1

G.R. No. 106719 September 21, 1993

DRA. BRIGIDA S. BUENASEDA, Lt. Col. ISABELO BANEZ, JR., ENGR.
CONRADO REY MATIAS, Ms. CORA S. SOLIS and Ms. ENYA N.
LOPEZ, petitioners,
vs.
SECRETARY JUAN FLAVIER, Ombudsman CONRADO M. VASQUEZ, and NCMH
NURSES ASSOCIATION, represented by RAOULITO GAYUTIN, respondents.
Renato J. Dilag and Benjamin C. Santos for petitioners.
Danilo C. Cunanan for respondent Ombudsman.
Crispin T. Reyes and Florencio T. Domingo for private respondent.

QUIASON, J.:
This is a Petition for Certiorari, Prohibition and Mandamus, with Prayer for
Preliminary Injunction or Temporary Restraining Order, under Rule 65 of the Revised
Rules of Court.
Principally, the petition seeks to nullify the Order of the Ombudsman dated January
7, 1992, directing the preventive suspension of petitioners,
Dr. Brigida S. Buenaseda, Chief of Hospital III; Isabelo C. Banez, Jr., Administrative
Officer III; Conrado Rey Matias, Technical Assistant to the Chief of Hospital; Cora C.
Solis, Accountant III; and Enya N. Lopez, Supply Officer III, all of the National Center
for Mental Health. The petition also asks for an order directing the Ombudsman to
disqualify Director Raul Arnaw and Investigator Amy de Villa-Rosero, of the Office of
the Ombudsman, from participation in the preliminary investigation of the charges
against petitioner (Rollo, pp. 2-17; Annexes to Petition, Rollo, pp. 19-21).
The questioned order was issued in connection with the administrative complaint
filed with the Ombudsman (OBM-ADM-0-91-0151) by the private respondents
against the petitioners for violation of the Anti-Graft and Corrupt Practices Act.
According to the petition, the said order was issued upon the recommendation of
Director Raul Arnaw and Investigator Amy de Villa-Rosero, without affording
petitioners the opportunity to controvert the charges filed against them. Petitioners
had sought to disqualify Director Arnaw and Investigator Villa-Rosero for manifest
partiality and bias (Rollo, pp. 4-15).
On September 10, 1992, this Court required respondents' Comment on the petition.

On September 14 and September 22, 1992, petitioners filed a "Supplemental

Petition (Rollo, pp. 124-130); Annexes to Supplemental Petition; Rollo pp. 140-163)
and an "Urgent Supplemental Manifestation" (Rollo,
pp. 164-172; Annexes to Urgent Supplemental Manifestation; Rollo, pp. 173-176),
respectively, averring developments that transpired after the filing of the petition
and stressing the urgency for the issuance of the writ of preliminary injunction or
temporary restraining order.
On September 22, 1992, this Court ". . . Resolved to REQUIRE the respondents to
MAINTAIN in the meantime, the STATUS QUO pending filing of comments by said
respondents on the original supplemental manifestation" (Rollo, p. 177).
On September 29, 1992, petitioners filed a motion to direct respondent Secretary of
Health to comply with the Resolution dated September 22, 1992 (Rollo, pp. 182-192,
Annexes, pp. 192-203). In a Resolution dated October 1, 1992, this Court required
respondent Secretary of Health to comment on the said motion.
On September 29, 1992, in a pleading entitled "Omnibus Submission," respondent
NCMH Nurses Association submitted its Comment to the Petition, Supplemental
Petition and Urgent Supplemental Manifestation. Included in said pleadings were the
motions to hold the lawyers of petitioners in contempt and to disbar them (Rollo, pp.
210-267). Attached to the "Omnibus Submission" as annexes were the orders and
pleadings filed in Administrative Case No. OBM-ADM-0-91-1051 against petitioners
(Rollo, pp. 268-480).
The Motion for Disbarment charges the lawyers of petitioners with:
(1) unlawfully advising or otherwise causing or inducing their clients petitioners
Buenaseda, et al., to openly defy, ignore, disregard, disobey or otherwise violate,
maliciously evade their preventive suspension by Order of July 7, 1992 of the
Ombudsman . . ."; (2) "unlawfully interfering with and obstructing the
implementation of the said order (Omnibus Submission, pp. 50-52; Rollo, pp. 259260); and (3) violation of the Canons of the Code of Professional Responsibility and
of unprofessional and unethical conduct "by foisting blatant lies, malicious falsehood
and outrageous deception" and by committing subornation of perjury, falsification
and fabrication in their pleadings (Omnibus Submission, pp. 52-54; Rollo, pp. 261263).
On November 11, 1992, petitioners filed a "Manifestation and Supplement to 'Motion
to Direct Respondent Secretary of Health to Comply with 22 September 1992
Resolution'" (Manifestation attached to Rollo without pagination between pp. 613
and 614 thereof).
On November 13, 1992, the Solicitor General submitted its Comment dated
November 10, 1992, alleging that: (a) "despite the issuance of the September 22,
1992 Resolution directing respondents to maintain the status quo, respondent
Secretary refuses to hold in abeyance the implementation of petitioners' preventive

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suspension; (b) the clear intent and spirit of the Resolution dated September 22,
1992 is to hold in abeyance the implementation of petitioners' preventive
suspension, the status quo obtaining the time of the filing of the instant petition; (c)
respondent Secretary's acts in refusing to hold in abeyance implementation of
petitioners' preventive suspension and in tolerating and approving the acts of Dr.
Abueva, the OIC appointed to replace petitioner Buenaseda, are in violation of the
Resolution dated September 22, 1992; and
(d) therefore, respondent Secretary should be directed to comply with the Resolution
dated September 22, 1992 immediately, by restoring the status quo
ante contemplated by the aforesaid resolution" (Comment attached toRollo without
paginations between pp. 613-614 thereof).
In the Resolution dated November 25, 1992, this Court required respondent
Secretary to comply with the aforestated status quo order, stating inter alia, that:
It appearing that the status quo ante litem motam, or the last
peaceable uncontested status which preceded the present
controversy was the situation obtaining at the time of the filing of
the petition at bar on September 7, 1992 wherein petitioners were
then actually occupying their respective positions, the Court
hereby ORDERS that petitioners be allowed to perform the duties
of their respective positions and to receive such salaries and
benefits as they may be lawfully entitled to, and that respondents
and/or any and all persons acting under their authority desist and
refrain from performing any act in violation of the aforementioned
Resolution of September 22, 1992 until further orders from the
Court (Attached to Rollo after p. 615 thereof).
On December 9, 1992, the Solicitor General, commenting on the Petition,
Supplemental Petition and Supplemental Manifestation, stated that (a) "The
authority of the Ombudsman is only to recommend suspension and he has no direct
power to suspend;" and (b) "Assuming the Ombudsman has the power to directly
suspend a government official or employee, there are conditions required by law for
the exercise of such powers; [and] said conditions have not been met in the instant
case" (Attached to Rollo without pagination).
In the pleading filed on January 25, 1993, petitioners adopted the position of the
Solicitor General that the Ombudsman can only suspend government officials or
employees connected with his office. Petitioners also refuted private respondents'
motion to disbar petitioners' counsel and to cite them for contempt (Attached
to Rollowithout pagination).
The crucial issue to resolve is whether the Ombudsman has the power to suspend
government officials and employees working in offices other than the Office of the
Ombudsman, pending the investigation of the administrative complaints filed
against said officials and employees.

In upholding the power of the Ombudsman to preventively suspend petitioners,

respondents (Urgent Motion to LiftStatus Quo, etc, dated January 11, 1993, pp. 1011), invoke Section 24 of R.A. No. 6770, which provides:
Sec. 24. Preventive Suspension. The Ombudsman or his Deputy
may preventively suspend any officer or employee under his
authority pending an investigation, if in his judgment the evidence
of guilt is strong, and (a) the charge against such officer or
employee involves dishonesty, oppression or grave misconduct or
neglect in the performance of duty; (b) the charge would warrant
removal from the service; or (c) the respondent's continued stay in
office may prejudice the case filed against him.
The preventive suspension shall continue until the case is
terminated by the Office of Ombudsman but not more than six
months, without pay, except when the delay in the disposition of
the case by the Office of the Ombudsman is due to the fault,
negligence or petition of the respondent, in which case the period
of such delay shall not be counted in computing the period of
suspension herein provided.
Respondents argue that the power of preventive suspension given the Ombudsman
under Section 24 of R.A. No. 6770 was contemplated by Section 13 (8) of Article XI
of the 1987 Constitution, which provides that the Ombudsman shall exercise such
other power or perform such functions or duties as may be provided by law."
On the other hand, the Solicitor General and the petitioners claim that under the
1987 Constitution, the Ombudsman can only recommend to the heads of the
departments and other agencies the preventive suspension of officials and
employees facing administrative investigation conducted by his office. Hence, he
cannot order the preventive suspension himself.
They invoke Section 13(3) of the 1987 Constitution which provides that the Office of
the Ombudsman shall haveinter alia the power, function, and duty to:
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.
The Solicitor General argues that under said provision of the Constitutions, the
Ombudsman has three distinct powers, namely: (1) direct the officer concerned to
take appropriate action against public officials or employees at fault; (2) recommend
their removal, suspension, demotion fine, censure, or prosecution; and (3) compel

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compliance with the recommendation (Comment dated December 3, 1992, pp. 910).
The line of argument of the Solicitor General is a siren call that can easily mislead,
unless one bears in mind that what the Ombudsman imposed on petitioners was not
a punitive but only a preventive suspension.
When the constitution vested on the Ombudsman the power "to recommend the
suspension" of a public official or employees (Sec. 13 [3]), it referred to
"suspension," as a punitive measure. All the words associated with the word
"suspension" in said provision referred to penalties in administrative cases, e.g.
removal, demotion, fine, censure. Under the rule of Noscitor a sociis, the word
"suspension" should be given the same sense as the other words with which it is
associated. Where a particular word is equally susceptible of various meanings, its
correct construction may be made specific by considering the company of terms in
which it is found or with which it is associated (Co Kim Chan v. Valdez Tan Keh, 75
Phil. 371 [1945]; Caltex (Phils.) Inc. v. Palomar, 18 SCRA 247 [1966]).
Section 24 of R.A. No. 6770, which grants the Ombudsman the power to preventively
suspend public officials and employees facing administrative charges before him, is
a procedural, not a penal statute. The preventive suspension is imposed after
compliance with the requisites therein set forth, as an aid in the investigation of the
administrative charges.
Under the Constitution, the Ombudsman is expressly authorized to recommend to
the appropriate official the discipline or prosecution of erring public officials or
employees. In order to make an intelligent determination whether to recommend
such actions, the Ombudsman has to conduct an investigation. In turn, in order for
him to conduct such investigation in an expeditious and efficient manner, he may
need to suspend the respondent.
The need for the preventive suspension may arise from several causes, among
them, the danger of tampering or destruction of evidence in the possession of
respondent; the intimidation of witnesses, etc. The Ombudsman should be given the
discretion to decide when the persons facing administrative charges should be
preventively suspended.
Penal statutes are strictly construed while procedural statutes are liberally construed
(Crawford, Statutory Construction, Interpretation of Laws, pp. 460-461; Lacson v.
Romero, 92 Phil. 456 [1953]). The test in determining if a statute is penal is whether
a penalty is imposed for the punishment of a wrong to the public or for the redress
of an injury to an individual (59 Corpuz Juris, Sec. 658; Crawford, Statutory
Construction, pp. 496-497). A Code prescribing the procedure in criminal cases is not
a penal statute and is to be interpreted liberally (People v. Adler, 140 N.Y. 331; 35
N.E. 644).

The purpose of R.A. No. 6770 is to give the Ombudsman such powers as he may
need to perform efficiently the task committed to him by the Constitution. Such
being the case, said statute, particularly its provisions dealing with procedure,
should be given such interpretation that will effectuate the purposes and objectives
of the Constitution. Any interpretation that will hamper the work of the Ombudsman
should be avoided.
A statute granting powers to an agency created by the Constitution should be
liberally construed for the advancement of the purposes and objectives for which it
was created (Cf. Department of Public Utilities v. Arkansas Louisiana Gas. Co., 200
Ark. 983, 142 S.W. (2d) 213 [1940]; Wallace v. Feehan, 206 Ind. 522, 190 N.E., 438
[1934]).
In Nera v. Garcia, 106 Phil. 1031 [1960], this Court, holding that a preventive
suspension is not a penalty, said:
Suspension is a preliminary step in an administrative investigation.
If after such investigation, the charges are established and the
person investigated is found guilty of acts warranting his removal,
then he is removed or dismissed. This is the penalty.
To support his theory that the Ombudsman can only preventively suspend
respondents in administrative cases who are employed in his office, the Solicitor
General leans heavily on the phrase "suspend any officer or employee under his
authority" in Section 24 of R.A. No. 6770.
The origin of the phrase can be traced to Section 694 of the Revised Administrative
Code, which dealt with preventive suspension and which authorized the chief of a
bureau or office to "suspend any subordinate or employee in his bureau or under his
authority pending an investigation . . . ."
Section 34 of the Civil Service Act of 1959 (R.A. No. 2266), which superseded Section
694 of the Revised Administrative Code also authorized the chief of a bureau or
office to "suspend any subordinate officer or employees, in his bureau or under his
authority."
However, when the power to discipline government officials and employees was
extended to the Civil Service Commission by the Civil Service Law of 1975 (P.D. No.
805), concurrently with the President, the Department Secretaries and the heads of
bureaus and offices, the phrase "subordinate officer and employee in his bureau"
was deleted, appropriately leaving the phrase "under his authority." Therefore,
Section 41 of said law only mentions that the proper disciplining authority may
preventively suspend "any subordinate officer or employee under his authority
pending an investigation . . ." (Sec. 41).

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The Administrative Code of 1987 also empowered the proper disciplining authority
to "preventively suspend any subordinate officer or employee under his authority
pending an investigation" (Sec. 51).
The Ombudsman Law advisedly deleted the words "subordinate" and "in his
bureau," leaving the phrase to read "suspend any officer or employee under his
authority pending an investigation . . . ." The conclusion that can be deduced from
the deletion of the word "subordinate" before and the words "in his bureau" after
"officer or employee" is that the Congress intended to empower the Ombudsman to
preventively suspend all officials and employees under investigation by his office,
irrespective of whether they are employed "in his office" or in other offices of the
government. The moment a criminal or administrative complaint is filed with the
Ombudsman, the respondent therein is deemed to be "in his authority" and he can
proceed to determine whether said respondent should be placed under preventive
suspension.
In their petition, petitioners also claim that the Ombudsman committed grave abuse
of discretion amounting to lack of jurisdiction when he issued the suspension order
without affording petitioners the opportunity to confront the charges against them
during the preliminary conference and even after petitioners had asked for the
disqualification of Director Arnaw and Atty. Villa-Rosero (Rollo, pp. 6-13). Joining
petitioners, the Solicitor General contends that assuming arguendo that the
Ombudsman has the power to preventively suspend erring public officials and
employees who are working in other departments and offices, the questioned order
remains null and void for his failure to comply with the requisites in Section 24 of the
Ombudsman Law (Comment dated December 3, 1992, pp. 11-19).
Being a mere order for preventive suspension, the questioned order of the
Ombudsman was validly issued even without a full-blown hearing and the formal
presentation of evidence by the parties. In Nera, supra, petitioner therein also
claimed that the Secretary of Health could not preventively suspend him before he
could file his answer to the administrative complaint. The contention of petitioners
herein can be dismissed perfunctorily by holding that the suspension meted out was
merely preventive and therefore, as held in Nera, there was "nothing improper in
suspending an officer pending his investigation and before tho charges against him
are heard . . . (Nera v. Garcia., supra).
There is no question that under Section 24 of R.A. No. 6770, the Ombudsman cannot
order the preventive suspension of a respondent unless the evidence of guilt is
strong and (1) the charts against such officer or employee involves dishonesty,
oppression or grave misconduct or neglect in the performance of duty; (2) the
charge would warrant removal from the service; or (3) the respondent's continued
stay in office may prejudice the case filed against him.
The same conditions for the exercise of the power to preventively suspend officials
or employees under investigation were found in Section 34 of R.A. No. 2260.

The import of the Nera decision is that the disciplining authority is given the
discretion to decide when the evidence of guilt is strong. This fact is bolstered by
Section 24 of R.A. No. 6770, which expressly left such determination of guilt to the
"judgment" of the Ombudsman on the basis of the administrative complaint. In the
case at bench, the Ombudsman issued the order of preventive suspension only
after: (a) petitioners had filed their answer to the administrative complaint and the
"Motion for the Preventive Suspension" of petitioners, which incorporated the
charges in the criminal complaint against them (Annex 3, Omnibus
Submission, Rollo, pp. 288-289; Annex 4, Rollo,
pp. 290-296); (b) private respondent had filed a reply to the answer of petitioners,
specifying 23 cases of harassment by petitioners of the members of the private
respondent (Annex 6, Omnibus Submission, Rollo, pp. 309-333); and (c) a
preliminary conference wherein the complainant and the respondents in the
administrative case agreed to submit their list of witnesses and documentary
evidence.
Petitioners herein submitted on November 7, 1991 their list of exhibits (Annex 8 of
Omnibus Submission, Rollo, pp. 336-337) while private respondents submitted their
list of exhibits (Annex 9 of Omnibus Submission, Rollo, pp. 338-348).
Under these circumstances, it can not be said that Director Raul Arnaw and
Investigator Amy de Villa-Rosero acted with manifest partiality and bias in
recommending the suspension of petitioners. Neither can it be said that the
Ombudsman had acted with grave abuse of discretion in acting favorably on their
recommendation.
The Motion for Contempt, which charges the lawyers of petitioners with unlawfully
causing or otherwise inducing their clients to openly defy and disobey the
preventive suspension as ordered by the Ombudsman and the Secretary of Health
can not prosper (Rollo, pp. 259-261). The Motion should be filed, as in fact such a
motion was filed, with the Ombudsman. At any rate, we find that the acts alleged to
constitute indirect contempt were legitimate measures taken by said lawyers to
question the validity and propriety of the preventive suspension of their clients.
On the other hand, we take cognizance of the intemperate language used by
counsel for private respondents hurled against petitioners and their counsel
(Consolidated: (1) Comment on Private Respondent" "Urgent Motions, etc.;
(2) Adoption of OSG's Comment; and (3) Reply to Private Respondent's Comment
and Supplemental Comment, pp. 4-5).
A lawyer should not be carried away in espousing his client's cause. The language of
a lawyer, both oral or written, must be respectful and restrained in keeping with the
dignity of the legal profession and with his behavioral attitude toward his brethren in
the profession (Lubiano v. Gordolla, 115 SCRA 459 [1982]). The use of abusive
language by counsel against the opposing counsel constitutes at the same time a

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disrespect to the dignity of the court of justice. Besides, the use of impassioned
language in pleadings, more often than not, creates more heat than light.
The Motion for Disbarment (Rollo, p. 261) has no place in the instant special civil
action, which is confined to questions of jurisdiction or abuse of discretion for the
purpose of relieving persons from the arbitrary acts of judges and quasi-judicial
officers. There is a set of procedure for the discipline of members of the bar separate
and apart from the present special civil action.
WHEREFORE, the petition is DISMISSED and the Status quo ordered to be maintained
in the Resolution dated September 22, 1992 is LIFTED and SET ASIDE.
SO ORDERED.

G.R. No. 79094 June 22, 1988

MANOLO P. FULE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, respondent.
Balagtas P. Ilagan for petitioner.
The Solicitor General for respondent.
MELENCIO-HERRERA, J.:
This is a Petition for Review on certiorari of the Decision of respondent Appellate
Court, which affirmed the judgment of the Regional Trial Court, Lucena City, Branch
LIV, convicting petitioner (the accused-appellant) of Violation of Batas Pambansa
Blg. 22 (The Bouncing Checks Law) on the basis of the Stipulation of Facts entered

6
into between the prosecution and the defense during the pre-trial conference in the
Trial Court. The facts stipulated upon read:

The 1985 Rules on Criminal Procedure, which became effective on January 1, 1985,
applicable to this case since the pre-trial was held on August 8, 1985, provides:

a) That this Court has jurisdiction over the person and subject
matter of this case;

SEC. 4. Pre-trial agreements must be signed. No agreement or

admission made or entered during the pre-trial conference shall be
used in evidence against the accused unless reduced to writing
and signed by him and his counsel. (Rule 118) [Emphasis supplied]

b) That the accused was an agent of the Towers Assurance

Corporation on or before January 21, 1981;
c) That on January 21, 1981, the accused issued and made out
check No. 26741, dated January 24, 1981 in the sum of P2,541.05;
d) That the said check was drawn in favor of the complaining
witness, Roy Nadera;
e) That the check was drawn in favor of the complaining witness in
remittance of collection;
f) That the said check was presented for payment on January 24,
1981 but the same was dishonored for the reason that the said
checking account was already closed;
g) That the accused Manolo Fule has been properly Identified as
the accused party in this case.
At the hearing of August 23, 1985, only the prosecution presented its evidence
consisting of Exhibits "A," "B" and "C." At the subsequent hearing on September 17,
1985, petitioner-appellant waived the right to present evidence and, in lieu thereof,
submitted a Memorandum confirming the Stipulation of Facts. The Trial Court
convicted petitioner-appellant.
On appeal, respondent Appellate Court upheld the Stipulation of Facts and affirmed
the judgment of conviction. 1
Hence, this recourse, with petitioner-appellant contending that:
The Honorable Respondent Court of Appeals erred in the decision
of the Regional Trial Court convicting the petitioner of the offense
charged, despite the cold fact that the basis of the conviction was
based solely on the stipulation of facts made during the pre-trial
on August 8, 1985, which was not signed by the petitioner, nor by
his counsel.
Finding the petition meritorious, we resolved to give due course.

By its very language, the Rule is mandatory. Under the rule of statutory construction,
negative words and phrases are to be regarded as mandatory while those in the
affirmative are merely directory (McGee vs. Republic, 94 Phil. 820 [1954]). The use
of the term "shall" further emphasizes its mandatory character and means that it is
imperative, operating to impose a duty which may be enforced (Bersabal vs.
Salvador, No. L-35910, July 21, 1978, 84 SCRA 176). And more importantly, penal
statutes whether substantive and remedial or procedural are, by consecrated rule,
to be strictly applied against the government and liberally in favor of the accused
(People vs. Terrado No. L-23625, November 25, 1983, 125 SCRA 648).
The conclusion is inevitable, therefore, that the omission of the signature of the
accused and his counsel, as mandatorily required by the Rules, renders the
Stipulation of Facts inadmissible in evidence. The fact that the lawyer of the
accused, in his memorandum, confirmed the Stipulation of Facts does not cure the
defect because Rule 118 requires both the accused and his counsel to sign the
Stipulation of Facts. What the prosecution should have done, upon discovering that
the accused did not sign the Stipulation of Facts, as required by Rule 118, was to
submit evidence to establish the elements of the crime, instead of relying solely on
the supposed admission of the accused in the Stipulation of Facts. Without said
evidence independent of the admission, the guilt of the accused cannot be deemed
established beyond reasonable doubt.
Consequently, under the circumstances obtaining in this case, the ends of justice
require that evidence be presented to determine the culpability of the accused.
When a judgment has been entered by consent of an attorney without special
authority, it will sometimes be set aside or reopened (Natividad vs. Natividad, 51
Phil. 613 [1928]).
WHEREFORE, the judgment of respondent Appellate Court is REVERSED and this
case is hereby ordered RE-OPENED and REMANDED to the appropriate Branch of the
Regional Trial Court of Lucena City, for further reception of evidence.
SO ORDERED.

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33
G.R. No. L-35910 July 21, 1978

which order was apparently received by petitioner on April 17,

1971.

PURITA BERSABAL, petitioner,

vs.
HONORABLE JUDGE SERAFIN SALVADOR, as Judge of the Court of First
Instance of Caloocan City, Branch XIV, TAN THAT and ONG PIN
TEE, respondents.

The transcript of stenographic notes not having yet been

forwarded to the respondent court, petitioner filed on May 5, 1971
a 'MOTION EX-PARTE TO SUBMIT MEMORANDUM WITHIN 30 DAYS
FROM RECEIPT OF NOTICE OF SUBMISSION OF THE TRANSCRIPT OF
STENOGRAPHIC NOTES TAKEN DURING THE HEARING OF THE CASE
BEFORE THE CITY COURT OF CALOOCAN CITY' which was granted
by respondent court on May 7, 1971. However, before the
petitioner could receive any such notice from the respondent
court, the respondent Judge issued an order on August 4, 1971
which says:

MAKASIAR, J.:
On March 23, 1972, petitioner Purita Bersabal seeks to annul the orders of
respondent Judge of August 4, 1971, October 30, 1971 and March 15, 1972 and to
compel said respondent Judge to decide petitioner's perfected appeal on the basis of
the evidence and records of the case submitted by the City Court of Caloocan City
plus the memorandum already submitted by the petitioner and respondents.
Since only questions of law were raised therein, the Court of Appeals, on October 13,
1972, issued a resolution certifying said case to this Court pursuant to Section 17,
paragraph (4) of the Judiciary Act of 1948, as amended.
As found by the Court of Appeals, the facts of this case are as follows:
It appears that private respondents Tan That and Ong Pin Tee filed
an ejectment suit, docketed as Civil Case No. 6926 in the City
Court of Caloocan City, against the petitioner. A decision was
rendered by said Court on November 25, 1970, which decision was
appealed by the petitioner to the respondent Court and docketed
therein as Civil Case No. C-2036.
During the pendency of the appeal the respondent court issued on
March 23, 1971 an order which reads:
Pursuant to the provisions of Rep. Act No. 6031,
the Clerk of Court of Caloocan City, is hereby
directed to transmit to this Court within fifteen
(15) days from receipt hereof the transcripts of
stenographic notes taken down during the
hearing of this case before the City Court of
Caloocan City, and likewise, counsels for both
parties are given thirty (30) days from receipt of
this order within which to file their respective
memoranda, and thereafter, this case shall be
deemed submitted for decision by this Court.

For failure of the defendant-appellant to

prosecute her appeal the same is hereby
ordered DISMISSED with costs against her.
Petitioner filed a motion for reconsideration of the order on
September 28, 1971, citing as a ground the granting of his exparte motion to submit memorandum within 30 days from notice
of the submission of the stenographic notes taken before the City
Court. Private respondents filed their opposition to the motion on
September 30,1971. In the meantime, on October 20,1971,
petitioner filed her memorandum dated October 18, 1971. On
October 30, 1971 the respondent Court denied the motion for
reconsideration. Then on January 25, 1972, petitioner filed a
motion for leave to file second motion for reconsideration which
was likewise denied by the respondent court on March 15, 1972.
Hence this petition.
The sole inquiry in the case at bar can be stated thus: Whether, in the light of the
provisions of the second paragraph of Section 45 of Republic Act No. 296, as
amended by R.A. No. 6031, the mere failure of an appellant to submit on nine the
memorandum mentioned in the same paragraph would empower the Court of First
Instance to dismiss the appeal on the ground of failure to Prosecute; or, whether it is
mandatory upon said Court to proceed to decide the appealed case on the basis of
the evidence and records transmitted to it, the failure of the appellant to submit a
memorandum on time notwithstanding.
The second paragraph of Section 45 of R.A. No. 296, otherwise known as the
Philippine Judiciary Act of 1948, as amended by R.A. No. 6031 provides, in part, as
follows:
Courts of First Instance shall decide such appealed cases on the
basis of the evidence and records transmitted from the city or

9
municipal courts: Provided, That the parties may
submit memoranda and/or brief with oral argument if so
requested ... . (Emphasis supplied).
The foregoing provision is clear and leaves no room for doubt. It cannot be
interpreted otherwise than that the submission of memoranda is optional on the part
of the parties. Being optional on the part of the parties, the latter may so choose to
waive submission of the memoranda. And as a logical concomitant of the choice
given to the Parties, the Court cannot dismiss the appeal of the party waiving the
submission of said memorandum the appellant so chooses not to submit the
memorandum, the Court of First Instance is left with no alternative but to decide the
case on the basis of the evidence and records transmitted from the city or municipal
courts. In other words, the Court is not empowered by law to dismiss the appeal on
the mere failure of an appellant to submit his memorandum, but rather it is the
Court's mandatory duty to decide the case on the basis of the available evidence
and records transmitted to it.
As a general rule, the word "may" when used in a statute is permissive only and
operates to confer discretion; while the word "shall" is imperative, operating to
impose a duty which may be enforced (Dizon vs. Encarnacion, L-18615, Dec. 24,
1963, 9 SCRA 714, 716-717). The implication is that the Court is left with no choice
but to decide the appealed case either on the basis of the evidence and records
transmitted to it, or on the basis of the latter plus memoranda and/or brief with oral
argument duly submitted and/or made on request.
Moreover, memoranda, briefs and oral arguments are not essential requirements.
They may be submitted and/or made only if so requested.
Finally, a contrary interpretation would be unjust and dangerous as it may defeat the
litigant's right to appeal granted to him by law. In the case of Republic vs. Rodriguez
(L-26056, May 29, 1969, 28 SCRA 378) this Court underscored "the need of
proceeding with caution so that a party may not be deprived of its right to appeal
except for weighty reasons." Courts should heed the rule inMunicipality of Tiwi,
Albay vs. Cirujales
(L-37520, Dec. 26, 1973, 54 SCRA 390, 395), thus:
The appellate court's summary dismissal of the appeal even
before receipt of the records of the appealed case as ordered by it
in a prior mandamus case must be set aside as having been
issued precipitously and without an opportunity to consider and
appreciate unavoidable circumstances of record not attributable to
petitioners that caused the delay in the elevation of the records of
the case on appeal.
In the instant case, no notice was received by petitioner about the submission of the
transcript of the stenographic notes, so that his 30-day period to submit his

memorandum would commence to run. Only after the expiration of such period can
the respondent Judge act on the case by deciding it on the merits, not by dismissing
the appeal of petitioner.
WHEREFORE, THE CHALLENGED ORDERS OF RESPONDENT JUDGE DATED AUGUST 4,
1971, OCTOBER 30, 1971 AND MARCH 15, 1971 ARE HEREBY SET ASIDE AS NULL
AND VOID AND THE RESPONDENT COURT IS HEREBY DIRECTED TO DECIDE CIVIL
CASE NO. C-2036 ON THE MERITS. NO COSTS.

10
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
assailing the Decision[1] dated April 28, 2005 of the Court of Appeals (CA) in CA-G.R. SP No.
78008 which set aside the Orders dated March 10, 2003 and June 24, 2003 of the petitioner
Office of the Ombudsman in OMB-ADM-0-00-0721.

The material antecedents are as follows:

On November 13, 1992, respondent Raidis J. Bassig, Chief of the Research and Publications
Division

of

the Intramuros Administration,

submitted

Memorandum

to

then IntramurosAdministrator Edda V. Henson (Henson) recommending that Brand Asia, Ltd. be
commissioned to produce a video documentary for a television program, as well implement a
media plan and marketing support services for Intramuros.

On November

17,

1992,

the

Bids

and

Awards

Committee

(BAC)

of

the Intramuros Administration, composed of respondent Merceditas de Sahagun, as Chairman,

with respondent Manuela T.Waquiz and Dominador C. Ferrer, Jr. (Ferrer), as members,
submitted a recommendation to Henson for the approval of the award of said contract to Brand
OFFICE OF THE OMBUDSMAN.
Petitioner,

G.R. No. 167982

Asia, Ltd. On the same day, Henson approved the recommendation and issued a Notice of

Present:

Award to Brand Asia, Ltd.

YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

On November 23, 1992, a contract of service to produce a video documentary

MERCEDITAS DE SAHAGUN,
MANUELA T. WAQUIZ and
RAIDIS J. BASSIG,
Promulgated:
Respondents.*
August 13, 2008
x----------------------------------------------------------x
DECISION
AUSTRIA-MARTINEZ, J.:

on Intramuros for TV program airing was executed between Henson and Brand Asia,
Ltd. On December 1, 1992, a Notice to Proceed was issued to Brand Asia, Ltd.

On June 2, 1993, the BAC, with Augusto P. Rustia (Rustia) as additional member, recommended
to Henson the approval of the award of contract for print collaterals to Brand Asia, Ltd. On the
same day, Henson approved the recommendation and issued a Notice of Award/Notice to
Proceed to Brand Asia, Ltd.

11
However, then Ombudsman Simeon V. Marcelo disapproved the recommendation. In an
On June 22, 1993, a contract of services to produce print collaterals was entered between

Order[5] dated March 10, 2003, he held that there was substantial evidence to hold respondents

Henson and Brand Asia, Ltd.

administratively liable since the contracts awarded to Brand Asia, Ltd. failed to go through the
required procedure for public bidding under Executive Order No. 301 dated July 26,

On March 7, 1995, an anonymous complaint was filed with the Presidential Commission Against

1987.Respondents and Ferrer were found guilty of grave misconduct and dismissed from

Graft and Corruption (PGAC) against Henson in relation to the contracts entered into with Brand

service. Rustia was found guilty of simple misconduct and suspended for six months without

Asia, Ltd.

pay.

On November 30, 1995, Henson was dismissed from the service by the Office of the President
upon recommendation of the PGAC which found that the contracts were entered into without

On March 17, 2003, respondents, along with Rustia, filed a Motion for Reconsideration.[6]

the required public bidding and in violation of Section 3 (a) and (e) of Republic Act (R.A.) No.
On June 24, 2003, Ombudsman Marcelo issued an Order [7] partially granting the motion for

3019, or the Anti-Graft and Corrupt Practices Act.

reconsideration. Respondents and Ferrer were found guilty of the lesser offense of simple
On August 8, 1996, an anonymous complaint was filed with the Ombudsman against the BAC

misconduct and suspended for six months without pay. Rustia's suspension was reduced to

in relation to the latters participation in the contracts with Brand Asia, Ltd. for which Henson was

three months.

dismissed from service.

Dissatisfied, respondents filed a Petition for Review[8] with the CA assailing the Orders
On September 5, 2000, Fact-Finding Intelligence Bureau (FFIB) filed criminal and administrative

dated March 10, 2003 and June 24, 2003 of the Ombudsman.

charges against respondents, along with Ferrer and Rustia, for violation of Section 3 (a) and (c)
of R.A. No. 3019 in relation to Section 1 of Executive Order No. 302 and grave misconduct,

On April 28, 2005, the CA rendered a Decision[9] setting aside the Orders dated March 10,

conduct grossly prejudicial to the best interest of the service and gross violation of Rules and

2003 and June 24, 2003 of the Ombudsman. The CA held that respondents may no longer be

Regulations pursuant to the Administrative Code of 1987, docketed as OMB-0-00-1411 and

prosecuted since the complaint was filed more than seven years after the imputed acts were

OMB-ADM-0-00-0721, respectively.[2] OMB-0-00-1411 was dismissed on February 27, 2002 for

committed which was beyond the one year period provided for by Section 20 (5) of Republic Act

lack of probable cause.[3]

(R.A.) No. 6770, otherwise known as The Ombudsman Act of 1989; and that the nature of the
function of the Ombudsman was purely recommendatory and it did not have the power to

In

his

proposed

Decision[4] dated June

19,

2002,

Graft

Investigation

II Joselito P. Fangon recommended the dismissal of OMB-ADM-0-00-0721.

Officer

penalize erring government officials and employees. The CA relied on the following statement
made by the Court in Tapiador v. Office of the Ombudsman,[10] to wit:
x x x Besides, assuming arguendo, that petitioner [Tapiador] was
administratively liable, the Ombudsman has no authority to directly
dismiss the petitioner from the government service, more
particularly from his position in the BID. Under Section 13, subparagraph 3,

12
of Article XI of the 1987 Constitution, the Ombudsman can only
recommend the removal of the public official or employee found
to be at fault, to the public official concerned.[11] (Emphasis supplied)

theOmbudsman on whether it would investigate a particular administrative offense. The use of

the word may in the provision is construed as permissive and operating to confer discretion.
[15]

Hence, the present petition raising the following issues (1) whether Section 20 (5) of R.A. No.

Where the words of a statute are clear, plain and free from ambiguity, they must be given

their literal meaning and applied without attempted interpretation.[16]

6770 prohibits administrative investigations in cases filed more than one year after commission,
and (2) whether the Ombudsman only has recommendatory, not punitive, powers against
erring government officials and employees.

The Court rules in favor of the petitioner.

The issues in the present case are settled by precedents.

On the first issue, well-entrenched is the rule that administrative offenses do not
prescribe.[12] Administrative offenses by their very nature pertain to the character of public
officers and employees. In disciplining public officers and employees, the object sought is not
the punishment of the officer or employee but the improvement of the public service and the

In Filipino v. Macabuhay,[17] the Court interpreted Section 20 (5) of R.A. No. 6770 in
this manner:
Petitioner argues that based on the abovementioned provision
[Section 20(5) of RA 6770)], respondent's complaint is barred by
prescription considering that it was filed more than one year after the
alleged commission of the acts complained of.
Petitioner's argument is without merit.
The use of the word "may" clearly shows that it is directory in
nature and not mandatory as petitioner contends. When used in a statute, it
is permissive only and operates to confer discretion; while the word "shall" is
imperative, operating to impose a duty which may be enforced. Applying
Section 20(5), therefore, it is discretionary upon the Ombudsman
whether or not to conduct an investigation on a complaint even if
it was filed after one year from the occurrence of the act or
omission complained of. In fine, the complaint is not barred by
prescription.[18] (Emphasis supplied)

preservation of the publics faith and confidence in our government.[13]

The declaration of the CA in its assailed decision that while as a general rule the word
Respondents insist that Section 20 (5) of R.A. No. 6770, to wit:
SEC. 20. Exceptions. The Office of the Ombudsman may not conduct the
necessary investigation of any administrative act or omission complained of
if it believes that:

may is directory, the negative phrase may not is mandatory in tenor; that a directory word,
when qualified by the word not, becomes prohibitory and therefore becomes mandatory in
character, is not plausible. It is not supported by jurisprudence on statutory construction.

xxx
(5) The complaint was filed after one year from the occurrence of the act or
omission complained of. (Emphasis supplied)

As the Court recently held in Office of the Ombudsman v. Court of Appeals,[19] Section
20 of R.A. No. 6770 has been clarified by Administrative Order No. 17, [20] which amended

proscribes the investigation of any administrative act or omission if the complaint was filed after
one year from the occurrence of the complained act or omission.
In Melchor v. Gironella,[14] the Court held that the period stated in Section 20(5) of
R.A. No. 6770 does not refer to the prescription of the offense but to the discretion given to

Administrative Order No. 07, otherwise known as the Rules of Procedure of the Office of
the Ombudsman. Section 4, Rule III[21] of the amended Rules of Procedure of the Office of
theOmbudsman reads:
Section 4. Evaluation. - Upon receipt of the complaint, the same
shall be evaluated to determine whether the same may be:

13
a) dismissed outright for any grounds stated under
Section 20 of Republic Act No. 6770, provided, however, that the
dismissal thereof is not mandatory and shall be discretionary on
the part of the Ombudsman or the Deputy Ombudsman
concerned;
b) treated as a grievance/request for assistance which may be
referred to the Public Assistance Bureau, this Office, for appropriate action
under Section 2, Rule IV of this Rules;
c) referred to other disciplinary authorities under paragraph 2,
Section 23, R.A. 6770 for the taking of appropriate administrative
proceedings;

that made reference to the power of the Ombudsman is, at best,

merely an obiter dictum and, as it is unsupported by sufficient
explanation, is susceptible to varying interpretations, as what precisely is
before us in this case. Hence, it cannot be cited as a doctrinal
declaration of this Court nor is it safe from judicial examination.
[23]
(Emphasis supplied)

In Estarija v. Ranada,[24] the Court reiterated its pronouncements in Ledesma and categorically
stated:

d) referred to the appropriate office/agency or official for the conduct

of further fact-finding investigation; or

x x x [T]he Constitution does not restrict the powers of the Ombudsman in

Section 13, Article XI of the 1987 Constitution, but allows the Legislature to
enact a law that would spell out the powers of the Ombudsman. Through
the enactment of Rep. Act No. 6770, specifically Section 15, par. 3, the
lawmakers gave the Ombudsman such powers to sanction erring officials
and employees, except members of Congress, and the Judiciary. To
conclude, we hold that Sections 15, 21, 22 and 25 of Republic Act No. 6770
are constitutionally sound. The powers of the Ombudsman are not
merely recommendatory. His office was given teeth to render this
constitutional body not merely functional but also effective. Thus, we hold
that under Republic Act No. 6770 and the 1987 Constitution, the
Ombudsman has the constitutional power to directly remove from
government service an erring public official other than a member of
Congress and the Judiciary.[25] (Emphasis supplied)

e) docketed as an administrative case for the purpose of

administrative adjudication by the Office of the Ombudsman. (Emphasis
supplied)

It is, therefore, discretionary upon the Ombudsman whether or not to conduct an

investigation of a complaint even if it was filed after one year from the occurrence of the act or
omission complained of.

The power of the Ombudsman to directly impose administrative sanctions has been

Thus, while the complaint herein was filed only on September 5, 2000, or more than seven
years after the commission of the acts imputed against respondents in November 1992 and
June 1993, it was within the authority of the Ombudsman to conduct the investigation of the

repeatedly reiterated in the subsequent cases of Barillo v. Gervasio,[26] Office of the

Ombudsman v.Madriaga,[27] Office of the Ombudsman v. Court of Appeals, [28] Balbastro v. Junio,
[29]

subject complaint.

Commission on Audit, Regional Office No. 13, Butuan City v. Hinampas,[30] Office of the

Ombudsman v. Santiago,[31] Office of the Ombudsman v. Lisondra,[32] and most recently

On the second issue, the authority of the Ombudsman to determine the administrative liability
of a public official or employee, and to direct and compel the head of the office or agency

in Deputy Ombudsman for the Visayas v. Abugan[33] and continues to be the controlling
doctrine.

concerned to implement the penalty imposed is likewise settled.

In fine, it is already well-settled that the Ombudsman's power as regards the administrative
In Ledesma v. Court of Appeals,[22] the Court has ruled that the statement in Tapiador that
made reference to the power of the Ombudsman to impose an administrative penalty was
merely anobiter dictum and could not be cited as a doctrinal declaration of this Court, thus:
x x x [A] cursory reading of Tapiador reveals that the main point of the
case was the failure of the complainant therein to present substantial
evidence to prove the charges of the administrative case. The statement

penalty to be imposed on an erring public officer or employee is not merely

recommendatory. TheOmbudsman has the power to directly impose the penalty of removal,
suspension, demotion, fine, censure, or prosecution of a public officer or employee, other than a
member of Congress and the Judiciary, found to be at fault, within the exercise of its
administrative disciplinary authority as provided in the Constitution, R.A. No. 6770, as well as

14
jurisprudence. This power gives the said constitutional office teeth to render it not merely
functional, but also effective.[34]

Thus, the CA committed a reversible error in holding that the case had already prescribed and
that the Ombudsman does not have the power to penalize erring government officials and
employees.

WHEREFORE, the petition is GRANTED. The Decision dated April 28, 2005 of the Court of
Appeals in CA-G.R. SP No. 78008 is REVERSED and SET ASIDE. The Order dated June 24,
2003 of the Office of the Ombudsman is REINSTATED.

SO ORDERED.

[G.R. No. 117188. August 7, 1997]

LOYOLA

GRAND
VILLAS
HOMEOWNERS
(SOUTH)
ASSOCIATION,
INC., petitioner,
vs. HON.
COURT
OF
APPEALS,
HOME INSURANCE AND
GUARANTY
CORPORATION,
EMDEN
ENCARNACION and HORATIO AYCARDO, respondents.
DECISION

15
ROMERO, J.:
May the failure of a corporation to file its by-laws within one month from the
date of its incorporation, as mandated by Section 46 of the Corporation Code, result
in its automatic dissolution?
This is the issue raised in this petition for review on certiorari of the
Decision[1] of the Court of Appeals affirming the decision of the Home Insurance and
Guaranty Corporation (HIGC).This quasi-judicial body recognized Loyola Grand Villas
Homeowners Association (LGVHA) as the sole homeowners association in Loyola
Grand Villas, a duly registered subdivision in Quezon City and Marikina City that was
owned and developed by Solid Homes, Inc. It revoked the certificates of registration
issued to Loyola Grand Villas Homeowners (North) Association Incorporated (the
North Association for brevity) and Loyola Grand Villas Homeowners (South)
Association Incorporated (the South Association).
LGVHAI was organized on February 8, 1983 as the association of homeowners
and residents of the Loyola Grand Villas. It was registered with the Home Financing
Corporation, the predecessor of herein respondent HIGC, as the sole homeowners
organization in the said subdivision under Certificate of Registration No. 04-197. It
was organized by the developer of the subdivision and its first president was Victorio
V. Soliven, himself the owner of the developer. For unknown reasons, however,
LGVHAI did not file its corporate by-laws.
Sometime in 1988, the officers of the LGVHAI tried to register its by-laws. They
failed to do so.[2] To the officers consternation, they discovered that there were two
other organizations within the subdivision the North Association and the South
Association. According to private respondents, a non-resident and Soliven himself,
respectively headed these associations. They also discovered that these
associations had five (5) registered homeowners each who were also the
incorporators, directors and officers thereof. None of the members of the LGVHAI
was listed as member of the North Association while three (3) members of LGVHAI
were listed as members of the South Association. [3] The North Association was
registered with the HIGC on February 13, 1989 under Certificate of Registration No.
04-1160 covering Phases West II, East III, West III and East IV. It submitted its bylaws on December 20, 1988.
In July, 1989, when Soliven inquired about the status of LGVHAI, Atty. Joaquin A.
Bautista, the head of the legal department of the HIGC, informed him that LGVHAI
had been automatically dissolved for two reasons. First, it did not submit its by-laws
within the period required by the Corporation Code and, second, there was non-user
of corporate charter because HIGC had not received any report on the associations
activities. Apparently, this information resulted in the registration of the South
Association with the HIGC on July 27, 1989 covering Phases West I, East I and East
11. It filed its by-laws on July 26, 1989.

These developments prompted the officers of the LGVHAI to lodge a complaint

with the HIGC. They questioned the revocation of LGVHAIs certificate of registration
without due notice and hearing and concomitantly prayed for the cancellation of the
certificates of registration of the North and South Associations by reason of the
earlier issuance of a certificate of registration in favor of LGVHAI.
On January 26, 1993, after due notice and hearing, private respondents
obtained a favorable ruling from HIGC Hearing Officer Danilo C. Javier who disposed
of HIGC Case No. RRM-5-89 as follows:
WHEREFORE, judgment is hereby rendered recognizing the Loyola Grand Villas
Homeowners Association, Inc., under Certificate of Registration No. 04-197 as the
duly registered and existing homeowners association for Loyola Grand Villas
homeowners, and declaring the Certificates of Registration of Loyola Grand Villas
Homeowners (North) Association, Inc. and Loyola Grand Villas Homeowners (South)
Association, Inc. as hereby revoked or cancelled; that the receivership be terminated
and the Receiver is hereby ordered to render an accounting and turn-over to Loyola
Grand Villas Homeowners Association, Inc., all assets and records of the Association
now under his custody and possession.
The South Association appealed to the Appeals Board of the HIGC. In its
Resolution of September 8, 1993, the Board [4] dismissed the appeal for lack of merit.
Rebuffed, the South Association in turn appealed to the Court of Appeals,
raising two issues. First, whether or not LGVHAIs failure to file its by-laws within the
period prescribed by Section 46 of the Corporation Code resulted in the automatic
dissolution of LGVHAI. Second, whether or not two homeowners associations may be
authorized by the HIGC in one sprawling subdivision. However, in the Decision of
August 23, 1994 being assailed here, the Court of Appeals affirmed the Resolution of
the HIGC Appeals Board.
In resolving the first issue, the Court of Appeals held that under the
Corporation Code, a private corporation commences to have corporate existence
and juridical personality from the date the Securities and Exchange Commission
(SEC) issues a certificate of incorporation under its official seal. The requirement for
the filing of by-laws under Section 46 of the Corporation Code within one month
from official notice of the issuance of the certificate of incorporation presupposes
that it is already incorporated, although it may file its by-laws with its articles of
incorporation. Elucidating on the effect of a delayed filing of by-laws, the Court of
Appeals said:
We also find nothing in the provisions cited by the petitioner, i.e., Sections 46 and
22, Corporation Code, or in any other provision of the Code and other laws which
provide or at least imply that failure to file the by-laws results in an automatic
dissolution of the corporation. While Section 46, in prescribing that by-laws must be
adopted within the period prescribed therein, may be interpreted as a mandatory

16
provision, particularly because of the use of the word must, its meaning cannot be
stretched to support the argument that automatic dissolution results from noncompliance.
We realize that Section 46 or other provisions of the Corporation Code are silent on
the result of the failure to adopt and file the by-laws within the required period.
Thus, Section 46 and other related provisions of the Corporation Code are to be
construed with Section 6 (1) of P.D. 902-A. This section empowers the SEC to
suspend or revoke certificates of registration on the grounds listed therein. Among
the grounds stated is the failure to file by-laws (see also II Campos: The Corporation
Code, 1990 ed., pp. 124-125). Such suspension or revocation, the same section
provides, should be made upon proper notice and hearing. Although P.D. 902-A
refers to the SEC, the same principles and procedures apply to the public respondent
HIGC as it exercises its power to revoke or suspend the certificates of registration or
homeowners associations. (Section 2 [a], E.O. 535, series 1979, transferred the
powers and authorities of the SEC over homeowners associations to the HIGC.)
We also do not agree with the petitioners interpretation that Section 46, Corporation
Code prevails over Section 6, P.D. 902-A and that the latter is invalid because it
contravenes the former. There is no basis for such interpretation considering that
these two provisions are not inconsistent with each other. They are, in fact,
complementary to each other so that one cannot be considered as invalidating the
other.
The Court of Appeals added that, as there was no showing that the registration
of LGVHAI had been validly revoked, it continued to be the duly registered
homeowners association in the Loyola Grand Villas. More importantly, the South
Association did not dispute the fact that LGVHAI had been organized and that,
thereafter, it transacted business within the period prescribed by law.
On the second issue, the Court of Appeals reiterated its previous ruling [5] that
the HIGC has the authority to order the holding of a referendum to determine which
of two contending associations should represent the entire community, village or
subdivision.
Undaunted, the South Association filed the instant petition for review
on certiorari. It elevates as sole issue for resolution the first issue it had raised
before the Court of Appeals, i.e., whether or not the LGVHAIs failure to file its bylaws within the period prescribed by Section 46 of the Corporation Code had the
effect of automatically dissolving the said corporation.
Petitioner contends that, since Section 46 uses the word must with respect to
the filing of by-laws, noncompliance therewith would result in self-extinction either
due to non-occurrence of a suspensive condition or the occurrence of a resolutory
condition under the hypothesis that (by) the issuance of the certificate of
registration alone the corporate personality is deemed already formed. It asserts

that the Corporation Code provides for a gradation of violations of requirements.

Hence, Section 22 mandates that the corporation must be formally organized and
should commence transactions within two years from date of incorporation.
Otherwise, the corporation would be deemed dissolved. On the other hand, if the
corporation commences operations but becomes continuously inoperative for five
years, then it may be suspended or its corporate franchise revoked.
Petitioner concedes that Section 46 and the other provisions of the Corporation
Code do not provide for sanctions for non-filing of the by-laws. However, it insists
that no sanction need be provided because the mandatory nature of the provision is
so clear that there can be no doubt about its being an essential attribute of
corporate birth. To petitioner, its submission is buttressed by the facts that the
period for compliance is spelled out distinctly; that the certification of the SEC/HIGC
must show that the by-laws are not inconsistent with the Code, and that a copy of
the by-laws has to be attached to the articles of incorporation. Moreover, no
sanction is provided for because in the first place, no corporate identity has been
completed. Petitioner asserts that non-provision for remedy or sanction is itself the
tacit proclamation that non-compliance is fatal and no corporate existence had yet
evolved, and therefore, there was no need to proclaim its demise. [6] In a bid to
convince the Court of its arguments, petitioner stresses that:
x x x the word MUST is used in Sec. 46 in its universal literal meaning and corollary
human implication its compulsion is integrated in its very essence MUST is always
enforceable by the inevitable consequence that is, OR ELSE. The use of the
word MUST in Sec. 46 is no exception it means file the by-laws within one month
after notice of issuance of certificate of registration OR ELSE. The OR ELSE, though
not specified, is inextricably a part of MUST. Do this or if you do not you are
Kaput. The importance of the by-laws to corporate existence compels such meaning
for as decreed the by-laws is `the government of the corporation. Indeed, how can
the corporation do any lawful act as such without by-laws. Surely, no law is intended
to create chaos.[7]
Petitioner asserts that P.D. No. 902-A cannot exceed the scope and power of
the Corporation Code which itself does not provide sanctions for non-filing of bylaws. For the petitioner, it is not proper to assess the true meaning of Sec. 46 x x x
on an unauthorized provision on such matter contained in the said decree.
In their comment on the petition, private respondents counter that the
requirement of adoption of by-laws is not mandatory. They point to P.D. No. 902-A as
having resolved the issue of whether said requirement is mandatory or merely
directory. Citing Chung Ka Bio v. Intermediate Appellate Court, [8] private
respondents contend that Section 6(I) of that decree provides that non-filing of bylaws is only a ground for suspension or revocation of the certificate of registration of
corporations and, therefore, it may not result in automatic dissolution of the
corporation.Moreover, the adoption and filing of by-laws is a condition subsequent
which does not affect the corporate personality of a corporation like the

17
LGVHAI. This is so because Section 9 of the Corporation Code provides that the
corporate existence and juridical personality of a corporation begins from the date
the SEC issues a certificate of incorporation under its official seal. Consequently,
even if the by-laws have not yet been filed, a corporation may be considered a de
facto corporation. To emphasize the fact the LGVHAI was registered as the sole
homeowners association in the Loyola Grand Villas, private respondents point out
that membership in the LGVHAI was an unconditional restriction in the deeds of sale
signed by lot buyers.

or other special corporations governed by special laws, unless accompanied by a

certificate of the appropriate government agency to the effect that such by-laws or
amendments are in accordance with law.

In its reply to private respondents comment on the petition, petitioner

reiterates its argument that the word must in Section 46 of the Corporation Code is
mandatory. It adds that, before the ruling in Chung Ka Bio v. Intermediate
Appellate Court could be applied to this case, this Court must first resolve the issue
of whether or not the provisions of P.D. No. 902-A prescribing the rules and
regulations to implement the Corporation Code can rise above and change the
substantive provisions of the Code.

As correctly postulated by the petitioner, interpretation of this provision of law

begins with the determination of the meaning and import of the word must in this
section. Ordinarily, the word must connotes an imperative act or operates to impose
a duty which may be enforced. [9] It is synonymous with ought which connotes
compulsion or mandatoriness.[10] However, the word must in a statute, like shall, is
not always imperative. It may be consistent with an exercise of discretion. In this
jurisdiction, the tendency has been to interpret shall as the context or a reasonable
construction of the statute in which it is used demands or requires. [11] This is equally
true as regards the word must. Thus, if the language of a statute considered as a
whole and with due regard to its nature and object reveals that the legislature
intended to use the words shall and must to be directory, they should be given that
meaning.[12]

The pertinent provision of the Corporation Code that is the focal point of
controversy in this case states:

In this respect, the following portions of the deliberations of the Batasang

Pambansa No. 68 are illuminating:

Sec. 46. Adoption of by-laws. Every corporation formed under this Code, must
within one (1) month after receipt of official notice of the issuance of its certificate of
incorporation by the Securities and Exchange Commission, adopt a code of by-laws
for its government not inconsistent with this Code. For the adoption of by-laws by
the corporation, the affirmative vote of the stockholders representing at least a
majority of the outstanding capital stock, or of at least a majority of the members, in
the case of non-stock corporations, shall be necessary. The by-laws shall be signed
by the stockholders or members voting for them and shall be kept in the principal
office of the corporation, subject to the stockholders or members voting for them
and shall be kept in the principal office of the corporation, subject to inspection of
the stockholders or members during office hours; and a copy thereof, shall be filed
with the Securities and Exchange Commission which shall be attached to the original
articles of incorporation.
Notwithstanding the provisions of the preceding paragraph, by-laws may be adopted
and filed prior to incorporation; in such case, such by-laws shall be approved and
signed by all the incorporators and submitted to the Securities and Exchange
Commission, together with the articles of incorporation.
In all cases, by-laws shall be effective only upon the issuance by the Securities and
Exchange Commission of a certification that the by-laws are not inconsistent with
this Code.
The Securities and Exchange Commission shall not accept for filing the by-laws or
any amendment thereto of any bank, banking institution, building and loan
association, trust company, insurance company, public utility, educational institution

MR. FUENTEBELLA. Thank you, Mr. Speaker.

