roberto Ortega, Funeral Consultant of La Funeraria Oro, sent a request for autopsy to the NBI. The Autopsy Report
and Certification of Post-Mortem Examination issued by the NBI stated that the cause of death of Lugmoso was
intracranial hemorrhage secondary to skull fracture.

On March 11, 1988, the NKI issued a press release announcing its successful double organ transplantation. Aida
Doromal, a cousin of plaintiff, heard the news aired on television that the donor was an eighteen (18) year old boy
whose remains were at La Funeraria Oro in Quezon City. As the name of the donor sounded like Arnelito Logmao,
Aida informed plaintiff of the news report.

It appears that on March 3, 1988, Arlen Logmao, a brother of Arnelito, who was then a resident of 17-C San Pedro
Street, Mandaluyong, reported to Police Station No. 5, Eastern Police District, Mandaluyong that the latter did not
return home after seeing a movie in Cubao, Quezon City, as evidenced by a Certification issued by said Station; and
that the relatives of Arnelito were likewise informed that the latter was missing. Upon receiving the news from Aida,
plaintiff and her other children went to La Funeraria Oro, where they saw Arnelito inside a cheap casket.
356
On April 29, 1988, plaintiff filed with the court a quo a complaint for damages against Dr. Emmanuel Lenon, Taurean
Protectors Agency, represented by its Proprietor, Celso Santiago, National Kidney Institute, represented by its
Director, Dr. Filoteo A. Alano, Jennifer Misa, Dr. Maximo Reyes, Dr. Enrique T. Ona, Dr. Manuel Chua-Chiaco, Jr.,
Dr. Rose Marie O. Rosete-Liquete, Dr. Aurea Z. Ambrosio, Dr. Ludivino de Guzman, Dr. Mary Litonjua, Dr. Jaime
Velasquez, Dr. Ricardo Fernando, Dr. Myrna Mendoza, Lee Tan Koc, Alexis Ambustan, Dr. Antonio R. Paraiso, La
Funeraria Oro, Inc., represented by its President, German E. Ortega, Roberto Ortega alias Bobby Ortega, Dr.
Mariano B. Cueva, Jr., John Doe, Peter Doe, and Alex Doe in connection with the death of her son Arnelito. Plaintiff
alleged that defendants conspired to remove the organs of Arnelito while the latter was still alive and that they
concealed his true identity.

On January 17, 2000, the court a quo rendered judgment finding only Dr. Filoteo Alano liable for damages to plaintiff
and dismissing the complaint against the other defendants for lack of legal basis. 3

After finding petitioner liable for a quasi-delict, the Regional Trial Court of Quezon City (RTC) ordered petitioner to
pay respondent ₱188,740.90 as actual damages; ₱500,000.00 as moral damages; ₱500,000.00 as exemplary
damages; ₱300,000.00 as attorney's fees; and costs of suit. Petitioner appealed to the CA.

On March 31, 2006, the CA issued its Decision, the dispositive portion of which reads as follows:

WHEREFORE, the Decision appealed from is AFFIRMED, with MODIFICATION by DELETING the award of
₱188,740.90 as actual damages and REDUCING the award of moral damages to ₱250,000.00, the award of
exemplary damages to ₱200,000.00 and the award of attorney's fees to ₱100,000.00.

SO ORDERED. 4

Petitioner then elevated the matter to this Court via a petition for review on certiorari, where the following issues are
presented for resolution:

A. WHETHER THE COURT OF APPEALS DISREGARDED EXISTING JURISPRUDENCE PRONOUNCED

BY THIS HONORABLE SUPREME COURT IN HOLDING PETITIONER DR. FILOTEO ALANO LIABLE
FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES DESPITE THE FACT THAT THE
ACT OF THE PETITIONER IS NOT THE PROXIMATE CAUSE NOR IS THERE ANY FINDING THAT THE
ACT OF THE PETITIONER WAS THE PROXIMATE CAUSE OF THE INJURY OR DAMAGE ALLEGEDLY
SUSTAINED BY RESPONDENT ZENAIDA MAGUD-LOGMAO.

B. WHETHER THE COURT OF APPEALS GRAVELY ERRED IN REFUSING AND/OR FAILING TO

DECLARE THAT PETITIONER DR. ALANO ACTED IN GOOD FAITH AND PURSUANT TO LAW WHEN
HE ISSUED THE AUTHORIZATION TO REMOVE AND RETRIEVE THE ORGANS OF ANGELITO
LUGMOSO (LATER IDENTIFIED TO BE IN FACT ARNELITO LOGMAO) CONSIDERING THAT NO
NEGLIGENCE CAN BE ATTRIBUTED OR IMPUTED ON HIM IN HIS PERFORMANCE OF AN ACT
MANDATED BY LAW.

C. WHETHER THE COURT OF APPEALS GRAVELY ERRED IN AWARDING RESPONDENT ZENAIDA

MAGUD-LOGMAO MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES THAT ARE NOT IN
ACCORDANCE WITH AND ARE CONTRARY TO ESTABLISHED JURISPRUDENCE. 5

The first two issues boil down to the question of whether respondent's sufferings were brought about by petitioner's
alleged negligence in granting authorization for the removal or retrieval of the internal organs of respondent's son
who had been declared brain dead.

Petitioner maintains that when he gave authorization for the removal of some of the internal organs to be
transplanted to other patients, he did so in accordance with the letter of the law, Republic Act (R.A.) No. 349, as
amended by Presidential Decree (P.D.) 856, i.e., giving his subordinates instructions to exert all reasonable efforts
to locate the relatives or next of kin of respondent's son. In fact, announcements were made through radio and
television, the assistance of police authorities was sought, and the NBI Medico-Legal Section was notified. Thus,
petitioner insists that he should not be held responsible for any damage allegedly suffered by respondent due to the
death of her son and the removal of her son’s internal organs for transplant purposes.

The appellate court affirmed the trial court's finding that there was negligence on petitioner's part when he failed to
ensure that reasonable time had elapsed to locate the relatives of the deceased before giving the authorization to
remove said deceased's internal organs for transplant purposes. However, a close examination of the records of this
case would reveal that this case falls under one of the exceptions to the general rule that factual findings of the trial
court, when affirmed by the appellate court, are binding on this Court. There are some important circumstances that
the lower courts failed to consider in ascertaining whether it was the actions of petitioner that brought about the
sufferings of respondent. 6

357
The Memorandum dated March 3, 1988 issued by petitioner, stated thus:

As shown by the medical records, the said patient died on March 3, 1988 at 9:10 in the morning due to
craniocerebral injury. Please make certain that your Department has exerted all reasonable efforts to locate the
relatives or next-of-kin of the said deceased patient, such as appeal through the radios and television, as well as
through police and other government agencies and that the NBI [Medico-Legal] Section has been notified and is
aware of the case.

If all the above has been complied with, in accordance with the provisions of Republic Act No. 349 as amended and
P.D. 856, permission and/or authority is hereby given to the Department of Surgery to retrieve and remove the
kidneys, pancreas, liver and heart of the said deceased patient and to transplant the said organs to any compatible
patient who maybe in need of said organs to live and survive. 7

A careful reading of the above shows that petitioner instructed his subordinates to "make certain" that "all
reasonable efforts" are exerted to locate the patient's next of kin, even enumerating ways in which to ensure that
notices of the death of the patient would reach said relatives. It also clearly stated that permission or authorization to
retrieve and remove the internal organs of the deceased was being given ONLY IF the provisions of the applicable
law had been complied with. Such instructions reveal that petitioner acted prudently by directing his subordinates to
exhaust all reasonable means of locating the relatives of the deceased. He could not have made his directives any
clearer. He even specifically mentioned that permission is only being granted IF the Department of Surgery has
complied with all the requirements of the law. Verily, petitioner could not have been faulted for having full confidence
in the ability of the doctors in the Department of Surgery to comprehend the instructions, obeying all his directives,
and acting only in accordance with the requirements of the law.

Furthermore, as found by the lower courts from the records of the case, the doctors and personnel of NKI
disseminated notices of the death of respondent's son to the media and sought the assistance of the appropriate
police authorities as early as March 2, 1988, even before petitioner issued the Memorandum. Prior to performing the
procedure for retrieval of the deceased's internal organs, the doctors concerned also the sought the opinion and
approval of the Medico-Legal Officer of the NBI.

Thus, there can be no cavil that petitioner employed reasonable means to disseminate notifications intended to
reach the relatives of the deceased. The only question that remains pertains to the sufficiency of time allowed for
notices to reach the relatives of the deceased.

If respondent failed to immediately receive notice of her son's death because the notices did not properly state the
name or identity of the deceased, fault cannot be laid at petitioner's door. The trial and appellate courts found that it
was the EAMC, who had the opportunity to ascertain the name of the deceased, who recorded the wrong
information regarding the deceased's identity to NKI. The NKI could not have obtained the information about his
name from the patient, because as found by the lower courts, the deceased was already unconscious by the time
he was brought to the NKI.

Ultimately, it is respondent's failure to adduce adequate evidence that doomed this case.  As stated in Otero v.
1âwphi1

Tan, "[i]n civil cases, it is a basic rule that the party making allegations has the burden of proving them by a
8

preponderance of evidence. The parties must rely on the strength of their own evidence and not upon the weakness
of the defense offered by their opponent."  Here, there is to proof that, indeed, the period of around 24 hours from
9

the time notices were disseminated, cannot be considered as reasonable under the circumstances. They failed to
present any expert witness to prove that given the medical technology and knowledge at that time in the 1980's, the
doctors could or should have waited longer before harvesting the internal organs for transplantation.

Verily, the Court cannot, in conscience, agree with the lower court. Finding petitioner liable for damages is improper.
It should be emphasized that the internal organs of the deceased were removed only after he had been declared
brain dead; thus, the emotional pain suffered by respondent due to the death of her son cannot in any way be
attributed to petitioner. Neither can the Court find evidence on record to show that respondent's emotional suffering
at the sight of the pitiful state in which she found her son's lifeless body be categorically attributed to petitioner's
conduct.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals, dated March 31, 2006, is
REVERSED and SET ASIDE. The complaint against petitioner is hereby DISMISSED.

SO ORDERED.

CONCURRING OPINION

"What you leave behind is not

what is engraved in stone monuments,
but what is woven in the lives of others. "

358
 Pericles

LEONEN, J.:

On February 28, 2014, the Philippines broke the Guinness World Record for the most number of people signing up
to be organ donors within an hour on a single site. A total of 3,548 people trooped to the Polytechnic University of
the Philippines to pledge their organs as part of the "I'm a Lifeline" campaign of the Philippine Network for Organ
Sharing under the Department of Health. 1

This. court is now faced with the opportunity to confront the issues concerning organ donation and transplantation
for the first time since the procedure was introduced in this country in 1983.

Before us is a petition for review under Rule 45 of the Rules of Court, assailing the decision  of the Court of Appeals
2

dated March 31, 2006 and its resolution dated November 22, 2006 in CA-G.R. CV No. 67399 entitled Zenaida
Magud-Logmao v. Dr. Emmanuel Lenon, et al. The appellate court affirmed the decision  dated January 17, 2000 of
3

the Regional Trial Court of Quezon City, Branch 100, which found Dr. Filoteo A. Alano, then the Executive Director
of the National Kidney Institute,  liable for damages to Zenaida Logmao.
4

The facts, as found by the lower courts, are as follows:

On March 1, 1988, at 9:50 p.m., Arnelito Logmao, 18 years old, was brought to the East Avenue Medical Center in
Quezon City by two sidewalk vendors who allegedly saw him fall from the overpass near Farmer’s Market,
Cubao. The security guards of the hospital noted in their blotter that when he was admitted to the hospital, he was
5

drunk. He gave his name as Arnelito Logmao and his address as Boni Avenue, Mandaluyong.
6 7

In the emergency room, Arnelito Logmao was conscious and was interviewed by Dr. Paterno Cabrera, the duty
resident physician.  The patient’s data sheet, prepared by Dr. Cabrera, identified the patient as Angelito Lugmoso
8

(and not Arnelito Logmao) of Boni Avenue, Mandaluyong.  He was subjected to an x-ray examination, but the
9

examination did not show him suffering from any skull fractures or head injuries. 10

At around 4:00 a.m. on March 2, 1988, the patient developed generalized seizures, and his condition progressively
deteriorated.  Admission to the Intensive Care Unit (ICU) and mechanical ventilatory support became necessary,
11

but there was no vacancy at the East Avenue Medical Center ICU.  A resident physician at National Kidney
12

Institute, Dr. Emmanuel Lenon, who was then conducting rounds at East Avenue Medical Center, suggested that
the patient be transferred to the National Kidney Institute.  After arrangements were made, the patient was
13

transferred to the National Kidney Institute at 10:10 a.m. on the same day. 14

When the patient arrived at the National Kidney Institute, his name was recorded as Angelito Lugmoso.  As the 15

patient was admitted without any relatives by his side, Jennifer B. Misa, Transplant Coordinator, was asked to locate
the patient’s family by enlisting police and media assistance.  Dr. Enrique T. Ona, Chairman of the Department of
16

Surgery, observed that the patient’s brain injury was so severe that it manifested symptoms of brain death.  Upon 17

his request, the Laboratory Section conducted a tissue typing and tissue cross-matching examination on the
patient.  The request was done on the basis that if the deceased patient is found to be a suitable organ donor and
18

has his family’s consent, the organs could be harvested and transplanted promptly to any of the compatible
beneficiaries. 19

Jennifer Misa verified the identity of the patient with the East Avenue Medical Center on the same day or March 2,
1988.  Upon her request, the hospital furnished her a copy of the patient’s data sheet which bore the name Angelito
20

Lugmoso with Boni Avenue, Mandaluyong, as his address.  She then contacted several radio and television stations
21

and requested for airtime in her search for the family of Angelito Lugmoso.  Her request was granted by Channel 4,
22

ABS-CBN, and GMA.  Police Station No. 5, Eastern Police District, Mandaluyong, issued a certification attesting
23

that on March 2, 1988, at about 6:00 p.m., Jennifer Misa requested for assistance to immediately locate the family
and relatives of Angelito Lugmoso and that she followed up her request until March 9, 1988. 24

On March 3, 1988 at about 7:00 a.m., Dr. Ona was informed that the patient was pronounced brain dead by Dr.
Abdias V. Aquino, a neurologist, and Dr. Antonio Rafael, the attending physician of the patient, and that another
electroencephalogram (EEG) was in progress to confirm the diagnosis.  At about 9:00 a.m., Dr. Ona was informed
25

that the EEG recording showed a flat tracing, confirming that the patient was brain dead. 26

Upon learning that the patient was a suitable organ donor and that there were some National Kidney Institute
patients who were compatible donees, Dr. Ona inquired from Jennifer Misa whether the patient’s relatives have
been located so that the necessary consent for organ donation could be obtained. 27

Since no relatives of Angelito Lugmoso could be found despite the ongoing search, Dr. Ona requested Dr. Filoteo A.
Alano, Executive Director of the National Kidney Institute, to authorize the removal of specific organs from the body
for transplantation purposes.  Dr. Ona likewise requested Dr. Rose Marie Rosete-Liquete to secure permission from
28

359
the National Bureau of Investigation’s Medico-Legal Office for organ retrieval and transplantation, on the assumption
that the incident which led to the death of the patient was a medico-legal case. 29

On March 3, 1988, Dr. Alano issued to Dr. Ona a memorandum which states:

This is in connection with the use of the human organs or any portion or portions of the human body of the
deceased patient, identified as a certain Mr. Angelito Lugmoso who was brought to the National Kidney Institute on
March 2, 1988 from the East Avenue Medical Center.

As shown by the medical records, the said patient died on March 3, 1988 at 9:10 in the morning due to
craniocerebral injury. Please make certain that your Department has exerted all reasonable efforts to locate the
relatives or next of kin of the said deceased patient such as appeal through the radios and television as well as
through police and other government agencies and that the NBI Medicolegal Section has been notified and is aware
of the case.

If all the above has been complied with, in accordance with the provisions of Republic Act No. 349 as amended and
P.D. 856, permission and/or authority is hereby given to the Department of Surgery to retrieve and remove the
kidneys, pancreas, liver and heart of the said deceased patient and to transplant the said organs to any compatible
patient who maybe in need of said organs to live and survive.  (Emphasis supplied)
30

Dr. Maximo Reyes, Medico-Legal Officer of the National Bureau of Investigation, issued a certification dated March
10, 1988, stating that he received a telephone call from Dr. Liquete on March 3, 1988 at 9:15 a.m. regarding the
case.  He certified that despite efforts to locate Angelito Lugmoso’s relatives, no one responded. Dr. Liquete also
31

sought from Dr. Reyes a second opinion on organ donation even in the absence of consent from the family of the
deceased patient, and Dr. Reyes verbally agreed to the organ retrieval. 32

On March 3, 1988 at 3:45 p.m., a medical team led by Dr. Ona removed the heart, kidneys, pancreas, liver, and
spleen of the deceased patient.  The medical team then transplanted a kidney and the pancreas to Lee Tan Koc
33

and the other kidney to Alexis Ambustan.  The transplant operation was completed around 11:00 p.m. on the same
34

day.35

On March 4, 1988, Dr. Antonio R. Paraiso, Head of the Cadaver Organ Retrieval Effort (CORE) program of the
National Kidney Institute, made arrangements with La Funeraria Oro for the embalming of the cadaver for up to 15
days to give the National Kidney Institute more time to continue searching for the relatives of the deceased patient. 36

On March 11, 1988, the National Kidney Institute issued a press release announcing its first successful double
organ transplantation.  Aida Doromal, a relative of Arnelito’s mother, Zenaida Logmao, saw the news on television
37

that the donor was an 18-year-old boy whose remains were laid at La Funeraria Oro in Quezon City.  Since the
38

name of the donor sounded like Arnelito Logmao, Aida informed Zenaida.  Upon receiving the news from Aida,
39

Zenaida and her other children went to La Funeraria Oro where they were able to retrieve Arnelito’s body. 40

On April 29, 1988, Zenaida filed with the Regional Trial Court a complaint for damages against Dr. Lenon, Taurean
Protectors Agency, National Kidney Institute, Jennifer Misa, Dr. Alano, Dr. Reyes, Dr. Ona, Dr. Liquete, the entire
medical team that conducted the transplant, Lee Tan Koc, Alexis Ambustan, Dr. Paraiso, La Funeraria Oro, Dr.
Mariano B. Cueva, Jr., John Doe, Peter Doe, and Alex Doe in connection with the death of her son, Arnelito.  She 41

alleged that all of them conspired to remove the organs of Arnelito when he was still alive and that they concealed
his true identity.
42

On January 17, 2000, the Regional Trial Court rendered judgment  dismissing the complaint against all defendants
43

but finding Dr. Alano liable for damages. The trial court found Dr. Alano negligent under Article 2176 of the Civil
Code for authorizing the retrieval of the deceased patient’s organs without first exerting reasonable efforts to locate
his relatives, in direct violation of the law. According to the trial court:

x x x. In the natural course of things, a search or inquiry of anything requires at least two days of probing and
seeking to be actually considered as having made said earnest efforts. But a one-day campaign, especially with
regard to a subject matter as important as a person’s disposal into the afterlife certainly warrants a longer time for
investigation. Indeed, what is "reasonable" is a relative term, dependent on the attendant circumstances of the case
(Philippine Law Dictionary, citing Katague vs. Lagana, CV 70164, March 7, 1986). Here, what was involved was the
detachment of the vital organs of plaintiff’s 18-year[-]old son from his body without her knowledge and consent, and
which act was upon the authority issued by defendant Dr. Alano as head of the hospital. The matter at hand was of
a very sensitive nature that an inquiry of less than one day cannot be deemed as sufficient and reasonable to
exculpate him from liability. x x x.  (Emphasis supplied)
44

Dr. Alano appealed  the ruling with the Court of Appeals.

45

360
On March 31, 2006, the Court of Appeals rendered its decision  affirming the ruling of the Regional Trial Court with
46

modifications.

The appellate court deleted the award for actual damages representing the expenses for autopsy fees, and wake
and funeral services, since Arnelito’s family would have still incurred those expenses even if no organ retrieval was
done on the body.  It also deleted the award of compensatory damages of ₱50,000.00 per organ retrieved since it
47

was not shown that Dr. Alano was the recipient of the organ transplants or that he received any consideration from
the transplant patients.  Finally, it affirmed the award of damages but reduced moral damages from ₱500,000.00 to
48

₱250,000.00, exemplary damages from ₱500,000.00 to ₱200,000.00, and attorney’s fees from ₱300,000.00 to
₱100,000.00. 49

Dr. Alano now comes before this court via a petition for review on certiorari. He argues  that there was no legal
50

basis for the Court of Appeals to hold him liable for damages since there was no finding that he was the proximate
cause of the injury or damage sustained by Zenaida. He also argues that he acted in good faith and pursuant to law
when he issued the authorization for the organ retrieval.

Thus, the issue before this court is whether Dr. Alano should be held liable for his alleged negligence in authorizing
the removal and retrieval of Arnelito’s internal organs without Zenaida’s consent.

I agree with the ponencia that Dr. Alano should not be found liable, but I take this opportunity to further expound on
the issues presented to this court.

As a general rule, only questions of law are to be considered in a petition for review under Rule 45. There are,
however, recognized exceptions to the rule, one of which is when "the Court of Appeals fails to notice certain
relevant facts which, if properly considered, will justify a different conclusion x x x."
51

Dr. Alano’s acts were not reckless, negligent or unreasonable. It was not his acts that caused the alleged injury to
the deceased patient’s relatives. Considering the circumstances that he had to face, the search he ordered for the
deceased patient’s relatives were all that ordinary prudence required. His retrieval of the deceased patient’s organs
was done legally and after allowing a reasonable time to lapse. The conclusions of the trial court and the appellate
court were, therefore, correctly reversed and set aside.

The elements of a quasi-delict

In cases involving quasi-delict and torts, the plaintiff complains that the acts of a defendant caused him or her injury.
In order to be actionable, the act should have been committed with the intention of injuring the plaintiff or was
committed recklessly or negligently or one which, even when done with the proper care, held such high risk for injury
to others that it will be presumed by law to be actionable.

The lower courts are all in agreement that Dr. Alano’s participation in the organ retrieval constituted a quasi-delict
under Article 2176 of the Civil Code for which he should be liable for damages.

This conclusion is erroneous.

Article 2176 may not be the proper legal basis for the cause of action. This article defines a quasi-delict as:

Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to
pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the
parties, is called a quasi-delict and is governed by the provisions of this Chapter.

The elements of a quasi-delict are: (1) an act or omission; (2) the presence of fault or negligence in the performance
or non-performance of the act; (3) injury; (4) a causal connection between the negligent act and the injury; and (5)
no pre-existing contractual relation. Jurisprudence, however, specifies four (4) essential elements: "(1) duty; (2)
breach; (3) injury; and (4) proximate causation."52

As a general rule, any act or omission coming under the purview of Article 2176 gives rise to a cause of action under
quasi-delict. This, in turn, gives the basis for a claim of damages. Verily, Article 1157 of the Civil Code provides as
follows:

Article 1157. Obligations arise from:

(1) Law;

(2) Contracts;

(3) Quasi-contracts;
361
 (4) Acts or omissions punished by law; and

(5) Quasi-delicts. (Emphasis supplied)

Article 2176 is not an all-encompassing enumeration of all actionable wrongs which can give rise to the liability for
damages. Under the Civil Code, acts done in violation of Articles 19, 20, and 21 will also give rise to damages. The
provisions state as follows:

Article 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith.

Article 20. Every person who, contrary to law, willfully or negligently causes damage to another, shall indemnify the
latter for the same.

Article 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good
customs, or public policy shall compensate the latter for the damage.

Baksh v. Court of Appeals  elaborates on the distinctions:

53

x x x. Quasi-delict, known in Spanish legal treatises as culpa aquiliana, is a civil law concept while torts is an Anglo-
American or common law concept. Torts is much broader than culpa aquiliana because it includes not only
negligence, but international criminal acts as well such as assault and battery, false imprisonment and deceit. In the
general scheme of the Philippine legal system envisioned by the Commission responsible for drafting the New Civil
Code, intentional and malicious acts, with certain exceptions, are to be governed by the Revised Penal Code while
negligent acts or omissions are to be covered by Article 2176 of the Civil Code. In between these opposite
spectrums are injurious acts which, in the absence of Article 21, would have been beyond redress. Thus, Article 21
fills that vacuum. It is even postulated that together with Articles 19 and 20 of the Civil Code, Article 21 has greatly
broadened the scope of the law on civil wrongs; it has become much more supple and adaptable than the Anglo-
American law on torts.  (Emphasis supplied)
54

Yuchengco v. Manila Chronicle Publishing Corporation  further elaborates on tort based on the concept of abuse of
55

right:

The principle of abuse of rights as enshrined in Article 19 of the Civil Code provides:

Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith.

This provision of law sets standards which must be observed in the exercise of one’s rights as well as in the
performance of its duties, to wit: to act with justice; give everyone his due; and observe honesty and good faith.

In Globe Mackay Cable and Radio Corporation v. Court of Appeals, it was elucidated that while Article 19 "lays
down a rule of conduct for the government of human relations and for the maintenance of social order, it does not
provide a remedy for its violation. Generally, an action for damages under either Article 20 or Article 21 would be
proper." The Court said:

One of the more notable innovations of the New Civil Code is the codification of "some basic principles that are to
be observed for the rightful relationship between human beings and for the stability of the social order." [REPORT
ON THE CODE COMMISSION ON THE PROPOSED CIVIL CODE OF THE PHILIPPINES, p. 39]. The framers of
the Code, seeking to remedy the defect of the old Code which merely stated the effects of the law, but failed to draw
out its spirit, incorporated certain fundamental precepts which were "designed to indicate certain norms that spring
from the fountain of good conscience" and which were also meant to serve as "guides for human conduct [that]
should run as golden threads through society, to the end that law may approach its supreme ideal, which is the
sway and dominance of justice." (Id.) Foremost among these principles is that pronounced in Article 19 which
provides:

Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith.

This article, known to contain what is commonly referred to as the principle of abuse of rights, sets certain standards
which must be observed not only in the exercise of one's rights, but also in the performance of one's duties. These
standards are the following: to act with justice; to give everyone his due; and to observe honesty and good faith. The
law, therefore, recognizes a primordial limitation on all rights; that in their exercise, the norms of human conduct set
forth in Article 19 must be observed. A right, though by itself legal because recognized or granted by law as such,
may nevertheless become the source of some illegality. When a right is exercised in a manner which does not
conform with the norms enshrined in Article 19 and results in damage to another, a legal wrong is thereby

362
committed for which the wrongdoer must be held responsible. But while Article 19 lays down a rule of conduct for
the government of human relations and for the maintenance of social order, it does not provide a remedy for its
violation. Generally, an action for damages under either Article 20 or Article 21 would be proper.

Corollarily, Article 20 provides that "every person who, contrary to law, willfully or negligently causes damage to
another shall indemnify the latter for the same." It speaks of the general sanctions of all other provisions of law
which do not especially provide for its own sanction. When a right is exercised in a manner which does not conform
to the standards set forth in the said provision and results in damage to another, a legal wrong is thereby committed
for which the wrongdoer must be responsible. Thus, if the provision does not provide a remedy for its violation, an
action for damages under either Article 20 or Article 21 of the Civil Code would be proper.  (Emphasis supplied)
56

Article 19 is the general rule which governs the conduct of human relations. By itself, it is not the basis of an
actionable tort. Article 19 describes the degree of care required so that an actionable tort may arise when it is
alleged together with Article 20 or Article 21.

Article 20 concerns violations of existing law as basis for an injury. It allows recovery should the act have been willful
or negligent. Willful may refer to the intention to do the act and the desire to achieve the outcome which is
considered by the plaintiff in tort action as injurious. Negligence may refer to a situation where the act was
consciously done but without intending the result which the plaintiff considers as injurious.

Article 21, on the other hand, concerns injuries that may be caused by acts which are not necessarily proscribed by
law. This article requires that the act be willful, that is, that there was an intention to do the act and a desire to
achieve the outcome. In cases under Article 21, the legal issues revolve around whether such outcome should be
considered a legal injury on the part of the plaintiff or whether the commission of the act was done in violation of the
standards of care required in Article 19.

Article 2176 covers situations where an injury happens through an act or omission of the defendant. When it
involves a positive act, the intention to commit the outcome is irrelevant. The act itself must not be a breach of an
existing law or a pre-existing contractual obligation. What will be considered is whether there is "fault or negligence"
attending the commission of the act which necessarily leads to the outcome considered as injurious by the plaintiff.
The required degree of diligence will then be assessed in relation to the circumstances of each and every case.

Article 2176 should not have been the basis for the cause of action in this case. Rather, it should have been Article
20, which is applicable when there is a violation of law.

The law that is applicable is the third paragraph of Section 2 of Republic Act No. 349,  as amended by Republic Act
57

No. 1056,  which provides for a way to determine substituted informed consent for deceased patients for purposes
58

of organ donation.

The doctrine of informed consent

The doctrine of informed consent was introduced in this jurisdiction only very recently in Dr. Li v. Spouses
Soliman. This court ruled that liability may arise in cases where the physician fails to obtain the consent of the
59

patient before performing any medical procedure, thus:

The doctrine of informed consent within the context of physician-patient relationships goes far back into English
common law. As early as 1767, doctors were charged with the tort of "battery" (i.e., an unauthorized physical
contact with a patient) if they had not gained the consent of their patients prior to performing a surgery or procedure.
In the United States, the seminal case was Schoendorff v. Society of New York Hospital which involved unwanted
treatment performed by a doctor. Justice Benjamin Cardozo's oft-quoted opinion upheld the basic right of a patient
to give consent to any medical procedure or treatment: "Every human being of adult years and sound mind has a
right to determine what shall be done with his own body; and a surgeon who performs an operation without his
patient's consent, commits an assault, for which he is liable in damages." From a purely ethical norm, informed
consent evolved into a general principle of law that a physician has a duty to disclose what a reasonably prudent
physician in the medical community in the exercise of reasonable care would disclose to his patient as to whatever
grave risks of injury might be incurred from a proposed course of treatment, so that a patient, exercising ordinary
care for his own welfare, and faced with a choice of undergoing the proposed treatment, or alternative treatment, or
none at all, may intelligently exercise his judgment by reasonably balancing the probable risks against the probable
benefits.

Subsequently, in Canterbury v. Spence[,] the court observed that the duty to disclose should not be limited to
medical usage as to arrogate the decision on revelation to the physician alone. Thus, respect for the patient's right
of self-determination on particular therapy demands a standard set by law for physicians rather than one which
physicians may or may not impose upon themselves. x x x. 60

Those who consent to using their organs upon their death for the benefit of another can make their consent known
prior to their death by following the requirements of the law. Should a patient die prior to making his or her informed
363
consent known, the law provides a list of persons who may consent on his or her behalf, that is, "substituted"
informed consent.

Since the incident in this case occurred in 1988, Republic Act No. 349, as amended by Republic Act No. 1056, is the
law that applies. Section 2 of the law states that:

SEC. 2. The authorization referred to in section one of this Act must: be in writing; specify the person or institution
granted the authorization; the organ, part or parts to be detached, the specific use or uses to which the organ, part
or parts are to be employed; and, signed by the grantor and two disinterested witnesses.

If the grantor is a minor or an incompetent person, the authorization may be executed by his guardian with the
approval of the court; in default thereof, by the legitimate father or mother, in the order, named. Married women may
grant the authority referred to in section one of this Act, without the consent of the husband.

After the death of the person, authority to use human organs or any portion or portions of the human body for
medical, surgical or scientific purposes may also be granted by his nearest relative or guardian at the time of his
death or in the absence thereof, by the person or head of the hospital, or institution having custody of the body of
the deceased: Provided, however, That the said person or head of the hospital or institution has exerted reasonable
efforts to locate the aforesaid guardian or relative.

A copy of every such authorization must be furnished the Secretary of Health. (Emphasis supplied)

Under this law, consent to organ retrieval after the patient’s death may be given first and foremost by the patient’s
nearest relative or guardian at the time of death. It is only in the event that these relatives cannot be contacted
despite reasonable efforts that the head of the hospital or institution having custody of the body may give consent
for organ retrieval on behalf of the patient. Failing this, liability for damages arises.

Considering that Republic Act No. 349, as amended, does not provide a remedy in case of violation, an application
of the doctrine of informed consent vis-à-vis Article 20 of the Civil Code may give rise to an action for damages. In
this case, Dr. Alano must first be shown to have acted willfully and negligently to the damage and prejudice of
Zenaida.

Petitioner did not willfully or

negligently, in a manner
contrary to law, authorize the
retrieval of the organs

Dr. Alano did not violate the provisions of the law willfully or negligently. In accordance with the requirements of the
third paragraph of Section 2 of Republic Act No. 349, as amended, he caused the discharge of "reasonable efforts"
to locate the relatives, allowed for a reasonable time to pass, and harvested the organs with care and prudence.

Negligence has been defined by law as "[t]he failure to observe, for the protection of the interests of another person,
that degree of care, precaution and vigilance which the circumstances justly demand, whereby such other person
suffers injury."
61

In Picart v. Smith,  the test for negligence is as follows:

62

The test by which to determine the existence of negligence in a particular case may be stated as follows: Did the
defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent
person would have used in the same situation? If not, then he is guilty of negligence. The law here in effect adopts
the standard supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the Roman law. The
existence of negligence in a given case is not determined by reference to the personal judgment of the actor in the
situation before him. The law considers what would be reckless, blameworthy, or negligent in the man of ordinary
intelligence and prudence and determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given situation must of course be
always determined in the light of human experience and in view of the facts involved in the particular case. Abstract
speculation cannot here be of much value but this much can be profitably said: Reasonable men govern their
conduct by the circumstances which are before them or known to them. They are not, and are not supposed to be,
omniscient of the future. Hence they can be expected to take care only when there is something before them to
suggest or warn of danger. Could a prudent man, in the case under consideration, foresee harm as a result of the
course actually pursued? If so, it was the duty of the actor to take precautions to guard against that harm.
Reasonable foresight of harm, followed by the ignoring of the suggestion born of this prevision, is always necessary
before negligence can be held to exist. Stated in these terms, the proper criterion for determining the existence of
negligence in a given case is this: Conduct is said to be negligent when a prudent man in the position of the

364
tortfeasor would have foreseen that an effect harmful to another was sufficiently probable to warrant his foregoing
the conduct or guarding against its consequences.  (Emphasis supplied)
63

As correctly found by the majority, Zenaida failed to prove that Dr. Alano did not exercise the reasonable care and
caution of an ordinarily prudent person.

In compliance with the duty reposed on him by the law, Dr. Alano, as the Executive Director of the National Kidney
Institute, directed Jennifer B. Misa, Transplant Coordinator, to locate Arnelito’s relatives. Radio announcements over
Radyo ng Bayan and DZMM Radio, televised notices on Channels 2, 7, 9, and 13, and a police blotter in the
Eastern Police District No. 5, Mandaluyong, were done on March 2, 1988, with a published advertisement also
appearing on the People’s Journal on March 20, 1988.  Assistance was also sought from the National Bureau of
64

Investigation. These findings were, in fact, adopted by the trial court. Dr. Enrique T. Ona also testified that the
search for the deceased patient’s relatives continued even after the organ retrieval, thus:

Q: After the retrieval of the organs from the patient and the transplantation of the organs to Mr. Ambustan and Tan
[K]oc Lee, did the hospital stop in its effort to locate the family of the patient,

Mr. Witness?

A: Since this patient is a John Doe and even after we had retrieved the organs and transplanted it to the 2
recipients, I was also made aware that no relatives could still be located. Specific instruction were [sic] given to the
transplant coordinator to continue looking for the relatives.  (Emphasis supplied)
65

The trial court and the appellate court, however, took exception to the period of time taken by Dr. Alano in
conducting the search for the deceased patient’s relatives before he authorized the organ retrieval.

What the lower courts failed to consider was that this was an unusual situation wherein time was of the essence.
Organ retrieval must always take into account the viability of the organs.

As explained by Dr. Ona in his testimony before the trial court:

Q: Does the time have any factor also with respect to the viability of these organs, Mr. Witness[?]

A: Yes, sir.

Q: Will you please explain this, Mr. Witness?

A When we remove the organs say, the kidney from the cadaver we put that into [a] special solution for preservation
and ideally we would like to transplant that kidney within 24 hours although oftentimes we extend it to 48 hours and
even stretching it to 72 hours, sir.

Court: I just want to clarify this issue.

Q: Is there any particular reason why the retrieval of the organs have to be done even when the patient is not yet
dead, as what we know heart beating [sic] stops but even at that stage when classified as brain dead, why the rush
to open it up, is there any particular reason or could it refer perhaps to the successful operation maybe for the
organs to fit well to the rec[i]pient?

A: Yes, Your Honor. The viability of the organ as I mentioned earlier the kidney is viable for several hours, as I
mentioned 24 hours, 48 hours up to 72 hours but for the liver, Your [Honor], during that time in 1988 the liver can be
preserved only for about 6 to 8 hours and for the heart it should be connected for 4 hours, Your Honor.

Q: So, in this particular case, the kidney, how many hours more or less?

A: At that time it was stretched into 24 hours, Your Honor and the pa[n]creas maybe 4 hours so that it is the leng[th]
of time when the organs most likely to be viable after that most likely did not function anymore [sic].

Q: But you do retrieval also to those dead on arrival, is that not?

A: In this particular case, Your Honor, it is possible for example the dead on arrival is brought to the emergency
room, the preparation of the operating room and the getting of [sic] the consent it will take time, Your Honor, so in
this particular case, Your Honor there is no more heart beat that cannot be viable anymore[.]  (Emphasis supplied)
66

This testimony is supported by several studies, which tend to show that the viability of organs in an organ donation
may depend on the length of time between the declaration of brain death and organ retrieval.

365
One study shows that widespread physiological changes occur during brain death. "In addition to acute changes,
which if untreated lead to rapid deterioration and cardiac arrest (even if ventilation is continued), there are ongoing
generalized inflammatory and hormonal changes associated with brain death which adversely affect donor organ
function and propensity to rejection."  Another study  shows that the time period between declaration of brain death
67 68

and organ retrieval was a "significant predictive factor"  in recipient mortality for cardiac transplants. There is also a
69

study  that shows that "[t]here are clear data that both [brain death] and prolonged [brain death duration] result in
70

[kidney] graft damage, and successful organ retrieval after [brain death] definitely relies on intensive donor
management." 71

Upon a showing by the Transplant Coordinator that the deceased patient’s relatives could not be found despite all
her efforts in locating them, Dr. Alano exercised his professional judgment and ordered the retrieval bearing in mind
the short length of time the organs could be viable after the declaration of brain death. He exercised all the
reasonable care and caution that an ordinarily prudent man would have exercised in the same situation.

Dr. Alano, therefore, should not have been found to be negligent. He did not violate Article 20 of the Civil Code
because he complied with all his duties in Republic Act No. 349, as amended.

There is no causal connection

between the alleged negligent
act and the damage suffered by
respondent

The trial court, by using the codal definition of a quasi-delict, identified the act or omission as that of authorizing the
retrieval of the deceased patient’s organs without seeking permission from his relatives; the presence of negligence
as the failure to exert reasonable efforts in searching for the deceased patient’s relatives; and the damage
pertaining to Zenaida’s discovery of her son’s lifeless body "mangled, robbed of its vital organs and x x x sewn up
like x x x a rag doll."  The court also found no pre-existing contractual relation.
72

The trial court is mistaken. Clearly, there is no causal connection between the alleged negligent act of Dr. Alano and
the damage suffered by Zenaida.

First, Zenaida alleged before the trial court that the damage she suffered was the loss of her son’s life. The trial
court, however, conceded that "the extent of Logmao’s injuries were such that the possibility of survival would have
been highly improbable, if not impossible x x x."  It then concluded that there was still damage suffered by Zenaida,
73

in that her son’s lifeless body was "mangled, robbed of its vital organs and x x x sewn up like some rag doll, without
her knowledge, much more her consent."  The Court of Appeals agreed, stating that "the pain and anguish of a
74

mother in seeing the lifeless body of her son like a slaughtered pig in the funeral parlor x x x is more than one can
take." 75

The "pain and anguish"  of Zenaida indeed may have resulted from the loss of her son. However, Dr. Alano or any
76

of his subordinates did not cause the loss of her son’s life. Even if Dr. Alano did not order the organ retrieval,
Zenaida would still find the body of her son lifeless.

It was, therefore, erroneous to impute the emotional suffering of Zenaida as being caused by Dr. Alano’s failure to
exert reasonable efforts to locate her before ordering the organ retrieval.

Second, the failure to locate Zenaida to secure her permission for the organ retrieval was not caused by Dr. Alano.

The records show that the difficulty in locating Zenaida stemmed from the erroneous information found on the
deceased’s patient data sheet, which indicated his name as Angelito Lugmoso, not Arnelito Logmao. It was the staff
of East Avenue Medical Center, not Dr. Alano and the staff of the National Kidney Institute, which provided the
erroneous information on the patient data sheet.

It can be conceded that there was a duty on the part of the National Kidney Institute to verify the information on the
patient data sheet with the patient himself. However, when Arnelito was transferred from East Avenue Medical
Center to the National Kidney Institute, he was already "intubated and ambu-bagging support was provided x x
x." This means that he would not have been coherent enough or even conscious enough to be able to answer any
77

query by the medical staff. The staff of the National Kidney Institute would have had no choice but to rely on the
information provided to them by East Avenue Medical Center considering the urgency of Arnelito’s situation.

The erroneous information on the patient data sheet was eventually the cause of the failure of the Transplant
Coordinator to locate Zenaida. The radio and television announcements, together with the newspaper
advertisements, were rendered futile by the fact that they were simply looking for the wrong person. Even if the
Transplant Coordinator spent more than 24 hours looking for the deceased patient’s relatives, it was doubtful
whether they could have been found, considering that they were looking for the relatives of Angelito Lugmoso, not
Arnelito Logmao.

366
Respondent should not
be awarded damages

Moral damages were awarded by the lower courts on the basis that it was Dr. Alano’s alleged negligence which
caused the emotional suffering of Zenaida. This is erroneous.

The pertinent provisions of the Civil Code on moral damages are:

Article 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar injury.

Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of
the defendant's wrongful act or omission.

Article 2219. Moral damages may be recovered in the following and analogous cases:

(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;

(3) Seduction, abduction, rape, or other lascivious acts;

(4) Adultery or concubinage;

(5) Illegal or arbitrary detention or arrest;

(6) Illegal search;

(7) Libel, slander or any other form of defamation;

(8) Malicious prosecution;

(9) Acts mentioned in Article 309;

(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may also recover
moral damages.

The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in No. 9 of this
article, in the order named.

It has already been established that Zenaida's emotional suffering was not caused by the acts of Dr. Alano. He also
did not commit any act in violation of Articles 19, 20 or 21 of the Civil Code. This is also not a case wherein the
alleged quasi-delict resulted in physical injuries. The lower courts are also in agreement that Dr. Alano did not cause
the death of Zenaida's son. Neither is this case analogous to any of the situations mentioned in the provision.
Contrary to the ruling of the trial court, this situation is also not covered by Article 309 of the Civil Code, which
states:

Article 309. Any person who shows disrespect to the dead, or wrongfully interferes with a funeral shall be liable to
the family of the deceased for damages, material and moral. 1âwphi1

The organ retrieval performed by the National Kidney Institute cannot be termed as "disrespect to the dead." Organ
donation is allowed by law. A sterile medical operation surely is not tantamount to grave robbery or mutilation.

Since Zenaida has not proven her claim to moral damages, she is also not entitled to exemplary damages.

Article 2234 of the Civil Code provides:

Article 2234. While the amount of the exemplary damages need not be proved, the plaintiff must show that he is
entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not
exemplary damages should be awarded. x x x.

367
Since the award of exemplary damages is not justified, there is no reason to award attorney's fees, in accordance
with Article 2208 of the Civil Code, which allows the award of attorney's fees only "when exemplary damages are
awarded."

ACCORDINGLY, I CONCUR and vote to GRANT the petition.

Republic of the Philippines

SUPREME COURT
Baguio City

THIRD DIVISION

G.R. No. 208007               April 2, 2014

PEOPLE OF THE PHILIPPINES, Plaintiff-appellee, 

vs.
RODRIGO GUTIEREZ Y ROBLES ALIAS "ROD AND JOHN LENNON", Accused-appellant.

DECISION

LEONEN, J.:

For a measly five- or ten-peso tip that a 10-year-old child would need for lunch money, a known acquaintance of
their family would destroy a child's dignity by having illicit carnal knowledge of her. This case involves an act that is
so dastardly that it is punished by Article 266-A of the Revised Penal Code as statutory rape which carries a
sentence of reclusion perpetua.

We are asked to review the Court of Appeals decision  in CA-G.R. CR-HC No. 02955. This decision affirmed the
1

conviction of the accused-appellant for statutory rape under Article 266-A of the Revised Penal Code and imposed
the penalty of reclusion perpetua.

The facts of the case are as follows:

On November 30, 2005, an information  was filed against the accused-appellant before the Regional Trial Court of
2

Baguio City, Branch 59. The information reads:

That on or about November 29, 2005, in the City of Baguio, Philippines, and within the jurisdiction of this Honorable
Court, the above-named accused, did then and there willfully, unlawfully and feloniously have carnal knowledge of
the offended party, (AAA), who is under twelve (12) years old.

Contrary to law.

Upon arraignment, Rodrigo Gutierez pleaded "not guilty." Trial on the merits ensued.

The prosecution presented the victim, AAA, who was then 10 years old and a Grade 2 student at Camp 7
Elementary School in Baguio City. She testified that on November 29, 2005, she went home from school at around
12 noon to have lunch.  On the way home, she met Rodrigo at his house. He brought her to his room and laid her
3

down on the bed. He then raised her skirt and removed her panties. He pulled down his pants and then inserted his
penis into her vagina. 4

According to AAA, Rodrigo stayed on top of her for a long time, and when he withdrew his penis, white liquid came
out. He then gave her five pesos (₱5.00) before she went back to school. 5

AAA went back to school at about 2:10 p.m. Her adviser, Agustina Chapap, asked her where she came from
because she was tardy. AAA initially did not answer. When asked again why she was tardy, AAA admitted she
came from "Uncle Rod." She also admitted that she went there to ask for money. Chapap then brought AAA to Rona
Ambaken, AAA's previous teacher. Together, they brought AAA to the principal's office. AAA was brought to the
comfort room where Ambaken inspected her panties. The principal was able to confirm that AAA was touched since
AAA's private organ was swelling. Her underwear was also wet. 6

368
Another teacher, Jason Dalisdis, then brought AAA to Baguio General Hospital where her underwear was again
inspected. Dr. Anvic Pascua also examined her. On the way to the hospital, Dalisdis passed by the barangay hall
and the police station to report the incident.
7

AAA also disclosed during trial that the accused-appellant had done the same thing to her about 10 times on
separate occasions. After each act, he would give her ten (₱10.00) or five (₱5.00) pesos.8

The prosecution also presented Dr. Asuncion Ogues as an expert witness. Dr. Ogues was the superior of Dr.
Pascua who examined AAA. Dr. Ogues testified based on the medical certificate issued by the examining physician
that there was blunt force penetrating trauma that could have been caused by sexual abuse. She also stated that
there was another medico-legal certificate issued by Dr. Carag, surgical resident of the Department of Surgery of
Baguio General Hospital, showing findings of some hematoma in AAA's legs. 9

In his defense, Rodrigo denied that AAA went to his house at 12 noon on November 29, 2005 and claimed he was
already at work at 1:30 p.m. He has known AAA for a long time since his family rented the house of AAA's
grandfather from 2001 to 2004.  When the police came and asked him if he knew AAA, he answered in the
10

affirmative. He was then brought to Baguio General Hospital where he was told that AAA identified him as the one
who raped her. 11

Rodrigo admitted that he had a relationship with AAA's sister, and they even lived together as common-law
spouses.  He also admitted that a similar complaint was filed against him by AAA's mother when AAA was eight
12

years old, but they settled the case at the barangay level.
13

On July 4, 2007, the trial court rendered a judgment  finding Rodrigo guilty beyond reasonable doubt of statutory
14

rape and imposing on him the penalty of reclusion perpetua. He was additionally required to indemnify the offended
party ₱50,000.00 moral damages and ₱25,000.00 exemplary damages with costs of suit.

Rodrigo appealed  to the Court of Appeals claiming that AAA's testimony fell short of the requirement of the law on
15

the quantum of evidence required. He argued that she did not cry for help when her family's house was just nearby,
which was cause for reasonable doubt that the trial court failed to appreciate.

On February 28, 2013, the Court of Appeals rendered a decision  affirming the conviction.
16

On March 11, 2013, Rodrigo filed a notice of appeal  with the appellate court, which was given due course in a
17

resolution  dated March 15, 2013.

18

Hence, this appeal was instituted.

In the resolution  of September 9, 2013, this court required the parties to submit their respective supplemental
19

briefs, if they so desired. Both parties, however, manifested that they were dispensing with the filing of a
supplemental brief as their arguments were already substantially and exhaustively discussed in their respective
briefs filed before the appellate court.

The only issue to be resolved by this court is whether the prosecution was able to prove beyond reasonable doubt
that the accused-appellant was guilty of statutory rape punishable under Article 266-A of the Revised Penal Code.

Rape is defined in Article 266-A of the Revised Penal Code, which states:

Art. 266-A. Rape: When and How Committed. ― Rape is committed:

1. By a man who shall have carnal knowledge of a woman under any of the following circumstances:

a. Through force, threat, or intimidation;

b. When the offended party is deprived of reason or otherwise unconscious;

c. By means of fraudulent machination or grave abuse of authority; and

d. When the offended party is under twelve (12) years of age or is demented, even though none of the
circumstances mentioned above be present.

xxxx

Statutory rape is committed when (1) the offended party is under 12 years of age and (2) the accused has carnal
knowledge of her, regardless of whether there was force, threat or intimidation; whether the victim was deprived of

369
reason or consciousness; or whether it was done through fraud or grave abuse of authority. It is enough that the age
of the victim is proven and that there was sexual intercourse.

People v. Teodoro  explained the elements of statutory rape committed under Article 266-A, paragraph (1) (d):
20

Rape under paragraph 3 of this article is termed statutory rape as it departs from the usual modes of committing
rape. What the law punishes in statutory rape is carnal knowledge of a woman below twelve (12) years old. Thus,
force, intimidation and physical evidence of injury are not relevant considerations; the only subject of inquiry is the
age of the woman and whether carnal knowledge took place. The law presumes that the victim does not and cannot
have a will of her own on account of her tender years; the child's consent is immaterial because of her presumed
incapacity to discern good from evil. (Emphasis supplied)

The defense did not dispute the fact that AAA was 10 years old at the time of the incident. Her birth certificate was
presented before the trial court.  What is critical in this case, therefore, is whether there is a showing that Rodrigo
21

had carnal knowledge of AAA.

In the testimony of AAA, she narrated that on November 29, 2005, she met Rodrigo in his house, thus:

Q: Now, when you met the accused, what did he do?

A: He brought me in the room, Ma'am.

Q: The room is located inside his house?

A: Yes, Ma'am.

Q: And, was that the first time you entered the room?

A: (The witness nods.)

Q: After entering the room, what did Uncle Rod tell you?

A: He laid me down, Ma'am.

COURT:

Q: Where?

A: On the bed, Ma'am.

PROS. BERNABE:

Q: Who were the persons inside the room aside from you and Uncle Rod?

A: (Witness shook her head - meaning no persons around.)

Q: After lying down on the bed, what did he do next?

A: He raised up my skirt.

Q: After raising up your skirt, what else did he do?

A: He removed my panty, Ma'am.

Q: Was he able to remove it from your legs your panty? [sic]

A: No, Ma'am.

Q: Until where was he able to remove?

A: (Witness is pointing down to the ankle.)

Q: After pulling down your panty until your ankle, what happened?

370
A: He pulled down his short pants, Ma'am.

Q: After pulling down his short pants, what did Uncle Rod do?

A: He brought out his penis.

Q: After bringing out his penis, what did he do next?

A: He inserted his penis to my vagina, Ma'am.

Q: Will you please show us where is your vagina?

A: (The witness stood and pointed to her private part.)

Q: You also mentioned AAA that Uncle Rod inserted his penis to your vagina, could you point to the "ari" of Uncle
Rod?

A: (The witness pointed to a portion where the private part of the elder brother was standing.)

Q: Was it painful when Uncle Rod inserted his penis inside your vagina?

A: Yes, Ma'am.

Q: Did you cry when Uncle Rod inserted his penis inside your vagina?

A: Yes, Ma'am.

Q: Did he stay long on top of you? At around how many minutes?

A: Very long, Ma'am.

Q: Did he withdraw his penis from your vagina?

A: Yes, Ma'am.

Q: And after he withdrew his penis inside your vagina, what happened?

A: There is some white liquid that came out of his penis, Ma'am. 22

As shown by her testimony, AAA was able to narrate in a clear and categorical manner the ordeal that was done to
her. As a child-victim who has taken significant risks in coming to court, her testimony deserves full weight and
credence. People v. Veloso  stated that:
23

In a litany of cases, this Court has ruled that the testimonies of child-victims of rape are to be given full weight and
credence. Reason and experience dictate that a girl of tender years, who barely understands sex and sexuality, is
unlikely to impute to any man a crime so serious as rape, if what she claims is not true. Her candid narration of how
she was raped bears the earmarks of credibility, especially if no ill will-as in this case-motivates her to testify falsely
against the accused. It is well-settled that when a woman, more so when she is a minor, says she has been raped,
she says in effect all that is required to prove the ravishment. The accused may thus be convicted solely on her
testimony-provided it is credible, natural, convincing and consistent with human nature and the normal course of
things.24

AAA's ordeal was supported by the testimonies of her teachers whose concern for her led to the discovery of the
crime. The medical certificate presented in court, together with the testimonies of the physicians, is consistent with
the finding that she was sexually abused.

Rodrigo asserted that AAA's failure to cry out for help shows reasonable doubt.  He noted that her house was just
1âwphi1

near his house where the incident happened.

This argument is so feeble that it could only have been put up out of desperation.

Rodrigo was referred to by the child-victim as "Uncle Rod." He admitted that AAA's family had known him for a long
time. Rodrigo had the trust and respect that any elder in the family of AAA had. Instead of providing the moral
guidance that his status allowed him, he took advantage of AAA's youthful innocence to satiate his illicit carnal
desires. To cover this up and seemingly justify his actions, he gave his child-victim the measly sum of five pesos.
371
Rodrigo knew that what he did was wrong; AAA would have probably doubted whether such act was normal among
adults.

With his moral ascendancy, it would not be unreasonable to assume that even the child-victim's desire for help
would be muffled by her fear of her "Uncle Rod." To a young 10-year-old, the ordinary world can be daunting. To be
so young and silently aware that one is the victim of such callous depravation by Rodrigo, who she could have
expected to take care of her, can create the kind of lasting fear that diminishes the development of her own person
and her own convictions.

In any case, whether she cried for help is immaterial in a charge of statutory rape since "[t]he law presumes that
such a victim, on account of her tender age, does not and cannot have a will of her own." 25

Beyond reasonable doubt, Rodrigo Gutierez raped AAA, a minor who was only 10 years of age, on November 29,
2005.

Article 266-B of the Revised Penal Code requires that the penalty of reclusion perpetua shall be imposed in cases of
rape stated in the first paragraph of Article 266-A where there are no aggravating or qualifying circumstances
present. The lower courts correctly imposed this penalty.

Their award of damages, however, must be modified in light of recent jurisprudence.

It is settled that the award of civil indemnity is mandatory upon a finding that rape was committed, along with the
award of moral and exemplary damages.  In People v. Degay,  the accused-appellant was found guilty of raping his
26 27

nine-year-old neighbor. This court did not hesitate to increase the award of civil indemnity and moral damages from
₱50,000.00 to ₱75,000.00. In People v. Gambao,  we have also increased the award of civil indemnity, moral
28

damages, and exemplary damages to ₱100,000.00 each.

Due to the utter heinousness of the crime involved in this case, we, therefore, exercise our judicial prerogative and
increase the damages to ₱100,000.00 as civil indemnity, ₱100,000.00 as moral damages, and ₱100,000.00 as
exemplary damages.

There are not enough words to condemn the depravity that one adult can do to a child-victim. The many years that
Rodrigo Gutierez will, by law, serve in prison will, of course, not make up for the wrong and the injury that he has so
selfishly and callously caused and with utter disregard for what truly makes us human: that we care, nurture, and
protect our children because we hope that they can make their world better than ours. All this was lost on Rodrigo
Gutierez. The five pesos that he gave on every occasion that he defiled his child-victim simply underscores the
ignominy of his act.

WHEREFORE, the decision of the Court of Appeals finding the accused-appellant Rodrigo Gutierez y Robles guilty
beyond reasonable doubt of statutory rape is AFFIRMED with MODIFICATION. The accused-appellant is sentenced
to reclusion perpetua and is ordered to pay AAA the amount of ₱100,000.00 as civil indemnity, ₱100,000.00 as
moral damages, and ₱100,000.00 as exemplary damages, with an interest of 6% per annum from the finality of this
decision until its full satisfaction.

SO ORDERED.

372
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 196735               May 5, 2014

PEOPLE OF THE PHILIPPINES, Plaintiff-appellee, 

vs.
DANILO FELICIANO, JR., JULIUS VICTOR MEDALLA, CHRISTOPHER SOLIVA, WARREN L. ZINGAPAN, and
ROBERT MICHAEL BELTRAN ALVIR, Accused-appellants.

DECISION

LEONEN, J.:

It is in the hallowed grounds of a university where students, faculty, and research personnel should feel safest. After
all, this is where ideas that could probably solve the sordid realities in this world are peacefully nurtured and
debated. Universities produce hope. They incubate all our youthful dreams.

Yet, there are elements within this academic milieu that trade misplaced concepts of perverse brotherhood for these
hopes. Fraternity rumbles exist because of past impunity. This has resulted in a senseless death whose justice is
now the subject matter of this case. It is rare that these cases are prosecuted. It is even more extraordinary that
there are credible witnesses who present themselves courageously before an able and experienced trial court
judge.

This culture of impunity must stop. There is no space in this society for hooliganism disguised as fraternity rumbles.
The perpetrators must stand and suffer the legal consequences of their actions. They must do so for there is an
individual who now lies dead, robbed of his dreams and the dreams of his family. Excruciating grief for them will
never be enough.

It is undisputed that on December 8, 1994, at around 12:30 to 1:00 in the afternoon, seven (7) members of the
Sigma Rho fraternity were eating lunch at the Beach House Canteen, near the Main Library of the University of the
Philippines, Diliman, when they were attacked by several masked men carrying baseball bats and lead pipes. Some
of them sustained injuries that required hospitalization. One of them, Dennis Venturina, died from his injuries.

An information  for murder, docketed as Criminal Case No. Q95-6113 3, was filed against several members of the
1

Scintilla Juris fraternity, namely, Danilo Feliciano, Jr., Julius Victor L. Medalla, Warren L. Zingapan, Robert Michael
Beltran Alvir, Christopher L. Soliva, Reynaldo G. Ablanida, Carlo Jolette Fajardo, George Morano, Raymund E.
Narag, Gilbert Merle Magpantay, Benedict Guerrero, and Rodolfo Penalosa, Jr. with the Regional Trial Court of
Quezon City, Branch 219. The information reads:

That on or about the 8th day of December 1994, in Quezon City, Philippines, the above-named accused, wearing
masks and/or other forms of disguise, conspiring, confederating with other persons whose true names, identities
and whereabouts have not as yet been ascertained, and mutually helping one another, with intent to kill, qualified
with treachery, and with evident premeditation, taking advantage of superior strength, armed with baseball bats,
lead pipes, and cutters, did then and there willfully, unlawfully and feloniously attack, assault and employ personal
violence upon the person of DENNIS F. VENTURINA, by then and there hitting him on the head and clubbing him
on different parts of his body thereby inflicting upon him serious and mortal injuries which were the direct and
immediate cause of his death, to the damage and prejudice of the heirs of said DENNIS F. VENTURINA. (Emphasis
supplied)

Separate informations were also filed against them for the attempted murder of Sigma Rho fraternity members
Cesar Mangrobang, Jr.,  Cristobal Gaston, Jr.,  and Leandro Lachica,  and the frustrated murder of Sigma Rho
2 3 4

373
fraternity members Mervin Natalicio  and Amel Fortes.  Only 11 of the accused stood trial since one of the accused,
5 6

Benedict Guerrero, remained at large.

A trial on the merits ensued.

The facts, according to the prosecution, are as follows:

Leandro Lachica, Amel Fortes, Derinis Venturina, Mervin Natalicio, Cristobal Gaston, Jr., Felix Tumaneng,  and 7

Cesar Magrobang, Jr. are all members of the Sigma Rho Fraternity. On December 8, 1994, at around 12:30 to 1 :00
p.m., they were having lunch at Beach House Canteen, located at the back of the Main Library of the University of
the Philippines, Diliman, Quezon City.  Suddenly, Dennis Venturina shouted, "Brads, brods!"
8 9

According to Leandro Lachica, Grand Archon of Sigma Rho Fraternity, he looked around when Venturina shouted,
and he saw about ten (10) men charging toward them.  The men were armed with baseball bats and lead pipes,
10

and their heads were covered with either handkerchiefs or shirts.  Within a few seconds, five (5) of the men started
11

attacking him, hitting him with their lead pipes.  During the attack, he recognized one of the attackers as Robert
12

Michael Beltran Alvir because his mask fell off. 13

Lachica tried to parry the blows of.his attackers, suffering scratches and contusions. 14

He was, however, able to run to the nearby College of Education.  Just before reaching it, he looked back and saw
15

Warren Zingapan and Julius Victor L. Medalla holding lead pipes and standing where the commotion was.  Both of 16

them did not have their masks on.  He was familiar with Alvir, Zingapan, and Medalla because he often saw them in
17

the College of Social Sciences and Philosophy (CSSP) and Zingapan used to be his friend.  The attack lasted about 18

thirty (30) to forty-five (45) seconds. 19

According to Mervin Natalicio, the Vice Grand Archon of Sigma Rho, he looked to his left when Venturina
shouted. He saw about fifteen (15) to twenty (20) men, most of who were wearing masks, running toward them.  He
20 21

was stunned, and he started running.  He stumbled over the protruding roots of a tree.  He got up, but the attackers
22 23

came after him and beat him up with lead pipes and baseball bats until he fell down.  While he was parrying the
24

blows, he recognized two (2) of the attackers as Warren Zingapan and Christopher L. Soliva since they were not
wearing any masks.  After about thirty (30) seconds, they stopped hitting him.
25 26

He was lying on his back and when he looked up, he saw another group of four (4) to five (5) men coming toward
him, led by Benedict Guerrero.  This group also beat him up.  He did not move until another group of masked men
27 28

beat him up for about five (5) to eight (8) seconds. 29

When the attacks ceased, he was found lying on the ground.  Several bystanders brought him to the U.P. Infirmary
30

where he stayed for more than a week for the treatment of his wounds and fractures. 31

According to Cesar Mangrobang, Jr., member of Sigma Rho, he also looked back when Venturina shouted and saw
a group of men with baseball bats and lead pipes. Some of them wore pieces of cloth around their heads.  He ran 32

when they attacked, but two (2) men, whose faces were covered with pieces of cloth, blocked his way and hit him
with lead pipes.  While running and parrying the blows, he recognized them as Gilbert Merle Magpantay and Carlo
33

Jolette Fajardo because their masks fell off.  He successfully evaded his attackers and ran to the Main Library.  He
34 35

then decided that he needed to help his fraternity brothers and turned back toward Beach House.  There, he saw 36

Venturina lying on the ground.  Danilo Feliciano, Jr. was beating Venturina up with a lead pipe while Raymund E.
37

Narag was aiming to hit Venturina.  When they saw him, they went toward his direction.  They were about to hit him
38 39

when somebody shouted that policemen were coming. Feliciano and Narag then ran away. 40

Cesar Mangrobang, Jr. then saw Amel Fortes. Fortes accompanied him to his car so they could bring Venturina to
the U.P. Infirmary.  When they brought the car over, other people, presumably bystanders, were already loading
41

Venturina into another vehicle.  They followed that vehicle to the U.P. Infirmary where they saw Natalicio.  He
42 43

stayed at the infirmary until the following morning. 44

According to Cristobal Gaston, Jr., member of Sigma Rho, he immediately stood up when he heard someone shout,
"Brods!"  He saw a group of men charging toward them carrying lead pipes and baseball bats.  Most of them had
45 46

pieces of cloth covering their faces.  He was about to run when two (2) of the attackers approached him.  One
47 48

struck him with a heavy pipe while the other stabbed him with a bladed instrument.  He was able to parry most of
49

the blows from the lead pipe, but he sustained stab wounds on the chest and on his left forearm. 50

He was able to run away.  When he sensed that no one was chasing him, he looked back to Beach House Canteen
51

and saw Danilo Feliciano, Jr., Warren Zingapan, and George Morano.  He decided to go back to the canteen to help
52

his fraternity brothers.  When he arrived, he did not see any of his fraternity brothers but only saw the ones who
53

attacked them.  He ended up going to their hang-out instead to meet with his other fraternity brothers.  They then
54 55

proceeded to the College of Law where the rest of the fraternity was already discussing the incident. 56

374
According to Amel Fortes, member of Sigma Rho, he also ran when he saw the group of attackers coming toward
them.  When he looked back, he saw Danilo Feliciano, Jr. hitting Venturina.  He was also able to see Warren
57 58

Zingapan and George Morano at the scene. 59

Leandro Lachica, in the meantime, upon reaching the College of Education, boarded a jeepney to the College of
Law to wait for their other fraternity brothers.  One of his fraternity brothers, Peter Corvera, told him that he received
60

information that members of Scintilla Juris were seen in the west wing of the Main Library and were regrouping in
SM North.  Lachica and his group then set off for SM North to confront Scintilla Juris and identify their attackers.
61 62

When they arrived in SM North, pillboxes and stones were thrown at them.  Lachica saw Robert Michael Beltran
63

Alvir and Warren Zingapan and a certain Carlo Taparan.  They had no choice but to get away from the mall and
64

proceed instead to U.P. where the Sigma Rho Fraternity members held a meeting. 65

On the night of December 8, 1994, the officers of Sigma Rho advised the victims to lodge their complaints with the
National Bureau of Investigation.  Their counsel, Atty. Frank Chavez, told the U.P. Police that the victims would be
66

giving their statements before the National Bureau of Investigation, promising to give the U.P. Police copies of their
statements. In the meantime, Venturina was transferred from the U.P. Infirmary to St. Luke's Hospital on December
8, 1994. He died on December 10, 1994.  On December 11, 1994, an autopsy was conducted on the cadaver of
67

Dennis Venturina.  Dr. Rolando Victoria, a medico-legal officer of the National Bureau of Investigation, found that
68

Venturina had "several contusions located at the back of the upper left arm and hematoma on the back of both
hands,"  "two (2) lacerated wounds at the back of the head,  generalized hematoma on the skull,"  "several
69 70 71

fractures on the head,"  and "inter-cranial hemorrhage."  The injuries, according to Dr. Victoria, could have been
72 73

caused by a hard blunt object.  Dr. Victoria concluded that Venturina died of traumatic head injuries.
74 75

On December 12, 1994, Lachica, Natalicio, Mangrobang, Fortes, and Gaston executed their respective
affidavits before the National Bureau of Investigation and underwent medico-legal examinations  with their
76 77

medicolegal officer, Dr. Aurelio Villena. According to Dr. Villena, he found that Mervin Natalicio had "lacerated
wounds on the top of the head, above the left ear, and on the fingers; contused abrasions on both knees; contusion
on the left leg and thigh,"  all of which could have been caused by any hard, blunt object. These injuries required
78

medical attendance for a period of ten (10) days to thirty (30) days from the date of infliction. 79

Dr. Villena found on Amel Fortes "lacerated wounds on the head and on the right leg which could have been caused
by a blunt instrument."  These injuries required hospitalization for a period of ten (10) days to thirty (30) days from
80

date of infliction.  He also found on Cesar Mangrobang, Jr. a "healed abrasion on the left forearm which could
81

possibly be caused by contact with [a] rough hard surface and would require one (1) to nine (9) days of medical
attention."  He found on Leandro Lachica "contusions on the mid auxiliary left side, left forearm and lacerated
82

wound on the infra scapular area, left side."  On Christopher Gaston, Jr. he found "lacerated wounds on the anterior
83

chest, left side, left forearm; swollen knuckles of both hands; contusions on the mid auxiliary left side, left forearm
and lacerated wound on the infra scapular area, left side." 84

On September 18, 1997, after the prosecution presented its evidence-in-chief, the court granted the demurrer to
evidence filed by Rodolfo Penalosa, Jr. on the ground that he was not identified by the prosecution's witnesses and
that he was not mentioned in any of the documentary evidence of the prosecution. 85

Upon the presentation of their evidence, the defense introduced their own statement of the facts, as follows:

According to Romeo Cabrera,  a member of the U.P. Police, he was on foot patrol with another member of the U.P.
86

Police, Oscar Salvador, at the time of the incident. They were near the College of Arts and Sciences (Palma Hall)
when he vaguely heard somebody shouting, "Rumble!" They went to the place where the alleged rumble was
happening and saw injured men being helped by bystanders. They helped an injured person board the service
vehicle of the Beach House Canteen. They asked what his name was, and he replied that he was Mervin Natalicio.
When he asked Natalicio who hit him, the latter was not able to reply but instead told him that his attackers were
wearing masks. Oscar Salvador  corroborated his testimony. 87

Benjamin Lato,  a utility worker of the Beach House Canteen, likewise testified that the identities of the attackers
88

were unrecognizable because of their masks. He, however, admitted that he did not see the attack; he just saw a
man sprawled on the ground at the time of the incident.

Frisco Capilo,  a utility worker of U.P. assigned to the Main Library, was buying a cigarette at a vendor located
89

nearby. From there, he allegedly saw the whole incident. He testified that ten (10) men, wearing either masks of red
and black bonnets or with shirts covering their faces, came from a red car parked nearby. He also saw three (3) men
being hit with lead pipes by the masked men. Two (2) of the men fell after being hit. One of the victims was lifting the
other to help him, but the attackers overtook him. Afterwards, the attackers ran away. He then saw students helping
those who were injured. He likewise helped in carrying one of the injured victims, which he later found out to be
Amel Fortes.

375
A U.P. student and member of the Sigma Alpha Nu Sorority, Eda Panganiban,  testified that she and her friends
90

were in line to order lunch at the Beach House Canteen when a commotion happened. She saw around fifteen (15)
to eighteen (18) masked men attack a group of Sigma Rhoans. She did not see any mask fall off. Her sorority sister
and another U.P. student, Luz Perez,  corroborated her story that the masked men were unrecognizable because of
91

their masks. Perez, however, admitted that a member of Scintilla Juris approached her to make a statement.

Another sorority sister, Bathalani Tiamzon,  testified on substantially the same matters as Panganiban and Perez.
92

She also stated that she saw a person lying on the ground who was being beaten up by about three (3) to five (5)
masked men. She also stated that some of the men were wearing black masks while some were wearing white t-
shirts as masks. She did not see any mask fall off the faces of the attackers.

According to Feliciana Feliciano,  accused-appellant Danilo Feliciano, Jr.'s motlier, her son was in Pampanga to
93

visit his sick grandfather at the time of the incident. She alleged that her son went to Pampanga before lunch that
day and visited the school where she teaches to get their house key from her.

According to Robert Michael Beltran Alvir,  he had not been feeling well since December 5, 1994. He said that he
94

could not have possibly been in U.P. on December 8, 1994 since he was absent even from work. He also testified
that he wore glasses and, thus, could not have possibly been the person identified by Leandro Lachica. He also
stated that he was not enrolled in U.P. at the time since he was working to support himself.

According to Julius Victor Medalla,  he and another classmate, Michael Vibas, were working on a school project on
95

December 8, 1994. He also claimed that he could not have participated in the rumble as he had an injury affecting
his balance. The injury was caused by an incident in August 1994 when he was struck in the head by an unknown
assailant. His testimony was corroborated by Jose Victor Santos  who stated that after lunch that day, Medalla
96

played darts with him and, afterwards, they went to Jollibee.

Christopher Soliva,  on the other hand, testified that he was eating lunch with his girlfriend and another friend in
97

Jollibee, Philcoa, on December 8, 1994. They went back to U.P. before 1:00 p.m. and went straight to their fraternity
hang-out where he was told that there had been a rumble at the Main Library. He also met several Sigma Rhoans
acting suspiciously as they passed by the hang-out. They were also told by their head, Carlo Taparan, not to react
to the Sigma Rhoans and just go home. Anna Cabahug,  his girlfriend, corroborated his story.
98

Warren Zingapan  also testified that he was not in U.P. at the time of the incident. He claimed to have gone to SM
99

North to buy a gift for a friend's wedding but ran into a fraternity brother. He also alleged that some Sigma Rhoans
attacked them in SM North that day.

On February 28, 2002, the trial court rendered its decision  with the finding that Robert Michael Alvir, Danilo
100

Feliciano, Jr., Christopher Soliva, Julius Victor Medalla, and Warren Zingapan were guilty beyond reasonable doubt
of murder and attempted murder and were sentenced to, among other penalties, the penalty of reclusion
perpetua.  The trial court, however, acquitted Reynaldo Ablanida, Carlo Jolette Fajardo, Gilbert Magpantay, George
101

Morano, and Raymund Narag.  The case against Benedict Guerrero was ordered archived by the court until his
102

apprehension.  The trial court, m evaluating the voluminous evidence at hand, concluded that:
103

After a judicious evaluation of the matter, the Court is of the considered view that of the ten accused, some were
sufficiently identified and some were not. The Court believes that out of the amorphous images during the
pandemonium, the beleaguered victims were able to espy and identify some of the attackers etching an indelible
impression in their memory. In this regard, the prosecution eyewitnesses were emphatic that they saw the attackers
rush towards them wielding deadly weapons like baseball bats, lead pipes, pieces of wood and bladed ones, and
pounce on their hapless victims, run after them, and being present with one another at the scene of the crime during
the assault. Although each victim had a very strong motive to place his fraternity rivals permanently behind bars, not
one .of them testified against all of them. If the prosecution eyewitnesses, who were all Sigma Rhoans, were simply
bent on convicting Scintilla Juris members for that matter, they could have easily tagged each and every single
accused as a participant in the atrocious and barbaric assault to make sure that no one else would escape
conviction. Instead, each eyewitness named only one or two and some were candid enough to say that they did not
see who delivered the blows against them. 104

Because one of the penalties meted out was reclusion perpetua, the case was brought to this court on automatic
appeal. However, due to the amendment of the Rules on Appeal,  the case was remanded to the Court of
105

Appeals.  In the Court of Appeals, the case had to be re-raffled several Times  before it was eventually assigned to
106 107

Presiding Justice Andres B. Reyes, Jr. for the writing of the decision.

On December 26, 2010, the Court of Appeals, in a Special First Division of Five, affirmed  the decision of the
108

Regional Trial Court, with three (3) members concurring  an one (1) dissenting.
109 110

The decision of the Court of Appeals was then brought to this court for review.

376
The issue before this court is whether the prosecution was able to prove beyond reasonable doubt that accused-
appellants attacked private complainants and caused the death of Dennis Venturina.

On the basis, however, of the arguments presented to this court by both parties, the issue may be further refined,
thus:

1. Whether accused-appellants' constitutional rights were violated when the information against them
contained the aggravating circumstance of the use of masks despite the prosecution presenting witnesses to
prove that the masks fell off; and

2. Whether the Regional Trial Court and the Court of Appeals correctly ruled, on the basis of the evidence,
that accused-appellants were sufficiently identified.

An information is sufficient
when the accused is fully
apprised of the charge against
him to enable him to prepare
his defense

It is the argument of appellants that the information filed against them violates their constitutional right to be
informed of the nature and cause of the accusation against them. They argue that the prosecution should not have
included the phrase "wearing masks and/or other forms of disguise" in the information since they were presenting
testimonial evidence that not all the accused were wearing masks or that their masks fell off.

It is enshrined in our Bill of Rights that "[n]o person shall be held to answer for a criminal offense without due
process of law."  This includes the right of the accused to be presumed innocent until proven guilty and "to be
111

informed of the nature and accusation against him." 112

Upon a finding of probable cause, an information is filed by the prosecutor against the accused, in compliance with
the due process of the law. Rule 110, Section 1, paragraph 1 of the Rules of Criminal Procedure provides that:

A complaint or information is sufficient if it states the name of the accused; the designation of the offense given by
the statute; the acts or omissions complained of as constituting the offense; the name of the offended pary; the
approximate date of the commission of the offense; and the place where the offense was committed.

In People v. Wilson Lab-ea,  this court has stated that:

113

The test of sufficiency of Information is whether it enables a person of common understanding to know the charge
against him, and the court to render judgment properly. x x x The purpose is to allow the accused to fully prepare for
his defense, precluding surprises during the trial.114

Contrary to the arguments of the appellants, the inclusion of the phrase "wearing masks and/or other forms of
disguise" in the information does not violate their constitutional rights.

It should be remembered that every aggravating circumstance being alleged must be stated in the information.
Failure to state an aggravating circumstance, even if duly proven at trial, will not be appreciated as such.  It was,
115

therefore, incumbent on the prosecution to state the aggravating circumstance of "wearing masks and/or other
forms of disguise" in the information in order for all the evidence, introduced to that effect, to be admissible by the
trial court.

In criminal cases, disguise is an aggravating circumstance because, like nighttime, it allows the accused to remain
anonymous and unidentifiable as he carries out his crimes.

The introduction of the prosecution of testimonial evidence that tends to prove that the accused were masked but
the masks fell off does not prevent them from including disguise as an aggravating circumstance.  What is
116

important in alleging disguise as an aggravating circumstance is that there was a concealment of identity by the
accused. The inclusion of disguise in the information was, therefore, enough to sufficiently apprise the accused that
in the commission of the offense they were being charged with, they tried to conceal their identity.

The introduction of evidence which shows that some of the accused were not wearing masks is also not violative of
their right to be informed of their offenses.

377
The information charges conspiracy among the accused. Conspiracy presupposes that "the act of one is the act of
all."  This would mean all the accused had been one in their plan to conceal their identity even if there was
117

evidence later on to prove that some of them might not have done so.

In any case, the accused were being charged with the crime of murder, frustrated murder, and attempted murder. All
that is needed for the information to be sufficient is that the elements of the crime have been alleged and that there
are sufficient details as to the time, place, and persons involved in the offense.

II

Findings of the trial court,

when affirmed by the
appellate court, are entitled
to great weight and credence

As a general rule, the findings of fact by the trial court, when affirmed by the appellate court, are given great weight
and credence on review. The rationale for this was explained in People v. Daniel Quijada,  as follows:
118

Settled is the rule that the factual findings of the trial court, especially on the credibility of witnesses, are accorded
great weight and respect. For, the trial court has the advantage of observing the witnesses through the different
indicators of truthfulness or falsehood, such as the angry flush of an insisted assertion or the sudden pallor of a
discovered lie or the tremulous mutter of a reluctant answer or the forthright tone of a ready reply;

or the furtive glance, the blush of conscious shame, the hesitation, the sincere or the flippant or sneering tone, the
heat, the calmness, the yawn, the sigh, the candor or lack of it, the scant or full realization of the solemnity of an
oath, the carriage and mien. 119

There are, of course, recognized exceptions to this rule. In People v. Leticia Labarias,  this court stated that:
120

It is the policy of this Court to sustain the factual findings of the trial court on the reasonable assumption that it is in a
better position to assess the evidence before it, particularly the testimonies of the witnesses, who reveal much of
themselves by their deportment on the stand. The exception that makes the rule is where such findings arc clearly
arbitrary or erroneous as when they are tainted with bias or hostility or are so lacking in basis as to suggest that they
were reached without the careful study and perceptiveness that should characterize a judicial decision. (Emphasis
121

supplied)

In criminal cases, the exception gains even more importance since the presumption is always in favor of innocence.
It is only upon proof of guilt beyond reasonable doubt that a conviction is sustained.

In this case, a total of eleven (11) witnesses for the prosecution and forty-two (42) witnesses for the defense were
put on the stand from 1995 to 2001. In an eighty-three (83)-page decision, the trial court acquitted six (6) and
convicted five (5) of the accused. On the basis of these numbers alone, it cannot be said that the trial court acted
arbitrarily or that its decision was "so lacking in basis" that it was arrived at without a judicious and exhaustive study
of all the evidence presented.

Inasmuch, however, as the trial court's findings hold great persuasive value, there is also nothing that precludes this
court from coming to its own conclusions based on an independent review of the facts and the evidence on record.

The accused were sufficiently

identified by the witnesses for
the prosecution

The trial court, in weighing all the evidence on hand, found the testimonies of the witnesses for the prosecution to be
credible. In its decision, the trial court stated that:

x x x. Although each victim had a very strong motive to place his fraternity rivals permanently behind bars, not one
testified against all of them. If the prosecution eyewitnesses, who were all Sigma Rhoans, were simply bent on
convicting Scintilla Juris members for that matter, they could have easily tagged each and every accused as a
participant in the atrocious and barbaric assault to make sure no one would escape conviction. Instead, each
eyewitness named only one or two and some were candid enough to say that they did not see who delivered the
blows against them.

Thus, the prosecution witnesses, Ernest Paulo Tan, Dennis Gaio and Darwin Asuncion, testified to have seen it all
but they could not, and did not, disclose any name. Lachica, on the other hand, said that he did not have the
opportunity to see and identify the person who hit him in the back and inflicted a two-inch cut. His forearm was also
hit by a lead pipe but he did not see who did it. Natalicio, one of the other three who were hospitalized, was severely

378
beaten by three waves of attackers totalling more than 15 but he could only name 3 of them. He added, however,
that he would be able to recognize those he saw if he would see them again. Of them, Mangrobang pointed to at
least 5 but he stressed that he did not see Zingapan, Soliva, Guerrero, Del Rosario, Daraoay, Denoista, and
Penalosa during the onslaught. Gaston could have named any of the accused as the one who repeatedly hit him
with a heavy pipe and stabbed him but he frankly said their faces were covered. Like Natalicio, Fortes was
repeatedly beaten by several groups but did not name any of the accused as one of those who attacked him. The
persons he identified were those leading the pack with one of them as the assailant of Venturina, and the two others
who he saw standing while he was running away. He added that he saw some of the accused during the attack but
did not know then their names.  (Emphasis supplied)
122

We agree.

The trial court correctly held that "considering the swiftness of the incident,"  there would be slight inconsistencies
123

in their statements. In People v. Adriano Cabrillas,  it was previously observed that:
124

It is perfectly natural for different witnesses testifying on the occurrence of a crime to give varying details as there
may be some details which one witness may notice while the other may not observe or remember. In fact,
jurisprudence even warns against a perfect dovetailing of narration by different witnesses as it could mean that their
testimonies were prefabricated and rehearsed.  (Emphasis supplied)
125

According to their testimonies, Lachica was able to identify Alvir, Zingapan, and Medalla; 126

Natalicio was able to identify Medalla, Zingapan, and Soliva;  and Fortes was able to identify Feliciano, Medalla,
127

and Zingapan.  Their positive identification was due to the fact that they either wore no masks or that their masks
128

fell off.

It would be in line with human experience that a victim or an eyewitness of a crime would endeavor to find ways to
identify the assailant so that in the event that he or she survives, the criminal could be apprehended. It has also
been previously held that:

It is the most natural reaction for victims of criminal violence to strive to see the looks and faces of their assailants
and observe the manner in which the crime was committed. Most often the face of the assailant and body
movements thereof, creates a lasting impression which cannot be easily erased from their memory. 129

In the commotion, it was more than likely that the masked assailants could have lost their masks. It had been
testified by the victims that some of the assailants were wearing masks of either a piece of cloth or a handkerchief
and that Alvir,  Zingapan,  Soliva,  and Feliciano  had masks on at first but their masks fell off and hung around
130 131 132 133

their necks.

Equally telling was the testimony of defense witness Frisco Capilo during cross-examination who observed that
some of the attackers were wearing masks and some were not, thus:

Q Mr. Capilo, do you know this Scintilla Juris Fraternity?

A No, sir.

Q During the incident of December 8, 1994, there were a lot of people eating in the Beach House Canteen, and then
running towards different directions, is it not?

A Yes, sir.

Q And some people were wearing masks and some were not?

A Yes, sir. 134

While the attack was swift and sudden, the victims would have had the presence of mind to take a look at their
assailants if they were identifiable. Their positive identification, in the absence of evidence to the contrary, must be
upheld to be credible.

It has been argued that the trial court did not give Mangrobang's testimony credence while Gaston's testimony was
found to be "hazy." This argument is unmeritorious.

It should be noted that it was the trial court itself that stated that the acquittal of the Scintilla Juris members identified
by Mangrobang "should not be. misinterpreted to mean that the tt:'.stimony of Mangrobang was an absolute
fabrication."  The court went on to state that they "were exonerated merely because they were accorded the benefit
135

of the doubt as their identification by Mangrobang, under tumultuous and chaotic circumstances were [sic] not
379
corroborated and their alibis, not refuted."  There was, therefore, no basis to say that Mangrobang was not credible;
136

it was only that the evidence presented was not strong enough to overcome the presumption of innocence.

Gaston's testimony, on the other hand, was considered "hazy"  by the trial court only with regard to his identification
137

of Zingapan's companion. Gaston testified that he saw Zingapan with Morano, with Zingapan moving and Morano
staying in place. Fortes, however, testified that both Zingapan and Morano were running after him. Lachica also
testified that it was Medalla, not Morano, who was with Zingapan. Because of this confusion, the trial court found
that there was doubt as to who was really beside Zingapan. The uncertainty resulted into an acquittal for Morano.
Despite this, the court still did not" impute doubt in their testimonies that Zingapan was present at the scene.

Be that as it may, the acquittals made by the trial court further prove that its decision was brought about only upon a
thorough examination of the evidence presented: It accepted that there were inconsistencies in the testimonies of
the victims but that these were minor and did not affect their credibility. It ruled that "[s]uch inconsistencies, and
even probabilities, are not unusual 'for there is no person with perfect faculties or senses."'
138

Evidence as part of the res

gestae may be admissible but
have little persuasive value in
this case

According to the testimony of U.P. Police Officer Salvador,  when he arrived at the scene, he interviewed the
139

bystanders who all told him that they could not recognize the attackers since they were all masked. This, it is
argued, could be evidence that could be given as part of the res gestae.

As a general rule, "[a] witness can testify only to the facts he knows of his personal knowledge; that is, which are
derived from his own perception, x x x."  All other kinds of testimony are hearsay and are inadmissible as evidence.
140

The Rules of Court, however, provide several exceptions to the general rule, and one of which is when the evidence
is part of res gestae, thus:

Section 42. Part of res gestae. - Statements made by a person while a starting occurrence is taking place or
immediately prior or subsequent thereto with respect to the circumstances thereof, may be given in evidence as part
of res gestae. So, also, statements accompanying an equivocal act material to the issue, and giving it a legal
significance, may be received as part of the res gestae. 141

In People v. Rodrigo Salafranca,  this court has previously discussed the admissibility of testimony taken as part of
142

res gestae, stating that:

A declaration or an utterance is deemed as part of the res gestae and thus admissible in evidence as an exception
to the hearsay rule when the following requisites concur, to wit: (a) the principal act, the res gestae, is a startling
occurrence; (b) the statements are made before the declarant had time to contrive or devise; and (c) the statements
must concern the occurrence in question and its immediately attending circumstances.

xxxx

The term res gestae has been defined as "those circumstances which are the undersigned incidents of a particular
litigated act and which are admissible when illustrative of such act." In a general way, res gestae refers to the
circumstances, facts, and declarations that grow out of the main fact and serve to illustrate its character and are so
spontaneous and contemporaneous with the main fact as to exclude the idea of deliberation and fabrication. The
rule on res gestae encompasses the exclamations and statements made by either the participants, victims, or
spectators to a crime immediately before, during, or immediately after the commission of the crime when the
circumstances are such that the statements were made as a spontaneous reaction or utterance inspired by the
excitement of the occasion and there was no opportunity for the declarant to deliberate and to fabricate a false
statement. The test of admissibility of evidence as a part of the res gestae is, therefore, whether the act, declaration,
or exclamation is so intimately interwoven or connected with the principal fact or event that it characterizes as to be
regarded as a part of the transaction itself, and also whether it clearly negatives any premeditation or purpose to
manufacture testimony. 143

There is no doubt that a sudden attack on a group peacefully eating lunch on a school campus is a startling
occurrence. Considering that the statements of the bystanders were made immediately after the startling
occurrence, they are, in fact, admissible as evidence given in res gestae.

In People v. Albarido,  however, this court has stated that "in accord to ordinary human experience:"
144

x x x persons who witness an event perceive the same from their respective points of reference. Therefore, almost
always, they have different accounts of how it happened. Certainly, we cannot expect the testimony of witnesses to

380
a crime to be consistent in all aspects because different persons have different impressions and recollections of the
same incident. x x x145

(Emphasis supplied)

The statements made by the bystanders, although admissible, have little persuasive value since the bystanders
could have seen the events transpiring at different vantage points and at different points in time. Even Frisco Capilo,
one of the bystanders at the time of the attack, testified that the attackers had their masks on at first, but later on,
some remained masked and some were unmasked.

When the bystanders' testimonies are weighed against those of the victims who witnessed the entirety of the
incident from beginning to end at close range, the former become merely corroborative of the fact that an attack
occurred. Their account of the incident, therefore, must be given considerably less weight than that of the victims.

The belated identification by

the victims do not detract from
their positive identification of
the appellants

It is argued that the fact that the victims stayed silent about the incident to the U.P. Police or the Quezon City Police
but instead executed affidavits with the National Bureau of Investigation four (4) days after the incident gives doubt
as to the credibility of their testimonies.

U.P. Police Officer Romeo Cabrera  testified that on their way to the U.P. Infirmary, he interviewed the victims who
146

all told him they could not recognize the attackers because they were all wearing masks. Meanwhile, Dr.
Mislang testified to the effect that when she asked Natalicio who attacked them, Natalicio answered that he did not
147

know because they were masked.

It must be remembered that the parties involved in this case belong to rival fraternities. While this court does not
condone their archaic and oftentimes barbaric traditions, it is conceded that there are certain practices that are
unique to fraternal organizations.

It is quite possible that at this point in time, they knew the identities of their attackers but chose not to disclose it
without first conferring with their other fraternity brothers. This probability is bolstered by the actions of Sigma Rho
after the incident, which showed that they confronted the members of Scintilla Juris in SM North. Because of the
tenuous relationship of rival fraternities, it would not have been prudent for Sigma Rho to retaliate against the wrong
fraternity.

Their act of not disclosing the correct information to the U.P. Police or to Dr. Mislang does not make the police
officer or the doctor's testimonies more credible than that of the victims. It should not be forgotten that the victims
actually witnessed the entire incident, while Officer Salvador, Officer Cabrera, and Dr. Mislang were merely relaying
secondhand information.

The fact that they went to the National Bureau of Investigation four (4) days after the incident also does not affect
their credibility since most of them had been hospitalized from their injuries and needed to recover first.

Since a fraternity moves as one unit, it would be understandable that they decided to wait until all of them were well
enough to go to the National Bureau of Investigation headquarters in order to give their statements.

Seniority is also often the norm in fraternities. It was upon the advice of their senior "brads" and their legal counsel
that they executed their sworn statements before the National Bureau of Investigation four (4) days after the
incident.

The decision to report the incident to the National Bureau of Investigation instead of to the U.P. Police was the call
of their legal counsel who might have deemed the National Bureau of Investigation more equipped to handle the
investigation. This does not, however, affect the credibility of the witnesses since they were merely following the
legal advice of their counsel.

Indeed, there is reason to believe that the National Bureau of Investigation is better equipped than the U.P. Police to
handle the investigation of the case. As stated in the U.P. College of Economics website:

The UP Diliman Police (UPDP) is tasked with maintaining campus security. Their station is located in front of the
College of Architecture.

The primary missions of the UPDP are to maintain peace and order, secure and protect lives and property, enforce
basic laws, applicable Quezon City Ordinances, and University Rules and Regulations including policies and
381
standards; and to perform such other functions relative to the general safety and security of the students,
employees, and residents in the U.P. Diliman Campus. x x x.  (Emphasis supplied)
148

It can be seen that the U.P. Police is employed by U.P. primarily for campus security. They are by no means an
actual police force that is equipped to handle a full-blown murder investigation. Fraternity-related violence in U.P.
has also increasingly become more frequent, which might possibly have desensitized the U.P. Police in such a way
that would prevent their objectivity in the conduct of their investigations. The victims' reliance on the National Bureau
of Investigation, therefore, is understandable.

III

Alibi cannot prevail over the

positive identification of the
victim

It is settled that the defense of alibi cannot prevail over the positive identification of the victim.  In People v.
149

Benjamin Peteluna,  this court stated that:

150

It is a time-honored principle that the positive identification of the appellant by a witness destroys the defense of alibi
and denial. Thus:

x x x. It is well-entrenched that alibi and denial are inherently weak and have always been viewed with disfavor by
the courts due to the facility with which they can be concocted. They warrant the least credibility or none at all and
cannot prevail over the positive identification of the appellant by the prosecution witnesses. For alibi to prosper, it is
not enough to prove that appellant was somewhere else when the crime was committed; he must also demonstrate
that it was physically impossible for him to have been at the scene of the crime at the time of its commission. Unless
substantiated by clear and convincing proof, such defense is negative, self-serving, and undeserving of any weight
in law. Denial, like alibi, as an exonerating justification[,] is inherently weak and if uncorroborated regresses to
blatant impotence. Like alibi, it also constitutes self-serving negative evidence which cannot be accorded greater
evidentiary weight than the declaration of credible witnesses who testify on affirmative matters. 151

In this case, the victims were able to positively identify their attackers while the accused-appellants merely offered
alibis and denials as their defense. The credibility of the victims was upheld by both the trial court and the appellate
court while giving little credence to the accused-appellants' alibis. There is, thus, no reason to disturb their findings.

Accused-appellants were
correctly charged with
murder, and there was
treachery in the commission
of the crime

According to the provisions of Article 248 of the Revised Penal Code, the accused-appellants were correctly
charged with murder. Article 248 states:

ART. 248. Murder.-Any person who, not falling within the provisions of Article 246, shall kill another, shall be guilty of
murder and shall be punished by reclusion perpetua, to death if committed with any of the following attendant
circumstances:

1. With treachery, taking advantage of superior strength, with the aid of armed men, or employing means to weaken
the defense, or of means or persons to insure or afford impunity;

xxxx

It is undisputed that on December 8, 1994, a group of men armed with lead pipes and baseball bats attacked
Dennis Venturina and his companions, which resulted in Venturina's death.

As correctly found by the trial court and the appellate court, the offense committed against Dennis Venturina was
committed by a group that took advantage of its superior strength and with the aid of armed men. The appellate
court, however, incorrectly ruled out the presence of treachery in the commission of the offense.

It has been stated previously by this court that:

[T]reachery is present when the offender commits any of the crimes against persons, employing means, methods, or
forms in the execution, which tend directly and specially to insure its execution, without risk to the offender arising
from the defense which the offended party might make. 152

382
Similarly, in People v. Leozar Dela Cruz,  this court stated that:
153

There is treachery when the offender commits any of the crimes against persons, employing means, methods, or
forms in the execution, which tend directly and specially to insure its execution, without risk to the offender arising
from the defense which the offended party might make. The essence of treachery is that the attack comes without a
warning and in a swift, deliberate, and unexpected manner, affording the hapless, unarmed, and unsuspecting
victim no chance to resist or escape. For treachery to be considered, two elements must concur: (1) the employment
of means of execution that gives the persons attacked no opportunity to defend themselves or retaliate; and (2) the
means of execution were deliberately or consciously adopted.  (Emphasis supplied)
154

The appellate court, in affirming the conviction of the accused-appellants, ruled that contrary to the findings of the
trial court, there was no treachery involved. In particular, they ruled that although the attack was sudden and
unexpected, "[i]t was done in broad daylight with a lot of people who could see them"  and that "there was a
155

possibility for the victims to have fought back or that the people in the canteen could have helped the victims." 156

This reasoning is clearly erroneous. The victims in this case were eating lunch on campus. They were not at a place
where they would be reasonably expected to be on guard for any sudden attack by rival fraternity men.

The victims, who were unarmed, were also attacked with lead pipes and baseball bats. The only way they could
parry the blows was with their arms. In a situation where they were unnamed and outnumbered, it would be
impossible for them to fight back against the attackers. The attack also happened in less than a minute, which would
preclude any possibility of the bystanders being able to help them until after the incident.

The swiftness and the suddenness of the attack gave no opportunity for the victims to retaliate or even to defend
themselves. Treachery, therefore, was present in this case.

The presence of conspiracy

makes all of the accused-
appellants liable for murder
and attempted murder

In the decision of the trial court, all of the accused-appellants were found guilty of the murder of Dennis Venturina
and the attempted murder of Mervin Natalicio, Cesar Mangrobang, Jr. Leandro Lachica, Arnel Fortes, and Cristobal
Gaston, Jr. The appellate court, however, modified their liabilities and found that the accused-appellants were guilty
of attempted murder only against Natalicio and Fortes, and not against Mangrobang, Lachica, and Gaston.

It is the appellate court's reasoning that because Lachica and Mangrobang "were no longer chased by the
attackers,"  it concluded that accused-appellants "voluntary desisted from pursuing them and from inflicting harm to
157

them, which shows that they did not have the intent to do more than to make them suffer pain by slightly injuring
them."  It also pointed out that the wound inflicted on Gaston "was too shallow to have been done with an intent to
158

kill."
159

Thus, it concluded that the accused-appellants would have been guilty only of slight physical injuries.

This is erroneous.

It should be remembered that the trial court found that there was conspiracy among the accused-appellants  and 160

the appellate court sustainedthis finding.161

Conspiracy, once proven, has the effect of attaching liability to all of the accused, regardless of their degree of
participation, thus: Once an express or implied conspiracy is proved, all of the conspirators are liable as co-
principals regardless of the extent and character of their respective active participation in the commission of the
crime or crimes perpetrated in furtherance of the conspiracy because in contemplation of law the act of one is the
act of all. The foregoing rule is anchored on the sound principle that "when two or more persons unite to accomplish
a criminal object, whether through the physical volition of one, or all, proceeding severally or collectively, each
individual whose evil will actively contributes to the wrong-doing is in law responsible for the whole, the same as
though performed by himself alone." Although it is axiomatic that no one is liable for acts other than his own, "when
two or more persons agree or conspire to commit a crime, each is responsible for all the acts of the others, done in
furtherance of the agreement or conspiracy." The imposition of collective liability upon the conspirators is clearly
explained in one case where this Court held that

... it is impossible to graduate the separate liability of each (conspirator) without taking into consideration the close
and inseparable relation of each of them with the criminal act, for the commission of which they all acted by common
agreement ... The crime must therefore in view of the solidarity of the act and intent which existed between the ...
accused, be regarded as the act of the band or party created by them, and they are all equally responsible

383
Verily, the moment it is established that the malefactors conspired and confederated in the commission of the felony
proved, collective liability of the accused conspirators attaches by reason of the conspiracy, and the court shall not
speculate nor even investigate as to the actual degree of participation of each of the perpetrators present at the
scene of the crime. x x x.  (Emphasis supplied)
162

The liabilities of the accused-appellants m this case arose from a single incident wherein the accused-appellants
were armed with baseball bats and lead pipes, all in agreement to do the highest amount of damage possible to the
victims. Some were able to run away and take cover, but the others would fall prey at the hands of their attackers.
The intent to kill was already present at the moment of attack and that intent was shared by all of the accused-
appellants alike when the presence of conspiracy was proven. It is, therefore, immaterial to distinguish between the
seriousness of the injuries suffered by the victims to determine the respective liabilities of their attackers. What is
relevant is only as to whether the death occurs as a result of that intent to kill and whether there are qualifying,
aggravating or mitigating circumstances that can be appreciated.

The appellate court, therefore, erred in finding the accused-appellants guilty only of slight physical injuries. It would
be illogical to presume that despite the swiftness and suddenness of the attack, the attackers intended to kill only
Venturina, Natalicio, and Fortes, and only intended to injure Lachica, Mangrobang, and Gaston. Since the intent to
kill was evident from the moment the accused-appellants took their first swing, all of them were liable for that intent
to kill.
1âwphi1

For this reason, the accused-appellants should be liable for the murder of Dennis Venturina and the attempted
murder of Mervin Natalicio, Cesar Mangrobang, Jr., Leandro Lachica, Arnel Fortes, and Cristobal Gaston, Jr.

A Final Note

It is not only the loss of one promising young life; rather, it is also the effect on the five other lives whose once bright
futures are now put in jeopardy because of one senseless act of bravado. There is now more honor for them to
accept their responsibility and serve the consequences of their actions. There is, however, nothing that they can do
to bring back Dennis Venturina or fully compensate for his senseless and painful loss.

This is not the first fraternity-related case to come to this court; neither will it be the last. Perhaps this case and
many cases like it can empower those who have a better view of masculinity: one which valorizes courage, sacrifice
and honor in more life-saving pursuits.

"Giting at dangal" are words of the anthem of the University of the Philippines. It colors the stories of many who
choose to expend their energy in order that our people will have better lives. Fraternity rumbles are an anathema,
an immature and useless expenditure of testosterone. It fosters a culture that retards manhood. It is devoid of "giting
at dangal."

This_ kind of shameful violence must stop.

WHEREFORE, the decision of the Court of Appeals in CA-G.R. CR N). 01158 dated November 26, 2010 is
AFFIRMED insofar as the accused-appellants Danilo Feliciano, Jr., Julius Victor Medalla, Christopher Soliva,
Warren L. Zingapan, and Robert Michael Beltran Alvir are found GUILTY beyond reasonable doubt of Murder in.
Criminal Case No. Q95-61133 with the MODIFICATION that they be fouhd GUILTY beyond reasonable doubt of
Attempted Murder in Criminal Case Nos. Q95-61136, Q95-61135, Q95-61134, Q95-61138, and Q95-61137.

SO ORDERED.

384
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

A.C. No. 5377               June 30, 2014

VICTOR C. LINGAN, Complainant, 
vs.
ATTYS. ROMEO CALUBAQUIB and JIMMY P. BALIGA, Respondents.

RESOLUTION

LEONEN, J.:

This court has the exclusive jurisdiction to regulate the practice of law. When this court orders a lawyer suspended
from the practice of law, the lawyer must desist from performing all functions requiring the application of legal
knowledge within the period of suspension. This includes desisting from holding a position in government requiring
the authority to practice law.

For our resolution is respondent Atty. Jimmy P. Baliga's motion to lift one-year suspension from the practice of law. 1

In the resolution  dated June 15, 2006, this court found Attys. Romeo I. Calubaquib and Jimmy P. Baliga guilty of
2

violating Rule 1.01, Canon 1 of the Code of Professional Responsibility  and of the Lawyer's Oath.  Respondents
3 4

allowed their secretaries to notarize documents in their stead, in violation of Sections 245  and 246  of the Notarial
5 6

Law. This court suspended respondents from the practice of law for one year, revoked their notarial commissions,
and disqualified them from reappointment as notaries public for two years.

Complainant Victor C. Lingan filed his motion for reconsideration,  praying that respondents be disbarred, not merely
7

suspended from the practice of law. In the resolution  dated September 6, 2006, this court denied complainant
8

Lingan's motion for reconsideration for lack of merit.

On March 22, 2007, Atty. Baliga, also the Regional Director of the Commission on Human Rights Regional Office for
Region II, filed the undated ex parte clarificatory pleading with leave of court.
9

In his ex parte clarificatory pleading, Atty. Baliga alleged that on July 14, 2006, complainant Lingan wrote the
Commission on Human Rights. Lingan requested the Commission to investigate Atty. Baliga following the latter's
suspension from the practice of law.

After this court had suspended Atty. Baliga from the practice of law, the Commission on Human Rights En Banc
issued the resolution  dated January 16, 2007, suspending him from his position as Director/Attorney VI of the.
10

Commission on Human Rights Regional Office for Region II. According to the Commission on Human Rights En
Banc, Atty. Baliga's suspension from the practice of law "prevent[ed] [him] from assuming his post [as Regional
Director] for want of eligibility in the meantime that his authority to practice law is suspended."
11

385
Atty. Baliga · argued that he cannot be suspended for acts not connected with his functions as Commission on
Human Rights Regional Director. According to Atty. Baliga, his suspension from the practice of law did not include
his suspension from public office. He prayed for clarification of this court's resolution dated June 15, 2006 "to
prevent further injury and prejudice to [his] rights."
12

This court noted without action Atty. Baliga's ex parte clarificatory pleading as this court does not render advisory
opinions. 13

On May 8, 2009, this court received ·a letter from complainant Lingan. In his letter  dated May 4, 2009, Lingan
14

alleged that Atty. Baliga continued practicing law and discharging his functions as Commission on Human Rights
Regional Director, in violation of this court's order of suspension.

Complainant Lingan allegedly received a copy of the Commission on Human Rights En Banc 's resolution
suspending Atty. Baliga as Regional Director. On Atty. Baliga's motion, the ommission reconsidered Atty. Baliga's
suspension and instead admonished him for "[violating] the conditions of his commission as a notary
public." According to complainant Lingan, he was not served a copy of Atty. Baliga's motion for reconsideration.
15 16

Complainant Lingan claimed that the discharge of the functions of a Commission on Human Rights Regional
Director necessarily required the practice of law. A Commission on Human Rights Regional Director must be a
member of the bar and is designated as Attorney VI. Since this court suspended Atty. Baliga from the practice of
law, Atty. Baliga was in effect "a non-lawyer . . . and [was] disqualified to hold the position of [Regional Director]
[during the effectivity of the order of suspension]."  The Commission on Human Rights, according to complainant
17

Lingan, should have ordered Atty. Baliga to desist from performing his functions as Regional Director. Complainant
Lingan prayed that this court give "favorable attention and action on the matter." 18

This court endorsed complainant Lingan's letter to the Office of the Bar Confidant for report and recommendation. 19

In its report and recommendation  dated June 29, 2009, the Office of the Bar Confidant found that the period of
20

suspension of Attys. Calubaquib and Baliga had already lapsed. It recommended that respondents be required to
file their respective motions to lift order of suspension with certifications from the Integrated Bar of the Philippines
and the Executive Judge of the court where they might appear as counsel and state that they desisted from
practicing law during the period of suspension.

On the claim that the Commission on Human Rights allowed Atty. Baliga to perform his functions as Regional
Director during the period of suspension, the Office of the Bar Confidant said that the Commission "deliberate[ly]
disregard[ed]"  this court's order of suspension. According to the Office of the Bar Confidant, the Commission on
21

Human Rights had no power to "[alter, modify, or set aside any of this court's resolutions] which [have] become final
and executory. " 22

Thus, with respect to Atty. Baliga, the Office of the Bar Confidant recommended that this court require him to submit
a certification from the Commission on Human Rights stating that he desisted from performing his functions as
Regional Director while he was suspended from the practice of law. 23

The Office of the Bar Confidant further recommended that Atty. Baliga and the Commission .on Human Rights be
required to comment on complainant Lingan's allegation that Atty. Baliga continued to perform his functions as
Regional Director while he was suspended from the practice of law.

On July 17, 2009, Atty. Baliga filed a manifestation,  arguing that his suspension from the practice of law did not
24

include his suspension from public office. Atty. Baliga said, "[t]o stretch the coverage of [his suspension from the
practice of law] to [his] public office would be tantamount to [violating] his constitutional rights [sic] to due process
and to the statutory principle in law that what is not included is deemed excluded." 25

In the resolution  dated September 23, 2009, this court required respondents to file their respective motions to lift
26

order of suspension considering the lapse of the period of suspension. This court further ordered Atty. Baliga and
the Commission on Human Rights to comment on complainant Lingari's allegation that Atty. Baliga continued
performing his functions as Regional Director while he was suspended from the practice of law. The resolution dated
September 23, 2009 provides:

Considering that the period of suspension from the practice of law and disqualification from being commissioned as
notary public imposed on respondents have [sic] already elapsed, this Court resolves:

(1) to require both respondents, within ten (10) days from notice, to FILE their respective motions to lift
relative to their suspension and disqualification from being commissioned as notary public and SUBMIT
certifications from the Integrated Bar of the Philippines and Executive Judge of the Court where they may
appear as counsel, stating that respondents have actually ceased and desisted from the practice of law

386
 during the entire period of their suspension and disqualification, unless already complied with in the
meantime;

(2) to require Atty. Jimmy P. Baliga to SUBMIT a certification from the Commission on Human Rights [CHR]
stating that he has been suspended from office and has stopped from the performance of his functions for
the period stated in the order of suspension and disqualification, within ten (10) days from notice hereof;

(3) to require respondent Atty. Baliga and the CHR to COMMENT on the allegations of complainant against
them, both within ten (10) days from receipt of notice hereof; ...  (Emphasis in the original)
27

In compliance with this court's order, Attys. Calubaquib and Baliga filed their respective motions to lift order of
suspension.  Atty. Baliga also filed his comment on complainant Lingan's allegation that he continued performing
28

his functions as Regional Director during his suspension from the practice of law.

In his comment  dated November 13, 2009, Atty. Baliga alleged that as Regional Director, he "perform[ed],
29

generally, managerial functions,"  which did not require the practice of law. These managerial functions allegedly
30

included ."[supervising] ... the day to day operations of the regional office and its personnel";  "monitoring progress
31

of investigations conducted by the [Commission on Human Rights] Investigation Unit";  "monitoring the
32

implementation of all other services and assistance programs of the [Commission on Human Rights] by the different
units at the regional level";  and "[supervising] . . . the budgetary requirement preparation and disbursement of funds
33

and expenditure of the [Regional Office]."  The Commission allegedly has its own "legal services unit which takes
34

care of the legal services matters of the [Commission]." 35

Stating that his functions as Regional Director did not require the practice of law, Atty. Baliga claimed thaf he
"faithful[ly] [complied] with [this court's resolution suspending him from the practice of law]." 36

The Commission on Human Rights filed its comment  dated November 27, 2009. It argued that "the penalty
37

imposed upon Atty. Baliga as a member of the bar is separate and distinct from any penalty that may be imposed
upon him as a public official for the same acts."  According to the Commission, Atty. Baliga's suspension from the
38

practice of law is a "bar matter"  while the imposition of penalty upon a Commission on Human Rights official "is an
39

entirely different thing, falling as it does within the exclusive authority of the [Commission as] disciplining body." 40

Nevertheless, the Commission manifested that it would defer to this court's resolution of the issue and would "abide
by whatever ruling or decision [this court] arrives at on [the] matter. "  In reply  to Atty. Baliga's comment,
41 42

complainant Lingan argued that Atty. Baliga again disobeyed this. court. Atty. Baliga failed to submit a certification
from the Commission on Human Rights stating that he was suspended from office and desisted from performing his
functions as Regional Director.

As to Atty. Baliga's claim that he did not practice law while he held his position as Regional Director and only
performed generally managerial functions, complainant Lingan countered that Atty. Baliga admitted to defying the
order of suspension. Atty. Baliga admitted to performing the functions of a "lawyer-manager,"  which under the 43

landmark case of Cayetano v. Monsod  constituted practice of law. Complainant Lingan reiterated that the position
44

of Regional Director/ Attorney VI requires the officer "to be a lawyer [in] good standing."  Moreover, as admitted by
45

Atty. Baliga, he had supervision and control over Attorneys III, IV, and V. Being a "lawyer-manager," Atty. Baliga
practiced law while he held his position as Regional Director.

With respect to Atty. Baliga's claim that he was in good faith in reassuming his position as Regional Director,
complainant Lingan countered that if Atty. Baliga were really in good faith, he should have followed the initial
resolution of the Commission on Human Rights suspending him from office. Atty. Baliga did not even furnish this
court a copy of his motion for reconsideration of the Commission on Human Right's resolution suspending him from
office. By "playing ignorant on what is 'practice of law', twisting facts and philosophizing,"  complainant Lingan
46

argued that Atty. Baliga "[no longer has that] moral vitality imperative to the title of an attorney."  Compfainant 47

Lingan prayed that Atty. Baliga be disbarred.

On February 17, 2010, this court lifted the order of suspension of Atty. Calubaquib.  He was allowed to resume his
48

practice of law and perform notarial acts subject to compliance with the requirements for issuance of a notarial
commission.

On the other hand, this court referred to the Office of the Bar Confidant for evaluation, report, and recommendation
Atty. Baliga's motion to lift one-year suspension and the respective comments of Atty. Baliga and the Commission
on Human Rights. 49

In its report and recommendation  dated October 18, 2010, the Office of the Bar Confidant stated that Atty. Baliga
50

"should not [have been] allowed to perform his functions, duties, and responsibilities [as Regional Director] which
[required acts constituting] practice .of law."  Considering that Atty. Baliga claimed that he did not perform his
51

functions as Regional Director which required the practice of law, the Office of the Bar Confidant recommended that
the Commission on Human Rights be required to comment on this claim. The Office of the Bar Confidant also
387
recommended holding in abeyance the resolution of Atty. Baliga's motion to lift suspension "pending [the
Commission on Human Right's filing of comment]." 52

In the resolution  dated January 12, 2011, this court held in abeyance the resolution of Atty. Baliga's motion to lift
53

one-year suspension. The Commission on Human Rights was ordered to comment on Atty. Baliga's claim that he
did not practice law while he held his position as Regional Director.

In its comment  dated April 6, 2011, the Commission on Human Rights reiterated that the penalty imposed on Atty.
54

Baliga as a member of the bar is separate from the penalty that might be imposed on him as Regional Director. The
Commission added that it is "of honest belief that the position of [Regional Director] is managerial and does not
[require the practice of law]."  It again manifested that it will "abide by whatever ruling or decision [this court] arrives
55

on [the] matter." 56

The issue for our resolution is whether Atty. Baliga's motion to lift order of suspension should be granted.

We find that Atty. Baliga violated this court's order of suspension. We, therefore, suspend him further from the
practice of law for six months.

Practice of law is "any activity, in or out of court, which requires the application of law, legal procedure, knowledge,
training and experience."  It includes "[performing] acts which are characteristics of the [legal] profession"  or
57 58

"[rendering any kind of] service [which] requires the use in any degree of legal knowledge or skill." 59

Work in government that requires the use of legal knowledge is considered practice. of law. In Cayetano v.
Monsod,  this court cited the deliberations of the 1986 Constitutional Commission and agreed that work rendered by
60

lawyers in the Commission on Audit requiring "[the use of] legal knowledge or legal talent"  is practice of law.
61

The Commission on Human Rights is an independent office created under the Constitution with power to investigate
"all forms of human rights violations involving civil and political rights[.]"  It is divided into regional offices with each
62

office having primary responsibility to investigate human rights violations in its territorial jurisdiction.  Each regional
63

office is headed by the Regional Director who is given the position of Attorney VI.

Under the Guidelines and Procedures in the Investigation and Monitoring of Human Rights Violations and Abuses,
and the Provision of CHR Assistance,  the Regional Director has the following powers and functions:
64

a. To administer oaths or affirmations with respect to "[Commission on Human Rights] matters;" 65

b. To issue mission orders in their respective regional offices; 66

c. To conduct preliminary evaluation or initial investigation of human rights complaints in the absence of the
legal officer or investigator; 67

d. To conduct dialogues or preliminary conferences among parties and discuss "immediate courses of action
and protection remedies and/or possible submission of the matter to an alternative dispute resolution"; 68

e. To issue Commission on Human Rights processes, including notices, letter-invitations, orders, or

subpoenas within the territorial jurisdiction of the regional office;  and
69

f. To review and approve draft resolutions of human rights cases prepared by the legal officer. 70

These powers and functions are characteristics of the legal profession. Oaths and affirmations are usually
performed by members of the judiciary and notaries public  - officers who are necessarily members of the
71

bar. Investigating human rights complaints are performed primarily by the Commission's legal officer.  Discussing
72 73

immediate courses of action and protection remedies and reviewing and approving draft resolutions of human rights
cases prepared by the legal officer require the use of extensive legal knowledge.

The exercise of the powers and functions of a Commission on Human Rights Regional Director constitutes practice
of law. Thus, the Regional Director must be an attorney - a member of the bar in good standing and authorized to
practice law.  When the Regional Director loses this authority, such as when he or she is disbarred or suspended
74

from the practice of law, the Regional Director loses a necessary qualification to the position he or she is holding.
The disbarred or suspended lawyer must desist from holding the position of Regional Director.

This court suspended Atty. Baliga from the practice of law for one year on June 15, 2006, "effective
immediately." From the time Atty. Baliga received the court's order of suspension on July 5, 2006,  he has been
75 76

without authority to practice law. He lacked a necessary qualification to his position as Commission on Human
Rights Regional Director/ Attorney VI. As the Commission on Human Rights correctly resolved in its resolution dated
January 16, 2007:
388
WHEREAS, this suspension under ethical standards, in effect, prevents Atty. Baliga from assuming his post, for
want of eligibility in the meantime that his authority to practice law is suspended. This is without prejudice to the
investigation to be conducted to the practice of law of Atty. Baliga, which in the case of all Regional Human Rights
Directors is not generally allowed by the Commission;

WHEREFORE, in the light of the foregoing, the Commission on Human Rights of the Philippines resolved to put into
effect and implement the legal implications of the SC decision by decreeing the suspension of Atty. Jimmy P. Baliga
in the discharge of his functions and responsibilities as Director/Attorney VI of CHRP-Region II in Tuguegarao City
for the period for which the Supreme Court Resolution is in effect.  (Emphasis in the original)
77

In ordering Atty. Baliga suspended from office as Regional Director, the Commission on Human Rights did not
violate Atty. Baliga's right to due process. First, he was only suspended after: investigation by the Commission on
Human Rights Legal and Investigation Office.  Second, the Commission gave Atty. Baliga an opportunity to be
78

heard when he filed his motion for reconsideration.

Atty. Baliga's performance of generally managerial functions was not supported by the record. It was also
immaterial.  He held the position of Commission on Human Rights Regional Director because of his authority to
1âwphi1

practice law. Without this authority, Atty. Baliga was disqualified to hold that position.

All told, performing the functions of a Commission on Human Rights Regional Director constituted practice of law.
Atty. Baliga should have desisted from holding his position as Regional Director.

Under Section 27, Rule 138 of the Rules of Court, willful disobedience to any lawful order of a superior court is a
ground for disbarment or suspension from the practice of law:

SEC. 27. Disbarment or suspension of attorneys by Supreme Court; grounds therefor. - A member of the bar may
be disbarred or suspended from his office as attorney by the Supreme Court for any deceit, malpractice, or other
gross misconduct in such office, grossly immoral conduct, or by reason of his conviction of a crime involving moral
turpitude, or for any violation of the oath which he is required to take before admission to practice, or for a willful
disobedience of any lawful order of a superior court, or for corruptly or willfully appearing as an attorney for a party
to a case without authority so to do. The practice of soliciting cases at law for the purpose of gain, either personally
or through paid agents or brokers, constitutes malpractice.

In Molina v. Atty. Magat,  this court suspended further Atty. Ceferino R. Magat from the practice of law for six
79

months for practicing his profession despite this court's previous order of suspension.

We impose the same penalty on Atty. Baliga for holding his position as Regional Director despite lack.of authority to
practice law. 1âwphi1

We note that the Commission on Human Rights En Banc issued the resolution dated April 13, 2007, reconsidering
its first resolution suspending Atty. Baliga as Regional Director/ Attorney VI. Instead, the Commission admonished
Atty. Baliga and sternly warned him that repeating the same offense will cause his dismissal from the service. The
resolution with CHR (III) No. A2007-045 dated April 13, 2007 reads:

In his Motion for Reconsideration dated March 15, 2007, respondent Atty. Jimmy P. Baliga prays before the
Honorable Commission to recall and annul his suspension as Regional Director/ Attorney VI of the Commission on
Human Rights - Regional Office No. II, per 16 January 2007 Commission en Banc Resolution CHR (III) No. A2007-
013.

The grounds relied upon the motion are not sufficient to convince the Commission that Atty. Jimmy P. Baliga is
totally blameless and should not suffer the appropriate penalty for breach of the Code of Professional Responsibility
and his Lawyer's oath.

The Commission, in the exercise of its authority to discipline, is concerned with the transgression by Atty. Baliga of
his oath of office as government employee. As records have it, the Commission granted Atty. Baliga authority to
secure a commission as a notary public. With this, he is mandated to act as a notary public in accordance with the
rules and regulations, to include the conditions expressly set forth by the Commission.

With the findings clearly enunciated in the Supreme Court resolution in SC Administrative Case No. 5277 dated 15
June 2006, the Commission cannot close its eyes to the act of Atty. Baliga that is clearly repugnant to the conduct of
an officer reposed with public trust.

This is enough just cause to have this piece of word, short of being enraged, and censure Atty. Baliga for having
contravened the conditions of his commission as a notary public. What was granted to Atty. Baliga is merely a
privilege, the exercise of which requires such high esteem to be in equal footing with the constitutional mandate of

389
the Commission. Clearly, Atty. Baliga should keep in mind that the Commission exacts commensurate solicitude
from whatever privilege the Commission grants of every official and employee.

The Commission notes that by now Atty. Baliga is serving the one year suspension imposed on him pursuant to the
Supreme Court resolution. The Commission believes that the further suspension of Atty. Baliga from the office may
be too harsh in the meantime that the Supreme Court penalty is being served. This Commission is prevailed upon
that the admonition of Atty. Baliga as above expressed is sufficient to complete the cycle of penalizing an erring
public officer.

WHEREFORE, the Commission hereby modifies its ruling in Resolution CHR (III) No. A2007-013 and imposes the
penalty of admonition with a stem warning that a repetition of the same will merit a penalty of dismissal from the
service.  (Emphasis in the original)
80

The Commission on Human Rights erred in issuing the resolution dated April 13, 2007. This resolution caused Atty.
Baliga to reassume his position as Regional Director/ Attorney VI despite lack of authority to practice law.

We remind the Commission on Human Rights that we have the exclusive jurisdiction to regulate the practice of
law.  The Commission cannot, by mere resolutions and .other issuances, modify or defy this court's orders of
81

suspension from the practice of law. Although the Commission on Human Rights has the power to appoint its
officers and employees,  it can only retain those with the necessary qualifications in the positions they are holding.
82

As for Atty. Baliga, we remind him that the practice of law is a "privilege burdened with conditions."  To enjoy the
83

privileges of practicing law, lawyers must "[adhere] to the rigid standards of mental fitness, [maintain] the highest
degree of morality[,] and [faithfully comply] with the rules of [the] legal profession."
84

WHEREFORE, we further SUSPEND Atty. Jimmy P. Baliga from the practice of law for six ( 6) months. Atty. Baliga
shall serve a total of one (1) year and six (6) months of suspension from the practice of law, effective upon service
on Atty. Baliga of a copy of this resolution.

SERVE copies of this resolution to the Integrated Bar of the Philippines, the Office of the Bar Confidant, and the
Commission on Human Rights.

SO ORDERED.

390
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 206806               June 25, 2014

ARCO PULP AND PAPER CO., INC. and CANDIDA A. SANTOS, Petitioners, 

vs.
DAN T. LIM, doing business under the name and style of QUALITY PAPERS & PLASTIC PRODUCTS
ENTERPRISES, Respondent.

DECISION

LEONEN, J.:

Novation must be stated in clear and unequivocal terms to extinguish an obligation. It cannot be presumed and may
be implied only if the old and new contracts are incompatible on every point.

Before us is a petition for review on certiorari  assailing the Court of Appeals’ decision  in CA-G.R. CV No. 95709,
1 2

which stemmed from a complaint  filed in the Regional Trial Court of Valenzuela City, Branch 171, for collection of
3

sum of money.

The facts are as follows:

Dan T. Lim works in the business of supplying scrap papers, cartons, and other raw materials, under the name
Quality Paper and Plastic Products, Enterprises, to factories engaged in the paper mill business.  From February
4

2007 to March 2007, he delivered scrap papers worth 7,220,968.31 to Arco Pulp and Paper Company, Inc. (Arco
Pulp and Paper) through its Chief Executive Officer and President, Candida A. Santos.  The parties allegedly agreed
5

that Arco Pulp and Paper would either pay Dan T. Lim the value of the raw materials or deliver to him their finished
products of equivalent value. 6

Dan T. Lim alleged that when he delivered the raw materials, Arco Pulp and Paper issued a post-dated check dated
April 18, 2007  in the amount of 1,487,766.68 as partial payment, with the assurance that the check would not
7

bounce.  When he deposited the check on April 18, 2007, it was dishonored for being drawn against a closed
8

account. 9

On the same day, Arco Pulp and Paper and a certain Eric Sy executed a memorandum of agreement  where Arco
10

Pulp and Paper bound themselves to deliver their finished products to Megapack Container Corporation, owned by
Eric Sy, for his account. According to the memorandum, the raw materials would be supplied by Dan T. Lim, through
his company, Quality Paper and Plastic Products. The memorandum of agreement reads as follows:

391
Per meeting held at ARCO, April 18, 2007, it has been mutually agreed between Mrs. Candida A. Santos and Mr.
Eric Sy that ARCO will deliver 600 tons Test Liner 150/175 GSM, full width 76 inches at the price of ₱18.50 per kg.
to Megapack Container for Mr. Eric Sy’s account. Schedule of deliveries are as follows:

....

It has been agreed further that the Local OCC materials to be used for the production of the above Test Liners will
be supplied by Quality Paper & Plastic Products Ent., total of 600 Metric Tons at ₱6.50 per kg. (price subject to
change per advance notice). Quantity of Local OCC delivery will be based on the quantity of Test Liner delivered to
Megapack Container Corp. based on the above production schedule. 11

On May 5, 2007, Dan T.Lim sent a letter  to Arco Pulp and Paper demanding payment of the amount of
12

7,220,968.31, but no payment was made to him. 13

Dan T. Lim filed a complaint  for collection of sum of money with prayer for attachment with the Regional Trial Court,
14

Branch 171, Valenzuela City, on May 28, 2007. Arco Pulp and Paper filed its answer  but failed to have its
15

representatives attend the pre-trial hearing. Hence, the trial court allowed Dan T. Lim to present his evidence ex
parte.16

On September 19, 2008, the trial court rendered a judgment in favor of Arco Pulp and Paper and dismissed the
complaint, holding that when Arco Pulp and Paper and Eric Sy entered into the memorandum of agreement,
novation took place, which extinguished Arco Pulp and Paper’s obligation to Dan T. Lim. 17

Dan T. Lim appealed  the judgment with the Court of Appeals. According to him, novation did not take place since
18

the memorandum of agreement between Arco Pulp and Paper and Eric Sy was an exclusive and private agreement
between them. He argued that if his name was mentioned in the contract, it was only for supplying the parties their
required scrap papers, where his conformity through a separate contract was indispensable. 19

On January 11, 2013, the Court of Appeals  rendered a decision  reversing and setting aside the judgment dated
20 21

September 19, 2008 and ordering Arco Pulp and Paper to jointly and severally pay Dan T. Lim the amount of
₱7,220,968.31 with interest at 12% per annum from the time of demand; ₱50,000.00 moral damages; ₱50,000.00
exemplary damages; and ₱50,000.00 attorney’s fees. 22

The appellate court ruled that the facts and circumstances in this case clearly showed the existence of an alternative
obligation.  It also ruled that Dan T. Lim was entitled to damages and attorney’s fees due to the bad faith exhibited
23

by Arco Pulp and Paper in not honoring its undertaking. 24

Its motion for reconsideration  having been denied,  Arco Pulp and Paper and its President and Chief Executive
25 26

Officer, Candida A. Santos, bring this petition for review on certiorari.

On one hand, petitioners argue that the execution of the memorandum of agreement constituted a novation of the
original obligation since Eric Sy became the new debtor of respondent. They also argue that there is no legal basis
to hold petitioner Candida A. Santos personally liable for the transaction that petitioner corporation entered into with
respondent. The Court of Appeals, they allege, also erred in awarding moral and exemplary damages and attorney’s
fees to respondent who did not show proof that he was entitled to damages. 27

Respondent, on the other hand, argues that the Court of Appeals was correct in ruling that there was no proper
novation in this case. He argues that the Court of Appeals was correct in ordering the payment of 7,220,968.31 with
damages since the debt of petitioners remains unpaid.  He also argues that the Court of Appeals was correct in
28

holding petitioners solidarily liable since petitioner Candida A. Santos was "the prime mover for such outstanding
corporate liability."  In their reply, petitioners reiterate that novation took place since there was nothing in the
29

memorandum of agreement showing that the obligation was alternative. They also argue that when respondent
allowed them to deliver the finished products to Eric Sy, the original obligation was novated. 30

A rejoinder was submitted by respondent, but it was noted without action in view of A.M. No. 99-2-04-SC dated
November 21, 2000. 31

The issues to be resolved by this court are as follows:

1. Whether the obligation between the parties was extinguished by novation

2. Whether Candida A. Santos was solidarily liable with Arco Pulp and Paper Co., Inc.

3. Whether moral damages, exemplary damages, and attorney’s fees can be awarded

The petition is denied.

392
The obligation between the
parties was an alternative
obligation

The rule on alternative obligations is governed by Article 1199 of the Civil Code, which states:

Article 1199. A person alternatively bound by different prestations shall completely perform one of them.

The creditor cannot be compelled to receive part of one and part of the other undertaking.

"In an alternative obligation, there is more than one object, and the fulfillment of one is sufficient, determined by the
choice of the debtor who generally has the right of election."  The right of election is extinguished when the party
32

who may exercise that option categorically and unequivocally makes his or her choice known. 33

The choice of the debtor must also be communicated to the creditor who must receive notice of it since: The object
of this notice is to give the creditor . . . opportunity to express his consent, or to impugn the election made by the
debtor, and only after said notice shall the election take legal effect when consented by the creditor, or if impugned
by the latter, when declared proper by a competent court. 34

According to the factual findings of the trial court and the appellate court, the original contract between the parties
was for respondent to deliver scrap papers worth ₱7,220,968.31 to petitioner Arco Pulp and Paper. The payment for
this delivery became petitioner Arco Pulp and Paper’s obligation. By agreement, petitioner Arco Pulp and Paper, as
the debtor, had the option to either (1) pay the price or(2) deliver the finished products of equivalent value to
respondent. 35

The appellate court, therefore, correctly identified the obligation between the parties as an alternative obligation,
whereby petitioner Arco Pulp and Paper, after receiving the raw materials from respondent, would either pay him the
price of the raw materials or, in the alternative, deliver to him the finished products of equivalent value.

When petitioner Arco Pulp and Paper tendered a check to respondent in partial payment for the scrap papers, they
exercised their option to pay the price. Respondent’s receipt of the check and his subsequent act of depositing it
constituted his notice of petitioner Arco Pulp and Paper’s option to pay.

This choice was also shown by the terms of the memorandum of agreement, which was executed on the same day.
The memorandum declared in clear terms that the delivery of petitioner Arco Pulp and Paper’s finished products
would be to a third person, thereby extinguishing the option to deliver the finished products of equivalent value to
respondent.

The memorandum of
agreement did not constitute
a novation of the original
contract

The trial court erroneously ruled that the execution of the memorandum of agreement constituted a novation of the
contract between the parties. When petitioner Arco Pulp and Paper opted instead to deliver the finished products to
a third person, it did not novate the original obligation between the parties.

The rules on novation are outlined in the Civil Code, thus:

Article 1291. Obligations may be modified by:

(1) Changing their object or principal conditions;

(2) Substituting the person of the debtor;

(3) Subrogating a third person in the rights of the creditor. (1203)

Article 1292. In order that an obligation may be extinguished by another which substitute the same, it is imperative
that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible
with each other. (1204)

Article 1293. Novation which consists in substituting a new debtor in the place of the original one, may be made
even without the knowledge or against the will of the latter, but not without the consent of the creditor. Payment by
the new debtor gives him the rights mentioned in Articles 1236 and 1237. (1205a)

393
Novation extinguishes an obligation between two parties when there is a substitution of objects or debtors or when
there is subrogation of the creditor. It occurs only when the new contract declares so "in unequivocal terms" or that
"the old and the new obligations be on every point incompatible with each other." 36

Novation was extensively discussed by this court in Garcia v. Llamas: 37

Novation is a mode of extinguishing an obligation by changing its objects or principal obligations, by substituting a
new debtor in place of the old one, or by subrogating a third person to the rights of the creditor. Article 1293 of the
Civil Code defines novation as follows:

"Art. 1293. Novation which consists in substituting a new debtor in the place of the original one, may be made even
without the knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the
new debtor gives him rights mentioned in articles 1236 and 1237."

In general, there are two modes of substituting the person of the debtor: (1) expromision and (2) delegacion. In
expromision, the initiative for the change does not come from — and may even be made without the knowledge of
— the debtor, since it consists of a third person’s assumption of the obligation. As such, it logically requires the
consent of the third person and the creditor. In delegacion, the debtor offers, and the creditor accepts, a third person
who consents to the substitution and assumes the obligation; thus, the consent of these three persons are
necessary. Both modes of substitution by the debtor require the consent of the creditor.

Novation may also be extinctive or modificatory. It is extinctive when an old obligation is terminated by the creation
of a new one that takes the place of the former. It is merely modificatory when the old obligation subsists to the
extent that it remains compatible with the amendatory agreement. Whether extinctive or modificatory, novation is
made either by changing the object or the principal conditions, referred to as objective or real novation; or by
substituting the person of the debtor or subrogating a third person to the rights of the creditor, an act known as
subjective or personal novation. For novation to take place, the following requisites must concur:

1) There must be a previous valid obligation.

2) The parties concerned must agree to a new contract.

3) The old contract must be extinguished.

4) There must be a valid new contract.

Novation may also be express or implied. It is express when the new obligation declares in unequivocal terms that
the old obligation is extinguished. It is implied when the new obligation is incompatible with the old one on every
point. The test of incompatibility is whether the two obligations can stand together, each one with its own
independent existence.  (Emphasis supplied)
38

Because novation requires that it be clear and unequivocal, it is never presumed, thus:

In the civil law setting, novatio is literally construed as to make new. So it is deeply rooted in the Roman Law
jurisprudence, the principle — novatio non praesumitur —that novation is never presumed.At bottom, for novation
tobe a jural reality, its animus must be ever present, debitum pro debito — basically extinguishing the old obligation
for the new one.  (Emphasis supplied) There is nothing in the memorandum of agreement that states that with its
39

execution, the obligation of petitioner Arco Pulp and Paper to respondent would be extinguished. It also does not
state that Eric Sy somehow substituted petitioner Arco Pulp and Paper as respondent’s debtor. It merely shows that
petitioner Arco Pulp and Paper opted to deliver the finished products to a third person instead.

The consent of the creditor must also be secured for the novation to be valid:

Novation must be expressly consented to. Moreover, the conflicting intention and acts of the parties underscore the
absence of any express disclosure or circumstances with which to deduce a clear and unequivocal intent by the
parties to novate the old agreement.  (Emphasis supplied)
40

In this case, respondent was not privy to the memorandum of agreement, thus, his conformity to the contract need
not be secured. This is clear from the first line of the memorandum, which states:

Per meeting held at ARCO, April 18, 2007, it has been mutually agreed between Mrs. Candida A. Santos and Mr.
Eric Sy. . . .
41

If the memorandum of agreement was intended to novate the original agreement between the parties, respondent
must have first agreed to the substitution of Eric Sy as his new debtor. The memorandum of agreement must also

394
state in clear and unequivocal terms that it has replaced the original obligation of petitioner Arco Pulp and Paper to
respondent. Neither of these circumstances is present in this case.

Petitioner Arco Pulp and Paper’s act of tendering partial payment to respondent also conflicts with their alleged
intent to pass on their obligation to Eric Sy. When respondent sent his letter of demand to petitioner Arco Pulp and
Paper, and not to Eric Sy, it showed that the former neither acknowledged nor consented to the latter as his new
debtor. These acts, when taken together, clearly show that novation did not take place. Since there was no
novation, petitioner Arco Pulp and Paper’s obligation to respondent remains valid and existing. Petitioner Arco Pulp
and Paper, therefore, must still pay respondent the full amount of ₱7,220,968.31.

Petitioners are liable for

damages

Under Article 2220 of the Civil Code, moral damages may be awarded in case of breach of contract where the
breach is due to fraud or bad faith:

Art. 2220. Willfull injury to property may be a legal ground for awarding moral damages if the court should find that,
under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the
defendant acted fraudulently or in bad faith. (Emphasis supplied)

Moral damages are not awarded as a matter of right but only after the party claiming it proved that the breach was
due to fraud or bad faith. As this court stated:

Moral damages are not recoverable simply because a contract has been breached. They are recoverable only if the
party from whom it is claimed acted fraudulently or in bad faith or in wanton disregard of his contractual obligations.
The breach must be wanton, reckless, malicious or in bad faith, and oppressive or abusive. 42

Further, the following requisites must be proven for the recovery of moral damages:

An award of moral damages would require certain conditions to be met, to wit: (1)first, there must be an injury,
whether physical, mental or psychological, clearly sustained by the claimant; (2) second, there must be culpable act
or omission factually established; (3) third, the wrongful act or omission of the defendant is the proximate cause of
the injury sustained by the claimant; and (4) fourth, the award of damages is predicated on any of the cases stated
in Article 2219 of the Civil Code. 43

Here, the injury suffered by respondent is the loss of ₱7,220,968.31 from his business. This has remained unpaid
since 2007. This injury undoubtedly was caused by petitioner Arco Pulp and Paper’s act of refusing to pay its
obligations.

When the obligation became due and demandable, petitioner Arco Pulp and Paper not only issued an unfunded
check but also entered into a contract with a third person in an effort to evade its liability. This proves the third
requirement.

As to the fourth requisite, Article 2219 of the Civil Code provides that moral damages may be awarded in the
following instances:

Article 2219. Moral damages may be recovered in the following and analogous cases:

(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;

(3) Seduction, abduction, rape, or other lascivious acts;

(4) Adultery or concubinage;

(5) Illegal or arbitrary detention or arrest;

(6) Illegal search;

(7) Libel, slander or any other form of defamation;

(8) Malicious prosecution;

(9) Acts mentioned in Article 309;

395
 (10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

Breaches of contract done in bad faith, however, are not specified within this enumeration. When a party breaches a
contract, he or she goes against Article 19 of the Civil Code, which states: Article 19. Every person must, in the
exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith.

Persons who have the right to enter into contractual relations must exercise that right with honesty and good faith.
Failure to do so results in an abuse of that right, which may become the basis of an action for damages. Article 19,
however, cannot be its sole basis:

Article 19 is the general rule which governs the conduct of human relations. By itself, it is not the basis of an
actionable tort. Article 19 describes the degree of care required so that an actionable tort may arise when it is
alleged together with Article 20 or Article 21. 44

Article 20 and 21 of the Civil Code are as follows:

Article 20. Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the
latter for the same.

Article 21.Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the damage.

To be actionable, Article 20 requires a violation of law, while Article 21 only concerns with lawful acts that are
contrary to morals, good customs, and public policy:

Article 20 concerns violations of existing law as basis for an injury. It allows recovery should the act have been willful
or negligent. Willful may refer to the intention to do the act and the desire to achieve the outcome which is
considered by the plaintiff in tort action as injurious. Negligence may refer to a situation where the act was
consciously done but without intending the result which the plaintiff considers as injurious.

Article 21, on the other hand, concerns injuries that may be caused by acts which are not necessarily proscribed by
law. This article requires that the act be willful, that is, that there was an intention to do the act and a desire to
achieve the outcome. In cases under Article 21, the legal issues revolve around whether such outcome should be
considered a legal injury on the part of the plaintiff or whether the commission of the act was done in violation of the
standards of care required in Article 19. 45

When parties act in bad faith and do not faithfully comply with their obligations under contract, they run the risk of
violating Article 1159 of the Civil Code:

Article 1159. Obligations arising from contracts have the force of law between the contracting parties and should be
complied with in good faith.

Article 2219, therefore, is not an exhaustive list of the instances where moral damages may be recovered since it
only specifies, among others, Article 21. When a party reneges on his or her obligations arising from contracts in
bad faith, the act is not only contrary to morals, good customs, and public policy; it is also a violation of Article 1159.
Breaches of contract become the basis of moral damages, not only under Article 2220, but also under Articles 19
and 20 in relation to Article 1159.

Moral damages, however, are not recoverable on the mere breach of the contract. Article 2220 requires that the
breach be done fraudulently or in bad faith. In Adriano v. Lasala: 46

To recover moral damages in an action for breach of contract, the breach must be palpably wanton, reckless and
malicious, in bad faith, oppressive, or abusive. Hence, the person claiming bad faith must prove its existence by
clear and convincing evidence for the law always presumes good faith.

Bad faith does not simply connote bad judgment or negligence. It imports a dishonest purpose or some moral
obliquity and conscious doing of a wrong, a breach of known duty through some motive or interest or ill will that
partakes of the nature of fraud. It is, therefore, a question of intention, which can be inferred from one’s conduct
and/or contemporaneous statements.  (Emphasis supplied)
47

Since a finding of bad faith is generally premised on the intent of the doer, it requires an examination of the
circumstances in each case.

396
When petitioner Arco Pulp and Paper issued a check in partial payment of its obligation to respondent, it was
presumably with the knowledge that it was being drawn against a closed account. Worse, it attempted to shift their
obligations to a third person without the consent of respondent.

Petitioner Arco Pulp and Paper’s actions clearly show "a dishonest purpose or some moral obliquity and conscious
doing of a wrong, a breach of known duty through some motive or interest or ill will that partakes of the nature of
fraud."  Moral damages may, therefore, be awarded.
48

Exemplary damages may also be awarded. Under the Civil Code, exemplary damages are due in the following
circumstances:

Article 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent manner.

Article 2233. Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not they
should be adjudicated.

Article 2234. While the amount of the exemplary damages need not be proven, the plaintiff must show that he is
entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not
exemplary damages should be awarded.

In Tankeh v. Development Bank of the Philippines,  we stated that:

49

The purpose of exemplary damages is to serve as a deterrent to future and subsequent parties from the commission
of a similar offense. The case of People v. Ranteciting People v. Dalisay held that:

Also known as ‘punitive’ or ‘vindictive’ damages, exemplary or corrective damages are intended to serve as a
deterrent to serious wrong doings, and as a vindication of undue sufferings and wanton invasion of the rights of an
injured or a punishment for those guilty of outrageous conduct. These terms are generally, but not always, used
interchangeably. In common law, there is preference in the use of exemplary damages when the award is to
account for injury to feelings and for the sense of indignity and humiliation suffered by a person as a result of an
injury that has been maliciously and wantonly inflicted, the theory being that there should be compensation for the
hurt caused by the highly reprehensible conduct of the defendant—associated with such circumstances as
willfulness, wantonness, malice, gross negligence or recklessness, oppression, insult or fraud or gross fraud—that
intensifies the injury. The terms punitive or vindictive damages are often used to refer to those species of damages
that may be awarded against a person to punish him for his outrageous conduct. In either case, these damages are
intended in good measure to deter the wrongdoer and others like him from similar conduct in the future.  (Emphasis
50

supplied; citations omitted)

The requisites for the award of exemplary damages are as follows:

(1) they may be imposed by way of example in addition to compensatory damages, and only after the
claimant's right to them has been established;

(2) that they cannot be recovered as a matter of right, their determination depending upon the amount of
compensatory damages that may be awarded to the claimant; and

(3) the act must be accompanied by bad faith or done in a wanton, fraudulent, oppressive or malevolent
manner. 51

Business owners must always be forthright in their dealings. They cannot be allowed to renege on their obligations,
considering that these obligations were freely entered into by them. Exemplary damages may also be awarded in
this case to serve as a deterrent to those who use fraudulent means to evade their liabilities.

Since the award of exemplary damages is proper, attorney’s fees and cost of the suit may also be recovered.

Article 2208 of the Civil Code states:

Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs,
cannot be recovered, except:

(1) When exemplary damages are awarded[.]

Petitioner Candida A. Santos
is solidarily liable with
petitioner corporation

397
Petitioners argue that the finding of solidary liability was erroneous since no evidence was adduced to prove that the
transaction was also a personal undertaking of petitioner Santos. We disagree.

In Heirs of Fe Tan Uy v. International Exchange Bank,  we stated that:

52

Basic is the rule in corporation law that a corporation is a juridical entity which is vested with a legal personality
separate and distinct from those acting for and in its behalf and, in general, from the people comprising it. Following
this principle, obligations incurred by the corporation, acting through its directors, officers and employees, are its
sole liabilities. A director, officer or employee of a corporation is generally not held personally liable for obligations
incurred by the corporation. Nevertheless, this legal fiction may be disregarded if it is used as a means to perpetrate
fraud or an illegal act, or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, or to
confuse legitimate issues.

....

Before a director or officer of a corporation can be held personally liable for corporate obligations, however, the
following requisites must concur: (1) the complainant must allege in the complaint that the director or officer
assented to patently unlawful acts of the corporation, or that the officer was guilty of gross negligence or bad faith;
and (2) the complainant must clearly and convincingly prove such unlawful acts, negligence or bad faith.

While it is true that the determination of the existence of any of the circumstances that would warrant the piercing of
the veil of corporate fiction is a question of fact which cannot be the subject of a petition for review on certiorari
under Rule 45, this Court can take cognizance of factual issues if the findings of the lower court are not supported
by the evidence on record or are based on a misapprehension of facts.  (Emphasis supplied)
53

As a general rule, directors, officers, or employees of a corporation cannot be held personally liable for obligations
incurred by the corporation. However, this veil of corporate fiction may be pierced if complainant is able to prove, as
in this case, that (1) the officer is guilty of negligence or bad faith, and (2) such negligence or bad faith was clearly
and convincingly proven.

Here, petitioner Santos entered into a contract with respondent in her capacity as the President and Chief Executive
Officer of Arco Pulp and Paper. She also issued the check in partial payment of petitioner corporation’s obligations
to respondent on behalf of petitioner Arco Pulp and Paper. This is clear on the face of the check bearing the account
name, "Arco Pulp & Paper, Co., Inc."  Any obligation arising from these acts would not, ordinarily, be petitioner
54

Santos’ personal undertaking for which she would be solidarily liable with petitioner Arco Pulp and Paper.

We find, however, that the corporate veil must be pierced. In Livesey v. Binswanger Philippines: 55

Piercing the veil of corporate fiction is an equitable doctrine developed to address situations where the separate
corporate personality of a corporation is abused or used for wrongful purposes. Under the doctrine, the corporate
existence may be disregarded where the entity is formed or used for non-legitimate purposes, such as to evade a
just and due obligation, or to justify a wrong, to shield or perpetrate fraud or to carry out similar or inequitable
considerations, other unjustifiable aims or intentions, in which case, the fiction will be disregarded and the
individuals composing it and the two corporations will be treated as identical.  (Emphasis supplied)
56

According to the Court of Appeals, petitioner Santos was solidarily liable with petitioner Arco Pulp and Paper, stating
that:

In the present case, We find bad faith on the part of the [petitioners] when they unjustifiably refused to honor their
undertaking in favor of the [respondent]. After the check in the amount of 1,487,766.68 issued by [petitioner] Santos
was dishonored for being drawn against a closed account, [petitioner] corporation denied any privity with
[respondent]. These acts prompted the [respondent] to avail of the remedies provided by law in order to protect his
rights.
57

We agree with the Court of Appeals. Petitioner Santos cannot be allowed to hide behind the corporate veil.  When1âwphi1

petitioner Arco Pulp and Paper’s obligation to respondent became due and demandable, she not only issued an
unfunded check but also contracted with a third party in an effort to shift petitioner Arco Pulp and Paper’s liability.
She unjustifiably refused to honor petitioner corporation’s obligations to respondent. These acts clearly amount to
bad faith. In this instance, the corporate veil may be pierced, and petitioner Santos may be held solidarily liable with
petitioner Arco Pulp and Paper.

The rate of interest due on

the obligation must be
reduced in view of Nacar v.
Gallery Frames 58

398
In view, however, of the promulgation by this court of the decision dated August 13, 2013 in Nacar v. Gallery
Frames,  the rate of interest due on the obligation must be modified from 12% per annum to 6% per annum from the
59

time of demand.

Nacar effectively amended the guidelines stated in Eastern Shipping v. Court of Appeals,  and we have laid down
60

the following guidelines with regard to the rate of legal interest:

To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping Linesare
accordingly modified to embody BSP-MB Circular No. 799, as follows:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the
Civil Code govern in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand
can be established with reasonable certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169,
Civil Code), but when such certainty cannot be so reasonably established at the time the demand is made,
the interest shall begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such
finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of
credit.

And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall not be
disturbed and shall continue to be implemented applying the rate of interest fixed therein.  (Emphasis supplied;
61

citations omitted.)

According to these guidelines, the interest due on the obligation of ₱7,220,968.31 should now be at 6% per annum,
computed from May 5, 2007, when respondent sent his letter of demand to petitioners. This interest shall continue
to be due from the finality of this decision until its full satisfaction.

WHEREFORE, the petition is DENIED in part. The decision in CA-G.R. CV No. 95709 is AFFIRMED.

Petitioners Arco Pulp & Paper Co., Inc. and Candida A. Santos are hereby ordered solidarily to pay respondent Dan
T. Lim the amount of ₱7,220,968.31 with interest of 6% per annum at the time of demand until finality of judgment
and its full satisfaction, with moral damages in the amount of ₱50,000.00, exemplary damages in the amount of
₱50,000.00, and attorney's fees in the amount of ₱50,000.00.

SO ORDERED.

399
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 194560               June 11, 2014

NESTOR T. GADRINAB, Petitioner, 
vs.
NORAT. SALAMANCA, ANTONIO TALAO AND ELENA LOPEZ, Respondents.

DECISION

LEONEN, J.:

A judgment on compromise agreement is a judgment on the merits. It has the effect of res judicata, and is
immediately final and executory unless set aside because of falsity or vices of consent. The doctrine of immutability
of judgments bars courts from modifying decisions that have already attained finality, even if the purpose of the
modification is to correct errors of fact or law.

This Rule 45 petlt10n seeks the review of the Court of Appeals' Decision  dated July 22, 2010 and its
1

resolution dated November 19, 2010.

2

The Court of Appeals dismissed petitioner’s appeal and affirmed the Regional Trial Court’s decision granting
respondent Salamanca’s motion for physical partition pending the execution of a judgment on compromise
agreement between the parties.

Respondents, together with Adoracion Gadrinab and Arsenia Talao, are siblings and heirs of the late Spouses
Talao, Nicolas and Aurelia.  The Spouses Talao died intestate, leaving a parcel of land in Sta. Ana, Manila.
3 4

The five Talao children divided the property among themselves through an extrajudicial settlement.  Subsequently,
5

Arsenia Talao waived her share over the property in favor of her siblings. 6

Respondent Salamanca filed a complaint for partition against her siblings, Antonio, Elena (deceased, now
represented by her husband, Jose Lopez), and Adoracion (deceased, now represented by heirs, petitioner Nestor
and Francisco Gadrinab) before the Regional Trial Court of Manila. 7

All parties claimed their respective shares in the property.  They also claimed shares in the rentals collected from
8

one of the units of a duplex apartment on the property.  The total amount of rental collection in the possession of
9

Jose Lopez was 528,623.00.  The amount, according to Jose’s counsel, was ready for distribution.
10 11

Upon being referred to mediation, the parties entered into a compromise agreement and stipulated the following:
400
 1) That the subject property (land with all the improvements) situated at 2370 Nacar Street, San Andres,
Sta. Ana, Manila will be subject for sale and the amount will be divided among the four (plaintiff and
defendants);

2) That the subject property will be appraised by independent appraiser and the appraised value will be
divided into four. Mr. Antonio Talao will pay in advance the share of Francisco Gadrinab immediately after
the report of the said appraisal;

3) That Cuervo Appraiser will be the one who appraised [sic] the property on or before March 21, 2003 and
any appraised value shall binding [sic] on all parties;

4) That the rental collection in its total amount of Five Hundred Twenty Eight Thousand and Six Hundred
Twenty Three Pesos (528,623.00) and the uncollected amount up to February 2003 once collected will be
divided among the parties;

5) That the amount of 528,623.00 divided by four be distributed among the parties will be given to all parties
on or before March 12, 2003 by Mr. Antonio Talao;

6) That upon payment of the appraised value to Francisco Gadrinab, Mr. Nestor Gadrinab is given forty-five
(45) days within which to leave the premises in question;

7) That the parties agreed to waive all their claims and counter-claims arising from this case; and

8) That the parties agreed to request this Honorable Court that a decision be issued base [sic] on this
Compromise Agreement or this Compromise Agreement be submitted before this Honorable Court for
approval.12

On April 10, 2003, the Regional Trial Court approved the compromise agreement.  Based on the entry of judgment,
13

the case became final and executory on April 10, 2003. 14

Nestor Gadrinab filed a motion for execution of the compromise agreement.  He demanded his one-fourth share in
15

the accumulated rentals.  During the hearing on the motion for execution, the parties agreed that the rentals shall be
16

divided only into three since Nestor had already been occupying one of the duplex units.  The parties also agreed
17

that Antonio Talao would shoulder Nestor’s share, equivalent to one-fourth of the rental amount. 18

Pursuant to the compromise agreement, Cuervo Appraiser appraised the property.  Unsatisfied with the appraisal,
19

Antonio Talao moved for the property’s reappraisal.  This was denied by the Regional Trial Court.
20 21

The portion of the duplex that Nestor refused to vacate,  remained unsold.
22 23

Because of the attitude of her co-heirs, respondent Salamanca moved for the physical partition of the property
before the Regional Trial Court of Manila.  She prayed for the physical partition of the property instead of having it
24

sold.25

Nestor and Francisco Gadrinab opposed the motion.  They contended that the judgment on the compromise
26

agreement had already become final and executory and had the effect of res judicata.  Antonio Talao and Jose
27

Lopez did not object to the motion for physical partition. 28

On December 29, 2005, the Regional Trial Court of Manila granted the motion for physical partition. 29

Nestor and Francisco Gadrinab appealed to the Court of Appeals. They assailed the grant of Salamanca’s motion
for physical partition after the issuance of the judgment on compromise agreement. 30

In a decision promulgated on July 22, 2010,  the Court of Appeals dismissed the appeal. The Court of Appeals ruled
31

that the exception to the immutability of judgments, that is, "whenever circumstances transpire after the finality of the
decision rendering its execution unjust and inequitable,"  applies in this case. The Court of Appeals specifically
32

noted that the "parties’ seemingly endless disagreements on matters involving the disposition of the subject
property"  were such circumstances that rendered the compromise agreement’s execution unjust and inequitable.
33

The Court of Appeals agreed with the Regional Trial Court’s ruling that "the proposed physical partition of the
subject lot . . . is just another way of enforcing the [c]ourt’s decision and will not in anyway vary the parties’
agreement nor affect their right over the property." 34

On November 19, 2010, the Court of Appeals denied petitioner’s motion for reconsideration. 35

Hence, this petition was filed.

401
Petitioner argued that the Court of Appeals erred in affirming the Regional Trial Court’s order granting respondent
Salamanca’s motion for physical partition.  A judgment on the compromise agreement had already been rendered
36

and had attained finality.  Petitioner also argued that the Court of Appeals failed to consider the following terms of
37

the compromise agreement:

2. That the subject property will be appraised by independent appraiser and the appraised value will be
divided into four (4). Mr. Antonio Talao will pay in advance the share of Francisco Gadrinab immediately
after the report of the said appraisal;

....

4. That the rental collection in its total amount of FIVE HUNDRED TWENTY EIGHT THOUSAND SIX
HUNDRED TWENTY THREE PESOS (Php528,623.00) and the uncollected amount up to February 2003
once collected [sic] will be divided among the parties;

5. That the amount of FIVEHUNDRED TWENTY EIGHT THOUSAND SIX HUNDRED TWENTY THREE
PESOS Php528,623.00 divided by four (4) among the parties will be given to all parties on or [sic] March 12,
2003 by Mr. Antonio Talao at Greenbelt, Mc Donald at 9:00 o’clock in the morning;

6. That upon payment of the appraised value to Mr. Francisco Gadrinab, Mr. Nestor Gadrinab is given forty
five (45) days within which to leave the premises in question[.]  (Emphasis in the original)
38

Petitioner alleged that the judgment on the compromise agreement had already been partially complied with, as
respondent Salamanca had already been paid her share in the accrued rentals.  On the other hand, petitioner still
39

had not been paid his share,  prompting him to file the motion for execution.
40 41

Petitioner pointed out that there was no agreement that he must vacate the property before it could be sold. 42

Moreover, petitioner argued that the Court of Appeals’ decision violated his right to due process.  According to him,
43

had there been a full-blown trial on the action for partition, he would have been able to present evidence of
exclusive possession of half of the property. 44

In their separate comments, respondents Salamanca and Talao argued that this case fell under the exception of the
rule on immutability of judgments.  The non-compliance of some of the parties with the compromise agreement
45

constituted an event that "[makes] it difficult if not totally impossible to enforce the compromise agreement."46

Respondents Salamanca and Talao also argued that the physical partition of the property would not prejudice the
parties.  The order granting the motion for physical partition was a mere enforcement of the compromise
47

agreement, which entitled the parties to their shares in the proceeds of the sale.  Respondent Salamanca pointed
48

out that the grant of the motion for physical partition would still be consistent with the intent of the compromise
agreement since it would result in the proceeds being divided equally among the parties.  "The Order granting the
49

physical partition was within the inherent power and authority of the court having jurisdiction to render a particular
judgment to enforce it and to exercise equitable control over such enforcement." 50

Moreover, petitioner’s refusal to vacate the property prevented it from being sold so that the proceeds could already
be distributed among the parties. 51

On the violation of due process, respondents Salamanca and Talao argued that it was only before this court that this
issue was raised.

The issue in this case is whether the Court of Appeals erred in affirming the Regional Trial Court’s decision allowing
the physical partition of the property despite finality of a previous judgment on compromise agreement involving the
division of the same property.

The petition is meritorious.

The Court of Appeals erred in

affirming the Regional Trial
Court’s decision allowing the
physical partition of the property

Respondent Salamanca filed two actions for physical partition. The two parties settled the first action through a
judicial compromise agreement. The same respondent filed the second action after she had determined that her co-
heirs were not being cooperative in complying with the compromise agreement.

402
In a compromise agreement, the parties freely enter into stipulations. "[A] judgment based on a compromise
agreement is a judgment on the merits"  of the case. It has the effect of res judicata. These principles are impressed
52

both in our law and jurisprudence.

Thus, Article 2037 of the Civil Code provides:

Article 2037. A compromise has upon the parties the effect and authority of res judicata; but there shall be no
execution except in compliance with a judicial compromise.

In Spouses Romero v. Tan,  this court said:

53

It is well settled that a judicial compromise has the effect of res judicata and is immediately executory and not
appealable unless set aside [by mistake, fraud, violence, intimidation, undue influence, or falsity of documents that
vitiated the compromise agreement]. 54

There is res judicata when the following concur:

1. Previous final judgment;

2. By a court having jurisdiction over the parties and the subject matter;

3. On the merits of the case;

4. Between identical parties, on the same subject matter, and cause of action 55

There are two rules that embody the principle of res judicata. The first rule refers to "bar by prior judgment,"  which
56

means that actions on the same claim or cause of action cannot be relitigated.  This rule is embodied in Rule 39,
57

Section 47, paragraph (b) of the Rules of Court, which provides:

Section 47. Effect of judgments or final orders. — The effect of a judgment or final order rendered by a court of the
Philippines, having jurisdiction to pronounce the judgment or final order, may be as follows:

(b) In other cases, the judgment or final order is, with respect to the matter directly adjudged or as to any other
matter that could have been raised in relation thereto, conclusive between the parties and their successors in
interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing
and under the same title and in the same capacity[.]

The second rule refers to "conclusiveness of judgment."  This means that facts already tried and determined in
58

another action involving a different claim or cause of action cannot anymore be relitigated.  This rule is embodied in
59

Rule 39, Section 47, paragraph (c) of the Rules of Court, which provides:

Section 47. Effect of judgments or final orders. — The effect of a judgment or final order rendered by a court of the
Philippines, having jurisdiction to pronounce the judgment or final order, may be as follows:

....

(c) In any other litigation between the same parties or their successors in interest, that only is deemed to have been
adjudged in a former judgment or final order which appears upon its face to have been so adjudged, or which was
actually and necessarily included therein or necessary thereto. (49a)

This case involves "bar by prior judgment." Respondents cannot file another action for partition after final judgment
on compromise had already been rendered in a previous action for partition involving the same parties and property.

This court explained in FGU Insurance Corporation v. Regional Trial Court  the doctrine of finality of judgment:
60

Under the doctrine of finality of judgment or immutability of judgment, a decision that has acquired finality becomes
immutable and unalterable, and may no longer be modified in any respect, even if the modification is meant to
correct erroneous conclusions of fact and law, and whether it be made by the court that rendered it or by the
Highest Court of the land. Any act which violates this principle must immediately be struck down. 61

This doctrine admits a few exceptions, usually applied to serve substantial justice:

1. "The correction of clerical errors;

2. the so-called nunc pro tunc entries which cause no prejudice to any party;

403
 3. void judgments; and

4. whenever circumstances transpire after the finality of the decision rendering its execution unjust and
inequitable." 62

Doctrines on bar by prior judgment and immutability of judgment apply whether judgment is rendered after a full-
blown trial or after the parties voluntarily execute a compromise agreement duly approved by the court.

Because a judicial compromise agreement is in the nature of both an agreement between the parties and a
judgment on the merits, it is covered by the Civil Code provisions on contracts. It can be avoided on grounds that
may avoid an ordinary contract, e.g., it is not in accord with the law;  lack of consent by a party; and existence of
63

fraud or duress. Further, the pertinent Civil Code provisions on compromise agreements provide:

Article 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence, or falsity of
documents is subject to the provisions of Article 1330 of this Code.

Article 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is
voidable.

Therefore, courts cannot entertain actions involving the same cause of action, parties, and subject matter without
violating the doctrines on bar by prior judgment and immutability of judgments, unless there is evidence that the
agreement was void, obtained through fraud, mistake or any vice of consent, or would disrupt substantial justice.

In this case, there was no issue as to the fact that the parties freely entered into the compromise agreement. There
was also no dispute about the clarity of its terms. Some of the parties simply do not wish to abide by the
compromise agreement’s terms.

This court does not see how substantial justice will be served by disturbing a previous final judgment on
compromise when failure of its execution was caused by the parties themselves.

Likewise, respondents’ argument that a supervening event, i.e. disagreement among the parties, was present to
justify disturbance of the final judgment on compromise fails to persuade. A supervening event may justify the
disturbance of a final judgment on compromise if it "brought about a material change in [the] situation"  between the
64

parties. The material change contemplated must render the execution of the final judgment unjust and inequitable.
Otherwise, a party to the compromise agreement has a "right to have the compromise agreement executed,
according to its terms." 65

The subsequent disagreement among the parties did not cause any material change in the situation or in the
relations among the parties. The situation and relations among the parties remained the same as the situation and
their relations prior to the compromise agreement. They remained co-owners of the property, which they desired to
partition.

Moreover, the parties voluntarily agreed to the compromise agreement, which was already stamped with judicial
approval. The agreement’s execution would bring about the effects desired by all parties and the most just and
equitable situation for all. On the other hand, the judgment granting the second action for partition filed by
respondent Salamanca was obtained with opposition.

Judges "have the ministerial and mandatory duty to implement and enforce [a compromise agreement]."  Absent 66

appeal or motion to set aside the judgment, courts cannot modify, impose terms different from the terms of a
compromise agreement, or set aside the compromises and reciprocal concessions made in good faith by the parties
without gravely abusing their discretion. 67

"[They cannot] relieve parties from [their] obligations . . . simply because [the agreements are] . . . unwise." Further,
68

"[t]he mere fact that the Compromise Agreement favors one party does not render it invalid."  Courts do not have
69

power to "alter contracts in order to save [one party]

from [the effects of] adverse stipulations. . . ." 70

Respondents have remedies if

parties to the compromise
agreement refuse to abide by its
terms

The issue in this case involves the non-compliance of some of the parties with the terms of the compromise
agreement.  The law affords complying parties with remedies in case one of the parties to an agreement fails to
1âwphi1

abide by its terms.

404
A party may file a motion for execution of judgment. Execution is a matter of right on final judgments. Section 1,
Rule 39 of the Rules of Court provides:

Section 1. Execution upon judgments or final orders. — Execution shall issue as a matter of right, on motion, upon a
judgment or order that disposes of the action or proceeding upon the expiration of the period to appeal therefrom if
no appeal has been duly perfected. (1a)

If the appeal has been duly perfected and finally resolved, the execution may forthwith be applied for in the court of
origin, on motion of the judgment obligee, submitting therewith certified true copies of the judgment or judgments or
final order or orders sought to be enforced and of the entry thereof, with notice to the adverse party.

The appellate court may, on motion in the same case, when the interest of justice so requires, direct the court of
origin to issue the writ of execution. (n)

If a party refuses to comply with the terms of the judgment or resists the enforcement of a lawful writ issued, an
action for indirect contempt may be filed in accordance with Rule 71 of the Rules of Court:

Section 3. Indirect contempt to be punished after charge and hearing. — After a charge in writing has been filed,
and an opportunity given to the respondent to comment thereon within such period as may be fixed by the court and
to be heard by himself or counsel, a person guilty of any of the following acts may be punished for indirect contempt;

....

(b) Disobedience of or resistance to a lawful writ, process, order, or judgment of a court, including the act of a
person who, after being dispossessed or ejected from any real property by the judgment or process of any court of
competent jurisdiction, enters or attempts or induces another to enter into or upon such real property, for the
purpose of executing acts of ownership or possession, or in any manner disturbs the possession given to the person
adjudged to be entitled thereto[.]

Since a judgment on compromise agreement is effectively a judgment on the case, proper remedies against
ordinary judgments may be used against judgments on a compromise agreement. Provided these are availed on
time and the appropriate grounds exist, remedies may include the following: a) motion for reconsideration; b) motion
for new trial; c) appeal; d) petition for relief from judgment; e) petition for certiorari; and f) petition for annulment of
judgment. 71

Respondent Salamanca knew that the only reason for the failed compromise agreement was the non-compliance
with the agreement’s terms of some of her co-heirs. Particularly, it was stipulated that petitioner’s removal from the
property was conditioned upon payment of an amount equivalent to his share. Respondent Talao refused to abide
by his own undertaking to shoulder respondent Salamanca’s share. He also refused to acknowledge the appraisal
of the appraiser appointed in the compromise agreement. This refusal caused the failure of the compromise
agreement.

Instead of availing herself of the proper remedies so the compromise could be enforced and the partition could be
effected, respondent Salamanca chose to move again for the partition of the property and set aside a valid and final
judgment on compromise. This court cannot allow such motion to prosper without going against law and established
jurisprudence on judgments.

WHEREFORE, the Court of Appeals’ decision is REVERSED and SET ASIDE. The judgment on the compromise
agreement is REINSTATED.

SO ORDERED.

405
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 208173               June 11, 2014

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, 

vs.
OLIVER A. BUCLAO, Accused-Appellant.

DECISION

LEONEN, J.:

To protect one's daughter is one of the noblest roles of a father. A father who defies this role is afflicted with a
dysfunctional character that borders on moral depravity. Even if this breach of trust deserves the highest penalties in
our legal order, it will never compensate for the daughter's deepest scars and sorrows.

This resolves the appeal, through Section 13, paragraph (c), Rule 124 of the Rules of Court, as amended by A.M.
No. 00-5-03-SC, of the decision of the Regional Trial Court, Branch 9, La Trinidad, Benguet in Criminal Case Nos.
06-CR-6298 and 06-CR-6299.  The trial court found the accused Oliver Buclao guilty beyond reasonable doubt of
1

two counts of rape. The Court of Appeals, upon intermediate review, affirmed with modification the trial court’s
decision, finding the accused guilty of two counts of qualified rape.
2

We restate the facts as summarized by the Court of Appeals. Accusedappellant was charged with two counts of
rape, as defined under Article 266-A, paragraph 1 (a) and (c) of the Revised Penal Code, as amended by Republic
Act No. 8353 or the Anti-RapeLaw of 1997, in relation to Republic Act No. 7610.  The informations read:
3

In Criminal Case No. 06-CR-6298:

INFORMATION

The undersigned prosecutor accuses OLIVER A. BUCLAO of the crime of Rape, defined under Article 266-A, par. 1
(a & c), and penalized under Article 266-B, both of the Revised Penal Code, as amended by Republic Act No. 8353,
otherwise known as "The Anti-Rape Law of 19[9]7", in relation to Republic Act No. 7610, committed as follows:

That on or about the third week of September 2004, at Camanggaan, Virac, Municipality of Itogon, Province of
Benguet, Philippines and within the jurisdiction of this Honorable Court, the above-named accused, who is the
biological father of the complainant, did then and there willfully, unlawfully and feloniously, by means of force,
threats, intimidation and grave abuse of authority, have carnal knowledge with her daughter AAA who is a minor,

406
being fifteen (15) years old, against her will and consent, to her great damage, prejudice and mental anguish.
CONTRARY TO LAW.

In Criminal Case No. 06-CR-6299:

INFORMATION

The undersigned prosecutor accuses OLIVER A. BUCLAO of the crime of Rape, defined under Article 266-A, par. 1
(a & c), and penalized under Article 266-B,both of the Revised Penal Code, as amended by Republic Act No. 8353,
otherwise known as "The Anti-Rape Law of 19[9]7", in relation to Republic Act No. 7610, committed as follows:

That on or about the 3rd day of June 2003, at Camanggaan, Virac, Municipality of Itogon, Province of Benguet,
Philippines and within the jurisdiction of this Honorable Court, the abovenamed accused, who is the biological father
of the complainant, did then and there willfully, unlawfully and feloniously, by means of force, threats, intimidation
and grave abuse of authority, have carnal knowledge with her daughter [sic] AAA who is a minor, being fifteen (15)
years old, against her will and consent, to her great damage, prejudice and mental anguish.

CONTRARY TO LAW. 4

Accused-appellant entered a plea of not guilty, and the cases were tried jointly. 5

During trial, private complainant AAA  testified that she was cleaning their backyard at 11:00 a.m. on June 3,
6

2003. AAA’s biological father, accused-appellant, called her to go inside their house.  When AAA was inside, her
7 8

father closed the door and pushed her onto the bed.  AAA’s father pulled her pants and panties down to her
9

knees  then he removed his pants and briefs.  Next, AAA’s father moved on top of her, inserted his erect penis into
10 11

her vagina, and started pumping or doing a push and pull or an up and down motion.  AAA felt pain during the act,
12

but she could not fight back so she just cried whileshe was being sexually assaulted.  Her father left after the
13

incident. However, before he left, the accused-appellant threatened her that he would kill her if she told anyone
14

about what happened. 15

On the third week of September 2004, AAA was raped for the second time.  AAA testified that at 12 in the
16

afternoon, she was sleeping on her bed and was awakened when she felt somebody lying on top of her.  AAA was 17

shocked to see her father. He pulled down her pants and panties until they were around her knees.  Her father then
18

removed his pants and briefs.  AAA’s father inserted his penis into her vagina and started doing the pumping
19

motion.  She cried out in pain, but she could not fight off her father. Her father threatened to kill her if she told
20

anyone about the incident.  AAA was afraid so she kept the incident a secret.  It was in 2006 when AAA told her
21 22

maternal grandmother about the rape.  They reported the incident to the police in Binanga, Tuding, on April 4,
23

2006.24

The prosecution also presented as witness Dr. Genalin B. Manipol.  The doctor testified that she examined AAA’s
25

genitalia and found no injuries.  However, the doctor clarified thatlack of evident injuries in the genitalia does not
26

negate the possibility of sexual abuse. 27

Accused-appellant denied raping his daughter twice.  He argued that the charges were false. He claimed that it was
28

his daughter BBB who was with him at their house on June 3, 2003.  Similarly, accused-appellant alleged that on
29

the third week of September 2004, it was his other children, BBB and CCC, who were with him at their house. 30

During trial, accused-appellant admitted that he was convicted for a previous case of child abuse.  His daughter
31

BBB and his sister Virginia Buclao Wacdagan testified for the defense and claimed there was no truth to AAA’s
stories. 32

On August 17, 2011 the trial court rendered a consolidated judgment finding accused-appellant guilty beyond
reasonable doubt.  The dispositive portion of the decision states: WHEREFORE, accused OLIVER BUCLAO is
33

hereby found GUILTY BEYOND REASONABLE DOUBT of TWO COUNTS OF RAPE. He is sentenced to suffer the
penalty of Reclusion Perpetua for each case.

Further, accused Oliver Buclao isordered to pay the victim child the amount of ₱75,000.00 as civil indemnity,
₱50,000.00 as moral damages, and another ₱30,000.00 as exemplary damages for each of the two counts of Rape.

Furnish copy of this Consolidated Judgment to the Office of the Provincial Prosecutor of Benguet, the complainant,
the accused and her counsel.

SO ORDERED. 34

On review, the Court of Appeals affirmed with modification  the trial court’s decision. It held that the prosecution
35

proved beyond reasonable doubt the elements of rape under Article 266-A of the Revised Penal Code.  AAA was 36

407
able to narratein detail the antecedents and the surrounding circumstances of both rape incidents.  Accused- 37

appellant’s defense of denial and ill motives of AAA’s grandmother in prodding AAA to file the case are insufficient to
rebut the evidence and arguments presented by the prosecution. 38

The dispositive part of the Court of Appeals’ decision provides:

WHEREFORE, in view of the foregoing premises, the instant appeal is hereby DENIED and the August 17, 2011
Consolidated Judgment of the Regional Trial Court (Family Court for Benguet Province), Branch 9, in LA Trinidad,
Benguet in Crim. Cases Nos. 06-CR-6298 and 06-CR-6299 is hereby AFFIRMED with MODIFICATION. Accused-
appellant OLIVER BUCLAO is found GUILTY beyond reasonable doubt of two counts of the crime of QUALIFIED
RAPE, and sentenced to reclusion perpetua, in lieu of death, without eligibility for parole, for each case. He is
ORDEREDto pay the victim AAA SeventyFive Thousand Pesos (₱75,000.00) as civil indemnity, Fifty Thousand
Pesos (₱50,000.00) as moral damages and Thirty Thousand Pesos (₱30,000.00) as exemplary damages, for each
of the two counts of rape.

SO ORDERED.  (Emphasis in the original)

39

On September 11, 2013, we issued a resolution which noted the records forwarded by the Court of Appeals, notified
the parties that they may file their respective supplemental briefsif they so desire, and required the Chief
Superintendent of the New Bilibid Prison to confirm the confinement of accused-appellant. 40

The following documents were then received by this court and noted in our resolution dated January 27, 2014: 1)
letter dated October 31, 2013 of P/Supt. IV Venancio J. Tesoro, new Bilibid Prison, Muntinlupa City, confirming the
confinement of accused-appellant since November 8, 2011; 2) the Public Attorney’s Office’s Manifestation (in Lieu of
Supplemental Brief)dated November 7, 2013 which stated that the Public Attorney’s Office would no longer file a
supplemental brief as all the relevant matters to the defense of appellant had already been taken up in the
appellant’s brief previously filed before the Court of Appeals; and 3) the Office of the Solicitor General’s
Manifestation (Re: Supplemental Brief)dated November 8, 2013 which stated that the office was not filing a
supplemental brief as the appellee’s brief had sufficiently addressed the issues and arguments in the appellant’s
brief.
41

In his brief, accused-appellant argued that physical evidence is the best evidence in a rape case.  During trial, the
42

prosecution’s witness, Dr. Genalin Manipol, testified that her examination of private complainant resulted in a
possibility that no penis entered private complainant’s vagina.  Accordingly, all doubts as to the truth ofAAA’s
43

allegations must be resolved in favor of accused-appellant and the presumption of innocence. 44

In addition, accused-appellant questioned the delay in AAA’s reporting of the incident.  Accused-appellant also
45

ascribed the filing of the charges against AAA’s maternal grandmother.  According to accusedappellant, the
46

animosity between him and his mother-in-law was the reason behind the rape charges. 47

The Office of the Solicitor General, for the people of the Philippines, argued in its brief that accused-appellant is
guilty beyond reasonable doubt of the crime of rape under Article266-A of the Revised Penal Code.  According to 48

the appellee, AAA’s positive identification of accusedappellant and her categorical testimony of the circumstances
during the two rape incidents cannot be easily overcome by bare assertions of alibi and denial. 49

Moreover, absence of lacerations inthe victim’s genitals does not negate the commission of rape.  Rape is also not
50

negated by the delay in the reporting of the incident, particularly when the delay was founded on the threats by the
accused-appellant to the victim’s life.51

The sole issue in this case is whether the accused-appellant is guilty of two counts of rape beyond reasonable
doubt.

We affirm the accused-appellant’s conviction.

Article 266-A, paragraph (1) of the Revised Penal Code provides the elements of the crime of rape:

Article 266-A. Rape: When And How Committed. - Rape is committed:

1) By a man who shall have carnal knowledge of a woman under any of the following circumstances:

a) Through force, threat, or intimidation;

b) When the offended party is deprived of reason or otherwise unconscious;

c) By means of fraudulent machination or grave abuse of authority; and

408
d) When the offended party is under twelve (12) years of age or is demented, even though none of the
circumstances mentioned above be present. . . . 52

Rape is qualified when "the victim is under eighteen (18) years of age and the offender is a parent, ascendant, step-
parent, guardian, relative by consanguinity or affinity within the third civil degree, or the common-law spouse of the
parent of the victim."  The elements of qualified rape are: "(1) sexual congress; (2) with a woman; (3) [done] by
53

force and without consent; . . . (4) the victim is under eighteen years of age at the time of the rape; and (5) the
offender is a parent (whether legitimate, illegitimate or adopted) of the victim." 54

In this case, both the trial court and Court of Appeals found that the prosecution proved beyond reasonable doubt all
the elements of qualified rape. This court sees no reason to depart from the findings of the lower courts. As correctly
observed by the Court of Appeals, AAA’s recollection of the heinous acts of her father was vivid and straightforward.
She was able to positively identify the accused-appellant as her sexual assailant. Her testimony was given in a
"categorical, straightforward, spontaneous and candid manner." 55

We recently held that "[i]t is doctrinally settled that factual findings of the trial court, especially on the credibility of the
rape victim, are accorded great weight and respect and will not be disturbed on appeal." 56

As to accused-appellant’s argument that the absence of hymenal lacerations admits the possibility thatthere was
never any sexual abuse, we find our disquisition in People v. Araojo  applicable:
57

The absence of external signs or physical injuries on the complainant’s body does not necessarily negate the
commission of rape, hymenal laceration not being,to repeat, an element of the crime of rape. A healed or fresh
laceration would of course be a compelling proof of defloration. [However,] the foremost consideration in the
prosecution of rape is the victim’s testimony and not the findings of the medico-legal officer. 58

We also disagree with accused-appellant’s argument that private complainant AAA’s delay in reporting the alleged
rape incidents, together with the prodding of AAA’s grandmother, signals the falsity of the rape allegations. In
People v. Delos Reyes,  this court ruled that:
59

The failure to immediately report the dastardly acts toher family or to the authorities at the soonest possible time or
her failure to immediately change her clothes is not enough reason to cast reasonable doubt on the guilt of
[accused]. This Court has repeatedly heldthat delay in reporting rape incidents, in the face of threats of physical
violence, cannot be taken against the victim. Further, it has beenwritten that a rape victim’s actions are oftentimes
overwhelmed by fear rather than by reason. It is this fear, springing from the initial rape, that the perpetrator hopes
to build a climate of extreme psychological terror, which would, he hopes, numb his victim into silence and
submissiveness. 60

To this court’s mind, there can be no greater source of fear or intimidation than your own father — one who,
generally, has exercised authority over your person since birth.Delay brought by fear for one’s life cannot be
deemed unreasonable. This court has recognized the moral ascendancy and influence the father has over his
child.  In cases of qualified rape, moral ascendancy or influence supplants the element of violence or intimidation. It
61 62

is not only an element of the crime, but it is also a factor in evaluating whether the delay in reporting the incident
was unreasonable.

Moreover, "[n]ot even the most ungrateful and resentful daughter would push her own father to the wall as the fall
guy in any crime unless the accusation against him is true."  Thus, accused-appellant’s argument that AAA was
63

forced by her grandmother to fabricate the charges fails to sway this court.

This court has held before that "mere denial, like alibi, is inherently a weak defense and constitutes self-serving
negative evidence which cannot be accorded greater evidentiary weight than the declaration of credible witnesses
who testify on affirmative matters."  It is settled that the defense of alibi and denial cannot overcome the victim’s
64

positive and categorical testimony and identification of the accused-appellant.  Presence of other family members is
65

not a valid defense in rape cases since rape may be carried out in the same room where the family members are
staying. 66

With all the elements of qualifiedrape duly alleged and proven, the Court of Appeals was correct in modifying the
trial court’s decision. Under Article 266-B of the Revised Penal Code, the proper penalty to be imposed is death.
However, with the effectivity of Republic Act No. 9346,  the imposition of death was prohibited, and the penalty of
67

reclusion perpetua without eligibility for parole should be imposed instead. 68

The suspension of the death penalty incases where the father rapes his daughter should not, however, be
misinterpreted as reducing the heinous nature of this crime. No matter how high the penalty, our legal system
cannot assuage the deepest injuries caused by the abuse of trust committed by the father.

409
A father is supposed to be a daughter’s role model of a man. He is there to protect and comfort her.  Withthe
1âwphi1

mother, a father’s love will be every daughter’s assurance that howeverharsh the world turns out to be, he will be
there for her. Fathers should inspire courage and trust within their daughters.

That a father abuses this trust to gratify his selfish carnal desires is a dastardly act. It defiles not only his daughter’s
person. It extinguishes all hope the daughter may have of the value of family. It skews her understanding of the
honor that may be inherent in all men.

This court will never countenance such repugnant acts.

In rape cases, the award of civil indemnity is mandatory upon proof of the commission of rape, whereas moral
damages are automatically awarded without the need to prove mental and physical suffering.  Exemplary damages
69

are also imposed, as example for the public good and to protect minors from all forms of sexual abuse. 70

In People v. Gambao,  we increased the amounts of indemnity and damages where the proper penalty for the crime
71

committed by the accused is death but where it cannot be imposed because of the enactment of Republic Act No.
9346.  We imposed as a minimum the amounts of One Hundred Thousand Pesos (₱100,000.00) as civil indemnity;
72

One Hundred Thousand Pesos (₱100,000.00) as moral damages;and One Hundred Thousand Pesos
(₱100,000.00) as exemplary damages.

In view of the depravity of the actsin this crime committed in this case — multiple rape of a minor by her father — we
further increase the amounts awarded to private complainant, AAA. Hence, we modify the award of civil indemnity
from Seventy-five Thousand Pesos (₱75,000.00) to One Hundred Fifty Thousand Pesos (₱150,000.00); moral
damages from Fifty Thousand Pesos (50,000.00) to One Hundred Fifty Thousand Pesos (₱150,000.00); and
exemplary damages from Thirty Thousand Pesos (₱30,000.00) to One Hundred Thousand Pesos (₱100,000.00).

In addition, interest at the rate of 6o/o per annum should be imposed on all damages awarded from the date of the
finality of this judgment until fully paid.
73

WHEREFORE, the Court of Appeals' decision dated November 8, 2012 finding the accused-appellant Oliver Buclao
guilty beyond reasonable doubt of two counts of rape and sentencing him to reclusion perpetua, without eligibility for
parole, for each count of rape, is AFFIRMED with MODIFICATION. The civil indemnity awarded is increased to
₱150,000.00, the moral damages to ₱150,000.00, and the exemplary damages to ₱100,000.00, for each of the two
counts of rape. The award of damages shall earn interest at the rate of 6% per annum from the date of finality of the
judgment until fully paid.

SO ORDERED.

410
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. P-13-3123               June 10, 2014

ALBERTO VALDEZ, Complainant, 
vs.
DESIDERIO W. MACUSI, JR., Sheriff IV, Regional Trial Court, Branch 25, Tabuk, Kalinga, Respondent.

DECISION

PER CURIAM:

This administrative matter refers to the failure of respondent Desiderio W. Macusi, Jr., Sheriff IV, Regional Trial
Court (RTC) of Tabuk, Kalinga, Branch 25, to act on a writ of execution issued by the Municipal Trial Court in Cities
(MTCC) of Tabuk, Kalinga on 3 December 2003 in Criminal Case No. 4050, entitled "People v. Jorge Macusi y
Wayet," for reckless imprudence and negligence resulting in homicide. Sheriff Macusi was charged with
misfeasance, nonfeasance or conduct prejudicial to the best interest of the service.

In a letter-complaint  dated 12 May 2009 sent to Judge Victor Dalanao (Judge Dalanao), presiding judge of the
1

MTCC of Tabuk, Kalinga, complainant Alberto Valdez (Valdez) alleged that Sheriff Macusi failed to act on the writ of
execution issued by the MTCC in violation of Section 14, Rule 39 of the 1997 Rules of Civil Procedure.

In his Comment  dated 14 July 2009, Sheriff Macusi stated that he was appointed as Sheriff IV in the Province of
2

Kalinga on 24 May 2004. Sheriff Macusi explained that in a Report  dated 6 January 2004, his predecessor,
3

Francisco C. Mabazza, served on accused Jorge Macusi the writ of execution issued by the MTCC on 5 December
2003. However, the accused replied that he had no money to pay for the execution. Thus, the notation in the writ of
execution was "unsatisfactory (sic) served. "Thereafter, Sheriff Macusi stated that he tried to serve the order again
by entering the residence of defendant looking for personal properties that could be confiscated on account of the
writ but to no avail. Sheriff Macusi then asked accused to voluntarily comply with his legal obligation but found out
that accused had suffered a stroke and could no longer fend for himself and his family and resorted to accepting
charity from his sister.

In a Partial Report  dated 3 May 2006, Sheriff Macusi filed a return of the writ of execution stating that it was still
4

unserved. The relevant portions of the Report state:

1. That the accused because of the incident suffered a stroke and therefrom could no longer find a livelihood for
himself and his children and as stated in the order of the Honorable Court is now living on the charity of his sister.
His sister is also tending to the needs of their mother who also suffered the same fate because of illness that befell
her son;

411
 xxxx

3. That the court battle begun armed with the hope that the accused was never given his day in court (in fact an
ocular inspection was done to determine the seriousness of the illness of the accused and at that time he could
hardly speak and walk yet the court continued hearing his case; thus, his right to be present in all the stages of the
court proceedings of his case was denied) will be imprisoned should the decision of the Hon. Court will (sic) be
against him;

xxxx

Sheriff Macusi averred that he could not be held liable for misfeasance, nonfeasance or conduct prejudicial to the
best interest of the service since he carried out all the possible legal remedies on execution and satisfaction of
judgment under the rules.

On 19 June 2006, Judge Dalanao issued an Order  stating that the Partial Report dated 3 May 2006 of Sheriff
5

Macusi was an improper and inadequate report as required under the Rules. The relevant portions of the Order
state:

It appears therefrom that the said report is not the report contemplated by law, which should be submitted monthly
to the Court (Section 14, Rule 39, 1997 Rules of Civil Procedure).

Instead, the Sheriff appears to be lawyering for accused, even going to the extent of accusing the Court of having
denied the accused his day in Court. Certainly, this comment, from a responsible officer of the Court is unwarranted
or without any justification at all. Not only that, it will certainly diminish the good image of the Court, and worst,
tarnish the faith and confidence of the litigants in our judicial processes.

The Court just came to know that the accused in this case is the brother of Sheriff Desiderio Macusi. The least that
he should have done was to inhibit himself from handling this case.

Furnish a copy of this Order to the Executive Judge for his information and/or appropriate action without prejudice
for this Court to take measures appropriate under the premises, where warranted.

SO ORDERED.

Valdez, in the letter-complaint, added that Sheriff Macusi did not submit another report to the court since the time
the MTCC issued the Order dated 19 June 2006. Acting on the letter-complaint, Judge Dalanao issued an Order
dated 13 May 2009 endorsing the letter-complaint to the Office of the Court Administrator (OCA) for appropriate
action.

In a Report dated 1 June 2010,the OCA recommended that the administrative complaint be referred tothe Executive
Judge of the RTC of Bulanao, Tabuk City, Kalinga, Branch 25, for investigation, report and recommendation within
60 days from receipt of notice. In a Resolution  dated 28 July 2010, this Court adopted the recommendation of the
6

OCA and referred the matter to Executive Judge Marcelino K. Wacas (Judge Wacas).

In an Investigation Report  dated 20 April 2012, Judge Wacas found no substantial evidence to hold Sheriff Macusi
7

for the offense charged and recommended the dismissal of the complaint. In a Resolution  dated 4 July 2012, this
8

Court referred the Investigation Report to the OCA.

In its Report  dated 23 April 2013, the OCA disagreed with the recommendation of Judge Wacas and found Sheriff
9

Macusi liable for (1) simple neglect of duty for his failure to submit the proper returns, and (2) violation of the Code
of Conduct for Court Personnel for his failure to disclose that the accused in "People v. Jorge Macusi y Wayet"is his
brother. The OCA recommended that Sheriff Macusi be suspended from office for two months without pay. The
recommendation of the OCA states:

1. The instant administrative complaint be RE-DOCKETED as a regular administrative matter;

2. Desiderio W. Macusi, Jr., Sheriff IV, Branch 25, Regional Trial Court, Tabuk, Kalinga, be held LIABLE for
Simple Neglect of Duty and Violation of the Code of Conduct for Court Personnel; and

3. Sheriff Macusi be SUSPENDED from office for two (2) months without pay, with a WARNING that a
repetition of the same or a similar act shall be dealt with more severely.10

We adopt the findings of the OCA but modify its recommendation on the penalty.

Section 14, Rule 39 of the 1997 Rules of Civil Procedure states:

412
Section 14. Return of writ of execution. — The writ of execution shall be returnable to the court issuing it
immediately after the judgment has been satisfied in part or in full. If the judgment cannot be satisfied in full within
thirty (30) days after his receipt of the writ, the officer shall report to the court and state the reason therefor. Such
writ shall continue in effect during the period within which the judgment may be enforced by motion. The officer shall
make a report to the court every thirty (30) days on the proceedings taken thereon until the judgment is satisfied in
full, or its effectivity expires. The returns or periodic reports shall set forth the whole of the proceedings taken, and
shall be filed with the court and copies thereof promptly furnished the parties.

The 30-day period imposed for the execution of the writ after the judgment has been received by the sheriff, as well
as the periodic report every 30 days, is mandatory under the rule. In Aquino v. Martin,  we held that it is mandatory
11

for the sheriff to execute the judgment and make a return on the writ of execution within the period provided by the
Rules of Court. Also, the sheriff must make periodic reports on partially satisfied or unsatisfied writs in accordance
with the rule in order that the court and the litigants are apprised of the proceedings undertaken. Such periodic
reporting on the status of the writs must be done by the sheriff regularly and consistently every 30 days until they
are returned fully satisfied.

In the present case, the records show that Sheriff Macusi submitted only one return of writ of execution in his Partial
Report dated 3 May 2006 and did not file any other report to the court. Sheriff Macusi failed to implement the court
order and failed to submit periodic reports of the actions he had taken on the writ "every 30 days until the judgment
is satisfied in full, or its effectivity expires," as required by the Rules. In Dilan v. Dulfo,  we held that sheriffs play an
12

important part in the administration of justice because they are tasked to execute the final judgment of courts. If not
enforced, such decisions are empty victories on the part of the prevailing parties. Clearly, Sheriff Macusi was remiss
in his duties and is thus liable for simple neglect of duty.

Simple neglect of duty is the failure to give attention to a task, or the disregard of a duty due to carelessness or
indifference. Under the Revised Uniform Rules on Administrative Cases in the Civil Service,  simple neglect of duty
13

is a less grave offense punishable with suspension of one month and one day to six months for the first offense and
dismissal for the second offense. 14

Further, aside from Sheriff Macusi’s long delay in the enforcement of the writ, it has also been verified by the OCA
that Sheriff Macusi is the brother of the accused Jorge Macusi in Criminal Case No. 4050. Section 1(a)(i) of Canon
III of the Code of Conduct for Court Personnel provides:

Section 1. Court personnel shall avoid conflicts of interest in performing official duties.  Every court personnel is
1âwphi1

required to exercise utmost diligence in being aware of conflicts of interest, disclosing conflicts of interest to the
designated authority, and terminating them as they arise.

(a) A conflict of interest exists when:

(i) The court personnel’s objective ability or independence of judgment in performing official duties is impaired or
may reasonably appear to be impaired; x x x

As an officer of the court, Sheriff Macusi should have informed the court and inhibited himself from enforcing the writ
knowing fully well that there is a conflict of interest since the accused is his brother. It is incumbent upon him, as an
agent of the law, to adhere to high ethical standards in order to preserve the good name and standing of the court.
In Office of the Court Administrator v. Sheriff IV Cabe,  we emphasized the heavy burden and responsibility which
15

court personnel bear in view of their exalted positions as keepers of public faith. They must be constantly reminded
that any impression of impropriety, misdeed or negligence in the performance of official functions must be avoided.
We agree with the OCA that Sheriff Macusi violated the Code of Conduct for Court Personnel for his failure to
disclose that the accused in "People v. Jorge Macusi y Wayet"is his brother. The Rules classify this violation of
existing Civil Service Law and rules a serious offense punishable with suspension of one month and one day to six
months for the first offense and dismissal for the second offense. 16

We disagree with the penalty of suspension for two months without pay as recommended by the OCA. This is the
second time that Sheriff Macusi was found guilty of simple neglect of duty. In the 2013 case of Office of the Court
Administrator v. Macusi, Jr.,  this Court found Sheriff Macusi liable for simple neglect of duty for his "failure to file
17

periodic reports on the Writ of Execution dated 10 September 2008 in Civil Case No. 429-06, as well as on the writs
of execution in the other cases in Judge Dalanao’s inventory." However, instead of imposing on him the penalty of
suspension from service in accordance with the Rules, the Court imposed on him the penalty of fine of ₱4,000 since
he was deemed resigned from government service after filing his certificate of candidacy for the 2010 local
elections.

Here, respondent is found guilty of committing two offenses: (1) simple neglect of duty (second offense), and (2)
violation of civil service law and rules of a serious nature (first offense). Thus, the penalty for the more serious
offense must be imposed. This is expressly laid down under Section 55, Rule IV of the Revised Uniform Rules on
Administrative Cases in the Civil Service which states:

413
Section 55. Penalty for the Most Serious Offense. If the respondent is found guilty of two or more charges or counts,
the penalty to be imposed should be that corresponding to the most serious charge or count and the rest shall be
considered as aggravating circumstances.

In view of the circumstances, the penalty that should be imposed is dismissal from the government service.
However, considering that Sheriff Macusi was deemed resigned after filing his certificate of candidacy making the
penalty of dismissal no longer feasible, we impose on him the penalty of forfeiture of retirement benefits, except
accrued leave credits, with prejudice to reemployment in any branch or instrumentality of the government, including
government owned and controlled corporations, since he had been previously warned that a repetition of the same
or similar act would be dealt with more severely. 18

WHEREFORE, we find respondent Desiderio W. Macusi, Jr., Sheriff IV, Regional Trial Court of Tabuk, Kalinga,
Branch 25, GUILTY of SIMPLE NEGLECT OF DUTY and VIOLATION OF THE CODE OF CONDUCT FOR COURT
PERSONNEL and impose on him the penalty of forfeiture of retirement benefits, except accrued leave credits, with
prejudice to reemployment in any branch or instrumentality of the government, including government-owned and
controlled corporations.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 192074               June 10, 2014

LIGHT RAIL TRANSIT AUTHORITY, represented by its Administrator MELQUIADES A. ROBLES, Petitioner, 

vs.
AURORA A. SALVAÑA, Respondent.

DECISION

LEONEN, J.:

An administrative agency has standing to appeal the Civil Service Commission's repeal or modification of its original
decision. In such instances, it is included in the concept of a "party adversely affected" by a decision of the Civil
Service Commission granted the statutory right to appeal:

We are asked in this petition for review  filed by the Light Rail Transit Authority (LRTA), a government-owned and
1

-controlled corporation, to modify the Civil Service Commission’s finding that respondent was guilty only of simple
dishonesty.

This case developed as follows:

On May 12, 2006, then Administrator of the Light Rail Transit Authority, Melquiades Robles, issued Office Order No.
119, series of 2006.  The order revoked Atty. Aurora A. Salvaña’s designation as Officer-in-Charge (OIC) of the
2

LRTA Administrative Department. It "direct[ed] her instead to handle special projects and perform such other duties
and functions as may be assigned to her"  by the Administrator.
3

Atty. Salvaña was directed to comply with this office order through a memorandum issued on May 22, 2006 by Atty.
Elmo Stephen P. Triste, the newly designated OIC of the administrative department. Instead of complying, Salvaña
questioned the order with the Office of the President. 4

In the interim, Salvaña applied for sick leave of absence on May 12, 2006 and from May 15 to May 31, 2006.  In5

support of her application, she submitted a medical certificate  issued by Dr. Grace Marie Blanco of the Veterans
6

Memorial Medical Center (VMMC).

LRTA discovered that Dr. Blanco did not issue this medical certificate. Dr. Blanco also denied having seen or treated
Salvaña on May 15, 2006, the date stated on her medical certificate.  On June 23, 2006, Administrator Robles
7

issued a notice of preliminary investigation. The notice directed Salvaña to explain in writing within 72 hours from
her receipt of the notice "why no disciplinary action should be taken against [her]"  for not complying with Office
8

Order No. 119 and for submitting a falsified medical certificate. 9

414
Salvaña filed her explanation on June 30, 2006.  She alleged that as a member of the Bids and Awards Committee,
10

she "refused to sign a resolution"  favoring a particular bidder. She alleged that Office Order No. 119 was issued by
11

Administrator Robles to express his "ire and vindictiveness"  over her refusal to sign.
12

The LRTA’s Fact-finding Committee found her explanation unsatisfactory. On July 26, 2006, it issued a formal
charge against her for Dishonesty, Falsification of Official Document, Grave Misconduct, Gross Insubordination, and
Conduct Prejudicial to the Best Interest of the Service. 13

On August 5, 2006, "Salvaña tendered her irrevocable resignation."  None of the pleadings alleged that this
14

irrevocable resignation was accepted, although the resolution of the Fact-finding Committee alluded to Administrator
Robles’ acceptance of the resignation letter.

In the meantime, the investigation against Salvaña continued, and the prosecution presented its witnesses. Salvaña 15

"submitted a manifestation dated September 6, 2006, stating that the Committee was biased and that
[Administrator] Robles was both the accuser and the hearing officer." 16

On October 31, 2006, the Fact-finding Committee issued a resolution "finding Salvaña guilty of all the charges
against her and imposed [on] her the penalty of dismissal from . . . service with all the accessory penalties."  The 17

LRTA Board of Directors approved the findings of the Fact-finding Committee 18

Salvaña appealed with the Civil Service Commission. "In her appeal, [she] claimed that she was denied due process
and that there [was] no substantial evidence to support the charges against her." 19

On July 18, 2007, the Civil Service Commission modified the decision and issued Resolution No. 071364.The Civil
Service Commission found that Salvaña was guilty only of simple dishonesty. She was meted a penalty of
suspension for three months. 20

LRTA moved for reconsideration  of the resolution. This was denied in a resolution dated May 26, 2008.  LRTA then
21 22

filed a petition for review with the Court of Appeals. 23

On November 11, 2009, the Court of Appeals  dismissed the petition and affirmed the Civil Service Commission’s
24

finding that Salvaña was only guilty of simple dishonesty. The appellate court also ruled that Administrator Robles
had no standing to file a motion for reconsideration before the Civil Service Commission because that right only
belonged to respondent in an administrative case.  LRTA moved for reconsideration  of this decision but was
25 26

denied.27

Hence, LRTA filed this present petition.

Petitioner argues that it has the legal personality to appeal the decision of the Civil Service Commission before the
Court of Appeals.  It cites Philippine National Bank v. Garcia  as basis for its argument that it can be considered a
28 29

"person adversely affected" under the pertinent rules and regulations on the appeal of administrative cases.  It also 30

argues that respondent’s falsification of the medical certificate accompanying her application for sick leave was not
merely simple but serious dishonesty. 31

Respondent agrees with the ruling of the Court of Appeals that petitioner had no legal personality to file the appeal
since it was not the "person adversely affected" by the decision. She counters that Administrator Robles had no
authority to file the appeal since he was unable to present a resolution from the Board of Directors authorizing him
to do so.  She also agrees with the Civil Service Commission’s finding that she was merely guilty of simple
32

dishonesty. 33

In its reply,  petitioner points out that it presented a secretary’s certificate  dated July 17, 2008 and which it attached
34 35

to the petitions before the Civil Service Commission, Court of Appeals, and this court. It argues that the certificate
authorizes the LRTA and its Administrator to file the necessary motion for reconsideration or appeal regarding this
case, and this authorization has yet to be revoked. 36

Both parties filed their respective memoranda before this court on May 23, 2012  and December 6, 2012. 37 38

The legal issues that will determine the results of this case are:

1. Whether the LRTA, as represented by its Administrator, has the standing to appeal the modification by the
Civil Service Commission of its decision

2. Whether Salvaña was correctly found guilty of simple dishonesty only

We grant the petition.

415
The parties may appeal in administrative cases involving members of the civil service

It is settled that "[t]he right to appeal is not a natural right [or] a part of due process; it is merely a statutory privilege,
and may be exercised only in the manner and in accordance with the provisions of the law."  If it is not granted by
39

the Constitution, it can only be availed of when a statute provides for it.  When made available by law or regulation,
40

however, a person cannot be deprived of that right to appeal. Otherwise, there will be a violation of the constitutional
requirement of due process of law.

Article IX (B), Section 3 of the Constitution mandates that the Civil Service Commission shall be "the central
personnel agency of the Government."  In line with the constitutionally enshrined policy that a public office is a
41

public trust, the Commission was tasked with the duty "to set standards and to enforce the laws and rules governing
the selection, utilization, training, and discipline of civil servants." 42

Civil servants enjoy security of tenure, and "[n]o officer or employee in the Civil Service shall be suspended or
dismissed except for cause as provided by law and after due process."  Under Section 12, Chapter 3, Book V of the
43

Administrative Code, it is the Civil Service Commission that has the power to "[h]ear and decide administrative
cases instituted by or brought before it directly or on appeal."

The grant of the right to appeal in administrative cases is not new. In Republic Act No. 2260 or the Civil Service Law
of 1959, appeals "by the respondent"  were allowed on "[t]he decision of the Commissioner of Civil Service
44

rendered in an administrative case involving discipline of subordinate officers and employees." 45

Presidential Decree No. 807, while retaining the right to appeal in administrative cases, amended the phrasing of
the party allowed to appeal. Section 37, paragraph (a), and Section 39, paragraph (a),of Presidential Decree No.
807 provide:

Sec. 37. Disciplinary Jurisdiction. - (a) The Commission shall decide upon appeal all administrative cases involving
the imposition of a penalty of suspension for more than thirty days, or fine in an amount exceeding thirty days'
salary, demotion in rank or salary or transfer, removal or dismissal from office.

Sec. 39. Appeals. - (a) Appeals, where allowable, shall be made by the party adversely affected by the decision
within fifteen days from receipt of the decision unless a petition shall be decided within fifteen days. (Emphasis
supplied)

Additionally, Section 47, paragraph (1), and Section 49, paragraph (1), of the Administrative Code provide:

SECTION 47. Disciplinary Jurisdiction.—(1) The Commission shall decide upon appeal all administrative disciplinary
cases involving the imposition of a penalty of suspension for more than thirty days, or fine in an amount exceeding
thirty days’ salary, demotion in rank or salary or transfer, removal or dismissal from office.

SECTION 49. Appeals.—(1) Appeals, where allowable, shall be made by the party adversely affected by the
decision within fifteen days from receipt of the decision unless a petition for reconsideration is seasonably filed,
which petition shall be decided within fifteen days….(Emphasis supplied)

The phrase, "person adversely affected," was not defined in either Presidential Decree No. 807 or the Administrative
Code. This prompted a series of cases  providing the interpretation of this phrase.
46

The first of these cases, Paredes v. Civil Service Commission,  declared:

47

Based on [Sections 37 (a) and 39 (a) of Presidential Decree No. 807], appeal to the Civil Service Commission in an
administrative case is extended to the party adversely affected by the decision, that is, the person or the respondent
employee who has been meted out the penalty of suspension for more than thirty days; or fine in an amount
exceeding thirty days salary demotion in rank or salary or transfer, removal or dismissal from office. The decision of
the disciplining authority is even final and not appealable to the Civil Service Commission in cases where the
penalty imposed is suspension for not more than thirty days or fine in an amount not exceeding thirty days
salary. (Emphasis supplied)
48

This ruling was repeated in Mendez v. Civil Service Commission  where this court stated that:
49

A cursory reading of P.D. 807, otherwise known as "The Philippine Civil Service Law" shows that said law does not
contemplate a review of decisions exonerating officers or employees from administrative charges.

....

416
By inference or implication, the remedy of appeal may be availed of only in a case where the respondent is found
guilty of the charges filed against him. But when the respondent is exonerated of said charges, as in this case, there
is no occasion for appeal.  (Emphasis supplied)
50

The same ratio would be reiterated and become the prevailing doctrine on the matter in Magpale, Jr. v. Civil Service
Commission,  Navarro v. Civil Service Commission and Export Processing Zone,  University of the Philippines v.
51 52

Civil Service Commission,  and Del Castillo v. Civil Service Commission.

53 54

In these cases, this court explained that the right to appeal being merely a statutory privilege can only be availed of
by the party specified in the law. Since the law presumes that appeals will only be made in decisions prescribing a
penalty, this court concluded that the only parties that will be adversely affected are the respondents that are
charged with administrative offenses. Since the right to appeal is a remedial right that may only be granted by
statute, a government party cannot by implication assert that right as incidental to its power, since the right to appeal
does not form part of due process. 55

In effect, this court equated exonerations in administrative cases to acquittals in criminal cases wherein the State or
the complainant would have no right to appeal.  When the Civil Service Commission enacted the Uniform Rules on
56

Administrative Cases in the Civil Service, or the URACCS, on September 27, 1999, it applied this court’s definition.
Thus, Section 2, paragraph (l),Rule I, and Section 38,Rule III of the URACCS defined "party adversely affected" as
follows:

Section 2. Coverage and Definition of Terms.

....

(l) PARTY ADVERSELY AFFECTED refers to the respondent against whom a decision in a disciplinary case has
been rendered.

For some time, government parties were, thus, barred from appealing exonerations of civil servants they had
previously sanctioned. It was not until the promulgation by this court of Civil Service Commission v. Dacoycoy  on57

April 29, 1999 that the issue would be revisited.

Civil Service Commission v. Dacoycoyand Philippine National Bank v. Garcia

In Civil Service Commission v. Dacoycoy,  an administrative complaint for habitual drunkenness, misconduct, and
58

nepotism was filed against the Vocational School Administrator of Balicuatro College of Arts and Trade in Allen,
Northern Samar. The Civil Service Commission found Dacoycoy guilty, but the Court of Appeals overturned this
finding and exonerated Dacoycoy of all charges. The Civil Service Commission then appealed the ruling of the
appellate court. This court, in addressing the issue of the Commission’s standing, stated that:

Subsequently, the Court of Appeals reversed the decision of the Civil Service Commission and held respondent not
guilty of nepotism. Who now may appeal the decision of the Court of Appeals to the Supreme Court? Certainly not
the respondent, who was declared not guilty of the charge. Nor the complainant George P. Suan, who was merely a
witness for the government. Consequently, the Civil Service Commission has become the party adversely affected
by such ruling, which seriously prejudices the civil service system. Hence, as an aggrieved party, it may appeal the
decision of the Court of Appeals to the Supreme Court. By this ruling, we now expressly abandon and overrule
extant jurisprudence that "the phrase ‘party adversely affected by the decision’ refers to the government employee
against whom the administrative case is filed for the purpose of disciplinary action which may take the form of
suspension, demotion in rank or salary, transfer, removal or dismissal from office" and not included are "cases
where the penalty imposed is suspension for not more than thirty (30) days or fine in an amount not exceeding thirty
days salary" or "when the respondent is exonerated of the charges, there is no occasion for appeal." In other words,
we overrule prior decisions holding that the Civil Service Law "does not contemplate a review of decisions
exonerating officers or employees from administrative charges" enunciated in Paredes v. Civil Service Commission;
Mendez v. Civil Service Commission; Magpale v. Civil Service Commission; Navarro v. Civil Service Commission
and Export Processing Zone Authority and more recently Del Castillo v. Civil Service Commission.  (Emphasis
59

supplied; citations omitted)

In his concurring opinion, then Chief Justice Puno summed up the rationale for allowing government parties to
appeal, thus:

In truth, the doctrine barring appeal is not categorically sanctioned by the Civil Service Law. For what the law
declares as "final" are decisions of heads of agencies involving suspension for not more than thirty (30) days or fine
in an amount not exceeding thirty (30) days salary.

But there is a clear policy reason for declaring these decisions final. These decisions involve minor offenses. They
are numerous for they are the usual offenses committed by government officials and employees. To allow their

417
multiple level appeal will doubtless overburden the quasi-judicial machinery of our administrative system and defeat
the expectation of fast and efficient action from these administrative agencies. Nepotism, however, is not a petty
offense. Its deleterious effect on government cannot be over-emphasized. And it is a stubborn evil. The objective
should be to eliminate nepotic acts, hence, erroneous decisions allowing nepotism cannot be given immunity from
review, especially judicial review. It is thus non sequitur to contend that since some decisions exonerating public
officials from minor offenses cannot be appealed, ergo, even a decision acquitting a government official from a
major offense like nepotism cannot also be appealed.  (Emphasis supplied)
60

The decision in Dacoycoy would be reiterated in 2002 when this court promulgated Philippine National Bank v.
Garcia.  Philippine National Bank categorically allowed the disciplining authority to appeal the decision exonerating
61

the disciplined employee.

In that case, the bank charged Ricardo V. Garcia, Jr., one of its check processors and cash representatives, with
gross neglect of duty when he lost ₱7 million in connection with his duties. Both the Civil Service Commission and
the Court of Appeals reversed the bank and exonerated Garcia from all liability.

This court, however, upheld Philippine National Bank’s right to appeal the case. Citing Dacoycoy, this court ruled:

Indeed, the battles against corruption, malfeasance and misfeasance will be seriously undermined if we bar appeals
of exoneration. After all, administrative cases do not partake of the nature of criminal actions, in which acquittals are
final and unappealable based on the constitutional proscription of double jeopardy.

Furthermore, our new Constitution expressly expanded the range and scope of judicial review. Thus, to prevent
appeals of administrative decisions except those initiated by employees will effectively and pervertedly erode this
constitutional grant.

Finally, the Court in Dacoycoy ruled that the CSC had acted well within its rights in appealing the CA’s exoneration
of the respondent public official therein, because it has been mandated by the Constitution to preserve and
safeguard the integrity of our civil service system. In the same light, herein Petitioner PNB has the standing to
appeal to the CA the exoneration of Respondent Garcia. After all, it is the aggrieved party which has complained of
his acts of dishonesty. Besides, this Court has not lost sight of the fact that PNB was already privatized on May 27,
1996. Should respondent be finally exonerated indeed, it might then be incumbent upon petitioner to take him back
into its fold. It should therefore be allowed to appeal a decision that in its view hampers its right to select honest and
trustworthy employees, so that it can protect and preserve its name as a premier banking institution in our
country. (Emphasis supplied) Thus, the Civil Service Commission issued Resolution No. 021600 published on
62

December 29, 2002, which amended the URACCS, to allow the disciplining authority to appeal the decision
exonerating the employee:

Section 2. Coverage and Definition of Terms. –

....

(l) PARTY ADVERSELY AFFECTED refers to the respondent against whom a decision in a disciplinary case has
been rendered or to the disciplining authority in an appeal from a decision exonerating the said employee.

Subsequent decisions continued to reiterate the rulings in Dacoycoy and Philippine National Bank.

In Constantino-David v. Pangandaman-Gania,  this court explained the rationale of allowing the Civil Service
63

Commission to appeal decisions of exonerations as follows:

That the CSC may appeal from an adverse decision of the Court of Appeals reversing or modifying its resolutions
which may seriously prejudice the civil service system is beyond doubt. In Civil Service Commission v. Dacoycoy[,]
this Court held that the CSC may become the party adversely affected by such ruling and the aggrieved party who
may appeal the decision to this Court.

The situation where the CSC’s participation is beneficial and indispensable often involves complaints for
administrative offenses, such as neglect of duty, being notoriously undesirable, inefficiency and incompetence in the
performance of official duties, and the like, where the complainant is more often than not acting merely as a witness
for the government which is the real party injured by the illicit act. In cases of this nature, a ruling of the Court of
Appeals favorable to the respondent employee is understandably adverse to the government, and unavoidably the
CSC as representative of the government may appeal the decision to this Court to protect the integrity of the civil
service system.

The CSC may also seek a review of the decisions of the Court of Appeals that are detrimental to its constitutional
mandate as the central personnel agency of the government tasked to establish a career service, adopt measures
to promote morale, efficiency, integrity, responsiveness, progressiveness and courtesy in the civil service,

418
strengthen the merit and rewards system, integrate all human resources development programs for all levels and
ranks, and institutionalize a management climate conducive to public accountability. Nonetheless, the right of the
CSC to appeal the adverse decision does not preclude the private complainant in appropriate cases from similarly
elevating the decision for review. 64

Then in Civil Service Commission v. Gentallan,  this court declared:

65

At the outset, it should be noted that the Civil Service Commission, under the Constitution, is the central personnel
agency of the government charged with the duty of determining questions of qualifications of merit and fitness of
those appointed to the civil service. Thus, the CSC, as an institution whose primary concern is the effectiveness of
the civil service system, has the standing to appeal a decision which adversely affects the civil service. We hold, at
this juncture, that CSC has the standing to appeal and/or to file its motion for reconsideration. 66

The right to appeal by government parties was not limited to the Civil Service Commission.

In Pastor v. City of Pasig,  this court ruled that the City of Pasig had standing to appeal the decision of the Civil
67

Service Commission reinstating a city employee to her former position, despite the city government having
reassigned her to another unit.

In Geronga v. Varela,  this court ruled that the Mayor of Cadiz City had the right to file a motion for reconsideration
68

of a decision by the Civil Service Commission exonerating a city employee on the ground that "as the appointing
and disciplining authority, [he] is a real party in interest."
69

In Department of Education v. Cuanan,  this court ruled that the Department of Education "qualifie[d] as a party
70

adversely affected by the judgment, who can file an appeal of a judgment of exoneration in an administrative case." 71

There are, however, cases, which sought to qualify this right to appeal.

In National Appellate Board v. Mamauag,  an administrative complaint for grave misconduct was filed by Quezon
72

City Judge Adoracion G. Angeles against several members of the Philippine National Police (PNP). The Central
Police District Command (CPDC) of Quezon City, upon investigation, dismissed the complaint. Dissatisfied, Judge
Angeles moved for a reinvestigation by then PNP Chief Recaredo Sarmiento II.

PNP Chief Sarmiento issued a decision finding the accused police officers guilty of the offenses charged. Some
were meted the penalty of suspension while others were dismissed from service. Upon motion for reconsideration
by Judge Angeles, Chief Sarmiento modified his ruling and ordered the dismissal of the suspended police officers.

One of the officers, Police Inspector John Mamauag, appealed the decision with the National Appellate Board of the
National Police Commission. The National Appellate Board, however, denied the appeal. Mamauag appealed the
denial with the Court of Appeals. The Court of Appeals reversed the decision of the National Appellate Board and
ruled that it was the Philippine National Police, not Judge Angeles, which had the right to appeal the decision of
PNP Chief Sarmiento, as it was the party adversely affected. The National Appellate Board then appealed this
decision with this court.

This court, while citing Dacoycoy, declared that Judge Angeles, as complainant, had no right to appeal the dismissal
by CPDC of the complaint against Mamauag. It qualified the right of government agencies to appeal by specifying
the circumstances by which the right may be given, thus:

However, the government party that can appeal is not the disciplining authority or tribunal which previously heard
the case and imposed the penalty of demotion or dismissal from the service. The government party appealing must
be one that is prosecuting the administrative case against the respondent. Otherwise, an anomalous situation will
result where the disciplining authority or tribunal hearing the case, instead of being impartial and detached,
becomes an active participant in prosecuting the respondent. Thus, in Mathay, Jr. v. Court of Appeals, decided after
Dacoycoy, the Court declared:

To be sure, when the resolutions of the Civil Service Commission were brought before the Court of Appeals, the
Civil Service Commission was included only as a nominal party. As a quasi-judicial body, the Civil Service
Commission can be likened to a judge who should "detach himself from cases where his decision is appealed to a
higher court for review."

In instituting G.R. No. 126354, the Civil Service Commission dangerously departed from its role as adjudicator and
became an advocate. Its mandated function is to "hear and decide administrative cases instituted by or brought
before it directly or on appeal, including contested appointments and to review decisions and actions of its offices
and agencies," not to litigate.  (Emphasis supplied)
73

419
The ruling in National Appellate Boardwas applied in Montoya v. Varilla,  Pleyto v. PNP-CIDG,  and Ombudsman v.
74 75

Liggayu.76

The present rule is that a government party is a "party adversely affected" for purposes of appeal provided that the
government party that has a right to appeal must be the office or agency prosecuting the case.

Despite the limitation on the government party’s right to appeal, this court has consistently upheld that right in
Dacoycoy. In Civil Service Commission v. Almojuela,  we stated that:
77

More than ten years have passed since the Court first recognized in Dacoycoy the CSC’s standing to appeal the
CA’s decisions reversing or modifying its resolutions seriously prejudicial to the civil service system. Since then, the
ruling in Dacoycoy has been subjected to clarifications and qualifications but the doctrine has remained the same:
the CSC has standing as a real party in interest and can appeal the CA’s decisions modifying or reversing the
CSC’s rulings, when the CA action would have an adverse impact on the integrity of the civil service. As the
government’s central personnel agency, the CSC is tasked to establish a career service and promote morale,
efficiency, integrity, responsiveness, progressiveness, and courtesy in the civil service; it has a stake in ensuring
that the proper disciplinary action is imposed on an erring public employee, and this stake would be adversely
affected by a ruling absolving or lightening the CSC-imposed penalty. Further, a decision that declares a public
employee not guilty of the charge against him would have no other appellant than the CSC. To be sure, it would not
be appealed by the public employee who has been absolved of the charge against him; neither would the
complainant appeal the decision, as he acted merely as a witness for the government. We thus find no reason to
disturb the settled Dacoycoy doctrine.  (Citations omitted)
78

Indeed, recent decisions showed that this court has allowed appeals by government parties. Notably, the
government parties’ right to appeal in these cases was not brought up as an issue by either of the parties.

In Civil Service Commission v. Yu,  this court allowed the Civil Service Commission to appeal the Court of Appeals’
79

decision granting the reinstatement of a government employee whose appointment had been revoked by the
Commission.

In National Power Corporation v. Civil Service Commission and Tanfelix,  the National Power Corporation had
80

previously filed an administrative complaint against one of its employees, Rodrigo Tanfelix, resulting in his dismissal
from service. When the Civil Service Commission exonerated Tanfelix and the Court of Appeals affirmed the
exoneration, the National Power Corporation was allowed to appeal.

These cases, however, allowed the disciplining authority to appeal only from a decision exonerating the said
employee. In this case, respondent was not exonerated; she was found guilty, but the finding was modified. This
court previously stated that:

If the administrative offense found to have been actually committed is of lesser gravity than the offense charged, the
employee cannot be considered exonerated if the factual premise for the imposition of the lesser penalty remains
the same. 81

Dacoycoy, Philippine National Bank, and the URACCS failed to contemplate a situation where the Civil Service
Commission modified the penalty from dismissal to suspension. The erring civil servant was not exonerated, and the
finding of guilt still stood. In these situations, the disciplinary authority should be allowed to appeal the modification
of the decision.

The LRTA had standing to appeal the modification by the Civil Service Commission of its decision

The employer has the right "to select honest and trustworthy employees."  When the government office disciplines
82

an employee based on causes and procedures allowed by law, it exercises its discretion. This discretion is inherent
in the constitutional principle that "[p]ublic officers and employees must, at all times, be accountable to the people,
serve them with utmost responsibility, integrity, loyalty, and efficiency; act with patriotism and justice, and lead
modest lives."  This is a principle that can be invoked by the public as well as the government office employing the
83

public officer.

Here, petitioner already decided to dismiss respondent for dishonesty. Dishonesty is a serious offense that
challenges the integrity of the public servant charged. To bar a government office from appealing a decision that
lowers the penalty of the disciplined employee prevents it from ensuring its mandate that the civil service employs
only those with the utmost sense of responsibility, integrity, loyalty, and efficiency.

Honesty and integrity are important traits required of those in public service. If all decisions by quasi-judicial bodies
modifying the penalty of dismissal were allowed to become final and unappealable, it would, in effect, show
tolerance to conduct unbecoming of a public servant. The quality of civil service would erode, and the citizens would
end up suffering for it.

420
During the pendency of this decision, or on November 18, 2011, the Revised Rules on Administrative Cases in the
Civil Service or RACCS was promulgated. The Civil Service Commission modified the definition of a "party
adversely affected" for purposes of appeal.

Section 4. Definition of Terms. –

....

k. PARTY ADVERSELY AFFECTED refers to the respondent against whom a decision in an administrative case
has been rendered or to the disciplining authority in an appeal from a decision reversing or modifying the original
decision. (Emphasis supplied)

Procedural laws have retroactive application. In Zulueta v. Asia Brewery: 84

As a general rule, laws have no retroactive effect. But there are certain recognized exceptions, such as when they
are remedial or procedural in nature. This Court explained this exception in the following language:

It is true that under the Civil Code of the Philippines, "(l)aws shall have no retroactive effect, unless the contrary is
provided. But there are settled exceptions to this general rule, such as when the statute is CURATIVE or
REMEDIAL in nature or when it CREATES NEW RIGHTS.

....

On the other hand, remedial or procedural laws, i.e., those statutes relating to remedies or modes of procedure,
which do not create new or take away vested rights, but only operate in furtherance of the remedy or confirmation of
such rights, ordinarily do not come within the legal meaning of a retrospective law, nor within the general rule
against the retrospective operation of statutes.

Thus, procedural laws may operate retroactively as to pending proceedings even without express provision to that
effect. Accordingly, rules of procedure can apply to cases pending at the time of their enactment. In fact, statutes
regulating the procedure of the courts will be applied on actions undetermined at the time of their effectivity.
Procedural laws are retrospective in that sense and to that extent.  (Emphasis supplied)
85

Remedial rights are those rights granted by remedial or procedural laws. These are rights that only operate to
further the rules of procedure or to confirm vested rights. As such, the retroactive application of remedial rights will
not adversely affect the vested rights of any person. Considering that the right to appeal is a right remedial in nature,
we find that Section 4, paragraph (k), Rule I of the RACCS applies in this case. Petitioner, therefore, had the right to
appeal the decision of the Civil Service Commission that modified its original decision of dismissal.

Recent decisions implied the retroactive application of this rule. While the right of government parties to appeal was
not an issue, this court gave due course to the appeals filed by government agencies before the promulgation of the
Revised Rules on Administrative Cases in the Civil Service.

In Civil Service Commission v. Clave,  the Government Service and Insurance System (GSIS) found one of its
86

employees, Aurora M. Clave, guilty of simple neglect of duty. The Civil Service Commission affirmed the GSIS’s
findings. The Court of Appeals, however, while affirming the Civil Service Commission, reduced the penalty. Both
the GSIS and the Civil Service Commission were given standing to appeal the decision of the Court of Appeals.

In GSIS v. Chua,  the GSIS dismissed Heidi R. Chua for grave misconduct, dishonesty, and conduct prejudicial to
87

the best interest of service. The Civil Service Commission affirmed the GSIS, but the Court of Appeals, while
affirming the findings of the Commission, modified the penalty to simple misconduct. The GSIS was then allowed to
bring an appeal of the modification of the penalty with this court.

Thus, we now hold that the parties adversely affected by a decision in an administrative case who may appeal shall
include the disciplining authority whose decision dismissing the employee was either overturned or modified by the
Civil Service Commission.

The offense committed was less serious dishonesty, not simple dishonesty

Dishonesty has been defined "as the ‘disposition to lie, cheat, deceive, or defraud; untrustworthiness, lack of
integrity’ . . . ."  Since the utmost integrity is expected of public servants, its absence is not only frowned upon but
88

punished severely.

Section 52, Rule IV of the URACCS provides:

421
Section 52. Classification of Offenses. – Administrative offenses with corresponding penalties are classified into
grave, less grave or light, depending on their gravity or depravity and effects on the government service.

A. The following are grave offenses with their corresponding penalties:

1. Dishonesty - 1st Offense – Dismissal

....

In Remolona v. Civil Service Commission,  this court explained the rationale for the severity of the penalty:
89

It cannot be denied that dishonesty is considered a grave offense punishable by dismissal for the first offense under
Section 23, Rule XIV of the Rules Implementing Book V of Executive Order No. 292. And the rule is that dishonesty,
in order to warrant dismissal, need not be committed in the course of the performance of duty by the person
charged. The rationale for the rule is that if a government officer or employee is dishonest or is guilty of oppression
or grave misconduct, even if said defects of character are not connected with his office, they affect his right to
continue in office. The Government cannot tolerate in its service a dishonest official, even if he performs his duties
correctly and well, because by reason of his government position, he is given more and ample opportunity to commit
acts of dishonesty against his fellow men, even against offices and entities of the government other than the office
where he is employed; and by reason of his office, he enjoys and possesses a certain influence and power which
renders the victims of his grave misconduct, oppression and dishonesty less disposed and prepared to resist and to
counteract his evil acts and actuations. The private life of an employee cannot be segregated from his public life.
Dishonesty inevitably reflects on the fitness of the officer or employee to continue in office and the discipline and
morale of the service.  (Emphasis supplied)
90

However, on April 4, 2006, the Civil Service Commission issued Resolution No. 06-0538 or the Rules on the
Administrative Offense of Dishonesty.

Resolution No. 06-0538 recognizes that dishonesty is a grave offense punishable by dismissal from service.  It, 91

however, also recognizes that "some acts of Dishonesty are not constitutive of an offense so grave as to warrant the
imposition of the penalty of dismissal from the service." 92

Recognizing the attendant circumstances in the offense of dishonesty, the Civil Service Commission issued
parameters "in order to guide the disciplining authority in charging the proper offense"  and to impose the proper
93

penalty.

The resolution classifies dishonesty in three gradations: (1) serious; (2) less serious; and (3) simple. Serious
dishonesty is punishable by dismissal.  Less serious dishonesty is punishable by suspension for six months and
94

one day to one year for the first offense and dismissal for the second offense.  Simple dishonesty is punishable by
95

suspension of one month and one day to six months for the first offense, six months and one day to one year for the
second offense, and dismissal for the third offense. 96

The medical certificate respondent submitted to support her application for sick leave was falsified. The question
remains as to whether this act could be considered serious dishonesty, less serious dishonesty, or simple
dishonesty.

According to the Civil Service Commission’s finding in its resolution:

In the instant case, the prosecution was able to establish that the medical certificate submitted by Salvaña was
spurious or not genuine as the physician-signatory therein, Dr. Blanco[,] testified that she did not examine/treat the
appellant nor did she issue a medical certificate on May 15, 2006 since she was on sick leave of absence on that
particular day. Worthy [of] mention is that the appellant never bothered to submit any evidence, documentary or
otherwise, to rebut the testimony of Blanco.

Thus, the Commission rules and so holds that the appellant is liable for Dishonesty but applying the aforementioned
CSC Resolution No. 06-0538, her dishonest act would be classified only as Simple Dishonesty as the same did not
cause damage or prejudice to the government and had no direct relation to or did not involve the duties and
responsibilities of the appellant. The same is true with the falsification she committed, where the information falsified
was not related to her employment.  (Emphasis supplied)
97

In Cuerdo v. Commission on Audit,  this court previously ruled that "it is the general policy of this Court to sustain
98

the decisions of administrative authorities ‘not only on the basis of the doctrine of separation of powers but also for
their presumed knowledge ability and even expertise in the laws they are entrusted to enforce.’"  The same case
99

also stated that:

422
. . . . we reaffirmed the oft-repeated rule that findings of administrative agencies are generally accorded not only
respect but also finality when the decision and order . . . are not tainted with unfairness or arbitrariness that would
amount to abuse of discretion or lack of jurisdiction. The findings off acts must be respected, so long as they are
supported by substantial evidence even if not overwhelming or preponderant. 100

Petitioner insists that respondent committed serious dishonesty when she submitted the falsified medical certificate.
Under Section 3 of Resolution No. 06-0538, serious dishonesty comprises the following acts:

Section 3. Serious Dishonesty. – The presence of any one of the following attendant circumstances in the
commission of the dishonest act would constitute the offense of Serious Dishonesty:

a. The dishonest act causes serious damage and grave prejudice to the government.

b. The respondent gravely abused his authority in order to commit the dishonest act.

c. Where the respondent is an accountable officer, the dishonest act directly involves property, accountable
forms or money for which he is directly accountable and the respondent shows an intent to commit material
gain, graft and corruption.

d. The dishonest act exhibits moral depravity on the part of the respondent.

e. The respondent employed fraud and/or falsification of official documents in the commission of the
dishonest act related to his/her employment.

f. The dishonest act was committed several times or in various occasions.

g. The dishonest act involves a Civil Service examination, irregularity or fake Civil Service eligibility such as,
but not limited to, impersonation, cheating and use of crib sheets.

h. Other analogous circumstances. (Emphasis supplied)

Simple dishonesty, on the other hand, comprises the following offenses:

Section 5. The presence of any of the following attendant circumstances in the commission of the dishonest act
would constitute the offense of Simple Dishonesty:

a. The dishonest act did not cause damage or prejudice to the government.

b. The dishonest act had no direct relation to or does not involve the duties and responsibilities of the
respondent.

c. In falsification of any official document, where the information falsified is not related to his/her
employment.

d. That the dishonest act did not result in any gain or benefit to the offender.

e. Other analogous circumstances. (Emphasis supplied)

This court previously ruled that "[f]alsification of an official document, as an administrative offense, is knowingly
making false statements in official or public documents."  Respondent, in her defense, states that she merely relied
101

on her Health Maintenance Organization’s (HMO) advice that it was going to issue her a medical certificate after she
had gone to the hospital complaining of hypertension.  She maintains that she did not know that her medical
102

certificate was falsified. We do not find this defense credible.

Respondent knew that she was not examined by Dr. Blanco, the medical certificate’s signatory. She knew that she
would not be able to fully attest to the truthfulness of the information in the certificate. Despite this, she still
submitted the certificate in support of her application for leave.

The Civil Service Commission, however, found that the medical certificate was falsified. Dr. Blanco repudiated the
certificate. Respondent did not present any evidence to defend its validity. Her application for sick leave, therefore,
should not have been granted since it was unaccompanied by the proper documents. The Commission correctly
found respondent guilty of dishonesty.

However, it would be wrong to classify this offense as simple dishonesty.

423
By law, all employees in the civil service are entitled to leave of absence for a certain number of days, with or
without pay.  Under Section 1, Rule XVI of the Omnibus Rules Implementing Book V of the Administrative Code,
103

government employees are entitled to 15 days of sick leave annually with full pay.

The grant of sick leave with pay is an exception to the principle of "no work, no pay," i.e., entitlement to
compensation only upon actual service rendered. As such, applications for leave must be properly filled out and filed
accordingly. Section 16, Rule XVI of the Omnibus Rules Implementing Book V of the Administrative Code provides
the rules for an application for sick leave:

SECTION 16. All applications for sick leaves of absence for one full day or more shall be on the prescribed form and
shall be filed immediately upon the employee's return from such leave. Notice of absence, however, should be sent
to the immediate supervisor and/or to the office head. Application for sick leave in excess of five days shall be
accompanied by a proper medical certificate.

Respondent’s application for sick leave, if approved, would allow her to be absent from work without any deductions
from her salary. Being a government employee, respondent would have received her salaries coming from
government funds.

Since her application for sick leave was supported by a false medical certificate, it would have been improperly filed,
which made all of her absences during this period unauthorized. The receipt, therefore, of her salaries during this
period would be tantamount to causing damage or prejudice to the government since she would have received
compensation she was not entitled to receive.

This act of causing damage or prejudice, however, cannot be classified as serious since the information falsified had
no direct relation to her employment. Whether or not she was suffering from hypertension is a matter that has no
relation to the functions of her office.

Given these circumstances, the offense committed can be properly identified as less serious dishonesty. Under
Section 4 of Resolution No. 06-0538, less serious dishonesty is classified by the following acts:

Section 4. The presence of any one of the following attendant circumstances in the commission of the dishonest act
would constitute the offense of Less Serious Dishonesty:

a. The dishonest act caused damage and prejudice to the government which is not so serious as to qualify
under the immediately preceding classification.

b. The respondent did not take advantage of his/her position in committing the dishonest act.

c. Other analogous circumstances. (Emphasis supplied)

We hold, therefore, that respondent Atty. Aurora A. Salvaña is guilty of less serious dishonesty.

A final note

The records showed that respondent tendered her irrevocable resignation on August 5, 2006. Petitioner’s
acceptance of respondent’s resignation was not mentioned in any of the pleadings. However, the resolution by the
Fact-finding Committee stated that "[o]n 16 August 2006, the Office of the Administrator received the
resignation." On the issue of whether respondent’s resignation mooted its proceedings, it concluded that:
104

[I]n the response of the Administrator to the letter of resignation filed by Respondent there was no unconditional
acceptance of the same. In fact it was specified therein that her resignation is "without prejudice to any appropriate
action on any malfeasance or misfeasance committed during her tenure[."]There can [sic] be no other conclusion
from the above that her resignation does not prevent the administration from proceeding with any charge/s
appropriate under the circumstances.  (Emphasis in the original)
105

Resignation from public office, to be effective, requires the acceptance of the proper government authority. In
Republic v. Singun,  this court stated:
106

Resignation implies an expression of the incumbent in some form, express or implied, of the intention to surrender,
renounce, and relinquish the office and the acceptance by competent and lawful authority. To constitute a complete
and operative resignation from public office, there must be: (a) an intention to relinquish a part of the term; (b) an act
of relinquishment; and (c) an acceptance by the proper authority.

....

424
In our jurisdiction, acceptance is necessary for resignation of a public officer to be operative and effective. Without
acceptance, resignation is nothing and the officer remains in office. Resignation to be effective must be accepted by
competent authority, either in terms or by something tantamount to an acceptance, such as the appointment of the
successor. A public officer cannot abandon his office before his resignation is accepted, otherwise the officer is
subject to the penal provisions of Article 238 of the Revised Penal Code. The final or conclusive act of a
resignation’s acceptance is the notice of acceptance. The incumbent official would not be in a position to determine
the acceptance of his resignation unless he had been duly notified therefor.  (Emphasis supplied)
107

If there was evidence to show that petitioner did not, in fact, accept respondent’s resignation, her resignation would
have been ineffective. Respondent’s continued absence from her post would have been deemed abandonment from
her office, of which she could be criminally charged.

Although the response of Administrator Robles was not attached to the record, it can be concluded from the
resolution of the Fact-finding Committee that he accepted the resignation, albeit with the qualification that it be
"without prejudice to any appropriate action on any malfeasance or misfeasance committed during her tenure." 108

The qualified acceptance of Administrator Robles, however, did not affect the validity of respondent’s
resignation. Section 1, Rule XII of the Civil Service Commission Memorandum Circular No. 40, series of 1998, as
1âwphi1

amended by Civil Service Commission Memorandum Circular No. 15, series of 1999, requires:

Sec. 1. Resignation. The following documents shall be submitted to the Commission for record purposes:

a. The voluntary written notice of the employee informing the appointing authority that he is relinquishing his
position and the efffectivity date of said resignation; and,

b. The acceptance of resignation in writing by the agency head or appointing authority which shall indicate
the date of effectivity of the resignation.

An officer or employee under investigation may be allowed to resign pending decision of his case without prejudice
to the continuation of the proceedings until finally terminated.

The qualification placed by Administrator Robles on his acceptance does not make respondent’s resignation any
less valid. The rules and regulations allow the acceptance of resignations while the administrative case is pending
provided that the proceedings will still continue.

We also note that the unauthorized absences were incurred after the issuance of Office Order No. 119.
Atrespondent’s refusal to comply, she was administratively charged, which prompted her resignation from office. If
there were irregularities in the issuance of Office Order No. 119, what respondent should have done would be to
occupy the new position and then file the proper remedies. She should not have defied the orders of her superiors.

Because of her resignation on August 5, 2006, any modification as to the service of her suspension became moot.
Her permanent employment record, however, must reflect the modified penalty. Considering that she is also a
member of the Bar, this court furnishes the Office of the Bar Confidant with a copy of this decision to initiate the
proper disciplinary action against respondent.

WHEREFORE, the petition is GRANTED. The decision dated November 11, 2009 of the Court of Appeals in CA-
G.R. SP. No. 104225 and Resolution No. 071364 dated July 18, 2007 of the Civil Service Commission is
AFFIRMED with the MODIFICATION that respondent, Atty. Aurora A. Salvaña, is found guilty of Less Serious
Dishonesty. The Civil Service Commission is DIRECTED to attach a copy of this decision to respondent's
permanent employment record.

Let a copy of this decision be given to the Office of the Bar Confidant to initiate the proper disciplinary action against
respondent Atty. Aurora A. Salvaña.

SO ORDERED.

425
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. RTJ-14-2388               June 10, 2014

[Formerly OCA IPI No. 10-3554-RTJ]

EMILIE SISON-BARIAS, Complainant, 
vs.
JUDGE MARINO E. RUBIA, REGIONAL TRIAL COURT [RTC], BRANCH 24, BIÑAN, LAGUNA and EILEEN A.
PECAÑA, DATA ENCODER II, RTC, OFFICE OF THE CLERK OF COURT, BIÑAN, LAGUNA, Respondents.

DECISION

PER CURIAM :

Public trust requires that we exact strict integrity from judges and court employees. This case emphasizes the need
for members of the judiciary and those within its employ to exhibit the impartiality, prudence, and propriety that the
New Code of Judicial Conduct and the Code of Conduct for Court Personnel require when dealing with parties in
pending cases.

Complainant Emilie Sison-Barias is involved in three cases pending before the sala of respondent Judge Marino
Rubia.

The first case is an intestate proceeding.  Complainant filed a petition for letters of administration over the intestate
1

estate of her late husband, Ramon A. Barias. This was opposed by her mother-in-law, Romelias Almeda-Barias. 2

The second case is a guardianship proceeding over Romelias Almeda-Barias.  Evelyn Tanael, the guardian
3

appointed by the court, submitted a property inventory report that included not only the properties of Romelias
Almeda-Barias but also properties forming part of the estate of complainant’s late husband. 4

The third case is a civil action  for annulment of contracts and reconveyance of real properties filed by Romelias
5

Almeda-Barias, represented by Evelyn Tanael, against complainant, among others. 6

In all these cases, a parcel of land covered by Transfer Certificate of Title No. T-510712 and part of the estate of
complainant’s husband was involved. 7

426
Complainant alleged that there was delay in the publication of the notice in the petition for issuance of letters of
administration filed. She was then informed by her brother, Enrique "Ike" Sison, that respondent Eileen Pecaña, the
daughter of his good friend, was a data encoder in the Office of the Clerk of Court of the Regional Trial Court of
Biñan, Laguna. 8

Complainant, together with her two brothers, Enrique and Perlito "Jun" Sison, Jr.,  met with respondent Pecaña on
9

February 20, 2010.  During this meeting, complainant informed respondent Pecaña of the delay in the publication of
10

the notice in the petition for issuance of letters of administration. She then asked respondent Pecaña to check the
status of the publication of the notice.  Respondent Pecaña asked for complainant’s number so that she could
11

inform her as soon as any development takes place in the case.  Enrique  and Perlito  executed affidavits to
12 13 14

corroborate these allegations.

Respondent Pecaña asked complainant to meet her again at her house in Biñan, Laguna.  Complainant went there
15

with Enrique.  Respondent Pecaña then informed complainant that she could no longer assist her since respondent
16

Judge Rubia had already given administration of the properties to Evelyn Tanael. 17

Complainant stated that she was not interested in the grant of administration to Tanael because these concerned
the properties of her mother-in-law, Romelias Almeda-Barias.  She was only concerned with the administration of
18

the properties of her late husband, to which respondent Pecaña replied, "Ah ganun ba? Iba pala ung kaso mo." 19

Complainant alleged that respondent Pecaña sent her a text message on March 2, 2010  asking complainant to call
20

her. Complainant called respondent Pecaña who informed her that respondent Judge Rubia wanted to talk to
her.  Complainant agreed to meet with respondent Judge Rubia over dinner, on the condition that respondent
21

Pecaña would be present as well. 22

On March 3, 2010  at around 7:00 p.m, complainant picked up respondent Pecaña at 6750 Ayala Avenuein Makati
23

City. They proceeded to Café Juanita in The Fort, Bonifacio Global City. Respondent Pecaña said that respondent
Judge Rubia would arrive late as he would be coming from a Rotary Club meeting held at the Mandarin Hotel. 24

Respondent Judge Rubia arrived at Café Juanita around 8:30 p.m. During the dinner meeting, respondents
allegedly asked complainant inappropriate questions. Respondent Judge Rubia allegedly asked whether she was
still connected with Philippine Airlines, which she still was at that time.  Complainant was then informed that
25

respondent Judge Rubia knew of this fact through Atty. Noe Zarate, counsel of Romelias Almeda-Barias.  This 26

disclosure surprised complainant,as she was under the impression that opposing counsel and respondent
JudgeRubia had no business discussing matters that were not relevant to their pending cases. 27

Respondent Judge Rubia also allegedly asked her questions about her supposed involvement with another man
and other accusations made by Romelias Almeda-Barias.  She was asked about the hospital where she brought her
28

husband at the time of his cardiac arrest. 29

These details, according to complainant, were never discussed in the pleadings or in the course of the trial.  Thus, 30

she inferred that respondent Judge Rubia had been talking to the opposing counsel regarding these matters outside
of the court proceedings.  The impression of complainant was that respondent Judge Rubia was actively taking a
31

position in favor of Atty. Zarate. 32

To confirm her suspicion, respondents then allegedly "told complainant to just talk to Atty. Zarate, counsel for the
oppositor, claiming that he is a nice person. Complainant was appalled by such suggestion and replied[,] ‘Why will I
talk to him? Judge di ko yata kaya gawin un.’" 33

After dinner, complainant stayed behind to settle the bill. Even before he left, she alleged that respondent Judge
Rubia had made insinuations that she was awaiting the company of another man. 34

From then on, complainant and respondents did not communicate and/or meet outside the courtroom until August 8,
2010.

In the meantime, complainant alleged that respondent Judge Rubia acted in a manner that showed manifest
partiality in favor of the opposing parties, namely, Romelias Almeda-Barias and Evelyn Tanael, as represented by
their counsel, Atty. Noe Zarate. 35

On June 15, 2010, counsel for complainant was personally handed a copy of a motion for consolidation filed by the
oppositor, Romelias Almeda-Barias, despite the date of the hearing on such motion being set on June 18,
2010. Complainant alleged that respondent Judge Rubia did not even consider the comment/opposition to the
36

motion for consolidation filed by her counsel, which stated that since two of these cases were special proceedings,
they could not be consolidated with an ordinary civil action. Respondent Judge Rubia insisted on discussing the
totality of the different issues involved in the three distinct cases under one court proceeding.  As such, complainant
37

alleged that the main issues of the special proceedings were consolidated with matters that were properly the

427
subject of a separate civil action.  Complainant alleged that respondent Judge Rubia refused to issue Orders  that
38 39

would have allowed her to comply with her duties as the special administrator of her late husband’s estate.  This
40

included the order to conduct an inventory of the properties, rights, and credits of the deceased, subject to the
authority of the administrator.

In addition, complainant alleged that respondent Judge Rubia refused to grant her request for subpoena duces
tecum and ad testificandum that she had prayed for to compel Evelyn Tanael to produce the documents showing
the accrued rentals of the parcel of land belonging toher late husband.  As such, complainant raised that
41

respondent Judge Rubia’s refusal emboldened Evelyn Tanael and oppositor Romelias Almeda-Barias to interfere in
the management of the estate of complainant’s late husband.  Because of this refusal, she asserted that respondent
42

Judge Rubia failed to adhere to the duty of the court to ensure a proper inventory of the estate. 43

Complainant enumerated occasions that alleged manifest partiality on the part of respondent Judge Rubia. She
alleged that respondent Judge Rubia failed to require a timely filing of the pre-trial brief on the part of Evelyn Tanael
and Romelias Almeda-Barias, and despite their noncompliance on four (4) separate pre-trials that were postponed,
Tanael and Almeda-Barias were not declared in default.  She also alleged that respondent Judge Rubia stated that
44

the burden to prove ownership of the property was on complainant, when in fact it was the oppositor, or Tanael and
Almeda-Barias, who had the burden of proof to show that the land was fraudulently transferred to her late husband. 45

Complainant admitted that she did not inform her counsel of the dinner meeting she had with respondents.  It was
46

Enrique who allegedly told complainant’s lawyers about it when he went to the lawyer’s office to pay some
bills. Complainant said that her lawyer immediately admonished her for agreeing to meet with respondent Judge
47

Rubia. Complainant then texted respondent Pecaña on August 8, 2010 on her lawyer’s reaction concerning the
March 3, 2010 meeting. The following exchanges took place via text message:

COMPLAINANT:

Hi Aileen! Sorry jz feeling bad. . my lawyer jz called me at galit n galit. My brother went to hm today to pay som bills.
Sa kakadaldal na mention s lawyr my meeting wid u n judge rubia. My lawyr ws mad dat m nt suppose to do dat
w/out hs knowledge. I cnt understand anymore wat he ws sayng kanina kse nga galit. He wil file yata somtng abt dat
n I dnt knwwat? Pls. Help me. (August 8, 2010, 2:31 p.m.)

AILEEN PECAÑA [sic]:

Ha? Anong ififile? Bkt xa galit? Bka lalo tayo mapahamak? (August 8, 2010, 3:48 p.m.)

COMPLAINANT

M nt very sure bt he mentioned abt administrative or administratn something. I hav to talk to hm n person para mas
claro. Hirap kse by fon tlaga. He ws mad bcoz f our meetng nga, dats wat struck hm. Sorry, daldal kse ni kuya. M
going to col kuya tomorrow na. Its 1am na hr, I have to buy foncard pa. (August 8, 2010, 4:18 p.m.)

AILEEN PECAÑA [sic]

Admin? Nku d mapapahamak nga kaming 2 ni juj. Pati ikaw mapapahamak pa dn. (August 8, 2010, 4:28 p.m.)

AILEEN PECAÑA [sic]

Bkt xa galit kng mkpg kta ka sminwidout his knowledge. I cnt fathom y wil it end up filing an admin case. (August 8,
2010, 4:29 p.m.)

AILEEN PECAÑA [sic]

Pls Emily do something 2 pacify ur lawyer, juj rubia will definitely get mad wid us. (August 8, 2010, 4:30
p.m.) (Emphasis supplied)
48

On September 15, 2010, complainant moved for respondent Judge Rubia’s inhibition. This was denied on October
6, 2010. Complainant then filed a motion for reconsideration denied in an order  dated November 15, 2010.
49 50

On November 11, 2010, complainant filed a complaint affidavit  before the Office of the Court Administrator
51

charging respondent Pecaña for gross misconduct and respondent Judge Rubia for conduct unbecoming of a judge,
partiality, gross ignorance of the law or procedure, incompetence, and gross misconduct. 52

The Office of the Court Administrator referred the complaint to respondents for comment. 53

428
In her comment,  respondent Pecaña did not deny meeting complainant on February 20, 2010 through the
54

introduction of Enrique Sison.  However, she claimed that the alleged meeting between complainant and
55

respondent Judge Rubia was merely a chance encounter.

Respondent Pecaña alleged that "sometime [in the] second week of March 2010,"  when she was on her way to
56

Makati City to meet her sisters for coffee, complainant invited her for dinner. Respondent Pecaña hesitantly agreed
after complainant had insisted.  Complainant picked her up at Starbucks 6750 in Makati City, and they proceeded to
57

Café Juanita in Burgos Circle for dinner. Upon passing by Burgos Circle, respondent Pecaña saw respondent Judge
Rubia’s car parked near Café Juanita. 58

At about past 10:00 p.m., respondent Pecaña said that she saw respondent Judge Rubia together with some
companions walking toward his car.  She stepped out of the restaurant and greeted him. Complainant allegedly
59

followed respondent Pecaña and so the latter was constrained to introduce complainant as an employee of
Philippine Airlines to respondent Judge Rubia.  After the introduction, respondent Judge Rubia went to his car and
60

left. Complainant and respondent Pecaña returned to the restaurant to finish their food and pay the bill. 61

Complainant drove respondent Pecaña back to Makati City. During the drive, complainant allegedly asked her help
regarding the cases filed in court and inquired as to what she could give to respondent Judge Rubia because her
lawyers instructed her to bribe him. Respondent Pecaña only said that respondent Judge Rubia does not accept
money and that he is financially stable. 62

After the dinner, complainant allegedly kept on sending text messages to respondent Pecaña concerning her case
filed in court.  Respondent Pecaña admitted to the exchanges through text messages she had with complainant on
63

August 8, 2010 regarding the filing of administrative case against her and respondent Judge Rubia. 64

Respondent Pecaña denied being an advocate of Atty. Zarate.  She maintained the position that she should not be
65

held administratively liable for what she construed to be primarily judicial matters, such as the bases for respondent
Judge Rubia’s decisions and orders in court. 66

Respondent Judge Rubia filed his comment  on January 17, 2011.
67

Respondent Judge Rubia claimed that the alleged meeting between him and his co-respondent Pecaña together
with complainant was a mere chance encounter.  He denied any pre-arranged dinner meeting, stating that after the
68

brief encounter with complainant, he had to rush home to attend to his ailing wife.  He stated that he was only
69

introduced to complainant because she was an employee of Philippine Airlines where he was a former
executive. Respondent Judge Rubia argued that if the alleged meeting with complainant did take place, it should
70

have been mentioned in the first motion for inhibition.  Further, he emphasized that it took complainant eight (8)
71

months since the alleged dinner meeting to file a motion for inhibition and an administrative case. 72

Respondent Judge Rubia surmised that complainant and her counsel, hoping for a favorable outcome of the cases
filed, initiated contact with respondent Pecaña. The filing of the administrative case against him was only to compel
him to inhibit from the cases to seek a friendlier forum. 73

Moreover, respondent Judge Rubia denied knowledge of any text messages exchanged between complainant and
respondent Pecaña as well as any active advocacy in favor of opposing counsel, Atty. Zarate. 74

As to the allegations of partiality concerning the orders he issued for the cases filed, respondent Judge Rubia
argued that the best forum to ventilate complainant’s allegations was not through an administrative proceeding but
through judicial recourse.75

Due to the gravity of the charges and the conflicting facts presented by the parties, the Office of the Court
Administrator recommended the referral of the administrative complaint to a Court of Appeals Justice for
investigation, report, and recommendation. 76

On September 12, 2011, this court issued a resolution referring the administrative complaint to a Justice of the Court
of Appeals for investigation, report, and recommendation.  The complaint was assigned to Court of Appeals
77

Associate Justice Samuel H. Gaerlan.

On December 5, 2011, Atty. Noe Zarate filed a motion for Intervention  allegedly due to the implication of his name
78

in the administrative complaint. 79

Atty. Zarate argued that the complaint should be dismissed on the ground of forum shopping because the orders
issued by respondent Judge Rubia and mentioned in the complaint were assailed in a petition for certiorari. 80

Further, Atty. Zarate alleged that he did not know respondents personally, and he was not closely associated with
them.  He asserted that the records were replete with incidents where he and respondent Judge Rubia engaged in
81

429
heated discussions on legal matters.  He maintained that he did not foster any closeness or personal affinity with
82

respondent Judge Rubia that would substantiate complainant’s allegations. 83

In addition, Atty. Zarate expressed his agreement with respondents’ narration of the events on the alleged dinner
meeting.  He argued that if the dinner meeting did take place, this incident should have been the ground for the
84

motion for inhibition filed.

85

Atty. Zarate stated that, granting arguendo that the dinner meeting happened, there was nothing "wrong, improper
or illegal"  about it. It could have been reasonably interpreted as an extrajudicial means initiated by respondent
86

Judge Rubia to assuage the parties in the contentious litigation. 87

The motion for intervention was noted without action by Justice Gaerlan. 88

On December 15, 2011, the parties, together with their counsels, appeared before Justice Gaerlan. It was agreed
that respondents would file their respective supplemental comments and complainant her reply to the comment.
Complainant manifested that she would present three (3) witnesses: herself and her two brothers. Respondent
Pecaña would testify for herself and present Semenidad Pecaña, her aunt, as witness. Respondent Judge Rubia
manifested that he would testify on his behalf and present respondent Pecaña as witness. 89

Respondents Judge Rubia and Pecaña filed their respective supplemental comments dated December 15,
2011 and December 16, 2011,  respectively. Complainant filed her consolidated reply on January 17, 2012.
90 91 92

A second hearing on the administrative complaint ensued on January 10, 2012 where complainant testified on the
dinner meeting on March 3, 2010.

During the hearing, complainant identified a document containing a list of phone calls showing that she called
respondent Pecaña on March 2 and 3, 2010.  Counsel for respondent Pecaña stipulated that these calls were made
93

to her. 94

The hearing of the administrative complaint continued on January 12, 17, and 24, 2012.

In the January 17, 2012 hearing, respondent Pecaña testified to the allegations in her comment and judicial affidavit.
She alleged for the first time that the dinner meeting with complainant happened on March 10, not March 3, 2010.

On January 24, 2012, Mr. Rodel Cortez, secretariat of the Rotary Club of Makati Southwest Chapter, was presented
as witness for respondent Judge Rubia. Rodel testified that the Rotary Club of Makati Southwest Chapter had a
meeting on March 10, 2010 at Numa Restaurant in Bonifacio Global City. Respondent Judge Rubia attended the
meeting as shown in the attendance sheet identified by Rodel.

Rodel testified that after the meeting, he, Billy Francisco, and respondent Judge Rubia walked together toward the
parking area. When they were nearing Burgos Circle where their cars were parked, Rodel allegedly saw
complainant and respondent Pecaña approaching them.  He then saw respondent Pecaña introduce complainant to
95

respondent Judge Rubia.  After the introduction, he saw respondent Judge Rubia go to his car and drive away.
96 97

Respondent Judge Rubia testified for himself. He identified the comment and judicial affidavit filed.  He alleged that
98

the encounter with complainant at Burgos Circle was on March 10, not March 3, 2010. 99

Complying with the order dated January 31, 2012,  the parties filed their respective memoranda.
100

Justice Gaerlan submitted his investigation report dated March 13, 2012.  In his report, Justice Gaerlan
101

recommended that no penalty be imposed against respondents.  He was "convinced that the meeting at Burgos
102

Circle was just a chance encounter"  and found that complainant failed to prove her claim with substantial evidence
103

that would justify the imposition of a penalty on respondents. 104

Justice Gaerlan relied on the testimony of Rodel Cortez as against the uncorroborated testimony of complainant. 105

Justice Gaerlan emphasized the fact that it had taken complainant eight (8) months before she filed the
administrative complaint.  He stated that the deliberate concealment of the meeting was inconsistent with her
106

resolve to prove respondent Judge Rubia’s alleged partiality toward the counsel of the opposing party. 107

As to the other charges against respondent Judge Rubia, Justice Gaerlan stated that the administrative case was
not the proper recourse for complainant.  The proper action for her was to pursue remedial action through the
108

courts "to rectify the purported error"  in the court proceedings.
109

The Office of the Court Administrator referred the report to this court.

430
The issue in this case is whether respondents Judge Rubia and Pecaña should be held administratively liable.

This court must set aside the findings of fact and reject the report of Justice Samuel Gaerlan. Respondents Judge
Rubia and Pecaña should be held administratively liable for their actions. The findings of fact of an investigating
justice must be accorded great weight and finality similar with the weight given to a trial court judge’s since an
investigating justice personally assessed the witnesses’ credibility.  However, this rule admits of exceptions.
110

In J. King & Sons Company, Inc. v. Judge Hontanosas, Jr.,  this court held:
111

Such findings may be reviewed if there appears in the record some fact or circumstance of weight which the lower
court may have overlooked, misunderstood or misappreciated, and which, if properly considered, would alter the
result of the case. Among the circumstances which had been held to be justifiable reasons for the Court to re-
examine the trial court or appellate court’s findings of facts are, when the interference made is manifestly mistaken;
when the judgment is based on misapprehension of facts; and when the finding of fact of the trial court or appellate
court is premised on the supposed absence of evidence and is contradicted by evidence on record.  (Citations
112

omitted)

These exceptions are applicable in this case. In disregarding the complainant’s testimony and relying on the
testimony of Cortez, respondent Judge Rubia’s witness, Justice Gaerlan said:

While respondents were able to present a witness to corroborate their version of the incident on all material points,
complainant miserably failed on this regard. The Investigating Justice who had the untrammeled opportunity to
observe the deportment and demeanor of the respondent’s witness, Rodel Cortez (Cortez) during the hearing finds
his forthright narration of facts credible and rang with truth. The clear, candid and unmistakable declaration of
Cortez that the incident that transpired along the sidewalk of Burgos Circle was just a chance encounter, absent any
ulterior motive for him to perjure, swayed this Investigating Justice to believe that the dinner meeting between Judge
Rubia and Barias did not [take] place. A testimony is credible if it bears the earmarks of truth and sincerity and has
been delivered in a spontaneous, natural, and straightforward manner.

Not only that. Cortez’[s] testimony was likewise corroborated by other pieces of evidence, such as the Program of
Meeting and the Attendance Sheet of the Rotary Club of Makati Southwest which tend to prove that at that particular
date and time Judge Rubia was in a rotary meeting and was not dining with Rubia and Pecaña. These evidence,
when taken together, debase the uncorroborated version of incident as narrated by Barias. Barias[’] self-serving
declarations have no evidentiary value when ranged against the testimony of a credible witness on affirmative
matters.  (Emphasis supplied)
113

We cannot agree with Justice Gaerlan’s assessment of the credibility of the witnesses and the weight given to their
testimonies.

Justice Gaerlan placed too much importance on the testimony of Rodel Cortez, the Secretariat of the Rotary Club of
Makati, Southwest Chapter, and qualified him as a "disinterested" witness.

A disinterested witness’ testimony is afforded evidentiary weight by his or her lack of interest in the outcome of the
case.  This lack of stake makes the disinterested witness’ testimony more believable. To actively take part in
1âwphi1

litigation as a party or a witness entails willingness to commit to the arduous and exacting nature of most judicial
proceedings. The disinterested witness’ candor and submission to the proceedings before the court add credibility
and believability to the content of his or her testimony.

To qualify a witness as truly disinterested, courts should analyze the circumstances that surround his or her
testimony.

The record shows that the Rotary Club of Makati, Southwest Chapter, employed Rodel in 1989.  He was appointed
114

Secretariat in 1994 where respondent Judge Rubia was a former President and remains an active member. 115

The finding that respondent Judge Rubia is administratively liable could taint the reputation of the organization that
the witness has been serving for more than 20 years. It would be a definite blow to the reputation of the Rotary Club
of Makati, Southwest Chapter, if its former President were to be found guilty of the offenses that complainant
imputed upon respondent Judge Rubia. The possibility of Rodel testifying in favor of respondent Judge Rubia as a
result of his loyalty to the latter and the Rotary Club puts into question the characterization that he is disinterested.
The substance of Rodel’s narration of events should also be scrutinized.

Complainant alleged that the dinner meeting set among her, respondent Pecaña, and respondent Judge Rubia took
place on March 3, 2010, as indicated in the investigation report of Justice Gaerlan. The record shows that the
Investigating Justice accepted the formal offer of Exhibit A, which was complainant’s judicial affidavit establishing
the date of the dinner as March 3, 2010 in Café Juanita.  Complainant also alleged in her complaint that respondent
116

Judge Rubia came from Mandarin Hotel in Makati from the Rotary Club of Makati, Southwest Chapter meeting. 117

431
The testimony of Rodel and the evidence submitted by respondents alleged that the chance meeting of respondent
Judge Rubia with complainant and respondent Pecaña took place on March 10, 2010 on the side street of Burgos
Circle in Bonifacio Global City, after the Rotary Club of Makati, Southwest Chapter meeting and dinner at Numa
Restaurant, on their way to the parking lot. This means that the testimony of and the evidence presented by Rodel
do not disprove the occurrence of the dinner meeting as alleged by complainant, since the meeting of the Rotary
Club and the dinner meeting alleged by complainant took place on different dates. Assuming that the alleged
chance meeting between complainant and respondent Judge Rubia took place on March 10, 2010 as alleged by
respondents, this does not discount the veracity of complainant’s allegations. Both the Rotary Club of Makati,
Southwest Chapter dinner and the dinner meeting alleged by complainant took place in the vicinity of Bonifacio
Global City. This could have allowed respondent Judge Rubia ample time to travel to the dinner meeting after the
meeting of the Rotary Club of Makati.

The investigation report stated that the attendance sheet  and the program of meeting that Rodel submitted
118

corroborated his testimony. The date indicated on the attendance sheet and on the program of meeting was March
10, 2010, not March 3, 2010. However, there was nothing to indicate the time of arrival or departure of the
attendees. Neither was there an indication of the time when the meeting began or ended. The attendance sheet and
the program of meeting, by themselves or taken as corroborative evidence of Rodel’s testimony, do not discount the
distinct and tangible possibility that the dinner meeting as narrated by complainant took place. On the other hand,
we find the allegation that the dinner meeting took place on March 3, 2010 more credible.

Complainant presented a document containing a list of calls she made from January to March 2010.  She identified
119

her cellular phone number  as well as respondent Pecaña’s.  Respondent Pecaña admitted that the number
120 121

identified by complainant was her number.  On March 2 and 3, 2010, calls were made to respondent Pecaña’s
122

number.  Respondent Pecaña admitted that she had received a call from complainant before the latter picked her
123

up at 6750 Makati City.  However, no calls to respondent Pecaña were recorded on March 10, 2010 in the
124

document presented.  On the other hand, the calls made to respondent Pecaña as shown in the document
125

coincided with complainant’s allegations.

Finally, during the December 15, 2011 hearing, respondent Judge only manifested that he would testify for himself
and present respondent Pecaña as witness.  He did not manifest that he would be presenting Rodel or any
126

participant in the Rotary Club meeting as his witness.

The totality of these circumstances places doubt on the alibi of respondent Judge Rubia and Rodel’s narration of
events.

The differing accounts on the dates and the venues were not addressed in the investigation report of Justice
Gaerlan. The report failed to mention that complainant alleged that respondent Judge Rubia arrived late precisely
because he came from a meeting of the Rotary Club of Makati. These glaring inconsistencies did not add
evidentiary weight to respondents’ claims. They only put into question the veracity of the exculpatory evidence.

This court has held:

In administrative proceedings, the quantum of proof required to establish a respondent’s malfeasance is not proof
beyond reasonable doubt but substantial evidence, i.e., that amount of relevant evidence that a reasonable mind
might accept as adequate to support a conclusion, is required. Faced with conflicting versions of complainant and
respondent, the Court gives more weight to the allegations and testimony of the complainant and her witnesses who
testified clearly and consistently before the Investigating Judge.  (Emphasis supplied; citations omitted)
127

After scrutinizing the testimony of complainant and the evidence she presented to support her allegations, we find
her account of the event to be genuine and believable.

Complainant’s narration of the dinner meeting held on March 3, 2010 and her account of events leading up to the
dinner meeting were detailed and comprehensive. The conversation alleged by complainant that took place with
respondents during the meeting was replete with details.

The strongest corroborative evidence to support complainant’s allegations was the exchange of text messages
between complainant and respondent Pecaña regarding the dinner meeting. These text messages were admitted by
respondent Pecaña.  However, Justice Gaerlan failed to give any weight to the exchange of text messages. This
128

fact was not included in his investigation report. 129

The content of the text messages of respondent Pecaña belied respondents’ claim that the alleged dinner meeting
in Burgos Circle was only a chance encounter.

AILEEN PECAÑA [sic]

432
Bkt xa galit kngmkpg kta ka smin widout his knowledge. I cnt fathom y wil it end up filing an admin case. (August 8,
2010, 4:29 p.m.)

AILEEN PECAÑA [sic]

Pls Emily do something 2 pacify ur lawyer, juj rubia will definitely get mad wid us. (August 8, 2010, 4:30
p.m.) (Emphasis supplied)
130

Respondent Pecaña used the phrase, "mkpg kta," which may be translated to "have a meeting." "Mkpg kta" can in
no way mean a chance encounter.

Further, respondent Pecaña’s text messages sent to complainant belied her claim of an innocent chance encounter.
She said that respondent Judge Rubia would get angry after complainant had informed her that her lawyer might file
an administrative case against them. Respondent Judge Rubia would not have had a reason to get upset because
of the possibility of administrative liability if an innocent and coincidental encounter happened and not a dinner
meeting. However, if the meeting took place as alleged by complainant, this would have logically led to a hostile
reaction from respondents, particularly respondent Judge Rubia.

In her testimony before Justice Gaerlan, respondent Pecaña gave the following testimony:

ATTY FERNANDEZ:

In August 2010, you admitted in your comment and your supplemental comment that you received a text coming
from Emilie Barias saying her lawyer is mad with her because of that meeting, isn’t it?

EILEEN PECAÑA:

Yes, sir.

ATTY FERNANDEZ:

In fact you admitted that there were text messages coming from you and Judge Rubia in March 2010, isn’t it?

EILEEN PECAÑA:

Yes, sir.

ATTY FERNANDEZ:

And in fact, you admitted that there were [sic] indeed a text message coming from you and this is: ["]ha anong ipafile
baka lalo tayong mapapahamk?["] And another message says "bakit siya...another...did you do something to pacify
her lawyer...so you affirm these message [sic]? EILEEN PECAÑA:

Yes, sir.

ATTY FERNANDEZ:

Based on those messages of yours, is it correct that you fear....?

EILEEN PECAÑA:

I am not afraid in a way na pinalalabas nila.

ATTY. FERNANDEZ:

And in fact in your comment and in your supplemental comment you were explaining the context of these
messages?

EILEEN PECAÑA:

Alin po doon?

ATTY. FERNANDEZ

433
The first one? "bakit sya galit baka lalo tayong mapahamak"

EILEEN PECAÑA:

Ang ipinapaliwanag ko chance meeting outside the street.

ATTY. FERNANDEZ

How about the part where "administrative[. . . .]"

EILEEN PECAÑA:

The reason why I said that is because as employees of the court, whenever an administrative case is filed against
us[,] we will be investigated like this, and our benefits and promotion chances we will be disqualified.

ATTY. FERNANDEZ

In your text messages you never mentioned to Emilie that it would end up in an administrative case because you
simply thought that it was a chance meeting?

EILEEN PECAÑA:

Ano po sir?

ATTY. FERNANDEZ:

You cannot fathom why it will end up as an administrative case because it was only a chance meeting?

EILEEN PECAÑA:

Immediately on the text messages she knows already what happened why should I have to explain?

....

ATTY. FERNANDEZ:

Did you tell her while exchanging text messages that it was just a chance meeting?

EILEEN PECAÑA:

No more, sir.

ATTY. FERNANDEZ:

So you no longer took it upon you to tell Emilie to advise her lawyer not to get mad becauseit was only a chance
meeting? (No answer from the witness.) 131

Respondents also alleged that the chance encounter happened because respondent Pecaña, while having dinner
with complainant, stepped out of the restaurant to greet respondent Judge Rubia on the side street of Burgos Circle.
Since complainant allegedly followed respondent Pecaña out of the restaurant, the latter introduced complainant to
respondent Judge Rubia.

This allegation is quite implausible after taking into account the following admissions:

1. Respondent Pecaña described her relationship with Judge Rubia as "[w]ala naman po masyado. My
dealing with the Judge is only in relation with my work because during flag ceremonies he always reminds
us not to act as go between or not to be involved in the cases filed in the court."132

2. Respondent Judge Rubia is not the immediate superior of respondent Pecaña as the latter is in the Office
of the Clerk of Court.

3. Respondent Pecaña was having dinner with complainant whom she knew had a pending case before
respondent Judge Rubia.

434
 4. Respondent Judge Rubia always reminded court employees not to have dealings with litigants.

There was clearly no reason for respondent Pecaña to go out of her way to greet respondent Judge Rubia. In fact,
after allegedly being repeatedly reminded that court employees should not have any dealings with litigants,
respondent Pecaña should not have gone out to greet respondent Judge Rubia since she was dining with a litigant.

The odds that complainant and respondent Pecaña would meet respondent Judge Rubia by pure coincidence are
highly improbable. Granted, chance meetings between persons may take place, but a chance meeting between a
litigant in the company of a court employee who acceded to assisting the litigant in a case and the judge deciding
that case is outside the realm of common experience. The odds of such an occurrence are, indeed, one in a million.
The sheer improbability of such an occurrence already puts into question the truth of respondents’ allegations.

Based on these considerations, the narrative of complainant is more believable and must be afforded greater
evidentiary weight.

Delay in filing of administrative complaint is not a defense

The investigation report placed particular emphasis on the eight-month period between the alleged dinner meeting
and the filing of the administrative complaint. The eight-month delay in the filing of the administrative complaint is of
no consequence.

Delay in filing an administrative complaint should not be construed as basis to question its veracity or credibility.
There are considerations that a litigant must think about before filing an administrative case against judges and
court personnel. This is more so for lawyers where the possibility of appearing before the judge where an
administrative complaint has been filed is high.

Here, respondent Judge Rubia presided over three cases that involved complainant and her late husband’s estate.
He wielded an unmistakable amount of control over the proceedings.

Filing an administrative case against respondents is a time-consuming ordeal, and it would require additional time
and resources that litigants would rather not expend in the interest of preserving their rights in the suit. Complainant
might have decided to tread with caution so as not to incur the ire of respondent Judge Rubia for fear of the reprisal
that could take place after the filing of an administrative complaint.

Judges and court personnel wield extraordinary control over court proceedings of cases filed. Thus, litigants are
always cautious in filing administrative cases against judges and court personnel.

In any case, administrative offenses, including those committed by members of the bench and bar, are not subject
to a fixed period within which they must be reported. In Heck v. Judge Santos,  this court held that:
133

Pursuant to the foregoing, there can be no other conclusion than that an administrative complaint against an erring
lawyer who was thereafter appointed as a judge, albeit filed only after twenty-four years after the offending act was
committed, is not barred by prescription. If the rule were otherwise, members of the bar would be emboldened to
disregard the very oath they took as lawyers, prescinding from the fact that as long as no private complainant would
immediately come forward, they stand a chance of being completely exonerated from whatever administrative
liability they ought to answer for. It is the duty of this Court to protect the integrity of the practice of law as well as the
administration of justice. No matter how much time has elapsed from the time of the commission of the act
complained of and the time of the institution of the complaint, erring members of the bench and bar cannot escape
the disciplining arm of the Court. This categorical pronouncement is aimed at unscrupulous members of the bench
and bar, to deter them from committing acts which violate the Code of Professional Responsibility, the Code of
Judicial Conduct, or the Lawyer’s Oath.  (Emphasis supplied)
134

If this court saw fit to penalize a member of the bench for an offense committed more than twenty years prior to the
filing of the complaint, then the eight-month period cannot prejudice the complainant.

The interval between the time when the offense was committed and the time when the offense was officially
reported cannot serve as a basis to doubt the veracity of complainant’s allegations. This court’s mandate to
discipline members of the judiciary and its personnel is implemented by pertinent rules and statutes. Judges are
disciplined based on whether their actions violated the New Code of Judicial Conduct.  Court personnel are also
135

governed by the Code of Conduct for Court Personnel  and are appointed in accordance with the Civil Service Law,
136

as provided for in Section 5, Article VIII of the 1987 Constitution. None of these rules for administrative discipline
mandates a period within which a complaint must be filed after the commission or discovery of the offense. This
court determines with finality the liability of erring members of the judiciary and its employees. The gravity of an
administrative offense cannot be diminished by a delay in the filing of a complaint.

435
To dismiss the commission of the offense based on this eight-month period is to ignore the distinct and tangible
possibility that the offense was actually committed. The commission of the offense is not contingent on the period of
revelation or disclosure. To dismiss the complaint on this ground is tantamount to attaching a period of prescription
to the offense, which does not apply in administrative charges.

Respondent Pecaña’s actions amount to violations of the Code of Conduct for Court Personnel

"Court personnel, regardless of position or rank, are expected to conduct themselves in accordance with the strict
standards of integrity and morality."
137

The complaint states that respondents were allegedly acting in favor of Atty. Noe Zarate, counsel for the opposing
parties in the three cases pending in the sala of respondent Judge Rubia. Because of respondents’ actions,
complainant and all who will be made aware of the events of this case will harbor distrust toward the judiciary and its
processes. For this alone, respondents should be held administratively liable.

For respondent Pecaña, the fact that she allowed herself to be placed in a position that could cause suspicion
toward her work as a court personnel is disconcerting.

As a court employee, respondent Pecaña should have known better than to interact with litigants in a way that could
compromise the confidence that the general public places in the judiciary. Respondent Pecaña should have refused
to meet with complainant in her home. She should have refused any other form of extended communication with
complainant, save for those in her official capacity as a Data Encoder of the court. This continued communication
between complainant and respondent Pecaña makes her culpable for failure to adhere to the strict standard of
propriety mandated of court personnel.

Respondent Pecaña admitted to meeting with complainant several times, despite the former’s knowledge of the
pendency of cases in the court where she is employed and in addition to the text messages exchanged between
them. She had a duty to sever all forms of communication with complainant or to inform her superiors or the proper
authority of complainant’s attempts to communicate with her. Respondent Pecaña failed to do so. Instead, she
continued to communicate with complainant, even to the extent of advising complainant against filing an
administrative case against her and respondent Judge Rubia.

Respondent Pecaña violated Canon 1 of the Code of Conduct for Court Personnel:

CANON I
FIDELITY TO DUTY

....

SECTION 3. Court personnel shall not discriminate by dispensing special favors to anyone. They shall not allow
kinship, rank, position or favors from any party to influence their official acts or duties.

....

SECTION 5. Court personnel shall use the resources, property and funds under their official custody in a judicious
manner and solely in accordance with the prescribed statutory and regulatory guidelines or procedures.

Respondent Pecaña’s actions constitute a clear violation of the requirement that all court personnel uphold integrity
and prudence in all their actions. As stated in Villaros v. Orpiano:
138

Time and time again, we have stressed that the behavior of all employees and officials involved in the administration
of justice, from judges to the most junior clerks, is circumscribed with a heavy responsibility. Their conduct must be
guided by strict propriety and decorum at all times in order to merit and maintain the public’s respect for and trust in
the judiciary. Needless to say, all court personnel must conduct themselves in a manner exemplifying integrity,
honesty and uprightness. 139

Respondent Pecaña should, thus, be held administratively liable for her actions.

Respondent Judge Rubia committed gross violations of the New Code of Judicial Conduct

By meeting a litigant and advising her to talk to opposing counsel, respondent Judge Rubia violated several canons
of the New Code of Judicial Conduct.

Respondent Judge Rubia failed to act in a manner that upholds the dignity mandated by his office. He was already
made aware of the impropriety of respondent Pecaña’s actions by virtue of her admissions in her comment. At the
time of the referral of the complaint to the Office of the Court Administrator, respondent Judge Rubia was already
436
the Executive Judge of Branch 24 of the Regional Trial Court of Biñan, Laguna.  As a judge, he had the authority to
140

ensure that all court employees, whether or not they were under his direct supervision, act in accordance with the
esteem of their office.

Respondent Pecaña even alleged that respondent Judge Rubia made several warnings to all court employees not
to intercede in any case pending before any court under his jurisdiction as Executive Judge.  However, nothing in
141

the record shows that respondent Judge Rubia took action after being informed of respondent Pecaña’s interactions
with a litigant, such as ascertaining her actions, conducting an inquiry to admonish or discipline her, or at least
reporting her actions to the Office of the Court Administrator.

For this failure alone, respondent Judge Rubia should be held administratively liable. Furthermore, the evidence on
record supports the allegations that a meeting with complainant, a litigant with several cases pending before his
sala, took place. Respondent Judge Rubia’s mere presence in the dinner meeting provides a ground for
administrative liability.

In Gandeza Jr. v. Tabin,  this court reminded judges:

142

Canon 2 of the Code of Judicial Conduct requires a judge to avoid not only impropriety but also the mere
appearance of impropriety in all activities.

To stress how the law frowns upon even any appearance of impropriety in a magistrate’s activities, it has often been
held that a judge must be like Caesar’s wife - above suspicion and beyond reproach. Respondent’s act discloses a
deficiency in prudence and discretion that a member of the Judiciary must exercise in the performance of his official
functions and of his activities as a private individual. It is never trite to caution respondent to be prudent and
circumspect in both speech and action, keeping in mind that her conduct in and outside the courtroom is always
under constant observation.  (Emphasis supplied, citations omitted) Respondent Judge Rubia clearly failed to live
143

up to the standards of his office. By participating in the dinner meeting and by failing to admonish respondent
Pecaña for her admitted impropriety, respondent Judge Rubia violated Canons 1 and 2 of the New Code of Judicial
Conduct.

Canon 1 INDEPENDECE

Judicial Independence is a pre-requisite to the rule of law and a fundamental guarantee of a fair trial. A judge shall
therefore uphold and exemplify judicial independence in both its individual and institutional aspects.

Section 1. Judges shall exercise the judicial function independently on the basis of their assessment of the facts and
in accordance with a conscientious understanding of the law, free of any extraneous influence, inducement,
pressure, threat or interference, direct or indirect, from any quarter or for any reason.

Section 6. Judges shall be independent in relation to society in general and in relation to the particular parties to a
dispute which he or she has to adjudicate.

Section 8. Judges shall exhibit and promote high standards of judicial conduct in order to reinforce public confidence
in the judiciary, which is fundamental to the maintenance of judicial independence.

Canon 2 INTEGRITY

Integrity is essential not only to the proper discharge of the judicial office but also to the personal demeanor of
judges.

Section 1. Judges shall ensure that not only is their conduct above reproach, but that it is perceived to be so in view
of a reasonable observer.

Section 2. The behavior and conduct of judges must reaffirm the people’s faith in the integrity of the judiciary.
Justice must not merely be done but must also be seen to be done.

Section 3. Judges should take or initiate appropriate disciplinary measures against lawyers or court personnel for
unprofessional conduct of which the judge may have become aware.

In De la Cruz v. Judge Bersamira,  this court explained the necessity of a judge’s integrity:
144

By the very nature of the bench, judges, more than the average man, are required to observe an exacting standard
of morality and decency. The character of a judge is perceived by the people not only through his official acts but
also through his private morals as reflected in his external behavior. It is therefore paramount that a judge’s
personal behavior both in the performance of his duties and his daily life, be free from the appearance of impropriety

437
as to be beyond reproach. Only recently, in Magarang v. Judge Galdino B. Jardin, Sr., the Court pointedly stated
that:

While every public office in the government is a public trust, no position exacts a greater demand on moral
righteousness and uprightness of an individual than a seat in the judiciary. Hence, judges are strictly mandated to
abide by the law, the Code of Judicial Conduct and with existing administrative policies in order to maintain the faith
of the people in the administration of justice. 145

In Castillo v. Judge Calanog, Jr.,  this court held:

146

The Code of Judicial Ethics mandates that the conduct of a judge must be free of a whiff of impropriety not only with
respect to his performance of his judicial duties, but also to his behavior outside his sala as a private individual.
There is no dichotomy of morality: a public official is also judged by his private morals. The Code dictates that a
judge, in order to promote public confidence in the integrity and impartiality of the judiciary, must behave with
propriety at all times. As we have recently explained, a judge’s official life can not simply be detached or separated
from his personal existence. Thus:

Being the subject of constant public scrutiny, a judge should freely and willingly accept restrictions on conduct that
might be viewed as burdensome by the ordinary citizen.

A judge should personify judicial integrity and exemplify honest public service. The personal behavior of a judge,
both in the performance of official duties and in private life should be above suspicion.  (Citations omitted)
147

In De la Cruz, this court emphasized the need for impartiality of judges:

. . . [A] judge should avoid impropriety and the appearance of impropriety in all his activities. A judge is not only
required to be impartial; he must also appear to be impartial. x x x Public confidence in the judiciary is eroded by
irresponsible or improper conduct of judges.

. . . In this connection, the Court pointed out in Joselito Rallos, et al. v. Judge Ireneo Lee Gako Jr., RTC Branch 5,
Cebu City, that:

Well-known is the judicial norm that "judges should not only be impartial but should also appear impartial."
Jurisprudence repeatedly teaches that litigants are entitled to nothing less than the cold neutrality of an impartial
judge. The other elements of due process, like notice and hearing, would become meaningless if the ultimate
decision is rendered by a partial or biased judge. Judges must not only render just, correct and impartial decisions,
but must do so in a manner free of any suspicion as to their fairness, impartiality and integrity.

This reminder applies all the more sternly to municipal, metropolitan and regional trial court judges like herein
respondent, because they are judicial front-liners who have direct contact with the litigating parties.

They are the intermediaries between conflicting interests and the embodiments of the people’s sense of justice.
Thus, their official conduct should be beyond reproach.  (Citations omitted, emphasis supplied)
148

In the motion for intervention filed by Atty. Zarate before Justice Gaerlan, Atty. Zarate stated that even if respondent
Judge Rubia was present at the dinner meeting, it was merely an attempt to reconcile the parties and reach an
extrajudicial solution.
149

This is telling of a culture of tolerance that has led to the decay of the exacting nature of judicial propriety. Instead of
being outraged by respondent Judge Rubia’s meeting an opposing party, Atty. Zarate defended respondent Judge
Rubia’s actions.

Had it been true that a settlement was being brokered by respondent Judge Rubia, it should have been done in
open court with the record reflecting such an initiative.

As to complainant’s questioning of respondent Judge Rubia’s actions in the issuance of the orders in her pending
cases and the exercise of his judgment, this court agrees that complainant should resort to the appropriate judicial
remedies. This, however, does not negate the administrative liability of respondent Judge Rubia. His actions failed
to assure complainant and other litigants before his court of the required "cold neutrality of an impartial
judge." Because of this, respondent Judge Rubia also violated Canon 3 of the New Code of Judicial Conduct on
150

Impartiality:

CANON 3. IMPARTIALITY

Impartiality is essential to the proper discharge of the judicial office. It applies not only to the decision itself but also
to the process by which the decision is made.
438
Section 1. Judges shall perform their judicial duties without favor, bias, or prejudice.

Section 2. Judges shall ensure that his or her conduct, both in and out of court, maintains and enhances the
confidence of the public, the legal profession and litigants in the impartiality of the judge and of the judiciary.

Section 3. Judges shall, so far as is reasonable, so conduct themselves as to minimize the occasions on which it will
be necessary for them to be disqualified from hearing or deciding cases.

Section 4. Judges shall not knowingly, while a proceeding is before, or could come before them, make any comment
that might reasonably be expected to affect the outcome of such proceeding or impair the manifest fairness of the
process. Nor shall judges make any comment in public or otherwise that might affect the fair trial of any person or
issue.

Complainant correctly cited Pascual v. Judge Bonifacio  where this court held:
151

Upon assumption of office, a judge becomes the visible representation of the law and of justice. Membership in the
judiciary circumscribes one's personal conduct and imposes upon him a number of inhibitions, whose faithful
observance is the price one has to pay for holding such an exalted position. Thus, a magistrate of the law must
comport himself at all times in such a manner that his conduct, official or otherwise, can withstand the most
searching public scrutiny, for the ethical principles and sense of propriety of a judge are essential to the preservation
of the people's faith in the judicial system. This Court does not require of judges that they measure up to the
standards of conduct of the saints and martyrs, but we do expect them to be like Caesar's wife in all their activities.
Hence, we require them to abide strictly by the Code of Judicial Conduct.

It appears now that respondent has failed to live up to those rigorous standards. Whether or not he purposely went
to the Manila Hotel on November 25, 1998 to meet complainant or only had a chance meeting with him, his act of
trying to convince complainant to agree to his proposal is an act of impropriety. It is improper and highly unethical for
a judge to suggest to a litigant what to do to resolve his case for such would generate the suspicion that the judge is
in collusion with one party. A litigant in a case is entitled to no less than the cold neutrality of an impartial judge.
Judges are not only required to be impartial, but also to appear to be so, for appearance is an essential
manifestation of reality. Hence, not only must a judge render a just decision, he is also duty bound to render it in a
manner completely free from suspicion as to its fairness and its integrity. Respondent's conduct in the instant case
inevitably invites doubts about respondent's probity and integrity. It gives ground for a valid reproach. In the
judiciary, moral integrity is more than a cardinal virtue, it is a necessity. Moreover, a judge's lack of impartiality or the
mere appearance of bias would cause resentment if the party who refused the judge's proposal subsequently lost
his case. It would give rise to suspicion that the judgment was "fixed" beforehand. Such circumstance tarnishes the
image of the judiciary and brings to it public contempt, disrepute, and ridicule. Thus, we are constrained to rule that
respondent violated Rule 2.01 of the Code of Judicial Conduct. His misconduct is not excused but rather made more
glaring by the fact that the controversy involving complainant was pending in his own sala.  (Citations omitted)
152

The totality of the actions of respondent Judge Rubia is a clear manifestation of a lack of integrity and impartiality
essential to a judge.

By meeting with complainant, respondent Judge Rubia also violated Canon 4 of the New Code of Judicial Conduct:

CANON 4. PROPRIETY

Propriety and the appearance of propriety are essential to the performance of all the activities of a judge.

Section 1. Judges shall avoid impropriety and the appearance of impropriety in all of their activities.

Section 2. As a subject of constant public scrutiny, judges must accept personal restrictions that might be viewed as
burdensome by the ordinary citizen and should do so freely and willingly. In particular, judges shall conduct
themselves in a way that is consistent with the dignity of the judicial office.

Section 3. Judges shall, in their personal relations with individual members of the legal profession who practice
regularly in their court, avoid situations which might reasonably give rise to the suspicion or appearance of favoritism
or partiality.

On propriety, this court held in Atty. Raul L. Correa v. Judge Medel Arnaldo Belen  that: Indeed, the New Code of
153

Judicial Conduct for the Philippine Judiciary exhorts members of the judiciary, in the discharge of their duties, to be
models of propriety at all times.

....

439
A judge is the visible representation of the law. Thus, he must behave, at all times, in such a manner that his
conduct, official or otherwise, can withstand the most searching public scrutiny. The ethical principles and sense of
propriety of a judge are essential to the preservation of the people's faith in the judicial system.154

Because of the meeting, and the subsequent orders issued after the meeting, respondent Judge Rubia violated the
notions of propriety required of his office. Respondents have relentlessly stood by their position that the meeting
was a chance encounter, and, thus, no impropriety could be attributed to the meeting itself.

Respondent Judge Rubia’s actions belittled the integrity required of judges in all their dealings inside and outside
the courts. For these actions, respondent Judge Rubia now lost the requisite integrity, impartiality, and propriety
fundamental to his office. He cannot be allowed to remain a member of the judiciary.

Respondents in this case failed to subscribe to the highest moral fiber mandated of the judiciary and its personnel.
Their actions tainted their office and besmirched its integrity. In effect, both respondents are guilty of gross
misconduct. This court defined misconduct as "a transgression of some established and definite rule of action, more
particularly, unlawful behavior or gross negligence by a public officer."  In Camus v. The Civil Service Board of
155

Appeals,  this court held that "[m]isconduct has been defined as ‘wrong or improper conduct’ and ‘gross’ has been
156

held to mean ‘flagrant; shameful’. . . . This Court once held that the word misconduct implies a wrongful intention
and not a mere error of judgment." 157

Both respondents are indeed guilty of gross misconduct. However, respondent Judge Rubia is also guilty of conduct
unbecoming of a judge for violating Canons 2, 3, and 4 of the New Code of Judicial Conduct.

This is not to say that complainant comes to these proceedings with clean hands either. As a litigant, she is enjoined
to act in such a way that will not place the integrity of the proceedings in jeopardy. Her liability, however, is not the
subject of these proceedings. To ensure that these actions will no longer be committed by any party, respondents
must be sanctioned accordingly, in keeping with the court’s mandate to uphold a character of trust and integrity in
society. WHEREFORE, the court resolved tore docket the case as a regular administrative matter. Respondent
Judge Marino Rubia is hereby DISMISSED from the service, with corresponding forfeiture of all retirement benefits,
except accrued leave credits, and disqualified from reinstatement or appointment in any public office, including
government owned or -controlled corporations. Respondent Eileen Pecaña is SUSPENDED for one (1) year for
gross misconduct. This decision is immediately executory. Respondent Judge Rubia is further ordered to cease and
desist from discharging the functions of his office upon receipt of this decision. Let a copy hereof be entered in the
personal records of respondents.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 199283               June 9, 2014

JULIET VITUG MADARANG and ROMEO BARTOLOME, represented by his attorneys-in-fact and acting in
their personal capacities, RODOLFO and RUBY BARTOLOME, Petitioners, 
vs.
SPOUSES JESUS D. MORALES and CAROLINA N. MORALES, Respondents.

DECISION

LEONEN, J.:

A petition for relief from judgment is an equitable relief granted only under exceptional circumstances.  To set aside
1

a judgment through a petition for relief, parties must file the petition within 60 days from notice of the judgment and
within six (6) months after the judgment or final order was entered; otherwise, the petition shall be dismissed
outright.

If the petition for relief is filed on the ground of excusable negligence of counsel, parties must show that their
counsel’s negligence could not have been prevented using ordinary diligence and prudence.  The mere allegation
2

that there is excusable negligence simply because counsel was 80 years old is a prejudicial slur to senior citizens. It
is based on an unwarranted stereotype of people in their advanced years. It is as empty as the bigotry that supports
it.

440
This is a petition  for review on certiorari of the Court of Appeals’ resolutions dated July 27, 2011  and November 10,
3 4

2011  in CA-G.R. SP No. 120251. The Court of Appeals dismissed petitioners Juliet Vitug Madarang, Romeo
5

Bartolome, Rodolfo Bartolome, and Ruby Anne Bartolome’s  petition for certiorari for failure to file a motion for
6

reconsideration of the order  denying their petition for relief from judgment.
7

The facts as established by the pleadings of the parties are as follows:

On January 9, 2001, Spouses Jesus D. Morales and Carolina N. Morales filed with the Regional Trial Court of
Quezon City a complaint  for judicial foreclosure of a house and lot located in Bago Bantay, Quezon City.
8

The Spouses Morales alleged that on March 23, 1993, Spouses Nicanor and Luciana Bartolome loaned
₱500,000.00 from them. The Spouses Bartolome agreed to pay within two months with interest of five percent (5%)
per month. To secure their loan, the Spouses Bartolome mortgaged  the Bago Bantay property to the Spouses
9

Morales.

The period to pay lapsed without the Spouses Bartolome having paid their loan. After demand, the Spouses
Bartolome only paid part of the loaned amount.

In the meantime, the Spouses Bartolome died. The Spouses Morales, thus, filed a complaint for judicial foreclosure
of the Bago Bantay property against Juliet Vitug Madarang, Romeo Bartolome, and the Spouses Rodolfo and Ruby
Anne Bartolome.

The Spouses Morales sued Madarang as the latter allegedly represented herself as Lita Bartolome and convinced
the Spouses Morales to lend money to the Spouses Bartolome. 10

Romeo and Rodolfo Bartolome were sued in their capacities as legitimate heirs of the Spouses Bartolome. Ruby
Anne Bartolome is Rodolfo Bartolome’s wife.

In their answer,  defendants assailed the authenticity of the deed of real estate mortgage covering the Bago Bantay
11

property, specifically, the Spouses Bartolome’s signatures on the instrument. They added that the complaint was
already barred since it had been dismissed in another branch of the Regional Trial Court of Quezon City for failure
to comply with an order of the trial court.

In its decision  dated December 22, 2009, the trial court ordered defendants to pay the Spouses Morales
12

₱500,000.00 plus 7% interest per month and costs of suit within 90 days but not more than 120 days from entry of
judgment. Should defendants fail to pay, the Bago Bantay property shall be sold at public auction to satisfy the
judgment.

Defendants received a copy of the trial court’s decision on January 29, 2010.

On February 8, 2010, defendants filed their motion for reconsideration of the trial court’s decision. They amended
their motion for reconsideration and filed a request for a Philippine National Police handwriting expert to examine
the authenticity of the Spouses Bartolome’s alleged signatures on the deed of real estate mortgage.

According to the trial court, the motion for reconsideration and its amendment were pro forma as defendants failed
to specify the findings and conclusions in the decision that were not supported by the evidence or contrary to law.

As to the request for a handwriting expert, the trial court ruled that the "reasons given therein [were] not well taken." 13

Thus, in its order  dated May 25, 2010, the trial court denied the motion for reconsideration, its amendment, and the
14

request for a handwriting expert.

Defendants received a copy of the May 25, 2010 order on June 24, 2010.

On August 11, 2010, defendants filed a notice of appeal. In its order  dated August 13, 2010, the trial court denied
15

due course the notice of appeal for having been filed out of time. According to the trial court, defendants, through
their counsel, Atty. Arturo F. Tugonon, received a copy of the order denying the motion for reconsideration on June
24, 2010. This is evidenced by the registry return receipt on file with the court. Consequently, they had 15 days from
June 24, 2010, or until July 9, 2010, to appeal the trial court’s decision. However, they filed their notice of appeal
only on August 11, 2010, which was beyond the 15-day period to appeal.

On September 24, 2010,defendants filed a petition for relief from judgment,  blaming their 80-year-old lawyer who
16

failed to file the notice of appeal within the reglementary period. They argued that Atty. Tugonon’s failure to appeal
within the reglementary period was a mistake and an excusable negligence due to their former lawyer’s old age:

441
15. Undersigned Petitioner’s counsel is already eighty (80) years of age and the lapses and failure of their counsel
to take appropriate steps immediately for the protection of his client is a mistake and an excusable negligence due
to the latter’s age and should not be attributable to undersigned defendants. 17

In its order  dated April 27, 2011, the trial court denied the petition for relief from judgment. The trial court held that
18

the petition for relief was filed beyond 60 days from the finality of the trial court’s decision, contrary to Section 3,
Rule 38 of the 1997 Rules of Civil Procedure.

On July 13, 2011, Madarang, Romeo, and Rodolfo and Ruby Anne Bartolome filed the petition for certiorari  with the 19

Court of Appeals. In its resolution  dated July 27, 2011, the appellate court denied outright the petition for certiorari.
20

The Court of Appeals found that petitioners did not file a motion for reconsideration of the order denying the petition
for relief from judgment, a prerequisite for filing a petition for certiorari.

Petitioners filed a motion for reconsideration that the Court of Appeals denied in its resolution  dated November 10,
21

2011. Petitioners filed the petition  for review on certiorari with this court. They argue that they need not file a motion
22

for reconsideration of the order denying their petition for relief from judgment because the questions they raised in
the petition for relief were pure questions of law. They cite Progressive Development Corporation, Inc. v. Court of
Appeals  as authority.
23

Petitioners add that the trial court erred in denying their notice of appeal. They personally received a copy of the
decision only on August 11, 2011. They argue that the period to file on appeal must be counted from August 11,
2011, not on the day their "ailing counsel"  received a copy of the decision.
24

A comment  was filed on the petition for review on certiorari by respondents Spouses Morales. They argue that the
25

trial court did not err in declaring pro forma petitioners’ motion for reconsideration of the trial court’s decision.

Respondents contend that the Court of Appeals did not err in denying the petition for certiorari since petitioners
failed to file a motion for reconsideration of the order denying their petition for relief from judgment.

The issues for our resolution are the following:

I. Whether the failure of petitioners’ former counsel to file the notice of appeal within the reglementary period
is excusable negligence; and

II. Whether the Court of Appeals erred in dismissing outright petitioners’ petition for certiorari for failure to file
a motion for reconsideration of the order denying the petition for relief from judgment.

The petition lacks merit.

A petition for relief from judgment must

be filed within 60 days after petitioner
learns of the judgment, final order, or
proceeding and within six (6) months
from entry of judgment or final order

This court agrees that the petition for relief from judgment was filed out of time. However, the trial court erred in
counting the 60-day period to file a petition for relief from the date of finality of the trial court’s decision. Rule 38,
Section 3 of the 1997 Rules of Civil Procedure is clear that the 60-day period must be counted after petitioner learns
of the judgment or final order. The period counted from the finality of judgment or final order is the six-month period.
Section 3, Rule 38 of the 1997 Rules of Civil Procedure states:

Sec. 3. Time for filing petition; contents and verification.– A petition provided for in either of the preceding sections of
this Rule must be verified, filed within sixty (60) days after petitioner learns of the judgment, final order, or other
proceeding to be set aside, and not more than six (6) months after such judgment or final order was entered, or
such proceeding was taken; and must be accompanied with affidavits, showing the fraud, accident, mistake or
excusable negligence relied upon and the facts constituting the petitioner’s good and substantial cause of action or
defense, as the case may be. (Emphasis supplied)

The double period required under Section 3, Rule 38 is jurisdictional and should be strictly complied with.  A petition
26

for relief from judgment filed beyond the reglementary period is dismissed outright. This is because a petition for
relief from judgment is an exception to the public policy of immutability of final judgments. 27

In Gesulgon v. National Labor Relations Commission,  the Labor Arbiter ordered Mariscor Corporation to reinstate
28

Edwin Gesulgon as chief cook on board one of its vessels. Mariscor Corporation had notice of the decision on
442
March 27, 1987, but it did not appeal the Labor Arbiter’s decision. Since decisions of Labor Arbiters become final 10
calendar days from receipt of the decision, the decision became final on April 6, 1987.

On February 28, 1989, Mariscor Corporation filed a motion to set aside judgment with the National Labor Relations
Commission. The Commission treated the motion as a petition for relief from judgment and granted the petition for
relief from judgment. It remanded the case to the Labor Arbiter for further proceedings.

This court set aside the order granting the petition for relief from judgment for having been filed beyond the double
period required under Section 3, Rule 38 of the 1997 Rules of Civil Procedure. This court explained:

A party filing a petition for relief from judgment must strictly comply with two (2) reglementary periods: (a) the petition
must be filed within sixty (60) days from knowledge of the judgment, order or other proceeding to be set aside; and
(b) within a fixed period of six (6) months from entry of such judgment, order or other proceeding. Strict compliance
with these periods is required because provision for a petition for relief from judgment is a final act of liberality on the
part of the State, which remedy cannot be allowed to erode any further the fundamental principle that a judgment,
order or proceeding must, at some definite time, attain finality in order at last to put an end to litigation. In Turqueza
v. Hernando, this Court stressed once more that:

. . . the doctrine of finality of judgments is grounded on fundamental considerations of public policy and sound
practice that at the risk of occasional error, the judgments of courts must become final at some definite date fixed by
law. The law gives an exception or ‘last chance’ of a timely petition for relief from judgment within the reglementary
period (within 60 days from knowledge and 6 months from entry of judgment) under Rule 38, supra, but such grave
period must be taken as ‘absolutely fixed, in extendible, never interruptedand cannot be subjected to any condition
or contingency. Because the period fixed is itself devised to meet a condition or contingency (fraud, accident,
mistake or excusable neglect), the equitable remedy is an act of grace, as it were, designed to give the aggrieved
party another and last chance’ and failure to avail of such last chance within the grace period fixed by the statute or
Rules of Court is fatal . . . .  (Emphasis in the original)
29

In Spouses Reyes v. Court of Appeals and Voluntad,  the Regional Trial Court of Bulacan rendered a decision
30

against the Spouses Reyes’ predecessors-in-interest. The decision became final on December 8, 1995. The
Spouses Reyes had notice of the decision on May 30, 1997 when they received a Court of Appeals order directing
them to comment on the petition for certiorari filed by respondents heirs of Voluntad. Attached to the Court of
Appeals’ order was a copy of the trial court’s decision.

On June 21, 2000, the Spouses Reyes filed a petition for relief from judgment against the Regional Trial Court of
Bulacan’s decision. This court affirmed the dismissal of the petition for relief from judgment for having been filed out
of time and said:

It should be noted that the 60-day period from knowledge of the decision, and the 6-month period from entry of
judgment, are both inextendible and uninterruptible. We have also time and again held that because relief from a
final and executory judgment is really more of an exception than a rule due to its equitable character and nature,
strict compliance with these periods, which are definitely jurisdictional, must always be observed.  (Emphasis in the
31

original)

In this case, petitioners, through counsel, received a copy of the trial court’s decision on January 29, 2010. They
filed a motion for reconsideration and an amended motion for reconsideration, which similarly alleged the following:

The defendants, by the undersigned counsel, to this Honorable Court, respectfully allege:

1. That on January 29, 2010, they received the decision in the above entitled case rendered by this Honorable
Court, dated December 22, 2009;

2. That with due respect to the Honorable Court, the decision is contrary to law & to the defendants[’] evidence
presented in court. Hence, this urgent motion.

WHEREFORE, it is most respectfully prayed of this Honorable Court, that the decision sought to be reversed be
reconsidered and another one be rendered in favor of the defendants. 32

Although petitioners filed a motion for reconsideration and amended motion for reconsideration, these motions were
pro forma for not specifying the findings or conclusions in the decision that were not supported by the evidence or
contrary to law.  Their motion for reconsideration did not toll the 15-day period to appeal.
33 34

Petitioners cannot argue that the period to appeal should be counted from August 11, 2011, the day petitioners
personally received a copy of the trial court’s decision. Notice of judgment on the counsel of record is notice to the
client.  Since petitioners’ counsel received a copy of the decision on January 29, 2010, the period to appeal shall be
35

counted from that date.

443
Thus, the decision became final 15 days after January 29, 2010, or on February 13, 2010. Petitioners had six (6)
months from February 13, 2010, or until August 12, 2010, to file a petition for relief from judgment.

Since petitioners filed their petition for relief from judgment on September 24, 2010, the petition for relief from
judgment was filed beyond six (6) months from finality of judgment. The trial court should have denied the petition
for relief from judgment on this ground.

II

Failure of petitioners’ former counsel to

file the notice of appeal within the
reglementary period is not excusable
negligence

Even if we assume that petitioners filed their petition for relief from judgment within the reglementary period,
petitioners failed to prove that their former counsel’s failure to file a timely notice of appeal was due to a mistake or
excusable negligence.

Under Section 1, Rule 38 of the 1997 Rules of Civil Procedure, a petition for relief from judgment may be filed on the
ground of fraud, accident, mistake, or excusable negligence:

Section 1. Petition for relief from judgment, order, or other proceedings.

When a judgment or final order is entered, or any other proceeding is thereafter taken against a party in any court
through fraud, accident, mistake, or excusable negligence, he may file a petition in such court and in the same case
praying that the judgment, order or proceeding be set aside.

A petition for relief from judgment is an equitable remedy and is allowed only in exceptional cases.  It is not
36

available if other remedies exist, such as a motion for new trial or appeal. 37

To set aside a judgment through a petition for relief, the negligence must be so gross "that ordinary diligence and
prudence could not have guarded against."  This is to prevent parties from "reviv[ing] the right to appeal [already]
38

lost through inexcusable negligence." 39

Petitioners argue that their former counsel’s failure to file a notice of appeal within the reglementary period was "a
mistake and an excusable negligence due to [their former counsel’s] age."  This argument stereotypes and
40

demeans senior citizens. It asks this court to assume that a person with advanced age is prone to incompetence.
This cannot be done.

There is also no showing that the negligence could have been prevented through ordinary diligence and prudence.
As such, petitioners are bound by their counsel’s negligence. 41

Petitioners had until July 9, 2010 to file a notice of appeal, considering that their former counsel received a copy of
the order denying their motion for reconsideration of the trial court’s decision on June 24, 2010.  Since petitioners
42

filed their notice of appeal only on August 11, 2010,  the trial court correctly denied the notice of appeal for having
43

been filed out of time.

III

The Court of Appeals correctly denied the

petition for certiorari for petitioners’
failure to file a motion for reconsideration
of the order denying the petition for relief
from judgment

In its resolution dated July 27, 2011, the Court of Appeals denied petitioners’ petition for certiorari for failure to file a
motion for reconsideration of the order denying the petition for relief from judgment. We agree with the appellate
court.

Section 1, Rule 65 of the 1997 Rules of Civil Procedure requires that no appeal or any plain, speedy, and adequate
remedy in the ordinary course of law is available to a party before a petition for certiorari is filed. This section
provides:

Section 1. Petition for certiorari.

444
When any tribunal, board or officer exercising judicial or quasi judicial functions has acted without or in excess of its
or his 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 person aggrieved thereby may
file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered
annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law
and justice may require. (Emphasis supplied) In Metro Transit Organization, Inc. v. PIGLAS NFWU-KMU,  this court
44

ruled that a motion for reconsideration is the plain, speedy, and adequate remedy in the ordinary course of law
alluded to in Section 1, Rule 65 of the 1997 Rules of Civil Procedure.  A motion for reconsideration is required
45

before a petition for certiorari is filed "to grant [the court which rendered the assailed judgment or order]an
opportunity . . . to correct any actual or perceived error attributed to it by the re-examination of the legal and factual
circumstances of the case." 46

In this case, a motion for reconsideration of the order denying the petition for relief from judgment is the plain,
speedy, and adequate remedy in the ordinary course of law. Petitioners failed to avail themselves of this remedy.
Thus, the Court of Appeals correctly dismissed petitioners’ petition for certiorari.

Contrary to petitioners’ claim, the questions they raised in their petition for relief from judgment were not pure
questions of law.  They raise the authenticity of the Spouses Bartolome’s signatures on the deed of real estate
1âwphi1

mortgage and the allegedly excusable negligence of their counsel.

These are questions of fact which put at issue the truth of the facts alleged in the petition for relief from
judgment. Petitioners cannot cite Progressive Development Corporation, Inc. v. Court of Appeals  where this court
47 48

held that "[t]he filing of the motion for reconsideration before availing of the remedy of certiorari is not sine qua non
when the issues raised is one purely of law." 49

All told, the Court of Appeals committed no reversible error in denying petitioners’ petition for certiorari. The
Regional Trial Court’s decision dated December 22, 2009 is final and executory.

WHEREFORE, the petition for review on certiorari is DENIED. The Court of Appeals’ resolutions dated July 27,
2011 and November 10, 2011 in CA-G.R. SP No. 120251 are AFFIRMED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 209287               July 1, 2014

MARIA CAROLINA P. ARAULLO, CHAIRPERSON, BAGONG ALYANSANG MAKABAYAN; JUDY M.

