Vol.32 No.1 2006

The IBP Journal
I N T E G R A T E D B A R O F T H E P H I L I P P I N E S
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PETER M. BANTILAN
ANDRES S. BAUTISTA
RODELLE B. BOLANTE
GREGORIO V. CABANTAC
IBARRA M. GUTIERREZ III
RITA LINDA V. JIMENO
EDUARDO A. LABITAG
VICTORIA V. LOANZON
ERIC HENRY F. MALLONGA
ALFREDO B. MOLO III
ROWENA E.V. DAROY-MORALES
AUGUSTO M. PEREZ, JR.
MA. VERENA KASILAG-VILLANUEVA
ROGELIO A. VINLUAN
WALTER T. YOUNG
AMADO D. VALDEZ
Board of Editors
RUDYARD A. AVILA III
Editor-in-Chief
ELPIDIO G. SORIANO III
Managing Editor
VICMUND Q. CAMACHO
Layout/Design
I N T E G R A T E D B A R O F T H E P H I L I P P I N E S
VIVIAN C. CAPIZNON
Editorial Assistant
AURORA G. GERONIMO
Administrative Assistant
CONTENTS
Law and Equity in the Changing Landscape
of Judicial Adjudication
Oscar G. Raro................................................................................................... 1
Workers Preference in Case of Bankruptcy
(Under Article 110 of the Labor Code and Related Laws)
Manuel D. Yngson, Jr.................................................................................... 23
Abu Ghraib and Guantanamo: The Importance
of Religion in Analyzing the Effects of Torture
Adel A. Tamano.............................................................................................. 69
From Santos to Ferraris:
Secularizing Psychological Incapacity
Rudyard A. Avila III..................................................................................... 87
Reinventing the Corporate Wheel:
A Discourse on the Limited Liability Company
Joseph Emmanuel L. Angeles ...................................................................... 117
Survey of 2005 Cases
in Property and Land Registration
Eduardo A. Labitag ..................................................................................... 143
EDITORS NOTE
The thirty second volume of the Journal marks the appointment of a new
editorial board which includes a mix of legal experts from all fields of the law, as
well as academics and law deans, present and past. The Board in its first meeting
saw little need for radical changes in editorial policy and will essentially maintain the
tested policies of the preceding Boards of Editors.
This issue also introduces a new and much more contemporary look for the
Journal symbolizing the state of flux of legal developments in the country, mainly in
the areas of constitutional change, individual rights, judicial review, family law,
corporate responsibility, and the role of equity in jurisprudence. This is reflected
not only symbolically in the change in the Journals look but in many of the articles
in this issue.
For the purpose of updating lawyers all over the country, we shall continue to
publish legal developments in the form of analytical reviews, such as Manuel D.
Yngson, Jr.s article on Workers Preference in Case of Bankruptcy or the article on
Psychological Incapacity by this writer as well as Professor Eduardo A. Labitags
comprehensive analytical survey of developments in Property Law in 2005.
Developments in the area of human rights, in legal theory and in the field of
corporate law are highlighted by the articles of Adel A. Tamano, Oscar G. Raro, and
Joseph Emmanuel L. Angeles, respectively in this issue of the Journal.
The Board recently sponsored a symposium on Constitutional Change inviting
experts in Constitutional Law to discuss possible amendments or revisions to the
1987 Constitution including the acceptability, feasibility and propriety of changes to
the fundamental law at this time. The proceedings of the symposium will be published
in the second issue of this volume.
Editor-in-Chief
1 VOLUME 32 NUMBER 1 ( JANUARY - MARCH 2006)
Law and Equity in the Changing
Landscape of Judicial Adjudication
Oscar G. Raro
*
When I hear of an equity in a case like
this, I am reminded of a blind man in a dark
room looking for a black hat - which isnt there.
Charles Bowen
Shoot all the bluejays you want, if you can hit em,
But remember its a sin to kill a mockingbird.
Harper Lee, To Kill a Mockingbird
Ethics and equity and the principles of
justice do not change with the calendar.
David Herbert Lawrence
I
Introduction: Equity In The Garb of Kings
There was a time when the exercise of equity jurisdiction in the settlement of
disputes was the sole prerogative of the king. That was in 14th century England
when parties, unsatisfied with the burdensome and inflexible procedures of the
royal courts, applied to the king instead for redress.
1
We may say that at that time
forum shopping was an acceptable practice sanctioned by no less than the sovereign.
Later, as the number of equity cases increased, the responsibility of deciding them
devolved to the chancellor, the highest administrative official of the realm.
2
The first chancellors were men of the cloth or ecclesiastics who were chosen
because they belong to a small class of people considered learned. They were
required to pass judgment guided by conscience and based on morals and equity.
3
These chancellors had no formal legal training until 1529 when a lawyer, Sir Thomas
* A.B., Ll.B., University of the Philippines, Ll.M. (candidate) San Beda Graduate School of Law, Editor-in-Chief,
San Beda Graduate School of Law Journal
1 A.G Tarr, JUDICIAL PROCESS AND JUDICIAL POLICYMAKING 12, West/Wadsworth (1999 ed.)
2 Id.
3 T. Cockburn & M. Shirley, EQUITY IN A NUTSHELL, Lawbook Co., Sydney, (2005) cited at Wikipedia, http://
en.wikipedia.org/wiki/Equity (last visited 31 August 2006).
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Oscar G. Raro
More, was appointed as chancellor, marking the beginning of a new era where,
thereafter, lawyers were appointed as chancellors. By the 18th century, petitions for
equitable relief had become institutionalized in a Court of Chancery,
4
presided over by
a chancellor, but still independent of the regular courts.
5
A. Supremacy of Equity
Over the Common Law
As the law of equity developed, friction and competition with the common law
followed. Throughout the 16th century, more and more petitions were brought to
the Chancery to remedy the harshness of the common law. This came to a head in
the 17th century in the famous Earl of Oxfords Case (1615),
6
when a defendant in a
common law action before Chief Justice Sir Edward Coke deigned to apply to Lord
Chancellor Ellesmere of the Chancery Court for an injunction, on the ground of
fraud, against Cokes common law judgment. At that time, any person refusing to
honor an injunction issued by the Chancery against a common law judgment may be
imprisoned for contempt.
7
The dispute between these two courts was ultimately
resolved in 1616 by King James I who, on the advice of his Attorney-General Sir
Francis Bacon,
8
ruled in favor of the Chancery Court, and thereby establishing the
supremacy of equity as a means of escaping the common law jurisdiction.
9
However, supremacy carries its own weight. By the early 19th century, despite
the creation of a chief Chancery Master to sit as a second judge, and a Vice Chancellor as
a third judge in 1813,
10
the Chancery, began to collapse with the burden of the ever
increasing number of cases heaped upon it for disposition. In an attempt to lighten
the burden of the Chancery, the Court of Chancery Act 1850 and the Court of Chancery
Procedure Act 1852 were passed. It was not until 1873, however, when a judiciary bill
was introduced in the Parliament which came into force in 1875, now known as
Judicature Acts 1873-1875, where a Supreme Court Judicature was established with
concurrent jurisdiction to administer the rules of equity and law within a uniform
procedure,
11
thereby fusing equity and law in the adjudication of cases in one court.
Thus, the kingly garb of equity was shed to acquire secular character when the
divine proved unequal to the task.
4 Although the Chancery was the earliest and best known court of equity, there were others, such as the Exchequer
which also heard equity suits from Elizabethan times (W.J. Jones, THE ELIZABETHAN COURT OF CHANCERY, [Oxford,
1967]) and various local courts, including those of the counties palatine of Chester, Lancaster, and Durham. (D.
Gerhold, COURTS OF EQUITY: A GUIDE TO CHANCERY AND OTHER LEGAL RECORDS FOR LOCAL AND FAMILY HISTORIANS (Newport, Isle
of Wight, 1994). The Court of Requests and the Court of Star Chamber, from the late 15th century, while not strictly
courts of equity, used similar procedures and left similar records. (J.A. Guy, THE COURT OF STAR CHAMBER AND ITS
RECORDS TO THE REIGN OF ELIZABETH I [London, 1985]).
5 A.G Tarr, JUDICIAL PROCESS AND JUDICIAL POLICYMAKING 12, West/Wadsworth (1999 ed.)
6 1 Rep Ch 1.
7 Gary Watt, TRUSTS TEXTBOOK 3, Oxford University Press (2
nd
ed, 2006).
8 Bacon would later succeed Lord Ellesmere as Chancellor (Id.).
9 Gary Watt, op. cit. supra Note 7 at 4.
10 Id.
11 Id.
Law and Equity in the Changing Landscape of Judicial Adjudication
B. Equity Courts in Early America
In the United States, in the early colonial period, courts were organized before
the fusion in England of law and equity jurisdictions in one court which may perhaps
explain the fact that, as in England, there were also separate courts of equity and
law where the former may overrule the latter.
12
However, after the American
Revolution, equity courts were widely distrusted in the northeastern United States,
while northern states eliminated their equity courts by the late 1700s.
13
Even when
the U.S. Constitution was finally ratified in New Hampshire on 21 June 1788
14
which
contained the provision that [j]udicial Power shall extend to all Cases, in Law and
Equity,
15
the mid-Atlantic and southern states persisted in maintaining their equity
courts in that even the organization of the federal courts did not abandon the old
law and equity separation until the promulgation of the Federal Rules of Civil
Procedure much later in 1938 except for several states which still maintain separate
courts for law and equity such as in Delaware.
16
II
Grasping at Straws: Equity Jurisdiction
in Early Philippine Cases
In the last fifty years of Spanish rule, Spain extended to the Philippines its
own Spanish Civil Code of 1889, (along with other Spanish laws and statutes).
17
This
civil code referred to equity in only two provisions: in Article 1544 where the judge
is empowered to equitably modify a penal clause in case of partial or irregular
performance, and in Article 1690, where designation of profits and losses entrusted
by the partners to a third party may be assailed if the same is clearly inequitable. It
is Article 6,
18
however, which allowed application of the general principles of law
12 Zephaniah Swift (1759-1823), A SYSTEM OF THE LAWS OF THE STATE OF CONNECTICUT (Volume 2, 1796).
13 Wikipedia, http://en.wikipedia.org/wiki/Equity (last visited 31 August 2006).
14 Robert G. McCloskey, THE AMERICAN SUPREME COURT 3 (1960 ed.); New Hampshire was the ninth state to ratify
and [b]y the terms of the Constitution nine States were sufficient for its establishment among the States so
ratifying. The advocates of the new Constitution realized, however, that the new Government could not succeed
without the addition of New York and Virginia, neither of which had ratified on 21 June 1788. Virginia,
however, ratified the Constitution four days later on 25 June 1788 and New York, more than a month later on
26 July 1788. It was only on 13 September 1788, however, that the irregularly functioning Continental Congress
passed the resolution putting the new Constitution in effect and in operation. North Carolina added her
ratification on November 21, 1789 and Rhode Island on May 29, 1790. (See E.S. Morgan, THE BIRTH OF THE
REPUBLIC 195 (3
rd
ed. 1992).
15 U.S. CONST. (1787), Article III, Section 2.
16 Wikipedia, http://en.wikipedia.org/wiki/Equity (last visited 31 August 2006).
17 Code of Commerce of 1885, Penal Code of 1870, Code of Civil Procedure (Ley de Enjuiciamiento Civil) of 1853;
Marriage Law of 1870, among others. (See F. Gupit, Jr. & D.T. Martinez, A GUIDE TO PHILIPPINE LEGAL MATERIALS
44 (1993 ed.).
18 No counterpart provision in the New Civil Code but see Articles 8, 10, and 11.
4 IBP JOURNAL
Oscar G. Raro
in the absence of local customs or laws, in the adjudication of cases,
19
which may
arguably be open to equity application as within the broad sweep of general principles
of law.
20
When the Americans came in 1898, they organized an independent judicial
system patterned after their own with the passage of the Judiciary Act of 1901.
21
This law provided for a three-tiered court system composed of the Supreme Court,
the Courts of First Instance, and the municipal and justice of the peace courts. It
was, however, a largely experimental judiciary system where the Philippine Supreme
Court was anything but supreme: American justices sat on the Bench and its
decisions may be appealed to the U.S. Supreme Court.
22
Decisions were drawn from
the meager organic acts imposed by the U.S. and from a hodgepodge of U.S. and
Spanish statutes, precedents, and commentaries. At that time until 1938, equity
courts existed in the U.S. independent of courts of law.
23
But here, equity jurisdiction
fused with law jurisdiction in one court and was the shape of the concept that came
to our shores. In U.S. v. Tamparong,
24
the Supreme Court said:
Under the system of procedure which obtains in the Philippine
Islands, both legal and equitable relief is dispensed in the same tribunal.
We have no courts of law and courts of equity as they are known and
distinguished in England and the United States. All cases (law and equity)
are presented and tried in the same manner, including their final disposition
in the Supreme Court. Therefore, the word appeal, as used in section
43 (supra), does not necessarily imply the removal of the cause from one
tribunal to another in its entirety, subjecting the facts, as well as the law,
to a review or a retrial, but it is to be interpreted by the ordinary rules of
construction.
It took a while though, and ever on shaky and gingerly footsteps, for equity to
gain a foothold in court decisions. Justice J.B.L. Reyes once observed that it is only
19 F. Gupit, Jr. & D.T. Martinez, A GUIDE TO PHILIPPINE LEGAL MATERIALS 45 (1993 ed.).
20 Since the essential mission of courts is to do justice, and a decision must always be rendered in a given case,
general principles of law must be given a broad meaning, with the only limitation that decisions should not
establish rules contrary to the essence and the fundamental purpose of the existing social order. The phrase may
therefore be considered as equivalent to equity, to natural law, to the fundamental principles of juridical science, so
long as in applying them the Judge complies with his duty to do justice. (Tolentino, 1 CIVIL CODE OF THE
PHILIPPINES: COMMENTARIES AND JURISPRUDENCE 42-43 (1990 ed.); We are a court of law and of equity, the case at bar
must be resolved on the general principles of law on constructive trust which basically rest on equitable
considerations in order to satisfy the demands of justice, morality, conscience and fair dealing and thus protect
the innocent against fraud. (Roa, Jr. v. Court of Appeals, G.R. No. L-27294. June 28, 1983).
It is true that there is nothing in the special law (Act No. 4054) on which we may predicate the right of a
landlord to deduct the income which a dismissed tenant may have earned during his ejectment from the
damages be may be liable to pay as a result of the ejectment, but in such a case the general principles of law
should apply. This is a matter of equity. (Potenciano vs. Estafani, G. R. No. L-7690, July 27, 1955).
21 Act No. 136.
22 F. Gupit, Jr. & D.T. Martinez, op. cit. supra Note 19 at 51.
23 See Note 15.
24 31 Phil. 296 (1915)
from and after American Sovereignty was implanted in these Islands that the term
equity appears commonly used by our Supreme Court and it was employed in
reference to remedies obtainable under chancery practice.
25
A. A Failed Attempt at Positivism
At the start, there was an attempt by the Supreme Court to lean on strict
positivist attitude: relief was denied in the absence of applicable law even when
equitable principles may be drawn to resolve the dispute and better serve the end of
justice. Benedicto v. De La Rama,
26
a 1903 case, will illustrate this point. In that case,
the Supreme Court denied a petition for divorce
27
filed by plaintiff-wife due to the
adultery of the defendant-husband upon finding, from its review of the factual
basis of the trial court, that the plaintiff was also guilty of adultery. The Court
stated that even the allegation by the wife of condonation by the husband would not
have the far-reaching effect to entitle her to a divorce against him in a case like the
present one. In short, the previous adultery by the wife, even if condoned, forever
bars her from seeking a divorce on ground of adultery committed later by the husband
because there is no law which covers the situation to resolve this immoral impasse!
Justice Cooper dissented on plainly equitable grounds:
But it is stated in the majority opinion that there is no law to be
found in the partidas which says that the effect of pardon would be so far-
reaching as to make it applicable to this case.
By condonation the offending party is restored to the same position
he or she occupied before the offense was committed, the only condition
being that the offense must not be repeated. To say that the effect of
pardon would not be so far-reaching as to entitle the plaintiff to divorce,
in a case like the present one, is equivalent to saying that because the
plaintiff has been once guilty she would forever lose her right to a divorce for
offenses of a like character thereafter committed by the husband. This makes
condonation conditioned, not only that the parties receiving it will not
again commit the same offense, but it adds the further condition that the
party granting it shall forever have the right to commit the same offense
himself with impunity.
25 J.B.L. Reyes, The Trend Toward Equity Versus Positive Law in Philippine Jurisprudence, Speech delivered in 1983 in
the seminar Analytical Survey of Selected Supreme Court Decisions in Civil Law conducted by the U.P. Law
Center.
26 3 Phil. 34 (1903), G.R. No. 1056, December 8, 1903.
27 Divorce even at that time does not mean dissolution of the marriage bond (Benedicto v. De La Rama, supra);
In this case, although the Court of First Instance of Palawan had jurisdiction to take cognizance of complaints
for divorce, such jurisdiction was limited to divorce quoad thorum et mutuam habitationem, or relative divorce,
on the ground of adultery, because Law II, Title X, Partida IV, which was the only divorce law then in force, did
not authorize divorce quoad vinculum, or absolute divorce. (Francisco v. Jason, G.R. No. 39871. August 30,
1934 citing Benedicto vs. De la Rama, 3 Phil. 34; 50 Law. ed., 765; Ibaez vs. Ortiz, 5 Phil. 325; Goitia vs.
Campos Rueda, 35 Phil., 252; U. S. vs. Joanino, 27 Phil. 477; Del Prado vs. De la Fuente, 28 Phil. 23; De Jesus
vs. Palma, 34 Phil. 483; Garcia Valdez vs. Soteraa Tuason, 40 Phil. 943).
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Oscar G. Raro
. . . . . . . . .
To deprive the plaintiff of the judgment which she has obtained
and make a final determination of the case here without giving her an
opportunity of correcting this error, if such exists, is INEQUITABLE
AND UNJUST. (emphasis ours)
Justice Coopers dissent would be vindicated later. The case was appealed by
the plaintiff to the United States Supreme Court which reversed the decision of the
Philippine Supreme Court almost three years later on 2 April 1906.
28
It may be
worthy to note, however, that while Justice Coopers dissent was both on grounds of
equity and improper review of facts by the Philippine Supreme Court, the United
States Supreme Court, in sustaining Justice Coopers dissent and in reversing the
majority opinion, relied merely on the ground of improper factual review. Thus,
while this initial bent at strict formalism of the law failed, it was curious that before
the reversal of the Benedicto ruling, the Philippine Supreme Court would decide
cases along equitable lines in Justice Coopers dissent.
B. Equity in Procedure: Supreme Courts
Review of Facts Found by the Trial Court
Thus, before this reversal of the Benedicto ruling, the Philippine Supreme Court
in 1904, in E. C. McCullough v. R. Aenlle & Co.,
29
relied on Benedicto for equity
jurisdiction to review facts on appeal. E. C. McCullough is a case where the plaintiff
who bought tobacco bales on the basis of quantity, would later sue on the basis of
inferior quality delivered. The Supreme Court found for the defendant and dismissed
the complaint, noting that the purpose of the plaintiff in buying the tobacco was
secondary, the primary purpose being to occupy the building where they were
warehoused for his own business. In determining these facts not apparent on the
contract of sale, the Supreme Court said that it is authorized in cases of this kind to
find the facts from the evidence and render such final judgment as justice and equity
require.
The fact is that the plaintiff in order to get the building had to buy
the factory and everything that went with it. He saw himself obliged to
take all the tobacco which the defendant had, no matter what its quality
was. The defendant was not willing to sell him the building and the good
tobacco which it had on hand, retaining itself that of poorer quality. He
had to take it all or not get the building.
. . . . . . . . .
28 De la Rama vs. De la Rama, 201 U. S. 303 [1906]; See De La Rama v. De La Rama, G.R. No. L-1056, March 13,
1907.
29 G.R. No. 1300, February 3, 1904.
By section 497, Code of Civil Procedure, we are authorized in cases
of this kind to find the facts from the evidence and render such final
judgment as justice and equity require. (Benedicto vs. de la Rama,
December 8, 1903.)
Still, in January 1906, in Tan Dangseng Tan Sui Pic v. Suico,
30
the Court, would
cite Benedicto once more to justify its review of the factual findings of the trial court,
as a matter of justice and equity. Here, since the documents by both parties were
written in Chinese, they agreed to refer the matter to a referee for determination of
the import of the documents and the facts of the case. The facts as found by the
referee, were adopted by the trial court which formed the basis of its decision. The
Supreme Court, however, appreciated facts absent in the report but were actually
present in the evidence submitted by the parties.
Up to this time, the power to rely on equity was being used by the Supreme
Court in support of its professed authority to examine the facts of the case found by
the trial court, which basis, as stated earlier, would be reversed later by the U.S.
Supreme Court on 2 April 1906.
31
C. Equity in Substantive
Law Adjudication
In 1916, however, a case in substantive law would be decided on patently
equitable grounds. In Goitia v. Campos Rueda
32
the Supreme Court allowed an action
by the wife against her husband for support outside of the conjugal domicile. Article
149 of the Civil Code at that time,
33
provided that support by the husband to his
wife, at his option, was either by paying her a fixed pension or by receiving and
maintaining her in his own home. Support for the wife outside of the conjugal
abode would clearly amount to deprivation of this option of the husband, not to
mention being further deprived of mutual assistance and support from the wife,
even morally and psychologically. In addition, there was the further provision that
the wife must obey and live with her husband and follow him when he changes his domicile or
residence, except when he removes to a foreign country. Obviously, this obligation
refers to the wife physically living with her husband, as shown by the exception of the
husbands physical geographical location outside of the country. In preferring equity
over law, the Court simply said that the Code is not absolute, because the option
given by article 149 of the Civil Code may not be exercised in any and all cases. On
the other hand, the underlying equitable reason here for allowing support for the
wife was succinctly captured in the concurring opinion of Justice Moreland, equity
30 G.R. No. 1973, January 8, 1906.
31 See Note 26.
32 G.R. No. 11263, November 2, 1916.
33 ART. 149. The person obliged to give support may, at his option, satisfy it, either by paying the pension that
may be fixed or by receiving and maintaining in his own home the person having the right to the same. (Civil
Code).
8 IBP JOURNAL
Oscar G. Raro
being all the more accentuated by his loose legal justification that despite physical
estrangement, the wife remains an inmate
34
of the conjugal domicile:
I based my vote in this case upon the ground that a husband cannot,
by his own wrongful acts, relieve himself from the duty to support his
wife imposed by law; and where a husband, by wrongful, illegal, and
unbearable conduct, drives his wife from the domicile fixed by him, he
cannot take advantage of her departure to abrogate the law applicable to
the marital relation and repudiate his duties thereunder. In law and for
all purposes within its purview, the wife still remains an inmate of the
conjugal domicile; for I regard it as a principle of law universally recognized
that where a person by his wrongful and illegal acts creates a condition which under
ordinary circumstances would produce the loss of rights or status pertaining to another,
the law will, whenever necessary to protect fully the rights or status of the person
affected by such acts, regard the condition by such acts created as not existing and will
recur to and act upon the original situation of the parties to determine their relative
rights or the status of the person adversely affected.
In 1923, in the leading case of Severino v. Severino,
35
equity would prevail over
the letter of the law when an uncle who was acting as agent or administrator of a
property belonging to an estate had procured a Torrens title over the property in his
own name. After one year from the issuance of the fraudulently obtained title, his
niece, the rightful heir to the property, sued for transfer of the property back to the
estate. By law, however, title issued under the Torrens system is final and unassailable
after a period of one year and res judicata sets in for any further question on the
registered owner. The Supreme Court again justified equity application by
pirouetting around the law: the nieces action was not for nullification of the Torrens
title, an action in rem which had clearly lapsed and may no longer be disturbed, but
one in personam for the reconveyance or transfer of the title and the property back to
the estate. Thus, what we have here is the rather incongruous legal proposition that
the act of an impostor and a non-owner who fraudulently registered in his name a
property belonging to another is valid under the Torrens system, but which validity
may not be maintained since he is duty bound to reconvey the property to the genuine
owner. In the end though, the Court would admit that such construction was dictated
by the demand of superior equitable right. Severinos 1923 equitable dictate would
later reverberate in succeeding court decisions through the years
36
starting as early
as 1924 in the case of Roman Catholic Bishop of Nueva Caceres v. Municipality of Tobaco
37
34 Even then, when we speak of inmate the reference is always physical: a person living in an institution such
as a prison or hospital; [archaic] one of several occupants of a house (The New Oxford Dictionary of English,
electronic).
35 44 Phil. 343 (1923); Justice J.B.L. Reyes, op. cit. supra Note 24.
36 Barreto v. Tuason, G.R. No. 23923. March 23, 1926.; Clemente v. Lukban, G.R. No. 30190. November 14,
1928.; Yumul v. Rivera, G.R. No. 43243. January 26, 1937; People v. Cainglet, G.R. Nos. L-21493-94. April
29, 1966; Arguelles v. Timbancaya, G.R. No. L-29052. July 30, 1976; Marcelo v. Court of Appeals, G.R. No.
131803. April 14, 1999; Adriano v. Court of Appeals, G.R. No. 124118. March 27, 2000, among others.
37 46 Phil., 271, 276 [1924].
until as late as 2003 in Arlegui v. Court of Appeals.
38
Severino, appeared to have established
the rule, although always on a balancing act between the two norms, that equity
follows the law.
Thus, we leave this point on this note. The historical antecedents of equity
cases in this jurisdiction were first insisted on the power of the Supreme Court to
review findings of facts by the lower court. The cases when equity was placed above
the letter of the law on substantive law issues appeared then to be isolated incidents
not dictated by facts which cry for equity justification. The consideration of equity
in both procedural and substantive law issues in these early cases, however, appeared
to be more of a Pavlovian reaction rather than design. The country then was at a
transition from a legal system of Spanish civil law tradition to the emerging Anglo-
American common law. Equity, of course, is a concept more at home in the common
law than in the civil law tradition.
39
III
The Ever Shifting Dichotomy
Between Equity and Law
The first attempt at codification of private law in the Philippines was made in
1940, during the time of President Manuel L. Quezon. The effort, however, was
aborted when the records of the Code Committee were destroyed in the battle for
the liberation of Manila in 1945.
40
Under President Manuel A. Roxas, the effort
was revived by the creation of new Code Commission on 20 March 1947 which
successfully finished its work on 15 December 1947. Congress approved the draft of
the Code on 18 June 1949 as Republic Act No. 386,
41
our current Civil Code of the
Philippines.
A. The Code Commissions
Intent: Equity Above Formalism
From the deliberation of the Code Commission, it is apparent that it intended
to place equity and justice above strict legalism or form.
42
Thus, equity
consideration permeates the Code provisions on human relations, quieting of title,
reformation of instruments, estoppel, implied trusts, and natural obligations, among
38 G.R. No. 126437, March 6, 2002.
39 F. Gupit, Jr. & D.T. Martinez, op. cit. supra Note 19 at 88.
40 Tolentino, 1 CIVIL CODE OF THE PHILIPPINES: COMMENTARIES AND JURISPRUDENCE 6-7 (1990)
41 Id.
42 N.R. Malolos & T.C. Martin, REPORT OF THE CODE COMMISSION ON THE PROPOSED CIVIL CODE OF THE PHILIPPINES, WITH
ANNOTATIONS 26, Domerte Book Supply (1951 ed.).
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others.
43
In judicial adjudication, the new Code is likewise suggestive of the judges
authority to consider equity in Article 9 which provides that he shall not decline to
render judgment by reason of the silence, obscurity or insufficiency of the laws and
in Article 10 where it is presumed that in case of doubt in the interpretation or
application of laws . . . the lawmaking body intended right and justice to prevail.
However, despite this clear intent of placing equity above the positivity of law,
the Supreme Court, thereafter, would decide cases with evolving positivist inclination
in that equity would be ruled as justice outside legality. The phrase would come to
mean that equity may only fill the gaps in the law when there are such gaps, but
would uphold the law when there are none. A few illustrative cases may be helpful.
B. Equity as Justice Outside Legality
In Reyes v. Lim (2003),
44
the Supreme Court sustained the trial court in ordering
the defendant to deposit in court the amount of P10 Million pending litigation despite
the fact that deposit is not among the provisional remedies enumerated in Rules
57 to 61 of the Rules of Court. There was no issue that the amount represented
the down payment made by the plaintiff to the defendant for a property which
defendant later sold to a third party. The Supreme Court in support of allowing the
deposit pendente lite stated that the instant case is precisely one where there is a
hiatus in the law and in the Rules of Court, which hiatus, if left alone, will result
in unjust enrichment to the seller at the expense of the aborted buyer here since
the seller has already sold the property to somebody else. The Court further stressed
that this is not a case of equity overruling a positive provision of law or judicial rule
for there is none that governs this particular case, but a case of silence or
insufficiency of the law and the Rules of Court which calls for the application of
equity which fills the open spaces in the law. What happened then to the principle
in law of inclusio unius est exclusio alterius?
But in Go v. Anti-Chinese League of the Philippines (1949),
45
the Supreme Court
would reverse the trial courts denial of the application for Filipino citizenship of a
Chinese national on the ground that it is the sworn duty of the trial court to apply
the law without fear or favor, to follow its mandate not to tamper with it. The
Supreme Court, in castigating the trial court further stated that the court cannot
adopt a policy different from that of the law and that [w]hat the law grants, the
court cannot deny. Here, the trial court denied the application for citizenship on
the judges belief that a more rigid policy in granting Filipino citizenship is desirable
that there should be a policy that the grant of citizenship may still be discretionary
to the court even though the applicant shall have satisfactorily proven that he has
all the qualifications and none of the disqualifications provided for by law.
43 Id.
44 G.R. No. 134241, August 11, 2003.
45 84 Phil. 468 (1949).
1 1 VOLUME 32 NUMBER 1 ( JANUARY - MARCH 2006)
In Aguila v. Court of First Instance of Batangas (1988),
46
the Supreme Court denied
continued occupancy of the premises by the lessee on the ground that equitable
consideration cannot serve to justify such occupancy, when the matter in issue had
already been previously decided despite the alleged ineptness of previous counsel,
adding that [f]or all its conceded merits, equity is available only in the absence of law
and not as its replacement.
In Alvendia v. Intermediate Appellate Court (1990),
47
citing Arsenal v. IAC, (1986)
48
petitioners attempt to recover a property sold by virtue of a writ of execution, by
offering cash to satisfy the judgment, was denied by the Court, on the pronouncement
that [c]ourts exercising equity jurisdiction are bound by rules of law and have no
arbitrary discretion to disregard them and that equitable reasons will not control
against any well-settled rule of law or public policy,
In Imperial Shipping Agency v. National Labor Relations Commission, (1991)
49
the
Supreme Court sustained the decision of the National Labor Relations Commission
making Imperial Shipping liable for death benefits of an employee placed through it
despite the fact that the manning agreement between Imperial Shipping and its
principal had already been terminated before the death of the employee. The Court
said that [o]ur courts are basically courts of law not courts of equity and [i]t is a
long standing principle that equity follows the law.
C. Emerging Ascendancy
Of Equity Over Legality
But this secondary gap-filling role of equity, where law is preferred over doubtful
equity application, is far from being a settled practice in judicial adjudication. In
several instances, the Supreme Court would render judgment with clear leanings on
equity over clear provisions of the law when, by its own appreciation, the facts of the
case dictate a deviation. We will not attempt here at comprehensiveness, but will
resort to few selected illustrative cases
50
to bring home the point.