On page 34, referring to the adoption of by-laws, are we made
to understand here, Mr. Speaker, that by-laws must immediately be
filed within one month after the issuance? In other words, would this
be mandatory or directory in character?
MR. MENDOZA. This is mandatory.
MR. FUENTEBELLA. It being mandatory, Mr. Speaker, what would
be the effect of the failure of the corporation to file these by-laws
within one month?
MR. MENDOZA. There is a provision in the latter part of the
Code which identifies and describes the consequences of violations
of any provision of this Code. One such consequence is the
dissolution of the corporation for its inability, or perhaps, incurring
certain penalties.
MR. FUENTEBELLA. But it will not automatically amount to a
dissolution of the corporation by merely failing to file the by-laws
within one month. Supposing the corporation was late, say, five
days, what would be the mandatory penalty?

18
MR. MENDOZA. I do not think it will necessarily result in the
automatic or ipso facto dissolution of the corporation. Perhaps, as in
the case, as you suggested, in the case of El Hogar Filipino where
a quo warranto action is brought, one takes into account the gravity
of the violation committed. If the by-laws were late the filing of the
by-laws were late by, perhaps, a day or two, I would suppose that
might be a tolerable delay, but if they are delayed over a period of
months as is happening now because of the absence of a clear
requirement that by-laws must be completed within a specified
period of time, the corporation must suffer certain consequences. [13]
This exchange of views demonstrates clearly that automatic corporate
dissolution for failure to file the by-laws on time was never the intention of the
legislature. Moreover, even without resorting to the records of deliberations of the
Batasang Pambansa, the law itself provides the answer to the issue propounded by
petitioner.
Taken as a whole and under the principle that the best interpreter of a statute
is the statute itself (optima statuli interpretatix est ipsum statutum),
[14]
Section 46 aforequoted reveals the legislative intent to attach a directory, and
not mandatory, meaning for the word must in the first sentence thereof. Note should
be taken of the second paragraph of the law which allows the filing of the by-laws
even prior to incorporation. This provision in the same section of the Code rules out
mandatory compliance with the requirement of filing the by-laws within one (1)
month after receipt of official notice of the issuance of its certificate of incorporation
by the Securities and Exchange Commission. It necessarily follows that failure to file
the by-laws within that period does not imply the demise of the corporation. By-laws
may be necessary for the government of the corporation but these are subordinate
to the articles of incorporation as well as to the Corporation Code and related
statutes.[15] There are in fact cases where by-laws are unnecessary to corporate
existence or to the valid exercise of corporate powers, thus:
In the absence of charter or statutory provisions to the contrary, by-laws are not
necessary either to the existence of a corporation or to the valid exercise of the
powers conferred upon it, certainly in all cases where the charter sufficiently
provides for the government of the body; and even where the governing statute in
express terms confers upon the corporation the power to adopt by-laws, the failure
to exercise the power will be ascribed to mere nonaction which will not
render void any acts of the corporation which would otherwise be valid.
[16]
(Italics supplied.)
As Fletcher aptly puts it:
It has been said that the by-laws of a corporation are the rule of its life, and that
until by-laws have been adopted the corporation may not be able to act for the
purposes of its creation, and that the first and most important duty of the members

is to adopt them. This would seem to follow as a matter of principle from the office
and functions of by-laws. Viewed in this light, the adoption of by-laws is a matter of
practical, if not one of legal, necessity. Moreover, the peculiar circumstances
attending the formation of a corporation may impose the obligation to adopt certain
by-laws, as in the case of a close corporation organized for specific purposes. And
the statute or general laws from which the corporation derives its corporate
existence may expressly require it to make and adopt by-laws and specify to some
extent what they shall contain and the manner of their adoption. The mere fact,
however, of the existence of power in the corporation to adopt by-laws
does not ordinarily and of necessity make the exercise of such power
essential to its corporate life, or to the validity of any of its acts. [17]
Although the Corporation Code requires the filing of by-laws, it does not
expressly provide for the consequences of the non-filing of the same within the
period provided for in Section 46. However, such omission has been rectified by
Presidential Decree No. 902-A, the pertinent provisions on the jurisdiction of the SEC
of which state:
SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall
possess the following powers:
xxx xxx xxx xxx
(l) To suspend, or revoke, after proper notice and hearing, the franchise or
certificate of registration of corporations, partnerships or associations, upon
any of the grounds provided by law, including the following:
xxx xxx xxx xxx
5. Failure to file by-laws within the required period;
xxx xxx xxx xxx
In the exercise of the foregoing authority and jurisdiction of the Commissions or by a
Commissioner or by such other bodies, boards, committees and/or any officer as
may be created or designated by the Commission for the purpose. The decision,
ruling or order of any such Commissioner, bodies, boards, committees and/or officer
may be appealed to the Commission sitting en banc within thirty (30) days after
receipt by the appellant of notice of such decision, ruling or order. The Commission
shall promulgate rules of procedures to govern the proceedings, hearings and
appeals of cases falling within its jurisdiction.
The aggrieved party may appeal the order, decision or ruling of the Commission
sitting en banc to the Supreme Court by petition for review in accordance with the
pertinent provisions of the Rules of Court.

19
Even under the foregoing express grant of power and authority, there can be
no automatic corporate dissolution simply because the incorporators failed to abide
by the required filing of by-laws embodied in Section 46 of the Corporation Code.
There is no outright demise of corporate existence. Proper notice and hearing are
cardinal components of due process in any democratic institution, agency or society.
In other words, the incorporators must be given the chance to explain their neglect
or omission and remedy the same.
That the failure to file by-laws is not provided for by the Corporation Code but
in another law is of no moment. P.D. No. 902-A, which took effect immediately after
its promulgation on March 11, 1976, is very much apposite to the Code. Accordingly,
the provisions abovequoted supply the law governing the situation in the case at
bar, inasmuch as the Corporation Code and P.D. No. 902-A are statutes in pari
materia. Interpretare
et
concordare
legibus
est
optimus
interpretandi. Every statute must be so construed and harmonized with other
statutes as to form a uniform system of jurisprudence.[18]
As the rules and regulations or private laws enacted by the corporation to
regulate, govern and control its own actions, affairs and concerns and its
stockholders or members and directors and officers with relation thereto and among
themselves in their relation to it,[19] by-laws are indispensable to corporations in this
jurisdiction. These may not be essential to corporate birth but certainly, these are
required by law for an orderly governance and management of corporations.
Nonetheless, failure to file them within the period required by law by no means tolls
the automatic dissolution of a corporation.
In this regard, private respondents are correct in relying on the
pronouncements of this Court in Chung Ka Bio v. Intermediate Appellate Court,
[20]
as follows:
x x x. Moreover, failure to file the by-laws does not automatically operate to dissolve
a corporation but is now considered only a ground for such dissolution.
Section 19 of the Corporation Law, part of which is now Section 22 of the
Corporation Code, provided that the powers of the corporation would cease if it did
not formally organize and commence the transaction of its business or the
continuation of its works within two years from date of its incorporation. Section 20,
which has been reproduced with some modifications in Section 46 of the Corporation
Code, expressly declared that every corporation formed under this Act, must within
one month after the filing of the articles of incorporation with the Securities and
Exchange Commission, adopt a code of by-laws. Whether this provision should be
given mandatory or only directory effect remained a controversial question until it
became academic with the adoption of PD 902-A. Under this decree, it is now clear
that the failure to file by-laws within the required period is only a ground for
suspension or revocation of the certificate of registration of corporations.

Non-filing of the by-laws will not result in automatic dissolution of the corporation.
Under Section 6(I) of PD 902-A, the SEC is empowered to suspend or revoke, after
proper notice and hearing, the franchise or certificate of registration of a corporation
on the ground inter alia of failure to file by-laws within the required period. It is clear
from this provision that there must first of all be a hearing to determine the
existence of the ground, and secondly, assuming such finding, the penalty is not
necessarily revocation but may be only suspension of the charter. In fact, under the
rules and regulations of the SEC, failure to file the by-laws on time may be penalized
merely with the imposition of an administrative fine without affecting the corporate
existence of the erring firm.
It should be stressed in this connection that substantial compliance with conditions
subsequent will suffice to perfect corporate personality. Organization and
commencement of transaction of corporate business are but conditions subsequent
and not prerequisites for acquisition of corporate personality. The adoption and filing
of by-laws is also a condition subsequent. Under Section 19 of the Corporation Code,
a corporation commences its corporate existence and juridical personality and is
deemed incorporated from the date the Securities and Exchange Commission issues
certificate of incorporation under its official seal. This may be done even before the
filing of the by-laws, which under Section 46 of the Corporation Code, must be
adopted within one month after receipt of official notice of the issuance of its
certificate of incorporation.[21]
That the corporation involved herein is under the supervision of the HIGC does
not alter the result of this case. The HIGC has taken over the specialized functions of
the former Home Financing Corporation by virtue of Executive Order No. 90 dated
December 17, 1986.[22] With respect to homeowners associations, the HIGC shall
exercise all the powers, authorities and responsibilities that are vested on the
Securities and Exchange Commission x x x, the provision of Act 1459, as amended
by P.D. 902-A, to the contrary notwithstanding. [23]
WHEREFORE, the instant petition for review on certiorari is hereby DENIED
and the questioned Decision of the Court of Appeals AFFIRMED. This Decision is
immediately executory.Costs against petitioner.
SO ORDERED.

20

36
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 196047

January 15, 2014

LEPANTO CONSOLIDATED MINING CORPORATION, Petitioner,

vs.
BELIO ICAO, Respondent.
DECISION
SERENO, CJ:
This Petition under Rule 45 of the Rules of Court seeks to annul and set aside the Court of
Appeals (CA) Decision dated 27 September 2010 and the Resolution dated 11 March 2011 in
CA-G.R. SP. No. 113095.1 In the assailed Decision and Resolution, the CA upheld the Order of
the National Labor and Relations Commission (NLRC) First Division dismissing petitioner s
appeal for allegedly failing to post an appeal bond as required by the Labor Code. Petitioner had
instead filed a motion to release the cash bond it posted in another NLRC case which had been
decided with finality in its favor with a view to applying the bond to the appealed case before the
NLRC First Division. Hence, the Court is now asked to rule whether petitioner had complied with
the appeal bond requirement. If it had, its appeal before the NLRC First Division should be
reinstated.
The Facts
We quote the CA s narration of facts as follows:
The instant petition stemmed from a complaint for illegal dismissal and damages filed by private
respondent Belio C. Icao [Icao] against petitioners Lepanto Consolidated Mining Company
(LCMC) and its Chief Executive Officer [CEO] Felipe U. Yap [Yap] before the Arbitration Branch
of the NLRC.

Private respondent essentially alleged in his complaint that he was an employee of petitioner
LCMC assigned as a lead miner in its underground mine in Paco, Mankayan, Benguet. On
January 4, 2008, private respondent reported for the 1st shift of work (11:00 p.m. to 7:00 a.m.)
and was assigned at 248-8M2, 750 Level of the mining area. At their workplace, private
respondent did some barring down, installed five (5) rock bolt support, and drilled eight (8) blast
holes for the mid-shift blast. They then had their meal break. When they went back to their
workplace, they again barred down loose rocks and drilled eight (8) more blast holes for the last
round of blast. While waiting for the time to ignite their round, one of his co-workers shouted to
prepare the explosives for blasting, prompting private respondent to run to the adjacent panels
and warn the other miners. Thereafter, he decided to take a bath and proceeded at [sic] the
bathing station where four (4) of his co-workers were also present. Before he could join them, he
heard a voice at his back and saw Security Guard (SG) Larry Bulwayan instructing his
companion SG Dale Papsa-ao to frisk him. As private respondent was removing his boots, SG
Bulwayan forcibly pulled his skullguard from his head causing it to fall down [sic] to the ground
including its harness and his detergent soap which was inserted in the skullguard harness. A few
minutes later, private respondent saw SG Bulwayan [pick] up a wrapped object at the bathing
station and gave it to his companion. SGs Bulwayan and Papsa-ao invited the private
respondent to go with them at the investigation office to answer questions regarding the
wrapped object. He was then charged with "highgrading" or the act of concealing, possessing or
unauthorized extraction of highgrade material/ore without proper authority. Private respondent
vehemently denied the charge. Consequently, he was dismissed from his work.
Private respondent claimed that his dismissal from work was without just or authorized cause
since petitioners failed to prove by ample and sufficient evidence that he stole gold bearing
highgrade ores from the company premises. If private respondent was really placing a wrapped
object inside his boots, he should have been sitting or bending down to insert the same, instead
of just standing on a muckpile as alleged by petitioners. Moreover, it is beyond imagination that
a person, knowing fully well that he was being chased for allegedly placing wrapped ore inside
his boots, will transfer it to his skullguard. The tendency in such situation is to throw the object
away. As such, private respondent prayed that petitioners be held liable for illegal dismissal, to
reinstate him to his former position without loss of seniority rights and benefits, and to pay his full
backwages, damages and attorneys fees.
For their defense, petitioners averred that SG Bulwayan saw private respondent standing on a
muckpile and inserting a wrapped object inside his right rubber boot. SG Bulwayan immediately
ran towards private respondent, but the latter ran away to escape. He tried to chase private
respondent but failed to capture him. Thereafter, while SG Bulwayan was on his way to see his
co-guard SG Papsa-ao, he saw private respondent moving out of a stope. He then shouted at
SG Papsa-ao to intercept him. When private respondent was apprehended, SG Bulwayan
ordered him to remove his skullguard for inspection and saw a wrapped object placed inside the
helmet. SG Bulwayan grabbed it, but the harness of the skullguard was also detached causing
the object to fall on the ground. Immediately, SG Bulwayan recovered and inspected the same
which turned out to be pieces of stone ores. Private respondent and the stone ores were later
turned over to the Mankayan Philippine National Police where he was given a written notice of
the charge against him. On January 9, 2008, a hearing was held where private respondent,
together with the officers of his union as well as the apprehending guards appeared. On
February 4, 2008, private respondent received a copy of the resolution of the company informing

21
him of his dismissal from employment due to breach of trust and confidence and the act of
highgrading.2
THE LABOR ARBITERS RULING THAT
PETITIONER LCMC IS LIABLE FOR ILLEGAL DISMISSAL
On 30 September 2008, the labor arbiter rendered a Decision holding petitioner and its CEO
liable for illegal dismissal and ordering them to pay respondent Icao P345,879.45, representing
his full backwages and separation pay.3 The alleged highgrading attributed by LCMCs security
guards was found to have been fabricated; consequently, there was no just cause for the
dismissal of respondent. The labor arbiter concluded that the claim of the security guards that
Icao had inserted ores in his boots while in a standing position was not in accord with normal
human physiological functioning.4
The labor arbiter also noted that it was inconsistent with normal human behavior for a man, who
knew that he was being chased for allegedly placing wrapped ore inside his boots, to then
transfer the ore to his skullguard, where it could be found once he was apprehended.5 To further
support the improbability of the allegation of highgrading, the labor arbiter noted that throughout
the 21 years of service of Icao to LCMC, he had never been accused of or penalized for
highgrading or any other infraction involving moral turpitude until this alleged incident.6

The rules are clear. Appeals from decision involving a monetary award maybe [sic] perfected
only upon posting of a cash or surety-bond within the ten (10) day reglementary period for filing
an appeal. Failure to file and post the required appeal bond within the said period results in the
appeal not being perfected and the appealed judgment becomes final and executory. Thus, the
Commission loses authority to entertain or act on the appeal much less reverse the decision of
the Labor Arbiter (Gaudia vs. NLRC, 318 SCRA 439).
In this case, respondents failed to post the required appeal bond equivalent to the monetary
award ofP345,879.45. The Consolidated Motion for Release of Cash Bond (posted as appeal
bond in another case) with prayer to apply the bond to be released as appeal bond may not be
considered as compliance with the jurisdictional requirement, as the application or posting is
subject to the condition that the cash bond would be released. Besides, even if the motion for
release is approved, the ten (10) day period has long expired, rendering the statutory right to
appeal forever lost.
WHEREFORE, respondents appeal is hereby DISMISSED for non-perfection and the
questioned decision is declared as having become final and executory. Let the Motion for
Release of Cash bond be forwarded to the Third Division, this Commission, for appropriate
action.
SO ORDERED.12 (Emphasis supplied)

THE NLRC ORDER DISMISSING THE APPEAL

OF PETITIONER LCMC FOR FAILURE TO POST THE APPEAL BOND
On 8 December 2008, petitioner and its CEO filed an Appearance with Memorandum of
Appeal7 before the NLRC. Instead of posting the required appeal bond in the form of a cash
bond or a surety bond in an amount equivalent to the monetary award of P345,879.45 adjudged
in favor of Icao, they filed a Consolidated Motion For Release Of Cash Bond And To Apply Bond
Subject For Release As Payment For Appeal Bond (Consolidated Motion). 8 They requested
therein that the NLRC release the cash bond of P401,610.84, which they had posted in the
separate case Dangiw Siggaao v. LCMC,9 and apply that same cash bond to their present
appeal bond liability. They reasoned that since this Court had already decided Dangiw Siggaao
in their favor, and that the ruling therein had become final and executory, the cash bond posted
therein could now be released.10 They also cited financial difficulty as a reason for resorting to
this course of action and prayed that, in the interest of justice, the motion be granted.
In its Order dated 27 February 2009, the NLRC First Division dismissed the appeal of petitioner
and the latters CEO for non-perfection.11 It found that they had failed to post the required appeal
bond equivalent to the monetary award of P345,879.45. It explained that their Consolidated
Motion for the release of the cash bond in another case (Dangiw Siggaao), for the purpose of
applying the same bond to the appealed case before it, could not be considered as compliance
with the requirement to post the required appeal bond. Consequently, it declared the labor
arbiters Decision to be final and executory. The pertinent portions of the assailed Order are
quoted below:

Petitioner and its CEO filed a Motion for Reconsideration. They emphasized therein that they
had tried to comply in good faith with the requisite appeal bond by trying to produce a cash bond
anew and also to procure a new surety bond. However, after canvassing several bonding
companies, the costs have proved to be prohibitive.13Hence, they resorted to using the cash
bond they posted in Dangiw Siggaao because the bond was now free, unencumbered and could
rightfully be withdrawn and used by them.14 Their motion was denied in a Resolution dated 27
November 2009. Hence, they filed a Petition for Certiorari with the CA.
THE CA RULING AFFIRMING THE ORDER OF THE NLRC
On 27 September 2010, the CA issued its assailed Decision15 affirming the Order of the NLRC
First Division, which had dismissed the appeal of petitioner and the latters CEO. According to
the CA, they failed to comply with the requirements of law and consequently lost the right to
appeal.16
The CA explained that under Article 223 of the Labor Code, an appeal from the labor arbiters
Decision must be filed within 10 calendar days from receipt of the decision. In case of a
judgment involving a monetary award, the posting of a cash or surety bond in an amount
equivalent to the monetary award is mandatory for the perfection of an appeal. In the instant
case, the CA found that petitioner and its CEO did not pay the appeal fees and the required
appeal bond equivalent to P345,879.45. Instead, it filed a Consolidated Motion praying that the
cash bond it had previously posted in another labor case be released and applied to the present
one. According to the CA, this arrangement is not allowed under the rules of procedure of the
NLRC.17

22
Furthermore, the CA said that since the payment of appeal fees and the posting of an appeal
bond are indispensable jurisdictional requirements, noncompliance with them resulted in
petitioners failure to perfect its appeal. Consequently, the labor arbiters Decision became final
and executory and, hence, binding upon the appellate court.18
Nevertheless, the CA ruled that the CEO of petitioner LCMC should be dropped as a party to
this case.19 No specific act was alleged in private respondents pleadings to show that he had a
hand in Icaos illegal dismissal; much less, that he acted in bad faith. In fact, the labor arbiter did
not cite any factual or legal basis in its Decision that would render the CEO liable to respondent.
The rule is that in the absence of bad faith, an officer of a corporation cannot be made
personally liable for corporate liabilities.
THE ISSUE
The sole issue before the Court is whether or not petitioner complied with the appeal bond
requirement under the Labor Code and the NLRC Rules by filing a Consolidated Motion to
release the cash bond it posted in another case, which had been decided with finality in its favor,
with a view to applying the same cash bond to the present case.
OUR RULING
The Petition is meritorious. The Court finds that petitioner substantially complied with the appeal
bond requirement.
Before discussing its ruling, however, the Court finds it necessary to emphasize the wellentrenched doctrine that an appeal is not a matter of right, but is a mere statutory privilege. It
may be availed of only in the manner provided by law and the rules. Thus, a party who seeks to
exercise the right to appeal must comply with the requirements of the rules; otherwise, the
privilege is lost.20
In appeals from any decision or order of the labor arbiter, the posting of an appeal bond is
required under Article 223 of the Labor Code, which reads:
Article 223. APPEAL. Decisions, awards, or orders of the Labor Arbiter are final and
executory unless appealed to the Commission by any or both parties within ten (10) calendar
days from receipt of such decisions, awards, or orders. Such appeal may be entertained only on
any of the following grounds:
xxxx
In case of a judgment involving a monetary award, an appeal by the employer may be perfected
only upon the posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the Commission in the amount equivalent to the monetary award in the judgment
appealed from. (Emphasis and underlining supplied)

The 2011 NLRC Rules of Procedure (NLRC Rules) incorporates this requirement in Rule VI,
Section 6, which provides:
SECTION 6. Bond. In case the decision of the Labor Arbiter or the Regional Director involves
a monetary award, an appeal by the employer may be perfected only upon the posting of a
bond, which shall either be in the form of cash deposit or surety bond equivalent in amount to
the monetary award, exclusive of damages and attorneys fees. (Emphases and underlining
supplied)
In Viron Garments Manufacturing Co., Inc. v. NLRC,21 the Court explained the mandatory nature
of this requirement as follows:
The intention of the lawmakers to make the bond an indispensable requisite for the perfection of
an appeal by the employer, is clearly limned in the provision that an appeal by the employer may
be perfected "only upon the posting of a cash or surety bond." The word "only" makes it perfectly
clear, that the lawmakers intended the posting of a cash or surety bond by the employer to be
the exclusive means by which an employer's appeal may be perfected. (Emphases supplied)
We now turn to the main question of whether petitioners Consolidated Motion to release the
cash bond it posted in a previous case, for application to the present case, constitutes
compliance with the appeal bond requirement. While it is true that the procedure undertaken by
petitioner is not provided under the Labor Code or in the NLRC Rules, we answer the question
in the affirmative. We reiterate our pronouncement in Araneta v. Rodas, 22 where the Court said
that when the law does not clearly provide a rule or norm for the tribunal to follow in deciding a
question submitted, but leaves to the tribunal the discretion to determine the case in one way or
another, the judge must decide the question in conformity with justice, reason and equity, in view
of the circumstances of the case. Applying this doctrine, we rule that petitioner substantially
complied with the mandatory requirement of posting an appeal bond for the reasons explained
below.
First, there is no question that the appeal was filed within the 10-day reglementary
period.23 Except for the alleged failure to post an appeal bond, the appeal to the NLRC was
therefore in order.
Second, it is also undisputed that petitioner has an unencumbered amount of money in the form
of cash in the custody of the NLRC. To reiterate, petitioner had posted a cash bond
of P401,610.84 in the separate case Dangiw Siggaao, which was earlier decided in its favor. As
claimed by petitioner and confirmed by the Judgment Division of the Judicial Records Office of
this Court, the Decision of the Court in Dangiw Siggaao had become final and executory as of
28 April 2008, or more than seven months before petitioner had to file its appeal in the present
case. This fact is shown by the Entry of Judgment on file with the aforementioned office. Hence,
the cash bond in that case ought to have been released to petitioner then.
Under the Rule VI, Section 6 of the 2005 NLRC Rules, "[a] cash or surety bond shall be valid
and effective from the date of deposit or posting, until the case is finally decided, resolved or
terminated, or the award satisfied." Hence, it is clear that a bond is encumbered and bound to a

23
case only for as long as 1) the case has not been finally decided, resolved or terminated; or 2)
the award has not been satisfied. Therefore, once the appeal is finally decided and no award
needs to be satisfied, the bond is automatically released. Since the money is now
unencumbered, the employer who posted it should now have unrestricted access to the cash
which he may now use as he pleases as appeal bond in another case, for instance. This is
what petitioner simply did. Third, the cash bond in the amount of P401,610.84 posted in Dangiw
Siggaao is more than enough to cover the appeal bond in the amount of P345,879.45 required
in the present case.
Fourth, this ruling remains faithful to the spirit behind the appeal bond requirement which is to
ensure that workers will receive the money awarded in their favor when the employers appeal
eventually fails.24 There was no showing at all of any attempt on the part of petitioner to evade
the posting of the appeal bond. On the contrary, petitioners move showed a willingness to
comply with the requirement. Hence, the welfare of Icao is adequately protected.
Moreover, this Court has liberally applied the NLRC Rules and the Labor Code provisions on the
posting of an appeal bond in exceptional cases. In Your Bus Lines v. NLRC,25 the Court excused
the appellants failure to post a bond, because it relied on the notice of the decision. While the
notice enumerated all the other requirements for perfecting an appeal, it did not include a bond
in the list. In Blancaflor v. NLRC,26 the failure of the appellant therein to post a bond was partly
caused by the labor arbiters failure to state the exact amount of monetary award due, which
would have been the basis of the amount of the bond to be posted. In Cabalan Pastulan Negrito
Labor Association v. NLRC27 petitioner-appellant was an association of Negritos performing
trash-sorting services in the American naval base in Subic Bay. The plea of the association that
its appeal be given due course despite its non-posting of a bond, on account of
its insolvency and poverty, was granted by this Court. In UERM-Memorial Medical Center v.
NLRC28 we allowed the appellant-employer to post a property bond in lieu of a cash or surety
bond. The assailed judgment involved more than P17 million; thus, its execution could adversely
affect the economic survival of the employer, which was a medical center.
If n the above-cited cases, the Court found exceptional circumstances that warranted an
extraordinary exercise of its power to exempt a party from the rules on appeal bond, there is all
the more reason in the present case to find that petitioner substantially complied with the
requirement. We emphasize that in this case we are not even exempting petitioner from the rule,
as in fact we are enforcing compliance with the posting of an appeal bond. We are simply
liberally applying the rules on what constitutes compliance with the requirement, given the
special circumstances surrounding the case as explained above.
Having complied with the appeal bond requirement, petitioner s appeal before the NLRC must
therefore be reinstated.1wphi1
Finally, a word of caution. Lest litigants be misled into thinking that they may now wantonly
disregard the rules on appeal bond in labor cases, we reiterate the mandatory nature of the
requirement. The Court will liberally apply the rules only in very highly exceptional cases such as
this, in keeping with the dictates of justice, reason and equity.

WHEREFORE, premises considered, the instant Rule 45 Petition is GRANTED. The Court of
Appeals Decision dated 27 September 2010 and its Resolution dated March 2011 in CA-G.R.
SP. No. 113095, which dismisse4 petitioner s Rule 65 Petition, are hereby REVERSED. Finally,
the National Labor Relations Commission Resolutions dated 27 February 2009 and 27
November 2009 are SET ASIDE and the appeal of petitioner before it is hereby REINSTATED.
SO ORDERED.

24
DECISION
ROMERO, J.:
This is a petition for review on certiorari of the Decision[1] of the Court of Appeals
affirming in toto the November 27, 1992 decision [2] of the Regional Trial Court of Makati, Branch
150 which disposed of Civil Case No. 8109, "Industrial Enterprises, Inc. v. Marinduque Mining
and Industrial Corporation, Geronimo Velasco (in his capacity as the then Minister of Energy)
and Philippine National Bank," an action for rescission of contract and damages, as follows:
"WHEREFORE, in the light of the foregoing, and as plaintiff Industrial Enterprises, Inc. was
able to establish by preponderant evidence the allegations in its Complaint and causes of
action against defendants Marinduque Mining and Industrial Corporation and Philippine
National Bank, the Court finds both defendants civilly liable to plaintiff and, therefore, orders
them to jointly and severally:
1. pay plaintiff the sum of P31.66 Million as of July 31, 1983, for the expenses invested by plaintiff in the
property subject of this case, as computed by Sycip, Gorres, Velayo and Company and brought to current
value per SGV formula, as agreed in the Memorandum of Agreement;
2. pay plaintiff the sum of P37,569,733.00, for the indemnification and rehabilitation cost, plus interest at
the legal rate from March 31, 1991, until fully paid;
3. pay plaintiff the sum of P120 Million for unrealized profit for five (5) years from August, 1983, the date
of defendant MMIC's takeover of the property, to October, 1988, when plaintiff was re-awarded the
contract, plus interest at the legal rate, from the date of this decision, until fully paid;
4. pay plaintiff an amount not less than ten (10) percent of the losses it incurred and its unrealized profits
as indicated in Numbers 1 to 3, for the injury done to plaintiff's business standing and commercial credit;
5. pay plaintiff an amount not less than five (5) percent of the above obligation as reimbursement to
plaintiff for litigation expenses and attorney's fees; and
6. COST OF SUIT.
And finally, the extrajudicial foreclosure sale held on August 31, 1984, in Catbalogan, Samar,
over the property of plaintiff, part of the Giporlos Coal Project, is hereby declared NULL and
VOID.
SO ORDERED."
[G.R. No. 118357. May 6, 1997]
PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS and INDUSTRIAL
ENTERPRISES, INC., respondents.

Marinduque Mining and Industrial Corporation (MMIC) was founded by Jesus S. Cabarrus
in 1949.[3] Four years later or in 1953, Cabarrus established J. Cabarrus, Inc. which
subsequently was renamed Industrial Enterprises, Inc. (IEI). During the period when most of the

25
facts relevant to this case transpired, Cabarrus and his family owned about 12% to 14% of the
shares of stock in the MMIC[4] where he was the President. He was also the President of IEI.
On July 27, 1979, IEI entered into a coal operating contract with the Bureau of Energy
Development (BED), with Cabarrus and then Minister of Energy Geronimo Velasco as
signatories.[5] The contract was pursuant to the Coal Development Act of 1976 (P.D. No. 972, as
amended) and covered 2,000 hectares of two (2) coal blocks in Barrio Carbon, Magsaysay,
Eastern Samar.
While exploring this area, IEI found the adjacent areas, comprising of three (3) coal
blocks, to be likewise coal potentials. Hence, upon confirmation by the BED that these three (3)
adjacent coal blocks were in the free area, IEI filed an application for another coal operating
contract on August 12, 1981. Simultaneously, IEI applied for the conversion of its July 27, 1979
coal operating contract from exploration to development/production. IEI also followed up its
application on the three (3) newly-discovered coal blocks. All of these coal blocks were
collectively known as the Giporlos Coal Project.
Sometime in April, 1982, Minister Velasco informed Cabarrus that IEI's application for
exploration of the three (3) coal blocks had been disapproved and that, instead, the contract
would be awarded to MMIC. Following Cabarrus' letter of May 4, 1982 [6] requesting that the
rejection of IEI's application be made in writing, Minister Velasco wrote him a letter dated June 2,
1982,[7] where Minister Velasco said:
"We appreciate your desire to increase Industrial Enterprises, Inc.'s (IEI) involvement in coal
development. In line, however, with the objective of rationalizing the country's overall coal
supply-demand balance, we believe that coal users who have the capability to go into coal
production themselves should, as much as possible, be encouraged and given the preference
to do so. This ensures maximum utilization of local coal and will be beneficial to coal
producer/user in the long run. In your area of interest, therefore, we believe that the logical
coal operator should be Marinduque Mining and Industrial Corporation (MMIC) which is
now developing the Bagacay coal deposit in order to support MMIC's coal conversion
program at the Nonoc Nickel Refinery. As a member of the board of MMIC, I am fully aware
that this coal conversion program is critical to the profitability and the survival of the Nonoc
Nickel Refinery. It is, therefore, imperative that MMIC secure its own coal supply.
Consistent with the above rationale, you are aware that MMIC Board has in fact taken
concrete steps to consolidate the Giporlos and Bagacay coal areas under MMIC and, for this
purpose, has authorized Chairman Cesar C. Zalamea to create a committee (of which I was
asked to be Chairman) to evaluate the Giporlos coal blocks of IEI to serve as basis for their
acquisition by MMIC. As President of MMIC, you are likewise aware that the Board has
recently hired the services of SGV to make an evaluation of the proper pricing for the IEI
coal interest to be paid for by MMIC. With these developments indicating the imminent
formal acquisition of Giporlos coal areas by MMIC, it would indeed be inconsistent now for
us to award additional coal blocks in the same area to IEI. We believe that these additional
coal areas, if at all, should be applied for and awarded direct to MMIC.

In view of the foregoing, please be advised that we are denying IEI's application, and we
suggest instead that MMIC apply for the same blocks."
On March 28, 1983, Minister Velasco informed Cesar Zalamea, Chairman of the Board of
the Development Bank of the Philippines (DBP) and of the MMIC, that IEI's application for the
conversion of its coal operating contract for the Giporlos area from exploration to
development/production had been put "under advisement in the light of the ongoing discussion
for the transfer of IEI's rights and obligations" to MMIC.[8]
Thereafter, MMIC and IEI, through Chairman Zalamea and President Cabarrus,
respectively, entered into a Memorandum of Agreement (MOA) whereby IEI assigned to MMIC
all its rights and interests under the July 27, 1979 coal operating contract. The MOA provided as
follows:
[9]

"NOW, THEREFORE, the parties have agreed, as hereby they agree, one with the other, as
follows:
1. That IEI, subject and conformably with the whereas clauses hereinabove stated, hereby assigns and
transfers all its rights and interests on the Coal Operating Contract described in the first whereas clause;
and MMIC shall in consideration of the above assignment and transfer
(a) Undertake all the obligations required of IEI under said Coal Operating Contract;
(b) Reimburse all costs and expenses actually incurred as of 31 July 1983 by IEI on the coal property and
brought up to current values, as shall be audited and confirmed by Sycip, Gorres and Velayo as of said
date of 31 July 1983; and
(c) Pay to IEI the total sum equivalent to P4.17 per ton of proven and positive reserves of coal to be
confirmed by an independent geologist who shall be designated and appointed by mutual agreement of the
parties.
2. That the total sum due from MMIC to IEI under this agreement shall be paid upon the effectivity of this
agreement in the following manner
(a) An assumption by MMIC of the outstanding loan obligation (evidenced by Promissory Note No. 1516
for P3.3 Million and Promissory Note No. 11098 for P5.0 Million) of IEI to Manila Banking Corporation
which as of 31 July 1983 stands at P8.3 Million.
(b) Payment in cash to IEI of the difference between the above amount of P8.3 Million and the sum total
of subparagraphs (b) and (c) par. 1, above.
3. That this agreement shall only become binding and effective upon its approval by the BED, which
approval shall be secured jointly by MMIC and IEI."

26
MMIC and IEI, again through Zalamea and Cabarrus, respectively, jointly informed the
BED on August 10, 1983, that they had entered into the MOA "at the instance and suggestion of
the Hon. Minister of Energy in one of the earlier meetings of the Board of Directors of
MMIC."[10] MMIC and IEI were informed of the approval of the MOA on August 29, 1983 by the
then Acting BED Director Wenceslao R. de la Paz.[11]
MMIC took over possession and control of the two (2) coal blocks even before the MOA
was finalized. However, instead of continuing the exploration and development work actively
pursued by IEI, MMIC completely stopped all works and dismissed the work force thereon,
leaving only a caretaker crew.
Consequently, IEI made written demands to MMIC, pursuant to the MOA, for the
reimbursement of all costs and expenses it had incurred on the project which, as of July 31,
1983, had amounted to P31.66 million as audited by the Sycip, Gorres and Velayo Company.

proportion to the amount of the obligation of the MORTGAGOR to each of them" as provided
therein.[14] One of the conditions of the mortgage was that:
"x x x. Should the MORTGAGORS fail to deliver said properties, as aforestated, the
TRUSTEE, through its duly authorized representative, is authorized to take possession of
said properties and bring the same to the location of any of their respective offices or to any
other place and the expenses of locating and bringing said properties to such place shall be
for the account of the MORTGAGOR and shall form part of the sums secured by this
mortgage; Provided, however, that the TRUSTEE shall have the option of selling said
properties at any place where their respective offices shall be located or at any place where
said properties may be found."[15] (Underscoring supplied.)
The MTA also provided that:

In view of MMIC's failure to comply with its obligations under the MOA, IEI filed a
complaint against MMIC and Minister Velasco on August 7, 1984, for rescission of the MOA and
damages, before the Regional Trial Court of Makati, Branch 137. Docketed as Civil Case No.
8109, the complaint alleged that MMIC acted in gross and evident bad faith in entering into the
MOA when it had no intention at all to operate the two (2) coal blocks and of complying with any
of its obligations under the said agreement. It likewise alleged that Minister Velasco was
instrumental in causing the assignment of the coal operating contracts to MMIC when he did not
act on complainant IEI's application for conversion of its coal operating contract from exploration
to development/production and in rejecting its application for another coal operating contract for
the exploration of additional three (3) coal blocks which he had reserved for MMIC.

"For the purpose of extra-judicial foreclosure, the MORTGAGOR hereby appoints the
TRUSTEE, through its duly authorized representatives, its attorney-in-fact to sell the
mortgaged properties in accordance with the provision of Act No. 3135, as amended, and/or
Act No. 1508, as amended, and subject to the stipulations herein set forth, to sign all
documents and perform any act requisite or necessary to accomplish said purpose and to
appoint their representatives or substitutes as such attorneys-in-fact with all the powers herein
conferred. In extra-judicial foreclosure under Act No. 3135, as amended, the auction sale
shall take place in the City or Capital of the Province where the mortgaged properties are
situated. In extra-judicial foreclosure under Act No. 1508, as amended, the auction sale shall
take place in such City or Municipality as the TRUSTEE at its option, may elect by virtue of
the provisions of the first paragraph of this Condition."[16] (Underscoring supplied.)

Meanwhile, on July 13, 1981, for various credit accommodations secured from the
Philippine National Bank (PNB), aggregating to four billion pesos (P4,000,000,000.00) excluding
interest and charges as of November 30, 1980, as well as from the DBP, amounting to two billion
pesos (P2,000,000,000.00), MMIC entered into a Mortgage Trust Agreement (MTA) [12]whereby it
constituted a mortgage pari passu of its assets in favor of PNB and DBP. These assets are
described in the third "whereas clause" of the MTA as follows:

The MTA was amended on April 27, 1984 with PNB Senior Vice President Gerardo Agulto,
Jr. and MMIC Senior Vice President Jose Luis Javier as signatories. [17] Premised on the fact that
the mortgagor (MMIC) had "acquired additional personal and real properties, including, but not
limited to, leasehold rights on mining claims, which pursuant to the terms of the Mortgage Trust
Agreement are deemed covered by the mortgage as after-acquired assets," the MTA amended
Sec. 2.01 thereof to read as follows:

"(1) all the MORTGAGOR'S assets described and covered under the Deed of Real Estate and
Chattel Mortgage executed by the MORTGAGOR in favor of PNB dated October 9,
1978, acknowledged before Notary Public of Manila, Lucas R. Vidad, as Doc. No.
1004, Page No. 94, Book No. VII, Series of 1978, as amended, which are made
integral parts of this Agreement by way of reference; and
(2) additional assets of the MORTGAGOR described and identified in the list hereto attached
as Annex 'A', including assets of whatever kind, nature or description, which the
MORTGAGOR may hereafter acquire whether in substitution of, in replenishment, or
in addition thereto, (the 'Mortgaged Properties')."[13]
Under the MTA, the PNB was constituted and appointed as the trustee tasked with holding
in trust the mortgaged properties "for the equal and ratable benefit of the Beneficiaries in

"As security for the prompt and full payment by the MORTGAGOR of the Secured
Obligations, the MORTGAGOR hereby establishes and constitutes in favor of the
MORTGAGEES a first lien and mortgage of the first rank in and to each and every item of the
Mortgaged Properties, together with any and all substitutes or replacements for or renewals of
or additions to any thereof, all of which belong to and are in the possession of (or will belong
to and will be in the possession of) the MORTGAGOR, free and clear of any liens or
encumbrances of any nature whatsoever." (Underscoring supplied.)[18]
MMIC defaulted in the payment of its loan obligation with PNB and DBP which, as of July
15, 1984 stood at P23.55 billion. As a consequence thereof, PNB and DBP simultaneously filed
in the provinces of Rizal, Samar, Negros and Surigao, joint petitions for sale on foreclosure
under Act Nos. 1508 and 3135,[19] of the MMIC assets located at: (a) Island Cement in Antipolo,
Rizal; (b) Sipalay Copper Mine in Negros; (c) Bagacay and Giporlos Coal Projects in Samar, and

27
(d) Nonoc Nickel Project in Surigao. The petitions were premised on: (1) the MOA of July 13,
1984 which delineated MMIC's mortgaged properties; (2) the April 27, 1984 amendment to the
MTA in favor of DBP and PNB which included in the mortgage MMIC's additional after-acquired
assets; (3) the liabilities of MMIC secured by the mortgage being past due, and (4) Presidential
Decree No. 385 mandating PNB and DBP to institute foreclosure proceedings when the
arrearages of the borrower have exceeded twenty percent (20%) of the principal obligation.
Deputy Sheriff Esteban G. Malindog of the Regional Trial Court in Catbalogan, Samar,
Branch XXVII, complied with the requirements of the law as to the posting and publication of the
notice of sale. Said notice, dated August 15, 1984, set for August 31, 1984 the auction sale of
the various mining equipment and other assets of MMIC, including the equipment at the Giporlos
Project.
On August 15, 1984, IEI advised PNB and DBP at their respective Manila and Makati
offices that the purchase price of the Giporlos Coal Project that it had assigned to MMIC per the
MOA, was still. unpaid.[20] However, despite said notice, the foreclosure sale proceeded as
scheduled and the various machineries and equipment of MMIC were sold to PNB as the sole
bidder for P33,940,940.00.
In its letter of September 20, 1984 to PNB and DBP,[21] IEI requested that the movable
properties in the Giporlos Coal Project which were detailed in a list attached to its August 15,
1984 letter to said banks, be excluded from the foreclosed assets of MMIC as the purchase
price thereof under the MOA had remained unpaid. IEI further informed PNB and DBP that a suit
for rescission of the assignment of the Giporlos Coal Project to MMIC (and damages) had been
filed before the Regional Trial Court of Makati.
On June 24, 1985, in view of the inclusion of the mining equipment and other movable
properties at the Giporlos Coal Project in the foreclosure sale of the assets of MMIC, IEI filed an
amended complaint impleading the PNB as an additional defendant. [22] The amended complaint
was admitted by the trial court on September 23, 1985.[23]
On April 23, 1986, the lower court[24] rendered a decision finding that:
"With respect to the plaintiff's claim against the Philippine National Bank, the evidence on
record is clear that said defendant bank is equally guilty of bad faith because it was advised
beforehand that the heavy equipment and movable property which are part of the Giporlos
Coal Project were still unpaid; however, despite that actual knowledge or information, the
said defendant bank proceeded to extrajudicially foreclose the mortgage on the said
properties; moreover, the foreclosure proceedings were held in Catbalogan, Province of
Samar, although the said movable properties are actually found or located at Giporlos,
Eastern Samar (Exhibit 'OOO'), a province, distinct and separate from, and outside the
jurisdiction of, the Province of Samar; these foreclosure proceedings in Catbalogan, Samar,
are clearly contrary to the provisions of Act 1508, as amended; likewise, the inclusion of the
movable properties which are part of the Giporlos Coal Project is contrary to the provisions
of the last paragraph of Sec. 7 of said Act No. 1508, as amended, which provides that a
chattel mortgage shall be determined to cover only the properties described therein and not

like or substituted property thereafter acquired by the mortgagor and placed in the same
depository as the property originally mortgaged, anything in the mortgage to the contrary
notwithstanding."[25]
Noting the futility of proceeding with the trial of the case because there was "no genuine
issue of any material facts," the lower court rendered a summary judgment disposing of Civil
Case No. 8109 as follows:
"WHEREFORE, judgment is hereby rendered:
a- declaring the memorandum agreement, Exhibit 'C' as rescinded or annulled and without further force
and effect between the parties thereto;
b- declaring and sustaining the continued efficacy and validity of the coal operating contract, Exhibit 'A'
between plaintiff and defendant BED;
c- ordering the reversion or return of the two coal blocks covered by the coal operating contract dated July
27, 1979, Exhibit 'A', from the defendant MMIC to and in favor of the plaintiff together with or including
all the pieces of equipment MMIC received by said defendant in virtue of the rescinded memorandum of
agreement, Exhibit 'C';
d- ordering the defendant Bureau of Energy Development to issue its corresponding formal written
affirmation and confirmation of the coal operating contract, Exhibit 'A', and to expeditiously cause the
conversion thereof from exploration to development/production or exploitation contract in favor of the
plaintiff;
e- directing the Bureau of Energy Development and the Ministry of Energy to give due course to plaintiff's
application for a coal operating contract for the exploration of the three additional coal blocks in the
plaintiff's Giporlos Coal Project;
f- condemning the defendant MMIC to pay the plaintiff the amount of P3,431,645.00 representing
expenditures on the two coal blocks covered by Exhibit 'A' from July 31, 1983 up to May 1984 and such
further amounts from said date up to the finality of this decision to be computed in accordance with the
formula adopted in the report of Sycip, Gorres and Velayo referred to in paragraph 14 of the Amended
Complaint;
g- ordering the defendant MMIC to pay the plaintiff the sum of P6,500,000.00 representing rehabilitation
expenses to be incurred by plaintiff in putting back the two coal blocks and the pieces of equipment
thereon in the same workable and operating condition as they were at the time they were taken possession
of by said defendant MMIC and the defendant PNB shall be subsidiarily liable therefor;
h- condemning the defendants MMIC and PNB jointly and solidarily liable to pay the plaintiff moral
damages in the amount of P300,000.00, as exemplary damages of P200,000.00 and the amount
ofP200,000.00 as and for attorney's fees;

28
i- declaring the extra-judicial foreclosure sale executed for and in behalf of the defendant Philippine
National Bank of the mining equipment and other movable property which are enumerated in Exh. 'OOO'
and which are part of the Giporlos Coal Project, as null and void and of no force and effect as against the
plaintiff; in the event of the loss or deterioration of the said mining equipment and other movable property,
the said defendants PNB and MMIC shall be held jointly and solidarily liable to the plaintiff for the
current market value thereof; and
j- ordering the defendants MMIC and PNB to pay the cost of this suit.
SO ORDERED."[26]
PNB and IEI filed separately motions for the reconsideration of said summary judgment.
PNB alleged that the lower court did not have jurisdiction over the subject matter and nature
of the action as the MOA between MMIC and IEI was an incident arising out of a mining claim
which was within the jurisdiction of the BED. Moreover, the validity of the extrajudicial
foreclosure proceedings which PNB effected on said properties was a genuine material issue
which was not determinable through summary judgment. Inasmuch as the merit of the case was
resolved through summary judgment, PNB was denied its constitutional right to due
process. Furthermore, the award of damages to IEI was improper as PNB was not a party to the
MOA.
[27]

For its part, IEI contended that the decision failed to award consequential damages in its
favor considering the finding that MMIC and PNB acted in bad faith and that it failed to realize
profits of about P14.5 million on the confirmed coal reserves of 3,485,915 metric tons computed
at P4.17 per metric ton.
On the other hand, the public defendant and MMIC filed their respective notices of appeal
to the then Intermediate Appellate Court.[28]
On July 14, 1986, IEI filed a motion for execution pending appeal [29] alleging that MMIC
had failed and refused to fulfill its obligations under the MOA and that it even allowed the PNB to
unlawfully foreclose the mortgage on the heavy equipment and other movable properties in the
Giporlos Coal Project. According to IEI, to allow this situation to persist would only aggravate the
damages suffered by all concerned parties. It added that the grant of the motion for execution
pending appeal would not only stop the continuing injury to the common weal but it would also
hasten the day when the coal blocks could be placed in useful production to provide gainful
employment to the people in the community. By the same token, IEI averred, granting of the
motion would accelerate realization of scarce foreign exchange savings occasioned by the local
production of a substitute energy source that would thereby contribute to the relief of an ailing
economy.
This motion was opposed by the public defendant, the MMIC and the PNB. [30] The public
defendant averred that the execution of the decision "would cause great irreparable damage and
injury to public interest" and that there were no "good reasons" of superior circumstance that
demand urgency of the execution pending appeal. MMIC opposed the motion on the ground that
the court had lost jurisdiction after the perfection of its appeal while PNB's objection was on the

ground that there were no good reasons to justify the issuance of a writ of execution and that the
issuance thereof was premature.
In its order of September 15, 1986, the lower court denied the motions for reconsideration
of IEI and PNB for lack of merit. It ordered the elevation of the records of the case to the Court of
Appeals considering that the MMIC and the public defendant had filed their notices of appeal on
time. It likewise directed the issuance of a writ of execution pending appeal to enforce the April
23, 1986 decision upon the filing of a bond in the amount of five million pesos (P5,000,000.00)
conditioned on the payment of damages the defendants might suffer should the court finally rule
that the plaintiff was not entitled to the writ.
In granting the writ of execution, the court held that "the immediate resumption of
operation of the two coal blocks in question became imperative and is of urgent necessity at this
time when our government is in dire need of capitalization to encourage the establishment of
business to generate employment and dollar-producing energy sources." In the court's
perception, this was enough reason to entitle IEI to execution pending appeal pursuant to Sec.
2, Rule 39 of the Rules of Court.
The corresponding writ having been issued on September 22, 1986, [31] on September 26,
1986, Pioquinto P. Villapana was appointed Special Sheriff to assist and cooperate with Deputy
Sheriff Arturo Flores in its enforcement. However, execution of the writ was curtailed.
The appeal to the Court of Appeals was docketed as CA-G.R. CV No. 12660. On October
14, 1988, IEI filed a motion to dismiss the case against Minister Velasco on the grounds of IEI's
reapplication for the two coal blocks with the Office of Energy Affairs (OEA) and its loss of
interest in pursuing the case against Minister Velasco. [32] The motion was favorably acted upon
by the Court of Appeals thereby effectively dropping Minister Velasco as a defendant in Civil
Case No. 8109 through the decision of May 29, 1989,[33] where the Court of Appeals disposed of
the appeal as follows:
"WHEREFORE, the judgment appealed from is hereby reversed and set aside and the appeal
of plaintiff Industrial Enterprises, Inc., is DISMISSED. The complaint against the defendants
Marinduque Iron Mines Corporation and Minister of Energy is dismissed for lack of
jurisdiction. The case against defendant PNB is remanded to the lower court for further
proceedings.
Cost against appellant Industrial Enterprises, Inc.
SO ORDERED."[34]
IEI elevated the decision to this Court through a petition for review on certiorari under G.R.
No. 88550 while the PNB filed in the Court of Appeals a motion for the reconsideration of the
same decision. On September 21, 1989, the Court of Appeals resolved the motion for
reconsideration with the following findings:

29
"Considering, therefore, that PNB was impleaded as party defendant only in connection with
its foreclosure of the mortgages on the properties of the principal defendant MMIC, and
considering that the main action against MMIC has been dismissed for lack of jurisdiction,
there appears to be no cogent reason to continue the case against PNB which is merely a
secondary defendant. There is thus merit in PNB's contention that since the case against
MMIC has been dismissed, the case against PNB should likewise be dismissed, considering
that PNB merely stepped into the shoes of MMIC.

"Wherefore, in the light of the foregoing, insofar as the Memorandum of Agreement is

concerned, such agreement may already be deemed rescinded and of no force and effect in
view of the re-award made in IEI's favor of the same coal areas subject of this
dispute. However, on the issue of the effects and consequences of the right to claim damages
for unpaid financial obligations and such other damages incidental thereto, by one party as
against the other, this matter may be referred to the regular courts for appropriate
adjudication.

Moreover, there is no privity of contract between PNB and IEI. Hence, there is no direct
cause of action by IEI against PNB independently of MMIC, it being merely a foreclosing
mortgage creditor of the latter. At any rate, the record shows that there is an on-going
litigation between MMIC stockholders and PNB before the Regional Trial Court of Makati
(Civil Case No. 9900) for the annulment of the PNB's extra-judicial foreclosure of MMIC's
mortgaged properties."[35]

Similarly, this likewise holds true insofar as the foreclosed properties involved in this case are
concerned where respondent Philippine National Bank was impleaded."[37]

Accordingly, the Court of Appeals modified its decision of May 29, 1989 by dismissing the case
against the PNB.
Meanwhile, G.R. No. 88550 was eventually decided by this Court on April 18, 1990. [36] In
denying the petition of IEI, the Court held:
"Clearly, the doctrine of primary jurisdiction finds application in this case since the question
of what coal areas should be exploited and developed and which entity should be granted coal
operating contracts over said areas involves a technical determination by the BED as the
administrative agency in possession of the specialized expertise to act on the matter. The Trial
Court does not have the competence to decide matters concerning activities relative to the
exploration, exploitation, development and extraction of mineral resources like coal. These
issues preclude an initial judicial determination. It behooves the courts to stand aside even
when apparently they have statutory power to proceed in recognition of the primary
jurisdiction of an administrative agency.
'One thrust of the multiplication of administrative agencies is that the
interpretation of contracts and the determination of private rights thereunder is
no longer a uniquely judicial function, exercisable only by our regular courts'
(Antipolo Realty Corp. v. National Housing Authority, 153 SCRA 399, at 407).

In accordance with this ruling of the OEA, on March 1, 1991, IEI filed in the lower court a
motion to set Civil Case No. 8109 for hearing. [38] On June 17, 1991, PNB filed a motion to
dismiss[39] alleging that the issue in this case, i.e., the validity of the foreclosure of MMIC's
assets, was virtually the same issue raised before the Regional Trial Court of Makati in Civil
Case No. 9900, "Jesus S. Cabarrus, Jesus Cabarrus, Jr., Jaime T. Cabarrus, Jose Miguel
Cabarrus, Alejandro S. Pastor, Jr., Antonio U. Miranda & Manuel M. Antonio v. Development
Bank of the Philippines and Philippine National Bank," a case filed by the plaintiffs as
stockholders of MMIC in their behalf as well as in behalf of other stockholders, which prayed,
among others, that the foreclosures effected by DBP and PNB on the assets of MMIC be
declared null and void.[40]
The motion to dismiss was denied by the lower court on July 10, 1991 on the ground that
there was no substantial identity in the cause of action, the relief sought and the parties in the
two cases.[41]
As aforestated, the lower court rendered the decision of November 27, 1992 finding MMIC
and PNB jointly and severally liable to IEI for damages and declaring null and void the August
31, 1984 extrajudicial foreclosure sale in Catbalogan, Samar. This was affirmed on December
20, 1994 by the Court of Appeals under CA-G.R. CV No. 40836.
MMIC did not interpose an appeal from the Decision of the Court of Appeals but the PNB
filed the instant petition for review on certiorari questioning the following "conclusions" of the
Court of Appeals:
(1) there was implied conspiracy or community of design among the defendants to ruin IEI;

The application of the doctrine of primary jurisdiction, however, does not call for the
dismissal of the case below. It need only be suspended until after the matters within the
competence of the BED are threshed out and determined. Thereby, the principal purpose
behind the doctrine of primary jurisdiction is salutarily served."
Pursuant to this Decision, IEI lodged a complaint against MMIC and PNB before the
OEA. After due hearing, a decision was issued by Executive Director W. R. de la Paz on January
25, 1991, with a decretal portion which reads:

(2) PNB acted in bad faith in including the IEI Giporlos equipment at the extrajudicial
foreclosure sale on August 31, 1984, and
(3) PNB is liable for a quasi-delict.
Petitioner PNB also contends that the Court of Appeals erred in not holding that (a) because
Minister Velasco had been dropped as party defendant, PNB was also absolved from liability
because it was solidarily liable with Minister Velasco, and (b) IEI's claim against PNB for actual,

30
consequential and moral damages including attorney's fees, litigation expenses and costs of
suit, has neither legal nor factual bases.[42]

subject of the assignment was only private respondent's rights and interests over the coal
operating contract covering said coal-rich land in Eastern Samar.

In its comment on the petition, private respondent IEI contends in the main that the issues
raised by petitioner PNB are all factual in nature and, therefore, they have no place before this
Court. We hold otherwise.