TAGUIWALO, PROFESSOR, UNIVERSITY OF THE PHILIPPINES DILIMAN, CO-CHAIRPERSON,
PAGBABAGO; HENRI KAHN, CONCERNED CITIZENS MOVEMENT; REP. LUZ ILAGAN, GABRIELA
WOMEN'S PARTY REPRESENTATIVE; REP. CARLOS ISAGANI ZARATE, BAY AN MUNA PARTY-LIST
REPRESENTATIVE; RENATO M. REYES, JR., SECRETARY GENERAL OF BAYAN; MANUEL K. DAYRIT,
CHAIRMAN, ANG KAPATIRAN PARTY; VENCER MARI E. CRISOSTOMO, CHAIRPERSON, ANAKBAYAN;
VICTOR VILLANUEVA, CONVENOR, YOUTH ACT NOW, Petitioners, 
vs.
BENIGNO SIMEON C. AQUINO III, PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES; PAQUITO N.
OCHOA, JR., EXECUTIVE SECRETARY; AND FLORENCIO B. ABAD, SECRETARY OF THE DEPARTMENT
OF BUDGET AND MANAGEMENT, Respondents.

x-----------------------x

G.R. No. 209135

AUGUSTO L. SY JUCO JR., Ph.D., Petitioner, 

vs.
FLORENCIO B. ABAD, IN HIS CAPACITY AS THE SECRETARY OF DEPARTMENT OF BUDGET AND
445
MANAGEMENT; AND HON. FRANKLIN MAGTUNAO DRILON, IN HIS CAP A CITY AS THE SENATE
PRESIDENT OF THE PHILIPPINES, Respondents.

x-----------------------x

G.R. No. 209136

MANUELITO R. LUNA, Petitioner, 
vs.
SECRETARY FLORENCIO ABAD, IN HIS OFFICIAL CAPACITY AS HEAD OF THE DEPARTMENT OF BUDGET
AND MANAGEMENT; AND EXECUTIVE SECRETARY PAQUITO OCHOA, IN HIS OFFICIAL CAPACITY AS
ALTER EGO OF THE PRESIDENT, Respondents.

x-----------------------x

G.R. No. 209155

ATTY. JOSE MALV AR VILLEGAS, JR., Petitioner, 

vs.
THE HONORABLE EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR.; AND THE SECRETARY OF BUDGET
AND MANAGEMENT FLORENCIO B. ABAD, Respondents.

x-----------------------x

G.R. No. 209164

PHILIPPINE CONSTITUTION ASSOCIATION (PHILCONSA), REPRESENTED BY DEAN FROILAN M.

BACUNGAN, BENJAMIN E. DIOKNO AND LEONOR M. BRIONES, Petitioners, 
vs.
DEPARTMENT OF BUDGET AND MANAGEMENT AND/OR HON. FLORENCIO B. ABAD, Respondents.

x-----------------------x

G.R. No. 209260

INTEGRATED BAR OF THE PHILIPPINES (IBP), Petitioner, 

vs.
SECRETARY FLORENCIO B. ABAD OF THE DEPARTMENT OF BUDGET AND MANAGEMENT
(DBM),Respondent.

x-----------------------x

G.R. No. 209442

GRECO ANTONIOUS BEDA B. BELGICA; BISHOP REUBEN MABANTE AND REV. JOSE L.
GONZALEZ,Petitioners, 
vs.
PRESIDENT BENIGNO SIMEON C. AQUINO III, THE SENATE OF THE PHILIPPINES, REPRESENTED BY
SENATE PRESIDENT FRANKLIN M. DRILON; THE HOUSE OF REPRESENTATIVES, REPRESENTED BY
SPEAKER FELICIANO BELMONTE, JR.; THE EXECUTIVE OFFICE, REPRESENTED BY EXECUTIVE
SECRETARY PAQUITO N. OCHOA, JR.; THE DEPARTMENT OF BUDGET AND MANAGEMENT,
REPRESENTED BY SECRETARY FLORENCIO ABAD; THE DEPARTMENT OF FINANCE, REPRESENTED BY
SECRETARY CESAR V. PURISIMA; AND THE BUREAU OF TREASURY, REPRESENTED BY ROSALIA V. DE
LEON, Respondents.

x-----------------------x

G.R. No. 209517

CONFEDERATION FOR UNITY, RECOGNITION AND ADV AN CEMENT OF GOVERNMENT EMPLOYEES

(COURAGE), REPRESENTED BY ITS 1ST VICE PRESIDENT, SANTIAGO DASMARINAS, JR.; ROSALINDA
NARTATES, FOR HERSELF AND AS NATIONAL PRESIDENT OF THE CONSOLIDATED UNION OF
EMPLOYEES NATIONAL HOUSING AUTHORITY (CUENHA); MANUEL BACLAGON, FOR HIMSELF AND AS
PRESIDENT OF THE SOCIAL WELFARE EMPLOYEES ASSOCIATION OF THE PHILIPPINES, DEPARTMENT
OF SOCIAL WELFARE AND DEVELOPMENT CENTRAL OFFICE (SWEAP-DSWD CO); ANTONIA PASCUAL,
FOR HERSELF AND AS NATIONAL PRESIDENT OF THE DEPARTMENT OF AGRARIAN REFORM
446
EMPLOYEES ASSOCIATION (DAREA); ALBERT MAGALANG, FOR HIMSELF AND AS PRESIDENT OF THE
ENVIRONMENT AND MANAGEMENT BUREAU EMPLOYEES UNION (EMBEU); AND MARCIAL ARABA, FOR
HIMSELF AND AS PRESIDENT OF THE KAPISANAN PARA SA KAGALINGAN NG MGA KAW ANI NG MMDA
(KKKMMDA), Petitioners, 
vs.
BENIGNO SIMEON C. AQUINO Ill, PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES; PAQUITO OCHOA,
JR., EXECUTIVE SECRETARY; AND HON. FLORENCIO B. ABAD, SECRETARY OF THE DEPARTMENT OF
BUDGET AND MANAGEMENT, Respondents.

x-----------------------x

G.R. No. 209569

VOLUNTEERS AGAINST CRIME AND CORRUPTION (VACC), REPRESENTED BY DANTE L.

JIMENEZ,Petitioner, 
vs.
PAQUITO N. OCHOA, EXECUTIVE SECRETARY, AND FLORENCIO B. ABAD, SECRETARY OF THE
DEPARTMENT OF BUDGET AND MANAGEMENT, Respondents.

DECISION

BERSAMIN, J.:

For resolution are the consolidated petitions assailing the constitutionality of the Disbursement Acceleration
Program(DAP), National Budget Circular (NBC) No. 541, and related issuances of the Department of Budget and
Management (DBM) implementing the DAP.

At the core of the controversy is Section 29(1) of Article VI of the 1987 Constitution, a provision of the fundamental
law that firmly ordains that "[n]o money shall be paid out of the Treasury except in pursuance of an appropriation
made by law." The tenor and context of the challenges posed by the petitioners against the DAP indicate that the
DAP contravened this provision by allowing the Executive to allocate public money pooled from programmed and
unprogrammed funds of its various agencies in the guise of the President exercising his constitutional authority
under Section 25(5) of the 1987 Constitution to transfer funds out of savings to augment the appropriations of
offices within the Executive Branch of the Government. But the challenges are further complicated by the interjection
of allegations of transfer of funds to agencies or offices outside of the Executive.

Antecedents

What has precipitated the controversy?

On September 25, 2013, Sen. Jinggoy Ejercito Estrada delivered a privilege speech in the Senate of the Philippines
to reveal that some Senators, including himself, had been allotted an additional ₱50 Million each as "incentive" for
voting in favor of the impeachment of Chief Justice Renato C. Corona.

Responding to Sen. Estrada’s revelation, Secretary Florencio Abad of the DBM issued a public statement entitled
Abad: Releases to Senators Part of Spending Acceleration Program,  explaining that the funds released to the
1

Senators had been part of the DAP, a program designed by the DBM to ramp up spending to accelerate economic
expansion. He clarified that the funds had been released to the Senators based on their letters of request for
funding; and that it was not the first time that releases from the DAP had been made because the DAP had already
been instituted in 2011 to ramp up spending after sluggish disbursements had caused the growth of the gross
domestic product (GDP) to slow down. He explained that the funds under the DAP were usually taken from (1)
unreleased appropriations under Personnel Services;  (2) unprogrammed funds; (3) carry-over appropriations
2

unreleased from the previous year; and (4) budgets for slow-moving items or projects that had been realigned to
support faster-disbursing projects.

The DBM soon came out to claim in its website  that the DAP releases had been sourced from savings generated by
3

the Government, and from unprogrammed funds; and that the savings had been derived from (1) the pooling of
unreleased appropriations, like unreleased Personnel Services  appropriations that would lapse at the end of the
4

year, unreleased appropriations of slow-moving projects and discontinued projects per zero based budgeting
findings;  and (2) the withdrawal of unobligated allotments also for slow-moving programs and projects that had
5

been earlier released to the agencies of the National Government.

The DBM listed the following as the legal bases for the DAP’s use of savings,  namely: (1) Section 25(5), Article VI
6

of the 1987 Constitution, which granted to the President the authority to augment an item for his office in the general
appropriations law; (2) Section 49 (Authority to Use Savings for Certain Purposes) and Section 38 (Suspension of
Expenditure Appropriations), Chapter 5, Book VI of Executive Order (EO) No. 292 (Administrative Code of 1987);

447
and (3) the General Appropriations Acts (GAAs) of 2011, 2012 and 2013, particularly their provisions on the (a) use
of savings; (b) meanings of savings and augmentation; and (c) priority in the use of savings.

As for the use of unprogrammed funds under the DAP, the DBM cited as legal bases the special provisions on
unprogrammed fund contained in the GAAs of 2011, 2012 and 2013.

The revelation of Sen. Estrada and the reactions of Sec. Abad and the DBM brought the DAP to the consciousness
of the Nation for the first time, and made this present controversy inevitable. That the issues against the DAP came
at a time when the Nation was still seething in anger over Congressional pork barrel – "an appropriation of
government spending meant for localized projects and secured solely or primarily to bring money to a
representative’s district"  – excited the Nation as heatedly as the pork barrel controversy.
7

Nine petitions assailing the constitutionality of the DAP and the issuances relating to the DAP were filed within days
of each other, as follows: G.R. No. 209135 (Syjuco), on October 7, 2013; G.R. No. 209136 (Luna), on October 7,
2013; G.R. No. 209155 (Villegas),  on October 16, 2013; G.R. No. 209164 (PHILCONSA), on October 8, 2013; G.R.
8

No. 209260 (IBP), on October 16, 2013; G.R. No. 209287 (Araullo), on October 17, 2013; G.R. No. 209442
(Belgica), on October 29, 2013; G.R. No. 209517 (COURAGE), on November6, 2013; and G.R. No. 209569
(VACC), on November 8, 2013.

In G.R. No. 209287 (Araullo), the petitioners brought to the Court’s attention NBC No. 541 (Adoption of Operational
Efficiency Measure – Withdrawal of Agencies’ Unobligated Allotments as of June 30, 2012), alleging that NBC No.
541, which was issued to implement the DAP, directed the withdrawal of unobligated allotments as of June 30, 2012
of government agencies and offices with low levels of obligations, both for continuing and current allotments.

In due time, the respondents filed their Consolidated Comment through the Office of the Solicitor General (OSG).

The Court directed the holding of oral arguments on the significant issues raised and joined.

Issues

Under the Advisory issued on November 14, 2013, the presentations of the parties during the oral arguments were
limited to the following, to wit:

Procedural Issue:

A. Whether or not certiorari, prohibition, and mandamus are proper remedies to assail the constitutionality and
validity of the Disbursement Acceleration Program (DAP), National Budget Circular (NBC) No. 541, and all other
executive issuances allegedly implementing the DAP. Subsumed in this issue are whether there is a controversy
ripe for judicial determination, and the standing of petitioners.

Substantive Issues:

B. Whether or not the DAP violates Sec. 29, Art. VI of the 1987 Constitution, which provides: "No money shall be
paid out of the Treasury except in pursuance of an appropriation made by law."

C. Whether or not the DAP, NBC No. 541, and all other executive issuances allegedly implementing the DAP violate
Sec. 25(5), Art. VI of the 1987 Constitution insofar as:

(a)They treat the unreleased appropriations and unobligated allotments withdrawn from government
agencies as "savings" as the term is used in Sec. 25(5), in relation to the provisions of the GAAs of 2011,
2012 and 2013;

(b)They authorize the disbursement of funds for projects or programs not provided in the GAAs for the
Executive Department; and

(c)They "augment" discretionary lump sum appropriations in the GAAs.

D. Whether or not the DAP violates: (1) the Equal Protection Clause, (2) the system of checks and balances, and (3)
the principle of public accountability enshrined in the 1987 Constitution considering that it authorizes the release of
funds upon the request of legislators.

E. Whether or not factual and legal justification exists to issue a temporary restraining order to restrain the
implementation of the DAP, NBC No. 541, and all other executive issuances allegedly implementing the DAP.

448
In its Consolidated Comment, the OSG raised the matter of unprogrammed funds in order to support its argument
regarding the President’s power to spend. During the oral arguments, the propriety of releasing unprogrammed
funds to support projects under the DAP was considerably discussed. The petitioners in G.R. No. 209287 (Araullo)
and G.R. No. 209442 (Belgica) dwelled on unprogrammed funds in their respective memoranda. Hence, an
additional issue for the oral arguments is stated as follows:

F. Whether or not the release of unprogrammed funds under the DAP was in accord with the GAAs.

During the oral arguments held on November 19, 2013, the Court directed Sec. Abad to submit a list of savings
brought under the DAP that had been sourced from (a) completed programs; (b) discontinued or abandoned
programs; (c) unpaid appropriations for compensation; (d) a certified copy of the President’s directive dated June
27, 2012 referred to in NBC No. 541; and (e) all circulars or orders issued in relation to the DAP.
9

In compliance, the OSG submitted several documents, as follows:

(1) A certified copy of the Memorandum for the President dated June 25, 2012 (Omnibus Authority to
Consolidate Savings/Unutilized Balances and their Realignment); 10

(2) Circulars and orders, which the respondents identified as related to the DAP, namely:

a. NBC No. 528 dated January 3, 2011 (Guidelines on the Release of Funds for FY 2011);

b. NBC No. 535 dated December 29, 2011 (Guidelines on the Release of Funds for FY 2012);

c. NBC No. 541 dated July 18, 2012 (Adoption of Operational Efficiency Measure – Withdrawal of
Agencies’ Unobligated Allotments as of June 30, 2012);

d. NBC No. 545 dated January 2, 2013 (Guidelines on the Release of Funds for FY 2013);

e. DBM Circular Letter No. 2004-2 dated January 26, 2004 (Budgetary Treatment of
Commitments/Obligations of the National Government);

f. COA-DBM Joint Circular No. 2013-1 dated March 15, 2013 (Revised Guidelines on the
Submission of Quarterly Accountability Reports on Appropriations, Allotments, Obligations and
Disbursements);

g. NBC No. 440 dated January 30, 1995 (Adoption of a Simplified Fund Release System in the
Government).

(3) A breakdown of the sources of savings, including savings from discontinued projects and unpaid
appropriations for compensation from 2011 to 2013

On January 28, 2014, the OSG, to comply with the Resolution issued on January 21, 2014 directing the
respondents to submit the documents not yet submitted in compliance with the directives of the Court or its
Members, submitted several evidence packets to aid the Court in understanding the factual bases of the DAP, to
wit:

(1) First Evidence Packet  – containing seven memoranda issued by the DBM through Sec. Abad, inclusive
11

of annexes, listing in detail the 116 DAP identified projects approved and duly signed by the President, as
follows:

a. Memorandum for the President dated October 12, 2011 (FY 2011 Proposed Disbursement
Acceleration Program (Projects and Sources of Funds);

b. Memorandum for the President dated December 12, 2011 (Omnibus Authority to Consolidate
Savings/Unutilized Balances and its Realignment);

c. Memorandum for the President dated June 25, 2012 (Omnibus Authority to Consolidate
Savings/Unutilized Balances and their Realignment);

d. Memorandum for the President dated September 4, 2012 (Release of funds for other priority
projects and expenditures of the Government);

e. Memorandum for the President dated December 19, 2012 (Proposed Priority Projects and
Expenditures of the Government);

449
 f. Memorandum for the President dated May 20, 2013 (Omnibus Authority to Consolidate
Savings/Unutilized Balances and their Realignment to Fund the Quarterly Disbursement
Acceleration Program); and

g. Memorandum for the President dated September 25, 2013 (Funding for the Task Force Pablo
Rehabilitation Plan).

(2) Second Evidence Packet  – consisting of 15 applications of the DAP, with their corresponding Special
12

Allotment Release Orders (SAROs) and appropriation covers;

(3) Third Evidence Packet  – containing a list and descriptions of 12 projects under the DAP;
13

(4) Fourth Evidence Packet  – identifying the DAP-related portions of the Annual Financial Report (AFR) of
14

the Commission on Audit for 2011 and 2012;

(5) Fifth Evidence Packet  – containing a letter of Department of Transportation and

15

Communications(DOTC) Sec. Joseph Abaya addressed to Sec. Abad recommending the withdrawal of
funds from his agency, inclusive of annexes; and

(6) Sixth Evidence Packet  – a print-out of the Solicitor General’s visual presentation for the January 28,
16

2014 oral arguments.

On February 5, 2014,  the OSG forwarded the Seventh Evidence Packet,  which listed the sources of funds brought
17 18

under the DAP, the uses of such funds per project or activity pursuant to DAP, and the legal bases thereof.

On February 14, 2014, the OSG submitted another set of documents in further compliance with the Resolution
dated January 28, 2014, viz:

(1) Certified copies of the certifications issued by the Bureau of Treasury to the effect that the revenue collections
exceeded the original revenue targets for the years 2011, 2012 and 2013, including collections arising from sources
not considered in the original revenue targets, which certifications were required for the release of the
unprogrammed funds as provided in Special Provision No. 1 of Article XLV, Article XVI, and Article XLV of the 2011,
2012 and 2013 GAAs; and (2) A report on releases of savings of the Executive Department for the use of the
Constitutional Commissions and other branches of the Government, as well as the fund releases to the Senate and
the Commission on Elections (COMELEC).

RULING

I.

Procedural Issue:

a) The petitions under Rule 65 are proper remedies

All the petitions are filed under Rule 65 of the Rules of Court, and include applications for the issuance of writs of
preliminary prohibitory injunction or temporary restraining orders. More specifically, the nature of the petitions is
individually set forth hereunder, to wit:

G.R. No. 209135 (Syjuco) Certiorari, Prohibition and Mandamus

G.R. No. 209136 (Luna) Certiorariand Prohibition

G.R. No. 209155 (Villegas) Certiorariand Prohibition

G.R. No. 209164 (PHILCONSA) Certiorariand Prohibition

G.R. No. 209260 (IBP) Prohibition

G.R. No. 209287 (Araullo) Certiorariand Prohibition

G.R. No. 209442 (Belgica) Certiorari

450
 G.R. No. 209517 (COURAGE) Certiorari and Prohibition

G.R. No. 209569 (VACC) Certiorari and Prohibition

The respondents submit that there is no actual controversy that is ripe for adjudication in the absence of adverse
claims between the parties;  that the petitioners lacked legal standing to sue because no allegations were made to
19

the effect that they had suffered any injury as a result of the adoption of the DAP and issuance of NBC No. 541; that
their being taxpayers did not immediately confer upon the petitioners the legal standing to sue considering that the
adoption and implementation of the DAP and the issuance of NBC No. 541 were not in the exercise of the taxing or
spending power of Congress;  and that even if the petitioners had suffered injury, there were plain, speedy and
20

adequate remedies in the ordinary course of law available to them, like assailing the regularity of the DAP and
related issuances before the Commission on Audit (COA) or in the trial courts. 21

The respondents aver that the special civil actions of certiorari and prohibition are not proper actions for directly
assailing the constitutionality and validity of the DAP, NBC No. 541, and the other executive issuances implementing
the DAP. 22

In their memorandum, the respondents further contend that there is no authorized proceeding under the Constitution
and the Rules of Court for questioning the validity of any law unless there is an actual case or controversy the
resolution of which requires the determination of the constitutional question; that the jurisdiction of the Court is
largely appellate; that for a court of law to pass upon the constitutionality of a law or any act of the Government
when there is no case or controversy is for that court to set itself up as a reviewer of the acts of Congress and of the
President in violation of the principle of separation of powers; and that, in the absence of a pending case or
controversy involving the DAP and NBC No. 541, any decision herein could amount to a mere advisory opinion that
no court can validly render. 23

The respondents argue that it is the application of the DAP to actual situations that the petitioners can question
either in the trial courts or in the COA; that if the petitioners are dissatisfied with the ruling either of the trial courts or
of the COA, they can appeal the decision of the trial courts by petition for review on certiorari, or assail the decision
or final order of the COA by special civil action for certiorari under Rule 64 of the Rules of Court. 24

The respondents’ arguments and submissions on the procedural issue are bereft of merit.

Section 1, Article VIII of the 1987 Constitution expressly provides:

Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be established
by law.

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.

Thus, the Constitution vests judicial power in the Court and in such lower courts as may be established by law. In
creating a lower court, Congress concomitantly determines the jurisdiction of that court, and that court, upon its
creation, becomes by operation of the Constitution one of the repositories of judicial power.  However, only the
25

Court is a constitutionally created court, the rest being created by Congress in its exercise of the legislative power.

The Constitution states that judicial power includes the duty of the courts of justice not only "to settle actual
controversies involving rights which are legally demandable and enforceable" but also "to determine whether or not
there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government." It has thereby expanded the concept of judicial power, which up to then was
confined to its traditional ambit of settling actual controversies involving rights that were legally demandable and
enforceable.

The background and rationale of the expansion of judicial power under the 1987 Constitution were laid out during
the deliberations of the 1986 Constitutional Commission by Commissioner Roberto R. Concepcion (a former Chief
Justice of the Philippines) in his sponsorship of the proposed provisions on the Judiciary, where he said:–

The Supreme Court, like all other courts, has one main function: to settle actual controversies involving conflicts of
rights which are demandable and enforceable. There are rights which are guaranteed by law but cannot be enforced
by a judicial party. In a decided case, a husband complained that his wife was unwilling to perform her duties as a
wife. The Court said: "We can tell your wife what her duties as such are and that she is bound to comply with them,
but we cannot force her physically to discharge her main marital duty to her husband. There are some rights
guaranteed by law, but they are so personal that to enforce them by actual compulsion would be highly derogatory
to human dignity." This is why the first part of the second paragraph of Section 1 provides that: Judicial power
451
includes the duty of courts to settle actual controversies involving rights which are legally demandable or
enforceable…

The courts, therefore, cannot entertain, much less decide, hypothetical questions. In a presidential system of
government, the Supreme Court has, also, another important function. The powers of government are generally
considered divided into three branches: the Legislative, the Executive and the Judiciary. Each one is supreme within
its own sphere and independent of the others. Because of that supremacy power to determine whether a given law
is valid or not is vested in courts of justice.

Briefly stated, courts of justice determine the limits of power of the agencies and offices of the government as well
as those of its officers. In other words, the judiciary is the final arbiter on the question whether or not a branch of
government or any of its officials has acted without jurisdiction or in excess of jurisdiction, or so capriciously as to
constitute an abuse of discretion amounting to excess of jurisdiction or lack of jurisdiction. This is not only a judicial
power but a duty to pass judgmenton matters of this nature.

This is the background of paragraph 2 of Section 1, which means that the courts cannot hereafter evade the duty to
settle matters of this nature, by claiming that such matters constitute a political question. (Bold emphasis supplied) 26

Upon interpellation by Commissioner Nolledo, Commissioner Concepcion clarified the scope of judicial power in the
following manner:–

MR. NOLLEDO. x x x

The second paragraph of Section 1 states: "Judicial power includes the duty of courts of justice to settle actual
controversies…" The term "actual controversies" according to the Commissioner should refer to questions which are
political in nature and, therefore, the courts should not refuse to decide those political questions. But do I
understand it right that this is restrictive or only an example? I know there are cases which are not actual yet the
court can assume jurisdiction. An example is the petition for declaratory relief.

May I ask the Commissioner’s opinion about that?

MR. CONCEPCION. The Supreme Court has no jurisdiction to grant declaratory judgments.

MR. NOLLEDO. The Gentleman used the term "judicial power" but judicial power is not vested in the Supreme
Court alone but also in other lower courts as may be created by law.

MR. CONCEPCION. Yes.

MR. NOLLEDO. And so, is this only an example?

MR. CONCEPCION. No, I know this is not. The Gentleman seems to identify political questions with jurisdictional
questions. But there is a difference.

MR. NOLLEDO. Because of the expression "judicial power"?

MR. CONCEPCION. No. Judicial power, as I said, refers to ordinary cases but where there is a question as to
whether the government had authority or had abused its authority to the extent of lacking jurisdiction or excess of
jurisdiction, that is not a political question. Therefore, the court has the duty to decide.
27

Our previous Constitutions equally recognized the extent of the power of judicial review and the great responsibility
of the Judiciary in maintaining the allocation of powers among the three great branches of Government. Speaking
for the Court in Angara v. Electoral Commission,  Justice Jose P. Laurel intoned:
28

x x x In times of social disquietude or political excitement, the great landmarks of the Constitution are apt to be
forgotten or marred, if not entirely obliterated. In cases of conflict, the judicial department is the only constitutional
organ which can be called upon to determine the proper allocation of powers between the several department and
among the integral or constituent units thereof.

xxxx

The Constitution is a definition of the powers of government. Who is to determine the nature, scope and extent of
such powers? The Constitution itself has provided for the instrumentality of the judiciary as the rational way. And
when the judiciary mediates to allocate constitutional boundaries, it does not assert any superiority over the other
department; it does not in reality nullify or invalidate an act of the legislature, but only asserts the solemn and sacred
obligation assigned to it by the Constitution to determine conflicting claims of authority under the Constitution and to
establish for the parties in an actual controversy the rights which that instrument secures and guarantees to them.
452
This is in truth all that is involved in what is termed "judicial supremacy" which properly is the power of judicial
review under the Constitution. x x x 29

What are the remedies by which the grave abuse of discretion amounting to lack or excess of jurisdiction on the part
of any branch or instrumentality of the Government may be determined under the Constitution?

The present Rules of Court uses two special civil actions for determining and correcting grave abuse of discretion
amounting to lack or excess of jurisdiction. These are the special civil actions for certiorari and prohibition, and both
are governed by Rule 65. A similar remedy of certiorari exists under Rule 64, but the remedy is expressly applicable
only to the judgments and final orders or resolutions of the Commission on Elections and the Commission on Audit.

The ordinary nature and function of the writ of certiorari in our present system are aptly explained in Delos Santos v.
Metropolitan Bank and Trust Company: 30

In the common law, from which the remedy of certiorari evolved, the writ of certiorari was issued out of Chancery, or
the King’s Bench, commanding agents or officers of the inferior courts to return the record of a cause pending
before them, so as to give the party more sure and speedy justice, for the writ would enable the superior court to
determine from an inspection of the record whether the inferior court’s judgment was rendered without authority.
The errors were of such a nature that, if allowed to stand, they would result in a substantial injury to the petitioner to
whom no other remedy was available. If the inferior court acted without authority, the record was then revised and
corrected in matters of law. The writ of certiorari was limited to cases in which the inferior court was said to be
exceeding its jurisdiction or was not proceeding according to essential requirements of law and would lie only to
review judicial or quasi-judicial acts.

The concept of the remedy of certiorari in our judicial system remains much the same as it has been in the common
law. In this jurisdiction, however, the exercise of the power to issue the writ of certiorari is largely regulated by laying
down the instances or situations in the Rules of Court in which a superior court may issue the writ of certiorari to an
inferior court or officer. Section 1, Rule 65 of the Rules of Court compellingly provides the requirements for that
purpose, viz:

xxxx

The sole office of the writ of certiorari is the correction of errors of jurisdiction, which includes the commission of
grave abuse of discretion amounting to lack of jurisdiction. In this regard, mere abuse of discretion is not enough to
warrant the issuance of the writ. The abuse of discretion must be grave, which means either that the judicial or
quasi-judicial power was exercised in an arbitrary or despotic manner by reason of passion or personal hostility, or
that the respondent judge, tribunal or board evaded a positive duty, or virtually refused to perform the duty enjoined
or to act in contemplation of law, such as when such judge, tribunal or board exercising judicial or quasi-judicial
powers acted in a capricious or whimsical manner as to be equivalent to lack of jurisdiction. 31

Although similar to prohibition in that it will lie for want or excess of jurisdiction, certiorari is to be distinguished from
prohibition by the fact that it is a corrective remedy used for the re-examination of some action of an inferior tribunal,
and is directed to the cause or proceeding in the lower court and not to the court itself, while prohibition is a
preventative remedy issuing to restrain future action, and is directed to the court itself.  The Court expounded on the
32

nature and function of the writ of prohibition in Holy Spirit Homeowners Association, Inc. v. Defensor: 33

A petition for prohibition is also not the proper remedy to assail an IRR issued in the exercise of a quasi-legislative
function. Prohibition is an extraordinary writ directed against any tribunal, corporation, board, officer or person,
whether exercising judicial, quasi-judicial or ministerial functions, ordering said entity or person to desist from further
proceedings when said proceedings are without or in excess of said entity’s or person’s jurisdiction, or are
accompanied with grave abuse of discretion, and there is no appeal or any other plain, speedy and adequate
remedy in the ordinary course of law. Prohibition lies against judicial or ministerial functions, but not against
legislative or quasi-legislative functions. Generally, the purpose of a writ of prohibition is to keep a lower court within
the limits of its jurisdiction in order to maintain the administration of justice in orderly channels. Prohibition is the
proper remedy to afford relief against usurpation of jurisdiction or power by an inferior court, or when, in the exercise
of jurisdiction in handling matters clearly within its cognizance the inferior court transgresses the bounds prescribed
to it by the law, or where there is no adequate remedy available in the ordinary course of law by which such relief
can be obtained. Where the principal relief sought is to invalidate an IRR, petitioners’ remedy is an ordinary action
for its nullification, an action which properly falls under the jurisdiction of the Regional Trial Court. In any case,
petitioners’ allegation that "respondents are performing or threatening to perform functions without or in excess of
their jurisdiction" may appropriately be enjoined by the trial court through a writ of injunction or a temporary
restraining order.

With respect to the Court, however, the remedies of certiorari and prohibition are necessarily broader in scope and
reach, and the writ of certiorari or prohibition may be issued to correct errors of jurisdiction committed not only by a
tribunal, corporation, board or officer exercising judicial, quasi-judicial or ministerial functions but also to set right,
undo and restrain any act of grave abuse of discretion amounting to lack or excess of jurisdiction by any branch or
453
instrumentality of the Government, even if the latter does not exercise judicial, quasi-judicial or ministerial functions.
This application is expressly authorized by the text of the second paragraph of Section 1, supra.

Thus, petitions for certiorari and prohibition are appropriate remedies to raise constitutional issues and to review
and/or prohibit or nullify the acts of legislative and executive officials.
34

Necessarily, in discharging its duty under Section 1, supra, to set right and undo any act of grave abuse of discretion
amounting to lack or excess of jurisdiction by any branch or instrumentality of the Government, the Court is not at all
precluded from making the inquiry provided the challenge was properly brought by interested or affected parties.
The Court has been thereby entrusted expressly or by necessary implication with both the duty and the obligation of
determining, in appropriate cases, the validity of any assailed legislative or executive action. This entrustment is
consistent with the republican system of checks and balances. 35

Following our recent dispositions concerning the congressional pork barrel, the Court has become more alert to
discharge its constitutional duty. We will not now refrain from exercising our expanded judicial power in order to
review and determine, with authority, the limitations on the Chief Executive’s spending power.

b) Requisites for the exercise of the

power of judicial review were
complied with

The requisites for the exercise of the power of judicial review are the following, namely: (1) there must bean actual
case or justiciable controversy before the Court; (2) the question before the Court must be ripe for adjudication; (3)
the person challenging the act must be a proper party; and (4) the issue of constitutionality must be raised at the
earliest opportunity and must be the very litis mota of the case. 36

The first requisite demands that there be an actual case calling for the exercise of judicial power by the Court.  An
37

actual case or controversy, in the words of Belgica v. Executive Secretary Ochoa: 38

x x x is one which involves a conflict of legal rights, an assertion of opposite legal claims, susceptible of judicial
resolution as distinguished from a hypothetical or abstract difference or dispute. In other words, "[t]here must be a
contrariety of legal rights that can be interpreted and enforced on the basis of existing law and jurisprudence."
Related to the requirement of an actual case or controversy is the requirement of "ripeness," meaning that the
questions raised for constitutional scrutiny are already ripe for adjudication. "A question is ripe for adjudication when
the act being challenged has had a direct adverse effect on the individual challenging it. It is a prerequisite that
something had then been accomplished or performed by either branch before a court may come into the picture,
and the petitioner must allege the existence of an immediate or threatened injury to itself as a result of the
challenged action." "Withal, courts will decline to pass upon constitutional issues through advisory opinions, bereft
as they are of authority to resolve hypothetical or moot questions."

An actual and justiciable controversy exists in these consolidated cases. The incompatibility of the perspectives of
the parties on the constitutionality of the DAP and its relevant issuances satisfy the requirement for a conflict
between legal rights. The issues being raised herein meet the requisite ripeness considering that the challenged
executive acts were already being implemented by the DBM, and there are averments by the petitioners that such
implementation was repugnant to the letter and spirit of the Constitution. Moreover, the implementation of the DAP
entailed the allocation and expenditure of huge sums of public funds. The fact that public funds have been allocated,
disbursed or utilized by reason or on account of such challenged executive acts gave rise, therefore, to an actual
controversy that is ripe for adjudication by the Court.

It is true that Sec. Abad manifested during the January 28, 2014 oral arguments that the DAP as a program had
been meanwhile discontinued because it had fully served its purpose, saying: "In conclusion, Your Honors, may I
inform the Court that because the DAP has already fully served its purpose, the Administration’s economic
managers have recommended its termination to the President. x x x." 39

The Solicitor General then quickly confirmed the termination of the DAP as a program, and urged that its termination
had already mooted the challenges to the DAP’s constitutionality, viz:

DAP as a program, no longer exists, thereby mooting these present cases brought to challenge its constitutionality.
Any constitutional challenge should no longer be at the level of the program, which is now extinct, but at the level of
its prior applications or the specific disbursements under the now defunct policy. We challenge the petitioners to pick
and choose which among the 116 DAP projects they wish to nullify, the full details we will have provided by
February 5. We urge this Court to be cautious in limiting the constitutional authority of the President and the
Legislature to respond to the dynamic needs of the country and the evolving demands of governance, lest we end
up straight jacketing our elected representatives in ways not consistent with our constitutional structure and
democratic principles. 40

454
A moot and academic case is one that ceases to present a justiciable controversy by virtue of supervening events,
so that a declaration thereon would be of no practical use or value. 41

The Court cannot agree that the termination of the DAP as a program was a supervening event that effectively
mooted these consolidated cases. Verily, the Court had in the past exercised its power of judicial review despite the
cases being rendered moot and academic by supervening events, like: (1) when there was a grave violation of the
Constitution; (2) when the case involved a situation of exceptional character and was of paramount public interest;
(3) when the constitutional issue raised required the formulation of controlling principles to guide the Bench, the Bar
and the public; and (4) when the case was capable of repetition yet evading review. 42

Assuming that the petitioners’ several submissions against the DAP were ultimately sustained by the Court here,
these cases would definitely come under all the exceptions. Hence, the Court should not abstain from exercising its
power of judicial review.

Did the petitioners have the legal standing to sue?

Legal standing, as a requisite for the exercise of judicial review, refers to "a right of appearance in a court of justice
on a given question."  The concept of legal standing, or locus standi, was particularly discussed in De Castro v.
43

Judicial and Bar Council,  where the Court said:

44

In public or constitutional litigations, the Court is often burdened with the determination of the locus standi of the
petitioners due to the ever-present need to regulate the invocation of the intervention of the Court to correct any
official action or policy in order to avoid obstructing the efficient functioning of public officials and offices involved in
public service. It is required, therefore, that the petitioner must have a personal stake in the outcome of the
controversy, for, as indicated in Agan, Jr. v. Philippine International Air Terminals Co., Inc.:

The question on legal standing is whether such parties have "alleged such a personal stake in the outcome of the
controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court
so largely depends for illumination of difficult constitutional questions." Accordingly, it has been held that the interest
of a person assailing the constitutionality of a statute must be direct and personal. He must be able to show, not only
that the law or any government act is invalid, but also that he sustained or is in imminent danger of sustaining some
direct injury as a result of its enforcement, and not merely that he suffers thereby in some indefinite way. It must
appear that the person complaining has been or is about to be denied some right or privilege to which he is lawfully
entitled or that he is about to be subjected to some burdens or penalties by reason of the statute or act complained
of.

It is true that as early as in 1937, in People v. Vera, the Court adopted the direct injury test for determining whether
a petitioner in a public action had locus standi. There, the Court held that the person who would assail the validity of
a statute must have "a personal and substantial interest in the case such that he has sustained, or will sustain direct
injury as a result." Vera was followed in Custodio v. President of the Senate, Manila Race Horse Trainers’
Association v. De la Fuente, Anti-Chinese League of the Philippines v. Felix, and Pascual v. Secretary of Public
Works.

Yet, the Court has also held that the requirement of locus standi, being a mere procedural technicality, can be
waived by the Court in the exercise of its discretion. For instance, in 1949, in Araneta v. Dinglasan, the Court
liberalized the approach when the cases had "transcendental importance." Some notable controversies whose
petitioners did not pass the direct injury test were allowed to be treated in the same way as in Araneta v. Dinglasan.

In the 1975 decision in Aquino v. Commission on Elections, this Court decided to resolve the issues raised by the
petition due to their "far reaching implications," even if the petitioner had no personality to file the suit. The liberal
approach of Aquino v. Commission on Elections has been adopted in several notable cases, permitting ordinary
citizens, legislators, and civic organizations to bring their suits involving the constitutionality or validity of laws,
regulations, and rulings.

However, the assertion of a public right as a predicate for challenging a supposedly illegal or unconstitutional
executive or legislative action rests on the theory that the petitioner represents the public in general. Although such
petitioner may not be as adversely affected by the action complained against as are others, it is enough that he
sufficiently demonstrates in his petition that he is entitled to protection or relief from the Court in the vindication of a
public right.

Quite often, as here, the petitioner in a public action sues as a citizen or taxpayer to gain locus standi. That is not
surprising, for even if the issue may appear to concern only the public in general, such capacities nonetheless equip
the petitioner with adequate interest to sue. In David v. Macapagal-Arroyo, the Court aptly explains why:

Case law in most jurisdiction snow allows both "citizen" and "taxpayer" standing in public actions. The distinction
was first laid down in Beauchamp v. Silk, where it was held that the plaintiff in a taxpayer’s suit is in a different
category from the plaintiff in a citizen’s suit. In the former, the plaintiff is affected by the expenditure of public funds,
455
while in the latter, he is but the mere instrument of the public concern. As held by the New York Supreme Court in
People ex rel Case v. Collins: "In matter of mere public right, however…the people are the real parties…It is at least
the right, if not the duty, of every citizen to interfere and see that a public offence be properly pursued and punished,
and that a public grievance be remedied." With respect to taxpayer’s suits, Terr v. Jordan held that "the right of a
citizen and a taxpayer to maintain an action in courts to restrain the unlawful use of public funds to his injury cannot
be denied." 45

The Court has cogently observed in Agan, Jr. v. Philippine International Air Terminals Co., Inc.  that "[s]tanding is a
46

peculiar concept in constitutional law because in some cases, suits are not brought by parties who have been
personally injured by the operation of a law or any other government act but by concerned citizens, taxpayers or
voters who actually sue in the public interest."

Except for PHILCONSA, a petitioner in G.R. No. 209164, the petitioners have invoked their capacities as taxpayers
who, by averring that the issuance and implementation of the DAP and its relevant issuances involved the illegal
disbursements of public funds, have an interest in preventing the further dissipation of public funds. The petitioners
in G.R. No. 209287 (Araullo) and G.R. No. 209442 (Belgica) also assert their right as citizens to sue for the
enforcement and observance of the constitutional limitations on the political branches of the Government. 47

On its part, PHILCONSA simply reminds that the Court has long recognized its legal standing to bring cases upon
constitutional issues.  Luna, the petitioner in G.R. No. 209136, cites his additional capacity as a lawyer. The IBP,
48

the petitioner in G.R. No. 209260, stands by "its avowed duty to work for the rule of law and of paramount
importance of the question in this action, not to mention its civic duty as the official association of all lawyers in this
country."49

Under their respective circumstances, each of the petitioners has established sufficient interest in the outcome of
the controversy as to confer locus standi on each of them.

In addition, considering that the issues center on the extent of the power of the Chief Executive to disburse and
allocate public funds, whether appropriated by Congress or not, these cases pose issues that are of transcendental
importance to the entire Nation, the petitioners included. As such, the determination of such important issues call for
the Court’s exercise of its broad and wise discretion "to waive the requirement and so remove the impediment to its
addressing and resolving the serious constitutional questions raised." 50

II.
Substantive Issues

1.
Overview of the Budget System

An understanding of the Budget System of the Philippines will aid the Court in properly appreciating and justly
resolving the substantive issues.

a) Origin of the Budget System

The term "budget" originated from the Middle English word bouget that had derived from the Latin word bulga (which
means bag or purse). 51

In the Philippine setting, Commonwealth Act (CA) No. 246 (Budget Act) defined "budget" as the financial program of
the National Government for a designated fiscal year, consisting of the statements of estimated receipts and
expenditures for the fiscal year for which it was intended to be effective based on the results of operations during
the preceding fiscal years. The term was given a different meaning under Republic Act No. 992 (Revised Budget
Act) by describing the budget as the delineation of the services and products, or benefits that would accrue to the
public together with the estimated unit cost of each type of service, product or benefit.  For a forthright definition,
52

budget should simply be identified as the financial plan of the Government,  or "the master plan of government."
53 54

The concept of budgeting has not been the product of recent economies. In reality, financing public goals and
activities was an idea that existed from the creation of the State.  To protect the people, the territory and sovereignty
55

of the State, its government must perform vital functions that required public expenditures. At the beginning,
enormous public expenditures were spent for war activities, preservation of peace and order, security,
administration of justice, religion, and supply of limited goods and services.  In order to finance those expenditures,
56

the State raised revenues through taxes and impositions.  Thus, budgeting became necessary to allocate public
57

revenues for specific government functions.  The State’s budgeting mechanism eventually developed through the
58

years with the growing functions of its government and changes in its market economy.

The Philippine Budget System has been greatly influenced by western public financial institutions. This is because
of the country’s past as a colony successively of Spain and the United States for a long period of time. Many

456
aspects of the country’s public fiscal administration, including its Budget System, have been naturally patterned after
the practices and experiences of the western public financial institutions. At any rate, the Philippine Budget System
is presently guided by two principal objectives that are vital to the development of a progressive democratic
government, namely: (1) to carry on all government activities under a comprehensive fiscal plan developed,
authorized and executed in accordance with the Constitution, prevailing statutes and the principles of sound public
management; and (2) to provide for the periodic review and disclosure of the budgetary status of the Government in
such detail so that persons entrusted by law with the responsibility as well as the enlightened citizenry can
determine the adequacy of the budget actions taken, authorized or proposed, as well as the true financial position of
the Government. 59

b) Evolution of the Philippine Budget System

The budget process in the Philippines evolved from the early years of the American Regime up to the passage of
the Jones Law in 1916. A Budget Office was created within the Department of Finance by the Jones Law to
discharge the budgeting function, and was given the responsibility to assist in the preparation of an executive
budget for submission to the Philippine Legislature. 60

As early as under the 1935 Constitution, a budget policy and a budget procedure were established, and
subsequently strengthened through the enactment of laws and executive acts.  EO No. 25, issued by President
61

Manuel L. Quezon on April 25, 1936, created the Budget Commission to serve as the agency that carried out the
President’s responsibility of preparing the budget.  CA No. 246, the first budget law, went into effect on January 1,
62

1938 and established the Philippine budget process. The law also provided a line-item budget as the framework of
the Government’s budgeting system,  with emphasis on the observance of a "balanced budget" to tie up proposed
63

expenditures with existing revenues.

CA No. 246 governed the budget process until the passage on June 4, 1954 of Republic Act (RA) No. 992,whereby
Congress introduced performance-budgeting to give importance to functions, projects and activities in terms of
expected results.  RA No. 992 also enhanced the role of the Budget Commission as the fiscal arm of the
64

Government. 65

The 1973 Constitution and various presidential decrees directed a series of budgetary reforms that culminated in the
enactment of PD No. 1177 that President Marcos issued on July30, 1977, and of PD No. 1405, issued on June 11,
1978. The latter decree converted the Budget Commission into the Ministry of Budget, and gave its head the rank of
a Cabinet member.

The Ministry of Budget was later renamed the Office of Budget and Management (OBM) under EO No. 711. The
OBM became the DBM pursuant to EO No. 292 effective on November 24, 1989.

c) The Philippine Budget Cycle 66

Four phases comprise the Philippine budget process, specifically: (1) Budget Preparation; (2) Budget Legislation; (3)
Budget Execution; and (4) Accountability. Each phase is distinctly separate from the others but they overlap in the
implementation of the budget during the budget year.

c.1.Budget Preparation 67

The budget preparation phase is commenced through the issuance of a Budget Call by the DBM. The Budget Call
contains budget parameters earlier set by the Development Budget Coordination Committee (DBCC) as well as
policy guidelines and procedures to aid government agencies in the preparation and submission of their budget
proposals. The Budget Call is of two kinds, namely: (1) a National Budget Call, which is addressed to all agencies,
including state universities and colleges; and (2) a Corporate Budget Call, which is addressed to all government-
owned and -controlled corporations (GOCCs) and government financial institutions (GFIs).

Following the issuance of the Budget Call, the various departments and agencies submit their respective Agency
Budget Proposals to the DBM. To boost citizen participation, the current administration has tasked the various
departments and agencies to partner with civil society organizations and other citizen-stakeholders in the
preparation of the Agency Budget Proposals, which proposals are then presented before a technical panel of the
DBM in scheduled budget hearings wherein the various departments and agencies are given the opportunity to
defend their budget proposals. DBM bureaus thereafter review the Agency Budget Proposals and come up with
recommendations for the Executive Review Board, comprised by the DBM Secretary and the DBM’s senior officials.
The discussions of the Executive Review Board cover the prioritization of programs and their corresponding support
vis-à-vis the priority agenda of the National Government, and their implementation.

The DBM next consolidates the recommended agency budgets into the National Expenditure Program (NEP)and a
Budget of Expenditures and Sources of Financing (BESF). The NEP provides the details of spending for each
department and agency by program, activity or project (PAP), and is submitted in the form of a proposed GAA. The
Details of Selected Programs and Projects is the more detailed disaggregation of key PAPs in the NEP, especially
457
those in line with the National Government’s development plan. The Staffing Summary provides the staffing
complement of each department and agency, including the number of positions and amounts allocated.

The NEP and BESF are thereafter presented by the DBM and the DBCC to the President and the Cabinet for further
refinements or reprioritization. Once the NEP and the BESF are approved by the President and the Cabinet, the
DBM prepares the budget documents for submission to Congress. The budget documents consist of: (1) the
President’s Budget Message, through which the President explains the policy framework and budget priorities; (2)
the BESF, mandated by Section 22, Article VII of the Constitution,  which contains the macroeconomic
68

assumptions, public sector context, breakdown of the expenditures and funding sources for the fiscal year and the
two previous years; and (3) the NEP.

Public or government expenditures are generally classified into two categories, specifically: (1) capital expenditures
or outlays; and (2) current operating expenditures. Capital expenditures are the expenses whose usefulness lasts
for more than one year, and which add to the assets of the Government, including investments in the capital of
government-owned or controlled corporations and their subsidiaries.  Current operating expenditures are the
69

purchases of goods and services in current consumption the benefit of which does not extend beyond the fiscal
year.  The two components of current expenditures are those for personal services (PS), and those for maintenance
70

and other operating expenses(MOOE).

Public expenditures are also broadly grouped according to their functions into: (1) economic development
expenditures (i.e., expenditures on agriculture and natural resources, transportation and communications,
commerce and industry, and other economic development efforts);  (2) social services or social development
71

expenditures (i.e., government outlay on education, public health and medicare, labor and welfare and others);  (3)72

general government or general public services expenditures (i.e., expenditures for the general government,
legislative services, the administration of justice, and for pensions and gratuities);  (4) national defense expenditures
73

(i.e., sub-divided into national security expenditures and expenditures for the maintenance of peace and
order);  and (5) public debt.
74 75

Public expenditures may further be classified according to the nature of funds, i.e., general fund, special fund or
bond fund. 76

On the other hand, public revenues complement public expenditures and cover all income or receipts of the
government treasury used to support government expenditures. 77

Classical economist Adam Smith categorized public revenues based on two principal sources, stating: "The revenue
which must defray…the necessary expenses of government may be drawn either, first from some fund which
peculiarly belongs to the sovereign or commonwealth, and which is independent of the revenue of the people, or,
secondly, from the revenue of the people."  Adam Smith’s classification relied on the two aspects of the nature of
78

the State: first, the State as a juristic person with an artificial personality, and, second, the State as a sovereign or
entity possessing supreme power. Under the first aspect, the State could hold property and engage in trade, thereby
deriving what is called its quasi private income or revenues, and which "peculiarly belonged to the sovereign." Under
the second aspect, the State could collect by imposing charges on the revenues of its subjects in the form of taxes. 79

In the Philippines, public revenues are generally derived from the following sources, to wit: (1) tax revenues(i.e.,
compulsory contributions to finance government activities); 80 (2) capital revenues(i.e., proceeds from sales of fixed
capital assets or scrap thereof and public domain, and gains on such sales like sale of public lands, buildings and
other structures, equipment, and other properties recorded as fixed assets); 81 (3) grants(i.e., voluntary
contributions and aids given to the Government for its operation on specific purposes in the form of money and/or
materials, and do not require any monetary commitment on the part of the recipient);  (4) extraordinary income(i.e.,
82

repayment of loans and advances made by government corporations and local governments and the receipts and
shares in income of the Banko Sentral ng Pilipinas, and other receipts);  and (5) public borrowings(i.e., proceeds of
83

repayable obligations generally with interest from domestic and foreign creditors of the Government in general,
including the National Government and its political subdivisions). 84

More specifically, public revenues are classified as follows: 85

General Income Specific Income

1. Subsidy Income from National 1. Income Taxes

Government
2. Property Taxes
2. Subsidy from Central Office
3. Taxes on Goods and Services
3. Subsidy from Regional 
Office/Staff Bureaus 4. Taxes on International Trade and

458
 4. Income from Government  Transactions
Services
5. Other Taxes 6.Fines and Penalties-Tax Revenue
5. Income from Government 
Business Operations 7. Other Specific Income

6. Sales Revenue

7. Rent Income

8. Insurance Income

9. Dividend Income

10. Interest Income

11. Sale of Confiscated Goods and

Properties

12. Foreign Exchange (FOREX)

Gains

13. Miscellaneous Operating and

Service Income

14. Fines and Penalties-Government

Services and Business Operations

15. Income from Grants and

Donations

c.2. Budget Legislation 86

The Budget Legislation Phase covers the period commencing from the time Congress receives the President’s
Budget, which is inclusive of the NEPand the BESF, up to the President’s approval of the GAA. This phase is also
known as the Budget Authorization Phase, and involves the significant participation of the Legislative through its
deliberations.

Initially, the President’s Budget is assigned to the House of Representatives’ Appropriations Committee on First
Reading. The Appropriations Committee and its various Sub-Committees schedule and conduct budget hearings to
examine the PAPs of the departments and agencies. Thereafter, the House of Representatives drafts the General
Appropriations Bill (GAB). 87

The GABis sponsored, presented and defended by the House of Representatives’ Appropriations Committee and
Sub-Committees in plenary session. As with other laws, the GAB is approved on Third Reading before the House of
Representatives’ version is transmitted to the Senate.
88

After transmission, the Senate conducts its own committee hearings on the GAB. To expedite proceedings, the
Senate may conduct its committee hearings simultaneously with the House of Representatives’ deliberations. The
Senate’s Finance Committee and its Sub-Committees may submit the proposed amendments to the GAB to the
plenary of the Senate only after the House of Representatives has formally transmitted its version to the Senate.
The Senate version of the GAB is likewise approved on Third Reading. 89

The House of Representatives and the Senate then constitute a panel each to sit in the Bicameral Conference
Committee for the purpose of discussing and harmonizing the conflicting provisions of their versions of the GAB.
The "harmonized" version of the GAB is next presented to the President for approval.  The President reviews the
90

GAB, and prepares the Veto Message where budget items are subjected to direct veto,  or are identified for
91

conditional implementation.

459
If, by the end of any fiscal year, the Congress shall have failed to pass the GAB for the ensuing fiscal year, the GAA
for the preceding fiscal year shall be deemed re-enacted and shall remain in force and effect until the GAB is
passed by the Congress. 92

c.3. Budget Execution 93

With the GAA now in full force and effect, the next step is the implementation of the budget. The Budget Execution
Phase is primarily the function of the DBM, which is tasked to perform the following procedures, namely: (1) to issue
the programs and guidelines for the release of funds; (2) to prepare an Allotment and Cash Release Program; (3) to
release allotments; and (4) to issue disbursement authorities.

The implementation of the GAA is directed by the guidelines issued by the DBM. Prior to this, the various
departments and agencies are required to submit Budget Execution Documents(BED) to outline their plans and
performance targets by laying down the physical and financial plan, the monthly cash program, the estimate of
monthly income, and the list of obligations that are not yet due and demandable.

Thereafter, the DBM prepares an Allotment Release Program (ARP)and a Cash Release Program (CRP).The ARP
sets a limit for allotments issued in general and to a specific agency. The CRP fixes the monthly, quarterly and
annual disbursement levels.

Allotments, which authorize an agency to enter into obligations, are issued by the DBM. Allotments are lesser in
scope than appropriations, in that the latter embrace the general legislative authority to spend. Allotments may be
released in two forms – through a comprehensive Agency Budget Matrix (ABM),  or, individually, by SARO.
94 95

Armed with either the ABM or the SARO, agencies become authorized to incur obligations  on behalf of the
96

Government in order to implement their PAPs. Obligations may be incurred in various ways, like hiring of personnel,
entering into contracts for the supply of goods and services, and using utilities.

In order to settle the obligations incurred by the agencies, the DBM issues a disbursement authority so that cash
may be allocated in payment of the obligations. A cash or disbursement authority that is periodically issued is
referred to as a Notice of Cash Allocation (NCA),  which issuance is based upon an agency’s submission of its
97

Monthly Cash Program and other required documents. The NCA specifies the maximum amount of cash that can be
withdrawn from a government servicing bank for the period indicated. Apart from the NCA, the DBM may issue a
Non-Cash Availment Authority(NCAA) to authorize non-cash disbursements, or a Cash Disbursement Ceiling(CDC)
for departments with overseas operations to allow the use of income collected by their foreign posts for their
operating requirements.

Actual disbursement or spending of government funds terminates the Budget Execution Phase and is usually
accomplished through the Modified Disbursement Scheme under which disbursements chargeable against the
National Treasury are coursed through the government servicing banks.

c.4. Accountability 98

Accountability is a significant phase of the budget cycle because it ensures that the government funds have been
effectively and efficiently utilized to achieve the State’s socio-economic goals. It also allows the DBM to assess the
performance of agencies during the fiscal year for the purpose of implementing reforms and establishing new
policies.

An agency’s accountability may be examined and evaluated through (1) performance targets and outcomes; (2)
budget accountability reports; (3) review of agency performance; and (4) audit conducted by the Commission on
Audit(COA).

2.

Nature of the DAP as a fiscal plan

a. DAP was a program designed to

promote economic growth

Policy is always a part of every budget and fiscal decision of any Administration.  The national budget the Executive
99

prepares and presents to Congress represents the Administration’s "blueprint for public policy" and reflects the
Government’s goals and strategies.  As such, the national budget becomes a tangible representation of the
100

programs of the Government in monetary terms, specifying therein the PAPs and services for which specific
amounts of public funds are proposed and allocated.  Embodied in every national budget is government spending.
101 102

460
When he assumed office in the middle of 2010, President Aquino made efficiency and transparency in government
spending a significant focus of his Administration. Yet, although such focus resulted in an improved fiscal deficit of
0.5% in the gross domestic product (GDP) from January to July of 2011, it also unfortunately decelerated
government project implementation and payment schedules.  The World Bank observed that the Philippines’
103

economic growth could be reduced, and potential growth could be weakened should the Government continue with
its underspending and fail to address the large deficiencies in infrastructure.  The economic situation prevailing in
104

the middle of 2011 thus paved the way for the development and implementation of the DAP as a stimulus package
intended to fast-track public spending and to push economic growth by investing on high-impact budgetary PAPs to
be funded from the "savings" generated during the year as well as from unprogrammed funds.  In that respect, the
105

DAP was the product of "plain executive policy-making" to stimulate the economy by way of accelerated
spending. The Administration would thereby accelerate government spending by: (1) streamlining the
106

implementation process through the clustering of infrastructure projects of the Department of Public Works and
Highways (DPWH) and the Department of Education (DepEd),and (2) front loading PPP-related projects  due for 107

implementation in the following year. 108

Did the stimulus package work?

The March 2012 report of the World Bank,  released after the initial implementation of the DAP, revealed that the
109

DAP was partially successful. The disbursements under the DAP contributed 1.3 percentage points to GDP growth
by the fourth quarter of 2011.  The continued implementation of the DAP strengthened growth by 11.8% year on
110

year while infrastructure spending rebounded from a 29% contraction to a 34% growth as of September 2013. 111

The DAP thus proved to be a demonstration that expenditure was a policy instrument that the Government could
use to direct the economies towards growth and development.  The Government, by spending on public
112

infrastructure, would signify its commitment of ensuring profitability for prospective investors.  The PAPs funded
113

under the DAP were chosen for this reason based on their: (1) multiplier impact on the economy and infrastructure
development; (2) beneficial effect on the poor; and (3) translation into disbursements.114

b. History of the implementation of

the DAP, and sources of funds
under the DAP

How the Administration’s economic managers conceptualized and developed the DAP, and finally presented it to
the President remains unknown because the relevant documents appear to be scarce.

The earliest available document relating to the genesis of the DAP was the memorandum of October 12,2011 from
Sec. Abad seeking the approval of the President to implement the proposed DAP. The memorandum, which
contained a list of the funding sources for ₱72.11 billion and of the proposed priority projects to be funded,  reads: 115

MEMORANDUM FOR THE PRESIDENT

xxxx

SUBJECT: FY 2011 PROPOSED DISBURSEMENT ACCELERATION PROGRAM (PROJECTS AND SOURCES

OF FUNDS)

DATE: OCTOBER 12, 2011

Mr. President, this is to formally confirm your approval of the Disbursement Acceleration Program totaling ₱72.11
billion. We are already working with all the agencies concerned for the immediate execution of the projects therein.

A. Fund Sources for the Acceleration Program

Amount
Action
Fund Sources (In million Description
Requested
Php)

FY 2011 30,000 Unreleased Personnel Declare as

Unreleased Services (PS) savings and
Personal appropriations which approve/
Services (PS) will lapse at the end of authorize its use
Appropriations FY 2011 but may be for the 2011
pooled as savings and Disbursement
realigned for priority Acceleration

461
 programs that require Program
immediate funding

FY 2011 482 Unreleased  

Unreleased appropriations (slow
Appropriations moving projects and
programs for
discontinuance)

FY 2010 12,336 Supported by the GFI Approve and

Unprogrammed Dividends authorize its use
Fund for the 2011
Disbursement
Acceleration
Program

FY 2010 21,544 Unreleased With prior

Carryover appropriations (slow approval from
Appropriation moving projects and the President in
programs for November 2010
discontinuance) and to declare as
savings from Zero-based Budgeting savings and with
Initiative authority to use
for priority
projects

FY 2011 Budget 7,748 FY 2011 Agency For information

items for Budget items that can
realignment be realigned within the
agency to fund new fast
disbursing projects
DPWH-3.981 Billion
DA – 2.497 Billion
DOT – 1.000 Billion
DepEd – 270 Million

TOTAL 72.110    

B. Projects in the Disbursement Acceleration Program

(Descriptions of projects attached as Annex A)

GOCCs and GFIs

Agency/Project Allotment
(SARO and NCA Release) (in Million Php)

1. LRTA: Rehabilitation of LRT 1 and 2 1,868

2. NHA: 11,050

a. Resettlement of North Triangle residents to 450

Camarin A7
b. Housing for BFP/BJMP 500
c. On-site development for families living 10,000

462
 100
along dangerous
d. Relocation sites for informal settlers
3. PHIL. HEART CENTER: Upgrading of 357
ageing physical plant and medical equipment

4. CREDIT INFO CORP: Establishment of 75

centralized credit information system
5. PIDS: purchase of land to relocate the PIDS 100
office and building construction
6. HGC: Equity infusion for credit insurance 400
and mortgage guaranty operations of HGC
7. PHIC: Obligations incurred (premium 1,496
subsidy for indigent families) in January-June
2010, booked for payment in Jul[y] – Dec
2010. The delay in payment is due to the
delay in the certification of the LGU
counterpart. Without it, the NG is obliged to
pay the full amount.

8. Philpost: Purchase of foreclosed property. 644

Payment of Mandatory Obligations, (GSIS,
PhilHealth, ECC), Franking Privilege

9. BSP: First equity infusion out of Php 40B 10,000

capitalization under the BSP Law
10. PCMC: Capital and Equipment Renovation 280

11. LCOP: 105

a. Pediatric Pulmonary Program
b. Bio-regenerative Technology Program 35
(Stem-Cell Research – subject to legal
review and presentation) 70

12. TIDCORP: NG Equity infusion 570

TOTAL 26,945

NGAs/LGUs

Agency/Project Allotment
(SARO) Cash
(In Million Requirement
Php) (NCA)

13. DOF-BIR: NPSTAR

centralization of data    
processing and others (To be    
synchronized with GFMIS    
activities) 758 758

14. COA: IT infrastructure

program and hiring of    
463
additional litigational experts 144 144

15. DND-PAF: On Base Housing

Facilities and Communication    
Equipment 30 30

16. DA: 2,959 2,223

a. Irrigation, FMRs and
Integrated Community Based Multi-Species    
Hatchery and Aquasilvi    
Farming 1,629 1,629
b. Mindanao Rural
Development Project 919 183

c. NIA Agno River Integrated

Irrigation Project 411 411

17. DAR: 1,293 1,293

a. Agrarian Reform
Communities Project 2 1,293 132
b. Landowners Compensation 5,432

18. DBM: Conduct of National

Survey of    
Farmers/Fisherfolks/Ips 625 625

19. DOJ: Operating requirements

of 50 investigation agents and    
15 state attorneys 11 11

20. DOT: Preservation of the Cine

Corregidor Complex 25 25

21. OPAPP: Activities for Peace

Process (PAMANA- Project    
details: budget breakdown,    
implementation plan, and    
conditions on fund release    
attached as Annex B) 1,819 1,819

22. DOST 425 425

a. Establishment of National
Meterological and Climate    
Center 275 275
b. Enhancement of Doppler
Radar Network for National    
Weather Watch, Accurate    
Forecasting and Flood Early    
Warning 190 190

23. DOF-BOC: To settle the

principal obligations with    
PDIC consistent with the    
agreement with the CISS and    
SGS 2,800 2,800

464
 24. OEO-FDCP: Establishment of
the National Film Archive and    
local cinematheques, and other    
local activities 20 20

25. DPWH: Various infrastructure

projects 5,500 5,500

26. DepEd/ERDT/DOST: Thin

Client Cloud Computing    
Project 270 270

27. DOH: Hiring of nurses and

midwives 294 294

28. TESDA: Training Program in

partnership with BPO industry    
and other sectors 1,100 1,100

29. DILG: Performance Challenge

Fund (People Empowered    
Community Driven    
Development with DSWD and    
NAPC) 250 50

30. ARMM: Comprehensive Peace

and Development Intervention 8,592 8,592

31. DOTC-MRT: Purchase of

additional MRT cars 4,500 -

32. LGU Support Fund 6,500 6,500

33. Various Other Local Projects 6,500 6,500

34. Development Assistance to the

Province of Quezon 750 750

TOTAL 45,165 44,000

C. Summary

  Fund Sources
Identified for Allotments Cash
Approval for Release Requirements for
(In Million Release in FY
Php) 2011

Total 72,110 72,110 70,895

GOCCs 26,895 26,895

NGAs/LGUs 45,165 44,000

465
For His Excellency’s Consideration

(Sgd.) FLORENCIO B. ABAD

[/] APPROVED

[ ] DISAPPROVED

(Sgd.) H.E. BENIGNO S. AQUINO, III

OCT 12, 2011

The memorandum of October 12, 2011 was followed by another memorandum for the President dated December
12, 2011  requesting omnibus authority to consolidate the savings and unutilized balances for fiscal year 2011.
116

Pertinent portions of the memorandum of December 12, 2011 read:

MEMORANDUM FOR THE PRESIDENT

xxxx

SUBJECT: Omnibus Authority to Consolidate Savings/Unutilized Balances and its Realignment

DATE: December 12, 2011

This is to respectfully request for the grant of Omnibus Authority to consolidate savings/unutilized balances in FY
2011 corresponding to completed or discontinued projects which may be pooled to fund additional projects or
expenditures.

In addition, Mr. President, this measure will allow us to undertake projects even if their implementation carries over
to 2012 without necessarily impacting on our budget deficit cap next year.

BACKGROUND

1.0 The DBM, during the course of performance reviews conducted on the agencies’ operations, particularly
on the implementation of their projects/activities, including expenses incurred in undertaking the same, have
identified savings out of the 2011 General Appropriations Act. Said savings correspond to completed or
discontinued projects under certain departments/agencies which may be pooled, for the following:

1.1 to provide for new activities which have not been anticipated during preparation of the budget;

1.2 to augment additional requirements of on-going priority projects; and

1.3 to provide for deficiencies under the Special Purpose Funds, e.g., PDAF, Calamity Fund,
Contingent Fund

1.4 to cover for the modifications of the original allotment class allocation as a result of on-going
priority projects and implementation of new activities

2.0 x x x x

2.1 x x x

2.2 x x x

ON THE UTILIZATION OF POOLED SAVINGS

3.0 It may be recalled that the President approved our request for omnibus authority to pool
savings/unutilized balances in FY 2010 last November 25, 2010.

4.0 It is understood that in the utilization of the pooled savings, the DBM shall secure the corresponding
approval/confirmation of the President. Furthermore, it is assured that the proposed realignments shall be
within the authorized Expenditure level.

466
 5.0 Relative thereto, we have identified some expenditure items that may be sourced from the said pooled
appropriations in FY 2010 that will expire on December 31, 2011 and appropriations in FY 2011 that may be
declared as savings to fund additional expenditures.

5.1 The 2010 Continuing Appropriations (pooled savings) is proposed to be spent for the projects
that we have identified to be immediate actual disbursements considering that this same fund source
will expire on December 31, 2011.

5.2 With respect to the proposed expenditure items to be funded from the FY 2011 Unreleased
Appropriations, most of these are the same projects for which the DBM is directed by the Office of
the President, thru the Executive Secretary, to source funds.

6.0 Among others, the following are such proposed additional projects that have been chosen given their
multiplier impact on economy and infrastructure development, their beneficial effect on the poor, and their
translation into disbursements. Please note that we have classified the list of proposed projects as follows:

7.0 x x x

FOR THE PRESIDENT’S APPROVAL

8.0 Foregoing considered, may we respectfully request for the President’s approval for the following:

8.1 Grant of omnibus authority to consolidate FY 2011 savings/unutilized balances and its
realignment; and

8.2 The proposed additional projects identified for funding.

For His Excellency’s consideration and approval.

(Sgd.)

[/] APPROVED

[ ] DISAPPROVED

(Sgd.) H.E. BENIGNO S. AQUINO, III

DEC 21, 2011

Substantially identical requests for authority to pool savings and to fund proposed projects were contained in various
other memoranda from Sec. Abad dated June 25, 2012,  September 4, 2012,  December 19, 2012,  May 20,
117 118 119

2013,  and September 25, 2013.  The President apparently approved all the requests, withholding approval only of
120 121

the proposed projects contained in the June 25, 2012 memorandum, as borne out by his marginal note therein to
the effect that the proposed projects should still be "subject to further discussions." 122

In order to implement the June25, 2012 memorandum, Sec. Abad issued NBC No. 541 (Adoption of Operational
Efficiency Measure – Withdrawal of Agencies’ Unobligated Allotments as of June 30, 2012),  reproduced herein as
123

follows:

NATIONAL BUDGET CIRCULAR No. 541

July 18, 2012

TO: All Heads of Departments/Agencies/State Universities and Colleges and other Offices of the National
Government, Budget and Planning Officers; Heads of Accounting Units and All Others Concerned

SUBJECT : Adoption of Operational Efficiency Measure – Withdrawal of Agencies’ Unobligated Allotments as of

June 30, 2012

1.0 Rationale

The DBM, as mandated by Executive Order (EO) No. 292 (Administrative Code of 1987), periodically reviews and
evaluates the departments/agencies’ efficiency and effectiveness in utilizing budgeted funds for the delivery of
services and production of goods, consistent with the government priorities.

467
In the event that a measure is necessary to further improve the operational efficiency of the government, the
President is authorized to suspend or stop further use of funds allotted for any agency or expenditure authorized in
the General Appropriations Act. Withdrawal and pooling of unutilized allotment releases can be effected by DBM
based on authority of the President, as mandated under Sections 38 and 39, Chapter 5, Book VI of EO 292.

For the first five months of 2012, the National Government has not met its spending targets. In order to accelerate
spending and sustain the fiscal targets during the year, expenditure measures have to be implemented to optimize
the utilization of available resources.

Departments/agencies have registered low spending levels, in terms of obligations and disbursements per initial
review of their 2012 performance. To enhance agencies’ performance, the DBM conducts continuous consultation
meetings and/or send call-up letters, requesting them to identify slow-moving programs/projects and the
factors/issues affecting their performance (both pertaining to internal systems and those which are outside the
agencies’ spheres of control). Also, they are asked to formulate strategies and improvement plans for the rest of
2012.

Notwithstanding these initiatives, some departments/agencies have continued to post low obligation levels as of end
of first semester, thus resulting to substantial unobligated allotments.

In line with this, the President, per directive dated June 27, 2012 authorized the withdrawal of unobligated
allotments of agencies with low levels of obligations as of June 30, 2012, both for continuing and current allotments.
This measure will allow the maximum utilization of available allotments to fund and undertake other priority
expenditures of the national government.

2.0 Purpose

2.1 To provide the conditions and parameters on the withdrawal of unobligated allotments of agencies as of
June 30, 2012 to fund priority and/or fast-moving programs/projects of the national government;

2.2 To prescribe the reports and documents to be used as bases on the withdrawal of said unobligated
allotments; and

2.3 To provide guidelines in the utilization or reallocation of the withdrawn allotments.

3.0 Coverage

3.1 These guidelines shall cover the withdrawal of unobligated allotments as of June 30, 2012 of all national
government agencies (NGAs) charged against FY 2011 Continuing Appropriation (R.A. No.10147) and FY
2012 Current Appropriation (R.A. No. 10155), pertaining to:

3.1.1 Capital Outlays (CO);

3.1.2 Maintenance and Other Operating Expenses (MOOE) related to the implementation of
programs and projects, as well as capitalized MOOE; and

3.1.3 Personal Services corresponding to unutilized pension benefits declared as savings by the
agencies concerned based on their updated/validated list of pensioners.

3.2 The withdrawal of unobligated allotments may cover the identified programs, projects and activities of
the departments/agencies reflected in the DBM list shown as Annex A or specific programs and projects as
may be identified by the agencies.

4.0 Exemption

These guidelines shall not apply to the following:

4.1 NGAs

4.1.1 Constitutional Offices/Fiscal Autonomy Group, granted fiscal autonomy under the Philippine
Constitution; and

4.1.2 State Universities and Colleges, adopting the Normative Funding allocation scheme i.e.,
distribution of a predetermined budget ceiling.

4.2 Fund Sources

468
 4.2.1 Personal Services other than pension benefits;

4.2.2 MOOE items earmarked for specific purposes or subject to realignment conditions per General
Provisions of the GAA:

• Confidential and Intelligence Fund;

• Savings from Traveling, Communication, Transportation and Delivery, Repair and

Maintenance, Supplies and Materials and Utility which shall be used for the grant of
Collective Negotiation Agreement incentive benefit;

• Savings from mandatory expenditures which can be realigned only in the last quarter after
taking into consideration the agency’s full year requirements, i.e., Petroleum, Oil and
Lubricants, Water, Illumination, Power Services, Telephone, other Communication Services
and Rent.

4.2.3 Foreign-Assisted Projects (loan proceeds and peso counterpart);

4.2.4 Special Purpose Funds such as: E-Government Fund, International Commitments Fund,
PAMANA, Priority Development Assistance Fund, Calamity Fund, Budgetary Support to GOCCs and
Allocation to LGUs, among others;

4.2.5 Quick Response Funds; and

4.2.6 Automatic Appropriations i.e., Retirement Life Insurance Premium and Special Accounts in the
General Fund.

5.0 Guidelines

5.1 National government agencies shall continue to undertake procurement activities notwithstanding the
implementation of the policy of withdrawal of unobligated allotments until the end of the third quarter, FY
2012. Even without the allotments, the agency shall proceed in undertaking the procurement processes (i.e.,
procurement planning up to the conduct of bidding but short of awarding of contract) pursuant to GPPB
Circular Nos. 02-2008 and 01-2009 and DBM Circular Letter No. 2010-9.

5.2 For the purpose of determining the amount of unobligated allotments that shall be withdrawn, all
departments/agencies/operating units (OUs) shall submit to DBM not later than July 30, 2012, the following
budget accountability reports as of June 30, 2012;

• Statement of Allotments, Obligations and Balances (SAOB);

• Financial Report of Operations (FRO); and

• Physical Report of Operations.

5.3 In the absence of the June 30, 2012 reports cited under item 5.2 of this Circular, the agency’s latest
report available shall be used by DBM as basis for withdrawal of allotment. The DBM shall
compute/approximate the agency’s obligation level as of June 30 to derive its unobligated allotments as of
same period. Example: If the March 31 SAOB or FRO reflects actual obligations of P 800M then the June 30
obligation level shall approximate to ₱1,600 M (i.e., ₱800 M x 2 quarters).

5.4 All released allotments in FY 2011 charged against R.A. No. 10147 which remained unobligated as of
June 30, 2012 shall be immediately considered for withdrawal. This policy is based on the following
considerations:

5.4.1 The departments/agencies’ approved priority programs and projects are assumed to be
implementation-ready and doable during the given fiscal year; and

5.4.2 The practice of having substantial carryover appropriations may imply that the agency has a
slower-than-programmed implementation capacity or agency tends to implement projects within a
two-year timeframe.

5.5. Consistent with the President’s directive, the DBM shall, based on evaluation of the reports cited above
and results of consultations with the departments/agencies, withdraw the unobligated allotments as of June
30, 2012 through issuance of negative Special Allotment Release Orders (SAROs).

469
 5.6 DBM shall prepare and submit to the President, a report on the magnitude of withdrawn allotments. The
report shall highlight the agencies which failed to submit the June 30 reports required under this Circular.

5.7 The withdrawn allotments may be:

5.7.1 Reissued for the original programs and projects of the agencies/OUs concerned, from which
the allotments were withdrawn;

5.7.2 Realigned to cover additional funding for other existing programs and projects of the
agency/OU; or

5.7.3 Used to augment existing programs and projects of any agency and to fund priority programs
and projects not considered in the 2012 budget but expected to be started or implemented during
the current year.

5.8 For items 5.7.1 and 5.7.2 above, agencies/OUs concerned may submit to DBM a Special Budget
Request (SBR), supported with the following:

5.8.1 Physical and Financial Plan (PFP);

5.8.2 Monthly Cash Program (MCP); and

5.8.3 Proof that the project/activity has started the procurement processes i.e., Proof of Posting
and/or Advertisement of the Invitation to Bid.

5.9 The deadline for submission of request/s pertaining to these categories shall be until the end of the third
quarter i.e., September 30, 2012. After said cut-off date, the withdrawn allotments shall be pooled and form
part of the overall savings of the national government.

5.10 Utilization of the consolidated withdrawn allotments for other priority programs and projects as cited
under item 5.7.3 of this Circular, shall be subject to approval of the President. Based on the approval of the
President, DBM shall issue the SARO to cover the approved priority expenditures subject to submission by
the agency/OU concerned of the SBR and supported with PFP and MCP.

5.11 It is understood that all releases to be made out of the withdrawn allotments (both 2011 and 2012
unobligated allotments) shall be within the approved Expenditure Program level of the national government
for the current year. The SAROs to be issued shall properly disclose the appropriation source of the release
to determine the extent of allotment validity, as follows:

• For charges under R.A. 10147 – allotments shall be valid up to December 31, 2012; and

• For charges under R.A. 10155 – allotments shall be valid up to December 31, 2013.

5.12 Timely compliance with the submission of existing BARs and other reportorial requirements is
reiterated for monitoring purposes.

6.0 Effectivity

This circular shall take effect immediately.

(Sgd.) FLORENCIO B. ABAD

Secretary

As can be seen, NBC No. 541 specified that the unobligated allotments of all agencies and departments as of June
30, 2012 that were charged against the continuing appropriations for fiscal year 2011 and the 2012 GAA (R.A. No.
10155) were subject to withdrawal through the issuance of negative SAROs, but such allotments could be either: (1)
reissued for the original PAPs of the concerned agencies from which they were withdrawn; or (2) realigned to cover
additional funding for other existing PAPs of the concerned agencies; or (3) used to augment existing PAPs of any
agency and to fund priority PAPs not considered in the 2012 budget but expected to be started or implemented in
2012. Financing the other priority PAPs was made subject to the approval of the President. Note here that NBC No.
541 used terminologies like "realignment" and "augmentation" in the application of the withdrawn unobligated
allotments.

Taken together, all the issuances showed how the DAP was to be implemented and funded, that is — (1) by
declaring "savings" coming from the various departments and agencies derived from pooling unobligated allotments

470
and withdrawing unreleased appropriations; (2) releasing unprogrammed funds; and (3) applying the "savings" and
unprogrammed funds to augment existing PAPs or to support other priority PAPs.

c. DAP was not an appropriation

measure; hence, no appropriation
law was required to adopt or to
implement it

Petitioners Syjuco, Luna, Villegas and PHILCONSA state that Congress did not enact a law to establish the DAP, or
to authorize the disbursement and release of public funds to implement the DAP. Villegas, PHILCONSA, IBP,
Araullo, and COURAGE observe that the appropriations funded under the DAP were not included in the 2011, 2012
and 2013 GAAs. To petitioners IBP, Araullo, and COURAGE, the DAP, being actually an appropriation that set
aside public funds for public use, should require an enabling law for its validity. VACC maintains that the DAP,
because it involved huge allocations that were separate and distinct from the GAAs, circumvented and duplicated
the GAAs without congressional authorization and control.

The petitioners contend in unison that based on how it was developed and implemented the DAP violated the
mandate of Section 29(1), Article VI of the 1987 Constitution that "[n]o money shall be paid out of the Treasury
except in pursuance of an appropriation made by law."

The OSG posits, however, that no law was necessary for the adoption and implementation of the DAP because of
its being neither a fund nor an appropriation, but a program or an administrative system of prioritizing spending; and
that the adoption of the DAP was by virtue of the authority of the President as the Chief Executive to ensure that
laws were faithfully executed.

We agree with the OSG’s position.

The DAP was a government policy or strategy designed to stimulate the economy through accelerated spending. In
the context of the DAP’s adoption and implementation being a function pertaining to the Executive as the main actor
during the Budget Execution Stage under its constitutional mandate to faithfully execute the laws, including the
GAAs, Congress did not need to legislate to adopt or to implement the DAP. Congress could appropriate but would
have nothing more to do during the Budget Execution Stage. Indeed, appropriation was the act by which Congress
"designates a particular fund, or sets apart a specified portion of the public revenue or of the money in the public
treasury, to be applied to some general object of governmental expenditure, or to some individual purchase or
expense."  As pointed out in Gonzales v. Raquiza:  ‘"In a strict sense, appropriation has been defined ‘as nothing
124 125

more than the legislative authorization prescribed by the Constitution that money may be paid out of the Treasury,’
while appropriation made by law refers to ‘the act of the legislature setting apart or assigning to a particular use a
certain sum to be used in the payment of debt or dues from the State to its creditors.’"
126

On the other hand, the President, in keeping with his duty to faithfully execute the laws, had sufficient discretion
during the execution of the budget to adapt the budget to changes in the country’s economic situation.  He could
127

adopt a plan like the DAP for the purpose. He could pool the savings and identify the PAPs to be funded under the
DAP. The pooling of savings pursuant to the DAP, and the identification of the PAPs to be funded under the DAP
did not involve appropriation in the strict sense because the money had been already set apart from the public
treasury by Congress through the GAAs. In such actions, the Executive did not usurp the power vested in Congress
under Section 29(1), Article VI of the Constitution.

3.
Unreleased appropriations and withdrawn
unobligated allotments under the DAP
were not savings, and the use of such
appropriations contravened Section 25(5),
Article VI of the 1987 Constitution.

Notwithstanding our appreciation of the DAP as a plan or strategy validly adopted by the Executive to ramp up
spending to accelerate economic growth, the challenges posed by the petitioners constrain us to dissect the
mechanics of the actual execution of the DAP. The management and utilization of the public wealth inevitably
demands a most careful scrutiny of whether the Executive’s implementation of the DAP was consistent with the
Constitution, the relevant GAAs and other existing laws.

a. Although executive discretion

and flexibility are necessary in
the execution of the budget, any
transfer of appropriated funds
should conform to Section 25(5),
Article VI of the Constitution

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We begin this dissection by reiterating that Congress cannot anticipate all issues and needs that may come into play
once the budget reaches its execution stage. Executive discretion is necessary at that stage to achieve a sound
fiscal administration and assure effective budget implementation. The heads of offices, particularly the President,
require flexibility in their operations under performance budgeting to enable them to make whatever adjustments are
needed to meet established work goals under changing conditions.  In particular, the power to transfer funds can
128

give the President the flexibility to meet unforeseen events that may otherwise impede the efficient implementation
of the PAPs set by Congress in the GAA.

Congress has traditionally allowed much flexibility to the President in allocating funds pursuant to the
GAAs, particularly when the funds are grouped to form lump sum accounts.  It is assumed that the agencies of the
129 130

Government enjoy more flexibility when the GAAs provide broader appropriation items.  This flexibility comes in the
131

form of policies that the Executive may adopt during the budget execution phase. The DAP – as a strategy to
improve the country’s economic position – was one policy that the President decided to carry out in order to fulfill his
mandate under the GAAs.

Denying to the Executive flexibility in the expenditure process would be counterproductive. In Presidential Spending
Power,  Prof. Louis Fisher, an American constitutional scholar whose specialties have included budget policy, has
132

justified extending discretionary authority to the Executive thusly:

[T]he impulse to deny discretionary authority altogether should be resisted. There are many number of reasons why
obligations and outlays by administrators may have to differ from appropriations by legislators. Appropriations are
made many months, and sometimes years, in advance of expenditures. Congress acts with imperfect knowledge in
trying to legislate in fields that are highly technical and constantly undergoing change. New circumstances will
develop to make obsolete and mistaken the decisions reached by Congress at the appropriation stage. It is not
practicable for Congress to adjust to each new development by passing separate supplemental appropriation bills.
Were Congress to control expenditures by confining administrators to narrow statutory details, it would perhaps
protect its power of the purse but it would not protect the purse itself. The realities and complexities of public policy
require executive discretion for the sound management of public funds.

xxxx

x x x The expenditure process, by its very nature, requires substantial discretion for administrators. They need to
exercise judgment and take responsibility for their actions, but those actions ought to be directed toward executing
congressional, not administrative policy. Let there be discretion, but channel it and use it to satisfy the programs and
priorities established by Congress.

In contrast, by allowing to the heads of offices some power to transfer funds within their respective offices, the
Constitution itself ensures the fiscal autonomy of their offices, and at the same time maintains the separation of
powers among the three main branches of the Government. The Court has recognized this, and emphasized so in
Bengzon v. Drilon,  viz:
133

The Judiciary, the Constitutional Commissions, and the Ombudsman must have the independence and flexibility
needed in the discharge of their constitutional duties. The imposition of restrictions and constraints on the manner
the independent constitutional offices allocate and utilize the funds appropriated for their operations is anathema to
fiscal autonomy and violative not only of the express mandate of the Constitution but especially as regards the
Supreme Court, of the independence and separation of powers upon which the entire fabric of our constitutional
system is based.

In the case of the President, the power to transfer funds from one item to another within the Executive has not been
the mere offshoot of established usage, but has emanated from law itself. It has existed since the time of the
American Governors-General.  Act No. 1902 (An Act authorizing the Governor-General to direct any unexpended
134

balances of appropriations be returned to the general fund of the Insular Treasury and to transfer from the general
fund moneys which have been returned thereto), passed on May 18, 1909 by the First Philippine Legislature,  was 135

the first enabling law that granted statutory authority to the President to transfer funds. The authority was without
any limitation, for the Act explicitly empowered the Governor-General to transfer any unexpended balance of
appropriations for any bureau or office to another, and to spend such balance as if it had originally been
appropriated for that bureau or office.

From 1916 until 1920, the appropriations laws set a cap on the amounts of funds that could be transferred, thereby
limiting the power to transfer funds. Only 10% of the amounts appropriated for contingent or miscellaneous
expenses could be transferred to a bureau or office, and the transferred funds were to be used to cover deficiencies
in the appropriations also for miscellaneous expenses of said bureau or office.

In 1921, the ceiling on the amounts of funds to be transferred from items under miscellaneous expenses to any
other item of a certain bureau or office was removed.

472
During the Commonwealth period, the power of the President to transfer funds continued to be governed by the
GAAs despite the enactment of the Constitution in 1935. It is notable that the 1935 Constitution did not include a
provision on the power to transfer funds. At any rate, a shift in the extent of the President’s power to transfer funds
was again experienced during this era, with the President being given more flexibility in implementing the budget.
The GAAs provided that the power to transfer all or portions of the appropriations in the Executive Department could
be made in the "interest of the public, as the President may determine." 136

In its time, the 1971 Constitutional Convention wanted to curtail the President’s seemingly unbounded discretion in
transferring funds.  Its Committee on the Budget and Appropriation proposed to prohibit the transfer of funds
137

among the separate branches of the Government and the independent constitutional bodies, but to allow instead
their respective heads to augment items of appropriations from savings in their respective budgets under certain
limitations.  The clear intention of the Convention was to further restrict, not to liberalize, the power to transfer
138

appropriations.  Thus, the Committee on the Budget and Appropriation initially considered setting stringent
139

limitations on the power to augment, and suggested that the augmentation of an item of appropriation could be
made "by not more than ten percent if the original item of appropriation to be augmented does not exceed one
million pesos, or by not more than five percent if the original item of appropriation to be augmented exceeds one
million pesos."  But two members of the Committee objected to the ₱1,000,000.00 threshold, saying that the
140

amount was arbitrary and might not be reasonable in the future. The Committee agreed to eliminate the
₱1,000,000.00 threshold, and settled on the ten percent limitation. 141

In the end, the ten percent limitation was discarded during the plenary of the Convention, which adopted the
following final version under Section 16, Article VIII of the 1973 Constitution, to wit:

(5) No law shall be passed authorizing any transfer of appropriations; however, the President, the Prime Minister,
the Speaker, the Chief Justice of the Supreme Court, and the heads of Constitutional Commissions may by law be
authorized to augment any item in the general appropriations law for their respective offices from savings in other
items of their respective appropriations.

The 1973 Constitution explicitly and categorically prohibited the transfer of funds from one item to another, unless
Congress enacted a law authorizing the President, the Prime Minister, the Speaker, the Chief Justice of the
Supreme Court, and the heads of the Constitutional omissions to transfer funds for the purpose of augmenting any
item from savings in another item in the GAA of their respective offices. The leeway was limited to augmentation
only, and was further constricted by the condition that the funds to be transferred should come from savings from
another item in the appropriation of the office.
142

On July 30, 1977, President Marcos issued PD No. 1177, providing in its Section 44 that:

Section 44. Authority to Approve Fund Transfers. The President shall have the authority to transfer any fund
appropriated for the different departments, bureaus, offices and agencies of the Executive Department which are
included in the General Appropriations Act, to any program, project, or activity of any department, bureau or office
included in the General Appropriations Act or approved after its enactment.

The President shall, likewise, have the authority to augment any appropriation of the Executive Department in the
General Appropriations Act, from savings in the appropriations of another department, bureau, office or agency
within the Executive Branch, pursuant to the provisions of Article VIII, Section 16 (5) of the Constitution.

In Demetria v. Alba, however, the Court struck down the first paragraph of Section 44 for contravening Section
16(5)of the 1973 Constitution, ruling:

Paragraph 1 of Section 44 of P.D. No. 1177 unduly over-extends the privilege granted under said Section 16. It
empowers the President to indiscriminately transfer funds from one department, bureau, office or agency of the
Executive Department to any program, project or activity of any department, bureau or office included in the General
Appropriations Act or approved after its enactment, without regard as to whether or not the funds to be transferred
are actually savings in the item from which the same are to be taken, or whether or not the transfer is for the
purpose of augmenting the item to which said transfer is to be made. It does not only completely disregard the
standards set in the fundamental law, thereby amounting to an undue delegation of legislative powers, but likewise
goes beyond the tenor thereof. Indeed, such constitutional infirmities render the provision in question null and void. 143

It is significant that Demetria was promulgated 25 days after the ratification by the people of the 1987 Constitution,
whose Section 25(5) of Article VI is identical to Section 16(5), Article VIII of the 1973 Constitution, to wit:

Section 25. x x x

xxxx

473
5) No law shall be passed authorizing any transfer of appropriations; however, the President, the President of the
Senate, the Speaker of the House of Representatives, the Chief Justice of the Supreme Court, and the heads of
Constitutional Commissions may, by law, be authorized to augment any item in the general appropriations law for
their respective offices from savings in other items of their respective appropriations.

xxxx

The foregoing history makes it evident that the Constitutional Commission included Section 25(5), supra, to keep a
tight rein on the exercise of the power to transfer funds appropriated by Congress by the President and the other
high officials of the Government named therein. The Court stated in Nazareth v. Villar: 144

In the funding of current activities, projects, and programs, the general rule should still be that the budgetary amount
contained in the appropriations bill is the extent Congress will determine as sufficient for the budgetary allocation for
the proponent agency. The only exception is found in Section 25 (5), Article VI of the Constitution, by which the
President, the President of the Senate, the Speaker of the House of Representatives, the Chief Justice of the
Supreme Court, and the heads of Constitutional Commissions are authorized to transfer appropriations to
augmentany item in the GAA for their respective offices from the savings in other items of their respective
appropriations. The plain language of the constitutional restriction leaves no room for the petitioner’s posture, which
we should now dispose of as untenable.

It bears emphasizing that the exception in favor of the high officials named in Section 25(5), Article VI of the
Constitution limiting the authority to transfer savings only to augment another item in the GAA is strictly but
reasonably construed as exclusive. As the Court has expounded in Lokin, Jr. v. Commission on Elections:

When the statute itself enumerates the exceptions to the application of the general rule, the exceptions are strictly
but reasonably construed. The exceptions extend only as far as their language fairly warrants, and all doubts should
be resolved in favor of the general provision rather than the exceptions. Where the general rule is established by a
statute with exceptions, none but the enacting authority can curtail the former. Not even the courts may add to the
latter by implication, and it is a rule that an express exception excludes all others, although it is always proper in
determining the applicability of the rule to inquire whether, in a particular case, it accords with reason and justice.

The appropriate and natural office of the exception is to exempt something from the scope of the general words of a
statute, which is otherwise within the scope and meaning of such general words. Consequently, the existence of an
exception in a statute clarifies the intent that the statute shall apply to all cases not excepted. Exceptions are subject
to the rule of strict construction; hence, any doubt will be resolved in favor of the general provision and against the
exception. Indeed, the liberal construction of a statute will seem to require in many circumstances that the
exception, by which the operation of the statute is limited or abridged, should receive a restricted construction.

Accordingly, we should interpret Section 25(5), supra, in the context of a limitation on the President’s discretion over
the appropriations during the Budget Execution Phase.

b. Requisites for the valid transfer of

appropriated funds under Section
25(5), Article VI of the 1987
Constitution

The transfer of appropriated funds, to be valid under Section 25(5), supra, must be made upon a concurrence of the
following requisites, namely:

(1) There is a law authorizing the President, the President of the Senate, the Speaker of the House of
Representatives, the Chief Justice of the Supreme Court, and the heads of the Constitutional Commissions
to transfer funds within their respective offices;

(2) The funds to be transferred are savings generated from the appropriations for their respective offices;
and (3) The purpose of the transfer is to augment an item in the general appropriations law for their
respective offices.

b.1. First Requisite–GAAs of 2011 and

2012 lacked valid provisions to
authorize transfers of funds under
the DAP; hence, transfers under the
DAP were unconstitutional

Section 25(5), supra, not being a self-executing provision of the Constitution, must have an implementing law for it
to be operative. That law, generally, is the GAA of a given fiscal year. To comply with the first requisite, the GAAs
should expressly authorize the transfer of funds.

474
Did the GAAs expressly authorize the transfer of funds?

In the 2011 GAA, the provision that gave the President and the other high officials the authority to transfer funds
was Section 59, as follows:

Section 59. Use of Savings. The President of the Philippines, the Senate President, the Speaker of the House of
Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional Commissions enjoying fiscal
autonomy, and the Ombudsman are hereby authorized to augment any item in this Act from savings in other items
of their respective appropriations.

In the 2012 GAA, the empowering provision was Section 53, to wit:

Section 53. Use of Savings. The President of the Philippines, the Senate President, the Speaker of the House of
Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional Commissions enjoying fiscal
autonomy, and the Ombudsman are hereby authorized to augment any item in this Act from savings in other items
of their respective appropriations.

In fact, the foregoing provisions of the 2011 and 2012 GAAs were cited by the DBM as justification for the use of
savings under the DAP. 145

A reading shows, however, that the aforequoted provisions of the GAAs of 2011 and 2012 were textually unfaithful
to the Constitution for not carrying the phrase "for their respective offices" contained in Section 25(5), supra. The
impact of the phrase "for their respective offices" was to authorize only transfers of funds within their offices (i.e., in
the case of the President, the transfer was to an item of appropriation within the Executive). The provisions carried a
different phrase ("to augment any item in this Act"), and the effect was that the 2011 and 2012 GAAs thereby literally
allowed the transfer of funds from savings to augment any item in the GAAs even if the item belonged to an office
outside the Executive. To that extent did the 2011 and 2012 GAAs contravene the Constitution. At the very least, the
aforequoted provisions cannot be used to claim authority to transfer appropriations from the Executive to another
branch, or to a constitutional commission.

Apparently realizing the problem, Congress inserted the omitted phrase in the counterpart provision in the 2013
GAA, to wit:

Section 52. Use of Savings. The President of the Philippines, the Senate President, the Speaker of the House of
Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional Commissions enjoying fiscal
autonomy, and the Ombudsman are hereby authorized to use savings in their respective appropriations to augment
actual deficiencies incurred for the current year in any item of their respective appropriations.

Even had a valid law authorizing the transfer of funds pursuant to Section 25(5), supra, existed, there still remained
two other requisites to be met, namely: that the source of funds to be transferred were savings from appropriations
within the respective offices; and that the transfer must be for the purpose of augmenting an item of appropriation
within the respective offices.

b.2. Second Requisite – There were

no savings from which funds
could be sourced for the DAP
Were the funds used in the DAP actually savings?

The petitioners claim that the funds used in the DAP — the unreleased appropriations and withdrawn unobligated
allotments — were not actual savings within the context of Section 25(5), supra, and the relevant provisions of the
GAAs. Belgica argues that "savings" should be understood to refer to the excess money after the items that needed
to be funded have been funded, or those that needed to be paid have been paid pursuant to the budget.  The 146

petitioners posit that there could be savings only when the PAPs for which the funds had been appropriated were
actually implemented and completed, or finally discontinued or abandoned. They insist that savings could not be
realized with certainty in the middle of the fiscal year; and that the funds for "slow-moving" PAPs could not be
considered as savings because such PAPs had not actually been abandoned or discontinued yet.  They stress that
147

NBC No. 541, by allowing the withdrawn funds to be reissued to the "original program or project from which it was
withdrawn," conceded that the PAPs from which the supposed savings were taken had not been completed,
abandoned or discontinued. 148

The OSG represents that "savings" were "appropriations balances," being the difference between the appropriation
authorized by Congress and the actual amount allotted for the appropriation; that the definition of "savings" in the
GAAs set only the parameters for determining when savings occurred; that it was still the President (as well as the
other officers vested by the Constitution with the authority to augment) who ultimately determined when savings
actually existed because savings could be determined only during the stage of budget execution; that the President
must be given a wide discretion to accomplish his tasks; and that the withdrawn unobligated allotments were
savings inasmuch as they were clearly "portions or balances of any programmed appropriation…free from any
475
obligation or encumbrances which are (i) still available after the completion or final discontinuance or abandonment
of the work, activity or purpose for which the appropriation is authorized…"

We partially find for the petitioners.

In ascertaining the meaning of savings, certain principles should be borne in mind. The first principle is that
Congress wields the power of the purse. Congress decides how the budget will be spent; what PAPs to fund; and
the amounts of money to be spent for each PAP. The second principle is that the Executive, as the department of
the Government tasked to enforce the laws, is expected to faithfully execute the GAA and to spend the budget in
accordance with the provisions of the GAA.  The Executive is expected to faithfully implement the PAPs for which
149

Congress allocated funds, and to limit the expenditures within the allocations, unless exigencies result to
deficiencies for which augmentation is authorized, subject to the conditions provided by law. The third principle is
that in making the President’s power to augment operative under the GAA, Congress recognizes the need for
flexibility in budget execution. In so doing, Congress diminishes its own power of the purse, for it delegates a
fraction of its power to the Executive. But Congress does not thereby allow the Executive to override its authority
over the purse as to let the Executive exceed its delegated authority. And the fourth principle is that savings should
be actual. "Actual" denotes something that is real or substantial, or something that exists presently in fact, as
opposed to something that is merely theoretical, possible, potential or hypothetical.150

The foregoing principles caution us to construe savings strictly against expanding the scope of the power to
augment. It is then indubitable that the power to augment was to be used only when the purpose for which the funds
had been allocated were already satisfied, or the need for such funds had ceased to exist, for only then could
savings be properly realized. This interpretation prevents the Executive from unduly transgressing Congress’ power
of the purse.

The definition of "savings" in the GAAs, particularly for 2011, 2012 and 2013, reflected this interpretation and made
it operational, viz:

Savings refer to portions or balances of any programmed appropriation in this Act free from any obligation or
encumbrance which are: (i) still available after the completion or final discontinuance or abandonment of the work,
activity or purpose for which the appropriation is authorized; (ii) from appropriations balances arising from unpaid
compensation and related costs pertaining to vacant positions and leaves of absence without pay; and (iii) from
appropriations balances realized from the implementation of measures resulting in improved systems and
efficiencies and thus enabled agencies to meet and deliver the required or planned targets, programs and services
approved in this Act at a lesser cost.

The three instances listed in the GAAs’ aforequoted definition were a sure indication that savings could be
generated only upon the purpose of the appropriation being fulfilled, or upon the need for the appropriation being no
longer existent.

The phrase "free from any obligation or encumbrance" in the definition of savings in the GAAs conveyed the notion
that the appropriation was at that stage when the appropriation was already obligated and the appropriation was
already released. This interpretation was reinforced by the enumeration of the three instances for savings to arise,
which showed that the appropriation referred to had reached the agency level. It could not be otherwise, considering
that only when the appropriation had reached the agency level could it be determined whether (a) the PAP for which
the appropriation had been authorized was completed, finally discontinued, or abandoned; or (b) there were vacant
positions and leaves of absence without pay; or (c) the required or planned targets, programs and services were
realized at a lesser cost because of the implementation of measures resulting in improved systems and efficiencies.

The DBM declares that part of the savings brought under the DAP came from "pooling of unreleased appropriations
such as unreleased Personnel Services appropriations which will lapse at the end of the year, unreleased
appropriations of slow moving projects and discontinued projects per Zero-Based Budgeting findings."

The declaration of the DBM by itself does not state the clear legal basis for the treatment of unreleased or unalloted
appropriations as savings.

The fact alone that the appropriations are unreleased or unalloted is a mere description of the status of the items as
unalloted or unreleased. They have not yet ripened into categories of items from which savings can be generated.
Appropriations have been considered "released" if there has already been an allotment or authorization to incur
obligations and disbursement authority. This means that the DBM has issued either an ABM (for those not needing
clearance), or a SARO (for those needing clearance), and consequently an NCA, NCAA or CDC, as the case may
be. Appropriations remain unreleased, for instance, because of noncompliance with documentary requirements (like
the Special Budget Request), or simply because of the unavailability of funds. But the appropriations do not actually
reach the agencies to which they were allocated under the GAAs, and have remained with the DBM technically
speaking. Ergo, unreleased appropriations refer to appropriations with allotments but without disbursement
authority.

476
For us to consider unreleased appropriations as savings, unless these met the statutory definition of savings, would
seriously undercut the congressional power of the purse, because such appropriations had not even reached and
been used by the agency concerned vis-à-vis the PAPs for which Congress had allocated them. However, if an
agency has unfilled positions in its plantilla and did not receive an allotment and NCA for such vacancies,
appropriations for such positions, although unreleased, may already constitute savings for that agency under the
second instance.

Unobligated allotments, on the other hand, were encompassed by the first part of the definition of "savings" in the
GAA, that is, as "portions or balances of any programmed appropriation in this Act free from any obligation or
encumbrance." But the first part of the definition was further qualified by the three enumerated instances of when
savings would be realized. As such, unobligated allotments could not be indiscriminately declared as savings
without first determining whether any of the three instances existed. This signified that the DBM’s withdrawal of
unobligated allotments had disregarded the definition of savings under the GAAs.

Justice Carpio has validly observed in his Separate Concurring Opinion that MOOE appropriations are deemed
divided into twelve monthly allocations within the fiscal year; hence, savings could be generated monthly from the
excess or unused MOOE appropriations other than the Mandatory Expenditures and Expenditures for Business-type
Activities because of the physical impossibility to obligate and spend such funds as MOOE for a period that already
lapsed. Following this observation, MOOE for future months are not savings and cannot be transferred.

The DBM’s Memorandum for the President dated June 25, 2012 (which became the basis of NBC No. 541) stated:

ON THE AUTHORITY TO WITHDRAW UNOBLIGATED ALLOTMENTS

5.0 The DBM, during the course of performance reviews conducted on the agencies’ operations, particularly
on the implementation of their projects/activities, including expenses incurred in undertaking the same, have
been continuously calling the attention of all National Government agencies (NGAs) with low levels of
obligations as of end of the first quarter to speedup the implementation of their programs and projects in the
second quarter.

6.0 Said reminders were made in a series of consultation meetings with the concerned agencies and with
call-up letters sent.

7.0 Despite said reminders and the availability of funds at the department’s disposal, the level of financial
performance of some departments registered below program, with the targeted obligations/disbursements
for the first semester still not being met.

8.0 In order to maximize the use of the available allotment, all unobligated balances as of June 30, 2012,
both for continuing and current allotments shall be withdrawn and pooled to fund fast moving
programs/projects.

9.0 It may be emphasized that the allotments to be withdrawn will be based on the list of slow moving
projects to be identified by the agencies and their catch up plans to be evaluated by the DBM.

It is apparent from the foregoing text that the withdrawal of unobligated allotments would be based on whether the
allotments pertained to slow-moving projects, or not. However, NBC No. 541 did not set in clear terms the criteria for
the withdrawal of unobligated allotments, viz:

3.1. These guidelines shall cover the withdrawal of unobligated allotments as of June 30, 2012 ofall national
government agencies (NGAs) charged against FY 2011 Continuing Appropriation (R.A. No. 10147) and FY
2012 Current Appropriation (R.A. No. 10155), pertaining to:

3.1.1 Capital Outlays (CO);

3.1.2 Maintenance and Other Operating Expenses (MOOE) related to the implementation of
programs and projects, as well as capitalized MOOE; and

3.1.3 Personal Services corresponding to unutilized pension benefits declared as savings by the
agencies concerned based on their undated/validated list of pensioners.

A perusal of its various provisions reveals that NBC No. 541 targeted the "withdrawal of unobligated allotments of
agencies with low levels of obligations"  "to fund priority and/or fast-moving programs/projects."  But the fact that
151 152

the withdrawn allotments could be "[r]eissued for the original programs and projects of the agencies/OUs
concerned, from which the allotments were withdrawn"  supported the conclusion that the PAPs had not yet been
153

finally discontinued or abandoned. Thus, the purpose for which the withdrawn funds had been appropriated was not
yet fulfilled, or did not yet cease to exist, rendering the declaration of the funds as savings impossible.

477
Worse, NBC No. 541 immediately considered for withdrawal all released allotments in 2011 charged against the
2011 GAA that had remained unobligated based on the following considerations, to wit:

5.4.1 The departments/agencies’ approved priority programs and projects are assumed to be
implementation-ready and doable during the given fiscal year; and

5.4.2 The practice of having substantial carryover appropriations may imply that the agency has a slower-
than-programmed implementation capacity or agency tends to implement projects within a two-year
timeframe.

Such withdrawals pursuant to NBC No. 541, the circular that affected the unobligated allotments for continuing and
current appropriations as of June 30, 2012, disregarded the 2-year period of availability of the appropriations for
MOOE and capital outlay extended under Section 65, General Provisions of the 2011 GAA, viz:

Section 65. Availability of Appropriations. — Appropriations for MOOE and capital outlays authorized in this Act shall
be available for release and obligation for the purpose specified, and under the same special provisions applicable
thereto, for a period extending to one fiscal year after the end of the year in which such items were appropriated:
PROVIDED, That appropriations for MOOE and capital outlays under R.A. No. 9970 shall be made available up to
the end of FY 2011: PROVIDED, FURTHER, That a report on these releases and obligations shall be submitted to
the Senate Committee on Finance and the House Committee on Appropriations.

and Section 63 General Provisions of the 2012 GAA, viz:

Section 63. Availability of Appropriations. — Appropriations for MOOE and capital outlays authorized in this Act shall
be available for release and obligation for the purpose specified, and under the same special provisions applicable
thereto, for a period extending to one fiscal year after the end of the year in which such items were appropriated:
PROVIDED, That a report on these releases and obligations shall be submitted to the Senate Committee on
Finance and the House Committee on Appropriations, either in printed form or by way of electronic document. 154

Thus, another alleged area of constitutional infirmity was that the DAP and its relevant issuances shortened the
period of availability of the appropriations for MOOE and capital outlays.

Congress provided a one-year period of availability of the funds for all allotment classes in the 2013 GAA (R.A. No.
10352), to wit:

Section 63. Availability of Appropriations.— All appropriations authorized in this Act shall be available for release
and obligation for the purposes specified, and under the same special provisions applicable thereto, until the end of
FY 2013: PROVIDED, That a report on these releases and obligations shall be submitted to the Senate Committee
on Finance and House Committee on Appropriations, either in printed form or by way of electronic document.

Yet, in his memorandum for the President dated May 20, 2013, Sec. Abad sought omnibus authority to consolidate
savings and unutilized balances to fund the DAP on a quarterly basis, viz:

7.0 If the level of financial performance of some department will register below program, even with the
availability of funds at their disposal, the targeted obligations/disbursements for each quarter will not be met.
It is important to note that these funds will lapse at the end of the fiscal year if these remain unobligated.

8.0 To maximize the use of the available allotment, all unobligated balances at the end of every quarter,
both for continuing and current allotments shall be withdrawn and pooled to fund fast moving
programs/projects.

9.0 It may be emphasized that the allotments to be withdrawn will be based on the list of slow moving
projects to be identified by the agencies and their catch up plans to be evaluated by the DBM.

The validity period of the affected appropriations, already given the brief Lifes pan of one year, was further
shortened to only a quarter of a year under the DBM’s memorandum dated May 20, 2013.

The petitioners accuse the respondents of forcing the generation of savings in order to have a larger fund available
for discretionary spending. They aver that the respondents, by withdrawing unobligated allotments in the middle of
the fiscal year, in effect deprived funding for PAPs with existing appropriations under the GAAs. 155

The respondents belie the accusation, insisting that the unobligated allotments were being withdrawn upon the
instance of the implementing agencies based on their own assessment that they could not obligate those allotments
pursuant to the President’s directive for them to spend their appropriations as quickly as they could in order to ramp
up the economy. 156

478
We agree with the petitioners.

Contrary to the respondents’ insistence, the withdrawals were upon the initiative of the DBM itself. The text of NBC
No. 541 bears this out, to wit:

5.2 For the purpose of determining the amount of unobligated allotments that shall be withdrawn, all
departments/agencies/operating units (OUs) shall submit to DBM not later than July 30, 2012, the following budget
accountability reports as of June 30, 2012;

• Statement of Allotments, Obligation and Balances (SAOB);

• Financial Report of Operations (FRO); and

• Physical Report of Operations.

5.3 In the absence of the June 30, 2012 reports cited under item 5.2 of this Circular, the agency’s latest report
available shall be used by DBM as basis for withdrawal of allotment. The DBM shall compute/approximate the
agency’s obligation level as of June 30 to derive its unobligated allotments as of same period. Example: If the March
31 SAOB or FRO reflects actual obligations of P 800M then the June 30 obligation level shall approximate to ₱1,600
M (i.e., ₱800 M x 2 quarters).

The petitioners assert that no law had authorized the withdrawal and transfer of unobligated allotments and the
pooling of unreleased appropriations; and that the unbridled withdrawal of unobligated allotments and the retention
of appropriated funds were akin to the impoundment of appropriations that could be allowed only in case of
"unmanageable national government budget deficit" under the GAAs,  thus violating the provisions of the GAAs of
157

2011, 2012 and 2013 prohibiting the retention or deduction of allotments. 158

In contrast, the respondents emphasize that NBC No. 541 adopted a spending, not saving, policy as a last-ditch
effort of the Executive to push agencies into actually spending their appropriations; that such policy did not amount
to an impoundment scheme, because impoundment referred to the decision of the Executive to refuse to spend
funds for political or ideological reasons; and that the withdrawal of allotments under NBC No. 541 was made
pursuant to Section 38, Chapter 5, Book VI of the Administrative Code, by which the President was granted the
authority to suspend or otherwise stop further expenditure of funds allotted to any agency whenever in his judgment
the public interest so required.

The assertions of the petitioners are upheld. The withdrawal and transfer of unobligated allotments and the pooling
of unreleased appropriations were invalid for being bereft of legal support. Nonetheless, such withdrawal of
unobligated allotments and the retention of appropriated funds cannot be considered as impoundment.

According to Philippine Constitution Association v. Enriquez:  "Impoundment refers to a refusal by the President, for
159

whatever reason, to spend funds made available by Congress. It is the failure to spend or obligate budget authority
of any type." Impoundment under the GAA is understood to mean the retention or deduction of appropriations. The
2011 GAA authorized impoundment only in case of unmanageable National Government budget deficit, to wit:

Section 66. Prohibition Against Impoundment of Appropriations. No appropriations authorized under this Act shall be
impounded through retention or deduction, unless in accordance with the rules and regulations to be issued by the
DBM: PROVIDED, That all the funds appropriated for the purposes, programs, projects and activities authorized
under this Act, except those covered under the Unprogrammed Fund, shall be released pursuant to Section 33 (3),
Chapter 5, Book VI of E.O. No. 292.

Section 67. Unmanageable National Government Budget Deficit. Retention or deduction of appropriations
authorized in this Act shall be effected only in cases where there is an unmanageable national government budget
deficit.

Unmanageable national government budget deficit as used in this section shall be construed to mean that (i) the
actual national government budget deficit has exceeded the quarterly budget deficit targets consistent with the full-
year target deficit as indicated in the FY 2011 Budget of

Expenditures and Sources of Financing submitted by the President and approved by Congress pursuant to Section
22, Article VII of the Constitution, or (ii) there are clear economic indications of an impending occurrence of such
condition, as determined by the Development Budget Coordinating Committee and approved by the President.

The 2012 and 2013 GAAs contained similar provisions.

The withdrawal of unobligated allotments under the DAP should not be regarded as impoundment because it
entailed only the transfer of funds, not the retention or deduction of appropriations.
479
Nor could Section 68 of the 2011 GAA (and the similar provisions of the 2012 and 2013 GAAs) be applicable. They
uniformly stated:

Section 68. Prohibition Against Retention/Deduction of Allotment. Fund releases from appropriations provided in this
Act shall be transmitted intact or in full to the office or agency concerned. No retention or deduction as reserves or
overhead shall be made, except as authorized by law, or upon direction of the President of the Philippines. The
COA shall ensure compliance with this provision to the extent that sub-allotments by agencies to their subordinate
offices are in conformity with the release documents issued by the DBM.

The provision obviously pertained to the retention or deduction of allotments upon their release from the DBM,
which was a different matter altogether. The Court should not expand the meaning of the provision by applying it to
the withdrawal of allotments.

The respondents rely on Section 38, Chapter 5, Book VI of the Administrative Code of 1987 to justify the withdrawal
of unobligated allotments. But the provision authorized only the suspension or stoppage of further expenditures, not
the withdrawal of unobligated allotments, to wit:

Section 38. Suspension of Expenditure of Appropriations.- Except as otherwise provided in the General
Appropriations Act and whenever in his judgment the public interest so requires, the President, upon notice to the
head of office concerned, is authorized to suspend or otherwise stop further expenditure of funds allotted for any
agency, or any other expenditure authorized in the General Appropriations Act, except for personal services
appropriations used for permanent officials and employees.

Moreover, the DBM did not suspend or stop further expenditures in accordance with Section 38, supra, but instead
transferred the funds to other PAPs.

It is relevant to remind at this juncture that the balances of appropriations that remained unexpended at the end of
the fiscal year were to be reverted to the General Fund.  This was the mandate of Section 28, Chapter IV, Book VI
1âwphi1

of the Administrative Code, to wit:

Section 28. Reversion of Unexpended Balances of Appropriations, Continuing Appropriations.- Unexpended

balances of appropriations authorized in the General Appropriation Act shall revert to the unappropriated surplus of
the General Fund at the end of the fiscal year and shall not thereafter be available for expenditure except by
subsequent legislative enactment: Provided, that appropriations for capital outlays shall remain valid until fully spent
or reverted: provided, further, that continuing appropriations for current operating expenditures may be specifically
recommended and approved as such in support of projects whose effective implementation calls for multi-year
expenditure commitments: provided, finally, that the President may authorize the use of savings realized by an
agency during given year to meet non-recurring expenditures in a subsequent year.

The balances of continuing appropriations shall be reviewed as part of the annual budget preparation process and
the preparation process and the President may approve upon recommendation of the Secretary, the reversion of
funds no longer needed in connection with the activities funded by said continuing appropriations.

The Executive could not circumvent this provision by declaring unreleased appropriations and unobligated
allotments as savings prior to the end of the fiscal year.

b.3. Third Requisite – No funds from

savings could be transferred under
the DAP to augment deficient items
not provided in the GAA

The third requisite for a valid transfer of funds is that the purpose of the transfer should be "to augment an item in
the general appropriations law for the respective offices." The term "augment" means to enlarge or increase in size,
amount, or degree. 160

The GAAs for 2011, 2012 and 2013 set as a condition for augmentation that the appropriation for the PAP item to
be augmented must be deficient, to wit: –

x x x Augmentation implies the existence in this Act of a program, activity, or project with an appropriation, which
upon implementation, or subsequent evaluation of needed resources, is determined to be deficient. In no case shall
a non-existent program, activity, or project, be funded by augmentation from savings or by the use of appropriations
otherwise authorized in this Act.

In other words, an appropriation for any PAP must first be determined to be deficient before it could be augmented
from savings. Note is taken of the fact that the 2013 GAA already made this quite clear, thus:

480
Section 52. Use of Savings. The President of the Philippines, the Senate President, the Speaker of the House of
Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional Commissions enjoying fiscal
autonomy, and the Ombudsman are hereby authorized to use savings in their respective appropriations to augment
actual deficiencies incurred for the current year in any item of their respective appropriations.

As of 2013, a total of ₱144.4 billion worth of PAPs were implemented through the DAP. 161

Of this amount ₱82.5 billion were released in 2011 and ₱54.8 billion in 2012.  Sec. Abad has reported that 9% of
162

the total DAP releases were applied to the PAPs identified by the legislators. 163

The petitioners disagree, however, and insist that the DAP supported the following PAPs that had not been covered
with appropriations in the respective GAAs, namely:

(i) ₱1.5 billion for the Cordillera People’s Liberation Army;

(ii) ₱1.8 billion for the Moro National Liberation Front;

(iii) ₱700 million for assistance to Quezon Province; 164

(iv) ₱50 million to ₱100 (million) each to certain senators; 165

(v) ₱10 billion for the relocation of families living along dangerous zones under the National Housing
Authority;

(vi) ₱10 billion and ₱20 billion equity infusion under the Bangko Sentral;

(vii) ₱5.4 billion landowners’ compensation under the Department of Agrarian Reform;

(viii) ₱8.6 billion for the ARMM comprehensive peace and development program;

(ix) ₱6.5 billion augmentation of LGU internal revenue allotments

(x) ₱5 billion for crucial projects like tourism road construction under the Department of Tourism and the
Department of Public Works and Highways;

(xi) ₱1.8 billion for the DAR-DPWH Tulay ng Pangulo;

(xii) ₱1.96 billion for the DOH-DPWH rehabilitation of regional health units; and

(xiii) ₱4 billion for the DepEd-PPP school infrastructure projects. 166

In refutation, the OSG argues that a total of 116 DAP-financed PAPs were implemented, had appropriation covers,
and could properly be accounted for because the funds were released following and pursuant to the standard
practices adopted by the DBM.  In support of its argument, the OSG has submitted seven evidence packets
167

containing memoranda, SAROs, and other pertinent documents relative to the implementation and fund transfers
under the DAP. 168

Upon careful review of the documents contained in the seven evidence packets, we conclude that the "savings"
pooled under the DAP were allocated to PAPs that were not covered by any appropriations in the pertinent GAAs.

For example, the SARO issued on December 22, 2011 for the highly vaunted Disaster Risk, Exposure, Assessment
and Mitigation (DREAM) project under the Department of Science and Technology (DOST) covered the amount of
₱1.6 Billion,  broken down as follows:
169

APPROPRIATION PARTICULARS AMOUNT

CODE AUTHORIZED

A.03.a.01.a Generation of new knowledge and technologies

and research capability building in priority areas
identified as strategic to National Development
Personnel Services
Maintenance and Other Operating Expenses  P 43,504,024
Capital Outlays 1,164,517,589

481
 391,978,387
P 1,600,000,000

the pertinent provision of the 2011 GAA (R.A. No. 10147) showed that Congress had appropriated only
₱537,910,000 for MOOE, but nothing for personnel services and capital outlays, to wit:

Personnel Maintenance Capital TOTAL

Services and Other Outlays
Operating
Expenditures

III. Operations

a. Funding Assistance to Science 177,406,000 1,887,365,000 49,090,000 2,113,861,000

and Technology Activities

1. Central Office 1,554,238,000 1,554,238,000

a. Generation of new
knowledge and
technologies and research
capability building in
priority areas identified as
strategic to National
Development 537,910,000 537,910,000

Aside from this transfer under the DAP to the DREAM project exceeding by almost 300% the appropriation by
Congress for the program Generation of new knowledge and technologies and research capability building in priority
areas identified as strategic to National Development, the Executive allotted funds for personnel services and capital
outlays. The Executive thereby substituted its will to that of Congress. Worse, the Executive had not earlier
proposed any amount for personnel services and capital outlays in the NEP that became the basis of the 2011
GAA. 170

It is worth stressing in this connection that the failure of the GAAs to set aside any amounts for an expense category
sufficiently indicated that Congress purposely did not see fit to fund, much less implement, the PAP concerned. This
indication becomes clearer when even the President himself did not recommend in the NEP to fund the PAP. The
consequence was that any PAP requiring expenditure that did not receive any appropriation under the GAAs could
only be a new PAP, any funding for which would go beyond the authority laid down by Congress in enacting the
GAAs. That happened in some instances under the DAP.

In relation to the December 22, 2011 SARO issued to the Philippine Council for Industry, Energy and Emerging
Technology Research and Development (DOST-PCIEETRD)  for Establishment of the Advanced Failure Analysis
171

Laboratory, which reads:

APPROPRIATION PARTICULARS AMOUNT

CODE AUTHORIZED

Development, integration and coordination of the

A.02.a National Research System for Industry, Energy and
Emerging Technology and Related Fields P 300,000,000
Capital Outlays

the appropriation code and the particulars appearing in the SARO did not correspond to the program specified in the
GAA, whose particulars were Research and Management Services(inclusive of the following activities: (1)
Technological and Economic Assessment for Industry, Energy and Utilities; (2) Dissemination of Science and
Technology Information; and (3) Management of PCIERD Information System for Industry, Energy and Utilities.
Even assuming that Development, integration and coordination of the National Research System for Industry,
Energy and Emerging Technology and Related Fields– the particulars stated in the SARO – could fall under the
broad program description of Research and Management Services– as appearing in the SARO, it would

482
nonetheless remain a new activity by reason of its not being specifically stated in the GAA. As such, the DBM, sans
legislative authorization, could not validly fund and implement such PAP under the DAP.

In defending the disbursements, however, the OSG contends that the Executive enjoyed sound discretion in
implementing the budget given the generality in the language and the broad policy objectives identified under the
GAAs;  and that the President enjoyed unlimited authority to spend the initial appropriations under his authority to
172

declare and utilize savings,  and in keeping with his duty to faithfully execute the laws.
173

Although the OSG rightly contends that the Executive was authorized to spend in line with its mandate to faithfully
execute the laws (which included the GAAs), such authority did not translate to unfettered discretion that allowed the
President to substitute his own will for that of Congress. He was still required to remain faithful to the provisions of
the GAAs, given that his power to spend pursuant to the GAAs was but a delegation to him from Congress. Verily,
the power to spend the public wealth resided in Congress, not in the Executive.  Moreover, leaving the spending
174

power of the Executive unrestricted would threaten to undo the principle of separation of powers. 175

Congress acts as the guardian of the public treasury in faithful discharge of its power of the purse whenever it
deliberates and acts on the budget proposal submitted by the Executive.  Its power of the purse is touted as the
176

very foundation of its institutional strength,  and underpins "all other legislative decisions and regulating the balance
177

of influence between the legislative and executive branches of government."  Such enormous power encompasses
178

the capacity to generate money for the Government, to appropriate public funds, and to spend the
money.  Pertinently, when it exercises its power of the purse, Congress wields control by specifying the PAPs for
179

which public money should be spent.

It is the President who proposes the budget but it is Congress that has the final say on matters of
appropriations. For this purpose, appropriation involves two governing principles, namely: (1) "a Principle of the
180

Public Fisc, asserting that all monies received from whatever source by any part of the government are public
funds;" and (2) "a Principle of Appropriations Control, prohibiting expenditure of any public money without legislative
authorization." To conform with the governing principles, the Executive cannot circumvent the prohibition by
181

Congress of an expenditure for a PAP by resorting to either public or private funds.  Nor could the Executive
182

transfer appropriated funds resulting in an increase in the budget for one PAP, for by so doing the appropriation for
another PAP is necessarily decreased. The terms of both appropriations will thereby be violated.

b.4 Third Requisite – Cross-border

augmentations from savings were
prohibited by the Constitution

By providing that the President, the President of the Senate, the Speaker of the House of Representatives, the Chief
Justice of the Supreme Court, and the Heads of the Constitutional Commissions may be authorized to augment any
item in the GAA "for their respective offices," Section 25(5), supra, has delineated borders between their offices,
such that funds appropriated for one office are prohibited from crossing over to another office even in the guise of
augmentation of a deficient item or items. Thus, we call such transfers of funds cross-border transfers or cross-
border augmentations.

To be sure, the phrase "respective offices" used in Section 25(5), supra, refers to the entire Executive, with respect
to the President; the Senate, with respect to the Senate President; the House of Representatives, with respect to the
Speaker; the Judiciary, with respect to the Chief Justice; the Constitutional Commissions, with respect to their
respective Chairpersons.

Did any cross-border transfers or augmentations transpire?

During the oral arguments on January 28, 2014, Sec. Abad admitted making some cross-border augmentations, to
wit:

JUSTICE BERSAMIN:

Alright, the whole time that you have been Secretary of Department of Budget and Management, did the Executive
Department ever redirect any part of savings of the National Government under your control cross border to another
department?

SECRETARY ABAD:

Well, in the Memos that we submitted to you, such an instance, Your Honor

JUSTICE BERSAMIN:

Can you tell me two instances? I don’t recall having read your material.

483
SECRETARY ABAD:

Well, the first instance had to do with a request from the House of Representatives. They started building their e-
library in 2010 and they had a budget for about 207 Million but they lack about 43 Million to complete its 250 Million
requirements. Prior to that, the COA, in an audit observation informed the Speaker that they had to continue with
that construction otherwise the whole building, as well as the equipments therein may suffer from serious
deterioration. And at that time, since the budget of the House of Representatives was not enough to complete 250
Million, they wrote to the President requesting for an augmentation of that particular item, which was granted, Your
Honor. The second instance in the Memos is a request from the Commission on Audit. At the time they were
pushing very strongly the good governance programs of the government and therefore, part of that is a requirement
to conduct audits as well as review financial reports of many agencies. And in the performance of that function, the
Commission on Audit needed information technology equipment as well as hire consultants and litigators to help
them with their audit work and for that they requested funds from the Executive and the President saw that it was
important for the Commission to be provided with those IT equipments and litigators and consultants and the
request was granted, Your Honor.

JUSTICE BERSAMIN:

These cross border examples, cross border augmentations were not supported by appropriations…

SECRETARY ABAD:

They were, we were augmenting existing items within their… (interrupted)

JUSTICE BERSAMIN:

No, appropriations before you augmented because this is a cross border and the tenor or text of the Constitution is
quite clear as far as I am concerned. It says here, "The power to augment may only be made to increase any item in
the General Appropriations Law for their respective offices." Did you not feel constricted by this provision?

SECRETARY ABAD:

Well, as the Constitution provides, the prohibition we felt was on the transfer of appropriations, Your Honor. What
we thought we did was to transfer savings which was needed by the Commission to address deficiency in an
existing item in both the Commission as well as in the House of Representatives; that’s how we saw…(interrupted)

JUSTICE BERSAMIN:

So your position as Secretary of Budget is that you could do that?

SECRETARY ABAD:

In an extreme instances because…(interrupted)

JUSTICE BERSAMIN:

No, no, in all instances, extreme or not extreme, you could do that, that’s your feeling.

SECRETARY ABAD:

Well, in that particular situation when the request was made by the Commission and the House of Representatives,
we felt that we needed to respond because we felt…(interrupted). 183

The records show, indeed, that funds amounting to ₱143,700,000.00 and ₱250,000,000.00 were transferred under
the DAP respectively to the COA  and the House of Representatives.  Those transfers of funds, which constituted
184 185

cross-border augmentations for being from the Executive to the COA and the House of Representatives, are
graphed as follows: 186

OFFICE PURPOSE DATE AMOUNT

RELEASED (In thousand pesos)

Reserve Releases

484
 Imposed

Commission on IT Infrastructure Program and 11/11/11   143,700

Audit hiring of additional litigation
experts

Congress – Completion of the construction of 07/23/12 207,034 250,000

House of the Legislative Library and (Savings of HOR)
Representative Archives Building/Congressional
s e-library

The respondents further stated in their memorandum that the President "made available" to the "Commission on
Elections the savings of his department upon [its] request for funds…"  This was another instance of a cross-border
187

augmentation.

The respondents justified all the cross-border transfers thusly:

99. The Constitution does not prevent the President from transferring savings of his department to another
department upon the latter’s request, provided it is the recipient department that uses such funds to augment its
own appropriation. In such a case, the President merely gives the other department access to public funds but he
cannot dictate how they shall be applied by that department whose fiscal autonomy is guaranteed by the
Constitution.188

In the oral arguments held on February 18, 2014, Justice Vicente V. Mendoza, representing Congress, announced a
different characterization of the cross-border transfers of funds as in the nature of "aid" instead of "augmentation,"
viz:

HONORABLE MENDOZA:

The cross-border transfers, if Your Honors please, is not an application of the DAP. What were these cross-border
transfers? They are transfers of savings as defined in the various General Appropriations Act. So, that makes it
similar to the DAP, the use of savings. There was a cross-border which appears to be in violation of Section 25,
paragraph 5 of Article VI, in the sense that the border was crossed. But never has it been claimed that the purpose
was to augment a deficient item in another department of the government or agency of the government. The cross-
border transfers, if Your Honors please, were in the nature of [aid] rather than augmentations. Here is a government
entity separate and independent from the Executive Department solely in need of public funds. The President is
there 24 hours a day, 7 days a week. He’s in charge of the whole operation although six or seven heads of
government offices are given the power to augment. Only the President stationed there and in effect in-charge and
has the responsibility for the failure of any part of the government. You have election, for one reason or another, the
money is not enough to hold election. There would be chaos if no money is given as an aid, not to augment, but as
an aid to a department like COA. The President is responsible in a way that the other heads, given the power to
augment, are not. So, he cannot very well allow this, if Your Honor please. 189

JUSTICE LEONEN:

May I move to another point, maybe just briefly. I am curious that the position now, I think, of government is that
some transfers of savings is now considered to be, if I’m not mistaken, aid not augmentation. Am I correct in my
hearing of your argument?

HONORABLE MENDOZA:

That’s our submission, if Your Honor, please.

JUSTICE LEONEN:

May I know, Justice, where can we situate this in the text of the Constitution? Where do we actually derive the
concepts that transfers of appropriation from one branch to the other or what happened in DAP can be considered a
said? What particular text in the Constitution can we situate this?

HONORABLE MENDOZA:

There is no particular provision or statutory provision for that matter, if Your Honor please. It is drawn from the fact
that the Executive is the executive in-charge of the success of the government.

485
JUSTICE LEONEN:

So, the residual powers labelled in Marcos v. Manglapus would be the basis for this theory of the government?

HONORABLE MENDOZA:

Yes, if Your Honor, please.

JUSTICE LEONEN:

A while ago, Justice Carpio mentioned that the remedy is might be to go to Congress. That there are opportunities
and there have been opportunities of the President to actually go to Congress and ask for supplemental budgets?

HONORABLE MENDOZA:

If there is time to do that, I would say yes.

JUSTICE LEONEN:

So, the theory of aid rather than augmentation applies in extra-ordinary situation?

HONORABLE MENDOZA:

Very extra-ordinary situations.

JUSTICE LEONEN:

But Counsel, this would be new doctrine, in case?

HONORABLE MENDOZA:

Yes, if Your Honor please. 190

Regardless of the variant characterizations of the cross-border transfers of funds, the plain text of Section 25(5),
supra, disallowing cross border transfers was disobeyed. Cross-border transfers, whether as augmentation, or as
aid, were prohibited under Section 25(5), supra.

4.
Sourcing the DAP from unprogrammed
funds despite the original revenue targets
not having been exceeded was invalid

Funding under the DAP were also sourced from unprogrammed funds provided in the GAAs for 2011, 2012,and
2013. The respondents stress, however, that the unprogrammed funds were not brought under the DAP as savings,
but as separate sources of funds; and that, consequently, the release and use of unprogrammed funds were not
subject to the restrictions under Section 25(5), supra.

The documents contained in the Evidence Packets by the OSG have confirmed that the unprogrammed funds were
treated as separate sources of funds. Even so, the release and use of the unprogrammed funds were still subject to
restrictions, for, to start with, the GAAs precisely specified the instances when the unprogrammed funds could be
released and the purposes for which they could be used.

The petitioners point out that a condition for the release of the unprogrammed funds was that the revenue
collections must exceed revenue targets; and that the release of the unprogrammed funds was illegal because such
condition was not met. 191

The respondents disagree, holding that the release and use of the unprogrammed funds under the DAP were in
accordance with the pertinent provisions of the GAAs. In particular, the DBM avers that the unprogrammed funds
could be availed of when any of the following three instances occur, to wit: (1) the revenue collections exceeded the
original revenue targets proposed in the BESFs submitted by the President to Congress; (2) new revenues were
collected or realized from sources not originally considered in the BESFs; or(3) newly-approved loans for foreign
assisted projects were secured, or when conditions were triggered for other sources of funds, such as perfected
loan agreements for foreign-assisted projects.  This view of the DBM was adopted by all the respondents in their
192

Consolidated Comment. 193

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The BESFs for 2011, 2012 and 2013 uniformly defined "unprogrammed appropriations" as appropriations that
provided standby authority to incur additional agency obligations for priority PAPs when revenue collections
exceeded targets, and when additional foreign funds are generated.  Contrary to the DBM’s averment that there
194

were three instances when unprogrammed funds could be released, the BESFs envisioned only two instances. The
third mentioned by the DBM – the collection of new revenues from sources not originally considered in the BESFs –
was not included. This meant that the collection of additional revenues from new sources did not warrant the release
of the unprogrammed funds. Hence, even if the revenues not considered in the BESFs were collected or generated,
the basic condition that the revenue collections should exceed the revenue targets must still be complied with in
order to justify the release of the unprogrammed funds.

The view that there were only two instances when the unprogrammed funds could be released was bolstered by the
following texts of the Special Provisions of the 2011 and 2012 GAAs, to wit:

2011 GAA

1. Release of Fund. The amounts authorized herein shall be released only when the revenue collections exceed the
original revenue targets submitted by the President of the Philippines to Congress pursuant to Section 22, Article VII
of the Constitution, including savings generated from programmed appropriations for the year: PROVIDED, That
collections arising from sources not considered in the aforesaid original revenue targets may be used to cover
releases from appropriations in this Fund: PROVIDED, FURTHER, That in case of newly approved loans for foreign-
assisted projects, the existence of a perfected loan agreement for the purpose shall be sufficient basis for the
issuance of a SARO covering the loan proceeds: PROVIDED, FURTHERMORE, That if there are savings
generated from the programmed appropriations for the first two quarters of the year, the DBM may, subject to the
approval of the President, release the pertinent appropriations under the Unprogrammed Fund corresponding to
only fifty percent (50%) of the said savings net of revenue shortfall: PROVIDED, FINALLY, That the release of the
balance of the total savings from programmed appropriations for the year shall be subject to fiscal programming and
approval of the President.

2012 GAA

1. Release of the Fund. The amounts authorized herein shall be released only when the revenue collections exceed
the original revenue targets submitted by the President of the Philippines to Congress pursuant to Section 22, Article
VII of the Constitution: PROVIDED, That collections arising from sources not considered in the aforesaid original
revenue targets may be used to cover releases from appropriations in this Fund: PROVIDED, FURTHER, That in
case of newly approved loans for foreign-assisted projects, the existence of a perfected loan agreement for the
purpose shall be sufficient basis for the issuance of a SARO covering the loan proceeds.

As can be noted, the provisos in both provisions to the effect that "collections arising from sources not considered in
the aforesaid original revenue targets may be used to cover releases from appropriations in this Fund" gave the
authority to use such additional revenues for appropriations funded from the unprogrammed funds. They did not at
all waive compliance with the basic requirement that revenue collections must still exceed the original revenue
targets.

In contrast, the texts of the provisos with regard to additional revenues generated from newly-approved foreign
loans were clear to the effect that the perfected loan agreement would be in itself "sufficient basis" for the issuance
of a SARO to release the funds but only to the extent of the amount of the loan. In such instance, the revenue
collections need not exceed the revenue targets to warrant the release of the loan proceeds, and the mere
perfection of the loan agreement would suffice.

It can be inferred from the foregoing that under these provisions of the GAAs the additional revenues from sources
not considered in the BESFs must be taken into account in determining if the revenue collections exceeded the
revenue targets. The text of the relevant provision of the 2013 GAA, which was substantially similar to those of the
GAAs for 2011 and 2012, already made this explicit, thus:

1. Release of the Fund. The amounts authorized herein shall be released only when the revenue collections exceed
the original revenue targets submitted by the President of the Philippines to Congress pursuant to Section 22, Article
VII of the Constitution, including collections arising from sources not considered in the aforesaid original revenue
target, as certified by the BTr: PROVIDED, That in case of newly approved loans for foreign-assisted projects, the
existence of a perfected loan agreement for the purpose shall be sufficient basis for the issuance of a SARO
covering the loan proceeds.

Consequently, that there were additional revenues from sources not considered in the revenue target would not be
enough. The total revenue collections must still exceed the original revenue targets to justify the release of the
unprogrammed funds (other than those from newly-approved foreign loans).

The present controversy on the unprogrammed funds was rooted in the correct interpretation of the phrase "revenue
collections should exceed the original revenue targets." The petitioners take the phrase to mean that the total
487
revenue collections must exceed the total revenue target stated in the BESF, but the respondents understand the
phrase to refer only to the collections for each source of revenue as enumerated in the BESF, with the condition
being deemed complied with once the revenue collections from a particular source already exceeded the stated
target.

The BESF provided for the following sources of revenue, with the corresponding revenue target stated for each
source of revenue, to wit:

TAX REVENUES

Taxes on Net Income and Profits

Taxes on Property
Taxes on Domestic Goods and Services

General Sales, Turnover or VAT

Selected Excises on Goods

Selected Taxes on Services

Taxes on the Use of Goods or Property or Permission to Perform Activities
Other Taxes
Taxes on International Trade and Transactions

NON-TAX REVENUES

Fees and Charges

BTR Income

Government Services
Interest on NG Deposits
Interest on Advances to Government Corporations
Income from Investments

Interest on Bond Holdings

Guarantee Fee
Gain on Foreign Exchange
NG Income Collected by BTr

Dividends on Stocks
NG Share from Airport Terminal Fee
NG Share from PAGCOR Income
NG Share from MIAA Profit

Privatization
Foreign Grants

Thus, when the Court required the respondents to submit a certification from the Bureau of Treasury (BTr) to the
effect that the revenue collections had exceeded the original revenue targets,  they complied by submitting
195

certifications from the BTr and Department of Finance (DOF) pertaining to only one identified source of revenue –
the dividends from the shares of stock held by the Government in government-owned and controlled corporations.

To justify the release of the unprogrammed funds for 2011, the OSG presented the certification dated March 4, 2011
issued by DOF Undersecretary Gil S. Beltran, as follows:

This is to certify that under the Budget for Expenditures and Sources of Financing for 2011, the programmed income
from dividends from shares of stock in government-owned and controlled corporations is 5.5 billion.

This is to certify further that based on the records of the Bureau of Treasury, the National Government has recorded
dividend income amounting to ₱23.8 billion as of 31 January 2011. 196

For 2012, the OSG submitted the certification dated April 26, 2012 issued by National Treasurer Roberto B. Tan,
viz:

This is to certify that the actual dividend collections remitted to the National Government for the period January to
March 2012 amounted to ₱19.419 billion compared to the full year program of ₱5.5 billion for 2012. 197

488
And, finally, for 2013, the OSG presented the certification dated July 3, 2013 issued by National Treasurer Rosalia
V. De Leon, to wit:

This is to certify that the actual dividend collections remitted to the National Government for the period January to
May 2013 amounted to ₱12.438 billion compared to the full year program of ₱10.0  billion for 2013.
198

Moreover, the National Government accounted for the sale of the right to build and operate the NAIA expressway
amounting to ₱11.0 billion in June 2013. 199

The certifications reflected that by collecting dividends amounting to ₱23.8 billion in 2011, ₱19.419 billion in 2012,
and ₱12.438 billion in 2013 the BTr had exceeded only the ₱5.5 billion in target revenues in the form of dividends
from stocks in each of 2011 and 2012, and only the ₱10 billion in target revenues in the form of dividends from
stocks in 2013.

However, the requirement that revenue collections exceed the original revenue targets was to be construed in light
of the purpose for which the unprogrammed funds were incorporated in the GAAs as standby appropriations to
support additional expenditures for certain priority PAPs should the revenue collections exceed the resource targets
assumed in the budget or when additional foreign project loan proceeds were realized. The unprogrammed funds
were included in the GAAs to provide ready cover so as not to delay the implementation of the PAPs should new or
additional revenue sources be realized during the year.  Given the tenor of the certifications, the unprogrammed
200

funds were thus not yet supported by the corresponding resources. 201

The revenue targets stated in the BESF were intended to address the funding requirements of the proposed
programmed appropriations. In contrast, the unprogrammed funds, as standby appropriations, were to be released
only when there were revenues in excess of what the programmed appropriations required. As such, the revenue
targets should be considered as a whole, not individually; otherwise, we would be dealing with artificial revenue
surpluses. The requirement that revenue collections must exceed revenue target should be understood to mean that
the revenue collections must exceed the total of the revenue targets stated in the BESF. Moreover, to release the
unprogrammed funds simply because there was an excess revenue as to one source of revenue would be an
unsound fiscal management measure because it would disregard the budget plan and foster budget deficits, in
contravention of the Government’s surplus budget policy. 202

We cannot, therefore, subscribe to the respondents’ view.

5.
Equal protection, checks and balances,
and public accountability challenges

The DAP is further challenged as violative of the Equal Protection Clause, the system of checks and balances, and
the principle of public accountability.

With respect to the challenge against the DAP under the Equal Protection Clause,  Luna argues that the
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implementation of the DAP was "unfair as it [was] selective" because the funds released under the DAP was not
made available to all the legislators, with some of them refusing to avail themselves of the DAP funds, and others
being unaware of the availability of such funds. Thus, the DAP practised "undue favoritism" in favor of select
legislators in contravention of the Equal Protection Clause.

Similarly, COURAGE contends that the DAP violated the Equal Protection Clause because no reasonable
classification was used in distributing the funds under the DAP; and that the Senators who supposedly availed
themselves of said funds were differently treated as to the amounts they respectively received.

Anent the petitioners’ theory that the DAP violated the system of checks and balances, Luna submits that the grant
of the funds under the DAP to some legislators forced their silence about the issues and anomalies surrounding the
DAP. Meanwhile, Belgica stresses that the DAP, by allowing the legislators to identify PAPs, authorized them to
take part in the implementation and execution of the GAAs, a function that exclusively belonged to the Executive;
that such situation constituted undue and unjustified legislative encroachment in the functions of the Executive; and
that the President arrogated unto himself the power of appropriation vested in Congress because NBC No. 541
authorized the use of the funds under the DAP for PAPs not considered in the 2012 budget.

Finally, the petitioners insist that the DAP was repugnant to the principle of public accountability enshrined in the
Constitution,  because the legislators relinquished the power of appropriation to the Executive, and exhibited a
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reluctance to inquire into the legality of the DAP.

The OSG counters the challenges, stating that the supposed discrimination in the release of funds under the DAP
could be raised only by the affected Members of Congress themselves, and if the challenge based on the violation
of the Equal Protection Clause was really against the constitutionality of the DAP, the arguments of the petitioners

489
should be directed to the entitlement of the legislators to the funds, not to the proposition that all of the legislators
should have been given such entitlement.

The challenge based on the contravention of the Equal Protection Clause, which focuses on the release of funds
under the DAP to legislators, lacks factual and legal basis. The allegations about Senators and Congressmen being
unaware of the existence and implementation of the DAP, and about some of them having refused to accept such
funds were unsupported with relevant data. Also, the claim that the Executive discriminated against some legislators
on the ground alone of their receiving less than the others could not of itself warrant a finding of contravention of the
Equal Protection Clause. The denial of equal protection of any law should be an issue to be raised only by parties
who supposedly suffer it, and, in these cases, such parties would be the few legislators claimed to have been
discriminated against in the releases of funds under the DAP. The reason for the requirement is that only such
affected legislators could properly and fully bring to the fore when and how the denial of equal protection occurred,
and explain why there was a denial in their situation. The requirement was not met here. Consequently, the Court
was not put in the position to determine if there was a denial of equal protection. To have the Court do so despite
the inadequacy of the showing of factual and legal support would be to compel it to speculate, and the outcome
would not do justice to those for whose supposed benefit the claim of denial of equal protection has been made.

The argument that the release of funds under the DAP effectively stayed the hands of the legislators from
conducting congressional inquiries into the legality and propriety of the DAP is speculative. That deficiency
eliminated any need to consider and resolve the argument, for it is fundamental that speculation would not support
any proper judicial determination of an issue simply because nothing concrete can thereby be gained. In order to
sustain their constitutional challenges against official acts of the Government, the petitioners must discharge the
basic burden of proving that the constitutional infirmities actually existed.  Simply put, guesswork and speculation
205

cannot overcome the presumption of the constitutionality of the assailed executive act.

We do not need to discuss whether or not the DAP and its implementation through the various circulars and
memoranda of the DBM transgressed the system of checks and balances in place in our constitutional system. Our
earlier expositions on the DAP and its implementing issuances infringing the doctrine of separation of powers
effectively addressed this particular concern.

Anent the principle of public accountability being transgressed because the adoption and implementation of the DAP
constituted an assumption by the Executive of Congress’ power of appropriation, we have already held that the DAP
and its implementing issuances were policies and acts that the Executive could properly adopt and do in the
execution of the GAAs to the extent that they sought to implement strategies to ramp up or accelerate the economy
of the country.

6.
Doctrine of operative fact was applicable

After declaring the DAP and its implementing issuances constitutionally infirm, we must now deal with the
consequences of the declaration.

Article 7 of the Civil Code provides:

Article 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused
by disuse, or custom or practice to the contrary.

When the courts declared a law to be inconsistent with the Constitution, the former shall be void and the latter shall
govern.

Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws or
the Constitution.

A legislative or executive act that is declared void for being unconstitutional cannot give rise to any right or
obligation.  However, the generality of the rule makes us ponder whether rigidly applying the rule may at times be
206

impracticable or wasteful. Should we not recognize the need to except from the rigid application of the rule the
instances in which the void law or executive act produced an almost irreversible result?

The need is answered by the doctrine of operative fact. The doctrine, definitely not a novel one, has been
exhaustively explained in De Agbayani v. Philippine National Bank: 207

The decision now on appeal reflects the orthodox view that an unconstitutional act, for that matter an executive
order or a municipal ordinance likewise suffering from that infirmity, cannot be the source of any legal rights or
duties. Nor can it justify any official act taken under it. Its repugnancy to the fundamental law once judicially declared
results in its being to all intents and purposes a mere scrap of paper. As the new Civil Code puts it: ‘When the courts
declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern.’

490
Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws of
the Constitution. It is understandable why it should be so, the Constitution being supreme and paramount. Any
legislative or executive act contrary to its terms cannot survive.

Such a view has support in logic and possesses the merit of simplicity. It may not however be sufficiently realistic. It
does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have
been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its
invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their
positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done while
such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a
doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect
awareness that precisely because the judiciary is the governmental organ which has the final say on whether or not
a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of
judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and
justice then, if there be no recognition of what had transpired prior to such adjudication.

In the language of an American Supreme Court decision: ‘The actual existence of a statute, prior to such a
determination [of unconstitutionality], is an operative fact and may have consequences which cannot justly be
ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects, with respect to particular relations, individual and corporate,
and particular conduct, private and official.’"

The doctrine of operative fact recognizes the existence of the law or executive act prior to the determination of its
unconstitutionality as an operative fact that produced consequences that cannot always be erased, ignored or
disregarded. In short, it nullifies the void law or executive act but sustains its effects. It provides an exception to the
general rule that a void or unconstitutional law produces no effect.  But its use must be subjected to great scrutiny
208

and circumspection, and it cannot be invoked to validate an unconstitutional law or executive act, but is resorted to
only as a matter of equity and fair play.  It applies only to cases where extraordinary circumstances exist, and only
209

when the extraordinary circumstances have met the stringent conditions that will permit its application.

We find the doctrine of operative fact applicable to the adoption and implementation of the DAP. Its application to
the DAP proceeds from equity and fair play. The consequences resulting from the DAP and its related issuances
could not be ignored or could no longer be undone.

To be clear, the doctrine of operative fact extends to a void or unconstitutional executive act. The term executive act
is broad enough to include any and all acts of the Executive, including those that are quasi legislative and quasi-
judicial in nature. The Court held so in Hacienda Luisita, Inc. v. Presidential Agrarian Reform Council: 210

Nonetheless, the minority is of the persistent view that the applicability of the operative fact doctrine should be
limited to statutes and rules and regulations issued by the executive department that are accorded the same status
as that of a statute or those which are quasi-legislative in nature. Thus, the minority concludes that the phrase
‘executive act’ used in the case of De Agbayani v. Philippine National Bank refers only to acts, orders, and rules and
regulations that have the force and effect of law. The minority also made mention of the Concurring Opinion of
Justice Enrique Fernando in Municipality of Malabang v. Benito, where it was supposedly made explicit that the
operative fact doctrine applies to executive acts, which are ultimately quasi-legislative in nature.

We disagree. For one, neither the De Agbayani case nor the Municipality of Malabang case elaborates what
‘executive act’ mean. Moreover, while orders, rules and regulations issued by the President or the executive branch
have fixed definitions and meaning in the Administrative Code and jurisprudence, the phrase ‘executive act’ does
not have such specific definition under existing laws. It should be noted that in the cases cited by the minority,
nowhere can it be found that the term ‘executive act’ is confined to the foregoing. Contrarily, the term ‘executive act’
is broad enough to encompass decisions of administrative bodies and agencies under the executive department
which are subsequently revoked by the agency in question or nullified by the Court.

A case in point is the concurrent appointment of Magdangal B. Elma (Elma) as Chairman of the Presidential
Commission on Good Government (PCGG) and as Chief Presidential Legal Counsel (CPLC) which was declared
unconstitutional by this Court in Public Interest Center, Inc. v. Elma. In said case, this Court ruled that the concurrent
appointment of Elma to these offices is in violation of Section 7, par. 2, Article IX-B of the 1987 Constitution, since
these are incompatible offices. Notably, the appointment of Elma as Chairman of the PCGG and as CPLC is,
without a question, an executive act. Prior to the declaration of unconstitutionality of the said executive act, certain
acts or transactions were made in good faith and in reliance of the appointment of Elma which cannot just be set
aside or invalidated by its subsequent invalidation.

In Tan v. Barrios, this Court, in applying the operative fact doctrine, held that despite the invalidity of the jurisdiction
of the military courts over civilians, certain operative facts must be acknowledged to have existed so as not to
trample upon the rights of the accused therein. Relevant thereto, in Olaguer v. Military Commission No. 34, it was
ruled that ‘military tribunals pertain to the Executive Department of the Government and are simply instrumentalities

491
of the executive power, provided by the legislature for the President as Commander-in-Chief to aid him in properly
commanding the army and navy and enforcing discipline therein, and utilized under his orders or those of his
authorized military representatives.’

Evidently, the operative fact doctrine is not confined to statutes and rules and regulations issued by the executive
department that are accorded the same status as that of a statute or those which are quasi-legislative in nature.

Even assuming that De Agbayani initially applied the operative fact doctrine only to executive issuances like orders
and rules and regulations, said principle can nonetheless be applied, by analogy, to decisions made by the
President or the agencies under the executive department. This doctrine, in the interest of justice and equity, can be
applied liberally and in a broad sense to encompass said decisions of the executive branch. In keeping with the
demands of equity, the Court can apply the operative fact doctrine to acts and consequences that resulted from the
reliance not only on a law or executive act which is quasi-legislative in nature but also on decisions or orders of the
executive branch which were later nullified. This Court is not unmindful that such acts and consequences must be
recognized in the higher interest of justice, equity and fairness.

Significantly, a decision made by the President or the administrative agencies has to be complied with because it
has the force and effect of law, springing from the powers of the President under the Constitution and existing laws.
Prior to the nullification or recall of said decision, it may have produced acts and consequences in conformity to and
in reliance of said decision, which must be respected. It is on this score that the operative fact doctrine should be
applied to acts and consequences that resulted from the implementation of the PARC Resolution approving the SDP
of HLI. (Bold underscoring supplied for emphasis)

In Commissioner of Internal Revenue v. San Roque Power Corporation,  the Court likewise declared that "for the
211

operative fact doctrine to apply, there must be a ‘legislative or executive measure,’ meaning a law or executive
issuance." Thus, the Court opined there that the operative fact doctrine did not apply to a mere administrative
practice of the Bureau of Internal Revenue, viz:

Under Section 246, taxpayers may rely upon a rule or ruling issued by the Commissioner from the time the rule or
ruling is issued up to its reversal by the Commissioner or this Court. The reversal is not given retroactive effect.
This, in essence, is the doctrine of operative fact. There must, however, be a rule or ruling issued by the
Commissioner that is relied upon by the taxpayer in good faith. A mere administrative practice, not formalized into a
rule or ruling, will not suffice because such a mere administrative practice may not be uniformly and consistently
applied. An administrative practice, if not formalized as a rule or ruling, will not be known to the general public and
can be availed of only by those with informal contacts with the government agency.

It is clear from the foregoing that the adoption and the implementation of the DAP and its related issuances were
executive acts.  The DAP itself, as a policy, transcended a merely administrative practice especially after the
1avvphi1

Executive, through the DBM, implemented it by issuing various memoranda and circulars. The pooling of savings
pursuant to the DAP from the allotments made available to the different agencies and departments was consistently
applied throughout the entire Executive. With the Executive, through the DBM, being in charge of the third phase of
the budget cycle – the budget execution phase, the President could legitimately adopt a policy like the DAP by virtue
of his primary responsibility as the Chief Executive of directing the national economy towards growth and
development. This is simply because savings could and should be determined only during the budget execution
phase.

As already mentioned, the implementation of the DAP resulted into the use of savings pooled by the Executive to
finance the PAPs that were not covered in the GAA, or that did not have proper appropriation covers, as well as to
augment items pertaining to other departments of the Government in clear violation of the Constitution. To declare
the implementation of the DAP unconstitutional without recognizing that its prior implementation constituted an
operative fact that produced consequences in the real as well as juristic worlds of the Government and the Nation is
to be impractical and unfair. Unless the doctrine is held to apply, the Executive as the disburser and the offices
under it and elsewhere as the recipients could be required to undo everything that they had implemented in good
faith under the DAP. That scenario would be enormously burdensome for the Government. Equity alleviates such
burden.

The other side of the coin is that it has been adequately shown as to be beyond debate that the implementation of
the DAP yielded undeniably positive results that enhanced the economic welfare of the country. To count the
positive results may be impossible, but the visible ones, like public infrastructure, could easily include roads,
bridges, homes for the homeless, hospitals, classrooms and the like. Not to apply the doctrine of operative fact to
the DAP could literally cause the physical undoing of such worthy results by destruction, and would result in most
undesirable wastefulness.

Nonetheless, as Justice Brion has pointed out during the deliberations, the doctrine of operative fact does not
always apply, and is not always the consequence of every declaration of constitutional invalidity. It can be invoked
only in situations where the nullification of the effects of what used to be a valid law would result in inequity and

492
injustice; but where no such result would ensue, the general rule that an unconstitutional law is totally ineffective
212

should apply.

In that context, as Justice Brion has clarified, the doctrine of operative fact can apply only to the PAPs that can no
longer be undone, and whose beneficiaries relied in good faith on the validity of the DAP, but cannot apply to the
authors, proponents and implementors of the DAP, unless there are concrete findings of good faith in their favor by
the proper tribunals determining their criminal, civil, administrative and other liabilities.

WHEREFORE, the Court PARTIALLY GRANTS the petitions for certiorari and prohibition; and DECLARES the
following acts and practices under the Disbursement Acceleration Program, National Budget Circular No. 541 and
related executive issuances UNCONSTITUTIONAL for being in violation of Section 25(5), Article VI of the 1987
Constitution and the doctrine of separation of powers, namely:

(a) The withdrawal of unobligated allotments from the implementing agencies, and the declaration of the
withdrawn unobligated allotments and unreleased appropriations as savings prior to the end of the fiscal
year and without complying with the statutory definition of savings contained in the General Appropriations
Acts;

(b) The cross-border transfers of the savings of the Executive to augment the appropriations of other offices
outside the Executive; and

(c) The funding of projects, activities and programs that were not covered by any appropriation in the
General Appropriations Act.

The Court further DECLARES VOID the use of unprogrammed funds despite the absence of a certification by the
National Treasurer that the revenue collections exceeded the revenue targets for non-compliance with the
conditions provided in the relevant General Appropriations Acts.

SO ORDERED.

CONCURRING OPINION

LEONEN, J.:

I concur in the result.

I agree that some acts and practices covered by the Disbursement Acceleration Program as articulated in National
Budget Circular No. 541 and in related executive issuances and memoranda are unconstitutional. We declare these
principles for guidance of bench and bar considering that the petitions were mooted. The application of these
principles to the 116 expenditures contained in the "evidence packet" submitted by the Solicitor General as well as
the application of the doctrine of operative fact should await proper appraisal in the proper forum.

Isolated from their political color and taking the required sterile juridical view, the petitions consolidated .in this case
ask us to define the limits of the constitutional discretion of the President to spend in relation to his duty to execute
laws passed by Congress. Specifically, we are asked to decide whether there has been grave abuse of discretion in
the promulgation and implementation of the Disbursement Acceleration Program (DAP).

The DAP was promulgated and implemented in response to the slowdown in economic growth in 2011.  Economic 1

growth in 2011 was within the forecasts of the National Economic Development Authority but below the growth
target of 7% expected by other agencies and organizations.  The Senate Economic Planning Office Report of March
2

2012 cited government’s under spending, specially in infrastructure, as one of the factors that contributed to the
weakened economy.  This was a criticism borne during the early part of this present administration.
3 4

On July 18, 2012, National Budget Circular No. 541 was issued. This circular recognized that the spending targets
were not met for the first five months of the year.  The reasons can be deduced from a speech delivered by the
5

President on October 23, 2013, wherein he said:

I remember that in 2011, I addressed you for the first time as President of the Republic. Back then, we had to face a
delicate balancing act. As we took a long hard look at the contracts and systems we inherited, and set about to
purge them of opportunities for graft, the necessary pause led to a growing demand to pump prime the economy. 6

During the oral arguments of this case, Secretary Florencio Abad of the Department of Budget and Management
(DBM) confirmed that they discovered leakages that resulted in the weakened capacity of agencies in implementing
projects when President Aquino assumed office.  Spending was hampered. Economic growth slowed down.
7

493
To address the under spending resulting from that "pause," "measures ha[d] to be implemented to optimize the
utilization of available resources"  and "to accelerate spending and sustain the fiscal targets during the year."  The
8 9

President authorized withdrawals from the agencies’ unobligated allotments.  National Budget Circular (NBC) No.
10

541, thus, stated its purposes as:

a. To provide the conditions and parameters on the withdrawal of unobligated allotments of agencies as of
June 30, 2012 to fund priority and/or fast-moving programs/projects of the national government;

b. To prescribe the reports and documents to be used as bases on the withdrawal of said unobligated
allotments; and

c. To provide guidelines in the utilization or reallocation of the withdrawn allotments. 11

The Department of Budget and Management describes the Disbursement Acceleration Program, which petitioners
associate with NBC No. 541, as "a stimulus package under the Aquino administration designed to fast-track public
spending and push economic growth. This covers high-impact budgetary programs and projects which will be
augmented out of the savings generated during the year and additional revenue sources." 12

According to Secretary Abad, the Disbursement Acceleration Program "is not just about the use of savings and
unprogrammed funds, it is a package of reformed interventions to de-clog processes, improve the absorptive
capacities of agencies and mobilize funds for priority social and economic services." 13

The President explained in the cited 2013 speech that the "stimulus package" was successful in ensuring that
programs delivered the greatest impact in the most efficient manner.  According to the President, the stimulus
14

package’s contribution of 1.3%percentage points to gross domestic product (GDP) growth in the last quarter of 2011
was recognized by the World Bank in one of its quarterly reports. 15

The subject matter of this constitutional challenge is unique. As ably clarified in the ponencia, the DAPis not covered
by National Budget Circular No. 541 alone or by a single legal issuance.  Furthermore, respondents manifested that
16

it has already served its purpose and is no longer being implemented. 17

II

The Disbursement Acceleration Program(DAP) is indeed a label for a fiscal management policy.  Several activities 18

and programs are included within this policy. To implement this policy, several internal memoranda requesting for
the declaration of savings and specific expenditures  as well as the DBM’s National Budget Circular No. 541 were
19

issued. DAP — as a label — served to distinguish the activities of a current administration from other past fiscal
management policies. 20

It is for this reason that we cannot make a declaration of constitutionality or unconstitutionality of the DAP. Petitions
filed with this court should be more specific in the acts of respondents — other than the promulgation of policy and
rules — alleged to have violated the Constitution.  Judicial review should not be wielded pursuant to political
21

motives; rather, it is a discretion that should be wielded with deliberation, care, and caution. Our pronouncements
should be narrowly tailored to the facts of the case to ensure that we do not unduly transgress into the province of
the other departments.  Ex facto jus oritur. Law arises only from facts.
22

III

We also run into several technical problems that can cause inadvisable precedents should we proceed to make
declarations on DBM NBC No. 541 alone.

First, this circular is addressed to agencies and meant to define the procedures for adopting and achieving
operational efficiency in government.  Hence, it is a set of rules internal to the executive. Our jurisdiction begins only
23

when these rules are the basis for actual expenditure of funds. Even so, the petitions that were filed with us should
specify which expenditures should be appraised in relation to existing law and the Constitution. 24

Second, there are laudable provisions in this circular that are not subject to controversy. These include the
exhortation that government agencies should effectively and efficiently use their funds within the soonest possible
time so that they become relevant to the purposes for which they had been allotted.  To declare the whole of the
25

circular unconstitutional confuses and detracts from the constitutional commitment that we should use our power of
judicial review cautiously and effectively. We have to wield our powers deliberately but with precision. Narrowly
tailored constitutional doctrines are better guides to future behavior. These doctrines will not stifle innovative and
creative approaches to good governance.

Third, on its face, the circular covers only appropriations in fiscal years 2011 and 2012.  However, from the
26

"evidence packets" which were submitted by the Solicitor General, there were expenditures pertaining to the DAP

494
even after the expiration of the circular. Any blanket declaration of constitutionality of this circular, therefore, will be
misdirected.

IV

In the spirit of deliberate precision, I agree with the ponencia’s efforts to clearly demarcate the discretion granted by
the Constitution to the legislature and the executive. I add some qualifications.

The budget process in the ponencia is descriptive,  not normative. That is, it reflects what is happening. It should
27

not be taken as our agreement that the present process is fully compliant with the Constitution.

For instance, I am of the firm view that the treatment of departments and offices granted fiscal autonomy should be
different.  Levels of fiscal autonomy among various constitutional organs can be different.
28 29

For example, the constitutional protection granted to the judiciary is such that its budget cannot be diminished below
the amount appropriated during the previous year.  Yet, we submit our items for expenditure to the executive
30

through the DBM year in and year out. This should be only for advice and accountability; not for approval.

In the proper case, we should declare that this constitutional provision on fiscal autonomy means that the budget for
the judiciary should be a lump sum corresponding to the amount appropriated during the previous year.  This may 31

mean that as a proportion of the national budget and in its absolute amount, the judiciary’s budget cannot be
reduced. Any additional appropriation for the judiciary should cover only new items for amounts greater than what
have already been constitutionally appropriated. Public accountability on our expenditures will be achieved through
a resolution of the Supreme Court En Banc detailing the items for expenditure corresponding to that amount.

The ponencia may inadvertently marginalize this possible view of how the Constitution requires the judiciary’s
budget to be prepared. It will also make it difficult for us to further define fiscal autonomy as constitutionally or legally
mandated for the other constitutional offices.

With respect to the discretions in relation to budget execution: The legislature has the power to authorize a
maximum amount to spend per item,  and the executive has the power to spend for the item up to the amount
32

limited in the appropriations act.  The metaphor that Congress has "the power of the purse" does not fully capture
33

this distinction. It only captures part of the dynamic between the executive and the legislature.

Any expenditure beyond the maximum amount provided for the item in the appropriations act is an augmentation of
that item.  It amounts to a transfer of appropriation. This is generally prohibited except for instances when "upon
34

implementation or subsequent evaluation of needed resources, [the appropriation for a program, activity or project
existing in the General Appropriations Act] is determined to be deficient."  In which case, all the conditions provided
35

in Article VI, Section 25 (5) of the Constitution must first be met.

The limits defined in this case only pertain to the power of the President — and by implication, other constitutional
offices — to augment items of appropriation. There is also the power of the President to realign allocations of funds
to another item — without augmenting that item — whenever revenues are insufficient in order to meet the priorities
of government.

The President’s power or discretion to spend up to the limits provided by law is inherent in executive power. It is
essential to his exercise of his constitutional duty to "ensure that the laws be faithfully executed"  and his
36

constitutional prerogative to "have control of all the executive departments." 37

The legislative authority to spend up to a certain amount for a specific item does not mean that the President must
spend that full amount. The President can spend less due to efficiency.  He may also recall any allocation of
38

unobligated funds to control an executive agency.  The expenditure may turn out to be irregular, extravagant,
39

unnecessary, or illegal.  It is always possible that there are contemporary circumstances that would lead to these
40

irregularities that could not have been seen by Congress.

Congress authorizes a budget predicting the needs for an entire fiscal year.  But the President must execute that
41

budget based on the realities that he encounters.

Parenthetically, because of the constitutional principle of independence, the power to spend is also granted to the
judiciary.  The President does not have the discretion to withhold any amount pertaining to the judiciary. The
42

Constitution requires that all appropriations for it shall be "automatically and regularly released."  The President’s
43

power to implement the laws  and the existence of provisions on automatic and regular release of appropriations  of
44 45

independent constitutional branches and bodies support the concept that the President’s discretion to spend up to

495
the amount allowed in the appropriations act inherent in executive power is exclusively for offices within his
department.

VI

Congress appropriates based on projected revenues for the fiscal year.  Not all revenues are available at the
46

beginning of the year. The budget is planned, and the General Appropriations Act (GAA) is enacted, before the
actual generation and collection of government funds. Revenue collection happens all throughout the year. Taxes
and fees, for instance, still need to be generated.

The appropriations act is promulgated, therefore, on the basis of hypothetical revenues of government in the coming
fiscal year. While hypothetical, it is the best educated, economic, and political collective guess of the President and
Congress.

Projected expenditures may not be equal to what will actually be collected. Hence, there is no prohibition from
enacting budgets that may result in a deficit spending. There is no requirement in the Constitution that Congress
pass only balanced budgets. 47

Ever since John Maynard Keynes introduced his theories of macroeconomic accounts, governments have accepted
that a certain degree of deficit spending (more expenditures than income) is acceptable to achieve economic growth
that will also meet the needs of an increasing population.  The dominant economic paradigm is that developmental
48

goals cannot be achieved without economic growth,  i.e., that the amount of products and services available are
49

greater than that measured in the prior years.

Economic growth is dependent on many things.  It is also the result of government expenditures.  The more that the
50 51

government spends, the more that businesses and individuals are able to raise revenues from their transactions
related to these expenditures.  The monies paid to contractors in public infrastructure projects will also be used to
52

allow these contractors to purchase materials and equipment as well as to pay their workers.  These workers will
53

use their income to purchase services and products and so on.  The possibility that value will be used to create
54

more value is what makes the economy grow.

Theoretically, the more the economy grows, the more that government is able to collect in the form of taxes and
fees.

It is necessary for the government to be able to identify the different factors limiting the impact of expenditures on
economic growth.  It is also necessary that it makes the necessary adjustments consistent with the country’s short-
55

term and long-term goals.  The government must be capable of making its own priorities so that resources could be
56

shifted in accordance with the country’s actual needs.

Thus, it makes sense for economic managers to recommend that government expenditures be used efficiently:
Scarce resources must be used for the project that will have the most impact at the soonest time. While Congress
contributes by putting the frame through the Appropriations Act, actual economic impact will be decided by the
executive who attends to present needs.

The executive may aim for better distribution of income among the population or, simply, more efficient ways to build
physical and social infrastructure so that prosperity thrives. Certainly, good economic management on the part of
our government officials means being concerned about projects or activities that do not progress in accordance with
measured expectations. At the beginning of the year or at some regular intervals, the executive should decide on
resource allocations reviewing prior ones so as to achieve the degree of economic efficiency required by good
governance.  These allocations are authorities to start the process of obligation. To obligate means the process of
57

entering into contract for the expenditure of public money. 58

However, disbursement of funds is not automatic upon allocation or allotment. There are procurement laws to
contend with.  Funds are disbursed only after the government enters into a contract, and a notice of cash allocation
59

is issued. 60

At any time before disbursement of funds, the President may again deal with contingencies. Inherent in executive
power is also the necessary power for the President to decide on priorities without violating the law. How and when
the President reviews these priorities are within his discretion. The Constitution should not be viewed with such
awkward academic restrictions that will constrain, in practice, the ability of the President to respond. Constitutional
interpretation may be complex, but it is not unreasonable. It should always be relevant.

Congress has the constitutional authority to determine the maximum levels of expenditures per item in the
budget.  It is not Congress, however, that decides when and how, in fact, the resources are to be actually spent.
61

Congress cannot do so because it is a collective deliberative body designed to create policy through laws.  It cannot
62

and does not implement the law. 63

496
Parenthetically, this was one of the principal reasons why we declared the Priority Development Assistance Fund
(PDAF) as unconstitutional. 64

Since the President attends to realities and decides according to priorities, our constitutional design is to grant him
the flexibility to make these decisions subject to clear legal limitations.

Hence, changes in the allotment of funds are not prohibited transfers of appropriations if these changes are still
consistent with the maximum allowances under the GAA. They are merely manifestations of changing priorities in
the use of funds. They are still in line with the President’s duty to implement the General Appropriations Act.

Thus, if revenues have not been fully collected at a certain time but there is a need to fully spend for an item
authorized in the appropriations act, the President should be able to move the funds from an agency, which is not
effectively and efficiently using its allocation, to another agency. This is the concept of realignment of funds as
differentiated from augmentation of an item.

VII

Realignment of the allocation of funds is different from the concept of augmentation contained in Article VI, Section
25 (5) of the Constitution.

In realignment of allocation of funds, the President, upon recommendation of his subalterns like the Department of
Budget and Management, finds that there is an item in the appropriations act that needs to be funded. However, it
may be that the allocated funds for that targeted item are not sufficient. He, therefore, moves allocations from
another budget item to that item but only to fund the deficiency: that is, the amount needed to fill in so that the
maximum amount authorized to be spent for that item in the appropriations act is actually spent.

The appropriated amount is not increased. It is only filled in order that the item’s purpose can be fully achieved with
the amount provided in the appropriations law. There is no augmentation that happens. In such cases, there is no
need to identify savings. The concept of savings is only constitutionally relevant as a requirement for augmentation
of items. It is the executive who needs to fully and faithfully implement sundry policies contained in many statutes
and needs to decide on priorities, given actual revenues.

The flexibility of realignment is required to allow the President to fully exercise his basic constitutional duty to
faithfully execute the law and to serve the public "with utmost responsibility . . . and efficiency." 65

Unlike in augmentation, which deals with increases in appropriations, realignment involves determining priorities
and deals with allotments without increases in the legislated appropriation. In realignment, therefore, there is no
express or implied amendment of any of the provisions of the Appropriations Act. The actual expenditure is only up
to the amount contained in the law.

For purposes of adapting to the country’s changing needs, the President’s power to realign expenditures necessarily
includes the power to withdraw allocations that were previously made for projects that are not effectively and
efficiently moving or that, in his discretion, are not needed at the present.66

These concepts are implicit in law. Thus, Book VI, Chapter 5, Section 3 of the Administrative Code provides:

Section 3. Declaration of Policy. — It is hereby declared the policy of the State to formulate and implement a
National Budget that is an instrument of national development, reflective of national objectives, strategies and plans.
The budget shall be supportive of and consistent with the socio-economic development plan and shall be oriented
towards the achievement of explicit objectives and expected results, to ensure that funds are utilized and operations
are conducted effectively, economically, and efficiently.(Emphasis supplied)

To set priorities is to favor one project over the other given limited resources available. Thus, there is a possibility
when resources are wanting, that some projects or activities authorized in the General Appropriations Act may be
suspended.

Justice Carpio’s interpretation of Section 38, Chapter 5, Book VI of the Administrative Code is that the power to
suspend can only be exercised by the President for appropriated funds that were obligated.  If the funds were
67

appropriated but not obligated, the power to suspend under Section 38 is not available.  Justice Carpio reasons that
68

to allow the President to suspend or stop the expenditure of unobligated funds is equivalent to giving the President
the power of impoundment.  If, in the opinion of the President, there are unsound appropriations in the proposed
69

General Appropriations Act, he is allowed to exercise his line item veto power.  Once the GAA is enacted into law,
70

the President is bound to faithfully execute its provisions.71

I disagree.

497
When there are reasons apparent to the President at the time when the General Appropriations Act is submitted for
approval, then he can use his line item veto. However, at a time when he executes his priorities, suspension of
projects is a valid legal remedy.

Suspension is not impoundment. Besides, the prohibition against impoundment is not yet constitutional doctrine.

It is true that the General Appropriations Act provides for impoundment.  Philconsa v. Enriquez  declined to rule on
72 73

its constitutional validity.  Until a ripe and actual case, its constitutional contours have yet to be determined.
74

Certainly, there has been no specific expenditure under the umbrella of the Disbursement Allocation Program
alleged in the petition and properly traversed by respondents that would allow us the proper factual framework to
delve into this issue. Any definitive pronouncement on impoundment as constitutional doctrine will be premature,
advisory, and, therefore, beyond the province of review in these cases. 75

Impoundment is not mentioned in the Constitution. At best, it can be derived either from the requirement for the
President to faithfully execute the laws with reference to the General Appropriations Act.  Alternatively, it can be
76

implied as a limitation imposed by the legislature in relation to the preparation of a budget. The constitutional
authority that will serve as the standpoint to carve out doctrine, thus, is not yet clear.

To be constitutionally sound doctrine, impoundment should refer to a willful and malicious withholding of funds for a
legally mandated and funded project or activity. The difficulty in making broad academic pronouncements is that
there may be instances where it is necessary that some items in the appropriations act be unfunded.

The President, not Congress, decides priorities when actual revenue collections during a fiscal year are not
sufficient to fund all authorized expenditures. In doing so, the President may have to leave some items with partial or
no funding. Making priorities for spending is inherently a discretion within the province of the executive. Without
priorities, no legal mandate may be fulfilled. It may be that refusing to fund a project in deficit situations is what is
needed to faithfully execute the other mandates provided in law. In such cases, attempting to partially fund all
projects may result in none being implemented.

Of course, even if there is a deficit, impoundment may exist if there is evidence of willful and malicious conduct on
the part of the executive to withdraw funding from a specific item other than to make priorities. Whether that situation
is present in the cases at bar is not clear. It has neither been pleaded nor proven. The contrary has not been
asserted by petitioners. They have filed broad petitions unarmed with the specifics of each of the expenditures.
They have also failed to traverse the "evidence packets" presented by respondents.

Impoundment, as a constitutional doctrine, therefore, becomes clear and salient under conditions of surpluses; that
is, that the revenue actually collected and available exceeds the expenditures that have been authorized. Again, this
situation has neither been pleaded nor proven.

Justice Carpio highlights Prof. Laurence Tribe’s position on impoundment.  While I have the highest admiration for
77

Laurence Tribe as constitutional law professor, I understand that his dissertation is on American Constitutional Law.
I maintain the view that the decisions of the United States Supreme Court and the analysis of their observers are not
part of our legal order. They may enlighten us or challenge our heuristic frames in our reading of our own
Constitution. But, in no case should we capitulate to them by implying that they are binding precedent. To do so
would be to undermine our own sovereignty. Thus, with due respect to Justice Carpio’s views, the discussions in
Philconsa v. Enriquez  could not have been rendered outdated by US Supreme Court decisions. They can only be
78

outdated by the discussions and pronouncements of this court.

VIII

Of course, there are instances when the President must mandatorily withhold allocations and even suspend
expenditure in an obligated item. This is in accordance with the concept of "fiscal responsibility": a duty imposed on
heads of agencies and other government officials with authority over the finances of their respective agencies.

Section 25 (1) of Presidential Decree No. 1445,  which defines the powers of the Commission on Audit, states:
79

Section 25. Statement of Objectives. –

. . . . (1) To determine whether or not the fiscal responsibility that rests directly with the head of the government
agency has been properly and effectively discharged; . . . .

This was reiterated in Volume I, Book 1, Chapter 2, Section 13 of the Government Accounting and Auditing
Manual, which states:
80

498
Section 13. The Commission and the fiscal responsibility of agency heads. – One primary objective of the
Commission is to determine whether or not the fiscal responsibility that rests directly with the head of the
government agency has been properly and effectively discharged.

The head of an agency and all those who exercise authority over the financial affairs, transaction, and operations of
the agency, shall take care of the management and utilization of government resources in accordance with law and
regulations, and safeguarded against loss or wastage to ensure efficient, economical, and effect operations of the
government.

Included in fiscal responsibility is the duty to prevent irregular, unnecessary, excessive, or extravagant expenses.
Thus:

Section 33. Prevention of irregular, unnecessary, excessive, or extravagant expenditures of funds or uses of
property; power to disallow such expenditures. The Commission shall promulgate such auditing and accounting
rules and regulations as shall prevent irregular, unnecessary, excessive, or extravagant expenditures or uses of
government funds or property.

The provision authorizes the Commission on Audit to promulgate rules and regulations. But, this provision also
guides all other government agencies not to make any expenditure that is "irregular, unnecessary, excessive, or
extravagant."  The President should be able to prevent unconstitutional or illegal expenditure based on any
81

allocation or obligation of government funds.

Volume I, Book III, Title3, Article 2 of the Government Accounting and Auditing Manual defines irregular,
unnecessary, excessive, extravagant, and unconscionable expenditures as:

Section 162. Irregular expenditures.– The term "irregular expenditure" signifies an expenditure incurred without
adhering to established rules, regulations, procedural guidelines, policies, principles or practices that have gained
recognition in law. Irregular expenditures are incurred without conforming with prescribed usages and rules of
discipline. There is no observance of an established pattern, course, mode of action, behavior, or conduct in the
incurrence of an irregular expenditure. A transaction conducted in a manner that deviates or departs from, or which
does not comply with standards set, is deemed irregular. An anomalous transaction which fails to follow or violate
appropriate rules of procedure is likewise irregular. Irregular expenditures are different from illegal expenditures
since the latter would pertain to expenses incurred in violation of the law whereas the former in violation of
applicable rules and regulations other than the law.

Section 163. Unnecessary expenditures.– The term "unnecessary expenditures" pertains to expenditures which
could not pass the test of prudence or the obligations of a good father of a family, thereby non-responsiveness to
the exigencies of the service. Unnecessary expenditures are those not supportive of the implementation of the
objectives and mission of the agency relative to the nature of its operation. This could also include incurrence of
expenditure not dictated by the demands of good government, and those the utility of which cannot be ascertained
at a specific time. An expenditure that is not essential or that which can be dispensed with without loss or damage to
property is considered unnecessary. The mission and thrusts of the agency incurring the expenditure must be
considered in determining whether or not the expenditure is necessary.

Section 164. Excessive expenditures.– The term "excessive expenditures" signifies unreasonable expense or
expenses incurred at an immoderate quantity or exorbitant price. It also includes expenses which exceed what is
usual or proper as well as expenses which are unreasonably high, and beyond just measure or amount. They also
include expenses in excess of reasonable limits.

Section 165. Extravagant expenditures.– The term "extravagant expenditures" signifies those incurred without
restraint, judiciousness and economy. Extravagant expenditures exceed the bounds of propriety. These
expenditures are immoderate, prodigal, lavish, luxurious, wasteful, grossly excessive, and injudicious.

Section 166. Unconscionable expenditures.– The term "unconscionable expenditures" signifies expenses without a
knowledge or sense of what is right, reasonable and just and not guided or restrained by conscience. These are
unreasonable and immoderate expenses incurred in violation of ethics and morality by one who does not have any
feeling of guilt for the violation.

These are sufficient guidelines for government officials and heads of agencies to determine whether a particular
program, activity, project, or any other act that involves the expenditure of government funds should be approved or
not.

The constitutional framework outlined and the cited statutory provisions should be the context for interpreting
Section 38, Chapter 5, Book VI of the Administrative Code:

499
Section 38. Suspension of Expenditure of Appropriations. — Except as otherwise provided in the General
Appropriations Act and whenever in his judgment the public interest so requires, the President, upon notice to the
head of office concerned, is authorized to suspend or otherwise stop further expenditure of funds allotted for any
agency, or any other expenditure authorized in the General Appropriations Act, except for personal services
appropriations used for permanent officials and employees.

The General Appropriations Act for Fiscal Years 2011, 2012, and 2013 also uniformly provide: [S]avings refer to
portions or balances of any programmed appropriation in this Act free from any obligation or encumbrance which
are (i) still available after the completion or final discontinuance or abandonment of the work, activity or purpose for
which the appropriation is authorized; (ii) from appropriations balances arising from unpaid compensation and
related costs pertaining to vacant positions and leaves of absence without pay; and (iii) from appropriations
balances realized from the implementation of measures resulting in improved systems and efficiencies and thus
enabled agencies to meet and deliver the required or planned targets, programs and services approved in this Act
at a lesser cost.

The President can withhold allocations from items that he deems will be "irregular, unnecessary, excessive or
extravagant."  Viewed in another way, should the President be confronted with an expenditure that is clearly
82

"irregular, unnecessary, excessive or extravagant,"  it may be an abuse of discretion for him not to withdraw the
83

allotment or withhold or suspend the expenditure

For purposes of augmenting items — as opposed to realigning funds — the President should be able to treat such
amounts resulting from otherwise "irregular, unnecessary, excessive or extravagant" expenditures as savings.

IX The Constitution mentions "savings" in Article VI, Section 25 (5) in relation to the power of the heads of
government branches and constitutional commissions to augment items in their appropriations. Thus: Sec. 25.

....

5. No law shall be passed authorizing any transfer of appropriations; however, the President, the President of the
Senate, the Speaker of the House of Representatives, the Chief Justice of the Supreme Court, and the heads of
Constitutional Commissions may, by law, be authorized to augment any item in the general appropriations law for
their respective offices from savings in other items of their respective appropriations.

....

The existence of savings in one item is a fundamental constitutional requirement for augmentation of another
item. Augmentation modifies the maximum amount provided in the General Appropriations Act appropriated for an
84

item by way of increasing such amount.  The power to augment items allows heads of government branches and
85

constitutional commissions to exceed the limitations imposed on their appropriations, through their savings, to meet
the difference between the actual and authorized allotments. 86

The law provides for the definition of savings. The law mentioned in Article VI, Section 25 (5) refers not only to the
General Appropriations Act’s general provisions but also to other statutes such as the Administrative Code and the
Auditing Code contained in Presidential Decree No. 1445.

The clause in the General Appropriations Act for Fiscal Years 2011, 2012, and 2013, subject to our interpretation for
purposes of determination of savings, is as follows:

[S]avings refer to portions or balances of any programmed appropriation in this Act free from any obligation or
encumbrances which are (i) still available after the completion or final discontinuance or abandonment of the work,
activity or purpose for which the appropriation is authorized. . . . 87

The ponencia,  Justice Antonio Carpio,  Justice Arturo Brion,  and Justice Estela Perlas-Bernabe  drew attention to
88 89 90 91

this GAA provision that qualified "savings" as "free from any obligation or encumbrances." The phrase, "free from
any obligation or encumbrances," however, provides for three situations namely: (1) completion; (2) final
discontinuance; or (3) abandonment. The existence of any of these three situations should constitute an
appropriation as free from obligation.

These words are separated by "or" as a conjunctive. Thus, "final discontinuance" should be given a meaning that is
different from "abandonment."

The only logical reading in relation to the other provisions of law is that "abandonment" may be discontinuance in
progress. This means that a project is temporarily stopped because to continue would mean to spend in a manner
that is "irregular, unnecessary, excessive or extravagant." When the project is remedied to prevent the irregularity in
these expenditures, then the project can further be funded. When the project is not remedied, then the executive
declares a "final discontinuance" of the project.

500
In these cases, it makes sense for the President to withdraw or withhold allocation or further obligation of the funds.
It is in this light that the Administrative Code provides that the President may suspend work or the entire program
when, based on his judgment, public interest requires it. 92

To further comply with the duty to use funds "effectively, economically and efficiently,"  the President should be able
93

to realign or reallocate these funds. The allocations withdrawn for any of these purposes should be available either
for realignment or as savings to augment certain appropriation items.

National Budget Circular No. 541 was issued because of the executive’s concern about the number of "slow-moving
projects."  The slow pace of implementation may have been due to irregularities or illegalities. It could be that it was
94

due to inefficiencies, or it could be that there were simply projects which the executive refused to implement.

There are other species of legitimate savings for purposes of augmentation of appropriation items that justify
withdrawal of allocations.

"Final discontinuance" or "abandonment" can occur when, even with the exercise of good faith by officials of the
executive departments, there are unforeseen events that make it improbable to complete the procurement and
obligation of an item within the time period allowed in the relevant General Appropriations Act.

DBM NBC No. 541 provides an implicit deadline of June 30, 2012 for unobligated but allocated items.  There is a
95

mechanism of consultation with the agencies concerned.  For instance, the 5th Evidence Packet submitted by the
96

Office of the Solicitor General shows a copy of Department of Transportation and Communication Secretary Joseph
Abaya’s letter to the Department of Budget and Management, recommending withdrawal of funds from certain
projects,  which they were having difficulties in implementing.
97 98

In Section 5.4 of Circular No. 541, the bases for the deadline are:

5.4.1 The departments/agencies’ approved priority programs and projects are assumed to be implementation ready
and doable during the given fiscal year; and

5.4.2 The practice of having substantial carry over appropriations may imply that the agency has a slower than-
programmed implementation capacity or agency tends to implant projects within a two-year timeframe.

These assumptions as well as the determination of a deadline are consistent with the President’s power to control
"all the executive departments, bureaus and offices."  It is also within the scope of his power to fully and faithfully
99

execute laws. Judicial review of the deadline as well as its policy basis will only be possible if there is a clear and
convincing showing by a petitioner that grave abuse of discretion is present. Generally, the nature of the
expenditure, the time left to procure, and the efforts both of the agency concerned and the Department of Budget
and Management to meet the obstacles to meet the procurement plans would be relevant. But in most instances,
this is really a matter left to the judgment of the President.

To this extent, I disagree with the proposal of Justice Carpio on our declaration of the timelines for purposes of
determining when there can be savings. Justice Carpio is of the view that there is a need to declare as
unconstitutional:

Disbursements of unobligated allotments for Capital Outlay as savings and their realignment to other items in the
GAA, prior to the last two months of the fiscal year if the period to obligate is one year, or prior to the last two
months of the second year if the period to obligate is two years. 100

It is not within the scope of our powers to insist on a specific time period for all expenditures given the nuances of
executing a budget. To so hold would be to impinge on the ability of the President to execute laws and exercise his
control over all executive departments.

XI

Article VI, Section 25 (5) requires that for any augmentation to be valid, it must be for an existing item. Furthermore,
with respect to the President, the augmentation may only be for items within the executive department. 101

The power to augment under this provision is qualified by the words, "respective offices." This means that the
President and the other officials enumerated can only augment items within their departments. In other words,
augmentation of items is allowed provided that the source department and the recipient department are the same.

Transfer of funds from one department to other departments had already been declared as unconstitutional in
Demetria v. Alba.  Moreover, a corollary to our pronouncement in Gonzales v. Macaraig, Jr.  that "[t]he doctrine of
102 103

501
separation of powers is in no way endangered because the transfer is made within a department (or branch of
government) and not from one department (branch) to another"  is that transfers across departments are
104

unconstitutional for being violative of the doctrine of separation of powers.

There are admissions in the entries contained in the evidence packets that presumptively show that there have
been at least two (2) instances of augmentation by the executive of items outside its department.  If these are
105

indeed validated upon the proper audit to have been actually expended, then such acts are unconstitutional.

The Solicitor General suggests that we stay our hand to declare these transfers as unconstitutional since the
Congress has acquiesced to these transfers of funds and have not prohibited them in the next budget
period.  Alternatively, respondents also suggest that the transfers were necessary because of contingencies or for
106

interdepartmental cooperation. 107

Acquiescence of an unconstitutional act by one department of government can never be a justification for this court
not to do its constitutional duty.  The Constitution will fail to provide for the neutrality and predictability inherent in a
108

society thriving within the auspices of the rule of law if this court fails to act in the face of an actual violation. The
interpretation of the other departments of government of their powers under the Constitution may be persuasive on
us,  but it is our collective reading which is final. The constitutional order cannot exist with acquiescence as
109

suggested by respondents.

Furthermore, the residual powers of the President exist only when there are plainly ambiguous statements in the
Constitution. If there are instances that require more funds for a specific item outside the executive agencies, a
request for supplemental appropriation may be made with Congress. Interdependence is not proscribed but must
happen in the context of the rule of law. No exigent circumstances were presented that could lead to a clear and
convincing explanation why this constitutional fiat should not be followed.

XII

Definitely, Section 5.7.3 of DBM NBC No. 541 is not an ideal example of good rule writing. By this provision,
withdrawn allotments may be:

5.7.3 Used to augment existing programs and projects of any agency and to fund priority programs and projects not
considered in the 2012 budget but expected to be started or implemented during the current year.

This provision is too broad. It appears to sanction the unconstitutional act of augmenting a non-existing item in the
general appropriations acts (GAAs) or any supplemental appropriations law.

The Solicitor General suggests that this provision should be read broadly so as to skirt any constitutional infirmity,
thus:

76. Paragraph 5.7.3 of NBC No. 541 makes no mention of items or appropriations. Instead, it refers to ‘. . .existing
programs and projects of any agency and . . . priority programs and projects not considered in the 2012 budget but
expected to be started or implemented during the current year.’ On questioning from the Chief Justice, respondents
submitted that ‘programs and projects’ do not refer to items of appropriation (as they appear in the GAA) but to
specific activities, the specific details and particular justifications for which may not have been considered by
Congress, but are necessarily included in the broad terms used in the GAA. Activities need not be enumerated for
consideration of Congress, as they are already encapsulated in the broader terms ‘programs’ or ‘projects’. This finds
statutory support in the Revised Administrative Code which defines ‘programs’ as ‘functions and activities for the
performance of a major purpose for which a government agency is established’ and ‘project’ as a ‘component of a
program covering a homogenous group of activities that results in the accomplishment of an identifiable output.’ 110

Every presumption in interpreting a provision of law should indeed be granted so as to allow constitutionality in any
provision in law or regulation.  This presumption applies to facial reviews of provisions. However, it is unavailing in
111

the face of actual facts that clearly and convincingly show a breach of the constitutional provision. Such facts must
be established through the rules of evidence. The Solicitor General himself submitted "evidence packets" which
admit projects benefiting from the DAP.  Based on respondent’s allegations, the projects have "appropriations
112

cover." Petitioners were unable to refute these allegations. Perhaps, it was because it was the first time that they
113

encountered this full accounting of the DAP.

In my view, it is not in this petition for certiorari and prohibition that the proper traverse of factual allegations can be
done. We cannot go beyond guidance that any allocation — or augmentation — for an activity not covered by any
item in any appropriation act is both unconstitutional and illegal.

XIII

502
I agree with the assessment on the constitutionality of using unprogrammed funds as appropriations cover.  An 114

increase in the dividends coming from government financial institutions and government owned and -controlled
corporations is not the condition precedent for using revenues for items allowed to be funded from unplanned
revenues. The provisions of the General Appropriations Act clearly provide that the actual revenues exceed the
projected revenues presented and used in the approval of the current law. 115

I agree with Justice Bernabe’s views relating to the pooling of funds.  There are many laudable intentions in the
116

Disbursement Acceleration Program (DAP). But its major problem lies in the concept of pooled funds. That is, that
there is a lump sum from various sources used both to realign allocation and to augment appropriations items. It is
unclear whether augmentation of one item is done with funds that are legitimately savings from another. It is difficult
to assess each and every source as well as whether each and every expenditure has appropriations cover.

It would have been better if the executive just augmented an item and was clear about its source for savings. What
happened was that there was an intermediary mechanism of commingling and pooling funds. Thus, there was the
confusion as to whether DAP was the source or ultimately only the mechanism to create savings. Besides, access
to information, clarity, and simplicity of governmental acts can ensure public accountability. When the information
cannot be accessed freely or when access is too sophisticated, public doubt will not be far behind.

In view of this, I, therefore, agree to lay down the basic principles in the fallo of our decision so that the expenditures
can be properly audited.

XIV

Thus, there are factual issues that need to be determined before some or all of the  projects  contained in the
116 117

evidence packets admitted by respondents to have benefitted from the DAP can be nullified:

First, whether the transfers of funds were in the nature of realignment of allocations or augmentation of
items;

Second, whether the withdrawal of allocations, under the circumstances and considering the nature of the
work, activity, or project, was consistent with the definition of savings in the General Appropriations Act, the
Administrative Code, and the Auditing Code;

Third, whether the transfer of allotments and the corresponding expenditures were proper augmentations of
existing items;

Fourth, whether there were actual expenditures from savings that amounted to augmentation of items
outside the executive;

Fifth, whether there were actual expenditures justified with unprogrammed funds as the appropriations
cover.

The accounts submitted by the Solicitor General should be assessed and audited in a proper proceeding that will
allow those involved to traverse the factual issues, thereby ensuring all parties a full opportunity to be heard. The
116 projects claimed as part of the Disbursement Allocation Program (DAP) were not alleged by petitioners but were
raised as part of the oral arguments of respondents. The details of each project need to be further examined. Each
of the expenditure involved in every project may, therefore, be the subject of more appropriate procedure such as a
special audit by the Commission on Audit or the proper case filed by any interested party to nullify any specific
transfer based on evidence that they can present.

XV

The general rule is that a declaration of unconstitutionality of any act means that such act has no legal existence: It
is null and void ab initio.
118

The existing exception is the doctrine of operative facts. The application of this doctrine should, however, be limited
to situations where (a) there is a showing of good faith in the acts involved or (b) where in equity we find that the
difficulties that will be borne by the public far outweigh rigid application to the effect of legal nullity of an act.

The doctrine saves only the effects of the unconstitutional act. It does not hint or even determine whether there can
be any liability arising from such acts. Whether the constitutional violation is in good faith or in bad faith, or whether
any administrative or criminal liability is forthcoming, is the subject of other proceedings in other forums.

Likewise, to rule that a declaration of unconstitutionality per se is the basis for determining liability is a dangerous
proposition. It is not proper that there are suggestions of administrative or criminal liability even before the proper
charges are raised, investigated, and filed.
503
Any discussion on good faith or bad faith is, thus, premature. But, in our jurisdiction, the presumption of good faith is
a universal one. It assures the fundamental requisites of due process and fairness. It frames a judicial attitude that
requires us to be impartial.

Certiorari and prohibition as remedies are, thus, unavailing for these questions where the factual conditions per
expense item cannot be convincingly established and where the regulations have become moot and academic. This
is definitely not the proper case to assess the effects of each of the 116 projects under the DAP.

Our decision today should not be misinterpreted as authority to undo infrastructure built or expenditures made under
the DAP. Nor should it be immediately used as basis for saying that any or all officials or beneficiaries are either
liable or not liable. Each expenditure must be audited in accordance with our ruling.

FINAL NOTE

Cases invested with popular and contemporary political interest are difficult. Sustained public focus is assured
because of the effect of this decision on the current balance of political power. It makes for good stories both in
traditional and social media. The public’s interest can be captivated because the protagonists live in the here and
now.

In the efforts to win over an audience, there are a few misguided elements who offer unverified and illicit peeks into
our deliberations. Since they do not sit in our chamber, they provide snapshots culled from disjointed clues and
conversations. Some simply move to speculation on the basis of their simplified and false view of what motivates
our judgments. We are not beholden to the powers that appoint us. There are no factions in this court. Unjustified
rumors are fanned by minds that lack the ability to appreciate the complexity of our realities. This minority assumes
that their stories or opinions will be well-received by the public as they imagine it to be. Those who peddle
stereotypes and prejudice fail to see the Filipino as they are. They should follow the example of many serious media
practitioners and opinion leaders who help our people as they engage in serious and deep analytical discussion of
public issues in all forms of public media.

The justices of this court are duty-bound to deliberate. This means that we are all open to listening to the views of
others. It is possible that we take tentative positions to be refined in the crucible of collegial discussion and candid
debate. We benefit from the views of others: each one shining their bright lights on our own views as we search for
disposition of cases that will be most relevant to our people.

We decide based on the actual facts in the cases before us as well as our understanding of the law and our role in
the constitutional order. We are aware of the heavy responsibilities that we bear. Our decisions will guide and affect
the future of our people, not simply those of our public officials.

DAP is a management program that appears to have had been impelled with good motives. It generally sought to
bring government to the people in the most efficient and effective manner. I entertain no doubt that not a few
communities have been inspired or benefited from the implementation of many of these projects.

A government of the people needs to be efficient and effective. Government has to find ways to cause change in the
lives of people who have lived in our society’s margins: whether this be through well thought out infrastructure or a
more egalitarian business environment or addressing social services or ensuring that just peace exists. The amount
and timing of funding these activities, projects, or programs are critical.

But, the frailty of the human being is that our passion for results might blind us from the abuses that can occur. In
the desire to meet social goals urgently, processes that similarly congeal our fundamental values may have been
overlooked. After all, "daang matuwid" is not simply a goal but more importantly, the auspicious way to get to that
destination.

The Constitution and our laws are not obstacles to be hurdled. They assure that the best for our people can be done
in the right way. In my view, the Constitution is a necessary document containing our fundamental norms and values
that assure our people that this government will be theirs and will always be accountable to them. It is to that faith
that we have taken our oaths. It is in keeping with that faith that we discharge our duties.

We can do no less.

ACCORDINGLY, for guidance of the bench and bar, I vote to declare the following acts and practices under the
Disbursement Acceleration Program (DAP); National Budget Circular No. 541 dated July 18, 2012; and related
executive issuances as unconstitutional:

(a) any implementation of Section 5. 7 .3 insofar as it relates to activities not related to any existing
appropriation item even if in anticipation of future projects;

504
 (b) any augmentation by the President of items appropriated for offices outside the executive branch; (c) any
augmentation of any item, even within the executive department, which is sourced from funds withdrawn
from activities which have not yet been (1) completed, (2) finally discontinued, or (3) abandoned; and

(d) any use of unprogrammed funds without all the conditions in the General Appropriations Act being
present.

Let a copy of this decision be served on all the other officers covered in Article VI, Section 25 ( 5) of the 1987
Constitution for their guidance.

The evidence packets submitted by respondents should also be transmitted to the Commission on Audit for their
appropriate action.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 172204               July 2, 2014

CATHAY METAL CORPORATION, Petitioner, 

vs.
LAGUNA WEST MULTI-PURPOSE COOPERATIVE, INC., Respondent.

DECISION

LEONEN, J.:

The Rules of Court governs court procedures, including the rules on service of notices and summons. The
Cooperative Code p~ovisions on notices cannot replace the rules on summons under the Rules of Court. Rule 14,
Section 11 of the Rules of Court provides an-exclusive enumeration of the persons authorized to receive summons
for juridical entities. These persons are the juridical entity's president, managing partner, general manager,
corporate secretary, treasurer, or in-house counsel.

This petition under Rule45 assails the Court of Appeals’ decision dated November 25, 2005, and its resolution dated
April 5, 2006. The Court of Appeals remanded the case to the trial court for respondent’s presentation of evidence.

Respondent Laguna West Multi-Purpose Cooperative is a cooperative recognized under Republic Act No. 6657 or
the Comprehensive Agrarian Reform Law.  It allegedly entered into a joint venture agreement with farmer-
1

beneficiaries through Certificates of Land Ownership Award (CLOA) in Silang, Cavite.  While respondent was
2

negotiating with the farmer-beneficiaries, petitioner CathayMetal Corporation entered into Irrevocable Exclusive
Right to Buy (IERB) contracts with the same farmerbeneficiaries.  Under the IERB, the farmer-beneficiaries
3

committed themselves to sell to petitioner their agricultural properties upon conversion to industrial or commercial
properties or upon expiration of the period of prohibition from transferringtitle to the properties.
4

In 1996, respondent caused the annotation of its adverse claim on the farmer-beneficiaries’ certificates of title. 5

505
On November 9, 1998, the Department of Agrarian Reform issued an order converting the properties from
agricultural to mixed use. 6

In 1999, petitioner and the farmer-beneficiaries executed contracts of sale of the properties.  Transfer certificates of 7

titlewere also issued in the name of petitioner in the same year.  The annotations in the original titles were copied to
8

petitioner's titles.
9

Respondent’s Vice-President, Orlando dela Peña, sent two letters dated March 20, 2000 and April 12, 2000 to
petitioner, informing it of respondent’s claim to the properties.  Petitioner did not respond.
10 11

On September 15, 2000,petitioner filed a consolidated petition for cancellation of adverse claims on its transfer
certificates of title with the Regional Trial Court of Tagaytay City.  It served a copy of the petition by registered mail
12

to respondent's alleged official address at "Barangay Mayapa, Calamba, Laguna."  The petition was returned to 13

sender because respondent could not be found at that address.  The postman issued a certification stating that the
14

reason for the return was that the "cooperative [was] not existing."  Petitioner allegedly attempted to serve the
15

petition upon respondent personally.  However, this service failed for the same reason.
16 17

Upon petitioner's motion, the Regional Trial Court issued an order on December 15, 2000 declaring petitioner’s
substituted service, apparently by registered mail,  to have been effected,  thus:
18 19

Acting on the "Manifestation And Motion For Substituted Service" filed by petitioner Cathay Metal Corporation, thru
counsel, and finding the reasons therein statedto be meritorious, the same is hereby GRANTED.

Accordingly, this Court hereby declares that substituted service of the Consolidated Petition for Cancellation of
Adverse Claim on the President of Laguna West Multi-Purpose Cooperative, Inc. has been effected. The latter
ishereby given a period of fifteen (15) days from the delivery of said pleadings to the Clerk of Court within which to
file their opposition to the Consolidated petition for cancellation of adverse claim. 20

Petitioner was later allowed to present its evidence ex parte. 21

Upon learning that a case involvingits adverse claim was pending, respondent, through Mr. Orlando dela Peña, filed
a manifestation and motion, alleging that respondent never received a copy of the summons and the petition.  It 22

moved for the service of the summons and for a copy of the petition to be sent to No. 160, Narra Avenue, Looc,
Calamba, Laguna. 23

The Regional Trial Court granted respondent's manifestation and motion on March 16, 2001.  It ordered that 24

respondent be furnished with a copy of the petition at its new address. 25

Instead of furnishing respondent with a copy of the petition, petitioner filed on April 16, 2001 a motion for
reconsideration of the March 16, 2001 Regional Trial Court order.  In its motion for reconsideration, petitioner
26

argued that the case was already submitted for decision after all of petitioner’s evidence had been admitted, and a
memorandum had been filed.  Therefore, it was too late for respondent to ask the court that it be furnished with a
27

copy of the petition.  Moreover, because respondent was already in default, a manifestation and motion, without
28

allegations of grounds for a motion to lift order of default, would not give it personality to participate in the
proceedings.  Petitioner sent a copy of the motion for reconsideration to respondent by registered mail and set the
29

motion for hearing on April 20, 2001.  Respondent failed to appear atthe hearing on the motion for reconsideration.
30

On April 20, 2001, the Regional Trial Court submitted the motion for resolution. 31

Respondent received a copy of the motion for reconsideration after the hearing. On August 13, 2001, respondent
filed a motion for leave to admit attached opposition  and opposition to petitioner’s motion for reconsideration of the
32

March 16,2001 Regional Trial Court order.  Respondent argued that since petitioner’s ex parte presentation of
33

evidence was secured through extrinsic fraud, there should be a new trial to give respondent a fair day in court. This 34

was opposed by petitioner on September 6, 2001.  Petitioner emphasized its alleged compliance with the
35

Cooperative Code rule on notices and respondent’s failure to file its comment despite the court’s order that
approved petitioner’s substituted service.  Petitioner further pointed out that it had always questioned the authority
36

of Mr. dela Peñato act for respondent. 37

On January 16, 2003, the Regional Trial Court granted petitioner's motion for reconsideration.  It found that 38

respondent's alleged representatives failed to prove their authorities to represent respondent.  It ruled that service 39

should be made to the address indicated in its Cooperative Development Authority Certificate of Registration.  The 40

case was declared submitted for decision. 41

Respondent filed a motion for reconsideration of the January 16, 2003 order of the Regional Trial Court. 42

On March 21, 2003, the Regional Trial Court issued a decision granting petitioner’s petition for cancellation of
annotations.  The Register of Deeds of Cavite was ordered to cancel the annotations onthe certificates of title.
43 44

506
On April 3, 2003, the Regional Trial Court issued an order  rescinding its March 21, 2003 decision for having been
45

prematurely rendered, thus:

This is regard to the Decision dated March 21, 2003 which the Court has rendered in this particular case.

A review of the records show that the court for reasons unexplained, has committed an error in judgment in
rendering said decision unmindful of the fact thatthere is still a pending incident (Oppositor Laguna’s Motion for
Reconsideration) which has first to be resolved.

Fully aware that the error if allowed to remain unrectified would cause a grave injustice and deeply prejudiced [sic]
the herein respondent, the Court, faithfully adhering to the principle enunciated by the Honorable Supreme Court in
the case of Astraquilio vs Javier, 13 CRA 125 which provides that:

"It is one of the inherent powers of the court to amend and control its process and orders so as to make them
conformable to law and justice. This power includes the right to reverse itself, especially when in its opinion it has
committed an error or mistake in judgment, and that to adhere to its decision will cause injustice to a party litigant."

do hereby, with deep and sincere apologies to the party-litigants, more particularly to the herein respondent Laguna
West Multi-Purpose Cooperative, Inc., RECALL and RESCIND its Decision which was prematurely rendered. 46

In an order dated May 26, 2003, the Regional Trial Court denied respondent’s motion for reconsideration of the
January 16, 2003 order. 47

On June 23, 2003, the Regional Trial Court decided to grant  petitioner's petition for cancellation of annotation on
48

the basis of the following facts: 49

. . . These annotations were subsequently copied to the Transfer Certificates of Titles over the parcels of land
subject of this suit that were issued in the name of Cathay. . . . Upon verification, Cathay found that Laguna did not
file any claim against the farmer-beneficiaries or Cathay since the time the annotations were made. . . . Moreover,
affidavits of adverse claim and supporting documents that Laguna supposedly submitted to the Register of Deeds of
Cavite were certified bythe Register of Deeds to be inexistent in the registry's vault. . . . Moreover, the Cooperative
Development Authority likewise certified that Laguna has been inoperative since 1992 and during the period when
the annotations were made in 1996. The Bureau ofPosts has also certified that Laguna's office at Barangay
Mayapa, Calamba, Laguna, its official address as indicated in its Articles of Incorporation and Confirmation of
Registration is "closed". 50

According to the Regional Trial Court, since respondent was inoperative at the time when its adverse claims were
annotated, "there [was] no reason for [it] to believe that the person who caused the annotations of adverse claim on
the titles of the farmer-beneficiaries . . . was authorized to do so." 51

The Regional Trial Court ordered the Register of Deeds to cancel the annotations on the transfer certificates of
title.  It held that Section 70 of Presidential Decree No. 1529 or the Property Registration Decree declares that "an
52

adverse claim is effective [only]for a period of thirty (30) days and may be cancelled upon filing of a verified petition
after the lapse of this period."  Since the 30-day period had already lapsed, the annotations were already the
53

subject of cancellation. 54

Respondent appealed to the Court of Appeals based on two grounds:

1) Petitioner-appellee secured the favorable orders of the lower court in fraud of appellant LagunaWest by
sending the petition, all other pleadings, and notices to its former address, thus, denying its day in court; and

2) The trial court erred in applying the rule on substituted service, thus, it did not validly acquire jurisdiction
over the appellant. 55

The Court of Appeals granted respondent's appeal on November 25, 2005. The dispositive portion of the Court of
Appeals' decision reads:

WHEREFORE, premises considered, the appeal is hereby granted. The case is ordered remanded for appellant's
presentation of evidence and thereafter, for the trial court to render judgment, albeit with dispatch. 56

The Court of Appeals ruled thatthere was no valid service of summons upon respondent in accordance with Rule
14, Section 11 of the Revised Rules of Civil Procedure.  Hence, the "court acquire[d] no jurisdiction to pronounce a
57

judgment in the case." 58

The Court of Appeals denied petitioner's motion for reconsideration on April 5, 2006. 59

507
The issue in this case is whether respondent was properly served with summons or notices of the hearing on the
petition for cancellation of annotations of adverse claim on the properties.

Petitioner emphasized the following points:

Summons was served upon respondentat its official registered address at Barangay Mayapa, Calamba,
Laguna. Since no one received the summons, petitioner insisted that the trial court issue an order to effect
60

substituted service.  Respondent still did not file its answer.

61 62

Later, a certain Orlando dela Peña would filea manifestation and motion dated February 27, 2001 purportedly on
behalf of respondent.  Mr. dela Peña claimed that he was an authorized representative of respondent and that
63

respondent was already holding office at No. 160, Narra Avenue, Looc, Calamba, Laguna, which was not the official
address of respondent.  Mr. dela Peña never submitted proof of his authority torepresent respondent. He was also
64

never a memberof respondent cooperative. 65

However, Mr. dela Peña was stillallowed to file an answer or opposition.  Petitioner filed a motion for
66

reconsideration opposing the order allowing him to file an answer or opposition on behalf of
respondent. Respondent failed to oppose this. He did not participate further.  Later, a certain Mr. Geriberto Dragon
67 68

would claim to be an officer of respondent. He would file an opposition on its behalf after the period to file an
opposition had lapsed.  Mr. Dragon alleged that respondent’s address was at No. 167, Barangay Looc, Calamba,
69

Laguna.  Like Mr. dela Peña, Mr. Dragon had never been a member or officer of respondent.
70 71

Petitioner argued that Mr. dela Peña and Mr. Dragon never submitted proof of their authority to represent
respondent.  They were never officers or members of respondent cooperative.  Therefore, petitioner cannot be
72 73

blamed for being skeptical about Mr. dela Peña’s and Mr. Dragon’s claims of authority. 74

Moreover, Mr. dela Peña and Mr. Dragon could not claim to have been authorized to represent respondent because
it was determined to be inoperative since 1992.  In 2002, respondent was dissolved by the Cooperative
75

Development Authority. 76

Petitioner’s motion for reconsideration of the trial court order allowing respondent to file an answer or opposition to
the petition for cancellation of annotation was granted because of Mr. dela Peña’s and Mr. Dragon’s failure to show
evidence ofauthority to act on behalf of respondent. 77

Petitioner argued that summons could only be validly served to respondent’s official address as indicated in its
registration with the Cooperative Development Authority.  This is because respondent as a registered cooperative is
78

governed by Republic Act No. 6938, a substantive law that requires summons to be servedto respondent’s official
address. 79

Substantive law takes precedence over procedural rules. 80

Petitioner cites Article 52 of Republic Act No. 6938:

Article 52. Address. – Every cooperative shall have an official postal address to which all notice and
communications shall be sent. Such address and every change thereof shall be registered with the Cooperative
Development Authority.

Further, petitioner argues that there is no law that requires parties to serve summons to "every unsubstantiated
address alleged by [a] party." 81

Petitioner also argued that the Court of Appeals erred when it remanded the case for trial because respondent
already admitted that its adverse claims were based not on a right over the property but on the "alarm[ing] . . .
possibility of losing the deal"  with the owners of the property. There was no agreement yet vesting in respondent
82

any right over the properties.  Moreover, the annotations on the title were made in 1996 when respondent was
83

already inoperative. 84

Meanwhile, respondent emphasized thatit entered into a joint venture agreement with the farmer-
beneficiaries. While in the process of negotiations, petitioner suddenly entered into the picture by offering the
85

farmer-beneficiaries an IrrevocableExclusive Right to Buy (IERB) contracts.  It was then that respondent caused the
86

annotation of an adverse claim on the titles. 87

Respondent, through its Vice President, Mr. dela Peña, wrote two letters between March and April 2000 relative to
its adverse claims in an attempt to amicably settle what seemed then as a brewing dispute.  These letters were
88

written on respondent’s letterheads indicating the address, No. 167, Barangay Looc, Calamba, Laguna. 89

508
Petitioner deliberately served summons upon respondent to its old address.  Later, petitioner would be allowed to
90

present evidence ex parte. 91

Moreover, respondent was unable to appear at the hearing on the motion for reconsideration of the court order
allowing respondent to file its answer or opposition. Basedon the records, respondent’s failure to appear was due to
petitioner setting the hearing on April 20, 2001 and mailing respondent’s a copy of the motion on April 16, 2001 or
just four (4) days before the hearing. 92

Respondent filed a motion for leave to admit attached opposition to petitioner’s motion for reconsideration. This was
opposed by petitioner. Pending respondent’s motion for leave toadmit attached opposition, the trial court already
issued its order dated January 16, 2013, granting petitioner’s motion for reconsideration of the order allowing
respondent to file its answer or opposition to the petition for cancellation of adverse claims. 93

Respondent filed a motion for reconsideration of the order dated January 16, 2003. While the said incidents were
pending,the trial court rendered its decision dated March 21, 2003, granting petitioner’s petition to cancel the
annotations of adverse claims.  This, according to respondent, was a premature decision.
94 95

The trial court rescinded the March 21, 2003 decision. On May 26, 2003, the trial court denied respondent’s motion
for reconsideration.96

Within the period allowed for respondent to file its petition for certiorari, the trial court rendered judgment granting
petitioner’s petition to cancel the annotations of adverse claims on the title. 97

Respondent appealed to the Court of Appeals. The appellate court remanded the case to the lower court so that
respondent could be allowed to present evidence. 98

Respondent argued that petitioner was not being fair when it served summons to respondent’s old address despite
knowledge of its actual address. 99

Moreover, respondent argued that itsrights over the property should be best determined after trial. 100

According to respondent, had there been a trial, it would have:

4.2.1 Presented documentary evidence that its negotiation with the former landowners had earned for it part-
ownership of the properties, or at the very least, the exclusive authority to deal with potential buyers or
developers of the properties such as petitioner.

4.2.2 Offered in evidence the actual Joint Venture Agreements ("JVA") between the former landowners and
Laguna West whereby Laguna West had made partial payment of the former landowners’ 40% share in the
joint venture. Laguna Westhad thus acquired interest over the properties, or had the same or better right
than the registered owner thereof.

4.2.3 Proved by competent evidence that the annotation sought to be cancelled was not a simple adverse
claim but qualifies as a registration of an interest over the subject properties;

4.2.4 Presented Laguna West’s authorized representatives, Orlando dela Peña, Geriberto Dragon and Ediza
Saliva, and one or two of the original landowners to testify on their dealings with Laguna West.

4.2.5 Called on the officers of the CD on questions about a cooperative’s address of record vis-à-vis its
actualaddress as known to the party that the cooperativehad previously been communicating with, in this
case, petitioner.101

We rule that respondent was not validly served with summons or notice of the hearing. However, its annotations of
adverse claims should be cancelled for being based on a future claim.

I
Respondent was not validly served with summons

Republic Act No. 6938 of 1990 or the Cooperative Code of the Philippines provides that cooperatives are mandated
to have an official postal address to which notices shall be sent, thus:

Art. 52. Address. – Every cooperative shall have an official postal address to which all notices and communications
shall be sent. Such address and every change thereof shall be registered with the Cooperative Development
Authority.

509
This provision was retained in Article 51 of RepublicAct No. 9520 or the Philippine Cooperative Codeof 2008. Article
51 provides:

Art. 51. Address. Every cooperativeshall have an official postal address to which all notices and communications
shall be sent. Such address and every change thereof shall be registered with the Authority.

Relying on the above provision, petitioner argued that respondent was sufficiently served with summons and a copy
of its petition for cancellation of annotations because it allegedly sent these documents to respondent’s official
address as registered with the Cooperative Development Authority. Petitioner further argued that the Rules of
Procedure cannot trump the Cooperative Code with respect to notices. This is because the Cooperative Code is
substantive law, as opposed to the Rules of Procedure, which pertains only to matters of procedure.

Petitioner is mistaken.

The promulgation of the Rules of Procedure is among the powers vested only in this court. Article VIII, Section 5(5)
provides:

Sec. 5. The Supreme Court shall have the following powers:

....

(5) Promulgate rules concerning the protection and enforcement of constitutional rights, pleading, practice, and
procedure in all courts, the admission to the practice of law,the integrated bar, and legal assistance to the
underprivileged.Such rules shall provide a simplified and inexpensive procedure for the speedy disposition of cases,
shall be uniform for all courts of the same grade, and shall not diminish, increase, or modifysubstantive rights. Rules
of procedure of special courts and quasi-judicial bodies shall remain effective unless disapproved by the Supreme
Court.

This means that on matters relating toprocedures in court, it shall be the Rules of Procedure that will govern. Proper
court procedures shall be determined by the Rules as promulgated by this court.

Service of notices and summons on interested parties in a civil, criminal, or special proceeding is court procedure.
Hence, it shall be governed by the Rules of Procedure.

The Cooperative Code provisions may govern matters relating to cooperatives’ activities as administered by the
Cooperative Development Authority. However, they are not procedural rules that will govern court processes. A
Cooperative Code provision requiring cooperatives to have an official address to which all notices and
communications shall be sent cannot take the place of the rules on summonsunder the Rules of Court concerning a
court proceeding.

This is not to say that the noticescannot be sent to cooperatives in accordance with the Cooperative Code. Notices
may be sent to a cooperative’s official address. However, service of notices sent to the official address in
accordance with the Cooperative Code may not be used as a defense for violations of procedures, specially when
such violation affects another party’s rights.

Section 11, Rule 14 of the Rules ofCourt provides the rule on service of summons upon a juridical entity. It provides
that summons may be served upon a juridical entity only through its officers. Thus:

Sec. 11. Service upon domestic private juridical entity. – When the defendant is a corporation, partnership or
association organized under the laws of the Philippines with a juridical personality, service may be made on the
president, managing partner, general manager, corporate secretary, treasurer, or in-house counsel.

We have already established that the enumeration in Section 11 of Rule 14 is exclusive.  Service of summons upon
102

persons other than those officers enumerated in Section 11 is invalid.  Even substantial compliance is not sufficient
103

service of summons. 104

This provision of the rule does not limit service to the officers’ places of residence or offices. If summons may not be
served upon these persons personally at their residences or offices, summons may be served upon any of the
officers wherever they may be found.

Hence, petitioner cannot use respondent's failure to amend its Articles of Incorporation to reflect its new address as
an excuse from sending or attempting to send to respondent copies of the petition and the summons. The Rules of
Court provides that noticesshould be sent to the enumerated officers. Petitioner failed to do this. Nonotice was ever
sent to any of the enumerated officers.

510
Petitioner insists that it should not be made to inquire further as to the whereabouts of respondent after the attempt
to serve the summons by registered mail to respondent’s address as allegedly indicated in its Articles of
Incorporation. The Rules does not provide that it needs to do so. However, it provides for service by publication.
Service by publication is available when the whereabouts of the defendant is unknown. Section 14, Rule 14 of the
Rules of Court provides:

Sec. 14. Service upon defendant whose identity or whereabouts are unknown. – In any action where the defendant
is designated as an unknown owner, or the like, or whenever his whereabouts are unknown and cannot be
ascertained by diligent inquiry, service may, by leave of court, be effected upon him by publication in a newspaper
of general circulation and in such places and for such time as the court may order. (Emphasis supplied)

This is not a matter of acquiringjurisdiction over the person of respondent since this is an action in rem. In an action
in rem, jurisdiction over the person is not required as long asthere is jurisdiction over the res. This case involves the
issue of fair play and ensuring that parties are accorded due process.

In this case, petitioner served summons upon respondent by registered mail and, allegedly, by personal service at
the office address indicated in respondent’s Certificate of Registration. Summons was not served upon respondent’s
officers. It was also not published in accordance with the Rules of Court. As a result, respondent was not given an
opportunity to present evidence, and petitioner was able to obtain from the Regional Trial Court an order cancelling
respondent’s annotations of adverse claims.

Respondent was, therefore, not validly served with summons.

II
Respondent’s alleged non-
operation does not bar it from
authorizing a person to act on
its behalf in court
proceedings

Petitioner argues that failure to serve the summons upon respondent was due to respondent's non-operation and
failure to amend its Articles of Incorporation to reflectits new address. Petitioner's conclusion that respondent was
no longer operating was based only on the postmaster's certification. According to the postmaster’s certification, it
failed to serve the petition for cancellation of annotation to respondent’s official address becauseof respondent’s
nonexistence or closure. Petitioner failed to consider that the postmaster was not in the position to make a reliable
statement as to the existence or closure of an entity.

Moreover, the Cooperative Development Authority's certification stating that respondent was not submitting any
financial report since 1992, which was proof of its non-operation, was a mere statement of what was indicative of
non-operation. It was not yet a conclusive statement that respondent was not in operation.

In any case, even assuming that respondent was not operating, it might still exercise its powers as a cooperative
until it would get dissolved. Section 9 of Republic Act No. 6938 provides the powers and capacities of registered
cooperatives.

Section 9. Cooperative Powers and Capacities.- A cooperative registered under this Code shall have the following
powers and capacities:

(1) To sue and be sued in its cooperative name;

(2) Of succession;

(3) To amend its articles of cooperation in accordance with the provisions of this code;

(4) To adopt by-laws not contrary to law, morals or public policy, and to amend and repeal the same in
accordance with this Code;

(5) To purchase, receive, take orgrant, hold, convey, sell, lease, pledge, mortgage, and otherwise deal with
such real and personal property as the transaction of the lawful affairs of the cooperative may reasonably
and necessarily require, subject to the limitations prescribed by law and the Constitution;

(6) To enter into division, mergeror consolidation, as provided in this Code;

(7) To join federations or unions, as provided in this Code;

(8) To accept and receive grants, donations and assistance from foreign and domestic sources; and
511
 (9) To exercise such other powers granted in this Code or necessary to carry out its purpose or purposes as
stated in its articles of cooperation.

Prior to dissolution, a cooperative isentitled to the exercise of these powers. It may engage indeals involving its
properties or rights. It may cause the annotation of claims it deems to have in order to protect such claim. Contrary
to petitioner’s claim, respondent is not prevented from authorizing persons to act on its behalf.

In any case, even if petitioner alleged that respondent was already dissolved by virtue of a November7, 2002
resolution of Cooperative Development Authority, the relevant acts of respondent had occurred before such
resolution.

The resolution of the issue of representation could have facilitated the resolution of the case on the merits.

III
The trial court could have
resolved the issue of
representation; premature
decisions elicit suspicion

The court must not trifle with jurisdictional issues. It is inexcusable that a case involving issues that the trial court
had full control of had to be elevated to this court for determination.

The trial court had every opportunityto resolve the validity of Mr. dela Peña’s and Mr. Dragon’s alleged authority to
act on behalf of respondent. The trial court had, in fact, already allowed respondent to file its answer and oppose
petitioner’s petitionfor cancellation of annotation. It could have easily ordered Mr. dela Peña or Mr. Dragon to
produce evidence of their authority to represent respondent.

Moreover, there had been at least two motions for reconsideration filed before the trial court finallydecided the
petitioner’s petition for cancellation of annotation.

The first was filed by petitioner when the trial court granted respondent’s manifestation and motion on March 16,
2001. The trial court could have heard the parties on the issue of representation at this instance had it noted
petitioner’s non-compliance with the rule that the notice of hearing must "be served in such a manner as to ensure
its receipt by the other party at least three (3) days before the date of the hearing."  Section 4, Rule 15 provides:
105

Sec. 4. Hearing of motion. – Except for motions which the court may act upon without prejudicing the rights of the
adverse party, every written motion shall be set for hearing by the applicant. Every written motion required to be
heard and the notice of the hearing thereof shall be served in such a manner as to ensure its receipt by the other
party at least three (3) days before the date of hearing, unless the court for good cause sets the hearing on shorter
notice.

In this case, petitioner set the case for hearing on April 20, 2001. It served a copy upon respondent by registered
mail only on April 16, 2001 or four (4) days before the set date for hearing. To be covered by the three-day rule
under Rule 15, Section 4, petitioner should ensure respondent’s receipt of the notice by April 17, 2001. We take
judicial notice that service by registered mail in our jurisdiction does not take place in one day. Service of notice by
registered mail only four (4) days before the date of hearing, therefore, does not amount to ensuring the other
party’s receipt at least three (3) days before the hearing.

The second motion for reconsideration was filed by respondent when the Regional Trial Court granted petitioner’s
motion for reconsideration of its order of March 16, 2001.Hence, for the second time, the trial court had an
opportunity to hear whether Mr. dela Peña or Mr. Dragon was properly authorized to act on behalf of respondent.

On one hand, nobody’s rights would have been prejudiced had respondent been allowed to prove the alleged
representatives’ authorities. On the other hand, there is a likelihood ofprejudice, in this case, if the court relied purely
on technicalities.

Thus, we reiterate this court’s ruling in Alonso v. Villamor: 106

. . . In other words, [processes] are a means to an end. When they lose the character of the one and become the
other, the administration of justice is at fault and courts are correspondingly remiss in the performance of their
obvious duty.

. . . To take advantage of [a purely technical error] for other purposes than to cure it, does not appeal to a fair sense
of justice. Its presentation as fatal to [a party]’s case smacks of skill rather than right. A litigation is not a game of
technicalities in which one, more deeply schooled and skilled in the subtle art of movement and position, entraps
and destroys the other. It is, rather, a contest in which each contending party fully and fairly lays before the court the

512
facts in issue and then, brushing aside as wholly trivial and indecisive all imperfections of form and technicalities of
procedure, asks that justice be done upon the merits. Lawsuits, unlike duels, are not to be won by a rapier’s thrust.
Technicality, when it deserts its proper office as anaid to justice and becomes its great hindrance and chief enemy,
deservesscant consideration from courts. There should be no vested rights in technicalities. No litigant should be
permitted to challenge a record of a court of these Islands for defect of form when his substantial rights have not
been prejudiced thereby.

Both motions for reconsideration filed in the trial court were opportunities to hear the parties on the issue of
representation and to ensure that all parties were given their fair opportunity to be heard. The trial court ignored both
opportunities and chose to rule based on technicalities to the prejudice of respondent.

The rules cannot be interpreted asa means to violate due process rights. Courts should, as much as possible, give
parties the opportunity to present evidence as to their claims so that decisions will be made based on the merits of
the case.

The trial court issued a decision pending incidents yet to be resolved. We take this opportunity to remind courtsthat
the issuance of fair decisions is the heart of our functions. The judiciary is expected to take seriously its task of
crafting decisions with utmostjudiciousness. Premature decisions only elicit suspicion of the courts and diminish our
role as administrator of justice.

IV
Rights still under negotiations
are not adverse claims

Ordinarily, this case would be remanded to the trial court for the presentation of respondent’s evidence. However,
this case has been pending in this court for about eight (8) years.In the interest of judicial economy and efficiency,
and given that the court records are sufficient to make a determination on the validity of respondent’s adverse claim,
we shall rule on the issue. Respondent had been assailing the lack of service of summons upon it and the resulting
cancellation of its alleged adverse claim on the titles. Its claim is anchored on its disrupted negotiations with the
farmer-beneficiaries involving the properties. In its memorandum filed on March 1, 2007, respondent stated:

1.2 Some ten (10) years ago, Laguna West entered into [sic] Joint Venture Agreement ("JVA") with various farmer-
CLOA beneficiaries in the Kaong-Kalayugan area of Silang, Cavite for a total lot area of Eight Hundred Fifty Five
Thousand and Nine Hundred Fourteen (855,914) square meters.

1.3 To hold the CLOA beneficiaries to their commitment to submit their respective lots to the JVA, Laguna West
promised them a guaranteed share of 40% in the proceeds of the project.

1.4 But, while Laguna West was still in the process of finalizing the negotiations with these farmer-beneficiaries,
petitioner entered the picture by offering an alleged "Irrevocable Exclusive Right to Buy (IERB)" contracts with the
same farmer-landowners for the purpose of converting the subject vast track [sic] of land into an industrial,
commercial and residential area.

1.5 Alarmed with the possibility that it could lose the deal to a big and moneyed corporation, Laguna Westcaused
the annotation of adverse claims on the thirty-nine (39) TCTs in 1996.  Respondent’s annotations on petitioner’s
107

certificates of title are similarly worded, thus:

Entry No. . . . -AFFIDAVIT OF ADVERSE CLAIM- Covering the parcel of land described in this title as per Affidavit
of Adverse Claim executed by Calisto M. Dela Pena [sic] of Laguna West Multi-Purpose Cooperative Inc., wherein
the registered owner entered into a Joint Venture Agreement, as per Affidavit ofAdverse Claim, subs. and sworn to
before the Not. Public for . . ., a copy is on file in this registry.

Date of inst.- . . . .

Date of inscription- . . . .

NOTE: The foregoing annotations were copied from TCT. . . . 108

Another version of the annotation is worded as follows:

Entry No. . . . -ADVERSE CLAIM- Signed and executed by Calixto M. dela Pena [sic], president and Chairman of
Cooperative, [alleging] therein the existence of Joint Venture Agreement with the registered owner and that there
are aboutto dispose said lot, exec. before the Not. Public . . . Copy is on file in this registry. Date of inst.- . . . . Date
of inscription- . . . . 109

NOTE: The foregoing annotations were copied from TCT. . . .

513
The purpose of annotations of adverse claims on title is to apprise the whole world of the controversy involving a
property. These annotations protect the adverse claimant's rights before or during the pendency of a case involving
a property. It notifies third persons that rights that may be acquired with respect to a property are subject to the
results of the case involving it.

Section 70 of Presidential Decree No. 1529 or the Property Registration Decree governs adverse claims. It
describes an adverse claim as a statement in writing setting forth a subsequent right or interest claimed involving
the property, adverse tothe registered owner. Thus:

Section 70. Adverse claim. – Whoever claims any part or interest in registered land adverse to the registered owner,
arising subsequent to the date of the original registration, may, if no other provision is made in this Decree for
registering the same, make a statement in writing setting forth fully his alleged right or interest, and how or under
whom acquired, a reference to the number of the certificate of title of the registered owner, the name of the
registered owner, and a description of the land in which the right or interest is claimed.

The statement shall be signed and sworn to, and shall state the adverse claimant’s residence, and a place at which
all notices may be served upon him. This statement shall be entitled to registration as an adverse claim on the
certificate of title. The adverse claim shall be effective for a period of thirty days from the date of registration. After
the lapse ofsaid period, the annotation of adverse claim may be cancelled upon filing of a verified petition therefor
by the party in interest: Provided, however, that after cancellation, no second adverse claim based on the same
ground shall be registered by the same claimant.

Before the lapse of thirty days aforesaid, any party in interest may file a petition in the court of First Instance where
the land is situated for the cancellation of the adverse claim, and the court shall grant a speedy hearing upon the
question of the validity of such adverse claim, and shall render judgment as may be just and equitable. If the
adverse claim is adjudged to be invalid, the registration thereof shall be ordered cancelled. If, in any case, the court,
after notice and hearing, shall find that the adverse claim thus registered was frivolous, it may fine the claimant in an
amount not less than one thousand pesos nor more than five thousand pesos, in its discretion. Before the lapse of
thirty days, the claimant may withdraw his adverse claim by filing with the Register of Deeds a sworn petition to that
effect.

A claim based on a future right does notripen into an adverse claim as defined in Section 70 of Presidential Decree
No. 1529. A right still subject to negotiations cannot be enforced against a title holder or against one that has a
legitimate title to the property based on possession, ownership, lien, or any valid deed of transfer.

Respondent’s claim was not based on any of those.  Its claim was based on a deal with the CLOA farmer-
1awp++i1

beneficiaries, which did not materialize.

Respondent alleged that had there been a trial, it could have "[p]resented documentary evidence that its negotiation
with the former landowners had earned for it part-ownership of the properties, or . . . the exclusive authority to deal
with potential buyers or developers."  Respondent contradicts itself. For there to be a contract, there must be a
110

meeting of the minds between the parties. There could not have been any contract earning for respondent part-
ownership or any right since it was still undergoing negotiations with the farmer-beneficiaries. At that stage, meeting
of the minds was absent. The terms were not yet final. Hence, no right or obligation could attach to the parties. In
essence, parties cannot claim, much less make an adverse claim of any right, from terms that are still under
negotiations.

Respondent also alleged that had it been allowed to offer as evidence the joint venture agreement it entered with
the farmer-beneficiaries, it would have shown that it "had made partial payment of the former landowners’ 40%
share in the joint venture,"  acquiring for itself an "interest over the properties, or . . . better right than the registered
111

owner[s]."  Respondent was mistaken.

112

Republic Act No. 6657 or the Comprehensive Agrarian Reform Law prohibits its own circumvention. The prohibition
on disposition includes all rights relating to disposition such as sale, and promise of sale of property upon the
happening of conditions that remove the restrictions on disposition.

Republic Act No. 6657 prohibits the sale, transfer, or conveyance of awarded lands within ten (10) years, subject
only to a few exceptions. Section 27 of the Act provides:

SECTION 27. Transferability of Awarded Lands. —Lands acquired by beneficiaries underthis Act may not be sold,
transferred or conveyed except through hereditary succession, or to the government, or the LBP, or to other
qualified beneficiaries for a period of ten (10) years: provided, however, that the children or the spouse of the
transferorshall have a right to repurchase the land from the government or LBP withina period of two (2) years. Due
notice of the availability of the land shall be given by the LBP to the Barangay Agrarian Reform Committee (BARC)
of the barangay where the land is situated. The Provincial Agrarian Reform Coordinating Committee (PARCCOM)
as herein provided, shall, in turn, be given due notice thereof by the BARC.

514
If the land has not yet been fully paid by the beneficiary, the rights to the land may be transferred orconveyed, with
prior approval of the DAR, to any heir of the beneficiary or to any other beneficiary who, as a condition for such
transferor conveyance, shall cultivate the land himself. Failing compliance herewith, the land shall be transferred to
the LBP which shall give due notice of the availability of the land in the manner specified in the immediately
preceding paragraph.

In the event of such transfer to the LBP, the latter shall compensate the beneficiary in one lump sum for the
amounts the latter has already paid, together with the value of improvements he has made on the land Republic Act
No. 6657 also provides that the awarded lands may be converted to residential, commercial,or industrial use if these
are not economically feasible anymore or because of urbanization, greater economic value will be derived with their
conversion. Section 65 of the Act provides:

SECTION 65. Conversion of Lands. — After the lapse of five (5) years from its award, when the land ceases to be
economically feasible and sound for agricultural purposes, or the locality has become urbanized and the land will
have a greater economic value for residential, commercial or industrial purposes, the DAR, upon application of the
beneficiary or the landowner, with due notice to the affected parties, and subject to existing laws, may authorize the
reclassification or conversion of the land and its disposition: provided, that the beneficiary shall have fully paid his
obligation.

These provisions imply the following on rules on sale of awarded lands:

1) Subject to a few exceptions, landsacquired by beneficiaries may be conveyed to non-beneficiaries after

ten (10) years.

2) Before the lapse of ten (10) years but after the lapse of five (5) years, a beneficiary may dispose of the
acquired land if it "ceases to be economically feasible and sound for agricultural purposes, or the locality has
become urbanized and the land will have a greater economic value"  with its residential, commercial, or
113

industrial use.

These implications are easily abused. Hence, Republic Act No. 6657 included among the prohibitions any act that
will circumvent its provisions. Thus:

SECTION 73. Prohibited Acts and Omissions. — The following are prohibited: (a) The ownership or possession, for
the purpose of circumventing the provisions of this Act, of agricultural lands in excess of the total retention limits or
award ceilings by any person, natural or juridical, except those under collective ownership by farmer-beneficiaries.
(b) The forcible entry or illegal detainer by persons who are not qualified beneficiaries under thisAct to avail
themselves of the rights and benefits of the Agrarian Reform Program. (c) The conversion by any landowner of his
agricultural land into any nonagricultural use with intent to avoid the application of this Act to his landholdings and to
dispossess his tenant farmers of the land tilled by them. (d) The willful prevention or obstruction by any person,
association or entity of the implementation of the CARP. (e) The sale, transfer, conveyance or change of the nature
of lands outside of urban centers and city limits either in whole or in part after the effectivity of this Act. The date
ofthe registration of the deed of conveyance in the Register of Deeds with respect to titled lands and the date of the
issuance ofthe tax declaration to the transferee of the property with respect to unregistered lands, as the case may
be, shall be conclusive for the purpose of this Act. (f) The sale, transfer or conveyance by a beneficiary of the right
to use or any other usufructuary right over the land he acquired by virtue of being a beneficiary, in order to
circumvent the provisions of this Act. (Emphasis supplied)

The prohibition from disposition of the properties encompasses all rights relating to disposition, including the right to
convey ownership or to promise the sale and transfer of property from the farmer-beneficiaries to anyone upon the
happening of certain conditions that will remove the conveyance restrictions.

The conveyance of the property withinthe prohibited period or before its conversion to non-agricultural use isan
outright violation of Republic Act No. 6657. Meanwhile, the promise of sale of properties upon the happening of
conditions that will remove restrictions carry with it an intent to circumvent the provisions of Republic Act No. 6657.
This law prohibits its circumvention.

In this case, the CLOAs were awarded to the farmer-beneficiaries between 1990 and 1992.  Since the affidavit of
114

adverse claim annotated on petitioner’s certificates of title was annotated in 1996 and the properties were converted
only in 1998, respondent’sjoint venture agreement with the farmer-beneficiaries could not have validly transferred
rights to respondent.

The 10-year period of prohibition against conveyance had not yet lapsed at that time.  Neither were the properties
1âwphi1

already converted to non-agricultural use at that time. Respondent's adverse claim, therefore, based on its alleged
payment of the farmer-beneficiaries' 40% could not be valid.

In sum, whether or not there were provisions on transfer of rights or promise to transfer rights in the joint venture
agreement, there could be no basis for respondent’s adverse claim. Lack of that provision means that respondent
515
does not have any valid claim or right over the properties at all. Meanwhile, inclusion of such provision is illegal and,
therefore, void.

This ruling is also applicable to petitioner, which entered into irrevocable exclusive right to buy contracts from the
farmer-beneficiaries. These contracts provided that the farmer-beneficiaries committed themselves to selling their
properties to petitioner upon expiration of the period of prohibition to transfer or upon conversion of the properties
from agricultural to industrial or commercial use, whichever comes first. These contracts were execl!ted between
farmer-beneficiaries and petitioner during the period of prohibition and before the properties' conversion from
agricultural to mixed use. Upon conversion of the properties, these were immediately sold to petitioner. Intent to
circumvent the provisions of Republic Act No. 6657 is, therefore, apparent. Petitioner's contracts are, therefore, also
illegal and void. Hence, this decision is without prejudice to the right of interested parties. to seek the cancellation of
petitioner's certificates of title obtained in violation of the law.

WHEREFORE, the petition is GRANTED. The Register of Deeds of Cavite is ORDERED to cancel the annotations
of adverse claims on the transfer certificates· of title.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 174411               July 2, 2014

CITY OF DAGUPAN, represented by the CITY MAYOR BENJAMIN S. LIM, Petitioner, 

vs.
ESTER F. MARAMBA, represented vy her ATTORNEY-IN-FACT JOHNNY FERRER, Respondent.

DECISION

LEONEN, J.:

A petition for relief from judgment under Rule 38 is an equitable remedy which allows courts to review a judgment
tainted with neglect bordering on extrinsic fraud. In this case, total damages in the amount of Pl 1 million was
awarded in spite of the evidence on record. The motion for reconsideration of such judgment filed by the legal officer
of the City of Dagupan inexplicably omitted the required notice for hearing. Considering the damage that would be
suffered by the local government, such mistake was so glaring as to raise suspicion that it was contrived to favor the
plaintiff.

We are asked in this petition  filed by the City of Dagupan through its then mayor, Benjamin S. Lim, to: (1) reverse
1

the Court of Appeals’ decision and resolution and (2) declare that the damages awarded to respondent Ester F.
Maramba are excessive. Petitioner, thus, prays that this court affirm the trial court’s August 25, 2005 and November
30, 2005 rulings in toto.  Respondent Ester F. Maramba was a grantee of a Department of Environment and Natural
2

Resources (DENR) miscellaneous lease contract  for a 284-square-meter property in Poblacion, Dagupan City, for a
3

period of 25 years.  Sometime in 1974, she caused the construction of a commercial fish center on the property.
4 5

On December 20, 2003, petitioner city caused the demolition of the commercial fish center, allegedly without giving
direct notice to Maramba and with threat of taking over the property.  This prompted Maramba, through her attorney-
6

516
in-fact, Johnny Ferrer, to file a complaint for injunction and damages with prayer for a writ of preliminary injunction
and/or temporary restraining order. 7

The complaint alleged that the demolition was unlawful and that the "complete demolition and destruction ofthe
previously existing commercial fish center of plaintiff is valued at Five Million (₱10,000,000.00) pesos."  The word,
8

"ten," was handwritten on top of the word, "five."

In the complaint’s prayer, Maramba asked for a judgment "ordering defendant corporation to pay plaintiff the amount
of Ten Thousand (₱10,000.00) pesos for the actual and present value of the commercial fish center completely
demolished by public defendant."  The word, "million," was handwritten on top of the word, "thousand," and an
9

additional zero was handwritten at the end ofthe numerical figure.

The handwritten intercalation was notexplained in any part of the records and in the proceedings.

She also prayed for 5 million asmoral damages and 500,000.00 as attorney’s fees. 10

On July 30, 2004, the trial court decision,  penned by Judge Crispin C. Laron, ruled in favor of Maramba and
11

awarded 10 million as actual damages:

WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendant as follows:

1. Ordering the defendant City of Dagupan to pay the plaintiff the amount of Ten Million (10M) Pesos for the
actual and present value of the commercial fish center which was completely demolished;

2. Ordering the public defendantto pay Php500,000.00 as moral damages;

3. Ordering the defendant to pay plaintiff the amount of Php500,000.00 as attorney’s fees;

4. Ordering the public defendant to pay the cost of suit; and

5. The writ of preliminary injunction is made permanent. 12

On August 26, 2004, petitioner city filed a motion for reconsideration. Maramba filed an opposition on the ground
that the motion was not set for hearing. The opposition prayed that the motion be stricken off the records. 13

On October 21, 2004, the trial court denied petitioner city’s motion for lack of notice of time and place ofhearing,
thus, "the motion for reconsideration is not entitled to judicial cognizance."  In a separate order on the same date,
14

the trial court also granted Maramba’s motion for execution and ordered that "a writ of execution [be] issue[d] in the
aboveentitled case upon submission of the certificate of finality." 15

Petitioner city then filed a petition for relief with prayer for preliminary injunction dated October 29, 2004, together
with an affidavit of merit.  The city alleged that "the decision, were it not for the City Legal Officer’s mistake,
16

negligence and gross incompetence, would not have been obtained by the plaintiff, or should have been
reconsidered or otherwise overturned, the damage award in the total amount of ₱11M being not only
unconscionable and unreasonable,but completely baseless." 17

On November 18, 2004, the trial court denied petitioner city’s petition for relief and ordered that the writ ofexecution
dated October 26, 2004 be implemented.  The court stressed that "[t]he negligence of counsel binds the
18

client." Petitioner city filed for reconsideration.

19 20

On August 25, 2005, the trial court, through acting Judge Silverio Q. Castillo, granted the petition for relief and
consequently modified its July 30, 2004 decision. It reduced the award ofactual damages from 10 million to
₱75,000.00:

WHEREFORE, in the highest interest of justice and equity, the petition for relief from judgment ishereby granted.
Consequently, the Decision is accordingly modified.

The amount of actual damages is hereby reduced from Ten Million Pesos to ₱75,000.00.

"(O)ne is entitled to an adequate compensation for such pecuniary loss suffered by him as duly proved. (Article
2199, Civil Code)

In this case, the plaintiff Ester Maramba was only able to prove the amount of ₱75,000.00 as the appraised value of
the improvements made on the leased premises.

517
She was not able to show proof of the ₱5 million amount of improvements made on the establishment, as she was
claiming to have been made.

Too, she did not show any single receipt for her travelling expenses and for the car rental she made during her stay
in the country for the purpose of prosecuting this case.

"It is necessary for a party seeking the award of actual damages to produce competent proof or the best evidence
obtainable to justify such award." (People v. Caraig, 400 SCRA 67).

The Supreme Court has held in a lot of cases that"documentary evidence should be presented to substantiate a
claim for damages"

Anent the moral damages, the same is hereby reduced from ₱500,000.00 to ₱20,000.00.

"Moral damages are not punitive in nature and were never intended to enrich the claimant atthe expense of the
defendant." (Samson, Jr. v. Bank of the Philippine Islands, 405 SCRA 607).

The award of attorney’s fees is likewise reduced from ₱500,000.00 to ₱20,000.00.

"The amount of damages awarded should not be palpably and scandalously excessive as to indicate that it was the
result of prejudice or corruption on the part of the trial court. (Cathay Pacific Airways, Ltd. v. Vasquez, 399 SCRA
207).

Consequently, the Writ of Execution is hereby recalled.

Notify parties and their counsel.

SO ORDERED. 21

Aggrieved by this order and the subsequent denial of her motion for reconsideration, Maramba filed a petition for
certiorari before the Court of Appeals. She argued that Judge Castillo"acted without jurisdiction as he ha[d] no
authority or legal power to substantially amend orcorrect a final and executory judgment. . . ."  Moreover, Judge
22

Castillo gravely abused his discretion "in granting the petition for relief filed by the other respondent city of Dagupan
on the 83rd day from receipt of the judgment or 26 days late." 23

On June 15, 2006, the Court of Appeals  granted Maramba’s petition for certiorari. It held that petitioner city’s
24

motion for reconsideration lacked a notice of hearing and was a mere scrap of paper  that did not toll the period to
25

appeal. Consequently, the July 30, 2004 decision penned by Judge Laron became final and executory.  The Court 26

of Appeals also denied reconsideration,  prompting petitioner city to elevate the case before this court.
27

Petitioner city emphasizes that its motion for reconsideration of the July 30, 2004 decision was timely filed, tolling
the prescriptive period to appeal. Since this decision was not yet final, its subsequent modification by the trial court
was proper.  The lack of notice of hearing in the motion for reconsideration was due to counsel’s oversight, and a
28

denial of the motion on this ground alone sacrificed substantial rights for mere technicalities.  Petitioner city also
29

cites jurisprudence on the suspension of procedural rules when its strict application would only result in grave
injustice.
30

Petitioner city agrees that "judgments must be final at some definite date," but Rule 38 also provides for relief from
judgments, orders, and other proceedings.  It submits that it raised substantial issues in its motion for
31

reconsideration such as the excessive damages awarded by the lower court in its July 30, 2004 decision.  The 32

petition for relief was correctly granted as "counsel’s mistake amounted to extrinsic fraud"  and "to give the plaintiff
33

much more than it was able to prove and allow the faulty decision to be implemented is, truly, a deprivation
ofdefendant of its property without due process." 34

Petitioner city contends that the modification of the July 30, 2004 decision was well established in that only duly
proven pecuniary loss may be awarded.  Maramba was only able to prove 75,000.00 as the appraised value of the
35

improvements made on the property.  According to petitioner city, "the proper amount ofdamages then should not
36

be Five Million Pesos (5,000,000.00) as alleged in the complaint, nor Ten Million Pesos (10,000,000.00) as
requested in the prayer of the complaint but only Seventy-five Thousand Pesos (75,000.00) as embodied in the
contract upon which Mrs. Maramba based her claim, the Miscellaneous Lease Agreement."  In fact, the commercial
37

fish center made of mere G.I. sheets and light metal bars was constructed around 1998, and its value would have
depreciated over time. 38

Lastly, petitioner city argues that its petition for relief was filed on time. On August 11, 2004, it received a copy of the
July 30, 2004 decision penned by Judge Laron. On August 26,2004, petitioner filed its motion for reconsideration.

518
On October 25, 2004, it received a copy of the October 21, 2004 trial court order denying its motion for
reconsideration. Four days later or on October 29, 2004, it filed itspetition for relief from judgment.

On the other hand, Maramba maintains that petitioner city is bound by the mistake of its counsel in failing toinclude
a notice of hearing in its motion for reconsideration. This is not excusable negligence that warrants relaxation of the
rules.
39

Maramba submits that the Court ofAppeals correctly sustained the award of damages in the July 30, 2004 trial court
decision. Since a special civil action for certiorari was brought before the Court of Appeals, it correctly refrained from
resolving factual questions.  Petitioner city then elevated this case on Rule 45, thus, only questions of law may be
40

raised. 41

Maramba adds that petitioner city "failed to nail down in the crossexamination, during the trial of private respondent
(plaintiff) and her witness (Johnny Ferrer) on the witness stand after their direct testimony on the damages
sustained." 42

The July 30, 2004 decision was final and executory and cannot be amended even if the court later discovers that its
decision was erroneous. 43

In any case, instead of merely amending the July 30, 2004 decision, acting judge should have proceeded as if a
motion for new trial had been granted.  This way, "evidence of the damages claimed would have to be taken anew
44

and offered by both parties, and such evidence on the issue of damages would then be complete before the
appellate court. . . ." 45

Lastly, Maramba argues that she was equally deprived of due process when acting judge of the trial court granted
petitioner city’s petition for relief without conducting a hearing. 46

The following issues are for resolution:

I. Whether the lack of notice of hearing in a motion for reconsideration is excusable negligence that allows
the filing of a petition for relief of judgment;

II. Whether the 60-day period to file a petition for relief from judgment, when reckoned from receipt of the
denial of the motion for reconsideration, is considered filed on time;

III. Whether the Court of Appeals erred in ruling that courts have no legal power to amend or correct a final
judgment even if it later finds that its decision is erroneous; and

IV. Whether actual damages must be substantiated in order to be awarded.

Petitioner city does not deny that its motion for reconsideration lacked a notice of hearing. It offered no explanation
for this lapse, except for oversight by its then counsel.

Petitioner city submits that this is excusable negligence by counsel, warranting its filing of a petition for relief from
judgment under Rule 38 of the Rules of Court. Thus, the Court ofAppeals erred in finding grave abuse of discretion
by the trial court in granting the city’s petition. Maramba counters that the lack of notice of hearing is not excusable
negligence that warrants relaxation of the rules. 47

Maramba also cites Dorotheo v. Court of Appeals,  International School, Inc. v. Minister of Labor and
48

Employment,  Florentino v. Rivera,  and Moneytrend Lending Corporation v. Court of Appeals  to support her
49 50 51

position that courts "have no legal power to amend or correct a final judgment even if it later finds that its decision is
erroneous." 52

The July 30, 2004 decision was set aside when the trial court granted petitioner city’s motion for reconsideration of
the denial of its petition for relief from judgment.  While the Court of Appeals found grave abuse of discretion by the
53

trial court in issuing this August 25, 2005 order granting the petition for relief on reconsideration, the Court of
Appeals’ decision was timely appealed before this court. Thus, there is no final and executory decision yet.

In any case, notwithstanding the doctrine of immutability of judgments, this court has set aside procedural rules in
"[t]he broader interests of justice and equity." 54

Lack of notice in the motion for reconsideration

Maramba cites Land Bank v. Natividad.  In this case, the trial court ordered the Department of Agriculture (DA) and
55

Land Bank to pay just compensation for the lands owned by private respondents. DA and Land Bank filed separate
motionsfor reconsideration, but these were denied for lack of notice of hearing.
519
Land Bank filed a petition for relief from order on the ground of excusable negligence by its counsel who "simply
scanned and signed the Motion for Reconsideration for Agrarian Case No. 2005, Regional Trial Court of Pampanga,
Branch 48, not knowing, or unmindful that it had no notice of hearing"  because of his heavy workload. This was
56

denied, prompting Land Bank to elevate the case to this court.

This court denied Land Bank’s petition as the reasons given by counsel for his failure to include a notice of hearing
in the motion for reconsideration were not considered excusable negligence. Nevertheless, this court resolved the
other issues Land Bank raised in its petition such as the question of just compensation and private respondents’
alleged failure to exhaust administrative remedies.

But in Jehan Shipping Corporation v. National Food Authority,  this court affirmed the Court of Appeals and focused
57

on whether the purpose of a notice of hearing in a motion for reconsideration was met. 58

In Jehan, the trial court ordered respondent National Food Authority (NFA) to pay Jehan the amounts it claimed as
freight services and other expenses. The NFA received a copy ofthe decision on October 1, 2001, while Jehan filed
a motion for execution pending appeal on October 2, 2001. The NFA later filed a motion for reconsideration on
October 16, 2001 and a supplemental motion for reconsideration on November 12, 2001. Jehan filed separate
oppositions to both motions. A hearing was set for the motions filed, but the NFA’s counsel failed to appear. On
January 8, 2002, the trial court denied NFA’s motions for lack of notice of hearing. The Court of Appeals ruled in
favor ofthe NFA. It held that even if the NFA’s motion lacked a notice of hearing, Jehan’s counsel was still able to
refute the substantial issues raised in the motions in its oppositions to the motions. This court affirmed this ruling
and discussed the purpose behind the notice of hearing requirement as follows:

This Court has indeed held time and time again that, under Sections 4 and 5 of Rule 15 of the Rules of Court,
mandatory is the notice requirement in a motion, which is rendered defective by failure to comply with the
requirement. As a rule, a motion without a notice of hearing is considered pro formaand does not affect the
reglementary period for the appeal or the filing of the requisite pleading.

As an integral component of procedural due process, the three-day notice required by the Rules is not intended for
the benefit of the movant. Rather, the requirement is for the purpose of avoiding surprises that may be sprung upon
the adverse party, who must be given time to study and meet the arguments in the motion before a resolution by the
court. Principles of natural justice demand that the right of a party should not be affected without giving it
anopportunity to be heard.

The test is the presence of the opportunity to be heard, as well as to have time to study the motion and meaningfully
oppose or controvert the grounds upon which it is based.Considering the circumstances of the present case, we
believe that the requirements of procedural due process were substantially complied with, and that the compliance
justified a departure from a literal application of the rule on notice of hearing.  (Emphasis supplied, citations omitted)
59

This court held that "when the adverse party has actually had the opportunity to be heard, and has indeedbeen
heard through pleadings filed in opposition to the motion, the purpose behind the rule is deemed duly served." 60

Jehan was quoted with approval in Preysler, Jr. v. Manila Southcoast Development Corporation.  In Preysler, this
61

court ruled that "a liberal construction of the procedural rules isproper where the lapse in the literal observance of a
rule of procedure has not prejudiced the adverse party and has not deprived the court of its authority." 62

Maramba was able to file an opposition to petitioner city’s motion for reconsideration on the ground thatthe motion
was not set for hearing. The opposition prayed that the motion be stricken off the records. 63

In its one-page opposition, Maramba did not address the substantive issues raised by petitioner city in its motion for
reconsideration such as the excessive award of actual damages.  Nevertheless, this opposition was an
64

opportunityto be heard for Maramba on the matters raised by petitioner city in its motion for reconsideration.

This court has relaxed procedural rules when a rigid application of these rules only hinders substantial justice. 65

In Sy v. Local Government of Quezon City,  Sy’s counsel filed the motion for reconsideration one day late. He
66

explained that "his secretary’s inadvertent placing of the date January 27, 2012, instead of January 26, 2012, on the
Notice of Decision constitutes excusable negligence which should therefore, justify a relaxation of the rules." 67

This court relaxed procedural rules togive way to substantial justice:

Be that as it may, procedural rules may, nonetheless, be relaxed for the most persuasive of reasons in order to
relieve a litigant of an injustice not commensurate with the degree of his thoughtlessness in not complying with the
procedure prescribed. Corollarily, the rule, which states that the mistakes of counsel bind the client, may not be
strictly followed where observance of it would result in the outright deprivation of the client’s liberty or property, or
where the interest of justice so requires.

520
As applied in this case, the Court finds that the procedural consequence of the above-discussed one-day delay in
the filing of the subject motion – which, as a matter ofcourse, should render the CA’s January 20, 2012 Decision
already final and executory and hence, bar the instant petition – is incommensurate to the injustice which Sy may
suffer. This is in line with the Court’s observation that the amount of just compensation, the rate of legal interest, as
well as the time of its accrual, were incorrectly adjudged by both the RTC and the CA, contrary to existing
jurisprudence. In this respect, the Court deems it proper to relax the rules of procedure and thus, proceed to resolve
these substantive issues.  (Citations omitted.)
68

In United Airlines v. Uy,  the notice of appeal was filed two days late, and no reason was given by respondent’s
69

counsel for the delay. This court still gave due course to the appeal "due to the unique and peculiar facts of the case
and the serious question of law it poses."  It discussed that "technicality, when it deserts its properoffice as an aid to
70

justice and becomes its great hindrance and chief enemy, deserves scant consideration." 71

In Samala v. Court of Appeals,  the notice of appeal was filed one day late because the one entrusted to file it
72

suffered from stomach pains. This court considered thisas excusable negligence:

We said that the general aim of procedural law is to facilitate the application of justice to the rival claims of
contending parties, bearing in mind that procedural rules are created not to hinder or delay but to facilitate and
promote the administration of justice. In rendering decisions, courts must not be too dogmatic. A complete view
must be taken in order to render a just and equitable judgment. It is far better to dispose of a case on the merits,
which is a primordial end, than on technicality that may result in injustice.

The rules of procedure are mere tools designed to facilitate the attainment of justice. Their strictand rigid application
especially on technical matters, which tends to frustrate rather than promote substantial justice, must be avoided.
Even the Revised Rules of Court envision this liberality. Technicality, when it deserts its proper office as an aid to
justice and becomes its great hindrance and chief enemy, deserves scant consideration from the courts. (Citations
omitted.)73

In this case, petitioner city received a copy of the trial court’s July 30, 2004 decision on August 11, 2004.  Its motion
74

for reconsideration filed on August 26, 2004 was filed within the 15-day period. The purposes behind the required
notice of hearing — provide the time to study the motion for reconsideration and give an opportunityto be heard —
were satisfied when Maramba filed an opposition to the motion.

Mistake bordering on extrinsic fraud

Rule 38 of the Rules of Court allows for the remedy called a petition for relief from judgment. This isan equitable
remedy "allowed in exceptional cases when there is no other available or adequate remedy"  that will allow for
75

substantive justice.

Section 1 of Rule 38 provides for the grounds that warrant the filing of a petition under Rule 38:

SECTION 1. Petition for relief from judgment, order, or other proceedings. – When a judgment or final order is
entered, or any other proceeding is thereafter taken against a party in any court through fraud, accident, mistake, or
excusable negligence, he may file a petition in such court and in the same case praying that the judgment, order or
proceeding be set aside. (Emphasis supplied)

Courts may set aside final and executory judgments provided that any of the grounds for their grant are present.

The presence of "fraud, accident, mistake or excusable negligence" must be assessed from the circumstances of
the case.

Excusable negligence as a ground for a petition for relief requires that the negligence be so gross "that ordinary
diligence and prudence could not have guarded against it."  This excusable negligence must also be imputable to
76

the party-litigant and not to his or her counsel whose negligence binds his or her client.  The binding effect of
77

counsel’s negligence ensures against the resulting uncertainty and tentativeness of proceedings if clients were
allowed to merely disown their counsels’ conduct. 78

Nevertheless, this court has relaxed this rule on several occasions such as: "(1) where [the] reckless or gross
negligence of counsel deprives the client of due process of law; (2) when[the rule’s] application will result in outright
deprivation of the client’s liberty or property; or (3) where the interests of justice so require."  Certainly, excusable
79

negligence must be proven.

Fraud as a ground for a petition for relief from judgment pertains to extrinsic or collateral fraud.  This court explained
80

this type of fraud as follows:

521
Where fraud is the ground, the fraud must be extrinsic or collateral. The extrinsic or collateral fraud that invalidates a
final judgment must be such that it prevented the unsuccessful party from fully and fairly presenting his case or
defense and the losing party from having an adversarial trial of the issue. There is extrinsic fraud when a party is
prevented from fully presenting his case to the court as when the lawyer connives to defeat or corruptly sells out his
client’s interest. Extrinsic fraud can be committed by a counsel against his client when the latter is prevented from
presenting his case to the court. (Citations omitted)81

On the other hand, mistake as used in Rule 38 means mistake of fact and not mistake of law.  A wrong choice in
82

legal strategy or mode of procedure will not be considered a mistake for purposes of granting a petition for relief
from judgment.  Mistake as a ground also "does not apply and was never intended to apply to a judicial error which
83

the court might have committed in the trial [since] such error may be corrected by means of an appeal." 84

Mistake can be of such nature as tocause substantial injustice to one of the parties. It may be so palpable that it
borders on extrinsic fraud.

Petitioner city recounted the "mistakes, negligence, incompetence and suspicious acts/omissions"  of city legal
85

officer Atty. Roy S. Laforteza in the affidavit of merit signed by then Mayor, Benjamin S. Lim:

a) He did not present testimonialevidence for the defense;

b) He filed a Motion for Reconsideration of a decision most prejudicial to the City on the last day, and did not
even base his arguments on the transcripts that clearly show that the plaintiff had presented absolutely no
evidence/proof of her claim for damages and attorney’s fees; also, he did not directly attack the Decision
itself, which awarded ₱10M as actual damages and ₱500,000.00 as attorney’s fees without stating clearly
and distinctly the facts on which the awards are based (because there are actually no such facts).

c) He filed a motion for reconsideration without the requisite notice of hearing – his most grievous and fatal
error. This resulted in the finality of the Decision, and the issuance of the Order of Execution.

d) He kept the adverse decision, the denial of his Motion for Reconsideration and the Order of Execution
from this affiant, his immediate superior, and relied on his own devices (several times, he received – but
completely ignored – the advice and the reminder of the City Administrator that he should consult and
coordinate with the City’s legal consultant, Atty. Francisco F. Baraan III) despite the already precarious
situation he put the City in. As I said, I was informed of the order of execution by another lawyer.  (Emphasis
86

supplied)

Atty. Laforteza’s "mistake" was fatal considering that the trial court awarded a total amount of ₱11 million in favor of
Maramba based merely on her testimony that "the actual costof the building through continuous improvement is
Five Million (5M) more or less";  that her husband spent $1,760 for a round trip business travel to the Philippines to
87

attend to the case; and that "for his accommodation and car rental, her husband spent more or less, ₱10,000.00
including round trip ticket."
88

First, nowhere in the trial court’s July 30, 2004 decision penned by Judge Laron did it state or refer to any document
presented by Maramba to substantiate her claimed costs. In fact, the amounts she testified on did not even add up
to the ₱10 million the court awarded as actual damages.

On the other hand, the August 25, 2005 trial court decision penned by Judge Castillo discussed that "Marambawas
only able to prove the amount of ₱75,000.00 as the appraised value of the improvements made on the leased
premises."  The renewal lease agreement covering the property, signed by Maramba, clearly stated this
89

amount. The decision also explained that Maramba "was not ableto show proof of the 5 million amount of
90

improvements made on the establishment, as she was claiming to have been made[,]"  and "she did not show any
91

single receipt for her traveling expenses and for the car rental she made during her stay in the country for the
purpose of prosecuting this case." 92

Second, the body of the trial court’s July 30, 2004 decision mentioned that Maramba was entitled to 1 million as
moral damages and ₱500,000.00 as attorney’s fees.  This is inconsistent with the dispositive portion that awarded
93

₱500,000.00 as moral damages and ₱500,000.00 as attorney’s fees. 94

The affidavit of merit discussed thatMaramba testified on her shock, sleepless nights, and mental anguish, but she
never expressly asked for moral damages or specified the amount of ₱500,000.00. 95

On the amount of attorney’s fees, the affidavit of merit explained that Maramba did not show a legal retainerbut only
mentioned in passing, "Of course, (I am asking for) my attorney’s fees in the amount of ₱500,000.00." 96

Maramba now wants this court to overlook all these blatant discrepancies and maintain the ₱11 million
unsubstantiated award in her favor on the sole ground that petitioner city’s assistant legal officer failed to include a

522
notice of hearing in its motion for reconsideration that was filed within the 15-day reglementary period. She did not
even attempt to address the lower court’s findings that her claimed amounts as damages were all unsubstantiated.

The gross disparity between the award of actual damages and the amount actually proved during the trial, the
magnitude of the award, the nature of the "mistake" made, and that such negligence did not personally affect the
legal officer of the city all contributed to a conclusion that the mistake or negligence committed by counsel bordered
on extrinsic fraud.

There were discrepancy and lack of proof even on the amount of moral damages and attorney’s fees awarded. This
only heightened a sense of arbitrariness in the trial court’s July 30, 2004 decision. Petitioner city’s petition for relief
was correctly granted in the trial court’s August 25, 2005 decision.

Petitioner city followed the procedure under Rule 38 of the Rules of Court. Section 4 of Rule 38 provides that "[i]f the
petition is sufficient in form and substance to justify relief, the court in which it is filed, shall issue an order requiring
the adverse parties toanswer the same within fifteen (15) days from the receipt thereof."

The trial court mentioned in its November 18, 2004 order denying petitioner city’s petition for relief from judgment
that an answer with motion to dismiss was filed before it.  Maramba prayed that the "petition for review be outright
97

denied for lack of merit [and] that the writ of execution dated October 26, 2004 be accordingly implemented." 98

Thus, the requirement under Section 4 of Rule 38 was complied with when Maramba filed an answer with motion to
dismiss, and the court considered this pleading in its resolution of petitioner city’s petition for relief from judgment.

Periods for filing a petition for relief under Rule 38

The time for filing a petition for relief is found under Section 3, Rule 38 of the Rules of Court, which reads:

SEC. 3 Time for filing petition; contents and verification. – A petition provided for in either of the preceding
sectionsof this Rule must be verified, filed within sixty (60) days after the petitioner learns of the judgment, final
order, or other proceeding to be set aside, and not more than six (6) months after such judgment or final order was
entered, or such proceeding was taken; and must be accompanied with affidavits showing the fraud, accident,
mistake or excusable negligence relied upon, and the facts constituting the petitioner’s good and substantial cause
of action or defense, as the case may be. (Emphasis supplied)

The double period required under thisprovision is jurisdictional and should be strictly complied with.  Otherwise, a
99

petition for relief from judgment filed beyond the reglementaryperiod will be dismissed outright. 100

The 60-day period to file a petition for relief from judgment is reckoned from actual receipt of the denial of the motion
for reconsideration when one is filed. 101

Petitioner city received a copy of the July 30, 2004 decision on August 11, 2004. It filed a motion for reconsideration
on August 26, 2004. On October 25, 2004, it received a copy of the October 21, 2004 trial court order denying its
motion for reconsideration. Four days later or on October 29, 2004, it filed its petition for relief from judgment.Thus,
the petition for relief from judgment was considered filed on time.

Actual damages

The issue on the amount of damages is a factual question that this court may not resolve in a Rule 45
petition. However, this rule admits of recognized exceptions:
102

The recognized exceptions to this rule are: (1) when the conclusion is a finding grounded entirely on speculation,
surmise and conjecture; (2) when the inference made is manifestly mistaken; (3) when there is a grave abuse of
discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are
conflicting; (6) when the Court of Appeals went beyond the issues of the case and its findings are contrary to the
admissions of both appellant and appellee; (7) when the findings of fact of the Court of Appeals are contrary to
those of the trial court; (8); when said findings of fact are conclusions without citation of specific evidence on which
they are based;(9) when the facts set forth in the petition aswell as in the petitioner’s main and reply briefs are not
disputed by the respondents; and (10) when the findings of fact of the Court of Appeals are premised on the
supposed absence of evidence and contradicted by the evidence on record. (Sarmiento v. Court of Appeals, 353
Phil. 834, 846 [1998]).  (Emphasis supplied)
103

The July 30, 2004 trial court decision penned by Judge Laron only summarized Maramba’s testimony as basis for its
award of 10 million as actual damages:

She asked her husband to help her on her legal problem regarding the demolished fish market, telling him to go to
the Philippines and find out what happened and help her family. Her husband came to the Philippines. He left on
523
December 30, 2003 and arrived on December 31, 2003. Her husband stayed in the Philippines for twenty-one (21)
days and paid 1,760 dollars for the business class round trip fare. For his accommodation and car rental, her
husband spent more or less Php10,000.00 including the round trip ticket. She has been in possession of that
property subject of this case for more than thirty-two (32) years and for the duration of more than 32 years that they
are in possession of the property, she spent for the construction and improvement of the building and the actual cost
of the building through continuous improvement is Five Million (5M) more or less. The amount of Php75,000.00 was
her expenses incurred for the year 1972.Due to her sufferings, she asked the Court for moral damages in the
amount of Ten Million (10M) pesos for the damages, attorney’s fees in the amount of Php500,000.00 and all those
expenses incurred in coming to the Philippines together with her husband to seek redress, they spent 1,760 dollars
times two (1-8 TSN March 9, 2004) (Emphasis supplied). 104

On the other hand, in the August 25, 2005 order penned by Judge Castillo, the court explained that "Maramba was
only able to prove the amount of ₱75,000.00 as the appraised value of the improvements made on the leased
premises." 105

In its petition filed beforethis court, petitioner city attached a copy of the miscellaneous lease agreement between
Maramba and the DENR which provides:

THIRD – It is hereby understood and agreed that the appraised value of the land for the first ten (10) years, from
May 13, 1998, is ₱400.00 per square meter or ₱13,600.00 for the whole tract of land and the appraised value of the
improvements existing on the land and those proposed to be introduced thereon is ₱75,000.00.  (Emphasis
106

supplied)

Article 2199 of the Civil Code defines actual damages. It states that "[e]xcept as provided by law or by stipulation,
one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly
proven." Competent proof of the amountclaimed as actual damages is required before courts may grant the award:
107

Actual damages, to be recoverable, must not only be capable of proof, but must actually be proved with a
reasonable degree of certainty.  Courts cannot simply rely on speculation, conjecture or guesswork in determining
1âwphi1

the fact and amount of damages. To justify an award of actual damages, there must be competent proof of the
actual amount of loss, credence can be given only to claims which are duly supported by receipts. 108

Petitioner city emphasized the argument it made in its motion for reconsideration that "the improvements allegedly
destroyed or damaged consists [sic] only of G.I. sheets and some makeshift stalls used for buying and selling of
fishery products [and] [b]y no stretch of imagination would said materials amount to Php10,000,000.00 as claimed
by the plaintiff."  Considering the foregoing, substantial justice warrants the grant of the petition.
109

WHEREFORE, the petition is GRANTED. The Court of Appeals’ June 15, 2006 decision and August 14, 2006
resolution are REVERSED and SET ASIDE. The trial court orders dated August 25, 2005 and November 30, 2005
are AFFIRMED.

524
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No.180086               July 2, 2014

AFP RETIREMENT AND SEPARATION BENEFITS SYSTEM [AFP-RSBS], Petitioner, 

vs.
REPUBLIC OF THE PHILIPPINES, Respondent.

DECISION

LEONEN, J.:

The period of possession prior to the declaration that land is alienable and disposable agricultural land is included in
the computation of possession for purposes of acquiring registration rights over a property if the land has already
been declared as such at the time of the application for registration.

This is a Rule 45 petition of the Court of Appeals' January 10, 2007 decision and October 5, 2007 resolution. The
Court of Appeals reversed the trial court decision approving petitioner's application for registration.

On July 10, 1997, the Armed Forcesof the Philippines Retirement and Separation Benefits System (AFP-RSBS)
filed an application for original registration of parcels of land consisting of 48,151 square meters in Silang,
Cavite. The parcels of land were designated as Lot Nos. 2969-A, 2969-B, and 2969-C, and had a total area of
1

48,151 square meters.  These were allegedly acquired from Narciso Ambrad, Alberto Tibayan, and Restituto
2

Tibayan on March 13, 1997.  It was also alleged that their predecessors-ininterest had been in possession ofthe
3

properties since June 12, 1945. 4

In a decision dated July 28, 2001,the Municipal Circuit Trial Court approved AFP-RSBS’s application for original
registration.  The Register of Deeds was directed to cause the registration of the properties in the name of AFP-
5

RSBS. 6

525
The Republic of the Philippines moved for the reconsideration of the decision.  However, the motion was denied in
7

an order dated February 19, 2003. 8

On March 14, 2003, the Republic appealed the decision and order of the trial court, alleging improper identification
of the properties, noncompliance with SC Administrative Circular No. 7-96 dated July 15, 1996 requiring that copies
of a list of lots applied for be furnished to the Bureau of Lands,  non-submission of a tracing cloth plan, and lack of
9

the Department of Environment and Natural Resources certification showing that the properties were already
declared alienable and disposable at the time of possession by the predecessors-in-interest. 10

On January 10, 2007, the Court ofAppeals reversed the decision of the trial court and dismissed AFP-RSBS’s
application.  The dispositive portion of the decision reads:
11

WHEREFORE, the Decision appealed from is REVERSED and SET ASIDE and another one entered DISMISSING
the application for original registration. 12

The Court of Appeals found that the properties had no pending land application and that there were no overlapping
lots.  Hence, no person needed to be notified of the land registration proceedings.  The Court of Appeals also found
13 14

that AFP-RSBS complied with the requirement to submit a tracing cloth plan. 15

However, according to the Court of Appeals, since Lot 2969 was declared alienable and disposable only on March
15, 1982, the period of possession of the predecessors-in-interest before that date should be excluded from the
computation of the period of possession.  Hence, AFPRSBS’s and its predecessors-in-interest’s possessions could
16

not ripen into ownership. 17

The Court of Appeals also ruled that AFP-RSBS, as a private corporation or association, may not own alienable
lands of the public domain pursuant to Section 3, Article XII of the Constitution. 18

On February 7, 2007, AFP-RSBS filed a motion for reconsideration of the Court of Appeals’ decision.  The Court of19

Appeals denied this motion in a resolution promulgated on October 5, 2007. 20

Hence, this petition was filed.

The issue in this case is whether the period of possession before the declaration that land is alienable and
disposable agricultural land should be excluded from the computation of the period of possession for purposes of
original registration.

AFP-RSBS argued that "[w]hat is required is that the property sought to be registered has already been declared to
be alienable and disposable land of the public domain at the time [of]the application for registration . . . before the
court."  In support of this argument, AFP-RSBS cited Republic v. CA and Naguit  and Republic v. Bibonia and
21 22

Manahan.  Hence, AFPRSBS and its predecessors-in-interest’s possession before June 12, 1945 should have
23

ripened into a bonafide claim of ownership.  AFP-RSBS also argued that the land had already been private before
24

its acquisition in 1997 by virtue of the claim of ownership ofits predecessors-in-interest before 1945.  Therefore,
25

petitioner corporation may acquire the property.

In its comment, the Republic argued that the classification of land as alienable and disposable is required before
possession can ripen into ownership.  The period of possession before declaration that the land is alienable and
26

disposable cannot be included in computing the period of adverse possession.  Hence, before March 15, 1982,
27

there could have been no possession in the concept of an owner.  The Republic also argued that there was no
28

sufficient evidence of open, continuous, exclusive, and notorious possession under a bona fide claim of ownership
before June 12, 1945.

We rule for petitioner.

The requirements for the application for original registration of land based on a claim of open and continuous
possession of alienable and disposable lands of public domain are provided in Section 14(1) of Presidential Decree
No. 1529 or the Property Registration Decree. It provides:

Section 14. Who may apply. The following persons may file in the proper Court of First Instance an application for
registration of title to land, whether personally orthrough their duly authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive
and notorious possession and occupationof alienable and disposable lands of the public domainunder a bona fide
claim of ownership since June 12, 1945, or earlier. (Emphasis supplied)

A similar provision can be found in Commonwealth Act No. 141 or Public Land Act:

526
Sec. 48. The following-described citizens of the Philippines, occupying lands of the public domain or claiming to own
any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court
of First Instance of the province where the land is located for confirmation of their claims and the issuance of a
certificate of title therefor under the Land Registration Act, to wit:

....

(b) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive,
and notorious possession and occupationof agricultural lands of the public domain, under a bona fide claim of
acquisition or ownership, since June 12, 1945, immediately preceding the filing of the application for confirmation of
title, except when prevented by war or force majeure. Those shall be conclusively presumed to have performed all
the conditions essential to a government grant and shall be entitled to a certificate of title under the provisions of this
chapter. (As amended by Presidential Decree No. 1073) (Emphasis supplied)

Based on these provisions, an applicant for original registration based on a claim of exclusive and
continuouspossession or occupation must show the existence of the following:

1) Open, continuous, exclusive,and notorious possession, by themselves or through their predecessors-in-interest,

of land;

2) The land possessed or occupied musthave been declared alienable and disposable agricultural land of public
domain;

3) The possession or occupation was under a bona fide claim of ownership;

4) Possession dates back to June 12, 1945 or earlier.

On one hand, petitioner argued that its and its predecessors-ininterest’s possession before the declaration that the
property was alienable and disposable agricultural land in1982 should be included in the computation of the period
of possession for purposes of registration.  On the other hand, respondent holds the position that possession before
29

the establishment of alienability of the land should be excluded in the computation. 30

Republic v. Naguit  involves the similar question.In that case, this court clarified that Section 14(1) of the Property
31

Registration Decree should be interpreted to includepossession before the declaration of the land’s alienability as
long as at the time of the application for registration, the land has already been declared part of the alienable and
disposable agricultural public lands. This court also emphasized in that case the absurdity that would result in
interpreting Section 14(1)as requiring that the alienability of public land should have already been established by
June 12, 1945. Thus, this court said in Naguit:

Besides, we are mindful of the absurdity that would result if we adopt petitioner’s position. Absent a legislative
amendment, the rule would be, adopting the OSG’s view, that all lands of the public domain which were not
declared alienable or disposable before June 12, 1945 would not be susceptible to originalregistration, no matter the
length of unchallenged possession by the occupant. Such interpretation renders paragraph (1) of Section 14
virtually inoperative and even precludes the government from giving it effect even as it decides to reclassify public
agricultural lands as alienable and disposable. The unreasonableness of the situation would even be aggravated
considering that before June 12, 1945, the Philippines was not yet even considered an independent state.

Instead, the more reasonable interpretation of Section 14(1) is that it merely requires the property sought tobe
registered as already alienable and disposable at the time the application for registration of title is filed. If the State,
at the time the application is made, has not yet deemed it proper to release the property for alienation ordisposition,
the presumption is that the government is still reserving the rightto utilize the property; hence, the need to preserve
its ownership in the State irrespective of the length of adverse possession even if in good faith. However, if the
property has already been classified as alienable and disposable, as it is in this case, then there is already an
intention on the part of the State to abdicate its exclusive prerogative over the property. 32

However, in the later case of Republic v. Herbieto  that was cited by respondent, this court ruled that the period of
33

possession before the declaration that land is alienable and disposable cannot be included in the computation of the
period of possession. This court said:

Section 48(b), as amended, now requires adverse possession of the land since 12 June 1945 or earlier.In the
present Petition, the Subject Lots became alienable and disposable only on 25 June 1963. Any period of possession
prior tothe date when the Subject Lots were classified as alienable and disposable is inconsequential and should be
excluded from the computation of the period of possession; such possession can never ripen into ownership and
unless the land had been classified as alienable and disposable, the rules on confirmation of imperfect title shall not
apply thereto. It is very apparent then that respondents could not have complied with the period of possession
required by Section 48(b) of the Public Land Act, as amended, to acquire imperfect or incomplete title to the Subject

527
Lots that may be judicially confirmed or legalized.  This court clarified the role of the date, June 12, 1945, in
34

computing the period of possession for purposes of registration in Heirs of Mario Malabanan v. Republic of the
Philippines.  In that case, this court declared that Naguit and not Herbieto should be followed. Herbieto "has [no]
35

precedental value with respect to Section 14(1)."  This court said:

36

The Court declares that the correct interpretation of Section 14(1) is that which was adopted in Naguit. The contrary
pronouncement in Herbieto, as pointed out in Naguit, absurdly limits the application of the provision to the point of
virtual inutility since it would only cover lands actually declared alienable and disposable prior to 12 June 1945, even
if the current possessor is able to establish open, continuous, exclusive and notorious possession under a bona
fideclaim of ownership long before that date.

Moreover, the Naguitinterpretation allows more possessors under a bona fideclaim of ownership to avail ofjudicial
confirmation of their imperfect titles than whatwould be feasible under Herbieto. This balancing fact is significant,
especially considering our forthcoming discussion on the scope and reach ofSection 14(2) of the Property
Registration Decree.

....

Thus, neither Herbietonor its principal discipular ruling Buenaventura has any precedental value with respect to
Section 14(1). On the other hand, the ratio of Naguitis embedded in Section 14(1), since it precisely involved
situation wherein the applicant had been in exclusive possession under a bona fideclaim of ownership prior to 12
June 1945. The Court’s interpretation of Section 14(1) therein was decisive to the resolution of the case. Any doubt
as to which between Naguitor Herbieto provides the final word of the Court on Section 14(1) isnow settled in favor of
Naguit.37

Moreover, in the resolution of the motions for reconsideration of this court’s 2009 decision in Heirs of
Malabanan, this court explained that there was no other legislative intent thatcould be associated with the date,
38

June 12, 1945, as written in our registration laws except that it qualifies the requisite period of possession and
occupation. The law imposes no requirement that land should have been declared alienable and disposable
agricultural land as early as June 12, 1945.

Therefore, what is important in computing the period of possession is that the land has already been
declaredalienable and disposable at the time of the application for registration. Upon satisfaction of this requirement,
the computation of the period may include the period of adverse possession prior to the declaration that land is
alienable and disposable.

Persons are entitled to the registration of their titles upon satisfaction of all the requirements enumerated under our
laws. No presumption or doctrine in favor of state ownership candeprive them of their titles once all the conditions
are satisfied.  Our Constitution contains no such limit upon our citizens or privilege upon the state.  Neither was this
39 40

doctrine extended to our organic acts. 41

Respondent argued that "[s]ince the land subject of petitioner’s application for registration was classified alienable
and disposable only on March 15, 1982, it follows that petitioner could not have possessed the same in the concept
of owner, earlier than the said date." 42

Respondent is mistaken. Although adverse, open, continuous, and notorious possession in the concept of an owner
is a conclusion of law to be determined by courts, it has more to do with a person’s belief in good faith that he or she
has just title to the property that he or she is occupying. It is unrelated to the declaration that land isalienable or
disposable. A possessor or occupant of property may, therefore,be a possessor in the concept of an owner prior to
the determination that the property is alienable and disposable agricultural land. His or her rights, however, are still
to be determined under the law.

Petitioner’s right to the original registration of titleover the property is, therefore, dependent on the existence of: a) a
declaration that the land is alienable and disposable at the time ofthe application for registration and b) open and
continuous possession in the concept of an owner through itself or through its predecessors-in-interest since June
12, 1945 or earlier.

In this case, there is no dispute that the properties were already declared alienable and disposable land on March
15, 1982. Hence, the property was already alienable and disposable at the time of petitioner’s application for
registration on July 10, 1997.

As to the required period of possession, petitioner was able to show that it, through itself or its predecessors-in-
interest, has been in open, continuous, exclusive, and notorious possession before 1945 through testimonies and
documents.

528
One of petitioner’s predecessors-in-interest, Emilia Amadure, testified that as early as her birth in 1917, her family
was already residing in Barangay Biluso, Silang, Cavite. Her father, Maximo Amadure, was the properties’ previous
owner. She was able to describe the lots’ metes and bounds as well as the adjoining properties’ owners.  She also
43

testified that "the first time she came to know aboutsaid lots was at the age of reason"  at which time, she saw her
44

father in possession of the properties. By June 12, 1945, she was already 28 years old.Tax declarations between
1948 to 1998 under Maximo’s name and other previous owners’ names were also presented. 45

Maximo Amadure’s grandson, Rogelio Amadure, corroborated Emilia’s testimony. He testified thathis grandfather
owned and tilled the properties with his five children: Catalino, Dominador, Margarita, Gregonia, and Emelia
Amadure.  They cultivated banana, corn, papaya, and palay on the properties.  Before the war, Rogelio’s father
46 47

informed him that Maximo owned the properties.  Maximo’s children took possession of the properties after
48

Maximo’s death. 49

Based on the testimonies, we can already deduce that petitioner’s predecessors-in-interest had possessed the
properties in the concept of an owner even earlier than 1945.

Petitioner was, therefore, able to prove all the requisites for the grant of an original registration of title under our
registration laws.

Respondent argues that although petitioner is a government-owned and -controlled corporation, it cannot acquire
title through acquisitive prescription. This argument is unmeritorious. The type of corporation that petitioner is has
nothing to do with the grant of its application for original registration. Petitioner also acquired title to the property
under Section 14(1) of the Property Registration Decree or Section 48(b) of the Public Land Act, and not through
acquisitive prescription.

If respondent’s argument stems from the Court of Appeals’ ruling that petitioner cannot acquire title to the property
because of Section 3, Article XII of the Constitution, which prohibits private corporations from acquiring public land,
respondent is, again, mistaken. The prohibition in Section 3, Article XII of the Constitution applies only to private
corporations. Petitioner is a government corporation organized under Presidential Decree No. 361, as amended by
Presidential Decree No. 1656.

WHEREFORE, the petition is GRANTED. The Court of Appeals' decision of January 10, 2007 and resolution of
October 5, 2007 are SET ASIDE. The July 28, 2001 trial court decision is REINSTATED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

A.M. No. P-14-3218               July 8, 2014

[Formerly: OCA IPI No. 13-4037-P]

SELECTION AND PROMOTION BOARD, OFFICE OF THE COURT ADMINISTRATOR, Complainant, 

vs.
RONALDO D. TACA, CASHIER I, METROPOLITAN TRIAL COURT, OFFICE OF THE CLERK OF COURT,
MANILA, Respondent.

RESOLUTION

PER CURIAM:

Personal data sheets should be accomplished with candor and truthfulness as the information these sheets contain
will be the basis of any appointment to government service. Any false entry in these documents will be considered
dishonesty and shall bepunishable by dismissal from service.

This is an administrative complaint for dishonesty and falsification of public documents against Ronaldo D. Taca.

Respondent Ronaldo D. Taca is a Cashier I at the Office of the Clerk of Court of the Metropolitan Trial Court of
Manila. He has been employed there since April 8, 1997.  Sometime in 2012, he applied for the position of Cashier II
1

and III.
2

On September 10, 2012, the Selection and Promotion Board for the Lower Courts of the Office of the Court
Administrator (OCA-SPB) wrote to him, asking him to explain the discrepancies found on his Personal Data Sheet
(PDS) on file. The discrepancies were found in the portion on his college educational attainment and the date of his
civil service examination. 3

529
Respondent sent a letter-reply dated October 1, 2012,alleging that the handwritten copy of his PDS was notthe
same as the Office of Administrative Services’ typewritten copy of his PDS on file.
4

In an endorsement dated October 15, 2012, the OCA-SBP referred the letter-reply to the legal office for appropriate
action.
5

On January 3, 2013, Wilhelmina D. Geronga, Chief of the OCA Legal Office, submitted a memorandum to Court
Administrator Jose Midas P. Marquez after finding that there was a prima facie case against respondent for
dishonesty. They alleged that there were several discrepancies found in the PDS submitted by the respondent from
1991 to 2010:6

Date Entry No. 17 Degree/Units Inclusive

Accomplished (Educational Earned Date of
Attainment) Attendance

May 6, 1991 College – B.S. Psychology 1974-1984

handwritten – Far Eastern
201 file copy University

January 6, 1997 Vocational   1977-1978

handwritten –
attached to the College – Far B.S. Psychology 1974-1984
letter of Mr. Taca Eastern
University

January 6, 1997 Vocational   1979

typewritten –
201 file copy College – Far Grad./B.S. 1974-1984
Eastern Psychology
University

December 29, College

2010 Far Eastern 101 units 1974 - ?
handwritten – University
submitted to the
SPB 201 PDS New Era BSBA Banking 2010
University & Finance/
Graduate

Date Entry No. 18 Date of Rating

Accomplished Civil Service Examination

May 6, 1991 Professional   76.3

handwritten – 201
file copy

January 6, 1997 Professional July 28, 1985 73.03

handwritten –
attached to the
letter of Mr. Taca

January 6, 1997 Professional 1982 73.00

typewritten – 201
file copy

October 15, 2001 Professional July 28, 1985 73.03

530
 typewritten – 201
file copy

December 29, Professional July 28, 1985 73.03

2010 handwritten
– submitted to the
SPB

January 24, 2012 Professional January 28, 1985 73.03

handwritten –
submitted to the
SPB

Upon the legal office’s recommendation, the memorandum was docketed as an administrative complaint and
respondent was required to comment on the charges against him. 7

In his comment dated April 3, 2013, respondent denied all the allegations, claiming that the discrepancies in his
PDS were"the result of hastiness and negligence."  He claimed that he understood degrees and units in
8

"Degrees/Units Earned" to mean the same thing. He also reiterated that the data he provided was the truth since he
graduated from college and he passed the civil service examinations. 9

On January 6, 2014, the OCA submitted its report recommending the dismissal of the respondent. 10

The OCA "was willing to turn a blind eye"  to the discrepancies in respondent’s civil service examination dates and
11

scores since "[t]he actual examination took only one day in the life of respondent and the score he attained was not
that remarkable."  The OCA concluded that these circumstances "would not have created an indelible impression in
12

respondent’s mind." 13

The OCA, however, took exception to the entries made by the respondent with regard to his educational attainment
and gave scant consideration to respondent’s claim that he misunderstood the meaning of "Degree/Units Earned." It
found that despite respondent’s claim, he wrote "Grad./B.S. Psy." as his degree earned on his PDS dated January
16, 1997. They also noted that respondent still wrote down "B.S. Psychology" in his PDS dated October 15, 2001
even if the PDS specified that the applicant "write NONE if not graduated." 14

The OCA also found that even withoutthese discrepancies in his PDS, respondent still deserved to be dismissed
from service since the position of Cashier I required a Bachelor’s Degree. When respondent was hired as Cashier I
on April 8, 1997, he was notqualified since he only earned his bachelor’s degree in 2010. 15

Citing Office of the Court Administrator v. Bermejo,  Re: Administrative Case for Dishonesty and Falsification of
16

Official Document: Benjamin R. Katly, Information Technology Officer I, Systems Development for Judicial
Application Division, MISO  and Retired Employee v. Merlyn G. Manubag,  the OCA found respondent guilty of
17 18

dishonesty and falsification of official documents. They recommended that the administrative complaint be docketed
asa regular administrative matter. They also recommended the dismissal of respondent from service with forfeiture
of all retirementbenefits, and disqualification from employment in any government office including government-
owned and controlled corporations. 19

The only issue this court is confronted with is whether the respondent committed dishonesty when he falsified the
entries in his PDS.

We adopt the findings of the OCA and agree with its recommendations.

Dishonesty is defined as "a disposition to lie, cheat, deceive or defraud; untrustworthiness; lack of integrity, lack of
honesty, probity or integrity in principle; lack of fairness and straightforwardness; disposition to defraud, deceive or
betray."20

Respondent is charged with falsifying certain entries in his PDS.

Civil Service Form No. 212, otherwise known as the PDS, is "the official information sheet for all government
personnel and [is] the main supporting document for appointment in government."  It has undergone several
21

revisions "to conform with the requirements for appointment." 22

Forms revised in 1982 and 1993 specify the "Degrees/Units Earned" while forms revised in 1998 specify "Degree
Earned" and "Number of Units Completed/Course Title." The current PDS, revised in 2005, is more specific, and
531
asks for the "Degree Course," "Year Graduated (if graduated)," and "Highest Grade/Level/Units Earned (if not
graduated)."

On respondent’s handwritten PDS dated May 6, 1991  and January 6, 1997,  he listed "B.S. Psychology" as
23 24

"Degrees/Units Earned." The typewritten PDS dated January 6, 1997 on file with OAS had listed "Grad./B.S. Psy."
under "Degrees/Units Earned." 25

Respondent claimed that the PDS copy on file with OAS was not his, which accounted for the discrepancies. An
examination, however, of both the handwritten and typewritten PDS dated January 6,1997 shows that most of the
details listed were the same. The signatures on both copies were also similar. Even if we were to disregard the
typewritten PDS dated January 6, 1997, his other PDS dated May 6, 1991, January 6,1997, and October 15, 2001
show that he listed "B.S. Psychology" as his college degree.

His argument that he interpreted degrees earned and units earned to mean the same has no merit.  It only takes a
1âwphi1

simple comprehension of the English language to understand that "degree earned" means the degree which the
applicant graduated with. "Units earned" would mean the number of units finished in a specific degree course if the
applicant has not yet earned the degree.

Respondent has shown that he understood exactly what the two terms meant. On his PDS dated October 15, 2001,
he wrote "B.S. Psychology" under "Degree Earned," even if the formspecified that the applicant "write NONE if not
graduated."  In the personal data sheets he submitted to the OCA-SPB, he specified "B.S. Psychology" under
26

"Degree Course" and "101 Units" under "Highest Grade/Level/UnitsEarned," while keeping the "Year Graduated"
blank. He made another entry for New Era University where he wrote down "BSBA Banking & Finance" for "Degree
Course," "Graduate" for "Highest Grade/Level/Units Earned," and "2010" for "Year Graduated." 27

Respondent’s intent to deceive is clear from the information he falsified.  Civil Service Resolution No. 97-0404 dated
1âwphi1

January 24, 1997 required a bachelor’s degree and Career Service (Professional) Second Level Eligibility for the
position of Cashier I.

At the time he was appointed Cashier I on April 8, 1997, he only possessed the required civil service eligibility, as
shown by his civil service certificate  dated May 13, 1988. He did not have a bachelor’s degree, since he had only
28

completed 101 units in Far Eastern University. Without this bachelor’s degree, he would not bequalified for the
position he was appointed to. Despite this, respondentmade it appear on his PDS dated May 6, 1991  and January 29

6, 1997  that he had a bachelor’s degree in psychology from Far Eastern University.
30

His deception would have gone unnoticed had he not attempted to apply for a promotion. It was as ifhe knew that
once he attained his bachelor’s degree in 2010, he was qualified not only for the positions he was applying for but
also the position he was occupying. His subsequent attainment of a college degree, however, does not mitigate his
liability. It does not remedy the fact that he knowingly falsified pertinent information in his PDS so he can be
appointed to a position he was not qualified for.

In Villordon v. Avila,  this court stated that:

31

Civil service rules mandate the accomplishment of the PDS as a requirement for employment in the government.
Hence, making false statements in one’s PDS is ultimatelyconnected with one’s employment in the government. The
employee making false statements in his or her PDS becomes liable for falsification.

....

The declarations that every government personnel makes in accomplishing and signing the PDS are not empty
statements. Duly accomplished forms of the Civil Service Commission are considered official documents, which, by
their very nature are in the same category as public documents, and become admissible in evidence without need of
further proof. As an official document made in the course of official duty, its contents are prima facie evidence of the
facts stated therein.32

The false statements in his PDS prejudiced other more qualified applicants, who would have been hired for that
position had it not been for his misrepresentations.  He is, therefore, liable not only for dishonesty but also for
33

falsification of public documents.

In Re: Administrative Case for Dishonesty and Falsification of Official Document: Benjamin R. Katly: 34

We have repeatedly said that persons involved in the dispensation of justice, from the highestofficial to the lowest
clerk, must live up to the strictest standards of integrity, probity, uprightness, honesty and diligence in the public
service. This Court will not tolerate dishonesty for the Judiciary expects the best from all its employees. An
employee, such as respondent, who falsifies an officialdocument to gain unwarranted advantage over other more

532
qualified applicants to the same position and secure the sought-after promotion cannot be said to have measured
up to the standards required of a public servant. 35

"Dishonesty and falsification are malevolent acts that have no place in the judiciary."  Under Rule 10, Section 46 (A)
36

(1) (6) of the Revised Rules on Administrative Cases in the Civil Service, these offenses are punishable by
dismissal. The penalty of dismissal from service includes cancellation of eligibility, forfeiture of leave credits, and
retirement benefits, and disqualification from re-employment in the government service. 37

As correctly pointed out by the OCA, a distinction must be made with respect to his credits accrued beforeApril 8,
1997 and his leave credits accrued after April 8, 1997.

Before he was appointed Cashier I on April 8, 1997, he had been previously working as a Cash Clerk II, a position
which only required Civil Service (Subprofessional) First Level Eligibility and completion of two years’ studies in
college.  Since he was qualified for the position of Cash Clerk II, he should be allowed to keepthe leave credits
38

accrued before his appointment to Casher I.

However, in accordance withthis court’s ruling in Re: Administrative Case for Dishonesty and Falsification ofOfficial
Document: Benjamin R. Katly,  all of respondent’s leave creditsaccrued after his appointment on April 8, 1997 are
39

forfeited, as his ineligibility retroacts to the date of his appointment.

WHEREFORE, respondent RONALDO D. TACA, Cashier I, Office of the Clerk of Court, Metropolitan Trial Court,
Manila, is found GUILTY of dishonesty and falsification of official document thereby warranting his DISMISSALfrom
the service effective immediately, with forfeiture of all retirement benefits, including all accrued leave credits earned
from April 8, 1997 to the present, and disqualification from re-employment in any government office including
government-owned and -controlled corporations.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 196251               July 9, 2014

OLIVAREZ REALTY CORPORATION and DR. PABLO R. OLIVAREZ, Petitioner, 

vs.
BENJAMIN CASTILLO, Respondent.

DECISION

LEONEN, J.:

Trial may be dispensed with and a summary judgment rendered if the case can be resolved judiciously by plain
resort to the pleadings, affidavits, depositions, and other papers filed by the parties.

This is a petition for review on certiorari  of the Court of Appeals' decision  dated July 20, 2010 and resolution dated
1 2 3

March 18, 2011 in CAG.R. CV No. 91244.

The facts as established from the pleadings of the parties are as follows:

Benjamin Castillo was the registered owner of a 346,918-squaremeter parcel of land located in Laurel, Batangas,
covered by Transfer Certificate of Title No. T-19972.  The Philippine Tourism Authority allegedly claimed ownership
4

of the sameparcel of land based on Transfer Certificate of Title No. T-18493.  On April 5, 2000, Castillo and Olivarez
5

Realty Corporation, represented by Dr. Pablo R. Olivarez, entered into a contract of conditional sale  over the
6

property. Under the deed of conditional sale, Castillo agreed to sell his property to Olivarez Realty Corporation for
₱19,080,490.00. Olivarez Realty Corporation agreed toa down payment of ₱5,000,000.00, to be paid according to
the following schedule:

DATE AMOUNT

April 8, 2000 500,000.00

533
 May 8, 2000 500,000.00

May 16, 2000 500,000.00

June 8, 2000 1,000,000.00

July 8, 2000 500,000.00

August 8, 2000 500,000.00

September 8, 2000 500,000.00

October 8, 2000 500,000.00

November 8, 2000 500,000.00 7

As to the balance of ₱14,080,490.00, Olivarez Realty Corporation agreed to pay in 30 equal monthly installments
every eighth day of the month beginning in the month that the parties would receive a decision voiding the Philippine
Tourism Authority’s title to the property.  Under the deed of conditional sale, Olivarez RealtyCorporation shall file the
8

action against the Philippine Tourism Authority "with the full assistance of [Castillo]."  Paragraph C of the deed of
9

conditional sale provides:

C. [Olivarez Realty Corporation] assumes the responsibility of taking necessary legal action thru Court to have the
claim/title TCT T-18493 of Philippine Tourism Authority over the above-described property be nullified and voided;
with the full assistance of [Castillo][.]
10

Should the action against the Philippine Tourism Authority be denied, Castillo agreed to reimburse all the amounts
paid by Olivarez Realty Corporation. Paragraph D of the deed of conditional sale provides:

D. In the event that the Court denie[s] the petition against the Philippine Tourism Authority, all sums received by
[Castillo] shall be reimbursed to [Olivarez Realty Corporation] without interest[.] 11

As to the "legitimate tenants" occupying the property, Olivarez Realty Corporation undertook to pay them
"disturbance compensation," while Castillo undertook to clear the land of the tenants within six months from the
signing of the deed of conditional sale. Should Castillo fail to clear the land within six months, Olivarez Realty
Corporation may suspend its monthly down payment until the tenants vacate the property. Paragraphs E and F of
the deed of conditional sale provide: E. That [Olivarez Realty Corporation] shall pay the disturbance compensation
to legitimate agricultural tenants and fishermen occupants which in no case shall exceed ONE MILLION FIVE
HUNDRED THOUSAND (₱1,500,000.00) PESOS. Said amountshall not form part of the purchase price. In excess
of this amount, all claims shall be for the account of [Castillo];

F. That [Castillo] shall clear the land of [the] legitimate tenants within a period of six (6) months upon signing of this
Contract, and in case [Castillo] fails, [Olivarez Realty Corporation] shall have the right to suspend the monthly down
payment until such time that the tenants [move] out of the land[.] 12

The parties agreed thatOlivarez Realty Corporation may immediately occupy the property upon signing of the deed
of conditional sale. Should the contract be cancelled, Olivarez RealtyCorporation agreed to return the property’s
possession to Castillo and forfeit all the improvements it may have introduced on the property. Paragraph I of the
deed of conditional sale states:

I. Immediately upon signing thisContract, [Olivarez Realty Corporation] shall be entitled to occupy, possess and
develop the subject property. In case this Contract is canceled [sic], any improvement introduced by [the
corporation] on the property shall be forfeited in favor of [Castillo][.]13

On September 2, 2004, Castillo filed a complaint  against Olivarez Realty Corporation and Dr. Olivarez with the
14

Regional Trial Court of Tanauan City, Batangas.

Castillo alleged that Dr. Olivarez convinced him into selling his property to Olivarez Realty Corporation on the
representation that the corporation shall be responsible in clearing the property of the tenants and in paying them
disturbance compensation. He further alleged that Dr. Olivarez solely prepared the deed of conditional sale and that
he was made to sign the contract with its terms "not adequately explained [to him] in Tagalog." 15

534
After the parties had signed the deed of conditional sale, Olivarez Realty Corporation immediately took possession
of the property. However, the corporation only paid 2,500,000.00 ofthe purchase price. Contrary to the agreement,
the corporation did not file any action against the Philippine Tourism Authority to void the latter’s title to the property.
The corporation neither cleared the land of the tenants nor paid them disturbance compensation. Despite demand,
Olivarez Realty Corporation refused to fully pay the purchase price. 16

Arguing that Olivarez Realty Corporation committed substantial breach of the contract of conditional sale and that
the deed of conditional sale was a contract of adhesion, Castillo prayed for rescission of contract under Article 1191
of the Civil Code of the Philippines. He further prayed that Olivarez Realty Corporation and Dr. Olivarez be made
solidarily liable for moral damages, exemplary damages, attorney’s fees, and costs of suit. 17

In their answer,  Olivarez Realty Corporation and Dr. Olivarez admitted that the corporation only paid ₱2,500,000.00
18

ofthe purchase price. In their defense, defendants alleged that Castillo failed to "fully assist"  the corporation in filing
19

an action against the Philippine Tourism Authority. Neither did Castillo clear the property of the tenants within six
months from the signing of the deed of conditional sale. Thus, according to defendants, the corporation had "all the
legal right to withhold the subsequent payments to [fully pay] the purchase price." 20

Olivarez Realty Corporation and Dr. Olivarez prayedthat Castillo’s complaint be dismissed. By way of compulsory
counterclaim, they prayed for ₱100,000.00 litigation expenses and ₱50,000.00 attorney’s fees. 21

Castillo replied to the counterclaim,  arguing that Olivarez Realty Corporation and Dr. Olivarez had no right to
22

litigation expenses and attorney’s fees. According to Castillo, the deed of conditional sale clearly states that the
corporation "assume[d] the responsibility of taking necessary legal action"  against the Philippine Tourism Authority,
23

yet the corporation did not file any case. Also, the corporation did not pay the tenants disturbance compensation.
For the corporation’s failure to fully pay the purchase price, Castillo claimed that hehad "all the right to pray for the
rescission of the [contract],"  and he "should not be held liable . . . for any alleged damages by way of litigation
24

expenses and attorney’s fees." 25

On January 10, 2005, Castillo filed a request for admission,  requesting Dr. Olivarez to admit under oath the
26

genuineness of the deed of conditional sale and Transfer Certificate of Title No. T-19972. He likewise requested Dr.
Olivarez to admit the truth of the following factual allegations:

1. That Dr. Olivarez is the president of Olivarez Realty Corporation;

2. That Dr. Olivarez offered to purchase the parcel of land from Castillo and that he undertook to clear the
property of the tenants and file the court action to void the Philippine Tourism Authority’s title to the property;

3. That Dr. Olivarez caused the preparation of the deed of conditional sale;

4. That Dr. Olivarez signed the deed of conditional sale for and on behalf of Olivarez Realty Corporation;

5. That Dr. Olivarez and the corporation did not file any action against the Philippine Tourism Authority;

6. That Dr. Olivarez and the corporation did not pay the tenants disturbance compensation and failed to
clear the property of the tenants; and

7. That Dr. Olivarez and the corporation only paid ₱2,500,000.00 of the agreed purchase price. 27

On January 25, 2005, Dr. Olivarez and Olivarez Realty Corporation filed their objections to the request for
admission,  stating that they "reiterate[d] the allegations [and denials] in their [answer]."
28 29

The trial court conducted pre-trial conference on December 17, 2005.

On March 8, 2006, Castillo filed a motion for summary judgment and/or judgment on the pleadings.  He argued that 30

Olivarez Realty Corporation and Dr. Olivarez "substantially admitted the material allegations of [his]
complaint," specifically:
31

1. That the corporation failed to fully pay the purchase price for his property; 32

2. That the corporation failed to file an action to void the Philippine Tourism Authority’s title to his
property; and33

3. That the corporation failed to clear the property of the tenants and pay them disturbance compensation. 34

535
Should judgment on the pleadings beimproper, Castillo argued that summary judgment may still be rendered
asthere is no genuine issue as to any material fact.  He cited Philippine National Bank v. Noah’s Ark Sugar
35

Refinery  as authority.

36

Castillo attached to his motion for summary judgment and/or judgment on the pleadings his affidavit  and the
37

affidavit of a Marissa Magsino  attesting to the truth of the material allegations of his complaint.
38

Olivarez Realty Corporation and Dr. Olivarez opposed  the motion for summary judgment and/or judgment on the
39

pleadings, arguing that the motion was "devoid of merit."  They reiterated their claim that the corporation withheld
40

further payments of the purchase price because "there ha[d] been no favorable decision voiding the title of the
Philippine Tourism Authority."  They added that Castillo sold the property to another person and that the sale was
41

allegedly litigated in Quezon City. 42

Considering that a title adverse to that of Castillo’s existed, Olivarez Realty Corporation and Dr. Olivarez argued that
the case should proceed to trial and Castillo be required to prove that his title to the property is "not spurious or fake
and that he had not sold his property to another person." 43

In reply to the opposition to the motion for summary judgment and/or judgment on the pleadings,  Castillo
44

maintained that Olivarez Realty Corporation was responsible for the filing of an action against the Philippine Tourism
Authority. Thus, the corporation could not fault Castillo for not suing the PhilippineTourism Authority.  The
45

corporation illegally withheld payments of the purchase price.

As to the claim that the case should proceed to trial because a title adverse to his title existed, Castillo argued that
the Philippine Tourism Authority’s title covered another lot, not his property. 46

During the hearing on August 3, 2006, Olivarez Realty Corporation and Dr. Olivarez prayed that they be given 30
days to file a supplemental memorandum on Castillo’s motion for summary judgment and/or judgment on the
pleadings. 47

The trial court granted the motion. Itgave Castillo 20 days to reply to the memorandum and the corporation and Dr.
Olivarez 15 days to respond to Castillo’s reply. 48

In their supplemental memorandum,  Olivarez Realty Corporation and Dr. Olivarez argued that there was "an
49

obvious ambiguity"  as to which should occur first — the payment of disturbance compensation to the tenants or the
50

clearing of the property of the tenants.  This ambiguity, according to defendants, is a genuine issue and "oughtto be
51

threshed out in a full blown trial." 52

Olivarez Realty Corporation and Dr. Olivarez added that Castillo prayed for irreconcilable reliefs of reformation of
instrument and rescission of contract.  Thus, Castillo’s complaint should be dismissed.
53

Castillo replied  to the memorandum, arguing that there was no genuine issue requiring trial of the case. According
54

to Castillo, "common sense dictates . . . that the legitimate tenants of the [property] shall not vacate the premises
without being paid any disturbance compensation . . ."  Thus, the payment of disturbance compensation should
55

occur first before clearing the property of the tenants.