In Elcano v. Hill (1973),
51
the father was held civilly liable in subsidiary capacity for
the damages caused by the negligence of his minor child. The minor, however, had
already been emancipated by marriage even before the negligence was caused. The
Supreme Court justified the ruling under Article 2180, par. 2 of the Civil Code
which mandates liability of the father, and in case of his death or incapacity, of the
mother, for the damages caused by the minor child who lives in their company.
More, the Supreme Court said that inasmuch as it is evident that [the son] is now of
46 G.R. No. L-48335, April 15, 1988; 160 SCRA 352, 360 [1988]).
47 G.R. No. 72138, 22 January 1990, 181 SCRA 252 (1990).
48 227 Phil. 36 (1986).
49 G.R. No. 84672, August 5, 1991 200 SCRA 178 (1991) citing Zabat, Jr. v. CA, 226 Phil. 489 [1986]).
50 J.B.L. Reyes, op. cit. supra Note 24.
51 G.R. No. 24803, May 26, 1973.
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age, the liability of the father has become merely subsidiary to that of his son as a
matter of equity. But as Justice J.B.L. Reyes would observe
52
from this case, the
conclusion of the Court is not only curious but downright anomalous: for it has been
uniformly ruled that the liability of a parent or employer under Article 2180 is
principal and direct, not subsidiary in that the minor answers for his own tortious act;
the parent responds for his own carelessness in the training or vigilance of the son.
53
As this is clear in law and jurisprudence, Justice Reyes was tempted to ask: Where
does equity here come in? How can the Court amend the rule of the positive law
through application of equity?
54
In Carbonell v. Court of Appeals(1976),
55
a possessor in bad faith was allowed to
remove his improvements if this costs would not be refunded by the lawful possessor.
But a possessor in bad faith forfeits any improvement under Article 449 of the Civil
Code: He who builds, plants or sows in bad faith on the land of another, loses what
is built, planted or sown without right to indemnity. Here, the Supreme Court
again danced with the provisions of the Civil Code thereafter applying by analogy
and as a matter of equity, Article 549 on improvements for pure luxury or mere
pleasure despite the fact that the improvements here were not for luxury or pleasure.
Ten years later, in Metropolitan Waterworks and Sewerage System v. Court of Appeals (1986),
56
the Supreme Court would refuse to apply Carbonell on the ground that said decision
does not establish a precedent since only four Members (of the court) concurred in
ruling that respondents were possessors in bad faith and two Members ruled that
they were possessors in good faith in addition to its findings that equitable
consideration present in said case are not present in the case at bar.
In Legarda Hermanos v. Saldaa (1974),
57
the buyer of two (2) subdivision lots at
an agreed price of Php1,500.00 each was declared defaulted by the seller for failure
to pay succeeding installments. At the time of default, however, the buyer had
already paid a total of Php1,682.28 on the principal for the two lots or Php841.14
for each lot. Upon considerations of justice and equity and in light of the provision
of Article 1234 on substantial compliance, the Court directed the conveyance of one
of the lots to the buyer since he had already paid more than the value thereof. What
happened to the basic rule that the agreement of the parties is the law between
them? And may the payment of Php841.14 against a price of Php1,500.00 for each
lot be construed as substantial compliance? In effect, the Court, on its own novated
the agreement between the parties and substituted its own terms on equitable
consideration to that of the parties clear intentions.
53 Id., Justice Reyes citation: Cango v. Manila Railroad Co., 38 Phil. 768 (1918); Standard Vacuum Oil Co. v. Tan,
107 Phil. 109 (1960); Cuadra v. Monfort, 35 SCRA 160 (1970)
54 See Note 24.
55 G.R. No. 29972, January 26, 1976
56 G.R. No. L-54526, August 25, 1986
57 G.R. No. 26578, January 28, 1974.
In New Pacific Timber & Supply co. v. Judge Seneris (1980), the Court ruled that
payment in cashier check to satisfy a writ of execution to prevent the sale of the
property in public auction was valid as it operates as an assignment of funds to the
payee, citing Section 63 of the General Banking Act. But the said legal provision
merely states that a check cleared and credited to the account of the creditor shall be
equivalent to delivery in cash. Here, the check was refused by the judgment creditor
who insisted payment in cash. Obviously, the provision has no application in this
case since for a check to be cleared and credited, it must first be accepted by the
creditor and presented for payment. More, under Article 1249 of the Civil Code,
payment of debts in money shall be made in the currency stipulated, and if it is not
possible to deliver such currency, then in the currency which is legal tender in the
Philippines. A managers, cashiers, or ordinary check is not a legal tender and
when offered in payment may be legally refused.
58
The equity consideration of the
Court here, however, is apparent from its observation that [o]bviously, the private
respondent is more interested in the levied properties than in the mere satisfaction
of the judgment obligation.
Where does this seemingly haphazard and flip-flopping application of equity
or law lead us in our attempt to divine the rationality of these decisions or at least,
discover an underlying symmetry of purpose or parameters in equity application in
judicial adjudication? This transports us to the next point.
IV
JUDICIAL FLUIDITY FOR THE SAKE OF INDIVIDUAL
JUSTICE AS EMERGING NORM
From the seeming incoherence of this jurisprudence on the dichotomy between
equity and law, a clear pattern may be discerned: The resort to equity depends to a
large extent on the factual milieu of a case. In short, equity application is fact-
specific. Thus, new trails are not blazed in jurisprudence in the name of equity.
Equity decision, more often than not, is peculiar to a case, that a precedent is not set
than a singular case resolved. Forest of laws is blazed not to set new trails in
jurisprudence but to create a clearing upon which a particular case may placed, viewed,
and decided. This is exactly the thoughts urged in Co v. Philippine National Bank,
59
where the Court allowed the redemption of properties foreclosed by the bank for
an amount less than the costs to it of the entire credit including taxes and expenses,
but ordering the mortgagor-debtor to pay the difference even beyond the redemption
period of one year:
58 A check, whether a managers check or ordinary check, is not legal tender, and an offer of a check in payment
of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. (Tibajia, Jr. v.
Court of Appeals, G.R. No. 100290, June 4, 1993 citing Philippine Airlines, Inc. vs. Court of Appeals, G.R. No.
49188, 30 January 1990, 181 SCRA 557 and Roman Catholic Bishop of Malolos, Inc. vs. Intermediate
Appellate Court, G.R. No. 72110, 16 November 1990, 191 SCRA 411).
59 G.R. No. L-51767, June 29, 1982.
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Of course, peculiar instances are naturally excepted. That is why
this decision cannot be invoked as a precedent for other parties not exactly
similarly situated as the appellee in this case. Should there be any thought
that our resolution of this case is not strictly according to legal principles,
let everyone be reminded that this Court has inherent equity jurisdiction
that can always exercise in settings attended by unusual circumstances to
prevent manifest injustice that could result from bare technical adherence to the letter
of the law and unprecise jurisprudence under it.
A. The Hazard of Equity Decision
Justice J.B.L. Reyes, however, would lament this emerging development in equity
adjudication in his usual lapidary prose:
Every judgment on the basis of equity becomes an ad hoc
adjudication, unusable for other cases, so that previous awards do not
serve as a guide, a variability that adversely affect the peoples quest for
justice, since situations basically similar can lead to different solutions.
60
Justice J.B.L. Reyes misgivings appeared to have been justified in the differing
and unpredictable postures taken by the Supreme Court on the issue of the right of
the criminally accused to speedy disposition of his case even during preliminary
investigation. Starting in Tatad v. Sandiganbayan,
61
a case with equitable underpinnings
within the context of the Due Process Clause, the right to speedy trial was ruled to
apply even during preliminary investigation. The reasoning in Tatad is lofty:
[s]ubstantial adherence to the requirements of the law governing the conduct of
preliminary investigation including substantial compliance with the time limitation
prescribed by the law for the resolution of the case by the prosecutor is part of the
procedural due process constitutionally guaranteed by the fundamental law.
Tatad, however, persistently resisted development to precedent as the Supreme
Court would later deny application of Tatad in succeeding cases. Thus, Tatads
invocation was refused in Magsaysay vs. Sandiganbayan,
62
because [a] mere mathematical
reckoning of the time involved, would not be sufficient . . . particular regard must
also be taken of the facts and circumstances peculiar to each case. In Dansal v.
Fernandez,
63
where the preliminary investigation took more than one year and four
months to finish, because [s]uch a happenstance alone, or any like delay, for that
matter, should not be cause for an unfettered abdication by the court of its duty to
try cases and to finally make a determination of the controversy after the presentation
of evidence; in Ty-Dazo v. Sandiganbayan,
64
where the preliminary investigation took
61 G.R. Nos. L-72335-39, March 21, 1988.
62 G.R. No. 128136, October 1, 1999.
63 G.R. No. 126814, March 2, 2000.
64 G.R. No. 143885-86, January 21, 2002.
three (3) years, because[t]here is no showing that the filing of the cases against
petitioners was politically motivated, among others. Socrates v. Sandiganbayan,
65
where
the preliminary investigation took six (6) years, because the political motive, while
alleged, was not proved and that the respondent therein contributed to the delay.
Yet, in Angchangco v. Ombudsman,
66
the delay of six (6) years alone in the preliminary
investigation merited the application of Tatad, and therefore, the dismissal of the
criminal case because [f]or all these past 6 years, petitioner has remained under a
cloud, and since his retirement has been deprived of the fruits of his retirement
after serving the government for over 42 years all because of the inaction of
respondent Ombudsman.
B. The Value of Isolation
or The Need for Variance
While here in Tatad and companion cases, we are left with slash-and-burn spots
of jurisprudence but not precedents; an individual kaingin of sort for this particular
crop of cases, they are still instructive and imperative. Instructive, because from the
cases we realized that equity application is not the sole monopoly of the accused, the
State may likewise be protected from being hampered in its right to prosecute so
that the right to speedy disposition of cases becomes a relative term and a flexible
concept which calls for a balancing test of several factors such as the length and
reasons for, the prejudice caused by, and the contribution of the accused to the
delay.
67
Imperative, because we discovered that equity serves the function of safety
valves from, at times, the overpowering and blind devotion to laws supremacy, if
not unintended tyranny in its application. After all, justice cannot be uniformly
legislated nor decided nor constructed like Lego bricks where all pieces fit to meet
the challenges of the differing and varying facts of every case. The facts are not
always presented in black-and-white where mechanical application of a norm may be
imposed with scientific precision, rather than as mysterious figures in that gray
penumbra between light and shadow which must be illumined in their varying hues
and shades for justice to be served.
V
EQUITY AS WALKING AWAY FROM OMELAS
A. The Metaphysical Argument for Equity
Welfare of society as within the compass of equity decisions should include
welfare of everyone in that society. However, the legal positivists of utilitarian
65 G.R. Nos. 116259-60, February 20, 1996.
66 G.R. No. 122728, February 13, 1997.
67 De La Pea v. Sandiganbayan, G.R. No. 144542. June 29, 2001.
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tradition suggest that in securing the greatest happiness to the greatest number,
68
the welfare of one or a few may be sacrificed. Thus, equity which at times overpowers
the law to do justice to a single man may not sit well with legal positivism of such
strain. At the extreme side of the debate, however, is William James, who, in his
The Moral Philosopher and the Moral Life, a lecture he delivered to the Yale
Philosophical Club in 1891, said:
Or if the hypothesis were offered us of a world in which Messrs.
Fouriers and Bellamys and Morriss utopias should all be outdone, and
millions kept permanently happy on the one simple condition that a certain
lost soul on the far-off edge of things should lead a life of lonely torture,
what except a specifical and independent sort of emotion can it be which
would make us immediately feel, even though an impulse arose within us
to clutch at the happiness so offered, how hideous a thing would be its
enjoyment when deliberately accepted as the fruit of such a bargain?
Ursula K. Le Guins tale, The Ones Who Walk Away From Omelas,
69
subtitled
Variations on a Theme by William James is, however, more appropriate for graphical
illustration than James. In Omelas, the inhabitants happiness is secured by observance
of a single law which requires that a child be maintained in abject misery, filth, and
sufferings at all times. Some of those who have been informed of the law upon their
coming of age and after having seen the sacrificed child in squalor, in a cage not even
fit for dogs and beasts of burden, and upon hearing his constant and ill-fated beseeching
and entreaty, Please let me out . I will be good. . I will be good , have decided
to walk away from Omelas. They walk away from this life of eternal bliss to the
uncertainties of existence beyond the towns borders, but where the lingering
memories of Omelas and its dark secret would not continue to haunt them. Here,
indeed, the law not only protects them all but provides for their eternal bliss. Yet, in
observing this law may conscience rest? What indeed, therefore, is the law for?
The echoes of Justice Benjamin N. Cardozos ponderings in the Storrs Lectures at
Yale University reverberate to this day:
The final cause of law is the welfare of society. The rule that misses
its aim cannot permanently justify its existence. Ethical considerations can
no more be excluded from the administration of justice which is the end and purpose
of all civil laws than one can exclude the vital air from his room and live. Logic
and history and custom have their place. We will shape the law to conform
to them when we may; but only within bounds. The end which the law
serves will dominate them all. There is an old legend that on one occasion
God prayed, and his prayer was Be it my will that my justice be ruled by
my mercy. That is a prayer which we all need to utter at times when the
demon of formalism tempts the intellect with the lure of scientific order.
70
68 Jeremy Bentham, ON UTILITARINISM AND GOVERNMENT, Wordsworth Classics (2000 ed.)
69 Ursula K. Le Guins short story, The Ones Who Walk Away From Omelas, (included in her short story collection,
The Winds Twelve Quarters Gollancz, [New Ed. October 19, 2000]).
70 Benjamin N. Cardozo, THE NATURE OF THE JUDICIAL PROCESS 66 (Yale University Press)
B. The Empirical Argument for Equity:
Salvacion v. Central Bank of the Philippines
While formalism may not actually be a demon in Justice Cardozos extreme
phraseology, it could have been so in Salvacion v. Central Bank of the Philippines,
71
a case
which amply illustrates the point for equity against the strict formalism of law, a
shivering case of Omelan proportion in the real world except that our magistrates,
thank God for their sense of equity, are the ones who walk away.
Karen E. Salvacion was then an innocent girl of twelve years, fond of fun and
play and easily delighted by stuffed teddy bears, as most children are in their tender
years. One day in February, Karen, while waiting for a ride home, was approached
by an American tourist, Greg Bartelli, and on pretext of needing a Filipino language
tutor for his niece, lured the child to his apartment. There was no niece at the
apartment, only a stuffed teddy bear and a vicious Bartelli of deviant sexual
preferences. For four days, Karen had been detained in the apartment and raped
repeatedly, at least ten times in four days, by Bartelli. Rescued from her harrowing
ordeal with the help of neighbors, Bartelli was later charged with multiple rape and
serious illegal detention. Simultaneously, Karen, through his father, filed a civil case
for damages with application for preliminary attachment against the American.
Bartelli, however, escaped from jail on the day of the hearing on his petition for bail
in the criminal cases. The criminal cases were later archived pending the arrest of
Bartelli.
In the civil case, the court issued the writ of attachment which was served on
China Banking Corporation where Bartelli maintains a dollar deposit account. China
Bank resisted the writ invoking finally Section 113 of Central Bank Circular No. 960
(taken from Republic Act No. 6426 as amended) on the sanctity of dollar deposits
by foreigners in that such deposit may not be attached, garnished, or touched at all
by any order or process of any court, legislative body, or government agency. In
short, the three branches of our government are rendered powerless, by law, against
this Holy Grail of currencies. The Central Bank, upon inquiry, sustained China
Banks position.
Later, judgment was rendered by the trial court against Bartelli in the civil
case, after summons had been served by publication and declaration of default of
the defendant for failure to file answer. Bartelli being still at large, was again notified
of the decision by publication. Upon finality of the judgment, counsel for Karen
went back to China Bank to execute on Bartellis dollar account. Again, the bank
invoked the legal untouchability of the dollar deposit. Karen went to the Supreme
Court on a petition for declaratory relief. Meanwhile, the effect of Karens ordeal
began to take its toll: she avoided playing with her brother and sister and refused to
even venture out of the house for one reason or the other. She was likewise in
71 G.R. No. 94723, August 21, 1997.
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constant shock and depression. Once, she was refused transfer of school to Jose
Abad Santos, Arellano University, because the school officials were afraid to be
implicated in the case. Karen was clearly becoming alone, mired in the filth and
dirt of her shoved experience; a virtual Omelan sacrifice except that, this time, we are
not talking of a fictional short story or character. Karen is flesh and blood in a
world of men and steel.
The lachrymose reader will note that the Central Banks position on the
supremacy of the law as justification in refusing to honor the writ of execution here,
while perhaps unknowing, echoed of utilitarian positivism dictating the greatest
happiness to the greatest, number, a failed philosophy in the context of the Omelan
sacrifice of a single child for the happiness of the entire community:
[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.
But the Supreme Court will not be deterred from administering justice. It
resolved the main question for Karen by sustaining her claim on the dollar deposit
and ordering its release to her in such amount as would satisfy the judgment.
72
In
a language bristling in righteous indignation and resonating with equity considerations,
the Court said:
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 rights 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 a 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 presumable, 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 iniquitous effects producing outright injustice
and inequality such as the case before us.
72 A little over than One Million Pesos: Php500,000.00 as moral damages for Karen; Php300,000.00 for her
parents; Php100,000.00 in exemplary damages; 25% of the total amount of damages awarded for attorneys fee;
and Php10,000.00 for litigation expenses plus the cost of suit.
. . . . . . . . .
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 specially 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 tortizeramente con
dano 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).
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 against legal tyranny.
We definitely cannot have both ways and rest in the belief that we
have served the ends of justice. (Italics ours)
In an apocryphal anecdote where a professor of law supposedly asked a sitting
Justice who participated in the deliberation in Salvacion on why the Court ruled in
such wise, our unnamed Justice replied: The law? But its so unfair!
VI
CONCLUSION
Who can argue against the Supreme Courts preference for equity over law in
Salvacion and face his God later in self-righteousness? And, therefore, who can argue
against equity as basis for adjudication when, at times, the facts of the case cry to
High Heavens for justice and restitution? For all its worth and logical imperfections,
Salvacion, is a shining beacon of light for those trapped and mired in the complexities
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of law and rules who, bereft of understanding on the purpose for which the law was
crafted, enshrined them as unseeing and unfeeling idols of worship in a vicious cycle
of deification and self-justification. Even Justice Oliver Wendell Holmes, Jr. perhaps,
in his legal realism which allows the influence of social sciences to law, but grudgingly
of morals and equity, in rare moments of conceding, would approve his own words
for our purpose here:
If you want to know the law and nothing else, you must look at it as
a bad man, who cares only for the material consequences which such
knowledge enables him to predict, not as a good one, who finds his reasons
for conduct, whether inside the law or outside of it, in the vaguer sanctions
of conscience.
73
Indeed, for against these androids of the law, a righteous cause must be shielded
by equity. The individual must be kept safe in his basic human rights against the
collective, yet abstract, public interests justification protected and advanced by the
formalism or strict positivism of law. After all, in figurative sense, there may be
other Karens out there as the Bartellis of the world with their dear dollar deposits
and cheap teddy bears continue to prowl the landscape of this hapless land.
Thus, the proper mindset here is that there should be no conflict between law
and equity in adjudication. Each has its own occasion and purpose. On one hand,
law cannot conceivably cover all future events and totally address with scientific
precision the ever shifting combinations of facts of prospective disputes and cases.
On the other, equity which is rooted in mans conscience and fundamental sense of
fairness and justice, may always be relied upon for all time and seasons as permanent
lodestar for our dimming humanity in a sea of diktat and fiat and laws and rules. Dr.
Jorge Bocobo, once said, every good law draws its breath of life from morals, from
those principles which are written with words of fire in the conscience of man.
74
As
Justice Somer of the New Zealand High Court would summarize the relationship
between the two norms: Neither law nor equity is now stifled by its origin and the
fact that both are administered by one Court has inevitably meant that each has
borrowed from the other in furthering the harmonious development of the law as a
whole.
75
On this note, we end as we started, as the wisdom of Medieval England revisits
us once again: recourse to equity is always an option to temper the harshness of the
law. Yet, when the law itself is clear but still inadequate or tyrannical to serve
elementary demands of individual fairness, fluidity is a virtue in judicial adjudication.
This may, of course, be susceptible to judicial abuse, as the king even in the exercise
73 O. W. Holmes, Jr., THE PATH OF THE LAW, 10 Harvard Law Review 457 (1987); also in Richard A. Posner (editor),
THE ESSENTIAL HOLMES 160, The University of Chicago Press (1992).
74 Juan Rivera, THE FATHER OF THE FIRST BROWN RACE CIVIL CODE 57 (1978).
75 Elders Pastoral Ltd. V. Bank of New Zealand, 2 NZLR 180 at 193, [1989] cited in Gary Watt, TRUSTS TEXTBOOK 14,
Oxford University Press (2006, 2
nd
ed.).
of his professed divine rights is so susceptible. But then we cannot have them both
ways unless in blind faith we grant that Nietzches Ubermensch
76
has already come to
us all in robes. Magistrates are men and women of imperfections as all of us are,
and at the risk of occasional error, we keep the faith in this system of judicial justice
that, to a great extent and for most of the time, honestly endeavors to serve us all.

76 Accurately translated as overman (one who towers over us all by the continuing perfection of his faculties)
instead of the more popular and sarcastic superman, (of superhuman powers). The idea received more
comprehensive exposition in Nietzches Thus Spoke Zarathustra (in Walter Kaufmanns translation), The
Modern Library (1995).
2 2 IBP JOURNAL
Workers Preference
in Case of Bankruptcy
Manuel D. Yngson, Jr.
*
Part I
1. Backgrounder
1.01. Prefatory Statement
As insolvency and bankruptcy specialists, one of the most interesting issues
that we came across with in the course of our continuing survey of Supreme Court
decisions on insolvency and related topics such as liquidation, bankruptcy and
dissolution (especially of corporations), concurrence and preference of credits,
corporate rehabilitation, intra-corporate cases and the like, has to do with the
preference accorded by law to the workers claim for unpaid wages and other
monetary claims.
This issue gains double significance from the fact that not only is there a specific
law that extends to workers special preference in case of bankruptcy, but also, no
less than the Constitution of the Philippines exhorts the protection of labor by the
State.

Especially so when the rights of workers are juxtaposed against the right of
the State to collect taxes which is likewise amply protected by basic legal postulates
as well as by the Constitution.
The clash of these titanic claimants with its explosive social implication is not
helped any by the preferential rights afforded to secured creditors who claim either
legal or contractual liens over particular personal or real properties, thereby resulting
in the triangular battle of giant claimants, namely (a) workers for unpaid wages
and other monetary claims, (b) the State and its local subdivisions for taxes, and
(c) secured creditors for their liens on particular properties.
* Atty. Manuel D. Yngson, Jr., AA (with honors) 1960, AB (cum laude) 1962, LLB 1966 and MBA 1981 all from
the University of Philippines, is a former member of the Consultants Group of the Philippine Judicial Academy
(Philja) and has been an insolvency law practitioner since 1984 when he was appointed as the first external
counsel of the then Central Bank of the Philippines to represent a number of banks closed by the Central Bank
for insolvency. Prior to that, he specialized on litigation, taxation, labor and corporate services for seventeen
(17) years. He is the Founding President of both the Tax Management Association of the Philippines (TMAP),
and the Corporate Recovery and Insolvency Practitioners Association of the Philippines, Inc. (INSOLPHIL).
Atty. Florante A. Cayunda, Jr., of San Beda Law Class 2005 assisted in the research of this legal essay.
2 4 IBP JOURNAL
This clash is so intense, so much so that the Supreme Court itself, starting
from 1982 in the case of PCIB vs. National Mines and Allied Workers Union, 115
SCRA 873, is seen by some quarters to have been flip-flopping in its decisions in
resolving the matter.
Apparently, in the Supreme Court, there were two (2) distinct schools of thought
on this subject of workers preference: one that exalted the unbridled and absolute
preference of workers claims, and the other that sought to maintain the technical
structure and symmetry of the Rules on Concurrence and Preference of Credits
provided under the Civil Code - one of the most carefully crafted and harmoniously
balanced set of rules that our country ever had.
Prompted by the foregoing background and urged further by recent reports
that certain rating companies allegedly hesitate to give the Philippines a better
economic evaluation for foreign loan purposes because their legal advisers purportedly
conclude, among others, that under existing Philippines Laws the claim of workers
are given more preference than the claim of the State for taxes, we urgently proceeded
to make this brief study.
Since the decisions of the Supreme Court were generally self-arguing and
self-justifying in the sense that the pro-worker and pro-legal structure decisions
tend to find support in the earlier decisions advocating their respective positions
even if such decisions were already subsequently overturned, it is easy for any
practitioner or for that matter, even a judge to get lost in the maze of seemingly
conflicting decisions.
Actually, we found harmony and consistency in the Supreme Court decisions,
for we noted that some justices who were earlier ponentes of pro-worker decisions,
eventually became ponentes of pro-legal structure decisions, attesting to the strength
of logical and objective reasoning over the passionate temptation to protect the
rights of labor at all cost, even if it tears down the very heart of insolvency proceedings,
the distribution of assets or the proceeds of liquidation pursuant to the Rules on
Concurrence and Preference of Credits.
We made this discovery by simply putting together the Supreme Court
decisions in chronological order and assuming that a later decision automatically
supercedes an earlier decision, pursuant to the precepts of res judicata and stare decisis.
In this way we arrived at what we call as the majority decision, since being most
recent and by sheer force of number, these decisions upholding the symmetrical
legal structure set by the Rules on Concurrence and Preference of Credits, are now
supported by majority of the members of the Supreme Court, at least based on the
latest decisions.
1.02. Quick Review of Insolvency Concepts
But first, lets take a quick review of insolvency concepts:
1.02.1. Bankruptcy - occurs when the realizable assets of a corporation are
less than its liabilities
1.02.2. Dissolution of a corporation - is the termination of the legal
existence of the juridical corporate entity arising from either the
expiration of its term or withdrawal of its certificate of registration.
1.02.3. Insolvency of a corporation is its state, status or condition of being
unable to pay its obligations as they fall due in the ordinary or usual
course of trade or business.
1
1.02.4. Meaning of Insolvency as used in the Insolvency Law (Act 1956)
is Liquidation
1.02.5. Liquidation of a corporation is the process of reducing or
conversion of its assets to cash and the distribution thereof to its
creditors, discharging liabilities and dividing surplus or loss in the
process.
2
1.02.6. Rehabilitation of a corporation means restoring it to its former
capacity as such corporation, clothing it again with its right, authority
or dignity. It also includes the totality of the efforts to cure the
sickness of the corporation.
1.02.7. Solvent Corporation- one that has more assets than liabilities and
can meet its financial obligations as they fall due in the ordinary
course of business.
1.02.8. Technical Insolvency or Illiquidity is a situation in which a firm
is unable to meet its current obligations as they come due, even
though the value of its assets may exceed its liabilities.
3
1 Blacks Law Dictionary
2 Id.
3 Id.
2 6 IBP JOURNAL
1.03. The Contending Laws
Before proceeding further, let us examine the relevant laws involved.
Aside from the Constitutional provisions involved
4
, there is a direct clash
between two (2) great body of laws: the Civil Code, and the Labor Code.
1.03.1. Civil Code of the Philippines (Rep. Act No. 386), enacted on
18 June 1949
In one corner, are the relevant provisions of the Civil Code of the
Philippines laying down the Rules on Concurrence and Preference of Credits,
particularly:
Article 2237. Insolvency shall be governed by special laws insofar
as they are not inconsistent with this Code. (Emphasis added)
Article 2241. With reference to specific movable property of the debtor,
the following claims or liens shall be preferred:
(1) Duties, taxes and fees due thereon to the State or any subdivision
thereof;
x x x x x
(4) Credits guaranteed with a pledge so long as the things pledged
are in the hands of the creditor, or those guaranteed by a
chattel mortgage, upon the things pledged or mortgaged, up to
the value thereof;
x x x x x
(6) Claims for laborers wages, on the goods manufactured or
the work done. (Emphasis added).
x x x x x
Article 2242. With reference to specific immovable property and real
rights of the debtor, the following claims, mortgages and liens shall
be preferred, and shall constitute an encumbrance on the
immovable or real right:
4 The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote
their welfare (Art. II, Sec. 18) x x x x The State shall afford full protection to labor, local and overseas,
organized and unorganized and promote full employment and equality of employment opportunities for allx
x x x (Art. XIII, Sec. 3).
(1) Taxes due upon the land or building;
x x x x x
(3) Claims of laborers, masons, mechanics and other workmen,
as well as of architects, engineers, and contractors, engaged in the
construction, reconstruction, or repair of buildings, canals, or other works;
x x x x x
(5) Mortgage credits recorded in the Registry of Property, upon
the real estate mortgaged; (Emphasis added).
x x x x x
Article 2243. The claims or credits enumerated in the two preceding
articles shall be considered as mortgages or pledges of real or personal
property, or liens within the purview of legal provisions governing
insolvency. Taxes mentioned in No. 1, Article 2241 and No. 1,
Article 2242, shall first be satisfied. (Emphasis added).
x x x x x
Article 2244. With reference to other property, real and personal of
the debtor, the following claims or credits shall be preferred in the
order named:
x x x x x
(1) Proper funeral expenses for the debtor, or children under his
or her parental authority who have no property of their own, when
approved by the court;
(2) Credits for services rendered the insolvent by employees,
laborers, or household helpers for one year preceding the
commencement of the proceedings in insolvency;
x x x x x
(9) Taxes and assessments due the national government, other
than those mentioned in Articles 2241 No. 1, and 2242, No. 1;
(10) Taxes and assessments due any province, other than those
referred to in Articles 2241 No. 1, and 2242, No. 1;
2 8 IBP JOURNAL
(11) Taxes and assessments due any city or municipality, other
than those indicated in Articles 2241 No. 1, and 2242, No. 1;
(Emphasis added).
x x x x x
Article 2245. Credits of any other kind or class, or by any other right
or title not comprised in the four preceding articles shall enjoy no
preference.
x x x x x
Article 2247. If there are two or more credits with respect to the same
specific movable property, they shall be satisfied pro rata, after the
payment of duties, taxes and fees due the State or any
subdivision thereof. (Emphasis added).
x x x x x
Article 2249. If there are two or more credits with respect to the same
specific real property or real rights, they shall be satisfied pro rata,
after the payment of duties, taxes and fees due the State or
any subdivision thereof. (Emphasis added).
1.03.2. Labor Code of the Philippines (PD No. 442) enacted on 01
November 1974
In the other corner is the Labor Code of the Philippines, Article 110 of
which originally provided, that:
Article 110. Worker preference in case of bankruptcy. In the event of
bankruptcy or liquidation of the employers business, his workers
shall enjoy first preference as regards wages due them for
the services rendered during the period prior to the bankruptcy or
liquidation, any provision of law to the contrary
notwithstanding. Unpaid wages shall be paid in full before
other creditors may establish any claim to a share in the
assets of the employer. (Emphasis added).
In the implementation of the foregoing provision, Section 10, Rule VIII,
Book III of the Revised Rules and Regulations Implementing the Labor Code,
as amended, provides:
Section 10. Payment of wages in case of bankruptcy. Unpaid wages
earned by the employees before the declaration of bankruptcy or
judicial liquidation of an employers business shall be given first
preference and shall be paid in full before the other creditors may
establish any claim to a share in the assets of the employer.
Subsequently, on 21 March 1989, Section 1 of Republic Act No. 6715
amended this provision of the Labor Code to read as follows:
Article 110. Worker preference in case of bankruptcy. In the event of
bankruptcy or liquidation of the employers business, his workers
shall enjoy first preference as regards their unpaid wages
and other monetary claims, any provision of law to the contrary
notwithstanding. Such unpaid wages and other monetary claims
shall be paid in full before claims of the Government and other
creditors may be paid. (Emphasis added).