However, a close scrutiny of the contract reveals that the MOA includes all tangible things
found in the coal-bearing land. Unquestionably, rights may be assigned as they are intangible
personal properties. The term "interests," on the other hand, is broader and more
comprehensive than the word "title" and its definition in a narrow sense by lexicographers as any
right in the nature of property less than title, indicates that the terms are not considered
synonymous.[46] It is practically synonymous, however, with the word "estate" which is the totality
of interest which a person has from absolute ownership down to naked possession. [47] An
"interest" in land is the legal concern of a person in the thing or property, or in the right to some
of the benefits or uses from which the property is inseparable.[48]

At the core of the instant petition is the legal question of ownership of the chattels involved
at the time of foreclosure. This issue appears to have been glossed over by the courts
below.Equally appropriate for determination by this Court is the legality of the foreclosure
proceedings on the assets of the MMIC. These two issues are the keys to the resolution of the
instant petition.
Privity between MMIC and private respondent was established by the execution of the
MOA. An important issue then is whether or not the chattels mortgaged to petitioner were
covered by the MOA so as to legally subject the same chattels to MMIC's ownership and,
eventually, to the foreclosure proceedings.
The MOA was an assignment of private respondent's "rights and interests on the Coal
Operating Contract described in the first whereas clause" thereof. In its most general and
comprehensive sense, an assignment is "a transfer or making over to another of the whole of
any property, real or personal, in possession or in action, or of any estate or right therein. It
includes transfers of all kinds of property, and is peculiarly applicable to intangible personal
property and, accordingly, it is ordinarily employed to describe the transfer of non-negotiable
choses in action and of rights in or connected with property as distinguished from the particular
item or property."[43]
An assignment is a contract between the assignor and the assignee. It generally operates
by way of such contract or agreement. It is subject to the same requisites as to validity of
contracts.[44] Whether or not a transfer of a particular right or interest is an assignment or some
other transactions depends, not on the name by which it calls itself, but on the legal effect of its
provisions. This rule applies in determining whether a particular transaction is an assignment or
a sale.[45]
As the aforequoted portions of the MOA state, its subject is described in the "whereas
clauses" thereof as follows:
"WHEREAS, IEI is the duly authorized operator over two coal blocks over an area outlined
and more particularly described in Annex 'A' of the Coal Operating Contract entered into on
the 27th day of July 1979 and between the Ministry of Energy, through the Bureau of Energy
Development ('BED'), and IEI; the Coal Operating Contract and Annex A thereof being
hereto attached and made an integral part of this contract;"
Annex "A" of the coal operating contract is the technical description of the 2,000-hectare coalbearing land in Carbon, Magsaysay, Eastern Samar. Therefore, as expressed in the MOA, the

That the MOA conveyed to MMIC more than the title to or rights over the coal operating
contract but also the "things" covered thereby, is manifest in the manner by which the parties,
particularly private respondent IEI, implemented the MOA. It disclosed the intention to include in
the MOA the equipment and machineries used in coal exploration. This intention is evident in the
following letters of private respondent: (1) letter of April 16, 1984 to Alfredo Velayo, President of
MMIC, where private respondent, through Cabarrus, included in the conditions for the negotiated
rescission of the MOA, the payment to private respondent of the amount of ten million pesos
(P10,000,000.00) for expenses such as those for the "recondition (of) the equipment which have
been left to the elements;"[49] (2) letter of May 2, 1984 to Velayo, where private respondent
mentioned a "list of probable equipment(s) that IEI would be interested to apply as part payment
in the event of rescission of contract;"[50] (3) letter of June 4, 1984 to Zalamea as Chairman of the
Board of the MMIC,[51] where private respondent attached an updated statement of account and
the expenses for rehabilitation of equipment, and (4) letter of August 15, 1984 to petitioner and
the DBP where private respondent enclosed a copy of "the movable properties included in said
Memorandum of Agreement" of August 1983.[52] Notably, all these listed equipment were sold at
the foreclosure sale initiated by petitioner.[53]
Also worth noting is the absence of proof that, like a good father of the family, private
respondent exerted some effort to take the chattels out of the premises upon the execution of
the MOA. All that private respondent proved, through the testimony of Cabarrus, was that the
equipment and machineries were taken over by MMIC, piled up and left to rot that trees even
grew on them.[54] Coupled with this is private respondents' failure to prove the presence of
insurmountable force[55] that would have prevented it from retrieving its equipment and
machineries from the Giporlos Project area. All these show that private respondent considered
these chattels as subjects of the MOA.
Private respondent had all the right to exclude these chattels from the MOA because they
were not expressly stipulated therein. However, its sheer inaction upon the execution of the
MOA and its subsequent admissions through the aforesaid letters, conclusively show that these
equipment and machineries were subjects of the assignment of rights to MMIC. It was only when
the foreclosure sale was about to take place that private respondent lifted a finger to object
thereto on the ground that the consideration stipulated in the MOA had not yet been paid by
MMIC.

31
Moreover, while the MOA was expressly a contract for the assignment of rights and
interests, it is in fact a contract of sale. Under Art. 1458 of the Civil Code, 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. By the
MOA, private respondent obligated itself to transfer ownership of the coal operating contract and
the properties found therein. The coal operating contract is a determinate thing as it has been
particularly designated in the MOA. The subject of the coal operating contract was physically
segregated from all other pieces of coal-rich Eastern Samar property by the technical description
attached to said contract.[56] A list of the equipment and machineries found on the property might
not have been attached to the MOA but these were itemized with specificity in private
respondent's letter of August 15, 1984.
Private respondent delivered the properties subject of the contract to MMIC, which
immediately gained control and possession of the Giporlos Project. This is explicit in private
respondent's numerous demand letters[57] which are exemplified by its letter of February 7, 1984
to Zalamea which states:
"Considering that all details necessary to determine the final purchase price are in
place; considering that the property has already been transferred in your name; and
considering finally that cash payment is stipulated in the contract, demand is hereby
respectfully made for the payment of the purchase price soonest." [58] (Underscoring supplied.)
Another very telling letter of private respondent is that of April 16, 1984 to Mr. Alfredo Velayo,
President of MMIC, which partly reads:
"After the Memorandum of Agreement was signed, BED promptly approved the transfer
from IEI to MMIC. After the price was fixed with the assistance of SGV and BED, MMIC
took over the entire project last July 1983. x x x."[59]
For its part, MMIC never denied that it had taken possession and control over the Giporlos
Project. In its replies to private respondent's demand letters, MMIC in fact acknowledged its
obligations under the MOA while professing incapacity to fulfill the same.
If the MOA merely embodied an assignment of rights over the coal-operating contract and
the properties found in the Giporlos Project and not a sale thereof, then private respondent
would not have insisted on the payment of MMIC's obligations under the MOA by attaching a
statement of account to most of its demand letters. [60] In assignments, a consideration is not
always a requisite, unlike in sales. Thus, an assignee may maintain an action based on his title
and it is immaterial whether or not he paid any consideration therefor. [61] Furthermore, in an
assignment, title is transferred but possession need not be delivered. [62] In this case, private
respondent transferred possession over the subjects of the "assignment" to MMIC.
Since the MOA was actually a contract of sale, MMIC acquired ownership over the
Giporlos Project when private respondent delivered it to MMIC. Under the Civil Code, unless the
contract contains a stipulation that ownership of the thing sold shall not pass to the purchaser
until he has fully paid the price,[63] ownership of the thing sold shall be transferred to the vendee

upon the actual or constructive delivery thereof. [64] In other words, payment of the purchase price
is not essential to the transfer of ownership as long as the property sold has been delivered.
[65]
Such delivery (traditio) operated to divest the vendor of title to the property which may not be
regained or recovered until and unless the contract is resolved or rescinded in accordance with
law.[66]
Consequently, the properties in the Giporlos Project were, therefore, owned by MMIC
notwithstanding its failure to pay the consideration stipulated in the MOA. Private respondent,
after such delivery and MMIC's continuous refusal to pay the consideration for the contract,
correctly opted to rescind the contract.[67] That private respondent did not succeed in collecting
payment prior to the filing of the complaint for rescission with damages is a fault entirely
attributable to MMIC which at the time, acted upon the orders of government authorities.
It is erroneous for private respondent and the courts below to impute bad faith on the part
of petitioner for foreclosing the properties in the Giporlos Project. Petitioner was simply acting in
accordance with its rights as a mortgagee. The MTA, as amended, clearly provides that the
mortgage covers even "after- acquired" properties. Because petitioner was simply implementing
this contractual provision of the MTA, its knowledge that MMIC had not yet paid the
consideration stipulated in the MOA could not have resulted in foreclosure in bad faith.After all,
petitioner was a total stranger as regards the MOA.
Similarly, neither may petitioner be deemed to have conspired with MMIC and government
authorities in divesting private respondent of its rights over the Giporlos Project. Petitioner's
involvement consisted in its exercising its right to foreclose the mortgage only after the MOA,
which effectively wrenched the Giporlos Project from private respondent's control, had become
a fait accompli. A lawful act, done in a lawful way, no matter how damaging the result, never lays
the basis for a claim of fraudulent conspiracy.[68] That a scheme to favor the financially strapped
MMIC over private respondent had been hatched and was in existence when the MOA was
executed is now beyond this Court's adjudicatory power. Suffice it to state that an action may be
maintained against persons who falsely and fraudulently recommend an insolvent person as
worthy of credit, by reason of which plaintiff is induced to trust him. [69]
In view of the noninvolvement of petitioner in the alleged conspiracy to strip private
respondent of the its rights over the Giporlos Project, petitioner cannot be made solidarily liable
with the MMIC for damages. However, although petitioner's rights to foreclose the mortgage and
to subject the equipment of private respondent to the foreclosure sale are unassailable, we find
that the foreclosure proceedings fell short of the requirements of the law.
The provision of the MTA vesting petitioner as trustee with the authority to choose the
place where the sale of the properties involved therein should be made is clearly in
contravention of the following provisions of Act No. 3135 as amended:
"SEC. 2. Said sale cannot be made legally outside the province in which the property sold is
situated; and in case the place within said province in which the sale is to be made is the
subject of stipulation, such sale shall be made in said place or in the municipal building of the
municipality in which the property or part thereof is situated."

32
The Giporlos Project is situated in Eastern Samar, a province separate and distinct from Samar
where the foreclosure sale took place.[70] Hence, the foreclosure sale is null and void. Even the
Chattel Mortgage Law (Act No. 1508) relied upon by private respondent in assailing the propriety
of the public auction sale in Samar, provides that the said sale should be made "in the
municipality where the mortgagor resides" or "where the property is situated." [71] It has not been
established that petitioner considered Catbalogan, Samar where the foreclosure sale was
conducted, as its "residence."
Moreover, the designation of a special sheriff to conduct the foreclosure sale is
questionable. According to Sheriff Malindog, he was designated as a special sheriff by the judge
of the Regional Trial Court of Samar, through the clerk of court, upon the request of petitioner's
counsel, one Atty. Aliena, even though there was a sheriff in Eastern Samar.[72]
Appointment of special sheriffs for the service of writs of execution or for the purpose of
conducting a foreclosure sale under Act No. 3135 is allowed only when there is no sheriff in the
area where the property involved is located or when the sheriff himself is involved in the
action. This restriction is founded on the requirement of law that sheriffs who take delivery of
money or property in trust must be duly bonded.[73] The said situations calling for the
appointment of a special sheriff being absent in this case, the appointment of Malindog as a
special sheriff by the judge of the Regional Trial Court of Samar is unauthorized. Such lack of
authority resulted in the nullification of the foreclosure sale conducted by Malindog.
Ordinarily, by the nullification of the foreclosure sale, the properties involved would revert
to their original status of being mortgaged. [74] However, the situation in this case is an exception
to that rule. The MOA, the source of MMIC's right of ownership over the properties sold at the
foreclosure sale, has been rescinded. Consequently, petitioner should exclude said properties
from the MMIC's properties which were mortgaged pari passu to the petitioner and DBP through
the MTA. However, since the foreclosed properties had been turned over to the Asset
Privatization Trust,[75] petitioner must reimburse private respondent the value thereof at the time
of the foreclosure sale.
WHEREFORE, the Decision of the Court of Appeals is hereby REVERSED and SET
ASIDE insofar as it renders petitioner solidarily liable with Marinduque Mining and Industrial
Corporation for damages and AFFIRMED insofar as it nullifies the foreclosure sale of August 31,
1984. Petitioner Philippine National Bank shall exclude the properties sold at the foreclosure
sale from the mortgaged properties of Marinduque Mining and Industrial Corporation and return
the same to private respondent Industrial Enterprises Inc. or, should such return be not feasible,
reimburse said private respondent the value thereof at the time of the foreclosure sale.
SO ORDERED.

33

G.R. No. 109902 August 2, 1994

ALU-TUCP, Representing Members: ALAN BARINQUE, with 13 others, namely: ENGR.
ALAN G. BARINQUE, ENGR. DARRELL LEE ELTAGONDE, EDUARD H. FOOKSON, JR.,
ROMEO R. SARONA, RUSSELL GACUS, JERRY BONTILAO, EUSEBIO MARIN, JR.,
LEONIDO ECHAVEZ, BONIFACIO MEJOS, EDGAR S. BONTUYAN, JOSE G. GARGUENA,
JR., OSIAS B. DANDASAN, and GERRY I. FETALVERO,petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and NATIONAL STEEL CORPORATION
(NSC), respondents.
Leonard U. Sawal for petitioners.

34
Saturnino Mejorada for private respondent.

FELICIANO, J.:
In this Petition for Certiorari, petitioners assail the Resolution of the National Labor Relations
Commission ("NLRC") dated 8 January 1993 which declared petitioners to be project employees
of private respondent National Steel Corporation ("NSC"), and the NLRC's subsequent
Resolution of 15 February 1993, denying petitioners' motion for reconsideration.
Petitioners plead that they had been employed by respondent NSC in connection with its Five
Year Expansion Program (FAYEP I & II) 1 for varying lengths of time when they were separated
from NSC's service:
Employee Date Nature of Separated
Employed Employment
1. Alan Barinque 5-14-82 Engineer 1 8-31-91
2. Jerry Bontilao 8-05-85 Engineer 2 6-30-92
3. Edgar Bontuyan 11-03-82 Chairman to present
4. Osias Dandasan 9-21-82 Utilityman 1991
5. Leonido Echavez 6-16-82 Eng. Assistant 6-30-92
6. Darrell Eltagonde 5-20-85 Engineer 1 8-31-91
7. Gerry Fetalvero 4-08-85 Mat. Expediter regularized
8. Eduard Fookson 9-20-84 Eng. Assistant 8-31-91
9. Russell Gacus 1-30-85 Engineer 1 6-30-92
10. Jose Garguena 3-02-81 Warehouseman to present
11. Eusebio Mejos 11-17-82 Survey Aide 8-31-91
12. Bonifacio Mejos 11-17-82 Surv. Party Head 1992
13. Romeo Sarona 2-26-83 Machine Operator 8-31-91 2
On 5 July 1990, petitioners filed separate complaints for unfair labor practice, regularization and
monetary benefits with the NLRC, Sub-Regional Arbitration Branch XII, Iligan City.
The complaints were consolidated and after hearing, the Labor Arbiter in a Decision dated 7
June 1991, declared petitioners "regular project employees who shall continue their employment
as such for as long as such [project] activity exists," but entitled to the salary of a regular
employee pursuant to the provisions in the collective bargaining agreement. It also ordered
payment of salary differentials. 3
Both parties appealed to the NLRC from that decision. Petitioners argued that they were regular,
not project, employees. Private respondent, on the other hand, claimed that petitioners are

project employees as they were employed to undertake a specific project NSC's Five Year
Expansion Program (FAYEP I & II).
The NLRC in its questioned resolutions modified the Labor Arbiter's decision. It affirmed the
Labor Arbiter's holding that petitioners were project employees since they were hired to perform
work in a specific undertaking the Five Years Expansion Program, the completion of which
had been determined at the time of their engagement and which operation was not directly
related to the business of steel manufacturing. The NLRC, however, set aside the award to
petitioners of the same benefits enjoyed by regular employees for lack of legal and factual basis.
Deliberating on the present Petition for Certiorari, the Court considers that petitioners have failed
to show any grave abuse of discretion or any act without or in excess of jurisdiction on the part
of the NLRC in rendering its questioned resolutions of 8 January 1993 and 15 February 1993.
The law on the matter is Article 280 of the Labor Code which reads in full:
Art. 280. Regular and Casual Employment The provisions of the written
agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, and employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the employment
is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: Provided, That, any employee who has rendered at
least one year service, whether such service is continuous or broken, shall
be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such actually exists.
(Emphasis supplied)
Petitioners argue that they are "regular" employees of NSC because: (i) their jobs are
"necessary, desirable and work-related to private respondent's main business, steel-making";
and (ii) they have rendered service for six (6) or more years to private respondent NSC. 4
The basic issue is thus whether or not petitioners are properly characterized as "project
employees" rather than "regular employees" of NSC. This issue relates, of course, to an
important consequence: the services of project employees are co-terminous with the project and
may be terminated upon the end or completion of the project for which they were
hired. 5 Regular employees, in contract, are legally entitled to remain in the service of their
employer until that service is terminated by one or another of the recognized modes of
termination of service under the Labor Code. 6

35
It is evidently important to become clear about the meaning and scope of the term "project" in
the present context. The "project" for the carrying out of which "project employees" are hired
would ordinarily have some relationship to the usual business of the employer. Exceptionally, the
"project" undertaking might not have an ordinary or normal relationship to the usual business of
the employer. In this latter case, the determination of the scope and parameeters of the "project"
becomes fairly easy. It is unusual (but still conceivable) for a company to undertake a project
which has absolutely no relationship to the usual business of the company; thus, for instance, it
would be an unusual steel-making company which would undertake the breeding and production
of fish or the cultivation of vegetables. From the viewpoint, however, of the legal characterization
problem here presented to the Court, there should be no difficulty in designating the employees
who are retained or hired for the purpose of undertaking fish culture or the production of
vegetables as "project employees," as distinguished from ordinary or "regular employees," so
long as the duration and scope of the project were determined or specified at the time of
engagement of the "project employees." 7 For, as is evident from the provisions of Article 280 of
the Labor Code, quoted earlier, the principal test for determining whether particular employees
are properly characterized as "project employees" as distinguished from "regular employees," is
whether or not the "project employees" were assigned to carry out a "specific project or
undertaking," the duration (and scope) of which were specified at the time the employees were
engaged for that project.
In the realm of business and industry, we note that "project" could refer to one or the other of at
least two (2) distinguishable types of activities. Firstly, a project could refer to a particular job or
undertaking that is within the regular or usual business of the employer company, but which is
distinct and separate, and identifiable as such, from the other undertakings of the company.
Such job or undertaking begins and ends at determined or determinable times. The typical
example of this first type of project is a particular construction job or project of a construction
company. A construction company ordinarily carries out two or more discrete identifiable
construction projects: e.g., a twenty-five- storey hotel in Makati; a residential condominium
building in Baguio City; and a domestic air terminal in Iloilo City. Employees who are hired for the
carrying out of one of these separate projects, the scope and duration of which has been
determined and made known to the employees at the time of employment, are properly treated
as "project employees," and their services may be lawfully terminated at completion of the
project.
The term "project" could also refer to, secondly, a particular job or undertaking that is not within
the regular business of the corporation. Such a job or undertaking must also be identifiably
separate and distinct from the ordinary or regular business operations of the employer. The job
or undertaking also begins and ends at determined or determinable times. The case at bar
presents what appears to our mind as a typical example of this kind of "project."
NSC undertook the ambitious Five Year Expansion Program I and II with the ultimate end in view
of expanding the volume and increasing the kinds of products that it may offer for sale to the
public. The Five Year Expansion Program had a number of component projects: e.g., (a) the
setting up of a "Cold Rolling Mill Expansion Project"; (b) the establishment of a "Billet SteelMaking Plant" (BSP); (c) the acquisition and installation of a "Five Stand TDM"; and (d) the "Cold
Mill Peripherals Project." 8 Instead of contracting out to an outside or independent contractor the
tasks of constructing the buildings with related civil and electrical works that would house the

new machinery and equipment, the installation of the newly acquired mill or plant machinery and
equipment and the commissioning of such machinery and equipment, NSC opted to execute
and carry out its Five Yeear Expansion Projects "in house," as it were, by administration. The
carrying out of the Five Year Expansion Program (or more precisely, each of its component
projects) constitutes a distinct undertaking identifiable from the ordinary business and activity of
NSC. Each component project, of course, begins and ends at specified times, which had already
been determined by the time petitioners were engaged. We also note that NSC did the work
here involved the construction of buildings and civil and electrical works, installation of
machinery and equipment and the commissioning of such machinery only for itself. Private
respondent NSC was not in the business of constructing buildings and installing plant machinery
for the general business community, i.e., for unrelated, third party, corporations. NSC
did not hold itself out to the public as a construction company or as an engineering corporation.
Which ever type of project employment is found in a particular case, a common basic requisite is
that the designation of named employees as "project employees" and their assignment to a
specific project, are effected and implemented in good faith, and not merely as a means of
evading otherwise applicable requirements of labor laws.
Thus, the particular component projects embraced in the Five Year Expansion Program, to
which petitioners were assigned, were distinguishable from the regular or ordinary business of
NSC which, of course, is the production or making and marketing of steel products. During the
time petitioners rendered services to NSC, their work was limited to one or another of the
specific component projects which made up the FAYEP I and II. There is nothing in the record to
show that petitioners were hired for, or in fact assigned to, other purposes, e.g., for operating or
maintaining the old, or previously installed and commissioned, steel-making machinery and
equipment, or for selling the finished steel products.
We, therefore, agree with the basic finding of the NLRC (and the Labor Arbiter) that the
petitioners were indeed "project employees:"
It is well established by the facts and evidence on record that herein 13
complainants were hired and engaged for specific activities or undertaking
the period of which has been determined at time of hiring or engagement. It
is of public knowledge and which this Commission can safely take judicial
notice that the expansion program (FAYEP) of respondent NSC consist of
various phases [of] project components which are being executed or
implemented independently or simultaneously from each other . . .
In other words, the employment of each "project worker" is dependent and
co-terminous with the completion or termination of the specific activity or
undertaking [for which] he was hired which has been pre-determined at the
time of engagement. Since, there is no showing that they (13 complainants)
were engaged to perform work-related activities to the business of
respondent which is steel-making, there is no logical and legal sense of
applying to them the proviso under the second paragraph of Article 280 of
the Labor Code, as amended.

36
xxx xxx xxx
The present case therefore strictly falls under the definition of "project
employees" on paragraph one of Article 280 of the Labor Code, as
amended. Moreover, it has been held that the length of service of a project
employee is not the controlling test of employment tenure but whether or not
"the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the
engagement of the employee". (See Hilario Rada v. NLRC, G.R. No. 96078,
January 9, 1992; and Sandoval Shipping, Inc. v. NLRC, 136 SCRA 674
(1985). 9
Petitioners next claim that their service to NSC of more than six (6) years should qualify them as
regular employees. We believe this claim is without legal basis. The simple fact that the
employment of petitioners as project employees had gone beyond one (1) year, does not detract
from, or legally dissolve, their status as project employees. 10 The second paragraph of Article
280 of the Labor Code, quoted above, providing that an employee who has served for at least
one (1) year, shall be considered a regular employee, relates to casual employees, not to project
employees.
In the case of Mercado, Sr. vs. National Labor Relations Commission, 11 this Court ruled that the
proviso in the second paragraph of Article 280 relates only to casual employees and is not
applicable to those who fall within the definition of said Article's first paragraph, i.e., project
employees. The familiar grammatical rule is that a proviso is to be construed with reference to
the immediately preceding part of the provision to which it is attached, and not to other sections
thereof, unless the clear legislative intent is to restrict or qualify not only the phrase immediately
preceding the proviso but also earlier provisions of the statute or even the statute itself as a
whole. No such intent is observable in Article 280 of the Labor Code, which has been quoted
earlier.
ACCORDINGLY, in view of the foregoing, the Petition for Certiorari is hereby DISMISSED for
lack of merit. The Resolutions of the NLRC dated 8 January 1993 and 15 February 1993 are
hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED.

37

38
The challenged portion of Section 12 of Republic Act No. 6715, which took effect on 21 March
1989, reads as follows:
SEC 12. Article 223 of the same code is amended to read as follows:
ART. 223. Appeal.
xxx xxx xxx
In any event, the decision of the Labor Arbiter reinstating a dismissed or
separated employee, in so far as the reinstatement aspect is concerned,
shall immediately be executory, even pending appeal. The employee shall
either be admitted back to work under the same terms and conditions
prevailing prior to his dismissal or separation or, at the option of the
employer, merely reinstated in the payroll. The posting of a bond by the
employer shall not stay the execution for reinstatement provided therein.
40
G.R. No. 90501 August 5, 1991
ARIS (PHIL.) INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER FELIPE GARDUQUE III,
LEODEGARIO DE GUZMAN, LILIA PEREZ, ROBERTO BESTAMONTE, AIDA OPENA,
REYNALDO TORIADO, APOLINARIO GAGAHINA, RUFINO DE CASTRO, FLORDELIZA
RAYOS DEL SOL, STEVE SANCHO, ESTER CAIRO, MARIETA MAGALAD, and MARY B.
NADALA, respondents.
Cesar C. Cruz & Partners for petitioner.

This is a new paragraph ingrafted into the Article.

Sections 2 and 17 of the "NLRC Interim Rules On Appeals Under R.A. No. 6715, Amending the
Labor Code", which the National Labor Relations Commission (NLRC) promulgated on 8 August
1989, provide as follows:
Section 2. Order of Reinstatement and Effect of Bond. In so far as the
reinstatement aspect is concerned, the decision of the Labor Arbiter
reinstating a dismissed or separated employee shall immediately be
executory even pending appeal. The employee shall either be admitted
back to work under the same terms and conditions prevailing prior to his
dismissal or separation, or, at the option of the employer, merely be
reinstated in the payroll.

Zosimo Morillo for respondent Rayos del Sol.

Banzuela, Flores, Miralles, Raneses, Sy & Associates for private respondents.

The posting of a bond by the employer shall not stay the execution for
reinstatement.
xxx xxx xxx

DAVIDE, JR., J.:p

Petitioner assails the constitutionality of the amendment introduced by Section 12 of Republic
Act No. 6715 to Article 223 of the Labor Code of the Philippines (PD No. 442, as amended)
allowing execution pending appeal of the reinstatement aspect of a decision of a labor arbiter
reinstating a dismissed or separated employee and of Section 2 of the NLRC Interim Rules on
Appeals under R.A. No. 6715 implementing the same. It also questions the validity of the
Transitory Provision (Section 17) of the said Interim Rules.

Section 17. Transitory provision. Appeals filed on or after March 21,

1989, but prior to the effectivity of these Interim Rules must conform to the
requirements as herein set forth or as may be directed by the Commission.
The antecedent facts and proceedings which gave rise to this petition are not disputed:
On 11 April 1988, private respondents, who were employees of petitioner, aggrieved by
management's failure to attend to their complaints concerning their working surroundings which

39
had become detrimental and hazardous, requested for a grievance conference. As none was
arranged, and believing that their appeal would be fruitless, they grouped together after the end
of their work that day with other employees and marched directly to the management's office to
protest its long silence and inaction on their complaints.
On 12 April 1988, the management issued a memorandum to each of the private respondents,
who were identified by the petitioner's supervisors as the most active participants in the rally
requiring them to explain why they should not be terminated from the service for their conduct.
Despite their explanation, private respondents were dismissed for violation of company rules
and regulations, more specifically of the provisions on security and public order and on inciting
or participating in illegal strikes or concerted actions.
Private respondents lost no time in filing a complaint for illegal dismissal against petitioner and
Mr. Gavino Bayan with the regional office of the NLRC at the National Capital Region, Manila,
which was docketed therein as NLRC-NCR-00-0401630-88.
After due trial, Labor Arbiter Felipe Garduque III handed down on 22 June 1989 a decision' the
dispositive portion of which reads:
ACCORDINGLY, respondent Aris (Phils.), Inc. is hereby ordered to reinstate
within ten (10) days from receipt hereof, herein complainants Leodegario de
Guzman, Rufino de Castro, Lilia M. Perez, Marieta Magalad, Flordeliza
Rayos del Sol, Reynaldo Toriado, Roberto Besmonte, Apolinario Gagahina,
Aidam (sic) Opena, Steve C. Sancho Ester Cairo, and Mary B. Nadala to
their former respective positions or any substantial equivalent positions if
already filled up, without loss of seniority right and privileges but with limited
backwages of six (6) months except complainant Leodegario de Guzman.

would not only result in the imposition of an additional obligation on petitioner but would also
dilute its right to appeal since it would be burdened with the consequences of reinstatement
without the benefit of a final judgment. In their Reply 8 filed on 1 September 1989, complainants
argued that R.A. No. 6715 is not sought to be given retroactive effect in this case since the
decision to be executed pursuant to it was rendered after the effectivity of the Act. The said law
took effect on 21 March 1989, while the decision was rendered on 22 June 1989.
Petitioner submitted a Rejoinder to the Reply on 5 September 1989.

On 5 October 1989, the Labor Arbiter issued an Order granting the motion for execution and the
issuance of a partial writ of execution 10 as far as reinstatement of herein complainants is
concerned in consonance with the provision of Section 2 of the rules particularly the last
sentence thereof.
In this Order, the Labor Arbiter also made reference to Section 17 of the NLRC Interim Rules in
this wise:
Since Section 17 of the said rules made mention of appeals filed on or after
March 21, 1989, but prior to the effectivity of these interim rules which must
conform with the requirements as therein set forth (Section 9) or as may be
directed by the Commission, it obviously treats of decisions of Labor
Arbiters before March 21,1989. With more reason these interim rules be
made to apply to the instant case since the decision hereof (sic) was
rendered thereafter. 11
Unable to accept the above Order, petitioner filed the instant petition on 26 October
1989 12 raising the issues adverted to in the introductory portion of this decision under the
following assignment of errors:

All other claims and prayers are hereby denied for lack of merit.
SO ORDERED.
On 19 July 1989, complainants (herein private respondents) filed a Motion For Issuance of a
Writ of Execution 2pursuant to the above-quoted Section 12 of R.A. No. 6715.
On 21 July 1989, petitioner filed its Appeal. 3
On 26 July 1989, the complainants, except Flor Rayos del Sol, filed a Partial Appeal.
On 10 August 1989, complainant Flor Rayos del Sol filed a Partial Appeal.

On 29 August 1989, petitioner filed an Opposition 6 to the motion for execution alleging that
Section 12 of R.A. No. 6715 on execution pending appeal cannot be applied retroactively to
cases pending at the time of its effectivity because it does not expressly provide that it shall be
given retroactive effect 7 and to give retroactive effect to Section 12 thereof to pending cases

A. THE LABOR ARBITER A QUO AND THE NLRC, IN ORDERING THE

REINSTATEMENT OF THE PRIVATE RESPONDENTS PENDING APPEAL
AND IN PROVIDING FOR SECTION 2 OF THE INTERIM RULES,
RESPECTIVELY, ACTED WITHOUT AND IN EXCESS OF JURISDICTION
SINCE THE BASIS FOR SAID ORDER AND INTERIM RULE, i.e.,
SECTION 12 OF R.A. 6715 IS VIOLATIVE OF THE CONSTITUTIONAL
GUARANTY OF DUE PROCESS IT BEING OPPRESSIVE AND
UNREASONABLE.
B. GRANTING ARGUENDO THAT THE PROVISION IN(SIC)
REINSTATEMENT PENDING APPEAL IS VALID, NONETHELESS, THE
LABOR ARBITER A QUO AND THE NLRC STILL ACTED IN EXCESS AND
WITHOUT JURISDICTION IN RETROACTIVELY APPLYING SAID
PROVISION TO PENDING LABOR CASES.
In Our resolution of 7 March 1989, We required the respondents to comment on the petition.

40
Respondent NLRC, through the Office of the Solicitor General, filed its Comment on 20
November 1989. 13Meeting squarely the issues raised by petitioner, it submits that the provision
concerning the mandatory and automatic reinstatement of an employee whose dismissal is
found unjustified by the labor arbiter is a valid exercise of the police power of the state and the
contested provision "is then a police legislation."
As regards the retroactive application thereof, it maintains that being merely procedural in
nature, it can apply to cases pending at the time of its effectivity on the theory that no one can
claim a vested right in a rule of procedure. Moreover, such a law is compatible with the
constitutional provision on protection to labor.

Execution pending appeal is interlinked with the right to appeal. One cannot be divorced from
the other. The latter may be availed of by the losing party or a party who is not satisfied with a
judgment, while the former may be applied for by the prevailing party during the pendency of the
appeal. The right to appeal, however, is not a constitutional, natural or inherent right. It is a
statutory privilege of statutory origin 18 and, therefore, available only if granted or provided by
statute. The law may then validly provide limitations or qualifications thereto or relief to the
prevailing party in the event an appeal is interposed by the losing party. Execution pending
appeal is one such relief long recognized in this jurisdiction. The Revised Rules of Court allows
execution pending appeal and the grant thereof is left to the discretion of the court upon good
reasons to be stated in a special order. 19

On 11 December 1989, private respondents filed a Manifestation 14 informing the Court that they
are adopting the Comment filed by the Solicitor General and stressing that petitioner failed to
comply with the requisites for a valid petition for certiorari under Rule 65 of the Rules of Court.

Before its amendment by Section 12 of R.A. No. 6715, Article 223 of the Labor Code already
allowed execution of decisions of the NLRC pending their appeal to the Secretary of Labor and
Employment.

On 20 December 1989, petitioner filed a Rejoinder

15

to the Comment of the Solicitor General.

In the resolution of 11 January 1990, 16 We considered the Comments as respondents' Answers,

gave due course to the petition, and directed that the case be calendared for deliberation.
In urging Us to declare as unconstitutional that portion of Section 223 of the Labor Code
introduced by Section 12 of R.A. No. 6715, as well as the implementing provision covered by
Section 2 of the NLRC Interim Rules, allowing immediate execution, even pending appeal, of the
reinstatement aspect of a decision of a labor arbiter reinstating a dismissed or separated
employee, petitioner submits that said portion violates the due process clause of the Constitution
in that it is oppressive and unreasonable. It argues that a reinstatement pending appeal negates
the right of the employer to self-protection for it has been ruled that an employer cannot be
compelled to continue in employment an employee guilty of acts inimical to the interest of the
employer; the right of an employer to dismiss is consistent with the legal truism that the law, in
protecting the rights of the laborer, authorizes neither the oppression nor the destruction of the
employer. For, social justice should be implemented not through mistaken sympathy for or
misplaced antipathy against any group, but even-handedly and fairly. 17
To clinch its case, petitioner tries to demonstrate the oppressiveness of reinstatement pending
appeal by portraying the following consequences: (a) the employer would be compelled to hire
additional employees or adjust the duties of other employees simply to have someone watch
over the reinstated employee to prevent the commission of further acts prejudicial to the
employer, (b) reinstatement of an undeserving, if not undesirable, employee may demoralize the
rank and file, and (c) it may encourage and embolden not only the reinstated employees but also
other employees to commit similar, if not graver infractions.
These rationalizations and portrayals are misplaced and are purely conjectural which,
unfortunately, proceed from a misunderstanding of the nature and scope of the relief of
execution pending appeal.

In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor
Arbiter reinstating a dismissed or separated employee, the law itself has laid down a
compassionate policy which, once more, vivifies and enhances the provisions of the 1987
Constitution on labor and the working-man.
These provisions are the quintessence of the aspirations of the workingman for recognition of
his role in the social and economic life of the nation, for the protection of his rights, and the
promotion of his welfare. Thus, in the Article on Social Justice and Human Rights of the
Constitution, 20 which principally directs Congress to give highest priority to the enactment of
measures that protect and enhance the right of all people to human dignity, reduce social,
economic, and political inequalities, and remove cultural inequities by equitably diffusing wealth
and political power for the common good, the State is mandated to afford full protection to labor,
local and overseas, organized and unorganized, and promote full employment and equality of
employment opportunities for all; to guarantee the rights of all workers to self-organization,
collective bargaining and negotiations, and peaceful concerted activities, including the right to
strike in accordance with law, security of tenure, human conditions of work, and a living wage, to
participate in policy and decision-making processes affecting their rights and benefits as may be
provided by law; and to promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes. Incidentally, a study
of the Constitutions of various nations readily reveals that it is only our Constitution which
devotes a separate article on Social Justice and Human Rights. Thus, by no less than its
fundamental law, the Philippines has laid down the strong foundations of a truly just and humane
society. This Article addresses itself to specified areas of concern labor, agrarian and natural
resources reform, urban land reform and housing, health, working women, and people's
organizations and reaches out to the underprivileged sector of society, for which reason the
President of the Constitutional Commission of 1986, former Associate Justice of this Court
Cecilia Muoz-Palma, aptly describes this Article as the "heart of the new Charter." 21
These duties and responsibilities of the State are imposed not so much to express sympathy for
the workingman as to forcefully and meaningfully underscore labor as a primary social and
economic force, which the Constitution also expressly affirms With equal intensity. 22 Labor is an
indispensable partner for the nation's progress and stability.

41
If in ordinary civil actions execution of judgment pending appeal is authorized for reasons the
determination of which is merely left to the discretion of the judge, We find no plausible reason to
withhold it in cases of decisions reinstating dismissed or separated employees. In such cases,
the poor employees had been deprived of their only source of livelihood, their only means of
support for their family their very lifeblood. To Us, this special circumstance is far better than any
other which a judge, in his sound discretion, may determine. In short, with respect to decisions
reinstating employees, the law itself has determined a sufficiently overwhelming reason for its
execution pending appeal.
The validity of the questioned law is not only supported and sustained by the foregoing
considerations. As contended by the Solicitor General, it is a valid exercise of the police power of
the State. Certainly, if the right of an employer to freely discharge his employees is subject to
regulation by the State, basically in the exercise of its permanent police power on the theory that
the preservation of the lives of the citizens is a basic duty of the State, that is more vital than the
preservation of corporate profits. 23 Then, by and pursuant to the same power, the State may
authorize an immediate implementation, pending appeal, of a decision reinstating a dismissed or
separated employee since that saving act is designed to stop, although temporarily since the
appeal may be decided in favor of the appellant, a continuing threat or danger to the survival or
even the life of the dismissed or separated employee and its family.
The charge then that the challenged law as well as the implementing rule are unconstitutional is
absolutely baseless. Laws are presumed constitutional. 24 To justify nullification of a law, there
must be a clear and unequivocal breach of the Constitution, not a doubtful and argumentative
implication; a law shall not be declared invalid unless the conflict with the constitution is clear
beyond reasonable doubt. 25 In Parades, et al. vs. Executive Secretary 26 We stated:
2. For one thing, it is in accordance with the settled doctrine that between
two possible constructions, one avoiding a finding of unconstitutionality and
the other yielding such a result, the former is to be preferred. That which will
save, not that which will destroy, commends itself for acceptance. After all,
the basic presumption all these years is one of validity. The onerous task of
proving otherwise is on the party seeking to nullify a statute. It must be
proved by clear and convincing evidence that there is an infringement of a
constitutional provision, save in those cases where the challenged act is
void on its face. Absent such a showing, there can be no finding of
unconstitutionality. A doubt, even if well-founded, does not suffice. Justice
Malcolm's aphorism is apropos: To doubt is to sustain. 27
The reason for this:
... can be traced to the doctrine of separation of powers which enjoins on
each department a proper respect for the acts of the other departments. ...
The theory is that, as the joint act of the legislative and executive
authorities, a law is supposed to have been carefully studied and
determined to be constitution before it was finally enacted. Hence, as long
as there is some other basis that can be used by the courts for its decision,

the constitutionality of the challenged law will not be touched upon and the
case will be decided on other available grounds. 28
The issue concerning Section 17 of the NLRC Interim Rules does not deserve a measure of
attention. The reference to it in the Order of the Labor Arbiter of 5 October 1989 was
unnecessary since the procedure of the appeal proper is not involved in this case. Moreover, the
questioned interim rules of the NLRC, promulgated on 8 August 1989, can validly be given
retroactive effect. They are procedural or remedial in character, promulgated pursuant to the
authority vested upon it under Article 218(a) of the Labor Code of the Philippines, as amended.
Settled is the rule that procedural laws may be given retroactive effect. 29 There are no vested
rights in rules of procedure. 30 A remedial statute may be made applicable to cases pending at
the time of its enactment. 31
WHEREFORE, the petition is hereby DISMISSED for lack of merit. Costs against petitioner.
SO ORDERED.

42
41
G.R. No. 115044 January 27, 1995
HON. ALFREDO S. LIM, in his capacity as Mayor of Manila, and the City of
Manila, petitioners,
vs.
HON. FELIPE G. PACQUING, as Judge, branch 40, Regional Trial Court of Manila and
ASSOCIATED CORPORATION, respondents.
G.R. No. 117263 January 27, 1995
TEOFISTO GUINGONA, JR. and DOMINADOR R. CEPEDA, petitioners,
vs.
HON. VETINO REYES and ASSOCIATED DEVELOPMENT CORPORATION, respondents.

PADILLA, J.:
These two (2) cases which are inter-related actually involve simple issues. if these issues have
apparently become complicated, it is not by reason of their nature because of the events
and dramatis personae involved.
The petition in G.R. No. 115044 was dismissed by the First Division of this Court on 01
September 1994 based on a finding that there was "no abuse of discretion, much less lack of or
excess of jurisdiction, on the part of respondent judge [Pacquing]", in issuing the questioned
orders. Judge Pacquing had earlier issued in Civil Case No. 88-45660, RTC of Manila, Branch
40, the following orders which were assailed by the Mayor of the City of Manila, Hon. Alfredo S.
Lim, in said G.R. No. 115044:
a. order dated 28 March 1994 directing Manila mayor Alfredo S. Lim to issue
the permit/license to operate the jai-alai in favor of Associated Development
Corporation (ADC).
b. order dated 11 April 1994 directing mayor Lim to explain why he should
not be cited for contempt for non-compliance with the order dated 28 March
1994.
c. order dated 20 April 1994 reiterating the previous order directing Mayor
Lim to immediately issue the permit/license to Associated Development
Corporation (ADC).
The order dated 28 march 1994 was in turn issued upon motion by ADC for execution of a final
judgment rendered on 9 September 1988 which ordered the Manila Mayor to immediately issue
to ADC the permit/licenseto operate the jai-alai in Manila, under Manila Ordinance No. 7065.

43
On 13 September 1994, petitioner Guingona (as executive secretary) issued a directive to then
chairman of the Games and Amusements Board (GAB) Francisco R. Sumulong, jr. to hold in
abeyance the grant of authority, or if any had been issued, to withdraw such grant of authority, to
Associated Development Corporation to operate the jai-alai in the City of Manila, until the
following legal questions are properly resolved:
1. Whether P.D. 771 which revoked all existing Jai-Alai franchisers issued
by local governments as of 20 August 1975 is unconstitutional.
2. Assuming that the City of Manila had the power on 7 September 1971 to
issue a Jai-Alai franchise to Associated Development Corporation, whether
the franchise granted is valied considering that the franchise has no
duration, and appears to be granted in perpetuity.
3. Whether the City of Manila had the power to issue a Jai-Alai franchise to
Associated Development Corporation on 7 September 1971 in view of
executive Order No. 392 dated 1 January 1951 which transferred from local
governments to the Games and Amusements Board the power to regulate
Jai-Alai. 1
On 15 September 1994, respondent Associated Development Corporation (ADC) filed a petition
for prohibition,mandamus, injunction and damages with prayer for temporary restraining order
and/or writ of preliminary injunction in the Regional Trial Court of Manila against petitioner
Guingona and then GAB chairman Sumulong, docketed as Civil Case No. 94-71656, seeking to
prevent GAB from withdrawing the provisional authority that had earlier been granted to ADC.
On the same day, the RTC of Manila, Branch 4, through presiding Judge Vetino Reyes, issued a
temporary restraining order enjoining the GAB from withdrawing ADC's provisional authority.
This temporary restraining order was converted into a writ of preliminary injunction upon ADC's
posting of a bond in the amount of P2,000,000.00. 2
Subsequently, also in G.R. No. 115044, the Republic of the Philippines, through the Games and
Amusements Board, filed a "Motion for Intervention; for Leave to File a Motion for
reconsideration in Intervention; and to Refer the case to the Court En Banc" and later a "Motion
for Leave to File Supplemental Motion for Reconsideration-in-Intervention and to Admit Attached
Supplemental Motion for Reconsideration-in-Intervention".
In an En Banc Resolution dated 20 September 1994, this Court referred G.R. No. 115044 to the
Court En Bancand required the respondents therein to comment on the aforementioned
motions.
Meanwhile, Judge Reyes on 19 October 1994 issued another order, this time, granting ADC a
writ of preliminarymandatory injunction against Guingona and GAB to compel them to issue in
favor of ADC the authority to operate jai-alai.

Guingona, as executive secretary, and Dominador Cepeda, Jr. as the new GAB chairman, then
filed the petition in G.R. No. 117263 assailing the abovementioned orders of respondent Judge
Vetino Reyes.
On 25 October 1994, in G.R. No. 117263, this Court granted petitioner's motion for leave to file
supplemental petition and to admit attached supplemental petition with urgent prayer for
restraining order. The Court further required respondents to file their comment on the petition
and supplemental petition with urgent prayer for restraining order. The Court likewise set the
case and all incidents thereof for hearing on 10 November 1994.
At the hearing on 10 November 1994, the issues to be resolved were formulated by the Court as
follows:
1. whether or not intervention by the Republic of the Philippines at this stage
of the proceedings is proper;
2. assuming such intervention is proper, whether or not the Associated
Development Corporation has a valid and subsisting franchise to maintain
and operate the jai-alai;
3. whether or not there was grave abuse of discretion committed by
respondent Judge Reyes in issuing the aforementioned temporary
restraining order (later writ of preliminary injunction); and
4. whether or not there was grave abuse of discretion committed by
respondent Judge Reyes in issuing the aforementioned writ of
preliminary mandatory injunction.
On the issue of the propriety of the intervention by the Republic of the Philippines, a question
was raised during the hearing on 10 November 1994 as to whether intervention in G.R. No.
115044 was the proper remedy for the national government to take in questioning the existence
of a valid ADC franchise to operate the jai-alai or whether a separate action for quo
warranto under Section 2, Rule 66 of the Rules of Court was the proper remedy.
We need not belabor this issue since counsel for respondent ADC agreed to the suggestion that
this Court once and for all settle all substantive issues raised by the parties in these cases.
Moreover, this Court can consider the petition filed in G.R. No. 117263 as one for quo warranto
which is within the original jurisdiction of the Court under section 5(1), Article VIII of the
Constitution. 3
On the propriety of intervention by the Republic, however, it will be recalled that this Court
in Director of Lands v. Court of Appeals (93 SCRA 238) allowed intervention even beyond the
period prescribed in Section 2 Rule 12 of the Rules of Court. The Court ruled in said case that a
denial of the motions for intervention would "lead the Court to commit an act of injustice to the
movants, to their successor-in-interest and to all purchasers for value and in good faith and

44
thereby open the door to fraud, falsehood and misrepresentation, should intervenors' claim be
proven to be true."
In the present case, the resulting injustice and injury, should the national government's
allegations be proven correct, are manifest, since the latter has squarely questioned the very
existence of a valid franchise to maintain and operate the jai-alai (which is a gambling operation)
in favor of ADC. As will be more extensively discussed later, the national government contends
that Manila Ordinance No. 7065 which purported to grant to ADC a franchise to conduct jai-alai
operations is void and ultra vires since Republic Act No. 954, approved on 20 June 1953, or very
much earlier than said Ordinance No. 7065, the latter approved 7 September 1971, in Section 4
thereof, requires a legislative franchise, not a municipal franchise, for the operation of jai-alai.
Additionally, the national government argues that even assuming, arguendo, that the
abovementioned ordinance is valid, ADC's franchise was nonetheless effectively revoked by
Presidential decree No. 771, issued on 20 August 1975, Sec. 3 of which expressly
revoked all existing franchises and permits to operate all forms of gambling facilities (including
the jai-alai) issued by local governments.
On the other hand, ADC's position is that Ordinance No. 7065 was validly enacted by the City of
Manila pursuant to its delegated powers under it charter, Republic Act No. 409. ADC also
squarely assails the constitutionality of PD No. 771 as violative of the equal protection and nonimpairment clauses of the Constitution. In this connection, counsel for ADC contends that this
Court should really rule on the validity of PD No. 771 to be able to determine whether ADC
continues to possess a valid franchise.

And on the question of whether or not the government is estopped from contesting ADC's
possession of a valid franchise, the well-settled rule is that the State cannot be put in estoppel
by the mistakes or errors, if any, of its officials or agents (Republic v. Intermediate Appellate
Court, 209 SCRA 90)
Consequently, in the light of the foregoing expostulation, we conclude that the republic (in contra
distinction to the City of Manila) may be allowed to intervene in G.R. No. 115044. The Republic
is intervening in G.R. No. 115044 in the exercise, not of its business or proprietary functions, but
in the exercise of its governmental functions to protect public morals and promote the general
welfare.
II
Anent the question of whether ADC has a valid franchise to operate the Jai-Alai de Manila, a
statement of the pertinent laws is in order.
1. The Charter of the City of Manila was enacted by Congress on 18 June 1949. Section 18
thereof provides:
Sec. 18. Legislative Powers. The Municipal Board shall have the
following legislative powers:
xxx xxx xxx

It will undoubtedly be a grave injustice to both parties in this case if this Court were to shirk from
ruling on the issue of constitutionality of PD No. 771. Such issue has, in our view, become the
very lis mota in resolving the present controversy, in view of ADC's insistence that it was granted
a valid and legal franchise by Ordinance No. 7065 to operate the jai-alai.
The time-honored doctrine is that all laws (PD No. 771 included) are presumed valid and
constitutional until or unless otherwise ruled by this Court. Not only this; Article XVIII Section 3 of
the Constitution states:
Sec. 3. All existing laws, decrees, executive orders, proclamations, letters of
instructions and other executive issuances not inconsistent with this
Constitution shall remain operative until amended, repealed or revoked.
There is nothing on record to show or even suggest that PD No. 771 has been repealed, altered
or amended by any subsequent law or presidential issuance (when the executive still exercised
legislative powers).
Neither can it be tenably stated that the issue of the continued existence of ADC's franchise by
reason of the unconstitutionality of PD No. 771 was settled in G.R. No. 115044, for the decision
of the Court's First Division in said case, aside from not being final, cannot have the effect of
nullifying PD No. 771 as unconstitutional, since only the Court En Banc has that power under
Article VIII, Section 4(2) of the Constitution. 4

(jj) To tax, license, permit and regulate wagers or betting by the public on
boxing, sipa, bowling, billiards, pools, horse and dog races, cockpits, jai-alai,
roller or ice-skating on any sporting or athletic contests, as well as grant
exclusive rights to establishments for this purpose, notwithstanding any
existing law to the contrary.
2. On 1 January 1951, Executive Order No. 392 was issued transferring the authority
to regulate jai-alais from local government to the Games and Amusements Board (GAB).
3. On 20 June 1953, Congress enacted Republic Act No. 954, entitled "An Act to Prohibit With
Horse Races and Basque Pelota Games (Jai-Alai), And To Prescribe Penalties For Its Violation".
The provisions of Republic Act No. 954 relating to jai-alai are as follows:
Sec. 4. No person, or group of persons other than the operator or
maintainer of a fronton with legislative franchise to conduct basque pelota
games (Jai-alai), shall offer, to take or arrange bets on any basque pelota
game or event, or maintain or use a totalizator or other device, method or
system to bet or gamble on any basque pelota game or event. (emphasis
supplied).

45
Sec. 5. No person, operator or maintainer of a fronton with legislative
franchise to conduct basque pelota games shall offer, take, or arrange bets
on any basque pelota game or event, or maintain or use a totalizator or
other device, method or system to bet or gamble on any basque pelota
game or event outside the place, enclosure, or fronton where the basque
pelota game is held. (emphasis supplied).
4. On 07 September 1971, however, the Municipal Board of Manila nonetheless passed
Ordinance No. 7065 entitled "An Ordinance Authorizing the Mayor To Allow And Permit The
Associated Development Corporation To Establish, Maintain And Operate A Jai-Alai In The City
Of Manila, Under Certain Terms And Conditions And For Other Purposes."
5. On 20 August 1975, Presidential Decree No. 771 was issued by then President Marcos. The
decree, entitled "Revoking All Powers and Authority of Local Government(s) To Grant Franchise,
License or Permit And Regulate Wagers Or Betting By The Public On Horse And Dog Races,
Jai-Alai Or Basque Pelota, And Other Forms Of Gambling", in Section 3 thereof, expressly
revoked all existing franchises and permits issued by local governments.
6. On 16 October 1975, Presidential Decree No. 810, entitled "An Act granting The Philippine
Jai-Alai And Amusement Corporation A Franchise To Operate, Construct And Maintain A Fronton
For Basque Pelota And Similar Games of Skill In THE Greater Manila Area," was promulgated.
7 On 08 May 1987, then President Aquino, by virtue of Article XVIII, Section 6, of the
Constitution, which allowed the incumbent legislative powers until the first Congress was
convened, issued Executive Order No. 169 expressly repealing PD 810 and revoking and
cancelling the franchise granted to the Philippine Jai-Alai and Amusement Corporation.
Petitioners in G.R. No. 117263 argue that Republic Act No. 954 effectively removed the power of
the Municipal Board of Manila to grant franchises for gambling operations. It is argued that the
term "legislative franchise" in Rep. Act No. 954 is used to refer to franchises issued by
Congress.
On the other hand, ADC contends that Republic Act N. 409 (Manila Chapter) gives legislative
powers to the Municipal Board to grant franchises, and since Republic Act No. 954 does not
specifically qualify the word "legislative" as referring exclusively to Congress, then Rep. Act No.
954 did not remove the power of the Municipal Board under Section 18(jj) of Republic Act No.
409 and consequently it was within the power of the City of Manila to allow ADC to operate the
jai-alai in the City of Manila.
On this point, the government counter-argues that the term "legislative powers" is used in Rep.
Act No. 409 merely to distinguish the powers under Section 18 of the law from the other powers
of the Municipal Board, but that the term "legislative franchise" in Rep. Act No. 954 refers to a
franchise granted solely by Congress.

Further, the government argues that Executive Order No. 392 dated 01 January 1951
transferred even the power to regulate Jai-Alai from the local governments to the Games and
Amusements Board (GAB), a national government agency.
It is worthy of note that neither of the authorities relied upon by ADC to support its alleged
possession of a valid franchise, namely the Charter of the City of Manila (Rep. Act No. 409) and
Manila Ordinance No. 7065 uses the word "franchise". Rep. Act No. 409 empowers the
Municipal Board of Manila to "tax, license, permit and regulatewagers or betting" and to "grant
exclusive rights to establishments", while Ordinance No. 7065 authorized the Manila City Mayor
to "allow and permit" ADC to operate jai-alai facilities in the City of Manila.
It is clear from the foregoing that Congress did not delegate to the City of Manila the power "to
franchise" wagers or betting, including the jai-alai, but retained for itself such power "to
franchise". What Congress delegated to the City of Manila in Rep. Act No. 409, with respect to
wagers or betting, was the power to "license, permit, or regulate" which therefore means that a
license or permit issued by the City of Manila to operate a wager or betting activity, such as the
jai-alai where bets are accepted, would not amount to something meaningful UNLESS the
holder of the permit or license was also FRANCHISED by the national government to so
operate. Moreover, even this power to license, permit, or regulate wagers or betting on jai-alai
was removed from local governments, including the City of Manila, and transferred to the GAB
on 1 January 1951 by Executive Order No. 392. The net result is that the authority to grant
franchises for the operation of jai-alai frontons is in Congress, while the regulatory function is
vested in the GAB.
In relation, therefore, to the facts of this case, since ADC has no franchise from Congress to
operate the jai-alai, it may not so operate even if its has a license or permit from the City Mayor
to operate the jai-alai in the City of Manila.
It cannot be overlooked, in this connection, that the Revised Penal Code punishes gambling and
betting under Articles 195 to 199 thereof. Gambling is thus generally prohibited by law, unless
another law is enacted byCongress expressly exempting or excluding certain forms of gambling
from the reach of criminal law. Among these form the reach of criminal law. Among these forms
of gambling allowed by special law are the horse races authorized by Republic Acts Nos. 309
and 983 and gambling casinos authorized under Presidential Decree No. 1869.
While jai-alai as a sport is not illegal per se, the accepting of bets or wagers on the results of jaialai games is undoubtedly gambling and, therefore, a criminal offense punishable under Articles
195-199 of the Revised Penal Code, unless it is shown that a later or special law had been
passed allowing it. ADC has not shown any such special law.
Republic Act No. 409 (the Revised Charter of the City of Manila) which was enacted by
Congress on 18 June 1949 gave the Municipal Board certain delegated legislative powers under
Section 18. A perusal of the powers enumerated under Section 18 shows that these powers are
basically regulatory in nature. 5 The regulatory nature of these powers finds support not only in
the plain words of the enumerations under Section 28 but also in this Court's ruling inPeople v.
Vera (65 Phil. 56).