With respect to the other issuesraised in the supplemental memorandum, specifically, that Castillo sold the property
to another person, he argued that these issues should not be entertained for not having been presented during pre-
trial.
56

In their comment on the reply memorandum,  Olivarez Realty Corporation and Dr. Olivarez reiterated their
57

arguments that certain provisions of the deed of conditional sale were ambiguous and that the complaint prayed for
irreconcilable reliefs. 58

As to the additional issues raised in the supplemental memorandum, defendants argued that issues not raised and
evidence not identified and premarked during pre-trial may still be raised and presented during trial for good cause
shown. Olivarez Realty Corporation and Dr. Olivarez prayed that Castillo’s complaint be dismissed for lack of merit. 59

Ruling of the trial court

The trial court found that Olivarez Realty Corporation and Dr. Olivarez’s answer "substantially [admitted the material
allegations of Castillo’s] complaint and [did] not . . . raise any genuine issue [as to any material fact]." 60

Defendants admitted that Castillo owned the parcel of land covered by Transfer Certificate of Title No. T-19972.
They likewise admitted the genuineness of the deed of conditional sale and that the corporation only paid
₱2,500,000.00 of the agreed purchase price. 61

536
According to the trial court, the corporation was responsible for suing the Philippine Tourism Authority and for paying
the tenants disturbance compensation. Since defendant corporation neither filed any case nor paid the tenants
disturbance compensation, the trial court ruled that defendant corporation had no right to withhold payments from
Castillo. 62

As to the alleged ambiguity of paragraphs E and F of the deed of conditional sale, the trial court ruled that Castillo
and his witness, Marissa Magsino, "clearly established"  in their affidavits that the deed of conditional sale was a
63

contract of adhesion. The true agreement between the parties was that the corporation would both clear the land of
the tenants and pay them disturbance compensation.

With these findings, the trial court ruled that Olivarez Realty Corporation breached the contract ofconditional
sale.  In its decision  dated April 23, 2007, the trial court ordered the deed of conditional sale rescinded and the
1âwphi1
64

₱2,500,000.00 forfeited in favor of Castillo "as damages under Article 1191 of the Civil Code." 65

The trial court declared Olivarez Realty Corporation and Dr. Olivarez solidarily liable to Castillo for 500,000.00 as
moral damages, ₱50,000.00 as exemplary damages, and ₱50,000.00 as costs of suit. 66

Ruling of the Court of Appeals

Olivarez Realty Corporation and Dr. Olivarez appealed to the Court of Appeals. 67

In its decision  dated July 20, 2010, the Court of Appeals affirmed in totothe trial court’s decision. According to the
68

appellate court, the trial court "did not err in its finding that there is no genuine controversy as to the facts involved
[in this case]."  The trial court, therefore, correctly rendered summary judgment.
69 70

As to the trial court’s award of damages, the appellatecourt ruled that a court may award damages through
summary judgment "if the parties’ contract categorically [stipulates] the respective obligations of the parties in case
of default."  As found by the trial court,paragraph I of the deed of conditional sale categorically states that "in case
71

[the deed of conditional sale] is cancelled, any improvementintroduced by [Olivarez Realty Corporation] on the
property shall be forfeited infavor of [Castillo]."  Considering that Olivarez Realty Corporation illegally retained
72

possession of the property, Castillo forewent rentto the property and "lost business opportunities."  The73

₱2,500,000.00 down payment, according to the appellate court, shouldbe forfeited in favor of Castillo. Moral and
exemplary damages and costs ofsuit were properly awarded.

On August 11, 2010, Olivarez RealtyCorporation and Dr. Olivarez filed their motion for reconsideration,  arguing that
74

the trial court exceeded its authority in forfeiting the ₱2,500,000.00 down payment and awarding ₱500,000.00 in
moral damages to Castillo. They argued that Castillo only prayed for a total of ₱500,000.00 as actual and moral
damages in his complaint.  Appellants prayed that the Court of Appeals "take a second hard look"  at the case and
75 76

reconsider its decision.

In the resolution  dated March 18, 2011, the Court of Appeals denied the motion for reconsideration.
77

Proceedings before this court

Olivarez Realty Corporation and Dr. Olivarez filed their petition for review on certiorari  with this court.
78

Petitionersargue that the trial court and the Court of Appeals erred in awarding damages to Castillo. Under Section
3, Rule 35 of the 1997 Rules ofCivil Procedure, summary judgment may be rendered except as to the amountof
damages. Thus, the Court of Appeals "violated the procedural steps in rendering summary judgment." 79

Petitioners reiterate that there are genuine issues ofmaterial fact to be resolved in this case. Thus, a full-blown trial
is required, and the trial court prematurely decided the case through summary judgment. They cite Torres v.
Olivarez Realty Corporation and Dr. Pablo Olivarez,  a case decided by the Ninth Division of the Court of Appeals.
80

In Torres, Rosario Torres was the registeredowner of a parcel of land covered by Transfer Certificate of Title No. T-
19971. Under a deed of conditional sale, she sold her property to OlivarezRealty Corporation for ₱17,345,900.00.
When the corporation failed to fully pay the purchase price, she sued for rescission of contractwith damages. In their
answer, the corporation and Dr. Olivarez argued thatthey discontinued payment because Rosario Torres failed to
clear the land of the tenants.

Similar to Castillo, Torres filed a motion for summary judgment, which the trial court granted. On appeal, the Court of
Appeals set aside the trial court’s summary judgment and remanded the case to the trial court for further
proceedings.  The Court of Appeals ruled that the material allegations of the complaint "were directly disputed by
81

[the corporation and Dr. Olivarez] in their answer"  when they argued that they refused to pay because Torres failed
82

to clear the land of the tenants.

537
With the Court of Appeals’ decision in Torres,Olivarez Realty Corporation and Dr. Olivarez argue that this case
should likewise be remanded to the trial court for further proceedings under the equipoise rule.

Petitioners maintain that Castillo availed himself of the irreconcilable reliefs of reformation of instrument and
rescission of contract.  Thus, the trial court should have dismissed the case outright.
83

Petitioners likewise argue that the trial court had no jurisdiction to decide the case as Castillo failed topay the correct
docket fees.  Petitioners argue that Castillo should have paid docket fees based on the property’s fair market value
84

since Castillo’s complaint is a real action.85

In his comment,  Castillo maintains that there are no genuine issues as to any material fact inthis case. The trial
86

court, therefore, correctly rendered summary judgment.

As to petitioners’ claim that the trial court had no jurisdiction to decide the case, Castillo argues that he prayed for
rescission of contract in his complaint. This action is incapable of pecuniary estimation, and the Clerk of Court
properly computed the docket fees based on this prayer.  Olivarez Realty Corporation and Dr. Olivarez
87

replied, reiterating their arguments in the petition for review on certiorari.

88

The issues for our resolution are the following:

I. Whether the trial court erred in rendering summary judgment;

II. Whether proper docket fees were paid in this case.

The petition lacks merit.

I
The trial court correctly rendered
summary judgment, as there were no

genuine issues of material fact in this case

Trial "is the judicial examination and determination of the issues between the parties to the action."  During trial,
89

parties "present their respective evidence of their claims and defenses."  Parties to an action have the right "to a
90

plenary trial of the case"  to ensure that they were given a right to fully present evidence on their respective claims.
91

There are instances, however, whentrial may be dispensed with. Under Rule 35 of the 1997 Rules of Civil
Procedure, a trial court may dispense with trial and proceed to decide a case if from the pleadings, affidavits,
depositions, and other papers on file, there is no genuine issue as to any material fact. In such a case, the judgment
issued is called a summary judgment.

A motion for summary judgment is filed either by the claimant or the defending party.  The trial court then hears the
92

motion for summary judgment. If indeed there are no genuine issues of material fact, the trial court shall issue
summary judgment. Section 3, Rule 35 of the 1997 Rules of Civil Procedure provides:

SEC. 3. Motion and proceedings thereon. – The motion shall be served at least ten (10) days beforethe time
specified for the hearing. The adverse party may serve opposing affidavits, depositions, or admission at least three
(3) days before the hearing. After the hearing, the judgment sought shall be rendered forthwith ifthe pleadings,
supporting affidavits, depositions, and admissions on file, showthat, except as to the amount of damages, there is
no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

An issue of material fact exists if the answer or responsive pleading filed specifically denies the material allegations
of fact set forth in the complaint or pleading. If the issue offact "requires the presentation of evidence, it is a genuine
issue of fact."  However, if the issue "could be resolved judiciously by plain resort"  to the pleadings, affidavits,
93 94

depositions, and other paperson file, the issue of fact raised is sham, and the trial court may resolve the action
through summary judgment.

A summary judgment is usually distinguished from a judgment on the pleadings. Under Rule 34 of the 1997 Rules of
Civil Procedure, trial may likewise be dispensed with and a case decided through judgment on the pleadings if the
answer filed fails to tender an issue or otherwise admits the material allegations of the claimant’s pleading. 95

Judgment on the pleadings is proper when the answer filed fails to tender any issue, or otherwise admitsthe material
allegations in the complaint.  On the other hand, in a summary judgment, the answer filed tenders issues as specific
96

denials and affirmative defenses are pleaded, but the issues raised are sham, fictitious, or otherwise not genuine. 97

538
In this case, Olivarez Realty Corporation admitted that it did not fully pay the purchase price as agreed upon inthe
deed of conditional sale. As to why it withheld payments from Castillo, it set up the following affirmative defenses:
First, Castillo did not filea case to void the Philippine Tourism Authority’s title to the property; second,Castillo did not
clear the land of the tenants; third, Castillo allegedly sold the property to a third person, and the subsequent sale is
currently being litigated beforea Quezon City court.

Considering that Olivarez RealtyCorporation and Dr. Olivarez’s answer tendered an issue, Castillo properly availed
himself of a motion for summary judgment.

However, the issues tendered by Olivarez Realty Corporation and Dr. Olivarez’s answer are not genuine issues of
material fact. These are issues that can be resolved judiciously by plain resort to the pleadings, affidavits,
depositions, and other papers on file; otherwise, these issues are sham, fictitious, or patently unsubstantial.

Petitioner corporation refused to fully pay the purchase price because no court case was filed to void the Philippine
Tourism Authority’s title on the property. However, paragraph C of the deed of conditional sale is clear that petitioner
Olivarez Realty Corporation is responsible for initiating court action against the Philippine Tourism Authority:

C. [Olivarez Realty Corporation] assumes the responsibility of taking necessary legal action thru Court to have the
claim/title TCT T-18493 of Philippine Tourism Authority over the above-described property be nullified and voided;
with the full assistance of [Castillo].
98

Castillo’s alleged failureto "fully assist"  the corporation in filing the case is not a defense. As the trial court said,
99

"how can [Castillo] assist [the corporation] when [the latter] did not file the action [in the first place?]"100

Neither can Olivarez Realty Corporation argue that it refused to fully pay the purchase price due to the Philippine
Tourism Authority’s adverse claim on the property. The corporation knew of this adverse claim when it entered into a
contract of conditional sale. It even obligated itself under paragraph C of the deed of conditional sale to sue the
Philippine Tourism Authority. This defense, therefore, is sham.

Contrary to petitioners’ claim, there is no "obvious ambiguity"  as to which should occur first — the payment of the
101

disturbance compensation or the clearing of the land within six months from the signing of the deed of conditional
sale. The obligations must be performed simultaneously. In this case, the parties should have coordinated to ensure
that tenants on the property were paid disturbance compensation and were made to vacate the property six months
after the signingof the deed of conditional sale.

On one hand, pure obligations, or obligations whose performance do not depend upon a future or uncertainevent, or
upon a past event unknown to the parties, are demandable at once.  On the other hand, obligations with a
102

resolutory period also take effect at once but terminate upon arrival of the day certain. 103

Olivarez Realty Corporation’s obligation to pay disturbance compensation is a pure obligation. The performance of
the obligation to pay disturbance compensation did not depend on any condition. Moreover, the deed of conditional
sale did not give the corporation a period to perform the obligation. As such, the obligation to pay disturbance
compensation was demandable at once. Olivarez RealtyCorporation should have paid the tenants disturbance
compensation upon execution of the deed of conditional sale.

With respect to Castillo’s obligation to clear the land of the tenants within six months from the signing of the contract,
his obligation was an obligation with a resolutory period. The obligation to clear the land of the tenants took effect at
once, specifically, upon the parties’ signing of the deed of conditional sale. Castillo had until October 2, 2000, six
months from April 5, 2000 when the parties signed the deed of conditional sale, to clear the land of the tenants.

Olivarez Realty Corporation, therefore, had no right to withhold payments of the purchase price. As the trial court
ruled, Olivarez Realty Corporation "can only claim non-compliance [of the obligation to clear the land of the tenants
in] October 2000."  It said:
104

. . . it is clear that defendant [Olivarez Realty Corporation] should have paid the installments on the ₱5 million
downpayment up to October 8, 2000, or a total of ₱4,500,000.00. That is the agreement because the only time that
defendant [corporation] can claim non-compliance of the condition is after October, 2000 and so it has the clear
obligation topay up to the October 2000 the agreed installments. Since it paid only 2,500,000.00, then a violation of
the contract has already been committed. . . . 105

The claim that Castillo sold the property to another is fictitious and was made in bad faith to prevent the trial court
from rendering summary judgment. Petitioners did not elaborate on this defense and insisted on revealing the
identity of the buyer only during trial.  Even in their petition for review on certiorari, petitioners never disclosed the
106

name of this alleged buyer. Thus, as the trial court ruled, this defense did not tender a genuine issue of fact, with the
defense "bereft of details."107

539
Castillo’s alleged prayer for the irreconcilable reliefs of rescission of contract and reformation of instrument is not a
ground to dismiss his complaint. A plaintiff may allege two or more claims in the complaint alternatively or
hypothetically, either in one cause of action or in separate causes of action per Section 2, Rule 8 of the 1997 Rules
of Civil Procedure.  It is the filing of two separatecases for each of the causes of action that is prohibited since the
108

subsequently filed case may be dismissed under Section 4, Rule 2 of the 1997 Rules of Civil Procedure  on splitting 109

causes of action.

As demonstrated, there are no genuineissues of material fact in this case. These are issues that can be resolved
judiciously by plain resort to the pleadings, affidavits, depositions, and other papers on file. As the trial court found,
Olivarez Realty Corporation illegally withheld payments of the purchase price. The trial court did not err in rendering
summary judgment.

II
Castillo is entitled to cancel the contract
of conditional sale

Since Olivarez Realty Corporation illegally withheld payments of the purchase price, Castillo is entitled to cancel his
contract with petitioner corporation. However, we properly characterize the parties’ contract as a contract to sell, not
a contract of conditional sale.

In both contracts to sell and contracts of conditional sale, title to the property remains with the seller until the buyer
fully pays the purchase price.  Both contracts are subject to the positive suspensive condition of the buyer’s full
110

payment of the purchase price. 111

In a contract of conditional sale, the buyer automatically acquires title to the property upon full payment of the
purchase price.  This transfer of title is "by operation of law without any further act having to be performed by the
112

seller."  In a contract to sell, transfer of title to the prospective buyer is not automatic.  "The prospective seller
113 114

[must] convey title to the property [through] a deed of conditional sale." 115

The distinction is important to determine the applicable laws and remedies in case a party does not fulfill his or her
obligations under the contract. In contracts of conditional sale, our laws on sales under the Civil Code of the
Philippines apply. On the other hand, contracts to sell are not governed by our law on sales  but by the Civil Code
116

provisions on conditional obligations.

Specifically, Article 1191 of the Civil Code on the right to rescind reciprocal obligations does not apply to contracts to
sell.  As this court explained in Ong v. Court of Appeals,  failure to fully pay the purchase price in contracts to sell
117 118

is not the breach of contract under Article 1191.  Failure to fully pay the purchase price is "merely an event which
119

prevents the [seller’s] obligation to convey title from acquiring binding force."  This is because "there can be no
120

rescission of an obligation that is still nonexistent, the suspensive condition not having [happened]." 121

In this case, Castillo reserved his title to the property and undertook to execute a deed of absolute sale upon
Olivarez Realty Corporation’s full payment of the purchase price.  Since Castillo still has to execute a deed of
122

absolute sale to Olivarez RealtyCorporation upon full payment of the purchase price, the transfer of title is
notautomatic. The contract in this case is a contract to sell.

As this case involves a contract tosell, Article 1191 of the Civil Code of the Philippines does not apply. The contract
to sell is instead cancelled, and the parties shall stand as if the obligation to sell never existed. 123

Olivarez Realty Corporation shall return the possession of the property to Castillo. Any improvement that Olivarez
Realty Corporation may have introduced on the property shall be forfeited in favor of Castillo per paragraph I of the
deed of conditional sale:

I. Immediately upon signing thisContract, [Olivarez Realty Corporation] shall be entitled to occupy, possess and
develop the subject property. In case this Contract is cancelled, any improvement introduced by [Olivarez Realty
Corporation] on the property shall be forfeited in favor of [Castillo.] 124

As for prospective sellers, thiscourt generally orders the reimbursement of the installments paidfor the property
when setting aside contracts to sell.  This is true especially ifthe property’s possession has not been delivered to
125

the prospective buyer prior to the transfer of title.

In this case, however, Castillo delivered the possession of the property to Olivarez Realty Corporation prior to the
transfer of title. We cannot order the reimbursement of the installments paid.

In Gomez v. Court of Appeals,  the City of Manila and Luisa Gomez entered into a contract to sell over a parcel of
126

land. The city delivered the property’s possession to Gomez. She fully paid the purchase price for the property but
violated the terms of the contract to sell by renting out the property to other persons. This court set aside the

540
contract to sell for her violation of the terms of the contract to sell. It ordered the installments paid forfeited in favor of
the City of Manila "as reasonable compensation for [Gomez’s] use of the [property]"  for eight years.
127

In this case, Olivarez Realty Corporation failed to fully pay the purchase price for the property. It only paid
₱2,500,000.00 out of the ₱19,080,490.00 agreed purchase price. Worse, petitioner corporation has been in
possession of Castillo’s property for 14 years since May 5, 2000 and has not paid for its use of the property.

Similar to the ruling in Gomez, we order the ₱2,500,000.00 forfeited in favor of Castillo as reasonable compensation
for Olivarez Realty Corporation’s use of the property.

III
Olivarez Realty Corporation is liable for
moral and exemplary damages and
attorney’s fees

We note that the trial court erred in rendering summary judgment on the amount of damages. Under Section 3, Rule
35 of the 1997 Rules of Civil Procedure, summary judgment may be rendered, except as to the amount of damages.

In this case, the trial court erred in forfeiting the ₱2,500,000.00 in favor of Castillo as damages under Article 1191 of
the Civil Code of the Philippines. As discussed, there is nobreach of contract under Article 1191 in this case.

The trial court likewise erred inrendering summary judgment on the amount of moral and exemplary damages and
attorney’s fees.

Nonetheless, we hold that Castillois entitled to moral damages, exemplary damages, and attorney’s fees.

Moral damages may be awarded in case the claimant experienced physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. 128

As for exemplary damages, they are awarded in addition to moral damages by way of example or correction for the
public good.  Specifically in contracts, exemplary damages may be awarded if the defendant acted in a wanton,
129

fraudulent,reckless, oppressive, or malevolent manner. 130

Under the deed of conditional sale, Olivarez Realty Corporation may only suspend the monthly down payment in
case Castillo fails to clear the land of the tenants six months from the signing of the instrument. Yet, even before the
sixth month arrived, Olivarez Realty Corporation withheld payments for Castillo’s property. It evenused as a defense
the fact that no case was filed against the PhilippineTourism Authority when, under the deed of conditional sale,
Olivarez Realty Corporation was clearly responsible for initiating action against the Philippine Tourism Authority.
These are oppressive and malevolent acts, and we find Castillo entitled to ₱500,000.00 moral damages and
₱50,000.00 exemplary damages:

Plaintiff Castillo is entitled to moral damages because of the evident bad faith exhibited by defendants in dealing
with him regarding the sale of his lot to defendant [Olivarez Realty Corporation]. He suffered much prejudice due to
the failure of defendants to pay him the balance of purchase price which he expected touse for his needs which
caused him wounded feelings, sorrow, mental anxiety and sleepless nights for which defendants should pay
₱500,000.00 as moral damages more than six (6) years had elapsed and defendants illegally and unfairly failed and
refused to pay their legal obligations to plaintiff, unjustly taking advantage of a poor uneducated man like plaintiff
causing much sorrow and financial difficulties. Moral damages in favor of plaintiff is clearly justified . . . [Castillo] is
also entitled to ₱50,000.00 as exemplary damages to serve as a deterrent to other parties to a contract to religiously
comply with their prestations under the contract. 131

We likewise agree that Castillo is entitled to attorney’s fees in addition to the exemplary damages.  Considering that
132

Olivarez Realty Corporation refused to satisfy Castillo’splainly valid, just, and demandable claim,  the award of
133

₱50,000.00 as attorney’s fees is in order. However, we find that Dr. Pablo R.Olivarez is not solidarily liable with
Olivarez Realty Corporation for the amount of damages.

Under Article 1207 of the Civil Code of the Philippines, there is solidary liability only when the obligation states it or
when the law or the nature of the obligation requires solidarity.  In case of corporations, they are solely liable for
134

their obligations.  The directors or trustees and officers are not liable with the corporation even if it is through their
135

acts that the corporation incurred the obligation. This is because a corporation is separate and distinct from the
persons comprising it. 136

As an exception to the rule, directors or trustees and corporate officers may be solidarily liable with the corporation
for corporate obligations if they acted "in bad faith or with gross negligence in directing the corporate affairs." 137

541
In this case, we find that Castillo failed to prove with preponderant evidence that it was through Dr. Olivarez’s bad
faith or gross negligence that Olivarez Realty Corporation failed to fully pay the purchase price for the property. Dr.
Olivarez’s alleged act of making Castillo sign the deed of conditional sale without explaining to the latter the deed’s
terms in Tagalog is not reason to hold Dr. Olivarez solidarily liable with the corporation. Castillo had a choice not to
sign the deed of conditional sale. He could have asked that the deed of conditional sale be written in Tagalog. Thus,
Olivarez Realty Corporation issolely liable for the moral and exemplary damages and attorney’s fees to Castillo.

IV
The trial court acquired jurisdiction over
Castillo’s action as he paid the correct
docket fees

Olivarez Realty Corporation and Dr. Olivarez claimed that the trial court had no jurisdiction to take cognizance of the
case. In the reply/motion to dismiss the complaint  they filed with the Court of Appeals, petitioners argued that
138

Castillo failed to pay the correct amount of docket fees. Stating that this action is a real action, petitioners argued
that the docket fee Castillo paid should have been based on the fair market value of the property. In this case,
Castillo only paid 4,297.00, which is insufficient "if the real nature of the action was admitted and the fair market
value of the property was disclosed and made the basis of the amount of docket fees to be paid to the court." Thus, 139

according to petitioners, the case should be dismissed for lack of jurisdiction.

Castillo countered that his action for rescission is an action incapable of pecuniary estimation. Thus, the Clerk of
Court of the Regional Trial Court of Tanauan City did not err in assessing the docket fees based on his prayer.

We rule for Castillo. In De Leon v. Court of Appeals,  this court held that an action for rescission of contract of sale
140

of real property is an action incapable of pecuniary estimation. In De Leon, the action involved a real property.
Nevertheless, this court held that "it is the nature of the action as one for rescission of contract which is
controlling."  Consequently, the docket fees to be paid shall be for actions incapableof pecuniary estimation,
141

regardless if the claimant may eventually recover the real property. This court said:

. . . the Court in Bautista v.Lim, held that an action for rescission of contract is one which cannot be estimated and
therefore the docket fee for its filing should be the flat amount of ₱200.00 as then fixed in the former Rule 141,
§141, §5(10). Said this Court:

We hold that Judge Dalisay did not err in considering Civil Case No. V-144 as basically one for rescission or
annulment of contract which is not susceptible of pecuniary estimation (1 Moran's Comments on the Rules of Court,
1970 Ed, p. 55; Lapitan vs. Scandia, Inc., L-24668, July 31, 1968, 24 SCRA 479, 781-483).

Consequently, the fee for docketing it is ₱200, an amount already paid by plaintiff, now respondent Matilda
Lim. (She should pay also the two pesos legal research fund fee, if she has not paid it, as required in Section 4 of
1âwphi1

Republic Act No. 3870, the charter of the U.P. Law Center).

Thus, although eventually the result may be the recovery of land, it is the nature of the action as one for rescission
of contract which is controlling. The Court of Appeals correctly applied these cases to the present one. As it said:

We would like to add the observations that since the action of petitioners [private respondents] against private
respondents [petitioners] is solely for annulment or rescission which is not susceptible of pecuniary estimation, the
action should not be confused and equated with the "value of the property" subject of the transaction; that by the
very nature of the case, the allegations, and specific prayer in the complaint, sans any prayer for recovery of money
and/or value of the transaction, or for actual or compensatory damages, the assessment and collection of the legal
fees should not be intertwined with the merits of the case and/or what may be its end result; and that to sustain
private respondents' [petitioners'] position on what the respondent court may decide after all, then the assessment
should be deferred and finally assessed only after the court had finally decided the case, which cannot be done
because the rules require that filing fees should be based on what is alleged and prayed for in the face of the
complaint and paid upon the filing of the complaint. 142

Although we discussed that there isno rescission of contract to speak of in contracts of conditional sale, we hold that
an action to cancel a contract to sell, similar to an action for rescission of contract of sale, is an action incapable of
pecuniary estimation. Like any action incapable of pecuniary estimation, an action to cancel a contract to sell
"demands an inquiry into other factors"  aside from the amount of money to be awarded to the claimant. Specifically
143

in this case, the trial court principally determined whether Olivarez Realty Corporation failed to pay installments of
the property’s purchase price as the parties agreed upon in the deed of conditional sale. The principal natureof
Castillo’s action, therefore, is incapable of pecuniary estimation.

All told, there is no issue that the parties in this case entered into a contract to sell a parcel of land and that Olivarez
Realty Corporation failed to fully pay the installments agreed upon.Consequently, Castillo is entitled to cancel the
contract to sell.

542
WHEREFORE, the petition for review on certiorari is DENIED. The Court of Appeals’ decision dated July 20, 2010
and in CA-G.R. CV No. 91244 is AFFIRMEDwith MODIFICATION.

The deed of conditional sale dated April 5, 2000 is declared CANCELLED. Petitioner Olivarez Realty Corporation
shall RETURN to respondent Benjamin Castillo the possession of the property covered by Transfer Certificate of
Title No. T-19972 together with all the improvements that petitioner corporation introduced on the property. The
amount of ₱2,500,000.00 is FORFEITED in favor of respondent Benjamin Castillo as reasonable compensation for
the use of petitioner Olivarez Realty Corporation of the property.

Petitioner Olivarez Realty Corporation shall PAY respondent Benjamin Castillo ₱500,000.00 as moral damages,
₱50,000.00 as exemplary damages, and ₱50,000.00 as attorney's fees with interest at 6% per annum from the time
this decision becomes final and executory until petitioner

corporation fully pays the amount of damages. 144

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No.197530               July 9, 2014

ABOITIZ EQUITY VENTURES, INC., Petitioner, 

vs.
VICTOR S. CHIONGBIAN, BENJAMIN D. GOTHONG, and CARLOS A. GOTHONG LINES, INC.
(CAGLI),Respondents.

DECISION

LEONEN, J.:

This is a petition for review on certiorari with an application for the issuance of a temporary restraining order and/or
writ of preliminary injunction under Rule 45 of the Rules of Court. This petition prays that the assailed orders dated
May 5, 2011  and June 24, 2011  of the Regional Trial Court, Cebu City, Branch 10 in Civil Case No. CEB-37004 be
1 2

nullified and set aside and that judgment be rendered dismissing with prejudice the complaint  dated July 20, 2010
3

filed by respondents Carlos A. Gothong Lines, Inc. ("CAGLI") and Benjamin D. Gothong. On January 8, 1996,
Aboitiz Shipping Corporation ("ASC"), principally owned by the Aboitiz family, CAGLI, principally owned by the
Gothong family, and William Lines, Inc.("WLI"), principally owned by the Chiongbian family, entered into
anagreement (the "Agreement"),  whereby ASC and CAGLI would transfer their shipping assets to WLI in exchange
4

for WLI’s shares of stock.  WLI, in turn, would run their merged shipping businesses and, henceforth, be known as
5

WG&A, Inc. ("WG&A"). 6

Sec. 11.06 of the Agreement required all disputes arising out of or in connection with the Agreement tobe settled by
arbitration:

11.06 Arbitration

All disputes arising out of or in connection with this Agreement including any issue as to this Agreement’s validity or
enforceability, which cannot be settled amicably among the parties, shall be finally settled by arbitration in
accordance with the Arbitration Law (Republic Act No. 876) by an arbitration tribunal composed of four (4)
arbitrators. Each of the parties shall appoint one (1) arbitrator, the three (3) to appoint the fourth arbitrator who shall

543
act as Chairman. Any award by the arbitration tribunal shall be final and binding upon the parties and shall be
enforced by judgment of the Courts of Cebu or Metro Manila. 7

Among the attachments to the Agreement was Annex SL-V.  This was a letter dated January 8,1996, from WLI,
8

through its President (herein respondent) Victor S. Chiongbian addressed to CAGLI, through its Chief Executive
Officer Bob D. Gothong and Executive Vice President for Engineering (herein respondent) Benjamin D. Gothong.
On its second page, Annex SL-V bore the signatures ofBob D. Gothong and respondent Benjamin D. Gothong by
way of a conforme on behalf of CAGLI.

Annex SL-V confirmed WLI’s commitment to acquire certain inventories of CAGLI. These inventories would havea
total aggregate value of, at most, ₱400 million, "as determinedafter a special examination of the
[i]nventories." Annex SL-V also specificallystated that such acquisition was "pursuant to the Agreement."
9 10

The entirety of Annex SL-V’s substantive portion reads:

We refer to the Agreement dated January 8, 1996 (the "Agreement") among William Lines, Inc. ("Company C"),
Aboitiz Shipping Corporation ("Company A") and Carlos A. Gothong Lines, Inc. ("Company B") regarding the
transfer of various assets of Company A and Company B to Company C in exchangefor shares of capital stock of
Company C. Terms defined in the Agreement are used herein as therein defined.

This will confirm our commitment to acquire certain spare parts and materials inventory (the "Inventories") of
Company B pursuant to the Agreement.

The total aggregate value of the Inventories to be acquired shall not exceed ₱400 Million as determined after a
special examination of the Inventories as performed by SGV & Co. to be completed on or before the Closing Date
under the agreed procedures determined by the parties.

Subject to documentation acceptable to both parties, the Inventories to be acquired shall be determined not later
than thirty (30) days after the Closing Date and the payments shall be made in equal quarterly instalments over a
period of two years with the first payment due on March 31, 1996. 11

Pursuant to Annex SL-V, inventories were transferred from CAGLI to WLI. These inventories were assessed to have
a value of 514 million, which was later adjusted to 558.89 million.  Of the total amount of 558.89 million, "CAGLIwas
12

paid the amount of 400 Million."  In addition to the payment of 400 million,petitioner Aboitiz Equity Ventures ("AEV")
13

noted that WG&A shares with a book value of 38.5 million were transferred to CAGLI. 14

As there was still a balance, in2001, CAGLI sent WG&A (the renamed WLI) demand letters "for the return of or the
payment for the excess [i]nventories."  AEV alleged that to satisfy CAGLI’s demand, WLI/WG&A returned
15

inventories amounting to 120.04 million.  As proof of this, AEV attached copies of delivery receipts signed by
16

CAGLI’s representatives as Annex "K" of the present petition. 17

Sometime in 2002, the Chiongbian and Gothong families decided to leave the WG&A enterprise and sell their
interest in WG&A to the Aboitiz family. As such, a share purchase agreement  ("SPA") was entered into by
18

petitioner AEV and the respective shareholders groups of the Chiongbians and Gothongs. In the SPA, AEV
agreedto purchase the Chiongbian group's 40.61% share and the Gothong group's 20.66% share in WG&A’s issued
and outstanding stock. 19

Section 6.5 of the SPA provided for arbitration as the mode of settling any dispute arising from the SPA. It reads:

6.5 Arbitration. Should there be any dispute arising between the parties relating to this Agreement including the
interpretation or performance hereof which cannot beresolved by agreement of the parties within fifteen (15) days
after written notice by a party to another, such matter shall then be finally settled by arbitration in Cebu City in
accordance with the Philippine Arbitration Law. Substantive aspects of the dispute shall be settled by applying the
laws of the Philippines. The decision of the arbitrators shall be final and binding upon the parties hereto and the
expense of arbitration (including without limitation the award of attorney’s fees to the prevailing party) shall be paid
as the arbitrators shall determine. 20

Section 6.8 of the SPA further provided that the Agreement (of January 8, 1996) shall be deemed terminated except
its Annex SL-V. It reads:

6.8 Termination of Shareholders Agreement. The Buyer and the Sellers hereby agree that on Closing, the
Agreement among Aboitiz Shipping Corporation, Carlos A. Gothong Lines, Inc. and William Lines, Inc. dated
January 8, 1996, as the same has been amended from time to time (the "Shareholders’ Agreement") shall all be
considered terminated, except with respect to such rights and obligations that the parties to the Shareholders’
Agreement have under a letter dated January 8, 1996 (otherwise known as "SL-V") from William Lines, Inc. to

544
Carlos A. Gothong Lines, Inc. regarding certain spare parts and materials inventory, which rights and obligations
shall survive through the date prescribed by the applicable statute of limitations. 21

As part of the SPA, the parties entered into an Escrow Agreement  whereby ING Bank N.V.-Manila Branch was to
22

take custody of the shares subject of the SPA.  Section 14.7 of the Escrow Agreement provided that all disputes
23

arising from it shall be settled through arbitration:

14.7 All disputes, controversies or differences which may arise by and among the parties hereto out of, or in relation
to, or in connection with this Agreement, orfor the breach thereof shall be finally settled by arbitration in Cebu City in
accordance with the Philippine Arbitration Law. The award rendered by the arbitrator(s) shall be final and binding
upon the parties concerned. However, notwithstanding the foregoing provision, the parties reserve the right to seek
redress before the regular court and avail of any provisional remedies in the event of any misconduct, negligence,
fraud or tortuous acts which arise from any extra-contractual conduct that affects the ability ofa party to comply with
his obligations and responsibilities under this Agreement. 24

As a result of the SPA, AEV became a stockholder of WG&A. Subsequently, WG&A was renamed Aboitiz Transport
Shipping Corporation ("ATSC"). 25

Petitioner AEV alleged that in2008, CAGLI resumed making demands despite having already received 120.04
million worth of excess inventories.  CAGLI initially made its demand to ATSC (the renamed WLI/WG&A) through a
26

letter  dated February 14, 2008. As alleged by AEV, however, CAGLI subsequently resorted to a "shotgun
27

approach"  and directed its subsequent demand letters to AEV  as well as to FCLC  (a company related to
28 29 30

respondent Chiongbian).

AEV responded to CAGLI’s demands through several letters.  In these letters, AEV rebuffed CAGLI's demands
31

noting that: (1) CAGLI already received the excess inventories;(2) it was not a party to CAGLI's claim as it had a
personality distinct from WLI/WG&A/ATSC; and (3) CAGLI's claim was already barred by prescription.

In a reply-letter  dated May 5, 2008, CAGLI claimed that it was unaware of the delivery to it of the excess
32

inventories and asked for copies of the corresponding delivery receipts.  CAGLI threatened that unless it received
33

proof of payment or return ofexcess inventories having been made on or before March 31, 1996, it would pursue
arbitration.
34

In letters written for AEV (the first dated October 16, 2008 by Aboitiz and Company, Inc.’s Associate General
Counsel Maria Cristina G. Gabutina  and the second dated October 27, 2008 by SyCip Salazar Hernandez and
35

Gatmaitan ), it was noted that the excess inventories were delivered to GT Ferry Warehouse.  Attached to these
36 37

letters were a listing and/or samples  of the corresponding delivery receipts. In these letters it was also noted that
38

the amount of excess inventories delivered (120.04 million) was actually in excess of the value of the supposedly
unreturned inventories (119.89 million).  Thus, it was pointed out that it was CAGLI which was liable to return the
39

difference between 120.04 million and 119.89 million.  Its claims not having been satisfied, CAGLI filed on
40

November 6, 2008 the first of two applications for arbitration ("first complaint")  against respondent Chiongbian,
41

ATSC, ASC, and petitioner AEV, before the Cebu City Regional Trial Court, Branch 20. The first complaint was
docketed as Civil Case No. CEB-34951.

In response, AEV filed a motion to dismiss  dated February 5, 2009. AEV argued that CAGLI failed to state a cause
42

of action as there was no agreement to arbitrate between CAGLI and AEV.  Specifically, AEV pointed out that: (1)
43

AEV was never a party to the January 8, 1996 Agreement or to its Annex SL-V;  (2) while AEV is a party to the SPA
44

and Escrow Agreement, CAGLI's claim had no connection to either agreement; (3) the unsigned and unexecuted
SPA attached to the complaint cannot be a source of any right to arbitrate;  and (4) CAGLI did not say how
45

WLI/WG&A/ATSC's obligation to return the excess inventories can be charged to AEV.

On December 4, 2009, the Cebu City Regional Trial Court, Branch 20 issued an order  dismissing the first complaint 46

with respect to AEV. It sustained AEV’s assertion that there was no agreement binding AEV and CAGLI to arbitrate
CAGLI’s claim.  Whether by motion for reconsideration, appeal or other means, CAGLI did not contest this
47

dismissal.

On February 26, 2010, the Cebu CityRegional Trial Court, Branch 20 issued an order  directing the parties 48

remaining in the first complaint (after the discharge of AEV) to proceed with arbitration.

The February 26, 2010 order notwithstanding, CAGLI filed a notice of dismissal  dated July 8, 2010, withdrawing the
49

first complaint. In an order  dated August 13, 2010, the Cebu City Regional Trial Court, Branch 20 allowed this
50

withdrawal.

ATSC (the renamed WLI/WG&A) filed a motion for reconsideration  dated September 20, 2010 to the allowance of
51

CAGLI's notice of dismissal. This motion was denied in an order  dated April 15, 2011.
52

545
On September 1, 2010, while the first complaint was still pending (n.b., it was only on April 15, 2011 that the Cebu
City Regional Trial Court, Branch 20 denied ATSC’s motion for reconsideration assailing the allowance of CAGLI’s
notice of disallowance), CAGLI, now joined by respondent Benjamin D. Gothong, filed a second application for
arbitration ("second complaint")  before the Cebu City Regional Trial Court, Branch 10. The second complaint was
53

docketed as Civil Case No. CEB-37004 and was also in view of the return of the same excess inventories subject of
the first complaint.

On October 28, 2010, AEV filed a motion to dismiss  the second complaint on the following grounds:  (1) forum
54 55

shopping; (2) failure to state a cause of action; (3) res judicata; and (4) litis pendentia.

In the first of the two (2) assailed orders dated May 5, 2011,  the Cebu City Regional Trial Court, Branch 10 denied
56

AEV's motion to dismiss.

On the matter of litis pendentia, the Regional Trial Court, Branch 10 noted that the first complaint was dismissed
with respect to AEV on December 4, 2009, while the second complaint was filed on September 1, 2010. As such,
the first complaint was no longer pending at the time of the filing of the second complaint.  On the matter of res
57

judicata, the trial court noted that the dismissal without prejudice of the first complaint "[left] the parties free to litigate
the matter in a subsequent action, as though the dismiss[ed] action had not been commenced."  It added that since
58

litis pendentia and res judicata did not exist, CAGLI could not be charged with forum shopping.  On the matter of an
59

agreement to arbitrate, the Regional Trial Court, Branch 10 pointed to the SPA as "clearly express[ing] the intention
of the parties to bring to arbitration process all disputes, if amicable settlement fails."  It further dismissed AEV’s
60

claim that it was not a party to the SPA, as "already touching on the merits of the case"  and therefore beyond its
61

duty "to determine if they should proceed to arbitration or not." 62

In the second assailed order  dated June 24, 2011, the Cebu City Regional Trial Court, Branch 10 deniedAEV's
63

motion for reconsideration.

Aggrieved, AEV filed the present petition.  AEV asserts that the second complaint is barred by res judicata and litis
64

pendentia and that CAGLI engaged in blatant forum shopping.  It insists that it is not bound by an agreement to
65

arbitrate with CAGLI and that, even assuming that it may be required to arbitrate, it is being ordered to do so under
terms that are "manifestly contrary to the . . . agreements on which CAGLI based its demand for arbitration." 66

For resolution are the following issues:

I. Whether the complaint in Civil Case No. CEB-37004 constitutes forum shopping and/or is barred by res judicata
and/or litis pendentia

II. Whether petitioner, Aboitiz Equity Ventures, Inc., is bound by an agreement to arbitrate with Carlos A. Gothong
Lines, Inc., with respect to the latter’s claims for unreturned inventories delivered to William Lines, Inc./WG&A,
Inc./Aboitiz Transport System Corporation

AEV availed of the wrong

remedy in seeking relief from
this court

Before addressing the specific mattersraised by the present petition, we emphasize that AEV is in error inseeking
relief from this court via a petition for review on certiorari under Rule45 of the Rules of Court. As such, we are well in
a position to dismiss the present petition outright. Nevertheless, as the actions of the Cebu City Regional Trial Court,
Branch 10 are tainted with grave abuse of discretion amounting to lack or excess of jurisdiction, this court treats the
present Rule 45 petition as a Rule 65 petition and gives it due course.

A petition for review on certiorari under Rule 45 is a mode of appeal. This is eminently clear from the very title and
from the first section of Rule 45 (as amended by A.M. No. 07-7-12-SC):

Rule 45
APPEAL BY CERTIORARITO THE SUPREME COURT

SECTION 1. Filing of petition with Supreme Court. A party desiring to appeal by certiorarifrom a judgment, final
order or resolution of the Court of Appeals, the Sandiganbayan, the Court of Tax Appeals, the Regional Trial Court
or other courts, whenever authorized by law, may file with the Supreme Court a verified petition for review on
certiorari. The petition may include an application for a writ of preliminary injunction or other provisional remedies
and shall raise only questions of law, which must be distinctly set forth. The petitioner may seek the same
provisional remedies by verified motion filed inthe same action or proceeding at any time during its pendency.
(Emphasis supplied)

546
Further, it is elementary that anappeal may only be taken from a judgment or final order that completely disposes of
the case.  As such, no appeal may be taken from an interlocutory order  (i.e., "one which refers to something
67 68

between the commencement and end of the suit which decides some point or matter but it is not the final decision of
the whole controversy" ). As explained in Sime Darby Employees Association v. NLRC,  "[a]n interlocutory order is
69 70

not appealable until after the rendition of the judgment on the merits for a contrary rule would delay the
administration of justice and unduly burden the courts." 71

An order denying a motion to dismiss is interlocutory in character. Hence, it may not be the subject of an appeal.
The interlocutory nature of an order denying a motion to dismiss and the remedies for assailing such an order were
discussed in Douglas Lu Ym v. Nabua: 72

An order denying a motion to dismiss is an interlocutory order which neither terminates nor finally disposes of a
case, as it leaves something to be done by the court before the case is finally decided on the merits. As such, the
general rule is that the denial of a motion to dismiss cannot be questioned in a special civil action for certiorariwhich
is a remedy designed to correct errors ofjurisdiction and not errors of judgment. Neither can a denial of a motion
todismiss be the subject of an appeal unless and until a final judgment or order is rendered.In order to justify the
grant of the extraordinary remedy of certiorari, the denial of the motion to dismiss must have been tainted with grave
abuse of discretion amounting to lack or excess of jurisdiction.  (Emphasis supplied)
73

Thus, where a motion to dismiss is denied, the proper recourse is for the movant to file an answer.  Nevertheless,
74

where the order denying the motion to dismiss is tainted with grave abuse of discretion amounting to lack or excess
of jurisdiction, the movant may assail such order via a Rule 65 (i.e., certiorari, prohibition, and/or mandamus)
petition. This is expressly recognized in the third paragraph of Rule 41, Section 1 of the Rules of Court.  Following
75

the enumeration in the second paragraph of Rule 41, Section 1 of the instances when an appeal may not be taken,
the third paragraph specifies that "[in] any of the foregoing circumstances, the aggrieved party may file an
appropriate special civil action as provided in Rule 65." 76

Per these rules, AEV is in error for having filed what it itself calls a "Petition for Review on Certiorari [Appeal by
Certiorari under Rule 45 of the Rules of Court]."  Since AEV availed of the improper remedy, this court is well in a
77

position to dismiss the present petition.

Nevertheless, there have been instances when a petition for review on certiorari under Rule 45 was treated by this
court as a petition for certiorari under Rule 65. As explained in China Banking Corporation v. Asian Construction and
Development Corporation: 78

[I]n many instances, the Court has treated a petition for review on certiorariunder Rule 45 as a petition for certiorari
under Rule 65 of the Rules of Court, such as in cases where the subject of the recourse was one of jurisdiction, or
the act complained of was perpetrated by a court with grave abuse of discretion amounting to lack or excess of
jurisdiction. 79

In this case, the May 5, 2011 and June 24, 2011 orders of the Cebu City Regional Trial Court, Branch 10 in Civil
Case No. CEB-37004 are assailed for having denied AEV’s motion todismiss despite: first, the second complaint
having been filed in a manner constituting forum shopping; second, the prior judgment on the merits made in Civil
Case No. CEB-34951, thereby violating the principle ofres judicata; and third, the (then) pendency of Civil Case No.
CEB-34951 with respect to the parties that, unlike AEV, were not discharged from the case, thereby violating the
principle of litis pendentia. The same orders are assailed for having allowed CAGLI’s application for arbitration to
continue despite supposedly clear and unmistakable evidence that AEV is not bound by an agreement to arbitrate
with CAGLI.

As such, the Cebu City, Regional Trial Court, Branch 10’s orders are assailed for having been made with grave
abuse of discretion amounting to lack or excess of jurisdiction in that the Cebu City Regional Trial Court, Branch 10
chose to continue taking cognizance of the second complaint, despite there being compelling reasons for its
dismissal and the Cebu City, Regional Trial Court Branch 20’s desistance. Conformably, we treat the present
petition as a petition for certiorari under Rule 65 of the Rules of Court and give it due course.

The complaint in Civil Case

No. CEB-37004 constitutes
forum shopping and is barred
by res judicata

The concept of and rationale against forum shopping were explained by this court in Top Rate Construction &
General Services, Inc. v. Paxton Development Corporation: 80

FORUM SHOPPING is committed by a party who institutes two or more suits in different courts, either
simultaneously or successively, in order to ask the courts to rule on the same or related causes or to grant the same
or substantially the same reliefs, on the supposition that one or the other court would make a favorabledisposition or
increase a party's chances of obtaining a favorable decision or action. It is an act of malpractice for it trifles with the
547
courts, abuses their processes, degrades the administration of justice and adds to the already congested court
dockets. What is critical is the vexation brought upon the courts and the litigants by a party who asks different courts
to rule on the same or related causes and grant the same or substantially the same reliefs and in the process
creates the possibility of conflicting decisions being rendered by the different fora upon the same issues, regardless
of whether the court in which one of the suits was brought has no jurisdiction over the action. 81

Equally settled is the test for determining forum shopping. As this court explained in Yap v. Chua: 82

To determine whether a party violated the rule against forum shopping, the most important factor toask is whether
the elements of litis pendentiaare present, or whether a final judgment in one case will amount to res judicatain
another; otherwise stated, the test for determining forum shopping is whether in the two (or more) cases pending,
there is identity of parties, rights or causes of action, and reliefs sought.
83

Litis pendentia "refers to that situation wherein another action is pending between the same parties for the same
cause ofaction, such that the second action becomes unnecessary and vexatious."  It requires the concurrence of
84

three (3) requisites: "(1)the identity of parties, or at least such as representing the same interests in both actions; (2)
the identity of rights asserted and relief prayed for,the relief being founded on the same facts; and (3) the identity of
the two cases such that judgment in one, regardless of which party issuccessful, would amount tores judicatain the
other."85

In turn, prior judgment or res judicata bars a subsequent case when the following requisites concur: "(1) the former
judgment is final; (2) it is rendered by a court having jurisdiction over the subject matter and the parties; (3) it is a
judgment or an order on the merits; (4) there is — between the first and the second actions — identityof parties, of
subject matter, and of causes of action." 86

Applying the cited concepts and requisites, we find that the complaint in Civil Case No. CEB-37004 is barred byres
judicata and constitutes forum shopping.

First, between the first and second complaints, there is identity of parties. The first complaint was brought by CAGLI
as the sole plaintiff against Victor S. Chiongbian, ATSC, and AEV as defendants. In the second complaint, CAGLI
was joined by Benjamin D. Gothong as (co-)plaintiff. As to the defendants, ATSC was deleted while Chiongbian and
AEV were retained.

While it is true that the parties to the first and second complaints are not absolutely identical, this court has clarified
that, for purposes of forum shopping, "[a]bsolute identity of parties is not required [and that it] is enough that there is
substantial identity of parties."
87

Even as the second complaint alleges that Benjamin D. Gothong "is . . . suing in his personal capacity,"  Gothong
88

failed to show any personal interest in the reliefs sought by the second complaint. Ultimately, what is at stake in the
second complaint is the extent to which CAGLI may compel AEV and Chiongbian to arbitrate in order that CAGLI
may then recover the value of its alleged unreturned inventories. This claim for recovery is pursuant to the
agreement evinced in Annex SL-V. Annex SL-V was entered into by CAGLI and not by Benjamin D. Gothong. While
it is true that Benjamin D. Gothong, along with Bob D. Gothong, signed Annex SL-V, he did so only in a
representative, and not in a personal, capacity. As such, Benjamin D. Gothong cannot claim any right that
personally accrues to him on account of Annex SL-V. From this, it follows that Benjamin D. Gothong is not a real
party in interest — "one who stands to be benefitted or injured by the judgment in the suit or the party entitled to the
avails of the suit"  — and that his inclusion in the second complaint is an unnecessary superfluity.
89

Second, there is identity in subject matter and cause of action. There is identity in subject matter as both complaints
are applications for the same relief. There is identity in cause ofaction as both complaints are grounded on the right
to be paid for or to receive the value of excess inventories (and the supposed corresponding breach thereof) as
spelled out in Annex SL-V.

The first and second complaints are both applications for arbitration and are founded on the same instrument —
Annex SL-V. Moreover, the intended arbitrations in both complaintscater to the sameultimate purpose, i.e., that
CAGLI may recover the value of its supposedly unreturned inventories earlier delivered to WLI/WG&A/ATSC.

In both complaints, the supposedpropriety of compelling the defendants to submit themselves to arbitration are
anchored on the same bases: (1) Section 6.8 of the SPA, which provides that the January 8, 1996 Agreement shall
be deemed terminatedbut that the rights and obligations arising from Annex SL-V shall continue to subsist;  (2) 90

Section 6.5 of the SPA, which requires arbitration as the mode for settling disputes relating to the SPA;  and, (3)
91

defendants’ refusal to submit themselves to arbitration vis-a-vis Republic Act No. 876, which provides that "[a] party
aggrieved by the failure, neglect or refusal of another to perform under an agreement in writing providing for
arbitration may petition the court for an order directing that such arbitration proceed in the manner provided for in
such agreement." 92

Both complaints also rely on the same factual averments: 93

548
 1. that ASC, CAGLI, and WLI entered into an agreement on January 8, 1996;

2. that under Annex SL-V of the Agreement, WLI/WG&A "committed to acquire certain [inventories], the total
aggregate value of which shall not exceed ₱400 Million"; 94

3. that after examination, it was ascertained that the value of the transferred inventories exceeded ₱400
million;

4. that pursuant to Annex SL-V, WG&A paid CAGLI ₱400 million but that the former failed to return or pay
for spare parts representing a value in excess of ₱400 million;

5. "[t]hat on August 31, 2001, [CAGLI] wrote the WG&A through its AVP Materials Management, Ms.
Concepcion M. Magat, asking for the return of the excess spare parts"; 95

6. that on September 5, 2001, WG&A’s Ms. Magat replied that the matter is beyond her authority level and
that she must elevate it to higher management;

7. that several communications demanding the return of the excess spare parts were sent to WG&Abut
these did not elicit any response; and

8. "[t]hat the issue of excess spare parts, was taken over by events, when on July 31, 2002,"  the 96

Chiongbians and Gothongs entered into an Escrow Agreement with AEV.

Third, the order dated December 4, 2009 of the Cebu City Regional Trial Court, Branch 20, which dismissed the first
complaint with respect to AEV, attained finality when CAGLI did not file a motion for reconsideration, appealed, or, in
any other manner, questioned the order.

Fourth, the parties did not dispute that the December 4, 2009 order was issued by a court having jurisdiction over
the subject matter and the parties. Specifically as to jurisdiction over the parties,jurisdiction was acquired over
CAGLI as plaintiff when it filed the first complaint and sought relief from the Cebu City Regional Trial Court, Branch
20; jurisdiction over defendants AEV, ATSC, and Victor S.Chiongbian was acquired with the service of summons
upon them. Fifth, the dismissal of the first complaint with respect to AEV was a judgment on the merits. As explained
in Cabreza, Jr. v. Cabreza: 97

A judgment may be considered as one rendered on the merits "when it determines the rights and liabilities of the
parties based on the disclosed facts, irrespective of formal, technical or dilatoryobjections"; or when the judgment is
rendered "aftera determination of which party is right, as distinguished from a judgment rendered upon some
preliminary or formal or merely technical point." 98

Further, as this court clarified in Mendiola v. Court of Appeals,  "[i]t is not necessary . . . that there [be] a trial"  in
99 100

order that a judgment be considered as one on the merits.

Prior to issuing the December 4, 2009 order dismissing the first complaint with respect to AEV, the Cebu City
Regional Trial Court, Branch 20 allowed the parties the full opportunity to establish the facts and to ventilate their
arguments relevant to the complaint. Specifically, the Cebu City Regional Trial Court, Branch 20 admitted: 1) AEV’s
motion to dismiss;  2) CAGLI’s opposition to the motion to dismiss;  3) AEV’s reply and opposition;  4) CAGLI’s
101 102 103

rejoinder;  and 5) AEV’s surrejoinder.

104 105

Following these, the Cebu City Regional Trial Court, Branch 20 arrived at the following findings and made a
definitive determination that CAGLI had no right to compel AEV to subject itself to arbitration with respect to CAGLI’s
claims under Annex SL-V:

After going over carefully the contentions and arguments of both parties, the court has found that no contract or
document exists binding CAGLI and AEV to arbitrate the former’s claim. The WLI Letter upon which the claim is
based confirms only the commitment of William Lines, Inc. (WLI) to purchase certain material inventories from
CAGLI. It does not involve AEV. The court has searched in vain for any agreement or document showing that said
commitment was passed on to and assumed by AEV. Such agreement or document, if one exists, being an
actionable document, should have been attached to the complaint. While the Agreement of January 8, 1996 and the
Share Purchase Agreement provide for arbitration of disputes, they refer to disputes arising from or in connection
with the Agreements themselves. No reference is made, as included therein, to the aforesaid commitment of WLI or
to any claim that CAGLI may pursue based thereon or relative thereto. Section 6.8 of the Share Purchase
Agreement, cited by plaintiff CAGLI, does not incorporate therein, expressly or impliedly, the WLI commitment
above-mentioned. It only declares that the rights and obligations of the parties under the WLI Letter shall survive
even after the termination of the Shareholder’s Agreement. It does not speak of arbitration. Finally, the complaint
does not allege the existence of a contract obliging CAGLI and AEV to arbitrate CAGLI’s claim under the WLI Letter.

549
Consequently, there is no legal or factual basis for the present complaint for application for arbitration.  (Emphasis
106

supplied)

In the assailed order dated May 5, 2011, the Cebu City Regional Trial Court, Branch 10 made much of the Cebu
City Regional Trial Court, Branch 20’s pronouncement in the latter’s December 4, 2009 order that "the [first]
complaint fails to state a cause of action."  Based on this, the Cebu City Regional Trial Court, Branch 10 concluded
107

that the dismissal of the first complaint was one made without prejudice, thereby "leav[ing] the parties free to litigate
the matter ina subsequent action, as though the dismissal [sic] action had not been commenced." 108

The Cebu City Regional Trial Court, Branch 10 is in serious error. In holding that the second complaint was not
barred by res judicata, the Cebu City Regional Trial Court, Branch 10 ignored established jurisprudence.

Referring to the earlier cases of Manalo v. Court of Appeals  and Mendiola v. Court of Appeals,  this court
109 110

emphasized in Luzon Development Bank v. Conquilla  that dismissal for failure to state a cause of action may very
111

well be considered a judgment on the merits and, thereby, operate as res judicata on a subsequent case:

[E]ven a dismissal on the ground of "failure to state a cause of action" may operate as res judicata on a subsequent
case involving the same parties, subject matter, and causes of action, provided that the order of dismissalactually
ruled on the issues raised.What appears to be essential to a judgment on the merits is that it be a reasoned
decision, which clearly states the facts and the law on which it is based.  (Emphasis supplied)
112

To reiterate, the Cebu City Regional Trial Court, Branch 20 made a definitive determination that CAGLI had no right
to compel AEV to subject itself to arbitrationvis-a-vis CAGLI’s claims under Annex SL-V. This determination was
arrived at after due consideration of the facts established and the arguments advancedby the parties. Accordingly,
the Cebu City Regional Trial Court, Branch 20’s December 4, 2009 order constituted a judgment on the merits and
operated as res judicata on the second complaint.

In sum, the requisites for res judicata have been satisfied and the second complaint should, thus, have been
dismissed. From this, it follows that CAGLI committed an act of forum shopping in filing the second complaint.
CAGLI instituted two suits in two regional trial court branches, albeit successively and not simultaneously. It asked
both branches to rule on the exact same cause and to grant the exact same relief. CAGLI did so after it had
obtained an unfavorable decision (at least with respect to AEV) from the Cebu City Regional Trial Court, Branch 20.
These circumstances afford the reasonable inference that the second complaint was filed in the hopes of a more
favorable ruling.

Notwithstanding our pronouncements sustaining AEV’s allegations that CAGLI engaged in forum shopping and that
the second complaint was barred by res judicata, we find that at the time of the filing of the second complaint, AEV
had already been discharged from the proceedings relating to the first complaint. Thus, asbetween AEV and CAGLI,
the first complaint was no longer pending at the time of the filing of the second complaint. Accordingly, the second
complaint could not have been barred by litis pendentia.

There is no agreement
binding AEV to arbitrate
with CAGLI on the latter’s
claims arising from Annex SL-V

For arbitration to be proper, it is imperative thatit be grounded on an agreement between the parties. This was
adequately explained in Ormoc Sugarcane Planters’ Association,Inc. v. Court of Appeals: 113

Section 2 of R.A. No. 876 (the Arbitration Law) pertinently provides:

Sec. 2. Persons and matterssubject to arbitration. – Two or more persons or parties may submit to the arbitration of
one or more arbitrators any controversy existing between them at the time of the submission and which may be the
subject of an action, or the parties to any contract may in such contract agree to settle by arbitration a controversy
thereafter arising between them. Such submission or contract shall be valid, enforceable and irrevocable, save upon
such grounds as exist at law for the revocation of any contract. . . . (Emphasis ours)

The foregoing provision speaks of two modes of arbitration: (a) an agreement to submit to arbitration somefuture
dispute, usually stipulated upon in a civil contract between the parties, and known as an agreement to submit to
arbitration, and (b) an agreement submitting an existing matter of difference to arbitrators, termed the submission
agreement. Article XX of the milling contract is an agreement to submit to arbitrationbecause it was made in
anticipation of a dispute that might arise between the parties after the contract’s execution.

Except where a compulsory arbitration is provided by statute, the first step toward the settlement of a difference by
arbitration is the entry by the parties into a valid agreement to arbitrate.An agreement to arbitrate is a contract, the
relation ofthe parties is contractual, and the rights and liabilities of the parties are controlled by the law of contracts.

550
In an agreement for arbitration, the ordinary elements of a valid contract must appear, including an agreement
toarbitrate some specific thing, and an agreement to abide by the award, either in express language or by
implication.  (Emphasis supplied)
114

In this petition, not one of the parties — AEV, CAGLI, Victor S. Chiongbian, and Benjamin D. Gothong — has
alleged and/or shown that the controversy is properly the subject of "compulsory arbitration [as] provided by
statute."  Thus, the propriety of compelling AEV to submit itself to arbitration must necessarilybe founded on
115

contract.

Four (4) distinct contracts have been cited in the present petition:

1. The January 8, 1996 Agreement in which ASC, CAGLI, and WLI merged their shipping enterprises, with
WLI (subsequently renamed WG&A) as the surviving entity. Section 11.06 of this Agreement provided for
arbitration as the mechanism for settling all disputes arising out of or in connection with the Agreement.

2. Annex SL-V of the Agreement between CAGLI and WLI (and excluded ASC and any other Aboitiz-
controlled entity), and which confirmed WLI’s commitment to acquire certain inventories, worth not more
than 400 million, of CAGLI. Annex SL-V stated that the acquisition was "pursuant to the Agreement."  It did116

not contain an arbitration clause.

3. The September 23, 2003 Share Purchase Agreement or SPA in which AEV agreed to purchasethe
Chiongbian and Gothong groups' shares in WG&A’s issued and outstanding stock. Section 6.5 of the SPA
provided for arbitration as the mode of settling any dispute arising from the SPA. Section 6.8 of the SPA
further provided that the Agreement of January 8, 1996 shall be deemed terminatedexcept its Annex SL-V.

4. The Escrow Agreement whereby ING Bank N.V.-Manila Branch was to take custody of the shares subject
of the SPA. Section 14.7 of the Escrow Agreement provided that all disputes arising from it shall be settled
via arbitration.

The obligation for WLI to acquire certain inventories of CAGLI and which is the subject of the present petition was
contained in Annex SL-V. It is therefore this agreement which deserves foremost consideration. As to this particular
agreement, these points must be underscored: first, that it has no arbitration clause; second, Annex SL-V is only
between WLI and CAGLI.

On the first point, it is clear, pursuant to this court’s pronouncements in Ormoc Sugarcane Planters’ Association, that
neither WLI nor CAGLI can compel arbitration under Annex SL-V. Plainly, there is no agreement to arbitrate.

It is of no moment that Annex SL-Vstates that it was made "pursuant to the Agreement" or that Section 11.06 of the
January 8, 1996 Agreement provides for arbitration as the mode of settling disputes arising out of or in connection
with the Agreement.

For one, to say that Annex SL-V was made"pursuant to the Agreement" is merely to acknowledge: (1) the factual
context in which Annex SL-V was executed and (2) that it was that context that facilitated the agreement embodied
in it. Absentany other clear or unequivocal pronouncement integrating Annex SL-V into the January 8, 1996
Agreement, it would be too much of a conjecture to jump to the conclusion that Annex SL-V is governed by the
exact same stipulations which govern the January 8, 1996 Agreement.

Likewise, a reading of the Agreement’s arbitration clause will reveal that it does not contemplate disputes arising
from Annex SL-V.

Section 11.06 of the January 8, 1996 Agreement requires the formation of an arbitration tribunal composed of four
(4) arbitrators. Each of the parties — WLI, CAGLI, and ASC — shall appoint one (1) arbitrator, and the fourth
arbitrator, who shall actas chairman, shall be appointed by the three (3) arbitrators appointed by the parties. From
the manner by which the arbitration tribunal is to be constituted, the necessary implication is that the arbitration
clause is applicable tothree-party disputes — as will arise from the tripartite January 8, 1996 Agreement — and not
to two-party disputesas will arise from the two-party Annex SL-V.

From the second point — that Annex SL-V is only between WLI and CAGLI — it necessarily follows that none but
WLI/WG&A/ATSC and CAGLI are bound by the terms of Annex SL-V. It is elementary that contracts are
characterized by relativity or privity, that is, that "[c]ontracts take effect only between the parties, their assigns and
heirs."  As such, one who is not a party to a contract may not seek relief for such contract’s breach. Likewise, one
117

who is not a party to a contract may not be held liable for breach of any its terms.

While the principle of privity or relativity of contracts acknowledges that contractual obligations are transmissible to a
party’s assigns and heirs, AEV is not WLI’s successor-in-interest. In the period relevant to this petition, the
transferee of the inventories transferred by CAGLI pursuant to Annex SL-V assumed three (3) names: (1) WLI, the

551
original name of the entity that survived the merger under the January 8, 1996 Agreement; (2) WG&A, the name
taken by WLI in the wake of the Agreement; and (3) ATSC, the name taken by WLI/WG&A inthe wake of the SPA.
As such, it is now ATSC that is liable under Annex SL-V.

Pursuant to the January 8, 1996 Agreement, the Aboitiz group (via ASC) and the Gothong group (viaCAGLI)
became stockholders of WLI/WG&A, along with the Chiongbiangroup (which initially controlled WLI). This continued
until, pursuant to the SPA, the Gothong group and the Chiongbian group transferred their shares to AEV. With the
SPA, AEV became a stockholder of WLI/WG&A, which was subsequently renamed ATSC. Nonetheless, AEV’s
status asATSC’s stockholder does not subject it to ATSC’s obligations

It is basic that a corporation has a personality separate and distinct from that of its individual stockholders. Thus, a
stockholder does not automatically assume the liabilities of the corporation of which he is a stockholder. As
explained in Philippine National Bankv. Hydro Resources Contractors Corporation: 118

A corporation is an artificial entitycreated by operation of law. It possesses the right of succession and such powers,
attributes, and properties expressly authorized by law or incident to its existence. It has a personality separate and
distinct from that of its stockholders and from that of other corporations to which it may be connected. As a
consequence of its status as a distinct legal entityand as a result of a conscious policy decision to promote capital
formation, a corporation incurs its own liabilities and is legally responsible for payment of its obligations. In other
words, by virtue of the separate juridical personality ofa corporation, the corporate debt or credit is not the debt or
credit of the stockholder. This protection from liability for shareholders is the principle of limited liability.
119

In fact, even the ownership by a single stockholder of all or nearly all the capital stock of a corporation is not, in and
of itself, a ground for disregarding a corporation’s separate personality. As explained in Secosa v. Heirs of
Francisco: 120

It is a settled precept in this jurisdiction that a corporation is invested by law with a personality separate from thatof
its stockholders or members. It has a personality separate and distinct from those of the persons composing it as
well as from that of any other entity to which it may be related. Mere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of a corporation is not in itself sufficient ground for disregarding the
separate corporate personality.A corporation’s authority to act and its liability for its actions are separate and apart
from the individuals who own it.

The so-called veil of corporation fiction treats as separate and distinct the affairs of a corporation and its officers and
stockholders. As a general rule, a corporation will be looked upon as a legal entity, unless and until sufficient reason
to the contrary appears. When the notion of legal entity is used to defeat public convenience, justify wrong, protect
fraud, or defend crime, the law will regard the corporation as an association of persons. Also, the corporate entity
may be disregarded in the interest of justice in such cases asfraud that may work inequities among members of the
corporation internally, involving no rights of the public or third persons. In both instances, there must have been
fraud and proof of it. For the separate juridical personality of a corporation to be disregarded, the wrongdoing must
be clearly and convincingly established. It cannot be presumed.  (Emphasis supplied)
121

AEV’s status as ATSC’s stockholder is, in and of itself, insufficient to make AEV liable for ATSC’s obligations.
Moreover, the SPA does not contain any stipulation which makes AEV assume ATSC’s obligations. It is true that
Section 6.8 of the SPA stipulates that the rights and obligations arising from Annex SL-V are not terminated. But all
that Section 6.8 does is recognize that the obligations under Annex SL-V subsist despite the termination of the
January 8, 1996 Agreement. At no point does the text of Section 6.8 support the position that AEV steps into the
shoes of the obligor under Annex SL-V and assumes its obligations.

Neither does Section 6.5 of the SPAsuffice to compel AEV to submit itself to arbitration. While it is true that Section
6.5 mandates arbitration as the mode for settling disputes between the parties to the SPA, Section 6.5 does not
indiscriminatelycover any and all disputes which may arise between the parties to the SPA. Rather, Section 6.5 is
limited to "dispute[s] arising between the parties relating tothis Agreement [i.e., the SPA]."  To belabor the point, the
122

obligation which is subject of the present dispute pertains to Annex SL-V, not to the SPA. That the SPA, in Section
6.8, recognizes the subsistence of Annex SL-Vis merely a factual recognition. It does not create new obligations and
does not alter or modify the obligations spelled out in Annex SL-V.

AEV was drawn into the present controversy on account of its having entered into the SPA. This SPA made AEV a
stockholder of WLI/WG&A/ATSC. Even then, AEV retained a personality separate and distinct from
WLI/WG&A/ATSC. The SPA did not render AEV personally liable for the obligations of the corporation whose stocks
it held.

The obligation animating CAGLI’s desire to arbitrate is rooted in Annex SL-V. Annex SL-V is a contractentirely
different from the SPA. It created distinct obligations for distinctparties. AEV was never a party to Annex SL-V.
Rather than pertaining to AEV, Annex SL-V pertained to a different entity: WLI (renamed WG&A then renamed
ATSC). AEV is, thus, not bound by Annex SL-V.

552
On one hand, Annex SL-V does not stipulate that disputes arising from it are to be settled via arbitration.On the
other hand, the SPA requires arbitration as the mode for settling disputes relating to it and recognizes the
subsistence of the obligations under Annex SL-V. But as a separate contract, the mere mention of Annex SL-V in
the SPA does not suffice to place Annex SL-V under the ambit of the SPA or to render it subject to the SPA’s terms,
such as the requirement to arbitrate.

WHEREFORE, the petition is GRANTED. The assailed orders dated May 5, 2011 and June 24,2011 of the Regional
Trial Court, Cebu City, Branch 10 in Civil Case No. CEB-37004 are declared VOID. The Regional Trial Court, Cebu
City, Branch 10 is ordered to DISMISSCivil Case No. CEB-37004.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 181843               July 14, 2014

MIGUEL CIRERA y USTELO, Petitioner, 

vs.
PEOPLE OF THE PHILIPPINES, Respondent.

DECISION

LEONEN, J.:

Treachery as a qualifying circumstance must be deliberately sought to ensure the safety of the accused from the
defensive acts of the victim. Unexpectedness of the attack does not always equate to treachery.

We are asked to decide on a petition for review on certiorari  of the Court of Appeals' decision  dated November 20,
1 2

2007 and the Court of Appeals’ resolution  dated February 18, 2008. The Court of Appeals affirmed the Regional
3

Trial Court’s decision  dated July 2, 2004 that found petitioner guilty of two (2) counts of frustrated murder and
4

sentenced him to suffer the indeterminate penalty of imprisonment of six (6) years and one (1) day of prision
mayoras minimum to 17 years and four (4) months of reclusion temporalas maximum for each count. 5

This case arose out of two (2) informations for frustrated murder filed against petitioner:

Criminal Case No. Q-00-91821

That on or about the 20th day of April 2000, in Quezon City, Philippines, the said accused, with intent to kill, with
evident premeditation and by means of treachery, did, then and there, wilfully, unlawfully and feloniously attackand
assault and employ personal violence upon the person of one GERARDO NAVAL by then and there stabbing the
latter with a sharp bladed weapon hitting him at the left back portion of his body, thereby inflicting upon said
offended party physical injuries which are necessarily fatal and mortal, thus performing all the acts of execution
which would have produced the crime of Murder as a consequence but which nevertheless did not produce it by
reason of causes independent of the will of the perpetrator, that is, by the timely and able medical attendance
rendered to said GERARDO NAVAL which save his life, to the damage and prejudice of the said offended party. 6

553
Criminal Case No. Q-00-91842

That on or about the 20 th day of April 2000, in Quezon City, Philippines, the said accused, with intent to kill, with
evident premeditation and by means of treachery, did, then and there, wilfully, unlawfully and feloniously attackand
assault and employ personal violence upon the person of one ROMEO AUSTRIA by then and there stabbing the
latter with a sharp bladed weapon hitting him at the left back portion of his body, thereby inflicting upon said
offended party physical injuries which are necessarily fatal and mortal, thus performing all the acts of execution
which would have produced the crime of Murder as a consequence but which nevertheless did not produce it by
reason of causes independent of the will of the perpetrator, that is, by the timely and able medical attendance
rendered to said ROMEO AUSTRIA which save his life, to the damage and prejudice of the said offended party. 7

Upon arraignment, petitioner pleadednot guilty to the offenses charged against him. 8

The prosecution presented private complainants Gerardo Naval and Romeo Austria as witnesses.  It also presented 9

Dr. Raisa D. Francisco, Carlos Angeles, and Arnold Angeles as witnesses.  Petitioner testified for the defense. 10 11

Facts according to the prosecution

Romeo Austria testified that at around 8:30 a.m. on April 20, 2000, he was playing a lucky nine game ata wake on
Araneta Avenue, Quezon City.  Miguel arrived, asking money from Austria so he could buy liquor.  In response,
12 13

Austria asked Miguel "to keep quiet."  Gerardo Naval "arrived and asked [Austria] to go home."  There was an
14 15

exchange of words between Naval and Miguel.  Austria "stood up [and] felt that he was stabbed."  As he ran home,
16 17

he noticedMiguel "armed with a knife,"  this time chasing Naval.  Austria was "hospitalized . . . and was . . . confined
18 19

for more than a month."  He spent around ₱110,000.00 for his hospitalization.  On cross-examination, Austria
20 21

testified that he saw Miguel attempt to stab him again. 22

Gerardo Naval testified that Miguel was irked when he asked Austria to go home.  After he and Miguel had an 23

exchange of words, he "felt a hard blow on his back."  Naval retaliated.  However, he ran away when he saw Miguel
24 25

holding a knife.  Miguel chased Naval who fell on the ground.  When Naval saw that Miguel was "about to stab him
26 27

again, he hit [Miguel] with a bench"  and left him lying on the ground, unable to stand.  According to Naval, "he did
28 29

not see the [knife] land on his back."  Naval was also confined at the hospital but only for six (6) days.
30 31

Dr. Carlos Angeles testified that "he treated [Austria] for [the] stab wound at [his] back."  He declared that Austria 32

could have died without an emergency operation.  According to him, "a long and sharp instrument, probably a
33

knife,"  could have been used to stab the victim.  Dr. Arnold Angeles, Naval’s doctor, testified that "continuous
34 35

blood loss"  could have caused Naval’s death.

36 37

Facts according to the defense

Miguel testified that he saw private complainants at a wake.  Naval tapped his back and asked, "Anong problema
38

mo?" to which he answered, "Wala naman."  Thereafter, Naval punched Miguel.  As he was about to stand up, he
39 40

was hit by a hard objecton his head, causing him to lose consciousness.  He was brought to UERM Memorial 41

Hospital where Naval identified him.  He was then brought to Station 11 in Galas, Quezon City.  Miguel also
42 43

testified that only Naval identified him at the hospital. 44

The parties stipulated that Dr. Renan Acosta, supposedly the second defense witness, conducted Miguel’s
examination.  He issued a temporary medical certificate and a separate permanent medical certificate.
45 46

Regional Trial Court

In its decision, the Regional Trial Court found petitioner guilty beyond reasonable doubt of two (2) counts of
frustrated murder.  He was sentenced to suffer the indeterminate penalty of imprisonment of six (6) years and one
47

(1) day of prision mayoras minimum, to 17 years and four (4) months of reclusion temporalas maximum for each
count.  Petitioner was ordered to indemnify Austria ₱25,000.00 as moral damages and ₱100,000.00 as actual
48

damages; and Naval ₱25,000.00 asmoral damages and ₱10,000.00 as temperate or moderate damages. 49

Petitioner was also ordered to pay the costs of suit.  The dispositive portion of the Regional
50

Trial Court decision reads:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Re: Criminal Case No. 00-91841-finding accused MIGUEL CIRERA y USTELO guilty beyond reasonable
doubt of the crime of Frustrated Murder hereby sentencing him to suffer the indeterminate penalty of
imprisonment of Six (6) years and one (1) day of Prision Mayor as MINIMUM to Seventeen (17)Years and
Four (4) months of Reclusion Temporal as MAXIMUM and to indemnify private complainant Gerardo Naval
554
 in the amount of Twenty Five Thousand (₱25,000.00) Pesos as and by way of morals [sic] damages and in
the absence of evidence, the amount of Ten Thousand (₱10,000.00) Pesos as and by way [of] Temperate or
moderate damages;

2. Re: Criminal Case NO. 00-91841-finding accused MIGUEL CIRERA y USTELO guilty beyond reasonable
doubt of the crime of Frustrated Murder, hereby sentencing him to suffer the indeterminate penalty [of] Six
(6) years and one (1) day of Prision Mayor as MINIMUM to Seventeen (17)years and four (4) months of
Reclusion Temporal as MAXIMUM and to indemnify private complainant Romeo Austria in the amount of
Twenty Five Thousand (₱25,000.00) Pesos as and by way of moral damages and the amount of One
Hundred Thousand (₱100,000.00) Pesos as actual damages.

3. To pay the cost of suit.  (Emphasis in the original)

51

The Regional Trial Court found thatpetitioner caused the stab wounds of private complainants.  Naval and Austria
52

were able to positively identify him and describe how they obtained their injuries. 53

Petitioner’s acts were not attended by evident premeditation as ruled by the trial court.  However, there was
54

treachery on petitioner’s end, considering the length of time it took private complainants to realize that they were
stabbed.  This, according to the Regional Trial Court, was a method or form that tended to insure the execution of
55

an act without risk from the offended party’s defense. 56

Petitioner appealed  the Regional Trial Court’s July 2, 2004 decision to the Court of Appeals, raising as issue the
57

credibility of the prosecution’s witnesses and, hence, the correctness of his conviction. 58

Court of Appeals

In a decision  promulgated on November 20, 2007, the Court of Appeals affirmed the decision of the trial court.
59

The Court of Appeals was not persuaded by petitioner’s arguments pointing to alleged inconsistencies inthe
prosecution witnesses’ narratives. It found that the inconsistency between Naval’s testimony and his sworn affidavit
on the number of times petitioner was hit might be attributed to the fact that "the statement was taken . . . while he
was [still at] the hospital [unable] to fully understand its contents".  The Court of Appeals was not persuaded either
60

by petitioner’s argument that Austria and Naval failed to testify that they saw him stab them.  The Court of Appeals
61

held that "no other person could have committed the crime"  as "all the circumstances point to [petitioner] as the
62

author of the crime." 63

The Court of Appeals affirmed the finding of the trial court that there was treachery in this case because"the attack
was so sudden and unexpected"  that "self-defense was not possible."
64 65

Petitioner’s motion for reconsideration was denied in the Court of Appeals’ resolution  promulgated on February 18,
66

2008.

Petitioner, in this case, raises the following issue:

WHETHER THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE APPEAL WHICH IN EFFECT,
AFFIRMS THE JUDGMENT OF CONVICTION RENDERED BY THE TRIAL COURT, DESPITE THE PATENT
LACK OF EVIDENCE AGAINST THE PETITIONER AND FOR THE FAILURE OF THE PROSECUTION TO
PROVE THE PETITIONER’S GUILT BEYOND REASONABLE DOUBT. 67

Petitioner argues that the Court of Appeals failed to consider the inconsistencies in Austria’s and Naval’s
statements.  Austria’s statement that only Naval and petitioner were standing behind him was inconsistent with
68

Austria’s other statement that "petitioner was on his left side, while [Naval] was on his right side." 69

Petitioner also stresses that Austria’s claim that Naval and petitioner "were still having an altercation when he
suddenly felt a stab blow at his back"  was inconsistent with Naval’s alleged failure to mention "that he had an
70

altercation with the petitioner before the stabbing incident."  Petitioner claims that it was not possible for him to have
71

stabbed Austria without Naval noticing since he was having a heatedexchange of words with Naval. 72

Petitioner insists that the claim that "petitioner was armed with a knife"  was not proven since "the knife was not
73

recovered."  Petitioner was left immobile, yet "nobody bothered to retrieve the knife"  he supposedly used in
74 75

committing the crimes charged against him.  Petitioner also points out that other players in the lucky nine game
76

might have gotten mad at private complainants when Naval allegedly asked Austria to go home for a drinking
spree.77

Petitioner also argues that there was no treachery.  Even assuming that an assault was sudden and unexpected,
78

there must be "evidence that [the] mode of assault was consciously and deliberately adopted to [e]nsure the
555
execution of the crime without risk to the [petitioner.]"  Given "private complainants’ superiority in number"  and
79 80

considering that petitioner "was left behind unconscious,"  private complainants were not left without "opportunity to
81

retaliate." 82

Respondent counters that the "trial court’s observations and conclusions deserve great respect and are often
accorded finality, unless there appears in the recordsome fact or circumstance of weight which the lower court may
have overlooked, misunderstood or misappreciated and which . . . would alter the result of the case." 83

Private complainants point out that the circumstances of the case show treachery since they were attacked from
behind.  Further, they claim that there was no warning that they were in danger when they were stabbed.
84 85

The petition should be partly granted. Treachery did not exist and, hence, petitioner may only be convicted of two
counts of frustrated homicide.

Nonetheless, we affirm the findingthat the prosecution’s witnesses were credible.

Petitioner points to alleged inconsistencies that pertain only to collateral and inconsequential matters. He directs this
court’s attention to inconsistent statements regarding the positions of private complainants at the time of the
incident.  He also points to the alleged impossibility of him committing the offense without being noticed by
86

Naval and to the alleged failure to recover the knife used in stabbing private complainants.
87 88

These alleged inconsistencies do not affect the credibility of the testimonies of the prosecution witnesses, specially
with respect to the "principal occurrence and positive identification"  of petitioner. Slight inconsistencies in the
89

testimony even strengthen credibility as they show that the "testimony [was] not rehearsed."  What is important is
90

that there is consistency as to the occurrence and identity of the perpetrator. 91

Further, the alleged failure to retrieve the knife supposed to have been used in perpetrating the offense does not
destroy the credibility of the testimonies.  The crime is proved not by presenting the object but by establishing the
92

existence of the elements of the crime as written in law. 93

II

Petitioner was charged and convicted by the trial court and the Court of Appeals with two counts of frustrated
murder.

Article 248 of the Revised Penal Code provides that murder is committed by a person who kills, under certain
circumstances, another person that is not his or her father, mother, child, ascendant, descendant, or spouse. It
provides:

ARTICLE 248. Murder. — Any person who, not falling within the provisions of Article 246 shall kill another, shall be
guilty of murder and shall be punished by reclusión temporalin its maximum period to death, if committed with any of
the following attendant circumstances:

1. With treachery, taking advantage ofsuperior strength, with the aid of armed men, or employing means to
weaken the defense or of means or persons to insure or afford impunity.

2. In consideration of a price, reward or promise.

3. By means of inundation, fire, poison, explosion, shipwreck, stranding of a vessel, derailment or assault
upon a street car or locomotive, fall of an airship, by means of motor vehicles, or with the use of any other
means involving great waste and ruin.

4. On occasion of any of the calamities enumerated in the preceding paragraph, or of an earthquake,

eruption of a volcano, destructive cyclone, epidemic, or any other public calamity. 5. With evident
premeditation.

6. With cruelty, by deliberately and inhumanly augmenting the suffering of the victim, or outraging or scoffing
at his person or corpse.

If these qualifying circumstances are not present or cannot be proven beyond reasonable doubt, the accused may
only be convicted with homicide, defined in Article 249 of the Revised Penal Code:

556
Art. 249. Homicide. – Any person who, not falling within the provisions of Article 246, shall kill another withoutthe
attendance of any of the circumstances enumerated in the next preceding article, shall be deemed guilty of
homicide and be punished by reclusión temporal.

In murder or homicide, the offender must have the intent to kill. If there is no intent to kill on the part ofthe offender,
he or she is liable only for physical injuries.
94

"[I]ntent to kill . . . must beproved by clear and convincing evidence."  "[It] should not be drawn inthe absence of
95

circumstances sufficient to prove such intent beyond reasonable doubt." 96

In Escamilla v. People,  we said that "[t]he evidence to prove intent to kill may consist of, inter alia, the means used;
97

the nature, location and number of wounds sustained by the victim; and the conduct of the malefactors before, at
the time of, orimmediately after the killing of the victim." 98

The act of killing becomes frustrated when an offender "perform[s] all the acts of execution which [c]ould produce
the [crime]"  but did not produce it for reasons independent of his or her will.
99

In convicting petitioner offrustrated murder, the trial court and the Court of Appeals found that petitioner intentionally
tried to kill private complainants. He was the author ofthe stab wounds obtained by private complainants. However,
for reasons independent of his will, he was unable to fully execute the crime.

This court held that "findings of facts and assessment of credibility of witnesses are matters best left to the trial
court,"  which is in the best position to observe the witnesses’ demeanor while being examined in court.  This court
100 101

gives more weight tosuch findings if affirmed by the Court of Appeals.  The exception to the ruleis when the trial
102

court misconstrued facts which if properly appreciated could alter the outcome of the case. 103

We find that there is nothing in the circumstances of this case that warrants the application of the exception, with
respect to the findings that: 1) there was intent to kill; 2) petitioner was the willful author of the stab wounds, which
almost killed private complainants; and that 3) petitioner’s failure to kill private complainants was a result of
circumstances independent of his will. Circumstantial evidence was used to identify the perpetrator in this case. 104

Rule 133, Section 4 of the Rules ofCourt provides that a person may be convicted based on circumstantial evidence
if the requisites are present. It provides:

Section 4. Circumstantial evidence, when sufficient.— Circumstantial evidence is sufficient for conviction if:

(a) There is more than one circumstance;

(b) The facts from which the inferences are derived are proven; and

(c) The combination of all the circumstances is such as to produce a conviction beyond reasonable doubt.

This court iterated this rule in Trinidad v. People: 105

The settled rule is that a judgment of conviction based purely on circumstantial evidence can be upheld only if the
following requisites concur: (1) there is more than one circumstance; (2) the facts from which the inferences are
derived are proven; and (3) the combination of all the

circumstance es is such as to produce conviction beyond reasonable doubt. 106

In this case, the following facts were considered:

1) Petitioner was identified by private complainants to be at the scene of the crime; 107

2) Private complainants were able todescribe how they obtained their injuries; 108

3) Petitioner was seen holding the knife at the scene of the crime; 109

4) Only three persons were involved in the incident — private complainants and petitioner; 110

5) Petitioner "was standing very close to the private complainants"; 111

6) Petitioner was the only one who had an altercation with private complainants,  and petitioner was seen
112

chasing and about to stab at least one of the private complainants; 113

557
 7) Private complainants sustained stab wounds; 114

8) The stab wounds sustained by private complainants would have been fatal had it not been given
appropriate medical attention. 115

The combination of these circumstances "constitute[s] an unbroken chain which leads to one fair and reasonable
conclusion pointing to the [petitioner], to the exclusion of all others, as the guilty person."
116

The version offered by petitioner that it was he who was punched and hit with a hard object  is not inconsistent with
117

the facts as stated by private complainants. It may even be true. However, it does not remove such reasonable
conclusion that he was the author of the acts complained about in this case.

Petitioner’s intent to kill is evident from his attempt to stab private complainants more than once.  Petitioner chased
118

private complainants after they had tried to flee from him.  The wounds inflicted by petitioner were also shown to
119

have been fatal if no medical attention had been given to private complainants immediately after the incident. 120

Petitioner’s acts did not result in private complainants’ deaths despite petitioner having already performed all acts of
execution of the crime. However, this was not due to his desistance but due to the timely medical attention given to
private complainants. 121

Meanwhile, Dr. Carlos Angeles’ and Dr. Arnold Angeles’ testimonies that private complainants would have died had
no immediate medical attention been given to them,  showed that petitioner’s failure to kill private complainants was
122

due toacts independent of his will.

Based on the foregoing, we do not find reason to disturb the trial court’s and the Court of Appeals’ findings.

III

However, treachery, as a qualifying circumstance to sustain a conviction of frustrated murder rather than frustrated
homicide, was not proven by the prosecution.

Article 14(16) of the Revised Penal Code defines treachery:

ARTICLE 14. Aggravating Circumstances. — The following are aggravating circumstances:

....

16. That the act be committed with treachery (alevosia).

There is treachery when the offender commits any of the crimes against the person, employing means, methods, or
forms in the execution thereof, which tend directly and specially to insure its execution, without risk to himself arising
from the defense which the offended party might make. 123

The requisites of treachery are:

(1) [T]he employment of means,method, or manner of execution which will ensure the safety of the
malefactor from defensive or retaliating acts on the part of the victim, no opportunity being given to the latter
to defend himself or to retaliate;  and
124

(2) [D]eliberate or conscious adoption of such means, method, or manner of execution. 125

A finding of the existence of treachery should be based on "clear and convincing evidence."  Such evidence must
126

be as conclusive as the fact of killing itself.  Its existence "cannot be presumed."  As with the finding of guilt of the
127 128

accused, "[a]ny doubt as to [its] existence . . . [should] be resolved in favor of the accused." 129

The unexpectedness of an attack cannotbe the sole basis of a finding of treachery  even if the attack was intended
130

to kill another as long as the victim’s position was merely accidental.  The means adopted must have been a result
131

of a determination to ensure success in committing the crime.

In this case, no evidence was presented to show that petitioner consciously adopted or reflected on the means,
method, or form of attack to secure his unfair advantage.

The attack might "have been done on impulse [or] as a reaction to an actual or imagined provocation offered by the
victim."  In this case, petitioner was not only dismissed by Austria when he approached him for money. There was
132

558
also an altercation between him and Naval. The provocation might have been enough to entice petitioner to action
and attack private complainants.

Therefore, the manner of attack might not have been motivated by a determination to ensure success in committing
the crime.  What was more likely the case, based on private complainants’ testimonies, was that petitioner’s action
1âwphi1

was an impulsive reaction to being dismissed by Austria, his altercation with Naval, and Naval’s attempt to summon
Austria home.

Generally, this type of provocation negates the existence of treachery.  This is the type of provocation that does not
133

lend itself to premeditation. The provocation in thiscase is of the kind which triggers impulsive reactions left
unchecked by the accused and caused him to commit the crime. There was no evidence of a modicum
ofpremeditation indicating the possibility of choice and planning fundamental to achieve the elements of treachery.

The ability of the offended parties toretaliate and protect themselves may not by itself negate the existence of
treachery. The efforts of the accused to employ means and method to ensure his safety and freedom from
retaliation may not have succeeded. However, in this case, the ability of the offended parties to have avoided
greater harm by running away or by being able to subdue the accused is a strongindicator that no treachery exists.

It is, therefore, an error for both the trial and appellate courts not to have considered the evidence that the offended
parties were able to flee and retaliate. Upon proof of evasion and retaliation, courts must evaluate the evidence
further to ensure whether there can be reasonable doubt for this qualifying circumstance to exist. This is only in
keeping with the presumption of innocence of the accused.

Thus, in the absence of clear proof of the existence of treachery, the crime proven beyond reasonable doubt isonly
frustrated homicide and, correspondingly, the penalty should be reduced. 134

IV

Article 250 of the Revised Penal Code provides that a penalty lower by one degree than that which should be
imposed for homicide may be imposed upon a person guilty of frustrated homicide.

The imposable penalty for homicide is reclusion temporal. Article 50 of the Revised Penal Code provides that the
penalty to be imposed upon principals of a frustrated crime shall be the penalty next lower in degree than that
prescribed by law for the consummated crimes. The penalty next lower in degree is prision mayor.

Applying the Indeterminate Sentence Law, the penalty to be imposed must have a maximum term which canbe
properly imposed under the rules considering the attending circumstances.  Since there is no attending
135

circumstance in this case, the penalty of prision mayor in its medium term or eight (8) years and one (1) day
asmaximum should beimposed. The minimum sentence should be within the range of the penalty next lower to that
prescribed by the Revised Penal Code.  A penalty of one (1) year and one (1) day as minimum, prision correccional
136

should, therefore, be proper.

Furthermore, petitioner’s civil liabilitymust be modified. The award of actual damages to Romeo Austria should be
88,028.77 since this is the only amount supported by receipts on record. This is in line with Article 2199  of the Civil
137

Code, which limits the entitlement for pecuniary loss to such amount duly proved.

We see no reason to modify the trial court’s award of moral damages, being in line with Article 2219  and
138

jurisprudence.  The trial court’s award of temperate damages to Naval isalso justified in recognition of the injuries
139

he sustained, which from their very nature imply damages and do not need to be proved inaccordance with Article
2216  of the Civil Code.
140

WHEREFORE, the Court of Appeals’ decision is SET ASIDE. Petitioner is found guilty of two (2) counts of frustrated
homicide. He is sentenced to a prison term of one (1) year and one (1) day of prision correccional as minimum, to
eight (8) years and one (1) day of prision mayor medium as maximum, for every count. Furthermore, he is ordered
to indemnify a) Romeo Austria ₱25,000.00 as moral damages and ₱88,028.77 as actual damages and b) Gerardo
Naval ₱25,000.00 as moral damages and ₱10,000.00 as temperate ormoderate damages.

Petitioner is also ordered to pay the c.osts of suit.

SO ORDERED.

559
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 200334               July 30, 2014

THE PEOPLE OF THE PHILIPPINES, Respondent-Appellee, 

vs.
VICTOR COGAED y ROMANA, Accused-Appellant.

DECISION

LEONEN, J.:

The mantle of protection upon one's person and one's effects through Article III, Section 2 of the Constitution is
essential to allow citizens to evolve their autonomy and, hence, to avail themselves of their right to privacy. The
alleged compromise with the battle against dangerous drugs is more apparent than real. Often, the compromise is
there because law enforcers neglect to perform what could have been done to uphold the Constitution as they
pursue those who traffic this scourge of society.

Squarely raised in· this appeal  is the admissibility of the evidence seized as a result of a warrantless arrest. The
1

police officers identified the alleged perpetrator through facts that were not based on their personal knowledge. The
information as to the accused’s whereabouts was sent through a text message. The accusedwho never acted
suspicious was identified by a driver. The bag that allegedly contained the contraband was required to be opened
under intimidating circumstances and without the accused having been fully apprised of his rights. This was not a
reasonable search within the meaning of the Constitution. There was no reasonable suspicion that would allow a
legitimate "stop and frisk" action. The alleged waiver of rights by the accused was not done intelligently, knowingly,
and without improper pressure or coercion.

The evidence, therefore, used against the accused should be excluded consistent with Article III, Section 3 (2) of the
Constitution. There being no possible admissible evidence, the accused should be acquitted.

560
According to the prosecution, at about 6:00 a.m. of November 25, 2005, Police Senior Inspector Sofronio Bayan
(PSI Bayan) of the San Gabriel Police Station in San Gabriel,La Union, "received a text message from an
unidentified civilian informer"  that one Marvin Buya (also known as Marvin Bugat) "[would]be transporting
2

marijuana"  from Barangay LunOy, San Gabriel, La Union to the Poblacion of San Gabriel, La Union.
3 4

PSI Bayan organized checkpoints in order "to intercept the suspect."  PSI Bayan ordered SPO1 Jaime Taracatac, 5

Jr. (SPO1 Taracatac), a member of the San Gabriel Police, to set up a checkpoint in the waiting area of passengers
from San Gabriel bound for San Fernando City.  A passenger jeepney from Barangay Lun-Oy arrived at SPO1
6

Taracatac’s checkpoint.  The jeepney driver disembarked and signalled to SPO1 Taracatac indicating the two male
7

passengers who were carrying marijuana.  SPO1 Taracatac approached the two male passengers who were later
8

identified as Victor RomanaCogaed and Santiago Sacpa Dayao.  Cogaed was carrying a blue bag and a sack while
9

Dayao was holding a yellow bag. 10

SPO1 Taracatac asked Cogaed and Dayao about the contents of their bags.  Cogaed and Dayao told SPO1 11

Taracatac that they did not know since they were transporting the bags as a favor for their barriomatenamed
Marvin.  After this exchange, Cogaed opened the blue bag, revealing three bricks of what looked like
12

marijuana. Cogaed then muttered, "nagloko daytoy nga Marvinen, kastoymet gayam ti nagyanna,"which translates
13

to "Marvin is a fool, this is what [is] contained in the bag."  "SPO1 Taracatac arrested [Cogaed] and . . . Dayao and
14

brought them to the police station."  Cogaed and Dayao "were still carrying their respective bags"  inside the
15 16

station. 17

While at the police station, the Chief of Police and Investigator PO3 Stanley Campit (PO3 Campit) requested
Cogaed and Dayao to empty their bags.  Inside Cogaed’s sack was "four (4) rolled pieces of suspected marijuana
18

fruiting tops,"  and inside Dayao’s yellow bag was a brick of suspected marijuana.
19 20

PO3 Campit prepared the suspected marijuana for laboratory testing.  PSI Bayan personally delivered the 21

suspected marijuana to the PNP Crime Laboratory.  Forensic Chemical Officer Police Inspector Valeriano Panem
22

Laya II performed the tests and found that the objects obtained were indeed marijuana.  The marijuana collected 23

from Cogaed’s blue bag had a total weight of 8,091.5 grams.  The marijuana from Cogaed’s sack weighed 4,246.1
24

grams.  The marijuana collected from Dayao’s bag weighed 5,092 grams.  A total of 17,429.6 grams werecollected
25 26

from Cogaed’s and Dayao’s bags. 27

According to Cogaed’s testimony during trial, he was at Balbalayan, La Union, "waiting for a jeepney to take him" to 28

the Poblacion of San Gabriel so he could buy pesticide.  He boarded a jeepney and recognized Dayao, his younger
29

brother’s friend.  Upon arrival at the Poblacion of San Gabriel, Dayao and Cogaed alighted from the
30

jeepney.  Dayao allegedly "asked for [Cogaed’s] help in carrying his things, which included a travelling bag and a
31

sack."  Cogaed agreed because they were both going to the market.  This was when SPO1 Taracatac approached
32 33

them, and when SPO1 Taracatac asked Cogaed what was inside the bags, Cogaed replied that he did not
know. SPO1 Taracatac then talked to Dayao, however, Cogaed was not privy to their conversation.  Thereafter,
34 35

SPO1 Taracatac arrested Dayao and Cogaed and brought them to the police station.  These facts were 36

corroborated by an eyewitness,Teodoro Nalpu-ot, who was standing across the parking lot where Cogaed was
apprehended. 37

At the police station, Cogaed said that "SPO1 Taracatac hit [him] on the head."  The bags were also opened, but 38

Cogaed never knew what was inside. 39

It was only later when Cogaed learned that it was marijuana when he and Dayao were charged with illegal
possession of dangerous drugs under Republic Act No. 9165.  The information against them states: 40

That on or about the 25th day of November, 2005, in the Municipality of San Gabriel, Province of La Union, and
within the jurisdiction of this Honorable Court, the above-named accused VICTOR COGAED Y ROMANA and
SANTIAGO DAYAO Y SACPA (who acted with discernment) and JOHN DOE,conspiring, confederating and
mutually helping one another, did then there wilfully, unlawfully, feloniously and knowingly, without being authorized
by law, have in their control, custody and possession dried marijuana, a dangerous drug, with a total weight of
seventeen thousand,four hundred twenty-nine and sixtenths (17, 429.6) grams.

CONTRARY TO Section 11 (Possession of Dangerous Drugs), Article II, of Republic Act No. 9165 (otherwise known
as the "Comprehensive Dangerous Drugs Act of 2002"). 41

The case was raffled to Regional Trial Court, Branch 28 of San Fernando City, La Union.  Cogaed and Dayao 42

pleaded not guilty.  The case was dismissed against Dayao because he was only 14 years old at that time and was
43

exempt from criminal liability under the Juvenile Justice and Welfare Act of 2006 or Republic Act No. 9344.  Trial 44

against Cogaed ensued. In a decision  dated May 21, 2008, the Regional Trial Court found Cogaed guilty. The
45

dispositive portion of the decision states:

561
WHEREFORE, the Court finds accused Victor Cogaed y Romana GUILTY beyond reasonable doubt for Violation of
Section 11, Article II of Republic Act No. 9165 (otherwise known as the "Comprehensive Dangerous Drugs Act of
2002") and sentences him to suffer life imprisonment, and to pay a fine of one million pesos (Php 1,000,000.00). 46

The trial court judge initiallyfound Cogaed’s arrest illegal considering that "Cogaed at that time was not, at the
moment of his arrest, committing a crime nor was shown that hewas about to do so or that had just done so. He just
alighted from the passenger jeepney and there was no outward indication that called for his arrest."  Since the
47

arrest was illegal, the warrantless search should also be considered illegal.  However, the trial court stated that
48

notwithstanding the illegality of the arrest, Cogaed "waived his right to object to such irregularity"  when "he did not
49

protest when SPO1 Taracatac, after identifying himself, asked him to open his bag." 50

Cogaed appealed  the trial court’s decision.However, the Court of Appeals denied his appeal and affirmed the trial
51

court’s decision.  The Court of Appeals found that Cogaed waived his right against warrantless searches when
52

"[w]ithout any prompting from SPO1 Taracatac, [he] voluntarily opened his bag."  Hence, this appeal was filed.
53

The following errors were assigned by Cogaed in his appellant’s brief:

THE TRIAL COURT GRAVELY ERRED IN ADMITTING THE SEIZED DANGEROUS DRUGS AS EVIDENCE
AGAINST THE ACCUSED-APPELLANT DESPITE BEING THE RESULT OF AN UNLAWFUL WARRANTLESS
SEARCH AND SEIZURE.

II

THE TRIAL COURT GRAVELY ERRED IN CONVICTING THE ACCUSED-APPELLANT DESPITE THE
ARRESTING OFFICER’S NON-COMPLIANCE WITH THE REQUIREMENTS FOR THE PROPER CUSTODY OF
SEIZED DANGEROUS DRUGS UNDER REPUBLIC ACT NO. 9165.

III

THE TRIAL COURT GRAVELY ERRED IN CONVICTING THE ACCUSED-APPELLANT DESPITE THE
ARRESTING OFFICER’S FAILURE TO PRESERVE THE INTEGRITY AND EVIDENTIARY VALUE OF THE
SEIZED DANGEROUS DRUGS. 54

For our consideration are the following issues: (1) whether there was a valid search and seizure of marijuana as
against the appellant; (2) whether the evidence obtained through the search should be admitted; and (3) whether
there was enough evidence to sustain the conviction of the accused.

In view of the disposition of this case, we deem that a discussion with respect to the requirements on the chain of
custody of dangerous drugs unnecessary. 55

We find for the accused.

II

The right to privacy is a fundamental right enshrined by implication in our Constitution. It has many dimensions. One
of its dimensions is its protection through the prohibition of unreasonable searches and seizures in Article III,
Section 2 of the Constitution:

The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches
and seizures of whatever nature and for any purpose shall be inviolable, and no search warrant or warrant of arrest
shall issue except upon probable cause to be determinedpersonally by the judge after examination under oath or
affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be
searched and the persons or things to be seized.

This provision requires that the court examine with care and diligence whether searches and seizures are
"reasonable." As a general rule, searches conducted with a warrant that meets all the requirements of this provision
are reasonable. This warrant requires the existence of probable cause that can only be determined by a judge. The 56

existence of probable cause must be established by the judge after asking searching questions and
answers. Probable cause at this stage can only exist if there is an offense alleged to be committed. Also, the
57

warrant frames the searches done by the law enforcers. There must be a particular description of the place and the
things to be searched. 58

However, there are instances when searches are reasonable even when warrantless.  In the Rules of Court,
59

searchesincidental to lawful arrests are allowed even without a separate warrant.  This court has taken into account
60

562
the "uniqueness of circumstances involved including the purpose of the search or seizure, the presence or absence
of probable cause, the manner in which the search and seizure was made, the place or thing searched, and the
character of the articles procured."  The known jurisprudential instances of reasonable warrantless searches and
61

seizures are:

1. Warrantless search incidental to a lawful arrest. . . ;

2. Seizure of evidence in "plain view," . . . ;

3. Search of a moving vehicle. Highly regulated by the government, the vehicle’s inherent mobility reduces
expectation of privacy especially when its transit in public thoroughfares furnishes a highly reasonable
suspicion amounting to probable cause that the occupant committed a criminal activity;

4. Consentedwarrantless search;

5. Customs search;

6. Stop and frisk; and

7. Exigent and emergency circumstances.  (Citations omitted)

62

III

One of these jurisprudential exceptionsto search warrants is "stop and frisk". "Stop and frisk" searches are often
confused with searches incidental to lawful arrests under the Rules of Court.  Searches incidental to a lawful arrest
63

require that a crime be committed in flagrante delicto, and the search conducted within the vicinity and withinreach
by the person arrested is done to ensure that there are no weapons, as well as to preserve the evidence. 64

On the other hand, "stop and frisk"searches are conducted to prevent the occurrence of a crime. For instance, the
search in Posadas v. Court of Appeals  was similar "to a ‘stop and frisk’ situation whose object is either to determine
65

the identity of a suspicious individual or to maintain the status quomomentarily while the police officer seeks to
obtain more information."  This court stated that the "stop and frisk" search should be used "[w]hen dealing with a
66

rapidly unfolding and potentially criminal situation in the city streets where unarguably there is no time to secure . . .
a search warrant." 67

The search involved in this case was initially a "stop and frisk" search, but it did not comply with all the requirements
of reasonability required by the Constitution.

"Stop and frisk" searches (sometimes referred to as Terrysearches ) are necessary for law enforcement. That is,
68

law enforcers should be given the legal arsenal to prevent the commission of offenses. However, this should be
balanced with the need to protect the privacy of citizens in accordance with Article III, Section 2 of the Constitution.

The balance lies in the concept of"suspiciousness" present in the situation where the police officer finds himself or
herself in. This may be undoubtedly based on the experience ofthe police officer. Experienced police officers have
personal experience dealing with criminals and criminal behavior. Hence, they should have the ability to discern —
based on facts that they themselves observe — whether an individual is acting in a suspicious manner. Clearly, a
basic criterion would be that the police officer, with his or her personal knowledge, must observe the facts leading to
the suspicion of an illicit act.

In Manalili v. Court of Appeals,  the police officers were initially informed about a place frequented by people
69

abusing drugs.  When they arrived, one of the police officers saw a man with "reddish eyes and [who was] walking
70

in a swaying manner."  The suspicion increased when the man avoided the police officers.  These observations led
71 72

the police officers to conclude that the man was high on drugs.  These were sufficient facts observed by the police
73

officers "to stop[the] petitioner [and] investigate." 74

In People v. Solayao,  police officers noticed a man who appeared drunk.  This man was also "wearing a
75 76

camouflage uniform or a jungle suit."  Upon seeing the police, the man fled.  His flight added to the suspicion. After
77 78 79

stopping him, the police officers found an unlicensed "homemade firearm"  in his possession.  This court ruled that
80 81

"[u]nder the circumstances, the government agents could not possibly have procured a search warrant first."  This 82

was also a valid search.

In these cases, the police officers using their senses observed facts that led to the suspicion. Seeing a man with
reddish eyes and walking in a swaying manner, based on their experience, is indicative of a person who uses
dangerous and illicit drugs. A drunk civilian in guerrilla wear is probably hiding something as well.

563
The case of Cogaed was different. He was simply a passenger carrying a bag and traveling aboarda jeepney. There
was nothing suspicious, moreover, criminal, about riding a jeepney or carrying a bag. The assessment of suspicion
was not made by the police officer but by the jeepney driver. It was the driver who signalled to the police that
Cogaed was "suspicious."

This is supported by the testimony of SPO1 Taracatac himself:

COURT:

Q So you don’t know what was the content while it was still being carried by him in the passenger jeep?

WITNESS:

A Not yet, Your Honor. 83

SPO1 Taracatac likewise stated:

COURT:

Q If the driver did not make a gesture pointing to the accused, did you have reason to believe that the accused were
carrying marijuana?

WITNESS:

A No, Your Honor. 84

The jeepney driver had to point toCogaed. He would not have been identified by the police officers otherwise.

It is the police officer who should observe facts that would lead to a reasonable degree of suspicion of a person. The
police officer should not adopt the suspicion initiated by another person. This is necessary to justify that the person
suspected be stopped and reasonably searched.  Anything less than this would be an infringementupon one’s basic
85

right to security of one’s person and effects.

IV

Normally, "stop and frisk" searches do not give the law enforcer an opportunity to confer with a judge to determine
probable cause. In Posadas v. Court of Appeals,  one of the earliest cases adopting the "stop and frisk" doctrine in
86

Philippine jurisprudence, this court approximatedthe suspicious circumstances as probable cause:

The probable causeis that when the petitioner acted suspiciously and attempted to flee with the buri bag there was a
probable cause that he was concealing something illegal in the bag and it was the right and duty of the police
officers to inspect the same.  (Emphasis supplied)
87

For warrantless searches, probable cause was defined as "a reasonable ground of suspicionsupported by
circumstances sufficiently strong in themselves to warrant a cautious man to believe that the person accused is
guilty of the offense with which he is charged." 88

Malacat v. Court of Appeals  clarifies the requirement further. It does not have to be probable cause,but it cannot be
89

mere suspicion.  It has to be a "genuine reason"  to serve the purposes of the "stop and frisk" exception:
90 91 92

Other notable points of Terryare that while probable cause is not required to conduct a "stop and frisk," it
nevertheless holds that mere suspicion or a hunch will not validate a "stop and frisk." A genuine reason must exist,
in light of the police officer’s experience and surrounding conditions, to warrant the belief that the person detained
has weapons concealed about him.  (Emphasis supplied, footnotes omitted)
93

In his dissent for Esquillo v. People,  Justice Bersamin reminds us that police officers must not rely on a single
94

suspicious circumstance.  There should be "presence of more than oneseemingly innocent activity, which, taken
95

together, warranted a reasonable inference of criminal activity."  The Constitution prohibits "unreasonable searches
96

and seizures."  Certainly, reliance on only one suspicious circumstance or none at all will not result in a reasonable
97

search.98

There was not a single suspicious circumstance in this case, and there was no approximation for the probable
cause requirement for warrantless arrest. The person searched was noteven the person mentioned by the
informant. The informant gave the name of Marvin Buya, and the person searched was Victor Cogaed. Even if it
was true that Cogaed responded by saying that he was transporting the bag to Marvin Buya, this still remained only

564
as one circumstance. This should not have been enough reason to search Cogaed and his belongings without a
valid search warrant.

Police officers cannot justify unbridled searches and be shielded by this exception, unless there is compliance with
the "genuine reason" requirement and that the search serves the purpose of protecting the public. As stated in
Malacat:

[A] "stop-and-frisk" serves a two-fold interest: (1) the general interest of effective crime prevention and detection,
which underlies the recognition that a police officer may, under appropriate circumstances and in an appropriate
manner, approach a person for purposes of investigating possible criminal behavior even without probable cause;
and (2) the more pressing interest of safety and self-preservationwhich permit the police officer to take steps to
assure himself that the person with whom he deals is not armed with a deadly weapon that could unexpectedly and
fatally be used against the police officer.  (Emphasis supplied)
99

The "stop and frisk" searchwas originally limited to outer clothing and for the purpose of detecting dangerous
weapons.  As in Manalili,  jurisprudence also allows "stop and frisk" for cases involving dangerous drugs.
100 101

The circumstances of thiscase are analogous to People v. Aruta.  In that case, an informant told the police that a
102

certain "Aling Rosa" would be bringing in drugs from Baguio City by bus.  At the bus terminal, the police officers
103

prepared themselves.  The informant pointed at a woman crossing the street  and identified her as "Aling
104 105

Rosa."  The police apprehended "Aling Rosa," and they alleged that she allowed them to look inside her bag. The
106 107

bag contained marijuana leaves. 108

In Aruta, this court found that the search and seizure conducted was illegal.  There were no suspicious 109

circumstances that preceded Aruta’s arrest and the subsequent search and seizure.  It was only the informant that 110

prompted the police to apprehend her.  The evidence obtained was not admissible because of the illegal
111

search. Consequently, Aruta was acquitted.

112 113

Arutais almost identical to this case, except that it was the jeepney driver, not the police’s informant, who informed
the police that Cogaed was "suspicious."

The facts in Arutaare also similar to the facts in People v. Aminnudin.  Here, the National Bureau ofInvestigation
114

(NBI) acted upon a tip, naming Aminnudin as somebody possessing drugs.  The NBI waited for the vessel to arrive115

and accosted Aminnudin while he was disembarking from a boat.  Like in the case at bar, the NBI inspected
116

Aminnudin’s bag and found bundles of what turnedout to be marijuana leaves.  The court declared that the 117

searchand seizure was illegal.  Aminnudin was acquitted.

118 119

People v. Chua  also presents almost the same circumstances. In this case, the police had been receiving
120

information that the accused was distributing drugs in "different karaoke bars in Angeles City."  One night, the 121

police received information that thisdrug dealer would be dealing drugs at the Thunder Inn Hotel so they conducted
a stakeout.  A car "arrived and parked"  at the hotel. The informant told the police that the man parked at the hotel
122 123 124

was dealing drugs.  The man alighted from his car.  He was carrying a juice box.  The police immediately
125 126 127

apprehended him and discovered live ammunition and drugs in his person and in the juice box he was holding. 128

Like in Aruta, this court did not find anything unusual or suspicious about Chua’s situation when the police
apprehended him and ruled that "[t]here was no valid‘stop-and-frisk’." 129

VI

None of the other exceptions to warrantless searches exist to allow the evidence to be admissible.The facts of this
case do not qualify as a search incidental to a lawful arrest.

Rule 126, Section 13 of the Rules of Court allows for searches incidental to a lawful arrest. For there to be a lawful
arrest, there should be either a warrant of arrest or a lawful warrantless arrest as enumerated in Rule 113, Section 5
of the Rules of Court:

Section 5. Arrest without warrant; when lawful. – A peace officer or a private person may, withouta warrant, arrest a
person:

(a) When, in his presence, the person to be arrested has committed, is actually committing, or is attempting
to commit an offense;

(b) When an offense has just been committed and he has probable cause to believe based on personal
knowledge of facts or circumstances that the person to be arrested has committed it; and
565
 (c) When the person to be arrested is a prisoner who has escaped from a penal establishment or place
where he is serving final judgment or temporarily confined while his case is pending, or has escaped while
being transferred from one confinement to another.

The apprehension of Cogaed was not effected with a warrant of arrest. None of the instances enumerated in Rule
113, Section 5 of the Rules of Court were present whenthe arrest was made. At the time of his apprehension,
Cogaed has not committed, was not committing, or was about to commit a crime. As in People v. Chua, for a
warrantless arrest of in flagrante delictoto be affected, "two elements must concur: (1) the person to bearrested
must execute anovert act indicating that he has just committed, is actually committing, or is attempting to commit a
crime; and (2) such overt act is done inthe presence or within the view of the arresting officer."  Both elements were
130

missing when Cogaed was arrested.  There were no overt acts within plain view of the police officers that
131

suggested that Cogaed was in possession of drugs at that time.

Also, Cogaed was not an escapee prisoner that time; hence, he could not have qualified for the last allowable
warrantless arrest.

VII

There can be no valid waiver of Cogaed’s constitutional rights even if we assume that he did not object when the
police asked him to open his bags. As this court previously stated:

Appellant’s silence should not be lightly taken as consent to such search. The implied acquiescence to the search, if
there was any, could not have been more than mere passive conformity given under intimidating or coercive
circumstances and is thus considered no consent at all within the purview of the constitutional guarantee. (Citations
132

omitted) Cogaed’s silence or lack of aggressive objection was a natural reaction to a coercive environment brought
about by the police officer’s excessive intrusion into his private space. The prosecution and the police carry the
burden of showing that the waiver of a constitutional right is one which is knowing, intelligent, and free from any
coercion. In all cases, such waivers are not to be presumed.

The coercive atmosphere created by the presence of the police officer can be discerned again from the testimony of
SPO1 Taracatac during cross-examination:

ATTY. BINWAG:

Q Now, Mr. witness, you claimed that you only asked them what are the contents of their bags, is it not?

WITNESS:

A Yes, ma’am.

Q And then without hesitation and voluntarily they just opened their bags, is it not?

A Yes, ma’am.

Q So that there was not any order from you for them to open the bags?

A None, ma’am.

Q Now, Mr. witness when you went near them and asked them what were the contents ofthe bag, you have not
seen any signs of hesitation or fright from them, is it not?

A It seems they were frightened, ma’am.

Q But you actually [claimed] that there was not any hesitation from them in opening the bags, is it not?

A Yes, ma’am but when I went near them it seems that they were surprised.  (Emphasis supplied)
133

The state of mind of Cogaed was further clarified with SPO1 Taracatac’s responses to Judge Florendo’s questions:

COURT:

....

Q Did you have eye contact with Cogaed?

566
A When I [sic] was alighting from the jeepney, Your Honor I observed that he was somewhat frightened.  He was a
1âwphi1

little apprehensive and when he was already stepping down and he put down the bag I asked him, "what’s that," and
he answered, "I don’t know because Marvin only asked me to carry." 134

For a valid waiver by the accused of his or her constitutional right, it is not sufficient that the police officerintroduce
himself or herself, or be known as a police officer.  The police officer must also inform the person to be searched
1âwphi1

that any inaction on his orher part will amount to a waiver of any of his or her objections that the circumstances do
not amount to a reasonable search. The police officer must communicate this clearly and in a language known to
the person who is about to waive his or her constitutional rights. There must be anassurance given to the police
officer that the accused fully understands his or her rights. The fundamental nature of a person’s constitutional right
to privacy requires no less.

VIII
The Constitution provides:

Any evidence obtained in violation of [the right against unreasonable searches and seizures] shall be inadmissible
for any purpose in any proceeding. 135

Otherwise known as the exclusionary rule or the fruit of the poisonous tree doctrine, this constitutional provision
originated from Stonehill v. Diokno.  This rule prohibits the issuance of general warrants that encourage law
136

enforcers to go on fishing expeditions. Evidence obtained through unlawful seizures should be excluded as
evidence because it is "the only practical means of enforcing the constitutional injunction against unreasonable
searches and seizures."  It ensures that the fundamental rights to one’s person, houses, papers, and effects are not
137

lightly infringed upon and are upheld.

Considering that the prosecution and conviction of Cogaed were founded on the search of his bags, a
pronouncement of the illegality of that search means that there is no evidence left to convict Cogaed.

Drugs and its illegal traffic are a scourgeto our society. In the fight to eradicate this menace, law enforcers should be
equipped with the resources to be able to perform their duties better. However, we cannot, in any way, compromise
our society’s fundamental values enshrined in our Constitution. Otherwise, we will be seen as slowlydismantling the
very foundations of the society that we seek to protect.

WHEREFORE, the decisions of the Regional Trial Court, Branch 28, San Fernando City, La Union and of the Court
of Appeals in CA-G.R. CR-HC No. 03394 are hereby REVERSEDand SET ASIDE. For lack of evidence to establish
his guilt beyond reasonable doubt, accused-appellant VICTOR COGAED Y ROMANA is hereby ACQUITTED and
ordered RELEASED from confinement unless he is being heldfor some other legal grounds. No costs.

SO ORDERED

567
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. P-06-2227               August 19, 2014

[Formerly A.M. No. 06-6-364-RTC]

OFFICE OF THE COURT ADMINISTRATOR, Complainant, 

vs.
ATTY. MARIO N. MELCHOR, JR., FORMER CLERK OF COURT VI, REGIONAL TRIAL COURT, BRANCH 16,
NAVAL, BILIRAN (now PRESIDING JUDGE, MUNICIPAL CIRCUIT TRIAL COURT, CALUBIAN-SAN ISIDRO,
LEYTE), Respondent.

DECISION

Per Curiam:

For review before the Court is this administrative matter which originated from the financial audit conducted by the
Fiscal Monitoring Division of the Office of the Court Administrator ( OCA) from March 14 to 20, 2006, on the books
of account of then Clerk of Court of the Regional Trial Court, Branch 16, Naval, Biliran (RTC), Atty. Mario N.
Melchor, Jr. (Melchor).  The audit covered the court transactions from September 1, 1997 to February 28, 2006.
1

In the course of the fiscal audit examination, members of the financial audit team discovered evidence of
irregularities in the handling of the financial transactions of the cou1i as well as shortage in its financial
accountabilities. There were shortages of massive amounts from various funds collected and handled by Melchor
totaling 1!939,547.80, as summarized in the table below:

For the Judiciary Development Fund (JDF)

Total Collection per Audit (9/1/1997 to 2/28/2006 ₱573,086.31

568
 Less: Total Remittances (9/1/1997 to 2/28/2006 541,9461.31

Less: Erroneous Deposits 9,733.00 532,213.31

₱40,873.00

For the Special Allowance for the Judiciary Fund (SAJF)

Total Collections (11/11/2003 to 2/28/2006 ₱209,992.51

Less: Total Remittances same period 110,665.71

Balance of Accountability as of 2/28/2006 ₱99,326.80

For the Fiduciary Fund (FF)

Beg. Unwithdrawan Fiduciary Fund as of 9/1/1997 ₱712,270.54

Add: Collections – 9/1/1997 to 2/28/2006 2,508,300.00

Total 3,220,570.54

Less: Withdrawals – 9/1/1997 to 2/28/2006 2,232,820.00

Bal. Of Unwithdrawn Fiduciary Fund as of 2/28/2006 ₱987,750.54

Bank Balance as of February 28, 2006 ₱248,125.02

Less: Outstanding Check No. 80945 dated 1/4/2006 12,000.00

Balance ₱236,125.02

Less: Unwithdrawn Interest (net of tax) as of 212812006 5.215.48

Adjusted Bank Balance as of February 28, 2006 P 230,209.54

Balance of Unwithdrawn Fiduciary Funds as of 2/28/2006 ₱987, 750.54

Adjusted Bank Balance as of February 28, 2006 230.909.54

Shortage as of February 28, 2006 ₱756,841.00

*Add: Unreceipted cash bond collection of Case No. 2347 40.000.00

569
 Total Shortage ₱796,841.00
===========

General Fund (GF)

Total Collections during the accountability period ₱99,931.15

Less: Total Remittance same period 97,426.15

Balance of Accountability - shortage ₱2,505.00

===========

Sheriffs General Fund (SGF)

Total Collections during the accountability period ₱2,144.00

Less: Total Remittance during the accountability period 2,124.00

2
Balance of Accountability - shortage ₱20.00
===========

It was also unearthed that Melchor failed to remit numerous cash bonds collected from the cases, amounting to
₱715,84 I .00 to the Court's legitimate bank account maintained with the Land Bank of the Philippines (Land Bank),
Biliran Branch.  Further, when folders of several cases were examined, the audit team found evidence of unrecorded
3

collections of cash bonds. Worse, official receipts were cancelled to conceal the unrep01ied collections. In lieu of
the supposed cancelled transactions, new receipts were then issued containing considerably understated amounts
of the bonds collected. In one instance, a withdrawal in the amount of ₱8,000.00, under Check No. 80941, dated
July 26, 2005, was issued in favor of a ce1iain Antonio Renol, but no equivalent record of collection of a cashbond
was ever received.  The summary of the findings are herein illustrated:
4

Case No. Unreported Bond Collection Action of Melchor

Civil Case No. 1205 5

₱424,440.00 collected under .R. -Reported under O.R. No. 1175989 as
No. 111759986 and 11175997 ₱300,000.00

Criminal Case No. ₱20,000.00 collected under O.R. -O.R. cancelled

2210 6
No. 1117598

Criminal Case No. ₱10,000.00 under O.R. No. -O.R. cancelled

2218 7
1175985

Civil Case No. B- ₱72,500.00 under O.R. No. -O.R. cancelled

1138 8
11175977

Criminal Case No. ₱15,000.00 under O.R. No. -Deposited late under O.R. No. 11175983
2051 9
11175967

Civil Case No. B- ₱30,000.00 under O.R. No. -O.R. cancelled

1120 10
11175983

Criminal Case No. ₱3,000.00 -No. O.R. was issued. The cash bond was
2215 11
withdrawn upon dismissal of the case.

570
 Criminal Case No. ₱12,000.00 -No. O.R. was issued. The cash bond was
2219 12
withdrawn upon dismissal of the case.

Criminal Case Nos. ₱44,000.00 ₱48,000.00 was refunded to the

1643, 1644, 1696 13
bondsman resulting to over-withdrawal.

Criminal Case No. B- ₱5,000.00 under O.R. No. ₱10,000.00 was refunded to the
0134 14
9284781 bondsman resulting to over-withdrawal.

Criminal Case No. ₱24,000.00 under O.R. No. ₱48,000.00 was refunded to the
2073 15
11175960 bondsman resulting to over-withdrawal.

Melchor likewise failed to present and maintain an official cashbook for the Fiduciary Fund from September 1, 1997
up to the time of the audit. Anent the JDF and the SAJF, no entries were made in the cashbooks from October 25,
2005 up to the time of audit. 16

As recommended by the audit team, Hon. Enrique C. Asis, Executive Judge of RTC, Naval, Biliran immediately
relieved Melchor from his duties and responsibilities as the accountable officer of the comi per Memorandum No.
01-2006,  dated March 17, 2006.
17

In his Comment,  dated April 3, 2006, Melchor readily admitted the findings of the audit team and apologized for his
18

negligence. He explained that the collected bail bonds from various cases, amounting to ₱256,940.00, were used to
defray the cost of the hospitalization expenses of his child. He pleaded for compassionate justice and humanitarian
consideration citing "humanely error in discretion."  He likewise informed the OCA that he already restituted the
19

shortages totaling ₱796,841,00.

In its Memorandum,  dated June 8, 2006, the OCA adopted the findings of the audit team and made its
20

recommendation. In the Court's Resolution of August 14, 2006,  the Comi approved the recommendation of the
21

OCA, and resolved to:

1. REDOCKET the report of the Financial Audit Team as a regular administrative complaint against Atty.
Mario N. Melchor, Jr., Clerk of Court VI, RTC, Naval, Biliran;

2. DIRECT Atty. Mario N. Melchor, Jr., to PAY and DEPOSIT the shortage of ₱2,505.oo and ₱20.oo for the
General Fund Sheriffs General Fund, respectively, within fifteen (15) days from notice;

3. DIRECT Executive Judge Enrique C. Asis to monitor the designated Officer-in-Charge, Ms. Algea Q.
Juntilla, Interpreter II, in the strict compliance of circulars in the proper handling of judiciary funds and
adhere strictly to the issuances of the Court to avoid repetition of the same offenses committed as
enumerated above; and

4. DIRECT the Legal office, OCA to file the appropriate criminal charges against Atty. Mario N. Melchor Jr. 22

In its Memorandum,  dated October 3, 3007, the OCA informed the Court that it has received a letter,  dated August
23 24

1, 2007, from Melchor disclosing his compliance with the directive of the Court by depositing the sho1iage of
₱2,505.00 and ₱20.00 for the General Fund and Shet·iff's General Fund, respectively. He further informed the OCA
that he had assumed office as Municipal Circuit Trial Collli (MCTC )Judge of CalubianSan Isidro, Leyte on
December 29, 2006, but had yet to receive his initial salary for lack of clearance from the Financial Management
Office. He prayed that the administrative case against him be considered closed and terminated.

In its Resolution,  dated November 19, 2007, the Court took note of the said letter and modified the Collli's
25

Resolution, dated August 14, 2006, by deleting the directive to file criminal charges against him.

In its Report,  dated August 22, 2008, the OCA revealed that the amounts of ₱2,505.00 and ₱20.00 returned by
26

Melchor were not the only sho1iages that he failed to remit on time. As previously illustrated in the table, he likewise
incurred shortages in the collection for the JDF in the amount of ₱40,873.00, which was restituted only on March 14,
2006; SAJF for the amount of ₱99,326.80 and returned only on March 16, 2006; and FF collections totaling
₱796,841,00 that was restituted on various dates, the latest being on March 24, 2006. 27

In the Resolution,  dated September 15, 2008, the Court denied Melchor's request for the release of his initial salary
28

and other benefits as Presiding Judge of MCTC, Calubian-San Isidro, Leyte.

571
In its Report,  dated February 24, 2012, the OCA held that although the shortages were eventually restituted as
29

reflected in the deposit slips presented to the Fiscal Monitoring Division, it should be not disregarded that Melchor
violated various court circulars. The OCA likewise opined that Melchor's promotion as a judge should not be taken
to mean that the infractions he committed while in the service as Clerk of Court were forgotten. Thus, the OCA
recommended:

PREMISES CONSIDERED, it is respectfully recommended that: (a) Judge Mario N. Melchor, Jr., former Clerk of
Court VI, RTC, Branch 16, Naval, Biliran, be found GUILTY of GROSS NEGLECT OF DUTY, GROSS
DISHONESTY and GROSS MISCONDUCT; and (b) Judge Mario N. Melchor, Jr., be DISMISSED from the service
effective immediately, with FORFEITURE of all retirements benefits due him except payment of his accrued leave
credits, if any, with prejudice to reemployment in any branch of the government or any of its agencies or
instrumentalities including government-owned and controlled corporations. 30

The Court's Ruling

After careful examination of the records of this case, the Court finds the recommendation of the OCA to be well-
taken.

By his own admission, Melchor knowingly used the court funds in his custody to defray the hospitalization expenses
of his child.  Regrettably though, personal problems or even medical emergencies in the family cannot justify acts of
1âwphi1

using the judiciary funds held by an accountable officer of the court.  As Clerk of Court, Melchor was entrusted with
31

delicate functions in the collection of legal fees.  He acted as cashier and disbursement officer of the cowi; and was
32

tasked to collect and receive all monies paid as legal fees, deposits, fines and dues, and controls the disbursement
of the same.  He was designated as custodian of the court's funds and revenues, records, prope1iies and premises,
33

and should be liable for any loss or shortage thereof. 34

Administrative Circular No. 3-2000  equally requires that the aggregate total of the deposit slips for any paiiicular
35

month should always be equal to, and tally with, the total collections for that month as reflected in the Monthly
Report of Collections and Deposits and Cash Book. Evidently, the accounting of the total collections and
remittances did not tally in this case.

SC Circular Nos. 13-92 and 5-93, as incorporated into the 2002 Revised Manual for Clerks of Court, likewise
provide the guidelines for the accounting of court funds. All fiduciary collections shall be deposited immediately by
the Clerk of Court concerned, upon receipt thereof, with an authorized government depository bank. In SC Circular
No. 5-93, the Land Bank was designated as the authorized government depository.  Furthermore, Section B( 4) of
36

Circular No. 50-95  directs that "all collections from bailbonds, rental deposits and other fiduciary collections shall be
37

deposited within twenty four (24) hours by the Clerk of court concerned, upon receipt thereof, with the Land Bank of
the Philippines, in the name of the court as instructed in Circular No. 13-92." 38

Court personnel tasked with collections of court funds, such as clerk of court and cash clerks, should deposit
immediately with the authorized government depositories the various funds they have collected. Being the custodian
of court funds and revenues, it was Melchor's primary responsibility to immediately deposit the funds received by his
office with the Land Bank and not to keep the same in his custody. 39

By failing to properly remit the cash collections constituting public funds, Melchor violated the trust reposed in him as
the disbursement officer of the Judiciary. Delayed remittance of cash collections constitutes gross neglect of duty
because this omission deprives the court of interest that could have been earned if the amounts were deposited in
the authorized depository bank. It should be stressed that clerks of court are required by SC Circular No. 13-92 to
withdraw interest earned on deposits, and to remit the same to the account of the JDF within two (2) weeks after the
end of each quarter.  Delay in the remittance of court funds in the period required casts a serious doubt on the court
40

employee's trustworthiness and integrity. As held In Re: Report on the Judicial and Financial Audit of RTC-Br. 4,
Panabo, Davao Del Norte  and Office of the Court Administrator v. Recio,  failure of the Clerk of Court to remit the
41 42

court funds is tantamount to gross neglect of duty, dishonesty and grave misconduct prejudicial to the best interest
of the service.

The audit team likewise uncovered that the cash shortages in the collection of various court funds, such as the GF,
SGF, JDF, SAJF for the Judiciary Fund, and FF. Although the said shortages were already restituted, his failure to
deposit the conect amount upon collection was already prejudicial to the court, it did not earn interest income on the
said amount or was not able to otherwise use the said funds.  Thus, even when there is restitution of funds,
43

unwarranted failure to fulfill these responsibilities deserves administrative sanction, and not even the full payment of
the collection shortages will exempt the accountable officer from liability.  Moreover, the restitution was only initiated
44

by him after the discovery of the anomalous records of collection under his custody.

Melchor's failure to manage and properly document the cash collections allocated for the JDF is likewise a c !ear
violation of Administrative Circular No. 5-93, which mandates that:

xxxx
572
3. Duty of the Clerks of Court, Officers-in-Charge or accountable officers.-The Clerks of Court, Officers-in-Charge of
the Office of the Clerk of Court, or their accountable duly authorized representative designated by them in writing,
who must be accountable officers, shall receive the Judiciary Development Fund collections, issue the proper
receipt therefor, maintain a separate cash book properly marked CASH BOOK FOR JUDICIARY DEVELOPMENT
FUND, deposit such collections in the manner herein prescribed, and render the proper Monthly Report of
Collections for said Fund.

4. Depositary Bank for the Fund. – The amounts accuring to the Fund shall be deposited for the account of the
Judiciary Development Fund, Supreme Court, Manila by the Clerks of Court, Officers-in-Charge of the Office of the
Clerk of Court in authorized government depository bank or private bank owned or controlled by the Government to
be specified by the Chief Justice. The income or interest earned shall likewise form part of the Fund. For this
purpose, the depositary bank for Fund shall be the Land Bank of the Philippines (LBP).

[Emphasis supplied]

The fact that Melchor tampered with several official receipts of the cash bond collections, even devising a way to
further conceal his misdeed, demonstrated a serious depravity on his integrity. It exemplified gross dishonesty,
which undermines the public's faith in courts and in the administration of justice as a whole. 45

Undoubtedly, the said transgressions and Melchor's blatant violation to comply with the aforementioned Court
circulars designed to promote full accountability for public funds does not only amount to gross neglect; it also
constitutes grave misconduct.  It should be emphasized that the 2002 Revised Manual for Clerks of Court requires
46

strict compliance of the rules and regulations of the collection and accounting funds, thus:

2.1.2-4 Sanctions

Strict observance of the rules and regulations on collection and accounting of funds is hereby enjoined. The Clerks
of Court or Officers-in-Charge shall exercise close supervision over their respective duly authorized representatives
to ensure strict compliance herewith, and shall be held administratively accountable for failure to do so. Failure to
comply with any of these rules and regulations shall mean the withholding of the salaries and allowances of those
concerned until compliance thereof is duly effected, pursuant to Sec. 122 of Pres Decree No. 1445 dated June 11,
1978, without prejudice to such furthe1· disciplinary action the Court may take against them.  [Emphasis supplied]
47

Melchor's promotion as a judge during the pendency of this case cannot be considered by the Court either as a
mitigating or an exculpatory circumstance to excuse him from any administrative liability. A judge is still bound by
the same principle enshrined in Section 1, Article XI of the Constitution, which states that a public office is a public
trust, and all public officers and employees must at all times be accountable to the people, serve them with utmost
responsibility, integrity, loyalty, and efficiency, act with patriotism and justice, and lead modest lives. The demand for
moral uprightness is more pronounced for the members and personnel of the Judiciary who are involved in the
dispensation of justice. The conduct of court members and personnel must not only be characterized with propriety
and decorum but must also be above suspicion, for any act of impropriety can seriously erode or diminish the
people's confidence in the Judiciary. As frontliners in the administration of justice, they should live up to the strictest
tandards of honesty and integrity in the public service.  Thus, Melchor's current position in the judiciary will not merit
48

any leniency from the Court.

In the same vein, the Comi does not agree with Melchor's contention that the withholding of his salary as a judge
was already penalty in itself. It was a mere precautionary measure and not in any way a form of penalty as he would
still be compensated for actual service rendered.

From the foregoing, there is no doubt that Melchor is guilty of dishonesty, gross neglect of duty and gross
misconduct. Under Section 52, Rule IV of the Uniform Rules on Administrative Cases in the Civil
Service, dishonesty, gross neglect of duty and grave misconduct are classified as grave offenses with the
49

corresponding penalty of dismissal for the first offense.  WHEREFORE, the Court finds respondent Judge Mario N.
50

Melchor, Jr., former Clerk of Court VT, GUILTY of GROSS DISHONESTY, GRAVE MISCONDUCT and GROSS
NEGLECT OF DUTY. Accordingly, he is DISMISSED from the service. All his retirement benefits, except accrued
leave benefits, are forfeited and he is barred from re-employment in any branch or instrumentality of the
government, including government-owned or controlled corporations.

The Financial Management Office, Office of the Court Administrator, is DIRECTED to process and release the
withheld salary and other benefits he may be entitled for his service as Municipal Trial Court judge until the
promulgation of this decision.

SO ORDERED.

573
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 213181               August 19, 2014

FRANCIS H. JARDELEZA Petitioner, 
vs.
CHIEF JUSTICE MARIA LOURDES P. A. SERENO, THE JUDICIAL AND BAR COUNCIL AND EXECUTIVE
SECRETARY PAQUITO N. OCHOA, JR., Respondents.

DECISION

MENDOZA, J.:

Once again, the Couii is faced with a controversy involving the acts of an independent body, which is considered as
a constitutional innovation the Judicial and Bar Council (JBC). It is not the first time that the Court is called upon to
settle legal questions surrounding the JBC's exercise of its constitutional mandate. In De Castro v. JBC,  the Court
1

laid to rest issues such as the duty of the JBC to recommend prospective nominees for the position of Chief Justice
vis-à-vis the appointing power of the President, the period within which the same may be exercised, and the ban on
midnight appointments as set forth in the Constitution. In Chavez v. JBC,  the Court provided an extensive discourse
2

on constitutional intent as to the JBC’s composition and membership.

This time, however, the selection and nomination process actually undertaken by the JBC is being challenged for
being constitutionally infirm. The heart of the debate lies not only on the very soundness and validity of the
application of JBC rules but also the extent of its discretionary power. More significantly, this case of first impression
impugns the end-result of its acts - the shortlistfrom which the President appoints a deserving addition to the Highest
Tribunal of the land.

To add yet another feature of noveltyto this case, a member of the Court, no less than the Chief Justice herself, was
being impleaded as party respondent.

The Facts

The present case finds its genesis from the compulsory retirement of Associate Justice Roberto Abad (Associate
Justice Abad) last May 22, 2014. Before his retirement, on March 6, 2014, in accordance with its rules,  the JBC
3

announced the opening for application or recommendation for the said vacated position.

On March 14, 2014, the JBC received a letter from Dean Danilo Concepcion of the University of the Philippines
nominating petitioner Francis H. Jardeleza (Jardeleza), incumbent Solicitor General of the Republic, for the said
position. Upon acceptance of the nomination, Jardeleza was included in the names of candidates, as well as in the
schedule of public interviews. On May 29, 2014, Jardeleza was interviewed by the JBC.

574
It appears from the averments in the petition that on June 16 and 17, 2014, Jardeleza received telephone callsfrom
former Court of Appeals Associate Justice and incumbent JBC member, Aurora Santiago Lagman (Justice
Lagman), who informed him that during the meetings held on June 5 and 16, 2014, Chief Justice and JBC ex-
officioChairperson, Maria Lourdes P.A. Sereno (Chief Justice Sereno),manifested that she would be invoking
Section 2, Rule 10 of JBC-009  against him. Jardeleza was then directed to "make himself available" before the JBC
4

on June 30, 2014, during which he would be informed of the objections to his integrity.

Consequently, Jardeleza filed a letter-petition (letter-petition)  praying that the Court, in the exercise of
5

itsconstitutional power of supervision over the JBC, issue an order: 1) directing the JBC to give him at least five (5)
working days written notice of any hearing of the JBC to which he would be summoned; and the said notice to
contain the sworn specifications of the charges against him by his oppositors, the sworn statements of supporting
witnesses, if any, and copies of documents in support of the charges; and notice and sworn statements shall be
made part of the public record of the JBC; 2) allowing him to cross-examine his oppositors and supporting
witnesses, if any, and the cross-examination to be conducted in public, under the same conditions that attend the
publicinterviews held for all applicants; 3) directing the JBC to reset the hearing scheduled on June 30, 2014 to
another date; and 4) directing the JBC to disallow Chief Justice Sereno from participating in the voting on June
30,2014 or at any adjournment thereof where such vote would be taken for the nominees for the position vacated by
Associate Justice Abad.

During the June 30, 2014 meeting of the JBC, sansJardeleza, incumbent Associate Justice Antonio T. Carpio
(Associate Justice Carpio) appeared as a resource person to shed light on a classified legal memorandum (legal
memorandum) that would clarify the objection to Jardeleza’s integrity as posed by Chief Justice Sereno. According
to the JBC, Chief Justice Sereno questioned Jardeleza’s ability to discharge the duties of his office as shown in a
confidential legal memorandum over his handling of an international arbitration case for the government.

Later, Jardeleza was directed to one of the Court’s ante-rooms where Department of Justice Secretary Leila M. De
Lima (Secretary De Lima) informed him that Associate Justice Carpio appeared before the JBC and disclosed
confidential information which, to Chief Justice Sereno, characterized his integrity as dubious. After the briefing,
Jardeleza was summoned by the JBC at around 2:00o’clock in the afternoon.

Jardeleza alleged that he was asked by Chief Justice Sereno if he wanted to defend himself against the integrity
issues raised against him. He answered that he would defend himself provided that due process would be
observed. Jardeleza specifically demanded that Chief Justice Sereno execute a sworn statement specifying her
objectionsand that he be afforded the right to cross-examine her in a public hearing. He requested that the same
directive should also be imposed on Associate Justice Carpio. As claimed by the JBC, Representative Niel G. Tupas
Jr. also manifested that he wanted to hear for himself Jardeleza’s explanation on the matter. Jardeleza, however,
refused as he would not be lulled intowaiving his rights. Jardeleza then put into record a written
statement  expressing his views on the situation and requested the JBC to defer its meeting considering that the
6

Court en banc would meet the next day to act on his pending letter-petition. At this juncture, Jardeleza was excused.

Later in the afternoon of the sameday, and apparently denying Jardeleza’s request for deferment of the
proceedings, the JBC continued its deliberations and proceeded to vote for the nominees to be included in the
shortlist. Thereafter, the JBC releasedthe subject shortlist of four (4) nominees which included: Apolinario D.
Bruselas, Jr. with six (6) votes, Jose C. Reyes, Jr. with six (6) votes, Maria Gracia M. Pulido Tan with five (5) votes,
and Reynaldo B. Daway with four (4) votes. 7

As mentioned in the petition, a newspaper article was later published in the online portal of the Philippine Daily
Inquirer, stating that the Court’s Spokesman, Atty. Theodore Te, revealed that there were actually five (5) nominees
who made it to the JBC shortlist, but one (1) nominee could not be included because of the invocation of Rule 10,
Section 2 of the JBC rules.

In its July 8, 2014 Resolution, the Court noted Jardeleza’s letterpetition in view of the transmittal of the JBC list of
nominees to the Office of the President, "without prejudice to any remedy available in law and the rules that
petitioner may still wish to pursue."  The said resolution was accompanied by an extensive Dissenting Opinion
8

penned by Associate Justice Arturo D. Brion,  expressing his respectful disagreement as to the position taken by the
9

majority.

The Petition

Perceptibly based on the aforementioned resolution’s declaration as to his availment of a remedy in law, Jardeleza
filed the present petition for certiorari and mandamus under Rule 65 of the Rules of Court with prayer for the
issuance of a Temporary Restraining Order (TRO), seeking to compel the JBC to include him in the list ofnominees
for Supreme Court Associate Justice viceAssociate Justice Abad, on the grounds that the JBC and Chief Justice
Sereno acted in grave abuse of discretion amounting to lack or excess of jurisdiction in excluding him, despite
having garnered a sufficient number of votes to qualify for the position.

575
Notably, Jardeleza’s petition decries that despite the obvious urgency of his earlier letter-petition and its concomitant
filing on June 25, 2014, the same was raffled only on July 1, 2014 or a day after the controversial JBC meeting. By
the time that his letter-petition was scheduled for deliberation by the Court en bancon July 8, 2014, the
disputedshortlist had already been transmitted to the Office of the President. He attributedthis belated action on his
letter-petition to Chief Justice Sereno, whose action on such matters, especially those impressed withurgency, was
discretionary.

An in-depth perusal of Jardeleza’s petition would reveal that his resort to judicial intervention hinges on the alleged
illegality of his exclusion from the shortlist due to: 1) the deprivation of his constitutional right to due process; and 2)
the JBC’s erroneous application, if not direct violation, of its own rules. Suffice it to say, Jardelezadirectly ascribes
the supposed violation of his constitutional rights tothe acts of Chief Justice Sereno in raising objections against his
integrity and the manner by which the JBC addressed this challenge to his application, resulting in his arbitrary
exclusion from the list of nominees.

Jardeleza’s Position

For a better understanding of the above postulates proffered in the petition, the Court hereunder
succinctlysummarizes Jardeleza’s arguments, as follows:

A. Chief Justice Sereno and the JBC violated Jardeleza’s right to due process in the events leading up to and during
the vote on the shortlist last June 30, 2014. When accusations against his integrity were made twice, ex parte, by
Chief Justice Sereno, without informing him of the nature and cause thereof and without affording him an
opportunity to be heard, Jardeleza was deprived of his right to due process. In turn, the JBC violated his right to due
process when he was simply ordered to make himself available on the June 30, 2014 meeting and was told that the
objections to his integrity would be made known to him on the same day. Apart from mere verbal notice (by way of a
telephone call) of the invocation of Section 2, Rule 10 of JBC-009 against his application and not on the accusations
against him per se, he was deprived of an opportunity to mount a proper defense against it. Not only did the JBC fail
to ventilate questions on his integrity during his public interview, he was also divested of his rights as an applicant
under Sections 3 and 4, Rule 4, JBC-009, to wit:

Section 3. Testimony of parties. – The Council may receive written opposition to an applicant on the ground of his
moral fitness and, at its discretion, the Council may receive the testimony of the oppositor at a hearing conducted for
the purpose, with due notice to the applicant who shall be allowed to cross-examine the oppositor and to offer
countervailing evidence.

Section 4. Anonymous Complaints. – Anonymous complaints against an applicant shall not be given due course,
unless there appears on its face a probable cause sufficient to engender belief that the allegations may be true. In
the latter case, the Council may direct a discreet investigation or require the applicant to comment thereon in writing
or during the interview.

His lack of knowledge as to the identity of his accusers (except for yet again, the verbalinformation conveyed to him
that Associate Justice Carpio testified against him) and as to the nature of the very accusations against him caused
him to suffer from the arbitrary action by the JBC and Chief Justice Sereno. The latter gravely abused her discretion
when she acted as prosecutor, witness and judge,thereby violating the very essence of fair play and the Constitution
itself. In his words: "the sui generis nature of JBC proceedings does not authorize the Chief Justice to assume these
roles, nor does it dispense with the need to honor petitioner’s right to due process." 10

B. The JBC committed grave abuse of discretion in excluding Jardeleza from the shortlist of nominees, in violation of
its own rules. The "unanimity requirement" provided under Section 2, Rule10 of JBC-009 does not find application
when a member of the JBC raises an objection to an applicant’s integrity. Here, the lone objector constituted a part
of the membership of the body set to vote. The lone objector could be completely capable oftaking hostage the
entire voting process by the mere expediency of raising an objection. Chief Justice Sereno’s interpretation of the
rule would allow a situation where all thata member has to do to veto other votes, including majority votes, would be
to object to the qualification of a candidate, without need for factual basis.

C. Having secured the sufficient number of votes, it was ministerial on the part of the JBC to include Jardeleza in the
subject shortlist.Section 1, Rule 10 of JBC-009 provides that a nomination for appointment to a judicial position
requires the affirmative vote of at least a majority of all members of the JBC. The JBC cannot disregard its own
rules. Considering that Jardeleza was able to secure four (4) out of six (6) votes, the only conclusion is that a
majority of the members of the JBC found him to be qualified for the position of Associate Justice.

D. The unlawful exclusion ofthe petitioner from the subject shortlist impairs the President’s constitutional power to
appoint.Jardeleza’s exclusion from the shortlist has unlawfully narrowed the President’s choices. Simply put, the
President would be constrained to choose from among four (4) nominees, when five (5) applicants rightfully qualified
for the position. This limits the President to appoint a member of the Court from a list generated through a process
tainted with patent constitutional violations and disregard for rules of justice and fair play. Until these constitutional

576
infirmities are remedied, the petitioner has the right to prevent the appointment of an Associate Justice
viceAssociate Justice Abad.

Comment of the JBC

On August 11, 2014, the JBC filed its comment contending that Jardeleza’s petition lacked proceduraland
substantive bases that would warrant favorable action by the Court. For the JBC, certiorariis only available against a
tribunal, a board or an officer exercising judicial or quasijudicial functions.  The JBC, in its exercise of its mandate to
11

recommend appointees to the Judiciary, does not exercise any of these functions. In a pending case,  Jardeleza
12

himself, as one of the lawyers for the government, argued in this wise: Certioraricannot issue against the JBC in the
implementation of its policies.

In the same vein, the remedy of mandamusis incorrect. Mandamus does not lie to compel a discretionary act. For it
to prosper, a petition for mandamus must, among other things, show that the petitioner has a clear legal right to the
act demanded. In Jardeleza’s case, there is no legal right to be included in the list of nominees for judicial
vacancies. Possession of the constitutional and statutory qualifications for appointment to the Judiciary may not be
used to legally demand that one’s name be included in the list of candidates for a judicial vacancy. One’s inclusion
in the shortlist is strictly within the discretion of the JBC.

Anent the substantive issues, the JBC mainly denied that Jardeleza was deprived of due process. The JBC
reiterated that Justice Lagman, on behalf of the JBC en banc, called Jardeleza and informed him that Chief Justice
Sereno would be invoking Section 2, Rule 10 of JBC-009 due to a question on his integrity based on the way he
handled a very important case for the government. Jardeleza and Justice Lagman spoke briefly about the case and
his general explanation on how he handled the same. Secretary De Lima likewise informed him about the content of
the impending objection against his application. On these occasions, Jardeleza agreed to explain himself. Come the
June 30, 2014 meeting, however, Jardeleza refused to shed light on the allegations against him,as he chose to
deliver a statement, which, in essence, requested that his accuser and her witnesses file sworn statements so that
he would know of the allegations against him, that he be allowed to cross-examine the witnesses;and that the
procedure be done on record and in public.

In other words, Jardeleza was given ample opportunity to be heard and to enlighten each member of the JBC on the
issues raised against him prior to the voting process. His request for a sworn statement and opportunity to cross-
examine is not supported by a demandable right. The JBC is not a fact-finding body. Neitheris it a court nor a quasi-
judicial agency. The members are notconcerned with the determination of his guilt or innocence of the accusations
against him. Besides, Sections 3 and 4, Rule 10,JBC-009 are merely directory as shown by the use of the word
"may." Even the conduct of a hearing to determine the veracity of an opposition is discretionary on the JBC.
Ordinarily, if there are other ways of ascertaining the truth or falsity of an allegation or opposition, the JBC would not
call a hearing in order to avoid undue delay of the selection process. Each member of the JBC relies on his or her
own appreciation of the circumstances and qualifications of applicants.

The JBC then proceeded to defend adherence to its standing rules. As a general rule, an applicant is included in the
shortlist when he or she obtains an affirmative vote of at least a majority of all the members of the JBC. When
Section 2, Rule 10 of JBC-009,however, is invoked because an applicant’s integrity is challenged, a unanimous vote
is required. Thus, when Chief Justice Sereno invoked the saidprovision, Jardeleza needed the affirmative vote of all
the JBC members tobe included in the shortlist. In the process, Chief Justice Sereno’s vote against Jardeleza was
not counted. Even then, he needed the votes of the five(5) remaining members. He only got four (4) affirmative
votes. As a result,he was not included in the shortlist. Applicant Reynaldo B. Daway, who gotfour (4) affirmative
votes, was included in the shortlist because his integrity was not challenged. As to him, the "majority rule" was
considered applicable.

Lastly, the JBC rued that Jardeleza sued the respondents in his capacity as Solicitor General. Despiteclaiming a
prefatory appearance in propria persona, all pleadings filed with the Court were signed in his official capacity. In
effect, he sued the respondents to pursue a purely private interest while retaining the office of the Solicitor General.
By suing the very parties he was tasked by law to defend, Jardeleza knowingly placed himself in a situation where
his personal interests collided against his public duties, in clear violation of the Code of Professional Responsibility
and Code of Professional Ethics. Moreover, the respondents are all public officials being sued in their official
capacity. By retaining his title as Solicitor General, and suing in the said capacity, Jardeleza filed a suit against his
own clients, being the legal defender of the government and its officers. This runs contrary to the fiduciary
relationship sharedby a lawyer and his client.

In opposition to Jardeleza’s prayer for the issuance of a TRO, the JBC called to mind the constitutional period within
which a vacancy in the Court must be filled. As things now stand, the President has until August 20, 2014 to
exercise his appointment power which cannot be restrained by a TRO or an injunctive suit.

Comment of the Executive Secretary

577
In his Comment, Executive Secretary Paquito N. Ochoa Jr. (Executive Secretary)raised the possible
unconstitutionality of Section 2, Rule 10 of JBC-009, particularly the imposition ofa higher voting threshold in cases
where the integrity of an applicant is challenged. It is his position that the subject JBC rule impairs the body’s
collegial character, which essentially operates on the basis of majority rule. The application of Section 2, Rule 10 of
JBC-009 gives rise to a situation where all that a member needs to do, in order to disqualify an applicant who may
well have already obtained a majority vote, is to object to his integrity. In effect, a member who invokes the said
provision is given a veto powerthat undermines the equal and full participation of the other members in the
nomination process. A lone objector may then override the will ofthe majority, rendering illusory, the collegial nature
of the JBC and the very purpose for which it was created— to shield the appointment process from political
maneuvering. Further, Section 2, Rule 10 of JBC-009 may beviolative of due process for it does not allow an
applicant any meaningful opportunity to refute the challenges to his integrity. While other provisions of the JBC rules
provide mechanisms enabling an applicant to comment on an opposition filed against him, the subject rule does not
afford the same opportunity. In this case, Jardeleza’s allegations as to the events which transpired on June 30, 2014
obviously show that he was neither informed ofthe accusations against him nor given the chance to muster a
defense thereto.

The Executive Secretary then offered a supposition: granting that the subject provision is held to be constitutional,
the "unanimity rule" would only be operative when the objector is not a member of the JBC. It is only in this scenario
where the voting ofthe body would not be rendered inconsequential. In the event that a JBC member raised the
objection, what should have been applied is the general rule of a majority vote, where any JBC member retains their
respective reservations to an application with a negative vote. Corollary thereto, the unconstitutionality of the said
rule would necessitate the inclusion of Jardeleza in the shortlist submitted to the President.

Other pleadings

On August 12, 2014, Jardeleza was given the chance to refute the allegations of the JBC in its Comment. He
submitted his Reply thereto on August 15, 2014. A few hours thereafter, orbarely ten minutes prior to the closing of
business, the Court received the Supplemental Comment-Reply of the JBC, this time with the attached minutes of
the proceedings that led to the filing of the petition,and a detailed "Statementof the Chief Justice on the Integrity
Objection."  Obviously, Jardeleza’s Reply consisted only of his arguments against the JBC’s original Comment, as it
13

was filed prior to the filing of the Supplemental Comment-Reply.

At the late stage of the case, two motions to admit comments-inintervention/oppositions-in-intervention were filed.
One was by Atty. Purificacion S. Bartolome-Bernabe, purportedly the President of the Integrated Bar of the
Philippines-Bulacan Chapter. This pleading echoed the position of the JBC. 14

The other one was filed by Atty. Reynaldo A. Cortes, purportedly a former President of the IBP Baguio-Benguet
Chapter and former Governor of the IBP-Northern Luzon. It was coupled with a complaint for disbarment against
Jardeleza primarily for violations of the Code of Professional Responsibility for representing conflicting interests. 15

Both motions for intervention weredenied considering that time was of the essence and their motions were merely
reiterative of the positions of the JBC and were perceived to be dilatory. The complaint for disbarment, however,
was re-docketed as a separate administrative case.

The Issues

Amidst a myriad of issues submitted by the parties, most of which are interrelated such that the resolution of one
issue would necessarily affect the conclusion as to the others, the Court opts to narrow down the questions to the
very source of the discord - the correct application of Section 2, Rule 10 JBC-009 and its effects, if any, on the
substantive rights of applicants.

The Court is not unmindful of the fact that a facial scrutiny of the petition does not directly raise the
unconstitutionality of the subject JBC rule. Instead, it bewails the unconstitutional effects of its application. It is only
from the comment of the Executive Secretary where the possible unconstitutionality of the rulewas brought to the
fore. Despite this milieu, a practical approach dictatesthat the Court must confront the source of the bleeding from
which the gaping wound presented to the Court suffers.

The issues for resolution are:

I.

WHETHER OR NOT THE COURT CAN ASSUME JURISDICTION AND GIVE DUECOURSE TO THE SUBJECT
PETITION FOR CERTIORARI AND MANDAMUS (WITH APPLICATION FOR A TEMPORARY RESTRAINING
ORDER).

II

578
WHETHER OR NOT THE ISSUES RAISED AGAINST JARDELEZA BEFIT "QUESTIONS OR CHALLENGES ON
INTEGRITY" AS CONTEMPLATED UNDER SECTION 2, RULE 10 OF JBC-009.

II.

WHETHER OR NOT THE RIGHT TO DUE PROCESS IS AVAILABLE IN THE COURSE OF JBC PROCEEDINGS
IN CASES WHERE AN OBJECTION OR OPPOSITION TO AN APPLICATION IS RAISED.

III.

WHETHER OR NOT PETITIONER JARDELEZA MAY BE INCLUDED IN THE SHORTLIST OF NOMINEES

SUBMITTED TO THE PRESIDENT.

The Court’s Ruling

I – Procedural Issue: The Court has constitutional bases to assume jurisdiction over the case

A - The Court’s Power of Supervision over the JBC

Section 8, Article VIII of the 1987 Constitution provides for the creation of the JBC. The Court was given supervisory
authority over it. Section 8 reads:

Section 8.

A Judicial and Bar Council is hereby created under the supervision of the Supreme Courtcomposed of the Chief
Justice as ex officio Chairman, the Secretary of Justice, and a representative of the Congress as ex officio
Members, a representative of the Integrated Bar, a professor of law, a retired Member of the Supreme Court, and a
representative of the private sector. [Emphasis supplied]

As a meaningful guidepost, jurisprudence provides the definition and scope of supervision. It is the power of
oversight, or the authority to see that subordinate officers perform their duties.It ensures that the laws and the rules
governing the conduct of a government entity are observed and complied with. Supervising officials see to it that
rules are followed, but they themselves do not lay down such rules, nor do they have the discretion to modify or
replace them. If the rules are not observed, they may order the work done or redone, but only to conform to such
rules. They may not prescribe their own manner of execution of the act. They have no discretion on this matter
except to see to it that the rules are followed.16

Based on this, the supervisory authority of the Court over the JBC covers the overseeing of compliance with its
rules. In this case, Jardeleza’s principal allegations in his petition merit the exercise of this supervisory authority.

B- Availability of the Remedy of Mandamus

The Court agrees with the JBC that a writ of mandamus is not available. "Mandamuslies to compel the performance,
when refused, of a ministerial duty, but not to compel the performance of a discretionary duty. Mandamuswill not
issue to control or review the exercise of discretion of a public officer where the law imposes upon said public officer
the right and duty to exercise his judgment in reference to any matter in which he is required to act. It is his
judgment that is to be exercised and not that of the court.  There is no question that the JBC’s duty to nominate is
17

discretionary and it may not becompelled to do something.

C- Availability of the Remedy of Certiorari

Respondent JBC opposed the petition for certiorarion the ground that it does not exercise judicial or quasi-judicial
functions. Under Section 1 of Rule 65, a writ of certiorariis directed against a tribunal exercising judicial or quasi-
judicial function. "Judicial functions are exercised by a body or officer clothed with authority to determine what the
law is and what the legal rights of the parties are with respect to the matter in controversy. Quasijudicial function is a
term that applies to the action or discretion of public administrative officers or bodies given the authority to
investigate facts or ascertain the existence of facts, hold hearings, and draw conclusions from them as a basis for
their official action using discretion of a judicial nature."  It asserts that in the performance of its function of
18

recommending appointees for the judiciary, the JBC does not exercise judicial or quasijudicial functions. Hence, the
resort tosuch remedy to question its actions is improper.

In this case, Jardeleza cries that although he earned a qualifying number of votes in the JBC, it was negated by the
invocation of the "unanimity rule" on integrity in violation of his right to due process guaranteed not only by the
Constitution but by the Council’s own rules. For said reason, the Court is of the position that it can exercise the
expanded judicial power of review vestedupon it by the 1987 Constitution. Thus:

579
Article VIII.

Section 1. The judicial power is vested in one Supreme Court and in such lower courts as may be established by
law.

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.

It has been judicially settled that a petition for certiorari is a proper remedy to question the act of any branch or
instrumentality of the government on the ground of grave abuse of discretion amounting to lack or excess of
jurisdiction by any branch orinstrumentality of the government, even if the latter does not exercise judicial, quasi-
judicial or ministerial functions.
19

In a case like this, where constitutional bearings are too blatant to ignore, the Court does not find passivity as an
alternative. The impassemust be overcome.

II – Substantial Issues

Examining the Unanimity Rule of the JBC in cases where an applicant’s integrity is challenged

The purpose of the JBC’s existence is indubitably rooted in the categorical constitutional declaration that"[a]
member of the judiciary must be a person of proven competence, integrity, probity, and independence." To ensure
the fulfillment of these standards in every member of the Judiciary, the JBC has been tasked toscreen aspiring
judges and justices, among others, making certain that the nominees submitted to the President are all qualified and
suitably best for appointment. In this way, the appointing process itself is shieldedfrom the possibility of extending
judicial appointment to the undeserving and mediocre and, more importantly, to the ineligible or disqualified.

In the performance of this sacred duty, the JBC itself admits, as stated in the "whereas clauses" of JBC-009, that
qualifications such as "competence, integrity, probity and independence are not easily determinable as they are
developed and nurtured through the years." Additionally, "it is not possible or advisable to lay down iron-clad rules to
determine the fitness of those who aspire to become a Justice, Judge, Ombudsman or Deputy Ombudsman." Given
this realistic situation, there is a need "to promote stability and uniformity in JBC’s guiding precepts and principles."
A set of uniform criteria had to be established in the ascertainment of "whether one meets the minimum
constitutional qualifications and possesses qualities of mind and heart expected of him" and his office. Likewise for
the sake oftransparency of its proceedings, the JBC had put these criteria in writing, now in the form of JBC-009.
True enough, guidelines have been set inthe determination of competence,"  "probity and
20

independence," "soundness of physical and mental condition,  and "integrity."

21 22 23

As disclosed by the guidelines and lists of recognized evidence of qualification laid down in JBC-009, "integrity" is
closely related to, or if not, approximately equated to an applicant’s good reputation for honesty, incorruptibility,
irreproachableconduct, and fidelity to sound moral and ethical standards. That is why proof of an applicant’s
reputation may be shown in certifications or testimonials from reputable government officials and non-governmental
organizations and clearances from the courts, National Bureau of Investigation, and the police, among others. In
fact, the JBC may even conduct a discreet background check and receive feedback from the public on the integrity,
reputation and character of the applicant, the merits of which shall be verifiedand checked. As a qualification, the
term is taken to refer to a virtue, such that, "integrity is the quality of person’s character."
24

The foregoing premise then begets the question: Does Rule 2, Section 10 of JBC-009, in imposing the "unanimity
rule," contemplate a doubt on the moral character of an applicant? Section 2, Rule 10 of JBC-009 provides:

SEC. 2. Votes required when integrity of a qualified applicant is challenged. - In every case where the integrity of an
applicant who is not otherwise disqualified for nomination is raised or challenged, the affirmative vote of all the
Members of the Council must be obtained for the favorable consideration of his nomination.

A simple reading of the above provision undoubtedly elicits the rule that a higher voting requirement is absolute in
cases where the integrity of an applicant is questioned. Simply put, when an integrity question arises, the voting
requirement for his or her inclusion as a nominee to a judicial post becomes "unanimous" instead of the "majority
vote" required in the preceding section.  Considering that JBC-009 employs the term "integrity" as an essential
25

qualification for appointment, and its doubtful existence in a person merits a higher hurdle to surpass, that is, the
unanimous vote of all the members of the JBC, the Court is of the safe conclusion that "integrity" as used in the
rules must be interpreted uniformly. Hence, Section 2, Rule 10 of JBC-009 envisions only a situation where an
applicant’s moral fitness is challenged. It follows then that the "unanimity rule" only comes into operation when the
moral character of a person is put in issue. It finds no application where the question is essentially unrelated to an
applicant’s moral uprightness.

580
Examining the "questions of integrity" made against Jardeleza

The Court will now examine the propriety of applying Section 2, Rule 10 of JBC-009 to Jardeleza’s case.

The minutes of the JBC meetings, attached to the Supplemental Comment-Reply, reveal that during the June 30,
2014 meeting, not only the question on his actuations in the handling of a case was called for explanation by the
Chief Justice, but two other grounds as well tending to show his lack of integrity: a supposed extra-marital affair in
the past and alleged acts of insider trading.26

Against this factual backdrop, the Court notes that the initial or original invocation of Section 2, Rule 10 of JBC-009
was grounded on Jardeleza’s "inability to discharge the duties of his office" as shown in a legal memorandum
related to Jardeleza’s manner of representing the government in a legal dispute. The records bear that the
"unanimity rule" was initially invoked by Chief Justice Sereno during the JBC meeting held on June 5, 2014, where
she expressed her position that Jardeleza did not possess the integrity required tobe a member of the Court.  In the27

same meeting, the Chief Justice shared withthe other JBC members the details of Jardeleza’s chosen manner of
framing the government’s position in a case and how this could have been detrimental to the national interest.

In the JBC’s original comment, the details of the Chief Justice’s claim against Jardeleza’s integrity were couched in
general terms. The particulars thereof were only supplied to the Court in the JBC’s Supplemental Comment-Reply.
Apparently, the JBC acceded to Jardeleza’s demand to make the accusations against him public. At the outset, the
JBC declined to raise the fine points of the integrity question in its original Comment due to its significant bearing on
the country’s foreign relations and national security. At any rate, the Court restrains itself from delving into the
details thereof in this disposition. The confidential nature of the document cited therein, which requires the
observance of utmost prudence, preclude a discussion that may possibly affect the country’s position in a pending
dispute.

Be that as it may, the Court has to resolve the standing questions: Does the original invocation of Section 2, Rule 10
of JBC-009 involve a question on Jardeleza’s integrity? Doeshis adoption of a specific legal strategy in the handling
of a case bring forth a relevant and logical challenge against his moral character? Does the "unanimity rule" apply in
cases where the main point of contention is the professional judgment sans charges or implications of immoral or
corrupt behavior?

The Court answers these questions in the negative.

While Chief Justice Sereno claims that the invocation of Section 2, Rule 10 of JBC-009 was not borne out ofa mere
variance of legal opinion but by an "act of disloyalty" committed by Jardeleza in the handling of a case, the fact
remains that the basis for her invocation of the rule was the "disagreement" in legal strategy as expressed by a
group of international lawyers. The approach taken by Jardeleza in that case was opposed to that preferred by the
legal team. For said reason, criticism was hurled against his "integrity." The invocation of the "unanimity rule" on
integrity traces its roots to the exercise ofhis discretion as a lawyer and nothing else. No connection was established
linking his choice of a legal strategy to a treacherous intent to trounce upon the country’s interests or to betray the
Constitution.

Verily, disagreement in legal opinion is but a normal, if not an essential form of, interaction among members of the
legal community. A lawyer has complete discretion on whatlegal strategy to employ in a case entrusted to
him provided that he lives up tohis duty to serve his client with competence and diligence, and that he exert his best
28

efforts to protect the interests of his client within the bounds of the law. Consonantly, a lawyer is not an insurer of
victory for clients he represents. An infallible grasp of legal principles and technique by a lawyer is a utopian ideal.
Stripped of a clear showing of gross neglect, iniquity, or immoral purpose, a strategy of a legal mind remains a legal
tactic acceptable to some and deplorable to others. It has no direct bearing on his moral choices.

As shown in the minutes, the other JBC members expressed their reservations on whether the ground invoked by
Chief Justice Sereno could be classified as a "question of integrity" under Section 2, Rule 10 of JBC-009.  These
29

reservations were evidently sourced from the factthat there was no clear indication that the tactic was a "brainchild"
of Jardeleza, as it might have been a collective idea by the legal team which initially sought a different manner of
presenting the country’s arguments, and there was no showing either of a corrupt purpose on his part.  Even Chief
30

Justice Sereno was not certain that Jardeleza’s acts were urged by politicking or lured by extraneous
promises. Besides, the President, who has the final say on the conduct of the country’s advocacy in the case, has
31

given no signs that Jardeleza’s action constituted disloyalty or a betrayal of the country’s trust and interest. While
this point does notentail that only the President may challenge Jardeleza’s doubtful integrity, itis commonsensical to
assume that he is in the best position to suspect a treacherous agenda. The records are bereft of any information
that indicatesthis suspicion. In fact, the Comment of the Executive Secretary expressly prayed for Jardeleza’s
inclusion in the disputed shortlist.

The Court notes the zeal shown by the Chief Justice regarding international cases, given her participation in the
PIATCO case and the Belgian Dredging case. Her efforts inthe determination of Jardeleza’s professional
background, while commendable, have not produced a patent demonstration of a connection betweenthe act
581
complained of and his integrity as a person. Nonetheless, the Court cannot consider her invocation of Section 2,
Rule 10 of JBC-009 as conformably within the contemplation of the rule. To fall under Section 2, Rule 10 of JBC-
009, there must be a showing that the act complained of is, at the least, linked to the moral character of the person
and not to his judgment as a professional. What this disposition perceives, therefore, is the inapplicability of Section
2, Rule 10 of JBC-009 to the original ground of its invocation.

As previously mentioned, Chief Justice Sereno raised the issues of Jardeleza’s alleged extra-marital affair and acts
of insider-trading for the first time onlyduring the June 30, 2014 meeting of the JBC. As can be gleaned from the
minutes of the June 30, 2014 meeting, the inclusion of these issues had its origin from newspaper reports that the
Chief Justice might raise issues of "immorality" against Jardeleza.  The Chief Justice then deduced that the
32

"immorality" issue referred to by the media might have been the incidents that could have transpired when Jardeleza
was still the General Counsel of San Miguel Corporation. She stated that inasmuch as the JBC had the duty to "take
every possible step to verify the qualification of the applicants," it might as well be clarified.
33

Do these issues fall within the purview of "questions on integrity" under Section 2, Rule 10 of JBC-009? The Court
nods in assent. These are valid issues.

This acquiescence is consistent with the Court’s discussion supra. Unlike the first ground which centered
onJardeleza’s stance on the tactical approach in pursuing the case for the government, the claims of an illicit
relationship and acts of insider trading bear a candid relation to his moral character. Jurisprudence  is replete with
34

cases where a lawyer’s deliberate participation in extra-marital affairs was considered as a disgraceful stain on
one’s ethical and moral principles. The bottom line is that a lawyer who engages in extra-marital affairs is deemed to
have failed to adhere to the exacting standards of morality and decency which every member of the Judiciary is
expected to observe. In fact, even relationships which have never gone physical or intimate could still be subject to
charges of immorality, when a lawyer, who is married, admits to having a relationship which was more than
professional, more than acquaintanceship, more than friendly.  As the Court has held: Immorality has not been
35

confined to sexual matters, but includes conduct inconsistentwith rectitude, or indicative of corruption, indecency,
depravity and dissoluteness; or is willful, flagrant, or shameless conduct showing moral indifference to opinions of
respectable members of the communityand an inconsiderate attitude toward good order and public welfare.  Moral 36

character is not a subjective term but one that corresponds to objective reality.  To have a good moral character, a
37

person must have the personal characteristic ofbeing good. It is not enough that he or she has a good reputation,
that is, the opinion generally entertained about a person or the estimate in which he or she is held by the public in
the place where she is known.  Hence, lawyers are at all times subject to the watchful public eye and community
38

approbation. 39

The element of "willingness" to linger in indelicate relationships imputes a weakness in one’s values, self-control and
on the whole, sense of honor, not only because it is a bold disregard of the sanctity of marriage and of the law, but
because it erodes the public’s confidence in the Judiciary. This is no longer a matter of an honest lapse in judgment
but a dissolute exhibition of disrespect toward sacredvows taken before God and the law.

On the other hand, insider trading is an offense that assaults the integrity of our vital securities market. Manipulative
40

devices and deceptive practices, including insider trading, throw a monkey wrench right into the heart of the
securities industry. Whensomeone trades inthe market with unfair advantage in the form of highly valuable secret
inside information, all other participants are defrauded. All of the mechanisms become worthless. Given enough of
stock marketscandals coupled with the related loss of faith in the market, such abuses could presage a severe drain
of capital. And investors would eventuallyfeel more secure with their money invested elsewhere.  In its barest
41

essence, insider trading involves the trading of securities based on knowledge of material information not disclosed
to the public at the time. Clearly, an allegation of insider trading involves the propensity of a person toengage in
fraudulent activities that may speak of his moral character.

These two issues can be properly categorized as "questions on integrity" under Section 2, Rule 10 of JBC-009.
They fall within the ambit of "questions on integrity." Hence, the "unanimity rule" may come into operation as the
subject provision is worded.

The Availability of Due Process in the

Proceedings of the JBC

In advocacy of his position, Jardeleza argues that: 1] he should have been informed of the accusations against him
in writing; 2] he was not furnished the basis of the accusations, that is, "a very confidential legal memorandum that
clarifies the integrityobjection"; 3] instead of heeding his request for an opportunity to defend himself, the JBC
considered his refusal to explain, during the June 30, 2014 meeting, as a waiver of his right to answer the
unspecified allegations; 4] the voting of the JBC was railroaded; and 5] the alleged "discretionary" nature of Sections
3 and 4 of JBC-009 is negated by the subsequent effectivity of JBC-010, Section 1(2) of which provides for a 10-day
period from the publication of the list of candidates within which any complaint or opposition against a candidate
may be filed with the JBC Secretary; 6] Section 2 of JBC-010 requires complaints and oppositions to be in writing
and under oath, copies of which shall be furnished the candidate in order for him to file his comment within five (5)

582
days from receipt thereof; and 7] Sections 3 to 6 of JBC-010 prescribe a logical, reasonable and sequential series of
steps in securing a candidate’s right to due process.

The JBC counters these by insisting that it is not obliged to afford Jardeleza the right to a hearing in the fulfillment of
its duty to recommend. The JBC, as a body, is not required by law to hold hearings on the qualifications of the
nominees. The process by which an objection is made based on Section 2, Rule 10 of JBC-009 is not judicial, quasi-
judicial, or fact-finding, for it does not aim to determine guilt or innocence akin to a criminal or administrative offense
but toascertain the fitness of an applicant vis-à-vis the requirements for the position. Being sui generis, the
proceedings of the JBC do not confer the rights insisted upon by Jardeleza. He may not exact the application of
rules of procedure which are, at the most, discretionary or optional. Finally, Jardeleza refused to shed light on the
objections against him. During the June 30, 2014 meeting, he did not address the issues, but instead chose totread
on his view that the Chief Justice had unjustifiably become his accuser, prosecutor and judge.

The crux of the issue is on the availability of the right to due process in JBC proceedings. After a tedious review of
the parties’ respective arguments, the Court concludes that the right to due process is available and thereby
demandable asa matter of right.

The Court does not brush aside the unique and special nature of JBC proceedings. Indeed, they are distinct from
criminal proceedings where the finding of guilt or innocence of the accused is sine qua non. The JBC’s constitutional
duty to recommend qualified nominees to the President cannot be compared to the duty of the courts of law to
determine the commission of an offense and ascribe the same to an accused, consistent with established rules on
evidence. Even the quantum ofevidence required in criminal cases is far from the discretion accorded to the JBC.

The Court, however, could not accept, lock, stock and barrel, the argument that an applicant’s access tothe rights
afforded under the due process clause is discretionary on the part of the JBC. While the facets of criminal  and
42

administrative  due process are not strictly applicable to JBC proceedings, their peculiarity is insufficient to justify
43

the conclusion that due process is not demandable.

In JBC proceedings, an aspiring judge or justice justifies his qualifications for the office when he presents proof of
his scholastic records, work experience and laudable citations. His goal is to establish that he is qualified for the
office applied for. The JBC then takes every possible step to verify an applicant's trackrecord for the purpose
ofdetermining whether or not he is qualified for nomination. It ascertains the factors which entitle an applicant to
become a part of the roster from which the President appoints.

The fact that a proceeding is sui generisand is impressed with discretion, however, does not automatically denigrate
an applicant’s entitlement to due process. It is well-established in jurisprudence that disciplinary proceedings against
lawyers are sui generisin that they are neither purely civil nor purely criminal; they involve investigations by the
Court into the conduct of one of its officers, not the trial of an action or a suit.  Hence, in the exercise of its
44

disciplinary powers, the Court merely calls upon a member of the Bar to accountfor his actuations as an officer of
the Court with the end in view of preserving the purity of the legal profession and the proper and honest
administration of justice by purging the profession of members who, by their misconduct, have proved themselves
no longer worthy to be entrusted with the duties and responsibilities pertaining to the office of an attorney. In such
posture, there can be no occasion to speak of a complainant or a prosecutor.  On the whole, disciplinary
45

proceedings are actually aimed to verifyand finally determine, if a lawyer charged is still qualifiedto benefit from the
rights and privileges that membership in the legal profession evoke.

Notwithstanding being "a class of itsown," the right to be heard and to explain one’s self is availing. The Court
subscribes to the view that in cases where an objection to an applicant’s qualifications is raised, the observance of
due process neither negates nor renders illusory the fulfillment of the duty of JBC torecommend. This holding is not
an encroachment on its discretion in the nomination process. Actually, its adherence to the precepts of due process
supports and enriches the exercise of its discretion. When an applicant, who vehemently denies the truth of the
objections, is afforded the chance to protest, the JBC is presented with a clearer understanding of the situation it
faces, thereby guarding the body from making an unsound and capriciousassessment of information brought before
it. The JBC is not expected to strictly apply the rules of evidence in its assessment of an objection against an
applicant. Just the same, to hear the side of the person challenged complies with the dictates of fairness for the only
test that an exercise of discretion must surmount is that of soundness.

A more pragmatic take on the matter of due process in JBC proceedings also compels the Court to examine its
current rules. The pleadings of the parties mentioned two: 1] JBC-009 and 2] JBC-010. The former provides the
following provisions pertinent to this case:

SECTION 1. Evidence of integrity. - The Council shall take every possible step to verify the applicant's record of and
reputation for honesty, integrity, incorruptibility, irreproachable conduct, and fidelity to sound moral and ethical
standards. For this purpose, the applicant shall submit to the Council certifications or testimonials thereof from
reputable government officials and non-governmental organizations, and clearances from the courts, National
Bureau of Investigation, police, and from such other agencies as the Council may require.

583
SECTION 2. Background check. - The Council mayorder a discreet background check on the integrity, reputation
and character of the applicant, and receive feedback thereon from the public, which it shall check or verify to
validate the merits thereof.

SECTION 3. Testimony of parties.- The Council may receive written opposition to an applicant on groundof his
moral fitness and, at its discretion, the Council mayreceive the testimony of the oppositor at a hearing conducted for
the purpose, with due notice to the applicant who shall be allowed to cross-examine the oppositor and to offer
countervailing evidence.

SECTION 4. Anonymous complaints. - Anonymous complaints against an applicant shall not begiven due course,
unless there appears on its face a probable cause sufficient to engender belief that the allegations may be true. In
the latter case, the Council may either direct a discreet investigation or require the applicant to comment thereon in
writing or during the interview. [Emphases Supplied]

While the "unanimity rule" invoked against him is found in JBC-009, Jardeleza urges the Court to hold that the
subsequent rule, JBC-010,  squarely applies to his case. Entitled asa "Rule to Further Promote Public Awareness of
46

and Accessibility to the Proceedings of the Judicial and Bar Council," JBC-010 recognizes the needfor transparency
and public awareness of JBC proceedings. In pursuance thereof, JBC-010 was crafted in this wise:

SECTION 1. The Judicial and Bar Council shall deliberate to determine who of the candidates meet prima facie the
qualifications for the positionunder consideration. For this purpose, it shall prepare a long list of candidates who
prima facieappear to have all the qualifications.

The Secretary of the Council shall then cause to be published in two (2) newspapers of general circulation a notice
of the long list of candidates in alphabetical order.

The notice shall inform the public that any complaint or opposition against a candidate may be filed with the
Secretary within ten (10) days thereof.

SECTION 2.The complaint or opposition shall be in writing, under oath and in ten (10) legible copies, together with
its supporting annexes. It shall strictly relate to the qualifications of the candidate or lack thereof, as provided for in
the Constitution, statutes, and the Rules of the Judicial and Bar Council, as well as resolutions or regulations
promulgated by it.

The Secretary of the Council shallfurnish the candidate a copy of the complaint or opposition against him. The
candidate shall have five (5) days from receipt thereof within which to file his comment to the complaint or
opposition, if he so desires.

SECTION 3.The Judicial and Bar Council shall fix a date when it shall meet in executive session to consider the
qualification of the long list of candidates and the complaint or opposition against them, if any. The Council may, on
its own, conduct a discreet investigation of the background of the candidates.

On the basis of its evaluationof the qualification of the candidates, the Council shall prepare the shorter list of
candidates whom it desires to interview for its further consideration.

SECTION 4.The Secretary of the Council shall again cause to be published the dates of the interview of candidates
in the shorter list in two (2) newspapers of general circulation. It shall likewise be posted in the websites of the
Supreme Court and the Judicial and Bar Council.

The candidates, as well as their oppositors, shall be separately notified of the dateand place of the interview.

SECTION 5.The interviews shall be conducted in public. During the interview, only the members ofthe Council can
ask questions to the candidate. Among other things, the candidate can be made to explain the complaint or
opposition against him.

SECTION 6. After the interviews, the Judicial and Bar Council shall again meet in executive session for the final
deliberation on the short list of candidates which shall be sent to the Office of the President as a basis for the
exercise of the Presidential power of appointment. [Emphases supplied]

Anent the interpretation of these existing rules, the JBC contends that Sections 3 and 4, Rule 10 of JBC-009 are
merely directory in nature as can be gleaned from the use of the word "may." Thus, the conduct of a hearing under
Rule 4 of JBC-009 is permissive and/or discretionary on the part of the JBC. Even the conduct of a hearing to
determine the veracity of an opposition is discretionary for there are ways, besides a hearing, to ascertain the truth
or falsity of allegations. Succinctly, this argument suggests that the JBC has the discretion to hold or not to hold a
hearing when an objection to an applicant’s integrity is raised and that it may resort to other means to accomplish its
objective. Nevertheless, JBC adds, "what is mandatory, however, is that if the JBC, in its discretion, receives a

584
testimony of an oppositor in a hearing, due notice shall be given to the applicant and that shall be allowed to cross-
examine the oppositor."  Again, the Court neither intends to strip the JBC of its discretion to recommend nominees
47

nor proposes thatthe JBC conduct a full-blown trial when objections to an application are submitted. Still, it is
unsound to say that, all together, the observance of due process is a part of JBC’s discretion when an opposition to
an application is made of record. While it may so rely on "other means" such as character clearances, testimonials,
and discreet investigation to aid it in forming a judgment of an applicant’s qualifications, the Court cannot accept a
situation where JBC is given a full rein on the application of a fundamental right whenever a person’s integrity is put
to question. In such cases, an attack on the person of the applicant necessitates his right to explain himself.

The JBC’s own rules convince the Court to arrive at this conclusion. The subsequent issuance of JBC-010
unmistakably projects the JBC’s deference to the grave import of the right of the applicant to be informed and
corollary thereto, the right to be heard. The provisions of JBC-010, per se, provide that: any complaint or opposition
against a candidate may be filed with the Secretary within ten (10) days thereof; the complaint or opposition shall be
in writing, under oath and in ten (10) legible copies; the Secretary of the Council shall furnish the candidate a copy
of the complaint or opposition against him; the candidate shall have five (5) days from receipt thereof within which to
file his comment to the complaint or opposition, if he so desires; and the candidate can be made to explain the
complaint or opposition against him.

The Court may not close its eyes to the existence of JBC-010 which, under the rules of statutory construction,bears
great weight in that: 1] it covers "any" complaint or opposition; 2] it employs the mandatory term, "shall"; and 3] most
importantly, it speaks of the very essence of due process. While JBC-010 does not articulate a procedure that
entails a trialtype hearing, it affords an applicant, who faces "any complaint or opposition," the right to answer the
accusations against him. This constitutes the minimum requirements of due process.

Application to Jardeleza’s Case

Nearing the ultimate conclusion of this case, the Court is behooved to rule on whether Jardeleza was deprived of his
right to due process in the events leading up to, and during, the vote on the shortlist last June 30, 2014.

The JBC gives great weight and substance to the fact that it gave Jardeleza the opportunity to answer the
allegations against him. It underscores the fact that Jardeleza was asked to attend the June 30, 2014 meeting so
that he could shed light on the issues thrown at him. During the said meeting, Chief Justice Sereno informed him
that in connection with his candidacy for the position of Associate Justice of the Supreme Court, the Council would
like to propound questions on the following issues raised against him: 1] his actuations in handling an international
arbitration case not compatible with public interest;  2] reports on his extra-marital affair in SMC; and 3] alleged
48

insider trading which led to the "show cause" order from the Philippine Stock Exchange. 49

As Jardeleza himself admitted, he declined to answer or to explain his side, as he would not want to be "lulled into
waiving his rights." Instead, he manifested that his statement be put on record and informed the Council of the then
pendency of his letter-petition with the Court en banc. When Chief Justice Sereno informed Jardeleza that the
Council would want to hear from him on the three (3) issues against him,Jardeleza reasoned out that this was
precisely the issue. He found it irregular that he was not being given the opportunity to be heard per the JBC
rules.He asserted that a candidate must be given the opportunity to respond to the charges against him. He urged
the Chief Justice to step down from her pedestal and translate the objections in writing. Towards the end of the
meeting, the Chief Justice said that both Jardeleza’s written and oral statements would be made part of the record.
After Jardeleza was excused from the conference, Justice Lagman suggested that the voting be deferred, but the
Chief Justice ruled that the Council had already completed the process required for the voting to proceed.

After careful calibration of the case, the Court has reached the determination that the application of the "unanimity
rule" on integrity resulted in Jardeleza’s deprivation of his right to due process.

As threshed out beforehand, due process, as a constitutional precept, does not always and in all situations require a
trial-type proceeding. Due process is satisfied when a person is notified of the charge against him and given an
opportunity to explain or defend himself.  Even as Jardeleza was verbally informed of the invocation of Section 2,
50

Rule 10 of JBC-009 against him and was later asked to explain himself during the meeting, these circumstances still
cannot expunge an immense perplexity that lingers in the mind of the Court. What is to become of the procedure
laid down in JBC-010 if the same would be treated with indifference and disregard? To repeat, as its wording
provides, any complaint or opposition against a candidate may be filed with the Secretary withinten (10) days from
the publication of the notice and a list of candidates. Surely, this notice is all the more conspicuous to JBC
members. Granting ex argumenti, that the 10-day period  is only applicable to the public, excluding the JBC
51

members themselves, this does not discount the fact that the invocation of the first ground in the June 5, 2014
meeting would have raised procedural issues. To be fair, several members of the Council expressed their concern
and desire to hear out Jardeleza but the application of JBC-010 did not form part of the agenda then. It was only
during the next meeting on June 16, 2014, that the Council agreed to invite Jardeleza, by telephone, to a meeting
that would be held on the same day when a resource person would shed light on the matter.

585
Assuming again that the classified nature of the ground impelled the Council to resort to oral notice instead of
furnishing Jardeleza a written opposition, why did the JBC not take into account its authority to summon Jardeleza in
confidence at an earlier time? Is not the Council empowered to "take every possible step to verify the qualification of
the applicants?" It would not be amiss to state, at this point, that the confidential legal memorandum used in the
invocation ofthe "unanimity rule" was actually addressed to Jardeleza, in his capacity as Solicitor General. Safe to
assume is his knowledge of the privileged nature thereof and the consequences of its indiscriminate release to the
public. Had he been privately informed of the allegations against him based on the document and had he been
ordered to respond thereto in the same manner, Jardeleza’s right to be informed and to explain himself would have
been satisfied.

What precisely set off the protest of lack of due process was the circumstance of requiring Jardeleza to appear
before the Council and to instantaneously provide those who are willing to listen an intelligent defense. Was he
given the opportunity to do so? The answer is yes, in the context of his physical presence during the meeting. Was
he given a reasonable chance to muster a defense? No, because he was merely asked to appear in a meeting
where he would be, right then and there, subjected to an inquiry. It would all be too well to remember that the
allegations of his extra-marital affair and acts of insider trading sprung up only during the June 30, 2014 meeting.
While the said issues became the object of the JBC discussion on June 16, 2014, Jardeleza was not given the idea
that he should prepare to affirm or deny his past behavior. These circumstances preclude the very idea of due
process in which the right to explain oneself is given, not to ensnare by surprise, but toprovide the person a
reasonable opportunity and sufficient time to intelligently muster his response. Otherwise, the occasion becomes
anidle and futile exercise.

Needless to state, Jardeleza’s grievance is not an imagined slight but a real rebuff of his right to be informed of the
charges against him and his right to answer the same with vigorouscontention and active participation in the
proceedings which would ultimately decide his aspiration to become a magistrate of this Court.

Consequences

To write finisto this controversy and in view of the realistic and practical fruition of the Court’s findings, the Court now
declares its position on whether or not Jardeleza may be included in the shortlist, just in time when the period to
appoint a member of the Court is about to end.

The conclusion of the Court is hinged on the following pivotal points:

1. There was a misapplication of the "unanimity rule" under Section 2, Rule 10 of JBC-009 as to Jardeleza’s
legal strategy in handling a case for the government.

2. While Jardeleza’s alleged extra-marital affair and acts of insider trading fall within the contemplation of a
"question on integrity" and would have warranted the application of the "unanimity rule," he was notafforded
due process in its application.

3. The JBC, as the sole body empowered to evaluate applications for judicial posts, exercises full discretion
on its power to recommend nomineesto the President. The sui generischaracter of JBC proceedings,
however, is not a blanket authority to disregard the due process under JBC-010.

4. Jardeleza was deprived of his right to due process when, contrary to the JBC rules, he was neither
formally informed of the questions on his integrity nor was provided a reasonable opportunity to prepare his
defense.

With the foregoing, the Court is compelled to rule that Jardeleza should have been included in the shortlist
submitted to the President for the vacated position of Associate Justice Abad. This consequence arose not from the
unconstitutionality of Section 2, Rule 10 of JBC-009, per se, but from the violation by the JBC of its own rules of
procedure and the basic tenets of due process. By no means does the Court intend to strike down the "unanimity
rule" as it reflects the JBC’s policy and, therefore, wisdom in its selection of nominees. Even so, the Court refuses to
turn a blind eye on the palpable defects in its implementation and the ensuing treatment that Jardeleza received
before the Council. True, Jardeleza has no vested right to a nomination, but this does not prescind from the fact that
the JBC failed to observe the minimum requirements of due process.

In criminal and administrative cases, the violation of a party’s right to due process raises a serious jurisdictional
issue which cannot be glossed over or disregarded at will. Where the denial of the fundamental right of due process
is apparent, a decision rendered in disregard of that right is void for lack of jurisdiction.  This rule may well be
52

applied to the current situation for an opposing view submits to an undue relaxation of the Bill of Rights. To this, the
Court shall not concede. Asthe branch of government tasked to guarantee that the protection of due process is
available to an individual in proper cases, the Court finds the subject shortlist as tainted with a vice that it is
assigned to guard against. Indeed, the invocation of Section 2, Rule 10 of JBC-009 must be deemed to have never
come into operation in light of its erroneous application on the original ground against Jardeleza’s integrity. At the
risk of being repetitive, the Court upholds the JBC’s discretion in the selection of nominees, but its application of the
586
"unanimity rule" must be applied in conjunction with Section 2, Rule 10 of JBC-010 being invoked by Jardeleza.
Having been able to secure four (4) out of six (6) votes, the only conclusion left to propound is that a majority of the
members of the JBC, nonetheless, found Jardeleza to be qualified for the position of Associate Justice and this
grants him a rightful spot in the shortlist submitted to the President. Need to Revisit JBC’s

Internal Rules

In the Court’s study of the petition,the comments and the applicable rules of the JBC, the Court is of the view that
the rules leave much to be desired and should be reviewed and revised. It appears that the provision on the
"unanimity rule" is vagueand unfair and, therefore, can be misused or abused resulting in the deprivation of an
applicant’s right to due process.

Primarily, the invocation of the "unanimity rule" on integrity is effectively a veto power over the collective will of a
majority. This should be clarified. Any assertion by a member aftervoting seems to be unfair because it effectively
gives him or her a veto power over the collective votes of the other members in view of the unanimous requirement.
While an oppositor-member can recuse himself orherself, still the probability of annulling the majority vote ofthe
Council is quite high.

Second, integrity as a ground has not been defined. While the initial impression is that it refers to the moral fiber of a
candidate, it can be, as it has been, used to mean other things. Infact, the minutes of the JBC meetings n this case
reflect the lack of consensus among the members as to its precise definition. Not having been defined or described,
it is vague, nebulous and confusing. It must be distinctly specified and delineated.

Third, it should explicitly provide who can invoke it as a ground against a candidate. Should it be invoked only by an
outsider as construed by the respondent Executive Secretary or also by a member?

Fourth, while the JBC vetting proceedings is "sui generis" and need not be formal or trial type, they must meet the
minimum requirements of due process. As always, an applicant should be given a reasonable opportunity and time
to be heard on the charges against him or her, if there are any.

At any rate, it is up to the JBC to fine-tune the rules considering the peculiar nature of its function. It need not be
stressed that the rules to be adopted should be fair, reasonable, unambiguous and consistent with the minimum
requirements of due process.

One final note.

The Court disclaims that Jardeleza's inclusion in the shortlist is an endorsement of his appointment as a member of
the Court.  In deference to the Constitution and his wisdom in the exercise of his appointing power, the President
1âwphi1

remains the ultimate judge of a candidate's worthiness.

WHEREFORE, the petition is GRANTED. Accordingly, it is hereby declared that Solicitor General Francis I-I.
Jardeleza is deemed INCLUDED in the shortlist submitted to the President for consideration as an Associate Justice
of the Supreme Court vice Associate Justice Roberto A. Abad.

The Court further DIRECTS that the Judicial and Bar Council REVIEW, and ADOPT, rules relevant to the
observance of due process in its proceedings, particularly JBC-009 and JBC-010, subject to the approval of the
Court.

This Decision is immediately EXECUTORY. Immediately notify the Office of the President of this Decision.

SO ORDERED.

DISSENTING OPINION

LEONEN, J.:

Prefatory Statement

In the guise of an invocation of due process of law, this petition tempts us to reach beyond our constitutional duties
and require the Judicial and Bar Council to amend the list of nominees to the vacancy in this court caused by the
retirement of Associate Justice Roberto Abad. The list was unanimously signed by all members of the Judicial and
Bar Council and validly transmitted to the President. None of its members dissented to nominating only four names
for the vacant position of Associate Justice of the Supreme Court.

587
The principal issue raised against petitioner during the proceedings in the Judicial and Bar Council was sensitive to
the national interest. It relates to his attempts, as Solicitor General, to exclude certain statements in an important
arbitration commenced by the Republic of the Philippines.

The comment and supplemental comment submitted by the Judicial and Bar Council show that it appeared to the
Chief Justice and another member that these attempts were legally baseless. Their assessment came not only frbm
their own knowledge of the issues as validated by their own discreet investigation but also from the presentation of
Senior Associate Justice Antonio Carpio. Senior Associate Justice Antonio Carpio was invited as resource person to
place in context the objections to the inclusion of petitioner in the list of nominees. A copy of the memorandum of the
Republic's principal foreign legal counsel in this international arbitration was also made available to the members of
the Council. The memorandum was addressed to petitioner as Solicitor General and the Secretary of Foreign
Affairs.

Given the sensitive character of the grounds raised, the Judicial and Bar Council chose to provide petitioner with a
discreet forum to hear his side of this issue. Despite being informed of the nature of the objection, petitioner instead
chose to raise solely procedural grounds claiming that the due process clause requires cross-examination.

No person has a vested right to be nominated for a judicial position. In my view, the elemental requirements of
fairness embedded in the due process clause was afforded to petitioner.

We should tread carefully, stay our hands, and practice judicial restraint. Significant cases such as these that could
result in the nullification of an act of a constitutional organ certainly do not deserve hasty conclusions and the
abbreviated deliberations. As the court of last resort, we have to give every argument in every document the
conscious thought it deserves.

The Constitution grants to the Judicial and Bar Council the sole and exclusive power to vet not only the
qualifications but also the fitness of applicants to this court. It is the Judicial and Bar Council that determines the
extent of competence, independence, probity, and integrity that should be possessed by an applicant before he or
she is included in the list of nominees prepared for the President.

By constitutional design, this court should wisely resist temptations to participate, directly or indirectly, inthe
nomination and appointment process of any of its members. In reality, nomination to this court carries with it the
political and personal pressures from the supporters of strong contenders. This court is wisely shaded from these
stresses. We know that the quality of the rule of law is reduced when any member of this court succumbs to
pressure.

The separation of powers inherentin our Constitution is a rational check against abuse and the monopolization of all
legal powers. We should not nullify any act of any constitutional organ unless there is grave abuse of discretion. The
breach of a constitutional provision should be clearly shown and the necessity for the declaration of nullity should be
compelling. Any doubt should trigger judicial restraint,not intervention. Doubts should be resolved in deference to
the wisdom and prerogative of co-equal constitutional organs.

Through a petition for certiorari and mandamus with an application for a temporary restraining order, petitioner prays
that we order that the list officially transmitted by the Judicialand Bar Council and received by the Office of the
President be disregarded and in its place a new one made with his name included. This is what he means when he
prays that his name be "deemed included." He claims thatthe production of a new list is mandatory and ministerial
on the partof the Judicial and Bar Council.

Conflicts in the narration of facts should be resolved in favor of the constitutional body

There are conflicts in the ambient facts as gathered from the pleadings.

On March 6, 2014, the Judicial and Bar Council announced the opening, for application and recommendation, of the
position of Associate Justice of the Supreme Court to be vacated by Associate Justice Roberto A. Abad. On March
14, 2014, the Council received a letter dated March 10, 2014 from Dean Danilo Concepcion of the University of the
Philippines College of Law, nominating petitioner to the position. The Council also received a letter dated March
10,2014 from petitioner accepting the nomination. 1

On April 24, 2014, the Council announced the names of candidates to the position, which included petitioner’s, as
well as the schedule of their interviews. Petitioner was interviewed on May 29, 2014. 2

Then the versions of petitioner and respondent Judicial and Bar Council diverge. The Council alleges as follows: 3

7. The basis of the challenge, as detailed by the Chief Justice, was the events that transpired in the handling
of the Republic of the Philippines’ Memorial in the case of Republic of the Philippines v. The People’s
Republic of China of which Petitioner was the Philippine agent. The case involved compulsory arbitration

588
under the United Nations Convention on the Law of the Sea (UNCLOS)initiated by the Republic of the
Philippines before the Permanent Court of Arbitration. 4

8. According to her, in the Philippine Memorial, the Petitioner deliberately sought the exclusion of a
discussion on a very important physical feature in the West Philippine Sea. This feature is the "rock" referred
to as Itu Aba.. . . The importance of the paragraphs thatthe Petitioner instructed the international lawyers to
delete from the entire Philippine claim will be discussed in a later portion of this Supplemental Comment.

9. In the view of the Chief Justice, this deliberate refusal to promote the remedies available to the
Philippines, by deliberately weakening the country’s arguments, showed that the Petitioner had been
disloyal to the country.

10. To provide the other JBC Members a factual background, the Chief Justice told them that she first
learned about Petitioner’s behaviour as the Philippine agent in the case through Senior Associate Justice
Carpio. She then conducted discreet inquiries on her own.While the final Philippine Memorial included the
important discussion point of Itu Aba she discovered that Petitioner insisted upon its exclusion and was only
overruled through timely intervention.

11. After this discussion, Congressman Tupas made it of record that he would still want to vote for
Petitioner. Justice Lagman, Atty. Mejia and Atty. Cayosa likewise manifested their intention to vote for
Petitioner, had it not been for the seriousness of the issue on the West Philippine Sea.They commonly
agreed on giving him an opportunity to present his side. For his part, Senator Pimentel inquired on the
definition of integrity as contemplated in Section 2 of Rule 10. 12. The Chief Justice indicated that because
of the seriousness of the matter being raised, it would be the first time that anyone would be invoking
Section 2, Rule 10, and unless a different scenario ensues, she would be invoking the rule at the appropriate
time.

13. On 16 June 2014, the JBC met again in an executive session. The Chief Justice informed the body that
since there was no change in the conditions obtaining since the meeting on 5 June 2014, she would invoke
Rule 10 with respect to Petitioner’s nomination. She was asked whether the integrity objection would hold
considering that there was no proof that the Petitioner obtained money for his actuation in the West
Philippine Sea case. She explained her point of view that one’s capacity and willingness to uphold the
Constitution determines integrity. An objection to integrity does not necessarily require proof of unlawful
receipt of money in exchange for a decision or an action. She stressed thatone does not have integrity when
one is not willing to protect the interest of one’s client to the utmost, especially in this case when the client
happens to be the Republic. She said that through his actuations, Petitioner has demonstrated weakness of
character. She inferred that he may have been listening to extraneous factors or may have been promised
something. She also said she had seen many instances where national interests had been compromised
because of personal agendas. She cited her experiences as the Director of the Institute of International
Legal Studies in the University of the Philippines, when she observed the actuations of certain government
officials. She saw how the country’s ability to protect Scarborough Shoal was compromised by a foreign
affairs official in exchange for a possible United Nations position. She also observed how public officials
were willing to see the country lose its defense in the two international arbitration casesbrought against it by
the companies Fraport and Philippine International Air Terminals Co., Inc., all for something other than duty
to the Republic.

14. Congressman Tupas raised questions on the proper interpretation and application of Rule 10, Section 2,
and extensive discussions onthe rule followed.

15. It was finally agreed that Petitioner would be invited to explain his side before the JBC at its next meeting
on 30 June 2014. Justice Lagman was requested by the JBC to convey this invitation to him. Itwas also
agreed that Senior Associate Justice Carpio would be invited to the next session as a resource speaker.

16. Before the start of the discussion in the executive session on 30 June 2014, copies of a memorandum
from the Philippines’ international legal counsel for the West Philippine Sea case were distributed.  The
5

memorandum was signed by Messrs. Paul Riechler and Lawrence Martin, and was dated 19 March 2014.
This memorandum had earlier been handed to the Chief Justice by Senior Associate Justice Carpio for
distribution to the Members of the JBC. . . .

17. Chief Justice Sereno clarified at the start of the executive session on 30 June 2014 that the invitations to
Senior Associate Justice Carpio and Petitioner were pursuant to Rule 4, Sections 1 (Evidence ofIntegrity)
and 2 (Background Check); and Rule 5, Sections 1 (Evidence of Probity and Independence) and 2
(Testimonials of Probity and Independence) of the JBC Rules.

18. The Chief Justice said that she took pains to validate all the information she had obtained, and that she
was able to confirm her initial impressions. She elaborated that the instruction to exclude the discussion
concerning Itu Aba was made by Petitioner himself to the Philippines’ international legal counsel, and that he
589
had insisted on this position up to the very end, when he was overruled when the President himself
intervened. Secretary DeLima then explained that she was not involved in the preparation of the Memorial,
but in the later stages learned that itwas the collective decision of the Philippine legal team not to raise any
discussion on Itu Aba in the Memorial but take it up during the oral arguments as a strategy.

19. The Chief Justice responded thatthe alleged strategy would have proven too risky, because the
International Tribunal may not call for oral arguments; and even if it does, it may not allow any argument on
a matter not raised in the Memorial. Secretary De Lima said she was not informed of such risk.

20. The JBC also discussed the media articles speculating on the issue of the nomination of Petitioner. It
lamented the fact that while it had done everything to keep the objection against the Petitioner confidential,
itstill leaked out. . . .

21. The Chief Justice emphasizedthe inaccuracy of media reports that Petitioner was not informed of the
objection against him, considering that he had been informed by the JBC through Justice Lagman of the
basis of the integrity objection.

....

23. After a short break, the JBC reconvened upon the arrival of Senior Associate Justice Carpioto shed light
on the legal memorandum that had been distributed. 6

24. Senior Associate Justice Carpio confirmed that the exclusion of the 14-paragraph discussion on Itu
Abafrom the Memorial would have been detrimental to the Philippine claim in the West Philippine Sea case.
He had found it strange that the Petitioner would not include the vital 14 paragraphs which were already in
the original draft submitted by the Philippines’ international lawyers Mssrs. Reichler and Martin.

25. At this point, Justice Lagman said that upon informing Petitioner that Itu Aba was the subject of the
integrity issue against him, the Petitioner mentioned that someone told him that a German scholar advised
its exclusion. She informed the body that she called Petitioner a second time to inform him of the invitation to
appear before the JBC for this day’s session.

26. Senior Associate Justice Carpio explained that in the arbitral tribunal, there might not be anoral
argument. The tribunal would wonder why the Philippines would not include Itu Aba. Moreover, he opined
that there could only be one German scholar referred to by the Petitioner, Professor Talman, who wrote in
his work that the tribunal does not have jurisdiction over the case because Itu Abawas never raised nor
mentioned by the Philippines in its earlier pleadings. He stressed that it was known in the international
community that Professor Talman has been engaged by China to write for it and to promote its cause.

27. Senior Associate Justice Carpio found it inexplicable that the Petitioner had instructed the exclusion of
Itu Abafrom the Memorial, even when its inclusion was already strongly advised by the best international
lawyers.

....

29. Petitioner was called to face the JBC in the afternoon of the same day. The Chief Justice acknowledged
and thanked Petitioner for his presence. She informed the Petitioner that the JBC would like to propound
questions on the following issues:

(a) His actuations in handling the West Philippine Sea case;

....

30. Petitioner, in response, reiterated his prayer in the aforementioned letter-petition and asked the JBC to
defer its meeting, since he was expecting the Supreme Court en banc, which would be meeting the next
day, to act on his letterpetition. Specifically, he demanded that the Chief Justice execute a sworn statement
of her objections, and that he must have the right to cross-examine her in a public hearing. He indicated that
the same should also be required of Senior Associate Justice Carpio. Congressman Tupas indicated that he
wanted to hear for himself the explanation of Petitioner, but the latter refused. Petitioner further stated that
he would not be lulled into waiving his rights. He then put on record a Statement  appealing that the JBC
7

"stay their hand" that day and let the full Supreme Court address the issue of what process was due him.

31. After a one-minute talk with Congressman Tupas, Petitioner gave his final remarks and asked to be
excused from the session. Congressman Tupas saidthat Petitioner was unwilling to answer any of the JBC’s
questions.

590
 32. The JBC moved on to discuss the nomination list and unanimously agreed that Petitioner’s name would
still be part of the ballot.

33. The voting resulted in a shortlist of the following candidates: Apolinario D. Bruselas Jr. withsix (6) votes;
Jose C. Reyes with six (6) votes; Maria Gracia M. Pulido-Tan with five (5) votes; and Reynaldo B. Daway
with four (4) votes.

34. The JBC agreed that while Petitioner garnered four (4) votes, he could not be included in the shortlist
because of an invocation of Rule 10, Section 2 of the JBC Rules.

35. Atty. Cayosa informed the JBC that while she had previously voted for Petitioner in various positions for
which he was a candidate, she could not vote for him this time. She stated that she had also studied,
investigated and validated the issues raised against Petitioner . . . on how he handled the West Philippine
Sea case. She said that this investigation had cast serious doubts on his integrity. She would have wanted
to hear his explanation or response to these issues to overcome the challenge to his integrity; but sadly, he
had insisted that all challenges be put in writing even if to do so may affect national interest.

36. Finally, to refute the claim of Petitioner in his Reply dated 15 August 2014 that he did not receive a copy
of Annex "J" of the Comment dated 11 August 2014, which is the legal memorandum addressed to
Petitioner and Sec. Albert del Rosario dated 19 March 2014 of Foley Hoag LLP, the international legal
counsel of the Republic of the Philippines in Philippines v. China,  attached as Annex "D" to this
8

Supplemental Comment-Reply is an affidavit of personal service confirming that Petitioner was duly
furnished Annex "J," a memorandum that he has had since 19 March 2014. (Emphasis and underscoring
supplied) 9

Petitioner, on his part, claims that while he was informed by Justice Lagman of the integrity objection, hewas given
very little information:

1. The acts of respondent Chief Justice Sereno in the events leading up to and during the vote on the
shortlist on June 30, 2014 show a premeditated and persistent pattern of exclusion on the petitioner.

2. First, on 16 and 17 June 2014, petitioner was informed by JBC member Justice Aurora S. Lagman,
through a phone call, that respondent Chief Justice Sereno directed that petitioner make himself "available"
to appearbefore them on 30 June 2014. Petitioner was also informed that Chief Justice Sereno invoked
Section 2, Rule 10 of JBC-009 against him at their June 5 and June 16 meetings. Justice Lagmanstated,
withoutdetail, that the objections had to do with his work as Solicitor General, but that Chief Justice Sereno
will be the one to inform him of her objection to his integrity, at the 30 June 2014 meeting. Petitioner was
never formallynotified in writing of the allegations against him. This, notwithstanding that respondent Chief
Justice Sereno had already been campaigning against petitioner at the previous JBC meetings of June 5
and 16, 2014.

3. Second, petitioner's letter-petition filed before the Supreme Court on 25 June 2014, or five (5) days before
the 30 June 2014 hearing of the JBC, was not acted upon by respondent Chief Justice Sereno who controls
the scheduling of the en banc meetings and agenda. Thus, the reliefs- which are based on the JBC's own
rules-prayed for by petitioner, including, among others, a written notice containing the sworn specifications
of the charges against him by his oppositors, the sworn statements of supporting witnesses, if any, and
copies of documents in support of the charges, were mooted and made academic pursuant to the Honorable
Court's Resolution dated 08 July 2014. Petitioner appeared before the JBC on 30 June 2014 with very little
information concerning the objections against his integrity. All that he could gather was that it had to do with
his work as Solicitor General.

4. Third, during the 30 June 2014 meeting, petitioner was informed by Secretary of Justice Leila M. de Lima,
just before the JBC summoned him at 2:00 PM, that Associate Justice Antonio T. Carpio testified against
him "about work." A "very confidential legal memorandum that clarifies and concretizes the integrity
objection that the Chief Justice raised against petitioner" was allegedly distributed. Petitioner was not
informed about the existence of such memorandum nor furnished a copy thereof. WhenChief Justice Sereno
asked petitioner if he wanted to defend himself, petitioner was compelled to reiterate his request for due
process as prayed for in his letter-petition. Representative [Niel] Tupas, Jr. also asked petitioner if he wanted
to defend himself. Petitioner answered he cannot defend himself unless his due process rights were
granted. Petitioner also submitted into the record a Statement, which was again a plea for due process.
Instead of heeding his request, respondent JBC considered petitioner's refusal to explain as a waiverof his
right to answer the unspecified allegations.The 30 June 2014 meeting lasted about ten (10) minutes.

5. Fourth, the JBC released the shortlist of nominees on the same day. It is a fact that petitioner obtained a
majorityof four votesthe same number of votes obtained by Judge Reynaldo B. Daway-even after
respondent Chief Justice Sereno and Justice Carpio presented their objections. Petitioner, however, was not
included in the shortlist, despite his plea for it to stay its hand and provide him real opportunity to be heard.
591
 6. Clearly, the manner by which petitioner was given only verbal notice of the allegations against him and
forced to answer on the spot said allegations shows a pre-meditated and persistent pattern of exclusion that
deprived him of a reasonable opportunity to mount a meaningful defense. It is a fact that no complaint or
opposition was filed against petitioner after the public had been notified of his nomination. No opposition was
raised against him during his public interview on 29 May 2014. It was only on 16 and 17 June 2014, or
shortly before the final deliberation on the shortlist, that petitioner was verbally notified of respondent Chief
Justice Sereno's objection against his integrity, and with no details at that. The objections against him were
therefore foisted pastthe period for filing objections to his nomination-a move calculated to deprive him of the
opportunity to properly respond in accordance with the JBC's own rules. Even his plea for relief before the
Honorable Court, as a last resort, was rendered useless due to the malicious scheme employed by
respondent Chief Justice Sereno.

7. Deprived of a formal notice detailing the unspecified allegations against him, coupledwith the lack of
reasonable time to prepare for his defense, the circumstances under which petitioner was placed patently
demonstrate a premeditated and persistent pattern to railroad the rejection of his nomination.

Without having been previously informed of the specific details of the accusation against him, petitioner had
only two options-either to participate in the proceeding unarmed with information and risk losing his case for
lack of opportunity to present strong countervailing evidence, or refuse to participate in the proceeding and
be estopped from claiming he was denied an opportunity to be heard. Either way, petitioner was caught in a
dilemma which effectively deprived him of any real opportunity to be heard.

8. Even now, petitioner is kept in the dark as to the details of the objection against him which allegedly
pertains to "a very important specific case for the Republic." Petitioner was not, and has not been, furnished
a copy of Annex "J" of the JBC Comment. If, indeed, the objection to petitioner's integrity relates to a matter
of highest importance, there is an even greater reason to disclose the allegations in public. Concealing the
details of these allegations amounts to irresponsible rumormongering which maximizes petitioner's inability
to defend himself.

9. Petitioner assumes that the objection against him is related to the conduct of his official functions as
Solicitor General of the Republic. The JBC Comment vaguely refers to an alleged "inability to discharge the
duty ofthe Solicitor General" on "a matter of highest importance" relating to the "way he handled a very
important specific case for the Republic." He therefore finds it in gross violation of his rights to due process
because, while his principals in the Executive Department have not sought it fit to complain, muchless
sanction him in any way for his official conduct "on a very important specific case for the Republic," two
members of the Judiciary, who are in no way his supervisors or principals, have found reasons to object to
his nomination on the basis ofwhat can only be considered second-hand information. (Emphasis in the
original)
10

However, petitioner, in his reply, admits to have been informed of the integrity issue against him at least immediately
after the executive session. Until this case was deliberatedby this court, he has not given any sufficient explanation
about the substance of the charges. Neither has he informed this court that he will not do so in view ofany privileges
he wishes to avail.

His claim that he was given very little information about the integrity objection is contrary to the statement of Justice
Lagman who disclosed during the June 30, 2014 session the following:

At this point, Justice Lagman said that upon informing Petitioner that Itu Aba was the subject of the integrity issue
against him, the Petitioner mentioned that someone told him that a German scholar advised its exclusion. She
informed the body that she called Petitioner a second time to inform him of the invitation to appear before the JBC
for this day’s session.
11

The factual claims of petitioner relating to the extent of the information given to him were sufficiently traversed in the
pleadings of the Judicial and Bar Council. We mustpresume that the Council’s minutes contains the true narration of
facts unless proven otherwise by petitioner. This is to give deference to a constitutional body in relation to its
discharge of its official functions. On the afternoon of the same day, the Judicial and Bar Council continued its
deliberations and proceeded to vote for the nominees. All members of the Council were present. Thereafter, the
Council released its list of nominees, which included: Court of Appeals Justice Apolinario D. Bruselas with six (6)
votes, Court of Appeals Justice Jose C. Reyes with six (6) votes, Commission on Audit Chair Maria Gracia M.
Pulido-Tan with five (5) votes, and Regional Trial Court Judge Reynaldo B. Daway with four (4) votes. 12

The communication to the Office of the President reads:

June 30, 2014

His Excellency
President Benigno Simeon C. Aquino III
592
Malacañang
Manila

Thru: Atty. Paquito N. Ochoa

Executive Secretary, Office of the President

Your Excellency:

Pursuant to Article VIII, Section 9 of the Constitution, the Judicial and Bar Council (JBC) has the honor to submit the
following nominations for the position of ASSOCIATE JUSTICE of the SUPREME COURT (viceHon. Roberto A.
Abad), according to the number of votes, per the JBC Minutes of even date:

1. BRUSELAS, Apolinario Jr. D - 6 votes

2. REYES, Jose Jr. C. - 6 votes

3. PULIDO-TAN, Maria Gracia M. - 5 votes

4. DAWAY, Reynaldo B. - 4 votes

Their respective curriculum vitae are hereto attached.

Very truly yours,

[Original signed]
MARIA LOURDES P.A. SERENO
Chief Justice & Ex-OfficioChairperson

[Original signed] [Original signed]

LEILA M. DE LIMA NIEL C. TUPAS, JR.
Ex Officio Member Ex Officio Member

[Original signed] [Original signed]

AURORA SANTIAGO LAGMAN JOSE V. MEJIA
Member Member

[Original signed]
MARIA MILAGROS N. FERNAN-CAYOSA
Member 13

The transmittal letter was signed by all the current members of the Judicial and Bar Council. There was no dissent.
The list submitted consisted of four names. It was clear that the Judicial and Bar Council unanimously agreed not to
transmit the name of petitioner.

On July 8, 2014, the court En Banc issued a resolution which only noted petitioner’s letter-petition on the ground of
mootness in view of the transmittal of the list of nominees to the Office of the President.14

On July 18, 2014, petitioner filed this petition for certiorari and mandamus with this court, with anapplication for the
issuance of a temporary restraining order, against Chief Justice Sereno, the Judicial and Bar Council, and the
Executive Secretary Paquito N. Ochoa. He prays that Chief Justice Sereno and the Judicial and Bar Council be
found to have acted in grave abuse of discretion and that the Council be ordered to include his name in the shortlist
of candidates for the position of Associate Justice. He also prays that a temporary restraining order be issued
against the President, through the Executive Secretary, to desist from appointing an Associate Justice pending the
determination of his petition.
15

While his letter and his petition were pending, it appeared that petitioner had been issuing statements to the media
defending his actions in this court.
16

The issues in this case are as follows:

593
Procedural:

1. Whether a writ of certiorari may issue against the proceedings of the Judicial and Bar Council 2. Whether
the remedy of mandamus may lie against the act of the Judicial and Bar Council

3. Whether a temporary restraining order may be issued against a period mandated by the Constitution

Substantive:

1. Whether the supervisory power of this court over the Judicial and Bar Council includes acts done in the
exercise of its discretion

2. Whether petitioner’s right to due process was violated by the Judicial and Bar Council

Petitioner argues that Chief Justice Sereno and the Judicial and Bar Council committed grave abuse of discretion
when his name was excluded from the final list of nominees. He argues that his right to due process was violated
when accusations against his integrity were made twice, ex parte, by Chief Justice Sereno without giving him an
opportunity to be heard. He argues that Rule 4 of JBC-009 allows him to confront his accusers publicly, and the
refusal of Chief Justice Sereno and the Judicial and Bar Council constitutes grave abuse of discretion. 17

He also argues that Chief Justice Sereno’s interpretation of Rule 10, Section 2 of JBC-009 goes against the collegial
character of the Judicial and Bar Council since "the lone objector will be made completely capable of taking hostage
the entire voting process, only by the expedient of objecting."  He argues that since he was ableto garner four (4)
18

votes, the same as that of trial court Judge Daway, his name should have been included in the shortlist. 19

In his comment, Executive Secretary Ochoa agrees with petitioner’s arguments and argues that Rule 10, Section 2
of JBC-009 is unconstitutional as it impairs the collegial natureof the Judicial and Bar Council.  He also prays that
20

petitioner’s name be deemed included in the shortlist of nominees. 21

The Judicial and Bar Council, on the other hand, argues that certiorari will not lie since the proceedings of the
Council are neither judicial nor quasi-judicial.  It also argues that the remedy of mandamus is incorrect since the
22

remedy does not lie tocompel a discretionary act. 23

The Council argues that petitioner was not deprived of due process since he was given every opportunity to be
heard.  The Council also argues that its interpretation of Rule 10, Section 2 was correct since even if Chief Justice
24

Sereno’s vote were excluded, petitioner still needed five (5) votes, not four (4), to be included in the shortlist.  It
25

argues that petitioner violated the prohibition on conflict of interest representation. It alleges that petitioner used the
Office of the Solicitor General to pursue a purely private interest in violation of Rule 15.03 of the Code of
Professional Responsibility. It also argues that petitioner, by suing in his capacity as a Solicitor General, has allowed
a situation where he became the petitioner against his own clients, despite the factthat the law establishes an
attorneyclient relationship between them. 26

The Council also argues that petitioner has not shown any right that may be protected by the issuance of a
temporary restraining order. It argues that a temporary restraining order cannotbe used to restrain a constitutional
mandate. 27

I vote to deny the petition.

I
The supervisory power of this court over the Judicial and Bar Council is mainly administrative

The Judicial and Bar Council is a fully independent constitutional body which functions as a check on the President’s
power of appointment. The historical context of its creation has been previously passed upon by this court in Chavez
v. Judicial and Bar Council: 28

Long before the naissance of the present Constitution, the annals of history bear witness to the fact that the
exercise of appointing members of the Judiciary has always been the exclusive prerogative of the executive and
legislative branches of the government. Like their progenitor of American origins, both the Malolos Constitution and
the 1935 Constitution had vested the power to appoint the members of the Judiciary in the President, subject to
confirmation by the Commission on Appointments. It was during these timesthat the country became witness to the
deplorable practice of aspirants seeking confirmation of their appointment in the Judiciary to ingratiate themselves
with the members of the legislative body.

Then, with the fusion of executive and legislative power under the 1973 Constitution, the appointment of judges and
justices was no longer subject to the scrutiny ofanother body. It was absolute, except that the appointees must have
all the qualifications and none of the disqualifications.
594
Prompted by the clamor to rid the process of appointments to the Judiciary from political pressure and partisan
activities, the members of the Constitutional Commission saw the need to create a separate, competent and
independent body to recommend nominees to the President. Thus, it conceived ofa body representative of all the
stakeholders in the judicial appointment process and called it the Judicial and Bar Council (JBC). Its composition,
term and functions are provided under Section 8, Article VIII of the Constitution . . . .
29

The creation of a Judicial and Bar Council was proposed by former Chief Justice Roberto Concepcion during the
deliberations in the drafting of the 1987 Constitution. According to him, the committee on justice of the Constitutional
Commission "felt neither the President nor the Commission on Appointments would have the time to carefully study
the qualifications of every candidate, especially with respect to their probity and sense of morality." 30

Commissioner Rene Sarmiento echoed this sentiment, stressing that "the creation of the Council is a step towards
achieving judicial independence."  Thus, under Article VIII, Section 8(5) of the Constitution, the Judicial and Bar
31

Council "shall have the principal function of recommending appointees to the Judiciary." In its entirety, the provision
states:

Section 8. (1) A Judicial and Bar Council is hereby created under the supervision of the Supreme Court composed
of the Chief Justice as ex officio Chairman, the Secretary of Justice, and a representative of the Congress as ex
officio Members, a representative of the Integrated Bar, a professor of law, a retired Member of the Supreme Court,
and a representative of the private sector.

(2) The regular members of the Council shall be appointed by the President for a term of four years with the
consent of the Commission on Appointments. Of the Members first appointed, the representative of the
IntegratedBar shall serve for four years, the professor of law for three years, the retired Justice for two
years, and the representative of the private sector for one year. (3) The Clerk of the Supreme Court shall be
the Secretary ex officio of the Council and shall keepa record of its proceedings.

(4) The regular Members of the Council shall receive such emoluments as may be determined by the
Supreme Court.  The Supreme Court shall providein its annual budget the appropriations for the Council.
1âwphi1

(5) The Council shall have the principal function of recommending appointees to the Judiciary. It may
exercise such other functions and duties as the Supreme Court may assign to it.

While the President has the discretion to choose who to appoint in the judiciary, the Constitution delegates tothe
Council the sovereign power to vet these choices after a careful and deliberative process. In the dissenting opinion
in Chavez v. Judicial and Bar Council: 32

By virtue of the fundamental premise of separation of powers, the appointing power in the judiciary should be done
by the Supreme Court. However, for judicial positions, this is vested in the Executive. Furthermore, because of the
importance of these appointments, the President’s discretion is limited to a shortlist submitted to him by the Judicial
and Bar Council which is under the supervision of the Supreme Court but composed of several components.

The Judicial and Bar Council represents the constituents affected by judicial appointments and by extension, judicial
decisions. It provides for those who have some function visa visthe law that should be applied and interpreted by
our courts. Hence,represented are practicing lawyers (Integrated Bar of the Philippines), prosecutors (Secretary of
the Department of Justice), legal academia(professor of law), and judges or justices (retired justice and the Chief
Justice). Also represented in some way are those that will be affected by the interpretation directly (private sector
representative).  (Emphasis supplied)
33

In Article VIII, Section 8(1) and (5) of the Constitution, the Judicial and Bar Council is "under the supervision of the
Supreme Court"  and "may exercise such other functions and duties as the Supreme Court may assign to it."
34 35

This court’s supervision over the Judicial and Bar Council is manifested by its composition, wherein the Chief
Justice is its ex-officio Chair and the Clerk of Court is its Secretary ex-officio.  The emoluments of the members of
36

the Council and its budget are determined and provided by this court.  Under Section 4(a) of A.M. No. 03-11-16-SC
37

or A Resolution Strengthening The Role and Capacity of the Judicial and Bar Council and Establishing the Offices
Therein, "the Ex-officio Chairman shall exercise overall administrative authority in the execution of the JBC's
mandate."

There is nothing in the Constitution which allows this court to interfere with the Council’s exercise ofits discretion in
the execution of its constitutional mandate. At most, this court’s supervision is merely administrative.

The fully independent character ofthe Judicial and Bar Council is further elucidated by Justice Brion in his separate
opinion in De Castro v. Judicial and Bar Council: 38

595
This aspect of the powerof the Court - its powerof supervision - is particularly relevant in this case since the JBC
was created "under the supervision of the Supreme Court," with the "principal function of recommending appointees
to the Judiciary." In the same manner that the Court cannot dictate on the lower courts on how they should decide
cases except through the appeal and review process provided by the Rules of Court, so also cannot the Court
intervene in the JBC's authority to discharge its principal function. In this sense, the JBC is fully independent as
shown by A.M. No. 03-11-16-SC or Resolution Strengthening The Role and Capacity ofthe Judicial andBar Council
and Establishing the Offices Therein. In both cases, however and unless otherwise defined by the Court (as in A.M.
No. 03-11-16-SC), the Court can supervise by ensuring the legality and correctness of these entities' exercise of
their powers as to means and manner, and interpreting for them the constitutional provisions, laws and regulations
affecting the means and manner of the exercise oftheir powers as the Supreme Court is the final authority on the
interpretation of these instruments. . . .  (Emphasis supplied)
39

II
The remedy of certiorari does not lie in non-judicial or non-quasi-judicial functions

Petitioner claims that the non-inclusion of his name in the shortlist was tantamount to grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the Chief Justice and the Judicial and Bar Council.

To be clear, Rule 65, Section 1 of the Revised Rules of Civil Procedure provides for the remedy of certiorari:

Section 1. Petition for certiorari. — When any tribunal, board or officer exercising judicial or quasi-judicial functions
has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack orexcess
of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying
that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting
such incidental reliefs as law and justice may require.

Spouses Ducadao v. Secretary of Justice  clarifies that the writ of certiorari only lies when the tribunal, board, or
40

officer exercises judicial or quasi-judicial functions. Thus:

For a special civil action for certiorari to prosper, therefore, the following requisites must concur, namely: (a) it must
be directed against a tribunal, board or officer exercising judicial or quasijudicial functions; (b) the tribunal, board, or
officer must have acted without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or
excess of jurisdiction; and (c) there is no appeal nor any plain, speedy, and adequate remedy in the ordinary course
of law.The burden of proof lies on petitioners to demonstrate that the assailed order was issued without or in excess
of jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction.  (Citation omitted;
41

emphasis supplied)

The Judicial and Bar Council correctly underscores that its proceedings is neither judicial nor quasi-judicial in
nature.  An administrative body is deemed to be exercising judicial or quasi-judicial functions when it is authorized
42

to adjudicate upon the rights and obligations of the parties before it.  It must have both judicial discretion and the
43

authority to render judgment that affects the parties. 44

The principal role of the Judicialand Bar Council is to recommend appointees to the judiciary.  It serves as a
45

constitutional body that scrutinizes applicants and recommends to the President not only those who are qualified
but, in its discretion, the most fit among the applicants to be included in a shortlist from which the President can
make appointments to the judiciary.  There is nothing in this function that makes it a quasijudicial office or agency.
46

When the Judicial and Bar Council requested petitioner to appear before its members on June 30, 2014,  it was not
47

for the purpose of determining whether petitioner was innocent or guilty of any allegation made against him. Loosely48

akin to a "job interview," the process before the Judicial and Bar Council "ascertains the fitness of the applicant vis-
a-vis the constitutional requirement of ‘proven competence, integrity, probity, and independence.’" The request to
49

appear was made not only to allow petitioner to air his side but also to enlighten Council members before they
nominate those they determine to be the most fit for the vacancy. 50

The Judicial and Bar Council is alsonot an agency for debate. The request for petitioner to appear before the
Judicial and Bar Council is merely an extension of the discreet background check the body is entitled to conduct,
especially on issues relating to the integrity of the applicant.  The Council is entitled to verify claimsmade against
51

petitioner, without necessarily going into a full-blown trial.

At any rate, it is not within the Council’s functions to determine factual issues and make a pronouncement based on
its findings. It is part of the process to satisfy eachmember’s basis for their choices. After being provided with such
information, the members vote for their preferences based on their own view of the qualifications and fitness of all
the applicants. The actions of the Council questioned in this petition, therefore, are not reviewable through the
procedural vehicle of certiorari as a special civil action.

III
The remedy of mandamus does not lie to compel a discretionary act
596
Mandamus also does not lie against respondents.

Rule 65, Section 3 of the RevisedRules of Civil Procedure provides for the remedy of mandamus, thus:

SEC. 3. Petition for mandamus.- When any tribunal, corporation, board, officer or person unlawfully neglects the
performance of an act which the law specifically enjoins as a duty resulting from an office, trust, or station, or
unlawfully excludes another from the use and enjoyment of a right or office to which such other is entitled, and there
is no other plain, speedy and adequate remedy in the ordinary course of law, the person aggrieved thereby may file
a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered
commanding the respondent, immediately or at someother time to be specified by the court, to do the act required to
be done to protect the rights of the petitioner, and to pay the damages sustained by the petitioner by reason of the
wrongful acts of the respondent.

Metro Manila Development Authority v. Concerned Residents of Manila Bay  clarifies when a writ of mandamus lies:
52

Generally, the writ of mandamus lies to require the execution of a ministerial duty. A ministerial duty isone that
"requires neither the exercise of official discretion nor judgment." It connotes an act in which nothing is left to the
discretion of the person executing it. It is a "simple, definite duty arising under conditions admitted or proved to exist
and imposed by law." Mandamus is available to compel action, when refused, on matters involving discretion, but
not todirect the exercise of judgment or discretion one way or the other. 53

The determination by the Judicial and Bar Council of the qualifications and fitness of applicants for positions in the
judiciary is not a ministerial duty. It is constitutionally part of its discretion. Mandamus cannot compel the
amendment of any list already transmitted, and it cannot be made available to compel the Council to transmit a
name not in the original list.

De Castro v. Judicial and Bar Council  clarifies a unique instance when mandamus lies against the Council. This is
54

with respect only to the constitutional duty to allow the Presidentthe mandatory 90 days to make an appointment.
Thus:

The duty of the JBC to submit a list of nominees beforethe start of the President’s mandatory 90-day period to
appoint is ministerial, but its selection of the candidates whose names will be in the list to be submitted to the
President lies within the discretion of the JBC.The object of the petitions for mandamus herein should only refer to
the duty to submit to the President the list of nominees for every vacancy in the Judiciary, because in order to
constitute unlawful neglect of duty, there must be an unjustified delay in performing that duty. For mandamus to lie
against the JBC, therefore, there should be an unexplained delay on its part in recommending nominees to the
Judiciary, that is, in submitting the list to the President.  (Emphasis supplied)
55

The decision to include names in the shortlist of nominees for the action of the President is, thus, a prerogative of
the Judicial and Bar Council, not this court.

In this case, the list was transmitted without any objection from the Council’s members. During the final deliberations
of the Council, all six (6) members were present, namely: Chief Justice Maria Lourdes P.A. Sereno, Department of
Justice Secretary Leila M. De Lima, Representative Niel C. Tupas, Jr., former Justice Aurora Santiago Lagman,
Atty. Jose V. Mejia, and Atty. Maria Milagros N. Fernan-Cayosa. Senator Aquilino Pimentel III was also present but
did not vote. The minutes of the Judicial and Bar Council executive session dated June 30, 2014 shows:  Justice
56

Lagman suggested that the voting be deferred but Chief Justice Sereno replied that the Council has already
completed the process required for the voting to proceed. There being no objection, the Council proceeded to vote
for the position of Associate Justice of the Supreme Court.

....

The Council agreed to consider the thirteen (13) candidates for the position of Associate Justice of the Supreme
Court.

The Members agreed to vote for a maximum of five (5) candidates each. The ballots were distributed and votes cast
and tallied accordingly.

....

The following candidates garnered the highest number of votes and included in the shortlist:

Bruselas, Apolinario - 6 votes

Reyes, Jose Jr. C. 6 votes

597
 Pulido-Tan, Maria Gracia M. - 5 votes

Daway, Reynaldo B. - 4 votes

While candidate Jardeleza, Francis H. garnered 4 votes, he cannot be included in the shortlist because ofan
invocation of Rule 10, Section 2 of JBC-009 (JBC Rules) against him.

....

There being no other matter to discuss, the meeting was adjourned at around 3:10 p.m.  (Emphasis supplied)
57

The absence of any objection by the members of the Council, orally and in the letter of transmittal submitted to the
President, should conclusively show that the manner of selection and the results were accepted by all concerned.
Again, it bears repeating, that the shortlist transmitted to the Office of the President was signed by all the members
of the Council without exception,  thereby expressing their unanimity as to its contents.
58

Mandamus, therefore, does not lie to amend this list.

IV
This court’s expanded jurisdiction does not justify interference with theprincipal functions of the Judicial and Bar
Council

The invocation of this court’s powerunder Article VIII, Section 1 of the Constitution "to determine whether ornot there
has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government" in relation to the Judicial and Bar Council’s discretion should be read in context.
It should not be read too expansively so as to undermine the constitutional limits of our relation to the Council.

A showing of grave abuse of discretion should refer to a demonstrably clear breach of a constitutional duty that is
"arbitrary, capricious and whimsical."  Our constitutional duty and powerof review is not to accept the arguments of
59

petitioner because it is plausible. Judicial review is also not a license to impose our own plausibleinterpretation of
the rules of the Council over their own. Judicial review requires as an absolute predicate, a showing that the
Council’s interpretation and application of its rules is so bereft of reason and so implausible. We do not analyze the
cogency of the arguments of petitioner or the interpretation that we would have put had we been in the Council.
Rather, the mode of analysis in our exercise of judicial review is to scrutinize whether there are no viable reasonable
bases for the interpretation, application, and actions of the Judicial and Bar Council.

In other words, the error we needto discover before nullifying a discretionary act of another constitutional organ is
not whether there could have been a more reasonable interpretation and application of its rules; rather, it should be
that we clearly find that their interpretation and application cannot stand on any legal justification. It is not about
which of the arguments posed by petitioner and respondents are better in relation to each other. Rather, judicial
review requires an absolute finding that the actions of respondents being reviewedare arbitrary, capricious, and
whimsical.

Notably, the constitutional text provides not simply "abuse of discretion"; it requires "graveabuse of discretion."

In this way, we do not overreach precipitously and endanger the balance of constitutional power. We do not disturb
the balance of political power envisioned by the sovereign and textually mapped out in the fundamental law. Judicial
restraint is required in a constitutional democracy. Even after this court determines that there is such grave abuse of
discretion, the relief we provide should be prudently tailored so as to preserve the carefully crafted balance among
constitutional organs as well as between governmental powers and its citizens.

Furthermore, any change in the interpretation of the rules of the Council should not inequitably prejudice third
parties who relied on the existence of these rules. Petitioner was not the sole applicant to the position vacated by
the retirement of a member ofthis court. There are four (4) individuals that passed the Council’s determination of
qualifications and fitness in the list transmitted to the President. There are six (6) other individuals who did not make
it to the list. Thus, even if we assume, without conceding, that there was "grave abuse of discretion" on the part of
respondents, it will beboth inequitable and a violation of the rights of the other applicants and the other nominees to
simply require the amendment of the list transmitted to the President. Petitioner chose not to implead them. They did
not benefit from an opportunity to be heard by this court. Any amendment to the rules of the Council through our
interpretation given the parties impleaded in this case should, thus, be prospective and applicable only to future
processes for nomination and appointment to our courts.

598
 V
The interpretation of Judicial and Bar Council Rules is best addressed to the Council.

Its interpretation should be given the presumption of constitutionality.

Petitioner argues that the Council erroneously interpreted its own rules when its Chair invoked Rule 10, Section 2. In
particular, he claims that Chief Justice Sereno’s interpretation "goes against the JBC’s collegial character, giving
any member an effective veto." 60

This argument is wrong for two reasons. First, the transmittal letter to the President was signed by all the members
of the Judicial and Bar Council. There was no dissent. The minutes showed that the whole council agreed to limit
the list to four (4) names excludingpetitioner’s. There remains to be no dissent as shown by the comment and the
supplemental comment of the Council which it filed in this case. The assertion that the rules were interpreted only by
the Chair of the Council is not accurate. It, unfortunately, unnecessarily colors the issues in this case as a personal
controversy between the applicant and the Chief Justice.

Second, the argument fails to properly characterize the issue in order to invoke the power of judicial review. Again,
to underscore by repeating, there must be a showing that the interpretation and application of the Council’s rules be
"arbitrary, capricious and whimsical." It must be shown to be implausible and bereft of reason. There must be a
compelling interest to provide relief in a narrowly tailored manner so as not to infringe inequitably into the rights of
innocent third parties who were not made parties to this case.

The Judicial and Bar Council, being a fully independent constitutional body, has the discretion to formulate its own
rules.

Before the promulgation of JBC-009, the only criteria the Council relied on was what was stated in ArticleVIII,
Section 7 of the Constitution:

Section 7. (1) No person shall be appointed Member of the Supreme Court or any lower collegiate court unless he is
a naturalborn citizen of the Philippines. A Member of the Supreme Court must be at least forty years of age, and
must have been for fifteen years or more, a judge of a lower court or engaged in the practice of law in the
Philippines.

(2) The Congress shall prescribe the qualifications of judges of lower courts, but no person may beappointed
judge thereof unless he is a citizen of the Philippines and a member of the Philippine Bar.

(3) A Member of the Judiciary must be a person of proven competence, integrity, probity, and independence.
(Emphasis supplied)

The Council, recognizing the monumental task mandated to them by the Constitution, resolved to promulgate on
October 18, 2000, JBC-009 or the Rules of the Judicial and Bar Council, stating:

....

WHEREAS, the Council is thus vestedwith a delicate function and burdened with a great responsibility; its task of
determining who meets the constitutional requirements to merit recommendation for appointment to the Judiciary is
a most difficult and trying duty because the virtues and qualities of competence, integrity, probity and independence
are not easily determinable as they are developed and nurtured through the years; and it is self-evident that, to be a
good judge, one must have attained sufficient mastery of the law and legal principles, be of irreproachable character
and must possess unsullied reputation and integrity, should consider his office as a sacred public trust; and, above
all, he must be one whose loyalty to law, justice and the ideals of an independent Judiciary is beyond doubt;

....

WHEREAS, while it is not possible or advisable to lay down ironclad rules to determine the fitness of those who
aspire to become a Justice, Judge, Ombudsman or Deputy Ombudsman, certain guidelines or criteria may be
prescribed to ascertain if one seeking such office meets the minimum constitutional qualifications and possesses
qualities of mind and heart expected of a member of the Judiciary, or an Ombudsman or Deputy Ombudsman;

WHEREAS, while the Council has been applying similar criteria in its assessment of candidates to the judicial office
or the Ombudsman or deputy Ombudsman, there is a need to put these criteria in writing to insure transparency in
its proceedings and promote stability and uniformity in its guiding precepts and principles;  (Emphasis supplied)
61

The rules of the Judicial and Bar Council is its interpretation as to how it is to go about with its duty to determine the
"competence, integrity, probity and independence" that is constitutionally required of every member to this court.
How the Council go about with its duty is primarily and presumptively addressed to it solely asan independent
599
constitutional organ attached only to this court through administrative supervision. The constitutional provisions do
not require a vote requirement on the part of the members for a finding of either competence, integrity, probity, or
independence. Neither does it textually provide for the meaning of these terms. It is up to the Judicial and Bar
Council to find a reasonable construction of the fundamental requirements. For reference, the constitutional
provisions relevant to the duties of the Judicial and Bar Council in relation to the appointment of a member of this
court are as follows:

ARTICLE VIII
Judicial Department

Sec. 7. (1) No person shall be appointed Member of the Supreme Court or any lower collegiate court unless he isa
natural-born citizen of the Philippines. A Member of the Supreme Court must be at least forty years of age and, must
have been for fifteen years or more a judge of a lower court or engaged in the practice of law in the Philippines.

(2) The Congress shall prescribe the qualifications of judges of lower courts, but no person may beappointed
judge thereof unless he is a citizen of the Philippines and a member of the Philippine Bar.

(3) A Member of the Judiciary must be a person of proven competence, integrity, probity, and independence.

Sec. 8. (1) A Judicial and Bar Council is hereby created under the supervision of the Supreme Court composed of
the Chief Justice as ex officio Chairman, the Secretary of Justice, and a representative of the Congress as ex officio
Members, a representative of the Integrated Bar, a professor of law, a retired Member of the Supreme Court, and a
representative of the private sector.

(2) The regular members of the Council shall be appointed by the President for a term of four years with the
consent of the Commission on Appointments. Of the Members first appointed, the representative of the
IntegratedBar shall serve for four years, the professor of law for three years, the retired Justice for two
years, and the representative of the private sector for one year. (3) The Clerk of the Supreme Court shall be
the Secretary ex officio of the Council and shall keepa record of its proceedings.

(4) The regular Members of the Council shall receive such emoluments as may be determined by the
Supreme Court. The Supreme Court shall providein its annual budget the appropriations for the Council.

(5) The Council shall have the principal function of recommending appointees to the Judiciary.It may
exercise such other functions and duties as the Supreme Court may assign to it.

Sec. 9. The Members of the Supreme Court and judges of lower courts shall be appointed by the President from a
list of at least three nominees prepared by the Judicial and Bar Council for every vacancy. Such appointments need
no confirmation.

For the lower courts, the President shall issue the appointments within ninety days from the submission of the list.
(Emphasis supplied)

In Section 4 of the same article, it provides the following:

Sec. 4. (1) The Supreme Court shall be composed of a Chief Justice and fourteen Associate Justices. It may sit en
banc or, in its discretion, in divisions of three, five, or seven Members. Any vacancy shall be filled within ninety days
from the occurrence thereof. (Emphasis supplied)

In Eastern Telecommunications Philippines v. International Communication Corporation,  this court stated:

62

The Court has consistently yielded and accorded great respect to the interpretation by administrative agencies of
their own rules unless there is an error of law, abuse of power, lack of jurisdiction or grave abuse of discretion
clearly conflicting with the letter and spirit of the law.

In City Government of Makativs. Civil Service Commission, the Court cited cases where the interpretation of a
particular administrative agency of a certain rule was adhered to, viz.:

As properly noted, CSC was only interpreting its own rules on leave of absence and not a statutory provision in
coming up with this uniform rule. Undoubtedly, the CSC like any other agency has the power to interpret its own
rules and any phrase contained in them with its interpretation significantly becoming part of the rules themselves. As
observed in West Texas Compress & Warehouse Co. v. Panhandle & S.F. Railing Co.–

....

600
This principle is not new to us. In Geukeko v. Araneta,this Court upheld the interpretation of the Department of
Agriculture and Commerce of its own rules of procedure in suspending the period of appeal even if such action was
nowhere stated therein. We said -

....

. . . It must be remembered thatLands Administrative Order No. 6 is in the nature of procedural rules promulgated by
the Secretary of Agriculture and Natural Resources pursuant to the power bestowed on said administrative agency
to promulgate rules and regulations necessary for the proper discharge and management of the functions imposed
by law upon said office. . . . Recognizing the existence of such rule-making authority, what is the weight of an
interpretation given by an administrative agency to its own rules or regulations? Authorities sustain the doctrine that
the interpretation given to a rule or regulation by those charged with its execution is entitled to the greatest weight
by the Court construing such rule or regulation, and such interpretation will be followed unless it appears to be
clearly unreasonable or arbitrary(42 Am. Jur. 431). It has also been said that:

....

The same precept was enunciated in Bagatsing v. Committee on Privatizationwhere we upheld the action of the
Commission on Audit (COA) in validating the sale of Petron Corporation to Aramco Overseas Corporation on the
basis of COA's interpretation of its own circular that set bidding and audit guidelines on the disposal of government
assets –

The COA itself, the agency thatadopted the rules on bidding procedure to be followed by government offices and
corporations, had upheld the validity and legality of the questioned bidding. The interpretation of an agency ofits
own rules should be given more weight than the interpretation by that agency of the law it is merely tasked to
administer.  (Emphasis and underscoring in the original)
63

The interpretation of any of the Council’s rules is constitutionally addressed to the Council’s discretion. It is the only
constitutional body with the power to interpret its rules to determine the competence, integrity, probity, and
independence of applicants to the judiciary. We cannot superimpose this court’s interpretation even if in our view it
would be a better one.

The Rules of the Judicial and Bar Council contains Rule 10, Section 2 which provides:

SEC. 2. Votes required when integrity of a qualified applicant is challenged. - In every case where the integrity of an
applicant who is not otherwise disqualified for nomination is raised or challenged the affirmative vote of all the
Members of the Council must be obtained for the favorable consideration of his nomination.

The current members of this court may have their own views with respect to the wisdom of this rule. For instance,
some may disagree with the qualified vote requirement for questions ofintegrity. Others may prefer a clearer
definition of what integrity may mean or who may invoke the rule as well as the procedure after it is invoked. These,
however, reflect policy preferences which are properly addressed to the constitutional body to whom the sovereign
delegated these matters of interpretation, i.e., the Judicial and Bar Council.

There is nothing inherently unconstitutional with the lack of statutory or procedural definition of integrity. This
remains within the purview of the members of the Council. It is a matter that is addressed to their reasoned
judgment. The Judicial and Bar Council is designed to act collegially. This is where contending views coming from
various sectors affected by every nomination and represented in the discussions may be taken into consideration.
Integrity can mean different things for different people. Like all significant words, it has a sufficient set of meanings
that can frame expectations but at the same time is left malleable to address the needs at present. The acts which
lead to questions relating to integrity may be different for each candidate. Thus, the past actions of a Justice of the
Court of Appeals, a Solicitor General, or a Dean of a College of Law who is aspiring for the position of Associate
Justice of this court that will be assessed by the Judicial and Bar Council will be different.

As seen in the debates in the minutes of the meeting of the Council submitted to us through its supplemental
comment, the lack of integrity could be seen through acts which directlyor indirectly could be considered as
dishonest and corrupt which result insome illicit pecuniary benefit to the applicant. For the principal legal counsel of
government tasked to oversee arbitration to protect our claims to our maritime resources, lack of integrity can mean
unexplained decisions which put this important initiative in peril.

It is not for us to make these judgments simply because it is not our constitutional duty to do so.

Neither is there anything strange with a qualified vote.

Even our Constitution provides for qualified votes for some sovereign acts such as the processes for the
amendment of our Constitution.  A qualified vote underscores the importance of the matter under scrutiny. Of the
64

601
four requirements — probity, integrity, competence, and independence — it may have been the policy decisionof the
Judicial and Bar Council to give importance to integrity.

There are very plausible reasons for this policy.

In this court, it is the quality of integrity of each member that inspires us to have the courage to use our constitutional
duty to speak to power. We speak to power whether this is sourcedformally from the authority of the Constitution or
informally when it comes from the political influence, commercial standing, or the ability of a party, litigant, or lawyer
to mold media opinion. While theoretically and constitutionally protected, we are hounded by the same human fears
as any person occupying a public office. We all know that we disgrace the privilege of our office if we succumb to
fear or favor.

More than any other quality, integrity emboldens us to separate the "what" from the "who": that is, to decidefor what
is right — in the light of the law and principle — rather than consider who it will incidentally and immediately benefit.
Giving it primordial importance through a stricter voting requirement when invoked is not bereft of reason. It is not
arbitrary, capricious, or whimsical. There are members of this court who feel that the invocation by one member of
the Council of this rule on integrity without any discussion amounts to a veto of its collegial nature. The records
submitted to us are clear: (1) discussions ensued when it was invoked and (2) all members of the Judicial and Bar
Council, after the basis of the objection had been laid out clearly before them, agreed that it be invoked.  There was
65

no violation of the collegiate nature of the Council. The Rules permits a member of the Council to invoke the rule.
The Chief Justice, who is the ex-officio chair of the Council, initially manifested that she was invoking the rule in the
executive session of the Council on June 5, 2014. 66

A discussion took place during the executive session on June 16, 2014 regarding Rule 10, Section 2. Thus, in the
minutes as submitted to this court:

Secretary de Lima inquired whether the Chief Justice would still invoke Rule 10, Sec. 2 of the JBC-009 (JBC Rules)
notwithstanding the vote of all the other members. She cautioned that there may be a lot of explaining to do on the
invocation of the Rule.

....

At this juncture, Congressman Tupas suggested a review of the JBC Rules on integrity and went on to read the
provisions in Rule 10, Section 2, thereof:

....

Congressman Tupas stressed the need to carefully examine the Rules since this is the first timethat the Rule will be
invoked. For instance, he poised the question of how many votes must a candidate garner when the affirmative vote
of all Members of the Council is required under Rule 10, Sec. 2. There is also the matter of whocan raise or
challenge the integrity of an applicant: must it be raised by a Member, or can a non-Member raise or challenge
under the Rule. At what stagemay the challenge on the integrity of an applicant be raised? Should there be a need
for a prior complaint or objection?

Secretary De Lima commented that the Rules do not say whether the challenge must be made by an insider or an
outsider.67

The minutes of the executive session undoubtedly show that the members of the Council were aware ofthe import of
the rule and its consequences. When the Council met again on June 30, 2014:

A discussion on Rule 10, Section 2 of JBC-009 (JBC Rules) followed. Congressman Tupas asked if the Rule is
being against a candidate, will the name of the candidate remain. The Council unanimously agreed that the name of
candidate will still be part of the ballot.
68

The excerpts of the minutes show that the Council, as a collegial body, not only allowed the invocation ofits own
rules by a Council member, but also agreed that petitioner’s name would still be part of the ballot, despite
knowledge that he might not get a unanimous vote. 69

This indicates that the Council wanted to see the actual votes for a candidate. There can be no other conclusion
except that the Council required a unanimous vote of all the other members excluding the member who invoked the
rule on integrity. Excluding the vote of the Chief Justice, petitioner still failed to garner unanimity of the remaining
members. He received four (4) votes of the possible five (5). 70

Clearly, it was not the will of only one member (the Chief Justice) which governed. The invocation of the rule was
collegially discussed. Clearly, the exclusion of petitioner from the list was a unanimous Council decision.

602
We are not presented with a situation where only one member invoked the integrity rule and the remaining members
were unanimous in still including the name of the applicant objected to in the list. This is not the situation that gave
rise to the issues in this case. The exercise of the power of judicial review must be narrowly tailored in the light of
the facts presented before us. It is not our duty to declare an actas unconstitutional on the basis of speculative facts
which could happen in the future. We are not constitutionally empowered to provide advisory opinions. Neither
would it be equitable to declare an act as unconstitutional on the basis of facts which have not yet happened.

This opinion is, therefore, limited tothe ambient facts of this case. I reserve opinion for other possibilities relating to
Rule 10, Section 2 which have not yet happened. The Judicialand Bar Council, not this court, continues to have the
power to amend its rules in the light of some possibilities that, in its judgment, may result in inequity.

With respect to the facts of this case, the interpretation and application of the rule by the Council were not
implausible or bereft of reason. Hence, the challenge against its constitutionality should fail.

VI
There is no violation of due process

The crux of this petition was that petitioner was allegedly deprived of his constitutional right to due process when he
was not given an opportunity to be heard with regard to the questionsagainst his integrity. He impliedly invokes
Article III, Section 1 of the Constitution which states that:

No person shall be deprived of life, liberty, or property without due process of the law. . . .

In White Light Corporation v. City of Manila,  this court said: . . .

71

Due process evades a precise definition. The purpose of the guaranty is to prevent arbitrary governmental
encroachment against the life, liberty and property of individuals. The due process guaranty serves as a protection
against arbitrary regulation or seizure. Even corporations and partnerships are protected by the guaranty insofar as
their property is concerned.

The due process guaranty has traditionally been interpreted as imposing two related but distinct restrictions on
government, "procedural due process" and "substantive due process." Procedural due process refers to the
procedures that the governmentmust follow before it deprives a person of life, liberty, or property. Procedural due
process concerns itself with government action adhering to the established process when it makes an intrusion into
the private sphere. Examples range from the form of notice given to the level of formality of a hearing. 72

Before the due process clause of the Constitution may be invoked, there must first be an encroachment toone’s "life,
liberty, or property." Petitioner carries the burden of showing that an act of government affects an indubitable vested
right protected by the Constitution.

This court clarified the concept of a vested right in ABAKADA Guro Party List v. Executive Secretary Ermita: 73

The concept of "vested right"is a consequence of the constitutional guaranty of due process that expresses a
present fixed interest which in right reason and natural justice is protected against arbitrary state action; it includes
not only legal or equitable title to the enforcement of a demand but also exemptions from new obligations created
after the right has become vested. Rights are considered vested when the right to enjoyment is a present interest,
absolute, unconditional, and perfect or fixed and irrefutable.  (Emphasis supplied)
74

No vested right to be nominated

No person has a constitutionally vested right to be nominated to a judicial position. Just because a person meets the
qualifications does not entitle him or her to a nomination. The Judicial and Bar Council must render a finding of his
or her fitness which results in the inclusion of his or her name in the list. A nomination is not a right that is protected
by the due process clause of the Constitution. It israther a privilege granted to one who has successfully passed the
application process and has qualified.

The attainment of the majority vote of Council members is not an "absolute, unconditional, and perfect or fixed and
irrefutable"  basis to garner a place in the shortlist. As discussed, under the present rules, when integrity is at stake,
75

the vote requirement may be unanimity in the vote of the remaining members excluding the member who invoked
Rule 10, Section 2 of the rules of the Judicial and Bar Council. Moreover, the list of qualified candidates is still
subject to the final deliberation of the Council in an executive session before the list is submitted to the Office of the
President. 76

Assuming arguendo, procedural due process is not as technical as claimed by petitioner

603
Fairness as embodied in the due process clause of the Constitution takes its form in relation to the right invoked and
the forum where it is invoked. Certainly, when the accused invokes his or her right in criminal trial, this takes the
form among others of the right to full-blown crossexamination of all witnesses presented by the prosecution. For
applicants to a vacancy in the Supreme Court and in the process of the Judicial and Bar Council, the right to be
considered for purposes of an assessment of his or her qualifications and fitness also certainly does not require a
forum for cross-examination. The Council is possessed with a wide latitude to draw information so that it may,
consistent with its constitutional duty, make a selection of at least three (3) names from a field of so many
applicants.

The Constitution does not require a specific procedure whether in terms of a process or a required vote. The sparse
language of the Constitution leaves it up to the Council to decide on these details. The Council only needs to follow
its own rules. It is entirely possible, at minimum, that fairness and due process be already met when the applicant is
given the opportunity to submit whatever information he or she deems important subject only to reasonable
requirements of form.

Even assuming, only for the sake ofargument, that petitioner is right with his insistence on procedural due process,
this court’s response is best seen through the prism of the concurring opinion of Justice Brion in Perez v. Philippine
Telegraph and Telephone Company: 77

At its most basic, procedural due process is about fairness in the mode of procedure to be followed. It is not a novel
concept, but one that traces its roots in the common law principle of natural justice.

Natural justice connotes the requirement that administrative tribunals, when reaching a decision, must do so with
procedural fairness. If they err, the superior courts will step in to quash the decision by certiorari or prevent the error
by a writ of prohibition. The requirement was initially applied in a purely judicial context, but was subsequently
extended to executive regulatory fact-finding, as the administrative powers of the English justices of the peace were
transferred to administrative bodies that were required to adopt some of the procedures reminiscent of those used in
a courtroom. Natural justice was comprised of two main subrules: audi alteram partem– that a person must know
the case against him and be given an opportunity to answer it; and nemo judex in sua cause debe esse- the rule
against bias. Still much later, the natural justice principle gave rise to the duty to befair to cover governmental
decisions which cannot be characterized as judicial or quasi-judicial in nature.

While the audi alteram partemrule provided for the right to be notified of the case against him, the right to bring
evidence, and to make argument – whether in the traditional judicial or the administrative setting – common law
maintained a distinction between the two settings. "An administrative tribunal had a duty to act in good faith and to
listen fairly to both sides, but not to treat the question as if it were a trial. There would be no need to examine under
oath, nor even to examine witnesses at all. Any other procedure could be utilized which would obtain the information
required, as long as the parties had an opportunity to know and to contradict anything which might be prejudicial to
their case."  (Emphasis supplied)
78

This characterization of due process is not without precedent. In Ledesma v. Court of Appeals: 79

. . . Due process, as a constitutional precept, does not always and in all situations require a trial-type proceeding.
Due process is satisfied when a person is notified of the charge against him and given an opportunity to explain or
defend himself. In administrative proceedings, the filing of charges and giving reasonable opportunity for the person
so charged to answer the accusations against him constitute the minimum requirements of due process. The
essence of due process is simply to be heard, or as applied to administrative proceedings, an opportunity to explain
one’s side, or an opportunity to seek a reconsideration of the action or ruling complained of. 80

In Pichay v. Office of the Executive Secretary: 81

. . . In administrative proceedings, the filing of charges and giving reasonable opportunity for the person so charged
to answer the accusations against him constitute the minimum requirements of due process, which simply means
having the opportunity toexplain one’s side. Hence, as long as petitioner was given the opportunityto explain his
side and present evidence, the requirements of due process are satisfactorily complied with because what the law
abhors is an absolute lack of opportunity to be heard. 82

Accordingly, the essence of procedural due process is simply the right to be heard. Petitioner’s insistence, therefore,
that the Council must adhere to a procedure hesuggested, using hisinterpretation of the Judicial and Bar Council’s
own rules, goes beyond the minimum required by jurisprudence.

Petitioner was given the opportunity to be heard

The right to procedural due process cannot be derived from an invocation of Rule 4, Sections 3 and 4 of JBC-009,
which state:

604
SEC. 3. Testimony of parties.- The Council mayreceive written opposition to an applicant on ground of his moral
fitness and, at its discretion, the Council mayreceive the testimony of the oppositor at a hearing conducted for the
purpose, with due notice to the applicant who shall be allowed tocross-examine the oppositor and to offer
countervailing evidence.

SEC. 4. Anonymous complaints. - Anonymous complaints against an applicant shall not be given due course,
unless there appears on its face a probable cause sufficient to engender belief that the allegations may be true.
Inthe latter case, the Council mayeither direct a discreet investigation orrequire the applicant to comment thereon in
writing or during the interview. (Emphasis supplied)

According to these provisions, the Council mayreceive written opposition and mayrequire the applicant to comment
on the opposition. The use of the word "may" is permissive, not mandatory.  The Council retains the discretion to
83

require that opposition be written. It also retains the discretion not to require comment on any of the opposition filed.
This may apply when the basis of the opposition is too trivial or when the members determine that they are already
possessed with sufficient information necessary for them to vote their preferences. But this is not what happened in
this case.

Contrary to petitioner’s allegations, petitioner was given the opportunity to explain his version of the facts that were
based to question his integrity. The Council insisted that petitioner be allowed to explain his side. The minutes of the
executive session dated June 16, 2014 narrate:

Justice Lagman stated that Sol. Gen. Jardeleza had a good reputation, but considering the seriousness of the
allegations on his integrity, he may challenge the process. She said that fairness dictates that he be given due
process and moved that Sol. Gen. Jardeleza be allowed to explain his side.

....

After a discussion of the differentoptions, Atty. Mejia reiterated Justice Lagman’s motion to give Sol. Gen. Jardeleza
a chance to explain. Duly seconded, the motion to invite Sol. Gen. Jardeleza to shed light on the issues raised
against him was approved. 84

When petitioner appeared before the Council on June30, 2014, he refused to answer the allegations against him
since the objections were not in writing. Representative Tupas evenapproached petitioner, hoping to get his
explanation. However, he was refused, as petitioner was insistent on a written opposition. 85

Furthermore, petitioner was provided with a venue to explain his side on the afternoon of June 30, 2014 with respect
to the matter raised against him. Instead of responding on the substance of the matter to enlighten and convince the
Council of his integrity, he chose to emphasize the procedural aspect of his claims. Rather than provide the Council
with the substantial arguments to defend his integrity, hechose to find the procedural path defaulting in the
opportunity to assistthe Council in assessing his fitness.

As the Solicitor General is the principal legal counsel of government, we could assume that there would have been
nothing amiss for him to state his substantial arguments arguendo.

Petitioner appeared to have abandoned his argument using JBC-009 when he filed his reply, stating that "[r]eliance
on Sections 3 and 4 of JBC-009 is misplaced."  He argued instead that Section 2 of JBC-10, or "Rule to Further
86

Promote Public Awareness of and Accessibility to the Proceedings of the Judicial and BarCouncil," requires
"complaints and oppositions to be in writing and under oath."  Section 2 states:
87

SEC. 2.The complaint or opposition shall be in writing, under oath and in ten (10) legible copies, together with its
supporting annexes. It shall strictly relate to the qualifications of the candidate or lack thereof, as provided for in the
Constitution, statutes, and the Rules of the Judicial and Bar Council, as well as resolutions or regulations
promulgated by it.

The Secretary of the Council shall furnish the candidate a copy of the complaint or opposition against him. The
candidate shall have five (5) days from receipt thereof within which to file his comment to the complaint or
opposition, if he so desires.

In the first place, petitioner was the one who relied on JBC-009 to formulate his argument that he was deprived of
due process. On page 7 of his petition, he alleged that"[t]he [Judicial and Bar Council] gravely abused its discretion
when it denied petitioner the mandatory due process safeguards under its own rules," citing Rule 4, Sections 3 and
4 of JBC-009. He cannot, by way of reply, suddenly abandon thatargument and insist on a different provision.

The reluctance of the Chief Justice to put the matter in writing was reasonable considering that it was a matter of
national security. According to the minutes of the executive session held on June 30, 2014, "the Members agreed
that it is best that this be kept as confidential as possible to avoid problems for the country."  The confidentiality
88

605
observed by the Council was not for the purpose of denying petitioner his rights. The Council merely had the best
interests of the nation in mind.

VII
A time period mandated by the Constitution cannot be deferred by injunctive writ

Petitioner requests the issuance of an injunctive writ or a temporary restraining order against the President of the
Republic of the Philippines. This cannot be done.

First, the President is not a party and could not be a party to this case.  It is the Executive Secretary who was
89

impleaded as a party respondent. As to why the Executive Secretary was made respondent is known only to
petitioner.

The power to appoint members of the judiciary from a list of names transmitted by the Judicial and Bar Council is a
prerogative of the President which cannot be delegated to the Executive Secretary. Thus, for issues raised by
petitioner and for the relief he prays for, the Executive Secretary cannot act as an alter ego of the President.

Second, Article VIII, Section 4(1)of the Constitution clearly provides for a constitutional period for making
appointments to this court. Thus:

Section 4. (1) The Supreme Court shall be composed of a Chief Justice and fourteen Associate Justices. It may sit
en banc or in its discretion, in division of three, five, or seven Members. Any vacancy shall be filled within ninety
days from the occurrence thereof.

In De Castro v. Judicial and Bar Council,  this court clarified:

90

[T]he usage in Section 4(1), Article VIII of the word shall – an imperative, operating to impose a duty that may be
enforced – should not be disregarded. Thereby, Sections 4(1) imposes on the President the imperative duty to make
an appointment of a Member of the Supreme Court within 90 days from the occurrence of the vacancy. The failure
by the President to do so will be a clear disobedience to the Constitution.  (Emphasis supplied)
91

The Constitution mandates that the President make anappointment 90 days from the occurrence of the vacancy.
Justice Abad’s retirement on his birthday which was May 22, 2014 caused the vacancy in the present court. The
President, therefore, has until August 20, 2014 to make an appointment for the vacancy. A temporary restraining
order is a writ in equity provided for only in the rules of procedure promulgated by this court.  This court cannot, by
92

way of temporary restraining order, delay the running of the period mandated by the Constitution.

Third, it would be highly irregular and a violation of the ethical rules of the profession for the present Solicitor
General to request for an injunctive writ or a temporary restraining order against the President who is his client and
principal.

Even assuming, for the sake of argument, that a temporary restraining order may be issued to restrain the President
from performing his constitutional duty, petitioner has not shown proof that he is entitled to its issuance. In Philippine
School of Business Administration v. Hon. Tolentino-Genilo,  this court stated:
93

The requisites for preliminary injunctive relief are: (a) the invasion of right sought to be protected ismaterial and
substantial; (b) the right of the complainant is clear and unmistakable; and (c) there is an urgent and paramount
necessity for the writ to prevent serious damage. 94

There is no right that exists that could be protected by the issuance of a temporary restraining order since petitioner
has no vested right. He has not shown that he possesses a clear and unmistakable right. Therefore, there is no
material and substantial invasion that must be prevented through a writ from this court.

VIII
To grant the reliefs prayed for by petitioner inequitably prejudices the rights of third parties not impleaded in the
petition

The rights of those currently in the list of nominees transmitted by the Judicial and Bar Council to the President will
be impaired by the reliefs prayed for by petitioner in this case. They are indispensable parties to this case because
no complete and final determination of the issues can be had without their participation. They have more of a vested
right in the preservation of the current list of nominees than petitioner. They certainly will have a more adversarial
stance thanthat of the Executive Secretary. Petitioner should have impleaded them and given them the opportunity
also to be heard by this court.

The proper remedy would be for thiscourt to order that the four individuals currently in the list of nominees
transmitted to the President be impleaded and the opportunity to be heard given. They deserve to be heard before
606
this court even considers diluting their chances of being appointed. Alternatively, any relief should, therefore, be
prospective and should not affect their vested rights. Assuming without conceding that the majority will vote to nullify
Rule 10, Section 2 of the Rules of the Judicial and Bar Council, its effects should be prospective. Those who were
nominated deserve the benefit of the presumption of constitutionality of the rules under which they were vetted.

The lack of efficacy of petitioner’s reliefs due to the deliberations of this court can be attributable only to
petitioner. His petition failed to implead all the indispensable parties. We cannot render a decision that will be at
1âwphi1

odds with the same constitutional provision of due process of law which petitioner invokes.

IX
Proposal to expunge supplemental comment-reply of the Judicial and Bar Council

A member  of this court is suggesting that the national interest requires the suppression of the matters raised in the
95

supplemental commentreply of the Judicial and Bar Council. This implies that we decide on this case without
considering the basis of the objection made by the Chief Justice and heard by the other members of the Council. In
effect, we are asked to decide without discussing the merits of the position of one of the respondents.

I disagree that this is the proper way to decide this case.

In my view, it is the insistence ofpetitioner not to respond directly to the objections during the in cameraand
confidential discussions of the Council on June 30, 2014 that has now caused both sides to lay bare their full
arguments. Surely, as much as petitioner believes in the importance of defending himself in this court, respondents
are also entitled to believe that it is institutionally important for them todefend the integrity of the Judicial and Bar
Council. For petitioner to claim due process of law is the more important question. For respondents, petitioner was
accorded his opportunity to be heard, and the moreimportant question is there would have been an anomaly inour
arbitral claims.

Both these views are entitled to our full consideration.

Parenthetically, the documents that have been submitted in the international arbitration between the Republic of the
Philippines and China are now the subject of vigorous academic discussion on both sides.  Discussion in our
96

opinions on the existence of this controversy will not be new. It may even perhaps contribute to the public’s desire
for transparency. The Solicitor General is a public officialas well as a lawyer. The arbitral claim affects all of us. It
behooves our public to fullyunderstand its contents. It behooves us to meet all the arguments of the parties fully in
the spirit of fairness and objectivity.

I do not share Justice Brion’s characterization of the actuations of the Chief Justice. I would rather be
morecircumspect and grant a colleague her full right to provide this court with her explanations of the motives
leveled against her. The power of our published opinions compels us to treat our words with the responsibility that
thisinstitution and its members deserve.

The letter filed earlier by the Solicitor General did not contain a prayer for special raffle. The opportunityto have an
early raffle of the case is known to all seasoned practitioners. Certainly, petitioner compares to none in terms of
present experience in this court. Be that as it may, we do have a raffle committee. The raffle committee does not
include the Chief Justice.

The Chief Justice inhibited early. This means that she had no control over the promulgation of our relevant
resolutions. The Senior Associate Justice also inhibited because he was named in the petition. At the relevant times,
the third most senior member of this court was on leave. This will probably explain why there was some delay in the
promulgation of some of our resolutions.

It is normal for a deliberative body to initially hear the tentative views of its members. Thus, the matter ofinvoking
Rule 10, Section 2 of the Council’s rules was discussed. Most of us can imagine how the conversations may have
transpired asall of those concerned would have wanted to find solutions to avoid the unnecessary taint on the
character of petitioner or deliberately air the conflicts in the legal team in charge of our international arbitration.
Failing in these efforts, the Council decided to give petitioner an opportunity to be heard.

X
Final note

Some members of this court will have their own personal evaluation of the qualification and fitness of petitioner to be
nominated for the position of Associate Justice of the Supreme Court. I am no exception.

I have benefited from the wisdom of petitioner as a colleague in the faculty of the UP Collegeof Law. I have
witnessed his appearances both orally and in writing as the Solicitor General in the many cases that passed through
this court. I know of his family as well as his reputation held by many of our common friends.

607
Like in many cases, our decisions asJustices of this court carry the pains and burdens which wehave sworn to
uphold.  We have to follow the results of our decisions on the issues posed before us.
1âwphi1

It is not up to us to make judgments of the Solicitor General’s competence, integrity, probity, and independence.

A becoming modesty of this court and its own respect for the constitutional legitimacy of its existence requires that it
respects and presumes competence in the constitutional organs including the Judicial and Bar Council. We should
presume that ithas discharged its functions with the same competence and zeal for the national interest that we
have. We should not presume that we have a monopoly of an understanding of the common weal, let alone of the
character of petitioner and his qualifications and fitness to become a member of this court.

Petitioner has not shown that he has vested rights to the nomination. He has not shown that the actions of the
Judicial and Bar Council were arbitrary, capricious, and whimsical. He has not demonstrated that the interpretation
and application by the whole Judicial and Bar Council of Rule 10, Section 2 were bereft of reason and so
implausible as to impair his alleged rights. He was given the opportunity to be heard. He chose not to use the
forums he was provided with torebut the substantial basis for the invocation of the rule on integrity.

The Judicial and Bar Council, by transmitting a list without petitioner’s name, has acceded to the invocation of lack
of integrity by one of its members. Excluding the vote of the Chief Justice, he was not able to garner unanimity
among the remaining members of the Council as required by the rules.

The importance of fully asserting the extent of our claims to natural resources located within our continental shelves
and our exclusive economic zone cannot be understated. Present and future generations of Filipinos will rely on
these valid and legal claims.

It is with this in mind that we mark the heroism of our men and women in uniform especially in our Navy and in the
Marines. With the least of equipment, they stand ready to defend the integrity of our claims in sometimes·desolate
and far-flung posts pitting post-war military equipment against the modem military might of a superpower. They stay
in harm's way knowing that their impending heroism is what our people deserve. There is no better way to
characterize them and their courage except to call them heroes.

Thankfully, legal argument in the context of peaceful international arbitration and diplomacy has been deployed by
the current administration. What we may lack in modem naval warfare, we make up with cogent and viable legal
acumen. Considering what is at stake, the margins for legal error are understandably thin. We have spared little to
get the best legal experts on the United Nations Convention on the Law of the Sea. We expect no less than
vigorous, aggressive, competent representation from the lawyers of the Republic led by petitioner as Solicitor
General. The .questions posed to petitioner by the Judicial and Bar Council are matters that are sensitive because
these pertain to a pending case undergoing international arbitration. However, they are also public matters that
needed a response.

It was within the power of petitioner to explain in executive session before· the Judicial and Bar Council. He could
have done so while not waiving any of his constitutional rights.

He has not done so. He chose not to. This case presents an ambiguity and an anomaly he has chosen to live with.
Perhaps, this will be one of those cases that will await our history's better judgment.

ACCORDINGLY, I vote to DISMISS this petition.

608
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 203655               August 13, 2014

SM LAND, INC., Petitioner, 
vs.
BASES CONVERSION AND DEVELOPMENT AUTHORITY and ARNEL PACIANO D. CASANOVA, ESQ., in his
official capacity as President and CEO of BCDA, Respondents.

DECISION

VELASCO, JR., J.:

The Case

Before Us is a Petition for Certiorari, Prohibition and Mandamus under Rule 65 of the Rules of Court, with prayer for
injunctive relief, seeking to nullify and set aside the Bases Conversion and Development Authority (BCDA)
Supplemental Notice No. 5 as well as all other acts  pursued in furtherance thereof, and to order respondents to
1

immelliately conduct and complete the Competitive Selection Process on petitioner's duly accepted unsolicited
proposal.

The Facts

As culled from the records, the facts are simple and undisputed.

Pursuant to Republic Act No. (RA) 7227 or the "Bases Conversion and Development Act of 1992," the BCDA
opened for disposition and development its Bonifacio South Property, a 33.1-hectare expanse located at Taguig City
that was once used as the command center for the country's military forces. Jumping on the opportunity, petitioner
SM Land, Inc. (SMLI), on December 14, 2009, submitted to the BCDA an unsolicited proposal for the development
of the lot through a public-private joint venture agreement. The proposal guaranteed the BCDA secured payments
amounting to PhP 15,985/sqm or a total of PhP 8.1 billion.

Barely three months later, the initial proposal was followed by a second one with guaranteed secured payments of
PhP 31,139/sqm, totaling PhP 20 billion. On May 4, 2010, however, SMLI submitted its third unsolicited proposal
with guaranteed secured payments amounting to PhP 32,501/sqm for a total of PhP 22.6 billion.

609
Thereafter, the BCDA created a Joint Venture Selection Committee (JV-SC) following the procedures prescribed
under Annex "C" of the Detailed Guidelines for Competitive Challenge Procedure for PublicPrivate Joint Ventures
(NEDA JV Guidelines) promulgated by the National Economic Development Authority(NEDA). The said committee
recommended the acceptance of the unsolicited proposal, which recommendation was favorablyacted upon by the
BCDA. Through a letter dated May 12, 2010, the BCDA communicated to petitioner its acceptance of the unsolicited
proposal. Despite its acceptance, however, the BCDA clarified that its act should not be construed to bind the
agency to enter into a joint venture agreement with the petitioner but only constitutes an authorization granted to the
JV-SC to conduct detailed negotiations with petitioner SMLI and iron out the terms and conditions of the agreement.

Pursuant to this authorization, the JV-SC and SMLI embarked on a series of detailed negotiations, and on July 23,
2010, SMLI submitted its final revised proposal with guaranteed secured payments amounting to a total of PhP 25.9
billion. Afterwards, upon arriving at mutually acceptable terms and conditions, a Certification of Successful
Negotiations (Certification) was issued by the BCDA and signed by both parties on August 6, 2010. Through the
said Certification, the BCDA undertook to "subject SMLI’s Original Proposal to Competitive Challenge pursuant to
Annex C" and committed itself to "commence the activities for the solicitation for comparative proposals." 1

In an attempt to comply with its obligations, the BCDA prepared for the conduct of a Competitive Challenge to
determine whether or not there are other Private Sector Entities (PSEs)that can match the proposal of SMLI, and
concurrently ensure that the joint venture contract will be awarded to the party that can offer the most advantageous
terms in favor of the government. In furtherance thereof, the agency issued Terms of Reference (TOR),  which
2

mapped out the procedure to be followed in connection with the Competitive Challenge. Consequently, SMLI was
required, as it did, to post a proposalsecurity in the amount of PhP 187 million, following the prescribed procedure
outlined in the TOR and the NEDA JV Guidelines.

Afterwards, the BCDA set the Pre-eligibility Conference on September 3, 2010. Invitations to apply for eligibility and
to submit comparative proposals were then duly published on August 12, 16 and 20, 2010. Hence, the pre-eligibility
conference was conducted as scheduled. The companies that participated in the conference included SMLI, as the
Original Proponent, and three (3) PSEs, namely Ayala Land, Inc., Rockwell Land Corp., and Filinvest Land, Inc.

On Ayala Land, Inc.’s request, the deadline for submission of Eligibility Documents was scheduled on October 20,
2010 through Supplemental Notice No. 1. However, the deadline was again moved to November 19, 2010 to allow
the BCDA, in conjunction with other national agencies, to resolve issues concerning the relocation and replication of
facilities located in the subject property.For this purpose, the BCDA issued Supplemental Notice No. 2.

Following a conference, the BCDA, on November 18, 2010, issued Supplemental Notice No. 3, again rescheduling
the submission deadline this time to an unspecified future date "pending final results of the policy review by the
Office of the President on the lease versus joint venture/sale mode and other issues."  Henceforth, the BCDA
3

repeatedly postponed the deadline of eligibility requirements untiltwo (2) years have already elapsed from the
signing of the Certification without the Competitive Challenge being completed.

Then, instead of proceeding withthe Competitive Challenge, the BCDA addressed a letter  to Jose T. Gabionza, Vice
4

President of SMLI, stating that it will welcome any "voluntary and unconditional proposal" to improve the original
offer, with the assurance that the BCDA will nonetheless respect any right which may have accrued in favor of SMLI.
SMLI, through a letter dated December 22, 2011, replied by increasing the total secured payments to PhP 22.436
billion in over fifteen (15) years with an upfront payment of PhP 3 billion. SMLI likewise proposed to increase the net
present value of the property to PhP 38,500.00/sqm. With this accelerated terms of payment, the total inflow to be
received by the BCDA from the project after five (5) years would amount to PhP 9.289 billion. In the same letter,
SMLI clarified that itsimproved offer is tendered on reliance of the BCDA’s previous commitment torespect SMLI’s
status as the Original Proponent.

Without responding to SMLI’s new proposal, the BCDA sent a memorandum to the Office of the President (OP)
dated February 13, 2012, categorically recommending the termination of the Competitive Challenge. The
memorandum, in part, reads:

In view of the foregoing, may we respectfully recommend the President’s approval for BCDA to terminate the
proceedings for the privatization and development of the BNS/PMC/ASCOM/SSU Properties in Bonifacio South
through Competitive Challenge and proceed with the bidding of the property. 5

Alarmed by this development, SMLI, in a letter dated August 10, 2012, urged the BCDA to proceed with the
Competitive Challenge as agreed upon. However, the BCDA, via the assailed Supplemental Notice No. 5,
terminated the Competitive Challenge altogether. Said Supplemental Notice pertinently reads:

This Supplemental Notice No. 05 is issued to inform the [PSEs] that the Competitive Challenge for the Selection of
BCDA’s Private Sector Partner for the Privatization and Development of the approximately 33.1-hectare
BNS/PMC/ASCOM/SSU Properties in Bonifacio South is hereby terminated. BCDA shall not dispose the property
through Competitive Challenge. 6

610
To support its position, the BCDA invoked Article VIII of the TOR on the subject "Qualifications and Waivers," to wit:

The BCDA reserves the right to call off [the] disposition prior to acceptance of the proposal(s) and call for a new
disposition process under amended rules and without any liability whatsoever to any or all the PSEs, except the
obligation to return the Proposal Security.

Thereafter, the BCDA informed SMLI of the OP’s decision to subject the development of the subject propertyto
public bidding. When asked by SMLI, the JV-SC manifested its conformity with the actions thus taken by the BCDA
and OP.

The JV-SC’s declaration proved to be the last straw that fractured SMLI’s patience as it lost no time in interposing
the instant recourse.

In the meantime, the BCDA issuedin favor of SMLI Philippine National Bank Check No. 11-634-610001-0 in the
amount of PhP 188,508,466.67 dated September 28, 2012. The check was sent through registered mail with no
explanation whatsoever accompanying the same, although the BCDA admitted that its value corresponds to the
proposal security posted by SMLI, plus interest in an unspecified rate. SMLI attempted to return the check but to no
avail.

The BCDA likewise caused the publication of an "Invitation to Bid" for the development of the subject property in the
December 21, 2012 issue of the Philippine Star.  This impelled SMLI to file an Urgent Manifestation with Reiterative
7

Motion to Resolve SMLI’s Application for Temporary Restraining Order (TRO) and Preliminary Injunctionon the
same day. By Resolution  of January 9, 2013, the Court issued the TRO prayed for by petitioner and enjoined
8

respondent BCDA from proceeding with the new selection process for the development of the property.

The Issue

Without a doubt, the issue in this case boils down to whether or not the BCDA gravely abused its discretion in
issuing Supplemental Notice No. 5, in unilaterally aborting the Competitive Challenge, and in subjecting the
development of the project to public bidding.

For its part, SMLI alleged in its petition that the Certification issued by the BCDA and signed by the parties
constituted a contract and that under the said contract, BCDA cannot renege on its obligation to conduct and
complete the Competitive Challenge. The BCDA, on the other hand, relies chiefly on the reservation clause in the
TOR, which allegedly authorized the agency to unilaterally cancel the Competitive Challenge. Respondents add that
the terms and conditions agreedupon are disadvantageous to the government, and that it cannot legally be barred
by estoppel in correcting a mistake committed by its agents.

The Court’s Ruling

The petition is impressed with merit. SMLI has the right to a completed competitive challenge pursuant to the NEDA
JV Guidelines and the Certification issued by the BCDA. The reservation clause adverted to by the respondent
cannot, in any way, prejudice said right.

The Procurement Process under the NEDA JV Guidelines

In resolving the case, discussing the procedure outlined under the NEDA JV Guidelines and a brief backgrounder
thereof is apropos.

To streamline the procurement process and expedite the acquisition of goods and services, Executive Order No.
(EO) 423 was issued on April 30, 2005, which prescribed the rules and procedures on the review and approval of
government contracts. The EO, in part, provides: Section 8. Joint Venture Agreements. The NEDA, in consultation
with the GPPB, shall issue guidelines regarding joint venture agreements with private entities with the objective of
promoting transparency, competitiveness, and accountability in government transactions, and, where applicable,
complying with the requirements of an open and competitive public bidding.

Taking its cue from the above-quoted provision, the NEDA promulgated the NEDA JV Guidelines, which detailed
two (2) modes of selecting a private sector JV partner: by competitive selectionor through negotiated agreements.

Competitive selection involves a selection process based on transparent criteria, which should not constrain or limit
competition, and is open to participation byany interested and qualified private entity.  Selection by negotiated
9

agreements  or negotiated projects,  on the other hand, comes about as an end result of an unsolicited
10 11

proposal from a private sector proponent, or if the government has failed to identify an eligible private sector partner
12

for a desired activity after subjecting the same to a competitive selection.

611
Relevant to the case at bar is the selection modality by negotiated agreement arising from the submission and
acceptance of an unsolicited proposal, known as the Swiss Challenge method,  in essea hybrid mechanism
13

between the direct negotiation approach and the competitive bidding route.  With the availability of the Swiss
14

Challenge method for utilization by those in the private sector, PSEs have studied, formulated, and submitted
numerous suo motoor unsolicited proposals with the ultimate goal of assisting the public sector in elevating the
country’s place in the global economy, as in the case herein.

The development and adoption by several countries of the Swiss Challenge scheme  is attributed to the recognition
15

that the private sector can be an important source of technical and managerial expertise, as well as financing, as
evidenced by private companies’ practice of directly approaching governments with new and innovative project
ideas through unsolicited proposals.  Some states, however, frown on the practice since transparency is allegedly
16

compromised when the government directly negotiates with a proponent. In this method, the Original Proponent,
who first submitted and secured acceptance ofthe unsolicited proposal, is given the right to match the successful bid
received in the competitive bid process for the said project.17

Item III, Annex "C" of the NEDA JV Guidelines, where the Swiss Challenge format is tucked in, maps out a three-
stage framework, to which Negotiated JV Agreements are to be mandatorily subjected, as summarized below:

Stage One

Submission and the Acceptance

or Rejection of the Unsolicited Proposal

Stage One  of the process involves the submission, evaluation, and the acceptance of unsolicited proposals from
18

private entities. The steps involved are:

1. A PSE submits an unsolicited proposalto the government entity (GE) or the GE seeks out a JV partner
after a failed competition (open bidding) for a JV activity or project.

2. The GE, through its JV-SC, undertakes the initial evaluation of the proposal.

3. The head of the GE shall then either issue an acceptance or nonacceptance notice of the proposal.

a. An acceptance shall not bind the GE to enter into the JV activity, but shall mean that authorization
is given to proceed with detailed negotiations on the terms and conditions of the JV activity.

b. In case of non-acceptance, the private sector entity shall be informed of the reasons/grounds for
such action.

Stage Two

Detailed Negotiations

Stage Two  entails negotiation on the terms and conditions of the JV activity. Below is a summary of the parameters
19

adhered to in detailed negotiations, and the preparation of the proposal documents in case of successful
negotiations:

1. The parties shall negotiate on, among other things, the scope as well as all legal, technical, and financial
aspects of the JV activity.

2. The JV-SC shall determine the eligibility of the PSE to enter into the JV activity in accordance with pre-set
rules.

3. Negotiations shall comply with the process, requirements and conditions as stipulated under Sections 6
(General Guidelines) and 7 (Process for Entering into JV Agreements) of the JV Guidelines.

a. If successful, the GE head and the representative of the PSE shall issue a signed certification of
successful negotiation to the effect that:

a) an agreement has been reached;

b) the PSE is eligible to enter into the proposed JV activity; and

c) the GE shall commence the activities for the solicitation for comparative proposals.

612
 b. If an acceptable agreement isnot reached, the GE may:

a) reject the proposal and thereafter accept a new one from private sector participants; or

b) pursue the proposed activity through alternative routes other than a joint venture.

4. After an agreement is reached, the contract documents, including the selection documents for the
competitive challenge, are prepared.

Stage Three

Competitive Challenge

In Stage Three,  upon the successful completion of the detailed negotiation phase, the JV activity shall be subjected
20

to a competitive challenge,  which includes the observance of the following procedure:

21

1. Preparation and approval of all tender documents including the draft contract before the invitation for
comparative proposals is published.

2. Publication of the invitation for comparative proposals followed by the posting by the PSE of the proposal
security.

3. Determination of the eligibility of comparative proponents/PSEs, issuance of supplemental competitive

selection bulletins and pre-selection conferences, submission, opening and evaluation of comparative
proposals.

4. In the evaluation of the comparative proposals as a prelude to determine the best offer, the original
proposal of the original proponent shall be considered.

a. If the GE determines that an offer made by a comparative private sector participant is more
advantageous to the government than the original proposal, the original proponent shall be given the
right to match such superior or more advantageous offer.

b. Should no matching offer be received, the JV activity shall be awarded to the comparative private
sector participant submitting the most advantageous proposal.

c. If a matching offer is received, or if there is no comparative proposal, the JV activity shall be

awarded to the original proponent.

5. After the completion of the competitive challenge, the JV-SC shall submit the recommendation of award to
the head of the GE. 22

6. Embarking on activities leading to the execution of the Final Agreement. 23

Deviation from the procedure outlined cannot be countenanced. Wellestablished is the rule that administrative
issuances––such as the NEDA JV Guidelines, duly promulgated pursuant to the rule-making power granted by
statute––have the force and effect of law.  Being an issuance in compliance with an executive edict, the NEDA JV
24

Guidelines, therefore, has the same binding effect as if it were issued by the President himself.  As such, no agency
25

or instrumentality covered by the JV Guidelines  can validly stray from the mandatory procedures set forth therein,
26

even if the other party acquiesced therewith  or not.

27

SMLI’s rights as an Original Proponent and BCDA’s correlative duty under the NEDA JV Guidelinesand the parties’
agreement

It is well to point out that after BCDA accepted the unsolicited proposal of SMLI and after both parties herein
successfully concluded the detailed negotiations on the terms and conditions of the project, SMLI acquired the
status of an Original Proponent. An Original Proponent, per the TOR, pertains to the party whose unsolicited
proposal for the development and privatization of the subject property though JV with BCDA has been accepted by
the latter, subject to certain conditions, and is now being subjected to a competitive challenge. 28

In this regard, SMLI insists that asan Original Proponent, it obtained the right to a completed competitive challenge.
On the other hand, the BCDA argues that it can, at any time, withdraw from the disposition process as it is not
bound to enter into the proposed JV activity with SMLI. Petitioner’s argument holds water.

613
A scrutiny of the NEDA JV Guidelinesreveals that certain rights are conferred to an Original Proponent. Ascorrectly
pointed out by SMLI, these rights include:

1. The right to the conduct and completion of a competitive challenge;

2. The right to match the superior or more advantageous offer, if any;

3. The right to be awarded the JV activity in the event that a matching offer is submitted within the
prescribed period; and

4. The right to be immediately awarded the JV activity should there be no comparative

proposals.  (emphasis added)
29

Material to the present case is the right to the conduct and completion of a Competitive Challenge. Based onthe
NEDA JV Guidelines, it is necessary that Stages One and Two of the Swiss Challenge shall have been fruitful for
this right to arise.

To recall, Stages One and Two ofthe framework deal with the submission and evaluation of the unsolicited proposal
and the conduct of the detailed negotiations. Should the parties productively conclude the in-depth negotiations, the
guidelines require the preparation of the contract and selection documents for the competitive challenge.  Following
30

this, Stage Three of the same rules provides that the GE shall subject the terms agreed upon to a Competitive
Challenge. Thus:

Stage Three – Once the negotiations have been successfully completed, the JV activity shallbe subjected to a
competitive challenge, as follows:

1. The [GE] shallprepare the tender documents pursuant to Section II (Selection/Tender Documents) of
Annex A hereof. The eligibility criteria used in determining the eligibility of the [PSE] shall be the same as
those stated in the tender documents. x x x The Head of the [GE] shall approve all tender documents
including the draft contract before the publication of the invitation for comparative proposals.

2. Within seven (7) calendar days from the issuance of the Certification of a successful negotiation referred
toin Stage Two above, the JV-SC shall publish the invitation for comparative proposals in accordance with
Section III.2. (Publication of Invitation to Apply for Eligibility and to Submit Proposal) under Annex A hereof.

3. The [PSE] shallpost the proposal security at the date of the first day of the publication of the invitation for
comparative proposals in the amount and form stated in the tender documents.

4. The procedure for the determination of eligibility of comparative proponents/private sector participants,
issuance of supplemental competitive selection bulletins and pre-selection conferences, submission and
receipt of proposals, opening and evaluation of proposals shall follow the procedure stipulated under Annex
A hereof. In the evaluation of proposals, the best offer shall be determined to include the original proposal of
the [PSE]. If the [GE] determines that an offer made by a comparative private sector participant other than
the original proponent is superior or more advantageous to the government than the original proposal, the
[PSE] who submitted the original proposal shall be given the right to match such superior or more
advantageous offerx x x. Should no matching offer be received within the stated period, the JV activity
shallbe awarded to the comparative private sector participant submitting the most advantageous proposal. If
a matching offer is received within the prescribed period, the JV activity shallbe awarded to the original
proponent. If no comparative proposal isreceived by the [GE], the JV activity shallbe immediately awarded to
the original private sector proponent.

5. Within seven (7) calendar days from the date of completion of the Competitive Challenge, the JV-SC
shallsubmit the recommendation of award to the Head of the [GE]. Succeeding activities shall be in
accordance with Sections VIII. (Awardand Approval of Contract) and X (Final Approval) of Annex A
hereof. (emphasis added)
31

Anent the above-quoted directives, emphasis must be given to the repeated use of the word "shall." It is elementary
that the word "shall" underscores the mandatory character of the rule. Itis a word of command, one which always
has or must be given a compulsory meaning, and is generally imperative or mandatory.  Considering the
32

compulsory tenor of the order, the rule could not be any clearer––that once the negotiations at Stage Two shall
have been successfully completed, it becomes mandatory for the GE to subject theJV activity to a competitive
challenge. By the Guidelines’ explicit order, proceeding to Stage Three of the process is compulsory, conditioned
only on the successful conclusion of Stage Two. The GE is not given any discretion to decide whether it will proceed
with the competitive challenge or not. Furthermore, there is no question in the case at hand that the unsolicited
proposal for the development of the subject property passed through scrutiny under the first two stages, resulting

614
inthe issuance and signing of the Certification. As a matter of fact, this is clearly evinced in the whereas clauses of
the Certification, to wit:

WHEREAS, on 04 May 2010, BCDA received from [SMLI] an unsolicited proposalfor the development of [the
subject property]. x x x

WHEREAS, after evaluation of the unsolicited proposalsubmitted by SMLI in accordance with the provisions of
Annex "C" of the JV Guidelines, the [JV-SC] created byBCDA x x x recommended to the BCDA Board, and the
BCDA Board approved, per Board Resolution No. 2010-05-100, the acceptance ofthe unsolicited proposal, subject
to the condition that such acceptance shall not bind BCDA to enter into a JV activity, but shall mean that
authorization is given to proceed with detailed negotiationson the terms and conditions of the JV activity;

WHEREAS, pursuant to the authorization granted by the Board and issued pursuant to Annex "C", Part III, Stage
One of the JV Guidelines, BCDA went into detailed negotiations with SMLI. The JV-SC simultaneously ascertained
the eligibility of SMLI inaccordance with Annex "C", Part III, Stage 2 (2) of the JV Guidelines;

WHEREAS, this Certificationisissuedpursuant to Annex "C" Part III, Stage 2 (2) of the JV Guidelines;

NOW, THEREFORE, for and in consideration of the foregoing, BCDA and SMLI, after successful
negotiationspursuant to Stage II of Annex C x x x reached an agreement on the purpose, terms and conditions of
the JV development of the subjectproperty, which shall become the terms for the Competitive Challenge pursuant to
Annex C of the JV Guidelinesx x x.  (emphasis added)
33

Moreover, the Certification further discloses that the BCDA has the obligation to subject SMLI’s unsolicited proposal
to a Competitive Challenge, to which SMLI assented. As provided:

BCDA and SMLI have agreed to subject SMLI’s Original Proposal to Competitive Challenge pursuant to Annex C –
Detailed Guidelines for Competitive Challenge Procedure for Public-Private Joint Ventures of the NEDA JV
Guidelines, which competitive challenge process shall be immediately implemented following the Terms of
Reference (TOR) Volumes 1 and 2. BCDA shall, thus, commence the activities for the solicitation for comparative
proposals with the publication of the Invitation to Apply for Eligibility and to Submit Comparative Proposals (IAESCP)
thrice for two (2) consecutive weeks in three (3) major newspapers starting on 10 August 2010, on which date SMLI
shall post the required Proposal Security as statedabove. Pursuant to Annex C of the NEDA JV Guidelines, if, after
solicitation of comparative proposals, BCDA determines that an offer by a comparative PSE is found to be superior
to SMLI’s Original Proposal,SMLI shall be given the right to match such superior offer within the period prescribed in
the attached TOR Volumes 1 and 2. If SMLI is ableto match such superior offer, SMLI shall be issued the Notice of
Award, subject to Item No. 19 above. In the event, however, that SMLI is unable to match the superior offer, the
comparative PSE which submitted such superior offer shall be awarded the contract, subject to Item No. 19
above. (emphasis added)
34

By their mutual consent and in signing the Certification, both parties, in effect, entered into a binding agreement to
subject the unsolicited proposal to the Competitive Challenge. Evidently, the certification partakes of a
contractwherein BCDA committed itself to proceed with the Third Stage of the process and simultaneously grants
SMLI the right to expect that the BCDA will fulfill its obligations under the same. The preconditions to the conduct of
the Competitive Challenge having been met, what is left, therefore, is tosubject the terms agreed upon to a
Competitive Challenge pursuant to Stage Three, Annex "C" of the NEDA JV Guidelines.

The Reservation Clause only covers the Third Stage and cannot prejudice SMLI’s rights stemming from the first two
stages

In an attempt to advance its claim, BCDA invokes the reservation clause in Article VIII of the TOR on "Qualifications
and Waivers." To reiterate, said provision reads:

3. BCDA further reserves the right to call off this disposition prior to acceptance of the proposal(s) and call for a new
disposition process under amended rules, and without any liability whatsoever to any or all of the PSEs, except the
obligation to return the Proposal Security.  (emphasis ours)
35

The BCDA insists that the "disposition process" to which the reservation clause refers is the entire Swiss Challenge,
and not merely Stage Three thereof regarding the Competitive Challenge. This interpretation does not come as a
surprise considering the term’s technical meaning, that is, alienation of property;  the transfer of the property and
36

possession of lands, tenements, or other things from one person to another; or the voluntary resignation of title to
real estate by one person to another and accepted by the latter, in the forms prescribed by law.  On the basis of
37

said definition, indeed, the reservation clause seemingly refers to the Swiss Challenge itself since in the case at bar,
it is the Swiss Challenge, not the competitive challenge, that is the avenue for the disposition.

615
To anchor the real import of the clause on the basis only of a single word may, however, result in a deviation from its
true meaning by rendering all the other terms unnecessaryor insignificant. Suchan interpretation would run afoul
Article 1373 of the Civil Code, which states that "[i]f some stipulation of any contract should admit of several
meanings, it shall be understood as bearing that import which is most adequate to render it effectual." It is a cardinal
rule in statutory construction that no word, clause, sentence, provision or part of a statute shall be considered
surplusage or superfluous, meaningless, void and insignificant.  For this purpose, an interpretation which renders
38

every word operative is preferred over that which makes some words idle and nugatory.

We find that the reservation clausecannot justify the cancellation of the entire procurement process. Respondent
cannot merely harp on the lone provision adverted to without first explaining the context surrounding the reservation
clause. The said provision cannot be interpreted in a vacuum and should instead be read in congruence with the
other provisions in the TOR for Us to fully appreciate its import.

At this juncture, it is worthy to point out that the TOR containing the reservation clause details the requirements for
eligibility to qualify as a PSE that may submit its proposal for the JV,  as well as the procedure to be followed in the
39

assessment of the eligibility requirements submitted and in the conduct of the Competitive Challenge. It basically
governs only part and parcel of Stage Three of the Swiss Challenge Process, that is, the requirements for and the
determination of an interested PSE’s eligibility to participate inthe Competitive Challenge. This conclusion is
deduced from the very provisions of the TOR, viz:

These [TOR] describe the procedures that shall be followed in connection with the disposition of the approximately
Three Hundred Thirty-one Thousand Three Hundred Twenty-seven square meters (331,327 sq.m.) or 33.1-hectare
Bonifacio Naval Station (BNS)/Philippine Marine Corps (PMC)/Army Support Command (ASCOM)/Service Support
Unit (SSU) Properties in Bonifacio South (the "Property"), located along Lawton Avenue, Fort Bonifacio, Taguig City,
Metro Manila, Philippines.

These TOR are issued in two (2) volumes: Volume 1 – Eligibility Documents; and Volume 2 – Tender Documents.
This first volume details the requirements for eligibility to qualify as a Private Sector Entity (PSE) that may submit
Technical and Financial Proposals for the Joint Venture (JV) Privatization and Development of [the] subject
Property, and the procedures involved in the entire Competitive Challenge procedure. [PSEs] which shall be
declared eligible shall be issued the second volume of the TOR which details the requirements and procedures for
the submission of Technical and Financial Proposals, with the end-view of determining a Winning PSE for subject
JV development.

xxxx

I. GENERAL INFORMATION

xxxx

2. Publication of Invitation for Comparative Proposals. BCDA shall publish x x x the "Invitation to Apply for Eligibility
and to Submit a Comparative Proposal" (IAESCP). This shall serve to inform and to invite the prospective PSEs to
the Competitive Challenge procedure at hand. x x x

3. Joint Venture Agreement.x x x the ultimate objective of BCDA in qualifying prospective PSEsto be eligible to
submit Technical and Financial Proposals is to select a partner in the unincorporated/contractual [JV]for the
privatization and development of the subject Property. x x x

xxxx

4. Amendment of these TOR. x x x Should any of the information and/or procedurescontained in these TOR be
amended or replaced, the JV-SC shall inform and send Supplemental Notices to all PSEs. To ensure all PSEs are
informed of any amendments, all PSEs are requested to inform BCDA of their contact [details].In addition, receipt of
all Supplemental Notices shall beduly acknowledged by each PSEprior to the submission of eligibility documents
and/or proposals and shall be soindicated therein.

5. Pre-Eligibility Conference. Interested parties are invited to attend a Pre-Eligibility Conference for prospective
PSEs x x x.

6. One-on-One Meetings. Prospective PSEs may request for one-on-one meetings with the JV-SC or its duly
authorized representatives. x x x

xxxx

9. Due Diligence. x x x

616
The PSE shall investigate x x x [and] carefully examine [the] conditions of and at the Property and its surrounding
vicinities affecting the actual execution and such other information as to allow the PSE to make a competitive
estimate. The PSE, by the act of submitting its proposal, acknowledges that it has inspected the Property and
accepted all the terms and conditions for this competitive challenge as set in TOR Volumes 1 and 2.

xxxx

V. APPLICATION FOR ELIGIBILITY

1. Eligibility Requirements. Only eligible PSEs shall be allowed to submit comparative Technical and Financial
Proposals, or collectively, the Tender Documents x x x. Hence, interested PSEs are invited to apply for eligibility and
to participate in the Competitive Challenge procedure. Aside from being required to purchase the [TOR] – Volume1,
for a non-refundable fee x x x, a PSE shall be considered eligible if it satisfies all of the following requirements:

1.1. Legal Requirements. The PSE must be a duly registered and existing corporation authorized by Philippine Laws
to own, hold or develop lands in the Philippines. x x

1.2. Technical Requirements.

1.2.1. Firm Experience. The PSEx x x shall have completed within a period of ten (10) years from the date of
submission and receipt of Proposals, a similar or related development project x x x.

1.2.2. Key Personnel. x x x

1.3. Financial Capability. The PSEx x x must have adequate capability to sustain the financing requirements for the
proposed development ofthe Property. This shall be measured in terms of:

1.3.1. Net Worth. x x x

1.3.2. Good financial standing. x x x

1.3.3. No Arrears. x x x

1.3.4. Timely and complete Payment of Taxes. x x x

1.3.5. Financial Capacity to Undertake the

Project.

xxxx

2. Required Eligibility Documents. The PSEs x x x that wish to be considered for eligibility are required to submit x x
x the following documents:

xxxx

VI. EVALUATION OF ELIGIBILITY

1. Opening of Eligibility Documents. x x x

2. Evaluation Process. Eligibility Documents submitted by the PSEshall be evaluated on a pass or fail basis
to determine if the PSEx x x complies with or satisfies all of the requirements specified in Article V hereof. x
xx

3. Motion for Reconsideration/Appeal on Eligibility. A prospective PSE determined as "Ineligible" has seven
(7) calendar days upon written notice within which to file a motion for reconsideration tothe JV-SC. x x x

4. No Eligible [PSEs]. In the event that no PSE be found eligible or no PSE submitted itself to eligibility
check for the Competitive Challenge procedure, BCDA shall proceed to the issuance of Notice of Award to
SMLI, as the original proponent for the subject JV project.

xxxx

617
VII. CHANGE IN MEMBERSHIP OF AN ELIGIBLE PSE.

xxxx

VIII. QUALIFICATIONS AND WAIVERS

1. BCDA reserves the right to reject any or all Eligibility Documents, to waive any defect or informality
thereon or minor deviations, which do notaffect the substance and validity of the proposal.

2. BCDA reserves the right to review other relevant information affecting the PSE or its Eligibility Documents
before its declaration as eligible to participate further in the selection process, and be allowed to submit a
Final Proposal. Should such review uncover any misrepresentations made in the eligibility documents, or
any change in the situation of the PSE, which affects its eligibility, BCDA may disqualify the PSE from
obtaining any award/contract.

3. BCDA further reserves the right tocall of this disposition prior to acceptance of the proposal(s) and call for
a new disposition process under amended rules,and without any liability whatsoever to any or all the PSEs,
except the obligation to return the Proposal Security x x x.  (emphasis ours; citation omitted)
40

A cursory reading of the TOR, ascouched, readily shows that it focuses only on the eligibility requirements for PSEs
who wish to challenge SMLI’s proposal as well as the procedure to be followed by the BCDA JVSC in the evaluation
of the PSEs’ submittals. We thus find merit in SMLI’s thrust that since the TOR governs the eligibility requirements
for PSE’s, the "disposition process" referred to inthe reservation clause could only refer to the eligibility process in
Stage Three of the Swiss Challenge and not the entire Swiss Challenge process itself. We are convinced that the
said provision does not authorize BCDA to abort the entire procurement process and cannot impair any of SMLI’s
statutorily and contractuallyconferred rights stemming from the first two stages’ conclusion. To rule otherwise would
grant the GE unbridled authority to thrust aside the agreement between the parties after successful detailed
negotiations. It would disregard the fact that through the said covenant,the GE bound itself to conduct and complete
the Competitive Challenge pertaining to SMLI’s proposal.

Provisions of the TOR cannot prevail over the NEDA JV Guidelines

In the same vein, We cannot also agree with respondents’ contention that the term "disposition" in the assailed
reservation clause refers to the entire Swiss Challenge itself and authorizes the BCDA to abandon the negotiations
even at Stage Three of the process for this would result in an interpretation that is antagonisticwith the NEDA JV
Guidelines.

A review of the outlined three-stage framework reveals that there are only two occasions where pre-termination of
the Swiss Challenge process is allowed: at Stage One, prior to acceptance of the unsolicited proposal; and at Stage
Two, should the detailed negotiationsprove unsuccessful. In the Third Stage, the BCDA can no longer withdraw with
impunity from conducting the Competitive Challenge as it became ministerial for the agency to commence and
complete the same. Thus, acceding to the interpretation of the TOR offered byBCDA will, in effect, result not only in
the alteration of the agreement between the parties but also of the NEDA JV Guidelines itself, both of which has the
force and effect of law.

The interpretation offered by BCDA is, therefore, unacceptable. Between procedural guidelines promulgated by an
agency pursuant to its rule-making power and a condition unilaterally designed and imposed for the implementation
of the same, the former must prevail. BCDA does not wield any rule-making power such that it can validly alter or
abandon a clear and definite provision in the NEDA JV Guidelines under the guise of a condition under the TOR.
AsWe have time and again harped, the ones dutybound to ensure observance with laws and rules should not be the
ones to depart therefrom.  A contrary rule would open the floodgates to abuses and anomalies more detrimental to
41

public interest.  For how can others be expected to respect the rule of law if the very persons or entities tasked to
42

administer laws and their implementing rules and regulations are the first to violate them, blatantly or surreptitiously?