Section 10, Rule VIII, Book III of the Omnibus Rules Implementing the
Labor Code has also been correspondingly amended, and now provides:
Section 10. Payment of wages and other monetary claims in case of
bankruptcy. In case of bankruptcy or liquidation of the employers
business, the unpaid wages and other monetary claims of the
employees shall be given first preference and shall be paid in full
before the claims of the government and other creditors may be
paid.
1.04. More Definitions
1.04.1. Classification of Credits (as to Preference)
Under the provisions of the Civil Code quoted above, the claims or credits
against an insolvent corporation/partnership (or for that matter, an insolvent
individual) may be classified into three (3) general categories, namely:
(a) special preferred credits listed in Articles 2241 and 2242;
(b) ordinary preferred credits listed in Article 2244; and
(c) common credits under Article 2245.
The special preferred credits may still be further classified into:
(a.1) Taxes mentioned in Articles 2241 No. 1 and 2242 No. 1 or
what this writer calls super special preferred credits; and
(a.2) other special preferred credits.
3 0 IBP JOURNAL
1.04.2. Concurrence of credits
Concurrence of credits occurs when the same specific property of
the debtor or all of his property is subjected to the claims of several creditors.
The concurrence of credits raises no questions of consequence where the value
of the property or the value of all assets of the debtor is sufficient to pay in full
all the creditors. However, it becomes material when said assets are insufficient
for then some creditors of necessity will not be paid or some creditors will not
obtain the full satisfaction of their claims. In this situation, the question of
preference will then arise, that is to say who of the creditors will be paid ahead
of the others. (Caguioa, Comments and Cases on Civil Law, 1970 ed., Vol. VI,
p. 472).
1.04.3. Preference of Credit
xxx A preference of credit points out solely the order in which creditors
would be paid from the properties of a debtor inventoried and appraised during
bankruptcy, insolvency or liquidation proceedings. xxx A preference does not
exist in any effective way prior to, and apart from, the institution of these
proceedings, for it is only then that the legal provisions on concurrence and
preference of credits begin to apply. Unlike a lien, a preference of credit does
not create in favor of the preferred creditor a charge or proprietary interest
upon any particular property of the debtor. Neither does it vest as a matter of
course upon the mere accrual of a money claim against the debtor [Kuenzle &
Streiff vs. Villuaneva, 41 Phil. 611 (1916)]
1.04.4. Special Preferred Credits
The credits mentioned in Articles 2241 and 2242 (whether tax or non-
tax) are called special preferred credits because they constitute liens or
encumbrances on the specific movable or immovable property to which they
are attached. They take precedence over ordinary preferred credits so far as
concerns such specific properties. These specially preferred credits must be
discharged first out of the proceeds of the property over which they have a
lien, before ordinary preferred credits may be paid.
1.05. Legal Issues Encountered
In this survey, we strove to answer the following specific questions enroute
to resolving the main issues on workers preference:
1.05.1. Considering that it provides for preference in bankruptcy which is
governed by the Civil Code, how should Article 110 of the Labor Code, as
amended, be interpreted?
1.05.2. In the light of the provision that In the event of the bankruptcy or
liquidation of an employers business, his workers shall enjoy first preference
as regards their unpaid wages and other monetary claims any provision of law
to the contrary notwithstanding embodied in Article 110 of the Labor Code,
as amended, should this law be construed to mean as giving absolute preference
to labor or workers claims?
1.05.3. Considering that under Art. 110 of the Labor Code, workers unpaid
wages and monetary claims shall be paid in full before claims of the government
and other creditors may be paid, are workers claims under said law given
more preference than the claims of the government, whether national or local,
for taxes, duties and fees?
1.05.4. Are taxes, duties and fees not constituting liens or encumbrances on
specific movable or immovable properties of taxpayers subordinate to labor
or workers claims under Article 110 of the Labor Code, as amended?
1.05.5. Is there any legal way whereby said taxes, duties and fees not
constituting liens or encumbrances on specific properties may be made superior
to said labor claims?
1.05.6. Are the liens of secured creditors and the other special preferred
credits under Articles 2241 and 2242 of the Civil Code, subordinate to the
claims of workers under Article 110 of the Labor Code, as amended? How
about workers claims under the same Civil Code articles?
1.05.7. Considering the deletion of the phrase declaration of bankruptcy or
judicial liquidation of the employers business in Sec. 10 Rule VIII, Book III
of the Revised Rules and Regulations Implementing the Labor Code, what are
the effects of the amendments introduced by R.A. No. 6715 on Article 110 of
the Labor Code if any?
1.05.8. Under the Rules on Concurrence and Preference of Credits, what are
the levels of liens and preferences concerning taxes as well as credits secured
by pledges or mortgages, vis--vis workers claims under Article 110 of the
Labor Code, as amended?
1.05.9. What kind of proceedings, if any, are required before the workers
preference mentioned in Article 110 of the Labor Code, as amended, may be
enforced? Does the same requirement apply to other preferred as well as secured
credits under the Rules on Concurrence and Preference of Credits?
1.05.10. Can workers preference be invoked if the proceedings involved are
Corporate Rehabilitation proceedings?
3 2 IBP JOURNAL
2. Survey of Supreme Court Decisions on Workers Preference
in Bankruptcy
Now we are ready to tackle the case survey.
2.01. De Barretto vs. Villanueva 01 SCRA 288 (28 January 1961)
and 06 SCRA 928 (29 December 1962)
This case was basically a contest between an unpaid vendor claiming the
vendors lien and a mortgage creditor claiming the mortgagees lien. Although it
did not pertain to a workers claim, it is included in this compilation because it
is the first key en-banc decision that pertains to concurrence and preference
of credit and insolvency after the effectivity of the New Civil Code. Also, the
change in the ruling of the Supreme Court after a Motion for Reconsideration
was filed in this case, heralded the dichotomy of thinking that the Supreme
Court would subsequently adopt starting two (2) decades later.
2.01.1. On the necessity of a proceeding for the prorating of preferred
credits, the initial ruling of the Supreme Court was:
As to the point made that the articles of the Civil Code on
concurrence and preference of credits are applicable only to the
insolvent debtor, suffice it to say that nothing in the law shows any
such limitation. If we are to interpret this portion of the Code as
intended only for insolvency cases, then other creditor-debtor
relationships where there are concurrence of credits would be left
without any rules to govern them, and it would render purposeless
the special laws on insolvency.
2.01.2. Upon Motion for Reconsideration, however, the Supreme Court
reversed its ruling on the same subject of necessity of liquidation
proceedings in this wise:
We have given protracted and mature consideration to the facts
and law of this case, and have reached the conclusion that our original
decision must be reconsidered and set aside, for the following
reasons:
A. The previous decision failed to take fully into account the radical
changes introduced by the Civil Code of the Philippines into the
system of priorities among creditors ordained by the Civil Code of
1889.
Pursuant to the former Code, conflicts among creditors entitled to
preference as to specific real property under Article 1923 were to
be resolved according to an order of priorities established by Article
1927, whereby one class of creditors could exclude the creditors of
lower order until the claims of the former were fully satisfied out
of the proceeds of the sale of the real property subject of the
preference, and could even exhaust proceeds if necessary.
Under the system of the Civil Code of the Philippines
however, only taxes enjoy a similar absolute preference.
All the remaining nine classes of preferred creditors under
Article 2242 enjoy no priority among themselves, but must
be paid pro rata, i.e., in proportion to the amount of the
respective credits. Thus 2249 provides:
If there are two or more credits with respect to the same specific
real property or real rights, they shall be satisfied pro rata, after
the payment of the taxes and assessments upon the immovable
property or real rights.
But in order to make this prorating fully effective, the
preferred creditors enumerated in Nos. 2 to 10 of Article
2242 (or such of them as have credits outstanding) must
necessarily be convened, and the import of their claims
ascertained. It is thus apparent that the full application
of Articles 2249 and 2242 demands that there must be
first some proceeding where the claims of all the preferred
creditors may be bindingly adjudicated, such as insolvency, the
settlement of decedents estate under Rule 87 of the Rules of Court,
or other liquidation proceedings of similar import. (Emphasis
added)
Score: Mortgagees lien-1; Vendors lien- 0.
2.02. Philippine Commercial and Industrial Bank (PCIB) vs.
National Mines & Allied Workers Union (NAMAWU-MIF), 115
SCRA 873 (19 August 1982)
This was the first in a series of cases of the Supreme Court with tug-of-
war decisions on the preference of workers claim, especially versus a foreclosing
mortgagees claim, a tax claim or the claim of some other secured lien-holder.
After quoting the workers preference under Article 110 of said Code and
citing the principles of social justice and the protection afforded to labor under
the Constitution, the Supreme Court, thru Justice Barredo held:
3 4 IBP JOURNAL
2.02.1. Mere application for clearance tolls workers preference
We hold that the right of the Union members over the properties
or assets of PIM became vested from the date the Minister of Labor
approved PIMs application for clearance on May 7, 1975. In the
most legal sense and, again, consonant with the principles of social
justice and protection to labor under the Constitution of the
Philippines above referred to the NLRC decision was only
confirmatory of such right, not unlike the juridical effect of the
issuance of a Torrens title over a piece of land already covered by a
legitimate Spanish title. And so, when petitioners acquired the
properties of PIM in the foreclosure sales, those properties were
already encumbered in favor of the Union members/claimants by
force of law.
2.02.2. Rationale behind the provisions of the Labor Code giving
preference to labor claims
The reason behind the provisions of the Labor Code giving
preference to claims of labor in the liquidation of a business or
industrial concern is patent and manifest. It is but humane and
partakes of the divine that labor, as human beings, must
be treated over and above chattels, machineries and other
kinds of properties and the interests of the employer who
can afford and survive the hardships of life better than
their workers. Universal sense of human justice, not to speak of
our specific social justice and protection to labor constitutional
injunctions dictate the preferential lien that the above provisions
accord to labor. (Emphasis added).
Score: Workers preference- 1; Mortgagees lien- 0.
2.03. Philippine Savings Bank (PSB) vs. Lantin, 124 SCRA 476
(02 September1983)
The conflict in this case was between a buyer in a foreclosure sale
claiming the mortgagees lien and an unpaid contractor claiming the
contractors lien. Again, while this case did not involve a workers
claim, it is included in this compilation because it clarified when
concurrence of credits occurs, when it becomes material and when
the Rules on Concurrence and Preference of Credits are applicable,
stressing the need for insolvency or some other type of in rem
liquidation proceeding before the Rules could apply, thereby making
this case one of the most quoted cases on concurrence and preference
of credits. In this case, the Supreme Court held:
2.03.1. Need for proceedings where preferred claims may be
bindingly adjudicated
Under the De Barreto decision, the full application of Articles 2242
and 2249 demands that there must first be some proceeding where
the claims of all the preferred creditors may be bindingly adjudicated,
such as insolvency, the settlement of a decedents estate
under Rule 87 of the Rules of Court, or other liquidation
proceedings of similar import. (Emphasis added)
x x x x x
2.03.2. When concurrence of credits occurs
Concurrence of credits occurs when the same specific property of
the debtor or all of his property is subjected to the claims of several
creditors. The concurrence of credits raises no questions of
consequence where the value of the property or the value of all
assets of the debtor is sufficient to pay in full all the creditors.
However, it becomes material when said assets are
insufficient for then some creditors of necessity will not
be paid or some creditors will not obtain the full
satisfaction of their claims. In this situation, the question of
preference will then arise, that is to say who of the creditors will be
paid ahead of the others [Caguioa, Comments and Cases on Civil
Law, 1970 ed., Vol. VI, p. 472]. (Emphasis added)
x x x x x
2.03.3. Among Special Preferred Credits, only taxes enjoy absolute
preference
Under the system established by Article 2249 of the Civil Code of
the Philippines, only taxes and assessments upon immovable property
enjoy absolute preference. All the remaining specified classes of
preferred creditors under Article 2242 enjoy no priority among
themselves. Their credits shall be satisfied pro-rata, i.e., in proportion
to the amount of the respective credits. (Emphasis added).
x x x x x
2.03.4. Insolvency and liquidation proceedings are proceedings in
rem
3 6 IBP JOURNAL
Insolvency proceedings and settlement of a decedents estate are
both proceedings in rem which are binding against the whole world.
All persons having interest in the subject matter involved, whether
they were notified or not, are equally bound. Consequently, a
liquidation of similar import or other equivalent general
liquidation must also necessarily be a proceeding in rem
so that all interested persons whether known to the parties
or not may be bound by such proceedings. (Emphasis added)
Score: Mortgagees lien-1; Contractors lien- 0.
2.04. Republic vs. Peralta, 150 SCRA 37 (20 May 1987)
This en-banc decision penned by Justice Feliciano is the most instructive decision
on concurrence and preference of credits. In this case which involved tax claims
versus workers claims under Art. 110 of the Labor Code, the Supreme Court not only
described in detail the classification of credits and the order of preference under the
Civil Code as well as discussed the distinction between a preference and a lien, but
also stressed on the need for a harmonious interpretation of the Rules on Concurrence
and Preference of Credits under the Civil Code and the Insolvency Law and kindred
provisions such as those under Art. 110 of the Labor Code, without totally ignoring
the impact of Art. 110 on such Rules. More importantly, this case tolled the first
major shift of the sentiment of the Supreme Court in favor of the structural scheme
of the rules on concurrence and preference of credits, thereby abandoning the pro-
labor ruling in PCIB vs. NAMAWU-MIF, supra.
Notably, Justice Cruz dissented from the Courts ruling, invoking the superiority
of a subsequent law i.e. Art. 110 of the Labor Code, over an older one, i.e. the Civil
Code, as a later expression of the legislative will. He also invoked social justice,
arguing that it is not a mere catchphrase.
The Supreme Court held:
2.04.1. Interpretation to harmonize laws; Art. 110 of the Labor
Code cannot be viewed in isolation
The resolution of the issue of priority among the several claims
filed in the insolvency proceedings instituted by the Insolvent cannot,
however, rest on a reading of Article 110 of the Labor Code alone.
Article 110 of the Labor Code, in determining the reach
of its terms, cannot be viewed in isolation. Rather, Article
110 must be read in relation to the provisions of the Civil Code
concerning the classification, concurrence and preference of credits,
which provisions find particular application in insolvency
proceedings where the claims of all creditors, preferred or non-
preferred, may be adjudicated in a binding manner. (Emphasis
added)
2.04.2. Classification of Credits under the Civil Code
It is thus important to begin by outlining the scheme constituted
by the provisions of the Civil Code on this subject.
Those provisions may be seen to classify credits against a
particular insolvent into three general categories, namely:
(a) special preferred credits listed in Articles 2241 and 2242;
(b) ordinary preferred credits listed in Article 2244; and
(c) common credits under Articles 2245. (Emphasis added)
2.04.3. Special Preferred Credits constitute liens or encumbrances
Turning first to special preferred credits under Articles 2241
and 2242, it should be noted at once that these credits
constitute liens or encumbrances on the specific movable
or immovable property to which they relate. Article 2243
makes clear that these credits shall be considered as mortgages or
pledges of real or personal property, or liens within the purview of
legal provisions governing insolvency. It should be emphasized in
this connection that duties, taxes and fees due [on specific movable
property of the insolvent] to the State or any subdivision thereof
(Article 2241 [1]) and taxes due upon the [insolvents] land or
building (2242 [1]) stand first in preference in respect of the
particular movable or immovable property to which the
tax liens have attached. Article 2243 is quite explicit: [T]axes
mentioned in number 1, Article 2241 and number 1, Article 2242
shall first be satisfied. The claims listed in numbers 2 to 13 in
Articles 2241 and in numbers 2 to 10 in Article 2242, all come after
taxes in order of precedence; such claims enjoy their privileged
character as liens and may be paid only to the extent that taxes
have been paid from the proceeds of the specific property involved
(or from any other sources) and only in respect of the remaining
balance of such proceeds. What is more these other (non-tax)
credits, although constituting liens attaching to particular
property, are not preferred one over another inter se.
Provided tax liens shall have been satisfied, non-tax liens or special
preferred credits which subsist in respect of specific movable or
immovable property are to be treated on an equal basis and to be
satisfied concurrently and proportionately. (Emphasis added).
3 8 IBP JOURNAL
2.04.4. Two-Tier Order of Preference among Special Preferred
Credits
Put succinctly, Articles 2241 and 2242 jointly with Articles 2246
to 2249 established a two-tier order of preference. The first tier
includes only taxes, duties and fees due on specific movable
or immovable property. All other special preferred credits
stand on the same second tier to be satisfied, pari passu and
pro rata, out of any residual value of the specific property to which
such other credits relate. (Emphasis added).
2.0.4.5. Special Preferred vs. Ordinary Preferred Credits
Credits which are specially preferred because they constitute liens
(tax or non-tax) in turn, take precedence over ordinary preferred
credits so far as concerns the property to which the liens have
attached. The specially preferred credits must be discharged
first out of the proceeds of the property to which they
relate, before ordinary preferred creditors may lay claim
to any part of such proceeds. (Emphasis added)
2.0.4.6. Order of Preference under Article 2244 of the Civil Code
In contrast with Articles 2241 and 2242, Article 2244 creates
no liens on determinate property which follow such property.
What Articles 2244 creates are simply rights in favor of certain
creditors to have the cash and other assets of the insolvent applied
in a certain sequence or order of priority (Emphasis added).
2.0.4.7. Article 110 of the Labor Code creates a preference, not a
lien
Article 110 of the Labor Code does not purport to create
a lien in favor of workers or employees for unpaid wages
either upon all of the properties or upon any particular
property owned by their employer. Claims for unpaid wages
do not therefore fall at all within the category of specially preferred
claims established under Articles 2241 and 2242 of the Civil Code,
except to the extent that such claims for unpaid wages are already
covered by Article 2241, number 6: claims for laborers wages, on
the goods manufactured or the work done; or by Article 2242,
number 3: claims of laborers and other workers engaged in the
construction, reconstruction or repair of buildings, canals and other
works, upon said buildings, canals or other works. To the extent
that claims for unpaid wages fall outside the scope of
Article 2241, number 6 and 2242, number 3, they would
come within the ambit of the category of ordinary
preferred credits under Article 2244. (Emphasis added).
2.04.8. Impact of Art. 110 on the Rules of Concurrence and
Preference of Credits.-
We come to the question of what impact Article 110 of the Labor
Code has had upon the complete scheme of classification,
concurrence and preference of credits in insolvency set out in the
Civil Code. We believe and so hold that Article 110 of the Labor
code did not sweep away the overriding preference accorded
under the scheme of the Civil Code to tax claims of the
government or any subdivision thereof which constitute a
lien upon properties of the Insolvent.
The use of the phrase first preference in Article 110
indicates that what Article 110 intended to modify is the
order of preference found in Article 2244, which order
relates, as we have seen, to property of the Insolvent that is not
burdened with the liens or encumbrances created or recognized by
Articles 2241 and 2242. (Emphasis added).
2.04.9. On changes brought about by Art. 110.-
Thus, very substantial effect may be given to the provisions of
Article 110 without grievously distorting the framework established
in the Civil Code by holding, as we so hold, that Article 110 of
the Labor Code has modified Article 2244 of the Civil
Code in two respects: (a) firstly, by removing the one year
limitation found in Article 2244, number 2; and (b) secondly,
by moving up claims for unpaid wages of laborers or
workers of the Insolvent from second priority to first priority
in the order of preference established by Article 2244.
(Emphasis added)
2.04.10. Cruz J., Dissenting.-
I regret I cannot give my concurrence to the majority opinion because it
reads into the law an exception that is not there. In so doing, it arrogates
for the Court a power rightfully belonging to the legislature.
It seems to me that the erudite ponencia doth protest too much.
The language of the provision in question is clear and categorical. Article
110 of P.D. No. 442 states quite plainly:
4 0 IBP JOURNAL
Art. 110 Worker preference in case of bankruptcy.- In
the event of bankruptcy or liquidation of an employers
business, his workers shall enjoy first preference as regards
wages due them for services rendered during the period prior
to the bankruptcy or liquidation, any provision of law to the
contrary notwithstanding. Unpaid wages shall be paid in
full before other creditors may establish any claim to a share
in the assets of the employer. (Emphasis mine).
I take the phrase any provision of law to the contrary notwithstanding
to mean exactly what it says. I submit that if the law had intended an
exception, it would have-and could easily have-provided for it.
x x x x x
Social justice is not a mere catchphrase to be mouthed with sham fervor
in Labor Day celebrations for the delectation and seduction of the working
class. It is a mandate we should pursue with energy and sincerity if we
are to truly insure the dignity and well-sign of the laborer
Score: Tax claim-1; Workers preference 0
2.05. A.C Ransom Labor Union-CCLU vs. National Labor
Relations Commission (NLRC) 150 SCRA 498 (29 May 1987)
After the flip, now comes the flop. Amazingly, only nine (9) days after the
promulgation of the scholarly en-banc decision in Republic vs. Peralta, 150 SCRA 37
(20 May 1987), the Supreme Court reverted to its pro-Labor stance in this Ransom
case. Justice Melencio-Herrera who voted with the majority in Peralta, penned the
Decision in this case which involved a contest between the buyer of mortgaged corporate
assets and the sellers workers claim under Art. 110 of the Labor Code. The Highest
Court did not bother to explain in detail its sudden departure from the Peralta
doctrine. Instead, it cited the pro-labor ruling in PCIB vs. NAMAWU-CIF, which was
in fact already superceded by the Peralta ruling.
Notably, however, it appears that the Decision in the Ransom case was not
really a departure from the Peralta doctrine because there was a finding of
fraud in the sale of the assets of the insolvent obligor. This obviously made
the Court decide the case in favor of labor, without any hesitation. There was no
need however, for the Court to cite Art. 110 of the Labor Code which according to
the Peralta doctrine confers only a preference under Art 2244 of the Civil Code, and not
a lien. The Supreme Court held:
2.05.1. In case of corporate bankruptcy, wages of laborers must
first be paid before other creditors
The alleged bankruptcy of RANSOM furnishes no justification
for non-payment of backwages to the employees concerned taking
into consideration Article 110 of the Labor Code, which provides:
ART. 110. Worker preference in case of bankruptcy. - In the event
of bankruptcy or liquidation of an employers business, his workers
shall enjoy first preference as regards wages due them for services
rendered during the period prior to the bankruptcy or liquidation,
any provision of law to the contrary notwithstanding. Unpaid wages
shall be paid in full before other creditors may establish any claim
to a share in the assets of the employer.
The term wages refers to all remunerations, earnings and other benefits in
terms of money accruing to the employees or workers for services rendered.
They are to be paid in full before other creditors may establish any claim to a
share in the assets of the employer.
Section 10. Payment of wages in case of bankruptcy.-Unpaid wages
earned by the employees before the declaration of bankruptcy or
judicial liquidation of the employers business shall be given first
preference and shall be paid in full before other creditors may
establish any claim to a share in the assets of the employer.
The foregoing provisions are but in consonance with the principles of social
justice and protection to labor guaranteed by past and present
Constitutions and are not really being given any retroactive effect when
applied herein. (Emphasis added)
2.05.2. Sale of Corporate Assets Cannot Prejudice Rights of
Employees
The workers preference applies even if the employers
properties are encumbered by means of a mortgage contract, as in
this case. So that, when machinery and equipment of RANSOM were sold to
Revelations Manufacturing Corporation for P2M in 1975, the right of the 22
laborers to be paid from the proceeds should have been recognized, even though
it is claimed that those proceeds were turned over to the Commercial Bank
and Trust Company (Comtrust) in payment of RANSOM obligations, since
the workers preference is over and above the claim of other creditors.
(Emphasis added)
2.05.3. When sale of assets is in fraud of workers, the buyer
corporation shall be required to absorb the illegally dismissed
workers and pay them backwages and separation pay solidarily with
the officers.
4 2 IBP JOURNAL
Aggravating RANSOMs clear evasion of payment of its financial
obligations is the organization of a run-away corporation, ROSARIO, in
1969 at the time the unfair labor practice case was pending before the CIR by
the same persons who were the officers and stockholders of RANSOM, engaged
in the same line of business as RANSOM, producing the same line of products,
occupying the same compound, using the same machineries, buildings,
laboratory, bodega and sales and accounts departments used by RANSOM,
and which is still in existence. Both corporations were closed corporations
owned and managed by members of the same family. Its organization proved
to be a convenient instrument to avoid payment of backwages and the
reinstatement of the 22 workers. This is another instance where the fiction of
separate and distinct corporate entities should be disregarded. (Emphasis
added).
Score: Workers preference 2; Mortgagees lien- 0
2.06. Development Bank of the Philippines (DBP) vs. Santos
et al., 171 SCRA 138 (08 March 1989).-
This is the first of eleven (11) decided cases in a span of twelve (12) years, involving
the claim of the DBP as a foreclosing mortgagee, versus the claim of the workers of the
mortgagor for preference under Art. 110 of the Labor Code. Relying on the rulings in
Republic vs. Peralta, supra and PSB vs. Lantin, supra, the Supreme Court, speaking
thru Justice Gutierrez, Jr., in this case stressed on the need for a declaration of
bankruptcy or a judicial liquidation proceedings before workers
preference under Art. 110 may be enforced. Notably, however, the Supreme
Court did not again bother to explain its departure from the Decision in the Ransom
case and abandon its pro-labor stance in favor of the pro-legal structure sentiment.
The Highest Court thus ruled:
2.06.1. Reiterating Republic vs. Peralta.-
We apply the rule expressed in Republic vs. Peralta (150 SCRA 37
[1988]), where we stated:
Article 110 of the Labor Code, in determining the reach of its terms,
cannot be viewed in isolation. Rather, Article 110 must be read
in relation to the provisions of the Civil Code concerning the
classification, concurrence and preference of credits, which
provisions find particular application in insolvency proceedings
where the claims of all creditors, preferred or non-preferred, may
be adjudicated in a binding manner. [Barreto v. Villanueva, 1 SCRA
288 pp. 44-45 (1961)]
x x x x x
It is quite clear from the provisions that a declaration of
bankruptcy or a judicial liquidation must be present before
the workers preference may be enforced. Thus, Article 110
of the Labor Code and its implementing rule cannot be invoked by
the respondents in this case absent a formal declaration of
bankruptcy or a liquidation order. Following the rule in Republic
vs. Peralta, supra, to hold that Article 110 is also applicable
in extra-judicial proceedings would be putting the worker
in a better position than the State which could only assert
its own prior preference in case of a judicial proceeding.
Therefore, as stated earlier, Article 110 must not be viewed in
isolation and must always be reckoned with the provisions of the
Civil Code.
There was no issue of judicial vis-a-vis extra-judicial proceedings in
the Republic v. Peralta interpretation of Article 110 but the necessity
of a judicial adjudication was pointed out when we explained
the impact of Article 110 on the concurrence and
preference of credits provided in the Civil Code.
We stated:
We come to the question of what impact Article 110 of the Labor
Code has had upon the complete scheme of classification,
concurrence and preference of credits in insolvency set out in the
Civil Code. We believe and so hold that Article 110 of the Labor
Code did not sweep away the overriding preference
accorded under the scheme of the Civil Code to tax claims
of the government or any subdivision thereof which constitute
a lien upon properties of the Insolvent. ... It cannot be assumed
simpliciter that the legislative authority, by using Article 110 of
the words first preference and any provision of law to the contrary
notwithstanding intended to disrupt the elaborate and symmetrical
structure set up in the Civil Code. Neither can it be assumed casually
that Article 110 intended to subsume the sovereign itself within the
term other creditors, in stating that unpaid wages shall be paid in
full before other creditors may establish any claim to a share in the
assets of the employer. Insistent considerations of public policy
prevent us from giving to other creditors a linguistically unlimited
scope that would embrace the universe of creditors save only unpaid
employees. (Emphasis added).
2.06.2. Reiterating rationale in Philippine Savings Bank vs. Lantin
Moreover, the reason behind the necessity for a judicial proceeding
or a proceeding in rem before the concurrence and preference of
credits may be applied was explained by this Court in the case of
4 4 IBP JOURNAL
Philippine Savings Bank v. Lantin [124 SCRA 476 (1983)]. We said:
The proceedings in the court below do not partake of the nature
of the insolvency proceedings or settlement of a decedents estate.
The action filed by Ramos was only to collect the unpaid cost of the
construction of the duplex apartment. It is far from being a general
liquidation of the estate of the Tabligan spouses. xxx.
Score: Workers preference 2; Mortgagees lien -1
2.07. DBP vs. Secretary of Labor, 179 SCRA 630
(28 November 1989)
In this second DBP case involving the rights of a foreclosing mortgagee versus the
rights of the mortgagors workers, the Supreme Court, speaking thru Justice Cortes,
reiterated its pro-legal structure sentiment. This time, the Court categorically ruled
on the status of workers preference in bankruptcy, under Art. 110 of the Labor
Code. Citing the recent case (at the time) of DBP vs. Santos, ibid, as well as the earlier
rulings in Barretto vs. Villanueva, supra; PSB vs. Lantin, and Republic vs. Peralta, supra; and
debunking the ruling in the PCIB vs. NAMAWU-CIF case supra as a
misconception which must be corrected, the Supreme Court once again clarified
that the workers right under Art. 110 of the Labor Code is just a preference, not a lien; that there
is no such thing as an automatic first lien in favor of labor; and that a bankruptcy, insolvency or
general judicial liquidation proceedings provide the only proper venue for the enforcement of creditors
rights such as those under Art. 110. In doing so, the Supreme Court did not ignore the
amendment of Art. 110 but instead clarified the legal implication of such amendment
in relation to the Rules on Concurrence and Preference of Credits. In another
scholarly Decision on the subject of Art. 110, the Highest Court ruled:
2.07.1. On the need for bankruptcy or judicial liquidation proceedings
It is clear from the wording of the law that the preferential
right accorded to employees and workers under Article 110 may be
invoked only during the bankruptcy or judicial liquidation
proceedings against the employer. The law is unequivocal and admits
of no other construction. (Emphasis added)
x x x x x
In this jurisdiction, bankruptcy, insolvency and general judicial
liquidation proceedings provide the only proper venue for the
enforcement of a creditors preferential right such as that established
in Article 110 of the Labor Code, for these are in rem proceedings binding
against the whole world where all persons having any interest in the assets of
the debtor are given the opportunity to establish their respective credits
[Philippine Savings Bank vs. Lantin, supra; Development Bank of the Philippines vs.
Santos supra]. (Emphasis added).
2.07.2. Rationale for Ruling
The rationale for making the application of Article 110 of the Labor
Code contingent upon the institution of bankruptcy or judicial liquidation
proceedings against the employer is premised upon the very nature of a
preferential right of credit. A preference of credit bestows upon the
preferred creditor an advantage of having his credit satisfied first
ahead of other claims which may be established against the debtor.
Logically, it becomes material only when the properties and assets
of the debtor are insufficient to pay his debts in full; for if the
debtor is amply able to pay his various creditors in full, how can
the necessity exist to determine which of his creditors shall be paid
first or whether they shall be paid out of the proceeds of the sale of
the debtors specific property? Indubitably, the preferential right of credit
attains significance only after the properties of the debtor have been inventoried
and liquidated, and the claims held by his various creditors have been
established [Kuenzle & Streiff (Ltd.) v. Villanueva, 41 Phil. 611 (1916); Barretto
v. Villanueva, G.R. No. L-14938, December 29, 1962, 6 SCRA 928; Philippine
Savings Bank v. Lantin, G.R. No. L-33929, September 2, 1983, 124 SCRA
476]. (Emphasis added)
2. 07. 3. Ruling in PCIB Case a Misconception.-
However, respondents, in citing the case of PCIB v. NAMAWU-MIF [supra],
argue that by virtue of Article 110 of the Labor Code, an automatic first lien
was created in favor of private respondents on RMC propertiesa lien which
predated the foreclosure of the subject properties by petitioner, and remained
vested on these properties even after its sale to petitioner and other parties.