46
In Vera, this Court declared that a law which gives the Provincial Board the discretion to
determine whether or not a law of general application (such as, the Probation law-Act No. 4221)
would or would not be operative within the province, is unconstitutional for being an undue
delegation of legislative power.
From the ruling in Vera, it would be logical to conclude that, if ADC's arguments were to prevail,
this Court would likewise declare Section 18(jj) of the Revised Charter of Manila unconstitutional
for the power it would delegate to the Municipal Board of Manila would give the latter the
absolute and unlimited discretion to render the penal code provisions on gambling inapplicable
or inoperative to persons or entities issued permits to operate gambling establishments in the
City of Manila.
We need not go to this extent, however, since the rule is that laws must be presumed valid,
constitutional and in harmony with other laws. Thus, the relevant provisions of Rep. Acts Nos.
409 and 954 and Ordinance No. 7065 should be taken together and it should then be clear that
the legislative powers of the Municipal Board should be understood to be regulatory in nature
and that Republic Act No. 954 should be understood to refer tocongressional franchises, as a
necessity for the operation of jai-alai.
We need not, however, again belabor this issue further since the task at hand which will
ultimately, and with finality, decide the issues in this case is to determine whether PD No. 771
validly revoked ADC's franchise to operate the jai-alai, assuming (without conceding) that it
indeed possessed such franchise under Ordinance No. 7065.
ADC argues that PD No. 771 is unconstitutional for being violative of the equal protection and
non-impairment provisions of the Constitution. On the other hand, the government contends that
PD No. 771 is a valid exercise of the inherent police power of the State.
The police power has been described as the least limitable of the inherent powers of the State. It
is based on the ancient doctrine salus populi est suprema lex (the welfare of the people is the
supreme law.) In the early case of Rubi v. Provincial Board of Mindoro (39 Phil. 660), this Court
through Mr. Justice George A. Malcolm stated thus:
The police power of the State . . . is a power co-extensive with selfprotection, and is not inaptly termed the "law of overruling necessity." It may
be said to be that inherent and plenary power in the State which enables it
to prohibit all things hurtful to the comfort, safety and welfare of society.
Carried onward by the current of legislation, the judiciary rarely attempts to
dam the onrushing power of legislative discretion, provided the purposes of
the law do not go beyond the great principles that mean security for the
public welfare or do not arbitrarily interfere with the right of the individual.
In the matter of PD No. 771, the purpose of the law is clearly stated in the "whereas clause" as
follows:

WHEREAS, it has been reported that in spite of the current drive of our law
enforcement agencies against vices and illegal gambling, these social ills
are still prevalent in many areas of the country;
WHEREAS, there is need to consolidate all the efforts of the government to
eradicate and minimize vices and other forms of social ills in pursuance of
the social and economic development program under the new society;
WHEREAS, in order to effectively control and regulate wagers or betting by
the public on horse and dog races, jai-alai and other forms of gambling
there is a necessity to transfer the issuance of permit and/or franchise from
local government to the National Government.
It cannot be argued that the control and regulation of gambling do not promote public morals and
welfare. Gambling is essentially antagonistic and self-reliance. It breeds indolence and erodes
the value of good, honest and hard work. It is, as very aptly stated by PD No. 771, a vice and a
social ill which government must minimize (if not eradicate) in pursuit of social and economic
development.
In Magtajas v. Pryce Properties Corporation (20 July 1994, G.R. No. 111097), this Court stated
thru Mr. Justice Isagani A. Cruz:
In the exercise of its own discretion, the legislative power may prohibit
gambling altogether or allow it without limitation or it may prohibit some
forms of gambling and allow others for whatever reasons it may consider
sufficient. Thus, it has prohibited jueteng and monte but permits lotteries,
cockfighting and horse-racing. In making such choices, Congress has
consulted its own wisdom, which this Court has no authority to review, much
less reverse. Well has it been said that courts do not sit to resolve the merits
of conflicting theories. That is the prerogative of the political departments. It
is settled that questions regarding wisdom, morality and practicability of
statutes are not addressed to the judiciary but may be resolved only by the
executive and legislative departments, to which the function belongs in our
scheme of government. (Emphasis supplied)
Talks regarding the supposed vanishing line between right and privilege in American
constitutional law has no relevance in the context of these cases since the reference there is to
economic regulations. On the other hand, jai-alai is not a mere economic activity which the law
seeks to regulate. It is essentially gambling and whether it should be permitted and, if so, under
what conditions are questions primarily for the lawmaking authority to determine, talking into
account national and local interests. Here, it is the police power of the State that is paramount.
ADC questions the motive for the issuance of PD Nos. 771. Clearly, however, this Court cannot
look into allegations that PD No. 771 was enacted to benefit a select group which was later
given authority to operate the jai-alai under PD No. 810. The examination of legislative
motivation is generally prohibited. (Palmer v. Thompson, 403 U.S. 217, 29 L. Ed. 2d 438 [1971]

47
per Black, J.) There is, the first place, absolute lack of evidence to support ADC's allegation of
improper motivation in the issuance of PD No. 771. In the second place, as already averred, this
Court cannot go behind the expressed and proclaimed purposes of PD No. 771, which are
reasonable and even laudable.
It should also be remembered that PD No. 771 provides that the national government can
subsequently grant franchises "upon proper application and verification of the qualifications of
the applicant." ADC has not alleged that it filed an application for a franchise with the national
government subsequent to the enactment of PD No. 771; thus, the allegations abovementioned
(of preference to a select group) are based on conjectures, speculations and imagined biases
which do not warrant the consideration of this Court.
On the other hand, it is noteworthy that while then president Aquino issued Executive Order No.
169 revoking PD No. 810 (which granted a franchise to a Marcos-crony to operate the jai-alai),
she did not scrap or repeal PD No. 771 which had revoked all franchises to operate jai-alais
issued by local governments, thereby re-affirming the government policy that franchises to
operate jai-alais are for the national government (not local governments) to consider and
approve.
On the alleged violation of the non-impairment and equal protection clauses of the Constitution,
it should be remembered that a franchise is not in the strict sense a simple contract but rather it
is more importantly, a mere privilege specially in matters which are within the government's
power to regulate and even prohibit through the exercise of the police power. Thus, a gambling
franchise is always subject to the exercise of police power for the public welfare.
In RCPI v. NTC (150 SCRA 450), we held that:
A franchise started out as a "royal privilege or (a) branch of the King's
prerogative, subsisting in the hands of a subject." This definition was given
by Finch, adopted by Blackstone, and accepted by every authority since . . .
Today, a franchise being merely a privilege emanating from the sovereign
power of the state and owing its existence to a grant, is subject to regulation
by the state itself by virtue of its police power through its administrative
agencies.

There was no violation by PD No. 771 of the equal protection clause since the decree
revoked all franchises issued by local governments without qualification or exception. ADC
cannot allege violation of the equal protection clause simply because it was the only one
affected by the decree, for as correctly pointed out by the government, ADC was not singled out
when all jai-alai franchises were revoked. Besides, it is too late in the day for ADC to seek
redress for alleged violation of its constitutional rights for it could have raised these issues as
early as 1975, almost twenty 920) years ago.
Finally, we do not agree that Section 3 of PD No. 771 and the requirement of a legislative
franchise in Republic Act No. 954 are "riders" to the two 92) laws and are violative of the rule
that laws should embrace one subject which shall be expressed in the title, as argued by ADC.
In Cordero v. Cabatuando (6 SCRA 418), this Court ruled that the requirement under the
constitution that all laws should embrace only one subject which shall be expressed in the title is
sufficiently met if the title is comprehensive enough reasonably to include the general object
which the statute seeks to effect, without expressing each and every end and means necessary
or convenient for the accomplishing of the objective.
III
On the issue of whether or not there was grave abuse of discretion committed by respondent
Judge Reyes in issuing the temporary restraining order (later converted to a writ of preliminary
injunction) and the writ of preliminary mandatory injunction, we hold and rule there was.
Section 3, Rule 58 of the rules of Court provides for the grounds for the issuance of a
preliminary injunction. While ADC could allege these grounds, respondent judge should have
taken judicial notice of Republic Act No. 954 and PD 771, under Section 1 rule 129 of the Rules
of court. These laws negate the existence of any legal right on the part of ADC to the reliefs it
sought so as to justify the issuance of a writ of preliminary injunction. since PD No. 771 and
Republic Act No. 954 are presumed valid and constitutional until ruled otherwise by the Supreme
Court after due hearing, ADC was not entitled to the writs issued and consequently there was
grave abuse of discretion in issuing them.
WHEREFORE, for the foregoing reasons, judgment is hereby rendered:
1. allowing the Republic of the Philippines to intervene in G.R. No. 115044.

There is a stronger reason for holding ADC's permit to be a mere privilege because jai-alai,
when played for bets, is pure and simple gambling. To analogize a gambling franchise for the
operation of a public utility, such as public transportation company, is to trivialize the great
historic origin of this branch of royal privilege.
As earlier noted, ADC has not alleged ever applying for a franchise under the provisions of PD
No. 771. and yet, the purpose of PD No. 771 is quite clear from its provisions, i.e., to give to
the national government the exclusive power to grant gambling franchises. Thus, all franchises
then existing were revoked but were made subject to reissuance by the national government
upon compliance by the applicant with government-set qualifications and requirements.

2. declaring Presidential Decree No. 771 valid and constitutional.

3. declaring that respondent Associated Development corporation (ADC)
does not possess the required congressional franchise to operate and
conduct the jai-alai under Republic Act No. 954 and Presidential Decree No.
771.

48
4. setting aside the writs of preliminary injunction and preliminary mandatory
injunction issued by respondent Judge Vetino Reyes in civil Case No. 9471656.
SO ORDERED.

49
On February 16, 2001, the City Prosecutor issued a resolution finding probable cause
against petitioners and recommending the filing of an information for estafa with no bail
recommended. On the same day, an information for the crime of estafa was filed with Branch
217 of the Regional Trial Court of Quezon City against petitioners. The case was docketed as
Criminal Case No. Q-01-101574. Thereafter, the trial court issued a warrant for the arrest of
herein petitioners, thus:
It appearing on the face of the information and from supporting affidavit of the complaining witness and
its annexes that probable cause exists, that the crime charged was committed and accused is probably
guilty thereof, let a warrant for the arrest of the accused be issued.
No Bail Recommended.
[G.R. No. 149276. September 27, 2002]
JOVENCIO LIM and TERESITA LIM, petitioners, vs. THE PEOPLE OF THE PHILIPPINES,
THE REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH 217, THE CITY
PROSECUTOR OF QUEZON CITY, AND WILSON CHAM, respondents.
DECISION
CORONA, J.:
The constitutionality of PD 818, a decree which amended Article 315 of the Revised Penal
Code by increasing the penalties for estafa committed by means of bouncing checks, is being
challenged in this petition for certiorari, for being violative of the due process clause, the right to
bail and the provision against cruel, degrading or inhuman punishment enshrined under the
Constitution.
The antecedents of this case, as gathered from the parties pleadings and documentary
proofs, follow.
In December 1991, petitioner spouses issued to private respondent two postdated checks,
namely, Metrobank check no. 464728 dated January 15, 1992 in the amount of P365,750 and
Metrobank check no. 464743 dated January 22, 1992 in the amount of P429,000. Check no.
464728 was dishonored upon presentment for having been drawn against insufficient funds
while check no. 464743 was not presented for payment upon request of petitioners who
promised to replace the dishonored check.
When petitioners reneged on their promise to cover the amount of check no. 464728, the
private respondent filed a complaint-affidavit before the Office of the City Prosecutor of Quezon
City charging petitioner spouses with the crime of estafa under Article 315, par. 2 (d) of the
Revised Penal Code, as amended by PD 818.

SO ORDERED.[1]
On July 18, 2001, petitioners filed an Urgent Motion to Quash Information and Warrant of
Arrest which was denied by the trial court. Likewise, petitioners motion for bail filed on July 24,
2001 was denied by the trial court on the same day. Petitioner Jovencio Lim was arrested by
virtue of the warrant of arrest issued by the trial court and was detained at the Quezon City
Jail.However, petitioner Teresita Lim remained at large.
On August 22, 2001, petitioners filed the instant petition for certiorari imputing grave abuse
of discretion on the part of the lower court and the Office of the City Prosecutor of Quezon City,
arguing that PD 818 violates the constitutional provisions on due process, bail and imposition of
cruel, degrading or inhuman punishment.
In a resolution dated February 26, 2002, this Court granted the petition of Jovencio Lim to
post bail pursuant to Department of Justice Circular No. 74 dated November 6, 2001 which
amended the 2000 Bail Bond Guide involving estafa under Article 315, par. 2 (d), and qualified
theft. Said Circular specifically provides as follows:
xxx xxx xxx
3) Where the amount of fraud is P32,000.00 or over in which the imposable penalty
is reclusion temporal to reclusion perpetua, bail shall be based on reclusion
temporal maximum, pursuant to Par. 2 (a) of the 2000 Bail Bond Guide,
multiplied by P2,000.00, plus an additional of P2,000.00 for every P10,000.00 in
excess of P22,000.00; Provided, however, that the total amount of bail shall not
exceed P60,000.00.
In view of the aforementioned resolution, the matter concerning bail shall no longer be
discussed. Thus, this decision will focus on whether or not PD 818 violates Sections 1 and 19 of
Article III of the Constitution, which respectively provide:

50
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.
xxx
Section 19 (1) Excessive fines shall not be imposed, nor cruel, degrading or inhuman punishment
inflicted. x x x.
We shall deal first with the issue of whether PD 818 was enacted in contravention of
Section 19 of Article III of the Constitution. In this regard, the impugned provision of PD 818
reads as follows:
SECTION 1. Any person who shall defraud another by means of false pretenses or fraudulent acts as
defined in paragraph 2(d) of Article 315 of the Revised Penal Code, as amended by Republic Act No.
4885, shall be punished by:
1st. The penalty of reclusion temporal if the amount of the fraud is over 12,000 pesos but does not exceed
22,000 pesos, and if such amount exceeds the later 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 in no case exceed thirty years. In such cases, and in connection with the
accessory penalties which may be imposed under the Revised Penal Code, the penalty shall be
termed reclusion perpetua;
2nd. The penalty of prision mayor in its maximum period, if the amount of the fraud is over 6,000 pesos but
does not exceed 12,000 pesos.
3rd. The penalty of prision mayor in its medium period, if such amount is over 200 pesos but does not
exceed 6,000 pesos; and
th

4 . By prision mayor in its minimum period, if such amount does not exceed 200 pesos.
Petitioners contend that, inasmuch as the amount of the subject check is P365,750, they
can be penalized with reclusion perpetua or 30 years of imprisonment. This penalty, according to
petitioners, is too severe and disproportionate to the crime they committed and infringes on the
express mandate of Article III, Section 19 of the Constitution which prohibits the infliction of
cruel, degrading and inhuman punishment.
Settled is the rule that a punishment authorized by statute is not cruel, degrading or
disproportionate to the nature of the offense unless it is flagrantly and plainly oppressive and
wholly disproportionate to the nature of the offense as to shock the moral sense of the
community. It takes more than merely being harsh, excessive, out of proportion or severe for a
penalty to be obnoxious to the Constitution. [2] Based on this principle, the Court has consistently
overruled contentions of the defense that the penalty of fine or imprisonment authorized by the
statute involved is cruel and degrading.

In People vs. Tongko,[3] this Court held that the prohibition against cruel and unusual
punishment is generally aimed at the form or character of the punishment rather than its severity
in respect of its duration or amount, and applies to punishments which never existed in America
or which public sentiment regards as cruel or obsolete. This refers, for instance, to those inflicted
at the whipping post or in the pillory, to burning at the stake, breaking on the wheel,
disemboweling and the like. The fact that the penalty is severe provides insufficient basis to
declare a law unconstitutional and does not, by that circumstance alone, make it cruel and
inhuman.
Petitioners also argue that while PD 818 increased the imposable penalties for estafa
committed under Article 315, par. 2 (d) of the Revised Penal Code, it did not increase the
amounts corresponding to the said new penalties. Thus, the original amounts provided for in the
Revised Penal Code have remained the same notwithstanding that they have become negligible
and insignificant compared to the present value of the peso.
This argument is without merit. The primary purpose of PD 818 is emphatically and
categorically stated in the following:
WHEREAS, reports received of late indicate an upsurge of estafa (swindling) cases committed by means
of bouncing checks;
WHEREAS, if not checked at once, these criminal acts would erode the peoples confidence in the use of
negotiable instruments as a medium of commercial transaction and consequently result in the retardation
of trade and commerce and the undermining of the banking system of the country;
WHEREAS, it is vitally necessary to arrest and curb the rise in this kind of estafa cases by increasing the
existing penalties provided therefor.
Clearly, the increase in the penalty, far from being cruel and degrading, was motivated by
a laudable purpose, namely, to effectuate the repression of an evil that undermines the countrys
commercial and economic growth, and to serve as a necessary precaution to deter people from
issuing bouncing checks. The fact that PD 818 did not increase the amounts corresponding to
the new penalties only proves that the amount is immaterial and inconsequential. What the law
sought to avert was the proliferation of estafa cases committed by means of bouncing
checks. Taking into account the salutary purpose for which said law was decreed, we conclude
that PD 818 does not violate Section 19 of Article III of the Constitution.
Moreover, when a law is questioned before the Court, the presumption is in favor of its
constitutionality. To justify its nullification, there must be a clear and unmistakable breach of the
Constitution, not a doubtful and argumentative one.[4] The burden of proving the invalidity of a
law rests on those who challenge it. In this case, petitioners failed to present clear and
convincing proof to defeat the presumption of constitutionality of PD 818.
With respect to the issue of whether PD 818 infringes on Section 1 of Article III of the
Constitution, petitioners claim that PD 818 is violative of the due process clause of the
Constitution as it was not published in the Official Gazette. This claim is incorrect and must be

51
rejected. Publication, being an indispensable part of due process, is imperative to the validity of
laws, presidential decrees and executive orders.[5] PD 818 was published in the Official Gazette
on December 1, 1975.[6]

SALVACION, petitioners, vs. CENTRAL BANK OF THE PHILIPPINES, CHINA

BANKING CORPORATION and GREG BARTELLI y NORTHCOTT,respondents.
DECISION

With the foregoing considerations in mind, this Court upholds the constitutionality of PD
818.

TORRES, JR., J.:

WHEREFORE, the petition is hereby DISMISSED.
SO ORDERED.

In our predisposition to discover the original intent of a statute, courts become the
unfeeling pillars of the status quo. Little do we realize that statutes or even constitutions are
bundles of compromises thrown our way by their framers. Unless we exercise vigilance, the
statute may already be out of tune and irrelevant to our day.
The petition is for declaratory relief. It prays for the following reliefs:
a.) Immediately upon the filing of this petition, an Order be issued restraining the respondents
from applying and enforcing Section 113 of Central Bank Circular No. 960;
b.) After hearing, judgment be rendered:
1.) Declaring the respective rights and duties of petitioners and respondents;
2.) Adjudging Section 113 of Central Bank Circular No. 960 as contrary to the
provision of the Constitution, hence void; because its provision that Foreign
currency deposits shall be exempt from attachment, garnishment, or any other
order to process of any court, legislative body, government agency or any
administrative body whatsoever
i.) has taken away the right of petitioners to have the bank deposit of
defendant Greg Bartelli y Northcott garnished to satisfy the judgment
rendered in petitioners favor in violation of substantive due process
guaranteed by the Constitution;
ii.) has given foreign currency depositors an undue favor or a class
privilege in violation of the equal protection clause of the Constitution;
iii.) has provided a safe haven for criminals like the herein respondent
Greg Bartelli y Northcott since criminals could escape civil liability for
their wrongful acts by merely converting their money to a foreign
currency and depositing it in a foreign currency deposit account with an
authorized bank.

[G.R. No. 94723. August 21, 1997]

KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father and Natural
Guardian, and Spouses FEDERICO N. SALVACION, JR., and EVELINA E.

The antecedents facts:

52
On February 4, 1989, Greg Bartelli y Northcott, an American tourist, coaxed and lured
petitioner Karen Salvacion, then 12 years old to go with him to his apartment. Therein, Greg
Bartelli detained Karen Salvacion for four days, or up to February 7, 1989 and was able to rape
the child once on February 4, and three times each day on February 5, 6, and 7, 1989. On
February 7, 1989, after policemen and people living nearby, rescued Karen, Greg Bartelli was
arrested and detained at the Makati Municipal Jail. The policemen recovered from Bartelli the
following items: 1.) Dollar Check No. 368, Control No. 021000678-1166111303, US
3,903.20; 2.) COCOBANK Bank Book No. 104-108758-8 (Peso Acct.); 3.) Dollar Account China
Banking Corp., US $/A#54105028-2; 4.) ID-122-30-8877; 5.) Philippine Money (P234.00)
cash; 6.) Door Keys 6 pieces; 7.) Stuffed Doll (Teddy Bear) used in seducing the complainant.

May 26, 1989

On February 16, 1989, Makati Investigating Fiscal Edwin G. Condaya filed against Greg
Bartelli, Criminal Case No. 801 for Serious Illegal Detention and Criminal Cases Nos. 802, 803,
804, and 805 for four (4) counts of Rape. On the same day, petitioners filed with the Regional
Trial Court of Makati Civil Case No. 89-3214 for damages with preliminary attachment against
Greg Bartelli. On February 24, 1989, the day there was a scheduled hearing for Bartellis petition
for bail the latter escaped from jail.

Dear Ms. Carolino:

On February 28, 1989, the court granted the fiscals Urgent Ex-Parte Motion for the
Issuance of Warrant of Arrest and Hold Departure Order. Pending the arrest of the accused Greg
Bartelli y Northcott, the criminal cases were archived in an Order dated February 28, 1989.
Meanwhile, in Civil Case No. 89-3214, the Judge issued an Order dated February 22,
1989 granting the application of herein petitioners, for the issuance of the writ of preliminary
attachment. After petitioners gave Bond No. JCL (4) 1981 by FGU Insurance Corporation in the
amount P100,000.00, a Writ of Preliminary Attachment was issued by the trial court on February
28, 1989.

Ms. Erlinda S. Carolino

12 Pres. Osmea Avenue
South Admiral Village
Paranaque, Metro Manila

This is in reply to your letter dated April 25, 1989 regarding your inquiry on Section 113, CB
Circular No. 960 (1983).
The cited provision is absolute in application. It does not admit of any exception, nor has the
same been repealed nor amended.
The purpose of the law is to encourage dollar accounts within the countrys banking system
which would help in the development of the economy. There is no intention to render futile
the basic rights of a person as was suggested in your subject letter. The law may be harsh as
some perceive it, but it is still the law. Compliance is, therefore, enjoined.
Very truly yours,
(SGD) AGAPITO S. FAJARDO

On March 1, 1989, the Deputy Sheriff of Makati served a Notice of Garnishment on China
Banking Corporation. In a letter dated March 13, 1989 to the Deputy Sheriff of Makati, China
Banking Corporation invoked Republic Act No. 1405 as its answer to the notice of garnishment
served on it. On March 15, 1989, Deputy Sheriff of Makati Armando de Guzman sent his reply to
China Banking Corporation saying that the garnishment did not violate the secrecy of bank
deposits since the disclosure is merely incidental to a garnishment properly and legally made by
virtue of a court order which has placed the subject deposits in custodia legis. In answer to this
letter of the Deputy Sheriff of Makati, China Banking Corporation, in a letter dated March 20,
1989, invoked Section 113 of Central Bank Circular No. 960 to the effect that the dollar deposits
of defendant Greg Bartelli are exempt from attachment, garnishment, or any other order or
process of any court, legislative body, government agency or any administrative body,
whatsoever.
This prompted the counsel for petitioners to make an inquiry with the Central Bank in a
letter dated April 25, 1989 on whether Section 113 of CB Circular No. 960 has any exception or
whether said section has been repealed or amended since said section has rendered nugatory
the substantive right of the plaintiff to have the claim sought to be enforced by the civil action
secured by way of the writ of preliminary attachment as granted to the plaintiff under Rule 57 of
the Revised Rules of Court. The Central Bank responded as follows:

Director[1]
Meanwhile, on April 10, 1989, the trial court granted petitioners motion for leave to serve
summons by publication in the Civil Case No. 89-3214 entitled Karen Salvacion. et al. vs. Greg
Bartelli y Northcott. Summons with the complaint was published in the Manila Times once a
week for three consecutive weeks. Greg Bartelli failed to file his answer to the complaint and
was declared in default on August 7, 1989. After hearing the case ex-parte, the court rendered
judgment in favor of petitioners on March 29, 1990, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against defendant,
ordering the latter:
1. To pay plaintiff Karen E. Salvacion the amount of P500,000.00 as moral damages;
2. To pay her parents, plaintiffs spouses Federico N. Salvacion, Jr., and Evelina E. Salvacion
the amount of P150,000.00 each or a total of P300,000.00 for both of them;

53
3. To pay plaintiffs exemplary damages of P100,000.00; and
4. To pay attorneys fees in an amount equivalent to 25% of the total amount of damages
herein awarded;
5. To pay litigation expenses of P10,000.00; plus
6. Costs of the suit.
SO ORDERED.
The heinous acts of respondents Greg Bartelli which gave rise to the award were related
in graphic detail by the trial court in its decision as follows:
The defendant in this case was originally detained in the municipal jail of Makati but was
able to escape therefrom on February 24, 1989 as per report of the Jail Warden of Makati to
the Presiding Judge, Honorable Manuel M. Cosico of the Regional Trial Court of Makati,
Branch 136, where he was charged with four counts of Rape and Serious Illegal Detention
(Crim. Cases Nos. 802 to 805).Accordingly, upon motion of plaintiffs, through counsel,
summons was served upon defendant by publication in the Manila Times, a newspaper of
general circulation as attested by the Advertising Manager of the Metro Media Times, Inc.,
the publisher of the said newspaper. Defendant, however, failed to file his answer to the
complaint despite the lapse of the period of sixty (60) days from the last publication; hence,
upon motion of the plaintiffs through counsel, defendant was declared in default and plaintiffs
were authorized to present their evidence ex parte.
In support of the complaint, plaintiffs presented as witness the minor Karen E. Salvacion, her
father, Federico N. Salacion, Jr., a certain Joseph Aguilar and a certain Liberato Mandulio,
who gave the following testimony:
Karen took her first year high school in St. Marys Academy in Pasay City but has recently transferred to
Arellano University for her second year.
In the afternoon of February 4, 1989, Karen was at the Plaza Fair Makati Cinema Square, with her friend
Edna Tangile whiling away her free time. At about 3:30 p.m. while she was finishing her snack on a
concrete bench in front of Plaza Fair, an American approached her. She was then alone because Edna
Tangile had already left, and she was about to go home. (TSN, Aug. 15, 1989, pp. 2 to 5)
The American asked her name and introduced himself as Greg Bartelli. He sat beside her when he talked
to her. He said he was a Math teacher and told her that he has a sister who is a nurse in New York. His
sister allegedly has a daughter who is about Karens age and who was with him in his house along
Kalayaan Avenue. (TSN, Aug. 15, 1989, pp. 4-5).

The American asked Karen what was her favorite subject and she told him its Pilipino. He then invited her
to go with him to his house where she could teach Pilipino to his niece. He even gave her a stuffed toy to
persuade her to teach his niece. (Id., pp.5-6)
They walked from Plaza Fair along Pasong Tamo, turning right to reach the defendants house along
Kalayaan Avenue. (Id., p.6)
When they reached the apartment house, Karen notices that defendants alleged niece was not outside the
house but defendant told her maybe his niece was inside. When Karen did not see the alleged niece inside
the house, defendant told her maybe his niece was upstairs, and invited Karen to go upstairs. (Id., p. 7)
Upon entering the bedroom defendant suddenly locked the door. Karen became nervous because his niece
was not there. Defendant got a piece of cotton cord and tied Karens hands with it, and then he undressed
her. Karen cried for help but defendant strangled her. He took a packing tape and he covered her mouth
with it and he circled it around her head. (Id., p. 7)
Then, defendant suddenly pushed Karen towards the bed which was just near the door. He tied her feet
and hands spread apart to the bed posts. He knelt in front of her and inserted his finger in her sex
organ.She felt severe pain. She tried to shout but no sound could come out because there were tapes on her
mouth. When defendant withdrew his finger it was full of blood and Karen felt more pain after the
withdrawal of the finger. (Id., p.8)
He then got a Johnsons Baby Oil and he applied it to his sex organ as well as to her sex organ. After that
he forced his sex organ into her but he was not able to do so. While he was doing it, Karen found it
difficult to breathe and she perspired a lot while feeling severe pain. She merely presumed that he was
able to insert his sex organ a little, because she could not see. Karen could not recall how long the
defendant was in that position. (Id., pp. 8-9)
After that, he stood up and went to the bathroom to wash. He also told Karen to take a shower and he
untied her hands. Karen could only hear the sound of the water while the defendant, she presumed, was in
the bathroom washing his sex organ. When she took a shower more blood came out from her. In the
meantime, defendant changed the mattress because it was full of blood. After the shower, Karen was
allowed by defendant to sleep. She fell asleep because she got tired crying. The incident happened at about
4:00 p.m. Karen had no way of determining the exact time because defendant removed her
watch.Defendant did not care to give her food before she went to sleep. Karen woke up at about 8:00
oclock the following morning. (Id., pp. 9-10)
The following day, February 5, 1989, a Sunday, after breakfast of biscuit and coke at about 8:30 to 9:00
a.m. defendant raped Karen while she was still bleeding. For lunch, they also took biscuit and coke. She
was raped for the second time at about 12:00 to 2:00 p.m. In the evening, they had rice for dinner which
defendant had stored downstairs; it was he who cooked the rice that is why it looks like lugaw. For the
third time, Karen was raped again during the night. During those three times defendant succeeded in
inserting his sex organ but she could not say whether the organ was inserted wholly.
Karen did not see any firearm or any bladed weapon. The defendant did not tie her hands and feet nor put
a tape on her mouth anymore but she did not cry for help for fear that she might be killed; besides, all

54
those windows and doors were closed. And even if she shouted for help, nobody would hear her. She was
so afraid that if somebody would hear her and would be able to call a police, it was still possible that as
she was still inside the house, defendant might kill her. Besides, the defendant did not leave that Sunday,
ruling out her chance to call for help. At nighttime he slept with her again. (TSN, Aug. 15, 1989, pp. 1214)
On February 6, 1989, Monday, Karen was raped three times, once in the morning for thirty minutes after
breakfast of biscuits; again in the afternoon; and again in the evening. At first, Karen did not know that
there was a window because everything was covered by a carpet, until defendant opened the window for
around fifteen minutes or less to let some air in, and she found that the window was covered by styrofoam
and plywood. After that, he again closed the window with a hammer and he put the styrofoam, plywood,
and carpet back. (Id., pp. 14-15)
That Monday evening, Karen had a chance to call for help, although defendant left but kept the door
closed. She went to the bathroom and saw a small window covered by styrofoam and she also spotted a
small hole. She stepped on the bowl and she cried for help through the hole. She cried: Maawa na po kayo
sa akin. Tulungan nyo akong makalabas dito. Kinidnap ako! Somebody heard her. It was a woman,
probably a neighbor, but she got angry and said she was istorbo. Karen pleaded for help and the woman
told her to sleep and she will call the police. She finally fell asleep but no policeman came. (TSN, Aug.
15, 1989, pp. 15-16)

They went out of the house and she saw some of her neighbors in front of the house. They rode the car of
a certain person she called Kuya Boy together with defendant, the policeman, and two of her neighbors
whom she called Kuya Bong Lacson and one Ate Nita. They were brought to Sub-Station I and there she
was investigated by a policeman. At about 2:00 a.m., her father arrived, followed by her mother together
with some of their neighbors. Then they were brought to the second floor of the police headquarters. (Id.,
p. 21)
At the headquarters, she was asked several questions by the investigator. The written statement she gave to
the police was marked Exhibit A. Then they proceeded to the National Bureau of Investigation together
with the investigator and her parents. At the NBI, a doctor, a medico-legal officer, examined her private
parts. It was already 3:00 in early morning, of the following day when they reached the NBI, (TSN, Aug.
15, 1989, p. 22) The findings of the medico-legal officer has been marked as Exhibit B.
She was studying at the St. Marys Academy in Pasay City at the time of the Incident but she subsequently
transferred to Apolinario Mabini, Arellano University, situated along Taft Avenue, because she was
ashamed to be the subject of conversation in the school. She first applied for transfer to Jose Abad Santos,
Arellano University along Taft Avenue near the Light Rail Transit Station but she was denied admission
after she told the school the true reason for her transfer. The reason for their denial was that they might be
implicated in the case. (TSN, Aug. 15, 1989, p. 46)
xxx xxx xxx

She woke up at 6:00 oclock the following morning, and she saw defendant in bed, this time sleeping. She
waited for him to wake up. When he woke up, he again got some food but he always kept the door
locked. As usual, she was merely fed with biscuit and coke. On that day, February 7, 1989, she was again
raped three times. The first at about 6:30 to 7:00 a.m., the second at about 8:30 9:00, and the third was
after lunch at 12:00 noon. After he had raped her for the second time he left but only for a short
while. Upon his return, he caught her shouting for help but he did not understand what she was shouting
about.After she was raped the third time, he left the house. (TSN, Aug. 15, 1989, pp. 16-17) She again
went to the bathroom and shouted for help. After shouting for about five minutes, she heard many
voices. The voices were asking for her name and she gave her name as Karen Salvacion. After a while,
she heard a voice of a woman saying they will just call the police. They were also telling her to change her
clothes.She went from the bathroom to the room but she did not change her clothes being afraid that
should the neighbors call the police and the defendant see her in different clothes, he might kill her. At that
time she was wearing a T-shirt of the American bacause the latter washed her dress. (Id., p. 16)
Afterwards, defendant arrived and opened the door. He asked her if she had asked for help because there
were many policemen outside and she denied it. He told her to change her clothes, and she did change to
the one she was wearing on Saturday. He instructed her to tell the police that she left home and willingly;
then he went downstairs but he locked the door. She could hear people conversing but she could not
understand what they were saying. (Id., p. 19)
When she heard the voices of many people who were conversing downstairs, she knocked repeatedly at
the door as hard as she could. She heard somebody going upstairs and when the door was opened, she saw
a policeman. The policeman asked her name and the reason why she was there. She told him she was
kidnapped. Downstairs, he saw about five policemen in uniform and the defendant was talking to
them. Nakikipag-areglo po sa mga pulis, Karen added. The policeman told him to just explain at the
precinct. (Id., p. 20)

After the incident, Karen has changed a lot. She does not play with her brother and sister anymore, and
she is always in a state of shock; she has been absent-minded and is ashamed even to go out of the
house. (TSN, Sept. 12, 1989, p. 10) She appears to be restless or sad. (Id., p. 11) The father prays
for P500,000.00 moral damages for Karen for this shocking experience which probably, she would always
recall until she reaches old age, and he is not sure if she could ever recover from this experience. (TSN,
Sept. 24, 1989, pp. 10-11)
Pursuant to an Order granting leave to publish notice of decision, said notice was
published in the Manila Bulletin once a week for three consecutive weeks. After the lapse of
fifteen (15) days from the date of the last publication of the notice of judgment and the decision
of the trial court had become final, petitioners tried to execute on Bartellis dollar deposit with
China Banking Corporation. Likewise, the bank invoked Section 113 of Central Bank Circular No.
960.
Thus, petitioners decided to seek relief from this Court.
The issues raised and the arguments articulated by the parties boil down to two:
May this Court entertain the instant petition despite the fact that original jurisdiction in
petitions for declaratory relief rests with the lower court? She Section 113 of Central Bank
Circular No. 960 and Section 8 of R.A. 6426, as amended by P.D. 1246, otherwise known as the
Foreign Currency Deposit Act be made applicable to a foreign transient?

55
Petitioners aver as heretofore stated that Section 113 of Central Bank Circular No. 960
providing that Foreign currency deposits shall be exempt from attachment, garnishment, or any
other order or process of any court, legislative body, government agency or any administrative
body whatsoever. should be adjudged as unconstitutional on the grounds that: 1.) it has taken
away the right of petitioners to have the bank deposit of defendant Greg Bartelli y Northcott
garnished to satisfy the judgment rendered in petitioners favor in violation of substantive due
process guaranteed by the Constitution; 2.) it has given foreign currency depositors an undue
favor or a class privilege n violation of the equal protection clause of the Constitution; 3.) it has
provided a safe haven for criminals like the herein respondent Greg Bartelli y Northcott since
criminal could escape civil liability for their wrongful acts by merely converting their money to a
foreign currency and depositing it in a foreign currency deposit account with an authorized bank;
and 4.) The Monetary Board, in issuing Section 113 of Central Bank Circular No. 960 has
exceeded its delegated quasi- legislative power when it took away: a.) the plaintiffs substantive
right to have the claim sought to be enforced by the civil action secured by way of the writ of
preliminary attachment as granted by Rule 57 of the Revised Rules of Court; b.) the plaintiffs
substantive right to have the judgment credit satisfied by way of the writ of execution out of the
bank deposit of the judgment debtor as granted to the judgment creditor by Rule 39 of the
Revised Rules of Court, which is beyond its power to do so.
On the other hand, respondent Central Bank, in its Comment alleges that the Monetary
Board in issuing Section 113 of CB Circular No. 960 did not exceed its power or authority
because the subject Section is copied verbatim from a portion of R.A. No. 6426 as amended by
P.D. 1246. Hence, it was not the Monetary Board that grants exemption from attachment or
garnishment to foreign currency deposits, but the law (R.A. 6426 as amended) itself; that it does
not violate the substantive due process guaranteed by the Constitution because a.) it was based
on a law; b.) the law seems to be reasonable; c.) it is enforced according to regular methods of
procedure; and d.) it applies to all members of a class.
Expanding, the Central Bank said; that one reason for exempting the foreign currency
deposits from attachment, garnishment or any other order process of any court, is to assure the
development and speedy growth of the Foreign Currency Deposit System and the Offshore
Banking System in the Philippines; that another reason is to encourage the inflow of foreign
currency deposits into the banking institutions thereby placing such institutions more in a
position to properly channel the same to loans and investments in the Philippines, thus directly
contributing to the economic development of the country; that the subject section is being
enforced according to the regular methods of procedure; and that it applies to all currency
deposits made by any person and therefore does not violate the equal protection clause of the
Constitution.
Respondent Central Bank further avers that the questioned provision is needed to
promote the public interest and the general welfare; that the State cannot just stand idly by while
a considerable segment of the society suffers from economic distress; that the State had to take
some measures to encourage economic development; and that in so doing persons and
property may be subjected to some kinds of restraints or burdens to secure the general welfare
or public interest. Respondent Central Bank also alleges that Rule 39 and Rule 57 of the
Revised Rules of Court provide that some properties are exempted from execution/attachment
especially provided by law and R.A. No. 6426 as amended is such a law, in that it specifically

provides, among others, that foreign currency deposits shall be exempted from attachment,
garnishment, or any other order or process of any court, legislative body, government agency or
any administrative body whatsoever.
For its part, respondent China Banking Corporation, aside from giving reasons similar to
that of respondent Central Bank, also stated that respondent China Bank is not unmindful of the
inhuman sufferings experienced by the minor Karen E. Salvacion from the beastly hands of Greg
Bartelli; that it is not only too willing to release the dollar deposit of Bartelli which may perhaps
partly mitigate the sufferings petitioner has undergone; but it is restrained from doing so in view
of R.A. No. 6426 and Section 113 of Central Bank Circular No. 960; and that despite the harsh
effect to these laws on petitioners, CBC has no other alternative but to follow the same.
This court finds the petition to be partly meritorious.
Petitioner deserves to receive the damages awarded to her by the court. But this petition
for declaratory relief can only be entertained and treated as a petition for mandamus to require
respondents to honor and comply with the writ of execution in Civil Case No. 89-3214.
The Court has no original and exclusive jurisdiction over a petition for declatory relief.
However, exceptions to this rule have been recognized. Thus, where the petition has farreaching implications and raises questions that should be resolved, it may be treated as one for
mandamus.[3]
[2]

Here is a child, a 12-year old girl, who in her belief that all Americans are good and in her
gesture of kindness by teaching his alleged niece the Filipino language as requested by the
American, trustingly went with said stranger to his apartment, and there she was raped by said
American tourist Greg Bartelli. Not once, but ten times. She was detained therein for four (4)
days. This American tourist was able to escape from the jail and avoid punishment. On the other
hand, the child, having received a favorable judgment in the Civil Case for damages in the
amount of more than P1,000,000.00, which amount could alleviate the humiliation, anxiety, and
besmirched reputation she had suffered and may continue to suffer for a long, long time; and
knowing that this person who had wronged her has the money, could not, however get the award
of damages because of this unreasonable law. This questioned law, therefore makes futile the
favorable judgment and award of damages that she and her parents fully deserve. As stated by
the trial court in its decision,
Indeed, after hearing the testimony of Karen, the Court believes that it was indoubtedly a
shocking and traumatic experience she had undergone which could haunt her mind for a long,
long time, the mere recall of which could make her feel so humiliated, as in fact she had been
actually humiliated once when she was refused admission at the Abad Santos High School,
Arellano University, where she sought to transfer from another school, simply because the
school authorities of the said High School learned about what happened to her and allegedly
feared that they might be implicated in the case.
xxx

56
The reason for imposing exemplary or corrective damages is due to the wanton and bestial
manner defendant had committed the acts of rape during a period of serious illegal detention
of his hapless victim, the minor Karen Salvacion whose only fault was in her being so naive
and credulous to believe easily that defendant, an American national, could not have such a
bestial desire on her nor capable of committing such heinous crime. Being only 12 years old
when that unfortunate incident happened, she has never heard of an old Filipino adage that in
every forest there is a snake, xxx.[4]
If Karens sad fate had happened to anybodys own kin, it would be difficult for him to
fathom how the incentive for foreign currency deposit could be more important than his childs
right to said award of damages; in this case, the victims claim for damages from this alien who
had the gall to wrong a child of tender years of a country where he is mere visitor. This further
illustrates the flaw in the questioned provisions.
It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time when the
countrys economy was in a shambles; when foreign investments were minimal and presumably,
this was the reason why said statute was enacted. But the realities of the present times show
that the country has recovered economically; and even if not, the questioned law still denies
those entitled to due process of law for being unreasonable and oppressive. The intention of the
questioned law may be good when enacted. The law failed to anticipate the inquitous effects
producing outright injustice and inequality such as as the case before us.
It has thus been said thatBut I also know,[5] that laws and institutions must go hand in hand with the progress of the
human mind. As that becomes more developed, more enlightened, as new discoveries are
made, new truths are disclosed and manners and opinions change with the change of
circumstances, institutions must advance also, and keep pace with the times We might as well
require a man to wear still the coat which fitted him when a boy, as civilized society to remain
ever under the regimen of their barbarous ancestors.
In his comment, the Solicitor General correctly opined, thus:
"The present petition has far-reaching implications on the right of a national to obtain redress
for a wrong committed by an alien who takes refuge under a law and regulation promulgated
for a purpose which does not contemplate the application thereof envisaged by the
allien. More specifically, the petition raises the question whether the protection against
attachment, garnishment or other court process accorded to foreign currency deposits PD No.
1246 and CB Circular No. 960 applies when the deposit does not come from a lender or
investor but from a mere transient who is not expected to maintain the deposit in the bank for
long.
The resolution of this question is important for the protection of nationals who are victimized
in the forum by foreigners who are merely passing through.
xxx

xxx Respondents China Banking Corporation and Central Bank of the Philippines refused to
honor the writ of execution issued in Civil Case No. 89-3214 on the strength of the following
provision of Central Bank Circular No. 960:
Sec. 113 Exemption from attachment. Foreign currency deposits shall be
exempt from attachment, garnishment, or any other order or process of any
court, legislative body, government agency or any administrative body
whatsoever.
Central Bank Circular No. 960 was issued pursuant to Section 7 of Republic Act No. 6426:
Sec. 7. Rules and Regulations. The Monetary Board of the Central Bank shall
promulgate such rules and regulations as may be necessary to carry out the
provisions of this Act which shall take effect after the publication of such
rules and regulations in the Official Gazette and in a newspaper of national
circulation for at least once a week for three consecutive weeks. In case the
Central Bank promulgates new rules and regulations decreasing the rights of
depositors, the rules and regulations at the time the deposit was made shall
govern.
The aforecited Section 113 was copied from Section 8 of Republic Act No. 6426. As amended
by P.D. 1246, thus:
Sec. 8. Secrecy of Foreign Currency Deposits. -- All foreign currency deposits
authorized under this Act, as amended by Presidential Decree No. 1035, as
well as foreign currency deposits authorized under Presidential Decree No.
1034, are hereby declared as and considered of an absolutely confidential
nature and, except upon the written permission of the depositor, in no instance
shall such foreign currency deposits be examined, inquired or looked into by
any person, government official, bureau or office whether judicial or
administrative or legislative or any other entity whether public or
private: Provided, however, that said foreign currency deposits shall be
exempt from attachment, garnishment, or any other order or process of any
court, legislative body, government agency or any administrative body
whatsoever.
The purpose of PD 1246 in according protection against attachment, garnishment and other
court process to foreign currency deposits is stated in its whereases, viz.:
WHEREAS, under Republic Act No. 6426, as amended by Presidential
Decree No. 1035, certain Philippine banking institutions and branches of
foreign banks are authorized to accept deposits in foreign currency;
WHEREAS, under provisions of Presidential Decree No. 1034 authorizing the
establishment of an offshore banking system in the Philippines, offshore

57
banking units are also authorized to receive foreign currency deposits in
certain cases;

WHEREAS, the establishment of an offshore banking system in the

Philippines has been authorized under a separate decree;

WHEREAS, in order to assure the development and speedy growth of the

Foreign Currency Deposit System and the Offshore Banking System in the
Philippines, certain incentives were provided for under the two Systems such
as confidentiality subject to certain exceptions and tax exemptions on the
interest income of depositors who are nonresidents and are not engaged in
trade or business in the Philippines;

WHEREAS, a number of local commercial banks, as depository bank under

the Foreign Currency Deposit Act (RA No. 6426), have the resources and
managerial competence to more actively engage in foreign exchange
transactions and participate in the grant of foreign currency loans to resident
corporations and firms;

WHEREAS, making absolute the protective cloak of confidentiality over such

foreign currency deposits, exempting such deposits from tax, and
guaranteeing the vested right of depositors would better encourage the inflow
of foreign currency deposits into the banking institutions authorized to accept
such deposits in the Philippines thereby placing such institutions more in a
position to properly channel the same to loans and investments in the
Philippines, thus directly contributing to the economic development of the
country;
Thus, one of the principal purposes of the protection accorded to foreign currency deposits is
to assure the development and speedy growth of the Foreign Currency Deposit system and the
Offshore Banking in the Philippines (3rd Whereas).
The Offshore Banking System was established by PD No. 1034. In turn, the purposes of PD
No. 1034 are as follows:
WHEREAS, conditions conducive to the establishment of an offshore banking
system, such as political stability, a growing economy and adequate
communication facilities, among others, exist in the Philippines;
WHEREAS, it is in the interest of developing countries to have as wide access
as possible to the sources of capital funds for economic development;

WHEREAS, it is timely to expand the foreign currency lending authority of

the said depository banks under RA 6426 and apply to their transactions the
same taxes as would be applicable to transaction of the proposed offshore
banking units;
It is evident from the above [Whereas clauses] that the Offshore Banking System and the
Foreign Currency Deposit System were designed to draw deposits from
foreign lenders and investors (Vide second Whereas of PD No. 1034; third Whereas of PD
No. 1035). It is these depositors that are induced by the two laws and given protection and
incentives by them.
Obviously, the foreign currency deposit made by a transient or a tourist is not the kind of
deposit encourage by PD Nos. 1034 and 1035 and given incentives and protection by said
laws because such depositor stays only for a few days in the country and, therefore, will
maintain his deposit in the bank only for a short time.
Respondent Greg Bartelli, as stated, is just a tourist or a transient. He deposited his dollars
with respondent China Banking Corporation only for safekeeping during his temporary stay
in the Philippines.
For the reasons stated above, the Solicitor General thus submits that the dollar deposit of
respondent Greg Bartelli is not entitled to the protection of Section 113 of Central Bank
Circular No. 960 and PD No. 1246 against attachment, garnishment or other court processes.
[6]

WHEREAS, an offshore banking system based in the Philippines will be

advantageous and beneficial to the country by increasing our links with
foreign lenders, facilitating the flow of desired investments into the
Philippines, creating employment opportunities and expertise in international
finance, and contributing to the national development effort.
WHEREAS, the geographical location, physical and human resources, and
other positive factors provide the Philippines with the clear potential to
develop as another financial center in Asia;
On the other hand, the Foreign Currency Deposit system was created by PD No. 1035. Its
purpose are as follows:

In fine, the application of the law depends on the extent of its justice. Eventually, if we rule
that the questioned Section 113 of Central Bank Circular No. 960 which exempts from
attachment, garnishment, or any other order or process of any court. Legislative body,
government agency or any administrative body whatsoever, is applicable to a foreign transient,
injustice would result especially to a citizen aggrieved by a foreign guest like accused Greg
Bartelli. This would negate Article 10 of the New Civil Code which provides that in case of doubt
in the interpretation or application of laws, it is presumed that the lawmaking body intended right
and justice to prevail. Ninguno non deue enriquecerse tortizerzmente con damo de otro.Simply
stated, when the statute is silent or ambiguous, this is one of those fundamental solutions that
would respond to the vehement urge of conscience. (Padilla vs. Padilla, 74 Phil. 377)

58
It would be unthinkable, that the questioned Section 113 of Central Bank No. 960 would be
used as a device by accused Greg Bartelli for wrongdoing, and in so doing, acquitting the guilty
at the expense of the innocent.
Call it what it may but is there no conflict of legal policy here? Dollar against
Peso? Upholding the final and executory judgment of the lower court against the Central Bank
Circular protecting the foreign depositor? Shielding or protecting the dollar deposit of a transient
alien depositor against injustice to a national and victim of a crime? This situation calls for
fairness legal tyranny.
We definitely cannot have both ways and rest in the belief that we have served the ends of
justice.
IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No. 960 and PD No.
1246, insofar as it amends Section 8 of R.A. 6426 are hereby held to be INAPPLICABLE to this
case because of its peculiar circumstances. Respondents are hereby REQUIRED to COMPLY
with the writ of execution issued in Civil Case No. 89-3214, Karen Salvacion, et al. vs. Greg
Bartelli y Northcott, by Branch CXLIV, RTC Makati and to RELEASE to petitioners the dollar
deposit of respondent Greg Bartelli y Northcott in such amount as would satisfy the judgment.

G.R. No. 72873 May 28, 1987

CARLOS ALONZO and CASIMIRA ALONZO, petitioners,
vs.
INTERMEDIATE APPELLATE COURT and TECLA PADUA, respondents.
CRUZ, J.:

SO ORDERED.
The question is sometimes asked, in serious inquiry or in curious conjecture, whether we are a
court of law or a court of justice. Do we apply the law even if it is unjust or do we administer
justice even against the law? Thus queried, we do not equivocate. The answer is that we do
neither because we are a court both of law and of justice. We apply the law with justice for that
is our mission and purpose in the scheme of our Republic. This case is an illustration.
Five brothers and sisters inherited in equal pro indiviso shares a parcel of land registered in 'the
name of their deceased parents under OCT No. 10977 of the Registry of Deeds of Tarlac. 1
On March 15, 1963, one of them, Celestino Padua, transferred his undivided share of the herein
petitioners for the sum of P550.00 by way of absolute sale. 2 One year later, on April 22, 1964,
Eustaquia Padua, his sister, sold her own share to the same vendees, in an instrument
denominated "Con Pacto de Retro Sale," for the sum of P 440.00. 3
By virtue of such agreements, the petitioners occupied, after the said sales, an area
corresponding to two-fifths of the said lot, representing the portions sold to them. The vendees
subsequently enclosed the same with a fence. In 1975, with their consent, their son Eduardo
Alonzo and his wife built a semi-concrete house on a part of the enclosed area. 4
On February 25, 1976, Mariano Padua, one of the five coheirs, sought to redeem the area sold
to the spouses Alonzo, but his complaint was dismissed when it appeared that he was an
American citizen . 5 On May 27, 1977, however, Tecla Padua, another co-heir, filed her own
complaint invoking the same right of redemption claimed by her brother.6

59
The trial court * also dismiss this complaint, now on the ground that the right had lapsed, not
having been exercised within thirty days from notice of the sales in 1963 and 1964. Although
there was no written notice, it was held that actual knowledge of the sales by the co-heirs
satisfied the requirement of the law. 7

prospective vendor, or by the vendors, as the case may be. The deed of
sale shall not be recorded in the Registry of Property, unless accompanied
by an affidavit of the vendor that he has given written notice thereof to all
possible redemptioners.

In truth, such actual notice as acquired by the co-heirs cannot be plausibly denied. The other coheirs, including Tecla Padua, lived on the same lot, which consisted of only 604 square meters,
including the portions sold to the petitioners . 8 Eustaquia herself, who had sold her portion, was
staying in the same house with her sister Tecla, who later claimed redemption
petition. 9 Moreover, the petitioners and the private respondents were close friends and
neighbors whose children went to school together. 10

The right of redemption of co-owners excludes that of the adjoining owners.