BCDA gravely abused its discretion when it issued Supplemental

Notice No. 5 in breach of its contractual obligation to SMLI

"Grave abuse of discretion" implies such capricious and whimsical exercise of judgment as is equivalent tolack of
jurisdiction. It must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to
perform the duty enjoined or to act at all in contemplation of law.  While it is the general policy of the Court to
43

sustain the decisions of administrative authorities, not only on the basis of the doctrine of separation of powers but
also for their presumed expertise in the laws they are entrusted to enforce, when said decisions and orders are
tainted with unfairness or arbitrariness that would amount to grave abuse of discretion, the Courts are duty-bound to
entertain petitions questioning the former’s rulings or actions.
44

618
In the present case, the Court finds that BCDA gravely abused its discretion for having acted arbitrarily and contrary
to its contractual commitment to SMLI, to the damage and prejudice of the latter. It veritably desecrated the rules the
Government itself set in the award of public contracts.

To review, We have demonstratedthat the BCDA is duty-bound to proceed with and complete the competitive
challenge if the detailed negotiations proved successful. Afterwards, it becomes mandatory for the competitive
challenge to proceed. Whatever rights and obligations that may have accrued to the parties by that time can no
longer be altered by a new disposition process. At most, the reservation clause in the TOR can only serve to alter
the rules of the eligibility process under the Competitive Challenge.

In the case at bar, however, BCDA, in its mistaken reliance on the reservation clause, aborted not just the eligibility
process of the Competitive Challenge but the entire Swiss Challenge. Even though the language of Supplemental
Notice No. 5 at first blush appears to limit its application to the Third Stage of the framework, BCDA’s actuations say
otherwise. Worthy of reiteration at this point is the fact that after BCDA issued the assailed notice, the agency also
returned through registeredmail the security posted by SMLI. Coupled with the factthat BCDA subjected the property
instead to straight bidding, it becomes obvious that BCDA no longer intends to comply with its obligations to SMLI
and that it abandoned the Swiss Challenge process altogether, in contravention of its statutory and contractual
obligations.

Moreover, the asseveration of the BCDA in its last ditch effort to salvage its position––that the withdrawal is justified
since it allegedly found that the revised SMLI proposal shall not yield the best value for the government  ––deserves
45

scant consideration. On the contrary, the BCDA’s statements have been inconsistentwhen it comes to identifying the
procurement process that would best serve the interest of the state.

Noticeably, in its November 8, 2010 Memorandum, the BCDA posited that competitive challenge is more
advantageous to the government than straight bidding, to wit:

The price of the Bonifacio South properties has already been set by the winning price in the bidding for the joint
venture development of the JUSMAG property (₱31,111/sq.m.). Thus, BCDA has established the benchmark for the
price of the remaining Bonifacio South properties, of which the JUSMAG property is the most prime. Logically the
minimum bid price under straight bidding for the BNS/PMC/ASCOM/SSU property, which is a far less inferior
property, would be ₱31,111/sq.m. However, with SM’s submission of a revised unsolicited proposal at
₱31,732/sq.m. and later further revised to ₱32,500/sq.m., BCDA saw the opportunity to negotiate for better terms
and eventually arrived at a higher price of ₱36,900/sq.m. In this case, BCDA deemed that going into Competitive
Challenge was more advantageous to the government than Competitive Selection (straight bidding) because of the
opportunity to increase the price.

Furthermore, subjecting the price tosubsequent price challenge will possibly drive up the price even higher than
₱38,900/sq.m. These opportunities cannot be taken advantage of under a straight bidding where failure of bidding
would likely ensue if in case BCDA immediately sets the price of the property too high. The competition in the real
estate industry and as experienced by BCDA issuch that the other developers will usually challenge the original
proposal to "up the ante" as they cannot allow the original proponent to get the property easily. 46

Despite this testament, the BCDA, over a year later, made a complete turnaround stating that straight bidding will be
best for the Government.  As can be gleaned from the BCDA’s Memorandum to the Presidentdated February 13,
47

2012, respondents themselves recommended to the President that the selection proceedings be terminated. To
reiterate:

In view of the foregoing, may we respectfully recommend the President’s approval for BCDA to terminate the
proceedings for the privatization and development of the BNS/PMC/ASCOM/SSU Properties in Bonifacio South
through Competitive Challenge and proceed with the bidding of the property. 48

The BCDA offered no explanation to reconcile its opposing positions. It also neglected to inform SMLI of the
provisions in its proposal that it deemed disadvantageous to the government. The sweeping statement of the BCDA
that the terms are disadvantageous cannot be accepted at face value, bearing in mind that a fruitful in-
depthnegotiation necessarily implies that BCDA found the terms offered by SMLI acceptable. Consider also that
should the Competitive Challenge prove to be unsuccessful, it has no other recourse but to award the project
toSMLI, the Original Proponent. This caveat forces BCDA to ensure that the terms agreed upon during the detailed
negotiations are advantageousto it, lest it run the risk of being bound to a project that is not beneficial to the
government in the first place.

Overall, the foregoing goes to showthat the BCDA failed to establish a justifiable reason for its refusal to proceed
with the Competitive Challenge and for canceling the entire Swiss Challenge. Because of BCDA’s mistaken reliance
on the TOR provision, and by changing its stand on the conduct of the Competitive Challenge without pointing out
with specificity the socalled unfavorable terms, Weare left to believe that the cancellation of the Swiss Challenge
was only due to BCDA’s whims and caprices.

619
Acceptance of Unsolicited Proposal vis-à-vis Estoppel

Lastly, respondents argue that the government cannot be estopped by the mistakes or errors of its agents, implying
that when it issued the Certification, it committed a lapse of judgment as it later discovered that the terms of the
proposal allegedly turnedout to be disadvantageous to the Government. Thus, according to them, it cannot be
compelled to proceed with the Competitive Challenge.

We are very much aware of the time-honored rule that "the government cannot be estopped by the mistakes or
errors of its agents."  Suffice it to state, however, that this precept is not absolute. As jurisprudence teaches, this
49

rule on estoppel cannot be used to perpetrate an injustice. 50

In the case at bar, it is evident that to allow BCDA to renege on its statutory and contractual obligationswould cause
grave prejudice to petitioner, who already invested time, effort, and resources in the study and formulation of the
proposal, in the adjustment thereof, as well as in the negotiations. To permit BCDA to suddenly cancel the
procurement process and strip SMLI of its earlier-enumerated rights as an Original Proponent at this point––after
the former has already benefited from SMLI’s proposal through the acquisition of information and ideas for the
development of the subject property––would unjustly enrich the agency through the efforts of petitioner. What is
worse, to do so would be contrary to BCDA’s representations and assurances that it will respect SMLI’s earlier
acquired rights, which statements SMLI reasonably and innocently believed.

All told, the BCDA’s acceptance ofthe unsolicited proposal and the successful in-depth negotiation cannot be written
off as mere mistake or error that respondents claim to be reversible and not susceptible to the legal bar of estoppel.
The subsequent cancellation of the Competitive Challenge on grounds that infringe the contractual rights of SMLI
and violate the NEDA JV Guidelines cannot be shrouded with legitimacy by invoking the above-cited rule.

Conclusion

To increase government prospects, participation in joint ventures has been incentivized by granting rightsand
advantages to the Original Proponent in the Competitive Challenge phase of a Swiss Challenge. Faithful
observance of these provisions oflaw that grant the aforesaid rights, may it be sourced from a bilateral contract or
executive edict, aids in improving government reliability. This, in turn, heavily correlates with greater availability of
options when entering into future joint venture agreements with private sector entities via public-private enterprises
as it will attract investors to contribute in formulating a roadmap towards a nationwide infrastructure development.

Needless to say, allowing government agencies to retract their commitments to the project proponents will
essentially render inutile the incentives offered to and have accrued in favor of the private sector entity. Without
securing these rights, the business community will be wary when it comes to forging contracts with the government.
Simply put, the failure of the government to abide by the rules ititself set would have detrimental effects on the
private sector’s confidence that the government will comply with its statutory and contractual obligations to the letter.

In the case at bench, considering the undisputed facts presented before Us, We cannot sustain the BCDA’s
arguments that its withdrawal from the negotiations is permissible and was not done with grave abuse of discretion.
Being an instrumentality of the government, it is incumbent upon the BCDA to abide by the laws, rules and
regulations, and perform its obligations with utmost good faith. It cannot, under the guise of protecting the public
interest, disregard the clear mandate of the NEDA JV Guidelines and unceremoniously disregard the very
commitments it made to the prejudice of the SMLI that innocently relied on such promises.  It is in instances such as
51

this––where an agency, instrumentality or officer of the government evades the performance of a positive duty
enjoined by law  ––wherein the exercise of judicial power is warranted. Consistent with Our solemn obligation to
52

afford protection by ensuring that grave abuses of discretion on the part of a branch or instrumentality of the
government do not go unchecked, the Petition for Certiorari must be granted and the corresponding injunctive relief
be made permanent.

As a final note, it is worth mentioning that the foreseeable repercussion of a contrary ponenciaencompasses the
reduction of the number of interested private sector entities that would bewilling to submit suo motoproposals and
invest in government projects. After all, what would be the point of developing ideas and allocating resources in the
formulation of PPP projects when one’s rights asan Original Proponent, under the NEDA JV Guidelines and the
agreement between the parties, can easily be wiped out should the agency decide tolevel the playing field and
conduct straight bidding instead? Evidently, this would not attract but would, in contrast, repel investors from
tendering offers. In addition, even if potential investors do submit unsolicited or comparative proposals, the terms
therein might be driven to become less competitive due to the adjustment in the balance of risks and returns on
investment. Taking into account the increased possibility of the development project not pushing through, investors
might not be too keen in guaranteeing a high amount of secured payments for the same.  These considerations
1âwphi1

further validate the need to secure the private sector’s trust and confidence in the government.

WHEREFORE, premises considered, the petition is hereby GRANTED. The assailed Supplemental Notice No. 5
dated August 6, 2012 issued by the BCDA is hereby ANULLED and SET ASIDE. The Temporary Restraining Order
issued bythis Court on January 9, 2013 is hereby madePERMANENT.
620
Respondent Bases Conversion and Development Authority and Arnel Paciano D. Casanova, or whoever assumes
the position of president of BCDA, are hereby ORDEREDto conduct and complete the Competitive Challenge
pursuant to the Certification, TOR, and NEDA JV Guidelines.

Specifically, the BCDA and/or the JV-SC are DIRECTEDto carry out the following:

1. Publish, within seven (7) calendar days from finality of this Decision, the "Invitation to Apply for Eligibility
and to Submit a Comparative Proposal" (IAESCP) in three (3) newspapers of general nationwide circulation
for two (2) consecutive weeks, and in the BCDA website (www.bcda.gov.ph), in accordance with Section
III.2. (Publication of Invitation to Apply for Eligibility and to Submit Proposal), Section III (Project Rationale),
Item 5 of the TOR, and Section III (General Information), Item 2 (Publication of Invitation for Comparative
Proposals) of the TOR;

2. Immediately make the necessary adjustments to the timetable of activities set forth in Supplemental
Notice No. 1, considering that the periods specified therein have already lapsed, without awaiting the lapse
of the period for publication;

3. Strictly adhere to the TOR, Supplemental Notice No. 1, as adjusted, the Certification of Successful
Negotiations, and the NEDA JV Guidelines, in the conduct and completion of the Swiss Challenge
procedure on SM Land Inc.’s unsolicited proposal accepted by the BCDA; and

4. Perform any and all acts necessary to carry out and complete Stage Three of the Swiss Challenge
pursuant to the provisions of the TOR and NEDA JV Guidelines, including, but not limited to, subjecting
petitioner's unsolicited proposal to a competitive challenge.

In the event that SM Land, Inc. already obtained from BCDA the amount representing its Proposal Security, SM
Land, Inc. is hereby DIRECTED to re-post the Proposal Security, in the same amount as the previous one, on the
first day of the publication of the invitation for comparative proposals, per the NEDA JV Guidelines.

SO ORDERED.

DISSENTING OPINION

LEONEN, J.:

SM Land, Inc. (SMLI) offered to pay the Bases Conversion and Development Authority (BCDA) ₱38,500.00 per
square meter for the development of BCDA's· 33.1-hectare BNS/PMC/ASCOM/SSU properties in Fort Bonifacio. 1

BCDA claimed that SMLI's offer would be "prejudicial to government's interest for ... it will not yield the best value for
the govemment."  BCDA estimates that it could get a minimum bid of ₱40,000.00 per square meter through public
2

bidding.3

This case arose from BCDA's issuance of Supplemental Notice No. 05,  which terminated the competitive challenge
4

for the selection of BCD A's joint venture partner for the development of a portion of Fort Bonifacio. A pertinent
portion of BCD A's Supplemental Order No. 05 reads: Supplemental Notice No.05

06 August 2012

This Supplemental Notice No. 05 is issued to inform the Private Sector Entities (PSEs) that the Competitive
Challenge for the Selection of BCDA's Private Sector Partner for the Privatization and Development of the
approximately 33.1-hectare BNS/PMC/ ASCOM/SSU Properties in Bonifacio South is hereby tenninated. BCDA
shall not dispose the property through Competitive Challenge.

Article VIII. Qualifications and Waivers of the Terms of Reference provides that BCDA reserves the right to call off
this disposition prior to acceptance of the proposal(s) and call for a new disposition process under amended rules
and without any liability whatsoever to any or all the PSEs, except the obligation to return the Proposal Security.

BCDA will notify and invite interested Proponents to the next scheduled selection process for BCDA's partner for the
privatization and development of the subject property. 5

SMLI now challenges the supplemental order through a petition  for certiorari, prohibition, and mandamus. Its main
6

argument is that BCDA's unilateral termination of the competitive challenge is a violation of SMLI's rights as an
original proponent and constitutes abandonment of BCDA's contractual obligations based on BCDA's acceptance of

621
petitioner's unsolicited proposal, the certification of successful negotiation, the terms of reference, and the National
Economic and Development Authority Joint Venture Guidelines and Procedures (Joint Venture Guidelines). 7

The issue here is not whether the Joint Venture Guidelines should apply. Rather, the issue is whether the
government is contractually bound to complete the competitive challenge initiated by its acceptance of SMLI' s
unsolicited proposal.

I dissent from the conclusion of the majority.

The government is not clearly contractually bound to a specific selection and disposition process.

In a situation where there can be many possible bidders, competitive challenge where the first offer is lower than the
potential floor for open competitive bidding may be disadvantageous to the public's interest.

BCDA did not consent to a

provision that limits the selection
process to competitive challenge

SMLI' s arguments arise from the premise that there was a contract between the parties, providing that the selection
process should be restricted to competitive challenge.

Neither BCDA's acceptance of SMLI's unsolicited proposal, its , issuance of the certification of successful
negotiation, nor the terms of reference did create a contract that could give rise to a right on the part of SMLI and an
obligation on the part of BCDA to adhere to a specific selection process.

Article 1318 of the Civil Code provides the requisites of a contract:

Art. 1318. There is no contract unless the following requisites concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;

(3) Cause of the obligation which is established.

The documents used by SMLI as bases for its alleged right to a completed competitive challenge do not show that
the parties· had a clear meeting of the minds to give SMLI a right to a completed competitive challenge or to restrict
the selection process to competitive challenge. BCDA's acceptance of SMLI's unsolicited proposal shows no
commitment on the part of BCDA to restrict its options for the selection process.

Based on BCDA's letter  dated May 12, 2010, the acceptance contained only a declaration that SMLI' s proposal
8

was accepted for purposes of subjecting it to a procedure.  BCDA did not make a binding commitment on any
9

matter, including the completion of the procedure, in favor of any person. Pertinent provisions in the acceptance
letter are reproduced as follows:

12 May 2010

....

We are pleased to inform you that the Bases Conversion and Development Authority (BCDA) has, after initial
evaluation, decided to accept your proposal, finding it substantially compliant and responsive to the plans and
requirements of BCDA, for the purpose of subjecting the same to Competitive Challenge Procedure (Annex "C") of
the 2008 Guidelines and Procedures for Entering into Joint Venture Agreements issued by the National Economic
and Development Authority (NEDA) on 02 May 2008.

Please note that this acceptance shall mean only that authorization is given to proceed with detailed negotiations on
the terms and conditions of the JV activity and shall not bind BCDA to enter into a JV agreement, nor to the terms of
your unsolicited proposal.  (Emphasis supplied)
10

Meanwhile, the certification of successful negotiation merely stated that SMLI and BCDA had reached an agreement
as to the terms and conditions of the joint venture activity  and that SMLI was eligible to enter into a joint venture·
11

activity with BCDA.  It does not contain a commitment on the part of BCDA a) to enter into a joint venture activity; b)
12

to subject SMLI's proposal to a completed competitive challenge; or c) to limit BCDA 's options of the selection

622
process to competitive cha}lenge only. Neither does it vest the right upon SMLI to the award of the joint venture
agreement.· The terms agreed upon are merely drafts of what would be the joint venture agreement terms. These
are documents preparatory to the joint venture agreement. Pertinent provisions of the certification are quoted as
follows:

Certification of Successful Negotiation

WHEREAS, under Republic Act No. 7227, the Bases Conversion and Development Authority (BCDA) is mandated
to accelerate the sound and balanced conversion into alternative productive uses of the Clark and Subic military
reservations and their extensions, to raise funds by the sale of portions of Metro Manila military camps, and to apply
said funds for the development and conversion to productive civilian use of the said military base lands;

....

WHEREAS, after evaluation of the unsolicited proposal submitted by SMLI in accordance with the provisions of
Annex "C" of the JV Guidelines, the Joint Venture Selection Committee (JV-SC) created by BCDA for the selection
of a private partner for the BNS/PMC/ ASCOM/SSU Property recommended to the BCDA Board, and the BCDA
Board approved, per Board Resolution NO. 2010-05-100, the acceptance of the unsolicited proposal, subject to the
condition that such acceptance shall not bind BCDA to enter into a JV activity, but shall mean that authorization is
given to proceed with detailed negotiations ·on the terms and conditions of the JV activity;

....

NOW THEREFORE, for and in consideration of the foregoing, BCDA and SMLI have, after successful negotiations
pursuant to Stage Jj of Annex C - Detailed Guidelines for Competitive Challenge Procedure for Public-Private Joint
Ventures of the NEDA JV Guidelines, reached an agreement on the purpose., terms and conditions. on the JV
development of the subject property, which shall become the terms for the Competitive Challenge 1 pursuant to
Annex C of the JV Guidelines, as follows:

....

FURTHERMORE, BCDA hereby declares SMLI eligible to enter into the proposed JV activity. Based on the
eligibility documents submitted by SMLI, BCDA determined that SMLI (i) is a duly registered and existing corporation
with Filipino ownership of more than sixty (60%) and is authorized by Philippine laws to own, hold or develop lands
in the Philippines; (ii) it has completed within a period of ten ( 10) years from the date of submission of and receipt of
its Proposal a similar or related development Project with a total cost of at least, fifty percent (50%) of the minimum
investment requirement, which in this case is ₱18.7 billion; and (iii) it has the financial capability to undertake the
Project.

BCDA and SMLI have agreed to subject SMLI's Original Proposal to Competitive Challenge pursuant to Annex C -
Detailed Guidelines for Competitive Challenge Procedure for PublicPrivate 'Joint Ventures of the NEDA JV
Guidelines, which competitive challenge process shall be immediately implemented following the Terms of
Reference (TOR) Volumes 1 and 2. BCDA shall, thus, commence the activities for the solicitatfon for comparative
proposals, with the publication of the Invitation to Apply for Eligibility and to Submit Comparative Proposals
(IAESCP) thrice for two (2) consecutive weeks in three (3) major newspapers starting on 10 August 2010, on which
date SMLI shall post the required Proposal Security as stated above. Pursuant to Annex C of the NEDA JV
Guidelines, if, after solicitation of comparative proposals, BCDA determines that an offer by a comparative PSE is
found to be superior to SMLI's Original Proposal, SMLI shall be given the right to match such superior offer within
the period prescribed in the attached TOR Volumes 1 and 2. If SMLI is able to match such superior offer, SMLI shall
be issued the Notice of Award, subject to Item No. 19 above. In the event, however, that SMLI is unable to match
the superior offer, the comparative PSE which submitted such superior offer shall be awarded the contract, subject
to Item No. 19 above.  (Emphasis supplied)
13

Similarly, the terms of reference only described the procedural aspects of the competitive challenge. It contained no
provision limiting BCDA's selection process options to competitive challenge, thus:

TERMS OF REFERENCE

for the Competitive Challenge for the Selection

of BCDA's Joint Venture Partner
for the Privatization and Development of the Approximately

33.1-Hectare NS/PMC/ASCOM/SSU Properties in Bonifacio South

Volume 1: Eligibility Documents

623
These Terms of Reference (TOR) describe the procedures that shall be followed in connection with the disposition
of tht:; approximately . . . 33.1-hectare Bonifacio Naval Station (BNS)/Philippine Marine Corps (PMC)/Army Support
Command (ASCOM)/Service Support Unit (SSU) Properties in Bonifacio South (the "Property"), located along
Lawton Avenue, Fort Bonifacio, Taguig City, Metro Manila, Philippines.

These TOR are issued in two (2) volumes: Volume 1 - Eligibility Documents; and Volume 2 - Tender Documents.
This first volume details the requirements for eligibility to qualify as a Private Sector Entity (PSE) that may submit
Technical and Financial Proposals for the Joint Venture (JV) Privatization and Development of subject Property, and
the procedures involved in the entire Competitive Challenge procedure. Private sector entities (PSEs) which shall be
declared eligible shall be issued the second volume of the TOR which details the requirements and procedures for
the submission of Technical and Financial Proposals, with the endview of determining a Winning PSE for subject JV
development.

BCDA reserves the right to amend ·or supplement Volume 1 of these TOR at any time prior to the submission of the
Eligibility Documents/

These TOR shall be administered by the Joint Venture Selection Committee (JV-SC) that has been duly constituted
for the purpose pursuant to BCDA Board Resolution No. 2010-03-057. Any decision of and/or action taken by the
JV-SC is recommendatory,; and is subject to the approval/ratification/confirmation of the BCDA Board. Prior to
BCDA's execution of the Joint Venture Agreement (JVA) with the Winning PSE, the Office .of the Government
Corporate Counsel (OGCC), as BCDA's statutory counsel, shall issue the corresponding Counsel's Opinion.

I. PROJECT RA TIO NALE

1. Under Republic Act No. 7227, BCDA is mandated to accelerate the sound and balanced conversion into
alternative productive uses of the Clark and Subic military reservations and their extensions, to raise funds
by the sale of portions of Metro Manila camps, and to apply said funds for the development and conversion
to productive civilian use of said military base lands. 2. The overall legal basis and framew.ork for the
selection of BCDA's joint venture partner for the privatization and development of the Property are R.A.
7227, as amended by R.A: 7917, Executive Order No. 40, the NEDA JV Guidelines issued pursuant to E.O.
No. 423 s. 2005, R.A. 9184 and its Implementing Rules and Regulations to the extent applicable, and other
relevant laws, Executive Orders, and rules and regulations to the extent applicable.

3. On 04 May 2010, BCDA received from SM Land, Inc. (SMLI) an unsolicited proposal for the development
of the said Property. The "Guidelines and Procedures for Entering into P Joint Venture (JV) Agreements
Between Government and Private Entities" (JV Guidelines), issued by the National Economic and
Development Authority (NEDA) in consultation with the Government Procurement Policy Board (GPPB) and
the OGCC pursuant to Executive Order No. 423 s. 2005, were published last 17 April 2008 (Philippine Star)
and had taken full force and effect on 02 May 2008. Annex C thereof, or the "Detailed Guidelines for
Competitive Challenge Procedure for Public-Private Joint Ventures", provides the bases for BCD A's
consideration of the unsolicited proposal of SMLI.

....

4. Hence, in accordance with Annex C of the JV Guidelines, BCDA proceeded with the consideration of the
unsolicited proposal submitted by SMLI. Upon recommendation by the BCDA JV-SC, the BCDA Board
approved, per Board Resolution No. 2010-05-100, the acceptance of the unsolicited proposal. Subject to the
condition that such acceptance shall not bind BCDA to enter into a JV activity, but shall mean that
authorization is given to proceed with detailed negotiations on the terms and conditions of the JV activity,
BCDA went into detailed negotiations with SMLI. The JV-SC ascertained the eligibility of SMLI, in
accordance with Article III.2 of Annex C of the JV Guidelines, and reached an agreement with the same on
the purpose, terms and conditions of the JV development of subject Property on __ 2010. Therefore, BCDA,
under Stage 3 of the Annex C Guidelines on Competitive Challenge, is now seeking comparative proposals
from PSEs for the JV privatization and development of the Property, located along Lawton Avenue, Fort
Bonifacio, Taguig City, on an "AS-IS, WHERE-IS" basis, to challenge the SMLI proposal.

....

III. GENERAL INFORMATION

1. Applicable Laws. All laws governing the operation and implementation of these TOR shall be deemed to
be those of the Republic of the Philippines, such as, but not limited to, Republic Act No. 7227, as amended
by Republic Act No. 7917, and the "Guidelines and Procedures for Entering into Joint Venture Agreements
Between Government and Private Entities" issued by the NEDA pursuant to Executive Order No. 423, which
took effect on 02 May 2008, as well as Executive Order No. 62 and Republic Act No. 9184, its Implementing
Rules and Regulations and its amendments, to the extent applicable, where applicable.

624
 2. Publication of Invitation for Comparative Proposals. BCDA shall publish in three (3) newspapers of
general nationwide circulation. . . the "Invitation to Apply for Eligibility and to Submit a Comparative
Proposal" (IAESCP). This shall serve to inform and to invite prospective PSEs to the Competitive Challenge
procedure at hand ....

3. Joint Venture Arrangement. As laid out in Article 1 above, the ultimate objective of BCDA in qualifying
prospective PSEs to be eligible to submit Technical and Financial Proposals is to select a partner in the
unincorporated/contractual joint venture (JV) for the privatization and development of the subject
Property ....

....

4. Amendment of these TOR. The information and/or procedures contained in these TOR may be amended
or' replaced at any time, at the discretion of the JV-SC, subject to the approval/confirmation of the BCDA
Board, without giving prior notice or providing for any reason. Should any of the information and/or
procedures contained in these TOR be amended or replaced, the JV-SC shall inform and send
Supplemental Notices to all PSEs ....

VIII. QUALIFICATIONS AND WAIVERS

....

3. BCDA further reserves the right to call off this disposition prior to acceptance of the proposal(s) and call for a new
disposition process under amended rules, and without any liability whatsoever to any or all the PSEs, except the
obligation to return the Proposal Security . . . . .  (Emphasis supplied)
14

The inclusion of Article III.4 and Article VIII.3 in the terms of reference cmnfirms BCDA's authority to reconsider the
selection process. These sections confirm BCDA' s power to unilaterally terminate the selection procedure.

Article III.4 provides for unilateral amendment of the information and proced.ures. This is a window for BCDA to alter
the procedures to adopt other selection processes.

Meanwhile, Article VIII.3 expressly bestows upon BCDA the power to terminate the disposition process without
incurring any liability to the private sector entities.

II

BCDA cannot consent to a

provision ·that limits the selection
process to competitive challenge

Not only is it unclear from the above documents that BCDA consented to restricting. its choice of selection process
to ·competitive challenge; it would also be grave abuse of discretion on the part of BCDA to agree to that restriction.
This is because the law requires that it adhere to certain policy considerations.

When the terms admit different interpretations, the Civil Code requires the use of an interpretation "bearing that
import which is most adequate to render it effectual."  When the government enters into agreements or terms, it
15

does so only in accordance with the law and to carry out the policies and purposes of the law. These laws and the
corresponding policies are incorporated in terms entered into by the government. The presumption when terms are
ambiguous, therefore, should be that which is consistent with the law, government policies, and its purposes. That
would be the import that is "most adequate to render [the terms of a government ideal or understanding] effectual." 16

Section 2 of Republic Act No. 7227  provides for the government's policy to enhance the benefits from the
17

conversion of BCDA-administered properties, thus:

Sec. 2. Declaration of Policies. - It is hereby declared the policy of the Government to accelerate the sound and
balanced conversion into alternative productive uses of the Clark and Subic military reservations and their extension
(John Hay Station, Wallace Air Station, O'Donnell Transmitter ·Station, San Miguel Naval Communications Station
and Capas Relay Station), to raise funds by the sale of portions of Metro Manila military camps, and to apply said
funds as provided herein for the development and conversion to productive civilian use of the lands covered under
the 1947 Military Bases Agreement between the Philippines and the Unit~d States of America, as amended.

It is likewise the declared policy of the Government to enhance the benefits to be derived from said properties in
order to promote the economic and social development of Central Luzon in particular and the country in general.
(Emphasis supplied)

625
Executive Order No. 62  provides for BCDA's duty to ensure maximized use of Metro Manila military camps. It also
18

provides that public bidding is the general rule in determining the privatization process to be used. Other processes
may be considered only when the exigencies demand it and In accordance with national interest, thus:

SEC. 1. POLICY FRAMEWOR;K The BCDA shall be guided by the following policy framework in its conversion
program:

....

1.4 The BCDA shall plan and implement fund generating projects which will maximize the use of the military camps
in Metro Manila that shal.l be sold pursuant to Section 8 of the Act with the funds generated therefrom to be strictly
utilized as provided for in the Act; and

1.5 Conversiort projects must be financially self-sustaining in the long term and should contribute significantly to
national economic development.

....

SEC. 4. PRIVATIZATION. The BCDA hereby adopts the following policy guidelines in pursuing privatization,
commercialization or divestment projects:

4.1 Privatization shall be the basic thrust of the conversion and development of the baselands. Privatization modes
shall include, among others, leasing, joint ventures, management contract, buildoperate-transfer (BOT) and its
variants;

....

4.3 As a general rule, the privatization process should be conducted through public bidding. However, in the
exigency of public service and national interest, and consonant with existing laws, rules and regulations on
negotiated contracts, simplified bidding through sealed canvass of at least three (3) pre-qualified investors, or direct
negotiation, may be resorted to. The process of selecting the prospective lessees and private investors shall be
transparent, where procedures and selection processes adapted are made public through newspaper
advertisements and similar other means; .... (Emphasis supplied)

BCDA issued Supplemental Notice No. 05 only after finding that the competitive challenge would be
disadvantageous to the government and, therefore, against national interest. Unless BCDA was determined in
deviating from government policies, it had no choice but to recommend to the President who had control and
supervision over BCDA on policy matters  that the privatization be done through public bidding.
19

As opposed to competitive challenge, public bidding- allows the government to set the minimum contract price and
set contract terms known to and appfied to all interested private entities. It is the more transparent and competitive
mode of awarding government contracts because no one is given a preferred status. Competitive challenge may
only be applicable should there be no interested party or there is need to entice interest among other private sector
entities. Certainly, it should not be availed to give advantage to any party without any clear basis. In this case,
petitioner has not shown why competitive challenge is more advantageous from the public policy standpoint.
Competitive challenge is the exception. Open competitive bidding is the general rule.

Our laws abide by the principles of transparency and competitiveness in awarding government contracts. Republic
Act No. 9184,  for example, provides:
20

Sec. 3. Governing Principles on Government Procurement. -All procurement of the national government, its
departments, bureaus,. offices and agencies, including state universities and colleges, government-owned and/or
-controlled corporations, government financial institutions and local government units, shall, in all cases, be
governed by these principles:

(a) Transparency in the procurement process and in the implementation of procurement contracts.

(b) Competitiveness by extending equal opportunity to enable private contracting parties who are eligible
and qualified to participate in public bidding.

.... (Emphasis supplied)

Section 8 of Executive Order No. 423  provides that guidelines issued by the National Economic and Development
21

Authority regarding joint venture agreements with private entities should adhere to the objective of "promoting
transparency and competitiveness," thus:

626
Sec. 8. Joint Venture Agreements.-The NEDA, in consultation with the GPPB, shall issue guidelines regarding joint
yenture agreements with private entities with the objective of promoting transparency, competitiveness, and
accountability in government transactions, and, where applicable, complying with the requirements of an open and
competitive public bidding. (Emphasis supplied)

Because of the level of transparency and competitiveness in public bidding, it is considered the preferred mode of
awarding government contracts. Section 2 of Executive Order No. 40  states:
22

Sec. 2. Statement of Policy. It is the policy of the government that procurement shall be competitive and transparent
and therefore shall be through public bidding, except as otherwise provided in this Executive Order.

Republic Act No. 9184 provides:

Sec. 10. Competitive Bidding. - All Procurement shall be done through Competitive Bidding, except as provided for
in Article XVI of this Act.

Executive Order No. 423 confirmed public bidding's preferred status as a mode of awarding government contracts:

Sec. 1. Policy Requiring Public Bidding. It is the policy of this Administration that all Government contracts of
Government Agencies shall be awarded through open and competitive public bidding, save in exceptional cases
provided by law and applicable rules and regulations ....

BCDA's acceptance of SMLI's unsolicited proposal, the issuance of the certificate of successful negotiations, and
terms of reference, should be read in light of the preference given to public bidding, the policy in favor of maximized
use of propeqies, and national interest. Any person who deals with the government also accepts the condition that
the government is not bound by any provision or interpretation that is against the law, government policies, and
national interest. The government may not agree to contract stipulations that are disadvantageous to it. These are
conditions that are deemed incorporated in dealings with BCDA.

In this case, the government policies· and purposes are best served through public bidding. Public bidding provides
more transparency, competitiveness, and benefit to the government. The ponencia is correct in reading the word
"shall" in Stage Three of Annex C of the applicable Joint Venture Guidelines  as mandatory:
23

Stage Three - Once the negotiations have been successfully completed, the JV activity shall be subjected to a
competitive challenge, as follows:

1. The Government Entity shall prepare the tender documents pursuant to Section II (Selection/Tender
Documents) of Annex A hereof.  The eligibility criteria used in determining the eligibility of the private sector
1âwphi1

entity shall be the same as those stated in the tender documents. Proprietary information shall, however, be
respected and protected, and treated with confidentiality. As such, it shall not form part of the tender and
related documents. The Head of the Government Entity shall approve all tender documents including the
draft contract before the publication of the invitation for comparative proposals.

2. Within seven (7) calendar days ·from the issuance of the Certification of a successful negotiation referred
to in Stage Two above, the JV-SC shall publish the invitation for comparative proposals in accordance with
Section III.2. (Publication of Invitation to Apply for Eligibility and to Submit Proposal) under Annex A hereof.

3. The private sector entity shall post the proposal security at the date of the first day of the publication of the
invitation for comparative proposals in the amount and form stated in the tender documents

4. The procedure· for the determination of eligibility of comparative proponents/private sector participants,
issuance of supplemental competitive selection bulletins and pre-selection conferences, submission and
receipt of proposals, opening and evaluation of proposals shall follow the procedure stipulated under Annex
A hereof. In the evaluation of proposals, the best offer shall be determined to include the original proposal of
the private sector entity. If the Government Entity determines that an offer made by a comparative private
sector participant other than the original proponent is superior or more advantageous to the government
than the original proposal, the private sector entity who submitted the original proposal shall be given the
right to match such superior or more advantageous offer within thirty (30) calendar days from receipt of
notification from the Government Entity of the results of the competitive selection. Should no matching offer
be received within the stated period, the JV activity shall be awarded' to the comparative private sector
participant submitting the most advantageous proposal. If a matching offer is received within the prescribed
period, the JV activity shall be awarded to the original proponent. If no comparative proposal is received by
the Government Entity, the JV activity shall be immediately awarded to the original private sector proponent.

627
 5. Within seven (7) calendar days from the date of completion of the Competitive Challenge, the JV-SC shall
submit the recommendation of award to the Head of the Government Entity. Succeeding activities shall be in
accordance with Sections VIII. (Award and Approval of Contract) and X (Final Approval) of Annex A hereof.

However, this only applies when the parties have contractually agreed to abide by the procedure outlined in Annex
C of the Joint Venture Guidelines.

The procedure in Annex C are guidelines. They do not have the same standing as law. It may be modified by the
parties in their contract, provided that the modifications are consistent with the law. The rights of the· parties are
determined by a valid agreement or, in this case, by Annex C, if it was agreed upon and only so long as it is still
consistent with the law. In that case, private sector entities may expect that the competitive challenge be done in
accordance with it.

Hence, contrary to what was stated in the ponencia, the word, "shall," in "Stage Three - Once the negotiations have
been successfully completed, the JV activity shall be subjected to a competitive challenge ... " should not be
interpreted to vest upon private sector entities the right to proceed to the competitive challenge after the completion
of Stages One and Two, once it is determined that proceeding with competitive challenge would be against the law
and government policy.

First, the Joint Venture Guidelines does not vest upon the original proporient "[t]he right to the conduct and
completion of a competitive challenge."  Based on the Joint Venture Guidelines and the terms of reference, the
24

extent of protection given to an original proponent is limited to the right to match the proposals of comparative
private sector entities or PSEs. It becomes effective only upon submission of proposals from other PSEs, thus:

TERMS OF REFERENCE

for the Competitive Challenge for the Selection of BCD A's Joint Venture Partner for the Privatization and
Development of the Approximately

33.1-Hectare NS/PMC/ASCOM/SSU Properties in Bonifacio South

Volume 1: Eligibility Documents

....

II. DEFINITION OF TERMS

....

Competitive Challenge means an alternative selection process, as defined under the "Guidelines and Procedures
for Entering into Joint Venture Agreements Between Government and Private Entities" issued by the NEDA, wherein
third parties shall be invited to submit comparative proposals to an unsolicited proposal; the PSE that submitted the
unsolicited proposal is accorded the right to match any superior offers given by a comparative PSE. 25

Annex C of the National Economic and Development Authority Joint Venture Guidelines reads as follows:

....

Stage Three – . . .

....

4. The procedure for the determination of eligibility of comparative proponents/private sector participants, issuance
of supplemental competitive selection bulletins and pre-selection conferences, submission and receipt of proposals,
opening and evaluation of proposals shall follow the procedure stipulated under Annex A hereof. In the evaluation of
proposals, the best offer shall be determined to include the original proposal of the private sector entity. If the
Government Entity determines that an offer made by a comparative private sector participant other than the original
proponent is superior or more advantageous to the government than the original proposal, the private sector entity
who submitted the original proposal shall be given the right to match such superior or more advantageous offer
within thirty (30) calendar days from receipt of notification from the Government Entity of the results of the
competitive selection. Should no matching offer be received within the stated period, the JV activity shall be
awarded to the comparative private sector participant submitting the most advantageous proposal. If a matching
offer is received within the prescribed period, the JV activity shall be awarded to the original proponent. If no
comparative proposal is received by the Government Entity, the JV activity shall be immediately awarded to the
original private sector proponent. (Emphasis supplied)

628
Second, if Stage Three is read in conjunction with Executive Order No. 62 and other laws, it is not the completion of
Stages 1 and 2 of the competitive challerige procedure under Annex C of the Joint Venture Guidelines that gives
private sector entities rights. Whatever rights that may have accrued to private sector entities under Annex C of the
Joint Venture Guidelines exist only as long as competitive challenge remains the operating process for· the
selection of a joint venture partner.

Commencement of the procedures under Annex C of the Joint Venture Guidelines cannot be interpreted as binding
the government to adhere to a specific selection process, regardless of policy and national interest considerations.

The documents issued by BCDA, therefore, should be considered as effective only if the choice of selection process
is competitive challenge. At Jany time prior to the execution of the joint venture agreement and after finding that
national interest and government policies should be best served through other processes, BCDA and the
government should not be limited in their choice of selection process for a joint venture partner.

It is for this reason that BCDA is not prohibited from aborting the entire process. Contrary to the ponencia's position,
there is no vested right to impair. Neither is there an obligation to renege on. Thus, any issue that may have arisen
regarding the interpretation of the term "disposition" in Section VIII.3 of the terms of reference is rendered
immaterial.  For clarity, however, the term "disposition" cannot be interpreted as anything other than the entire
26

competitive challenge process.  The terms of reference define "privatization' as "the disposition of the Property
27

through joint venture."  In the context of SMLI and BCDA's dealings, the object of disposition is always the 33.1-
28

hectare property of BCDA in Fort Bonifacio, and the disposition of that property is privatization. Privatization is an
entire process that starts from selection and ends with the actual transfer of ownership of property. 1âwphi1

This is not to say that the government may at any time renege on its contractual obligations. In this instance,
however, there is no contractual obligation to speak of that limits BCDA 's power to change the selection process
because it is not allowed to consent ·to such a provision. The documents used by SMLI to support its argument that
BCDA has the obligation to complete the competitive challenge contain no provision to that effect. However,
granting that there is such provision, that provision should be considered void because BCDA has no authority to
agree to it. For this reason alone, BCDA did not gravely abuse its discretion in issuing Supplemental Notice No. 05.

Finally, there would be no unjust enrichment on the part of BCDA or injustice on the part of SMLI if the competitive
challenge is terminated. BCDA offered to return the value of SMLI's security plus interest and admitted its obligation
to return it upon terpiination of the process.  As shown in the letter dated August 15, 2012, BCDA even "invite[d]
29

SMLI to participate in the bidding for the subject property."  SMLI is, therefore, not precluded from participating in
30

the subsequent disposition process that may be selected by BCDA. SMLI will be given an equal opportunity and
chance to become BCDA's partner.

Any advantage given to SMLI now, arising from ambiguous terms and from an erroneous interpretation of the Joint
Venture Guidelines, may have unnecessary and undesirable effects.

It is partiality in favor of one company that has deterred investors. Fairness and transparency have always been an
expectation for those who would wish to participate in our economy.

Accordingly, I vote to deny the petition.

629
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 175689               August 13, 2014

GEORGE A. ARRIOLA, Petitioner, 
vs.
PILIPINO STAR .NGAYON, INC. and/or MIGUEL G. BELMONTE, Respondents.

DECISION

LEONEN, J.:

The prescriptive period for filing an illegal dismissal complaint is four years from the time the cause of action
accrued. This four-year prescriptive period, not the three-year period for filing money claims under Article 291 of the
Labor Code, applies to claims for backwages and damages due to illegal dismissal.

This is a petition for review on certiorari of the Court of Appeals' Decision  and resolution  in CA-G.R. SP No. 91256,
1 2

affirming the decision of the National Labor Relations Commission. The Commission affirmed the Labor Arbiter’s
findings that there was no illegal dismissal in this case and that petitioner George A. Arriola abandoned his
employment with respondent Pilipino Star Ngayon, Inc.

In July 1986, Pilipino Star Ngayon, Inc. employed George A. Arriola as correspondent assigned in Olongapo Cityand
Zambales. Arriola had held various positions in Pilipino Star Ngayon, Inc. before becoming a section editor and

630
writer of its newspaper. He wrote "Tinig ng Pamilyang OFWs" until his column was removed from publication on
November 15, 1999. Since then, Arriola never returned for work. 3

On November 15, 2002, Arriola filed a complaint  for illegal dismissal, non-payment of salaries/wages, moral and
4

exemplary damages, actual damages, attorney's fees, and full backwages with the National Labor Relations
Commission. In his position paper,  Arriola alleged that Pilipino Star Ngayon, Inc. "arbitrarily dismissed"  him on
5 6

November 15, 1999. Arguing that he was a regular employee,Arriola contended that his rights to security of tenure
and due process wereviolated when Pilipino Star Ngayon, Inc. illegally dismissed him.  Pilipino Star Ngayon, Inc.
7

and Miguel G. Belmonte denied Arriola’s allegations. In their position paper,  they alleged that around the third week
8

of November 1999, Arriola suddenly absented himself from work and never returned despite Belmonte’s phone
callsand beeper messages. After a few months, they learned that Arriola transferred to a rival newspaper publisher,
Imbestigador, to write "Boses ng Pamilyang OFWs." 9

In his reply,  Arriola denied that he abandoned his employment. He maintained that Pilipino Star Ngayon, Inc.
10

ordered him to stop reporting for work and to claim his separation pay.To prove his allegation, Arriola presented a
statement of account  allegedly faxed to him by Pilipino Star Ngayon, Inc.’s accounting head. Thisstatement of
11

account showed a computation of his separation pay as of November 30, 1999.

Labor Arbiter Fatima Jambaro-Franco decided the case. At the outset, she ruled that laches had set in, emphasizing
that Arriola took three years and one day to file his complaint. According to the Labor Arbiter, this was "contrary to
the immediate and natural reaction of an aggrieved person."  If Arriola were indeed aggrieved, he would not have
12

waited three years and one day to sue Pilipino Star Ngayon, Inc. 13

The Labor Arbiter found that Arriola abandoned his employment with Pilipino Star Ngayon, Inc. to write for a rival
newspaper publisher.  She also noted Arriola’s admission that hedid not contemplate the filing of an illegal dismissal
14

complaint but nevertheless filed one upon his lawyer’s advice. 15

On Arriola’s money claims, the Labor Arbiter ruled that they have already prescribed.  She cited Article 291 ofthe
16

Labor Code, which requires that all money claims arising from employer-employee relations be filed three years
from the time the cause of action accrued. Since Arriola filed his complaint on November 15, 2002, which was three
years and one day from his alleged illegal dismissal on November 15, 1999,  the Labor Arbiter ruled that his money
17

claims were already barred.

Thus, in the decision  dated July 16, 2003, the Labor Arbiter dismissed Arriola's complaint for lack of merit.
18

On Arriola’s appeal, the National Labor Relations Commission sustained the Labor Arbiter’s findings and affirmed in
toto the decision dated July 16, 2003.  The Commission likewise denied Arriola’s motion for reconsideration  for
19 20

lack of merit. 21

Arriola filed a petition for certiorari with the Court of Appeals. 22

The Court of Appeals noted that the petition for certiorari questioned whether Arriola was illegally dismissed.
According to the appellate court, Arriola raised a factual issue "beyond the province of certiorari to resolve."  It
23

added that the Labor Arbiter’s factual findings, if affirmed by the National Labor Relations Commission,bound the
appellate court. 24

Nevertheless, the Court of Appeals resolved the factual issue "in the interest of substantial justice." 25

The Court of Appeals ruled that Arriola was not illegally dismissed. Pilipino Star Ngayon, Inc. had the management
prerogative to determine which columns to maintain in its newspaper. Its removal of "Tinig ng Pamilyang OFWs"
from publication did not mean that it illegally dismissed Arriola. His employment, according to the appellate court,did
not depend on the existence of the column. 26

The appellate court enumerated the following factual findings belying Arriola’s claim of illegal dismissal:

a) In his complaint, Arriola alleged that he did not receive his salary for the period covering November 1,
1999 to November 30, 1999. This implied that he had worked for the whole month of November 1999.
However, this was contrary to his claim that Pilipino Star Ngayon, Inc.dismissed him on November 15, 1999.

b) Sometime in 1999, an Aurea Reyes charged Arriola with libel. Pilipino Star Ngayon Inc.’s counsel
represented Arriola in that case and filed a counter-affidavit on November 24, 1999, nine days after Arriola’s
alleged illegal dismissal.

c) Pilipino Star Ngayon, Inc. never sent Arriola any notice of dismissal or termination. 27

631
Similar to the ruling of the Labor Arbiter and the National Labor Relations Commission, the Court of Appeals ruled
that it was Arriola who abandoned his employment.  The Court of Appeals likewise ruled that his money claims have
28

all prescribed based on Article 291 of the Labor Code. 29

Thus, in the decision  dated August 9, 2006, the Court of Appeals found no grave abuse of discretion on the part of
30

the National Labor Relations Commission and dismissed Arriola's petition for certiorari.

Arriola moved for reconsideration,  but the Court of Appeals denied the motion in its resolution  dated November
31 32

24, 2006.

In his petition for review on certiorari,  Arriola maintains that he did not abandon his employment. He insists that
33

Pilipino Star Ngayon, Inc. illegally dismissed him when it removed his column, "Tinig ng Pamilyang OFWs," from
publication. 34

On the finding that he abandoned his work in Pilipino Star Ngayon, Inc. to write "Boses ng Pamilyang OFWs" in
Imbestigador, Arriola presents a certification  from Imbestigador’s Managing Editor, Almar B. Danguilan, stating that
35

Arriola started writing for Imbestigador only on February 17, 2003. This was after he had filed his complaint for
illegal dismissal on November 15, 2002.

As to the finding that his money claims have prescribed, Arriola argues that the three-year prescriptive period under
Article 291 of the Labor Code should be counted from December 1, 1999, not November 15, 1999. According to
Arriola, Pilipino Star Ngayon, Inc. computed his separation pay up to November 30, 1999, as evidenced by the
faxed statement of account. Consequently, he was deprived of his salary as a regular employee beginning
December 1, 1999. His causeof action for payment of backwages and damages accrued only on December 1,
1999.36

Arriola argues that assuming thathis cause of action accrued on November 15, 1999, he pleads that his one-day-
late filing of the complaint be excused.

This court ordered Pilipino StarNgayon, Inc. and Belmonte to comment on Arriola’s petition for review on certiorari. 37

In their comment,  respondents argue that this court should not entertain Arriola’s petition for review on certiorari.
38

Arriola raised questions of fact not allowed in a Rule 45 petition. They highlight that the Labor Arbiter, the National
Labor Relations Commission, and the Court of Appeals all found that Arriola was not illegallydismissed and that he
abandoned his employment. These factual findings, respondents argue, bind this court. 39

Respondents maintain that Arriola was not illegally dismissed. On the contrary, it was Arriola who abandoned his
employment in Pilipino Star Ngayon, Inc. According to respondents,they "must not be faulted if they presumed that
[Arriola] was no longer interested in [writing for Pilipino Star Ngayon, Inc.]"  considering that he did not report for
40

work for more than three years.

On Arriola’s money claims, respondents argue that these have all prescribed. According to respondents, Arriola’s
one-day late filing of the complaint cannot be excused because prescription is a matter of substantive law, not
technicality. 41

Arriola replied to respondents’ comment, reiterating his arguments in his petition for review on certiorari. 42

The issues for our resolution are the following:

I. Whether Arriola’s money claims have prescribed

II. Whether Pilipino Star Ngayon,Inc. illegally dismissed Arriola

The petition lacks merit.

Arriola’s claims for backwages and 

damages have not yet prescribed when he filed his complaint 
with the National Labor Relations Commission

The Labor Arbiter, the National Labor Relations Commission, and the Court of Appeals all ruled that Arriola’s claims
for unpaid salaries, backwages, damages, and attorney’s fees have prescribed. They cited Article 291 of the Labor
Code, which requires that money claims arising from employer-employee relations be filed within three years from
the time the cause of action accrued:

632
Art. 291. MONEY CLAIMS. All money claims arising from employer-employee relations accruing during the
effectivity of this Code shall be filed within three (3) years from the time the cause of action accrued; otherwise they
shall be forever barred.

Article 291 covers claims for overtime pay,  holiday pay,  service incentive leave pay,  bonuses,  salary
43 44 45 46

differentials,  and illegal deductions by an employer.  It also covers money claims arising from seafarer contracts.
47 48 49

The provision, however, does not cover "money claims" consequent to an illegal dismissal such as backwages.It
also does not cover claims for damages due to illegal dismissal. These claims are governed by Article 1146 of the
Civil Code of the Philippines, which provides:

Art. 1146. The following actions must be instituted within four years:

(1) Upon injury to the rights of the plaintiff[.]

In Callanta v. Carnation Philippines, Inc.,  Virgilio Callanta worked as a salesperson for Carnation Philippines, Inc.
50

beginning in January 1974. On June 1, 1979, Carnation filed with the Regional Office No. X of the then Ministry of
Labor and Employment an application for issuance of clearance to terminate Callanta. The application was granted,
and Callanta’s employment was declared terminated effective June 1, 1979. 51

On July 5, 1982, Callanta filed a complaint for illegal dismissal with claims for backwages and damages. Inits
defense, Carnation argued that Callanta’s complaint was barred by prescription. 52

Carnation stressed that Callanta filed his complaint three years, one month, and five days after his termination.
Since illegal dismissal is a violation of the Labor Code, Carnation argued that Callanta’s complaint was barred by
Article 290 of the Labor Code.  Under Article 290, offenses penalized under the Code shall prescribe in three
53

years.54

As to Callanta’s claims for backwages and damages, Carnation contended that these claims arose from employer-
employee relations. Since Callanta filed his complaint beyond the three-year period under Article 291 of the Labor
Code, his claims for backwages and damages were forever barred. 55

This court ruled that Callanta’s complaint for illegal dismissal had not yet prescribed. Although illegal dismissal is a
violation of the Labor Code, it is not the "offense" contemplated in Article 290.  Article 290 refers to illegal acts
56

penalized under the Labor Code, including committing any of the prohibited activities during strikes or lockouts,
unfair labor practices, and illegal recruitment activities.  The three-year prescriptive period under Article 290,
57

therefore, does not apply to complaints for illegal dismissal.

Instead, "by way of supplement,"  Article 1146 of the Civil Code of the Philippines governs complaints for illegal
58

dismissal. Under Article 1146, an action based upon an injury to the rights of a plaintiff must be filed within four
years. This court explained:

. . . when one is arbitrarily and unjustly deprived of his job or means of livelihood, the action instituted to contest the
legality of one's dismissal from employment constitutes, in essence, an action predicated "upon an injury to the
rights of the plaintiff," as contemplated under Art. 1146 of the New Civil Code, which must be brought within four [4]
years.59

This four-year prescriptive period applies to claims for backwages, not the three-year prescriptive period under
Article 291 of the Labor Code. A claim for backwages, according to this court, may be a money claim "by reason of
its practical effect."  Legally, however, an award of backwages "is merely one of the reliefs which anillegally
60

dismissed employee prays the labor arbiter and the NLRC to render inhis favor as a consequence of the unlawful
act committed by the employer."  Though it results "in the enrichment of the individual [illegally dismissed], the
61

award of backwages is not in redress of a private right, but, rather, is in the nature of a command upon the employer
to make public reparation for his violation of the Labor Code." 62

Actions for damages due to illegal dismissal are likewise actions "upon an injury to the rights of the plaintiff." Article
1146 of the Civil Code of the Philippines, therefore, governs these actions. 63

Callanta filed his complaint for illegal dismissal with claims for backwages and damages three years, one month,
and five days from his termination. Thus, this court ruled that Callanta filed his claims for backwages and damages
well within the four-year prescriptive period. 64

This court applied the Callanta ruling in Texon Manufacturing v. Millena.  In Texon, Marilyn and Grace Millena
65

commenced work for Texon Manufacturing in 1990 until Texon terminated their employment. Texon first dismissed
Grace on May 31, 1994 then dismissed Marilyn on September 8, 1995. 66

633
On August 21, 1995, Grace filed a complaint for money claims representing underpayment and non-payment of
wages, overtime pay, and holiday pay with the National Labor Relations Commission. Marilyn filed her own
complaint for illegal dismissal with prayer for payment of full backwages and benefits on September 11, 1995. 67

Texon filed a motion to dismiss both complaints on the ground of prescription.  It argued that Grace and Marilyn’s
68

causes of action accrued from the time they began working in Texon. Their complaints, therefore, were filed beyond
the three-year prescriptive period under Article 291 of the Labor Code. 69

This court ruled that both complaints had not yet prescribed. With respect to Grace’s complaint for overtime pay and
holiday pay, this court ruled that the three-year prescriptiveperiod under Article 291 of the Labor Code applied.
Since Grace filed her claim one year, one month, and 21 days from her dismissal, her claims were filed within the
three-year prescriptive period.  With respect to Marilyn’s complaint for illegal dismissal with claims for backwages,
70

this court while citing Callanta as legal basis ruled that the four-year prescriptive period under Article 1146 of the
Civil Code of the Philippines applied. Since Marilyn filed her complaint three days from her dismissal, she filed her
complaint well within the four-year prescriptive period.  Applying these principles in this case, we agree that Arriola’s
71

claims for unpaid salaries have prescribed.  Arriola filed his complaint three years and one day from the time he was
1âwphi1

allegedly dismissed and deprived of his salaries. Since a claim for unpaid salaries arises from employer-employee
relations, Article 291 of the Labor Code applies.  Arriola’s claim for unpaid salaries was filed beyond the three-year
72

prescriptive period.

However, we find that Arriola’s claims for backwages, damages, and attorney’s fees arising from his claim of illegal
dismissal have not yet prescribed when he filed his complaint with the Regional Arbitration Branch for the National
Capital Region ofthe National Labor Relations Commission. As discussed, the prescriptive period for filing an illegal
dismissal complaint is four years from the time the cause of action accrued. Since an award of backwages is merely
consequent to a declaration of illegal dismissal, a claim for backwages likewise prescribes in four years.

The four-year prescriptive period under Article 1146 also applies to actions for damages due to illegal dismissal
since such actions are based on an injury to the rights of the person dismissed. In this case, Arriola filed his
complaint three years and one day from his alleged illegal dismissal.He, therefore, filed his claims for backwages,
actual, moral and exemplary damages, and attorney’s fees well within the four-year prescriptive period.

All told, the Court of Appeals erred infinding that Arriola’s claims for damages have already prescribed when he filed
his illegal dismissal complaint.

II

Arriola abandoned his employment with

Pilipino Star Ngayon, Inc.

In general, we do not entertain questions of fact in a petition for review on certiorari.  We do not try facts.  Rule 45,
73 74

Section 1 of the Rules of Court is clear that in a petition for review on certiorari with this court, only questions of law
may be raised:

Section 1. Filing of petition with Supreme Court.

A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme
Court a verified petition for review on certiorari. The petition shall raise only questions of lawwhich must be distinctly
set forth. (Emphasis supplied)

A question of fact exists "when the doubt arises as to the truth or falsity of the alleged facts."  On the other hand,
75

there is a question of law "when there is doubt as to what the law is on a certain state of facts."  As this court
76

explained in Century Iron Works, Inc. v. Bañas: 77

. . . For a question to be one of law, the question must not involve an examination of the probative value of the
evidence presented by the litigants or any of them. The resolution of the issue must rest solely on what the law
provides on the given set of circumstances. Once it is clear that the issue invites a review of the evidence
presented, the question posed is one of fact. 78

This court has made exceptions to this rule. We may review questions of fact in a petition for review on certiorari if:

(1) the findings are grounded entirely on speculations, surmises, or conjectures; (2) the inference made is manifestly
mistaken, absurd, or impossible; (3) there isa grave abuse of discretion; (4) the judgment is based on
misappreciation of facts; (5) the findings of fact are conflicting; (6) in making its findings, the same are contrary to
the admissions of both appellant and appellee; (7) the findings are contrary to those of the trial court; (8) the findings
are conclusions without citation of specific evidence on which they are based; (9) the facts set forth in the petition as

634
well as in the petitioner’s main and reply briefs are not disputed by the respondent; and (10) the findings of fact are
premised on the supposed absence of evidence and contradicted by the evidence on record. 79

In his petition for review on certiorari, Arriola raises questions of fact. He invites us to examine the probative value of
a faxed letter  containing a computation of his separation pay, and a certification  from Imbestigador’s Managing
80 81

Editor, stating that Arriola started writing for Imbestigador only on February 17, 2003. These pieces of documentary
evidence allegedly prove that Pilipino Star Ngayon, Inc. illegally dismissed Arriola and that he did not abandon his
employment.

This court has ruled that the issues of illegal dismissal  and abandonment of employment  are factual issues which
82 83

cannot be raised in a petition for review on certiorari. Arriola also failed to persuade us why we should make an
exception in this case.

We agree that Pilipino Star Ngayon, Inc. did not illegally dismiss Arriola. As the Court of Appeals ruled, "the removal
of [Arriola’s] column from private respondent [Pilipino Star Ngayon, Inc.’s newspaper] is not tantamount to a
termination of his employment as his job is not dependent on the existence of the column ‘Tinig ng Pamilyang
OFWs.’"  When Pilipino Star Ngayon, Inc. removed "Tinig ng Pamilyang OFWs" from publication, Arriola remained
84

as section editor. Moreover, a newspaper publisher has the management prerogative to determine what columns to
print in its newspaper.  As the Court of Appeals held:
85

. . . it is a management prerogative of private respondent [Pilipino Star Ngayon, Inc.] to decide on what sections
should and would appear in the newspaper publication taking into consideration the business viability and
profitability of each section. Respondent [Pilipino Star Ngayon, Inc.] decided to replace the "Pamilyang
OFWs"section with another which it ought would better sell to the reading public. Every business enterprise
endeavors to increase its profits. In the process, it may adopt or devise means designed towards that goal. Even as
the law is solicitous of the welfare of the employees, it must also protect the right of an employer to exercise what
are clearly management prerogatives. . . . The free will of management to conduct its own business affairs to
achieve its purposes cannot be denied. 86

Arriola abandoned his employment with Pilipino Star Ngayon, Inc. Abandonment is the "clear, deliberate and
unjustified refusal of an employee to continue his employment, without any intention of returning."  It has two
87

elements: first, the failure to report for work or absence without valid or justifiable reason and, second, a clear
intention to sever employer-employee relations exists.  The second element is "the more determinative factor and is
88

manifested by overt acts from which it may be deduced that the employee has no more intention to
work." Assuming that Arriola started writing for Imbestigador only on February 17, 2003, he nonetheless failed to
89

report for work at Pilipino Star Ngayon, Inc. after November 15, 1999 and only filed his illegal dismissal complaint on
November 15, 2002. Hetook three years and one day to remedy his dismissal. This shows his clear intention to
sever his employment with Pilipino Star Ngayon, Inc.

Contrary to Arriola’s claim, Villar v. NLRC,  Globe Telecom, Inc. v. Florendo-Flores,  and Anflo Management &
90 91

Investment Corp. v. Bolanio  do not apply to this case. In these cases, the dismissed workers immediately took
92

steps to remedy their dismissal, unlike Arriola who "slept on his rights."  In Villar, the workers filed their complaint
93

within the month they were dismissed.  In Globe,the employee filed her complaint two months after she had been
94

constructively dismissed.  In Anflo,the employee filed his complaint one day after he had been dismissed.
95 96

With respect to the computation ofArriola’s separation pay allegedly faxed by Pilipino Star Ngayon, Inc.’s accounting
head, we agree with the Court of Appeals that this does notprove that Arriola was illegally dismissed:

[The faxed computation] does not conclusively show that the salaries were withheld from petitioner Arriola starting
01 December 1999. It could not likewise be given probative value as the said document does not bear the signature
ofan unauthorized representative of private respondent PSN[.] [N]either does it bears (sic) the official seal of the
company. Besides, the abovementioned computation for separation pay is not a conclusive proof of the existence of
dismissal or termination from work. It is just a mere computations (sic) which the authenticity thereof is being
assailed.  (Citations omitted)
97

Considering the foregoing, we will not disturb the Labor Arbiter’s findings that Arriola was not illegally dismissed and
that he abandoned his employment. This is true especially since the National Labor Relations Commission and the
Court of Appeals affirmed these factual findings. 98

WHEREFORE, the petition is DENIED. The Court of Appeals' decision dated August 9, 2006 and resolution dated
November 24, 2006 in CA-G.R. SP No. 91256 are AFFIRMED.

SO ORDERED.

635
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 172404               August 13, 2014

PEOPLE'S TRANS-EAST ASIA INSURANCE CORPORATION, a.k.a. PEOPLE'S GENERAL INSURANCE

CORPORATION, Petitioner, 
vs.
DOCTORS OF NEW MILLENNIUM HOLDINGS, INC., Respondent.

DECISION

LEONEN, J.:

The liabilities of an insurer under the surety bond are not extinguished when the modifications in the principal
contract do not sub'stantially or materially alter the principal's obligations. The surety is jointly and severally liable
with its principal when the latter defaults from its obligations under the principal contract.

636
This is a petition for review on certiorari under Rule 45 of the Rules of Court, praying for the reversal of the
decision of the Court of Appeals which set aside the decision  of the Regional Trial Court of Pasig City, Branch 267.
1 2

In the assailed decision,the Court of Appeals held People's General Insurance Corporation and Million State
Development Corporation jointly and severally liable to respondent Doctors of New Millennium Holdings, Inc.

As found by the trial court and the Court of Appeals, the facts are as follows.

Doctors of New Millennium Holdings, Inc. is a domestic corporation comprised of about 80 doctors. On March 2,
1999, it entered into a construction and development agreement (signed agreement) with Million State Development
Corporation, a contractor, for the construction of a 200-bed capacity hospital in Cainta, Rizal. 3

According to the terms of the signed agreement, Doctors of New Millennium obliged itself to pay ₱10,000,000.00 to
Million State Development at the time of the signingof the agreement to commence the construction of the hospital.
Million State Development was to shoulder 95% of the project cost and committed itself to secure ₱385,000,000.00
within 25 banking days from Doctors of New Millennium’s initial payment,  part of which was to be used for the
4

purchase of the lot where the hospital was to be constructed. 5

As part of the conditions prior tothe initial payment, Million State Development submitted a surety bond of
₱10,000,000.00 to Doctors of New Millennium. The surety bond was issued by People’s Trans-East Asia Insurance
Corporation, now known as People’s General Insurance Corporation. Doctors of New Millennium, on the other hand,
made the initial payment of ₱10,000,000.00. 6

Million State Development, however, failed to comply with its obligation to secure ₱385,000,000.00 within 25
banking days from initial payment.  On April 7, 1999, it faxed a letter to Doctors of New Millennium explaining its
7

delay was caused by its foreign creditors’ delay in processing its application. 8

On April 9, 1999, Doctors of New Millennium sent a formal demand letter to Million State Development for the
remittance of the funds to be used for the purchase of the lot and demanding for the cost of money from the time the
remittance was due. Instead of replying to the demand letter, Million State Development sent another letter on April
16, 1999, explaining that they would have their standby letter of credit within 15 banking days. 9

When Million State Development reneged on its obligations, Doctors of New Millennium sent a demand letter dated
June 14, 1999 to People’s General Insurance for the return of itsinitial payment of ₱10,000,000.00, in accordance
with its surety bond.  On July 9, 1999, Doctors of New Millennium sent another letter to People’s General Insurance,
10

this time furnishing a copy to the Insurance Commission. The Insurance Commission referred the matter to its
Public Assistance and Investigation Division, which conducted conciliation proceeding. 11

After several conferences, People’s General Insurance sent a letter dated September 15, 1999 to then Insurance
Commissioner Eduardo T. Malinis, stating that Doctors of New Millennium’s surety claim was denied on the ground
that the guarantee only extended to "the full and faithful construction of a First Class 200 hospital bed building" and
12

not to "the ‘funding’ of the construction of the hospital."  As a result of the letter, the conciliation proceedings were
13

terminated, and Doctors of New Millennium filed an administrative complaint for unfair claim settlementpractice
against People’s General Insurance. 14

On October 5, 1999, while the administrative complaint was pending before the Insurance Commission, Doctors of
New Millennium sent a demand letter to Million State Development for the return of their initial payment of
₱10,000,000.00.  Due to Million State Development’s inaction, Doctors of New Millenniumfiled a complaint for
15

breach of contract with damages with prayerfor the issuance of preliminary attachment against Million State
Development and People’s General Insurance with the Regional Trial Court of Pasig City. 16

In the proceedings before the trial court, Million State Development did not appear or submit any responsive
pleading and was declared in default. The trial court resolved the issues of the case only as to the remaining parties
and primarily involving the surety bond. 17

Doctors of New Millennium, represented by its President, Dr. Cenon Alfonso, testified that the surety bond was
entered into to protect the release of the ₱10,000,000.00 initial mobilization fund. People’s General Insurance, on
the other hand, represented by its President, Manual Liboro, testified that its liability was only limited to the
construction of the hospital.
18

Mr. Liboro also argued that the terms of the surety bond were based on the Draft Construction and Development
Agreement (draft agreement). It alleged that without its knowledge and consent, Doctors of New Millennium and
Million State Development substantially altered the conditions of the draft agreement by inserting the clause"or the
Project Owner’s waiver," which appeared in the signed agreement. 19

The draft agreement stated:

637
 ARTICLE XIII
CONDITIONS TO DISBURSEMENT OF INITIAL PAYMENT

13.1 The obligations of the Project Owner to pay to the Contractor the amount constituting the Initial Payment shall
be subject to and shall be made on the date (the"Closing Date") following the fulfillment of the following conditions:

(a) the approval and selections by the Project Owner of the subcontractor that shall perform the Works, in
accordance with Section 5.1[;]

(b) the submission by the Contractor of a breakdown of the phases of the Work to be performed in
pursuance of the Project, the corresponding percentage value and weight of each such phase, and the
schedule of the Works indicating the chronological order in which the Contractor proposed to carry out such
Works, together with the dates on which each phase of work shall be completed (the "Schedule of Work");

(c) the submission by the Contractor of a copy of the (Surety Bond) in the form and substance satisfactory to
the Project Owner, in accordance with Section 9.1;

(d) the submission by the Contractor of proof of a firm commitment by banking institution(s) to fund the
Project in the form of a committed credit line and representing committed funds in the amount not less than
the Contract Price, or such other similar financing arrangements acceptable to the Project Owner; and

(e) the compliance by the Contractorwith all the obligations required to be performed by the Contractor as of
the Closing Date. 20

The same provisions appeared in Article XIII ofthe signed agreement, except for its first paragraph, which stated:

ARTICLE XIII
CONDITIONS TO DISBURSEMENT OF INITIAL PAYMENT

13.1 The obligation of the Project Owner to pay to the Contractor the amount constituting the Initial Payment shall
be subject to and shall be made on the date (the"Closing Date") following the fulfillment or the Project Owner’s
waiver of the following conditions: . . . (Emphasis supplied) 21

Mr. Liboro claimed that they became aware of the alteration during the conciliation proceedings before the
Insurance Commission. 22

On February 18, 2002, the Insurance Commission rendered its decision on the administrative complaint, finding that
People’s General Insurance engaged in unfair claim settlement practice under Section 241(1) of the Insurance
Code. The Commission imposed a fine of ₱500.00, the suspension of its certificate of registration of its bond
underwriter for six months, and the suspension of its authority to issue bonds for six months. 23

On August 25, 2004, the trial court rendered its decision  finding only Million State Development liable toDoctors of
24

New Millennium. It discharged People’s General Insurance from any liability on the ground that the inclusion of the
clause "or the Project Owner’s waiver" in the signed agreement was a novation of the draft agreement. It found that
the Doctors of New Millennium’s right under the surety bond can only be exercised upon the fulfillment of the
conditions provided for in Article XIII(13.1).  The dispositive portion states:
25

WHEREFORE, IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby rendered declaring the
defaulted defendant Contractor, Million State Development Corporation represented by Peter A. Perez, President
solely liable to plaintiff Doctors of New Millen[n]ium Holdings, Inc., represented by Cenon R. Alfonso in the amount
of Ten Million Pesos (Ph₱10,000,000.00), plus legal interests from October 1999 until fully paid. Saiddefendant
Contractor is likewise directed to pay plaintiff the amountof Ph₱150,000.00 as attorney’s fees and litigation
expenses as well as the costs of the suit.

In the meantime, the instant complaint as against the defendant People’s Trans East Asia Insurance Corporation
a.k.a. People’s General Insurance Corporation is hereby dismissed for lack of merit.

SO ORDERED. 26

Upon the denial of its motion for partial reconsideration, Doctors of New Millennium filed an appeal with the Court of
Appeals, seeking the reversal of the trial court’s finding that the surety was not liable.
27

On December 29, 2005, the Court of Appeals rendered a decision  granting the appeal and holding People’s
28

General Insurance jointly and severally liable with Million State Development.

638
The appellate court found that the surety bond was made to cover for the initial payment made by Doctors of New
Millennium. Citing the Whereas Clause of the surety bond, it ruled that People’s General Insurance guaranteed not
only the construction ofthe hospital but also secured the initial payment in case the contractor defaults.  The surety
29

bond stated:

That we MILLION STATE DEVELOPMENT CORPORATION . . ., as principal, and PEOPLE’S TRANS-EAST ASIA
INSURANCE CORPORATION, a corporation duly organized and existing under and by virtue of the laws of the
Philippines, as surety, are held and firmly bound unto the DOCTORS OF NEW MILLENNIUM HOLDINGS, INC. . . .
in the sum of TEN MILLION PESOS ONLY (10,000,000.00) Philippine Currency, for the payment of which sum, well
and truly to be made, we bind ourselves, our heirs, executors, administrators, successors, and assigns jointly and
severallyfirmly by these presents:

The condition[s] of this obligation are as follows:

WHEREAS, the above bounded principal, on the 2nd day of March, 1999 entered into a construction and Dev’t.
Agreement with DOCTORS OF NEW MILLENNIUM HOLDINGS, INC. to full and faithfully guarantee for the
construction of a first class 200 bed capacity hospital building project Site.

WHEREAS, the DOCTORS OF NEW MILLENNIUM HOLDINGS, INC. requires the Principal to post a Surety
(Downpayment) Bond in the above-stated sum to guarantee the repayment of the downpayment as provided under
the terms and conditions of its contract with the obligee, a copy of which is hereto attached and made an integral
part of this bond.

WHEREAS, the liability of the herein Surety shall in no case exceed the sum of TEN MILLION PESOS
(₱10,000,000.00) ONLY, Philippine Currency.

WHEREAS, said DOCTORSOF NEW MILLENNIUM HOLDINGS, INC. requires said principal to give a good and
sufficient bond in the above stated sum to securethe full and faithful performance on his part said contract
agreement.

NOW, THEREFORE, if the principal shall well and truly perform and fulfill all the undertakings, covenants, terms,
conditions, and agreements stipulated in said contractagreement then, this obligation shall be null and void,
otherwise it shall remain in full force and effect.
30

The appellate court also ruled thatthe Doctors of New Millennium’s waiver of the preconditions stated in Article XIII
of the signed agreement did not increase the surety’s risk since it has"absolutely no relation at all and are not
material to the undertaking of People’s General Insurance to guarantee repayment."  The dispositive portion of the
31

decision states:

WHEREFORE, the judgment appealed as regards the dismissal of the complaint against defendant People’s
General Insurance is hereby REVERSED and SET ASIDE. Surety is hereby adjudged jointly and severally liable
with Million State Development Corporation for the damages suffered by the plaintiff in a) the amount of ten million
pesos (₱10,000,000.00), plus legal interests fromOctober 1999 until fully paid and; b) the amount of ₱200,000.00
representing attorney’s fees and litigation expenses. Costs against defendants.

SO ORDERED. 32

People’s General Insurance filed a motion for reconsideration, which the Court of Appeals denied in a resolution
dated April 20, 2006. Aggrieved, it filed the present petition for review on certiorari praying for the reversal of the
decision of the Court of Appeals. 33

People’s General Insurance argues that Million State Development furnished it a copy of the draft agreement with
the assurance that the same terms and conditions would be embodied in the signed agreement. It argues that when
the parties inserted the clause "or the Project Owner’s waiver," it substantially altered the terms and conditions of
the contract as "they exponentially increase[d] the risk that petitioner was willing to take as surety."  It explains that
34

under the draft agreement, Million State Development "must hurdle certain stringent requirements"  before the
35

₱10,000,000.00 initial payment could be released to it. 36

Petitioner People’s General Insurance also alleges that because of the disputed clause, the initial payment was
released to the contractor on the pretext that the preconditions were already waived by Doctors of New
Millennium.  It argues that the clause "effectively deprived [it] of the opportunity to objectively assess the realrisk of
37

its undertaking and fix the reasonable rate of premium thereon."  This, it argues, constituted an implied novation,
38

which should automatically relieve it from its undertaking as a surety as it makes its obligation more onerous. 39

Doctors of New Millennium, on the other hand, argues that there was no novation since the draft agreement was not
yet a valid and binding contract between it and Million State Development. It alleged that Million State Development

639
entered into a surety agreement with People’s General Insurance on the basis of the draft agreement without its
knowledge. 40

It also argues that if People’s General Insurance disagreed with the terms and conditions of the signed agreement, it
should have informed Doctors of New Millennium or Million State Development of the matter since the premium
payment of 158,792.50 remained in its possession, control, and disposal. 41

We are asked to resolve the issue of whether the surety bond guaranteeing respondent Doctors of New
Millennium’s initial payment was impliedly novated by the insertion of a clause in the principal contract, which
waived the conditions for the initial payment’s release.

The petition is without merit

The principal contract of the suretyship is the signed agreement

The obligations of the surety to the principal under the surety bond are different from the obligations of the
contractor to the client under the principal contract. The surety guarantees the performanceof the contractor’s
obligations. Upon the contractor’s default,its client may demand against the surety bond even ifthere was no privity
of contract between them. This is the essence of a surety agreement.

The definition of a surety is provided for under the Civil Code, which states:

Art. 2047. By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the
principal debtor in case the latter should fail to do so.

If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I of this
Book shall be observed. In such case the contract is called a suretyship.

In Stronghold Insurance Company v. Tokyu Construction Company: 42

A contract of suretyship is an agreement whereby a party, called the surety, guarantees the performance by another
party, called the principal or obligor, of an obligation or undertaking in favor of another party, called the obligee. By
its verynature, under the laws regulating suretyship, the liability of the surety is joint and several but is limited to the
amount of the bond, and its terms are determined strictly by the terms of the contract of suretyship in relation to the
principal contract between the obligor and the obligee. 43

In American Home Insurance Co. v. F. F. Cruz: 44

The surety is considered in law aspossessed of the identity of the debtor in relation to whatever is adjudged
touching upon the obligation of the latter. Their liabilities are so interwoven as to be inseparable. Although the
contract of suretyship is, in essence, secondary only to a valid principal obligation, the surety’s liability to the creditor
is direct, primary, and absolute; he becomes liable for the debt and duty of another although he possesses no direct
or personal interest over the obligations nor does he receive any benefit therefrom. 45

In this case, the surety bond was executed "to guarantee the repayment of the downpayment"  and "to secure the
46

full and faithful performance"  of Million State Development. According to the terms of the bond, People’s General
47

Insurance bound itself to be liable in the amount of ₱10,000,000.00 in the event that Million State Development
defaults in its obligations.
48

Petitioner, however, contends that the inclusion of the clause "or the Project Owner’s waiver" in Article XIII of the
signed agreement made its obligations more onerous and, therefore,the surety must be released from its bond.

A suretyship consists of two different contracts: (1) the surety contract and (2) the principal contract which it
guarantees. Since the insurer’s liability is strictly based only on the terms stated in the surety contract in relation to
the principal contract, any change in the principal contract, which materially alters the principal’s obligations would,
in effect, constitute an implied novation of the surety contract:

[A] surety is released from its obligation when there is a material alteration of the contract in connection with which
the bond is given, such as a change which imposes a new obligation on the promising party, or which takes away
some obligation already imposed, or one which changes the legal effect of the original contract and not merely its
form. A surety, however, is not released by a change in the contract which does not have the effect of making its
obligation more onerous. 49

Petitioner insists that the principal contract of the suretyship was the draft agreement since it was assured byits
principal that the draft would embody the same terms and conditions asthe final signed agreement. The insertion of

640
the disputed clause in the signed agreement, it argues, "effectively deprived petitioner of the opportunity to
objectively assess the real risk of its undertaking and fix the reasonable rate of premium thereon." 50

This argument is unmeritorious.

In his testimony before the trial court, Mr. Liboro, representing petitioner, admitted that the signed copyof the
agreement was attached to the surety bond when it was returned to them by Million State Development and
respondent:

ATTY. PEREZ: Do I get it correct Mr. Witness that after the contract was finalize[d], it was attached to the bond and
returned to you?

A: Yes, it was returned to us together with the attachment.

ATTY. PEREZ: So, that was maybe if the payment was made on March 3, 1999 about March 4, 1999 [sic] you have
a copy of the final draft already? It was attached to your bond?

A: It was attached to our copy of the bond. 51

Mr. Liboro also admitted that they were not diligent in reviewing the documents presented to them and merely relied
on their principal’s assurances of the content of the documents:

ATTY. PEREZ:

Q: Is that normal procedure inyour company that you evaluate an application on the basis of a mere draft?

WITNESS:

A: Draft is for us to study whether we can accept or not. In fact, that is the first requirement you have the contract
submitted and we have to study, but once the bond is to be issued, there are some other requirements that you
have to comply with. That is the initial requirement.

Q: But do you remember having mentioned that it came to your knowledge that the final signed contract agreement
between Million State Development Corporation and the Doctors of New Millennium happened two (2) days after
you issued the bond?

A: No, only one (1) day. In factI did not evenobserve until later on when they were reviewing this bond, from the
lawyer "pa nanggaling yon; hindi naman napupuna iyon eh."I have trust and confidence that the final draft was the
same draft that was drafted. 52

Petitioner, as the surety, had the responsibility to read through the terms of the principal contract; it cannot simply
rely on the assurances of its principal. It was petitioner’s duty to carefully scrutinize the agreement since the
Insurance Code mandates that its liability is determined strictly in accordance with the provisions of the principal
contract:

Sec. 176. The liability of the suretyor sureties shall be joint and several with the obligor and shall be limited to the
amount of the bond. It is determined strictly bythe terms of the contract of suretyship in relation to the principal
contract between the obligor and the obligee. 53

If petitioner had any objection to the terms of the signed agreement, it could have pointed it out before its principal
defaults and it becomes liable under the surety bond. The silence ofpetitioner must be taken against it since it was
responsible for exerting diligence in the conduct of its affairs.

Even the Insurance Commission was aware that petitioner acted irresponsibly when it issued the surety bond:

This Commission, however, took notice of the laxity or irresponsible underwriting practice ofrespondent insurance
company’s bond underwriter when the latter did notrequire a collateral security for this kind of bond considering that
the business of suretyship is a very risky one. It would have been easier for respondent company to settle the claim
had there been a collateral given by the principal when the latter defaulted from the obligation under the contract. 54

Petitioner’s failure to notice the changes in the signed agreement was due to its own fault and not to any deception
on the part of respondent. Respondent was not privy to the terms of the surety bond entered into by petitioner and
Million State Development. If there were any changes in the contract that petitioner should have been aware of, it
was Million State Development, as its principal, which had the duty to inform them about the changes.

641
On the basis of petitioner’s own admissions, the principal contract of the suretyship is the signed agreement. The
surety, therefore, is presumed to have acquiesced to the terms and conditions embodied in the principal contract
when it issued its surety bond. Accordingly, petitioner cannot argue that the insertion of the clause inthe signed
agreement constituted an implied novation of the obligation which extinguished its obligations as a surety since
there was nothing to novate: [I]n order that an obligation may be extinguished by another which substitutes the
same, it is imperative that it be so declared in unequivocal terms, or that the old and new obligation be in every point
incompatible with each other. Novation of a contractis never presumed. In the absence of an express agreement,
novation takes place only when the old and the new obligations are incompatible on every point. 55

Even if we were to assume, for the sake of argument, that the principal contract in the suretyship was the draft
agreement, the addition of the clause "or the Project Owner’s waiver" in the signed agreement does not operate as
a novation of petitioner’s liability under the surety bond.

The disputed clause is not material to People’s General Insurance’s undertaking to guarantee Doctors of New
Millennium’s initial payment

Respondent’s waiver of the conditionsset forth under Article XIII of the agreement does not substantially or
materially alter petitioner’s obligation to guarantee the performance of its principal, Million State Development.
Article XIII states:

ARTICLE XIII

CONDITIONS TO DISBURSEMENT OF INITIAL PAYMENT

13.1 The obligation of the Project Owner to pay to the Contractor the amount constituting the Initial Payment shall
be subject to and shall be made on the date (the "Closing date") following the fulfillment or the Project Owner’s
waiver of the following conditions:

(a) the approval and selection by the Project Owner of the Subcontractor that shall perform the Works, in
accordance with Section 5.1;

(b) the submission by the Contractor of a breakdown of the phases of the Work to be performed in
pursuance of the Project, the corresponding percentage value and weight of each such phase, and a
schedule of the Works indicating the chronological order in which the Contractor proposes to carry out such
Works, together with the dates on which each phase of work shall be completed (the "Schedule of Work");

(c) the submission by the Contractor of a copy of the (Surety Bond) in the form and substance satisfactory to
the Project Owner, in accordance with Section 9.1;

(d) the submission by the Contractor of proof of a firm commitment by banking institution(s) to fund the
Project in the form of a committed credit line and representing committed funds in an amount not less than
the Contract Price, or such other similar financing arrangements acceptable to the Project Owner; and

(e) the compliance by the Contractor with all obligations required to be performed by the Contractor as of the
Closing Date. 56

These conditions, however, only embody a portion of Million State Development’s obligations to respondent.

Petitioner, as a surety, bound itself to guarantee the repayment of the initial price in the event that Million State
Development fails to perform not only the conditions under Article XIII but all its obligations under the signed
agreement. This is clear from the terms of the surety bond: WHEREAS, the DOCTORS OF NEW MILLENNIUM
HOLDINGS, INC. requires the Principal to post a Surety (Downpayment) Bond in the above-stated sum to
guarantee the repayment of the downpayment as provided under the terms and conditions of its contract with the
obligee, a copy of which is hereto attached and made an integral part of this bond. 57

The conditions under Article XIII ofthe signed agreement refer only to the conditions that Million State Development
was responsible for so that initial payment could be disbursed to them.  Petitioner failed to take into account that
1âwphi1

Article XIII must be read together with ArticleIX, which states:

Article IX
SECURITY FOR CONTRACTOR’S OBLIGATIONS

9.1 Upon receipt of the execution of this Agreement, the Contractor shall deliver to the Project Owner a Surety bond
for the amount equal to the Initial Payment of TEN MILLION PESOS (Ph₱10,000,000.00) secured from Peoples
Trans-East Asia Insurance Corporation for the purpose of securing the performance by the Contractor of its
obligations in accordance with the terms and conditions of this Agreement as set out in Annex F and shall be valid
642
until the issuance by the Project Owner of the Certificate of Final Acceptance of the Project, provided that the
amount available to be drawn under the Surety Bond shall be reduced semi-annually commencing six (6) months
from the date of Initial Payment and in proportion to such work, services, materials, supplies and equipment certified
by the Project Owner to have been performed, completed or provided during the relevant six month period. 58

Article IX requires Million State Development to procure a surety bond to cover the initial payment "upon the
execution of the Agreement," and not upon the fulfillment of the conditions under Article XIII. Any waiver by
respondent of the conditions for the release of the initial payment would not affect the conditions by which the surety
bond was issued. 1âwphi1

Million State Development’s obligations under the contract subsist regardless of whether respondent waives the
conditions for the release of the initial payment. Its obligation upon the release of the initial payment was for it to
"make available the funds constituting the Balance Payment . . . [in] the amount of THREE HUNDRED EIGHTY-
FIVE MILLION PESOS (Ph₱385,000,000.00), within twenty-five(25) banking days from payment by the Project
Owner of the Initial Payment."  It is this performance of this obligation that the surety primarily guarantees.
59

Even the Insurance Commission arrived at the same conclusion when it found that:

It appears from the provisions of Art. [VII] 7.5 of the Agreement that the initial payment of ₱10 million serves as a
basis and a reckoning for the "Contractor to make available the funds constituting the Balance Payment under the
following schedule: a) the amount of ₱385 million within 25 days from payment by the Project Owner of the Initial
Payment xxx." Considering that the contractor failed to provide for the Balance Payment on the prescribed due date,
he has the obligation to return what he has received so as not to unjustly enrich himself at the expense of the other.
It can be inferred[,] therefore,that the undertaking pertains to the return of the initial payment of ₱10 million.
60

Petitioner cannot feign ignorance of Million State Development’s obligation to provide the funds for the balance
since this provision was present in both the draft agreement and the signed agreement.  Since Million State
61

Development failed to fulfillits obligation, the surety becomes jointly and severally liable for the amount of the bond.

The award of attorney’s fees must be deleted

The trial court and the Court of Appeals awarded attorney’s fees to respondent without giving any factual or legal
basis for the award. The award merely appeared on the dispositive portion of the lower court’s rulings without
explanation or justification.

As we have stated in Philippine National Construction Corporation v. APAC Marketing Corporation: 62

The general rule is thatattorney’s fees cannot be recovered as part of damages because of the policy that no
premium should be placed on the right to litigate. They are not to be awarded every time a party wins a suit. The
power of the court to award attorney’s fees under Article 2208  demands factual, legal, and equitable justification.
63

Even when a claimant is compelled to litigate with third persons or to incur expenses to protect his rights, still
attorney’s fees may not be awarded where no sufficient showing of bad faith could be reflected in a party’s
persistence in a case other than an erroneous conviction of the righteousness of his cause. 64

As respondent has not shown any justification as to its award of attorney’s fees, the samemust be deleted.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals in CA-G.R. CV No. 84645 dated
December 29, 2005 is AFFIRMEDwith MODIFICATION. Petitioner People’s General Insurance Corporation is held
jointly and severally liable with Million State Development Corporation for the payment of ₱10,000,000.00 with legal
interest of 12% per annum from June14, 1999 until June 30, 2013 and legal interest of 6% per annum from July 1,
2013 until fully paid.  The award of ₱200,000.00 representing attorney’s fees and litigation expenses is DELETED.
65

SO ORDERED.

643
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. P-14-3232               August 12, 2014

(Formerly: A.M. No. 14-4-46-MTCC)

Re: Report of Judge Rodolfo D. Vapor, Municipal Trial Court in Cities [MTCC], Tangub City, Misamis
Occidental, on the Habitual Absenteeism of Filigrin E. Velez, Jr., Process Server, same court.

DECISION

Per Curiam:

This administrative matter stemmed from the letter  dated 5 April 2011 of Judge Rodolfo D. Vapor (Judge Vapor),
1

Municipal Trial Court in Cities (MTCC), Tangub City, Misamis Occidental, informing the Office of the Court
Administrator (OCA) of the habitual absenteeism of Filigrin E. Velez, Jr. (respondent Velez), the process server of

644
his court. He reported that for the first quarter of 2011, respondent Velez incurred twenty-three (23) absences,
broken down as follows:

MONTH YEAR NUMBER OF ABSENCES

January 2011 1

February 2011 5

March 2011 17*

*16 based on the unsigned DTR

TOTAL 23 days

In an indorsement dated 7 June2011, the OCA required respondent Velez to comment on the letter of Judge Vapor.

In his letter dated 2 August 2011,  respondent Velez admitted having incurred the aforesaid absences. He explained
2

that the absences were reasonable because he was undergoing treatment for liver disease, urinary tract infection
and iron deficiency at thattime. He attached as evidence the Medical Certificate  issued by Dr. Meimei R. Yu-
3

Porlares advising him to seek further work-up and treatment for three (3) to four (4) months in higher health facilities.
Meanwhile, on 3 August 2011, Atty. Caridad A. Pabello, Chief of Office, Office of Administrative Services, OCA,
directed respondent Velez to submit his Daily Time Records (DTRs) beginning March 2011 and the corresponding
approved leave applications from the executive judge/presiding judge for the absenceshe had incurred. Respondent
Velez submitted his DTRs and the correspondingleave applications, albeit without the corresponding approval of his
executive/presiding judge. As culled from the documents he submitted, he incurred the following absences:

NUMBER OF DATE OF FILING OF

MONTH/YEAR
ABSENCES LEAVE APPLICATION

16
March 30, 2011
March 2011 5 (sick leave)
(unsigned by Presiding Judge)
11 (vacation leave)

30 December 3, 2011
April 2011
(sick leave) (unsigned by Presiding Judge)

31
May 2011 - do -
(sick leave)

30
June 2011 - do -
(sick leave)

15
July 2011 11 (sick leave) - do -
4 (vacation leave)

31
August 2011 - do -
(sick leave)

30
September 2011 - do -
(sick leave)

31
October 2011 - do -
(sick leave)

30
November 2011 - do -
(sick leave)

645
In his letter dated 10 October 2011, respondent Velez contended that he had been incurring absences becauseof
an illness, by reason of which he was already being treated by a psychiatrist, Dr. Mario B. Estella. He admitted that
he was an alcoholic and that he was undergoing detoxification and rehabilitation at the It Works Rehabilitation
Center in Tinago, Ozamis City, Misamis Occidental. He attached the Substance Use Evaluation Report of Dr.
Estella as his proof. He maintained that he shall be ready to resume his duty as soon as he had fully recovered. He
requested that his absences be considered excusable.

On 1 December 2011, Judge Vapor informed the OCA that respondent Velez failed to report for work for the entire
months of October and November 2011. He recommended that respondent Velez be dropped from the rolls.

In his letter dated 20 February 2012,Judge Vapor reported that while respondent Velez returned to work for the
month of January2012, he was no longer given any task and his duties were distributed to the court’s utility worker
and sheriff. Judge Vapor reiterated his recommendation for the dropping of respondent Velez from the rolls.

In its Report  dated 27 March 2014, the OCA recommended that respondent Velez be found guilty of habitual
4

absenteeism and, accordingly, be dismissed from the service.

We adopt the findings and recommendation of the OCA.

Under Administrative Circular No. 14-2002,  an officer or employee in the civil service shall be considered habitually
5

absent if he incurs unauthorized absences exceeding the allowable 2.5 days monthly leave credit under the leave
law for at least three (3) months in a semester or at least three (3) consecutive months during the year.

It is evident from the records that respondent Velez is guilty of habitual absenteeism for incurring unauthorized
absences for the period covering 1 January up to 1 December 2011. We note that in the Resolution dated 11 July
2012 in A.M. No. 12-6-47-MTCC, the Court disapproved the application for leave filed by respondent Velez for the
period 1 March 2011 up to 1 December 2011. All the absences he incurred during that period were thus considered
unauthorized.

We also note that respondent Velez was earlier charged for his unauthorized absences and tardiness
in2009. Accordingly, the Court in a Resolution dated 23 April 2012 in A.M. No. P-11-2899, suspended him for six (6)
1âwphi1

months and one (1) day. This instant administrative case is therefore the second incursion of respondent Velez.

Under Section 46 (b) of the Revised Rules on Administrative Cases in the Civil Service,  frequent unauthorized
6

absences in reporting for duty is classified as a grave offense punishable by suspension of six (6) months and one
(1) day to one (1) year for the first offense and dismissal from the service for the second offense.

There is no question that respondentVelez is again administratively liable. Although we understand his situation and
his resolve to reform, we cannot, however, ignore the fact that his habitual absenteeism has caused inefficiency in
the performance of his functions. Thus, we cannot blame his judge for assigning his duties to the branch utility
worker and sheriff. We cannot countenance the infractions ofrespondent Velez for it seriously compromise efficiency
and prejudice public service.

Time and again, this Court has pronounced that any act which falls short of the exacting standards for public office,
especially on the part of those expected to preserve the image of the judiciary, shall not be countenanced. Public
office is a public trust. Public officers must at all imes be accountable to the people, serve them with utmost degree
of responsibility, integrity, loyalty and efficiency.
7

WHEREFORE, we find Filigrin E. Velez, Jr., Process Server, Municipal Trial Court in Cities, Tangub City, Misamis
Occidental, GUILTY of HABITUAL ABSENTEEISM. Accordingly, we DISMISS him from the service with forfeiture of
all retirement benefits, except accrued leave credits, and with prejudice to reemployment in any branch or
instrumentality of the government, including government owned or controlled corporations.

SO ORDERED.

646
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 207992               August 11, 2014

PEOPLE OF THE PHILIPPINES, Plaintiff-appellee, 

vs.
ROBERTO HOLGADO Y DELA CRUZ AND ANTONIO MISAREZ Y ZARAGA, Accused-appellants.

DECISION

LEONEN, J.:

Law enforcers should not trifle with the legal requirement to ensure integrity in the chain of custody of seized
dangerous drugs and drug paraphernalia. This is especially true when only a miniscule amount of dangerous drugs
is alleged to have been taken from the accused.

This resolves an appeal from a conviction for illegal sale of dangerous drugs or for violation of Section 5 of Republic
Act No. 9165, otherwise known as the Comprehensive Dangerous Drugs Act of 2002.

647
Accused-appellants Roberto Holgado y Dela Cruz (Holgado) and Antonio Misarez y Zaraga (Misarez) were charged
in an information dated January 19, 2007, as follows:

On or about January 17, 2007, in Pasig City and within the jurisdiction of this Honorable Court, the accused
conspiring and confederating together and both of them mutually helping and aiding with (sic) one another, and not
being lawfully authorized to sell any dangerous drug, did then and there wilfully, unlawfully and feloniously sell,
deliver and give away to PO1 Philip Aure, one (1) piece of heat-sealed transparent plastic sachet containing five (5)
centigrams (0.05 gram) of white crystalline substance, which was found to (sic) positive to the test for
methylamphetamine hyrdrocloride (shabu), a dangerous drug, in violation of the said law.

Contrary to law. 1

Holgado and Misarez were also charged with possession of dangerous drugs, and possession of drug
paraphernalia, but subsequently acquitted.

As alleged by the prosecution, inDecember 2006, the Pasig City Police received reports of illegal drug activities of
Holgado along C. Raymundo Street, Pasig City.  After surveillance operations, a search warrant was issued against
2

Holgado. Acting on the search warrant, the Pasig City Chief of Police instructed his officers to, if possible, first
conduct a buy-bust operation before actuallyenforcing the search warrant. 3

In the evening of January 17, 2007, police operatives went to No. 17, C. Raymundo Street for the buy-bust
operation. PO1 Philip Aure, acting as poseur-buyer and accompanied by the police informant, approached Holgado
who was then part of a drinking session with two (2) companions. Holgado asked the informant if he was buying
drugs while at the same time offering him a drink. The informant accepted the drink and introduced PO1 Aure as a
drug user. PO1 Aure thenhanded Holgado two (2) marked one hundred peso bills. Holgado asked PO1 Aure and
the informant to wait as the drugs were with his "kumpare" who was then in the restroom. 4

Holgado called Misarez. After some time, co-accused Antonio Misarez stepped out of the restroomand asked who
was buying drugs. PO1 Aure and the informant answered, "Kami." Misarez then handed a plastic sachet containing
a white crystalline substance to PO1 Aure. PO1 Aure examined the sachet’s contents and took out his cellphone.
This was the pre-arranged signal to the other police operatives that the sale of drugs had been consummated. 5

The police operatives then approached PO1 Aure. When PO1 Aure saw his companions approaching, he seized
Misarez’s hand, but the latter was able to escape and lock himself inside the house. Holgado, too, was able to flee
into the house and join Misarez. The police operatives managed to break open the wooden door with a crowbar. By
then, however, Holgado and Misarez had managed to leave the house through a passageway in the ceiling leading
to an adjoining house. PO3 Rolando Abuyme and PO2 Arnulfo Dancel managed to get inside the adjoining house
where they apprehended Holgado and Misarez. 6

The search warrant was then enforced "in coordination with a barangay official and in the presence of some media
people."  The search allegedly yielded several drugs and drug paraphernalia.  These items (i.e., other than the
7 8

plastic sachet containing a white crystalline substance supposedly sold to PO1 Aure) were the subject of three (3)
other cases. These other cases have since been dismissed. 9

As noted in the Regional Trial Court’s August 17, 2009 decision, PO3 Abuyme prepared an inventory of the seized
items.  Specifically with respect to the plastic sachet which was the basis of the charge of illegal sale of dangerous
10

drugs, PO1 Aure supposedly marked the plastic sachet handed to him by Misarez with "RH-PA"  at the site of the
11

buy-bust operation.

Following their arrest, Holgado and Misarez were charged with violating Sections 5 (sale of dangerous drugs),  1112

(possession of dangerous drugs),  and 12 (possession of drug paraphernalia)  of Republic Act No. 9165. The case
13 14

for violating Section 5 was docketed as Criminal Case No. 15338-D. The cases for violating Section 11 were
docketed as Criminal Case Nos. 15339-D and 15341-D. The case for violating Section 12 was docketed as Criminal
Case No. 15340-D. The charge for violating Section 5 was in view of the plastic sachet containing a white crystalline
substance supposedly sold by Holgado to PO1 Aure. The charges for violations of Sections 11 and 12 were in view
of the items supposedly seized in enforcing the search warrant.

During trial, the prosecution presented as witnesses PO1 Aure and the apprehending officers PO2 Roberto Castulo
and PO3 Abuyme. The defense presented as its witnesses accused-appellants Holgado and Misarez, as well as
their neighbor, Carlos Marquing, and Holgado’s wife, Maribel Villareal. 15

In their testimonies, accused-appellants claimed that no buy-bust operation was conducted. Instead, the police
operatives allegedly barged into Holgado’s house and arrested accused-appellants who were then merely having a
few drinks. While Holgado and Misarez were handcuffed, the police operatives conducted a supposed search of
Holgado’s house. They were then taken to the police station. Defense witnesses Marquing and Villareal
corroborated accused-appellants’ claims. 16

648
After trial, the Pasig City Regional Trial Court, Branch 154 found Holgado and Misarez guilty of illegal saleof
dangerous drugs (i.e., violating Section 5 of Republic Act No. 9165). They were acquitted of the charges pertaining
to Section 11 of Republic Act No. 9165 as the drugs supposedly seized were not introduced in evidence. Holgado,
the sole accused in Criminal Case No. 15340-D, was also acquitted of the charges relating to Section 12 of Republic
Act No. 9165 asthe paraphernalia to which PO2 Castulo testified to in court were different from those indicated in
the inventory supposedly made when the search warrant was enforced. 17

Holgado and Misarez were sentencedto suffer the penalty of life imprisonment and to pay a penalty of ₱1million.
The dispositive portion of the Regional Trial Court’s decision reads:

WHEREFORE, premises considered, judgment is hereby rendered –

In Crim. Case No. 15338-D finding both the accused Roberto Holgado and Antonio Misarez GUILTY beyond
reasonable doubt of the crime of violation of Section 5 of R.A. 9165 (sale of dangerous drug), and each of them is
hereby sentenced to suffer the penalty of life imprisonment. Each of them is also ordered to pay a fine of One Million
Pesos (₱1,000,000.00). In Crim. Cases Nos. 15339-D and 15341-D for violation of Section 11 of R.A. 9165
(possession of dangerous drug) against accused Roberto Holgado and Antonio Misarez, they are hereby found
NOT GUILTY of the said offense for lack of evidence.

In Crim. Case No. 15340-D for violation of Section 12 of R.A. 9165 (possession of drug paraphernalia) against
Roberto Holgado, judgment is hereby rendered finding the said accused NOT GUILTY of the said offense charged
against him on the ground of reasonable doubt.

The dangerous drugs and drug paraphernalia allegedly obtained from the persons of the accused and subject of the
Informations are hereby ordered delivered forthwith to the Philippine Drug Enforcement Agency (PDEA) for proper
disposition.

Considering the penalty imposed by the Court on the accused ROBERTO HOLGADO and ANTONIO MISAREZ for
violation of Section 5 of R.A. 9165 (sale of dangerous drug), their immediate commitment to the National Bilibid
Prisons is hereby ordered.

SO ORDERED.  (Underscoring in the original)

18

In the decision dated February 18, 2013,  the Court of Appeals affirmed the Regional Trial Court’s decision
19

convicting Holgado and Misarez.

On March 4, 2013, Holgado and Misarez filed their notice of appeal. 20

In the resolution dated September 11, 2013, this court noted the records forwarded by the Court of Appeals and
informed the parties that they may file their supplemental briefs.21

On November 6, 2013, the Office of the Solicitor General filed a manifestation and motion, on behalf ofthe People of
the Philippines, noting that it would no longer file a supplemental brief. 22

On December 27, 2013, Holgado and Misarez filed their joint supplemental brief  where they assailed the supposed
23

lack of compliance with the requirements set by the chain of custody of seized drugs and drug paraphernalia as
provided by Section 21 of Republic Act No. 9165.

For resolution is the issue of whether Holgado’s and Misarez’s guilt beyond reasonable doubt for violating Section 5
of Republic Act No. 9165 was established. Subsumed in the resolution of this issue is the question of whether the
prosecution was able to establish compliance with the requisites of Section 21 of Republic Act No. 9165.

The elements that must be established to sustain convictions for illegal sale of dangerous drugs are settled. In
People v. Morales,  this court stated:
24

In actions involving the illegal sale of dangerous drugs, the following elements must first be established: (1) proof
that the transaction or sale took place and (2) the presentation in court of the corpus delicti or the illicit drug as
evidence. 25

On corpus delicti, Section 21 of Republic Act No. 9165, as amended by Republic Act No. 10640, provides for the
custody and disposition of confiscated, seized, and/or surrendered drugs and/or drug paraphernalia. Specifically
with respect to custody before the filing of a criminal case, Section 21, as amended, provides: SEC. 21. Custody
and Disposition ofConfiscated, Seized, and/or Surrendered Dangerous Drugs, Plant Sources of Dangerous Drugs,
Controlled Precursors and Essential Chemicals, Instruments/Paraphernalia and/orLaboratory Equipment. – The
PDEA shall take charge and havecustody of all dangerous drugs, plant sources of dangerous drugs, controlled

649
precursors and essential chemicals, as well as instruments/paraphernalia and/or laboratory equipment so
confiscated, seized and/or surrendered, for proper disposition in the following manner:

(1) The apprehending teamhaving initial custody and control of the dangerous drugs, controlled precursors
and essential chemicals, instruments/paraphernalia and/or laboratory equipment shall, immediately after
seizure and confiscation, conduct a physical inventory of the seized items and photograph the same in the
presence of the accused or the person/s from whom such items were confiscated and/or seized, or his/her
representative or counsel, with an elected public official and a representative of the National Prosecution
Service or the media who shall be required to sign the copies of the inventory and be given a copy
thereof:Provided, That the physical inventory and photograph shall be conducted at the place where the
search warrant is served; or at the nearest police station or at the nearest office of the apprehending
officer/team, whichever is practicable, in case of warrantless seizures: Provided, finally, That noncompliance
of these requirements under justifiable grounds, as long as the integrity and the evidentiary value of the
seized items are properly preserved by the apprehending officer/team, shall not render void and invalid such
seizures and custody over said items.

(2) Within twenty-four (24) hours upon confiscation/seizure of dangerous drugs, plant sources ofdangerous
drugs, controlled precursors and essential chemicals, as well as instruments/paraphernalia and/or laboratory
equipment, the same shall be submitted to the PDEA Forensic Laboratory for a qualitative and quantitative
examination;

(3) A certification of the forensic laboratory examination results, which shall be done by the forensic
laboratory examiner, shall be issued immediately upon the receipt of the subject item/s: Provided, That when
the volume of dangerous drugs, plant sources of dangerous drugs, and controlled precursors and essential
chemicals does not allow the completion of testing within the time frame, a partial laboratory examination
report shall be provisionally issued stating therein the quantities of dangerous drugs still to be examined by
the forensic laboratory: Provided, however, That a final certification shall be issued immediately
uponcompletion of the said examination and certification[.] (Emphasis supplied)

As this court declared in People v. Morales, "failure to comply with Paragraph 1, Section 21, Article II of RA 9165
implie[s] a concomitant failure on the part of the prosecution toestablish the identity of the corpus delicti."  It
26

"produce[s] doubts as tothe origins ofthe [seized paraphernalia]." 27

The significance of ensuring the integrity of drugs and drug paraphernalia in prosecutions under Republic Act No.
9165 is discussed in People v. Belocura: 28

Worse, the Prosecution failed to establish the identity of the prohibited drug that constituted the corpus delicti itself.
The omission naturally raises grave doubt about any search being actually conducted and warrants the suspicion
that the prohibited drugs were planted evidence.

In every criminal prosecution for possession of illegal drugs, the Prosecution must account for the custody of the
incriminating evidence from the moment of seizure and confiscation until the moment it is offered in evidence. That
account goes to the weight of evidence. It is not enough that the evidence offered has probative value on the issues,
for the evidence must also be sufficiently connectedto and tied with the facts in issue. The evidence is not relevant
merely because it is available but that it has an actual connection with the transaction involved and with the parties
thereto. This is the reason why authentication and laying a foundation for the introduction of evidence are
important.  (Emphasis supplied)
29

In Malilin v. People,  this court explained that the exactitude required by Section 21 goes into the very nature of
30

narcotics as the subject of prosecutions under Republic Act No. 9165:

Indeed, the likelihood of tampering, loss or mistake withrespect to an exhibit is greatest when the exhibit issmall and
is one that has physical characteristics fungible in nature and similar in form to substances familiar to people in their
daily lives. Graham vs. Statepositively acknowledged this danger. In that case where a substance later analyzed as
heroin—was handled by two police officers prior to examination who however did not testify in court on the condition
and whereabouts of the exhibit at the time it was in their possession—was excluded from the prosecution evidence,
the court pointing out that the white powder seized could have been indeed heroin or it could havebeen sugar or
baking powder. It ruled that unless the state can show by records or testimony, the continuous whereabouts of the
exhibit at least between the time it came into the possession of police officers until it was tested in the laboratory to
determine its composition, testimony of the state as to the laboratory’s findings is inadmissible. A unique
characteristic of narcotic substances is that they are not readily identifiable as in fact they are subject to scientific
analysis to determine their composition and nature.The Court cannot reluctantly close its eyes to the likelihood, or at
least the possibility, that at any of the links in the chain of custody over the same there could have been tampering,
alteration or substitution of substances from other cases—by accident or otherwise—in which similar evidence was
seized or in which similar evidence was submitted for laboratory testing. Hence, in authenticating the same, a
standard more stringent than that applied to cases involving objects which are readily identifiable must be applied,a
more exacting standard that entails a chain of custody of the item with sufficient completeness if only to render it

650
improbable that the original item has either been exchanged with another or been contaminated or tampered
with. (Emphasis supplied)
31

Compliance with the chain of custody requirement provided by Section 21, therefore, ensures the integrity of
confiscated, seized, and/or surrendered drugs and/or drugparaphernalia in four (4) respects: first, the nature of the
substances or items seized; second, the quantity (e.g., weight) of the substances or items seized; third, the relation
of the substances or items seized to the incident allegedly causing their seizure; and fourth, the relation of the
substances or items seized to the person/s alleged to have been in possession of or peddling them. Compliance
with this requirement forecloses opportunities for planting, contaminating, or tampering of evidence in any manner.

By failing to establish identity of corpus delicti, non-compliance with Section 21 indicates a failure to establish an
element of the offense of illegal sale of dangerous drugs. It follows that this non-compliance suffices as a ground for
acquittal. As this court stated in People v. Lorenzo: 32

In both illegal sale and illegal possession of prohibited drugs, conviction cannot be sustained if there is a persistent
doubt on the identity of the drug.The identity of the prohibited drug must be established with moral certainty. Apart
from showing that the elements of possession or sale are present, the fact that the substance illegally possessed
and sold in the first place is the same substance offered in court as exhibit must likewise be established with the
same degree of certitude as that needed to sustain a guilty verdict.  (Emphasis supplied)
33

The prosecution’s sweeping guarantees as to the identity and integrity of seized drugs and drug paraphernaliawill
not secure a conviction. Not even the presumption of regularity in the performance of official duties will suffice. In
fact, whatever presumption there is as to the regularity of the manner by which officers took and maintained custody
of the seized items is "negated."  Republic Act No. 9165 requires compliance with Section 21.
34

Even the doing of acts which ostensibly approximate compliance but do not actuallycomply with the requirements of
Section 21 does not suffice. In People v. Magat,  for instance, this court had occasion to emphasize the inadequacy
35

of merely marking the items supposedly seized: "Marking of the seized drugs alone by the law enforcers is not
enough to comply with the clear and unequivocal procedures prescribed in Section 21 of R.A. No. 9165." 36

The exactitude which the state requires in handling seized narcotics and drug paraphernalia is bolstered by the
amendments made to Section 21 by Republic Act No. 10640. Section 21(1), as amended, now includes the
following proviso, thereby making it even more stringent than as originally worded:

Provided, That the physical inventory and photograph shall be conducted at the place where the search warrant is
served; or at the nearest police station or at the nearest office of the apprehending officer/team, whichever is
practicable, in case of warrantless seizures:

In People v. Nandi,  this court explained that four (4) links "should be established in the chain of custody of the
37

confiscated item: first, the seizure and marking, if practicable, of the illegal drug recovered from the accused by the
apprehending officer; second, the turnover of the illegal drug seized by the apprehending officerto the investigating
officer; third, the turnover by the investigating officer ofthe illegal drug to the forensic chemist for laboratory
examination; and fourth, the turnover and submission of the marked illegal drug seized from the forensic chemist to
the court."
38

In Nandi, where the prosecution failed to show how the seized items were handled following the actual seizure and,
thereafter, turned over for examination, this court held thatthe accused must be acquitted:

After a closer look, the Court finds that the linkages in the chain of custody of the subject item were not clearly
established.  As can be gleaned from his forequoted testimony, PO1 Collado failed to provide informative details on
1âwphi1

how the subject shabu was handled immediately after the seizure. He just claimed that the item was handed to him
by the accused in the course of the transaction and, thereafter, hehanded it to the investigator.

There is no evidence either on how the item was stored, preserved, labeled, and recorded. PO1 Collado could not
even providethe court with the name of the investigator. He admitted that he was not present when it was delivered
to the crime laboratory. It was Forensic Chemist Bernardino M. Banac, Jr. who identified the person who delivered
the specimen to the crime laboratory. Hedisclosed that he received the specimen from one PO1 Cuadra, who was
not even a member of the buybust team. Per their record, PO1 Cuadra delivered the letter-request with the attached
seized item to the CPD Crime Laboratory Office where a certain PO2 Semacio recorded it and turned it over to the
Chemistry Section.

In view of the foregoing, the Court is of the considered view that chain of custody of the illicit drug seized was
compromised. Hence, the presumption of regularity in the performance of duties cannot be applied in this case.

Given the flagrant procedural lapses the police committed in handling the seized shabu and the obvious evidentiary
gaps in the chain of its custody, a presumption of regularity in the performance of duties cannot be made in this

651
case. A presumption of regularity in the performance of official duty is made in the context of an existing rule of law
or statute authorizing the performance of an act or duty or prescribing a procedure in the performance thereof. The
presumption applies when nothing in the record suggests that the law enforcers deviated from the standard conduct
of official duty required by law; where the official act is irregular on its face, the presumption cannot arise. In light of
the flagrant lapses we noted, the lower courts were obviously wrong when they relied on the presumption of
regularity in the performance of official duty.

With the chain of custody in serious question, the Court cannot gloss over the argument of the accused regarding
the weight of the seized drug. The standard procedure is that after the confiscation of the dangerous substance, it is
brought to the crime laboratory for a series of tests. The result thereof becomes oneof the bases of the charge to be
filed.  (Citations omitted)
39

In this case, the defense points out that all that the prosecution claimed, with respect to the handling of the
sachetsupposedly handed by Misarez to PO1 Aure, was that PO1 Aure supposedly marked it "RH-PA" at the scene
of the buy-bust operation. 40

While the buy-bust operation team allegedly conducted an inventory of the seized items, it is unclear if this inventory
was limited to those seized pursuant to the enforcement of the search warrant (i.e., after the conduct of the buy-bust
operation) or was inclusive of whatever items seized during the buy-bust operation. In any case, this inventory was
discredited as Holgado was acquitted by the Regional Trial Court of the charge of illegal possession of drug
paraphernalia because the inventory was found to be unreliable visa-vis the testimony of PO2 Castulo. The
paraphernaliato which PO2 Castulo testified to in court were different from those indicated in the inventory
supposedly made when the search warrant was enforced.

There have been claims to the effect that the search warrant was enforced "in coordination with a barangay official
and in the presence of some media people."  However, this "barangay official" and these "media people" have
41

neither been identified nor presented as witnesses. In any case, even if it were to be granted that these individuals
took part in the events that transpired in the evening of January 17, 2007, their participation was alleged to have
been only with respect to the enforcement of the search warrant. It did not extend to the physical inventory and
taking of photographs of the seized items arising from the buy-bust operation, as required by Section 21. For that
matter, it was not even shown that photographs of the sachet marked as "RH-PA" were taken. Per his own
testimony, PO1 Aure himself doubtedif any photograph was taken. 42

The defense also points out that "PO1 Aure . . . failed to disclose who, in particular, held the sachet of shabu from
the crime scene (after it was marked) up to the police station, and finally to the crime laboratory for the requisite
chemical examination."  It added that "nothing on (sic) the records showed who, in particular, submitted/brought the
43

specimen to the crime laboratory for examination." 44

In People v. Gatlabayan  and People v. Sitco,  this court considered as fatal to the prosecution’s case the lack of
45 46

evidence on the identity of the person who submitted the specimen for examination to the PNP Crime Laboratory
and/or the forensic chemist. In Sitco, this court characterized the lack of evidence on this matter as "glaring gaps or
missing links in the chain of custody of evidence, raising doubt asto the identity of the seized items and necessarily
their evidentiary value."  This court also underscored that "[t]his broken chain of custody is especially significant
47

given that what are involved are fungible items that may beeasily altered or tampered with." 48

In sum, the integrity of three (3) ofthe four (4) links enumerated in People v. Nandi  (i.e., seizure and marking,
49

turnover by the apprehending officer to the investigating officer, and turnover by the investigating officer to the
forensic chemist) has been cast in doubt. As in Nandi, this doubt must be resolved in favor of accused-appellants.

It is true that Section 21(1), as amended, now includes a proviso to the effect that "noncompliance of (sic) these
requirements under justifiable grounds, as long as the integrity and the evidentiary value of the seized items are
properly preserved by the apprehending officer/team, shall not render void and invalid such seizures and custody
over said items." However, the prosecution has not shown that when the buy-bust operation was allegedly
conducted on January 17, 2007 and the sachet was supposedly seized and marked, there were "justifiable grounds"
for dispensing with compliance with Section 21. Rather, it merely insisted on its self-serving assertion that the
integrity of the seized sachet has nevertheless been, supposedly, preserved. The omission became more glaring
considering that the prosecution asserted that the events of January 17, 2007 entailed a carefully planned
operation, engendered by reports of drug-related activities along C. Raymundo Street. This planning even led to the
application for and issuance of a search warrant.

Apart from the officers’ glaring non-compliance with Section 21, two (2) circumstances are worth underscoringin this
case. First, the shabu supposedly seized amounted to five (5) centigrams (0.05 gram). This quantity is so miniscule
it amounts to only about 2.5% of the weight of a five-centavo coin (1.9 grams) or a one-centavo coin (2.0 grams).
Second, Holgado and Misarez were acquitted by the Regional Trial Court of all other charges (i.e., for possession of
dangerous drugs and for possession of drug paraphernalia).

652
While the miniscule amount of narcotics seized is by itself not a ground for acquittal, this circumstance underscores
the need for more exacting compliance with Section 21. In Malilin v. People,  this court said that "the likelihood of
50

tampering, loss ormistake with respect to an exhibit is greatest when the exhibit is small and is one that has physical
characteristics fungible innature and similar in form to substances familiar to people in their daily lives."
51

Moreover, the Regional Trial Court’s observations which led to accused-appellants’ acquittal for violations of
Sections 11 and 12 of Republic Act No. 9165 should have warned the Regional Trial Court and the Court of Appeals
that something was amiss.

The events of January 17, 2007 should be taken and appreciated as a whole even as they gave rise to four (4)
distinct criminal cases which were separately docketed. The reasons for acquitting accused-appellants for the
charges of violating Sections 11 and 12 (i.e., the prosecution’s complete failure to introduce in evidence the drugs
seized and the testifying police operative’s own failure to properly account for the paraphernalia he himself took part
in seizing)  seriously cast doubt, not only on accused-appellants’ own guilt, but more so on the soundness and
52

reliability of the measures taken and procedures followed by the police operatives. These circumstances cast a
heavy shadow on the integrity of the operation and the police operatives themselves.

Trial courts should meticulously consider the factual intricacies of cases involving violations of Republic Act No.
9165.  All details that factor into an ostensibly uncomplicatedand barefaced narrative must be scrupulously
1âwphi1

considered. Courts must employ heightened scrutiny, consistent with the requirement ofproof beyond reasonable
doubt, in evaluating cases involving miniscule amounts of drugs. These can be readily planted and tampered. Also,
doubt normally follows in cases where an accused has been discharged from other simultaneous offenses due to
mishandling of evidence. Had the Regional Trial Court and the Court of Appeals been so judicious in this case, a
speedier resolution would have been handed to Holgado and Misarez whose guilt beyond reasonable doubt was not
established.

It is lamentable that while our dockets are clogged with prosecutions under Republic Act No. 9165 involving small-
time drug users and retailers, we are seriously short of prosecutions involving the proverbial "big fish." We are
swamped with cases involving small fry who have been arrested for miniscule amounts. While they are certainly a
bane to our society, small retailers are but low-lying fruits in an exceedingly vast network of drug cartels. Both law
enforcers and prosecutors should realize that the more effective and efficient strategy is to focus resources more on
the source and true leadership of these nefarious organizations. Otherwise, all these executive and judicial
resources expended to attempt to convict an accused for 0.05 gram of shabu under doubtful custodial arrangements
will hardly make a dent in the overall picture. Itmight in fact be distracting our law enforcers from their more
challenging task: to uproot the causes of this drug menace. We stand ready to assess cases involving greater
amounts of drugs and the leadership of these cartels.

WHEREFORE, premises considered, the decision dated February 18, 2013 of the Court of Appeals inCA-G.R. CR-
HC No. 04635 is REVERSED and SET ASIDE. Accused-appellants Roberto Holgado y Dela Cruz and Antonio
Misarez y Zaraga are hereby ACQUITTEDfor failure of the prosecution to prove their guilt beyond reasonable doubt.
They are ordered immediately RELEASED from detention, unless they are confined for any other lawful cause.

Let a copy of this decision be furnished to the Director of the Bureau of Corrections, Muntinlupa City, for immediate
implementation. The Director of the Bureau of Corrections is directed to report to this court within five (5) days from
receipt of this decision the action he has taken. Copies shall also be furnished to the Director General of Philippine
National Police and the Director General of Philippine Drugs Enforcement Agency for their information.

The Regional Trial Court is directed to tum over the seized sachet of methamphetamine hydrochloride to the
Dangerous Drugs Board for destruction in accordance with law.

SO ORDERED.

653
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.C. No. 7766               August 5, 2014

JOSE ALLAN TAN, Complainant, 

vs.
PEDRO S. DIAMANTE, Respondent.

DECISION

PER CURIAM:

For the Court's resolution is an administrative Complaint  for disbarment dated February 1, 2008 filed by
1

complainant Jose Allan Tan (complainant) against respondent Pedro S. Diamante (respondent), charging him of
654
violating the Code of Professional Responsibility (CPR) and the lawyer’s oath for fabricating and using a spurious
court order, and for failing to keep his client informed of the status of the case.

The Facts

On April 2, 2003, complainant, claiming to be a recognized illegitimate son of the late Luis Tan, secured the services
of respondent in order to pursue a case for partition of property against the heirs of the late spouses Luis and
Natividad Valencia-Tan.  After accepting the engagement, respondent filed the corresponding complaint  before the
2 3

Regional Trial Court of Bacolod City, Branch 46 (RTC), docketed as Civil Case No. 03-11947. The complaint was
eventually dismissed by the RTC in an Order  dated July 25, 2007 for lack of cause of action and insufficiency of
4

evidence.  While respondent was notified of such dismissal as early as August 14, 2007,  complainant learned of the
5 6

same only on August 24, 2007 when he visited the former’s office.  On such occasion, respondent allegedly asked
7

for the amount of ₱10,000.00 for the payment of appeal fees and other costs, but since complainant could not
produce the said amount at that time, respondent, instead, asked and was given the amount of ₱500.00 purportedly
as payment of the reservation fee for the filing of a notice of appeal before the RTC.  On September 12, 2007, Tan
8

handed the amount of ₱10,000.00 to respondent, who on even date, filed a notice of appeal  before the RTC.
9 10

In an Order  dated September 18, 2007, the RTC dismissed complainant’s appeal for having been filed beyond the
11

reglementary period provided for by law. Respondent, however, did not disclose such fact and, instead, showed
complainant an Order  dated November 9, 2007 purportedly issued by the RTC (November 9, 2007 Order) directing
12

the submission of the results of a DNA testing to prove his filiation to the late Luis Tan, within 15 days from receipt of
the notice. Considering the technical requirements for such kind of testing, complainant proceeded to the RTC and
requested for an extension of the deadline for its submission. It was then that he discovered that the November 9,
2007 Order was spurious, as certified by the RTC’s Clerk of Court.  Complainant also found out that, contrary to the
13

representations of respondent, his appeal had long been dismissed.  Aggrieved, he filed the instant administrative
14

complaint for disbarment against respondent.

In his Comments/Compliance  dated September 4, 2009, respondent alleged that it was complainant’s failure to
15

timely produce the amount of 1,400.00 to pay for the appeal fees that resulted in the late filing of his appeal.
According to him, he informed complainant of the lapse of the reglementary period to appeal, but the latter insisted
in pursuing the same. He also claimed to have assisted complainant "not for money or malice" but being a
desperate litigant, he was blamed for the court’s unfavorable decision. 16

The IBP’s Report and Recommendation

In a Report and Recommendation  dated September 21, 2010, the Integrated Bar of the Philippines (IBP)
17

Investigating Commissioner found respondent administratively liable, and accordingly recommended that the
penalty of suspension for a period of one (1) year be meted out against him. 18

The Investigating Commissioner found complainant’s imputations against respondent to be well-founded, observing
that instead of meeting complainant’s allegations squarely, particularly, the issue of the nondisclosure of the
dismissal of the partition case, respondent sidestepped and delved on arguments that hardly had an effect on the
issues at hand. 19

Moreover, the Investigating Commissioner did not find credence in respondent’s accusation that the spurious
November 9, 2007 Order originated from complainant, ratiocinating that it was respondent who was motivated to
fabricate the same to cover up his lapses that brought about the dismissal of complainant’s appeal and make it
appear that there is still an available relief left for Tan.
20

In a Resolution dated April 16, 2013, the IBP Board of Governors unanimously adopted and approved the aforesaid
report and recommendation. 21

The Issue Before the Court

The essential issue in this case is whether or not respondent should be held administratively liable for violating the
CPR.

The Court’s Ruling

After a judicious perusal of the records, the Court concurs with the IBP’s findings, subject to the modification of the
recommended penalty to be imposed upon respondent.

Under Rule 18.04, Canon 18 of the CPR, it is the lawyer’s duty to keep his client constantly updated on the
developments of his case as it is crucial in maintaining the latter’s confidence, to wit:

CANON 18 – A LAWYER SHALL SERVE HIS CLIENT WITH COMPETENCE AND DILIGENCE.

655
Rule 18.04 – A lawyer shall keep the client informed of the status of his case and shall respond within a reasonable
time to client’s request for information.

As an officer of the court, it is the duty of an attorney to inform his client of whatever important information he may
have acquired affecting his client’s case. He should notify his client of any adverse decision to enable his client to
decide whether to seek an appellate review thereof. Keeping the client informed of the developments of the case will
minimize misunderstanding and loss of trust and confidence in the attorney. The lawyer should not leave the client
in the dark on how the lawyer is defending the client’s interests.  In this connection, the lawyer must constantly keep
22

in mind that his actions, omissions, or nonfeasance would be binding upon his client. Concomitantly, the lawyer is
expected to be acquainted with the rudiments of law and legal procedure, and a client who deals with him has the
right to expect not just a good amount of professional learning and competence but also a whole-hearted fealty to
the client’s cause. 23

In the case at bar, records reveal that as of August 14, 2007, respondent already knew of the dismissal of
complainant’s partition case before the RTC. Despite this fact, he never bothered to inform complainant of such
dismissal as the latter only knew of the same on August 24, 2007 when he visited the former’s office. To add insult
to injury, respondent was inexcusably negligent in filing complainant’s appeal only on September 12, 2007, or way
beyond the reglementary period therefor, thus resulting in its outright dismissal. Clearly, respondent failed to
exercise such skill, care, and diligence as men of the legal profession commonly possess and exercise in such
matters of professional employment. 24

Worse, respondent attempted to conceal the dismissal of complainant’s appeal by fabricating the November 9, 2007
Order which purportedly required a DNA testing to make it appear that complainant’s appeal had been given due
course, when in truth, the same had long been denied. In so doing, respondent engaged in an unlawful, dishonest,
and deceitful conduct that caused undue prejudice and unnecessary expenses on the part of complainant.
Accordingly, respondent clearly violated Rule 1.01, Canon 1 of the CPR, which provides:

CANON 1 – A lawyer shall uphold the constitution, obey the laws of the land and promote respect for law and legal
processes.

Rule 1.01 – A lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct.

As officers of the court, lawyers are bound to maintain not only a high standard of legal proficiency, but also of
morality, honesty, integrity, and fair dealing,  failing in which whether in his personal or private capacity, he
25

becomes unworthy to continue his practice of law.  A lawyer’s inexcusable neglect to serve his client’s interests with
26

utmost diligence and competence as well as his engaging in unlawful, dishonest, and deceitful conduct in order to
conceal such neglect should never be countenanced, and thus, administratively sanctioned.

In view of the foregoing, respondent’s conduct of employing a crooked and deceitful scheme to keep complainant in
the dark and conceal his case’s true status through the use of a falsified court order evidently constitutes Gross
Misconduct.  His acts should not just be deemed as unacceptable practices that are disgraceful and dishonorable;
27

they reveal a basic moral flaw that makes him unfit to practice law.  In this regard, the Court’s pronouncement in
28

Sebastian v. Calis  is instructive, viz.:

29

Deception and other fraudulent acts by a lawyer are disgraceful and dishonorable. They reveal moral flaws in a
lawyer.  They are unacceptable practices. A lawyer’s relationship with others should be characterized by the highest
1âwphi1

degree of good faith, fairness and candor. This is the essence of the lawyer’s oath. The lawyer’s oath is not mere
facile words, drift and hollow, but a sacred trust that must be upheld and keep inviolable. The nature of the office of
an attorney requires that he should be a person of good moral character. This requisite is not only a condition
precedent to the admission to the practice of law, its continued possession is also essential for remaining in the
practice of law. We have sternly warned that any gross misconduct of a lawyer, whether in his professional or
private capacity, puts his moral character in serious doubt as a member of the Bar, and renders him unfit to continue
in the practice of law.  (Emphases and underscoring supplied)
30

Jurisprudence reveals that in analogous cases where lawyers failed to inform their clients of the status of their
respective cases, the Court suspended them for a period of six (6) months. In Mejares v. Romana,  the Court
31

suspended the lawyer for the same period for his failure to timely and adequately inform his clients of the dismissal
of their petition. In the same vein, in Penilla v. Alcid, Jr.,  the same penalty was imposed on the lawyer who
32

consistently failed to update his client of the status of his cases, notwithstanding several follow-ups.

However, in cases where lawyers engaged in unlawful, dishonest, and deceitful conduct by falsifying documents,
the Court found them guilty of Gross Misconduct and disbarred them. In Brennisen v. Contawi,  the Court disbarred
33

the lawyer who falsified a special power of attorney in order to mortgage and sell his client’s property. Also, in
Embido v. Pe,  the penalty of disbarment was meted out against the lawyer who falsified an in existent court
34

decision for a fee.

656
As already discussed, respondent committed acts of falsification in order to misrepresent to his client, i.e.,
complainant, that he still had an available remedy in his case, when in reality, his case had long been dismissed for
failure to timely file an appeal, thus, causing undue prejudice to the latter. To the Court, respondent’s acts are so
reprehensible, and his violations of the CPR are so flagrant, exhibiting his moral unfitness and inability to discharge
his duties as a member of the bar. His actions erode rather than enhance the public perception of the legal
profession. Therefore, in view of the totality of his violations, as well as the damage and prejudice caused to his
client, respondent deserves the ultimate punishment of disbarment.

WHEREFORE, respondent Pedro S. Diamante is hereby DISBARRED for Gross Misconduct and violations of Rule
1.01, Canon 1, and Rule 18.04, Canon 18 of the Code of Professional Responsibility, and his name is ordered
STRICKEN OFF from the roll of attorneys.

Let a copy of this Decision be attached to respondent Pedro S. Diamante's record in this Court. Further, let copies of
this Decision be furnished to the Integrated Bar of the Philippines and the Office of the Court Administrator, which is
directed to circulate them to all the courts in the country for their information and guidance.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 170139               August 5, 2014

SAMEER OVERSEAS PLACEMENT AGENCY, INC., Petitioner, 

vs.
JOY C. CABILES, Respondent.

DECISION

LEONEN, J.:

This case involves an overseas Filipino worker with shattered dreams. It is our duty, given the facts and the law, to
approximate justice for her.

657
We are asked to decide a petition for review  on certiorari assailing the Court of Appeals’ decision  dated June 27,
1 2

2005. This decision partially affirmed the National Labor RelationsCommission’s resolution dated March 31,
2004, declaring respondent’s dismissal illegal, directing petitioner to pay respondent’s three-month salary equivalent
3

to New Taiwan Dollar (NT$) 46,080.00, and ordering it to reimburse the NT$3,000.00 withheld from respondent, and
pay her NT$300.00 attorney’s fees. 4

Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and placement agency.  Responding to an ad 5

it published, respondent, Joy C. Cabiles, submitted her application for a quality control job in Taiwan. 6

Joy’s application was accepted.  Joy was later asked to sign a oneyear employment contract for a monthly salary of
7

NT$15,360.00.  She alleged that Sameer Overseas Agency required her to pay a placement fee of ₱70,000.00
8

when she signed the employment contract. 9

Joy was deployed to work for TaiwanWacoal, Co. Ltd. (Wacoal) on June 26, 1997.  She alleged that in her 10

employment contract, she agreed to work as quality control for one year.  In Taiwan, she was asked to work as a 11

cutter. 12

Sameer Overseas Placement Agencyclaims that on July 14, 1997, a certain Mr. Huwang from Wacoal informedJoy,
without prior notice, that she was terminated and that "she should immediately report to their office to get her salary
and passport."  She was asked to "prepare for immediate repatriation."
13 14

Joy claims that she was told that from June 26 to July 14, 1997, she only earned a total of NT$9,000.  According to 15

her, Wacoal deducted NT$3,000 to cover her plane ticket to Manila. 16

On October 15, 1997, Joy filed a complaint  with the National Labor Relations Commission against petitioner and
17

Wacoal. She claimed that she was illegally dismissed.  She asked for the return of her placement fee, the withheld
18

amount for repatriation costs, payment of her salary for 23 months as well as moral and exemplary damages.  She 19

identified Wacoal as Sameer Overseas Placement Agency’s foreign principal. 20

Sameer Overseas Placement Agency alleged that respondent's termination was due to her inefficiency, negligence
in her duties, and her "failure to comply with the work requirements [of] her foreign [employer]."  The agency also 21

claimed that it did not ask for a placement fee of ₱70,000.00.  As evidence, it showedOfficial Receipt No. 14860
22

dated June 10, 1997, bearing the amount of ₱20,360.00.  Petitioner added that Wacoal's accreditation with
23

petitioner had already been transferred to the Pacific Manpower & Management Services, Inc. (Pacific) as of August
6, 1997.  Thus, petitioner asserts that it was already substituted by Pacific Manpower.
24 25

Pacific Manpower moved for the dismissal of petitioner’s claims against it.  It alleged that there was no employer- 26

employee relationship between them.  Therefore, the claims against it were outside the jurisdiction of the Labor
27

Arbiter.  Pacific Manpower argued that the employment contract should first be presented so that the employer’s
28

contractual obligations might be identified.  It further denied that it assumed liability for petitioner’s illegal acts.
29 30

On July 29, 1998, the Labor Arbiter dismissed Joy’s complaint.  Acting Executive Labor Arbiter Pedro C.Ramos
31

ruled that her complaint was based on mereallegations.  The Labor Arbiter found that there was no excess payment
32

of placement fees, based on the official receipt presented by petitioner.  The Labor Arbiter found unnecessary a 33

discussion on petitioner’s transfer of obligations to Pacific  and considered the matter immaterial in view of the
34

dismissal of respondent’s complaint. 35

Joy appealed  to the National Labor Relations Commission.

36

In a resolution  dated March 31, 2004, the National Labor Relations Commission declared that Joy was illegally
37

dismissed.  It reiterated the doctrine that the burden of proof to show that the dismissal was based on a just or valid
38

cause belongs to the employer.  It found that Sameer Overseas Placement Agency failed to prove that there were
39

just causes for termination.  There was no sufficient proofto show that respondent was inefficient in her work and
40

that she failed to comply with company requirements.  Furthermore, procedural dueprocess was not observed in
41

terminating respondent. 42

The National Labor Relations Commission did not rule on the issue of reimbursement of placement fees for lack of
jurisdiction.  It refused to entertain the issue of the alleged transfer of obligations to Pacific.  It did not acquire
43 44

jurisdiction over that issue because Sameer Overseas Placement Agency failed to appeal the Labor Arbiter’s
decision not to rule on the matter. 45

The National Labor Relations Commission awarded respondent only three (3) months worth of salaryin the amount
of NT$46,080, the reimbursement of the NT$3,000 withheld from her, and attorney’s fees of NT$300. 46

The Commission denied the agency’s motion for reconsideration  dated May 12, 2004 through a resolution  dated
47 48

July 2, 2004.

658
Aggrieved by the ruling, Sameer Overseas Placement Agency caused the filing of a petition  for certiorari with the
49

Court of Appeals assailing the National Labor Relations Commission’s resolutions dated March 31, 2004 and July 2,
2004.

The Court of Appeals  affirmed the decision of the National Labor Relations Commission with respect to the finding
50

of illegal dismissal, Joy’s entitlement to the equivalent of three months worth of salary, reimbursement of withheld
repatriation expense, and attorney’s fees.  The Court of Appeals remanded the case to the National Labor Relations
51

Commission to address the validity of petitioner's allegations against Pacific.  The Court of Appeals held, thus:
52

Although the public respondent found the dismissal of the complainant-respondent illegal, we should point out that
the NLRC merely awarded her three (3) months backwages or the amount of NT$46,080.00, which was based upon
its finding that she was dismissed without due process, a finding that we uphold, given petitioner’s lack of worthwhile
discussion upon the same in the proceedings below or before us. Likewise we sustain NLRC’s finding in regard to
the reimbursement of her fare, which is squarely based on the law; as well as the award of attorney’s fees.

But we do find it necessary to remand the instant case to the public respondent for further proceedings, for the
purpose of addressing the validity or propriety of petitioner’s third-party complaint against the transferee agent or the
Pacific Manpower & Management Services, Inc. and Lea G. Manabat. We should emphasize that as far as the
decision of the NLRC on the claims of Joy Cabiles, is concerned, the same is hereby affirmed with finality, and we
hold petitioner liable thereon, but without prejudice to further hearings on its third party complaint against Pacific for
reimbursement.

WHEREFORE, premises considered, the assailed Resolutions are hereby partly AFFIRMED in accordance with the
foregoing discussion, but subject to the caveat embodied inthe last sentence. No costs.

SO ORDERED. 53

Dissatisfied, Sameer Overseas Placement Agency filed this petition. 54

We are asked to determine whether the Court of Appeals erred when it affirmed the ruling of the National Labor
Relations Commission finding respondent illegally dismissed and awarding her three months’ worth of salary, the
reimbursement of the cost ofher repatriation, and attorney’s fees despite the alleged existence of just causes of
termination.

Petitioner reiterates that there was just cause for termination because there was a finding of Wacoal that respondent
was inefficient in her work.
55

Therefore, it claims that respondent’s dismissal was valid. 56

Petitioner also reiterates that since Wacoal’s accreditation was validly transferred to Pacific at the time respondent
filed her complaint, it should be Pacific that should now assume responsibility for Wacoal’s contractual obligations to
the workers originally recruited by petitioner. 57

Sameer Overseas Placement Agency’spetition is without merit. We find for respondent.

Sameer Overseas Placement Agency failed to show that there was just cause for causing Joy’s dismissal. The
employer, Wacoal, also failed to accord her due process of law.

Indeed, employers have the prerogative to impose productivity and quality standards at work.  They may also
58

impose reasonable rules to ensure that the employees comply with these standards.  Failure to comply may be a
59

just cause for their dismissal.  Certainly, employers cannot be compelled to retain the services of anemployee who
60

is guilty of acts that are inimical to the interest of the employer.  While the law acknowledges the plight and
61

vulnerability of workers, it does not "authorize the oppression or self-destruction of the employer."  Management
62

prerogative is recognized in law and in our jurisprudence.

This prerogative, however, should not be abused. It is "tempered with the employee’s right to security of
tenure." Workers are entitled to substantive and procedural due process before termination. They may not be
63

removed from employment without a validor just cause as determined by law and without going through the proper
procedure.

Security of tenure for labor is guaranteed by our Constitution. 64

Employees are not stripped of their security of tenure when they move to work in a different jurisdiction. With respect
to the rights of overseas Filipino workers, we follow the principle of lex loci contractus.Thus, in Triple Eight
Integrated Services, Inc. v. NLRC,  this court noted:
65

659
Petitioner likewise attempts to sidestep the medical certificate requirement by contending that since Osdana was
working in Saudi Arabia, her employment was subject to the laws of the host country. Apparently, petitioner hopes
tomake it appear that the labor laws of Saudi Arabia do not require any certification by a competent public health
authority in the dismissal of employees due to illness.

Again, petitioner’s argument is without merit.

First, established is the rule that lex loci contractus (the law of the place where the contract is made) governs in this
jurisdiction. There is no question that the contract of employment in this case was perfected here in the Philippines.
Therefore, the Labor Code, its implementing rules and regulations, and other laws affecting labor apply in this
case.Furthermore, settled is the rule that the courts of the forum will not enforce any foreign claim obnoxious to the
forum’s public policy. Herein the Philippines, employment agreements are more than contractual in nature. The
Constitution itself, in Article XIII, Section 3, guarantees the special protection of workers, to wit:

The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to selforganization, collective bargaining and negotiations, and peaceful
concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. Theyshall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law.

....

This public policy should be borne in mind in this case because to allow foreign employers to determine for and by
themselves whether an overseas contract worker may be dismissed on the ground of illness would encourage illegal
or arbitrary pretermination of employment contracts.  (Emphasis supplied, citation omitted)
66

Even with respect to fundamental procedural rights, this court emphasized in PCL Shipping Philippines, Inc. v.
NLRC,  to wit:
67

Petitioners admit that they did notinform private respondent in writing of the charges against him and that they failed
to conduct a formal investigation to give him opportunity to air his side. However, petitioners contend that the twin
requirements ofnotice and hearing applies strictly only when the employment is within the Philippines and that these
need not be strictly observed in cases of international maritime or overseas employment.

The Court does not agree. The provisions of the Constitution as well as the Labor Code which afford protection to
labor apply to Filipino employees whether working within the Philippines or abroad. Moreover, the principle of lex
loci contractus (the law of the place where the contract is made) governs in this jurisdiction. In the present case, it is
not disputed that the Contract of Employment entered into by and between petitioners and private respondent was
executed here in the Philippines with the approval of the Philippine Overseas Employment Administration (POEA).
Hence, the Labor Code together with its implementing rules and regulations and other laws affecting labor apply in
this case.  (Emphasis supplied, citations omitted)
68

By our laws, overseas Filipino workers (OFWs) may only be terminated for a just or authorized cause and after
compliance with procedural due process requirements.

Article 282 of the Labor Code enumerates the just causes of termination by the employer. Thus:

Art. 282. Termination by employer. An employer may terminate an employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;

(d) Commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representatives; and

(e) Other causes analogous to the foregoing.

Petitioner’s allegation that respondentwas inefficient in her work and negligent in her duties  may, therefore,
69

constitute a just cause for termination under Article 282(b), but only if petitioner was able to prove it.
660
The burden of proving that there is just cause for termination is on the employer. "The employer must affirmatively
show rationally adequate evidence that the dismissal was for a justifiable cause."  Failure to show that there was
70

valid or just cause for termination would necessarily mean that the dismissal was illegal. 71

To show that dismissal resulting from inefficiency in work is valid, it must be shown that: 1) the employer has set
standards of conduct and workmanship against which the employee will be judged; 2) the standards of conduct and
workmanship must have been communicated tothe employee; and 3) the communication was made at a reasonable
time prior to the employee’s performance assessment.

This is similar to the law and jurisprudence on probationary employees, which allow termination ofthe employee only
when there is "just cause or when [the probationary employee] fails to qualify as a regular employee in accordance
with reasonable standards made known by the employer to the employee at the time of his [or her] engagement." 72

However, we do not see why the application of that ruling should be limited to probationary employment. That rule is
basic to the idea of security of tenure and due process, which are guaranteed to all employees, whether their
employment is probationary or regular.

The pre-determined standards that the employer sets are the bases for determining the probationary employee’s
fitness, propriety, efficiency, and qualifications as a regular employee. Due process requires that the probationary
employee be informed of such standards at the time of his or her engagement so he or she can adjusthis or her
character or workmanship accordingly. Proper adjustment to fit the standards upon which the employee’s
qualifications will be evaluated will increase one’s chances of being positively assessed for regularization by his or
her employer.

Assessing an employee’s work performance does not stop after regularization. The employer, on a regular basis,
determines if an employee is still qualified and efficient, based on work standards. Based on that determination, and
after complying with the due process requirements of notice and hearing, the employer may exercise its
management prerogative of terminating the employee found unqualified.

The regular employee must constantlyattempt to prove to his or her employer that he or she meets all the standards
for employment. This time, however, the standards to be met are set for the purpose of retaining employment or
promotion. The employee cannot be expected to meet any standard of character or workmanship if such standards
were not communicated to him or her. Courts should remain vigilant on allegations of the employer’s failure to
communicatework standards that would govern one’s employment "if [these are] to discharge in good faith [their]
duty to adjudicate."73

In this case, petitioner merely alleged that respondent failed to comply with her foreign employer’s work
requirements and was inefficient in her work.  No evidence was shown to support such allegations. Petitioner did
74

not even bother to specify what requirements were not met, what efficiency standards were violated, or what
particular acts of respondent constituted inefficiency.

There was also no showing that respondent was sufficiently informed of the standards against which her work
efficiency and performance were judged. The parties’ conflict as to the position held by respondent showed that
even the matter as basic as the job title was not clear.

The bare allegations of petitioner are not sufficient to support a claim that there is just cause for termination. There
is no proof that respondent was legally terminated.

Petitioner failed to comply with

the due process requirements

Respondent’s dismissal less than one year from hiring and her repatriation on the same day show not onlyfailure on
the partof petitioner to comply with the requirement of the existence of just cause for termination. They patently
show that the employersdid not comply with the due process requirement.

A valid dismissal requires both a valid cause and adherence to the valid procedure of dismissal.  The employer is
75

required to give the charged employee at least two written notices before termination.  One of the written notices
76

must inform the employee of the particular acts that may cause his or her dismissal.  The other notice must "[inform]
77

the employee of the employer’s decision."  Aside from the notice requirement, the employee must also be given "an
78

opportunity to be heard."79

Petitioner failed to comply with the twin notices and hearing requirements. Respondent started working on June 26,
1997. She was told that she was terminated on July 14, 1997 effective on the same day and barely a month from
her first workday. She was also repatriated on the same day that she was informed of her termination. The
abruptness of the termination negated any finding that she was properly notified and given the opportunity to be
heard. Her constitutional right to due process of law was violated.

661
 II

Respondent Joy Cabiles, having been illegally dismissed, is entitled to her salary for the unexpired portion ofthe
employment contract that was violated together with attorney’s fees and reimbursement of amounts withheld from
her salary.

Section 10 of Republic Act No. 8042,otherwise known as the Migrant Workers and Overseas Filipinos Act of1995,
states thatoverseas workers who were terminated without just, valid, or authorized cause "shall be entitled to the full
reimbursement of his placement fee with interest of twelve (12%) per annum, plus his salaries for the unexpired
portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less."

Sec. 10. MONEY CLAIMS. – Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National
Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within
ninety (90) calendar days after filing of the complaint, the claims arising out of an employer-employee relationship or
by virtue of any law or contract involving Filipino workers for overseas deployment including claims for actual, moral,
exemplary and other forms of damages.

The liability of the principal/employer and the recruitment/placement agency for any and all claims under this section
shall be joint and several. This provisions [sic] shall be incorporated in the contract for overseas employment and
shall be a condition precedent for its approval. The performance bond to be filed by the
recruitment/placementagency, as provided by law, shall be answerable for all money claims or damages that may
be awarded to the workers. If the recruitment/placement agency is a juridical being, the corporate officers and
directors and partners as the case may be, shall themselves be jointly and solidarily liable with the corporation
orpartnership for the aforesaid claims and damages.

Such liabilities shall continue during the entire period or duration of the employment contract and shall not be
affected by any substitution, amendment or modification made locally or in a foreign country of the said contract.

Any compromise/amicable settlement or voluntary agreement on money claims inclusive of damages under this
section shall be paid within four (4) months from the approval of the settlement by the appropriate authority.

In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract,
the workers shall be entitled to the full reimbursement of his placement fee with interest of twelve (12%) per annum,
plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the
unexpired term, whichever is less.

....

(Emphasis supplied)

Section 15 of Republic Act No. 8042 states that "repatriation of the worker and the transport of his [or her] personal
belongings shall be the primary responsibility of the agency which recruited or deployed the worker overseas." The
exception is when "termination of employment is due solely to the fault of the worker,"  which as we have
80

established, is not the case. It reads: SEC. 15. REPATRIATION OF WORKERS; EMERGENCY REPATRIATION
FUND. – The repatriation of the worker and the transport of his personal belongings shall be the primary
responsibility of the agency which recruited or deployed the worker overseas. All costs attendant to repatriation shall
be borne by or charged to the agency concerned and/or its principal. Likewise, the repatriation of remains and
transport of the personal belongings of a deceased worker and all costs attendant thereto shall be borne by the
principal and/or local agency. However, in cases where the termination of employment is due solely to the fault of
the worker, the principal/employer or agency shall not in any manner be responsible for the repatriation of the
former and/or his belongings.

....

The Labor Code  also entitles the employee to 10% of the amount of withheld wages as attorney’s feeswhen the
81

withholding is unlawful.

The Court of Appeals affirmedthe National Labor Relations Commission’s decision to award respondent
NT$46,080.00 or the threemonth equivalent of her salary, attorney’s fees of NT$300.00, and the reimbursement of
the withheld NT$3,000.00 salary, which answered for her repatriation.

We uphold the finding that respondent is entitled to all of these awards. The award of the three-month equivalent of
respondent’s salary should, however, be increased to the amount equivalent to the unexpired term of the
employment contract.

662
In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc.,  this court ruled that the clause "or for
82

three (3) months for every year of the unexpired term, whichever is less"  is unconstitutional for violating the equal
83

protection clause and substantive due process. 84

A statute or provision which was declared unconstitutional is not a law. It "confers no rights; it imposes no duties; it
affords no protection; it creates no office; it is inoperative as if it has not been passed at all."
85

We are aware that the clause "or for three (3) months for every year of the unexpired term, whichever is less"was
reinstated in Republic Act No. 8042 upon promulgation of Republic Act No. 10022 in 2010. Section 7 of Republic
Act No. 10022 provides:

Section 7.Section 10 of Republic Act No. 8042, as amended, is hereby amended to read as follows:

SEC. 10. Money Claims.– Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National
Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within
ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-employee
relationship or by virtue of any law or contract involving Filipino workers for overseas deployment including claims
for actual, moral, exemplary and other forms of damage. Consistent with this mandate, the NLRC shall endeavor to
update and keep abreast with the developments in the global services industry.

The liability of the principal/employer and the recruitment/placement agency for any and all claims under this section
shall be joint and several. This provision shall be incorporated in the contract for overseas employment and shall be
a condition precedent for its approval. The performance bond to de [sic] filed by the recruitment/placement agency,
as provided by law, shall be answerable for all money claims or damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the corporate officers and directors and partners as the case may
be, shall themselves be jointly and solidarily liable with the corporation or partnership for the aforesaid claims and
damages.

Such liabilities shall continue during the entire period or duration of the employment contract and shall not be
affected by any substitution, amendment or modification made locally or in a foreign country of the said contract.

Any compromise/amicable settlement or voluntary agreement on money claims inclusive of damages under this
section shall be paid within thirty (30) days from approval of the settlement by the appropriate authority.

In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract,
or any unauthorized deductions from the migrant worker’s salary, the worker shall be entitled to the full
reimbursement if [sic] his placement fee and the deductions made with interest at twelve percent (12%) per annum,
plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the
unexpired term, whichever is less.

In case of a final and executory judgement against a foreign employer/principal, it shall be automatically disqualified,
without further proceedings, from participating in the Philippine Overseas Employment Program and from recruiting
and hiring Filipino workers until and unless it fully satisfies the judgement award.

Noncompliance with the mandatory periods for resolutions of case providedunder this section shall subject the
responsible officials to any or all of the following penalties:

(a) The salary of any such official who fails to render his decision or resolution within the prescribed period
shall be, or caused to be, withheld until the said official complies therewith;

(b) Suspension for not more than ninety (90) days; or

(c) Dismissal from the service with disqualification to hold any appointive public office for five (5) years.

Provided, however,That the penalties herein provided shall be without prejudice to any liability which any such
official may have incured [sic] under other existing laws or rules and regulations as a consequence of violating the
provisions of this paragraph. (Emphasis supplied)

Republic Act No. 10022 was promulgated on March 8, 2010. This means that the reinstatement of the clause in
Republic Act No. 8042 was not yet in effect at the time of respondent’s termination from work in 1997.  Republic Act
86

No. 8042 before it was amended byRepublic Act No. 10022 governs this case.

When a law is passed, this court awaits an actual case that clearly raises adversarial positions in their proper
context before considering a prayer to declare it as unconstitutional.

663
However, we are confronted with a unique situation. The law passed incorporates the exact clause already declared
as unconstitutional, without any perceived substantial change in the circumstances.

This may cause confusion on the part of the National Labor Relations Commission and the Court of Appeals.At
minimum, the existence of Republic Act No. 10022 may delay the execution of the judgment in this case, further
frustrating remedies to assuage the wrong done to petitioner.

Hence, there is a necessity to decide this constitutional issue.

Moreover, this court is possessed with the constitutional duty to "[p]romulgate rules concerning the protection and
enforcement of constitutional rights."  When cases become mootand academic, we do not hesitate to provide for
87

guidance to bench and bar in situations where the same violations are capable of repetition but will evade review.
This is analogous to cases where there are millions of Filipinos working abroad who are bound to suffer from the
lack of protection because of the restoration of an identical clause in a provision previously declared as
unconstitutional.

In the hierarchy of laws, the Constitution is supreme. No branch or office of the government may exercise its powers
in any manner inconsistent with the Constitution, regardless of the existence of any law that supports such exercise.
The Constitution cannot be trumped by any other law. All laws must be read in light of the Constitution. Any law that
is inconsistent with it is a nullity.

Thus, when a law or a provision of law is null because it is inconsistent with the Constitution,the nullity cannot be
cured by reincorporation or reenactment of the same or a similar law or provision. A law or provision of law that was
already declared unconstitutional remains as such unless circumstances have sochanged as to warrant a reverse
conclusion.

We are not convinced by the pleadings submitted by the parties that the situation has so changed so as to cause us
to reverse binding precedent.

Likewise, there are special reasons of judicial efficiency and economy that attend to these cases. The new law puts
our overseas workers in the same vulnerable position as they were prior to Serrano. Failure to reiterate the very
ratio decidendi of that case will result in the same untold economic hardships that our reading of the Constitution
intended to avoid. Obviously, we cannot countenance added expenses for further litigation thatwill reduce their
hardearned wages as well as add to the indignity of having been deprived of the protection of our laws simply
because our precedents have not been followed. There is no constitutional doctrine that causes injustice in the face
of empty procedural niceties. Constitutional interpretation is complex, but it is never unreasonable.

Thus, in a resolution  dated October 22, 2013, we ordered the parties and the Office of the Solicitor General to
88

comment on the constitutionality of the reinstated clause in Republic Act No. 10022.

In its comment,  petitioner argued that the clause was constitutional.  The legislators intended a balance between
89 90

the employers’ and the employees’ rights by not unduly burdening the local recruitment agency.  Petitioner is also of
91

the view that the clause was already declared as constitutional in Serrano. 92

The Office of the Solicitor General also argued that the clause was valid and constitutional.  However, since the
93

parties never raised the issue of the constitutionality of the clause asreinstated in Republic Act No. 10022, its
contention is that it is beyond judicial review. 94

On the other hand, respondentargued that the clause was unconstitutional because it infringed on workers’ right to
contract.95

We observe that the reinstated clause, this time as provided in Republic Act. No. 10022, violates the constitutional
rights to equal protection and due process.  Petitioner as well as the Solicitor General have failed to show any
96

compelling changein the circumstances that would warrant us to revisit the precedent.

We reiterate our finding in Serrano v. Gallant Maritime that limiting wages that should be recovered by anillegally
dismissed overseas worker to three months is both a violation of due process and the equal protection clauses of
the Constitution.

Equal protection of the law is a guarantee that persons under like circumstances and falling within the same class
are treated alike, in terms of "privileges conferred and liabilities enforced."  It is a guarantee against "undue favor
97

and individual or class privilege, as well as hostile discrimination or the oppression of inequality." 98

In creating laws, the legislature has the power "to make distinctions and classifications." 99

In exercising such power, it has a wide discretion. 100

664
The equal protection clause does not infringe on this legislative power.  A law is void on this basis, only if
101

classifications are made arbitrarily.  There is no violation of the equal protection clause if the law applies equally to
102

persons within the same class and if there are reasonable grounds for distinguishing between those falling within
the class and those who do not fall within the class.  A law that does not violate the equal protection clause
103

prescribesa reasonable classification. 104

A reasonable classification "(1) must rest on substantial distinctions; (2) must be germane to the purposes of the
law; (3) must not be limited to existing conditions only; and (4) must apply equally to all members of the same
class."105

The reinstated clause does not satisfy the requirement of reasonable classification.

In Serrano, we identified the classifications made by the reinstated clause. It distinguished between fixed-period
overseas workers and fixedperiod local workers.  It also distinguished between overseas workers with employment
106

contracts of less than one year and overseas workers with employment contracts of at least one year.  Within the 107

class of overseas workers with at least one-year employment contracts, there was a distinction between those with
at least a year left in their contracts and those with less than a year left in their contracts when they were illegally
dismissed. 108

The Congress’ classification may be subjected to judicial review. In Serrano, there is a "legislative classification
which impermissibly interferes with the exercise of a fundamental right or operates to the peculiar disadvantage of a
suspect class." 109

Under the Constitution, labor is afforded special protection.  Thus, this court in Serrano, "[i]mbued with the same
110

sense of ‘obligation to afford protection to labor,’ . . . employ[ed] the standard of strict judicial scrutiny, for it
perceive[d] in the subject clause a suspect classification prejudicial to OFWs." 111

We also noted in Serranothat before the passage of Republic Act No. 8042, the money claims of illegally terminated
overseas and local workers with fixed-term employment werecomputed in the same manner.  Their money claims
112

were computed based onthe "unexpired portions of their contracts."  The adoption of the reinstated clause in
113

Republic Act No. 8042 subjected the money claims of illegally dismissed overseas workers with an unexpired term
of at least a year to a cap of three months worth of their salary.  There was no such limitation on the money claims
114

of illegally terminated local workers with fixed-term employment. 115

We observed that illegally dismissed overseas workers whose employment contracts had a term of less than one
year were granted the amount equivalent to the unexpired portion of their employment contracts.  Meanwhile, 116

illegally dismissed overseas workers with employment terms of at least a year were granted a cap equivalent to
three months of their salary for the unexpired portions of their contracts. 117

Observing the terminologies used inthe clause, we also found that "the subject clause creates a sub-layer of
discrimination among OFWs whose contract periods are for more than one year: those who are illegally dismissed
with less than one year left in their contracts shall be entitled to their salaries for the entire unexpired portion thereof,
while those who are illegally dismissed with one year or more remaining in their contracts shall be covered by the
reinstated clause, and their monetary benefits limited to their salaries for three months only." 118

We do not need strict scrutiny to conclude that these classifications do not rest on any real or substantial distinctions
that would justify different treatments in terms of the computation of money claims resulting from illegal termination.

Overseas workers regardless of their classifications are entitled to security of tenure, at least for the period agreed
upon in their contracts. This means that they cannot be dismissed before the end of their contract terms without due
process. If they were illegally dismissed, the workers’ right to security of tenure is violated.

The rights violated when, say, a fixed-period local worker is illegally terminated are neither greater than norless than
the rights violated when a fixed-period overseas worker is illegally terminated. It is state policy to protect the rights of
workers withoutqualification as to the place of employment.  In both cases, the workers are deprived of their
119

expected salary, which they could have earned had they not been illegally dismissed. For both workers, this
deprivation translates to economic insecurity and disparity.  The same is true for the distinctions between overseas
120

workers with an employment contract of less than one year and overseas workers with at least one year of
employment contract, and between overseas workers with at least a year left in their contracts and overseas
workers with less than a year left in their contracts when they were illegally dismissed.

For this reason, we cannot subscribe to the argument that "[overseas workers] are contractual employeeswho can
never acquire regular employment status, unlike local workers"  because it already justifies differentiated treatment
121

in terms ofthe computation of money claims. 122

665
Likewise, the jurisdictional and enforcement issues on overseas workers’ money claims do not justify a differentiated
treatment in the computation of their money claims.  If anything, these issues justify an equal, if not greater
123

protection and assistance to overseas workers who generally are more prone to exploitation given their physical
distance from our government.

We also find that the classificationsare not relevant to the purpose of the law, which is to "establish a higher
standard of protection and promotion of the welfare of migrant workers, their families and overseas Filipinos in
distress, and for other purposes."  Further, we find specious the argument that reducing the liability of placement
124

agencies "redounds to the benefit of the [overseas] workers." 125

Putting a cap on the money claims of certain overseas workers does not increase the standard of protection
afforded to them. On the other hand, foreign employers are more incentivizedby the reinstated clause to enter into
contracts of at least a year because it gives them more flexibility to violate our overseas workers’ rights. Their
liability for arbitrarily terminating overseas workers is decreased at the expense of the workers whose rights they
violated. Meanwhile, these overseas workers who are impressed with an expectation of a stable job overseas for the
longer contract period disregard other opportunities only to be terminated earlier. They are left with claims that are
less than what others in the same situation would receive. The reinstated clause, therefore, creates a situation
where the law meant to protect them makes violation of rights easier and simply benign to the violator.

As Justice Brion said in his concurring opinion in Serrano:

Section 10 of R.A. No. 8042 affects these well-laid rules and measures, and in fact provides a hidden twist affecting
the principal/employer’s liability. While intended as an incentive accruing to recruitment/manning agencies, the law,
as worded, simply limits the OFWs’ recovery in wrongfuldismissal situations. Thus, it redounds to the benefit of
whoever may be liable, including the principal/employer – the direct employer primarily liable for the wrongful
dismissal. In this sense, Section 10 – read as a grant of incentives to recruitment/manning agencies – oversteps
what it aims to do by effectively limiting what is otherwise the full liability of the foreign principals/employers. Section
10, in short, really operates to benefit the wrong party and allows that party, without justifiable reason, to mitigate its
liability for wrongful dismissals. Because of this hidden twist, the limitation ofliability under Section 10 cannot be an
"appropriate" incentive, to borrow the term that R.A. No. 8042 itself uses to describe the incentive it envisions under
its purpose clause.

What worsens the situation is the chosen mode of granting the incentive: instead of a grant that, to encourage
greater efforts at recruitment, is directly related to extra efforts undertaken, the law simply limits their liability for the
wrongful dismissals of already deployed OFWs. This is effectively a legally-imposed partial condonation of their
liability to OFWs, justified solely by the law’s intent to encourage greater deployment efforts. Thus, the
incentive,from a more practical and realistic view, is really part of a scheme to sell Filipino overseas labor at a
bargain for purposes solely of attracting the market. . . .

The so-called incentive is rendered particularly odious by its effect on the OFWs — the benefits accruing to the
recruitment/manning agencies and their principals are takenfrom the pockets of the OFWs to whom the full salaries
for the unexpired portion of the contract rightfully belong. Thus, the principals/employers and the
recruitment/manning agencies even profit from their violation of the security of tenure that an employment contract
embodies. Conversely, lesser protection is afforded the OFW, not only because of the lessened recovery afforded
him or her by operation of law, but also because this same lessened recovery renders a wrongful dismissal easier
and less onerous to undertake; the lesser cost of dismissing a Filipino will always bea consideration a foreign
employer will take into account in termination of employment decisions. . . . 126

Further, "[t]here can never be a justification for any form of government action that alleviates the burden of one
sector, but imposes the same burden on another sector, especially when the favored sector is composed of private
businesses suchas placement agencies, while the disadvantaged sector is composed ofOFWs whose protection no
less than the Constitution commands. The idea thatprivate business interest can be elevated to the level of a
compelling state interest is odious." 127

Along the same line, we held that the reinstated clause violates due process rights. It is arbitrary as it deprives
overseas workers of their monetary claims without any discernable valid purpose. 128

Respondent Joy Cabiles is entitled to her salary for the unexpired portion of her contract, in accordance with Section
10 of Republic Act No. 8042. The award of the three-month equivalence of respondent’s salary must be modified
accordingly. Since she started working on June 26, 1997 and was terminated on July 14, 1997, respondent is
entitled to her salary from July 15, 1997 to June 25, 1998. "To rule otherwise would be iniquitous to petitioner and
other OFWs, and would,in effect, send a wrong signal that principals/employers and recruitment/manning agencies
may violate an OFW’s security of tenure which an employment contract embodies and actually profit from such
violation based on an unconstitutional provision of law." 129

III

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On the interest rate, the Bangko Sentral ng Pilipinas Circular No. 799 of June 21, 2013, which revised the interest
rate for loan or forbearance from 12% to 6% in the absence of stipulation,applies in this case. The pertinent portions
of Circular No. 799, Series of 2013, read: The Monetary Board, in its Resolution No. 796 dated 16 May 2013,
approved the following revisions governing the rate of interest in the absence of stipulation in loan contracts, thereby
amending Section 2 of Circular No. 905, Series of 1982:

Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in
judgments, in the absence of an express contract as to such rateof interest, shall be six percent (6%) per annum.

Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1,
4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions are hereby amended
accordingly.

This Circular shall take effect on 1 July 2013.

Through the able ponencia of Justice Diosdado Peralta, we laid down the guidelines in computing legal interest in
Nacar v. Gallery Frames: 130

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand
can be established with reasonable certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169,
Civil Code), but when such certainty cannot be so reasonably established at the time the demand is made,
the interest shall begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of
the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case
falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of credit.

And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall not be
disturbed and shall continue to be implemented applying the rate of interest fixed therein. 131

Circular No. 799 is applicable only in loans and forbearance of money, goods, or credits, and in judgments when
there is no stipulation on the applicable interest rate. Further, it is only applicable if the judgment did not become
final and executory before July 1, 2013. 132

We add that Circular No. 799 is not applicable when there is a law that states otherwise. While the Bangko Sentral
ng Pilipinas has the power to set or limit interest rates,  these interest rates do not apply when the law provides that
133

a different interest rate shall be applied. "[A] Central Bank Circular cannot repeal a law. Only a law can repeal
another law."134

For example, Section 10 of Republic Act No. 8042 provides that unlawfully terminated overseas workers are entitled
to the reimbursement of his or her placement fee with an interest of 12% per annum. Since Bangko Sentral ng
Pilipinas circulars cannotrepeal Republic Act No. 8042, the issuance of Circular No. 799 does not have the effect of
changing the interest on awards for reimbursement of placement fees from 12% to 6%. This is despite Section 1 of
Circular No. 799, which provides that the 6% interest rate applies even to judgments.

Moreover, laws are deemed incorporated in contracts. "The contracting parties need not repeat them. They do not
even have to be referred to. Every contract, thus, contains not only what has been explicitly stipulated, but the
statutory provisions that have any bearing on the matter."  There is, therefore, an implied stipulation in contracts
135

between the placement agency and the overseasworker that in case the overseas worker is adjudged as entitled to
reimbursement of his or her placement fees, the amount shall be subject to a 12% interest per annum. This implied
stipulation has the effect of removing awards for reimbursement of placement fees from Circular No. 799’s
coverage.

667
The same cannot be said for awardsof salary for the unexpired portion of the employment contract under Republic
Act No. 8042. These awards are covered by Circular No. 799 because the law does not provide for a specific
interest rate that should apply.

In sum, if judgment did not become final and executory before July 1, 2013 and there was no stipulation in the
contract providing for a different interest rate, other money claims under Section 10 of Republic Act No. 8042 shall
be subject to the 6% interest per annum in accordance with Circular No. 799.

This means that respondent is also entitled to an interest of 6% per annum on her money claims from the finality of
this judgment.

IV

Finally, we clarify the liabilities ofWacoal as principal and petitioner as the employment agency that facilitated
respondent’s overseas employment.

Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995 provides that the foreign employer and the
local employment agency are jointly and severally liable for money claims including claims arising out of an
employer-employee relationship and/or damages. This section also provides that the performance bond filed by the
local agency shall be answerable for such money claims or damages if they were awarded to the employee.

This provision is in line with the state’s policy of affording protection to labor and alleviating workers’ plight. 136

In overseas employment, the filing of money claims against the foreign employer is attended by practical and legal
complications.  The distance of the foreign employer alonemakes it difficult for an overseas worker to reach it and
1âwphi1

make it liable for violations of the Labor Code. There are also possible conflict of laws, jurisdictional issues, and
procedural rules that may be raised to frustrate an overseas worker’sattempt to advance his or her claims.

It may be argued, for instance, that the foreign employer must be impleaded in the complaint as an indispensable
party without which no final determination can be had of an action. 137

The provision on joint and several liability in the Migrant Workers and Overseas Filipinos Act of 1995 assures
overseas workers that their rights will not be frustrated with these complications. The fundamental effect of joint and
several liability is that "each of the debtors is liable for the entire obligation."  A final determination may, therefore,
138

be achieved even if only oneof the joint and several debtors are impleaded in an action. Hence, in the case of
overseas employment, either the local agency or the foreign employer may be sued for all claims arising from the
foreign employer’s labor law violations. This way, the overseas workers are assured that someone — the foreign
employer’s local agent — may be made to answer for violationsthat the foreign employer may have committed.

The Migrant Workers and Overseas Filipinos Act of 1995 ensures that overseas workers have recourse in law
despite the circumstances of their employment. By providing that the liability of the foreign employer may be
"enforced to the full extent"  against the local agent,the overseas worker is assured of immediate and
139

sufficientpayment of what is due them. 140

Corollary to the assurance of immediate recourse in law, the provision on joint and several liability in the Migrant
Workers and Overseas Filipinos Act of 1995 shifts the burden of going after the foreign employer from the overseas
worker to the local employment agency. However, it must be emphasized that the local agency that is held to
answer for the overseas worker’s money claims is not leftwithout remedy. The law does not preclude it from going
after the foreign employer for reimbursement of whatever payment it has made to the employee to answer for the
money claims against the foreign employer.

A further implication of making localagencies jointly and severally liable with the foreign employer is thatan
additional layer of protection is afforded to overseas workers. Local agencies, which are businesses by nature, are
inoculated with interest in being always on the lookout against foreign employers that tend to violate labor law. Lest
they risk their reputation or finances, local agenciesmust already have mechanisms for guarding against
unscrupulous foreign employers even at the level prior to overseas employment applications.

With the present state of the pleadings, it is not possible to determine whether there was indeed a transfer of
obligations from petitioner to Pacific. This should not be an obstacle for the respondent overseas worker to proceed
with the enforcement of this judgment. Petitioner is possessed with the resources to determine the proper legal
remedies to enforce its rights against Pacific, if any.

Many times, this court has spoken on what Filipinos may encounter as they travel into the farthest and mostdifficult
reaches of our planet to provide for their families. In Prieto v. NLRC: 141

668
The Court is not unaware of the many abuses suffered by our overseas workers in the foreign land where they have
ventured, usually with heavy hearts, in pursuit of a more fulfilling future. Breach of contract, maltreatment, rape,
insufficient nourishment, sub-human lodgings, insults and other forms of debasement, are only a few of the
inhumane acts towhich they are subjected by their foreign employers, who probably feel they can do as they please
in their own country. Whilethese workers may indeed have relatively little defense against exploitation while they are
abroad, that disadvantage must not continue to burden them when they return to their own territory to voice their
muted complaint. There is no reason why, in their very own land, the protection of our own laws cannot be extended
to them in full measure for the redress of their grievances.142

But it seems that we have not said enough.

We face a diaspora of Filipinos. Their travails and their heroism can be told a million times over; each of their stories
as real as any other. Overseas Filipino workers brave alien cultures and the heartbreak of families left behind daily.
They would count the minutes, hours, days, months, and years yearning to see their sons and daughters. We all
know of the joy and sadness when they come home to see them all grown up and, being so, they remember what
their work has cost them. Twitter accounts, Facetime, and many other gadgets and online applications will never
substitute for their lost physical presence.

Unknown to them, they keep our economy afloat through the ebb and flow of political and economic crises. They are
our true diplomats, they who show the world the resilience, patience, and creativity of our people. Indeed, we are a
people who contribute much to the provision of material creations of this world.

This government loses its soul if we fail to ensure decent treatment for all Filipinos. We default by limiting the
contractual wages that should be paid to our workers when their contracts are breached by the foreign employers.
While we sit, this court will ensure that our laws will reward our overseas workers with what they deserve: their
dignity.

Inevitably, their dignity is ours as weil.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED with modification.
Petitioner Sameer Overseas Placement Agency is ORDERED to pay respondent Joy C. Cabiles the amount
equivalent to her salary for the unexpired portion of her employment contract at an interest of 6% per annum from
the finality of this judgment. Petitioner is also ORDERED to reimburse respondent the withheld NT$3,000.00 salary
and pay respondent attorney's fees of NT$300.00 at an interest of 6% per annum from the finality of this judgment.

The clause, "or for three (3) months for every year of the unexpired term, whichever is less" in Section 7 of Republic
Act No. 10022 amending Section 10 of Republic Act No. 8042 is declared unconstitutional and, therefore, null and
void.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 202066               September 30, 2014

CBK POWER COMPANY LIMITED, Petitioner, 

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

x-----------------------x

G.R. No. 205353

CBK POWER COMPANY LIMITED, Petitioner, 

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

LEONEN, J.:

CBK Power Company Limited filed two petitions for review  assailing the dismissal of its judicial claim for tax credit
1

of unutilized input taxes on the ground of premature filing.

669
The first petition  was filed on July 16, 2012, docketed as G.R. No. 202066. This involves a tax credit claim for
2

₱58,802,85 l.18 covering the period of January 1, 2007 to December 31, 2007. 3

The other petition  was filed on March 4, 2013, docketed as G.R. No. 205353. This involves a tax credit claim for
4

₱43,806,549.72 covering the period of January 1, 2006 to December 31, 2006. 5

CBK Power Company Limited is a VAT-registered domestic partnership with the sole purpose of engaging in "all
aspects of (a) the design, financing, construction, testing, commissioning, operation, maintenance, management
and ownership of Kalayaan II pumped-storage hydroelectric power plant, the new Caliraya Spillway, and other
assets located in the Province of Laguna, and (b) the rehabilitation, upgrade, expansion, testing, commissioning,
operation, maintenance and management of the Caliraya, Botocan · and Kalayaan I hydroelectric powerplants and
their related facilities located in the Province of Laguna."
6

The Bureau of Internal Revenue Ruling No. DA-146-2006 was issued on March 17, 2006, stating that "petitioner is
an entity engaged in hydropower generation, and that its billings and fees for the sale of electricity to NPC are
subject to VAT at zero percent (0%) rate under Section 108(B)(7) of the Tax Code of 1997, as amended by R.A. No.
9337."7

G.R. No. 202066

On March 26, 2009, petitioner filed an administrative claim with the Bureau of Internal Revenue Laguna Regional
DistrictOffice No. 55 for the issuance of a tax credit certificate for 58,802,851.18.  This amount represented
8

"unutilized input taxes on itslocal purchases and/or importation of goods and services, capital goods and payments
for services rendered by non-residents, which were all attributable to petitioner’s zero-rated sales for the period of
January 1, 2007 to December 31, 2007, pursuant to Section 112 (A) of the Tax Code of 1997, as amended." 9

The next day, March 27, 2009, petitioner filed a petition for review with the Court of Tax Appeals since respondent
had not yet issued a final decision on its administrative claim.  Respondent raised prematurity of judicial claim as
10

one of itsdefenses in its answer. 11

"[P]etitioner presented documentaryand testimonial evidence to support its claim [during trial, while] respondent filed
a Motion to Dismiss on December 6, 2010."  Petitioner filed a comment on/opposition to the motion to dismiss on
12

December 17, 2010. 13

In the January 28, 2011 resolution,  the Court of Tax Appeals Third Division  granted respondent’s motion and
14 15

dismissed the petition for having been prematurely filed:

WHEREFORE, premises considered, respondent’s "Motion to Dismiss" is hereby GRANTED. Accordingly, the
Petition for Review filed in the above-captioned case is hereby DISMISSED for having been prematurely filed.

SO ORDERED. 16

In the April 5, 2011 resolution,  the Court of Tax Appeals Third Division denied reconsideration for lack of merit:
17

WHEREFORE, premises considered, petitioner’s "Motion for Reconsideration" is hereby DENIED for lack of merit.

SO ORDERED. 18

In the February 1, 2012 decision,  the Court of Tax Appeals En Banc  dismissed the petition and affirmed the Third
19 20

Division’s resolutions:

WHEREFORE, on the basis of the foregoing considerations, the Petition for Review En Banc is DISMISSED.
Accordingly, the Resolutions of CTA Third Division dated January 28, 2011 and April 5, 2011 are hereby
AFFIRMED.

SO ORDERED. 21

In the May 24, 2012 resolution,  the Court of Tax Appeals denied reconsideration for lack of merit:
22

WHEREFORE, finding no reversible error committed by this Court in the assailed Decision promulgated on
February 1, 2012, petitioner’s "Motion for Reconsideration" is hereby DENIEDfor lack of merit.

SO ORDERED. 23

670
Hence, CBK Power Company Limited filed the instant petition docketed as G.R. No. 202066. Petitioner argues that
Section 112(C)  of the Tax Code, as amended, "is directory and permissive, and not mandatory nor jurisdictional, as
24

long as it is made within the two (2)-year prescriptive period prescribed under Section 229  of the same 25

Code," citing cases such as Atlas Consolidated Mining and Development Corp. v. Commissioner of Internal
26

Revenue  and Commissioner of Internal Revenue v. Mirant Pagbilao Corporation.

27 28

Petitioner submits that the recent cases of Silicon Philippines Inc. v. Commissioner of Internal Revenue  and 29

Southern Philippines Power Corp. v. Commissioner of Internal Revenue  should have been considered. These are
30

inconsistent with the ruling in the earlier case of Commissioner of Internal Revenue v. Aichi Forging Company of
Asia;  thus, Aichishould not be applied.
31 32

Petitioner further asserts thatassuming arguendo that the interpretations in Aichi andMirant Pagbilaoon the two-year
prescription period were those intended by law, the lower court would have erred in retroactively applying such
ruling to the instant case. 33

Lastly, petitioner faults the lower court for not considering "the huge negative financial impact on the [p]etitioner and
other businesses and the business community as a whole of the denial of refunds or issuance of tax credit
certificates for unutilized input taxes." 34

Respondent counters that Aichiand Mirantmerely interpreted Section 112 of the Tax Code.  Consequently, these 35

formedpart of the law at the time of its original enactment and properly applied to petitioner.  Respondent is bound 36

by the Aichi ruling. 37

On February 18, 2013, petitioner filed its reply.  Both parties then filed their respective memoranda.
38 39

On August 27, 2013, this court En Banc accepted the consolidation of the petition docketed as G.R. No.
205353 with the petition docketed as G.R. No. 202066.
40 41

G.R. No. 205353

Petitioner filed its original and amended quarterly VAT returns for the four quarters of 2006 on the following dates: 42

2006 Taxable Quarter Original VAT Return Amended VAT Return

(date filed) (date filed)

1st April 25, 2006 December 28, 2007

March 31, 2008

2nd July 25, 2006 April 18, 2008

3rd October 20, 2006 May 7, 2008

4th January 24, 2007 July 21, 2008

The amended returns reported zero-rated sales and input tax credits as follows: 43

Zero-Rated Sales for the period of January 01 to December 31, 2006

2006 Taxable Quarter Zero-Rated Sales/Receipts

1st 1,583,390,407.46

2nd 1,648,748,033.50

3rd 1,599,882,354.64

4th 1,547,858,529.27

TOTAL 6,379,879,324.87

671
1âwphi1

Input Tax Credits for the period of January 1 to December 31, 2006

Domestic
Purchase of Importation
Purchase of
2006 Capital of Goods Domestic Services
Goods Total Input
Taxable Goods Other than Purchase of Rendered
Other than Tax Credits
Quarter exceeding Capital Services by Non-Residents
Capital
₱1 Millio Goods
Goods

1st 1,870,700.70 1,821,359.38 556,816.00 4,151,387.81 968,642.68 9,368,906.57

2nd 1,346,348.83 1,209,055.88 1,152,424.00 5,797,606.67 1,199,547.36 10,704,981.94

3rd 2,998,466.11 1,425,019.73 810,906.00 10,921,541.86 302,627.14 16,458,560.84

4th 344,377.46 1,620,670.63 654,763.00 8,586,528.36 1,608,644.90 12,814,984.35

TOTAL 6,559,893.10 6,076,104.82 3,174,909.00 29,457,064.70 4,079,462.08 49,347,433.70

From the total reported input tax of 49,347,433.70 for 2006, petitioner sought tax credit certificates in the amount of
43,806,549.72. 44

On March 31, 2008, petitioner filed an administrative claim with the Bureau of Internal Revenue LagunaRegional
District Office No. 55 for the issuance of a tax credit certificate for 7,559,943.44, representing unutilized input tax for
the period ofJanuary 1, 2006 to March 31, 2006. 45

On April 23, 2008, petitioner filed a petition for review  with the Court of Tax Appeals Division, alleging respondent’s
46

inaction on its administrative claim. 47

On July 23, 2008, petitioner filed another administrative claim with the Bureau of Internal Revenue LagunaRegional
District Office No. 55 for the issuance of a tax credit certificate for 36,246,606.28, representing unutilized input tax
for the period of April 1, 2006 to December 31, 2006. 48

The next day, July 24, 2008, petitioner filed a petition for review  with the Court of Tax Appeals Division on the same
49

claim. 50

The Court of Tax Appeals Divisionconsolidated these two petitions on judicial claims for unutilized input tax covering
the taxable year of 2006. Petitioner adduced evidence during trial while respondent rested its case without
presenting any. 51

On December 3, 2010, the Court of Tax Appeals Third Division  dismissed the consolidated cases for having been
52

prematurely filed:

WHEREFORE, premises considered, the instant Petitions for Review are hereby DISMISSED for having been
prematurely filed. 53

On April 7, 2011, it likewise deniedreconsideration for lack of merit:

WHEREFORE, premises considered, petitioner’s Motion for Reconsideration is DENIEDfor lack of merit. 54

On October 4, 2012, the Court of Tax Appeals En Banc  denied the petition for lack of merit.
55

WHEREFORE, the Petition for Review filed by petitioner CBK Power Company Limited on May 06, 2011, is hereby
DENIED, for lack of merit.

SO ORDERED. 56

672
On January 15, 2013, it denied reconsideration for lack of merit.

WHEREFORE, the Motion for Reconsideration dated November 7, 2012, filed by petitioner is hereby DENIED, for
lack of merit.

SO ORDERED. 57

Hence, CBK Power Company Limited filed the instant petition, docketed as G.R. No. 205353, raising substantially
the same arguments made in its earlier petition docketed as G.R. No. 202066.

In its consolidated comment, respondent explained that the two-year period pertains to administrative claimswith the
Commissioner of Internal Revenue, while judicial claims with the Court of Tax Appeals must be made within 30 days
reckoned from either receipt of the Commissioner’s decision or after the lapse of the 120-day period for the
Commissioner to act on the administrative claim.  Observance of the 120-day period under Section 112 of the Tax
58

Code is mandatory and jurisdictional, and non-compliance results in the denial of the claim.  Respondent submits
59

that Aichi and Mirant Pagbilao apply. 60

This court noted petitioner’s reply on June 3, 2014.

The main issue in these consolidated cases involves the timeliness of petitioner’s judicial claims for the issuance of
tax credit certificates considering Section 112(C) ofthe Tax Code, as amended:

Section 112. Refunds or Tax Credits of Input Tax.—

....

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. — In proper cases, the Commissioner
shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days
from the date of submission of complete documentsin support of the application filedin accordance with Subsection
(A) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner
to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from
the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the
decision or the unacted claim with the Court of Tax Appeals. (Emphasis supplied)

Timeliness of judicial claim

A simple reading of the provision quoted above reveals that the taxpayer may appeal the denial or the inaction of
the Commissioner of Internal Revenue only within thirty (30) days from receipt of the decision that denied the claim
or the expiration of the 120-day period given to the Commissioner to decide the claim.

In the fairly recent case of Commissioner of Internal Revenue v. San Roque Power Corporation,  this court En Banc
61

affirmed with qualification the decision of its First Division in Commissioner of Internal Revenue v. Aichi Forging
Company of Asia, Inc.  This court held that compliance with the 120-day and the 30-day periods under Section 112
62

of the Tax Code, save for those Value-added Tax refund cases that were prematurely (i.e., before the lapse of the
120-day period) filed with the Court of Tax Appeals between December 10, 2003 (when the Bureau of Internal
Revenue Ruling No. DA- 489-03 was issued) and October 6, 2010,is mandatory and jurisdictional. 63

This court also declared that, following Commissioner of Internal Revenue v. Mirant Pagbilao Corporation,  claims
64

for refund or tax credit of excess input tax are governed not by Section 229 but only by Section 112 of the 1997
National Internal Revenue Code. 65

In San Roque, a motion for reconsideration and supplemental motion for reconsideration in G.R. No. 187485 were
filed, arguing for the prospective application of the 120-day and 30-day mandatory and jurisdictional periods. This
court denied the motion for reconsideration with finality in the resolution  dated October 10, 2013. The same
66

resolution also denied the Commissioner’s motion for reconsideration in G.R. No. 196113 assailing the validity of
Ruling No. DA-489-03. 67

In G.R. No. 202066, petitioner filed its judicial claim on March 27, 2009, only a day after it had filed its administrative
claim on March 26, 2009.

In G.R. No. 205353, petitioner filed its judicial claim on April 23, 2008 for the taxable period of January 1, 2006 to
March 31, 2006, just 23 days after it had filed its administrative claim on March 31, 2008. Petitioner also filed its
judicial claim on July 24, 2008 for the taxable period of April 1, 2006 to December 31, 2006, only a day after it had
filed its administrative claim on July 23, 2008.
673
Clearly, petitioner failed to comply with the 120-day waiting period, the time expressly given by law to the
Commissioner of Internal Revenue to decide whether to grant or deny its application for tax refund or credit.

Nevertheless, since the judicial claims were filed within the window created in San Roque, the petitions are
exempted from the strict application of the 120-day mandatory period.

Timeliness of administrative claim

In G.R. No. 205353, the Court of Tax Appeals En Banc ruled that the administrative claim for the second quarter of
2006 was belatedly filed on July 23, 2008.  This is consistent with Section 112(A) of the Tax Code, as amended,
68

reckoning the two-year period from the close of the taxable quarter when the sales were made:

Sec. 112. Refunds or Tax Credits of Input Tax. –

(A) Zero-Rated or Effectively Zero-Rated Sales. – Any VATregistered person, whose sales are zero-rated or
effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made,
apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such
sales, except transitional input tax, to the extent that such input tax has not been applied against output tax:
Provided, however,That in the case of zerorated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108(B)
(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance
with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further,That where the taxpayer is
engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of [sic] properties or
services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of
the transactions, it shall be allocated proportionately on the basis of the volumes of sales. . . . (Emphasis supplied)
With the close of the second taxable quarter of 2006 being June 30, 2006, petitioner should have filed its
administrative claim for this quarter on or before June 30, 2008, and not on July23, 2008. This applies the clear text
of Section 112(A).

The June 8, 2007 case of Atlas Consolidated Mining v. Commissioner of Internal Revenue explained that "it is more
practical and reasonable to count the two-year prescriptive period for filing a claim for refund/credit of input VAT on
zero-rated sales from the date of filing of the return and payment of the tax due which, according to the law then
existing, should be made within 20 days from the end of each quarter." 69

The September 12, 2008 case of Commissioner of Internal Revenue v. Mirant Pagbilao Corporation abandoned
Atlas when it ruled that "[t]he reckoning frame would always be the end of the quarter when the pertinent sales or
transaction was made, regardless when the input VAT was paid,"  applying Section 112(A) of the Tax Code and not
70

other provisions that pertain to erroneous tax payments. 71

Thus, the 2013 San Roque case clarified the effectivity of the Atlas and Mirant doctrines on when to reckon the two-
year prescriptive period as follows:

The Atlas doctrine, which held that claims for refund or credit of input VAT must comply with the two-year
prescriptive period under Section 229, should be effective only from its promulgation on 8 June 2007 until its
abandonment on 12 September 2008 in Mirant.  The Atlas doctrine was limited to the reckoning of the twoyear
1âwphi1

prescriptive period from the date of payment of the output VAT. Prior to the Atlas doctrine, the two-year prescriptive
period for claiming refund or credit of input VAT should be governed by Section 112(A) following the verba legis
rule. The Mirant ruling, which abandoned the Atlas doctrine, adopted the verba legis rule, thus applying Section
112(A) in computing the two-year prescriptive period in claiming refund or credit of input VAT.  (Emphasis supplied)
72

Since July 23, 2008 falls within the window of effectivity of Atlas, petitioner’s administrative claim for the second
quarter of 2006 was filed on time considering that petitioner filed its original VAT return for the second quarter on
July 25, 2006.

We note that there were dissents submitted by other members of this court in the 2013 San Roquecase.  The 73

ponente of a case, however, always writes a decision for this court.

WHEREFORE, the petitions docketed as G.R. Nos. 202066 and 205353 are GRANTED. Accordingly, the Court of
Tax Appeals En Banc’s February 1, 2012 decision and May 24, 2012 resolution assailed in the petition docketed as
G.R. No. 202066, and the Court of Tax Appeals En Banc’s October 4, 2012 decision and January 15, 2013
resolution assailed in the petition docketed as G.R. No. 205353, are REVERSED and SET ASIDE.

The consolidated cases are REMANDED to the Court of Tax Appeals for the determination and computation of the
amounts valid for refund or the issuance of a tax credit certificate.

SO ORDERED.

674
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 180290               September 29, 2014

COMMISSIONER OF INTERNAL REVENUE, Petitioner, 

vs.
PHILIPPINE NATIONAL BANK, Respondent.

DECISION

LEONEN, J.:

Before this court is a petition for review  under Rule 45 of the Rules of Court, seeking to annul the October 1, 2007
1

decision  and October 30, 2007 resolution  of the Court of Tax Appeals En Banc in C.T.A. E.B. No. 285.
2 3

The assailed decision denied petitioner's appeal and affirmed the January 30, 2007 decision  and May 30, 2007
4

resolution  of the First Division of the Court of Tax Appeals, granting respondent a tax refund or credit in the amount
5

of ₱23,762,347.83, representing unutilized excess creditable withholding taxes for taxable year 2000. The assailed
resolution denied petitioner’s motion for reconsideration.

The pertinent facts are summarized inthe assailed decision as follows:

In several transactions including but not limited to the sale of real properties, lease and commissions, [respondent]
allegedly earned income and paid the corresponding income taxes due which were collected and remitted by
various payors as withholding agents to the Bureau of Internal Revenue ("BIR") during the taxable year 2000.

On April 18, 2001, [respondent] filed its tentative income tax return for taxable year 2000 which [it] subsequently
amended on July 25, 2001.

675
. . . [Respondent] filed again an amended income tax return for taxable year 2000 on June 20, 2002, declaring no
income tax liability . . . as it incurred a net loss in the amount of ₱11,318,957,602.00 and a gross loss of
₱745,713,454.00 from its Regular Banking Unit ("RBU") transactions. However, [respondent] had a 10% final
income tax liability of ₱210,364,280.00 on taxable income of ₱1,959,931,182.00 earned from its Foreign Currency
Deposit Unit ("FCDU") transactions for the same year. Likewise, in the [same] return, [respondent] reported a total
amount of ₱245,888,507.00 final and creditable withholding taxes which was applied against the final income tax
due of ₱210,364,280.00 leaving an overpayment of ₱35,524,227.00. . . .

....

In its second amended return, [respondent’s] income tax overpayment of ₱35,524,227.00 consisted of the balance
of the prior year's (1999) excess credits of ₱9,057,492.00 to becarried-over as tax credit to the succeeding
quarter/year and excess creditable withholding taxes for taxable year 2000 in the amountof ₱26,466,735.00 which
[respondent] opted to be refunded. On November 11, 2002, [respondent] . . . filed a claim for refund or the issuance
of a tax credit certificate in the amount of ₱26,466,735.40 for the taxable year 2000 with the [BIR].

Due to [BIR's] inaction on its administrative claim, [respondent] appealed before [the Court of Tax Appeals] by way
of a Petition for Review on April 11, 2003.  (Citation omitted)
6

On January 30, 2007, the Court of Tax Appeals First Division rendered a decision in favor of respondent as follows:

WHEREFORE, premises considered, the petition is hereby GRANTED. Accordingly, respondent is hereby
ORDERED TO REFUND or ISSUE A TAX CREDIT CERTIFICATE to petitioner in the reduced amount of Twenty
Three Million Seven Hundred Sixty Two Thousand Three Hundred Forty Seven Pesos and 83/100
(₱23,762,347.83)representing unutilized excess creditable withholding taxes for taxable year 2000.  (Emphasis in
7

the original)

Petitioner’s motion for reconsideration was subsequently denied for lack of merit in the First Division’s resolution
dated May 30, 2007.

On appeal, the Court of Tax Appeals En Banc sustained the First Division’s ruling. It held that the fact of withholding
and the amount of taxes withheld from the income payments received by respondent were sufficiently established
by the creditable withholding tax certificates, and there was no need to present the testimonies of the various payors
or withholding agents who issued the certificates and madethe entries therein. It also held that respondent need not
prove actual remittance of the withheld taxes to the Bureau of Internal Revenue because the functions of
withholding and remittance of income taxes are vested in the payors who are considered the agents of petitioner. 8

The Court of Tax Appeals En Banc also denied petitioner’s motion for Reconsideration  in its October 30, 2007
9

resolution.

Hence, this instant petition was filed.

Petitioner claims that the Court of Tax Appeals "erred on a question of law in ordering the refund to respondent of
alleged excess creditable withholding taxes because(:)

A. Respondent failed to prove that the creditable withholding taxes amounting to ₱23,762,347.83 are duly
supported by valid certificates of creditable tax withheld at source;

B. Respondent failed to prove actual remittance of the alleged withheld taxes to the Bureau of Internal
Revenue (BIR); and

C. Respondent failed to discharge its burden of proving its entitlement to a refund." 10

Petitioner questions the validity of respondent’s certificates of creditable tax withheld at source (withholding tax
certificates) and contends that even if the original certificates were offered in evidence, respondent failed to present
the various withholding agents to: (1) identify and testify on their contents; and (2) prove the subsequent remittance
of the withheld taxes to the Bureau of Internal Revenue. Moreover, petitioner faults respondent for presenting the
withholding tax certificates only before the Court of Tax Appeals, and not at the first instance when it filed its claim
for refund administratively before the Bureau of Internal Revenue. 11

In its comment,  respondent counters that:

12

1) The petition should be dismissed for being pro forma because it does not specify the reversible errors of
either fact or law that the lower courts committed, and the arguments raised are all rehash and purely
factual;

676
 2) It complied with all the requirements for judicial claim for refund of unutilized creditable withholding taxes;

3) The fact of withholding was sufficiently established by the 622 creditable withholding tax certificates,
primarily attesting the amount of taxes withheld from the income payments received by respondent.
Furthermore, topresent to the court all the withholding agents or payors to identify and authenticate each
and every one of the 622 withholding tax certificates would be too burden some and would unnecessarily
prolong the trial of the case; and

4) Respondent need not prove the actual remittance of withheld taxes to the Bureau of Internal Revenue
because the remittance is the responsibility of the payoror withholding agent and not the payee.

In its reply,  petitioner maintains that claims for refund are strictly construed against the claimant, and "it is
13

incumbent upon respondent to discharge the burden of proving . . . the fact of withholding of taxes and their
subsequent remittance to the Bureau of Internal Revenue." 14

In the resolution dated February 2, 2009,  the court resolved to give due course to the petition and decide the case
15

according to the pleadings already filed.

The petition, however, should be denied.

The petition is but a reiteration of reasons and arguments previously set forth in petitioner’s pleadings beforethe
Court of Tax Appeals En Banc, and which the latter had already considered, weighed,and resolved before it
rendered its decision and resolution now sought to be set aside. Furthermore, the questions on whether
respondent’s claim for refund of unutilized excess creditable withholding taxes amounting to ₱23,762,347.83 were
duly supported by valid certificates of creditable tax withheld at source and whether it had sufficiently proven its
claim are questions of fact.  These issues require a review, examination, evaluation, or weighing of the probative
1âwphi1

value of evidence presented, especially the withholding tax certificates, which thiscourt does not have the
jurisdiction to do, barring the presence of any exceptional circumstance, as it is not a trier of facts.
16

Besides, as pointed out by respondent, petitioner did not object to the admissibility of the 622 withholding tax
certificates when these were formally offered by respondent before the tax court.  Hence, petitioner is deemed to
17

have admitted the validity of these documents.  Petitioner’s "failure to object to the offered evidence renders it
18

admissible, and the court cannot, on its own, disregard such evidence." 19

At any rate, the Court of Tax Appeals First Division and En Banc uniformly found that respondent has established its
claim for refund or issuance of a tax credit certificate for unutilized excess creditable withholding taxes for the
taxable year 2000 in the amount of ₱23,762,347.83. The Court of Tax Appeals First Division thoroughly passed
upon the evidence presented by respondent and the report of the court-commissioned auditing firm, SGV & Co.,
and found: [O]ut of the total claimed creditable withholding taxes of ₱26,466,735.40, [respondent] was able to
substantiate only the amount of ₱25,666,064.80 [sic], computed as follows:

Amount of Claimed Creditable Taxes Withheld ₱26,466,735.40

Less: 1.) Certificates which do not bear any date

or period when the indicated
creditable taxes were withheld 48,600.00

2.) Certificates dated outside the period of claim 730,151.10

3.) Certificate without indicated amount 

of tax withheld 8,794.50

4.) Certificates taken-up twice 9,000.00

Substantiated Creditable Taxes Withheld ₱25,670,189.80

....

[O]ut of the claimed amount of ₱25,670,189.80 supported by valid certificates, only the creditable withholding taxes
of ₱23,762,347.83, the related income of which were verified to have been recorded in [respondent’s] general
ledger and reported in [respondent’s] income tax return either in the year 1999, 2000 or2001, satisfied the third
requisite, computed as follows:

677
 Creditable Taxes Withheld With Valid Certificates ₱25,670,189.80

Less: Creditable Taxes Withheld, the related

income of which was not verified against
the general ledger 1,907,841.97

Refundable Excess Creditable Taxes Withheld ₱23,762,347.83 20

===============

(Emphasis supplied)

This court accords respect to the conclusion reached by the Court of Tax Appeals and will not presumptuouslyset it
aside absent any showing of gross error or abuse on its part. 21

The certificate of creditable tax withheld at source  is the competent proof to establish the factthat taxes are
22

withheld.  It is not necessary for the person who executed and preparedthe certificate of creditable tax withheld at
23

source to be presented and to testify personally to prove the authenticity of the certificates.
24

In Banco Filipino Savings and Mortgage Bank v. Court of Appeals,  this court declared that a certificate iscomplete
25

in the relevant details that would aid the courts in the evaluation of any claim for refund of excess creditable
withholding taxes:

In fine, the document which may be accepted as evidence of the third condition, that is, the fact of withholding, must
emanate from the payor itself, and not merely from the payee, and must indicate the name of the payor, the income
payment basis ofthe tax withheld, the amount of the tax withheld and the nature of the tax paid.

At the time material to this case, the requisite information regarding withholding taxes from the sale of acquired
assets can be found in BIR Form No. 1743.1. As described in Section 6 of Revenue Regulations No. 6-85, BIR
Form No. 1743.1 is a written statement issued by the payor as withholding agent showing the income or other
payments made by the said withholding agent during a quarter or year and the amount of the tax deducted and
withheld therefrom. It readily identifies the payor, the income payment and the tax withheld. It is complete in the
relevant details which would aid the courts in the evaluation of any claim for refund of creditable withholding
taxes. (Emphasis supplied, citations omitted)
26

Moreover, as correctly held by the Court of Tax Appeals En Banc, the figures appearing in the withholding tax
certificates can betaken at face value since these documentswere executed under the penalties of perjury, pursuant
to Section 267 of the 1997 National Internal Revenue Code, as amended, which reads:

SEC. 267. Declaration under Penalties of Perjury. – Any declaration, return and other statements required under this
Code, shall, in lieu of an oath, contain a written statement that they are made under the penalties of perjury. Any
person who willfully files a declaration, return or statement containing information which is not true and correct as to
every material matter shall, upon conviction, be subject to the penalties prescribed for perjury under the Revised
Penal Code.

Thus, upon presentation of a withholding tax certificate complete in its relevant details and with a written statement
that it was made under the penalties of perjury, the burden of evidence then shifts to the Commissioner of Internal
Revenue to prove that (1) the certificate is not complete; (2) it is false; or (3) it was not issued regularly.

Petitioner's posture that respondent is required to establish actual remittance to the Bureau of Internal Revenue
deserves scant consideration. Proof of actual remittance is not a condition to claim for a refund of unutilized tax
credits. Under Sections 57 and 58 of the 1997 National Internal Revenue Code, as amended, it is the payor-
withholding agent, and not the payee-refund claimant such asrespondent, who is vested with the responsibility of
withholding and remitting income taxes.

This court’s ruling in Commissioner of Internal Revenue v. Asian Transmission Corporation,  citing the Court of Tax
27

Appeals’ explanation, is instructive:

. . . proof of actual remittance by the respondent is not needed in order to prove withholding and remittance of taxes
to petitioner.  Section 2.58.3 (B) of Revenue Regulation No. 2-98 clearly provides that proof of remittance is the
1âwphi1

responsibility of the withholding agent and not of the taxpayer-refund claimant. It should beborne in mind by the
petitioner that payors of withholding taxes are by themselves constituted as withholding agents of the BIR. The
taxes they withhold are held in trust for the government. In the event that the withholding agents commit fraud
against the government by not remitting the taxes so withheld, such act should not prejudice herein respondent who

678
has been duly withheld taxes by the withholding agents acting under government authority. Moreover, pursuant to
Section 57 and 58 ofthe NIRC of 1997, as amended, the withholding of income tax and the remittance thereof to the
BIR is the responsibility of the payor and not the payee. Therefore, respondent . . . has no control over the
remittance of the taxes withheld from its income by the withholding agent or payor who isthe agent of the petitioner.
The Certificates of Creditable Tax Withheld at Source issued by the withholding agents ofthe government are prima
facieproof of actual payment by herein respondent-payee to the government itself through said agents. 28

Finally, petitioner’s allegation that the submission of the certificates of withholding taxes before the Court of Tax
Appeals was late is untenable. The samples of the withholding tax certificates attached to respondent’s comment
bore the receiving stamp of the Bureau of Internal Revenue’s Large Taxpayers Document Processing and Quality
Assurance Division.  As observed by the Court of Tax Appeals En Banc, "[t]he Commissioner is in no position to
29

assail the authenticity of the CWT certificates due to PNB’s alleged failure to submit the same before the
administrative level since he could have easily directed the claimant to furnish copies of these documents, if the
refund applied for casts him any doubt."  Indeed, petitioner’s inaction prompted respondent to elevate its claim for
30

refund to the tax court.

More importantly, the Court of Tax Appeals is not precluded from accepting respondent’s evidence assuming these
were not presented at the administrative level. Cases filed in the Court of Tax Appeals are litigated de novo.  Thus,
31

respondent "should prove every minute aspect of its case by presenting, formally offering and submitting ... to the
Court of Tax Appeals [all evidence] . . . required for the successful prosecution of [its] administrative claim." 32

WHEREFORE, the petition is DENIED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 172843               September 24, 2014

ALFREDO L. VILLAMOR, JR., Petitioner, 

vs.
JOHN S. UMALE, in substitution of HERNANDO F. BALMORES, Respondent.

x-----------------------x

G.R. No. 172881

ODIVAL E. REYES, HANS M. PALMA and DOROTEO M. PANGILINAN, Petitioners, 

vs.
HERNANDO F. BALMORES, Respondent.

DECISION

LEONEN, J.:

Before us is a petition for review on certiorari  under Rule 45 of the Rules of Court, assailing the decision  of the
1 2

Court of Appeals dated March 2, 2006 and its resolution  dated May 29, 2006, denying petitioners’ motions for
3

reconsideration. The Court of Appeals placed Pasig Printing Corporation (PPC) under receivership and appointed
an interim management committee for the corporation. 4

MC Home Depot occupied a prime property (Rockland area) in Pasig. The property was part of the area owned by
Mid-Pasig Development Corporation (Mid-Pasig). 5

On March 1, 2004, PPC obtained an option to lease portions of MidPasig’s property, including the Rockland area. 6

679
On November 11, 2004, PPC’s board of directors issued a resolution  waiving all its rights, interests, and
7

participation in the option to lease contract in favor of the law firm of Atty. Alfredo Villamor, Jr. (Villamor), petitioner
in G.R. No. 172843. PPC received no consideration for this waiver in favor of Villamor’s law firm. 8

On November 22, 2004, PPC, represented by Villamor, entered into a memorandum of agreement (MOA) with MC
Home Depot.  Under the MOA, MC Home Depot would continue to occupy the area as PPC’s sublessee for four (4)
9

years, renewable for another four (4) years, at a monthly rental of ₱4,500,000.00 plus goodwill of ₱18,000,000.00. 10

In compliance with the terms of the MOA, MC Home Depot issued 20 post-dated checks representing
rentalpayments for one year and the goodwill money. The checks were given to Villamor who did not turn these or
the equivalent amount over to PPC, upon encashment. 11

Hernando Balmores, respondent inG.R. No. 172843 and G.R. No. 172881 and a stockholder and director of
PPC, wrote a letter addressed to PPC’s directors, petitioners inG.R. No. 172881, on April 4, 2005.  He informed
12 13

them that Villamor should bemade to deliver to PPC and account for MC Home Depot’s checks or their equivalent
value.14

Due to the alleged inaction of the directors, respondent Balmores filed with the Regional Trial Court an intra-
corporate controversy complaint under Rule 1, Section 1(a)(1) of the Interim Rules for Intra-Corporate
Controversies  (Interim Rules) against petitioners for their alleged devices or schemes amounting to fraud or
15

misrepresentation "detrimental to the interest of the corporation and its stockholders." 16

Respondent Balmores alleged in his complaint that because of petitioners’ actions, PPC’s assets were ". . . not only
in imminent danger, but have actually been dissipated,lost, wasted and destroyed." 17

Respondent Balmores prayed that a receiver be appointed from his list of nominees.  He also prayed for petitioners’
18

prohibition from "selling, encumbering, transferring or disposing in any manner any of [PPC’s] properties, including
the MC Home [Depot] checks and/or their proceeds."  He prayed for the accounting and remittance to PPC of the
19

MC Home Depot checks or their proceeds and for the annulment of the board’s resolution waiving PPC’s rights in
favor of Villamor’s law firm. 20

Ruling of the Regional Trial Court

In its resolution  dated June 15, 2005, the Regional Trial Court denied respondent Balmores’ prayer for the
21

appointment of a receiver or the creation of a management committee.The dispositive portion reads:

WHEREFORE, premises considered the appointment of a Receiver and the creation of a Management Committee
applied for by plaintiff Hernando F. Balmores are, as they are hereby, DENIED.  (Emphasis in the original)
22

According to the trial court, PPC’s entitlement to the checks was doubtful. The resolution issued by PPC’s board of
directors, waiving its rights to the option to lease contract infavor of Villamor’s law firm, must be accorded prima
facie validity. 23

The trial court also noted that there was a pending case filed by one Leonardo Umale against Villamor, involving the
same checks. Umale was also claiming ownership of the checks.  This, according to the trial court, weakened
24

respondent Balmores’ claim that the checks were properties of PPC. 25

The trial court also found that there was "no clear and positive showing of dissipation, loss, wastage, or destruction
of [PPC’s] assets . . . [that was] prejudicial to the interestof the minority stockholders, partieslitigants or the general
public."  The board’s failure to recover the disputed amounts was not an indication of mismanagement resulting in
26

the dissipation of assets. 27

The trial court noted that PPC was earning substantial rental income from its other sub-lessees. 28

The trial court added that the failure to implead PPCwas fatal. PPC should have been impleaded as an
indispensable party, without which, there would be no final determination of the action. 29

Ruling of the Court of Appeals

Respondent Balmores filed with the Court of Appeals a petition for certiorari under Rule 65 of the Rules of Court. He 30

assailed the decision of the trial court, which denied his "application for the appointment of a [r]eceiver and the
creation ofa [m]anagement [c]ommittee." 31

In the decision promulgated on March 2, 2006, the Court of Appeals gave due course to respondent Balmores’
petition. It reversed the trial court’s decision, and issued a new order placing PPC under receivership and creating
an interim management committee.  The dispositive portion reads:
32

680
WHEREFORE, premises considered, the instant petition is hereby GRANTED and GIVEN DUE COURSE and the
June 15, 2005 Order/Resolution of the commercial court, the Regional Trial Court of Pasig City, Branch 167, in
S.E.C. Case No. 05-62, is hereby REVERSED and SET ASIDE and a NEW ORDER is ISSUED that, during the
pendency of the derivative suit, untiljudgment on the merits is rendered by the commercial court, in order toprevent
dissipation, loss, wastage or destruction of the assets, in order to prevent paralization of business operations which
may be prejudicial to the interest of stockholders, parties-litigants or the general public, and in order to prevent
violations of the corporation laws: (1) Pasig Printing Corporation (PPC) is hereby placed under receivership
pursuant to the Rules Governing Intra-Corporate Controversies under R.A. No. 8799;(2) an Interim Management
Committee is hereby created for Pasig Printing Corporation (PPC) composed of Andres Narvasa, Jr., Atty. Francis
Gustilo and Ms Rosemarie Salvio-Leonida; (3) the interim management committee is hereby directed to forthwith,
during the pendency of the derivative suit until judgment on the merits is rendered by the commercial court, to: (a)
take over the business of Pasig Printing Corporation (PPC), (b) take custody and control of all assets and properties
owned and possessed by Pasig Printing Corporation (PPC), (c) take the place of the management and the board of
directors of Pasig Printing Corporation (PPC), (d) preserve Pasig Printing Corporation’s assets and properties, (e)
stop and prevent any disposal, in any manner, of any of the properties of Pasig Printing Corporation (PPC) including
the MC Home Depot checks and/or their proceeds; and (3) [sic] restore the status quo ante prevailing by directing
respondents their associates and agents to account and return to the Interim Management Committee for Pasig
Printing Corporation (PPC) all the money proceeds of the 20 MC Home Depot checks taken by them and to account
and surrender to the Interim Management Committee all subsequent MC Home Depot checks or proceeds. (Citation 33

omitted)

The Court of Appeals characterizedthe assailed order/resolution of the trial court as an interlocutory order that is not
appealable.  In reversing the trial court order/resolution, the Court of Appeals considered the danger of dissipation,
34

wastage, and loss of PPC’s assets if the review of the trial court’s judgment would be delayed. 35

The Court of Appeals ruled that the case filed by respondent Balmores with the trial court "[was] a derivative suit
because there were allegations of fraud or ultra vires acts . . . by [PPC’s directors]."
36

According to the Court of Appeals,the trial court abandoned its duty to the stockholders in a derivative suit when it
refused to appoint a receiver or create a management committee, all during the pendency of the proceedings. The
assailed order ofthe trial court removed from the stockholders their right, in an intra-corporate controversy, to be
allowed the remedy of appointment of a receiverduring the pendency of a derivative suit, leaving the corporation
under the control of an outsider and its assets prone to dissipation.  The Court of Appeals also ruled that this
37

amounts to "despotic, capricious, or whimsicalexercise of judicial power"  on the part of the trial court.
38

In justifying its decision to place PPCunder receivership and to create a management committee, the Court of
Appeals stated that the board’s waiver of PPC’s rights in favor ofVillamor’s law firm without any consideration and its
inaction on Villamor’s failure to turn over the proceeds of rental payments to PPC warrant the creation of a
management committee.  The circumstances resulted in the imminent danger of loss, waste, or dissipation of PPC’s
39

assets.40

Petitioners filed separatemotions for reconsideration. Both motions were denied by the Court of Appeals on May 29,
2006. The dispositive portion of the Court of Appeals’ resolution reads:

WHEREFORE, for lack of merit, respondents’ March 10, 2006 and March 20, 2006 Motions for Reconsideration are
hereby DENIED. 41

Petitioners filed separatepetitions for review under Rule 45, raising the following threshold issues:

I. Whether the Court of Appeals correctly characterized respondent Balmores’ action as a derivative suit

II. Whether the Court of Appeals properly placed PPC under receivership and created a receiver or
management committee

PPC’s directors argued that the Court of Appeals erred in characterizing respondent Balmores’ suit as a derivative
suit because of his failure to implead PPC as party in the case. Hence, the appellate court did not acquire
jurisdiction over the corporation, and the appointment of a receiver or management committee is not valid. 42

The directors further argued that the requirements for the appointment of a receiver or management committee
under Rule 9  of the Interim Rules were not satisfied. The directors pointed out that respondent Balmores failed to
43

prove that the assets of the corporation were in imminent danger of being dissipated. 44

According to the directors, assuming that a receiver or management committee may be appointed in the case, it is
the Regional Trial Court only and not the Court of Appeals that must appoint them. 45

681
Meanwhile, Villamor argued that PPC’s entitlement to the checks or their proceeds was still in dispute. In a separate
civil case against Villamor, a certain Leonardo Umale was claiming ownership of the checks. 46

Villamor also argued that the Court of Appeals’ order to place PPC under receivership and to appoint a
management committee does not endanger PPC’s assets because the MC Home Depot checks were not the only
assets of PPC.  Therefore, it would not affect the operation of PPC or result in its paralysation.
47 48

In his comment, respondent Balmores argued that Villamor’s and the directors’ petitions raise questions of facts,
which cannot be allowed in a petition for review under Rule 45. 49

On the appointment of a receiver or management committee, respondent Balmores stated that the ". . . very practice
of waiving assets and income for no consideration can in factlead, not only to the paralyzation of business, but to
the complete loss or cessation of business of PPC[.] It is

precisely because of this fraudulent practice that a receiver/management committee must be appointed to protect
the assets of PPC from further fraudulent acts, devices and schemes." 50

The petitions have merit.

Petition for review on

certiorari under Rule 45 was proper

First, we rule on the issue of whether petitioners properly filed a petition for review on certiorari under Rule 45.

Respondent Balmores argued that the petition raises questions of fact.

Under Rule 45, only questionsof law may be raised.  There is a question of law "when there is doubt or controversy
51

as to what the law is on a certain [set] of facts."  The test is "whether the appellate court can determine the issue
52

raised without reviewing or evaluating the evidence."  Meanwhile, there is a question of fact when there is
53

"doubt . . . as to the truth or falsehood of facts."  The question must involve the examination of probative value of
54

the evidence presented.

In this case, petitioners raise issues on the correctness of the Court of Appeals’ conclusions. Specifically, petitioners
ask (1) whether respondent Balmores’ failure to implead PPC in his action with the trial court was fatal; (2) whether
the Court of Appeals correctly characterized respondent Balmores’ action as a derivative suit; (3) whether the Court
of Appeals’ appointment of a management committee was proper; and (4) whether the Court of Appeals may
exercise the power to appoint a management committee.

These are questions of law that may be determined without looking into the evidence presented. The question of
whether the conclusion drawn by the Court of Appeals from a set of facts is correct is a question of law, cognizable
by this court.
55

Petitioners, therefore, properly filed a petition for review under Rule 45.

II

Respondent Balmores’ action

in the trial court is not a derivative suit

A derivative suit is an action filed by stockholders to enforce a corporate action.  It is an exception to the general
56

rule that the corporation’s power to sue  is exercised only by the board of directors or trustees.
57 58

Individual stockholders may be allowed to sue on behalf of the corporation whenever the directors or officers of the
corporation refuse to sue to vindicate the rights of the corporation or are the ones to be sued and are in control of
the corporation.  It is allowed when the "directors [or officers] are guilty of breach of . . . trust, [and] not of mere error
59

of judgment." 60

In derivative suits, the real party in interest is the corporation, and the suing stockholder is a mere nominal party. 61

Thus, this court noted:

The Court has recognized that a stockholder’s right to institute a derivative suit is not based on any express
provision of the Corporation Code, or even the Securities Regulation Code, but is impliedly recognized when the

682
said laws make corporate directors or officers liable for damages suffered by the corporation and its stockholders for
violation of their fiduciary duties. In effect, the suit isan action for specific performance of an obligation, owed by the
corporation to the stockholders, to assist its rights of action when the corporation has been put in default by the
wrongful refusal of the directors or management to adopt suitable measures for its protection. 62

Rule 8, Section 1 of the Interim Rules of Procedure for Intra Corporate Controversies (Interim Rules) provides the
five (5) requisites  for filing derivative suits:
63

SECTION 1. Derivative action. – A stockholder or member may bring an action in the name of a corporation or
association, as the case may be, provided, that:

(1) He was a stockholder or member at the time the acts or transactions subject of the action occurred and
at the time the action was filed;

(2) He exerted all reasonable efforts, and alleges the same with particularity in the complaint, toexhaust all
remedies available under the articles of incorporation, by-laws, laws or rules governing the corporation or
partnership to obtain the relief he desires;

(3) No appraisal rights are available for the act or acts complained of; and

(4) The suit is not a nuisance or harassment suit.

In case of nuisance or harassment suit, the court shall forthwith dismiss the case.

The fifth requisite for filing derivative suits, while not included in the enumeration, is implied in the first paragraph of
Rule 8, Section 1 of the Interim Rules: The action brought by the stockholder or member must be "in the name of
[the] corporation or association. . . ." This requirement has already been settled in jurisprudence.

Thus, in Western Institute of Technology, Inc., et al. v. Salas, et al.,  this court said that "[a]mong the basic
64

requirements for a derivative suit to prosper is that the minority shareholder who is suing for and on behalf of the
corporation must allege in his complaint before the proper forum that he is suing on a derivative cause of action on
behalf of the corporation and all other shareholders similarly situated who wish to join [him]."  This principle on
65

derivative suits has been repeated in, among other cases, Tam Wing Tak v. Hon. Makasiar and De Guia  and in 66

Chua v. Court of Appeals,  which was cited in Hi-Yield Realty, Incorporated v. Court of
67

Appeals. 68

Moreover, it is important that the corporation be made a party to the case. 69

This court explained in Asset Privatization Trust v. Court of Appeals  why it is a condition sine qua nonthat the
70

corporation be impleaded as party in derivative suits. Thus:

Not only is the corporation an indispensible party, but it is also the present rule that it must be served with process.
The reason given is that the judgment must be made binding upon the corporation inorder that the corporation may
get the benefit of the suit and may not bring a subsequent suit against the same defendants for the same cause of
action. In other words the corporation must be joined as party because it is its cause of action that is being litigated
and because judgment must be a res judicata against it. 71

In the same case, this court enumerated the reasons for disallowing a direct individual suit.

The reasons given for not allowing direct individual suit are:

(1) . . . "the universally recognized doctrine that a stockholder in a corporation has no title legal or equitable
to the corporate property; that both of these are in the corporation itself for the benefit of the stockholders."
Inother words, to allow shareholders to sue separately would conflict with the separate corporate entity
principle;

(2) . . . that the prior rights of the creditors may be prejudiced. Thus, our Supreme Court held in the case of
Evangelista v. Santos, that ‘the stockholders may not directly claim those damages for themselves for that
would result in the appropriation by, and the distribution among them of part of the corporate assets before
the dissolution of the corporation and the liquidation of its debts and liabilities, something which cannot be
legally donein view of Section 16 of the Corporation Law. . .";

(3) the filing of such suits would conflict with the duty of the management to sue for the protection of all
concerned;

683
 (4) it would produce wasteful multiplicity of suits; and

(5) it would involve confusion in ascertaining the effect of partial recovery by an individual on the damages
recoverable by the corporation for the same act. 72

While it is true that the basis for allowing stockholders to file derivative suits on behalf of corporations is based on
equity, the above legal requisites for its filing must necessarily be complied with for its institution.
73

Respondent Balmores’ action in the trial court failed to satisfy all the requisites of a derivative suit.

Respondent Balmores failed to exhaust all available remedies to obtain the reliefs he prayed for. Though he tried to
communicate with PPC’s directors about the checks in Villamor’s possession before he filed an action with the trial
court, respondent Balmores was not able to show that this comprised all the remedies available under the articles of
incorporation, bylaws, laws, or rules governing PPC.

An allegation that appraisal rights were not available for the acts complained of is another requisite for filing
derivative suits under Rule 8, Section 1(3) of the Interim Rules.

Section 81 of the Corporation Code provides the instances of appraisal right:

SEC. 81. Instances of appraisal right.— Any stockholder of a corporation shall have the right to dissent and demand
payment of the fair value of his shares in the following instances:

1. In case any amendment to the articles of incorporation has the effect of changing or restricting the rights
of any stockholders or class of shares, or of authorizing preferences in any respect superior to those of
outstanding shares of any class, or of extending or shortening the term of corporate existence;

2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all
of the corporate property and assets as provided in this Code; and

3. In case of merger or consolidation.

Section 82 of the Corporation Codeprovides that the stockholder may exercise the right if he or she voted against
the proposed corporate action and if he made a written demand for payment on the corporation within thirty (30)
days after the date of voting.

Respondent Balmores complained aboutthe alleged inaction of PPC’s directors in his letter informing themthat
Villamor should be made to deliver to PPC and accountfor MC Home Depot’s checks or their equivalent value. He
alleged that these are devices or schemes amounting to fraud or misrepresentation detrimental to the corporation’s
and the stockholders’ interests. He also alleged that the directors’ inaction placed PPC’s assets in imminent and/or
actual dissipation, loss, wastage, and destruction.

Granting that (a) respondent Balmores’ attempt to communicate with the other PPC directors already comprised all
the available remedies that he could have exhausted and (b) the corporation was under full control of petitioners
that exhaustion of remedies became impossible or futile,  respondent Balmores failed toallege that appraisal rights
74

were not available for the acts complained of here.

Neither did respondent Balmores implead PPC as party in the case nor did he allege that he was filing on behalf of
the corporation.

The non-derivative character of respondent Balmores’ action may also be gleaned from his allegations in the trial
court complaint. In the complaint, he described the nature ofhis action as an action under Rule 1, Section 1(a)(1) of
the Interim Rules, and not an action under Rule 1, Section 1(a)(4) of the Interim Rules, which refers to derivative
suits. Thus, respondent Balmores said:

1.1 This is an action under Section 1 (a) (1), Rule 1 of the Interim Rules of Procedure for Intra-corporate
Controversies, involving devices or schemes employed by, or acts of, the defendants as board of directors, business
associates and officers of Pasig Printing Corporation (PPC), amounting to fraud or misrepresentation, which are
detrimental to the interest of the plaintiff as stockholder of PPC.  (Emphasis supplied)
75

Rule 1, Section 1(a)(1) of the Interim Rules refers to acts of the board, associates, and officers, amounting to fraud
or misrepresentation, which may be detrimental to the interest of the stockholders. This is different from a derivative
suit.

While devices and schemes of the board of directors, business associates, or officers amounting to fraud under
Rule 1, Section 1(a)(1) of the Interim Rules are causes of a derivative suit, it is not always the case that derivative
684
suits are limited to such causes or that they are necessarily derivative suits. Hence, they are separately enumerated
in Rule 1, Section 1(a) of the Interim Rules:

SECTION 1. (a) Cases covered. – These Rules shall govern the procedure to be observed in civil cases involving
the following:

(1) Devices or schemes employed by, or any act of, the board of directors, business associates, officers or
partners, amounting to fraud or misrepresentation which may be detrimental to the interest of the public
and/or of the stockholders, partners, or members of any corporation, partnership, or association;

(2) Controversies arising out of intra-corporate, partnership, or association relations, between and among
stockholders, members, or associates; and between, any or all of them and the corporation, partnership, or
association of which they are stockholders, members, or associates, respectively;

(3) Controversies in the election orappointment of directors, trustees, officers, or managers ofcorporations,
partnerships, or associations;

(4) Derivative suits;and

(5) Inspection of corporate books. (Emphasis supplied)

Stockholder/s’ suits based on fraudulent or wrongful acts of directors, associates, or officers may also beindividual
suits or class suits.

Individual suits are filed when the cause of action belongs to the individual stockholder personally, and notto the
stockholders as a group or to the corporation, e.g., denial of right to inspection and denial of dividends to a
stockholder.  If the cause of action belongs to a group of stockholders, such as when the rights violated belong to
76

preferred stockholders, a class or representative suit may be filed to protect the stockholders in the group. 77

In this case, respondent Balmores filed an individual suit. His intent was very clear from his manner of describing the
nature of his action:

1.1 This is an action under Section 1 (a) (1), Rule 1 of the Interim Rules of Procedure for Intra-corporate
Controversies, involving devices or schemes employed by, or acts of, the defendants as board of directors, business
associates and officers of Pasig Printing Corporation (PPC),amounting to fraud or misrepresentation, which are
detrimental to the interest of the plaintiff as stockholder of PPC.78

(Emphasis supplied)

His intent was also explicit from his prayer:

WHEREFORE, plaintiff respectfully prays that the Honorable Court –

....

2. After notice and due proceedings –

Declare that the acts of defendant Directorsin allowing defendant VILLAMOR to retain custody of the MC Home
checks and encash them upon maturity, as well as their refusal or failure to take any action against defendant
VILLAMOR to make him account and deliver the MC Home checks and/or their proceeds to Pasig Printing
Corporation are devices, schemes or acts amounting to fraud that are detrimental to plaintiff’s interest as a
stockholder of PPC;  (Emphasis supplied)
79

Respondent Balmores did not bring the action for the benefit of the corporation. Instead, hewas alleging that the
acts of PPC’s directors, specifically the waiver of rights in favor of Villamor’s law firm and their failure to take back
the MC Home Depot checks from Villamor, were detrimental to his individual interest as a stockholder. In filing an
action, therefore, his intention was to vindicate his individual interest and not PPC’s or a group of stockholders’.

The essence of a derivative suit is thatit must be filed on behalf of the corporation. This is because the cause of
action belongs, primarily, to the corporation. The stockholder who sues on behalf of a corporation is merely a
nominal party.

Respondent Balmores’ intent to file an individual suit removes it from the coverage of derivative suits.

III

685
 Respondent Balmores has no cause of action that would
entitle him to the reliefs sought

Corporations have a personality that is separate and distinct from their stockholders and directors. A wrong tothe
corporation does not necessarily create an individual cause of action. "A cause of action is the act or omission by
which a party violates the right of another."  A cause of action must pertain to complainant if he or she is to be
80

entitled to the reliefs sought. Thus, in Cua v. Tan,  this court emphasized:
81

. . . where the acts complainedof constitute a wrong to the corporation itself, the cause of action belongs to the
corporation and not to the individual stockholder or member. Although in most every case of wrong to the
corporation, each stockholder is necessarily affected because the value of his interest therein would beimpaired,
this fact of itself is not sufficient to give him an individual cause of action since the corporation is a person distinct
and separate from him, and can and should itself sue the wrongdoer. Otherwise, not only would the theory of
separate entity be violated, but there would be multiplicity of suits as well as a violation of the priority rights of
creditors. Furthermore, there is the difficulty of determining the amount of damages that should be paid to each
individual stockholder. 82

In this case, respondent Balmores did not allege any cause of action that is personal to him. His allegations are
limited to the facts that PPC’s directors waived their rights to rental income in favor of Villamor’s law firm without
consideration and that they failed to take action when Villamor refused to turn over the amounts to PPC. These are
wrongsthat pertain to PPC. Therefore, the cause of action belongs to PPC — not to respondent Balmores or any
stockholders as individuals.

For this reason, respondent Balmoresis not entitled to the reliefs sought in the complaint. Only the corporation, or
arguably the stockholders as a group, is entitled to these reliefs, which should have been sought in a proper
derivative suit filed on behalf of the corporation.

PPC will not be bound by a decision granting the application for the appointment of a receiver or management
committee. Since it was not impleaded in the complaint, the courtsdid not acquire jurisdiction over it. On this matter,
it is an indispensable party, without which, no final determination can be had.

Hence, it is not only respondent Balmores’ failure to implead PPC that is fatal to his action, as petitioners point out. It
is the fact that he alleged no cause of action that pertains personally to him that disqualifies him from the reliefs he
sought in his complaint.

On this basis alone, the Court of Appeals erred in giving due course to respondent Balmores’ petition for certiorari,
reversing the trial court’s decision, and issuing a new order placing PPC under receivership and creating an interim
management committee.

IV

Appointment of a management committee was not proper

Assuming that respondent Balmores has an individual cause of action, the Court of Appeals still erred in placing
PPC under receivership and in creating and appointing a management committee.

A corporation may be placed under receivership, or management committees may be created to preserveproperties
involved in a suit and to protect the rights of the parties under the control and supervision of the court. Management
83

committees and receivers are appointed when the corporation is in imminent danger of "(1) [d]issipation, loss,
wastage or destruction of assets or other properties; and (2) [p]aralysation of its business operations that may be
prejudicial to the interest of the minority stockholders, parties-litigants, or the general public."
84

Applicants for the appointment of a receiver or management committee need to establish the confluence of these
two requisites.  This is because appointed receivers and management committees will immediately take over the
1âwphi1

management of the corporation and will have the management powers specified in law.  This may have a negative
85

effect on the operations and affairs of the corporation with third parties,  as persons who are more familiar with its
86

operations are necessarily dislodged from their positions in favor of appointees who are strangers to the
corporation’s operations and affairs.

Thus, in Sy Chim v. Sy Siy Ho & Sons, Inc.,  this court said:

87

. . . the creation and appointment of a management committee and a receiver is an extra ordinary and drastic
remedy to be exercised with care and caution; and only when the requirements under the Interim Rules are shown.
It is a drastic course for the benefit of the minority stockholders, the parties-litigants or the general public are allowed
only under pressing circumstances and, when there is inadequacy, ineffectual or exhaustion of legal or other
remedies . . . The powerof the court to continue a business of a corporation . . . must be exercised with the greatest

686
care and caution. There should be a full consideration ofall the attendant facts, including the interest of all the
parties concerned. 88

PPC waived its rights, without any consideration in favor of Villamor. The checks were already in Villamor’s
possession. Some of the checks may have already been encashed. This court takes judicial notice that the goodwill
money of ₱18,000,000.00 and the rental payments of ₱4,500,000.00 every month are not meager amounts only to
be waived without any consideration. It is, therefore, enough to constitute loss or dissipation of assets under the
Interim Rules.

Respondent Balmores, however, failed to show that there was an imminent danger of paralysis of PPC’s business
operations. Apparently, PPC was earning substantial amounts from its other sub-lessees. Respondent Balmores did
not prove otherwise. He, therefore, failed to show at least one of the requisites for appointment of a receiver or
management committee.

The Court of Appeals had no

jurisdiction to appoint the receiver or management

committee

The Court of Appeals has no power to appoint a receiver or management committee. The Regional Trial Court has
original and exclusive jurisdiction  to hear and decide intra-corporate controversies,  including incidents of such
89 90

controversies.  These incidents include applications for the appointment of receivers or management committees.
91

"The receiver and members of the management committee . . . are considered officers of the court and shall be
under its control and supervision."  They are required to report tothe court on the status of the corporation within
92

sixty (60) days from their appointment and every three (3) months after. 93

When respondent Balmores filed his petition for certiorari with the Court of Appeals, there was still a pending action
in the trial court. No less than the Court of Appeals stated that it allowed respondent Balmores’ petition under Rule
65 because the order or resolution in question was an interlocutory one. This means that jurisdiction over the main
case was still lodged with the trial court.

The court making the appointment controls and supervises the appointed receiver or management
committee. Thus, the Court of Appeals’ appointment of a management committee would result in an absurd
1âwphi1

scenario wherein while the main case is still pending before the trial court, the receiver or management committee
reports to the Court of Appeals.

WHEREFORE, the petitions are GRANTED. The decision of the Court of Appeals dated March 2, 2006 and its
resolution dated May 29, 2006 are SET ASIDE.

SO ORDERED.

687
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.C. No. 10438               September 23, 2014

CF SHARP CREW MANAGEMENT INCORPORATED, Complainant, 

vs.
NICOLAS C. TORRES, Respondent.

DECISION

PER CURIAM:

For the Court's resolution is the Complaint  dated October 30, 2008 filed by complainant CF Sharp Crew
1

Management Incorporated (complainant) against respondent Nicolas C. Torres (respondent), charging him with
violating the Code of Professional Responsibility (CPR).

The Facts

Complainant is a corporation duly organized and existing under Philippine laws engaged in overseas maritime
employment.  It hired respondent, a medical doctor and a lawyer by profession, as its Legal and Claims Manager
2

who was tasked, inter alia, to serve as its legal counsel and to oversee the administration and management of legal
cases and medicalrelated claims instituted by seafarers against complainant’s various principals. Among the cases
respondent handled in his capacity as Legal and Claims Manager were the claims of seafarers Bernardo R. Mangi
(Mangi), Rodelio J. Sampani (Sampani), Joseph C. Delgado (Delgado), and Edmundo M. Chua (Chua). 3

In its administrative complaint, it was alleged that per respondent’s request, complainant issued checks in the
amounts of ₱524,000.00, ₱652,013.20, ₱145,650.00, ₱97,100.00, and ₱296,808.40 as settlement of the respective
claims of Mangi, Sampani, Delgado, and Chua.  However, complainant later discovered that, save for the check in
4

the amount of 145,650.00 issued to Delgado, respondent never gave the checks to the seafarers and instead, had
them deposited at International Exchange Bank, Banawe, Quezon City Branch, under Account No. 003-10-06902-
1.  With respect to Sampani, complainant also discovered that he only received the amounts of ₱216,936.00 and
5

₱8,303.00 or a total of ₱225,239.00 out of the requested amount of ₱652,013.20, through checks not issued by
complainant. 6

688
On October 30, 2008, the Integrated Bar of the Philippines (IBP) Commission on Bar Discipline directly received the
instant complaint and on even date, issued an Order  requiring respondent to file an answer, but the latter failed to
7

do so. Neither did respondent appear in the mandatory conference scheduled on March 20, 2009 nor did he file his
position paper. 8

The IBP’s Report and Recommendation

In a Report and Recommendation  dated August 1, 2009, the IBP Investigating Commissioner found respondent
9

administratively liable for violating the CPR, and accordingly recommended that he be meted the penalty of
suspension from the practice of law for one (1) year. 10

The Investigating Commissioner found that respondent had indeed requested and was issued checks as settlement
of the respective claims of Mangi, Sampani, Delgado, and Chua onthe pretense that the requested amounts
represented what was lawfully due them.  However, instead of giving the said checks to the named seafarers, he
11

deposited the same at the International Exchange Bank, Banawe,Quezon City Branch, under Account No. 003-10-
06902-1,  except for the check in the amount of 145,650.00 issued to Delgado.
12 13

Meanwhile, respondent belatedly filed his Verified Answer (With Motion to Re-Open Investigation)  on March 24,
14

2010. He explained that he was not able to timely file an answer because complainant supplied a wrong address to
the IBP and filed non-bailable criminal cases against him which caused his detention in a regular prison cell and,
thus, his inability to comply with the IBP’s directives. 15

On the merits of the complaint,respondent maintained that the seafarers’ claims had long been settled and that the
release documents signed by the named seafarers were already inactual custody and possession of the
complainant.  He further contended that he only signed the dorsal portions of the checks as a form of guaranty of
16

their genuineness  and that he could not have encashed them as they wereall payable to a particular payee. Lastly,
17 18

respondent claimed that when he resigned in August 2008, complainant forced him to sign promissory notes to
reimburse certain amounts which had not been accounted for by the latter in exchange for his clearance
documents.  But before he was able to settle the promissory notes, he was already arrested in connection with the
19

criminal cases filed by complainant against him. 20

In a Resolution  dated December 29, 2012, the IBP Board of Governors unanimously adopted and approved the
21

aforesaid report and recommendation with modification, increasing the recommended period of suspension from the
practice of law to two (2) years, and ordering respondent to return the full amount of money he received from
complainant which is legally due to the seafarers, with legal interest, within thirty (30) days from receipt of notice.

Aggrieved, respondent filed a Motion for Reconsideration  on April 22, 2013 which was, however, denied in a
22

Resolution  dated March 8, 2014.

23

The Issue Before the Court

The essential issue in this case is whether or not respondent should be held administratively liable for violating the
CPR.

The Court’s Ruling

After a judicious perusal of the records, the Court concurs with the findings of the IBP in its report and
recommendation, except as to: (a) the recommended penalty to be imposed upon respondent; and (b) the monetary
award in favor of the complainant.

It is fundamental that the relationship between a lawyer and his client is highly fiduciary and ascribes to a lawyer a
great degree of fidelity and good faith.  The highly fiduciary nature of this relationship imposes upon the lawyer the
24

duty to account for the money or property collected or received for or from his client.  This is the standard laid down
25

by Rules 16.01 and 16.03, Canon 16 of the CPR, which read:

CANON 16 – A LAWYER SHALL HOLD IN TRUST ALL MONEYS AND PROPERTIES OF HIS CLIENTTHAT MAY
COME INTO HIS POSSESSION.

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

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

In the foregoing light, it has been heldthat a lawyer’s failure to return upon demand the funds held by him on behalf
of his client gives rise to the presumption that he has appropriated the same for his own use in violation of the trust
reposed in him by his client. Such act is a gross violation of general morality as well as of professional ethics.
26

689
In this case, the IBP Investigating Commissioner correctly found that complainant had duly proven its charges
against respondent. In particular, complainant had exposed respondent’s modus operandi of repeatedly requesting
the issuance of checks purportedly for the purpose of settling seafarers’ claims against the complainant’s various
principals, only to have such checks (except for the check inthe amount of 145,650.00 issued to Delgado) deposited
to an unauthorized bank account, particularly International Exchange Bank, Banawe,Quezon City Branch, under
Account No. 003-10-06902-1. It is well-settled that "when a lawyer receives money from the client for a particular
purpose,the lawyer is bound to render an accounting to the client showing that the money was spent for a particular
purpose. And if he does not use the money for the intended purpose, the lawyer must immediately return the money
to his client."  This, respondent failed to do.
27

Clearly, respondent’s acts of misappropriation constitute dishonesty, abuse of trust and confidence reposedin him
by the complainant, and betrayal of his client’s interests which he is duty-bound to protect.  They are contrary to the
28

mandate of Rule 1.01, Canon 1 of the CPR which provides that "[a] lawyer shall not engage in unlawful, dishonest,
immoral, or deceitful conduct." Such malfeasance is not only unacceptable, disgraceful, and dishonorable to the
legal profession; it also reveals a basic moral flaw that makes him unfit to practice law.
29

Anent the proper penalty for respondent’s acts, the Court deems it proper to modify the penalty recommended by
the IBP.  Jurisprudence provides that in similar cases where lawyers misappropriated their clients’ money, the Court
1âwphi1

imposed upon them the ultimate penalty of disbarment from the practice of law. In Arellano University, Inc. v. Mijares
III,  the Court disbarred the lawyer for misappropriating his client’s money intended for securing a certificate of title
30

on the latter’s behalf. Similarly, in Freeman v. Reyes,  the same penalty was imposed upon the lawyer who
31

misappropriated the insurance proceeds of her client’s deceased husband.

As already discussed, respondent's conduct of misappropriating complainant's money has made him unfit to remain
in the legal profession. He has definitely fallen below the moral bar when he engaged in deceitful, dishonest,
unlawful, and grossly immoral acts.  As a member of the Bar, he is expected at all times to uphold the integrity and
32

dignity of the legal profession and refrain from any act or omission which might lessen the trust and confidence
reposed in him by the public in the fidelity, honesty, and integrity of the legal profession.  Membership in the legal
33

profession is a privilege, and whenever it is made to appear that an attorney is no longer worthy of the trust and
confidence of his clients and the public, it becomes not only the right but also the duty of the Court to withdraw the
same,  as in this case. In view of the foregoing, respondent deserves the ultimate penalty of disbarment from the
34

practice of law.

Likewise, the Court cannot concur with the IBP's recommendation regarding the return of the settlement money
respondent received from complainant, considering, among others, that it was not specifically prayed for in the
latter's administrative complaint and that the civil liability of respondent therefor may already be the subject of
existing cases involving the same parties. WHEREFORE, respondent Nicolas C. Torres is found guilty of violating
Rule 1.01, Canon 1 and Rules 16.01 and 16.03, Canon 16 of the Code of Professional Responsibility. Accordingly,
he is hereby DISBARRED from the practice of law and his name ordered STRICKEN OFF from the roll of attorneys.

Let a copy of this Decision be attached to respondent's record in this Court as attorney. Further, let copies of this
Decision be furnished the Integrated Bar of the Philippines and the Office of the Court Administrator, which is
directed to circulate them to all the courts in the country for their information and guidance.

SO ORDERED.

690
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. SB-14-21-J               September 23, 2014

[Formerly A.M. No. 13-10-06-SB]

RE: ALLEGATIONS MADE UNDER OATH AT THE SENATE BLUE RIBBON COMMITTEE HEARING HELD ON
SEPTEMBER 26, 2013 AGAINST ASSOCIATE JUSTICE GREGORY S. ONG, SANDIGANBAYAN

DECISION

PER CURIAM:

The character of every act depends upon the circumstances in which it is done.

- Justice Oliver Wendell Holmes

This administrative complaint was filed by the Court En Banc after investigation into certain allegations that surfaced
during the Senate Blue Ribbon Committee Hearing indicated prima facie violations of the Code of Judicial Conduct
by an Associate Justice of the Sandiganbayan. The investigation was conducted motu proprio pursuant to the
Court's power of administrative supervision over members of the Judiciary. 1

Factual Antecedents

In the middle of 2013, the local media ran an expose involving billions of government funds channeled through
bogus foundations. Dubbed as the "pork barrel scam," as the money was sourced from the Priority Development
Assistance Fund allotted to members of the House of Representatives and Senate, the controversy spawned
massive protest actions all over the country. In the course of the investigation conducted by the Senate Committee
on Accountability of Public Officers and Investigations (Blue Ribbon Committee), the names of certain government
officials and other individuals were mentioned by "whistle-blowers" who are former employees of the alleged
mastermind, Janet Lim-Napoles (Mrs. Napoles), wife of an ex-military officer. These personalities identified by the
whistle-blowers allegedly transacted with or attended Mrs. Napoles' parties and events, among whom is incumbent
Sandiganbayan Associate Justice Gregory S. Ong, herein respondent.

Benhur Luy (Luy), a cousin of Mrs. Napoles who had worked for several years with the Napoleses, filed illegal
detention charges against Mrs. Napoles who accused him of double-dealing. When Luy went public with his story
691
about Mrs. Napoles' anomalous transactions and before the warrant of arrest was issued by the court, she
reportedly tried to reach out to the other whistle-blowers for them not to testify against her but instead point to Luy
as the one receiving and distributing the money.

Marina Sula (Sula) executed a Sworn Statement  before the National Bureau of Investigation (NBI) on August 29,
2

2013, part of which reads:

32. In the sixteen (16) years that I worked with Ms. Napoles, I witnessed several personalities visit our
offices and join us as our special guests during our parties and other special occasions. 33. These
personalities who would either visit our office or join our events and affairs are: Senator Franklin Drilon,
Senator Jinggoy Estrada and family, Senator Bong Revilla, Lani Mercado-Revilla, Bryan Revilla, Secretary
Rene Villa, Congressman Pichay and Wife, Congressman Plaza, Congressman Ducut, DAR Director
Theresita Panlilio, Catherine Mae Canlas Santos, Pauline Labayen, Jen Corpuz (Staff of Senator Sotto),
Mayor Rene Maglanque, Atty. Dequina, Justice Gregory Ong, x x x.

34. Before the warrant of arrest was issued against Ms. Napoles, she told us that that case could take four
to five years to clear. She said, "Antayin niyo munang ma-clear pangalan ko para makakilos ako at
matulungan ko kayo". Sinabi niya na meron na siyang kausap sa Ombudsman at sa Sandiganbayan.

35. On 28 August 2013 while me and my companions were at the NBI, Janet Lim Napoles called me. She
was crying and ask[i]ng me not to turn my back on her, that we should stay together. She said "kahit
maubos lahat ng pera ko, susuportahan ko kayo. Hintay[i]n nyo kasi lalabas na ang TRO ko."

xxxx

38. Attorney Tan instructed us to implicate Benhur in case we were asked by the NBI. He said "wala naman
ipinakita sa inyong masama si Madam (Janet Lim Napoles). Siguro wala naman kayong sama ng loob kay
madam, kaya nga idiin ninyo si Benhur na siya ang nag-utos at saka sa kanya ninyo ibinibigay ang
pera." (Emphasis supplied.)
3

The following day, the social news network Rappler published an article by Aries Rufo entitled "Exclusive: Napoles
Parties with Anti-Graft Court Justice" showing a photograph of Senator Jinggoy Estrada (Senator Estrada), one of
the main public figures involved in the pork barrel scam, together with Mrs. Napoles and respondent. The reporter
had interviewed respondent who quickly denied knowing Mrs. Napoles and recalled that the photograph was
probably taken in one of the parties frequently hosted by Senator Estrada who is his longtime friend. Respondent
also supposedly admitted that given the ongoing pork barrel controversy, the picture gains a different context;
nevertheless, he insisted that he has untainted service in the judiciary, and further denied he was the one advising
Mrs. Napoles on legal strategies in connection with the Kevlar helmet cases where she was acquitted by a Division
of the Sandiganbayan of which respondent is the Chairman and the then Acting Presiding Justice. 4

On September 12, 2013, Sula executed a "Karagdagang Sinumpaang Salaysay "  wherein she gave details
5

regarding those persons named in her sworn statement, alleged to have visited their office or attended their events,
thus:

63) T: Ayon sa paragraph Nos. 32 at 33 ng iyong sinumpaang salaysay na may petsang 29 Agosto 2013, nabanggit
mo ang mga personalidad na nakikita mong bumibisita sa inyong opisina o di kaya naman sa tuwing may party o
special occacions si JANET NAPOLES ay may mga special guests kayo na kinabibilangan ng mga malalaking
pulitiko at ang iba naman ay may mga katungkulan sa gobyerno. Maari mo bang ilahad ang mga pangyayari sa mga
bawat pagkakataon na nakita mo sila sa iyong pagkaka-alala?

S : Opo, iisa-isahin ko po ang mga pangyayari sa mga pagkakataon na nakita ko po ang mga taong nabanggit ko:

xxxx

w) Justice GREGORY ONG - Isang beses ko po siyang nakitang nagpunta sa office sa 2501 Discovery Centre,
Ortigas at nakita ko po silang magkausap ni Madam JANET NAPOLES sa conference room.

xxxx 6

In her testimony before the Senate Blue Ribbon Committee on September 26, 2013, Sula was asked to confirm her
statement regarding Justice Ong, thus:

THE CHAIRMAN. Thank you, Senator Grace.

Isang tanong lang kay Ms. Sula.

692
Sinabi niyo kanina may tinawagan si Ms. Napoles at sinabi niya, "Malapit na lumabas yung TRO galing sa korte."
May kilala pa ba si Janet Lim Napoles sa ltuwes sa korte sa Sandiganbayan? MS. SULA. Hindi ko po alam.

THE CHAIRMAN. Your attention is called sa page –

MS. SULA. Sandiganbayan po, sorry. Mayroon po siyang binanggit na ano po –

THE CHAIRMAN. Nandito sa page 20.

MS. SULA. Si Mr. Ong, po, Justice Ong po.

THE CHAIRMAN. Gregory Ong.

MS. SULA Opo.

THE CHAIRMAN. Sa Sandiganbayan?

MS. SULA. Opo.

x x x  (Emphasis supplied.)
7

In a letter dated September 26, 2013 addressed to Chief Justice Maria Lourdes P. A. Sereno, respondent
meticulously explained the controversial photograph which raised questions on his integrity as a magistrate,
particularly in connection with the decision rendered by the Sandiganbayan' s Fourth Division in the Kevlar helmet
cases, which convicted some of the accused but acquitted Mrs. Napoles.

Respondent surmised that the photograph was taken during the birthday of Senator Estrada in February, either in
the year 2012 or 2013, but definitely not in 2010 or earlier. He explained that he could vaguely remember the
circumstances but it would have been rude for him to prevent any guest from posing with him and Senator Estrada
during the party. On the nature of his association with Mrs. Napoles, respondent asserted:

(4) I can categorically state, on the other hand, that I have never attended any party or social event hosted by Mrs.
Napoles or her family, either before she had a case with our court, or while she already had a pending case with our
court, or at any time afterwards. I have never, to use the term of Mr. Rufo in his article, "partied" with the Napoleses.
(Emphasis supplied.)

As to the Kevlar helmet cases, respondent said it was impossible for him to have been advising Mrs. Napoles, as
claimed by Mr. Rufo, as even the article itself noted that Mrs. Napoles' own brother, Reynald L. Lim, ( a.k.a.
Reynaldo L. Francisco), a co-accused in the case, was convicted by the Sandiganbayan. He stressed that these
cases were decided on the merits by the Sandiganbayan, acting as a collegial body and he was not even the
ponente of the decision. Respondent thus submitted himself to the discretion of the Chief Justice such that even
without being required to submit an explanation, he voluntarily did so "to defend [his] reputation as a judge and
protect the Sandiganbayan as an institution from unfair and malicious innuendos."

On October 7, 2013, Chief Justice Sereno wrote the Members of this Court, citing the testimonies of Luy and Sula
before the Senate Blue Ribbon Committee "[t]hat the malversation case involving Mrs. Janet Lim-Napoles, Major
Jaime G. Napoles, Jenny Lim Napoles, Reynaldo L. Francisco and other perpetrators was 'fixed' (inayos) through
the intervention of Justice Gregory S. Ong of the Sandiganbayan", to wit:

SEN. ANGARA. Sa inyo, hindi niyo a/am kung inayos iyong kaso na iyon? Kasi napakaraming koneksiyon, 'di ba?

xxxx Sige, huwag kang matakot, Benhur.

MR. LUY. Alam ko, inayos ni Ms. Napoles iyon dahil may connect nga siya sa Sandiganbayan

SEN. ANGARA. Okay.

xxxx

THE CHAIRMAN. xxx Sinabi niyo kanina na may tinawagan si Ms. Napoles at sinabi niya "Malapit na lumabas yung
TRO galing sa korte." May kilala pa ba si Janet Lim Napoles sa huwes sa korte sa Sandiganbayan?

xxxx

MS. SULA. Si Mr. Ong po, Justice Ong po.

693
THE CHAIRMAN. Gregory Ong.

MS. SULA. Opo.

THE CHAIRMAN. Sa Sandiganbayan?

MS. SULA. Opo.

Xxxx 8

Chief Justice Sereno then requested the Court En Banc to conduct an investigation motu proprio under this Court's
power of administrative supervision over members of the judiciary and members of the legal profession (referring to
notaries public who were alleged to have purposely left their specimen signatures, dry seals and notarial books with
Mrs. Napoles to facilitate the incorporation of non-governmental organizations [NGOs] involved in the scam). 9

Under our Resolution dated October 17, 2013, the Court En Banc required respondent to submit his comment and
directed the NBI to furnish the Court with certified copies of the affidavit of Luy. On November 21, 2013, the Court
received respondent's Comment.  Respondent categorically denied any irregularity in the Kevlar helmet cases and
10

explained the visit he had made to Mrs. Napoles as testified by Sula.

On Sula's statement, respondent points out that Sula never really had personal knowledge whether respondent is
indeed the alleged "contact" of Mrs. Napoles at the Sandiganbayan; what she supposedly "knows" was what Mrs.
Napoles merely told her. Hence, Sula's testimony on the matter is based purely on hearsay. Assuming that Mrs.
Napoles actually made the statement, respondent believes it was given in the context of massive media coverage of
the pork barrel scam exploding at the time. With the consciousness of a looming criminal prosecution before the
Office of the Ombudsman and later before the Sandiganbayan, it was only natural for Mrs. Napoles to assure Sula
and others involved in their business operation that she would not leave or abandon them and that she would do all
that she can to help them just so they would not turn their backs on her and become whistle-blowers. Thus, even if
Mrs. Napoles made misrepresentations to Sula regarding respondent as her "connection", she only had to do so in
order to convince Sula and her co-employees that the cases to be filed against them would be "fixed."

As to Sula's statement that she personally witnessed respondent at one time visiting Mrs. Napoles at her office and
having a meeting with her at the conference room, respondent said that at the birthday party of Senator Estrada
where the controversial photograph was taken, Mrs. Napoles engaged him in a casual conversation during which
the miraculous healing power of the robe or clothing of the Black Nazarene of Quiapo was mentioned. When Mrs.
Napoles told respondent that she is a close friend of the Quiapo Church's parish priest, he requested her help to
gain access to the Black Nazarene icon. Eventually, respondent, who is himself a Black Nazarene devotee and was
undergoing treatment for his prostate cancer, was given special permission and was able to drape the Black
Nazarene's robe or clothing for a brief moment over his body and also receive a fragrant ball of cotton taken or
exposed to the holy image, which article he keeps to this day and uses to wipe any ailing part of his body in order to
receive healing. Because of such favor, respondent out of courtesy went to see Mrs. Napoles and personally thank
her. Respondent stressed that that was the single occasion Sula was talking about in her supplemental affidavit
when she said she saw respondent talking with Mrs. Napoles at the conference room of their office in Discovery
Suites.

Respondent maintains that there was nothing improper or irregular for him to have personally seen Mrs. Napoles at
the time in order to thank her, considering that she no longer had any pending case with his court, and to his
knowledge, with any other division of the Sandiganbayan at the time and even until the date of the preparation of his
Comment. He thus prays that this Court duly note his Comment and accept the same as sufficient compliance with
the Court's Resolution dated October 17, 2013.

This Court upon evaluation of the factual circumstances found possible transgressions of the New Code of Judicial
Conduct committed by respondent. Accordingly, a Resolution was issued on January 21, 2014 stating that:

WHEREFORE, the Court hereby resolves to have the instant administrative matter RE-DOCKETED as A.M. No.
SB-14-21-J (Re: Allegations Made Under Oath at tlze Senate Blue Ribbon Committee Hearing held on September
26, 2013 against Associate Justice Gregory S. Ong, Sandiganbayan), and ASSIGNS the same to retired Supreme
Court Justice Angelina Sandoval-Gutierrez for investigation, report and recommendation within a period of sixty (60)
days from notice hereof.

The Court further resolves to NOTE the letter dated January 7, 2014 of Atty. Joffre Gil C. Zapata, Executive Clerk of
Court III, Sandiganbayan, Fourth Division, in compliance with the resolution of the Court En Banc dated December
3, 2013, transmitting the original records of Criminal Case Nos. 26768 and 26769. Atty. Zapata is INFORMED that
there is no more need to transmit to this Court the post-sentence investigation reports and other reports on the
supervisory history of the accused-probationers in Criminal Case Nos. 26768 and 26769.

Report and Recommendation of the Investigating Justice

694
Justice Angelina Sandoval-Gutierrez, a retired Member of this Court, submitted her report with the following findings
and conclusions:

FACTUAL ANTECEDENTS

1. THE KEVLAR CASE

Two criminal cases were filed with the Sandiganbayan sometime in 2001 - Criminal Case No. 26768 for Falsification
of Public Documents and Criminal Case No. 26769 for Violation of Section 3(e) of the AntiGraft Law. Charged were
several members of Philippine Marine Corps and civilian employees including Ms. Janet L. Napoles (Napoles), her
mother Magdalena Francisco (now deceased), her brother Reynaldo Francisco and wife Anna Marie Dulguime, and
her (Napoles') three employees.

These cases are referred to as the Kevlar case because the issue involved is the same - the questionable purchase
of 500 Kevlar helmets by the Philippine Marine Corps in the amount of ₱3,865,310.00 from five suppliers or
companies owned by Napoles.

The prosecution alleged inter alia that the accused, acting in conspiracy, released the payment although there was
yet no delivery of the Kevlar helmets; that the suppliers are mere dummies of Napoles; and that the helmets were
made in Taiwan, not in the U.S.A.

Napoles' husband, Major Jaime Napoles, was dropped from the two Informations in an Order issued by the
Ombudsman on March 18, 2002.

Napoles' mother, brother, and sister-in-law were among those convicted for the lesser crime of Falsification of Public
Documents and sentenced to suffer the penalty of 4 years and 2 months of prision correccional to 8 years and 1 day
of prision mayor and each to pay PS,000.00. They all underwent probation.

Napoles and six members of the Philippine Marine Corps were acquitted in both cases.

The court ruled that Napoles "was not one of the dealer-payees in the transaction in question. Even if she owns the
bank account where the 14 checks were later deposited, this does not in itself translate to her conspiracy in the
crimes charged x x x."

xxxx

THE INVESTIGATION

xxxx

I. During the investigation, Benhur testified that he and Napoles are second cousins. After passing the Medical
Technology Licensure Examination in 2002, he was employed in the JLN (Janet Lim Napoles) Corporation as
Napoles' personal assistant. As such, he was in charge of disbursements of her personal funds and those of her
office. He was also in charge of government transactions of the corporation and kept records of its daily business
activities.

In the course of Benhur's employment at the JLN Corporation, Napoles mentioned to him the Kevlar case, then
pending in the Sandiganbayan, saying she has a "connect" in that court who would help her.

When asked about his testimony before the Senate Blue Ribbon Committee concerning the Kevlar case, Benhur
declared that Napoles' "connect" with the Sandiganbayan is respondent, thus:

Q The question was, Mr. Witness, this is coming from Senator Angara, and I quote, "Kailan ho lumabas yung
decision ng Court sa Kevlar?" And just to refresh your memory, Mr. Witness, then Ms. Sula answered, "I think 2010.
Yun po yung lumabas po." And then going forward, Senator Angara referred to both of you this question: "Sa inyo,
hindi ninyo alam kung inayos yung kaso na iyon kasi napakaraming koneksyon, di ba? Baka alam ng ibang
whistleblowers kung nagka-ayusan sa kaso na iyon. Sige, huwag kang matakot, Benhur." Do you remember that
question being asked from you?

xxxx

A Yes po.

Q And now Mr. Witness, about this statement of yours at the Blue Ribbon Committee that Ms. Napoles has a certain
connect sa Sandiganbayan, who was this connect you were talking about, if you remember?

695
Witness Luy

A Si Justice Gregory Ong po.

Q How do you know that Justice Gregory Ong was the connect of Ms. Napoles at the Sandiganbayan?

A Ang sinabi po ... Si Ms. Napoles, pinsan ko po kasi we are second cousins. So kinuwento talaga sa akin ni
Madam kung ano ang mga developments sa mga cases, kung ano ang mga nangyayari. Tapos po, sinabi niya sa
akin mismo na nakakausap niya si Justice Gregory Ong at ang nagpakilala raw sa kanya po ay si Senator Jinggoy
Estrada.

Benhur further testified that even before the decision in the Kevlar case was promulgated, Napoles and respondent
were already communicating with each other (nag-uusap na po si!a). Therefore, she was sure the decision would be
in her favor:

Q Do you remember the date when the decision (in Kevlar case) was promulgated?

A Ano po, the year 2010 po ma' am.

Q And you met him (Justice Ong) in 2012?

A 2012 po, pero prior to that decision, madam, naririnig ko na po kay madam (Ms. Napoles) kasi kinukwento na po
ni madam sa akin na nag-uusap na po sila ni Justice Gregory Ong.

Q That was after the decision was promulgated?

A Bago po nailabas yung decision, ikinwento po m Ms. Napoles sa akin na nag-uusap na po sila ni Justice Gregory
Ong. Kaya kampante po si Ms. Napoles. Noong lumabas po yung decision, alam niya na po. Yung ang sabi sa akin
ni Ms. Napoles.

Going back to the hearing before the Blue Ribbon Committee, Benhur told Senator Angara that Napoles fixed the
Kevlar case because she has a "connect" in the Sandiganbayan:

"Baka alam ng ibang whistle blowers kung nagkaka-ayusan sa kaso na iyon (Kevlar case). Sige huwag kang
matakot Benhur."

Benhur Luy: "Alam ko inayos ni Ms. Napoles iyon dahil may connect nga siya sa Sandiganbayan."

On how Napoles "inayos" or fixed the Kevlar case, Benhur said that he kept a ledger of the Sandiganbayan case
wherein he listed all her expenses in the sum of P 100 million pesos. He was surprised why she would spend such
amount considering that what was involved in the Kevlar case was only ₱3.8 million. She explained that she gave
various amounts to different people during the pendency of the case which lasted up to ten years. And before the
decision in the Kevlar case was released, she also gave money to respondent but she did not mention the amount.
Thus, she knew she would be acquitted.

Q You answered Senator Angara this way which we already quoted a while ago, "Alam ko inayos ni Ms. Napoles
iyon dahil may connect nga siya sa Sandiganbayan." You stated that the connect is Justice Ong. Can you explain
before us what you mean, "Alam ko inayos ni Ms. Napoles iyon." What do you mean by that "inayos"?

A Kasi po ma' am meron kaming ledger ng Sandiganbayan case sa lahat ng nagastos ni Ms. Janet Napoles, nilista
ko po yon lahat. Kasi naririnig ko po kay Janet Napoles, parang pinsan ko po si Janet Napoles, "Paano nagkaroon
ng kaso ang ate ko? So nadiscover ko na Jang po na yun pala yung Kevlar. So, mahigit one hundred million na
nagastos po ni Ms. Napoles kasi di Jang naman po si sir Justice Gregory Ong ...

xxx

Q Did you come to know to whom she gave all the money?

A Wala po siyang ... basta ang sabi niya inayos na niya si ... binaggit niya po si ... kasi si madam hindi kasi nagki-
keep kasi ako pinsan niya po kasi ako, nabanggit niya po si Justice Gregory Ong. Sinabi niya nagbigay daw po siya
ng pera kay Justice Ong pero she never mentioned kung magkano yung amount.

xxx

Q Nagbigay ng pera kay Justice Gregory Ong?

696
A Opo, yung ang sabi niya (referring to Ms. Napoles).

Q To you?

A Yes, madam.

Q Do you remember when she made that kind of statement?

A Bago po ano madam, bago po lumabas yung decision kaya kampante na po si Ms. Napoles bago lumabas yung
decision na acquitted siya. Alam na niya. Sa Kevlar case.

xxx

Justice Gutierrez

Continue counsel.

Witness Luy

Kasi naikwento po madam ni Ms. Napoles na almost PlOO million na ang nagastos niya. Tapos ang sabi ko nga po
sa kanya: "Madam, P 100 million na sa halagang ₱3.8 lang na PO (purchase order) sa Kevlar helmet, tapos P 100
million na ang nagastos mo?"

Q Did she tell you or explain to you to whom this P 100 million was paid? How was it spent?

A Basta ang natatandaan ko ... di ko na po matandaan ang mga dates kasi parang staggered. May ₱5 million sa
ibang tao ang kausap niya. Tapos ito naman tutulong ng ganito. lba-iba kasi madam, eh.

Q But there was no showing the money was given to Justice Ong?

A Wala po pero nabanggit lang po niya (Ms. Napoles) sa akin na nagbigay po siya kay Justice Ong, but she never
mentioned the amount.

Continuing with his testimony, Benhur declared that in 2012, respondent went twice to Napoles' office at the
Discovery Suites Center, 25 ADB Avenue, Ortigas, Pasig City. On the first visit, Napoles introduced Justice Ong to
Benhur and her other employees.

Benhur narrated what transpired during that visit. According to him, Napoles has so much money being placed at
the Armed Forces of the Philippines and Police Savings and Loan Association, Inc. (AFPSLAI) which offered 13%
interest annually. Napoles called Benhur telling him that respondent would like to avail of such interest for his BDO
check of ₱25.5 million. To arrange this, Napoles informed Benhur that she would just deposit respondent's ₱25.5
million in her personal account with Metro bank. Then she would issue to respondent in advance eleven (11)
checks, each amounting to ₱282,000.00 as monthly interest, or a total of ₱3,102,000.00 equivalent to 13% interest.
Upon Justice Ong's suggestion, the checks should be paid to cash. So, Benhur prepared the corresponding eleven
(11) checks, thus:

Q With respect to the Kevlar case, what participation did you have, if there was any?

Witness Luy

A Noon 2012 po kasi si Justice Gregory Ong po nasa unit 2501, yung office (of Ms. Napoles), so kami ni Janet
Napoles, nandito sa 2502 kasi yun po talaga ang office namin. Si Ms. Napoles po sinabi niya sa akin, Ben, kasi si
Ms. Napoles, may pera siyang madarni na pine-place niya po sa AFPSLAI at yung AFPSLAI po ay nagbibigay po sa
kanya o nagooffer ng 13% interest annually po. So, ang nangyari po <loon, sabi ni Janet Napoles, si Justice Ong ho
raw, gustong magkaroon din ng interest parang ganoon. So tutulungan niya. So ang ginawa po namin x x x. Q
Meaning to say, Justice Ong would like to deposit money?

A Opo.

Q So he could get 13% interest?

A Opo, kasi tapos madam ang nangyari po pumunta na po si Ms. Napoles sa kanyang opisina. Tinawag po niya ako
kasi pinasulat na niya sa akin ang checke. So, ang ginawa po ni Ms. Napoles, yung checke ni .. BDO check po kasi
yun. Ang sabi sa akin ni Ms. Napoles, checke daw po yun ni Justice Gregory Ong. Sa, BDO. So, di ko naman din po
nakita Madam yung nakalagay sa ...

697
Q So it is the check of Justice Ong, not the check of Ms. Napoles?

A Opo, ang amount po ng check madam ay ₱25.5 million ang amount noong BDO check na inissue ...

Q That belongs to Justice Ong?

A Opo. Tapos madam, so ang ginawa po namin ni Ms. Napoles, dahil po 13% interest ang ino-offer ng AFPSLAI,
sabi ni Madam ganito na lang, Ben, ipasok na lang muna natin yung check niya sa personal account ko. Ako na
lang muna for the meantime, mag-iissue ng check sa kanya para maavail ni Justice Ong yung interest. So, ang
ginawa nan1in madam, ₱25.5 million times 13% interest, tapos divided by 12, lumalabas ₱282,000.00 or
₱283,000.00 or ₱281,000.00 po madam kasi naground off kami sa ₱282,000.00. So, ang ginawa ni Madam, baga
monthly. So eleven (11) checks ang prinepare namin. Kung hindi po ako nagkakamali po, JLN Corporation check
ang ... Ako pa nga po ang nagsulat at saka bago po namin isinulat yung payee, inalam pa po namin. x x x So,
pumunta na naman si madam sa 2501 kasi nandoon si Justice Gregory Ong. Noong bumalik siya, pay to cash na
lang daw. So, makikita po sa records namin ni Ms. Napoles na pumasok ang ₱25.5 million na amount sa kanyang
account at the same time nag-issue siya ng checke na ₱282,000.00 na eleven checks. Nagstart kami madam 2012,
siguro sometime July or August or mga ganoong buwan po. Basta 11 checks, hindi nalalayo doon. So, siguro tapos
na.

Q But what actually turned out was that the money of Justice Ong was deposited at the bank but the interest was
paid in advance by Ms. Napoles, and actually the bank will pay Ms. Napoles the advanced interest she paid to
Justice Ong, is that clear? Is that the arrangement? Do you understand me?

A Kasi ang nangyari po ma'am ganito e: yung ₱25.5 million ipinasok sa personal account ni Ms. Napoles dito sa
Metrobank. Metrobank kasi po yun e.

On the second visit of respondent to Napoles' office, they just engaged in conversation. She ordered Chinese food
for him which, according to Benhur, is his (respondent's) favorite.

On cross-examination, Benhur claimed that in his affidavits executed in the NBI, he did not mention respondent's
name. However, in his reply-affidavit filed with the Sandiganbayan, he alleged that Napoles issued ₱282,000.00 (the
amount stated in each of the 11 checks) but he did not mention the name of the payee upon instruction of his
lawyer, Atty. Baligod. Nonetheless, he knew that the checks were issued to respondent.

II. Sula, also a whistle blower, testified that she was an employee of JLN Corporation. Her duties included the
formation of corporations by making use of the forms, applying for business licenses, transfer of properties,
purchase of cars, and others.

Sula corroborated Benhur's testimony that respondent visited the office of Napoles twice sometime in 2012.

Sula was asked to explain her testimony before the Blue Ribbon Committee during the hearing on September 26,
2013, quoted as follows:

The Chairman (Senator Teofisto Guingona III)

Sinabi ninyo na may tinawagan si Mrs. Napoles at sinabi niya, Malapit nang lumabas yung TRO galing sa korte.
May kilala pa ba si Janet Lim Napoles sa huwes sa korte sa Sandiganbayan?

xxx

Ms. Sula

Si Mr. Ong po. Justice Ong po.

The Chairman

Gregory Ong?

Ms. Sula

Opo.

The Chairman

Sa Sandiganbayan?

698
Ms. Sula

Opo.

The Chairman

Okay. With that, I will just have a closing statement before we leave the hearing.

Sula explained that the TRO mentioned by Napoles refers to the TRO to be issued by the Sandiganbayan in the
event the case involving the PIO billion PDAF scam against her is filed with that court; and that Napoles told Sula
and the other employees not to worry because she has contact with the Sandiganbayan - respondent Justice Ong,
thus:

Q Not the illegal detention case?

Witness Sula

A Hindi po, pag nakasuhan na po kami sa Sandiganbayan.

Q Okay, again?

A Sa pagkakaintindi po namin, ang sabi po ni Madam na it takes 4 to 5 years, so hihintayin niya na maacquit, sabi
niyang ganoon, ang pangalan niya para maluwag na tulungan kami. Ito po ang pagkakaintindi namin na sa
Sandiganbayan.

Q Yung PDAF?

A Opo, yung PDAF sa Sandiganbayan.

Q Pagdating ng kaso sa Sandiganbayan?

A Opo, kasi po ina-ano po niya, siya po tinitira na ni Benhur - si Madam tungkol sa PlO billion scam. So, pinag-
uusapan namin sa bahay niya sa South Garden Unit na, Madam, paano po yan, pag lahat ng kaso na iyan dadaan
sa lawmakers, dadaan yon sa Ombudsman at saka sa Sandiganbayan? Sabi niya, "Huwag kayong mag-alala.
Meron naman akong mga contact doon." Sabi niyang ganoon sa Ombudsman at sa Sandiganbayan.

Q Is that in your affidavit?

A Wala po. Pero sinabi ko po doon sa part na yon (her testimony before the Senate Blue Ribbon Committee) na
meron na siyang kilala sa Ombudsman, pero hindi niya nabanggit ang pangalan. Pero sa Sandiganbayan, ang alam
namin kilala niya si Justice Ong.

Q Yun ang sagot niya kay Chairman Guingona. Di ba I read it a while ago?

A Opo, doon sa Sandiganbayan.

Sula also testified that every time Napoles talked to her and the other employees, she would say that Justice Ong
will help her in the Kevlar case. Sula's testimony is as follows:

Q x x x you told me that somebody will help in the Kevlar case?

A Opo. Sinabi po niya sa amin every time po pag nagkukwento siya, sinasabi niya na si Justice Ong ang tumulong
sa kanya para ma-clear po yung Kevlar case niya.

Sula likewise testified that Napoles told her and the other employees that she will fix (aayusin) the "PDAF case" in
the Sandiganbayan. Then they replied in jest that her acquaintance in that court is respondent. Napoles retorted,
"Ay huag na iyon kasi masyadong mataas ang talent fee."

xxxx

III. Aries Rufo, a Reporter of Rappler, testified that he cannot reveal who gave him the photograph [of respondent
beside Napoles and Senator Jinggoy Estrada] because he is shielded by law and he has to protect his source.

When asked about his comment upon seeing the picture, Rufo said:

699
Initially, when I saw the picture, since I knew that Justice Ong was one of the members of the division that handled
the Kevlar case, it aroused my curiosity why he was in that picture. Second, because in journalism, we also get to
practice ethical standards, I immediately sensed though that a Justice or a lawyer, that he should not be seen or be
going to a party or be in an event where respondent (Ms. Napoles) was in a case under his Division. He should not
be in a situation that would compromise the integrity of his office.

Rufo further testified that on August 27, 2013, he faxed a letter to respondent to "get his side about the photo." The
next day, he went to respondent's office and showed it to him. Respondent was shocked. He explained that it must
have been taken during one of the parties hosted by his friend Senator Jinggoy Estrada; that he did not know that
the woman in the picture is Napoles because she did not appear during the hearing of the Kevlar case; and that
such picture must have been taken in one of those instances when a guest would like to pose with celebrities or
public figures.

xxxx

Respondent, in his defense, vehemently denied the imputations hurled against him.

1. He asserted that he could not be the contact or "connect" of Napoles at the Sandiganbayan for he never
met or came to know her during the pendency of the Kevlar case;

2. Challenging Benhur's testimony that he fixed or "inayos" the Kevlar case, respondent claimed that it was
decided based on the merits by the Sandiganbayan Fourth Division as a collegial body. The two other
members of the court, Justice Jose R. Hernandez (ponente) and Justice Maria Cristina J. Cornejo, are
independent-minded jurists who could not be pressured or influenced by anybody, not even by their peers;

3. On Benhur's allegation that respondent received an amount of money from Napoles prior to the
promulgation of the decision in the Kevlar case, respondent deplored the fact that Benhur was attempting to
tarnish his reputation without any proof. And that it is unthinkable for him to have received money from
Napoles considering that her mother, brother, and sister-in-law were convicted;

4. Respondent admitted he went to Napoles' office twice, sometime in March 2012, after the decision in the
Kevlar case was promulgated in 2010 and narrated what prompted him to do so, thus:

At the birthday party of Senator Jinggoy Estrada on February 17, 2012, Napoles approached him and introduced
herself. She engaged him in a casual conversation and thanked him for her acquittal in the Kevlar case.
Respondent replied she should thank her "evidence" instead, adding that had the court found enough evidence
against her, she would have been convicted. She talked about her charity works like supporting Chinese priests,
building churches and chapels in China, and sponsoring Chinese Catholic priests. He was not interested though in
what she was saying until she mentioned the name of Msgr. Ramirez, former Parish Priest of Quiapo Church.

Respondent became interested because he has been a devotee of the Holy Black Nazarene since he was a little
boy. Napoles told him that Msgr. Ramirez has with him the robe of the Holy Black Nazarene which has a healing
power if one wears it. Then respondent asked if he can have access to the robe so he can be cured of his ailment
(prostate cancer) which he keeps only to himself and to the immediate members of his family. Napoles made
arrangement with Msgr. Ramirez until respondent was able to drape the robe over his body for about one or two
minutes in Quiapo Church. He also received a fragrant ball of cotton which he keeps until now to heal any ailing part
of his body. That was a great deal for him. So out of courtesy, he visited Napoles in her office and thanked her. That
was his first visit.

Thereafter, Napoles kept on calling respondent, inviting him to her office, but he kept on declining. Then finally after
two weeks, he acceded for she might think he is "walang kwentang tao." They just engaged in a small talk for about
30 minutes and had coffee.

5. Concerning Benhur's testimony that Napoles paid respondent an advanced interest consisting of eleven (11)
checks in the amount of ₱282,000.00 each and that he issued to her his BDO check of ₱25.5 million which she
deposited in her account, he claimed that "he never issued that check as he did not intend to invest in AFPSLAI. In
fact, he does not have any money deposited there. Inasmuch as he did not issue any BDO check, it follows that
Napoles could not have given him those eleven (11) checks representing advanced interest. He further explained
that he found from the internet that in AFPSLAI, an investor can only make an initial deposit of ₱30,000.00 every
quarter or Pl20,000.00 per year. The limit or ceiling is ₱3 million with an interest of 15% or 16% per annum.

6. The whistle blower's testimony are conflicting and therefore lack credibility. While Sula testified that Napoles told
her that she did not want to approach respondent (should a case involving the pork barrel scam be filed with the
Sandiganbayan) because his talent fee is too high, however, both whistle blowers claimed that he is Napoles'
contact in the Sandiganbayan.

700
With respect to the Rappler Report, according to respondent, Rufo was insinuating four things: 1. That there was
irregularity in the manner the Kevlar case was decided;

2. That respondent was close to Napoles even during the pendency of the Kevlar case;

3. That respondent was attending parties of the Napoleses; and

4. That respondent was advising Napoles about legal strategies relative to the Kevlar case. Respondent "dismissed
all the above insinuations as false and without factual basis." As to the last insinuation that he advised Napoles
about legal strategies to be pursued in the Kevlar case, respondent stressed that the case was decided by a
collegial body and that he never interceded on her behalf.

EVALUATION

xxxx

It bears stressing that before the Senate Blue Ribbon Committee, Benhur initially testified that Napoles fixed or
"inayos" the Kevlar case because she has a contact at the Sandiganbayan, referring to respondent. Sula
corroborated Benhur's testimony.

Testifying before the Senate Blue Ribbon Committee is certainly an ordeal. The witnesses and everything they say
are open to the public. They are subjected to difficult questions propounded by the Senators, supposedly intelligent
and knowledgeable of the subject and issues under inquiry. And they can easily detect whether a person under
investigation is telling the truth or not. Considering this challenging and difficult setting, it is indubitably improbable
that the two whistle blowers would testify false! y against respondent.

Moreover, during the investigation of this case, Benhur and Sula testified in a candid, straightforward, and
categorical manner. Their testimonies were instantaneous, clear, unequivocal, and carried with it the ring of truth.

In fact, their answers to the undersigned's probing questions were consistent with their testimonies before the
Senate Blue Ribbon Committee. During cross-examination, they did not waver or falter. The undersigned found the
two whistle blowers as credible witnesses and their story untainted with bias and contradiction, reflective of honest
and trustworthy witnesses.

The undersigned therefore finds unmeritorious respondent's claim that Benhur and Sula were lying.

. . . respondent insisted he could not have intervened in the disposition of the Kevlar case considering that Napoles'
mother, brother and sister-in-law were convicted.

Respondent must have forgotten that Napoles' natural instinct was self-preservation. Hence, she would avail of
every possible means to be exonerated. Besides, respondent's belief that the two members of his Division are
independent-minded Jurists remains to be a mere allegation.

xxxx

With the undersigned's finding that there is credence in the testimonies of Benhur and Sula, there is no need to
stretch one's imagination to arrive at the inevitable conclusion that in "fixing" Kevlar case, money could be the
consideration ... Benhur testified he kept a ledger (already shredded) of expenses amounting to P 100 million
incurred by Napoles for the Sandiganbayan during the pendency of the Kevlar case which extended up to ten years;
and that Napoles told him she gave respondent an undetermined sum of money.

Respondent maintains that the testimonies of Benhur and Sula are pure hearsay, inadmissible in evidence:

Justice Ong

Your honor, since these are all accusations against me by Luy and Sula, and according to Luy and Sula, these were
only told to them by Napoles, always their statements were ... they do not have personal knowledge, it was only told
to them by Napoles, is it possible that we subpoena Napoles so that the truth will come out? If. ..

xxxx

Justice Gutierrez

That is your prerogative.

701
Justice Ong

I am willing to take the risk although I know I am not an acquaintance of Napoles. Just to clear my name whether I
should be hung or I should not be hung.

xxxx

Atty. Geronilla

I don't think it would be necessary, your honor.

Justice Gutierrez (to Atty. Geronilla)

Discuss this matter with your client, file a motion, then we will see.

However, respondent and his counsel did not take any action on the undersigned's suggestion. They did not present
Napoles to rebut the testimonies of Benhur and Sula. Significantly, respondent failed to consider that his testimony
is likewise hearsay. He should have presented Msgr. Ramirez and Napoles as witnesses to support his claim
regarding their role which enabled him to wear the robe of the Holy Black Nazarene.

x x xx

Respondent's acts of allowing himself to be Napoles' contact in the Sandiganbayan, resulting in the fixing of the
Kevlar case, and of accepting money from her, constitute gross misconduct, a violation of the New Code of Judicial
Conduct for the Philippine Judiciary.

xxxx

That Benhur personally prepared the eleven (11) checks which Napoles handed to respondent led the undersigned
to conclude without hesitation that this charge is true. It is highly inconceivable that Benhur could devise or concoct
his story. He gave a detailed and lucid narration of the events, concluding that actually Napoles gave respondent
₱3, 102,000.00 as advanced interest.

According to respondent, the purpose of his first visit was to thank Napoles for making it possible for him to wear the
Holy Black Nazarene's robe. Even assuming it is true, nonetheless it is equally true that during that visit, respondent
could have transacted business with Napoles. Why should Napoles pay respondent an advanced interest of
₱3,102,000.0 with her own money if it were not a consideration for a favor?

Respondent's transgression pertains to his personal life and no direct relation to his judicial function. It is not
misconduct but plain dishonesty. His act is unquestionably disgraceful and renders him morally unfit as a member of
the Judiciary and unworthy of the privileges the law confers on him. Furthermore, respondent's conduct supports
Benhur's assertion that he received money from Napoles.

Dishonesty likewise violates Canon 2 (1 and 2) on Integrity of the same Code providing in part that judges must
ensure that their conduct is above reproach and must reaffirm the people's faith in the integrity of the Judiciary.

Indeed, respondent should not stay in his position even for a moment.

xxxx

...From respondent's end, there was nothing wrong when he visited Napoles twice in her office considering that the
visits took place long after the promulgation of the decision in the Kevlar case.

Contrary to respondent's submission, such acts also constitute gross misconduct in violation of Canon 4 on
Propriety of the same Code. Section 1 provides that judges shall avoid impropriety and the appearance of
impropriety in all of their activities .

. . . respondent's reason for his first visit was to thank Napoles for her help in making it possible for him to wear the
robe of the Holy Black Nazarene. Instead of visiting her, respondent could have extended his gratitude by simply
calling her by phone. Worse, he visited her again because she may think he is an unworthy person. This is an
extremely frail reason. He was seen by the whistle blowers and their co-workers who, without doubt, readily
confirmed that he was Napoles' contact at the Sandiganbayan and that he "fixed" the decision in the Kevlar case.

Respondent cannot be excused for his unconcern for the position he holds. Being aptly perceived as the visible
personification of law and justice, his personal behavior, not only while in the performance of official duties but also

702
outside the court, must be beyond reproach. A judicial office circumscribes a personal conduct and imposes a
number of inhibitions, whose faithful observance is the price one has to pay for holding an exalted position.

xxxx

On the photograph showing respondent

with Senator Jinggoy Estrada and Napoles.

xxxx

This incident manifests respondent's disregard of the dictum that propriety and the appearance of propriety are
essential to the performance of all the activities of a judge. This exacting standard of decorum is demanded from
judges to promote public confidence in the integrity of the Judiciary.

In joining Senator Estrada and Napoles in a picture taking, respondent gave a ground for reproach by reason of
impropriety. It bears reiterating Canon 4 (1) on Propriety of the same Code which provides that judges shall avoid
impropriety and the appearance of impropriety in all of their activities.

Respondent maintained that he did not know Napoles at that time because she was not present before the
Sandiganbayan during the hearing of the Kevlar case for she must have waived her appearance. Respondent's
explanation lacks merit. That court could not have acquired jurisdiction over her if she did not appear personally for
arraignment.

Of utmost significance is the fact that this is not the first time that respondent has been charged administratively. In
"Assistant Special Prosecutor Ill Rohermina J Jamsani-Rodriguez v. Justices Gregory S. Ong, Jose R. Hernandez
and Rodolfo A. Ponferrada, Sandiganbayan,'' the Supreme Court found respondent Justice Ong guilty of violation of
PD 1606 and The Revised Internal Rules of the Sandiganbayan for nonobservance of collegiality in hearing criminal
cases in the Hall of Justice, Davao City. Instead of siting as a collegial body, the members of the Sandiganbayan
Fourth Division adopted a different procedure. The Division was divided into two. As then Chairperson of the
Division, respondent was ordered to pay a fine of ₱15,000.00 with a stern warning that a repetition of the same or
similar offense shall be dealt with more severely.

xxxx

...the undersigned cannot hold back her skepticism regarding the acquittal of Napoles. The Sandiganbayan Fourth
Division, of which respondent was the Chairman, held that Napoles did not conspire with the suppliers in the
questionable purchase of the Kevlar helmets as she was not one of the "dealer-payees" in the transaction in
question and that there was no proof of an overt act on her part. How could the Fourth Division arrive at such
conclusion? The Decision itself indicates clearly that ( 1) Napoles was following up the processing of the documents;
(2) that she was in charge of the delivery of the helmets; and (3) the checks amounting to ₱3,864,310.00 as
payment for the helmets were deposited and cleared in only one bank account, Security Bank Account No. 512-000-
2200, in the name of Napoles.

Considering this glaring irregularity, it is safe to conclude that indeed respondent has a hand in the acquittal of
Napoles. All along, the whistle blowers were telling the truth.

xxxx

RECOMMENDATION

IN VIEW OF THE FOREGOING, It is respectfully recommended, for consideration of the Honorable Court, that
respondent Justice Gregory S. Ong be found GUILTY of gross misconduct, dishonesty, and impropriety, all in
violations of the New Code of Judicial Conduct for the Philippine Judiciary and be meted the penalty of DISMISSAL
from the service WITH FORFEITURE of all retirement benefits, excluding accrued leave credits, and WITH
PREJUDICE to reemployment to any government, including government-owned or controlled corporations.

xxxx

The Court's Ruling

This Court adopts the findings, conclusions and recommendations of the Investigating Justice which are well-
supported by the evidence on record.

Based on the testimonies of Luy, Sula and Rufo, the Investigating Justice formulated the charges against the
respondent, as follows:
703
 1. Respondent acted as contact of Napoles in connection with the Kevlar case while it was pending in the
Sandiganbayan Fourth Division wherein he is the Chairman;

2. Respondent, being Napoles' contact in the Sandiganbayan, fixed the Kevlar case resulting in her
acquittal;

3. Respondent received an undetermined amount of money from Napoles prior to the promulgation of the
decision in the Kevlar case thus, she was sure ("kampante")of her acquittal; 4. Respondent visited Napoles
in her office where she handed to him eleven (ll) checks, each amounting to ₱282,000.00 or a total of
₱3,102,000.00, as advanced interest for his ₱25.5 million BDO check she deposited in her personal
account; and

5. Respondent attended Napoles' parties and was photographed with Senator Estrada and Napoles. 11

Respondent thus stands accused of gross misconduct, partiality and corruption or bribery during the pendency of
the Kevlar case, and impropriety on account of his dealing and socializing with Napoles after her acquittal in the said
case. Additionally, respondent failed to disclose in his September 26, 2013 letter to Chief Justice Sereno that he had
actually visited Napoles at her office in 2012, as he vehemently denied having partied with or attended any social
event hosted by her.

Misconduct is a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty,
unlawful behavior, willful in character, improper or wrong behavior; while ·"gross" has been defined as "out of all
measure beyond allowance; flagrant; shameful; such conduct as is not to be excused."  We agree with Justice
12

Sandoval-Gutierrez that respondent's association with Napoles during the pendency and after the promulgation of
the decision in the Kevlar case resulting in her acquittal, constitutes gross misconduct notwithstanding the absence
of direct evidence of corruption or bribery in the rendition of the said judgment.

We cannot overemphasize that in administrative proceedings, only substantial evidence, i.e., that amount of relevant
evidence that a reasonable mind might accept as adequate to support a conclusion, is required. The standard of
substantial evidence is satisfied when there is reasonable ground to believe that respondent is responsible for the
misconduct complained of, even if such evidence might not be overwhelming or even preponderant. 13

The testimonies of Luy and Sula established that Napoles had been in contact with respondent ("nag-uusap sila")
during the pendency of the Kevlar case. As Napoles' trusted staff, they (especially Luy who is a cousin) were privy
to her daily business and personal activities. Napoles constantly updated them of developments regarding the case.
She revealed to them that she has a "connect" or "contact" in the Sandiganbayan who will help "fix" the case
involving her, her mother, brother and some employees. Having closely observed and heard Napoles being
confident that she will be acquitted even prior to the promulgation of the decision in the Kevlar case, they were
convinced she was indeed in contact with respondent, whose identity was earlier divulged by Napoles to Luy. Luy
categorically testified that Napoles told him she gave money to respondent but did not disclose the amount. There
was no reason for them to doubt Napoles' statement as they even keep a ledger detailing her expenses for the
"Sandiganbayan," which reached Pl 00 million. Napoles' information about her association with respondent was
confirmed when she was eventually acquitted in 2010 and when they saw respondent visit her office and given the
eleven checks issued by Napoles in 2012.

Respondent maintains that the testimonies of Luy and Sula were hearsay as they have no personal knowledge of
the matters they were testifying, which were merely told to them by Napoles. Specifically, he points to portions of
Sula's testimony indicating that Napoles had not just one but "contact persons" in Ombudsman and Sandiganbayan;
hence, it could have been other individuals, not him, who could help Napoles "fix" the Kevlar case, especially since
Napoles never really disclosed to Sula who was her (Napoles) contact at the Sandiganbayan and at one of their
conversations Napoles even supposedly said that respondent's "talent fee" was too high. Bribery is committed when
a public officer agrees to perform an act in connection with the performance of official duties in consideration of any
offer, promise, gift or present received.  Ajudge who extorts money from a party-litigant who has a case before the
14

court commits a serious misconduct and this Court has condemned such act in the strongest possible terms.
Particularly because it has been committed by one charged with the responsibility of administering the law and
rendering justice, it quickly and surely corrodes respect for law and the courts.
15

An accusation of bribery is easy to concoct and difficult to disprove. The complainant must present a panoply of
evidence in support of such an accusation. Inasmuch as what is imputed against the respondent judge connotes a
grave misconduct, the quantum of proof required should be more than substantial.  Concededly, the evidence in this
16

case is insufficient to sustain the bribery and corruption charges against the respondent. Both Luy and Sula have
not witnessed respondent actually receiving money from Napoles in exchange for her acquittal in the Kevlar case.
Napoles had confided to Luy her alleged bribe to respondent.

Notwithstanding the absence of direct evidence of any corrupt act by the respondent, we find credible evidence of
his association with Napoles after the promulgation of the decision in the Kevlar case. The totality of the
circumstances of such association strongly indicates respondent's corrupt inclinations that only heightened the
704
public's perception of anomaly in the decision-making process. By his act of going to respondent at her office on two
occasions, respondent exposed himself to the suspicion that he was partial to Napoles. That respondent was not
the ponente of the decision which was rendered by a collegial body did not forestall such suspicion of partiality, as
evident from the public disgust generated by the publication of a photograph of respondent together with Napoles
and Senator Jinggoy Estrada. Indeed, the context of the declarations under oath by Luy and Sula before the Senate
Blue Ribbon Committee, taking place at the height of the "Pork Barrel" controversy, made all the difference as
respondent himself acknowledged. Thus, even in the present administrative proceeding, their declarations are taken
in the light of the public revelations of what they know of that government corruption controversy, and how it has
tainted the image of the Judiciary.

The hearsay testimonies of Luy and Sula generated intense public interest because of their close relationship to
Napoles and their crucial participation in her transactions with government officials, dubbed by media as the "Pork
Barrel Queen." But as aptly observed by Justice SandovalGutierrez, the "challenging and difficult setting" of the
Senate hearings where they first testified, made it highly improbable that these whistle blowers would testify against
the respondent. During the investigation of this case, Justice Sandoval-Gutierrez described their manner of testifying
as "candid, straightforward and categorical." She likewise found their testimonies as "instantaneous, clear,
unequivocal, and carried with it the ring of truth," and more important, these are consistent with their previous
testimonies before the Senate; they never wavered or faltered even during cross-examination.

It is a settled rule that the findings of investigating magistrates are generally given great weight by the Court by
reason of their unmatched opportunity to see the deportment of the witnesses as they testified.  The rule which
17

concedes due respect, and even finality, to the assessment of credibility of witnesses by trial judges in civil and
criminal cases applies a fortiori to administrative cases.  In particular, we concur with Justice Sandoval-Gutierrez's
18

assessment on the credibility of Luy and Sula, and disagree with respondent's claim that these witnesses are simply
telling lies about his association with Napoles.

Contrary to respondent's submission, Sula in her testimony said that whenever Napoles talked about her contacts in
the Ombudsman and Sandiganbayan, they knew that insofar as the Sandiganbayan was concerned, it was
understood that she was referring to respondent even as she may have initially contacted some persons to get to
respondent, and also because they have seen him meeting with Napoles at her office. It appears that Napoles made
statements regarding the Kevlar case not just to Luy but also to the other employees of JLN Corporation. The
following are excerpts from Sula's testimony on direct examination, where she even hinted at their expected
outcome of the Kevlar case:

Atty. Benipayo

Q So, Ms. Sula, what were the statements being made by Ms. Janet Lim Napoles regarding her involvement in the
Kevlar case, or how she was trying to address the problem with the Kevlar case pending before the
Sandiganbayan?

Witness Sula

A Ang alam ko po kasi marami po siyang kinaka-usap na mga lawyers na binabayaran niya para tulungan siya kay
Gregory Ong sa Kevlar case. Tapos, sa kalaunan po, nasabi na niya sa amin na mcron na po siyang nakilala sa
Sandiganbayan na nagngangalang Justice Gregory Ong. Tapos, sabi niya, siya po ang tutulong sa amin para ma-
clear kami. Pero hindi niya sinabi na meron din pong ma ... sasagot sa kaso. Hindi po lahat, kasi po dalawa sa mga
empleyado niya, bale apat, dalawang empleyado niya, isang kapatid niya at sister-in-law ang mag-aano sa kaso
pati yung mother niya na namatay na ay sasagot din sa kaso. Siya Jang at saka yung asawa niya ang bale makli-
clear sa kaso.

Q So, she told you that two (2) employees, one (1) sister-in-law and one brother will answer for the case and Janet
Lim Napoles and her husband will be acquitted, is that right?

A Yun po ang aking pagkaka-alam kasi po, nag-petition po kasi sila eh, yung mga officemates ko. Nagkaroon ng
probation. Noong lumabas ang hatol, meron silang probation period.

xxxx

Q Which you told me that somebody will help in the Kevlar case?

A Opo. Sinabi po niya sa amin everytime po pag nagkukwento siya, sinasabi niya na si Justice Ong ang tutulong sa
kanya para ma-clear po yung Kevlar case niya.

x x x x  (Emphasis supplied.)
19

705
As it turned out, Napoles' husband was dropped from the two informations while her mother, brother and sister-in-
law were convicted in the lesser charge of falsification of public documents. Apparently, after her acquittal, Napoles
helped those convicted secure a probation. But as stated in our earlier resolution, the Court will no longer delve into
the merits of the Kevlar case as the investigation will focus on respondent's administrative liability.

Respondent's act of voluntarily meeting with Napoles at her office on two occasions was grossly improper and
violated Section 1, Canon 4 (Propriety) of the New Code of Judicial Conduct, which took effect on June 1, 2004.

SECTION 1. Judges shall avoid impropriety and the appearance of impropriety in all of their activities.

A judge must not only be impartial but must also appear to be impartial and that fraternizing with litigants tarnishes
this appearance.  Public confidence in the Judiciary is eroded by irresponsible or improper conduct of judges. A
20

judge must avoid all impropriety and the appearance thereof. Being the subject of constant public scrutiny, a judge
should freely and willingly accept restrictions on conduct that might be viewed as burdensome by the ordinary
citizen.
21

In Caneda v. Alaan,  we held that:

22

Judges are required not only to be impartial but also to appear to be so, for appearance is an essential
manifestation of reality. Canon 2 of the Code of Judicial Conduct enjoins judges to avoid not just impropriety in their
conduct but even the mere appearance of impropriety.

They must conduct themselves in such a manner that they give no ground for reproach. [Respondent's] acts have
been less than circumspect. He should have kept himself free from any appearance of impropriety and endeavored
to distance himself from any act liable to create an impression of indecorum.

xxxx

Indeed, respondent must always bear in mind that:

"A judicial office traces a line around his official as well as personal conduct, a price one has to pay for o ccupying
an exalted position in the judiciary, beyond which he may not freely venture. Canon 2 of the Code of Judicial
Conduct enjoins a judge to avoid not just impropriety in the performance of judicial duties but in all his activities
whether in his public or private life. He must conduct himself in a manner that gives no ground for reproach."
(Emphasis supplied.)

On this score, our previous pronouncements have enjoined judges to avoid association or socializing with persons
who have pending cases before their court. Respondent cites the case of Abundo v. Mania, Jr.  where this Court did
23

not find fault with a judge who was charged with fraternizing with his lawyer-friend. In that case, we said:

Respondent admits that he and Atty. Pajarillo became close friends in 1989 when they were both RTC judges
stationed in Naga City. Since they both resided in Camarines Norte, Atty. Pajarillo hitched rides with respondent to
Daet, Camarines Norte in the latter's car.

In his Comment, respondent claims that he leaves the door to his chambers open to lawyers or parties with official
court business, whose requests and complaints regarding their cases he listens to in full view of his staff, who are
witnesses to his transparency and honesty in conducting such dialogues. He also admits that Atty. Pajarillo has
been to his house on several occasions, but only to make emergency long-distance calls to his children in Metro
Manila. He, however, denies that he and Atty. Pajarillo were frequently seen eating and drinking together in public
places.

We agree with Justice Buzon's finding that the evidence against respondent on this point was insufficient, viz.:

"On the other hand, the admission of respondent that he attended two public functions where Atty. Pajarillo was also
present; that Atty. Pajarillo had been in his house twice or thrice and used his telephone; and that he receives
lawyers, including Atty. Pajarillo, and litigants inside his chambers, the door to which is always open so that [the]
staff could see that no under the table transactions are taking place, is not proof that he is fraternizing with Atty.
Pajarillo. A judge need not ignore a former colleague and friend whenever they meet each other or when the latter
makes requests which are not in any manner connected with cases pending in his court. Thus, Canon 30 of the
Canons of Judicial Ethics provides:

'30. Social relations

It is not necessary to the proper performance of judicial duty that judges should live in retirement or seclusion; it is
desirable that, so far as the reasonable attention to the completion of their work will permit, they continue to mingle
in social intercourse, and that they should not discontinue their interests in or appearance at meetings of members
706
at the bar. A judge should, however, in pending or prospective litigation before him be scrupulously careful to avoid
such action as may reasonably tend to waken the suspicion that his social or business relations or friendships
constitute an element in determining his judicial course.'"

The factual setting in Abundo v. Mania, Jr. is not similar to the present case because Napoles was not a colleague
or lawyer-friend but an accused in a former case before the Sandiganbayan's Fourth Division chaired by respondent
and which acquitted her from malversation charge. What respondent perhaps want to underscore is the caveat for
judges, in pending or prospective litigation before them, to avoid such action as may raise suspicion on their
partiality in resolving or deciding the case. Thus, he emphasized in his Memorandum that he "never knew Napoles
on a personal level while she was still on trial as an accused in Kevlar helmet case." Respondent even quoted
Sula's testimony expressing her opinion that she finds nothing wrong with respondent going to Napoles' office
because at that time, the Kevlar case had already been terminated.

We do not share the view that the rule on propriety was intended to cover only pending and prospective litigations.

Judges must, at all times, be beyond reproach and should avoid even the mere suggestion of partiality and
impropriety.  Canon 4 of the New Code of Judicial Conduct states that "[p ]ropriety and the appearance of propriety
24

are essential to the performance of all the activities of a judge." Section 2 further provides:

SEC. 2. As a subject of constant public scrutiny, judges must accept personal restrictions that might be viewed as
burdensome by the ordinary citizen and should do so freely and willingly. In particular, judges shall conduct
themselves in a way that is consistent with the dignity of the judicial office.

As we held in Sibayan-Joaquin v. Javellana 25

... Judges, indeed, should be extra prudent in associating with litigants and counsel appearing before them so as to
avoid even a mere perception of possible bias or partiality. It is not expected, of course, that judges should live in
retirement or seclusion from any social intercourse. Indeed, it may be desirable, for instance, that they continue,
time and work commitments permitting, to relate to members of the bar in worthwhile endeavors and in such fields
of interest, in general, as are in keeping with the noble aims and objectives of the legal profession. In pending or
prospective litigations before them, however, judges should be scrupulously careful to avoid anything that may tend
to awaken the suspicion that their personal, social or sundry relations could influence their objectivity, for not only
must judges possess proficiency in law but that also they must act and behave in such manner that would assure,
with great comfort, litigants and their counsel of the judges' competence, integrity and independence.

In this light, it does not matter that the case is no longer pending when improper acts were committed by the judge.
Because magistrates are under constant public scrutiny, the termination of a case will not deter public criticisms for
acts which may cast suspicion on its disposition or resolution. As what transpired in this case, respondent's
association with Napoles has unfortunately dragged the Judiciary into the "Pork Barrel" controversy which initially
involved only legislative and executive officials. Worse, Napoles' much-flaunted "contact" in the judiciary is no less
than a Justice of the Sandiganbayan, our special court tasked with hearing graft cases. We cannot, by any stretch of
indulgence and compassion, consider respondent's transgression as a simple misconduct.

During his testimony, respondent acknowledged his violation of judicial ethics and its serious repercussions, as
shown by his answers to the questions from the Investigation Justice, viz: Justice Gutierrez

What I am thinking Justice, as a Justice holding a very high position, could it not be possible for you to just go to the
Church of Quiapo and ask the priest there to help you or assist you, no longer through Ms. Napoles?

Justice Ong

You cannot do that, your honor. Ever since when I was a small boy, I never got near the image of the Mahal na
Poon. Nobody can do that, your honor.

Justice Gutierrez

No, no. What I mean is that you can just go to the priest in Quiapo and make the proper request. Why did you not do
that?

Justice Ong

I don't know, your honor.

Justice Gutierrez

707
Because you have been suffering from that ailment, mass or whatever, and that you are a devotee of the Black
Nazarene. You could have gone to the Office of the priest there and had that request for you to wear that robe of the
Black Nazarene?

Justice Ong

Hindi ko po alam na may ganyan, your honor. I was only told by Napoles during that conversation. Had I known that,
siguro po pwede ko pong gawin. Had I known that there is such a robe, maybe I will do that.

Justice Gutierrez

Okay. It happened already. But just to thank Ms. Napoles, I think Justice you should have been very, very careful
about your actuations. You should not have been seen in public, you know, with a woman like her who was an
accused before. You could have thanked her simply by calling her. You could have relayed to her your true feelings
that you are so grateful because of her assistance. Were it not for her, you could not have worn that Holy Robe of
the Black Nazarene. You could have simply called her instead of going to her office; instead of, you know, going to
the Church of Santuario de San Antonio in Forbes Park. And you should have been more careful not to be seen by
the public with her considering that she was a former accused in that case.

Justice Ong

I will heed to that advice, your honor.

Justice Gutierrez

Q And you admitted a while ago, during the interview conducted by Mr. Aries Rufo that. "That is a lesson for me;
that I should not have associated, you know, with a former respondent or accused in a case before me." You
admitted that? You said you learned you lesson. Was that the first time you learned that kind of lesson, Mr. Justice?
Or even before you took your oath as a member of the Judiciary, you already knew that lesson, isn't it or was that
the first time? That is why you associated yourself with Senator Jinggoy Estrada who was accused before of
plunder?

Justice Ong

Your honor, talking about ....

Justice Gutierrez

Q Do you admit you committed a lapse along that line?

Justice Ong

A Yes, your honor. You have to forgive me for that.  (Emphasis supplied.)
26

In her report, Justice Sandoval-Gutierrez noted that respondent's purported reason for visiting Napoles in her office
remains uncorroborated, as Napoles and the Quiapo parish priest were not presented as witnesses despite her
suggestion to respondent and his counsel. On the other hand, Luy's testimony on what transpired in one of
respondent's meeting with Napoles at her office appears to be the more plausible and truthful version. Expectedly,
respondent denied having issued a BDO check for ₱25 .5 million as claimed by Luy, and asserted he (respondent)
did not deposit any money to AFPSLAI. Unfortunately, Luy is unable to present documentary evidence saying that,
as previously testified by him before the Senate, most of the documents in their office were shredded upon orders of
Napoles when the "Pork Barrel Scam" controversy came out.

Justice Sandoval-Gutierrez stated that the eleven checks of ₱282,000.00 supposed advance interest for
respondent's check deposit to AFPSLAI were given to respondent as consideration for the favorable ruling in the
Kevlar case.  Such finding is consistent with Luy's testimony that Napoles spent a staggering PlOO million just to
1âwphi1

"fix" the said case. Under the circumstances, it is difficult to believe that respondent went to Napoles office the
second time just to have coffee. Respondent's act of again visiting Napoles at her office, after he had supposedly
merely thanked her during the first visit, tends to support Luy's claim that respondent had a financial deal with
Napoles regarding advance interest for AFPSLAI deposit. The question inevitably arises as to why would Napoles
extend such an accommodation to respondent if not as consideration for her acquittal in the Kevlar case?
Respondent's controversial photograph alone had raised adverse public opinion, with the media speculating on pay-
offs taking place in the courts.

Regrettably, the conduct of respondent gave cause for the public in general to doubt the honesty and fairness of his
participation in the Kevlar case and the integrity of our courts of justice. Before this Court, even prior to the
708
commencement of administrative investigation, respondent was less than candid. In his letter to the Chief Justice
where he vehemently denied having attended parties or social events hosted by Napoles, he failed to mention that
he had in fact visited Napoles at her office. Far from being a plain omission, we find that respondent deliberately did
not disclose his social calls to Napoles. It was only when Luy and Sula testified before the Senate and named him
as the "contact" of Napoles in the Sandiganbayan, that respondent mentioned of only one instance he visited
Napoles ("This is the single occasion that Sula was talking about in her supplemental affidavit x x x." ).
27

The Court finds that respondent, in not being truthful on crucial matters even before the administrative complaint
was filed against him motu proprio, is guilty of Dishonesty, a violation of Canon 3 (Integrity) of the New Code of
Judicial Conduct.

Dishonesty is a "disposition to lie, cheat, deceive, or defraud; untrustworthiness; lack of integrity; lack of honesty,
probity or integrity in principle; lack of fairness and straightforwardness; disposition to defraud, deceive or
betray." Dishonesty, being a grave offense, carries the extreme penalty of dismissal from the service with forfeiture
28

of retirement benefits except accrued leave credits, and with perpetual disqualification from reemployment in
government service. Indeed, dishonesty is a malevolent act that has no place in the Judiciary. 29

Under Section 11(A), Rule 140 of the Rules of Court, a respondent found guilty of a serious charge may be
penalized as follows:

SEC. 11. Sanctions. - A. If the respondent is guilty of a serious charge, any of the following sanctions may be
imposed:

1. Dismissal from the service, forfeiture of all or part of the benefits as the Court may determine, and
disqualification from reinstatement or appointment to any public office, including governmentowned or
-controlled corporations. Provided, however, that the forfeiture of benefits shall in no case include accrued
leave credits;

2. Suspension from office without salary and other benefits for more than three (3) but not exceeding six (6)
months; or

3. A fine of more than ₱20,000.00 but not exceeding ₱40,000.00. Considering that respondent is not a first
time offender and the charges of gross misconduct and dishonesty are both grave offenses showing his
unfitness to remain as a magistrate of the special graft court, we deem it proper to impose the supreme
penalty of dismissal.