There is no merit to this contention. It proceeds from a
misconception which must be corrected.
What Article 110 of the Labor Code establishes is not a lien,
but a preference of credit in favor of employees [See Republic v. Peralta,
G.R. No. 56568, May 20, 1987, 150 SCRA 37]. This simply means that during
bankruptcy, insolvency or liquidation proceedings involving the existing
properties of the employer, the employees have the advantage of having their
unpaid wages satisfied ahead of certain claims which may be proved therein.
(Emphasis added)
2.07.4. Preference cannot exist without proceedings on bankruptcy,
Insolvency or Liquidation
It bears repeating that a preference of credit points out solely the order
in which creditors would be paid from the properties of a debtor inventoried
4 6 IBP JOURNAL
and appraised during bankruptcy, insolvency or liquidation proceedings.
Moreover, a preference does not exist in any effective way prior to,
and apart from, the institution of these proceedings, for it is only
then that the legal provisions on concurrence and preference of
credits begin to apply. Unlike a lien, a preference of credit does not
create in favor of the preferred creditor a charge or proprietary interest
upon any particular property of the debtor. Neither does it vest as a matter of
course upon the mere accrual of a money claim against the debtor. Certainly,
the debtor could very well sell, mortgage or pledge his property, and convey
good title thereon, to third parties free from such preference [Kuenzle & Streiff
vs. Villanueva, supra]. (Emphasis added)
2.07.5. Highest Court not unmindful of amendments to Art. 110 of
the Labor Code.-
Incidentally, the Court is not unmindful of the 1989 amendments
to the article introduced by Section 1, R.A. No. 6715 [March 21,
1989]. Article 110 of the Labor Code as amended reads:
WORKER PREFERENCE IN CASE OF BANKRUPTCY. In the event
of bankruptcy or liquidation of an employers business, his workers shall enjoy
first preference as regards their unpaid wages and other monetary claims, any
provision of law to the contrary notwithstanding. Such unpaid wages and monetary
claims shall be paid in full before the claims of the Government and other creditors may
be paid. [Amendments indicated.]
However, these amendments only relate to the scheme of concurrence
and preference of credits; they do not affect the issues heretofore
discussed regarding the applicability of Article 110 to the attendant facts.
(Emphasis added).
Score: Workers preference- 2; Mortgagees lien -2.
2.08. Philippine National Bank (PNB) vs. Cruz et al.,
180 SCRA 206 (18 December 1989)
Only twenty (20) days after the promulgation of the Decision in DBP vs.
Secretary of Labor supra, the Supreme Court, this time speaking thru Justice
Gancayco who voted with the majority in the case of A.C. Ransom Labor Union-
CCLU vs. NLRC, supra, again reversed itself and decided in favor of the workers on
the same issue of preference between the claim of a mortgage creditor versus the
claim of the workers of the mortgagor. As in the case of Ransom which involved a
fraudulent transfer of the mortgaged properties in question, the Highest Court has
a good legal excuse to decide in favor of the workers in the PNB case because
Petitioner PNB did not initially question the validity of the workers
claim for unpaid wages with respect to the mortgaged properties in
question, nor raised the issue of priority of mortgagees lien over workers
preference on appeal. Hence, the court could not really have allowed PNB to
alter its stance in the Supreme Court inasmuch as it had already acquiesced in the
decision of the Labor Arbiter concerning unpaid wages.
Unfortunately, however, the Supreme Court did not stop there but instead,
proceeded to explain that the Court must uphold the preference accorded to the
workers in view of the provisions of Art. 110 of the Labor Code which are clear and
which admit of no other interpretation. Expectedly, the Court cited the pro-labor
Decision in Ransom, that workers preference prevails over mortgagees claim, without
however, pointing out that the main reason for the Decision in favor of the workers
in the Ransom case was the fraud committed by the mortgagor in effecting the transfer
of its property. Worse, in this PNB case, the Supreme Court even tried to debunk
the ruling in Republic vs. Peralta by in effect limiting its applicability only to conflicts
between a tax lien and the workers preference under Art. 110 of the Labor Code.
Worst of all, not only did the Highest Court also cite the equitable principle
enunciated in PCIB vs. NAMAWU-CIF, the Decision of which was just described
by the Court twenty (20) days earlier as having proceeded from a misconception
which must be corrected, but it also volunteered the interpretation, despite the fact
that the subject was not even raised as an issue, that not even tax claims could have
preference over workers claim
Notably, Justice Cruz concurred in this Decision, stressing that in Republic vs.
Peralta, he was the only one who held the view that the claims of laborers should
take precedence over those of even the Government under Art. 110 of the Labor
Code.
The Supreme Court held:
2.08.1. On PNBs failure to timely raise the issue of mortgagees
lien prior to its appeal.-
At the outset, petitioner PNB did not question the validity of the workers
claim for unpaid wages with respect to the mortgaged properties of AMEX,
provided that the same be limited to the unpaid wages, and to the exclusion of
termination pay. In the instant petition however, PNB starts off with the question
of whether or not the workers lien take precedence over any other claim
considering that this Court has ruled otherwise in Republic vs. Peralta [150 SCRA
37 (1987)]
This Court cannot allow the petitioner to alter its stance at
this stage inasmuch as it is deemed to have acquiesced in the decision
of the Labor Arbiter concerning payment of unpaid wages. The
records reveal that the petitioner failed to question the same on appeal. Hence
4 8 IBP JOURNAL
it is now barred from claiming that the workers lien applied only to the products
of their labor and not to the properties of the employer which are encumbered
by mortgage contracts or otherwise. (Emphasis added).
2.08.2. Even absent such failure, the provisions of the Labor Code
on workers preference as regards monetary claims, must still prevail
Notwithstanding the foregoing, an attempt on the part of the petitioner
to seek relief from that portion of the decision would still be in vain.
Article 110 of the Labor Code provides that:
Art. 110. Worker preference in case of bankruptcy. In the event of
bankruptcy or liquidation of an employers business his workers
shall enjoy first preference as regards their unpaid wages and other
monetary claims, any provision of law to the contrary
notwithstanding. Such unpaid wages and monetary claims, shall be
paid in full before claims of the government and other creditors
may be paid. (Emphasis added).
This Court must uphold the preference accorded to the private
respondents in view of the provisions of Article 110 of the Labor
Code which are clear and which admit of no other interpretation.
The phrase any provision of law to the contrary notwithstanding indicates
that such preference shall prevail despite the order set forth in Articles 2241
to 2245 of the Civil Code. No exceptions were provided under the said
article, henceforth, none shall be considered. Furthermore, the Labor
Code was signed into Law decades after the Civil Code took effect.
(Emphasis added).
3.3.3. Invoking The Ransom Case Once Again
Moreover, Our pronouncement in A. C. Ransom Labor Union-CCLU vs.
NLRC, reinforces the above-mentioned interpretation where this Court,
speaking through Associate Justice Melencio-Herrera, explicitly stated that
(t)he worker preference applies even if the employers properties are
encumbered by means of a mortgage contract ... So that, when (the) machinery
and equipment of RANSOM were sold to Revelations Manufacturing
Corporation for P2M in 1975, the right of the 22 laborers to be paid from the
proceeds should have been recognized ...
x x x x x
Consistent with the ruling of this Court in Volkschel Labor Union vs. Bureau
of Labor Relations, this court adopts the doctrine that (i)n the implementation
and interpretation of the provisions of the Labor Code and its
implementing regulations, the workingmans welfare should be the
primordial and paramount consideration. Bearing this in mind, this
Court must reiterate the dictum laid down in A.C. Ransom that the conflict
between Article 110 of the Labor Code and Article 2241 to 2245 of the Civil
Code must be resolved in favor of the former. A contrary ruling would defeat
the purpose for which Article 110 was intended; that is, for the protection of
the working class, pursuant to the never-ending quest for social justice.
(Emphasis added)
2.08.4. Delimiting the Ruling in Republic vs. Peralta
Reliance by the petitioners on Republic vs. Peralta is without
basis. The said case involved a question of workers preference as against the
tax claims of the State. In the said case the Court held that the State must
prevail in that instance since it has been frequently said that taxes are the
very lifeblood of government. The effective collection of taxes is a task of
highest importance for the sovereign. It is critical indeed for its own survival .
(Emphasis added)
2.08.5. Even Demoting Tax Liens
Nevertheless, under Article 110 of the Labor Code as amended, the
unpaid wages and other monetary claims of workers should be paid in full
before the claims of the Government and other creditors. Thus not even
tax claims could have preference over the workers claim. (Emphasis
added).
2.08.6. Finally, Quoting From The PCIB Case Again
Lastly, it must be noted that the amount claimed by petitioner PNB for
the satisfaction of the obligations of AMEX is relatively insubstantial and is
not significant enough as to drain its coffers. By contrast, that same amount
could mean subsistence or starvation for the workingman. Quoting further
from Philippine Commercial and Industrial Bank, this Court supports the
equitable principle that it is but humane and partakes of the divine
that labor, as human beings, must be treated over and above chattels,
machineries and other kinds of properties and the interests of the
employer who can afford and survive the hardships of life better
than their workers. Universal sense of human justice, not to speak of our
specific social justice and protection to labor constitutional injunctions dictate
the preferential lien that the above provision accord to labor. In line with this
policy, measures must be undertaken to ensure that such constitutional mandate
on protection to labor is not rendered meaningless by an erroneous
interpretation of the applicable laws. (Emphasis added)
Score: Workers preference -3; Mortgagees lien 2.
5 0 IBP JOURNAL
Notably, in the three (3) cases decided in favor of workers preference, the
first was declared a misconception, the second involved fraud against the workers
while in the third there was failure to appeal the Labor Arbiters decision.
2.09. DBP vs. NLRC, 183 SCRA 328 (19 March 1990)
Exactly three (3) months after the foregoing PNB ruling was promulgated, the
Supreme Court, in another en-banc Decision, this time written by Justice Melencio-
Herrera who was the ponente in the Ransom case, and concurred in by Justice
Gancayco who was also the ponente in the just discussed PNB case, once again decided
in favor of the foreclosing mortgagee and against the workers of the mortgagor, as regards
the mortgaged properties of the mortgagor, thereby once again upholding the
harmony of the kindred provisions of the Insolvency Law, the Civil Code and the
Labor Code on the classification and concurrence of credits. In this third DBP case,
the Supreme Court reverted once again to its rulings in Republic vs. Peralta, supra,
as well as in the first DBP case decided only a year prior to this third DBP case.
Stressing that the workers right under Art. 110 of the Labor Code confers
only a preference which do not attach to specific properties unlike a lien such as a
mortgagees lien which creates a charge on particular property and that the preference
of workers under Art. 110 can only exist in a distribution proceeding such as
insolvency, and citing the cases of both De Barretto vs. Villanueva, supra, and PSB
vs. Lantin, supra, the Supreme Court spoke in the words of Republic vs. Peralta all
over again, reiterating that Art. 110 of the Labor Code cannot be viewed in isolation,
that kindred provisions of said Code must be made to harmonize with the Civil
Code and the Insolvency Law, the principal objective being to effect an equitable
distribution of the insolvents property among its creditors, etc.
Notably, Justice Cruz who dissented in the Peralta case, again dissented in this
case, this time together with Justices Padilla and Sarmiento. Also, Justice Paras
concurred with the Dissent of Justice Padilla.
2.09.1. The Court thus reiterated the following rulings, which for
convenience, they even numbered
1. Because of its impact on the entire system of credit, Article
110 of the Labor Code cannot be viewed in isolation but must
be read in relation to the Civil Code scheme on classification
and preference of credits. (Emphasis added)
x x x x x
2. In the same way that the Civil Code provisions on classification of
credits and the Insolvency Law have been brought into harmony, so also
must the kindred provisions of the Labor Law be made to harmonize
with those laws. (Emphasis added)
3. In the event of insolvency, a principal objective should be to effect
an equitable distribution of the insolvents property among his creditors.
To accomplish this there must first be some proceeding where
notice to all of the insolvents creditors may be given and
where the claims of preferred creditors may be bindingly
adjudicated (De Barretto vs. Villanueva, No. L-14938, December 29, 1962,
6 SCRA 928). The rationale therefor has been expressed in the recent
case of DBP vs. Secretary of Labor (G.R. No. 79351, 28 November 1989).
(Emphasis added)
x x x x x
4. A distinction should be made between a preference of credit and a
lien. A preference applies only to claims which do not attach to specific
properties. A lien creates a charge on a particular property. The right
of first preference as regards unpaid wages recognized by Article
110 does not constitute a lien on the property of the insolvent
debtor in favor of workers. It is but a preference of credit in
their favor, a preference in application. It is a method adopted to
determine and specify the order in which credits should be paid in the
final distribution of the proceeds of the insolvents assets. It is a right to
a first preference in the discharge of the funds of the judgment debtor.
(Emphasis added)
x x x x x
5. The DBP anchors its claims on a mortgage credit. A mortgage
directly and immediately subjects the property upon which it
is imposed, whoever the possessor may be, to the fulfillment
of the obligation for whose security it was constituted (Article
2176, Civil Code). It creates a real right which is enforceable against the
whole world. It is a lien on an identified immovable property,
which a preference is not. A recorded mortgage credit is a special
preferred credit under Article 2242 (5) of the Civil Code on classification
of credits. The preference given by Article 110, when not falling within
Article 2241 (6) and Article 2242 (3) of the Civil Code and not attached
to any specific property, is an ordinary preferred credit although its impact
is to move it from second priority to first priority in the order of
preference established by Article 2244 of the Civil Code (Republic vs.
Peralta, supra). (Emphasis added)
However, as if it still had some lingering doubts, the Supreme Court made two
(2) statements in this third DBP case which we believe requires some special attention.
The Supreme Court ruled:
5 2 IBP JOURNAL
2.09.2. On the superiority of workers preference over Government
claims
The amendment expands worker preference to cover not only unpaid
wages but also other monetary claims to which even claims of the Government
must be deemed subordinate.
With regard to the above statement, we respectfully hazard the view that
since the Highest Court reiterated the distinction between a preference and a
lien in this case, the only Government claims which could be deemed
subordinate to workers preference under Art. 110 of the Labor Code, are
those provided in Art. 2244 of the Civil Code, particularly paragraph nos. 9,
10 and 11 on taxes and assessments due the national, provincial and
municipal/city governments, respectively. Surely, it cannot possibly refer to
the Duties, taxes and fees due thereon to the State or any subdivision thereof,
or to Taxes due upon the land or building provided under Art. 2241 paragraph
No. 1, and Art. 2242 paragraph No. 1, concerning movables and immovables/
real rights, respectively. This is because while Art. 2244 (under which workers
preference is considered number 1 because of Art. 110 of the Labor Code)
pertains only to the order of preference of claims as enumerated in said Article,
Arts. 2241 and 2242 pertain to the liens on particular movables and immovables/
real rights to which they attach.
2.09.3. Granting Arguendo that workers have absolute preference
pursuant to Art. 110 of the Labor Code
Even if Article 110 and its Implementing Rule, as amended, should be
interpreted to mean absolute preference, the same should be given only
prospective effect in line with the cardinal rule that laws shall have no retroactive
effect, unless the contrary is provided (Article 4, Civil Code).
On the understanding of the aforequoted statement to mean that the
Supreme Court, while ruling against workers claim and in favor of mortgagees
claim, nevertheless entertains the idea of ruling in favor of workers if the
mortgage is not in place at the time of liquidation, again, we respectfully hazard
the opinion that this statement of the Highest Court of the land, does not
necessarily mean acceptance of the absolute preference of workers claim,
because it is merely a supposition, hence an obiter dictum. If is not treated as an
obiter statement, it could throw havoc on the stability of the Courts rulings
on workers preference.
2.09.4. Dissenting Opinions
(a) CRUZ, J., dissenting:
I was the lone dissenter in Republic v. Peralta, 150 SCRA 37, which is
the mainstay of the present majority ponencia. Even then, I was convinced
that it was the intention of the legislature to give absolute preference to the
workers claims pursuant to the social justice policy. The amendment of Article
110 of the Labor Code only strengthens that conviction and, I like to think,
vindicates my original position. I reiterate it now and repeat that:
Social Justice is not a mere catchphrase to be mouthed with sham
fervor in Labor Day celebrations for the delectation and seduction of
the working class. It is a mandate we should pursue with energy and
sincerity if we are to truly insure the dignity and well-being of the laborer.
I am proud to dissent once again on the side of labor.
(b) PADILLA, J., dissenting:
The majority holds that LAND may not enforce its first preference in
the satisfaction of unpaid monetary claims of its members, viz. LIRAGs worker,
over that of DBP, in the absence of a formal declaration of bankruptcy or
judicial liquidation of LIRAGs business.
I regret that I cannot join the majority ruling in the light of the amendment
to Article 110 of the Labor Code by Republic Act 6715, approved on 2 March
1989, and the resultant amendment of Section 10, Rule VIII Book III of the
Revised Rules and Regulations Implementing the Labor Code.
The majority, in my considered opinion, has failed to fully take into
account the radical change introduced by Republic Act 6715 into the system of
priorities or preferences among credits or creditors ordained by the Civil Code.
Under the provisions of the Civil Code, specifically, Articles 2241 and
2242, jointly with Articles 2246 to 2249, a two-tier order of preference of
credits is established. The first tier includes only taxes, duties and fees on
specific movable or immovable property. All other special preferred credits
stand on a second tier.
With the amendment of Article 110 of the Labor Code by Republic Act
6715, a three-tier order of preference is established wherein unpaid wages
and other monetary claims of workers enjoy absolute preference over all other
claims, including those of the Government, in cases where a debtor-employer
is unable to pay in full all his obligations. The absolute preference given to
monetary claims of workers, to which claims of the Government, i.e., taxes,
are now subordinated, manifests the clear and deliberate intent of our lawmaker
to put flesh and blood into the expressed Constitutional policy of protecting
the rights of workers and promoting their welfare.
5 4 IBP JOURNAL
I thus take exception to the proposition that a prior formal declaration of
insolvency or bankruptcy or a judicial liquidation of the employers business is
a condition sine qua non to the operation of the preference accorded to workers
under Article 110 of the Labor Code, for the following specific reasons:
First, the majority reads into the aforesaid law and implementing
rule a qualification that is not there. Nowhere is it stated in the present
law and its new implementing rule that a prior declaration of bankruptcy or
judicial liquidation is a condition sine qua non to the operation of Article 110. In
fact, it will be noted that the phrase declaration of bankruptcy or judicial liquidation
of the employers business, which formerly appeared in Section 10, Rule VIII, Book
III of the Revised Rules and Regulations Implementing the Labor Code has
been deleted in the new implementing rule. What is to me even more obvious
and, therefore, significant in the present law and implementing new rule is the
unconditional and unqualified grant of priority to workers monetary claims over
and above all other claims as against all the assets of an employer incapable of
fully paying his obligations.
Second, a proceeding in rem, by its nature, seeks to bar any other person
who claims any interest in the property or right subject of the suit. To my
mind, such a proceeding is not essential or necessary to enforce the
workers preferential right over the assets of the insolvent debtor
as against other creditors of the lower tier, as Article 110 of the Labor Code
itself bars the satisfaction of claims of other creditors, including the Government,
until unpaid wages and monetary claims of the workers are first satisfied in full.
Further, it appears that such a proceeding is essential only where the credits
are concurring and enjoy no preference over one another, but not when the
law accords to one of the credits absolute priority and undisputed supremacy.
In sum, it is to me clear that, whether or not there be a judicial proceeding
in rem, i.e., insolvency, bankruptcy or liquidation proceedings, the fact remains
that Congress intends that the assets of the insolvent debtor be held, first and
above all else, to satisfy in full the unpaid wages and monetary claims of its
workers. Translated into the case at bar, a formal declaration of insolvency or
bankruptcy or judicial liquidation of the employers business should not be a
price imposed upon the workers to enable them to get their much needed and
already adjudicated unpaid wages. This position, I believe, is only in keeping
with a fundamental state policy enshrined in the Constitutional mandate to
accord protection to labor. The legislative intent being clear and manifest, it is
the duty of this Court, I submit, not to decimate but to give it breath and life.
ACCORDINGLY, I vote to DISMISS the DBP petition and to AFFIRM
the resolution of the NLRC in favor of LAND. (Emphasis added)
(c) SARMIENTO, J., Dissenting:
I join Mr. Justice Teodoro Padilla in his dissent. It is also my considered
opinion that under Republic Act No. 6715, the payment of unpaid wages and
other benefits to labor enjoys preference over all other indebtedness, including
taxes, of management, with or without a declaration of insolvency.
It is likewise so, because labor enjoys protection not only from statute
but from the very Constitution. Thus:
Sec. 18. The State affirms labor as a primary social economic force. It
shall protect the rights of workers and promote their welfare. (Article II)
x x x x x
Sec. 3. The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full employment
and equality or employment opportunities for all.
It shall 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. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. They shall also participate
in policy and decision-making processes affecting their rights and benefits as
may be provided by law.
The State shall promote the principle of shared responsibility between
workers and employers and the preferential use of voluntary modes in settling
disputes, including conciliation, and shall enforce their mutual compliance
therewith to foster industrial peace.
The State shall regulate the relations between workers and employers
recognizing the right of labor to its just share in the fruits of production and
the right of enterprises to reasonable returns on investments, and to expansion
and growth. (Article XIII) (Emphasis added)
(d) PARAS J., dissenting:
I concur with J. Padillas dissent.
Score: Workers preference 3; Mortgagees lien 3.
2.10. Bolinao, Jr. vs. Padolina, 186 SCRA 368 (06 June 1990)
In this case involving the claim of garnishing creditors versus the claim of workers
under Art. 110 of the Labor Code, the Supreme Court, thru Justice Paras, again
upheld the need for a declaration of bankruptcy or a judicial liquidation proceedings
5 6 IBP JOURNAL
before the workers preference may be enforced. Citing Republic vs. Peralta, supra,
and DBP vs. Santos (the first DBP case), the Highest Court reiterated that:
2.10.1. On the need for declaration of bankruptcy or a judicial
liquidation proceedings
It is quite clear from the provisions of Article 110 of the Labor Code
and Section 10, Rule VIII, Book III of the Revised Rules and Regulations
Implementing the Labor Code, that a declaration of bankruptcy or a judicial
liquidation must be present before the workers preference may be enforced.
Thus, it was held that Article 110 of the Labor Code and its
implementing rule cannot be invoked absent a formal declaration
of bankruptcy or a liquidation order (Development Bank of the Philippines vs.
Labor Arbiter, G.R. Nos. 78261-62, March 8, 1989). (Emphasis supplied)
In the case at bar, there was no showing of any insolvency proceeding or
declaration of bankruptcy or judicial liquidation that was being filed by Sabena
Mining Corporation. It is only an extra-judicial foreclosure that was being
enunciated as when DBP extra-judicially foreclosed the assets of Sabena Mining
Corporation. Conversely, to hold that Article 110 is also applicable in extra-
judicial proceedings would be putting the worker in a better position than the
State which could only assert its own prior preference in case of a judicial
proceeding. Article 110 must not be viewed in isolation and must always be
reckoned with the provisions of the Civil Code (DBP v. Labor Arbiter, supra).
Amazingly, the Decision did not bother to cite the third DBP case which
was decided along the same legal arguments, only two-and a half (2 ) months
earlier. Justices Padilla and Sarmiento also dissented from the Decision in this
Bolinao case.
2.10.2. Dissenting Opinions
(a) PADILLA, J. dissenting:
I dissent for the same reasons stated in my dissent in DBP vs. NLRC,
G.R. Nos. 82763- 64, 19 March 1990.
(b) SARMIENTO, J. dissenting:
I reiterate my dissent in Development Bank of the Philippines vs. National
Labor Relations Commission. I also adopt Mr. Justice Teodoro Padillas dissent
therein, insofar as he holds that under Article 110 of the Labor Code, as
amended, by Republic Act No. 6715, workers enjoy absolute
preference as and for unpaid wages and other monetary claims,
over and above taxes due to the government and claims of creditors,
and subject to no prior declaration of bankruptcy or judicial order
of liquidation. I find his opinion to be not only in accord with the explicit
language of Republic Act No. 6715, but, as I held in my own dissent, consistent
with the express decree of the Constitution affording full protection to labor.
While I agree that prior to its amendment, Article 110 was couched in
arguable terms, that is, a declaration of insolvency was necessary before labor
may claim preference, Republic Act No. 6715 has laid the debate to rest. The
very language of the Act:
SECTION 1. Article 110 of Presidential Decree No. 442, as amended,
otherwise known as the Labor Code of the Philippines, is hereby further
amended to read as follows:
ART. 110. Worker Preference in case of bankruptcy. In the event of bankruptcy
or liquidation of an employers business, his workers shall enjoy first preference
as regards their unpaid wages and other monetary claims, any provision of law
to the contrary notwithstanding. Such unpaid wages and monetary claims shall
be paid in full before the claims of the Government and other creditors may
be paid.
convinces this writer that the Congressional intent was precisely to settle
the argument-in favor of absolute worker preference.(Emphasis added).
Score: Workers preference -3; Mortgagees lien 4.
2.11. DBP vs. NLRC, 186 SCRA 841 (27 June 1990)
This fourth DBP case on workers preference was decided only three (3) weeks
after the Bolinao case. The Supreme Court, thru Justice Regalado, denied the
monetary claims of the employees of mortgagor Philippine Smelters Corp. whose
mortgage was foreclosed by DBP citing the first DBP case, DBP vs. Santos, supra, and
the earlier cases of De Barretto and PSB vs. Lantin, supra, The Supreme Court reiterated
the need for a declaration of bankruptcy or a judicial liquidation proceeding before
workers preference may be enforced. Ruled the Supreme Court:
2.11.1. On the need for a declaration of bankruptcy or a judicial
liquidation proceeding
The pivotal issue for resolution is whether DBP, as foreclosing creditor,
could be held liable for the unpaid wages, 13th month pay, incentive leave pay
and separation pay of the employees of PSC.
We rule in the negative.
5 8 IBP JOURNAL
During the dates material to the foregoing proceedings, Article 110 of
the Labor Code read:
Art. 110. Worker preference in case of bankruptcy. In the event of
bankruptcy or liquidation of an employers business, his workers shall
enjoy first preference as regards wages due them for services rendered
during the period prior to the bankruptcy or liquidation, any provision
of law to the contrary notwithstanding. Unpaid wages shall be paid in full
before other creditors may establish any claim to a share in the assets of
the employer.
x x x x x
Interpreting the above provisions, this Court, in Development Bank of the
Philippines vs. Hon. Labor Arbiter Ariel C. Santos, et al. 171 SCRA 138 (1989),
explicated as follows:
It is quite clear from the provisions that a declaration of bankruptcy or
a judicial liquidation must be present before the workers preference may be
enforced. ... . (Emphasis added).
2.11.2. Rationale for the necessity of a judicial proceedings
Moreover, the reason behind the necessity for a judicial proceeding or
a proceeding in rem before the concurrence and preference of credits may be
applied was explained by this Court in the case of Philippine Savings Bank v.
Lantin (124 SCRA 476 [1983]). We said:
The proceedings in the court below do not partake of the nature of the
insolvency proceedings or settlement of a decedents estate. The action filed
by Ramos was only to collect the unpaid cost of the construction of the duplex
apartment. It is far from being a general liquidation of the estate of the Tabligan
spouses.
Insolvency proceedings and settlement of a decedents estate are both
proceedings in rem which are binding against the whole world. All persons
having interest in the subject matter involved, whether they were notified or
not, are equally bound. Consequently, a liquidation of similar import or
other equivalent general liquidation must also necessarily be a
proceeding in rem so that all interested persons whether known to
the parties or not may be bound by such proceeding.
x x x x x
The claims of all creditors whether preferred or non- preferred, the
Identification of the preferred ones and the totality of the employers asset
should be brought into the picture. There can then be an authoritative, fair,
and binding adjudication instead of the piece meal settlement which would
result from the questioned decision in this case. (Emphasis added)
2.11.3. On the effects of the amendments of Art. 110.- The Supreme
Court, citing the cases of DBP vs. Santos supra, and the third DBP case, DBP
vs. NLRC 183 SCRA 328 (19 march 1990) which was decided by the Court en-
banc, noted that the same interpretation was earlier adopted in those cases.
Despite said amendments, however, the same interpretation of Article
110 as applied in the aforesaid case of Development Bank of the Philippines
vs. Hon. Labor Arbiter Ariel C. Santos, et al., supra, was adopted by this
Court in the recent case of Development Bank of the Philippines vs. National
Labor Relations Commission, et. al., 183 SCRA 328 (19 March 1990) For
facility of reference, especially the rationalization for the conclusions reached
therein, we reproduce the salient portions of the decision in this later case.
Notably, the terms declaration of bankruptcy or judicial liquidation have
been eliminated. Does this mean then that liquidation proceedings have been
done away with?
We opine in the negative, upon the following considerations:
1. Because of its impact on the entire system of credit, Article 110 of the Labor
Code cannot be viewed in isolation but must be read in relation to the
Civil Code scheme on classification and preference of credits.
x x x x x
2. In the same way that the Civil Code provisions on classification of credits
and the Insolvency Law have been brought into harmony, so also must the
kindred provisions of the Labor Law be made to harmonize with
those laws.
3.In the event of insolvency, a principal objective should be to effect an
equitable distribution of the insolvents property among his creditors. To
accomplish this there must first be some proceeding where notice to
all of the insolvents creditors may be given and where the claims
of preferred creditors may be bindingly adjudicated (De Barretto vs.
Villanueva, No. L-14938, December 29, 1962, 6 SCRA 928). The rationale
therefor has been expressed in the recent case of DBP vs. Secretary of Labor
(G.R. No. 79351, 28 November 1989)
x x x x x
4. A distinction should be made between a preference of credit and
a lien. A preference applies only to claims which do not attach to specific
6 0 IBP JOURNAL
properties. A lien creates a charge on a particular property. The right of first
preference as regards unpaid wages recognize by Article 110 does not constitute
a lien on the property of the insolvent debtor in favor of workers. It is but a
preference of credit in their favor, a preference in application. It is a method
adopted to determine and specify the order in which credits should be paid in
the final distribution of the proceeds of the insolvents assets- It is a right to a
first preference in the discharge of the funds of the judgment debtor.
x x x x x
5.The DBP anchors its claim on a mortgage credit. A mortgage directly and
immediately subjects the property upon which it is imposed, whoever the
possessor may be, to the fulfillment of the obligation for whose security it was
constituted (Article 2176, Civil Code). It creates a real right which is
enforceable against the whole world. It is a lien on an identified
immovable property, which a preference is not.
x x x x x
6.Even if Article 110 and its Implementing Rule, as amended, should be
interpreted to mean absolute preference, the same should be given
only prospective effect in line with the cardinal rule that laws shall have no
retroactive effect, unless the contrary is provided (Article 4, Civil Code)
x x x x x
In fine, the right to preference given to workers under Article 110 of the
Labor Code cannot exist in any effective way prior to the time of
its presentation in distribution proceedings. It will find application when,
in proceedings such as insolvency, such unpaid wages shall be paid in full before
the claims of the Government and other creditors may be paid. (Emphasis
added).