It is highly improbable that the other co-heirs were unaware of the sales and that they thought,
as they alleged, that the area occupied by the petitioners had merely been mortgaged by
Celestino and Eustaquia. In the circumstances just narrated, it was impossible for Tecla not to
know that the area occupied by the petitioners had been purchased by them from the other. coheirs. Especially significant was the erection thereon of the permanent semi-concrete structure
by the petitioners' son, which was done without objection on her part or of any of the other coheirs.
The only real question in this case, therefore, is the correct interpretation and application of the
pertinent law as invoked, interestingly enough, by both the petitioners and the private
respondents. This is Article 1088 of the Civil Code, providing as follows:
Art. 1088. Should any of the heirs sell his hereditary rights to a stranger
before the partition, any or all of the co-heirs may be subrogated to the
rights of the purchaser by reimbursing him for the price of the sale, provided
they do so within the period of one month from the time they were notified in
writing of the sale by the vendor.
In reversing the trial court, the respondent court ** declared that the notice required by the said
article was written notice and that actual notice would not suffice as a substitute. Citing the same
case of De Conejero v. Court of Appeals 11 applied by the trial court, the respondent court held
that that decision, interpreting a like rule in Article 1623, stressed the need for written notice
although no particular form was required.
Thus, according to Justice J.B.L. Reyes, who was the ponente of the Court, furnishing the coheirs with a copy of the deed of sale of the property subject to redemption would satisfy the
requirement for written notice. "So long, therefore, as the latter (i.e., the redemptioner) is
informed in writing of the sale and the particulars thereof," he declared, "the thirty days for
redemption start running. "
In the earlier decision of Butte v. UY, 12 " the Court, speaking through the same learned jurist,
emphasized that the written notice should be given by the vendor and not the vendees,
conformably to a similar requirement under Article 1623, reading as follows:
Art. 1623. The right of legal pre-emption or redemption shall not be
exercised except within thirty days from the notice in writing by the

As "it is thus apparent that the Philippine legislature in Article 1623 deliberately selected a
particular method of giving notice, and that notice must be deemed exclusive," the Court held
that notice given by the vendees and not the vendor would not toll the running of the 30-day
period.
The petition before us appears to be an illustration of the Holmes dictum that "hard cases make
bad laws" as the petitioners obviously cannot argue against the fact that there was really no
written notice given by the vendors to their co-heirs. Strictly applied and interpreted, Article 1088
can lead to only one conclusion, to wit, that in view of such deficiency, the 30 day period for
redemption had not begun to run, much less expired in 1977.
But as has also been aptly observed, we test a law by its results; and likewise, we may add, by
its purposes. It is a cardinal rule that, in seeking the meaning of the law, the first concern of the
judge should be to discover in its provisions the in tent of the lawmaker. Unquestionably, the law
should never be interpreted in such a way as to cause injustice as this is never within the
legislative intent. An indispensable part of that intent, in fact, for we presume the good motives of
the legislature, is to render justice.
Thus, we interpret and apply the law not independently of but in consonance with justice. Law
and justice are inseparable, and we must keep them so. To be sure, there are some laws that,
while generally valid, may seem arbitrary when applied in a particular case because of its
peculiar circumstances. In such a situation, we are not bound, because only of our nature and
functions, to apply them just the same, in slavish obedience to their language. What we do
instead is find a balance between the word and the will, that justice may be done even as the
law is obeyed.
As judges, we are not automatons. We do not and must not unfeelingly apply the law as it is
worded, yielding like robots to the literal command without regard to its cause and consequence.
"Courts are apt to err by sticking too closely to the words of a law," so we are warned, by Justice
Holmes again, "where these words import a policy that goes beyond them." 13 While we
admittedly may not legislate, we nevertheless have the power to interpret the law in such a way
as to reflect the will of the legislature. While we may not read into the law a purpose that is not
there, we nevertheless have the right to read out of it the reason for its enactment. In doing so,
we defer not to "the letter that killeth" but to "the spirit that vivifieth," to give effect to the law
maker's will.
The spirit, rather than the letter of a statute determines its construction,
hence, a statute must be read according to its spirit or intent. For what is
within the spirit is within the letter but although it is not within the letter
thereof, and that which is within the letter but not within the spirit is not
within the statute. Stated differently, a thing which is within the intent of the
lawmaker is as much within the statute as if within the letter; and a thing

60
which is within the letter of the statute is not within the statute unless within
the intent of the lawmakers. 14
In requiring written notice, Article 1088 seeks to ensure that the
redemptioner is properly notified of the sale and to indicate the date of such
notice as the starting time of the 30-day period of redemption. Considering
the shortness of the period, it is really necessary, as a general rule, to
pinpoint the precise date it is supposed to begin, to obviate any problem of
alleged delays, sometimes consisting of only a day or two.
The instant case presents no such problem because the right of redemption was invoked
not days but years after the sales were made in 1963 and 1964. The complaint was filed by
Tecla Padua in 1977, thirteen years after the first sale and fourteen years after the second sale.
The delay invoked by the petitioners extends to more than a decade, assuming of course that
there was a valid notice that tolled the running of the period of redemption.
Was there a valid notice? Granting that the law requires the notice to be written, would such
notice be necessary in this case? Assuming there was a valid notice although it was not in
writing. would there be any question that the 30-day period for redemption had expired long
before the complaint was filed in 1977?
In the face of the established facts, we cannot accept the private respondents' pretense that they
were unaware of the sales made by their brother and sister in 1963 and 1964. By requiring
written proof of such notice, we would be closing our eyes to the obvious truth in favor of their
palpably false claim of ignorance, thus exalting the letter of the law over its purpose. The
purpose is clear enough: to make sure that the redemptioners are duly notified. We are satisfied
that in this case the other brothers and sisters were actually informed, although not in writing, of
the sales made in 1963 and 1964, and that such notice was sufficient.
Now, when did the 30-day period of redemption begin?

readily available upon inquiry, but the party neglects to make it, he will be
chargeable with laches, the same as if he had known the facts. 15
It was the perfectly natural thing for the co-heirs to wonder why the spouses Alonzo, who were
not among them, should enclose a portion of the inherited lot and build thereon a house of
strong materials. This definitely was not the act of a temporary possessor or a mere mortgagee.
This certainly looked like an act of ownership. Yet, given this unseemly situation, none of the coheirs saw fit to object or at least inquire, to ascertain the facts, which were readily available. It
took all of thirteen years before one of them chose to claim the right of redemption, but then it
was already too late.
We realize that in arriving at our conclusion today, we are deviating from the strict letter of the
law, which the respondent court understandably applied pursuant to existing jurisprudence. The
said court acted properly as it had no competence to reverse the doctrines laid down by this
Court in the above-cited cases. In fact, and this should be clearly stressed, we ourselves are not
abandoning the De Conejero and Buttle doctrines. What we are doing simply is adopting an
exception to the general rule, in view of the peculiar circumstances of this case.
The co-heirs in this case were undeniably informed of the sales although no notice in writing was
given them. And there is no doubt either that the 30-day period began and ended during the 14
years between the sales in question and the filing of the complaint for redemption in 1977,
without the co-heirs exercising their right of redemption. These are the justifications for this
exception.
More than twenty centuries ago, Justinian defined justice "as the constant and perpetual wish to
render every one his due." 16 That wish continues to motivate this Court when it assesses the
facts and the law in every case brought to it for decision. Justice is always an essential
ingredient of its decisions. Thus when the facts warrants, we interpret the law in a way that will
render justice, presuming that it was the intention of the lawmaker, to begin with, that the law be
dispensed with justice. So we have done in this case.

While we do not here declare that this period started from the dates of such sales in 1963 and
1964, we do say that sometime between those years and 1976, when the first complaint for
redemption was filed, the other co-heirs were actually informed of the sale and that thereafter
the 30-day period started running and ultimately expired. This could have happened any time
during the interval of thirteen years, when none of the co-heirs made a move to redeem the
properties sold. By 1977, in other words, when Tecla Padua filed her complaint, the right of
redemption had already been extinguished because the period for its exercise had already
expired.

WHEREFORE, the petition is granted. The decision of the respondent court is REVERSED and
that of the trial court is reinstated, without any pronouncement as to costs. It is so ordered.

The following doctrine is also worth noting:

CAMPOS, JR., J.:

While the general rule is, that to charge a party with laches in the assertion
of an alleged right it is essential that he should have knowledge of the facts
upon which he bases his claim, yet if the circumstances were such as
should have induced inquiry, and the means of ascertaining the truth were

46 G.R. No. 103982 December 11, 1992

ANTONIO A. MECANO, petitioner,
vs.
COMMISSION ON AUDIT, respondent.

Antonio A. Mecano, through a petition for certiorari, seeks to nullify the decision of the
Commission on Audit (COA, for brevity) embodied in its 7th Indorsement, dated January 16,

61
1992, denying his claim for reimbursement under Section 699 of the Revised Administrative
Code (RAC), as amended, in the total amount of P40,831.00.
Petitioner is a Director II of the National Bureau of Investigation (NBI). He was hospitalized for
cholecystitis from March 26, 1990 to April 7, 1990, on account of which he incurred medical and
hospitalization expenses, the total amount of which he is claiming from the COA.
On May 11, 1990, in a memorandum to the NBI Director, Alfredo S. Lim (Director Lim, for
brevity), he requested reimbursement for his expenses on the ground that he is entitled to the
benefits under Section 699 1 of the RAC, the pertinent provisions of which read:
Sec. 699. Allowances in case of injury, death, or sickness incurred in
performance of duty. When a person in the service of the national
government of a province, city, municipality or municipal district is so injured
in the performance of duty as thereby to receive some actual physical hurt
or wound, the proper Head of Department may direct that absence during
any period of disability thereby occasioned shall be on full pay, though not
more than six months, and in such case he may in his discretion also
authorize the payment of the medical attendance, necessary transportation,
subsistence and hospital fees of the injured person. Absence in the case
contemplated shall be charged first against vacation leave, if any there be.
xxx xxx xxx
In case of sickness caused by or connected directly with the performance of
some act in the line of duty, the Department head may in his discretion
authorize the payment of the necessary hospital fees.
Director Lim then forwarded petitioner's claim, in a 1st Indorsement dated June 22, 1990, to the
Secretary of Justice, along with the comment, bearing the same date, of Gerarda Galang, Chief,
LED of the NBI, "recommending favorable action thereof". Finding petitioner's illness to be
service-connected, the Committee on Physical Examination of the Department of Justice
favorably recommended the payment of petitioner's claim.
However, then Undersecretary of Justice Silvestre H. Bello III, in a 4th Indorsement dated
November 21, 1990, returned petitioner's claim to Director Lim, having considered the
statements of the Chairman of the COA in its 5th Indorsement dated 19 September 1990, to the
effect that the RAC being relied upon was repealed by the Administrative Code of 1987.
Petitioner then re-submitted his claim to Director Lim, with a copy of Opinion No. 73, S.
1991 2 dated April 26, 1991 of then Secretary of Justice Franklin M. Drilon (Secretary Drilon, for
brevity) stating that "the issuance of the Administrative Code did not operate to repeal or
abregate in its entirety the Revised Administrative Code, including the particular Section 699 of
the latter".

On May 10, 1991, Director Lim, under a 5th Indorsement transmitted anew Mecano's claim to
then Undersecretary Bello for favorable consideration. Under a 6th Indorsement, dated July 2,
1991, Secretary Drilon forwarded petitioner's claim to the COA Chairman, recommending
payment of the same. COA Chairman Eufemio C. Domingo, in his 7th Indorsement of January
16, 1992, however, denied petitioner's claim on the ground that Section 699 of the RAC had
been repealed by the Administrative Code of 1987, solely for the reason that the same section
was not restated nor re-enacted in the Administrative Code of 1987. He commented, however,
that the claim may be filed with the Employees' Compensation Commission, considering that the
illness of Director Mecano occurred after the effectivity of the Administrative Code of 1987.
Eventually, petitioner's claim was returned by Undersecretary of Justice Eduardo Montenegro to
Director Lim under a 9th Indorsement dated February 7, 1992, with the advice that petitioner
"elevate the matter to the Supreme Court if he so desires".
On the sole issue of whether or not the Administrative Code of 1987 repealed or abrogated
Section 699 of the RAC, this petition was brought for the consideration of this Court.
Petitioner anchors his claim on Section 699 of the RAC, as amended, and on the
aforementioned Opinion No. 73, S. 1991 of Secretary Drilon. He further maintains that in the
event that a claim is filed with the Employees' Compensation Commission, as suggested by
respondent, he would still not be barred from filing a claim under the subject section. Thus, the
resolution of whether or not there was a repeal of the Revised Administrative Code of 1917
would decide the fate of petitioner's claim for reimbursement.
The COA, on the other hand, strongly maintains that the enactment of the Administrative Code
of 1987 (Exec. Order No. 292) operated to revoke or supplant in its entirety the Revised
Administrative Code of 1917. The COA claims that from the "whereas" clauses of the new
Administrative Code, it can be gleaned that it was the intent of the legislature to repeal the old
Code. Moreover, the COA questions the applicability of the aforesaid opinion of the Secretary of
Justice in deciding the matter. Lastly, the COA contends that employment-related sickness,
injury or death is adequately covered by the Employees' Compensation Program under P.D.
626, such that to allow simultaneous recovery of benefits under both laws on account of the
same contingency would be unfair and unjust to the Government.
The question of whether a particular law has been repealed or not by a subsequent law is a
matter of legislative intent. The lawmakers may expressly repeal a law by incorporating therein a
repealing provision which expressly and specifically cites the particular law or laws, and portions
thereof, that are intended to be repealed. 3 A declaration in a statute, usually in its repealing
clause, that a particular and specific law, identified by its number or title, is repealed is an
express repeal; all others are implied repeals. 4
In the case of the two Administrative Codes in question, the ascertainment of whether or not it
was the intent of the legislature to supplant the old Code with the new Code partly depends on
the scrutiny of the repealing clause of the new Code. This provision is found in Section 27, Book
VII (Final Provisions) of the Administrative Code of 1987 which reads:

62
Sec. 27. Repealing Clause. All laws, decrees, orders, rules and
regulations, or portions thereof, inconsistent with this Code are hereby
repealed or modified accordingly.
The question that should be asked is: What is the nature of this repealing clause? It is certainly
not an express repealing clause because it fails to identify or designate the act or acts that are
intended to be repealed. 5 Rather, it is an example of a general repealing provision, as stated in
Opinion No. 73, S. 1991. It is a clause which predicates the intended repeal under the condition
that substantial conflict must be found in existing and prior acts. The failure to add a specific
repealing clause indicates that the intent was not to repeal any existing law, unless an
irreconcilable inconcistency and repugnancy exist in the terms of the new and old laws. 6 This
latter situation falls under the category of an implied repeal.
Repeal by implication proceeds on the premise that where a statute of later date clearly reveals
an intention on the part of the legislature to abrogate a prior act on the subject, that intention
must be given effect. 7 Hence, before there can be a repeal, there must be a clear showing on
the part of the lawmaker that the intent in enacting the new law was to abrogate the old one. The
intention to repeal must be clear and manifest; 8 otherwise, at least, as a general rule, the later
act is to be construed as a continuation of, and not a substitute for, the first act and will continue
so far as the two acts are the same from the time of the first enactment. 9
There are two categories of repeal by implication. The first is where provisions in the two acts on
the same subject matter are in an irreconcilable conflict, the later act to the extent of the conflict
constitutes an implied repeal of the earlier one. The second is if the later act covers the whole
subject of the earlier one and is clearly intended as a substitute, it will operate to repeal the
earlier law. 10
Implied repeal by irreconcilable inconsistency takes place when the two statutes cover the same
subject matter; they are so clearly inconsistent and incompatible with each other that they
cannot be reconciled or harmonized; and both cannot be given effect, that is, that one law
cannot be enforced without nullifying the other. 11
Comparing the two Codes, it is apparent that the new Code does not cover nor attempt to cover
the entire subject matter of the old Code. There are several matters treated in the old Code
which are not found in the new Code, such as the provisions on notaries public, the leave law,
the public bonding law, military reservations, claims for sickness benefits under Section 699, and
still others.
Moreover, the COA failed to demonstrate that the provisions of the two Codes on the matter of
the subject claim are in an irreconcilable conflict. In fact, there can be no such conflict because
the provision on sickness benefits of the nature being claimed by petitioner has not been
restated in the Administrative Code of 1987. However, the COA would have Us consider that the
fact that Section 699 was not restated in the Administrative Code of 1987 meant that the same
section had been repealed. It further maintained that to allow the particular provisions not
restated in the new Code to continue in force argues against the Code itself. The COA anchored
this argument on the whereas clause of the 1987 Code, which states:

WHEREAS, the effectiveness of the Government will be enhanced by a new

Administrative Code which incorporate in a unified document the major
structural, functional and procedural principles and rules of governance; and
xxx xxx xxx
It argues, in effect, that what is contemplated is only one Code the Administrative Code of
1987. This contention is untenable.
The fact that a later enactment may relate to the same subject matter as that of an earlier statute
is not of itself sufficient to cause an implied repeal of the prior act, since the new statute may
merely be cumulative or a continuation of the old one. 12 What is necessary is a manifest
indication of legislative purpose to repeal. 13
We come now to the second category of repeal the enactment of a statute revising or
codifying the former laws on the whole subject matter. This is only possible if the revised statute
or code was intended to cover the whole subject to be a complete and perfect system in itself. It
is the rule that a subsequent statute is deemed to repeal a prior law if the former revises the
whole subject matter of the former statute. 14 When both intent and scope clearly evidence the
idea of a repeal, then all parts and provisions of the prior act that are omitted from the revised
act are deemed repealed. 15 Furthermore, before there can be an implied repeal under this
category, it must be the clear intent of the legislature that the later act be the substitute to the
prior act. 16
According to Opinion No. 73, S. 1991 of the Secretary of Justice, what appears clear is the
intent to cover only those aspects of government that pertain to administration, organization and
procedure, understandably because of the many changes that transpired in the government
structure since the enactment of the RAC decades of years ago. The COA challenges the weight
that this opinion carries in the determination of this controversy inasmuch as the body which had
been entrusted with the implementation of this particular provision has already rendered its
decision. The COA relied on the rule in administrative law enunciated in the case of Sison
vs.Pangramuyen 17 that in the absence of palpable error or grave abuse of discretion, the Court
would be loathe to substitute its own judgment for that of the administrative agency entrusted
with the enforcement and implementation of the law. This will not hold water. This principle is
subject to limitations. Administrative decisions may be reviewed by the courts upon a showing
that the decision is vitiated by fraud, imposition or mistake. 18 It has been held that Opinions of
the Secretary and Undersecretary of Justice are material in the construction of statutes in pari
materia. 19
Lastly, it is a well-settled rule of statutory construction that repeals of statutes by implication are
not favored. 20The presumption is against inconsistency and repugnancy for the legislature is
presumed to know the existing laws on the subject and not to have enacted inconsistent or
conflicting statutes. 21
This Court, in a case, explains the principle in detail as follows: "Repeals by implication are not
favored, and will not be decreed unless it is manifest that the legislature so intended. As laws

63
are presumed to be passed with deliberation with full knowledge of all existing ones on the
subject, it is but reasonable to conclude that in passing a statute it was not intended to interfere
with or abrogate any former law relating to some matter, unless the repugnancy between the two
is not only irreconcilable, but also clear and convincing, and flowing necessarily from the
language used, unless the later act fully embraces the subject matter of the earlier, or unless the
reason for the earlier act is beyond peradventure renewed. Hence, every effort must be used to
make all acts stand and if, by any reasonable construction, they can be reconciled, the later act
will not operate as a repeal of the earlier. 22
Regarding respondent's contention that recovery under this subject section shall bar the
recovery of benefits under the Employees' Compensation Program, the same cannot be upheld.
The second sentence of Article 173, Chapter II, Title II (dealing on Employees' Compensation
and State Insurance Fund), Book IV of the Labor Code, as amended by P.D. 1921, expressly
provides that "the payment of compensation under this Title shall not bar the recovery of benefits
as provided for in Section 699 of the Revised Administrative Code . . . whose benefits are
administered by the system (meaning SSS or GSIS) or by other agencies of the government."
WHEREFORE, premises considered, the Court resolves to GRANT the petition; respondent is
hereby ordered to give due course to petitioner's claim for benefits. No costs.
SO ORDERED.

64

65
considered the SK election as a regular local election. Petitioner maintains that as the SK
election is a regular local election, hence no recall election can be had for barely four months
separate the SK election from the recall election. We do not agree.
47G.R. No. 123169 November 4, 1996

The subject provision of the Local Government Code provides:

DANILO E. PARAS, petitioner,

vs.
COMMISSION ON ELECTIONS, respondent.
RESOLUTION

FRANCISCO, J.:
Petitioner Danilo E. Paras is the incumbent Punong Barangay of Pula, Cabanatuan City who
won during the last regular barangay election in 1994. A petition for his recall as Punong
Barangay was filed by the registered voters of the barangay. Acting on the petition for recall,
public respondent Commission on Elections (COMELEC) resolved to approve the petition,
scheduled the petition signing on October 14, 1995, and set the recall election on November 13,
1995. 1 At least 29.30% of the registered voters signed the petition, well above the 25%
requirement provided by law. The COMELEC, however, deferred the recall election in view of
petitioner's opposition. On December 6, 1995, the COMELEC set anew the recall election, this
time on December 16, 1995. To prevent the holding of the recall election, petitioner filed before
the Regional Trial Court of Cabanatuan City a petition for injunction, docketed as SP Civil Action
No. 2254-AF, with the trial court issuing a temporary restraining order. After conducting a
summary hearing, the trial court lifted the restraining order, dismissed the petition and required
petitioner and his counsel to explain why they should not be cited for contempt for
misrepresenting that the barangay recall election was without COMELEC approval. 2
In a resolution dated January 5, 1996, the COMELEC, for the third time, re-scheduled the recall
election an January 13, 1996; hence, the instant petition for certiorari with urgent prayer for
injunction. On January 12, 1996, the Court issued a temporary restraining order and required the
Office of the Solicitor General, in behalf of public respondent, to comment on the petition. In view
of the Office of the Solicitor General's manifestation maintaining an opinion adverse to that of the
COMELEC, the latter through its law department filed the required comment. Petitioner
thereafter filed a reply. 3
Petitioner's argument is simple and to the point. Citing Section 74 (b) of Republic Act No. 7160,
otherwise known as the Local Government Code, which states that "no recall shall take place
within one (1) year from the date of the official's assumption to office or one (1) year immediately
preceding a regular local election", petitioner insists that the scheduled January 13, 1996 recall
election is now barred as the Sangguniang Kabataan (SK) election was set by Republic Act No.
7808 on the first Monday of May 1996, and every three years thereafter. In support thereof,
petitioner cites Associated Labor Union v. Letrondo-Montejo, 237 SCRA 621, where the Court

Sec. 74. Limitations on Recall. (a) Any elective local official may be the
subject of a recall election only once during his term of office for loss of
confidence.
(b) No recall shall take place within one (1) year from the date of the
official's assumption to office or one (1) year immediately preceding
a regular local election.
[Emphasis added]
It is a rule in statutory construction that every part of the statute must be interpreted with
reference to the context,i.e., that every part of the statute must be considered together with the
other parts, and kept subservient to the general intent of the whole enactment. 4 The evident
intent of Section 74 is to subject an elective local official to recall election once during his term of
office. Paragraph (b) construed together with paragraph (a) merely designates the period when
such elective local official may be subject of a recall election, that is, during the second year of
his term of office. Thus, subscribing to petitioner's interpretation of the phrase regular local
election to include the SK election will unduly circumscribe the novel provision of the Local
Government Code on recall, a mode of removal of public officers by initiation of the people
before the end of his term. And if the SK election which is set by R.A No. 7808 to be held every
three years from May 1996 were to be deemed within the purview of the phrase "regular local
election", as erroneously insisted by petitioner, then no recall election can be conducted
rendering inutile the recall provision of the Local Government Code.
In the interpretation of a statute, the Court should start with the assumption that the legislature
intended to enact an effective law, and the legislature is not presumed to have done a vain thing
in the enactment of a statute. 5 An interpretation should, if possible, be avoided under which a
statute or provision being construed is defeated, or as otherwise expressed, nullified, destroyed,
emasculated, repealed, explained away, or rendered insignificant, meaningless, inoperative or
nugatory. 6
It is likewise a basic precept in statutory construction that a statute should be interpreted in
harmony with the Constitution. 7 Thus, the interpretation of Section 74 of the Local Government
Code, specifically paragraph (b) thereof, should not be in conflict with the Constitutional
mandate of Section 3 of Article X of the Constitution to "enact a local government code which
shall provide for a more responsive and accountable local government structure instituted
through a system of decentralization with effective mechanism of recall, initiative, and
referendum . . . ."

66
Moreover, petitioner's too literal interpretation of the law leads to absurdity which we cannot
countenance. Thus, in a case, the Court made the following admonition:
We admonish against a too-literal reading of the law as this is apt to
constrict rather than fulfill its purpose and defeat the intention of its authors.
That intention is usually found not in "the letter that killeth but in the spirit
that vivifieth". . . 8
The spirit, rather than the letter of a law determines its construction; hence, a statute,
as in this case, must be read according to its spirit and intent.
Finally, recall election is potentially disruptive of the normal working of the local government unit
necessitating additional expenses, hence the prohibition against the conduct of recall election
one year immediately preceding the regular local election. The proscription is due to the
proximity of the next regular election for the office of the local elective official concerned. The
electorate could choose the official's replacement in the said election who certainly has a longer
tenure in office than a successor elected through a recall election. It would, therefore, be more in
keeping with the intent of the recall provision of the Code to construe regular local election as
one referring to an election where the office held by the local elective official sought to be
recalled will be contested and be filled by the electorate.
Nevertheless, recall at this time is no longer possible because of the limitation stated under
Section 74 (b) of the Code considering that the next regular election involving the barangay
office concerned is barely seven (7) months away, the same having been scheduled on May
1997. 9
ACCORDINGLY, the petition is hereby dismissed for having become moot and academic. The
temporary restraining order issued by the Court on January 12, 1996, enjoining the recall
election should be as it is hereby made permanent.
SO ORDERED.

67
case, it indicates that it will not press its appeal in the event that "the instant petition for review
be denied and that judgment be rendered affirming the decision of the Court of Tax Appeals."
The facts are simple enough and are quite quickly recounted. ESSO overpaid its 1959 income
tax by P221,033.00. It was accordingly granted a tax credit in this amount by the Comissioner on
August 5,1964. However, ESSOs payment of its income tax for 1960 was found to be short by
P367,994.00. So, on July 10, 1964, the Commissioner wrote to ESSO demanding payment of
the deficiency tax, together with interest thereon for the period from April 18,1961 to April
18,1964. On August 10, 1964, ESSO paid under protest the amount alleged to be due, including
the interest as reckoned by the Commissioner. It protested the computation of interest,
contending it was more than that properly due. It claimed that it should not have been required
to pay interest on the total amount of the deficiency tax, P367,994.00, but only on the amount of
P146,961.00representing the difference between said deficiency, P367,994.00, and ESSOs
earlier overpayment of P221,033.00 (for which it had been granted a tax credit). ESSO thus
asked for a refund.
The Internal Revenue Commissioner denied the claim for refund. ESSO appealed to the Court
of Tax Appeals. As aforestated. that Court ordered payment to ESSO of its "refund-claim x x in
the amount of P39,787.94 as overpaid interest. Hence, this appeal by the Commissioner. The
CTA justified its award of the refund as follows:

48 G.R. Nos. L-28502-03 April 18, 1989

COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
ESSO STANDARD EASTERN, INC. and THE COURT OF TAX APPEALS, respondents.

NARVASA, J.:
In two (2) cases appealed to it 1 by the private respondent, hereafter simply referred to as
ESSO, the Court of Tax Appeals rendered judgment 2sustaining the decisions of the
Commissioner of Internal Revenue excepted to, save "the refund-claim .. in the amount of
P39,787.94 as overpaid interest which it ordered refunded to ESSO
Reversal of this decision is sought by the Commissioner by a petition for review
on certiorari filed with this Court. He ascribes to the Tax Court one sole error: "of applying the tax
credit for overpayment of the 1959 income tax of .. ESSO, granted by the petitioner
(Commissioner), to .. (ESSO's) basic 1960 deficiency income tax liability x x and imposing the 11/2% monthly interests 3 only on the remaining balance thereof in the sum of
P146,961.00" 4 (instead of the full amount of the 1960 deficiency liability in the amount of
P367,994.00). Reversal of the same judgment of the Court of Tax Appeals is also sought by
ESSO in its own appeal (docketed as G.R. Nos. L28508-09); but in the brief filed by it in this

... In the letter of August 5, 1964, .. (the Commissioner) admitted that ..

ESSO had overpaid its 1959 income tax by P221,033.00. Accordingly .. (the
Commissioner) granted to .. ESSO a tax credit of P221,033.00. In short, the
said sum of P221,033.00 of ESSO's money was in the Government's hands
at the latest on July 15, 1960 when it ESSO paid in full its second
installment of income tax for 1959. On July 10, 1964 .. (the Commissioner)
claimed that for 1960, .. ESSO underpaid its income tax by P367,994.00.
However, instead of deducting from P367,994.00 the tax credit of
P221,033.00 which .. (the Commissioner) had already admitted was due ..
ESSO .. (the Commissioner) still insists in collecting the interest on the full
amount of P367,994.00 for the period April 18, 1961 to April 18,1964 when
the Government had already in its hands the sum of P221,033.00 of ..
ESSOs money even before the latter's income tax for 1960 was due and
payable. If the imposition of interest does not amount to a penalty but
merely a just compensation to the State for the delay in paying the tax, and
for the concomitant use by the taxpayer of funds that rightfully should be in
the Government's hand (Castro v. Collector, G.R. No. L-1274, Dec. 28,
1962), the collection of the interest on the full amount of P367,994.00
without deducting first the tax credit of P221,033.00, which has long been in
the hands of the Government, becomes erroneous, illegal and arbitrary.
.. (ESSO) could hardly be charged of delinquency in paying P221,033.00
out of the deficiency income tax of P367,994.00, for which the State should
be compensated by the payment of interest, because the said amount of
P221,033.00 was already in the coffers of the Government. Neither could ..
ESSO be charged for the concomitant use of funds that rightfully belong to

68
the Government because as early as July 15, 1960, it was the Government
that was using .. ESSOs funds of P221,033.00. In the circumstances, we
find it unfair and unjust for .. (the Commissioner) to exact the interest on the
said sum of P221,033.00 which, after all, was paid to and received by the
Government even before the incidence of the deficiency income tax of
P367,994.00. (Itogon-Suyoc Mines, Inc. v. Commissioner, C.T.A. Case No.
1327, Sept. 30,1965). On the contrary, the Government should be the first to
blaze the trail and set the example of fairness and honest dealing in the
administration of tax laws.
Accordingly, we hold that the tax credit of P221,033.00 for 1959 should first
be deducted from the basic deficiency tax of P367,994.00 for 1960 and the
resulting difference of P146,961.00 would be subject to the 18% interest
prescribed by Section 51 (d) of the Revenue Code. According to the prayer
of ..(ESSO) .. (the Commissioner) is hereby ordered to refund to .. (ESSO)
the amount of P39,787.94 as overpaid interest in the settlement of its 1960
income tax liability. However, as the collection of the tax was not attended
with arbitrariness because .. (ESSO) itself followed x x (the Commissioner's)
manner of computing the tax in paying the sum of P213,189.93 on August
10, 1964, the prayer of .. (ESSO) that it be granted the legal rate of interest
on its overpayment of P39,787.94 from August 10, 1964 to the time it is
actually refunded is denied. (See Collector of Internal Revenue v.
Binalbagan Estate, Inc., G.R. No. 1,12752, Jan. 30, 1965).
The Commissioner's position is that income taxes are determined and paid on an annual basis,
and that such determination and payment of annual taxes are separate and independent
transactions; and that a tax credit could not be so considered until it has been finally approved
and the taxpayer duly notified thereof. Since in this case, he argues, the tax credit of
P221,033.00 was approved only on August 5, 1964, it could not be availed of in reduction of
ESSOs earlier tax deficiency for the year 1960; as of that year, 1960, there was as yet no tax
credit to speak of, which would reduce the deficiency tax liability for 1960. In support of his
position, the Commissioner invokes the provisions of Section 51 of the Tax Code pertinently
reading as follows:
(c) Definition of deficiency. As used in this Chapter in respect of tax imposed
by this Title, the term 'deficiency' means:
(1) The amount by which the tax imposed by this Title exceeds the amount
shown as the tax by the taxpayer upon his return; but the amount so shown
on the return shall first be increased by the amounts previously assessed
(or collected without assessment) as a deficiency, and decreased by the
amount previously abated credited, returned, or otherwise in respect of such
tax; ..
xxx xxx xxx

(d) Interest on deficiency. Interest upon the amount determined as

deficiency shall be assessed at the same time as the deficiency and shall be
paid upon notice and demand from the Commissioner of Internal Revenue;
and shall be collected as a part of the tax, at the rate of six per centum per
annum from the date prescribed for the payment of the tax (or, if the tax is
paid in installments, from the date prescribed for the payment of the first
installment) to the date the deficiency is assessed;Provided, That the
amount that may be collected as interest on deficiency shall in no case
exceed the amount corresponding to a period of three years, the present
provision regarding prescription to the contrary notwithstanding.
The fact is that, as respondent Court of Tax Appeals has stressed, as early as July 15, 1960, the
Government already had in its hands the sum of P221,033.00 representing excess payment.
Having been paid and received by mistake, as petitioner Commissioner subsequently
acknowledged, that sum unquestionably belonged to ESSO, and the Government had the
obligation to return it to ESSO That acknowledgment of the erroneous payment came some four
(4) years afterwards in nowise negates or detracts from its actuality. The obligation to return
money mistakenly paid arises from the moment that payment is made, and not from the time
that the payee admits the obligation to reimburse. The obligation of the payee to reimburse an
amount paid to him results from the mistake, not from the payee's confession of the mistake or
recognition of the obligation to reimburse. In other words, since the amount of P221,033.00
belonging to ESSO was already in the hands of the Government as of July, 1960, although the
latter had no right whatever to the amount and indeed was bound to return it to ESSO, it was
neither legally nor logically possible for ESSO thereafter to be considered a debtor of the
Government in that amount of P221,033.00; and whatever other obligation ESSO might
subsequently incur in favor of the Government would have to be reduced by that sum, in respect
of which no interest could be charged. To interpret the words of the statute in such a manner as
to subvert these truisms simply can not and should not be countenanced. "Nothing is better
settled than that courts are not to give words a meaning which would lead to absurd or
unreasonable consequences. That is a principle that goes back to In re Allen (2 Phil. 630)
decided on October 29, 1903, where it was held that a literal interpretation is to be rejected if it
would be unjust or lead to absurd results." 6 "Statutes should receive a sensible construction,
such as will give effect to the legislative intention and so as to avoid an unjust or absurd
conclusion." 7
WHEREFORE, the petition for review is DENIED, and the Decision of the Court of Tax Appeals
dated October 28, 1967 subject of the petition is AFFIRMED, without pronouncement as to
costs.

69
2. ID.; COMMONWEALTH ACT 142, AS AMENDED (AN ACT TO REGULATE THE USE OF
ALIASES); PURPOSE IS TO REGULATE THE USE OF ALIASES IN BUSINESS
TRANSACTION. - The objective and purpose of C.A. No. 142 have their origin and basis
in Act No. 3883, An Act to Regulate the Use in Business Transactions of Names other than
True Names, Prescribing the Duties of the Director of the Bureau of Commerce and
Industry in its Enforcement, Providing Penalties for Violations thereof, and for other
purposes, which was approved on 14 November 1931 and amended by Act No. 4147,
approved on 28 November 1934. The enactment of C.A. No. 142 as amended was made
primarily to curb the common practice among the Chinese of adopting scores of different
names and aliases which created tremendous confusion in the field of trade. Such a
practice almost bordered on the crime of using fictitious names which for obvious reasons
could not be successfully maintained against the Chinese who, rightly or wrongly, claimed
they possessed a thousand and one names. C.A. No. 142 thus penalized the act of using
an alias name, unless such alias was duly authorized by proper judicial proceedings and
recorded in the civil register.
3. CRIMINAL LAW; COMMONWEALTH ACT 142, AS AMENDED (AN ACT TO REGULATE
THE USE OF ALIASES); ALIAS, DEFINED. - An alias is a name or names used by a
person or intended to be used by him publicly and habitually usually in business
transactions in addition to his real name by which he is registered at birth or baptized the
first time or substitute name authorized by a competent authority. A mans name is simply
the sound or sounds by which he is commonly designated by his fellows and by which
they distinguish him but sometimes a man is known by several different names and thse
are known as aliases.
4. ID.; ID.; USE OF FICTITIOUS NAME IN A SINGLE TRANSACTION WITHOUT INTENDING
TO BE KNOWN BY THIS NAME IN ADDITION TO HIS REAL NAME, NOT A VIOLATION
THEREOF. - The use of a fictitious name or a different name belonging to another person
in a single instance without any sign or indication that the user intends to be known by this
name in addition to his real name from that day forth does not fall within the prohibition
contained in C.A. No. 142 as amended.

[G.R. No. 112170. April 10, 1996]

CESARIO
URSUA, petitioner, vs. COURT
THE PHILIPPINES, respondents.

OF

APPEALS

AND

PEOPLE

OF

SYLLABUS
1. STATUTORY CONSTRUCTION; STATUTES; CONSTRUED WITH REFERENCE TO THE
INTENDED SCOPE AND PURPOSE. - Time and again we have decreed that statutes are
to be construed in the light of the purposes to be achieved and the evils sought to be
remedied. Thus in construing a statute the reason for its enactment should be kept in mind
and the statute should be construed with reference to the intended scope and
purpose. The court may consider the spirit and reason of the statute, where a literal
meaning would lead to absurdity, contradiction, injustice, or would defeat the clear
purpose of the lawmakers.

5. ID.; ID.; ID.; CASE AT BAR. - This is so in the case at bench. It is not disputed that petitioner
introduced himself in the Office of the Ombudsman as Oscar Perez, which was the name
of the messenger of his lawyer who should have brought the letter to that office in the first
place instead of petitioner. He did so while merely serving the request of his lawyer to
obtain a copy of the complaint in which petitioner was a respondent. There is no question
then that Oscar Perez is not an alias name of petitioner. There is no evidence showing
that he had used or was intending to use that name as his second name in addition to his
real name. The use of the name Oscar Perez was made by petitioner in an isolated
transaction where he was not even legally required to expose his real identity. For, even if
he had identified himself properly at the Office of the Ombudsman, petitioner would still be
able to get a copy of the complaint as a matter of right, and the Office of the Ombudsman
could not refuse him because the complaint was part of public records hence open to
inspection and examination by anyone under the proper circumstances. While the act of
petitioner may be covered by other provisions of law, such does not constitute an offense
within the concept of C.A. No. 142 as amended under which he is prosecuted. The

70
confusion and fraud in business transactions which the anti-alias law and its related
statutes seek to prevent are not present here as the circumstances are peculiar and
distinct from those contemplated by the legislature in enacting C.A. No. 142 as
amended. There exists a valid presumption that undesirable consequences were never
intended by a legislative measure and that a construction of which the statute is fairly
susceptible is favored, which will avoid all objectionable, mischievous, indefensible,
wrongful, evil and injurious consequences. Indeed, our mind cannot rest easy on the
proposition that petitioner should be convicted on a law that does not clearly penalize the
act done by him.

On 1 August 1989 Atty. Francis Palmones, counsel for petitioner, wrote the Office of the
Ombudsman in Davao City requesting that he be furnished copy of the complaint against
petitioner. Atty. Palmones then asked his client Ursua to take his letter-request to the Office of
the Ombudsman because his law firms messenger, Oscar Perez, had to attend to some
personal matters. Before proceeding to the Office of the Ombudsman petitioner talked to Oscar
Perez and told him that he was reluctant to personally ask for the document since he was one of
the respondents before the Ombudsman. However, Perez advised him not to worry as he could
just sign his (Perez) name if ever he would be required to acknowledge receipt of the complaint.

Wherefore, the questioned decision of the Court of Appeals affirming that of the Regional
Trial Court of Davao City is REVERSED and SET ASIDE and petitioner CESARIO URSUA
is ACQUITTED of the crime charged.

When petitioner arrived at the Office of the Ombudsman in Davao City he was instructed
by the security officer to register in the visitors logbook. Instead of writing down his name
petitioner wrote the name Oscar Perez after which he was told to proceed to the Administrative
Division for the copy of the complaint he needed. He handed the letter of Atty. Palmones to the
Chief of the Administrative Division, Ms. Loida Kahulugan, who then gave him a copy of the
complaint, receipt of which he acknowledged by writing the name Oscar Perez. [4]

6. STATUTORY CONSTRUCTION; A PENAL STATUTE LIKE COMMONWEALTH ACT 142,

AS AMENDED, CONSTRUED STRICTLY AGAINST THE STATE AND IN FAVOR OF
THE ACCUSED. - As C.A. No. 142 is a penal statute, it should be construed strictly
against the State and in favor of the accused. The reason for this principle is the
tenderness of the law for the rights of individuals and the object is to establish a certain
rule by conformity to which mankind would be safe, and the discretion of the court limited.
APPEARANCES OF COUNSEL
Ceferino Padua Law Office for petitioner.
The Solicitor General for respondents.
DECISION
BELLOSILLO, J.:
This is a petition for a review of the decision of the Court of Appeals which affirmed the
conviction of petitioner by the Regional Trial Court of Davao City for violation of Sec. 1 of C.A.
No. 142, as amended by R.A. No. 6085, otherwise known as An Act to Regulate the Use of
Alliases.[1]

[3]

Before petitioner could leave the premises he was greeted by an acquaintance, Josefa
Amparo, who also worked in the same office. They conversed for a while then he left. When
Loida learned that the person who introduced himself as Oscar Perez was actually petitioner
Cesario Ursua, a customer of Josefa Amparo in her gasoline station, Loida reported the matter
to the Deputy Ombudsman who recommended that petitioner be accordingly charged.
On 18 December 1990, after the prosecution had completed the presentation of its
evidence, petitioner without leave of court filed a demurrer to evidence alleging that the failure of
the prosecution to prove that his supposed alias was different from his registered name in the
local civil registry was fatal to its cause. Petitioner argued that no document from the local civil
registry was presented to show the registered name of accused which according to him was a
condition sine qua non for the validity of his conviction.
The trial court rejected his contentions and found him guilty of violating Sec. 1 of C.A. No.
142 as amended by R. A. No. 6085. He was sentenced to suffer a prison term of one (1) year
and one (1) day of prision correccional minimum as minimum, to four (4) years of prision
correccional medium as maximum, with all the accessory penalties provided for by law, and to
pay a fine of P4,000.00 plus costs.
Petitioner appealed to the Court of Appeals.

Petitioner Cesario Ursua was a Community Environment and Natural Resources Officer
assigned in Kidapawan, Cotabato. On 9 May 1989 the Provincial Governor of Cotabato
requested the Office of the Ombudsman in Manila to conduct an investigation on a complaint for
bribery, dishonesty, abuse of authority and giving of unwarranted benefits by petitioner and other
officials of the Department of Environment and Natural Resources. The complaint was initiated
by the Sangguniang Panlalawigan of Cotabato through a resolution advising the Governor to
report the involvement of petitioner and others in the illegal cutting of mahogany trees and
hauling of illegally-cut logs in the area.[2]

On 31 May 1993 the Court of Appeals affirmed the conviction of petitioner but modified the
penalty by imposing an indeterminate term of one (1) year as minimum to three (3) years as
maximum and a fine of P5,000.00.
Petitioner now comes to us for review of his conviction as. he reasserts his innocence. He
contends that he has not violated C.A. No. 142 as amended by R. A. No. 6085 as he never used
any alias name; neither is Oscar Perez his alias. An alias, according to him, is a term which
connotes the habitual use of another name by which a person is also known. He claims that he

71
has never been known as Oscar Perez and that he only used such name on one occasion and it
was with the express consent of Oscar Perez himself. It is his position that an essential
requirement for a conviction under C.A. No. 142 as amended by R. A. No. 6085 has not been
complied with when the prosecution failed to prove that his supposed alias was different from his
registered name in the Registry of Births. He further argues that the Court of Appeals erred in
not considering the defense theory that he was charged under the wrong law.[5]
Time and again we have decreed that statutes are to be construed in the light of the
purposes to be achieved and the evils sought to be remedied. Thus in construing a statute the
reason for its enactment should be kept in mind and the statute should be construed with
reference to the intended scope and purpose. [6] The court may consider the spirit and reason of
the statute, where a literal meaning would lead to absurdity, contradiction, injustice, or would
defeat the clear purpose of the lawmakers.[7]
For a clear understanding of the purpose of C.A. No. 142 as amended, which was
allegedly violated by petitioner, and the surrounding circumstances under which the law was
enacted, the pertinent provisions thereof, its amendments and related statutes are herein cited.
C.A. No. 142, which was approved on 7 November 1936, and before its amendment by R. A.
No. 6085, is entitled An Act to Regulate the Use of Aliases. It provides as follows:
Section 1. Except as a pseudonym for literary purposes, no person shall use any name different from the
one with which he was christened or by which he has been known since his childhood, or such substitute
name as may have been authorized by a competent court. The name shall comprise the patronymic name
and one or two surnames.

Sec. 2. Any person desiring to use an alias shall apply for authority therefor in proceedings like those
legally provided to obtain judicial authority for a change of name and no person shall be allowed to secure
such judicial authority for more than one alias. The petition for an alias shall set forth the persons
baptismal and family name and the name recorded in the civil registry, if different, his immigrants name, if
an alien, and his pseudonym, if he has such names other than his original or real name, specifying the
reason or reasons for the desired alias. The judicial authority for the use of alias, the christian name and
the alien immigrants name shall be recorded in the proper local civil registry, and no person shall use any
name or names other than his original or real name unless the same is or are duly recorded in the proper
local civil registry.
The objective and purpose of C. A. No. 142 have their origin and basis in Act No. 3883, An
Act to Regulate the Use in Business Transactions of Names other than True Names, Prescribing
the Duties of the Director of the Bureau of Commerce And Industry in its Enforcement, Providing
Penalties for Violations thereof, and for other purposes, which was approved on 14 November
1931 and amended by Act No. 4147, approved on 28 November 1934.[8] The pertinent provisions
of Act No. 3883 as amended follow -Section 1. It shall be unlawful for any person to use or sign,
on any written or printed receipt including receipt for tax or business or any written or printed
contract not verified by a notary public or on any written or printed evidence of any agreement or
business transactions, any name used in connection with his business other than his true name,
or keep conspicuously exhibited in plain view in or at the place where his business is conducted,
if he is engaged in a business, any sign announcing a firm name or business name or style
without first registering such other name, or such firm name, or business name or style in the
Bureau of Commerce together with his true name and that of any other person having a joint or
common interest with him in such contract agreement, business transaction, or business x x x.

Section 2. Any person desiring to use an alias or aliases shall apply for authority therefor in proceedings
like those legally provided to obtain judicial authority for a change of name. Separate proceedings shall be
had for each alias, and each new petition shall set forth the original name and the alias or aliases for the
use of which judicial authority has been obtained, specifying the proceedings and the date on which such
authority was granted. Judicial authorities for the use of aliases shall be recorded in the proper civil
register x x x.

For a bit of history, the enactment of C.A. No. 142 as amended was made primarily to curb
the common practice among the Chinese of adopting scores of different names
and aliaseswhich created tremendous confusion in the field of trade. Such a practice almost
bordered on the crime of using fictitious names which for obvious reasons could not be
successfully maintained against the Chinese who, rightly or wrongly, claimed they possessed a
thousand and one names. CA. No. 142 thus penalized the act of using an alias name, unless
such aliaswas duly authorized by proper judicial proceedings and recorded in the civil register.[9]

The above law was subsequently amended by R. A. No. 6085, approved on 4 August
1969. As amended, C.A. No. 142 now reads:

In Yu Kheng Chiau v. Republic[10] the Court had occasion to explain the meaning, concept
and ill effects of the use of an alias within the purview of C.A. No. 142 when we ruled

Section 1. Except as a pseudonym solely for literary, cinema, television, radio or other entertainment
purposes and in athletic events where the use of pseudonym is a normally accepted practice, no person
shall use any name different from the one with which he was registered at birth in the office of the local
civil registry or with which he was baptized for the first time, or in case of an alien, with which he was
registered in the bureau of immigration upon entry; or such substitute name as may have been authorized
by a competent court: Provided, That persons whose births have not been registered in any local civil
registry and who have not been baptized, have one year from the approval of this act within which to
register their names in the civil registry of their residence. The name shall comprise the patronymic name
and one or two surnames.

There can hardly be any doubt that petitioners use of alias Kheng Chiau Young in addition to his real
name Yu Cheng Chiau would add to more confusion. That he is known in his business, as manager of the
Robert Reid, Inc., by the former name, is not sufficient reason to allow him its use. After all, petitioner
admitted that he is known to his associates by both names. In fact, the Anselmo Trinidad, Inc., of which he
is a customer, knows him by his real name. Neither would the fact that he had encountered certain
difficulties in his transactions with government offices which required him to explain why he bore two
names, justify the grant of his petition, for petitioner could easily avoid said difficulties by simply using
and sticking only to his real name Yu Cheng Chiau.
The fact that petitioner intends to reside permanently in the Philippines, as shown by his having filed a
petition for naturalization in Branch V of the abovementioned court, argues the more against the grant of

72
his petition, because if naturalized as a Filipino citizen, there would then be no necessity for his further
using said alias, as it would be contrary to the usual Filipino way and practice of using only one name in
ordinary as well as business transactions. And, as the lower court correctly observed, if he believes (after
he is naturalized) that it would be better for him to write his name following the Occidental method, he
can easily file a petition for change of name, so that in lieu of the name Yu Kheng Chian, he can,
abandoning the same, ask for authority to adopt the name Kheng Chiau Young.
All things considered, we are of the opinion and so hold, that petitioner has not shown
satisfactory proper and reasonable grounds under the aforequoted provisions of Commonwealth
Act No. 142 and the Rules of Court, to warrant the grant of his petition for the use of
an alias name.
Clearly therefore an alias is a name or names used by a person or intended to be used by
him publicly and habitually usually in business transactions in addition to his real name by which
he is registered at birth or baptized the first time or substitute name authorized by a competent
authority. A mans name is simply the sound or sounds by which he is commonly designated by
his fellows and by which they distinguish him but sometimes a man is known by several different
names and these are known as aliases.[11] Hence, the use of a fictitious name or a different
name belonging to another person in a single instance without any sign or indication that the
user intends to be known by this name in addition to his real name from that day forth does not
fall within the prohibition contained in C.A. No. 142 as amended. This is so in the case at bench.
It is not disputed that petitioner introduced himself in the Office of the Ombudsman as
Oscar Perez, which was the name of the messenger of his lawyer who should have brought the
letter to that office in the first place instead of petitioner. He did so while merely serving the
request of his lawyer to obtain a copy of the complaint in which petitioner was a
respondent.There is no question then that Oscar Perez is not an alias name of petitioner. There
is no evidence showing that he had used or was intending to use that name as his second name
in addition to his real name. The use of the name Oscar Perez was made by petitioner in an
isolated transaction where he was not even legally required to expose his real identity. For, even
if he had identified himself properly at the Office of the Ombudsman, petitioner would still be able
to get a copy of the complaint as a matter of right, and the Office of the Ombudsman could not
refuse him because the complaint was part of public records hence open to inspection and
examination by anyone under the proper circumstances.
While the act of petitioner may be covered by other provisions of law, such does not
constitute an offense within the concept of C.A. No. 142 as amended under which he is
prosecuted.The confusion and fraud in business transactions which the anti-alias law and its
related statutes seek to prevent are not present here as the circumstances are peculiar and
distinct from those contemplated by the legislature in enacting C.A. No. 142 as amended. There
exists a valid presumption that undesirable consequences were never intended by a legislative
measure and that a construction of which the statute is fairly susceptible is favored, which will
avoid all objectionable, mischievous, indefensible, wrongful, evil and injurious consequences.
[12]
Moreover, as C.A. No. 142 is a penal statute, it should be construed strictly against the State
and in favor of the accused.[13] The reason for this principle is the tenderness of the law for the
rights of individuals and the object is to establish a certain rule by conformity to which mankind
would be safe, and the discretion of the court limited. [14] Indeed, our mind cannot rest easy on

the proposition that petitioner should be convicted on a law that does not clearly penalize the act
done by him.
WHEREFORE, the questioned decision of the Court of Appeals affirming that of the
Regional Trial Court of Davao City is REVERSED and SET ASIDE and petitioner CESARIO
URSUA is ACQUITTED of the crime charged.
SO ORDERED.

73

50 [G.R. No. 127325. March 19, 1997]

MIRIAM

DEFENSOR SANTIAGO, ALEXANDER PADILLA and MARIA ISABEL

ONGPIN, petitioners, vs. COMMISSION ON ELECTIONS, JESUS DELFIN,
ALBERTO PEDROSA & CARMEN PEDROSA, in their capacities as founding
members of the Peoples Initiative for Reforms, Modernization and Action
(PIRMA), respondents, SENATOR
RAUL
S.
ROCO,
DEMOKRASYAIPAGTANGGOL ANG KONSTITUSYON (DIK), MOVEMENT OF ATTORNEYS FOR
BROTHERHOOD INTEGRITY AND NATIONALISM, INC. (MABINI), INTEGRATED
BAR OF THE PHILIPPINES (IBP) and LABAN NG DEMOKRATIKONG PILIPINO
(LABAN), petitioners-intervenors.
DECISION

DAVIDE, JR., J.:

74
The heart of this controversy brought to us by way of a petition for prohibition under Rule
65 of the Rules of Court is the right of the people to directly propose amendments to the
Constitution through the system of initiative under Section 2 of Article XVII of the 1987
Constitution. Undoubtedly, this demands special attention, as this system of initiative was
unknown to the people of this country, except perhaps to a few scholars, before the drafting of
the 1987 Constitution. The 1986 Constitutional Commission itself, through the original
proponent[1] and the main sponsor[2] of the proposed Article on Amendments or Revision of the
Constitution, characterized this system as innovative.[3] Indeed it is, for both under the 1935 and
1973 Constitutions, only two methods of proposing amendments to, or revision of, the
Constitution were recognized, viz., (1) by Congress upon a vote of three-fourths of all its
members and (2) by a constitutional convention. [4] For this and the other reasons hereafter
discussed, we resolved to give due course to this petition.
On 6 December 1996, private respondent Atty. Jesus S. Delfin filed with public respondent
Commission on Elections (hereafter, COMELEC) a Petition to Amend the Constitution, to Lift
Term Limits of Elective Officials, by Peoples Initiative (hereafter, Delfin Petition) [5] wherein Delfin
asked the COMELEC for an order

Upon the filing of the Delfin Petition, which was forthwith given the number UND 96-037
(INITIATIVE), the COMELEC, through its Chairman, issued an Order [11] (a) directing Delfin to
cause the publication of the petition, together with the attached Petition for Initiative on the 1987
Constitution (including the proposal, proposed constitutional amendment, and the signature
form), and the notice of hearing in three (3) daily newspapers of general circulation at his own
expense not later than 9 December 1996; and (b) setting the case for hearing on 12 December
1996 at 10:00 a.m.
At the hearing of the Delfin Petition on 12 December 1996, the following appeared: Delfin
and Atty. Pete Q. Quadra; representatives of the Peoples Initiative for Reforms, Modernization
and Action (PIRMA); intervenor-oppositor Senator Raul S. Roco, together with his two other
lawyers; and representatives of, or counsel for, the Integrated Bar of the Philippines (IBP),
Demokrasya-Ipagtanggol ang Konstitusyon (DIK), Public Interest Law Center, and Laban ng
Demokratikong Pilipino (LABAN).[12] Senator Roco, on that same day, filed a Motion to Dismiss
the Delfin Petition on the ground that it is not the initiatory petition properly cognizable by the
COMELEC.

1. Fixing the time and dates for signature gathering all over the country;

After hearing their arguments, the COMELEC directed Delfin and the oppositors to file
their memoranda and/or oppositions/memoranda within five days.[13]

2. Causing the necessary publications of said Order and the attached Petition for
Initiative on the 1987 Constitution, in newspapers of general and local
circulation;

On 18 December 1996, the petitioners herein -- Senator Miriam Defensor Santiago,

Alexander Padilla, and Maria Isabel Ongpin -- filed this special civil action for prohibition raising
the following arguments:

3. Instructing Municipal Election Registrars in all Regions of the Philippines, to assist

Petitioners and volunteers, in establishing signing stations at the time and on
the dates designated for the purpose.
Delfin alleged in his petition that he is a founding member of the Movement for Peoples
Initiative,[6] a group of citizens desirous to avail of the system intended to institutionalize people
power; that he and the members of the Movement and other volunteers intend to exercise the
power to directly propose amendments to the Constitution granted under Section 2, Article XVII
of the Constitution; that the exercise of that power shall be conducted in proceedings under the
control and supervision of the COMELEC; that, as required in COMELEC Resolution No. 2300,
signature stations shall be established all over the country, with the assistance of municipal
election registrars, who shall verify the signatures affixed by individual signatories; that before
the Movement and other volunteers can gather signatures, it is necessary that the time and
dates to be designated for the purpose be first fixed in an order to be issued by the COMELEC;
and that to adequately inform the people of the electoral process involved, it is likewise
necessary that the said order, as well as the Petition on which the signatures shall be affixed, be
published in newspapers of general and local circulation, under the control and supervision of
the COMELEC.
The Delfin Petition further alleged that the provisions sought to be amended are Sections
4 and 7 of Article VI, [7] Section 4 of Article VII, [8] and Section 8 of Article X [9] of the
Constitution.Attached to the petition is a copy of a Petition for Initiative on the 1987
Constitution[10] embodying the proposed amendments which consist in the deletion from the
aforecited sections of the provisions concerning term limits, and with the following proposition:
DO YOU APPROVE OF LIFTING THE TERM LIMITS OF ALL ELECTIVE GOVERNMENT
OFFICIALS, AMENDING FOR THE PURPOSE SECTIONS 4 AND 7 OF ARTICLE VI, SECTION 4
OF ARTICLE VII, AND SECTION 8 OF ARTICLE X OF THE 1987 PHILIPPINE CONSTITUTION?
According to Delfin, the said Petition for Initiative will first be submitted to the people, and
after it is signed by at least twelve per cent of the total number of registered voters in the country
it will be formally filed with the COMELEC.

(1) The constitutional provision on peoples initiative to amend the Constitution can only be implemented
by law to be passed by Congress. No such law has been passed; in fact, Senate Bill No. 1290 entitledAn
Act Prescribing and Regulating Constitutional Amendments by Peoples Initiative, which petitioner
Senator Santiago filed on 24 November 1995, is still pending before the Senate Committee on
Constitutional Amendments.
(2) It is true that R.A. No. 6735 provides for three systems of initiative, namely, initiative on the
Constitution, on statutes, and on local legislation. However, it failed to provide any subtitle on initiative on
the Constitution, unlike in the other modes of initiative, which are specifically provided for in Subtitle II
and Subtitle III. This deliberate omission indicates that the matter of peoples initiative to amend the
Constitution was left to some future law. Former Senator Arturo Tolentino stressed this deficiency in the
law in his privilege speech delivered before the Senate in 1994: There is not a single word in that law
which can be considered as implementing [the provision on constitutional initiative]. Such implementing
provisions have been obviously left to a separate law.
(3) Republic Act No. 6735 provides for the effectivity of the law after publication in print media. This
indicates that the Act covers only laws and not constitutional amendments because the latter take effect
only upon ratification and not after publication.
(4) COMELEC Resolution No. 2300, adopted on 16 January 1991 to govern the conduct of initiative on
the Constitution and initiative and referendum on national and local laws, is ultra vires insofar
asinitiative on amendments to the Constitution is concerned, since the COMELEC has no power to
provide rules and regulations for the exercise of the right of initiative to amend the Constitution. Only
Congress is authorized by the Constitution to pass the implementing law.
(5)The peoples initiative is limited to amendments to the Constitution, not to revision thereof. Extending
or lifting of term limits constitutes a revision and is, therefore, outside the power of the peoples initiative.