WHEREFORE, the Court finds respondent Sandiganbayan Associate Justice Gregory S. Ong GUILTY of GROSS
MISCONDUCT, DISHONESTY and IMPROPRIETY, all in violations of the New Code of Judicial Conduct for the
Philippine Judiciary, for which he is hereby DISMISSED from the service, with forfeiture of all retirement benefits,
except accrued leave credits, if any, and with prejudice to reemployment in any branch, agency or instrumentality of
the government including government-owned or -controlled corporations.

This Decision is IMMEDIATELY EXECUTORY.

SO ORDERED.

CONCURRING OPINION

LEONEN, J.:

I join the ponencia and the concurring opinions of Justices Arturo Brion and Francis Jardeleza in this important case
that defines our collective commitment to strictly enforce our own ca.nons of judicial ethics. I add the following views
to those they have already mentioned.

A full understanding of this case requires that we consider the facts in context.

Janet "Jenny" Lim Napoles is one of the accused in the Sandiganbayan case, People v. Lt. Gen. Edgardo Viray
Espinosa.  The . . accused were charged . with malversation of public funds, through falsification of public
1

documents, and violation of Section 3( e) of Republic Act No. 3019.

The case involved the purchase by the Philippine Marine Corps of 500 US-made Kevlar helmets worth
₱3,864,044.99 (hence, this case· is referred to as the Kevlar case). Several vouchers and documents were falsified
to certify their delivery by dealers who won t}:ie public biddings. It was alleged that the dealers were merely the
dummies of Napoles and that the helmets were not delivered. It was also alleged that when the helmets were
subsequently delivered, they turned out to be poorly made Kevlar helmets, made elsewhere and not from the United
States as specified in the bid documents.
709
Benhur Luy, Napoles' cousin and personal assistant, testified at the Senate Blue Ribbon Committee hearing held on
September 26, 2013, that he was aware that Napoles· "fixed" the Kevlar case in the Sandiganbayan. Another
witness and former employee of Napoles, Marina Sula, stated that Napoles knew Justice Gregory S. Ong, the
chairperson of the Sandiganbayan

Division that heard the Kevlar case. 2

During this court's investigation following up on statements made during the Senate Blue Ribbon Committee
hearing, Benhur Luy further testified that he kept a ledger where he listed all the expenses of Napoles in relation to
the Kevlar case, which took ten ( 10) years to resolve. He found it strange that for a four-million-peso nialversation
case, Napoles was spending Pl 00 million. According to Luy, Napoles explained that she had to pay several
individuals in order to fix this case. Luy also stated that one of the beneficiaries to these pay-offs was Justice Ong,
although he did not know how much Justice Ong received. Before the decision on the Kevlar case was released,
Benhur Luy observed that Napoles was confident that she would be acquitted. 3

On October 28, 2010, the Fourth Division of the Sandiganbayan promulgated the decision in the Kevlar case. The
decision was penned by Associate Justice Jose R. Hernandez and concurred in by Associate Justices Gregory S.
Ong and Cristina J. Cornejo. As predicted, Napoles was acquitted from the charges against her.

In assessing the guilt of Napoles and her co-accused, the Sandiganbayan relied on the elements of .malversation
and falsification of public documents.

The elements of malversation under Article 217 of the Revised Penal Code are as follows: (1) that the offender is a
public officer; (2) that he had the custody or control of funds or prope1iy by reason of the duties of his office; (3) that
those funds or property were public funds or property for which he was accountable; and (4) that he appropriated,
took, misappropriated or consented or, through abandonment or· negligence, permitted another person to take
them. The Sandiganbayan identified Commander Eduardo Resurreccion Loyola as the accountable officer in the
Kevlar case.  Commander Loyola had control over the funds of the Philippine Marine Corps.
4

The Sandiganbayan also found tha.t the 500 helmets were not yet delivered to the Philippine Marine Corps even if
the inspection report stated otherwise. Without the delivery of the 500 Kevlar helmets, the Sandiganbayan
concluded that there was taking of government funds. 5

Despite these findings, the Sandiganbayan found that there was no sufficient evidence to show that Commander
Loyola malversed funds because the prosecution did not present evidence that shows Commander Loyola's
participation in the preparation of the procurement documents that supported the disbursement vouchers. What was
only proven was that Commander Loyola signed those disbursement vouchers and the fourteen (14) checks that
paid for the Kevlar helmets' acquisition. 6

The Sandiganbayan acquitted everyone for the charge of malversation due to the lack of guilt of the accountable
officer.
7

However, the Sandiganbayan ruled that the property inspection and acceptance report that certified the delivery of
the helmets was falsified. The Sandiganbayan found the members of the Inspection and Acceptance Committee
and the private bidders who conspired with the committee guilty for falsification of a public document.

Napoles was not included among those implicated for the falsification charge. The Sandiganbayan acquitted
Napoles on this basis. Thus, in that decision:

The same finding, however, cannot be attributed to accused Napoles. She was not one of the dealer-payees in the
transaction in question; on this score alone, her participation as a private individual becomes remote. Even if she
owns the bank account where the 14 checks were later deposited, this does not in itself translate to her conspiracy
in the crime charged in the information absent evidence of an overt act on her part.  (Emphasis supplied)
8

The Sandiganbayan also pointed out that the prosecution failed to prove that Napoles used the dealers as dummies
since there was "no sufficient evidence that [Napoles] maintains a controlling interest in these entities." 9

Napoles' co-defendants in the Kevlar case filed a motion for reconsideration on their conviction for the falsification
charge. In the resolution dated September 20, 2011, the same Sandiganbayan Division lowered the penalty of those
who were convicted.

From the records of this case, it appears that Justice Ong met Napoles on February 17, 2012. 10

Justice Ong claims that he did not know Napoles during the pendency of the Kevlar case. He also claims that he
was formally introduced to Napoles during a party hosted by Senator Jinggoy Estrada sometime in 2012. 11

710
When Justice Ong met Napoles, she thanked him for her acquittal in the Kevlar case. Justice Ong told her that she
should not thank him, but, rather, she should thank her evidence. 12

In the course of this meeting, Justice Ong discovered that Napoles engaged in philanthropic work and worked with
different" churches.  Napoles offered to arrange a meeting between Justice Ong and the parish priest of Quiapo
13

Church, so Justice Ong could have an opportunity to wear the robe of the Black Nazarene. 14

Justice Ong emphasized the importance of the opportunity given to him by Napoles.  He was a devotee of the Black
15

Nazarene and was suffering from a terminal illness (prostate cancer). He believed that wearing the robe could
catalyze his healing. Justice Ong exchanged cellphone numbers with Napoles in order to coordinate his meeting
with the parish priest of Quiapo Church. 16

One Sunday, Napoles' driver collected Justice Ong from the adoration chapel of Santuario· de San Antonio Parish
in Makati. The driver brought him to a private residence. He attended a private mass followed by a lunch hosted by
Napoles. In that lunch, he met Monsignor Ramirez of the Quiapo Church. 17

Due to the intercession of Napoles, Justice Ong was able to wear the Black Nazarene's robe. 18

Justice Ong testified further that he went to Napoles' office at the Discovery Suites Center, 25 ADB A venue,
Ortigas, Pasig City, to thank Napoles for giving him the opportunity to wear the Black Nazarene's robe. 19

After Justice Ong's first visit, Napoles continued calling him and inviting him, and he felt that he would be a "walang
kwentang tao" if he turned her down.  He went again for a second time to Napoles' office for "chit-chat and small
20

talk."
21

Based on Benhur Luy's testimony, during the first time that Justice Ong visited Napoles' office, Napoles helped
Justice Ong invest in the Armed Forces and Police Savings & Loan Association, Inc. (AFPSLAI). Napoles earns
13% per annum in interest in her AFPSLAI placements. 22

In that visit, Justice Ong brought a check for ₱25.5 million to deposit to the AFPSLAI. Napoles told Luy that the
check would be deposited in her Metro bank account. She further instructed Luy to prepare eleven ( 11) checks to
advance the interest earnings of Justice Ong. Each check was for approximately ₱282,000.00, for a total of
₱3,102,000.00. 23

After Luy had prepared the eleven (11) checks, he asked Napoles if the payee should be in the name of Justice
Ong. Napoles told Luy that she would ask Justice Ong who was in the room next to where Luy had prepared the
checks. When Napoles returned, she told Luy that the checks should be paid to cash. Luy followed Napoles'
instructions. Luy handed the checks to Napoles who went to the next room presumably to hand the checks to
Justice Ong. 24

Sometime in July 2013, news broke out that Napoles mastenninded a multibillion peso scam involving the Priority
Development Assistance Fund or PDAF.  This prompted media attention to shift to Napoles, her operations, her
25

lifestyle, and her relationships with powerful individuals.

On August 13, 2013, Aries Rufo's article, entitled Exclusive: Napoles parties with antl-graft court justice, was
published in the news website, Rappler.  The article featured a photograph of Justice Ong with Senator Jinggoy
26

Estrada and Janet Lim Napoles during a social function. The article published statements made by Justice Ong
when the reporter confronted him with the photo and knowledge of Napoles' acquittal in the Kevlar case. Excerpts
from the article state:

I do not know her. She did not appear in court. I think she had a waiver of appearance in court," he replied when
reminded that Napoles and her brother, Reynald. Lim aka Reynaldo Francisco, were both respondents in the Kelvar
[sic] helmet case.

....

Asked where the photo was taken, Ong vaguely remembers the occasion but said it could have been one of the
parties frequently hosted by Estrada. "Jinggoy is a friend. I am closer to him than with the father," Ong said, referring
to former President Joseph Estrada. The former president appointed Ong to the Sandiganbayan in 1998.

....

In an interview Wednesday, August 28, Ong sought to downplay the first impression that he was close to or even a
friend of Napoles. He explained, "I was beside Jinggoy. Jinggoy was the one in the middle. If she was beside me,
that would have been a different story."

711
He said he "would not be stupid enough" to be posing with Napoles had he known that she was the respondent in
the case previously handled by his division. The ruling, where a number of Marine officials were found guilty, was
penned by Justice Jose Hernandez. Ong and Justice Maria Cristina Cornejo concurred.

Told abqut the propriety of members of the judiciary being seen in social events that could compromise their
integrity, Ong said: "I should have learned my lesson."

In response to the Rappler article, Justice Ong wrote a letter dated September 26, 2013, explaining to this court that
he did not know Napoles during the pendency of the Kevlar case.

On September 26, 2013, the Senate Blue Ribbon Committee held an investigation in aid of legislation in relation to
the Priority Development Assistance Fund (PDAF) scandal. In that hearing, Luy and Sula were presented. Both
witnesses mentioned ·Justice Ong's connection with Napoles.

The statements made during the Senate Blue Ribbon Committee hearing prompted this court to investigate the
matter surrounding Justice ) Ong's relationship with Napoles. We referred the case to former Associate Justice
Angelina Sandoval-Gutierrez to conduct an investigation.

In the report dated May 15, 2014, Justice Sandoval-Gutierrez found Justice Ong guilty of gross misconduct,
dishonesty, and impropriety. She recommended the penalty of dismissal with forfeiture of all retirement benefits,
excluding accrued leave credits, and with prejudice to reemployment to any government agency, including
government-owned or controlled corporations. 27

The issues in this case are:

(a) Whether Justice Ong committed improprieties amounting to grave misconduct in the course of his
interactions with Janet Lim Napofes;

(b) Whether Justice Ong committed dishonesty; and

(c) Whether dismissal is the appropriate penalty for Justice Ong's actions.

I
Improprieties

Canon 4 of the Code of Judicial Conduct provides for the rules relating to the proprieties required of judges and
justices.

The canon states that "[p ]ropriety and the appearance of propriety are essential to the performance of all the
activities of a judge." The rules in the canon .regulate the manner how judges should conduct themselves and how
they should relate to lawyers and litigants. It extensively provides guidelines on judges' receipt of gifts.

Justice Ong improperly received gifts. from Napoles. Napoles facilitated his access to religious garments and
allowed him to either illicitly invest in the AFPSLAI or to receive interest on his alleged investments prior to such
interest being earned.

Public officers are prohibited to receive gifts unless it is a) unsolicited; b) of a token value; and c) customary to an
occasion. In addition to these requirements, judges and justices should ensure that they do not receive any gift
which may reasonably be "perceived as intended to influence the judge in the performance of judicial duties or
otherwise give rise to an appearance of partiality." 28

There was no occasion for Justice Ong to receive a gift from Napoles. His having been one of the justices that
acquitted her from very serious charges in the Sandiganbayan raises a reasonable belief · that such
accommodation was the result of Napoles' influence during his performance of his judicial duties. Justice Ong
himself testified that the accommodations started when he met with Napoles. According to him, Napoles thanked
him while at the same time offered him assistance regarding access to religious garments.

Furthermore, Luy testified that a) he knew that at least ₱100 million was being spent by Napoles to ensure her
acquittal, and (b) he personally prepared checks that were to be handed over to Justice Ong.

Finally, the amount of the checks prepared by Luy for Justice Ong was definitely not a token amount.

Laws and rules regulating gift-giving to public officers and judges

712
I disagree with the dissenting opinions that there has to be proof that Justice Ong committed an act in consideration
of these gifts. The mere receipt is in itself illegal and, thus, grave misconduct was apparent on his part.

Several laws regulate a public officer's receipt of gifts:

The Revised Penal Code in Articles 210, 211, 211-A, and 212 provide:

Art. 210. Direct Bribery. - Any public officer who shall agree to perform an act constituting a crime, in connection with
the performance of his official duties, in consideration of any offer, promise, gift or present received by such officer,
personally or through the mediation of another, shall suffer the penalty of prision mayor in its medium and maximum
periods and a fine of not less than three times the value of the .gift, in addition to the penalty corresponding to the
crime agreed upon, if the same shall have been committed.

If the gift was accepted by the officer. in consideration of the execution of an act which does not constitute a crime,
and the officer executed said act, he shall suffer the same penalty provided in the preceding paragraph; and if said
act shall not have been accomplished, the officer shall suffer the penalties of prision correccional in its medium
period and a fine of not less than twice the value of such gift.

If the object for which the gift was received or promised was to make the public officer refrain from doing something
which it was his official duty to do, he shall suffer the penalties of prision correccional in its maximum period to
prision mayor in its minimum period and a fine of not less than three times the v.alue of such gift.

In addition to the penalties provided in the preceding paragraphs, the culprit shall suffer the penalty of special
temporary disqualification.

The provisions contained in the preceding paragraphs shall be made applicable to assessors, arbitrators, appraisal
and claim commissioners, experts or any other persons performing public duties.

Art. 211. Indirect bribery. - The penalties of prision correccional in its medium and maximum periods, suspension
and public censure shall be imposed upon any public officer who shall accept gifts offered to him by reason of his
office.

Art. 211"-A. Qualified Bribery. - If any public officer is entrusted with law enforcement and he refrains from arresting
or prosecuting an offender who has comni.itted a crime punishable by reclusion perpetua and/or death in
consideration of any offer, promise, gift or present, he shall suffer the penalty for the offense which was not
prosecuted.

If it is the public officer who asks or demands such gift or present, he shall suffer the penalty of death.

Art. 212. Corruption of' Public Officials. – The same penalties imposed upon the officer corrupted, except those of
disqualification and suspension, shall be imposed upon any person who shall have made the offers or promises or
given the gifts or presents as described in the preceding articles. (Emphasis supplied)

Direct bribery requires proof that the public officer agrees to commit or refrain to do an act "in consideration of any
offer, promise, gift or present" which he· receives directly or indirectly. Indirect bribery is committed when the public
officer accepts a gift "offered to him by reason of his office."

Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) added to the acts proscribed in relation to gift-giving.
Thus:

Section 3. Corrupt practices of public officers.— In addition to acts or omissions of public officers already penalized
by existing law, the following shall constitute corrupt practices of any public officer and are hereby declared to be
unlawful:

....

(b) Directly or indirectly requesting or receiving any gift, present, share, percentage, or benefit, for himself or
for any other person, in connection with any contract or transaction between the Government and any other
party, wherein the public officer in his official capacity has to intervene under the law.

(c) Directly or indirectly requesting or receiving any gift, present or other pecuniary or material benefit, for
himself or for another, from a11y person for whom the public officer, in any mam1er or capacity, has
secured or obtained, or will secure or obtain, any Government permit or license, in consideration for the help
given or to be given, without prejudice to Section thirteen of this Act. (d) Accepting· or having any member of
his family accept employment in a private enterprise which has pending official business with him during the
tendency thereof or within one year after its termination.
713
The Anti-Graft and Corrupt Practices Act added the – prohibition against "directly or indirectly requesting" gifts,
presents, shares, percentages, and other benefits in connection with the work of a public officer. The scope of work
that will be done by the public officer for the illicit consideration includes "contracts or transactions," granting of
"permits and licenses," or any other governmental act where "the public officer in his official capacity has to
intervene under the law."

Republic Act No. 3019 added soliciting for others, including members of the family of the public officer. Republic Act
No. 6713 or the Code of Conduct and Ethic.al Standards for Public Officials and Employees further refined the
proscriptions through the following provisions:

Section 3. Definition of Terms. - ...

(c) "Gift" refers to a thing or a right disposed of gratuitously, or any act or liberality, in favor of another who
accept it, and shall include a simulated sale or an ostensibly onerous disposition thereof. It shall not include
an unsolicited gift of nominal or insignificant value not given in anticipation of, or in exchange for, a favor
from a public official or employee.

(d) "Receiving any gift" includes the act of accepting, directly or indirectly, a gift from a person other than a
member of his family or relative as defined in this Act, even on the occasion of a family celebratfon or
national festivity like Christmas, if the value of the gift is neither nominal nor insignificant, or the gift is given
in anticipation of, or in exchange for, a favor.

....

Section. ·7. Prohibited Acts and Transactions. - In addition to acts and omissions of public officials and employees
now prescribed in the Constitution and existing laws, the following shall constitute prohibited acts· and transactions
of any public official and employee and are hereby declared to be unlawful:

....

(d) Solicitation or acceptance of gifts. - Public officials and employees shall not solicit or accept, directly or
indirectly, any gift, gratuity, favor, entertainment, loan or anything of monetary value from any person in tlze
course of their official duties or in connection with any operation being regulated by, or any transaction which
may be affected by the functions of their office. (Emphasis supplied)

Republic Act No. 6713 expanded the concept of a "gift" to include "a thing or a right disposed of gratuitously, or any
act or liberality, in favor of another who accepts it, and shall include a simulated sale or an ostensibly onerous
disposition thereof." Access to use of religious garments is an act of liberality. The receipt of interest before it is
earned is a "gift" not only because it is a "thing or a right disposed of gratuitously" but also because it is likewise an
act of liberality.

Republic Act No. 6713 expressly excluded an "unsolicited gift of nominal or insignificant value not given in
anticipation of, or in exchange for, a favor from a public official or employee." Finally, Presidential Decree No. 46,
which is still in effect, provides:

WHEREAS, under existing laws and the Civil Service Rules, it is prohibited to receive, directly or indirectly, any gift,
present or any other form of benefit in the course of official duties; WHEREAS, it is believed necessary to put more
teeth to existing laws and regulations to wipe out all conceivable forms of graft and corruption in the public service,
the members of which should not only be honest but above suspicion and reproach; and

WHEREAS, the stoppage of the practice of gift-giving to government men is a concrete step in the administration
program of reforms for the development of new moral values in the social structure of the country, one of the main
objectives of the New Society;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, ... do hereby make it punishable for
any public official or employee, whether of the national or local governments, to receive, directly or indirectly, and for
private persons to give, or offer to give, any gift, present or other valuable thing on any occasion, including
Christmas, when such gift, present or other valuable thing is given by reason of his official position, regardless of
whether or not the same is for past favors or the giver hopes or expects to receive a Javor or better treatment in the
future from the public official or employee concerned in the discharge of his official functions. Included within the
prohibition is the throwing of parties or entertainments in honor of the official or employee or of his immediate
relatives.

For violation of this Decree the penalty of imprisonment for not less than one (1) year nor more than five (5) years
and perpetual disqualification from public office shall be imposed. The official or employee concerned shall likewise

714
be subject to administrative disciplinary action and, if found guilty, shall be meted out the penalty of suspension or
removal, depending on the seriousness of the offense. (Emphasis supplied)

The law proscribes the receipt of gifts before or after the official act or omission. It punishes the receipt of gifts
"regardless of whether or not the same is for past favors or the giver hopes or expects to receive· a favor or better
treatment in the future from the public official or employee concerned in the discharge of his official functions." This
law also expressly proscribes "the throwing of parties or entertainments" by others "in honor of the official or
employee or of his immediate relatives." Even repairing the automobile of a public officer for free is recognized as
another form of gift.
29

In addition to these statutory proscriptions, Canon 4 of the Code of Judicial Conduct clarifies the rules with respect
to judges and justices receiving gifts. Thus:

SECTION 1. Judges shall avoid impropriety and the appearance of impropriety in all of their activities.

SEC. 2. As a subject of constant public scrutiny, judges must accept personal restrictions that might be viewed as
burdensome by the ordinary citizen and should do so freely and willingly. In particular, judges shall conduct
themselves in a way that is consistent with the dignity of the judicial office.

....

SEC. 13. Judges and members of their families shall neither ask for, nor accept, any gift, bequest, loan or favor in
relation to anything done or to be done or omitted to be done by him or her in connection with the performance of
judicial duties.

SEC. 14. Judges shall not knowingly permit court staff or others subject to their influence, direction or authority, to
ask for, or accept, any gift, bequest, loan or favor in relation to anything done or to be done or omitted to be done in
connection with their duties or functions.

SEC. 15. Subject to law and to any legal requirements of public disclosure, judges may receive a token gift, award
or benefit as appropriate to the occasion on which it is made provided that such gift, award or benefit might not
reasonably be perceived as intended to influence the judge in the performance of judicial duties or otherwise give
rise to an appearance of partiality.

Judicial propriety requires more from judges and justices than with other public officers. Public confidence in rule of
law requires that all basis for doubt with respect to the independence and integrity of the judicial profession should
be avoided. Canon 3, Section 2 of the Code of Judicial Conduct requires judges to "ensure that his or her conduct,
both in and out of court, maintains and enhances the confidence of the public, the legal profession and litigants in
the impartiality of the judge and of the judiciary." Judges and justices should "ensure that not only is their conduct
above reproach, but that it is perceived to be so in the view of a reasonable observer."  As this court previously
30

required:

. . . .a judge's official conduct and his behavior in the performance of judicial duties should be free from the
appearance of impropriety and must be beyond reproach. One who occupies an exalted position in the
administration of justice must pay a high price for the honor bestowed upon him, for his private as well as his official
conduct must at all times be free from the appearance of impropriety. Because appearance. is as important as
reality in the performance of judicial functions, like Caesar's wife, a judge must not only be pure but also beyond
suspicion. A judge has the duty to not only render a just and impartial decision, but also render it in such a manner
as to be free from any suspicion as to its fairness and impartiality, and also as to the judge's integrity.

It is obvious, therefore, that while ·judges should possess proficiency in law in order that they can competently
construe and enforce the law, it is more important that they should act and behave in such a manner that the parties
before them should have confidence in their impartiality. 31

In summary: Judges and justices cannot accept gifts, favors, and accommodations.

The only exception under existing law is that a judge or justice may only receive a gift if:

1) it is of nominal value or "a token gift, award or benefit";

2) the gift and its value are "appropriate for the occasion on which it is made"· and

3) the act of giving and accepting the gift, the gift itself, or the value of such gift "might not reasonably be
perceived as intended to influence the judge in the performance of judicial duties or otherwise give rise to an
appearance of partiality." 32

715
If any of these requirements are not present, the judge or justice commits a ·serious breach of both law and the
canons. Since it is a violation of law and it affects the public's perception of the fundamental values of integrity and
independence of the judiciary, it amounts to a grave misconduct punishable by dismissal from the service

We have penalized several judges who have asked favors from lawyers and litigants who appeared before them.
This court dismissed a judge who solicited "retirement money" and food for his court staff's Christmas party.  That
33

judge solicited from a litigant with a pending case in his court. This court also ·reprimanded a judge who solicited
and received court office equipment from a litigant.  We also warned and fined a judge for soliciting and receiving
34

contributions for a religious celebration and barangay fiesta.  While this court gave merit to the judge's defense that
35

she was merely "following-up" on the solicitation letter signed by the parish priest, this court stated that the judge
going to the prosecutor's office to receive the donations from lawyers "does not bode well for the image of the
judiciary."  In that case, we stated:
36

Respondent's act of proceeding to the Prosecutor's Office under the guise of soliciting for a religious cause betrays
not only her lack of maturity as a judge but also a lack of understanding of her vital role. as an impartial dispenser of
justice, held in high esteem and respect by the local community, which must be preserved at all times. It spawns the
impression that she was using her office to unduly influence or pressure Atty. Yruma, a private lawyer appearing
before her sala, and Prosecutor Diaz into donating money through her charismatic group for religious purposes.

....

Respondent's act discloses a deficiency in prudence and discretion that a member of the judiciary must exercise in
the performance of his official functions and of his activities as a private individual.
37

Justice Ong's receipt of a religious favor from Napoles is improper

It was improper for Justice Ong to receive a favor from Napoles. Napoles offered it to him on the same occasion she
thanked him for her acquittal. Justice Ong himself narrated:

Ms. Napoles approached me and introduced herself. She started the conversation talking to me partly in Chinese
because partly, I can speak Chinese language, and then, on that occasion, she was thanking me for her acquittal.
Your honor if you may allow me. Alam niyo naman may kayabangan ako. Sabi ko, you should not thank me. y OU
should thank their evidence. That is what I do in cases wherein the accused would thank me for their acquittal and I
tell them, do not thank the court for your acquittal. You. should thank your evidence. It is your evidence that sets you
free. In fact, I told her that if only there are enough evidence that would warrant her conviction, she would be
convicted.  (Emphasis supplied)
38

It was after this conversation when Napoles began talking about her work with churches and offered Justice Ong the
opportunity to wear the robe of the Black Nazarene. This gives us the impression that Justice Ong accepted the
favor in return for the acquittal.

The height of impropriety can be seen in the manner Napoles arranged for Justice Ong to meet Monsignor Ramirez,
the parish priest of Quiapo Church. The meeting occurred on a Sunday.  Sunday is sacred for Catholics, a day
39

when all priests are busy. Justice Ong had the luxury of being picked up by Napoles' driver. There was a private
mass officiated by Monsignor Ramirez and attended by several Chinese individuals.  During the lunch after the
40

mass, Napoles even made sure that Justice Ong was seated next to the monsignor.  This meeting in itself is
41

already a huge favor for Justice Ong.

Justice Ong felt that Napoles "was instrumental in successfully paving the way ... to be able to do something that
was very important to him."  It did not bother him that Napoles, who provided this "favor and accomonodation to
42

him, was a winning litigant in a previous case that his Sandiganbayan Division decided.

Justice Ong's excuse for using Napoles to arrange for the wearing of the robe is that he did not know that it could be
done until he met Napoles.

Justice Gutierrez

What I am thinking Justice, as a Justice holding a very high position, could it not be possible for you to .iust go to the
Church of Quiapo and ask the priest there to help you or assist you, no longer-through Ms. Napoles?

....

Because you have been suffering from that ailment, mass or whatever, and that you are a devotee of the Black
Nazarene. [Y]ou could have gone to the Office of the priest there and had that request for you to wear that robe of
the [Black] Nazarene?

716
Justice Ong

Hindi ko po alam na may ganyan, your honor, I was only told by Napoles during that conversation. Had I known that,
siguro po pwede ko pong gawin. Had I known that there is such a robe, maybe I will do that.  (Emphasis supplied)
43

Justice Ong's reasoning is flimsy to say the least. It is insulting to his colleagues in this court who are aware of the
possibilities of ac:cess to such religious garments. Justice Ong knew about the robe when Napoles told him about it.
He should not have accepted Napoles' offer to arrange the wearing of the robe. As Justice Sandoval-Gutierrez
suggested, he should have gone to the parish priest directly instead of risking the appearance of impropriety: Even
his god would have frowned at the use of religious symbols for an immoral end.

In Felongco v. Dictado,  a judge received free bus tickets from a litigant bus company. The judge explained that the
44

vice president of the bus company was his cousin and that in the civil case he was trying, the bus company
lost. However, this court still found him guilty of grave misconduct. Due to this and his other indiscretions, he was
45

dismissed from service.  A religious favor might not be as tangible as bus tickets, but if a judge was dismissed for
46

accepting bus tickets from a losing litigant, a Sandiganbayan justice who accepted a favor from a winning litigant
deserves a similar penalty.

By accepting the favor, Justice Ong created an impression of partiality, contrary to Canon 4, Section 15 of the Code
of Judicial Conduct. If he really wanted to wear the Black Nazarene robe after Napoles had told him that it was
possible, he would have pursued it himself, and not accept the offer of Napoles to do it for him. It does not appear
that there was no other way for him to touch what he considered as sacred garments except to work through a
person he acquitted. Justice Ong's continued fraternization with Napoles constitutes another-impropriety

It was improper for Justice Ong to visit Janet Lim Napoles on two separate occasions just to· thank her for the
religious favor he received from her.

It seems contrary to human experience that a Sandiganbayan justice will visit a mere acquaintance (not a close
friend) just to. thank the acquaintance for a favor. The second visit of Justice Ong makes it more suspicious that his
visits were not merely for "chit-chat and small talk." 47

Justice Ong admitted to continuously socializing with a former litigant and even going to the extent of visiting her in
her office. If they are not friends, as he alleged, and he was merely doing it to not seem as "walang kwentang
tao," then he essentially admitted to socializing with a former litigant.
48

To be beholden to the impressions of an acquaintance as a result of doing what is right rather·than to be concerned
about maintaining the public trust does not speak well of Justice Ong's character. The Code of Judicial Conduct is
not subservient to his interpretation of social customs.· Mas nagiging "walang kwenta " ang isang mahistrado kapag
nalalagay sa alanganin ang buong hudikatura dahil bumibisita siya sa isang akusado sa isang kasong kanyang
hinusgahan.

Besides, the courage required to be ·able to comply with the required integrity of judges and justices also means the
courage to face a public which may misunderstand his compliance with the rules. Rather than succumb to this
misunderstanding, Justice Ong should have behaved as a justice should and educated others who would not
understand why the rules are what they are.

Just like when receiving gifts, the Code of Judicial Conduct frowns upon judges fraternizing with litigants. It is
considered an impropriety. This court previously stated, "[a] judge is not only required to be impartial; he must
appear to be impartial. Fraternizing with litigants tarnishes this appearance." 49

The constant association with Napoles creates a perception of past bias and partiality. Judges in the past always
use the excuse that those litigants or counsels that they fraternized with lost in their cases. Even then, this court
proceeded to penalize these judges. 50

Fraternizing with litigants after the · finality of their cases is no different, especially if the judge is fraternizing with the
winning litigant. It appears from a reasonable observer that the winning litigant only won because of her
camaraderie with the judge. It tends to exhibit the partiality of a judge, which violates Canon 3 of the Code of
Judicial Conduct on impartiality. Section 2 of Canon 3 states that "[j]udges shall ensure that his or her conduct, both
in and out of court, maintains and enhances the confidence of the public, the legal profession and litigants in the
impartiality of the judge and of the judiciary."

Both Luy and Sula witnessed the visits of Justice Ong to Napoles. This affirmed Napoles' statement to them that her
connection in the Sandiganbayan was Justice Ong. Whether or not Justice Ong brokered th~ fixing of the Kevlar
case may not be relevant. The visits were not made by Napoles. Justice Ong himself went to the condominium unit
of Napoles who was a former accused. This, in itself, is an impropriety.

717
Justice Ong's receipt of the eleven (11) checks from Napoles is another impropriety

Financial accommodations are considered as "gifts" on the basis of law and the Code of Judicial Conduct.

The opportunity to invest in a financial instrument with low risks but high returns is a favor. Advancing interest
earnings not yet earned on the investment is another favor. Being able to invest in a fund without being qualified to
do so is yet another favor received by Justice Ong.

Benhur Luy testified that he prepared the checks to advance the interest earnings of Justice Ong in his AFPSLAI
deposit. The checks amounted to approximately ₱3 million.

There was substantial evidence to support the conclusion that Justice Ong received these checks from Napoles.
Substantial evidence is "such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion." 51

Luy attested that he saw Justice Ong visit Napoles. Napoles informed Luy that they would help Justice Ong invest in
AFPSLAI. Napoles entertained Justice Ong in a different unit of the building (Unit 2501) from where Luy was holding
office (Unit 2502). Napoles then went to Luy and instructed him to issue the checks for Justice Ong. Luy even
remembered asking Napoles if he should put Justice Ong's name as payee. Napoles had to confirm with Justice
Ong before instructing Luy to have the checks paid to cash.

Even if Luy was not at Unit 2501 when Napoles handed the checks to Justice. Ong, there could be no other
conclusion to be derived from the facts. It appears that Napoles gave those eleven (11) checks to Justice Ong in
advance of his interest earnings to his AFPSLAI deposit.

Justice Sandoval-Gutierrez characterized that Luy testified in a "candid, straightforward and categorical
manner." This narration was corroborated by Justice Ong's admission that he visited Napoles on two occasions.
52

These pieces of evidence, taken together, lead to no other conclusion but that Justice Ong received eleven (11)
checks from Napoles, a former litigant in his court.

Justice Ong argued that it was impossible for him to invest ₱25.5 million with the AFPSLAI. He argued that the
AFPSLAI rules only allow for a maximum deposit of ₱30,000.00 per quarter and a maximum deposit per member of
₱3 million.

This argument does not cast serious doubt on Luy's testimony because it is possible that Napoles and AFPSLAI
have a special and illicit arrangement. This provides an explanation why Napoles told Luy that she would deposit
Justice Ong's check in her personal account. In addition, Justice Ong's argument omitted the fact that those
limitations for the maximum deposit in AFPSLAI only refer to a capital contribution account. 53

The AFPSLAI also offers a deposit product referred to as a savings deposit account. The latter account type earns
at a lower interest rate per annum, but the product does not have deposit restrictions.

Currently, AFPSLAI membership is exclusive to current and retired and active ~niformed personnel of the Philippine
National Police, the Armed Forces of the Philippines, the Bureau of Jail Management and Penology, and the Bureau
of Fire Protection.  By allowing Napoles to invest on his behalf, Justice Ong indirectly violated the rules of the
54

AFPSLAI. This is another unacceptable impropriety that Justice Ong committed.

It is difficult to understand why Justice Ong would choose Napoles to broker his investments. Assuming that he had
₱25.5 million, legitimate investment bankers and financial managers will easily find products that are as competitive
as the AFPSLAI capital contribution account for that amount of money. Justice Ong could have invested that amount
of money in the stock market, bonds market, real estate, hedge funds, and mutual funds under reasonable tenns
and conditions.

Justice Ong should have avoided the impropriety of having a former litigant – one whom he. voted to acquit -
manage his money. Risking public condemnation and loss of public trust simply because he desired an interest rate
of 13% and getting the interest income in advance is inexcusable. Canon 4, Section 1 of the Code of Professional
Responsibility states that "judges must accept personal restrictions that might be viewed as burdensome by the
ordinary citizen .... " One of these personal .restrictions is choosing financial intermediaries. Judges and justices
should consciously avoid availing financial accommodations from their former litigants, even if it is not as apparent
as receiving ·money. Receiving financial accommodations show impropriety and casts doubts on judges'
impartiality.

In Guinto v. Flores,  this court said:

55

Respondent judge's conduct of "borrowing" money from litigants in his sala was highly improper and warrants
extreme sanction from this Court. His insistence that the money he got from Manalastas was merely a "loan" taxes

718
our credulity. In a recent case, we ruled that receiving money from. litigants unavoidably creates the impression that
litigants can facilitate the favorable resolution of cases pending before the courts.

A judge should impress upon the public that legal issues are resolved based solely on the facts and the laws
applicable. Being at the forefront of the judicial system, respondent judge should have avoided mpropriety and the
appearance of impropriety in his behavior so as not to corrode the people's respect for the law and judicial
institutions.
56

I disagree with the dissenting opinions that focus on the alleged lack of evidence connecting the issuance of the
checks to the Kevlar case. This is not relevant to concluding that Justice Ong committed an unlawful act violative of
the Code of Judicial Conduct.

In Verginesa-Suarez v. Dilag,  it was alleged by several anonymous complainants that Judge Renato Dilag was
57

accepting bribes to render favorable decisions in declaration of nullity of marriage cases. A judicial audit was
conducted, and it was discovered that a number of the declaration of nullity of marriage cases were decided with
irregularities.  The Investigatil'lg Justice found that the evidence on record was not enough to prove graft and
58

corruption. The allegations of pay-offs were merely hearsay. However, this court dismissed Judge Di lag from
service for violations of the Code of Judicial Conduct, specifically for violating the canons on impartiality and
impropriety. This court stated:

[W]hile not conclusively and clearly proving the charge of graft and corruption, the same casts a cloud of suspicion
upon the integrity, impartiality and propriety of which respondent Judge is expected to possess and manifest. These
requirements are concepts of the mind which can only be manifested through actuations of. a magistrate. Thus, as
explicitly worded in the New Code of Judicial Conduct, a judge must not merely possess these requirements but he
must be also be seen and perceived to be .such. The judiciary is the bastion of justice, fairness and equity.
Certainly, it cannot afford to have erring magistrates who will only tarnish its image rather than maintain and
preserve the same. 59

This reasoning is applicable to this case.

A cursory review of the Kevlar case, however, reveals some questions that raise reasonable suspicions that some
irregularities have happened.

Pinpointing the irregularities in the Kevlar case is not in exercise of our appellate jurisdiction. It is similar to the
judicial audit conducted in the Verginesa-Suarez. It will not affect the rights of the parties to a final judgment but
should assist this court assess whether there was abuse of discretion by a trial judge or a justice of the.
Sandiganbayan. Abuse of discretion can provide the context for charges of grave misconduct or improprieties.

The offense charged was a complex crime. The acts consist of falsification of a series of documents in order to
make it appear that the government purchased five hundred (500) Kevlar helmets for the Marines. However, no
helmets were initially delivered. As charged, falsification was committed as a necessary means to commit the crime
of malversation.

The evidence presented during trial shows that all the requirements of a complex crime were proven beyond
reasonable doubt. To recall:

Under A1iicle 48 of the Revised ·Penal Code, a complex crime refers to (1) the commission of at least two grave or
less grave felonies that must both (or all) be the result of a single act, or (2) one offense must be a necessary
means for committing the other (or others). Negatively put, there is no complex crime when (1) two or more crimes
are committed, but not by a single act; or (2) committing one crime is not a necessary means for comn:itting the
other (or others).  However, the Divis.ion of the Sandiganbayan  participated in by Justice Ong treated malversation
60 61

and falsification of public documents as two separate crimes that must be pleaded and proved, without taking into
account the relation between the two crimes.

This is strange because the same Division of the Sandiganbayan found that the evidence presented supports the
finding that malversation indeed happened. However, the Division reasoned that since the accountable officer,
Commander Loyola, cannot be fau)ted for relying on the supporting documents in the disbursement voucher, the
acts constituting the malversation could no longer be attributed to anyone. This is clearly non-sequitur.

This is also contrary to our doctrines. In People v. Enfermo,  this court ruled:
62

[O]ur Supreme Court has ruled that to justify convicti.on for malversation of public funds, the prosecution has only to
prove that the accused received public funds or property and that he could not account for them or did not have
them in his possession and could not give a reasonable excuse for the disappearance of the same. An accountable
public officer may be convicted of malversation even if there is no direct evidence of misappropriation and the only
evidence is that there is a shortage in his accounts which he has not been able to explain satisfactorily. Such

719
conversion of public funds must be affirmatively proved, whether by direct evidence or by the production of facts
from which conversion necessarily follows. 63

Even assuming that Commander Loyola was unaware that the documents he relied on were falsified, the
Sandiganbayan failed to take into account that malversation may also be committed through negligence:

Malversation may be committed either through a positive act of misappropriation of public funds or property or
passively through negligence by allowing another to commit such misappropriatio'n. To sustain a charge of
malversation, there must either be criminal intent or criminal negligence and while the prevailing facts of a case may
not show that deceit attended the commission of the offense, it will not preclude the reception of evidence to prove
the existence of negligence because both are equally punishable in Article 217 of the Revised Penal Code.

More pointedly, the felony involves breach of public trust, and whether it is committed through deceit or negligence,
the law makes it punishable and prescribes a uniform penalty therefor. Even when the information charges willful
malversation, conviction for malversation through negligence may still be adjudged if the evidence ultimately proves
that mode of commission of the offense. 64

Having, thus, disposed of the charge for malversation, the Sandiganbayan focused only on the lighter offense of
falsification.

The Sandiganbayan found that there was falsification of public documents when the accused public officers certified
that Napoles already delivered the Kevlar helmets when, in truth, she did not.  The certification issued by
65

Commander Loyola was made allegedly to facilitate the encashment of the checks and which were deposited in
Napoles' account. 66

Isolating the malversation charge from the falsification charge paved the way for Napoles' acquittal. She was a
critical link in the charge for malversation because she was the point-person of the winning bidders and the
Philippine Marine Corps.  The Sandiganbayan recognized the reports naming Napoles.  Surprisingly, they chose to
67 68

disregard these reports since they dismissed the malversation charge for everyone.

The Fourth Division of the Sandiganbayan ruled that the evidence showed that fomieen (14) government checks
were issued and deposited in Napoles' name. Surprisingly, the same Division of the Sandiganbayan was convinced
that this was not enough to show that she participated in the falsification of the public documents. In spite of the
checks, it still concluded that there was no evidence to support that the winning bidders were merely dummies of
Napoles. In spite of these checks and the finding that these were deposited in her account, the same Division found
that she could not be treated as a conspirator. Finally, completing its unorthodox conclusions, the Division of Justice
Ong concluded that since Napoles did not sign any of the falsified documents, she was acquitted for the falsification
charge.

The irregularities in the Sandiganbayan decision coupled with the cloud of suspicion cast by Justice Ong's
acquaintance with Napoles erode the integrity and credibility of his court. Any observer with the required probity can
justifiably and reasonably conclude that the irregularities in the Kevlar case were deliberate. It is not merely an error
of judgment made in good faith if we consider that the justices that participated in the decision are not only
competent but are experts on the rules of evidence, on deriving inference from the evidence, and on the law from
which they are.required to render fair judgments.

Even if Justice Jose Hernandez was the ponente of the Kevlar case, Justice Ong still participated in the case. The
case was decided by a collegiate body, hence, we can presume that any irregularity should be attributed to the
members of the collegiate body ·and not only to the ponente. It is contrary to public policy for this court to assume
that justices of the Fourth Division of the Sandiganbayan concur with decisions that they have not read, understood,
and studied.

In addition, it was Justice Ong who was seen in the company of Napoles. There are no reports on the relationship of
Napoles to Justice Hernandez. Justice Ong's actions after his participation in the deliberations of the Kevlar case
rouse the suspicion of this court and transgress the Code of Judicial Conduct.

It has been an accepted doctrine that judges should not be punished for errors in their judgment, if they were made
in good faith.  Errors per se should not be subject to administrative penalties against the deciding judge. However,
69

there will be administrative sapctions when judicial errors are "tainted with fraud, dishonesty, gross ignorance, bad
faith or deliberate intent to do an injustice."70

When a Sandiganbayan Division renders a highly irregular decision and one of the Division'sjustices continuously
associates with the winning litigant, the judicial error becomes tainted with bad faith. It becomes conduct
inconsistent with the ideals of the office of an Associate Justice of the Sandiganbayan. It deserves administrative
sanction to· the highest degree. Otherwise, it will jeopardize the integrity of the courts as a whole.

720
Justice Ong acting as the "connection" of Napoles is supported by independently relevant statements

It was improper for Justice Ong to ·appear to be the "connection" of Napoles to the Sandiganbayan.

Justices Perez, Bersamin, and Reyes are all of the belief that Luy and Sula were testifying on matters not of their
personal knowledge. Hence, in their view, Luy's and Sula's testimonies are entirely based on hearsay.

Luy testified on a ledger for the Sandiganbayan during the pendency of the Kev(ar case. Napoles also told him that
she paid Justice Ong for the results of that case. However, Luy was not able to see if any of the items in the ledger
were attributed to Justice Ong. 71

Sula knew from Napoles that Justice Ong helped them in their Sandiganbayan case.  However, when the PDAF
72

scandal broke out, Napoles told Sula that they would not approach Justice Ong for help because his "talent fee" was
too high.73

Luy also testified that Napoles instructed him to prepare eleven (11) checks for Justice Ong, but he was not able to
witness Napoles turning over those checks to Justice Ong.

I disagree with the view that the testimonies of Luy and Sula were hearsay. Even if Luy and Sula testified on matters
that Napoles imparted to them in confidence, these statements do not necessarily constitute hearsay; rather, they
are independently relevant statements. The value of these statements .depends on the fact that it was supposed to
prove and should be taken in context.

Independently relevant statements are considered exceptions to the hearsay rule:

Under the doctrine of independently relevant statements, regardless of their truth or falsity, the fact that such
statements have been made is relevant. The hearsay rule does not apply, and the statements are admissible as
evidence. Evidence as to the making of such statement is not secondary but primary, for the statement itself may
constitute a fact in issue or be circumstantially relevant as to the existence of such a fact.  (Emphasis supplied,
74

citation omitted)

In addition, "[e]vidence as to the making of such statements is not secondary but primary, for in itself it (a)
constitutes a fact in is.sue or (b) is circumstantially relevant to the existence of such fact."
75

The testimonies of Luy and Sula pertaining to Napoles' statements on her supposed connection with Justice Ong
constitute independently relevant statements. They are circumstantially relevant to the administrative charges
against him, regardless of the truth or falsity of Napoles' utterances to them.

While Luy and Sula do not have personal knowledge of Napoles' actual dealings with Justice Ong, their testimonies
prove that Napoles bragged about her connection with Justice Ong. Evidence tending to prove that Napoles indeed
mentioned Justice Ong as a "connect" should be admissible and credible evidence against Justice Ong in this
administrative case.

The following testimonies should be considered by this court in establishing the fact that Justice Ong was improperly
associated and connected with Napoles:

1) Luy's testimony stating his personal knowledge of a) his preparation of the eleven (11) checks allegedly
issued by Napoles to Justice Ong as advance for the latter's deposit in AFPSLAI, b) the ledger listing
Napoles' alleged Sandiganbayan expenses, and c) Justice Ong's visit to Napoles' office;

2) Sula's testimony stating her personal knowledge of Justice Ong's visit to Napoles' office; and

3) Justice Ong's own admission that he personally met with Napoles twice.

This court can also take judicial notice of the fact that Napoles has been charged for numerous cases involving the
PDAF together with, among other high-ranking officials, Senator Estrada. Justice Ong admits to a friendship with
Senator Jinggoy Estrada. This relationship is supported by the picture showing Justice Ong, Senator Estrada, and
Napoles posing together in what appears to be a social gathering. If Justice Ong is to be believed, he claims that it
was Senator Jinggoy Estrada who introduced him – formally – to Napoles.

These pieces of evidence tend to prove that Napoles herself mentioned to her trusted staff that she had connections
with Justice Ong, particularly for the fixing of the Kevlar case. These statements are admissible and meet the
requirements of credibility for the purpose of assessing Justice Ong's fitness to continue as a member of the bench.

Justice Ong would rather call attention to minor inconsistencies in the statements of the witnesses to place them out
of their context. He argues that his favorite food is Japanese,  and not Chinese, as Luy suggested in his
76

721
testimony.  Just because Luy got his favorite food wrong does not cast doubt as to the rest of his testimony. Luy
77

never stated that he knew Justice Ong well. He was merely narrating his recollection of his visits to Napoles.

Justice Ong also points out that Sula's testimony that Justice Ong is the "connect" of Napoles in the Sandiganbayan
runs contrary to her statement that Napoles told her once that t~ey would not fix the PDAF cases with Justice Ong
because his "talent fee" is too high. These statements are not mutually exclusive. The statement of Napoles that
Justice Ong's "talent fee" is high already suggests that she had previous dealings with him directly or indirectly. Any
transaction involving a "talent fee" already demeans the profession of all judges and justices.

The minor inconsistencies that Justice Ong points out do not cast doubt as to the credibility .of the statements made
by Luy and Sula. Rather, they show that such statements were not rehearsed or contrived. For so long as the
principal content remains consistent, minor inconsistencies in the / details of the statement which do not cast doubt
on the purpose for which they are presented supports the credibility of such evidence.

Justice Ong's conduct prejudiced the best interest of the courts

Justice Ong's improprieties do not only constitute grave misconduct, they are also conduct prejudicial to the best
interest of service.

Conduct prejudicial to the best interest of service is subject to disciplinary action under the Administrative Code. 78

Aries Rufo, a journalist who is a keen observer of the judiciary, mentioned in his testimony:

Judges and Justices ... should insulate themselves from situations that could compromise their integrity. Without
Napoles in the picture, I wouid have been uncomfortable seeing Justice Ong with Jinggoy considering that Senator
Jinggoy was tried before at the Sandiganbayan for plunder. He is still an active Justice and an ordinary person
might conclude that, you know, he could favor him in cases if there are.

An ordinary private citizen testified that he perceives Justice Ong as someone who is partial. Such perception is not
unique or isolated. It is enough to prejudice the service that the judiciary is providing the public.

A reasonable public perception of partiality of one justice with good basis tarnishes the entire Sandiganbayan and
the judiciary in general. It is for this reason that we promulgated Canon 3, Section 2 of the Code of Judicial Conduct,
to· wit:

SEC. 2. Judges. shall ensure that his or her conduct, both in and out of court, maintains and enlzances the
confidence of the public, the legal profession and litigants in the impartiality of the judge and of the judiciary.
(Emphasis supplied)

In Tan v. Pacuribot: 79

We have repeatedly reminded members of the Judiciary to so conduct themselves as to be beyond reprodch and
suspicion, and to be fi'ee from any appearance of impropriety in their personal behavior, not only in the discharge of
their official duties but also in their everyday lives.

For no position exacts a greater demand on the moral righteousness and uprightness of an individual than a seat in
the Judiciary. Judges are mandated to maintain good moral character and are at all times expected to observe
irreproachable behavior so as not to outrage public decency. 80

II

Dishonesty

Dishonesty is "the concealment of truth in a matter of fact relevant to one's office or connected with the performance
of his duties. It is an absence of integrity, a disposition to betray, cheat, deceive or defraud, bad faith."  Dishonesty
81

is also the "disposition to lie, cheat, deceive, or defraud; untrustworthiness; lack of integrity; lack of honesty, probity
or integrity in principle; lack of fairness and straightforwardness; disposition to defraud, deceive or betray." 82

Dishonesty need not be an outright lie. It can consist of the concealment of the truth. The truth can be concealed not
only by negating the truth. Under certain circumstances, facts can be concealed by one who does not say anything.
The truth can be denied by uttering statements that make a contrary reality seem like the truth.

Truth can also be denied by slanting the facts, i.e., refocusing events on a detail that is irrelevant or stating only a
partial truth. Dishonesty may be the conclusion from an examination of a series of actions. Sometimes, individuals
can utter independently true statements, but when taken together, would create a context that is contrary to the
truth.
722
Justice Ong committed dishonest acts in concealing his .association with Napoles.

Justice Ong misrepresented his affiliation with Napoles when Aries Rufo confronted him with the photograph of him
with Senator Estrada and Napoles. Before the Investigating Justice, Rufo testified:

Q Did you ask why Janet Napoles was there?

A Yes, I asked him and he said he doesn't recognize her because it appears that she did not appear in the Kevlar
case. He said that...

Q You mean, he did not recognize who this lady is?

A Yes, Justice.

Q When you reminded him, did he finally recognize her as Janet Napoles?

A There was no categorical statement that he knew that it was Janet Napoles. I got the sense that he knew her
because of the stories and the photos that. . . .

....

I asked him what brought about the photograph. He said it must have been in one of those instances where a guest
would like to have his· or her photo taken with celebrities or with other public figures and he also stated it must have
been when I asked him whether they are close or not, he qualified the situation ... the photo, by saying that. 1t would
have been different if he was close to Napoles in that photo that would indicate that they were closed [sic] but the
fact that they were separated by Senator Jinggoy Estrada, it must have been the case where a person like Janet
Lim Napoles would want her photo taken with public figures. 83

As a result of this conversation, Aries Rufo quoted Justice. Ong in his article: "I do not know her. She did not appear
in court. I think she had a waiver of appearance in court."84

The ponencia also points out that Justice Ong's dishonest act was contained in his letter to the Chief Justice dated
September 26, 2013. In that letter, he did not disclose that he visited Napoles' office sometime in 2012.

In addition to the letter, Justice Ong's denial that he did not attend any party hosted by Napoles was reiterated in his
comment:

Justice Ong categorically states that he has never attended any party or social event or affair hosted by Mrs.
Napoles or her family, either before she had a case with his court, or while she already had a pending case with his
court, or at any time afterwards. This fact has now been confirmed by Sula who never claimed that Justice Ong was
a presenc.e or a fixture in any of the parties or social events or affairs that were hosted by Mrs. Napoles.85

Justice Ong's representations constitute dishonesty that renders him administratively liable

Justices Perez and Reyes are of the belief that Justice Ong's acts do not constitute dishonesty. They opine that
Justice Ong's statements were taken out of context. According to them, in his letter dated September 26, 2013,
Justice Ong was only defending himself from the impression created by the Rappler article that makes it seem that
he was part of Napoles' social circle. At. that time, he was not obi igated to disclose anything about the favor
regarding the Black Nazarene's robes or that he visited Napoles' office.

Justice Reyes also points out that during the investigation, Justice Ong readily admitted to having associated with
Napoles, which negates the finding that he intended to be dishonest in the letter to the Chief Justice.

I disagree.

I believe that Justice Ong's actions show a disposition to deceive. His words lacked the integrity and honesty we
require from a Sandiganbayan justice. This is obvious if we take all his statements in the proper context.

Before the investigation on these issues went full-scale, Justice Ong deliberately wanted to create an impression
that he was not associated with Napoles. This could be concluded from Aries Rufo's narration of the interview that
preceded the Rappler article. Napoles already had a notorious reputation at that time, and an ordinary citizen would
impulsively dissociate himself in order to avoid being implicated by Napoles' notoriety.

However, Justice Ong is not an ordinary citizen. He is required by the Rules of Court and the Code of Judicial
Conduct to be honest in all his dealings.  If he has stayed true to this Code, he would not have had anything to
86

723
conceal from the public. He would be able to face reporters and confidently say that he had nothing to do with
Napoles.

A specifically dishonest statement Justice Ong made during the Rappler interview was when "[h]e said he 'would not
be stupid enough' to be posing with Napoles tiad he known that she was the respondent in the case previously
handled by his division."

However, during his testimony last March 21, 2014, he revealed that during the first time he was introduced to
Napoles, Napoles thanked him for the Kevlar case acquittal. It is reasonable to presume that the introduction
occurred, as narrated by Justice Ong, prior to the picture-taking. Thus, the statement made by Justice Ong to Rufo
was an outright lie.

Another specifically dishonest statement of Justice Ong was made in his comment. He stated that he never
attended a social event or affair hosted by the Napoleses. It was to negate the statement made in the Rappler
article that "Napoles parties with anti-graft court justice." At that time, Justice Ong just needed to address the fact
that he was seen at the party of Senator Estrada, which was also attended by Napoles. Hence, there is no
inconsistency with· the truth (he and Napoles were guests at Senator Estrada's party) and his statement in the
comment (he was not a guest at Napoles' party).

However, during the course of the investigation, Justice Ong admitted to attending an affair where he was invited by
Napoles. He attended a Eucharistic mass at a private residence. It is difficult to deny that it was Napoles who hosted
that affair. This conclusion is based on Justice Ong's own narration. Napoles' driver picked him up. She seated him
·next to the Monsignor of Quiapo Church. His admissions are inconsistent with his previous statements.

Even if we assume that Justice Ong was not dishonest solely on the basis of his letter to the Chief Justice, he did
commit dishonesty elsewhere. He committed dishonesty when he interacted with the reporter. He continued his
dishonesty when he was asked to comment on the statements made during the Senate Blue Ribbon Committee
investigation.

I disagree with some of my colleagues that his dishonesty was cured because he readily admitted his association
with Napoles during the investigation. It is easy to admit matters when already confronted with so many pieces of
evidence that cannot be denied. It does not wipe out his past acts of dishonesty.

Justice Ong had the disposition to deceive the public by limiting his association with Napoles as much as possible.
His story accommodated more details as more facts emerged about his association with Napoles.

When Aries Rufo only had a photo to confront Justice Ong, Justice Ong limited his association with Napoles to the
fact that they were both fattendees of Senator Estrada's party.

His narrative evolved after the picture had been published. He stated in the letter to the Chief Justice that he did not
know Napoles during the pendency of the Kevlar case.

On Marina Sula's testimony that she saw Justice Ong once in their office, he explained in his comment dated
November 21, 2013 the reason why Sula saw him there .. He narrated the religious favor Napoles gave him and the
need for him to personally thank Napoles in her office. During the hearing on February 12, 2014, Benhur Luy stated
that he saw Justice Ong twice in Napoles' office. On March 21, 2014, when it was Justice Ong's turn to testify, his
story evolved once more to accommodate the second instance that Luy referred to by stating that he visited
Napoles' office twice to thank her for the religious favor.

Justice Ong's dishonest acts might not be as apparent as irregularly punching on the bundy clock,  or 87

misrepresenting facts in the personal data sheet for civil service qualifications.  However, his acts are still dishonest
88

and show his disposition to betray, cheat, deceive, and defraud.

This court must be wary of non-traditional concealments of truth. It shows that a person not orily made a dishonest
act but that the person has a propensity .to conceal the truth. This runs against the very principles of truth and
justice that the judiciary tries to uphold. It is reprehensible if it is a judge or justice - expected by the public trust to be
honest - who perpetrates this act. As we have time and again declared: "[D]ishonesty is a malevolent act that has no
place in the Judiciary."89

Justice Ong should be dismissed for his dishonesty

Rule 140, Section 8 of the Rules of Court classifies dishonesty as a serious charge. Rule 140, Section 11 (A)
provides for a range of penalties:

1. Dismissal from service, forfeiture of all or part of the benefits as the Court may determine, and
disqualification from reinstatement or appointment to any public office, including government-owned or

724
 controlled corporations. Provided, however, That the forfeiture of benefits shall in no case include accrued
leave credits;

2 . Suspension from office without salary and other benefits for more than three (3) but not exceeding six (6)
months; or

3. A fine of more than ₱20,000.00 but not exceeding ₱40,000.00.

Justice Bersamin opines that Justice Ong's dishonesty "did not meet the required seriousness or gravity that would
merit the extreme penalty of dismissal." Justice Bersamin applied the standard that for there to be dishonesty that is
subject to the penalty of dismissal, the act of dishonesty should relate to Justice Ong's official duties or qualifications
as a justice of the Sandiganbayan.

I cannot agree with Justice Bersamin's assessment. Justice Ong's dishonesty was related. · to his qualifications as a
justice of the Sandiganbayan. He might not have placed a false entry in his personal data sheet for the Judicial Bar
Council to assess,  but he concealed truth that affects his fitness to be a member of the judiciary. The Code of
90

Judicial Conduct requires propriety from its members. This qualification of a justice should be constant and should
be met by a justice at all times. When Justice Ong committed dishonest acts to conceal his impropriety, his·
dishonesty related to his qualifications as a Sandiganbayan justice.

The dishonesty of Justice Ong did not only pertain to a single act. Taken together, this set of acts reveals a
propensity of Justice Ong to be dishonest. For dishonesty alone, he should· be meted the penalty of dismissal.

III

Grave misconduct

Time and again, this court has clarified what can be considered as misconduct. Thus:

Misconduct has been defined as improper or wrongful conduct. It is the transgression of some cstahl ished and
definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not
mere error in judgment.  (Underscoring supplied)
91

To be considered grave misconduct, "the elements of corruption, clear intent to violate the law or flagrant disregard
of established rule"  must be present.
92

Justices Perez, Bersamin, and Reyes concur that the improprieties of Justice Ong were tantamount to misconduct.
However, due to the absence of the element of corruption, the misconduct cannot be considered grave, hence, they
merely penalized him for simple misconduct.

However, grave misconduct is not only qualified by corruption, it could also be qualified by violation of law or
"flagrant disregard of established rule."

Justice Ong violated the law by improperly receiving gifts from Napoles. In addition, he flagrantly disregarded
established rules.

In Imperial, Jr. v. Government Service Insurance System,  this court described the instances when there is flagrant
93

disregard of an established rule:

Flagrant. disregard of rules is a ground that jurisprudence has already touched upon. It has been demonstrated,
among others, in the instances when there had been open defiance of a customary rule; in the repeated voluntary
disregard of established rules in the procurement of supplies; in the practice of illegally collecting fees more than
what is prescribed for delayed registration of marriages; when several violations or disregard of regulations
governing the collection of government funds were committed; and when the employee arrogated unto herself
responsibilities that were clearly beyond her given duties. The common denominator in these cases was the
employee's propensity to ignore the rules as clearly manifested by his or her actions.  (Emphasis in the original,
94

citations omitted)

Justice Ong repeatedly ignored the Code of Judicial Conduct. His many years in the judiciary should have instilled in
him the discipline to be cautious in his social life. Otherwise, he compromises his independence and impartiality.

Yet, Justice Ong repeatedly met and accepted favors from a former litigant. He offers no other explanation to
characterize his relationship with Napoles. Certainly, his many acts of impropriety constitute grave misconduct.

725
Grave misconduct or gross misconduct constituting violations of the Code of Judicial Conduct under the Rules of
Court, Rule 140, Section 8, is another serious charge. Again, the range of penalties for serious charges include
dismissal, three- to six-month suspension, or a fine ranging from ₱20,000.00 to ₱40,000.00.

For Justice Ong's series of improprieties, he deserves the penalty of DISMISSAL.

We meted the penalty of dismissal to a Regional Trial Court judge, Judge Marino Rubia, for similar improprieties. In
Sison-Barias v. Rubia,  Judge Rubia and one of his court staff met with a litigant in a restaurant in the Bonifacio
95

Global City. At that time, the litigant had three pending cases in Judge Rubia's sa1a. During the meeting, Judge
Rubia asked inappropriate questions relating to the personal circumstances of the litigant. The litigant was disturbed
because Judge Rubia revealed that he was close to the opposing counsel, and he. seemed to be using information
about that litigant that he derived from the opposing counsel. The litigant felt that Judge Rubia was severely biased
toward the opposing party. Judge Rubia convinced her to meet with opposing counsel to arrange her cases extra-
judicially. For that meeting, Judge Rubia did not ask or receive favors from the litigant in exchange for a favorable
decision, but the litigant paid the bill for the meals at the restaurant. After this incident, the litigant felt the bias
against her in every order that Judge Rubia issued regarding her cases.

In Rubia, this court strictly enforced Canons 2, 3, and 4 of the Code of Judicial Conduct. To our mind, due to "[Judge
Rubia's] actions, complainant and all who will be made aware of the events of this case will harbor distrust toward
the judiciary and its processes."

Justice Ong should not be given a lighter penalty simply because he fraternized with a previous litigant, not a
current litigant. The effect on his integrity, impartiality, and propriety is the same. He was a Sandiganbayan
associate Justice who was willing to compromise the integrity of the judiciary for favors. In that sense, Justice Ong's
transgressions are even graver than Judge Rubia's.

IV

Proper penalty

The charge of grave misconduct constituting Justice Ong's improprieties and his dishonesty is enough to justify the
penalty of DISMISSAL.

In addition, Justice Ong already had a prior administrative sanction that aggravates his current standing in this
administrative case.

In Jamsani-Rodriguez v. Ong,  this court already penalized Justice Ong for his misconduct. . While the nature of
96

Justice Ong's ·offense was different, the finding of his administrative liability came with a warning that a repetition of
the same or similar act shall be dealt with more severely. The fact that this court subsequently granted him judicial
clemency  does not cure this warning. This warning persists.
97

The acts committed by Justice Ong in this case are more severe than in Jamsani-Rodriguez v. Ong. In Jamsani-
Rodriguez, Justice Ong was found guilty of irregularly holding proceedings in court, violative of the collegial nature
of the Sandiganbayan. In this case, his acts lacked integrity, were improper, and dishonest.

FINAL NOTE

The Code of Judicial Conduct requires "[j]udges [to] ensure that not only is their conduct above reproach, but that it
is perceived to. be so in the view of a reasonable observer."  A judge should ensure that his conduct, even out of
98

court, maintains and enhances the confidence of the public in the impartiality of the judiciary. 99

The expectations of propriety are higher for Sandiganbayan justices like Justice Ong. It is the Sandiganbayan that
has the primacy exclusive jurisdiction to hear and decide the most difficult cases involving graft and corruption. It is
the Sandiganbayan that sits in judgement of public officers who violate the provisions of the Revised Penal Code,
Republic Act No. 3019, Republic Act No. 6713, and Presidential Decree No. 46 on the receiving of gifts. It is the
justices of the Sandiganbayan that struggle day in and day out against political pressure and personal risk to live by
the public's faith that they will themselves follow the law.

Many times during the deliberations of this case, colleagues have pointed to the need for compassion for the case
of Justice Ong.· We are told that he has served long years as a judge and as a justice. We were even told that he
attempted to informally circulate a letter through other colleagues in this court that he was willing to take optional
retirement should he be meted with any kind of suspension.

That he had the audacity to try to influence the members of this court by offering to resign through an informal letter
circulated through some colleagues is in my view could have been another basis for his dismissal. It shows that he

726
has at least made attempts to communicate ex parte with members of this court outside the formal processes
allowed by our rules.

Ex parte communication sub rosa by one being investigated with any member of this court while we sit in
deliberation of his case is wrong. Influence peddling is wrong.

We should, as the court with the ·constitutional duty to discipline judges and justices of the lower courts, properly
call out an attempt to illicitly influence this court when it happens.

If there is any group deserving of compassion, it should be the judges and justices who toil with meager salaries and
highly taxed benefits and who struggle daily to keep their integrity and independence intact. Our compassion should
be reserved to judges and justices who do p.ot succumb to temptation or pressure to cater to the rich and powerful
accused at the expense of.the Filipino people. Our compassion should be for them who we will disappoint should
we mistake a failure of our ability to do justice for mercy.

Every decision will cause us discomfort. I do not take personal pleasure in voting for his dismissal.  But it is what is
1âwphi1

called for by law and my conscience.

We fail ourselves, our institution, and the values and principles we swore to uphold when we lose the courage to do
what is right and just.

ACCORDINGLY, I vote that Justice Ong be found GUILTY of GRAVE MISCONDUCT, IMPROPRIETY, ACTS
PREJUDICIAL TO THE BEST INTEREST OF SERVICE, and DISHONESTY. I vote that he be DISMISSED from the
service, with forfeiture of all retirem.ent benefits, except accrued leave credits, if any, and with prejudice to re-
employment in any branch, agency, or instrumentality of the government including government-owned or controlled
corporations.

727
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 207950               September 22, 2014

PEOPLE OF THE PHILIPPINES, Plaintiff-appellee, 

vs.
MARK JASON CHAVEZ y BITANCOR alias "NOY", Accused-appellant.

DECISION

LEONEN, J.:

Every conviction for any crime must be accompanied by the required moral certainty that the accused has
committed the offense charged beyond reasonable doubt. The prosecution must prove "the offender's intent to take
personal property before the killing, regardless of the time when the homicide [was] actually carried out"  !n order to
1

convict for the crime of robbery with homicide. The accused may nevertheless be convi·cted of the separate crime
of homicide once the prosecution establishes beyond reasonable doubt the accused's culpability for the victim's
death.

In the information dated November 8, 2006, Mark Jason Chavez y Bitancor (Chavez) was charged with the crime of
robbery with homicide:

That on or about October 28, 2006, in the City of Manila, Philippines, the said accused, did then and there wilfully,
unlawfully and feloniously, with intent of gain and means of force, violence and intimidation upon the person of
ELMER DUQUE y OROS, by then and there, with intent to kill, stabbing the latter repeatedly with a kitchen knife,
thereby inflicting upon him mortal stab wounds which were the direct and immediate cause of his death thereafter,
and on the saidoccasion or by reason thereof, accused took, robbed and carried away the following:

One (1) Unit Nokia Cellphone

One (1) Unit Motorola Cellphone

Six (6) pcs. Ladies Ring

Two (2) pcs. Necklace

One (1) pc. Bracelet All of undetermined value and undetermined amount of money, all belonging to said ELMER
DUQUE y OROS @ BARBIE to the damage and prejudice of the said owner/or his heirs, in the said undetermined
amount in Philippines currency.

Contrary to law. 2

728
Chavez pleaded not guilty during his arraignment on December 4, 2006. The court proceeded to trial. The
prosecution presented Angelo Peñamante (Peñamante), P/Chief Inspector Sonia Cayrel (PCI Cayrel), SPO3 Steve
Casimiro (SPO3 Casimiro), Dr. Romeo T. Salen (Dr. Salen), and Raymund Senofa as witnesses. On the other hand,
the defense presented Chavez as its sole witness. 3

The facts as found by the lower court are as follows.

On October 28, 2006, Peñamante arrived home at around 2:45 a.m., coming from work as a janitor in Eastwood
City.  When he was about to go inside his house at 1326 Tuazon Street, Sampaloc, Manila, he saw a person
4

wearing a black, long-sleeved shirt and black pants and holding something while leaving the house/parlor of Elmer
Duque (Barbie) at 1325 Tuazon Street, Sampaloc, Manila, just six meters across Peñamante’s house. 5

There was a light at the left side of the house/parlor of Barbie, his favorite haircutter, so Peñamante stated that he
was able to see the face of Chavez and the clothes he was wearing. 6

Chavez could not close the door of Barbie’s house/parlor so he simply walked away. However, he dropped
something that he was holding and fell down when he stepped on it.  He walked away after, and Peñamante was not
7

able to determine what Chavez was holding.  Peñamante then entered his house and went to bed.
8 9

Sometime after 10:00 a.m., the Scene of the Crime Office (SOCO) team arrived, led by PCI Cayrel. She was joined
by PO3 Rex Maglansi (photographer), PO1 Joel Pelayo (sketcher), and a fingerprint technician.  They conducted an
10

initial survey of the crime scene after coordinating with SPO3 Casimiro of the Manila Police District Homicide
Section. 11

The team noted that the lobby and the parlor were in disarray, and they found Barbie’s dead body inside.  They took 12

photographs and collected fingerprints and other pieces of evidence such as the 155 pieces of hair strands found
clutched in Barbie’s left hand.  They documented the evidence then turned them over to the Western Police District
13

Chemistry Division. Dr. Salen was called to conduct an autopsy on the body. 14

At around 11:00 a.m., Peñamante’s landlady woke him up and told him that Barbie was found dead at 9:00 a.m. He
then informed his landlady that he saw Chavez leaving Barbie’s house at 2:45 a.m. 15

At around 1:00 p.m., Dr. Salen conducted an autopsy on the body and found that the time of death was
approximately 12 hours prior to examination.  There were 22 injuries on Barbie’s body — 21 were stab wounds in
16

various parts of the body caused by a sharp bladed instrument, and one incised wound was caused by a sharp
object.  Four (4) of the stab wounds were considered fatal.
17 18

The next day, the police invited Peñamante to the Manila Police Station to give a statement. Peñamante described
to SPO3 Casimiro the physical appearance of the person he saw leaving Barbie’s parlor. 19

Accompanied by his mother, Chavez voluntarily surrendered on November 5, 2006 to SPO3 Casimiro at the police
station.  Chavez was then 22 years old.  His mother told the police that she wanted to help her son who might be
20 21

involved in Barbie’s death.22

SPO3 Casimiro informed them ofthe consequences in executing a written statement without the assistance of a
lawyer. However, Chavez’s mother still gave her statement, subscribed by Administrative Officer Alex
Francisco. She also surrendered two cellular phones owned by Barbie and a baseball cap owned by Chavez.
23 24

The next day, Peñamante was again summoned by SPO3 Casimiro to identify from a line-up the person he saw
leaving Barbie’s house/parlor that early morning of October 28, 2006.  Peñamante immediately pointed to and
25

identified Chavez and thereafter executed his written statement.  There were no issues raised in relation to the line-
26

up.

On the other hand, Chavez explained that he was athome on October 27, 2006, exchanging text messages
withBarbie on whether they could talk regarding their misunderstanding.  According to Chavez, Barbie suspected
27

that he was having a relationship with Barbie’s boyfriend, Maki.  When Barbie did not reply to his text message,
28

Chavez decided to go to Barbie’s house at around 1:00 a.m. of October 28, 2006.  Barbie allowed him to enter the
29

house, and he went home after. 30

On August 19, 2011, the trial court  found Chavez guilty beyond reasonable doubt of the crime of robbery with
31

homicide:

WHEREFORE, in view of the foregoing, this Court finds accused MARK JASON CHAVEZ y BITANCOR @ NOY
GUILTY beyond reasonable doubt of the crime of Robbery with Homicideand hereby sentences him to suffer the
penaltyof reclusion perpetua without eligibility for parole.

729
Further, he is ordered to pay tothe heirs of the victim, Elmer Duque y Oros the sum of 75,000.00 as death indemnity
and another ₱75,000 for moral damages.

SO ORDERED. 32

On February 27, 2013, the Court of Appeals  affirmed the trial court’s decision.  Chavez then filed a notice of appeal
33 34

pursuant to Rule 124, Section 13(c) of the Revised Rules of Criminal Procedure, as amended, elevating the case
with this court. 35

This court notified the parties tosimultaneously submit supplemental briefs if they so desire. Both parties filed
manifestationsthat they would merely adopt their briefs before the Court of Appeals. 36

In his brief, Chavez raised presumption of innocence, considering that the trial court "overlooked and misapplied
some facts of substance that could have altered its verdict."  He argued that since the prosecution relied on purely
37

circumstantial evidence, conviction must rest on a moral certainty of guilt on the part of Chavez.  In this case, even
38

if Peñamante saw him leaving Barbie’s house, Peñamante did not specify whether Chavez was acting suspiciously
at that time.39

As regards his mother’s statement,Chavez argued its inadmissibility as evidence since his mother was not
presented before the court to give the defense an opportunity for cross-examination.  He added that affidavits are
40

generally rejected as hearsay unless the affiant appears before the court and testifies on it. 41

Chavez argued that based on Dr. Salen’s findings, Barbie’s wounds were caused by two sharp bladed instruments,
thus, it was possible that there were two assailants.  It was also possible that the assailants committed the crime
42

after Chavez had left Barbie’s house.  Given that many possible explanations fit the facts,that which is consistent
43

with the innocence of Chavez should be favored. 44

On the other hand, plaintiff-appellee argued that direct evidence is not indispensable when the prosecution
isestablishing guilt beyond reasonable doubt of Chavez.  The circumstantial evidence presented before the trial
45

court laid down an unbroken chain of events leading to no other conclusion than Chavez’s acts of killing and robbing
Barbie.46

On the argument made by Chavez that his mother’s statement was inadmissible as hearsay, plaintiff-appellee
explained that the trial court did not rely on, and did not even refer to, any of the statements made by Chavez’s
mother. 47

Finally, insofar as Chavez’s submission that Dr. Salen testified on the possibility that there weretwo assailants, Dr.
Salen equally testified on the possibility that there was only one.  The sole issue now before us iswhether Chavez is
48

guilty beyond reasonable doubt of the crime of robbery with homicide.

We reverse the decisions of the lower courts, but find Chavez guilty of the crime of homicide.

Chavez was found guilty of the specialcomplex crime of robbery with homicide under the Revised Penal Code:

Art. 294. Robbery with violence against or intimidation of persons – Penalties. – Any person guilty of robberywith the
use of violence against or intimidation of any person shall suffer:

1) The penalty of reclusion perpetua to death, when by reason or on occasion of the robbery, the crime of homicide
shall have been committed. . . .49

Chavez invokes his constitutional right to be presumed innocent, especially since the prosecution’s evidence is
purely circumstantial and a conviction must stand on a moral certainty of guilt.50

The Rules of Court expressly provides that circumstantial evidence may be sufficient to establish guilt beyond
reasonable doubt for the conviction of an accused:

SEC. 4. Circumstantial evidence, when sufficient. – Circumstantial evidence is sufficient for conviction if:

(a) There is more than one circumstance;

(b) The facts from which the inferences are derived are proven; and

(c) The combination of all the circumstances is such as to produce a conviction beyond reasonable doubt. 51

730
The lower courts found that the circumstantial evidence laid down by the prosecution led to no other conclusion than
the commission by Chavez of the crime charged:

In the instant case, while there is no direct evidence showing that the accused robbed and fatally stabbed the victim
to death, nonetheless, the Court believes that the following circumstances form a solid and unbroken chain of
events that leads to the conclusion, beyond reasonable doubt, that accused Mark Jason Chavez y Bitancor @ Noy
committed the crime charged, vi[z]: first, it has been duly established, as the accused himself admits, that he went to
the parlor of the victim at around 1:00 o’clock in the morning of 28 October 2006 and the accused was allowed by
the victim to get inside his parlor as it serves as his residence too; second, the victim’s two (2) units of cellular
phones (one red Nokia with model 3310 and the other one is a black Motorola) without sim cards and batteries,
which were declared as partof the missing personal belongings of the victim, were handled to SPO3 Steve Casimiro
by the mother of the accused, Anjanette C. Tobias on 05 November 2006 when the accused voluntarily
surrendered, accompanied by his mother, at the police station: third, on 28 October 2006 at about 2:45 o’clock in
the morning, witness Angelo Peñamante, who arrived from his work, saw a person holding and/or carrying
something and about toget out of the door of the house of the victim located at 1325 G. Tuazon Street, Sampaloc,
Manila, and trying to close the door but the said person was not able to successfully do so. He later positively
identified the said person at the police station as MARK JASON CHAVEZ y BITANCOR @ NOY, the accused
herein; and finally, the time when the accused decided on 27 October 2006 to patch up things with the victim and
the circumstances (Dr. Salen’s testimony that the body of the victim was dead for more or less twelve (12) hours)
when the latter was discovered fatally killed on 28 October 2006 is not a co-incidence.

The prosecution has equally established, based on the same circumstantial evidence, that the accused had indeed
killed the victim.
52

Factual findings by the trial court on its appreciation of evidence presented by the parties, and even its conclusions
derived from the findings, are generally given great respect and conclusive effect by this court, more so when these
factual findings are affirmed by the Court of Appeals. 53

Nevertheless, this court has held that "[w]hat is imperative and essential for a conviction for the crime of robbery
with homicide is for the prosecution to establish the offender’s intent to take personal property before the killing,
regardless of the time when the homicide is actually carried out."  In cases when the prosecution failed to
54

conclusively prove that homicide was committed for the purpose of robbing the victim, no accused can be convicted
of robbery with homicide. 55

The circumstantial evidence relied on by the lower courts, as quoted previously, do not satisfactorily establish an
original criminal design by Chavez to commit robbery.

At most, the intent to take personal property was mentioned by Chavez’s mother in her statement as follows:

Na si Noy na aking anak ay nagtapat sa akin tungkol sa kanyang kinalaman sa pagkamatay ni Barbie at kasabay
ang pagbigay sa akin ng dalawang (2) piraso ng cellular phones na pag/aari [sic] ni Barbie na kanyang kinuha
pagka/tapos [sic] ng insidente.

Na ipinagtapat din sa akin ni Noy na ang ginamit na panaksak na isang kutsilyo na gamit namin sabahay ay inihulog
niya sa manhole sa tapat ng aming bahay matapos ang insidente.

At ang isang piraso ng kwintas na kinuha rin nya mula kay Barbie ay naisanla niya sa isang sanglaan sa Quezon
City.

Na ang suot niyang tsinelas ay nag/iwan [sic] ng bakas sa pinangyarihan ng insidente. At sya rin ang nakasugat sa
kanyang sariling kamay ng [sic] maganap ang insidente.

Na sinabi niya sa akin na wala siyang intensyon na patayin [sic] si Barbie kundi ay pagnakawan lamang. (Emphasis
56

supplied)

However, this statement is considered as hearsay, with no evidentiary value, since Chavez’s mother was never
presented as a witness during trial to testify on her statement.57

An original criminal design to take personal property is also inconsistent with the infliction of no less than 21 stab
wounds in various parts of Barbie’s body. 58

The number of stab wounds inflicted on a victim has been used by this court in its determination of the nature and
circumstances of the crime committed.

731
This may show an intention to ensure the death of the victim. In a case where the victim sustained a total of 36 stab
wounds in his front and back, this court noted that "this number of stab wounds inflicted on the victim is a strong
indication that appellants made sure of the success of their effort to kill the victim without risk to themselves."59

This court has also looked into the number and gravity of the wounds sustained by the victim as indicative ofthe
accused’s intention to kill the victim and not merely to defend himself or others. 60

In the special complex crime of robbery with homicide, homicide is committed in order "(a) to facilitate the robbery or
the escape of the culprit; (b) to preserve the possession by the culprit of the loot; (c) to prevent discovery of the
commission of the robbery; or (d) to eliminate witnesses to the commission of the crime."  21 stab wounds would be
61

overkill for these purposes. The sheer number of stab wounds inflicted on Barbie makes it difficult to conclude an
original criminal intent of merely taking Barbie’s personal property.

In People v. Sanchez,  this court found accused-appellant liable for the separate crimes of homicide and theft for
62

failure of the prosecution to conclusively prove that homicide was committed for the purpose of robbing the victim:

But from the record of this case, we find that the prosecution palpably failed to substantiate its allegations of the
presence of criminal design to commit robbery, independent ofthe intent to commit homicide. There is no evidence
showing that the death of the victim occurred by reason or on the occasion of the robbery. The prosecution was
silent on accused-appellant’s primary criminal intent. Did he intend to kill the victim in order to steal the cash and the
necklace? Or did he intend only to kill the victim, the taking of the latter’s personal property being merely an
afterthought? Where the homicide is notconclusively shown to have been committed for the purpose of robbing the
victim, or where the robbery was not proven at all, there can be no conviction for robo con homicidio. 63

II

This court finds that the prosecution proved beyond reasonable doubt the guilt of Chavez for the separate crime of
homicide.

First, the alibi of Chavez still placeshim at the scene of the crime that early morning of October 28, 2006.

The victim, Elmer Duque, went by the nickname, Barbie, and he had a boyfriend named Maki. Nevertheless,
Chavez described his friendship with Barbie to be "[w]e’re like brothers."  He testified during cross-examination that
64

he was a frequent visitor at Barbie’s parlor that he cannot recall how many times he had been there.  This speaks of
65

a close relationship between Chavez and Barbie.

Chavez testified that he went to Barbie’s house at 1:00 in the morning of October 28, 2006 to settle his
misunderstanding with Barbie who suspected him of having a relationship with Barbie’s boyfriend:

MARK JASON CHAVEZ was a friend to the victim, Barbie, for almost three (3) years and the two (2) treated each
other like brothers. The latter, however, suspected Mark Jason of having a relationship with Maki Añover, Barbie’s
boyfriend for six (6) months, which resulted in a misunderstanding between them. Mark Jason tried to patch things
up with Barbie so thru a text message he sent on the evening of 27 October 2006, he asked if they could talk. When
Barbie did not reply, he decided to visit him at his parlor at around 1:00 o’clock in the morning. Barbie let him in and
they tried to talk about the situation between them. Their rift, however, was not fixed so he decided to gohome. Later
on, he learned that Barbie was already dead. 66

This court has considered motive as one of the factors in determining the presence of an intent to kill,  and a
67

confrontation with the victim immediately prior to the victim’sdeath has been considered as circumstantial evidence
for homicide.68

Second, the number of stab wounds inflicted on Barbie strengthens an intention to kill and ensures his death.The
prosecution proved that there was a total of 22 stab wounds found indifferent parts of Barbie’s body and that a
kitchen knife was found in a manhole near Chavez’s house at No. 536, 5th Street, San Beda, San Miguel, Manila. 69

The Court of Appeals’ recitation of facts quoted the statement of Chavez’s mother. This provides, among others, her
son’s confession for stabbing Barbie and throwing the knife used in a manhole near their house:

Na si Noy na aking anak ay nagtapat sa akin tungkol sa kanyang kinalaman sa pagkamatay ni Barbie at kasabay
ang pagbigay sa akin ng dalawang (2) piraso ng cellular phones na pag/aari [sic] ni Barbie na kanyang kinuha
pagka/tapos [sic] ng insidente.

Na ipinagtapat din sa akin ni Noy na ang ginamit na panaksak na isang kutsilyo na gamit namin sa bahay ay
inihulog niya sa manhole sa tapat ng aming bahay matapos ang insidente.

732
At ang isang piraso ng kwintas nakinuha rin nya mula kay Barbie ay naisanla niya sa isang sanglaan sa Quezon
City.

Na ang suot niyang tsinelas ay nag/iwan [sic] ng bakas sa pinangyarihan ng insidente. At sya rin ang nakasugat sa
kanyang sariling kamay ng [sic] maganap ang insidente.

Na sinabi niya sa akin na wala siyang intensyon na patayin [sic] si Barbie kundi ay pagnakawan lamang. (Emphasis
70

supplied)

Even if this statement was not taken into account for being hearsay, further investigation conducted still led tothe
unearthing of the kitchen knife with a hair strand from a manhole near Chavez’s house. 71

Third, no reason exists to disturb the lower court’s factual findings giving credence to 1) Peñamante’s positive
identification of Chavez as the person leaving Barbie’s house that early morning of October 28, 2006  and 2) the
72

medico-legal’s testimony establishing Barbie’s time of death as 12 hours prior to autopsy at 1:00 p.m., thus,
narrowing the time of death to approximately 1:00 a.m. of the same day, October 28, 2006. 73

All these circumstances taken together establish Chavez’s guilt beyond reasonable doubt for the crime of homicide.

III

There is a disputable presumption that "a person found in possession of a thing taken in the doing of a recent
wrongful act is the taker and the doer of the whole act; otherwise, thatthing which a person possesses, or exercises
acts of ownership over, are owned by him."  Thus, when a person has possession of a stolen property, hecan be
74

disputably presumed as the author of the theft. 75

Barbie’s missing cellular phones were turned over to the police by Chavez’s mother, and this was never denied by
the defense.  Chavez failed to explain his possession of these cellular phones.  The Court of Appeals discussed
76 77

that "a cellular phone has become a necessary accessory, no person would part with the same for a long period of
time, especially in this case as it involves an expensive cellular phone unit, as testified by Barbie’s kababayan,
witness Raymond Seno[f]a." 78

However, with Chavez and Barbie’s close relationship having been established, there is still a possibilitythat these
cellphones were lent to Chavez by Barbie.

The integrity of these cellphones was also compromised when SPO3 Casimiro testified during cross-examination
that the police made no markings on the cellphones, and their SIM cards were removed.

Q: But you did not place any marking on the cellphone, Mr. witness?

A: No, sir.

Atty. Villanueva: No further questions, Your Honor.

Court: When you received the items,there were no markings also?

Witness: No, Your Honor.

Court: The cellular phones, were they complete with the sim cards and the batteries?

A: There’s no sim card, Your Honor.

Q; No sim card and batteries?

A; Yes, Your Honor.

Q: No markings when you receivedand you did not place markings when these were turned over to the Public
Prosecutor, no markings?

A: No markings, Your Honor. 79

The other missing items were no longer found, and no evidence was presented to conclude that these weretaken by
Chavez. The statement of Chavez’s mother mentioned that her son pawned one of Barbie’s necklaces ["At ang
isang piraso ng kwintas na kinuha rin nya mula kay Barbie ay naisanla niya sa isang sanglaan sa Quezon City"  ], 80

but, as earlier discussed, this statement is mere hearsay.

733
In any case, the penalty for the crime of theft is based on the value of the stolen items.  The lower court made no
81

factual findings on the value of the missing items enumerated in the information — one Nokia cellphone unit, one
Motorola cellphone unit, six pieces ladies ring, two pieces necklace, and one bracelet.

At most, prosecution witness Raymund Senofa, a town mate of Barbie, testified that he could not remember the
model of the Motorola fliptype cellphone he saw used by Barbie but that he knew it was worth 19,000.00 more or
less.  This amounts to hearsay as he has no personal knowledge on how Barbie acquired the cellphone or for how
82

much.

These circumstances create reasonable doubt on the allegation that Chavez stole the missing personal properties
of Barbie.

It is contrary to human nature for a mother to voluntarily surrender her own son and confess that her son committed
a heinous crime.

Chavez was 22 years old, no longer a minor, when he voluntarily went to the police station on November 5, 2006 for
investigation,  and his mother accompanied him. SPO3 Casimiro testified that the reason she surrendered Chavez
83

was because "she wanted to help her son"  and "perhaps the accused felt that [the investigating police] are getting
84

nearer to him."  Nevertheless, during cross-examination, SPO3 Casimiro testified:

85

Q: Regarding the mother, Mr. witness, did I get you right that when the mother brought her son, according to you
she tried to help her son, is that correct?

A: That is the word I remember, sir.

Q: Of course, said help you do notknow exactly what she meant by that?

A: Yes, sir.

Q: It could mean that she is trying to help her son to be cleared from this alleged crime, Mr. witness?

A: Maybe, sir. 86

Chavez’s mother "turned-over (2) units of Cellular-phones and averred that her son Mark Jason told her that said
cellphones belong[ed] to victim Barbie. . . [that] NOY was wounded in the incident and that the fatal weapon was put
in a manhole infront[sic] of their residence."  The records are silent on whether Chavez objected to his mother’s
87

statements. The records also do not show why the police proceeded to get his mother’s testimony as opposed to
getting Chavez’s testimony on his voluntary surrender.

At most, the lower court found thatChavez’s mother was informed by the investigating officer at the police station of
the consequences in executing a written statement withoutthe assistance of a lawyer.  She proceeded to give her
88

statement dated November 7, 2006 on her son’s confession of the crime despite the warning.  SPO3 Casimiro
89

testified during his cross-examination:

Q: Do you remember if anybody assisted this Anjanette Tobias when she executed this Affidavit you mentioned?

A: She was with some neighbors.

Atty. Villanueva

Q: How about a lawyer, Mr. Witness?

A: None, sir.

Q: So, in other words, no lawyer informed her of the consequence of her act of executing an Affidavit?

A: We somehow informed her of what will be the consequences of that statement, sir.

Q: So, you and your police officer colleague at the time?

A: Yes, sir. 90

The booking sheet and arrest report states that "when [the accused was] appraised [sic] of his constitutional rights
and nature of charges imputed against him, accused opted to remain silent."  This booking sheet and arrest report
91

734
is also dated November 7, 2006, or two days after Chavez, accompanied by his mother, had voluntarily gone to the
police station.

The right to counsel upon being questioned for the commission of a crime is part of the Miranda rights, which require
that:

. . . (a) any person under custodial investigation has the right to remain silent; (b) anything he says can and will be
used against him in a court of law; (c) he has the right totalk to an attorney before being questioned and to have his
counsel present when being questioned; and (d) if he cannot afford an attorney, one will be provided before any
questioning if he so desires. 92

The Miranda rightswere incorporated in our Constitution but were modified to include the statement thatany waiver
of the right to counsel must be made "in writing and in the presence of counsel." 93

The invocation of these rights applies during custodial investigation, which begins "when the police investigation is
no longer a general inquiry into an unsolved crime but has begun tofocus on a particular suspect taken into custody
by the police who starts the interrogation and propounds questions to the person to elicit incriminating statements." 94

It may appear that the Miranda rightsonly apply when one is "taken into custody by the police," such as during an
arrest. These rights are intended to protect ordinary citizens from the pressures of a custodial setting:

The purposes of the safeguards prescribed by Miranda are to ensure that the police do not coerce or trick captive
suspects into confessing, to relieve the "inherently compelling pressures" "generated by the custodial setting itself,"
"which work to undermine the individual’s will to resist," and as much as possible to free courts from the task of
scrutinizing individual cases to try to determine, after the fact, whether particular confessions were voluntary. Those
purposes are implicated as much by in-custody questioning of persons suspected of misdemeanours as they are by
questioning of persons suspected of felonies.  (Emphasis supplied)
95

Republic Act No. 7438  expanded the definition of custodial investigation to "include the practice ofissuing an
96

‘invitation’ to a person who is investigated in connection with an offense he is suspected to have committed, without
prejudice to the liability of the ‘inviting’ officer for any violation of law."
97

This means that even those who voluntarily surrendered before a police officer must be apprised of their Miranda
rights. For one, the same pressures of a custodial setting exist in this scenario. Chavez is also being questioned by
an investigating officer ina police station. As an additional pressure, he may have been compelled to surrender by
his mother who accompanied him to the police station.

This court, thus, finds that the circumstantial evidence sufficiently proves beyond reasonable doubt that Chavez is
guilty of the crime of homicide, and not the special complex crime of robbery with homicide.

On the service of Chavez’s sentence, the trial court issued the order dated November 14, 2006 in that "as prayed
for, the said police officer is hereby ordered to immediately commit accused, Mark Jason Chavez y Bitancor @ Noy
to the Manila City Jail and shall be detained thereat pending trial of this case and/or untilfurther orders from this
court."  The order of commitment dated September 28, 2011 was issued after his trial court conviction in the
98

decision dated August 19, 2011.

Chavez has been under preventive detention since November 14, 2006, during the pendency of the trial.  This 1âwphi1

period may be credited in the service of his sentence pursuant to Article 29 of the Revised Penal Code, as
amended:

ART. 29. Period of preventive imprisonment deducted from term of imprisonment.– Offenders or accused who have
undergone preventive imprisonment shall be credited in the service of their sentence consisting of deprivation of
liberty, with the full time during which they have undergone preventive imprisonment if the detention prisoner agrees
voluntarily in writing after being informed of the effects thereof and with the assistance of counsel to abide by the
same disciplinary rules imposed upon convicted prisoners, except in the following cases:

1. When they are recidivists, or have been convicted previously twice or more times of any crime; and

2. When upon being summoned for the execution of their sentence they have failed to surrender voluntarily.

If the detention prisoner does notagree to abide by the same disciplinary rules imposed upon convicted prisoners,
he shall do so in writing with the assistance of a counsel and shall be credited in the service of his sentence with
four-fifths of the time during which he has undergone preventive imprisonment.

Credit for preventive imprisonment for the penalty of reclusion perpetua shall be deducted from thirty (30) years.

735
Whenever an accused has undergone preventive imprisonment for a period equal to the possible maximum
imprisonment of the offense charged to which he may be sentenced and his case is not yet terminated, he shall be
released immediately without prejudice to the continuation of the trial thereof or the proceeding on appeal, if the
same is under review. Computation of preventive imprisonment for purposes of immediate release under this
paragraph shall be the actual period of detention with good conduct time allowance: Provided, however, That if the
accused is absent without justifiable cause at any stage of the trial, the court may motu proprio order the rearrest of
the accused: Provided, finally, That recidivists, habitual delinquents, escapees and persons charged with heinous
crimes are excluded from the coverage of this Act. In case the maximum penalty to which the accused may be
sentenced is destierro, he shall be released after thirty (30) days of preventive imprisonment. 99

Finally, this court laments thatobject evidence retrieved from the scene of the crime were not properly handled, and
no results coming from the forensic examinations were presented to the court. There was no examination of the
fingerprints found on the kitchen knife retrieved from the manhole near the house of Chavez.  There were no
100

results of the DNA examination done on the hair strands found with the knife and those in the clutches of the victim.
Neither was there a comparison made between these strands of hair and Chavez’s. There was no report regarding
any finding of traces of blood on the kitchen knife recovered, and no matching with the blood of the victim or
Chavez’s. The results of this case would have been rendered with more confidence at the trial court level had all
these been done. In many cases, eyewitness testimony may not be as reliable — or would have been belied — had
object evidence been properly handled and presented.

We deal with the life of a personhere. Everyone’s life — whether it be the victim’s or the accused’s — is valuable.
The Constitution and our laws hold these lives in high esteem. Therefore, investigations such as these should have
been attended with greaterprofessionalism and more dedicated attention to detail by our law enforcers. The quality
of every conviction depends on the evidence gathered, analyzed, and presented before the courts. The public’s
confidence on our criminal justice system depends on the quality of the convictions we promulgate against the
accused. All those who participate in our criminal justice system should realize this and take this to heart.

WHEREFORE, the judgment of the trial court is MODIFIED. Accused-appellant Mark Jason Chavez y Bitancor alias
"Noy" is hereby declared GUILTYbeyond reasonable doubt of the separate and distinct crime of HOMICIDE.
Inasmuch as the commission of the crime was not attended by any aggravating or mitigating circumstances,
accused-appellant Chavez is hereby SENTENCEDto suffer an indeterminate penalty ranging from eight (8) years
and one (1) day of prision mayor, as minimum, to seventeen (17) years and four (4) months of reclusion temporal,
as maximum.

Accused-appellant Chavez's period of detention shall be deducted if consistent with Article 29 of the Revised Penal
Code.

SO ORDERED.

736
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 181921               September 17, 2014

INTERORIENT MARITIME ENTERPRISES, INC., Petitioner, 

vs.
VICTOR M. CREER III, Respondent.

DECISION

DEL CASTILLO, J.:

"The oft repeated rule is that whoever claims entitlement to the benefits provided by law should establish his or her
right thereto by substantial evidence." 1

This Petition for Review on Certiorari  assails the November 29, 2007 Decision  of the Court of Appeals (CA) in CA-
2 3

G.R. SP No. 90374 which reversed and set aside the July 30, 2004 Decision  of the National Labor Relations
4

Commission (NLRC). The said NLRC Decision affirmed the November 28, 2003 Decision  of the Labor Arbiter which
5

dismissed the Complaint  filed by respondent Victor M. Creer III (Victor) against petitioner InterOrient Maritiime
6

Enterprises, Inc. (InterOrient) for permanent disability benefits, medical reimbursement, sickness allowances, moral
and exemplary damages, and attorney’s fees.

Also assailed in this Petition is the February 21, 2008 CA Resolution  which denied InterOrient’s Motion for
7

Reconsideration. 8

Factual Antecedents

On April 4, 2001, InterOrient hired Victor as Galley Boy on board the vessel M/V MYRTO owned by Calidero
Shipping Company, Ltd. (Calidero) for a period of nine months, which may be extended for three more months upon
mutual consent of the parties. Victor was required to work 48 hours a week, with a basic monthly salary of
US$235.00 and US$94.00 fixed overtime pay per month.

Prior to embarkation, Victor went through the requisite Pre-Employment Medical Examination (PEME) and was
declared fit for sea duty. On May 12, 2001, Victor commenced his employment on boardthe vessel where he
performed the following duties and responsibilities as Galley Boy/2nd Cook:

* carry food stuff from reefer and dry store provisions to galley;

* wash vegetables;
737
 * prepare and cook breakfast;

* prepare and cook lunch and dinner;

* wash used cooking utensils;

* keep hygiene in mess room and mess room pantry;

* general cleaning in provision chambers and dry provision store;

* clean up mess room. 9

As 2nd Cook, Victor was tasked to get provisions from the cold storage which is kept at its coldest temperature to
maintain freshness of the food stored therein. He would do this either immediately before or after his exposure to
intense heat in the galley.

Victor alleged that when he was about to get provisions from the cold storage sometime inNovember 2001, he felt a
sudden pain in his chest that radiated to his back. Since then, he experienced incessant cough, nasal congestion,
difficulty in breathing, physical weakness, chills and extreme apprehension. According tohim, this condition persisted
until the expiration of his contract on May 7, 2002.

On May 9, 2002, Victor arrived in Manila. The following day, he reported to the office of InterOrient and informed the
company about the pain he experienced while he was on board. Victor averred that InterOrient merely advised him
to consult a doctor without giving him any doctor’s referral. He did, however, sign a Receipt and Release  where he
10

acknowledgedreceipt of the full payment of his monetary entitlements under the employmentcontract, which
provides in part, viz:

I hereby declare and confirm that I have no other claim against said vessel, her Master, Owners, Operators and
Agents and I hereby discharge and release them from any other liability whatsoever[.] I further certify and confirm
that I worked on board the said vessel under normal conditions and that I have not contracted or suffered any illness
orinjury from my work and that I was discharged in good and perfect health. 11

Thereafter, Victor claimed that he underwent medical examination at the Fatima Medical Clinic where he shouldered
all expenses. Although he reported his condition to InterOrient, he was still notgiven any medical assistance.
Instead, he was merely told to continue medication and consultation.

On June 18, 2002, Victor went to the Heart and Lung Diagnostic Center where his attending physician, Dr.
Fernando G. Ayuyao (Dr. Ayuyao), found Victor to be suffering from Community-Acquired Pneumonia 1 and
Bronchial Asthma. Medicines were prescribed and he was advised to have another chest xray for re-evaluation after
two weeks. One month later, or on July 18, 2002, Dr. Ayuyao prescribed Victor with anti-TB medications.
Victorclaimed that he continued his medication for nine months. But when heconsulted another doctor, a certain Dr.
Purugganan from Citihealth Diagnostic Centeron June 5, 2003, it was found out that he had far-advanced
pulmonary tuberculosis. 12

On August 13, 2003, Victor consulted another physician,Dr. Efren R. Vicaldo (Dr. Vicaldo), at the Philippine Heart
Center. After conducting a medical examination and evaluation, Dr. Vicaldo issueda medical certificate indicating
that Victor was diagnosed with Hypertension, Stage II, and Pulmonary Tuberculosis.  He gave Victor an impediment
13

grade VIII (33.59%)  and further declared him unfit to resume work as a seaman in any capacity, and that his illness
14

was considered work-aggravated. 15

Victor contended that during the course of his treatment, he regularly informed InterOrient of his sickness. However,
he was neitherapprised of his rights to nor paid sickness allowance amounting to US$940.00 asmandated in the
Philippine Overseas Employment Agency (POEA) 2000 Amended Standard Terms and Conditions of Employment
Contract Governing Seafarers (POEA Contract). And as his requests for payment of the said allowance were
consistently ignored, he filed with the Labor Arbiter on August 28, 2003 a Complaint for permanent disability benefits
for pulmonary tuberculosis, medical reimbursement, sickness allowance, compensatory, moral and exemplary
damages, and attorney’s fees against InterOrient and Calidero.

In its Position Paper,  InterOrient negated Victor’s claim for disability benefits averring that the same has no
16

factual,contractual or legal basis. It argued that his discharge from the vessel was not occasioned by any illness or
injury sustained or contracted on board but was simply due tocompletion or expiration of his contract; that he
voluntarily executed a Receipt and Release document wherein he acknowledged that he had notcontracted any
illness while on board; that he was released in good and perfect health; and that there is no clear evidence that
shows his entitlement to the benefits or damages being claimed.

Ruling of the Labor Arbiter

738
In his Decision  of November 28, 2003, the Labor Arbiter notedthat there is nothing on record to show that Victor
17

ever made any formal claim for sickness allowance, medical benefitsand disability benefits while on board the
vessel or immediately after his repatriation. Neither did he submit to, nor apply for any post-employment medical
examination withinthree days from his repatriation – a requirement for claims for sickness and disability benefits.
Instead, his Complaint to recover benefits based on the claim that he contracted sickness on board the vessel was
only filed 15 months after his repatriation.

The Labor Arbiter took judicial notice of the fact that seamen enjoy the most generous and liberal medical and
disability benefits of all overseas workers. Thus, he deemed it contrary to logic, reason and experience for Victor not
to claim medical and sickness benefitsif he really was ill while on board the vessel, or immediately after his
repatriation. In conclusion, the Labor Arbiter held that InterOrient cannot be held liable for Victor’s claims since he
must have contracted his ailment after repatriation and not while aboard the vessel, not to mention that the contract
between the parties had already expired. Hence, the dispositive portion of the said Decision reads:

WHEREFORE, premises considered, the complaint is hereby dismissed for lack of merit.

SO ORDERED. 18

Ruling of the National LaborRelations Commission

Victor appealed tothe NLRC averring the following: that the Receipt and Release primarily relied upon by the Labor
Arbiter in arriving athis Decision contained a mere pro-forma addendum (particularly a certificate of fitness) which
had no substantial basis; that said Receipt and Release cannot overrule the certifications of the doctors/health
experts as to the status of his health; that the Receipt and Release cannot effectively bar his entitlement to benefits
since at the time of its execution, he honestly believed that what he had was just the common cough and colds that
he has had for several months; that he did not know that letting common colds persist for prolonged periods
weakens the body’s defenses and increases the risk of acquiring infection, including tuberculosis; that the absence
of any showing that he was claiming to be sick or claiming sickness benefits does not prevent his present claim;that
his acquisition of the infection can be clearly traced to his employment with InterOrient; that the absence of signs
and symptoms of tuberculosis while still underthe employ of InterOrient, and even after his disembarkation, does not
absolutely mean that he was free from such infection during the said period; and that the initial stages of
tuberculosis are usually asymptomatic thus explaining the absence of signs and symptoms during the early stages
of his infection while he was on board the vessel.

The NLRC, however, did not find merit in Victor’sarguments. In a Decision  dated July 30, 2004, it affirmed in
19

totothe Decision of the Labor Arbiter and dismissed Victor’s appeal.

Victor moved for reconsideration  but the same was denied in an Order  dated April 20, 2005.
20 21

Ruling of the Court of Appeals

The CA, in resolving Victor’s Petition for Certiorari  in a Decision  dated November 29, 2007, granted the same and
22 23

awarded him permanent disability benefits and attorney’s fees. Applying Section 32-A of the POEA Contract, the CA
declared Victor’s illness, pulmonary tuberculosis, included inthe list of occupational diseases. It found that Victor
was overworked and over-fatigued as a result of the long hours of work required by his duties and that he was
exposed todaily rapid variations in temperature. Aside from physical strain, he was also subjected to emotional
stress brought about by the separation from his family. The CA concluded that with his daily exposure to these
factors which could weaken his immune system, it was not impossible that he contracted tuberculosis during the
course of his employment.

The CA disregarded the argument attributing the cause of ailment to Victor’s lifestyle and activities after his
repatriation, explaining that it was sufficient that the employment contributed even ina small degree to the
development of the disease. Anent InterOrient’s contention that Victor never intimated or complained about any
illness or injury while on board the vessel, the said court stated that it is not required for an illness to be considered
as an occupational disease before a Complaint can be filed. One needs only to prove that the ailment was
contracted while working under conditions involving the risk described in the POEA Contract. The CA did not
likewise give much weight to the Receipt and Release signed by Victor as it found its terms so unconscionable that
Victor was shortchanged by a significant amount.

InterOrient filed a Motion for Reconsideration  which was denied by the CA in a Resolution  dated February 21,
24 25

2008.

Issues

Hence, this Petition for Review on Certiorariimputing upon the CA the following errors:

739
X X X THE HONORABLE COURT OFAPPEALS GRIEVOUSLY ERRED IN AWARDING PERMANENT DISABILITY
BENEFITS IN THE AMOUNT OF US$60,000.00 AND ATTORNEY’S FEES, CONSIDERING THAT:

A.

THE COURT OF APPEALS ERRED INSETTING ASIDE THE NLRC’S DECISION, THERE BEING NO GRAVE
ABUSE OF DISCRETION ON THE PART OF THE COMMISSION. ON THE CONTRARY, THE NLRC DECISION
WAS SUPPORTED BY SUBSTANTIAL EVIDENCE.

B.

THE COURT OF APPEALS DISREGARDED THE TERMS AND CONDITIONS OF THE POEA STANDARD
EMPLOYMENT CONTRACT WHEN IT RULED THAT VICTORM. CREER III’S ILLNESS WAS WORK-RELATED
DESPITE THE FACT THAT THE SAME AROSE ELEVEN (11) MONTHS AFTER THE EXPIRATION OF HIS
EMPLOYMENT CONTRACT.

C.

THE COURT OF APPEALS ERRED IN RULING THAT VICTOR M. CREER III’S ILLNESS AROSE DURING HIS
EMPLOYMENT OR THE RISK OF CONTRACTING THE SAME WAS AGGRAVATED BY HIS EMPLOYMENT
DESPITE THE LACKOF REASONABLE PROOF IN THIS RESPECT.

D.

THE COURT OF APPEALS ERRED IN AWARDING ATTORNEY’S FEES.  The pivotal issue is whether InterOrient
26

can be held accountable for Victor’s disease even if the same was diagnosed 11 months after he disembarked from
the vessel upon the termination of his employment contract.

The Parties’ Arguments

InterOrient insists that the CA erred in ruling that Victor’s sickness was work-related considering the dearth of
evidence that would establish that he suffered from the symptoms of the disease while on board the vessel. It
argues that if Victor was really suffering from chest and backpains, incessant coughing and low-grade fever, he
would have reported the matter in the Ship’s Logbook, inform his superiors, and ask for a medical check-up upon
arrival. However, he did not. Instead, upon his repatriation, Victor willingly signed a Receipt and Release declaring
that he was not suffering from any ailments at that time. On the other hand, there is strong probability that Victor
contracted the disease after his disembarkation.

InterOrient also contends that Victor failed to satisfy allthe conditions for compensability of an occupational disease
as provided under the POEA Contract. It maintains that Victor failed to prove that hecontracted TB as a result of his
exposure to the described risks; that it was contracted within a period of exposure and under such other factors
necessary to contract it; and that there was an absence of notorious negligence on his part. Lastly, InterOrient
argues that Victor’s notorious negligence was apparent as he neither declared his alleged illness nor informed the
former about it; he did notinform the agency about his initial diagnoses; he did not follow the doctor’s
recommendation to take the medication for four months; and it took him a long time after the second diagnosis
before he went back to the physician. Had Victor not been negligent, his TB could have been successfully treated.

Victor, on the other hand, adopts the CA’s ratiocinations in its assailed Decision and impresses upon this Court
thathis illness was contracted during the term of his employment and that the risk of contracting the same was
increased or aggravated by his working conditions.

Our Ruling

The Petition is impressed with merit.

At the outset, we notethat the Petition essentially assails the factual findings of the CA. As a rule, this Court is not a
trier of facts and only questions of law may be raised in petitions brought under Rule 45 of the Rules of Court.
However, the Court is constrained to decide factual issues in exceptional cases, one of which is when there is
conflict between the findings and position of the CA, on one hand, and that of the quasi-judicial bodies, on the
other,  as in this case.
27

For a seaman’s claim for disability to prosper, it is mandatory that within three days from his repatriation, he is
examined by a company-designated physician. Non-compliance with this mandatory requirement results in the
forfeiture of the right to claim for compensation and disability benefits.

740
It is undisputed that on May 7, 2002, Victor’s employment contract was completed. He arrived in Manila on May 9,
2002; the following day, or on May 10, 2002, he reported to the office of InterOrient. Although he averred that he
informed InterOrient about the pain he experienced whileon board the vessel, the company allegedly only advised
him to consult a doctor but did not give any referral.

We are not persuaded by Victor’s contention. It must be stressed that his repatriation was not due toany medical
reasons but because his employment contract had already expired. Other than his self-serving allegation that he
experienced pain while on board, he was not able to substantiate the same. There was no showing that he reported
his injury to his officers while on board the vessel; neither did he prove that he sought medical attention but was
refused. Likewise, other than his bare and self-serving assertion that he informed InterOrient about his pain, he
presented no evidence ortangible proof that he indeed requested for medical attention, much more that he was
rebuffed.

On the contrary, the records show that when he reported to InterOrient immediately after his repatriation, he signed
a Receipt and Release stating that he has not contracted or suffered any illness or injury from work and that he was
discharged in good and perfect health. Moreover, we are baffled why, if indeed Victor needed medical services, he
opted to consult several doctors other than the company-designatedphysician. He offered no explanation for this.

"The rationale for the rule [on mandatory post-employment medical examination within three days from repatriation
by a company-designated physician] is that reporting the illness or injury within three days from repatriation fairly
makes it easier for a physician to determine the cause of the illness or injury. Ascertaining the real cause of the
illness or injury beyond the period may prove difficult. To ignore the rule might set a precedent with negative
repercussions, like opening floodgates to a limitless number of seafarers claiming disability benefits, or causing
unfairness to the employer who would have difficultydetermining the cause of a claimant’sillness because of the
passage of time. The employer would then have no protection against unrelated disability claims." 28

In fine, we hold that Victor’s non-compliance with the three-day rule on post-employment medical examination is
fatal to his cause. As a consequence, his right to claim for compensation and disability benefits is forfeited.  On this
1âwphi1

score alone, his Complaint could have been dismissed outright.

Victor’s illness is not compensable.

Even if we disregard the mandatory three-day rule on post-employment medical examination by the company-
designated physician, Victor’s claim for disability benefits must still failfor not being compensable.

For an illness to be compensable, Section 20(B)(6)  of the 2000 Amended Standard Terms and Conditions
29

Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels (2000 Amended StandardTerms
and Conditions), deemed incorporated in the POEA Contract, requires the concurrence of two elements: first, that
the illness mustbe work-related; and second, that the work- related illness must have existed during the term of the
seafarer’s employment contract. 30

a) Victor failed to show that his illness existed during the term of his contract.

In this case, Victor submitted no proofthat his illness was contracted during the term of his contract with
InterOrient. As already mentioned, the reason for Victor’s repatriation was the completion/expiration of his
contract and not because of any sickness. Other than his uncorroborated and self-serving assertion that he
experienced chest pains while on board the vessel, there was absolutely no proof at all that he consulted a
doctor while on board, or thathe reported the same to his superiors so that he will be provided with medical
assistance. On the contrary, upon repatriation, he signed a Receipt and Release wherein he acknowledged
that he worked under normal conditions on board the vessel; thathe did not contract or suffer any injury; and
that hewas discharged in good health. Victor never alleged that he was coerced into signing the Receipt and
Release or that he did not understand the same. Thus, it was crucial that Victor presented "concrete proof
showing that he acquired orcontracted the x x x illness that resulted to his disability during the term of his
employment contract."  Proof of this circumstance was particularly crucial considering the absence of any
31

evidence that he reported his illness while on board and after his repatriation.  However, all that Victor put
32

forward were bare allegations that he experienced what appeared to be symptoms of pulmonary
tuberculosis on board the vessel, and the dogged insistence that his working conditions are proof enough
that his work contributed to his contracting the disease.

b) Victor failed to show thathis illness is work-related.

"Work-related illness" is defined under the 2000 Amended Standard Terms and Condition "as any sickness resulting
in disability or death due to an occupational disease listed under Section 32-A of [the said] contract[,] with the
conditions set therein satisfied."  There is no question that Pulmonary Tuberculosis is listed as an occupational
33

disease under Section 32-A(18). However, for the disability caused by this occupational disease to be compensable,
the POEA Contract provides conditions that must be satisfied, viz:

741
SECTION 32-A OCCUPATIONAL DISEASES

For an occupational disease and the resulting disability or death to be compensable, allof the following conditions
must be satisfied:

1. The seafarer’s work must involve the risks describe herein;

2. The disease was contracted as a result of the seafarer’s exposure to the describe[d] risks;

3. The disease was contracted within a period of exposure and under such other factors necessary to
contract it;

4. There was no notorious negligence onthe part of the seafarer. x x x (Emphasis supplied)

Victor miserably failed to comply with these conditions.

While pulmonary tuberculosis is listed as an occupational disease, the Court is not convinced that Victor’s
pulmonary tuberculosis is work-acquired or work-aggravated because if it were so, then at the outset, Victor should
have already been diagnosed with pulmonary tuberculosis when he sought medical help one month from his
repatriation. Instead, Dr. Ayuyao diagnosed him with Community Acquired Pneumonia I and Bronchial Asthma  – 34

sicknesses which aside from being different from pulmonary tuberculosis, were not shown to have any relation
thereto.

Furthermore, while it is undisputed thatVictor’s work as a Galley Boy/2nd Cook involved the risks provided in the
POEA Contract (first condition), i.e., overwork or fatigue and exposure to rapid variationsin temperature, there was
failure to prove that the TB was contracted as a result ofhis exposure to the said described risks (second condition).
No evidence on record shows how Victor’s working conditions caused or aggravated his TB. On the contrary, Victor
himself acknowledged that he worked under normal conditions while on board the vessel.

Likewise, the third and fourth conditions were not satisfied. There was no credible evidence on record to prove that
the TB was contracted within a period of exposure and under such other factors necessary to contract it. Neither is
there substantial evidence presented to show that his working conditions activated the disease-causing organism
thatmay be dormant in his system. As pointed out by both parties, pulmonary tuberculosis is airborne and easily
transmissible by infected patients. The risk of being infected, or acquiring, the tuberculosis infection is mainly
determined by exogenous factors.  The probability of contact with a case of tuberculosis, the intimacy and duration
35

of that contact, the degree of infectiousness of the case, and the shared environment of the contact are all important
determinantsof transmission.  On the other hand, the risk of developingthe disease after being infected is largely
36

dependent on endogenous factors.  The tuberculosis bacteria may lie dormant in the infected person’s immune
37

system for years before it becomes reactivated, or he may ultimately develop the disease within the first year or two
after infection, depending on the innate susceptibility to disease of the person and level of immunity.  Simply put,
38

there are so many possibilities how and when Victor could have acquired pulmonary tuberculosis. Itis "[t]he oft
repeated rule x x x that whoever claims entitlement to the benefits provided by law should establish his x x x right
thereto by substantial evidence."  "The general principle is that one who makes an allegation has the burden
39

ofproving it. A party alleging a critical fact must support his allegation with substantial evidence. Any decision based
on unsubstantiated allegation cannot stand as it will offend due process." 40

Besides, as already emphasized by this Court, "in the absence of substantial evidence, working conditions cannot
be accepted to have caused or at least increased the risk of contracting the disease x x x. Substantial evidence is
more than a mere scintilla. The evidence must be real and substantial, and not merely apparent; for the duty to
prove work-causation or work-aggravation imposed by law is real and not merely apparent." 41

The Court cannot give credence to the medical certificate issued by Dr. Vicaldo. Records failed to show that the said
medical certification, which declares Victor’s illness as work-aggravated, was supported by diagnostic tests and
procedures. There was no explanation how the conclusions were arrived at. Neither was there any medical records
orother sufficient proof presented that would support and validate the findings contained therein. At most, the said
medical certificate is a mere summary and generalization of Victor’s ‘medical history and condition based on a one-
time consultation. While it is true that "[p]robability and not ultimate degree of certainty is the test of proof in
compensation proceedings[, i]t cannot begainsaid, however, that award of compensation and disability benefits
cannot rest on speculations, presumptions and conjectures." 42

On the other hand, while the letter  of Dr. Ayuyao two months after Victor returned to the Philippines would suggest
43

that the latter had developed pulmonary tuberculosis by then, the said letter still does not establish that the disease
was work-related or work-aggravated. There is nothing on record that would establish the development of the illness
astraceable to Victor’s employment. The Court cannot take at face value Victor’s bare allegations that he suffered
incessant cough, nasal congestion, difficulty of breathing, and that he experienced physical weakness and chills
while on board. Plainly, the claim is unsubstantiated.

742
The Court cannot over-emphasize that "self-serving and unsubstantiated declarations are insufficient to establish a
case x x x where the quantum of evidence required to establish as fact is substantial evidence." 44

In fine, Victor's claim for disability benefits must be denied for failure to comply with the mandatory three-day rule on
post-employment medical examination without any valid or justifiable reason, and for being noncompensable there
being no showing that the illness existed during the term of his employment contract or that it is work-related.

As this Court has reiterated in a number of cases, it is "[ w ]ell aware of the principle that, consistent with the
purposes underlying the formulation of the POEA [Contract], its provisions must be applied fairly, reasonably and
liberally in favor of the seafarers, for it is only then that its beneficent provisions can be fully carried into effect. This
exhortation cannot, however, be taken to sanction the award of disability benefits and sickness allowance based on
flimsy evidence and/ or even in the face of an unjustified non-compliance with the mandatory reporting requirement
under the POEA [Contract]."  "Liberal construction is not a license to disregard the evidence[, or lack thereof] on
45

record; or to misapply [the] laws."  While we sympathize with Victor's plight, the Court is constrained to deny his
46

claims for disability benefits absent substantial evidence on record to justify such grant.

WHEREFORE, premises considered, the Petition is GRANTED and the assailed November 29, 2007 Decision of
the Court of Appeals in CA-G.R. SP No. 90374 is, accordingly, REVERSED and SET ASIDE. In lieu thereof, another
is entered REINSTATING the Decision dated July 30, 2004 of the National Labor Relations Commission which, in
tum, affirmed the Decision dated November 28, 2003 of the Labor Arbiter.

SO ORDERED.

CONCURRING OPINION

LEONEN, J.:

I concur in the result. I, however, wish to express some reservations regarding the present sweeping scope of the
mandatory three-day rule within which a seafarer must submit to medical examination prior to being able to succeed
in a claim for disability benefits and medical reimbursements.

Compliance with the mandatory three-day post-employment medical examination requirement (three-day rule) is
provided under the Philippine Overseas Employment Administration Standard Employment Contract (POEA-SEC).
Since Victor M. Creer III was hired by InterOrient on April 4, 2001,   the 2000 POEA-SEC applies to him. Section
1

20(B) of the 2000 POEA-SEC states: SECTION 20. COMPENSATION AND BENEFITS

....

B. COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS

The liabilities of the employer when the seafarer suffers workrelated injury or illness during the term of his contract
are as follows:

....

3. Upon sign-off from the vessel for medical treatment, the seafarer is entitled to sickness allowance equivalent to
his basic wage until he is declared fit to work or the degree of permanent disability has been assessed by the
company-designated physician, but in no case shall this period exceed one hundred twenty (120) days.

For this purpose. the seafarer shall submit himself to a·postemployment medical examination by a company-
designated physician within three-working days upon his return except when he is physically incapacitated to do so,
in which case, a written notice to the agency within the same period is deemed as compliance. Failure of the
seafarer to comply with the mandatory reporting requirement shall result in his forfeiture of the right to claim the
above benefits.

If a doctor appointed by the seafarer disagrees with the assessment, a third doctor may be agreed jointly between
the Employer and the seafarer. The third doctor’s decision shall be final and binding on both parties. (Emphasis
supplied)

I acknowledge that the current doctrine is well-articulated in the ponencia, thus:

For a seaman’s claim for disability to prosper, it is mandatory that within three days from his repatriation, he is
examined by a companydesignated physician. Non-compliance with this mandatory requirement results in the
forfeiture of the right to claim for compensation and disability benefits.

....
743
It must be stressed that his repatriation was not due to any medical reasons but because his employmentcontract
had already expired.

....

In fine, we hold that Victor’s non-compliance with the three-day rule on post-employment medical examination is
fatal to his cause. As a consequence, his right to claim for compensation and disability benefits is forfeited. On this
score alone, his Complaint could have been dismissed outright.  (Emphasis supplied)
2

This is consistent with past cases.

For instance, Jebsens Maritime, Inc. v. Undag  involved a seafarer who was repatriated after the completion of his
3

four-month contract. He embarked in March 2003 and disembarked in July 2003. He consulted a personal physician
two months after his repatriation.  This court denied his claim for failure to comply with the three-day rule, explaining
4

that:

Within three days from repatriation, it would be fairly easier for a physician to determine if the illness was work-
related or not. After that period, there would be difficulty in ascertaining the real cause of the illness.
5

This court further stated in Jebsensthat:

Respondent claims that the 3-day mandatory rule is not applicable as it is only for those who were repatriated for
medical reasons. This could only mean that he had no medicalreason then. Inhis pleadings, he claimed that
sometime in July 2003, he showed manifestations of a heart disease as he suddenly felt chest pains, shortness of
breathand fatigability. He, however, failed to disclose when exactly in July 2003 that he felt those manifestations
whether before orafter his repatriation on July 18, 2003. If it was before the said date, heshould have submitted
himself to a medical examination three days after repatriation.  (Emphasis supplied, citation omitted) However, I am
6

of the view that there is basis to revisit the scope of such a doctrine.

First, current doctrine assumes thatseafarers will make claims only on the basis of breaches of contractual
obligations.

The Philippine Overseas Employment Administration or POEA regulations require certain provisions tobe put in the
employment contract. Necessarily, it prescribes a procedure thatfinds a balance of interest in both the amount and
the process for recovery of compensation as a result of occupational hazards suffered by the seafarer. The cause of
action in such recovery is based on contract inclusive of both statutory and regulatory provisions impliedly included
in it.

While this may be the theory pursued in practice, substantive law still allows recovery of damages for injuries
suffered by the seafarer as a result of a tortious violation on the part of the employer. This may be on the basis of
the provisions of the Civil Code as well as special laws. These special laws may relate, among others, to
environmental regulations and requirements to ensure the reduction of risks to occupational hazards both for the
seafarer and the public in general. In such cases, the process for recovery should not be constrained by contract.
Second, even as a basis for contractual breach, the exceptions provided in the Philippine Overseas Employment
Administration regulations and current jurisprudence do not contemplate situations that may result in an
unreasonable denial of the constitutional protection to labor.

The current exception is provided inthe same section, Section 20(B), of the POEA contract. Thus, in Wallem
Maritime Services, Inc. v. NLRC and Inductivo,  this court held that: Admittedly, Faustino Inductivo did not subject
7

himself to postemployment medical examination within three (3) days from his return to the Philippines, as required
by the above provision of the POEA standard employment contract. But such requirement is not absolute and
admits of an exception, i.e., when the seaman is physically incapacitated from complying with the
requirement.Indeed, for a man who was terminally ill and in need of urgent medical attention one could not
reasonably expect that he would immediately resort toand avail of the required medical examination, assuming that
he was still capable of submitting himself to such examination at that time. Itis quite understandable that his
immediate desire was to be with his family in Nueva Ecija whom he knew would take care of him. Surely, under the
circumstances, we cannot deny him, or his surviving heirs after his death, the right to claim benefits under the
law. (Emphasis supplied)
8

Also, in Crew and Ship Management International, Inc. v. Soria,  the seafarer, Zosimo Soria, failed to comply with
9

the three-day rule. However, this court relaxed this rule since Zosimo had a physical infirmity. 10

The other exception to the three-day rule is not patent from the POEA regulations but exists in doctrine.  Thisis
1âwphi1

when the employer refuses to refer the seafarer to a company-designated physician.

In Interorient Maritime Enterprises, Inc. v. Leonora S. Remo,  this court held:

11

744
. . . What if the seafarer reported to his employer but despite his request for a post-employment medical
examination, the employer, who is mandated to provide this service under POEA Memorandum Circular No. 055-96,
did not do so? Would the absence of a post-employment medical examination be taken against the seafarer?

Both parties in this case admitted that Lutero was confined in a hospital in Dubai for almost one week due to atrial
fibrillation and congestive heart failure. Undeniably, Lutero suffered a heart ailment while under the employ of
petitioners. This fact is duly established. Respondent has also consistently asserted that 2-3 days immediately after
his repatriation on April 19, 1999, Lutero reported to the office of Interorient, requesting the required post-
employment medical examination. However, it appears that, instead of heeding Lutero's request, Interorient
conveniently prioritized the execution of the Acknowledgment and Undertaking which were purportedly notarized on
April 20, 1999, thus leaving Lutero in the cold. In their pleadings, petitioners never traversed this assertion and did
not meet this issue head-on. This self-serving act of petitioners should not be condoned at the expense of our
seafarers. Therefore, the absence of a post-employment medical examination cannot be used to defeat
respondent’sclaim since the failure to subject the seafarer to this requirement was not due to the seafarer’s fault but
to the inadvertence or deliberate refusal of petitioners.  (Emphasis supplied)
12

I believe that the state of our exceptions even for a contractual obligation on the part of the employer is not
sufficient.

A physician does not test for all possible disease and injuries when a seafarer presents himself or herself for
examination.  The examination is limited to general standard operating procedures to test for the usual diseases
1âwphi1

expanded by the physician’s hypothesis of diseases or injuries as a result of a presentation of symptoms from the
patient. In many cases, diseases or the consequences of injuries that may havebeen suffered by the seafarer will
not be apparent to one’s self. There are diseases whose gestation periods are greater than three days.

Thus, it is possible that the repatriated seafarer will opt not to submit to post-employment medical examination for
the simple reason that no symptom may be apparent at that time. In my view, the legal and contractual limitation of
the exception to the mandatory post-employment examination to instances where the seafarer is "physically
incapacitated to do so"  will be contrary to the constitutional requirement for protection to labor and the priority that
13

the state should grant to health.

I concur in the result in this case because it does not appear that a) Victor grounded his cause of action on tort and
b) he was suffering from the kind of disease he allegedly contracted on the occasion of his employment which
symptoms could not have manifested within the mandatory three-day post-employment medical examination period.

Victor was also unable to prove that his illness was contracted during the term of his employment. He did notshow
that the natural course of the illness resulted in the permanent disability he claims. He did not support his allegation
that he felt chest pains while on board.  Further, findings of the physician he consulted did not overcome the
14

difficulties of showing that the illness is work-related or work-aggravated considering the lapse of more than a year
from his post-employment.

Some may argue that the relaxation of the three-day rule will reduce the competitiveness of Filipino seafarers. I do
not believe so. The competitiveness of our seafarers is attributed to their skills, creativity, and resiliency.
Competitiveness has very little to do with the mandatory three-day post-employment medical examination period.

ACCORDINGLY, I join the ponencia and vote to GRANT the petition.

745
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. P-14-3260               September 16, 2014

(Formerly A.M. No. 12-2-38-RTC)

OFFICE OF THE COURT ADMINISTRATOR, Complainant, 

vs.
EDGAR S. CRUZ, Clerk III, Regional Trial Court, Branch 52, Guagua, Pampanga, Respondent.

RESOLUTION

Per Curiam:

This administrative matter stemmed from the report entitled "Summary of Absences Incurred by Edgar S. Cruz"
submitted by tlie Chief of the Leave Division, Office of Administrative Services (OAS), Office of the Court
Administrator (OCA) on 6 February 2012. The report indicated that Edgar S. Cruz (Cruz), Clerk III, Branch 52,
Regional Trial Court (RTC), Guagua, Pampanga, incurred three (3) unauthorized absences in November and four
(4) unauthorized absences in December 2011.

In an indorsement  dated 8 March 2012, the OCA required Cruz to comment on the report submitted by the Leave
1

Division, OAS, OCA.

In his letter  dated 23 April 2012, Cruz explained that he was forced to skip work during the dates reported because
2

of circumstances beyond his control. He explained that since his wife works overseas, he had to attend to the needs
of their children first before reporting for work. He added that he often got sick and, as proof, he submitted medical
certificates showing that he was diagnosed and treated for systemic viral infection on 3 November 2011, acute
gastro-enteritis on 8 November 2011, and an infected wound on 14 November 2011.

Cruz prayed for compassion from the Court and promised not to commit the same mistake again. He likewise
promised to inform his superiors whenever he will absent himself from work.

The OCA found sufficient evidence to hold Cruz and recommended that he be dismissed from the service. 3

We adopt the findings and recommendation of the OCA.

Cruz admitted skipping work without filing the corresponding leave applications during the dates mentioned in the
report of the Leave Division, OAS, OCA. In his comment, Cruz could only present medical certificates to
substantiate his explanation that he fell sick during the subject dates. He, however, failed to submit any duly
accomplished and approved leave applications from his executive/presiding judge.

The Omnibus Rules Implementing Book V of Executive Order No. 292 and Other Pertinent Civil Service Laws (Civil
Service Rules) mandate that an employee must submit an application for both sick and vacation leaves, viz:

Rule XVI
Leave of Absence

xxxx

746
Section 16. All applications for sick leave of absence for one full day or more shall be on the prescribed form and
shall be filed immediately upon the employee’s return from such leave. Notice of absence, however, should be sent
to the immediate supervisor and/or to the office head. Application for sick leave in excess offive days shall be
accompanied by a proper medical certificate.

xxxx

Section 20. Leave of absence for any reason other than illness of an officer or employee or of any member of his
immediate family must be contingent upon the needs of the service. Hence, the grant of vacation leave shall be at
the discretion ofthe head of department/agency.

Under the Civil Service Rules, anemployee should submit in advance, whenever possible, an application for
vacation leave of absence for action by the proper chief of agency prior to the effective date of the leave. In case of
sick leave of absence, the application should be filed immediately upon the employee’s return. In the instant case, it
is clear from respondent Cruz’s own admission that he failed to file oracquire the necessary leave permits for his
absences.

Under Administrative Circular No. 14-20024 (Re: Reiterating the Civil Service Commission’s Policy on Habitual
Absenteeism), "[a]n officer or employee in the civil service shall beconsidered habitually absent if he incurs
unauthorized absences exceeding the allowable 2.5 days monthly leave credit under the law for at least three (3)
months in a semester or at least three (3) consecutive months during the year[.]"

Although strictly speaking respondent Cruz may not yet be considered habitually absent on the basis of his
unauthorized absences in November and December 2011, he should still be penalized because his omissions
clearly caused inefficiency and hampered public service. In Re: Unauthorized Absences of Karen R. Cuenca, Clerk
II, Property Division-Office of Administrative Services,5 this Court held that under Administrative Circular No. 2-99,
which took effect on 1 February 1999, "[a]bsenteeism and tardiness, even if such do not qualify as ‘habitual’ or
‘frequent’under Civil Service Commission Memorandum Circular No. 04, Series of 1991, shall be dealt with
severely[.]"

An evaluation of his record with the Employees’ Leave Division, OAS, OCA revealed that Cruz has the propensity of
not reporting for work. From January to April 2012 alone, Cruzincurred thirty (30) absences, broken down as follows:

Month-Day-Year Number of Absences

January 2012 (undertime/LWOP) 0.5 day

January 2-3, 12 and 31, 2012 4 days

(disapproved)

January 20 and 27, 2012 (VLWOP) 2 days

February 2012 (undertime/LWOP) 0.5 day

February 6, 9 and 13, 2012 3 days

(disapproved)

February 23-24 and 27, 2012 3 days

(VLWOP)

March 2012 (undertime/LWOP) 1 day

March 6-7, 2012 (disapproved) 2 days

March 5, 9, 23, 28 and 30, 2012 5 days

(VLWOP)

April 2012 (undertime/LWOP) 1.5 days

747
 April 2, 4, 13, 17, 19, 23, and 26- 7.5 days
27, 2012

It is evident from the aforesaid illustration that Cruz can be held administratively liable for being habitually absent
from January to March 2012. In fact, such was a continuation of his absenteeism from November 2011.  We also1avvphi1

noted that he exceededthe number of absences allowed by law in April 2012.

This marks the second time that hecan be found guilty of habitual absenteeism.  In the Resolution dated 15
1âwphi1

February 2012 in A.M. No. P-12-3040 (Judge Jonel S. Mercado v. Edgar Cruz, Clerk III, Branch 52, RTC, Guagua,
Pampanga), the Court found respondent guilty of gross insubordination, neglect of duty, misconduct, absenteeism
and tardiness and suspended him for one (1) year without pay and other benefits. Cruz was also sternly warned that
a repetition ofthe same or similar offense shall be dealt with severely. It was established in that case that respondent
Cruz defied and ignored several directives from his presiding judge to explain his enchant for absenting himself from
work without filing the required leave applications. It is evident that until now Cruz has not mended his ways.

Under Section 46 (b) of the Revised Rules on Administrative Cases in the Civil Service,  frequent unauthorized
6

absences in reporting for duty is classified as a grave offense punishable by suspension of six (6) months and one
(1) day to one (1) year for the first offense and dismissal from the service for the second offense.

There is no question that Cruz is again administratively liable. Although we commiserate with his situation, we
cannot ignore the fact that his habitual absenteeism has caused inefficiency in the performance of his functions. We
cannot countenance such infractions which seriously compromise efficiency and prejudice public service. 1âwphi1

Time and again, this Court has pronounced that any act which falls short of the exacting standards for public office,
especially on the part of those expected to preserve the image of the judiciary, shall not be countenanced. Public
Office is a public trust. Public officers must at all times be accountable to the people, serve them with utmost degree
of responsibility, integrity, loyalty and efficiency.
7

WHEREFORE, we find Edgar S. Cruz, Clerk III, Regional Trial Court; Branch 52, Guagua, Pampanga, GUILTY of
HABITUAL ABSENTEEISM. Accordingly, we DISMISS him from the service with forfeiture of all retirement benefits,
except accrued leave credits, and with prejudice to reemployment in any branch or instrumentality of the
government, including government-owned or controlled corporations.

SO ORDERED.

748
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 206510               September 16, 2014

MOST REV. PEDRO D. ARIGO, Vicar Apostolic of Puerto Princesa D.D.; MOST REV. DEOGRACIAS S.
INIGUEZ, JR., Bishop-Emeritus of Caloocan, FRANCES Q. QUIMPO, CLEMENTE G. BAUTISTA, JR.,
Kalikasan-PNE, MARIA CAROLINA P. ARAULLO, RENATO M. REYES, JR., Bagong Alyansang Makabayan,
HON. NERI JAVIER COLMENARES, Bayan Muna Partylist, ROLAND G. SIMBULAN, PH.D., Junk VF A
Movement, TERESITA R. PEREZ, PH.D., HON. RAYMOND V. PALATINO, Kabataan Party-list, PETER SJ.
GONZALES, Pamalakaya, GIOVANNI A. TAPANG, PH. D., Agham, ELMER C. LABOG, Kilusang Mayo Uno,
JOAN MAY E. SALVADOR, Gabriela, JOSE ENRIQUE A. AFRICA, THERESA A. CONCEPCION, MARY JOAN
A. GUAN, NESTOR T. BAGUINON, PH.D., A. EDSEL F. TUPAZ, Petitioners, 
vs.
SCOTT H. SWIFT in his capacity as Commander of the US. 7th Fleet, MARK A. RICE in his capacity as
Commanding Officer of the USS Guardian, PRESIDENT BENIGNO S. AQUINO III in his capacity as
Commander-in-Chief of the Armed Forces of the Philippines, HON. ALBERT F. DEL ROSARIO, Secretary,
pepartment of Foreign Affair.s, HON. PAQUITO OCHOA, JR., Executiv~.:Secretary, Office of the President, .
HON. VOLTAIRE T. GAZMIN, Secretary, Department of National Defense, HON. RAMON JESUS P. P AJE,
Secretary, Department of Environment and Natural Resoz!rces, VICE ADMIRAL JOSE LUIS M. ALANO,
Philippine Navy Flag Officer in Command, Armed Forces of the Philippines, ADMIRAL RODOLFO D. ISO
RENA, Commandant, Philippine Coast Guard, COMMODORE ENRICO EFREN EVANGELISTA, Philippine
Coast Guard Palawan, MAJOR GEN. VIRGILIO 0. DOMINGO, Commandant of Armed Forces of the
Philippines Command and LT. GEN. TERRY G. ROBLING, US Marine Corps Forces. Pacific and Balikatan
2013 Exercise Co-Director, Respondents.

DECISION

VILLARAMA, JR, J.:

Before us is a petition for the issuance of a Writ of Kalikasan with prayer for the issuance of a Temporary
Environmental Protection Order (TEPO) under Rule 7 of A.M. No. 09-6-8-SC, otherwise known as the Rules of
Procedure for Environmental Cases (Rules), involving violations of environmental laws and regulations in relation to
the grounding of the US military ship USS Guardian over the Tubbataha Reefs.

Factual Background

The name "Tubbataha" came from the Samal (seafaring people of southern Philippines) language which means
"long reef exposed at low tide." Tubbataha is composed of two huge coral atolls - the north atoll and the south atoll -
and the Jessie Beazley Reef, a smaller coral structure about 20 kilometers north of the atolls. The reefs of
Tubbataha and Jessie Beazley are considered part of Cagayancillo, a remote island municipality of Palawan. 1

In 1988, Tubbataha was declared a National Marine Park by virtue of Proclamation No. 306 issued by President
Corazon C. Aquino on August 11, 1988. Located in the middle of Central Sulu Sea, 150 kilometers southeast of
Puerto Princesa City, Tubbataha lies at the heart of the Coral Triangle, the global center of marine biodiversity.

In 1993, Tubbataha was inscribed by the United Nations Educational Scientific and Cultural Organization
(UNESCO) as a World Heritage Site. It was recognized as one of the Philippines' oldest ecosystems, containing
excellent examples of pristine reefs and a high diversity of marine life. The 97,030-hectare protected marine park is
749
also an important habitat for internationally threatened and endangered marine species. UNESCO cited
Tubbataha's outstanding universal value as an important and significant natural habitat for in situ conservation of
biological diversity; an example representing significant on-going ecological and biological processes; and an area
of exceptional natural beauty and aesthetic importance. 2

On April 6, 2010, Congress passed Republic Act (R.A.) No. 10067,  otherwise known as the "Tubbataha Reefs
3

Natural Park (TRNP) Act of 2009" "to ensure the protection and conservation of the globally significant economic,
biological, sociocultural, educational and scientific values of the Tubbataha Reefs into perpetuity for the enjoyment
of present and future generations." Under the "no-take" policy, entry into the waters of TRNP is strictly regulated and
many human activities are prohibited and penalized or fined, including fishing, gathering, destroying and disturbing
the resources within the TRNP. The law likewise created the Tubbataha Protected Area Management Board
(TPAMB) which shall be the sole policy-making and permit-granting body of the TRNP.

The USS Guardian is an Avenger-class mine countermeasures ship of the US Navy. In December 2012, the US
Embassy in the Philippines requested diplomatic clearance for the said vessel "to enter and exit the territorial waters
of the Philippines and to arrive at the port of Subic Bay for the purpose of routine ship replenishment, maintenance,
and crew liberty."  On January 6, 2013, the ship left Sasebo, Japan for Subic Bay, arriving on January 13, 2013 after
4

a brief stop for fuel in Okinawa, Japan.1âwphi1

On January 15, 2013, the USS Guardian departed Subic Bay for its next port of call in Makassar, Indonesia. On
January 17, 2013 at 2:20 a.m. while transiting the Sulu Sea, the ship ran aground on the northwest side of South
Shoal of the Tubbataha Reefs, about 80 miles east-southeast of Palawan. No cine was injured in the incident, and
there have been no reports of leaking fuel or oil.

On January 20, 2013, U.S. 7th Fleet Commander, Vice Admiral Scott Swift, expressed regret for the incident in a
press statement.  Likewise, US Ambassador to the Philippines Harry K. Thomas, Jr., in a meeting at the Department
5

of Foreign Affairs (DFA) on February 4, "reiterated his regrets over the grounding incident and assured Foreign
Affairs Secretazy Albert F. del Rosario that the United States will provide appropriate compensation for damage to
the reef caused by the ship."  By March 30, 2013, the US Navy-led salvage team had finished removing the last
6

piece of the grounded ship from the coral reef.

On April 1 7, 2013, the above-named petitioners on their behalf and in representation of their respective
sector/organization and others, including minors or generations yet unborn, filed the present petition agairtst Scott
H. Swift in his capacity as Commander of the US 7th Fleet, Mark A. Rice in his capacity as Commanding Officer of
the USS Guardian and Lt. Gen. Terry G. Robling, US Marine Corps Forces, Pacific and Balikatan 2013 Exercises
Co-Director ("US respondents"); President Benigno S. Aquino III in his capacity as Commander-in-Chief of the
Armed Forces of the Philippines (AFP), DF A Secretary Albert F. Del Rosario, Executive Secretary Paquito Ochoa,
Jr., Secretary Voltaire T. Gazmin (Department of National Defense), Secretary Jesus P. Paje (Department of
Environment and Natural Resources), Vice-Admiral Jose Luis M. Alano (Philippine Navy Flag Officer in Command,
AFP), Admiral Rodolfo D. Isorena (Philippine Coast Guard Commandant), Commodore Enrico Efren Evangelista
(Philippine Coast Guard-Palawan), and Major General Virgilio 0. Domingo (AFP Commandant), collectively the
"Philippine respondents."

The Petition

Petitioners claim that the grounding, salvaging and post-salvaging operations of the USS Guardian cause and
continue to cause environmental damage of such magnitude as to affect the provinces of Palawan, Antique, Aklan,
Guimaras, Iloilo, Negros Occidental, Negros Oriental, Zamboanga del Norte, Basilan, Sulu, and Tawi-Tawi, which
events violate their constitutional rights to a balanced and healthful ecology. They also seek a directive from this
Court for the institution of civil, administrative and criminal suits for acts committed in violation of environmental laws
and regulations in connection with the grounding incident.

Specifically, petitioners cite the following violations committed by US respondents under R.A. No. 10067:
unauthorized entry (Section 19); non-payment of conservation fees (Section 21 ); obstruction of law enforcement
officer (Section 30); damages to the reef (Section 20); and destroying and disturbing resources (Section 26[g]).
Furthermore, petitioners assail certain provisions of the Visiting Forces Agreement (VFA) which they want this Court
to nullify for being unconstitutional.

The numerous reliefs sought in this case are set forth in the final prayer of the petition, to wit: WHEREFORE, in view
of the foregoing, Petitioners respectfully pray that the Honorable Court: 1. Immediately issue upon the filing of this
petition a Temporary Environmental Protection Order (TEPO) and/or a Writ of Kalikasan, which shall, in particular,

a. Order Respondents and any person acting on their behalf, to cease and desist all operations over the
Guardian grounding incident;

b. Initially demarcating the metes and bounds of the damaged area as well as an additional buffer zone;

750
c. Order Respondents to stop all port calls and war games under 'Balikatan' because of the absence of clear
guidelines, duties, and liability schemes for breaches of those duties, and require Respondents to assume
responsibility for prior and future environmental damage in general, and environmental damage under the
Visiting Forces Agreement in particular.

d. Temporarily define and describe allowable activities of ecotourism, diving, recreation, and limited
commercial activities by fisherfolk and indigenous communities near or around the TRNP but away from the
damaged site and an additional buffer zone;

2. After summary hearing, issue a Resolution extending the TEPO until further orders of the Court;

3. After due proceedings, render a Decision which shall include, without limitation:

a. Order Respondents Secretary of Foreign Affairs, following the dispositive portion of Nicolas v. Romulo, "to
forthwith negotiate with the United States representatives for the appropriate agreement on [environmental
guidelines and environmental accountability] under Philippine authorities as provided in Art. V[] of the VFA ...
"

b. Direct Respondents and appropriate agencies to commence administrative, civil, and criminal
proceedings against erring officers and individuals to the full extent of the law, and to make such
proceedings public;

c. Declare that Philippine authorities may exercise primary and exclusive criminal jurisdiction over erring
U.S. personnel under the circumstances of this case;

d. Require Respondents to pay just and reasonable compensation in the settlement of all meritorious claims
for damages caused to the Tubbataha Reef on terms and conditions no less severe than those applicable to
other States, and damages for personal injury or death, if such had been the case;

e. Direct Respondents to cooperate in providing for the attendance of witnesses and in the collection and
production of evidence, including seizure and delivery of objects connected with the offenses related to the
grounding of the Guardian;

f. Require the authorities of the Philippines and the United States to notify each other of the disposition of all
cases, wherever heard, related to the grounding of the Guardian;

g. Restrain Respondents from proceeding with any purported restoration, repair, salvage or post salvage
plan or plans, including cleanup plans covering the damaged area of the Tubbataha Reef absent a just
settlement approved by the Honorable Court;

h. Require Respondents to engage in stakeholder and LOU consultations in accordance with the Local
Government Code and R.A. 10067;

i. Require Respondent US officials and their representatives to place a deposit to the TRNP Trust Fund
defined under Section 17 of RA 10067 as a bona .fide gesture towards full reparations;

j. Direct Respondents to undertake measures to rehabilitate the areas affected by the grounding of the
Guardian in light of Respondents' experience in the Port Royale grounding in 2009, among other similar
grounding incidents;

k. Require Respondents to regularly publish on a quarterly basis and in the name of transparency and
accountability such environmental damage assessment, valuation, and valuation methods, in all stages of
negotiation;

l. Convene a multisectoral technical working group to provide scientific and technical support to the TPAMB;

m. Order the Department of Foreign Affairs, Department of National Defense, and the Department of
Environment and Natural Resources to review the Visiting Forces Agreement and the Mutual Defense
Treaty to consider whether their provisions allow for the exercise of erga omnes rights to a balanced and
healthful ecology and for damages which follow from any violation of those rights;

n. Narrowly tailor the provisions of the Visiting Forces Agreement for purposes of protecting the damaged
areas of TRNP;

o. Declare the grant of immunity found in Article V ("Criminal Jurisdiction") and Article VI of the Visiting
Forces Agreement unconstitutional for violating equal protection and/or for violating the preemptory norm of
751
 nondiscrimination incorporated as part of the law of the land under Section 2, Article II, of the Philippine
Constitution;

p. Allow for continuing discovery measures;

q. Supervise marine wildlife rehabilitation in the Tubbataha Reefs in all other respects; and

4. Provide just and equitable environmental rehabilitation measures and such other reliefs as are just and
equitable under the premises.  (Underscoring supplied.)
7

Since only the Philippine respondents filed their comment  to the petition, petitioners also filed a motion for early
8

resolution and motion to proceed ex parte against the US respondents. 9

Respondents' Consolidated Comment

In their consolidated comment with opposition to the application for a TEPO and ocular inspection and production
orders, respondents assert that: ( 1) the grounds relied upon for the issuance of a TEPO or writ of Kalikasan have
become fait accompli as the salvage operations on the USS Guardian were already completed; (2) the petition is
defective in form and substance; (3) the petition improperly raises issues involving the VFA between the Republic of
the Philippines and the United States of America; and ( 4) the determination of the extent of responsibility of the US
Government as regards the damage to the Tubbataha Reefs rests exdusively with the executive branch.

The Court's Ruling

As a preliminary matter, there is no dispute on the legal standing of petitioners to file the present petition.

Locus standi is "a right of appearance in a court of justice on a given question."  Specifically, it is "a party's personal
10

and substantial interest in a case where he has sustained or will sustain direct injury as a result" of the act being
challenged, and "calls for more than just a generalized grievance."  However, the rule on standing is a procedural
11

matter which this Court has relaxed for non-traditional plaintiffs like ordinary citizens, taxpayers and legislators when
the public interest so requires, such as when the subject matter of the controversy is of transcendental importance,
of overreaching significance to society, or of paramount public interest. 12

In the landmark case of Oposa v. Factoran, Jr.,  we recognized the "public right" of citizens to "a balanced and
13

healthful ecology which, for the first time in our constitutional history, is solemnly incorporated in the fundamental
law." We declared that the right to a balanced and healthful ecology need not be written in the Constitution for it is
assumed, like other civil and polittcal rights guaranteed in the Bill of Rights, to exist from the inception of mankind
and it is an issue of transcendental importance with intergenerational implications.  Such right carries with it the
1âwphi1

correlative duty to refrain from impairing the environment. 14

On the novel element in the class suit filed by the petitioners minors in Oposa, this Court ruled that not only do
ordinary citizens have legal standing to sue for the enforcement of environmental rights, they can do so in
representation of their own and future generations. Thus:

Petitioners minors assert that they represent their generation as well as generations yet unborn. We find no difficulty
in ruling that they can, for themselves, for others of their generation and for the succeeding generations, file a class
suit. Their personality to sue in behalf of the succeeding generations can only be based on the concept of
intergenerational responsibility insofar as the right to a balanced and healthful ecology is concerned. Such a right,
as hereinafter expounded, considers the "rhythm and harmony of nature." Nature means the created world in its
entirety. Such rhythm and harmony indispensably include, inter alia, the judicious disposition, utilization,
management, renewal and conservation of the country's forest, mineral, land, waters, fisheries, wildlife, off-shore
areas and other natural resources to the end that their exploration, development and utilization be equitably
accessible to the present a:: well as future generations. Needless to say, every generation has a responsibility to the
next to preserve that rhythm and harmony for the full 1:njoyment of a balanced and healthful ecology. Put a little
differently, the minors' assertion of their right to a sound environment constitutes, at the same time, the performance
of their obligation to ensure the protection of that right for the generations to come.  (Emphasis supplied.)
15

The liberalization of standing first enunciated in Oposa, insofar as it refers to minors and generations yet unborn, is
now enshrined in the Rules which allows the filing of a citizen suit in environmental cases. The provision on citizen
suits in the Rules "collapses the traditional rule on personal and direct interest, on the principle that humans are
stewards of nature." 16

Having settled the issue of locus standi, we shall address the more fundamental question of whether this Court has
jurisdiction over the US respondents who did not submit any pleading or manifestation in this case.

752
The immunity of the State from suit, known also as the doctrine of sovereign immunity or non-suability of the
State, is expressly provided in Article XVI of the 1987 Constitution which states:
17

Section 3. The State may not be sued without its consent.

In United States of America v. Judge Guinto,  we discussed the principle of state immunity from suit, as follows:
18

The rule that a state may not be sued without its consent, now · expressed in Article XVI, Section 3, of the 1987
Constitution, is one of the generally accepted principles of international law that we have adopted as part of the law
of our land under Article II, Section 2. x x x.

Even without such affirmation, we would still be bound by the generally accepted principles of international law
under the doctrine of incorporation. Under this doctrine, as accepted by the majority of states, such principles are
deemed incorporated in the law of every civilized state as a condition and consequence of its membership in the
society of nations. Upon its admission to such society, the state is automatically obligated to comply with these
principles in its relations with other states.

As applied to the local state, the doctrine of state immunity is based on the justification given by Justice Holmes that
''there can be no legal right against the authority which makes the law on which the right depends." [Kawanakoa v.
Polybank, 205 U.S. 349] There are other practical reasons for the enforcement of the doctrine. In the case of the
foreign state sought to be impleaded in the local jurisdiction, the added inhibition is expressed in the maxim par in
parem, non habet imperium. All states are sovereign equals and cannot assert jurisdiction over one another. A
contrary disposition would, in the language of a celebrated case, "unduly vex the peace of nations." [De Haber v.
Queen of Portugal, 17 Q. B. 171]

While the doctrine appears to prohibit only suits against the state without its consent, it is also applicable to
complaints filed against officials of the state for acts allegedly performed by them in the discharge of their duties.
The rule is that if the judgment against such officials will require the state itself to perform an affirmative act to satisfy
the same,. such as the appropriation of the amount needed to pay the damages awarded against them, the suit
must be regarded as against the state itself although it has not been formally impleaded. [Garcia v. Chief of Staff, 16
SCRA 120] In such a situation, the state may move to dismiss the comp.taint on the ground that it has been filed
without its consent.  (Emphasis supplied.)
19

Under the American Constitution, the doctrine is expressed in the Eleventh Amendment which reads:

The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or
prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign
State.

In the case of Minucher v. Court of Appeals,  we further expounded on the immunity of foreign states from the
20

jurisdiction of local courts, as follows:

The precept that a State cannot be sued in the courts of a foreign state is a long-standing rule of customary
international law then closely identified with the personal immunity of a foreign sovereign from suit and, with the
emergence of democratic states, made to attach not just to the person of the head of state, or his representative,
but also distinctly to the state itself in its sovereign capacity. If the acts giving rise to a suit arc those of a foreign
government done by its foreign agent, although not necessarily a diplomatic personage, but acting in his official
capacity, the complaint could be barred by the immunity of the foreign sovereign from suit without its consent. Suing
a representative of a state is believed to be, in effect, suing the state itself. The proscription is not accorded for the
benefit of an individual but for the State, in whose service he is, under the maxim -par in parem, non habet imperium
-that all states are soverr~ign equals and cannot assert jurisdiction over one another. The implication, in broad
terms, is that if the judgment against an official would rec 1uire the state itself to perform an affirmative act to satisfy
the award, such as the appropriation of the amount needed to pay the damages decreed against him, the suit must
be regarded as being against the state itself, although it has not been formally impleaded.  (Emphasis supplied.)
21

In the same case we also mentioned that in the case of diplomatic immunity, the privilege is not an immunity from
the observance of the law of the territorial sovereign or from ensuing legal liability; it is, rather, an immunity from the
exercise of territorial jurisdiction.
22

In United States of America v. Judge Guinto,  one of the consolidated cases therein involved a Filipino employed at
23

Clark Air Base who was arrested following a buy-bust operation conducted by two officers of the US Air Force, and
was eventually dismissed from his employment when he was charged in court for violation of R.A. No. 6425. In a
complaint for damages filed by the said employee against the military officers, the latter moved to dismiss the case
on the ground that the suit was against the US Government which had not given its consent. The RTC denied the
motion but on a petition for certiorari and prohibition filed before this Court, we reversed the RTC and dismissed the
complaint. We held that petitioners US military officers were acting in the exercise of their official functions when
they conducted the buy-bust operation against the complainant and thereafter testified against him at his trial. It
753
follows that for discharging their duties as agents of the United States, they cannot be directly impleaded for acts
imputable to their principal, which has not given its consent to be sued.

This traditional rule of State immunity which exempts a State from being sued in the courts of another State without
the former's consent or waiver has evolved into a restrictive doctrine which distinguishes sovereign and
governmental acts (Jure imperil") from private, commercial and proprietary acts (Jure gestionis). Under the
restrictive rule of State immunity, State immunity extends only to acts Jure imperii. The restrictive application of
State immunity is proper only when the proceedings arise out of commercial transactions of the foreign sovereign,
its commercial activities or economic affairs.24

In Shauf v. Court of Appeals,  we discussed the limitations of the State immunity principle, thus:
25

It is a different matter where the public official is made to account in his capacity as such for acts contrary to law and
injurious to the rights of plaintiff. As was clearly set forth by JustiGe Zaldivar in Director of the Bureau of
Telecommunications, et al. vs. Aligaen, etc., et al. : "Inasmuch as the State authorizes only legal acts by its officers,
unauthorized acts of government officials or officers are not acts of the State, and an action against the officials or
officers by one whose rights have been invaded or violated by such acts, for the protection of his rights, is not a suit
against the State within the rule of immunity of the State from suit. In the same tenor, it has been said that an action
at law or suit in equity against a State officer or the director of a State department on the ground that, while claiming
to act for the State, he violates or invades the personal and property rights of the plaintiff, under an unconstitutional
act or under an assumption of authority which he does not have, is not a suit against the State within the
constitutional provision that the State may not be sued without its consent." The rationale for this ruling is that the
doctrine of state immunity cannot be used as an instrument for perpetrating an injustice.

xxxx

The aforecited authorities are clear on the matter. They state that the doctrine of immunity from suit will not apply
and may not be invoked where the public official is being sued in his private and personal capacity as an ordinary
citizen. The cloak of protection afforded the officers and agents of the government is removed the moment they are
sued in their individual capacity. This situation usually arises where the public official acts without authority or in
excess of the powers vested in him. It is a well-settled principle of law that a public official may be liable in his
personal private capacity for whatever damage he may have caused by his act done with malice and in bad faith, or
beyond the scope of his authority or jurisdiction.  (Emphasis supplied.) In this case, the US respondents were sued
26

in their official capacity as commanding officers of the US Navy who had control and supervision over the USS
Guardian and its crew. The alleged act or omission resulting in the unfortunate grounding of the USS Guardian on
the TRNP was committed while they we:re performing official military duties. Considering that the satisfaction of a
judgment against said officials will require remedial actions and appropriation of funds by the US government, the
suit is deemed to be one against the US itself. The principle of State immunity therefore bars the exercise of
jurisdiction by this Court over the persons of respondents Swift, Rice and Robling.

During the deliberations, Senior Associate Justice Antonio T. Carpio took the position that the conduct of the US in
this case, when its warship entered a restricted area in violation of R.A. No. 10067 and caused damage to the TRNP
reef system, brings the matter within the ambit of Article 31 of the United Nations Convention on the Law of the Sea
(UNCLOS). He explained that while historically, warships enjoy sovereign immunity from suit as extensions of their
flag State, Art. 31 of the UNCLOS creates an exception to this rule in cases where they fail to comply with the rules
and regulations of the coastal State regarding passage through the latter's internal waters and the territorial sea.

According to Justice Carpio, although the US to date has not ratified the UNCLOS, as a matter of long-standing
policy the US considers itself bound by customary international rules on the "traditional uses of the oceans" as
codified in UNCLOS, as can be gleaned from previous declarations by former Presidents Reagan and Clinton, and
the US judiciary in the case of United States v. Royal Caribbean Cruise Lines, Ltd. 27

The international law of the sea is generally defined as "a body of treaty rules arid customary norms governing the
uses of the sea, the exploitation of its resources, and the exercise of jurisdiction over maritime regimes. It is a
branch of public international law, regulating the relations of states with respect to the uses of the oceans."  The
28

UNCLOS is a multilateral treaty which was opened for signature on December 10, 1982 at Montego Bay, Jamaica. It
was ratified by the Philippines in 1984 but came into force on November 16, 1994 upon the submission of the 60th
ratification.

The UNCLOS is a product of international negotiation that seeks to balance State sovereignty (mare clausum) and
the principle of freedom of the high seas (mare liberum).  The freedom to use the world's marine waters is one of
29

the oldest customary principles of international law.  The UNCLOS gives to the coastal State sovereign rights in
30

varying degrees over the different zones of the sea which are: 1) internal waters, 2) territorial sea, 3) contiguous
zone, 4) exclusive economic zone, and 5) the high seas. It also gives coastal States more or less jurisdiction over
foreign vessels depending on where the vessel is located. 31

754
Insofar as the internal waters and territorial sea is concerned, the Coastal State exercises sovereignty, subject to the
UNCLOS and other rules of international law. Such sovereignty extends to the air space over the territorial sea as
well as to its bed and subsoil. 32

In the case of warships,  as pointed out by Justice Carpio, they continue to enjoy sovereign immunity subject to the
33

following exceptions:

Article 30
Non-compliance by warships with the laws and regulations of the coastal State

If any warship does not comply with the laws and regulations of the coastal State concerning passage through the
territorial sea and disregards any request for compliance therewith which is made to it, the coastal State may require
it to leave the territorial sea immediately.

Article 31
Responsibility of the flag State for damage caused by a warship

or other government ship operated for non-commercial purposes

The flag State shall bear international responsibility for any loss or damage to the coastal State resulting from the
non-compliance by a warship or other government ship operated for non-commercial purposes with the laws and
regulations of the coastal State concerning passage through the territorial sea or with the provisions of this
Convention or other rules of international law.

Article 32
Immunities of warships and other government ships operated for non-commercial purposes

With such exceptions as are contained in subsection A and in articles 30 and 31, nothing in this Convention affects
the immunities of warships and other government ships operated for non-commercial purposes. (Emphasis
supplied.) A foreign warship's unauthorized entry into our internal waters with resulting damage to marine resources
is one situation in which the above provisions may apply. But what if the offending warship is a non-party to the
UNCLOS, as in this case, the US?

An overwhelming majority - over 80% -- of nation states are now members of UNCLOS, but despite this the US, the
world's leading maritime power, has not ratified it.

While the Reagan administration was instrumental in UNCLOS' negotiation and drafting, the U.S. delegation
ultimately voted against and refrained from signing it due to concerns over deep seabed mining technology transfer
provisions contained in Part XI. In a remarkable, multilateral effort to induce U.S. membership, the bulk of UNCLOS
member states cooperated over the succeeding decade to revise the objection.able provisions. The revisions
satisfied the Clinton administration, which signed the revised Part XI implementing agreement in 1994. In the fall of
1994, President Clinton transmitted UNCLOS and the Part XI implementing agreement to the Senate requesting its
advice and consent. Despite consistent support from President Clinton, each of his successors, and an ideologically
diverse array of stakeholders, the Senate has since withheld the consent required for the President to internationally
bind the United States to UNCLOS.

While UNCLOS cleared the Senate Foreign Relations Committee (SFRC) during the 108th and 110th Congresses,
its progress continues to be hamstrung by significant pockets of political ambivalence over U.S. participation in
international institutions. Most recently, 111 th Congress SFRC Chairman Senator John Kerry included "voting out"
UNCLOS for full Senate consideration among his highest priorities. This did not occur, and no Senate action has
been taken on UNCLOS by the 112th Congress. 34

Justice Carpio invited our attention to the policy statement given by President Reagan on March 10, 1983 that the
US will "recognize the rights of the other , states in the waters off their coasts, as reflected in the convention
[UNCLOS], so long as the rights and freedom of the United States and others under international law are
recognized by such coastal states", and President Clinton's reiteration of the US policy "to act in a manner
consistent with its [UNCLOS] provisions relating to traditional uses of the oceans and to encourage other countries
to do likewise." Since Article 31 relates to the "traditional uses of the oceans," and "if under its policy, the US
'recognize[s] the rights of the other states in the waters off their coasts,"' Justice Carpio postulates that "there is
more reason to expect it to recognize the rights of other states in their internal waters, such as the Sulu Sea in this
case."

As to the non-ratification by the US, Justice Carpio emphasizes that "the US' refusal to join the UN CLOS was
centered on its disagreement with UN CLOS' regime of deep seabed mining (Part XI) which considers the oceans
and deep seabed commonly owned by mankind," pointing out that such "has nothing to do with its [the US']
acceptance of customary international rules on navigation."

755
It may be mentioned that even the US Navy Judge Advocate General's Corps publicly endorses the ratification of
the UNCLOS, as shown by the following statement posted on its official website:

The Convention is in the national interest of the United States because it establishes stable maritime zones,
including a maximum outer limit for territorial seas; codifies innocent passage, transit passage, and archipelagic sea
lanes passage rights; works against "jurisdictiomtl creep" by preventing coastal nations from expanding their own
maritime zones; and reaffirms sovereign immunity of warships, auxiliaries anJ government aircraft.

xxxx

Economically, accession to the Convention would support our national interests by enhancing the ability of the US to
assert its sovereign rights over the resources of one of the largest continental shelves in the world. Further, it is the
Law of the Sea Convention that first established the concept of a maritime Exclusive Economic Zone out to 200
nautical miles, and recognized the rights of coastal states to conserve and manage the natural resources in this
Zone. 35

We fully concur with Justice Carpio's view that non-membership in the UNCLOS does not mean that the US will
disregard the rights of the Philippines as a Coastal State over its internal waters and territorial sea. We thus expect
the US to bear "international responsibility" under Art. 31 in connection with the USS Guardian grounding which
adversely affected the Tubbataha reefs. Indeed, it is difficult to imagine that our long-time ally and trading partner,
which has been actively supporting the country's efforts to preserve our vital marine resources, would shirk from its
obligation to compensate the damage caused by its warship while transiting our internal waters. Much less can we
comprehend a Government exercising leadership in international affairs, unwilling to comply with the UNCLOS
directive for all nations to cooperate in the global task to protect and preserve the marine environment as provided
in Article 197, viz:

Article 197
Cooperation on a global or regional basis

States shall cooperate on a global basis and, as appropriate, on a regional basis, directly or through competent
international organizations, in formulating and elaborating international rules, standards and recommended
practices and procedures consistent with this Convention, for the protection and preservation of the marine
environment, taking into account characteristic regional features.

In fine, the relevance of UNCLOS provisions to the present controversy is beyond dispute. Although the said treaty
upholds the immunity of warships from the jurisdiction of Coastal States while navigating the.latter's territorial sea,
the flag States shall be required to leave the territorial '::;ea immediately if they flout the laws and regulations of the
Coastal State, and they will be liable for damages caused by their warships or any other government vessel
operated for non-commercial purposes under Article 31.

Petitioners argue that there is a waiver of immunity from suit found in the VFA. Likewise, they invoke federal statutes
in the US under which agencies of the US have statutorily waived their immunity to any action. Even under the
common law tort claims, petitioners asseverate that the US respondents are liable for negligence, trespass and
nuisance.

We are not persuaded.

The VFA is an agreement which defines the treatment of United States troops and personnel visiting the Philippines
to promote "common security interests" between the US and the Philippines in the region. It provides for the
guidelines to govern such visits of military personnel, and further defines the rights of the United States and the
Philippine government in the matter of criminal jurisdiction, movement of vessel and aircraft, importation and
exportation of equipment, materials and supplies.  The invocation of US federal tort laws and even common law is
36

thus improper considering that it is the VF A which governs disputes involving US military ships and crew navigating
Philippine waters in pursuance of the objectives of the agreement.

As it is, the waiver of State immunity under the VF A pertains only to criminal jurisdiction and not to special civil
actions such as the present petition for issuance of a writ of Kalikasan. In fact, it can be inferred from Section 17,
Rule 7 of the Rules that a criminal case against a person charged with a violation of an environmental law is to be
filed separately:

SEC. 17. Institution of separate actions.-The filing of a petition for the issuance of the writ of kalikasan shall not
preclude the filing of separate civil, criminal or administrative actions.

In any case, it is our considered view that a ruling on the application or non-application of criminal jurisdiction
provisions of the VF A to US personnel who may be found responsible for the grounding of the USS Guardian,
would be premature and beyond the province of a petition for a writ of Kalikasan. We also find it unnecessary at this

756
point to determine whether such waiver of State immunity is indeed absolute. In the same vein, we cannot grant
damages which have resulted from the violation of environmental laws. The Rules allows the recovery of damages,
including the collection of administrative fines under R.A. No. 10067, in a separate civil suit or that deemed instituted
with the criminal action charging the same violation of an environmental law. 37

Section 15, Rule 7 enumerates the reliefs which may be granted in a petition for issuance of a writ of Kalikasan, to
wit:

SEC. 15. Judgment.-Within sixty (60) days from the time the petition is submitted for decision, the court shall render
judgment granting or denying the privilege of the writ of kalikasan.

The reliefs that may be granted under the writ are the following:

(a) Directing respondent to permanently cease and desist from committing acts or neglecting the
performance of a duty in violation of environmental laws resulting in environmental destruction or damage;

(b) Directing the respondent public official, govemment agency, private person or entity to protect, preserve,
rehabilitate or restore the environment;

(c) Directing the respondent public official, government agency, private person or entity to monitor strict
compliance with the decision and orders of the court;

(d) Directing the respondent public official, government agency, or private person or entity to make periodic
reports on the execution of the final judgment; and

(e) Such other reliefs which relate to the right of the people to a balanced and healthful ecology or to the
protection, preservation, rehabilitation or restoration of the environment, except the award of damages to
individual petitioners. (Emphasis supplied.)

We agree with respondents (Philippine officials) in asserting that this petition has become moot in the sense that the
salvage operation sought to be enjoined or restrained had already been accomplished when petitioners sought
recourse from this Court. But insofar as the directives to Philippine respondents to protect and rehabilitate the coral
reef stn icture and marine habitat adversely affected by the grounding incident are concerned, petitioners are
entitled to these reliefs notwithstanding the completion of the removal of the USS Guardian from the coral reef.
However, we are mindful of the fact that the US and Philippine governments both expressed readiness to negotiate
and discuss the matter of compensation for the damage caused by the USS Guardian. The US Embassy has also
declared it is closely coordinating with local scientists and experts in assessing the extent of the damage and
appropriate methods of rehabilitation.

Exploring avenues for settlement of environmental cases is not proscribed by the Rules. As can be gleaned from the
following provisions, mediation and settlement are available for the consideration of the parties, and which dispute
resolution methods are encouraged by the court, to wit:

RULE3

xxxx

SEC. 3. Referral to mediation.-At the start of the pre-trial conference, the court shall inquire from the parties if they
have settled the dispute; otherwise, the court shall immediately refer the parties or their counsel, if authorized by
their clients, to the Philippine Mediation Center (PMC) unit for purposes of mediation. If not available, the court shall
refer the case to the clerk of court or legal researcher for mediation.

Mediation must be conducted within a non-extendible period of thirty (30) days from receipt of notice of referral to
mediation.

The mediation report must be submitted within ten (10) days from the expiration of the 30-day period.

SEC. 4. Preliminary conference.-If mediation fails, the court will schedule the continuance of the pre-trial. Before the
scheduled date of continuance, the court may refer the case to the branch clerk of court for a preliminary conference
for the following purposes:

(a) To assist the parties in reaching a settlement;

xxxx

757
SEC. 5. Pre-trial conference; consent decree.-The judge shall put the parties and their counsels under oath, and
they shall remain under oath in all pre-trial conferences.

The judge shall exert best efforts to persuade the parties to arrive at a settlement of the dispute. The judge may
issue a consent decree approving the agreement between the parties in accordance with law, morals, public order
and public policy to protect the right of the people to a balanced and healthful ecology.

xxxx

SEC. 10. Efforts to settle.- The court shall endeavor to make the parties to agree to compromise or settle in
accordance with law at any stage of the proceedings before rendition of judgment. (Underscoring supplied.)

The Court takes judicial notice of a similar incident in 2009 when a guided-missile cruiser, the USS Port Royal, ran
aground about half a mile off the Honolulu Airport Reef Runway and remained stuck for four days. After spending
$6.5 million restoring the coral reef, the US government was reported to have paid the State of Hawaii $8.5 million in
settlement over coral reef damage caused by the grounding. 38

To underscore that the US government is prepared to pay appropriate compensation for the damage caused by the
USS Guardian grounding, the US Embassy in the Philippines has announced the formation of a US interdisciplinary
scientific team which will "initiate discussions with the Government of the Philippines to review coral reef
rehabilitation options in Tubbataha, based on assessments by Philippine-based marine scientists." The US team
intends to "help assess damage and remediation options, in coordination with the Tubbataha Management Office,
appropriate Philippine government entities, non-governmental organizations, and scientific experts from Philippine
universities."
39

A rehabilitation or restoration program to be implemented at the cost of the violator is also a major relief that may be
obtained under a judgment rendered in a citizens' suit under the Rules, viz:

RULES

SECTION 1. Reliefs in a citizen suit.-If warranted, the court may grant to the plaintiff proper reliefs which shall
include the protection, preservation or rehabilitation of the environment and the payment of attorney's fees, costs of
suit and other litigation expenses. It may also require the violator to submit a program of rehabilitation or restoration
of the environment, the costs of which shall be borne by the violator, or to contribute to a special trust fund for that
purpose subject to the control of the court.1âwphi1

In the light of the foregoing, the Court defers to the Executive Branch on the matter of compensation and
rehabilitation measures through diplomatic channels. Resolution of these issues impinges on our relations with
another State in the context of common security interests under the VFA. It is settled that "[t]he conduct of the
foreign relations of our government is committed by the Constitution to the executive and legislative-"the political"
--departments of the government, and the propriety of what may be done in the exercise of this political power is not
subject to judicial inquiry or decision."
40

On the other hand, we cannot grant the additional reliefs prayed for in the petition to order a review of the VFA and
to nullify certain immunity provisions thereof.

As held in BAYAN (Bagong Alyansang Makabayan) v. Exec. Sec. Zamora,  the VFA was duly concurred in by the
41

Philippine Senate and has been recognized as a treaty by the United States as attested and certified by the duly
authorized representative of the United States government. The VF A being a valid and binding agreement, the
parties are required as a matter of international law to abide by its terms and provisions.  The present petition under
42

the Rules is not the proper remedy to assail the constitutionality of its provisions. WHEREFORE, the petition for the
issuance of the privilege of the Writ of Kalikasan is hereby DENIED.

No pronouncement as to costs.

SO ORDERED.

CONCURRING OPINION

LEONEN, J.:

Prefatory

I agree that the petition should be dismissed primarily because it is moot and academic.

758
The parties who brought this petition have no legal standing. They also invoke the wrong remedy. In my view, it is
time to clearly unpack the rudiments of our extraordinary procedures in environmental cases in order to avoid their
abuse. Abuse of our procedures contributes to the debasement of the proper function of the remedies and invites
inordinate interference from this court from what may be technical and political decisions that must be made in a
different forum. Our sympathy for environmental concerns never justifies our conversion to an environmental super
body.

The writ of kalikasan is not an all-embracing legal remedy to be wielded like a political tool.  It is both an
1âwphi1

extraordinary and equitable remedy which assists to prevent environmental catastrophes. It does not replace other
legal remedies similarly motivated by concern for the environment and the community's ecological welfare.
Certainly, when the petition itself alleges that remedial and preventive remedies have occurred, the functions of the
writ cease to exist. In case of disagreement, parties need to exhaust the political and administrative arena. Only
whei: a concrete cause of action arises out of facts that can be proven with substantial evidence may the proper
legal action be entertained.

Citizen's suits are suits brought by parties suffering direct and substantial injuries; although in the environmental
field, these injuries may be shared with others. It is different from class suits brought as representative suits under
Oposa v. Factoran.  In my view, there is need to review. this doctrine insofar as it allows a nonrepresentative group
1

to universally represent a whole population as well as an unborn generation binding them to causes of actions,
arguments, and reliefs which they did not choose. Generations yet unborn suffer from the legal inability to assert
against false or unwanted representation.

Citizen's suits are procedural devices that allow a genuine cause of action to be judicially considered in spite of the
social costs or negative externalities of such initiatives. This should be clearly distinguished in our rules and in
jurisprudence from class suits that purport to represent the whole population and unborn generations. The former is
in keeping with the required constitutional protection for our people. The latter is dangerous and should be used only
in very extraordinary or rare situations. It may be jurisprndentia;ly inappropriate.

In my view, decisions relating to environmental concen1s should be more balanced. It must attend in a more sober
way to the required balance of all interests. Hence, our rule with respect to standing should require that parties
bringing the suit are sufficiently and substantially possessed of individual interest and capability so that they can
properly shape the issues brought before this court. The capability of the parties to bring suit can readily be seen
through the allegations made in their petition.

Our doctrine regarding sovereign immunity also needs to be refined in the proper case with respect to its nature,
source, and its limitations.

The doctrine of sovereign immunity evolves out of the theory and practice of sovere'ignty and the principle par in
parem non habet Jurisdictionem. Its particular contours as an international norm have evolved far beyond the form it
took when the theory of absolute sovereignty was current. Contemporarily, ·it is understood as a basic right
extended to states by other states on the basis of respect for sovereignty and independence.  There appears to be a
2

consensus among states that sovereign immunity as a concept is legally binding.  However, there remains to be a
3

lack of international agreement as to how it is to be invoked and the extent of immunity in some cases. 4

This vagueness arises from the debate on which among the sources of international law the doctrine of sovereign
immunity draws its binding authority and the content of the doctrine given its source.

This doctrine of relative jurisdictional immunity (sovereign immunity) of states and their agents becomes binding in
our jurisdiction as international law only through Section 2 of Article II or Section 21 of Article VII of the Constitution.
Article XVII, Section 3 of the Constitution is a limitation on suits against our state. It is not the textual anchor for
determining the extent of jurisdicional immunities that should be accorded to other states or their agents.
International law may have evolved further than the usual distinction between acta Jure imperii and acta Jure
gestionis. Indications of state practice even of public respondents show that jurisdictional immunity for foreign states
may not apply to certain violations of Jus cogens rules of international customary law. There can be tort exemptions
provided by statute.and, therefore, the state practice of an agent's sovereign being sued in our courts.

International law does not also prohibit legislation that clarifies national policy and, therefore, our own considerations
of state practice in relation to the limits of jurisdictional immunities for other sovereigns. Neither does international
law prohibit domestic courts from shaping exceptions to jurisdictional immunity based upon our reading of the
Constitution as well as international and municipal law.

I am of the view, therefore, that this case be dismissed principally for its procedural infirmities. We should reserve
doctrinal exposition and declaration of the content of jurisdictional immunities for other sovereigns and their agents
when the proper cases merit our attention and not yet unduly limit such jurisprudence in relation to the law of the
sea, municipal torts, and violations of international customary law of a jus cogens character. The results in this case
would have been different if initiated with the proper remedy, by the proper parties in the proper court.

759
 I
Procedural antecedents

This court was asked to issue a writ of kalikasan with temporary environmental protection order or TEPO pursuant
to Rule 7 of A.M. No. 09-6-8-SC, otherwise known as the Rules of Procedure for Environmental Cases. Petitioners
seek an immediate order from this court:

1) for respondents to cease and desist all operations over the Guardian grounding incident;

2) for the demarcation of the metes and bounds of the damaged area, with an additional buffer zone;

3) for respondents to stop all port calls and war games under the Balikatan;

4) for respondents to assume responsibility for prior and future uwironmental damage in general and under
the Visiting Forces Agreement (VFA);

5) for the temporary definition of allowable activities near or around the Tubbataha Reefs [Natural] Park, but
away from the damageq site and the additional buffer zone;

6) for respondent Secretary of Foreign Affairs to negotiate with the United States representatives for an
agreement on environmental guidelines and accountability pursuant to the VFA;

7) for respondents and appropriate agencies to commence administrative, civil, and criminal proceedings
against erring officers and individuals;

8) for the declaration of exclusive criminal jurisdiction of Philippine authorities over erring USS Guardian
personnel;

9) for respondents to pay just and reasonable compensation in the settlement of all meritorious claims for
damages caused 1o the Tubbataha Reefs;

10) for respondents to cooperate in securing the attendance of witnesses and the collection and production
of evidence, including c bjects com1ected with the offenses related to the grounding of the Guardian;

11) for respondents US officials and their representatives to place a clcposit to the TRNP Trust Fund, as
defined in Section 17 of RA 10067, as a bona fide gesture towards full reparations;

12) for respondents to undertake rehabilitation measures for areas affected by the grounding of the
Guardian;

13) for respondents to . publish on a quarterly basis the environmental damage assessment, valuation, and
valuation methods, in all stages of negotiations to ensure transparency and accountability;

14) for the convention of a multisectoral teclmical working group that will provide scientific and technical
support to the Tubbataha Protected Area Management Board (TPAMB);

15) for respondents Department of Foreign Affairs, Department of National Defense, and the Department of
Environmental and Natural Resources to review the ·VFA and the Mutual Defense Treaty in light of the right
to a balanced and healthful ecology, and any violation related thereto;

16) for the declaration of the grant of immunity under Articles V and VI of the VFA as being violative of equal
protection and/or the peremptory norm of nondiscrimination;

17) for permission to resort to continuing discovery measures; and

18) for other. just and equitable environmenta: rehabilitation measures and reliefs. 5

Petitioners include representatives from people's organizations, nongovernment organizations, accredited public
interest groups, environmental institutes, government officials, and academicians.  Respondents, on the other hand,
6

are the American commanding officers of the USS Guardian and the Balikatan 2013 Exercises, incumbent
Philippine government officials, and Philippine military officers involved, by virtue of their office, in issues arising out
of the grounding of the USS Guardian in Tubbataha Reefs and its subsequent salvage. 7

The USS Guardian is a fifth Avenger Class Mine Countermeasures, United States Navy ship.  The three diplomatic
8

notes issued by the Embassy of the United States of America in the Philippines dated December 3, 2012, December 9

760
31, 2012,  and January 14, 2013  all sought clear.ance for the ship to "enter and exit the· territorial waters of the
10 11

Philippines and to arrive at the port of Subic Bay for the purpose of routine ship replenishment, maintenance, and
crew libeiiy." 12

Thus, on January 17, 2013, while en route to Makasaar, Indonesia, the USS Guardian ran aground in the
Tubbataha Reefs' south atoll, approximately 80 miles east-southeast of Palawan.  In a statement issued on January
13

25, 2013, US Ambassador to the Philippines Harry K. Thomas expressed his regret over the incident, recognizing
the legitimate concerns over the damage caused to the reef.  On February 5, 2013, a joint statement was issued by
14

the Philippines and the United States where the latter undertook to provide compensation.  On the same day, a
15

salvage plan was submitted by a Singaporean company contracted by the US Navy to conduct the USS Guardian
salvage operations.  The salvage operations were completed on March 30, 2013.
16 17

On April 17, 2013, petitioners filed the present petition for writ of kalikasan with prayer for temporary environmental
protection order (TEPO).

Acting on petitioners' petition but without necessarily giving due course, this court on May 8, 2013 issued a
resolution. The resolution a) required respondents, except the President of the Republic of the Philippines, to
comment within ten (10) days from notice of the resolution; and b) held in abeyance the issuance of a TEPO. 18

We note that on May 27, 2013, the Office of Legal Affairs of the Depaiiment of Foreign Affairs sent a letter to this
court, requesting that the notice of this court's resolution dated May 8, 2013 be returned, as it was not an agent for
the service of processes upon American respondents. 19

The pleadings presented the following issues: a) whether petitioners have legal· standing to file a petition for writ of
kalikasan with prayer for temporary environmental protection order (TEPO), and b) whether the doctrine of
sovereign immunity applies to foreign respondents.

Petitioners argued that they have locus standi.  Having categorized the petition as a citizen's suit, they alleged that
20

they are representing "others, including minors and generations yet unborn" in asserting their constitutional right to a
balanced and healthful ecology. 21

Petitioners cited this court's ruling in Oposa v. Factoran that Article II, Section 16 of the 1987 Constitution vyas
immediately enforceable. The pronouncement was anchored on the premise that the right to a balanced and
healthful ecology belonged "to a different category of rights altogether for it concerns nothing less than self-
preservation and self-perpetuation."  Petitioners also alleged that the American respondents are not immune from
22

suit.  Citing Nicolas v. Romulo,  they argued that Article V of the Visiting Forces Agreement or VFA, which pertained
23 24

to "Criminal Jurisdiction,"  establishes a waiver of the US military officers involved in the incident's immunity from
25 26

suit in light of their violation of Republic Act 10067; or the Tubbataha Reefs Natural Park (TRNP) Act of
2009,  including its entry in the area without prop·er permit.  Also citing US cases New York v. United States Army
27 28

Corps of Engineers (E.D.N. Y September 24, 2012) and Trudeau v. FTC (456 F3d 178, D.C. Cir. 2006), petitioners
further argued that existing US federal statutes clearly provide that American government agencies have statutorily
waived their immunity from any equitable action involving environmental damages.  They referred to both Resource
29

Conservation and Recovery Act of 1976 (RCRA) and the Federal Tort Claims Act (FTCA) as legal bases. 30

Petitioners stated that RCRA waives sovereign immunity in citizen's suits when a) there is a need to enforce a
permit, standard, or regulation; b) there is a need to abate an imminent and substantial danger to health or the
environment; or c) the United States Environmental Protection Agency is required to perform a nondiscretionary
duty.31

On the other hand, the FTCA provides that "the U.S. Government is liable in tort in the same manner and to the
same extent as private individuals under like circumstances [but only] if the laws of the state in which the wrongful
act occurred provide recovery in similar situations involving private pai1ies." 32

Petitioners also argued that the USS Guardian is liable in rem  to the Philippines for response costs and damages
33

resulting from the destruction, loss, and inju:y caused to the Tubbataha Reefs.  Aside from not having had prior
34

permit to enter the area, petitioners pointed out that the American respondents had committed gross and
inexcusable negligence when it failed to utilize its technical expertise and equipment in preventing the incident.  It is 35

their position that this necessarily rendered sovereign immunity inapplicabfo to American respondents, even if they
were acting within the scope of their authority, office, or employment. 36

II
The parties do not have legal standing

Petitioners brought this case as a citizen's suit under the Tubbataha Reefs Natural Park Act of 2009, in conjunction
with the Rules of Procedure for Environmental Cases. 37

761
Section 37 of the Tubbataha Reefs Natural Park Act of 2009 allows any citizen to file a Civil, criminal, or
administrative case against:

(a) Any person who violates or fails to comply with the provisions of this Act its implementing rules and
regulations; or

(b) Those mandated to implement and enforce the provisions of this Act with respect to orders, rules and
regulations issued inconsistent with this Act; and/or

(c) Any public officer who wilfully or grossly neglects the performance of an act, specifically enjoined as a
duty by this Act or its implementing rules and regulations; or abuses his authority in the performance of his
duty; or, in any manner improperly performs his duties under this act or its implementing rules and
regulations: Provided, however, That, no suit can be filed until after a thirty (30)-day notice has been given to
the public officer and the alleged violator concerned and no appropriate action has been taken thereon. The
court shall exempt such action from the'payment of filing fees, upon prima facie showing of the non-
enforcement or violations complained of and exempt the plaintiff from the filing of an injunction bond for the
issuance of preliminary injunction. In the event that the citizen should prevail, the court shall award
reasonable attorney's fees, moral damages and litigation costs as appropriate.

While the Tubbataha Reefs Natural Park Act enumerates causes of action available against duty-bearers, it does
not specifically describe the parties who may file a case.

The "environmental" nature of this petition, based upon the alleged violation of the Tubbataha Reefs Natural Park
Act, by itself does not and should not automatically render the Rules of Procedure· for Environmental Cases
applicable. At best, it must be reconciled with rules on parties as contained in the Rules of Court. This is to preclude
a situation where the interpretation of the Rules of Procedure for Environmental Cases results in a ruling
inconsistent or contrary to established legal concepts. It is my position that unless the remedy sought will serve the
purpose of preventing an environmental catastrophe, the traditional procedural route should be taken. This means
that even in environmental cases, Rule 3, Section 2, 3, or 12 of the 1997 Rules of Civil Procedure should still also
apply.

Real party in interest

Rule 3, Section 2 pertains to real party in interest:

SEC. 2. Parties in interest. - A real party in interest is the party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules,
every action must be fsrosecuted or defended in the name of the real party in interest. (2a) 38

A real party in interest is a litigant whose right or interest stands to benefit or get injured by the judgment of the
case.  The interest referred to must be material interest, founded upon a legal right sought to be enforced.  They
39 40

bring a suit because the act or omission of another has caused them to directly suffer its consequences.  Simply
41

put, a real party in interest has a cause of action based upon an existing legal right-duty correlative.

Representatives as parties

Section 3 of Rule 3, on the other hand, discusses parties acting in representation of the real party in interest:

Sec. 3. Representatives as parties. - Where the action is allowed to be prosecuted or defended by a representative
or someone acting in a fiduciary capacity, the beneficiary shall be included in the title of the case and shall be
deemed to be the real party in interest. A representative may be a trustee of an express trust, a guardian, an
executor or administrator, or a party authorized by law or these Rules. An agent acting in his own name and for the
benefit of an undisclosed principal may sue or be sued without joining the principal except when the contract
involves things belonging to the principal.(3a) 42

A "representative" is not the party who will actually benefit or suffer from the judgment of the case. The rule requires
that the beneficiary be identified as he or she is deemed the real party in interest.  This means that acting ·in a
43

representative capacity does not turn into a real party in interest someone who is otherwise an outsider to the cause
of action.

This rule enumerates who may act as representatives, including those acting in a fiduciary capacity. While not an
exhaustive list, it does set a limit by allowing only those who are "authorized by law or these Rules."  In
44

environmental cases, this section may be used to bring a suit, provided that two elements concur: a) the suit is
brought on behalf of an identified party whose right has been violated, resulting in some form of damage, and b) the
representativE· authorized- by law or the Rules of Comt to represent the victim.

762
The citizen's suit under the Rules of Procedure for Environmental Cases is a representative suit. A citizen's suit is
defined:

SEC. 5. Citizen suit. - Any Filipino citizen in representation of others, including minors or generations yet unborn,
may file an action to enforce rights or obligations under environmental laws. Upon the filing of a citizen suit, the court
shall issue an order which shall contain a brief description of the cause of action and the reliefs prayed for, requiring
all interested parties to manifest their interest to intervene in the case within fifteen (15) days from notice thereof.
The plaintiff may publish the order once in a newspaper of a general circulation in the Philippines or furnish all
affected barangays copies of said order.

In my view, this rule needs to be reviewed. A citizen's suit that seeks to enforce environmental rights and obligations
may be bro1:1ght by any Filipino who is acting as a representative of others, including minors or generations yet
unborn.  As representatives, it is not necessary for petitioners to establish that they directly suffered from the
45

grounding of the USS Guardian and the subsequent salvage operations. However, it is imperative for them to
indicate with certainty the injured parties on whose behalf they bring the suit. Furthermore, the interest of those they
represent must be based upon concrete legal rights. It is not sufficient to draw out a perceived interest from a
general, nebulous idea of a potential "injury."

This is particularly important when the parties sought to be represented are "minors and generations yet unborn."

"Minors and generations yet unborn" is a category of real party in interest that was first established in Oposa v.
Factoran. In Oposa v. Factoran, this court ruled that the representatives derived their personality to file a suit on
behalf of succeeding generations from "intergenerational responsibility."  The case mirrored through jurisprudence
46

the general moral duty of the· present generation to ensure the full enjoyment of a balanced and healthful ecology
by the succeeding generations. 47

Since environmental cases necessarily involve the balancing of different types and degrees of interests, allowing
anyone from the present generation to represent others who are yet unborn poses three possible dangers.

First, they run the risk of foreclosing arguments of others who are unable to take part in the suit, putting into
question its representativeness. Second, varying interests may potentially result in arguments that are bordering on
political issues, the resolutions of which do not fall upon this court. Third, automatically allowing a class or citizen's
suit on behalf of "minors and generations yet unborn" may result in the oversimplification of what may be a complex
issue, especially in light of the impossibility of determining future generation's true interests on the matter.

Decisions of this court will bind future generations. The unbridled and misguided use of this remedy by supposed
representatives may not only weaken the minors' and unborn's ability to decide for themselves but may have
unforeseen and unintended detrimental effects on their interests.

The last point is especially crucial in light of res judicata. A longestablished doctrine on litigation, res judicata:

... is an old axiom of law, dictated by wisdom and sanctified by age, and founded on the broad principle that it is to
the interest of the public that there should be an end to litigation by the same parties over a subject once fully and
fairly adjudicated. It has been appropriately said that the doctrine is a rule pervading every well-regulated system of
jurisprudence, and is put upon two grounds embodied in various maxims of the common law: one, public policy and
necessity, which makes it to the interest of the State that there should be an end to litigation - interest reipublicae ut
sit finis litium; the other, the hardship on the individual tlwt he should be vexed twice for one and the same cause -
nemo debet bis vexari pro una et eadem causa. A contrary doctrine would subject the public peace and quiet to the
will and neglect of individuals and prefer the gratification of the litigious disposition on the pmi of suitors to the
preservation of the public tranquillity and happiness.  (Emphasis supplied, citation omitted)
48

The elements of res judicata are:

. . . (1) the former judgment must be final; (2) the former judgment must have been rendered by a court having
jurisdiction of the subject matter and the parties; (3) the former judgment must be a judgment on the merits; and (4)
there must be between the first and subsequent actions (i) identity of parties or at least such as representing the
same interest in both actions; (ii) identity of subject matter, or of the rights asse1ied and relief prayed for, the relief
being founded on the same facts; and, (iii) identity of causes of action in both actions such that any judgment that
may be rendered in the other action will, regardless of which party is successful, amount to res judicata in the
action· under consideration.  (Emphasis supplied, citation omitted)
49

An absolute identity of the parties is not required for res judicata to apply, for as long as there exists an identity or
community of interest. 50

Res judicata renders conclusive between the parties and their privies a ruling 'on their rights, not just for the present
action, but in all subsequent suits. This pertains to all points and matters judicially tried by a competent court. The

763
doctrine bars parties to litigate an issue more than once, and this is strictly applied because "the maintenance of
public order, the repose of society ... require that what has been definitely determined by competent tribunals shat'
be accepted as irrefragable legal truth." 51

Considering the effect of res judicata, the ruling in Oposa v. F actoran has opened a dangerous practice of binding
parties who are yet incapable of making choices for themselves, either due to minority or the sheer fact that they do
not yet exist. Once res judicata sets in, the impleaded minors and generations yet unborn will be unable to bring a
suit to relitigate their interest. Perhaps it is time to revisit the ruling in Oposa v. Factoran.

That case was significant in that, at that time, there was need to call attention to environmental concerns in light of
emerging international legal principles. While "intergenerational responsibility" is a noble principle, it should not be
used to obtain judgments that would preclude future generations from making their own assessment based on their
actual concerns. The present generation must restrain itself from assuming that it can speak best for those who will
exist at a different time, under a different set of circumstances.. In essence, the unbridled resort to representative
suit will inevitably result in preventing future generations from protecting their own rights and pursuing their own
interests and decisions. It reduces the autonomy of our children. and our children s children. Even before they are
born, we again restricted their ability to make their own arguments.

It is my opinion that, at best, the use of the Oposa doctrine in environmental cases should be allowed only when a)
there is a clear legal basis for the representative suit; b) there are actual concerns based squarely upon an existing
legal right; c) there is no possibility of any countervailing interests existing within the population represented or those
that are yet to be born; and d) there is an absolute necessity for such standing because there is a threat of
catastrophe so imminent that an immediate protective measure is necessary. Better still, in the light of its costs and
risks, we abandon the precedent all together.

Class suit

The same concern regarding res judicata also applies to a class suit.

Rule 3, Section 12 of the Rules of Court states:

SEC. 12. Class suit. - When the subject matter of the controversy is one of common or general interest to many
persons so numerous that it is impracticable to join all as parties, a number of them which the court finds to be
sufficiently numerous and representative as to fully protect the interests of all concerned may sue or defend for the
benefit of all. Any party in interest shall have t he right to intervene to protect his individual interest. (12a)

In Mathay et al. v. The Consolidated Bank and Trust Company,  this court held that a class suit must essentially
52

contain the following elements:

The necessary elements for the maintenance of a class suit are accordingly (1) that the subject matter of the
controversy be one of common or general interest to many persons, and (2) that such persons be so numerous as
to make it impracticable to bring them all to the court. An action does not become a class suit merely because it is
designated as such in the pleadings. Whether the suit is or is not a class suit depends upon the attending facts, and
the complaint, or other pleading initiating the class action should allege the existence of the necessary facts, to wit?
the existence of a subject matter of cqmmon interest, and the existence of a class and the number of persons in the
alleged class, in order that the court might be enabled to determine whether the members of the class are so
numerous as to make it impracticable to bring them all before the court, to contrast the number appearing on the
record with the number in the class and to determine whether claimants on record adequately represent the class
and the subject matter of general or common interest.

The complaint in the instant case explicitly declared that the plaintiffs-appellants instituted the "present class suit
under Section 12, Rule 3, of the Rules of Comi in behalf of CMI subscribing stockholders" but did not state the
number of said CMI subscribing stockholders so that the trial court could not infer, much less make sure as explicitly
required by the statutory provision, that the parties actually before it were sufficiently numerous and representative
in order that all interests concerned might be fully protected, and that it was impracticable to bring such a large
number of pmiies before the court.

The statute also requires, as a prerequisite to a class suit, that the subject-matter of the controversy be of common
or general interest to numerous persons. Although it has been remarked that the "innocent 'cominon or general
interest' requirement is not very helpful in determining whether or not the suit is proper," the decided cases in our
jurisdiction have more incisively certified the matter when there is such common or general interest in the subject
matter of the controversy. By the phrase "subject matter of the action" is meant "the physical facts, the things real or
personal, the money, lands, chattels, and the like, in relation to which the suit is prosecuted, and not the delict or
wrong committed by the defendant. "  (Emphasis supplied, citations omitted)
53

The same case referred to the United States Federal Rules of Civil Procedure. After having been raised by Mathay
et al. as legal basis for its class suit, this court held:
764
. . . We have no conflict with the authorities cited; those were rulings under the Federal Rules of Civil Procedure,
pursuant to Rule 23 of which, there were three types of class suits, namely: the true, the hybrid, and the spurious,
and these three had only one feature in common, that is, in each the persons constituting the class must be so
numerous as to make it impracticable to bring them all before the court. The authorities cited by plaintiffs-appellants
refer to the spurious class action Rule 23 (a) (3) which involves a right sought to be enforced, which is several, and
there is a common question of law or fact affecting the several rights and a common relief is sought. The spurious
class action is merely a permissive joinder device; between the members of the class there is no jural relationship,
and the right or liability of each is distinct, the class being formed solely by the presence of a common question of
law or fact. This permissive joinder is provided in Section 6 of Rule 3, of our Rules of Court. Such joinder is not and
cannot be regarded as a class suit, which this action purported and was intended to be as per averment of the
complaint. It may be granted that the claims of all the appellants involved the same question of law. But this alone,
as said above, did not constitute the common interest over the subject matter indispensable in a class suit . . . .
54
(Emphasis supplied, citations omitted)

In a class suit, petitioners necessarily bring the suit in two capacities: first, as persons directly injured by the act or
omission compla.ined of; and second, as representatives of an entire class who have suffered the same injury. In
-order to fully protect all those concerned, petitioners must show that they belong in the same universe as those
they seek to represent. More importantly, they must establish that, in that universe, they can intervene on behalf of
the rest.

These requirements equally apply in environmental cases.

Petitioners who bring the suit both for themselves and those they seek to represent must share a common legal
interest - that is, the subject of the suit over which there exists a cause of action is common to all persons who
belong to the group.  As a result, the right sought to be enforced is enjoyed collectively, and not separately or
55

individually.  The substantial injury must have been suffered by both the parties bringing the suit and the
56

represented class. However, it is recognized that any damage to the environment affects people differently,
rendering it impossible for the injury suffered to be of the same nature and degree for each and every person. For
instance, secondhand smoke from one who lights up a cigarette may cause lung and other health complications of a
much graver degree to exposed commuters, compared to those who are kept insulated by well-maintained and
wellventilated buildings. The same may be said for dumpsites along the shores of a bay. The gravity of injury they
cause to those whose source of livelihood is purely fishing in the affected area would be entirely different from that
sufiered by an office worker.

The differences in effects, ranging from miniscule to grave, increase the possibility of "free-riders" in a case. This
results in a negative externality: an environmental management concept that delves into the effect of an individual's
or firm's action on others.  In this case, the effect on others is a disadvantage or an injury.
57

In most instances where this free-rider or negative externality exists, a suit is not filed because the cost of
maintaining and litigating outweighs the actual damage suffered due to the act or omission of another. The theory is
that bringing a class suit allows those who are not as affected as petitioners, though they may share the same
interest, to latch their claim on someone else without any personal expense. There must be some assurances,
however, that the interests are the same and the arguments that should have been brought by others who do not
have the resources to bring the suit are properly represented. This is why the niles allow courts to be liberal in
assessing "common interest."

Another essential element of a class suit is that petitioners must be sufficiently numerous and representative so as
to fully protect the interest of all concerned. One of the dangers of bringing a class suit is that while the parties'
environmental interest shares a common legal basis, the extent and nature of that interest differ depending on
circumstances.

In the case of Re: Request of the Plaintiffs, Heirs of the Passengers of the Dona Paz,  which quoted Moore's
58

Federal Practice we noted:

A "true class action" - distinguished from the so-called hybrid and the spurious class action in U.S. Federal Practice
- "involves principles of compulsory joinder, since ... (were it not) for the numerosity of the class members all
should ... (be) before the court. Included within the true class suit ... (are) the shareholders' derivative suit and a
class action by or against an unincorporated association .... A judgment in a class suit, whether favorable or
unfavorable to the class, is binding under res judicata principles upon all the members of the class, whether or not
they were before the court. It is tlze non-divisible nature of the right sued on which determines both the membership
of the class and the res judicata effect of the final determination of the right."  (Emphasis supplied)
59

Those who bring class suits do so, carrying a heavy burden of representation. All the parties represented may not
have consented to the agency imposed on them.

Courts, therefore, must ensure that the parties that bring the suit are sufficiently numerous to. ensure that all
possible interests and arguments have been· considered. The community, class, group, or identity that is
765
represented must be sufficiently defined so that the court will be able to properly assess that the parties bringing the
suit are properly representative.

In view of the technical nature of some environmental cases, not only should. the parties be representative in terms.
of the interests and arguments that they bring, they must likewise show. that they have the capability to bring
reasonably cogent, rational, scientific, well-founded arguments. This is so because if they purportedly represent a
community, class, group, or identity, we should assume that all those represented would have wanted to . argue in
the best possible manner.

The cogency "and representativeness of the arguments can readily be seen in the initiatory pleading. In the special
civil actions invoked in this case, this court has the discretion to scrutinize the initiatory pleading to determine
whether it should grant due course prior or after the filing of a comment. In my view, this pleading falls short of the
requirement of representativeness.

For instance, it is clear in some of the reliefs that were requested that the arguments may not be what all those they
purport to represent really want. As an illustration, the petition requests:

3) for respondents to stop all port calls and war games under the Balikatan;

The facts in this case and the writ of kalikasan certainly have no bearing on why this· court should issue an
injunction against all port calls in any part of the country made by all kinds of ships even if this is related to
the Balikatan exercises. "War games" even undertaken solely on land has no bearing on the subject matter
of this case. Also, in the facts as alleged in the pleading, it is not clear how all those affected by the
ecological mishap that may have occurred in the Tubbataha Reefs would also be interested in stopping "war
games under the Balikatan." The pleading asserts that it represents all generations yet unborn. Thus, it
includes the sons and daughters of all government officials who are now involved in the Balikatan exercises.
It also includes the military commanders who are now administering such exercise. The broad relief
requested belies the representativess of the suit.

Of similar nature are the following prayers for relief in the petition:

4) for respondents to assume responsibility for prior and future environmental damage in general and under
the Visiting Forces Agreement (VFA);

5) for the temporary definition of allowable activities near or around the Tubbataha Reefs [Natural] Park, but
away from the damaged site and the additional buffer zone;

6) for respondent Secretary of Foreign Affairs to negotiate with the United States representatives for an
agreement on environmental guidelines and accountability pursuant to the VFA;

....

8) for the declaration of exclusive criminal jurisdiction of Philippine authorities over erring USS Guardian
personnel;

....

14) for the convention of a multisectoral technical working group that will provide scientific and teclmical
support to the Tubbataha Protected Area Management Board (TPAMB1);

15) for respondents Department of Foreign Affairs, Department of National Defense, and the Department of
Environmental and Natural ·Resources to review the VFA and the Mutual Defense Treaty in light of the right
to a balanced and healthful ecology, and any violation related thereto;

16) for the declaration of the grant of immunity under Articles V and VI of the VFA as being violative of equal
protection and/or the peremptory norm of nondiscrimination; 17) for permission to resort to continuing
discovery measures

17) for permission to resort to continuing discovery measures

Not all environmental cases need to be brought as class suits. There is no procedural requirement that majority of
those affected must file a suit in order that an injunctive writ or a writ of kalikasan can be issued. It is sufficient that
the party has suffered its own direct and substantial interest, its legal basis is cogent, and it has the capability to
move forward to present the facts and, if necessary, the scientific basis for its analysis for some of these cases to be
given due course.

766
Parenthetically, the humility of bringing suits only in the name of petitioners vvill protect them from the charge that
more than the legal argurnents they want to bring, they also want to impose their own political views as views which
are umversally accepted.

In all environmental cases, it is also not necessary that generations yet unborn be represented. It is not also
necessary that minors bring the suit. In my view, pleading their interests have no value added to the· case except for
its emotive effect at the risk of encouraging a paternal attitude toward our children and for those belonging to
generations yet unborn. Certainly, it was not necessary with respect to the putative cause of action relating to the
grounding of the USS Guardian.

With the class suit improperly brought, the parties who filed this petition have no legal standing. To protect the
individuals, families, and communities who are improperly represented, this case should be dismissed.

III
A petition for a writ of kaiikasan is a wrong remedy

Rule 7, Part III of the Rules of Procedure for Environmental Cases pertaines to the writ of kalikasan. It describes the
nature of the writ:

Section 1. Nature of the writ. -The writ is a remedy available to a natural or juridical person, entity authorized by law,
people's organization, non-governmental organization, or any public interest group accredited by or registered with
any government agency, on behalf of persons whose constitutional right to a balanced and healthful ecology is
violated, or threatened with violation by an unlawful act or omission of a public official or employee, or private
individual or entity, involving environmental damage of such magnitude as to prejudice the life, health or property of
inhabitants in two or more cities or provinces. (Emphasis supplied)

The writ of kalikasan is a remedy that covers environmental damages the magnitude of wliich transcends both
political and territorial boundaries.  It specifically provides that the prejudice to life, health, or property caused by an
60

unlawful act or omission of a public official, public employee, or a private individual or entity must be felt in at least
two cities or provinces.  The petition for its issuance may be filed on behalf of those whose right to a balanced and
61

healthful ecology is violated, provided that the group or organization which seeks to represent is duly accredited. 62

Two things must be examined: first, whether petitioners are qualified to bring this suit under the requirements of the
provisions; and second, whether there are actual injured parties being represented. On the first issue, the following
petitioners bring this case as individuals:

• Rev. Pedro Agiro, Vicar Apostolic of Puerto Princesa 63

• Rev. Deogracias Iniguez, Jr., Bishop-Emeritus of Caloocan 64

• Frances Quimpo 65

• Teresita R. Perez, Ph.D 66

• Giovanni Tapang, Ph.D 67

• Jose Enrique Africa 68

• Nestor Baguinon 69

• A. Edsel Tupaz 70

The following petitioners represent organizations:

• Clemente Bautista Jr., Coordinator of Kalikasan People's Network for the Environment 71

• Maria Carolina Araullo, Chairperson of Bagong Alyansang Makabayan (Bayan) 72

• Renato Reyes Jr., Secretary-General of Bagong Alyansang Makabayan (Bayan) 73

• Hon. Neri Javier Colmenares, Representative of Bayan Muna Party-list 74

• Roland Simbulan, Ph.D., Junk VFA Movement 75

• Hon. Raymond Palatino, Representative of Kabataan Party-list 76

767
 • Peter Gonzales, Vice Chairperson of Pambansang Lakas ng Kilusang Mamamalakaya ng Pilipinas
(Pamalakaya) 77

• Elmer Labog, Chairperson of Kilusang Mayo Uno 78

• Joan May Salvador, Secretary-General of Gabriela 79

• Theresa Concepcion, Earth Island lnstitute 80

• Mary Joan Guan, Executive Director for Center for Women's Resources 81

Petitioners satisfy the first requirement as they comprise both natural persons and groups duly recognized by the
government. It is doubtful, however, whether there are actual injured parties being represented. As discussed
previously, a citizen's suit on an environmental issue must be resorted to responsibly.

Petitioners in this case also seek the issuance of a temporary environmental protection order or TEPO. Rule 7, Part
III of the Rules of Procedure for Environmental Cases provides:

SEC. 8. Issuance of Temporary Environmental Protection Order (TEPO). - If it appears from the verified complaint
with a prayer for the issuance of an Environmental Protection Order (EPO) that the matter is of extreme urgency and
tlze applicant will suffer grave injustice and irreparable injury, the executive judge of the multiple-sala court before
raffle or the pres1ding judge of a singlesala court as the case may be, may issue ex parte a TEPO effective for only
seventy-two (72) hours from date of the receipt of the TEPO by the party or person enjoined. Within said period, the
court where the case is assigned, shall conduct a summary hearing to determine whether the TEPO may be
extended until the termination of the case.

The court where the case is assigned, shall periodically monitor the existence of acts that are the subject matter of
the TEPO even if issued by the executive judge, and may lift the same at any time as circumstances may warrant.

The applicant shall be exempted from the posting of a bond for the issuance of a TEPO. (Emphasis supplied)

A TEPO is an order which either directs or enJoms a person or government agency to perform or refrain from a
certain act, for the purpose of protecting, preserving, and/or rehabilitating the environment.  The crucial elements in
82

"its issuance are the presence of "extreme urgency" and "grave injustice and irreparable injury" to the applicant. 83

Petitioners hinge the basis for this prayer on the salvage operations conducted immediately after the incident. The
remedy is no longer available considering that all activities to remove the grounded USS Guardian have been
concluded.  Furthermore, the Notice to Mariners No. 011-2013 issued by the Philippine Coast Guard on January 29,
84

2013 effectively set the metes and bounds of the damaged area.  This notice also prohibited "leisure trips to
85

Tubbataha" and advised "all watercrafts transitting the vicinity to take precautionary measures." 86

In light of the facts of this case, 1 vote that the petition be also dismissed for being moot and being brought through
the wrong remedy.

IV
Doctrine of relative jurisdictional immunity
(sovereign immunity)

It is my position that doctrine on relative jurisdictional immunity of foreign state or otherw!se referred to as sovereign
immunity should be further refined. I am of the view that immunity does not necessarily apply to all the foreign
respondents should the case have been brought in a timely manner, with the proper remedy, and in the proper
court. Those who have directly and actually committed culpable acts or acts resulting from gross negligence
resulting in the grounding of a foreign warship in violation of our laws defining a tortious act or one that protects the
environment which implement binding international obligations cannot claim sovereign immunity.

Some clarification may be necessary to map the contours of relative jurisdictional immunity of foreign states
otherwise known as the doctrine of sovereign immunity.

The doctrine of sovereign immunity can be understood either as a domestic or an inte1national concept. 87

As a domestic concept, sovereign immunity is understood as the nonsuability of the state. In the case of the
Republic of the Philippines as a State, this is contained in Article XVI, Section 3 of the 1987 Philippine Constitution,
which provides that "[the] State may not be sued without its consent."

In Air Transportation Office v. Spouses Ramos,  this court underscored the practical considerations underlying the
88

doctrine:
768
Practical considerations dictate the establishment of an immunity from suit in favor of the State.  Otherwise, and the
1âwphi1

State is suable at the instance of every other individual, government service may be severely obstructed and public
safety endangered because of the number of suits hat the State has to defend against ....  (Emphasis supplied,
89

citation omitted)

The textual reference to "[the] State" in Article XVI, Section 3 of the Constitution does not refer to foreign
governments. Rather, as a doctrine in international law, the concept of sovereign immunity is incorporated into our
jurisdiction as international custom or general principle of international law through Article II, Section 2, which
provides:

Section 2. The Philippine renounces war as an instrument of national policy, adopts the generally accepted
principles of international law as part of the law of the land and adheres to the policy of peace, equality, justice,
freedom, cooperation, and amity with all nations.  Alternatively, should there be an international agreement or a
90

treaty  that articulates the scope of jurisdictional immunity for other sovereigns, then it can be incorporated through
91

Article VII, Section 21, which provides:

No treaty or international agreement shall be valid and effective unless concurred in by at least two-thirds of all the
Members of the Senate.

In Republic of Indonesia v. Vinzon,  this court ruled that "[the] rule that a State may not be sued without its consent
92

is a necessary consequence of the principles of independence and equality of States."  However, it did not make
93

any reference to Article XVI, Section 3 of the Constitution. Instead, it used Article II, Section 2  as basis for its
94

discussion:

International law is founded largely upon the principles of reciprocity, comity, independence, and equality of States
which were adopted as part of the law of our land under Article II, Section 2 of the 1987 Constitution. The rule that a
State may not be sued without its consent is a necessary consequence qf the principles of independence and
equality of States. As enunciated in Sanders v. Veridiano II, the practical justification for the doctrine of sovereign
immunity is that there can be no legal right against the authority that makes the law on which the right depends. In
the case of foreign States, the rule is derived from the principle of the sovereign equality of States, as expressed in
the maxim par in parem non lzabet imperium. All states are sovereign equals and cannot assert jurisdiction over one
another. A contrary attitude would "unduly vex the peace of nations."  (Emphasis supplied, citations omitted)
95

V
Sovereign immunity under international law

Under international law, sovereign immunity remains to be an abstract concept. On a basic level, it is understood as
a basic right extended to states by other states on the basis of respect for sovereignty and independence.  There 96

appears to be a consensus among states that sovereign immunity as a concept is legally binding.  Nevertheless, 97

legal scholars observe that there remains to be a lack of agreement as to how it is to be invoked or exercised in
actual cases.  Finke presents:
98

States accept sovereign immunity as a legally binding concept, but only on a very abstract level. They agree on the
general idea of immunity, but disagree on the extent to which they actually must grant immunity in a specific
case. (Emphasis supplied, citations omitted)
99

This vagueness arises from the debate about the sources of international law for the doctrine of sovereign immunity.

Article 38(1) of the Statute of the International Court of Justice (ICJ Statute)  enumerates the classic sources of
100

international law: 101

The Court, whose function is to decide in accordance with international law such disputes as are submitted to it,
shall apply:

a. international conventions, whether general or particular, establishing rules expressly recognized by the
contesting states;

b. international custom, as evidence of a general practice accepted as law;

c. the general principles of law recognized by civilized nations;

d. subject to the provisions of Article 59, judicial decisions and the teachings of the most highly qualified
publicists of the various nations, as subsidiary means for the determination of rules of law.

International conventions, or treaties, are "international agreement[s] concluded between States in written form and
governed by international law, whether embodied in a· single instrument, or in two or more related instruments and
769
whatever its particular designation."  International custom, or customary international law, pertains to principles, not
102

necessarily expressed in treaties, resulting from practices consistently followed by states due to a sense of legal
obligation.  General principles of law recognized by civilized nations are "(those) principles of law, private and
103

public, which contemplation of the legal experience of civilized nations leads one to regard as obvious maxims of
jurisprudence of a general and fundamental character." 104

Sovereign immunity under treaty law

Attempts hav.e been made to establish sovereign immunity under treaty law.  On a multilateral level, two treaties
105

on this issue have been codified: a) the European Convention on State Immunity (ECSI), and b) the UN Convention
on Jurisdictional Immunities of States (UNCJIS).

The European Convention on State Immunity is a treaty established through the Council of Europe on May 16,
1972.  In the Council of Europe's explanatory report, sovereign immunity is defined as "a concept of international
106

law, which has developed out of the principle par in parem non habet imperium, by virtue of which one State is not
subject to the jurisdietion of another State."  The treaty arose out of the need to address cases where states
107

become involved in areas of private law:

For many years State immunity has occupied the attention of eminent jurists. It is also the object of abundant case
law. The development of international relations and the inc.reasing intervention of States in sphen;s belonging to
private law have posed the problem still more acutely by increasing the number of disputes opposing individuals
andforeign States.

There are, at present, two theories, that of absolute State immunity which is the logical consequence of the principle
stated above and that of relative State immunity which is tending. to predominate on account of the requirement of
modern conditions. According to this latter theory, the State enjoys immunity for acts jure imperii but not for acts jure
gestionis, that is to say when it acts in the same Jvay as a private person in relations governed by private law. This
divergence of opinion causes difficulties in international relations. States whose courts and administrative authorities
apply the theory of absolute State immunity are led to call for the same treatment abroad. (Emphasis supplied)

However, the European Convention on Sovereign Immunity's application is limited to the signatories of the treaty:

The Convention requires each Contracting State to give effect to judgments rendered against it by the courts of
another Contracting State. It is in particular for this reason that it operates only between the Contracting States on
the basis of the special confidence subsisting among the Members of the Council of Europe. The Convention
confers no rig/u:s on nonContracting States; in particular, it leaves open all questions as to the exercise of
jurisdiction against non-Contracting States in Contracting States, and vice versa.

On the other hand, the UN Convention on Jurisdictional Immunities of States  is a treaty adopted by the UN
108

General Assembly in December 2004. It was opened for signature on January 27, 2005, but is yet to be in force for 109

lacking the requisite number of member-state signatories.  At present, it only has 28 signatories, 16 of which have
110

either ratified, accepted, approved, or acceded to the treaty. 111

UNCJIS refers to jurisdictional immunities of states as a principle of customary international law.  Scholars,
112

however, point out that this posture is not accurate. According to N agan and Root: 113

It may be true that all states recognize jurisdictional immunity, but as we have already alluded to, that is so only at
an abstract level; there is "substantial disagreement on detail ·and substance."  (Emphasis supplied, citations
114

omitted)

Wiesinger adds:

The UN Convention is not a codification of customary international law concerning enforcement measures either,
since it introduces new categories of State property, which are immune from execittion. Moreover, it contains a
connection requirement of property serving commercial purposes with the entity against which the claim was
directed, which is a novelty in international law.  (Emphasis supplied)
115

The Philippines has neither signed nor ratified the UNCJIS. Article VII, Section 21 of the Constitution clearly
provides the legal requisites to a valid and enforceable international treaty: "No treaty or international agreement
shall be valid and effective unless concurred in by at least twothirds of all the Members of the Senate."

Senior Associate Justice Antonio T. Carpio ably points to the UN Convention on the Law of the Sea (UNCLOS) as
basis for the waiver of sovereign immunity in this case, on account of a warship entering a restricted area and
causing damage to the TRNP reef system. This is based on a reading of Articles 31 and 32 of the UNCLOS, thus:

770
 Article 31
Responsibility of the flag State for damage caused by a warship or
other government ship operated for non-commercial purposes

The flag State shall bear international responsibility for any loss or damage to the coastal State resulting from the
non-compliance by a warship or other government ship operated for non-commercial purposes with the laws and
regulations of the coastal State concerning passage through the territorial sea or with the provisions of this
Convention or other rules of international law.

This is, however, subject to Article 32 of the same treaty which provides:

Article 32
Immunities of warships and other government ships operated for
non-commercial purposes

With such exceptions as are contained in subsection A and in articles 30 and 31, nothing in this Convention affects
the immunities of warships and other 'government ships operated for non-commercial purposes.

I agree that the UNCLOS does provide an opening clarifying the "international responsibility" of the flag ship for non-
compliance by a warship with the laws of a coastal State. However, because of Article 32 of the same treaty, it
would seem that it should not be the only basis for this court to infer either a waiver by the United States or authority
under international law for domestic courts to shape their own doctrines of sovereign jurisdictional immunity.

Other international agreements

The text of A1iicle VII, Section 21 would seem to require Senate concurrence for treaties and "international
agreements." The term "international agreements," however, for purposes of granting sovereign immunity, should
not cover mere executive agreements.

We are aware of Bayan Muna v. Romulo  where the ponente for this court held:
116

. . . . International agreements may be in the form of (1) treaties that require legislative concurrence after executive
ratification; or (2) executive agreements that are similar to treaties, except that they do not require legislative
concurrence and are usually less formal and deal with a narrower range of subject matters than treaties.

Under international law, there is no difference between treaties and executive agreements in terms of their binding
effects on the contracting states concerned, as long as the negotiating functionaries have remained within their
powers. Neither, on the domestic sphere, can one be held valid if it violates the Constitution. Authorities are,
however, agreed that one is distinct from another for accepted reasons apaii from the concurrence-requirement
aspect. As has been observed by US constitutional scholars, a treaty has greater "dignity" than an executive
agreement, because its constitutional efficacy is beyond doubt, a treaty having behind it the authority of the
President, the Senate, and the people;

a ratified treaty, unlike an executive agreement, takes precedence over any pnor statutory enactment.  (Emphasis
117

supplied, citations omitted)

This statement, however, should be confined only to the facts of that case. Executive agreements are not the same
as treaties as a source of international law. It certainly may have a different effect in relation to our present statutes
unlike a treaty that is properly ratified.

Due to the nature of respondents' position ill the United States Armed Forces, the Visiting Forces Agreement of
1998 (VFA) is relevant in this case. In particular, the question of whether the VFA, executed between the Republic
of the Philippines and the United States government, may be treated as a "treaty" upon· which the doctrine of
foreign sovereign immunity is founded must be addressed.

In BAYAN v. Zamora,  this court tackled the issues pertaining to the constitutionality of the VFA. It was described
118

as "consist[ing] of a Preamble and nine (9) Articles, [and it] provides for the mechanism for regulating the
circumstances and conditions under which [the] US Armed Forces and defense personnel maybe present in the
Philippines .... "
119

As a preliminary issue, this court ruled that the Senate concurrence as required by the Constitution was achieved,
thereby giving VFA a legally binding effect upon the government.  However the agreement's characterization as a
120

"treaty" was put in question. This court held that despite the non-concurrence of the United States Senate, the VFA
is validly categorized as a treaty:

771
This Court is of the firm view that the phrase "recognized as a treaty" means that the other contracting party accepts
or acknowledges the agreement as a treaty. To require the other contracting state, the United States of America in
this case, to submit the VFA to the United States Senate for concurrence pursuant to its Constitution, is to accord
strict meaning to the phrase.

Well-entrenched is the principle that the words used in the Constitution are to be given their ordinary meaning
except where technical terms are employed, in which case the significance thus attached to them prevails. Its
language should be understood in the sense they have in common use.

Moreover, it is inconsequential whether the United States treats the VFA only qs an executive agreement because,
under international law, an executive agreement is as binding as a treaty. To be sure, as long as the VFA_
possesses the elements of an agreement under international law, the said agreement is to be taken equally as a
treaty.

A treaty, as defined by the Vienna Convention on the Law of Treaties, is "an international instrument concluded
between States in written form and governed by international law, whether embodied in a single instrument or in two
or more related instruments, and whatever its particular designation." There are many other terms used for a treaty
or international agreement, some of which are: act, protocol, agreement, compromised' arbitrage, concordat,
convention, declaration, exchange of notes, pact, statute, charter and modus vivendi. All writers, from Hugo Grotius
onward, have pointed out that the names or titles of international agreements included under the general term treaty
have little or no legal significance. Certain terms are useful, but they furnish little more than mere description.

Article 2(2) of the Vienna Convention provides that "the provisions of paragraph 1 regarding the use of terms in the
present Convention are without prejudice to the use of those terms, or to the meanings whic;h may be given to them
in the internal law of the State.

Thus, in international law, there is no difference between treaties and executive agreements in their binding effect
upon states concerned, as long as the negotiating functionaries have remained within their powers. International law
continues to make no distinction between treaties and executive agreements: they are equally binding obligations
upon nations.

In our jurisdiction, we have recognized the binding effect of executive agreements even without the concurrence of
the Senate or Congress....

....

The records reveal that the United States Government, through Ambassador Thomas C. Hubbard, has stated that
the United States government has fully committed to living up to the terms of the VFA. For as long as the United
States of America accepts or acknowledges the VFA as a treaty, and binds itself further to comply with its
obligations under the treaty, there is indeed marked compliance with the mandate of the Constitution.  (Emphasis
121

supplied, citations omitted)

Under the US legal ,system, however, an executive agret:ment, while legally binding, may not-have the same effect
as a treaty. It may, under certain circumstances, be considered as inferior to US law and/or Constitution. According
to Garcia:122

Under the U.S. legal system, international agreements can be entered into by means of a treaty or an executive
agreement. The Constitution allocates primary responsibility for entering into such agreements to the executive
branch, but Congress also plays an essential role. First, in order for a treaty (but not an executive agreement) to
become binding upon the United States, the Senate must provide its advice and consent to treaty ratification by a
two-thirds majority. Secondly, Congress may authorize congressional-executive agreements. Thirdly, many treaties
and executive agreements are not self-executing, meaning that implementing legislation is required to provide. U.S.
bodies with the domestic legal authority necessary to enforce and comply with an international agreement 's
provisions.

The status of an international agreement within the United States depends on a variety of factors. Self-executing
treaties have a status equal to. federal statute, superior to U.S. state law, and inferior to the Constitution. Depending
upon the nature of executive agreements, they may or may not have a status equal to federal statute. In any case,
self-executing executive agreements have a status that is superior to U.S. state law and inferior to the Constitution.
Treaties or executive agreements that are not selfexecuting have been understood by the courts to have limited
status domestically; rather, the legislation or regulations implementing these agreements are controlling. (Emphasis
123

supplied, citation omitted)

Domestic politics and constitutional guidelines also figure into the effect of an executive agreement in the United
States. Garcia adds:

772
The great majority of international agreements that the United States enters into are not treaties but executive
agreements-agreements entered into by the executive branch that are not submitted to the Senate for its advice and
consent. Congress generally requires notification upon the entry of such an agreement. Although executive
agreements are not specifically discussed in the Constitution, they nonetheless have been considered valid
international compacts under Supreme Court jurisprudence and as a matter of historical practice.

....

Sole executive agreements rely on neither treaty nor congressional authority to provide for their legal basis. The
Constituti Jn may confer limited authority upon the President to promulgate such ag1eements on the basis of his
foreign affairs power. If the President enters into an executive agreement pursuant to and dealing with an area
where he has clear, exclusive constitutional authority - such as an agreement to recognize a particular foreign
government for diplomatic purposes - the agreement is legally permissible regardless of Congress's opinion on the
matter. If, however, the President enters into an agreement and his constitutional authority over the agreement's
subject matter is unclear, a reviewing court may consider Congress's position in determining whether the agreement
is legitimate. If Congress has given. its implicit approval to the President entering the agreement, or is silent on the
matter, it is more likely that the agreement will be deemed valid. When Congress opposes the agreement and the
President's constitutional authority to enter the agreement is ambiguous, it is unclear if or when such an agreement
would be given effect.  (Emphasis supplied, citation omitted)
124

The recognition of the complex nature and legal consequences of an executive agreement entered into by the
United States with another State must not be taken lightly. This is especially in light of the invocation of
"international comity", which loosely refers to "applying foreign law or limiting domestic jurisdiction out of respect for
foreign sovereignty."125

As it stands, international comity is by itself no longer a simple matter. In quoting an 1895 US case, Hilton v.
Guyot,  Paul argues that at the beginning of the 20th century, the underlying principle of international comity was
126

the respect afforded by one sovereign to another. At present, however, Paul posits:

For all these reasons, international comity would seem to be too vague, incoherent, illusory, and ephemeral to serve
as a foundation for U.S. private international law. Yet, it is precisely these qualities that have allowed the doctrine of
international comity to mutate over time in ways that re.)pond to different geopolitical circumstances. Specifically,
international comity has shifted in three distinct respects. First, the meaning of comity has shifted over time.
Originally, international comity was a discretionary doctrine that empowered courts to decide when to defer to
foreign law out of respect for foreign sovereigns. Comity has become a rule that obligates courts to· apply foreign
law in certain circumstances. Second, the object of comity has changed. Whereas once comis justified applying
foreign law out of deference to foreign sovereigns, courts later justified their decisions out of deference to the
autonomy of private parties or to the political branches. Most recently, courts have justified limits on domestic law
out of deference to the global market. Third, the function of comity has changed. Comity is no longer merely a
doctririe for deciding when to apply foreign law; it has become a justification for deference in a: wide range of cases
concerning prescriptive, adjudicatory, and enforcement jurisdiction. (Emphasis supplied, citation omitted)

On a substantive note, another issue raised in BAYAN v. Zamora is whether the VFA amounted to an abdication of
Philippine sovereignty insofar as the jurisdiction of local courts "to hear and try offenses committed by US military
personnel"  was concerned. Upon finding at the outset that the VFA did not amount to grave abuse of discretion,
127

this court no longer proceeded to rule on this matter:

In fine, absent any clear showing of grave abuse of discretion on the part of respondents, this Court - as the final
arbiter of legal controv'!rsies and staunch sentinel of the rights· of the people - is then without power to conduct an
incursion and me.ddle with such affairs purely executii;e and legislative in character and nature. For the Constitution
no less, maps out the distinct boundaries and limits the metes and bounds within which each of the three political
branches of government may exercise the powers exclusively and essentially conferred to it by law.  (Emphasis
128

supplied)

In sum, the extent of the VFA's categorization as between the Philippine and United States government - either as a
"treaty"/"executive agreement" or as a matter subject to international comity - remains vague. Nevertheless, it is
certain that the United States have made a political commitment to recognize the provisions and execute their
obligations under the VFA. This includes respecting jurisdictional issues in cases involving an offense committed by
a US military personnel.

Sovereign immunity as customary international law

Customary international law traditionally pertains to:

. . . the collection of international behavioral regularities that nations over time come to view as binding on them as a
matter of law. This standard definition contain two elements. There must be a widespread and uniform practice of
nations. And nations must engage in the practice out of a sense of legal obligation. This second requirement, often
773
referred to as opinio juris, is the central concept of CIL. Because opinio juris refers to the reason why a nation acts
in accordance with a behavioral regularity, it is often described as the "psychological" element of CIL. It is what
distinguishes a national act done voluntarily or out of comity from one that a nation follows because required to do
so by law. Courts and scholars say that a longstanding practice among nations "ripens" or "hardens" into a rule of
CIL· when it becomes accepted by nations as legally binding.  (Emphasis supplied, citation omitted)
129

Nagan and Root  categorize the doctrine of sovereign immunity as a customary rule of international law. They
130

argue that the doctrine, which is also referred to as j11risdictional immunity, "has its roots in treaties, domestic
statutes, state practice, and the writings of juris consults".  Quoting United States law,  Nagan and Root state:
131 132

. . . . The doctrine of jurisdictional immunity takes the abstract concept of sovereignty and applies it to facts on the
ground. As the Restatement notes, "Under international law, a state or state instrumentality is immune from the
jurisdiction of the courts of another state .... " The Restatement further states unambiguously that the rule of
sovereign immunity is "an undisputed principle of international law." ...

The doctrine of sovereign immunity is one of the older concepts in customary international law . . .  (Emphasis
133

supplied, citation omitted)

While the doctrine in itself is recognized by states, they do so only in abstraction. 134

There appears to be a general recognition that foreign states are to be afforded immunity on account of equality of
states, but the "practice" lacks uniformity. Finke points out that the doctrine as exercised by different states suffers
from. "substantial disagreement on detail and substance."  The inconsistencies in state practice render the
135

possibility of invoking international comity even more problematic.

The legislation of other states highlight the differences in specific treatment of sovereign immunity. For instance, the
United States Foreign Sovereign Immunities Act (FSIA) of 1978 was enacted in order to render uniform
determinations in cases involving sovereign immunity.  While it recognizes sovereign immunity, it provides the
136

following exceptions:

... the general principle that a foreign state is immune from the jurisdiction of the courts of the United States, but sets
forth several limited exceptions. The primary exceptions are

1. waiver ("the foreign state has waived its immunity either expressly or by implication"),

2. commercial activity ("the action is based upon a commercial activity carried on in the United States by the
foreign state"), and

3. torts committed by a foreign official within the United States (the "suit is brought against a foreign State for
personal injury or death, or damage to property occurring in the United States as a result of the ton ious act
of an official or employee of that State acting within the scope of his office or employment").(Emphasis
supplied, citation omitted)

The United Kingdom State Immunity Act of 1978 also recognizes general immunity from jurisdiction, subject to the
following exceptions: a) submission to jurisdiction;  b) commercial transactions and contracts to be performed in the
137

United Kingdom;  c) contracts of employment;  d) personal injuries and damage to property;  e) ownership,
138 139 140

possession, and use of property;  f) patents, trademarks, etc.;  g) membership of bodies corporate, etc.,  h)
141 142 143

arbitration;  i) ships used for commercial purpose;  and value-added tax, customs duties, etc.
144 145 146

The Australian Foreign States Immunities Act of 1985 provides for exceptions similar to the ones found in the United
Kingdom law. 147

Aside from the variations in foreign laws, rulings in domestic cases have also remained on a theoretical level. There
appears to be a general refusal by international bodies to set particular rules and guidelines for the disposition of
actual cases involving sovereign immunity.

Two cases are relevant for the purpose of discussing sovereign immunity as an international customary norm: the
International Court of Justice's decision in Germany v. Italy, and the International Tribunal for the Law of the Sea's
procedural order on the· Ara Libertad case. While stare decisis does not apply, these are nevertheless instructive in
understanding the status of sove;:eign immunity in international law.

The issue of sovereign immunity as invoked between two States was dealt with in the 2012 case of Jurisdictional
Immunities of the State (Germany v. Italy).  This arose out of a civil case brought before Italian domestic courts,
148

seeking reparations from Germany for grave breaches of international humanitarian law during World War II.  The 149

Italian Court of Cassation held that it had jurisdiction over the claims on the ground that state immunity was
untenable if the act complained of was an international crime.  Thereafter, an Italian real estate owned by Germany
150

774
was attached for execution.  As a result, Germany brought the case before the International Court of Justice,
151

questioning the legality of the judgment rendered by the Italian court. It based its claim on state immunity. 152

The International Court of Justice ruled that Italy had violated customary international law when it took cognizance of
the claim against Germany before its local courts.  It held that:
153

In the present context, State practice of particular significance is to be found in the judgments of national courts
faced with the question whether a foreign State is immune, the legislation of those States which have enacted
statutes dealing with immunity, the claims to immunity advanced by States before foreign courts and the statements
made by States, first in the co·urse of the extensive study of the subject by the Interi1ational Law Commission and
then in the context of the adoption of the United Nations Convention. Opinio juris in this context is reflected in
particular in the assertion by States claiming immunity that international law accords them a right to such immunity
from the jurisdiction of other States; in the acknowledgment, by States granting immunity, that inter- national law
imposes upon them an obligation to do so; and, conversely, in the assertion by States in other cases of a right to
exercise jurisdiction over foreign States. While it may be true that States sometimes decide to accord an imrilunity
more extensive than that required by international law, for present purposes, the point is that the grant of immunity
in such a case is not accompanied by the requisite opinio juris and therefore sheds no light upon the issue currently
under consideration by the Court.

56. Although there has been much debate regarding the origins of State immunity and the identification of
the principles underlying that immunity in the past, the International Law Commission concluded in 1980 that
the rule of State immunity had been "adopted as a general rule of customary international law solidly rooted
in the current practice of States" (Yearbook of the International Law Commission, 1980, Vol. II (2), p. 147,
para. 26). That conclusion was based upon an extensive survey of State practice and, in the opinion of the
Court, is confirmed by the record of national legislation, judicial decisions, assertions of a right to immunity
and the comments of States on what became the United Nations Convention. That practice shows that,
whether in claiming immunity for themselves or according it to others, States generally proceed on the basis
that there is a right to immunity under international law, together with a corresponding obligation on the part
of other States to respect and give effect to that immunity.

57. The Court considers that the rule ofState immunity occupies an important place in international law ·and
international relations. It derives from tf!e principle of sovereign equality of States, which, as Article 2,
paragraph 1, of the Charter of the United Nations makes dear, is one of the fundamental principles of the
international legal order.

This principle .has to be viewed together with the principle that each .State possesses sovereignty over its own
territory and that there flows from that sovereignty the jurisdiction of the State over events and persons within that
territory. Exceptions to the immunity of the State represent a departure from the principle of sovereign equality.
Immunity may represent a departure from the principle of territorial sovereignty and the jurisdiction which flows from
it. (Emphasis supplied)154

The International Court of Justice deemed it unnecessary to discuss the difference between the application of
sovereign imuunity in sovereign acts (jus imperii) and non-sovereign activities (jus gestionis) of a State.  As to the
155

argument that a serious violation of international law or peremptory nonns (jus cogens) is an exception to sovereign
immunity, the International Court.of Justice held that:

82. At the outset, however, the Court must observe that the proposition that the availability of immunity will
be to some. extent dependent upon the gravity of the unlawful act presents a logical problem. Immunity from
jurisdiction is an immunity not merely from being subjected to an adverse judgment but from being subjected
to the trial process. It is, therefore, necessarily preliminary in nature. Consequently, a national court is
required to determine whether or not aforeign State is entitled to immunity as a matter of international law
before it can hear the merits of the case brought before it and before the facts have been established. If
immunity were to be dependent upon the State actually having committed a serious violation of international
human rights law or the law of armed conflict, then it would become necessary for the national court to hold
an enquiry into the merits in order to determine whether it had jurisdiction. If, on the other hand, the mere
allegation that the State had committed such wrongful acts were to be sufficient to deprive tlte State of its
entitlement to immunity, immunity could, in effect be negated simply by skilful construction of tlte claim.

83. That said, the Comi must nevertheless inquire whether customary international law has developed to the
point where a State is not entitled to immunity in the case of serious violations of human rights law or the law
of anped conflict. Apart from the decisions of the Italian courts which are the subject of the present
proceedings, there is almost no State practice which might be considered to support the proposition that a
State is deprived of its entitlement to immunity in such a case....

84. In addition, there is a substantial body of State practice from other countries which demonstrates that
customary international law does not treat a State's entitlement to immunity as dependent upon the gravity
of the act of which it is accused or the peremptory nature of the rule which it is alleged to ltave violated.

775
 85. That practice is particularly evident in the judgments of national courts. Arguments to the effect that
international law no longer required State immunity in cases of allegations of serious violations of
international human rights law, war crimes or crimes against humanity have been rejected by the courts in
Canada (Bouzari v. Islamic Republic of Iran, Court of Appeal of Ontario, (2004] Dominion Law Reports
(DLR), 4th Series, Vol. 243, p. 406; ILR, Vol. 128, p. 586; allegations of torture), France 1judgment of the
Court of Appeal of Paris, 9 September 2002, and Cour de cassation, No. 02-45961, 16 December 2003,
Bulletin civil de la Cour de cassation (Bull. civ.), 2003, I, No. 258, p. 206 (the Bucheron case); Cour de
cassation, No. 03-41851, 2 June 2004, Bull. civ., 2004, I, No. 158, p. 132 (the X case) and Cour de
cassation, No. 04-47504, 3 January 2006 (the Grosz case); allegations of crimes against huni.anity),
Slovenia (case No. Up-13/99, Constitutional Court of Slovenia; allegations of war crimes and crimes against
humanity), New Zealand (Fang v. Jiang, High Court, (2007] New Zealand Administrative Reports (NZAR), p.
420; ILR, Vol. 141, p. 702; allegations of torture), Poland (Natoniewski, Supreme Court, 2010, Polish
Yearbook of International Law, Vol. XXX, 2010, p. 299; allegations of war crimes and crimes against
humanity) and the United Kingdom (Jones v. Saudi Arabia, House of Lords, (2007] 1 Appeal Cases (AC)
270; !LR, Vol. 129, p. 629; allegations of torture).

....

93. This argument therefore depends upon the existence of a conflict between a rule, or rules, of jus co
gens, and the rule of customary law which requires one State to accord immunity to another. In the opinion
of the Court, however, no such conflict exists. Assuming for this purpose that the rules of the law of armed
conflict which prohibit the murder of civilians in occupied territory, the deportation of civilian inhabitunts to
slave labour and the deportation of prisoners of war to slave labour are rules of jus co gens, there is no
conflict between those ml es and the rules on State immunity. The two sets of rules address different
matters. Tlte rules of State immunity are procedural in character and are confined to determining whether or
not tlte courts of one State may exercise jurisdiction in respect of another State. They do not bear upon tile
question whether or not the conduct in respect of which the proceedings are brought was lawful or unlawful.
That is why the application of the con-temporary law of State immunity to proceedings concerning events
which occurred in 1943-1945 does not infringe the principle that law should not be applied retrospectively to
determine matters of legality and responsibility (as the Court has explained in paragraph 58 above). For the
same reason, recognizing the immunity of a foreign State in accordance with customary international law
does not amount to recognizing as law/ ul a situation created by the breach of a jus cogens rule, or
rendering aid and assistance in maintaining that situation, and so cannot contravene the principle in Article
41 of the International Law Commission's Articles on State Responsibility.

95. To the extent that it is argued that no rule which is not of the status of jus cogens may be applied if to do
so would hinder the enforcement of a jus cogens rule, even in the absence of a direct conflict, the Court
sees no basis for such a proposition. A)us co gens rule is one from which no derogation is permitted but the
rules which determine the scope and extent of jurisdiction and when that jurisdiction may be exercis"ed do
not derogate from those substantive rules which possess jus cogens status, nor is there anything inherent in
the concept of jus cogens which would require their modification or would displace their application. The
Court has taken that approach in two · cases, notwithstanding that the effect was that a means by which a }
us cogens rule might be enforced was rendered unavailable. In Armed Activities, it held that the fact that a
rule has the status of jus cogens does not confer upon the Court a jurisdiction which it would not otherwise
possess (Armed Activities on the Territory of the Congo (New Application: 2002) (Democratic Republic of
the Congo v. Rwanda), Jurisdiction and Admissibility, Judgment, ICJ Reports 2006, p. 32, para. 64, and p.
52, para. 125). In Arrest Warrant, the Court held, albeit without express reference to the concept of jus
cogens, that the fact that a Minister for Foreign Affairs was accused of criminal violations of rules which
undoubtedly possess the character of jus cogens did n;ot deprive the Democratic Republic of the Congo of,
the entitlement which it possessed as a matter of customary international law to demand immunity on his
behalf (Arrest. Warrant of 11 April 2000 (Democratic Republic of the Congo v. Belgium), Judgment, JC.J
Reports 2002, p. 24, para. 58, and p. 33, para. 78). The Court considers that the same reasoning is
applicable to the application of the customary international law regardins the immunity of one State from
proceedings in the courts of another. 156

Though pertaining to provisional measures, another case that involved the issue of sovereign immunity is the "Ara
Libertad", case (Argentina v. Ghana). Lodged before the International Tribunal for the Law of the Sea (ITLOS), the
case arose after "ARA Fragata Libertad," an Argentinian warship, was alleged to have been detained and subjected
to several judicial measures by the Republic of Ghana.  In doing so, Argentina alleged that Ghana violated the
157

immunities from jurisdiction and execution extended to the warship by its flag. 158

Ghana countered:

. . . that the coastal State [Ghana] enjoys full territorial sovereignty over internal waters, and that any foreign vessel
located in internal waters is subject to the legislative, admihistrative, judicial and jurisdicti'onal powers of the coastal
State."  (Emphasis supplied)
159

776
The order dated December 15, 2012 ruled the following:

... that a warship is an expression of the sovereignty of the State whose flag it flies; 160

... in accordance with general international law, a warship enjoys immunity, including in intedrnal waters .... 161

....

Ghana shall forthwith and unconditionally release the frigate ARA Liberiad, shall ensure that the frigate ARA
Libertad, its Commander and crew are able to leave the port of Terna and the maritime areas under the jurisdiction
of Ghana, and shall ensure that the frigate ARA Libertad is resupplied to that end.  (Citation supplied)
162

In sum, the Jntemational Court of Justice's position that sovereign immunity remains applicable even if the action is
based upon violations of international law should be limited only to acts during armed conflict. Jurisdictional
Immunities of the State (Germany v. Italy) also referred to actions commited during World War II and especially
referred to the situation of international law at that time. The majority reflected the attitude that sovereig:J. immunity
is a customary norm. It, however, recognizes that unifoimity in state practice is far from the consensus required to
articulate specific rules pertaining to other circumstances - such as transgressions of foreign warships of domestic
legislation while granted innocent passage. It, impliedly accepted that states enjoyed wide latitude to specify their
own norms.

The provisional order in the ITLOS Ara Libertad case should also be read within its factual ambient. That is, that the
warship was the subject of seizure to enforce a commercial obligation of its flag state. In this case, the foreign
warship enjoys sovereign immunity. The case, however, did not interpret Sections 31 and 32 of the UN CLOS.

On this note, it is· my opinion that there would be no violation of customary-international law or existing treaty law if
this court further refines the limits of the doctrine of sovereign immunity's application when determining jurisdictional
immunities of foreign warships specifically when it violates domestic laws implementing international obligations
even while on innocent passage.

Sovereign immunity as general principle of law

There are indications from international legal scholars that sovereign immunity might make more sense if it is
understood as a general principle of international law rather than as international obligation arising out of treaty or
customary norm.

Finke suggests that this provides the better platform. Whereas a rule is more precise and consistent in both its
application and legal consequences, a principle "allows for a broader spectrum of possible behaviour."  Principles
163

recognize a general idea and serve as a guide in policy determinations, rather than prescribe a particular mode of
action, which is what rules do. This distinction is significant, as principles provide the leeway to accommodate legal
and factual circumstances surrounding each case that customary rules generally do not.  General principles of
164

international law are said to be:

... an autonomous, created by general consensus, systematically fundamental part of International Law, that
consists of different normative notions, in which judges refer to, through a creative process, in order to promote the
consistency of International Law. 165

Clearly, sovereign immunity is a doctrine recognized by states under the international law system. However, its
characterization as a principle is more appropriate in that "the extent to which foreign states are awarded immunity
dffers from state to state."  This appears to be an accepted arrangement in light of the different state immunity
166

laws .all over the world.

As it stands, states are allowed to draw the line in the application of sovereign immunity in cases involving foreign
states and their agents. As a principle of international law, it is deemed automatically incorporated in our domestic
legal system as per Article II, Section 2 of the Constitution.

Considering this leeway, along with the urgency and importance of the case at hand, the Philippines is, therefore,
free to provide guidelines consistent with international law, domestic legislation, and existing jurisprudence.

Exceptions to sovereign immunity

Our own jurisprudence is consistent with the pronouncement that the doctrine of sovereign immunity is not an
absolute rule. Thus, the doctrine should take the form of relative sovereign jurisdictional immunity. 167

The tendency in our jurisprudence moved along with the development in other states.

777
States began to veer away from absolute sovereign immunity when "international trade increased and governments
expanded into what had previously been private spheres."  The relative theory of sovereign immunity distinguishes
168

a state's official (acta jure imperii) from private (acta Jure gestionis conduct.  The distinction is founded on the
169

premise "[that] once the sovereign has descended from his throne and entered the marketplace[,] he has divested
himself of his sovereign status and is therefore no longer immune to the domestic jurisdiction of the courts of other
countries."170

In the 2003 case of Republic of Indonesia v. Vinzon, this court enunciated that in cases involving foreign states, the
basis of sovereign immunity is the maxim par in parem non habet imperium. Founded on sovereign equality, a state
cannot assert its jurisdiction over another.  To do so otherwise would "unduly vex the peace of nations." However,
171 172

it also m1derscored that the doctrine only applies to public acts or acts Jure imperii, thus, referring to the relative
theory. JUSMAG Philippines v. NLRC  discussed the restrictive application:
173

In this jurisdiction, we recognize and adopt the generally accepted principles of international law as part of the law of
the land. Immunity of State from suit is one of tltese universally recognized principles. In international law,
"immunity" is commonly understood as an exemption of the state and its organs from the judicial jurisdiction of
another state. This is anchored on the principle of the sovereign equality of states under which one state cannot
assert jurisdiction over another in violation of the maxim par in parem non habet imperium (an equal has no .power
over an equal).

....

As it stands now, the application of the doctrine of immunity from suit has been restricted to sovereign or
governmental activities (jure imperii). The mantle of state immunity cannot be extended to commercial, private and
proprietary acts (jure gestionis).  (Emphasis supplied, citations omitted)
174

In United States of America v. Ruiz,  which dealt with a contract involving the repair of wharves in Subic Bay's US
175

naval installation, this court further adds that: ... the correct test for the application of State immunity is not the
conclusion of a contract by a State but the legal nature of the act....  (Emphasis supplied)
176

In JUSMAG, this court stated:

. . . if the contract was entered; into in the discharge of its governmental functions, the sovereign state cannot be
deemed to have waived its immunity from suit.  (Emphasis supplied, citation omitted)
177

These cases involved contracts. This made the determination of whether there was waiver on the part of the state
simpler.

Further in Municipality of San Fernando, La Union v. Firme,  this court stated that two exceptions are a) when the
178

State gives its consent to be sued and b) when it enters into a business contract.  It ruled that:
179

Express consent may be embodied in a general law or a special law.

....

Consent is implied when the government enters into business contracts, thereby descending to the levei of the other
contracting party, and also when the State files a complaint, thus opening itself to a counterclaim.  (Emphasis
180

supplied, citations omitted)

Other exceptions are cases involving acts unauthorized by the State, and violation of rights by the impleaded
government official. In the 1970 case of Director of Bureau of Telecommunications, et al. v. Aligaen, et al.,  this 181

court held that:

Inasmuch as the State authorizes only legal acts by its officers, unau'tlwrized acts of government officials or officers
are not acts of the State, and an action against the officials or officers by one whose rights have been invaded or
violated by such acts, for the protection of his rights, is not a suit against the State within the rule of immunity of the
State from suit. In the same tenor, it has been said that an action at law or suit in equity against a State officer or the
director of a State department on the ground that, while claiming to act for the State, he violates or invades tile
personal and property rights of the plaintiff, under an unconst.itutional act or under an assumption of authority which
he does not har·e, is not a suit against the State within the constitutional provision that the State may not be sued
without its coment.  (Emphasis supplied, citations omitted)
182

Shauf v. Court of Appeals  evolved the doctrine further as it stated that "[the] rational for this ruling is that the
183

doctrine of state immunity cannot be used as an instrument for perpetrating an injustice." 184

778
Tortious acts or crimes committed while discharging official functions are also not covered by sovereign immunity.
Quoting the ruling in Chavez v. Sandiganbayan,  this court held American naval officers personally liable for
185

damages in Wylie v. Rarang,  to wit:

186

. . . The petitioners, however, were negligent because under their direction they issued the publication without
deleting the name "Auring." Such act or omission is ultra vires and cannot be part of official duty. It was a tortious
act which ridiculed the private respondent. 187

We note that the American naval officers were held to be accountable in their personal capacities. 188

As it stands, the Philippines has no law on the application of sovereign irnmunity in cases of damages and/or
violations of domestic law involving agents of a foreign state. But our jurisprudence does have openings to hold
those who have committed an act ultra vires responsible in our domestic courts.

As previously discussed, it was held in Germany v. Italy that the issue of implied waiver of sovereign immunity and a
State’s commission of a serious violation of a peremptory norm (jus co gens) are two independent areas. This
reflects one of the positions taken by scholars in the jurisdictionimmunity discourse:

Jurisdiction and its limits have developed differently depending on the subject matter. The jurisdiction to adjudicate
in civil matters has, for example, developed mainly in the context of private international law, even though it is not
unrelated to public international law. Immunity, on the other hand, is linked to official acts of a state (if we accept the
principal distinction between private and public acts) and is therefore more sensitive to the sovereignty of the foreign
state. Linking immunity to the limits of jurisdiction to adjudicate in civil matters would therefore mean disregarding
the official character of the foreign state's conduct.  (Emphasis supplied, citation omitted)
189

This ruling holds no value as a precedent, and, therefore, does not precluc;le the Philippines to make a
determination that may be different from the International Court of Justice's ruling. Its value must only be to
elucidate on the concept of sovereign immunity, in the context of that case, as the general rule with the possibility of
other exceptions.

Furthermore, if we consider the doctrine of sovereign immunity as a binding general principle of international law
rather than an international customary norm, the particular rules and guidelines in its application and invocation may
be determined on a domestic level either through statute or by jurisprudence.

It is difficult to imagine that the recognition of equality among nations is still, in these modern times, as absolute as
we have held it to be in the past or only has commercial acts as an exception. International law has conceded jus
cogens rules of international law and other obligations erga omnes. It is time that our domestic jurisprudence adopts
correspondingly. Considering the flexibility in international law and the doctrines that we have evolved so far, I am of
the view that immunity does not necessarily apply to all the foreign respondents should the case have been brought
in a timely manner, with the proper remedy, and in the proper court. Those who have directly and actually committed
culpable acts or acts resulting rom gross negligence resulting in the grounding of a foreign warship in violation of our
laws defining a tortious act or one that protects the environment which implement binding international obligations
cannot claim sovereign immunity.

Certainly, this petition being moot and not brought by the proper parties, I agree that it is not the proper case where
we can lay down this doctrine. I, therefore, can· only concur in the result.

ACCORDINGLY, I vote to DISMISS the petition

779
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 198656               September 8, 2014

NANCY S. MONTINOLA, Petitioner, 
vs.
PHILIPPINE AIRLINES, Respondnet.

DECISION

LEONEN, J.:

Illegally suspended employees, similar to illegally dismissed employees, are entitled to moral damages when their
suspension was attended by bad faith or fraud, oppressive to labor, or done in a manner contrary to morals, good
customs, or public policy.

Petitioner Nancy S. Montinola (Montinola) comes to this court via a petition for review on certiorari under Rule 45 of
the Rules of Court. She assails the decision  of the Court of Appeals  dated June 28, 2011 and its resolution  dated
1 2 3

September 20, 2011 in Philippine Airlines v. National Labor Relations Commission and Nancy S. Montinola.  The 4

Court of Appeals affirmed the finding of the National Labor Relations Commission that petitioner was suspended
illegally but deleted the award of moral and exemplary damages and attorney’s fees. 5

The deletion of the award of attorney’s fees and moral and exemplary damages is the subject of this petition.

Montinola was employed as a flightattendant of Philippine Airlines (PAL) since 1996.  On January 29, 2008,
6

Montinola and other flight crew members were subjected to custom searches in Honolulu, Hawaii, USA. Items from
the airline were recovered from the flight crew by customs officials. Nancy Graham (Graham), US Customs and
Border Protection Supervisor, sent an email to PAL regarding the search. The email  contained a list of PAL flight
7

crewmembers involved in the search:

FP CHUIDIAN, JUAN DE GUZMAN

FS CARTAGENA, REGINALD

FS NAVA, PETER DE GUZMAN

FS PADILLA, ANGELITO

FA CRUZ, MARIA FA MONTINOLA, NANCY

FA VICTA, ROSE ANN (Emphasis supplied)

Another email  enumerated the list of items taken from the crew members:
8

Katie,

Here is the list.

Flight Crew Blitz in gate area 10 crew. Seven of the 10 crew members had items removed from the aircraft on their
possession. Two additional bags were found on jet-way after blitz. No bonded items were found but crew removed
food items as listed:

18 bags Doritos
780
15 bags Banana Chips

5 pkg instant chocolate

5 bars Granola

18 bars Kit Kat

34 Chocolate flavored Goldilocks

16 Regular Goldilocks cakes

9 1st class Bulgari Kits

2 magazines

6 rolls toilet paper

9 cans soda

16 bottles of water

1 yogurt

12 small ice creams

2 jars salsa

2 bottles Orange Juice

1 bottle Cranberry Juice

1 bottle smoothie

All items returned to Philippine Airlines.

Nancy I. Graham

Supervisory CBPO

A-TCET Air

Honolulu Hi

PAL conducted an investigation. Montinola was among those implicated because she was mentioned in Graham’s
email.  On February 1, 2008, PAL’s Cabin Services Sub-Department required Montinola to comment on the
9

incident.  She gave a handwritten explanation three days after, stating that she did not take anything from the
10

aircraft. She also committed to give her full cooperation should there be any further inquiries on the matter. 11

On February 22, 2008, PAL’s International Cabin Crew Division Manager, Jaime Roberto A. Narciso (Narciso),
furnished Montinola the emails from the Honolulu customs official.  This was followed by a notice of administrative
12

charge  which Narciso gave Montinola on March 25, 2008. On April 12, 2008, there was a clarificatory hearing. The
13 14

clarificatory hearing was conducted by a panel of PAL’s Administrative Personnel, namely, Senior Labor Counsel
Atty. Crisanto U. Pascual (Atty. Pascual), Narciso, Salvador Cacho, June Mangahas,Lina Mejias, Carolina Victorino,
and Ruby Manzano. 15

Montinola alleged that her counselobjected during the clarificatory hearing regarding PAL’s failure to specify her
participation in the alleged pilferage.  Atty. Pascual threatened Montinola that a request for clarification would result
16

in a waiver of the clarificatory hearing.  This matter was not reflected in the transcript of the hearing.  Despite her
17 18

counsel’s objections, Montinola allowed the clarificatory hearings to proceed because she "wanted to extend her full
cooperation [in] the investigation[s]."
19

During the hearing, Montinola admitted that in Honolulu, US customs personnel conducted a search of her person.
At that time, she had in her possession only the following food items: cooked camote, 3-in-1 coffee packs, and
Cadbury hot chocolate. 20

781
PAL, through Senior Assistant Vice President for Cabin Services Sub- Department Sylvia C.Hermosisima, found
Montinola guilty of 11 Violations  of the company’s Code ofDiscipline and Government Regulation. She was meted
21

with suspension for one (1) year without pay.  Montinola asked for a reconsideration.  Hermosisima, however,
22 23

denied her motion for reconsideration a month after. 24

Montinola brought the matter before the Labor Arbiter.  The Labor Arbiter  found her suspension illegal,  finding that
25 26 27

PAL never presented evidence that showed Montinola as the one responsible for any of the illegally taken airline
items.  The Labor Arbiter ordered Montinola’s reinstatement with backwages, inclusive of allowances and benefits
28

amounting to ₱378,630.00. 29

In addition, the Labor Arbiter awarded moral damagesin the amount of ₱100,000.00 and exemplary damages
amounting to ₱100,000.00 for the following reasons: 30

This Office observes that the records are replete with substantial evidence that the circumstances leading to
complainant’s one-year suspension without pay are characterized by arbitrariness and bad faith on the part of
respondents. The totality ofrespondents’ acts clearly shows that complainant had been treated unfairly and
capriciously, for which complainant should be awarded moral damages in the amount of One Hundred Thousand
Pesos (₱100,000.00) and exemplary damages also in the amount of One Hundred Thousand Pesos
(₱100,000.00). 31

The Labor Arbiter also awarded attorney’s feesto Montinola because she was "forced to litigate and incur expenses
to protect [her] rights."
32

PAL appealed the Labor Arbiter’sdecision to the National Labor Relations Commission (NLRC).  During the 33

pendency of the appeal, PAL submitted new evidence consisting of an affidavit executed by Nancy Graham, the
Customs and Border Protection Supervisor who witnessed the January 29, 2008 search in Honolulu.  This affidavit
34

enumerated the names of the flight crew members searchedby the Honolulu customs officials. However, the
National Labor RelationsCommission observed that "it was categorically admitted in the said declaration that Ms.
Graham did not know which items were attributable to eachof the seven crew members whom she identified and
there was no individual inventories (sic)."35

Through the resolution  dated June 9, 2009,the National Labor Relations Commission  affirmed the decision of the
36 37

Labor Arbiter. PAL appealed the Commission’s decision to the Court of Appeals through a petition for certiorari. 38

The Court of Appeals affirmed the decisions of the Labor Arbiter and National Labor Relations Commission in
finding the suspension illegal.  However, the Court of Appeals modified the award:
39

WHEREFORE, premises considered, the petition is DENIED. Respondent NLRC’s Decision in NLRC LAC No.
01000263-09 (NLRC NCR CN 08-11137-08), dated June 9, 2009, is AFFIRMED with MODIFICATION in that the
award of moral and exemplary damages and attorney’s fees to private respondent are deleted.  (Emphasis 40

supplied)

The Court of Appeals deleted the moral and exemplary damages and attorney’s fees stating that:

Relevant to the award of moral damages, not every employee who is illegally dismissed or suspended isentitled to
damages. Settled is the rule that moral damages are recoverable only where the dismissal or suspension of the
employee was attended by bad faith or fraud, or constituted an act oppressive to labor, or was done in a manner
contrary to morals, good customs or public policy. Bad faith does not simply mean negligence or bad judgment. It
involves a state of mind dominated by ill will or motive. It implies a conscious and intentional design to do a wrongful
act for a dishonest purpose orsome moral obliquity. The person claiming moral damages must prove the existence
of bad faith by clear and convincing evidence for the law always presumes good faith.

In the case at bar, there is no showing that PAL was moved by any ill will or motive in suspending private
respondent. It is evident that petitioner gave private respondent every opportunity to refute the charges against her
and to present her side as part of due process.These negate the existence of bad faith on the part of petitioner.
Under the circumstances, we hold that private respondent is not entitled to moral damages and exemplary
damages. Furthermore, the Court finds the award of attorney’s fees improper. The award of attorney’s fees was
merely cited in the dispositive portion of the decision without the RTC [sic] stating any legal or factual basis for said
award.  (Citations omitted)
41

Montinola filed a partial motion for reconsideration,  praying that the award of moral and exemplary damages and
42

attorney’s fees be reintegrated into the decision. PAL also filed a motion for reconsideration,  but its motion sought a
43

complete reversal of the decision.

The Court of Appeals denied both motions.  Only Montinola sought to continue challenging the Court of Appeals’
44

decision through a petition for review on certiorari  brought to this court.

45

782
The sole issue in this case is whether Montinola’s illegal suspension entitled her to an award of moral and
exemplary damages and attorney’s fees.

Montinola claims that she is entitled to moral damages because her illegal suspension was attended by bad faith,
causing her to suffer "mental anguish, fright, serious anxiety, and moral shock."  Furthermore, the illegal suspension
46

tarnished her good standing.  Prior to this incident and in her 12 years of service, she was never charged
47

administratively.  The illegal suspension likewise affected her family because it created "a state of uncertainty and
48

adversity." 49

Montinola underscores that the investigation against her was conducted in a "hasty, impetuous, harsh and
unjust" manner. She was not properly apprised of the charges against her.  She requested for proper notice of the
50 51

acts violative of PAL’s Codeof Discipline. Instead of giving proper notice, PAL threatened that she would be waiving
her right to a clarificatory hearing if she insisted on her request.
52

Montinola likewise alleges that PAL violated its own rules by not applying the same penalty uniformly.  Flight Purser
53

Juan Chuidian III was involved in the same incident and was likewise suspended. However, on motion for
reconsideration, PAL allowed him to retire early without serving the penalty of suspension. 54

The claim for exemplary damages isanchored on Montinola’s belief that such damages "are designed to permit the
courts to mould behaviour that has socially deleterious consequences, and their imposition is required by public
policy to suppress the wanton acts of the offender."  In Montinola’s view, PAL suspended her in a "wanton,
55

oppressive, and malevolent manner." 56

Finally, Montinola argues that she is entitled to attorney’s fees because she was forced to litigate. In Article 2208,
paragraph (2) of the Civil Code, individuals forced to litigate may ask for attorney’s fees.

On the other hand, PAL argues that moral damages are only recoverable when "the dismissal of the employee was
attended by bad faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to
morals, good customs or public policy."  The company believes that Montinola failed to present clear and convincing
57

proof of bad faith.

PAL stands by how it investigated the alleged pilferage of the in-flight items in the January 29, 2008 flight. Itbelieves
that it afforded due process to Montinola and the other implicated crew members. From PAL’s point of view, she
was given an opportunity to explain her side and was even assisted by counsel of her choice. 58

PAL claims that since moral damages have not been proven, exemplary damages should likewise not be awarded. 59

Moreover, PAL argues that Montinola failed to provide basis for the award of attorney’s fees. Attorney’s fees are
only awarded when the trial court (or in this case, the Labor Arbiter) states a factual, legal, or equitable justification
for awarding the same. 60

Montinola is entitled to moral and exemplary damages. She is also entitled to attorney’s fees.

The Labor Code provides:

Art. 279. Security of Tenure – In cases of regular employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and other privileges and to full backwages, inclusive
of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.

Security of tenure of workers is not only statutorily protected, it is also a constitutionally guaranteed right.  Thus, any
61

deprivation of this right must be attended by due process of law.  This means that any disciplinary action which
62

affects employment must pass due process scrutiny in both its substantive and procedural aspects.

The constitutional protection for workers elevates their work to the status of a vested right. It is a vested right
protected not only against state action but against the arbitrary acts of the employers as well. This court in Philippine
Movie Pictures Workers’ Association v. Premier Productions, Inc.  categorically stated that "[t]he rightof a person to
63

his labor is deemed to be property within the meaning of constitutional guarantees."  Moreover, it is of that species
64

of vestedconstitutional right that also affects an employee’s liberty and quality of life. Work not only contributes to
defining the individual, it also assists in determining one’spurpose. Work provides for the material basis of human
dignity.

783
Suspension from work is prima facie a deprivation of this right. Thus, termination and suspension from workmust be
reasonable to meet the constitutional requirement of due process of law. It will be reasonable if it is based on just or
authorized causes enumerated in the Labor Code. 65

On the other hand, articulation of procedural due process in labor cases is found in Article 277(b) ofthe Labor Code,
which states:

(b) Subject to the constitutional right of workers to security of tenure and their right tobe protected against dismissal
except for a just and authorized cause and without prejudice to the requirement of notice under Article 283 of this
Code, the employer shall furnish the worker whose employment is sought to be terminated a written notice
containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and to
defend himself with the assistance of his representative if he so desires in accordance with the company rules and
regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any decision
taken bythe employer shall be without prejudice to the right of the worker to consent the validity or legality of his
dismissal by filing a complaint with the regional branch of the National Labor Relations Commission. The burden of
proving that the termination was for a valid or authorized cause shall rest on the employer.

The procedure can be summarized in this manner. First, the employer must furnish the employee with a written
notice containing the cause for termination. Second, the employer must give the employee an opportunity to be
heard. This could be done either through a position paper or through a clarificatory hearing.  The employee may
66

alsobe assisted by a representative or counsel. Finally, the employer must give another written noticeapprising the
employee of its findings and the penalty to be imposed against the employee, if any.  In labor cases, these
67

requisites meet the constitutional requirement of procedural due process, which "contemplates notice and
opportunity to be heard before judgment is rendered, affecting one’s person or property." 68

In this case, PAL complied with procedural due process as laid out in Article 277, paragraph (b) of the
LaborCode. PAL issued a written notice of administrative charge, conducted a clarificatory hearing, and rendered a
1âwphi1

written decision suspending Montinola. However, we emphasize that the written notice of administrative charge did
not serve the purpose required under due process. PAL did not deny her allegation that there would be a waiver of
the clarificatory hearing ifshe insisted on a specific notice of administrative charge. With Montinola unable to clarify
the contents of the notice of administrative charge, there were irregularities in the procedural due process accorded
to her.

Moreover, PAL denied Montinola substantial due process.

Just cause has to be supported by substantial evidence. Substantial evidence, or "such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion,"  is the quantum of evidence required in
69

administrative bodies such as the National Labor Relations Commission. It is reasonable to expect the employer to
consider substantial evidence in disciplinary proceedings against its employees. The employer’s decision will be
subject to review by the LaborArbiter and National Labor Relations Commission.

The employer has the burden of proof in showing that disciplinary action was made for lawful cause.  The employer
70

must consider and show facts adequate to support the conclusionthat an employee deserves to be disciplined for
his or her acts or omissions.

PAL, however, merely relied on these pieces of information in finding administrative liability against Montinola:

1) a list of offenses found in PAL’s Code of Discipline that Montinola allegedly violated;

2) a list of flight crew members that were checked at the Honolulu airport; and

3) a list of all items confiscated from allthese flight crew members.

The lists are not sufficient to show the participation of any of the flight crew members,least of all Montinola. None of
the evidence presented show that the customs officials confiscated any of these items from her. Thus, the evidence
by themselves do not show that Montinola pilfered airline items.

Together with the manner in which the investigation proceeded, i.e., that Montinola was prevented from asking for
clarification of the charges against her, the absence of substantial evidence is so apparent that disciplining an
employee only on these bases constitutes bad faith. Under the Labor Code, Labor Arbitersare authorized by law to
award moral and exemplary damages:

Art. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as otherwise provided under this Code, the
Labor Arbiters shall have original and exclusive jurisdiction to hear and decide within thirty (30) calendar days after
the submission of the case by the parties for decision without extension, even in the absence of stenographic notes,
the following cases involving all workers, whether agricultural or non-agricultural:

784
 ....

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations[.]

The nature of moral damages is defined under our Civil Code. Article 2220 states that "[w]illful injury to property may
be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages
are justlydue. The same rule applies to breaches of contract where the defendantacted fraudulently or in bad faith."
In Primero v. Intermediate Appellate Court,  this court stated that damages, as defined in the Civil Code, is
71

recoverable in labor cases. Thus, moral damages:

. . . cannot be justified solely upon the premise (otherwise sufficient for redress under the Labor Code) that the
employer fired his employee without just cause or due process. Additional facts must be pleaded and proven to
warrant the grant of moral damages under the Civil Code, these being, to repeat, that the act of dismissal
wasattended by bad faith or fraud, or was oppressive to labor, or done ina manner contrary to morals, good
customs, or public policy;and, of course, that social humiliation, wounded feelings, grave anxiety, etc., resulted
therefrom. 72

The employee is entitled to moral damages when the employer acted a) in bad faith or fraud; b) in a manner
oppressive to labor; or c) in a manner contrary to morals, good customs, or public policy.

Bad faith "implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral
obliquity."  Cathay Pacific Airways v. Spouses Vazquez  established that bad faith must be proven through clear
73 74

and convincing evidence.  This is because "[b]adfaith and fraud . . . are serious accusations that can be so
75

conveniently and casually invoked, and that is why they are never presumed. They amount to mere slogans or
mudslinging unless convincingly substantiated by whoever is alleging them."  Here, there was clear and convincing
76

evidence of bad faith adduced in the lower tribunals.

PAL’s actions in implicating Montinola and penalizing her for no clear reason show bad faith. PAL’s denial of her
request to clarify the charges against her shows its intent to do a wrongful act for moral obliquity. If it were acting in
good faith, it would have gathered more evidence from its contact in Honolulu or from other employees before it
started pointing fingers. PAL should not have haphazardly implicated Montinola and denied her livelihood even for a
moment.

PAL apparently granted Montinola procedural due process by giving her a notice of administrative charge and
conducting a hearing. However, this was more apparent than real. The notice of administrative charge did not
specify the acts committed by Montinola and how these acts violated PAL’s Code of Discipline. The notice did not
state which among the items confiscated by the US customs officials were originally found in Montinola’s
possession. Worse, the panel of PAL officers led by Atty. Pascual did not entertain any query toclarify the charges
against her.

There is denial of an opportunity to be heard if the employee is not clearly apprised of the acts she committed that
constituted the cause for disciplinary action. The Omnibus Rules Implementing the Labor Code requires that "a
written notice [be] served on the employee specifying the ground or grounds for termination, and giving said
employee reasonable opportunity within which to explain his side."  Reasonable opportunity has been described as
77

"every kind of assistance that managementmust accord to the employees to enable them to prepare adequately for
their defense." 78

When the alleged participation of the employee in the illicit act which serves as a basis for the disciplinary action is
not clear from the notice, the opportunity to be heard will not be reasonable. The notice fails to meet reasonable
standards. It does not have enough information to enable the employee to adequatelyprepare a defense.

Moreover, the list of provisions in PAL’s Code of Discipline allegedly violated was long and exhaustive.  PAL’s
1âwphi1

notice of administrative charge stated that it had probable cause to administratively chargeMontinola of the
following:

I. ILLEGAL ACTS – Section 2/Article 20

....

As a cabin attendant you should know very well the laws, rules and regulations of every country in which the
Company operates including the entry/exit requirements to which your cabin crew must adhere.

II. VIOLATION OF LAW/GOVERNMENT REGULATIONS – Section 6/Article 46

....

785
Incident is a violation of the Entry/Exit requirements in HNL Station, as quoted:

"Note: U.S. Customs Trade Law/Sec. 301 on Intellectual Property Right prohibits bringing of counterfeit consumer
goods such as fake bags, clothes, shoes, colognes, books, medicine, audio/video tapes & CD’s." (ref. Entry-Exit
Requirements Quick Reference Guide–Transpacific)

III. ANTI-COMPANY OFFENSES – Article 44/Section 5

....

As noted on the e-mail report from HNL Station dated 30 January 2008, PAL will be penalized by customs and
border protection – HNL due to cabin crew took items again from the aircraft upon arrival.

Article 26 NON-OBSERVANCE OF QUALITY STANDARDS

....

As a cabin attendant, it is yourresponsibility to strictly adhered [sic] to the rules, regulations, prescriptions, mandates
and policies of the Company.

Article 28 INEFFICIENCY AND WASTE

....

The subject items confiscated at the holding gate area are Company supplies and resources which must only be
consumed or utilized reasonably inflight [sic].

Article 37 ANTI-TEAMWORK OFFENSES

....

In the email report from HNL Station, Ms. Nancy Graham, CBP–Supervisor your name was specifically listed as part
of the cabin crew members who were involved in the Flight

Crew Blitz in gate area.

Article 38 INSUBORDINATIONS OR WILLFUL DISOBEDIENCE

....

Article 58 MISHANDLING/MISUSE OF COMPANY FUNDS, PROPERTY OR RECORDS

....

The subject items confiscated at the holding gate area are Company supplies and resources which must only be
consumed or utilized reasonably inflight [sic].

Article 59 THEFT, PILFERAGE, OR EMBEZZLEMENT

....

As noted on the e-mail reports from HNL Station both from Station Supervisor, Ms. Keity Wells and Ms. Nancy
Graham, CBP–Supervisor, The different items confiscated are taken by the cabin crew from the aircraft upon arrival.

Article 61 UNOFFICIAL USE OF COMPANY PROPERTY AND FACILITIES

....

IV. FAILURE ON THE JOB – Article 25/Section 2

....

As a cabin attendant, you should know very well the certain laws, rules and regulations ofevery country in which the
Company operates. Thus, adherence (sic) to these rules and regulations is a must. 79

786
To constitute proper notice, the facts constitutive of the violations of these rules — and not just the rules of conduct
— must be clearly stated. Proper notice also requires that the alleged participation of the employee be clearly
specified. Without these, the most fundamental requirement of a fair hearing cannot be met.

Parenthetically, we note that the enumeration of rules violated even included violation of "U.S. Customs Trade
Law/Sec. 301 on Intellectual Property Right." This has no bearing on the basis for the termination or suspension of
the employee. It only serves to confuse. At worse, it is specified simply to intimidate.

Montinola was found by PAL to be guilty of allthe charges against her. According to PAL, "[t]hese offenses call for
the imposition of the penalty of Termination, however, we are imposing upon you the reduced penalty of One (01)
year Suspension."  It is not clear how she could violate all the prestations in the long list of rules she allegedly
80

violated. There is also no clear explanation why termination would be the proper penalty to impose. That the penalty
was downgraded, without legal explanation, to suspension appears as a further badgeof intimidation and bad faith
on the part of the employer.

Nothing in PAL’s action supports the finding that Montinola committed specific acts constituting violations of PAL’s
Code of Discipline.

This act of PAL is contrary tomorals, good customs, and public policy. PAL was willing to deprive Montinola of the
wages she would have earned during her year of suspension even if there was no substantial evidence that she
was involved in the pilferage.

Moral damages are, thus, appropriate. In Almira v. B.F. Goodrich Philippines, this court noted that unemployment
"brings untold hardships and sorrows on those dependent on the wage-earner."  This is also true for the case of
81

suspension. Suspension istemporary unemployment. During the year of her suspension, Montinola and her family
had to survive without her usual salary. The deprivation of economic compensation caused mental anguish, fright,
serious anxiety, besmirched reputation, and wounded feelings. All these are grounds for an award of moral
damages under the Civil Code. 82

II

Montinola is also entitled to exemplary damages.

Under Article 2229 of the Civil Code, "[e]xemplary or corrective damages are imposed, by way of example or
correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages." As this
court has stated in the past: "Exemplary damages are designed by our civil law to permit the courts to reshape
behaviour that is socially deleterious in its consequence by creating negative incentives or deterrents against such
behaviour." 83

If the case involves a contract, Article 2332 of the Civil Code provides that "the court may award exemplary
damages if the defendant acted in a wanton, fraudulent, reckless,oppressive or malevolent manner." Thus, in Garcia
v. NLRC,  this court ruled that in labor cases, the court may award exemplary damages "if the dismissal was
84

effected in a wanton, oppressive or malevolent manner." 85

It is socially deleterious for PAL to suspend Montinola without just cause in the manner suffered by her.Hence,
exemplary damages are necessary to deter future employers from committing the same acts.

III

Montinola is also entitled to attorney’s fees.

Article 2208 of the Civil Code enumerates the instances when attorney’s fees can be awarded:

ART. 2208. In the absence of stipulation, attorney’s fees and expenses of litigation,other than judicialcosts, cannot
be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest;

(3) In criminal cases of malicious prosecution against the plaintiff;

(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

787
 (5) Where the defendant acted ingross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid,
just and demandable claim;

(6) In actions for legal support;

(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;

(8) In actions for indemnity under workmen’s compensation and employer’s liability laws;

(9) In a separate civil action to recover civil liability arising from a crime;

(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and equitable that attorney’s fees and expenses of
litigation should be recovered.

In all cases, the attorney’s fees and expenses of litigation must be reasonable. (Emphasis supplied)

This case qualifies for the first, second, and seventh reasons why attorney’s fees are awarded under the Civil Code.

First, considering thatwe have awarded exemplary damages in this case, attorney’s fees canlikewise be awarded.

Second, PAL’s acts and omissionscompelled Montinola to incur expenses to protect her rights with the National
Labor Relations Commission and the judicial system. She went through four tribunals, and she was assisted by
counsel. These expenses would have been unnecessary if PAL had sufficient basis for its decision to discipline
Montinola.

Finally, the action included recovery for wages. To bring justice to the illegal suspension of Montinola, she asked for
backwages for her year of suspension:

PAL argued that the factual, legal, or equitable justification for awarding attorney's fees must be stated in the Labor
Arbiter's decision. The legal justification of the Labor Arbiter is apparent in the decision:

Complainant's claim for attorney's fees is also justified. It is settled that where an employee was forced 'to litigate
and incur expenses to protect his rights and interest, as in the instant case, he is entitled to an award of attorney's
fees (Building Case Corp. vs. NLRC, G.R. No. 94237, February 26, 1997). She is thus granted attorney's fees
equivalent to ten percent of the total award. 86

We find no factual, legal, or equitable reason to depart from this justification. Hence, we also affirm the award of
attorney's fees equivalent to 10% of the total award, or ₱57,863.00. 87

We acknowledge the right of PAL to be constantly vigilant to prevent and deter pilferage. After all, that is equally its
property which is also protected by the Constitution. However, PAL cannot assume liability on the employee. It has
to endeavor to move through its administrative investigations more humanely and more in consonance with the law.
Its employees may only have their work. It is their work, no matter what the classification and how significant they
may be in the eyes of their employer, that should give them their dignity.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 112552 is
MODIFIED in order to REINTEGRATE the award for moral damages of ₱100,000.00, exemplary damages of
₱100,000.00, and attorney's fees of ₱57,863.00.

SO ORDERED.

788
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 205357               September 2, 2014

GMA NETWORK, INC., Petitioner, 

vs.
COMMISSION ON ELECTIONS, Respondent.

SENATOR ALAN PETER "COMPAÑERO" S. CAYETANO,Petitioner-Intervenor.

x-----------------------x

G.R. No. 205374

ABC DEVELOPMENT CORPORATION, Petitioner, 

vs.
COMMISSION ON ELECTIONS, Respondent.

x-----------------------x

G.R. No. 205592

MANILA BROADCASTING COMPANY, INC. and NEWSOUNDS BROADCASTING NETWORK, INC., Petitioner, 

vs.
COMMISSION ON ELECTIONS, Respondent.

x-----------------------x

G.R. No. 205852

KAPISANAN NG MGA BRODKASTER NG PILIPINAS (KBP) and ABS-CBN CORPORATION, Petitioners, 

vs.
COMMISSION ON ELECTIONS, Respondent.

x-----------------------x

G.R. No. 206360

RADIO MINDANAO NETWORK, INC., Petitioner, 

vs.
COMMISSION ON ELECTIONS, Respondent.

DECISION

PERALTA, J.:

"The clash of rights demands a delicate balancing of interests approach which is a 'fundamental postulate of
constitutional law.'"
1

Once again the Court is asked to draw a carefully drawn balance in the incessant conflicts between rights and
regulations, liberties and limitations, and competing demands of the different segments of society. Here, we are
confronted with the need to strike a workable and viable equilibrium between a constitutional mandate to maintain
free, orderly, honest, peaceful and credible elections, together with the aim of ensuring equal opportunity, time and
space, and the right to reply, including reasonable, equal rates therefor, for public information campaigns and
forums among candidates,  on one hand, and the imperatives of a republican and democratic state,  together with its
2 3

guaranteed rights of suffrage,  freedom of speech and of the press,  and the people's right to information,  on the
4 5 6

other.
789
In a nutshell, the present petitions may be seen as in search of the answer to the question - how does the Charter of
a republican and democratic State achieve a viable and acceptable balance between liberty, without which,
government becomes an unbearable tyrant, and authority, without which, society becomes an intolerable and
dangerous arrangement?

Assailed in these petitions are certain regulations promulgated by the Commission on Elections (COMELEC)
relative to the conduct of the 2013 national and local elections dealing with political advertisements. Specifically, the
petitions question the constitutionality of the limitations placed on aggregate airtime allowed to candidates and
political parties, as well as the requirements incident thereto, such as the need to report the same, and the
sanctions imposed for violations.

The five (5) petitions before the Court put in issue the alleged unconstitutionality of Section 9 (a) of COMELEC
Resolution No. 9615 (Resolution) limiting the broadcast and radio advertisements of candidates and political parties
for national election positions to an aggregate total of one hundred twenty (120) minutes and one hundred eighty
(180) minutes, respectively. They contend that such restrictive regulation on allowable broadcast time violates
freedom of the press, impairs the people's right to suffrage as well as their right to information relative to the
exercise of their right to choose who to elect during the forth coming elections.

The heart of the controversy revolves upon the proper interpretation of the limitation on the number of minutes that
candidates may use for television and radio advertisements, as provided in Section 6 of Republic Act No. 9006 (R.A.
No. 9006), otherwise known as the Fair Election Act. Pertinent portions of said provision state, thus:

Sec. 6. Equal Access to Media Time and Space. - All registered parties and bona fide candidates shall have equal
access to media time and space. The following guidelines may be amplified on by the COMELEC:

xxxx

6.2 (a) Each bona fide candidate or registered political party for a nationally elective office shall be entitled to not
more than one hundred twenty (120) minutes of television advertisement and one hundred eighty (180) minutes of
radio advertisement whether by purchase or donation.

b. Each bona fide candidate or registered political party for a locally elective office shall be entitled to not more than
sixty ( 60) minutes of television advertisement and ninety (90) minutes of radio advertisement whether by purchase
or donation.

For this purpose, the COMELEC shall require any broadcast station or entity to submit to the COMELEC a copy of
its broadcast logs and certificates of performance for the review and verification of the frequency, date, time and
duration of advertisements broadcast for any candidate or political party.

During the previous elections of May 14, 2007 and May 10, 2010, COMELEC issued Resolutions implementing and
interpreting Section 6 of R.A. No. 9006, regarding airtime limitations, to mean that a candidate is entitled to the
aforestated number of minutes "per station."  For the May 2013 elections, however, respondent COMELEC
7

promulgated Resolution No. 9615 dated January 15, 2013, changing the interpretation of said candidates' and
political parties' airtime limitation for political campaigns or advertisements from a "per station" basis, to a "total
aggregate" basis.

Petitioners ABS-CBN Corporation (ABS-CBN), ABC Development Corporation (ABC), GMA Network, Incorporated (
GMA), Manila Broadcasting Company, Inc. (MBC), Newsounds Broadcasting Network, Inc. (NBN), and Radio
Mindanao Network, Inc. (RMN) are owners/operators of radio and television networks in the Philippines, while
petitioner Kapisanan ng mga Brodkaster ng Pilipinas (KBP) is the national organization of broadcasting companies
in the Philippines representing operators of radio and television stations and said stations themselves. They sent
their respective letters to the COMELEC questioning the provisions of the aforementioned Resolution, thus, the
COMELEC held public hearings. Thereafter, on February 1, 2013, respondent issued Resolution No. 9631
amending provisions of Resolution No. 9615. Nevertheless, petitioners still found the provisions objectionable and
oppressive, hence, the present petitions.

All of the petitioners assail the following provisions of the Resolution:

a) Section 7 (d),  which provides for a penalty of suspension or revocation of an offender's franchise or
8

permit, imposes criminal liability against broadcasting entities and their officers in the event they sell airtime
in excess of the size, duration, or frequency authorized in the new rules;

b) Section 9 (a),  which provides for an "aggregate total" airtime instead of the previous "per station" airtime
9

for political campaigns or dvertisements, and also required prior COMELEC approval for candidates'
television and radio guestings and appearances; and

790
 c) Section 14,  which provides for a candidate's "right to reply."
10

In addition, petitioner ABC also questions Section 1 (4)   thereof, which defines the term "political advertisement" or
11

"election propaganda," while petitioner GMA further assails Section 35,   which states that any violation of said
12

Rules shall constitute an election offense.

On March 15, 2013, Senator Alan Peter S. Cayetano (Petitioner-Intervenor) filed a Motion for Leave to Intervene
and to File and Admit the Petition-in-Intervention, which was granted by the Court per its Resolution dated March
19, 2013. Petitioner-Intervenor also assails Section 9 (a) of the Resolution changing the interpretation of candidates'
and political parties' airtime limitation for political campaigns or advertisements from a "per station" basis, to a "total
aggregate" basis. Petitioners allege that Resolutions No. 9615 and 9631, amending the earlier Resolution, are
unconstitutional and issued without jurisdiction or with grave abuse of discretion amounting to lack or excess of
jurisdiction, for the reasons set forth hereunder.

Petitioners posit that Section 9 (a) of the assailed Resolution provides for a very restrictive aggregate airtime limit
and a vague meaning for a proper computation of "aggregate total" airtime, and violates the equal protection
guarantee, thereby defeating the intent and purpose of R.A. No. 9006.

Petitioners contend that Section 9 (a), which imposes a notice requirement, is vague and infringes on the
constitutionally protected freedom of speech, of the press and of expression, and on the right of people to be
informed on matters of public concern

Also, Section 9 (a) is a cruel and oppressive regulation as it imposes an unreasonable and almost impossible
burden on broadcast mass media of monitoring a candidate's or political party's aggregate airtime, otherwise, it may
incur administrative and criminal liability.

Further, petitioners claim that Section 7 (d) is null and void for unlawfully criminalizing acts not prohibited and
penalized as criminal offenses by R.A. No. 9006.

Section 14 of Resolution No. 9615, providing for a candidate's or political party's "right to reply," is likewise assailed
to be unconstitutional for being an improper exercise of the COMELEC's regulatory powers; for constituting prior
restraint and infringing petitioners' freedom of expression, speech and the press; and for being violative of the equal
protection guarantee. In addition to the foregoing, petitioner GMA further argues that the Resolution was
promulgated without public consultations, in violation of petitioners' right to due process. Petitioner ABC also avers
that the Resolution's definition of the terms "political advertisement" and "election propaganda" suffers from
overbreadth, thereby producing a "chilling effect," constituting prior restraint.

On the other hand, respondent posits in its Comment and Opposition  dated March 8, 2013, that the petition should
13

be denied based on the following reasons:

Respondent contends that the remedies of certiorari and prohibition are not available to petitioners, because the writ
of certiorari is only available against the COMELEC's adjudicatory or quasi-judicial powers, while the writ of
prohibition only lies against the exercise of judicial, quasijudicial or ministerial functions. Said writs do not lie against
the COMELEC's administrative or rule-making powers.

Respondent likewise alleges that petitioners do not have locus standi, as the constitutional rights and freedoms they
enumerate are not personal to them, rather, they belong to candidates, political parties and the Filipino electorate in
general, as the limitations are imposed on candidates, not on media outlets. It argues that petitioners' alleged risk of
exposure to criminal liability is insufficient to give them legal standing as said "fear of injury" is highly speculative
and contingent on a future act.

Respondent then parries petitioners' attack on the alleged infirmities of the Resolution's provisions.

Respondent maintains that the per candidate rule or total aggregate airtime limit is in accordance with R.A. No. 9006
as this would truly give life to the constitutional objective to equalize access to media during elections. It sees this as
a more effective way of levelling the playing field between candidates/political parties with enormous resources and
those without much. Moreover, the COMELEC's issuance of the assailed Resolution is pursuant to Section 4, Article
IX (C) of the Constitution which vests on the COMELEC the power to supervise and regulate, during election
periods, transportation and other public utilities, as well as mass media, to wit:

Sec. 4. The Commission may, during the election period, supervise or regulate the enjoyment or utilization of all
franchises or permits for the operation of transportation and other public utilities, media of communication or
information, all grants, special privileges, or concessions granted by the Government or any subdivision, agency, or
instrumentality thereof, including any government-owned or controlled corporation or its subsidiary. Such
supervision or regulation shall aim to ensure equal opportunity, and equal rates therefor, for public information

791
campaigns and forums among candidates in connection with the objective of holding free, orderly, honest, peaceful,
and credible elections.

This being the case, then the Resolutions cannot be said to have been issued with grave abuse of discretion
amounting to lack of jurisdiction.

Next, respondent claims that the provisions are not vague because the assailed Resolutions have given clear and
adequate mechanisms to protect broadcast stations from potential liability arising from a candidate's or party's
violation of airtime limits by putting in the proviso that the station "may require buyer to warrant under oath that such
purchase [of airtime] is not in excess of size, duration or frequency authorized by law or these rules." Furthermore,
words should be understood in the sense that they have in common usage, and should be given their ordinary
meaning. Thus, in the provision for the right to reply, "charges" against candidates or parties must be understood in
the ordinary sense, referring to accusations or criticisms.

Respondent also sees no prior restraint in the provisions requiring notice to the COMELEC for appearances or
guestings of candidates in bona fide news broadcasts. It points out that the fact that notice may be given 24 hours
after first broadcast only proves that the mechanism is for monitoring purposes only, not for censorship. Further,
respondent argues, that for there to be prior restraint, official governmental restrictions on the press or other forms
of expression must be done in advance of actual publication or dissemination. Moreover, petitioners are only
required to inform the COMELEC of candidates'/parties' guestings, but there is no regulation as to the content of the
news or the expressions in news interviews or news documentaries. Respondent then emphasized that the
Supreme Court has held that freedom of speech and the press may be limited in light of the duty of the COMELEC
to ensure equal access to opportunities for public service.

With regard to the right to reply provision, respondent also does not consider it as restrictive of the airing of bona
fide news broadcasts. More importantly, it stressed, the right to reply is enshrined in the Constitution, and the
assailed Resolutions provide that said right can only be had after going through administrative due process. The
provision was also merely lifted from Section 10 of R.A. No. 9006, hence, petitioner ABC is actually attacking the
constitutionality of R.A. No. 9006, which cannot be done through a collateral attack.

Next, respondent counters that there is no merit to ABC's claim that the Resolutions' definition of "political
advertisement" or "election propaganda" suffers from overbreadth, as the extent or scope of what falls under said
terms is clearly stated in Section 1 (4) of Resolution No. 9615.

It is also respondent's view that the nationwide aggregate total airtime does not violate the equal protection clause,
because it does not make any substantial distinctions between national and regional and/or local broadcast stations,
and even without the aggregate total airtime rule, candidates and parties are likely to be more inclined to advertise
in national broadcast stations. Respondent likewise sees no merit in petitioners' claim that the Resolutions amount
to taking of private property without just compensation. Respondent emphasizes that radio and television
broadcasting companies do not own the airwaves and frequencies through which they transmit broadcast signals;
they are merely given the temporary privilege to use the same. Since they are merely enjoying a privilege, the same
may be reasonably burdened with some form of public service, in this case, to provide candidates with the
opportunity to reply to charges aired against them.

Lastly, respondent contends that the public consultation requirement does not apply to constitutional commissions
such as the COMELEC, pursuant to Section 1, Chapter I, Book VII of the Administrative Code of 1987. Indeed,
Section 9, Chapter II, Book VII of said Code provides, thus:

Section 9. Public Participation. - (1) If not otherwise required by law, an agency shall, as far as practicable,
publish or circulate notices of proposed rules and afford interested parties the opportunity to submit their
views prior to the adoption of any rule.

However, Section 1, Chapter 1, Book VII of said Code clearly provides:

Section 1. Scope. -This Book shall be applicable to all agencies as defined in the next succeeding section,
except the Congress, the Judiciary, the Constitutional Commissions, military establishments in all matters
relating exclusively to Armed Forces personnel, the Board of Pardons and Parole, and state universities and
colleges.

Nevertheless, even if public participation is not required, respondent still conducted a meeting with representatives
of the KBP and various media outfits on December 26, 2012, almost a month before the issuance of Resolution No.
9615.

On April 2, 2013, petitioner GMA filed its Reply,  where it advanced the following counter-arguments:
14

792
According to GMA, a petition for certiorari is the proper remedy to question the herein assailed Resolutions, which
should be considered as a "decision, order or ruling of the Commission" as mentioned in Section 1, Rule 37 of the
COMELEC Rules of Procedure which provides:

Section 1. Petition for Certiorari,· and Time to File. - Unless otherwise provided by law, or by any specific provisions
in these Rules, any decision, order or ruling of the Commission may be brought to the Supreme Court on certiorari
by the aggrieved party within thirty (30) days from its promulgation.

GMA further stressed that this case involves national interest, and the urgency of the matter justifies its resort to the
remedy of a petition for certiorari.

Therefore, GMA disagrees with the COMELEC's position that the proper remedy is a petition for declaratory relief
because such action only asks the court to make a proper interpretation of the rights of parties under a statute or
regulation. Such a petition does not nullify the assailed statute or regulation, or grant injunctive relief, which
petitioners are praying for in their petition. Thus, GMA maintains that a petition for certiorari is the proper remedy.

GMA further denies that it is making a collateral attack on the Fair Election Act, as it is not attacking said law. GMA
points out that it has stated in its petition that the law in fact allows the sale or donation of airtime for political
advertisements and does not impose criminal liability against radio and television stations. What it is assailing is the
COMELEC's erroneous interpretation of the law's provisions by declaring such sale and/or donation of airtime
unlawful, which is contrary to the purpose of the Fair Election Act.

GMA then claims that it has legal standing to bring the present suit because:

x x x First, it has personally suffered a threatened injury in the form of risk of criminal liability because of the alleged
unconstitutional and unlawful conduct of respondent COMELEC in expanding what was provided for in R.A. No.
9006. Second, the injury is traceable to the challenged action of respondent COMELEC, that is, the issuance of the
assailed Resolutions. Third, the injury is likely to be redressed by the remedy sought in petitioner GMA's Petition,
among others, for the Honorable Court to nullify the challenged pertinent provisions of the assailed Resolutions. 15

On substantive issues, GMA first argues that the questioned Resolutions are contrary to the objective and purpose
of the Fair Election Act. It points out that the Fair Election Act even repealed the political ad ban found in the earlier
law, R.A. No. 6646. The Fair Election Act also speaks of "equal opportunity" and "equal access,'' but said law never
mentioned equalizing the economic station of the rich and the poor, as a declared policy. Furthermore, in its opinion,
the supposed correlation between candidates' expenditures for TV ads and actually winning the elections, is a mere
illusion, as there are other various factors responsible for a candidate's winning the election. GMA then cites
portions of the deliberations of the Bicameral Conference Committee on the bills that led to the enactment of the
Fair Election Act, and alleges that this shows the legislative intent that airtime allocation should be on a "per station"
basis. Thus, GMA claims it was arbitrary and a grave abuse of discretion for the COMELEC to issue the present
Resolutions imposing airtime limitations on an "aggregate total" basis.

It is likewise insisted by GMA that the assailed Resolutions impose an unconstitutional burden on them, because
their failure to strictly monitor the duration of total airtime that each candidate has purchased even from other
stations would expose their officials to criminal liability and risk losing the station's good reputation and goodwill, as
well as its franchise. It argues that the wordings of the Resolutions belie the COMELEC's claim that petitioners
would only incur liability if they "knowingly" sell airtime beyond the limits imposed by the Resolutions, because the
element of knowledge is clearly absent from the provisions thereof. This makes the provisions have the nature of
malum prohibitum.

Next, GMA also says that the application of the aggregate airtime limit constitutes prior restraint and is
unconstitutional, opining that "[t]he reviewing power of respondent COMELEC and its sole judgment of a news event
as a political advertisement are so pervasive under the assailed Resolutions, and provoke the distastes or chilling
effect of prior restraint"  as even a legitimate exercise of a constitutional right might expose it to legal sanction.
16

Thus, the governmental interest of leveling the playing field between rich and poor candidates cannot justify the
restriction on the freedoms of expression, speech and of the press.

On the issue of lack of prior public participation, GMA cites Section 82 of the Omnibus Election Code, pertinent
portions of which provide, thus:

Section 82. Lawful election propaganda. - Lawful election propaganda shall include:

xxxx

All other forms of election propaganda not prohibited by this Code as the Commission may authorize after due
notice to all interested parties and hearing where all the interested parties were given an equal opportunity to be

793
heard: Provided, That the Commission's authorization shall be published in two newspapers of general circulation
throughout the nation for at least twice within one week after the authorization has been granted.

There having been no prior public consultation held, GMA contends that the COMELEC is guilty of depriving
petitioners of its right to due process of law.

GMA then concludes that it is also entitled to a temporary restraining order, because the implementation of the
Resolutions in question will cause grave and irreparable damage to it by disrupting and emasculating its mandate to
provide television and radio services to the public, and by exposing it to the risk of incurring criminal and
administrative liability by requiring it to perform the impossible task of surveillance and monitoring, or the broadcasts
of other radio and television stations.

Thereafter, on April 4, 2013, the COMELEC, through the Office of the Solicitor General (OSG), filed a Supplemental
Comment and Opposition  where it further expounded on the legislative intent behind the Fair Election Act, also
17

quoting portions of the deliberations of the Bicameral Conference Committee, allegedly adopting the Senate Bill
version setting the computation of airtime limits on a per candidate, not per station, basis. Thus, as enacted into law,
the wordings of Section 6 of the Fair Election Act shows that the airtime limit is imposed on a per candidate basis,
rather than on a per station basis. Furthermore, the COMELEC states that petitioner intervenor Senator Cayetano is
wrong in arguing that there should be empirical data to support the need to change the computation of airtime limits
from a per station basis to a per candidate basis, because nothing in law obligates the COMELEC to support its
Resolutions with empirical data, as said airtime limit was a policy decision dictated by the legislature itself, which
had the necessary empirical and other data upon which to base said policy decision.

The COMELEC then points out that Section 2 (7),  Article IX (C) of the Constitution empowers it to recommend to
18

Congress effective measures to minimize election spending and in furtherance of such constitutional power, the
COMELEC issued the questioned Resolutions, in faithful implementation of the legislative intent and objectives of
the Fair Election Act.

The COMELEC also dismisses Senator Cayetano's fears that unauthorized or inadvertent inclusion of his name,
initial, image, brand, logo, insignia and/or symbol in tandem advertisements will be charged against his airtime limits
by pointing out that what will be counted against a candidate's airtime and expenditures are those advertisements
that have been paid for or donated to them to which the candidate has given consent.

With regard to the attack that the total aggregate airtime limit constitutes prior restraint or undue abridgement of the
freedom of speech and expression, the COMELEC counters that "the Resolutions enjoy constitutional and
congressional imprimatur. It is the Constitution itself that imposes the restriction on the freedoms of speech and
expression, during election period, to promote an important and significant governmental interest, which is to
equalize, as far as practicable, the situation of rich and poor candidates by preventing the former from enjoying the
undue advantage offered by huge campaign 'war chests."' 19

Lastly, the COMELEC also emphasizes that there is no impairment of the people's right to information on matters of
public concern, because in this case, the COMELEC is not withholding access to any public record.

On April 16, 2013, this Court issued a Temporary Restraining Order  (TRO) in view of the urgency involved and to
20

prevent irreparable injury that may be caused to the petitioners if respondent COMELEC is not enjoined from
implementing Resolution No. 9615.

On April 19, 2013 respondent filed an Urgent Motion to Lift Temporary Restraining Order and Motion for Early
Resolution of the Consolidated Petitions. 21

On May 8, 2013, petitioners ABS-CBN and the KBP filed its Opposition/Comment  to the said Motion. Not long after,
22

ABC followed suit and filed its own Opposition to the Motion  filed by the respondent.
23

In the interim, respondent filed a Second Supplemental Comment and Opposition  dated April 8, 2013.
24

In the Second Supplemental Comment and Opposition, respondent delved on points which were not previously
discussed in its earlier Comment and Supplemental Comment, particularly those raised in the petition filed by
petitioner ABS-CBN and KBP.

Respondent maintains that certiorari in not the proper remedy to question the Constitutionality of the assailed
Resolutions and that petitioners ABS-CBN and KBP have no locus standi to file the present petition.

Respondent posits that contrary to the contention of petitioners, the legislative history of R.A. No. 9006 conclusively
shows that congress intended the airtime limits to be computed on a "per candidate" and not on a "per station"
basis. In addition, the legal duty of monitoring lies with the COMELEC. Broadcast stations are merely required to

794
submit certain documents to aid the COMELEC in ensuring that candidates are not sold airtime in excess of the
allowed limits.

Also, as discussed in the earlier Comment, the prior notice requirement is a mechanism designed to inform the
COMELEC of the appearances or guesting of candidates in bona fide news broadcasts. It is for monitoring purposes
only, not censorship. It does not control the subject matter of news broadcasts in anyway. Neither does it prevent
media outlets from covering candidates in news interviews, news events, and news documentaries, nor prevent the
candidates from appearing thereon.

As for the right to reply, respondent insists that the right to reply provision cannot be considered a prior restraint on
the freedoms of expression, speech and the press, as it does not in any way restrict the airing of bona fide new
broadcasts. Media entities are free to report any news event, even if it should turn out to be unfavourable to a
candidate or party. The assailed Resolutions merely give the candidate or party the right to reply to such charges
published or aired against them in news broadcasts.

Moreover, respondent contends that the imposition of the penalty of suspension and revocation of franchise or
permit for the sale or donation of airtime beyond the allowable limits is sanctioned by the Omnibus Election Code.

Meanwhile, RMN filed its Petition on April 8, 2013. On June 4, 2013, the Court issued a Resolution  consolidating
25

the case with the rest of the petitions and requiring respondent to comment thereon.

On October 10, 2013, respondent filed its Third Supplemental Comment and Opposition.  Therein, respondent
26

stated that the petition filed by RMN repeats the issues that were raised in the previous petitions. Respondent,
likewise, reiterated its arguments that certiorari in not the proper remedy to question the assailed resolutions and
that RMN has no locus standi to file the present petition. Respondent maintains that the arguments raised by RMN,
like those raised by the other petitioners are without merit and that RMN is not entitled to the injunctive relief sought.

The petition is partly meritorious.

At the outset, although the subject of the present petit10ns are Resolutions promulgated by the COMELEC relative
to the conduct of the 2013 national and local elections, nevertheless the issues raised by the petitioners have not
been rendered moot and academic by the conclusion of the 2013 elections. Considering that the matters elevated to
the Court for resolution are susceptible to repetition in the conduct of future electoral exercises, these issues will be
resolved in the present action.

PROCEDURAL ASPECTS

Matters of procedure and technicalities normally take a backseat when issues of substantial and transcendental
importance are presented before the Court. So the Court does again in this particular case.

Proper Remedy

Respondent claims that certiorari and prohibition are not the proper remedies that petitioners have taken to question
the assailed Resolutions of the COMELEC. Technically, respondent may have a point. However, considering the
very important and pivotal issues raised, and the limited time, such technicality should not deter the Court from
having to make the final and definitive pronouncement that everyone else depends for enlightenment and guidance.
"[T]his Court has in the past seen fit to step in and resolve petitions despite their being the subject of an improper
remedy, in view of the public importance of the tile issues raised therein. 27

It has been in the past, we do so again.

Locus Standi

Every time a constitutional issue is brought before the Court, the issue of locus standi is raised to question the
personality of the parties invoking the Court's jurisdiction. The Court has routinely made reference to a liberalized
stance when it comes to petitions raising issues of transcendental importance to the country. Invariably, after some
discussions, the Court would eventually grant standing. 28

In this particular case, respondent also questions the standing of the petitioners. We rule for the petitioners. For
petitioner-intervenor Senator Cayetano, he undoubtedly has standing since he is a candidate whose ability to reach
out to the electorate is impacted by the assailed Resolutions.

For the broadcast companies, they similarly have the standing in view of the direct injury they may suffer relative to
their ability to carry out their tasks of disseminating information because of the burdens imposed on them.
Nevertheless, even in regard to the broadcast companies invoking the injury that may be caused to their customers
or the public - those who buy advertisements and the people who rely on their broadcasts - what the Court said in
795
White Light Corporation v. City of Manila  may dispose of the question. In that case, there was an issue as to
29

whether owners of establishments offering "wash-up" rates may have the requisite standing on behalf of their
patrons' equal protection claims relative to an ordinance of the City of Manila which prohibited "short-time" or "wash-
up" accommodation in motels and similar establishments. The Court essentially condensed the issue in this manner:
"[T]he crux of the matter is whether or not these establishments have the requisite standing to plead for protection of
their patrons' equal protection rights."  The Court then went on to hold:
30

Standing or locus standi is the ability of a party to demonstrate to the court sufficient connection to and harm from
the law or action challenged to support that party's participation in the case. More importantly, the doctrine of
standing is built on the principle of separation of powers, sparing as it does unnecessary interference or invalidation
by the judicial branch of the actions rendered by its co-equal branches of government.

The requirement of standing is a core component of the judicial system derived directly from the Constitution. The
constitutional component of standing doctrine incorporates concepts which concededly are not susceptible of
precise definition. In this jurisdiction, the extancy of "a direct and personal interest" presents the most obvious
cause, as well as the standard test for a petitioner's standing. In a similar vein, the United States Supreme Court
reviewed and elaborated on the meaning of the three constitutional standing requirements of injury, causation, and
redressability in Allen v. Wright.

Nonetheless, the general rules on standing admit of several exceptions such as the overbreadth doctrine, taxpayer
suits, third party standing and, especially in the Philippines, the doctrine of transcendental importance.

For this particular set of facts, the concept of third party standing as an exception and the overbreadth doctrine are
appropriate. x x x

xxxx

American jurisprudence is replete with examples where parties-ininterest were allowed standing to advocate or
invoke the fundamental due process or equal protection claims of other persons or classes of persons injured by
state action. x x x

xxxx

Assuming arguendo that petitioners do not have a relationship with their patrons for the former to assert the rights of
the latter, the overbreadth doctrine comes into play. In overbreadth analysis, challengers to government action are
in effect permitted to raise the rights of third parties. Generally applied to statutes infringing on the freedom of
speech, the overbreadth doctrine applies when a statute needlessly restrains even constitutionally guaranteed
rights. In this case, the petitioners claim that the Ordinance makes a sweeping intrusion into the right to liberty of
their clients. We can see that based on the allegations in the petition, the Ordinance suffers from overbreadth.