2.11.4. SARMIENTO, J., dissenting:
As I held in DBP vs. NLRC and more recently, in Bolinao vs. Padolina,
that on account of the amendment introduced by Republic Act No. 6715.
workers now enjoy absolute preference in the payment of labor claims, above
and beyond taxes due from the Government, and credits belonging to private
persons. As I said therein, Republic Act No. 6715 was enacted, precisely, to
work more favorable terms to labor- because prior to the amendment, labor
enjoyed no preference. I am afraid that the majority has misread the clear
intent of the legislature.
Score: Workers preference 3; Mortgagees lien 5.
2.12. Banco Filipino Savings and Mortgage Bank vs. NLRC, 188
SCRA 700 (20 August 1990)
This case the Decision of which was penned by Justice Midealdea, involved
the money claim of a worker against a bank employer which was placed under receivership
and later ordered liquidated by the Monetary Board of the Central Bank, although
the liquidation was subsequently enjoined by the Supreme Court. In such case, the
Supreme Court ruled that the labor arbiter whose jurisdiction is not lost,
may continue to hear the workers money claim.
As regards the payment of the workers claim, however, the Supreme Court,
quoting Barretto vs. Villanueva supra, ruled that the payment may not yet be
effected until the free property is determined. The Highest Court also
reiterated its position as to the significance of Art. 110 of the Labor Code in the
scheme of concurrence and preference of credit by quoting Peralta and the third
DBP case (DBP vs. NLRC, 183 SCRA 328; 19 March 1990). The Supreme Court
ruled:
2.12.1. On the significance of Art. 110
In Republic v. Peralta, supra the majority of this Court was of the opinion
that the above quoted provision did not upgrade the workers claim as absolutely
preferred credit. There We explained that the provision did not alter
Articles 2241 and 2242 of the Civil Code so much so that creditors
with liens over a certain property are still given special preference
over the proceeds of that property. And it is only after these specially
preferred credits are satisfied may the ordinary preferred credits enumerated
in Article 2244 of the Civil Code be paid according to their order of priority.
The significance of Article 110 in the scheme of concurrence and
preference of credit is to raise the workers money claim into first
priority under Article 2244. (See also Development Bank of the Philippines
v. NLRC, G.R. Nos. 82763-64, March 19, 1990). (Emphasis added)
2.12.2. As to when the workers claim may be paid
Not being an absolutely preferred credit, as taxes are under
Articles 2241 (1) and 2242 (1), Dizons claims cannot be paid ahead
of other credits and outside of the liquidation proceeding because
the free property or the property left after the creditors mentioned
in Articles 2241 and 2242 are paid has not yet been determined (See
Barreto v. Villanueva, No. L-14938, December 29, 1962, 6 SCRA 928). In the
words of Lipana v. Development Bank of Rizal, No. 73884, September 24, 1987,
154 SCRA 257, 261, to execute the judgment would unduly deplete the assets
of respondent bank to the obvious prejudice of other [depositors and] creditors.
6 2 IBP JOURNAL
Thus, Dizons adjudicated claims should be submitted to the
liquidators for processing. If, of course, it is later determined that Banco
Filipinos liquidation is improper then the NLRCS decision may be executed
under normal procedure. If the contrary is proven, however, and the banks
liquidation should proceed, Dizons established claims should be treated
as an ordinary preferred credit enjoying first preference under Art.
2244 of the Civil Code. (Emphasis added).
Score: Employer 0; Workers 1
2.13. Philippine Veterans Bank Employees Union-NUBE vs. Philippine
Veterans Bank, 189 SCRA 14 (24 August 1990)
Just when jurisprudence on the matter appears stable already, only four
(4) days later, another ruling is issued in a case involving workers and their employer
which may be misinterpreted to mean that workers claim of first preference
under Art. 2244 of the Civil Code may supercede all Government claims
including those for Duties, taxes and fees under Art. 2241 No. 1 and Taxes
due upon the land or building under Art. 2242 No. 1. In its en-banc Decision,
the Supreme Court, thru Justice Cruz, ruled that even members of the Board
of Directors of a bank under liquidation may claim retirement benefits if this
is so provided in the retirement Plan of the Bank; but their claim as managerial
employees, is subordinate to that of the rank-and-file employees. The Supreme
Court also added, rather matter-of-factly because this was not raised as an
issue, that such workers claims must be accorded priority over all
other claims, even of the Government itself, quoting Art. 110. The
Supreme Court ruled:
2.13.1. Directors can claim retirement benefits if they are covered
by the employers Retirement Plan
As regards the claims of Marking and Mejia for the payment of their
retirement benefits, which we restrained temporarily x x x we find with the
public respondents that such payment is in order. We so hold, considering
that although the said retirees are members of the board of directors, they are
nevertheless covered by the Retirement Plan of the Bank..
x x x x x
2.13.2. Claim of rank and file employees under Art. 110 of the
Labor Code accorded priority over all other claims, including those
of directors and all other creditors and even of the Government
itsel f
However, for purposes of the application of Article 110 of the Labor
Code, the said directors must be considered managerial employees, or officers,
and so not entitled to the preference of claims granted thereunder to workers
in general or the rank-and-file employees. The claims of these workers
must be accorded priority over all other claims, including those of
the said directors, and indeed even of the Government itself. This
provision as amended by Republic Act No. 6715, reads as follows:
Article 110. Worker preference in case of bankruptcy. In the event of bankruptcy
or liquidation of an employers business, his workers shall enjoy first
preference as regards their unpaid wages and other monetary claims, any
provision of law to the contrary notwithstanding. Such unpaid wages and
monetary claims shall be paid in full before the claims of the Government and other
creditors may be paid. (Amendments italicized).
Score: Employer - 0; Workers - 2.
Keeping tab on the score, the Decision in this case was in favor of the workers
and against the Government. Notably, however, there was no tax claim involved
whatsoever, and the issue was not even raised in the case. Obviously, the courts
reference to the Government claim was an obiter, because the issue only involved
the workers and their employer.
2.14. Chua vs. NLRC, 190 SCRA 558 (17 October 1990)
This case the Decision of which was penned by Justice Gutierrez, Jr., involved
liquidation proceedings in the Securities and Exchange Commission (SEC). The
Supreme Court, citing PSB vs. Lantin, supra and DBP vs. Santos, supra, (first DBP case),
reiterated that liquidation proceedings are proceedings in rem wherein all claims of
creditors whether preferred or not may be filed. Where labor claims are filed in
such proceedings, the labor arbiter may not insist on exercising its jurisdiction over
the workers money claims. The Supreme Court held:
2.14.1. Insolvency proceedings are proceedings in rem
An insolvency proceeding is similar to the settlement of a
decedents estate in that it is a proceeding in rem and is binding
against the whole world. Therefore, all persons which have interest
in the subject matter involved, whether or not they are given notice
are equally bound. Thus, a liquidation of similar import or other equivalent
general liquidation must also necessarily be a proceeding in rem so that all
other interested persons whether known to the parties or not may be bound
by such proceedings. (Philippine Savings Bank vs. Lantin, 124 SCRA 476 [1983];
(Emphasis supplied)
x x x x x
6 4 IBP JOURNAL
2.14.2. All claims of creditors must be filed in the judicial liquidation
proceedings
x x x x x
The rule is that a declaration of bankruptcy or a judicial
liquidation must be present before preferences over various money
claims may be enforced. Since a liquidation proceeding is a
proceeding in rem, all claims of creditors whether preferred or
non-preferred, the Identification of the preferred ones and the
totality of the employers asset should be brought into the picture.
There can then be an authoritative, fair and binding adjudication.
(See Development Bank of the Philippines v. Santos, 171 SCRA 138 [1989]). (Emphasis
added)
2.14.3. NLRC cannot continue to exercise jurisdiction over money
claims of workers apart from judicial liquidation proceedings if
workers themselves reject NLRC jurisdiction
The money claims of workers pose a special problem of jurisdiction
when liquidation proceedings are on-going because of the highly preferred
nature given by law to said claims.
In these cases, however, the problem poses no particular difficulty because
the workers themselves have voluntarily opted to participate in the
liquidation proceedings. Their representatives in the MOA Liquidation
Committee participated in the discussions and proceedings which led to the
orders to distribute payments to the various claimants. The workers
themselves oppose the orders of the NLRC which have denied them to
speedy receipt of funds they urgently need. It is a grave abuse of discretion
on the part of NLRC to raise a technical question of its own
jurisdiction when the workers over whom it is raised reject the
assertion of that jurisdiction.
Consequently, the Solicitor Generals submission that the money claims
of Stanfords former employees pending with respondent Labor Arbiter
Dominador M. Cruz should be allowed to continue and that the money awards
be later presented to the Stanford Liquidation Committee is not the correct
solution. It would only spawn needless controversy, delays, and confusion.
(Emphasis added).
Notably, however, isnt jurisdiction conferred by law and the choice of the
litigants as to the court of proper jurisdiction does not matter for what matters is
what the law says? Also, if the rule is that if there are judicial liquidation proceedings
all claims must be filed with the Liquidator in such proceedings, the workers have
really no choice but to pursue their claim with the Liquidator, not with anyone else,
such as thru the NLRC or the Labor Arbiter. This rule must be followed, regardless
of what the creditors want.
No Score
2.15. National Development Co. vs. Philippine Veterans Bank, 192
SCRA 257 (10 December 1990)
In its en-banc Decision penned by Justice Cruz in this case which primarily
involved the constitutionality of PD No. 1717 (which Decree cancelled mortgage
liens and accrued interest and placed secured and unsecured creditors on equal footing
among others), the Supreme Court, quoting the third DBP case, (DBP vs. NLRC, 183
SCRA 328 [19 March 1990]), once again upheld the superiority of the claim of mortgage
creditors over workers claim. En route to this decision however, the Court declared
that the Government cannot decree the extinguishment of mortgage and accrued
interest since these are protected by the due process and contract clauses of the
Constitution. It thus declared PD No. 1717 unconstitutional, ruling that:
2.15.1. Disturbing provisions of PD No. 1717
The Court is especially disturbed by Section 4(1) of the decree, quoted
above, extinguishing all mortgages and other liens attaching to the assets of
AGRIX. It also notes, with equal concern, the restriction in Subsection (ii)
thereof that all unsecured obligations shall not bear interest and in Subsection
(iii) that all accrued interests, penalties or charges as of date hereof pertaining
to the obligations, whether secured or unsecured, shall not be recognized.
2.15.2. Invalid exercise of police power if public interest is not
sufficiently involved
A legislative act based on the police power requires the concurrence of
a lawful subject and a lawful method. In more familiar words, a) the
interest of the public generally, as distinguished from those of a particular
class, should justify the interference of the state; and b) the means employed
are reasonably necessary for the accomplishment of the purpose and not unduly
oppressive upon individuals.
Applying these criteria to the case at bar, the Court finds first of all that
the interest of the public are not sufficiently involved to warrant the interference
of the government with the private contracts of AGRIX. (Emphasis added)
2.15.3. Invalid exercise of police power if public interest is not
identified or explained
The public interest supposedly involved is not identified or explained.
It has not been shown that by the creation of the New Agrix, Inc. and the
6 6 IBP JOURNAL
extinction of the property rights of the creditors of AGRIX, the interests of
the public as a whole, as distinguished from those of a particular class, would
be promoted or protected.
2.15.4. Invalid exercise of police power if means employed are unduly
aggressive
Assuming there is a valid public interest involved, the Court still finds
that the means employed to rehabilitate AGRIX fall far short of the requirement
that they shall not be unduly oppressive.
2.15.5. Mortgage lien and interest on loan are property rights
protected by the Bill of Rights
A mortgage lien is a property right derived from contract and
so comes under the protection of the Bill of Rights. So do interests
on loans, as well as penalties and charges, which are also vested
rights once they accrue. Private property cannot simply be taken by law
from one person and given to another without compensation and any known
public purpose. This is plain arbitrariness and is not permitted under the
Constitution.
And not only is there arbitrary taking, there is discrimination as well. In
extinguishing the mortgage and other liens, the decree lumps the secured
creditors with the unsecured creditors and places them on the same level in
the prosecution of their respective claims. In this respect, all of them are
considered unsecured creditors.
2.15.6. Equal protection clause
Under the equal protection clause, all persons or things similarly situated
must be treated alike, both in the privileges conferred and the obligations
imposed. Conversely, all persons or things differently situated should be treated
differently. In the case at bar, persons differently situated are similarly treated,
in disregard of the principle that there should be equality only among equals.
2.15.7. Superiority of Mortgage creditors claim
It is worth noting that only recently in the case of the
Development bank of the Philippines v. NLRC (GR Nos. 82763-64,
March 19, 1990), we sustained the preference in payment of a
mortgage creditor as against the argument that the claims of laborers
should take precedence over all other claims, including those of the
government. In arriving at this ruling the Court recognized the
mortgage lien as a property right protected by the due process and
contract clauses notwithstanding the argument that the amendment
in Section 110 of the Labor Code was a proper exercise of the
police power. (Emphasis added).
Score: Workers preference - 3; Mortgagees lien - 6.

6 8 IBP JOURNAL
Abu Ghraib and Guantanamo:
The Importance of Religion in
Analyzing the Effects of Torture
By Adel A. Tamano*
You have heard that it was said, You shall love your neighbor and hate your enemy.
But I say to you, love your enemies, and pray for those who persecute you,
That you may be children of your heavenly Father, for he makes his sun rise
on the bad and the good, and causes rain to fall on the just and the unjust.
For if you love those who love you, what recompense will you have?
Do not the tax collectors do the same?
And if you greet your brothers only, what is unusual about that?
Do not the pagans do the same?
So be perfect, just as your heavenly Father is perfect.
- 5 Matthew, Verses 43 - 48
Introduction
It might seem inappropriate to begin a legal article on torture and cruel,
inhuman, or degrading treatment with a reference to religion; however, specifically
in regard the atrocities committed at the prison facility at Abu Ghraib in Iraq and at
the detention centre
1
at Guantanamo Bay, Cuba, which were committed by the U.S.
Military, it becomes self-evident that religion is a significant element to consider in
the analysis of what constitutes torture and cruel, inhuman, or degrading treatment.
That religion is important is apparent when one considers that the detainees at both
Abu Ghraib and Guantanamo were all of the Islamic faith and that a number of the
interrogation techniques used by the U.S authorities were specifically designed to
undermine and offend the religious sensitivities of the detainees.
2
* The author obtained his Masters Degree in Law from Harvard Law School (2005) and his Masters Degree in
Public Administration from the University of the Philippines (2003). Atty. Tamano is a Professor of Law of the Far
Eastern University. He is the author of the Handbook on Impeachment under the 1987 Constitution.
1 Over 700 persons, some of them children as young as 13 years old, from forty-four countries have been
detained here. (See: http://hrw.org/; http://www.hrw.org/english/docs/2004/01/29/usint7117_txt.htm)
2 Paisley Dodds, Gitmo Soldier Details Sexual Tactics, Associated Press, January 28, 2005 (Available at: http://
abcnews.go.com/International/wireStory?id=448004, Site last visited: February 8, 2005 )
7 0 IBP JOURNAL
Adel A. Tamano
On a more fundamental level, the reference to religion is appropriate as these
biblical verses fittingly point to the moral ethos that forms the foundation of the
modern proscription against torture and underscores the need for humane treatment
of those who, in the current socio-political climate within the context of the global
war on terrorism, are seen as the most terrible of enemies.
Torture and cruel, inhuman, or degrading treatment, regrettably, remains a
bane of the modern world in spite of the condemnation of the practice by the
international community. It persists as an indiscriminate worldwide phenomenon
afflicting all - democracies and dictatorships, Muslims and Christians, Asians and
Americans alike. Yet despite its universality, the offence has a significant subjective
and personal component, which is where religion as a factor for analysis and study
comes into play.
This paper shall show, through the experience of Abu Ghraib and Guantanamo,
that torture and cruel, inhuman, or degrading treatment should be viewed through
the victims perspective taking into account the subjective element of the individual
and, appropriately, the persons religious background. Accordingly, religion is
submitted to be one of the important factors that must be considered in the analysis
of what constitutes torture and cruel, inhuman, and degrading treatment.
While objective legal standards are important in analyzing what constitutes
torture and cruel, inhuman, or degrading treatment - such as the definitions under
international conventions proscribing torture and cruel, inhuman, or degrading
treatment - it is likewise essential to consider the subjective element, which is the
identity and personhood of the victim and how the acts may have special meaning or
consequences for him.
The paper will begin with a brief discussion on the history of torture in order
to establish the development of the modern conception of torture and cruel, inhuman,
or degrading treatment culminating in the present-day covenants that define and
proscribe the same.
Afterwards, torture and cruel, inhuman, or degrading treatment shall be defined
in greater detail and particularly in order to provide the objective element of the
offence as well as to show the distinction, under International Criminal Law, between
torture, as a distinct crime, and cruel, inhuman, or degrading treatment, which
has its own specific concept. The definition shall utilize recent cases on torture and
cruel, inhuman, or degrading treatment such as the Furundzija (1998) case of the
International Criminal Tribunal for Yugoslavia (ICTY) and the recent Van Der Ven v.
Netherlands (2003) case of the European court of Human Rights (ECHR) as well as
commentaries of specialists on the field of International Criminal Law to flesh out
the meaning of the term. More specifically, the landmark - and controversial - case of
Ireland v. the United Kingdom (1978) decided by the ECHR will be used to discuss the
distinction between torture and cruel, inhuman, or degrading treatment.
Abu Ghraib and Guantanamo: The Importance of Religion
in Analyzing the Effects of Torture
This distinction is important, as this will be the basis to show how the subjective
element of the victims personality and perspective becomes even more vital in
determining if an act constitutes cruel, inhuman, or degrading treatment. Specifically,
the atrocities in Abu Ghraib and Guantanamo will be used to demonstrate the
immense import that something as subjective as the victims religion has in the legal
analysis of torture and cruel, inhuman, and degrading treatment.
Focus on Cruel, Inhuman, and
Degrading Treatment
This paper will primarily focus on the issue of what constitutes cruel, inhuman,
or degrading treatment under International Criminal Law. As stated earlier, a
discussion and analysis of torture will be necessary as this concept is deeply inter-
linked with the notion of cruel, inhuman, or degrading treatment. However, it should
be emphasized that this paper shall deal primarily with the latter concept for the
simple reason that the specific atrocities committed at Abu Ghraib and Guantanamo
were so terrible and were such obvious acts of torture. In fact, the U.S. Militarys
own investigations on the matter produced a wealth of evidence detailing and thus
explicitly admitting - the torture committed at Abu Ghraib.
3
Consequently, as a matter of legal analysis, it is the inhuman treatment afforded
to the Abu Ghraib and Guantanamo detainees that were not as blatant and evident
violations of the torture conventions, which is of greater interest and will be the
centre of this study. This is because the subjective factors may play a greater role in
the assessment of what constitutes cruel, inhuman, or degrading treatment as
compared to actions that are more clearly and objectively torture.
History of Torture
The modern reader may be surprised to discover that the universal
condemnation of torture is a fairly recent phenomenon. In fact, for centuries torture
was viewed as a legitimate means of obtaining evidence. As history clearly
demonstrates, torture was not always prohibited.
4
On the contrary, it was deemed,
for a long period, perfectly legal.
5
The Greeks and Romans, ironically the founders
of the modern democratic system, were the first to systematically use torture.
6
Demosthenes and Aristotle expressed the view that torture was an effective method
3 See: Taguba Report On Treatment of Abu Ghraib Prisoners in Iraq (Also available on: http://news.findlaw.com/
hdocs/docs/iraq/tagubarpt.html#ThR1.9, Site last visited on February 3, 2005)
4 M. Cherif Bassiouni, Crimes Against Humanity in International Criminal Law, Second Edition, Kluwer Law
International Publisher, p. 333 (1999).
5 Id.
6 Matthew Lippman, The Development And Drafting Of The United Nations Convention Against Torture And Other Cruel
Inhuman Or Degrading Treatment Or Punishment, Boston College International & Comparative Law Review (1994).
7 2 IBP JOURNAL
Adel A. Tamano
for obtaining evidence.
7
Torture was initially employed only on slaves. Since slaves
were thought to lack moral rectitude, torture was therefore deemed a useful method
of ensuring testimonial reliability.
8
Eventually, the Romans started using torture on
citizens as well; specifically in regard the crime of treason.
9
The reasoning behind
the use of torture on citizens was that the commission of the crime of treason caused
a person to lose his rights.
10
Over time, political dissenters were subjected to torture.
11
The technique of choice for torture under the Romans was the rack: a wooden
frame mounted on rails that could be manoeuvred in order to agonizingly distend
the joints and muscles of the victim.
12
The Romans would also use hooks to tear
parts of the victims flesh and brands to burn a persons skin.
13
Roman lawyers,
however, acknowledged that torture did not always achieve the intended results
with victims admitting crimes in order to avoid pain.
14
Nonetheless, the use of torture
was never seriously questioned and the legal basis for torture under Roman Law
became the basis for the practice of torture in later times.
15
Later, from the fourth to the middle of the thirteenth century, the official
practice of torture by the State decreased as it was thought, under Christian Doctrine,
that the practice was inhuman.
16
Only when Pope Innocentius III granted authority
for torture of those considered as apostates, which was a precursor of the inquisition,
did torture become predominant.
17
Thus, from this time till the eighteenth century,
European jurists relied heavily on evidence extracted via torture.
18
The use of torture
was so rampant that it was termed the queen of proofs.
19
Eventually, the use of torture was considered inconsistent and irreconcilable
with the historical tide of rationality and humanity.
20
In 1764, Cesare Beccaria, an
Italian criminologist, wrote the most influential critique of torture arguing that the
use of torture was contrary to the principle that a finding of guilt had first to be
reached before the application of punishment and, more importantly, that the use of
torture rarely led to truthful testimony.
21
7 Dodds, supra, Note 2.
8 Bassiouni, supra, Note 4.
9 Id.
10 Id.
11 Id.
12 Id.
13 Id.
14 Chris Inglese, The UN Committee on Torture An Assessment, Kluwer Law International Publisher, pp. 24-25
(2001)
15 Id.
16 Id., p. 27.
17 Id.
18 Lippman, supra, Note 6.
19 Id.
20 Id.
21 Id.
Towards, the end of the seventeenth century, there was a change in the system
of legal evidence wherein absolute certainty in regard criminal guilt then only
reached, in the minds of the judges, after the use of torture was no longer absolutely
necessary for conviction and that the new benchmark was the judges inner subjective
certainty, based on evidence presented that a crime had been committed.
22
Accordingly, there was no longer any need for torture because suspects could be
convicted upon other valid evidentiary bases aside from their confessions.
23
It was
this watershed moment in the law of evidence that served as the catalyst for the
subsequent abolition of torture as an official state practice.
24
Concerning U.S. history, most Americans would answer in the negative if asked
whether torture has been a prominent part of the nations past.
25
However, torture,
in its different guises and labels, has been consistent feature of U.S. history.
26
Slaves
were often whipped for offences and, in the South, after the Civil war and well into
the 1930s, lynching of black men were committed in the interest of maintaining a
racist social order.
27
Moreover, the third degree, a euphemism for police brutality
in interrogation of suspects regardless of race, has also been an unfortunate part of
American history.
28
History of the Torture Conventions
It has been stated that the evolution of modern human rights law was in
response to World War II atrocities.
29
Modern human rights law, including the
condemnation of torture, was thus an effort to provide a moral and judicial
reckoning in response to the legacy of the conflict.
30
Totalitarian regimes, such as
those of Hitler and Stalin, had used torture as a means to subdue its people and
maintain their hold on power.
31
After the Second World War, the Allies, through the
Tokyo and Nuremberg Trials, sent a clear signal that torture was now held to be
morally unacceptable and that national law could no longer be used to justify the use
of torture.
32
22 Inglese, supra, Note 14, p. 28.
23 Id.
24 Id.
25 Sanford Levinson (Editor), Torture A Collection, Oxford University Press, p. 105 (2004)
26 Id.
27 Id.
28 Id., p.112-113
29 Winston P. Nagan and Lucy Atkins, The International Law of Torture: From Universal Proscription to Effective
Application and Enforcement, 14 Harv. Hum. Rts. J. 87
30 Id.
31 Inglese, supra, Note 14, p. 30.
32 Id.
7 4 IBP JOURNAL
Adel A. Tamano
Later, the UN Charter of 1945 became the embodiment of an effort to prescribe
obligations on States as a means to prevent the recurrence of atrocities.
33
Aggression,
peace, security, and fundamental human rights were the obligations that under girded
the establishment of the UN.
34
Later the UN would be the vehicle for declarations
and conventions specifically outlawing the use of torture.
The prohibition against torture and cruel, inhuman, or degrading treatment
on a worldwide level predates the Convention Against Torture and Other Cruel
Inhuman or Degrading Treatment or Punishment (1984) (hereinafter the Torture
Convention). As early as 1948, the Universal Declaration of Human Rights explicitly
proscribed torture in these terms: No one shall be subjected to torture or cruel,
inhuman or degrading punishment.
35
Later, on December 9, 1975, the United Nations General Assembly adopted
the Declaration on the Protection of All Persons from Being Subjected to Torture
and Other Cruel, Inhuman or Degrading Treatment or Punishment.
36
Although
non-binding, it was deemed a historic step towards the eradication of torture.
37
Subsequently, this prohibition on torture was adopted in a number of other
international human rights instruments, inter alia, the American Convention on
Human Rights (Article 5[3]), the International Covenant on Civil and Political Rights
(Article 7), and the Convention on the Rights of the Child, and the European
Convention on Human Rights.
38
As shall be discussed later in Furundzija (1998), the
prohibition against torture has ripened into customary law. The fact that numerous
international covenants contain a proscription against this offense strongly supports
the Furundzija ruling.
Definition of Torture
Torture is defined under the Torture Convention in Article 1 as follows:
1. For the purposes of this Convention, torture means any act by which
severe pain or suffering, whether physical or mental, is intentionally
inflicted on a person for such purposes as obtaining from him or a third
person information or a confession, punishing him for an act he or a
third person has committed or is suspected of having committed, or
intimidating or coercing him or a third person, or for any reason based
33 Nagan, supra, Note 29
34 Id.
35 Article 5, Universal Declaration of Human Rights
36 Adopted by General Assembly resolution 3452 (XXX) of 9 December 1975
37 Lippman, supra, Note 6.
38 Anthony Cullen, Defining Torture in International Law: A Critique of the Concept Employed by the European Court of
Human Rights, California Western International Law Journal (2003)
on discrimination of any kind, when such pain or suffering is inflicted by
or at the instigation of or with the consent or acquiescence of a public
official or other person acting in an official capacity. It does not include
pain or suffering arising only from, inherent in or incidental to lawful
sanctions.
It should be noted that the proscription against torture is not merely a right
established by convention but is deemed a part of Customary International Law.
39
In the Furundzija case decided by the International Criminal Tribunal for the former
Yugoslavia (ICTY), the Court stated that a number of factors indicated that the
torture prohibition is no longer a mere conventional - meaning based solely upon
treaty or convention - obligation upon States:
That these treaty provisions have ripened into customary
rules is evinced by various factors. First, these treaties and in
particular the Geneva Conventions have been ratified by practically all
States of the world. Admittedly those treaty provisions remain as such
and any contracting party is formally entitled to relieve itself of its
obligations by denouncing the treaty (an occurrence that seems extremely
unlikely in reality); nevertheless the practically universal participation in
these treaties shows that all States accept among other things the
prohibition of torture. In other words, this participation is highly indicative
of the attitude of States to the prohibition of torture. Secondly, no State
has ever claimed that it was authorised to practice torture in time of
armed conflict, nor has any State shown or manifested opposition to the
implementation of treaty provisions against torture. When a State has
been taken to task because its officials allegedly resorted to torture, it
has normally responded that the allegation was unfounded, thus expressly
or implicitly upholding the prohibition of this odious practice. Thirdly,
the International Court of Justice has authoritatively, albeit not with
express reference to torture, confirmed this custom-creating process: in
the Nicaragua case it held that common article 3 of the 1949 Geneva
Conventions, which inter alia prohibits torture against persons taking no
active part in hostilities, is now well-established as belonging to the corpus
of customary international law and is applicable both to international
and internal armed conflicts.
It therefore seems incontrovertible that torture in time
of armed conflict is prohibited by a general rule of international
law. In armed conf licts this rule may be applied both as part of
international customary law and if the requisite conditions are met - qua
treaty law, the content of the prohibition being the same.
(Emphasis supplied)
39 Prosecutor v. Furundzija, Case No.: IT-95-17/1-T, International Criminal Tribunal for the former Yugoslavia (1988)
7 6 IBP JOURNAL
Adel A. Tamano
Objective Elements of Torture
Under the Torture Convention, the following elements define the offence of
torture:
40
a. There must be an act or omission;
b. It results in pain or suffering;
c. The pain or suffering is of a certain gravity;
d. It is inflicted intentionally;
e. The infliction of pain or suffering has a specific objective;
f. It is carried out by the State;
g. It is imposed on someone who has been deprived of his liberty; and
h. It is not inherent or incidental to lawful sanctions.
These elements constitute the hard core or the unambiguous elements of
the definition of torture under the Torture Convention.
41
Although, there may still
be, admittedly, vague areas, these elements have attained wide consensus.
42
For the purposes of this paper, additional comment is necessary for the element
of severity or gravity as this relates to the issue of what differentiates or distinguishes
torture from cruel, inhuman, or degrading treatment. The pain inflicted must be of
a certain intensity or power.
43
However, the threshold of intensity of pain or the
standards to measure the intensity is not provided in the definition and it is, therefore,
only the victim that can bear witness to the severity of the pain inflicted.
44
This vagueness of standards, not merely in the Torture Convention but in
other conventions prohibiting torture, has been a basis for the claim of some accused
of torture that their acts have not reached such a level of severity as to amount to
torture. Examples of this are seen in the Ireland vs. United Kingdom case and in the
memoranda on torture issued by the U.S. Department of Justice for the Counsel to
the President (hereinafter Torture Memo).
45
According to the Torture Memo, which was issued to address concerns about
the treatment of detainees outside the United States subject to the U.S. war on
terror such as those in Afghanistan and Iraq, the U.S. standard for an act to be
deemed torture is that it must be of such gravity or severity to be equivalent to the
intensity of the pain accompanying serious physical injury such as organ failure,
impairment of bodily functions, or even death.
46
In regard mental pain or suffering,
40 Inglese, supra, Note 14, pp. 208-211 (See also: Antonio Cassese, International Criminal Law, Oxford Press, pp.
119-120).
41 Id.
42 Id.
43 Id.
44 Id.
45 U.S. Department of Justice, Office of Legal Counsel, Memorandum for R. Alberto Gonzalez, Counsel to the President
(Re: Standards of Conduct for Interrogation under 18 USCSS 2340-2340A), August 1, 2002
46 Id., paragraph 2, p. 1
it must be of such intensity to create psychological damage that lasts for months or
even years.
47
It is noted that there have been subsequent changes to the American position
on the torture issue. Nonetheless, the Torture Memo remains an important
document, especially for this papers analysis on the subjective element of torture.
The changes in the U.S. stance on torture is well captured by the following:
In a memorandum signed on February 7, 2002, President Bush stated that he
accept[ed] the legal conclusion of the Attorney General and the Department of
Justice that I have the authority under the Constitution to suspend [Geneva Accord
provisions dealing with the treatment of prisoners] as between the United States
and Afghanistan, but I decline to exercise that authority at this time. [I] reserve the
right to exercise this authority in this or future conflicts. The memorandum goes
on to assert that our values as a Nation [call] for us to treat detainees humanely,
including those who are not legally entitled to such treatment. [As] a matter of policy,
the United States Armed Forces shall continue to treat detainees humanely and, to
the extent appropriate and consistent with military necessity, in a manner consistent
with the principles of Geneva.