75
(6) Finally, Congress has not yet appropriated funds for peoples initiative; neither the COMELEC nor any
other government department, agency, or office has realigned funds for the purpose.

GUIDELINES AND RULES FOR BOTH NATIONAL AND LOCAL USE, IN IMPLEMENTING OF
THESE LAWS.

To justify their recourse to us via the special civil action for prohibition, the petitioners
allege that in the event the COMELEC grants the Delfin Petition, the peoples initiative
spearheaded by PIRMA would entail expenses to the national treasury for general re-registration
of voters amounting to at least P180 million, not to mention the millions of additional pesos in
expenses which would be incurred in the conduct of the initiative itself. Hence, the
transcendental importance to the public and the nation of the issues raised demands that this
petition for prohibition be settled promptly and definitely, brushing aside technicalities of
procedure and calling for the admission of a taxpayers and legislators suit. [14] Besides, there is
no other plain, speedy, and adequate remedy in the ordinary course of law.

6. EVEN SENATOR DEFENSOR-SANTIAGOS SENATE BILL NO. 1290 CONTAINS A PROVISION

DELEGATING TO THE COMELEC THE POWER TO PROMULGATE SUCH RULES AND
REGULATIONS AS MAY BE NECESSARY TO CARRY OUT THE PURPOSES OF THIS ACT. (SEC.
12, S.B. NO. 1290, ENCLOSED AS ANNEX E, PETITION);

On 19 December 1996, this Court (a) required the respondents to comment on the petition
within a non-extendible period of ten days from notice; and (b) issued a temporary restraining
order, effective immediately and continuing until further orders, enjoining public respondent
COMELEC from proceeding with the Delfin Petition, and private respondents Alberto and
Carmen Pedrosa from conducting a signature drive for peoples initiative to amend the
Constitution.
On 2 January 1997, private respondents, through Atty Quadra, filed their Comment [15] on
the petition. They argue therein that:
1. IT IS NOT TRUE THAT IT WOULD ENTAIL EXPENSES TO THE NATIONAL TREASURY FOR
GENERAL REGISTRATION OF VOTERS AMOUNTING TO AT LEAST PESOS: ONE HUNDRED
EIGHTY MILLION (P180,000,000.00) IF THE COMELEC GRANTS THE PETITION FILED BY
RESPONDENT DELFIN BEFORE THE COMELEC.
2. NOT A SINGLE CENTAVO WOULD BE SPENT BY THE NATIONAL GOVERNMENT IF THE
COMELEC GRANTS THE PETITION OF RESPONDENT DELFIN. ALL EXPENSES IN THE
SIGNATURE GATHERING ARE ALL FOR THE ACCOUNT OF RESPONDENT DELFIN AND HIS
VOLUNTEERS PER THEIR PROGRAM OF ACTIVITIES AND EXPENDITURES SUBMITTED TO
THE COMELEC. THE ESTIMATED COST OF THE DAILY PER DIEM OF THE SUPERVISING
SCHOOL TEACHERS IN THE SIGNATURE GATHERING TO BE DEPOSITED and TO BE PAID BY
DELFIN AND HIS VOLUNTEERS IS P2,571, 200.00;
3. THE PENDING PETITION BEFORE THE COMELEC IS ONLY ON THE SIGNATURE
GATHERING WHICH BY LAW COMELEC IS DUTY BOUND TO SUPERVISE CLOSELY
PURSUANT TO ITS INITIATORY JURISDICTION UPHELD BY THE HONORABLE COURT IN ITS
RECENT SEPTEMBER 26, 1996 DECISION IN THE CASE OF SUBIC BAY METROPOLITAN
AUTHORITY VS. COMELEC, ET AL. G.R. NO. 125416;
4. REP. ACT NO. 6735 APPROVED ON AUGUST 4, 1989 IS THE ENABLING LAW
IMPLEMENTING THE POWER OF PEOPLE INITIATIVE TO PROPOSE AMENDMENTS TO THE
CONSTITUTION. SENATOR DEFENSOR-SANTIAGOS SENATE BILL NO. 1290 IS A
DUPLICATION OF WHAT ARE ALREADY PROVIDED FOR IN REP. ACT NO. 6735;
5. COMELEC RESOLUTION NO. 2300 PROMULGATED ON JANUARY 16, 1991 PURSUANT TO
REP. ACT 6735 WAS UPHELD BY THE HONORABLE COURT IN THE RECENT SEPTEMBER 26,
1996 DECISION IN THE CASE OF SUBIC BAY METROPOLITAN AUTHORITY VS. COMELEC, ET
AL. G.R. NO. 125416 WHERE THE HONORABLE COURT SAID: THE COMMISSION ON
ELECTIONS CAN DO NO LESS BY SEASONABLY AND JUDICIOUSLY PROMULGATING

7. THE LIFTING OF THE LIMITATION ON THE TERM OF OFFICE OF ELECTIVE OFFICIALS

PROVIDED UNDER THE 1987 CONSTITUTION IS NOT A REVISION OF THE CONSTITUTION. IT
IS ONLY AN AMENDMENT. AMENDMENT ENVISAGES AN ALTERATION OF ONE OR A FEW
SPECIFIC PROVISIONS OF THE CONSTITUTION. REVISION CONTEMPLATES A REEXAMINATION OF THE ENTIRE DOCUMENT TO DETERMINE HOW AND TO WHAT EXTENT
IT SHOULD BE ALTERED. (PP. 412-413, 2ND. ED. 1992, 1097 PHIL. CONSTITUTION, BY
JOAQUIN G. BERNAS, S.J.).
Also on 2 January 1997, private respondent Delfin filed in his own behalf a
Comment[16] which starts off with an assertion that the instant petition is a knee-jerk reaction to a
draft Petition for Initiative on the 1987 Constitution ... which is not formally filed yet. What he filed
on 6 December 1996 was an Initiatory Pleading or Initiatory Petition, which was legally
necessary to start the signature campaign to amend the Constitution or to put the movement to
gather signatures under COMELEC power and function. On the substantive allegations of the
petitioners, Delfin maintains as follows:
(1) Contrary to the claim of the petitioners, there is a law, R.A. No. 6735, which governs the conduct
of initiative to amend the Constitution. The absence therein of a subtitle for such initiative is not fatal,
since subtitles are not requirements for the validity or sufficiency of laws.
(2) Section 9(b) of R.A. No. 6735 specifically provides that the proposition in an initiative to amend the
Constitution approved by the majority of the votes cast in the plebiscite shall become effective as of the
day of the plebiscite.
(3) The claim that COMELEC Resolution No. 2300 is ultra vires is contradicted by (a) Section 2, Article
IX-C of the Constitution, which grants the COMELEC the power to enforce and administer all laws and
regulations relative to the conduct of an election, plebiscite, initiative, referendum, and recall; and (b)
Section 20 of R.A. 6735, which empowers the COMELEC to promulgate such rules and regulations as
may be necessary to carry out the purposes of the Act.
(4) The proposed initiative does not involve a revision of, but mere amendment to, the Constitution
because it seeks to alter only a few specific provisions of the Constitution, or more specifically, only those
which lay term limits. It does not seek to reexamine or overhaul the entire document.
As to the public expenditures for registration of voters, Delfin considers petitioners
estimate of P180 million as unreliable, for only the COMELEC can give the exact
figure. Besides, if there will be a plebiscite it will be simultaneous with the 1997 Barangay
Elections. In any event, fund requirements for initiative will be a priority government expense
because it will be for the exercise of the sovereign power of the people.
In the Comment[17] for the public respondent COMELEC, filed also on 2 January 1997, the
Office of the Solicitor General contends that:

76
(1) R.A. No. 6735 deals with, inter alia, peoples initiative to amend the Constitution. Its Section 2 on
Statement of Policy explicitly affirms, recognizes, and guarantees that power; and its Section 3, which
enumerates the three systems of initiative, includes initiative on the Constitution and defines the same as
the power to propose amendments to the Constitution. Likewise, its Section 5 repeatedly
mentionsinitiative on the Constitution.
(2) A separate subtitle on initiative on the Constitution is not necessary in R.A. No. 6735 because, being
national in scope, that system of initiative is deemed included in the subtitle on National Initiative and
Referendum; and Senator Tolentino simply overlooked pertinent provisions of the law when he claimed
that nothing therein was provided for initiative on the Constitution.
(3) Senate Bill No. 1290 is neither a competent nor a material proof that R.A. No. 6735 does not deal
with initiative on the Constitution.
(4) Extension of term limits of elected officials constitutes a mere amendment to the Constitution, not a
revision thereof.
(5) COMELEC Resolution No. 2300 was validly issued under Section 20 of R.A. No. 6735 and under the
Omnibus Election Code. The rule-making power of the COMELEC to implement the provisions of R.A.
No. 6735 was in fact upheld by this Court in Subic Bay Metropolitan Authority vs. COMELEC .
On 14 January 1997, this Court (a) confirmed nunc pro tunc the temporary restraining
order; (b) noted the aforementioned Comments and the Motion to Lift Temporary Restraining
Order filed by private respondents through Atty. Quadra, as well as the latters Manifestation
stating that he is the counsel for private respondents Alberto and Carmen Pedrosa only and the
Comment he filed was for the Pedrosas; and (c) granted the Motion for Intervention filed on 6
January 1997 by Senator Raul Roco and allowed him to file his Petition in Intervention not later
than 20 January 1997; and (d) set the case for hearing on 23 January 1997 at 9:30 a.m.
On 17 January 1997, the Demokrasya-Ipagtanggol ang Konstitusyon (DIK) and the
Movement of Attorneys for Brotherhood Integrity and Nationalism, Inc. (MABINI), filed a Motion
for Intervention. Attached to the motion was their Petition in Intervention, which was later
replaced by an Amended Petition in Intervention wherein they contend that:
(1) The Delfin proposal does not involve a mere amendment to, but a revision of, the Constitution
because, in the words of Fr. Joaquin Bernas, S.J.,[18] it would involve a change from a political philosophy
that rejects unlimited tenure to one that accepts unlimited tenure; and although the change might appear to
be an isolated one, it can affect other provisions, such as, on synchronization of elections and on the State
policy of guaranteeing equal access to opportunities for public service and prohibiting political dynasties.
[19]
A revision cannot be done by initiative which, by express provision of Section 2 of Article XVII of the
Constitution, is limited to amendments.
(2) The prohibition against reelection of the President and the limits provided for all other national and
local elective officials are based on the philosophy of governance, to open up the political arena to as
many as there are Filipinos qualified to handle the demands of leadership, to break the concentration of
political and economic powers in the hands of a few, and to promote effective proper empowerment for
participation in policy and decision-making for the common good; hence, to remove the term limits is to
negate and nullify the noble vision of the 1987 Constitution.

(3) The Delfin proposal runs counter to the purpose of initiative, particularly in a conflict-of-interest
situation. Initiative is intended as a fallback position that may be availed of by the people only if they are
dissatisfied with the performance of their elective officials, but not as a premium for good performance. [20]
(4) R.A. No. 6735 is deficient and inadequate in itself to be called the enabling law that implements the
peoples initiative on amendments to the Constitution. It fails to state (a) the proper parties who may file
the petition, (b) the appropriate agency before whom the petition is to be filed, (c) the contents of the
petition, (d) the publication of the same, (e) the ways and means of gathering the signatures of the voters
nationwide and 3% per legislative district, (f) the proper parties who may oppose or question the veracity
of the signatures, (g) the role of the COMELEC in the verification of the signatures and the sufficiency of
the petition, (h) the appeal from any decision of the COMELEC, (I) the holding of a plebiscite, and (g) the
appropriation of funds for such peoples initiative. Accordingly, there being no enabling law, the
COMELEC has no jurisdiction to hear Delfins petition.
(5) The deficiency of R.A. No. 6735 cannot be rectified or remedied by COMELEC Resolution No. 2300,
since the COMELEC is without authority to legislate the procedure for a peoples initiative under Section 2
of Article XVII of the Constitution. That function exclusively pertains to Congress. Section 20 of R.A.
No. 6735 does not constitute a legal basis for the Resolution, as the former does not set a sufficient
standard for a valid delegation of power.
On 20 January 1997, Senator Raul Roco filed his Petition in Intervention. [21] He avers that
R.A. No. 6735 is the enabling law that implements the peoples right to initiate constitutional
amendments. This law is a consolidation of Senate Bill No. 17 and House Bill No. 21505; he coauthored the House Bill and even delivered a sponsorship speech thereon. He likewise submits
that the COMELEC was empowered under Section 20 of that law to promulgate COMELEC
Resolution No. 2300. Nevertheless, he contends that the respondent Commission is without
jurisdiction to take cognizance of the Delfin Petition and to order its publication because the said
petition is not the initiatory pleading contemplated under the Constitution, Republic Act No. 6735,
and COMELEC Resolution No. 2300. What vests jurisdiction upon the COMELEC in an initiative
on the Constitution is the filing of a petition for initiative which is signed by the required number
of registered voters. He also submits that the proponents of a constitutional amendment cannot
avail of the authority and resources of the COMELEC to assist them is securing the required
number of signatures, as the COMELECs role in an initiative on the Constitution is limited to the
determination of the sufficiency of the initiative petition and the call and supervision of a
plebiscite, if warranted.
On 20 January 1997, LABAN filed a Motion for Leave to Intervene.
The following day, the IBP filed a Motion for Intervention to which it attached a Petition in
Intervention raising the following arguments:
(1) Congress has failed to enact an enabling law mandated under Section 2, Article XVII of the 1987
Constitution.
(2) COMELEC Resolution No. 2300 cannot substitute for the required implementing law on the initiative
to amend the Constitution.
(3) The Petition for Initiative suffers from a fatal defect in that it does not have the required number of
signatures.
(4) The petition seeks, in effect a revision of the Constitution, which can be proposed only by Congress or
a constitutional convention.[22]

77
On 21 January 1997, we promulgated a Resolution (a) granting the Motions for
Intervention filed by the DIK and MABINI and by the IBP, as well as the Motion for Leave to
Intervene filed by LABAN; (b) admitting the Amended Petition in Intervention of DIK and MABINI,
and the Petitions in Intervention of Senator Roco and of the IBP; (c) requiring the respondents to
file within a nonextendible period of five days their Consolidated Comments on the aforesaid
Petitions in Intervention; and (d) requiring LABAN to file its Petition in Intervention within a
nonextendible period of three days from notice, and the respondents to comment thereon within
a nonextendible period of five days from receipt of the said Petition in Intervention.

Private respondents Alberto and Carmen Pedrosa filed their Consolidated Comments on
the Petitions in Intervention of Senator Roco, DIK and MABINI, and IBP.[23] The parties thereafter
filed, in due time, their separate memoranda.[24]

At the hearing of the case on 23 January 1997, the parties argued on the following pivotal
issues, which the Court formulated in light of the allegations and arguments raised in the
pleadings so far filed:

1. Whether R.A. No. 6735, entitled An Act Providing for a System of Initiative and Referendum and
Appropriating Funds Therefor, was intended to include or cover initiative on amendments to the
Constitution; and if so, whether the Act, as worded, adequately covers such initiative.

As we stated in the beginning, we resolved to give due course to this special civil action.
For a more logical discussion of the formulated issues, we shall first take up the fifth issue
which appears to pose a prejudicial procedural question.

THE INSTANT PETITION IS VIABLE DESPITE THE

PENDENCY IN THE COMELEC OF THE DELFIN
PETITION.

2. Whether that portion of COMELEC Resolution No. 2300 (In re: Rules and Regulations Governing the
Conduct of Initiative on the Constitution, and Initiative and Referendum on National and Local Laws)
regarding the conduct of initiative on amendments to the Constitution is valid, considering the absence in
the law of specific provisions on the conduct of such initiative.

Except for the petitioners and intervenor Roco, the parties paid no serious attention to the
fifth issue, i.e., whether it is proper for this Court to take cognizance of this special civil action
when there is a pending case before the COMELEC. The petitioners provide an affirmative
answer. Thus:

3. Whether the lifting of term limits of elective national and local officials, as proposed in the draft
Petition for Initiative on the 1987 Constitution, would constitute a revision of, or an amendment to, the
Constitution.

28. The Comelec has no jurisdiction to take cognizance of the petition filed by private respondent Delfin.
This being so, it becomes imperative to stop the Comelec from proceeding any further, and under the
Rules of Court, Rule 65, Section 2, a petition for prohibition is the proper remedy.

4. Whether the COMELEC can take cognizance of, or has jurisdiction over, a petition solely intended to
obtain an order (a) fixing the time and dates for signature gathering; (b) instructing municipal election
officers to assist Delfin's movement and volunteers in establishing signature stations; and (c) directing or
causing the publication of, inter alia, the unsigned proposed Petition for Initiative on the 1987
Constitution.

29. The writ of prohibition is an extraordinary judicial writ issuing out of a court of superior jurisdiction
and directed to an inferior court, for the purpose of preventing the inferior tribunal from usurping a
jurisdiction with which it is not legally vested. (People v. Vera, supra., p. 84). In this case the writ is an
urgent necessity, in view of the highly divisive and adverse environmental consequences on the body
politic of the questioned Comelec order. The consequent climate of legal confusion and political
instability begs for judicial statesmanship.

5. Whether it is proper for the Supreme Court to take cognizance of the petition when there is a pending
case before the COMELEC.
After hearing them on the issues, we required the parties to submit simultaneously their
respective memoranda within twenty days and requested intervenor Senator Roco to submit
copies of the deliberations on House Bill No. 21505.
On 27 January 1997, LABAN filed its Petition in Intervention wherein it adopts the
allegations and arguments in the main Petition. It further submits that the COMELEC should
have dismissed the Delfin Petition for failure to state a sufficient cause of action and that the
Commissions failure or refusal to do so constituted grave abuse of discretion amounting to lack
of jurisdiction.
On 28 January 1997, Senator Roco submitted copies of portions of both the Journal and
the Record of the House of Representatives relating to the deliberations of House Bill No.
21505, as well as the transcripts of stenographic notes on the proceedings of the Bicameral
Conference Committee, Committee on Suffrage and Electoral Reforms, of 6 June 1989 on
House Bill No. 21505 and Senate Bill No. 17.

30. In the final analysis, when the system of constitutional law is threatened by the political ambitions of
man, only the Supreme Court can save a nation in peril and uphold the paramount majesty of the
Constitution.[25]
It must be recalled that intervenor Roco filed with the COMELEC a motion to dismiss the
Delfin Petition on the ground that the COMELEC has no jurisdiction or authority to entertain the
petition.[26] The COMELEC made no ruling thereon evidently because after having heard the
arguments of Delfin and the oppositors at the hearing on 12 December 1996, it required them to
submit within five days their memoranda or oppositions/memoranda. [27] Earlier, or specifically on
6 December 1996, it practically gave due course to the Delfin Petition by ordering Delfin to
cause the publication of the petition, together with the attached Petition for Initiative, the
signature form, and the notice of hearing; and by setting the case for hearing. The COMELECs
failure to act on Rocos motion to dismiss and its insistence to hold on to the petition rendered
ripe and viable the instant petition under Section 2 of Rule 65 of the Rules of Court, which
provides:
SEC. 2. Petition for prohibition. -- Where the proceedings of any tribunal, corporation, board, or person,
whether exercising functions judicial or ministerial, are without or in excess of its or his jurisdiction, or
with grave abuse of discretion, and there is no appeal or any other plain, speedy and adequate remedy in

78
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 commanding the defendant to
desist from further proceedings in the action or matter specified therein.
It must also be noted that intervenor Roco claims that the COMELEC has no jurisdiction
over the Delfin Petition because the said petition is not supported by the required minimum
number of signatures of registered voters. LABAN also asserts that the COMELEC gravely
abused its discretion in refusing to dismiss the Delfin Petition, which does not contain the
required number of signatures. In light of these claims, the instant case may likewise be treated
as a special civil action for certiorari under Section I of Rule 65 of the Rules of Court.
In any event, as correctly pointed out by intervenor Roco in his Memorandum, this Court
may brush aside technicalities of procedure in cases of transcendental importance. As we stated
in Kilosbayan, Inc. v. Guingona, Jr.:[28]
A partys standing before this Court is a procedural technicality which it may, in the exercise of its
discretion, set aside in view of the importance of issues raised. In the landmark Emergency Powers Cases,
this Court brushed aside this technicality because the transcendental importance to the public of these
cases demands that they be settled promptly and definitely, brushing aside, if we must, technicalities of
procedure.
II

R.A. NO. 6735 INTENDED TO INCLUDE THE SYSTEM

OF INITIATIVE ON AMENDMENTS TO THE
CONSTITUTION, BUT IS, UNFORTUNATELY,
INADEQUATE TO COVER THAT SYSTEM.

Section 2 of Article XVII of the Constitution provides:

recognized or granted that right, the people cannot exercise it if Congress, for whatever reason,
does not provide for its implementation.
This system of initiative was originally included in Section 1 of the draft Article on
Amendment or Revision proposed by the Committee on Amendments and Transitory Provisions
of the 1986 Constitutional Commission in its Committee Report No. 7 (Proposed Resolution No.
332).[30] That section reads as follows:
SECTION 1. Any amendment to, or revision of, this Constitution may be proposed:
(a) by the National Assembly upon a vote of three-fourths of all its members; or
(b) by a constitutional convention; or
(c) directly by the people themselves thru initiative as provided for in Article ____ Section ____ of the
Constitution.[31]
After several interpellations, but before the period of amendments, the Committee submitted a
new formulation of the concept of initiative which it denominated as Section 2; thus:
MR. SUAREZ. Thank you, Madam President. May we respectfully call attention of the Members of the
Commission that pursuant to the mandate given to us last night, we submitted this afternoon a complete
Committee Report No. 7 which embodies the proposed provision governing the matter of initiative. This
is now covered by Section 2 of the complete committee report. With the permission of the Members, may
I quote Section 2:
The people may, after five years from the date of the last plebiscite held, directly propose amendments to
this Constitution thru initiative upon petition of at least ten percent of the registered voters.
This completes the blanks appearing in the original Committee Report No. 7.[32]

SEC. 2. Amendments to this Constitution may likewise be directly proposed by the people through
initiative upon a petition of at least twelve per centum of the total number of registered voters, of which
every legislative district must be represented by at least three per centum of the registered voters
therein. No amendment under this section shall be authorized within five years following the ratification
of this Constitution nor oftener than once every five years thereafter.

The interpellations on Section 2 showed that the details for carrying out Section 2 are left
to the legislature. Thus:

The Congress shall provide for the implementation of the exercise of this right.

First, on Section 1 on the matter of initiative upon petition of at least 10 percent, there are no details in the
provision on how to carry this out. Do we understand, therefore, that we are leaving this matter to the
legislature?

This provision is not self-executory. In his book,[29] Joaquin Bernas, a member of the 1986
Constitutional Commission, stated:

FR. BERNAS. Madam President, just two simple, clarificatory questions.

MR. SUAREZ. That is right, Madam President.

Without implementing legislation Section 2 cannot operate. Thus, although this mode of amending the
Constitution is a mode of amendment which bypasses congressional action, in the last analysis it still is
dependent on congressional action.

FR. BERNAS. And do we also understand, therefore, that for as long as the legislature does not pass the
necessary implementing law on this, this will not operate?

Bluntly stated, the right of the people to directly propose amendments to the Constitution
through the system of initiative would remain entombed in the cold niche of the Constitution until
Congress provides for its implementation. Stated otherwise, while the Constitution has

MR. SUAREZ. That matter was also taken up during the committee hearing, especially with respect to the
budget appropriations which would have to be legislated so that the plebiscite could be called. We deemed
it best that this matter be left to the legislature. The Gentleman is right. In any event, as envisioned, no

79
amendment through the power of initiative can be called until after five years from the date of the
ratification of this Constitution. Therefore, the first amendment that could be proposed through the
exercise of this initiative power would be after five years. It is reasonably expected that within that fiveyear period, the National Assembly can come up with the appropriate rules governing the exercise of this
power.
FR. BERNAS. Since the matter is left to the legislature - the details on how this is to be carried out - is it
possible that, in effect, what will be presented to the people for ratification is the work of the legislature
rather than of the people? Does this provision exclude that possibility?

It was made clear during the interpellations that the aforementioned Section 2 is limited to
proposals to AMEND -- not to REVISE -- the Constitution; thus:
MR. SUAREZ. ... This proposal was suggested on the theory that this matter of initiative, which came
about because of the extraordinary developments this year, has to be separated from the traditional modes
of amending the Constitution as embodied in Section 1. The committee members felt that this system of
initiative should not extend to the revision of the entire Constitution, so we removed it from the operation
of Section 1 of the proposed Article on Amendment or Revision. [34]
xxx

MR. SUAREZ. No, it does not exclude that possibility because even the legislature itself as a body could
propose that amendment, maybe individually or collectively, if it fails to muster the three-fourths vote in
order to constitute itself as a constituent assembly and submit that proposal to the people for ratification
through the process of an initiative.

MS. AQUINO. In which case, I am seriously bothered by providing this process of initiative as a separate
section in the Article on Amendment. Would the sponsor be amenable to accepting an amendment in terms
of realigning Section 2 as another subparagraph (c) of Section 1, instead of setting it up as another
separate section as if it were a self-executing provision?

xxx
MS. AQUINO. Do I understand from the sponsor that the intention in the proposal is to vest constituent
power in the people to amend the Constitution?
MR. SUAREZ. That is absolutely correct, Madam President.
MS. AQUINO. I fully concur with the underlying precept of the proposal in terms of institutionalizing
popular participation in the drafting of the Constitution or in the amendment thereof, but I would have a
lot of difficulties in terms of accepting the draft of Section 2, as written. Would the sponsor agree with me
that in the hierarchy of legal mandate, constituent power has primacy over all other legal mandates?
MR. SUAREZ. The Commissioner is right, Madam President.
MS. AQUINO. And would the sponsor agree with me that in the hierarchy of legal values, the
Constitution is source of all legal mandates and that therefore we require a great deal of circumspection in
the drafting and in the amendments of the Constitution?

MR. SUAREZ. We would be amenable except that, as we clarified a while ago, this process of initiative is
limited to the matter of amendment and should not expand into a revision which contemplates a total
overhaul of the Constitution. That was the sense that was conveyed by the Committee.
MS. AQUINO. In other words, the Committee was attempting to distinguish the coverage of modes (a)
and (b) in Section 1 to include the process of revision; whereas the process of initiation to amend, which is
given to the public, would only apply to amendments?
MR. SUAREZ.That is right. Those were the terms envisioned in the Committee.[35]
Amendments to the proposed Section 2 were thereafter introduced by then Commissioner
Hilario G. Davide, Jr., which the Committee accepted. Thus:
MR. DAVIDE. Thank you Madam President. I propose to substitute the entire Section 2 with the
following:
xxx

MR. SUAREZ. That proposition is nondebatable.

MS. AQUINO. Such that in order to underscore the primacy of constituent power we have a separate
article in the constitution that would specifically cover the process and the modes of amending the
Constitution?
MR. SUAREZ. That is right, Madam President.
MS. AQUINO. Therefore, is the sponsor inclined, as the provisions are drafted now, to again concede to
the legislature the process or the requirement of determining the mechanics of amending the Constitution
by people's initiative?
MR. SUAREZ. The matter of implementing this could very well be placed in the hands of the National
Assembly, not unless we can incorporate into this provision the mechanics that would adequately cover all
the conceivable situations.[33]

MR. DAVIDE. Madam President, I have modified the proposed amendment after taking into account the
modifications submitted by the sponsor himself and the honorable Commissioners Guingona, Monsod,
Rama, Ople, de los Reyes and Romulo. The modified amendment in substitution of the proposed Section
2 will now read as follows: "SECTION 2. -- AMENDMENTS TO THIS CONSTITUTION MAY
LIKEWISE BE DIRECTLY PROPOSED BY THE PEOPLE THROUGH INITIATIVE UPON A
PETITION OF AT LEAST TWELVE PERCENT OF THE TOTAL NUMBER OF REGISTERED
VOTERS, OF WHICH EVERY LEGISLATIVE DISTRICT MUST BE REPRESENTED BY AT LEAST
THREE PERCENT OF THE REGISTERED VOTERS THEREOF. NO AMENDMENT UNDER THIS
SECTION SHALL BE AUTHORIZED WITHIN FIVE YEARS FOLLOWING THE RATIFICATION OF
THIS CONSTITUTION NOR OFTENER THAN ONCE EVERY FIVE YEARS THEREAFTER.
THE NATIONAL ASSEMBLY SHALL BY LAW PROVIDE FOR THE IMPLEMENTATION OF THE
EXERCISE OF THIS RIGHT.

80
MR. SUAREZ. Madam President, considering that the proposed amendment is reflective of the sense
contained in Section 2 of our completed Committee Report No. 7, we accept the proposed amendment. [36]
The interpellations which ensued on the proposed modified amendment to Section 2
clearly showed that it was a legislative act which must implement the exercise of the right. Thus:
MR. ROMULO. Under Commissioner Davide's amendment, is it possible for the legislature to set forth
certain procedures to carry out the initiative...?
MR. DAVIDE. It can.

The Davide modified amendments to Section 2 were subjected to amendments, and the
final version, which the Commission approved by a vote of 31 in favor and 3 against, reads as
follows:

xxx
MR. ROMULO. But the Commissioners amendment does not prevent the legislature from asking another
body to set the proposition in proper form.
MR. DAVIDE. The Commissioner is correct. In other words, the implementation of this particular right
would be subject to legislation, provided the legislature cannot determine anymore the percentage of the
requirement.
MR. ROMULO. But the procedures, including the determination of the proper form for submission to the
people, may be subject to legislation.
MR. DAVIDE. As long as it will not destroy the substantive right to initiate. In other words, none of the
procedures to be proposed by the legislative body must diminish or impair the right conceded here.

MR. DAVIDE. Thank you Madam President. Section 2, as amended, reads as follows: "AMENDMENT
TO THIS CONSTITUTION MAY LIKEWISE BE DIRECTLY PROPOSED BY THE PEOPLE
THROUGH INITIATIVE UPON A PETITION OF AT LEAST TWELVE PERCENT OF THE TOTAL
NUMBER OF REGISTERED VOTERS, OF WHICH EVERY LEGISLATIVE DISTRICT MUST BE
REPRESENTED BY AT LEAST THREE PERCENT OF THE REGISTERED VOTERS THEREOF. NO
AMENDMENT UNDER THIS SECTION SHALL BE AUTHORIZED WITHIN FIVE YEARS
FOLLOWING THE RATIFICATION OF THIS CONSTITUTION NOR OFTENER THAN ONCE
EVERY FIVE YEARS THEREAFTER.
THE NATIONAL ASSEMBLY SHALL BY LAW PROVIDE FOR THE IMPLEMENTATION OF THE
EXERCISE OF THIS RIGHT.[40]
The entire proposed Article on Amendments or Revisions was approved on second reading on 9
July 1986.[41] Thereafter, upon his motion for reconsideration, Commissioner Gascon was
allowed to introduce an amendment to Section 2 which, nevertheless, was withdrawn. In view
thereof, the Article was again approved on Second and Third Readings on 1 August 1986.[42]

MR. ROMULO. In that provision of the Constitution can the procedures which I have discussed be
legislated?
MR. DAVIDE. Yes.[37]
Commissioner Davide also reaffirmed that his modified amendment
confines initiative to AMENDMENTS to -- NOT REVISION of -- the Constitution. Thus:

MR. DAVIDE. A distinction has to be made that under this proposal, what is involved is an amendment to
the Constitution. To amend a Constitution would ordinarily require a proposal by the National Assembly
by a vote of three-fourths; and to call a constitutional convention would require a higher
number. Moreover, just to submit the issue of calling a constitutional convention, a majority of the
National Assembly is required, the import being that the process of amendment must be made more
rigorous and difficult than probably initiating an ordinary legislation or putting an end to a law proposed
by the National Assembly by way of a referendum. I cannot agree to reducing the requirement approved
by the Committee on the Legislative because it would require another voting by the Committee, and the
voting as precisely based on a requirement of 10 percent. Perhaps, I might present such a proposal, by way
of an amendment, when the Commission shall take up the Article on the Legislative or on the National
Assembly on plenary sessions.[39]

strictly

MR. DAVIDE. With pleasure, Madam President.

MR. MAAMBONG. My first question: Commissioner Davide's proposed amendment on line 1 refers to
"amendment." Does it not cover the word "revision" as defined by Commissioner Padilla when he made
the distinction between the words "amendments" and "revision"?
MR. DAVIDE. No, it does not, because "amendments" and "revision" should be covered by Section 1. So
insofar as initiative is concerned, it can only relate to "amendments" not "revision." [38]
Commissioner Davide further emphasized that the process of proposing amendments
through initiative must be more rigorous and difficult than the initiative on legislation. Thus:

However, the Committee on Style recommended that the approved Section 2 be amended
by changing percent to per centum and thereof to therein and deleting the phrase by law in the
second paragraph so that said paragraph reads: The Congress[43] shall provide for the
implementation of the exercise of this right.[44] This amendment was approved and is the text of
the present second paragraph of Section 2.
The conclusion then is inevitable that, indeed, the system of initiative on the Constitution
under Section 2 of Article XVII of the Constitution is not self-executory.
Has Congress provided for the implementation of the exercise of this right? Those who
answer the question in the affirmative, like the private respondents and intervenor Senator Roco,
point to us R.A. No. 6735.
There is, of course, no other better way for Congress to implement the exercise of the
right than through the passage of a statute or legislative act. This is the essence or rationale of
the last minute amendment by the Constitutional Commission to substitute the last paragraph of
Section 2 of Article XVII then reading:
The Congress[45] shall by law provide for the implementation of the exercise of this right.

81
with
The Congress shall provide for the implementation of the exercise of this right.
This substitute amendment was an investiture on Congress of a power to provide for the
rules implementing the exercise of the right. The rules means the details on how [the right] is to
be carried out.[46]
We agree that R.A. No. 6735 was, as its history reveals, intended to cover initiative to
propose amendments to the Constitution. The Act is a consolidation of House Bill No. 21505 and
Senate Bill No. 17. The former was prepared by the Committee on Suffrage and Electoral
Reforms of the House of Representatives on the basis of two House Bills referred to it, viz., (a)
House Bill No. 497,[47] which dealt with the initiative and referendum mentioned in Sections 1 and
32 of Article VI of the Constitution; and (b) House Bill No. 988, [48] which dealt with the subject
matter of House Bill No. 497, as well as with initiative and referendum under Section 3 of Article
X (Local Government) and initiative provided for in Section 2 of Article XVII of the
Constitution. Senate Bill No. 17[49] solely dealt with initiative and referendum concerning
ordinances or resolutions of local government units. The Bicameral Conference Committee
consolidated Senate Bill No. 17 and House Bill No. 21505 into a draft bill, which was
subsequently approved on 8 June 1989 by the Senate[50] and by the House of Representatives.
[51]
This approved bill is now R.A. No. 6735.
But is R.A. No. 6735 a full compliance with the power and duty of Congress to provide for
the implementation of the exercise of the right?
A careful scrutiny of the Act yields a negative answer.
First. Contrary to the assertion of public respondent COMELEC, Section 2 of the Act does
not suggest an initiative on amendments to the Constitution. The said section reads:
SECTION 2. Statement and Policy. -- The power of the people under a system of initiative and
referendum to directly propose, enact, approve or reject, in whole or in part, the Constitution, laws,
ordinances, or resolutions passed by any legislative body upon compliance with the requirements of this
Act is hereby affirmed, recognized and guaranteed. (Underscoring supplied).
The inclusion of the word Constitution therein was a delayed afterthought. That word is neither
germane nor relevant to said section, which exclusively relates to initiative and referendum on
national laws and local laws, ordinances, and resolutions. That section is silent as
to amendments on the Constitution. As pointed out earlier, initiative on the Constitution is
confined only to proposals to AMEND. The people are not accorded the power to directly
propose, enact, approve, or reject, in whole or in part, the Constitution through the system
of initiative. They can only do so with respect to laws, ordinances, or resolutions.
The foregoing conclusion is further buttressed by the fact that this section was lifted from
Section 1 of Senate Bill No. 17, which solely referred to a statement of policy on local initiative
and referendum and appropriately used the phrases propose and enact, approve or reject and in
whole or in part.[52]
Second. It is true that Section 3 (Definition of Terms) of the Act defines initiative on
amendments to the Constitution and mentions it as one of the three systems of initiative, and
that Section 5 (Requirements) restates the constitutional requirements as to the percentage of
the registered voters who must submit the proposal. But unlike in the case of the other systems
ofinitiative, the Act does not provide for the contents of a petition for initiative on the
Constitution. Section 5, paragraph (c) requires, among other things, statement of the proposed
law sought to be enacted, approved or rejected, amended or repealed, as the case may be . It

does not include, as among the contents of the petition, the provisions of the Constitution sought
to be amended, in the case of initiative on the Constitution. Said paragraph (c) reads in full as
follows:
(c) The petition shall state the following:
c.1 contents or text of the proposed law sought to be enacted, approved or rejected, amended or repealed,
as the case may be;
c.2 the proposition;
c.3 the reason or reasons therefor;
c.4 that it is not one of the exceptions provided therein;
c.5 signatures of the petitioners or registered voters; and
c.6 an abstract or summary proposition is not more than one hundred (100) words which shall be legibly
written or printed at the top of every page of the petition. (Underscoring supplied).
The use of the clause proposed laws sought to be enacted, approved or rejected, amended or
repealed only strengthens the conclusion that Section 2, quoted earlier, excludes initiative on
amendments to the Constitution.
Third. While the Act provides subtitles for National Initiative and Referendum (Subtitle II)
and for Local Initiative and Referendum (Subtitle III), no subtitle is provided for initiative on the
Constitution. This conspicuous silence as to the latter simply means that the main thrust of the
Act is initiative and referendum on national and local laws. If Congress intended R.A. No. 6735
to fully provide for the implementation of the initiative on amendments to the Constitution, it
could have provided for a subtitle therefor, considering that in the order of things, the primacy of
interest, or hierarchy of values, the right of the people to directly propose amendments to the
Constitution is far more important than the initiative on national and local laws.
We cannot accept the argument that the initiative on amendments to the Constitution is
subsumed under the subtitle on National Initiative and Referendum because it is national in
scope. Our reading of Subtitle II (National Initiative and Referendum) and Subtitle III (Local
Initiative and Referendum) leaves no room for doubt that the classification is not based on
thescope of the initiative involved, but on its nature and character. It is national initiative, if what
is proposed to be adopted or enacted is a national law, or a law which only Congress can pass.It
is local initiative if what is proposed to be adopted or enacted is a law, ordinance, or
resolution which only the legislative bodies of the governments of the autonomous regions,
provinces, cities, municipalities, and barangays can pass. This classification of initiative
into national and local is actually based on Section 3 of the Act, which we quote for emphasis
and clearer understanding:
SEC. 3. Definition of terms -xxx
There are three (3) systems of initiative, namely:

82
a.1 Initiative on the Constitution which refers to a petition proposing amendments to the Constitution;

(c) The submission to the electorate of the proposition and the required number of votes for its approval;

a.2 Initiative on Statutes which refers to a petition proposing to enact a national legislation; and

(d) The certification by the COMELEC of the approval of the proposition;

a.3 Initiative on local legislation which refers to a petition proposing to enact a regional, provincial, city,
municipal, or barangay law, resolution or ordinance. (Underscoring supplied).

(e) The publication of the approved proposition in the Official Gazette or in a newspaper of general
circulation in the Philippines; and

Hence, to complete the classification under subtitles there should have been a subtitle on
initiative on amendments to the Constitution.[53]

(f) The effects of the approval or rejection of the proposition.[55]

A further examination of the Act even reveals that the subtitling is not accurate. Provisions
not germane to the subtitle on National Initiative and Referendum are placed therein, like (1)
paragraphs (b) and (c) of Section 9, which reads:
(b) The proposition in an initiative on the Constitution approved by the majority of the votes cast in the
plebiscite shall become effective as to the day of the plebiscite.
(c) A national or local initiative proposition approved by majority of the votes cast in an election called for
the purpose shall become effective fifteen (15) days after certification and proclamation of the
Commission. (Underscoring supplied).
(2) that portion of Section 11 (Indirect Initiative) referring to indirect initiative with the legislative
bodies of local governments; thus:
SEC. 11. Indirect Initiative. -- Any duly accredited peoples organization, as defined by law, may file a
petition for indirect initiative with the House of Representatives, and other legislative bodies....
and (3) Section 12 on Appeal, since it applies to decisions of the COMELEC on the findings of
sufficiency or insufficiency of the petition for initiative or referendum, which could be petitions for
both national and local initiative and referendum.
Upon the other hand, Section 18 on Authority of Courts under subtitle III on Local Initiative
and Referendum is misplaced,[54] since the provision therein applies to both national and local
initiative and referendum. It reads:
SEC. 18. Authority of Courts. -- Nothing in this Act shall prevent or preclude the proper courts from
declaring null and void any proposition approved pursuant to this Act for violation of the Constitution or
want of capacity of the local legislative body to enact the said measure.
Curiously, too, while R.A. No. 6735 exerted utmost diligence and care in providing for the
details in the implementation of initiative and referendum on national and local legislation
thereby giving them special attention, it failed, rather intentionally, to do so on the system of
initiative on amendments to the Constitution. Anent the initiative on national legislation, the Act
provides for the following:
(a) The required percentage of registered voters to sign the petition and the contents of the petition;
(b) The conduct and date of the initiative;

As regards local initiative, the Act provides for the following:

(a) The preliminary requirement as to the number of signatures of registered voters for the petition;
(b) The submission of the petition to the local legislative body concerned;
(c) The effect of the legislative bodys failure to favorably act thereon, and the invocation of the power of
initiative as a consequence thereof;
(d) The formulation of the proposition;
(e) The period within which to gather the signatures;
(f) The persons before whom the petition shall be signed;
(g) The issuance of a certification by the COMELEC through its official in the local government unit
concerned as to whether the required number of signatures have been obtained;
(h) The setting of a date by the COMELEC for the submission of the proposition to the registered voters
for their approval, which must be within the period specified therein;
(i) The issuance of a certification of the result;
(j) The date of effectivity of the approved proposition;
(k) The limitations on local initiative; and
(l) The limitations upon local legislative bodies.[56]
Upon the other hand, as to initiative on amendments to the Constitution, R.A. No. 6735, in
all of its twenty-three sections, merely (a) mentions, the word Constitution in Section 2; (b)
defines initiative on the Constitution and includes it in the enumeration of the three systems of
initiative in Section 3; (c) speaks of plebiscite as the process by which the proposition in an
initiative on the Constitution may be approved or rejected by the people; (d) reiterates the
constitutional requirements as to the number of voters who should sign the petition; and (e)
provides for the date of effectivity of the approved proposition.

83
There was, therefore, an obvious downgrading of the more important or the paramount
system of initiative. R.A. No. 6735 thus delivered a humiliating blow to the system of initiative on
amendments to the Constitution by merely paying it a reluctant lip service. [57]
The foregoing brings us to the conclusion that R.A. No. 6735 is incomplete, inadequate, or
wanting in essential terms and conditions insofar as initiative on amendments to the Constitution
is concerned. Its lacunae on this substantive matter are fatal and cannot be cured by
empowering the COMELEC to promulgate such rules and regulations as may be necessary to
carry out the purposes of [the] Act.[58]
The rule is that what has been delegated, cannot be delegated or as expressed in a Latin
maxim: potestas delegata non delegari potest.[59] The recognized exceptions to the rule are as
follows:
(1) Delegation of tariff powers to the President under Section 28(2) of Article VI of the Constitution;

COMELEC ACTED WITHOUT JURISDICTION OR WITH GRAVE ABUSE OF

DISCRETION IN ENTERTAINING THE DELFIN PETITION.
Even if it be conceded ex gratia that R.A. No. 6735 is a full compliance with the power of
Congress to implement the right to initiate constitutional amendments, or that it has validly
vested upon the COMELEC the power of subordinate legislation and that COMELEC Resolution
No. 2300 is valid, the COMELEC acted without jurisdiction or with grave abuse of discretion in
entertaining the Delfin Petition.
Under Section 2 of Article XVII of the Constitution and Section 5(b) of R.A. No. 6735, a
petition for initiative on the Constitution must be signed by at least 12% of the total number of
registered voters of which every legislative district is represented by at least 3% of the registered
voters therein. The Delfin Petition does not contain signatures of the required number of
voters. Delfin himself admits that he has not yet gathered signatures and that the purpose of his
petition is primarily to obtain assistance in his drive to gather signatures. Without the required
signatures, the petition cannot be deemed validly initiated.

(5) Delegation to administrative bodies.[60]

The COMELEC acquires jurisdiction over a petition for initiative only after its filing. The
petition then is the initiatory pleading. Nothing before its filing is cognizable by the COMELEC,
sitting en banc. The only participation of the COMELEC or its personnel before the filing of such
petition are (1) to prescribe the form of the petition; [63] (2) to issue through its Election Records
and Statistics Office a certificate on the total number of registered voters in each legislative
district;[64] (3) to assist, through its election registrars, in the establishment of signature stations;
[65]
and (4) to verify, through its election registrars, the signatures on the basis of the registry list
of voters, voters affidavits, and voters identification cards used in the immediately preceding
election.[66]

Empowering the COMELEC, an administrative body exercising quasi-judicial functions, to

promulgate rules and regulations is a form of delegation of legislative authority under no. 5
above. However, in every case of permissible delegation, there must be a showing that the
delegation itself is valid. It is valid only if the law (a) is complete in itself, setting forth therein the
policy to be executed, carried out, or implemented by the delegate; and (b) fixes a standard -the limits of which are sufficiently determinate and determinable -- to which the delegate must
conform in the performance of his functions.[61] A sufficient standard is one which defines
legislative policy, marks its limits, maps out its boundaries and specifies the public agency to
apply it. It indicates the circumstances under which the legislative command is to be effected.[62]

Since the Delfin Petition is not the initiatory petition under R.A. No. 6735 and COMELEC
Resolution No. 2300, it cannot be entertained or given cognizance of by the COMELEC. The
latter knew that the petition does not fall under any of the actions or proceedings under the
COMELEC Rules of Procedure or under Resolution No. 2300, for which reason it did not assign
to the petition a docket number. Hence, the said petition was merely entered as UND,
meaning, undocketed. That petition was nothing more than a mere scrap of paper, which should
not have been dignified by the Order of 6 December 1996, the hearing on 12 December 1996,
and the order directing Delfin and the oppositors to file their memoranda or oppositions. In so
dignifying it, the COMELEC acted without jurisdiction or with grave abuse of discretion and
merely wasted its time, energy, and resources.

Insofar as initiative to propose amendments to the Constitution is concerned, R.A. No.

6735 miserably failed to satisfy both requirements in subordinate legislation. The delegation of
the power to the COMELEC is then invalid.

The foregoing considered, further discussion on the issue of whether the proposal to lift
the term limits of the elective national and local officials is an amendment to, and not
a revisionof, the Constitution is rendered unnecessary, if not academic.

(2) Delegation of emergency powers to the President under Section 23(2) of Article VI of the Constitution;
(3) Delegation to the people at large;
(4) Delegation to local governments; and

III
COMELEC RESOLUTION NO. 2300, INSOFAR AS IT PRESCRIBES RULES AND
REGULATIONS ON THE CONDUCT OF INITIATIVE ON AMENDMENTS TO THE
CONSTITUTION, IS VOID.
It logically follows that the COMELEC cannot validly promulgate rules and regulations to
implement the exercise of the right of the people to directly propose amendments to the
Constitution through the system of initiative. It does not have that power under R.A. No.
6735. Reliance on the COMELECs power under Section 2(1) of Article IX-C of the Constitution is
misplaced, for the laws and regulations referred to therein are those promulgated by the
COMELEC under (a) Section 3 of Article IX-C of the Constitution, or (b) a law where subordinate
legislation is authorized and which satisfies the completeness and the sufficient standard tests.
IV

CONCLUSION

This petition must then be granted, and the COMELEC should be permanently enjoined
from entertaining or taking cognizance of any petition for initiative on amendments on the
Constitution until a sufficient law shall have been validly enacted to provide for the
implementation of the system.
We feel, however, that the system of initiative to propose amendments to the Constitution
should no longer be kept in the cold; it should be given flesh and blood, energy and
strength.Congress should not tarry any longer in complying with the constitutional mandate to
provide for the implementation of the right of the people under that system.

84
WHEREFORE, judgment is hreby rendered
a) GRANTING the instant petition;
b) DECLARING R.A. No. 6735 inadequate to cover the system of initiative on
amendments to the Constitution, and to have failed to provide sufficient standard for subordinate
legislation;
c) DECLARING void those parts of Resolutions No. 2300 of the Commission on Elections
prescribing rules and regulations on the conduct of initiative or amendments to the Constitution;
and
d) ORDERING the Commission on Elections to forthwith DISMISS the DELFIN petition
(UND-96-037).
The Temporary Restraining Order issued on 18 December 1996 is made permanent as
against the Commission on Elections, but is LIFTED against private respondents.
Resolution on the matter of contempt is hereby reserved.

SO ORDERED.

85

[G.R. No. 109404. January 22, 1996]

FLORENCIO EUGENIO, doing business under the name E & S Delta Village, petitioner, vs.
EXECUTIVE SECRETARY FRANKLIN M. DRILON, HOUSING AND LAND USE.
REGULATORY BOARD (HLURB) AND PROSPERO PALMIANO, respondents.
RESOLUTION
PANGANIBAN, J.:
Did the failure to develop a subdivision constitute legal justification for the non-payment of
amortizations by a buyer on installment under land purchase agreements entered into prior tothe
enactment of P.D. 957, The Subdivision and Condominium Buyers Protective Decree? This is
the major question raised in the instant Petition seeking to set aside the Decision of the

86
respondent Executive Secretary dated March 10, 1992 in O.P. Case No. 3761, which affirmed
the order of the respondent HLURB dated September 1, 1987.

land purchase agreements were entered into in 1972, prior to the effectivity of P.D. 957 in 1976,
said law cannot govern the transaction.

On May 10, 1972, private respondent purchased on installment basis from petitioner and
his co-owner/ developer Fermin Salazar, two lots in the E & S Delta Village in Quezon City.

We hold otherwise, and herewith rule that respondent Executive Secretary did not abuse
his discretion, and that P.D. 957 is to be given retroactive effect so as to cover even those
contracts executed prior to its enactment in 1976.

Acting on complaints for non-development docketed as NHA Cases Nos. 2619 and 2620
filed by the Delta Village Homeowners Association, Inc., the National Housing Authority rendered
a resolution on January 17, 1979 inter alia ordering petitioner to cease and desist from making
further sales of lots in said village or in any project owned by him.
While NHA Cases Nos. 2619 and 2620 were still pending, private respondent filed with the
Office of Appeals, Adjudication and Legal Affairs (OAALA) of the Human Settlements Regulatory
Commission (HSRC), a complaint (Case No. 80-589) against petitioner and spouses Rodolfo
and Adelina Relevo alleging that, in view of the above NHA resolution, he suspended payment of
his amortizations, but that petitioner resold one of the two lots to the said spouses Relevo, in
whose favor title to the said property was registered. Private respondent further alleged that he
suspended his payments because of petitioners failure to develop the village. Private
respondent prayed for the annulment of the sale to the Relevo spouses and for reconveyance of
the lot to him.
On October 11, 1983, the OAALA rendered a decision upholding the right of petitioner to
cancel the contract with private respondent and dismissed private respondents complaint.
On appeal, the Commission Proper of the HSRC reversed the OAALA and, applying P.D.
957, ordered petitioner to complete the subdivision development and to reinstate private
respondents purchase contract over one lot, and as to the other, it appearing that Transfer
Certificate of Title No. 269546 has been issued to x x x spouses Rodolfo and Ad(e)lina Relevo x
x x, the management of E & S Delta Village is hereby ordered to immediately refund to the
complainant-appellant (herein private respondent) all payments made thereon, plus interests
computed at legal rates from date of receipt hereof until fully paid.
The respondent Executive Secretary, on appeal, affirmed the decision of the HSRC and
denied the subsequent Motion for Reconsideration for lack of merit and for having been filed out
of time. Petitioner has now filed this Petition for review before the Supreme Court.
Under Revised Administrative Circular No. 1-95, appeals from judgments or final orders of
the x x x Office of the President x x x may be taken to the Court of Appeals x x x. However, in
order to hasten the resolution of this case, which was deemed submitted for decision one and a
half years ago, the Court resolved to make an exception to the said Circular in the interest of
speedy justice.
In his Petition before this Court, petitioner avers that the Executive Secretary erred in
applying P.D. 957 and in concluding that the non-development of the E & S Delta Village justified
private respondents non-payment of his amortizations. Petitioner avers that inasmuch as the

P.D. 957 did not expressly provide for retroactivity in its entirety, but such can be plainly
inferred from the unmistakable intent of the law.
The intent of the law, as culled from its preamble and from the situation, circumstances
and conditions it sought to remedy, must be enforced. On this point, a leading authority on
statutory construction stressed:
The intent of a statute is the law x x x. The intent is the vital part, the essence of the law, and the primary
rule of construction is to ascertain and give effect to the intent. The intention of the legislature in enacting
a law is the law itself and must be enforced when ascertained, although it may not be consistent with the
strict letter of the statute. Courts will not follow the letter of a statute when it leads away from the true
intent and purpose of the legislature and to conclusions inconsistent with the general purpose of the act x
x x. In construing statutes the proper course is to start out and follow the true intent of the legislature and
to adopt that sense which harmonizes best with the context and promotes in the fullest manner the
apparent policy and objects of the legislature.1 (italics supplied.)
It goes without saying that, as an instrument of social justice, the law must favor the weak
and the disadvantaged, including, in this instance, small lot buyers and aspiring homeowners.
P.D. 957 was enacted with no other end in view than to provide a protective mantle over helpless
citizens who may fall prey to the manipulations and machinations of unscrupulous subdivision
and condominium sellers, and such intent is nowhere expressed more clearly than in its
preamble, pertinent portions of which read as follows:
WHEREAS, it is the policy of the State to afford its inhabitants the requirements of decent human
settlement and to provide them with ample opportunities for improving their quality of life;
WHEREAS, numerous reports reveal that many real estate subdivision owners, developers, operators,
and/or sellers have reneged on their representations and obligations to provide and maintain properly
subdivision roads, drainage, sewerage, water systems, lighting systems, and other similar basic
requirements, thus endangering the health and safety of home and lot buyers;
WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent manipulations
perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver
titles to the buyers or titles free from liens and encumbrances, and to pay real estate taxes, and fraudulent
sales of the same subdivision lots to different innocent purchasers for value;2 (italics supplied.)
From a dedicated reading of the preamble, it is manifest and unarguable that the
legislative intent must have been to remedy the alarming situation by having P.D. 957 operate

87
retrospectively even upon contracts already in existence at the time of its enactment. Indeed, a
strictly prospective application of the statute will effectively emasculate it, for then the State will
not be able to exercise its regulatory functions and curb fraudulent schemes and practices
perpetrated under or in connection with those contracts and transactions which happen to have
been entered into prior to P.D. 957, despite obvious prejudice to the very subdivision lot buyers
sought to be protected by said law. It is hardly conceivable that the legislative authority intended
to permit such a loophole to remain and continue to be a source of misery for subdivision lot
buyers well into the future.
Adding force to the arguments for the retroactivity of P.D. 957 as a whole are certain of its
provisions, viz., Sections 20, 21 and 23 thereof, which by their very terms have retroactive effect
and will impact upon even those contracts and transactions entered into prior to P.D. 957s
enactment:
Sec. 20. Time of Completion. - Every owner or developer shall construct and provide the facilities,
improvements, infrastructures and other forms of development, including water supply and lighting
facilities, which are offered and indicated in the approved subdivision or condominium plans, brochures,
prospectus, printed matters, letters or in any form of advertisement, within one year from the date of the
issuance of the license for the subdivision or condominium project or such other period of time as may be
fixed by the Authority.
Sec. 21. Sales Prior to Decree. - In cases of subdivision lots or condominium units sold or disposed of
prior to the effectivity of this Decree, it shall be incumbent upon the owner or developer of the subdivision
or condominium project to complete compliance with his or its obligations as provided in the preceding
section within two years from the date of this Decree unless otherwise extended by the Authority or unless
an adequate performance bond is filed in accordance with Section 6 hereof.
Failure of the owner or developer to comply with the obligations under this and the preceding provisions
shall constitute a violation punishable under Sections 38 and 39 of this Decree.
Sec. 23. Non-Forfeiture of Payments. - No installment payment made by a buyer in a subdivision or
condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or
developer when the buyer, after due notice to the owner or developer, desists from further payment due to
the failure of the owner or developer to develop the subdivision or condominium project according to the
approved plans and within the time limit for complying with the same. Such buyer may, at his option, be
reimbursed the total amount paid including amortization interests but excluding delinquency interests,
with interest thereon at the legal rate. (italics supplied)
On the other hand, as argued by the respondent Executive Secretary, the application of
P.D. 957 to the contracts in question will be consistent with paragraph 4 of the contracts
themselves, which expressly provides:
(4) The party of the First Part hereby binds himself to subdivide, develop and improve the entire area
covered by Transfer Certificate of Title No. 168119 of which the parcels of lands subject of this contract is
a part in accordance with the provisions of Quezon City Ordinance No. 6561, S-66 and the Party of the
First Part further binds himself to comply with and abide by all laws, rules and regulations respecting the

subdivision and development of lots for residential purposes as may be presently in force or may hereafter
be required by laws passed by the Congress of the Philippines or required by regulations of the Bureau of
Lands, the General Registration Office and other government agencies. (italics supplied)
Moreover, as P.D. 957 is undeniably applicable to the contracts in question, it follows that
Section 23 thereof had been properly invoked by private respondent when he desisted from
making further payment to petitioner due to petitioners failure to develop the subdivision project
according to the approved plans and within the time limit for complying with the same. (Such
incomplete development of the subdivision and non-performance of specific contractual and
statutory obligations on the part of the subdivision-owner had been established in the findings of
the HLURB which in turn were confirmed by the respondent Executive Secretary in his assailed
Decision.) Furthermore, respondent Executive Secretary also gave due weight to the following
matters: although private respondent started to default on amortization payments beginning May
1975, so that by the end of July 1975 he had already incurred three consecutive arrearages in
payments, nevertheless, the petitioner, who had the cancellation option available to him under
the contract, did not exercise or utilize the same in timely fashion but delayed until May 1979
when he finally made up his mind to cancel the contracts. But by that time the land purchase
agreements had already been overtaken by the provisions of P.D. 957, promulgated on July 12,
1976. (In any event, as pointed out by respondent HLURB and seconded by the Solicitor
General, the defaults in amortization payments incurred by private respondent had been
effectively condoned by the petitioner, by reason of the latters tolerance of the defaults for a long
period of time.)
Likewise, there is no merit in petitioners contention that respondent Secretary exceeded
his jurisdiction in ordering the refund of private respondents payments on Lot 12 although
(according to petitioner) only Lot 13 was the subject of the complaint. Respondent Secretary
duly noted that the supporting documents submitted substantiating the claim of nondevelopment justified such order inasmuch as such claim was also the basis for non-payment of
amortizations on said Lot 12.
Finally, since petitioners motion for reconsideration of the (Executive Secretarys) Decision
dated March 10, 1992 was filed only on the 21st day from receipt thereof, said decision had
become final and executory, pursuant to Section 7 of Administrative Order No. 18 dated
February 12, 1987, which provides that (d)ecisions/ resolutions! orders of the Office of the
President shall, except as otherwise provided for by special laws, become final after the lapse of
fifteen (15) days from receipt of a copy thereof x x x , unless a motion for reconsideration thereof
is filed within such period.
WHEREFORE, there being no showing of grave abuse of discretion, the petition
is DENIED due course and is hereby DISMISSED. No costs.
SO ORDERED.