We thus recognize that the petitioners have a right to assert the constitutional rights of their clients to patronize their
establishments for a "wash-rate" time frame. 31

If in regard to commercial undertakings, the owners may have the right to assert a constitutional right of their clients,
with more reason should establishments which publish and broadcast have the standing to assert the constitutional
freedom of speech of candidates and of the right to information of the public, not to speak of their own freedom of
the press. So, we uphold the standing of petitioners on that basis.

SUBSTANTIVE ASPECTS

Aggregate Time Limits

COMELEC Resolution No. 9615 introduced a radical departure from the previous COMELEC resolutions relative to
the airtime limitations on political advertisements. This essentially consists in computing the airtime on an aggregate
basis involving all the media of broadcast communications compared to the past where it was done on a per station
basis. Thus, it becomes immediately obvious that there was effected a drastic reduction of the allowable minutes
within which candidates and political parties would be able to campaign through the air. The question is accordingly
whether this is within the power of the COMELEC to do or not. The Court holds that it is not within the power of the
COMELEC to do so.

a. Past elections and airtime limits

The authority of the COMELEC to impose airtime limits directly flows from the Fair Election Act (R.A. No. 9006
[2001])  - one hundred (120) minutes of television advertisement and one-hundred· eighty (180) minutes for radio
32

advertisement. For the 2004 elections, the respondent COMELEC promulgated Resolution No. 6520  implementing
33

the airtime limits by applying said limitation on a per station basis.  Such manner of determining airtime limits was
34

796
likewise adopted for the 2007 elections, through Resolution No. 7767.  In the 2010 elections, under Resolution No.
35

8758,  the same was again adopted. But for the 2013 elections, the COMELEC, through Resolution No. 9615, as
36

amended by Resolution No. 9631, chose to aggregate the total broadcast time among the different broadcast
media, thus: Section 9. Requirements and/or Limitations on the Use of Election Propaganda through Mass Media. -
All parties and bona fide candidates shall have equal access to media time and space for their election propaganda
during the campaign period subject to the following requirements and/or limitations:

a. Broadcast Election Propaganda

The duration of an air time that a candidate, or party may use for their broadcast advertisements or election
propaganda shall be, as follows:

For Candidates/Registered Not more than an aggregate total of one

Political parties for a National hundred (120) minutes of television advertising,
Elective Position
For Candidates/Registered
Political parties for a Local
Elective Position
whether appearing on national, regional, or
local, free or cable television, and one hundred
eighty (180) minutes of radio advertising,
whether airing on national, regional, or local
radio, whether by purchase or donation
Not more than an aggregate total of sixty (60)
minutes of television advertising, whether
appearing on national, regional, or local, free or
cable television, and ninety (90) minutes of
radio advertising, whether airing on national,
regional, or local radio, whether by purchase or
donation.

In cases where two or more candidates or parties whose names, initials, images, brands, logos, insignias, color
motifs, symbols, or forms of graphical representations are displayed, exhibited, used, or mentioned together in the
broadcast election propaganda or advertisements, the length of time during which they appear or are being
mentioned or promoted will be counted against the airtime limits allotted for the said candidates or parties and the
cost of the said advertisement will likewise be considered as their expenditures, regardless of whoever paid for the
advertisements or to whom the said advertisements were donated.

xxxx 37

Corollarily, petitioner-intervenor, Senator Cayetano, alleges:

6.15. The change in the implementation of Section 6 of R.A. 9006 was undertaken by respondent Comelec without
consultation with the candidates for the 2013 elections, affected parties such as media organizations, as well as the
general public. Worse, said change was put into effect without explaining the basis therefor and without showing
any data in support of such change. Respondent Comelec merely maintained that such action "is meant to level the
playing field between the moneyed candidates and those who don i have enough resources," without particularizing
the empirical data upon which such a sweeping statement was based. This was evident in the public hearing held
on 31 January 2013 where petitioner GMA, thru counsel, explained that no empirical data on he excesses or abuses
of broadcast media were brought to the attention of the public by respondent Comelec, or even stated in the
Comelec

Resolution No. 9615. Thus –

xxxx

Chairman Brillantes

So if we can regulate and amplify, we may amplify meaning we can expand if we want to. But the authority of the
Commission is if we do not want to amplify and we think that the 120 or 180 is okay we cannot be compelled to
amplify. We think that 120 or 180 is okay, is enough.

Atty. Lucila

But with due respect Your Honor, I think the basis of the resolution is found in the law and the law has been
enterpreted (sic) before in 2010 to be 120 per station, so why the change, your Honor?

Chairman Brillantes

797
No, the change is not there, the right to amplify is with the Commission on Elections. Nobody can encroach in our
right to amplify. Now, if in 2010 the Commission felt that per station or per network is the rule then that is the
prerogative of the Commission then they could amplify it to expand it. If the current Commission feels that 120 is
enough for the particular medium like TV and 180 for radio, that is our prerogative. How can you encroach and what
is unconstitutional about it?

Atty. Lucila

We are not questioning the authority of the Honorable Commission to regulate Your Honor, we are just raising our
concern on the manner of regulation because as it is right now, there is a changing mode or sentiments of the
Commission and the public has the right to know, was there rampant overspending on political ads in 2010, we were
not informed Your Honor. Was there abuse of the media in 2010, we were not informed Your Honor. So we would
like to know what is the basis of the sudden change in this limitation, Your Honor .. And law must have a consistent
interpretation that [is]our position, Your Honor.

Chairman Brillantes

But my initial interpretation, this is personal to this representation counsel, is that if the Constitution allows us to
regulate and then it gives us the prerogative to amplify then the prerogative to amplify you should leave this to the
discretion of the Commission. Which means if previous Commissions felt that expanding it should be part of our
authority that was a valid exercise if we reduce it to what is provided for by law which is 120-180 per medium, TV,
radio, that is also within the law and that is still within our prerogative as provided for by the Constitution. If you say
we have to expose the candidates to the public then I think the reaction should come, the negative reaction should
come from the candidates not from the media, unless you have some interest to protect directly. Is there any interest
on the part of the media to expand it?

Atty. Lucila

Well, our interest Your Honor is to participate in this election Your Honor and we have been constantly (sic) as the
resolution says and even in the part involved because you will be getting some affirmative action time coming from
the media itself and Comelec time coming from the media itself. So we could like to be both involved in the whole
process of the exercise of the freedom of suffrage Your Honor.

Chairman Brillantes

Yes, but the very essence of the Constitutional provision as well as the provision of 9006 is actually to level the
playing field. That should be the paramount consideration. If we allow everybody to make use of all their time and all
radio time and TV time then there will be practically unlimited use of the mass media ....

Atty. Lucila

Was there in 2010 Your Honor, was there any data to support that there was an unlimited and abuse of a (sic)
political ads in the mass media that became the basis of this change in interpretation Your Honor? We would like to
know about it Your Honor.

Chairman Brillantes

What do you think there was no abuse in 201 O?

Atty. Lucila

As far as the network is concern, there was none Your Honor.

Chairman Brillantes

There was none ..... .

Atty. Lucila

I'm sorry, Your Honor ...

Chairman Brillantes

Yes, there was no abuse, okay, but there was some advantage given to those who took ... who had the more
moneyed candidates took advantage of it.

798
Atty. Lucila

But that is the fact in life, Your Honor there are poor candidates, there are rich candidates. No amount of law or
regulation can even level the playing filed (sic) as far as the economic station in life of the candidates are concern
(sic) our Honor.38

Given the foregoing observations about what happened during the hearing, Petitioner-Intervenor went on to allege
that:

6.16. Without any empirical data upon which to base the regulatory measures in Section 9 (a), respondent Comelec
arbitrarily changed the rule from per station basis to aggregate airtime basis. Indeed, no credence should be given
to the cliched explanation of respondent Comelec (i.e. leveling the playing field) in its published statements which in
itself is a mere reiteration of the rationale for the enactment of the political ad ban of Republic Act No. 6646, and
which has likewise been foisted when said political ad ban was lifted by R.A. 9006. 39

From the foregoing, it does appear that the COMELEC did not have any other basis for coming up with a new
manner of determining allowable time limits except its own idea as to what should be the maximum number of
minutes based on its exercise of discretion as to how to level the playing field. The same could be encapsulized in
the remark of the COMELEC Chairman that "if the Constitution allows us to regulate and then it gives us the
prerogative to amplify then the prerogative to amplify you should leave this to the discretion of the Commission." 40

The Court could not agree with what appears as a nonchalant exercise of discretion, as expounded anon.

b. COMELEC is duty bound to come up with reasonable basis for changing the interpretation and implementation of
the airtime limits

There is no question that the COMELEC is the office constitutionally and statutorily authorized to enforce election
laws but it cannot exercise its powers without limitations - or reasonable basis. It could not simply adopt measures
or regulations just because it feels that it is the right thing to do, in so far as it might be concerned. It does have
discretion, but such discretion is something that must be exercised within the bounds and intent of the law. The
COMELEC is not free to simply change the rules especially if it has consistently interpreted a legal provision in a
particular manner in the past. If ever it has to change the rules, the same must be properly explained with sufficient
basis.

Based on the transcripts of the hearing conducted by the COMELEC after it had already promulgated the
Resolution, the respondent did not fully explain or justify the change in computing the airtime allowed candidates
and political parties, except to make reference to the need to "level the playing field." If the "per station" basis was
deemed enough to comply with that objective in the past, why should it now be suddenly inadequate? And, the short
answer to that from the respondent, in a manner which smacks of overbearing exercise of discretion, is that it is
within the discretion of the COMELEC. As quoted in the transcript, "the right to amplify is with the COMELEC.
Nobody can encroach in our right to amplify. Now, if in 2010 the Commission felt that per station or per network is
the rule then that is the prerogative of the Commission then they could amplify it to expand it. If the current
Commission feels that 120 is enough for the particular medium like TV and 180 for radio, that is our prerogative.
How can you encroach and what is unconstitutional about it?" 41

There is something basically wrong with that manner of explaining changes in administrative rules. For one, it does
not really provide a good basis for change. For another, those affected by such rules must be given a better
explanation why the previous rules are no longer good enough. As the Court has said in one case:

While stability in the law, particularly in the business field, is desirable, there is no demand that the NTC slavishly
follow precedent. However, we think it essential, for the sake of clarity and intellectual honesty, that if an
administrative agency decides inconsistently with previous action, that it explain thoroughly why a different result is
warranted, or ?f need be, why the previous standards should no longer apply or should be overturned. Such
explanation is warranted in order to sufficiently establish a decision as having rational basis. Any inconsistent
decision lacking thorough, ratiocination in support may be struck down as being arbitrary. And any decision with
absolutely nothing to support it is a nullity.
42

What the COMELEC came up with does not measure up to that level of requirement and accountability which
elevates administrative rules to the level of respectability and acceptability. Those governed by administrative
regulations are entitled to a reasonable and rational basis for any changes in those rules by which they are
supposed to live by, especially if there is a radical departure from the previous ones.

c. The COMELEC went beyond the authority granted it by the law in adopting "aggregate" basis in the determination
of allowable airtime

The law, which is the basis of the regulation subject of these petitions, pertinently provides:

799
6.2. (a) Each bona fide candidate or registered political party for a nationally elective office shall be entitled to not
more than one hundred twenty (120) minutes of television advertisement and one hundred eighty (180) minutes of
radio advertisement whether by purchase or donation.

(b) Each bona fide candidate or registered political party for a locally elective office shall be entitled to not more than
sixty (60) minutes of television advertisement and ninety (90) minutes of radio advertisement whether by purchase
or donation; x x x

The law, on its face, does not justify a conclusion that the maximum allowable airtime should be based on the
totality of possible broadcast in all television or radio stations. Senator Cayetano has called our attention to the
legislative intent relative to the airtime allowed - that it should be on a "per station" basis.
43

This is further buttressed by the fact that the Fair Election Act (R.A. No. 9006) actually repealed the previous
provision, Section ll(b) of Republic Act No. 6646,  which prohibited direct political advertisements -the so-called
44

"political ad ban." If under the previous law, no candidate was allowed to directly buy or procure on his own his
broadcast or print campaign advertisements, and that he must get it through the COMELEC Time or COMELEC
Space, R.A. No. 9006 relieved him or her from that restriction and allowed him or her to broadcast time or print
space subject to the limitations set out in the law. Congress, in enacting R.A. No. 9006, felt that the previous law
was not an effective and efficient way of giving voice to the people. Noting the debilitating effects of the previous law
on the right of suffrage and Philippine democracy, Congress decided to repeal such rule by enacting the Fair
Election Act.

In regard to the enactment of the new law, taken in the context of the restrictive nature of the previous law, the
sponsorship speech of Senator Raul Roco is enlightening:

The bill seeks to repeal Section 85 of the Omnibus Election Code and Sections 10 and 11 of RA 6646. In view of the
importance of their appeal in connection with the thrusts of the bill, I hereby quote these sections in full:

"SEC. 85. Prohibited forms of election propaganda. - It shall be unlawful:

"(a) To print, publish, post or distribute any poster, pamphlet, circular, handbill, or printed matter urging
voters to vote for or against any candidate unless they hear the names and addresses of the printed and
payor as required in Section 84 hereof;

"(b) To erect, put up, make use of, attach, float or display any billboard, tinplate-poster, balloons and the like,
of whatever size, shape, form or kind, advertising for or against any candidate or political party;

"(c) To purchase, manufacture, request, distribute or accept electoral propaganda gadgets, such as pens,
lighters, fans of whatever nature, flashlights, athletic goods or materials, wallets, shirts, hats, bandannas,
matches, cigarettes and the like, except that campaign supporters accompanying a candidate shall be
allowed to wear hats and/or shirts or T-shirts advertising a candidate;

"(d) To show or display publicly any advertisement or propaganda for or against any candidate by means of
cinematography, audio-visual units or other screen projections except telecasts which may be allowed as
hereinafter provided; and

"(e) For any radio broadcasting or television station to sell or give free of charge airtime for campaign and
other political purposes except as authorized in this Code under the rules and regulations promulgated by
the Commission pursuant thereto;

"Any prohibited election propaganda gadget or advertisement shall be stopped, confiscated or tom down by the
representative of the Commission upon specific authority of the Commission." "SEC. 10. Common Poster Areas. -
The Commission shall designate common poster areas in strategic public places such as markets, barangay centers
and the like wherein candidates can post, display or exhibit election propaganda to announce or further their
candidacy.

"Whenever feasible, common billboards may be installed by the Commission and/or non-partisan private or civic
organizations which the Commission may authorize whenever available, after due notice and hearing, in strategic
areas where it may readily be seen or read, with the heaviest pedestrian and/or vehicular traffic in the city or
municipality.

The space in such common poster areas or billboards shall be allocated free of charge, if feasible, equitably and
impartially among the candidates in the province, city or municipality. "SEC. 11. Prohibite,d Forms of Election
Propaganda. - In addition to the forms of election propaganda prohibited under Section 85 of Batas Pambansa Blg.
881, it shall be unlawful: (a) to draw, paint, inscribe, write, post, display or puolicly exhibit any election propaganda
in any place, whether private or public, except in common poster areas and/or billboards provided in the

800
immediately preceding section, at the candidate's own residence, or at the campaign headquarters of the candidate
or political party: Provided, That such posters or election propaganda shall in no case exceed two (2) feet by three
(3) feet in area; Provided, further, That at the site of and on the occasion of a public meeting or rally, streamers, not
more than two (2) feet and not exceeding three (3) feet by eight (8) each may be displayed five (5) days before the
date of the meeting or rally, and shall be removed within twenty-four (24) hours after said meeting or rally; and

"(b) For any newspapers, radio broadcasting or television station, or other mass media, or any person making use of
the mass media to sell or give for free of charge print space or air time for campaign or other political purposes
except to the Commission as provided under Section 90 and 92 of Batas Pambansa Big. 881. Any mass media
columnist, commentator, announcer or personality who is a candidate for any elective public office shall take a leave
of absence from his work as such during the campaign."

The repeal of the provision on the Common Poster Area implements the strong recommendations of the
Commission on Elections during the hearings. It also seeks to apply the doctrine enunciated by the Supreme Court
in the case of Blo Umpar Adiong vs. Commission on Elections, 207 SCRA 712, 31 March 1992. Here a unanimous
Supreme Court ruled: The COMELEC's prohibition on the posting of decals and stickers on "mobile" places whether
public or private except [in] designated areas provided for by the COMELEC itself is null and void on constitutional
grounds.

For the foregoing reasons, we commend to our colleagues the early passage of Senate Bill No. 1742. In so doing,
we move one step towards further ensuring "free, orderly, honest, peaceful and credible elections" as mandated by
the Constitution.45

Given the foregoing background, it is therefore ineluctable to conclude that Congress intended to provide a more
expansive and liberal means by which the candidates, political parties, citizens and other stake holders in the
periodic electoral exercise may be given a chance to fully explain and expound on their candidacies and platforms
of governance, and for the electorate to be given a chance to know better the personalities behind the candidates.
In this regard, the media is also given a very important part in that undertaking of providing the means by which the
political exercise becomes an interactive process. All of these would be undermined and frustrated with the kind of
regulation that the respondent came up with.

The respondent gave its own understanding of the import of the legislative deliberations on the adoption of R.A. No.
9006 as follows:

The legislative history of R.A. 9006 clearly shows that Congress intended to impose the per candidate or political
party aggregate total airtime limits on political advertisements and election propaganda. This is evidenced by the
dropping of the "per day per station" language embodied in both versions of the House of Representatives and
Senate bills in favour of the "each candidate" and "not more than" limitations now found in Section 6 of R.A. 9006.

The pertinent portions of House Bill No. 9000 and Senate Bill No. 1742 read as follows:

House Bill No. 9000:

SEC. 4. Section 86 of the same Batas is hereby amended to read as follows:

Sec. 86. Regulation of Election Propaganda Through Mass Media.

x x x           x x x          x x x

A) The total airtime available to the candidate and political party, whether by purchase or by donation, shall be
limited to five (5) minutes per day in each television, cable television and radio stations during the applicable
campaign period.

Senate Bill No. 1742:

SEC. 5. Equal Access to Media Space and Time. -All registered parties and bona fide candidates shall have equal
access to media space and time. The following guidelines may be amplified by the COMELEC.

x x x           x x x          x x x

2. The total airtime available for each registered party and bona fide candidate whether by purchase or donation
shall not exceed a total of one (1) minute per day per television or radio station. (Emphasis supplied.)

As Section 6 of R.A. 9006 is presently worded, it can be clearly seen that the legislature intended the aggregate
airtime limits to be computed on per candidate or party basis. Otherwise, if the legislature intended the computation
to be on per station basis, it could have left the original "per day per station" formulation.
46

801
The Court does not agree. It cannot bring itself to read the changes in the bill as disclosing an intent that the
COMELEC wants this Court to put on the final language of the law. If anything, the change in language meant that
the computation must not be based on a "per day" basis for each television or radio station. The same could not
therefore lend itself to an understanding that the total allowable time is to be done on an aggregate basis for all
television or radio stations. Clearly, the respondent in this instance went beyond its legal mandate when it provided
for rules beyond what was contemplated by the law it is supposed to implement. As we held in Lakin, Jr. v.
Commission on Elections: 47

The COMELEC, despite its role as the implementing arm of the Government in the enforcement and administration
of all laws and regulations relative to the conduct of an election, has neither the authority nor the license to expand,
extend, or add anything to the law it seeks to implement thereby. The IRRs the COMELEC issued for that purpose
should always be in accord with the law to be implemented, and should not override, supplant, or modify the law. It
is basic that the IRRs should remain consistent with the law they intend to carry out.

Indeed, administrative IRRs adopted by a particular department of the Government under legislative authority must
be in harmony with the provisions of the law, and should be for the sole purpose of carrying the law's general
provisions into effect. The law itself cannot be expanded by such IRRs, because an administrative agency cannot
amend an act of Congress. 48

In the case of Lakin, Jr., the COMELEC's explanation that the Resolution then in question did not add anything but
merely reworded and rephrased the statutory provision did not persuade the Court. With more reason here since the
COMELEC not only reworded or rephrased the statutory provision - it practically replaced it with its own idea of what
the law should be, a matter that certainly is not within its authority. As the Court said in Villegas v. Subido:
49

One last word. Nothing is better settled in the law than that a public official exercises power, not rights. The
government itself is merely an agency through which the will of the state is expressed and enforced. Its officers
therefore are likewise agents entrusted with the responsibility of discharging its functions. As such there is no
presumption that they are empowered to act. There must be a delegation of such authority, either express or
implied. In the absence of a valid grant, they are devoid of power. What they do suffers from a fatal infirmity. That
principle cannot be sufficiently stressed. In the appropriate language of Chief Justice Hughes: "It must be conceded
that departmental zeal may not be permitted to outrun the authority conferred by statute." Neither the high dignity of
the office nor the righteousness of the motive then is an acceptable substitute. Otherwise the rule of law becomes a
myth. Such an eventuality, we must take all pains to avoid. 50

So it was then. So does the rule still remains the same.

d. Section 9 (a) of COMELEC Resolution No. 9615 on airtime limits also goes against the constitutional guaranty of
freedom of expression, of speech and of the press

The guaranty of freedom to speak is useless without the ability to communicate and disseminate what is said. And
where there is a need to reach a large audience, the need to access the means and media for such dissemination
becomes critical. This is where the press and broadcast media come along. At the same time, the right to speak and
to reach out would not be meaningful if it is just a token ability to be heard by a few. It must be coupled with
substantially reasonable means by which the communicator and the audience could effectively interact. Section 9
(a) of COMELEC Resolution No. 9615, with its adoption of the "aggregate-based" airtime limits unreasonably
restricts the guaranteed freedom of speech and of the press.

Political speech is one of the most important expressions protected by the Fundamental Law. "[F]reedom of speech,
of expression, and of the press are at the core of civil liberties and have to be protected at all costs for the sake of
democracy."  Accordingly, the same must remain unfettered unless otherwise justified by a compelling state
51

interest.

In regard to limitations on political speech relative to other state interests, an American case observed:

A restriction on the amount of money a person or group can spend on political communication during a campaign
necessarily reduces the quantity of expression by restricting the number of issues discussed, the depth of their
exploration, and the size of the audience reached. This is because virtually every means of communicating ideas in
today's mass society requires the expenditure of money. The distribution of the humblest handbill or leaflet entails
printing, paper, and circulation costs. Speeches and rallies generally necessitate hiring a hall and publicizing the
event. The electorate's increasing dependence on television, radio, and other mass media for news and information
has made these expensive modes of communication indispensable instruments of effective political speech.

The expenditure limitations contained in the Act represent substantial, rather than merely theoretical restraints on
the quantity and diversity of political speech. The $1,000 ceiling on spending "relative to a clearly identified
candidate," 18 U.S.C. § 608(e)(l) (1970 ed., Supp. IV), would appear to exclude all citizens and groups except
candidates, political parties, and the institutional press from any significant use of the most effective modes of
communication. Although the Act's limitations on expenditures by campaign organizations and political parties
802
provide substantially greater room for discussion and debate, they would have required restrictions in the scope of a
number of past congressional and Presidential campaigns and would operate to constrain campaigning by
candidates who raise sums in excess of the spending ceiling. 52

Section 9 (a) ofCOMELEC Resolution No. 9615 comes up with what is challenged as being an unreasonable basis
for determining the allowable air time that candidates and political parties may avail of. Petitioner GMA came up with
its analysis of the practical effects of such a regulation:

5.8. Given the reduction of a candidate's airtime minutes in the New Rules, petitioner GMA estimates that a
national candidate will only have 120 minutes to utilize for his political advertisements in television during the
whole campaign period of 88 days, or will only have 81.81 seconds per day TV exposure allotment. If he
chooses to place his political advertisements in the 3 major TV networks in equal allocation, he will only
have 27.27 seconds of airtime per network per day. This barely translates to 1 advertisement spot on a 30-
second spot basis in television.

5.9. With a 20-hour programming per day and considering the limits of a station's coverage, it will be difficult
for 1 advertising spot to make a sensible and feasible communication to the public, or in political
propaganda, to "make known [a candidate's] qualifications and stand on public issues".

5.10 If a candidate loads all of his 81.81 seconds per day in one network, this will translate to barely three
30-second advertising spots in television on a daily basis using the same assumptions above.

5.11 Based on the data from the 2012 Nielsen TV audience measurement in Mega Manila, the commercial
advertisements in television are viewed by only 39.2% of the average total day household audience if such
advertisements are placed with petitioner GMA, the leading television network nationwide and in Mega
Manila. In effect, under the restrictive aggregate airtime limits in the New Rules, the three 30-second political
advertisements of a candidate in petitioner GMA will only be communicated to barely 40% of the viewing
audience, not even the voting population, but only in Mega Manila, which is defined by AGB Nielsen
Philippines to cover Metro Manila and certain urban areas in the provinces of Bulacan, Cavite, Laguna,
Rizal, Batangas and Pampanga. Consequently, given the voting population distribution and the drastically
reduced supply of airtime as a result of the New Rules' aggregate airtime limits, a national candidate will be
forced to use all of his airtime for political advertisements in television only in urban areas such as Mega
Manila as a political campaign tool to achieve maximum exposure.

5.12 To be sure, the people outside of Mega Manila or other urban areas deserve to be informed of the
candidates in the national elections, and the said candidates also enjoy the right to be voted upon by these
informed populace. 53

The Court agrees. The assailed rule on "aggregate-based" airtime limits is unreasonable and arbitrary as it unduly
restricts and constrains the ability of candidates and political parties to reach out and communicate with the people.
Here, the adverted reason for imposing the "aggregate-based" airtime limits - leveling the playing field - does not
constitute a compelling state interest which would justify such a substantial restriction on the freedom of candidates
and political parties to communicate their ideas, philosophies, platforms and programs of government. And, this is
specially so in the absence of a clear-cut basis for the imposition of such a prohibitive measure. In this particular
instance, what the COMELEC has done is analogous to letting a bird fly after one has clipped its wings.

It is also particularly unreasonable and whimsical to adopt the aggregate-based time limits on broadcast time when
we consider that the Philippines is not only composed of so many islands. There are also a lot of languages and
dialects spoken among the citizens across the country. Accordingly, for a national candidate to really reach out to as
many of the electorates as possible, then it might also be necessary that he conveys his message through his
advertisements in languages and dialects that the people may more readily understand and relate to. To add all of
these airtimes in different dialects would greatly hamper the ability of such candidate to express himself - a form of
suppression of his political speech.

Respondent itself states that "[t]elevision is arguably the most costeffective medium of dissemination. Even a slight
increase in television exposure can significantly boost a candidate's popularity, name recall and electability."  If that
54

be so, then drastically curtailing the ability of a candidate to effectively reach out to the electorate would unjustifiably
curtail his freedom to speak as a means of connecting with the people.

Finally on this matter, it is pertinent to quote what Justice Black wrote in his concurring opinion in the landmark
Pentagon Papers case: "In the First Amendment, the Founding Fathers gave the free press the protection it must
have to fulfill its essential role in our democracy. The press was to serve the governed, not the governors. The
Government's power to censor the press was abolished so that the press would remain forever free to censure the
Government. The press was protected so that it could bare the secrets of government and inform the people. Only a
free and unrestrained press can effectively expose deception in government." 55

803
In the ultimate analysis, when the press is silenced, or otherwise muffled in its undertaking of acting as a sounding
board, the people ultimately would be the victims.

e. Section 9 (a) of Resolution 9615 is violative of the people's right to suffrage

Fundamental to the idea of a democratic and republican state is the right of the people to determine their own
destiny through the choice of leaders they may have in government. Thus, the primordial importance of suffrage and
the concomitant right of the people to be adequately informed for the intelligent exercise of such birthright. It was
said that:

x x x As long as popular government is an end to be achieved and safeguarded, suffrage, whatever may be the
modality and form devised, must continue to be the means by which the great reservoir of power must be emptied
into the receptacular agencies wrought by the people through their Constitution in the interest of good government
and the common weal. Republicanism, in so far as it implies the adoption of a representative type of government,
necessarily points to the enfranchised citizen as a particle of popular sovereignty and as the ultimate source of the
established authority. He has a voice in his Government and whenever possible it is the solemn duty of the judiciary,
when called upon to act in justifiable cases, to give it efficacy and not to stifle or frustrate it. This, fundamentally, is
the reason for the rule that ballots should be read and appreciated, if not with utmost, with reasonable, liberality. x x
x  It has also been said that "[ c ]ompetition in ideas and governmental policies is at the core of our electoral
56

process and of the First Amendment freedoms."  Candidates and political parties need adequate breathing space -
57

including the means to disseminate their ideas. This could not be reasonably addressed by the very restrictive
manner by which the respondent implemented the time limits in regard to political advertisements in the broadcast
media.

f. Resolution No. 9615 needs prior hearing before adoption

The COMELEC promulgated Resolution No. 9615 on January 15, 2013 then came up with a public hearing on
January 31, 2013 to explain what it had done, particularly on the aggregate-based air time limits. This circumstance
also renders the new regulation, particularly on the adoption of the aggregate-based airtime limit, questionable. It
must not be overlooked that the new Resolution introduced a radical change in the manner in which the rules on
airtime for political advertisements are to be reckoned. As such there is a need for adequate and effective means by
which they may be adopted, disseminated and implemented. In this regard, it is not enough that they be published -
or explained - after they have been adopted.

While it is true that the COMELEC is an independent office and not a mere administrative agency under the
Executive Department, rules which apply to the latter must also be deemed to similarly apply to the former, not as a
matter of administrative convenience but as a dictate of due process. And this assumes greater significance
considering the important and pivotal role that the COMELEC plays in the life of the nation. Thus, whatever might
have been said in Commissioner of Internal Revenue v. Court of Appeals,  should also apply mutatis mutandis to
58

the COMELEC when it comes to promulgating rules and regulations which adversely affect, or impose a heavy and
substantial burden on, the citizenry in a matter that implicates the very nature of government we have adopted:

It should be understandable that when an administrative rule is merely interpretative in nature, its applicability needs
nothing further than its bare issuance for it gives no real consequence more than what the law itself has already
prescribed. When, upon the other hand, the administrative rule goes beyond merely providing for the means that
can facilitate or render least cumbersome the implementation of the law but substantially adds to or increases the
burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard,
and thereafter to be duly informed, before that new issuance is given the force and effect of law.

A reading of RMC 37-93, particularly considering the circumstances under which it has been issued, convinces us
that the circular cannot be viewed simply as a corrective measure (revoking in the process the previous holdings of
past Commissioners) or merely as construing Section 142(c)(l) of the NIRC, as amended, but has, in fact and most
importantly, been made in order to place "Hope Luxury," "Premium More" and "Champion" within the classification
of locally manufactured cigarettes bearing foreign brands and to thereby have them covered by RA 7654.
Specifically, the new law would have its amendatory provisions applied to locally manufactured cigarettes which at
the time of its effectivity were not so classified as bearing foreign brands. x x x In so doing, the BIR not simply
interpreted the law; verily, it legislated under its quasi-legislative authority. The due observance of the requirements
of notice, of hearing, and of publication should not have been then ignored. 59

For failing to conduct prior hearing before coming up with Resolution No. 9615, said Resolution, specifically in
regard to the new rule on aggregate airtime is declared defective and ineffectual.

g. Resolution No. 9615 does not impose an unreasonable burden on the broadcast industry

It is a basic postulate of due process, specifically in relation to its substantive component, that any governmental
rule or regulation must be reasonable in its operations and its impositions. Any restrictions, as well as sanctions,
must be reasonably related to the purpose or objective of the government in a manner that would not work
804
unnecessary and unjustifiable burdens on the citizenry. Petitioner GMA assails certain requirements imposed on
broadcast stations as unreasonable. It explained:

5.40 Petitioner GMA currently operates and monitors 21 FM and AM radio stations nationwide and 8
originating television stations (including its main transmitter in Quezon City) which are authorized to dechain
national programs for airing and insertion of local content and advertisements.

5.41 In light of the New Rules wherein a candidate's airtime minutes are applied on an aggregate basis and
considering that said Rules declare it unlawful in Section 7( d) thereof for a radio, television station or other
mass media to sell or give for free airtime to a candidate in excess of that allowed by law or by said New
Rules:

"Section 7. Prohibited Forms of Election Propaganda -During the campaign period, it is unlawful: x x x x x x x
xx

(d) for any newspaper or publication, radio, television or cable television station, or other mass media, or any
person making use of the mass media to sell or to give free of charge print space or air time for campaign or
election propaganda purposes to any candidate or party in excess of the size, duration or frequency
authorized by law or these rules;

x x x           x x x          x x x

(Emphasis supplied)

petitioner GMA submits that compliance with the New Rules in order to avoid administrative or criminal
liability would be unfair, cruel and oppressive.

x x x x.

5.43 In the present situation wherein airtime minutes shall be shared by all television and radio stations,
broadcast mass media organizations would surely encounter insurmountable difficulties in monitoring the
airtime minutes spent by the numerous candidates for various elective positions, in real time.

5.44 An inquiry with the National Telecommunications Commission (NTC) bears out that there are 372
television stations and 398 AM and 800 FM radio stations nationwide as of June 2012. In addition, there are
1, 113 cable TV providers authorized by the NTC to operate within the country as of the said date.

5.45 Given such numbers of broadcast entities and the necessity to monitor political advertisements
pursuant to the New Rules, petitioner OMA estimates that monitoring television broadcasts of all authorized
television station would involve 7,440 manhours per day. To aggravate matters, since a candidate may also
spend his/her broadcasting minutes on cable TV, additional 281,040 manhours per day would have to be
spent in monitoring the various channels carried by cable TV throughout the Philippines. As far as radio
broadcasts (both AM and FM stations) are concerned, around 23,960 manhours per day would have to be
devoted by petitioner OMA to obtain an accurate and timely determination of a political candidate's
remaining airtime minutes. During the campaign period, petitioner OMA would have to spend an estimated
27,494,720 manhours in monitoring the election campaign commercials of the different candidates in the
country.1âwphi1

5.46 In order to carry-out the obligations imposed by the New Rules, petitioner OMA further estimates that it
would need to engage and train 39,055 additional persons on an eight-hour shift, and assign them all over
the country to perform the required monitoring of radio, television and cable TV broadcasts. In addition, it
would likewise need to allot radio, television, recording equipment and computers, as well as
telecommunications equipment, for this surveillance and monitoring exercise, thus imputing additional costs
to the company. Attached herewith are the computations explaining how the afore-said figures were derived
and the conservative assumptions made by petitioner OMA in reaching said figures, as Annex "H".

5.47 Needless to say, such time, manpower requirements, expense and effort would have to be replicated
by each and every radio station to ensure that they have properly monitored around 33 national and more
than 40,000 local candidates' airtime minutes and thus, prevent any risk of administrative and criminal
liability.
60

The Court cannot agree with the contentions of GMA. The apprehensions of the petitioner appear more to be the
result of a misappreciation of the real import of the regulation rather than a real and present threat to its broadcast
activities. The Court is more in agreement with the respondent when it explained that:

805
The legal duty of monitoring lies with the Comelec. Broadcast stations are merely required to submit certain
documents to aid the Comelec in ensuring that candidates are not sold airtime in excess of the allowed limits. These
documents include: (1) certified true copies of broadcast logs, certificates of performance, and certificates of
acceptance, or other analogous record on specified dates (Section 9[d][3], Resolution No. 9615, in relation to
Section 6.2, R.A. 9006; and (2) copies of all contract for advertising, promoting or opposing any political party or the
candidacy of any person for public office within five (5) days after its signing (Section 6.3, R.A. 9006).

*****

[T]here is absolutely no duty on the broadcast stations to do monitoring, much less monitoring in real time. GMA
grossly exaggerates when it claims that the non-existent duty would require them to hire and train an astounding
additional 39,055 personnel working on eight-hour shifts all over the country. 61

The Court holds, accordingly, that, contrary to petitioners' contention, the Reporting Requirement for the
COMELEC's monitoring is reasonable.

Further, it is apropos to note that, pursuant to Resolution No. 9631,  the respondent revised the third paragraph of
62

Section 9 (a). As revised, the provision now reads:

Appearance or guesting by a candidate on any bona fide newscast, bona fide news interview, bona fide news
documentary, if the appearance of the candidate is incidental to the presentation of the subject or subjects covered
by the news documentary, or on-the-spot coverage of bona fide news events, including but not limited to events
sanctioned by the Commission on Elections, political conventions, and similar activities, shall not be deemed to be
broadcast election propaganda within the meaning of this provision. For purposes of monitoring by the COMELEC
and ensuring that parties and candidates were afforded equal opportunities to promote their candidacy, the media
entity shall give prior notice to the COMELEC, through the appropriate Regional Election Director (RED), or in the
case of the National Capital Region (NCR), the Education and Information Department (EID). If such prior notice is
not feasible or practicable, the notice shall be sent within twenty-four (24) hours from the first broadcast or
publication.  Nothing in the foregoing sentence shall be construed as relieving broadcasters, in connection with the
1awp++i1

presentation of newscasts, news interviews, news documentaries, and on-the-spot coverage of news events, from
the obligation imposed upon them under Sections 10 and 14 of these Rules." 63

Further, the petitioner in G.R. No. 205374 assails the constitutionality of such monitoring requirement, contending,
among others, that it constitutes prior restraint. The Court finds otherwise. Such a requirement is a reasonable
means adopted by the COMELEC to ensure that parties and candidates are afforded equal opportunities to promote
their respective candidacies. Unlike the restrictive aggregate-based airtime limits, the directive to give prior notice is
not unduly burdensome and unreasonable, much less could it be characterized as prior restraint since there is no
restriction on dissemination of information before broadcast. Additionally, it is relevant to point out that in the original
Resolution No. 9615, the paragraph in issue was worded in this wise:

Appearance or guesting by a candidate on any bona fide newscast, bona fide news interview, bona fide news
documentary, if the appearance of the candidate is incidental to the presentation of the subject or subjects covered
by the news documentary, or on-the-spot coverage of bona fide news events, including but not limited to events
sanctioned by the Commission on Elections, political conventions, and similar activities, shall not be deemed to be
broadcast election propaganda within the meaning of this provision. To determine whether the appearance or
guesting in a program is bona fide, the broadcast stations or entities must show that (1) prior approval of the
Commission was secured; and (2) candidates and parties were afforded equal opportunities to promote their
candidacy. Nothing in the foregoing sentence shall be construed as relieving broadcasters, in connection with the
presentation of newscasts, news interviews, news documentaries, and on-the-spot coverage of news events, from
the obligation imposed upon them under Sections 10 and 14 of these Rules. 64

Comparing the original with the revised paragraph, one could readily appreciate what the COMELEC had done - to
modify the requirement from "prior approval" to "prior notice." While the former may be suggestive of a censorial
tone, thus inviting a charge of prior restraint, the latter is more in the nature of a content-neutral regulation designed
to assist the poll body to undertake its job of ensuring fair elections without having to undertake any chore of
approving or disapproving certain expressions.

Also, the right to reply provision is reasonable

In the same way that the Court finds the "prior notice" requirement as not constitutionally infirm, it similarly
concludes that the "right to reply" provision is reasonable and consistent with the constitutional mandate.

Section 14 of Resolution No. 9615, as revised by Resolution No. 9631, provides:

SECTION 14. Right to Reply. - All registered political parties, party-list groups or coalitions and bona fide candidates
shall have the right to reply to charges published or aired against them. The reply shall be given publicity by the

806
newspaper, television, and/or radio station which first printed or aired the charges with the same prominence or in
the same page or section or in the same time slot as the first statement.

Registered political parties, party-list groups or coalitions and bona fide candidates may invoke the right to reply by
submitting within a nonextendible period of forty-eight hours from first broadcast or publication, a formal verified
claim against the media outlet to the COMELEC, through the appropriate RED. The claim shall include a detailed
enumeration of the circumstances and occurrences which warrant the invocation of the right to reply and must be
accompanied by supporting evidence, such a copy of the publication or recording of the television or radio
broadcast, as the case may be. If the supporting evidence is not yet available due to circumstances beyond the
power of the claimant, the latter shall supplement his claim as soon as the supporting evidence becomes available,
without delay on the part of the claimant. The claimant must likewise furnish a copy of the verified claim and its
attachments to the media outlet concerned prior to the filing of the claim with the COMELEC.

The COMELEC, through the RED, shall view the verified claim within forty-eight ( 48) hours from receipt thereof,
including supporting evidence, and if circumstances warrant, give notice to the media outlet involved for appropriate
action, which shall, within forty-eight ( 48) hours, submit its comment, answer or response to the RED, explaining
the action it has taken to address the claim. The media outlet must likewise furnish a copy of the said comment,
answer or response to the claimant invoking the right to reply.

Should the claimant insist that his/her right to reply was not addressed, he/she may file the appropriate petition
and/or complaint before the Commission on Elections or its field offices, which shall be endorsed to the Clerk of
Court.

The attack on the validity of the "right to reply" provision is primarily anchored on the alleged ground of prior
restraint, specifically in so far as such a requirement may have a chilling effect on speech or of the freedom of the
press.

Petitioner ABC states, inter alia:

5 .14 5. A "conscious and detailed consideration" of the interplay of the relevant interests - the constitutional
mandate granting candidates the right to reply and the inviolability of the constitutional freedom of
expression, speech, and the press - will show that the Right to Reply, as provided for in the Assailed
Resolution, is an impermissible restraint on these fundamental freedoms.

5.146. An evaluation of the factors set forth in Soriano (for the balancing of interests test) with respect to the
present controversy will show that the Constitution does not tilt the balance in favor of the Right to Reply
provision in the Assailed Resolution and the supposed governmental interest it attempts to further. 65

The Constitution itself provides as part of the means to ensure free, orderly, honest, fair and credible elections, a
task addressed to the COMELEC to provide for a right to reply.  Given that express constitutional mandate, it could
66

be seen that the Fundamental Law itself has weighed in on the balance to be struck between the freedom of the
press and the right to reply. Accordingly, one is not merely to see the equation as purely between the press and the
right to reply. Instead, the constitutionallymandated desiderata of free, orderly, honest, peaceful, and credible
elections would necessarily have to be factored in trying to see where the balance lies between press and the
demands of a right-to-reply.

Moreover, as already discussed by the Court in Telecommunications and Broadcast Attorneys of the Philippines,
Inc. v. Commission on Elections. 67

In truth, radio and television broadcasting companies, which are given franchises, do not own the airwaves and
frequencies through which they transmit broadcast signals and images. They are merely given the temporary
privilege of using them. Since a franchise is a mere privilege, the exercise of the privilege may reasonably be
burdened with the performance by the grantee of some form of public service. x x x 68

Relevant to this aspect are these passages from an American Supreme Court decision with regard to broadcasting,
right to reply requirements, and the limitations on speech:

We have long recognized that each medium of expression presents special First Amendment problems. Joseph
Burstyn, Inc. v. Wilson, 343 US 495, 502-503, 96 L Ed 1098, 72 S Ct 777. And of all forms of communication, it is
broadcasting that has received the most limited First Amendment protection. Thus, although other speakers cannot
be licensed except under laws that carefully define and narrow official discretion, a broadcaster may be deprived of
his license and his forum if the Commission decides that such an action would serve "the public interest,
convenience, and necessity." Similarly, although the First Amendment protects newspaper publishers from being
required to print the replies of those whom they criticize, Miami Herald Publishing Co. v. Tornillo, 418 US 241, 41 L
Ed 2d 730, 94 S Ct 2831, it affords no such protection to broadcasters; on the contrary, they must give free time to
the victims of their criticism. Red Lion Broadcasting Co. v. FCC, 395 US. 367, 23 L Ed 2d 371, 89 S Ct 1794.

807
The reasons for these distinctions are complex, but two have relevance to the present case. First, the broadcast
media have established a uniquely pervasive presence in the lives of all Americans. Patently offensive, indecent
material presented over the airwaves confronts the citizen not only in public, but also in the privacy of the home,
where the individual's right to be left alone plainly outweighs the First Amendment rights of an intruder. Rowan v.
Post Office Dept., 397 US 728, 25 L Ed 2d 736, 90 S Ct 1484. Because the broadcast audience is constantly tuning
in and out, prior warnings cannot completely protect the listener or viewer from unexpected program content. To say
that one may avoid further offense by turning off the radio when he hears indecent language is like saying that the
remedy for an assault is to run away after the first blow. One may hang up on an indecent phone call, but that option
does not give the caller a constitutional immunity or avoid a harm that has already taken place.

Second, broadcasting is uniquely accessible to children, even those too young to read. Although Cohen's written
message might have been incomprehensible to a first grader, Pacifica's broadcast could have enlarged a child's
vocabulary in an instant. Other forms of offensive expression may be withheld from the young without restricting the
expression at its source. Bookstores and motion picture theaters, for example, may be prohibited from making
indecent material available to children. We held in Ginsberg v. New York, 390 US 629, that the government's
interest in the "well-being of its youth" and in supporting "parents' claim to authority in their own household" justified
the regulation of otherwise protected expression. The ease with which children may obtain access to broadcast
material, coupled with the concerns recognized in Ginsberg, amply justify special treatment of indecent
broadcasting. 69

Given the foregoing considerations, the traditional notions of preferring speech and the press over so many other
values of society do not readily lend itself to this particular matter. Instead, additional weight should be accorded on
the constitutional directive to afford a right to reply. If there was no such mandate, then the submissions of
petitioners may more easily commend themselves for this Court's acceptance. But as noted above, this is not the
case. Their arguments simplistically provide minimal importance to that constitutional command to the point of
marginalizing its importance in the equation.

In fine, when it comes to election and the exercise of freedom of speech, of expression and of the press, the latter
must be properly viewed in context as being necessarily made to accommodate the imperatives of fairness by giving
teeth and substance to the right to reply requirement.

WHEREFORE, premises considered, the petitions are PARTIALLY GRANTED, Section 9 (a) of Resolution No.
9615, as amended by Resolution No. 9631, is declared UNCONSTITUTIONAL and, therefore, NULL and VOID. The
constitutionality of the remaining provisions of Resolution No. 9615, as amended by Resolution No. 9631, is upheld
and remain in full force and effect.

In view of this Decision, the Temporary Restraining Order issued by the Court on April 16, 2013 is hereby made
PERMANENT.

SO ORDERED.

CONCURRING OPINION

LEONEN, J.:

I concur and vote to grant the petitions.

At issue in this case is the Commission on Elections' (COMELEC) more restrictive interpretation of Section 6.2 of
Republic Act No. 9006 or the Fair Election Act resulting in further diminution of the duration of television and radio
advertising that candidates may have during the 2013 elections. This section provides:

Sec. 6. Equal Access to Media Time and Space. - All registered parties and bona fide candidates shall have equal
access to media time and space. The following guidelines may be amplified on by the COMELEC:

....

6.2

a. Each bona fide candidate or registered political party for a 9 nationally elective office shall be entitled to
not more than one hundred twenty (120) minutes of television advertisement and one hundred eighty (180)
minutes of radio advertisement whether by purchase or donation.

b. Each bona fide candidate or registered political party for a locally elective office shall beentitled to not
more than sixty (60) minutes of television advertisement and ninety (90) minutes of radio advertisement
whether by purchase or donation.

808
For this purpose, the COMELEC shall require any broadcast station or entity to submit tothe COMELEC a copy of its
broadcast logs and certificates ofperformance for the review and verification of the frequency, date, time and
duration of advertisements broadcast for any candidate or political party.

Prior restraint is defined as the "official governmental restrictions on the press or other forms of expressionin
advance of actual publication or dissemination."  Prior restraints of speech are generally presumptively
1

unconstitutional. The only instances when this is not the case are in pornography,  false and misleading
2

advertisement,  advocacy of imminent lawless action,  and danger to national security.

3 4 5

Section 6 of the Fair Election Act is a form of prior restraint. While it does not totally prohibit speech, it has the effect
of limitations in terms of the candidates’ and political parties’ desired time duration and frequency.

When an act of government is in prior restraint of speech, government carries a heavy burden of
unconstitutionality. In Iglesia ni Cristo v. Court of Appeals,  this court said that "any act that restrains speech is
6 7

hobbled by the presumption of invalidity and should be greeted with furrowed brows."  This is the only situation
8

where we veer away from our presumption of constitutionality. 9

In the context of elections, this court declared as unconstitutional the acts of the Commission on Elections
inprohibiting the playing of taped jingles,  disallowing newspaper columnists to express their opinion on a
10

plebiscite,  and limiting the publication of election surveys.  However, this presumption, though heavy, is not
11 12

insurmountable.

Generally, there are very clear constitutionally defined and compelling interests to limit the speech of candidates
and political parties. Article IX-C, Section 4 of the Constitution provides: Section 4. The Commission may,during the
election period, supervise or regulate the enjoyment or utilization of all franchises or permits for the operation of
transportation and other public utilities, media of communication or information, all grants, special privileges, or
concessionsgranted by the Government or any subdivision, agency, or instrumentality thereof, including any
government-owned or controlled corporation or its subsidiary. Such supervision or regulation shall aim to ensure
equal opportunity, time, and space, and the right to reply, including reasonable, equal rates therefor, for public
information campaigns and forums among candidates in connection with the objective of holding free orderly
honest, peaceful, and credible elections.(Emphasis supplied)

In addition, the Commission on Elections has been given the competence to minimize election spendingin Section
2(7) of Article IX-C of the Constitution:

Section 2. The Commission on Elections shall exercise the following powers and functions:

....

(7) Recommend to the Congress effective measures to minimize election spending, including limitation of places
where propaganda materials shall be posted, and to prevent and penalize all forms of election frauds, offenses,
malpractices, and nuisance candidates.

In National Press Club v. COMELEC,  this court considered the prohibition on the sale and donation of space and
13

time for political advertisement provided in Section 11(b) of Republic Act No. 6646.  This court recognized that
14

though freedom ofspeech is a preferred right in our constitutional hierarchy, it is not unlimited.  There are other
15

constitutional values that should also be considered including the equalization of opportunities for candidates.  This16

idea was echoed in Osmeña v. COMELEC.  This court found that the "restriction on speech is only incidental, and it
17

is no more than isnecessary to achieve its purpose of promoting equality of opportunity inthe use of mass media for
political advertising."  In Osmeña, this court noted the silence of the legislature in amending Section 11(b) of
18

Republic Act No. 6646. 19

Thus, in 2001, the Fair Election Act  was promulgated, repealing the challenged provisions in National Press
20

Cluband Osmeña. Congress determined that the old law was not effective in giving voice to the people.  It shifted
21

state policy by liberalizing the granting of time and space to candidates and political parties while maintaining
equality in terms of duration of exposure. 22

Section 6 of the Fair Election Act is a

form of prior restraint

It is recognized that Section 6 of the Fair Election Act does not completely prohibit speech. However, the provision
effectively limits speech in terms of time duration and frequency. Admittedly, the present wording of Section 6 of the
Fair Election Act does not clearly imply whether the one hundred twenty (120) minutes of television advertisement
and the one hundred eighty (180) minutes of radio advertisement allotted to each candidateor registered political
party is for each network or is an aggregate timefor all such advertisements, whether paid or donated, during the

809
entire election period. However, during the 2007  and the 2010  elections, the Commission on Elections allowed
23 24

candidates and registered political parties to advertise as much as 120 minutes of television advertisement and 180
minutes of radio advertisement per station.

For the 2013 elections, however, respondent Commission on Elections, without hearing, issued Resolution No.
9615, Section 9(a) which now interprets the 120/180 minute airtime to be on a "total aggregate basis." This section
provides:

SECTION 9. Requirements and/or Limitations on the Use of Election Propaganda through Mass Media. - All parties
and bona fide candidates shall have equal access to media time and space for their election propaganda during the
campaign period subject to the following requirements and/or limitations:

a. Broadcast Election Propaganda:

The duration of air time that a candidate, or party may use for their broadcast advertisements or election
propaganda shall be, as follows:

Not more than an aggregate total of one

For Candidates / Registered
Political parties for a National
Elective Position
For Candidates / Registered
Political parties for a Local
Elective Position
hundred (120) minutes of television
advertising, whether appearing on national,
regional, or local, free or cable television, and
one hundred eighty (180) minutes of radio
advertising, whether airing on national,
regional, or local radio, whether by purchase
or donation.
Not more than an aggregate total of sixty (60)
minutes of television advertising, whether
appearing on national, regional, or local, free
or cable television, and ninety (90) minutes of
radio advertising, whether airing on national,
regional, or local radio, whether by purchase
or donation.

In cases where two or more candidates or parties whose names, initials, images, brands, logos, insignias, color
motifs, symbols, or forms of graphical representations are displayed, exhibited, used, or mentioned together in the
broadcast election propaganda or advertisements, the length of time during which they appear or are being
mentioned or promoted will be counted against the airtime limits allotted for the said candidates or parties and the
cost of the said advertisement will likewise be considered as their expenditures, regardless of whoever paidfor the
advertisements or to whom the said advertisements were donated.

Appearance or guesting by a candidate on any bona fide newscast, bona fide news interview, bona fide news
documentary, if the appearance of the candidate is incidental to the presentation of the subject or subjects covered
by the news documentary, or on-the-spotcoverage of bona fide news events, including but not limited to events
sanctioned by the Commission on Elections, political conventions, and similar activities, shall not be deemed to be
broadcast election propaganda within the meaning of this provision. To determine whether the appearance or
guesting in a program is bona fide, the broadcast stations or entities must show that: (1) prior approval of the
Commission was secured; and (2) candidates and parties were afforded equal opportunities to promote their
candidacy. Nothing in the foregoing sentence shall be construed as relieving broadcasters, in connection with the
presentation of newscasts, news interviews, news documentaries, and on-the-spot coverage of news events, from
the obligation imposed upon them under Sections 10 and 14 of these Rules.

Provided, further, that a copy of the broadcast advertisement contract be furnished to the Commission, thru the
Education and Information Department, within five (5) days from contract signing.

The issuance caused petitioners to send their respective letters to respondent to clarify and/or protest against the
new regulations. It was only then that respondent Commission on Elections held a public hearing.  Respondent then
25

issued Resolution No. 9631 amending certain provisions of Resolution No. 9615, Section 9(a), without touching on
the "total aggregate" interpretation of Section 6 of the Fair Election Act. 26

In addition to the television and radio networks represented in the various petitions, a candidate for the senatorial
elections, Alan Peter Cayetano, also filed an intervention. 27

Whether the airtime in television and radio spots ofcandidates and registered political parties may be regulated is
not an issue in this case. Indeed, the Constitution clearly allows this for purposes of providing equal opportunity to
all candidates.  The issue is also not whether Congress, in promulgating Section 6 of the Fair Election Act,
28

810
committed grave abuse of discretion in determining a cap of 120 minutes advertising for television and 180 minutes
for radio. It is within the legislature’s domain to determine the amount of advertising sufficient to balance the need to
provide information to voters and educate the public on the one hand, and to cause the setting of an affordable price
to most candidates that would reduce their expenditures on the other. We are not asked to decide in these cases
whether these actual time limitations hurdle the heavy burden of unconstitutionality that attends to any prior
limitations on speech. Rather, petitioners and the intervenor raise constitutional objections to a second order of
restriction: that the interpretation earlier allowed by the Commission on Elections was suddenly, arbitrarily, and
capriciously reduced by adopting the "total aggregate" method.

While the Commission on Elections does have the competence to interpret Section 6, it must do so without running
afoul of the fundamental rights enshrined in our Constitution, especially of the guarantee of freedom of expression
and the right to suffrage. Not only mustthe Commission on Elections have the competence, it must also be
cognizant of our doctrines in relation to any kind of prior restraint.

It has failed to discharge this burden.

A more restrictive interpretation of Section 6 will not necessarily meet the Commission on Elections’ expected
economic benefits

The Commission on Elections hinges the shift in the interpretation of Section 6 of the Fair Election Act on its
constitutional power to recommend to Congress effectivemeasures to minimize election spending.  During the
29

January 31, 2013 public hearing, COMELEC Chairman Brillantes said:

Yes, but the very essence of the Constitutional provision as well as the provision of 9006 is actually to level the
playing field. That should be the paramount consideration. If we allow everybody to make use of all their time and all
radio time and TV time then there will be practically unlimited use of the mass media. . . . 30

On a cursory look, it will seem asif a reduction in the length of airtime allowable per candidate will translate to a
reduction in a candidate’s election spending. For example, under the old regulation of giving 120 minutes "per
network," it would mean that if the candidate wanted to broadcast on two (2) television networks, the candidate
could purchase a total of 240 minutes. The total campaign expenditure for television advertisements would be 240
minutes multiplied by the rate for television advertisements per minute, say, ₱500,000.00. The candidate would
have to spend a total of ₱120 million for 240 minutes of television advertisements. Under the new regulation of
giving 120 minutes to the candidate in an "aggregate total," the candidate would have to distribute the 120 minutes
between the two (2) networks. The 120 minutes multiplied by ₱500,000.00 is only ₱60 million. The reduction in
expenditure is obvious under this example. However, the previous example is a simplistic view starkly different from
our economic realities. This assumes that the regulation would not affect the prices charged by the networks. A
more realistic economic possibility is that the restriction in airtime allotment of candidates will increase the prices of
television and radio spots. This can happen because the limitation in the airtime placed on each candidate will
increase his or her willingness to pay for television spots at any price. This will be the perfect opportunity for
television networks to hike up their prices. For instance, these networks can increase their usual rates of
₱500,000.00/minute to ₱1,000,000.00/minute. The candidate will take the airtime at this rate because of the
inevitable need for the campaign to be visible to the public eye. At this rate, it will cost a candidate 120 million to air
120 minutes.

This is the same price to be paid had it been under the old regulation; hence, the candidate’s election spending will
notbe minimized. In fact, it will even increase the cost per unit of airtime. Ideally, television and radio stations should
bid and compete for a candidate’s or a political party's airtime allocation, so that instead of networks dictating
artificially high prices for airtime (which price will be high as television and radio stations are profit-driven), the
market will determine for itself the price. The market for airtime allocation expands, and a buyer's market emerges
with low prices for airtime allocation. This situation assumes that in the market for airtime allocation, television and
radio networks are the same in terms of audience coverage and facilities.

What Resolution No. 9615 does not take into consideration is that television and radio networks are not similarly
situated. The industry structure consists of network giants  with tremendous bargaining powers that dwarf local
31

community networks. Thus, a candidate with only a total aggregate of 120/180 minutes of airtime allocation will
choose a national network with greater audience coverage to reach more members of the electorate. Consequently,
the big networks can dictate the price, which it can logically set at a higher price to translate to more profits. This is
true in any setting especially in industries with high barriers to entry and where there are few participants with a high
degree of market dominance. Reducing the airtime simply results in a reduction of speech and not a reduction of
expenses.

Resolution No. 9615 may result in local community television and radio networks not being chosen by candidates
running for national offices. Hence, advertisement by those running for national office will generally be tailored for
the national audience. This new aggregate time may, therefore, mean that local issues which national candidates
should also address may not be the subject of wide-ranging discussions.

811
Candidates’ expenses are still limitedby existing regulations that peg total allowable expenditures based on the
number of votes. Even with aggregate airtime limits being allowed on a per station basis, the limits on expenditures
remain the same. In other words, the limits in candidate expenses are already set and are independent of whether
aggregate time is total airtime or per station.

Each candidate decides what media they will avail to allow for efficiency, i.e., the most impact with the broadest
audience and with the least cost. All candidate’s limits will be the same. Limiting airtime to only a total of 120/180
minutes per candidate or political party will most likely only succeed in caricaturing debate, enriching only the more
powerful companies in the media sector and making it more prohibitive for less powerful candidates to get their
messages across. There is no showing from respondent Commission on Elections of any study that the "total
aggregate basis" interpretation will indeed minimize election spending. It did not show that this would better serve
the objective of assisting the poorer candidates. The relationship between the regulation and constitutional objective
must be morethan mere speculation. Here, the explanation respondent Commission on Elections gave is that it has
the power to regulate. As COMELEC Chairman Brillantes said during the January 31, 2013 public hearing:

No, the change is not there, the right to amplify is with the Commission on Elections.  Nobody canencroach in our
1awp++i1

right to amplify. Now, if in 2010 the Commission felt that per station or per network is the rule then that isthe
prerogative of the Commission then they could amplify it to expand it.If the current Commission feels that 120 is
enough for the particular medium like TV and 180 for radio, that is our prerogative.How can you encroach and what
is unconstitutional about it?  (Emphasis supplied)
32

We emphasize that where a governmental act has the effect of preventing speech before it is uttered, it is the
burden of government and not of the speaker to justify the restriction in terms which are clear to this court. Article III,
Section 4 of the Constitution which provides for freedom of expression occupies such high levels of protection that
its further restriction cannot be left to mere speculation.

Contrary to COMELEC Chairman Brillantes’ statement, this court will step in and review the Commission on
Elections’ right to amplify if it infringes on people's fundamental rights. What the Commission "feels," even if it has
the prerogative, will never be enough to discharge its burden of proving the constitutionality of its regulations limiting
the freedom of speech.

Election regulations are not alwayscontent-neutral regulations, and even if they were, they do not necessarily carry
a mantle of immunity from free speech scrutiny. The question always is whether the regulations are narrowly tailored
so as to meet a significant governmental interest and so that there is a lesser risk of excluding ideas for a public
dialogue.  The scrutiny for regulations which restrict speech during elections should be greater considering that
33

these exercises substantiatethe important right to suffrage. Reducing airtime to extremely low levels reduces
information to slogans and sound bites which may impoverish public dialogue. We know that lacking the
enlightenment that comes with information and analysis makes the electorate’s role to exact accountability from
elected public officers a sham. More information requires more space and airtime equally available to all candidates.
The problemin this case is that the Commission on Elections does not seem tohave the necessary basis to justify
the balance it wanted to strike with the imposition of the aggregate time limits.

Just because it is called electoral reform does not necessarily make it so.

The standard of analysis for prior restraints on speech is well-known to all legal practitioners especially tothose that
may have crafted the new regulations. Good intentions are welcome but may not be enough if the effect would be to
compromise our fundamental freedoms. It is this court’s duty to perform the roles delegated to it by the sovereign
people. In a proper case invoking this court’s powers of judicial review, it should sometimes result in more mature
reflection by those who do not benefit from its decisions. The Commission on Elections does not have a monopoly
of the desire for genuine electoral reform without compromising fundamental rights. Our people cannot be cast as
their epigones.

Fundamental rights are very serious matters. The core of their existence is not always threatened through the crude
brazen acts of tyrants. Rather, it can also be threatened by policies that are well-intentioned but may not have the
desired effect in reality.

We cannot do justice to hard-won fundamental rights simply on the basis of a regulator’s intuition. When speech and
prior restraints are involved, it must always be supplemented by rigorous analysis and reasoned evidence already
available for judicial review.

Thus, I vote to PARTIALLY GRANT the petitions. Section 9(a) of Resolution No. 9615 is unconstitutional and is,
therefore, NULL and VOID. This has the effect of reinstating the interpretation of the Commission on Elections with
respect to the airtime limits in Section 6 of the Fair Elections Act. I vote to DEN:Y the constitutional challenge to
Sections 7(d) and 14 of COMELEC Resolution 9615, as amended by Resolution 9631.

812
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 188753               October 1, 2014

AM-PHIL FOOD CONCEPTS, INC., Petitioner, 

vs.
PAOLO JESUS T. PADILLA, Respondent.

DECISION

LEONEN, J.:

This is a petition for review on certiorari   under Rule 45 of the Rules of Court, praying that the February 25, 2009
1

decision  of the Court of Appeals sustaining the February 28, 2007 resolution  of the National Labor Relations
2 3

Commission, and the July 3, 2009 resolution  of the Court of Appeals denying petitioner Am-Phil Food Concept, Inc.
4

's (Am-Phil) motion for reconsideration, be annulled. The February 28, 2007 decision of the National Labor Relations
Commission affirmed the May 9, 2005 decision  of Labor Arbiter Eric V. Chuanico that held that respondent Paolo
5

Jesus T. Padilla (Padilla) was illegally dismissed.

Padilla’s position paper  states that he was hired on April 1, 2002 as a Marketing Associate by Am-Phil, a
6

corporation engaged in the restaurant business.  On September 29, 2002, Am-Phil sent Padilla a letter confirming
7

his regular employment.  Sometime in the first week of March 2004, three (3) of Am-Phil’s officers (Marketing
8

Supervisor Elaine de Jesus, Area Director Art Latinazo, and Human Resources Officer Eunice Tugab) informed
Padilla that Am-Phil would be implementing a retrenchment program that would be affecting three (3) of its
employees, Padilla being one of them. The retrenchment program was allegedly on account of serious and adverse
business conditions, i.e., lack of demand in the market, stiffer competition, devaluation of the Philippine peso, and
escalating operation costs. 9

Padilla questioned Am-Phil’s choice to retrench him. He noted that Am-Phil had six (6) contractual employees, while
he was a regular employee who had a good evaluation record. He pointed out that Am-Phil was actually then still
hiring new employees. He also noted that Am-Phil's sales have not been lower relative to the previous year. 10

In response, Am-Phil's three (3) officers gave him two options: (1) be retrenched with severance pay or (2) be
transferred as a waiter in Am-Phil’s restaurant, a move that entailed his demotion. 11

On March 17, 2004, Am-Phil sent Padilla a memorandum notifying him of his retrenchment.  Padilla was paid
12

separation pay in the amount of P26,245.38. On April 20, 2004, Padilla executed a quitclaim and release in favor of
Am-Phil.13

On July 28, 2004, Padilla filed the complaint  for illegal dismissal (with claims for backwages, damages, and
14

attorney’s fees), which is now subject of this petition. Apart from Am-Phil, Padilla impleaded Am-Phil’s officers: Luis
L. Vera, Jr., Winston L. Chan, Robert B. Epes, Richmond S. Yang, John Arthur Latinazo, and Eunice D. Tugab.

For its defense, Am-Phil claimed that Padilla was not illegally terminated and that it validly exercised a management
prerogative. It asserted that Padilla was hired merely as part of an experimental marketing program. It added that in
2003, it did suffer serious and adverse business losses and that, in the first quarter of 2004, it was compelled to
retrench employees so as to avoid further losses. Am-Phil also underscored that Padilla executed a quitclaim and
release in its favor. With respect to its impleaded officers, Am-Phil claimed that the complaint should be dismissed
as they have a personality distinct and separate from Am-Phil. 15

On May 9, 2005, Labor Arbiter Eric V. Chuanico (Labor Arbiter Chuanico) rendered the decision finding that Padilla
was illegally dismissed.  He noted that Am-Phil failed to substantiate its claim of serious business losses and that it
16

failed to comply with the procedural requirement for a proper retrenchment (i.e., notifying the Department of Labor
and Employment).  He also held that the quitclaim and release executed by Padilla is contrary to law.  Finding,
17 18

however, that Padilla failed to show bad faith on the part of Am-Phil’s officers, Labor Arbiter Chuanico dismissed the
complaint with respect to the latter and held that only Am-Phil was liable to Padilla.
19

The dispositive portion of Labor Arbiter Chuanico’s decision reads:

813
Prescinding from the forgoing, this office orders the respondent to pay the complainant limited backwages from the
time of his dismissal up to the time of rendition of this judgment. The computation of backwages as prepared by the
NLRC Computation Unit is herewith attached and made an integral part of this decision. Given that the position had
already been abolished and since separation pay had already been received by the complainant, reinstatement is
no longer viable [sic] remedy under the present situation.

As the complainant was constrained to hire the services of a lawyer, attorneys [sic] fees are ordered paid equivalent
to ten percent of the total award thereof [sic]. Complainants [sic] claim for damages are [sic] denied for lack of merit.

For failure of the complainant to properly substantiate that individual respondents are guilty of bad faith or conduct
towards him (in Sunio et. al. vs. NLRC GRN L 57767 [sic] January 31, 1984) only respondent Am-Phil Food
Concepts, Inc. is held solidarily liable towards [sic] the complainant.

SO ORDERED. 20

On August 15, 2005, Am-Phil filed an appeal  with the National Labor Relations Commission. Apart from asserting
21

its position that Padilla was validly retrenched, Am-Phil claimed that Labor Arbiter Chuanico was in error in deciding
the case despite the pendency of its motion for leave to file supplemental rejoinder.  Through this supplemental
22

rejoinder, Am-Phil supposedly intended to submit its audited financial statements for the years 2001 to 2004 and,
thereby, prove that it had suffered business losses. Am- Phil claimed that its right to due process was violated by
Labor Arbiter Chuanico’s refusal to consider its 2001 to 2004 audited financial statements. 23

On February 28, 2007, the National Labor Relations Commission issued the resolution affirming Labor Arbiter
Chuanico’s ruling, albeit clarifying that Labor Arbiter Chuanico wrongly used the word "solidarily" in describing Am-
Phil’s liability to Padilla.
24

With respect to Am-Phil’s claim that Labor Arbiter Chuanico erroneously ignored its 2001 to 2004 audited financial
statements, the National Labor Relations Commission noted that a supplemental rejoinder was not a necessary
pleading in proceedings before labor arbiters. It added that, with the exception of the 2004 audited financial
statements, all of Am- Phil’s relevant audited financial statements were already available at the time it submitted its
position paper, reply, and rejoinder, but that Am-Phil failed to annex them to these pleadings. The National Labor
Relations Commission added that, granting that this failure was due to mere oversight, Am-Phil was well in a
position to attach them in its memorandum of appeal but still failed to do so.  Holding that Labor Arbiter Chuanico
25

could not be faulted for violating Am-Phil’s right to due process, the National Labor Relations Commission
emphasized that:

[O]mission by a party to rebut that which would have naturally invited an immediate pervasive and stiff competition
creates an adverse inference that either the controverting evidence to be presented will only prejudice its case or
that the uncontroverted evidence speaks the truth.  (Citation omitted)
26

The dispositive portion of this National Labor Relations Commission resolution reads:

WHEREFORE, the foregoing premises considered, the instant appeal is DIMISSED for lack of merit. Accordingly,
the decision appealed from is AFFIRMED.

However, the word "solidarily" in the last sentence of the decision should be deleted to conform with the Labor
Arbiter’s finding that the complainant-appellee failed to properly substantiate that individual respondents-appellants
were guilty of bad faith or conduct towards him.

SO ORDERED. 27

In the resolution  dated April 27, 2007, the National Labor Relations Commission denied Am-Phil’s motion for
28

reconsideration.

Am-Phil then filed with the Court of Appeals a petition for certiorari  under Rule 65 of the 1997 Rules of Civil
29

Procedure.

On February 25, 2009, the Court of Appeals rendered the assailed decision  dismissing Am-Phil’s petition for
30

certiorari and affirming the National Labor Relations Commission’s February 28, 2007 and April 27, 2007
resolutions. The Court of Appeals denied Am-Phil's motion for reconsideration in its July 3, 2009 resolution.

Hence, this petition.

Am-Phil insists on its position that it was denied due process and posits that the National Labor Relations
Commission’s contrary findings are founded on "illogical ratiocinations."  It asserts that the evidence support the
31

814
conclusion that Padilla was validly dismissed, that it was an error to ignore the quitclaim and release which Padilla
had executed, and that Padilla’s retrenchment was a valid exercise of management prerogative. 32

For resolution is the issue of whether respondent Paolo Jesus T. Padila was dismissed through a valid retrenchment
implemented by petitioner Am- Phil Food Concepts, Inc. Related to this, we must likewise resolve the underlying
issue of whether it was proper for Labor Arbiter Eric V. Chuanico to have ruled that Padilla was illegally dismissed
despite Am- Phil’s pending motion for leave to file supplemental rejoinder.

Am-Phil’s right to due process was not violated

Am-Phil faults Labor Arbiter Chuanico for not having allowed its motion for leave to file supplemental rejoinder that
included its 2001 to 2004 audited financial statements as annexes. These statements supposedly show that Am-Phil
suffered serious business losses. Thus, it claims that its right to due process was violated.

Am-Phil’s motion for leave to file supplemental rejoinder,  dated May 20, 2005,  was filed on May 31, 2005,  well
33 34 35

after Labor Arbiter Chuanico promulgated his May 9, 2005 decision. Common sense dictates that as the motion for
leave to file supplemental rejoinder was filed after the rendition of the decision, the decision could not have possibly
taken into consideration the motion. Giving consideration to a motion filed after the promulgation of the decision is
not only unreasonable, it is impossible. It follows that it is completely absurd to fault Labor Arbiter Chuanico for not
considering a May 31 motion in his May 9 decision

Even if we were to ignore the curious fact that the motion was filed after the rendition of the decision, Labor Arbiter
Chuanico was under no obligation to admit the supplemental rejoinder.

Rule V of the 2002 National Labor Relations Commission Rules of Procedure (2002 Rules), which were in effect
when Labor Arbiter Chuanico promulgated his decision on May 9, 2005,  provides:
36

SECTION 4. SUBMISSION OF POSITION PAPERS / MEMORANDA. Without prejudice to the provisions of the last
paragraph, SECTION 2 of this Rule, the Labor Arbiter shall direct both parties to submit simultaneously their position
papers with supporting documents and affidavits within an inextendible period of ten (10) days from notice of
termination of the mandatory conference.

These verified position papers to be submitted shall cover only those claims and causes of action raised in the
complaint excluding those that may have been amicably settled, and shall be accompanied by all supporting
documents including the affidavits of their respective witnesses which shall take the place of the latter’s direct
testimony. The parties shall thereafter not be allowed to allege facts, or present evidence to prove facts, not referred
to and any cause or causes of action not included in the complaint or position papers, affidavits and other
documents.  (Emphasis supplied)
37

....

SECTION 11. ISSUANCE OF AN ORDER SUBMITTING THE CASE FOR DECISION. After the parties have
submitted their position papers and supporting documents, and upon evaluation of the case the Labor Arbiter finds
no necessity of further hearing, he shall issue an order expressly declaring the submission of the case for decision. 38

From the provisions of the 2002 Rules, it is clear that a supplemental rejoinder, as correctly ruled by the National
Labor Relations Commission,  is not a pleading which a labor arbiter is duty-bound to accept.  Even following
39 40

changes to the National Labor Relations Commission Rules of Procedure in 2005 and 2011, a rejoinder has not
been recognized as a pleading that labor arbiters must necessarily admit. The 2005 and 2011 National Labor
Relations Commission Rules of Procedure only go so far as to recognize that a reply "may" be filed by the parties. 41

Thus, Labor Arbiter Chuanico was under no obligation to grant Am- Phil’s motion for leave to admit supplemental
rejoinder and, thereby, consider the supplemental rejoinder’s averments and annexes. That Am- Phil had to file a
motion seeking permission to file its supplemental rejoinder (i.e., motion for leave to file) is proof of its own
recognition that the labor arbiter is under no compulsion to accept any such pleading and that the supplemental
rejoinder’s admission rests on the labor arbiter’s discretion.

The standard of due process in labor cases was explained by this court in Sy v. ALC Industries, Inc.: 42

Due process is satisfied when the parties are afforded fair and reasonable opportunity to explain their respective
sides of the controversy. In Mariveles Shipyard Corp. v. CA, we held:

The requirements of due process in labor cases before a Labor Arbiter is satisfied when the

parties are given the opportunity to submit their position papers to which they are supposed to attach all the
supporting documents or documentary evidence that would prove their respective claims, in the event that the Labor
815
Arbiter determines that no formal hearing would be conducted or that such hearing was not necessary.  (Emphasis
43

in the original)

Am-Phil filed three (3) pleadings with Labor Arbiter Chuanico: first, its position paper  on September 9, 2004;
44

second, its reply  on September 30, 2004; and third, its rejoinder  on October 11, 2004. It was more than six (6)
45 46

months after it had filed its rejoinder that it filed its motion for leave to admit supplemental rejoinder on May 31,
2005.

Its three (3) pleadings having been allowed, Am-Phil had no shortage of opportunities to plead its claims and to
adduce its evidence. It has no basis for claiming that it was not "afforded [a] fair and reasonable opportunity to
explain [its side] of the controversy."  The filing of its motion for leave to admit supplemental rejoinder represents
47

nothing more than a belated and procedurally inutile attempt at resuscitating its case.

Retrenchment and its requirements

Article 283 of the Labor Code recognizes retrenchment as an authorized cause for terminating employment. It
states:

Art. 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of
any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the
closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of
labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to
at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case
of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one
(1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at
least six (6) months shall be considered one (1) whole year.

In Sebuguero v. National Labor Relations Commission,  this court explained the concept of retrenchment as follows:
48

Retrenchment . . . is used interchangeably with the term "lay-off." It is the termination of employment initiated by the
employer through no fault of the employee's and without prejudice to the latter, resorted to by management during
periods of business recession, industrial depression, or seasonal fluctuations, or during lulls occasioned by lack of
orders, shortage of materials, conversion of the plant for a new production program or the introduction of new
methods or more efficient machinery, or of automation. Simply put, it is an act of the employer of dismissing
employees because of losses in the operation of a business, lack of work, and considerable reduction on the
volume of his business, a right consistently recognized and affirmed by this Court. 49

As correctly pointed out by Am-Phil, retrenchment entails an exercise of management prerogative. In Andrada v.
National Labor Relations Commission,  this court stated:
50

Retrenchment is an exercise of management’s prerogative to terminate the employment of its employees en masse,
to either minimize or prevent losses, or when the company is about to close or cease operations for causes not due
to business losses. 51

Nevertheless, as has also been emphasized in Andrada, the exercise of management prerogative is not absolute:

A company’s exercise of its management prerogatives is not absolute. It cannot exercise its prerogative in a cruel,
repressive, or despotic manner. We held in F.F. Marine Corp. v. NLRC:

This Court is not oblivious of the significant role played by the corporate sector in the country’s economic and social
progress. Implicit in turn in the success of the corporate form in doing business is the ethos of business autonomy
which allows freedom of business determination with minimal governmental intrusion to ensure economic
independence and development in terms defined by businessmen. Yet, this vast expanse of management choices
cannot be an unbridled prerogative that can rise above the constitutional protection to labor. Employment is not
merely a lifestyle choice to stave off boredom. Employment to the common man is his very life and blood, which
must be protected against concocted causes to legitimize an otherwise irregular termination of employment.
Imagined or undocumented business losses present the least propitious scenario to justify
retrenchment. (Underscoring supplied, citation omitted)
52

Thus, retrenchment has been described as "a measure of last resort when other less drastic means have been tried
and found to be inadequate." 53

816
Retrenchment is, therefore, not a tool to be wielded and used nonchalantly. To justify retrenchment, it "must be due
to business losses or reverses which are serious, actual and real." 54

There are substantive requirements relating to the losses or reverses that must underlie a retrenchment. That these
losses are serious relates to their gravity and that they are actual and real relates to their veracity and verifiability.
Likewise, that a retrenchment is anchored on serious, actual, and real losses or reverses is to say that the
retrenchment is done in good faith and not merely as a veneer to disguise the illicit termination of employees.
Equally significant is an employer’s basis for determining who among its employees shall be retrenched. Apart from
these substantive requirements are the procedural requirements imposed by Article 283 of the Labor Code.

Thus, this court has outlined the requirements for a valid retrenchment, each of which must be shown by clear and
convincing evidence, as follows:

(1) that the retrenchment is reasonably necessary and likely to prevent business losses which, if already
incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are
reasonably imminent as perceived objectively and in good faith by the employer;

(2) that the employer served written notice both to the employees and to the Department of Labor and
Employment at least one month prior to the intended date of retrenchment;

(3) that the employer pays the retrenched employees separation pay equivalent to one month pay or at least
½ month pay for every year of service, whichever is higher;

(4) that the employer exercises its prerogative to retrench employees in good faith for the advancement of its
interest and not to defeat or circumvent the employees’ right to security of tenure; and

(5) that the employer used fair and reasonable criteria in ascertaining who would be dismissed and who
would be retained among the employees, such as status (i.e., whether they are temporary, casual, regular or
managerial employees), efficiency, seniority, physical fitness, age, and financial hardship for certain
workers. (Citations omitted)
55

Am-Phil failed to establish compliance with the requisites for a valid retrenchment

Am-Phil’s 2001 to 2004 audited financial statements, the sole proof upon which Am-Phil relies on to establish its
claim that it suffered business losses, have been deemed unworthy of consideration. These audited financial
statements were mere annexes to the motion for leave to admit supplemental rejoinder which Labor Arbiter
Chuanico validly disregarded. No credible explanation was offered as to why these statements were not presented
when the evidence-in-chief was being considered by the labor arbiter. It follows that there is no clear and convincing
evidence to sustain the substantive ground on which the supposed validity of Padilla’s retrenchment rests.

Moreover, it is admitted that Am-Phil did not serve a written notice to the Department of Labor and Employment one
(1) month before the intended date of Padilla’s retrenchment, as required by Article 283 of the Labor Code. 56

While it is true that Am-Phil gave Padilla separation pay, compliance with none but one (1) of the many requisites for
a valid retrenchment does not absolve Am-Phil of liability.

Padilla’s quitclaim and release does not negate his having been illegally dismissed

It is of no consequence that Padilla ostensibly executed a quitclaim and release in favor of Am-Phil.  This court’s
1âwphi1

pronouncements in F.F. Marine Corporation v. National Labor Relations Commission,  which similarly involved an
57

invalid retrenchment, are of note:

Considering that the ground for retrenchment availed of by petitioners was not sufficiently and convincingly
established, the retrenchment is hereby declared illegal and of no effect. The quitclaims executed by retrenched
employees in favor of petitioners were therefore not voluntarily entered into by them. Their consent was similarly
vitiated by mistake or fraud. The law looks with disfavor upon quitclaims and releases by employees pressured into
signing by unscrupulous employers minded to evade legal responsibilities. As a rule, deeds of release or quitclaim
cannot bar employees from demanding benefits to which they are legally entitled or from contesting the legality of
their dismissal. The acceptance of those benefits would not amount to estoppel. The amounts already received by
the retrenched employees as consideration for signing the quitclaims should, however, be deducted from their
respective monetary awards.  (Citations omitted)
58

In sum, the Court of Appeals committed no error in holding that there was no grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of the National Labor Relations Commission in affirming the May 9, 2005
decision of Labor Arbiter Eric V. Chuanico holding that respondent Paolo Jesus T. Padilla was illegally dismissed.

817
WHEREFORE, the petition for review. on certiorari is DENIED. The February 25, 2009 decision and the July 3, 2009
resolution of the Court of Appeals are AFFIRMED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 205821               October 1, 2014

PEOPLE OF THE PHILIPPINES, Plaintiff-appellee, 

vs.
GARRY DELA CRUZ y DE GUZMAN, Accused-appellant.

DECISION

LEONEN, J.:

"Law enforcers should not trifle with the legal requirement to ensure integrity in the chain of custody of seized
dangerous drugs and drug paraphernalia. This is especially true when only a miniscule amount of dangerous drugs
is alleged to have been taken from the accused." 1

This resolves an appeal from a conviction for violation of Sections 5 and 11 of Republic Act No. 9165, otherwise
known as the Comprehensive Dangerous Drugs Act of 2002.

On September 15, 2004, accused-appellant Garry dela Cruz (dela Cruz) was charged with illegal sale and illegal
possession of dangerous drugs in two separate informations,  as follows:
2

Criminal Case No. 5450 (20920)

VIOLATION OF SECTION 5, A[R]TICLE (sic) II K OF THE

COMPREHENSIVE DANGEROUS DRUGS ACT OF 2002

(REPUBLIC ACT NO. 9165)

That on or about September 14, 2004, in the City of Zamboanga, Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused, not being authorized by law to sell, deliver, transport, distribute or give
away to another any dangerous drugs, did then and there wilfully, unlawfully and feloniously, SELL AND DELIVER
to PO1 WILFREDO BOBON y TARROZA, a member of the PNP, who acted as buyer, one (1) small heat-sealed
transparent plastic pack containing white crystalline substance having a total weight of 0.0120 gram which when
subjected to qualitative examination gave positive result to the tests for the presence of METHAMPHETAMINE
HYDROCHLORIDE (shabu) knowing the same to be a dangerous drug.

CONTRARY TO LAW.

Criminal Case No. 5451 (20921)

VIOLATION OF SECTION 11, ARTICLE II OF THE

COMPREHENSIVE DANGEROUS DRUGS ACT OF 2002

(REPUBLIC ACT NO. 9165)

That on or about September 14, 2004, in the City of Zamboanga, Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused, not being authorized by law, did then and there wilfully, unlawfully and
feloniously, have in his possession and under his custody and control six (6) pieces heat-sealed transparent plastic
sachets each containing white crystalline substance, each weighing as follows: 1) 0.0135 gram; 2) 0.0183 gram; 3)
0.0542 gram; 4) 0.0197 gram; 5) 0.0100 [gram]; and 6) 0.0128 gram or a total of 0.1285 gram; which when
subjected to qualitative examination gave positive result to the tests for Methamphetamine Hydrochloride (shabu)
knowing same to be a dangerous drug.

CONTRARY TO LAW.  (Citations omitted)

3

As alleged by the prosecution, dela Cruz was arrested in a buy-bust operation. The buy-bust operation was
allegedly conducted after a civilian informant (the informant) tipped the Zamboanga City Police Office that a certain

818
"Gary" was selling illegal drugs at the parking area for buses behind Food Mart, Governor Lim Street, Sangali,
Bunguioa, Zamboanga City (the target area). 4

The buy-bust operation team included PO1 Wilfredo Bobon (PO1 Bobon), as poseur-buyer, and SPO1 Roberto
Roca (SPO1 Roca), as back-up arresting officer. It was agreed that "PO1 Bobon would remove his bull cap once the
sale of illegal drugs was [consummated]." The buy-bust team prepared a _100.00 bill with serial number KM 776896
as marked money. 5

At around 11:00 a.m. of September 14, 2004, the buy-bust operation team, accompanied by the informant, went to
the target area. The informant initially brokered the sale of shabu. It was PO1 Bobon who handed the marked
money to dela Cruz in exchange for one (1) heat-sealed plastic sachet of suspected shabu. After which, he removed
his bull cap. SPO1 Roca then arrested dela Cruz. 6

Upon frisking dela Cruz, PO1 Bobon supposedly recovered six (6) more heat-sealed sachets of suspected shabu.
PO1 Bobon placed the sachet he purchased from dela Cruz in his right pocket and the six (6) other sachets in his
left pocket. SPO1 Roca recovered the marked _100.00 bill. 7

Dela Cruz and the seven (7) sachets seized from him were then brought to the Zamboanga City Police
Station. There, PO1 Bobon taped the sachets. He then marked the sachet from his right pocket with his initials,
8

"WB."  He marked the sachets from his left pocket as "WB-1," "WB-2," "WB-3," "WB-4," "WB-5," and "WB-6."
9 10

On the same day, the seven (7) sachets were turned over to SPO1 Federico Lindo, Jr., the investigating officer, who
prepared the request for laboratory examination. Subsequently, the tests yielded positive results for shabu. 11

During trial, the prosecution presented as witnesses PO1 Bobon, SPO1 Roca, and forensic chemist Police Inspector
Melvin L. Manuel. The sole witness presented for the defense was dela Cruz himself. 12

For his part, dela Cruz acknowledged that on the morning of September 14, 2004, he was in the target area. As he
was leaving the comfort room, someone embraced him from behind, while another poked a gun at him. He was then
handcuffed and brought to an L-300 van which was parked in front of Food Mart. Inside the van, he was asked if he
was Jing-Jong, alias Jong-Jong. Despite his denials, he was brought to the police station. It was when he was
already detained that he learned that he was charged for violation of the Comprehensive Dangerous Drugs Act of
2002.13

On August 19, 2010, the Regional Trial Court, Branch 13, Zamboanga City, convicted dela Cruz for violating Article
II, Section 5 of the Comprehensive Dangerous Drugs Act of 2002 and sentenced him to life imprisonment and a fine
of _500,000.00. He was also convicted for violating Article II, Section 11 of the Comprehensive Dangerous Drugs
Act of 2002 and sentenced to 12 years and one day up to 14 years imprisonment and a fine of _300,000.00. The
dispositive portion of this decision reads:

WHEREFORE, this Court finds:

1. In Criminal Case No. 5450 (20920), accused GARRY DELA CRUZ y DE GUZMAN guilty beyond
reasonable doubt for violating Section 5, Article II of R.A. 9165 and sentences him to suffer the penalty of
LIFE IMPRISONMENT and to pay a fine of FIVE HUNDRED THOUSAND PESOS (₱500,000) without
subsidiary imprisonment in case of insolvency;

2. In Criminal Case No. 5451 (20921), accused GARRY DELA CRUZ y DE GUZMAN guilty beyond
reasonable doubt for violating Section 11, Article II of R.A. 9165 and sentences him to suffer the penalty of
TWELVE YEARS AND ONE DAY to FOURTEEN YEARS of imprisonment and pay a fine of THREE
HUNDRED THOUSAND PESOS (₱300,000) without subsidiary imprisonment in case of insolvency.

The methamphetamine hydrochloride used as evidence in these cases are hereby ordered confiscated to be turned
over to the proper authorities for disposition.

SO ORDERED. 14

On appeal to the Court of Appeals, dela Cruz assailed the prosecution’s failure to establish the chain of custody of
the seized sachets of shabu. He also assailed the validity of the buy-bust operation and the prosecution’s failure to
present the informant in court. 15

On May 31, 2012, the Court of Appeals rendered a decision  affirming dela Cruz’ conviction in toto. Thereafter, dela
16

Cruz filed his notice of appeal. 17

In the resolution  dated April 15, 2013, this court noted the records forwarded by the Court of Appeals and informed
18

the parties that they may file their supplemental briefs.

819
On June 6, 2013, the Office of the Solicitor General filed a manifestation and motion,  on behalf of the People of the
19

Philippines, noting that it would no longer file a supplemental brief as the brief it filed with the Court of Appeals had
adequately addressed the arguments and issues raised by dela Cruz.

On August 7, 2013, dela Cruz filed a manifestation  indicating that he, too, would no longer file a supplemental brief
20

and that he was instead re-pleading, adopting, and reiterating the defenses and arguments in the brief he filed
before the Court of Appeals.

For resolution is the issue of whether dela Cruz’s guilt beyond reasonable doubt for violating Sections 5 and 11 of
the Comprehensive Dangerous Drugs Act of 2002 was established. Subsumed in the resolution of this issue are the
issues raised by dela Cruz in the brief he filed with the Court of Appeals, foremost of which is whether the
prosecution was able to establish compliance with the chain of custody requirements under Section 21 of the
Comprehensive Dangerous Drugs Act of 2002.

The elements that must be established to sustain convictions for illegal sale and illegal possession of dangerous
drugs are settled:

In actions involving the illegal sale of dangerous drugs, the following elements must first be established: (1) proof
that the transaction or sale took place and (2) the presentation in court of the corpus delicti or the illicit drug as
evidence.

On the other hand, in prosecutions for illegal possession of a dangerous drug, it must be shown that (1) the accused
was in possession of an item or an object identified to be a prohibited or regulated drug, (2) such possession is not
authorized by law, and (3) the accused was freely and consciously aware of being in possession of the drug.
Similarly, in this case, the evidence of the corpus delicti must be established beyond reasonable doubt. 21

With respect to the element of corpus delicti, Section 21 of the Comprehensive Dangerous Drugs Act of 2002, as
amended by Republic Act No. 10640 provides for the custody and disposition of confiscated, seized, and/or
surrendered drugs and/or drug paraphernalia. Particularly on the matter of custody before a criminal case is filed,
Section 21, as amended, provides:

SEC. 21. Custody and Disposition of Confiscated, Seized, and/or Surrendered Dangerous Drugs, Plant Sources of
Dangerous Drugs, Controlled Precursors and Essential Chemicals, Instruments/Paraphernalia and/or Laboratory
Equipment. – The PDEA shall take charge and have custody of all dangerous drugs, plant sources of dangerous
drugs, controlled precursors and essential chemicals, as well as instruments/paraphernalia and/or laboratory
equipment so confiscated, seized and/or surrendered, for proper disposition in the following manner:

(1) The apprehending team having initial custody and control of the dangerous drugs, controlled precursors
and essential chemicals, instruments/paraphernalia and/or laboratory equipment shall, immediately after
seizure and confiscation, conduct a physical inventory of the seized items and photograph the same in the
presence of the accused or the person/s from whom such items were confiscated and/or seized, or his/her
representative or counsel, with an elected public official and a representative of the National Prosecution
Service or the media who shall be required to sign the copies of the inventory and be given a copy thereof:
Provided, That the physical inventory and photograph shall be conducted at the place where the search
warrant is served; or at the nearest police station or at the nearest office of the apprehending officer/team,
whichever is practicable, in case of warrantless seizures: Provided, finally, That noncompliance of these
requirements under justifiable grounds, as long as the integrity and the evidentiary value of the seized items
are properly preserved by the apprehending officer/team, shall not render void and invalid such seizures and
custody over said items.

(2) Within twenty-four (24) hours upon confiscation/seizure of dangerous drugs, plant sources of dangerous
drugs, controlled precursors and essential chemicals, as well as instruments/paraphernalia and/or laboratory
equipment, the same shall be submitted to the PDEA Forensic Laboratory for a qualitative and quantitative
examination;

(3) A certification of the forensic laboratory examination results, which shall be done by the forensic
laboratory examiner, shall be issued immediately upon the receipt of the subject item/s: Provided, That when
the volume of dangerous drugs, plant sources of dangerous drugs, and controlled precursors and essential
chemicals does not allow the completion of testing within the time frame, a partial laboratory examination
report shall be provisionally issued stating therein the quantities of dangerous drugs still to be examined by
the forensic laboratory: Provided, however, That a final certification shall be issued immediately upon
completion of the said examination and certification;

....

The significance of complying with Section 21’s requirements cannot be overemphasized. Non-compliance is
tantamount to failure in establishing identity of corpus delicti, an essential element of the offenses of illegal sale and
820
illegal possession of dangerous drugs. By failing to establish an element of these offenses, non-compliance will,
thus, engender the acquittal of an accused.

We reiterate the extensive discussion on this matter from our recent decision in People v. Holgado: 22

As this court declared in People v. Morales, "failure to comply with Paragraph 1, Section 21, Article II of RA 9165
implie[s] a concomitant failure on the part of the prosecution to establish the identity of the corpus delicti."  It
23

"produce[s] doubts as to the origins of the [seized paraphernalia]." 24

The significance of ensuring the integrity of drugs and drug paraphernalia in prosecutions under Republic Act No.
9165 is discussed in People v. Belocura: 25

Worse, the Prosecution failed to establish the identity of the prohibited drug that constituted the corpus delicti itself.
The omission naturally raises grave doubt about any search being actually conducted and warrants the suspicion
that the prohibited drugs were planted evidence.

In every criminal prosecution for possession of illegal drugs, the Prosecution must account for the custody of the
incriminating evidence from the moment of seizure and confiscation until the moment it is offered in evidence. That
account goes to the weight of evidence. It is not enough that the evidence offered has probative value on the issues,
for the evidence must also be sufficiently connected to and tied with the facts in issue. The evidence is not relevant
merely because it is available but that it has an actual connection with the transaction involved and with the parties
thereto. This is the reason why authentication and laying a foundation for the introduction of evidence are
important.  (Emphasis supplied)
26

In Malilin v. People,  this court explained that the exactitude required by Section 21 goes into the very nature of
27

narcotics as the subject of prosecutions under Republic Act No. 9165:

Indeed, the likelihood of tampering, loss or mistake with respect to an exhibit is greatest when the exhibit is small
and is one that has physical characteristics fungible in nature and similar in form to substances familiar to people in
their daily lives. Graham vs. State positively acknowledged this danger. In that case where a substance later
analyzed as heroin—was handled by two police officers prior to examination who however did not testify in court on
the condition and whereabouts of the exhibit at the time it was in their possession—was excluded from the
prosecution evidence, the court pointing out that the white powder seized could have been indeed heroin or it could
have been sugar or baking powder. It ruled that unless the state can show by records or testimony, the continuous
whereabouts of the exhibit at least between the time it came into the possession of police officers until it was tested
in the laboratory to determine its composition, testimony of the state as to the laboratory’s findings is inadmissible.

A unique characteristic of narcotic substances is that they are not readily identifiable as in fact they are subject to
scientific analysis to determine their composition and nature. The Court cannot reluctantly close its eyes to the
likelihood, or at least the possibility, that at any of the links in the chain of custody over the same there could have
been tampering, alteration or substitution of substances from other cases—by accident or otherwise—in which
similar evidence was seized or in which similar evidence was submitted for laboratory testing. Hence, in
authenticating the same, a standard more stringent than that applied to cases involving objects which are readily
identifiable must be applied, a more exacting standard that entails a chain of custody of the item with sufficient
completeness if only to render it improbable that the original item has either been exchanged with another or been
contaminated or tampered with.  (Emphasis supplied)
28

Compliance with the chain of custody requirement provided by Section 21, therefore, ensures the integrity of
confiscated, seized, and/or surrendered drugs and/or drug paraphernalia in four (4) respects: first, the nature of the
substances or items seized; second, the quantity (e.g., weight) of the substances or items seized; third, the relation
of the substances or items seized to the incident allegedly causing their seizure; and fourth, the relation of the
substances or items seized to the person/s alleged to have been in possession of or peddling them. Compliance
with this requirement forecloses opportunities for planting, contaminating, or tampering of evidence in any manner.

By failing to establish identity of corpus delicti, non-compliance with Section 21 indicates a failure to establish an
element of the offense of illegal sale of dangerous drugs. It follows that this non-compliance suffices as a ground for
acquittal. As this court stated in People v. Lorenzo: 29

In both illegal sale and illegal possession of prohibited drugs, conviction cannot be sustained if there is a persistent
doubt on the identity of the drug. The identity of the prohibited drug must be established with moral certainty. Apart
from showing that the elements of possession or sale are present, the fact that the substance illegally possessed
and sold in the first place is the same substance offered in court as exhibit must likewise be established with the
same degree of certitude as that needed to sustain a guilty verdict.  (Emphasis supplied)
30

The prosecution’s sweeping guarantees as to the identity and integrity of seized drugs and drug paraphernalia will
not secure a conviction. Not even the presumption of regularity in the performance of official duties will suffice. In

821
fact, whatever presumption there is as to the regularity of the manner by which officers took and maintained custody
of the seized items is "negated."  Republic Act No. 9165 requires compliance with Section 21.
31

Even the doing of acts which ostensibly approximate compliance but do not actually comply with the requirements of
Section 21 does not suffice. In People v. Magat,  for instance, this court had occasion to emphasize the inadequacy
32

of merely marking the items supposedly seized: "Marking of the seized drugs alone by the law enforcers is not
enough to comply with the clear and unequivocal procedures prescribed in Section 21 of R.A. No. 9165." 33

The exactitude which the state requires in handling seized narcotics and drug paraphernalia is bolstered by the
amendments made to Section 21 by Republic Act No. 10640. Section 21(1), as amended, now includes the
following proviso, thereby making it even more stringent than as originally worded:

Provided, That the physical inventory and photograph shall be conducted at the place where the search warrant is
served; or at the nearest police station or at the nearest office of the apprehending officer/team, whichever is
practicable, in case of warrantless seizures:

In People v. Nandi,  this court explained that four (4) links "should be established in the chain of custody of the
34

confiscated item: first, the seizure and marking, if practicable, of the illegal drug recovered from the accused by the
apprehending officer; second, the turnover of the illegal drug seized by the apprehending officer to the investigating
officer; third, the turnover by the investigating officer of the illegal drug to the forensic chemist for laboratory
examination; and fourth, the turnover and submission of the marked illegal drug seized from the forensic chemist to
the court."
35

In Nandi, where the prosecution failed to show how the seized items were handled following the actual seizure and,
thereafter, turned over for examination, this court held that the accused must be acquitted:

After a closer look, the Court finds that the linkages in the chain of custody of the subject item were not clearly
established. As can be gleaned from his forequoted testimony, PO1 Collado failed to provide informative details on
how the subject shabu was handled immediately after the seizure. He just claimed that the item was handed to him
by the accused in the course of the transaction and, thereafter, he handed it to the investigator.

There is no evidence either on how the item was stored, preserved, labeled, and recorded. PO1 Collado could not
even provide the court with the name of the investigator. He admitted that he was not present when it was delivered
to the crime laboratory. It was Forensic Chemist Bernardino M. Banac, Jr. who identified the person who delivered
the specimen to the crime laboratory. He disclosed that he received the specimen from one PO1 Cuadra, who was
not even a member of the buy-bust team. Per their record, PO1 Cuadra delivered the letter-request with the
attached seized item to the CPD Crime Laboratory Office where a certain PO2 Semacio recorded it and turned it
over to the Chemistry Section.

In view of the foregoing, the Court is of the considered view that chain of custody of the illicit drug seized was
compromised. Hence, the presumption of regularity in the performance of duties cannot be applied in this case.

Given the flagrant procedural lapses the police committed in handling the seized shabu and the obvious evidentiary
gaps in the chain of its custody, a presumption of regularity in the performance of duties cannot be made in this
case. A presumption of regularity in the performance of official duty is made in the context of an existing rule of law
or statute authorizing the performance of an act or duty or prescribing a procedure in the performance thereof. The
presumption applies when nothing in the record suggests that the law enforcers deviated from the standard conduct
of official duty required by law; where the official act is irregular on its face, the presumption cannot arise. In light of
the flagrant lapses we noted, the lower courts were obviously wrong when they relied on the presumption of
regularity in the performance of official duty.

With the chain of custody in serious question, the Court cannot gloss over the argument of the accused regarding
the weight of the seized drug. The standard procedure is that after the confiscation of the dangerous substance, it is
brought to the crime laboratory for a series of tests. The result thereof becomes one of the bases of the charge to be
filed.  (Citations omitted)
36

As Holgado emphasized, "[e]ven the doing of acts which ostensibly approximate compliance but do not actually
comply with the requirements of Section 21 does not suffice."  In People v. Garcia,  this court noted that the mere
37 38

marking of seized paraphernalia, unsupported by a physical inventory and taking of photographs, and in the
absence of the persons required by Section 21 to be present, does not suffice:

Thus, other than the markings made by PO1 Garcia and the police investigator (whose identity was not disclosed),
no physical inventory was ever made, and no photograph of the seized items was taken under the circumstances
required by R.A. No. 9165 and its implementing rules. We observe that while there was testimony with respect to the
marking of the seized items at the police station, no mention whatsoever was made on whether the marking had
been done in the presence of Ruiz or his representatives. There was likewise no mention that any representative

822
from the media and the Department of Justice, or any elected official had been present during this inventory, or that
any of these people had been required to sign the copies of the inventory.  (Citations omitted)
39

In this case, the Regional Trial Court acknowledged that no physical inventory of the seized items was
conducted. Similarly, there is nothing in the records to show that the seized items were photographed in the manner
40

required by Section 21. Likewise, none of the persons required by Section 21 to be present (or their possible
substitutes) have been shown to be present.

The Regional Trial Court and the Court of Appeals assert that dela Cruz must nevertheless be convicted as "it had
been clearly established that the identity of the items were [sic] properly preserved."  They anchor this conclusion
41

on PO1 Bobon’s having supposedly kept the seized sachets in his own pockets: one (1) sachet in his right pocket
and six (6) sachets in his left pocket.

The Court of Appeals reasons:

We found no gap in the prosecution’s presentation of the chain of custody. There was a seizure of seven (7) heat-
sealed sachets of shabu as a result of a valid buy-bust operation. PO1 Bobon and SPO1 Roca testified how the
seizure was conducted. PO1 Bobon was able to identify the shabu which were involved in the illegal sale vis-a-vis
the one involved in illegal possession because he knowingly put them in different pockets. The seized drugs were
marked at the police station which was only 200 meters away from the area where the arrest was made. The identity
of these seized items were secured as PO1 Bobon placed tapes on the respective heat-sealed sachets of shabu
and marked them with his initials which he later identified in court.  (Citation omitted)
42

The circumstance of PO1 Bobon keeping narcotics in his own pockets precisely underscores the importance of
strictly complying with Section 21. His subsequent identification in open court of the items coming out of his own
pockets is self-serving.

The prosecution effectively admits that from the moment of the supposed buy-bust operation until the seized items’
turnover for examination, these items had been in the sole possession of a police officer. In fact, not only had they
been in his possession, they had been in such close proximity to him that they had been nowhere else but in his
own pockets.

Keeping one of the seized items in his right pocket and the rest in his left pocket is a doubtful and suspicious way of
ensuring the integrity of the items. Contrary to the Court of Appeals’ finding that PO1 Bobon took the necessary
precautions, we find his actions reckless, if not dubious.

Even without referring to the strict requirements of Section 21, common sense dictates that a single police officer’s
act of bodily-keeping the item(s) which is at the crux of offenses penalized under the Comprehensive Dangerous
Drugs Act of 2002, is fraught with dangers. One need not engage in a meticulous counter-checking with the
requirements of Section 21 to view with distrust the items coming out of PO1 Bobon’s pockets. That the Regional
Trial Court and the Court of Appeals both failed to see through this and fell — hook, line, and sinker — for PO1
Bobon’s avowals is mind-boggling.

Moreover, PO1 Bobon did so without even offering the slightest justification for dispensing with the requirements of
Section 21.

Section 21, paragraph 1, of the Comprehensive Dangerous Drugs Act of 2002, includes a proviso to the effect that
"noncompliance of (sic) these requirements under justifiable grounds, as long as the integrity and the evidentiary
value of the seized items are properly preserved by the apprehending officer/team, shall not render void and invalid
such seizures and custody over said items." Plainly, the prosecution has not shown that –on September 14, 2004,
when dela Cruz was arrested and the sachets supposedly seized and marked – there were "justifiable grounds" for
dispensing with compliance with Section 21. All that the prosecution has done is insist on its self-serving assertion
that the integrity of the seized sachets has, despite all its lapses, nevertheless been preserved.

Apart from the blatantly irregular handling by PO1 Bobon of the seven (7) sachets, it is also admitted that no
physical inventory and taking of photographs in the presence of dela Cruz or of any of the other persons specified
by Section 21 were conducted. 43

As in People v. Garcia, the mere marking of seized paraphernalia, will not suffice to sustain a conviction in this case.

The miniscule amount of narcotics supposedly seized from dela Cruz amplifies the doubts on their integrity.  In total,
1âwphi1

the seven (7) sachets supposedly contained all of 0.1405 gram of shabu. This quantity is so miniscule it amounts to
little more than 7% of the weight of a five-centavo coin (1.9 grams) or a one-centavo coin (2.0 grams).

As we have discussed in People v. Holgado:

823
While the miniscule amount of narcotics seized is by itself not a ground for acquittal, this circumstance underscores
the need for more exacting compliance with Section 21. In Malilin v. People, this court said that "the likelihood of
tampering, loss or mistake with respect to an exhibit is greatest when the exhibit is small and is one that has
physical characteristics fungible in nature and similar in form to substances familiar to people in their daily lives."

....

Trial courts should meticulously consider the factual intricacies of cases involving violations of Republic Act No.
9165. All details that factor into an ostensibly uncomplicated and barefaced narrative must be scrupulously
considered. Courts must employ heightened scrutiny, consistent with the requirement of proof beyond reasonable
doubt, in evaluating cases involving miniscule amounts of drugs. These can be readily planted and
tampered. . . .  (Citations omitted)
44

As the integrity of the corpus delicti of the crimes for which dela Cruz is charged has not been established, it follows
that there is no basis for finding him guilty beyond reasonable doubt. It is proper that dela Cruz be acquitted.

We close by hearkening to the same words with which we ended in Holgado:

It is lamentable that while our dockets are clogged with prosecutions under Republic Act No. 9165 involving small-
time drug users and retailers, we are seriously short of prosecutions involving the proverbial "big fish." We are
swamped with cases involving small fry who have been arrested for miniscule amounts. While they are certainly a
bane to our society, small retailers are but low-lying fruits in an exceedingly vast network of drug cartels. Both law
enforcers and prosecutors should realize that the more effective and efficient strategy is to focus resources more on
the source and true leadership of these nefarious organizations. Otherwise, all these executive and judicial
resources expended to attempt to convict an accused for 0.05 gram of shabu under doubtful custodial arrangements
will hardly make a dent in the overall picture. It might in fact be distracting our law enforcers from their more
challenging task: to uproot the causes of this drug menace. We stand ready to assess cases involving greater
amounts of drugs and the leadership of these cartels. 45

WHEREFORE, premises considered, the decision dated May 31, 2012 of the Court of Appeals in CA-G.R. CR-H.C.
No. 00869-MIN is REVERSED and SET ASIDE. Accused-appellant Garry dela Cruz y de Guzman is hereby
ACQUITTED for failure of the prosecution to prove his guilt beyond reasonable doubt. He is ordered immediately
RELEASED from detention, unless he is confined for any other lawful cause.

Let a copy of this decision be furnished the Director of the Bureau of Corrections, Muntinlupa City, for immediate
implementation. The Director of the Bureau of Corrections is directed to report to this court within five days from
receipt of this decision the action he has taken. Copies shall also be furnished the Director General of the Philippine
National Police and the Director General of the Philippine Drugs Enforcement Agency for their information.

The Regional Trial Court is directed to tum over the seized sachets of shabu to the Dangerous Drugs Board for
destruction in accordance with law.

SO ORDERED.

824
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 192026               October 1, 2014

AUTOMAT REALTY AND DEVELOPMENT CORPORATION, LITO CECILIA AND LEONOR LIM, Petitioners, 
vs.
SPOUSES MARCIANO DELA CRUZ, SR. AND OFELIA DELA CRUZ, Respondents.

DECISION

LEONEN, J.:

Before us is a petition for review  assailing the Court of Appeals' August 19, 2009 decision  affirming the Department
1 2

of Agrarian Reform Adjudication Board (DARAB) in finding the Spouses Dela Cruz to be lawful tenants, and its April
14, 2010 resolution denying reconsideration.

Petitioners pray that the Court of Appeals' decision and resolution be set aside and a new one be issued nullifying
the DARAB's February 8, 2005 decision  and June 30, 2006 resolution,  and reinstating the August 28, 2001
3 4

decision  of the Provincial Agrarian Reform Adjudicator (PARAD) for Laguna that dismissed the petition to maintain
5

peaceful possession with injunction filed by respondent Spouses Dela Cruz (respondent spouses). 6

The facts as found by the Court of Appeals are as follows.

Petitioner Automat Realty and Development Corporation (Automat) is the registered owner of two parcels of land
located in Barangay Malitlit, Sta. Rosa, Laguna, covered by TCT Nos. T-210027 and T-209077. 7

Automat acquired the 49,503-square-meter parcel of land covered by TCT No. T-209077 from El Sol Realty and
Development Corporation in 1990. In the same year, Automat also acquired the 24,562-square-meter parcel of land
covered by TCT No. T-210027 from Ofelia Carpo.  Petitioner Leonor Lim (petitioner Lim) was the real estate broker
8

behind Automat’s purchase of the property. Respondent spouses sometimes referred to petitioner Lim some Sta.
Rosareal estate properties available for sale. They received a share in the broker's fees either from the seller or
buyer.9

The land was not occupied in 1990 when it was purchased by Automat. Respondent Ofelia dela Cruz volunteered
her services to petitioner Lim as caretaker to prevent informal settlers from entering the property. Automat agreed,
through its authorized administrator, petitioner Lim, on the condition that the caretaker would voluntarily vacate the
premises upon Automat’s demand. 10

Respondent spouses’ family stayed in the property as rent-paying tenants. They cultivated and improved the land.
They shared the produced palay with Automat through its authorized agent, petitioner Lito Cecilia (petitioner
Cecilia). He also remitted the rentals paid by respondent Ofelia Dela Cruz to petitioner Lim in Makati and to
Automat's office in Quezon City. 11

Sometime in August 2000, Automat asked respondent spouses to vacate the premises as it was preparing the
groundwork for developing the property. 12

Respondent spouses refused to vacate unless they were paid compensation. They claimed "they were agricultural
tenants [who] enjoyed security of tenure under the law." 13

On October 19, 2000, respondent spouses filed a petition for maintenance of peaceful possession withprayer for
preliminary mandatory injunction and/or temporary restraining order against Automat before the PARAD for
Laguna. 14

Automat had recovered possession ofthe property before respondent spouses filed their petition, and it continues to
have possession at present. 15

On August 28, 2001, the PARAD dismissed the complaint. It declared, among other things, that "no agricultural
tenancy can be established between [the parties] under the attending factual circumstances."  The PARAD found it
16

undisputed that when petitioners entered the property in 1990, it was already classified as residential, commercial,
and industrial land. Thus, "it is legally impossible for [the property] to be the subject of an agricultural tenancy
relation[ship]."
17

825
On February 8, 2005, the DARAB reversed and set aside the PARAD's decision. It declared respondent spouses as
de juretenants of the landholding, thus, protected by security of tenure.  It ordered Automat "to maintain [the
18

spouses] in peacefulpossession and cultivation of the landholding." 19

Automat, petitioner Lim, and petitioner Cecilia appealed with the Court of Appeals,  arguing that (a) the DARAB had
20

no jurisdiction since the property is not agricultural land, (b) the board’s finding that respondent spouses are de
juretenants was not supported by evidence, and (c) the essential requisites for a valid agricultural tenancy
relationship are not present. 21

On August 19, 2009, the Court of Appeals affirmed the DARAB without prejudice to petitioners’ right to seek
recourse from the Department of Agrarian Reform Secretary on the other issues. 22

The Court of Appeals, like the DARAB, gave more weight to the following documentary evidence:  (a) Municipal 23

Agrarian Reform Office’s Job H. Candinado’s October 18, 2000 certification stating that respondent spouses are the
actual tillers of the land;  (b) sworn statements by Norma S. Bartolozo, Ricardo M. Saturno, and Resurrection E.
24

Federiso who are residents and owners of the adjoining lots;  (c) Irrigation Superintendent Cesar C. Amador’s
25

certification on the irrigation service fee paid by respondent spouses;  and (d) checks paid by respondent spouses
26

as proof of rental.  Petitioners filed for reconsideration.  Meanwhile, the Department of Agrarian Reform (DAR)
27 28

Region IV-A CALABARZON issued two orders, both dated March 30, 2010, exempting the property from coverage
of the Comprehensive Agrarian Reform Program (CARP). 29

On April 16, 2010, petitioners filed a supplemental motion for reconsideration informing the Court of Appeals of
these exemption orders. 30

Two days earlier or on April 14,2010, the Court of Appeals had denied reconsideration. On May 4, 2010, it noted
without action the supplemental motion for reconsideration. 31

Hence, petitioners Automat, Leonor Lim, and Lito Cecilia appealed before this court.

Petitioners submit that the Court of Appeals erred in applying Sta. Ana v. Carpo  in support of its ruling that the
32

parcels of land are agricultural in nature and that an agricultural tenancy relationship existed between Automat and
respondent spouses.  They also argue that the DAR exemption orders confirmed their "consistent position that the
33

DARAB never had jurisdiction over the subject matter of this case." 34

Respondent spouses counter that the Court of Appeals correctly ruled that a tenancy relationship existed between
Automat and respondent spouses.  They argue that an implied contract of tenancy was created when they were
35

allowed to till the land for 10 years.  Consequently, they are entitled to security of tenure as tenants.  They add that
36 37

the "subsequent reclassification of agricultural lands into non-agricultural [land] after the effectivity of the
(Comprehensive Agrarian Reform Law) CARL does not automatically remove the land from the coverage of the
Comprehensive Agrarian Reform Program [as a] valid certificate of exemption o[r] exclusion, or a duly approved
conversion order, must first be secured." 38

The issues for resolution are as follows:

I. Whether an agricultural tenancy relationship exists between Automat and respondent spouses; and

II. Whether the DAR exemption orders have an effect on the DARAB’s earlier exercise of jurisdiction.

No agricultural tenancy relationship

The elements to constitute a tenancy relationship are the following: "(1) the parties are the landowner and the tenant
or agricultural lessee; (2) the subject matter of the relationship isagricultural land; (3) there is consent between the
parties to the relationship; (4) the purpose of the relationship is to bring about agricultural production; (5) there is
personal cultivation on the part of the tenant or agricultural lessee;and (6) the harvest is shared between the
landowner and the tenant or agricultural lessee." 39

There must be substantial evidence on the presence of all these requisites; otherwise, there is no de jure
tenant. Only those who have established de jure tenant status are entitled to security of tenure and coverage under
40

tenancy laws. 41

Well-settled is the rule that he who alleges must prove.  Respondent spouses filed the petition before the PARAD,
42

praying to be maintained in peaceful possession of the property. They were the ones claiming they had a tenancy
relationship with Automat. Thus, they had the burden of proof to show that such relationship existed.

826
 I.A

Actual tillers

On the first requisite, respondent spouses contend that the Municipal Agrarian Reform Office (MARO) Officer Job A.
Candanido issued a certification on October 18, 2000 that respondent spouses are the actual tillers of the
land. Three farmers of adjacent lands  testified on the same fact — that respondent spouses are the actual
43 44

tillers. Irrigation Superintendent Cesar Amador also issued a certification that respondent spouses paid the irrigation
45

service fees. 46

Petitioners counter with MARO Officer Candanido’s March 23, 2001 amended certification. This later certification
states that there are "No Records of Tenancy or written Agricultural Leasehold Contract to any farmer/tiller"  in
47

relation to the property.

This court has held that a MARO certification "concerning the presence or the absence of a tenancy relationship
between the contending parties, is considered merely preliminary or provisional, hence, such certification does not
bind the judiciary." 48

The amended certification does not bind this court. Several elements must be present before the courts can
conclude that a tenancy relationship exists. MARO certifications are limited to factual determinations such as the
presence of actual tillers. It cannot make legal conclusions on the existence of a tenancy agreement.

Thus, petitioners’ reliance on the amended MARO certification fails to persuade.

Nevertheless, the finding in the original MARO certification on the presence of actual tillers is closely related to the
nature of the land. This brings us to the second requisite that the property must be agricultural land.

I.B

Not agricultural land

Petitioners submit that the two parcels of land were classified as industrial prior to the effectivity of CARL on June
15, 1988. This was done through the Municipal Zoning Ordinance of Sta. Rosa Laguna No. XVIII, series of 1981,
approved on December 2, 1981 by the then Human Settlements Regulatory Commission, now the Housing and
Land Use Regulatory Board or HLURB.  This classification was reiterated in the town plan or Zoning Ordinance No.
49

20-91 of Sta. Rosa, Laguna, approving the town plan classifying the lands situated in Barangay Malitlit as industrial
land.50

Respondent spouses counter that the reclassification of the lands into non-agricultural was done in 1995, after the
effectivity of CARL, by virtue of Sangguniang Bayan Resolution as approved by the Sangguniang Panlalawigan
Resolution No. 811, seriesof 1995. Section 20 of the Local Government Code  governs the reclassification of land in
51

that "[a] city or municipality may, through an ordinance passed by the Sanggunian after conducting public hearing
for the purpose, authorize [sic] the reclassification of agricultural lands. . . ."
52

Respondent spouses then argue that a subsequent reclassification does not automatically remove the land from
CARP coverage. "A valid certificate of exemption [or] exclusion,or a duly approved conversion order, must first be
secured. . . ." 53

The land in this case cannot be considered as agricultural land.

First, it is undisputed that the DAR Region IV-A CALABARZON had already issued two orders,  both dated March
54

30, 2010, exempting the property from CARP coverage.  These orders were submitted before the Court of
55

Appeals  and raised again before this court. The orders provide in part:
56

Department of Justice Opinion No. 44, series of 1990 ruled that "Lands already classified as commercial, industrial
or residential use and approved by the HLURB prior to the effectivity of RA No. 6657 on June 15, 1988 no longer
need any conversion clearance. Moreover, the term agricultural lands as defined in Section 3 (c) of RA 6657 do not
include those lands already classified as mineral, forest, residential, commercial or industrial. The case at hand
shows that the subject property is within the non-agricultural zone prior to 15 June 1988.

Further, said lands reclassified to non-agricultural prior to June 15, 1988 ceased to be considered as"agricultural
lands" and removed from the coverage of the Comprehensive Agrarian Reform Program.

After a careful evaluation of the documents presented, this office finds substantial compliance by the applicant with
the documentary requirements prescribed under DAR Administrative Order No. 04, Series of 2003.  (Emphasis
57

supplied)
827
The exemption orders clearly provide that the lands were reclassified to non-agricultural prior to June 15, 1988, or
prior to the effectivity of Republic Act No. 6657 known as the Comprehensive Agrarian Reform Law of 1988
(CARL). 58

Section 3(c) of the CARL defines "agricultural land" as "land devoted to agricultural activity as defined in this Act and
not classified as mineral, forest, residential, commercial or industrial land."

This meaning was further explained by DAR Administrative Order No. 1, Series of 1990, otherwise known as the
Revised Rules and Regulations Governing Conversion of Private Agricultural Lands to NonAgricultural Uses:

. . . . Agricultural land refers to those devoted to agricultural activity as defined in R.A. 6657 and not classified as
mineral or forest by the Department of Environment and Natural Resources (DENR) and its predecessor agencies,
and not classified in town plans and zoning ordinances as approved by the Housing and Land Use Regulatory
Board (HLURB) and its preceding competent authorities prior to 15 June 1988 for residential, commercial or
industrial use.  (Emphasis in the original)
59

While the earlier Republic Act No. 3844,  otherwise known as the Agricultural Land Reform Code, focuses on actual
60

use of the land when it defines "agricultural land"as "land devoted to any growth, including but not limited to crop
lands, salt beds, fish ponds, idle land  and abandoned land  as defined in paragraphs 18 and 19 of this Section,
61 62

respectively,"  this must be read with the later Republic Act No. 6675 (CARL) that qualifies the definition with land
63

classifications.

Second, in Sta. Ana v. Carpo  cited at length by the Court of Appeals, this court found that the PARAD and the
64

Court of Appeals both acted without jurisdiction in ruling that "the land had become non-agricultural based on a
zoning ordinance of 1981 – on the strength of a mere vicinity map." 65

In Sta. Ana, the land owner had the burdenof proof in filing a complaint for ejectment due to non-payment of lease
rentals. In the instant case, respondent spouses have the burden of proving all elements of tenancy in filing their
petition to be maintained in peaceful possession of the property. Unlike the facts in Sta. Ana, respondent spouses
do not contend that the reclassification of the land was by a "mere vicinity map." Their contention is that it was made
only in 1995, thus, the land remains within CARP coverage unless petitioners secure a certificate of exemption or
exclusion, or a duly approved conversion order.

As earlier discussed, petitioners have secured exemption orders for the lands.

I.C

Consent; nature of relationship

Respondent spouses allege that petitioners "never contest[ed] nor refute[d] [respondent’s] cultivation and
occupation of residence in the land (since 1990) for the past ten (10) years or so."  This brings us to the third
66

requisite on consent.

Respondent spouses argue that petitioners’ inaction or failure to refute their occupation and cultivation of the land
for the past 10 years, coupled with the acceptance of payments for use of the land, is "indicative of consent, if not
acquiescence to . . . tenancy relations."  They contend that a "[t]enancy relationship may be deemed established by
67

implied agreement [when a] land owner allows another [to] cultivate his land in the concept of a tenant for a period
of ten (10) years."  They add that Automat cannot deny the authority of administrator, petitioner Cecilia, whose acts
68

are binding on the land owner. 69

On the other hand, petitioners argue that the acts of the parties "taken in their entirety must be demonstrative of an
intent to continue a prior tenancy relationship established by the landholder."  There should be "no issue . . . [on] the
70

authority of the overseer to establish a real right over the land." 71

Petitioners contend that there is no prior tenancy relationship to speak of between respondent spouses and
Automat. Petitioner Cecilia executed an affidavit submitted to the DARAB categorically denying respondent
spouses’ allegations that he instituted them as agricultural tenants.  Petitioner Lim executed a similar affidavit
72

"debunking [respondent spouses’] claim that they were instituted as agricultural tenants."  Petitioners, thus,
73

emphasize that petitioners Cecilia and Lim’s authority to establish a real right over the land has been properly
questioned, and no special power of attorney  has been presented by respondent spouses on such authority.
74 75

The PARAD agreed in that "it would be totally behind [sic] human comprehension for Automat to institutea tenant on
their untenanted lands [as] [i]t has been of public knowledge that landowners were paying millions of pesos a
hectare just to get rid of their tenants in Sta.Rosa, Laguna since 1989 so that they could fully and freely [dispose]
and [use] their lands. . . . it would be easier for this Office to believe and be convinced that, in deed [sic], if ever

828
petitioners were allowed entry into the land it would be for any other purposes other than the establishment of a
tenancy [relationship]." 76

This court has ruled that "[t]enancyis not a purely factual relationship dependent on what the alleged tenant does
upon the land [but] is also a legal relationship."  Tenancy relationship cannot bepresumed. The allegation of its
77

existence must be proven by evidence, and working on another’s landholding raises no presumption of an
agricultural tenancy.  Consequently, the landowner’s consent to an agricultural tenancy relationship must be shown.
78

While this court agrees with the conclusion that no agricultural tenancy relationship can exist in thiscase, we find
that the element of consent in establishing a relationship, not necessarily of agricultural tenancy, is present.

This court finds that Automat consented to a relationship with respondent spouses when (a) through petitioner Lim,it
constituted respondent Ofelia dela Cruz as caretaker of the property with the understanding that she would vacate
when asked by Automat, and (b) it accepted rental payments from respondent spouses.

First, petitioner Lim executed an affidavit stating that "Mrs. Ofelia dela Cruz or Nida volunteered to act as
caretakerof the properties bought by Automat Realty only for the purpose ofpreventing squatters from entering the
same and on the understandingthat she would vacate the properties voluntarily when asked todo so by Automat
Realty."79

Automat confirmed this agreement entered into by petitioner Lim on its behalf when it included such allegation in the
statement of facts in its memorandum with this court. 80

While Automat questioned petitioners Lim and Cecilia’s authority to establish a real right over the property in that
"[r]espondents had not shown any special power of attorney showing that Cecilia was authorized by Automat Realty
to install any agricultural tenant on the latter’s properties,"  it never denied giving consent to installing respondent
81

spouses as caretakers of the land.

Second, while both petitioners Lim and Cecilia denied in their affidavits being the authorized administrator of
Automat,  petitioner Cecilia nevertheless confirms accepting checks as rental payments from respondent spouses
82

for convenience, considering that he often went to Makati where petitioner Lim holds office and Quezon City where
Automat has its office. 83

Automat never denied receipt of these rentals.

Respondent spouses’ petition for maintenance of peaceful possession filed with the PARAD alleged that "as regards
the sharing arrangement derived from the rice/palay harvests, petitioners were verbally instructed to deliver the
same to . . . Lito Cecilia who was authorized to collect for and in behalf of Automat every cropping period, the
amount of Fifteen Thousand Five Hundred Pesos covering the two (2) parcels of land."  They attached photocopies
84

of five (5) checks in the name of Automat for the following amounts: (a) 8,000.00 dated December 31, 1993; (b)
7,500.00 dated December 31, 1993; (c) 7,500.00 dated January 5, 1995; (d) 8,000.00 dated January 10, 1995; and
(e) 7,500.00 dated June 22, 1997. 85

I.C.1

Civil lease

Automat is considered to haveconsented to a civil lease. 86

Article 1643 of the Civil Code provides that "[i]n the lease of things, one of the parties binds himself to giveto another
the enjoyment or use of a thing for a price certain, and for a period which may be definite or indefinite. . . ."

The Civil Code accommodates unwritten lease agreements such as Article 1682 that provides: "The lease of a piece
of rural land, when its duration has not been fixed, is understood to have been for all the time necessary for the
gathering of the fruitswhich the whole estate leased may yield in one year, or which it may yield once, although two
or more years may have to elapse for the purpose."

On the other hand, Article 1687 statesthat "[i]f the period for the lease has not been fixed, it is understood to be from
year to year, if the rent agreed upon is annual; from month to month, if it is monthly; from week to week, if the rent is
weekly; and from day to day, if the rent is to be paid daily. . . ." Applying this provision, "the contract expires at the
end of such month [year, week, or day] unless prior thereto, the extension of said term has been sought by
appropriate action and judgment is, eventually, rendered therein granting the relief." 87

Under the statute of frauds, an unwritten lease agreement for a period of more than one year is unenforceable
unless ratified. 88

829
Respondent spouses were allowed to stay in the property as caretakers and, in turn, they paid petitioners rent for
their use of the property. Petitioners’ acceptance of rental payments may be considered as Ratification  of an
89

unwritten lease agreement whose period depends on their agreed frequency of rental payments.

I.C.2

Builder, planter, sower

In the alternative, if the facts can show that the proper case involves the Civil Code provisions on builders, planters,
and sowers, respondent spouses may be considered as builders, planters, or sowers in good faith, provided such is
proven before the proper court.

Article 448 of the Civil Code provides that if the landowner opts to "appropriate as his own the works, sowing or
planting," he must pay indemnity to the builder, planter, or sower in good faith in accordance with the relevant
provisions of the Code:

ART. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the
right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles
546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the
proper rent. However, the builder or planter cannot be obligedto buy the land ifits value is considerably more than
that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to
appropriate the building ortrees after proper indemnity. The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms thereof.

....

ART. 546. Necessary expenses shall be refunded to every possessor; but only the possessor ingood faith may
retain the thing until he has been reimbursed therefor.

Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person
who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the
increase in value which the thing may have acquired by reason thereof.

....

Art. 548. Expenses for pure luxury or mere pleasure shall not be refunded to the possessor in good faith; but he
may remove the ornaments with which he has embellished the principal thing if it suffers no injury thereby, and ifhis
successor in the possession does not prefer to refund the amount expended. (Emphasis supplied)

Article 448 of the Civil Code on builders, planters, and sowers in good faith applies when these parties have a claim
of title over the property.  This court has expanded this limited definition in jurisprudence:
90

This Court has ruled that this provision covers only cases in which the builders, sowers or planters believe
themselves to be owners of the land or, at least, to have a claim of title thereto. It does not apply when the interest is
merely that of a holder,such as a mere tenant, agent or usufructuary. From these pronouncements, good faith is
identified by the belief that the land is owned; or that — by some title — one has the right to build, plant, or sow
thereon.

However, in some special cases, this Court has used Article 448 by recognizing good faith beyond this limited
definition. Thus, in Del Campo v. Abesia, this provision was applied to whose house — despite having been built at
the time he was still co-owner — overlapped with the land of another. This article was also applied to cases wherein
a builder had constructed improvements with the consent of the owner. The Court ruled that the law deemed the
builder tobe in good faith. In Sarmiento v. Agana, the builders were found to be in good faith despite their reliance
on the consent of another, whom they had mistakenly believed to be the owner of the land.  (Emphasis supplied)
91

Respondent spouses alleged in their petition before the PARAD that they "introduced various agricultural
improvements purposely to make the said landholdings productive, harvests ofwhich were remitted and delivered
to . . . AUTOMAT through its administrator LITO CECILIA. . . ."  The Court of Appeals’ recitation offacts also state
92

that respondent spouses "cultivated the area, improved the same and shared the palay produced therein to the
owner, Automat,through its authorized agent, Lito Cecilia." 93

Petitioners allege in their memorandumbefore this court that at the time Automat purchased the property, these
"were not irrigated and they were not planted to rice or any other agricultural crop."  No further allegations were
94

made on whether the property was planted with trees or crops after its purchase in 1990, until respondent spouses
were asked to vacate in 2000. However, this court is not a trier of facts and can only entertain questions of law. This
95

court also applies the rule that damages must be proven in order to be awarded. 96

830
The causes of action of respondent spouses, if these can be supported by the facts and evidence, may be pursued
in the proper case either under builder, planter, or sower provisions, or civil lease provisions before the proper court.

II

DARAB jurisdiction

Petitioners submit that in light of the exemption orders, "[a]s a matter of law, the subject properties were never
subject to the jurisdiction of the DARAB, which issued the decision erroneously affirmed by the Court of Appeals." 97

In the same breath, petitioners recognize the PARAD’s jurisdiction in praying that this court "reinstat[e] the Decision
of the Provincial Agrarian Reform Adjudication (PARAD) for the Province of Laguna dated August 28, 2001 in Reg
Case No. R-0403-0041, dismissing the ‘Petition to Maintain Peaceful Possession with Injunction’ filed by the
respondents." 98

The DARAB has "primary and exclusive jurisdiction, both original and appellate, to determine and adjudicate all
agrarian disputes involving the implementation of the [CARP] . . . and other agrarian laws and their implementing
rules and regulations:"99

RULE II

Jurisdiction Of The Adjudication Board

SECTION 1. Primary and Exclusive Original and Appellate Jurisdiction.– The Board shall have primary and
exclusive jurisdiction, both original and appellate, todetermine and adjudicate all agrarian disputesinvolving the
implementation ofthe Comprehensive Agrarian Reform Program (CARP) under Republic Act No. 6657, Executive
Order Nos. 228, 229, and 129-A, Republic Act No. 3844 as amended by Republic Act No. 6389, Presidential Decree
No. 27 and other agrarian laws and their implementing rules and regulations. Specifically, such jurisdiction shall
include but not be limited to cases involving the following:

a) The rights and obligations of persons, whether natural or juridical, engaged in the management,
cultivation and use of all agricultural lands covered by the CARP and other agrarian laws;

b) The valuation of land, and the preliminary determination and payment of just compensation,fixing and
collection of lease rentals, disturbance compensation, amortization payments, and similar disputes
concerning the functions of the Land Bank of the Philippines (LBP);

c) The annulment or cancellation oflease contracts or deeds of sale or their amendments involving lands
under the administration and disposition of the DAR or LBP;

d) Those cases arising from, or connected with membership or representation in compact farms, farmers’
cooperatives and other registered farmers’ associations or organizations, related to lands covered by the
CARP and other agrarian laws;

e) Those involving the sale, alienation, mortgage, foreclosure, pre-emption and redemption of agricultural
lands under the coverage of the CARP orother agrarian laws;

f) Those involving the issuance, correction and cancellation of Certificates of Land Ownership Award
(CLOAs) and Emancipation Patents (EPs) which are registered with the Land Registration Authority;

g) Those cases previously falling under the original and exclusive jurisdiction of the defunct Court of
Agrarian Relations under Section 12 of Presidential No. 946, except sub-paragraph (q) thereof and
Presidential Decree No. 815.

It is understood that the aforementioned cases, complaints or petitions were filed with the DARAB after August 29,
1987.

Matters involving strictly the administrative implementation of Republic Act No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law (CARL) of 1988 and other agrarian laws as enunciated by pertinent rules
shall be the exclusive prerogative of and cognizable by the Secretary of the DAR.

h) And such other agrarian cases, disputes, matters or concerns referred to it by the Secretary of the DAR.

831
SECTION 2. Jurisdiction of the Regional and Provincial Adjudicators. – The RARAD and the PARAD shall have
concurrent original jurisdiction with the Board to hear, determine and adjudicate all agrarian cases and disputes, and
incidents in connection therewith, arising within their assigned territorial jurisdiction.  (Emphasis supplied)
100

"Agrarian dispute" has been defined under Section 3(d) of Republic Act No. 6657  as referring to "any controversy
101

relating to tenurial arrangements, whether leasehold, tenancy, stewardship or otherwise, over lands devoted to
agriculture. . . ."

This court has held that "jurisdiction of a tribunal, including a quasijudicial office or government agency, over the
nature and subject matter of a petition or complaint is determined by the material allegationstherein and the
character of the relief prayed for irrespective of whether the petitioner or complainant is entitled to any or all such
reliefs." 102

The petition filed by respondent spouses before the PARAD alleged that "AUTOMAT REALTY AND DEV’T CORP. .
. is the registered owner of two (2) parcels of agricultural land. . .",  respondent spouses were "instituted as tenant-
103

tillers of the two (2) parcels of rice landholdings by . . . AUTOMAT through its authorized administrator LITO
CECILIA",  and that "shares of the harvests of . . . AUTOMAT were paid and delivered in the form of checks
104

payable in cash in the name of . . . AUTOMAT. . . ." 105

However, jurisdiction is conferred by law, and "an order or decision rendered by a tribunal or agency without
jurisdiction is a total nullity."
106

The DAR exemption orders have determined with certainty that the lands were reclassified as non-agricultural prior
to June 15, 1988. Consequently, the petition filed by respondent spouses in 2000 before the PARAD did not involve
"lands devoted to agriculture" and, necessarily, it could not have involved any controversy relating to such
land. Absent an "agrarian dispute," the instant case cannot fall under the limited jurisdiction of the DARAB as a
1âwphi1

quasi-judicial body. WHEREFORE, the petition is GRANTED. The Court of Appeals' August 19, 2009 decision and
April 14, 2010 resolution are REVERSED and SET ASIDE. The PARAD's decision dated August 28, 2001 and
DARAB's decision dated February 8, 2005 are declared NULL and VOID for lack of jurisdiction, without prejudice to
the filing of a civil case with the proper court.

SO ORDERED

832
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 172505               October 1, 2014

ANTONIO M. GARCIA, Petitioner, 
vs.
FERRO CHEMICALS, INC., Respondent.

DECISION

LEONEN, J.:

Before this court is a petition for review on certiorari  assailing the decision  of the Court of Appeals dated August 11,
1 2

2005 and its· resolution  dated April 27, 2006, denying petitioner Antonio Garcia's motion for reconsideration.
3

Antonio Garcia, as seller, and Ferro Chemicals, Inc., through Ramon Garcia, as buyer, entered into a deed of
absolute· sale and purchase of shares of stock on July 15, 1988. The deed was for the sale and purchase of shares
of stock from various corporations, including one class "A" share in Alabang Country Club, Inc. and one proprietary
membership in the Manila Polo Club, Inc.  These shares of stock were in the name of Antonio Garcia.  The contract
4 5

was allegedly entered into to prevent these shares of stock from being sold at public auction to pay the outstanding
obligations of Antonio Garcia. 6

On March 3, 1989, a deed of right of repurchase over the same shares of stock subject of the deed of absolute sale
and purchase of shares of stock was entered into between Antonio Garcia and Ferro Chemicals, Inc. Under the
deed of right of repurchase, Antonio Garcia can redeem the properties sold within 180 days from the signing of the
agreement. 7

Before the end of the 180-day period, Antonio Garcia exercised his right to repurchase the properties.  However,
8

Ferro Chemicals, Inc. did not agree to the repurchase ofthe shares of stock.  Thus, Antonio Garcia filed an action for
9

specific performance and annulment of transfer of shares. 10

On September 6, 1989, the class "A" share in Alabang Country Club, Inc. and proprietary membership in the Manila
Polo Club, Inc., which were included in the contracts entered intobetween Antonio Garcia and Ferro Chemicals, Inc.,
were sold at public auction to Philippine Investment System Organization. 11

On September 3, 1990, the information based on the complaint of Ferro Chemicals, Inc. was filed against Antonio
Garcia before the Regional Trial Court.  He was charged with estafaunder Article 318 (Other Deceits) of the
12

Revised Penal Code for allegedly misrepresenting to Ferro Chemicals, Inc. that the shares subject of the contracts
entered into were free from all liens and encumbrances. The information reads:

The undersigned Assistant Prosecutor accuses Antonio M. Garcia of the felony of Estafa as defined and penalized
under Art. 318 of the Revised Penal Code as amended, committed as follows:

THAT on or about 15 July 1988, in Makati, Metro Manila, Philippines, a place within the jurisdiction of this Honorable
Court, the above-named accused, with evident bad faith and deceit, did, then and there, willfully, unlawfully and
feloniously, misrepresent to FERRO CHEMICALS, INC. (FCI) represented by Ramon M. Garcia, that his share of
stock/proprietary share with Ayala Alabang Country Club, Inc. and Manila Polo Club, Inc. collectively valued at about
₱10.00 Million Pesos, being part of other shares of stock subject matter of a Deed of Absolute Sale and Purchase of
Shares of Stock between the accused and FCI, were free from all liens, encumbrances and claims by third persons,
when in truth and in fact, accused well knew that aforesaid share of stock/proprietary share had already been
garnished in July 1985 and subsequently sold at public auction in September 1989, and which misrepresentation
and assurance FCI relied upon and paid the consideration in accordance with the stipulated condition/manner of
payment, all to the damage and prejudice of FCI in the aforestated amount of ₱10.00 Million Pesos.

Contrary to law. 13

In the decision dated December 12, 1996 of the Regional Trial Court, Antonio Garcia was acquitted for insufficiency
of evidence.  The Regional Trial Court held:
14

833
From the foregoing, it is very clear that private complainant was aware of the status of the subject CLUB SHARES.
Thus, the element of false pretense, fraudulent act or fraudulent means which constitute the very cause or the only
motive which induced the private complainant to enter into the questioned deed of sale (Exh. "A") is wanting in the
case at bar.  (Underscoring in the original)
15

Ferro Chemicals, Inc. filed a motion for reconsideration, which was denied by the Regional Trial Court in the order
dated July 29, 1997. 16

On August 25, 1997, Ferro Chemicals, Inc. appealed to the Court of Appeals the July 29, 1997 order of the Regional
Trial Court as to the civil aspect of the case.  The notice of appeal  filed was entitled "Notice of Appeal Ex Gratia
17 18

Abudantia Ad Cautelam (Of The Civil Aspect of the Case)." It alleged:

4. Herein private complainant hereby gives notice, out of extreme caution, that it is appealing the Decision dated 12
December 1996 and the Order dated 29 July 1997 on the civil aspect of the case to the Court of Appeals on the
ground that it is notin accordance with the law and the facts of the case.

5. This notice of appeal is without prejudice to the filing of an appropriate petition for certiorari under Rule 65 of the
Rules of Court on the criminal aspect, upon the giving of due course thereto, private complainant shall endeavor to
seek the consolidation of this appeal with the said petition. 19

On October 15, 1997, the Makati City Prosecutor’s Office and Ferro Chemicals, Inc. also filed a petition for
certiorari  with this court, assailing the Regional Trial Court’s December 12, 1996 decision and July 29, 1997 order
20

acquitting Antonio Garcia. 21

The petition for certiorari  filed before this court sought to annul the decision of the trial court acquitting Antonio
22

Garcia. People of the Philippines and Ferro Chemicals, Inc. argued that the trial court "acted in grave abuse of
discretion amounting to lack or excess of jurisdiction when it rendered the judgment of acquittal based on affidavits
not at all introduced in evidence by either of the parties thereby depriving the people of their substantive right to due
process of law."  The verification/certification against forum shopping, signed by Ramon Garcia as president of
23

Ferro Chemicals, Inc., disclosed that the notice of appeal was filed "with respect to the civil aspect of the case." 24

In the resolution  dated November 16, 1998, this court dismissed the petition for certiorari filed, and entry of
25

judgment was made on December 24, 1998. 26

On the other hand, the Court of Appeals,  in its decision  dated August 11, 2005, granted the appeal and awarded
27 28

Ferro Chemicals, Inc. the amount of ₱1,000,000.00 as actual loss with legal interest and attorney’s fees in the
amount of ₱20,000.00.  The appellate court found that Antonio Garcia failed to disclose the Philippine Investment
29

and Savings Organization’s lien over the club shares.  Thus:

30

The issue in this case is whether or not Antonio Garcia disclosed to Ferro-Chemicals, during the negotiation stage of
the impending sale of the imputed club shares, the third attachment lien in favor of Philippine Investment and
Savings Organization (PISO) which, ultimately, became the basis of the auction sale of said club shares. We have
scrutinized the records of the case but found no evidence that Antonio Garcia intimated to his brother the third
attachment lien of PISO over the said club shares. While it is true that Antonio Garcia divulged the two liens of
Security Bank and Insular Bank of Asia and America, the lien of PISO was clearly not discussed. The affidavits
executed by the two lawyers to the effect that the lien of PISO was considered but deliberately left out in the deed
cannot be given much weight as they were never placed on the witness stand and cross-examined by Ferro-
Chemicals. If their affidavits, although not offered, were considered inthe criminal aspect and placed a cloud on the
prosecution’s thrust, theycannot be given the same probative value in this civil aspect as only a preponderance of
evidence is necessary to carry the day for the plaintiff, Ferro Chemicals.

While Antonio Garcia insists that no consideration was ever made over the club shares as the same were merely
given for safekeeping, the document denominated as Deed of Absolute Sale states otherwise. It is a basic rule of
evidence that between documentary evidence and oral evidence, the former carries more weight.

Also, We have observed that in Antonio Garcia’s letter of redemption addressed to Ferro Chemicals, he mentioned
his interest in redeeming the company shares only. That he did not include the club shares only meant that said club
shares no longer had any much redeemable value as there was a lienover them. To redeem them would be
pointless.

If they had no redeemable value to Antonio Garcia, to Ferro Chemical they were certainly marketable assets. The
non-disclosure of the third lien in favor of PISO materially affected Ferro Chemicals since it was not able to act on
time to protect its interest when the auction sale over the club shares actually took place. As a result, Ferro
Chemicals suffered losses due to the unfortunate public auction sale. It is but just and fair that Antonio Garcia be
made to compensate the loss pursuant to Articles 21 and 2199 of the Civil Code.

834
The actual loss suffered by Ferro Chemicals amounted to ₱1,000,000.00 which correspondents to the bid value of
the club shares at the time of the auction as evidenced by the Sheriff’s Certificate of Sale.  (Citations omitted)
31

Antonio Garcia filed a motion for reconsideration and Ferro Chemicals, Inc. filed a partial motion for reconsideration
of the decision of the Court of Appeals.  These motions were denied in the resolution  dated April 27, 2006. Thus,
32 33

Antonio Garcia filed this petition for review on certiorari,  assailing the decision and resolution of the Court of
34

Appeals.

Antonio Garcia argues that the factual findings of the Court of Appeals were erroneous  and insists that "[Ferro
35

Chemicals, Inc.] was fully aware that the shares covered by the Deed of Absolute Sale, including the Subject Club
Shares, were not free from liens and encumbrances and that the Deed [of] Sale was executed [to] warehouse
[Antonio Garcia’s] assets based on, among other evidence, the affidavits executed by Jaime Gonzales . . . and
Rolando Navarro. . . ." 36

Antonio Garcia faults the Court of Appeals in disregarding the affidavits executed by Jaime Gonzales and Rolando
Navarro. Antonio Garcia argues that even thiscourt in G.R. No. 130880 entitled People of the Philippines and Ferro
Chemicals, Inc. v. Hon. Dennis Villa Ignacio and Antonio Garcia where the admissibility of the affidavits was put in
issue held that the trial court did not commit any grave abuse of discretion in the challenged decision.  He then 37

reasoned that "pursuant to the law of the case, [the affidavits of Gonzalez and Navarro] are admissible and should
be given weight." 38

Finally, Antonio Garcia claims thatboth he and and Ferro Chemicals, Inc. acted in bad faith when they entered into
the deed of absolute sale as a scheme to defraud Antonio Garcia’s creditors. Thus, they are in pari delicto and Ferro
Chemicals, Inc. should not be allowed to recover from Antonio Garcia. 39

In its comment,  Ferro Chemicals, Inc. points out that Antonio Garcia raised factual issues not proper ina Rule 45
40

petition and reiterates the findings of the Court of Appeals. 41

There are pertinent and important issues that the parties failed to raise before the trial court, Court of Appeals, and
this court. Nonetheless, we resolve to rule on these issues.

As a general rule, this court through its appellate jurisdiction can only decide on matters or issues raised by the
parties.  However, the rule admits of exceptions.  When the unassigned error affects jurisdiction over the subject
42 43

matter  or when the consideration of the error is necessary for a complete resolution of the case,  this court can still
44 45

decide on these issues.

We cannot turn a blind eye on glaring misapplications of the law or patently erroneous decisions or resolutions
simply because the parties failed to raise these errors before the court. Otherwise, we will be allowing injustice by
reason of the mistakes of the parties’ counsel and condoning reckless and negligent acts of lawyers to the prejudice
of the litigants. Failure to rule on these issues amounts to an abdication of our duty to dispense justice to all parties.

The issues are:

I. Whether the Regional Trial Court had jurisdiction over the case

II. Whether the act of FerroChemicals, Inc. in filing the notice of appeal before the Court of Appeals and the
petition for certiorari assailing the same trial court decision amounted to forum shopping

III. Whether Ferro Chemicals, Inc. was entitled to the awards given as civil liability ex delicto

The Regional Trial Court did not have jurisdiction

Jurisdiction of a court over the subject matter is vested by law.  In criminal cases, the imposable penalty of the
46

crime charged in the information determines the court that has jurisdiction over the case. 47

The information charged Antonio Garcia with violation of Article 318 of the Revised Penal Code, which is punishable
by arresto mayor, or imprisonment for a period of one (1) month and one (1) day to six (6) months. Article 318
states:

ART. 318: Other deceits. – The penalty of arresto mayor and a fine of not less than the amount of the damage
caused and not more than twice such amount shall be imposed upon any person who shall defraud or damage
another by any other deceit not mentioned in the preceding articles of this chapter.

Any person who, for profit or gain, shall interpret dreams, make forecasts, tell fortunes, or take advantage of the
credulity of the public in any other similar manner, shall suffer the penalty of arresto mayoror a fine not exceeding
200 pesos.
835
When the information was filed on September 3, 1990, the law in force was Batas Pambansa Blg. 129 before it was
amended by Republic Act No. 7691. Under Section 32 of Batas Pambansa Blg. 129, the Metropolitan Trial Court
had jurisdiction over the case:

SEC. 32. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in
criminal cases.–

....

2. Exclusive original jurisdiction over all offenses punishable with imprisonment of not exceeding four years and two
months, or a fine of not more than four thousand pesos, or both such fine and imprisonment, 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 where the imposable fine does
not exceed twenty thousand pesos. (Emphasis supplied)

The Regional Trial Court did not have jurisdiction to hear and decide the case. This lack of jurisdiction resulted in
voiding all of the trial court’s proceedings and the judgment rendered.  Although the trial court’s lack of jurisdiction
48

was never raised as an issue in any part of the proceedings and even until it reached this court, we proceed with
resolving the matter.

In Pangilinan v. Court of Appeals,  this court held:

49

Thus, we apply the general rule thatjurisdiction is vested by law and cannot be conferred or waived by the parties.
Even on appeal and even if the reviewing parties did not raise the issue of jurisdiction, the reviewing court is not
precluded fromruling that the lower court had no jurisdiction over the case[.]

....

Having arrived at the conclusion that the Regional Trial Court did not have jurisdiction to try the case against the
appellant, it is no longer necessary to consider the other issues raised as the decision of the Regional Trial Court is
null and void. 50

The trial court’s lack of jurisdiction cannot be cured by the parties’ silence on the matter.  The failure of the parties to
51

raise the matter of jurisdiction also cannot be construed as a waiver of the parties. Jurisdiction is conferred by law
and cannot be waived by the parties.

The assailed decision is void, considering that it originates from a void decision of the Regional Trial Court for lack
of jurisdiction over the subject matter.

Ferro Chemicals, Inc. committed forum shopping

Forum shopping is defined as "theact of a litigant who ‘repetitively availed of several judicial remedies in different
courts, simultaneously or successively, all substantially founded on the same transactions and the same essential
facts and circumstances, and all raising substantially the same issues either pending in, or already resolved
adversely by some other court . . . to increase his chances of obtaining a favorable decision if not in one court, then
in another’."  Once clearly established that forum shopping was committed willfully and deliberately by a party or his
52

or her counsel, the case may be summarily dismissed with prejudice, and the act shall constitute direct contempt
and a cause for administrative sanctions. 53

Forum shopping is prohibited, and sanctions are imposed on those who commit forum shopping as "it trifles with the
courts, abuses their processes, degrades the administration of justice and adds to the already congested court
dockets."  This court has said:
54

What is critical is the vexation brought upon the courts and the litigants by a party who asks different courts to rule
on the same or related causes and grant the same or substantially the same reliefs and in the process creates the
possibility of conflicting decisions being rendered by the different fora upon the same issues, regardless of whether
the court in which one of the suits was brought has no jurisdiction over the action.  (Citation omitted)
55

The test and requisites that must concur to establish when a litigant commits forum shopping are the following:

The test for determining the existence of forum shopping is whether the elements of litis pendentiaare present, or
whether a final judgment in one case amounts to res judicatain another. Thus, there is forum shopping when the
following elements are present: (a) identity of parties, or at least such parties asrepresent the same interests in both
actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (c) the
identity of the two preceding particulars, such that any judgment rendered in the other action will, regardless of
836
which party is successful, amount to res judicatain the action under consideration; said requisites are also
constitutive of the requisites for auter action pendant or lis pendens.  (Citation omitted) 56

There is no question that Ferro Chemicals, Inc. committed forum shopping when it filed an appeal before the Court
of Appeals and a petition for certiorari before this court assailing the same trial court decision. This is true even if
Ferro Chemicals, Inc.’s notice of appeal to the Court of Appeals was entitled "Notice of Appeal Ex Gratia Abudantia
Ad Cautelam (Of The Civil Aspect of the Case)."  The "civil aspect of the case" referred to by Ferro Chemicals, Inc.
57

is for the recovery of civil liability ex delicto. However, it failed to make a reservation before the trial court to institute
the civil action for the recovery of civil liability ex delictoor institute a separate civil action prior to the filing of the
criminal case.

There is identity of parties. Petitioner, Antonio Garcia, and respondent, Ferro Chemicals, Inc., are both parties in the
appeal filed before the Court of Appeals and the petition for certiorari before this court.

There is identity of the rights asserted and reliefs prayed for in both actions. At a glance, it may appear that Ferro
Chemicals, Inc. asserted different rights: The appeal before the Court of Appeals is purely on the civil aspect of the
trial court’s decision while the petition for certiorari before this court is allegedly only onthe criminal aspect of the
case. However, the civil liability asserted by Ferro Chemicals, Inc. before the Court of Appeals arose from the
criminal act. It is in the nature of civil liability ex delicto. Ferro Chemicals, Inc. did not reserve the right to institute the
civil action for the recovery of civil liability ex delictoor institute a separate civil action prior to the filing of the criminal
case.  Thus, it is an adjunct of the criminalaspect of the case.  As held in Lim v. Kou Co Ping:
58
1âwphi1
59

The civil liability arising from the offense or ex delictois based on the acts or omissions that constitute the criminal
offense; hence, its trial is inherently intertwined with the criminal action.For this reason, the civil liability ex delictois
impliedly instituted with the criminal offense. If the action for the civil liability ex delictois instituted prior to or
subsequent to the filing of the criminal action, its proceedings are suspended until the final outcome of the criminal
action. The civil liability based on delict is extinguished when the court hearing the criminal action declares that ‘the
act or omission from which the civil liability may arise did not exist’."  (Emphasis supplied, citations omitted).
60

When the trial court’s decision was appealed as to its criminal aspect in the petition for certiorari before thiscourt, the
civil aspect thereof is deemed included in the appeal. Thus, the relief prayed for by Ferro Chemicals, Inc., that is,
recovery of civil liability ex delicto, is asserted in both actions before this court and the Court of Appeals.

Even the allegations in the notice of appeal readily show that Ferro Chemicals, Inc. committedforum shopping, to
wit:

5. This notice of appeal is without prejudice to the filing of an appropriate petition for certiorari under Rule 65 of the
Rules of Court on the criminal aspect, upon the giving of due course thereto, private complainant shall endeavor to
seek the consolidation of this appeal with the said petition. 61

As to the third requisite, on the assumption that the trial court had jurisdiction over the case, this court’s decision in
G.R. No. 130880 affirming the trial court’s decision acquitting the accused for lack of an essential element of the
crime charged amounts to res judicatato assert the recovery of civil liability arising from the offense. This court’s
resolution dismissing the petition for certiorari filed by Ferro Chemicals, Inc. states:

In any event, petitioners failed to sufficiently show that any grave abuse of discretion was committed by the Regional
Trial Court in rendering the challenged decision and order which, on the contrary, appear to be in accord with the
facts and the applicable law and jurisprudence. 62

Litigants cannot avail themselves of two separate remedies for the same relief in the hope that in one forum, the
relief prayed for will be granted. This is the evil sought tobe averted by the doctrine of non-forum shopping, and this
is the problem that has happened in this case. This court denied the petition for certiorari filed byFerro Chemicals,
Inc. resulting in finality of the trial court’s decision.  The decision found Antonio Garcia not guilty of the offense
1awp++i1

charged, and no civil liability was awarded to Ferro Chemicals, Inc. However, at present,there is a conflicting
decision from the Court of Appeals awarding Ferro Chemicals, Inc. civil indemnity arising from the offense charged.

When the civil action for the recovery of civil liability ex delicto is instituted with the criminal action, whether by
choice of private complainant (i.e., no reservation is made or no prior filing of a separate civil action) or as required
by the law or rules, the case will be prosecuted under the direction and control of the public prosecutor.  The civil
63

action cannot proceed independently of the criminal case. This includes subsequent proceedings on the criminal
action such as an appeal. In any case, Ferro Chemicals, Inc. joined the public prosecutor in filing the petition for
certiorari before this court. Ramon Garcia, President of Ferro Chemicals, Inc., signed the verification and
certification of non-forum shopping of the petition for certiorari. 64

We must clarify, however, that private complainants in criminal cases are not precluded from filing a motion for
reconsideration and subsequently an appeal on the civil aspect of a decision acquitting the accused. An exception
to the rule that only the Solicitor General can bring actions in criminal proceedings before the Court of Appeals or
837
this court is "when the private offended party questions the civil aspect of a decision of a lower court."  As discussed
65

in Mobilia Products, Inc. v. Hajime Umezawa: 66

In a criminal case in which the offended party is the State, the interest of the private complainant or the offended
party is limited to the civil liability arising there from. Hence, if a criminal case is dismissed by the trial court or if
there is an acquittal, a reconsideration of the order of dismissal or acquittal may be undertaken, whenever legally
feasible, insofar as the criminal aspect there of is concerned and may be made only by the public prosecutor; or in
the case of an appeal, by the State only, through the OSG. The private complainant or offended party may not
undertake such motion for reconsideration or appeal on the criminal aspect of the case.However, the offended party
or private complainant may file a motion for reconsideration of such dismissal or acquittal or appeal therefrom but
only insofar as the civil aspect thereof is concerned. In so doing, the private complainant or offended party need not
secure the conformity of the public prosecutor. If the court denies his motion for reconsideration, the private
complainant or offended party may appeal or file a petition for certiorarior mandamus,if grave abuse amounting to
excess or lack of jurisdiction is shown and the aggrieved party has no right of appeal or given an adequate remedy
in the ordinary course of law.  (Citations omitted)
67

This is in consonance with the doctrine that:

[T]he extinction of the penal action does not necessarily carry with it the extinction ofthe civil action, whether the
latter is instituted with or separately from the criminal action. The offended party may still claim civil liability ex
delictoif there is a finding in the final judgment in the criminal action that the act or omission from which the liability
may arise exists. Jurisprudence has enumerated three instances when, notwithstanding the accused’s acquittal, the
offended party may still claim civil liability ex delicto: (a) if the acquittal is based on reasonable doubt as only
preponderance of evidence is required; (b) if the court declared that the liability of the accused is only civil;and (c) if
the civil liability of the accused does not arise from or is not based upon the crime of which the accused is
acquitted.68

However, if the state pursues an appeal on the criminal aspect of a decision of the trial court acquitting the accused
and private complainant/s failed to reserve the right to institute a separate civil action,the civil liability ex delictothat
is inherently attached to the offense is likewise appealed. The appeal of the civil liability ex delictois impliedly
instituted with the petition for certiorari assailing the acquittal of the accused. Private complainant cannot anymore
pursue a separate appeal from that of the state without violating the doctrine of non-forum shopping.

On the other hand, the conclusion isdifferent if private complainant reserved the right to institute the civil action for
the recovery of civil liability ex delicto before the Regional Trial Court orinstitute a separate civil action prior to the
filing of the criminal case in accordance with Rule 111 of the Rules of Court. In these situations, the filing of an
appealas to the civil aspect of the case cannot be considered as forum shopping.  This is not the situation here.
1âwphi1

We see no more reason to discuss the issues presented by the parties in light of the foregoing discussion.

Entry of judgment having been made on the resolution of the court in G.R. No. 130880 involving the same parties
and issues and by virtue of the doctrine of finality of judgment, we reiterate the resolution of this court.

WHEREFORE, the resolution in G.R. No. 130880 is reiterated. We grant the petition insofar as it prays for the
setting aside of the Court of Appeals' decision d~ted August 11, 2005 and resolution dated April 27, 2006 as a final
decision over the assailed Regional Trial Court decision that was rendered on November 16, 1998 in G.R. No.
130880.

SO ORDERED.

838
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 174938               October 1, 2014

GERARDO LANUZA, JR. AND ANTONIO O. OLBES, Petitioners, 

vs.
BF CORPORATION, SHANGRI-LA PROPERTIES, INC., ALFREDO C. RAMOS, RUFO B. COLAYCO, MAXIMO
G. LICAUCO III, AND BENJAMIN C. RAMOS, Respondents.

DECISION

LEONEN, J.:

Corporate representatives may be compelled to submit to arbitration proceedings pursuant to a contract entered into
by the corporation they represent if there are allegations of bad faith or malice in their acts representing the
corporation.

This is a Rule 45 petition, assailing the Court of Appeals' May 11, 2006 decision and October 5, 2006 resolution.
The Court of Appeals affirmed the trial court's decision holding that petitioners, as director, should submit
themselves as parties tothe arbitration proceedings between BF Corporation and Shangri-La Properties, Inc.
(Shangri-La).

In 1993, BF Corporation filed a collection complaint with the Regional Trial Court against Shangri-Laand the
members of its board of directors: Alfredo C. Ramos, Rufo B.Colayco, Antonio O. Olbes, Gerardo Lanuza, Jr.,
Maximo G. Licauco III, and Benjamin C. Ramos. 1

BF Corporation alleged in its complaint that on December 11, 1989 and May 30, 1991, it entered into agreements
with Shangri-La wherein it undertook to construct for Shangri-La a mall and a multilevel parking structure along
EDSA. 2

Shangri-La had been consistent in paying BF Corporation in accordance with its progress billing
statements. However, by October 1991, Shangri-La started defaulting in payment.
3 4

BF Corporation alleged that Shangri-La induced BF Corporation to continue with the construction of the buildings
using its own funds and credit despite Shangri-La’s default.  According to BF Corporation, ShangriLa
5

misrepresented that it had funds to pay for its obligations with BF Corporation, and the delay in payment was simply
a matter of delayed processing of BF Corporation’s progress billing statements. 6

BF Corporation eventually completed the construction of the buildings.  Shangri-La allegedly took possession of the
7

buildings while still owing BF Corporation an outstanding balance. 8

BF Corporation alleged that despite repeated demands, Shangri-La refused to pay the balance owed to it.  It also
9

alleged that the Shangri-La’s directors were in bad faith in directing Shangri-La’s affairs. Therefore, they should be
held jointly and severally liable with Shangri-La for its obligations as well as for the damages that BF Corporation
incurred as a result of Shangri-La’s default.
10

On August 3, 1993, Shangri-La, Alfredo C. Ramos, Rufo B. Colayco, Maximo G. Licauco III, and Benjamin C.
Ramos filed a motion to suspend the proceedings in view of BF Corporation’s failure to submit its dispute to
arbitration, in accordance with the arbitration clauseprovided in its contract, quoted in the motion as follows: 11

35. Arbitration

(1) Provided always that in case any dispute or difference shall arise between the Owner or the Project Manager on
his behalf and the Contractor, either during the progress or after the completion or abandonment of the Works as to
the construction of this Contract or as to any matter or thing of whatsoever nature arising there under or
inconnection therewith (including any matter or thing left by this Contract to the discretion of the Project Manager or
the withholding by the Project Manager of any certificate to which the Contractor may claim to be entitled or the
measurement and valuation mentioned in clause 30(5)(a) of these Conditions or the rights and liabilities of the
parties under clauses 25, 26, 32 or 33 of these Conditions), the owner and the Contractor hereby agree to exert all
efforts to settle their differences or dispute amicably. Failing these efforts then such dispute or difference shall be
referred to arbitration in accordance with the rules and procedures of the Philippine Arbitration Law.

839
 x x x           x x x          x x x

(6) The award of such Arbitrators shall be final and binding on the parties. The decision of the Arbitrators shall be a
condition precedent to any right of legal action that either party may have against the other. . . .  (Underscoring in
12

the original)

On August 19, 1993, BF Corporation opposed the motion to suspend proceedings. 13

In the November 18, 1993 order, the Regional Trial Court denied the motion to suspend proceedings. 14

On December 8, 1993, petitioners filed an answer to BF Corporation’s complaint, with compulsory counter claim
against BF Corporation and crossclaim against Shangri-La.  They alleged that they had resigned as members of
15

Shangri-La’s board of directors as of July 15, 1991. 16

After the Regional Trial Court denied on February 11, 1994 the motion for reconsideration of its November 18, 1993
order, Shangri-La, Alfredo C. Ramos, Rufo B. Colayco,Maximo G. Licauco III, and Benjamin Ramos filed a petition
for certiorari with the Court of Appeals. 17

On April 28, 1995, the Court of Appeals granted the petition for certiorari and ordered the submission of the dispute
to arbitration.
18

Aggrieved by the Court of Appeals’ decision, BF Corporation filed a petition for review on certiorari with this
court. On March 27, 1998, this court affirmed the Court of Appeals’ decision, directing that the dispute be submitted
19

for arbitration.
20

Another issue arose after BF Corporation had initiated arbitration proceedings. BF Corporation and Shangri-La
failed to agree as to the law that should govern the arbitration proceedings.  On October 27, 1998, the trial court
21

issued the order directing the parties to conduct the proceedings in accordance with Republic Act No. 876. 22

Shangri-La filed an omnibus motion and BF Corporation an urgent motion for clarification, both seeking to clarify the
term, "parties," and whether Shangri-La’s directors should be included in the arbitration proceedings and served with
separate demands for arbitration. 23

Petitioners filed their comment on Shangri-La’s and BF Corporation’s motions, praying that they be excluded from
the arbitration proceedings for being non-parties to Shangri-La’s and BF Corporation’s agreement. 24

On July 28, 2003, the trial court issued the order directing service of demands for arbitration upon all defendants in
BF Corporation’s complaint.  According to the trial court, Shangri-La’s directors were interested parties who "must
25

also be served with a demand for arbitration to give them the opportunity to ventilate their side of the controversy,
safeguard their interest and fend off their respective positions."  Petitioners’ motion for reconsideration ofthis order
26

was denied by the trial court on January 19, 2005. 27

Petitioners filed a petition for certiorari with the Court of Appeals, alleging grave abuse of discretion in the issuance
of orders compelling them to submit to arbitration proceedings despite being third parties to the contract between
Shangri-La and BF Corporation. 28

In its May 11, 2006 decision,  the Court of Appeals dismissed petitioners’ petition for certiorari. The Court of
29

Appeals ruled that ShangriLa’s directors were necessary parties in the arbitration proceedings.  According to the
30

Court of Appeals:

[They were] deemed not third-parties tothe contract as they [were] sued for their acts in representation of the party
to the contract pursuant to Art. 31 of the Corporation Code, and that as directors of the defendant corporation,
[they], in accordance with Art. 1217 of the Civil Code, stand to be benefited or injured by the result of the arbitration
proceedings, hence, being necessary parties, they must be joined in order to have complete adjudication of the
controversy. Consequently, if [they were] excluded as parties in the arbitration proceedings and an arbitral award is
rendered, holding [Shangri-La] and its board of directors jointly and solidarily liable to private respondent BF
Corporation, a problem will arise, i.e., whether petitioners will be bound bysuch arbitral award, and this will prevent
complete determination of the issues and resolution of the controversy. 31

The Court of Appeals further ruled that "excluding petitioners in the arbitration proceedings . . . would be contrary to
the policy against multiplicity of suits." 32

The dispositive portion of the Court of Appeals’ decision reads:

WHEREFORE, the petition is DISMISSED. The assailed orders dated July 28, 2003 and January 19, 2005 of public
respondent RTC, Branch 157, Pasig City, in Civil Case No. 63400, are AFFIRMED. 33

840
The Court of Appeals denied petitioners’ motion for reconsideration in the October 5, 2006 resolution. 34

On November 24, 2006, petitioners filed a petition for review of the May 11, 2006 Court of Appeals decision and the
October 5, 2006 Court of Appeals resolution. 35

The issue in this case is whether petitioners should be made parties to the arbitration proceedings, pursuant to the
arbitration clause provided in the contract between BF Corporation and Shangri-La.

Petitioners argue that they cannot be held personally liable for corporate acts or obligations.  The corporation is a
36

separate being, and nothing justifies BF Corporation’s allegation that they are solidarily liable with Shangri-
La. Neither did they bind themselves personally nor did they undertake to shoulder Shangri-La’s obligations should
37

it fail in its obligations.  BF Corporation also failed to establish fraud or bad faith on their part.
38 39

Petitioners also argue that they are third parties to the contract between BF Corporation and Shangri-La. Provisions 40

including arbitration stipulations should bind only the parties.  Based on our arbitration laws, parties who are
41

strangers to an agreement cannot be compelled to arbitrate. 42

Petitioners point out thatour arbitration laws were enacted to promote the autonomy of parties in resolving their
disputes.  Compelling them to submit to arbitration is against this purpose and may be tantamount to stipulating for
43

the parties. 44

Separate comments on the petition werefiled by BF Corporation, and Maximo G. Licauco III, Alfredo C.Ramos and
Benjamin C. Ramos. 45

Maximo G. Licauco III Alfredo C. Ramos, and Benjamin C. Ramos agreed with petitioners that Shangri-
La’sdirectors, being non-parties to the contract, should not be made personally liable for Shangri-La’s acts.  Since 46

the contract was executed only by BF Corporation and Shangri-La, only they should be affected by the contract’s
stipulation.  BF Corporation also failed to specifically allege the unlawful acts of the directors that should make them
47

solidarily liable with Shangri-La for its obligations. 48

Meanwhile, in its comment, BF Corporation argued that the courts’ ruling that the parties should undergo arbitration
"clearly contemplated the inclusion of the directors of the corporation[.]"  BF Corporation also argued that while
49

petitioners were not parties to the agreement, they were still impleaded under Section 31 of the Corporation
Code. Section 31 makes directors solidarily liable for fraud, gross negligence, and bad faith.  Petitioners are not
50 51

really third parties to the agreement because they are being sued as Shangri-La’s representatives, under Section 31
of the Corporation Code. 52

BF Corporation further argued that because petitioners were impleaded for their solidary liability, they are necessary
parties to the arbitration proceedings.  The full resolution of all disputes in the arbitration proceedings should also be
53

done in the interest of justice. 54

In the manifestation dated September 6, 2007, petitioners informed the court that the Arbitral Tribunal had already
promulgated its decision on July 31, 2007.  The Arbitral Tribunal denied BF Corporation’s claims against
55

them. Petitioners stated that "[they] were included by the Arbitral Tribunal in the proceedings conducted . . .
56

notwithstanding [their] continuing objection thereto. . . ."  They also stated that "[their] unwilling participation in the
57

arbitration case was done ex abundante ad cautela, as manifested therein on several occasions."  Petitioners 58

informed the court that they already manifested with the trial court that "any action taken on [the Arbitral Tribunal’s
decision] should be without prejudice to the resolution of [this] case." 59

Upon the court’s order, petitioners and Shangri-La filed their respective memoranda. Petitioners and Maximo G.
Licauco III, Alfredo C. Ramos, and Benjamin C. Ramos reiterated their arguments that they should not be held liable
for Shangri-La’s default and made parties to the arbitration proceedings because only BF Corporation and Shangri-
La were parties to the contract.

In its memorandum, Shangri-La argued that petitioners were impleaded for their solidary liability under Section 31 of
the Corporation Code. Shangri-La added that their exclusion from the arbitration proceedings will result in multiplicity
of suits, which "is not favored in this jurisdiction."  It pointed out that the case had already been mooted by the
60

termination of the arbitration proceedings, which petitioners actively participated in.  Moreover, BF Corporation
61

assailed only the correctness of the Arbitral Tribunal’s award and not the part absolving Shangri-La’s directors from
liability. 62

BF Corporation filed a counter-manifestation with motion to dismiss  in lieu of the required memorandum.
63

In its counter-manifestation, BF Corporation pointed out that since "petitioners’ counterclaims were already
dismissed with finality, and the claims against them were likewise dismissed with finality, they no longer have any
interest orpersonality in the arbitration case. Thus, there is no longer any need to resolve the present Petition, which

841
mainly questions the inclusion of petitioners in the arbitration proceedings."  The court’s decision in this case will no
64

longer have any effect on the issue of petitioners’ inclusion in the arbitration proceedings. 65

The petition must fail.

The Arbitral Tribunal’s decision, absolving petitioners from liability, and its binding effect on BF Corporation, have
rendered this case moot and academic.

The mootness of the case, however, had not precluded us from resolving issues so that principles may be
established for the guidance of the bench, bar, and the public. In De la Camara v. Hon. Enage,  this court
66

disregarded the fact that petitioner in that case already escaped from prison and ruled on the issue of excessive
bails:

While under the circumstances a ruling on the merits of the petition for certiorari is notwarranted, still, as set forth at
the opening of this opinion, the fact that this case is moot and academic should not preclude this Tribunal from
setting forth in language clear and unmistakable, the obligation of fidelity on the part of lower court judges to the
unequivocal command of the Constitution that excessive bail shall not be required. 67

This principle was repeated in subsequent cases when this court deemed it proper to clarify important matters for
guidance. 68

Thus, we rule that petitioners may be compelled to submit to the arbitration proceedings in accordance with Shangri-
Laand BF Corporation’s agreement, in order to determine if the distinction between Shangri-La’s personality and
their personalities should be disregarded.

This jurisdiction adopts a policy in favor of arbitration. Arbitration allows the parties to avoid litigation and settle
disputes amicably and more expeditiously by themselves and through their choice of arbitrators.

The policy in favor of arbitration has been affirmed in our Civil Code,  which was approved as early as 1949. It was
69

later institutionalized by the approval of Republic Act No. 876,  which expressly authorized, made valid, enforceable,
70

and irrevocable parties’ decision to submit their controversies, including incidental issues, to arbitration. This court
recognized this policy in Eastboard Navigation, Ltd. v. Ysmael and Company, Inc.: 71

As a corollary to the question regarding the existence of an arbitration agreement, defendant raises the issue that,
even if it be granted that it agreed to submit its dispute with plaintiff to arbitration, said agreement is void and without
effect for it amounts to removing said dispute from the jurisdiction of the courts in which the parties are domiciled or
where the dispute occurred. It is true that there are authorities which hold that "a clause in a contract providing that
all matters in dispute between the parties shall be referred to arbitrators and to them alone, is contrary to public
policy and cannot oust the courts of jurisdiction" (Manila Electric Co. vs. Pasay Transportation Co., 57 Phil., 600,
603), however, there are authorities which favor "the more intelligent view that arbitration, as an inexpensive,
speedy and amicable method of settling disputes, and as a means of avoiding litigation, should receive every
encouragement from the courts which may be extended without contravening sound public policy or settled law" (3
Am. Jur., p. 835). Congress has officially adopted the modern view when it reproduced in the new Civil Code the
provisions of the old Code on Arbitration. And only recently it approved Republic Act No. 876 expressly authorizing
arbitration of future disputes.  (Emphasis supplied)
72

In view of our policy to adopt arbitration as a manner of settling disputes, arbitration clauses are liberally construed
to favor arbitration. Thus, in LM Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc.,  this 73

court said:

Being an inexpensive, speedy and amicable method of settling disputes, arbitration — along with mediation,
conciliation and negotiation — is encouraged by the Supreme Court. Aside from unclogging judicial dockets,
arbitration also hastens the resolution of disputes, especially of the commercial kind. It is thus regarded as the
"wave of the future" in international civil and commercial disputes. Brushing aside a contractual agreement calling
for arbitration between the parties would be a step backward.

Consistent with the above-mentioned policy of encouraging alternative dispute resolution methods, courts should
liberally construe arbitration clauses. Provided such clause is susceptible of an interpretation that covers the
asserted dispute, an order to arbitrate should be granted. Any doubt should be resolved in favor of
arbitration. (Emphasis supplied)
74

A more clear-cut statement of the state policy to encourage arbitration and to favor interpretations that would render
effective an arbitration clause was later expressed in Republic Act No. 9285: 75

SEC. 2. Declaration of Policy.- It is hereby declared the policy of the State to actively promote party autonomy in the
resolution of disputes or the freedom of the party to make their own arrangements to resolve their disputes. Towards

842
this end, the State shall encourage and actively promote the use of Alternative Dispute Resolution (ADR) as an
important means to achieve speedy and impartial justice and declog court dockets. As such, the State shall provide
means for the use of ADR as an efficient tool and an alternative procedure for the resolution of appropriate cases.
Likewise, the State shall enlist active private sector participation in the settlement of disputes through ADR. This Act
shall be without prejudice to the adoption by the Supreme Court of any ADR system, such as mediation, conciliation,
arbitration, or any combination thereof as a means of achieving speedy and efficient means of resolving cases
pending before all courts in the Philippines which shall be governed by such rules as the Supreme Court may
approve from time to time.

....

SEC. 25. Interpretation of the Act.- In interpreting the Act, the court shall have due regard to the policy of the law in
favor of arbitration.Where action is commenced by or against multiple parties, one or more of whomare parties who
are bound by the arbitration agreement although the civil action may continue as to those who are not bound by
such arbitration agreement. (Emphasis supplied)

Thus, if there is an interpretation that would render effective an arbitration clause for purposes ofavoiding litigation
and expediting resolution of the dispute, that interpretation shall be adopted. Petitioners’ main argument arises from
the separate personality given to juridical persons vis-à-vis their directors, officers, stockholders, and agents. Since
they did not sign the arbitration agreement in any capacity, they cannot be forced to submit to the jurisdiction of the
Arbitration Tribunal in accordance with the arbitration agreement. Moreover, they had already resigned as directors
of Shangri-Laat the time of the alleged default.

Indeed, as petitioners point out, their personalities as directors of Shangri-La are separate and distinct from Shangri-
La.

A corporation is an artificial entity created by fiction of law.  This means that while it is not a person, naturally, the
76

law gives it a distinct personality and treats it as such. A corporation, in the legal sense, is an individual with a
personality that is distinct and separate from other persons including its stockholders, officers, directors,
representatives,  and other juridical entities. The law vests in corporations rights,powers, and attributes as if they
77

were natural persons with physical existence and capabilities to act on their own.  For instance, they have the
78

power to sue and enter into transactions or contracts. Section 36 of the Corporation Code enumerates some of a
corporation’s powers, thus:

Section 36. Corporate powers and capacity.– Every corporation incorporated under this Code has the power and
capacity:

1. To sue and be sued in its corporate name;

2. Of succession by its corporate name for the period of time stated in the articles of incorporation and the
certificate ofincorporation;

3. To adopt and use a corporate seal;

4. To amend its articles of incorporation in accordance with the provisions of this Code;

5. To adopt by-laws, not contrary to law, morals, or public policy, and to amend or repeal the same in
accordance with this Code;

6. In case of stock corporations, to issue or sell stocks to subscribers and to sell treasury stocks in
accordance with the provisions of this Code; and to admit members to the corporation if it be a non-stock
corporation;

7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with
such real and personal property, including securities and bonds of other corporations, as the transaction of
the lawful business of the corporation may reasonably and necessarily require, subject to the limitations
prescribed by law and the Constitution;

8. To enter into merger or consolidation with other corporations as provided in this Code;

9. To make reasonable donations, including those for the public welfare or for hospital, charitable, cultural,
scientific, civic, or similar purposes: Provided, That no corporation, domestic or foreign, shall give donations
in aid of any political party or candidate or for purposes of partisan political activity;

10. To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers and
employees; and
843
 11. To exercise such other powers asmay be essential or necessary to carry out its purpose or purposes as
stated in its articles of incorporation. (13a)

Because a corporation’s existence is only by fiction of law, it can only exercise its rights and powers through
itsdirectors, officers, or agents, who are all natural persons. A corporation cannot sue or enter into contracts without
them.

A consequence of a corporation’s separate personality is that consent by a corporation through its representatives is
not consent of the representative, personally. Its obligations, incurred through official acts of its representatives, are
its own. A stockholder, director, or representative does not become a party to a contract just because a corporation
executed a contract through that stockholder, director or representative.

Hence, a corporation’s representatives are generally not bound by the terms of the contract executed by the
corporation. They are not personally liable for obligations and liabilities incurred on or in behalf of the corporation.

Petitioners are also correct that arbitration promotes the parties’ autonomy in resolving their disputes. This court
recognized in Heirs of Augusto Salas, Jr. v. Laperal Realty Corporation  that an arbitration clause shall not apply to
79

persons who were neither parties to the contract nor assignees of previous parties, thus:

A submission to arbitration is a contract. As such, the Agreement, containing the stipulation on arbitration, binds the
parties thereto, as well as their assigns and heirs. But only they.  (Citations omitted)
80

Similarly, in Del Monte Corporation-USA v. Court of Appeals,  this court ruled:

81

The provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is part of that
contract and is itself a contract. As a rule, contracts are respected as the law between the contracting parties and
produce effect as between them, their assigns and heirs. Clearly, only parties to the Agreement . . . are bound by
the Agreement and its arbitration clause as they are the only signatories thereto.  (Citation omitted)
82

This court incorporated these rulings in Agan, Jr. v. Philippine International Air Terminals Co., Inc.  and Stanfilco
83

Employees v. DOLE Philippines, Inc., et al. 84

As a general rule, therefore, a corporation’s representative who did not personally bind himself or herself to an
arbitration agreement cannot be forced to participate in arbitration proceedings made pursuant to an agreement
entered into by the corporation. He or she is generally not considered a party to that agreement.

However, there are instances when the distinction between personalities of directors, officers,and representatives,
and of the corporation, are disregarded. We call this piercing the veil of corporate fiction.

Piercing the corporate veil is warranted when "[the separate personality of a corporation] is used as a means to
perpetrate fraud or an illegal act, or as a vehicle for the evasion of an existing obligation, the circumvention of
statutes, or to confuse legitimate issues."  It is also warranted in alter ego cases "where a corporation is merely a
85

farce since it is a mere alter ego or business conduit of a person, or where the corporation is so organized and
controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of
another corporation." 86

When corporate veil is pierced, the corporation and persons who are normally treated as distinct from the
corporation are treated as one person, such that when the corporation is adjudged liable, these persons, too,
become liable as if they were the corporation.

Among the persons who may be treatedas the corporation itself under certain circumstances are its directors and
officers. Section 31 of the Corporation Code provides the instances when directors, trustees, or officers may
become liable for corporate acts:

Sec. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or
assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the
affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or
trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons.

When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the
corporation in respect of any matter which has been reposed inhim in confidence, as to which equity imposes a
disability upon him to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for
the profits which otherwise would have accrued to the corporation. (n)

844
Based on the above provision, a director, trustee, or officer of a corporation may be made solidarily liable with it for
all damages suffered by the corporation, its stockholders or members, and other persons in any of the following
cases:

a) The director or trustee willfully and knowingly voted for or assented to a patently unlawful corporate act;

b) The director or trustee was guilty of gross negligence or bad faith in directing corporate affairs; and

c) The director or trustee acquired personal or pecuniary interest in conflict with his or her duties as director
or trustee.

Solidary liability with the corporation will also attach in the following instances:

a) "When a director or officer has consented to the issuance of watered stocks or who, having knowledge
thereof, did not forthwith file with the corporate secretary his written objection thereto";87

b) "When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and
solidarily liable with the corporation";  and
88

c) "When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate
action."89

When there are allegations of bad faith or malice against corporate directors or representatives, it becomes the duty
of courts or tribunals to determine if these persons and the corporation should be treated as one. Without a trial,
courts and tribunals have no basis for determining whether the veil of corporate fiction should be pierced. Courts or
tribunals do not have such prior knowledge. Thus, the courts or tribunals must first determine whether
circumstances exist towarrant the courts or tribunals to disregard the distinction between the corporation and the
persons representing it. The determination of these circumstances must be made by one tribunal or court in a
proceeding participated in by all parties involved, including current representatives of the corporation, and those
persons whose personalities are impliedly the sameas the corporation. This is because when the court or tribunal
finds that circumstances exist warranting the piercing of the corporate veil, the corporate representatives are treated
as the corporation itself and should be held liable for corporate acts. The corporation’s distinct personality is
disregarded, and the corporation is seen as a mere aggregation of persons undertaking a business under the
collective name of the corporation.

Hence, when the directors, as in this case, are impleaded in a case against a corporation, alleging malice orbad
faith on their part in directing the affairs of the corporation, complainants are effectively alleging that the directors
and the corporation are not acting as separate entities. They are alleging that the acts or omissions by the
corporation that violated their rights are also the directors’ acts or omissions.  They are alleging that contracts
90

executed by the corporation are contracts executed by the directors. Complainants effectively pray that the
corporate veilbe pierced because the cause of action between the corporation and the directors is the same.

In that case, complainants have no choice but to institute only one proceeding against the parties.  Under the Rules
1âwphi1

of Court, filing of multiple suits for a single cause of action is prohibited. Institution of more than one suit for the
same cause of action constitutes splitting the cause of action, which is a ground for the dismissal ofthe others. Thus,
in Rule 2:

Section 3. One suit for a single cause of action. — A party may not institute more than one suit for a single cause of
action. (3a)

Section 4. Splitting a single cause of action;effect of. — If two or more suits are instituted on the basis of the same
cause of action, the filing of one or a judgment upon the merits in any one is available as a ground for the dismissal
of the others. (4a)

It is because the personalities of petitioners and the corporation may later be found to be indistinct that we rule that
petitioners may be compelled to submit to arbitration.

However, in ruling that petitioners may be compelled to submit to the arbitration proceedings, we are not overturning
Heirs of Augusto Salas wherein this court affirmed the basic arbitration principle that only parties to an arbitration
agreement may be compelled to submit to arbitration. In that case, this court recognizedthat persons other than the
main party may be compelled to submit to arbitration, e.g., assignees and heirs. Assignees and heirs may be
considered parties to an arbitration agreement entered into by their assignor because the assignor’s rights and
obligations are transferred to them upon assignment. In other words, the assignor’s rights and obligations become
their own rights and obligations. In the same way, the corporation’s obligations are treated as the representative’s
obligations when the corporate veil is pierced. Moreover, in Heirs of Augusto Salas, this court affirmed its policy
against multiplicity of suits and unnecessary delay. This court said that "to split the proceeding into arbitration for

845
some parties and trial for other parties would "result in multiplicity of suits, duplicitous procedure and unnecessary
delay."  This court also intimated that the interest of justice would be best observed if it adjudicated rights in a single
91

proceeding.  While the facts of that case prompted this court to direct the trial court to proceed to determine the
92

issues of thatcase, it did not prohibit courts from allowing the case to proceed to arbitration, when circumstances
warrant.

Hence, the issue of whether the corporation’s acts in violation of complainant’s rights, and the incidental issue of
whether piercing of the corporate veil is warranted, should be determined in a single proceeding. Such finding would
determine if the corporation is merely an aggregation of persons whose liabilities must be treated as one with the
corporation.

However, when the courts disregard the corporation’s distinct and separate personality from its directors or officers,
the courts do not say that the corporation, in all instances and for all purposes, is the same as its directors,
stockholders, officers, and agents. It does not result in an absolute confusion of personalities of the corporation and
the persons composing or representing it. Courts merely discount the distinction and treat them as one, in relation to
a specific act, in order to extend the terms of the contract and the liabilities for all damages to erring corporate
officials who participated in the corporation’s illegal acts. This is done so that the legal fiction cannot be used to
perpetrate illegalities and injustices.

Thus, in cases alleging solidary liability with the corporation or praying for the piercing of the corporate veil, parties
who are normally treated as distinct individuals should be made to participate in the arbitration proceedings in order
to determine ifsuch distinction should indeed be disregarded and, if so, to determine the extent of their liabilities.

In this case, the Arbitral Tribunal rendered a decision, finding that BF Corporation failed to prove the existence of
circumstances that render petitioners and the other directors solidarily liable. It ruled that petitioners and Shangri-
La’s other directors were not liable for the contractual obligations of Shangri-La to BF Corporation. The Arbitral
Tribunal’s decision was made with the participation of petitioners, albeit with their continuing objection. In view of our
discussion above, we rule that petitioners are bound by such decision.

WHEREFORE, the petition is DENIED. The Court of Appeals' decision of May 11, 2006 and resolution of October 5,
2006 are AFFIRMED.

SO ORDERED.

846
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 175507               October 8, 2014

RAMON CHING AND POWING PROPERTIES, INC., Petitioners, 

vs.
JOSEPH CHENG, JAIME CHENG, MERCEDES IGNE  AND LUCINA SANTOS, Respondents.
1

DECISION

LEONEN, J.:

Rule 17 of the Rules of Civil Procedure governs dismissals of actions at the instance of the plaintiff. Hence, the
"two-dismissal rule" under Rule 17, Section 1 of the Rules of Civil Procedure will not apply if the prior dismissal was
done at the instance of the defendant.

This is a petition for review on certiorari assailing the decision  and resolution  of the Court of Appeals in CA-G.R.
2 3

SP. No. 86818, which upheld the (1) order  dated November 22, 2002 dismissing Civil Case No. 02-103319 without
4

prejudice, and (2) the omnibus order  dated July 30, 2004, which denied petitioners’ motion for reconsideration. Both
5

orders were issued by the Regional Trial Court of Manila, Branch 6. 6

The issues before this court are procedural. However, the factual antecedents in this case, which stemmed from a
complicated family feud, must be stated to give context to its procedural development.

It is alleged that Antonio Ching owned several businesses and properties, among which was Po Wing Properties,
Incorporated (Po Wing Properties).  His total assets are alleged to have been worth more than 380 million.  It is also
7 8

alleged that whilehe was unmarried, he had children from two women. 9

Ramon Ching alleged that he was the only child of Antonio Ching with his common-law wife, Lucina Santos.  She, 10

however, disputed this. She maintains that even ifRamon Ching’s birth certificate indicates that he was Antonio
Ching’s illegitimate child, she and Antonio Ching merely adopted him and treated him like their own. 11

Joseph Cheng and Jaime Cheng, on the other hand, claim to be Antonio Ching’s illegitimate children with his
housemaid, Mercedes Igne.  While Ramon Ching disputed this,  both Mercedes and Lucina have not.
12 13 14

Lucina Santos alleged that when Antonio Ching fell ill sometime in 1996, he entrusted her with the distribution of his
estate to his heirs if something were to happen to him. She alleged that she handed all the property titles and
business documents to Ramon Ching for safekeeping.  Fortunately, Antonio Ching recovered from illness and
15

allegedly demanded that Ramon Ching return all the titles to the properties and business documents. 16

On July 18, 1996, Antonio Ching was murdered.  Ramon Ching allegedly induced Mercedes Igne and her children,
17

Joseph Cheng and Jaime Cheng, to sign an agreement and waiver  to Antonio Ching’s estate in consideration of
18

₱22.5 million. Mercedes Igne’s children alleged that Ramon Ching never paid them.  On October 29, 1996, Ramon
19

Ching allegedly executed an affidavit of settlement of estate,  naming himself as the sole heir and adjudicating upon
20

himself the entirety of Antonio Ching’s estate. 21

Ramon Ching denied these allegationsand insisted that when Antonio Ching died, the Ching family association,
headed by Vicente Cheng, unduly influenced him to give Mercedes Igne and her children financial aid considering
that they served Antonio Ching for years. It was for this reason that an agreement and waiver in consideration of
22.5 million was made. He also alleged that hewas summoned by the family association to execute an affidavit of
settlement of estate declaring him to be Antonio Ching’s sole heir. 22

After a year of investigating Antonio Ching’s death, the police found Ramon Ching to be its primary
suspect. Information  was filed against him, and a warrant of arrest  was issued.
23 24 25

On October 7, 1998, Joseph Cheng, Jaime Cheng, and Mercedes Igne (the Chengs) filed a complaint for
declaration of nullity of titles against Ramon Ching before the Regional Trial Court of Manila. This case was
docketed as Civil Case No. 98-91046 (the first case). 26

On March 22, 1999, the complaint was amended, with leave of court, to implead additional defendants, including Po
Wing Properties, of which Ramon Ching was a primary stockholder.The amended complaint was for "Annulment of
Agreement, Waiver, Extra-Judicial Settlement of Estate and the Certificates of Title Issued by Virtue of Said
847
Documents with Prayer for Temporary Restraining Order and Writ of Preliminary Injunction."  Sometime after,
27

Lucina Santos filed a motion for intervention and was allowed to intervene. 28

After the responsive pleadings had been filed, Po Wing Properties filed a motion to dismiss on the ground of lack of
jurisdiction of the subject matter. 29

On November 13, 2001, the Regional Trial Court of Manila, Branch 6, granted the motion to dismiss on the ground
of lack of jurisdiction over the subject matter.  Upon motion of the Chengs’ counsel, however, the Chengs and
30

Lucina Santos were given fifteen (15) days to file the appropriate pleading. They did not do so. 31

On April 19, 2002, the Chengs and Lucina Santos filed a complaint for "Annulment of Agreement, Waiver, Extra-
Judicial Settlement of Estate and the Certificates of Title Issued by Virtue of Said Documents with Prayer for
Temporary Restraining Order and Writ of Preliminary Injunction" against Ramon Ching and Po Wing
Properties. This case was docketed as Civil Case No. 02-103319 (the second case) and raffled to Branch 20 of the
32

Regional Trial Court of Manila.  When Branch 20 was made aware of the first case, it issued an order transferring
33

the case to Branch 6, considering that the case before it involved substantially the same parties and causes of
action.
34

On November 11, 2002, the Chengs and Lucina Santos filed a motion to dismiss their complaint in the second case,
praying that it be dismissed without prejudice. 35

On November 22, 2002, Branch 6 issued an order granting the motion to dismiss on the basis that the summons
had not yet been served on Ramon Ching and Po Wing Properties, and they had not yet filed any responsive
pleading. The dismissal of the second case was made without prejudice. 36

On December 9, 2002, Ramon Ching and Po Wing Properties filed a motion for reconsideration of the order dated
November 22, 2002. They argue that the dismissal should have been with prejudice under the "two dismissal rule"
of Rule 17, Section 1 of the 1997 Rules of Civil Procedure, in view of the previous dismissal of the first case. 37

During the pendency of the motion for reconsideration, the Chengs and Lucina Santos filed a complaint for
"Disinheritance and Declaration of Nullity of Agreement and Waiver, Affidavit of Extra judicial Agreement, Deed of
Absolute Sale, and Transfer Certificates of Title with Prayer for TRO and Writ of Preliminary Injunction" against
Ramon Ching and Po Wing Properties. This case was docketed as Civil Case No. 02-105251(the third case) and
was eventually raffled to Branch 6. 38

On December 10, 2002, Ramon Ching and Po Wing Properties filed their comment/opposition to the application for
temporary restraining order in the third case. They also filed a motion to dismiss on the ground of res judicata, litis
pendencia, forum-shopping, and failure of the complaint to state a cause of action. A series of responsive pleadings
were filed by both parties. 39

On July 30, 2004, Branch 6 issued an omnibus order  resolving both the motion for reconsideration in the second
40

case and the motion to dismiss in the third case. The trial court denied the motion for reconsideration and the
motion to dismiss, holding that the dismissal of the second case was without prejudice and, hence, would not bar
the filing of the third case.  On October 8, 2004, while their motion for reconsideration in the third case was pending,
41

Ramon Ching and Po Wing Properties filed a petition for certiorari (the first certiorari case) with the Court of
Appeals, assailing the order dated November 22,2002 and the portion of the omnibus order dated July 30, 2004,
which upheldthe dismissal of the second case. 42

On December 28, 2004, the trial court issued an order denying the motion for reconsideration in the third case. The
denial prompted Ramon Ching and Po Wing Properties to file a petition for certiorari and prohibition with application
for a writ of preliminary injunction or the issuance of a temporary restraining order (the second certiorari case) with
the Court of Appeals. 43

On March 23, 2006, the Court of Appeals rendered the decision  in the first certiorari case dismissing the petition.
44

The appellate court ruled that Ramon Ching and Po Wing Properties’ reliance on the "two-dismissal rule" was
misplaced since the rule involves two motions for dismissals filed by the plaintiff only. In this case, it found that the
dismissal of the first case was upon the motion of the defendants, while the dismissal of the second case was at the
instance of the plaintiffs.45

Upon the denial of their motion for reconsideration,  Ramon Ching and Po Wing Properties filed this present petition
46

for review  under Rule 45 of the Rules of Civil Procedure.

47

Ramon Ching and Po Wing Properties argue that the dismissal of the second case was with prejudice since the
non-filing of an amended complaint in the first case operated as a dismissal on the merits.  They also argue that the
48

second case should be dismissed on the ground of res judicata since there was a previous final judgment of the first
case involving the same parties, subject matter, and cause of action. 49

848
Lucina Santos was able to file a comment  on the petition within the period required.  The Chengs, however, did not
50 51

comply.  Upon the issuance by this court of a show cause order on September 24, 2007,  they eventually filed a
52 53

comment with substantially the same allegations and arguments as that of Lucina Santos’. 54

In their comment, respondents allege that when the trial court granted the motion to dismiss, Ramon Ching’s
counsel was notified in open court that the dismissal was without prejudice. They argue that the trial court’s order
became final and executory whenhe failed to file his motion for reconsideration within the reglementary period. 55

Respondents argue that the petition for review should be dismissed on the ground of forum shopping and litis
pendencia since Ramon Ching and Po Wing Properties are seeking relief simultaneously in two forums by filing the
two petitions for certiorari, which involved the same omnibus order by the trial court.  They also argue that the "two-
56

dismissal rule" and res judicata did not apply since (1) the failure to amend a complaint is not a dismissal, and (2)
they only moved for dismissal once in the second case. 57

In their reply,  petitioners argue that they did not commit forum shopping since the actions they commenced against
58

respondents stemmed from the complaints filed against them in the trial courts.  They reiterate that their petition for
59

review is only about the second case; it just so happened that the assailed omnibus order resolved both the second
and third cases. 60

Upon the filing of the parties’ respective memoranda,  the case was submitted for decision.
61 62

For this court’s resolution are the following issues:

I. Whether the trial court’s dismissal of the second case operated as a bar to the filing of a third case, asper
the "two-dismissal rule"; and

II. Whether respondents committed forum shopping when they filed the third case while the motion for
reconsideration of the second case was still pending.

The petition is denied.

The "two-dismissal rule" vis-à-vis

the Rules of Civil Procedure

Dismissals of actions are governed by Rule 17 of the 1997 Rules of Civil Procedure. The pertinent provisions state:

RULE 17
DISMISSAL OF ACTIONS

SEC. 1. Dismissal upon notice by plaintiff. — A complaint may be dismissed by the plaintiff by filing a notice of
dismissal at any time before service of the answer or of a motion for summary judgment. Upon such notice being
filed, the court shall issue an order confirming the dismissal. Unless otherwise stated in the notice, the dismissal is
without prejudice, except that a notice operates as an adjudication upon the merits when filed by a plaintiff who has
once dismissed in a competent court an action based on or including the same claim.

SEC. 2. Dismissal upon motion of plaintiff. — Except as provided in the preceding section, a complaint shall not be
dismissed at the plaintiff's instance save upon approval of the court and upon such terms and conditions as the
court deems proper. If a counterclaim has been pleaded by a defendant prior to the service upon him of the
plaintiff’s motion for dismissal, the dismissal shall be limited to the complaint. The dismissal shall be without
prejudice to the right of the defendant to prosecute his counterclaim in a separate action unless within fifteen (15)
days from notice of the motion he manifests his preference to have his counterclaim resolved in the same action.
Unless otherwise specified in the order, a dismissal under this paragraph shall be without prejudice. A class suit
shall not be dismissed or compromised without the approval of the court.

SEC. 3. Dismissal due to fault of plaintiff. — If, for no justifiable cause, the plaintiff fails to appear on the date of the
presentation of his evidence in chief on the complaint, or to prosecute his action for an unreasonable length of time,
or to comply with these Rules or any order of the court, the complaint may be dismissed upon motion of the
defendant or upon the court's own motion, without prejudice to the right of the defendant to prosecute his
counterclaim in the same or in a separate action. This dismissal shall have the effect of an adjudication upon the
merits, unless otherwise declared by the court. (Emphasis supplied)

The first section of the rule contemplates a situation where a plaintiff requests the dismissal of the case beforeany
responsive pleadings have been filed by the defendant. It is donethrough notice by the plaintiff and confirmation by
the court. The dismissal is without prejudice unless otherwise declared by the court.

849
The second section of the rule contemplates a situation where a counterclaim has been pleaded by the defendant
before the service on him or her of the plaintiff’s motion to dismiss. It requires leave of court, and the dismissal is
generally without prejudice unless otherwise declared by the court.

The third section contemplates dismissals due to the fault of the plaintiff such as the failure to prosecute. The case
is dismissed either upon motion of the defendant or by the court motu propio. Generally, the dismissal is with
prejudice unless otherwise declared by the court.

In all instances, Rule 17 governs dismissals at the instance of the plaintiff, not of the defendant. Dismissals upon the
instance of the defendant are generally governed by Rule 16, which covers motions to dismiss. 63

In Insular Veneer, Inc. v. Hon. Plan,  Consolidated Logging and Lumber Mills filed a complaint against Insular
64

Veneer to recover some logs the former had delivered to the latter. It also filed ex partea motion for issuance of a
restraining order. The complaint and motion were filed in a trial court in Isabela.65

The trial court granted the motion and treated the restraining order as a writ of preliminary injunction. When
Consolidated Logging recovered the logs, it filed a notice of dismissal under Rule 17, Section 1 of the 1964 Rules of
Civil Procedure. 66

While the action on its notice for dismissal was pending, Consolidated Logging filed the same complaint against
Insular Veneer, this time in a trial court in Manila. It did not mention any previous action pending in the Isabela
court. 67

The Manila court eventually dismissed the complaint due to the nonappearance of Consolidated Logging’s counsel
during pre-trial. Consolidated Logging subsequently returned to the Isabela court to revive the same complaint. The
Isabela court apparently treated the filing of the amended complaint as a withdrawal of its notice of dismissal. 68

Insular Veneer also filed in the Isabela court a motion to dismiss, arguing that the dismissal by the Manila court
constituted res judicataover the case. The Isabela court, presided over by Judge Plan, denied the motion to dismiss.
The dismissal was the subject of the petition for certiorari and mandamus with this court. 69

This court stated that:

In resolving that issue, we are confronted with the unarguable fact that Consolidated Logging on its volition
dismissed its action for damages and injunction in the Isabela court and refiled substantially the same action in the
Manila court. Then, when the Manila court dismissed its action for failure to prosecute, it went hack [sic] to the
Isabela court and revived its old action by means of an amended complaint.

Consolidated Logging would liketo forget the Manila case, consign it to oblivion as if it were a bad dream, and
prosecute its amended complaint in the Isabela court as if nothing had transpired in the Manila court. We hold that it
cannot elude the effects of its conduct in junking the Isabela case and in giving that case a reincarnation in the
Manila court.

Consolidated Logging’ [sic] filed a new case in Manila at its own risk. Its lawyer at his peril failed toappear at the pre-
trial.
70

This court ruled that the filing of the amended complaint in the Isabela court was barred by the prior dismissal of the
Manila court, stating that:

The provision in section 1(e), Rule 16 of the Rules of Court that an action may be dismissed because "there is
another action pending between the same parties for the same cause" presupposes that two similar actions are
simultaneously pending in two different Courts of First Instance. Lis pendensas a ground for a motion to dismiss has
the same requisites as the plea of res judicata.

On the other hand, when a pleading is amended, the original pleading is deemed abandoned. The original ceases to
perform any further function as a pleading. The case stands for trial on the amended pleading only. So, when
Consolidated Logging filed its amended complaint dated March 16, 1970 in Civil Case No. 2158, the prior dismissal
order dated January 5, 1970 in the Manila case could he [sic] interposed in the Isabela court to support the defense
of res judicata. 71

As a general rule, dismissals under Section 1 of Rule 17 are without prejudice except when it is the second time that
the plaintiff caused its dismissal. Accordingly, for a dismissal to operate as an adjudication upon the merits, i.e, with
prejudice to the re-filing of the same claim, the following requisites must be present:

(1) There was a previous case that was dismissed by a competent court;

850
 (2) Both cases were based on or include the same claim;

(3) Both notices for dismissal werefiled by the plaintiff; and

(4) When the motion to dismiss filed by the plaintiff was consented to by the defendant on the ground that
the latter paid and satisfied all the claims of the former. 72

The purpose of the "two-dismissal rule" is "to avoid vexatious litigation."  When a complaint is dismissed a second
73

time, the plaintiff is now barred from seeking relief on the same claim.

The dismissal of the second case was without prejudice in view of the "two-dismissal rule"

Here, the first case was filed as an ordinary civil action. It was later amended to include not only new defendants but
new causes of action that should have been adjudicated in a special proceeding. A motion to dismiss was inevitably
filed by the defendants onthe ground of lack of jurisdiction.

The trial court granted that motion to dismiss, stating that:

A careful perusal of the allegations of the Amended Complaint dated February 10, 1999, filed by Plaintiff Joseph
Cheng, show that additional causes of action were incorporated i.e. extra-judicial settlement of the intestate estate
of Antonio Ching and receivership, subject matters, which should be threshed out in a special proceedings case.
This is a clear departure from the main cause of action in the original complaint which is for declaration of nullity of
certificate of titles with damages. And the rules of procedure which govern special proceedings case are different
and distinct from the rules of procedure applicable in an ordinary civil action.

In view of the afore-going, the court finds the Motion to Dismiss filed by Atty. Maria Lina Nieva S. Casals to be
meritorious and the Court is left with no alternative but to dismiss as it hereby dismisses the Amended Complaint.

However, on motion of Atty. Mirardo Arroyo Obias, counsel for the plaintiffs, he is given a period of fifteen (15) days
from today, within which to file an appropriate pleading, copy furnished to all the parties concerned.

....

SO ORDERED. 74

Petitioners are of the view that when Atty. Mirardo Arroyo Obias failed to file the appropriate pleading within fifteen
(15) days, he violated the order of the court. This, they argue, made the original dismissal an adjudication upon the
merits, in accordance with Rule 17, Section 3, i.e., a dismissal through the default of the plaintiff. Hence, they argue
that when respondents filed the second case and then caused its dismissal, the dismissal should have been with
prejudice according to Rule 17, Section 1, i.e., two dismissals caused by the plaintiff on the same claim.
Unfortunately, petitioners’ theory is erroneous.

The trial court dismissed the first case by granting the motion to dismiss filed by the defendants. When it allowed
Atty. Mirardo Arroyo Obias a period of fifteen (15) days tofile an appropriate pleading, it was merely acquiescing to a
request made bythe plaintiff’s counsel that had no bearing on the dismissal of the case.

Under Rule 17, Section 3, a defendant may move to dismiss the case if the plaintiff defaults; it does not contemplate
a situation where the dismissal was due to lack of jurisdiction. Since there was already a dismissal prior to plaintiff’s
default, the trial court’s instruction to file the appropriate pleading will not reverse the dismissal. If the plaintiff fails to
file the appropriate pleading, the trial court does not dismiss the case anew; the order dismissing the case still
stands.

The dismissal of the first case was done at the instance of the defendant under Rule 16, Section 1(b) of the Rules of
Civil Procedure, which states:

SECTION 1. Grounds.— Within the time for but before filing the answer to the complaint or pleading asserting a
claim, a motion to dismiss may be made on any of the following grounds:

....

(b) That the court has no jurisdiction over the subject matter of the claim;

....

Under Section 5 of the same rule,  a party may re-file the same action or claim subject to certain exceptions.
75

851
Thus, when respondents filed the second case, they were merely refiling the same claim that had been previously
dismissed on the basis of lack of jurisdiction. When they moved to dismiss the second case, the motion to dismiss
can be considered as the first dismissal at the plaintiff’s instance.

Petitioners do not deny that the second dismissal was requested by respondents before the service of any
responsive pleadings. Accordingly, the dismissal at this instance is a matter of right that is not subject to the trial
court’s discretion. In O.B. Jovenir Construction and Development Corporation v. Macamir Realty and Development
Corporation: 76

[T]he trial court has no discretion or option to deny the motion, since dismissal by the plaintiff under Section 1, Rule
17 is guaranteed as a matter of right to the plaintiffs. Even if the motion cites the most ridiculous of grounds for
dismissal, the trial court has no choice but to consider the complaint as dismissed, since the plaintiff may opt for
such dismissal as a matter of right, regardless of ground.  (Emphasis supplied)
77

For this reason, the trial court issued its order dated November 22, 2002 dismissing the case, without prejudice. The
order states:

When this Motion was called for hearing, all the plaintiffs namely, Joseph Cheng, Jaime Cheng, Mercedes Igne and
Lucina Santos appeared without their counsels. That they verbally affirmed the execution of the Motion to Dismiss,
as shown by their signatures over their respective names reflected thereat. Similarly, none of the defendants
appeared, except the counsel for defendant, Ramon Chang [sic], who manifested that they have not yet filed their
Answer as there was a defect in the address of Ramon Cheng [sic] and the latter has not yet been served with
summons.

Under the circumstances, and further considering that the defendants herein have not yet filed their Answers nor
any pleading, the plaintiffs has [sic] the right to out rightly [sic] cause the dismissal of the Complaint pursuant to
Section 2, Rule 17 of the 1997 Rules of Civil Procedure without prejudice. Thereby, and as prayed for, this case is
hereby ordered DISMISSED without prejudice.

SO ORDERED.  (Emphasis supplied)

78

When respondents filed the third case on substantially the same claim, there was already one prior dismissal at the
instance of the plaintiffs and one prior dismissal at the instance of the defendants. While it is true that there were two
previous dismissals on the same claim, it does not necessarily follow that the re-filing of the claim was barred by
Rule 17, Section 1 of the Rules of Civil Procedure. The circumstances surrounding each dismissal must first be
examined to determine before the rule may apply, as in this case.

Even assuming for the sake of argument that the failure of Atty. Mirardo Arroyo Obias to file the appropriate
pleading in the first case came under the purview of Rule 17, Section 3 of the Rules of Civil Procedure, the dismissal
in the second case is still considered as one without prejudice. In Gomez v. Alcantara: 79

The dismissal of a case for failure to prosecute has the effect of adjudication on the merits, and is necessarily
understood to be with prejudice to the filing of another action, unless otherwise provided in the order of dismissal.
Stated differently, the general rule is that dismissal of a case for failure to prosecute is to be regarded as an
adjudication on the merits and with prejudice to the filing of another action, and the only exception is when the order
of dismissal expressly contains a qualification that the dismissal is without prejudice.  (Emphasis supplied)
80

In granting the dismissal of the second case, the trial court specifically orders the dismissal to be without prejudice.
It is only when the trial court’s order either is silent on the matter, or states otherwise, that the dismissal will be
considered an adjudication on the merits.

However, while the dismissal of the second case was without prejudice, respondents’ act of filing the third case
while petitioners’ motion for reconsideration was still pending constituted forum shopping.

The rule against forum shopping and the "twin-dismissal rule"

In Yap v. Chua: 81

Forum shopping is the institution of two or more actions or proceedings involving the same parties for the same
cause of action, either simultaneously or successively, on the supposition that one or the other court would make a
favorable disposition. Forum shopping may be resorted to by any party against whom an adverse judgment or order
has been issued in one forum, in an attempt to seek a favorable opinion in another, other than by appeal or a
special civil action for certiorari. Forum shopping trifles with the courts, abuses their processes, degrades the
administration of justice and congest court dockets. What iscritical is the vexation brought upon the courts and the
litigants by a party who asks different courts to rule on the same or related causes and grant the same or
substantially the same reliefs and in the process creates the possibility of conflicting decisions being renderedby the

852
different fora upon the same issues. Willful and deliberate violation of the rule against forum shopping is a ground
for summary dismissal of the case; it may also constitute direct contempt.

To determine whether a party violated the rule against forum shopping, the most important factor toask is whether
the elements of litis pendentiaare present, or whether a final judgment in one case will amount to res judicatain
another; otherwise stated, the test for determining forum shopping is whether in the two (or more) cases pending,
there is identity of parties, rights or causes of action, and reliefs sought.  (Emphasis supplied)
82

When respondents filed the third case, petitioners’ motion for reconsideration of the dismissal of the second case
was still pending. Clearly, the order of dismissal was not yet final since it could still be overturned upon
reconsideration, or even on appeal to a higher court.

Moreover, petitioners were not prohibited from filing the motion for reconsideration. This court has already stated in
Narciso v. Garcia  that a defendant has the right to file a motion for reconsideration of a trial court’s order denying
83

the motion to dismiss since "[n]o rule prohibits the filing of such a motion for reconsideration."  The second case,
84

therefore, was still pending when the third case was filed.

The prudent thing that respondents could have done was to wait until the final disposition of the second case before
filing the third case. As it stands, the dismissal of the second case was without prejudice to the re-filing of the same
claim, in accordance with the Rules of Civil Procedure. In their haste to file the third case, however, they
unfortunately transgressed certain procedural safeguards, among which are the rules on litis pendentiaand res
judicata.

In Yap:

Litis pendentiaas a ground for the dismissal of a civil action refers to that situation wherein another action is pending
between the same parties for the same cause of action, such that the second action becomes unnecessary and
vexatious. The underlying principle of litis pendentia is the theory that a party is not allowed to vex another more
than once regarding the same subject matter and for the same cause of action. This theory is founded on the public
policy that the same subject matter should not be the subject of controversy incourts more than once, in order that
possible conflicting judgments may be avoided for the sake of the stability of the rights and status of persons.

The requisites of litis pendentiaare: (a) the identity of parties, or at least such as representing the same interests in
both actions; (b) the identity of rights asserted and relief prayed for, the relief being founded on the same facts; and
(c) the identity of the two cases such that judgment in one, regardless ofwhich party is successful, would amount to
res judicatain the other.  (Emphasis supplied)
85

There is no question that there was an identity of parties, rights, and reliefs in the second and third cases. While it
may be true that the trial court already dismissed the second case when the third case was filed, it failed to take into
account that a motion for reconsideration was filed in the second case and, thus, was still pending. Considering that
the dismissal of the second case was the subject of the first certiorari case and this present petition for review, it can
be reasonably concluded that the second case, to this day, remains pending.

Hence, when respondents filed the third case, they engaged in forum shopping. Any judgment by this court on the
propriety of the dismissal of the second case will inevitably affect the disposition of the third case.

This, in fact, is the reason why there were two different petitions for certiorari before the appellate court. The
omnibus order dated July 30, 2004 denied two pending motions by petitioners: (1) the motion for reconsideration in
the second case and (2) the motion to dismiss in the third case. Since petitioners are barred from filing a second
motion for reconsideration of the second case, the first certiorari case was filed before the appellate court and is
now the subject of this review. The denial of petitioners’ motion for reconsideration in the third case, however, could
still be the subject of a separate petition for certiorari. That petition would be based now on the third case, and not
on the second case.

This multiplicity of suits is the veryevil sought to be avoided by the rule on forum shopping. In Dy v. Mandy
Commodities Co., Inc.,  the rule is that:
86

Once there is a finding of forum shopping, the penalty is summary dismissal not only of the petition pending before
this Court, but also of the other case that is pending in a lower court. This is so because twin dismissal is a punitive
measure to those who trifle with the orderly administration of justice.  (Emphasis supplied)
87

The rule originated from the 1986 case of Buan v. Lopez, Jr.  In Buan, petitioners filed a petition for prohibition with
88

this court while another petition for prohibition with preliminary injunction was pending before the Regional Trial
Court of Manila involving the same parties and based on the same set of facts. This court, in dismissing both
actions, stated:

853
Indeed, the petitioners in both actions . . . have incurred not only the sanction of dismissal oftheir case before this
Court in accordance with Rule 16 of the Rules of Court, but also the punitive measure of dismissal of both their
actions, that in this Court and that in the Regional Trial Court as well. Quite recently, upon substantially identical
factual premises, the Court en banchad occasion to condemn and penalize the act of litigants of filing the same suit
in different courts, aptly described as "forum shopping[.]" 89

The rule essentially penalizes the forum shopper by dismissing all pending actions on the same claim filed in any
court. Accordingly, the grant of this petition would inevitably result in the summary dismissal of the third case. Any
action, therefore, which originates from the third case pending with any court would be barred by res judicata.

Because of the severity of the penalty of the rule, an examination must first be made on the purpose of the
rule. Parties resort to forum shopping when they file several actions of the same claim in different forums in the
1âwphi1

hope of obtaining a favorable result. It is prohibited by the courts as it "trifle[s] with the orderly administration of
justice." 90

In this case, however, the dismissal of the first case became final and executory upon the failure of
respondents’counsel to file the appropriate pleading. They filed the correct pleading the second time around but
eventually sought its dismissal as they"[suspected] that their counsel is not amply protecting their interests as the
case is not moving for almost three (3) years."  The filing of the third case, therefore, was not precisely for the
91

purpose of obtaining a favorable result butonly to get the case moving, in an attempt to protect their rights.

It appears that the resolution on the merits of the original controversy between the parties has long beenmired in
numerous procedural entanglements. While it might be more judicially expedient to apply the "twin-dismissal rule"
and disallow the proceedings in the third case to continue, it would not serve the ends of substantial justice. Courts
of justice must always endeavor to resolve cases on their merits, rather than summarily dismiss these on
technicalities: [C]ases should be determined on the merits, after all parties have been given full opportunity to
ventilate their causes and defenses, rather than on technicalities or procedural imperfections. In that way, the ends
of justice would be served better. Rules of procedure are mere tools designed to expedite the decision or resolution
of cases and other matters pending in court. A strict and rigid application of rules, resulting in technicalities that tend
to frustrate rather than promote substantial justice, must be avoided.In fact, Section 6 of Rule 1 states that the Rules
[on Civil Procedure] shall be liberally construed in order to promote their objective of ensuring the just, speedy and
inexpensive disposition of every action and proceeding.  (Emphasis supplied)
92

The rule on forum shopping will not strictly apply when it can be shown that (1) the original case has been dismissed
upon request of the plaintiff for valid procedural reasons; (2) the only pending matter is a motion for reconsideration;
and (3) there are valid procedural reasons that serve the goal of substantial justice for the fresh new· case to
proceed.

The motion for reconsideration filed in the second case has since been dismissed and is now the subject of a
petition for certiorari. The third case filed apparently contains the better cause of action for the plaintiffs and is now
being prosecuted by a counsel they are more comfortable with. Substantial justice will be better served if
respondents do not fall victim to the labyrinth in the procedures that their travails led them. It is for this reason that
we deny the petition. WHEREFORE, the petition is DENIED. The Regional Trial Court of Manila, Branch 6 is
ordered to proceed with Civil Case No. 02-105251 with due and deliberate dispatch.

SO ORDERED.

854
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 208976               October 13, 2014

THE HONORABLE OFFICE OF THE OMBUDSMAN, Petitioner, 

vs.
LEOVIGILDO DELOS REYES, JR. Respondent.

RESOLUTION

LEONEN, J.:

This resolves the petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of Appeals'
decision  dated March 1, 2013, which set aside the Office of the Ombudsman's decision and order in OMB-C-A-04-
1

0309-G finding respondent Leovigildo Delos Reyes, Jr. guilty of grave misconduct and gross neglect of duty,  and 2

order dated August 29, 2013, which denied petitioner Office of the Ombudsman's motion for reconsideration.

The facts as summarized by the Court of Appeals are as follows:

To generate more funds in linewith its mandate, the Philippine Charity Sweepstakes Office (PCSO) maintains On-
line Lottery Terminals in its main office and in provincial district offices. The Marketing and On-line Division of
PCSO’s Central Operations Department (COD) manages the terminals in the main office under Agency Number 14-
5005-1.  Respondent Leovigildo Delos Reyes, Jr. (Delos Reyes) served as the COD Division Chief.
3 4

On June 13, 2001, PCSO auditorssubmitted a consolidated report based on a surprise audit conducted on June 5,
2001.  The auditors found that the cash and cash items under Delos Reyes’ control were in order.  However, the
5 6

auditors recommended thatthe lotto proceeds be deposited in a bank the next working day instead of Delos Reyes
keeping the lotto sales and proceeds in a safe inside his office. 7

On June 5, 2002, COD Manager Josefina Lao instructed OIC Division Chief of the Liaison and Accounts
Management Division Teresa Nucup (Nucup) to conduct an account validation and verification to reconcile accounts
due to substantial outstanding balances as of May 31, 2002.  On August 16, 2002, Nucup reported that Agency No.
8

14-5005-1 had unremitted collections in the amount of ₱428,349.00 from May 21, 2001 to June 3, 2001.  The 9

amount was subsequently reduced to ₱387,879.00 excluding penalties. 10

Nucup also found that "there was a deliberate delay in the submission of the periodic sales report; that the partial
remittance of total sales were made to cover previous collections; and that the unremitted collections were attributed
to Cesar Lara, Cynthia Roldan, Catalino Alexandre Galang, Jr., who were all employed by [PCSO] as Lottery
Operations Assistants II, and Elizabeth Driz, the Assistant Division Chief." 11

After conducting its own investigation, the PCSO Legal Department recommended filing formal charges against
Delos Reyes and Elizabeth Driz (Driz) for dishonesty and gross neglect of duty. The PCSO Legal Department found
that the Lottery Operations Assistants turned over the lotto proceeds and lotto ticket sales reports to Delos Reyes as
the Division Chief. In case of his absence, the proceeds and reports were turned over to Driz.  Driz would then
12

deposit the proceeds in the bank. If both Delos Reyes and Driz were absent, the proceeds would be placed in the
vault under Delos Reyes’ control and deposited the next banking day. 13

On May 14, 2003, formal charges were filed against Delos Reyes and Driz, with the cases docketed as
Administrative Case Nos. 03-01 and 03-02, respectively.  Delos Reyes and Driz were preventively suspended for 90
14

days.15

On June 8, 2004, PCSO filed an affidavit-complaint with the Office of the Ombudsman.  Delos Reyes and Driz were
16

criminally charged with malversation of public funds or property under Article 217 of the Revised Penal Code, and
administratively charged with dishonesty and gross neglect of duty under Section 46(b)(1) and (3) of Book V of
Executive Order No. 292. 17

After the submission of the parties’ pleadings, the Office of the Ombudsman rendered the decision dated June 10,
2006 in OMB-C-A-04-0309-G finding Delos Reyes and Driz guilty of grave misconduct and gross neglect of duty,
and ordering their dismissal from service. The dispositive portion of the decision reads:

WHEREFORE, premises considered, respondents, Leovigildo T. Delos Reyes, Jr. and Elizabeth G. Driz, are found
guilty for Grave Misconduct and Gross Neglect of Duty, and are thus imposed the penalty of DISMISSAL from the
855
service, including all the accessory penalties of, cancellation of eligibility, forfeitureof leave credits and retirement
benefits, and disqualification for reemployment in the government service.

The complaint for Dishonesty filed against the respondent is however Dismissed for insufficiency of evidence.

The Honorable Rosario Uriarte, Chairman and General Manager of the Philippine Charity Sweepstakes Office, is
hereby directed to implement immediately thisdecision pursuant to Memorandum Circular No. 01, Series of 2006.

SO ORDERED. 18

Delos Reyes’ partial motion for reconsideration was denied on November 15, 2007.  He then filed before the Court
19

of Appeals a petition for certiorari docketed as CA-G.R. SP No. 117683 under Rule 65 of the Rules of Court.

On March 1, 2013, the Court of Appeals granted the petition and reversed and set aside the Office of the
Ombudsman’s decision and resolution, thus:

WHEREFORE, the petition is GRANTED and the assailed June 10, 2006 Decision and November 15, 2007 Order,
finding petitioner Leovigildo T. Delos Reyes, Jr. guilty of grave misconduct and gross neglect of duty, are
REVERSED and SET ASIDE. The Philippine Charity Sweepstakes Office (PCSO) is ordered to REINSTATE
petitioner as Chief of the Marketing and On-Line Division, Central Operations Department (COD) of the PCSO, with
full backwages, retirement benefits and emoluments, and without diminution as to his seniority rights from the time
of his dismissal from office until his reinstatement.

SO ORDERED. 20

According to the Court of Appeals, the Office of the Ombudsman disregarded the PCSO’s findings asto Delos
Reyes’ liability for grave misconduct and gross neglect of duty.  The Office of the Ombudsman failed to prove Delos
21

Reyes’ guilt with substantial evidence, and the ruling must be overturned. The Court of Appeals found that it was
Driz who had the specific duty to prepare and consolidate the sales reports and to remit the proceeds to the bank. 22

The Court of Appeals relied on PCSO’s position paper before the Office of the Ombudsman, which stated that Driz’s
manipulation of the lotto sales reports exonerates Delos Reyes from liability.  The Court of Appeals also gave
23

weight to PCSO’s assertion that he had no means of verifying the reports submitted to him by Driz, absent the final
accounting report of another division, the Liaison and Accounts Management Division. 24

The Court of Appeals further held that:

Generally, the Court will not interfere with the investigatory and prosecutorial powers of the Ombudsman, so long as
the rulings are supported by substantial evidence. For the Court to overturn the Ombudsman’s finding, it is
imperative to clearly prove that the Ombudsman acted with grave abuse of discretion. Grave abuse of discretion
refers not merely to palpable errors of jurisdiction, or to violations of the Constitution, the law and jurisprudence, it
refers also to cases in which, for various reasons, there has been a gross misapprehension of facts.  (Citations and
25

original emphasis omitted)

The Office of the Ombudsman and PCSO filed their respective motions for reconsideration.  These were denied by
26

the Court of Appeals in its resolution dated August 29, 2013. 27

On October 29, 2013, the Office of the Ombudsman, through the Office of the Solicitor General, filed the present
petition for review on certiorari. In the resolution dated January 22, 2014, we required Delos Reyes to comment on
the petition.
28

On April 21, 2014, we noted Delos Reyes’ comment dated March 10, 2014 and required the Office of the
Ombudsman to submit its reply.  However, it submitted a manifestation and motion instead.
29

The manifestation and motion dated June 16, 2014, filed by the Office of the Solicitor General, prayed thatthis court
adopt the Office of the Ombudsman’s petition for review on certiorari as its reply to Delos Reyes’ comment. This
was because the comment did not raise any new matter which must be controverted. 30

The manifestation and motion was noted and granted in this court’s resolution dated July 9, 2014. 31

The issues to be resolved in thiscase are: (1) whether the Court of Appeals erred in taking cognizance of the petition
for certiorari under Rule 65 of the Rules of Court despite availability of the remedy under Rule 43 of the Rules of
Court; and (2) whether the Court of Appeals erred in holding that the Office of the Ombudsman committed gross
misapprehension of facts in finding that substantial evidence exists for the administrative charge of grave
misconduct and gross neglect of duty.

856
Petitioner argued that the petition for certiorari under Rule 65 of the Rules of Court was the wrong remedy to assail
the Office of the Ombudsman’s decision before the Court of Appeals.  The proper remedy is a petition for review
32

under Rule 43 of the Rules of Court. In any case, the petition was already filed out of time.  A petition for certiorari is
33

not a substitute for a lost appeal.

34

The Court of Appeals also erred in ruling that the Office of the Ombudsman committed gross misapprehension of
facts despite lack of proof of grave abuse of discretion on the part of the Office of the Ombudsman.  There was 35

substantial evidence to justify the finding of gross misconduct and gross neglect of duty.  Misappreciation of facts or
36

evidence is not equivalent to a finding of grave abuse of discretion. 37

Moreover, citing Section 27 of Republic Act No. 6770, petitioner argued that "findings of fact of the Ombudsman are
conclusive when supported by substantial evidence." 38

In his comment  dated March 10, 2014, respondent relied on the PCSO’s acknowledgement that it was Driz who
39

was solely liable for the missing lotto proceeds. He argued that "Driz was manipulating the bank deposit slips as
against her daily sales report to cover her lapping activities without the knowledge or participation of [respondent]." 40

Respondent assailed the Office ofthe Ombudsman’s argument that respondent had the obligation to ensure Driz’s
deposit of the daily lotto sales proceeds to the bank.  As established from the proceedings before the PCSO up to
41

the Court of Appeals, the task of depositing the proceeds falls squarely on Driz based on her job description. 42

Respondent summarized facts that belie the Office of the Ombudsman’s finding of guilt for grave misconduct,
hence:

(1) Driz made the lapping of funds in a clandestine manner and respondent Delos Reyes had no means to make the
necessary precautionary measures or restorative measures to avoid the misappropriation of funds, (2) there were
no clear-cut guidelines by which Delos Reyes’ actions can be measured against to determine whether his acts were
of such nature to render it a grave misconduct or gross neglect of duty, and (3) it was impossible to pinpoint the
lapping of funds based on Delos Reyes’ functions, the latter cannot be held guilty of simple misconduct, more so, of
grave misconduct[.] 43

Likewise, respondent cannot be held liable for gross neglect of duty. Respondent faithfully discharged his duties as
certified in the Commission on Audit auditor’s report finding the cash and cash items under respondent’s control to
be in order.  There was never a flagrant culpable refusal to perform a duty on respondent’s part.
44 45

Respondent added that "[c]onsidering . . . PCSO, the very institution that initiated this case, sought to exculpate the
respondent from the administrative charges filed against him indicates that there are compelling reasons for this
Honorable Court to review the flawed decisions of the Honorable Office of the Ombudsman." 46

Furthermore, respondent averred thathe has served the PCSO with a clean record for 27 years, with him starting as
a young clerk to support himself in college.  The wrongful actions of a "scheming subordinate"  resulted in his
47 48

termination from service and tarnished his and his family’s reputation.  He asked that justice be given and his
49

innocence proven. 50

We grant the petition.

At the outset, we note that the Court of Appeals initially dismissed the petition for certiorari under Rule 65 filed by
respondent to assail the Office of the Ombudsman’s decision dated June 10, 2006 in OMB-C-A-04-0309-G.  The 51

Court of Appeals, however, reinstated the case "in the interest of substantial justice and in order to afford the parties
the amplest opportunity for the proper and just disposition of their cause." 52

It is settled that appeals from decisions of the Office of the Ombudsman in administrative disciplinary cases should
be appealed to the Court of Appeals under Rule43 of the Rules of Court.  Indeed, certiorari lies to assail the Office
53

of the Ombudsman’s decision when there is

allegation of grave abuse of discretion.  Grave abuse of discretion involves a "capricious and whimsical exercise of
54

judgment tantamount to lack of jurisdiction."  It must be shown that the Office of the Ombudsman exercised its
55

power "in an arbitrary or despotic manner — which must be so patent and gross as to amount to an evasion of a
positive duty or a virtual refusal to perform the duty enjoined or to act at all in contemplation of law — in order to
exceptionally warrant judicial intervention." 56

The prevailing view is that the remedy of certiorari from an unfavorable decision or resolution of the Office of the
Ombudsman is available only in the following situations: a) in administrative cases that have become final and
unappealable where respondent is exonerated or where respondent is convicted and the penalty imposed is public
censure or reprimand, suspension of not more than one month, or a fine equivalent to a one-month salary; and b) in

857
criminalcases involving the Office of the Ombudsman’s determination of probable cause during preliminary
investigation. 57

Furthermore, the writ of certiorari is an extraordinary remedy and is only granted when "there is no appeal, or any
plain, speedy, and adequate remedy in the ordinary course of law. . . ." 58

In Balbastro v. Junio,  this court held that certiorari is not a substitute for a lost appeal. Verily, a petition for review
59

under Rule 43 of the Rules of Court was already proscribed for being filed beyond the reglementary period, thus:

Appeals from decisions in administrative disciplinary cases of the Office of the Ombudsman should be taken to the
CA by way of petition for review under Rule 43 of the 1997 Rules of Civil Procedure, as amended. Rule 43 which
prescribes the manner of appeal from quasi judicial agencies, such as the Ombudsman, was formulated precisely to
provide for a uniform rule of appellate procedure for quasi-judicial agencies. Thus, certiorari under Rule 65 will not
lie, as appeal under Rule 43 is an adequate remedy in the ordinary course of law.

Petitioner failed to file an appeal with the CA within fifteen days from notice of the assailed decision. As noted by the
CA, she filed her petition for certiorari only after 52 days from receiving the denial of her motion for reconsideration
by the Ombudsman. Such remedy cannot prosper as certiorari under Rule 65 cannot be resorted to as a substitute
for the lost remedy of appeal. The remedies of appeal and certiorariare mutually exclusive and not alternative or
successive.  (Citations omitted)
60

In this case, the remedy of an appealvia Rule 43 of the Rules of Court was available to respondent; however, he still
opted to file a petition for certiorari in complete disregard of the rules. The rules and jurisprudence necessitated the
dismissal of the petition before the Court of Appeals. In addition, the petition for certiorari was filed 60 days from the
receipt of the copy of the denial of respondent’s motion for reconsideration, which was beyond the 15-day period to
file an appeal provided in the rules. Liberal application of the rules cannot be invoked to justify a flagrant disregard
of the rules of procedure. 61

The Court of Appeals, thus, erred in granting respondent’s petition for certiorari.

On the issue of the Office of the Ombudsman’s gross misapprehension of facts in finding that substantial evidence
exists for the administrative charge of grave misconduct and gross neglect of duty, we hold that the Court of
Appeals committed reversible error in reversing and setting aside the Office of the Ombudsman’s findings and
decision.

It is settled that "[f]indings of fact by the Office of the Ombudsman when supported by substantial evidence are
conclusive."  Substantial evidence is defined as "such relevant evidence which a reasonable mind may accept as
62

adequate to support a conclusion."  We reiterate that only arbitrariness will warrant judicial intervention of the Office
63

of the Ombudsman’s findings. 64

The records reveal that petitioner did not commit grave abuse of discretion in rendering its assailed decision in
OMB-C-A-04-0309-G.

Misconduct has been defined as a "transgression of some established and definite rule of action, more particularly,
unlawful behavior or gross negligence by a public officer. The misconduct is grave if it involves any of the additional
elements of corruption, willful intent to violate the law or disregard of established rules, which must be proved by
substantial evidence." 65

Meanwhile, gross neglect of duty is:

"[N]egligence characterized by the want of even slight care, or by acting or omitting to act in a situation where there
is a duty to act, not inadvertently but wilfully and intentionally, with a conscious indifference to the consequences,
insofar as other persons may be affected. It is the omission of that care that even inattentive and thoughtless men
never fail to giveto their own property." It denotes a flagrant and culpable refusal or unwillingness of a person to
perform a duty. In cases involving public officials, gross negligence occurs when a breach ofduty is flagrant and
palpable.  (Citations omitted)
66

To establish respondent’s liability for grave misconduct and gross neglect of duty, the Office of the Ombudsman
found that:

. . . both the respondents [have] the authority to receive daily remittances from the tellers.  But all must be handed to
1âwphi1

respondent Delos Reyes, Jr. for the reconciliation of the dailyreports and the proceeds remitted. . . . [Driz] cannot
[deposit the proceeds] without the authority and/or approval of her chief and supervisor, respondent Delos Reyes,
Jr.

858
. . . . As far as Delos Reyes, Jr. is [concerned], he not only has the obligation of monitoring, checking and reconciling
lotto sales proceeds with the reports of the tellers, but is likewise responsible for seeing to the prompt deposits of
these proceeds, he being the chief of the Marketing and On-Line Division and the supervisor of the remitting tellers
of the Main Office. . . . The procedure is quite simple. To safeguard the proceeds of the daily lotto sales, prompt
deposit to the agency’s bank must be made. Yet, they failed to fulfill the same . . . and despite COA’s
recommendation to deposit it immediately to a bank, the respondents failed to heed the same, in apparent and
wanton disregard of their lawful duty.  (Emphasis supplied)
67

Furthermore, as argued by petitioner,respondent’s liability is shown in the following:

First, the Ombudsman investigation revealed that the Commission on Audit, in a Memorandum dated June 13,
2011, submitted a consolidated report recommending that the proceeds of the lotto sales for June 1 to 4, 2001 . . .
be deposited promptly in a bank to avoid any untoward incident.It was respondent’s failure to heed COA’s advice to
promptly deposit the amount found in the vault that caused the loss of the subject amount of ₱387,879.00.

Second, the said vault in which the lost money was kept is subject to the control and custody of the respondent
Leovigildo Delos Reyes, Jr.

Third, based on his Performance and Evaluation System, it is the duty of respondent Delos Reyes to monitor, check,
and reconcile reports and daily remittances of lotto sales submitted by the tellers assigned at the Main Office
(wherethe subject unremitted collections originated) and San Marcelino Outlets. Clearly, he is accountable for the
proceeds of the lotto sales in said outlets.

Fourth, while it is the duty of Elizabeth Driz to deposit the said amount, it is her defense that said deposit must be
made with the authority of respondent Delos Reyes, and any remittances or deposits made without his approval is
considered unauthorized. It would thus be improbable for Driz to have misappropriated the amount without the
connivance of respondent Delos Reyes.  (Emphasis supplied)
68

In administrative cases, it is sufficient that "there is reasonable ground to believe that the petitioner is guilty of the
act or omission complained of, even if the evidence might not be overwhelming." 69

In this case, we find respondent guilty of both grave misconduct and gross neglect of duty.  There is substantial
1âwphi1

evidence supporting the Office of the Ombudsman’s finding that respondent intentionally failed to act on his duty
with a conscious indifference to the consequences. The alleged lack of specific internal control procedures does not
sway this court.

It is undisputed that as Chief of the Marketing and On-Line Division of the COD, respondent was accountable for the
vault and the lotto proceeds placed inside it. As the Division Chief,respondent had the duty to monitor, check, and
reconcile the reports of the daily lotto proceeds. It is true that it was not his job to personally deposit the lotto
proceeds with the bank, as this fell under Driz’s responsibility. However, it was incumbent upon respondent to
ensure that the lotto proceeds deposited in the bank correspond to the reports submitted to him and that the
proceeds are deposited promptly.

Despite such duty, respondent willfully ignored the auditor’s recommendations for prompt deposit ofthe lotto sales
proceeds. He disregarded his duty of overseeing the deposit of the proceeds and wholly relied on Driz’s
representations. Respondent’s act constitutes gross neglect of duty. Similarly, records show that petitioner adduced
substantial evidence to show how respondent flagrantly disregarded the rules and acted with a willful intent to
violate the law, thus, amounting to grave misconduct. The Office of the Ombudsman’s investigation revealed that all
of the daily lotto remittances went through the hands of respondent. It also found that respondent’s authorization
and/or approval was required before Driz could deposit the daily lotto proceeds. Driz’s alleged manipulation of the
bank deposit slips and lapping of funds could not have been missed by respondent had he performed his duties.
Respondent could have easily discovered the lapping of funds if he had checked the deposit records with Driz vis-à-
vis the reports and lotto sales proceeds he had allegedly reconciled upon turn-over of the tellers to him.

This court’s ruling in Arias v. Sandiganbayan,  that heads of offices may rely to a certain extent on their
70

subordinates, will not exonerate respondent in this case. As held in Cesa v. Office of the Ombudsman,  when there
71

are facts that point to an irregularity and the officer failed to take steps to rectify it, even tolerating it, the Arias
doctrine is inapplicable.72

Grave misconduct is punished by dismissal from the service, even for the first offense.  Likewise, gross neglect of
73

duty merits dismissal from the service. 74

In sum, the Court of Appeals erred when it failed to show how the Office of the Ombudsman committed grave abuse
of discretion in rendering the contested decision and order despite the presence of substantial evidence.

859
WHEREFORE, the petition is GRANTED. The Court of Appeals' decision dated March 1, 2013 and resolution dated
August 29, 2013 are REVERSED and SET ASIDE. The Office of the Ombudsman's decision dated June 10, 2006
and order dated November 15, 2007 are REINSTATED. Respondent Leovigildo Delos Reyes, Jr. is DISMISSED
from service, which includes the accessory penalties of cancellation of eligibility, forfeiture of leave credits · and
retirement benefits, and disqualification for re-employment in the government service.

SO ORDERED.

860
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. P-14-3252               October 14, 2014

[Formerly OCA IPI No. 08-2960-P]

JUDGE JUAN GABRIEL H. ALANO, Complainant, 

vs.
PADMA L. SAHI, COURT INTERPRETER, MUNICIPAL CIRCUIT TRIAL COURT, MALUSO,
BASILAN,Respondent.

DECISION

Per Curiam:

This refers to the administrative complaint filed by Judge Juan Gabriel H. Alano (Judge Alano) of the 2nd Municipal
Circuit Trial Court (MCTC) of Sumisip, Maluso and Lantawan, Basilan Province against Padma L. Sahi (Sahi), Court
Interpreter I of the same court, charging her with violations of Sections 1  and 2,  Canon 1 of the Code of Conduct for
1 2

Court Personnel,  violation of Section 3(a) of Republic Act No. 3019,  otherwise known as the Anti-Graft and Corrupt
3 4

Practices Act, Grave Misconduct and Absence Without Leave (AWOL).

In the complaint, Judge Alano alleged that Sahi brokered for party litigants and solicited money and gifts in
exchange for favorable decisions in the election protest cases pending before his court, despite constant reminders
to his staff that they should never demand, solicit, or receive money, gifts or other benefits from any party litigants.
For particulars:

1. During the months of November to December 2007, there were 19 election protests involving barangay
elective officials filed in the MCTC. Sahi was constantly telling him that some of the protestants and
protestees were offering cash between ₱50,000.00 and ₱100,000.00 in exchange for favorable judgments.

2. In the middle of December 2007, Sahi went to Judge Alano’s chamber and informed him that Arzad, the
protestee in E₱11-2007, offered to give him a brand new M-4 carbine assault rifle worth at least
₱180,000.00 "with no strings attached." So as not to arouse Sahi’s suspicions that she was discreetly being
investigated, Judge Alano told her that he preferred to buy a Russian AK-47 assault rifle (Russian AK-47)
instead. On January 18, 2008, Sahi informed him that she has a Russian AK-47 at her home for sale for
₱70,000.00. After viewing it, Judge Alano offered to buy the same for ₱30,000.00 since he noted some
defects. Sahi immediately agreed and insisted that he bring the firearm home. Judge Alano’s suspicion that
the firearm was part of a bribe was confirmed by Sahi herself.

In April 2008, Sahi informed Judge Alano of Arzad’s new offer of a Honda 200R motorcycle in exchange for
a favorable judgment.

3. Sometime in November 2007, Sahi demanded from Sawari, a protestee in EP09-2007, to pay the court
₱50,000.00 in exchange for a favorable judgment. Sahifurther demanded and received from him the amount
of ₱5,000.00 for the alleged transportation expenses of Judge Alano to Manila.

4. Abdurajak A. Jalil (Jalil), protestant in EP03-2007, claimed that sometime in December 2007, Sahi
solicited from him the amount of ₱60,000.00 for the purchase of a printer for the court. Through his son, he
gave Sahi the initial amount of ₱10,000. Upon inquiry, he learned that Sahi never bought any printer but
instead used the said amount for her own benefit.

5. Sahi received bribe money in the amount of ₱50,000.00 and ₱5,000.00 from the Barangay Chairman of
Mebak, Sumisip, Basilan allegedly intended for JudgeAlano. She further stated that the former Mayor of
Sumisip, Jim Hataman, was collecting ₱200,000.00 from each barangay captain through Judge Alano’s
father.

Judge Alano further claimed that, on May 4, 2008, Sahi went to his residence to inform him that she already
returned the ₱50,000.00 to Sawari and that there was no truth to the allegations that she received ₱5,000.00
allegedly for Judge Alano’s travel to Manila.

On Sahi’s case of AWOL, Judge Alano also complained that she had not been reporting for work, and did not even
file an official leave application for more than 30 calendar days since the afternoon of June 18, 2008.

861
On July 11 and 24, 2008, Judge Alano requested the Leave Section of the Office of the Administrative Services,
Office of the Court Administrator (OAS-OCA), to drop Sahi from the rolls pursuant to Section 63  of the Omnibus
5

Leave Rules for being on AWOLfor more than 30 calendar days.

In the 1st Indorsement  dated October 6, 2008, Sahi was directed to file her Comment within 10 days from receipt
6

thereof.

On November 17, 2008, Sahi filed her Answer  denying that she defied the order given by Judge Alano in relation to
7

soliciting gifts or money from party litigants. She contended thatshe went inside the chambers of Judge Alano
because the latter requested her to look for a dealer of a Russian AK-47. When she found one through Arzad,
Judge Alano allegedly wanted to view the firearm at her house. The sale, however, was not consummated because
the owner and Judge Alano failed to agree on the purchase price.

She denied that she informed Judge Alano of Arzad’s alleged offer of a brand new motorcycle and that she received
₱5,000.00 from Jalil for Judge Alano’s travel.

She countered that the two witnesses presented against her were the type who can easily be pressured to execute
a document, like affidavits, without being fully aware of its consequences and content.

With respect to Judge Alano’s allegation on her failure to report for work without prior leave, Sahi contended that
she was forced not to report for work on June 10 and 11, 2008 and June 18 until July 2008 because she was having
high fever, prompting her to seek medical help in Basilan. She said that she was found to be suffering from acute
bronchitis  and later on, of urinary tract infection.
8 9

Sahi claimed that she filed her leave applications for the absences incurred and presumed that they were
recommended for approval. She later on discovered that her leave application was just thrown to the waste basket
by Judge Alano.

On August 4, 2008, Sahi narrated that when she reported for work at around 7:30 a.m. she was prohibited by court
personnel to enter the court upon instructions of Judge Alano. On the following day, Sahi reported the incident to
Executive JudgeLeo J. Principe (Judge Principe) and was advised to report, for the meantime, at the Regional Trial
Court (RTC)-Office of the Clerk of Court.

When Sahi did not receive her salary and other benefits for the month of August 2008, she was allegedly forced to
fly to Manila to inquire with the Leave Section of the OAS-OCA regarding her alleged dropping from the rolls and
unclaimed salaries. Upon inquiry, she was informed that her leave application for June 2008 was disapproved while
her July 2008 leave applications were not yet transmitted to the OAS-OCA.

In the Resolution  dated December 14, 2009, the Court referred the instant administrative matter to Judge Principe,
10

RTC, Isabela City, Basilan for investigation, report and recommendation.

On December 1, 2010, acting on Sahi’s request for the inhibition of Judge Principe due to the latter’s close family
relationship with Judge Alano, the Court ordered the transfer of the administrative case to Executive Judge Reynerio
G. Estacio (Judge Estacio) of the RTC of Zamboanga Del Sur, Branch 14 for investigation,report and
recommendation.

On July 25, 2013, Judge Estacio submitted his report and Recommendation  dated July 12, 2013 with the following
11

findings:

The undersigned is convinced that respondent had indeed, been into the activities of brokering for party litigants and
soliciting money or gifts, in consideration for favorable decision. The respondent admitted to having heard herself of
rumors that she received ₱70,000.00 from a party litigant and that the same was indeed, brought to the attention of
the complainant. Rumors on respondent’s activities prompted complainant to subject the respondent to
investigation, lest he would be suspected of being involved therein, if not faulted for tolerating respondent’s acts.

The respondent was said to have been calling the complainant’s attention to the offer either in cash of various
amounts or in kind, by the protestants and protestees in exchange for a favorable decision in their election protest
cases pending before his sala in connection with the 2007 Barangay Election, despite his constant reminder to her
not to entertain the same. The complainant has been cautioning the respondent not to demand, solicit or receive
money or other gifts or benefits from any party litigant.

True indeed, the said actsof the respondent found confirmation in the Affidavit of Complaint of Gajad Sawari,
Protestee in EPC No. 09-2007, subscribed and sworn to on April 29, 2008, wherein he declared that respondent
demanded from him ₱50,000.00 in consideration of her promise for a favorable action on the election protest case
filed against him, which amount, he delivered to her at her house at Barangay Kaumpurnah, Isabela City, Basilan,
on January 4, 2008; and in his Supplemental Affidavit which he subscribed and swore to on May 13, 2008, wherein

862
he declared that in April 2008, the respondent demanded from him the amount of ₱5,000.00 allegedly, for the
complainant’s travel to Manila, which amount, he delivered tothe respondent also at the latter’s house at
Kaumpurnah, Isabela City.

Similarly, Abdurajak Jalil, protestee in EPC No. 06-2007, in his affidavit of complaint subscribed and sworn to on
May 15, 2008, declared that during the pendency of his case sometime in December 2007, and while he was at the
Isabela City Hallof Justice, the respondent solicited from him the amount of [₱60,000.00], allegedly, for the purchase
of a printer for court’s use with the assurance that he will get a favorable decision in the election protest case filed
against him; that he was able to agree with her to give the amount but on installment basis with the first payment of
₱10,000.00 delivered to her by his son, Hassan Jalil, for which the respondent issued a receipt.

Hassan Jalil confirmed the sworn statement of his father, Abdujarak Jalil, in his affidavit subscribed and sworn to
also on May 15, 2008. He also identified respondent’s receipt x x x. Comparing the signature appearing on the
receipt with the signature of the respondent appearing on the Clerk of Court’s Log Book of Attendance, the
undersigned finds that the signature appearing on the receipt is strikingly, similar to the signature of the respondent
appearing on the Clerk of Court’s Log Book of Attendance.

The respondent on the other hand, had only to say that it is in the height of stupidity and hence, unbelievable that,
she would sign the receipt which could be used against her, adding that the questioned receipt could easily be
procured, implying that the same is fabricated evidence. The respondent could have dared the questioned signature
subject to handwriting examination, to prove that it is indeed, a forgery. She however, did not and did not even,
attempt.12

Judge Estacio recommended that Sahi be dismissed from service, with prejudice to re-employment in any branch,
instrumentality or agency of the government, including government-owned and controlled corporation, and forfeiture
of all her benefits, except accrued leave credits. The findings and the recommendation of the Investigating Judge
are well-taken.

As found by Judge Estacio, the evidence on record undeniably shows that during several instances, Sahi solicited
and received various sums of money from party litigants in the election protest cases pending before the 2nd MCTC
of Sumisip, Maluso and Lantawan, Basilan Province despite constant reminders from Judge Alano not to demand,
solicit or receive money or other gifts or benefits from any party litigant. In fact, Judge Alano’s discreet investigation
was corroborated by affidavits executed by the parties who stated that Sahi exacted money from them in exchange
for favorable judgments in the sala of Judge Alano. 13

Moreover, the records of the case will show that the party litigants in the election protest cases pending before
Judge Alano’s court had the impression that Sahi was acting as an agent of Judge Alano. This explained why
several protestants and protestees inquired from several court personnel if Judge Alano received the bribe money
they gave through Sahi. Convincingly, the Affidavits of Sawari and Jalil showed Sahi’s corrupt practice of soliciting
money in exchange for favorable judgments.

To escape liability, Sahi proffered her defense of bare denial and self-serving claim that she never acted as broker
to any party litigant. According to her, the affidavits executed by the party litigants should not be taken as gospel
truth because they are the kind of persons who can easily be pressured to execute a document without being fully
aware of its consequences and contents. It bears to note, however, that during the hearing held on March 30, 2011
at about 2:00 p.m., Sawari and Jalil, together with the latter’s son, Hassan Jalil, appeared and re-affirmed their
respective affidavits.

Clearly, Sahi failed to overcome the positive, candid, and straightforward testimonies of the complaining party
litigants. By jurisprudence, "denial is an intrinsically weak defense which must be buttressed by strong evidence of
non-culpability to merit credibility."  In the present case, the investigating judge took note of the fact that Sahi failed
14

to present even a single witness to believe the accusations hurled against her.

Time and time again, the Court has stressed that the behavior of all employees and officials involved in the
administration of justice, from judges to the most junior clerks, is circumscribed with a heavy responsibility.  "That is
15

why, the Court provides the rule against any form of solicitations of gift or other pecuniary or material benefits or
receipts of contributions for himself/herself from any person, whether or not a litigant or lawyer, to avoid any
suspicion that the major purpose of the donor is to influence the court personnel in performing official duties." 16

Section 2, Canon I of the Code of Conduct for Court Personnel, provides that "court personnel shall not solicit or
accept any gift, favor or benefit based on any explicit or implicit understanding that such gift, favor or benefit shall
influence their official actions," while Section 2(e), Canon III states that "court personnel shall not x x x solicit or
accept any gift, loan, gratuity, discount, favor, hospitality or service under circumstances from which it could
reasonably be inferred that a major purpose of the donor is to influence the court personnel in performing official
duties."

863
In the present case, the corrupt practice of Sahi in soliciting and receiving bribe money from party litigants on the
pretext that they will obtain a favorable judgment undoubtedly degraded the Judiciary and diminished the respect
and regard of the people for the court and its personnel. Such practice constitutes grave misconduct in office which
is appalling. It is a grave offense that carries an equally grave penalty. Under Section 22(c) of Rule XIV of the
Omnibus Rules Implementing Book V of Executive Order No. 292 and Other Pertinent Civil Service Laws, gross
misconduct is classified as a grave offense. The penalty for this offense is dismissal even for the first offense.

This Court has been resolute in its drive to discipline and, if warranted, to remove from the service errant
magistrates, employees and even Justices of higher collegiate appellate courts for any infraction that tends to give
the Judiciary a bad name. The Court has been unflinching in imposing discipline on errant personnel or in purging
the ranks of those undeserving to remain in the service, suchas in this case. Thus, this Court finds the respondent
administratively liable for improper solicitation and imposes the penalty prescribed by prevailing rules and
jurisprudence, which is dismissal from service on the first offense. 17

Anent Sahi’s continuous absences, this Court finds that she, indeed, had been AWOL from June 18, 2008 until
September 24, 2008, or for 67 consecutive working days. 18

The records show that Sahi’s absences from June 18, 2008 to June 30, 2008 were unauthorized because her
application for leave was disapproved by Judge Alano on the ground, among others, that no notice was given by
Sahi regarding her alleged illness despite reports from court employees that she was able to personally claim her
paycheck on June 20, 2008 and that she was seen loitering around the City prior to that date.

On Sahi’s claim that she submitted her sick and vacation leave application for the month of July, the records show
that the same was neither acted upon nor filed at all with the court.

Pursuant to Section 63, Rule XVI of the Omnibus Rules on Leave, as amended by Civil Service Resolution No.
070631, an employee’s AWOL for at least 30 working days warrants his separation from the service. The Rule
specifically provides:

Sec. 63. Effect of absences without approved leave. — An official or employee who is continuously absent without
approved leave for at least thirty (30) working days shall be considered on absence without official leave (AWOL)
and shall be separated from the service or dropped from the rolls without prior notice. However, when it is clear
under the obtaining circumstances that the official or employee concerned, has established a scheme to circumvent
the rule by incurring substantial absences though less than thirty working (30) days3x in a semester, such that a
pattern is already apparent, dropping from the rolls without notice may likewise be justified.

If the number of unauthorized absences incurred is less than thirty (30) working days, a written Return-to-Work-
Order shall be served to him at his last known address on record. Failure on his part to report for work within the
period stated in the order shall be valid ground to drop him from the rolls.

In this connection, Section 63, Rule XVI of the Omnibus Civil Service Rules and Regulations, as amended by
Circular No. 14, series of 1999, provides:

Sec. 63. Effect of absences without approved leave. – An official or employee who is continuously absent without
approved leave for at least thirty (30) calendar days shall be considered on absence without official leave (AWOL)
and shall be separated from the service or dropped from the rolls without prior notice. He shall, however, be
informed, at his address appearing on his 201 files, of his separation from the service, not later than five (5) days
from its effectivity.

Thus, under civil service rules, Sahi should be dropped from the rolls on account of her continued unauthorized
absence since June 18, 2008. Proofs of Sahi’s ongoing AWOL are: (1) her disapproved leave application for the
month of June 2008; (2) the absence of any application for leave during the remaining relevant dates; (3) the letters
dated July 11 and 24, 2008 of Judge Alano to the Leave Section of the OAS-OCA, stating that Sahi had been on
AWOL for more than 30 calendar days; and (4) the Certification  issued by Clerk of Court Pawaki dated September
19

24, 2008 stating that Sahi had not been reporting for work since June 18, 2008 and that she had not given any
notice of her absences.

A court employee who goes on AWOLfor a prolonged period of time disrupts the normal functioning of the
organization  and delays its operations. His conduct is prejudicial to the best interest of public service.  It
20 21

contravenes a public servant’s duty toserve the public with utmost degree of responsibility, integrity, loyalty and
efficiency.  It also manifests disrespect for his superiors and colleagues, in particular, and for the service and the
22

public at large, in general.

By going on AWOL, Sahi grossly ignored and abandoned the duties of her office.  She failed to remain faithful to the
1âwphi1

high standards of public accountability imposed on all those in government service. 23

864
Moreover, Judge Estacio also took note of Sahi’s poor performance rating in the discharge of her duties and
responsibilities as Court Interpreter. The report and recommendation of Judge Estacio stated:

The absences of [Sahi] from June 19 to August 1, 2008, were incurred without prior approval. [Sahi] has been
remiss in her duties as interpreter of the court and her continuous absence from work has been prejudicial to public
service. In fact, [Judge Alano] has expressed his dissatisfaction with her performance for the past four (4) years x x
x.
24

The Court has repeatedly held that the conduct and behavior of everyone connected with an office charged with the
dispensation of justice is circumscribed with the heavy burden of responsibility. The Court cannot countenance any
act or omission on the part of all those involved in the administration of justice which would violate the norm of public
accountability and diminish or even justtend to diminish the faith of the people in the Judiciary.
25

WHEREFORE, the Court finds Padma L. Sahi, Court Interpreter I of the 2nd Municipal Circuit Trial Court ofSumisip,
Maluso and Lantawan, Basilan Province, GUILTY of GRAVE MISCONDUCT and imposes upon her the penalty of
DISMISSAL with forfeiture of retirement benefits except leave credits, with prejudice to re-employment in any
branch, instrumentality or agency of the government, including government-owned or controlled corporations.

SO ORDERED.

865
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 181760               October 14, 2014

ATTY. ANACLETO B. BUENA, JR., MNSA, in his capacity as Regional Director of Regional Office No. XVI,
Civil Service Commission, Autonomous Region in Muslim Mindanao, Cotabato City, Petitioner, 
vs.
DR. SANGCAD D. BENITO, Respondent.

DECISION

LEONEN, J.:

The Regional Governor of the Autonomous Region in Muslim Mindanao has the power to appoint officers in the
region's civil service. However, if there is no regional law providing for the qualifications for the position at the time of
appointment, the appointee must satisfy the civil service eligibilities required for the position in the national
government to be appointed in a permanent capacity.

This is a petition for review on certiorari  of the Court of Appeals’ resolution,  dismissing the appeal of the Civil
1 2

Service Commission Regional Office for the Autonomous Region in Muslim Mindanao (Regional Office) for failure to
file a memorandum. The Regional Office appealed the Regional Trial Court’s decision,  ruling that the position of
3

Assistant Schools Division Superintendent of the Department of Education, Division of Lanao del Sur-I, does not
require career executive service eligibility.

On August 27, 2004, Dr. Parouk S. Hussin (Regional Governor Hussin), then Regional Governor of the Autonomous
Region in Muslim Mindanao, appointed Dr. Sangcad D. Benito (Dr. Benito) as Assistant Schools Division
Superintendent of the Department of Education, Division of Lanao del Sur-I, ina temporary capacity.  On June 20,4

2005, Regional Governor Hussin reappointed Dr. Benito as Assistant Schools Division Superintendent, this time in a
permanent capacity.  To change the status of Dr. Benito’s appointment from temporary to permanent, Regional
5

Governor Hussin requested the Civil Service Commission Regional Office for the Autonomous Region in Muslim
Mindanao to attest to Dr. Benito’s permanent appointment.  However, the Regional Office, through Regional Director
6

Anacleto B. Buena, Jr. (Regional Director Buena), returnedthe appointment to the Regional Governor. According to
the Regional Office, Dr. Benito did not possess the career executive service eligibility required for the position of
Assistant Schools Division Superintendent. 7

On August 24, 2005, Dr. Benito filed a petition for mandamus  with the Regional Trial Court, Branch 9, Lanao del
8

Sur, to compel the Regional Office to attest to his permanent appointment as Assistant Schools Division
Superintendent. He argued that the position does not belong to the Career Executive Service under Book V, Title I,
Subtitle A, Chapter 2, Section 7(3) of the Administrative Code of 1987.  Consequently, the position of Assistant
9

Schools Division Superintendent does not require career executive service eligibility. 10

Dr. Benito claimed that it was the Regional Office’s ministerial duty to attest to his appointment.  Under Article VII,
11

Section 19 of Republic Act No. 9054,  the Regional Governor of the Autonomous Region in Muslim Mindanao is the
12

appointing authority for positions in the civil service in the region. Since the appointing authority already exercised
his discretion, the Regional Office allegedly had no choicebut to attest to Dr. Benito’s appointment. 13

In his answer,  Regional Director Buena claimed that the position of Assistant Schools Division Superintendent
14

meets the following criteria for positions in the Career Executive Service: The position is career, ranks higher than
Division Chief, has a salary grade of 25, and entails performance of executive and managerial functions and
supervisory responsibility over a division.  The permanent appointee to the position must, therefore, have career
15

executive service eligibility.

16

According to Regional Director Buena, the Regional Office recognizes the autonomy of the Autonomous Region in
Muslim Mindanao. However, until the region enacts its own regional civil service law, the Regional Office shall carry
on with the Civil Service Commission’s mandate under the Constitution to promote and enforce civil service laws
and rules.17

For Dr. Benito’s failure to exhaust administrative remedies before filing a petition for mandamus, Regional Director
Buena prayed that the trial court dismiss the petition for mandamus. 18

866
The trial court noted that Dr. Benito did not appeal to the Civil Service Commission proper the Regional Office’s
refusal to attest to his appointment. Nevertheless, the trial court found that the petition for mandamus raised a purely
legal question. The case, therefore, falls within the exceptions to the rule on exhaustion of administrative remedies. 19

As to whether the position of Assistant Schools Division Superintendent requires career executive service eligibility,
the trial court held that it did not. Under Civil Service Commission Resolution No. 021011 dated August 1,2002, only
"director positions" in the Autonomous Region in Muslim Mindanao require career executive service eligibility.
Considering that the Career Executive Service Board had not declared the position of Assistant Schools Division
Superintendent a director position, the trial court ruled that the position does not require career executive service
eligibility.  The Regional Office "ha[d] no choice but to attest to [Dr. Benito’s] appointment in accordance with Civil
20

Service Laws." 21

Thus, in the decision  dated September 12, 2005, the trial court granted Dr. Benito’s petition for mandamus. It
22

ordered the Civil Service Commission Regional Office for the Autonomous Region in Muslim Mindanao to attest to
the permanent appointment of Dr. Benito as Assistant Schools Division Superintendent of the Department of
Education, Division of Lanao del Sur-I. 23

In the meantime, Regional Director Buena retired.  The Regional Office, through Regional Director Grace R.
24

Belgado-Saqueton, thus, filed a motion for reconsideration, which the trial court denied in its order  dated May 19,
25

2006. The notice of appeal  filed was initially denied due course in the order  dated August 16, 2006. On
26 27

reconsideration, the trial court reversed itself and granted the Regional Office’s notice of appeal. 28

The Court of Appeals took cognizance of the appeal. On November 8, 2006, the Court of Appeals directed the
parties to file their respective memoranda. 29

Dr. Benito filed his memorandum  on December 27, 2006. As for the Regional Office, it filed a manifestation,
30

requesting representation by the Office of the Solicitor General and an additional 30 days to file a memorandum. 31

The 30th day within which to filea memorandum lapsed without the Regional Office filing the required memorandum.
Thus, in the resolution  dated June 8, 2007, the Court of Appeals declared the Regional Office’s appeal abandoned
32

and dismissed:

While We could have granted CSC’s prayer for an additional period, per JRD Report dated April 12, 2007 however,
no Memorandum for the appellant was filed as per docket book entry. Consequently, considering that appellant is
the initiator of the instant appeal, We are constrained to dismiss the same pursuant to Section 3, Rule 17; Section
10, Rule 44; and Section 1(e), Rule 50 of the 1997 Rules of Civil Procedure.

WHEREFORE, in view of the foregoing, the instant appeal is hereby deemed ABANDONED and DISMISSED
pursuant to Section 3, Rule 17; Section 10, Rule 44; and Section 1(e), Rule 50 of the 1997 Rules of Civil
Procedure. 33

The Regional Office, through the Office of the Solicitor General, filed a motion for reconsideration. The Associate
Solicitor handling the case assumed responsibility for the non-filing of the memorandum, citing her alleged heavy
workload as an excuse. She subsequently filed the required memorandum on behalf of the Regional Office. 34

In his comment on the motion for reconsideration, Dr. Benito argued that the delay of seven (7) months and 22 days
in the filing of the memorandum was inexcusable negligence. 35

In the resolution  dated January 14, 2008,the Court of Appeals denied the Regional Office’s motion for
36

reconsideration.

On April 1, 2008, the Regional Office filed a petition for review on Certiorari  on which Dr. Benito commented.  A
37 38

reply  to the comment was filed. Afterwards, this court considered this case submitted for deliberation in the
39

resolution  dated December 1, 2009.

40

On March 6, 2012, this court resolvedto require the parties to move in the premises.  On June 19, 2012, this court
41

clarified its March 6, 2012 resolution and required the parties to notify the court of new or intervening significant
developments relevant to the case, if any. The parties were likewise required to signify their interest in resolving the
legal matters in this case. 42

Dr. Benito filed the compliance  dated August 20, 2012, on which the Regional Office commented.
43 44

In the petition for review on certiorari for the Regional Office, the Associate Solicitor handling the casepleads for this
court’s "kind understanding on her human limitations as a government lawyer handling numerous cases."  She 45

contends that "[the Regional Office] should not be made to bear the prejudice on account of [her] failure to submit
the required memorandum." 46

867
The Regional Office argues that the trial court erred in taking cognizance of respondent Dr. Benito’spetition for
mandamus. A petition for mandamus, according tothe Regional Office, is filed only when there is no other plain,
speedy, and adequate remedy in the ordinary course of law. In this case, appeal to the Civil Service Commission
proper was still available. Worse, the petition for mandamus was allegedly filed as a substitute for a lost appeal.
Consequently, the Regional Office’s action on the attestation had already become final and executory, "bar[ring] . . .
resort to any judicial action."  The trial court should not have entertained the petition for mandamus.
47 48

On the merits, petitioner Regional Director Buena maintains that the position of Assistant Schools Division
Superintendent requires career executive service eligibility, citing Civil Service Commission Resolution No.
021011 dated August 1, 2002. Since the resolution does not distinguish between a holder of a government position
49

in the Autonomous Region in Muslim Mindanao and one ina regular agency of the national government, the
qualifications for positions in the national government must apply to positions in the Autonomous Region in Muslim
Mindanao. 50

In his comment, respondent Dr. Benito emphasizes that the Regional Office took seven (7) months and 22 days to
file a memorandum with the Court of Appeals.  He argues that the failure of petitioner Regional Director Buena’s
51

counsel to file the memorandum is inexcusable negligence. Consequently, the negligence of petitioner Regional
Director Buena’s counsel binds the Regional Office.

In his compliance  dated August 20, 2012, respondent Dr. Benito added that the issuance of Civil Service
52

Commission Resolution No. 100623 and, subsequently, the Regional Assembly’s enactment of the Muslim
Mindanao Autonomy Act No. 279 or the ARMM Basic Education Act of 2010 confirm that the position of Assistant
Schools Division Superintendent does not require career executive service eligibility. 53

The issues for our resolution are the following:

I. Whether the Court of Appeals erred in dismissing the Civil Service Commission Regional Office for the
Autonomous Region in Muslim Mindanao’s appealfor its failure to file the required memorandum;

II. Whether respondent Dr. Benito correctly availed himself of a petition for mandamus against the Civil
Service Commission’s refusal to attest to his appointment; and

III. Whether the position of Assistant Schools Division Superintendent requires careerexecutive service
eligibility.

We rule for the Civil Service Commission Regional Office.

The Court of Appeals did not err in dismissing the Civil Service Commission’s appeal for failure to file the required
memorandum

Failure to comply with the Rules orwith any order of the court is a ground to dismiss the action.  Specifically on the
54

appellant’s failure to file a memorandum with the Court of Appeals, Rule 44, Section 10 of the Rules of Civil
Procedure provides:

SEC. 10. Time for filing memoranda in special cases.— In certiorari, prohibition, mandamus, quo warranto and
habeas corpus cases, the parties shall file, in lieu of briefs, their respective memoranda within a non-extendible
period of thirty (30) days from receipt of the notice issued by the clerk that all evidence, oral and documentary, is
already attached to the record.

The failure of the appellant tofile his memorandum within the period therefor may be a ground for dismissal of the
appeal.

Rule 50, Section 1 reiterates that the appellant’s failure to file the required memorandum within the reglementary
period is a ground for the Court of Appeals to dismiss the appeal:

SECTION 1. Grounds for dismissal of appeal.— An appeal may be dismissed by the Court of Appeals,on its motion
or on that of the appellee, on the following grounds:

....

(e) Failure of the appellant to serve and file the required number of copies of his brief or memorandum within the
time provided by these Rules[.]

868
In this case, the Court of Appeals ordered the parties to file their respective memoranda. Instead of filing the
memorandum, the Regional Office requested additional 30 days to file the pleading. The additional period requested
lapsed without the Regional Office filing the required memorandum. The Court of Appeals, therefore, correctly
dismissed the appeal.

That "the case was not properly calendared in the list of due dates of the . . . Associate Solicitor [handling the
case]"  and the Associate Solicitor’s "overwhelming workload"  do not justify counsel’s failure to file the
55 56

memorandum on behalf of the Regional Office. We have ruled that heavy workload is no excuse for failure to
comply with the reglementary periods under the Rules. 57

Nevertheless, considering the important question before us, we take cognizance of the petition and resolve the case
on the merits.58

II

A petition for mandamus is the proper remedy to compel the Civil Service Commission to attest to the appointment
of respondent

Under Rule 65, Section 3 of the Rules of Civil Procedure, a petition for mandamus may be filed when any tribunal,
corporation, board, officer, or person unlawfully neglects the performance of an act which the law specifically enjoins
as a duty resulting froman office, trust, or station. It may also be filed when any tribunal, corporation, board, officer,
or person unlawfully excludes another from the use and enjoyment of a right or office to which such other is entitled.

For mandamus to lie, the act sought to be enjoined must be a ministerial act or duty.  An act is ministerial if the act
59

should be performed "[under] a given state of facts, in a prescribed manner, in obedience to the mandate of a legal
authority, without regard to or the exercise of [the tribunal or corporation’s] own judgment upon the propriety or
impropriety of the act done."  The tribunal, corporation, board, officer, or person must have no choice but to perform
60

the act specifically enjoined by law.  This is opposed to a discretionary act wherein the officer has the choice to
61

decide how or when to perform the duty. 62

In the context of attestation of appointments in the civil service, this court has ruled that the Civil Service
Commission’s attestation is a ministerial duty once it finds the appointee eligible for the position. The Commission
"is limited only to the non-discretionary authority of determining whether or not the person appointed meets all the
required conditions laid down by the law."  If the appointee possesses the required civil service eligibility, the
63

Commission has "no choice but to attest to the appointment."  As this court explained in Luego v. Civil Service
64

Commission: 65

The Civil Service Commission is not empowered to determine the kind or nature of the appointment extended by the
appointing officer, its authority being limited to approving orreviewing the appointment in the light of the
requirements of the Civil Service Law. When the appointee is qualified and all the other legal requirements are
satisfied, the Commission has no choice but to attest to the appointment in accordance with the Civil Service
Laws.  Mandamus, therefore, is the proper remedy to compel the Civil Service Commission to attest to a valid
66

appointment as this court ruled in Villegas v. Subido. 67

In Villegas, Manila Mayor Antonio J. Villegas appointed Gregorio A. Ejercito as City Legal Officer pursuant to
Republic Act No. 5185. Mayor Villegas then sent the appointment of Atty. Ejercito to the Civil Service Commission
for attestation. 68

The Commission disapproved the appointment, reasoning that Atty. Ejercito did not meet the required trial work
experience. Arguing that Atty. Ejercito possessed the requirements under the civil service law, Mayor Villegas filed a
petition for mandamus to compel the Commission to attest to Atty. Ejercito’s appointment. 69

Finding that Atty. Ejercito possessed the required civil service eligibility, this court granted the petition for
mandamus. The Civil Service Commission was ordered to approve the appointment of Atty. Ejercito as City Legal
Officer of Manila. 70

In this case, respondent Dr. Benito availed himself of the correct remedy. Given his claim that he possesses the
required civil service eligibility for the position of Assistant Schools Division Superintendent, he correctly filed a
petition for mandamus to compel the Civil Service Commission to approve his appointment.

The Regional Office argues that respondent Dr. Benito availed himself of the wrong remedy considering that the
plain, speedy, and adequate remedy of appeal to the Civil Service Commission proper was still available. The trial
court should have dismissed respondent Dr. Benito’s petition for mandamus.

True, the general rule is that there be no other plain, speedy, and adequate remedy in the ordinary course of law
when filing a petition for mandamus.  Moreover, the rule on exhaustion of administrative remedies requires that a
71

869
party "exhaust all administrative remedies to give the administrative agency an opportunity to decide the matter and
to prevent unnecessary and premature resort to the courts."  The Revised Uniform Rules on Administrative Casesin
72

the Civil Service,  then effective when Dr. Benito was appointed, states:
73

Section 71. Complaint or Appeal to the Commission. – Other personnel actions, such as, but not limited to,
separation from the service due to unsatisfactory conduct or wantof capacity during probationary period, dropping
from the rolls due toAbsence Without Official Leave (AWOL), physically and mentally unfit, and unsatisfactory or
poor performance, action on appointments (disapproval, invalidation, recall, and revocation), reassignment, transfer,
detail, secondment, demotion, or termination of services, may be brought to the Commission, by way of an appeal.

Section 72. When and Where to File.– A decision or ruling of a department or agency may be appealed within
fifteen (15) days from receipt thereof by the party adversely affected to the Civil Service Regional Office and finally,
to the Commission Proper within the same period.

A motion for reconsideration may be filed with the same office which rendered the decision or ruling within fifteen
(15) days from receipt thereof. (Emphasis supplied)

Nevertheless, there are exceptionsto the rule on exhaustion of administrative remedies. A party may directly resort
to judicial remedies if any of the following is present:

1. when there is a violation of due process;

2. when the issue involved ispurely a legal question;

3. when the administrative action is patently illegal amounting to lack or excess ofjurisdiction;

4. when there is estoppel on the part of the administrative agency concerned;

5. when there is irreparable injury;

6. when the respondent is a department secretary whose acts as an alter ego of the President bear the
implied and assumed approval of the latter;

7. when to require exhaustion of administrative remedies would be unreasonable;

8. when it would amount to a nullification of a claim;

9. when the subject matter is a private land in land case proceedings;

10. when the rule does not providea plain, speedy and adequate remedy; and

11. when there are circumstances indicating the urgency of judicial intervention. 74

In this case, the facts are undisputed. Respondent Dr. Benito is not career executive service eligible. The question is
whether the position for which he was appointed requires career executive service eligibility. This is a purely legal
question which is an exception to the rule on exhaustion of administrative remedies.

All told, respondent Dr. Benito did not err in filing a petition for mandamus with the trial court.

III

The position of Assistant Schools Division Superintendent is a position in the Career Executive Service

Under the civil service law, positions in the Career Executive Service are: "Under secretary, Assistant Secretary,
Bureau Director, Assistant Bureau Director, Regional Director, Assistant Regional Director, Chief of Department
Service, and other officers of equivalent rank as may be identified by the Career Executive Service Board, all of
whom are appointed by the President." 75

In the exercise of its legal mandate, the Career Executive Service Board issued Resolution No. 945 dated June 14,
2011, where it set the following criteria to determine whether a position belongs to the Career Executive Service:

1. The position is career;

2. The position is above division chief; and

870
 3. The position entails performance of executive and managerial functions.

Aside from satisfying the criteriaset by the Career Executive Service Board, the holder of the position must also be a
presidential appointee. 76

Applying these principles in thiscase, we rule that the position of Assistant Schools Division Superintendent belongs
to the Career Executive Service.

The position of Assistant Schools Division Superintendent is a career position. Appointment to the position is based
on merit and fitness and gives the appointee an opportunity for advancement to higher career positions,  such as
77

Schools Division Superintendent. If permanently appointed, the appointee is guaranteed security of tenure. 78

The position is above Division Chief. An Assistant Schools Division Superintendent has a salary grade of 25. 79

As to functions and responsibilities, the Assistant Schools Division Superintendent assists the Schools Division
Superintendent in performing the following executive and managerial functions under Republic Act No. 9155 or the
Governance of Basic Education Act of 2001:

1. Developing and implementing division education development plans;

2. Planning and managing the effective and efficient use of all personnel, physical and fiscal resources of
the division, including professional staff development;

3. Hiring, placing and evaluating all division supervisors and schools district supervisors as well as all
employees in the division, both teaching and non-teaching personnel, including school heads, except for the
assistant division superintendent;

4. Monitoring the utilization of funds provided by the national government and the local government units to
the schools and learning centers;

5. Ensuring compliance of quality standards for basic education programs and for this purpose strengthening
the role of division supervisors as subject area specialists;

6. Promoting awareness of and adherence by all schools and learning centers to accreditation standards
prescribed by the Secretary of Education;

7. Supervising the operations of all public and private elementary, secondary and integrated schools, and
learning centers; and

8. Performing such other functions as may be assigned by proper authorities. 80

In fact, the law recognizes that the position of Assistant Schools Division Superintendent belongs to the Career
Executive Service. Section 7 of Republic Act No. 9155 explicitly provides that an appointee to the position must be a
career executive service officer:

SEC. 7. Powers, Duties and Functions. –

....

No appointment to the positions of regional directors, assistant regional directors, schools division superintendents
and assistant schools division superintendents shall be made unless the appointee is a career executive service
officer who preferably shall have risen from the ranks. (Emphasis supplied)

In Osea v. Malaya,  this court took judicial notice of the Career Executive Service Board’s Memorandum Circular
81

No. 21, Series of 1994, where the Board identified the position of Assistant Schools Division Superintendent as a
Career Executive Service position. 82

Even Regional Governor Hussin admitted that the President appoints the Assistant Schools Division
Superintendent.  In his letter-request for attestation of respondent Dr. Benito’s appointment, he said:
1âwphi1

Our stand is that Dr. Benito, Assistant Schools Division Superintendent being an appointee of the ARMM Regional
Governor need not possess the said eligibility. More importantly, if the agencies of the National Government who
have fiscal autonomy enjoys the exemption, then the more for an appointee of the ARMM for the reason that in the
ARMM we do not only exercise fiscal autonomy but weare an Autononmous [sic] Local Government Unit with unique

871
structure. We emphasize that the other Assistant Schools Superintendents in the ARMM were appointed by the
President thus, they were required to have the 3rd level eligibility pursuant to Presidential Decree 1.

In view of this, we are submitting the herein appointment for the approval of your Office.  (Emphasis supplied)
83

It is settled, therefore, that the position of Assistant Schools Division Superintendent belongs to the Career
Executive Service. The appointee to the position must be career executive service eligible.

Permanent appointment to positionsin the Career Executive Service presupposes that the appointee has passed the
Career Executive Service examinations.  In this case, respondent Dr. Benito does not possess the required career
84

executive service eligibility. He, therefore, cannot be appointed to the position of Assistant Schools Division
Superintendent in a permanent capacity. The Civil Service Commission cannot be compelled to attest to the
permanent appointment of respondent Dr. Benito.

The Regional Governor has the power to appoint civil servants in the Autonomous Region in Muslim Mindanao
under Article VII, Section 19 of Republic Act No. 9054.  In Muslim Mindanao Autonomy Act No. 279 or the ARMM
85

Basic Education Act of 2010, the Regional Assembly set the qualification standards of Assistant Schools Division
Superintendents of Divisions of the Department of Education in the Autonomous Region:

Sec. 45. Qualification Standards of Schools Division Superintendent and Assistant Schools Division
Superintendent.  No person maybe appointed Schools Division Superintendent or Assistant Schools Division
1âwphi1

Superintendent unless he is natural born citizen of the Philippines; a native inhabitant of the Autonomous Region; a
registered voter in any province or cityin the region for at least five years prior to his appointment.

. . . The Assistant Schools Division Superintendent, at the time of his appointment, shall at least be a Master’s
Degree holder; five years of supervisory and administrative experiences; with relevant trainings; and possesses
appropriate civil service eligibility.

....

Nevertheless, when respondent Dr. Benito was appointed Assistant Schools Division Superintendent in 2005, there
was yet no regional law providing for the qualifications for the Assistant Schools Division Superintendents of
Divisions of the Department of Education in the Autonomous Region. Consequently, the civil service eligibilities
required for positions in the national government shall likewise be required for appointments to positions in the
Autonomous Region. Article XVI, Section 4 of Republic Act No. 9054 provides:

SEC. 4. Civil Service Eligibility. – Until the Regional Assembly shall have enacted a civil service law, the civil service
eligibilities required by the central government or national government for appointments to public positions shall
likewise be required for appointments to government positions in the Regional Government. As may be necessary,
the Civil Service Commission shall hold special civil service examinations in the autonomous region. For a period
not longer more than six (6) years from the approval of this Organic Act, the central government or national
government shall endeavor to provide appropriate civil service eligibility to applicants coming from the autonomous
region for government positions therein. The minimum qualifications prescribed by law shall, however, be met.

All told, respondent Dr. Benito did not possess the required civil service eligibility at the time he was appointed
Assistant Schools Division Superintendent. Consequently, he cannot be appointed in a permanent capacity to the
position. The Civil Service Commission cannot be compelled through a writ of mandamus to attest to the permanent
appointment of respondent Dr. Benito.

WHEREFORE, the petition for review on certiorari is GRANTED. The Regional Trial ·court, Branch 9, Lanao del
Sur's September 12, 2005 decision in Special Civil Action Case No. 1538-05 is SET ASIDE.

SO ORDERED.

872
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 205249               October 15, 2014

SPOUSES BENEDICT and SANDRA MANUEL, Petitioners, 

vs.
RAMON ONG, Respondent.

DECISION

LEONEN, J.:

This resolves a petition  for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, praying that the
1

June 28, 2012 decision  and the December 19, 2012 resolution  of the Court of Appeals in CA-G.R. SP No. 119270
2 3

be reversed and set aside. The assailed June 28, 2012 decision dismissed for lack of merit the petition for certiorari
under Rule 65 of the 1997 Rules of Civil Procedure filed by petitioners Benedict and Sandra Manuel (the Spouses
Manuel) and sustained the November 30, 2010 and February 16, 2011 orders of the Regional Trial Court, La
Trinidad, Benguet.  The assailed December 19, 2012 resolution of the Court of Appeals denied the Spouses
4

Manuel’s motion for reconsideration. The Regional Trial Court’s November 30, 2010 order denied their motion to lift
order of default, while its February 16, 2011 order denied their motion for reconsideration. 5

On December 21, 2009, respondent Ramon Ong (Ong) filed with the Regional Trial Court, La Trinidad, Benguet, a
complaint for accion reivindicatoria.  Ong charged the Spouses Manuel with having constructed improvements —
6

through force, intimidation, strategy, threats, and stealth — on a property he supposedly owned.  The case was
7

docketed as Civil Case No. 09-CV-2582. 8

On January 19, 2010, Ong filed an "amended complaint."  On February 3, 2010, summons was issued directed to
9

the Spouses Manuel. 10

On April 23, 2010, Ong filed with the Regional Trial Court a motion to declare the Spouses Manuel in default.  Per 11

the sheriff’s return on summons, on February 12, 2010, Sheriff Joselito Sales, along with Ong’s counsel, Atty.
Christopher Donaal, and a certain Federico Laureano, attempted to personally serve summons on the Spouses
Manuel at their address in Lower Bacong, Loacan, Itogon, Benguet.  The Spouses Manuel, however, requested that
12

service be made at another time considering that petitioner Sandra Manuel's mother was then critically ill.  The
13

sheriff’s return further indicates that on March 16, 2010, another attempt at personal service was made. After Sheriff
Joselito Sales had personally explained to petitioner Sandra Manuel the content of the summons and the complaint,
the latter refused to sign and receive the summons and the complaint. Sheriff Joselito Sales was thus prompted to
merely tender the summons and complaint to petitioner Sandra Manuel and to advise her to file their answer within
fifteen (15) days.  As the Spouses Manuel failed to file their answer within this period, Ong asked that they be
14

declared in default. 15

On June 28, 2010, the Regional Trial Court issued an order granting Ong's motion to declare the Spouses Manuel in
default. Following this, Ong moved for the ex parte presentation ofevidence, which the Regional Trial Court
granted.16

On September 13, 2010, the Spouses Manuel filed a motion to lift the order of default. They alleged thatit is the
siblings of petitioner Sandra Manuel who resided in Lower Bacong, Itogon, Benguet, while they resided in Ambiong,
La Trinidad, Benguet. Thus, summons could not have been properly served on them in the former address. They
surmised that Ong and his companions mistook petitioner Sandra Manuel’s siblings as the defendants in Civil Case
No. 09-CV-2582.They further claimed that they only subsequently received via registered mail copies of (1) a
compliance and manifestation filed by Ong and (2) the Regional Trial Court’s order scheduling the ex parte
presentation of evidence. Attachedto the Spouses Manuel’s motion to lift order of default was their answer. 17

In its order dated November 30, 2010,the Regional Trial Court denied the Spouses Manuel’s motion to lift order of
default. It noted that, first, their motion was not sworn to, as required by the 1997 Rules of Civil Procedure, and,
second, they did not showthat their failure to timely file an answer "was due to fraud, accident, mistake or excusable
negligence."  In its order dated February16, 2011, the Regional Trial Court denied the Spouses Manuel’s motion for
18

reconsideration. 19

Aggrieved, the Spouses Manuel filed a petition for certiorari before the Court of Appeals. 20

873
As mentioned, the assailed June 28, 2012 decision of the Court of Appeals dismissed the Spouses Manuel’s Rule
65 petition for lack of merit. The assailed December 19, 2012 resolution of the Court of Appeals denied their motion
for reconsideration.

Hence, this petition.

For resolution is the sole issue ofwhether the Spouses Manuel may be granted relief from the Regional Trial Court’s
June 28, 2010 order of default.

Jurisdiction over the persons of the Spouses Manuel acquired

As a preliminary matter, we ruleon whether jurisdiction over the persons of the Spouses Manuel, as defendants in
Civil Case No. 09-CV-2582, was validly acquired. This preliminary matter is determinative of whether the fifteen-day
period within which they must file their answer started to run, thereby facilitating the context in which they could
have validly been declared to be in default.

We hold that jurisdiction over the persons of both defendants in Civil Case No. 09-CV-2582 — the Spouses
Benedict and Sandra Manuel — was validly acquired. This is so because personal service of summons, via tender
to petitioner Sandra Manuel, was made by Sheriff Joselito Sales on March 16, 2010.

Rule 14, Section 6 of the 1997 Rules of Civil Procedure provides:

SEC. 6. Service in person on defendant. — Whenever practicable, the summons shall be served by handing a copy
thereof to the defendant in person, or, if he refuses to receive and sign for it, by tendering it to him.

Tendering summons is itself a means of personal service as it is contained in Rule 14, Section 6. Personal service,
as provided by Rule 14, Section 6, is distinguished from its alternative — substituted service — as provided by Rule
14, Section 7:

SEC. 7. Substituted service. — If, for justifiable causes, the defendant cannot be served within a reasonable time as
provided in the preceding section, service may be effected (a) by leaving copies of the summons at the defendant's
residence with some person of suitable age and discretion then residing therein, or (b) by leaving the copies at
defendant's office or regular place of business with some competent person in charge thereof. (Emphasis supplied)

In this case, the sheriff’s returnon summons indicated that Sheriff Joselito Sales endeavored to personallyhand the
summons and a copy of the complaint to the Spouses Manuel on two (2) separate occasions. He relented from
doing so on the first occasion in deference to the medical condition of petitioner Sandra Manuel’s mother. On the
second occasion, he was constrained to tender the summons and copy of the complaint as petitioner Sandra
Manuel refused to accept them.

The Spouses Manuel did not deny the occurrence of the events narrated in the sheriff’s return but claimed that no
valid service of summons was made. They claimed that they did not reside in Lower Bacong, Loacan, Itogon,
Benguet, where the service of summons was made. From this, they surmised that the "Sandra Manuel" who was
specifically identified in the sheriff’s return was someone other than petitioner Sandra Manuel.

The Spouses Manuel cannot capitalize on the supposed variance of address. Personal service of summons has
nothing to do with the location where summons is served. A defendant’saddress is inconsequential. Rule 14,
Section 6 of the 1997 Rules of Civil Procedure is clear in what it requires: personally handing the summons to the
defendant (albeit tender is sufficient should the defendant refuseto receive and sign). What is determinative of the
validity of personal service is, therefore, the person of the defendant, not the locus of service.

In any case, the Court of Appeals iscorrect in pointing out that the Spouses Manuel’s self-serving assertion must
crumble in the face of the clear declarations in the sheriff’s return.  Pursuant to Rule 131, Section 3(m) of the
21

Revised Rules on Evidence,  the acts of Sheriff Joselito Sales and the events relating to the attempt to personally
22

hand the summons and a copy of the complaint to the Spouses Manuel, as detailed in the sheriff’s return, enjoy the
presumption of regularity.  Moreover, Sheriff Joselito Sales must be presumed to have taken ordinary care and
23

diligence in carrying out his duty to make service upon the proper person(s) and not upon an impostor. 24

A sheriff’s return, if complete on its face, must be accorded the presumption of regularity and, hence, taken to be an
accurate and exhaustive recital of the circumstances relating to the steps undertaken by a sheriff. In this case, the
Spouses Manuel have harped on their (self-serving) claim of maintaining residence elsewhere but failed to even
allege that there was anything irregular about the sheriff’sreturn or that it was otherwise incomplete.

Having alleged irregularities in the service of summons, it was incumbent upon the Spouses Manuel to adduce proof
of their claims. All they mustered was their self-serving allegation of an alternative address. If at all, this claim of
maintaining residence elsewhere should not even be lent an iota of credibility considering that, as respondent

874
Ramon Ong pointed out, the barangay clearances, which the Spouses Manuel themselves attached to one of their
pleadings (as proof of their identities), actually indicated that they were residents of Bacong Loacan, Itogon,
Benguet.  Their lie is, thus, revealed by their own pleading.
25

As the Spouses Manuel not only failed in discharging the burden of proving their allegation but even succeeded in
contradicting themselves, Sheriff Joselito Sales’ recollection of events must be taken tobe true. Thus, valid personal
service of summons, via tender to petitioner Sandra Manuel, was made. From this, it follows that jurisdiction over
the persons of petitioners Benedict and Sandra Manuel was acquired by the Regional Trial Court, La Trinidad,
Benguet, in Civil Case No. 09-CV-2582.

The Spouses Manuel are not entitled to relief from the order of default

As valid service of summons was made on them, it was incumbent upon the Spouses Manuel, pursuant to Rule 11,
Section 1 of the 1997 Rules of Civil Procedure,  to file their answer withinfifteen (15) days from March 16, 2011.
26

Having failed to do so, they wererightly declared to be in default.

Rule 9, Section 3 of the 1997 Rules of Civil Procedure provides for when a party to an action may be declared in
default. Further, Rule 9, Section 3(b) governs the grant of relief from orders of default:

SEC. 3. Default; declaration of.— If the defending party fails to answer within the time allowed therefor, the court
shall, upon motion of the claiming party with notice to the defending party, and proof of such failure, declare the
defending party in default. Thereupon, the court shall proceed to render judgment granting the claimant such relief
as his pleading may warrant, unless the court in its discretion requires the claimant to submit evidence. Such
reception of evidence may be delegated to the clerk of court.

(a) Effect of order of default. — A party in default shall be entitled to notice of subsequent proceedingsbut not to
take part in the trial. (b)

Relief from order of default.— A party declared in default may at any time after notice thereof and before judgment
file a motion under oathto set aside the order of default upon proper showing that his failure to answer was due to
fraud, accident, mistake or excusable negligence and that he has a meritorious defense. In such case, the order of
default may be set aside on such terms and conditions as the judge may impose in the interest of justice. (Emphasis
supplied)

Pursuant to Rule 9, Section 3, a court may proceed to render judgment as the pleading may warrant should a
defendant fail to timely file his or her answer. However, a court may decline from immediately rendering judgment
and instead require the plaintiff to present evidence. Per Rule 9, Section 3(a), a party declared to be indefault shall
nevertheless be "entitled to notice of subsequent proceedings," although he or she may no longer take part in the
trial.

As explained in Spouses Delos Santos v. Carpio,  "there are three requirements which must be complied with by
27

the claiming party before the court may declare the defending party in default:

(1) the claiming party must filea motion asking the court to declare the defending party in default;

(2) the defending party must be notified of the motion to declare him in default;

(3) the claiming party must provethat the defending party has failed to answer within the period provided by
the Rule."28

All these requisites were complied with by respondent Ramon Ong.

It is not disputed that Ong filed a motion to declare the Spouses Manuel in default. It is also not disputed that the
latter filed their answer after the fifteen-day period, counted from March 16, 2010, had lapsed. The Spouses Manuel
only filed their answer along with their motion to lift order of default on September 13, 2010.

It is similarly settled that the Spouses Manuel were notified that a motion to declare them in default had been filed.
They acknowledged in the present petition for certiorari that on June 23, 2010, Ong filed a compliance to the
Regional Trial Court’s April 30, 2010 order that required the submission of the registry return card evidencing the
mailing to the Spouses Manuel of a copy of the motion to have them declared in default.

Not only were the requisites for declaring a party in default satisfied, the Spouses Manuel’s motion to lift order of
default was also shown to be procedurally infirm.

Consistent with Rule 9, Section 3(b) of the 1997 Rules of Civil Procedure, "the remedy against an order of default is
a motion to set it aside on the ground of fraud, accident, mistake, or excusable negligence."  However, it is not only
29

875
the motion to lift order of default which a defendant must file. As this court emphasized in Agravante v. Patriarca, to 30

the motion to lift order of default must "be appended an affidavit showing the invoked ground, and another,
denominated affidavit of merit, setting forth facts constituting the party's meritorious defense or defenses." 31

The need for an affidavit of merit isconsistent with Rule 8, Section 5 of the 1997 Rules of Civil Procedure,  which
32

requires that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake must be
statedwith particularity."

In Montinola, Jr. v. Republic Planters Bank,  this court noted that the three (3) requisites that must be satisfied by a
33

motion in order "to warrant the setting aside of an order of default for failure to file answer, are:

(1) it must be made by motion under oath by one that has knowledge of the facts;

(2) it must be shown that the failure to file answer was due to fraud, accident, mistake or excusable
negligence; and

(3) there must be a proper showing of the existence of a meritorious defense."  (Citations omitted)
34

Consistent with Agravante, it is through an affidavit of merit that a defendant seeking relief from an order of default
shows that "the failure to file answer was due to fraud, accident, mistake or excusable negligence." 35

In this case, the Court of Appeals noted that the Spouses Manuel’s motion to lift order of default was not made
under oath. We add that this motion was not accompanied by an affidavit of merit specifying the facts which would
show that their non-filing of an answer within fifteen (15) days from March 16, 2010 was due to fraud, accident,
mistake, or excusable negligence.

Failing both in making their motion under oath and in attaching an affidavit of merits, the Spouses Manuel’s motion
to lift order of default must be deemed pro-forma. It is not even worthy of consideration.

Certainly, there is jurisprudence to the effect that an affidavit of merit is not necessary "where a motion to lift an
order of default is grounded on the very root of the proceedings [such as] where the court has not acquired
jurisdiction over the defendants."  Similarly, there is jurisprudence stating that "when a motion to lift an order
36

ofdefault contains the reasons for the failure to answer as well as the facts constituting the prospective defense of
the defendant and it is sworn to by said defendant, neither a formal verification nor a separate affidavit of merit is
necessary." 37

However, in this case, the Spouses Manuel failed not only in attaching an affidavit of merit but alsoin making their
motion under oath. They are, therefore, left without any alternative on which to rest. Their motion is utterly
ineffectual.

Apart from their failure to make their motion to lift order of default under oath and to attach to it an affidavit of merit,
the Court of Appeals also noted that the Spouses Manuel set their motion to lift order of default for hearing on the
same date that they filed it(i.e., September 13, 2010). Thus, they also violated Rule 15, Section 4 of the 1997 Rules
of Civil Procedure,  which requires that service of a motion upon an adverse party must be made in such a manner
38

that ensures receipt by the latter "at least three (3) days before the date of hearing. . . ."

We do not lose sight of the admonitions that have been made in jurisprudence that, as a rule, courts should be
liberal in setting aside orders of default and that default judgments are frowned upon.  Indeed, apart from a motion
39

to lift order of default,other remedies are available to a defaulted defendant evenafter judgment has been rendered.
Thus, if judgment had already been rendered but has not yet become final and executory, an appeal asserting that
the judgment was contrary to the law or to the evidence,  or a motion for new trial under Rule 37, may be filed.  In
40 41

the case of the latter, the same affidavits as are required in a motion to lift order of default must be attached.  If 42

judgment has become final and executory, a defaulted defendant may file a petition for relief from judgment under
Rule 38.  Still, should the defaulted defendant fail tofile a petition for relief, a petition for annulment ofjudgment on
43

the ground of lack of jurisdiction or extrinsic fraud remains available. 44

However, jurisprudence, too, has qualified the intent that animates this liberality.  As this court stated in Acance v.
1âwphi1

Court of Appeals: 45

The issuance of the orders of default should be the exception rather than the rule, to be allowed only in clear cases
of obstinate refusal by the defendant to comply with the orders of the trial court.  (Emphasis supplied)
46

Moreover, this liberality must be tempered with a recognition that, in the first place, it is a defendant who is at fault in
failing to timely file an answer.

876
Rule 9, Section 3(b) gives an exclusive list of only four (4) grounds that allow for relief from orders of default.
Moreover, these grounds — extrinsic fraud, accident, mistake, and excusable negligence — relate to factors that are
extraneous to a defendant, that is, grounds that show that a defendant was prevented, by reasons beyond his or her
influence, from timely filing an answer.

The recognition that it is the defendant who is at fault and must suffer the consequences of his or her own failure is
analogous to the dismissal of an action due to the fault of a plaintiff, as provided by Rule 17, Section 3 of the 1997
Rules of Civil Procedure. Rule 17, Section 3 reads:

SEC. 3. Dismissal due to fault of plaintiff.— If for no justifiable cause, the plaintiff fails to appear on the date of the
presentation of his evidence in chief on the complaint, or to prosecute his action for an unreasonable length of time,
or to comply with these Rules or any order of the court, the complaint may be dismissed upon motion of the
defendant or upon the court's own motion, without prejudice to the right of the defendant to prosecute his
counterclaim in the same or in a separate action. This dismissal shall have the effect of an adjudication upon the
merits, unless otherwise declared by the court.

Rule 17, Section 3 is qualified by the phrase "for no justifiable cause." Thus, in cases covered by Rule 17, Section 3,
should the failure to comply with court processes be the result of the plaintiff’s own fault, it is but logical that a
plaintiff must suffer the consequences of his own heedlessness. Rule 9, Section 3 — on default — applies the same
logic to a culpable defendant. In this case, the Spouses Manuel only have themselves to blame in not properly
receiving the summons and copyof the complaint served on them. It has been shown that their claim that service of
summons was made on persons other than them deserves no credence. Quite the contrary, it is quite apparent that
Sheriff Joselito Sales notonly explained the contents of the summons and the complaint but actually told them that
they must file their answer in fifteen (15) days. It was petitioner Sandra Manuel who refused to sign and receive the
summons and the complaint. This is evidently an act of obstinate refusal to submit to and to comply with court
processes. Thus, the Spouses Manuel are not deserving of any leniency.

WHEREFORE, the petition for review on certiorari is DENIED. The June 28, 2012 decision and the December 19,
2012 resolution of the Court of Appeals in CA-G.R. SP No. 119270 are AFFIRMED.

SO ORDERED

877
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 187240               October 15, 2014

CARLOS A. LORIA, Petitioner, 
vs.
LUDOLFO P. MUÑOZ, JR. Respondent.

DECISION

LEONEN, J.:

No person should unjustly enrich himself or herself at the expense of another.

This is a petition for review on certiorari  to set aside the Court of Appeals' decision  and resolution  in CA-G.R. CV
1 2 3

No. 81882. The Court of Appeals ordered petitioner Carlos A. Loria to pay respondent Ludolfo P. Muñoz, Jr.
₱2,000,000.00 in actual damages with 12% interest per year from the filing of the complaint until full payment. 4

The facts of this case are as follows:

Ludolfo P. Muñoz, Jr. (Muñoz) filed a complaint for sum of money and damages with an application for issuance of a
writ of preliminary attachment against Carlos A. Loria (Loria) with the Regional Trial Court of Legazpi City. 5

In his complaint, Muñoz alleged that he has been engaged in construction under the name, "Ludolfo P. Muñoz, Jr.
Construction." In August 2000, Loria visited Muñoz in his office in Doña Maria Subdivision in Daraga, Albay. He
invited Muñoz to advance ₱2,000,000.00 for a subcontract of a ₱50,000,000.00 river-dredging project in
Guinobatan. 6

Loria represented that he would makearrangements such that Elizaldy Co, owner of Sunwest Construction and
Development Corporation, would turn out to be the lowest bidder for the project. Elizaldy Co would pay
₱8,000,000.00 to ensure the project’s award to Sunwest. After the award to Sunwest, Sunwest would subcontract
20% or ₱10,000,000.00 worth of the project to Muñoz. 7

Since Muñoz had known Loria for five years, Muñoz accepted Loria’s proposal. 8

On October 2, 2000, Muñoz requested Allied Bank to release ₱3,000,000.00 from his joint account withhis business
partner, Christopher Co, to a certain Grace delos Santos (delos Santos). Loria then obtained the money from delos
Santos. 9

Four days later, ₱1,800,000.00 of the ₱3,000,000.00 was returned to Muñoz. 10

On January 10, 2001, Loria collectedMuñoz’s ₱800,000.00 balance. After deducting Loria’s personal loans from
Muñoz, Muñoz issued a check to Loria for ₱481,800.00. Loria acknowledged receiving this amount from Muñoz. 11

The project to dredge the Masarawag and San Francisco Rivers in Guinobatan was subjected to public bidding. The
project was awarded to the lowest bidder, Sunwest Construction and Development Corporation. 12

Sunwest allegedly finished dredging the Masarawag and San Francisco Rivers without subcontracting Muñoz. With 13

the project allegedly finished, Muñozdemanded Loria to return his ₱2,000,000.00. Loria, however, did not return the
money. 14

Muñoz first charged Loria and Elizaldy Co with estafa. This criminal case was dismissed by the Municipal Trial Court
of Daraga, Albay for lack of probable cause. 15

Muñoz then filed the complaint for sum of money. The case was raffled to Branch 6 and presidedby Judge Vladimir
B. Brusola. 16

Loria answered Muñoz’s complaint. He admitted receiving ₱481,800.00 from Muñoz but argued that the complaint
did not state a cause of action against him. According to Loria, he followed up the project’s approval with the Central
Office of the Department of Public Works and Highways as the parties agreed upon. He was, therefore, entitled to
his representation expenses. 17

878
Loria also argued that Muñoz was guilty of forum shopping. Muñoz first filed a criminal complaint for estafa against
him and Elizaldy Co, which complaint the Municipal Trial Court of Daraga, Albay dismissed. The subsequently filed
complaint for sum of money, allegedly a complaint to recover the civil aspect of the estafa case, must, therefore, be
dismissed as argued by Loria. 18

During pre-trial, the parties agreed to litigate the sole issue of whether Loria is liable to Muñoz for ₱2,000,000.00. 19

According to the trial court, Muñoz established with preponderant evidence that Loria received ₱2,000,000.00 from
Muñoz for a subcontract of the river-dredging project. Since no part of the project was subcontracted to Muñoz,
Loria must return the ₱2,000,000.00 he received, or he would be "unduly enriching himself at the expense of
[Muñoz]." 20

On the claim of forum shopping, the trial court ruled that Loria’s obligation to return the 2,000,000.00 did not arise
from criminal liability. Muñoz may, therefore, file a civil action to recover his ₱2,000,000.00. 21

As to the prayer for issuance of a writ of preliminary attachment, the trial court denied the prayer for lack of sufficient
basis.22

Thus, in the decision  dated January 30, 2004, the trial court ordered Loria to return the ₱2,000,000.00 toMuñoz as
23

actual damages with 12% interest from the filing of the complaint until the amount’s full payment. The trial court
likewise ordered Loria to pay Muñoz ₱100,000.00 in attorney’s fees, ₱25,000.00 in litigation expenses, and
₱25,000.00 in exemplary damages with costs against Loria. 24

Loria appealed to the Court of Appeals, arguing that Muñoz failed to establish his receipt of the ₱2,000,000.00.
Specifically, Muñoz failed to establish that he obtained ₱3,000,000.00from a certain Grace delos Santos. Loria also
appealed the award of attorney’s fees, litigation expenses, and exemplary damages for having no basis in fact and
in law.25

The Court of Appeals sustained the trial court’s factual findings. In ruling that Loria received the net amount of
₱2,000,000.00 from Muñoz, the Court of Appeals referred to Muñoz’s testimony that he ordered Allied Bank to
release ₱3,000,000.00 from his joint account with Christopher Co to a certain Grace delos Santos.  Loria then
26

obtained the money from delos Santos and confirmed with Muñoz his receipt of the money.  This testimony,
27

according to the appellate court, was supported by Exhibit "C," a check voucher the trial court admitted inevidence.
Loria signed this check voucher and acknowledged receiving ₱1,200,000.00 on October 2, 2000 and ₱800,000.00
on January 10, 2001, ora total of ₱2,000,000.00. 28

Considering that Muñoz did not benefit from paying Loria ₱2,000,000.00, the appellate court ruled that Loria must
return the money to Muñoz under the principle of unjust enrichment. 29

The appellate court, however, ruled that Muñoz failed to show his right to exemplary damages and attorney’s fees. 30

Thus, in the decision  dated October 23, 2008, the Court of Appeals affirmed the trial court’s decision but deleted
31

the award of exemplary damages and attorney’s fees.  The appellate court likewise denied Loria’s motion for
32

reconsideration in the resolution  dated March 12, 2009.

33

Loria filed a petition for review on certiorari  with this court, arguing that the principle of unjust enrichment does not
34

apply in this case. As the trial and appellate courts found, Muñoz paid Loria ₱2,000,000.00 for a subcontract of a
government project. The parties’ agreement, therefore, was void for being contrary to law, specifically, the Anti-Graft
and Corrupt Practices Act, the Revised Penal Code, and Section 6 of Presidential Decree No. 1594. The agreement
was likewise contrary to the public policy of public or open competitive bidding of government contracts. 35

Since the parties’ agreement was void, Loria argues that the parties were in pari delicto, and Muñoz should not be
allowed to recover the money he gave under the contract. 36

On the finding that he received a net amount of ₱2,000,000.00 from Muñoz, Loria maintains that Muñoz failed to
prove his receipt of ₱3,000,000.00 through a certain Grace delos Santos. 37

In the resolution  dated June 3, 2009, thiscourt ordered Muñoz to comment on Loria’s petition.
38

In his comment,  Muñoz argues that Loria’s petition raises questions of fact and law that the trial and appellate
39

courts have already passed upon and resolved in his favor. He prays that this court deny Loria’s petition for raising
questions of fact.

Loria replied  to the comment, arguing thathe raised only questions of law in his petition.  Even assuming that he
40 41

raised questions of fact, Loria argues that this does not warrant the automatic dismissal of his petition since the trial
and appellate courts allegedly erred inruling for Muñoz. 42

879
On October 8, 2010, the parties filed their joint motion to render judgment based on the compromise agreement.  In 43

their compromise agreement,  the parties declared that thiscase "was a product of a mere misunderstanding."  To
44 45

amicably settle their dispute, the parties agreed to waive all their claims, rights, and interests against each other. 46

This court denied the joint motion for lack of merit in the resolution  dated December 15, 2010.
47

The issues for our resolution are the following:

I. Whether Loria initially obtained ₱3,000,000.00 from a certain Grace delos Santos

II. Whether Loria is liable for ₱2,000,000.00 to Muñoz

We rule for Muñoz and deny Loria’s petition for review on certiorari.