After the Office of Legal counsel memorandum became public in Spring, 2004,
the President disavowed its conclusions.
48
Concerns About the Meaning of Severity:
The Ireland Case and the Torture Memo
The issue of what level of severity is needed to constitute torture is not new.
As early as 1978, in the case of Ireland v. United Kingdom (1978), the ECHR formulated
a concept of torture that explained the level severity needed to be deemed torture.
The Court stated that there was a minimum level of severity needed for an act that
was merely ill-treatment to become torture. The case makes a distinction between
torture and cruel, inhuman, and degrading punishment based upon the intensity of
suffering inflicted.
The concept of torture in the Ireland case required an extreme amount of
suffering and that the pain applied had to be severe. Consequently, the test of severity
is an objective one and not necessarily considering the viewpoint of the victim in
regard that amount or nature of pain that is inflicted.
49
This objective test of severity,
that it must be an extreme type of suffering or pain that is inflicted, is in accordance
47 Id.
48 Geoffrey Stone, et al., Constitutional Law, 2004 Supplement, Aspen Publishers, p. 89
49 Anthony Cullen, Defining Torture In International Law A Critique of the Concept Employed by the European Court of
Human Rights, California Western International Law Journal (2003)
7 8 IBP JOURNAL
Adel A. Tamano
with the U.S. position on what constitutes the offence as shown by the Torture Memo.
Both the American approach and the ECHRs methodology did not consider using a
subjective test that would take into account the victims own assessment of the pain
or suffering inflicted.
50
The U.S. and ECHRs view on torture is very problematic in the sense that it
removes an extremely important factor in determining the gravity of suffering
inflicted, which is, very ironically, the victim himself.
51
In fact, in the Ireland case the
ECHR chose not to even call the witnesses to testify as to their own perceptions of
the ill-treatment that they received.
52
On a more elemental level, the focus on the
objective standard fails to consider the important fact that suffering is fundamentally
subjective
53
the victim is the best judge to say how much he has suffered at the
hands of his tormentors.
An even greater concern that has been raised in critiquing the ECHR decision
and by analogy the U.S. position in the Torture Memo is that it is an overly
narrow concept of torture such that only the most exceptionally brutal of acts would
constitute torture.
54
The Torture Memo clearly takes the narrow view in defining
torture as needing to cause pain or suffering equivalent to the amount of pain
associated with serious physical injury such as organ failure, impairment of bodily
functions, or even death and that mental torture must be of such power to create
psychological injury that lasts for months or even years.
55
Distinction between Torture and
Cruel, Inhuman, or Degrading Treatment
The Torture Convention not only proscribes torture but also cruel, inhuman,
or degrading treatment or punishment. The very definition of torture in the
Convention, excluding an explicit definition of cruel, inhuman, and degrading
treatment or punishment, implies a distinction between torture and cruel, inhuman,
or degrading treatment or punishment.
56
No definition of what constitutes cruel, inhuman, or degrading treatment or
punishment is found in the Torture Convention.
57
At the time of the Conventions
drafting, there was no universal agreement on the definition of cruel, inhuman, or
degrading treatment or punishment.
58
However, in the case of ECRM, Denmark,
50 Id.
51 Id.
52 Id.
53 Id.
54 Id.
55 Supra, Note 45.
56 Inglese, supra, Note 14, pp. 206-207.
57 Id.
58 Id.
Norway, Sweden and the Netherlands v. Greece (Greek Case)
59
of the ECHR, indicators of
whether an act constituted torture or cruel, inhuman, or degrading treatment or
punishment were implied:
60
a. Firstly, there must be a prohibition against the infliction of torture or
human or degrading treatment; and
b. All torture is considered to be a form of inhuman and degrading treatment.
The notion of inhuman treatment covers treatment that deliberately causes
severe suffering, mental or physical, which, in the particular situation, is
unjustified.
Accordingly, it is validly deduced that firstly, cruel, inhuman, or degrading
treatment or punishment is deemed a subset or a lower form of torture. As stated
explicitly be the ECHR in the above-cited case: torture constitutes an aggravated
and deliberated form of cruel, inhuman, or degrading treatment or punishment.
Secondly, as in the Ireland case, the line of distinction between torture and cruel,
inhuman, or degrading treatment is one of degree. Thus, torture is a higher level of
cruel, inhuman, or degrading treatment.
In Van Der Ven v. Netherlands (2003), the ECHR stated that in the analysis of
what constitutes the minimum standards of ill-treatment to constitute a violation of
the European Convention for the Prevention of Torture and Inhuman or Degrading
Treatment or Punishment (1984), it was essential to consider the all circumstances
of the case including the individual or subjective aspect of the victim his sex, age,
and state of health:
1. The Court reiterates at the outset that Article 3 of the Convention
enshrines one of the most fundamental values of democratic
society. It prohibits in absolute terms torture or inhuman or
degrading treatment or punishment, irrespective of the
circumstances and the victims behaviour (see, for example, Labita
v. Italy [GC], no. 26772/95, 119, ECHR 2000-IV).
2. The Court further reiterates that, according to its case-law, ill-treatment
must attain a minimum level of severity if it is to fall within the scope of
Article 3. The assessment of this minimum is relative; it depends
on all the circumstances of the case, such as the duration of the
treatment, its physical and mental effects and, in some cases,
the sex, age and state of health of the victim (see, among other
authorities, Ireland v. the United Kingdom, judgment of 18 January 1978,
Series A no. 25, p. 65, 162).
59 Report of November 5, 1969, Yearbook 12 (1969), p. 186
60 Bassiouni, Supra, Note 4
8 0 IBP JOURNAL
Adel A. Tamano
3. Treatment has been held by the Court to be inhuman because, inter
alia, it was premeditated, was applied for hours at a stretch and caused
either actual bodily injury or intense physical and mental suffering, and
also degrading because it was such as to arouse in the victims feeling of
fear, anguish and inferiority capable of humiliating and debasing them
(see, for example, KudBa v. Poland [GC], no. 30210/96, 92, ECHR
2000-XI). In order for a punishment or treatment associated
with it to be inhuman or degrading, the suffering or
humiliation involved must in any event go beyond that inevitable
element of suffering or humiliation connected with a given form
of legitimate treatment or punishment.
(Emphasis supplied)
The definitions provided by the foregoing cases do not provide a clear baseline
or point of demarcation between torture and cruel, inhuman, or degrading treatment.
This is problematic because it opens the possibility for the legal position that by
raising the baseline of what is considered torture so high, as in the Torture Memo
that equivocates torture to serious physical injury, that the acts committed, as long
as these do not reach very high levels of severity or suffering, will not be considered
as torture but are merely cruel, inhuman, or degrading treatment.
Importance of Subjective Element Islam
And the Victims Experience and Personhood
The foregoing discussions point to the importance of including the subjective
factor in the analysis of what constitutes torture and cruel, inhuman, or degrading
treatment. In Van Der Ven v. Netherlands (2003), the ECHR, in an apparent departure
from the objective test employed in the Ireland case, provided several subjective
factors to consider in assessing the minimum level of severity for an act to be
considered cruel, inhuman, or degrading treatment: sex, age and state of health of
the victim. These three personal factors need not exclusive bases for assessment
and it is submitted that another important factor should be considered religion.
A persons faith, his religious beliefs, traditions, and culture, may be very
significant in affecting how he experiences particular types of treatment, which, given
the persons religio-cultural context, likewise affects the assessment of when an act
becomes cruel, inhuman, or degrading treatment. Specifically relevant is the ruling
in Van Der Ven v. Netherlands (2003) that treatment may be deemed inhuman if it was
such as to arouse in the victims feeling of fear, anguish and inferiority capable of
humiliating and debasing them.
This method of analysis opens the way for a more subjective approach to
assessing the occurrence of cruel, inhuman, or degrading treatment. This is because
an act may be more humiliating or cause more fear, anguish, or inferiority when
inflicted on a victim with a specific religio-cultural background than on a person with
a different one.
Abu Ghraib and Guantanamo provide good examples of how religion should
be used in the assessment of what acts constitute cruel, inhuman, or degrading
treatment: All the detainees were Muslim and, as shall be demonstrated, the
interrogation techniques as well as the other torments inflicted upon the detainees
would be deemed much more offensive and severe when perceived with the victims
Islamic viewpoint. Again, the critique of the ruling in Ireland is relevant here - that it
is the victim, the very object of attack and torment, who is in the best position to
testify as to what extent he has suffered. The importance of a subjective test to fully
appreciate the gravity of not only torture but also what would be deemed as cruel,
inhuman, or degrading treatment becomes clear.
Before elaborating on how some acts may be deemed more offensive or severe
using a subjective test of the victims religion, in this case Islam, it is important to
take note of some of the religious principles and concepts of the Islamic faith and
how theses would relate to the acts inflicted on the detainees. This is not the place
to indulge in a long discussion of Islamic doctrine and strictures; however, it is relevant
to this papers analysis to state a few clear Islamic injunctions.
Islam and Respect for the Human Being
The broad and general aims and aspirations of what an Islamic society should
be and the formula of the Muslim religious ethic is contained in the Muslim holy
book or Quran.
61
Fundamentally, Islam is a deeply ethical way of life enjoining
righteousness,
62
kindness towards parents,
63
upholding equity, maintaining
truthfulness,
64
and constant striving towards goodness.
65
Islam is a complete way of life that encompasses all matters including mundane
aspects as eating and dressing.
66
Accordingly, a number of Islamic schools of thought
do not maintain dichotomies between secular and spiritual or moral and legal as in
modern secular States.
67
In regard dietary restrictions, Islamic law forbids the eating of pork
68
as such
is considered unclean as well as the consumption of alcohol.
69
On what a woman
61 Noel J. Coulson, A History of Islamic Law, Edinburg University Press, p. 11 (1978)
62 The Quran, Surah 3, Verse 110
63 Id., Surah 29, Verse 8
66 Id., Surah V, Verse 3: This day have I perfected your religion for you and completed My favors unto you and
have chosen for you as religion, al-Islam.
67 Frank Vogel, Islamic Law and Legal systems: Studies of Saudi Arabia, Brill (Publisher) p. 22 (2000)
68 Supra Note 61, Surah II, Verse 173
69 Id., Verse 219 and Surah V, Verses 90-91
8 2 IBP JOURNAL
Adel A. Tamano
may properly wear, Islam enjoins women to wear clothes that are, in the modern
parlance conservative and which do not overly expose the female body.
70
In fact, in more traditional Muslim societies, the women are made to wear the
hijab or veil. Men similarly must dress conservatively and not expose certain parts
of their body in public. These seemingly mundane matters are part of a total system
of life wherein a Muslim submits himself to the will of God. It is a way of life that
upholds human dignity and promotes goodness and justice.
Abuses Committed at Abu Ghraib
And Guantanamo
The abuses committed at Abu Ghraib and Guantanamo have attained worldwide
infamy. The images of detainees treated with utter cruelty will continue to haunt the
conscience of mankind for decades to come. The U.S. military investigation into
allegations of torture of the detainees at Abu Ghraib gave a detailed account of the
abuses inflicted upon the detainees:
6. I find that the intentional abuse of detainees by military police personnel
included the following acts:
a. Punching, slapping, and kicking detainees; jumping on their naked feet;
b. Videotaping and photographing naked male and female detainees;
c. Forcibly arranging detainees in various sexually explicit positions for
photographing;
d. Forcing detainees to remove their clothing and keeping them naked for
several days at a time;
e. Forcing naked male detainees to wear womens underwear;
f. Forcing groups of male detainees to masturbate themselves while being
photographed and videotaped;
g. Arranging naked male detainees in a pile and then jumping on them;
h. Positioning a naked detainee on a MRE Box, with a sandbag on his head,
and attaching wires to his fingers, toes, and penis to simulate electric
torture;
70 Id., Surah XXIV, Verse 31 and Surah XXXIII, Verse 59
i. Writing I am a Rapest (sic) on the leg of a detainee alleged to have
forcibly raped a 15-year old fellow detainee, and then photographing
him naked;
j. Placing a dog chain or strap around a naked detainees neck and having
a female Soldier pose for a picture;
k. A male MP guard having sex with a female detainee;
l. Using military working dogs (without muzzles) to intimidate and frighten
detainees, and in at least one case biting and severely injuring a detainee;
m. Taking photographs of dead Iraqi detainees.
71
In 2005, an insiders account by one of the translators at the detention facility
in Cuba, stated that some interrogation techniques adopted by the military authorities
at Guantanamo had been specifically designed to offend the religious sensibilities of
the detainees, specifically in regard sex.
Specifically, he alleged that female interrogators attempted to break the spirit
of Muslims detainees by sexual touching, wearing miniskirt and thong underwear,
removing their uniforms and exposing a tight-fitting top, touching their breasts and
rubbing them against the detainees, and smearing their faces with fake menstrual
blood.
72
In the prosecution of Spc. Charles Graner, the supposed ringleader of the
group that tortured Muslim detainees at Abu Ghraib, the victims alleged that they
were forced to eat pork and consume alcohol.
73
It is noted that the interrogation techniques at Guantanamo and some of the
acts committed in Abu Ghraib would not constitute torture using either the ECHRs
formulation under the Ireland case or under the concept of the Torture Memo. Among
these acts would be feeding of pork and alcohol, forcing victims to wear female
underwear, smearing a detainees face with fake menstrual blood, and having female
interrogators rub their breasts on the detainees backs. Both the ECHR and the U.S.
positions would consider the aforesaid acts and techniques as lacking the requisite
severity, using a purely objective test, to be deemed torture.
71 Taguba, supra, Note 3.
72 Supra Note 2.
73 See: BBC World News, UK Edition, January 12, 2005, http://news.bbc.co.uk/1/hi/world/americas/4165627.stm,
Site last visited on Febraury 7, 2005
8 4 IBP JOURNAL
Adel A. Tamano
Importance of Religion in Analysis of
Cruel, Inhuman, and Degrading Treatment
The foregoing acts vary in degrees to the most seemingly innocuous, in terms
of being considered as cruel, inhuman, or degrading treatment, which, arguably, is
the rubbing of breasts on the detainees backs. But viewed through the lens of the
victims Islamic belief, these acts in all its varied degrees attain a higher level of
offensiveness and inhumanity. Thus, the most ostensibly innocuous act becomes
highly offensive when understood in the light of the Islamic conservative view of
women in both what they may wear and in their conduct. So although some acts may
not be considered as offences under the legal definition of torture, whether under
the Torture convention or the overly high levels necessitated by the Torture Memo,
these act constitute inhuman treatment when viewed in a Muslim context.
Similarly, technically, feeding detainees pork and alcohol would not cause any
physical injury and thus would hardly be thought of as cruel, inhuman, or degrading
treatment when applied to another non-Muslim group. However, forcing Muslims
to consume things believed to be unclean and forbidden would, using the language
of the ECHR, arouse in the victims feeling of fear, anguish and inferiority capable
of humiliating and debasing them.
The point being made here is that subjective elements in this case that of
religion should play a significant role in the analysis of what constitutes cruel,
inhuman, or degrading treatment. This point is not made for merely theoretical or
academic purposes but rather to emphasize the obligation of States under the Torture
Convention to treat detainees humanely specifically by taking into account the special
circumstances of the individual whether it is religious belief, or sex, or health. In a
way, the analysis must be then turned on its head in order to focus on the need for
States to be sensitive to the religion in regard to its obligations under the Torture
Convention.
For precisely the conventions on torture were established as a historical
response to the commission of atrocities to the effect that the practice of torture
would no longer be countenanced. By emphasizing the importance of religion as a
factor that affect the victims subjective perception of cruel, inhuman, or degrading
treatment, States and State actors should bear in mind to be more circumspect in
the treatment of detainees.
Conclusion
One of the legacies of the abuses at Abu Ghraib and Guantanamo is that it has
provided the world with a new iconography of torture and inhuman treatment.
74
The shocking images of the detainees - hooded and standing on a box with arms
outstretched and wires dangling from his body in apparent danger of electric torture,
naked and forced into sexual positions amidst a background of smiling soldiers, and
bound and tied while being beaten mercilessly serve as a grave reminder of
what States, even those who claim to be committed to the high principles of
democracy and freedom, are capable of when it ignores its obligations under
International Law to treat detainees humanely and not to commit torture.
It is undeniable that the atrocities committed at Abu Ghraib and Guantanamo
were especially offensive and painful to the Muslim detainees. The fact that the
religion of the detainees was an aggravating factor in their suffering is a reminder
that States must take into account subjective factors, i.e. religion, as this relates to
the treatment of detainees and, more importantly, of the moral principles that have
served to give birth to the international covenants that proscribe torture and cruel,
inhuman, or degrading treatment. The moral principles uphold the dignity of the all
human beings that all men, regardless of race, religion, or creed, are worthy of
international protection from inhuman treatment.
Consequently, while it may not be reasonably expected for any of the leaders
and policy-makers of any State to be perfect, as St. Matthew suggests; however
acting in accordance with the conventional obligations proscribing torture should
certainly be a bare minimum expectation. For while the aforesaid standard of loving
the enemy may be an impossible one given the context of the global war on terrorism,
nevertheless, at the least, it should force us to recognize the fact that under
International Law, even those accused of terrorism, who are among the most
hated and feared at this point in human history, must still be accorded human
rights protection - not for their sake but in respect and protection of our own
humanity - and treated in a manner that is civilized and just.

74 See: USA: Human dignity denied: Torture and accountability in the war on terror, AI Index: AMR 51/145/2004,
October 2004, http://web.amnesty.org/library/Index/ENGAMR511452004.
8 6 IBP JOURNAL
From Santos to Ferraris:
Secularizing Psychological
Incapacity
Rudyard A. Avila III*
I
Introduction: The Most Liberal Divorce
Procedure in the World
Marriage is an institution the maintenance of which in its purity the public is
deeply interested.
1
Since the protection of the marriage relation is deemed essential
to the public welfare,
2
the preservation of marriage as a sacred institution requires
not just the defense of a true and genuine union but the exposure of an invalid one
as well.
3
Divorce is generally an option available to married couples in many
modern societies in cases of an invalid marriage
4
or a failure of marriage. However
acceptable it may be in many countries, divorce remains a controversial option
because of the staunch and unrelenting opposition of the church to the idea.
Consequently, as an alternative to the politically volatile issue of divorce, members
of the Civil Code Revision Committee prudently opted to adopt a solution that
would allow the termination of invalid marriages, lifting from Art. 1095 of the Code
of Canon Law a ground that is not in conflict with the civil law concept of voidable
marriages.
5
That the whole concept was borrowed from grounds allowed by the church
itself - which was made perfectly clear in the deliberations of the committee - avoided
suspicion that Article 36 was a subterfuge for divorce and eliminated any possible
* B.S. and Ll.B., University of the Philippines. Editor-in-Chief, IBP Journal, Senior Lecturer, University of the
Philippines College of Law, former Assistant Professor, U.P. College of Law, former Dean, Araullo University
College of Law, Professorial Lecturer, U.P. College of Medicine and San Beda University College of Medicine.
1 Maynard vs. Hill, 125 U.S. 190, 8 S. Ct. 723, 31 L. Ed. 654.
2 Hood vs. Roleson, 125 Ark. 30, 187 SW 1059.
3 G.R. No. 137590, March 26, 2001, 284 SCRA 355
4 Annulment is another option although many annullable marriages are terminated by divorce.
5 SEMPIO-DIY, HANDBOOK ON THE FAMILY CODE OF THE PHILIPPINES, 36 (1988).
8 8 IBP JOURNAL
Rudyard A. Avila III
opposition from the church. However, the Roman Catholic concept of psychological
incapacity is entirely separate and distinct from divorce. Its purpose is the preservation
of an institution that formalizes the surrender of the husband and wife to each
other,
6
creating a partnership (consortium to tius vitae)
7
whose primary ends include
the pursuit of the good of the spouses and the procreation and education of offspring.
8
Provisions allowing termination of marriages under Canon Law preserve these
principles by exposing unions incapable of meeting the primary ends of partnership
through the inability to perform essential matrimonial obligations from the onset of
marriage.
The idea that psychological incapacity is a substitute for a divorce law
9
has
consistently been turned down by the Supreme Court in its growing body of decisions
involving Article 36 of the Family Code. From Santos vs. Court of Appeals
10
and Republic
vs. Molina
11
up to its recent Resolution in Perez-Ferraris vs. Ferraris
12
, the Court has
taken a firm stand against trivializing the concept of psychological incapacity limiting
its application only to the most serious cases of incapacity grave enough to bring
about disability on the part of one or both of the parties to assume the essential
obligations of marriage.
13
In Carating Siyangco vs.Siyangco
14
, the Court held:
Article 36 of the Family Code, we stress, is not to be confused with a
divorce law that cuts the marital bond at the time the causes therefore
manifest themselves. It refers to a serious psychological illness afflicting
a party even before the celebration of the marriage. It is a malady so
grave and so permanent as to deprive one of awareness of the duties and
responsibilities of the matrimonial bond one is about to assume.
15
Notwithstanding the Supreme Courts views that psychological incapacity
should not be treated as an alternative for divorce, no less than the Solicitor General
in Molina commented that in its application in the lower courts, Article 36 may have
created the most liberal divorce procedure in the world. Professor Florin Hilbay
of the University of the Philippines has observed that given the propensity with
6 Ephesians 5:21-33.
7 Id, at 369.
8 Id., at 371.0
9 The Solicitor General has in fact commented that the provision on psychological incapacity in the Family Code
is the most liberal divorce procedure in the world. Prior to the establishment of strict guidelines on the
procedure involved in such cases, many courts, in the early years immediately following the affectivity of the
Family Code, granted petitions for nullity on the basis merely of trial by a commissioner upon the agreement
and urging of the parties themselves.
10 240 SCRA 20 (1995)..
11 G.R. No. 108763, February 13, 1997,268 SCRA 198. (1997).
12 G.R. No. 162368, July 17, 2006.
13 Molina, supra note 11.
14 Carating Siyangco vs. Siyangco, G.R. No. 158896. October 27, 2004.
15 Id.
From Santos and Molina to Ferraris: Secularizing Psychological Incapacity
which lower courts almost routinely grant petitions for declaration of nullity under
Article 36, trial courts have created a subculture of divorce, away from the Churchs
prying eyes, and, since most of these cases are never appealed, from the Supreme
Courts own views on psychological incapacity.
The emerging body of jurisprudence
16
from the higher court on the matter
however makes it crystal clear that cases of psychological incapacity are not common
and are very difficult to prove.
Proving Supervening and Natal Factors:
When Expert testimony Fails to Prove a Case
The difficulty of proving cases of psychological incapacity arises partly from
the fact that most of the grounds adduced in support of a petition for a declaration
of nullity under Article 36 may likewise be grounds for annulment of marriage
17
or
16 See, 16 Ferraris vs. Ferraris, G.R. No. 162368, July 17, 2006; Republic of the Philippines vs. Iyoy, G.R. No. 152577,
September 21, 2005; Carating-Siayngco v. Siayngco, G.R. No. 158896, 27 October 2004, 441 SCRA 422; Dedel
v. Court of Appeals and Corpuz-Dedel, G.R. No. 151867, 29 January 2004, 421 SCRA 461; Guillen-Pesca v. Pesca, G.R.
No. 136921, 17 April 2001, 356 SCRA 588; Marcos v. Marcos, ; Hernandez v. Court of Appeals, G.R. No. 126010,
08 December 1999, 320 SCRA 76.
17 Art. 45. A marriage may be annulled for any of the following causes, existing at the time of the marriage:
(1) That the party in whose behalf it is sought to have the marriage annulled was eighteen years of age or over
but below twenty-one, and the marriage was solemnized without the consent of the parents, guardian or person
having substitute parental authority over the party, in that order, unless after attaining the age of twenty-one, such
party freely cohabited with the other and both lived together as husband and wife;
(2) That either party was of unsound mind, unless such party after coming to reason, freely cohabited with the
other as husband and wife;
(3) That the consent of either party was obtained by fraud, unless such party afterwards, with full knowledge
of the facts constituting the fraud, freely cohabited with the other as husband and wife;
(4) That the consent of either party was obtained by force, intimidation or undue influence, unless the same
having disappeared or ceased, such party thereafter freely cohabited with the other as husband and wife;
(5) That either party was physically incapable of consummating the marriage with the other, and such
incapacity continues and appears to be incurable; or
(6) That either party was afflicted with a sexually-transmissible disease found to be serious and appears to be
incurable. (85a)
Art. 46. Any of the following circumstances shall constitute fraud referred to in Number 3 of the preceding
Article:
(1) Non-disclosure of a previous conviction by final judgment of the other party of a crime involving moral
turpitude;
(2) Concealment by the wife of the fact that at the time of the marriage, she was pregnant by a man other than
her husband;
(3) Concealment of sexually transmissible disease, regardless of its nature, existing at the time of the marriage;
or
(4) Concealment of drug addiction, habitual alcoholism or homosexuality or lesbianism existing at the time
of the marriage.
No other misrepresentation or deceit as to character, health, rank, fortune or chastity shall constitute such fraud
as will give grounds for action for the annulment of marriage. (86a)
9 0 IBP JOURNAL
for legal separation.
18
Early discussions on psychological incapacity generally
enumerated causes common to legal separation and annulment routinely adding
that: (1) these grounds should exist at the time of the celebration of the marriage;
and (2) render the affected spouse incapable of performing the essential marital
obligations.
19
Looking at the most recent cases decided by the Supreme Court a
true case for psychological incapacity may not be as mathematically simple as merely
alleging grounds for voidable marriage or legal separation and adding allegations of
antecedence and gravity.
a) The Conceptual Problems of Ferraris vs. Ferraris
The Courts recent Resolution in the petition for declaration of nullity under
Art. 36 involving of two celebrities, the television personality Amy Perez Ferraris
and band soloist Brix Ferraris demonstrates the difficulties encountered in making
allegations that overlap with the grounds for either legal separation or for voidable
marriages. It also demonstrates the difficulty and ethical propriety of psychiatrists
and psychologists making a diagnosis where the person being diagnosed is actually
unavailable to undergo interviews and tests.
In Ferraris, petitioner Amy Perez Ferraris filed an action for a declaration of
nullity of marriage against her husband Brix, alleging that the latter was
psychologically incapacitated to perform the essential obligations of marriage as he
was suffering from mixed personality disorder. Since it appears that her spouse
refused to cooperate by having himself undergo diagnostic tests, the diagnosis of
the expert witness, Dr. Dayan was presumably reached without Dayan taking routine
and directed tests with the subject to confirm her diagnosis. In medicine, diagnosis
made at arms length culled from second hand data is generally suspect.
Most of the data for Dayans evaluation was furnished by petitioner herself
who appeared to be the most interested in obtaining a declaration of nullity. The
18 Art. 55. A petition for legal separation may be filed on any of the following grounds:
(1) Repeated physical violence or grossly abusive conduct directed against the petitioner, a common child, or
a child of the petitioner;
(2) Physical violence or moral pressure to compel the petitioner to change religious or political affiliation;
(3) Attempt of respondent to corrupt or induce the petitioner, a common child, or a child of the petitioner,
to engage in prostitution, or connivance in such corruption or inducement;
(4) Final judgment sentencing the respondent to imprisonment of more than six years, even if pardoned;
(5) Drug addiction or habitual alcoholism of the respondent;
(6) Lesbianism or homosexuality of the respondent;
(7) Contracting by the respondent of a subsequent bigamous marriage, whether in the Philippines or abroad;
(8) Sexual infidelity or perversion;
(9) Attempt by the respondent against the life of the petitioner; or
(10) Abandonment of petitioner by respondent without justifiable cause for more than one year.
For purposes of this Article, the term child shall include a child by nature or by adoption. (9a)
19 See. Edlyn Frances V. Versola and Marie Cecile T. Roque, The Concept of Psychological Incapacity Under Article 36
of the Family Code., 66 Phil. L. J., 535, 548 (1992).
allegations in made in support of the petition included the following, among others:
1) leaving-the-house whenever the couple quarreled; 1) violent tendencies during
epileptic attacks, 3) sexual infidelity; 4) abandonment and lack of support; and the
husbands preference to spend more time with his band mates than his family. These
manifestations were summed up by petitioners expert witness, Dr. Dayan as evidence
of a mixed personality disorder called a schizoid personality of the dependent
and avoidant type.
What Dayan failed to do, however, was to explain exactly how this disorder
came about and how the same constituted a condition grave enough to amount to
psychological incapacity. The Court pointed out that Dayans testimony fell within
the realm of speculation since she did not provide enough specificity to convince
the Court that petitioner satisfied the threshold of proof required in such cases.
Said the Court:
At any rate, Dr. Dayan did not explain how she arrived at her diagnosis
that respondent has a mixed personality disorder called schizoid, and
why he is the dependent and avoidant type. In fact, Dr. Dayans statement
that one suffering from such mixed personality disorder is dependent on
others for decision x x x lacks specificity; it seems to belong to the realm
of theoretical speculation.
20
The lack of specificity which caused Dayans testimony to be, in the Courts
own words, speculative, may have been due to the fact that the subject himself may
not have been directly interviewed or tested by Dayan, a professional flaw which
would likely be pointed out even in medical (psychiatric) audits and grand rounds.
Obviously, Dayan may have had to rely on second hand sources leading the doctor
to provide testimony that was inappropriate and which may have breached the ethics
of her profession by dragging innocent parties who may not have wanted to be part
of the proceedings, and likely without their informed consent, into the picture.
21
The Court observed:
Notably, when asked as to the root cause of respondents alleged
psychological incapacity, Dr. Dayans answer was vague, evasive and
inconclusive. She replied that such disorder can be part of his family
upbringing x x x. She stated that there was a history of
respondents parents having difficulties in their relationship.
But this input on the supposed problematic history of respondents parents
also came from petitioner.
22
(Emphasis ours)
20 Supra, note 12.
21 Id.
22 In their over-eagerness to testify for one of the parties, experts should zealously guard against ethical violations.
Forensic expert Dr. Raquel Fortun, in her lectures touching on expert testimony suggests that a good expert
witness is not an advocate even if he/she testifies for only one side of the case. Further, the ethical expert witness
opinions and conclusions should be reached independently of interests of litigants. He or she should be
objective, neutral, independent and sincere. Id.
9 2 IBP JOURNAL
In any case, the Court concluded that Dr. Dayan failed to clearly demonstrate
that there was really a natal or supervening disabling factor on the part of
respondent, or an adverse integral element in respondents character that effectively
incapacitated him from accepting, and, thereby complying with, the essential marital
obligations. Proof of respondents supposed psychological or mental malady existing
even before the marriage was likewise severely lacking.
23
From the Courts disquisitions on the diagnosis in this case, it appears that
diagnosis of a psychological or mental condition must be fully supported by evidence:
1) of the diagnosis itself; 2) the basis of the diagnosis from the history of the problem,
results of interviews; and 3) specific results of tests - medical, psychiatric, psychological
or psychometric - appropriate to reach a proper diagnosis. These elements may be
culled through an expert or from various pieces of evidence (since an expert is no
longer an absolute necessity) that would demonstrate the elements of gravity, juridical
antecedence and incurability necessary for petitions under Article 36.
b. Juridical Antecedence
As stated earlier, there is a significant degree of overlap between the causes of
psychological incapacity and voidable marriages. The most common allegations made
in support of petitions under Art. 36 include abandonment, failure of support, sexual
difficulties, sexual problems, habitual alcoholism, dependency and dependent
personalities and various forms of psychological disorders, psychiatric disorders,
personality disorders, personality quirks, etc.
However, all individuals possess attributes of personality disorders and quirks.