88
That sometime in the year 1974 continuously up to the present at barangay
Magsaysay, municipality of Talibon, province of Bohol, Philippines and
within the jurisdiction of this Honorable Court, the above-named accused,
with stealth and strategy, enter into, occupy and cultivate a portion of a
grazing land physically occupied, possessed and claimed by Atty. Vicente
de la Serna, Jr. as successor to the pasture applicant Celestino de la Serna
of Pasture Lease Application No. 8919, accused's entrance into the area
has been and is still against the win of the offended party; did then and
there willfully, unlawfully, and feloniously squat and cultivate a portion of the
said grazing land; said cultivating has rendered a nuisance to and has
deprived the pasture applicant from the full use thereof for which the land
applied for has been intended, that is preventing applicant's cattle from
grazing the whole area, thereby causing damage and prejudice to the said
applicant-possessor-occupant, Atty. Vicente de la Serna, Jr. (sic)
G.R. No. L-47757-61 January 28, 1980
THE PEOPLE OF THE PHILIPPINES, ABUNDIO R. ELLO, As 4th Assistant of Provincial
Bohol VICENTE DE LA SERNA. JR., as complainant all private prosecutor, petitioners,
vs.
HON. VICENTE B. ECHAVES, JR., as Judge of the Court of First Instance of Bohol Branch
II, ANO DACULLO, GERONIMO OROYAN, MARIO APARICI, RUPERTO CAJES and
MODESTO S SUELLO,respondents.

AQUINO, J.:p
The legal issue in this case is whether Presidential Decree No. 772, which penalizes squatting
and similar acts, applies to agricultural lands. The decree (which took effect on August 20, 1975)
provides:
SECTION 1. Any person who, with the use of force, intimidation or threat, or
taking advantage of the absence or tolerance of the landowner, succeeds in
occupying or possessing the property of the latter against his will for
residential, commercial or any other purposes, shall be punished by an
imprisonment ranging from six months to one year or a fine of not less than
one thousand nor more than five thousand pesos at the discretion of the
court, with subsidiary imprisonment in case of insolvency. (2nd paragraph is
omitted.)
The record shows that on October 25, 1977 Fiscal Abundio R. Ello filed with the lower court
separate informations against sixteen persons charging them with squatting as penalized by
Presidential Decree No. 772. The information against Mario Aparici which is similar to the other
fifteen informations, reads:

Five of the informations, wherein Ano Dacullo, Geronimo Oroyan, Mario Aparici, Ruperto Cajes
and Modesto Suello were the accused, were raffled to Judge Vicente B. Echaves, Jr. of Branch
II (Criminal Cases Nos. 1824, 1828, 1832, 1833 and 1839, respectively).
Before the accused could be arraigned, Judge Echaves motu proprio issued an omnibus order
dated December 9, 1977 dismissing the five informations on the grounds (1) that it was alleged
that the accused entered the land through "stealth and strategy", whereas under the decree the
entry should be effected "with the use of force, intimidation or threat, or taking advantage of the
absence or tolerance of the landowner", and (2) that under the rule of ejusdem generis the
decree does not apply to the cultivation of a grazing land.
Because of that order, the fiscal amended the informations by using in lieu of "stealth and
strategy" the expression "with threat, and taking advantage of the absence of the ranchowner
and/or tolerance of the said ranchowner". The fiscal asked that the dismissal order be
reconsidered and that the amended informations be admitted.
The lower court denied the motion. It insisted that the phrase "and for other purposes" in the
decree does not include agricultural purposes because its preamble does not mention the
Secretary of Agriculture and makes reference to the affluent class.
From the order of dismissal, the fiscal appealed to this Court under Republic Act No. 5440. The
appeal is devoid of merit.
We hold that the lower court correctly ruled that the decree does not apply to pasture lands
because its preamble shows that it was intended to apply to squatting in urban communities or
more particularly to illegal constructions in squatter areas made by well-to-do individuals. The
squating complained of involves pasture lands in rural areas.
The preamble of the decree is quoted below:

89
WHEREAS, it came to my knowledge that despite the issuance of Letter of
Instruction No. 19 dated October 2, 1972, directing the Secretaries of
National Defense, Public Work. 9 and communications, Social Welfare and
the Director of Public Works, the PHHC General Manager, the Presidential
Assistant on Housing and Rehabilitation Agency, Governors, City and
Municipal Mayors, and City and District Engineers, "to remove an illegal
constructions including buildings on and along esteros and river banks,
those along railroad tracks and those built without permits on public and
private property." squatting is still a major problem in urban communities all
over the country;
WHEREAS, many persons or entities found to have been unlawfully
occupying public and private lands belong to the affluent class;
WHEREAS, there is a need to further intensify the government's drive
against this illegal and nefarious practice.
It should be stressed that Letter of Instruction No. 19 refers to illegal constructions on public and
private property. It is complemented by Letter of Instruction No. 19-A which provides for the
relocation of squatters in the interest of public health, safety and peace and order.
On the other hand, it should be noted that squatting on public agricultural lands, like the grazing
lands involved in this case, is punished by Republic Act No. 947 which makes it unlawful for any
person, corporation or association to forcibly enter or occupy public agricultural lands. That law
provides:
SECTION 1. It shall be unlawful for any person corporation or association to
enter or occupy, through force, intimidation, threat, strategy or stealth, any
public agriculture land including such public lands as are granted to private
individuals under the provision of the Public Land Act or any other laws
providing for the of public agriculture lands in the Philippines and are duly
covered by the corresponding applications for the notwithstanding standing
the fact that title thereto still remains in the Government or for any person,
natural or judicial to investigate induce or force another to commit such acts.
Violations of the law are punished by a fine of not exceeding one thousand or imprisonment for
not more than one year, or both such fine and imprisonment in the discretion of the court, with
subsidiary imprisonment in case of insolvency. (See People vs. Lapasaran 100 Phil. 40.)
The rule of ejusdem generis (of the same kind or species) invoked by the trial court does not
apply to this case. Here, the intent of the decree is unmistakable. It is intended to apply only to
urban communities, particularly to illegal constructions. The rule of ejusdem generis is merely a
tool of statutory construction which is resorted to when the legislative intent is uncertain (Genato
Commercial Corp. vs. Court of Tax Appeals, 104 Phil. 615,618; 28 C.J.S. 1049-50).
WHEREFORE, the trial court's order of dismissal is affirmed. No costs.

SO ORDERED.

90
Appeal from the decision of the Court of Tax Appeals reversing the Commissioner of Customs'
decision holding respondent ESSO Standard Eastern, Inc., (formerly the Standard-Vacuum
Refining Corporation (Phil.) and hereinafter referred to as ESSO) liable in the total sum of
P775.62 as special import tax on certain articles imported by the latter under Republic Act No.
387, otherwise known as the Petroleum Act of 1949.
Respondent ESSO is the holder of Refining Concession No. 2, issued by the Secretary of
Agriculture and Natural Resources on December 9, 1957, and operates a petroleum refining
plant in Limay Bataan. Under Article 103 of Republic Act No. 387 which provides: "During the
five years following the granting of any concession, the concessionaire may import free of
customs duty, all equipment, machinery, material, instruments, supplies and accessories,"
respondent imported and was assessed the special import tax (which it paid under protest) on
the following separate importations:
1) One carton, scientific instruments with C & F value of assessed a special
import tax in the amount of P31.98 (Airport Protest No. 10);
2) One carton of recorder parts with C & F value of $221.56; assessed
special import tax in the amount of P43.82 (Airport Protest No. 11);
3) One carton of valves with C & F value of $310.58; assessed special
import tax in the amount of P60.72 (Airport Protest No. 12);
4) One box of parts for Conversion boilers and Auxiliary Equipment with C &
F value of $2,389.69; assessed special import tax in the amount of P467.00
(Airport Protest No. 15);

G.R. No. L-28329 August 17, 1975

COMMISSIONER OF CUSTOMS, petitioner,
vs.
ESSO STANDARD EASTERN, INC., (Formerly: Standard-Vacuum Refining Corp.
(Phil.), respondent.
Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Antonio A. Torres
and Solicitor Antonio M. Martinez for petitioner.
Carlos J. Valdez & Associates for respondent.

ESGUERRA, J.:

5) One carton of X-ray films with C & F value of $132.80; assessed special
import tax in the amount of P26.00 (Airport Protest No. 16); and
6) One carton of recorder parts with C & F value of $750.39; assessed
special import tax in the amount of P147.00 (Airport Protest No. 17). 1
The Collector of Customs on February 16, 1962, held that respondent ESSO was subject to the
payment of the special import tax provided in Republic Act No. 1394, as amended by R.A. No.
2352, and dismissed the protest. 2
On March 1, 1962, respondent appealed the ruling of the Collector of Customs to the
Commissioner of Customs who, on March 19, 1965, affirmed the decision of said Collector of
Customs. 3
On July 2, 1965, respondent ESSO filed a petition with the Court of Tax Appeals for review of the
decision of the Commissioner of Customs.

91
The Court of Tax Appeals, on September 30, 1967, reversed the decision of herein petitioner
Commissioner of Customs and ordered refund of the amount of P775.62 to respondent ESSO
which the latter had paid under protest. 4

THE COURT OF TAX APPEALS ERRED IN HOLDING THAT EXEMPTION

FROM PAYMENT OF CUSTOMS DUTIES UNDER REPUBLIC ACT NO.
387 INCLUDES EXEMPTION FROM PAYMENT OF THE SPECIAL
IMPORT TAX.

This decision of the Court of Tax Appeals is now before this Court for review.
On the other hand, the Court of Tax Appeals rationalized the ground for its ruling thus:
Petitioner contends that the special import tax under Republic Act No. 1394 is separate and
distinct from the customs duty prescribed by the Tariff and Customs Code, and that the
exemption enjoyed by respondent ESSO from the payment of customs duties under the
Petroleum net of 1949 does not include exemption from the payment of the special import tax
provided in R.A. No. 1394. 5
For its stand petitioner puts forward this rationale:

If we are to adhere, as we should, to the plain and obvious meaning of

words in consonance with settled rules of interpretation, it seems clear that
the special import tax is an impost or a charge on the importation or bringing
into the Philippines of all goods, articles or products subject thereto, for the
phrase "import tax on all goods, articles or products imported or brought into
the Philippines" in explicit and unambiguous terms simply means customs
duties. It is hardly necessary to add that "customs duties" are simply taxes
assessed on merchandise imported from, or exported to a foreign country.

A perusal of the provisions of R.A. No. 1394 will show that the legislature
considered the special import tax as a tax distinct from customs duties as
witness the fact that Section 2(a) of the said law made separate mention of
customs duties and special import tax when it provided that ... if as a result
of the application of the schedule therein, the total revenue derived from the
customs duties and from the special import tax on goods, ... imported from
the United States is less in any calendar year than the proceeds from the
exchange tax imposed under Republic Act Numbered Six Hundred and
One, as amended, on such goods, articles or products during the calendar
year 1955, the President may, by proclamation, suspend the reduction of
the special import tax for the next succeeding calendar year ....

Citing numberous American decisions and definitions of terms "customs duties," "duties,"
"imposts," "levies," "tax," and "tolls," and their distinctions, including some pronouncements of
this Court on the subject, the Court of Tax Appeals in its decision, went to great lengths to show
that the term "special import tax" as used in R.A. No. 1394 includes customs duties. It sees the
special import tax as nothing but an impost or a charge on the importation or bringing into the
Philippines of goods, articles or products. 7

If it were the intention of Congress to exempt the holders of petroleum

refinery concessions like the protestant (respondent herein), such
exemption should have been clearly stated in the statute. Exemptions are
never presumed. They must be expressed in the clearest and most
unambiguous language and not left to mere implication. 6

To clinch its theory the Court of Tax Appeals cited the similarity in the basis of computation of the
customs duty as well as the similarity in the phraseology of Section 3 of Republic Act No. 1394
(which established the special import tax) and Section 9-01 of the Tariff & Customs code (the
basic law providing for and regulating the imposition of customs duties and imposts on
importations). 8

Specifically, petitioner in his brief submitted two assignment of errors allegedly committed by the
Court of Tax Appeals in the controverted decision, to wit:

And being a charge upon importation, the special import tax is essentially a
customs duty, or at least partakes of the character thereof.

For its part, private respondent, ESSO, in its answer to the petition, leaned heavily on the same
arguments as those given by the Tax Court, the burden of which is that the special import tax law
is a customs law. 9

1st assignment of error:

THE COURT OF TAX APPEALS ERRED IN HOLDING THAT THE TERM
"CUSTOMS DUTY" IN ARTICLE 103 OF REPUBLIC ACT NO. 387
INCLUDES THE SPECIAL IMPORT TAX IMPOSED BY REPUBLIC ACT
NO. 1394;
2nd assignment of error:

It is clear that the only issue involved in this case is whether or not the exemption enjoyed by
herein private respondent ESSO Standard Eastern, Inc. from customs duties granted by
Republic Act No. 387, or the Petroleum Act of 1949, should embrace or include the special
import tax imposed by R.A. No. 1394, or the Special Import Tax Law.
We have examined the records of this case thoroughly and carefully considered the arguments
presented by both parties and We are convinced that the only thing left to this Court to do is to
determine the intention of the legislature through interpretation of the two statutes involved, i.e.,
Republic Act No. 1394 and Republic Act No. 387.

92
It is a well accepted principle that where a statute is ambiguous, as Republic Act No. 1394
appears to be, courts may examine both the printed pages of the published Act as well as those
extrinsic matters that may aid in construing the meaning of the statute, such as the history of its
enactment, the reasons for the passage of the bill and purposes to be accomplished by the
measure. 10
Petitioner in the first assignment of error took exception to the finding of the Court of Tax Appeals
that "The language of Republic Act No. 1394 seems to leave no room for doubt that the law
intends that the phrase 'Special import tax' is taken to include customs duties" and countered
with the argument that "An examination of the provisions of Republic Act No. 1394 will
indubitably reveal that Congress considered the special import tax as a tax different from
customs duties, as may be seen from the fact that Section 2(a) of said law made separate
mention of customs duties and special import tax ..." Thus:
... if as a result of the application of the schedule therein the total revenue
derived from the customs duties and from the special import tax on
goods, ... imported from the United States is less in any calendar year than
the proceeds from the exchange tax imposed under Republic Act Numbered
Six Hundred and One, as amended, on such goods, articles or products
during the calendar year 1955, the President may, by proclamation,
suspend the reduction of the special import tax for the next succeeding
calendar year ...
Petitioner further argues:
Customs duties are prescribed by the Tariff and Customs Code, while the
special import tax is provided for by Republic Act No. 1394. If our legislature
had intended to classify the special import tax as customs duty, the said Art
would not have expressly exempted from payment of the special Import tax
importations of machinery, equipment, accessories, and spare parts for use
of industries, without distinguishing whether the industries referred to are
the industries exempt from the payment of Customs duties or the nonexempt ones (Sec. 6). It is sufficient that the imported machinery, etc., is for
the use of any industry. 11
A study of petitioner's two assignments of errors shows that one is anchored on practically the
same ground as the other: both involve the interpretation of R.A. No. 387 (The Petroleum Act of
1949) in relation with R.A. No. 1394 (The Special Import Tax Law).
While the petitioner harps on particular clauses and phrases found in the two cited laws, which
in a way was likewise resorted to by the respondent ESSO, it would do Us well to restate the
fundamental rule in the construction of a statute.
In order to determine the true intent of the legislature, the particular clauses and phrases of the
statute should not be taken as detached and isolated expressions, but the whole and every part
thereof must be considered in fixing the meaning of any of its parts. In fact every statute should

receive such construction as will make it harmonize with the pre-existing body of laws.
Antagonism between the Act to be interpreted and existing or previous laws is to be avoided,
unless it was clearly the intention of the legislature that such antagonism should arise and one
amends or repeals the other, either expressly or by implication.
Another rule applied by this Court is that the courts may take judicial notice of the origin and
history of the statutes which they are called upon to construe and administer, and of facts which
affect their derivation, validity and operation. 12
Applying the above stated rules and principles, let us consider the history, the purpose and
objectives of Republic Act No. 387 as it relates to Republic Act No. 1394 and other laws passed
by the Congress of the Philippines insofar as they relate to each other.
Republic Act No. 387, the Petroleum Act of 1949, has this for its title, to wit:
AN ACT TO PROMOTE THE EXPLORATION, DEVELOPMENT,
EXPLOITATION, AND UTILIZATION OF THE PETROLEUM RESOURCES
OF THE PHILIPPINES; TO ENCOURAGE THE CONSERVATION OF
SUCH PETROLEUM RESOURCES; TO AUTHORIZE THE SECRETARY
OF AGRICULTURE AND NATURAL RESOURCES TO CREATE AN
ADMINISTRATION UNIT AND A TECHNICAL BOARD IN THE BUREAU OF
MINES; TO APPROPRIATE FUNDS THEREFORE; AND FOR OTHER
PURPOSES.
Art. 103 of said Act reads:
ART. 103. Customs duties. During the five years following the granting of
any concessions, the concessionaire may import free of customs duty, all
equipment, machinery, material, instruments, supplies and accessories.
xxx xxx xxx
Art. 102 of the Same law insofar as pertinent, provides:
ART. 102. Work obligations, taxes, royalties not to be charged. ...; nor
shall any other special taxes or levies be applied to such concessions, nor
shall concessionaires under this Act be subjected to any provincial,
municipal, or other local taxes or levies; nor shall any sales tax be charged
on any petroleum produced from the concession or portion thereof,
manufactured by the concessionaire and used in the working of his
concession. ....
Art. 104, still of the same Act, reads:

93
ART. 104. No export to be imposed. No export tax shall be levied upon
petroleum produced from concessions granted under this Act.
The title of Republic Act No. 387 and the provisions of its three articles just cited give a clue to
the intent of the Philippine legislature, which is to encourage the exploitation and development of
the petroleum resources of the country. Through the instrumentality of said law, it declared in no
uncertain terms that the intensification of the exploration for petroleum must be carried on
unflinchingly even if, for the time being, no taxes, both national and local, may be collected from
the industry. This is the unequivocal intention of the Philippine Congress when the language of
the Petroleum Act is examined. Until this law or any substantial portion thereof is clearly
amended or repealed by subsequent statutes, the intention of the legislature must be upheld.
Against this unambiguous language of R.A. No. 387, there is the subsequent legislation, R.A.
No. 1394, the Special Import Tax Law, which, according to the herein petitioner, shows that the
legislature considered the special import tax as a tax distinct from customs duties.
Republic Act No. 1394, otherwise known as the Special Import Tax Law, is entitled as follows:
AN ACT TO IMPOSE A SPECIAL IMPORT TAX ON ALL GOODS,
ARTICLES OR PRODUCTS IMPORTED OR BROUGHT INTO THE
PHILIPPINES, AND TO REPEAL REPUBLIC ACTS NUMBERED SIX
HUNDRED AND ONE, EIGHT HUNDRED AND FOURTEEN, EIGHT
HUNDRED AND SEVENTY-ONE, ELEVEN HUNDRED AND SEVENTYFIVE. ELEVEN HUNDRED AND NINETY-SEVEN AND THIRTEEN
HUNDRED AND SEVENTY FIVE.
The title indicates unmistakably that it is repealing six prior statutes. As will be seen later, all
these laws dealt with the imposition of a special excise tax on foreign exchange or other form of
levy on importation of goods into the country.
Section I of Republic Act No. 1394 reads as follows:
SECTION 1. Except as herein otherwise provided, there shall be levied,
collected and paid as special import tax on all goods, articles or products
imported or brought into the Philippines, irrespective of source, during the
period and in accordance with the rates provided for in the following
schedule:

Section 6 of Republic Act No. 1394 declares that the tax provided for in its Section I shall not be
imposed against importation into the Philippines of machinery and/or raw materials to be used
by new and necessary industries as determined in accordance with R A. No. 901 and a long list
of other goods, articles, machinery, equipment, accessories and others.
We shall now examine the six statutes repealed by R.A. No. 1394, namely:
R.A. No. 601 is an Act imposing a special excise tax of 17% on foreign
exchange sold by the Central Bank or its agents. This is known as the
Exchange Tax Law;
R.A. No. 814 amended Sections one, two and five and repealed Sections
three and four of R.A. No. 601;
R.A. No. 871 amended Sections one and two of R.A. No. 601, as amended
earlier by R.A. No. 814;
R.A. No. 1175 amended further Sections one and two of R.A. No. 601, as
amended;
R.A. No. 1197 amended furthermore R.A. No. 601 as amended previously
by R.A. No. 1175;
R.A. No. 1375 amended Sections one and two of R.A. No. 601 as amended
by R.A. Nos. 1175 and 1197.
As can be seen from the foregoing, in one fell swoop, Republic Act No. 1394
repealed and revoked six earlier statutes which had something to do with
the imposition of special levies and/or exemption of certain importations
from the burden of the special import taxes or levies. On the other hand, it is
apparent that R.A. No. 387, the Petroleum Act, had been spared from the
pruning knife of Congress, although this latter law had granted more
concessions and tax exemption privileges than any of the statutes that were
amended, repealed or revoked by R.A. No. 1394. The answer must be that
the Congress of the Philippine saw fit to preserve the privileges granted
under the Petroleum Law of 1949 in order to keep the door open to the
exploitation and development of the petroleum resources of the country with
such incentives as are given under that law.

xxx xxx xxx

It would appear that by the provision of Section 1 of this Act, the pertinent provision of the
Petroleum Law, for which there appears to be no proviso to the contrary has been modified or
altered.

This ascertained will and intention of the legislature finds a parallelism in a

case brought earlier before this Court.
A fishpond owner was slapped with taxes as a "merchant" by the Collector of Internal Revenue.
He paid under protest and filed an action to recover the taxes paid, claiming that he was an
agriculturist and not a merchant. When this Court was called upon to interpret the provisions of

94
the Internal Revenue Law on whether fish is an agricultural product which falls under the
exemption provisions of said law, it inquired into the purpose of the legislature in establishing the
exemption for agricultural products. We held:

No costs.
SO ORDERED.

The first inquiry, therefore, must relate to the purpose the legislature had in
mind in establishing the exemption contained in the clause now under
consideration. It seems reasonable to assume that it was due to the belief
on the part of the law-making body that by exempting agricultural products
from this tax the farming industry would be favored and the development of
the resources of the country encouraged. .... 13
Having this in mind, particularly the manner in which extrinsic aids the history of the enactment
of the statute and purpose of the legislature in employing a clause or provision in the law had
been applied in determining the true intent of the lawmaking body, We are convinced that R.A.
No. 387, The Petroleum Act of 1949, was intended to encourage the exploitation, exploration
and development of the petroleum resources of the country by giving it the necessary incentive
in the form of tax exemptions. This is the raison d etre for the generous grant of tax exemptions
to those who would invest their financial resources towards the achievement of this national
economic goal.
On the contention of herein petitioner that the exemptions enjoyed by respondent ESSO under
R.A. No. 387 have been abrogated by R.A. No. 1394, We hold that repeal by implication is not
favored unless it is manifest that the legislature so intended. As laws are presumed to be passed
with deliberation and with full knowledge of all existing ones on the subject, it is logical to
conclude that in passing a statute it was not intended to interfere with or abrogate any former
law relating to the same matter, unless the repugnancy between the two is not only
irreconcilable but also clear and convincing as a result of the language used, or unless the latter
act fully embraces the subject matter of the earlier. 14
As observed earlier, Congress lined up for revocation by Republic Act No. 1394 six statutes
dealing with the imposition of special imposts or levies or the granting of exemptions from
special import taxes. Yet, considering the tremendous amount of revenues it was losing under
the Petroleum Law of 1949, it failed to include the latter statute among those it chose to bury by
the Special Import Taw Law. The reason for this is very clear: The legislature wanted to continue
the incentives for the continuing development of the petroleum industry.
It is not amiss to mention herein passing that contrary to the theory of the herein petitioner, R.A.
No. 387 had not been repealed by R.A. No. 2352 which expressly abrogated Section 6 of R.A.
No. 1394 but did not repeal any part of R.A. No. 387. Therefore, the exemption granted by
Republic Act No. 387 still stands.
WHEREFORE, taking into consideration the weight given by this Court to the findings and
conclusions of the Court of Tax Appeals on a matter it is well-equipped to handle, which findings
and conclusions We find no reason to overturn, the petition of the Commissioner of Customs to
reverse the decision of the Court of Tax Appeals should be, as it is hereby, denied.

G.R. No. L-33693-94 May 31, 1979

MISAEL P. VERA, as Commissioner of Internal Revenue, and THE FAIR TRADE
BOARD, petitioner,
vs.
HON. SERAFIN R. CUEVAS, as Judge of the Court of First Instance of Manila, Branch IV,
INSTITUTE OF EVAPORATED FILLED MILK MANUFACTURERS OF THE PHILIPPINES,
INC., CONSOLIDATED MILK COMPANY (PHIL.) INC., and MILK INDUSTRIES,
INC., respondents.
Solicitor General Felix Q. Antonio and Solicitor Bernardo P. Pardo for petitioners.
Sycip, Salazar, Luna, Manalo & Feliciano for private respondents.

DE CASTRO, J.:

95
This is a petition for certiorari with preliminary injunction to review the decision rendered by
respondent judge, in Civil Case No. 52276 and in Special Civil Action No. 52383 both of the
Court of First Instance of Manila.
Plaintiffs, in Civil Case No. 52276 private respondents herein, are engaged in the manufacture,
sale and distribution of filled milk products throughout the Philippines. The products of private
respondent, Consolidated Philippines Inc. are marketed and sold under the brand Darigold
whereas those of private respondent, General Milk Company (Phil.), Inc., under the brand
"Liberty;" and those of private respondent, Milk Industries Inc., under the brand "Dutch Baby."
Private respondent, Institute of Evaporated Filled Milk Manufacturers of the Philippines, is a
corporation organized for the principal purpose of upholding and maintaining at its highest the
standards of local filled milk industry, of which all the other private respondents are members.
Civil Case No. 52276 is an action for declaratory relief with ex-parte petition for preliminary
injunction wherein plaintiffs pray for an adjudication of their respective rights and obligations in
relation to the enforcement of Section 169 of the Tax Code against their filled milk products.
The controversy arose from the order of defendant, Commissioner of Internal Revenue now
petitioner herein, requiring plaintiffs- private respondents to withdraw from the market all of their
filled milk products which do not bear the inscription required by Section 169 of the Tax Code
within fifteen (15) days from receipt of the order with the explicit warning that failure of plaintiffs'
private respondents to comply with said order will result in the institution of the necessary action
against any violation of the aforesaid order. Section 169 of the Tax Code reads as follows:

Special Civil Action No. 52383, on the other hand, is an action for prohibition and injunction with
a petition for preliminary injunction. Petitioners therein pray that the respondent Fair Trade Board
desist from further proceeding with FTB I.S. No. I . entitled "Antonio R. de Joya vs. Institute of
Evaporated Milk Manufacturers of the Philippines, etc." pending final determination of Civil Case
No. 52276. The facts of this special civil action show that on December 7, 1962, Antonio R. de
Joya and Sufronio Carrasco, both in their individual capacities and in their capacities as Public
Relations Counsel and President of the Philippine Association of Nutrition, respectively, filed FTB
I.S. No. 1 with Fair Trade Board for misleading advertisement, mislabeling and/or misbranding.
Among other things, the complaint filed include the charge of omitting to state in their labels any
statement sufficient to Identify their filled milk products as "imitation milk" or as an imitation of
genuine cows milk. and omitting to mark the immediate containers of their filled milk products
with the words: "This milk is not suitable for nourishment for infants less than one year of age or
with other equivalent words as required under Section 169 of the Tax Code. The Board
proceeded to hear the complaint until it received the writ of preliminary injunction issued by the
Court of First Instance on March 19, 1963.
Upon agreement of the parties, Civil Case No. 52276 and Special Civil Action No. 52383 were
heard jointly being intimately related with each other, with common facts and issues being also
involved therein. On April 16, 1971, the respondent court issued its decision, the dispositive part
of which reads as follows:
Wherefore, judgment is hereby rendered:
In Civil Case No. 52276:

Section 169. Inscription to be placed on skimmed milk. All condensed

skimmed milk and all milk in whatever form, from which the fatty part has
been removed totally or in part, sold or put on sale in the Philippines shall
be clearly and legibly marked on its immediate containers, and in all the
language in which such containers are marked, with the words, "This milk is
not suitable for nourishment for infants less than one year of age," or with
other equivalent words.
The Court issued a writ of preliminary injunction dated February 16, 1963 restraining the
Commissioner of Internal Revenue from requiring plaintiffs' private respondents to print on the
labels of their rifled milk products the words, "This milk is not suitable for nourishment for infants
less than one year of age or words of similar import, " as directed by the above quoted provision
of Law, and from taking any action to enforce the above legal provision against the plaintiffs'
private respondents in connection with their rifled milk products, pending the final determination
of the case, Civil Case No. 52276, on the merits.
On July 25, 1969, however, the Office of the Solicitor General brought an appeal from the said
order by way of certiorari to the Supreme Court. 1 In view thereof, the respondent court in the
meantime suspended disposition of these cases but in view of the absence of any injunction or
restraining order from the Supreme Court, it resumed action on them until their final disposition
therein.

(a) Perpetually restraining the defendant, Commissioner of Internal

Revenue, his agents, or employees from requiring plaintiffs to print on the
labels of their filled milk products the words: "This milk is not suitable for
nourishment for infants less than one year of age" or words with equivalent
import and declaring as nun and void and without authority in law, the order
of said defendant dated September 28, 1961, Annex A of the complaint, and
the Ruling of the Secretary of Finance, dated November 12, 1962, Annex G
of the complaint; and
In Special Civil Action No. 52383:
(b) Restraining perpetually the respondent Fair Trade Board, its agents or
employees from continuing in the investigation of the complaints against
petitioners docketed as FTB I.S. No. 2, or any charges related to the
manufacture or sale by the petitioners of their filled milk products and
declaring as null the proceedings so far undertaken by the respondent
Board on said complaints. (pp. 20- 21, Rollo).
From the above decision of the respondent court, the Commissioner of Internal Revenue and
the Fair Trade Board joined together to file the present petition for certiorari with preliminary
injunction, assigning the following errors:

96
I. THE LOWER COURT ERRED IN RULING THAT SEC. TION 169 OF THE
TAX CODE HAS BEEN REPEALED BY IMPLICATION.
II. THE LOWER COURT ERRED IN RULING THAT SECTION 169 OF THE
TAX CODE HAS LOST ITS TAX PURPOSE, AND THAT COMMISSIONER
NECESSARILY LOST HIS AUTHORITY TO ENFORCE THE SAME AND
THAT THE PROPER AUTHORITY TO PROMOTE THE HEALTH OF
INFANTS IS THE FOOD AND DRUG ADMINISTRATION, THE
SECRETARY OF HEALTH AND THE SECRETARY OF JUSTICE, AS
PROVIDED FOR IN RA 3720, NOT THE COMMISSIONER OF INTERNAL
REVENUE.
III. THE LOWER COURT ERRED IN RULING THAT THE POWER TO
INVESTIGATE AND TO PROSECUTE VIOLATIONS OF FOOD LAWS IS
ENTRUSTED TO THE FOOD AND DRUG INSPECTION, THE FOOD AND
DRUG ADMINISTRATION, THE SECRETARY OF HEALTH AND THE
SECRETARY OF JUSTICE, AND THAT THE FAIR TRADE BOARD IS
WITHOUT JURISDICTION TO INVESTIGATE AND PROSECUTE
ALLEGED MISBRANDING, MISLABELLING AND/OR MISLEADING
ADVERTISEMENT OF FILLED MILK PRODUCTS. (pp, 4-5, Rollo).
The lower court did not err in ruling that Section 169 of the Tax Code has been repealed by
implication. Section 169 was enacted in 1939, together with Section 141 (which imposed a
Specific tax on skimmed milk) and Section 177 (which penalized the sale of skimmed milk
without payment of the specific tax and without the legend required by Section 169). However,
Section 141 was expressly repealed by Section 1 of Republic Act No. 344, and Section 177, by
Section 1 of Republic Act No. 463. By the express repeal of Sections 141 and 177, Section 169
became a merely declaratory provision, without a tax purpose, or a penal sanction.
Moreover, it seems apparent that Section 169 of the Tax Code does not apply to filled milk. The
use of the specific and qualifying terms "skimmed milk" in the headnote and "condensed
skimmed milk" in the text of the cited section, would restrict the scope of the general clause "all
milk, in whatever form, from which the fatty pat has been removed totally or in part." In other
words, the general clause is restricted by the specific term "skimmed milk" under the familiar rule
of ejusdem generis that general and unlimited terms are restrained and limited by the particular
terms they follow in the statute.
Skimmed milk is different from filled milk. According to the "Definitions, Standards of Purity,
Rules and Regulations of the Board of Food Inspection," skimmed milk is milk in whatever form
from which the fatty part has been removed. Filled milk, on the other hand, is any milk, whether
or not condensed, evaporated concentrated, powdered, dried, dessicated, to which has been
added or which has been blended or compounded with any fat or oil other than milk fat so that
the resulting product is an imitation or semblance of milk cream or skim milk." The difference,
therefore, between skimmed milk and filled milk is that in the former, the fatty part has been
removed while in the latter, the fatty part is likewise removed but is substituted with refined
coconut oil or corn oil or both. It cannot then be readily or safely assumed that Section 169
applies both to skimmed milk and filled milk.

The Board of Food Inspection way back in 1961 rendered an opinion that filled milk does not
come within the purview of Section 169, it being a product distinct from those specified in the
said Section since the removed fat portion of the milk has been replaced with coconut oil and
Vitamins A and D as fortifying substances (p. 58, Rollo). This opinion bolsters the Court's stand
as to its interpretation of the scope of Section 169. Opinions and rulings of officials of the
government called upon to execute or implement administrative laws command much respect
and weight. (Asturias Sugar Central Inc. vs. Commissioner of Customs, G. R. No. L-19337,
September 30, 1969, 29 SCRA 617; Tan, et. al. vs. The Municipality of Pagbilao et. al., L-14264,
April 30, 1963, 7 SCRA 887; Grapilon vs. Municipal Council of Carigara L-12347, May 30, 1961,
2 SCRA 103).
This Court is, likewise, induced to the belief that filled milk is suitable for nourishment for infants
of all ages. The Petitioners themselves admitted that: "the filled milk products of the petitioners
(now private respondents) are safe, nutritious, wholesome and suitable for feeding infants of all
ages" (p. 44, Rollo) and that "up to the present, Filipino infants fed since birth with filled milk
have not suffered any defects, illness or disease attributable to their having been fed with filled
milk." (p. 45, Rollo).
There would seem, therefore, to be no dispute that filled milk is suitable for feeding infants of all
ages. Being so, the declaration required by Section 169 of the Tax Code that filled milk is not
suitable for nourishment for infants less than one year of age would, in effect, constitute a
deprivation of property without due. process of law.
Section 169 is being enforced only against respondent manufacturers of filled milk product and
not as against manufacturers, distributors or sellers of condensed skimmed milk such as
SIMILAC, SMA, BREMIL, ENFAMIL, OLAC, in which, as admitted by the petitioner, the fatty part
has been removed and substituted with vegetable or corn oil. The enforcement of Section 169
against the private respondents only but not against other persons similarly situated as the
private respondents amounts to an unconstitutional denial of the equal pro petition of the laws,
for the law, equally enforced, would similarly offend against the Constitution. Yick Wo vs.
Hopkins, 118 U.S. 356,30 L. ed. 220).
As stated in the early part of this decision, with the repeal of Sections 141 and 177 of the Tax
Code, Section 169 has lost its tax purpose. Since Section 169 is devoid of any tax purpose,
petitioner Commissioner necessarily lost his authority to enforce the same. This was so held by
his predecessor immediately after Sections 141 and 177 were repealed in General Circular No.
V-85 as stated in paragraph IX of the Partial Stipulation of facts entered into by the parties, to
wit:
... As the act of sewing skimmed milk without first paying the specific tax
thereon is no longer unlawful and the enforcement of the requirement in
regard to the placing of the proper legend on its immediate containers is a
subject which does not come within the jurisdiction of the Bureau of Internal
Revenue, the penal provisions of Section 177 of the said Code having been
repealed by Republic Act No. 463. (p. 102, Rollo).

97
Petitioner's contention that he still has jurisdiction to enforce Section 169 by virtue of Section 3
of the Tax Code which provides that the Bureau of Internal Revenue shall also "give effect to and
administer the supervisory and police power conferred to it by this Code or other laws" is
untenable. The Bureau of Internal Revenue may claim police power only when necessary in the
enforcement of its principal powers and duties consisting of the "collection of all national internal
revenue taxes, fees and charges, and the enforcement of all forfeitures, penalties and fines
connected therewith." The enforcement of Section 169 entails the promotion of the health of the
nation and is thus unconnected with any tax purpose. This is the exclusive function of the Food
and Drug Administration of the Department of Health as provided for in Republic Act No. 3720.
In particular, Republic Act No. 3720 provides:
Section 9. ... It shall be the duty of the Board (Food and Drug Inspection),
conformably with the rules and regulations, to hold hearings and conduct
investigations relative to matters touching the Administration of this Act, to
investigate processes of food, drug and cosmetic manufacture and to
subject reports to the Food and Drug Administrator, recommending food and
drug standards for adoption. Said Board shall also perform such additional
functions, properly within the scope of the administration thereof, as maybe
assigned to it by the Food and Drug Administrator. The decisions of the
Board shall be advisory to the Food and Drug Administrator.
Section 26. ...
xxx xxx xxx
(c) Hearing authorized or required by this Act shall be conducted by the
Board of Food and Drug Inspection which shall submit recommendation to
the Food and Drug Administrator.
(d) When it appears to the Food and Drug Administrator from the reports of
the Food and Drug Laboratory that any article of food or any drug or
cosmetic secured pursuant to Section 28 of this Act is adulterated or
branded he shall cause notice thereof to be given to the person or persons
concerned and such person or persons shall be given an opportunity to
subject evidence impeaching the correctness of the finding or charge in
question.
(e) When a violation of any provisions of this Act comes to the knowledge of
the Food and Drug Administrator of such character that a criminal
prosecution ought to be instituted against the offender, he shall certify the
facts to the Secretary of Justice through the Secretary of Health, together
with the chemists' report, the findings of the Board of Food and Drug
Inspection, or other documentary evidence on which the charge is based.
(f) Nothing in this Act shall be construed as requiring the Food and Drug
Administrator to certify for prosecution pursuant to subparagraph (e) hereof,

minor violations of this Act whenever he believes that public interest will be
adequately served by a suitable written notice or warning.
The aforequoted provisions of law clearly show that petitioners, Commissioner of Internal
Revenue and the Fair Trade Board, are without jurisdiction to investigate and to prosecute
alleged misbranding, mislabeling and/or misleading advertisements of filled milk. The jurisdiction
on the matters cited is vested upon the Board of Food and Drug inspection and the Food and
Drug Administrator, with the Secretary of Health and the Secretary of Justice, also intervening in
case criminal prosecution has to be instituted. To hold that the petitioners have also jurisdiction
as would be the result were their instant petition granted, would only cause overlapping of
powers and functions likely to produce confusion and conflict of official action which is neither
practical nor desirable.
WHEREFORE, the decision appealed from is hereby affirmed en toto. No costs.
SO ORDERED.

98

99
G.R. No. L-43760 August 21, 1976
PHILIPPINE ASSOCIATION OF FREE LABOR UNIONS (PAFLU), petitioner
vs.
BUREAU OF LABOR RELATIONS, HONORABLE CARMELO C. NORIEL, NATIONAL
FEDERATION OF FREE LABOR UNIONS (NAFLU), and PHILIPPINE BLOOMING MILLS
CO., INC., respondents.
Guevara, Pineda, Guevara & Castillon for petitioner.
Olalia Dimapilis & Associates for respondent Union (NAFLU)
Assistant Solicitor General Reynato S. Puno and Solicitor Jesus V. Diaz for respondent Bureau
of Labor Relations, etc., et al.

FERNANDO, Acting C.J.:

A certification by respondent Director of Labor Relations, Carmelo C. Noriel, that respondent
National Federation of Free Labor Unions (NAFLU) as the exclusive bargaining agent of all the
employees in the Philippine Blooming Mills, Company, Inc. disregarding the objection raised by
petitioner, the Philippine Association of Free Labor Unions (PAFLU), is assailed in this certiorari
proceeding. Admittedly, in the certification election held on February 27, 1976, respondent Union
obtained 429 votes as against 414 of petitioner Union. Again, admittedly, under the Rules and
Regulations implementing the present Labor Code, a majority of the valid votes cast suffices for
certification of the victorious labor union as the sole and exclusive bargaining agent. 1 There
were four votes cast by employees who did not want any union. 2 On its face therefore,
respondent Union ought to have been certified in accordance with the above applicable rule.
Petitioner, undeterred, would seize upon the doctrine announced in the case of Allied Workers
Association of the Philippines v. Court of Industrial Relations 3 that spoiled ballots should be
counted in determining the valid votes cast. Considering there were seventeen spoiled ballots, it
is the submission that there was a grave abuse of discretion on the part of respondent Director.
Implicit in the comment of respondent Director of Labor Relations, 4 considered as an answer, is
the controlling weight to be accorded the implementing rule above-cited, no inconsistency being
shown between such rule and the present Labor Code. Under such a view, the ruling in the
Allied Workers Association case that arose during the period when it was the Industrial Peace
Act 5, that was in effect and not the present law, no longer possesses relevance. It cannot and
should not be applied. It is not controlling. There was no abuse of discretion then, much less a
grave one.
This Court is in agreement. The law is on the side of respondent Director, not to mention the
decisive fact appearing in the Petition itself that at most, only ten of the spoiled ballots "were
intended for the petitioner Union,"6 thus rendering clear that it would on its own showing obtain
only 424 votes as against 429 for respondent Union. certiorari does not lie.

1. What is of the essence of the certification process, as noted in Lakas Ng Manggagawang

Pilipino v. Benguet Consolidated, Inc. 7 "is that every labor organization be given the opportunity
in a free and honest election to make good its claim that it should be the exclusive collective
bargaining representative." 8 Petitioner cannot complain. It was given that opportunity. It lost in a
fair election. It came out second best. The implementing rule favors, as it should, respondent
Union, It obtained a majority of the valid votes cast. So our law Prescribes. It is equally the case
in the United States as this excerpt from the work of Cox and Bok makes clear: "It is a wellsettled rule that a representative will he certified even though less than a majority of all the
employees in the unit cast ballots in favor of the union. It is enough that the union be designated
by a majority of the valid ballots, and this is so even though only a small proportion of the eligible
voters participates. Following the analogy of political elections, the courts have approved this
practice of the Board." 9
2. There is this policy consideration. The country is at present embarked on a wide-scale
industrialization project. As a matter of fact, respondent firm is engaged in such activity.
Industrialization, as noted by Professor Smith, Merrifield and Rothschild, "can thrive only as
there is developed a. stable structure of law and order in the productive sector." 10 That objective
is best attained in a collective bargaining regime, which is a manifestation of industrial
democracy at work, if there be no undue obstacles placed in the way of the choice of a
bargaining representative. To insist on the absolute majority where there are various unions and
where the possibility of invalid ballots may not be ruled out, would be to frustrate that goal. For
the probability of a long drawn-out, protracted process is not easy to dismiss. That is not unlikely
given the intensity of rivalry among unions capable of enlisting the allegiance of a group of
workers. It is to avoid such a contingency that there is this explicit pronouncement in the
implementing rule. It speaks categorically. It must be obeyed. That was what respondent
Director did.
3. Nor can fault of a grave and serious character be imputed to respondent Director presumably
because of failure to abide by the doctrine or pronouncement of this Court in the aforesaid Allied
Workers Association case. The reliance is on this excerpt from the opinion: "However, spoiled
ballots, i.e., those which are defaced, torn or marked (Rules for Certification Elections, Rule II,
sec. 2[j]) should be counted in determining the majority since they are nevertheless votes cast
by those who are qualified to do so." 11 Nothing can be clearer than that its basis is a paragraph
in a section of the then applicable rules for certification elections. 12 They were promulgated
under the authority of the then prevailing Industrial Peace Act. 13 That Legislation is no longer in
force, having been superseded by the present Labor Code which took effect on November 1,
1974. This certification election is governed therefore, as was made clear, by the present Labor
Code and the Rules issued thereunder. Absent a showing that such rules and regulations -are
violative of the Code, this Court cannot ignore their existence. When, as should be the case, a
public official acts in accordance with a norm therein contained, no infraction of the law is
committed. Respondent Director did, as he ought to, comply with its terms. He took into
consideration only the "valid votes" as was required by the Rules. He had no choice as long as
they remain in force. In a proper showing, the judiciary can nullify any rule it found in conflict with
the governing statute. 14 That was not even attempted here. All that petitioner did was to set forth
in two separate paragraphs the applicable rule followed by respondent Director 15 and the
governing article. 16 It did not even bother to discuss why such rule was in conflict with the
present Labor Code. It failed to point out any repugnancy. Such being the case, respondent
Director must be upheld.

100
4. The conclusion reached by us derives further support from the deservedly high repute
attached to the construction placed by the executive officials entrusted with the responsibility of
applying a statute. The Rules and Regulations implementing the present Labor Code were
issued by Secretary Blas Ople of the Department of Labor and took effect on February 3, 1975,
the present Labor Code having been made known to the public as far back as May 1, 1974,
although its date of effectivity was postponed to November 1, 1974, although its date of
effectivity was postponed to November 1, 1974. It would appear then that there was more than
enough time for a really serious and careful study of such suppletory rules and regulations to
avoid any inconsistency with the Code. This Court certainly cannot ignore the interpretation
thereafter embodied in the Rules. As far back as In re Allen,"17 a 1903 decision, Justice
McDonough, as ponente, cited this excerpt from the leading American case of Pennoyer v.
McConnaughy, decided in 1891: "The principle that the contemporaneous construction of a
statute by the executive officers of the government, whose duty it is to execute it, is entitled to
great respect, and should ordinarily control the construction of the statute by the courts, is so
firmly embedded in our jurisprudence that no authorities need be cited to support it." 18There was
a paraphrase by Justice Malcolm of such a pronouncement in Molina v. Rafferty," 19 a 1918
decision: "Courts will and should respect the contemporaneous construction placed upon a
statute by the executive officers whose duty it is to enforce it, and unless such interpretation is
clearly erroneous will ordinarily be controlled thereby." 20 Since then, such a doctrine has been
reiterated in numerous decisions . 21 As was emphasized by Chief Justice Castro, "the
construction placed by the office charged with implementing and enforcing the provisions of a
Code should he given controlling weight. "22
WHEREFORE, the petition for certiorari is dismissed. Costs against petitioner Philippine
Association of Free Labor Unions (PAFLU).

101
check when presented to the drawee bank within ninety (90) days from the
date thereof was subsequently dishonored for the reason "INSUFFICIENT
FUNDS" and despite receipt of notice of such dishonor said accused failed
to pay said ROBERTO Z. LORAYEZ the amount of P50,000.00 of said
check or to make arrangement for full payment of the same within five (5)
banking days after receiving said notice.
After arraignment and after private respondent had testified on direct examination,
petitioner moved to dismiss the Information on the following grounds: (a) Respondent
court has no jurisdiction over the offense charged; and (b) That no offense was
committed since the check involved was payable in dollars, hence, the obligation
created is null and void pursuant to Republic Act No. 529 (An Act to Assure Uniform
Value of Philippine Coin and Currency).

G.R. No. 87416

April 8, 1991

CECILIO S. DE VILLA, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, PEOPLE OF THE PHILIPPINES, HONORABLE
JOB B. MADAYAG, and ROBERTO Z. LORAYES, respondents.
San Jose Enriquez, Lacas Santos & Borje for petitioner.
Eduardo R. Robles for private respondent.

On July 19, 1988, respondent court issued its first questioned orders stating:
Accused's motion to dismiss dated July 5, 1988, is denied for lack of merit.
Under the Bouncing Checks Law (B.P. Blg. 22), foreign checks, provided
they are either drawn and issued in the Philippines though payable outside
thereof, or made payable and dishonored in the Philippines though drawn
and issued outside thereof, are within the coverage of said law. The law
likewise applied to checks drawn against current accounts in foreign
currency.
Petitioner moved for reconsideration but his motion was subsequently denied by
respondent court in its order dated September 6, 1988, and which reads:
Accused's motion for reconsideration, dated August 9, 1988, which was
opposed by the prosecution, is denied for lack of merit.1wphi1

PARAS, J.:
This petition for review on certiorari seeks to reverse and set aside the decision* of the Court of
Appeals promulgated on February 1, 1989 in CA-G.R. SP No. 16071 entitled "Cecilio S. de Villa
vs. Judge Job B. Madayag, etc. and Roberto Z. Lorayes," dismissing the petition
for certiorari filed therein.
The factual backdrop of this case, as found by the Court of Appeals, is as follows:
On October 5, 1987, petitioner Cecilio S. de Villa was charged before the Regional
Trial Court of the National Capital Judicial Region (Makati, Branch 145) with violation
of Batas Pambansa Bilang 22, allegedly committed as follows:
That on or about the 3rd day of April 1987, in the municipality of Makati,
Metro Manila, Philippines and within the jurisdiction of this Honorable Court,
the above-named accused, did, then and there willfully, unlawfully and
feloniously make or draw and issue to ROBERTO Z. LORAYEZ, to apply on
account or for value a Depositors Trust Company Check No. 3371
antedated March 31, 1987, payable to herein complainant in the total
amount of U.S. $2,500.00 equivalent to P50,000.00, said accused well
knowing that at the time of issue he had no sufficient funds in or credit with
drawee bank for payment of such check in full upon its presentment which

The Bouncing Checks Law is applicable to checks drawn against current

accounts in foreign currency (Proceedings of the Batasang Pambansa,
February 7, 1979, p. 1376, cited in Makati RTC Judge (now Manila City
Fiscal) Jesus F. Guerrero's The Ramifications of the Law on Bouncing
Checks, p. 5). (Rollo, Annex "A", Decision, pp. 20-22).
A petition for certiorari seeking to declare the nullity of the aforequoted orders dated
July 19, 1988 and September 6, 1988 was filed by the petitioner in the Court of
Appeals wherein he contended:
(a) That since the questioned check was drawn against the dollar account of
petitioner with a foreign bank, respondent court has no jurisdiction over the
same or with accounts outside the territorial jurisdiction of the Philippines
and that Batas Pambansa Bilang 22 could have not contemplated extending
its coverage over dollar accounts;
(b) That assuming that the subject check was issued in connection with a
private transaction between petitioner and private respondent, the payment

102
could not be legally paid in dollars as it would violate Republic Act No. 529;
and
(c) That the obligation arising from the issuance of the questioned check is
null and void and is not enforceable with the Philippines either in a civil or
criminal suit. Upon such premises, petitioner concludes that the dishonor of
the questioned check cannot be said to have violated the provisions of
Batas Pambansa Bilang 22. (Rollo, Annex "A", Decision, p. 22).
On February 1, 1989, the Court of Appeals rendered a decision, the decretal portion of
which reads:
WHEREFORE, the petition is hereby dismissed. Costs against petitioner.

Sec. 10. Place of the commission of the offense. The complaint or

information is sufficient if it can be understood therefrom that the offense
was committed or some of the essential ingredients thereof occured at
some place within the jurisdiction of the court, unless the particular place
wherein it was committed constitutes an essential element of the offense or
is necessary for identifying the offense charged.
Sec. 15. Place where action is to be instituted. (a) Subject to existing laws,
in all criminal prosecutions the action shall be instituted and tried in the court
of the municipality or territory where the offense was committed or any of
the essential ingredients thereof took place.
In the case of People vs. Hon. Manzanilla (156 SCRA 279 [1987] cited in the case of
Lim vs. Rodrigo, 167 SCRA 487 [1988]), the Supreme Court ruled "that jurisdiction or
venue is determined by the allegations in the information."

SO ORDERED. (Rollo, Annex "A", Decision, p. 5)

A motion for reconsideration of the said decision was filed by the petitioner on
February 7, 1989 (Rollo, Petition, p. 6) but the same was denied by the Court of
Appeals in its resolution dated March 3, 1989 (Rollo, Annex "B", p. 26).
Hence, this petition.
In its resolution dated November 13, 1989, the Second Division of this Court gave due
course to the petition and required the parties to submit simultaneously their
respective memoranda (Rollo, Resolution, p. 81).
The sole issue in this case is whether or not the Regional Trial Court of Makati has
jurisdiction over the case in question.

The information under consideration specifically alleged that the offense was
committed in Makati, Metro Manila and therefore, the same is controlling and sufficient
to vest jurisdiction upon the Regional Trial Court of Makati. The Court acquires
jurisdiction over the case and over the person of the accused upon the filing of a
complaint or information in court which initiates a criminal action (Republic vs. Sunga,
162 SCRA 191 [1988]).
Moreover, it has been held in the case of Que v. People of the Philippines (154 SCRA
160 [1987] cited in the case of People vs. Grospe, 157 SCRA 154 [1988]) that "the
determinative factor (in determining venue) is the place of the issuance of the check."
On the matter of venue for violation of Batas Pambansa Bilang 22, the Ministry of
Justice, citing the case of People vs. Yabut (76 SCRA 624 [1977], laid down the
following guidelines in Memorandum Circular No. 4 dated December 15, 1981, the
pertinent portion of which reads:

The petition is without merit.