Whether Loria initially received 3,000,000.00 is a question of fact not proper in a petition for review on certiorari

We first address Loria’s contention that Muñoz failed to prove his initial receipt of ₱3,000,000.00. This is a question
of fact the trial and appellate courts have already resolved. In a Rule 45 petition, we do not address questions of
fact, questions which require us to ruleon "the truth or falsehood of alleged facts."  Under Section 1, Rule 45 of the
48

Rules of Court, we only entertain questions of law — questions as to the applicable law given a set of facts  — in a
49

petition for review on certiorari:

Section 1. Filing of petition with Supreme Court.

A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file withthe Supreme
Court a verified petition for review on certiorari. The petition shall raise only questions of lawwhich must be distinctly
set forth. (Emphasis supplied) 50

We may review questions of fact in a Rule 45 petition:

. . . (1) when the findings are grounded entirely on speculations, surmises, or conjectures; (2) when the inference
made is manifestly mistaken, absurd, or impossible; (3) when there is a grave abuse of discretion; (4) when the
judgment is based on misappreciation of facts; (5) when the findings of fact are conflicting; (6) when in making its
findings, the same are contrary to the admissions of both appellant and appellee; (7) the findings are contrary to
those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are
based; (9) the facts set forth in the petition as well as in petitioner’s main and reply briefs are not disputed by
respondent; and (10) the findings of fact are premised on the supposed absence of evidence and contradicted by
the evidence on record.  [Emphases omitted]
51

Loria failed to convince us why we should make an exception in this case.

During trial, Muñoz testified thathe ordered Allied Bank to release ₱3,000,000.00 from his joint account
withChristopher Co to a certain Grace delos Santos.  Loria then obtained the money from delos Santos and
52

confirmed with Muñoz his receipt of the amount.  ₱1,800,000.00 was subsequently returned to Muñoz, leaving a
53

₱1,200,000.00 balance with Loria. This testimony was supported by Exhibit "C," the check voucher where Loria
acknowledged receiving ₱1,200,000.00 from Muñoz. 54

We agree that these pieces ofevidence duly prove Loria’s initial receipt of ₱3,000,000.00. We will not disturb this
finding.

II

Loria must return Munoz’s ₱2,000,000.00 under the principle of unjust enrichment

Under Article 22 of the Civil Codeof the Philippines, "every person who through an act of performance by another, or
any other means, acquires or comes into possession of something at the expense of the latter without just or legal
ground, shall return the same to him." There is unjust enrichment "when a person unjustly retains a benefit to the
loss of another, or when a person retains money orproperty of another against the fundamental principles of justice,
equity and good conscience." 55

The principle of unjust enrichment has two conditions. First, a person must have been benefited without a real or
valid basis or justification. Second, the benefit was derived at another person’s expense or damage. 56

880
In this case, Loria received ₱2,000,000.00 from Muñoz for a subcontract of a government projectto dredge the
Masarawag and San Francisco Rivers in Guinobatan, Albay. However, contrary to the parties’ agreement, Muñoz
was not subcontracted for the project. Nevertheless, Loria retained the ₱2,000,000.00.

Thus, Loria was unjustly enriched. He retained Muñoz’s money without valid basis or justification. Under Article 22
of the Civil Code of the Philippines, Loria must return the ₱2,000,000.00 to Muñoz.

Contrary to Loria’s claim, Section 6 of the Presidential Decree No. 1594 does not prevent Muñoz from recovering his
money.

Under Section 6 of the Presidential Decree No. 1594,  a contractor shall not subcontract a part or interestin a
57

government infrastructure project without the approval of the relevant department secretary:

Section 6. Assignment and Contract.The contractor shall not assign, transfer, pledge, subcontract ormake any other
disposition of the contract or any part or interest therein except with the approval of the Minister of Public Works,
Transportation and Communications, the Minister of Public Highways, or the Minister of Energy, as the case may
be. Approval of the subcontract shall not relieve the main contractor from any liability or obligation under his contract
with the Government nor shall it create any contractual relation between the subcontractor and the Government.

A subcontract, therefore, is void only if not approved by the department secretary.

In this case, it is premature to rule on the legality of the parties’ agreement precisely becausethe subcontract did not
push through. No actual agreement was proven in evidence.The Secretary of Public Works and Highways could
have approved the subcontract, which is allowed under Section 6 of the Presidential Decree No. 1594.

At any rate, even assuming that there was a subcontracting arrangement between Sunwest Construction and
Development Corporation and Muñoz, this court has allowed recovery under a void subcontract as an exception to
the in pari delicto doctrine.

In Gonzalo v. Tarnate, Jr.,  the Department of Public Works and Highways (DPWH) awarded the contractto
58

Dominador Gonzalo to improve the Sadsadan-Maba-ay section of the Mountain Province Road. Gonzalo then
subcontracted the supply of materials and labor to John Tarnate, Jr. without the approval of the Secretary of Public
Works and Highways. The parties agreed to a total subcontract fee of 12% of the project’s contract price. 59

Tarnate, Jr. also rented equipment to Gonzalo. In a deed of assignment, the parties agreed to a retention fee of
10% of Gonzalo’s total collection from the Department of Public Works and Highways, or 233,526.13, as rent for the
equipment. They then submitted the deed of assignment to the Department for approval. 60

Subsequently, Tarnate, Jr. learned that Gonzalo filed with the Department of Public Works and Highways an
affidavit to unilaterally cancel the deed of assignment. Gonzalo also collected the retention fee from the
Department. 61

Tarnate, Jr. demanded payment for the rent of the equipment, but Gonzalo ignored his demand. He thenfiled a
complaint for sum of money and damages with the Regional Trial Court of Mountain Province to collect on the 10%
retention fee. 62

In his defense, Gonzalo argued thatthe subcontract was void for being contrary to law, specifically, Section 6 of the
Presidential Decree No. 1594. Since the deed of assignment "was a mere product of the subcontract,"  the deed of
63

assignment was likewise void. With Tarnate, Jr. "fully aware of the illegality and ineffectuality of the deed of
assignment,"  Gonzalo contended that Tarnate, Jr. could not collect on the retention fee under the principle of in
64

pari delicto.
65

This court ruled that the subcontract was void for being contrary to law. Under Section 6 of the Presidential Decree
No. 1594, a contractor shall not subcontract the implementation of a government infrastructure project without the
approval of the relevant department secretary.  Since Gonzalo subcontracted the project to Tarnate, Jr. without the
66

approvalof the Secretary of Public Works and Highways, the subcontract was void, including the deed of
assignment, which "sprung from the subcontract." 67

Generally, parties to an illegal contract may not recover what they gave under the contract.  Under the doctrine of in
68

pari delicto, "no action arises, in equity or at law, from anillegal contract[.] No suit can be maintained for its specific
performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages
for its violation[.]"  Nevertheless, this court allowed Tarnate, Jr. to recover 10% of the retention fee. According to this
69

court,"the application of the doctrine of in pari delictois not always rigid."  An exception to the doctrine is "when its
70

application contravenes well-established public policy."  In Gonzalo, this court ruled that "the prevention of unjust
71

enrichment is a recognized public policy of the State."  It is, therefore, an exception to the application of the in pari
72

delicto doctrine. This court explained:

881
. . . the application of the doctrine of in pari delicto is not always rigid.  An accepted exception arises when its
1âwphi1

application contravenes wellestablished public policy. In this jurisdiction, public policy has been defined as "that
principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to
the public or against the public good."

Unjust enrichment exists, according to Hulst v. PR Builders, Inc., "when a person unjustly retains a benefit at the
loss of another, or when a person retains money or property of another against the fundamental principles of justice,
equity and good conscience." The prevention of unjust enrichment is a recognized public policy of the State, for
Article 22 of the Civil Code explicitly provides that "[e]veryperson who through an act of performance by another, or
any other means, acquires or comes into possession of something at the expense of the latter without just or legal
ground, shall return the same to him." It is well to note that Article 22 "is part of the chapter of the Civil Code on
Human Relations, the provisions of which were formulated as basic principles to be observed for the rightful
relationship between human beings and for the stability of the social order; designed to indicate certain norms that
spring from the fountain of good conscience;guides for human conduct that should run as golden threads through
society to the end that law may approach its supreme ideal which is the sway and dominance of justice."  (Citations
73

omitted)

Given that Tarnate, Jr. performed his obligations under the subcontract and the deed of assignment, this court ruled
that he was entitled to the agreed fee. According to this court, Gonzalo "would be unjustly enriched at the expense
of Tarnate if the latter was tobe barred from recovering because of the rigid application of the doctrine of in pari
delicto."
74

In this case, both the trial and appellate courts found that Loria received ₱2,000,000.00 from Muñoz for a
subcontract of the river-dredging project. Loria never denied that hefailed to fulfill his agreement with Muñoz.
Throughout the case’s proceedings, Loria failed to justify why he has the right to retain Muñoz’s ₱2,000,000.00. As
the Court of Appeals ruled, "it was not shown that [Muñoz] benefited from the delivery of the amount of
₱2,000,000.00 to [Loria]."75

Loria, therefore, is retaining the ₱2,000,000.00 without just or legal ground. This cannot be done. Under Article 22 of
the Civil Code of the Philippines, he must return the ₱2,000,000.00 to Muñoz.

This court notes the possible irregularities in these transactions. At the very least, there appears to have been an
attempt to circumvent our procurement laws. If petitioner indeed had the authority of Sunwest Construction and
Development Corporation, it is strange that Loria could have guaranteed a bidding result. If he did not have any true
dealing with Sunwest Construction, then his is an elaborate scheme to cause financiers to lose their hard-earned
money for nothing. WHEREFORE, the petition for review on certiorari is DENIED. The Court of Appeals' decision
and resolution in CA-GR. CV No. 81882 are AFFIRMED with MODIFICATION as to interest rate. Petitioner Carlos
A. Loria shall pay respondent Ludolfo P. Mufioi, Jr. ₱2,000,000.00 in actual damages, with interest of 12% interest
per annum from the filing of the complaint until June 30, 2013, and 6% interest per annum from July 1, 2013 until full
payment. 76

Let a copy of this decision be SERVED on the Office of the Ombudsman and the Department of Justice for their
appropriate actions.

SO ORDERED.

882
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 204964               October 15, 2014

REMIGIO D. ESPIRITU AND NOEL AGUSTIN, Petitioners, 

vs.
LUTGARDA TORRES DEL ROSARIO represented by SYLVIA R. ASPERILLA, Respondents.

DECISION

LEONEN, J.:

Lands classified as non-agricultural in zoning ordinances approved by the Housing and Land Use Regulatory Board
or its predecessors prior to June 15, 1998 are outside the coverage of the compulsory acquisition program of the
Comprehensive Agrarian Reform Law. However, there has to be substantial evidence to prove that lands sought to
be exempted fall within the non-agricultural classification.

This is a petition for review on certiorari  seeking to set aside the decision  dated September 28, 2012 and
1 2

resolution  dated November 29, 2012 of the Court of Appeals. These orders reinstated the order  dated February 19,
3 4

2004 of then Secretary of Agrarian Reform Roberto M. Pagdanganan approving petitioner’s application for
exemption.

The pertinent facts are as follows:

In 1978, the City Council of Angeles City, Pampanga, enacted Zoning Ordinance No. 13, Series of 1978, classifying
areas in Barangay Margot and Barangay Sapang Bato, Angeles City, as agricultural land. 5

Pursuant to this ordinance, Lutgarda Torres del Rosario (del Rosario) allegedly requested the City Zoning
Administrator to exempt from the zoning classification Lot Nos. 854 and 855 located in Barangay Margot and
Barangay Sapang Bato, Angeles City.  The land is covered by Transfer Certificate of Title No. T-11809 withan area
6

of 164.7605 hectares.  The request was allegedly approved on March 7, 1980 by Engineer Roque L. Dungca,
7

Angeles City Development Coordinator/Zoning Administrator, and the lots were allegedly reclassified as non-
agricultural or industrial lots. 8

On June 10, 1988, the Comprehensive Agrarian Reform Law (Republic Act No. 6657) was enacted.

On October 10, 2000, del Rosario, through her representative Sylvia R. Asperilla (Asperilla), filed an application for
exemption with the Department of Agrarian Reform, seeking to exempt Lot Nos. 854 and 855 from the
Comprehensive Agrarian Reform Program (CARP) coverage. 9

On February 19, 2004, then Secretary of Agrarian Reform Roberto M. Pagdanganan (Secretary Pagdanganan)
issued an order granting the application for exemption. Citing Department of Justice Opinion No. 44, Series of 1990,
Secretary Pagdanganan stated that lands classified as non agricultural before the enactment of CARP are beyond
its coverage. 10

On March 26, 2004, farmers in del Rosario’s landholdings, led by Remigio Espiritu (Espiritu), filed a motion for
reconsideration  of the order. They argued that under Zoning Ordinance No. 13, Series of 1978, Housing and Land
11

Use Regulatory Board Resolution No. 705, Series of 2001, and Angeles City Council Resolution No. 3300, Series of
2001, the land holdings were classified as agricultural, not industrial.  They argued that as per certifications by the
12

Housing and Land Use Regulatory Board dated June 1, 2001, May 28, 2001, and November 24, 2003, the
landholdings were within the agricultural zone, and there was no zoning ordinance passed that reclassified the area
into other land uses. 13

The motion was given due course by the Department of Agrarian Reform, this time headed by Secretary Nasser C.
Pangandaman (Secretary Pangandaman). Hence, on June 15, 2006, then Secretary Pangandaman issued an
order  granting the motion for reconsideration and revoking the earlier order of then Secretary of Agrarian Reform
14

Pagdanganan.

Del Rosario contended that this order was sent to her through Clarita Montgomery in Barangay Margot, Sapang
Bato, Angeles City, and not at Asperilla’s address in Cubao, Quezon City, which was her address on record. Del
Rosario alleged that she only came to know of the order on January 26, 2007, when the Provincial Agrarian Reform

883
Officer of Pampanga handed her a copy of the order.  She then filed her motion for reconsideration of the order
15

dated June 15, 2006. The motion was dated February 9, 2007. 16

Acting on del Rosario’s motion for reconsideration, Secretary Pangandaman found that the certifications issued by
the Housing and Land Use Regulatory Board classified the landholdings as agricultural before June 15,
1988. Based on the ocular inspections conducted by the Center for Land Use Policy, Planning and Implementation
17

(CLUPPI), the land remained agricultural and was planted with sugar cane and corn.  Accordingly, Secretary
18

Pangandaman denied del Rosario’s motion in the order  dated March 3, 2008.
19

Del Rosario filed a notice of appeal  before the Office of the President on March 27, 2008.
20

On May 7, 2009, the Office of the President, through then Deputy Executive Secretary for Legal Affairs Manuel B.
Gaite (Deputy Executive Secretary Gaite), rendered the decision  dismissing the appeal for lack of merit.
21

Del Rosario filed a motion for extension of 10 days to file her motion for reconsideration.  Citing Administrative
22

Order No. 18, Series of 1987, and Habaluyas Enterprises, Inc. v. Japzon,  the Office of the President, through then
23

Deputy Executive Secretary Natividad G. Dizon, denied the motion in the order  dated July 14, 2009.
24

Aggrieved, del Rosario filed a petition for review before the Court of Appeals arguing (1) that she was denied due
process when the order of Secretary Pangandaman was "erroneously sent to another address"  and (2) that the 25

decision of then Deputy Executive Secretary Gaite was void since he had been appointed to the Securities and
Exchange Commission two months prior to the rendering of the decision. 26

On September 28, 2012, the Court of Appeals rendered a decision granting the petition. The Court of Appeals
stated that del Rosario was indeed prevented from participating inthe proceedings that led to the issuance of
Secretary Pangandaman’s order when the notices were sent to her other address on record.  It also found that the
27

decision issued by then Deputy Executive Secretary Gaite was void since it violated Article VII, Section 13 of the
Constitution.  The dispositive portion of the decision states:
28

WHEREFORE, premises considered, the PETITION is GRANTED. The assailed Decision dated 07 May 2009, and
the Order dated 15 June 2006 are hereby SET ASIDE. Perforce, with the nullity of the said Decision and Order, the
Pagdanganan Order granting exemption to petitioner’s land is REINSTATED.

SO ORDERED. 29

Their motion for reconsideration having been denied,  petitioners, namely Remigio Espiritu and Noel Agustin, now
30

come before this court via a petition for review on certiorari, seeking to set aside the ruling of the Court of Appeals.

In particular, petitioners argue that respondent was not denied due process as she was able to actively participate in
the proceedings before the Department of Agrarian Reform and the Office of the President.  They also argue that
31

respondent was not able to present proof that Deputy Executive Secretary Gaite was not authorized tosign the
decision and, hence, his action is presumed to have been donein the regular performance of duty. 32

Respondent, on the other hand, argues that the Court of Appeals did not commit any reversible error in itsdecision.
She argues that she was deprived of due process when Secretary Pangandaman’s order was sent to the wrong
address. She also argues that the Deputy Executive Secretary Gaite’s decision was void since he had already been
appointed to the Securities and Exchange Commission two months prior. 33

The issue, therefore, before this court is whether the Court of Appeals correctly set aside the order of Secretary
Pangandaman and the decision of Deputy Secretary Gaite and reinstated the order of Secretary Pagdanganan.

This petition should be granted.

Respondent was not deprived of due process

The Court of Appeals, in finding for respondent, stated that:

Since she was not notified, [del Rosario] was not able to participate in the proceedings leading to the issuance of
the Pangandaman Order. The absence of notice that resulted in the inability of [del Rosario] to be heard indubitably
confirms her claim of lackof due process. [Del Rosario] indeed was denied her day in the administrative proceedings
below. And considering that [del Rosario] was not accorded due process, the Pangandaman Order is void for lack
ofjurisdiction. Hence, contrary to respondents’ submission, it could not attain finality.
34

The Court of Appeals, however, did not take into consideration that respondent was still able to file a motion for
reconsideration of Secretary Pangandaman’s order, albeit beyond the allowable period to file. In Department of
Agrarian Reform Administrative Order No. 06,  Series of 2000:
35

884
 RULE III
Commencement, Investigation and Resolution of Cases

....

SECTION 21. Motion for Reconsideration. — In case any of the parties disagrees with the decision or resolution, the
affected party may file a written motion for reconsideration within fifteen (15) days from receipt of the order,
furnishing a copy thereof tothe adverse party. The filing of the motion for reconsideration shall suspend the running
of the period to appeal.

Any party shall be allowed only one(1) motion for reconsideration. Thereafter, the RD or approving authority shall
rule on the said motion within fifteen (15) days from receipt thereof. In the event that the motion is denied, the
adverse party has the right to perfect his appeal within the remainder of the period to appeal, reckoned from receipt
of the resolution of denial. If the decision is reversed on reconsideration, the aggrieved party shall have fifteen (15)
days from receipt of the resolution of reversal within which to perfect his appeal.(Emphasis supplied) Despite being
filed late, Secretary Pangandaman still gave due course to the motion and resolved it on its merits. This is clear from
his order dated March 3, 2008, which reads:

During the 50th Special CLUPPI Committee-B Meeting, held on 18 December 2007, the Motion for Reconsideration
filed by Sylvia Espirilla [sic] was deliberated upon and the Committee recommended the DENIAL of the Motion for
Reconsideration based on the following grounds:

● The certifications issued by the HLURB shows that the subject properties were classified as agricultural
before 15 June 1986 [sic]; and

● Based on the ocular inspection conducted by the CLUPPI Inspection Team, it was found out that the area
remained agricultural. In fact, it [is] still dominantly planted with sugar cane and corn.  (Emphasis supplied)
36

While it may be true that respondent was prevented from filing a timelymotion for reconsideration of Secretary
Pangandaman’s order, it would be erroneous to conclude that she had been completely denied her opportunity to
be heard. In Department of Agrarian Reform v. Samson: 37

. . . . In administrative proceedings, a fair and reasonable opportunity to explain one’s side suffices to meet the
requirements of due process.In Casimiro v. Tandog, the Court held:

The essence of procedural due process is embodied in the basic requirement of notice and a real opportunity to be
heard. In administrative proceedings, such as in the case at bar, procedural due process simply means the
opportunity to explain one’s sideor the opportunity to seek a reconsideration of the action or ruling complained of.
"To be heard" does not mean only verbal arguments in court; one may be heard also thru pleadings. Where
opportunity to be heard, either through oral arguments or pleadings, is accorded, there is no denial of procedural
due process.

In administrative proceedings, procedural due process has been recognized toinclude the following: (1) the right to
actual or constructive notice of the institution of proceedings which may affect a respondent’s legal rights; (2) a real
opportunity to be heard personally or with the assistance of counsel, to present witnesses and evidence in one’s
favor, and to defend one’s rights; (3) a tribunal vested with competent jurisdiction and so constituted as to afford a
person charged administratively a reasonable guarantee of honesty as well as impartiality; and (4) a finding by said
tribunal which is supported by substantial evidence submitted for consideration during the hearing or contained in
the records or made known to the parties affected.  (Emphasis supplied)
38

When respondent filed her motion for reconsideration assailing Secretary Pangandaman’s order, she was able to
completely and exhaustively present her arguments. The denial of her motion was on the basis of the merits of her
arguments and any other evidence she was able to present. She was given a fair and reasonable opportunity to
present her side; hence, there was no deprivation of due process.

It was also erroneous to conclude that respondent was "denied her day in the administrative proceedings
below." Respondent was able to actively participate not only in the proceedings before the Department of Agrarian
39

Reform, but also on appeal to the Office of the President and the Court of Appeals.

Deputy Executive Secretary Gaite’s decision is presumed valid, effective, and binding

Article VII, Section 13 of the Constitution states:

Section 13. The President, Vice-President, the Members of the Cabinet, and their deputies orassistants shall not,
unless otherwise provided in this Constitution, hold any other office or employment during their tenure. They shall
not, during said tenure, directly or indirectly, practice any other profession, participate in any business, or be

885
financially interested in any contract with, or in any franchise, or special privilege granted by the Government or any
subdivision, agency, or instrumentality thereof, including government-owned or controlled corporations or their
subsidiaries. They shall strictly avoid conflict ofinterest in the conduct of their office.

. . . . (Emphasis supplied)

It is alleged that Gaite was appointed Commissioner to the Securities and Exchange Commission on March 16,
2009.  It is also alleged that he has already lost his authority as Deputy Executive Secretary for Legal Affairs when
40

he rendered the decision dated May 7, 2009 since he is constitutionally prohibited from holding two offices during
his tenure. This, however, is not conclusive since no evidence was presented as to when he accepted the
appointment, took his oath of office, or assumed the position.

Assuming that Gaite’s appointment became effective on March 16, 2009, he can be considered a de factoofficer at
the time he rendered the decision dated May 7, 2009.

In Funa v. Agra,  a petition was filed against Alberto Agra for holding concurrent positions as the acting Secretary of
41

Justice and as Solicitor General. This court, while ruling that the appointment of Alberto Agra as acting Secretary of
Justice violated Article VII, Section 13 of the Constitution, held that he was a de facto officer during his tenure in the
Department of Justice:

A de facto officer is one who derives his appointment from one having colorable authority to appoint, if the office is
an appointive office, and whose appointment is valid on its face. He may also be one who is in possession of an
office, and is discharging its duties under color of authority, by which is meant authority derived from an
appointment, however irregular or informal, so that the incumbent is not a mere volunteer. Consequently, the acts of
the de facto officer are just as valid for all purposes as those of a de jure officer, in so far as the public or third
persons who are interested therein are concerned.

In order to be clear, therefore, the Court holds that all official actions of Agra as a de facto Acting Secretary of
Justice, assuming that was his later designation, were presumed valid, binding and effective as if he was the officer
legally appointed and qualified for the office. This clarification is necessary in order to protect the sanctity of the
dealings by the public with persons whose ostensible authority emanates from the State. Agra’s official actions
covered by this clarification extend to but are not limited to the promulgation of resolutions on petitions for review
filed in the Department of Justice, and the issuance of department orders, memoranda and circulars relative to the
prosecution of criminal cases.  (Emphasis supplied)
42

Assuming that Gaite was a de facto officer of the Office of the President after his appointment to the Securities and
Exchange Commission, any decision he renders during this time is presumed to be valid, binding, and effective.

With Gaite being a public officer, his acts also enjoy the presumption of regularity, thus:

The presumption of regularity of official acts may be rebutted by affirmative evidence of irregularity or failure to
perform a duty. The presumption, however, prevails until it is overcome by no less than clear and convincing
evidence to the contrary. Thus, unless the presumption in [sic] rebutted, it becomes conclusive. Every reasonable
intendment will be madein support of the presumption and in case of doubt as to an officer’s act being lawful or
unlawful, construction should be in favor of its lawfulness.  (Emphasis supplied)
43

Respondent has not presented evidence showing that the decision was rendered ultra vires, other than her
allegation that Gaite had already been appointed to another office. Unless there is clear and convincing evidence to
the contrary, the decision dated May 7, 2009 is conclusively presumed to have been rendered in the regular course
of business.

Respondent’s landholdings were agricultural, not industrial

Prior to the enactment of Republic Act No. 6657, lands were classified into agricultural, residential, or industrial by
law or by zoning ordinances enacted by local government units. In Heirs of Luna v. Afable: 44

It is undeniable that local governments have the power to reclassify agricultural into non-agricultural lands. Section 3
of RA No. 2264 (The Local Autonomy Act of 1959) specifically empowers municipal and/or city councils to adopt
zoning and subdivision ordinances or regulations in consultation with the National Planning Commission. By virtue
of a zoning ordinance, the local legislature may arrange, prescribe, define, and apportion the land within itspolitical
jurisdiction into specific uses based not only on the present, butalso on the future projection of needs. It may,
therefore, be reasonably presumed that when city and municipal boards and councils approved an ordinance
delineating an area or district in their cities or municipalities as residential, commercial, or industrial zone pursuant to
the power granted tothem under Section 3 of the Local Autonomy Act of 1959, they were, at the same time,
reclassifying any agricultural lands within the zone for non-agricultural use; hence, ensuring the implementation of
and compliance with their zoning ordinances.  (Emphasis supplied) Republic Act No. 6657 became effective on
45

886
June 15, 1988, and it covered all public and private lands, including lands of the public domain suited for
agriculture.  Upon its enactment, questions arose as to the authority of the Department of Agrarian Reform to
46

approve or disapprove applications for conversion of agricultural land to non-agricultural. Then Agrarian Reform
Secretary Florencio B.Abad (Secretary Abad) was of the opinion that laws prior to Republic Act No. 6657 authorized
the Department of Agrarian Reform, together with the Department of Local Government and Community
Development and the Human Settlements Commission, to allow or disallow conversions. In response to Secretary
Abad’s query, the Department of Justice issued Opinion No. 44 on March 16, 1990, written by then Secretary of
Justice Franklin M.Drilon. The opinion, reproduced in full, states:

Sir:

This refers to your letter of the 13th instant stating your "position that prior to the passage of R.A. 6657, the
Department of Agrarian Reform had the authority to classify and declare which agricultural lands are suitable for
non-agricultural purposes, and to approve or disapprove applications for conversion from agricultural to non-
agricultural uses."

In support of the foregoing view, you contend that under R.A. No. 3844, as amended, the Department of Agrarian
Reform (DAR) is empowered to "determine and declare anagricultural land to be suited for residential, commercial,
industrial orsome other urban purpose" and to "convert agricultural land from agricultural to non-agricultural
purposes"; that P.D. No. 583, as amended by P.D. No. 815 "affirms that the conversion of agricultural lands shall be
allowed only upon previous authorization of the [DAR]; with respectto tenanted rice and corn lands"; that a
Memorandum of Agreement dated May 13, 1977 between the DAR, the Department of Local Government and
Community Development and the then Human Settlements Commission "further affirms the authority of the [DAR] to
allow or disallow conversion of agricultural lands"; that E.O. No. 129-A expressly invests the DAR with exclusive
authority to approve or disapprove conversion of agricultural lands for residential, commercial, industrial and other
land uses'; and that while inthe final version of House Bill 400, Section 9 thereof provided that lands devoted to
"residential, housing, commercial and industrial sites classified as such by the municipal and city development
councils as already approved by the Housing and Land Use Regulatory Board, in their respective zoning
development plans" be exempted from the coverage of the Agrarian Reform program, this clause was deleted from
Section 10 of the final version of the consolidated bill stating the exemptions from the coverage of the
Comprehensive Agrarian Reform Program. We take it that your query has been prompted by the study previously
made by this Department for Executive Secretary Catalino Macaraig Jr. and Secretary Vicente Jayme
(Memorandum dated February 14, 1990) which upheld the authority of the DAR to authorize conversions of
agricultural lands to non-agricultural uses as of June 15, 1988, the date of effectivity of the Comprehensive Agrarian
Reform Law (R.A. No. 6657). [I]t is your position that the authority of DAR to authorize such conversion existed even
prior to June 15, 1988 or as early as 1963 under the Agricultural Land Reform Code(R.A. No. 3844; as amended).

It should be made clear at the outset that the aforementioned study of this Department was based on facts and
issues arising from the implementation of the Comprehensive Agrarian Reform Program (CARP). While there is no
specific and express authority given to DAR in the CARP law to approve or disapprove conversion of agricultural
lands to nonagricultural uses, because Section 65 only refers to conversions effected after five years from date of
the award, we opined that the authority of the DAR to approve or disapprove conversions of agricultural lands to
nonagricultural uses applies only to conversions made on or after June 15, 1988, the date of effectivity of R.A.No.
6657, solely on the basis of our interpretation of DAR's mandate and the comprehensive coverage of the land
reform program. Thus, we said:

"Being vested with exclusive original jurisdiction over all matters involving the implementation of agrarian reform, it is
believed to be the agrarian reform law's intention that any conversion ofa private agricultural land to non-agricultural
uses should be cleared beforehand by the DAR. True, the DAR's express power over land use conversion is limited
to cases in which agricultural lands already awarded have, after five years, ceased to be economically feasible and
sound for agricultural purposes, or the locality has become urbanized and the land will have a greater economic
value for residential, commercial or industrial purposes. But to suggest that these are the only instances when the
DAR can require conversion clearances would open a loophole in the R.A. No. 6657, which every landowner may
use to evade compliance with the agrarian reform program. Hence, it should logically follow from the said
department's express duty and function to execute and enforce the said statute that any reclassification of a private
land as a residential, commercial or industrial property should first be cleared by the DAR."

It is conceded that under the laws in force prior to the enactment and effective date of R.A. No. 6657, the DAR had
likewise the authority, to authorize conversions of agricultural lands to other uses, but always in coordination with
other concerned agencies. Under R.A. No. 3344, as amended by R.A. No. 6389, an agricultural lessee may, by
order of the court, be dispossessed of his landholding if after due hearing, it is shown that the "landholding is
declared by the [DAR] upon the recommendation of the National Planning Commission to be suited for residential,
commercial, industrial or some other urban purposes."

Likewise, under various Presidential Decrees (P.D. Nos. 583, 815 and 946) which were issued to give teeth to the
implementation of the agrarian reform program decreed inP.D. No. 27, the DAR was empowered to authorize
conversions of tenanted agricultural lands, specifically those planted to rice and/or corn, to other agricultural or

887
tonon-agricultural uses, "subject to studies on zoning of the Human Settlements Commissions" (HSC). This non-
exclusive authority of the DAR under the aforesaid laws was, as you have correctly pointed out, recognized and
reaffirmed by other concerned agencies, such as the Department of Local Government and Community
Development (DLGCD) and the then Human Settlements Commission (HSC) in a Memorandum of Agreement
executed by the DAR and these two agencies on May 13, 1977, which is an admission that with respect to land use
planning and conversions, the authority is not exclusive to any particular agency but is a coordinated effort of all
concerned agencies.

It is significant to mention thatin 1978, the then Ministry of Human Settlements was granted authority to review and
ratify land use plans and zoning ordinance of local governments and to approve development proposals which
include land use conversions (see LOI No. 729 [1978]). This was followed by P.D.No. 648 (1981) which conferred
upon the Human Settlements Regulatory Commission (the predecessors of the Housing and Land Use Regulatory
Board [HLURB][)] the authority to promulgate zoning and other land use control standards and guidelines which
shall govern land use plans and zoning ordinances of local governments, subdivision or estate development
projects of both the public and private sector and urban renewal plans, programs and projects; as well as to review,
evaluate and approve or disapprove comprehensive land use development plans and zoning components of civil
works and infrastructure projects, of national, regional and local governments, subdivisions, condominiums or estate
development projects including industrial estates.

P.D. No. 583, as amended by P.D. No. 815, and the 1977 Memorandum of Agreement, abovementioned, cannot
therefore, be construed as sources of authority of the DAR; these issuances merely affirmed whatever power DAR
had at the time oftheir adoption.

With respect to your observation that E.O. No. 129-A also empowered the DAR to approve or disapprove
conversions of agricultural lands into non-agricultural uses as of July 22, 1987, it is our view that E.O. No. 129-A
likewise did not provide a new source of power of DAR with respect to conversion but it merely recognized and
reaffirmed the existence of such power as granted under existing laws. This is clearly inferrable from the following
provision of E.O. No. 129-A to wit:

"Sec. 5. Powers and Functions. Pursuant to the mandate of the Department, and in order to ensure the successful
implementation of the Comprehensive Agrarian Reform Program, the Department is hereby authorized to:

1) Have exclusive authority to approve or disapprove conversion of agricultural lands for residential, commercial,
industrial and other land uses as may be provided by law"

Anent the observation regarding the alleged deletion of residential, housing, commercial and industrial sites
classifiedby the HLURB in the final version of the CARP bill, we fail to see how this [sic] circumstances could
substantiate your position that DAR's authority to reclassify or approve conversions of agricultural lands to non-
agricultural uses already existed prior to June 15, 1988. Surely, it is clear that the alleged deletion was necessary to
avoid a redundancy inthe CARP law whose coverage is expressly limited to "all public and private agricultural lands"
and "other lands of the public domain suitable for agriculture" (Sec. 4, R.A. No. 6657). Section 3(c) of R.A. No. 6657
defines "agricultural land" as that "devoted to agricultural activity as defined in the Act and not classified as mineral
forest, residential, commercial or industrial land."

Based on the foregoing premises, wereiterate the view that with respect to conversions ofagricultural lands covered
by R.A. No. 6657 to non-agricultural uses, the authority of DAR to approve such conversions may be exercised from
the date of the law's effectivity on June 15, 1988. This conclusion is based on a liberal interpretation of R.A. No.
6657 in the light of DAR's mandate and the extensive coverage of the agrarian reform program.  (Emphasis
47

supplied) Department of Justice Opinion No. 44 became the basis of subsequent issuances by the Department of
Agrarian Reform, stating in clear terms that parties need not seek prior conversion clearance from the Department
of Agrarian Reform for lands that were classified as non-agricultural prior to Republic Act No. 6657. The subsequent
rulings are outlined in Junio v. Secretary Garilao:
48

Following the opinion of the Department of Justice (DOJ), the DAR issued Administrative Order (AO)No. 6, Series of
1994, stating that conversion clearances were no longer needed for lands already classified as non-agricultural
before the enactment of Republic Act 6657. Designed to "streamline the issuance of exemption clearances, based
on DOJ Opinion No. 44," the AO provided guidelines and procedures for the issuance of exemption clearances.

Thereafter, DAR issued AO 12, Series of 1994, entitled "Consolidated and Revised Rules and Procedures
Governing Conversion of Agricultural Lands to Non-Agricultural Uses." It provided that the guidelines on how to
secure an exemption clearance under DAR AO No. 6, Series of 1994, shall apply to agricultural lands classified or
zoned for non-agricultural uses by local government units (LGUs); and approved by the Housing and Land Use
Regulatory Board (HLURB) before June 15, 1988. Under this AO, the DAR secretary had the ultimate authority to
issue orders granting or denying applications for exemption filed by landowners whose lands were covered by DOJ
Opinion No. 44.  (Citations omitted)
49

888
Accordingly, lands are consideredexempt from the coverage of Republic Act No. 6657 if the following requisites are
present:

1. Lands were zoned for non-agricultural use by the local government unit; and

2. The zoning ordinance was approved by the Housing and Land Use Regulatory Board before June 15,
1998.

In revoking the prior order of exemption, Secretary Pangandaman took note of the following considerations:

● The Certification dated 18 November 2003, of Mr. David D. David, Planning Officer IV and Zoning
Administrator of the City of Angeles states that the City Planning and Development Office, Zoning
Administration Unit (CPDO-ZAU) certifies that subject property covered by TCT No. 11804 is classified as
agricultural based on the certified photocopy of Zoning Ordinance, Ordinance No. 13, Series of 1978, issued
by the Housing and Land Use Regulatory Board, Regional Office No. 3 (HLURB-Region III) on 03
September 2001;

● Also, upon verification with HLURB-Region III, we were informed that as per copy of the approved Zoning
Plan of 1978, the subject properties were classified as agricultural. The said Zoning Plan of 1978 was
approved under NCC Plan dated 24 September 1980; and

● Based on the ocular inspection conducted by the CLUPPI Inspection Team, it was found that the area
remained agricultural. In fact, it is still dominantly planted withsugar cane and corn.
50

(Emphasis supplied)

Upon respondent’s motion for reconsideration, Secretary Pangandaman also took into consideration the
recommendations of the Center for Land Use Policy, Planning, and Implementation Committee, thus:

During the 50th Special CLUPPI Committee-B Meeting, held on 18 December 2007, the Motion for Reconsideration
filed by Sylvia Espirilla [sic] was deliberated upon and the Committee recommended the DENIAL of the Motion for
Reconsideration based on the following grounds:

● The certifications issued by the HLURB shows that the subject properties were classified as agricultural
before 15 June 1986 [sic]; and

● Based on the ocular inspection conducted by the CLUPPI Inspection Team, it was found out that the area
remained agricultural.  In fact, it [is] still dominantly planted with sugar cane and corn.  (Emphasis supplied)
1âwphi1
51

Secretary Pangandaman also found that:

The certifications submitted by the [respondents] which is the Certification dated 18 November 2003, of Mr. David D.
David, Planning Officer IV and Zoning Administrator of the City of Angeles states that the City Planning
Development Office, Zoning Administration Unit (CPDOZAU) certifies that the subject properties covered by TCT
No. T-11804 is classified as agricultural based on the certified photocopy of Zoning Ordinance, Ordinance No. 13[,]
Series of 1978 issued by the Housing and Land Use Regulatory Board, Regional Office No. 3 (HLURB-Region III)
on 03 September 2001.

Such certification was corroborated bya certification issued by the HLURB Regional Director, Region III, Ms. Edithat
[sic] Barrameda in its certification dated 28 May 2001 and 24 November 2003. It was stated in the said certification
that the subject landholding is within the agricultural zone based on Comprehensive LandUse Plan and Zoning
Ordinance of the City Council of Angeles City approved through HLURB Resolution No. 705 dated 17 October 2001.
Also a certification was issued by Director Barrameda on 01 June 2001, stating therein that, "Duplicate copies of the
Certification issued by this Board toMs. Lutgarda Torres on 18 December 1991 and 8 July 1998, respectively are not
among the files for safekeeping when she assumed as Regional Officer on 03 July 2000.["]  (Emphasis supplied)
52

These findings were sustained on appeal by the Office of the President, stating that:

[Respondents'] argument that the land has ceased to be agricultural by virtue of reclassification under Ordinance
No. 13, series of 1978 cannot be sustained since the records of the case or the evidence presented thereto are
bereft of any indication showing the same. In fact, nowhere was it shown that a certified true copy of the said
Ordinance was presented before this Office or the office a quo. 53

The factual findings of administrative agencies are generally given great respect and finality by the courts as it is
presumed that these agencies have the knowledge and expertise over matters under their jurisdiction.  Both the
54

889
Department of Agrarian Reform and the Office of the President found respondent's lands to be agricultural. We see
no reason to disturb these findings.

WHEREFORE, the petition is GRANTED. The decision dated September 28, 2012 and resolution dated November
29, 2012 of the Court of Appeals are SET ASIDE. The order dated June 15, 2006 of the Department of Agrarian
Reform and the decision dated May 7, 2009 of the Office of the President are REINSTATED.

SO ORDERED.

890
 SECOND DIVISION

October 15, 2014

G.R. No. 188801

ROSARIO MATA CASTRO and JOANNE BENEDICTA CHARISSIMA M. CASTRO, A.K.A. "MARIA SOCORRO
M. CASTRO" and "JAYROSE M. CASTRO", Petitioners 
vs.
JOSE MARIA JED LEMUEL GREGORIO and ANA MARIA REGINA GREGORIO, Respondents

DECISION

LEONEN, J.:

The policy of the law is clear. In order to maintain harmony, there must be a showing of notice and consent. This
cannot be defeated by mere procedural devices. In all instances where it appears that a spouse attempts to adopt a
child out of wedlock, the other spouse and other legitimate children must be personally notified through personal
service of summons. It is not enough that they be deemed notified through constructive service.

This is a petition for review on certiorari  assailing the decision  of the Court of Appeals in CA-G.R. SP No. 101021,
1 2

which denied the petition for annulment of judgment filed by petitioners. The petition before the appellate court
sought to annul the judgment of the trial court that granted respondents’ decree of adoption. 3

The case originally stemmed from the adoption of Jose Maria Jed Lemuel Gregorio (Jed) and Ana Maria Regina
Gregorio (Regina) by Atty. Jose G. Castro (Jose). Jose is the estranged husband of Rosario Mata Castro (Rosario)
and the father of Joanne Benedicta Charissima M. Castro (Joanne), also known by her baptismal name, "Maria
Socorro M. Castro" and her nickname, "Jayrose."

Rosario alleged that she and Jose were married on August 5, 1962 in Laoag City. Their marriage had allegedly
been troubled. They had a child, Rose Marie, who was born in 1963, but succumbed to congenital heart disease
and only lived for nine days. Rosario allegedly left Jose after a couple of months because of the incompatibilities
between them. 4

Rosario and Jose, however, briefly reconciled in 1969. Rosario gave birth to Joanne a year later. She and Jose
allegedly lived as husband and wife for about a year even if she lived in Manila and Jose stayed in Laoag City. Jose
would visit her in Manila during weekends. Afterwards, they separated permanently because Rosario alleged that
Jose had homosexual tendencies.  She insisted, however, that they "remained friends for fifteen (15) years despite
5

their separation(.)"
6

On August 1, 2000, Jose filed a petition  for adoption before the Regional Trial Court of Batac, Ilocos Norte. In the
7

petition, he alleged that Jed and Regina were his illegitimate children with Lilibeth Fernandez Gregorio
(Lilibeth), whom Rosario alleged was his erstwhile housekeeper.
8 9

At the time of the filing of the petition, Jose was 70 years old.  According to the Home Study Report  conducted by
10 11

the Social Welfare Officer of the trial court, Jose belongs to a prominent and respected family, being one of the three
children of former Governor Mauricio Castro.

He was also a well-known lawyer in Manila and Ilocos Norte.  The report mentioned that he was once married to
12

Rosario, but the marriage did not produce any children.  It also stated that he met and fell in love with Lilibeth in
13

1985, and Lilibeth was able to bear him two children, Jed on August 1987, and Regina on March 1989.  Under 14

"Motivation for Adoption," the social welfare officer noted:

Since, he has no child with his marriaged [sic] to Rosario Mata, he was not able to fulfill his dreams to parent a child.
However, with the presence of his 2 illegitimate children will fulfill his dreams [sic] and it is his intention to legalize
their relationship and surname. . . . 15

At the time of the report, Jose was said to be living with Jed and Regina temporarily in Batac, Ilocos Norte.  The 16

children have allegedly been in his custody since Lilibeth’s death in July 1995. 17

On October 16, 2000, the trial court approved the adoption,  having ruled that "[n]o opposition had been received by
18

this Court from any person including the government which was represented by the Office of the Solicitor
General."  A certificate of finality  was issued on February 9, 2006.
19 20

891
Meanwhile, on July 3, 2006, Rosario, through her lawyer, Atty. Rene V. Saguisag, filed a complaint for disbarment
against Jose with the Integrated Bar of the Philippines.  In her complaint, she alleged that Jose had been remiss in
21

providing support for their daughter, Joanne, for the past 36 years.  She alleged that she single-handedly raised and
22

provided financial support to Joanne while Jose had been showering gifts to his driver and alleged lover, Larry R.
Rentegrado (Larry), and even went to the extent of adopting Larry’s two children, Jed and Regina, without her and
Joanne’s knowledge and consent.  She also alleged that Jose made blatant lies to the trial court by alleging that Jed
23

and Regina were his illegitimate children with Larry’s wife, Lilibeth, to cover up for his homosexual relationship with
Larry.24

In his answer before the Integrated Bar of the Philippines, Jose denies being remiss in his fatherly duties to Joanne
during her minority. He alleged that he always offered help, but it was often declined.  He also alleged that he
25

adopted Jed and Regina because they are his illegitimate children. He denied having committed any of the
falsification alluded to by Rosario. He also stated that he had suffered a stroke in 1998 that left him paralyzed. He
alleged that his income had been diminished because several properties had to be sold to pay for medical
treatments.  He then implored the Integrated Bar of the Philippines to weigh on the case with "justice and equity."
26 27

On October 8, 2006, Jose died in Laoag City, Ilocos Norte. 28

On October 18, 2007, Rosario and Joanne filed a petition for annulment of judgment under Rule 47 of the Rules of
Civil Procedure with the Court of Appeals, seeking to annul the October 16, 2000 decision of the trial court
approving Jed and Regina’s adoption. 29

In their petition, Rosario and Joanne allege that they learned of the adoption sometime in 2005.  They allege that 30

Rosario’s affidavit of consent, marked by the trial court as "Exh. K,"  was fraudulent.  They also allege that Jed and
31 32

Regina’s birth certificates showed different sets of information, such as the age of their mother, Lilibeth, at the time
she gave birth. They argue that one set of birth certificates states the father to be Jose and in another set of
National Statistic Office certificates shows the father to be Larry, Jose’s driver and alleged lover.  It was further 33

alleged that Jed and Regina are not actually Jose’s illegitimate children but the legitimate children of Lilibeth and
Larry who were married at the time of their birth.  On May 26, 2009, the Court of Appeals denied the petition.
34

While admittedly, no notice was given by the trial court to Rosario and Joanne of the adoption, the appellate court
ruled that there is "no explicit provision in the rules that the spouse and legitimate child of the adopter . . . should be
personally notified of the hearing." 35

The appellate court "abhor[red] the mind baffling scheme employed by [Jose] in obtaining an adoption decree in
favor of [his illegitimate children] to the prejudice of the interests of his legitimate heirs"  but stated that its hands
36

were bound by the trial court decision that had already attained "finality and immutability." 37

The appellate court also ruled that the alleged fraudulent information contained in the different sets of birth
certificates required the determination of the identities of the persons stated therein and was, therefore, beyond the
scope of the action for annulment of judgment. The alleged fraud was also perpetrated during the trial and could not
be classified as extrinsic fraud, which is required in an action for annulment of judgment. 38

When Rosario and Joanne’s motion for reconsideration was denied on July 10, 2009,  they filed this petition.
39

The issue before this court is whether the Court of Appeals erred in denying the petition for annulment for failure of
petitioners to (1) show that the trial court lacked jurisdiction and (2) show the existence of extrinsic fraud.

In their petition, petitioners argue that the appellate court erred in its application of the law on extrinsic fraud as
ground to annul a judgment.  They argue that because of the fabricated consent obtained by Jose and the alleged
40

false information shown in the birth certificates presented as evidence before the trial court,  they were not given the
41

opportunity to oppose the petition since the entire proceedings were concealed from them. 42

Petitioners also argue that the appellate court misunderstood and misapplied the law on jurisdiction despite the
denial of due process, notice, and non-inclusion of indispensable parties.  They argue that the adoption of
43

illegitimate children requires the consent, not only of the spouse, but also the legitimate children 10 years or over of
the adopter, and such consent was never secured from Joanne. 44

Respondents, however, argue in their comment that petitioners could not have been deprived of their day in court
since their interest was "amply protected by the participation and representation of the Solicitor General through the
deputized public prosecutor." 45

Respondents also argue that there was constructive notice through publication for three consecutive weeks in a
newspaper of general circulation, which constitutes not only notice to them but also notice to the world of the
adoption proceedings.  They argue that since the alleged fraud was perpetrated during the trial, it cannot be said to
46

be extrinsic fraud but intrinsic fraud, which is not a ground for annulment of judgment.  They also argue that
47

892
petitioners were not indispensable parties because adoption is an action in rem and, as such, the only indispensable
party is the state.
48

The petition is granted.

Annulment of judgment under Rule

47 of the Rules of Civil Procedure

Under Rule 47, Section 1 of the Rules of Civil Procedure, a party may file an action with the Court of Appeals to
annul judgments or final orders and resolutions in civil actions of Regional Trial Courts. This remedy will only be
available if "the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no longer
available through no fault of the petitioner."
49

In Dare Adventure Farm Corporation v. Court of Appeals: 50

A petition for annulment of judgment is a remedy in equity so exceptional in nature that it may be availed of only
when other remedies are wanting, and only if the judgment, final order or final resolution sought to be annulled was
rendered by a court lacking jurisdiction or through extrinsic fraud. Yet, the remedy, being exceptional in character, is
not allowed to be so easily and readily abused by parties aggrieved by the final judgments, orders or resolutions.
The Court has thus instituted safeguards by limiting the grounds for the annulment to lack of jurisdiction and
extrinsic fraud, and by prescribing in Section 1 of Rule 47 of the Rules of Court that the petitioner should show that
the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no longer available
through no fault of the petitioner. A petition for annulment that ignores or disregards any of the safeguards cannot
prosper.

The attitude of judicial reluctance towards the annulment of a judgment, final order or final resolution is
understandable, for the remedy disregards the time-honored doctrine of immutability and unalterability of final
judgments, a solid corner stone in the dispensation of justice by the courts. The doctrine of immutability and
unalterability serves a two-fold purpose, namely: (a) to avoid delay in the administration of justice and thus,
procedurally, to make orderly the discharge of judicial business; and (b) to put an end to judicial controversies, at
the risk of occasional errors, which is precisely why the courts exist. As to the first, a judgment that has acquired
finality becomes immutable and unalterable and is no longer to be modified in any respect even if the modification is
meant to correct an erroneous conclusion of fact or of law, and whether the modification is made by the court that
rendered the decision or by the highest court of the land. As to the latter, controversies cannot drag on indefinitely
because fundamental considerations of public policy and sound practice demand that the rights and obligations of
every litigant must not hang in suspense for an indefinite period of time.  (Emphasis supplied)
51

Because of the exceptional nature of the remedy, there are only two grounds by which annulment of judgment may
be availed of: extrinsic fraud, which must be brought four years from discovery, and lack of jurisdiction, which must
be brought before it is barred by estoppel or laches. 52

Lack of jurisdiction under this rule means lack of jurisdiction over the nature of the action or subject matter, or lack of
jurisdiction over the parties.  Extrinsic fraud, on the other hand, is "[that which] prevents a party from having a trial
53

or from presenting his entire case to the court, or [that which] operates upon matters pertaining not to the judgment
itself but to the manner in which it is procured."54

The grant of adoption over respondents should be annulled as the trial court did not validly acquire jurisdiction over
the proceedings, and the favorable decision was obtained through extrinsic fraud.

Jurisdiction over adoption

proceedings vis-à-vis the law on
adoption

Petitioners argue that they should have been given notice by the trial court of the adoption, as adoption laws require
their consent as a requisite in the proceedings.

Petitioners are correct.

It is settled that "the jurisdiction of the court is determined by the statute in force at the time of the commencement of
the action."  As Jose filed the petition for adoption on August 1, 2000, it is Republic Act No. 8552  which applies
55 56

over the proceedings. The law on adoption requires that the adoption by the father of a child born out of wedlock
obtain not only the consent of his wife but also the consent of his legitimate children.

Under Article III, Section 7 of Republic Act No. 8552, the husband must first obtain the consent of his wife if he
seeks to adopt his own children born out of wedlock:

893
 ARTICLE III

ELIGIBILITY

SEC. 7. Who May Adopt. — The following may adopt:

....

Husband and wife shall jointly adopt, except in the following cases:

(i) if one spouse seeks to adopt the legitimate son/daughter of the other; or

(ii) if one spouse seeks to adopt his/her own illegitimate son/daughter: Provided, however, That the other
spouse has signified his/her consent thereto; or

(iii) if the spouses are legally separated from each other. . . (Emphasis supplied)

The provision is mandatory. As a general rule, the husband and wife must file a joint petition for adoption. The
rationale for this is stated in In Re: Petition for Adoption of Michelle P. Lim:
57

The use of the word "shall" in the above-quoted provision means that joint adoption by the husband and the wife is
mandatory. This is in consonance with the concept of joint parental authority over the child which is the ideal
situation. As the child to be adopted is elevated to the level of a legitimate child, it is but natural to require the
spouses to adopt jointly. The rule also insures harmony between the spouses. 58

The law provides for several exceptions to the general rule, as in a situation where a spouse seeks to adopt his or
her own children born out of wedlock. In this instance, joint adoption is not necessary. However, the spouse seeking
to adopt must first obtain the consent of his or her spouse.

In the absence of any decree of legal separation or annulment, Jose and Rosario remained legally married despite
their de facto separation. For Jose to be eligible to adopt Jed and Regina, Rosario must first signify her consent to
the adoption. Jose, however, did not validly obtain Rosario’s consent. His submission of a fraudulent affidavit of
consent in her name cannot be considered compliance of the requisites of the law. Had Rosario been given notice
by the trial court of the proceedings, she would have had a reasonable opportunity to contest the validity of the
affidavit. Since her consent was not obtained, Jose was ineligible to adopt.

The law also requires the written consent of the adopter’s children if they are 10 years old or older. In Article III,
Section 9 of Republic Act No. 8552:

SEC. 9. Whose Consent is Necessary to the Adoption. — After being properly counseled and informed of his/her
right to give or withhold his/her approval of the adoption, the written consent of the following to the adoption is
hereby required: . . . .

(c) The legitimate and adopted sons/daughters, ten (10) years of age or over, of the adopter(s) and adoptee, if any;
(Emphasis supplied)

The consent of the adopter’s other children is necessary as it ensures harmony among the prospective siblings. It
also sufficiently puts the other children on notice that they will have to share their parent’s love and care, as well as
their future legitimes, with another person.

It is undisputed that Joanne was Jose and Rosario’s legitimate child and that she was over 10 years old at the time
of the adoption proceedings. Her written consent, therefore, was necessary for the adoption to be valid.

To circumvent this requirement, however, Jose manifested to the trial court that he and Rosario were childless,
thereby preventing Joanne from being notified of the proceedings. As her written consent was never obtained, the
adoption was not valid.

For the adoption to be valid, petitioners’ consent was required by Republic Act No. 8552.  Personal service of
1âwphi1

summons should have been effected on the spouse and all legitimate children to ensure that their substantive rights
are protected. It is not enough to rely on constructive notice as in this case. Surreptitious use of procedural
technicalities cannot be privileged over substantive statutory rights.

Since the trial court failed to personally serve notice on Rosario and Joanne of the proceedings, it never validly
acquired jurisdiction.

894
There was extrinsic fraud

The appellate court, in denying the petition, ruled that while fraud may have been committed in this case, it was only
intrinsic fraud, rather than extrinsic fraud. This is erroneous.

In People v. Court of Appeals and Socorro Florece: 59

Extrinsic fraud refers to any fraudulent act of the prevailing party in litigation committed outside of the trial of the
case, whereby the defeated party is prevented from fully exhibiting his side of the case by fraud or
deception practiced on him by his opponent, such as by keeping him away from court, by giving him a false
promise of a compromise, or where the defendant never had the knowledge of the suit, being kept in ignorance by
the acts of the plaintiff, or where an attorney fraudulently or without authority connives at his defeat.  (Emphasis
60

supplied)

An action for annulment based on extrinsic fraud must be brought within four years from discovery.  Petitioners
61

alleged that they were made aware of the adoption only in 2005. The filing of this petition on October 18, 2007 is
within the period allowed by the rules.

The badges of fraud are present in this case.

First, the petition for adoption was filed in a place that had no relation to any of the parties. Jose was a resident of
Laoag City, Ilocos Norte.  Larry and Lilibeth were residents of Barangay 6, Laoag City.  Jed and Regina were born
62 63

in San Nicolas, Ilocos Norte.  Rosario and Joanne were residents of Parañaque City, Manila.  The petition for
64 65

adoption, however, was filed in the Regional Trial Court of Batac, Ilocos Norte.  The trial court gave due course to
66

the petition on Jose’s bare allegation in his petition that he was a resident of Batac,  even though it is admitted in
67

the Home Study Report that he was a practicing lawyer in Laoag City. 68

Second, using the process of delayed registration,  Jose was able to secure birth certificates for Jed and Regina
69

showing him to be the father and Larry as merely the informant.  Worse still is that two different sets of fraudulent
70

certificates were procured: one showing that Jose and Lilibeth were married on December 4, 1986 in Manila,  and 71

another wherein the portion for the mother’s name was not filled in at all.  The birth certificates of Jed and Regina
72

from the National Statistics Office, however, show that their father was Larry R. Rentegrado.  These certificates are
73

in clear contradiction to the birth certificates submitted by Jose to the trial court in support of his petition for adoption.

Third, Jose blatantly lied to the trial court when he declared that his motivation for adoption was because he and his
wife, Rosario, were childless,  to the prejudice of their daughter, Joanne. The consent of Rosario to the adoption
74

was also disputed by Rosario and alleged to be fraudulent. 75

All these tactics were employed by Jose, not only to induce the trial court in approving his petition, but also to
prevent Rosario and Joanne from participating in the proceedings or opposing the petition.

The appellate court erroneously classified the fraud employed by Jose as intrinsic on the basis that they were
"forged instruments or perjured testimonies"  presented during the trial. It failed to understand, however, that fraud
76

is considered intrinsic when the other party was either present at the trial or was a participant in the proceedings
when such instrument or testimony was presented in court, thus:

[I]ntrinsic fraud refers to the acts of a party at a trial that prevented a fair and just determination of the case, but the
difference is that the acts or things, like falsification and false testimony, could have been litigated and determined at
the trial or adjudication of the case. In other words, intrinsic fraud does not deprive the petitioner of his day in court
because he can guard against that kind of fraud through so many means, including a thorough trial preparation, a
skillful cross-examination, resorting to the modes of discovery, and proper scientific or forensic applications. Indeed,
forgery of documents and evidence for use at the trial and perjury in court testimony have been regarded as not
preventing the participation of any party in the proceedings, and are not, therefore, constitutive of extrinsic
fraud.  (Emphasis supplied)
77

When fraud is employed by a party precisely to prevent the participation of any other interested party, as in this
case, then the fraud is extrinsic, regardless of whether the fraud was committed through the use of forged
documents or perjured testimony during the trial.

Jose’s actions prevented Rosario and Joanne from having a reasonable opportunity to contest the adoption. Had
Rosario and Joanne been allowed to participate, the trial court would have hesitated to grant Jose’s petition since
he failed to fulfill the necessary requirements under the law. There can be no other conclusion than that because of
Jose’s acts, the trial court granted the decree of adoption under fraudulent circumstances.

The law itself provides for penal sanctions for those who violate its provisions. Under Article VII, Section 21 of
Republic Act No. 8552:

895
 ARTICLE VII

VIOLATIONS AND PENALTIES

SEC. 21. Violations and Penalties. —

(a) The penalty of imprisonment ranging from six (6) years and one (1) day to twelve (12) years and/or a fine not
less than Fifty thousand pesos (P50,000.00), but not more than Two hundred thousand pesos (P200,000.00) at the
discretion of the court shall be imposed on any person who shall commit any of the following acts:

(i) obtaining consent for an adoption through coercion, undue influence, fraud, improper material inducement, or
other similar acts;

(ii) non-compliance with the procedures and safeguards provided by the law for adoption; or

(iii)subjecting or exposing the child to be adopted to danger, abuse, or exploitation.

(b) Any person who shall cause the fictitious registration of the birth of a child under the name(s)of a person(s) who
is not his/her biological parents(s) shall be guilty of simulation of birth, and shall be punished by prision mayorin its
medium period and a fine not exceeding Fifty thousand peso (P50,000.00). (Emphasis supplied)

Unfortunately, Jose's death carried with it the extinguishment of any of his criminal liabilities.  Republic Act No. 8552
78

also fails to provide any provision on the status of adoption decrees if the adoption is found to have been obtained
fraudulently. Petitioners also cannot invoke Article VI, Section 19 of Republic Act No. 8552  since rescission of
79

adoption can only be availed of by the adoptee. Petitioners, therefore, are left with no other remedy in law other than
the annulment of the judgment.

The fraud employed in this case has been to Joanne's prejudice. There is reason to believe that Joanne has grown
up having never experienced the love and care of a father, her parents having separated a year after her birth. She
has never even benefited from any monetary support from her father. Despite all these adversities, Joanne was able
to obtain a medical degree from the University of the Philippines College of Medicine  and is now working as a
80

doctor in Canada.  These accomplishments, however, are poor substitutes if the injustice done upon her is allowed
81

to continue.

WHEREFORE, the petition is GRANTED. The decision dated October 16, 2000 of the Regional Trial Court of Batac,
Ilocos Norte, Branch 17 in SP. Proc. No. 3445-17 is rendered NULL and VOID.

SO ORDERED.

896
 SECOND DIVISION

October 15, 2014

G.R. No. 173548

ONOFRE ANDRES, SUBSTITUTED BY HIS HEIRS, NAMELY: FERDINAND, ROSALINA, ERIBERTO, FROILAN,
MA. CLEOFE, NELSON, GERMAN, GLORIA, ALEXANDER, MAY, ABRAHAM, and AFRICA, All Surnamed
ANDRES, Petitioners 
vs.
PHILIPPINE NATIONAL BANK, Respondents

DECISION

LEONEN, J.:

A bank that accepts a mortgage based upon a title which appears valid on its face and after exercising the requisite
care, prudence, and diligence appropriate to the public interest character of its business can be deemed a
mortgagee in good !aith. The subsequent consolidation of title in its name after a valid foreclosure shall be
respected notwithstanding later proof showing that the title was based upon a void transaction.

This case involves a 4,634-square-meter parcel of land in Nueva Ecija mortgaged to respondent Philippine National
Bank (PNB). PNB later foreclosed the property and consolidated title in its name.  Petitioner Onofre Andres, the
1

uncle of mortgagors Reynaldo Andres and his wife, Janette de Leon, filed a complaint for cancellation of title and
reconveyance of the property alleging that title in mortgagor's name was based on a falsified document
denominated as "Self-Adjudication of Sole Heir."

The trial court ruled in favor of Onofre Andres by voiding all derivative titles from TCT No. NT-7267. The Court of
Appeals modified this decision by declaring as valid and existing TCT No. N-24660 in PNB’s name. Onofre Andres
filed the instant petition  assailing the Court of Appeals’ decision and resolution.
2

The Spouses Victor and Filomena Andres acquired during their marriage a 4,634-square-meter parcel of land in
Sto. Domingo, Nueva Ecija, covered by TCT No. NT-7267. 3

They had nine children.  Among them were Onofre Andres and Roman Andres who is the father of Reynaldo
4

Andres.  Victor passed away on June 15, 1955, while his wife, Filomena, died on April 23, 1973.
5 6

After Victor’s death, or on July 1, 1965,  his widow, Filomena, and six of their children — Onofre, Roman, Juana,
7

Guillermo, Felisa,  and Maxima — agreed in an extrajudicial partition with sale to adjudicate one half of the land
8

covered by TCT No. NT-7267 to each of them pro indiviso.  This document also provides that for 1,000.00, they all
9

sold, transferred, and conveyed to Roman Andres their respective rights and participation to the one-half portion of
the property.  This was annotated on the title.
10 11

Consequently, TCT No. NT-7267 was cancelled, and a new title was issued on August 20, 1965 in the name of
Roman Andres and his wife, Lydia Echaus-Andres, under TCT No. NT-57731.  PNB alleged that on October 22,
12

1968, the Spouses Roman and Lydia Andres mortgaged the property to PNB for 3,000.00.  According to PNB, no 13

objection was made, even after the mortgage had been cancelled on July 20, 1972. 14

PNB also alleged that on October 14, 1992, the Nueva Ecija Regional Trial Court  cancelled the guardianship
15

issued in favor of the Security Bank and Trust Company and transferred ownership of the properties of the
deceased, Spouses Roman and Lydia Andres, to their only living heir, Reynaldo Andres. 16

TCT No. NT-57731 was consequently cancelled, and title was transferred to the Spouses Reynaldo Andres and
Janette de Leon, under TCT No. (NT-239548) NT-7725 on December 27, 1994. 17

On September 4, 1995, the Spouses Reynaldo Andres and Janette de Leon used this title and mortgaged the
property to PNB for a 1.2 million loan.  This was without the consent of Onofre Andres.
18 19

Onofre Andres, claiming ownership over the property, filed on November 13, 1996 a complaint for cancellation of
title, reconveyance of property and damages, with prayer for the issuance of a preliminary injunction against his
nephew Reynaldo Andres and Reynaldo’s wife, Janette de Leon, PNB, Lydia Echaus-Andres, and the Register of
Deeds of Nueva Ecija. 20

897
The complaint alleged that on November 8, 1994, Onofre Andres’ nephew Reynaldo Andres was in collusion with
his mother, Lydia EchausAndres, in executing a falsified document denominated as "SelfAdjudication of Sole Heir."
This stated that Reynaldo Andres was the sole heir of his father, Roman Andres, who died on October 12, 1968,
and his mother who died on December 15, 1969.  However, his mother was then still alive and his father, Roman
21

Andres, died only on May 29, 1990. 22

PNB denied the material allegations in the complaint. It argued that it conducted an investigation on the
property. The title presented to PNB by Reynaldo Andres and his wife was clear and free from adverse claims.
23 24

For their part, the Spouses Reynaldo Andres and Janette de Leon claimed that from the time title was issued in the
name of Reynaldo Andres’ parents, until title transferred to them on December 27, 1994, his father, Roman Andres,
had exercised acts of ownership over the property until they succeeded in its possession.  Onofre Andres’ 25

possession was merely "tolerated [because] of their close relationship."  The Spouses Reynaldo Andres and
26

Janette de Leon also raised prescription and estoppel. 27

In his reply, Onofre Andres countered that the extrajudicial partition with sale executed on July 1, 1965 was fictitious,
thus, void.  Onofre Andres argued that (1) this was not published in a newspaper of general circulation; (2) it was
28

executed only to accommodate the request of Roman Andres and his wife who wanted to mortgage the property; (3)
three of the legitimate heirs of the late Victor and Filomena Andres, who were then still living, namely, Sixto, Ofelia,
and Araceli, did not participate in its execution; and (4) there was no consideration for the alleged sale. 29

Even assuming that the document was valid, only a one-half undivided portion of the land was sold since the other
half was the conjugal share of Filomena Andres who was then still living.  The residential building did not exist yet at
30

the time of the questioned partition so this could not have been sold to Roman Andres. 31

Onofre Andres also denied that his continuous possession of the property was by mere tolerance. 32

This case was filed as early as November 13, 1996, but the entire Nueva Ecija Regional Trial Court was razed by
fire.  The records of this case were among those destroyed that needed reconstitution.
33 34

The parties submitted documents and pleadings forming part of the reconstituted records, and the case was set for
the retaking of testimonies and presentation of evidence.  Unfortunately, Onofre Andres' testimony could not be
35

retaken since he was already bedridden at that time. 36

It appears that PNB was considered to have waived further presentation of evidence when its counsel failed to
appear at the hearing despite notice.  The trial court denied PNB’s motion for reconsideration to be allowed to
37

present evidence. 38

Onofre Andres died on March 20, 2001 when the case was in the presentation of evidence stage. He was
substituted by his surviving heirs.  The Regional Trial Court  rendered its decision  on November 7, 2003 in favor of
39 40 41

Onofre Andres:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring null and void all derivative titles from TCT No. NT-7267 specifically TCT No. NT-57731, TCT No. NT-
239548 and TCT No. NT-24660, and ordering the concerned Register of Deeds to reinstate said TCT NT-7267 in
the names of its original owners, Victor Andres and Filomena Ramos.

2. Ordering defendant spouses Reynaldo Andres and Janette de Leon, jointly and severally, to pay plaintiff or his
substitutes the sum of 100,000.00 by way of moral damages.

3. Ordering defendant spouses Reynaldo Andres and Janette de Leon, jointly and severally, to pay plaintiff or his
substitutes the sum of 50,000.00 by way of exemplary damages;

4. Ordering defendant spouses Reynaldo Andres and Janette de Leon, jointly and severally, to pay plaintiff or his
substitutes attorney's fees in the sum of 30,000.00, and to pay the costs of suit.

SO ORDERED. 42

The Court of Appeals  rendered its decision  on December 13, 2005, modifying the trial court’s decision in that TCT
43 44

No. N-24660 in the name of PNB was declared valid and existing. The rest of the decision stands.  It also denied 45

reconsideration  on July 5, 2006, prompting Onofre Andres to file the instant petition.
46 47

Petitioner heirs of Onofre Andres argue that (1) there is no legal basis to uphold the validity of PNB's title as it was
derived from a void title;  (2) Cabuhat v. Court of Appeals  on innocent mortgagees for value is not applicable;  (3)
48 49 50

898
PNB is "not a mortgagee in good faith";  (4) there was no valid mortgage, thus, no valid foreclosure and auction
51

sale;  and (5) "trial courts are in [a] better position to determine questions involving [the] credibility of witnesses."
52 53

Petitioner heirs pray that the assailed Court of Appeals’ decision and resolution be set aside, and the trial court’s
November 7, 2003 decision be reinstated. 54

In its comment, PNB countered that "a defective title may be a source of a completely legal and valid title in the
hands of an innocent purchaser for value."  Cruz v. Bancom Finance Corporation  cited by petitioner heirs is off-
55 56

tangent and inapplicable.  On the other hand, Cabuhat v. Court of Appeals on innocent mortgagees in good faith
57

involved similar facts and the same legal issue. 58

PNB adds that the issue of whether it is a mortgagee in good faith involves a factual issue not within this court’s
power of review.  The issue on the validity of the foreclosure proceedings and sale was not raised in the complaint,
59

thus, cannot be raised for the first time on appeal. 60

Lastly, PNB contends that the factual findings of the Court of Appeals are deemed final and conclusive by this
court.61

Petitioner heirs filed a reply reiterating their arguments and submitting certified true copies of the property’s tax
declarations to support their contentions. 62

Thus, the issues before this court for resolution are:

I. Whether a valid title can be derived from a void title; and

II. Whether PNB is an innocent mortgagee for value and in good faith, thus, its right on the property is protected
even if the mortgagor obtained title through fraud.

A petition for review on certiorari shall raise only questions of law.  The core of the issues presented requires a
63

determination of whether PNB was in good faith and exercised due diligence in accepting the property mortgaged
by Spouses Reynaldo Andres and Janette de Leon. These are questions of fact  that fall outside the ambit of this
64

court’s power of review.

This court is not a trier of facts that routinely re-examines evidence presented. Factual findings by the Court of
Appeals are, thus, generally considered binding and conclusive upon this court. 65

The rule against entertaining factual questions admits of exceptions,  but none are present in this case. This court
66

finds no reason to overturn the findings of the Court of Appeals.

Petitioner heirs submit that the trial court "did not rule categorically on the issue of good faith interposed by the
respondent bank[; however], it ruled that since the mortgage was without object and cause, it was parenthetically
void such that the defense of and protestation of good faith is thus rendered of no consequence."  In support of their
67

contention that PNB’s title was derived from a void title, petitioner heirs cited at length the trial court decision:

A close examination of the said deed of partition will show that not all the children of the spouses Victor Andres and
Filomena Ramos were parties nor signatories thereto. Specifically, only six of the nine children of said spouses
executed the supposed extra-judicial partition which, in effect, preterited three others, namely: Sixto, Ofelia and
Araceli.

The extra-judicial partition is thus vitiated by what appeared to have been a deliberate omission therein of the said
three children. The obvious explanation to that is what is claimed by the plaintiff: that the deed was simulated to
afford financial accommodation to their brother Roman.

More significantly, the deed very clearly provided that only one half of the subject property was covered by partition
since the other half was recognized as the conjugal share of Victor Andres’ spouses [sic], Filomena Ramos.

Even assuming the validity of the partition as executed, only onehalf of the subject property should have been
transferred, by virtue thereof, to Roman Andres.

Insofar, therefore, as the Extra-Judicial Partition with Sale was made the basis for the transfer of TCT No. NT-7267
to TCT No. NT57731, the same may not be characterized other than as absolutely simulated or fictitious contract or
document. As such, the transfer effected through it was void ab initioand, in legal contemplation, never existed.

By the same token, any subsequent transfer from the void TCT No. NT-57731, could not have had any valid and
binding effect so as to constitute the transferee thereof as the legal owner of the property embraced and described
therein.
899
Interestingly, even the manner defendant Andres effected the transfer of TCT No. NT-57731 to himself was legally
flawed.

To be sure, the issuance of TCT No. NT-239548 in the name of defendant Reynaldo Andres was by way of a
document styled as Self Adjudication of Sole Heir (Exh. "D") executed by defendant Reynaldo Andres himself. In
this document, he declared that Roman Andres died on October 12, 1968, and his mother died Lydia Echaus, on
December 15, 1969; that they died with the subject property as their only property, that he is the only child and heir
of the decedents and for that reason he declared the estate to be his inheritance and adjudicated the same unto
himself extra-judicially pursuant to Section 1, Rule 74 of the Rules of Court.

It appears, however, that at the time the Self-Adjudication of Sole Heir was executed by defendant Reynaldo
Andres, it is not true that his mother, Lydia Echaus, was already dead. In fact, up to the present she [is] still alive.
Not only that, defendant Reynaldo Andres is not really the sole child of spouses Roman Andres and Lydia Echaus
because they have other children, namely: Cynthia and Vienna who are both in the United States of
America.  (Emphasis supplied)
68

On the other hand, the Court of Appeals ascertained good faith on the part of PNB.

Preliminarily, the Court of Appeals mentioned that it is "in quandary as to whether or not the appellant PNB indeed
was able to present evidence for and on its own behalf [but a] close scrutiny of the records of this case would
disclose that Gerardo Pestaño was presented as a witness for the defendant-PNB and his testimony was adopted
by the defendants-spouses." 69

It then found that PNB followed the standard practice of banks before approving a loan by sending representatives
to inspect the property offered as collateral.  PNB even investigated on "where and from whom the title . . .
70

originated." 71

According to the Court of Appeals, evidence disclosed that Spouses Reynaldo Andres and Janette de Leon
submitted TCT No. (NT-239548) N7725 as proof of their ownership. PNB’s property appraiser, Gerardo Pestaño,
conducted an investigation and verified the status of the property with the Register of Deeds and Assessor's Office. 72

On August 8, 1995, Gerardo Pestaño went to the property and personally met with the borrowers, Spouses
Reynaldo Andres and Janette de Leon, who told him they were living in the property. He appraised the residential
building then being constructed. Upon Gerardo Pestaño’s request, Reynaldo Andres submitted the property’s tax
declaration. 73

Gerardo Pestaño also went to the Municipal Trial Court to check on any pending cases, particularly on estafa, filed
against Spouses Reynaldo Andres and Janette de Leon. Upon verification from the Register of Deeds, he learned
that all previous annotations on the titles have been cancelled. 74

The Court of Appeals found that there was nothing on the face of the titles that would excite any suspicion of an
irregular issuance.  Reynaldo Andres’ parents had even previously mortgaged the property to a bank in 1965, and
75

the property was accepted. 76

We affirm the decision of the Court of Appeals.

The Court of Appeals quoted Cabuhat v. Court of Appeals in holding that "when a mortgagee relies upon what
appears on the face of a Torrens title and loans money in all good faith on the basis of the title in the name of the
mortgagor, only thereafter to learn that the latter’s title was defective, being thus an innocent mortgagee for value,
his or her right or lien upon the land mortgaged must be respected and protected, even if the mortgagor obtained
her title thereto through fraud." 77

Petitioner heirs argued the inapplicability of Cabuhat to the instant case. They explained how Cabuhat involved a
private individual mortgagee while respondent was a universal bank. They added that unlike in Cabuhat, good faith
was not duly proven by PNB. 78

Petitioner heirs then cited Cruz v. Bancom Finance Corporation for its holding that "[the bank] should not have
simply relied on the face of the Certificate of Title to the property, as its ancillary function of investing funds required
a greater degree of diligence. . . ." 79

The Civil Code is clear that only the absolute owner of a property can mortgage such property.  The law also
80

provides that absolutely simulated or fictitious contracts are void and inexistent.  Consequently, these fictitious
81

contracts convey no rights.

900
The trial court has declared as void all titles that originated from the contracts it found to be void, such as the
extrajudicial partition with sale in favor of Roman Andres, and the "Self-Adjudication of Sole Heir" in favor of
Reynaldo Andres. This was affirmed by the Court of Appeals.

The issue now is whether a valid title in favor of PNB can be derived from these void titles.

This court reiterated the good faith doctrine that applies to innocent mortgagees for value in the 2012 case
of Philippine Banking Corporation v. Dy: 82

While it is settled that a simulated deed of sale is null and void and therefore, does not convey any right that could
ripen into a valid title, it has been equally ruled that, for reasons of public policy, the subsequent nullification of title
to a property is not a ground to annul the contractual right which may have been derived by a purchaser, mortgagee
or other transferee who acted in good faith.  (Emphasis supplied, citations omitted)
83

The doctrine protecting mortgagees and innocent purchasers in good faith emanates from the social interest
embedded in the legal concept granting indefeasibility of titles. The burden of discovery of invalid transactions
relating to the property covered by a title appearing regular on its face is shifted from the third party relying on the
title to the co-owners or the predecessors of the title holder. Between the third party and the coowners, it will be the
latter that will be more intimately knowledgeable about the status of the property and its history. The costs of
discovery of the basis of invalidity, thus, are better borne by them because it would naturally be lower. A reverse
presumption will only increase costs for the economy, delay transactions, and, thus, achieve a less optimal welfare
level for the entire society.
84

The general rule allows every person dealing with registered land to rely on the face of the title when determining its
absolute owner.  Thus, cases like Cabuhat have held that "a mortgagee has a right to rely in good faith on the
85

certificate of title of the mortgagor of the property given as security and in the absence of any sign that might arouse
suspicion, has no obligation to undertake further investigation."  The protection of innocent mortgagees for value
86

finds support in the Land Registration Act:

Then in Penullar v. PNB, this Court resolved a similar issue ruling that Section 38 of the Land Registration Act
places an innocent mortgagee for value under the mantle of protection accorded to innocent purchasers for value.

Furthermore, Section 39 of Act No. 496 provides that every person receiving a certificate of title in pursuance of a
decree of registration, and every subsequent purchaser (or mortgagee) of registered land who takes a certificate of
title for value in good faith, shall hold the same free of all encumbrance except those noted on said certificate. . .
87
 (Citations omitted)

Section 38 of Act No. 496 in what is now Section 32 of Presidential Decree No. 1529 reads:

SEC. 32. Review of decree of registration; Innocent purchaser for value. — The decree of registration shall not be
reopened or revised by reason of absence, minority, or other disability of any person adversely affected thereby, nor
by any proceeding in any court for reversing judgments, subject, however, to the right of any person, including the
government and the branches thereof, deprived of land or of any estate or interest therein by such adjudication or
confirmation of title obtained by actual fraud, to file in the proper Court of First Instance a petition for reopening and
review of the decree of registration not later than one year from and after the date of the entry of such decree of
registration, but in no case shall such petition be entertained by the court where an innocent purchaser for value has
acquired the land or an interest therein, whose rights may be prejudiced. Whenever the phrase "innocent purchaser
for value" or an equivalent phrase occurs in this Decree, it shall be deemed to include an innocent lessee,
mortgagee, or other encumbrancer for value.

Upon the expiration of said period of one year, the decree of registration and the certificate of title issued shall
become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy
by action for damages against the applicant or any other persons responsible for the fraud.

However, the banking industry belongs to a different category than private individuals. Banks are considered
businesses impressed with public interest, requiring "high standards of integrity and performance."  Consequently,
88

banks must exercise greater care, prudence, and due diligence in their property dealings. The standard operating
practice for banks when acting on a loan application is "to conduct an ocular inspection of the property offered for
mortgage and to verify the genuineness of the title to determine the real owner(s) thereof." 89

Unlike in Cruz v. Bancom Finance Corporation cited by petitioners,  PNB complied with this standard operating
90

practice.

The petition even attached certified true copies of the transcript of bank appraiser Gerardo Pestaño’s testimony,
offered "to prove that defendant spouses Reynaldo and Jannette [sic] Andres mortgaged the property subject matter
of the litigation covered by Transfer Certificate of Title No. NT-239548 to secure their loan to PNB approved in 1995

901
and at that time the defendant Andres [spouses] were the owner[s] of the mortgaged property; that there was no
claim filed by the plaintiff Onofre Andres. . . ."
91

Petitioner heirs disagree with the Court of Appeals’ findings of due diligence by PNB. They submit that Gerardo
Pestaño failed to conduct a thorough investigation; otherwise, he would have discovered that Reynaldo Andres did
not own the residential building then being constructed on the property.  Petitioner heirs add that the approval of a
92

collateral in 1965 does not mean the same property is good collateral 30 years later.  Lastly, PNB was negligent
93

when it failed to take into account the two-year period under

Rule 74, Section 4 of the Rules of Court. 94

These arguments fail to convince.

First, it is undisputed that PNB sent its appraiser and credit investigator Gerardo Pestaño to conduct an ocular
inspection of the property.  He also went to the relevant government offices to verify the ownership status of the
95

property.  There was an on-going construction of a residential building during his inspection, so he appraised this
96

building as well, in case the land proved insufficient to cover the applied loan.  These acts complied with the
97

standard operating practice expected of banks when dealing with real property.

Second, the two-year period under Rule 74, Section 4 of the Rules of Court had lapsed and petitioner heirs did not
allege if any heir or creditor of Roman Andres and his wife had invoked their right under this provision. Rule 74,
Section 4 of the Rules of Court provides:

SEC 4. Liability of distributees and estate. – If it shall appear at any time within two (2) years after the
settlement and distribution of an estate in accordance with the provisions of either of the first two sections of this
rule, that an heir or other person has been unduly deprived of his lawful participation in the estate, such heir
or such other person may compel the settlement of the estate in the courts in the manner hereinafter provided for
the purpose of satisfying such lawful participation. And if within the same time of two (2) years, it shall appear that
there are debts outstanding against the estate which have not been paid, or that an heir or other person has been
unduly deprived of his lawful participation payable in money, the court having jurisdiction of the estate may, by order
for that purpose, after hearing, settle the amount of such debts or lawful participation and order how much and in
what manner each distributee shall contribute in the payment thereof, and may issue execution, if circumstances
require, against the bond provided in the preceding section or against the real estate belonging to the deceased, or
both. Such bond and such real estate shall remain charged with a liability to creditors, heirs, or other persons for the
full period of two (2) years after such distribution, notwithstanding any transfers of real estate that may have been
made. (Emphasis supplied)

This provision was no longer annotated on the title at the time the title was submitted to PNB as collateral for the
loan:

Q: You mentioned that you did went [sic] to the Register of Deeds and in the Register of Deeds you found the
document concerning an order in Civil Case involving the property, do you remember having said that?

A: Yes, sir.

Q: What was that Civil Case all about?

A: I go to the Register of Deeds to verify the previous title because there is a Sec. 4 Rule 74 of the title and I found
out at the back of the title that there is an order in favor of Reynaldo Andres commissioned by virtue of an order of
RTC 3rd Judicial Region, Branch 37, Sto. Domingo, Nueva Ecija issued by Hon. Senen Saguyod issued by Security
Bank and Trust Company and the transfer of ownership of the properties of the deceased spouses Roman Andres
and Lydia Echauz to Reynaldo Andres and the date is October 14, 1992, sir.

Atty. Lasam:

Q: Having read that at the Register of Deeds of Nueva Ecija you proceeded to Branch 37, Baloc, Sto. Domingo,
Nueva Ecija to verify whether there are still pending cases regarding the lot?

A: A[t] the time they submit the title there is no annotation at the back of the title and the title is clean, sir.

Q: You mean to say that when they applied for a loan that annotation which you read earlier was not present?

A: There is no more annotation, sir.  (Emphasis supplied)

98

In any event, Rule 74, Section 4 does not apply to Onofre Andres who never alleged being an excluded heir or
unpaid creditor of his brother Roman Andres and Roman’s wife.
902
Petitioner heirs also insist that Gerardo Pestaño did not interview or inquire from residents in the surrounding area
regarding the ownership of the residential building then being constructed on the land.  They submit that this
99

amounts to lack of due diligence by PNB considering Reynaldo Andres’ admission that Onofre Andres possessed
the property, but by mere tolerance. 100

On the contrary, Gerardo Pestaño testified that he interviewed the laborers working on the residential building in the
property, and he asked the Spouses Reynaldo Andres and Janette de Leon to obtain the tax declaration from the
Assessor’s Office:

ATTY LASAM: Mr. witness, the time you conducted the credit investigation who was in possession of the property?

A. I was asked by Reynaldo Andres to see the property and we went to the place and there is on going construction
of a building and it was 50% finish. I told them to go to the Municipal Assessor’s Office for Tax Declaration.

Q. So it is cle[unreadable] that Reynaldo and Jannette was in possession of the subject property?

A. Yes, sir.

Q. And at the time you conducted the credit investigation was there any claim of that property. . regarding this claim
of Onofre Andres?

A. I went to the Municipal Hall of Sto. Domingo and I don’t have any knowledge of that.

....

Q. When you investigated you solely relied to the title being offered?

A. No, sir. I went to the Assessor’s Office of Sto. Domingo, to see the tax payments and to the Register of Deeds.

Q. You did talk to the laborers working in the building?

A. Yes, sir.

Q. Mr. witness, you mentioned that you required Reynaldo Andres to submit the tax declaration of the building?

A. Yes, sir.

Q. Did he submit to you the tax declaration?

A. Yes.  (Emphasis supplied)

101

Gerardo Pestaño did not have a copy of the tax declaration of the residential building at the time of his testimony,
but he testified that the Spouses Reynaldo Andres and Janette de Leon presented Tax Declaration No. 449459, and
he inspected this document.  He does not appear to have been questioned on the contents of Tax Declaration No.
102

449459.

Nevertheless, even Onofre Andres’ possession appears doubtful since Gerardo Pestaño testified that the residential
building was still under construction during his inspection on August 8, 1995: 103

Q: Did you actually inspect the 4,634 square meters of the property?

A: Yes, sir.

Q: At the time of your inspection of the property, who was actually living in the property?

A: At the time of my inspection on August 8, 1995 the house is under construction? sir.

Q: There were no occupants?

A: The spouses borrower Reynaldo Andres and his wife, sir.

Atty. Lasam:

Q: You mean to say that while the building is under construction they were at the same time living there?

903
A: They were not living there but they were in possession of the property, sir.

Q: You only presumed that they are the once [sic] in possession of the property?

A: Because they accompanied me there, sir.  (Emphasis supplied)

104

In their reply, petitioner heirs attached tax declarations over the land and the residential building, asking this court to
allow the submission of such documentary evidence in the interest of substantial justice.  Again, this court is not a
105

trier of facts. A petition for review on certiorari "shall raise only questions of law."  This court cannot accept and
106

consider documentary evidence only raised and submitted now on review.

In any event, the tax declarations attached to the reply fail to convince.  Reynaldo Andres attached two tax
1âwphi1

declarations to show that he owned the residential building standing on the property, thus, Gerardo Pestaño did not
conduct an exhaustive investigation. 107

The first tax declaration in Reynaldo Andres’ name was for year 1994. The spaces allotted for the boundaries of the
land where the house stands read "erected on the lot of Roman Andres," but the name Roman Andres was written
on top of a white out erasure, and such correction was not countersigned.  Reynaldo Andres did not explain such
108

erasure in his reply. A person presenting an altered document must account for the alteration; otherwise, this affects
its admissibility.
109

The second tax declaration was for year 2006, long after Gerardo Pestafio inspected the property in 1995. 110

In sum, this court reiterates the rule that banks, as businesses impressed with public interest, must exercise greater
care, prudence, and due diligence in all their property dealings. This court upholds the Court of Appeals' findings
that PNB complied with the standard operating practice of banks, which met the requisite level of diligence, when it
sent Gerardo Pestano to conduct an ocular inspection of the property and verify the status of its ownership and title.
Consequently, PNB is a mortgagee in good faith. The title resulting from the foreclosure sale, therefore, is to be
protected. The bank is an innocent purchaser for value.

WHEREFORE, the petition is DENIED. The assailed Court of

Appeals decision and resolution are AFFIRMED.

SO ORDERED.

904
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. P-14-3278               October 21, 2014

[Formerly A.M. OCA IPI No. 09-3222-P]

CONCERNED CITIZENS OF NAVAL, BILIRAN, Complainants, 

vs.
FLORANTE F. RALAR, Court Stenographer III, Regional Trial Court, Branch 37, Caibiran,
Biliran, Respondent.

DECISION

PER CURIAM:

The falsification of an official document like the personal data sheet required for employment in the Judiciary is
gross dishonesty, and constitutes a serious administrative offense that warrants the dismissal of the employee.

Antecedents

By an anonymous letter dated June 17, 2008,  the writers, self-styling themselves as the Concerned Citizens of
1

Naval, Biliran, formally charged Florante F. Ralar, Court Stenographer III of Branch 37 of the Regional Trial Court in
Caibiran, Biliran with dishonesty through falsification of public documents.

The letter alleged that Ralar, who had been appointed as Court Stenographer III in 1998, did not state inhis
application for the position his having been previously employed in the Bureau of Post, later known as the Philippine
Postal Corporation; that in his Civil Service Form No. 212 (Personal Data Sheet),  he had filled out and attached his
2

application without stating therein that he had then been employed in that office; that all papers relative to his
employment had shown his deliberate omission of his previous employment in the Bureau ofPost; that a verification
at Regional Office No. 08 of the Philippine Postal Corporation in Tacloban City disclosed that he had been actually
employed as a Letter Carrier prior to his employment in the Judiciary, and that atthat time he had been indefinitely
suspended for committing mail pilferage, and had eventually been dismissed from the service for such offense;  that 3

his co-employees were wondering why he had been employed in the Judiciary despite his disqualification to work in
the Government; that he had also been previously employed as a Revenue Collection Clerk in Naval, Biliran, in
which position he had also committed misappropriation of his collections, but the matter had been settled without
him being formally charged;  that he had frequently indulged in gambling and drinking during office hours to the
4

prejudice of the public service; that his notoriety had been of common knowledge in the community; that despite
knowing nothing about stenography, he had obtained a falsified certification of his knowledge of stenography to
secure an appointment to his present position; and that he had even asked court litigants for money in consideration
of assistance extended to them in cases pending in court.

In his comment dated September 2, 2009,  Ralar denied the accusation of dishonesty. He insisted that the
5

allegations made against him were general statements that did not state causes of action and should be outrightly
dismissed; that giving due course tothe complaint against him despite the absence of any named complainant would
violate his fundamental right to face and to confront the witnesses against him; that he admitted having been
previously employed by the Philippine Postal Corporation (formerly, the Bureau of Post), and later on by the local
government of Naval, Biliran; that in his pursuit and determination to earn more, particularly to ensure the education
of his children, he had applied in the Judiciary, where he presently holds the position of court stenographer;that he
had no knowledge of having violated any law, rules and regulations that would disqualify or render him ineligible to
hold any government position; that all the allegations about his suspension and dismissal from the service for mail
pilferage, use of government funds collected as Revenue Collection Clerk in the local government for his personal
benefit, being recently seen in gambling and drinking places during office hours, and soliciting money from litigants,
being unsubstantiated, should not be given credence.

The Office of the Court Administrator (OCA) submitted its report and recommendation dated January 19, 2010,  as 6

follows:

EVALUATION: After a careful perusal of the records on hand, this Office finds that there is sufficient basis to hold
respondent Ralar guilty of the offense attributed to him.

905
A scrutiny of respondent Ralar’s Personal Data Sheet (PDS) showed that the latter deliberately concealed the fact
that he was previously charged administratively and was eventually penalized for acts of dishonesty while he was
still an employee of then Bureau of Post, now Philippine Postal Corporation. To show proof that respondent Ralar
was previously dismissed from government service, the Department of Transportation and Communication rendered
a Decision on 20 March 1990, the dispositive portion ofwhich reads, to wit:

PREMISES CONSIDERED, Respondent Florante F. Ralar is found guilty as charged. Taking into account the
mitigating circumstance of length of service against the aggravating circumstance of being found guilty of other
offenses in this case, he is ordered dismissed from the service, as recommended.

In the interest of the service, it is hereby directed that this decision be implemented immediately.

In determining the authenticity or veracity of the foregoing decision, then Deputy Court Administrator (DCA) Antonio
H. Dujua, now retired, requested for a certified copy of the said decision. In response to such request, the National
Archives of the Philippines in a Letter, addressed to DCA Dujua, provided this Office, certified copies of the said
decision. Furthermore, a close scrutiny of respondent Ralar’s Personal Data Sheet (PDS) are the portions where the
latter put a check mark beside the boxes indicating "No" answers, anent the questions, particularly in No. 37, letters
a and b, to wit:

a. Have you ever been formally charged?; and b. Have you ever been found guilty of any administrative offense?
(italics ours)

To our mind, the fact that respondent Ralar affixed check marks in the "No" answer box clearly shows his intention
to misrepresent himself in order to gain employment in the government. Indeed, his actuations fall squarely as an
act of dishonesty. This is plain and simple.

In Advincula v. Dicen, the Court emphasized that the Personal Data Sheet (PDS) is an official document required of
a government employee and official by the CSC. It is the repository of all information about any government
employee and official regarding his personal background, qualification, and eligibility. Since truthful completion of
the PDS is a requirement for employment in the judiciary, the importance of answering the same with candor need
not begainsaid. Concealment of any information in the PDS, therefore, warrants disciplinary action against the erring
employee.

Anent respondent Ralar’s contentions, this Office submits that in the absence of a categorical denial on the charges
against him and noting the hostile attitude manifested by respondent Ralar in his comment, this Office holds that the
latter’s general denial cannot prevail over the sufficiency of the pieces of documentary evidence adduced in this
case. In the first place, respondent Ralar’s general denial is considered under the rules as a negative pregnant
which cannotbe given credence in view of its weakness.

Verily, the complainants overcame the required burden to prove that respondent Ralar committed dishonesty while
in government service. It is undisputed that substantial evidence was present in the instant case. Indeed,
respondent Ralar committed the same offense while in the judiciary because of his deliberate omission to state in
his personal data sheet that he was neither formally charged nor found guilty of administrative offense.

More significantly, the pieces of documentary evidence adduced are the very reason why this Office is convinced
that respondent Ralar has indeed committed the offense hurled against him. In the case of Noel G. Wabe vs. Luisita
P. Bionson, Clerk of Court of Municipal Trial Court in Cities, Malaybalay City [A.M. No. P-03-1760. December 30,
2003], the Supreme Court held: The Court condemns and cannot countenance any act or omission on the part of
court personnel that would violate the norm of public accountability and diminish or even just tend to diminish the
faith of the people in the judiciary (citing, Almario v. Resus, 318 SCRA 742 (1999).)

Corollary thereto, in the case of Civil Service Commission vs. Santos Enrie Perocho, Jr., the Supreme Court ruled
that:

Dishonesty, like bad faith, isnot simply bad judgment or negligence. Dishonesty is a question of intention. In
ascertaining the intention of a person accused of dishonesty, consideration must be taken not only of the facts and
circumstances which gave rise to the act committed by the respondent, but also of his state of mind at the time the
offense was committed, the time he might have had at his disposal for the purpose of meditating on the
consequences of his act, and the degree of reasoning he could have had at that moment.

The OCA recommended the dismissal of Ralar from the service with forfeiture of all retirement benefits, except his
accrued leave credits, and with prejudice to re-employment in any branch or instrumentality of the government,
including government-ownedand controlled corporations.  Ruling
7

The Court finds the report of the OCA to be substantiated by the records, and adopts its recommendation in its
entirety.
1âwphi1

906
Ralar appeared defiant becausethe charge had been made anonymously. Yet, his invocation of the right to face and
to confront his accusers was misplaced, for the charge was soon easily substantiated by the results of the OCA’s
legitimate queriesput to the various offices of the public service in which he had previously served. That he
committed falsification of an official document when he did not disclose in his written application for his present
position his having been formally charged administratively, and having been found guilty of such charge became
indisputable. His omission, being designed by him to misrepresent his qualifications for the position he sought,
constituted gross dishonesty that the Court cannot tolerate. It is the State’s policy to promote a high standard of
ethics and utmost responsibility in the public service; and to hold all public officials and employees accountable to
the people at all times. This policy demands that they discharge their duties with utmost responsibility, integrity,
competence, and loyalty; act with patriotism and justice; lead modest lives; and uphold public interest over personal
interest.  No more essential is that policy than in the Judiciary, for no other office in the Government exacts the
8

greatest demand for moral righteousness and uprightness from public employees and officials than the Judiciary. As
such, the Judiciary deserves the best from all its employees and officials. Dishonesty and falsification – malevolent
and abhorrent – have no place in the Judiciary.

Ralar was guilty of dishonesty, which is defined as the absence of integrity; the disposition to betray, cheat, deceive,
or defraud; or the intentional violation of truth. Pursuant to Section 46, Rule 10 of the Revised Uniform Rules on
Administrative Case in the Civil Service, dishonesty, classified as a grave offense, is penalized with dismissal for the
first offense.

WHEREFORE, the Court FINDS and PRONOUNCES FLORANTE F. RALAR, Court Stenographer III of Branch 37,
Regional Trial Court in Caibiran, Biliran, GUILTY of DISHONESTY as charged; and DISMISSES him from the
service with forfeiture of all retirement benefits, except his accrued leave credits, with prejudice to re-employment in
any branch or instrumentality of the Government, including government owned and government-controlled
corporations.

This decision is FINAL and IMMEDIATELY EXECUTORY, and no further pleadings shall be entertained.

SO ORDERED.

907
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. P-09-2673               October 21, 2014

(A.M. OCA IPI No. 00-857-P)

FRUMENCIO E. PULGAR, Petitioner, 
vs.
PAUL M. RESURRECCION and MARICAR M. EUGENIO, Respondents.

DECISION

PER CURIAM:

Any employee or official of the Judiciary who usurps the functions of another employee Qr official, or illegally exacts
money from law practitioners and litigants is guilty of grave misconduct, and may be dismissed from the service
even for the first offense.

The Charge

In his complaint-affidavit dated March 15, 2000, Atty. Frumencio E. Pulgar denounced Court Interpreter Paul M.
Resurreccion of the Regional Trial Court, Branch 276, in Muntinlupa City, for committing acts of extortion, illegal
exaction, and blackmail by using his position to extort money from him, a law practitioner, inexchange for non-
existent goodwill, and for violation of Administrative Circular No. 31-90.1

In the course of the investigation of the complaint-affidavit filed against Resurreccion, Court Stenographer Maricar
M. Eugenio testified in favor of Resurreccion. She thereby laid the responsibility for theex parte reception of the
evidence on Gina Bacayon, then the acting clerk of court. She claimed that being the stenographer recording the ex
parte presentation of evidence on February 26, 1997, she was the one who had asked for the payment of the
transcript of the stenographic notes from Atty. Pulgar. However, her testimony invited suspicion of her covering up
Resurreccion’s malfeasance, leading to her being likewise investigated and made to answer for dishonesty.

Antecedents

In his complaint-affidavit, Atty. Pulgar set forth Resurreccion’s acts in the following manner:  1. I am the counsel for
2

the petitioner in Civil Case No. 95-079 entitled Rey O. Chand vs. Armenia P. Chand for Annulment of marriage
based on Art. 36 of the Family Code;

2. The complaint was filed in April 1996 and eventually the aforeindicated case was set for hearing before
the Commissioner on February 26, 1997;

3. Herein affiant presented his first and only witness, the petitioner Rey O. Chand and he testified on the
factual grounds on why the marriage celebrated between him and the defendant should be dissolved;

4. After the presentation of ex-parte evidence, I was being charged by the Acting Clerk of Court, Paul M.
Resurreccion to whom I paid the first ₱2,000.00 and I promised to pay the balance of ₱3,000.00 on the
following day. No receipt was issued to the undersigned;

5. The following day, I sent my Liaison Officer, Oswaldo L. Serdon who brought with him the ₱3,000.00 in
cash with my instruction that he pays the Acting Clerk of Court the said amount of ₱3,000.00. My L.O paid
the respondent, however the Acting Clerk of Court failed to issue the corresponding receipt;

6. Undersigned being a sucker for public relations and being a practicing lawyer who does not want to cross
or antagonize court personnel of Branch 276 by not giving in to his unwarranted exaction although this not
embodied nor allowed in the Rules of Court by coming across to the importunings of respondent;

7. Sometime on June 26, 1997I received a copy of the Resolution denying our Petition. Undersigned was
perturbed by the turn of events because the Acting Clerk of Court promised that he shall be the one to take
care of a favorable decision inexchange for the payment that I made. But since, the decision was adverse I
did not anymore bother to file a Motion for Reconsideration and again being a sucker for public relations
treated the dismissal as oneof those things being encountered by a practicing attorney;
908
 8. Sometime on February 21, 2000at around 9:00 a.m while I was attending a case before the Sala of the
Honorable Norma Perello in People of the Philippines vs. Marlon Velancio, I was approached by the person
announcing the cases whom I later or (sic) able to identify as the respondent, and he asked whether I am
the Atty. Pulgar who was the counsel of Rey O. Chand in the afore-indicated case of annulment of marriage;

9. I answered in the affirmative. Then all of a sudden Paul M. Ressureccion uttered "may utang pa kayong
dapat bayaran sa akin doon sa kaso ni Rey O. Chand sa ex-parte. Ibinigay na raw sa inyo yung pera pero
hindi ninyo naman daw na i-bayad" the voice of Raul Resurrecion was loud enough to be heard by almost
everybody in the Sala. As a matter of fact, another employee butted-in and said "wala pang ibinabayad kayo
Atty." And Paul Resurrecion again uttered and said "ibinigay na sa inyo, aba’y bayaran n’yo na at ng
matapos na ang kasong yan". I reasoned that the case that he was referring to was already dismissed and
as far as I am concerned it was already terminated and I said "why should I pay again when it was already
dismissed. As a matter of fact, I paid already then why are still exacting payment from me?." Again, in an
angry voice respondent reiterated his previous demands. To cut the display of unbecoming behavior of the
respondent court personnel I told him "mabuti pa maghaharap tayo."

10. In view thereof, I am formally charging Paul M. Resurreccion of extortion, illegal exaction, and blackmail
by using his position to extort money from a practitioner in exchange for non-existent goodwill and for
violation of Administrative Circular No. 31-90 particularly Sec. 76 which provides: x x x

On May 25, 2000, the Office of the Court Administrator (OCA), acting on the complaint-affidavit, required
Resurreccion to submit his comment within ten days from receipt. 3

In his comment,  Resurreccion tendered the following explanations:

4

Pars. 1, 2 and 3 of the complaint-affidavit are admitted.

Par. 4 is vehemently denied. I did not take the ex-parte presentation of evidence for his client, much more received
the initial ₱2,000.00, and the promised ₱3,000.00 the following day, hence, must issue the corresponding receipt. In
fact, the testimony of the Petitioner was taken before the Clerk of Court not before this Branch Clerk of Court, who is
not a lawyer. The Honorable Judge was then available and in attendance on February 26, 1997. The Resolution
denying the Petition was prepared by the Presiding Judge assisted by the Clerk of Court.

Par. 5. If it is true that his Liaison Officer went to my office the following day, and paid the ₱3,000.00, where is the
Affidavit of his Liaison Officer attesting that he/she gave any money to me? Again, it is emphasized that ex-parte
presentation of evidence, was taken by the Office of the Clerk of Court never by me, the Branch Clerk of Court,
hence, no payment, granting there was, will be forth coming to me. I did nor render any service in connection with
this case. Why would this lawyer pay me ₱2,000.00 and be promised ₱3,000.00 more for doing nothing? He is truly
confused!

Par. 6 is denied for the same reason as No. 5. I am not an extortionist, much more "importunings." Even granting
this is so, I cannot ask to be paid for doing nothing.

Par. 7 is admitted as the Resolution in that case was sent to complainant, which was adverse to him. The reason
why the PETITION was denied, was the negligence of Atty. Pulgar who did not present the Psychiatrist, not even
her report, while this Petition is based on psychological incapacity yet. Now he is trying to redeem himself by making
it appear that he lost because he did not pay the alleged ₱3,000.00. How cheap can he get. The price[-]of his
incompetence is truly minimal. In fact, upon a Motion for Reconsideration by another lawyer, the case was re-
opened, the Psychiatrist testimony and report taken, and the decision was reconsidered. His client probably saw his
negligence, so he got himself another lawyer. The case was lost due to his negligence, if not ignorance, not
because of the lack of ₱3,000.00.

Par. 8. If I ever I talke (sic) with Atty. Pulgar on February 21, 2000 at around 9:00 A.M. it was to remind him about
the payment of the transcript, upon the prodding of the stenographer, who had been asking for its payment, from
this squelching lawyer, who refused to pay. I only echoed the pleas of said stenographer, who herself attested to the
unpaid sum, and seconded my request. Par. 9. I politely approached Atty. Pulgar, NEVER in a demanding manner
as I have no right to the amountdue to the stenographer. It was Atty. Pulgar who instead shouted, embarrassed
probably, because he knew that his client told us that he had remitted the payment for the TSN to Atty. Pulgar by
way of a check, issued to him. But Atty. Pulgar never paid the stenographer for the transcript. All that he paid for
was the Commissioner’s fee. Surely, if there is any amount due me, I cannot announce this and demand for it in a
loud manner, specially, if I am "committing graft." Why would I OPENLY demand the money from Atty. Pulgar in the
presence of lawyers and other people. It was him, shame that made him defensive knowing that the sum for the
stenographer was kept by him.

Par. 10 is strongly disputed. Asking for any sum from any lawyer or party litigant, much more "extort", is never
tolerated in our office. My presiding judge will gun me down, and I mean literally, because she carries a gun, if this is
everdone by anyone of her staff.
909
Finally, it is impossible for me or anyone of us to ask money from the LOSING party, should we ever ask, which
never happened!

WHEREFORE, it is respectfully prayed that this baseless, unfounded, tramped-up (sic) and malicious charge by this
negligent, penny squelching, and blundering lawyer, who did not pay the TSN even though he received the sum
from his client, be dismissed.

Upon the recommendation of then Court Administrator Presbitero J. Velasco, Jr.,  the Court called upon then
5

Executive Judge Norma C. Perello (Judge Perello) of the Regional Trial Court in Muntinlupa City (RTC in Muntinlupa
City) to investigate the complaint-affidavit, and to report and submit her recommendations thereon. 6

On December 12, 2002, Judge Perello submitted her report and recommendation to the OCA, stating that the
complaint-affidavit against Resurreccion should be dismissed due to what she perceived as the failure of Atty.
Pulgar to substantiate his charge. 7

On April 24, 2003, however, the OCA rejected the findings and recommendation of Judge Perello, and, instead,
recommended that the case be referred to another investigator in the person of Judge Juanita TomasGuerrero
(Judge Guerrero) of the RTC in Muntinlupa City.  Accordingly, on June 16, 2003, the Court directed Judge Guerrero
8

to conduct further investigation, and to submit her report and recommendation; and to exhaust all possible means to
locate Atty. Pulgar.
9

In the ensuing hearings conducted by Judge Guerrero, Court Stenographer Maricar Eugenio of the RTC in
Muntinlupa City testified that it was Gina Bacayon, then acting clerk of court, who had received the evidence ex
parte in the case of Atty. Pulgar;  that being the stenographer who had recorded the ex partepresentation of
10

evidence on February 26, 1997,  she had asked for the payment of the transcript of the stenographic notes from
11

Atty. Pulgar;  and that she had submitted a duplicate copy of the transcript of the stenographic notes.
12 13

Report and Recommendation of Investigating Judge Guerrero

In her report and recommendation dated October 22, 2003,  Judge Guerrero made the following conclusions and
14

recommendations, to wit:

CONCLUSIONS:

PREMISES CONSIDERED, the Court concludes that the following scenarios must have happened on February 26,
1997 and February 21, 2000:

On February 26, 1997, after the caseof Rey Chand was called, the Court allowed the petitioner to present evidence
ex-partebecause of the failure of Armenia Chand to file her Answer. As is the practice and being the Acting Branch
Clerk of Court,Mr. Resurreccion was allowed to receive the evidence of the petitioner while the Court was busy
hearing other cases ready for trial. Since Mr. Resurreccion, being also the Court Interpreter, was needed in the
courtroom, he had to call Ms. Gina Bucayon, the Acting Clerk of Court, who is also not a lawyer, to attend to the ex-
parte proceedings. This is probably the reason why Ms. Bucayon’s handwritings appeared in the minutes of
February 26, 1997 and why Mr. Resurreccion claimed that he did not know Atty. Pulgar as he had not met him. As
was the practice, Atty. Pulgar could have given the fee for the exparteto Mr. Resurreccion through Ms. Bucayon.
Then, Mr. Oswaldo Serdon went to the court office and delivered the balance of the ex-parte proceedings but which
failed to reach Mr. Resurreccion as he had just left it on a table. In the meantime, the Rey Chand case was
dismissed.

Subsequently, while Mr. Chand was following up his case after it was revived, he mentioned that hehas paid the
commissioner’s fee inclusive of stenographer’s fee to his lawyer (Atty. Pulgar) for the ex-parte proceedings of
February 26, 1997. So, when Atty. Pulgar appeared again on February 21, 2000, Ms. Thelma Manlingit who was
familiar with Atty. Pulgar, had to call the attention ofMr. Resurreccion about Mr. Pulgar’s presence in the courtroom.
Mr. Resurrecion, then demanded payment of what was due him as commissioner’s fee since he failed to receive it
from either Atty. Pulgar or his liaison officer. Atty. Pulgar got irked by the demand for said fee and shouted
becauseas far as he was concerned no amount was due since the Rey Chand case was already dismissed.

RECOMMENDATIONS:

Mr. Paul Resurreccion could not beheld liable for extorting money from Atty. Pulgar because Extortion is defined as
compelling of a person by a wrongful and illegal means (duress, threats, etc.) to give up money or property. There
was neither force nor intimidation committed by Mr. Resurreccion in demanding money from a lawyer or litigant.

However, the Court finds Mr. Resurreccion guilty of exacting money for some legal fees that do not exist. While Sec.
6, Rule 130 of the 1997 Rules of Procedure allows a judgeto delegate the reception of evidence to its clerk of court
who is a member of the bar in defaults or expartehearings, the Supreme Court does not give the commissioner the

910
privilege to collect money from the litigant or lawyer as legal fees for this purpose. Rule 141 of the Rules of Court
enumerates the numerous legal fees that may be collected by the courts, commissioner’s fees for receiving
evidence are not one of them. The demand thereof under the guise of a commissioner’s fee is illegal and
tantamount to conduct grossly prejudicial to the best interest of the service.

Employees of the Judiciary are expected to be examples of integrity, honesty and uprightness. Their conduct should
be characterized by propriety and decorum. Mr. Paul Resurreccion being the designated Acting Branch Clerk of
Court of RTC Branch 276 should be an exemplar of all these characteristics. The Manual of Clerks of Court that
prohibits the collection of commissioner’s fees in an ex-parte proceeding binds him. Furthermore, he and his
lawyer’s act of dictating upon his witness, Rey O. Chand on what to say in an investigation is detestable and
contumacious, to say the least, he being a judicial employee whose main task is to see to it that the administration
of justice is upheld.

The Respondent’s actions also caused needless anxiety and shame on the part of the complainant thereby
diminishing the latter’s faith not only with the Regional Trial Courts of Muntinlupa but in the entire Judiciary. The
gradual erosion of public confidence in the Judiciary caused by the failure of Mr. Resurreccion to uphold the
objective of the Supreme Court in improving public service and preserving the people’s faith and confidence in the
government, is constitutive of the offense Conduct Grossly Prejudicial to the Best Interest ofthe Service for which
respondent must be made answerable.

xxxx

As this is the first time that the respondent committed the act complained of, it is hereby recommended that MR.
PAUL RESURRECCION be suspended for one (1) year from service without pay. Any repetition of the same act
shall be dealt with more severely.15

In addition, Judge Guerrero found impropriety on the part of Eugenio, observing:

As an aside: Equally detestable is the attempt of the other court employees of the Regional Trial Court,Branch 276
more particularly, Ms. Maricar M. Eugenio to cover up the wrongdoings of their comrade by testifying falsely, should
not go unchecked. Ms. Eugenio should also be penalized for trying to mislead the Court by making such false
testimony. Her actuation amounts to neglect in the performance of [her] official function as co-player in the
administration of justice. The undersigned recommends that she be reprimanded. 16

First Report of the OCA

In its memorandum for the Court dated July 6, 2009,  the OCA rendered its own findings based on the report and
17

recommendation of Judge Guerrero, and recommended: (a) thatResurreccion be dismissed from the service; and
(b) that Eugenio be ordered to explain why she should not be held administratively liable, viz:

WHEREFORE, in view of the foregoing, respectfully submitted for the consideration of the Honorable Court, are the
following recommendations:

1. That this instant administrative complaint be REDOCKETED as a regular administrative matter;

2. That respondent Paul M. Resurreccion be found GUILTY of Grave Misconduct for:

1.1) committing gross violation of the following:

a) Circular No. 50-2001, August 21, 2001, Unauthorized Collection of Fees or Amountof
Compensation by Clerks of Court for Reception of Evidence Ex-Partefor demanding
commissioner’s fee in ex-parteproceedings;

b) Section 9, Rule 30, 1997 Rules of Civil Procedure, which requires that only a member of
the bar may sit as commissioner to receive evidence ex-parte in default or ex-partehearings;

c) Republic Act No. 6713, Section 7, Paragraph

(d) which prohibits public officials and employees from soliciting or accepting "directly or
indirectly, any gift, gratuity, favor, entertainment, loan or anything of monetary value from any
person in the course oftheir official duties or in connection with any operation being regulated
by, or any transaction which may be affected by the function of their office.

1.2) inducing his witness Rey O. Chand to give false testimony;

911
 3. That respondent Paul M. Ressurreccion be DISMISSED from the service with forfeiture of all benefits,
excluding accrued leave credits, with prejudice to re-employment inany branch or agency of the government,
including government-owned or controlled corporations; and

4. That Maricar M. Eugenio, Court Stenographer, Regional Trial Court, Branch 276, be DIRECTED to
COMMENT, within ten (10) days from notice, why she should not be held administratively liable for grave
misconduct for giving false testimony in the administrative proceedings of the case and for making fictitious
and excessive claim for payment of nonexistent Transcript of Stenographic Notes. 18

In view of the recommendation of the OCA as to her, the Court required Eugenio to show cause why she should not
be held administratively liable for grave misconduct.19

On November 13, 2009, Eugenio proffered her comment, denying giving false testimony in favor of Resurreccion
and stating as follows:

I did not give false testimony in the administrative proceedings conducted by Hon. Judge Guerrero and for making
fictitious and excessive claim for payment of a non-existent transcript of stenographic notes (TSN for short). I only
told the truth as I am a God-fearing person. Nowhere in my testimony that I demanded excessive claim for the
payment of TSN and admitted before the Honorable Judge that I was asking for the payment of my TSN in
connection with the case of Rey Chand which was already terminated. When I was asked how much was I am
demanding for the payment of said TSN, I simply stated "Wala po akong sinabing amount", so how could I be
charged for making fictitious and excessive claim for payment of non-existent transcript of stenographic notes? My
answer on Page 35, TSN dated August 14, 2003 on the question of the Court: is that the duty of the lawyer to pay
the tsn or the client? And the answer reflected on the said tsn which I quote "A: What I know is that in the payment
of commissioner’s fee isthe payment of transcript of stenographic notes", which the interpretation is not correct, I
answered in vernacular during that said hearing is: "Ang pagkakaalam ko po ang bayad sa tsn ay kasama na doon
sa commissioner’s fee". I was even asked by Atty. Pulgar about my educational attainment, and the answer as
stated in the said tsn is Secretary, which is very erroneous. The answer should be Secretarial. Also in the said
hearing, I was asked by the Court where is the said transcript, I told the Honorable Judge, I will just bring the same
to her. So after the said hearing, I looked for the said TSN and gave the same to one of Judge Guerrero’s staff, as
she, the staff, even went to our office to ask for the same. I gave her the said tsn together with the diskette. If the
said transcript of stenographic notes is inexistent, how could then Judge Perello finished (sic) her
Resolution/Decision regarding the annulment case of Mr. Rey Chand if no transcript of stenographic notes was ever
attached to the case record as itwas an ex-parte presentation of Petitioner’s evidence? Of course, Judge Perello
could not decide the same, as it was taken ex-parte.

As a matter of fact, the Resolution/Decision of the said Annulment case has already been issued and its finality was
given likewise. I did not lie in my testimony before Honorable Judge Guerrero. What I told is only the truth and I was
innocent of the charges imputed in my person. Even without the presence of a lawyer, I testified to tell the truth
about the charge against Mr. Paul Resurreccion. I did not give a false testimony and for making a fictitious and
excessive claim for the payment of a nonexistent transcript of stenographic notes, as in fact I furnished the said tsn
to the Office of Honorable Judge Guerrero, together with the diskette, when I was required to do so. 20

Second Report of the OCA

In its July 22, 2011 memorandum,  the OCA stated its findings and recommendations on the administrative liability
21

of Eugenio, to wit:

For deliberately offering false testimony during the investigatory hearing, there is substantial evidence that
respondent Eugenio committed the act of dishonesty. It behooved respondent Eugenio to testify truthfully in
accordance with the oath she took before her testimony was taken during the investigation conducted by
Investigating Judge Guerrero. Sadly, she disregarded the sanctity of her oath due to her misplaced loyalty to
respondent Resurreccion. Time and time again, the Court has stressed that every employee of the judiciary should
be an example of integrity, uprightness and honesty. Like any public servant, she must exhibit the highest sense of
honesty and integrity not only in the performance of her official duties but most especially when she herself is on the
witness stand, to preserve the court’s good name and standing.

Moreover, respondent Eugenio’s failure to attach the T.S.N taken on 26 February 1997 amounts to simple neglect of
duty which is classified as a less grave offense under subsection B(1) of the same section and is penalized by
suspension of one (1) month and one (1) day to six (6) months for the first offense and dismissal for the second
offense. This is her second infraction of such nature in her eighteen (18) years of service in the Judiciary. As earlier
mentioned, the Court extended its compassion the first time respondent Eugenio committed simple neglect of duty
and imposed upon her the penalty of a fine instead of suspension. The instant case is, however, significantly
different in that, aside from committing simple neglect of duty, she further committed an act constituting dishonesty
which is a more serious offense.

xxxx
912
Premises considered, it is respectfully recommended that:

1. Respondent Maricar M. Eugenio, Court Stenographer, RTC Branch 276, Muntinlupa City be IMPLEADED
as a co-respondent in the administrative matter; and

2. Respondent Maricar M. Eugenio be found GUILTY of dishonesty and simple neglect of duty, imposing
upon her the penalty of SUSPENSION of SIX (6) months without pay, with a stern warning that commission
of the same or similar acts in the future will be dealt with more severely.22

Ruling of the Court

We consider and declare the findings of the OCA fully warranted.

Enshrining the tenet that a public office is a public trust, Section 1, Article XI of the 1987 Constitution mandates that
public officers and employees, who are servants of the people, must at all times be accountable to them, serve them
with utmost responsibility, integrity, loyalty, and efficiency, act with patriotism and justice, and lead modest lives. To
enforce this constitutional tenet, the Court has incessantly reminded that officials and employees involved in the
administration of justice should faithfully adhere to their mandated duties and responsibilities. Any act of impropriety
on their part – whether committed by the highest judicial official or by the lowest member of the judicial workforce –
can greatly erode the people’s confidence in the Judiciary. This is because the image of a court of justice is
necessarily mirrored in the conduct of its personnel; hence, it becomes their constant duty to maintain the good
nameand standing of the Judiciary as a true temple of justice. 23

At the time material to this administrative case, Resurreccion was the Court Interpreter of Branch 276 of the RTC in
Muntinlupa City. In order to maintain the trust and confidence of the people in the Judiciary, therefore, he should
have acted within the limits ofhis authority as such. Although his Presiding Judge designated him as commissioner
to receive evidence ex parte in some cases, he still could not discharge or perform that task because he was not a
member of the Philippine Bar, and thus had no authority whatsoever to act or serve as suchcommissioner to receive
the evidence ex parte of any of the parties. But, as the records indicated, he served as such commissioner. His
deliberate assumption of the duties of a commissioner for that purpose blatantly transgressed the limits of his official
functions as the Court Interpreter, and constituted unmitigated usurpation of powers. Such irregularity was
undeniable, because the language of Section 9, Rule 30 of the Rules of Court, of which he and his Presiding Judge
were well aware, was straightforward and unequivocal, viz:

Section 9. Judge to receive evidence; delegation to clerk of court. — The judge of the court where the case is
pending shall personally receive the evidence to be adduced by the parties. However, in default or ex partehearings,
and in any case where the parties agree in writing, the court may delegate the reception of evidence to its clerk of
court who is a member of the bar.The clerk of court shall have no power to rule on objections to any question or to
the admission of exhibits, which objections shall be resolved by the court upon submission ofhis report and the
transcripts within ten (10) daysfrom termination of the hearing. (n)

Compounding the usurpation of powers was the more serious offense of illegally exacting fees from litigants and
their lawyers or representatives. It is worth mentioning that Circular No. 50-2001, which proscribed the unauthorized
collection of fees or amounts of compensation by clerks of court for their reception of evidence ex parte, was issued
only on August 21, 2001. Even then, Resurreccion could not feign ignorance of the prohibition because the Manual
of Clerks of Court,which had been issued long before the issuance of Circular No. 50-2001, already contained a
similar prohibition that explicitly stated: No Branch Clerk of Court shall demand and/or receive commissioner's fees
for reception of evidence ex-parte. 24

In view of the foregoing, the recommendation of the OCA for the immediate dismissal of Resurreccion from the
service is warranted.  His acts of dishonesty, usurpation of official functions and illegal exaction demanded that we
1âwphi1

classify his acts as grave misconduct. In grave misconduct, as distinguished from simple misconduct, the elements
of corruption, clear intent to violate the law, or flagrant disregard of established rule must be manifest. They were so
in his case. Corruption as an element of grave misconduct consisted in his acts of unlawfully or wrongfully using his
position or character of his office to procure some benefit for himself or for another, contrary to the rights of
others. The collection of the fees had no legal basis whatsoever; hence, his illegal exactions were outrightly and
25

plainly corrupt. It then becomes unavoidable for us to judge his transgressions as motivated by the lust for money
and power, rather than having proceeded from his unfamiliarity with standing rules and guidelines.

Dismissal from the service was called for because of the grave nature of Resurreccion’s offense. He thereby
revealed his absolute unworthiness to remain in the service of the Judiciary.Indeed, he should not be allowed to
serve a minute longer in the Judiciary lest the reputation and integrity of the service be prejudiced. Under Section
46, Rule 10 of the Revised Rules on Administrative Cases in the Civil Service, serious dishonesty and grave
misconduct, among others, are grave offenses punishable by dismissal from the service.

As to Eugenio, the OCA justifiably pointed out that her evident intention in testifying in the investigation of
Resurreccion was to refute the charge that he had been the one who had conducted the ex partehearing on
913
February 26, 1997 despite his being not qualified to do so.  It was quite obvious that she wanted to give the
26

impression that it was physically impossible for Resurreccion to demand the commissioner’s fee from Atty. Pulgar if
a different person had received the evidence ex parte. Such thinly veiled attempt to mislead the investigatorin the
quest for the truth during the administrative hearings constituted simple dishonesty nonetheless, considering that
Judge Guerrero’s clear judicial vision still saw through the attempt in order to reach the most logical conclusion that:

x x x As is the practice and being the Acting Branch Clerk of Court, Mr. Resurreccion was allowed to receive the
evidence of the petitioner while the Court was busy hearing other cases ready for trial. Since Mr. Resurreccion,
being also the Court Interpreter, was needed in the court room, he had to call Ms. Gina Bucayon, the Acting Clerk of
Court, who is also not a lawyer, to attend to the ex-parte proceedings. This is probably the reason why Ms.
Bucayon’s handwritings appeared in the minutes of February 26, 1997 and why Mr. Resurreccion claimed that he
did not know Atty. Pulgar as he had not met him. As was the practice, Atty. Pulgar could have given the fee for the
ex-parteto Mr. Resurreccion through Ms. Bucayon. Then, Mr. Oswaldo Serdon went to the court office and delivered
the balance of the ex-parte proceedings but which failed to reach Mr. Resurreccion as he had just left it on the
table.x x x.
27

Simple dishonesty is categorized as a less grave offense, and is punishable by suspension of one month and one
day to six months for the first offense; six months and one day toone year for the second offense; or dismissal for
the second offense. In Santiago v. Jovellanos,  we meted suspension of four months with a warning to a branch
28

clerk of court of the MTC in Pangasinan for her false testimony. In the case of Eugenio, we should suspend her from
the service without pay for six months, a penalty that the Court hopes will quickly bring her to realize the
seriousness of her offense. Although this is not her first administrative case, she being already held administratively
liable for simple neglect of duty and meted a fine of ₱5,000.00 for not transcribing her stenographic notes in relation
to habeas corpus proceedings,  such previous case is not a factor here because of the dissimilarity of the offenses.
29

Even so, she has to be warned to be more prudent in her actuations as an employee of the Judiciary.

WHEREFORE, the Court:

1. FINDS AND PRONOUNCES Court Interpreter PAUL M. RESURRECCION of Branch 276, Regional Trial
Court, in Muntinlupa City GUILTY of GRAVE MISCONDUCT; and DISMISSES him from the service, with
forfeiture of all benefits except accrued leave credits and with prejudice to re-employment in any branch or
instrumentality of the government, including government-owned and -controlled corporations;

2. DECLARES Court Stenographer MARICAR EUGENIO of Branch 276, Regional Trial Court, in Muntinlupa
City GUILTY of SIMPLE DISHONESTY; and SUSPENDS her from the service for six months without pay,
with a warning that a repetition of the same or similar act shall be dealt with more severely; and

3. ORDERS Court Interpreter PAUL M. RESURRECCION to RESTITUTE to Atty. Frumencio E. Pulgar

within 30 days from his receipt of this decision the amount of ₱5,000.00.

This decision is IMMEDIATELY EXECUTORY.

SO ORDERED.

914
 EN BANC

October 21, 2014

A.M.  No. P-14-3237

[Formerly OCA IPI No. 09-3256-P]

JEAN PAUL V. GILLERA, SUZETTE P. GILLERA, ATTY. JILLINA M. GERODIAS, AND IBARRA
BARCEBAL,Complainants 
vs.
MARIA CONSUELO JOIE A. FAJARDO, SHERIFF IV, REGIONAL TRIAL COURT, BRANCH 93, SAN PEDRO,
LAGUNA, Respondent

RESOLUTION

PER CURIAM, J.:

An Administrative complaint  was filled before the Office of the Court Administrator against Maria Consuelo Joie A.
1

Fajardo, the Court Sheriff of Regional Trial Court, Branch 93, San Pedro, Laguna. Complainants alleged that
respondent committed conduct unbecoming a court officer by her (a) non-payment of house rental fees; (b)
issuance of bouncing checks; (c) falsification of a deed of absolute sale and Official Receipt No. 8010; (d)
harassment; and (e) ill-gotten wealth.2

On July 6, 2011, this court resolved to refer the complaint to the Executive Judge of the Regional Trial Court in San
Pedro, Laguna, for "investigation, report and recommendation."  The report  summarized the facts as follows.
3 4

Complainants Spouses Jean Paul and Suzette Gillera (Spouses Gillera) alleged that they were the former owners of
a house and lot in Biñan, Laguna. On September 15, 2007 when they still owned the house and lot, they leased it to
respondent Maria Consuelo Joie A. Fajardo (Fajardo) for 14,000.00 per month. 5

Fajardo issued three (3) post-dated checks for the November 2007, December 2007, and January 2008 rentals. The
bank, Banco de Oro (BDO), dishonored the first two checks for being drawn against a closed account. Fajardo
ignored demands to replace the checks and failed to pay the rentals. 6

Meanwhile, the Spouses Gillera incurred debts to MMG Construction and Development Corporation (MMG), a family
corporation owned by complainant Atty. Jillina M. Gerodias. The Spouses Gillera were then leasing MMG’s
warehouse in San Pedro, Laguna. 7

In order to pay their debts, the Spouses Gillera designated Hercules Financing Corporation (HFC), another
Gerodias-owned company, to sell their house and lot occupied by Fajardo and apply the proceeds to their debt with
MMG. The Spouses Gillera signed a blank deed of absolute sale that HFC could complete upon consummation of
the sale.
8

Fajardo offered to buy the house and lot from HFC on the condition that the mortgage with BDO over the house and
lot should first be discharged. HFC paid the Spouses Gillera’s loan with BDO to release the mortgage. 9

In February 2009, Fajardo and HFC agreed on the sale of the house and lot for 3.1 million with 350,000.00 as
earnest money and the balance to be paid after one (1) month. HFC gave Fajardo a photocopy of the blank deed of
absolute sale signed by the Spouses Gillera as proof of its authority to sell the house and lot.10

Fajardo failed to pay the balance when it fell due on March 27, 2009. After seeking extensions, she issued HFC
three (3) post-dated checks for 35,000.00, 77,000.00 and 2,750,000.00. 11

The checks bounced. The check for 35,000.00 was replaced, but the other two remained unpaid despite demand.
HFC gave Fajardo until August 31, 2009 to pay the balance plus 1% per month interest and other fees; otherwise,
HFC would sell the property to another. 12

On September 1, 2009, HFC employee Victor Romero called Fajardo to collect payment. It was then that Fajardo
claimed having paid the entire balance of 2,774,478.67 in cash on August 29, 2009 to complainant Ibarra Barcebal,
HFC’s general manager. Fajardo claimed that she was issued Official Receipt No. 8010 and given the deed of
absolute sale signed by the Spouses Gillera as sellers and Fajardo's mother as buyer. 13

Fajardo continued to occupy the property without paying rent, prompting the Spouses Gillera to file for unlawful
detainer in September 2009. The Municipal Trial Court, affirmed by the Regional Trial Court, ordered Fajardo's
eviction and payment of rentals in arrears from November 2007 that had accumulated to 322,000.00. Fajardo was
evicted on September 21, 2011, but the rentals in arrears remain unpaid.  The Spouses Gillera also filed charges
14

915
against Fajardo for two counts of violation of Batas Pambansa Blg. 22, and this administrative complaint praying for
Fajardo’s dismissal from the service. 15

This administrative complaint also includes allegations of harassment and ill-gotten wealth against respondent.
Complainants question respondent’s capacity to purchase a 3.1 million property in cash and a Ford 150 truck with
her salary as Sheriff IV. They also claim receiving threats in their homes from unidentified men in the middle of the
night, as well as bomb threats to their office from unknown mobile numbers. 16

In her defense, respondent admitted to closing her bank account so that complainants Spouses Gillera would not be
able to encash the two checks. Respondent explained that complainants Spouses Gillera refused to offset her
expenses for repairs and improvements on the leased property with rentals due despite having such an agreement
with complainants Spouses Gillera. 17

Respondent also admitted that she stopped paying rentals by November 2007. She claimed having a verbal
agreement with complainant Suzette Gillera who allegedly agreed to write off rentals if respondent buys the house
and lot.
18

Respondent then claimed that her mother — deriving income from pensions from the Government Service
Insurance System, Social Security System, Philippine/US Veterans Organization, and the Australian government —
bought the house and lot on August 29, 2009. Respondent allegedly paid complainant and HFC’s general manager
Ibarra Barcebal the 2,774,478.67 balance in cash when complainant Ibarra Barcebal came to the leased house on
said date. 19

Respondent explained that payment was made in 1,000.00 denominations, "placed in a large sando bag about the
size of the Supreme Court issued courtroom calendar (24x36 inches)."  Respondent mentioned that she did not
20

know how her mother accumulated the money, if her mother withdrew the money from the bank, or if the money was
just kept in the house.21

According to respondent, complainant Ibarra Barcebal issued Official Receipt No. 8010 and the deed of absolute
sale after receiving the cash payment. Respondent failed to produce the original copy of the deed of absolute sale
and the owner's duplicate copy of the property’s title. 22

In the report and recommendation  of Executive Judge Sonia T. YuCasano dated December 17, 2012, she
23

recommended that "[t]he complaint for harassment and ill-gotten wealth be DISMISSED for paucity of evidence[,]
[r]espondent be held administratively liable for violation of the bouncing checks law, for falsification and for gross
dishonesty[,] [and] respondent be DISMISSED from the service with forfeiture of retirement benefits except accrued
leave credits, and perpetual disqualification for reemployment in the government service." 24

On March 11, 2013, this court resolved to refer the "report and recommendation to the Office of the Court
Administrator for evaluation, report and recommendation." 25

The Office of the Court Administrator agreed with the findings and recommendations of Executive Judge Sonia T.
Yu-Casano,  and recommended that respondent "be found GUILTY of dishonesty and conduct unbecoming an
26

officer of the court and be ordered DISMISSED from the service with forfeiture of retirement benefits except accrued
leave credits, and perpetual disqualification for re-employment in the government service, including government-
owned and controlled corporation." 27

This court adopts the factual findings and recommendations of the Office of the Court Administrator.

Sheriffs, our front-line representatives,  play a crucial role in our justice system, having the important task of
28

executing our courts’ final judgments.  Sheriffs must conduct themselves with integrity at all times as "once he[/she]
29

loses the people’s trust, he[/she] diminishes the people’s faith in the judiciary."  Respondent’s acts failed to meet the
30

high standards of conduct expected from the position held. Respondent only paid one (1) monthly rental during the
entire three (3) years she occupied the house and lot.  She anchored her non-payment on an alleged agreement
31

with complainant Suzette Gillera that rental arrears would be written off if respondent buys the house and lot, and
her contention that her mother did buy the house and lot.

Both Executive Judge Sonia T. Yu-Casano and the Office of the Court Administrator found that no agreement
materialized.  In fact, the court in the ejectment case found respondent liable for rental arrears.  Thus, respondent’s
32 33

continuous refusal to pay a just debt amounts to "conduct unbecoming of a public employee." 34

Worse, respondent testified during investigation that her mother had bought the house and lot, and respondent
produced anew documents already rejected by the ejectment court. 35

Both Executive Judge Sonia T. Yu-Casano and the Office of the Court Administrator found that respondent
presented a falsified Official Receipt No. 8010 and passed off a deed of absolute sale copy, bearing her mother’s

916
signature, to serve as a faithful reproduction of a nonexistent original document.  Executive Judge Sonia T. Yu-
36

Casano found as follows:

There is overwhelming evidence that original copies of the documents presented by respondent were inexistent, or
if they exist, were mere forgeries. Respondent in the ejectment suit filed against her was asked to produce the
original copies of the Deed of Absolute Sale and the official receipt she presented there as proof of the
consummation of the sale of the property between her mother and Hercules but she was unable to do so. Hence,
the presumption that the original copy of the Deed of Absolute Sale is inexistent or manufactured arises. During the
investigation of this case, respondent presented what she referred to as an original copy of the Deed of Absolute
Sale bearing the original signature of her mother. But the signatures of the vendors were mere photocopies.
Confronted with this fact, she committed to present the copy bearing the original signatures of the vendor but was
unable to do so. It is therefore evident that respondent merely filled up her mother’s name on the photocopy of the
blank Deed of Absolute Sale furnished to her by Hercules at the beginning of their transaction.

The evidence presented by the complainant also proves that O.R. No. 8010 is a forgery. Comparing the signatures
of Barcebal in the affidavits and O.R. No. 7092 (which respondent admitted as bearing the true and authentic
signature of Barcebal) as against the signature appearing on O.R. No. 8010, one can immediately discern the
difference. Aside from the marked difference in the signatures of Barcebal on the two receipts, the printed words on
the two receipts themselves were different in sizes and dimensions. Aside from this, the complainants were able to
show that O.R. No. 8010 is a series belonging to an unused and unissued booklet of receipts. In other words, O.R.
No. 8010 was never issued by Hercules to the respondent. Besides, respondents claim that the balance of
₱2,774,478.67 was picked up by Barcebal in cash in her residence on board a tricycle is utterly incredible. In this
age of modern bank credit transactions and considering the worsening peace and order situation, no businessman
in his right sense would take the risk of picking up in a client’s house cash in such huge amounts on board a tricycle.
Finally, if indeed there had been full payment, the title over the property should have also been delivered to the
respondent. Considering the good sense the respondent had demonstrated when in dealing with Hercules she
immediately imposed that the property be released from all liens and charges before she agreed to buy it, it is hard
to imagine the same buyer paying in full the purchase price of ₱3,100,000.00 without receiving

simultaneously the owner’s duplicate copy of the title to the property she had paid for. 37

The Office of the Court Administrator found that respondent "debased the judicial process by introducing in evidence
a falsified document, committing perjury and giving false testimony in an effort to obtain unfairly a favorable
judgment for herself." 38

The blatant disregard of the rules in an effort to mislead and deceive the court in its investigation reflects
respondent’s "incorrigible and unrepentant conduct." 39

Respondent also issued bouncing checks, having been drawn against closed accounts. She failed to substantiate
her claim that complainants Spouses Gillera agreed to offset her expenses for improvements with rental arrears. On
the other hand, respondent’s bank account had been closed when complainants Spouses Gillera deposited the
checks on January 23, 2008, and yet on July 19, 2009, respondent issued another check for complainants Spouses
Gillera drawn from the same account. 40

Such fraudulent behavior compounds respondent’s acts of presenting forged documents and making untruthful
testimony, all in all depicting her as "lack[ing] [in] personal honesty and good moral character [that] render her
unworthy of public confidence." 41

Dishonesty refers to "intentionally making a false statement on any material fact."  Dishonesty involves "a
42

disposition to lie, cheat, deceive or defraud; untrustworthiness; lack of integrity, lack of honesty, probity or integrity in
principle; lack of fairness and straightforwardness; disposition to defraud, deceive or betray." 43

The rules  consider dishonesty as a grave offense such that the first offense merits dismissal from the service  and
44 45

carries with it "cancellation of eligibility, forfeiture of retirement benefits, and the perpetual disqualification for
reemployment in the government service, unless otherwise provided in the decision."  Dishonesty need not be
46

committed in the performance of official duty as to warrant the penalty of dismissal:

And the rule is that dishonesty, in order to warrant dismissal, need not be committed in the course of the
performance of duty by the person charged. The rationale for the rule is that if a government officer or employee is
dishonest or is guilty of oppression or grave misconduct, even if said defects of character are not connected with his
office, they affect his right to continue in office. The Government cannot tolerate in its service a dishonest official,
even if he performs his duties correctly and well, because by reason of his government position, he is given more
and ample opportunity to commit acts of dishonesty against his fellow men, even against offices and entities of the
government other than the office where he is employed; and by reason of his office, he enjoys and possesses a
certain influence and power which renders the victims of his grave misconduct, oppression and dishonesty less
disposed and prepared to resist and to counteract his evil acts and actuations. The private life of an employee

917
cannot be segregated from his public life. Dishonesty inevitably reflects on the fitness of the officer or employee to
continue in office and the discipline and morale of the service.47

This court has emphasized that "[c]ourt employees should be models of uprightness, fairness and honesty to
maintain the people’s respect and faith in the judiciary."  Consequently, their conduct "must not only be, but must
48

also be perceived to be, free from any whiff of impropriety, both with respect to their duties in the judiciary and to
their behavior outside the court."  This court will not tolerate acts or omissions "diminishing or tending to diminish
49

public trust and confidence in the courts."50

WHEREFORE, this court finds respondent Maria Consuelo Joie A. Fajardo GUILTY of dishonesty and conduct
unbecoming an officer of the court. She is DISMISSED from the service, with forfeiture of retirement benefits except
accrued leave credits, and perpetual disqualification for reemployment in the government service, including in
government-owned or controlled corporations.

SO ORDERED.

918
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 182601               November 10, 2014

JOEY M. PESTILOS, DWIGHT MACAPANAS, MIGUEL GACES, JERRY FERNANDEZ and RONALD
MUNOZ,Petitioners, 
vs.
MORENO GENEROSO and PEOPLE OF THE PHILIPPINES, Respondents.

DECISION

BRION, J.:

We resolve the petition for review on certiorari under Rule 45 of the Rules of Court challenging the decision  dated
1

January 21, 2008 and the resolution  dated April 17, 2008 of the Court of Appeals (CA) in CAG.R. SP No. 91541.
2

The appealed decision affirmed the Order dated March 16, 2005 of the Regional Trial Court (RTC), Branch 96,
Quezon City, denying Joey M. Pestilos, Dwight Macapanas, Miguel Gaces, Jerry Fernandez, and Ronald Munoz's
(petitioners) Urgent Motion for Regular Preliminary Investigation, as well as their subsequent motion for
reconsideration.

The Antecedent Facts

The records of the case reveal that on February 20, 2005, at around 3: 15 in the morning, an altercation ensued
between the petitioners and Atty. Moreno Generoso (Atty. Generoso) at Kasiyahan Street, Barangay Holy Spirit,
Quezon City where the petitioners and Atty. Generoso reside. 3

Atty. Generoso called the Central Police District, Station 6 (Batas an Hills Police Station) to report the
incident. Acting on this report, Desk Officer SPOl Primitivo Monsalve (SPOJ Monsalve) dispatched SP02 Dominador
4

Javier (SP02 Javier) to go to the scene of the crime and to render assistance.  SP02 Javier, together with
5

augmentation personnel from the Airforce, A2C Alano Sayson and Airman Ruel Galvez, arrived at the scene of the
crime less than one hour after the alleged altercation  and they saw Atty. Generoso badly beaten.
6 7

Atty. Generoso then pointed to the petitioners as those who mauled him. This prompted the police officers to "invite"
the petitioners to go to Batasan Hills Police Station for investigation.  The petitioners went with the police officers to
8

Batasan Hills Police Station.  At the inquest proceeding, the City Prosecutor of Quezon City found that the
9

petitioners stabbed Atty. Generoso with a bladed weapon. Atty. Generoso fortunately survived the attack. 10

In an Information dated February 22, 2005, the petitioners were indicted for attempted murder allegedly committed
as follows:

That on or about the 20th h day of February, 2005, in Quezon City, Philippines, the said accused, conspiring
together, confederating with and mutually helping one another, with intent to kill, qualified with evident
premeditation, treachery and taking advantage of superior strength, did then and there, willfully, unlawfully and
feloniously commence the commission of the crime of Murder directly by overt acts, by then and there stabbing one
Atty. MORENO GENEROSO y FRANCO, with a bladed weapon, but said accused were not able to perform all the
acts of execution which would produce the crime of Murder by reason of some cause/s or accident other than their
own spontaneous desistance, that is, said complainant was able to parry the attack, to his damage and prejudice.

CONTRARY TO LAW. 11

On March 7, 2005, the petitioners filed an Urgent Motion for Regular Preliminary Investigation  on the ground that
12

they had not been lawfully arrested. They alleged that no valid warrantless arrest took place since the police officers
had no personal knowledge that they were the perpetrators of the crime. They also claimed that they were just
"invited" to the police station. Thus, the inquest proceeding was improper, and a regular procedure for preliminary
investigation should have been performed pursuant to Rule 112 of the Rules of Court. 13

On March 16, 2005, the RTC issued its order denying the petitioners' Urgent Motion for Regular Preliminary
Investigation.  The court likewise denied the petitioners' motion for reconsideration.
14 15

919
The petitioners challenged the lower court's ruling before the CA on a Rule 65 petition for certiorari. They attributed
grave abuse of discretion, amounting to lack or excess of jurisdiction, on the R TC for the denial of their motion for
preliminary investigation.16

The Assailed CA Decision

On January 21, 2008, the CA issued its decision dismissing the petition for lack of merit.  The CA ruled that the
17

word "invited" in the Affidavit of Arrest executed by SP02 Javier carried the meaning of a command. The arresting
officer clearly meant to arrest the petitioners to answer for the mauling of Atty. Generoso. The CA also recognized
that the arrest was pursuant to a valid warrantless arrest so that an inquest proceeding was called for as a
consequence. Thus, the R TC did not commit any grave abuse of discretion in denying the Urgent Motion for
Regular Preliminary Investigation.

The CA saw no merit in the petitioners' argument that the order denying the Urgent Motion for Regular Preliminary
Investigation is void for failure to clearly state the facts and the law upon which it was based, pursuant to Rule 16,
Section 3 of the Revised Rules of Court. The CA found that the RTC had sufficiently explained the grounds for the
denial of the motion.

The petitioners moved for reconsideration, but the CA denied the motion in its Resolution of April 17, 2008;  hence,
18

the present petition.

The Issues

The petitioners cited the following assignment of errors:

I.

WHETHER OR NOT THE PETITIONERS WERE VALIDLY ARRESTED WITHOUT A WARRANT.

II.

WHETHER OR NOT THE PETITIONERS WERE LAWFULLY ARRESTED WHEN THEY WERE MERELY
INVITED TO THE POLICE PRECINCT.

III.

WHETHER OR NOT THE ORDER DENYING THE MOTION FOR PRELIMINARY INVESTIGATION IS
VOID FOR FAILURE TO STATE THE FACTS AND THE LAW UPON WHICH IT WAS BASED.

The petitioners primarily argue that they were not lawfully arrested. No arrest warrant was ever issued; they went to
the police station only as a response to the arresting officers' invitation. They even cited the Affidavit of Arrest, which
actually used the word "invited. "

The petitioners also claim that no valid warrantless arrest took place under the terms of Rule 112, Section 7 of the
Revised Rules of Court. The incident happened two (2) hours before the police officers actually arrived at the crime
scene. The police officers could not have undertaken a valid warrantless arrest as they had no personal knowledge
that the petitioners were the authors of the crime.

The petitioners additionally argue that the R TC' s Order denying the Urgent Motion for Regular Preliminary
Investigation is void because it was not properly issued.

The Court's Ruling

We find the petition unmeritorious and thus uphold the RTC Order. The criminal proceedings against the petitioners
should now proceed.

It is unfortunate that the kind of motion that the petitioners filed has to reach this Court for its resolution. The thought
is very tempting that the motion was employed simply to delay the proceedings and that the use of Rule 65 petition
has been abused.

But accepting things as they are, this delay can be more than compensated by fully examining in this case the
legalities surrounding warrantless warrants and establishing the proper interpretation of the Rules for the guidance
of the bench and the bar. These Rules have evolved over time, and the present case presents to us the opportunity
to re-trace their origins, development and the current applicable interpretation.

920
I. Brief history on warrantless arrests

The organic laws of the Philippines, specifically, the Philippine Bill of 1902,  and the 1935,  1973  and
19 20 21

1987 Constitutions all protect the right of the people to be secure in their persons against unreasonable searches
22

and seizures. Arrest falls under the term "seizure. " 23

This constitutional mandate is identical with the Fourth Amendment of the Constitution of the United States. The
Fourth Amendment traces its origins to the writings of Sir Edward Coke  and The Great Charter of the Liberties of
24

England (Magna Carta Libertatum), sealed under oath by King John on the bank of the River Thames near Windsor,
England on June 15, 1215.  The Magna Carta Libertatum limited the King of England's powers and required the
25

Crown to proclaim certain liberties  under the feudal vassals' threat of civil war.  The declarations in Chapter 29 of
26 27

the Magna Carta Libertatum later became the foundational component of the Fourth Amendment of the United
States Constitution.  It provides:
28

No freeman shall be taken, or imprisoned, or be disseised  of his Freehold, or Liberties, or free Customs, or be
29

outlawed, or exiled, or any otherwise destroyed; nor will we not pass upon him, nor condemn him, but by lawful
Judgment of his Peers, or by the Law of the Land, We will sell to no man, we will not deny or defer to any man either
Justice or Right.  [Emphasis supplied]
30

In United States v. Snyder,  the United States Supreme Court held that this constitutional provision does not prohibit
31

arrests, searches and seizures without judicial warrant, but only those that are unreasonable.  With regard to an
32

arrest, it is considered a seizure, which must also satisfy the test of reasonableness. 33

In our jurisdiction, early rulings of the Court have acknowledged the validity of warrantless arrests. The Court based
these rulings on the common law of America and England that, according to the Court, were not different from the
Spanish laws.  These court rulings likewise justified warrantless arrests based on the provisions of separate laws
34

then existing in the Philippines. 35

In 1905, the Court held in The United States v. Wilson  that Section 37  of Act No. 183, or the Charter of Manila,
36 37

defined the arresting officer's power to arrest without a warrant, at least insofar as the City of Manila was concerned.

In The United States v. Vallejo, et al.,  the Court held that in the absence of any provisions under statutes or local
38

ordinances, a police officer who held similar functions as those of the officers established under the common law of
England and America, also had the power to arrest without a warrant in the Philippines.

The Court also ruled in The United States v. Santos  that the rules on warrantless arrest were based on common
39

sense and reason.  It further held that warrantless arrest found support under the then Administrative Code  which
40 41

directed municipal policemen to exercise vigilance in the prevention of public offenses.

In The United States v. Fortaleza,  the Court applied Rules 27, 28, 29 and 30  of the Provisional Law for the
42 43

Application of the Penal Code which were provisions taken from the Spanish Law.

These rules were subsequently established and incorporated in our Rules of Court and jurisprudence. Presently, the
requirements of a warrantless arrest are now summarized in Rule 113, Section 5 which states that: Section 5. Arrest
without warrant; when lawful. - A peace officer or a private person may, without a warrant, arrest a person:

(a) When, in his presence, the person to be arrested has committed, is actually committing, or is attempting
to commit an offense;

(b) When an offense has just been committed, and he has probable cause to believe based on personal
knowledge of facts or circumstances that the person to be arrested has committed it; and

(c) When the person to be arrested is a prisoner who has escaped from a penal establishment or place
where he is serving final judgment or is temporarily confined while his case is pending, or has escaped while
being transferred from one confinement to another.

In cases falling under paragraph (a) and (b) above, the person arrested without a warrant shall be forth with
delivered to the nearest police station or jail and shall be proceeded against in accordance with section 7 of Rule
112.

A warrantless arrest under the circumstances contemplated under Section 5(a) above has been denominated as
one "in flagrante delicto," while that under Section 5(b) has been described as a "hot pursuit" arrest. 44

For purposes of this case, we shall focus on Section 5(b) – the provision applicable in the present case. This
provision has undergone changes through the years not just in its phraseology but also in its interpretation in our
jurisprudence.
921
We shall first trace the evolution of Section 5(b) and examine the applicable American and Philippine jurisprudence
to fully understand its roots and its appropriate present application.

II. Evolution of Section 5(b), Rule 113

A. Prior to the 1940 Rules of Court

Prior to 1940, the Court based its rulings not just on American and English common law principle on warrantless
arrests but also on laws then existing in the Philippines. In Fortaleza,  the Court cited Rule 28 of the Provisional Law
45

for the Application of the Penal Code which provided that:

Judicial and administrative authorities have power to detain, or to cause to be detained, persons whom there is
reasonable ground to believe guilty of some offense. It will be the duty of the authorities, as well as of their agents,
to arrest:

First. Such persons as may be arrested under the provisions of rule 27.

Second. A person charged with a crime for which the code provides a penalty greater than that of confinamiento.

Third. A person charged with a crime for which the code provides a penalty less than that of confinamiento, if his
antecedents or the circumstances of the case would warrant the presumption that he would fail to appear when
summoned by the judicial authorities.

The provisions of the preceding paragraph shall not apply, however, to a defendant who gives sufficient bond, to the
satisfaction of the authority or agent who may arrest him, and who it may reasonably be presumed will appear
whenever summoned by the judge or court competent to try him.

Fourth. A person coining under the provisions of the preceding paragraph may be arrested, although no formal
complaint has been filed against him, provided the following circumstances are present:

First. That the authority or agent had reasonable cause to believe that an unlawful act, amounting to a crime had
been committed.

Second. That the authority or agent had sufficient reason to believe that the person arrested participated in the
commission of such unlawful act or crime." [Emphasis and underscoring supplied]

In the same decision, the Court likewise cited Section 3 7 of the Charter of Manila, which provided that certain
officials, including police officers may, within the territory defined in the law, pursue and arrest without warrant, any
person found in suspicious places or under suspicious circumstances, reasonably tending to show that such person
has committed, or is about to commit any crime or breach of the peace.

In Santos,  the Court cited Miles v. Weston,  which ruled that a peace officer may arrest persons walking in the
46 47

street at night when there is reasonable ground to suspect the commission of a crime, although there is no proof of
a felony having been committed.

The Court ruled in Santos that the arresting officer must justify that there was a probable cause for an arrest without
a warrant. The Court defined probable cause as a reasonable ground of suspicion, supported by circumstances
sufficiently strong in themselves as to warrant a reasonable man in believing that the accused is guilty. Besides
reasonable ground of suspicion, action in good faith is another requirement. Once these conditions are complied
with, the peace officer is not liable even if the arrested person turned out to be innocent.

Based on these discussions, it appears clear that prior to the 1940 Rules of Court, it was not necessary for the
arresting officer to first have knowledge that a crime was actually committed. What was necessary was the presence
of reasonably sufficient grounds to believe the existence of an act having the characteristics of a crime; and that the
same grounds exist to believe that the person sought to be detained participated in it. In addition, it was also
established under the old court rulings that the phrase "reasonable suspicion" was tantamount to probable cause
without which, the warrantless arrest would be invalid and the arresting officer may be held liable for its breach. 48

In The US. v. Hachaw,  the Court invalidated the warrantless arrest of a Chinaman because the arresting person did
49

not state in what way the Chinaman was acting suspiciously or the particular act or circumstance which aroused the
arresting person's curiosity.

It appears, therefore, that prior to the establishment in our Rules of Court of the rules on warrantless arrests, the
gauge for a valid warrantless arrest was the arresting officer's reasonable suspicion (probable cause) that a crime
was committed and the person sought to be arrested has participated in its commission. This principle left so much

922
discretion and leeway on the part of the arresting officer. However, the 1940 Rules of Court has limited this
discretion.

B. The 1940 Rules of Court

(Restricting the arresting
officer's determination of
probable cause)

Rules 27 and 28 of the Provisional Law for the Application of the Penal Code were substantially incorporated in
Section 6, Rule 109 of the 1940 Rules of Court as follows: 50

SEC. 6. Arrest without warrant - When lawful. - A peace officer or a private person may, without a warrant, arrest a
person:

(a) When the person to be arrested has committed, is actually committing, or is about to commit an offense
in his presence;

(b) When an offense has in fact been committed, and he has reasonable ground to believe that the person
to be arrested has committed it;

(c) When the person to be arrested is a prisoner who has escaped from a penal establishment or place
where he is serving final judgment or temporarily confined while his case is pending, or has escaped while
being transferred from one confinement to another. [Emphasis and underscoring supplied]

These provisions were adopted in toto in Section 6, Rule 113 of the 1964 Rules of Court. Notably, the 1940 and
1964 Rules have deviated from the old rulings of the Court. Prior to the 1940 Rules, the actual commission of the
offense was not necessary in determining the validity of the warrantless arrest. Too, the arresting officer's
determination of probable cause (or reasonable suspicion) applied both as to whether a crime has been committed
and whether the person to be arrested has committed it.

However, under the 1940 and the 1964 Rules of Court, the Rules required that there should be actual commission
of an offense, thus, removing the element of the arresting officer's "reasonable suspicion of the commission of an
offense." Additionally, the determination of probable cause, or reasonable suspicion, was limited only to the
determination of whether the person to be arrested has committed the offense. In other words, the 1940 and 1964
Rules of Court restricted the arresting officer's discretion in warrantless arrests under Section 6(b), Rule 113 of the
1964 Rules of Court.

C. The more restrictive 1985 Rules of Criminal Procedure

Section 6, Rule 113 of the 1964 Rules of Court again underwent substantial changes and was re-worded and re-
numbered when it became Section 5, Rule 113 of the 1985 Rules of Criminal Procedure, to wit:

Sec. 5. Arrest without warrant; when. lawful. - A peace officer or a private person may, without a warrant, arrest a
person:

(a) When, in his presence, the person to be arrested has committed, is actually committing, or is attempting
to commit an offense;

(b) When an offense has in fact just been committed, and he has personal knowledge of facts indicating that
the person to be arrested has committed it; and

(c) When the person to be arrested is a prisoner who has escaped from a penal establishment or place
where he is serving final judgment or temporarily confined while his case is pending, or has escaped while
being transferred from one confinement to another. In cases falling under paragraphs (a) and (b) hereof, the
person arrested without a warrant shall be forthwith delivered to the nearest police station or jail, and he
shall be proceeded against in accordance with Rule 112, Section 7. [Emphasis and underscoring supplied]

As amended, Section 5(b ), Rule 113 of the 1985 Rules of Court retained the restrictions introduced under the 1964
Rules of Court. More importantly, however, it added a qualification that the commission of the offense should not
only have been "committed" but should have been "just committed." This limited the arresting officer's time frame for
conducting an investigation for purposes of gathering information indicating that the person sought to be arrested
has committed the crime.

D. The Present Revised Rules of Criminal Procedure

923
Section 5(b ), Rule 113 of the 1985 Rules of Criminal Procedure was further amended with the incorporation of the
word "probable cause" as the basis of the arresting officer's determination on whether the person to be arrested has
committed the crime.

Hence, as presently worded, Section 5(b), Rule 113 of the Revised Rules of Criminal Procedure provides that:

When an offense has just been committed, and he has probable cause to believe based on personal knowledge of
facts or circumstances that the person to be arrested has committed it.

From the current phraseology of the rules on warrantless arrest, it appears that for purposes of Section S(b ), the
following are the notable changes: first, the contemplated offense was qualified by the word "just," connoting
immediacy; and second, the warrantless arrest of a person sought to be arrested should be based on probable
cause to be determined by the arresting officer based on his personal knowledge of facts and circumstances that
the person to be arrested has committed it.

It is clear that the present rules have "objectified" the previously subjective determination of the arresting officer as
to the (1) commission of the crime; and (2) whether the person sought to be arrested committed the crime.
According to Feria, these changes were adopted to minimize arrests based on mere suspicion or hearsay. 51

As presently worded, the elements under Section 5(b), Rule 113 of the Revised Rules of Criminal Procedure are:
first, an offense has just been committed; and second, the arresting officer has probable cause to believe based on
personal knowledge of facts or circumstances that the person to be arrested has committed it.

For purposes of this case, we shall discuss these elements separately below, starting with the element of probable
cause, followed by the elements that the offense has just been committed, and the arresting officer's personal
knowledge of facts or circumstances that the person to be arrested has committed the crime.

i) First Element of Section 5(b), Rule 113 of the Revised Rules of Criminal Procedure: Probable cause

The existence of "probable cause" is now the "objectifier" or the determinant on how the arresting officer shall
proceed on the facts and circumstances, within his personal knowledge, for purposes of determining whether the
person to be arrested has committed the crime.

i.a) U.S. jurisprudence on probable cause in warrantless arrests

In Payton v. New York,  the U.S. Supreme Court held that the Fourth Amendment of the Federal Constitution does
52

not prohibit arrests without a warrant although such arrests must be reasonable. According to State v. Quinn,  the 53

warrantless arrest of a person who was discovered in the act of violating the law is not a violation of due process.

The U.S. Supreme Court, however indicated in Henry v. United States  that the Fourth Amendment limited the
54

circumstances under which warrantless arrests may be made. The necessary inquiry is not whether there was a
warrant or whether there was time to get one, but whether at the time of the arrest probable cause existed. The term
probable cause is synonymous to "reasonable cause" and "reasonable grounds." 55

In determining the existence of probable cause, the arresting officer should make a thorough investigation and
exercise reasonable judgment. The standards for evaluating the factual basis supporting a probable cause
assessment are not less stringent in warrantless arrest situation than in a case where a warrant is sought from a
judicial officer. The probable cause determination of a warrantless arrest is based on information that the arresting
officer possesses at the time of the arrest and not on the information acquired later. 56

In evaluating probable cause, probability and not certainty is the determinant of reasonableness under the Fourth
Amendment. Probable cause involves probabilities similar to the factual and practical questions of everyday life
upon which reasonable and prudent persons act. It is a pragmatic question to be determined in each case in light of
the particular circumstances and the particular offense involved. 57

In determining probable cause, the arresting officer may rely on all the information in his possession, his fair
inferences therefrom, including his observations. Mere suspicion does not meet the requirements of showing
probable cause to arrest without warrant especially if it is a mere general suspicion. Probable cause may rest on
reasonably trustworthy information as well as personal knowledge. Thus, the arresting officer may rely on
information supplied by a witness or a victim of a crime; and under the circumstances, the arresting officer need not
verify such information.58

In our jurisdiction, the Court has likewise defined probable cause in the context of Section 5(b), Rule 113 of the
Revised Rules of Criminal Procedure.

924
In Abelita Ill v. Doria et al.,  the Court held that personal knowledge of facts must be based on probable cause,
59

which means an actual belief or reasonable grounds of suspicion. The grounds of suspicion are reasonable when, in
the absence of actual belief of the arresting officers, the suspicion that the person to be arrested is probably guilty of
committing the offense is based on actual facts, i.e., supported by circumstances sufficiently strong in themselves to
create the probable cause of guilt of the person to be arrested. A reasonable suspicion, therefore, must be founded
on probable cause, coupled with good faith on the part of the peace officers making the arrest.

i.b) Probable cause under Section 5(b), Rule 113 of the Revised Rules of Criminal Procedure, distinguished from
probable cause in preliminary investigations and the judicial proceeding for the issuance of a warrant of arrest

The purpose of a preliminary investigation is to determine whether a crime has been committed and whether there is
probable cause to believe that the accused is guilty of the crime and should be held for triat.  In Buchanan v. Viuda
60

de Esteban,  we defined probable cause as the existence of facts and circumstances as would excite the belief in a
61

reasonable mind, acting on the facts within the knowledge of the prosecutor, that the person charged was guilty of
the crime for which he was prosecuted.

In this particular proceeding, the finding of the existence of probable cause as to the guilt of the respondent was
based on the submitted documents of the complainant, the respondent and his witnesses. 62

On the other hand, probable cause in judicial proceedings for the issuance of a warrant of arrest is defined as the
existence of such facts and circumstances that would lead a reasonably discreet and prudent person to believe that
an offense has been committed by the person sought to be arrested.

Hence, before issuing a warrant of arrest, the judge must be satisfied that based on the evidence submitted, there is
sufficient proof that a crime has been committed and that the person to be arrested is probably guilty thereof. At this
stage of the criminal proceeding, the judge is not yet tasked to review in detail the evidence submitted during the
preliminary investigation. It is sufficient that he personally evaluates the evidence in determining probable cause  to
63

issue a warrant of arrest.

In contrast, the arresting officer's determination of probable cause under Section 5(b), Rule 113 of the Revised
Rules of Criminal Procedure is based on his personal knowledge of facts or circumstances that the person sought to
be arrested has committed the crime. These facts or circumstances pertain to actual facts or raw evidence, i.e.,
supported by circumstances sufficiently strong in themselves to create the probable cause of guilt of the person to
be arrested. A reasonable suspicion therefore must be founded on probable cause, coupled with good faith on the
part of the peace officers making.the arrest.

The probable cause to justify warrantless arrest ordinarily signifies a reasonable ground of suspicion supported by
circumstances sufficiently strong in themselves to warrant a cautious man to believe that the person accused is
guilty of the offense with which he is charged,  or an actual belief or reasonable ground of suspicion, based on
64

actual facts.
65

It is clear therefore that the standard for determining "probable cause" is invariable for the officer arresting without a
warrant, the public prosecutor, and the judge issuing a warrant of arrest. It is the existence of such facts and
circumstances that would lead a reasonably discreet and prudent person to believe that an offense has been
committed by the person sought to be arrested or held for trial, as the case may be.

However, while the arresting officer, the public prosecutor and the judge all determine "probable cause," within the
spheres of their respective functions, its existence is influenced heavily by the available facts and circumstance
within their possession. In short, although these officers use the same standard of a reasonable man, they possess
dissimilar quantity of facts or circumstances, as set by the rules, upon which they must determine probable cause.

Thus, under the present rules and jurisprudence, the arresting officer should base his determination of probable
cause on his personal knowledge of facts and circumstances that the person sought to be arrested has committed
the crime; the public prosecutor and the judge must base their determination on the evidence submitted by the
parties.

In other words, the arresting officer operates on the basis of more limited facts, evidence or available information
that he must personally gather within a limited time frame.

Hence, in Santos,  the Court acknowledged the inherent limitations of determining probable cause in warrantless
66

arrests due to the urgency of its determination in these instances. The Court held that one should not expect too
much of an ordinary policeman. He is not presumed to exercise the subtle reasoning of a judicial officer. Oftentimes,
he has no opportunity to make proper investigation but must act in haste on his own belief to prevent the escape of
the criminal.
67

925
ii) Second and Third Elements of Section 5(b), Rule 113:
The crime has just been committed/personal
knowledge of facts or circumstances that the person
to be arrested has committed it

We deem it necessary to combine the discussions of these two elements as our jurisprudence shows that these
were usually taken together in the Court's determination of the validity of the warrantless arrests that were made
pursuant to Section 5(b), Rule 113 of the Revised Rules of Criminal Procedure.

In Posadas v. Ombudsman,  the killing of Dennis Venturina happened on December 8, 1994. It was only on
68

December 11, 1994 that Chancellor Posadas requested the NBI's assistance. On the basis of the supposed
identification of two (2) witnesses, the NBI attempted to arrest Francis Carlo Taparan and Raymundo Narag three
(3) days after the commission of the crime. With this set of facts, it cannot be said that the officers have personal
knowledge of facts or circumstances that the persons sought to be arrested committed the crime. Hence, the Court
invalidated the warrantless arrest.

Similarly, in People v. Burgos,  one Cesar Masamlok personally and voluntarily surrendered to the authorities,
69

stating that Ruben Burgos forcibly recruited him to become a member of the NPA, with a threat of physical harm.
Upon receipt of this information, a joint team of PC-INP units was dispatched to arrest Burgos who was then plowing
the field. Indeed, the arrest was invalid considering that the only information that the police officers had in effecting
the arrest was the information from a third person. It cannot be also said in this case that there was certainty as
regards the commission of a crime.

In People v. del Rosario,  the Court held that the requirement that an offense has just been committed means that
70

there must be a large measure of immediacy between the time the offense was committed and the time of the
arrest. If there was an appreciable lapse of time between the arrest and the commission of the crime, a warrant of
arrest must be secured.

The Court held that the arrest of del Rosario did not comply with these requirements because he was arrested only
a day after the commission of the crime and not immediately thereafter. Additionally, the arresting officers were not
present and were not actual eyewitnesses to the crime. Hence, they had no personal knowledge of facts indicating
that the person to be arrested had committed the offense. They became aware of del Rosario's identity as the driver
of the getaway tricycle only during the custodial investigation.

In People v. Cendana,  the accused was arrested one (1) day after the killing of the victim and only on the basis of
71

information obtained from unnamed sources. The unlawful arrest was held invalid.

In Rolito Go v. CA,  the arrest of the accused six ( 6) days after the commission of the crime was held invalid
72

because the crime had not just been committed. Moreover, the "arresting" officers had no "personal knowledge" of
facts indicating that the accused was the gunman who had shot the victim. The information upon which the police
acted came from statements made by alleged eyewitnesses to the shooting; one stated that the accused was the
gunman; another was able to take down the alleged gunman's car's plate number which turned out to be registered
in the name of the accused's wife. That information did not constitute "personal knowledge."

In People v. Tonog, Jr.,  the warrantless arrest which was done on the same day was held valid. In this case, the
73

arresting officer had knowledge of facts which he personally gathered in the course of his investigation, indicating
that the accused was one of the perpetrators.

In People v. Gerente,  the policemen arrested Gerente only about three (3) hours after Gerente and his companions
74

had killed the victim. The Court held that the policemen had personal knowledge of the violent death of the victim
and of facts indicating that Gerente and two others had killed him. The warrantless arrest was held valid.

In People v. Alvario,  the warrantless arrest came immediately after the arresting officers received information from
75

the victim of the crime. The Court held that the personal knowledge of the arresting officers was derived from the
information supplied by the victim herself who pointed to Alvario as the man who raped her at the time of his arrest.
The Court upheld the warrantless arrest. In People v. Jayson,  there was a shooting incident. The policemen who
76

were summoned to the scene of the crime found the victim. The informants pointed to the accused as the assailant
only moments after the shooting. The Court held that the arresting officers acted on the basis of personal knowledge
of the death of the victim and of facts indicating that the accused was the assailant. Thus, the warrantless arrest was
held valid.

In People v. Acol,  a group held up the passengers in a jeepney and the policemen immediately responded to the
77

report of the crime. One of the victims saw four persons walking towards Fort Bonifacio, one of whom was wearing
his jacket. The victim pointed them to the policemen. When the group saw the policemen coming, they ran in
different directions. The Court held that the arrest was valid.

926
In Cadua v. CA,  there was an initial report to the police concerning a robbery. A radio dispatch was then given to
78

the arresting officers, who proceeded to Alden Street to verify the authenticity of the radio message. When they
reached the place, they met with the complainants who initiated the report about the robbery. Upon the officers'
invitation, the victims joined them in conducting a search of the nearby area where the accused was spotted in the
vicinity. Based on the reported statements of the complainants, he was identified as a logical suspect in the offense
just committed. Hence, the arrest was held valid.

In Doria,  the Court held that Section S(b ), Rule 113 of the 1985 Rules of Criminal Procedure does not require the
79

arresting officers to personally witness the commission of the offense.

In this case, P/Supt. Doria alleged that his office received a telephone call from a relative of Rosa Sia about a
shooting incident. He dispatched a team headed by SP03 Ramirez to investigate the incident. SP03 Ramirez later
reported that a certain William Sia was wounded while Judge Abelita III, who was implicated in the incident, and his
wife just left the place of the incident. P/Supt. Doria looked for Abelita III and when he found him, he informed him of
the incident report. P/Supt. Doria requested Abelita III to go with him to the police headquarters as he had been
reported to be involved in the incident. Abelita III agreed but suddenly sped up his vehicle and proceeded to his
residence where P/Supt. Doria caught him up as he was about to run towards his house.

The police officers saw a gun in the front seat of the vehicle beside the driver's seat as Abelita III opened the door.
They also saw a shotgun at the back of the driver's seat. The police officers confiscated the firearms and arrested
Abelita III. The Court held that the petitioner's act of trying to get away, coupled with the incident report which they
investigated, were enough to raise a reasonable suspicion on the part of the police authorities as to the existence of
probable cause. Based on these discussions, it appears that the Court's appreciation of the elements that "the
offense has just been committed" and ''personal knowledge of facts and circumstances that the person to be
arrested committed it" depended on the particular circumstances of the case. However, we note that the element of
''personal knowledge of facts or circumstances" under Section S(b ), Rule 113 of the Revised Rules of Criminal
Procedure requires clarification.

The phrase covers facts or, in the alternative, circumstances. According to the Black's Law
Dictionary, "circumstances are attendant or accompanying facts, events or conditions. " Circumstances may pertain
80

to events or actions within the actual perception, personal evaluation or observation of the police officer at the scene
of the crime. Thus, even though the police officer has not seen someone actually fleeing, he could still make a
warrantless arrest if, based on his personal evaluation of the circumstances at the scene of the crime, he could
determine the existence of probable cause that the person sought to be arrested has committed the crime.
However, the determination of probable cause and the gathering of facts or circumstances should be made
immediately after the commission of the crime in order to comply with the element of immediacy.

In other words, the clincher in the element of ''personal knowledge of facts or circumstances" is the required element
of immediacy within which these facts or circumstances should be gathered. This required time element acts as a
safeguard to ensure that the police officers have gathered the facts or perceived the circumstances within a very
limited time frame. This guarantees that the police officers would have no time to base their probable cause finding
on facts or circumstances obtained after an exhaustive investigation.

The reason for the element of the immediacy is this - as the time gap from the commission of the crime to the arrest
widens, the pieces of information gathered are prone to become contaminated and subjected to external factors,
interpretations and hearsay. On the other hand, with the element of immediacy imposed under Section 5(b), Rule
113 of the Revised Rules of Criminal Procedure, the police officer's determination of probable cause would
necessarily be limited to raw or uncontaminated facts or circumstances, gathered as they were within a very limited
period of time. The same provision adds another safeguard with the requirement of probable cause as the standard
for evaluating these facts of circumstances before the police officer could effect a valid warrantless arrest.

In light of the discussion above on the developments of Section 5(b), Rule 113 of the Revised Rules of Criminal
Procedure and our jurisprudence on the matter, we hold that the following must be present for a valid warrantless
arrest: 1) the crime should have been just committed; and 2) the arresting officer's exercise of discretion is limited by
the standard of probable cause to be determined from the facts and circumstances within his personal knowledge.
The requirement of the existence of probable cause objectifies the reasonableness of the warrantless arrest for
purposes of compliance with the Constitutional mandate against unreasonable arrests.

Hence, for purposes of resolving the issue on the validity of the warrantless arrest of the present petitioners, the
question to be resolved is whether the requirements for a valid warrantless arrest under Section 5(b), Rule 113 of
the Revised Rules of Criminal Procedure were complied with, namely: 1) has the crime just been committed when
they were arrested? 2) did the arresting officer have personal knowledge of facts and circumstances that the
petitioners committed the crime? and 3) based on these facts and circumstances that the arresting officer
possessed at the time of the petitioners' arrest, would a reasonably discreet and prudent person believe that the
attempted murder of Atty. Generoso was committed by the petitioners? We rule in the affirmative.

927
III. Application of Section S(b), Rule 113 of the Revised Rules
of Criminal Procedure in the present case: there was a
valid warrantless arrest

We deem it necessary to review the records of the CA because it has misapprehended the facts in its
decision. From a review of the records, we conclude that the police officers had personal knowledge of facts or
81

circumstances upon which they had properly determined probable cause in effecting a warrantless arrest against
the petitioners. We note, however, that the determination of the facts in the present case is purely limited to the
resolution of the issue on the validity of the warrantless arrests of the petitioners.

Based on the police blotter  entry taken at 4:15 a.m. on February 20, 2005, the date that the alleged crime was
82

committed, the petitioners were brought in for investigation at the Batasan Hills Police Station. The police blotter
stated that the alleged crime was committed at 3:15 a.m. on February 20, 2005, along Kasiyahan St., Brgy. Holy
Spirit, Quezon City.

The time of the entry of the complaint in the police blotter at 4:15 a.m., with Atty. Generoso and the petitioners
already inside the police station, would connote that the arrest took place less than one hour from the time of the
occurrence of the crime. Hence, the CA finding that the arrest took place two (2) hours after the commission of the
crime is unfounded.

The arresting officers' personal observation of Atty. Generoso's bruises when they arrived at the scene of the crime
is corroborated by the petitioners' admissions that Atty: Generoso indeed suffered blows from petitioner Macapanas
and his brother Joseph Macapanas,  although they asserted that they did it in self-defense against Atty. Generoso.
83

Atty. Generoso's bruises were also corroborated by the Medico-Legal Certificate  that was issued by East Avenue
84

Medical Center on the same date of the alleged mauling. The medical check-up of Atty. Generoso that was made
about 8:10 a.m. on the date of the incident, showed the following findings: "Contusion Hematoma, Left Frontal Area;
Abrasion, T6 area, right midclavicular line periorbital hematoma, left eye; Abrasion, distal 3rd posterolateral aspect
of right forearm; Abrasion, 4th and fifth digit, right hand; Abrasion on area of ih rib (L ant. Chest wall), tenderness on
L peripheral area, no visible abrasion. In addition, the attending physician, Dr. Eva P. Javier, diagnosed Atty.
Generoso of contusion hematoma, periorbital L., and traumatic conjunctivitis, o.s.

To summarize, the arresting officers went to the scene of the crime upon the complaint of Atty. Generoso of his
alleged mauling; the police officers responded to the scene of the crime less than one (1) hour after the alleged
mauling; the alleged crime transpired in a community where Atty. Generoso and the petitioners reside; Atty.
Generoso positively identified the petitioners as those responsible for his mauling and, notably, the petitioners  and
85

Atty. Generoso  lived almost in the same neighborhood; more importantly, when the petitioners were confronted by
86

the arresting officers, they did not deny their participation in the incident with Atty. Generoso, although they narrated
a different version of what transpired. 87

With these facts and circumstances that the police officers gathered and which they have personally observed less
than one hour from the time that they have arrived at the scene of the crime until the time of the arrest of the
petitioners, we deem it reasonable to conclude that the police officers had personal knowledge of facts or
circumstances justifying the petitioners' warrantless arrests. These circumstances were well within the police
officers' observation, perception and evaluation at the time of the arrest. These circumstances qualify as the police
officers' personal observation, which are within their personal knowledge, prompting them to make the warrantless
arrests.

Similar to the factual antecedents in Jayson,  the police officers in the present case saw Atty. Generoso in his sorry
88

bloodied state. As the victim, he positively identified the petitioners as the persons who mauled him; however,
instead of fleeing like what happened in Jayson, the petitioners agreed to go with the police officers.

This is also similar to what happened in People v. Tonog, Jr.  where Tonog did not flee but voluntarily went with the
89

police officers. More than this, the petitioners in the present case even admitted to have been involved in the
incident with Atty. Generoso, although they had another version of what transpired.

In determining the reasonableness of the warrantless arrests, it is incumbent upon the courts to consider if the
police officers have complied with the requirements set under Section 5(b), Rule 113 of the Revised Rules of
Criminal Procedure, specifically, the requirement of immediacy; the police officer's personal knowledge of facts or
circumstances; and lastly, the propriety of the determination of probable cause that the person sought to be arrested
committed the crime.

The records show that soon after the report of the incident occurred, SPOl Monsalve immediately dispatched the
arresting officer, SP02 Javier, to render personal assistance to the victim.  This fact alone negates the petitioners'
90

argument that the police officers did not have personal knowledge that a crime had been committed - the police
immediately responded and had personal knowledge that a crime had been committed. 1âwphi1

928
To reiterate, personal knowledge of a crime just committed under the terms of the above-cited provision, does not
require actual presence at the scene while a crime was being committed; it is enough that evidence of the recent
commission of the crime is patent (as in this case) and the police officer has probable cause to believe based on
personal knowledge of facts or circumstances, that the person to be arrested has recently committed the crime.

Considering the circumstances of the stabbing, particularly the locality where it took place, its occasion, the personal
circumstances of the parties, and the immediate on-the-spot investigation that took place, the immediate and
warrantless arrests of the perpetrators were proper. Consequently, the inquest proceeding that the City Prosecutor
conducted was appropriate under the circumstances.

IV. The term "invited" in the Affidavit of Arrest is construed to

mean as an authoritative command

After the resolution of the validity of the warrantless arrest, the discussion of the petitioners' second issue is largely
academic. Arrest is defined as the taking of a person into custody in order that he may be bound to answer for the
commission of an offense. An arrest is made by an actual restraint of the person to be arrested, or by his
submission to the custody of the person making the arrest.  Thus, application of actual force, manual touching of the
91

body, physical restraint or a formal declaration of arrest is not required. It is enough that there be an intention on the
part of one of the parties to arrest the other and the intent of the other to submit, under the belief and impression
that submission is necessary. 92

Notwithstanding the term "invited" in the Affidavit of Arrest,  SP02 Javier could not but have the intention of arresting
93

the petitioners following Atty. Generoso' s account. SP02 Javier did not need to apply violent physical restraint when
a simple directive to the petitioners to follow him to the police station would produce a similar effect. In other words,
the application of actual force would only be an alternative if the petitioners had exhibited resistance.

To be sure, after a crime had just been committed and the attending policemen have acquired personal knowledge
of the incidents of the crime, including the alleged perpetrators, the arrest of the petitioners as the perpetrators
pointed to by the victim, was not a mere random act but was in connection with a particular offense. Furthermore,
SP02 Javier had informed the petitioners, at the time of their arrest, of the charges against them before taking them
to Batasan Hills Police Station for investigation. 94

V. The Order denying the motion for preliminary

investigation is valid

In their last ditch attempt at avoidance, the petitioners attack the R TC Order denying the petitioners' urgent motion
for regular preliminary investigation for allegedly having been issued in violation of Article VIII, Section 14 of the
1987 Constitution  and Rule 16, Section 3 of the Revised Rules of Court.
95 96

The RTC, in its Order dismissing the motion, clearly states that the Court is not persuaded by the evidentiary nature
of the allegations in the said motion of the accused. Aside from lack of clear and convincing proof, the Court, in the
exercise of its sound discretion on the matter, is legally bound to pursue and hereby gives preference to the speedy
disposition of the case."

We do not see any taint of impropriety or grave abuse of discretion in this Order. The RTC, in resolving the motion,
is not required to state all the facts found in the record of the case. Detailed evidentiary matters, as the RTC
decreed, is best reserved for the full-blown trial of the case, not in the preliminary incidents leading up to the trial.

Additionally, no less than the Constitution itself provides that it is the decision that should state clearly and distinctly
the facts and the law on which it is based. In resolving a motion, the court is only required to state clearly and
distinctly the reasons therefor. A contrary system would only prolong the proceedings, which was precisely what
happened to this case. Hence, we uphold the validity of the RTC's order as it correctly stated the reason for its
denial of the petitioners' Urgent Motion for Regular Preliminary Investigation. WHEREFORE, premises considered,
we hereby DENY the petition, and hereby AFFIRM the decision dated January 21, 2008 and the resolution dated
April 17, 2008 of the Court of Appeals in CA-G.R. SP No. 91541. The City Prosecutor of Quezon City is hereby
ORDERED to proceed with the criminal proceedings against the petitioners.

SO ORDERED.

DISSENTING OPINION

LEONEN, J.:

I regret that I cannot bring myself to agree that the warrantless arrest was valid.

To review, the facts as established are as follows:

929
Both petitioners and respondent are residents of Kasiyahan Street, Barangay Holy Spirit, Quezon City. 1

On February 20, 2005, at around 3:00 to 3:15 a.m., petitioners Joey M. Pestilo.s (Pestilos ), Dwight Macapanas
(Macapanas ), Miguel Gaces (Gaces), Jerry Hernandez (Hernandez), and Ronald Mufioz (Mufioz), and respondent
Atty. Moreno Generoso (Atty. Generoso) were waiting for the water supply on Kasiyahan Street. Pestilos and
Macapanas got into an altercation with Atty. Generoso that involved physical violence. Immediately after the
incident, Pestilos and Macapanas went to the barangay hall to seek help from the local barangay officials. 2

At the barangay hall, Pestilos reported the incident and wanted to have it inscribed in the barangay blotter. The
barangay tanod advised them to secure a medical certificate first before Pestilos and Macapanas could register their
complaint in the barangay blotter.  Pestilos and Macapanas requested the barangay tanod to accompany them on
3

their way back to their residences on Kasiyahan Street, "to avoid further trouble." 4

At around 5:30 a.m., Pestilos and Macapanas arrived with the barangay tanod on Kasiyahan Street. Bythen, officers
from Batasan Hills Police Station were present. Atty. Generoso pointed to Pestilos and Macapanas as
perpetratorsof his alleged mauling.  The two began complaining about Atty. Generoso’s attack against them. The
5

police officers, led by SPO2 Dominador Javier (SPO2 Javier), brought Pestilos, Macapanas, and Atty. Generoso to
the police station. The other petitioners, Gaces, Hernandez, and Muñoz, were brought by Pestilos and Macapanas
to act as their witnesses.

Macapanas left the police station for a while to get a medical certificate from the East Avenue Medical Center, as
advised by the barangay tanod earlier.  Meanwhile, at the police station, Atty. Generoso filed charges against all
6

petitioners (Pestilos, Macapanas, Gaces, Hernandez, and Muñoz) for frustrated murder. 7

Macapanas also filed charges against Atty. Generoso for slight physical injuries.  The police officers in the Batasan
8

Hills Police Station rendered reports for both charges. Inaddition to the reports, SPO2 Javier executed an affidavit of
arrestwith respect to petitioners.9

At the Office of the Prosecutor,the prosecutor subjected all the petitioners to inquest, while the complaint against
Atty. Generoso was treated as a case subject topreliminary investigation.  Two days after the incident, the
10

prosecutor filed an information against petitioners for attempted murder. 11

Before arraignment, petitioners filed an urgent motion for regular preliminary investigation. However, the Regional
Trial Court of Quezon City, Branch 96, denied the motion.  They filed a motion for reconsideration, but the motion
12

was denied. 13

On appeal via Rule 65, the Court ofAppeals sustained the order of the Regional Trial Court: WHEREFORE, the
instant petition for certiorari is hereby DISMISSEDfor lack of merit.

SO ORDERED. 14

The Court of Appeals denied petitioners’ motion for reconsideration in the resolution dated April 17, 2008.  They 15

came to this court via a petition for review on certiorari. They argue that they are entitled to preliminary investigation.
Subjecting them to inquest proceedings was irregular because they were not properly arrested. Assuming that their
decision to go to the police station was an "arrest," the arrest was invalid because it was not made in compliance
with the ruleon warrantless arrests.

I vote that the petition be granted. Petitioners are entitled to a preliminary investigation because the warrantless
arrest was not valid.

The right of a person to his or her liberties in the form of protections against unreasonable searches and seizures
enjoys a high degree of protection.  The Constitution only allows for reasonable searches and seizures. As a
16

general rule, courts decide whether there is probable cause to issue a search warrant or warrant of arrest. In People
v. Burgos,  this court stated that:
17

The right of a person to be secure against any unreasonable seizure of his body and any deprivation of his liberty is
a most basic and fundamental one. The statute or rule which allows exceptions to the requirement of warrants of
arrest is strictly construed.Any exception must clearly fall within the situations when securing a warrant would be
absurd or is manifestly unnecessary as provided by the Rule. We cannot liberally construe the rule on arrests
without warrant or extend its application beyond the cases specifically provided by law. To do so would infringe
upon personal liberty and set back a basic right so often violated and so deserving of full protection.  (Emphasis
18

supplied).

The limited circumstances for the conduct of reasonable warrantless arrests are enumerated in Rule 113, Section 5
of the Rules of Court.

930
SEC. 5. Arrest without warrant; when lawful—A peace officer or a private person may, without a warrant, arrest a
person:

(a) When, in his presence, the person to be arrested has committed, is actually committing, or is attempting
to commit an offense;

(b) When an offense has just been committed, and he has probable cause to believe based on personal
knowledge of facts or circumstances that the person to be arrested has committed it; and

(c) When the person to be arrestedis a prisoner who has escaped from a penal establishment or place
where he is serving final judgment or temporarily confined while his case ispending, or has escaped while
being transferred from one confinement to another.

In cases falling under paragraphs (a) and (b) hereof, the person arrested without a warrant shall be forthwith
delivered to the nearest police station or jail, and he shall be proceeded against in accordance with Rule 12, Section
7.

This case does not fall under the first and third exceptions. The question is whether this falls under the special
circumstances of Section 5(b) of Rule 113 of the Rules of Court. The elements of a valid warrantless arrest under
Rule113, Section 5(b) are the following: (1) the offense has just been committed; (2) the arresting officer has
personal knowledge of facts orcircumstances; and (3) these facts and circumstances give riseto probable cause that
the person to be arrested has committed the offense.

The first element requires that there are facts leading to a conclusion that an offense has been committed. Being
based on objectivity, the first element requires the occurrence of facts that, when taken together, constitutes the
commission of an offense.

If we accepted the version of Atty. Generoso, it appears that he was a victim of an attack from petitioners. The facts
that he narrated may, thus, constitute the possible offenses of physical injuries or even attempted or frustrated
homicide or murder. The offense should be evaluated from the facts and circumstances as it appearedto the person
making the warrantless arrest. The element that the offense had "just been committed" was introduced in the 1985
revision of the Rules of Criminal Procedure. This element must be read in relation to the general requirement that a
warrant of arrest must be procured to ensure a more impartial determination of the existence of facts and
circumstances. This element, however, acknowledges the necessities of law enforcement. At times, the police
officer arrives at the scene of the crime after the crime just happened and there are facts and circumstances — such
as the sudden flight of a person or the wielding of a weapon by a person near the incident — that reasonably lead
the police officer to believe that the person is the perpetrator. In such cases, to ensure that the right person can be
put withinthe jurisdiction of a court, the rules allow a valid warrantless arrest.

This necessity is wanting in this case. Petitioners themselves, together with a barangay tanod, voluntarily went to
the police station. They did so after they had gone to the barangay hall to report the incident and had their own
complaints entered into the barangay blotter.

There was no urgency to arrest petitioners. Theywere not planning to flee. They voluntarily presented themselves as
complainants against private respondent. For reasons not clear in the record, they were subjected to a warrantless
arrest and thento inquest. Private respondent, on the other hand, was allowed to be a respondent in a preliminary
investigation. He was not arrested.

Several cases qualified the time element of "just been committed" to range from three (3) hours  to 14 days.  This is
19 20

not the correct approach.

In Re Petition for Habeas Corpus of Laurente C. Ilagan  and Umil v. Ramos,  cited by the majority, were decided
21 22

under the dark days of Martial Law. The dissents in those cases were clarion calls for the protection of our liberties.

Former Chief Justice Claudio Teehankee, in his dissent in In Re Ilagan, was of the opinion that "just been
committed" "connotes immediacy in point of time."  Former Associate Justice Florenz Regalado  emphasized the
23 24

requirement of immediacy:

The brevity in the interval of time between the commission of the crime and the arrest, as now required by Section
5(b), must have been dictated by the consideration, among others, that by reason of such recency of the criminal
occurrence, the probability of the arresting officer acquiring personal and/or reliable knowledge of such fact and the
identity of the offender is necessarily enhanced, if not assured. The longer the interval, the more attenuated are the
chances of his obtaining such verifiable knowledge. 25

In the same case, Associate Justice Florentino Feliciano illustrated how a hot pursuit warrantless arrest should be
made:

931
Turning to Section 5 (b), two (2) elements must coincide before a warrantless arrest may be sustained under this
subsection: 1) the offense must have "just been committed" when the arresting officer arrived in the scene; and
2)the officer must have "personal knowledge" of facts indicating that the person to be arrested has committed the
offense. In somewhat different terms, the first requirement imports that the effects or corpus of the offense which
has just been committed are still visible: e.g. a person sprawled on the ground, dead of a gunshot wound; or a
person staggering around bleeding profusely from stab wounds.The arresting officer may not have seen the actual
shooting or stabbing of the victim, and therefore the offense can not be said to have been committed "in [his]
presence." The requirement of "personal knowledge" on the part of the arresting officer is a requirement that such
knowledge must have been obtained directly from sense perception by the arresting officer.That requirement would
exclude information conveyed by another person, no matter what his reputation for truth and reliability might be.
Thus, where the arresting officer comes upon a person dead on the streetand sees a person running awaywith a
knife from where the victim is sprawled on the ground, he has personal knowledge of facts which rendered it highly
probable that the person fleeing was the doer of the criminal deed. The arresting officer must, in other words,
perceive through his own senses some act which directly connects the person to be arrested with the visible effects
or corpus of a crime which has "just been committed."  (Emphasis supplied)
26

The second element under Rule 113, Section 5(b) is that the arresting officer has personal knowledge of facts and
circumstances. Personal knowledge is "derived from the [person’s] own perception." 27

On the other hand, information not of personal knowledge is hearsay. Hearsay is "evidence not of what the witness
knows himself but of what he has heard from others." 28

The arresting officers must obtain personal knowledge of the facts and circumstances that lead to the conclusion
that an offense has just been committed. They must also perceivefacts and circumstances that would substantiate
the probable liability of the person. The accused is usually identified when he or she is seen fleeing the scene
because the act of fleeing suggests the attempt to evade authority. A person in possession of a weapon could also
be perceived as the one liable for an offense.

There must be a reasonable amount offacts short of seeing the entire offense being committed. A collection offacts,
on the other hand, is a set of circumstances. If the arresting officer saw facts and circumstances indicating that an
offense has just been committed and the person is probably liable for that offense, a warrantless arrest is justified
under Rule 113, Section 5(b). If the arresting officer saw the offense being committed, then the warrantless arrest
will be justified under Rule 113, Section 5(a), not under subsection (b).

Facts or circumstances relating tothe nature of the offense cannot substitute for personal knowledge of facts or
circumstances relating to the liability of the person who probably committed the offense. One pertains to the object
and the other the method of perception. SPO2 Javier had personal knowledgeof the injuries of private respondent.
This is only personal knowledge with respect to the offense, not yet as to the identity of the perpetrators.

On the other hand, the information obtained by the police officers when private respondent pointed to petitioners as
the perpetrators of the crime was hearsay. Private respondent’s act of pointing to petitioners communicated that
petitioners committed the mauling. It becomes hearsay on the part of the police officers who did not see petitioners
mauling private respondent. The only personal knowledge obtained by the police officers was that private
respondent pointed to petitioners.

According to petitioners, they returned to the crime scene and saw the police officers. They also informed the police
officers that private respondent attacked them. That is another hearsay received by the police officers at the crime
scene.

The police officers perceived limited facts while investigating at the crime scene. These limited facts do not provide
sufficient bases for the liability of anyone at the scene. No one was reported holding a weapon allegedly used
against private respondent. None of the petitioners fled at the sight of the police officers.

There were only facts relating to the offense, such as the sight of an injured private respondent. This fact cannot
substitute for the personal knowledge of facts and circumstances relating to the liability of petitioners.

Parenthetically, the police officers also had hearsay knowledge that private respondent was the perpetrator against
petitioners. For reasons not clear in the records, however, the police officers preferred not to arrest him.

The third element requires that these facts and circumstances must lead to the conclusion that there is probable
cause to believe that the person to be arrested committed the offense. Rule 113, Section 5(b) requires that
"probable cause" or "actual belief or reasonable grounds of suspicion" must be supported by personal knowledge of
facts or circumstances that, when taken together, builds the suspicion thatan individual committed the offense.

The plurality in the phrasing suggests that there should be more than one fact or circumstance. In People v.
Cogaed,  we ruled that for there to be a "genuine reason" to execute a warrantless arrest or search, there should be
29

more than one suspicious circumstance to infer that there was criminal activity. 30

932
In most cases that found the validity of the warrantless arrest, there was the presence of more than one
circumstance that formed part of the personal knowledge of the police officers.

In People v. Jayson,  police officers were summoned immediately to the crime scene. They found the victim, and
31

saw the accused fleeing. These are two facts that show that the offense was committed and that the person
arrested was probably responsible because he attempted to escape.

In People v. Tonog,  there was a murder. Police officers at the crime scene saw the following: the body of the victim
32

and a motorcab that was driven by Tonog that day. Tonog voluntarily went to the police station, and one of the
police officers noticed that he had blood splatters on his jeans. All three facts and circumstances were observed by
the police officers during the arrest, thereby building the probable cause that Tonog committed the murder.  On the
33

other hand, this court ruled that there are instances when there is no personal knowledge of the police officers;
hence, there is no valid warrantless arrest.

In People v. Burgos,  a source informed the police officers that Ruben Burgos was engaged in subversive activities.
34

This court held that the report was not enough to enact a warrantless arrest under Rule 113, Section 5(b), especially
since there were no facts personally known to the police officers that a crime was committed.

In Posadas v. Ombudsman,  the National Bureau of Investigation officers arrested two students identified
35

bywitnesses as the perpetrators of a killing during a fraternity rumble. The arrest was made without a warrant, and
this court declared the warrantless arrest invalid.

Rule 113, Section 5(b) did not apply in People v. Briones  where the accused was arrested after one eyewitness
36

had identified him as the murderer. This court declared that the warrantless arrest was invalid "because the police
officer who effected the arrest indubitably had no personal knowledge of facts indicating that the person to be
arrested has committed the crime. It is [the] eyewitness . . . who had such personal knowledge." 37

Jurisprudence often repeats the doctrine summarized in Umil v. Ramos: 38

It has been ruled that "personal knowledge of facts", in arrests without warrant must be based upon probable cause,
which means an actual belief or reasonable ground of suspicion.

The grounds of suspicion are reasonable when, in the absence of actual belief of the arresting officers,the suspicion
that the person to be arrested is probably guilty of committing the offense, is based on actual facts, i.e., supported
by circumstances sufficiently strong in themselves to create the probable cause of guilt of the person to be arrested.
A reasonable suspicion therefore must be founded on probable cause, coupled with good faith on the part of the
peace officers making the arrest.  (Citations omitted)
39

The confusion with this treatment is that it qualifies personal knowledge with probable cause, not the other way
around. The rule states that "probable cause . . . [is] based on personal knowledge of facts and circumstances."  It
40

does not state personal knowledge of facts based on probable cause or reasonable suspicion.The import of the text
is that reasonable suspicion and probable cause is built by personal knowledge of facts and circumstances.
Personal knowledge is the method of perceiving facts. Probable cause is the conclusion of all the facts so
perceived. Flight of the accused is often a sign that there is probable cause that he or she committed the offense.
When he or she attempts to escape from authorities, the authorities must act immediately because not doing so
might compromise the investigation.

If there is no personal knowledge offacts and circumstances on the part of the police officers, a warrantless arrest
under Rule 113, Section 5(b) will be unreasonable because there is nothing to base probable cause on that the
accused committed the offense.

Here, there was no flight of the accused. On the contrary, petitioners returned to the crime scene  because they felt
41

that they were the victims, not the perpetrators.

The police officers were still investigating the matter when petitioners were brought to the police station. The
circumstances of the situation did not call for an exception to the rulerequiring a warrant of arrest. The statement
made by private respondent on the identity of his perpetrators, as communicated to the police, could have been
reduced to an affidavit used to support an application for a warrant of arrest. The statements made by petitioners
were other pieces of evidence to be considered for the issuance of a warrant of arrest.

The police officers were not threatened by the immediate flight of the alleged perpetrators who believed that they
also have a right to vindicate since they were cooperating with the police. All facts point to the reasonability of
obtaining a warrant ofarrest. There was no exigency to cause the warrantless arrest of petitioners.

It bears stressing that petitioners went with the police officers in their capacity as complainants against private
respondent. They did not know that they were already being arrested. Totheir mind, the police officers just wanted to

933
continue the investigation at the police station. This is shown by the police report dated February 20,2005 regarding
the complaint of petitioner Macapanas against private respondent Atty. Generoso. In this report, petitioner
Macapanas was the complainant, and private respondent Atty. Generoso was the accused. To wit:

It is worthy to mentioned [sic] that complainant voluntarily [sic] appeared to this Station wherein he was identified by
complainant at [sic] the one who punched him(,) which also causing [sic] him to be bitten (by) a dog thereat. 42

The existence of two police reportsfor two separate crimes committed during one incident — one with petitioners as
accused  and the other with private respondent as accused  — proves that at the time that petitioners were taken
43 44

into custody, the police officers were still uncertain about what happened. This negates the presenceof probable
cause, required by Rule 113, Section 5(b).

Probable cause must exist at the time of the warrantless arrest. Otherwise, any form of uncertainty should be
resolved through the exercise of judicial caution.

When the police officers becamemore convinced that private respondent’s version was more believable than
petitioners’, the police officers should have applied for a warrant of arrest. SPO2 Javier expedited procedure when
he executed an affidavit of arrest. He made it appear that there was a valid warrantless arrest, instead of applying
for a warrant of arrest. This is unacceptable in our Constitution.

Strict standards should be imposed on law enforcement. It is said that "the prosecution can bring the full resources
of the state to bear on winning. Imposing a heavy burden of proof on the prosecution diminishes this advantage." 45

Relaxing our standards in taking individuals under custody enhances the advantage of the prosecution, tothe
detriment of the individual. Compared to the state, the accused does not have the resources to question the
legitimacy of an arrest. Some of them do not even know that they are already being arrested. Many arrested
individuals may not even be able to afford lawyers until the public attorney steps in during custodial investigation or,
worse, during arraignment. By then, the accused would have already been deprived of his or her liberty.

The circumstances of this case requirethe vigilance of this court in protecting the neglected rights of petitioners.
Petitioners were just in their 20s when the altercation occurred. Pestilos was a student, Macapanas and Muñoz
were unemployed, Gaces was a driver, and Fernandez was a printing press operator. Petitioners havebeen certified
as indigents.  They are of limited means. At the time that they were trying to vindicate their rights at the police
46

station, they did not have counsel.

On the other hand, it is easier for the police officers to be persuaded by private respondent, a member of the bar
who is fully aware of his constitutional rights. The police officers became more inclined to believe his story because
he is a lawyer, while petitioners were all non-lawyers. Petitioners were not expected to know that a detention was an
arrest. The affidavit of arrest stated that SPO2 Javier "informed all the suspects of the charges imputed against
themby complainant Atty. Generoso."  To an ordinary citizen, they were just complaints. An invitation is really just
47

an invitation for petitioners. They did not go to the police station because they were being arrested.

With the absence of a valid warrantless arrest, petitioners are entitled to preliminary investigation. Preliminary
investigation is "an inquiry or a proceeding the purpose of which is to determine whether there is sufficient ground to
engender a well-founded belief that a crime has been committed and the respondent is probably guilty thereof, and
should be held for trial."  The right to preliminary investigation is statutory in character.  Being mandated by statute,
48 49

a preliminary investigation becomes part of the constitutional due process rights accorded to the accused. 50

Under Rule 112, a preliminary investigation is required if an offense has a penalty of at least four (4) years, two (2)
months, and one (1) day. However, under Section 6 of the same rules, a preliminary investigation is no longer
necessary if the person accused was arrested lawfully without a warrant. If there was a valid warrantless arrest
under Rule 113, Section 5, inquest proceedings are required.

Based on the Manual for Prosecutors, inquests are conducted by a public prosecutor assigned as an Inquest
Officer. An inquest is conducted only at the police stations or headquarters of the Philippine National Police, unless
otherwise directed.51

Here, petitioners alleged that theywere brought from Batasan Hills Police Station to the Office of the Prosecutor. At
the Office of the Prosecutor, it was decided that petitioners would be subjected to inquest, while respondent would
undergo preliminary investigation. This irregularly conducted inquest aggravates the fact that petitioners were
subjected to an inquest despite lack of a valid warrantless arrest.

Considering that petitioners were not arrested in accordance with the strict guidelines of our Constitution and the
Rules of Court, petitioners' statutory right to preliminary investigation is mandatory.

ACCORDINGLY, the petition should be GRANTED.

934
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 200894               November 10, 2014

LUZVIMINDA APRAN CANLAS, Petitioner, 

vs.
REPUBLIC OF THE PHILIPPINES, Respondent.

DECISION

LEONEN, J.:

This resolves the petition for review on certiorari under Rule 45 of the Rules of Court, assailing the decision  dated
1

November 10, 2011 and resolution  dated February 23, 2012 of the Court of Appeals. The Court of Appeals
2

reversed the trial court's decision dated January 30, 2008 in LRC Case No. N-06-003  and dismissed petitioner's
3

application for registration of title:

We restate the pertinent facts in this case.

On August 22, 2006, petitioner Luzviminda A. Canlas (Canlas) applied for the original registration of title, under
Presidential Decree No. 1529,  of the 9,751-square-meter parcel of land located in Barrio Macamot, Municipality of
4

Binangonan, Province of Rizal, and technically described as Cadastral Lot No. 11566, Psu-04-006561. 5

There was no opposition to Canlas’ application. Respondent Republic of the Philippines (Republic) did not submit its
comment or opposition despite the opportunity given by the trial court.  The case was then submitted for decision.
6 7

The Regional Trial Court granted Canlas’ application  and held that:
8

We GRANT the application. We ORDER the Register of Deeds of Rizal (Binangonan) to cause the registration of
the property, described in Cadastral Lot No. 11566 of the subdivision plan, Psu-04-006561, in the name of the
applicant Luzviminda A. Canlas with the reservation that it shall be subject of easement to public use. Once this
judgment becomes final and executory, we shall issue a decree of registration and then order the issuance of an
original certificate of title in her name.  (Emphasis and underscoring in the original)
9

According to the trial court, Canlas complied with the procedural requirements and substantiated her
application. She sufficiently proved that, through her predecessors-in-interest, she has been in "open, continuous,
10

exclusive and notorious possession of an alienable and disposable parcel of land of the public domain under a bona
fide claim of ownership for more than 30 years." 11

The Republic of the Philippines, however, filed a notice of appeal on February 29, 2008.  Acting on the Republic’s
12

appeal, the Court of Appeals reversed and set aside the decision of the trial court. The Court of Appeals held that
Canlas was not able to prove open, continuous, exclusive, and notorious possession and occupation of the
property.  According to the Court of Appeals, Canlas failed to discharge the burden of proof placed on applicants for
13

land registration. 14

The Court of Appeals also found that Canlas admitted during cross examination that she has not resided on the
property since she got married in 1966 and left for San Francisco Del Monte, Quezon City.  During the same cross-
15

examination, Canlas contradicted her allegations in the application as to knowledge of any mortgage, encumbrance,
or interest of other persons in the property in question.  Moreover, she did not show "any acts of occupation,
16

development, cultivation or maintenance over the property." 17

The dispositive portion of the Court of Appeals’ decision reads:

WHEREFORE, the appeal is GRANTED. The Decision dated January 30, 2008 in LRC Case No. N-06-003 is
REVERSED and SET ASIDE. Accordingly, the Application of Registration of Title of Luzviminda A. Canlas is
DISMISSED.

SO ORDERED.  (Emphasis in the original)

18

The Court of Appeals denied on February 23, 2012 Canlas’ December 7, 2011 motion for reconsideration. 19

935
Canlas comes before this court, arguing that she has duly overcome the burden of proof by showing open,
continuous, exclusive, adverse, and notorious possession and occupation of the property. This is allegedly shown in
the following acts of Canlas and her predecessors-in-interest since the 1900’s: declaring the property in their
names, paying taxes due on the property, having the property surveyed, and allowing the excavation in the property
for the retrieval and hauling of "pulang lupa" for the making of clay pots. 20

Canlas argued further that "residence" is not synonymous with "possession and occupation" as implied by the Court
of Appeals.  Presidential Decree No. 1529 does not require the applicant to reside on the land being
21

registered. The law also does not require that a relative of the applicant be present to oversee the property.
22 23

On March 4, 2013, this court resolved, among others, to require the Republic to submit its comment, without
necessarily giving due course, within 10 days from notice. 24

In its comment, the Republic argued that "[Canlas] failed to present sufficient and convincing evidence to support
her application for registration of the subject parcel of land."  Canlas must offer more than a bare assertion of
25

possession and occupation. 26

In addition, the property had been sporadically and irregularly declared for tax purposes under the name of Honorio
Apran from 1949 until 1999.  Realty taxes on the property were paid only in 2003.  The Republic observed that the
27 28

tax declarations presented by Canlas had been made a few months before the application for registration was made
and served only to establish a weak claim for a registrable title for her. 29

On October 23, 2013, this court resolved to require Canlas to file her reply.  In her reply  dated December 13, 2013,
30 31

she claimed that she "suddenly realized that she has a significant document that she believes would . . . change the
complexion of the instant case."  This document is the Land Registration Authority’s report and motion dated May
32

12, 2009 and was allegedly prepared after the Land Registration Authority’s receipt of the trial court decision dated
January 30, 2008. 33

The Land Registration Authority, through its Director for Registration,  stated that the land described as Psu-04-
34

006561 located in Barrio Macamot,  Municipality of Bingangonan, Province of Rizal, is found entirely within the land
35

denominated as Lot 16 of the subdivision plan Psd-240150 covered by Transfer Certificate of Title (TCT) No. M-
00861 and is under the name of the "Heirs of Francisco Guido and Hermogenes Guido." 36

TCT No. M-00861 was derived from a mother title, TCT No. 23377,  which was the subject of Republic v. Court of
37

Appeals and Guido, et al.  The case stemmed from a complaint, filed by the Republic of the Philippines, for
38

declaration of nullity of Decree No. 6145, the owner's duplicate copy of TCT No. 23377, and all titles derived from
the decree.  The Republic also prayed that the land covered by the decree be declared in its name, except those
39

parcels of land validly acquired by third persons. According to the Republic, Decree No. 6145 was spurious and
false and, in turn, the reconstituted TCT No. 23377, aswell as the derivative titles, was invalid.  Both the trial court
40

and the Court of Appeals found that Decree No. 6145 and TCT No. 23377 were genuine and authentic. 41

This court in Republicupheld the authenticity and validity of Decree No. 6145 and TCT No. 23377. However, in
affirming respondent heirs’ title, this court recognized the waiver of certain parts of the land covered by TCT No.
23377 in favor of bona fide occupants. The court held that: Moreover, conscious of the resulting "large scale
dispossession and social displacement of several hundreds of bona fide occupants and their families" which the
Solicitor General pointed out, the private respondent agreed unanimously to accept the alternative prayer of the
petitioner in their joint memorandum (pp. 624–636, Rollo). This agreement by private respondents takes the form of
a waiver. Though a valid and clear right over the property exists in their favors, they seemingly have voluntarily
abandoned the same in favor of: 1) those who possessed and actually occupied specific portions and obtained
torrens certificates of titles, and 2) those who possessed certain specific portions for such lengths of time as to
amount to full ownership. The waiver, not being contrary to law, morals, good customs and good policy, isvalid and
binding on the private respondents.

However, with respect to the second set of possessors, whose alleged bona fide occupancy of specific portions of
the property is not evidenced by Torrens Titles, it is imperative that their claims/occupancy be duly proven in an
appropriate proceeding.

ACCORDINGLY, the decision of the Court of Appeals in CA-G.R. No. 12933 is AFFIRMED subject to the herein
declared superior rights of bona fide occupants with registered titles within the area covered by the questioned
decree and bona fide occupants therein with length of possession which had ripened to ownership, the latter to be
determined in an appropriate proceeding.

SO ORDERED.  (Emphasis supplied)

42

Citing the case above, the Land Registration Authority prayed the following before the trial court in its report and
motion:

936
WHEREFORE,it is respectfully prayed of this Honorable Court to issue an order (1) directing the Register of Deeds
of Rizal, Binangonan, Rizal to annotate on TCT No. M-2106the following memorandum:

By virtue of the decision of the Court dated January 30, 2008 in Land Reg. Case No. 06-003, LRC Record No. N-
78156, LUZVIMINDA A. CANLAS, applicant, Psu-04-006561, has been adjudicated in favor of the applicant and
pursuant to the decision of the Supreme Court in G.R. No. 84966, promulgated on November 21, 1991, entitled
Republic of the Philippines vs. Court of Appeals and Antonina Guido, et al., (204 SCRA160), afore-said [sic] lot is
deemed excluded from this certificate of title.

and (2) Authorizing this Authority to issue the corresponding decree of registration for the land embraced in plan
Psu-04-006561, in accordance with the adjudication of the Honorable Court in its decision January 30,
2008. (Emphasis and italics in the original)
43

According to Canlas, she falls under the second set of possessors described in Republic — bona fide occupants
whose possession of specific portions for such lengths of time amounted to full ownership but whose occupancy
must be duly provedin appropriate proceedings. 44

In sum, Canlas changed the theory of her case from an application for original registration of land, to a declaration
of a right to an indefeasible registrable title of the land described in plan Psu-04-006561 and covered by TCT No.
23377.

Despite the change in Canlas’ theory, the main issues to be resolved are: 1) whether petitioner Luzviminda A.
Canlas has proven open, continuous, exclusive, and notorious possession and occupation of the land described in
plan Psu-04-006561; and 2) whether Psu-04-006561 is covered by TCT No. 23377 wherein she is one of the bona
fide occupants whose possession and occupation ripened into an indefeasible right to title as pronounced in
Republic.

After considering the parties’ arguments and the records of this case, this court resolves to grant the petition. The
assailed decision and resolution of the Court of Appeals are reversed and set aside. The case is remanded to the
trial court for further proceedings with regard to the determination of whether Psu-04-006561 is covered by TCT No.
23377.

At the outset, the issue on sufficiency of evidence is factual in nature and is generally outside the province of this
court’s review of petitions under Rule 45 of the Rules of Court.  However, exceptions are allowed when the findings
45

of the trial court and Court of Appeals are conflicting with each other  or when the assailed judgment isbased on a
46

misapprehension of facts,  such as the case at bar.

47

Section 14 of Presidential Decree No. 1529  or the Property Registration Decree governs the applications for
48

registration of title to land:

Section 14. Who may apply. The following persons may file in the proper Court of First Instance an application for
registration of title to land, whether personally or through their duly authorized representatives:

(1) Those who by themselves or through their predecessors-ininterest have been in open, continuous,
exclusive and notorious possession and occupation of alienable and disposable lands of the public domain
under a bona fide claim of ownership since June 12, 1945, or earlier. (2) Those who have acquired
ownership of private lands by prescription under the provision of existing laws.

(3) Those who have acquired ownership of private lands or abandoned river beds by right of accession or
accretion under the existing laws.

(4) Those who have acquired ownership of land in any other manner provided for by law. Where the land is
owned in common, all the co-owners shall file the application jointly.

Section 14(1) of Presidential Decree No. 1529 proceeds from Section 48(b) of Commonwealth Act No. 141 or The
Public Land Act, as amended, which provides for the grant of the substantive right of title to land to qualified
persons:

Sec. 48. The following-described citizens of the Philippines, occupying lands of the public domain or claiming to own
any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court
of First Instance of the province where the land is located for confirmation of their claims and the issuance of a
certificate of title therefor under the Land Registration Act, to wit:

....

937
(b) Those who by themselves or through their predecessors-ininterest have been in open, continuous, exclusive,
and notorious possession and, occupation of agricultural lands of the public domain, under a bona fide claim of
acquisition or ownership, since June 12, 1945, immediately preceding the filing of the application for confirmation of
title, except when prevented by war or force majeure. Those shall be conclusively presumed to have performed all
the conditions essential to a government grant and shall be entitled to a certificate of title under the provisions of this
chapter. (As amended by P.D. 1073.)

In land registration cases, the applicants’ legal basis is important in determining the required number of years or the
reference point for possession or prescription. This court has delineated the differences in the modes of acquiring
imperfect titles under Section 14 of Presidential Decree No. 1529. Heirs of Mario Malabanan v. Republic extensively
49

discussed the distinction between Section 14(1) and Section 14(2) of Presidential Decree No. 1529. Thus, this court
laid down rules to guide the public:

(1) In connection with Section 14(1) of the Property Registration Decree, Section 48(b) of the Public Land
Act recognizes and confirms that "those who by themselves or through their predecessors in interest have
been in open, continuous, exclusive, and notorious possession and occupation of alienable and disposable
lands of the public domain, under a bona fide claim of acquisition of ownership, since June 12, 1945" have
acquired ownership of, and registrable title to, such lands based on the length and quality of their
possession.

(a) Since Section 48(b) merely requires possession since 12 June 1945 and does not require that
the lands should have been alienable and disposable during the entire period of possession, the
possessor is entitled to secure judicial confirmation of his title thereto as soon as it is declared
alienable and disposable, subject to the timeframe imposed by Section 47 of the Public Land Act.

(b) The right to register granted under Section 48(b) of the Public Land Act is further confirmed by
Section 14(1) of the Property Registration Decree.

(2) In complying with Section 14(2) of the Property Registration Decree, consider that under the Civil Code,
prescription is recognized as a mode of acquiring ownership of patrimonial property. However, public
domain lands become only patrimonial property not only with a declaration that these are alienable or
disposable. There must also be an express government manifestation that the property isalready patrimonial
or no longer retained for public service or the development of national wealth, under Article 422 of the Civil
Code. And only when the property has become patrimonial can the prescriptive period for the acquisition of
property of the public dominion begin to run.

(a) Patrimonial property is private property of the government. The person [who] acquires ownership
of patrimonial property by prescription under the Civil Code is entitled to secure registration thereof
under Section 14(2) of the Property Registration Decree.

(b) There are two kinds of prescription by which patrimonial property may be acquired, one ordinary
and [the] other extraordinary. Under ordinary acquisitive prescription, a person acquires ownership
of a patrimonial property through possession for at least ten (10) years, in good faith and with just
title. Under extraordinary acquisitive prescription, a person’s uninterrupted adverse possession of
patrimonial property for at least thirty (30) years, regardless of good faith or just title, ripens into
ownership. 50

In Republic v. Gielczyk,  this court summarized and affirmed the differences between Section 14(1) and Section
51

14(2) of Presidential Decree No. 1529 as discussed in Heirs of Malabanan:

In Heirs of Mario Malabanan v. Republic, the Court further clarified the difference between Section 14(1) and
Section 14(2) of P.D. No. 1529. The former refers to registration of title on the basis of possession, while the latter
entitles the applicant to the registration of his property on the basis of prescription. Registration under the first mode
is extended under the aegis of the P.D. No. 1529 and the Public Land Act (PLA) while under the second mode is
made available both by P.D. No. 1529 and the Civil Code. Moreover, under Section 48(b) of the PLA, as amended
by Republic Act No. 1472, the 30-year period is in relation to possession without regard to the Civil Code, while
under Section 14(2) of P.D. No. 1529, the 30-year period involves extraordinary prescription under the Civil Code,
particularly Article 1113 in relation to Article 1137.
52

In this case, neither the trial court nor the Court of Appeals clarified under which paragraph of Section 14 of
Presidential Decree No. 1529 the land was being registered. However, petitioner’s allegations in the application filed
on August 22, 2006 established Section 14(1) of Presidential Decree No. 1529 as her legal basis. 53

An applicant for land registration or judicial confirmation of incomplete or imperfect title under Section 14(1) of
Presidential Decree No. 1529 must prove the following requisites:"(1) that the subject land forms part of the
disposable and alienable lands of the public domain, and (2) that [the applicant has] been in open, continuous,
exclusive and notorious possession and occupation of the same under a bona fide claim of ownership since June
938
12, 1945, or earlier."  Concomitantly, the burden to prove these requisites rests on the applicant.  With regard to the
54 55

first requisite, it is undisputed that the land subject of registration is part of the alienable and disposable lands of the
public domain. The trial court found the Department of Environment and Natural Resources’ report sufficient to
prove the existence of the first requisite.  The Court of Appeals’ decision was silent on this matter. Respondent
56

failed to make objections on the issue as well. Thus, we do not see any reason to deviate from the findings of the
lower courts.

As to the second requisite, petitioner claims that she "by herself, and through [her] predecessors-in-interest, had
since June 12, 1945 or earlier[,] been in open[,] continuous, exclusive and notorious possession of the . . . parcel of
land."  However, the Court of Appeals found that petitioner failed to prove with sufficient evidence her open,
57

continuous, exclusive, and notorious possession and occupation of the land. Likewise, respondent argued that
petitioner’s allegations ofpossession and occupation were mere conclusions and unsubstantiated.

Petitioner has sufficiently overcome the burden of proof required in a judicial confirmation of incomplete or imperfect
title to land.

Contrary to respondent’s arguments, the trial court specifically found that petitioner’s possession and occupation,
through her predecessors-ininterest, started earlier than June12, 1945. The trial court found:

Applicant’s evidence shows that she complied with the notice requirements (Exhibits "A" to ["]M,"inclusive of
submarkings) and she was able to substantiate the allegations in her application (Exhibits "N" to "II," inclusive of
submarkings). In a nutshell, applicant acquired the property by inheritance from Honorio and Gregorio S. Apran and
she and her predecessors-in-interest have been in its continuous possession since 1900(Exhibits "Q" to "HH,"
inclusive of submarkings). . . . The testimonies of the applicant and her witnesses proved that the applicant through
her predecessors-in-interest have been in open, continuous, exclusive and notorious possession of an alienable and
disposable parcel of land of the public domain under a bona fide claim of ownership for more than 30 years.After
considering the report and the evidence, we find that the applicant has sufficient title proper for registration, and we
render judgment confirming it.  (Emphasis and italics supplied)
58

Possession involves committing acts of dominion over a parcel of land in such a way that an owner would perform
over his or her property.  In explaining the nature of the terms "possession and occupation" provided in law, this
59

court has held that:

The law speaks of possession and occupation. Since these words are separated by the conjunction and, the clear
intention of the law is not to make one synonymous with the other. Possession is broader than occupation because
it includes constructive possession. When, therefore, the law adds the word occupation, it seeks to delimit the all
encompassing effect of constructive possession. Taken together with the words open, continuous, exclusive and
notorious, the word occupation serves to highlight the fact that for an applicant to qualify, his possession must not
be a mere fiction. Actual possession ofa land consists in the manifestation of acts of dominion over it of such a
nature as a party would naturally exercise over his own property.  (Italics in the original)
60

Moreover, to qualify as open, continuous, exclusive, and notorious possession and occupation, the possession must
be of the following character:

Possession is open when it is patent, visible, apparent, notorious and not clandestine. It is continuous when
uninterrupted, unbroken and not intermittent or occasional; exclusive when the adverse possessor can show
exclusive dominion over the land and an appropriation of it to his own use and benefit; and notorious when it is so
conspicuous that it is generally known and talked of by the public or the people in the neighborhood. 61

In reversing the trial court’s decision, the Court of Appeals found that petitioner "failed to address the issue of
whether she had . . . an open, continuous, exclusive and notorious possession and occupation of the subject
property. . . . [Petitioner] could have advanced proofs or arguments to the contrary."  Thus, she "had not shown ‘any
62

acts of occupation, development, cultivation or maintenance over the property.’" 63

This court puts more premium on the findings of the trial court that petitioner has sufficiently shown acts of dominion
before 1945 and throughout the years. It is settled that the trial court’s appreciation of the evidence presented is
entitled to great respect since it is in a better position to evaluate the testimonies of witnesses. 64

Petitioner has sufficiently shown that she, through her predecessors in-interest, have been in open, continuous,
exclusive, and notorious possession and occupation of the 9,751-square-meter parcel of land located in Barrio
Macamot, Municipality of Binangonan, Province of Rizal, since June 12, 1945 or earlier.  Documentary evidence to
65

prove possession was presented and substantiated by the witnesses’ testimonies.  There were sufficient pieces of
66

evidence to show that petitioner and her predecessors-ininterest exercised specific acts of ownership such as:
farming activities; allowing the excavation of land for "pulang lupa" to make clay pots; paying realty taxes; declaring
the property for tax purposes; employing a caretaker; causing corrections in entries in public documents with regard
to the land; and demanding unlawful occupants to vacate the premises. 67

939
The fact of actual possession and occupation can also be gleaned from petitioner’s judicial affidavit:

Q : When you inherited the property, who was in possession and cultivation thereof?

A : My father? [sic]

Q : When did he possess the property?

A : When he was born thereat and lived there, and when he grew up he cultivated it.

Q : When was he born?

A : May 16, 1918, Sir.

Q : Before your father, who?

A : My grandfather, Honorio Apran.

Q : Since when?

A : Approximately 1900’s, Sir.

Q : What was done by your grandfather on the property?

A : He tilled the land by growing palay on rainy days, and kamatis, and sometimes watermelon on summer
days.

Q : What happened to those farming activities when your grandfather Honorio died?

A : My father continued the farming activities and so did I until I transferred to Quezon City sometime year
2000.

Q : How young were you then in the 1900’s?

A : I was not yet even born, Sir.

Q : When were you born?

A : February 26, 1944, Sir.

....

Q : After your father, who possessed and cultivated the property?

A : I, Sir. 68

In its assailed decision, the Court of Appeals found that petitioner was not in possession of the propertyto the
exclusion of others.  It relied on petitioner’s statements during cross-examination before the trial court on the
69

following matters: that a conditional sale was made between petitioner and Maura F. Reyes and Lorenza F. Reyes
in 1976  and that the property had other occupants.  The Court of Appeals alsostated that it "received an Appeal in
70 71

Intervention filed by the heirs of Lorenza F. Reyes and the [h]eirs of Maura F. Reyes." 72

The totality of petitioner’s evidence trumps any doubt as to the exclusivity and continuity of petitioner’s possession
with regard to other occupants and an alleged failed conditional sale executed in 1976 between petitioner and third
parties, Lorenza F. Reyes and Maura F. Reyes. We observe that no oppositors appeared during the initial hearing
on petitioner’s application.  Aside from petitioner’s statement during cross-examination that the sale did not push
73

through due to non-payment of the full purchase price, the Court of Appeals did not refer to other evidence to
establish the conditional sale.

In addition, the Court of Appeals did not allow the intervention of the heirs of Lorenza F. Reyes and Maura F.
Reyes.  No third parties intervened in the present case.
74 75

Respondent’s claim that the tax declarations presented by petitioner were sporadic and irregular deserves scant
consideration. The Court of Appeals observed that:

940
The OSG likewise claims that [petitioner] failed to show her ownership and possession of the property in question,
since the subject property was declared for tax purposes only in 1949, 1966, 1974, 1980, 1985, 1994–1999 under
the name of Honorio Apan and in 2004 under the name of [petitioner]. . . .

We do not see the point of the OSG in attacking the tax declarations. We do not understand why it harps on the fact
that the property was declared for taxation purposes only in 1948. We do not see any irregularity here. It would have
helped Usa lot had the OSG been more specific and did not leave Us ina guessing and explorative game. To Our
mind, what matters here is that the tax declarations from 1948 up to the latest are in the correct series — one tax
declaration cancels the immediately previously issued tax declaration which in effect also cancels all the previously
issued tax declarations.

Further, We find it misleading for OSG to claim that the realty taxes were only paid a few months before the filing of
the application. Per records of this case, the recent payment was on October 22, 2003 while the application for
registration was filed on August 22, 2006 or almost three years after.  (Italics supplied)
76

It is settled that tax declarationsare not conclusive evidence of ownership.  Other evidence may be appreciated to
77

determine actual possession and occupation. Documentary evidence, such as tax declarations, when coupled with
positive and clear testimonies of the applicant and his or her witnesses,may be weighed in favor of the applicant. 78

The fact that a parcel of land is not declared for tax purposes regularly, or that realty taxes are not paid on a regular
basis, does not automaticallycontradict the claim of possession. Tax declarations serve as additional indicia of
ownership. It is not conclusive as to the fact of possession, occupation, or ownership.

Likewise, to solely rely on tax declarations and payment of realty taxes would mean that petitioner’s possession of
the land should be reckoned from 1949 or the year the earliest tax declaration was made. Such interpretation is
untenable and goes beyond the text of Section 14(1) of Presidential Decree No. 1529. Moreover, as shown in the
records, petitioner, through her predecessors-in-interest, has been in possession of the land since the early 1900s.

We remand the issue of the inclusion of plan Psu-04-006561 in TCT No. 23377, as allegedly certified by the Land
Registration Authority, to the trial court of origin.

Generally, the remand of a case will not be permitted if "in the interest of justice, the Supreme Court itself can
resolve the dispute based on the records before it."  Thus, remand may not be allowed in the following instances:
79

"(a) where the ends of justice would not be subserved by a remand; or (b) where public interest demands an early
disposition of the case; or (c) where the trial court had already received all the evidence presented by both parties,
and the Supreme Court is in a position, based upon said evidence, to decidethe case on its merits."  None of these
80

are present in this case.

The trial court is in the best position to ascertain the validity and authenticity of the alleged Land Registration
Authority report and motion, as well as the truth and probative weight of the statements contained in the document.
A reading of Republic v. Court of Appeals and Guido, et al., invoked by petitioner, does not revealthe precise metes
and bounds of the property under TCT No. 23377 and whether plan Psu-04-006561 is covered by the title.

It does not escape this court’s attention — considering the length of time the document was in petitioner’s
possession — that the document was presented by petitioner at this latestage in the Court of Appeals proceedings.
Records show that petitioner was aware of this development as early as 2009 or even before the appeal to the
Court of Appeals.  There has been no mention of this document before the Court of Appeals or in the present
81

petition.

The concealment of a document that changes a party’s theory of the case is highly improper, if not misleading, and
should not be tolerated. In Multi-Realty Development Corporation v. The Makati Tuscany Condominium
Corporation,  this court said that:
82

[s]ettled is the rule that no questions will be entertained on appeal unless they have been raised below. Points of
law, theories, issues and arguments not adequately brought to the attention of the lower court need not be
considered by the reviewing court as they cannot be raised for the first time on appeal. Basic considerations of due
process impel this rule.83

However, the ends of substantial justice would be better served when the threshing of the issue before the trial court
is allowed, to give all parties due process and avoid multiplicity of suits in the future.

WHEREFORE, the petition is GRANTED. The assailed decision dated November 10, 2011 and resolution. dated
February 23, 2012 of the Court of Appeals are REVERSED and SET ASIDE. The case is, however, REMANDED to
the trial court for presentation of evidence to determine whether the 9,751-square-meter parcel of land located in
Barrio Macamot, Municipality of Binangonan, Province of Rizal, technically described as Cadastral Lot No. 11566,

941
Psu-04-006561, is included in TCT No. 23377, and to proceed accordingly with this court's ruling in Republic v.
Court of Appeals and Guido, et al. 84

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

A.C. No.7054               November 11, 2014

CONRADO N. QUE, Complainant, 
vs.
ATTY. ANASTACIO E. REVILLA, JR., Respondent.

RESOLUTION

PER CURIAM:

For the Court's consideration is the Profound Appeal for Judicial Clemency  filed by Atty. Anastacio E. Revilla, Jr.
1

(respondent), who seeks to be reinstated as a member of the Philippine Bar.

Factual Background

In a Decision  dated December 4, 2009, this Court disbarred the respondent from the practice of law on the following
2

grounds: abuse of court procedures and processes; filing of multiple actions and forum-shopping; willful, intentional
and deliberate resort to falsehood and deception before the courts; maligning the name of his fellow lawyer; and
fraudulent and unauthorized appearances in court.

The material portions of the subject Decision provide:

Based on the foregoing, we conclude that the respondent committed various acts of professional misconduct and
thereby failed to live up to the exacting ethical standards imposed on members of the Bar. We cannot, agree,
however, that only a penalty of one-year suspension from the practice of law should be imposed. Neither should we
limit ourselves to the originally recommendedpenalty of suspension for two (2) years.

Given the respondent’s multiple violations, his past record as previously discussed, and the nature of these
violations which shows the readiness to disregard court rules and to gloss over concerns for the orderly
administration of justice,we believe and so hold that the appropriate action of this Court is to disbar the respondent
to keep him away from the law profession and from any significant role in the administration of justice which he has
disgraced. He is a continuing risk, too, to the public that the legal profession serves. Not even his ardor and
overzealousness in defending the interests of his client can save him. Such traits at the expense of everything else,
particularly the integrity of the profession and the orderly administration of justice, this Court cannot accept nor
tolerate.

Additionally, disbarment is merited because this is not the respondent’s first ethical infraction of the same nature.
We penalized him in Plus Builders, Inc. and Edgardo Garcia versus Atty. Anastacio E. Revilla for his willful and
intentional falsehood before the court; for misuse of court procedures and processes to delay the execution of a
judgment; and for collaborating with non-lawyers in the illegal practice of law. We showed leniency then by reducing
his penalty to suspension for six (6) months. We cannot similarly treat the respondent this time; it is clear that he did
not learn any lesson from his past experience and since then has exhibited traits of incorrigibility. It is time to put a
finis to the respondent’s professional legal career for the sake of the public, the profession and the interest of
justice.

WHEREFORE, premises considered, we hereby AFFIRM Resolution No. XVII-2005-164 dated December 17, 2005
and Resolution No. XVII-2008-657 dated December 11, 2008 of the Board of Governors of the IBP Committee on
Bar Discipline insofar as respondent Atty. Anastacio Revilla, Jr. is found liable for professional misconduct for
violations of the Lawyer’s Oath; Canon 8; Rules 10.01 and 10.03, Canon 10; Rules 12.02 and 12.04, Canon 12; and
Rule 19.01, Canon 19 of the Code of Professional Responsibility;and Sections 20(d), 21 and 27 of Rule 138 of the
Rules of Court. However, we modify the penalty the IBP imposed, and hold that the respondent should be
DISBARREDfrom the practice of law.

SO ORDERED.

942
On July 8, 2010, the respondent filed a Petition for Judicial Clemency and Compassion  praying that his license to
3

practice law be restored based on humanitarian considerations, but the Court En Bancresolved to deny the petition
for lack of merit.

The respondent subsequently filed on January 11, 2011, an Appeal for Grace, Succor, and Mercy  asking the Court
4

to take a second look at the penalty imposed upon him. He maintained that Conrado N. Que (complainant) failed to
establish by clear and convincing evidence that he committed grossly immoral conduct meriting the severe penalty
of disbarment. He also attempted to pass the blame on another individual (a certain Gerolin Piedad, General
Manager of Kalayaan Development Corporation) to free himself from liability by claiming that one of the charges
leading to his disbarment was not of his own doing.

In a Resolution  dated February 8, 2011, the Court denied the appeal.

5

The respondent again wrote the Court on July 13, 2011, reiterating his pleas for the Court’s compassion and
mercy. He sought the Court’s forgiveness stating that he has learned his lesson; but at the same time, questioning
6

the Court’s finding for lackof factual support. He appended to his appeal proofs of his updated payment of IBP
membership dues,  MCLE compliance,  and a letter from the Bishop of Marinduque.  His appeal, however, was
7 8 9

denied by a Resolution  dated August 2, 2011.

10

On May 17, 2012, the respondent sent a letter  addressed to the Members of the Court En Banc once again
11

reiterating his prayer to lift the order of disbarment. He alleged among others that for more than three years that he
has been disbarred in the practice of law, he has never been involved in any immoral or illegal activities, has
devoted himself in the services of St. Peter Parish and Shrine, CommonwealthAvenue as Eucharistic Minister
leader, has conducted regular monthly lectures on the subject of marriage at the Diocese of Novaliches, and has
participated as monthly financial contributor to Mr. Carmel Church, Lucena City. He also begged the Court to no
longer prolong his penalty since it had already served its purpose. The plea was also denied on July 3, 2012. 12

On August 30, 2012, the respondent once more prayed for his reinstatement professing repentance and remorse for
what he did.  He pleaded for the Court’s consideration, and vowed that he will no longer misuse the rules of
13

procedure but instead, devote his time and energy for its proper observance and implementation. He also stated
that for almost three years of being disbarred from the practice of law, he has never been involved in any unlawful,
dishonest, and immoral activities. He promised to maintain at all times a high degree of legal proficiency, morality,
integrity, and fair dealings to the courts, clients, and the legal profession in accordance with the values and morals
embodied in the Code of Professional Responsibility.

In a Resolution  dated October 9, 2012, the Court denied his petition for lack of merit. Aggrieved, the respondent
14

filed on March 27, 2013 a letter  pleading the Court to revisit his previousrequests for reinstatement.
15

Treating his letter as a motion for the reconsideration of the resolutions dated August 2, 2011, July3, 2012, and
October 9, 2012, the Court, on June 4, 2013 deniedthe motion with finality.  On July 18, 2014, the respondent filed a
16

Profound Appeal for Judicial Clemency  reiterating his apologies to the Court. He stressed that the penalty of
17

disbarment has already taken its toll on his health; he has now become most frail and weak; and he had been
diagnosed with chronic kidney disease at stage five (5) and undergoing dialysis thrice weekly. He also stressed that
in the years that he had been excluded from the practice of law, he devoted his time to Christian and charity pursuits
serving with all humility as a Lay Minister and a regular lecturer on Legal Aspect of Marriage at St. Peter Church,
Quezon City.

The respondent also pleads for clemency, not because he intends to practice law again, but to be made whole, to
recover from being shattered, and to finally have peace of mind. Heexpressed his sincere repentance and deep
remorse by taking full responsibility for his misdemeanor. He also prayed that his disbarment be lifted and that he be
reinstated as a member of the Philippine bar. As part of his petition, he submitted a Medical Abstract  evidencing his
18

diagnosis for chronic kidney disease, and a certification  from St. Peter Parish, Commonwealth Avenue, Quezon
19

City, proving that he and his family are dedicated parishioners.

The Court's Ruling

We deny the present appeal.

Membership in the Bar is a privilege burdened with conditions.  It is not a natural, absolute or constitutional right
20

granted to everyone who demands it, but rather, a special privilege granted and continued only to those who
demonstrate special fitness inintellectual attainment and in moral character.  The same reasoning applies to
21

reinstatement of a disbarred lawyer. When exercising its inherent power to grant reinstatement, the Court should
see to it that only those who establish their present moral fitness and knowledge of the law will be readmitted to the
Bar. Thus, though the doors to the practice of law are never permanently closed on a disbarred attorney, the Court
owes a duty to the legal profession as well as to the general public to ensure that if the doors are opened,it is done
so only as a matter of justice.22

943
The basic inquiry in a petition for reinstatementto the practice of law is whether the lawyer has sufficiently
rehabilitated himself or herself in conduct and character.  Whether the applicant shall be reinstated in the Roll of
23

Attorneys rests to a great extent on the sound discretion of the Court.  The lawyer has to demonstrate and prove by
24

clear and convincing evidence that he or she is again worthy of membership in the Bar. The Court will take into
consideration his or her character and standing prior to the disbarment, the nature and character of the charge/s for
which he or she was disbarred, his or her conduct subsequent to the disbarment, and the time that has elapsed in
between the disbarment and the application for reinstatement. 25

In the present case, we note that before his admission to the Bar, the respondent had demonstrated an active
involvement and participation in community and church activities by joining Youth For Christ, Catechism, and Bible
Study and Sharing. Likewise, upon admission to the Bar, the respondent worked as Municipal Attorney in Sta. Cruz,
Marinduque rendering free legal assistance to his townmates who were inneed of legal service. Thereafter, the
respondentwas appointed as a Municipal Administrator and had continued extending assistance to the indigent
residents.

The respondent also actively engaged and participated in various community projects, through the Marinduque
Jaycees, where he served as President from 1980 to 1981, and the Integrated Bar of the Philippines Marinduque
Chapter, where he served as a member, Director, and President from 1982 to 1987.

In his present appeal for judicial clemency, the respondent acknowledged his indiscretions and claimed to have
taken full responsibility for his misdemeanor. Unlike in his previous petitions/appeal for judicial clemency, the
respondent no longerquestioned the Court’s decision. According to him, he has long expressed deep remorse and
genuine repentance.

The respondent also claimed that the long period of his disbarment gave him sufficient time to reflect on his
professional conduct, to show remorse and repentance, and to realize the gravity of his mistakes. After his
disbarment, the respondent continued lending assistance, and deviated his time and effort in pursuing civic and
religious work that significantly contributed to his character reformation.He professed that during his almost five (5)
years of disbarment, he has been an active member of the Couples for Christ, Marriage Encounter, and Knights of
Columbus; and through his affiliations with these groups, he had served in the ecclesial affairs in his parish as an
Extraordinary Minister for Holy Communion and a lecturer on Legal Aspect of Marriage Pre-Cana and Marriage
Preparation Seminar at the Parish Church of St. Peter in Commonwealth Avenue, Quezon City.

Although the Court believes that the respondent is not inherently lacking in moral fiber as shown by his conduct prior
to his disbarment, we are not convinced that he had sufficiently achieved moral reformation.

In Rodolfo M. Bernardo v. Atty. Ismael F. Mejia,  the Court, in deciding whether or not to reinstate Atty. Mejia,
26

considered that 15 years had already elapsed from the time hewas disbarred, which gave him sufficient time to
acknowledge his infractions and to repent. The Court also took into account the fact that Atty. Mejiais already of
advanced years, has long repented, and suffered enough. The Court also notedthat he had made a significant
contribution by putting up the Mejia Law Journal containing his religious and social writings; and the religious
organization named "El Cristo Movement and Crusade on Miracle of the Heart and Mind." Furthermore, the Court
considered that Atty. Mejia committed no other transgressions since he was disbarred.

Similarly in Adez Realty, Inc. v. Court of Appeals,  the Court granted the reinstatement of the disbarred lawyer
27

(found to be guilty of intercalating a material fact in a CA decision) and considered the period of three (3) years as
sufficient time to do soul-searching and to prove that he is worthy to practice law. In that case, the Court took into
consideration the disbarred lawyer’s sincere admission of guilt and repeated pleas for compassion.

Also in Valencia v. Antiniw,  the Court reinstated Atty. Antiniw (who was found guilty of malpractice in falsifying a
28

notarized deed of sale and subsequently introducing the document in court) after considering the long period of his
disbarment (almost 15 years). The Court considered that during Atty. Antiniw’s disbarment, he has been persistent
in reiterating his apologies to the Court, has engaged inhumanitarian and civic services, and retained an
unblemished record as an elected public servant, as shown by the testimonials of the numerous civic and
professional organizations, government institutions, and members of the judiciary.

In all these cases, the Court considered the conduct of the disbarred attorney before and after his disbarment, the
time that had elapsed from the disbarment and the application for reinstatement, and more importantly, the
disbarred attorneys’ sincere realization and acknowledgement of guilt.

In the present case, we are not fully convinced that the passage of more than four (4) years is sufficient to enable
the respondent to reflect and to realize his professional transgressions.

We emphasize that this is the second timethat the respondent was accused and was found guilty of gross
misconduct.  The respondent, in an earlier case of Plus Builders, Inc. v. Atty. Anastacio E. Revilla,Jr.,  was likewise
1âwphi1
29

found guilty of gross misconduct for committing willful and intentional falsehood before the court; misusing court
procedure and processes to delay the execution of a judgment; and collaborating with nonlawyers in the illegal
944
practice of law – mostly the same grounds on which the Decision dated December 4, 2009 (2nd disbarment) was
based. In Plus Builders, we granted the respondent’s motion for reconsideration and reduced the penalty of
suspension from the practice of law from two (2) years to six (6) months out of compassion to the respondent.

Considering the respondent’s earlier disbarment case(and subsequent reduction of the penalty imposed as an act of
clemency), and another disbarment case against him still pending review by the Court, we are not fully and
convincingly satisfied that the respondent has already reformed. The period of five (5) years is likewise not
considerably long considering the nature and perversityof the respondent’s misdeeds. We believe that it is still early
for the Court to consider the respondent’s reinstatement.

Furthermore, we are not persuaded by the respondent's sincerity in acknowledging his guilt.  While he expressly
1âwphi1

stated in his appeal that he had taken full responsibility of his misdemeanor, his previous inclination to pass the
blame to other individuals, to invoke self-denial, and to make alibis for his wrongdoings, contradicted his assertion.
The respondent also failed to submit proof satisfactorily showing his contrition. He failed to establish by clear and
convincing evidence that he is again worthy of membership in the legal profession. We thus entertain serious doubts
that the respondent had completely reformed.

As a final word, while the Court sympathizes with the respondent's unfortunate physical condition, we stress that in
considering his application for reinstatement to the practice of law, the duty of the Court is to determine whether he
has established moral reformation and rehabilitation, disregarding its feeling of sympathy or pity. Surely at this point,
this requirement was not met. Until such time when the respondent can demonstrate to the Court that he has
completely rehabilitated himself and deserves to resume his membership in the Bar, Our decision to disbar him from
the practice of law stands.

WHEREFORE, premises considered, the Profound Appeal for Judicial Clemency filed by Atty. Anastacio E. Revilla,
Jr. is hereby DENIED.

SO ORDERED.

945
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 125346               November 11, 2014

LA SUERTE CIGAR & CIGARETTE FACTORY, Petitioner, 

vs.
COURT OF APPEALS and COMMISSIONER OF INTERNAL REVENUE, Respondents.

x-----------------------x

G.R. Nos. 136328-29

COMMISSIONER OF INTERNAL REVENUE, Petitioner, 

vs.
FORTUNE TOBACCO CORPORATION, Respondent.

x-----------------------x

G.R. No. 144942

COMMISSIONER OF INTERNAL REVENUE, Petitioner, 

vs.
LA SUERTE CIGAR & CIGARETTE FACTORY, Respondent.

x-----------------------x

G.R. No. 148605

STERLING TOBACCO CORPORATION, Petitioner, 

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

x-----------------------x

G.R. No. 158197

LA SUERTE CIGAR & CIGARETTE FACTORY, Petitioner, 

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

x-----------------------x

G.R. No. 165499

LA SUERTE CIGAR & CIGARETTE FACTORY, Petitioner, 

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

LEONEN, J.:

These cases involve the taxability of stemmed leaf tobacco imported and locally purchased by cigarette
manufacturers for use as raw material in the manufacture of their cigarettes. Under the National Internal Revenue
Code of 1997 (1997 NIRC), before it was amended on December 19, 2012 through Republic Act No. 10351  (Sin 1

Tax Law), stemmed leaf tobacco is subject to an excise tax of P0.75 for each kilogram thereof.  The 1997 NIRC
2

further provides that stemmed leaf tobacco - "leaf tobacco which has had the stem or midrib removed"  - "may be
3

sold in bulk as raw material by one manufacturer directly to another without payment of the tax, under such
conditions as may be prescribed in the rules and regulations prescribed by the Secretary of Finance."
4

946
This is a consolidation of six petitions for review of several decisions of the Court of Appeals, involving three
cigarette manufacturers and the Commissioner of Internal Revenue. G.R. No. 125346 is anal  from the Court of
5

Appeals (Sixth Division) that rever LEONEN, LEONEN, sed  the Court of Tax Appeals' decision  and held petitioner
6 7

La Suerte Cigar & Cigarette Factory (La Suerte) liable for deficiency specific tax on its purchase of imported and
locally produced stemmed leaf tobacco and sale of stemmed leaf tobacco to Associated Anglo-American Tobacco
Corporation (AATC) during the period from January 1, 1986 to June 30, 1989. GR. Nos. 136328-29 is an appeal  by 8

the Commissioner of Internal Revenue (Commissioner) from the decision  of the Court of Appeals that affirmed the
9

Court of Tax Appeals' rulings  that Fortune Tobacco Corporation (Fortune) was not obliged to pay the excise tax on
10

its importations of stemmed leaf tobacco for the periods from January 1, 1986 to June 30, 1989 and July 1, 1989 to
November 30, 1990. In G.R. No. 148605, Sterling Tobacco Corporation (Sterling) appeals  the decision  of the
11 12

Court of Appeals that reversed the Court of Tax Appeals’ decision  and held it liable to pay deficiency excise taxes
13

on its importation and local purchases of stemmed leaf tobacco from November 1986 to June 24, 1989. G.R. No.
144942is an appeal  from the Court of Appeals’ decision  that affirmed the Court of Tax Appeals’ decision  and
14 15 16

ordered the refund of specific taxes paid by La Suerte on its importation of stemmed leaf tobacco in April 1995. In
G.R. No. 158197, La Suerte sought to appeal  the decision  of the Court of Appeals holding it liable for deficiency
17 18

specific tax on its local and imported purchases of stemmed leaf tobacco and those it sold for the period from June
21, 1989 to November 20, 1990. Finally, in G.R. No. 165499, La Suerte again sought to appeal by certiorari  the 19

decision  of the Court of Appeals reversing the Court of Tax Appeals and holding it liable for deficiency specific tax
20

on its importation of stemmed leaf tobacco in March 1995.

Factual background

Overview of cigarette manufacturing

The primary component of cigarettes is tobacco, a processed product derived from the leaves of the plants in the
genus Nicotiana.  Most cigarettes contain a mixture or blend of several types of tobacco from a variety of sources.
21

The tobacco types grown in the Philippines are: Virginia (or ‘fluecured’),  which accounts for 59.35% of tobacco
22

production, Burley (or ‘bright air-cured’),  which makes up 22.21%, and the Native (or ‘dark air-cured),  which
23 24

makes up the remaining 18.44%.  "[T]he ‘native’ type is normally categorized into three: cigar filler type, wrapper
25

type and chewing type, or . . . ‘Batek’ tobacco."  Virginia and Burley, considered as the aromatic type, are intended
26

for cigarette manufacturing.

Growing and harvesting

"Tobacco seeds undergo a process of germination, which takes about 7 to 10 days, depending on the tobacco
varieties. . . . The tobacco seedlings are then sown in cold frames or hotbedsto prevent attacks from insects, and
then transplanted into the fields"  after 45 to 65 days.  Harvesting begins 55 to 60 days after transplanting.  A
27 28 29

farmer carries out either priming(leaf by leaf) or stalk harvesting (by the whole plant). 30

Curing

"After harvest, tobacco is stored for curing, which allows for the slow oxidation and degradation of carotenoids. This
allows for the leaves to take on properties that are usually attributed to the ‘smoothness’ of the smoke." 31

"Curing methods vary with the type of tobacco grown. The tobacco barn design varies accordingly."  There are two 32

main ways of curing tobacco in the Philippine setting:

1) Air-curing (for Burley and Native tobacco) "is carried out by hanging the tobacco in well-ventilated barns,
where the tobacco is allowed to dry over a period of 4 to 8 weeks. Air-cured tobacco is generally low in
sugar content, which gives the tobacco smoke a light, smooth, semi-sweet flavor. These tobacco leaves
usually have a high nicotine content[;]"  and
33

2) Flue-curing (for Virginia tobacco) process "starts by the sticking of tobacco leaves, which are then hung
from tier-poles in curing barns. The procedure will generally take about a week. Fluecured tobacco generally
produces cigarette tobacco, which usually has a high content of sugar, with medium to high levels of
nicotine." 34

Once cured, the leaves are sorted into grades based on size, color, and quality, and packed in standard bales.  The 35

bales are then moved to accredited trading centers where they are purchased by leaf buyers such as wholesale
tobacco dealers and exporters or cigarette manufacturing companies. 36

Redrying and aging

After purchase, leaf tobacco is re-dried and then added with moisture to make the tobacco pliable enough to remove
its large stems.  The leaves are stripped or de-stemmed, eitherby hand or machine, cleaned and compressed into
37

947
boxes or porous wooden vats called hogsheads, and aged.  Thereafter, the leaves are either exported or used for
38

the manufacture of cigarettes, cigars, and other tobacco products.

Primary processing 39

In the cigarette factory, the tobacco leaves undergo a conditioning process where "high temperatures and humidity
restore moisture to suitable levels for cutting and blending tobacco and completing the cigarette-making process." 40

"[T]obaccos are precisely cut and blended according to . . . formulas, or recipes, to produce tobaccos for various
brands of cigarettes. These brand recipes include ingredients and flavors that are added to the tobacco to give each
brand its unique characteristics." 41

Cigarette making and packing 42

"The blended tobacco — often referred to as "filler" or "cut-filler" — . . . is delivered by a pneumatic feed system to
cigarette making machines . . . within the factory."  The machine disperses the shredded tobacco over a continuous
43

roll of cigarette paper and cuts the paper to the desired length. The completed cigarettes are subsequently packed,
sealed, and placed in cartons.

Cigarette manufacturers

La Suerte Cigar & Cigarette Factory (La Suerte),  Fortune Tobacco Corporation (Fortune),  and Sterling Tobacco
44 45

Corporation (Sterling)  are domestic corporations engaged in the production and manufacture of cigars and
46

cigarettes. These companies import leaf tobacco from foreign sources and purchase locally produced leaf tobacco
to be used in the manufacture of cigars and cigarettes. 47

The transactions of these cigarette manufacturers pertinent to these consolidated cases are the following:

1. La Suerte’s local purchases, importations, and sale of stemmed leaf tobacco from January 1, 1986 to
June 30, 1989 (G.R. No. 125346), and from June 1989 to November 1990 (G.R. No. 158197), and
importations in March 1995 (G.R. No. 165499) and April 1995 (G.R. No. 144942); 2. Fortune’s importation of
tobacco strips from January 1, 1986 to June 30, 1989, and from July 1, 1989 to November 30, 1990 (G.R.
Nos. 136328–29); and

3. Sterling’s importations and local purchases of stemmed leaf tobacco from November 1986 to June 24,
1989 (G.R. No. 148605).

History of applicable tax provisions

The first tax code came into existence in 1939 with the enactment of Commonwealth Act No. 466  (1939 Code).
48

Section 136 of the 1939 Code imposed specific (excise) taxes on manufactured products of tobacco, but excluded
cigars and cigarettes, which were subject to tax under a different section.  Section 136 provided thus:
49

SECTION 136. Specific Tax on Products of Tobacco. – On manufactured products of tobacco, except cigars,
cigarettes, and tobacco specially prepared for chewing so as to be unsuitable for consumption in any other manner,
but including all other tobacco twisted by hand or reduced into a condition to be consumed in any manner other than
by the ordinary mode of drying and curing; and on all tobacco prepared or partially prepared for sale or
consumption, even if prepared without the use of any machine or instrument and without being pressed or
sweetened; and on all fine-cut shorts and refuse, scraps, clippings, cuttings, and sweepings of tobacco, there shall
be collected on each kilogram, sixty centavos.

On tobacco specially prepared for chewing so as to be unsuitable for use in any other manner, on each kilogram,
forty-eight centavos. (Emphasis supplied)

Section 132 of the 1939 Code, however, by way of exception, provided that "stemmed leaf tobacco . . . may be sold
in bulk as raw material by one manufacturer directly to another, under such conditions as may be prescribed in the
regulations of the Department of Finance, without the prepayment of the tax." Section 132 stated:

SECTION 132. Removal of Tobacco Products Without Prepayment of Tax. – Products of tobacco entirely unfit for
chewing or smoking may be removed free of tax for agricultural or industrial use, under such conditionsas may be
prescribed in the regulations of the Department of Finance; and stemmed leaf tobacco, fine-cut shorts, the refuse of
fine-cut chewing tobacco, refuse, scraps, cuttings, clippings and sweepings of tobacco may be sold in bulk as raw
material byone manufacturer directly to another, under such conditions as may be prescribed in the regulations of
the Department of Finance, without the prepayment of the tax.

948
"Stemmed leaf tobacco," as herein used means leaf tobacco which has had the stem or midrib removed. The term
does not include broken leaf tobacco. (Emphasis supplied)

On September 29, 1954, upon the recommendation of then Acting Collector of Internal Revenue J. Antonio Araneta,
the Department of Finance promulgated Revenue Regulations No. V-39 (RR No. V-39), or "The Tobacco Products
Regulations," relative to "the enforcement of the provisions of Title IV of the [1939 Tax Code] in so far as they affect
the manufacture or importation of, and the collection and payment of the specific tax on, manufactured tobacco or
products of tobacco."  Section 20(a) of RR No. V-39, which lays the rules for tax exemption on tobacco products,
50

states:

SECTION 20. Exemption from tax of tobacco products intended for agricultural or industrial purposes. — (a) Sale of
stemmed leaf tobacco, etc., by one factory to another. — Subject to the limitations herein established, products of
tobacco entirely unfit for chewing or smoking may be removed free of tax for agricultural or industrial use;and
stemmed leaf tobacco, finecut shorts, the refuse of fine-cut chewing tobacco, refuse, scraps, cuttings, clippings, and
sweepings of tobacco may be sold in bulk as raw materials by one manufacturer directly to another without the
prepayment of specific tax.

Stemmed leaf tobacco, fine-cut shorts, the refuse of fine-cut chewing tobacco, scraps, cuttings, clippings, and
sweeping of leaf tobacco or partially manufactured tobacco or other refuse of tobacco may be transferred from one
factory to another under an official L-7 in voice on which shall be entered the exact weight of the tobacco at the time
of its removal, and entry shall be made in the L-7 register in the place provided on the page of removals.

Corresponding debit entry will be made in the L-7 register book of the factory receiving the tobacco under heading
"Refuse, etc., received from other factory," showing the date of receipt, assessment and invoice numbers, name and
address of the consignor, form in which received, and the weight of the tobacco. This paragraph should not,
however, be construed to permit the transfer of materials unsuitable for the manufacture of tobacco products from
one factory to another. (Emphasis supplied)

Sections 10 and 11 of RR No. V-39 enumerate and describe the record books to be kept and used by
manufacturers of tobacco products, viz:

SECTION 10. (a) Register, auxiliary, and stamps requisition books for manufacturers. — The Collector of Internal
Revenue shall from time to time supply provincial revenue agents or the Chief of the Tobacco Tax Section with the
necessary number of manufacturers official register books and official auxiliary register booksas may be required in
each locality by manufacturers of tobacco products. Whenever any manufacturer shall have qualified himself as
such by executing a proper bond, registering his factory, and paying the privilege tax and shall have complied with
all the requirements ofengaging in such business contained in the National Internal Revenue Code and in these
regulations, the internal revenue agent within whose district the factory is located shall deliver to said manufacturer
the necessary official register books and auxiliary register books. These books consist of the following:

B.I.R. No. 31.09—Official RegisterBook, A-3 for manufacturers of chewing and smoking tobacco. B.I.R. No.
31.10—Manufactured tobacco (Transcript sheet of above).

B.I.R. No. 31.18—Official Register Book, A-4, for manufacturers of cigar.

B.I.R. No. 31.19—(Transcriptsheet of the above).

B.I.R. No. 31.27—Official Register Book, A-5, for Manufacturers of cigarettes.

B.I.R. No. 31.28—(Transcript sheet of above).

B.I.R. No. 31.01—Official Register Book, L-7, record of raw materials for manufacturers of any class of
tobacco products.

B.I.R. No. 31.02—(Transcript sheet of above)[.]

B.I.R. No. 31.46—Auxiliary Register Book, L-7-1/2, bale book, for manufacturers of any class of tobacco
products.

B.I.R. No. 31.47—(Transcript sheet of above).

B.I.R. No. 31.12—Stamp requisition book, for manufacturers of manufactured tobacco.

B.I.R. No. 31.21—Stamp requisition book, for manufacturers of cigars.

B.I.R. No. 31.30—Stamp requisition book, for manufacturers of cigarettes.

949
 B.I.R. No. 31.05—L-7 Official Invoice Book for, use in connection with L-7 register book.

B.I.R. No. 31.05—L-7-1/2 OfficialInvoice Book, for use in connection with L-7-1/2 bale book.

(b) General nature of official register and auxiliary register books.— The L-7 official register book isthe
record of all raw materials used in the manufacture of tobacco products of all description in the factory.It is
the primary record of the internal operations of the factory. It shows the raw materials used in the
manufacture and the articles actually manufactured or produced. The Schedule A register books are the
record of the articles actually manufactured or produced, and transferred from the credit side of the official
register book, L-7. They show the amount of taxes paid and the name of the person to whom the finished
products is consigned or sold when leaving the factory. The bale book[,] L-7-1/2, is an auxiliary to the L-7
official register book.

All official register books and other official records herein required of manufacturers shall be kept in the
factory premises, or in the factory warehouse, in the case of bale books, and open to inspection by any
internal revenue officer at all times of the day or night.

....

SECTION 11. Entries to be made in the official register and auxiliary register books; monthly transcripts.— (a)
Official bale book (L-7-1/2). All leaf tobacco received in any factory or factory warehouse shall be debited, and any
removal of tobacco from the factory shall be credited in the official bale book; except cuttings, clippings, sweepings,
and other partially manufactured tobacco, which shall be credited in the L-7 register book.

The Collector of Internal Revenue may in his discretion waive the requirements of keeping an official bale book by
small factories.

(b) The Official Register Book (L-7).— One L-7 books shall suffice for each manufacturer of tobacco products,
regardless of the classes of tobacco manufactured by him.All loose leaf tobacco received in the factory proper and
all bales of leaf tobacco which are opened in the factory for use in the manufacture of tobacco products shall be
entered in the L-7 official register book under the heading "Received from Dealers" at the net weights. In the column
headed "Name["] and "Address" shall be shown the words "Transferred from tobacco factory warehouse". All leaf
tobacco received into a factory must be entered in the official bale book pertaining to the factory and bales of leaf
tobacco shall not be taken up in the L-7 register book until said bales are transferred for use and credited in the
official bale book. While leaf tobacco must be taken in the official bale book, this is done for statistical purposes only.
As soon asit enters the factory for use in manufacture it should be taken up in the L-7 register book and credited in
the official bale book.

All removals of waste of tobacco, whether transferred to other factories, removed for agricultural orindustrial
purposes, or destroyed on the premises or elsewhere, shall be entered in the official register book, L-7, under the
heading "Raw Materials Removed", showing all information required therein. (Emphasis supplied)

Section 2 of RR No. V-39 broadly defined "manufactured products of tobacco" and "manufacturer of tobacco
products" as follows:

Section 2. Definition of terms. — When used in there [sic] regulations, the following terms shall begiven the
interpretations indicated in their respective definitions given below, except where the context indicates otherwise:

(a) "Manufactured products of tobacco" shall include cigars, cigarettes, smoking tobacco, chewing, snuff,
and all other forms of manufactured and partially manufactured tobacco, as defined in section 194 (M)  of 51

the National Internal Revenue Code.

(b) "Manufacturer of tobacco products" shall include all persons engaged in the manufacture of any of the
forms of tobacco mentioned in the next preceding paragraph.

In 1967, the Secretary of Finance promulgated Revenue Regulations No. 17-67 (RR No. 17-67), as amended,  or 52

the "Tobacco Revenue Regulations on Leaf, Scrap, Other Partially Manufactured Tobacco and Other Tobacco
Products; Grading, Classification, Inspection, Shipments, Exportation, Importation and the Manufacturers thereof
under the provisions of Act No. 2613, as amended." Section 2(i) of RR No. 17-67 defined a "manufacturer of
tobacco" and included in the definition one who prepares partially manufactured tobacco. Section 2(m) defined
"partially manufactured tobacco" as including stemmed leaf tobacco. Thus, Sections 2(i) and (m) read:

(i) "Manufacturer of tobacco" — Includes every person whose business it is to manufacture tobacco o[r] snuff or who
employs others to manufacture tobacco or snuff, whether such manufacture be by cutting, pressing (not baling),
grinding, or rubbing (grating) any raw or leaf tobacco, or otherwise preparing raw or leaf tobacco, or manufactured
or partially manufactured tobacco and snuff, or putting up for consumption scraps, refuse, or stems of tobacco

950
resulting from any process of handling tobacco stems, scraps, clippings, or waste by sifting, twisting, screening or by
any other process.

....

(m) "Partially manufactured tobacco" — Includes:

(1) "Stemmed leaf" — handstripped tobacco, clean, good, partially broken leaf only, free from mold and dust.

(2) "Long-filler" — handstripped tobacco of good, long pieces of broken leaf usableas filler for cigars without
further preparation, and free from mold, dust stems and cigar cuttings.

(3) "Short-filler" — handstripped or machine-stripped tobacco, clean, good, short pieces of broken leaf,
which will not pass through a screen of two inches (2") mesh.

(4) "Cigar-cuttings" — clean cuttings or clippings from cigars, unsized with any other form of tobacco.

(5) "Machine-scrap tobacco"— machine-threshed, clean, good tobacco, not included in any of the above
terms, usable in the manufacture of tobacco products.

(6) "Stems" — midribs of leaftobacco removed from the whole leaf or broken leaf either by hand or machine.

(7) "Waste tobacco" — denatured tobacco; powder or dust, refuse, unfit for human consumption; discarded
materials in the manufacture of tobacco products, which may include stems.

Section 3 of RR No. 17-67 classifiedentities that dealt with tobacco according to the type of permit that the Bureau of
Internal Revenue issued to each entity. Under this classification, wholesale leaf tobacco dealers were considered L-
3 permittees. Those (referring to wholesale leaf tobacco dealers) that reprocess partially manufactured tobacco for
export, for themselves, and/or for other L-6 or L-7 permittees were considered L-6 permittees. Manufacturers of
tobacco products such as cigarette manufacturers were considered L-7 permittees. Section 3 of RR No. 17-67
reads:

(a) L-3 — Wholesale leaf tobacco dealer.

(b) L-3F — Wholesale leaf tobacco dealer. Issued only in favor of Farmer's Cooperative Marketing
Association (FaCoMas) duly organized in accordance with law. [This function relative to tobacco trading was
transferred to the Philippine Virginia Tobacco Administration (PVTA) under Section 15 of Republic Act No.
2265].

(c) L-3R — Wholesale leaf tobacco dealers. Issued only in favor of persons or entities having fully equipped
Redrying Plants.

(d) L-3-1/4 — Buyers for wholesale leaf tobacco dealers.

(e) L-4 — Wholesale leaf tobacco dealers. Issued only in favor of persons or entities having flue-curing
barns, who may purchase or receive green Virginia leaf tobacco from bona fide tobacco planters only, or
handle green leaf of their own production, which tobacco shall be sold or transferred only to holders of L-3
and L-3R permits after flue-curing the tobacco.

(f) L-5 — Tobacco planters selling to consumers part or the whole of their tobacco production. (g) L-6 —
Wholesale leaf tobacco dealers who, exclusively for export, except as otherwise provided for in these
regulations, perform the following functions:

(1) Handstripped and/or threshwhole leaf tobacco for themselves or for other L-6 or L-7 permittees;

(2) Re-process partially manufactured tobacco for themselves, or for other L-6 or L-7 permittees; (3)
Sell their partially manufactured tobacco to other L-6 permittees.

(h) L-7 — Manufacturers of tobacco products. [L-7 1/2 designates an auxiliary registered book (bale books),
for manufacturers of tobacco products.]

(i) B-14 — Wholesale leaf tobaccodealers (Privilege tax receipt)

(j) B-14 (a) — Retail leaf tobacco dealers (Privilege tax receipt)

951
La Suerte contends that on December 12, 1972, then Internal Revenue Commissioner Misael P. Vera issued a
ruling which declared that:

. . . . The subsequent sale or transfer by the L-6/L-3R permittee for export or to an L-7-1/2 for use in the
manufacture of cigars or cigarettes may also be allowed without the prepayment of the specific tax. 53

Almost 40 years from the enactment of the 1939 Tax Code, Presidential Decree No. 1158-A, otherwise known as
the "National Internal Revenue Code of 1977," was promulgated on June 3, 1977, to consolidate and integrate the
various tax laws which have so far amended or repealed the provisions found in the 1939 Tax Code. Section 132
was renumbered as Section 144, and Section 136 as Section 148. Sections 144 and 148, read:

SEC. 144. Removal of tobacco products without prepayment of tax.—Products of tobacco entirely unfit for chewing
or smoking may be removed free of tax for agricultural or industrial use, under such conditions as may be prescribed
in the regulations of the Department of Finance, and stemmed leaf tobacco, fine-cut shorts, the refuse of fine-cuts
chewing tobacco, re-refuse, scraps, cuttings, clippings, stems or midribs, and sweepings of tobacco may be sold in
bulk as raw material by one manufacturer directly to another, under such conditions as may be prescribed in the
regulations of the Department of Finance, without the prepayment of the tax. "Stemmed leaf tobacco", as herein
used means leaf tobacco which has had the stem or midrib removed. The term does not include broken leaf
tobacco.

....

SEC. 148. Specific tax on products of tobacco.—On manufactured products of tobacco, except cigars, cigarettes,
and tobacco specially prepared for chewing so as to be unsuitable for consumption in any other manner, but
including all other tobacco twisted by hand or reduced into a condition to be consumed in any manner other than by
the ordinary mode of drying and curing; and on all tobacco prepared orpartially prepared for sale or consumption,
even if prepared without the use of any machine or instrument and without being pressed or sweetened; and on all
fine-cut shorts and refuse, scraps, clippings,cuttings, stems, and sweepings of tobacco, there shall be collected on
each kilogram, seventy-five centavos: Provided, however, That fine-cut shorts and refuse, scraps, clippings,
cuttings, stems and sweepings of tobacco resulting from the handling, or stripping of whole leaf tobacco may be
transferred, disposed of, or otherwise sold, without prepayment ofthe specific tax herein provided for under such
conditions as may be prescribed in the regulations promulgated by the Secretary of Finance upon recommendation
of the Commissioner if the same are to be exported or to be used in the manufacture of other tobacco products on
which the specific tax will eventually be paid on the finished product.

On tobacco specially prepared for chewing so as to be unsuitable for use in any other manner, on each kilogram,
sixty centavos.

Sections 144 and 148 were subsequently renumbered as Sections 120 and 125 respectively under Presidential
Decree No. 1994,  which took effect on January 1, 1986 (1986 Tax Code); then as Sections 137 and 141 under
54

Executive Order No. 273;  and finally as Sections 140 and 144 under Republic Act No. 8424 or the "Tax Reform Act
55

of 1997." However, the provisions remained basically unchanged.

The business transactions of La Suerte, Fortune, and Sterling that the Commissioner found to be taxable for specific
tax took place during the effectivity of the 1986 Tax Code, as amended by Executive Order No. 273. The pertinent
provisions are Sections 137 and 141, thus:

SEC. 137. Removal of tobacco products without prepayment of tax. – Products of tobacco entirely unfit for chewing
or smoking may be removed free of tax for agricultural or industrial use, under such conditions as may be prescribed
in the regulations of the Ministry of Finance. Stemmed leaf tobacco, fine-cut shorts, the refuse of fine-cut chewing
tobacco, scraps, cuttings, clippings, stems or midribs, and sweepings of tobacco may be soldin bulk as raw material
by one manufacturer directly to another, without payment of the tax under such conditions as may be prescribed in
the regulations of the Ministry of Finance.

‘Stemmed leaf tobacco,' as herein used, means leaf tobacco which has had the stem or midrib removed. The term
does not include broken leaf tobacco.

....

SEC. 141. Tobacco Products. – There shall be collected a tax of seventy-five centavos on each kilogram of the
following products of tobacco:

(a) tobacco twisted by hand or reduced into a condition to be consumed in any manner other than the
ordinary mode of drying and curing;

952
 (b) tobacco prepared or partially prepared with or without the use of any machine or instruments or without
being pressed or sweetened; and

(c) fine-cut shorts and refuse, scraps, clippings, cuttings, stems and sweepings of tobacco. Fine-cut shorts
and refuse, scraps, clippings, cuttings, stems and sweepings of tobacco resulting from the handling or
stripping of whole leaf tobacco may be transferred, disposed of, or otherwise sold, without prepayment of the
specific tax herein provided for under such conditions as may be prescribed in the regulations promulgated
by the Ministry of Finance upon recommendation of the Commissioner, if the same are to be exported or to
be used in the manufacture of other tobacco products on which the excise tax will eventuallybe paid on the
finished product.

On tobacco specially prepared for chewing so as to be unsuitable for use in any other manner, on each kilogram,
sixty centavos.

Parenthetically, the present provisionsexplicitly state the following:

Stemmed leaf tobacco, tobacco prepared or partially prepared with or without the use of any machine or instrument
or without being pressed or sweetened, fine-cut shorts and refuse, scraps, clippings, cuttings, stems, midribs, and
sweepings of tobacco resulting from the handling or stripping of whole leaf tobacco shall be transferred, disposed of,
or otherwise sold, without any prepayment of the excisetax . . . if the same are to be exported or to be used in the
manufacture of cigars, cigarettes, or other tobacco products on which the excise tax will eventually be paid on the
finished product, under such conditions as may be prescribed in the rules and regulations promulgated by the
Secretary of Finance, upon recommendation of the Commissioner. 56

BIR assessments

G.R. No. 125346

Sometime in June, 1989, a team of examiners from the Bureau of Internal Revenue, led by Crisanto G. Luna,
Revenue Officer III of the Field Operation Division of the Excise Tax Service, conducted an examination of the
books of La Suerte by virtue of a letter of authority issued by then Commissioner Jose U. Ong.

On January 3, 1990, La Suerte received a letter from then Commissioner Jose U. Ong demanding the payment of
34,934,827.67 as deficiency excise tax on La Suerte’s entire importation and local purchase of stemmed leaf
tobacco for the period covering January 1, 1986 to June 30, 1989.

On January 12, 1990, La Suerte . . . protest[ed] the excise tax deficiency assessment . . . stressing that the BIR
assessment was based solely on Section 141(b) of the Tax Code without, however, applying Section 137 thereof,
the more specific provision, which expressly allows the sale of stemmed leaf tobacco as raw material by one
manufacturer directly to another without payment of the excise tax. However, in a letter, dated August 31, 1990,
Commissioner Jose U. Ong denied La Suerte’s protest, insisting that stemmed leaf tobacco is subject to excise tax
"unless there is an express grant of exemption from [the] payment of tax."

In a letter dated October 17, 1990, Commissioner Ong reiterated his demand for the payment of the alleged
deficiency excise taxes due from La Suerte, to wit:

"Please be informed that in an investigation conducted by this Office, it was ascertainedthat you incurred a
deficiency specific tax on your importation and local purchase of stemmed leaf tobacco covering the period from
January 1, 1986 to June 30, 1989 in the total amount of 34,904,247.00 computed as follows:

STEMMED–LEAF TOBACCO

Imported 13,918,465 kls. x 0.75 ₱10,438,848.00

Local 32,620,532 kls. x 0.75 24,465,399.00

Total Amount Due (Basic Tax)- - - - - - - - - - - - ₱34,904,247.00

. . . ." (page 99, Rollo)

On December 6, 1990, La Suerte filed with the Court of Tax Appeals a Petition for Review seeking for the
annulment of the assessments. . .
953
. . . On July 13, 1995, the Tax Court rendered [its] Decision, the dispositive portion of which reads[:]

"WHEREFORE, in all the foregoing, the assessment of alleged deficiency specific tax in the amount of
₱34,904,247.00 issued by the Respondent is hereby CANCELLED for lack of merit.

SO ORDERED." 57

The Commissioner appealed the Court of Tax Appeals’ decision before the Court of Appeals. On December 29,
1995, the Court of Appeals Sixth Division ruled against La Suerteand found that RR No. V-39 limits the tax
exemption on transfers of stemmed leaf tobacco to transfers between two L-7 permittees.  The Court of Appeals
58

ruled as follows:

IN THE LIGHT OF ALL THE FOREGOING, the Decision appealed from is hereby REVERSED and SET ASIDE.
Respondent is ordered to pay the petitioner Commissioner of Internal Revenue the amount of ₱34,904,247.00 as
deficiency specific tax on its importations and local purchases of stemmed leaf tobacco and its sale of stemmed leaf
tobacco to Associated Anglo-American Tobacco Corporation covering the period from January 1, 1986 to June 30,
1989, plus 25% surcharge for late payment and 20% interest per annum from October 17, 1990 until fully paid
pursuant to sections 248 and 249 of the Tax Code.

SO ORDERED. 59

La Suerte filed a motion for reconsideration, which was denied by the Court of Appeals in its June 7, 1996
resolution.
60

On August 2, 1996, La Suerte filed the instant petition for review,  praying for the reversal of the Court of Appeals’
61

decision and cancellation of the assessment by the Commissioner. La Suerte raises the following grounds in
support of its prayer:

A. THE COURT OF APPEALS ERRED WHEN IT CONSIDERED SECTION 20 (A) OF RR NO. V-39, SINCE
THE COMMISSIONER RAISED IT FOR THE FIRST TIMEIN THE COURT OF APPEALS

B. THE COURT OF APPEALS ERRED WHEN IT HELD THAT SECTION 20(A) OF RR NO. V-39
RESTRICTS THE APPLICATION OF SECTION 137 OF THE TAX CODE, SINCE LANGUAGE IN SEC. 137
IS UNQUALIFIED, WHILE SEC. 20(A) CONTAINS NO RESTRICTIVE LANGUAGE

C. THE COURT OF APPEALS ERRED WHEN IT IGNORED SEC. 43 OF RR NO. 17-67 AS WELL AS
OPINIONS OF BIR OFFICIALS WHICH CONFIRMED THE EXEMPTION OFSTEMMED LEAF TOBACCO
FROM PREPAYMENT OF SPECIFIC TAX

D. THE COURT OF APPEALS ERRED WHEN IT HELD THAT SEC. 43 OF RR NO. 17-67 DID NOT
REPEAL SECTIONS 35 AND 20(A) OF RR NO. V-39, SINCE THEIR PROVISIONS ARE REPUGNANT TO
EACH OTHER

E. THE COURT OF APPEALS ERRED WHEN IT HELD THAT RR NO. V-39 IMPOSES SPECIFIC TAXES
ON STEMMED LEAF TOBACCO, SINCE IT MAKES NO MENTION AT ALL OF TAXES ON STEMMED
LEAF TOBACCO

F. THE COURT OF APPEALS ERRED WHEN IT HELD RR NO. V-39 APPLIED TO L-6 PERMITTEES OR
MANUFACTURERS OF STEMMED LEAF TOBACCO, SINCE L-6 CLASSIFICATION WAS NON-
EXISTENT AT THE TIME

G. THE COURT OF APPEALS ERRED WHEN IT INTERPRETED SECTION 20(A) OF RR NO. V-39 IN
SUCH A WAY AS TO RESULT IN ADMINISTRATIVE LEGISLATION, SINCE THE INTERPRETATION
SANCTIONED THE RESTRICTION OF AN UNQUALIFIED PROVISION OF LAW BY A MERE
REGULATION

H. THE COURT OF APPEALS ERRED WHEN IT GAVE NO WEIGHT TO THE DECEMBER 12, 1972 BIR
RULING AND OPINIONS OF OTHER BIR OFFICIALS WHICH CONFIRMED THE EXEMPTION OF
STEMMED LEAF TOBACCO FROM PREPAYMENT OF SPECIFIC TAX

I. THE COURT OF APPEALS ERRED WHEN IT HELD [THAT] NONAPPLICATION OF [THE] DECEMBER
12 RULING DID NOT IMPINGE ON PRINCIPLE OF NON-RETROACTIVITY OF RULINGS BECAUSE THE
ASSESSMENT DID NOT CITE THE RULING, SINCE CITATION OF A RULING INAN ASSESSMENT [IS]
NOT NECESSARY FOR PRINCIPLE TO APPLY

954
 J. THE COURT OF APPEALS ERRED WHEN IT DISREGARDED THE ADMINISTRATIVE PRACTICE OF
BIR FOR OVER HALF A CENTURY OF NOT SUBJECTINGSTEMMED LEAF TOBACCO TO SPECIFIC
TAX

K. THE COURT OF APPEALS ERRED WHEN IT HELD THAT SUBJECTING STEMMED LEAF TOBACCO
TO SPECIFIC TAX IS NOT PROHIBITED FORM OF DOUBLE TAXATION, SINCE A TAX ON BOTH
STEMMED LEAF TOBACCO AND CIGARETTES INTO WHICH IT IS MANUFACTURED IS DOUBLE
TAXATION

L. THE COURT OF APPEALS ERRED WHEN IT HELD LA SUERTE LIABLE FOR SPECIFIC TAX EVENIF
NO EFFORT WAS FIRST MADE TO COLLECT THE TAX FROM THE MANUFACTURER OF STEMMED
LEAF TOBACCO, SINCE TAX CODE ALLOWS THIS ONLY IF SPECIAL ALLOWANCE IS GRANTED,
WHICH IS NOT THE CASE

M. THE COURT OF APPEALS ERRED WHEN IT FAILED TO CONSIDER THAT THE REENACTMENT OF
THE 1939 CODE AS THE 1977 CODE AND 1986 TAX CODES ADOPTED THE INTERPRETATION IN
THE DECEMBER 1972 BIR RULING

N. THE COURT OF APPEALS ERRED WHEN IT APPLIED THE RULES OF CONSTRUCTION ON

EXEMPTION FROM TAXES, SINCE NO TAX EXEMPTION WAS INVOLVED BUT MERELY AN
EXEMPTION FROM PREPAYMENT OF TAX. 62

G.R. No. 136328–29

In the letter dated November 24,1989, the Commissioner demanded from Fortune the payment of deficiency excise
tax in the amount of ₱28,938,446.25 for its importation of tobacco strips from January 1, 1986 to June 30, 1989.
Fortune requested for reconsideration, which was denied by the Commissioner on August 31, 1990. Undaunted,
Fortune appealed to the Court of Tax Appeals through a petition for review, which was docketed as CTA Case No.
4587.63

In the decision dated November 23, 1994, the Court of Tax Appeals ruled in favor of Fortune and set aside the
Commissioner’s assessment of ₱28,938,446.25 as deficiency excise tax. Meanwhile, on March 20, 1991, Fortune
received another letter from the Bureau of Internal Revenue, demanding payment of 1,989,821.86 as deficiency
specific tax on its importation of stemmed leaf tobacco from July 1, 1989 to November 30, 1990.  Fortune filed its
64

protest and requested the Commissioner to cancel and withdraw the assessment.  On April 18, 1991, the
65

Commissioner denied with finality Fortune’s request.  Fortune appealed to the Court of Tax Appeals, and the case
66

was docketed as CTA Case No. 4616. 67

In the decision dated October 6, 1994, the Court of Tax Appeals ruled in favor of Fortune and set aside the
Commissioner’s assessment of ₱1,989,821.26 as deficiency excisetax on stemmed leaf tobacco.

The Commissioner filed separate petitions before the Court of Appeals, challenging the decisions rendered by the
Court of Tax Appeals in CTA Case Nos. 4587 and 4616. These petitions were consolidated on November 28,
1996.68

In the decision dated January 30, 1998, the Court of Appeals Seventeenth Division dismissed the consolidated
petitions filed by the Commissioner and affirmedthe assailed decisions of the Court of Tax Appeals. It also denied
the Commissioner’s motion for reconsideration.

Hence, the Commissioner filed the present petition  on January 8, 1999. The Commissioner claims that the Court of
69

Appeals erred (1) "in holding that stemmed leaf tobacco is not subject to the specific tax imposed under Section 141
of the Tax Code[;]"  (2) "in not holding that under Section 137 of the Tax Code, stemmed leaf tobacco is exempt
70

from specific tax when sold in bulk as raw material by one manufacturer directly to another under such conditions as
may be prescribed in the regulations of the Department of Finance[;]"  and (3) "in holding that there is double
71

taxation in the prohibited sense when specific tax is imposed on stemmed leaf tobacco and again on the finished
product of which stemmed leaf tobacco is a raw material." 72

G.R. No. 144942

In April 1995, "[La Suerte] imported stemmed leaf tobacco from various sellers abroad."  The Commissioner
73

"assessed specific taxes on the stemmed leaf tobacco in the amount of 175,909.50, which [La Suerte] paid under
protest."  "Consequently, [La Suerte] filed a claim for refund with [the Commissioner], [who] failed to act on the
74

same."  Undeterred, La Suerte appealed to the Court of Tax Appeals, which in its March 9, 1999 decision, ruled in
75

its favor. The Commissioner appealed to the Court of Appeals Third Division, which on August 31, 2000, rendered
its decision in CA-G.R. SP. No. 51902, affirming the decision of the Court of Tax Appeals.

955
The Commissioner then filed the instant petition for review  asking this court to overturn the Court of Appeals’
76

decision. It avers that the Court of Appeals erred in holding that Section 137 of the Tax Code applied "without any
conditions as to the domicile of the manufacturers and that [the Commissioner] cannot indirectly restrict its
application to local manufacturers." 77

The Third Division of this court initially denied  the petition due to an insufficient or defective verification and
78

because "the petition was filed by revenue lawyers and not by the Solicitor General." 79

The Commissioner filed a motion for clarification  seeking to clarify whether the Bureau of Internal Revenuelegal
80

officers can file petitions for review pursuant to Section 220 of the Tax Code without the intervention of the Office of
the Solicitor General.

The motion was referred to the En Banc  on August 7, 2001, which issued the resolution on July 4, 2002, holding
81

that "Section 220 of the Tax Reform Act must not be understood asoverturning the long established procedure
before this Court in requiring the Solicitor General to represent the interest of the Republic. This Court continues to
maintain that it is the Solicitor General who has the primary responsibility to appear for the government in appellate
proceedings."  In the same resolution, this court also declared the following:
82

The present controversy ruminate upon the singular issue of whether or not Revenue Regulation 1767 [sic] issued
by petitioner, in relation to Section 137 of the InternalRevenue Code in the imposition of a tax on stemmed-leaf
tobacco, deviated from the tax code. This question basically inquires then into whether or not the revenue regulation
has exceeded, on constitutional grounds, the allowable limits of legislative delegation.

Aware that the dismissal of the petition could have lasting effect on government tax revenues, the lifeblood of the
state, the Court heeds the plea of petitioner for a chance to prosecute its case.  (Emphasis and underscoring
83

supplied)

This court resolved to reinstate  and give due course  to the Commissioner’s petition. G.R. No. 148605
84 85

"On January 12, 1990, [Sterling] received a pre-assessment notice for alleged deficiency excise tax on
itsimportation and local purchase of stemmed-leaf tobacco for ₱5,187,432.00 covering the period from November
1986 to January 1989."  Sterling filed its protest letter  dated January 19, 1990. The Commissioner, through its
86 87

letters  dated August 31, 1990 and October 17, 1990, denied the protest with finality.
88

Sterling filed before the Court of Tax Appeals a petition for review  dated January 3, 1991, seeking the cancellation
89

of the deficiency assessment and praying that the Commissioner be ordered to desist from collecting the assessed
excise tax. On July 13, 1995,the Court of Tax Appeals rendered its decision ordering the cancellation of the
assessment for deficiency excise tax.

The Commissioner then appealed  to the Court of Appeals. On March 7, 2001, the latter, through its Ninth Division,
90

rendered a decision reversing the Court of Tax Appeals’ ruling, thus:

WHEREFORE, premises considered, the Decision of the Court of Tax Appeals in C.T.A. Case No. 4532 is hereby
REVERSED and SET ASIDE, and the respondent is ORDERED to pay to the public petitioner the amount of
₱5,187,432.00 as deficiency specific tax on its imported and locally purchased stemmed leaf tobacco from
November 1986 to June 24, 1989, plus 25% surcharge on ₱5,187,432.00, and 20% interest per annum on the total
amount due from December 07, 1990 until full payment, pursuant to Sections 248-49 of the Tax Code.

SO ORDERED. 91

Sterling filed a motion for reconsideration,  which was denied by the Court of Appeals in its June 19, 2001
92

resolution.

Hence, on August 13, 2001, Sterling filed the instant petition for review. 93

Sterling argues that the Court of Appeals erred in holding that (1) then Section 141 of the Tax Code subjects
stemmed leaf tobacco to excise tax; (2) Section 137 of the Tax Code did notexempt stemmed leaf tobacco from
prepayment of excise tax; (3) Section 20(A) of RR No. V-39 restricts the application of Section 137 of the Tax Code
since its language was unqualified, while Section 20(A) contained no restrictive language; (4) RR No. V-39 imposed
specific taxes on stemmed leaf tobacco since its language made no mention of taxes on stemmed leaf tobacco; (5)
the reason behind limiting exemptions only to transfers fromone L-7 to another L-7 is because sale has previously
been subjected tospecific tax; and (6) the exemption from specific tax did not apply to imported stemmed leaf
tobacco. 94

Sterling further argues that the Court of Appeals erred in not holding that (1) the Commissioner’s interpretation of
Section 141 of the Tax Code and Section 20(A) of RR No. V-39 amounts to an amendment of Sections 141 and 137

956
of the Tax Code by a mere administrative regulation; (2) a December 12, 1972 Bureau of Internal Revenue ruling
and opinions of other Bureau of Internal Revenue officials confirmed the exemption of stemmed leaf tobacco from
prepayment of specific tax; (3) the administrative practice of the Bureau of Internal Revenue for over half a century
of not subjecting stemmed leaf tobacco to excise tax proves that no excise taxes were ever intended to be imposed;
(4) imposition of excise tax on stemmed leaf tobacco would result in the prohibited form of double taxation; and (5)
the re-enactment of the relevant provisions in the 1977 and 1986 Tax Codes adopted the interpretation in the
December 1972 Bureau of Internal Revenue ruling.  Sterling also contends that the "Court of Appeals erred in
95

applying the rules of construction on exemption from taxes, since no tax exemption was involved, but merely an
exemption from prepayment of excise tax." 96

G.R. No. 158197

On January 10, 1991, the Commissioner sent a pre-assessment notice to La Suerte demanding payment of
11,757,275.25 as deficiency specific tax on its local purchases and importations and on the sale of stemmed leaf
tobacco during the period from September 14, 1989 to November 20, 1990.  On February 8, 1991, La Suerte
97

received the formal assessment letter of the Commissioner. 98

La Suerte filed its protest on March 8, 1991.  On May 14, 1991, La Suerte received the Commissioner’s decision
99

"denying the protest with finality."

100

"On June 13, 1991, the Court of Tax Appeals promulgated a Decision finding for . . . La Suerte and disposing [as
follows:]"
101

WHEREFORE, in view of the foregoing, We find the petition for review meritorious and the same is hereby
GRANTED. Respondent’s decision dated April 29, 1991 is hereby set aside and the formal assessment for the
deficiency specific tax in the sum of ₱11,575,275.25 subject of the respondent’s letter, dated January 30, 1991, is
deemed cancelled.

No pronouncement as to costs of suit.

SO ORDERED. 102

The Commissioner filed a motion for reconsideration that was denied by the Court of Tax Appeals in its April 5, 1995
resolution. 103

The Commissioner appealed to the Court of Appeals.  In its decision dated July 18, 2002, the Court of Appeals
104

reversed the decision of the Court of Tax Appeals. It cited Commissioner of Internal Revenue v. La Campaña
Fabrica de Tabacos, Inc.  as basis for its ruling. La Suerte filed a motion for reconsideration, but it was denied by
105

the Court of Appeals in the resolution  dated May 9, 2003.

106

La Suerte prays for the reversal of the Court of Appeals’ decision and resolution in its petition for review,  wherein it
107

raises the following arguments:

I. THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD THAT SECTION 20(A) OF REV.
REGS. NO. V-39 LIMITED THE CLASS OF MANUFACTURERS WHOSE SALES OF STEMMED LEAF
TOBACCO WERE EXEMPT FROM PRE-PAYMENT OF SPECIFIC TAX.

II. EVEN IF SEC. 3 OF RR NO. 17-67 HAD BEEN WAS [sic] INTENDED TO LIMIT MANUFACTURERS
EXEMPT FROM PREPAYMENT OF SPECIFIC TAX, THIS WOULD AMOUNT TO UNLAWFUL
DELEGATION OF LEGISLATIVE POWER.

III. RR NO. 17-67 WAS NEITHER ISSUED TO AMEND RR NO. V-39 NOR TO AMEND THE TAX CODE,
BUT SOLELY TO IMPLEMENT ACT NO. 2613, AS AMENDED, WHICH WAS ENACTED IN 1916 AND
HAD ABSOLUTELY NOTHING TO DO WITH TAXES.

IV. SECTION 2(H) OF RR NO. 17-67 EXCEEDED THE CONSTITUTIONAL LIMITS ON THE DELEGATION
OF LEGISLATIVE POWER.

V. SECTION 3(M) OF RR NO. 17-67 AS INTERPRETED BY COMMISSIONER EXCEEDED ALLOWABLE

LIMITS ON DELEGATION OF LEGISLATIVE POWER.

VI. THE HONORABLE COURT OFAPPEALS ERRED IN APPLYING SECTION 20(A) OF RR NO. V-39 TO
LA SUERTE’S IMPORTS OF STEMMED LEAF TOBACCO, FOR THE APPLICABLE PROVISION IS
CHAPTER V OF RR NO. V-39.

957
 VII. THE COMMISSIONER’S PRESENT INTERPRETATION OF SECTIONS 2(M)(1) AND 3(H)OF RR NO.
17-67, WAS NOT THE INTERPRETATION GIVEN TO THOSE SECTIONS BY ITS FRAMERS, AS SHOWN
BY THE LONG ADMINISTRATIVE PRACTICE AFTER THE ISSUANCE OF RR NO. 17-67 AND THE BIR
RULING DATED DECEMBER 12, 1972, WHICH CONFIRMED THE TAX-FREE TRANSFER OF
STEMMED- LEAF TOBACCO. 108

G.R. No. 165499

On various dates in March 1995, the Commissioner of Internal Revenue . . . collected from La Suerte the aggregate
amount of THREE HUNDRED TWENTY-FIVE THOUSAND FOUR HUNDRED TEN PESOS (₱325,410.00) for
specific taxes on La Suerte’s bulk purchases of stemmed-leaf tobacco from foreign tobacco manufacturers. La
Suerte paid the said amount under protest.

....

On September 27, 1996 and October 2, 1996, La Suerte instituted with the Commissioner of Internal Revenue . . .
and with Revenue District No. 52, a claim for refund of specific taxes said to have been erroneously paid on its
importations of stemmed-leaf tobacco for the period of November 1994 up to May 1995, including the amount of
Three Hundred Twenty Five Thousand Four Hundred Ten Pesos (₱325,410.00). . . .

Inasmuch as its claim for refund was not acted upon by petitioner and in order to toll the running of the two-year
reglementary period within which to file a judicial claim for such refund as provided under Section 229 of the 1997
National Internal Revenue Code, as amended, La Suerte filed on February 8, 1997 a petition for review with the
CTA. 109

On September 23, 1998, the Court of Tax Appeals rendered judgment granting the petition for review and ordering
the Commissioner to refund the amount of ₱325,410.00 to La Suerte.  The Commissioner filed a motion for
110

reconsideration, but this was denied by the Court of Tax Appeals on December 15, 1998. 111

On appeal, the Court of Appeals Fourth Division reversed  the Court of Tax Appeals’ ruling. It also denied  La
112 113

Suerte’s motion for reconsideration. Hence, this petition was filed,  reiterating the same arguments already
114

presented in the other cases.

This court ordered the consolidation of G.R. Nos. 136328–29 and 125346.  Thereafter, this court consolidated G.R.
115

Nos. 165499, 144942, and 148605.  Finally, this court approved the consolidation of G.R. Nos. 125346, 136328–
116

29, 144942, 148605, 158197, and 165499. 117

Issues

I. Whether stemmed leaf tobacco is subject to excise (specific) tax under Section 141 of the 1986 Tax Code;

II. Whether Section 137 of the 1986 Tax Code exempting from the payment of specific tax the sale of
stemmed leaf tobacco by one manufacturer to another is not subject to any qualification and, therefore,
exempts an L-7 manufacturer from paying said tax on its purchase of stemmed leaf tobacco from other
manufacturers who are not classified as L-7 permittees;

III. Whether stemmed leaf tobacco imported by La Suerte, Fortune, and Sterling is exempt from specific tax
under Section 137 of the 1986 Tax Code;

IV. Whether Section 20(a) of RR No. V-39, in relation to RR No. 17-67, which limits the exemption from
payment of specific tax on stemmed leaf tobacco to sales transactions between manufacturers classified as
L-7 permittees is a valid exercise by the Department of Finance ofits rule-making power under Section
338 of the 1939 Tax Code;
118

V. Whether the possessor or owner of stemmed leaf tobacco may be held liable for the payment of specific
tax if such tobacco product is removed from the place of production without payment of said tax;

VI. Whether the August 31, 1990 ruling of then Bureau of Internal Revenue Commissioner Jose U. Ong
denying La Suerte’s request for exemption from specific tax on its local purchase and importation of
stemmed leaf tobacco violates the principle on non-retroactivity of administrative ruling for allegedly
contradicting the previous position taken by the Bureau of Internal Revenue that such a transaction is not
subject to specific tax as expressed in the December 12, 1972 ruling of then Bureau of Internal Revenue
Commissioner Misael P. Vera; and

VII. Whether the imposition of excise tax on stemmed leaf tobacco under Section 141 of the 1986 Tax Code
constitutes double taxation.
958
 Arguments of the cigarette manufacturers

The cigarette manufacturers claim that since Section 137 of the 1986 Tax Code and Section 20(a) of RR No. V-39
do not distinguish "as to the type of manufacturer that may sell stemmed-leaf tobacco without the prepayment of
specific tax[,] [t]he logical conclusion is that any kind of tobacco manufacturer is entitled to this treatment."  The 119

authority of the Secretary of Finance to prescribe the "conditions" refers only to procedural matters and should not
curtail or modifythe substantive right granted by the law.  The cigarette manufacturers add thatthe reference to an
120

L-7 invoice and L-7 register book in the second paragraph of Section 20(a) cannot limit the application of the tax
exemption provision only to transfers between L-7 permittees because (1) it does not so provide;  and (2) under the 121

terms of RR No. V-39, L-7 referred to manufacturers of any class of tobacco products, including manufacturers of
stemmed leaf tobacco. 122

They further argue that, going by the theory of the Commissioner, RR No. 17-67 would have unduly restricted the
meaning of "manufacturers" by limiting it to a few manufacturers suchas manufacturers of cigars and
cigarettes. Allegedly, RR No. 17-67 cannotchange the original meaning of L-7 in Section 20(A) of RR No. V-39
123

without exceeding constitutional limits of delegated legislative power.  La Suerte further points out that RR No. 17-
124

67 was not even issued for the purpose of implementing the Tax Code but for the sole purpose of implementing Act
No. 2613; and Section 3 of RR No. 17-67 restricts the new designations only for administrative purposes. 125

Moreover, the cigarette manufacturers contend "that Section 132 does not operate as a tax exemption" because
"prepayment means payment of obligation in advance or before it is due."  Consequently, the rules of construction
126

on tax exemption do not apply.  According to them, "the absence of tax prepayment for the saleof stemmed leaf
127

tobacco impliedly indicates the underlying policy of the law: that stemmed leaf tobacco shall not be taxed twice, first,
as stemmed leaf tobacco and, second, as a component of the finished products of which it forms an integral part." 128

Fortune, for its part, claims that stemmed leaf tobacco is not subject to excise tax. It argues that stemmed leaf
tobacco cannot be considered prepared or partially prepared tobaccobecause it does not fall within the definition of
a "processed tobacco" under Section 1-b of Republic Act No. 698, as amended.  Furthermore, it adds that Section
129

141 should be strictly construed against the taxing power.  "There being no explicit reference to stemmed leaf
130

tobacco in Section 141, it cannot be claimed or construed to be subject to specific tax." 131

According to Fortune, "a plain reading of Section 141 readily reveals that the intention was to impose excise taxes
on products oftobacco that are not to be used as raw materials in the manufacture of other tobacco
products." "Section 2(m)(1) unduly expanded the meaning of prepared or partially prepared tobacco to includea raw
132

material like stemmed leaf tobacco; hence, ultra viresand invalid." 133

As regards the taxability of their importations, Sterling argues that since locally manufactured stemmed leaf
tobaccos are not subject to specific tax, it follows that imported stemmed leaf tobaccos are also not subject to
specific tax.  On the other hand, La Suerteclaims that Section 20(A) of RR No. V-39 does not apply to its imports
134

because the applicable provision is Section 128(b) of the 1986 Tax Code, which states that "imported articles shall
be subject to the same tax and the same rates and basis of excise taxes applicable to locally manufactured articles,"
and Chapter V of RR No. V-39 (Payment of specific taxes on imported cigars, cigarettes, smoking and chewing
tobacco). 135

Finally, La Suerte and Sterling  argues that the Court of Appeals erred: (1) in ignoring Section 43 of RR No. 17-67,
136

December 12, 1972 Bureau of Internal Revenue ruling and other Bureau of Internal Revenue opinions confirming
the exemption of stemmed leaf tobacco from prepayment of specific tax;  (2) in disregarding the Bureau of Internal
137

Revenue’s practice for over half a century of not subjecting stemmed leaf tobacco to specific tax;  (3) in failing to 138

consider that the re-enactment of the 1939 Tax Code as the 1977 and 1986 Tax Codes impliedly adopted the
interpretation in the December 12, 1972 ruling; and 4) in holding that nonapplication of the December 12, 1972
ruling did not impinge on the principle of non-retroactivity of rulings.  Moreover, it argues that the Tax Code does
139

not authorize collection of specific tax from buyers without a prior attempt to collect tax from manufacturers. 140

Respondent’s arguments

Respondent counters that "under Section 141(b), partially prepared or manufactured tobacco is subject to specific
tax."  The definition of "partially manufactured tobacco" in Section 2(m) of RR No. 17-67 includes stemmed leaf
141

tobacco; hence, stemmed leaf tobacco is subject to specific tax.  "Imported stemmed leaf tobacco isalso subject to
142

specific tax under Section 141(b) in relation to Section 128 of the 1977 Tax Code."  Fortune’s reliance on the 143

definition of "processed tobacco" in Section 1-b of Republic Act No. 698  as amended by Republic Act No. 1194 is
144

allegedly misplaced because the definition therein of processed tobacco merely clarified the type of tobacco product
that may not be imported into the country.  Respondent posits that "there is no double taxation in the prohibited
145

sense even if specific tax is also imposed on the finished product of which stemmed leaf tobacco is a raw
material."  Congress clearly intended it "considering that stemmed leaf tobacco, as partially prepared or
146

manufactured tobacco, is subjected to specific tax under Section 141(b), while cigars and cigarettes, of which
stemmed leaf tobacco is a raw material, are also subjected to specific tax under Section 142."  It adds that there is 147

no constitutional prohibition against double taxation.148

959
"Foreign manufacturers of tobacco products not engaged in trade or business in the Philippines cannot be classified
as L-7, L-6, or L-3R since they are beyond the pale of Philippine laws and regulations."  "Since the transfer of
149

stemmed leaf tobacco from one factory to another must be under an official L-7 invoice and entered in the L-7
registers of both transferor and transferee, it is obvious that the factories contemplated are those located or
operating in the Philippines and operated only by L-7 permittees."  The transaction contemplated under Section
150

137 is sale and not importation because the law uses the word "sold."  The law uses "importation" or "imported"
151

whenever the transaction involves bringing in articles from foreign countries. 152

Respondent argues that "the issuance of RR Nos. V-39 and 17-67 is a valid exercise by the Department of Finance
of its rule-making power" under Sections 132 and 338 of the 1939 Tax Code.  It explains that "the reason for the
153

exemption from specific tax of the sale of stemmed leaf tobacco as raw material by one L-7 directly to another L-7 is
that the stemmed leaf tobacco is supposed to have been already subjected to specific tax when an L-7 purchased
the same from an L-6."  "Section 20(A) of RR No. V-39 adheres to the standards set forth in Section 245 because it
154

provides the conditions for a tax-free removal of stemmed leaf tobacco under Section 137 without negating the
imposition of specific tax under Section 141(b)."  "To construe Section 137 in the restrictive manner suggested by
155

La Suerte will practically defeat the revenue-generating provision of Section 141(b)." 156

It further argues that the August 31, 1990 ruling of then Bureau of Internal Revenue Commissioner Jose U. Ong
denying La Suerte’s request for exemption from specific tax on its local purchase and importation of stemmed leaf
tobacco does not violate the principle on non-retroactivity of administrative ruling. It alleges that an erroneous ruling,
like the December 12, 1972 ruling, does not give rise to a vested right that can be invoked by La Suerte. 157

Finally, respondent contends that under Section 127, if domestic products are removed from the place ofproduction
without payment of the excise taxes due thereon, it is not required that the tax be collected first from the
manufacturer or producer before the possessor thereof shall be liable. 158

Court’s ruling

Nature of excise tax

Excise tax is a tax on the production, sale, or consumption of a specific commodity in a country. Section 110 of the
1986 Tax Code explicitly provides that the "excise taxes on domestic products shall be paid by the manufacturer or
producer before[the] removal [of those products] from the place of production." "It does not matter to what use the
article[s] subject to tax is put; the excise taxes are still due, even though the articles are removed merely for storage
in someother place and are not actually sold or consumed."  The excise tax based on weight, volume capacity or
159

any other physical unit of measurement is referred to as "specific tax." If based on selling price or other specified
value, itis referred to as "ad valorem" tax.

Section 141 subjects partially

prepared tobacco, such as
stemmed leaf tobacco, to
excise tax

Section 141 of the 1986 Tax Code provides:

SEC. 141. Tobacco Products. – There shall be collected a tax of seventy-five centavos on each kilogram of the
following products of tobacco:

(a) tobacco twisted by hand or reduced into a condition to be consumed in any manner other than the
ordinary mode of drying and curing;

(b) tobacco prepared orpartially prepared with or without the use of any machine or instruments or without
being pressed or sweetened; and

(c) fine-cut shorts and refuse, scraps, clippings, cuttings, stems and sweepings of tobacco. Fine-cut shorts
and refuse, scraps, clippings, cuttings, stems and sweepings of tobacco resulting from the handling or
stripping of whole leaf tobacco may be transferred, disposed of, or otherwise sold, without prepayment of the
specific tax herein provided for under such conditions as may be prescribed in the regulations promulgated
by the Ministry of Finance upon recommendation of the Commissioner, if the same are tobe exported or to
be used in the manufacture of other tobacco products on which the excise tax will eventually be paid on the
finished product.

On tobacco specially prepared for chewing so as to be unsuitable for use in any other manner, on each kilogram,
sixty centavos. (Emphasis supplied)

960
It is evident that when tobacco is harvested and processed either by hand or by machine, all itsproducts become
subject to specific tax. Section 141 reveals the legislative policy to tax all forms of manufactured tobacco — in
contrast to raw tobacco leaves — including tobacco refuse or all other tobacco which has been cut, split, twisted, or
pressed and is capable of being smoked without further industrial processing.

Stemmed leaf tobacco is subject to the specific tax under Section 141(b). It is a partially prepared tobacco. The
removal of the stem or midrib from the leaf tobacco makes the resulting stemmed leaf tobacco a prepared or
partially prepared tobacco. The following is La Suerte’s own illustration of how the stemmed leaf tobacco comes
about: In the process of removing the stems, the whole leaf tobacco breaks into pieces; after the stems or midribs
are removed, the tobacco is threshed (cut by machine into fine narrow strips) and then undergoes a process of
redrying,  undoubtedly showing that stemmed leaf tobacco is a partially prepared tobacco. Since the Tax Code
160

contained no definition of "partially prepared tobacco," then the term should be construed in its general, ordinary,
and comprehensive sense. 161

RR No. 17-67, as amended, supplements the law by delineating what products of tobacco are "prepared or
manufactured" and "partially prepared or partially manufactured." Section 2(m) states:

(m) "Partially manufactured tobacco" — Includes:

(1) "Stemmed leaf" — handstripped tobacco, clean, good, partially broken leaf only, free from mold and dust.

(2) "Long-filler" — handstripped tobacco of good, long pieces of broken leaf usableas filler for cigars without
further preparation, and free from mold, dust stems and cigar cuttings.

(3) "Short-filler" — handstripped or machine-stripped tobacco, clean, good, short pieces of broken leaf,
which will not pass through a screen of two inches (2") mesh.

(4) "Cigar-cuttings" — clean cuttings or clippings from cigars, unsized with any other form of tobacco.

(5) "Machine-scrap tobacco"— machine-threshed, clean, good tobacco, not included in any of the above
terms, usable in the manufacture of tobacco products.

(6) "Stems" — midribs of leaftobacco removed from the whole leaf or broken leaf either by hand or machine.

(7) "Waste tobacco" — denatured tobacco; powder or dust, refuse, unfit for human consumption;

discarded materials in the manufacture of tobacco products, which may include stems.

Insisting on the inapplicability of RR No. 17-67, La Suerte points to the different definitions given to stemmed leaf
tobacco by Section 2(m)(1) of RR No. 17-67 and Section 137. It argues that while RR No. 17-67 defines stemmed
leaf tobacco as handstripped tobacco of clean, good, partially broken leaf only, free from mold and dust,Section 137
defines it as leaf tobacco which has had the stemor midrib removed.The term does not include broken leaf tobacco.
We are not convinced.

Different definitions of the term "stemmed leaf" are unavoidable, especially considering that Section 2(m)(1) is an
implementing regulation of Act No. 2613, which was enacted in 1916 for purposes of improving the qualityof
Philippine tobacco products, while Section 137 defines the tobacco product only for the purpose of exempting it from
the specific tax. Whichever definition is adopted, there is no doubt that stemmed leaf tobacco is a partially prepared
tobacco.

The onus of proving that stemmed leaf tobacco is not subject to the specific tax lies with the cigarette
manufacturers. Taxation is the rule, exemption is the exception.  Accordingly, statutes granting tax exemptions
162

must be construed instrictissimi jurisagainst the taxpayer and liberally in favor of the taxing authority. The cigarette
manufacturers must justify their claim by a clear and categorical provision in the law. Otherwise, they are liable for
the specific tax on stemmed leaf tobacco found in their possession pursuant to Section 127  of the 1986 Tax Code,
163

as amended.