People who suffer from neurosis, neurological illnesses and one or another form of
mental deviation enter into successful and lasting marriages. Ultimately this depends
on how successful coping mechanisms help individuals adjust to their problems.
The Family Code recognizes that many of the defects causing individuals to
fail to fulfill their marital obligations may actually exist at the time of the marriage
but would show no manifestations. The responsibilities of marriage itself may be a
trigger for some of these manifestations to come out. Problems in determining
whether or not the grounds for psychological incapacity exist at the time of the
celebration of the marriage however arise where there were no signs and symptoms
of incapacity and for sometime after the marriage, the union seemed to be blessed
with stability. As general proposition seen in many recent cases where evidence
exists that the couple seemed to be happy, contented and fairly adjusted to the
requirements and responsibilities of marriage it would be very difficult to meet
one of the requirements established by the case of Santos that of juridical
antecedence.
23 Id.
Moreover, when, as a result of problems that occur later in the marriage, one
of the spouses fails to perform his or her marital obligations, the courts must
distinguish whether or not the non-performance was due to a supervening or natal
course or whether or not the same constitutes simply a refusal to carry out
responsibilities of fidelity, support, love, respect, etc. The Court, in Ferraris, in fact
distinguished between the actual existence of psychological incapacity and a mere
refusal.
As with many marriages that end up in trouble at some point of the union, the
relationship between Ms. Perez-Ferraris and her husband seemed to be a good one.
As noted by the Court the couples relationship before the marriage and even
during their brief union (for well about a year or so) was not all bad. During that
relatively short period of time, petitioner was happy and contented with her life in
the company of respondent. In fact, by petitioners own reckoning, respondent was
a responsible and loving husband.
Problems began when Ms. Perez-Ferraris started doubting respondents fidelity
and they began fighting about the calls from women. Because of Ms. Perezs persistent
nagging, respondent began to withdraw into his shell and corner, and failed to perform
his so-called marital obligations. As the Court observed: Respondent could not
understand petitioners lack of trust in him and her constant nagging. He thought
her suspicious and irrational. Respondent could not relate to her anger, temper and
jealousy.
In the end, the Court concluded that the evidence on record did not convincingly
establish that respondent was suffering from psychological incapacity. The Court
noted that There is absolutely no showing that his defects were already present
at the inception of the marriage, or that those are incurable. Moreover the Court
stressed that the defects alleged by Ms. Ferraris were not rooted on some debilitating
psychological condition but a mere refusal or unwillingness to assume the essential
obligations of marriage. Citing Republic vs. Molina,
24
the Court stressed that one
must distinguish between incapacity on one hand as opposed to mere difficulty,
refusal or neglect.
c. The Supreme Court and the Family Courts in Cases of Psychological Incapacity
The ease with which parties are able to obtain favorable judgments in petitions
for declaration of nullity from Family Courts stands in direct contrast to the difficulty
of getting these judgments affirmed once a case reaches the Supreme Court on
appeal. In a study at the University of the Philippines College of Law on trial court
judgments in psychological incapacity cases, it was found that in certain family courts
the success rate reached 90%. At least two Family Courts studied granted petitions
in 100% of cases filed in the year 2005.
25
24 Id.
25 Supra, note 11.
9 4 IBP JOURNAL
Republic of the Philippines vs. Iyoy,
26
penned by Justice Chico-Nazario illustrates
this point. The Regional Trial Court of Cebu entered a favorable judgment in a
psychological incapacity case in spite of the fact that the evidence produced by the
complainant in court clearly did not meet the threshold required for such cases.
Moreover, the Complaint in Iyoy was filed thirty six (36) years after the couples
marriage and after they had raised their children into adulthood. What the trial
court in fact granted in this case was the equivalent of a divorce, as seen form the
facts below.
On March 25, 1997 Crasus Iyoy filed a complaint for declaration of nullity of
marriage with Branch 22 of the Regional Trial Court (RTC) of Cebu City. According
to the facts averred in the Complaint, Crasus married his wife Fely on December 16,
1961 in Cebu City. From their union came five children who, at the time of the
Supreme Courts decision were all of legal age. Crasus alleged that following the
celebration of their marriage in 1961 he discovered that his wife Fely was hot-
tempered, a nagger and extravagant.
In 1984, Fely left the Philippines for the United States, leaving all of their
children, the youngest being only six years old, to the care of her husband. Barely a
year after Fely left for the U.S.A., Crasus received a letter from his wife asking for a
divorce. He ignored the request. In 1985, Crasus learned that Fely got married to an
American, with whom she eventually bore a child.
In 1987, Fely visited the Philippines with her American family. However, Crasus
and his wife did not get to meet or talk to each other. He avoided seeing her as he
was afraid he might not be able to bear the sorrow and the pain she had caused him.
Fely returned to the Philippines several times thereafter for the wedding of their
eldest child; for the brain operation of their fourth child, Calvert; and in 1995, for
reasons unstated. In her visits, Fely openly used the surname of her American
husband. For the wedding of Crasus, Jr., Fely herself had invitations made in which
she was named as Mrs. Fely Ada Micklus.
At the time the Complaint was filed, it had been 13 years since Fely left and
abandoned her husband, and there was clearly no more possibility of reconciliation
between the spouses. In his Complaint, Crasus alleged that Felys acts brought danger
and dishonor to the family, which he considered indications of her psychological
incapacity to perform the essential obligations of marriage.
In her Answer, Fely averred that she was already an American citizen since
1988 and was married to Stephen Micklus. Admitting that she was previously married
to Crasus having five children with him, Fely however denied the other allegations,
countering that she was no more hot-tempered than any normal person, and that
she may have been angry at Crasus on certain occasions but this was because of the
latters drunkenness, womanizing, and lack of any sincere efforts to find employment
26 ARTICLE 36 OF THE FAMILY CODE: A DECADE AFTER SANTOS VS. COURT OF APPEALS AND BEDIA-SANTOS, 19-21 (2006).
or to contribute to the support or maintenance of their household. She claimed she
could not have been extravagant since the family hardly had enough money for basic
needs. In fact, she left for the United States for financial reasons since Crasus was
unemployed and she had to be the sole breadwinner of the family in the Philippines.
Her income in Cebu was inadequate to meet the needs of her family. She denied
abandoning her family because she continued to provide financial support to them
while in the U.S.
Subsequently, Fely was able to bring her children to the U.S.A., except for one,
Calvert, who had to stay behind for medical reasons. After securing a divorce from
respondent Crasus, Fely married her American husband and acquired American
citizenship. She argued that her marriage to her American husband was legal because
now being an American citizen, her status shall be governed by the law of her present
nationality. In her counterclaim, Fely also pointed out that Crasus himself was
presently living with another woman who bore him a child. She also accused him of
misusing funds advanced to finance the brain operation of their son, Calvert. On
the basis of these allegations, Fely likewise prayed that the trial court declare her
marriage to respondent Crasus null and void.
Confusing Divorce
for Psychological Incapacity
The Supreme Court has time and again emphasized that any doubts in cases
of void or voidable marriages, legal separation and, of late, psychological incapacity
should be resolved in favor of the validity of the marriage. Consequently, courts
should adopt a high index of suspicion in cases under Article 36 with the aim of
preserving the institution as much as they can.
It is recognized that many marriages eventually encounter serious difficulties,
some irreconcilable. The absence of a divorce law does not provide an excuse for
trial courts to substitute the article on psychological incapacity to terminate marriages
merely on findings of serious and irreconcilable differences if the evidence is weak
and does not satisfy the elements of gravity, incurability and juridical antecedence.
In Iyoy, the trial court entered favorable judgment in favor of the husband
stating the following reasons:
[D]efendant had indeed exhibited unmistakable signs of psychological
incapacity to comply with her marital duties such as striving for family
unity, observing fidelity, mutual love, respect, help and support. From
the evidence presented, plaintiff adequately established that the defendant
practically abandoned him. She obtained a divorce decree in the United
States of America and married another man and has establish [sic] another
family of her own. Plaintiff is in an anomalous situation, wherein he is
9 6 IBP JOURNAL
married to a wife who is already married to another man in another
country.
27
The anomalous situation described by the court, i.e., the subsequent marriage
of Mrs. Iyoy in the United States in spite of the existence of a valid and subsisting
marriage in the Philippines is either a ground for Bigamy or legal separation
(infidelity) or both.
Without much evidence the trial Court, in bending backwards to fulfill the
element of juridical antecedence further stated:
Defendants intolerable traits may not have been apparent or manifest
before the marriage, the FAMILY CODE nonetheless allows the
annulment of the marriage provided that these were eventually manifested
after the wedding. It appears to be the case in this instance.
Certainly defendants posture being an irresponsible wife erringly reveals
her very low regard for that sacred and inviolable institution of marriage
which is the foundation of human society throughout the civilized world.
It is quite evident that the defendant is bereft of the mind, will and heart
to comply with her marital obligations, such incapacity was already there
at the time of the marriage in question is shown by defendants own
attitude towards her marriage to plaintiff.
In sum, the ground invoked by plaintiff which is defendants psychological
incapacity to comply with the essential marital obligations which already
existed at the time of the marriage in question has been satisfactorily
proven. The evidence in herein case establishes the irresponsibility of
defendant Fely Ada Rosal Iyoy, firmly.
28
In reversing the trial courts decision, the Supreme Court found that the
totality of evidence presented by Crasus failed miserably to establish the alleged
psychological incapacity of his wife Fely. Moreover the Court held that there was
no basis for declaring their marriage null and void under Article 36 of the Family
Code of the Philippines as the evidence presented by the husband in this case was
not only weak but wanting and insufficient. The Court observed:
The only substantial evidence presented by respondent Crasus before
the RTC was his testimony, which can be easily put into question for
being self-serving, in the absence of any other corroborating evidence.
He submitted only two other pieces of evidence: (1) the Certification on
the recording with the Register of Deeds of the Marriage Contract between
27 Supra, note 12.
28 Id.
respondent Crasus and Fely, such marriage being celebrated on 16
December 1961; and (2) the invitation to the wedding of Crasus, Jr., their
eldest son, in which Fely used her American husbands surname. Even
considering the admissions made by Fely herself in her Answer to
respondent Crasuss Complaint filed with the RTC, the evidence is not
enough to convince this Court that Fely had such a grave mental illness
that prevented her from assuming the essential obligations of marriage.
29
One is tempted to ask why, in spite of the obvious insufficiency and weakness
of the evidence, the trial court rendered judgment favoring the husband in this case.
Two reasons are apparent from the decision of the Court of Appeals which affirmed
the trial courts decision in Iyoy (which likewise explains the propensity of some family
courts to grant petitions for psychological incapacity against the clear guidelines of
Santos vs. Court of Appeals and Republic vs. Molina):
1. Where one of the spouses has gone abroad and remarried, some courts will
try to find an equitable solution to reverse what they would consider an untenable
situation, leaving something for the spouse who may have been abandoned. In
doing this, the court misappreciated Article 26 of the Family Code. It held:
The rationale behind the second paragraph of the above-quoted
provision (Art. 26) is to avoid the absurd and unjust situation of a Filipino
citizen still being married to his or her alien spouse, although the latter is
no longer married to the Filipino spouse because he or she has obtained
a divorce abroad. In the case at bench, the defendant has undoubtedly
acquired her American husbands citizenship and thus has become an
alien as well. This Court cannot see why the benefits of Art. 26 aforequoted
can not be extended to a Filipino citizen whose spouse eventually embraces
another citizenship and thus becomes herself an alien.
30
Unfortunately, Art. 26 applies only to a situation where the spouse who obtained
a second marriage was already an alien at the time of his or her marriage abroad.
From the facts of this case, Mrs. Iyoy became an American Citizen as a result of and
following her marriage to her second husband. This is not the situation contemplated
by the second paragraph of Article 26.
2. The second reason is that the court, out of sheer compassion may actually
be granting a divorce, not sanctioned by law, knowingly or unknowingly, however
using Art. 36 as its instrument. The following statement from the lower appellate
court is quite revealing. The lower appellate court considered it unfair that Mrs.
Iyoy could remarry in the United States while the husband under Philippine law
cannot. It stated:
29 Id.
30 Id.
9 8 IBP JOURNAL
It would be the height of unfairness if, under these circumstances,
plaintiff would still be considered as married to defendant, given her
total incapacity to honor her marital covenants to the former. To condemn
plaintiff to remain shackled in a marriage that in truth and in fact does
not exist and to remain married to a spouse who is incapacitated to
discharge essential marital covenants, is verily to condemn him to a
perpetual disadvantage which this Court finds abhorrent and will not
countenance. Justice dictates that plaintiff be given relief by affirming the
trial courts declaration of the nullity of the marriage of the parties.
31
Obviously, considerations of justice and equity permeated the decisions of
both the trial court and the Court of Appeals. However, equity follows law and the
law in this case allows no room for divorce under the guise of psychological incapacity
even when an unfair situation is created where the spouse remaining in the Philippines
cannot remarry while the guilty spouse has already married.
The Court in Iyoy reiterated the principle that Article 36 should not be confused
with a divorce law that cuts the marital bond at the time the causes therefore manifest
themselves. It is a malady that is both so grave and so permanent as to deprive
one of awareness of the duties and responsibilities of the matrimonial bond one is
about to assume.
a. Degree of Suffering Not an Index: Pesca vs. Pesca
32
The degree of suffering endured by the innocent spouse in a case for
psychological incapacity does not constitute the measure of gravity required by the
Bedia Santos doctrine. Gravity refers to the seriousness of the psychological condition
suffered by the spouse against whom the action for declaration of nullity is directed
not the recipient of the manifestations of psychological incapacity. Repeated physical
or psychological violence by itself constitutes a ground for legal separation unless it
is clearly established by the evidence that this trait existed at the time of the marriage
and rendered the guilty spouse incapable of fulfilling his obligations towards family.
However, emotional immaturity leading one spouse to beat up the other does not
standing alone constitute psychological incapacity as the case hereunder illustrates.
From the facts culled by the trial court, Lorna G. Pesca and Zosimo A. Pesca
first met in 1975 while on board an inter-island vessel bound for Bacolod City. After
a whirlwind courtship, they got married on March 3, 1975. For thirteen years, the
marriage was uneventful. Their union begot four children: Ruhem, 19; Rez, 17;
Ryan, 11 and Richie, 9.
Sometime in 1988, Lorna noticed that Zosimo showed signs of psychological
incapacity. He manifested signs of being emotionally immature and irresponsible,
31 Id.
32 G.R. No. 136921, April 17, 2001; 358 SCRA 588.
he was cruel and violent, and he became a habitual drinker, staying with friends
daily from 4:00 oclock in the afternoon until 1:00 oclock in the morning. When
asked to stop or reduce his drinking Zosimo would beat, slap and kick her.
33
The
violence got worse and at one point, Zosimo chased Lorna with a loaded shotgun
and threatened to kill her in the presence of the children. The children themselves
were not spared from physical violence.
Things did not get better. In the morning of March 22 1994, about eight oclock,
Zosimo beat up Lorna black and blue for about half an hour in the presence of the
children. A case was filed against Zosimo for slight physical injuries where he was
convicted by the Metropolitan Trial Court of Caloocan City and sentenced to eleven
days of imprisonment. After this incident, petitioner and her children left Zosimo
for good. Petitioner sued respondent before the Regional Trial Court for the
declaration of nullity of their marriage under Art. 36, seeking custody of her minor
children and praying for support pendente lite.
On November 15, 1995, the trial court rendered its decision declaring the
marriage between petitioner and respondent to be null and void ab initio on the basis
of psychological incapacity on the part of Zosimo and ordered the liquidation of the
conjugal partnership. The Court of Appeals reversed, declaring the marriage between
then spouses still valid and subsisting. In sustaining the lower appellate courts findings
and conclusions in the case, the Supreme Court stressed that:
At all events, petitioner has utterly failed, both in her allegations in the
complaint and in her evidence, to make out a case of psychological incapacity on the
part of respondent, let alone at the time of solemnization of the contract, so as to
warrant a declaration of nullity of the marriage. Emotional immaturity and
irresponsibility, invoked by her, cannot be equated with psychological incapacity.
The Court reiterates its reminder that marriage is an inviolable social institution
and the foundation of the family that the State cherishes and protects. While the
Court commiserates with petitioner in her unhappy marital relationship with
respondent, totally terminating that relationship, however, may not necessarily be
the fitting denouement to it. In these cases, the law has not quite given up, neither
should we.
34
b. Alleging Ones Own Psychological Incapacity
It is fairly settled that both parties in a case based on Article 36 may be
psychologically incapacitated, or the petitioner himself or herself may allege that he
or she is psychologically incapacitated to perform the essential obligations of marriage.
It may be that in the latter case, the petitioner is genuinely afflicted with a disorder
that meets the stringent criteria of the high court, or it is possible that the petitioner
33 Id, at 590.
34 Id, at 594.
100 IBP JOURNAL
would not want to antagonize the other spouse and risk vigorous opposition that
would lead to losing the case by alleging some defect of the respondent. In such
instances, courts should exercise a greater degree of skepticism to avoid possible
collusion between the spouses and look very closely at expert evidence that may
have been canned to suit the petitioners needs, from a professional lacking the
neutrality and objectivity of an honest expert. In cases where the expert opinion
though obviously canned meets little opposition from the other side, the magistrate
must act as the devils advocate and determine for himself whether or not a genuine
case of psychological incapacity actually exists.
Where the petitioner alleges his own psychological incapacity as a matter of
strategy to minimize the possibility of opposition, the tactic might backfire if the
other spouse nonetheless actively opposes the petition and presents superior expert
evidence from a board certified psychiatrist. This appears to be the situation in
Villalon vs. Villalon.
In this case, the husband, Jaime F. Villalon, filed a petition for the annulment
of his marriage against his wife, Ma. Corazon N. Villalon before Branch 69 of the
Regional Trial Court of Pasig City. He alleged his own psychological incapacity which
he claimed existed even prior to his marriage. However, as found by the Court, the
expert testimony and evaluations of the psychologist, Dr. Natividad Dayan appeared
to be based only on interviews with the petitioner and was found to be insufficient
to establish a case for psychological incapacity.
Villalon alleged the following manifestations of his psychological incapacity in
support of his petition: (a) a chronic refusal to maintain harmonious family relations
and lack of interest in a normal married life; (b) immaturity and irresponsibility in
refusing to accept the essential obligations of marriage; (c) a desire for other women
and a desire for a life unchained from any spousal obligation; and (d) false assumption
of the fundamental obligations of companionship and consortium towards
respondent. However, the petition for declaration of nullity was opposed by his
wife, Corazon.
Corazon asserted that her 18-year marriage to petitioner was actually fruitful,
joyous, contented and promising. She alleged that had her husband not strayed,
there was genuine opportunity for more growth in their relationship. The occasional
marital squabbles, she claimed, were normal based on community standards.
Moreover, her husband had a successful career, allowing him to adequately support
his family as husband, father, and provider. Corazon claimed that her husbands
commitment to his paternal and marital responsibilities was beyond reproach.
The trial court ordered the prosecution to determine whether or not there
was collusion between the spouses. The report submitted to the trial court stated
that there was no such collusion. However, the Office of the Solicitor General (OSG)
subsequently entered its appearance in behalf of the Republic of the Philippines and
opposed the petition.
Petitioner claimed that he married respondent because he believed that it was
the right time to raise a family and that she would be a good mother to his children.
In mid-1993, however, petitioner decided to leave the respondent because,
according to him, his marriage reached a point where genuine communication,
affection, love and respect between him and his wife was no longer possible. He
claimed that this was caused by his philandering ways, a trait he admitted existed
even before his marriage since he was seeing other women even when he was engaged
to his future wife. Even before meeting his wife, he usually had two girlfriends at the
same time.
Before he left the conjugal abode petitioner claims that he and his wife spoke
to their three children who, at that time, were 14, 8, and 6 years old, respectively.
Prior to this, petitioner consulted a child psychologist. He considered himself to be
a good and loving father and despite the separation, would regularly visit his children
who stayed with him on alternate weekends. He voluntarily gave adequate support
to the children and his wife.
Dr. Natividad Dayan, a clinical psychologist, testified in behalf of petitioner,
claiming that he suffered from a condition known as Narcissistic Histrionic
Personality Disorder with a Casanova Complex. In her testimony, Dr. Dayan
described the disorder as a pervasive maladaptation in terms of interpersonal and
occupational functioning with main symptoms of grand ideation about oneself,
self-centeredness, thinking he is unique and wanting to always be the one followed,
the I personality. She claimed that an individual person afflicted with this disorder
is self-centered and selfish and engaged in activities geared towards personal
gratification, including the constant satisfaction of his emotional and sexual feelings
thereby engaging in serial infidelity. An individual with a Casanova Complex
exhibits habitual adulterous behavior and goes from one relationship to another.
Dr. Dayan submitted a psychological report on both petitioner and respondent based
on clinical interviews and psychological tests.
In her testimony, Corazon claimed that she knew of only two instances of
infidelity which occurring 13 years apart. She also theorized that petitioner wanted
to have their marriage annulled so he could marry her old friend. She stated that
she has not closed her doors to petitioner but the latter would have to give up his
extra-marital relationship.
Dr. Cecilia Villegas, a board certified psychiatrist, testifying for Corazon, averred
that Dr. Dayans findings were incomplete. She explained that a team approach
was necessary in evaluating an individuals personality for the purpose of psychological
incapacity since the latter is a relative term requiring the expertise of a psychiatrist
and investigation and opinion from social worker who will have to look into the
actual environment, the interactions and relationships from which the psychological
incapacity was supposed to have manifested.
102 IBP JOURNAL
In spite of the evidence presented by Corazon, the Regional Trial Court, Branch
39 of Pasig City declared the marriage null and void ab initio on the ground of
psychological incapacity.
On appeal by both Corazon and the Office of the Solicitor General, the Court
of Appeals reversed the trial courts decision holding that petitioner failed to prove
the juridical antecedence, gravity and incurability of his alleged psychological incapacity.
Commenting on the insufficiency of Dr. Dayans process at arriving at her conclusions
the lower appellate court noted that:
Although Dr. Dayan testified that petitioners psychological
incapacity preceded the marriage, she failed to give sufficient basis for
such a finding. Dr. Dayan also stated that parental marital instability was
the root cause of petitioners psychological incapacity but failed to
elaborate thereon or link the two variables. Moreover, petitioners sexual
infidelity was made to appear as symptomatic of a grave psychological
disorder when, in reality, the same merely resulted from a general
dissatisfaction with the marriage.
Ordinary Dissatisfaction
Not Psychological Incapacity
The arcane technical terms of the fields of psychology and psychiatry would
fail to impress the courts if these are unsupported by an explanation of the process
by which an expert arrived at his or her conclusions. As the lower appellate court
explained in Villalon (likewise in Iyoy where Dr. Dayans testimony was likewise
found to be lacking), not only should the expert explain the procedure followed in
arriving at his or her conclusions, but that the latter should also establish a causal
link between his findings and the alleged psychological incapacity. As explained in
Marcos, infra, examination by a psychologist is unnecessary if the evidence presented
clearly provides the root cause of the problem and the picture created by the totality
of the facts and circumstances of a case establishes psychological incapacity. Courts
should look with suspicion at psychologists reports that routinely drop complicated
technical terms, aimed at dazzling the former (like a lawyer who uses legalisms and
archaic language to try to impress a client) with insufficient supporting data.
In the appeal from the decision of the Court of Appeals against Jaime Villalon
to the high court, the latter upheld the findings of the lower appellate court to the
effect that petitioner was a good husband to respondent for a substantial period of
time prior to their separation, a loving father to their children and a good provider
of the family for a substantial period of time prior to their separation. As to the
averment of infidelity, the court concluded:
Although he engaged in marital infidelity in at least two occasions,
the same does not appear to be symptomatic of a grave psychological
disorder which rendered him incapable of performing his spousal
obligations. The same appears as the result of a general dissatisfaction
with his marriage rather than a psychological disorder rooted in
petitioners personal history.
xxx
Moreover, we are not convinced that petitioner is a serial or habitual
adulterer, as he wants the court to believe. As stated by respondent
herself, it cannot be said that two instances of infidelity which occurred
13 years apart could be deemed womanizing, especially considering that
these instances involved the same woman. In fact, at the time of
respondents testimony, petitioners illicit relationship has been going on
for six years. This is not consistent with the symptoms of a person
suffering from Casanova Complex who, according to Dr. Dayan, is one
who jumps from one relationship to another.
Agreeing with the lower appellate court in respect to the insufficiency of Dr.
Dayans findings, the Court noted:
[A]lthough Dr. Dayan testified that petitioner suffered from
Narcissistic Histrionic Personality Disorder with Casanova Complex even
before the marriage and thus had the tendency to cheat on his wife, such
conclusion was not sufficiently backed by concrete evidence showing that
petitioner indeed had several affairs and finds it difficult to be faithful.
Except for petitioners general claim that on certain occasions he had
two girlfriends at the same time, no details or explanations were given of
such circumstances that would demonstrate petitioners inability to be
faithful to respondent either before or at the time of the celebration of
their marriage. xxx While Dr. Dayan described the symptoms of one
afflicted with Narcissistic Histrionic Personality Disorder as self-
centered, characterized by grandiose ideation and lack of empathy in
relating to others, and one with Casanova Complex as a serial adulterer,
the evidence on record betrays the presence of any of these symptoms.
The Court emphasized that simple loss of love leading to a refusal to cohabit
or stay married to the other spouse as held in Republic vs. Molina is not psychological
incapacity within the meaning of the law.
Psychological Incapacity
Without Expert Evidence
For sometime, the requirement for expert evidence coming from psychiatrists,
psychologists and other clinicians created a cottage industry that allowed a few
104 IBP JOURNAL
unscrupulous practitioners to provide opinions demand, tailoring their testimonies
to the requirements of the party paying for their services. The possibility of ethical
breach was noted several years ago by the Philippine Psychiatric Association when it
issued a memorandum letter reminding its members to guard against practices that
would constitute violations of the Code of Ethics of the association, the Medical Act
of 1959 and the Philippine Medical Association.
One important difference between psychologists and psychiatrists is that the
latter are professionals who have to secure their licenses to practice their profession
from the Professional Regulations Commission by passing tests given by the Board
of Medicine. After obtaining their license to practice, they will have to undergo
three or four years (more if they pursue post residency fellowship) of formal study
and training either with a teaching institution or with a major medical center whose
psychiatry program meets the rigid standards followed by psychiatry residency
programs here, the United States, the United Kingdom and in other countries. The
process of reaching expertise is described in the landmark case of Felix vs. Buenaseda
penned by Justice Santiago M. Kapunan.
In Marcos vs. Marcos
35
the Supreme Court clarified that there is no requirement
that the party alleged to be incapacitated should be personally examined by a
physician, psychiatrist or psychologist as a condition sine qua non for the declaration
of nullity of marriage based on psychological incapacity.
36
Accordingly, the Court
held that it is no longer necessary to allege expert opinion in a petition under
Article 36 of the Family Code, however, it required that psychological incapacity,
must be established by the totality of the evidence presented during the trial.
37
One of the main issues discussed by the Court in the Marcos case was whether
or not the Court of Appeals acted correctly when it reversed the decision of the
Regional Trial Court granting a decree for nullity under Article 36 on the ground
that the trial court failed to establish incapacity through a proper psychological
evaluation. Although a psychological report was actually made, coincidentally again
in this case by Dr. Natividad Dayan, the Court of Appeals observed that the appellant
was not subjected to any psychological or psychiatric examination. It noted that:
The psychological findings about the appellant by psychiatrist
38
Natividad
Dayan was based only on the interviews conducted with the appellee.
39
35 G.R. No. 136490, October 19, 2000, 343 SCRA 755.
36 Id.
37 Id.
38 Curiously, the lower appellate court used the term Psychiatrist in describing Dr. Dayan. In two other cases in
which Dr. Dayan was the expert witness, the court used the terms Clinical Psychologist or Psychiatrist to
describe her. A psychiatrist is different from a psychologist. The former is a professional accredited as a
physician by the PRC. However, a psychiatrist may also be a psychologist if the former took psychology as an
undergraduate course or took further courses in clinical psychology.
39 In fairness to Dr. Dayan, an interview is part of a psychologic evaluation. The clinician, after conducting the
interview may decide to proceed to other tests and most likely will, However, if the interview is satisfactory and
establishes the diagnosis, that is the evaluation itself.
A psychological evaluation by either a psychiatrist or a psychologist is an added
expense by the parties to a case that could actually be dispensed with if the totality
of the evidence presented adequately established the partys psychological condition.
It is submitted, though that it would be next to impossible to have a proper evaluation
and assessment of an individuals psychological or mental state without consulting
an expert. The Court nonetheless affirmed the lower appellate courts reversal of
the trial courts decision stating that this was not quite the case.
II
Constitutional and Statutory Genesis
The seriousness with which courts should limit cases of psychological incapacity
to only those which are clearly characterized by gravity, juridical antecedence and
incurability, has both statutory and constitutional reasons. The 1987 Constitution
accords to marriage and to the family primacy as an institution
40
that requires
protection by the courts.
41
It is an inviolable social institution and the foundation of
the family,
42
for which the State is committed to strengthen its solidarity and promote
its development.
43
In its revision of the definition of marriage for the Family Code,
the Family Code Committee characterized marriage as a special contract of
permanent union entered into in accordance with law for the purpose of family
life
44
which the state is mandated to uphold and strengthen. The absence of a divorce
law apart from the Catholic Churchs staunch opposition against the introduction
of divorce in the country - emphatically indicates the States policy to safeguard the
institution by disallowing the creation of laws that would undermine and erode this
bedrock upon which the State itself is founded.
45
Given these considerations and the Supreme Courts low level of tolerance for
attempts by litigants to turn Art. 36 into a de facto divorce law, family courts should
follow the high courts lead and confine the application of the provision only to
40 Id.
41 Const., art. II, sec. 12.
42 Const., art. XV, sec. 2.
43 Const., art. XV, sec. 1.
44 Art. 1 of the Family Code Provides: Article 1. Marriage is a special contract of permanent union between a man
and a woman entered into in accordance with law for the establishment of conjugal and family life. It is the
foundation of the family and an inviolable social institution whose nature, consequences, and incidents are
governed by law and not subject to stipulation, except that marriage settlements may fix the property relations
during the marriage within the limits provided by this Code. The Civil Code provides: Art. 52. Marriage is not
a mere contract but an inviolable social institution. Its nature, consequences and incidents are governed by law
and not subject to stipulation, except that the marriage settlements may to a certain extent fix the property
relations during the marriage.
45 Const., art. II, sec. 12: The State recognizes the sanctity of family life and shall protect and strengthen the
family as a basic autonomous social institution. It shall equally protect the life of the mother and the life of the
unborn from conception. The natural and primary right and duty of parents in the rearing of the youth for civic
efficiency and the development of moral character shall receive the support of the Government.
106 IBP JOURNAL
those cases which conform to the guidelines established in Santos
46
and Molina
47
in
relation to its disquisitions in Marcos vs. Marcos
48
and recent cases. In Santos vs. Court
of Appeals, the Court held that:
There is hardly any doubt that the intendment of the law has been to
confine the meaning of psychological incapacity to the most serious
cases of personality disorders clearly demonstrative of an utter insensitivity
or inability to give meaning and significance to the marriage. This
psychologic condition must exist at the time the marriage is celebrated.