Jurisdiction is the power with which courts are invested for administering justice, that
is, for hearing and deciding cases (Velunta vs. Philippine Constabulary, 157 SCRA
147 [1988]).
Jurisdiction in general, is either over the nature of the action, over the subject matter,
over the person of the defendant, or over the issues framed in the pleadings (Balais
vs. Balais, 159 SCRA 37 [1988]).
Jurisdiction over the subject matter is determined by the statute in force at the time of
commencement of the action (De la Cruz vs. Moya, 160 SCRA 538 [1988]).
The trial court's jurisdiction over the case, subject of this review, can not be
questioned.
Sections 10 and 15(a), Rule 110 of the Rules of Court specifically provide that:

(1) Venue of the offense lies at the place where the check was executed
and delivered; (2) the place where the check was written, signed or dated
does not necessarily fix the place where it was executed, as what is of
decisive importance is the delivery thereof which is the final act essential to
its consummation as an obligation; . . . (Res. No. 377, s. 1980, Filtex Mfg.
Corp. vs. Manuel Chua, October 28, 1980)." (See The Law on Bouncing
Checks Analyzed by Judge Jesus F. Guerrero, Philippine Law Gazette, Vol.
7. Nos. 11 & 12, October-December, 1983, p. 14).
It is undisputed that the check in question was executed and delivered by the
petitioner to herein private respondent at Makati, Metro Manila.
However, petitioner argues that the check in question was drawn against the dollar
account of petitioner with a foreign bank, and is therefore, not covered by the
Bouncing Checks Law (B.P. Blg. 22).
But it will be noted that the law does not distinguish the currency involved in the case.
As the trial court correctly ruled in its order dated July 5, 1988:

103
Under the Bouncing Checks Law (B.P. Blg. 22), foreign checks, provided
they are either drawn and issued in the Philippines though payable outside
thereof . . . are within the coverage of said law.
It is a cardinal principle in statutory construction that where the law does not
distinguish courts should not distinguish.1wphi1 Parenthetically, the rule is that where
the law does not make any exception, courts may not except something unless
compelling reasons exist to justify it (Phil. British Assurance Co., Inc. vs. IAC, 150
SCRA 520 [1987]).
More importantly, it is well established that courts may avail themselves of the actual
proceedings of the legislative body to assist in determining the construction of a
statute of doubtful meaning (Palanca vs. City of Manila, 41 Phil. 125 [1920]). Thus,
where there is doubts as to what a provision of a statute means, the meaning put to
the provision during the legislative deliberation or discussion on the bill may be
adopted (Arenas vs. City of San Carlos, 82 SCRA 318 [1978]).
The records of the Batasan, Vol. III, unmistakably show that the intention of the
lawmakers is to apply the law to whatever currency may be the subject thereof. The
discussion on the floor of the then Batasang Pambansa fully sustains this view, as
follows:
xxx

xxx

xxx

THE SPEAKER. The Gentleman from Basilan is recognized.

MR. TUPAY. Parliamentary inquiry, Mr. Speaker.
THE SPEAKER. The Gentleman may proceed.
MR. TUPAY. Mr. Speaker, it has been mentioned by one of the Gentlemen
who interpellated that any check may be involved, like U.S. dollar checks,
etc. We are talking about checks in our country. There are U.S. dollar
checks, checks, in our currency, and many others.
THE SPEAKER. The Sponsor may answer that inquiry.
MR. MENDOZA. The bill refers to any check, Mr. Speaker, and this check
may be a check in whatever currency. This would not even be limited to
U.S. dollar checks. The check may be in French francs or Japanese yen or
deutschunorhs. (sic.) If drawn, then this bill will apply.
MR TUPAY. So it include U.S. dollar checks.
MR. MENDOZA. Yes, Mr. Speaker.
xxx

xxx

xxx

(p. 1376, Records of the Batasan, Volume III; Emphasis supplied).

PREMISES CONSIDERED, the petition is DISMISSED for lack of merit.

104

105
January 2, 1991. Among others, RA 6975 provides for a uniform retirement system for PNP
members. Section 39 thereof reads:
Sec. 39. Compulsory Retirement. Compulsory retirement, for officer and
non-officer, shall be upon the attainment of age fifty-six (56); Provided, That,
in case of any officer with the rank of chief superintendent, director or
deputy director general, the Commission may allow his retention in the
service for an unextendible period of one (1) year.
Based on the above provision, petitioners sent notices of retirement to private respondents who
are all members of the defunct Philippine Constabulary and have reached the age of fifty-six
(56).

G.R. No. 106724 February 9, 1994

THE NATIONAL POLICE COMMISSION, represented by its Acting Chairman, Cesar Sarino,
Teodolo C. Natividad, Vice-Chairman and Executive Officer, Brig. Gen. Virgilio H. David,
Edgar Dula Torre, Guillermo P. Enriquez, Commissioners, and Chief Supt. Levy D.
Macasiano Director for Personnel, petitioners,
vs.
Honorable Judge Salvador de Guzman, Jr., Chief Supt. Norberto M. Lina, Chief Supt.
Ricardo Trinidad, Jr., Sr. Supt. Manuel Suarez, Supt. Justito B. Tagum, Sr. Supt.
Tranquilino Aspiras, Sr., Supt. Ramon I. Navarro,
Sr. Supt. Ramon I. Navarro, Sr. Supt. Jose P. Suria, Sr. Supt. Agaton Abiera, Chief Insp.
Bienvenido Torres, and the National (ROTC) Alumni Association Inc. (NARRA),
represented by its President Col. Benjamin Gundran, and Director Hermogenes Peralta,
Jr., respondents.

In response, private respondents filed a complaint on December 19, 1991 for declaratory relief
with prayer for the issuance of an ex parte restraining order and/or injunction (docketed as Civil
Case No. 91-3498) before the Regional Trial Court of Makati, Branch 142. In their complaint,
respondents aver that the age of retirement set at fifty-six (56) by Section 39 of RA 6975 cannot
be applied to them since they are also covered by Sec. 89 thereof which provides:
Any provision hereof to the contrary notwithstanding, and within the
transition period of four (4) years following the effectivity of this Act, the
following members of the INP shall be considered compulsorily retired:
a) Those who shall attain the age of sixty (60) on the first year of the
effectivity of this Act.
b) Those who shall attain the age of fifty-nine (59) on the second year of the
effectivity of this Act.
c) Those who shall attain the age of fifty-eight (58) on the third year of the
effectivity of this Act.

The Solicitor General for petitioners.

Renecio R. Espiritu for private respondents.
Diosdado P. Peralta for respondent-intervenor.

BIDIN, J.:
The case at bar had its origin in the implementation of the compulsory retirement of PNP officers
as mandated in Sec. 39, RA 6975, otherwise known as "An Act Establishing the Philippine
National Police Under a Reorganized Department of the Interior and Local Government", which
took effect on

d) Those who shall attain the age of fifty-seven (57) on the fourth year of the
effectivity of this Act.
It is the submission of respondents that the term "INP" includes both the former members of the
Philippine Constabulary and the local police force who were earlier constituted as the Integrated
National Police (INP) by virtue of
PD 765 in 1975.
On the other hand, it is the belief of petitioners that the 4-year transition period provided in
Section 89 applies only to the local police forces who previously retire, compulsorily, at age sixty
(60) for those in the ranks of Police/Fire Lieutenant or higher (Sec. 33, PD 1184); while the
retirement age for the PC had already been set at fifty-six (56) under the AFP law.

106
On December 23, 1991, respondent judge issued a restraining order followed by a writ of
injunction on January 8, 1992 upon posting of a P100,000.00 bond by private respondents.
After the parties have submitted their respective pleadings, the case was submitted for
resolution and on August 14, 1992, the respondent judge rendered the assailed decision, the
decretal portion of which reads:
WHEREFORE, the court hereby declares that the term "INP" in Section 89
of the PNP Law includes all members of the present Philippine National
Police, irrespective of the original status of the present members of the
Philippine National Police before its creation and establishment, and that
Section 39 thereof shall become operative after the lapse of the
four-year transition period.
The preliminary injunction issued is made permanent.
SO ORDERED. (Rollo, pp. 29-30)
Petitioners filed the instant petition on October 8, 1992 seeking the reversal of the above
judgment. On January 12, 1993, the Court resolved to treat the respondents' Comment as
Answer and gave due course to the petition.

has not limited nor intended to limit the meaning of the word when the bill
was finally passed into law. It is not difficult for the court to also presume
that in drafting the wording of the PNP Law, the legislators were aware of
the historical legislative origin of the "INP".
xxx xxx xxx
The court takes particular note of the fact that Section 89 is found in the
Transitory Provisions of the law which do not provide for any distinction
between the former PC officers and those belonging to the civilian police
forces. These provision are specifically enacted to regulate the period
covering the dissolution of the PC and the creation of the PNP, a period that
necessarily would be attended by imbalances and or confusion occasioned
by the wholesale and mass integration. In fact, the retirement payment
scheme of the INP is still to be formulated, leaving the impression that
nothing is really settled until after the transition of four years has lapsed.
Section 89 therefore prevails over Section 39 up to the year 1995 when the
retirement age for the members of the PNP shall then be age 56; after the
year 1995, Section 39 shall then be the applicable law on retirement of PNP
members. (Rollo, pp. 27-28; emphasis supplied)
Petitioners disagree and claim that the use of the term INP in Sec. 89 does not imply the same
meaning contemplated under PD 765 wherein it is provided:

In ruling in favor of private respondents, respondent judge observed, among others, that:
It may have been the intention of Congress to refer to the local police forces
as the "INP" but the PNP Law failed to define who or what constituted the
INP. The natural recourse of the court is to trace the source of the "INP" as
courts are permitted to look to prior laws on the same subject and to
investigate the antecedents involved. There is nothing extant in the statute
books except that which was created and established under
PD 765 pursuant to the mandate of Article XV of the 1973 Constitution
providing that the "State shall establish and maintain an integrated national
police force whose organization, administration and operation shall be
provided by law." Heretofore, INP was unknown. And the said law
categorically declared the PC "as the principal component of the Integrated
National Police" (Sec. 5, PD 765).
The court was supplied by respondents (petitioners herein) with excerpts
taken from the discussion amongst the members of Congress concerning
the particular provision of Section 89. The court is not persuaded by said
discussion; it was a simple matter for the members of the legislature to state
precisely in clear and unequivocal terms their meaning, such as "integrated
police" as used in PD 765. Instead, they employed "INP", a generic term
that includes the PC as the principal component of the INP, supra. In failing
to categorically restrict the application of Section 89 as the members of
legislature are said to have intended, it gave rise to the presumption that it

Sec. 1. Constitution of the Integrated National Police. There is hereby

established and constituted the Integrated National Police (INP) which shall
be composed of the Philippine Constabulary as the nucleus, and the
integrated police forces as established by Presidential Decrees
Nos. 421, 482, 531, 585 and 641, as components, under the Department of
National Defense.
On the other hand, private respondents assert that being the nucleus of the Integrated National
Police (INP) under PD 765, former members of the Philippine Constabulary (PC) should not be
discriminated against from the coverage of the term "INP" in Sec. 89, RA 6975. Clearly, it is
argued, the term "INP" found in Section 89 of RA 6975 refers to the INP in PD 765. Thus, where
the law does not distinguish, the courts should not distinguish.
Does the law, RA 6975, distinguish INP from the PC? Petitioners submit that it does and cite
Sections 23 and 85 to stress the point, viz.:
Sec. 23. Composition. Subject to the limitations provided for in this Act,
the Philippine National Police, hereinafter referred to as the PNP, is hereby
established, initially consisting of the members of the police forces who
were integrated into the Integrated National Police (INP) pursuant to
Presidential Decree No. 765, and the officers and enlisted personnel of the
Philippine Constabulary (PC). . .

107
xxx xxx xxx
The permanent civilian employees of the present PC, INP, Narcotics
Command, CIS and the technical command of the AFP assigned with the
PC, including NAPOLCOM hearing officers holding regular items as such,
shall be absorbed by the Department as employees thereof, subject to
existing laws and regulations.

From a careful perusal of the above provisions, it appears therefore that the use of the term INP
is not synonymous with the PC. Had it been otherwise, the statute could have just made a
uniform reference to the members of the whole Philippine National Police (PNP) for retirement
purposes and not just the INP. The law itself distinguishes INP from the PC and it cannot be
construed that "INP" as used in Sec. 89 includes the members of the PC.
And contrary to the pronouncement of respondent judge that the law failed to define who
constitutes the INP, Sec. 90 of RA 6975 has in fact defined the same. Thus,

xxx xxx xxx

Sec. 85. Phase of Implementation. The implementation of this Act shall
be undertaken in three (3) phases, to wit:
Phase I Exercise of option by the uniformed members of the Philippine
Constabulary, the PC elements assigned with the Narcotics Command, CIS,
and the personnel of the technical services of the AFP assigned with the PC
to include the regular CIS investigating agents and the operatives and
agents of the NAPOLCOM Inspection, Investigation and Intelligence
Branch, and the personnel of the absorbed National Action Committee on
Anti-Hijacking (NACAH) of the Department of National Defense, to be
completed within six (6) months from the date of the effectivity of this Act. At
the end of this phase, all personnel from the INP, PC, technical Services,
NACAH, and NAPOLCOM Inspection, Investigation and Intelligence Branch
shall have been covered by official orders assigning them to the PNP . . .
xxx xxx xxx
. . . Any PC-INP officer or enlisted personnel may, within the twelve-month
period from the effectivity of this Act, retire . . .
Phase III . . . To accomplish the tasks of Phase III, the Commission shall
create a Board of Officers composed of the following: NAPOLCOM
Commissioner as Chairman and one (1) representative each from the PC,
INP, Civil Service Commission and the Department of Budget and
Management.

Sec. 90. Status of Present NAPOLCOM, PC-INP. Upon the effectivity of

this Act, the present National Police Commission and the Philippine
Constabulary-Integrated National Police shall cease to exist. The Philippine
Constabulary, which is the nucleus of the Philippine Constabulary-Integrated
National Police shall cease to be a major service of the Armed Forces of the
Philippines. The Integrated National Police, which is the civilian component
of the Philippine Constabulary-Integrated National Police, shall cease to be
the national police force and lieu thereof, a new police force shall be
established and constituted pursuant to this Act. (emphasis supplied)
It is not altogether correct to state, therefore, that the legislature failed to define who the
members of the INP are. In this regard, it is of no moment that the legislature failed to
categorically restrict the application of the transition period in Sec. 89 specifically in favor of the
local police forces for it would be a mere superfluity as the PC component of the INP was
already retirable at age fifty-six (56).
Having defined the meaning of INP, the trial court need not have belabored on the supposed
dubious meaning of the term. Nonetheless, if confronted with such a situation, courts are not
without recourse in determining the construction of the statute with doubtful meaning for they
may avail themselves of the actual proceedings of the legislative body. In case of doubt as to
what a provision of a statute means, the meaning put to the provision during the legislative
deliberations may be adopted (De Villa v. Court of Appeals,
195 SCRA 722 [1991] citing Palanca v. City of Manila, 41 Phil. 125 [1920]; Arenas v. City of San
Carlos, 82 SCRA 318 [1978]).
Courts should not give a literal interpretation to the letter of the law if it runs counter to the
legislative intent (Yellow Taxi and Pasay Transportation Workers' Association v. Manila Yellow
Taxi Cab. Co., 80 Phil. 83 [1948]).

Section 86 of the same law further provides:

Sec. 86. Assumption by the PNP of Police Functions. The PNP shall
absorb the functions of the PC, the INP and the Narcotics Command upon
the effectivity of this Act.

Examining the records of the Bicameral Conference Committee, we find that the legislature did
intent to exclude the members of the PC from the coverage of Sec. 89 insofar as the retirement
age is concerned, thus:
THE CHAIRMAN. (SEN. MACEDA). Well, it seems what people really want
is one common rule, so if it is fifty-six, fifty-six; of course, the PC wants sixty
for everybody. Of course, it is not acceptable to us in the sense that we tied
this up really to the question of: If you are lax in allowing their (the PC) entry

108
into the PNP, then tighten up the retirement. If we will be strict in, like
requiring examinations and other conditions for their original entry, then
since we have sifted out a certain amount of undesirables, then we can
allow a longer retirement age. That was the rationale, that was the tie-up.
Since we are relaxing the entry, we should speed up . . .

SEN. SAGUISAG. Dahil 'yon, may time to . . .

THE CHAIRMAN. (SEN. MACEDA). Walang problema dito sa transition ng
pulis, acceptable ito, eh.
THE CHAIRMAN. (REP. COJUANGCO). Sa PC?

THE CHAIRMAN. (REP. GUTANG). Exit.

THE CHAIRMAN. (SEN. MACEDA). PC, walang mawawala sa kanila, 56

ang retirement age nilang talaga, eh. Kaya ayaw ko
ngang dagdagan 'yung 56 nila at 'yon din ang sa Armed Forces, 56. (Ibid.,
May 22, 1990)

THE CHAIRMAN. (SEN. MACEDA) . . . the retirement, the exit.

THE CHAIRMAN. (REP. GUTANG). So let me get it very clear, Mr.
Chairman. Fifty-six, let's say, that will not make any adjustment in the PC
because there (they) are (retirable at age) fifty-six.
THE CHAIRMAN. (SEN. MACEDA). Kaya nga, wala na silang masasabi.
THE CHAIRMAN. (REP. GUTANG). In the case of the Police, since they are
retireable now at sixty, for the officers, it will be
applicable to them on a one-year every year basis for a total period of four
years transition. (Bicameral Conference Committee on National Defense,
March 12, 1990)
REP. GUTANG. On the first year of effectivity, the police will retire at 60
years.
THE CHAIRMAN. (SEN. MACEDA). Sixty.
REP. GUTANG. On the second year, 59.
THE CHAIRMAN. (SEN. MACEDA). Oo.
REP. GUTANG. On the third year, 58.
THE CHAIRMAN. (SEN. MACEDA). Fifty-eight. So 'yung 55, on the third
year, 58, doon siya re-retire.
REP. GUTANG. Oo.

In applying the provisions of Sec. 89 in favor of the local police force as established in PD 765,
the Court does not, in any manner, give any
undue preferential treatment in favor of the other group. On the contrary, the Court is merely
giving life to the real intent of the legislators based on the deliberations of the Bicameral
Conference Committee that preceded the enactment of RA 6975.
The legislative intent to classify the INP in such manner that Section 89 of RA 6975 is applicable
only to the local police force is clear. The question now is whether the classification is valid. The
test for this is reasonableness such that it must conform to the following requirements: (1) It
must be based upon substantial distinctions; (2) It must be germane to the purpose of the law;
(3) It must not be limited to existing conditions only; (4) It must apply equally to all members of
the same class (People vs. Cayat, 68 Phil. 12 [1939]).
The classification is based upon substantial distinctions. The PC, before the effectivity of the law
(RA 6975), were already retirable at age 56 while the local police force were retirable at 60, and
governed by different laws
(P.D. 1184, Sec. 33 and Sec. 50). The distinction is relevant for the purpose of the statute, which
is to enable the local police force to plan for their retirement which would be earlier than usual
because of the new law. Section 89 is merely transitory, remedial in nature, and loses its force
and effect once the four-year transitory period has elapsed. Finally, it applies not only to some
but to all local police officers.
It may be appropriate to state at this point that it seems absurd that a law will grant an extension
to PC officers' retirable age from 56 to 60 and then gradually lower it back to 56 without any
cogent reason at all. Why should the retirement age of PC officers be increased during the
transitory period to the exclusion of other PC officers who would retire at age 56 after such
period? Such absurdity was never contemplated by the law and would defeat its purpose of
providing a uniform retirement age for PNP members.

SEN. SAGUISAG. So kung 55, when the law becomes effective . . .

THE CHAIRMAN. (SEN. MACEDA). He will retire at 58, doon siya aabot.

WHEREFORE, the petition is GRANTED. The writ of injunction issued on January 8, 1992 is
hereby LIFTED and the assailed decision of respondent judge is REVERSED and SET ASIDE.

REP. UNICO. Pwede.

SO ORDERED.

109
G.R. No. L-17931

February 28, 1963

CASCO PHILIPPINE CHEMICAL CO., INC., petitioner,

vs.
HON. PEDRO GIMENEZ, in his capacity as Auditor General of the Philippines,
and HON. ISMAEL MATHAY, in his capacity as Auditor of the Central Bank, respondents.
Jalandoni & Jamir for petitioner.
Officer of the Solicitor General for respondents.
CONCEPCION, J.:
This is a petition for review of a decision of the Auditor General denying a claim for refund of
petitioner Casco Philippine Chemical Co., Inc.
The main facts are not disputed. Pursuant to the provisions of Republic Act No. 2609, otherwise
known as the Foreign Exchange Margin Fee Law, the Central Bank of the Philippines issued on
July 1, 1959, its Circular No. 95. fixing a uniform margin fee of 25% on foreign exchange
transactions. To supplement the circular, the Bank later promulgated a memorandum
establishing the procedure for applications for exemption from the payment of said fee, as
provided in said Republic Act No. 2609. Several times in November and December 1959,
petitioner Casco Philippine Chemical Co., Inc. which is engaged in the manufacture of
synthetic resin glues, used in bonding lumber and veneer by plywood and hardwood producers
bought foreign exchange for the importation of urea and formaldehyde which are the main
raw materials in the production of said glues and paid therefor the aforementioned margin fee
aggregating P33,765.42. In May, 1960, petitioner made another purchase of foreign exchange
and paid the sum of P6,345.72 as margin fee therefor.
Prior thereto, petitioner had sought the refund of the first sum of P33,765.42, relying upon
Resolution No. 1529 of the Monetary Board of said Bank, dated November 3, 1959, declaring
that the separate importation of urea and formaldehyde is exempt from said fee. Soon after the
last importation of these products, petitioner made a similar request for refund of the sum of
P6,345.72 paid as margin fee therefor. Although the Central Bank issued the corresponding
margin fee vouchers for the refund of said amounts, the Auditor of the Bank refused to pass in
audit and approve said vouchers, upon the ground that the exemption granted by the Monetary
Board for petitioner's separate importations of urea and formaldehyde is not in accord with the
provisions of section 2, paragraph XVIII of Republic Act No. 2609. On appeal taken by petitioner,
the Auditor General subsequently affirmed said action of the Auditor of the Bank. Hence, this
petition for review.
The only question for determination in this case is whether or not "urea" and "formaldehyde" are
exempt by law from the payment of the aforesaid margin fee. The pertinent portion of Section 2
of Republic Act No. 2609 reads:

110
The margin established by the Monetary Board pursuant to the provision of section
one hereof shall not be imposed upon the sale of foreign exchange for the importation
of the following:.
xxx

xxx

xxx

XVIII. Urea formaldehyde for the manufacture of plywood and hardboard when
imported by and for the exclusive use of end-users.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be
admitted and approved by this Honorable Court, without prejudice to the parties
adducing other evidence to prove their case not covered by this stipulation of
facts. 1wph1.t
Petitioner maintains that the term "urea formaldehyde" appearing in this provision should be
construed as "ureaand formaldehyde" (emphasis supplied) and that respondents herein, the
Auditor General and the Auditor of the Central Bank, have erred in holding otherwise. In this
connection, it should be noted that, whereas "urea" and "formaldehyde" are the principal raw
materials in the manufacture of synthetic resin glues, the National Institute of Science and
Technology has expressed, through its Commissioner, the view that:
Urea formaldehyde is not a chemical solution. It is the synthetic resin formed as a
condensation product from definite proportions of urea and formaldehyde under
certain conditions relating to temperature, acidity, and time of reaction. This produce
when applied in water solution and extended with inexpensive fillers constitutes a fairly
low cost adhesive for use in the manufacture of plywood.

Hence, "urea formaldehyde" is clearly a finished product, which is patently distinct and different
from urea" and "formaldehyde", as separate articles used in the manufacture of the synthetic
resin known as "urea formaldehyde". Petitioner contends, however, that the bill approved in
Congress contained the copulative conjunction "and" between the terms "urea" and
"formaldehyde", and that the members of Congress intended to exempt "urea" and
"formaldehyde" separately as essential elements in the manufacture of the synthetic resin glue
called "urea" formaldehyde", not the latter as a finished product, citing in support of this view the
statements made on the floor of the Senate, during the consideration of the bill before said
House, by members thereof. But, said individual statements do not necessarily reflect the view
of the Senate. Much less do they indicate the intent of the House of Representatives (see Song
Kiat Chocolate Factory vs. Central Bank, 54 Off. Gaz., 615; Mayon Motors Inc. vs. Acting
Commissioner of Internal Revenue, L-15000 [March 29, 1961]; Manila Jockey Club, Inc. vs.
Games & Amusement Board, L-12727 [February 29, 1960]). Furthermore, it is well settled that
the enrolled bill which uses the term "urea formaldehyde" instead of "urea and formaldehyde"
is conclusive upon the courts as regards the tenor of the measure passed by Congress and
approved by the President (Primicias vs. Paredes, 61 Phil. 118, 120; Mabanag vs. Lopez Vito,
78 Phil. 1; Macias vs. Comm. on Elections, L-18684, September 14, 1961). If there has been
any mistake in the printing ofthe bill before it was certified by the officers of Congress and
approved by the Executive on which we cannot speculate, without jeopardizing the principle
of separation of powers and undermining one of the cornerstones of our democratic system
the remedy is by amendment or curative legislation, not by judicial decree.
WHEREFORE, the decision appealed from is hereby affirmed, with costs against the petitioner.
It is so ordered.

111

G.R. No. 169435

February 27, 2008

MUNICIPALITY OF NUEVA ERA, ILOCOS NORTE, represented by its Municipal Mayor,

CAROLINE ARZADON-GARVIDA, petitioner,
vs.
MUNICIPALITY OF MARCOS, ILOCOS NORTE, represented by its Municipal Mayor,
SALVADOR PILLOS, and the HONORABLE COURT OF APPEALS, respondents.
DECISION
REYES, R.T., J.:
AS the law creating a municipality fixes its boundaries, settlement of boundary disputes between
municipalities is facilitated by carrying into effect the law that created them.
Any alteration of boundaries that is not in accordance with the law creating a municipality is not
the carrying into effect of that law but its amendment, which only the Congress can do.1

112
For Our review on certiorari is the Decision2 of the Court of Appeals (CA) reversing to a certain
extent that3 of the Regional Trial Court (RTC), Branch 12, Laoag City, Ilocos Norte, in a case that
originated from the Sangguniang Panlalawigan (SP) of Ilocos Norte about the boundary dispute
between the Municipalities of Marcos and Nueva Era in Ilocos Norte.

There is no issue insofar as the first paragraph is concerned which named only Dingras as the
mother municipality of Marcos. The problem, however, lies in the description of Marcos'
boundaries as stated in the second paragraph, particularly in the phrase: "on the East, by the
Ilocos Norte-Mt. Province boundary."

The CA declared that Marcos is entitled to have its eastern boundary extended up "to the
boundary line between the province of Ilocos Norte and Kalinga-Apayao."4 By this extension of
Marcos' eastern boundary, the CA allocated to Marcos a portion of Nueva Era's territory.

It must be noted that the term "Mt. Province" stated in the above phrase refers to the present
adjoining provinces of Benguet, Mountain Province, Ifugao, Kalinga and Apayao, which were
then a single province.

The Facts
The Municipality of Nueva Era was created from the settlements of Bugayong, Cabittaoran,
Garnaden, Padpadon, Padsan, Paorpatoc, Tibangran, and Uguis which were previously
organized as rancherias, each of which was under the independent control of a chief. Governor
General Francis Burton Harrison, acting on a resolution passed by the provincial government of
Ilocos Norte, united these rancherias and created the township of Nueva Era by virtue of
Executive Order (E.O.) No. 66 5 dated September 30, 1916.
The Municipality of Marcos, on the other hand, was created on June 22, 1963 pursuant to
Republic Act (R.A.) No. 3753 entitled "An Act Creating the Municipality of Marcos in the Province
of Ilocos Norte." Section 1 of R.A. No. 3753 provides:
SECTION 1. The barrios of Capariaan, Biding, Escoda, Culao, Alabaan, Ragas and
Agunit in the Municipality of Dingras, Province of Ilocos Norte, are hereby separated
from the said municipality and constituted into a new and separate municipality to be
known as the Municipality of Marcos, with the following boundaries:
On the Northwest, by the barrios Biding-Rangay boundary going down to the barrios
Capariaan-Gabon boundary consisting of foot path and feeder road; on the Northeast,
by the Burnay River which is the common boundary of barrios Agunit and Naglayaan;
on the East, by the Ilocos Norte-Mt. Province boundary; on the South, by the Padsan
River which is at the same time the boundary between the municipalities of Banna and
Dingras; on the West and Southwest, by the boundary between the municipalities of
Batac and Dingras.
The Municipality of Marcos shall have its seat of government in the barrio of Biding.
Based on the first paragraph of the said Section 1 of R.A. No. 3753, it is clear that Marcos shall
be derived from the listed barangays of Dingras, namely: Capariaan, Biding, Escoda, Culao,
Alabaan, Ragas and Agunit. The Municipality of Nueva Era or any of its barangays was not
mentioned. Hence, if based only on said paragraph, it is clear that Nueva Era may not be
considered as a source of territory of Marcos.

Mt. Province was divided into the four provinces of Benguet, Mountain Province, Ifugao, and
Kalinga-Apayao by virtue of R.A. No. 4695 which was enacted on June 18, 1966. On February
14, 1995, the province of Kalinga-Apayao, which comprises the sub-provinces of Kalinga and
Apayao, was further converted into the regular provinces of Kalinga and Apayao pursuant to
R.A. No. 7878.
The part of then Mt. Province which was at the east of Marcos is now the province of Apayao.
Hence, the eastern boundary referred to by the second paragraph of Section 1 of R.A. No. 3753
is the present Ilocos Norte-Apayao boundary.
On the basis of the said phrase, which described Marcos' eastern boundary, Marcos claimed
that the middle portion of Nueva Era, which adjoins its eastern side, formed part of its territory.
Its reasoning was founded upon the fact that Nueva Era was between Marcos and the Ilocos
Norte-Apayao boundary such that if Marcos was to be bounded on the east by the Ilocos NorteApayao boundary, part of Nueva Era would consequently be obtained by it.6
Marcos did not claim any part of Nueva Era as its own territory until after almost 30 years,7 or
only on March 8, 1993, when its Sangguniang Bayan passed Resolution No. 93-015.8 Said
resolution was entitled: "Resolution Claiming an Area which is an Original Part of Nueva Era, But
Now Separated Due to the Creation of Marcos Town in the Province of Ilocos Norte."
Marcos submitted its claim to the SP of Ilocos Norte for its consideration and approval. The SP,
on the other hand, required Marcos to submit its position paper.9
In its position paper, Marcos alleged that since its northeastern and eastern boundaries under
R.A. No. 3753 were the Burnay River and the Ilocos Norte-Mountain Province boundary,
respectively, its eastern boundary should not be limited to the former Dingras-Nueva Era
boundary, which was coterminous and aligned with the eastern boundary of Dingras. According
to Marcos, its eastern boundary should extend further to the east or up to the Ilocos-Norte-Mt.
Province boundary pursuant to the description of its eastern boundary under R.A. No. 3753.10
In view of its claim over the middle portion of Nueva Era, Marcos posited that Nueva Era was cut
into two parts. And since the law required that the land area of a municipality must be compact
and contiguous, Nueva Era's northern isolated portion could no longer be considered as its
territory but that of Marcos'. Thus, Marcos claimed that it was entitled not only to the middle
portion11 of Nueva Era but also to Nueva Era's isolated northern portion. These areas claimed by
Marcos were within Barangay Sto. Nio, Nueva Era.

113
Nueva Era reacted to the claim of Marcos through its Resolution No. 1, Series of 1993. It alleged
that since time immemorial, its entire land area was an ancestral domain of the "tinguians," an
indigenous cultural community. It argued to the effect that since the land being claimed by
Marcos must be protected for the tinguians, it must be preserved as part of Nueva Era.12
According to Nueva Era, Marcos was created out of the territory of Dingras only. And since R.A.
No. 3753 specifically mentioned seven (7) barrios of Dingras to become Marcos, the area which
should comprise Marcos should not go beyond the territory of said barrios.13
From the time Marcos was created in 1963, its eastern boundary had been considered to be
aligned and coterminous with the eastern boundary of the adjacent municipality of Dingras.
However, based on a re-survey in 1992, supposedly done to conform to the second paragraph
of Section 1 of R.A. No. 3753, an area of 15,400 hectares of Nueva Era was alleged to form part
of Marcos.14 This was the area of Barangay Sto. Nio, Nueva Era that Marcos claimed in its
position paper.
On March 29, 2000, the SP of Ilocos Norte ruled in favor of Nueva Era. The fallo of its
decision15 reads:
WHEREFORE, in view of all the foregoing, this Body has no alternative but to dismiss,
as it hereby DISMISSES said petition for lack of merit. The disputed area consisting of
15,400 hectares, more or less, is hereby declared as part and portion of the territorial
jurisdiction of respondent Nueva Era.16
R.A. No. 3753 expressly named the barangays that would comprise Marcos, but none of Nueva
Era's barangayswere mentioned. The SP thus construed, applying the rule of expressio unius
est exclusio alterius, that no part of Nueva Era was included by R.A. No. 3753 in creating
Marcos.17
The SP ratiocinated that if Marcos was to be bounded by Mt. Province, it would encroach upon a
portion, not only of Nueva Era but also of Abra. Thus:
x x x Even granting, for the sake of argument, that the eastern boundary of Marcos is
indeed Mountain Province, Marcos will then be claiming a portion of Abra because the
province, specifically Barangay Sto. Nio, Nueva Era, is actually bounded on the East
by the Province of Abra. Abra is situated between and separates the Provinces of
Ilocos Norte and Mountain Province.
This is precisely what this body would like to avoid. Statutes should be construed in
the light of the object to be achieved and the evil or mischief to be suppressed, and
they should be given such construction as will advance the object, suppress the
mischief and secure the benefits intended.18 (Citations omitted)

Invariably, it is not the letter, but the spirit of the law and the intent of the legislature
that is important. When the interpretation of the statute according to the exact and
literal import of its words would lead to absurdity, it should be construed according to
the spirit and reason, disregarding if necessary the letters of the law. It is believed that
congress did not intend to have this absurd situation to be created when it created the
Municipality of Marcos. This body, by the mandate given to it by the RA 7160
otherwise known Local Government Code, so believes that respondent Nueva Era or
any portion thereof has been excluded from the ambit of RA 3753. Under the principle
of "espressio (sic) unios (sic) est exclusio alterius," by expressly naming
the barangays that will comprise the town of Marcos, those not mentioned are
deemed excluded. In Republic Act 4354, where Section 2 thereof enumerated the
barrios comprising the City of Davao excluding the petitioner Barrio Central as part of
the said City, the court held that there arose a prima facie conclusion that the said law
abolished Barrio Central as part of Davao City.
Historically, the hinterlands of Nueva Era have been known to be the home of our
brothers and sisters belonging to peculiar groups of non-(C)hristian inhabitants with
their own rich customs and traditions and this body takes judicial notice that the
inhabitants of Nueva Era have proudly claimed to be a part of this rich culture. With
this common ancestral heritage which unfortunately is absent with Marcos, let it not be
disturbed.19 (Emphasis ours and citations omitted)
RTC Decision
On appeal by Marcos, the RTC affirmed the decision of the SP in its decision20 of March 19,
2001. The dispositive part of the RTC decision reads:
WHEREFORE, the instant appeal is hereby DISMISSED. The questioned decision of
the Sangguniang Panlalawigan of Ilocos Norte is hereby AFFIRMED.
No costs.
SO ORDERED.21
The RTC reasoned out in this wise:
The position of the Municipality of Marcos is that the provision of R.A. 3753 as regards
its boundary on the East which is the "Ilocos Norte-Mt. Province" should prevail.
On the other hand, the Municipality of Nueva Era posits the theory that only the
barrios of the Municipality of Dingras as stated in R.A. 3753 should be included in the
territorial jurisdiction of the Municipality of Marcos. The Sangguniang Panlalawigan
agreed with the position of Nueva Era.

The SP further explained:

xxxx

114
An examination of the Congressional Records during the deliberations of the R.A.
3753 (House Bill No. 3721) shows the Explanatory Note of Congressman Simeon M.
Valdez, 2nd District, Ilocos Norte, to wit:
EXPLANATORY NOTE
This bill seeks to create in the Province of Ilocos Norte a new municipality to
be known as the Municipality of Marcos, to be comprised by the present
barrios of Capariaan, Biding Escoda, Culao, Alabaan, Ragas and Agunit, all
in the Municipality of Dingras of the same province. The seat of government
will be in the sitio of San Magro in the present barrio of Ragas.
xxxx
On the other hand, the Municipality of Dingras will not be adversely affected
too much because its finances will still be sound and stable. Its capacity to
comply with its obligations, especially to its employees and personnel, will
not be diminished nor its operations paralyzed. On the contrary, economic
development in both the mother and the proposed municipalities will be
accelerated.

1. Whether or not the site of Hercules Minerals and Oil, Inc. which is within a
Government Forest Reservation in Barangay Sto. Nio, formerly of Nueva Era, is a
part of the newly created Municipality of Marcos, Ilocos Norte.
2. Whether or not the portion of Barangay Sto. Nio on the East which is separated
from Nueva Era as a result of the full implementation of the boundaries of the new
Municipality of Marcos belongs also to Marcos or to Nueva Era. 25
The twin issues involved two portions of Nueva Era, viz.: (1) middle portion, where Hercules
Minerals and Oil, Inc. is located; and (2) northern portion of Nueva Era, which, according to
Marcos, was isolated from Nueva Era in view of the integration to Marcos of said middle portion.
Marcos prayed before the CA that the above two portions of Nueva Era be declared as part of its
own territory. It alleged that it was entitled to the middle portion of Nueva Era in view of the
description of Marcos' eastern boundary under R.A. No. 3753. Marcos likewise contended that it
was entitled to the northern portion of Nueva Era which was allegedly isolated from Nueva Era
when Marcos was created. It posited that such isolation of territory was contrary to law because
the law required that a municipality must have a compact and contiguous territory.26
In a Decision27 dated June 6, 2005, the CA partly reversed the RTC decision with the following
disposition:

In view of the foregoing, approval of this bill is earnestly requested.

(Sgd.) SIMEON M. VALDEZ
Congressman, 2nd District
Ilocos Norte22
Parenthetically, the legislative intent was for the creation of the Municipality
of Marcos, Ilocos Norte from the barrios (barangays) of the Municipality of
Dingras, Ilocos Norte only. Hence, the Municipality of Marcos cannot add
any area beyond the territorial jurisdiction of the Municipality of Dingras,
Ilocos Norte. This conclusion might have been different only if the area
being claimed by the Municipality of Marcos is within the territorial
jurisdiction of the Municipality of Dingras and not the Municipality of Nueva
Era. In such case, the two conflicting provisions may be harmonized by
including such area within the territorial jurisdiction of the Municipality of
Dingras as within the territorial jurisdiction of the Municipality of
Marcos.23 (Emphasis ours)
CA Disposition
Still determined to have a more extensive eastern boundary, Marcos filed a petition for
review24 of the RTC decision before the CA. The issues raised by Marcos before the CA were:

WHEREFORE, we partially GRANT the petition treated as one

for certiorari. The Decisions of both the Sangguniang Panlalawigan and Regional
Trial Court of Ilocos Norte are REVERSED and SET ASIDEinsofar as they made the
eastern boundary of the municipality of Marcos co-terminous with the eastern
boundary of Dingras town, and another is rendered extending the said boundary of
Marcos to the boundary line between the province of Ilocos Norte and KalingaApayao, but the same Decisions are AFFIRMEDwith respect to the denial of the
claim of Marcos to the detached northern portion of barangay Sto. Nio which should,
as it is hereby ordered to, remain with the municipality of Nueva Era. No costs.
SO ORDERED.28
In concluding that the eastern boundary of Marcos was the boundary line between Ilocos Norte
and Kalinga-Apayao, the CA gave the following explanation:
Clearly then, both the SP and the RTC erred when they ruled that the eastern boundary of
Marcos is only coterminous with the eastern boundary of the adjacent municipality of Dingras
and refused to extend it up to the boundary line between the provinces of Ilocos Norte and
Mountain Province (Kalinga-Apayao). R.A. No. 3753, the law creating Marcos, is very explicit
and leaves no room for equivocation that the boundaries of Marcos town are:
"On the Northwest by the barrios Biding-Rangay boundary going down to
the barrios Capariaan-Gabon boundary consisting of foot path and feeder

115
road; on the Northeast, by the Burnay River which is the common boundary
of barrios Agunit and Naglayaan; on the East, by the Ilocos Norte-Mt.
Province boundary; on the South by the Padsan River, which is at the
same time the boundary between the municipalities of Banna and Dingras;
on the West and Southwest by the boundary between the municipalities of
Batac and Dingras."
To stop short at the eastern boundary of Dingras as the eastern boundary also of
Marcos and refusing to go farther to the boundary line between Ilocos Norte and
Mountain Province (Kalinga-Apayao) is tantamount to amending the law which
Congress alone can do. Both the SP and RTC have no competence to undo a valid
act of Congress.
It is not correct to say that Congress did not intend to take away any part of Nueva Era
and merge it with Marcos for it is chargeable with conclusive knowledge that when it
provided that the eastern boundary of Marcos is the boundary line between Ilocos
Norte and Mountain Province, (by the time of both the SB and RTC Decision was
already Kalinga-Apayao), it would be cutting through a portion of Nueva Era. As the
law is written so must it be applied. Dura lex sed lex!29
The CA likewise held that the province Abra was not located between Marcos and KalingaApayao; and that Marcos would not encroach upon a portion of Abra for it to be bounded by
Kalinga-Apayao, to wit:
Nueva Era's contention that to lay out the eastern jurisdiction of Marcos to the
boundary line between Ilocos Norte and Mountain Province (Kalinga-Apayao) would
mean annexing part of the municipality of Itnig, province of Abra to Marcos as Abra is
between Ilocos Norte and Mountain Province is geographically erroneous. From
Nueva Era's own map of Region 1, which also depicts the locations of KalingaApayao, Abra, Mountain Province, Benguet and Nueva Vizcaya after the partition of
the old Mountain Province into the provinces of Kalinga-Apayao, Ifugao, Mountain
Province and Benguet, the province of Abra is situated far to the south of Kalinga
Apayao and is between the latter and the present Mountain Province, which is farther
south of Abra. Abra is part of the eastern boundary of Ilocos Sur while Kalinga-Apayao
is the eastern boundary of Ilocos Norte. Hence, in no way will the eastern boundary of
the municipality of Marcos encroach upon a portion of Abra.30
However, Marcos' claim over the alleged isolated northern portion of Nueva Era was denied. The
CA ruled:
Going now to the other area involved, i.e., the portion of Sto. Nio that is separated
from its mother town Nueva Era and now lies east of the municipalities of Solsona and
Dingras and north of Marcos, it bears stressing that it is not included within the area of
Marcos as defined by law. But since it is already detached from Sto. Nio, Marcos is
laying claim to it to be integrated into its territory by the SP because it is contiguous to
a portion of said municipality.

We hold that the SP has no jurisdiction or authority to act on the claim, for it will
necessarily substantially alter the north eastern and southern boundaries of Marcos
from that defined by law and unduly enlarge its area. Only Congress can do that. True,
the SP may substantially alter the boundary of a barangay within its jurisdiction. But
this means the alteration of the boundary of a barangay in relation to
another barangaywithin the same municipality for as long as that will not result in
any change in the boundary of that municipality. The area in dispute therefore remains
to be a part of Sto. Nio, a barangay of Nueva Era although separated by the newly
created Marcos town pursuant to Section 7(c) of the 1991 Local Government Code
which states:
SEC. 7. Creation and Conversion. - As a general rule, the creation of a local
government unit or its conversion from one level to another shall be based
on verifiable indicators of viability and projected capacity to provide
services, to wit:
xxxx
(c) Land Area. - It must be contiguous, unless it comprises two or more
islands or is separated by a local government unit independent of the
others; properly identified by metes and bounds with technical descriptions;
and sufficient to provide for such basic services and facilities to meet the
requirements of its populace.31
The CA also expressed the view that Marcos adopted the wrong mode of appeal in bringing the
case to it. The case, according to the CA, was appealable only to the RTC. Nonetheless, despite
its pronouncement that the case was dismissible, the CA took cognizance of the same by
treating it as one for certiorari, to wit:
A final word. At the outset, we agonized over the dilemma of choosing between
dismissing outright the petition at bar or entertaining it. This is for the simple reason
that a petition for review is a mode of appeal and is not appropriate as the Local
Government Code provides for the remedy of appeal in boundary disputes only to the
Regional Trial Court but not any further appeal to this Court. Appeal is a purely
statutory right. It cannot be exercised unless it is expressly granted by law. This is too
basic to require the citation of supporting authority.
xxxx
By the same token, since the Local Government Code does not explicitly grant the
right of further appeal from decisions of the RTCs in boundary disputes between or
among local government units, Marcos town cannot exercise that right from the
adverse decision of the RTC of Ilocos Norte. Nonetheless, because of the
transcendental legal and jurisdictional issues involved, we solved our inceptive
dilemma by treating the petition at bar as a special civil action for certiorari.32

116
Nueva Era was not pleased with the decision of the CA. Hence, this petition for review on
certiorari under Rule 45.
Issues
Nueva Era now raises the following issues:
a) Whether or not, the Court of Appeals has jurisdiction on the Petition for Review on
Appeal, since Sec. 119 of the Local Government Code, which provides that "An
appeal to the Decision of the Sangguniang Panlalawigan is exclusively vested to the
Regional Trial Court, without further Appeal to the Court of Appeals";
b) Whether or not, the Court of Appeals gravely abused its discretion, in treating the
Petition for Review On Appeal, filed under Rule 45, Revised Rules of Court, as a
Petition for Certiorari, under Rule 65 of the Revised Rules of Court;
c) Whether or not, the Court of Appeals erred in its appreciation of facts, in declaring
that MARCOS East is not coterminous with the Eastern boundary of its mother townDingras. That it has no factual and legal basis to extend MARCOS territory
beyond Brgys. Agunit (Ferdinand) and Culao (Elizabeth) of Marcos, and to go further
East, by traversing and disintegrating Brgy. Sto. Nio, and drawing parallel lines from
Sto. Nio, there lies Abra, not Mt. Province or Kalinga-Apayao. 33
Basically, there are two (2) issues to resolve here: (1) whether or not the mode of appeal
adopted by Marcos in bringing the case to the CA is proper; and (2) whether or not the eastern
boundary of Marcos extends over and covers a portion of Nueva Era.
Our Ruling

SECTION 119. Appeal. - Within the time and manner prescribed by the Rules of
Court, any party may elevate the decision of the sanggunian concerned to the proper
Regional Trial Court having jurisdiction over the area in dispute. The Regional Trial
Court shall decide the appeal within one (1) year from the filing thereof. Pending final
resolution of the disputed area prior to the dispute shall be maintained and continued
for all legal purposes.
The CA concluded that since only the RTC was mentioned as appellate court, the case may no
longer be further appealed to it. The CA stated that "(a)ppeal is a purely statutory right. It cannot
be exercised unless it is expressly granted by law. This is too basic to require the citation of
supporting authority."36
The CA, however, justified its taking cognizance of the case by declaring that: "because of the
transcendental legal and jurisdictional issues involved, we solved our inceptive dilemma by
treating the petition at bar as a special civil action for certiorari."37
The CA erred in declaring that only the RTC has appellate jurisdiction over the judgment of the
SP.
True, appeal is a purely statutory right and it cannot be exercised unless it is expressly granted
by law. Nevertheless, the CA can pass upon the petition for review precisely because the law
allows it.
Batas Pambansa (B.P.) Blg. 129 or the Judiciary Reorganization Act of 1980, as amended by
R.A. No. 7902,38vests in the CA the appellate jurisdiction over all final judgments, decisions,
resolutions, orders or awards of Regional Trial Courts and quasi-judicial agencies,
instrumentalities, boards or commissions, among others.39 B.P. Blg. 129 has been further
supplemented by the 1997 Rules of Civil Procedure, as amended, which provides for the
remedy of appeal via petition for review under Rule 42 to the CA in cases decided by the RTC in
the exercise of its appellate jurisdiction.

Marcos correctly appealed the RTC judgment via petition for review under Rule 42.
Under Section 118(b) of the Local Government Code, "(b)oundary disputes involving two (2) or
more municipalities within the same province shall be referred for settlement to the sangguniang
panlalawigan concerned." The dispute shall be formally tried by the said sanggunian in case the
disputing municipalities fail to effect an amicable settlement. 34
The SP of Ilocos validly took cognizance of the dispute between the parties. The appeal of the
SP judgment to the RTC was likewise properly filed by Marcos before the RTC. The problem,
however, lies in whether the RTC judgment may still be further appealed to the CA.

Thus, the CA need not treat the appeal via petition for review filed by Marcos as a petition
for certiorari to be able to pass upon the same. B.P. Blg. 129, as amended, which is
supplemented by Rule 42 of the Rules of Civil Procedure, gives the CA the authority to entertain
appeals of such judgments and final orders rendered by the RTC in the exercise of its appellate
jurisdiction.
At the time of creation of Marcos, approval in a plebiscite of the creation of a local
government unit is not required.
Section 10, Article X of the 1987 Constitution provides that:

The CA pronounced that the RTC decision on the boundary dispute was not appealable to it. It
ruled that no further appeal of the RTC decision may be made pursuant to Section 119 of the
Local Government Code35 which provides:

No province, city, municipality, or barangay may be created, divided, merged,

abolished, or its boundary substantially altered, except in accordance with the criteria

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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.40
The purpose of the above constitutional provision was acknowledged by the Court through
Justice Reynato S. Puno in Miranda v. Aguirre,41 where it was held that:
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.42
Nueva Era contends that the constitutional and statutory43 plebiscite requirement for the creation
of a local government unit is applicable to this case. It posits that the claim of Marcos to its
territory should be denied due to lack of the required plebiscite.
We agree with Nueva Era's contention that Marcos' claim over parts of its territory is not tenable.
However, the reason is not the lack of the required plebiscite under the 1987 and 1973
constitutions and the Local Government Code of 1991 but other reasons as will be discussed
below.
At the time Marcos was created, a plebiscite was not required by law to create a local
government unit. Hence, Marcos was validly created without conducting a plebiscite. As a matter
of fact, no plebiscite was conducted in Dingras, where it was derived.
Lex prospicit, non respicit. The law looks forward, not backward.44 It is the basic norm that
provisions of the fundamental law should be given prospective application only, unless legislative
intent for its retroactive application is so provided.45
46

In the comparable case of Ceniza v. Commission on Elections involving the City of Mandaue,
the Court has this to say:
Petitioners assail the charter of the City of Mandaue as unconstitutional for not having
been ratified by the residents of the city in a plebiscite. This contention is
untenable. The Constitutional requirement that the creation, division, merger, abolition,
or alteration of the boundary of a province, city, municipality, or barrio should be
subject to the approval by the majority of the votes cast in a plebiscite in the
governmental unit or units affected is a new requirement that came into being only
with the 1973 Constitution. It is prospective in character and therefore cannot affect

the creation of the City of Mandaue which came into existence on June 21,
1969.47 (Citations omitted and underlining supplied).
Moreover, by deciding this case, We are not creating Marcos but merely interpreting the law that
created it. Its creation was already a fait accompli. Therefore, there is no reason for Us to further
require a plebiscite.
As pointed out by Justice Isagani Cruz, to wit:
Finally, it should be observed that the provisions of the Constitution should be given
only a prospective application unless the contrary is clearly intended. Were the rule
otherwise, rights already acquired or vested might be unduly disturbed or withdrawn
even in the absence of an unmistakable intention to place them within the scope of the
Constitution.48
No part of Nueva Era's territory was taken for the creation of Marcos under R.A. No. 3753.
Only the barrios (now barangays) of Dingras from which Marcos obtained its territory are named
in R.A. No. 3753. To wit:
SECTION 1. The barrios of Capariaan, Biding, Escoda, Culao, Alabaan, Ragas and
Agunit in the Municipality of Dingras, Province of Ilocos Norte, are hereby separated
from the said municipality and constituted into a new and separate municipality to be
known as the Municipality of Marcos, with the following boundaries:
Since only the barangays of Dingras are enumerated as Marcos' source of territory, Nueva Era's
territory is, therefore, excluded.
Under the maxim expressio unius est exclusio alterius, the mention of one thing implies the
exclusion of another thing not mentioned. If a statute enumerates the things upon which it is to
operate, everything else must necessarily and by implication be excluded from its operation and
effect.49 This rule, as a guide to probable legislative intent, is based upon the rules of logic and
natural workings of the human mind.50
Had the legislature intended other barangays from Nueva Era to become part of Marcos, it could
have easily done so by clear and concise language. Where the terms are expressly limited to
certain matters, it may not by interpretation or construction be extended to other matters.51 The
rule proceeds from the premise that the legislature would not have made specified enumerations
in a statute had the intention been not to restrict its meaning and to confine its terms to those
expressly mentioned.52
Moreover, since the barangays of Nueva Era were not mentioned in the enumeration
of barangays out of which the territory of Marcos shall be set, their omission must be held to
have been done intentionally. This conclusion finds support in the rule of casus omissus pro

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omisso habendus est, which states that a person, object or thing omitted from an enumeration
must be held to have been omitted intentionally.53
Furthermore, this conclusion on the intention of the legislature is bolstered by the explanatory
note of the bill which paved the way for the creation of Marcos. Said explanatory note mentioned
only Dingras as the mother municipality of Marcos.
Where there is ambiguity in a statute, as in this case, courts may resort to the explanatory note
to clarify the ambiguity and ascertain the purpose and intent of the statute.54
Despite the omission of Nueva Era as a mother territory in the law creating Marcos, the latter still
contends that said law included Nueva Era. It alleges that based on the description of its
boundaries, a portion of Nueva Era is within its territory.
The boundaries of Marcos under R.A. No. 3753 read:
On the Northwest, by the barrios Biding-Rangay boundary going down to the barrios
Capariaan-Gabon boundary consisting of foot path and feeder road; on the Northeast,
by the Burnay River which is the common boundary of barrios Agunit and
Naglayaan; on the East, by the Ilocos Norte-Mt. Province boundary; on the South, by
the Padsan River which is at the same time the boundary between the municipalities
of Banna and Dingras; on the West and Southwest, by the boundary between the
municipalities of Batac and Dingras.
Marcos contends that since it is "bounded on the East, by the Ilocos Norte-Mt. Province
boundary," a portion of Nueva Era formed part of its territory because, according to it, Nueva Era
is between the Marcos and Ilocos Norte-Mt. Province boundary. Marcos posits that in order for
its eastern side to reach the Ilocos Norte-Mt. Province boundary, it will necessarily traverse the
middle portion of Nueva Era.
Marcos further claims that it is entitled not only to the middle portion of Nueva Era but also to its
northern portion which, as a consequence, was isolated from the major part of Nueva Era.
We cannot accept the contentions of Marcos.
Only Dingras is specifically named by law as source territory of Marcos. Hence, the said
description of boundaries of Marcos is descriptive only of the listed barangays of Dingras as a
compact and contiguous territory.
Considering that the description of the eastern boundary of Marcos under R.A. No. 3753 is
ambiguous, the same must be interpreted in light of the legislative intent.
The law must be given a reasonable interpretation, to preclude absurdity in its application.55 We
thus uphold the legislative intent to create Marcos out of the territory of Dingras only.

Courts must give effect to the general legislative intent that can be discovered from or is
unraveled by the four corners of the statute, and in order to discover said intent, the whole
statute, and not only a particular provision thereof, should be considered.56 Every section,
provision or clause of the statute must be expounded by reference to each other in order to
arrive at the effect contemplated by the legislature. The intention of the legislator must be
ascertained from the whole text of the law, and every part of the act is to be taken into view.57
It is axiomatic that laws should be given a reasonable interpretation, not one which defeats the
very purpose for which they were passed. This Court has in many cases involving the
construction of statutes always cautioned against narrowly interpreting a statute as to defeat the
purpose of the legislature and stressed that it is of the essence of judicial duty to construe
statutes so as to avoid such a deplorable result (of injustice or absurdity) and that therefore "a
literal interpretation is to be rejected if it would be unjust or lead to absurd results."58
Statutes are to be construed in the light of the purposes to be achieved and the evils sought to
be remedied. Thus, in construing a statute, the reason for its enactment should be kept in mind
and the statute should be construed with reference to the intended scope and purpose. The
court may consider the spirit and reason of the statute, where a literal meaning would lead to
absurdity, contradiction, injustice, or would defeat the clear purpose of the lawmakers.59
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals is
partly REVERSED. The Decision of the Regional Trial Court in Ilocos Norte is Reinstated.
SO ORDERED.