Stemmed leaf tobacco

transferred in bulk between
cigarette manufacturers are
exempt from excise tax under
Section 137 of the 1986 Tax
Code in conjunction with RR
No. V-39 and RR No. 17-67

961
In the instant case, an exemption on the taxability of stemmed leaf tobacco is found in Section 137, which provides
the following:

SEC. 137. Removal of tobacco products without prepayment of tax. – Products of tobacco entirely unfit for chewing
or smoking may be removed free of tax for agricultural or industrial use, under such conditions as may be prescribed
in the regulations of the Ministry of Finance. Stemmed leaf tobacco,fine-cut shorts, the refuse of fine-cut chewing
tobacco, scraps, cuttings, clippings, stems or midribs, and sweepings of tobacco may be sold in bulk as raw material
by one manufacturer directly to another, without payment of the tax under such conditions as may be prescribed in
the regulations of the Ministry of Finance.

‘Stemmed leaf tobacco,' as herein used, means leaf tobacco which has had the stem or midrib removed. The term
does not include broken leaf tobacco. (Emphasis and underscoring supplied) Section 137 authorizes a tax
exemption subject to the following: (1) that the stemmed leaf tobacco is sold in bulk as raw material by one
manufacturerdirectly to another; and (2) that the sale or transfer has complied with the conditions prescribed by the
Department of Finance.

That the title of Section 137 uses the term "without prepayment" while the body itself uses "without payment" is of no
moment. Both terms simply mean that stemmed leaf tobacco may be removed from the factory or place of
production without prior payment of the specific tax.

This court has held in Commissioner of Internal Revenue v. La Campaña Fabrica de Tabacos, Inc.,  reiterated in
164

Compania General de Tabacos de Filipinas v. Court of Appeals  and Commissioner of Internal Revenue v. La
165

Suerte Cigar and Cigarette Factory, Inc.  that the exemption from specific tax of the sale of stemmed leaf tobacco is
166

qualified by and is subject to "such conditions as may be prescribed in the regulations of the Department of
Finance." These conditions were provided for in RR Nos. V-39 and 17-67. Thus, Section 137 must be read and
interpreted in accordance with these regulations.

Section 20(a) of RR No. V-39 provides the rules for tax exemption on tobacco products: SECTION 20. Exemption
from tax of tobacco products intended for agricultural or industrial purposes. — (a) Sale of stemmed leaf tobacco,
etc., by one factory to another.— Subject to the limitations herein established, products of tobacco entirely unfit for
chewing or smoking may be removed free of tax for agricultural or industrial use; and stemmed leaf tobacco, fine-cut
shorts, the refuse of fine-cut chewing tobacco, refuse, scraps, cuttings, clippings, and sweepings of tobacco may be
sold in bulk as raw materials by one manufacturer directly to another without the prepayment of the specific tax.

Stemmed leaf tobacco, fine-cut shorts, the refuse of fine-cut chewing tobacco, scraps, cuttings, clippings, and
sweeping of leaf tobacco or partially manufactured tobaccoor other refuse of tobacco may be transferred from one
factory to another under an official L-7 invoiceon which shall be entered the exact weightof the tobacco at the time
of its removal, and entry shall be made in the L-7 register in the place provided on the page of removals.
Corresponding debit entry will be made in the L-7 register book of the factory receiving the tobacco under heading
"Refuse, etc., received from other factory," showing the date of receipt, assessment and invoice numbers, name and
address of the consignor, form in which received, and the net weight of the tobacco. This paragraph should not,
however, be construed to permit the transfer of materials unsuitable for the manufacture of tobacco products from
one factory to another. (Emphasis supplied)

The conditions under which stemmed leaf tobacco may be transferred from one factory to another without
prepayment of specific tax are as follows:

(a) The transfer shall be under an official L-7 invoice on which shall be entered the exact weight of the
tobacco at the time of its removal;

(b) Entry shall be made in the L-7 register in the place provided on the page for removals; and

(c) Corresponding debit entry shall bemade in the L-7 register book of the factory receiving the tobacco
under the heading, "Refuse, etc.,received from the other factory," showing the date of receipt, assessment
and invoice numbers, name and address of the consignor, formin which received, and the weight of the
tobacco.

Under Section 3(h) of RR No. 17-67, entities that were issued by the Bureau of Internal Revenue with an L-7 permit
refer to "manufacturers of tobacco products." Hence, the transferor and transferee of the stemmed leaf tobacco
must be an L-7 tobacco manufacturer.

La Campañaexplained that the reason behind the tax exemption of stemmed leaf tobacco transferred between two
L-7 manufacturers is that the same had already been previouslytaxed when acquired by the L-7 manufacturer from
dealers of tobacco, thus:

962
[T]he exemption from specific tax of the sale of stemmed leaf tobacco as raw material by one L-7 directly to another
L-7 is because such stemmed leaf tobacco has been subjected to specific tax when an L-7 manufacturer purchased
the same from wholesale leaf tobacco dealers designated under Section 3, Chapter I, Revenue Regulations No. 17-
67 (supra) as L-3, L-3F, L-3R, L-4, or L-6, the latter being also a stripper of leaf tobacco. These are the sources of
stemmed leaf tobacco to be used as raw materials by an L-7 manufacturer which does not produce stemmed leaf
tobacco. When an L-7 manufacturer sells the stemmed leaf tobacco purchased from the foregoing suppliersto
another L-7 manufacturer as raw material, such sale is not subject to specific tax under Section 137 (now Section
140), as implemented by Section 20(a) of Revenue Regulations No. V-39. 167

There is no new product when stemmed leaf tobacco is transferred between two L-7 permit holders. Thus, there can
be no excise tax that will attach. The regulation, therefore, is reasonable and does not create a new statutory right.

RR Nos. V-39 and 17-67 did

not exceed the allowable
limits of legislative delegation

The cigarette manufacturers contend that the authority of the Department of Finance to prescribe conditions is
merely procedural. Its rule-making power is only for the effective enforcement of the law, which implicitly rules out
substantive modifications. The Secretary of Finance cannot, by mere regulation, limit the classes of manufacturers
that may be entitled to the tax exemption. Otherwise, Section 137 (Section 132 in the 1939 Tax Code) would be
invalid as an undue delegation of legislative power without the required standards or parameters.

The power of taxation is inherently legislative and may be imposed or revoked only by the legislature.  Moreover,
168

this plenary power of taxation cannot be delegated by Congress to any other branch of government or private
persons, unless its delegation is authorized by the Constitution itself.  Hence, the discretion to ascertain the
169

following — (a) basis, amount, or rate of tax; (b) person or property that is subject to tax; (c) exemptions and
exclusions from tax; and (d) manner of collecting the tax — may not be delegated away by Congress.

However, it is well-settled that the power to fill in the details and manner as to the enforcement and administration of
a law may be delegated to various specialized administrative agencies like the Secretary of Finance in this case. 170

This court in Maceda v. Macaraig, Jr.  explained the rationale behind the permissible delegation of legislative
171

powers to specialized agencies like the Secretary of Finance:

The latest in our jurisprudence indicates that delegation of legislative power has become the rule and its non-
delegation the exception. The reason is the increasing complexity of modern life and many technical fields of
governmental functions as in matters pertaining to tax exemptions. This is coupled by the growing inability of the
legislature to cope directly with the many problems demanding its attention. The growth of society has ramified its
activities and created peculiar and sophisticated problems that the legislature cannot be expected reasonably to
comprehend. Specialization even in legislation has become necessary. To many of the problems attendant upon
present day undertakings, the legislature may not have the competence, let alone the interest and the time, to
provide the required directand efficacious, not to say specific solutions. 172

Thus, rules and regulations implementing the law are designed to fill in the details or to make explicit whatis general,
which otherwise cannot all be incorporated in the provision of the law.  Such rules and regulations, when
173

promulgated in pursuance of the procedure or authority conferred upon the administrative agency by law, "deserve 174

to be given weight and respect by the courts in view of the rule-making authority given to those who formulate them
and their specific expertise in their respective fields."  To be valid, a revenue regulation mustbe within the scope of
175

statutory authority or standard granted by the legislature. Specifically, the regulation must (1) be germane to the
object and purpose of the law;  (2) not contradict, but conform to, the standards the law prescribes;  and (3) be
176 177

issued for the sole purpose of carrying into effect the general provisions of our tax laws.178

Section 338 authorizes the Secretary of Finance to promulgate all needful rules and regulations for the effective
enforcement of the provisions of the 1939 Tax Code.

The specific authority of the Department of Finance to issue regulations relating to the taxation of tobacco products
is found in Section 4  (Specific provisions to be contained in regulations); Section 125  (Payment of specific tax on
179 180

imported articles to customs officers prior to release from the customhouse); Section 132 (Removal of tobacco
products without prepayment of tax); Section 149  (Extent of supervision over establishments producing taxable
181

output); Section 150  (Records to be kept by manufacturers; Assessment based thereon); and Section 152 (Labels
182 183

and form of packages) of the 1939 Tax Code.

RR No. V-39 was promulgated to enforce the provisions of Title IV (Specific Taxes) of the 1939 Tax Code relating to
the manufacture and importation of, and payment of specific tax on, manufactured tobacco or products of tobacco.
By an explicit provision in Section 132, the lawmakers defer to the Department of Finance to provide the details
upon which the removal of stemmed leaf tobacco may be exempt from the specific tax in view of its supposed
expertise in the tobacco trade. Section 20(a) of RR No. V-39 adhered to the standards because it provided the
963
conditions— the proper documentation and recording of raw materials transferred from one factory to another — for
a tax-free removal of stemmed leaf tobacco, without negating the imposition of specific tax under Section 137. The
"effective enforcement of the provisions of [the Tax Code]" in Section 338 provides a sufficient standard for the
Secretary of Finance in determining the conditionsfor the tax-free removal of stemmed leaf tobacco. Section 4
further provides a limitation on the contents of revenue regulations to be issued by the Secretary of Finance.

On the other hand, RR No. 17-67 was promulgated "[i]n accordance with the provisions of Section 79 (B) of the
Administrative Code, as amended by Act No. 2803."  Among the specific administrative powers conferred upon a
184

department head under the Administrative Code is that of promulgating rules and regulations, not contrary to law,
"necessary to regulate the proper working and harmonious and efficient administration of each and all of the offices
and dependencies of his Department, and for the strict enforcement and proper execution ofthe laws relative to
matters under the jurisdiction of said Department."  Under the 1939 Tax Code, the Secretary of Finance is
185

authorized to prescribe regulations affecting the business of persons dealing in articles subject to specific tax,
including the mode in which the processes of production of tobacco and tobacco products should be conducted and
the records to be kept by manufacturers. Clearly then, the provisions of RR No. 17-67 classifying and regulating the
business of persons dealing in tobacco and tobacco products are within the rulemaking authority of the Secretary of
Finance.

RR No. 17-67 did not create a

new classification

The contention of the cigarette manufacturers that RR No. 17-67 unduly restricted the meaning of manufacturers of
tobacco products by limiting it to a few manufacturers suchas manufacturers of cigars and cigarettes is misleading.

The definitions in RR No. 17-67 of"manufacturer of tobacco" and "manufacturer of cigars and/or cigarettes" are in
conformity with, as in fact they are verbatim adoptions of, the definitions under Section 194(m) and (n) of the 1939
Tax Code.

The cigarette companies further argue that RR No. 17-67 unduly restricted the meaning of L-7 in Section 20(a) of
RR No. V-39 because when RR No. V-39 was issued, there was no distinction at all between L-7, L-3, L-6
permittees, and L-7 referred to manufacturers of any class of tobacco products including stemmed leaf tobacco.

This argument is similarly misplaced.

A reading of the entire RR No. V-39 shows that the regulation pertains particularly to activities ofmanufacturers of
smoking and chewing tobacco, cigars and cigarettes.  This was rightly so because the regulation was issued to
186

enforce the tax law provisions in relation to the manufacture and importation of tobacco products. Clearly apparent
in Section 10(a) is that when a manufacturer of chewing and smoking tobacco, cigars, or cigarettes has been
qualified to conduct his or her business as such, he or she is issued by the internal revenue agent the
corresponding register books and auxiliary register books pertaining to his business as well as the official register
book, L-7, to be used as record of the raw materials for his or her product. It is, therefore, logical toconclude that the
L-7 invoice and L-7 register book under Section 20(a) refers to those invoice and books used by manufacturers of
chewing and smoking tobacco, cigars or cigarettes.

RR No. 17-67 clarified RR No. V-39 by explicitly designating the manufacturers of tobacco products as L-7
permittees (Section 2), in contrast to wholesale leaf tobacco dealers and those that process partially manufactured
tobacco such as stemmed leaf tobacco. RR No. 17-67 did not create a new and restrictive classification but only
expressed in clear and categorical terms the distinctions between "manufacturers" and "dealers" of tobacco that
were already implicit in RR No. V-39.

Indeed, there is no repugnancy between RR No. 17-67 and RR No. V-39, on the one hand, and the Tax Code, on
the other. It is safer to presume that the term "manufacturer" used in Section 137 on tax exempt removals referred
to an entity that is engaged in the business of, and was licensed by the Bureau of Internal Revenue as a,
manufacturer of tobacco products. It does not include an entity engaged in business as a dealer in tobacco that,
incidentally or in furtherance of its business as a dealer, strip or thresh whole leaf tobacco or reprocess partially
manufactured tobacco. 187

Such construction is consistent with the rule that tax exemptions, deemed to be in derogation of the state’s
sovereign right of taxation, are strictly applied and may be granted only under clear and unmistakable terms of the
law and not merely upon a vague implication or inference. 188

RR No. V-39 must be applied

and read together with RR
No. 17-67

The cigarette manufacturers’ argument is misplaced, stating that RR No. 17-67 could not modify RR No. V-39
because it was promulgated to enforce Act No. 2613, as amended (entitled "An Act to Improve the Methods of
964
Production and the Quality ofTobacco in the Philippines and to Develop the Export Trade Therein"), which allegedly
had nothing whatsoever to do with the Tax Code or with the imposition of taxes.

"The Tobacco Inspection Service,instituted under Act No. 2613, was made part of the Bureau of Internal Revenue
and Bureau of Customs administration for . . . internal revenue purposes."  The Collector of Internal Revenue was
189

charged to enforce Act No. 2613, otherwise known as the Tobacco Inspection Law, with a view to promoting the
Philippine tobacco trade and thereby increase the revenues of the government. This can be inferred from a reading
of the following provisions of Act No. 2613:

SEC. 6. The Collector of InternalRevenue shall have the power and it shall be his duty:

(a) To establish general and local rules respecting the classification, marking, and packing of tobacco for
domestic sale or factory use and for exportation so far as may be necessary to secure leaf tobacco of good
quality and to secure its handling under sanitary conditions, and to the end that leaf tobacco be not mixed,
packed, and marked and of the same quality when it is not of the same class and origin.

(b) To establish from time to time adequate rules defining the standard and the type of leaf and
manufactured tobacco which shall be exported, as well also as the manner in which standard tobacco, shall
be packed. Before establishing the rules above specified, the Collector of Internal Revenue shall give due
notice of the proposed rules or amendments to those interested and shall give them an opportunity to
present their objections to such rules or amendments.

(c) To require, whenever it shall be deemed expedient the inspection of and affixture of inspection labels to
tobacco removed from the province of itsorigin to another province before such removal, or to tobacco for
domestic sale or factory use.190

SEC. 7. No leaf tobacco or manufactured tobacco shall be exported until it shall have been inspected by the
Collector of Internal Revenue or his duly authorized representative and found to be standard for export.Collector of
customs shall not permit the exportation of tobacco from the Philippines unless the shipment be in conformity with
the requirements set forth in this Act. The prohibition contained in this section shall not apply to waste and refuse
tobacco accumulated in the manufacturing process when it is invoiced and marked as such waste and
refuse. (Emphasis supplied)
191

....

SEC. 9. The Collector of Internal Revenue may appoint inspectors of tobacco for the purpose of making the
inspections herein required, and may also detail any officer or employee of the Bureau to perform such duty. Said
inspectors or employees shall likewise be charged with the dutyof grading leaf tobacco and shall perform such other
duties as may be required of them in the promotion of the Philippine tobacco industry. The Collector of Internal
Revenue shall likewise appoint, with the approval of the Secretary of Finance, agents in the United States for the
purpose of promoting the export trade in tobacco with the United States, whose duty it shall be to inspect shipments
of tobacco upon or after their arrival in that country when so required, to assist manufacturers of, exporters of, and
dealers in tobacco in disseminating information regarding Philippine tobacco and, at the request of the parties, to act
as arbitrators between the exporter in the Philippine Islands and the importer in the United States whenever a
dispute arises between them as to the quality, sizes, classes, or shapes shipped or received. When acting
asarbitrator as aforesaid, the agent shall proceed in accordance with the law governing arbitration and award inthe
locality where the dispute arises. All agents, inspectors, and employees acting under and by virtue of this Act shall
be subject to all penal provisions applicable to internal-revenue officers generally.  (Emphasis supplied)
192

....

SEC. 12. The inspection fees collectedby virtue of the provisions of this Act shall constitute a special fund to be
known a the Tobacco Inspection Fund, which shall be expended by the Collector of Internal Revenue, with the
approval of the Secretary of Finance, upon allotment by a Board consisting of the Commissioner of Internal
Revenue, the Director of Plant Industry, the Director of the Bureau of Commerce and Industry, two manufacturers
designated by the Manila Tobacco Association, and two persons representing the interests of the tobacco producers
and growers, appointed by the President of the Philippine Islands[.]

These funds may be expended for any of the following purposes:

(a) The payment of the expenses incident to the enforcement of this Act including the salaries of the
inspectors and agents.

(b) The payment of expenses incident to the reconditioning and returning to the Philippine Islands of
damaged tobacco and the reimbursement of the value of the United States internal-revenue stamps lost
thereby.

965
 (c) The advertising of Philippine tobacco products in the United States and in foreign countries. (d) The
establishment of tobaccowarehouses in the Philippine Islands and in the United States at such points as the
trade conditions may demand.

(e) The payment of bounties to encourage the production of leaf tobacco of high quality.

(f) The promotion and defense of the Philippine tobacco interests in the United States and in foreign
countries.

(g) The establishment, operation, and maintenance of tobacco experimental farms for the purpose of
studying and testing the best methods for the improvement of the leaves:Provided, however, That thirty per
centum of the total annual income of the tobacco inspection fund shall be expended for the establishment,
operation, and maintenance of said tobacco experimental farms and for the investigation and discovery of
efficacious ways and means for the extermination and control of the pests and diseases of tobacco:
Provided, further, That in the establishment of experimental farms, preference shall be given to
municipalities offering the necessary suitable land for the establishment of an experimental farm.

(h) The sending of special agentsand commissions to study the markets of the United States and foreign
countries with regard to the Philippine cigars and their propaganda in said markets.

(i) The organization of exhibits of cigars and other Philippine tobacco products in the United States and in
foreign countries.193

SEC. 13. The Collector Internal Revenue shall be the executive officer charged with the enforcement of the
provisions of this Act and of the regulations issued in accordance therewith, but it shall be the duty of the Director of
Agriculture, with the approval of the Secretary of Public Instruction, to execute and enforce the provisions hereof
referring to the cultivation of tobacco. (Emphasis supplied)

The cigarette manufacturers, thus, erroneously concluded that Act No. 2613 does not involve taxation.

Parenthetically, Section 8 of Act No. 2613 pertained to the imposition of tobacco inspection fees, which are National
Internal Revenue taxes, these being one of the miscellaneous taxes provided for under the Tax Code. Said Section
8 was in fact repealed by Section 369(b) of the 1939 Tax Code, and the provision regarding inspection feesare
found in Section 302 of the 1939 Tax Code.

Since the two revenue regulations, RR Nos. V-34 and 17-67, are in pari materia, i.e., they both pertain specifically to
the regulation of tobacco trade, they should be read and applied together. Statutes are in pari materia when they
relate to the same person or thing or to the same class of persons or things, or object, or cover the same specific or
particular subject matter.

It is axiomatic in statutory construction that a statute must be interpreted, not only to be consistent with itself, but
also to harmonize with other laws on the same subject matter, as to form a complete, coherent and intelligible
system. The rule is expressed in the maxim, "interpretare et concordare legibus est optimus interpretandi,"or every
statute must be so construed and harmonized with other statutes as to form a uniform system of
jurisprudence. (Citation omitted)
194

The foregoing rules on statutory construction can be applied by analogy to administrative issuances suchas RR No.
V-39 and RR No. 17-67, especially since both are issued by the same administrative agency.

Importation of stemmed leaf

tobacco not included in the
exemption under Section 137

The transaction contemplated in Section 137 does not include importation of stemmed leaf tobacco for the reason
that the law uses the word "sold" to describe the transaction of transferring the raw materials from one manufacturer
to another.

The Tax Code treats an importerand a manufacturer differently. Section 123 clearly distinguishes between goods
manufactured or produced in the Philippines and things imported. The law uses the proper term "importation" or
"imported" whenever the transaction involves bringing in articles from foreign countries as provided under Section
125 (cf. Section 124). Whenever the Tax Code refers to importers and manufacturers, they are separately
mentioned as two distinct persons or entities (Sections 156 and 160). Under Chapter II, whenever the law uses the
word manufacturer, it only means local manufacturer or producer of domestic products (Sections 150, 151, and 152
of the 1939 Tax Code).

966
Moreover, foreign manufacturers oftobacco products not engaged in trade or business in the Philippines cannot be
designated as L-7 since these are beyond the pale of Philippine law and regulations. The factories contemplated are
those located oroperating only in the Philippines. Contrary to La Suerte’s claim, Chapter V, Section 61 of RR No. V-
39  is not applicable to justify the tax exemption of its importation of stemmed leaf tobacco because from the title of
195

Chapter V, the provision particularly refers to specific taxes on imported cigars, cigarettes, smoking and chewing
tobacco.

No estoppel against government

The cigarette manufacturers contend that for a long time prior to the transactions herein involved, the Collector of
Internal Revenue had never subjected their purchases and importations of stemmed leaf tobacco to excise taxes.
This prolonged practice allegedly represents the official and authoritative interpretation of the law by the Bureau of
Internal Revenue which must be respected.

We are not persuaded.

In Philippine Long Distance Telephone Co. v. Collector of Internal Revenue,  this court has held that this principle is
196

not absolute, and an erroneous implementation by an officerbased on a misapprehension of law may be corrected
when the true construction is ascertained. Thus:

The appellant argues that the Collector of Internal Revenue, previous to the transactions hereininvolved, had never
collected the franchise tax on items of the same nature as those herein in question and this is strong evidence that
such transactions are not subject to tax on the principle that a prolonged practice on the part of an executive or
administrative officer in charge of executing a certain statute is an authoritative construction of great weight. This
contention may be granted, but the principle is not absolute and may be overcome by strong reasons to the
contrary. If through a misapprehension of law an officer has erroneously executed it for a long time, the error may be
corrected when the true construction is ascertained. Such we deem to be the situation in the present case.
Incidentally, the doctrine of estoppel does not apply here.  (Emphasis supplied)
197

This court reiterated this rule in Abello v. Commissioner of Internal Revenue  where it rejected petitioners’ claim
198

that the prolonged practice (since 1939 up to 1988) of the Bureau of Internal Revenue in not subjecting political
contributions to donor’s tax was an authoritative interpretation of the statute, entitled to great weight and the highest
respect:

This Court holds that the BIR isnot precluded from making a new interpretation of the law, especially when the old
interpretation was flawed. It is a well-entrenched rule that[:]

. . . erroneous application and enforcement of the law by public officers do not block subsequent correct application
of the statute, and that the Government is never estopped by mistake or error on the part of its agents.  (Emphasis
199

supplied, citations omitted)

Prolonged practice of the Bureau of Internal Revenue in not collecting the specific tax on stemmed leaf tobacco
cannot validate what is otherwise an erroneous application and enforcement of the law. The government is never
estopped from collecting legitimate taxes because of the error committed by its agents. 200

In La Suerte Cigar and Cigarette Factory v. Court of Tax Appeals,  this court upheld the validity of a revenue
201

memorandum circular issued by the Commissioner of Internal Revenue to correct an error in a previous circular that
resulted in the non-collection of tobacco inspection fees for a long time and declared that estoppel cannot work
against the government:

. . . the assailed Revenue Memorandum Circular was issued to rectify the error in General Circular No. V-27 and to
interpret the phrase "tobacco for domestic sale or factory use" with the view of arresting huge losses of tobacco
inspection fees which were not collected and imposed since the said Circular (No. V-27) took effect. Furthermore,
the questioned Revenue Memorandum Circular was also issued to apprise those concerned of the construction and
interpretation which should be accorded to Act No. 2613, as amended, and which respondent is duty bound to
enforce. It is an opinion on how the law should be construed and there was no attempt whatsoever to enlarge or
restrict the meaning of the law.

The basis for the issuance of said Memorandum Circular was so stated in Resolution No. 2-67 of the Tobacco
Board, wherein petitioners as members of the Manila Tobacco Association, Inc. were duly represented, the pertinent
portions of which read:

". . . .

WHEREAS, this original recommendation of Mr. Hernandez was perfectly in accordance with existing law, more
particularly Sec. 1 of Republic Act No. 31 which took effect since September 25, 1946, but perhaps thru oversight by

967
the former Commissioners and officers of the Tobacco Inspection Service the propriety and legality of effecting the
inspection of tobacco products for local salesand imported leaf tobacco for factory use might have overlooked
resulting in huge losses of tobacco inspection fees. . ." (Italics supplied)

....

Tobacco Inspection fees are undoubtedly National Internal Revenue taxes, they being one of the miscellaneous
taxes provided for under the Tax Code. Section 228 (formerly Section 302) of Chapter VII of the Code
specificallyprovides for the collection and manner of payment of the said inspection fees. It is within the power and
duty of the Commissioner to collect the same, even without inspection, should tobacco products be removed
clandestinely or surreptitiously from the establishment of the wholesaler, manufacturer or redrying plant and from
the customs custody in case of imported leaf tobacco. Errors, omissions or flaws committed by BIR inspectors and
representatives while in the performance of their duties cannot beset up as estoppel nor estop the Government from
collecting a tax legally due. Tobacco inspection fees are levied and collected for purposes of regulation and control
and also as a source of revenue since fifty percentum (50%) of said fees shall accrue to the Tobacco Inspection Fee
Fund created by Sec. 12 of Act No. 2613, as amended and the other fifty percentum, to the Cultural Center of the
Philippines. (Sec. 88, Chapter VII, NIRC)  (Emphasis in this paragraph supplied, citation omitted)
202

Furthermore, the December 12, 1972 ruling of Commissioner Misael P. Vera runs counter to Section 20(a)of RR No.
V-39 in relation to RR No. 17-67, which provides that only transfers of stemmed leaf tobacco between L-7
permittees are exempt. An implementing regulation cannot be superseded by a ruling which is a mere interpretation
of the law. While opinions and rulings of officials of the government called upon to execute or implement
administrative laws command much respect and weight, courts are not bound to accept the same if they override,
instead of remain consistent and in harmony with, the law they seek to apply and implement. 203

Double taxation

The contention that the cigarette manufacturers are doubly taxed because they are paying the specific tax on the
raw material and on the finished product in which the raw material was a part is also devoid of merit.

For double taxation in the objectionable or prohibited sense to exist, "the same property must be taxed twice, when
it should be taxed but once."  "[B]oth taxes must be imposed on the same property or subject- matter, for the same
204

purpose, by the same. . . taxing authority, within the same jurisdiction or taxing district, during the same taxing
period, and they must be the same kind or character of tax." 205

At all events, there is no constitutional prohibition against double taxation in the Philippines.  This court has
206

explained in Pepsi-Cola Bottling Company of the Philippines, Inc. v. Municipality of Tanauan, Leyte: 207

There is no validity to the assertion that the delegated authority can be declared unconstitutional on the theory of
double taxation.  It must be observed that the delegating authority specifies the limitations and enumerates the
1âwphi1

taxes over which local taxation may not be exercised. The reason is that the State has exclusively reserved the
same for its own prerogative. Moreover, double taxation, in general, is not forbidden by our fundamental law, since
We have not adopted as part thereof the injunction against double taxation found in the Constitution of the United
States and some states of the Union. Double taxation becomes obnoxious only where the taxpayer is taxed twice for
the benefit of the same governmental entity or by the same jurisdiction for the same purpose, but not in a case
where one tax is imposed by the State and the other by the city or municipality.  (Emphasis supplied, citations
208

omitted)

"It is something not favored, but is permissible, provided some other constitutional requirement is not thereby
violated, such as the requirement that taxes must be uniform." 209

Excise taxes are essentially taxes on property  because they are levied on certain specified goods or articles
210

manufactured or produced in the Philippines for domestic saleor consumption or for any other disposition, and on
goods imported. In this case, there is no double taxation in the prohibited sense because the specific tax is imposed
by explicit provisions of the Tax Code on two different articles or products: (1) on the stemmed leaf tobacco; and (2)
on cigar or cigarette. 211

WHEREFORE, this court:

1. DENIESthe petition for review filed by La Suerte Cigar & Cigarette Factory in G.R. No. 125346 and
AFFIRMSthe questioned decision and resolution of the Court of Appeals in CA-G.R. SP. No. 38107;

2. GRANTS the petition for review filed by the Commissioner of Internal Revenue in G.R. Nos. 136328–29
and REVERSES and SETS ASIDE the challenged decision and resolution of the Court of Appeals in CA-
G.R. SP. Nos. 38219 and 40313. Fortune Tobacco Corporation is ORDERED to pay the following taxes:

968
 a. ₱28,938,446.25 as deficiency excise tax for the period covering January 1, 1986to June 30, 1989,
plus 20% interest per annum from November 24,1989 until fully paid; and

b. ₱1,989,821.26 as deficiency excise tax for the period covering July 1, 1989 to November 30,
1990, plus 20% interest per annum from March 1,1991 until fully paid.

3. GRANTS the petition for review filed by the Commissioner of Internal Revenue in G.R. No. 144942 and
REVERSES and SETS ASIDE the challenged decision of the Court of Appeals in CA-G.R. SP. No. 51902.
La Suerte Cigar & Cigarette Factory’s claim for refund of the amount of ₱175,909.50 is DENIED.

4. DENIES the petition for review filed by Sterling Tobacco Corporation in G.R. No. 148605 and AFFIRMS
the questioned decision and resolution of the Court of Appeals in CA-G.R. SP. No. 38159;

5. DENIES the petition for review filed by La Suerte Cigar & Cigarette Factory in G.R. No. 158197 and
AFFIRMS the questioned decision and resolution of the Court of Appeals in CA-G.R. SP. No. 37124; and

6. DENIES the petition for review filed by La Suerte Cigar & Cigarette Factory in G.R. No. 165499 and
AFFIRMS the questioned decision and resolution of the Court of Appeals inCA-G.R. SP. No. 50241.

969
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. P-14-3272               November 11, 2014

[Formerly: OCA IPI No. 14-4264-P]

FELICIANO O. FRANCIA, Complainant, 
vs.
ROBERTO C. ESGUERRA, Sheriff IV, Regional Trial Court, Branch 14, Davao City, Respondent.

DECISION

PER CURIAM:

This case stemmed from the letter-complaint  dated 26 April 2013 filed by Feliciano 0. Francia (Feliciano) charging
1

Roberto C. Bsguerra (respondent sheriff), Sheriff IV, Regional Trial Court (RTC), Branch 14, Davao City with neglect
of duty in connection with his failure to implement the Writ of Execution issued in Civil Case No. 21-584-F-2009 for
Unlawful Detainer.

Feliciano is the plaintiff in the Unlawful Detainer case filed before the Municipal Trial Court in Cities (MTCC), Davao
City. On 2 August 2010, the MTCC rendered a Decision  in favor of Feliciano and ordered the defendants and their
2

heirs, assigns and those acting for and in their behalf to, among others, vacate the property subject matter of the
case.

The defendants filed an appeal which was raffled to RTC, Branch 14, Davao City. In a Decision  dated 31 January
3

2011,the RTC affirmed in toto the Decision of the MTCC. The Motion for Reconsideration filed by defendants was
denied in an Order dated 2 July 2012.

On 26 April 2012, a Writ of Execution  was issued by the RTC commanding respondent sheriff to implement the
4

dispositive portion of the affirmed MTCC Decision and to make a return within sixty (60) days from receipt thereof.
The writ was received by respondent sheriff on 2 May 2012.

In his complaint, Feliciano alleged that respondent sheriff asked ₱3,000.00 from him for expenses which hereadily
gave. He even offered respondent sheriff another ₱15,000.00 for the full satisfaction of the writ. Despite the lapse of
more than one (1) year, however, the writ remained unimplemented. This prompted him to file the instant
administrative case against respondent sheriff for neglect of duty.

The Office of the Court Administrator (OCA) referred the lettercomplaint to Judge George Omelio (Judge Omelio),
RTC, Branch 14, Davao City for appropriate action or comment.  Judge Omelio issued a memorandum directing
5

respondent sheriff to comment within five (5) days from receipt of the same on 14 June 2013.

In his Explanation,  respondent sheriff acknowledged receiving the ₱3,000.00 from Feliciano and contended that the
6

amount was for legal expenses. He reported that he tried on several occasions to convince the defendants to
voluntarily vacate the place,subject matter of the case, but his efforts proved futile. He maintained that Feliciano was
aware of all the actions he has undertaken.

He contended that defendants insisted on staying in the subject place. Thus, he requested for police assistance in
the implementation of the writ and in the service of the Notice to Vacate.

He averred that by the time the request for police assistance was approved, Feliciano could no longer be found. He
further averred that as of date of his letter-explanation, he is still waiting for Feliciano to appear so that he could
proceed with the implementation of the Writ of Execution. In its Report  dated 6 March 2014, the OCA found
7

respondent sheriff guilty of gross neglect of duty. It recommended that respondent sheriff be dismissed from the
service with forfeiture of retirement benefits except accrued leave credits and with prejudice to re-employment in any
branch or instrumentality of the government, including government-owned or controlled corporations.

We agree with the findings of the OCA that respondent sheriff is administratively liable. We, however, find him also
liable for other offenses.

The duties of sheriffs in the implementation of writs are explicitly laid down in Section 10, Rule 141 of the Rules of
Court, as amended, which reads:

Sec. 10. Sheriffs, process servers and other persons serving processes. – x x x
970
 xxxx

With regard to sheriff’s expenses in executing writs issued pursuant to court orders or decisions or safeguarding the
property levied upon, attached or seized, including kilometrage for each kilometer of travel, guards’ fees,
warehousing and similar charges, the interested party shall pay said expenses in anamount estimated by the sheriff,
subject to approval of the court. Upon approval of said estimated expenses, the interested party shall deposit such
amount with the clerk of court and ex-officio sheriff, who shall disburse the same to the deputy sheriff assigned to
effect the process, subject to liquidation within the same period for rendering a return on the process. The liquidation
shall be approved by the court. Any unspent amount shall be refunded to the party making the deposit. A full report
shall be submitted by the deputy sheriff assigned with his return, the sheriff’s expenses shall be taxed as cost
against the judgment debtor. (Emphasis supplied)

The aforesaid rule enumerated the steps to be followed in the payment and disbursement of fees for the execution
of a writ, to wit: (1) the sheriff must prepare and submit to the court anestimate of the expenses he would incur; (2)
the estimated expenses shall be subject to court approval; (3) the approved estimated expenses shall be deposited
by the interested party with the Clerk of Court, who is also the ex-officio sheriff; (4) the Clerk of Court shall disburse
the amount to the executing sheriff; (5) the executing sheriff shall thereafter liquidate his expenses within the same
period for rendering a return on the writ; and (6) any amount unspent shall be returned to the person who made the
deposit. It is clear from the enumeration that sheriffs are not authorized to receive direct payments from a winning
party. Any amount to be paid for the execution ofthe writ should be deposited with the Clerk of Court and it would be
the latter who shall release the amount to the executing sheriff. The amount deposited should be spent entirely for
the execution only and any remainder of the amount should be returned.

Respondent sheriff acknowledged his receipt of the ₱3,000.00 from Feliciano and explained that it was for legal
expenses. Other than his vague explanation, there was no accounting ofthe ₱3,000.00 he admitted to have
received. In fact, there was also no showing that a liquidation was prepared and submitted to the court as required
under the rules.

Even if Feliciano was amenable to the amount requested or that the money was given voluntarily, such would not
absolve respondent sheriff from liability because of his failure to secure the court’s prior approval. We held in
Bernabe v. Eguia  that acceptance of any other amount is improper, even if it were to be applied for lawful purposes.
8

Good faith on the part of the sheriff, or lack of it, in proceeding to properly execute its mandate would be of no
moment, for he is chargeable with the knowledge that being the officer of the court tasked therefore, it behooves
him to make due compliances. In the implementation of the writ of execution, only the payment of sheriff’s fees may
be received by sheriffs. They are not allowed to receive any voluntary payments from parties in the course of the
performance of their duties. To do so would be inimical to the best interests of the service because even assuming
arguendo that such payments were indeed given and received in good faith,this fact alone would not dispel the
suspicion that such payments were made for less than noble purposes. In fact, even "reasonableness" of the
amounts charged, collected and received by the sheriff is not a defense where the procedure laid down in Section
10, Rule 141 of the Rules of Court has been clearly ignored.

The rules on sheriff’s expenses are clear-cut and do not provide procedural shortcuts.  A sheriff cannot just
1âwphi1

unilaterally demand sums of money from a party-litigant without observing the proper procedural steps otherwise, it
would amount to dishonesty and extortion  . And any amount received in violation of Section 10,Rule 141 of the
9

Rules of Court constitutes unauthorized fees. Respondent sheriff is charged with neglect of duty. In the
implementation of writs, sheriffs are mandated to follow the procedure under Section 14, Rule 39 of the Rules, which
reads:

SEC. 14. Return of writ of execution. – The writ of execution shall be returnable to the court issuing itimmediately
after the judgment has been satisfied in part or in full. Ifthe judgment cannot be satisfied in full within thirty (30) days
after his receipt of the writ, the officer shall report to the court and state the reason therefore. Such writ shall
continue in effect during the period within which the judgment may be enforced by motion. The officer shall make a
report to the court every thirty (30) days on the proceedings taken thereon until the judgment is satisfied in full, or its
effectivity expires. The returns or periodic reports shall set forth the whole of the proceedings taken, and shall be
filed with the court and copies thereof promptly furnished the parties. Respondent sheriff would want us to believe
that his failure to implement the writ was brought about by circumstances beyond his control. He maintained that the
defendants wereadamant in staying in the subject property. Thus, he had to seek police assistance which he
obtained only after several months of waiting. Respondent sheriff further alleged that he thereafter waited for
Feliciano to appear before him so that he could proceed with the implementation of the writ.

We find respondent sheriff’s contention untenable. His being remiss in his duties was underscored by the fact that a
year had passed without the writ being implemented. If his contention was true, then he could have still complied
with his duty by making a return on the writ within 30 days from his receipt thereof and submitting periodic reports
every 30 days thereafter until it was satisfied in full. Respondentsheriff failed in accomplishing any of these. We held
in Mendoza v. Tuquero  that sheriffs have no discretion on whether or not to implement a writ. There is no need for
10

the litigants to "follow-up" its implementation. When writs are placed in their hands, it is their ministerial duty to
proceed with reasonable celerity and promptness to execute them in accordance with their mandate. Unless

971
restrained by a court order, they should see to it that the execution of judgments is not unduly delayed. Respondent
11

sheriff’s failure to implement the writ gives rise to presumption that he was waiting for additional financial
consideration from Feliciano or that he has already received a bribe from the losing party to stall the writ’s
implementation. We have previously ruled that failure of the sheriff to carry out what is a purely ministerial duty, to
follow wellestablished rules in the implementation of court orders and writs, to promptly undertake the execution
ofjudgments, and to accomplish the required periodic reports, constitute gross neglect and gross inefficiency in the
performance of official duties.  Records reveal that this is not the first offense of respondent sheriff. In A.M. No. P-
12

07-2370 dated 14 September 2007, he was suspended by the Court for one (1) month for dereliction of duty.
Records further reveal that another charge of neglect of duty (OCA IPI No. 12-3880-P) is pending before the Legal
Office, OCA. 13

As a final note, it cannot be over-emphasized that sheriffs are ranking officers of the court. They play an important
part in the administration of justice – execution being the fruit and end of the suit, and the life of the law. In view of
their exalted position as keepers of the faith, their conduct should be geared towards maintaining the prestige and
integrity of the court.  Respondent sheriff failed to live up to this standard. It is evident that he never learned from his
14

previous infraction. Having tarnished the good image of the judiciary, he should not be allowed to stay a minute
longer in the service.

WHEREFORE, we find respondent Roberto C. Esguerra, Sheriff IV, Regional Trial Court, Branch 14, Davao City
GUILTY of dishonesty, gross neglect of duty and gross inefficiency in the performance of official duties. Accordingly,
he is DISMISSED from the service, with forfeiture of all his retirement benefits, except accrued leave credits, if any,
and with prejudice to re-employment in any branch or instrumentality of the government, including government-
owned or controlled corporations.

SO ORDERED.

972
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 196122               November 12, 2014

JOEL B. MONANA, Petitioner, 
vs.
MEC GLOBAL SHIPMANAGEMENT AND MANNING CORPORATION AND HD HERM DAVELSBERG
GMBH,Respondents.

DECISION

LEONEN, J.:

This labor case involves a seafarer's claim for disability benefits. It involves an application of Section 20(B) of the
Philippine Overseas Employment Administration Standard Employment Contract (POEA contract). The POEA
contract states that for an illness to be compensable, (1) it must be work-related and (2) it must have existed during
the term of the seafarer's employment contract. 1

Joel B. Monana (Monana) filed this petition for review  in relation to his disability benefits claim for hypertension. The
2

Labor Arbiter ruled in favor of Monana and granted US$60,000.00 as disability benefits. The National Labor
Relations Commission vacated the Labor Arbiter’s decision, but granted US$3,000.00 as financial assistance. The
Court of Appeals agreed with the National Labor Relations Commission and dismissed Monana’s petition. Monana
now seeks to reinstate the Labor Arbiter's judgment. 3

On September 5, 2006, MEC Global Ship Management and Manning Corporation and its foreign principal, HD Herm
Davelsberg GMBH, employed Monana as an ordinary seafarer for a six-month duration on board M/V
Bellavia. Monana boarded on September 11, 2006 and performed his tasks that "included cleaning, chipping,
4

painting, and assisting in deck work."  On January 22, 2007, Monana felt dizzy with blurring of vision and body
5

weakness associated with slurred speech and numbness of the right side of the face.  The ship doctor prescribed
6

oral anti-hypertensive medication.  Monana was airlifted to Honolulu Medical Center the next day where he was
7

treated and diagnosedto have suffered a stroke.  He then transferred to a rehabilitation hospital where he underwent
8

physical therapy for two days. 9

On January 31, 2007, Monana was repatriated to the Philippines and referred to Dr. Susannah Ong-Salvador (Dr.
Ong-Salvador), the company designated physician.  He was first confined atthe University of Sto. Tomas hospital,
10

then he continued his physical therapy and treatment with company-designated doctors in Iloilo. 11

On February 19, 2007, Dr. Ong-Salvador wrote respondents a reply to a medical query,  stating that "patient’s
12

condition is regarded as non-work related, as the disease is mainly of a heredofamilial etiology that is enhanced by
a number of modifiable and non-modifiable risk factors. . . ."  Monana did not dispute this report.
13 14

Nevertheless, respondents continued providing Monana with medical assistance. 15

On March 3, 2007, Monana was referred to neurologist Dr. Generoso D. Licup, who found thatMonana "still
experience[d] occasional heaviness and clumsiness of the right upper and lower extremities especially during
strenuous and prolonged activities." 16

On July 18, 2007, Monana was referred to cardiologist Dr. Glenn A. Mana-ay (Dr. Mana-ay), who also diagnosed
him with S/P Stroke secondary to Acute Ischemic Infarct, Left Periventicular Parietal Lobe and Hypertensive Cardio
vascular Disease.  Dr. Mana-ay reported that Monana’s blood pressure was controlled, and he had minimal
17

weakness on the right side of the body.  Monana’s condition steadily improved.
18 19

On August 23, 2007, Monana sought a second opinion with cardiologist Dr. Efren R. Vicaldo (Dr. Vicaldo) from the
Philippine Heart Center. 20Dr. Vicaldo declared that Monana’s illness was work-related/-aggravated, and that
Monana was unfit toresume work as a seafarer in any capacity. 21

Consequently, Monana claimed disability and illness allowance. Respondents refused, prompting Monanato file a
complaint with the Regional Arbitration Branch. The Labor Arbiter, in his decision  dated May 30, 2008, ruled in
22

favor of Monana and ordered respondents to pay US$60,000.00 or its peso equivalent as disability benefits:

973
WHEREFORE, judgment is hereby rendered ordering respondent-entities to pay complainant jointly and severally
the sum of US$60,000.00 or its Philippine Peso equivalent at the time of payment, representing his disability
benefits.

Further, respondents jointly and severally are hereby ordered to pay complainant 10% of the total judgment award
as and [sic] way of attorney’s fees.

Other claims are hereby denied for lack of merit.

SO ORDERED.  (Emphasis in the original)

23

The National Labor Relations Commission, in its resolution  dated January 30, 2009, vacated the Labor Arbiter’s
24

decision and instead ordered respondents to grant financial assistance of US$3,000.00 or its peso equivalent:

WHEREFORE, premises considered, the appeal is PARTLY GRANTED and the Decision dated 30 May 2008 is
ordered VA C ATE D and SET ASIDE.

A new decision is hereby promulgated ordering respondents appellants to grant financial assistance to complainant-
appellee in the amount of US$3,000.00 in its Philippine Peso equivalent at the time of payment.

SO ORDERED.  (Emphasis in the original)

25

The Court of Appeals, in its decision  dated February 26, 2010, agreed with the National Labor Relations
26

Commission and dismissed Monana's petition.  It likewise denied reconsideration.

27 28

Hence, Monana filed this petition.

Petitioner argues that hypertension is a compensable illness, and there was a causal relation between his work and
his illness.
29

Pursuant to Section 20(B)(3) of the POEA contract, the right to secure a third doctor’s opinion is optional. Petitioner30

submits that the findings of independent cardiologist Dr. Vicaldo deserves more credence than those of company-
designated physician Dr. Ong-Salvador, who is neither a cardiologist nor a neurologist.  Petitioner alleged that Dr.
31

Ong-Salvador signed the report as a medical coordinator, and that she is a dermatologist. 32

Petitioner contends that his disability continued beyond 240 days without any assessment from a company-
designated physician on his fitness, thus, his disability must be deemed total and permanent.  Petitioner prays for
33

disability benefits and attorney’s fees. 34

Respondents counter that the lower court’s factual findings on petitioner’s non-entitlement to total and permanent
disability benefits are well-supported by evidence, thus, shouldbe deemed final and conclusive upon this court. 35

Section 20(B) of the POEA contract provides that entitlement to disability benefits requires that the seafarer’s
disability be work-related and that it occur during the contract’s term.  Respondents cite the Court of Appeals’
36

decision at length on petitioner’s failure to prove that his medical condition is work-related. 37

Respondents submit that the company-designated physician Dr. Ong Salvador’s extensive assessment based on
medical treatments should prevail over Dr. Vicaldo’s unsupported medical opinion.  Respondents submit that Dr.
38

Vicaldo only saw petitioner once as an outpatient.  Respondents also quote at length the 2012 case of Andrada v.
39

Agemar Manning Agency  where this court gave greater credence to the company-designated physician’s extensive
40

assessment over those of Dr. Vicaldo’s cryptic and unsupported conclusions since Dr. Vicaldo only examined
petitioner once.  Respondents also cite Vergara v. Hammonia Maritime Services, Inc.  in that a company-
41 42

designated physician’s assessment must be sustained unless a third doctor’s opinion is obtained. 43

Respondents quote Millan v. Wallem Maritime Services, Inc.  in that "[a] seafarer’s inability to resume his work after
44

the lapse of more than 120 days from the time he suffered an injury and/or illness is not a magic wand that
automatically warrants the grant of total and permanent disability benefits in his favor."45

Lastly, respondents argue that Monana’s claim for illness allowance is baseless since this was paid.  Monana’s 46

claim for attorney’s fees also lacks basis as respondents are not in bad faith.
47

The main issue for this court’s resolution is whether petitioner Joel B. Monana is entitled to total and permanent
disability benefits.

We affirm the Court of Appeals in dismissing petitioner’s petition.

974
The POEA contract, deemed read and incorporated into petitioner’s employment contract,  governs petitioner’s
48

claims for disability benefits. These guidelines were amended in recent years,  but the year 2000 version applies
49

since he was hired in 2006,  and he filed his complaint in 2007.

50 51

Section 20(B) provides for the two requisites of compensable disability as follows:

SECTION 20. COMPENSATION AND BENEFITS

....

B. COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS

The liabilities of the employer when the seafarer suffers work related injury or illness during the term of his
contractare as follows: . . .
52

There is no dispute that petitioner suffered a stroke during the term of his contract.  Upon repatriation, he underwent
53

extensive medical treatment and therapy from January 31, 2007 toAugust 2007. He was provided physical therapy
even in his hometown, Iloilo.  He was diagnosed with "hypertension Stage ASHD, CAD at risk S/P stroke."
54 55

In contention is the other requisite that the illness claimant suffered must be work-related.

The POEA contract defines "work-related illness" as"any sickness resulting to disability or death as a result of an
occupational disease listed under Section 32-A of this contractwith the conditions set therein satisfied."  The
56

relevant portions of Section 32-A are as follows: SECTION 32-A Occupational Diseases

For an occupational disease and the resulting disability or death to be compensable, all of the following conditions
mustbe satisfied:

(1) The seafarer’s work must involve the risks described herein;

(2) The disease was contracted as a result of the seafarer’s exposure to the described risks;

(3) The disease was contracted within a period of exposure and under such other factors necessary to
contract it;

(4) There was no notorious negligence on the part of the seafarer.

The following diseases are considered as occupational when contracted under working conditions involving the risks
described herein: . . . .

11. Cardio-Vascular Diseases. Any of the following conditions must be met:

a. If the heart disease was known to have been present during employment, there must be proof that an
acute exacerbation was clearly precipitated by the unusual strain by reasons of the nature of his work.

b. The strain of work that brings about an acute attack must be sufficient severity and must befollowed within
24 hours by the clinical signs of a cardiac insult to constitute causal relationship.

c. If a person who was apparently a symptomatic before being subjected to strain at work showed signs and
symptoms of cardiac injury during the performance of his work and such symptoms and signs persisted, it is
reasonable to claim a causal relationship.

12. Cerebro-Vascular Accidents. All of the following conditions must be met:

a. There must be a history, which should be proved, or trauma at work (to the head specially) dueto unusual
and extraordinary physical or mental strain or event, or undue exposure to noxious gases in industry.

b. There must be a direct connection between the trauma or exertion in the course of employment and the
worker’s collapse.

c. If the trauma or exertion then and there caused a brain hemorrhage, the injury may be considered as
arising from work.

....

975
20. Essential Hypertension

Hypertension classified as primary or essential is considered compensable if it causes impairment of function of

body organs like kidneys, heart, eyes and brains, resulting in permanent disability; Provided, that, the following
documents substantiate it: (a) chest x-ray report, (b) ECG re[p]ort (c) blood chemistry report, (d) funduscopy report,
and (f) C-T scan.  The POEA contract also states that "illnesses not listed in Section 32 of this contract are
57

disputablypresumed as work related." 58

Petitioner argues that all four conditions for compensability under Section 32-A were satisfied.  He discusses the
59

stressful nature of his work considering the changing weather conditions and compounded by being away from
loved ones.  He mentions that he was declared fit to work after his pre-employment medical examination, thus, he
60

contracted his illness after exposure to the stressful working conditions.  Lastly, he alleges that there was no
61

notorious negligence on his part. 62

Both the National Labor Relations Commission and Court of Appeals63 found that petitioner failed toprove
compliance with the conditions under Section 32 of the POEA contract, thus, failing to show a causal connection
between his illness and his work. The National Labor Relations Commission discussed as follows:

The main issue that would determine complainant-appellee’s entitlement to permanent disability is whether his
illness is work-related or not. We rule in the negative. For one, complainant-appellee failed to discharge the burden
of proving the conditions set forth in Section 32-A particularly, that his work as ordinary seaman involved the risks of
having a stroke; that complainant-appellee’s hypertension was contracted as a result of his exposure to his work;
that the disease was contracted within the period of exposure and such other factors necessary to contract it and
that there was no notorious negligence on complainant-appellee’s part. For another and on the contrary,
complainant-appellee admitted that he had a family history of hypertension and that he smoked about one pack a
day for thirty (30) years. Further, complainant-appellee also failed to prove that his hypertension can be classified as
primary oressential; that he has suffered impairments in his vital organs; and that he failed to submit documents to
substantiate his claim for compensability. Furthermore, we find that despite the non work relatedness of the illness
of complainant-appellee, respondents-appellants in good faith exerted efforts and caused complainant-appellee’s
treatment in a foreign country, shouldered his repatriation expenses and caused his examinations and treatment for
more than eight (8) months shouldering the expenses therein.

Under the circumstances, respondents-appellants is not liable for the disability benefits of complainant-appellee
considering that his illness of hypertension was not proven by substantial evidence to be workrelated. 64

A petition for review is limited to questions of law.  This court does not "re-examine conflicting evidence, re-evaluate
65

the credibility of witnesses, or substitute the findings offact of the NLRC, an administrative body that has expertise in
its specialized field."  This court has held that "factual findings of the NLRC, when affirmed by the Court of Appeals,
66

are generally conclusive on this court." 67

Petitioner presents no compelling reason for this court to deviate from this general rule. Petitioner’s reliance on Dr.
Vicaldo’s medical opinion also fails to convince. Section 20(B)(3) of the POEA contract provides:

3. Upon sign-off from the vessel for medical treatment, the seafarer is entitled to sickness allowance equivalent to
his basic wage until he is declared fit to work or the degree of permanent disability has been assessed by the
company-designated physician but in no case shall this period exceed one hundred twenty (120) days.

For this purpose, the seafarer shall submit himself to a post employment medical examination by a company-
designated physician within three working days upon his return except when he is physically incapacitated to do so,
in which case, a written notice to the agency within the same period is deemed as compliance. Failure of the
seafarer to comply with the mandatory reporting requirement shall result inhis forfeiture of the right to claim the
above benefits.

If a doctor appointed by the seafarer disagrees with the assessment, a third doctor may be agreed jointly between
the Employer and the seafarer. The third doctor’s decision shall be final and binding on both parties.  (Emphasis
68

supplied)

Petitioner did not consult with a third doctor chosen by both parties. His contention is that the National Labor
Relations Commission and Court of Appeals both erred in giving more credence to the assessment of the company-
designated physician, Dr. Ong-Salvador, as opposed to the opinion of his private physician, Dr. Vicaldo. 69

The question of weighing the credibility of two opposing medical opinions involves a factual review beyond the
scope of a petition under Rule 45.

There appears to be no reason to overturn the lower court’s factual findings giving more weight to the assessment
of the company-designated physician.

976
As discussed by the Court of Appeals, "as between the company designated doctor who has all the medical records
of petitioner for the duration of his treatment and as against the latter’s private doctor who merely examined him for
a day as an outpatient, the former’s finding must prevail." 70

Several jurisprudence have given more weight to the assessment of the doctor that closely monitored and actually
treated the seafarer.

In Philman Marine v. Cabanban,  this court gave more credence to the company-designated physician’s
71

assessment since "records show that the medical certifications issued by Armando’s chosen physician were not
supported by such laboratory tests and/or procedures that would sufficiently controvert the "normal" results of those
administered to Armando at the St. Luke’s Medical Center. . . [while] the medical certificate of the petitioners’
designated physician was issued after three months of closely monitoring Armando’s medical condition and
progress, and after careful analysis of the results of the diagnostic tests and procedures administered to Armando
while in consultation with Dr. Crisostomo, a cardiologist."  Philman discussed as follows:
72

In several cases, we held that the doctor who have had a personal knowledge of the actual medical condition,
having closely, meticulously and regularly monitored and actually treated the seafarer’s illness, is more qualified to
assess the seafarer’s disability. In Coastal Safeway Marine Services, Inc. v. Esguerra, the Court significantly
brushed aside the probative weight of the medical certifications of the private physicians, which were based merely
on vague diagnosis and general impressions. Similarly in Ruben D. Andrada v. Agemar Manning Agency, Inc., et
al., the Court accorded greater weight to the assessments of the company designated physician and the consulting
medical specialist which resulted from an extensive examination, monitoring and treatment of the seafarer’s
condition, in contrast with the recommendation of the private physician which was "based only on a single medical
report . . . [outlining] the alleged findings and medical history . . . obtained after . . . [one examination]."  (Emphasis
73

supplied)

In the recent case of Dalusong v. Eagle Clarc Shipping Philippines, Inc.,  we ruled that "the findings of the
74

company-designated doctor, who, with his team of specialists . . . periodically treated petitioner for months and
monitored his condition, deserve greater evidentiary weight than the single medical report of petitioner’s doctor, who
appeared to have examined petitioner only once." 75

Regardless of who the doctor is and his or her relation to the parties, the overriding consideration by boththe Labor
Arbiter and the National Labor Relations Commission should be that the medical conclusions are based on (a) the
symptoms and findings collated with medically acceptable diagnostic tools and methods, (b) reasonable
professional inferences anchored on prevailing scientific findings expected to be known to the physician given his or
her level of expertise, and (c) the submitted medical findings or synopsis, supported by plain English annotations
that will allow the Labor Arbiter and the National Labor Relations Commission to make the proper evaluation. The
Court of Appeals in a petition for review should be limited to determining whether there was grave abuse of
discretion committed by the National Labor Relations Commission.

In this case, the company-designated physician and her associated specialists provided petitioner with extensive
medical attention and treatment from January 31, 2007 to August 2007.  These are supported by medical reports.
76

In Dr. Ong-Salvador’s initial medical report dated January 31, 2007, she provided a chronological history of
petitioner’s present illness, mentioning that he had a family history of hypertension on his paternal side, and smoked
a pack a day for 30 years.  She then outlined the results of petitioner’s physical examination and neurological
77

examination.  Under "Working Impression," the initial medical report states "Hypertension Stage II, ASHD, CAD at
78

risk, S/P Stroke."  Under "Plan of Management," the initial medical report states that petitioner was "admitted atthe
79

Santo Tomas Hospital today for further evaluation and management" and that he was "under the care of our
specialists."  These specialists included neurologist Dr. Generoso D. Licup and cardiologist Dr. Glenn A. Mana-ay
80

who both diagnosed petitioner and provided medical reports on their findings. 81

In Dr. Ong-Salvador’s reply to medical query dated February 19, 2007, she discussed that "patient’s condition is
regarded as non-work related, as the disease is mainly of a heredo familial etiology that is enhanced by a number of
modifiable and non-modifiable risk factors."  Dr. Ong-Salvador, having access to all of petitioner’s medical records,
82

was in the best position to make this conclusion.

Nevertheless, despite the non-work-related nature of petitioner’s condition, respondents continued providing him
with medical assistance.

In Dr. Ong-Salvador’s medical progress report dated April 30, 2007, she discussed that petitioner "has continued
with his medical treatment in his province in Iloilo . . . has been under physical therapy sessions to help him recover
muscular functions and strength . . . [and] [c]ontinuous physical improvements were noted." 83

Dr. Ong-Salvador continued to issue progress reports on petitioner’s examinations with the company-designated
cardiologist in Iloilo, and scheduling him for more re-evaluation by their specialists. The medical progress report

977
dated August 21, 2007 stated that petitioner "underwent blood work-ups today [and] he tolerated the procedure
well."
84

On the other hand, Dr. Vicaldo’s medical certificate provides as follow:

JUSTIFICATION OF IMPEDIMENT GRADE VII (41.80%) FOR

SEAMAN Joel B. Monana

● This patient/seaman presented with history of sudden weakness of the right upper and lower extremities
associated with slurred speech and numbness on the right side of the face noted on January 2007 while on board
ship. He was confined in Honolulu, Hawaii on January 24 to January 31, 2007. He underwent cranial CT scan and
was diagnosed as cerebrovascular disease, infarct at the left parietal and periventiculararea. He was started on
medication as well as physical rehabilitation.

● He was repatriated on January 31, 2007 and was subsequently admitted at UST hospital where he was diagnosed
and managed as a case of hypertension, coronary artery disease an[d] recent stroke.

● When seen at the clinic his blood pressure was 110/80 mmHg; PE of the heart and lungs were unremarkable.
There were no significant motor deficits on the extremities but he complains of numbness on the right side of his
body. He claims being forgetful after his stroke.

● He is now unfit to resume work as seaman in any capacity.

● His illness is considered work aggravated/related.

● He requires maintenance medication to control his blood pressure to prevent cardiovascular complications such
as a repeat stroke, coronary artery disease and renal insufficiency.

● He requires regular follow up with his cardiologist and neurologist as well as regularblood chemistry examination
to monitor his lipid profile aswell as renal function to anticipate possible other risk factors.

● He has to modify his lifestyle to include low salt diet, regular exercise and nicotine abstinence.

● He is not expected to land a gainful employment given his medical background.  (Emphasis supplied)
85

The above medical certificate reveals that Dr. Vicaldo’s findings were not based on results from medical tests and
procedures. In fact, Dr. Vicaldo recognizes that petitioner already has a cardiologist and neurologist with whom he
should regularly follow up with.

Dr. Ong-Salvador is familiar withpetitioner’s medical history and condition, thus, her medical opinion on whether his
illness is workaggravated/-related deserves more credence as opposed to Dr. Efren Vicaldo’s unsupported
conclusions.

This court notes that in several cases filed before this court on seafarer’s disability claims, Dr. Vicaldo’s findings
have not been given due merit due to their unsubstantiated nature. 86

It, therefore, behooves the National Labor Relations Commission, perhaps, to cause an investigation on why, in
spite of the unsupported nature of Dr. Vicaldo’s submissions, Labor Arbiters still give him credence. This
unnecessarily clogs their administrative dockets, and the dockets of the Court of Appeals and this court. Judicial
efficiency requires that Labor Arbiters and the National Labor Relations Commission keep guard against these types
of doctors and their medical findings.

Since petitioner’s illness is not work-related, this court need not labor on petitioner’s argument that his illness must
be deemed total and permanent since 240 days had lapsed withoutany assessment by the companydesignated
physician on his fitness to work.87

We observe that most seafarer complaints for compensation pursue the cause of action petitioner took in this case
— breach of contractual obligations by its employer by invoking provisions of the POEA contract. This course
follows a procedure that considers a balance of interests in the amount of compensation for the occupational
hazards a seafarer suffers, and the process to recover such compensation. 88

Seafarers who suffer from occupational hazards are not necessarily constrained to contractual breach as cause of
action in claiming compensation. Our laws allow seafarers, in a proper case, to seek damages based on tortious
violations by their employers by invoking Civil Code provisions, and even special laws such as environmental
regulations requiring employers to ensure the reduction of risks to occupational hazards. 89

978
Lastly, petitioner failed to substantiate his claim for attorney’s fees.  Attorney’s fees are awarded by way ofexception
1âwphi1

when a defendant acted in evident and gross bad faith. 90

Quite the opposite, "respondents merely relied on the company designated physician’s finding that petitioner’s
illness was not work-related [and] [d]espite of [sic] such finding, private respondents still extended to petitioner the
required medical assistance and therapy." 91

Respondents also submit that they already paid petitioner illness allowance.  Respondents’ comment attached
92

copies of approved illness allowance payments for petitioner in the amounts of US$555.87 for January and
February 2007, US$589.29 for February and March 2007, and US$854.84 for April and May 2007. 93

Petitioner no longer mentioned illness allowance in his memorandum. This court’s resolution  requiring the filing of
94

memoranda explained that "issues raised in the pleadings but notincluded in the memorandum shall be deemed
waived or abandoned." 95

This court’s commitment to providefull protection to labor "does not prevent us from sustaining the employer when it
is in the right."  In any event, the lower court has awarded US$3,000.00 as financial assistance in the interest of
96

equity and compassionate justice. WHEREFORE, the petition is DENIED. The Court of Appeals’ decision and
resolution are AFFIRMED.

SO ORDERED.

979
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 190901               November 12, 2014

AMADA COTONER-ZACARIAS, Petitioner, 
vs.
SPOUSES ALFREDO AND THE HEIRS REVILLA OF PAZ REVILLA, Respondents.

DECISION

LEONEN, J.:

Well-settled is the rule that "conveyances by virtue of a forged signature ... are void ab initio [as] [t]he absence of the
essential [requisites] of consent and cause or consideration in these cases rendered the contract inexistent[.]" 1

Before us is a petition for review  filed by Amada Cotoner-Zacarias against respondent spouses Alfredo Revilla and
2

Paz Castillo-Revilla, praying that this court render a decision "reversing the Decision of the Regional Trial Court and
Court of Appeals and declaring the transfer of title to the Petitioner and then to her successors-in-interest as valid
and binding as against the respondents." 3

The Court of Appeals summarized the facts as follows.

Alfredo Revilla and Paz Castillo-Revilla (Revilla spouses) are the owners in fee simple of a 15,000-square-meter
unregistered parcel of land in Silang, Cavite, covered by Tax Declaration No. 7971. 4

In 1983, the Revilla spouses faced financial difficulties in raising funds for Alfredo Revilla’s travel to Saudi Arabia, so
Paz Castillo-Revilla borrowed money from Amada Cotoner-Zacarias (Amada). By way of security, the parties
verbally agreed that Amada would take physical possession of the property, cultivate it, then use the earnings from
the cultivation to pay the loan and realty taxes.  Upon full payment of the loan, Amada would return the property to
5

the Revilla spouses. 6

Unknown to the Revilla spouses, Amada presented a fictitious document entitled "Kasulatan ng Bilihanng Lupa"
before the Provincial Assessor of Cavite. This document was executed on March 19, 1979 with the Revilla spouses
as sellers and Amada as buyer of the property.  Consequently, Tax Declaration No. 7971 in the name of the Revilla
7

spouses was cancelled, and Tax Declaration No. 19773 in the name of Amada was issued.

On August 25, 1984, Amada sold the property to the spouses Adolfo and Elvira Casorla (Casorla spouses) by
"Deed of Absolute SaleUnregistered Land." Tax Declaration No. 30411-A was later issued in the name of the
Casorla spouses. 8

In turn, the Casorla spouses executed a deed of absolute sale dated December 16, 1991 in favor of the spouses
Rodolfo and Yolanda Sun (Sun spouses). Tax Declaration Nos. 30852-A and 18584 were issued in favor of the Sun
spouses. 9

In December 1994, Alfredo Revilla returned from Saudi Arabia. He asked Amada why she had not returnedtheir tax
declaration considering their full payment of the loan. He then discovered that the property’s tax declaration was
already in the name of the Sun spouses. 10

On February 15, 1995, the Revilla spouses were served a copy of the answer  in the land registration case filed by
11

the Sun spouses for the property.  The Revilla spouses then saw a copy of the "Kasulatan ng Bilihan ng Lupa" and
12

noticed that their signatures as sellers were forged. 13

They then demanded the cancellation of the "Kasulatan ng Bilihan ng Lupa" from Amada and all subsequent
transfers of the property, its reconveyance, and the restoration of its tax declaration in their name.  Amada failed to
14

take action.

On November 17, 1995, the Revillaspouses filed a complaint before the Tagaytay Regional Trial Court for the
annulment of sales and transfers of title and reconveyance of the property with damages against Amada, the
Casorla spouses, the Sun spouses, and the Provincial Assessor of Cavite. 15

980
In her answer, Amada denied that the property was used as a security for the Revilla spouses’ loan.  Instead, she
16

claimed that the Revilla spouses voluntarily executed the "Kasulatan ng Bilihan ng Lupa" in her favor on March 19,
1979. She added that the Revilla spouses’ cause of action already prescribed. 17

For their part, the Sun spouses argued good faith belief that Amada was the real owner of the property asAmada
showed them a tax declaration in her name and the "Kasulatan ng Bilihan ng Lupa" allegedly executed by the
Revilla spouses.  When the Sun spouses discovered there was another sale with the Casorla spouses, they were
18

assured by Amada that she had already bought back the property from the Casorla spouses.  Subsequently, the
19

Casorla spouses executed a deed ofabsolute sale dated December 16, 1991 in favor of the Sun spouses.  They 20

also argued prescription against the Revilla spouses, and prayed for damages against Amada by way of
crossclaim.21

On August 3, 2006, the Regional Trial Court  found the "Kasulatan ng Bilihan ng Lupa" to be a fictitious document,
22

and ruled in favor of the Revilla spouses:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring the sales/transfers from Tax Declaration No. 7971, s. 1980 to Tax Declaration No. 18584, s.
1994 as NULL and VOID, without valid transmission of title and interest from the original owners, plaintiffs
herein and consequently, entitling plaintiffs to reinstatement and reconveyance of their title/taxdeclaration as
well as possession of the subject property;

2. Ordering defendant Zacariasto pay the following:

2.1 To the Plaintiffs:

a. ₱50,000.00 for moral damages;

b. ₱20,000.00 for exemplary damages; and

c. ₱80,000.00 for attorney’s fees.

2.2 To Defendant-Spouses Sun:

a. ₱467,350.00 for actual damages;

b. ₱50,000.00 for moral damages;

c. ₱20,000.00 for exemplary damages; and

d. ₱100,000.00 for attorney’s fees.

SO ORDERED. 23

Amada appealed the trial court’s decision, while the Sun spouses partially appealed the decision as to interest and
damages.

On August 13, 2009, the Court of Appeals  dismissed the appeal of Amada, and partially granted the appeal of the
24

Sun spouses. The dispositive portion reads:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us DISMISSING the appeal filed
by defendant appellant Amada C. Zacarias in this case, and PARTIALLY GRANTING the appeal filed by the
Spouses Rodolfo and Yolanda Sun. The Decision dated August 3, 2006 rendered by Branch 18 of the Regional
Trial Court of the Fourth Judicial Region stationed in Tagaytay City, Cavite in Civil Case No. TG-1543 is MODIFIED
in that defendant-appellant Amada C. Zacarias is ordered to pay interest at 6% per annum on the principal
obligation in the amount of ₱467,350.00 from February 3, 1995, the date of the first judicial demand by the Spouses
Sun, until said decision on the principal obligation became final and executory, and interest at 12% per annum on
the principal obligation, moral and exemplary damages, as well as attorney’s fees, from the time said decision
became final and executory until full payment of said amounts.

SO ORDERED. 25

The Court of Appeals denied Amada’s motion for reconsideration; hence, she filed this petition. Petitioner argues
that the antichresisclaim of the Revilla spouses was not reduced into writing, thus, it is void under Article 2134 of the

981
Civil Code.  She submits that the allegation of antichresis was only an excuse by the Revilla spouses for their failure
26

to impugn possession of the property by Amada and her successors-in-interest for over 16 years. 27

Petitioner contends that the sale inher favor was established by the "Kasulatan ng Bilihan ng Lupa," the delivery of
the tax declaration, and the testimony of one Mrs. Rosita Castillo (Rosita).  Rosita was the second wife of Felimon
28

Castillo, the previous owner of the property. She testified that respondent Paz Castillo-Revilla admitted toher father,
Felimon, that she and Alfredo Revilla sold the property to Amada. 29

On the alleged forgery, petitioner submits that the court misapplied the principle that "he who alleges not he who
denies must prove" when it stated that she had the burden of proving the due execution of the deed of absolute
sale. Since the Revilla spouses alleged that the deedwas a forged document, they had the burden of proving the
forgery.  She then cites the trial court in that "[a]ccordingly, the National Bureauof Investigation was not able to
30

ascertain the genuineness of the signatureof plaintiff Paz Revilla because of lack of sufficient sample
signatures. . . ." 31

On the prescription argument, the parties live in a very small barangay. While Alfredo Revilla worked in Saudi
Arabia, he admitted returning to the Philippines twice a year, while his wife never left Silang, Cavite,  and yet the
32

Revilla spouses never questioned the activities on the property for more than 16 years. 33

On the proper docket fees, petitioner contends that the Revilla spouses paid docket fees based on their prayer for
actual damages of ₱50,000.00, moral damages of ₱50,000.00, and attorney’s fee of ₱80,000.00, when they should
have based it on ₱12,000,000.00, the value of the property they alleged in their supplemental pre-trial brief. 34

Lastly, petitioner argues that the property is conjugal in nature, but the court never declared that respondent Paz
Castillo-Revilla’s signature was falsified. Thus, the sale over her half of the property cannot be declared void.  She 35

adds that the Sun spouses are buyers in good faith for value, making reinstatement of the property impossible. 36

Respondents Revilla spouses counter that the factual issue of whether the "Kasulatan ng Bilihan ng Lupa" isa
falsified document was already conclusively resolved by the lower courts and, generally, factual findings are beyond
this court’s power of review. 37

On the prescription issue, respondents Revilla spouses argue that an action or defense to declare a document null
is imprescriptible.  Laches also does not apply since they immediately questioned the fraudulent transfers by filing a
38

complaint in November 1995 upon learning of the questionable documents in February 1995, after Alfredo had
returned from Saudi Arabia in December 1994. 39

Respondents Revilla spouses contend that they paid the proper docket fees. The ₱12,000,000.00 mentioned during
pre-trial that petitioner insists should have been the basis of the fees was neither stated in the complaint nor
awarded by the court. 40

Respondents Revilla spouses argue that the court did not err in ordering reinstatement of the property tothem. First,
the defense that the Sun spouses were buyers in good faith is a personal defense that cannot be raised by
petitioner who was not privy to the sale between the Casorla spouses and the Sun spouses.  Second, an alternative
41

prayer for damages cannot be interpreted as an admission that the relief for reinstatement is not viable. Third, the
42

transaction happened prior to the effectivity of the Family Code; thus, Article 172 of the Civil Code applies such that
"[t]he wife cannot bind the conjugal partnership without the husband’s consent, except in cases provided by
law."  Consequently, the result is the same even if respondent Paz Castillo-Revilla did not testify that the signature
43

is not hers, as she cannot bind the entire property without her husband’s consent.  Lastly, no unjust enrichment
44

exists since they were deprived of their property for so long. 45

The issues for this court’s resolution are as follows:

First, whether respondents Revilla spouses’ cause of action is barred by prescription or laches; Second, whether the
trial court acquired jurisdiction when respondents Revilla spouses paid filing fees based on the ₱50,000.00 claim for
damages in the complaint but stated in their supplemental pre-trial brief that the property is valued at
₱12,000,000.00; and

Third, whether the Court of Appeals erred in upholding the reinstatement and reconveyance of the property in favor
of respondents Revilla spouses.

I.

On the first issue, petitioner argues that respondents Revilla spouses’ claim is barred by laches since theyallowed
16 years to lapse, with petitioner having possession of the property, before filing suit.46

982
Laches has been defined as "the failure or neglect, for an unreasonable and unexplained length of time, to do that
which — by the exercise of due diligence — could or should have been done earlier." 47

The elements that need to be present and proven before an action is considered barred by laches are the following:

The four basic elements of laches are: (1) conduct on the part of the defendant, or of one under whom he claims,
giving rise to the situation of which complaint is made and for which the complaint seeks a remedy; (2) delay in
asserting the complainant's rights, the complainant having had knowledge or notice of the defendant’s conduct and
having been afforded an opportunity to institute suit; (3) lack of knowledge or notice on the part of the defendant that
the complainant would assert the right on which he bases his suit; and, (4) injury or prejudice to the defendant in the
event relief is accorded to the complainant or the suit is not held to be barred. 48

There was no delay by respondents Revilla spouses in asserting their rights over the property. The lower courts
found that respondents Revilla spouses first learned of the existence of the "Kasulatan ng Bilihan ng Lupa" in
February 1995 when they were serveda copy of the pleading in the land registration case instituted by the Sun
spouses.  They filed their complaint within the same year, specifically, on November 17, 1995. The lapse of only
49

nine (9) months from the time they learned of the questionable transfers on the property cannot be considered as
sleeping on their rights.

In any case, doctrines of equity such as laches apply only in the absence of statutory law. The Civil Code clearly
provides that "[t]he action or defense for the declaration of the inexistence of a contract does not prescribe."  This 50

court has discussed:

Lachesis a doctrine in equity and our courts are basically courts of law and not courts of equity. Equity, which has
been aptly described as "justice outside legality," should be applied only in the absence of, and never against,
statutory law. Aequetas nunguam contravenit legis. The positive mandate of Art. 1410 of the New Civil Code
conferring imprescriptibility to actions for declaration of the inexistence of a contract should pre-empt and prevail
over all abstract arguments based only on equity. Certainly, laches cannot be set up to resist the enforcement of an
imprescriptible legal right, and petitioners can validly vindicate their inheritance despite the lapse of time. 51

II.

On the second issue, petitioner argues that respondents Revilla spouses did not pay the correct docket fees. She
submits that docket fees paid were based on the prayer for actual damages of ₱50,000.00, moral damages of
₱50,000.00, and attorney’s fee of ₱80,000.00, when the spouses Revilla should have based it on ₱12,000,000.00,
the value of the property they alleged in their supplemental pre-trial brief.  Petitioner cites Supreme Court Circular
52

No. 7 and jurisprudence holding that the payment of proper docket fees is crucial in vesting courts with jurisdiction
over the subject matter. 53

This court finds that respondents Revilla spouses paid the proper docket fees, thus, the trial court acquired
jurisdiction.

It is true that "[i]t is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the
prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the action." 54

In Manchester Development Corporation v. Court of Appeals,  this court "condemned the practice of counsel who in
55

filing the original complaint omitted from the prayer any specification of the amount of damages although the amount
of over 78 million is alleged in the body of the complaint."  The court gave the following warning against this
56

unethical practice that serves no other purpose than to avoid paying the correct filing fees:

The Court serves warning that itwill take drastic action upon a repetition of this unethical practice. To put a stop to
this irregularity, henceforth all complaints, petitions, answers and other similar pleadings should specify the amount
of damages being prayed for not only inthe body of the pleading but also in the prayer, and said damages shall be
considered in the assessment of the filing fees in any case. Any pleading that fails to comply with this requirement
shall not be accepted nor admitted, or shall otherwise be expunged from the record.

The Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. An amendment
of the complaint or similar pleading will not thereby vest jurisdiction in the Court, much less the payment of the
docket fee based on the amounts sought in the amended pleading. The ruling in the Magaspi case in sofar as it is
inconsistent with this pronouncement is overturned and reversed.  (Emphasis supplied)
57

This ruling was circularized through Supreme Court Circular No. 7  addressed to all lower court judges and the
58

Integrated Bar of the Philippines for dissemination to and guidance for all its members.

The facts of this case differ from Manchester and similar situations envisioned under the circular. The complaint filed
by respondents Revilla spouses included in its prayer the amount of ₱50,000.00 as actual damages, without

983
mention of any other amount in the body of the complaint. No amended complaint was filed to increase this amount
in the prayer. Thus, the Court of Appeals found as follows:

In the case at bench, the complaint filed by the Spouses Revilla only asked for actual damages in the amount of
₱50,000.00. While the Spouses Revilla mentioned the amount of ₱12,000,000.00 as actual damages in the pre-trial,
said amount was not stated in the complaint and neither was it awarded by the lower court in its judgment. Hence,
said amount was not even considered by the court a quo when it awarded damages in favor of the Spouses Revilla.
Considering that the complaint was not formally amended by the spouses to increase the amount of actual damages
being sought, the trial court was not stripped of its jurisdiction to try the case since the Spouses Revilla correctly
paid the docket fees based merely on what was prayed for in the complaint.Indeed, the mere mentioning by the
Spouses Revilla of the amount of ₱12,000,000.00 during the pre-trial is inconsequential, as the trial court properly
acquired jurisdiction over the action when the Spouses Revilla filed the complaint and paid the requisite filing fees
based on the amount as prayed for in the complaint.  (Emphasis supplied)
59

In Padlan v. Dinglasan,  this court reiterated that "[w]hat determines the jurisdiction of the court is the nature of the
60

action pleaded as appearing from the allegations in the complaint [and] [t]he averments therein and the character of
the relief sought are the ones to be consulted." 61

Petitioner attached copies of the tax declarations and deeds of sale over the property to the petition. Tax
Declaration No. 7971 in the name of respondents Revilla spouses provides that the land had a market value of
₱13,500.00, while the mango trees had a market value of ₱3,500.00.  Petitioner alleged in her petition that
62

respondents Revilla spouses offered to sell the property to her for ₱50,000.00,  while the trial court found that the
63

"Kasulatan ng Bilihan ng Lupa" reflected the amount of ₱20,000.00.  Subsequent tax declarations in the name of
64

petitioner, the Casorla spouses, and the Sun spouses all provided for land market values lower than
₱50,000.00.  The deed of sale in favor of the Casorla spouses states that the assessed value of the property was
65

₱1,400.00, and the consideration for the sale was ₱50,000.00.  The subsequent deed of sale in favor of the Sun
66

spouses provides for the same amount as consideration. 67

None of these documents submitted by petitioner indicate an amount in excess of the ₱50,000.00 prayed for by
respondents Revilla spouses as actual damages in their complaint. Thus, the basis for the ₱12,000,000.00 value
raised during pre-trial is unclear. Based on the complaint, respondents Revilla spouses paid the correct docket fees
computed from the amounts in their prayer.

III.

The third issue involves the reinstatement of respondents Revilla spouses in the property and reconveyance of its
tax declaration in their favor.

Petitioner argues that antichresis is a formal contract that must be in writing in order to be valid.  Respondents
68

Revilla spouses were not able to prove the existence of the alleged antichresis contract. On the other hand, the sale
of the property to petitioner was established by the "Kasulatan ng Bilihan ng Lupa" and the testimony of Rosita
Castillo, the second wife of the previous owner, Felimon Castillo. 69

We affirm the lower courts’ order of reinstatement and reconveyance of the property in favor of respondents Revilla
spouses.

Respondents Revilla spouses’ complaint sought "to annul the sales and transfers of title emanating from Tax
Declaration No. 7971 registered in their name involving a 15,000-square[-]meter unregistered land . . . with prayer
for reconveyance and claims for damages."  There was no prayer to declare the purported contract of sale as
70

antichresis.  Thus, respondents Revilla spouses neither discussed nor used the term "antichresis" in their comment
71

and memorandum before this court. They focused on the nature of their complaint as one for annulment of titles on
the ground of forgery.  At most, the trial court’s summary of respondents Revilla spouses’ evidence described the
72

parties’ agreements as follows:

Plaintiffs’ evidence and the testimony of plaintiff Alfredo Revilla tend to indicate that plaintiffs are the owners in fee
simple of a 15,000-square[-]meter unregistered land, located at Brgy. Adlas, Silang, Cavite. Their ownership being
evidenced by Tax Declaration No. 7971, s. 1980 (Exh. "A"). Sometime in 1981, plaintiffs needed money for the
travel and deployment of plaintiff Alfredo to Saudi Arabia. Plaintiff Paz Revilla sought financial help from defendant
Cotoner-Zacarias from whom she was able to obtain a loan but secured with and by way of mortgage of the subject
property. The parties further agreed that defendant Cotoner Zacarias would take possession of the subject property
and cultivate it with the earnings therefrom to be used to pay-off the loan and the annual realty taxes on the land.It
was their agreement with defendant Cotoner Zacarias that the latter will rent the subject property and with that
agreement, the lease started sometime in 1981 and plantiffs got from defendant Cotoner-Zacarias the amount of
Php3,000.00 as rental for the first year, 1981, with no specific agreement as to the period covered by such
rental[.] (Emphasis supplied)
73

984
Article 2132 of the Civil Code provides that "[b]y the contract of antichresis the creditor acquires the right to receive
the fruits of an immovable of his debtor, with the obligation to apply them to the payment of the interest, if owing,
and thereafter to the principal of his credit."

Thus, antichresis involves an express agreement between parties such that the creditor will have possession of the
debtor’s real property given as security, and such creditor will apply the fruits of the property to the interest owed by
the debtor, if any, then to the principal amount. 74

The term, antichresis, has a Greek origin with "‘anti’ (against) and ‘chresis’ (use) denoting the action of giving a
credit ‘against’ the ‘use’ of a property." 75

Historically, 15th century B.C. tablets revealed that "antichresis contracts were commonly employed in the Sumerian
and Akkadian Mesopotamian cultures."  Antichresis contracts were incorporated in Babylonian law, modifying and
76

combining it with that of mortgage pledge.  Nearing the end of the classical period, antichresis contracts entered
77

Roman law that "adopted the convention that the tenant usufruct had to be exactly compensated by the interest on
the lump sum payment."  During the middle ages, canon law banned antichresis contracts for being a form of
78

usury.  These contracts only reappeared in the 1804 Napoleonic Code that influenced the laws of most countries
79

today.  It had been observed that "antichresis contracts coexist with periodic rent contracts in many property
80

markets." 81

In the Civil Code, antichresis provisions may be found under Title XVI, together with other security contracts such as
pledge and mortgage.

Antichresis requires delivery of the property to the antichretic creditor, but the latter cannot ordinarily acquire this
immovable property in his or her possession by prescription. 82

Similar to the prohibition against pactum commissorium  since creditors cannot "appropriate the thingsgiven by way
83

of pledge or mortgage, or dispose of them,"  an antichretic creditor also cannot appropriate the real property in his
84

or her favor upon the non-payment of the debt. 85

Antichresis also requires that the amount of the principal and the interest be in writing for the contract to be valid. 86

However, the issue before us does not concern the nature of the relationship between the parties, but the validity of
the documents that caused the subsequent transfers of the property involved.

The reinstatement of the propertyin favor of respondents Revilla spouses was anchored on the lower courts’ finding
that their signatures as sellers in the "Kasulatan ng Bilihan ng Lupa" were forged.

This court has held that the "question of forgery is one of fact."  Well-settled is the rule that "[f]actual findings of the
87

lower courts are entitled great weight and respect on appeal, and in fact accorded finality when supported by
substantial evidence on the record." 88

The Court of Appeals agreed with the finding of the trial court that the signature of Alfredo Revilla in the "Kasulatan
ng Bilihan ng Lupa" was forged:

It was convincingly found by the court a quo that the Kasulatan ng Bilihan ng Lupaor Deed of Sale covering the
subject property allegedly executed by the Spouses Revilla in favorof Zacarias was spurious, as the trial court, after
relying on the report of the handwriting experts of the National Bureau of Investigation (NBI) saying that "there exist
significant differences in handwriting characteristics/habits between the questioned and the standard/sample
signatures ‘ALFREDO REVILLA’ such as in the manner of execution of strokes, structural pattern of
letters/elements, and minute identifying details", as well as the trial court’s own visual analysis of the document and
the sample signatures of plaintiff-appellee Alfredo, clearly showed that his signature on the said Kasulatan ng
Bilihan ng Lupawas indeed forged. 89

Petitioner contends that the lower courts never declared as falsified the signature of Alfredo’s wife, Paz Castillo-
Revilla. Since the property is conjugal in nature, the sale as to the one-half share ofPaz Castillo-Revilla should not
be declared as void. 90

The transaction took place before the effectivity of the Family Code in 2004. Generally, civil laws have no retroactive
effect.  Article 256 of the Family Code provides that "[it] shall have retroactive effect insofar as it does not prejudice
91

or impair vested or acquired rights in accordance with the Civil Code or other laws."

Article 165 of the Civil Code states that "[t]he husband is the administrator of the conjugal partnership." Article 172
of the Civil Code provides that "[t]he wife cannot bind the conjugal partnership without the husband’s consent,
except incases provided by law."  In any case, the Family Code also provides as follows:
92

985
Art. 96. The administration and enjoyment of the community property shall belong to both spouses jointly. In case of
disagreement, the husband’s decision shall prevail, subject to recourse to the court by the wife for proper remedy,
which must be availed of within five years from the date of the contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the common
properties, the other spouse may assume sole powers of administration. These powers do not include disposition or
encumbrance without authority of the court or the written consent of the other spouse. In the absence of such
authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a
continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding
contract upon the acceptance by the other spouse or authorization by the court before the offer iswithdrawn by
either or both offerors. (Emphasis supplied)

Thus, as correctly found by the Court of Appeals, "assuming arguendo that the signature of plaintiff-appellee Paz on
the Kasulatan ng Bilihan ng Lupawas not forged, her signature alone would still not bind the subject property, it
being already established that the said transaction was made without the consent of her husband plaintiff-appellee
Alfredo."93

Lastly, petitioner argues that she has no obligation to prove the genuineness and due execution of the "Kasulatan
ng Bilihan ng Lupa" considering it is a public document. 94

The trial court found otherwise. Atty. Diosdado de Mesa, who allegedly notarized the "Kasulatanng Bilihan ng Lupa,"
was not a commissioned notary public. The trial court discussed as follows:

Furthermore, it was discovered that the notary public who purportedly notarized the "Kasulatanng Bilihan ng Lupa"
has not been registered notary public in the province of Cavite in 1979 nor at present. The record bears out various
Certifications to prove there is no available record on file with the Office of the Clerk of Court, Regional Trial Court,
Cavite City of a Commission/Order appointing Atty. Diosdado de Mesa, the lawyer who notarized the subject
document, as Notary Public for the Province and City of Cavite (Exh. "Y" to "Y-2"); Certification from the Records
Management and Archives Office, Manila that no copy is on file with the said office of the Deed of Sale allegedly
executed by plaintiffs before Notary Public Diosdado de Mesa, for and within Imus, Cavite, acknowledged as Doc.
No. 432, Page No. 45, Book No. VIII, Series of 1979 (Exh. "Z" to "Z-1"); Certification issued by Clerk of Court, Atty.
Ana Liza M. Luna, Regional Trial Court, Tagaytay City that there is no available record on file of a
Commission/Order appointing Atty. Diosdado de Mesa as Notary Public for the Province and Cities of Tagaytay,
Cavite and Trece Martires in 1979 (Exh. "AA" to"AA-2"); Certification issued by Clerk of Court, Atty. Jose O, Lagao,
Jr., Regional Trial Court, Multiple Sala, Bacoor, Cavite that there isno available record on file of a Commission/Order
appointing Atty. Diosdado de Mesa as Notary Public for the Province and City of Cavite (Exh. "BB" to "BB-2"); and
Certification issued by Clerk of Court, Atty. Regalado E. Eusebio, Regional Trial Court, Multiple Sala, Imus, Cavite
that there is no available record on file of a Commission/Order appointing Atty. Diosdado de Mesa as Notary Public
for the Province of Cavite (Exh. "CC" to "CC-2").  (Emphasis supplied).
95

Petitioner contends that the Sun spouses were buyers in good faith for value, thus, the court erred in ordering
reinstatement of the property in favor of respondents Revilla spouses. 96

This court has held that "the rule in land registration law that the issue of whether the buyer of realty is in good or
bad faith is relevant only where the subject of the sale is registeredland and the purchase was made from the
registered owner whose title to the land is clean[.]"  Our laws have adopted the Torrens system to strengthen public
97

confidence in land transactions: [T]he Torrens system was adopted in this country because it was believed to be the
most effective measure to guarantee the integrity of land titles and to insure their indefeasibility once the claim of
ownership is established and recognized. If a person purchases a piece of land on the assurance that the seller’s
title thereto is valid, he should not run the risk of losing his acquisition. If this were permitted, public confidence in
the system would be eroded and land transactions would have to be attended by complicated and not necessarily
conclusive investigations and proof of ownership. 98

Necessarily, those who rely in good faith on a clean title issued under the Torrens system for registered lands must
be protected.  On the other hand, those who purchase unregistered lands do so at their own peril.
1âwphi1
99

This good faith argument cannot be considered as this case involves unregistered land. In any case, as explained
by respondents Revilla spouses in their memorandum, this is a defense personal to the Sun spouses and cannot be
borrowed by petitioner.  The Sun spouses no longer raised this argument on appeal, but only made a partial appeal
100

regarding legal interest on the award. 101

WHEREFORE, this petition is DENIED for lack of merit. The decision of the Court of Appeals dated August 13, 2009
is AFFIRMED.

SO ORDERED.

986
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 175410               November 12, 2014

SMI-ED PHILIPPINES TECHNOLOGY, INC., Petitioner, 

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

LEONEN, J.:

In an action for the refund of taxes allegedly erroneously paid, the Court of Tax Appeals may determine whether
there are taxes that should have been paid in lieu of the taxes paid. Determining the proper category of tax that
should have been paid is not an assessment. It is incidental to determining whether there should be a refund.

A Philippine Economic Zone Authority (PEZA)-registered corporation that has never commenced operations may
not avail the tax incentives and preferential rates given to PEZA-registered enterprises. Such corporation is subject
to ordinary tax rates under the National Internal Revenue Code of 1997.

This is a petition for review  on certiorari of the November 3, 2006 Court of Tax Appeals En Banc decision.  It
1 2

affirmed the Court of Tax Appeals Second Division’s decision  and resolution  denying petitioner SMI-Ed Philippines
3 4

Technology, Inc.’s (SMI-Ed Philippines) claim for tax refund. 5

SMI-Ed Philippines is a PEZA-registered corporation authorized "to engage in the business of manufacturing ultra
high-density microprocessor unit package." 6

After its registration on June 29, 1998, SMI-Ed Philippines constructed buildings and purchased machineries and
equipment.  As of December 31, 1999, the total cost of the properties amounted to ₱3,150,925,917.00.
7 8

SMI-Ed Philippines "failed to commence operations."  Its factory was temporarily closed, effective October 15, 1999.
9

On August 1, 2000, it sold its buildings and some of its installed machineries and equipment to Ibiden Philippines,
Inc., another PEZA-registered enterprise, for ¥2,100,000,000.00 (₱893,550,000.00). SMI-Ed Philippines was
dissolved on November 30, 2000. 10

In its quarterly income tax return for year 2000, SMI-Ed Philippines subjected the entire gross sales of itsproperties
to 5% final tax on PEZA registered corporations. SMI-Ed Philippines paid taxes amounting to ₱44,677,500.00. 11

On February 2, 2001, after requesting the cancellation of its PEZA registration and amending its articles of
incorporation to shorten its corporate term, SMI-Ed Philippines filed an administrative claim for the refund of
₱44,677,500.00 with the Bureauof Internal Revenue (BIR). SMIEd Philippines alleged that the amountwas
erroneously paid. It also indicated the refundable amount in its final income tax return filed on March 1, 2001. It also
alleged that it incurred a net loss of ₱2,233,464,538.00. 12

The BIR did not act on SMI-Ed Philippines’ claim, which prompted the latter to file a petition for reviewbefore the
Court of Tax Appeals on September 9, 2002. 13

The Court of Tax Appeals Second Division denied SMI-Ed Philippines’ claim for refund in the decision dated
December 29, 2004. 14

The Court of Tax Appeals Second Division found that SMI-Ed Philippines’ administrative claim for refund and the
petition for review with the Court of Tax Appeals were filed within the two-year prescriptive period.  However, fiscal
15

incentives given to PEZA-registered enterprises may be availed only by PEZA-registered enterprises that had
already commenced operations.  Since SMI-Ed Philippines had not commenced operations, it was not entitled to
16

the incentives of either the income tax holiday or the 5% preferential tax rate.  Payment of the 5% preferential tax
17

amounting to ₱44,677,500.00 was erroneous. 18

After finding that SMI-Ed Philippines sold properties that were capital assets under Section 39(A)(1) of the National
Internal Revenue Code of 1997, the Court of Tax Appeals Second Division subjected the sale of SMIEd Philippines’
assets to 6% capital gains tax under Section 27(D)(5) of the same Code and Section 2 of Revenue Regulations No.
8-98.  It was found liable for capital gains tax amounting to ₱53,613,000.00.  Therefore, SMIEd Philippines must
19 20

987
still pay the balance of ₱8,935,500.00 as deficiency tax,  "which respondent should perhaps look into."  The
21 22

dispositive portion of the Court of Tax Appeals Second Division’s decision reads:

WHEREFORE, premises considered, the instant petition is hereby DENIED.

SO ORDERED. 23

The Court of Tax Appeals denied SMI-Ed Philippines’ motion for reconsideration in its June 15, 2005 resolution. 24

On July 17, 2005, SMI-Ed Philippines filed a petition for review before the Court of Tax Appeals En Banc.  It argued25

that the Court of Tax Appeals Second Division erroneously assessed the 6% capital gains tax on the sale of SMI-Ed
Philippines’ equipment, machineries, and buildings.  It also argued that the Court of Tax Appeals Second Division
26

cannot make an assessment at the first instance.  Even if the Court of Tax Appeals Second Division has such
27

power, the period to make an assessment had already prescribed. 28

In the decision promulgated on November 3, 2006, the Court of Tax Appeals En Banc dismissed SMI-Ed
Philippines’ petition and affirmed the Court of Tax Appeals Second Division’s decision and resolution.  The
29

dispositive portion of the Court of Tax Appeals En Banc’s decision reads:

WHEREFORE, finding no reversible error to reverse the assailed Decision promulgated on December 29, 2004 and
the Resolution dated June 15, 2005, the instant petition for review is hereby DISMISSED. Accordingly, the assailed
Decision and Resolution are hereby AFFIRMED. SO ORDERED. 30

SMI-Ed Philippines filed a petition for review before this court on December 27, 2006,  praying for the grant of its
31

claim for refund and the reversal of the Court of Tax Appeals En Banc’s decision. 32

SMI-Ed Philippines assigned the following errors:

A. The honorable CTA En Banc grievously erred and acted beyond its jurisdiction when it assessed for
deficiency tax in the first instance.

B. Even assuming that the honorable CTA En Banc has the right to make an assessment against the
petitioner-appellant, it grievously erred in finding that the machineries and equipment sold by the petitioner-
appellant is subject to the six percent (6%) capital gains tax under Section 27(D)(5) of the Tax Code. 33

Petitioner argued that the Court of Tax Appeals has no jurisdiction to make an assessment since its jurisdiction, with
respect to the decisions of respondent, is merely appellate.  Moreover, the power to make assessment had already
34

prescribed under Section 203 of the National Internal Revenue Code of 1997 since the return for the erroneous
payment was filed on September 13, 2000. This is more than three (3) years from the last day prescribed by law for
the filing of the return. 35

Petitioner also argued that the Court of Tax Appeals En Banc erroneously subjected petitioner’s machineries to 6%
capital gains tax.  Section 27(D)(5) of the National Internal Revenue Code of 1997 is clear that the 6% capital gains
36

tax on domestic corporations applies only on the sale of lands and buildings and not tomachineries and
equipment.  Since ¥1,700,000,000.00 of the ¥2,100,000,000.00 constituted the consideration for the sale of
37

petitioner’s machineries, only ¥400,000,000.00 or ₱170,200,000.00 should be subjected to the 6% capital gains
tax.  Petitioner should be liable only for ₱10,212,000.00.  It should be entitled to a refund of ₱34,464,500.00 after
38 39

deducting ₱10,212,000.00 from the erroneously paid final tax of ₱44,677,500.00. 40

In its comment, respondent argued that the Court of Tax Appeals’ determination of petitioner’s liability for capital
gains tax was not an assessment. Such determination was necessary to settle the question regarding the tax
consequence of the sale of the properties.  This is clearly within the Court of Tax Appeals’ jurisdiction under Section
41

7 of Republic Act No. 9282.  Respondent also argued that "petitioner failed to justify its claim for refund."
42 43

The petition is meritorious.

Jurisdiction of the Court of Tax Appeals

The term "assessment" refers to the determination of amounts due from a person obligated to make payments. In
the context of national internal revenue collection, it refers the determination of the taxes due from a taxpayer under
the National Internal Revenue Code of 1997.

The power and duty to assess national internal revenue taxes are lodged with the BIR.  Section 2 of the National
44

Internal Revenue Code of 1997 provides:

988
SEC. 2. Powers and Duties of the Bureau of Internal Revenue. - The Bureau of Internal Revenue shall be under the
supervision and control of the Department of Finance and its powers and duties shall comprehend the assessment
and collection ofall national internal revenue taxes, fees, and charges, and the enforcement of all forfeitures,
penalties, and fines connected therewith, including the execution of judgments in all cases decided in its favor by
the Court of Tax Appeals and the ordinary courts. The Bureau shall give effect to and administer the supervisory
and police powers conferred to it by this Code or other laws. (Emphasis supplied) The BIR is not mandated to make
an assessment relative to every return filed with it. Tax returns filed with the BIR enjoy the presumption that these
are in accordance with the law.  Tax returns are also presumed correct since these are filed under the penalty of
45

perjury. Generally, however, the BIR assesses taxes when it appears, after a return had been filed, that the taxes
46

paid were incorrect,  false,  or fraudulent.  The BIR also assesses taxes when taxes are due but no return is
47 48 49

filed.  Thus:
50

SEC. 6. Power of the Commissioner to Make assessments and Prescribe additional Requirements for Tax
Administration and Enforcement.–

(A) Examination of Returns and Determination of Tax Due. - After a return has been filed as required under the
provisions of this Code, the Commissioner or his duly authorized representative may authorize the examination of
any taxpayer and the assessment of the correct amount of tax: Provided, however; That failure to file a return shall
not prevent the Commissioner from authorizing the examination of any taxpayer.The tax or any deficiency tax so
assessed shall be paid upon notice and demand from the Commissioner or from his duly authorized representative.

....

SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.

(a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be
assessed, or a preceeding in court for the collection of such tax may be filed without assessment, at any time within
ten (10) years after the discovery of the falsity, fraud or omission: Provided, That in a fraud assessment which has
become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for
the collection thereof. (Emphasis supplied)

The Court of Tax Appeals has no powerto make an assessment at the first instance. On matters such as tax
collection, tax refund, and others related to the national internal revenue taxes, the Court of Tax Appeals’ jurisdiction
is appellate in nature.

Section 7(a)(1) and Section 7(a)(2) of Republic Act No. 1125,  as amended by Republic Act No. 9282,  provide that
51 52

the Court of Tax Appeals reviews decisions and inactions of the Commissioner of Internal Revenue in disputed
assessments and claims for tax refunds. Thus: SEC. 7. Jurisdiction.- The CTA shall exercise:

a. Exclusive appellate jurisdiction toreview by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the
National Internal Revenue or other laws administered by the Bureau of Internal Revenue;

2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relations thereto, or other matters arising under
the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where
the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be
deemed a denial[.] (Emphasis supplied) Based on these provisions, the following must be present for the
Court of Tax Appeals to have jurisdiction over a case involving the BIR’s decisions or inactions:

a) A case involving any of the following:

i. Disputed assessments;

ii. Refunds of internal revenue taxes, fees, or other charges, penalties in relation thereto; and

iii. Other matters arising under the National Internal Revenue Code of 1997.

b) Commissioner of Internal Revenue’s decision or inaction in a case submitted to him or her

Thus, the BIR first has to make an assessment of the taxpayer’s liabilities. When the BIR makes the assessment,
the taxpayer is allowed to dispute that assessment before the BIR. If the BIR issues a decision that is unfavorable to
the taxpayer or if the BIR fails to act on a dispute brought by the taxpayer, the BIR’s decision or inaction may be
brought on appeal to the Court of Tax Appeals. The Court of Tax Appeals then acquires jurisdiction over the case.
989
When the BIR’s unfavorable decision is brought on appeal to the Court of Tax Appeals, the Court of Tax Appeals
reviews the correctness of the BIR’s assessment and decision. In reviewing the BIR’s assessment and decision, the
Court of Tax Appeals had to make its own determination of the taxpayer’s tax liabilities. The Court of Tax Appeals
may not make such determination before the BIR makes its assessment and before a dispute involving such
assessment is brought to the Court of Tax Appeals on appeal.

The Court of Tax Appeals’ jurisdiction is not limited to cases when the BIR makes an assessment or a decision
unfavorable to the taxpayer. Because Republic Act No. 1125  also vests the Court of Tax Appeals with jurisdiction
53

over the BIR’s inaction on a taxpayer’s refund claim, there may be instances when the Court of Tax Appeals has to
take cognizance of cases that have nothing to do with the BIR’s assessments or decisions. When the BIR fails to act
on a claim for refund of voluntarily but mistakenly paid taxes, for example, there is no decision or assessment
involved.

Taxes are generally self-assessed. They are initially computed and voluntarily paid by the taxpayer. The
government does not have to demand it. If the tax payments are correct, the BIR need not make an assessment.

The self-assessing and voluntarily paying taxpayer, however, may later find that he or she has erroneously paid
taxes. Erroneously paid taxes may come in the form of amounts thatshould not have been paid. Thus, a taxpayer
may find that he or she has paid more than the amount that should have been paid under the law. Erroneously paid
taxes may also come in the form of tax payments for the wrong category of tax. Thus, a taxpayer may find that he or
she has paid a certain kindof tax that he or she is not subject to.

In these instances, the taxpayer may ask for a refund. If the BIR fails to act on the request for refund, the taxpayer
may bring the matter to the Court of Tax Appeals.

From the taxpayer’s self-assessment and tax payment up to his or her request for refund and the BIR’s inaction,the
BIR’s participation is limited to the receipt of the taxpayer’s payment. The BIR does not make an assessment; the
BIR issues no decision; and there is no dispute yet involved. Since there is no BIR assessment yet, the Court of Tax
Appeals may not determine the amount of taxes due from the taxpayer. There is also no decision yet to review.
However, there was inaction on the part of the BIR. That inaction is within the Court of Tax Appeals’ jurisdiction.

In other words, the Court of Tax Appeals may acquire jurisdiction over cases even if they do not involve BIR
assessments or decisions.

In this case, the Court of Tax Appeals’ jurisdiction was acquired because petitioner brought the case on appeal
before the Court of Tax Appeals after the BIR had failed to act on petitioner’s claim for refund of erroneously paid
taxes. The Court of Tax Appeals did not acquire jurisdiction as a result of a disputed assessment of a BIR decision.

Petitioner argued that the Court of Tax Appeals had no jurisdiction to subject it to 6% capital gains tax or other taxes
at the first instance. The Court of Tax Appeals has no power to make an assessment.

As earlier established, the Court of Tax Appeals has no assessment powers. In stating that petitioner’s transactions
are subject to capital gains tax, however, the Court of Tax Appeals was not making an assessment. It was merely
determining the proper category of tax that petitioner should have paid, in view of its claim that it erroneously
imposed upon itself and paid the 5% final tax imposed upon PEZA-registered enterprises.

The determination of the proper category of tax that petitioner should have paid is an incidental matter necessary for
the resolution of the principal issue, which is whether petitioner was entitled to a refund. 54

The issue of petitioner’s claim for tax refund is intertwined with the issue of the proper taxes that are due from
petitioner. A claim for tax refund carries the assumption that the tax returns filed were correct.  If the tax return filed
55

was not proper, the correctness of the amount paid and, therefore, the claim for refund become questionable. In that
case, the court must determine if a taxpayer claiming refund of erroneously paid taxes is more properly liable for
taxes other than that paid.

In South African Airways v. Commissioner of Internal Revenue,  South African Airways claimed for refund of its
56

erroneously paid 2½% taxes on its gross Philippine billings. This court did not immediately grant South African’s
claim for refund. This is because although this court found that South African Airways was not subject to the 2½%
tax on its gross Philippine billings, this court also found that it was subject to 32% tax on its taxable income. 57

In this case, petitioner’s claim that it erroneously paid the 5% final tax is an admission that the quarterly tax return it
filed in 2000 was improper. Hence, to determine if petitioner was entitled to the refund being claimed, the Court of
Tax Appeals has the duty to determine if petitioner was indeed not liable for the 5% final tax and, instead, liable for
taxes other than the 5% final tax. As in South African Airways, petitioner’s request for refund can neither be granted
nor denied outright without such determination. 58

990
If the taxpayer is found liable for taxes other than the erroneously paid 5% final tax, the amount of the taxpayer’s
liability should be computed and deducted from the refundable amount.

Any liability in excess of the refundable amount, however, may not be collected in a case involving solely the issue
of the taxpayer’s entitlement to refund. The question of tax deficiencyis distinct and unrelated to the question of
petitioner’s entitlement to refund. Tax deficiencies should be subject to assessment procedures and the rules of
prescription. The court cannot be expected to perform the BIR’s duties whenever it fails to do so either through
neglect or oversight. Neither can court processes be used as a tool to circumvent laws protecting the rights of
taxpayers.

II

Petitioner’s entitlement to benefits given to PEZA-registered enterprises

Petitioner is not entitled to benefits given to PEZA-registered enterprises, including the 5% preferential tax rate
under Republic Act No. 7916 or the Special Economic Zone Act of 1995. This is because it never began its
operation.

Essentially, the purpose of Republic Act No. 7916 is to promote development and encourage investments and
business activities that will generate employment.  Giving fiscal incentives to businesses is one of the means
59

devised to achieve this purpose. It comes with the expectation that persons who will avail these incentives will
contribute to the purpose’s achievement. Hence, to avail the fiscal incentives under Republic Act No. 7916, the law
did not say that mere PEZA registration is sufficient.

Republic Act No. 7916 or The Special Economic Zone Act of 1995 provides:

SEC. 23. Fiscal Incentives.— Business establishments operating within the ECOZONES shall be entitled to the
fiscal incentives as provided for under Presidential Decree No. 66, the law creating the Export Processing Zone
Authority, or those provided under Book VI of Executive Order No. 226, otherwise known as the Omnibus
Investment Code of 1987.

Furthermore, tax credits for exporters using local materials as inputs shall enjoy the same benefits provided for in
the Export Development Act of 1994.

SEC. 24. Exemption from Taxes Under the National Internal Revenue Code. — Any provision of existing laws, rules
and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed on business
establishments operating within the ECOZONE. In lieu of paying taxes, five percent (5%) of the gross income
earned by all businesses and enterprises within the ECOZONE shall be remitted tothe national government. This
five percent (5%) shall be shared and distributed as follows:

a. Three percent (3%) to the national government;

b. One percent (1%) to the localgovernment units affected by the declaration of the ECOZONE inproportion
to their population, land area, and equal sharing factors; and

c. One percent (1%) for the establishment of a development fund to be utilized for the development of
municipalities outside and contiguous to each ECOZONE: Provided, however, That the respective share of
the affected local government units shall be determined on the basis of the following formula:

1. Population - fifty percent (50%);

2. Land area - twenty-five percent (25%); and

3. Equal sharing - twenty-five percent (25%). (Emphasis supplied)

Based on these provisions, the fiscal incentives and the 5% preferential tax rate are available only to businesses
operating within the Ecozone.  A business is considered in operation when it starts entering into commercial
60

transactions that are not merely incidental to but are related to the purposes of the business. It is similar to the
definition of "doing business," as applied in actions involvingthe right of foreign corporations to maintain court
actions. In Mentholatum Co. Inc., et al. v. Mangaliman, et al.,  this court said that the terms "doing" or "engaging in"
61

or "transacting" business":

. . . impl[y] a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance
of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the
purpose and object of its organization.  Petitioner never started its operations since its registration on June 29,
62

1998  because of the Asian financial crisis.  Petitioner admitted this.  Therefore, it cannot avail the incentives
63 64 65

991
provided under Republic Act No. 7916. It is not entitled to the preferential tax rate of 5% on gross income in lieu of
all taxes. Because petitioner is not entitled to a preferential rate, it is subject to ordinary tax rates under the National
Internal Revenue Code of 1997.

III

Imposition of capital gains tax

The Court of Tax Appeals found that petitioner’s sale of its properties is subject to capital gains tax.

For petitioner’s properties to be subjected to capital gains tax, the properties must form part ofpetitioner’s capital
assets.

Section 39(A)(1) of the National Internal Revenue Code of 1997 defines "capital assets":

SEC. 39. Capital Gains and Losses. -

(A) Definitions.- As used in this Title -

(1) Capital Assets.- the term ‘capital assets’ means property held by the taxpayer (whether or not connected with his
trade or business), but does not include stock in trade of the taxpayer or other property of a kind which would
properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by
the taxpayer primarily for sale to customers in the ordinary course of his trade orbusiness, or property used in the
trade or business, of a character which is subject to the allowance for depreciation provided in Subsection (F) of
Section 34; or real property used in trade or business of the taxpayer. (Emphasis supplied) Thus, "capital assets"
refers to taxpayer’s property that is NOT any of the following:

1. Stock in trade;

2. Property that should be included inthe taxpayer’s inventory at the close of the taxable year;

3. Property held for sale in the ordinary course of the taxpayer’s business;

4. Depreciable property used in the trade or business; and

5. Real property used in the trade or business.

The properties involved in this case include petitioner’s buildings, equipment, and machineries. They are not among
the exclusions enumerated in Section 39(A)(1) of the National Internal Revenue Code of 1997. None of the
properties were used in petitioner’s trade or ordinary course of business because petitioner never commenced
operations. They were not part of the inventory. None of themwere stocks in trade. Based on the definition of capital
assets under Section 39 of the National Internal Revenue Code of 1997, they are capital assets.

Respondent insists that since petitioner’s machineries and equipment are classified as capital assets, their sales
should be subject to capital gains tax. Respondent is mistaken.

In Commissioner of Internal Revenue v. Fortune Tobacco Corporation,  this court said:

66

The rule in the interpretation of tax laws is that a statute will not be construed as imposing a tax unless it does so
clearly, expressly, and unambiguously. A tax cannot be imposed without clear and express words for that purpose.
Accordingly, the general rule of requiring adherence to the letter in construing statutes applies with peculiar
strictness to tax laws and the provisions of a taxing act are not to be extended by implication. In answering the
question of who is subject to tax statutes, it is basic that in case of doubt, such statutes are to be construed most
strongly against the government and in favor of the subjects or citizens because burdens are not to be imposed nor
presumed to be imposed beyond what statutes expressly and clearly import. As burdens, taxes should not be
unduly exacted nor assumed beyond the plain meaning of the tax laws.  (Citations omitted)
67

Capital gains of individuals and corporations from the sale of real properties are taxed differently. Individuals are
taxed on capital gains from sale of all real properties located in the Philippines and classified as capital assets.
Thus:

SEC. 24. Income Tax Rates.

....

992
(D) Capital Gains from Sale of Real Property. –

(1) In General. - The provisions of Section 39(B) notwithstanding, a final tax of six percent (6%) based on the gross
selling price or current fair market value as determined in accordance with Section 6(E) of this Code, whichever is
higher, is hereby imposed upon capital gains presumed to have been realized from the sale, exchange, or other
disposition of real property located in the Philippines, classified as capital assets, including pacto de retro sales and
other forms of conditional sales, by individuals, including estates and trusts: Provided, That the tax liability, if any, on
gains from sales or other dispositions of real property to the government or any of its political subdivisions or
agencies or to government-owned or controlled corporations shall be determined either under Section 24 (A) or
under this Subsection, at the option of the taxpayer.  (Emphasis supplied)
68

For corporations, the National Internal Revenue Code of 1997 treats the sale of land and buildings, and the sale of
machineries and equipment, differently. Domestic corporations are imposed a 6% capital gains tax only on the
presumed gain realized from the sale of lands and/or buildings. The National Internal Revenue Code of 1997 does
not impose the 6% capital gains tax on the gains realized from the sale of machineries and equipment. Section
27(D)(5) of the National Internal Revenue Code of 1997 provides:

SEC. 27. Rates of Income tax on Domestic Corporations. -

....

(D) Rates of Tax on Certain Passive Incomes. -

....

(5) Capital Gains Realized from the Sale, Exchange or Disposition of Lands and/or Buildings. - A final tax of six
percent (6%) is hereby imposed on the gain presumed to have been realized on the sale, exchange or disposition of
lands and/or buildings which are not actually used in the business of a corporation and are treated as capital assets,
based on the gross selling price of fair market value as determined in accordance with Section 6(E) of this Code,
whichever is higher, of such lands and/or buildings. (Emphasis supplied)

Therefore, only the presumed gain from the sale of petitioner’s land and/or building may be subjected to the 6%
capital gains tax. The income from the sale of petitioner’s machineries and equipment is subject to the provisions on
normal corporate income tax.

To determine, therefore, if petitioner is entitled to refund, the amount of capital gains tax for the sold land and/or
building of petitioner and the amount of corporate income tax for the sale of petitioner’s machineries and equipment
should be deducted from the total final tax paid. Petitioner indicated, however, in its March 1, 2001 income tax
return for the 11-month period ending on November 30, 2000 that it suffered a net loss of ₱2,233,464,538.00.  This 69

declaration was made under the pain of perjury. Section 267 of the National Internal Revenue Code of 1997
provides:

SEC. 267. Declaration under Penalties of Perjury. - Any declaration, return and other statement required under this
Code, shall, in lieu of an oath, contain a written statement that they are made under the penalties of perjury. Any
person who willfully files a declaration, return or statement containing information which is not true and correct as to
every material matter shall, upon conviction, be subject to the penalties prescribed for perjury under the Revised
Penal Code. Moreover, Rule 131, Section 3(ff) of the Rules of Court provides for the presumption that the law has
been obeyed unless contradicted or overcome by other evidence, thus:

SEC. 3. Disputable presumptions.— The following presumptions are satisfactory if uncontradicted, but may be
contradicted and overcome by other evidence:

....

(ff) That the law has been obeyed;

The BIR did not make a deficiency assessment for this declaration. Neither did the BIR dispute this statement in its
pleadings filed before this court. There is, therefore, no reason todoubt the truth that petitioner indeed suffered a net
loss in 2000.

Since petitioner had not started its operations, it was also not subject to the minimum corporate income tax of 2% on
gross income.  Therefore, petitioner is not liable for any income tax.
70

IV

Prescription
993
Section 203 of the National Internal Revenue Code of 1997 provides that as a general rule, the BIR has three (3)
years from the last day prescribed by law for the filing of a return to make an assessment. If the return is filed
beyond the last day prescribed by law for filing, the three-year period shall run from the actual date of filing. Thus:

SEC. 203. Period of Limitation Upon Assessment and Collection. - Except as provided in Section 222, internal
revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return,
and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of
such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the three (3)-year
period shall be counted from the day the return was filed. For purposes of this Section, a return filed before the last
day prescribed by law for the filing thereof shall be considered as filed on such last day.

This court said that the prescriptive period to make an assessment of internal revenue taxes is provided "primarily to
safeguard the interests of taxpayers from unreasonable investigation."  This court explained in Commissioner of
71

Internal Revenue v. FMF Development Corporation  the reason behind the provisions on prescriptive periods for tax
72

assessments: Accordingly, the government must assess internal revenue taxes on time so as not to extend
indefinitely the period of assessment and deprive the taxpayer of the assurance that it will no longer be subjected to
further investigation for taxes after the expiration of reasonable period of time.
73

Rules derogating taxpayers’ right against prolonged and unscrupulous investigations are strictly construed against
the government. 74

[T]he law on prescription should beinterpreted in a way conducive to bringing about the beneficent purpose of
affording protection to the taxpayer within the contemplation of the Commission which recommended the approval
of the law. To the Government, its tax officers are obliged to act promptlyin the making of assessment so that
taxpayers, after the lapse of the period of prescription, would have a feeling of security against unscrupulous tax
agents who will always try to find an excuse to inspect the books of taxpayers, not to determine the latter’s real
liability, but to take advantage of a possible opportunity to harass even law-abiding businessmen. Without such legal
defense, taxpayers would be open season to harassment by unscrupulous tax agents. 75

Moreover, in Commissioner of Internal Revenue v. BF Goodrich Phils.: 76

For the purpose of safeguarding taxpayers from any unreasonable examination, investigation or assessment, our
tax law provides a statute of limitations in the collection of taxes. Thus, the law on prescription, being a remedial
measure, should be liberally construed in order to afford such protection. As a corollary, the exceptions to the law on
prescription should perforce be strictly construed[.]

....

. . . . Such instances of negligence or oversight on the part of the BIR cannot prejudice taxpayers, considering that
the prescriptive period was precisely intended to give them peace of mind.  (Citation omitted)
77

The BIR had three years from the filing of petitioner’s final tax return in 2000 to assess petitioner’s taxes. Nothing
stopped the BIR from making the correct assessment. The elevation of the refund claim with the Court of Tax
Appeals was not a bar against the BIR’s exercise of its assessment powers.

The BIR, however, did not initiate any assessment for deficiency capital gains tax.  Since more than a decade have
78

lapsed from the filing of petitioner's return, the BIR can no longer assess petitioner for deficiency capital gains taxes,
if petitioner is later found to have capital gains tax liabilities in excess of the amount claimed for refund.

The Court of Tax Appeals should not be expected to perform the BIR's duties of assessing and collecting taxes
whenever the BIR, through neglect or oversight, fails to do so within the prescriptive period allowed by law.

WHEREFORE, the Court of Tax Appeals' November 3, 2006 decision is SET ASIDE. The Bureau of Internal
Revenue is ordered to refund petitioner SMI-Ed Philippines Technology, Inc. the amount of 5% final tax paid to the
BIR, less the 6% capital gains tax on the sale of petitioner SMI-Ed Philippines Technology, Inc. 's land and building.
In view of the lapse of the prescriptive period for assessment, any capital gains tax accrued from the sale of its land
and building that is in excess of the 5% final tax paid to the Bureau of Internal Revenue may no longer be recovered
from petitioner SMI-Ed Philippines Technology, Inc.

SO ORDERED.

994
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 199402               November 12, 2014

PEOPLE OF THE PHILIPPINES, Appellee, 

vs.
ENRIQUE QUINTOS y BADILLA, Accused-appellant.

DECISION

LEONEN, J.:

A person commits rape when he sexually assaults another who does not consent or is incapable of giving consent
to a sexual act. Children, either in chronological or mental age, are incapable of giving consent to a sexual act.

This case involves accused Enrique Quintos y Badilla who was charged with rape allegedly committed against AAA,
a mental retardate  (intellectually disabled ).
1 2

Two informations were filed against accused. Pertinent portions of which read:

A. Crim. Case No. 07-0873 (Rape under Article 266-A, paragraph 2, in relation to Article 266-B, 9th paragraph,
RPC)

That on or about the 25th day of October 2007, in the City of Las Pinas, Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused, with lewd design, did then and there wilfully, unlawfully and feloniously
commit an act of sexual assault by inserting his penis into the mouth of one [AAA], through force, threat, or
intimidation, and against her will and consent, thereby debasing, demeaning and degrading her intrinsic worth and
dignity.
3

B. Crim. Case No. 07-0874 (Rape under Article 266-A, paragraph 1, Revised Penal Code)

That on or about the 26th day of October, 2007, in the City of Las Pinas, Philippines, and within the jurisdiction of
this Honorable Court, the above-named accused, with lewd design, did then and there wilfully, unlawfully and
feloniously by means of force and intimidation, have carnal knowledge with one [AAA], when she is deprived of
reason or otherwise unconscious or asleep, and against her will and consent,thereby debasing, demeaning and
degrading her intrinsic worth and dignity.

Accused pleaded not guilty in both cases. 4

Upon motion, the Regional Trial Court consolidated the two cases on March 6, 2008. 5

The prosecution established that atthe time of the incident, AAA was intellectually disabled.  She was 21 years old
6

with a mental age of 6 years and 2 months.  She had an IQ of 38.  This was based on the testimony of National
7 8

Bureau of Investigation clinical psychologist Brenda Tablizo.

Brenda Tablizo testified that she had been with the National Bureau of Investigation for 33 years at the timeher
testimony was taken. In handling rape cases, they have a procedure,which involves "interviewing [the victim], giving
[the victim a] psychological battery of tests and then . . . [an] in-depth interview. . . ."  With respect to this particular
9

case, Brenda Tablizo "administered the standard intelligence scale, and projective test."  She "conducted the
10

standard intelligence scale to determine the mental and emotional capacity of the individual."  She also gave AAA a
11

draw-aperson test. 12

According to Brenda Tablizo, the purpose of the tests was "to have a general assessment of the mental and
emotional capacity of an individual and . . . to determine mental illness. . . ."  These were the standard tests used to
13

evaluate mental competence.  She conducted the tests on the day AAA was referred to her by the Philippine
14

National Police on December 5, 2007. 15

AAA testified that in October 2007, accused, who was her neighbor, went to her house to watch television. Accused 16

followed her when she went to the bathroom.  In the bathroom, accused removed his shorts and underwear, and
17

inserted his penis into her vagina.  AAA did not want to have intercourse with the accused, but she did not tell the
18

accused to stop.  During the trial, AAA pointed to a man in yellow shirt as the man who followed her in the
19

bathroom.  She identified his name as "Enrique Quintos."

20 21

995
A similar incident happened the nextday. While AAA was sleeping, accused removed her undergarments, as well as
his own undergarments.  Accused then laid on top of her and, again, inserted his penis into her vagina.  AAA also
22 23

recalled that on a different day, accused kissed her and held her breasts.  There was also one Thursday night when
24

accused forced AAA to take his penis inside her mouth despite her protests. 25

Based on the medico-legal report dated November 5, 2007, there was evidence of lacerations in AAA’s hymen that
were not self-inflicted.
26

Accused claimed that he did not rape AAA.  He was in a romantic and sexual relationship with AAA.  However, he
27 28

ended this relationship when he got his now common-law wife pregnant.  He insisted that AAA’s charges were
29

fabricated because of AAA’s inability to accept that he ended their relationship. 30

On September 9, 2009, the trial court issued a judgment finding accused guilty of two counts of rape.  The 31

dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. In Criminal Case No. 07-0873, accused Enrique Quintos y Badilla @ Eric is hereby found GUILTY beyond
reasonable doubt of Simple Rape under Article 266-A, paragraph 2 in relation to Article 266-B, 9th
paragraph and sentenced him to suffer an indeterminate penaltyof 6 years of prision correccional as the
minimum penalty to 10 years and 1 day of prision mayor as the maximum penalty.

2. In Criminal Case No. 07-0874, this Court likewise finds the said accused GUILTY of the crime of rape
under Article 266-A, paragraph 1 of the Revised Penal Code and sentenced him to suffer the penalty of
reclusion perpetua

For each count or rape, accused is ordered to pay complainant [AAA] ₱50,000 as moral damages, ₱50,000 as civil
indemnity and ₱25,000 as exemplary damages, or a total of ₱250,000.00 for two (2) counts of rape. Costs against
the accused.

Accused appealed the trial court decision before the Court of Appeals. 32

On March 23, 2011, the Court of Appeals issued a decision affirming with modification the trial court’s decision, the
dispositive portion of which reads:

WHEREFORE, for the reasons stated, the appealed judgment finding accused appellant guilty of two counts of
Rape is hereby AFFIRMED WITH MODIFICATION in that in Criminal Case No. 07- 0873, accused-appellant is
sentenced to suffer the indeterminate penalty of six (6) years of prision correccional, as minimum, to ten (10) years
of prision mayor, as maximum. The award of exemplary damages is increased from ₱25,000 to ₱30,000 for each
count of rape

All other aspects of the fallo of the assailed Decision rendered by the Regional Trial Court Branch 202 ofLas Pinas
City on September 9, 2009 in Criminal Case Nos. 07-0873 and 07-0874, stand. 33

The Court of Appeals found that AAA’s testimony was credible and sufficient to convict accused.  "Her simple
34

recollection of the acts done to her by accused-appellant evinces sincerity and truthfulness. . . . A woman with a
mental age of that of a six yearold child [as testified to by a National Bureau of Investigation psychologist] could not
possibly concoct an accusation as serious as rape against . . . accused or at any one for that matter."  The Court of
35

Appeals also considered the medical evaluation finding evidence of five-day-old (or less) lacerations. 36

The Court of Appeals ruled that accused’s denial and alibi could not prosper because he was not able to
demonstrate the impossibility that he was present at the crime scene when the incident happened. 37

On the alleged lack of resistance from AAA during the alleged assault, the Court of Appeals ruled that since an
intellectually disabled person cannot give consent, carnal knowledge with her is rape under the law.  Moreover,
38

accused did not show proof that would substantiate his claim that he was in a relationship with AAA.  In any case,
39

the existence of a romantic relationship does not justify such force upon a party. 40

The Court of Appeals modified the maximum penalty in Criminal Case No. 07-0873 to 10 years of prision mayor.
The Court of Appeals removed the additional one day imposed by the trial court.

On April 11, 2012, accused, through the Public Attorney’s Office, filed a notice of appeal of the Court of Appeals’
decision dated March 23, 2011. 41

996
Both the People, through the Office of the Solicitor General, and accused, through the Public Attorney’sOffice,
manifested their intent to dispense with the filing of supplemental briefs.  The issue in this case is whether accused
42

was guilty beyond reasonable doubt of two counts of rape.

In the accused’s brief filed before the Court of Appeals, accused argued that the trial court overlooked "material
loopholes"  in AAA’s direct testimony that could discredit her.  These include AAA’s failure to disclose that accused
43 44

employed force or intimidation against her. She never mentioned that accused was in any occasion carrying a
deadly weapon, uttering threats, or subjecting AAA to physical violence.  Force and intimidation are elements of the
45

crime of rape under Article 355, paragraph 1 of the Revised Penal Code, in relation to Republic Act No. 7659. 46

Accused also emphasized that AAA did not offer resistance or attempted to flee despite accused’s lack of weapon to
intimidate her.  She did not tell accused to stop when accused allegedly removed her undergarments.
47 48

Accused pointed out the closeness of the houses in the locality.  The incident also happened in broad daylight
49

inside AAA’s house where she lived with six other family members.  These circumstances made it improbable for
50

AAA not to make an outcry. 51

Moreover, the prosecution’s act ofhaving to recall AAA to the witness stand so that she could testify to 1) the alleged
threats that accused made to her and 2) the alleged fact that she wept after the incident reflects the weakness of
AAA’s initial testimony.  It was clearly an "attempt to make out a stronger rape case."  She could have alleged those
52 53

if it were true in her sinumpaang salaysay and during her direct testimony. 54

Lastly, accused argued that he and AAA were sweethearts who were engaged in sexual intimacies, and the charges
against him were mere responses to their break-up. 55

We affirm accused’s conviction.

Trial courts are in the best position

to evaluate witnesses’ credibility

Both the trial court and the Court of Appeals found AAA’s testimony to be credible and convincing.  There is no
56

reason to disturb this finding.

The observance of the witnesses’ demeanor during an oral direct examination, cross-examination, and during the
entire period that he or she is present during trial is indispensable especially in rape cases because it helps
establish the moral conviction that an accused is guilty beyond reasonable doubt of the crime charged. Trial
provides judges with the opportunity to detect, consciously or unconsciously, observable cues and micro
expressions that could, more than the words said and taken as a whole, suggest sincerity or betray lies and ill will.
These important aspects can never be reflected or reproduced in documents and objects used as evidence.

Hence, "[t]he evaluation of the witnesses’ credibility is a matter best left to the trial court because it has the
opportunity to observe the witnesses and their demeanor during the trial. Thus, the Court accords great respect to
the trial court’s findings,"  more so when the Court of Appeals affirmed such findings.
57 58

The exception is when the trial court and/or the Court of Appeals "overlooked or misconstrued substantial facts that
could have affected the outcome of the case."  No such facts were overlooked or misconstrued in this case.
59

II.

The intellectual disability of the

witness does not make her
testimony incredible, especially
when corroborated by other
evidence

When a victim’s testimony is credible and sufficiently establishes the elements of the crime, it may be enough basis
to convict an accused of rape. 60

Article 266-A of the RevisedPenal Code provides:

Art. 266-A. Rape, When and How Committed. – Rape is committed –

1) By a man who shall have carnal knowledge of a woman under any of the following circumstances:

997
 a. Through force, threat or intimidation;

b. When the offended party is deprived of reason or is otherwise unconscious;

c. By means of fraudulent machination or grave abuse of authority;

d. When the offended party isunder twelve (12) years of age or is demented, even though none of the
circumstances mentioned above be present;

2) By any person who, under any of the circumstances mentioned in paragraph 1 hereof, shall commit an act of
sexual assault by inserting his penis into another person’s mouth or anal orifice, or any instrument or object, into the
genital or anal orifice of another person (Republic Act No. 8353 which took effect on October 22, 1997).

Thus, to be convicted of rape under Article 266-A of the Revised Penal Code, it only needs to be shown that a man
had carnal knowledge with a woman, or a person sexually assaulted another, under any of the following
circumstances:

a) Through force, threat or intimidation;

b) The victim is deprived of reason;

c) The victim is unconscious;

d) By means of fraudulent machination;

e) By means of grave abuse of authority;

f) When the victim is under 12 years of age; or

g) When the victim is demented.

In this case, AAA made a spontaneous and unadorned testimony in court about the fact, the manner, and the
circumstances of the male accused’s sexual intercourse with her over a period of days. She was also able to
positively identify the accused, when asked. Thus:

Q: When accused followed you to the bathroom what happened?

A: He removed his short and underwear, Ma’am.

Q: And, what did he do after he removed his short and underwear?

A: He inserted, Ma’am.

Q: What did he insert?

A: His penis, Ma’am.

Q: And, where did he insert his penis?

A: In my vagina, Ma’am.

....

Q: And, what happened on that another incident?

A: On a Tuesday he kissed me on the lips and held my breast, Ma’am.

Q: And, after that incident on a Tuesday, what else happened?

A: On a Thursday he waited on me downstairs when it was already dark, Ma’am.

Q: What did you do on that Thursday incident?

A: He let me swallowed, Ma’am.

998
Q: Who in particular let you swallowed something?

A: Eric, Ma’am.

Q: Are you referring to Eric the same accused who repeatedly inserted his penis into your vagina?

A: It is him, Ma’am.

....

Q: Who let you swallow that "something"?

A: Eric, Ma’am.

Q: Please point to Eric if he is in this Courtroom.

RECORD: (Witness is pointing to a man wearing a yellow shirt and when asked his name answered, Enrique
Quintos.)

Q: And, you said that the accused made you swallowed.

What is that thing that he made you swallow?

A: His penis, Ma’am.

Q: What did you do when he made you swallowed his penis?

A: He forced me, Ma’am.

Q: And by forcing you, what action did you make with regard to his act of making you swallow his penis?

A: I told him, "I do not like it, Ma’am.

Q: And, did you in fact, ableto swallow his penis?

A:"Opo, isinubo po sa akin", Ma’am.  (Emphasis supplied)

61

It was established by clinical psychologist Brenda Tablizo, however, through examinations and interviews, that AAA
was intellectually disabled with a mental age of 6 years and 2 months. Pertinent portions of Brenda Tablizo’s
testimony are reproduced as follows:

Q: In handling rape victim cases, what do you usually do with regard to them?

A: We usually do a certain procedure like interviewing them, giving them psychological battery of tests and
then we still do the in-depth interview, ma’am.

Q: In this particular case . . . what kind of examination did you conduct upon her?

A: I administered the standard intelligence scale and projective test, ma’am.

....

Pros. Sion: Madam Witness, will you please be more precise in informing this Honorable Court on the
various tests which you conducted upon the person of the victim. . .?

Witness: I conducted the standard intelligence scale to determine the mental and emotional capacity of the
individual, ma’am.

Q: Other than that kind of test, what other tests were conducted upon the victim?

A: I also gave her the draw-a-person test and battery of tests, ma’am.

Q: What were the purposes or the goals of these kinds of tests conducted upon the said victim?

999
 A: The purpose of all these tests is to have a general assessment of the mental and emotional capacity of
an individual and also these tests determine mental illness, ma’am.

Q: These kinds of tests that you resulted to which you employed upon the victim, are these tests the
standard method being used all over to be able to specifically evaluate the mental competence and
incompetence of a certain person?

A: Yes, ma’am.

Q: For how long did you conduct this psychiatric examination upon the said victim?

A: I conducted the tests on the same day when the victim was referred to me, ma’am. I started it in the
morning until late in the afternoon. And we also asked for the victim to come back.

Q: So, for how much time was required for you to completely terminate and fully satisfied that you have
completed this neuro-psychiatric examination upon the said victim?

A: For exactly one week, ma’am.

Q: As a result of the examination that you conducted upon the victim, what was the findings which yielded
from said examination?

A: In the conclusion which I made, it was found out that the victim is suffering from mental retardation, her IQ
is 38 and her mental age is 6 years and two months, ma’am.

Q. How old was the victim at that time that you conducted this psychiatric examination?

A: She was 21 years old, ma’am.  (Emphasis supplied)

62

AAA's mental condition does not makeher testimony incredible as long as she can recount her experiencein a
straightforward, spontaneous, and believable manner. In People v. Monticalvo, this court said the following:

Competence and credibility of mentally deficient rape victims as witnesses have been upheld by this Court where it
is shown that they can communicate their ordeal capable and consistently. Rather than undermine the gravity of the
complainant's accusations, it even lends greater credence to her testimony, that, someone as feeble-minded and
guileless could speak so tenaciously and explicitly on the details of the rape if she has not in fact suffered such
crime at the hands of the accused.63

AAA’s testimony was corroborated by the medical findings, which showed that there were lacerations inher hymen
that were produced by a blunt object. The testimonial evidence is bolstered by the presence of these lacerations.
Together, they produce a moral conviction that accused committed the crimes charged.

The presence of lacerations is not anelement of the crime of rape.  This court previously characterized the presence
1âwphi1

or absence of lacerations as a "trivial or inconsequential [matter] that does not alter the essential fact of the
commission of rape."  The presence of lacerations is, therefore, not necessary to sustain a conviction. Anaccused
64

may be found guilty of rape regardless of the existence or inexistence of lacerations. The absence of lacerations is
not a sufficient defense.

However, the presence of lacerations may be used to sustain conviction of an accused by corroborating testimonies
of abuse and documents showing trauma upon the victim's genitals.

In this case, the medical evidence of lacerations supported AAA’s testimony that she was sexually abused. It was
not necessary to convict accused, but it strengthened AAA's testimony and the moral certainty that accused was
guilty of the crimes charged.

III

The existence of a relationship

between accused and the victim
does not negate rape

Accused’s argument that he and AAA were sweethearts is irrelevant in rape cases wherein the main element is
"lack of consent." Regardless of the relationship between two individuals, forcing carnal knowledge upon another is
considered rape, more so when the victim is incapable of giving consent due to her mental capacity. Even married
couples, upon whom the law imposes the duty to cohabitate, are protected from forced sexual congress.

1000
Rape, as now defined in Article 266-A of the Revised Penal Code, does not make a distinction with regard to an
accused's relationship with the victim. It only requires that sexual congress be forced by a man upon another
person. Moreover, Republic Act No. 9262 recognizes that wives, former wives, co-parents, and sweethearts may be
raped by their husbands, former husbands, co-parents, or sweethearts by stating that committing acts of rape
against these persons are considered violence against women. Republic Act No. 9262 provides:

Section 3. Definition of Terms. -- As used in this Act,

(a) "Violence against women and their children" refers to any act or a series of acts committed by any person
against a woman who is his wife former wife, or against a woman with whom the person has or had a sexual
ordating relationship, or with whom he has a common child . . . which result in or is likely to result in physical,
sexual, psychological harm or suffering,or economic abuse. . . .

....

B. "Sexual violence" refers to an act which is sexual in nature, committed against a woman or her child.It includes,
but is not limited to:

a) rape, sexual harrassment, acts of lasciviousness . . . (Emphasis supplied)

Further, we discussed marital rape in People v. Jumawan.  We said:

65

Husbands do not have property rights over their wives' bodies. Sexual intercourse, albeit within the realm of
marriage, if not consensual, is rape.

....

Clearly, it is now acknowledged thatrape, as a form of sexual violence, exists within marriage.A man who penetrates
her wife without her consent or against her will commits sexual violence upon her, and the Philippines, as a State
Party to the CEDAW and its accompanying Declaration, defines and penalizes the act as rape under R.A. No. 8353.

A woman is no longer the chattel-antiquated practices labeled her to be. A husband who has sexual intercourse with
his wife is not merely using a property, he is fulfilling a marital consortium with a fellow human being with dignity
equal to that he accords himself. He cannot be permitted to violate this dignity by coercing her to engage in a sexual
act without her full and free consent. 66

IV

Absence of resistance does not, by

itself, establish consent

Accused’s allegation that AAA did notresist his advances was belied by AAA’s testimony that accused threatened
the lives of her mother and siblings.  This is intimidation that could explain AAA’s alleged lack of resistance.
67

In any case, resistance is not an element of the crime of rape. It need not be shown by the prosecution. Neither is it
necessary to convict an accused. The main element ofrape is "lack of consent."

"Consent," "resistance," and "absence of resistance" are different things. Consent implies agreement and
voluntariness. It implies willfulness. Similarly, resistance is an act of will. However, it implies the opposite of consent.
It implies disagreement.

Meanwhile, absence of resistance only implies passivity. It may be a product of one’s will. It may imply consent.
However, it may also be the product of force, intimidation, manipulation, and other external forces.

Thus, when a person resists another’ssexual advances, it would not be presumptuous to say that that person does
not consent to any sexual activity with the other. That resistance may establish lack of consent. Sexual congress
with a person who expressed her resistance by words or deeds constitutes force either physically or psychologically
through threat or intimidation. It is rape. Lack of resistance may sometimes imply consent. However, that is not
always the case. While it may imply consent, there are circumstances that may render a person unable to express
her resistance to another’s sexual advances. Thus, when a person has carnal knowledge with another person who
does not show any resistance, it does not always mean that that person consented to such act. Lack of resistance
does not negate rape.

Hence, Article 266-A of the Revised Penal Code does not simply say that rape is committed when a man has carnal
knowledge with or sexually assaults another by means of force, threat, or intimidation. It enumerates at least four
other circumstances under which rape may be committed: (1) by taking advantage of a person’s deprived reason or
1001
unconscious state; (2) through fraudulent machination; (3) bytaking advantage of a person’s age (12 years of age)
or demented status; and (4) through grave abuse of authority. Article 266-A recognizesthat rape can happen even in
circumstances when there is noresistance from the victim.

Resistance, therefore, is not necessary to establish rape, especially when the victim is unconscious, deprived of
reason, manipulated, demented, or young either in chronological age or mental age.

The circumstances when rape may be committed under Article 266-A of the Revised Penal Code should be defined
in terms of the capacity of an individual to give consent. An unconscious person cannot rationally respond to stimuli
or perform acts such asgiving consent or offering resistance because he or she is either unaware, asleep, or in a
coma.

Meanwhile, when a person is a victim of fraudulent machination or manipulation, such as when she is induced to
have carnal knowledge to treat a person’s disease that he or she does not really have, she is not in full control of his
or her decisions. He or she acts without full or with false knowledge of the circumstances from which he or she
bases his or her actions. Therefore, any consent he or she gives is either false or not his or her own. Any lack of
resistance may not be interpreted as voluntariness.

The term, "deprived of reason," is associated with insanity or madness. A person deprived of reason has mental
abnormalities that affect his or her reasoning and perception of reality and, therefore, his or her capacity to resist,
make decisions, and give consent.

The term, "demented," refers to a person who suffers from a mental condition called dementia. Dementia refers to
the deterioration or loss of mental functions such as memory, learning, speaking, and social condition, which impairs
one’s independence in everyday activities.  We are aware that the terms, "mental retardation" or "intellectual
68

disability," had been classifiedunder "deprived of reason."  The terms, "deprived of reason" and "demented",
69

however, should be differentiated from the term, "mentally retarded" or"intellectually disabled." An intellectually
disabled person is not necessarily deprived of reason or demented. This court had even ruled that they may be
credible witnesses.  However, his or her maturityis not there despite the physical age. He or she is deficient in
70

general mental abilities and has an impaired conceptual, social, and practical functioning relative to his or her age,
gender, and peers.  Because of such impairment, he or she does not meet the "sociocultural standards of personal
71

independence and social responsibility." 72

Thus, a person with a chronological age of 7 years and a normal mental age is as capable of making decisions and
giving consent as a person with a chronological age of 35 and a mental age of 7. Both are considered incapable of
giving rational consent because both are not yet considered to have reached the level of maturity that gives them
the capability to make rational decisions, especially on matters involving sexuality. Decisionmaking is a function of
the mind. Hence, a person’s capacity to decide whether to give consent or to express resistance to an adult activity
is determined not by his or her chronological age but by his or her mental age. Therefore, in determining whether a
person is "twelve (12) years of age" under Article 266-A(1)(d), the interpretation should be in accordance with either
the chronological age of the child if he or she is not suffering from intellectual disability, or the mentalage if
intellectual disability is established.

In all the above circumstances, rapeis ensured because the victim lacks the awareness or presence of mind to resist
a sexual abuse. The unconscious, the manipulated, the reason-deprived, the demented, and the young cannot be
expected to offer resistance to sexual abuse for the simple reason that their mental statuses render them incapable
of doing so. They are incapable of rational consent. Thus, sexual intercourse with them is rape. No evidence of
force, intimidation, or resistance is necessary.

In this case, the victim, AAA, is intellectually disabled, with a mental age of 6 years and 2 months at 21 years of
chronological age and an IQ of 38 at the time of the incident. Her capacityto give consent is only that of a 6-year-
and 2-month-old child. She is incapable of giving rational consent to a sexual act. Any sexual intercourse with her,
regardless of her relationship with accused and the presence or absence of resistance, is considered rape. In
People v. Butiong,  this court said:
73

Carnal knowledge of a mental retardate is rape under paragraph 1 of Article 266-A of the Revised Penal Code, as
amended by Republic Act No. 8353 because a mental retardate is not capable of giving her consent to a sexual act.
Proof of force or intimidation is not necessary, it being sufficient for the State to establish, one, the sexual congress
between the accused and the victim, and, two, the mental retardation of the victim. 74

Similarly, in People v. Monticalvo,  this court said:

75

The gravamen of the crime of rape under Art. 266-A(1) is sexual intercourse with a woman against her will or
without her consent. . . .

. . . [F]or the charge of rape to prosper, the prosecution must prove that the offender had carnal knowledge of a
woman through any of the four enumerated circumstances. Without doubt, carnal knowledge of a woman who is a
1002
mental retardate is rape under the aforesaid provisions of law. Proof of force or intimidation is not necessary as a
mental retardate is not capable of giving consent to a sexual act. What needs to be proved are the facts of sexual
congress between the accused and the victim, and the mental retardation of the latter. 76

For the same reason that AAA was incapable of giving her consent, forcing her to take one’s genitals inside her
mouth is rape under Article 266-A(2) regardless of the existence of or lack of consent.

The classifications of rape in Article 266-A of the Revised Penal Code are relevant only insofar as these define the
manners of commission of rape. However, it does not mean that one manner is less heinous or wrong than the
other. Whether rape is committed by nonconsensual carnal knowledge of a woman or by insertion of the penis into
the mouth of another person, the damage to the victim’s dignity is incalculable. Child sexual abuse in general has
been associated with negative psychological impacts such as trauma, sustained fearfulness, anxiety, self-
destructive behavior, emotional pain, impaired sense of self, and interpersonal difficulties.  Hence, one experience
77

of sexual abuse should not be trivialized just because it was committed in a relatively unusual manner.

"The prime purpose of [a] criminal action is to punish the offender in order to deter him and others from committing
the same or similar offense, to isolate him from society, reform and rehabilitate him or, in general, to maintain social
order."  Crimes are punished as retribution so that society would understand that the act punished was wrong.
78

Imposing different penalties for different manners of committing rape creates a message that one experience ofrape
is relatively trivial or less serious than another. It attaches different levels of wrongfulness to equally degrading acts.
Rape, in whatever manner, is a desecration of a person’s will and body. In terms of penalties, treating one manner
of committing rape as greater or less in heinousness than another may be of doubtful constitutionality.

However, the discriminatory treatment of these two acts with the same result was not raised in this
case. Acknowledging that every presumption must be accorded in favor of accused in criminal cases, we have no
1âwphi1

choice but to impose a lesser penalty for rape committed by inserting the penis into the mouth of the victim.

The victim’s mental incapacity need

not be alleged in the information in
order to convict an accused of the
crime of rape as long as evidence
established such incapacity

Article 266-B of the Revised Penal Code provides that rape under paragraph 1 of Article 266-A is punishable by
reclusion perpetua.

The information charging accused of this crime lacked the allegation of any mental disability on the part of AAA. This
is not necessary to convict accused of the crime of rape provided that sexual congress and mental incapacity and,
therefore, the incapacity to give consent, are proved by clear and convincing evidence.

However, to qualify the crime of rape and increase the penalty of accused from reclusion perpetua to death under
Article 266-B in relation to Article 266-(A)(1) of the Revised Penal Code, an allegation of the victim's intellectual
disability must be alleged in the information. If not alleged in the information, such mental incapacity may prove lack
of consent but it cannot increase the penalty to death. Neither can it be the basis of conviction for statutory rape.

In this case, the elements of sexual congress and lack of consent were sufficiently alleged in the information. They
were also clearly and conveniently determined during trial.The fact of being mentally incapacitated was only shown
to prove AAA's incapacity to give consent, not to qualify the crime of rape.

Thus, the Court of Appeals is correct in affirming the trial court’s decision to impose the penalty of reclusion
perpetua and not death in Criminal Case No. 07-0874.

Article 266-B also provides that rape under paragraph 2 of Article 266-A is punishable by prision mayor.  Applying
1âwphi1

Act No. 4103 or the Indeterminate Sentence Law, and considering that there were no attending circumstances that
should be considered, accused’s penalty in Criminal Case No. 07-0873 should be "within the range of penalty next
lower to [prision mayor]" or prision correccional in its maximum period as minimum, and prision mayor in its medium
period as maximum. Prision correccional in its maximum period has a range of 4 years, 2 months and 1 day to 6
years. Prision mayor in its medium period has a rangeof 8 years and 1 day to 10 years. Since the penalty imposed
by the trial court exceeds by one day the allowable penalty for the offenses committed, the Court of Appeals was
correct in removing that excess.

1003
This court had not hesitated to increase the awards of damages in crimes of utter heinousness and depravity. Thus,
79

we increase the awards for moral damages, civil indemnity, and exemplary damages to ₱100,000.00 each, and for
each count of rape.

WHEREFORE, the decision of the Court of Appeals finding accused Enrique Quintos y Badilla guilty of two counts
of rape is AFFIRMED with MODIFICATION. Accused is sentenced to suffer the penalty of reclusion perpetua for
Criminal Case No. 07-0874, without possibility for parole in accordance with Republic Act No. 9346.  For Criminal
80

Case No. 07-0873, accused is sentenced to suffer the indeterminate penalty of six (6) years of prision correccional
as minimum to 10 years of prision mayor as maximum. The awards for moral damages, civil indemnity, and
exemplary damages are increased to ₱100,000.00 each for each count of rape or a total of ₱600,000.00, with an
interest of 6% per annum from the finality of this decision until satisfaction of the award.

SO ORDERED.

1004
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. RTJ-11-2290               November 18, 2014

[Formerly OCA IPI No. 08-2954-RTJ]

MARILOU T. RIVERA, Complainant, 
vs.
JUDGE JAIME C. BLANCAFLOR, REGIONAL TRIAL COURT, BRANCH 26, STA. CRUZ, LAGUNA, Respondent.

DECISION

PER CURIAM:

Before the Court is the administrative matter that stemmed from the complaint-affidavit  filed on July 16, 2008 by
1

Marilou T. Rivera (Rivera) with the Office of the Court Administrator (OCA), charging Judge Jaime C. Blancaflor
[Judge Blancaflor, Regional Trial Court (RTC), Branch 26, Sta. Cruz, Laguna] with Bribery, Gross Misconduct,
Immorality and violation of the Anti-Graft and Corrupt Practices Act [Republic Act (R.A.) No. 3019].

The Antecedents

The facts — as set out in the final report and recommendation  of Associate Justice Remedios A. Salazar-Fernando
2

(Justice Fernando) of the Court of Appeals — are summarized below. 3

Rivera alleged that she had been engaged in assisting litigants to obtain judicial bonds since year 2000. Sometime
in February 2008, she asked her daughter Shiela T. De Mata (De Mata), who was also a bondsman, to help her
secure a bail bond for accused Ricardo Catuday (Catuday). Catuday was charged of violating Section 11 of R. A.
No. 9165 (the Comprehensive Dangerous Drugs Act of 2002) by the Office of the Provincial Prosecutor (OPP) of
Laguna.

On February 27, 2008, Assistant Provincial Prosecutor Dan B. Rodrigo (Prosecutor Rodrigo) recommended a bail of
200,000.00 for Catuday who moved to reduce his bail to120,000.00 before the Office of the Executive Judge, RTC,
Sta. Cruz, Laguna. De Mata brought a copy of the motion to Prosecutor Rodrigo who did not object to the motion
and who signified his conformity by writing "no objection" and affixing his signature and the date "4/14/08" on the
face of the motion.
4

De Mata thereafter brought the document to the Office of the Clerk of Court (OCC), RTC, Sta. Cruz, Laguna for the
approval of Judge Blancaflor who was then the Executive Judge. De Mata failed to see Judge Blancaflor; she was
told by Dennis Trinidad (Trinidad), a member of the OCC staff, that Judge Blancaflor was not in the court. Trinidad
volunteered to bring the motion to Judge Blancaflor at Tagpuan Restaurant(in Pila, Laguna that the judge allegedly
owned) for the judge’s approval. Trinidad, however, returned without securing the requested approval. De Mata was
told to come back the next day.

De Mata went back to the OCC the following morning and was advised this time by Gemma Gallardo (Gemma),
another OCC personnel, to personally approach Judge Blancaflor about Catuday’s motion. De Mata acted as
advised, but Judge Blancaflor simply told De Mata that it was not her job to ask for the motion’s approval and that
she should return it to the OCC. De Mata at that point approached a Kuya Moring, the process server of Branch 27,
about her predicament. Kuya Moring introduced her to Judge Blancaflor’s driver who tried to help, but the judge still
refused to act on the motion. De Mata next approached Manuel Bugain (Bugain), a court employee at Branch 26.
Bugain offered to bring the motion to Judge Blancaflor who was then in Barangay Layugan, Pagsanjan, Laguna.
When Bugain returned, he told De Mata that Judge Blancaflor refused to sign the motion because it did not bear the
signature of Prosecutor Rodrigo.

De Mata went back to Branch 26, together with Councilor Cecil Magana (Magana), whose assistance she sought
upon Bugain’s advice, to secure the requested approval. Whilethe motion was being handed to Judge Blancaflor, he
blurted out: "Hindi granted yan! Magbayad siya ng ₱200,000.00. Ayaw ko ng drugs! Hindi granted yan!" Frustrated
by the turn of events, De Mata returned the unapproved motion to Rivera.

On May 27, 2008, Rivera brought the motion to Branch 91, RTC, Sta. Cruz, Laguna as Judge Blancaflor was then
out on a seminar. The following day, Judge Divinagracia Ongkeko (Judge Ongkeko), the Presiding Judge of Branch
91 and Vice-Executive Judge of RTC, Sta. Cruz, Laguna, issued an order granting Catuday’s motion to reduce
bond. Rivera immediately secured a bail bond for Catuday from the Industrial Insurance Company and presented it
to Branch 26 for Catuday’s provisional release.

1005
Still, Judge Blancaflor refused to issue a release order, saying that he never approved Catuday’s reduced bailbond
of ₱120,000.00. Rivera then learned from one Teresa Mirasol (Mirasol) that Judge Blancaflor refused to approve
Catuday’s motion because it was Rivera who was working for it. According to Mirasol, the information was given to
her over the phone by Noralyn Villamar (Villamar), a.k.a.Macky, allegedly Judge Blancaflor’s live-in partner.

Rivera further alleged that she experienced the same treatment from Judge Blancaflor when she worked for the
approval of the bail of Roel Namplata (Namplata) who was charged with violation of Section 15 of R.A. No. 9165,
also by the OPP, Laguna. Namplata’s recommended bail was ₱60,000.00. After securing Prosecutor Rodrigo’s
consent and with the help of Gemma, she succeeded in securing Judge Blancaflor’s approval with the handwritten
notation: "Approved ₱40,000.00 for surety bond. 3-27-08 (SGD.) Judge Blancaflor."

After obtaining a bail bond for Namplata, Rivera tried to secure a release order from Judge Blancaflor who refused
to honor the bond as it had been belatedly filed. He even brought back the cost of the bond to ₱60,000.00. In the
afternoon of June 12, 2008, Rivera learned that Judge Blancaflor declared that he would not release Namplata
unless a criminal case is filed against her by Rina Tranilla (Tranilla), a sister of Namplata. True enough, Tranilla filed
a complaint for estafa  against Rivera at around 4:00 o’clock that afternoon. The following day, Judge Blancaflor’s
5

order  was issued, dated June 10, 2008, for Namplata’s release.
6

Explaining her difficulties with Judge Blancaflor in relation with her work as a bondsman, Rivera claimed that the
judge harbored ill will against her because of her involvement in Special Proceeding No. 4605 entitled Arsenio S.
Leron, et al. v. Benjamin S. Leron, et al.,then pending before Judge Blancaflor’s sala. Rivera alleged that she was
the attorney-in-fact of one of the defendants in the case, Dr. Emelita R. Leron (Dr. Leron) who filed on March 2,
2007 a motion for inhibition against Judge Blancaflor.  The motion allegedly recited in detail Judge Blancaflor’s
7

misdeeds and gross misconduct, manifest partiality and indiscretion in fraternizing with clients and litigants in
connection with the case.

Rivera further alleged that Judge Blancaflor inhibited himself from the case after she executed an affidavit attesting
to (1) the judge’s recommendation to the plaintiff, Normita Leron, to secure the services of Atty. Ricardo Pilares, Jr.
(Atty. Pilares); (2) the rigging of the raffle of the case to Judge Blancaflor; and (3) the irregular service of summons
to the defendants in the case. Moreover, her son Byron Torres (Byron) and son-inlaw Ricel De Mata (Ricel)) also
executed a joint affidavit  stating that Judge Blancaflor "bribed" them not to testify in connection with the motion for
8

inhibition.

Lastly, Rivera maintained that Judge Blancaflor should be charged with immorality for maintaining an illicit
relationship with Villamar, who is not his wife.

In a Supplemental Affidavit,  dated July 29, 2008, Rivera reiterated her charge that Judge Blancaflor committed
9

gross misconduct in (1) fraternizing with litigants;(2) maintaining an illicit affair with a woman not his wife; and (3)
exhibiting personal bias and prejudice against her in her efforts to obtain bail bonds for Catuday and Namplata.

Judge Blancaflor’s Comment

In his Comment  dated August 26, 2008, Judge Blancaflor denied Rivera’s accusations and dismissed them as
10

"mere concoctions" of her "fertile imagination."

Judge Blancaflor claimed that neither Rivera nor her daughter approached him regarding Catuday’s and Namplata’s
bail bonds. Even assuming that they did, he refused their requests because they were not authorized bondsmen or
agents of any duly accredited surety company. They were acting as fixers, he explained; thus, he was justified in
denying their requests. Further, Judge Blancaflor claimed that he strictly observes a policy of refusing to reduce the
required bail in drug-related cases even if approval is recommended by the investigating prosecutor. He could not
also order Catuday’s release because it was Judge Ongkeko who granted his motion to reduce bail; in his view,
Judge Ongkeko should also order Catuday’s release.

Judge Blancaflor considered as "fantastic" Rivera’s account that she and De Mata brought the motions to reduce
bail of Catuday and Namplata to Tagpuan Restaurant in Pila, Laguna for his approval. He maintained that Rivera’s
account was simply untrue because as a matter of policy, he does not allow court personnel orany other person for
thatmatter, to bring the case records or any part thereof outsidethe court premises. Moreover, he does not own a
restaurant in Pila, Laguna, nor a house, chapel and resort in Pagsanjan, Laguna.

In the Leron case, Judge Blancaflor recalled that Rivera asked him to extend assistance to her boss, Dr. Leron, a
defendant in the case. He denied her request and since then, she started harassing and blackmailing him and even
filed an administrative case against him.

Shortly thereafter, the Lerons (defendants in Special Proceeding No. 4605), with Rivera’s active participation,
started circulating stories against him, which culminated in the filing ofa letter-complaint before Executive Judge
Mary Ann E. Corpus-Mañalac (Judge Corpus-Mañalac) accusing him of bias, partiality and bribery. The Lerons

1006
however eventually withdrew the complaint after being enlightened aboutthe raffle of cases. Also, he had absolutely
no involvement in the engagement of Atty. Pilares as a lawyer in the case as he does not entertain fixers.

Judge Blancaflor brushed off the immorality charge against him. He branded it as malicious and a mere fabrication
of Rivera. He alleged that Rivera even hired a Solomon Ondevilla (Ondevilla) to execute an affidavit against him,
[11]] but Ondevilla subsequently denied that he executed and signed the affidavit. 12

Judge Blancaflor questioned Rivera’s credibility, claiming that she is known for filing fabricated charges and
malicious complaints against lawyers, judges and other public officials, among them, an Atty. Cayetano
Santos. Further, she has also been charged with numerous criminal offenses, mostly swindling or estafa cases and
13

violations of Batas Pambansa Blg. 22, and is known to have an illicit relationship withdifferent men.

In his Comment  to Rivera’s supplemental affidavit,  Judge Blancaflor reiterated his denial of Rivera’s charges
14 15

against him. In particular, he took exception to Annex "B"  of the supplemental affidavit, which referred to
16

Namplata’s motion to reduce bail bond and which allegedly carried his marginal note of approval. Judge Blancaflor
claimed that the document was manufactured and was not on file with the court. He added that the marginal note
approving a reduced bail of ₱40,000.00 was forged; even assuming that it was genuine, it was not a formal order
and he still had the discretion on whether toreduce the ₱60,000.00 recommended bail. By way of a reply-
affidavit, Rivera countered that she is a legitimate bondsman as she is an agent of Genric Insurance and that she is
17

also a swimming instructor and in business through her "Rivera Swimming Lessons." With respect to Tagpuan
Restaurant, she clarified that the property is registered in the name of Villamar, Judge Blancaflor’s live-in partner,
and that the two also purchased and co-owned several parcels of land in Layugan, Pagsanjan, Laguna.

Rivera also claimed that Ondevilla withdrew his affidavit relating Judge Blancaflor’s illicit relationship with Villamar
because the two of them threatened to file a case against him and would have him imprisoned. She stressed that
Judge Blancaflor’s attack on her person has nothing to do with the case she filed against him.

Justice Fernando’s Investigation/Findings/Recommendation

In compliance with the Court’s resolution of August 17, 2011,  Justice Fernando conducted a thorough investigation
18

of the complaint, in the course of which, she conducted several hearings, received affidavits and documentary
evidence, heard testimonies of witnesses, and even conducted an ocular inspection. 19

Justice Fernando found Judge Blancaflor guilty of (1) bribery, gross misconduct and violation of R.A. 3019; and (2)
immorality. She recommended that the judge be dismissed from the service, with prejudice to his reinstatement or
appointment to any public office, and likewise recommended the forfeiture of the judge’s retirement benefits, if any.

The OCA Report and Recommendation

On July 24, 2013, the Court referred Justice Fernando’s final report to the OCA for evaluation, report and
recommendation.  In its memorandum  of February 25, 2014, the OCA submitted its report to the Court, adopting
20 21

the findings and recommendations of Justice Fernando.

The Court’s Ruling

After considering Justice Fernando’s report and the records of the case, we note that she conducted a very
thorough investigation. We uphold her findings and recommendation as we find sufficient basis to dismiss
respondent Judge Blancaflor from the service.

Re: charge of bribery, gross misconduct

and violation of R.A. No. 3019

The first count against Judge Blancaflor regarding this charge involved his alleged: (1) refusal to approve Catuday’s
motion to reduce bail bond, despite a "no objection" from the prosecutor; (2) refusal to order Catuday’s release,
despite Judge Ongkeko’s grant of the motion; (3) refusal to order Namplata’s release, despitehis own approval of
the motion to reduce bail bond; and (4) offer of money to Byron and Ricel to prevent them from testifying in the
motion for his inhibition in the Leron case.

While Judge Blancaflor has the discretion to approve or disapprove a motion to reduce bail, it appears from the
records that he abused this prerogative in the cases of Catuday and Namplata. Through Judge Blancaflor’s
inaccessibility (he was usually not in the court in the afternoon)  and refusal to take action on their pleas for
22

provisional liberty, Catuday and Namplata and the people working for the approval of their motions (Rivera and De
Mata) suffered inordinate delay and frustrations in securing the motions’ approval. In more ways than one, Judge
Blancaflor gave De Mata and Riveraa run-around in Catuday’s and Namplata’s cases for no plausible reason other
than the judge’s strong antipathy towards Rivera.

1007
This is serious misconduct and a violation of the New Code of Judicial Conduct for the Philippine Judiciary  which
23

mandates that "judges shall perform their judicial duties without favor, bias or prejudice,"  and that they "shall
24

ensure that his or her conduct, both in and out of court, maintains and enhances the confidence of the public, the
legal profession and litigants in the impartiality of the judge and of the judiciary."
25

For instance, when De Mata learned that Judge Blancaflor said that he did not approve Catuday’s motion for
reduction of his bail because Prosecutor Rodrigo was against the motion, she went to see the prosecutor about it.
Prosecutor Rodrigo told her that there was no problem with the motion, so he signed it, but he did not know why
Judge Blancaflor would not approve the motion. De Mata then asked the help of Magana, yet even with Magana’s
intercession, Judge Blancaflor refused to sign the motion, saying that he did not like drugs. Magana wondered why
Catuday’s motion was not approved when all the other surety bonds were approved. The following testimony of De
Mata confirmed the difficulties De Mata and her mother experienced in their work as bondsmen in Judge
Blancaflor’s sala:

xxxx

Q: After Mr. Bugain told you that Judge Blancaflor refuses to sign for the reason that Fiscal Rodrigo also
does not approve of the said motion, what did you do?

A. I went to Fiscal Rodrigo and asked him what was the problem with the motion?

Q: What did Fiscal Rodrigo [tell] you?

A: He said there was really no problem with the motion so he signed it. He did not know why the motion of
Catuday was left pending.

xxxx

Q: During this time, this Mayora was also in branch 26?

A: Yes, ma’m, and she was also wondering why our application cannot be approved while all the other
surety bonds were approved.

Q: Can you tell us who this Mayora is, what is her occupation?

A: She was a councilor, the wife of the previous mayor. If there are people who cannot afford to pay bail,
they ask her for help and she helps people. 26

xxxx

Judge Blancaflor denied the allegations, contending that Catuday’s motion was not filed with the OCC and never
reached him.  Justice Fernando found otherwise, citing the Order  dated May 28, 2008 of Judge Ongkeko, Vice-
27 28

Executive Judge of the RTC, Sta. Cruz, Laguna, granting the motion when Judge Blancaflor was attending a
seminar in Tagaytay City. Judge Ongkeko could not have issued the order had it not been filed with the OCC. But
what was more surprising was Judge Blancaflor’s refusal to acknowledge and to act on the order of approval. This
belies Judge Blancaflor’s excuses for not acting on Catuday’s motion and lends credence to Rivera’s submission
that the judge’s refusal was to spite her.

The same thing happened when Rivera processed Namplata’s bail bond. As the records show, Judge Blancaflor
approved Namplata’s motion for reduction of bail. The judge admitted his approval during the investigation. When
he was asked: "Do you clearly remember Judge that you reduced it as shown by your signature from ₱60,000,00 to
₱40,000.00 bail?," he answered: "That is correct sir, that day," referring to March 27, 2008.  Yet, he refused to
29

approve Namplata’s temporary release. In fact, in his Comment to Rivera’s supplemental complaint,  he disowned
30

the marginal note he made on a copy of Namplata’s motion reducing his bail bond to ₱40,000.00.

The following exchanges during the investigation further indicate that Judge Blancaflor overstepped and abused his
authority as a judge when he took time to release Namplata, despite his approval of Namplata’s bail bond at its
original amount which he earlier reduced to ₱40.000.00:

J. Fernando:

But you admit you issued a March 27 Order reducing it to ₱40,000.00?

Judge Blancaflor:

1008
The marginal note I admit, Your Honor.

J. Fernando:

Yes, that’s fine.

Atty. Aguirre (Rivera’s, counsel):

Q: The reason Judge Blancaflor why you did not anymore honor your marginal note reducing the amount
from 60 to 40 is that you came to know that it was Waling, the complainant, and her daughter Shiela who
was (sic) following it up with you?

A: That is not correct, sir. What you claim that I did not honor the original marginal note is because I did not
see it in the original file of the case.

Q: But the more important reason Judge is that you came to know that it was the complainant and her
daughter who were following up this bail bond case and when you came to know that follow up of the
complainant and her daughter, you wanted it returned back to 60 because you said it was too long in
coming, the ₱40,000.00 bond, is that correct?

A: That is not correct sir:

Q: And another condition of yours before the bail could be approved by you is that the sister or Namplata
must file a case of estafa against the complainant which she did and one day after, the case against the
complainant for estafa was filed before the Office of the City Prosecutor, you issued the Order of Release, is
that correct?

A: That is not correct. That is your own language, sir.

Q: That is the testimony of the witnesses. 31

In an effort to justify his errors and omissions in relation to Catuday’s and Namplata’s motions, Judge Blancaflor
argued that he refused to act on the motions because he hates drugs and,in the case of Namplata, there was a
delay in the processing of the bail bond.

We are not at all convinced by Judge Blancaflor’s explanations. His excuses – which were marked by
inconsistencies and typified by his initial denial that he approved Namplata’s motion, only to admit the approval
before Justice Fernando – cannotjustify his failure to act. Action by the judge was clearly called for by the urgency of
the matter before him – the plea for provisional liberty of Catuday and Namplata who enjoy the right to bail despite
the serious offenses they were charged with. His unexplained refusal in these cases can only support Rivera’s claim
that his inaction was due to Rivera’s intervention in the approval of the motions, a clear sign of his personal bias and
prejudice against her. This, in our view, ispatently a gross misconduct on the part of Judge Blancaflor.

It appears from the records that Judge Blancaflor’s antipathy towards Rivera arose from her involvement in the
Leron case when she testified against the judge in a motion for his inhibition from the case. The motion must have
caused considerable anxiety and concern for the judge so that he even exerted efforts to neutralize Rivera, to the
extent of offering cash to Byron (Rivera’s son) and Ricel (Rivera’s son-in-law) who executed a joint Affidavit  that
32

Judge Blancaflor and Villamar offered them ₱10,000.00 each and even warned them not to testify atthe hearing on
the motion. The two showed the cash to Rivera and they had the incident entered in the police blotter.  In this
33

regard, Torres and Ricel deposed:

xxxx

1. x x x Kami ay namamasukan kay Armando Q. Torres ("ARMANDO") na tatay ni BYRON at biyenan na

lalaki ni RICEL. Kami ay laging nagkakaroon ng komunikasyon kay Noralyn M. Villamar a.k.a. Macky
("Macky") dahil may mga transaksiyon silang pinag-uusapan ng aming tatay na si Armando.

2. Noong ika-02 Marso 2007, araw ng Biyernes, mga 5:00 – 5:30 ng hapon, tumawag si Macky kay Byron at
sinabi na gusto daw siya makausap nito tungkol sa pagtetestigo nila laban kay Judge Jaime C. Blancaflor
("Judge Blancaflor"), at sinabihan na pumunta sa bahay nila.

3. Pagdating ni Byron sa bahay nila Macky at Judge Blancaflor sa Brgy. Layugan ng mga bandang 6:00 ng
gabi, tinanong ni Macky si Byron "Bakit natin kailangang maglaban?"Nagkunwari akong walang alam at
tumahimik na lang ako.

1009
 4. Nilapitan ako (Byron) ni Judge Blancflor at sinabi na: "Byron, ayaw ko tayong mag-kabanggaan. Kung
lilitaw kayo sa hearing sa petsa 6 ay ipapakulongko kayo. Ito ang ten thousand (₱10,000.00), ito ay hindi
suhol. Wag ka lang tumistigo. Kung tetestigo ka, mapipilitan kaming lumaban. Kayang-kaya kitang gawan ng
kaso tulad ng rape at anumang kaso na puwedeng isaksak sa iyo.

5. Pinahabol pa ni Macky na: "Kahit patayan pwede kami."

6. Noong 03 ng Marso 2007, araw ng Sabado, bandang 5:10 ng hapon, pumunta si Macky at si Guillen
Almonte sa bahay ng tatay namin na si Armando sa Brgy. Duhat kung saan kami ay nagtratrabaho.

7. Galit na galit si Macky at sinabi nito kay Armando ngunit nakatingin sa amin: "Pare, bakit ganito? Ano ang
ginawa ng mga bata? Kayong dalawa, tinanggap namin kayo nang maayos sa Layugan."

8. Hindi na kami umimik at hinayaan naming magsalita na lamang si Macky.

9. Sinabi pa ni Macky na: "Huwag na nating patagalin ito. Ayaw kong tayo ang magkabanggaan. Kung
lalaban kayo, lalaban kami hanggang patayan."

10. Nagtangkang umalis si Byron kaya sumigaw si Macky na: "Byron! Huwag kang umiwas. Problema natin
to. Huwag kang umalis!"

11. Nag-isip si Byron ng dahilan upang maka-alis. Bago siya nakaalis, pahabol na sinabi ni Macky na: "Mag-
aabot ako ng tulong, huwag lang kayong sumali."

12. Nang nakaalis na si Byron mga bandang 6:00 pm, naglabas ng pera si Macky at inaabot ito kay Ricel,
ngunit hindi niya ito kinuha. Kaya ang ginawa ni Macky ay kinausap si Armando at inilagay ang pera sa
mesa at sinabi na: "Pare, kung ayaw magtiwala ng anak mo sa amin, ito ang ₱20,000.00 para kay Byron at
para kay Ricel. Ikaw na ang bahala. Meron pang kasunod yan kung pipirma sila ng Affidavit of Desistance." 34

In his comment  on Rivera’s complaint, Judge Blancaflor denied the alleged offer, claiming that the alleged sums did
35

not come from him but from Armando Torres (Torres) and were "given as support to his son Byron and son-in-law
Ricel." When Rivera saw the ₱20,000.00, she grabbed it from Byron and proceeded to the police station and made
a false story of bribery against him.  Judge Blancaflor offered in evidence two affidavits Armando executed dated
36 37

March 6, 2007 and August 22, 2008.

Again, the explanation fails to persuade us. Armando is Rivera’s estranged husband. Their union produced Byron
and De Mata, the wife of Ricel. Rivera and Armando separated in 1983. It was a case of a marriage turned sour
where the spouses filed cases against one another, as Armando himself stated in his affidavit of August 22,
2008. We should not be too quick therefore to admit Armando’s statements as unvarnished truth, especially when
38

he did not even appear during the investigation to affirm the statements attributed to him, despite several
subpoenas for him to testify, the last one being on December 6, 2012. 39

On the other hand, Rivera and Byron reported the bribery incident to the police. The following exchanges on what
transpired in the police station significantly shed light on this incident and bolstered Rivera’s claim that Judge
Blancaflor committed a serious misconduct in relation with the Leron case, thus:

Q: Now, do you remember what thisis all about, the incident reported by Byron Torres?

A: It was a threat.

Q. Will you please read it again to refresh your memory?

(Witness reading the blotter)

Q: What you read, the entry in the blotter is in your handwriting?

A. Yes sir.

Q: What do you remember about this ₱10,000.00?

J. Fernando: 10 or 20?

A: ₱10,000.00

J. Fernando: 10 lang?

1010
 A: Yes, ₱10,000.00.

Wag siyang aatend sa hearing saa-sais kung hindi sila ang magkakabangga ni Judge Blancaflor. Q: What is
that ₱10,000.00 there?

A: Ang akin pong pagkakaintindi ito ay suhol dahil nakalagay dito hindi ito suhol. Wag kang tumestigo dahil
kung tetestigo ka ay mapipilitan lumaban gawan ka ng kaso. Pag tumestigo siya gagawa siya ng kaso.

Translation:

If he testified, he would have a case filed against him.

xxxx

Q: But the signature here of Byron, did he sign it in your presence?

A: Yes sir.

Q: And the witness also signed it in your presence?

A: Yes, sir, in my presence. 40

The root cause of the Leron case, as Justice Fernando established and stressed, was the irregular assignment of
the case which was directly brought to Judge Blancaflor’s sala without going through a raffle. Atty. Arthur Trinidad,
Jr. (Atty. Trinidad), then RTC Clerk of Court, Sta. Cruz, Laguna, testified that the case, Special Proceeding No.
4605, which was filed on November 15, 2006 was not included in the schedule of raffle of cases for the period
November 10 to 30, 2006 and was brought to the judge’s sala even before the case was supposed tobe raffled on
November 30, 2006 because he was made to understand, based on the judge’s letter to him, that the case — a
settlement of estate dispute — belonged to the Family Court then handled by Judge Blancaflor.  Due to the judge’s
41

letter, he assumed that the case was within the jurisdiction of the Family Court so that it was his ministerial duty to
forward the case to Judge Blancaflor’s sala. 42

Not only does it appear that Judge Blancaflor intervened in the assignment of the Leron case, he also had a hand in
ensuring who would represent the disputants, by suggesting, in the presence of and with the active participation of
Villamar, that the lawyers for the parties would be Atty. Pilares for the plaintiffs  and Atty. Stephen David (Atty.
43

David) for the defendants.  He even went to the extent of voicing out how the case should turn out.
44

Thus, Dr. Leron deposed: "Tinanong ko si Judge Blancaflor kung matatalo ako kahit sabihin ko na wala naman
talaga ang lahat ng hinahanap nila. Sagot ni Judge Blancaflor ‘Pwede, depende sa presentasyon ng abogado mo.’
Tinanong ko kung sino yong abogado na sinasabi ni Macky. Sagot ni Judge Blancaflor[,] si [Atty. David] at dinagdag
pa niya ‘kumpare ko yan,magaling yan, at taga-Tektite, madali nating maayos ang kaso.’ Nabanggit din niya na
kumpare ni Atty. David si

Atty. Pilares. Sinabi niya pa ‘mas lamang kayo kasi mas alam niyo nangyayari kaysa sa kabila.’" 45

Also, Ricel, Rivera’s son-in-law, stated under oath that he saw Judge Blancaflor and plaintiff Gilbert Leron (Gilbert)
during the blessing of the chapel inside the compound of the judge’s house on January 16, 2007 and he overheard
Judge Blancaflor assuring Gilbert not to worry about the case saying: "Pare wag na kayo mag-alala, ayos na ang
kaso nyo nina Dr. Leron," while they were drinking beer. 46

Judge Blancaflor argued that he had no interest whatsoever in the Leron case as it was forwarded to Branch 26 in
the ordinary course of business since cases falling within the exclusive jurisdiction of the Family Court are directly
forwarded to Branch26, his branch. His letter to Atty. Trinidad should not be considered against him because he was
then a new family court judge. He further argued that he did not refer Atty. Pilares to the plaintiffs; he even
dismissed the case for prematurity and inhibited himself from the case after it was re-raffled. 47

We do not find Judge Blancaflor’s explanations convincing.The circumstances of the Leron case left Judge
Blancaflor no other recourse but to inhibit. As Justice Fernando aptly observed, it was more prudent for the judge to
inhibit than to be placed under a cloud of distrust by the parties. On the matter of the parties’ legal representation
alone, we find credible the statements of Rivera, Dr. Leron and Ricel that not only did Judge Blancaflor refer lawyers
to the parties but, more seriously, he gave them hints that they would prevail in the case.

Judge Blancaflor’s interference in the case in the way just described is not only gross misconduct; it also constitutes
a violation of R.A. No. 3019, the Anti-Graft and Corrupt Practices Act, particularly Section 3(e) which provides: "In
addition to acts or omissions of public officers already penalized by existing law, the following shall constitute corrupt
practices of any public officer and are hereby declared to be unlawful: x x x Causing any undue injury to any party,
1011
including the Government, or giving any private party any unwarranted benefits, advantage or preference in the
discharge of his official administrative or judicial functions through manifest partiality, evident bad faith or gross
inexcusable negligence x x x."

To be sure, even if Judge Blancaflor inhibited himself from the Leron case, he cannot extricate himself from the legal
mess he brought upon himself. His interference in the case caused an undue injury to the party who should have
prevailed had the case pushed through; and an unwarranted benefit to the party who should have lost had the case
been decided on the merits. Worse, he exhibited evident bad faith when he gave both parties expectations of
winning the case. Thus, there is every reason to find probable cause against him for violation of R.A. No. 3019.

It is unfortunate that Judge Blancaflor lost sight of the exacting standards demanded of the office of a judge in the
Leroncase. Time and again, judges have been reminded thatas magistrates, they must comport themselves in such
a manner that their conduct, official or otherwise, can bear the most searching scrutiny of the public that looks up to
them as the epitome of integrity and justice.  Sad to state, Judge Blancaflor failed to pass this "searching scrutiny."
48

Re: charge of immorality

On the charge of immorality – for allegedly maintaining an illicit relationship with Villamar who is nothis wife – Justice
Fernando aptly observed that Judge Blancaflor offered no evidence, except general denials to disprove his moral
indiscretion, which appeared to be widely known in the community at the time material to the case. As the records
show, statements made here and there by witnesses and personalities drawn into the case confirm the special
relationship between Judge Blancaflor and Villamar such that Villamar had no hesitation in speaking for the judge
on matters concerning him and his work.

The community, it seemed, had accepted them as man and wife, given that they stayed in Layugan, Pagsanjan,
Laguna and owned Tagpuan Restaurant in Pila, Laguna. This restaurant, incidentally, even became Judge
Blancaflor’s extension office, usually in the afternoons, as deposed by Rivera, De Mata, Byron, Ricel and Judge
Blancaflor’s staff whose assistance Rivera and De Mata sought in their effort to secure the provisional liberty for
their clients Catuday and Namplata. The depositions were backed up by pictures of (1) the places where Tagpuan
Restaurant used to stand and where the two were residing, and (2) the events in the life of the live-in partners.
Notably, Exhs. "N," "N-1," and "N-2"  were separate camera shots of the place where Tagpuan Restaurant used to
49

stand; Exh. "A-15-C"  was a picture of Gilbert, a party in the Leron case, attending the blessing of the chapel inside
50

the compound of Judge Blancaflor’s house; Exh. "E"  was a picture of Judge Blancaflor and Villamar together in a
51

hut located inside the compound of their house in Layugan, Pagsanjan, Laguna, apparently relaxing; and Exhs. "F,"
"G," and "H" were pictures of Villamar picking up Judge Blancaflor from his office at the RTC, Sta. Cruz, Laguna,
using her Pajero with plate no. XHF 887. 52

Judge Blancaflor belittled the immorality charge, dismissing it as merely a fabrication and a product of Rivera’s
fertile imagination. To substantiate his claim, he cited the withdrawal of Ondevilla’s affidavit confirming Rivera’s
charge that he was maintaining an illicit liaison with Villamar.53

Again, we are not persuaded by the judge’s response. Given the fact that Judge Blancaflor is a person of authority
and his involvement in the "bribery" incident (as revealed by Byron and Ricel whom the judge even threatened if
they would testify against him), we find more credibility in Rivera’s submission that Ondevilla withdrew his affidavit
on the immorality charge because the judge likewise threatened him.

The confluence of the statements of Rivera and the others (Byron, De Mata, Ricel and Mirasol), the information
provided by Judge Blancaflor’s staff, and the exhibits described above, constitute more than enough support for the
immorality charge against Judge Blancaflor. These interwoven pieces of evidence pointing to the relationship
between the judge and Villamar, several of which materialized over a period of time, could not conceivably have
been the result of Rivera’s fabrications. As De Mata testified during the investigation:

ATTY. SHALIM:

Q: Ms. Witness, you mentioned that Noralyn Villamar is the live-in partner of Judge Blancaflor. How do you
know this?

A: Because Tita Macky herself was the one who told me that Judge Blancaflor is her live-in partner.

xxxx

J. FERNANDO:

Q: If you know, how long have JudgeBlancaflor and Noralyn been living together as live-in partners?

A: 2006, your Honor.

1012
 Q: So they started as live-in partners since 2006?

A: June of 2006, Your Honor, because that was when I came back from Manila.

Q: As far as you are concerned, you only learned about it in 2006?

A. Yes , Your Honor.

Q: Have you seen them really living together as live-in partners?

A: No, Your Honor. It was my husband because they were still at Layugan because my husband was the
driver of my father at that time.

xxxx

Q: Are you saying that Judge and Macky are living in Layugan?

A: Yes, Your Honor.

xxxx

Q: Are you sure that Macky told you that Judge Blancaflor is her live-in partner?

A: Yes, Your Honor.

Q: How did she tell you?

A: It was just in a casual way that she told me that Judge is her current live-in partner because previously it
was a Colonel.

Q: So despite the fact that you are not close to Macky, Macky intimidated (sic) to you that Judge Blancaflor
is her live-in-partner?

A: Yes, Your Honor. 54

Justice Fernando stressed that Judge Blancaflor did not categorically deny the allegations of an illicit relationship
with Villamar. While he stated that his marriage to his wife NoraLopez was already annulled, the annulment became
final only on July 18, 2012 by virtue of an entry of judgment from the RTC, Br. 199, Las Piñas City. Thus, he was still
a married man at the time of his liaison with Villamar. 55

For maintaining a relationship with Villamar, Judge Blancaflor crossed the line of a proper and acceptable conduct
as a magistrate and a private person. In Re: Complaint of Mrs. Rotilla A. Marcos and her children against Judge
Ferdinand J. Marcos,  we said: "x x x The Code of Judicial Ethics mandates that the conduct of a judge must be free
56

of a whiff of impropriety not only with respect to his performance of his official duties, but also to his behavior outside
his sala and as a private individual. There is no dichotomy of morality: a public official is also judged by his private
morals. The code dictates that a judge, in order to promote public confidence in the integrity and impartiality of the
judiciary, must behave with propriety at all times. x x x."

In sum, we find substantial evidence to hold Judge Blancaflor guilty as charged. This conclusion, as correctly
observed by Justice Fernando:

x x x jibes with the affidavits and testimonies of complainant Rivera and her witnesses. His acts of fraternizing with
lawyers and litigants, his partiality in the performance of his duties, his act of giving bribe money to two (2) witnesses
to a case in order for them to withdraw, and maintaining an illicit affair with a woman not his wife tarnished the image
of the judiciary. Respondent judge demonstrated himself to be wanting of moral integrity x x x He is therefore unfit to
remain in office and discharge his functions and duties as judge.  (Emphasis supplied)
57

Indeed, as observed by the OCA, it has been established that "[t]he findings of investigating magistrates on the
credibility of witnesses are given great weight by reason of their unmatched opportunity to see the deportment of the
witnesses as they testified." 58

Gross misconduct, bribery, violation of R.A. No. 3019 and immorality, all of them constituting violations of the Code
of Judicial Conduct,  are serious charges under Section 8, Rule 140 of the Rules of Court punishable under Section
59

11 of the same Rule by any of the following: (1) dismissal from the service, forfeiture of the benefits as the Court
may determine, and disqualification from reinstatement or appointment to any public office, including government-

1013
owned or controlled corporations; forfeiture of benefits shall in no case include accrued leave credits; (2) suspension
from office without salary and other benefits for more than three (3) months but not exceeding six (6) months; or (3)
a fine of more than ₱20,000.00 but not exceeding ₱40,000.00.

Considering the gravity of theoffenses committed by Judge Blancaflor, we approve and adopt the recommendations
of Justice Fernando and the OCA for his dismissal from the service, with the accessory penalties.

WHEREFORE, premises considered, Presiding Judge Jaime C. Blancaflor, Branch 26, Regional Trial Court, Sta.
Cruz, Laguna, is found GUILTY of gross misconduct, violation of the Anti-Graft and Corrupt Practices Act (R.A. No.
3019) and immorality, constituting serious violations of the Code of Judicial Conduct under Section 8,Rule 140 of
the Rules of Court.

Judge Blancaflor is DISMISSED from the service, with forfeiture of his retirement and other monetary benefits,
except accrued leave credits. He is DISQUALIFIED from reinstatement or appointment to any public office, including
government-owned or controlled corporations.

This ruling shall be without prejudiceto any disciplinary action that may be brought against Judge Blancaflor as a
lawyer under A.M. No. 02-9-02-SC.  Accordingly, Judge Blancaflor is directed to COMMENT within ten (10) days
60

from receipt of this decision and to show cause why heshould not alsobe suspended, disbarred or otherwise
disciplinarily sanctioned as a member of the Philippine Bar.

SO ORDERED.

1014
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. P-11-2979               November 18, 2014

[formerly OCA IPI No. 10-3352-P]

ELLA M. BARTOLOME, Complainant, 
vs.
ROSALIE B. MARANAN, COURT STENOGRAPHER III, REGIONAL TRIAL COURT, BRANCH 20, IMUS,
CAVITE, Respondent.

DECISION

PER CURIAM:

This administrative matter started through the sworn affidavit complaint  in the vernacular, dated December 16,
1

2009, that Ella M. Bartolome (complainant) filed against Rosalie B. Maranan [respondent, Court Stenographer III,
Regional Trial Court (RTC), Branch 20, Imus, Cavite], charging her with extortion, graft and corruption, gross
misconduct and conduct unbecoming of a court employee.

The complainant alleged that the respondent asked money from her in the amount of ₱200,000.00, which was later
reduced to ₱160,000.00, to facilitate the filing of her case for annulment of marriage. She further alleged that the
respondent undertook to have the case decided in her favor without the need of court appearances during the
proceedings of the case. For a clear and complete picture of the accusations against the respondent, we quote
verbatim the pertinent portions of the complainant’s narration of the incidents that gave rise to the filing of the
present administrative complaint –

xxxx

2. Na noong October 21, 2009 nakilala ko si ROSALIE MARANAN na isang stenographer sa Regional Trial Court
ng Imus, Cavite. Nasabihan ko siya ng aking kagustuhan na magsampa ng annulment of marriage case. Agad niya
akong inalok at pinangakuan na kaya niyang ipasok ang aking annulment case sa RTC, Br. 20, Imus, Cavite kung
saan siya nagtratrabaho. Noong una ang hinihingi niya sa akin ay halagang TWO HUNDRED THOUSAND PESOS
(₱200,000.00) pero humingi ako sakanya ng discount at pumayag siya sa ONE HUNDRED SIXTY THOUSAND
PESOS (₱160,000.00). Ako po ay naengganyo na magtiwala sa kanya dahil nangako siya na siya na ang bahala sa
lahat. May kausap na daw siyang abogado na pipirma sa petisyon koat di ko na daw kailangan pang umappear sa
korte. Sinabi niya na malakas daw siya sa judge at sa fiscal at siya lang daw ang pinapayagan na magpasok ng
mga aaregluhin na kaso sa kanilang korte. Sinabi niya din na kasama na sa ₱160,000.00 ang para sa judge at sa
fiscal kaya siguradong maaaprubahan ang aking annulment case sa mabilis na panahon. Kasama po ng Affidavit
Complaint na ito ang transcript at ang SIM Carday aking ipadadala kapag ako ay makasigurado na ang Korte
Suprema ay poprotektahan ang mga ebidensya laban kay MARANAN sapagkat rito lahat nakatagon (sic) ang mga
text messages at nakarecord lahat ng calls nitong si ROSALIE MARANAN sa akin na nagpapatunay ng panghihingi
niya sa akin ng pera at pangako na aaregluhin niya ang aking annulment of marriage case. Ang cellphone number
po na nagaappear dito sa SIM ay kay ROSALINA MARANAN, ang numero niya ay 09175775982. Maaaring nagpalit
na ng numero ang inirereklamo ko kung kaya’t maganda rin na ipag-utos ang pag-alam ng detalye mula sa Globe
Telecoms kung saan post-paid subscriber ang may-ari ng numero na iyan. [Emphasis supplied]

To put an end to the respondent’s extortion activities, the complainant decided to report the matter to the police
authorities. During the entrapment operation conducted by police officers of Imus Police Station, the respondent
was apprehended inside the premises of the RTC, Branch 20, Imus, Cavite, in the act of receiving the money from
the complainant.

In support of her allegations, the complainant attached to her affidavit-complaint the transcribed electronic
communications (text messages) between her and the respondent;  a copy of an Electronic Psychiatric History form
2

given to her by the respondent for her to accomplish in filing the petition for annulment of marriage;  a copy of the
3

Imus Police Station Blotter showing that the respondent was apprehended during the entrapment operation
conducted by police officers of Imus Police Station on November 11, 2009 at 2:40 p.m.;  and a versatile compact
4

disc (VCD) containing the video taken during the entrapment operation conducted against the respondent. 5

The Court, in a 1st Indorsement  dated March 19, 2010, required the respondent to comment onthe complaint
6

against her.

1015
In her Comment dated May 27, 2010,  the respondent denied the accusations against her. She alleged her belief
7

that Bartolome is a fictitious name as the affidavit-complaint does not indicate the complainant’s exact address. She
asserted that her detention at Imus Police Station does not prove her culpability since no actual criminal charges
were filed against her. She claimed that the lapse of six (6) months from the time of the alleged incident indicates
that the complaint is pure and simple harassment orchestrated by a lawyer or litigant who has a grudge against her
and who wants to publiclybesmirch her reputation. In support of her defense, the respondent mentioned that even
Judge Fernando L. Felicen (Judge Felicen), Presiding Judge of RTC, Branch 20, Imus, Cavite interceded for her
release from detention.

On July 29, 2010, the complainant sent a letter to the Office of the Court Administrator (OCA),  without indicating her
8

address, alleging that she has to constantly change residence because unidentified persons had been seen in their
neighborhood asking questions about her. She has also been receiving text messages from the respondent telling
her that her complaint would only be dismissed because she knows people in the Supreme Court. The respondent
also threatened retaliation against her after the case is terminated. The complainant further claimed that the pieces
of evidence she submitted are sufficient to prove the respondent’s anomalous activities, and prayed for the
immediate resolution of her complaint.

Based on the complainant’s pleadings and evidence, the OCA, (through then Deputy Court Administrator Nimfa C.
Vilches and OCA Chief of Legal Office Wilhelmina D. Geronga) submitted its Report to the Court dated May 9,
2011,  finding enough evidence to prove the respondent’s involvement in anomalous activities and recommending
9

that –

1) OCA IPI No. 10-3352-P be RE-DOCKETED as a regular administrative matter;

2) respondent Rosalie B. Maranan, Court Stenographer III, Regional Trial Court, Branch20, Imus, Cavite, be
found GUILTY of Grave Misconduct and Conduct Prejudicial to the Best Interest of the Service; and

3) respondent Maranan be immediately DISMISSED from the service with forfeiture of retirement benefits
except her accrued leave credits, and withperpetual disqualification from employment in any government
agencies or instrumentalities, including government owned and controlled corporations.

In a Resolution dated September 5, 2011,  the Court required the parties to manifest whether they were willing to
10

submit their case for resolution on the basis of the pleadingsfiled. The respondent filed her Manifestation dated
November 17, 2011  submitting the case for resolution by the Court. She reiterated her complete innocence and
11

"vigorous" and "vehement" denial ofthe allegations against her. She insisted that the present complaint against her
is plain and simple harassment and a vexatious suit by the complainant who either has a grudge against her or must
have been used by another person with a grudge against her. All she did was tosecure the services of a lawyer at
the complainant’s request; this act, she claimed, does not constitute graft and corruption, gross misconduct, conduct
unbecoming of a court employee and extortion.

The complainant did not respond to our September 5, 2011 Resolution as it was returned unserved on her.
Wenevertheless considered the case submitted for resolution considering her letter of July 16, 2010 praying for the
immediate resolution of her complaint.

In our Internal Resolution dated December 7, 2011,  we resolved to refer the complaint to the OCA for evaluation,
12

report and recommendation.

The OCA responded through its Memorandum of July 16, 2012,  finding that the pieces of evidence on record
13

establish the guilt of the respondent on the charges of Gross Misconduct and Conduct Prejudicial to the Best
Interest of the Service filed against her. It recommended that the respondent be found guilty of the offenses charged
and be dismissed from the service, with forfeiture of retirement benefits except her accrued leave credits and with
perpetual disqualification from employment in any government agency.

The Court fully agrees with the OCA’s recommendation.

The respondent’s bare denial cannot overcome the evidence supporting the complainant’s accusation that she
demanded money on the promise that she would facilitate the annulment of her (complainant’s) marriage. The
respondent’s actions from the time the complainant started communicating with her on October 21, 2009 and
thereafter through a series of messages they exchanged via SMS,  until the entrapment operation on November 11,
14

2009, showed that the complaint is indeed meritorious. The respondent’s text messages sent to the complainant
corroborate that she promised to expedite – in exchange for a monetary consideration of ₱160,000.00 and that she
would provide the lawyer who would file the annulment case – the complainant’s annulment case once it is filed: 15

21/19/09 8:40pm

Sino po to

1016
 21/10/09 8:53pm

Sino nagrefer sayo sakin ano pangalan?

21/10/09 8:54pm

San mo nakuha # ko

21/10/09 9:05pm

Ako rin magbibigay lawyer sayo

21/10/09 9:13pm

D kaba tlaga makakatawag ngayon

21/10/09 9:18pm

Ako n lang tatawag sayo kc mahirap ang txt lang

21/10/09 9:24pm

Tawag n lng ako ha

21/10/09 9:49pm

Natitiwala ako sayo ha dahil hindi lahat pinagbibigyan namin. Sally n lang tawag mo sakin nagtataka lng kc
ako kanina kc buong buong buo yung txt ng name ko e.

21/10/09 9:51pm

Ay sorry mali pala sabi ko sayo 160k pala singil namin

22/10/09 10:05am

Gud am. Ano pwede k bukas

22/10/09 10:25am

ls txt bak naghihintay po kme

22/10/09 10:51am

Bukas lng available si atty

22/10/09 10:56am

Sana kung makakagawa ka daw paraan bukas kahit 40k n lng muna down tapos 3pm bukas

22/10/09 11:04am

Ok pero d kita pilipilit ha nasayopa din and decision yan ang sakin lng kc nagmamadali k at tsaka yun ang
free time ng lawyer ha

22/10/09 11:11am

Ella pakihusto mo n daw pala 50k at ibabayad daw mua sa psychiatrist at osg kahit sa susunod n lng daw
yung sa kanya

22/10/09 1:09pm

The complainant described the respondent as an influence peddler in the courts of Imus, Cavite who acts as a
conduit to judges, prosecutors and private law practitioners.

1017
In her comment to the complaint,the respondent admitted that "she suggested to the complainant the name of a
lawyer friend, Atty. Renante C. Bihasa (Atty. Bihasa), and forwarded to her the cell phone number of this lawyer so
that theycould discuss the case." While she was in detention at Imus Police Station, she called Atty. Bihasa, who
told her that he was on his way and assured her that he had already asked his lawyer friends to assist her. Atty.
Bihasa arrived at about five o’clock in the afternoon. As it was already beyond office hours, she was told by Atty.
Bihasa of the possibility that she would be detained pending investigation. Atty. Bihasa returned the following day
and was joined by Judge Felicen and her officemates. Judge Feliceninterceded in her behalf that she begiven
permission by the police officers to leave her detention in order to take a bath and change clothes. She was granted
permission, with the full guaranty of Judge Felicen that she would return. 16

In an affidavit  dated May 28, 2010, Atty. Bihasa corroborated the respondent’s allegations. In his affidavit, he
17

narrated that upon receiving a call from the respondent that she was being detained, he immediately called up two
(2) of his lawyer friends based at Imus, Atty. Wilfredo P. Saquilayan and Atty. Jose Emmanuel Montoya, to assist
the respondent. As he arrived at Imus Police Station at around past four o’clock in the afternoon, he told the
respondent of the probability of her detention until formal charges were filed against her. According to him, "[he] took
it upon [himself] to assist[the respondent] on that date and accompanied her while the police officers of Imus PNP
were doing their routine work on suspects."

Atty. Bihasa further narrated thaton the next day at about five o’clock in the afternoon, he went backto Imus Police
Station to wait for the complainant. After a few hours, the respondent’s co-workers, including Judge Felicen arrived.
They waited for the complainant until seven o’clock in the evening but she failed to come. Only the complainant’s
lawyer arrived who informed the police investigator that the complainant cannot come out of fear because of the
death threats she received. 18

The concern that Atty. Bihasa and Judge Felicen showed to the respondent while under detention at Imus PNP
Station gives rise to the suspicion that they have knowledge and tolerate the respondent’s anomalous activities. The
respondent’s text messages to the complainant support this suspicion: 19

At tsaka alam mo naman nakailang appointment n tayo sa abogado hiyang hiya nga ako kahapon e

7/11/09 3:13pm

Tawagan ko muna si judge kung pwede pa kami tumanggap hanggang wed

7/11/09 3:15pm

Try ko lng

7/11/09 3:25pm

Hanggang Tuesday na lg tayo after nun nxt year na. Yan ang sabi

7/11/09 3:28pm

Sayang kc ang haba n ng time mo dp natuloy sabi ko naman sayo e kapag inabot ng naghigpit dn pwede
none appearance. Yun nagan nagpatulong sakin kahapon lng tumawag yun d sana nagka sabay n kayo

7/11/09 3:59pm

Ok po mit po tayo bukas 10 am sinabi ko napo kay atty. Tnx po. See you po

Ephemeral electronic communications are now admissible evidence, subject to certain conditions. "Ephemeral
electronic communication" refers to telephone conversations, text messages, chatroom sessions, streaming audio,
streaming video, and other electronic forms of communication the evidence of which is not recorded or retained.  It20

may be proven by the testimony of a person who was a party to the communications or has personal knowledge
thereof.  In the present case, we have no doubt regarding the probative value of the text messages as evidence in
21

considering the present case. The complainant, who was the recipient of the text messages and who therefore has
personal knowledge of these text messages, identified the respondent as the sender through cellphone number
09175775982. The respondent herself admitted that her conversations with the complainant had been thru SMS
messaging and thatthe cellphone number reflected in the complainant’s cellphone from which the text messages
originated was hers. She confirmed that it was her cellphone number during the entrapment operation the Imus
Cavite Police conducted 22

Sally:

1018
 Halika dito sa office, sa clerk of court. Pupunta ka ngayon? O sige, sige, pupunta ka ngaun? Ah sige OK,
salamat! Ang number ko …

Lalaki:

Ibigay ko sa kanya?

Sally:

Oo, ang number ko ay 09175775982, ok thank you.

The complainant submitted two (2) copies of the VCD  containing pictures taken during the entrapment conducted
23

by the Imus Cavite Police on November 11, 2009. 24

Under Section 1, Rule 11 of A.M. No. 01-7-01-SC, audio, photographic and video evidence of events, acts or
transactions shall be admissible provided it shall be shown, presented or displayed to the court and shall be
identified, explained or authenticated by the person who made the recording or by some other person competent to
testify on the accuracy thereof.

We viewed the VCD and the video showed the actual entrapment operation. The complainant herself certified that
the video and text messages are evidence of her complaint against the respondent, "Sapat at malinaw ang lahat ng
ebidensya na kasama ng aking reklamo na nagpapatunay na totoo lahat ang nakasaad sa aking reklamo. Kitang
kita sa video at sa mga text messages niya ang kanyang modus operandi at paggamit niya ng pwesto sa gobyerno
upang makapanghingi ng malaking pera sa mga inosenteng tao." It is also well to remember that in administrative
cases, technical rules of procedure and evidence are not strictly applied.  A.M. No. 01-7-01-SC specifically provides
25

that these rules shall be liberally construed to assist the parties in obtaining a just, expeditious and inexpensive
determination of cases.

The Court totally agrees with the OCA’s finding that the respondent is guilty of grave misconduct and conduct
prejudicial to the best interest of the service. The respondent’s assertion that Bartolome is a fictitious name because
the complainant has not stated in her complaint her exact address is preposterous in light of the evidence of direct
personal and text message contacts between them. In the absence of supporting evidence, the claim that the
complaint against her is pure and simple harassment orchestrated by persons with grudge against her, is mere
conjectural allegation.

As a public servant, nothing less than the highest sense of honesty and integrity is expected of the respondent at all
times.  She should be the personification of the principle that public office is a public trust.  The respondent
26 27

unfortunately fell extremely short of the standards that should have governed her life as a public servant. By
soliciting money from the complainant, she committed a crimeand an act of serious impropriety that tarnished the
honor and dignity of the judiciary and deeply affected the people’s confidence in it. She committed an ultimate
betrayal of the duty to uphold the dignity and authority of the judiciary by peddling influence to litigants, thereby
creating the impression that decision can be bought and sold.  The Court has never wavered in its vigilance in
28

eradicating the socalled "bad-eggs" in the judiciary.  We have been resolute in our drive to discipline and, if
29

warranted, to remove from the service errant magistrates, employees and even Justices of higher collegiate
appellate courts for any infraction that gives the Judiciary a bad name. To stress our earnestness in this pursuit, we
have, in fact, been unflinching in imposing discipline on errant personnel or in purging the ranks of those
undeserving to remain in the service. 30

WHEREFORE, the Court finds respondent Rosalie B. Maranan, Court Stenographer Ill, Regional Trial Court, Branch
20, Imus, Cavite, GUILTY of Grave Misconduct and Conduct Prejudicial to the Best Interest of the Service and is
accordingly DISMISSED from the service, with prejudice to re-employment in any government agency including
government-owned or controlled corporations. Her retirement benefits, except accrued leave credits are ordered
forfeited.  This decision shall be immediately executory.
1âwphi1

The Court further Resolves to REQUIRE Judge Fernando L. Felicen, Regional Trial Court, Branch 20, Imus, Cavite
and Atty. Renante C. Bihasa, to file their Comments on their alleged participation in the anomalous activities of the
respondent, within fifteen ( 15) days from notice. This directive is without prejudice to the investigation of all or
selected employees and officials of the Branch, who may have participated in anomalous transactions relating to
annulment of marriage.

The Office of the Court Administrator is hereby directed to submit to this Court, within thirty (30) days, a list of the
annulment of marriage decisions of Judge Fernando L. Felicen for the past ten (10) years, indicating therein the
judgments made and the names of participating lawyers and prosecutors.

The Office of the Chief Attorney shall analyze the submitted data, including the records of and the proceedings in
the listed cases, and recommend to the Court the actions it should take in the event a pattern of corruption involving

1019
annulment of marriage cases emerges. The Office of the Chief Attorney is given ninety (90) days from receipt of the
Office of the Court Administrator's list, within which to submit its recommendations to the Court.

The Office of the Court Administrator shall likewise refer this administrative case and its records to the Ombudsman
for whatever action it may take within its jurisdiction.

SO ORDERED.

1020
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. P-14-3270               November 18, 2014

[formerly OCA IPI No. 11-3579-P]

ANGELITO P. MIRANDA, Complainant, 
vs.
MA. THERESA M. FERNANDEZ, CLERK III, METROPOLITAN TRIAL COURT, QUEZON CITY, Respondent.

DECISION

PER CURIAM:

We resolve the complaint  of Angelito Miranda (complainant) dated July 19, 2010 against Ma. Theresa M.
1

Fernandez (respondent), Clerk III, Metropolitan Trial Court, Quezon City, for grave misconduct, dishonesty, estafa
and other deceits.

The complaint was initially filed with the Office of the Ombudsman, docketed thereat as CPL-C-10-1343. After
finding that the respondent is a court employee, the Office of the Ombudsman dismissed  and referred the complaint
2

to this Court, through the Office of the Court Administrator (OCA) for appropriate action, pursuant to the Court’s
ruling in Maceda v. Hon. Ombudsman Vasquez, et al. 3

The complainant acts asan agent of money lenders Manuel P. Miranda and Josephine Miranda Cabusao (creditors).
On January 4, 2010, the respondent obtained a loan of ₱124,800.00 from the creditors, through the complainant.
The transaction was evidenced by an Agreement  between the respondent and her creditors. The Agreement
4

provided that the amount of loan shall be paid in equal installments of ₱2,600.00 every 15th and 30th day of the
month until fully paid; the first payment was to start on January 12, 2010.

As security for the loan, the respondent surrendered her ATM Card No. 1727165289 to her creditors to allow them
to withdraw the amount of ₱2,600.00 every payday from her salaries deposited with the Land Bank of the
Philippines (LBP). She undertook that "filing false Affidavits of Loss or causing any deliberate blocking of my ATM
card in any form by myself, the Borrower,during this Agreement shall be a case for Perjury or Estafa." She also
executed a waiver of rights  under the "Bank Secrecy Law of the Philippines addressed to the Manager of the LBP,
5

Quezon City Hall, Quezon City. At the time of the filing of the complaint, the respondent’s outstanding loan was
₱103,700.00.

On July 15, 2010, the respondent’s creditors went to the bank to collect the amount due from her bank
account. When the respondent’s ATM card was inserted into the ATM machine, it was retained by the ATM machine
1âwphi1

with the advisory receipt stating "Invalid Card."  This happened because the respondent had blocked her ATM card
6

to prevent withdrawals by her creditors. It appeared that the respondent reported to the LBP that she had lost her
ATM card. The report enabled her to withdraw her salary over the counter and led to the issuance of a new ATM
card in her favor.

A day after discovery of the fraud, the complainant sent the respondent a demand letter  which she ignored. She
7

continuously failed to comply with her undertaking. The complainant, acting as the representative of the creditors
under a Special Power of Attorney dated July 19, 2010,  filed the present administrative complaint against the
8

respondent.

In its 1st Indorsement dated January 12, 2011,  the OCA required the respondent to comment on the complaint. The
9

directive was reiterated in a 1st Tracer dated August 5, 2011.  The Registry Return Receipts for both
10

communications showed that the respondent had received them but failed to comply.

In a resolution dated June 10, 2013,  the Court directed the respondent to show cause why she should not be
11

disciplined or held in contempt for her failure to file the required comment despite her receipt of the two (2) directives
from the OCA, and to submit the required comment within five (5) days from receipt thereof. The resolution carried
the warning, that upon further failure, the Court shall take the necessary action against her and decide the
administrative complaint on the basis of the record at hand. The respondent received a copy of the June 10, 2013
resolution on July 30, 2013, but still failed to comply. Thus she is considered to have waived her right to submit
controverting evidence. 12

1021
Executive Order No. 292 (E.O. 292), otherwise known as the Administrative Code of 1987, provides that a public
employee’s failure to pay just debts is a ground for disciplinary action. Section 22, Rule XIV of the Omnibus Rules
Implementing Book V of E.O. 292 and Other Pertinent Civil Service Laws, as modified by the Revised Uniform Rules
on Administrative Cases in the Civil Service, defines "just debts" as those (1) claims adjudicated by a court of law or
(2) claims the existence and justness of which are admitted by the debtor. By the respondent’s failure to file her
comment on the complaint despite the OCA’s two (2) directives and warning, she is deemedto have admitted the
existence and justness of the claim against her.The obligation having remained unpaid since the demand was made
upon her conclusively speaks of her willful refusal to settle the same.

The respondent’s liability does notend there. To guaranty the monthly payments due on her loan, the respondent
surrendered her ATM card to her creditors to allow the latter to withdraw her payments from her salary. However,
whenthe payments became due, the complainant could not withdraw from the respondent’s account because the
ATM machine "swallowed" and retained the ATM card. The ATM machine released an advisory receipt stating
"Invalid Card."

The respondent made false representations to the LBP declaring that she lost her ATM card so she could directly
withdraw her salary over the bank’s counter and cause the issuance of a new ATM card in her favor. She did this in
violation of her undertaking that she will not block her ATM card to avoid withdrawal by her creditors of the amounts
due on her loan. The blocking of the ATM card she surrendered to her creditors and her act of securing a new ATM
card from the LBP to avoid payment of her indebtedness constitute dishonesty and conduct unbecoming of a court
employee. Dishonesty refers to the disposition to lie, cheat, deceive or defraud; untrustworthiness; lack of integrity;
lack of honesty, probity or integrity inprinciple; lack of fairness and straightforwardness; disposition todefraud,
deceive or betray.13

The respondent has failed to file her comment on the lettercomplaint despite receipt of the two (2) directives sent to
her and the show cause resolution of June 10, 2013. The respondent’s failure to comply with the Court’s directives
constitutes gross misconduct and insubordination. Misconduct is a transgression of some established and definite
rule of action, or an unlawful behavior or gross negligence by a public officer; misconduct is grave ifit involves any of
the additional elements of corruption, such as willful intent to violate the law or to disregard established rules, as
established by substantial evidence. 14

CSC Memorandum Circular No. 19,s. 1999 classifies willful failure to pay just debts as a lightoffense punishable by
reprimand for the first offense. Dishonesty and grave misconduct are both classified as grave offenses punishable
by dismissal for the first offense.

It is clear that the respondent is guilty of the offenses charged. As an employee of the judiciary, the respondent is
held to the highest ethical standards to preserve the integrity ofthe courts. These standards include the moral and
legal duty to settle contractual obligations when they become due.  To preserve decency in the judiciary, court
15

employees must comply with just contractual obligations and act fairly and adhere to high ethical standards.  The
16

respondent’s actions, although arising from a private transaction, stained the image of her public office. Like any
other member of the judiciary, the respondent is expected to be a model of fairness and honesty not only in all her
official conduct but also in her personal actuations, involving business and commercial transactions. 17

The Court finds the respondentseparately liable for three administrative offenses of willful failure to pay just debts,
gross misconduct and insubordination and dishonesty. She has demonstrated her unfitness to be in the judiciary
service, thus warranting her dismissal from the service.

Under Section 55, Rule IV of the Revised Uniform Rules on Administrative Cases in the Civil Service, when the
respondent is found guilty of two or more charges or counts, the penalty to be imposed should be that which
corresponds to the most serious charge or count and the rest shall be considered as aggravating circumstances.

WHEREFORE, the Court finds respondent Ma. Theresa M. Fernandez, Clerk III, Metropolitan Trial Court, Quezon
City, GUILTY of willful failure to pay just debts, gross misconduct and insubordination, and dishonesty, and
accordingly orders her DISMISSAL from the service, with forfeiture of all benefits, except accrued leaves. She is
further disqualified from holding any position in the government or in any government-owned or controlled
corporation.

This is without prejudice to any criminal action which the complainant may pursue against the respondent.

SO ORDERED.

1022
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. SB-12-19-P               November 18, 2014

[Formerly OCA IPI No. 10-26-SB-P]

CIVIL SERVICE COMMISSION, Complainant, 

vs.
HERMINIGILDO L. ANDAL, Security Guard II, Sandiganbayan, Quezon City, Respondent.

RESOLUTION

PER CURIAM:

At bench is an administrative case involving respondent Herminigildo L. Andal, employed as permanent Security
Guard II of the Sandiganbayan.  The investigating officer, Sandiganbayan Associate Justice Roland B. Jurado,
1

found him guilty of dishonesty for allowing another person to take his 2000 Civil Service Professional Examination-
Computer Assisted Test(CSPE-CAT). Justice Jurado recommended that respondent be meted out the principal
penalty of suspension from office for one year, and the accessory penalties of being barred from taking any civil
service examination and disqualification from promotion.

The antecedent facts are as follows:

On 20 December 2006, the Civil Service Commission (CSC) issued Resolution Nos. 062255  and 071493  affirming
2 3

the Decision dated 25 May 2005  of the Civil Service Commission-National Capital Region (CSCNCR). The CSC-
4

NCR dismissed respondent from government service after finding him guilty of dishonesty by allowing another
person to take his CSPE-CAT. On appeal, the Court ofAppeals (CA) issued a Decision setting aside the judgment of
the CSC for want of jurisdiction. The CA held that the case against a security guard of the Sandiganbayan was
cognizable by the Supreme Court, which had administrative supervision over all the courts and personnel thereof. In
a Decision dated 16 December 2009, docketed as G.R. No. 185749, we affirmed the judgment of the CA. 5

Thereafter, on 24 July 2012, the Supreme Court en bancissued a Resolution re-docketing the case as an
administrative matter.  In the same Resolution, the Court resolved to refer this case to then Presiding Justice of the
6

Sandiganbayan, Justice Francisco H. Villaruz, Jr. for investigation, report and recommendation.

On 22 October 2012, Justice Villaruz, Jr. requested the Court to assign the investigation of this case to a senior
Justice of the Sandiganbayan. As reason, he adduced that an administrative investigation would take a toll on his
functions at a time when some programs in the Sandiganbayan needed his immediate attention. 7

Appreciating the merit of the request, and considering also that Justice Villaruz, Jr. had compulsorily retired on 8
June 2013, the Office of the Court Administrator (OCA) recommended that Justice Villaruz, Jr. be relieved of the
duty of conducting the investigation of this case; and that A.M. No. SB-12-19-P be referred instead to the then most
senior justice of the Sanidganbayan, Justice Gregory S. Ong. 8

In our Resolution dated 10 December 2013, the Court adopted the recommendations of the OCA. However, due to
the administrative case against Justice Gregory S. Ong, then pending before this Court, we directed the
Sandiganbayan to refer the instant case for investigation, report and recommendation to the most senior justice
after Justice Ong.  Hence, on 15 January 2014, the current Presiding Justice of the Sanidganbayan, Justice
9

Amaparo M. Cabotaje-Tang, referred A.M. No. SB-12-19-P to Justice Roland B. Jurado for his investigation, report,
and recommendation. 10

On 17 January 2014, Justice Jurado conducted a preliminary conference on the case. This proceeding was followed
by the parties’ submission of judicial affidavits, formal offers of evidence and memoranda. Then, on 27 February
2014, he submitted before this Court his Investigation Report and Recommendation. 11

Petitioner CSC claimed that respondent had applied for the CSPECAT scheduled for 24 January 2000 and that it
appeared that he passed the test with a rating of 81.08%.  But based on the differing photographs in the Picture
12

Seat Plan (PSP) and his Civil Service Application Form, the CSC averred that he had not taken the test himself.

Respondent admitted  that he could not have taken the test on 24 January 2000, since he was in the province
13

nursing an alcohol hangover. As his defense, he maintained that hehad not authorized another person to take the
1023
test for him. Respondent alleged that the impersonation was perpetrated by a group of employees who disliked him
for revealing their drinking sprees and doping sessions to their superiors. He further narrated that in 2007, he
learned from his co-employee, Larry Lincallo, that the impersonator was Emmerson Nucom, the latter’s high school
classmate. Aggrieved, respondent executed a Complaint-Affidavit  in 2012 charging Nucom with impersonation
14

before the CSC.

Justice Jurado disbelieved the claimsof respondent. The investigating officer appreciated that the employees who
had an axe to grind would naturally ensure that respondent flunked the test. As regards the claim of unauthorized
impersonation, the investigating officer held that it "defies reason that another person would simply take the
examination on respondent’s behalf without having been instructed to do so or without examinee’s knowledge, for
how then would such person know the examinee’s personal circumstances which are essential preliminary
questions in the civil service examinations?"15

Moreover, Justice Jurado disregarded the circumstance that respondent had filed an impersonation case against
Nucom. For the investigating officer, the five-year hiatus between knowledge of the identity of the impersonator in
2007 and the execution of the Complaint-Affidavit in 2012 belied the authenticity of the claim that respondent was
aggrieved by the impersonation.

Thus, Justice Jurado sided with petitioner and found respondent guilty of dishonesty. But the investigating officer did
not dismiss but only suspended him. Justice Jurado counted in favor of respondent the following as mitigating
circumstances: "(1) Andal has satisfactorily served the judiciary for almost fifteen years without any infraction in the
performance of his duties; (2) respondent had good performance ratings; and (3) respondent never took advantage
of the ‘acquired eligibility’ as a tool for promotion and never benefited from it."  Justice Jurado also took note of the
16

fact that respondent was a family man, and that the latter’s loss of his job might cause him to turn to extreme
measures to satisfy the needs of his family.

The recommendation of the investigating officer reads thus: 17

WHEREFORE, in view of all the foregoing, the undersigned investigating Justice finds respondent HERMINIGILDO
L. ANDAL guilty of DISHONESTY under Rule IV Section 52 (A) (1) of the Revised Uniform Rules on Administrative
Cases in the Civil Service Rules. Accordingly, it is hereby recommended that in view of the existence of mitigating
circumstances, respondent be meted the penalty of suspension from office for one (1) year instead ofdismissal from
service. Further, pursuant to Sections 57 and 58 of the said rules, the accessory penalties of being barred from
taking any civil service examination and disqualification for promotion are also recommended.

RULING OF THE COURT

After a judicious examination of the records, we partially adopt the above recommendation. Justice Jurado’s
Investigation Report and Recommendation is supported by the evidence on record showing that respondent did not
take the CSPE-CAT of 24 January 2000. Firstly, by claiming that he was nursing a hangover on the day of
examination, respondent was effectively admitting that he did not take the test; and logically, he did not earn for
himself the 81.08% passing rate. Secondly, the pictures in his Civil Service Application Form and PSP are entirely
different.  In other words, it cannot be doubted that another person took the test under his name.
18

Despite this established fact, respondent still tries to refute the charge of dishonesty by claiming that the actual
examinee impersonated him and took the test without his knowledge. Indeed, to be found guilty of dishonesty, there
must be substantial evidence that respondent intentionally made false statements or practiced deception in securing
his permanent employment with the Sandiganbayan. 19

Substantial evidence, which is the quantum of proof required in this administrative case, is that amount of relevant
evidence that a reasonable mind might accept as adequate to justify a conclusion.  This standard is satisfied in the
20

present case so long as there is reasonable groundto believe that respondent is responsible for the misconduct
complained of, even if the evidence may not be overwhelming or even preponderant. 21

Here, we agree with Justice Jurado that the impersonation theory of respondent, claimed to be perpetrated by his
officemates, is incredible.

First, the claim of respondent isself-serving and uncorroborated by any witness. Second, it is more reasonable to
believe that the employees who had an axe to grind against him would rather have him fail than pass the test. Third,
as Justice Jurado aptly pointed out, it defies reason that the actual examinee would take the test for the benefit of
another without any recompense. Fourth, even assuming arguendo that respondent had an unauthorized
impersonator, he should have alerted the CSC or the Sandiganbayan as soon as he received the passing grade.
Respondent’s scheme of passing the blame to the actual examinee is old hat. In Donato, Jr. v. Civil Service
Commission Regional Office No. 1,  we have already dealt with the same issue and explained that persons being
22

impersonated actually consent to the impersonation:

1024
The picture of Donato pasted over the name of Gil Arce in the PSP during the Career Service Sub-professional
Examination on August 5, 1990 is indicative of the fact that respondent Arce did not personally take the said
examination but Donato in his behalf. This is so because as a matter of procedure, the room examiners assigned to
supervise the conduct of examination closely examine the pictures submitted by the examinees. An examinee is not
allowed by the examiners to take the examination if he does not look like the person in the picture he submitted and
affixed in the PSP. Obviously, the person whose picture is pasted on the PSP was the one who took the
examination for and in behalf of Arce. In the offense of impersonation, there are always two persons involved. The
offense cannot prosper without the active participation of both persons. Further, by engaging or colluding with
another person to take the test in his behalf and thereafter by claiming the resultant passing rate as his, clinches the
case against him. In cases of impersonation, the Commission has consistently rejected claims of good faith, for "it is
contrary to human nature that a person will do (impersonation) without the consent of the person being
impersonated." (Citations omitted and emphasis in the original)

In Office of the Court Administrator v. Bermejo,  this Court also rejected the respondent’s claim of impersonation
23

seeing that the actual examinee – as in this case – was not present to defend himself.

All told, the facts of this case cannot support the conclusion that respondent was completely innocent of dishonesty
in obtaining his eligibility for permanent employment with the Sandiganbayan. Respondent, who admitted that he did
not take the test, took credit for his false rating. Worse, after knowing that another person had taken the test on his
behalf, he did not even attempt to earn his eligibility on his own accord. Basic honesty would have required
transparency and uprightness in the actions of an employee of the judiciary.

By perpetrating his false eligibility and letting it remain on record, respondent concealed and distorted the truth in a
matter of fact relevant to his office.  His actions thus speak of his disposition to lie, cheat, deceive, or defraud;
24

untrustworthiness; lack of integrity; lack of honesty, probity or integrity in principle; and lack offairness and
straightforwardness. 25

Nevertheless, Justice Jurado recommended that because of the attendant circumstances, respondent should only
be meted out the principal penalty of suspension from office for one year, after which, the latter should return to the
government service. Justice Jurado further recommends that respondent should be barred from taking any civil
service examination and must be disqualified from promotion.

The recommendations of Justice Jurado are conflicting.  By ruling that respondent falsely obtained his civil service
1âwphi1

eligibility, and by barring respondent from taking any civil service examination, it logically follows that respondent no
longer holds a basic qualification to hold his permanent position in the judiciary.  Therefore, the recommended
26

penalty cannot simply be a one-year suspension, but removal from government service.

Contrary to the recommendation of Justice Jurado, the reduced penalty of suspension cannot be justified by the
alleged mitigating circumstances of atisfactory performance, length of service and non-utilization of the acquired
eligibility.

Dishonesty cannot be tolerated from government officials or employees, even when official duties are performed
well.  First-time offenders found guilty of grave dishonesty involving falsification of their civil service examination
27

results already merit the penalty of dismissal from service.  Thus, as in the case of the respondent in Civil Service
28

Commission v. Ramoneda-Pita,  the mitigating circumstance of length of service was not considered, since the act
29

of falsifying eligibility does not satisfy the high standards demanded of a court employee. It is likewise erroneous to
appreciate that "respondent never took advantage of the 'acquired eligibility' as a tool for promotion and never
benefited from it,"  given that respondent enjoyed his permanent position without the requisite eligibility.
30

Accordingly, this Court maintains its exacting standards for those who seek to be employed in its fold. While we
recognize that respondent stands to lose his source of support for himself and his family, the Court cannot tum a
blind eye to what is clearly a transgression of the law.  Dishonesty is a malevolent act that has no place in the
31

judiciary. Thus, similar to the fate of prior employees who falsified their eligibility requirement, we castigate the grave
offense of respondent by imposing upon him the penalty of dismissal from service. 32

WHEREFORE, respondent Herminigildo L. Andal is hereby found GUILTY of dishonesty. He is DISMISSED from
the service with forfeiture of all his retirement benefits, except the value of his accrued leave credits, if any, and with
prejudice to re-employment in the government or any of its subdivisions, instrumentalities, or agencies including
government-owned or controlled corporations. Let a copy of this Resolution be attached to his records.

SO ORDERED.

1025
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. P-12-3076               November 18, 2014

(Formerly OCA l.P.l. No. 11-3612-P)

NOVO A. LUCAS, Complainant, 
vs.
ROLANDO A. DIZON, Sheriff IV, Office of the Clerk of Court, Regional Trial Court, Sto. Domingo, Nueva
Ecija, Respondent.

DECISION

PER CURIAM:

In a complaint-affidavit,  dated February 15, 2011, Novo A. Lucas (complainant) charged Rolando A. Dizon
1

(respondent), Sheriff IV of the Office of the Clerk of Court, Regional Trial Court, Sto. Domingo, Nueva Ecija (RTC),
with serious neglect of duty and violation of Republic Act (R.A.) No. 3019,  for delaying the implementation of the
2

Writ of Execution  issued by the Municipal Trial Court of Sto. Domingo (MTC)in a case for collection of sum of
3

money against Francisco Pascual (Pascual), docketed as Civil Case No. 2374.

Complainant alleged that after having secured the August 18, 2010 Writ of Execution (writ)of the judgment which
awarded him, among others, the amount of ₱104,000.00, he immediately proceeded to see respondent, who, being
the sheriff, was assigned to implement the writ. According to him, respondent’s response tohis request was this –
"Five (5) years pa naman bago mag-lapse order mokaya relaks ka lang.  "He made several attempts to seek the
4

writ’s enforcement, but nothing happened. Respondent informed him that he was attending to many things,
including complainant’s case.

On September 23, 2010, he again went to respondent.  The latter, however, asked him if he had a car. Not having
5

one, he offered his tricycle, to which respondent remarked, "Ayoko ng traysikel at matatagtag ang katawan
ko." Complainant pleaded and respondent told him: "Bigyan mo ako ng native na manok at sari-saring gulay.
6

Kakailanganin din ang Two Thousand Pesos (₱2,000.00) na pambayad sa pulis. Pag nabigay mo na, tutulungan na
kita."  Complainant claimed that he delivered the native chicken personally to respondent on the same day.
7 8

Complainant made another attempt to follow up after securing a clearance from the Sto. Domingo Police sometime
in October of 2010.  Respondent, seemingly infuriated by the insistence of complainant to immediately enforce the
9

writ, commented: "Tutal inaapura mo ako, ikaw na ang magbigay sa kalaban mo ng order dahil apurado ka. Kung
wala kang ibibigay na panggastos wala akong maibibigay na tulong sa iyo! Tsaka di basta-basta ise-serve yun.
Kailangan pa ng notice kay Pascual. Wala pa akong naipadala. Kaya maghintay ka!"  Complainant added that there
10

was a time that respondent asked him to look for other properties owned by Pascual which could be used to satisfy
the judgment on the pretext that it would be embarrassing to only get televisions, radios and other household
items.  When he intimated that such a responsibility was not his but that ofrespondent, the latter simply said, "Kahit
11

ang sasakyan, hindi aandar kung walang gasolina."  He then asked respondent what the latter wanted and the latter
12

requested a goat. 13

With the complainant’s inability to provide a goat, respondent purportedly became more stubborn in implementing
the writ. Out of desperation, complainant offered to give to respondent half of what he would be receiving from
Pascual. Respondent rejected the offer by saying: "Ang gusto ko kaliwaan. Bigyan mo ako ng SAMPUNG LIBONG
PISO (₱10,000.00) at ako ang bahala sa lahat. Tutulungan kita. Uubusin at sasaidin ko ang bank account ni
Pascual. Kayang-kaya kong gawin un!" 14

At the time the complaint was filed, no copy of the Sheriff’s Return had been received by complainant.

On March 23, 2011, the Court Administrator Jose Midas P. Marquez required the respondent to file his comment on
the complaint-affidavit. 15

In his Comment,  respondent denied the accusations against him. He claimed that when he and complainant first
16

met, he explained the process of implementing the writ especially the need to demand from Pascual the fulfillment of
the judgment before any seizure of personal properties could be made. He accused complainant of not being
interested in the rules as his concern centered on proceeding immediately to Pascual’s residence. He claimed that
on the day they were toproceed to Pascual’s residence, complainant informed him that there was no need to

1026
proceed to the house of Pascual because an arrangement had been made. This, according to him, explained why
he filed on February 14,2011 the Sheriff’s Partial Return of Service, narrating the details of the execution
proceedings in the subject case.

Respondent insisted that the delay inthe implementation of the writ was attributable to complainant as the latter
never returned after making arrangements with Pascual. A day or two after filing the partial return with the MTC,
complainant arrived, togetherwith two other persons on board a tricycle, demanding to immediately proceed to the
house of Pascual to seize the latter’s truck since the commitment to pay the judgment debt was not honored.
Respondent allegedly begged complainant to come back the next day as he was ill and because the weather was
bad.

Respondent also denied asking for any amount of money, or native chicken, or vegetables, or goat from
complainant.  He claimed that he was always reminded by his Clerk of Court toclaim his Sheriff’s Fees, which at one
1âwphi1

time had accumulated to more than ₱30,000.00. Thus, it was unbelievable that he, "as a sheriff witha detached
interest in his own sheriff’s fees would demand the measly sum of Two Thousand Pesos and Ten Thousand Pesos
from a poor litigant, who from the very first meeting, emphasized to me that he is poor and thathe can only afford a
tricycle as a means of conveyance in the implementation of the writ." 17

In his Reply,  complainant denied that respondent explained to him the procedure for the implementation of the writ;
18

that he knew for a fact that personal properties of Pascual could be seized as he believed all along that he would be
getting cash; that there was an arrangement he made with Pascual; and that the real reason why they did not
proceed to Pascual’s house was respondent’s refusal to ride in a tricycle. Finally, complainant cited respondent’s
failure tofile a return with the court within the period prescribed by Section 14 of Rule 39 of the Rules of Court. In its
Resolution,  dated July 11, 2012, the Court resolved to refer the administrative matter to Executive Judge Nelson A.
19

Tribiana (Judge Tribiana)  for investigation, report and recommendation.

20

In his Report,  dated March 8, 2013, Judge Tribiana stated that the full implementation and satisfaction ofthe writ
21

was made only on December 4, 2012 or more than two years since it was assigned to respondent in September
2010; that respondent deliberately neglected and refused to perform a mandated duty; and that the reasons offered
by respondent were not worthy of consideration.

Regarding the allegation of corruption, Judge Tribiana found no evidence to support it because complainant
declined to substantiate his claims. For said reason, Judge Tribiana recommended that respondent be meted out
the penalty of dismissal from service for gross neglect of duty.

With regard to the complaint for violation of R.A. No. 3019,  Judge Tribiana recommended that it be dismissed for
22

lack of evidence.

In its July 10, 2013 Resolution,  the Court noted the investigation, report and recommendation of Judge Tribiana.
23

Thereafter, the Court referred the administrative matter to the Office of the Court Administrator (OCA) for evaluation,
report and recommendation. 24

The Findings and Recommendations of the OCA

In its Report,  dated February 5, 2014, the OCA found respondent liable for gross neglect of duty:
25

Respondent Sheriff Dizon’s delay in the implementation of the Writ of Execution for two (2) years is so serious and
prejudicial to the best interest of the service as to amount to gross neglect of duty. Gross neglect of duty is classified
as a grave offense and is punishable by dismissal from the service. As this is his second offense, the penalty of
dismissal from the service is proper. 26

The OCA also agreed with Investigating Judge Tribiana that there was no sufficient evidence to support the charge
of violation of R.A. No. 3019 against respondent.

The Court's Ruling

The last standing frontier that the victorious litigant must face is often another difficult process– the execution stage.
In this stage, a litigant who has won the battle might lose the war. Thus, the sheriffs, being agents of the court, play
an important role, particularly in the matter of implementing the writ of execution. Indeed, [sheriffs] "are tasked to
execute final judgments of courts. If not enforced, such decisions are empty victories of the prevailing parties. They
must therefore comply with their mandated ministerial duty to implement writs promptly and expeditiously. As agents
of the law, sheriffs are called upon to discharge their duties with due care and utmost diligence because in serving
the court’s writs and processes and implementing its order, they cannot afford to err without affecting the integrity of
their office and the efficient administration of justice."
27

1027
Engraved in jurisprudence is the rule that thesheriff's duty in the execution of a writ is purely ministerial.  Once the
28

writ is placed in his or her hands, a sheriff is obligated to execute the order of the court strictly to the letter and with
reasonable promptness, taking heed of the prescribed period required by the Rules. 29

In this case, respondent is charged for failing to perform his ministerial functions in the implementation of the writ of
execution issued in favor of complainant. In this regard, the Court agrees with the recommendation of the OCA that
respondent’s omissions clearly qualify as gross neglect of duty.

In Proserpina V. Anico v. Emerson B. Pilipiña,  this Court held that the failure of the sheriff to carry out what was a
30

purely ministerial duty, to follow well-established rules in the implementation of court orders and writs, to promptly
undertake the execution of judgments, and to accomplish the required periodic reports constituted gross neglect and
gross inefficiency in the performance of official duties.

As defined, gross neglect of duty refers to negligence that is characterized by a glaring want of care; by acting or
omitting to act in a situation where there is a duty to act, not inadvertently, but wilfully and intentionally; or by acting
with a conscious indifference to consequences with respect to other persons who may beaffected. It is the omission
of that care that even inattentive and thoughtless men never fail totake on their own property. In cases involving
public officials, there is gross negligence when a breach of duty is flagrant and palpable. 31

Here, respondent failed to implement and enforce the writ promptly despite repeated pleas by complainant.  He 1âwphi1

attributed his delay tohis seeming physical inability to travel several kilometers in inclement weather on board a
small crowded tricycle and complainant’s failure to return to him after making arrangements with Pascual. These
excuses, in the mind of the Court, were not justifiable as they only manifested respondent’s deliberate refusal to
carryout his mandatory and ministerial functions. Indeed, records show that it took respondent two years from the
time the writ of execution in Civil Case No. 2374 was assigned to him. It was only on December 5, 2012,
thatrespondent submitted the Sheriff’s Final Report.  Verily, he had more than enough time to execute the writ, but
32

because of his indifference and inattentiveness to the rights of complainant and the obligations of his office, he did
not do anything.

Respondent’s indifference became more apparent when he reasoned out during the investigation that the
"execution" of a judgment expires only after a period of five (5) years.  It appears that he misunderstood the said
33

five-year period as the same period thatthe sheriff may be allowed to carry out the implementation of the writ
assigned to him. Obviously, respondent had not only been negligent, but also ignorant of the very rules pertaining to
his office. He ought to know that the five-year limitation is the period allowed by the Rules for a party tomove for the
issuance of a writ  and not a period within which the sheriff may complete his task of implementing a writ.
34

Lastly, respondent utterly failed to make periodic reports, thus, depriving the court of the opportunity to know and
ensure the speedy execution of its decision. Pursuant to Section 14, Rule 39 of the Rules of Court, such periodic
report is mandatory, to wit:

SEC. 14. Return of writ of execution.– The writ of execution shall be returnable to the court issuing it immediately
after judgment has been satisfied in part or in full. If the judgment cannot be satisfied in full within thirty (30) days
after his receipt of the writ, the officer shall report to the court and state the reason therefor. Such writ shall continue
in effect during the period within which the judgment may be enforced by motion. The officer shall make a report to
the court every thirty (30) days on the proceedings taken thereon until the judgment is satified in full, or its effectivity
expires. The returns or periodic reports shall set forth the whole of the proceedings taken, and shall be filed with the
court and copies thereof promptly furnished the parties.  Had he done so, the difficulties he had in dealing with
35

complainant would have been mitigated. Records also show that this is not the first instance that respondent faced
issues of this kind. The Court takes note that in another administrative matter,  respondent was meted out the
36

penalty of suspension for simple neglect of duty. This time around, however, the circumstances prevailing in this
case reveal respondent's gross and palpable neglect of his sheriff duties - a grave offense according to the Revised
Uniform Rules on Administrative Cases in the Civil Service (Civil Service Rules),  which is punishable with dismissal
37

from the service. 38

Hence, for the infractions committed, respondent should be meted out the penalty of dismissal from service with the
accessory penalties of forfeiture of all his retirement benefits, except accrued leave credits, and with prejudice to re-
employment in any branch or instrumentality of the government, including government-owned or controlled
corporations.

Time and again, the Court has reiterated that the duties of a sheriff are mandatory and ministerial functions, devoid
of discretion and more importantly, burdened with the responsibility of adhering to high ethical standards to preserve
the courts' good name and standing.  He should be an example of responsibility, competence and efficiency, and he
39

must discharge his duties with due care and utmost diligence, since he is an officer of the Court and an agent of the
law. Faith of the people in the Judiciary rests equally in his hands. WHEREFORE, the Court finds ROLANDO A.
DIZON, Sheriff IV, Office of the Clerk of Court, Regional Trial Court, Sto. Domingo, Nueva Ecija, GUILTY of gross
neglect of duty in the performance of his duties, and hereby DISMISSES him from service. This penalty shall carry
with it the accessory penalties of forfeiture of all his retirement benefits, except accrued leave credits, with prejudice

1028
to re-employment in any branch or instrumentality of the government, including government-owned or controlled
corporations.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

A.M. No. P-10-2800               November 18, 2014

OFFICE OF THE COURT ADMINISTRATOR, Complainant, 

vs.
MRS. AURORA T. ZUNIGA, CLERK OF COURT II, MRS. MINDA H. CERVANTES, STENOGRAPHER 1, both of
MUNICIPAL TRIAL COURT (MTC) VIRAC, CATANDUANES, and MR. PEPITO F. LUCERO, INTERPRETER III,
REGIONAL TRIAL COURT, Br. 43, VIRAC, CATANDUANES, Respondents.

DECISION

PER CURIAM:

For review before the Court is this administrative matter which originated from the financial audit conducted by the
Fiscal Monitoring Division (FMD)of the Office of the CRespondents.ourt Administrator (OCA)on the books of account
of the Municipal Trial Court, Virac, Catanduanes (MTC). The financial review was brought about by the fund
shortages discovered by state auditor Madeleine S. Riveraof the Commission on Audit (COA) for the period from
August 21, 2003 to June19, 2007 in the amount of ₱294,797.75. 1

Specifically, the financial audit teamexamined the books of account of the MTC covering the period from March 3,
1985 to March 31, 2008, under the following accountable officers: Mrs. Aurora T. Zuñiga (respondent), Mrs. Paz T.
Tacorda (Tacorda), Mrs. Minda H. Cervantes (Cervantes), Mr. Pepito F. Lucero (Lucero), Mr. Garibaldi L. Sarmiento
(Sarmiento), and Ms. Sonia T. Bagadiong (Bagadiong).

The financial audit team reported that these court employees shared the task of acting as Officer-in-
Charge/Accountable Officer from 1985 up to the dates of the audit, which are herein summarized: 2

Name of Clerk of Position Period Fund Audited

Court/Officer-in-Charge (Per CSC Appointment) of Accountability

Paz T. Tacorda (OIC Court Legal Mar. 3, 1985 to JDF

Researcher II Nov, 23, 1987

Sonia T. Bagadiong Court Nov. 24, 1987 to JDF

(OIC) Stenographer III Dec. 27, 1987

Minda H. Cervantes Court Dec. 28, 1987 to JDF

(OIC) Stenographer I Sep. 28, 1988 FF
Jan. 26, 1996 to
Jan. 31, 2005

Aurora T. Zuñiga 3
Clerk of Court II Aug. 25, 1988 to JDF
(COC) Nov. 13, 1995

Pepito F. Lucero (OIC) Court Interpreter Nov. 14, 1995 to JDF/GF

III Jan. 25, 1996

Aurora T. Zuñiga Clerk of Court II Jan. 26, 1996 to JDF/GF/SAJF/MF

(COC) Oct. 31, 2006

Garibaldi L. Sarmiento Clerk of Court II Jul. 10, 2007 to JDF/SAJF/MF

1029
 (OIC) Mar. 31, 2008 ff
Feb. 1, 2005 to
Mar. 31, 2008

In its Financial Audit Report,  dated January 28, 2009, the audit team disclosed that Tacorda incurred a shortage of
4

₱10.00 from the Judicial Development Fund (JDF); Cervantes, ₱4,100.00 from the Fiduciary Fund (FF); Lucero,
₱1,095.00 from the JDF and ₱600.00 from the General Fund (GF); Sarmiento, 384.00 from JDF and ₱1,626.00 from
the Special Allowance for the Judiciary Fund (SAJF), although said amounts were already restituted on April 25,
2008;  and Zuñiga a total of ₱278,811.85, as well as accountabilities from her FF collections. Based on their
5

findings, the audit team recommended that:

I. MRS. PAZ T. TACORDA, Court Legal Researcher II of RTC Branch 43, Virac, Catanduanes, and former
Officer-in-Charge of MTC, Virac, Catanduanes be directed to deposit the amount of Ten Pesos (10.00) to
the account of Judiciary Development Fund (JDF), copy furnished the FiscalMonitoring Division, Court
Management Office of the Office of the Court Administrator of the duly validated deposit slip as proof of
compliance;

II. MR. PEPITO F. LUCERO, Court Interpreter III of RTC, Branch 43, Virac, Catanduanes, and former
Officer-in-Charge of MTC, Virac, Catanduanes, be DIRECTED within ten (10) days from receipt of this
notice to:

a) RESTITUTE his incurred shortages on the following funds, copy furnished the Fiscal Monitoring
Division, Court Management Office of the Office of the Court Administrator of the duly validated
deposit slip/s as proof of compliance:

Name of Fund Period Covered Amount

Judiciary Development Fund Nov. 14, 1995-Jan. 25, 1996 ₱1,095.00

General Fund Nov. 14, 1995-Jan. 25, 1996 600.00

Total   ₱1,695.00

b) EXPLAIN in writing why he should not be administratively dealt with for failure to deposit his
collections to their respective fund bank accounts, which is contrary of the circulars issued by the
Court in the proper handling of Judiciary Funds.

III. MS. SONIA T. BAGADIONG and Mr. GARIBALDI L. SARMIENTO, former Officers-in-Charge of MTC,
Virac, Catanduanes, after having been audited of their books of accounts which were found to be in order,
be CLEARED from any accountability in so far as their period of accountability as an Officers-in-Charge are
concerned.

IV. MRS. MINDA H. CERVANTES, Court Stenographer I and former Officer-in-Charge of MTC, Virac,
Catanduanes, be DIRECTED within ten (10) days from receipt of this notice to: a) RESTITUTE her incurred
shortage on Fiduciary Fund account in the amount of Four Thousand One Hundred Pesos (₱4,100.00)
supported by duly validated deposit slip/s as proof of compliance, copy furnished the Fiscal Monitoring
Division, Court Management Office, Office of the Court Administrator; b) EXPLAIN in writing why she failed
to deposit her collections amounting to Forty Nine Thousand Six Hundred Sixty Pesos (₱49,660.00), thus,
depriving the government of the interests that should have been earned (Annex "D"-Summary of
Unreported/Undeposited Fiduciary Fund Collections); and c) EXPLAIN in writing why she should not be
administratively dealt with for failure to deposit big/substantial portion of her collections on Fiduciary Fund to
its fund bank account.

V. MRS AURORA T. ZUÑIGA, Clerk of Court II of MTC, Virac, Catanduanes, be DIRECTED within ten (10)
days from receipt of this notice to:

1. RESTITUTEher incurred shortages on the following funds with the duly validated deposit slip as
proof of compliance, copy furnished the Fiscal Monitoring Division, Court Management Office of the
Office of the Court Administrator:

1030
 Name of Fund Period Covered Amount

Judiciary Development Fund Sep. 29, 1988- ₱2,013.90

Nov. 13, 1995

Judiciary Jan. 26, 1996- 3,070.40

Development Fund Oct. 31, 2006

Special Allowance Nov. 11, 2003- 4,364.20

for the Judiciary Oct. 31, 2006
Fund

Fiduciary Fund Jul. 10, 2007- 269,363.35

Mar. 31, 2008

Total   ₱278,811.85

2. TRANSMITto this Court through the Fiscal Monitoring Division, Court Management Office all the
documents (i.e. court orders and acknowledgement receipts of the bondsmen/litigants) to support
the validity and authenticity ofthe withdrawals/refund of cash bonds as enumerated in the attached
list of Fiduciary Collections from June 26, 1992 to August 11, 1995 amounting to Two Hundred Thirty
Two Thousand Eight Hundred Sixty Pesos (₱232,860.00). Failure to provide this Court withthe said
requirements, the same shall be considered outstanding and unwithdrawn and she will be directed to
restitute the aforementioned amount;

3. EXPLAIN in writing why she should not be administratively dealt with for failure to report and
deposit the following collections in their corresponding fund bank accounts, a clear violation of the
circulars and other issuances of the Court on the proper handling of Judiciary collections, thus:

a. Judiciary Development Fund collections in the amount of Two Thousand Thirteen Pesos
and 90/100 Centavos (₱2,013.90) and Three Thousand Seventy Pesos and 40/100
Centavos (₱3,070.40), which comprised her undeposited collections for the period covering
August 25, 1988 to November 13, 1995 and January 26, 1996 to October 31, 2006
respectively;

b. Special Allowance for the Judiciary Fund collections in the amount of Four Thousand
Three Hundred Sixty Four Pesos and 20/100 Centavos (₱4,364.20); and

c. Fiduciary Fund collections in the amount of Two Hundred Sixty Nine Thousand Three
Hundred Sixty Three Pesos and 35/100 Centavos (₱269,363.35).

4. EXPLAIN in writing why during the period of accountability of Mr. Garibaldi L. Sarmiento as an
accountable officer from November 2, 2006 to July 9, 2007, she was collecting legal fees accruing to
Judiciary Development Fund and Special Allowance for the Judiciary Fund without the knowledge of
Mr. Sarmiento and the fees collected were not reported and deposited, broken down as follows:

For Judiciary Development Fund

Official Receipts Number Period Covered Amount

5389101 December 12, 2006 9.60

5389102-109 January 2-23, 2006 76.80

5389110-138 February 8-21, 2006 278.40

5389139-140 May 29, 2006 6

19.20

1031
 Total   384.00

For Special Allowance for Judiciary Fund

Date of Collection Official Recceipts Amount

Number

December 15, 2006 5389101 40.40

January 1-23, 2007 5389102-109 323.20

February 8-21, 2007 5389110-138 1,171.60

May 29, 2007 5389139-140 80.80

July 2007   10.00

Total   1,626.00

5. SECURE from the Finance Division and/or from the Accounting Division, Financial Management
Office, Office of the Court Administrator certified photocopiesof vouchers, checks or any documents
that would show that on March 5, 1997, her withheld salary checks and bonuses from January 1996
to February 1997 were applied to her JDF undeposited collections covering the period from
September 29, 1988 to November 13, 1995 amounting to Eighty Seven Thousand Seventy Pesos
and 89/100 Centavos (₱87,070.89).

VI. HON. LORNA B. SANTIAGO-UBALDE, Presiding Judge be DIRECTED to:

1. ASSIGN a court personnel to assist Mrs. Aurora T. Zuñiga in going over the records of the
courtfor her to comply with the above directives; and

2. PROPERLY MONITOR the financial transactions of Ms. Ma Elviza S. Yuga, designated collecting
officer, to ensure strict adherence to circulars and other issuances of the court regarding the proper
handling of judiciary funds.7

Lucero, in his letter,  dated March 2, 2009, claimed that the amount mentioned in the report was already
8

deposited  to the account of the court in the Land Bank of the Philippines (LBP)on May 19, 2008.
9

Cervantes, on the other hand,explained in her letter,  dated March 9, 2009, that her shortage was mainly
10

due to missing reimbursement receipts that she could not locate anymore, which was why she opted to just
restitute her shortage of ₱4,100.00 on March 2, 2009 by depositing it in the bank.

In the Memorandum,  dated April 23, 2010,the OCA adopted the findings of the audit team and
11

recommended that the report be re-docketed as an administrative matter against Zuñiga, Cervantes and
Lucero. Thus, in the Resolution of June 23, 2010,  the Court approved the recommendations of the OCA
12

which are herein reproduced in full, to wit:

1. RE-DOCKET the audit report as a regular administrative complaint against Mrs. Aurora T. Zuñiga,
Mrs. Minda H. Cervantes and Mr. Pepito F. Lucero for failure to exercise diligence in the
performance of their duties as officer of the court, thus, violating the circulars and other issuances of
the Court regarding the proper handling of Judiciary collections resulting in the shortages incurred in
the different fund accounts of the Court;

2. PLACE Mrs. Aurora T. Zuñiga, Clerk of Court II of MTC, Virac, Catanduanes UNDER
PREVENTIVE SUSPENSIONeffective immediately and continuing until further orders from this Court
for failure to deposit the funds in due time which constitutes gross dishonesty and gross misconduct;
and COMPLYwith the Memorandum of the Court dated 28January 2009 within fifteen (15) days from
notice, otherwise an order of arrest shall be issued against her to be implemented by the National
Bureau of Investigation. The aforementioned directive as contained in the memorandum is reiterated
as follows:
1032
 a. RESTITUTEyour incurred shortages in the following funds with the duly validated deposit
slip as proof of compliance, copy furnished the Fiscal Monitoring Division, Court
Management Office of the Office of the Court Administrator:

Name of Fund Period Covered Amount

Judiciary Development Fund Sep. 29, 1988- ₱2,013.90

Nov. 13, 1995

Judiciary Jan. 26, 1996- 3,070.40

Development Fund Oct. 31, 2006

Special Allowance Nov. 11, 2003- 4,364.20

for the Judiciary Oct. 31, 2006
Fund

Fiduciary Fund Jul. 10, 2007- 269,363.35

Mar. 31, 2008

Total   ₱278,811.85

b. TRANSMITto this Court through the Fiscal Monitoring Division, Court Management Office,
all the documents (i.e., court orders and acknowledgment receipts of the bondsmen/litigants)
to support the validity and authenticity of the withdrawals/refund of cash bonds as
enumerated in the attached list of Fiduciary Collections from 26 June 1992 to 11 August
1995 amounting to Two Hundred Thirty Two Thousand Eight Hundred Sixty Pesos
(₱232,860.00). Failure to provide this Court with the said requirements, the same shall be
considered outstanding and unwithdrawn and she will bedirected to restitute the
aforementioned amount.

3. DIRECT Mr. Pepito F. Lucero, Court Interpreter III of RTC, Br. 43, Virac, Catanduanes, and
former Officer-in-Charge of MTC, Virac, Catanduanes to PAYa FINEof ₱2,000.00 for violations of
Section 23, Rule XIV of the Omnibus Civil Service Rules and Regulations (Gross Neglect of Duty)
within fifteen (15) days from receipt of notice, with stern warning that repetition of the same or similar
act in the future will be dealt with more severely;

4. DIRECT Mrs. Minda H. Cervantes, former Officer-inCharge and Court Stenographer I ofMTC,
Virac, Catanduanes, to PAY a FINEof ₱2,000.00 for violations of Section 23, Rule XIV of the
Omnibus Civil Service Rules and Regulations (Gross Neglect of Duty) within fifteen (15) days from
receipt of notice, with stern warning that commission of the same or similar acts in the future,
including violation of court resolutions will be dealt with more severely;

5. REQUIRE Mrs. Paz T. Tacorda to EXPLAIN within ten (10) days from notice why she failed to
comply with the directive in the Memorandum of the Court dated 28 January 2009; and COMPLY
with the said directive subject of the aforesaid Memorandum within ten (10) days from notice;

6. CLEAR Ms. Sonia T. Bagadiong and Mr. Garibaldi L. Sarmiento, former Officers-in-Charge of
MTC, Virac, Catanduanes, from any accountability in so far as their period of accountability as
Officers-in-Charge are concerned, after having been audited of their books of accounts which were
found to be in order; and

7. DIRECT Hon. Lorna B. Santiago-Ubalde, Presiding Judge of MTC, Virac, Catanduanes, to

ASSIGN a court personnel to assist Mrs. Aurora T. Zuñiga in going over the records of the court for
her to comply with the above directiveswith the close supervision of Ms. Ma. Elviza S. Yuga,
designated collecting officer; and EFFECTIVELY MONITOR the financial transactions of Ms. Ma.
Elviza S. Yuga, to ensure strictadherence to circulars and other issuances of the court regarding the
proper handling of judiciary funds to avoid the incurrence of infractions/violations committed by the
aforementioned court employees, otherwise, she shall be held equally liable if funds of the Court are
subsequently found to be mishandled. 13

1033
In her letters, dated August 19, 2010  and September 30, 2010,  Zuñiga claimed that she had already
14 15

complied with the Court’s directive of January 28, 2009. She averred that, on July 9, 2007, she personally
handed over to the presiding judge, Hon. Lorna B. Santiago-Ubalde (Judge Santiago-Ubalde), the following
amounts as restitution: ₱20,640.00 for the JDF ₱146,750.00 for the FF; and ₱31,000.00 for the Process
Server’s Deposit (STP Fund) She further claimed that, in addition to the said payments, on January 30,
2008, she further deposited another ₱10,000.00 as additional restitution for the FF and that although she
was not the designated collecting officer for the FF from July 10, 2007 to March 31, 2008, but the late Cheryl
Gonzales and Miss Judith Tacorda, the said collections were all deposited with the LBP.

In the meantime, Judge Santiago-Ubalde, in a letter,  dated September 21, 2010, informed the Court that
16

Zuñiga already received the suspension order on August 17, 2010, but she still had not made any restitution
as directed.

In her letter of November 18, 2010, Zuñiga echoed her plea for the lifting of her suspension insisting thatshe
had already complied with the court’s directive to restitute her shortages.
17

In its Memorandum,  dated May 30, 2011, considering that the Court, in its previous resolution,  took note of
18 19

the payment of the court fine of Cervantes and Lucero while Tacorda paid her shortage of ₱10.00 and
explained why she was not able to immediately comply with the Court’s memorandum, dated January 28,
2009, the OCA recommended that the administrative matter against Cervantes, Lucero and Tacorda be
closed and terminated. In the meantime, the OCA requested additional time of sixty (60) days to fully
evaluate the lettersand documents that Zuñiga submitted.

In the September 14, 2011 Resolution,  the Court resolved to consider the administrative matter against
20

Cervantes, Lucero and Tacorda as closed and terminated. The Court likewise granted the OCA’s request for
additional time to complete the evaluation of the letters and documents of Zuñiga.

In its Report,  dated December 13, 2013, the OCA stated that most of the documents that Zuñigapresented
21

relative to her accountability on the FF were already tagged as valid withdrawals; thus, her unaccounted
withdrawals had been reduced to ₱269,363.35, while those with incomplete documentation totaled
₱134,050.00. The OCA also clarified that the money she returned amounting to ₱94,737.32 was already
credited in the audit report.  Thus, the OCA recommended that:
22

1. Mrs. Aurora T. Zuñiga, Clerk of Court II, Municipal Trial Court, Virac, Catanduanes, be found
GUILTY of dishonesty and that she be DISMISSEDfrom the service effective immediately, with
forfeiture of all benefits, except her accrued leave credits, and with prejudice to re-employment inany
branch or service of the government, including government-owned or controlled corporations;

2. The Financial Management Office (FMO) of the Office of the Court Administrator (OCA) be
DIRECTED to:

2.1) PROCESSthe money value of the terminal leave benefits of Mrs. Aurora T. Zuñiga,
dispensing with the usual documentary requirements, and apply the same to the following
shortages:

Name of Fund Period Covered Amount

Judiciary Development Fund Sep. 29, 1988- ₱2,013.90

Nov. 13, 1995

Judiciary Jan. 26, 1996- 3,070.40

Development Fund Oct. 31, 2006

Special Allowance Nov. 11, 2003- 4,364.20

for the Judiciary Oct. 31, 2006
Fund

Fiduciary Fund Jul. 10, 2007- 269,363.35

Mar. 31, 2008

1034
 Fiduciary Fund Jun. 26, 1992-Dec. 134,050.00
(Unauthorized FF 31, 1995
withdrawals due to
insufficient
documentations)

Total   ₱412,861.85

and order Mrs. Zuñiga to restitute the remaining shortages, the monetary value of her earned
leave credits being insufficient to cover the aforementioned shortages; and

2.2) COORDINATE with the Fiscal Monitoring Division (FMD), Court Management Office
(CMO), OCA, before the processing of the checks to be issued in favor of the Fiduciary Fund
account of the MTC, Virac Catanduanes, and for the preparation of the necessary
communication with the incumbent Clerk of Court/Officerin-Charge thereat.

3. The Office of the Administrative Services (OAS), OCA be DIRECTEDto provide the Financial
Management Office (FMO), OCA with the following documents (pertaining to Mrs. Zuñiga) for the
said Office to comply with item No. 2 above:

3.1)Official Service Record;

3.2)Certification of Leave Credits; and

3.3)Notice of Salary Adjustment (NOSA), if any.

4. The Legal Office, OCA, be DIRECTEDto file the appropriate criminal charges against Mrs. Aurora
T. Zuñiga.
23

The Court's Ruling

After a careful examination of the records of this case, the Court finds the recommendation of the OCA to be
correct.
1awp++i1

SC Circular Nos. 13-92 and 5-93, as integrated in the 2002 Revised Manual for Clerks of Court, provide the
guidelines for the accounting of court funds. All fiduciary collections upon receipt shall be deposited immediately by
the Clerk of Court concerned with an authorized government depository bank. In SC Circular No. 5-93, the LBP was
designated as the authorized government depository.  Furthermore, Section B(4) of Circular No. 50-95  directs that
24 25

all collections from bailbonds, rental deposits and other fiduciary collections shall be deposited with the LBP within
twenty-four (24) hours by the Clerk of Court concerned as instructed in Circular No. 13-92. 26

Zuñiga, as Clerk of Court, was entrusted with the delicate functions of collecting legal fees.  She acted as cashier
27

and disbursement officer of the court and was tasked to collect and receive all monies paid as legal fees, deposits,
fines and dues, and controls the disbursement of the same.  She was also designated as custodian of the court’s
28

funds and revenues, records, properties and premises, and should be liable for any loss or shortage thereof. 29

Zuñiga, however, failed to properly account for her FF collections and to judiciously deposit the same with the Land
Bank within twenty-four (24) hours upon receipt. She was also unable to explain the shortage of ₱269,363.35 from
her July 10, 2007-March 31, 2008 transactions. Moreover, she failed to provide proper documentation to completely
support the cash bond withdrawals amounting to ₱232,860.00 spanning from June 26, 1992 to December 31, 1995
which she claimed to have been refunded to bondsmen/litigants. Circular No. 50-95 provides for the guidelines on
how to make withdrawals from the court fiduciary funds, to wit:

B. Guideline in Making Withdrawals:

(1) Withdrawal slips shall be signed by the Executive/Presiding Judge and countersigned by the Clerk of
Court.

(2) No withdrawals, except as specifically provided in the immediately preceding paragraph, shall be allowed
unless there is a lawful order from the Court that has jurisdiction over the subject matter involved.

(3) When maintaining a current account, withdrawals shall be made by check. Signatures on the check shall
likewise be the Executive/Presiding Judge and the Clerk of Court.

1035
As can be gleaned from the saidprovision, supporting documents such as a court order from the judge authorizing
the withdrawal and acknowledgment receipts of the bondsmen or litigants must be fully presented. Failure to strictly
comply with these requirements would make the withdrawals unauthorized. Thus, after recomputation, Zuñigastill
had a shortage of ₱134,050.00 representing unauthorized FF withdrawals due to insufficient documentation. 30

As observed by the financial audit team, there were also instances when Zuñiga failed to deposit her JDF collections
within twenty-four (24) hours upon receipt. She deferred the deposit of her JDF collections for another day or the
succeeding month without any valid justification.  Due to this unconventional method, the interest on the FF account
31

was erroneously receipted and deposited in the GF account. 32

Clearly, Zuñiga’s unorganized method of managing and documenting the cash collections allocated for the JDF was
a serious violation of Administrative Circular No. 5-93, the pertinent portion of which reads:

3. Duty of the Clerks of Court, Officers-in-Charge or accountable officers.- The Clerks of Court, Officers-in-Charge of
the Office of the Clerk of Court, or their accountable duly authorized representative designated by them in writing,
who must be accountable officers, shall receive the Judiciary Development Fund collections, issue the proper
receipt therefor, maintain a separate cash book properly marked CASH BOOK FOR JUDICIARY DEVELOPMENT
FUND, deposit such collections in the manner herein prescribed, and render the proper Monthly Report of
Collections for said Fund. 33

More importantly, delayed remittance of cash collections constitutes gross neglect of dutybecause this omission
deprives the court of interest that may be earned if the amounts were to be deposited in the authorized depository
bank. SC Circular No. 13-92 requires clerks of court to withdraw interest earned on deposits and to remit the same
to the account of the JDF within two (2) weeks after the end of each quarter.  Delay in the remittance of court’s
34

funds casts a serious doubt on the concerned court employee’s trustworthiness and integrity. As ruled in In Re:
Report on the Judicial and Financial Audit of RTC-Br. 4, Panabo, Davao del Norte  and Office of the Court
35

Administrator v. Recio,  the failure of the Clerk of Court to remit the court fundswas tantamount to gross neglect of
36

duty, dishonesty and grave misconduct prejudicial to the best interest of the service.

It need not be over emphasized that court personnel tasked with collections of court funds, such as the clerk of court
and cash clerks, should deposit immediately with the authorized government depositories the various funds they
had collected. Being the custodian of court funds and revenues, Zuñiga had the primary responsibility to
immediately deposit the funds received by her office with the authorized government depositories and not to keep
the same in her custody.  The Court cannot accept Zuñiga’s argument that she already made the appropriate
37

restitution because it was not supported by evidence. Zuñiga posits that she personally gave the money to her
presiding judge to answer for her accountabilities on July 9, 2007,  but it was only in 2008 that the financial audit
38

team examined her books of account. Besides, a claim of payment is just a self-serving allegation and mere
allegation of payment without proof merits no weight. In fact, Judge Santiago-Ubalde belied this claim in her
letter, dated September 21, 2010, when she specifically mentioned that Zuñiga did not make any restitution
39

whatsoever. She also dragged the names of her other co-workers in her predicament, but passing the blame to
another with no credible explanation would not suffice to absolve her from liability.

Remarkably, Zuñiga’s present stand is contrary to what she wrote in her previous letter,  dated April 11, 2008, when
40

she informed the audit team of her intention to fully restitute her accountabilities. In fact, in her other letter, dated
March 9, 2009, she openly admitted that she used the money collected as bail to pay for her own expenses and
household bills. Thus:

There were also times when I gave the bail amount to the designated collecting officer or at times, divided the
amount because we both needed the money to buy food or pay the house bills. However, much to my dismay, she
negated my story because according to her, she did not sign any receipt when she received the money. 41

Her incongruous statements do not reflect highly on her character as a public servant; they constitute gross
dishonesty, which undermines the public’s faith in courts and in the administration of justice as a whole. 42

In fact, Zuñiga’s unjustified failure to comply with the Court’s circulars designed to promote full accountability for
public funds even constitutes gross neglect ofduty and grave misconduct.  No protestation of good faith can
43

override the mandatory observance of court circulars.  It should be emphasized that the 2002 Revised Manual for
44

Clerks of Court requires strict compliance with the rules and regulations of the collection and accounting funds, thus:

2.1.2.4 Sanctions

Strict observance of the rules and regulations on collection and accounting of funds is hereby enjoined.  The Clerks
1âwphi1

of Court or Officers-in-Charge shall exercise close supervision over their respective duly authorized representatives
to ensure strict compliance herewith, and shall be held administratively accountable for failure to do so. Failure to
comply with any of these rules and regulations shall mean the withholding of the salaries and allowances of those
concerned until compliance thereof is duly effected, pursuant to Sec. 122 of Pres Decree No. 1445 dated June 11,
1978, without prejudice to such further disciplinary action the Court may take against them.  [Emphases supplied]
45

1036
Section 1, Article XI of the Constitution, provides that a public office is a public trust, and all public officers and
employees must at all times be accountable to the people; serve themwith utmost responsibility, integrity, loyalty,
and efficiency; act with patriotism and justice; and lead modest lives. The demand for moral uprightness is more
pronounced for the members and personnel of the Judiciary who are involved in the dispensation of justice. The
conduct of court members and personnel must not only be characterized with propriety and decorum but must also
be above suspicion, for any act of impropriety can seriously erode or diminish the people’s confidence in the
Judiciary. As frontliners in the administration of justice, they should live up to the strictest standards of honesty and
integrity in the public service.
46

Thus, applying the parameters set forth by the 2002 Revised Manual for Clerks of Court and various court circulars,
there is no doubt that Zuñiga is guilty of gross dishonesty. Section 52, Rule IV of the Uniform Rules on
Administrative Cases in the Civil Service  classifies gross dishonesty as a grave offense with the corresponding
47

penalty of dismissal for the first offense.48

Equally, the maximum penalty of dismissal from service for gross dishonesty is provided in Section 9, Rule XIV of
the Civil Service Rules:

The penalty of dismissal shall carry with it cancellation of eligibility, forfeiture of leave credits and retirement benefits,
and the disqualification for reemployment in the government service. Further, it may be imposed without prejudice to
criminal or civil liability.

Indeed, a public servant isexpected to exhibit, at all times, the highest degree of honesty and integrity, and should
be made accountable to all those whom he serves. There is no place inthe Judiciary for those who cannot meet the
exacting standards of judicial conduct and integrity.  WHEREFORE, finding respondent Aurora T. Zuñiga, Clerk of
49

Court II, Municipal Trial Court, Virac, Catanduanes, GUILTY of DISHONESTY, the Court hereby DISMISSES her
from the service effective immediately. All her retirement benefits, except accrued leave benefits, are forfeited and
she is barred from re-employment in any branch or instrumentality of the government, including government-owned
or controlled corporations. Thus, the Court DIRECTS: A] The Financial Management Office (FMO) of the Office of
the Court Administrator to:

1) PROCESS the monetary value of the terminal leave benefits of Aurora T. Zuñiga, dispensing with the
usual documentary requirements, and apply the sameto the following shortages:

Name of Fund Period Covered Amount

Judiciary Development Fund Sep. 29, 1988- ₱2,013.90

Nov. 13, 1995

Judiciary Jan. 26, 1996- 3,070.40

Development Fund Oct. 31, 2006

Special Allowance Nov. 11, 2003- 4,364.20

for the Judiciary Oct. 31, 2006
Fund

Fiduciary Fund Jul. 10, 2007- 269,363.35

Mar. 31, 2008

Fiduciary Fund Jun. 26, 1992-Dec. 134,050.00

(Unauthorized FF 31, 1995
withdrawals due to
insufficient
documentations)

Total   ₱412,861.85

and ORDER her to restitute the remaining shortages, the monetary value of her earned leave credits being
insufficient to cover the aforementioned shortages; and

2) COORDINATE with the Fiscal Monitoring Division, Court Management Office (CMO), OCA, before the
processing of the checks to be issued in favor of the Fiduciary Fund account or the MTC, Virac,
1037
 Catanduanes, and for the preparation of the necessary communication with the incumbent Clerk of
Court/Officer-in-Charge thereat.

B] The Office of the Administrative Services, OCA, to PROVIDE the Financial Management Office with the following
documents (pertaining to Zufiiga) for the said Office to comply with item No. 1 above:

2.1 Official Service Record;

2.2 Certification of Leave Credits; and

2.3 Notice of Salary Adjustment (NOSA), if any.

C] The Legal Office, OCA, to file the appropriate criminal charges against respondent Aurora T. Zuniga.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 199008               November 19, 2014

DANILO ALMERO, TERESITA ALAGON, CELIA BULASO, LUDY RAMADA, REGINA GEGREMOSA, ISIDRO
LAZARTE, THELMA EMBARQUE, FELIPE LAZARTE, GUILERMA LAZARTE, DULCESIMA
1038
BENIMELE,Petitioners, 
vs.
HEIRS OF MIGUEL PACQUING, as represented by LINDA PACQUING FADRILAN, Respondents.

DECISION

BRION, J.:

Before this Court is a petition for review on certiorari   filed under Rule 45 of the Rules of Court directly assailing the
1

February 16, 2011 Decision  and July 19, 2011 resolution  of the Office of the President (OP) in OP Case No. 10-C-
2 3

152. The OP recalled and cancelled the Certificate of Land Ownership Awards ( CLOAs) issued to the petitioners
covering certain homestead lots that formed part of the Pacquing Estate, a 23.6272-hectare property located in
Cuambogan, Tagum City.

Factual Antecedents

Miguel Pacquing acquired agricultural lands (the property) with a total area of 23.6272 hectares in Cuambogan,
Tagum City through Homestead Patent No. V-33775. These lands were registered on January 6, 1955 with the
Register of Deeds under Original Certificate of Title No. (P-2590) P-653.

The records show that, on August 5, 1991, the Municipal Agrarian Reform Officer (MARO) sent Miguel’s
representative a Notice of Coverage placing the Pacquing Estate under the Comprehensive Agrarian Reform
Program (CARP). Miguel failed to reply to the notice and, instead filed a Voluntary Offer to Sell (VOS) with the
Department of Agrarian Reform (DAR) on August 31, 1991. Miguel, however, died during the pendency of the VOS
proceedings. Miguel’s wife, Salome, had died five years earlier.

In January 1992, respondent Linda Pacquing-Fadrilan, sole heir of the spouses Pacquing, executed an affidavit
adjudicating to herself ownership of the property. In August of the sameyear, she filed an application for retention
with the DAR Regional Directorwho denied Linda’s application in an order dated December 14, 1993. The order
denying Linda’s application for retention later became final and executory.

On June 25, 1994, certain individuals, including the present petitioners who were earlier identified as farmer-
beneficiaries of the subject land, were issued CLOAs over their respective cultivated portions of the property.

On October 20, 1999, Linda, through her attorney-in-fact, Samuel Osias, filed with the Office of the Provincial
Adjudicator in Tagum City a petition to cancel the petitioners’ CLOAs. The Provincial Adjudicator later dismissed the
petition due to Linda’s failure to file her position paper. She appealed the dismissal with the Department of Agrarian
Reform Adjudication Board (DARAB).

It appears that, in the meantime, Transfer Certificates of Title (TCTs) covering portions of the property were issued
to Napoleon Villa Sr., et al. who had been contracted by Linda, under an agricultural leasehold agreement, to
cultivate the lands.

In a resolution dated June 29, 2001, the DARAB nullified the TCTs issued to Napoleon Villa Sr. et. al. and reinstated
Linda’s title to the property. At the same time, the DARAB ordered the generation and issuance of titles to the
petitioners and other farmer-beneficiaries of the subject land. In a subsequent resolution dated September 28, 2001,
the DARAB validated the TCTs issued to the following individuals: Danilo Almero, Celia Bulaso, Ludy Ramada,
Isidro Lazarte, Cepriano Lazarte, Thelma Emorque, Domingo Juanico, Candido Labeste and Renato Benimate.

Root of the present petition: Petition to Recall and Cancel the petitioners’ CLOAs

Linda again sought to recall and cancel the petitioners’ CLOAs by filing a petition with the DAR, which the latter
endorsed to the DAR Regional Office. Linda argued that the DARAB erred in distributing portions of the land to the
petitioners because the entire property was supposed to be exempt from CARP coverage. The petitioners opposed
Linda’s petition.

In an order dated December 18,2008, the DAR Regional Director ruled that the Pacquing Estate was subject to
CARP and that the CLOAs issued to the petitioners were valid. Linda filed an appeal to the DAR Secretary.

In an order dated August 18, 2009, former DAR Secretary Nasser C. Pangandaman denied Linda’s appeal under
the following terms:

"xxx, under Section 6 of R.A. No. 6657, there are two requisites to exempt homestead lands from CARP coverage.
First, the homestead grantee or his direct compulsory heir(s) still own the original homestead at the time of the
effectivity of R.A. No. 6657 on 15 June 1988; and second, the original homestead grantee or his direct compulsory
heir(s) was cultivating the homestead as of 15 June 1988 and continues to cultivate the same.
1039
In this case, it is undisputed that the subject landholdings were still owned by the original homestead grantees at the
time of the effectivity of R.A. No. 6657. However,the said homestead grantees no longer cultivate the same.
Therefore, on this score, the subject landholdings cannot be exempted from CARP coverage." (Emphasis ours)

Linda appealed the DAR Secretary’s August 18, 2009 order to the OP.

In a decision dated February 16,2011, the OP, through Executive Secretary Paquito N. Ochoa Jr., reversed the DAR
Secretary’s August 18, 2009 Order and recalled and cancelled the petitioners’ CLOAs. The OP held that:

"xxx, the fact that petitioners-appellants (referring to the respondent Linda), since the beginning, have always
protested the issuance of the CLOAs to the respondents-appellees (referring to the petitioners) is a clear
demonstration of their willingness to continue with the cultivation of the subject landholdings, or tostart anew with the
cultivation or even to direct the management of the farm.

Given the foregoing, petitioners-appellants should be given the chance to exercise their rights as heirs of the
homestead grantee to continue to cultivate the homestead lots either personally or directly managing the farm
pursuant to the pronouncement in the Paris case. They still own the original homestead issuedto their predecessor-
in-interest and have manifested their intention to continue with the cultivation of the homestead lots."  (Emphasis
4

supplied)

The petitioners moved to reconsider the decision, but the OP denied their motion in a resolution  dated July 19,
5

2011.

With no appeal or petition for review filed with the Court of Appeals within the fifteen (15) - day appeal period, the
DAR Bureau of Agrarian Legal Assistance issued on August 22, 2011 a Certificate of Finality  declaring as final and
6

executory the OP’s February 16, 2011 decision and July 19, 2011 resolution.The petitioners, however, contest the
finality of the OP’s decision and allege that their counsel only received a certified copy of the OP’s resolution
denying their motion for reconsideration on September 29, 2011.

On November 14, 2011, the petitioners directly filed with this Court a petition for review on certiorari under Rule 45
assailing the subject OP’s decision and resolution.

The Petition

The petitioners raise the following issues:

I- WHO WILL ISSUE A CERTIFICATE OF FINALITY OF THE DECISION WHEN THE DECISION OF THE
ADMINISTRATIVE AGENCY IS REVERSE (sic) ON APPEAL BY THE OFFICE OF THE PRESIDENT?

II- ARE LANDS UNDER THE HOMESTEAD GRANT, EXEMPT FROM AGRARIAN REFORM COVERAGE
UNDER SECTION 6 OF R.A. 6657, EVEN IF THE HEIR OF THE PATENTEE IS NOT CULTIVATING THE
LAND, BUT AND HAD EVEN OFFERED THE SAME UNDER THE VOLUNTARY OFFER TO SELL
SCHEME?

III- IN CARP COVERAGE, IS DEPOSIT OF LAND OWNER’S COMPENSATION WITH LAND BANK OF
THE PHILIPPINES ENOUGH TO TRANSFER TITLE TO THE STATE, EVEN IF THE OWNER DOES NOT
ACCEPT THE SAME?  (Emphasis supplied)
7

Pleadings Subsequent to the Petition

In her comment dated March 16, 2012,  Linda counter-argues that the present petition should be denied outright for
8

being an improper mode of appeal: the appeal from the OP’s assailed decision and resolution should have been
filed with the CA via a petition for review under Rule 43 and not directly with this Court viaa petition for review on
certiorari under Rule 45.

The petitioners filed their counter-comment/reply  asking this Court to decide the present case not on technicalities
9

but based on its merits, and that the Court, instead, treat their petition as a special civil action for certiorari under
Rule 65.

OUR RULING

We see MERIT in the present petition.

First, we address the proceduralissue raised by the respondent.

1040
Under Rule 43 of the Rules of Court, an appeal from the awards, judgments, final orders or resolutions of or
authorized by any quasi-judicial agency such as the Office of the President, in the exercise of its quasijudicial
functions shall be filed to the CA  within a period of fifteen (15) days from notice of, publication or denial of a motion
10

for new trial or reconsideration.  The appeal may involve questions of fact, of law, or mixed questions of fact and
11

law.12

A direct resort to this Court, however, may be allowed in cases where only questions of law are raised.  A question
13

of law exists when the doubt or controversy concerns the correct application of law or jurisprudence to a certain set
of facts; or when the issue does not call for an examination of the probative value of the evidence presented, the
truth or falsehood of facts being admitted. 14

In the present petition, the petitioners raised valid questions of law that warranted the direct recourse to this Court.
Basically, they question the OP’s application of the law and jurisprudence on the issue of whether the Pacquing
Estate should be exempt from CARP coverage. In this case, no further examination of the truth or falsity of the facts
is required. Our review of the case is limited to the determination of whether the OP has correctly applied the law
and jurisprudence based on the facts on record.

We now proceed to the merits of the case.

R.A. No. 6657 or the Comprehensive Agrarian Reform Law (CARL) of 1988 covers all public and private agricultural
lands as provided in Proclamation No. 131  and E.O. No. 229,  including other lands of the public domain suitable
15 16

for agriculture. Section 4 of R.A. 6657, as amended,  specifically lists the lands covered by the CARP, which
17

include:

(a) All alienable and disposable lands of the public domain devoted to or suitable for agriculture. No
reclassification of forest or mineral lands to agricultural lands shall be undertaken after the approval of this
Act until Congress, taking into account ecological, developmental and equity considerations, shall have
determined by law, the specific limits of the public domain;

(b) All lands of the public domain in excess to the specific limits as determined by Congress in the preceding
paragraph;

(c) All other lands owned by the Government devoted to or suitable for agriculture; and

(d) All private lands devoted to or suitable for agriculture regardless of the agricultural products raised or that
can be raised thereon.

And Section 10 of R.A. 6657, as amended,  expressly provides for the lands exempted or excluded from the CARP,
18

namely:

(a) Lands actually, directly and exclusively used for parks, wildlife, forest reserves, reforestation, fish
sanctuaries and breeding grounds, watersheds and mangroves shall be exempt from the coverage of this
Act

(b) Private lands actually, directly and exclusively used for prawn farms and fishponds shall be exempt from
the coverage of this Act: Provided, that said prawn farms and fishponds have not been distributed and
Certificate of Land Ownership (CLOA) issued under the Agrarian Reform Program; and

xxxx

(c) Lands actually, directly and exclusively used and found to be necessary for national defense, school sites
and campuses, including experimental farms stations operated by public or private schools for educational
purposes, seeds and seedlings research and pilot production centers, church sites and covenants
appurtenant thereto, mosque sites and Islamic centers appurtenant thereto, communal burial grounds and
cemeteries, penal colonies and penal farms actually worked by the inmates, government and private
research and quarantine centers and all lands with eighteen percent (18%) slope and over, except those
already developed, shall be exempt from the coverage of this Act.

The subject land, being agricultural in nature, is clearly not exempt from CARP coverage.

But Linda argues that the subject land is exempt from CARP primarily because it was acquired by her father viaa
homestead patent. She claims that the rights of homestead grantees have been held superior to those of agrarian
reform tenants and, thus, her right to the subject land must be upheld. The OP, agreeing with the respondent, stated
that:

1041
"There can be no question that, weighed against each other, the rights of a homesteader prevail over the rights of
the tenants guaranteed by agrarian reform laws.

As early as the case of Patricio v. Bayug, it has been held that the more paramount and superior policy
consideration is to uphold the right of the homesteader and his heirs to own and cultivate personally the land
acquired from the State without being encumbered by tenancy relations.

Just right after the promulgation of Republic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform
Law (CARL), the doctrine enunciated in Patricio was applied in Alita v. Court of Appeals where it was held
thatPresidential DecreeNo. 27 cannot be invoked to defeat the very purpose of the enactment of the Public Land Act
or Commonwealth Act No. 141. It was further pointedout that even the Philippine Constitution respects the
superiority of the homesteaders’ rights over the rights of the tenants guaranteed by the Agrarian Reform
statute." (Citations omitted.)
19

The right of homestead grantees to retain or keep their homestead is, however, not absolutely guaranteed by
law. Section 6 of R.A 6657 provides that:
1âwphi1

"Section 6. Retention Limits.— Except as otherwise provided in this Act, no person may own or retain, directly or
indirectly, any public or private agricultural land, the size of which shall vary according to factors governing a viable
family-size farm, such as commodity produced, terrain, infrastructure, and soil fertility as determined by the
Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall retention by the landowner
exceed five (5) hectares. Three (3) hectares may be awarded to each child of the landowner, subject to the following
qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he is actually tilling the land or directly
managing the farm: provided, that landowners whose lands have been covered by Presidential Decree No. 27 shall
be allowed to keep the areas originally retained by them thereunder: provided, further, that original homestead
grantees or their direct compulsory heirs who still own the original homestead at the time of the approval of this Act
shall retain the same areas as long as they continue to cultivate said homestead. (Emphasis ours)

Thus, in order for the homestead grantees or their direct compulsory heirs to retain or keep their homestead, the
following conditions must first be satisfied: (a) they must still be the owners of the original homestead at the time of
the CARL's effectivity, and (b) they must continue to cultivate the homestead land.

In this case, Linda, as the direct compulsory heir of the original homestead grantee, is no longer cultivating the
subject homestead land. The OP misinterpreted our ruling in Paris v. Alfeche  when it held that Linda's mere
20

expression of her desire to continue or to start anew with the cultivation of the land would suffice to exempt the
subject homestead land from the CARL. On the contrary, we specifically held in Paris v. Alfeche that:

"Indisputably, homestead grantees or their direct compulsory heirs can own and retain the original homestead, only
for "as long as they continue to cultivate" them. That parcels of land are covered by homestead patents will not
automatically exempt them from the operation of land reform. It is the fact of continued cultivation by the original
grantees or their direct compulsory heirs that shall exempt their lands from land reform coverage."  (Emphasis
21

supplied) WHEREFORE, in view of the foregoing, we hereby:

(a) REVERSE and SET ASIDE the February 16, 2011 Decision and July 19, 2011 Resolution of the Office of
the President in OP Case No. 1 O-C-152;

(b) RECALL and REVOKE the August 22, 2011 Certificate of Finality issued by the Department of Agrarian
Reform Bureau of Agrarian Legal Assistance; and

(c) AFFIRM the August 18, 2009 Order of the Department of Agrarian Reform Secretary in DARCO Order
No. MS-0908-295 Series of 2009 A-999-10-CLT-028-09.

SO ORDERED.

DISSENTING OPINION

LEONEN, J.:

I dissent on two points. First, the Office of the President's February 16, 2011 Decision  is already final and
1

executory. This court, therefore, may no longer review the Decision.

Second, the property in this case is covered by a homestead patent. Thus, it is exempt from agrarian reform
coverage. The heirs of the original homesteader must be given the chance to cultivate their land.

1042
 I

This court may no longer review the final and executory Decision of the Office of the President

Under Rule 43 of the Rules of Court, decisions of the Office of the President are appealed before the Court of
Appeals through a Petition for Review raising questions of fact, of law, or mixed questions of fact and law.  The 2

Appeal must be filed within 15 days from notice of the decision or resolution denying the Motion for Reconsideration
as provided in Rule 43, Sections 1 and 4:

Section 1. Scope. - This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals and
from awards, judgments, final orders or resolutions of or authorized by any quasi judicial agency in the exercise of
its quasi-judicial functions. Among these agencies are the Civil Service Commission, Central Board of Assessment
Appeals, Securities and Exchange Commission, Office of the President, Land Registration Authority, Social Security
Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and Technology Transfer, National
Electrification Administration, Energy Regulatory Board, National Telecommunications Commission, Department of
Agrarian Reform under Republic Act No. 6657, Government Service Insurance System, Employees Compensation
Commission, Agricultural Inventions Board, Insurance Commission, Philippine Atomic Energy Commission, Board of
Investments, Construction Industry Arbitration Commission, and voluntary arbitrators authorized by law.

Sec. 4. Period of appeal. The appeal shall be taken within fifteen (15) days from notice of the award, judgment, final
order or resolution, or from the date of its last publication, if publication is required by law for its effectivity, or of the
denial of petitioner’s motion for new trial or reconsideration duly filed in accordance with the governing law of the
court or agency a quo. Only one (1) motion for reconsideration shall be allowed. Upon proper motion and the
payment of the full amount of the docket fee before the expiration of the reglementary period, the Court of Appeals
may grant an additional period of fifteen (15) days only within which to file the petition for review. No further
extension shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days.

Petitioners Danilo Almero, Teresita Alagon, Celia Bulaso, Ludy Ramada, Regina Gegremosa, Isidro Lazarte,
Thelma Embarque, Felipe Lazarte, Guilerma Lazarte, and Dulcesima Benimele (Almero, et al.) availed themselves
of the wrong remedy against the Office of the President’s Decision. Instead of directly appealing before this court,
Almero, et al. should have filed a Petition for Review before the Court of Appeals under Rule 43.

It is true that a Petition for Review on Certiorari may be directly filed before this court if the Petition raises pure
questions of law.  However, even assuming that Almero, et al.’s Petition raises pure questions of law, this court
3

should have dismissed outright Almero, et al.’s Petition for having been filed out of time. Under Rule 45, Section 2 of
the Rules of Court, a Petition for Review on Certiorari must be filed within 15 days from notice of the assailed
Decision or Resolution:

Sec. 2. Time for filing; extension.– The petition shall be filed within fifteen (15) days from notice of the judgment
orfinal order or resolution appealed from, or of the denial of the petitioner’s motion for new trial or reconsideration
filed in due time after notice of the judgment. On motion duly filed and served, withfull payment of the docket and
other lawful fees and the deposit for costs before the expiration of the reglementary period, the Supreme Court may
for justifiable reasons grant an extension of thirty (30) days only within which to file the petition.

Almero, et al. had notice of the Office of the President’s Resolution denying their Motion for Reconsideration on
September 29, 2011. Thus, Almero, et al. had until October 14, 2011 tofile their Appeal. Yet, Almero, et al. appealed
before this court only on November 14, 2011, which was beyond 15 days from their notice of the Resolution denying
their Motion for Reconsideration. Their filing of the Petition, therefore, did not toll the reglementary period for filing
an appeal. The Decision of the Office of the President has become final and executory as of October 15, 2011, and
this court may no longer review the Decision.

II

The property is exempt from coverage of the Comprehensive Agrarian Reform Program Agrarian reform is the
"redistribution of lands, regardless of crops or fruits produced, to farmers and regular farm workers who are
landless."  It includes not only the physical redistribution of lands but also other alternative arrangements, such as
4

production or profit-sharing, labor administration, and the redistribution of shares of stock all aimed to lift the
economic status of the property’s farmer-beneficiaries. 5

As a general rule, all agricultural lands, whether public or private, are covered by the Comprehensive Agrarian
Reform Program.  An agricultural land refers to land devotedto any of the following agricultural activities: cultivation
6

of the soil, planting of crops, growing of fruit trees, raising of livestock, poultry or fish, including the harvesting of
such farm products, and other farm activities and practices performed by a farmer in conjunction with such farming
operations done by persons whether natural or juridical.  Section 4 of the Comprehensive Agrarian Reform Law
7

enumerates properties covered by the Comprehensive Agrarian Reform Program:

1043
SEC. 4. Scope. – The Comprehensive Agrarian Reform Law of 1988 shall cover, regardless of tenurial arrangement
and commodity produced, all public and private agricultural lands as provided in Proclamation No. 131 and
Executive Order No. 229, including other lands of the public domain suitable for agriculture.

More specifically, the following lands are covered by the Comprehensive Agrarian Reform Program:

a. All alienable and disposablelands of the public domain devoted to or suitable for agriculture. No
reclassification of forest or mineral lands to agricultural lands shall be undertaken after the approval of this
Act until Congress, taking into account ecological, developmental and equity considerations, shall have
determined by law, the specific limits of the public domain;

b. All lands of the public domain in excess of the specific limits as determined by Congress inthe preceding
paragraph;

c. All other lands owned by the Government devoted to or suitable for agriculture; and

d. All private lands devoted to or suitable for agriculture regardless of the agricultural products raised or that
can be raised thereon.

As for the properties exempt from agrarian reform coverage, Section 10 of the Comprehensive Agrarian Reform Law
provides:

SEC. 10. Exemptions and Exclusions. – Lands actually, directly and exclusively used and found to be necessary for
parks, wildlife, forest reserves, reforestation, fish sanctuaries and breeding grounds, watersheds and mangroves,
national defense, school sites and campuses including experimental farm stations operated by public or private
schools for educational purposes, seeds and seedlings research and pilot production centers, church sites and
convents appurtenant thereto, mosque sites and Islamic centers appurtenant thereto, communal burial grounds and
cemeteries, penal colonies and penal farms actually worked by the inmates, government and private research and
quarantine centers and all lands with eighteen percent (18%) slope and over, except those already developed shall
be exempt fromthe coverage of this Act.

In the present case, the majority ruled that the property of the Heirs of Manuel Pacquing is covered by the
Comprehensive Agrarian Reform Program, the property being an agricultural land.

I disagree with the majority. The property in this case is exempt from agrarian reform, having been granted to
Manuel Pacquing through a homestead patent.

Although a social justice measure,  agrarian reform is subject to limitations. Under Article XIII, Section 6 of the
8

Constitution, distribution of lands through agrarian reform is "subjectto prior rights, homestead rights of small
settlers, and the rights of indigenous cultural communities to their ancestral lands":

Section 6. The State shall apply the principles of agrarian reform or stewardship, whenever applicable in
accordance with law, in the disposition or utilization of other natural resources, including lands of the public domain
under lease or concession suitable to agriculture, subject to prior rights, homestead rights of small settlers, and the
rights of indigenous cultural communities to their ancestral lands. (Emphasis supplied)

Chapter IV of Commonwealth Act No. 141 or the Public Land Act governs the grant of homestead patents. Under
Section 12 of the law, an applicant "may enter a homestead of not exceeding twenty-four hectares of agricultural
land of the public domain." A homestead patent or title to the homestead is issued only if the applicant has improved
and cultivated at least one-fifth of the agricultural land applied for. Section 14 of the Public Land Act provides:

Sec. 14. No certificate shall be given or patent issued for the land applied for until at least one-fifth of the land has
been improved and cultivated. The period within which the land shall be cultivated shall not be less than one nor
more than five years from and after the date of the approval of the application. The applicant shall, within the said
period, notify the Director of Lands as soon as he is ready to acquire the title. If at the date of such notice, the
applicant shall prove to the satisfaction of the Director of Lands, that hehas resided continuously for at least one
year in the municipality in which the land is located, or in a municipality adjacent to the same, and has cultivated at
least one-fifth of the land continuously since the approval of the application, and shall make affidavit that no part of
said land has been alienated or encumbered, and that he has complied with all the requirements of this Act,then
upon the payment of five pesos, as final fee, he shall be entitled to a patent.

The state grants homestead rights "to encourage residence upon and the cultivation and improvement of
[agricultural lands] of the public domain."  In Jocson v. Soriano,  this court further explained the purpose of granting
9 10

and protecting homesteads:

1044
[The object of homestead laws] is to provide a home for each citizen of the Government, where his family may
shelter and live beyond the reach of financial misfortune, and to inculcate in individuals those feelings of
independence which are essential to the maintenance of free institutions. Furthermore, the state itself is concerned
that the citizens shall not be divested of a means of support, and reduced to pauperism.

The conservation of a family home is the purpose of homestead laws. The policy of the state is to foster families as
the factors of society, and thus promote general welfare. The sentiment of patriotism and independence, the spirit
offree citizenship, the feeling of interest in public affairs, are cultivated and fostered more readily when the citizen
lives permanently in his own home, witha sense of its protection and durability.  (Citations omitted)
11

In 1982, this court had the opportunity to resolve the issue of who has the better right to a homestead — the
homesteader or the tenant tilling the land. In Patricio v. Bayog,  this court said that "the more paramount and
12

superior policy consideration is to uphold the right of the homesteader and his heirs to own and cultivate personally
the land acquired from the State without being encumbered by tenancy relations." 13

In Alita v. Court of Appeals,  this court categorically ruled that lands obtained through homestead patents are not
14

covered by the agrarian reform program, the rights of homesteaders being "superior"  to the rights of tenants. This
15

court said that the provisions of Presidential Decree No. 72, Series of 1972, then governing agrarian reform, "cannot
be invoked to defeat the very purpose of the enactment of the Public Land Act or Commonwealth Act No.
141." Citing Patricio:
16

The Homestead Act has been enacted for the welfare and protection of the poor. The law gives a needy citizen a
piece of land where he may build a modest house for himself and family and plant what is necessary for subsistence
and for the satisfaction of life’s other needs. The right of the citizens to their homes and to the things necessary for
their subsistence is as vital as the right to life itself. They have a right to live with a certain degree of comfort as
become human beings, and the State which looks after the welfare of the people’s happiness is under a duty to
safeguard the satisfaction of this vital right.
17

In ruling for the homesteader in Alita,this court relied on Article XIII, Section 6 of the Constitution. This court went on
to state that even the Comprehensive Agrarian Reform Law of 1988 recognizes the "inapplicability of [agrarian
reform laws] to lands covered by homestead patents."  This court referred to the proviso in Section 6 of the
18

Comprehensive Agrarian Reform Law:

Section 6. Retention Limits. – Except as otherwise provided in this Act, no person may own or retain, directly or
indirectly, any public or private agricultural land, the size of which shall vary according to factors governing a viable
family-size farm, such as commodity produced, terrain, infrastructure, and soil fertility as determined by the
Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall retention by the landowner
exceed five (5) hectares. Three (3) hectares may be awarded to each child of the landowner, subject to the following
qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he is actually tilling the land or directly
managing the farm: Provided, That landowners whose lands have been covered by Presidential Decree No. 27 shall
be allowed to keep the area originally retained by them thereunder: Provided further, That original homestead
grantees or their direct compulsory heirs who still own the original homestead at the time of the approval of this Act
shall retain the sameareas as long as they continue to cultivate said homestead.(Emphasis supplied)

However, contrary to the Alitaruling, this court used Section 6 as legal basis to rule that homesteads are covered by
the agrarian reform program. In the 2001 case of Paris v. Alfeche,  the state granted Florencia Paris a homestead
19

patent over a parcel of land in Paitan, Quezon, Bukidnon. Emancipation patents were subsequently issued tothe
tenants tilling her property, depriving Paris and her children of their right to personally cultivate their property. To
recover her property, Paris filed an application to retain at least five (5) hectares of her property in Bukidnon. Since
her property was covered by a homestead patent, Paris argued, among others, that she and her children have the
better right to cultivate their land as this court ruled in Patricio and Alita.

The Department of Agrarian Reform Adjudicator ruled in favor of Paris and cancelled the emancipation patents
issued to the tenants. On appeal, however, the Department of Agrarian Reform Adjudication Board reversed the
Adjudicator and declared the tenants as "full owners of the land they till."  The Court of Appeals agreed with the
20

Department of Agrarian Reform Adjudication Board and affirmed its Decision.

This court affirmed the Court of Appeals’ Decision, ruling that "parcels of land . . . covered by homestead patents
[are] not automatically exempt . . . from the operation of land reform." Section 6 of the Comprehensive Agrarian
Reform Law allows homesteaders to retain their land "as long as they continue to cultivate [their]
homestead." Therefore, "it is the fact of continued cultivation by the original grantees or their direct compulsory heirs
21

that shall exempt their lands from land reform coverage." 22

Finding that Paris and her children were not personally cultivating their homestead, this court denied Paris’
application for retention.

1045
On Paris’ contention that she and her children, as homesteaders, had the better right to cultivate their land, this
court held that Patricio and Alita did not apply to Paris’ case. The homesteaders in Patricioand Alita showed their
intention to continue cultivating their homesteads.  Thus, this court allowed the homesteaders to retain their
23

properties in Patricio and Alita.

Unlike the homesteaders in Patricio and Alita, this court found that Paris and her children never personally cultivated
their homestead, and they never expressed their intention to do so. For these reasons, this court denied Paris’
application for retention and surmised that Paris and her children would "undoubtedly continue to be absentee
landlords":24

[T]he rulings in both Patricio and Alita, which are in line with the state objective of fostering owner cultivatorship and
of abolishing tenancy, would be inapplicable to the present case. Since petitioner and her heirs have evinced no
intention of actually cultivating the lands or even directly managing the farm, they will undoubtedly continue to be
absentee landlords. Therefore, to blindly and indiscriminately apply the ruling in the cited cases would be
tantamount to encouraging feudalistic practices and going against the very essence of agrarian reform. This we
cannot sanction.  (Citation omitted)
25

Despite this court’s ruling in Paris, I maintain that the property should be exempt from agrarian reform.  As this court
1âwphi1

held in Patricio and Alita, the right of tenants to own the land they till through agrarian reform is subject to the right of
homesteaders to personally cultivate their property. This right of homesteaders is guaranteed by no less than the
Constitution.

In providing that homesteaders may retain their land "as long as they continue to cultivate said homestead," Section
6 of the Comprehensive Agrarian Reform Law is unconstitutional. The Constitution does not require homesteaders
to show their intention to cultivate their land before their properties are exempted from agrarian reform coverage.
Under the law, homestead patents are granted only if the applicants have proven to the satisfaction of the Director
of Lands that they have entered, improved, and cultivated the land applied for.  It must therefore be presumed that
26

grantees of homestead patents cultivate their land.

In any case, the Heirs of Manuel Pacquing must be allowed to retain their homestead, similar to the homesteaders
in Patricio and Alita. As this court declared in Paris, homesteaders are allowed to retain their property if they show
their intention to continue cultivating their property.  As the Office of the President found, the Heirs of Manuel
27

Pacquing have shown their intention to continue cultivating their property by protesting the issuance of certificates of
land ownership qward to Almero, et al. The Heirs of Manuel Pacquing "should be given the chance to exercise their
rights as heirs of the homestead grantee to continue to cultivate the homestead lots either personally or directly
managing the farm pursuant to the pronouncement in the Paris case." 28

III

This case must be elevated to the court en banc

In the alternative, this case must be elevated to the court en bane considering that the constitutionality of Section 6
of the Comprehensive Agrarian Reform Law is at issue in this case. Rule 2, Section 3(a) of the Internal Rules of the
Supreme Court provides:

Section 3. Court en bane matters and cases. - The Court en bane shall act on the following matters and cases:

(a) cases in which the constitutionality or validity of any treaty, international or executive agreement, law, executive
order, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question[.]

IN VIEW OF THE FOREGOING, I vote to DENY the Petition for Review on Certiorari. The Office of the President's
DeCision dated February 16, 2011 must be AFFIRMED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 193551               November 19, 2014

HEIRS OF GREGORIO LOPEZ, represented by Rogelia Lopez, et al., Petitioners, 

vs.

1046
DEVELOPMENT BANK OF THE PHILIPPINES [Now substituted by Philippine Investment Two (SPVAMC),
Inc.], Respondents.

DECISION

LEONEN, J.:

This case involves the application of the doctrine on innocent purchaser or mortgagee for value. It also involves the
application of the doctrines on sales by persons who are not owners of the property.

This is a Rule 45 petition  filed on October 15, 2010, assailing the Court of Appeals May 8, 2009 decision  and
1 2

August 16, 2010 resolution.  The Court of Appeals reversed and set aside the Regional Trial Court's December 27,
3

2005 decision,  which ordered the nullification of the affidavit of self-adjudication executed by Enrique Lopez, and
4

the documents relating

to the sale and mortgage of the property to respondent Development Bank of the Philippines.

Gregoria Lopez owned a 2,734-square-meter property in Bustos, Bulacan.  She died on March 19, 1922  and was
5 6

survived by her three sons: Teodoro Lopez, Francisco Lopez, and Carlos Lopez.  Tax Declaration No. 613 was 7

issued under the names of Teodoro, Francisco, and Carlos. 8

Teodoro, Francisco, and Carlos died.  Only Teodoro was survived by children: Gregorio, Enrique, Simplicio, and
9

Severino. 10

Petitioners in this case are Simplicio substituted by his daughter Eliza Lopez, and the heirs of Gregorio and
Severino.  Enrique is deceased.
11 12

Petitioners discovered that on November 29, 1990, Enrique executed an affidavit of self-adjudication declaring
himself to be Gregoria Lopez’s only surviving heir, thereby adjudicating upon himself the land in Bulacan.  He sold 13

the property to Marietta Yabut. 14

Petitioners demanded from Marietta the nullification of Enrique’s affidavit of self-adjudication and the deed of
absolute sale.  They also sought to redeem Enrique’s one-fourth share.  Marietta, who was already in possession of
15 16

the property, refused. 17

Sometime in 1993, Marietta obtained a loan from Development Bank of the Philippines (DBP) and mortgaged the
property to DBP as security.  At the time of the loan, the property was covered by Tax Declaration No. 18727, with
18

the agreement that the land shall be brought under the Torrens system.  On July 26, 1993, an original certificate of
19

title was issued in Marietta’s name.  Marietta and DBP "executed a supplemental document dated 28 February
20

1995 placing the subject [property]within the coverage of the mortgage."  The mortgage was annotated to the title.
21 22

Sometime between 1993 and 1994, petitioners filed a complaint  and an amended complaint  with the Regional
23 24

Trial Court for the annulment of document, recovery of possession, and reconveyance of the property. They prayed
that judgment be rendered, ordering the annulment of Enrique’s affidavit of self-adjudication, the deed of sale
executed by Enrique and Marietta, and the deed of real estate mortgage executed by Marietta in favor of
DBP. Petitioners also prayed for the reconveyance of their three-fourth share in the property, their exercise of their
25

right of redemption of Enrique’s one-fourth share, as well as attorney’s fees and costs of suit. 26

Petitioners caused the annotation of a notice of lis pendens at the back of the original certificate of title.  The 27

annotation was inscribed on June 27, 1994. 28

Marietta failed to pay her loan to DBP.  "DBP instituted foreclosure proceedings on the . . . land."  It was "awarded
29 30

the sale of the [property] as the highest bidder."  "The Certificate of Sale was registered with the Register of Deeds .
31

. . on 11 September 1996."  Marietta failed to redeem the property.  The title to the property was "consolidated in
32 33

favor of DBP." 34

On December 27, 2005, the Regional Trial Court ruled in favor of petitioners.  The Regional Trial Court found that
35

the affidavit of self-adjudication and the deed of absolute sale did not validly transfer to Marietta the title to the
property.  Enrique could not transfer three-fourths of the property since this portion belonged to his co-heirs.  The
36 37

Regional Trial Court also found that Marietta was not an innocent purchaser for value because when the deed of
absolute sale was executed, the property was only covered by a tax declaration in the name of the heirs of Gregoria
Lopez,  thus:
38

[Marietta] should have looked further into the veracity of vendor Enrique Lopez’ claim of ownership over the subject
property considering that he has not presented her any other proof of his ownership when the said Deed of Absolute
Sale was executed other than his mere allegation of ownership thereof. 39

1047
Hence, the issuance of the original certificate of title would not protect Marietta. Title is not vested through a
certificate.  At best, Marietta’s ownership over the subject property would cover only Enrique’s share.
40 41

The Regional Trial Court also found that DBP was not a mortgagee in good faith because at the time of the
execution of the mortgage contract, a certificate of title was yet to be issued in favor of Marietta.  Marietta’s title at42

that time was still based on a tax declaration.  Based on jurisprudence, a tax declaration is not a conclusive proof of
43

ownership.  The DBP should have exerted due diligence in ascertaining Marietta’s title to the property.
44 45

The Regional Trial Court ordered the nullification of Enrique’s affidavit of self-adjudication, the sale of the three-
fourth portion of the subject property in favor of Marietta, the reconveyance of the three-fourth share of the property
in favor of petitioners, the nullification of the real estate mortgage executed in favor of DBP, and the surrender of
possession of the property to petitioners.  The trial court also ordered DBP to pay attorney’s fees.
46

DBP, substituted by Philippine Investment Two (PI Two), appealed to the Court of Appeals.  The Court of Appeals 47

reversed the decision of the Regional Trial Court in the decision  promulgated on May 8, 2009. It held that DBP was
48

a mortgagee in good faith:

[W]ith the absence of any evidence to show that the DBP was ever privy to the fraudulent execution of the late
Enrique Lopez’ [sic] affidavit of Adjudication over the subject land, the right of the former over the same must be
protected and respected by reason of public policy. 49

The dispositive portion of the Court of Appeals’ decision reads:

WHEREFORE, the appeal is GRANTED. The 27 December 2005 Decision of the Regional Trial Court is hereby
REVERSED and SET ASIDE as to defendant-appellant Development Bank of the Philippines and dismissing the
complaint against the latter [now substituted by Philippine Investment Two (SPV-AMC), Inc.] 50

The Court of Appeals denied petitioners’ motion for reconsideration on August 16, 2010.  Petitioners filed a Rule 45
51

petition  before this court on October 15, 2010.

52

The issue in this case is whether the property was validly transferred to Marietta and, eventually, to DBP.

Petitioners argued that the Court of Appeals erred in its application of the doctrine on "innocent purchaser for
value."  DBP should have exercised diligence in ascertaining Marietta’s claim of ownership since at the time of the
53

mortgage, the property was only covered by a tax declaration under Marietta’s name.  As a financial institution of
54

which "greater care and prudence"  is required, DBP should not have relied on the face of a certificate of title to the
55

property. 56

On the other hand, DBP’s position, citing Blanco v. Esquierdo,  was that since its participation in Enrique’s
57

execution of the affidavit of self-adjudication was not shown on record, it could not have been aware that there was
any irregularity in the sale in favor of Marietta and in her title to the property.  Moreover, Marietta was in possession
58

of the property at the time of the contract with DBP.  Therefore, DBP should enjoy the protection accorded to
59

innocent purchasers for value. 60

We find merit in the petition.

I
Validity of Enrique’s affidavit and the sale to Marietta

We have consistently upheld the principle that "no one can give what one does not have."  A seller can only sell
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what he or she owns, or that which he or she does not own but has authority to transfer, and a buyer can only
acquire what the seller can legally transfer. 62

This principle is incorporated in our Civil Code. It provides that in a contract of sale, the seller binds himself to
transfer the ownership of the thing sold, thus:

Art. 1458. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

The seller cannot perform this obligation if he or she does not have a right to convey ownership of the thing. Hence,
Article 1459 of the Civil Code provides:

Art. 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is
delivered.

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Title or rights to a deceased person’s property are immediately passed to his or her heirs upon death.  The heirs’
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rights become vested without need for them to be declared "heirs."  Before the property is partitioned, the heirs are
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co-owners of the property. 65

In this case, the rights to Gregoria Lopez’s property were automatically passed to her sons — Teodoro, Francisco,
and Carlos — when she died in 1922.  Since only Teodoro was survived by children, the rights to the property
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ultimately passed to them when Gregoria Lopez’s sons died.  The children entitled to the property were Gregorio,