In Republic vs. Molina, the Court instituted the following guidelines to be strictly
observed by courts in deciding cases of psychological incapacity:
(1) The burden of proof to show the nullity of marriage belongs to the
plaintiff. Any doubt should be resolved in favor of the existence and
continuation of the marriage and against its dissolution and nullity. This
is rooted in the fact that both our Constitution and our laws cherish the
validity of marriage and unity of the family. Thus, our Constitution devotes
an entire Article on the Family, recognizing it as the foundation of the
nation. It decrees marriage as legally inviolable, thereby protecting it
from dissolution at the whim of the parties. Both the family and marriage
are to be protected by the state. The Family Code echoes this
constitutional edict on marriage and the family and emphasizes their
permanence, inviolability and solidarity.
(2) The root cause of the psychological incapacity must be: a) medically
or clinically identified, b) alleged in the complaint, c) sufficiently proven
by experts and d) clearly explained in the decision. Article 36 of the Family
Code requires that the incapacity must be psychological not physical,
although its manifestations and/or symptoms may be physical. The
evidence must convince the court that the parties, or one of them, was
mentally or physically ill to such an extent that the person could not have
known the obligations he was assuming, or knowing them, could not have
given valid assumption thereof. Although no example of such incapacity
need be given here so as not to limit the application of the provision
under the principle of ejusdem generis, nevertheless such root cause must
be identified as a psychological illness and its incapacitating nature fully
explained. Expert evidence may be given by qualified psychiatrists and
clinical psychologists.
46 Supra, note 10.
47 Supra, note 11.
48 Marcos v. Marcos, G.R. No. 136490, October 19, 2000, 343 SCRA 755, clarified that there is no requirement
that the defendant/respondent spouse should be personally examined by a physician or psychologist as a
condition sine qua non for the declaration of nullity of marriage based on psychological incapacity. Accordingly,
it is no longer necessary to allege expert opinion in a petition under Article 36 of the Family Code of the
Philippines. Psychological incapacity, however, must be established by the totality of the evidence presented
during the trial.
(3) The incapacity must be proven to be existing at the time of the
celebration of the marriage. The evidence must show that the illness
was existing when the parties exchanged their I dos. The manifestation
of the illness need not be perceivable at such time, but the illness itself
must have attached at such moment, or prior thereto.
(4) Such incapacity must also be shown to be medically or clinically
permanent or incurable. Such incurability may be absolute or even relative
only in regard to the other spouse, not necessarily absolutely against
everyone of the same sex. Furthermore, such incapacity must be relevant
to the assumption of marriage obligations, not necessarily to those not
related to marriage like the exercise of a profession or employment in a
job. Hence, a pediatrician may be effective in diagnosing illnesses of
children and prescribing medicine to cure them but may not be
psychologically capacitated to procreate, bear and raise his/her own
children as an essential obligation of marriage.
(5) Such illness must be grave enough to bring about the disability of the
party to assume the essential obligations of marriage. Thus, mild
characteriological peculiarities, mood changes, occasional emotional
outbursts cannot be accepted as root causes. The illness must be shown
as downright incapacity or inability, not a refusal, neglect or difficulty,
much less ill will. In other words, there is a natal or supervening disabling
factor in the person, an adverse integral element in the personality
structure that effectively incapacitates the person from really accepting
and thereby complying with the obligations essential to marriage. (6)
The essential marital obligations must be those embraced by Articles 68
up to 71 of the Family Code as regards the husband and wife as well as
Articles 220, 221 and 225 of the same Code in regard to parents and
their children. Such non-complied marital obligation(s) must also be stated
in the petition, proven by evidence and included in the text of the decision.
(6) The essential marital obligations must be those embraced by Articles
68 up to 71 of the Family Code as regards the husband and wife as well as
Articles 220, 221 and 225 of the same Code in regard to parents and
their children. Such non-complied marital obligation(s) must also be stated
in the petition, proven by evidence and included in the text of the decision.
(7) Interpretations given by the National Appellate Matrimonial Tribunal
of the Catholic Church in the Philippines, while not controlling or decisive,
should be given great respect by our courts.
The trial court must order the prosecuting attorney or fiscal and the
Solicitor General to appear as counsel for the State.
(8) No decision shall be handed down unless the Solicitor General issues
a certification, which will be quoted in the decision, briefly stating therein
108 IBP JOURNAL
his reasons for his agreement or opposition, as the case may be, to the
petition.
49
Objective Standards and Subjective Factors:
The Emerging Psychological Incapacity
In his dissenting opinion in Republic vs. Molina, Justice Teodoro Padilla suggested
that every case of psychological incapacity must be judged not on the basis of a
priori assumptions, predilections or generalizations but according to its own facts
50
.
Clarifying that the absence of a psychological examination or a psychiatric evaluation
is not fatal to petitions under Art. 36 the Court, in Marcos vs. Marcos likewise stated
that personal medical or psychological exams are not a sine qua non for necessary in
proving psychological incapacity
51
because what is important in such cases is the
actual presence of evidence that can adequately establish the partys psychological
condition.
52
This may be inferred from the totality of the picture created by the
evidence adduced in the proceeding in the trial court and not from isolated snippets
given by a medical (psychiatric) professional acting either as a consultant or expert.
From a provision that began as a nebulous concept, the picture that has
gradually emerged from the cases coming out of the Supreme Court is that
psychological incapacity is less a legal than a clinical construct. In Santos vs. Court of
Appeals, the Court clarified that the condition refers to no less than a mental (not
physical) incapacity that causes a party to be truly cognitive of the basic marital
covenants that concomitantly must be assumed and discharged by the parties to the
marriage
53
in which the clear intent of the law was to confine its meaning only to
the most serious cases of personality disorders clearly demonstrative of an utter
insensitivity or inability to give meaning and significance to the marriage.
54
Emphasizing that psychological incapacity is a clinical concept, Chief Justice Artemio
Panganiban in Republic vs. Molina
55
required that the cause of the problem must be
medically or clinically identified.
56
For this purpose, the evidence must convince the
court that the parties, or one of them, was mentally or psychically ill.
57
Further, Justice
49 Supra, note 11, at 210-213.
50 Supra, note 11. Padilla J, Dissenting.
51 Supra, note 50..The statement by the Court must however be seen in the context of the facts of Marcos. The
Court of Appeals reversed the trial courts finding of psychological incapacity because the appellate court
found that psychological incapacity was not sufficiently established since the defendant did not undergo
psychological evaluation. The Supreme Court ruled that this was not an absolute requirement in cases where
other pieces of evidence or the total picture would in fact establish psychological incapacity.
52 Id. The Court held: [I] is no longer necessary to allege expert opinion in a petition under Article 36 of the
Family Code of the Philippines.
53 Supra, note 11, at 34.
54 Id.
55 Id., at 210.
56 Id. (Italics supplied).
57 Id.
Panganiban required that the cause of the alleged psychological incapacity must be
identified as a psychological illness and its incapacitating nature fully explained. In
a case in which sexual infidelity and perversion were alleged as the reasons for filing
a petition for psychological incapacity, the Court stated that the acts of perversion
and sexual infidelity must be shown to be manifestations of a disordered personality
which [would] make respondent completely unable to discharge the essential
obligations of the marital state.
58
The Supreme Court there further held that youth,
immaturity or sexual promiscuity by themselves do not make a case of psychological
incapacity.
59
Consistently, these cases have characterized time and again the nature of
psychological incapacity as a mental
60
disorder or a personality disorder
61
or an
incapacity of a psychological nature
62
in which one or both of the parties is mentally
or psychically ill
63
and one which has to be medically or clinically identified.
64
Aside from the fact of juridical antecedence, the mental disorder must be grave and
incurable but not grave enough like dementia, polar disorders or schizophrenia,
for instance to vitiate consent,
65
otherwise the marriage would be merely voidable.
The picture that emerges from Santos vs. Court of Appeals up to Ferraris, i.e., of
psychological incapacity as a clinical state clearly diverges from the concept of the
condition originally envisioned by the Family Code Committee. It is the writers
opinion that this development is for the better since the objective parameters and
measurements of the disciplines of psychiatry, psychology, the behavioral sciences
and medicine would balance the subjectivity that has characterized the early cases
and would help the magistrate understand the root causes of the problem partly
assisted in formulating a total picture by the more or less impartial accoutrements
of science.
Confusion of Concept
Confusion of Origin
The origins of the concept of psychological incapacity from Canon Law are
thoroughly threshed out in the deliberations of the Family Code Committee, the
discussions in Congress and the Philippine Supreme Courts disquisitions in the
case of Santos vs. Santos. For a while, a uniform understanding of psychological
58 See, Dedel vs. Court of Appeals, G.R. No. 151867. January 29, 2004 (Italics supplied)..
59 Id.
60 Supra, note 11, at 34.
61 Id.
62 Hernandez vs. Court of Appeals, G.R. No. 126010, December 8, 1999.
63 Supra, note 10.
64 Id. It is not enough that the disorder be medically or clinically identified. In Ferraris, supra, the Court require
65 Even in such cases (psychiatric illness or disorders), where it is clearly shown that the consent was given during
a lucid interval, the marriage is not voidable.
110 IBP JOURNAL
incapacity was elusive because of the absence not only of a definition of psychological
incapacity but also of a definite and coherent framework which judges could work
on. The deliberations of the Family Code Committee were not of great help because
committee members themselves were confused as to the concept and nature of
psychological incapacity. Some of the reasons for this confusion are explained below:
First, many psychological problems vitiate consent and a psychological problem
may both affect consent and an individuals capacity to understand his fundamental
marital obligations. This dilemma is clearly recognized and capsulized in the following
exchange between members of the Committee:
On subparagraph (7), which as lifted from the Canon Law, Justice (Jose
B.L.) Reyes suggested that they say wanting in sufficient use, but Justice
(Eduardo) Caguioa preferred to say wanting in the sufficient use. On
the other hand, Justice Reyes proposed that they say wanting in sufficient
reason. Justice Caguioa, however, pointed out that the idea is that one is
not lacking in judgment but that he is lacking in the exercise of judgment.
He added that lack of judgment would make the marriage voidable. Judge
(Alicia Sempio-) Diy remarked that lack of judgment is more serious than
insufficient use of judgment and yet the latter would make the marriage
null and void and the former only voidable. Justice Caguioa suggested
that subparagraph (7) be modified to read:
That contracted by any party who, at the time of the celebration, was
psychologically incapacitated to discharge the essential marital obligations,
even if such lack of incapacity is made manifest after the celebration.
Justice Caguioa explained that the phrase was wanting in sufficient use
of reason of judgment to understand the essential nature of marriage
refers to defects in the mental faculties vitiating consent, which is not the
idea in subparagraph (7), but lack of appreciation of ones marital
obligations.
Judge Diy raised the question: Since insanity is also a psychological or
mental incapacity, why is insanity only a ground for annulment and not
for declaration or nullity? In reply, Justice Caguioa explained that in
insanity, there is the appearance of consent, which is the reason why it is
a ground for voidable marriages, while subparagraph (7) does not refer
to consent but to the very essence of marital obligations.
Prof. (Araceli) Baviera suggested that, in subparagraph (7), the word
mentally be deleted, with which Justice Caguioa concurred. Judge Diy,
however, prefers to retain the word mentally.
Justice Caguioa remarked that subparagraph (7) refers to psychological
impotence. Justice (Ricardo) Puno stated that sometimes a person may
be psychologically impotent with one but not with another. Justice (Leonor
Ines-) Luciano said that it is called selective impotency.
Dean (Fortunato) Gupit stated that the confusion lies in the fact that in
inserting the Canon Law annulment in the Family Code, the Committee
used a language which describes a ground for voidable marriages. Dean
Gupit said that this is precisely the reason why they should make a
distinction.
Justice Puno remarked that in Canon Law, the defects in marriage cannot
be cured.
Justice Reyes pointed out that the problem is: Why is insanity a ground
for void ab initio marriages? In reply, Justice Caguioa explained that
insanity is curable and there are lucid intervals, while psychological
incapacity is not.
On another point, Justice Puno suggested that the phrase even if such
lack or incapacity is made manifest be modified to read even if such lack
or incapacity becomes manifest.
Justice Reyes remarked that in insanity, at the time of the marriage, it is
not apparent.
Justice Caguioa stated that there are two interpretations of the phrase
psychological or mentally incapacitated in the first one, there is vitiation
of consent because one does not know all the consequences of the
marriages, and if he had known these completely, he might not have
consented to the marriage.
xxx xxx xxx
Prof. Bautista stated that he is in favor of making psychological incapacity
a ground for voidable marriages since otherwise it will encourage one
who really understood the consequences of marriage to claim that he did
not and to make excuses for invalidating the marriage by acting as if he
did not understand the obligations of marriage. Dean Gupit added that it
is a loose way of providing for divorce.
66
Dean Fortunato Gupit hit the nail straight on the head when he observed that
that the confusion lies in the fact that in inserting the Canon Law annulment in the
Family Code, the Committee used a language which describes a ground for voidable
marriages. As will be pointed out later, in the Canon Law concept of psychological
66 Supra, note 11 citing A. SEMPIO DY, HANDBOOK OF THE FAMIY CODE OF THE PHILIPPINES 43 (1995)
112 IBP JOURNAL
incapacity, the whole idea of incapacity is inextricably linked to consent. When an
individual fails to appreciate what his obligations are, he does not know what he is
consenting to. Thus, even Justice Caguioa, who appears from the above-quoted
portion of the Family Code Committees deliberations to be the most vigorous
exponent of psychological incapacity concedes that psychological incapacity may be
a ground for voidable marriage.
67
This is apparent from the following paragraph
quoted from the committees minutes:
Justice Caguioa stated that there are two interpretations of the phrase
psychological or mentally incapacitated in the first one, there is vitiation
of consent because one does not know all the consequences of the
marriages, and if he had known these completely, he might not have
consented to the marriage.
68
Second, some members of the committee asserted that psychological incapacity
is in fact a legal concept and should not be treated as a medical, clinical, psychological
or psychiatric disorder. However, all legal concepts involving psychiatric, psychological
and personality disorders are rooted in medical science and in developments in the
field of psychiatry and psychology. The clinical and technical criteria of various mental
or psychological disorders that constitute incapacity cannot be totally ignored or
dispensed with.
Again, the treatment of psychological incapacity as a legal concept abetted
greater confusion because members of the committee itself, in various fora following
the enactment of the Family Code, themselves considered psychological incapacity
as being principally a psychological or a psychiatric disorder. For instance, in a
symposium following the passage of Article 36 held at the University of the Philippines
Law Center on November 19, 1988, Justice Puno gave the following as examples of
psychological incapacity: neuroses, psychosis or epilepsy, nymphomania, satyriasis,
extremely low intelligence among others. Psychosis should not be confused with
psychological incapacity because the same clearly affects reason, judgment and
consent.
Epilepsy has demonstrated organic causes generally unrelated to the genesis
of psychological and mental disorders. An epileptic individual is a disabled person
and should not be discriminated against, even in marriage. Severe cases of epilepsy
may affect an individuals ability to perform the essential obligations of marriage
but that would be a failure of performance, not a failure of appreciation. In any case,
a person marrying one who suffers from severe epilepsy to a degree that incapacitates
that persons ability to perform marital obligations enters into the relationship with
eyes wide open since the cause and manifestations of epilepsy would have existed
67 A position strongly advanced by Professor Esteban Bautista who preferred to make psychological incapacity a
ground for voidable marriages to avoid a situation where one of the spouses who really understood the
consequences of marriage to claim that he did not and to make excuses for invalidating the marriage by acting
as if he did not understand the obligations of marriage.
68 Id.
prior to the marriage, or on the date of the marriage itself. Being an organic illness,
a definite date of onset can actually be identified. In fact, the problem can be
organically identified through electroencephalograms, magnetic resonance imaging,
computerized axial tomography or other tests.
Lastly, while Canon Law may have played a central role in the formulation of
the Family Codes provision on Article 36, they should be merely persuasive and
courts should not feel bound by the positions taken by the Churchs matrimonial
tribunals in cases of psychological incapacity. There are compelling reasons why this
should be so.
Article 36s
Origins from Canon Law
In the guidelines enunciated by the Philippine Supreme Court in Republic vs.
Molina the Court while pursuing a clinical approach to psychological incapacity
69
suggested that the [i]nterpretations given by the National Appellate Matrimonial
Tribunal of the Catholic Church in the Philippines, while not controlling or decisive,
should be given great respect by our courts.
Otherwise stated, where interpretations given by the National Appellate
Matrimonial Tribunal may help in providing greater understanding of the root causes
of psychological incapacity, looking at the totality of circumstances of the case then
they should be respected or considered. Parenthetically, this portion of the Molina
Guidelines, unlike Guidelines No. 2 and 3 which are mandatory, is merely directive.
Thus where the clinical picture coming from the evidence contradicts with the
interpretations given by the matrimonial tribunal, the former should prevail. While
the Court concedes the origins of Art. 36 of the Family Code from paragraph 3,
Canon 1095 of the Code of Canon Law, courts have steadfastly maintained that
decisions of the marital tribunals of the church are at best persuasive in cases decided
under the article. A civil court must be fully satisfied with its own determination of
psychological incapacity and a simple invocation of a declaration of nullity by a church
tribunal is in most cases neither controlling nor sufficient.
70
69 The Court required the following in its Molina Guidelines: (2) The root cause of the psychological incapacity
must be: a) medically or clinically identified, b) alleged in the complaint, c) sufficiently proven by experts and
d) clearly explained in the decision. Article 36 of the Family Code requires that the incapacity must be
psychological not physical, although its manifestations and/or symptoms may be physical. The evidence must
convince the court that the parties, or one of them, was mentally or physically ill to such an extent that the
person could not have known the obligations he was assuming, or knowing them, could not have given valid
assumption thereof. Although no example of such incapacity need be given here so as not to limit the
application of the provision under the principle of ejusdem generis, nevertheless such root cause must be
identified as a psychological illness and its incapacitating nature fully explained. Expert evidence may be given
by qualified psychiatrists and clinical psychologists.
70 Note 3, supra.
114 IBP JOURNAL
The view taken by the Court in Molina with respect to the influence of Canon
Law in the understanding of Psychological Incapacity appears to diverge only slightly
from the view taken by the Family Code Committee and by some writers. However,
Molina and the cases that followed it clearly signal the Courts drift towards a more
secular, clinical and scientific concept of psychological incapacity although respect
for the origins of Article 36 from Canon Law remains. In any case, even Justice
Puno, during the committees deliberations observed that Civil Law should not
reconcile with Canon Law because [psychological incapacity] is a new ground even
under Canon Law
Finding New Ground
Divorced form Canon Law
In its final Resolution of the case of Perez-Ferraris vs. Ferraris,
71
the Philippine
Supreme Court held that it relies heavily on psychological experts for its
understanding of the human personality. However, the root cause must be identified
as a psychological illness and its incapacitating nature must be fully explained.
72
In Republic vs. Molina, the Courts drift towards further clarifying the nature of
psychological incapacity veered towards a more secular approach, highlighting the
clinical nature of psychological incapacity rather than leaning towards the opinions
of the Churchs marital tribunals. In Marcos vs. Marcos, the Court further underscored
the need for the root cause of psychological incapacity to be (i) medically or
clinically identified, (ii) alleged in the complaint, (iii) sufficiently proven, and (iv)
clearly explained in the decision.
Prof. Michael Anthony Dizon, in his article tracing the genesis of Art. 36 to
Canon Law explains that Art. 1095 of the Code of Canon law is inextricably linked
to the requirement of consent in the sacrament of matrimony. Under this formulation,
consent includes an understanding or appreciation of the fundamental marital
obligations, the failure of which renders the consent ineffectual. This view is
diametrically opposed to the concept of psychological incapacity under the Family
Code which Justice Caguioa and other members of the Committee took pains to
separate from consent, vitiation of which merely renders the marriage voidable. It
must be noted however, that members of the committee themselves, including Justice
Caguioa, toyed with the idea of considering psychological incapacity as a ground for
a voidable marriage, not one which considers the marriage a nullity from its inception.
Given the conceptual differences between the treatment of psychological
incapacity in Canon Law and its counterpart in the Family Code, which generates
fundamental difficulties in looking at and understanding the nature of psychological
incapacity, the Court should find new ground in viewing and interpreting these cases,
71 Penned by Justice Consuelo Ynares-Santiago, G.R. No. 162368, July 17, 2008.
72 Id.
which it in fact has begun to undertake beginning with Santos vs. Court of Appeals up to
the case of Ferraris. Its gradual evolution from a concept rooted in the religious
sacrament of matrimony to one which is secular, i.e., one which can be clinically and
medically identified from objective parameters should eradicate any further confusion
about its nature. This was probably the intention of the Committee in refusing to
define and enumerate instances of psychological incapacity, leaving the concept room
for evolution and growth enriched by wisdom gained from actual experience.

116 IBP JOURNAL
Reinventing the Corporate Wheel:
A Discourse on the Limited
Liability Company
Joseph Emmanuel L. Angeles
Introduction
The Filipino entrepreneurs choice of business entity is relatively limited
compared to other jurisdictions. Each of these alternatives has significant flaws that
stifle the growth of small and medium sized enterprises (SME). This article seeks to
dissect the characteristics of the limited liability company
1
and expose the advantages
of using this juridical form as an investment vehicle.
Origins of the Limited Liability Company (LLC)
The origin of the LLC is generally attributed to the German law of 1892,
authorizing the creation of Gesellschaft mit beschrnkter Haftung.
2
However, an author
has expressed the view that the American LLC was an original creation based on an
amalgam of English and American partnership law, since European LLCs lacked the
contractual freedom of their American counterparts.
3
The LLCs success in Germany subsequently became a discussion point for
commercial law reform. Within a short period of time after the enactment of the
GmbH law in Germany, the following countries followed suit: Portugal (1917), Brazil
(1919), Chile (1923), France (1925), Turkey (1926), Cuba (1929), Argentina (1932),
Uruguay (1933), Mexico (1934), Belgium (1935), Switzerland (1936), Italy (1936),
Peru (1936), Columbia (1937), Costa Rica (1942), Guatemala (1942), and Honduras
(1950). Today, organizations similar to the LLC are common throughout Europe
and Latin America.
4
In addition to providing for limited liability, the LLC laws of
the cited countries have the following four basic characteristics, which distinguish
1 For the purposes of this article, all references to limited liability company shall mean that described in the
Uniform Limited Liability Company Act of 1996 (ULLCA), unless the context otherwise requires.
2 Carney, Limited Liability Companies: Origins and Antecedents, 66 U. Colo. L. Rev. 855 (1995).
3 Id.
4 Bahls, Application of Corporate Common Law Doctrines to Limited Liability Companies, 55 Montana L. Rev.
43, 46 (1994) citing Friedmann & Kalmanoff, Joint International Business Ventures 214, 216-17 (1961); Bagley
& Whynott, The Limited Liability Company: The Better Alternative 1.502-.503 (1991).
118 IBP JOURNAL
this entity from other business forms: (1) use of the word limited in the entitys
name; (2) juridical personality; (3) the partnership concept of delectus personae,
permitting a member to control admission of new members to the entity; and (4)
inclusion of a members death as an event of dissolution, unless otherwise expressly
stated in the articles of association.
5
In 1977, Wyoming became the first U.S. state to enact an LLC act. However,
the Wyoming LLC Act was not an immediate success.
6
Due to conflicting taxation
laws and regulations, few entrepreneurs used the LLC entity as an investment vehicle.
7
In 1988, the U.S. Internal Revenue Service finally resolved the conflict between the
proposed regulations and the private letter rulings, and issued Revenue Ruling 88-
76, which provided that a Wyoming LLC could be classified as a partnership for tax
purposes.
8
Within six years, LLC statutes were adopted in nearly all states of the
U.S.
9
The speed with which the LLC was embraced is remarkable considering that
changes in corporate laws normally take at least twenty-five years to percolate through
the states.
10
Advantages of the LLC over the current Philippine commercial
law regime
Entrepreneurs have the following options under the present Philippine
commercial law framework: the sole proprietorship, the general partnership,
11
the
limited partnership,
12
the open corporation,
13
the close corporation,
14
and the
cooperative.
15
This writer shall discuss the following aspects of each vis a vis the
LLC: a) incorporation requirements; b) flexibility; c) management; d) transferability
of interests; e) tax treatment; f) asset protection; and g) continuity of life.
Incorporation requirements
Sole proprietorships do not constitute juridical entities separate from the person
constituting it.
16
As such, compliance with incorporation requirements is not a
prerequisite for the use of a sole proprietorship as an investment vehicle. However,
5 Eder, Limited Liability Firms Abroad, 13 Univ Pitt L Rev 193 (1952).
6 Carney, Limited Liability Companies: Origins and Antecedents, 66 U. Colo. L. Rev. 855 (1995).
7 Id.
8 Id.
9 Id.
10 Id.
11 Republic Act No. 386, Article 1767 (1949).
13 Batas Pambansa Blg. 68, Section 3 (1980).
15 Republic Act No. 6938 (1990).
Reinventing the Corporate Wheel: A Discourse on the Limited Liability Company
compliance with other laws is required prior to transacting business. These
requirements are generally applicable to the other juridical entities discussed.
17
General and limited partnerships require at least two persons to form.
18
By
and large, the constitution of a general partnership only requires the following: a)
contract between the parties to contribute money, property, or industry to a common
fund with the intention of dividing the profits among themselves;
19
b) consent of
each party;
20
c) capacity to contract of each party;
21
and d) lawful subject matter and
cause.
22
However, where immovable property or real rights are contributed, the
contract of partnership must be set forth in a public instrument
23
and an inventory
of the property must be signed by the parties and attached thereto.
24
A public
instrument is likewise necessary where the value of the partnership capital is
Php3,000.00 or more.
25
However, this does not affect the partnerships acquisition
of juridical personality but is merely a condition precedent for it to engage in business
or trade.
26
Persons seeking to form a limited partnership must: a) sign and swear to
a certificate
27
and b) file the certificate for record with the Securities and Exchange
Commission (SEC).
28
The certificate must state: a) the name of the partnership,
adding thereto the word Limited; b) the character of the business; c) the location
of the principal place of business; d) the name and place of residence of each partner;
e) the term for which the partnership is to exist; f) the amount of cash and a description
and value of other property contributed by each limited partner; and g) the share of
the profits or the other compensation that each limited partner shall receive.
29
The
certificate may also provide for: a) the right of a limited partner to substitute an
assignee as contributor in his place; b) the right of the partners to admit additional
limited partners; c) the right of limited partners to priority over other limited partners
as to contributions or as to compensation by way of income; d) the right of the
remaining general partners to continue the business on the death, retirement, civil
interdiction, insanity, or insolvency of a general partner; and e) the right of a limited
partner to demand and receive property other than cash in return for his
17 Act No. 3883, Section 1-2 (1931); Republic Act No. 7160, Section 16 (1991); Republic Act No. 8424, Section
236 (1997).
19 Republic Act No. 386, Article 1767 (1949); Bautista, Treatise on Philippine Partnership Law, p. 5 (1995).
20 Republic Act No. 386, Article 1318(1) (1949); Bautista, Treatise on Philippine Partnership Law, p. 5 (1995).
21 Republic Act No. 386, Article 1327, 1329, 1782, etc. (1949); Bautista, Treatise on Philippine Partnership Law,
p. 11 (1995).
26 Bautista, Treatise on Philippine Partnership Law, p. 71 (1995).
120 IBP JOURNAL
contribution.
30
Substantial compliance in good faith with the following requirements
is sufficient to form the limited partnership.
31
Moreover, partnerships may only be
formed for lawful purposes.
32
The open corporation requires at least five incorporators, all of legal age and
a majority of whom are residents of the Philippines.
33
Each of the incorporators
must own or be a subscriber to at least one share of the corporation.
34
At least
twenty-five percent of the authorized capital stock as stated in the articles of
incorporation must be subscribed at the time of incorporation and at least twenty-
five percent of the total subscription must be paid upon subscription, with a minimum
paid-up capital of Php5,000.00.
35
The incorporators must also draft articles of
incorporation stating the following: a) the name of the corporation; b) the specific
purpose or purposes for which the corporation is being incorporated; c) the place
where the principal office of the corporation is to be located within the Philippines;
d) the term for which the corporation is to exist; e) the names, nationalities, and
residences of the incorporators; f) the number of directors or trustees, which shall
not be less than five nor more than fifteen; g) the names, nationalities, and residences
of persons who shall act as directors or trustees until the first regular directors or
trustees are duly elected and qualified; and h) the amount of its authorized capital
stock in lawful money of the Philippines, the number of shares into which it is divided,
and the par value of par value shares; and i) the names, nationalities, and residences
of the original subscribers, and the amount subscribed and paid-up by each.
36
The
incorporators must file the articles of incorporation with the SEC along with the
following documents: a) SEC name verification slip; b) by-laws; c) sworn statement
of the Treasurer attesting to compliance with the subscribed and paid-up capital
requirements;
37
d) authority to verify bank account; e) bank certificates of deposit
notarized in the place where the bank is located; f) written undertaking to change
corporate name; and g) clearance from other government agencies when needed.
38
The corporation may only be formed for a lawful purpose
39
and commences its
corporate existence from the date the SEC issues the certificate of incorporation.
40
A close corporation has incorporation requirements almost identical to the open
corporation. The former differs in that its articles of incorporation provide that: a)
all the corporations issued stock of all classes, exclusive of treasury shares, shall be
held of record by not more than a specified number of persons, not exceeding twenty
30 Id.
34 Id.
37 Id.
38 SEC Regulations
(20); b) all the issued stock of all classes shall be subject to one or more specified
restrictions on transfer, which shall not be more onerous than a right of first refusal;
and c) the corporation shall not list in any stock exchange or make any public offering
of any of its stock of any class.
41
Moreover, at least two-thirds (2/3) of its voting
stock or voting rights must not be owned or controlled by another corporation that
is not a close corporation.
42
On the other hand, cooperatives require at least fifteen persons who are all
citizens of the Philippines who reside or work in the intended area of operation to
incorporate.
43
The organizers must file four copies of the articles of cooperation, by-
laws and general statement of structure, purposes, and feasibility with the Cooperative
Development Authority (CDA).
44
Additionally, the organizers must file the bonds of
its accountable officers and a sworn statement of the treasurer indicating compliance
with the subscribed and paid-up share capital requirements.
45
The articles of
cooperation must be signed by each of the organizers and acknowledged by them if
natural persons, and by the presidents or secretaries, if juridical persons, before a
notary public.
46
The articles of cooperation shall include: a) the name of the
cooperative; b) the purposes and scope of business for which the cooperative is to be
registered; c) the term of existence of the cooperative; d) the area of operation and
the postal address of its principal office; e) the names, nationalities, and the postal
addresses of the registrants; f) the common bond of membership; g) the list of names
of the directors who shall manage the cooperative; h) the amount of its share capital,
the names and residences of its contributors; and i) a statement of whether the
cooperative is primary, secondary, or tertiary.
47
On the other hand, the by-laws shall
include: a) the qualifications for admission to membership; b) the rights and liabilities
of membership; c) how membership is acquired, maintained, and lost; d) the
procedure in cases of termination of membership; e) the requirements for the transfer
of a share or interest of the members; f) the rules on matters relative to the business
affairs of the general assembly, board of directors, and committees; g) the general
conduct of the affairs of the cooperative, including the powers and duties of the
general assembly, the board of directors, committees, and the officers; h) the manner
in which the capital may be raised and the purposes for which it can be utilized; i) the
mode of custody and of investment of net surplus; j) the accounting and auditing
systems; k) the manner of loaning and borrowing; l) the method of distribution of
net surplus; m) the manner of adopting, amending, repealing, and abrogating by-
laws; and n) a conciliation or mediation mechanism for the amicable settlement of
intra-cooperative disputes.
48
The cooperative acquires juridical personality from the
42 Id.
44 Republic Act No. 6938, Article 14(1) and 14(4) (1990).
45 Republic Act No. 6938, Article 14(5) (1990).
47 Id.
122 IBP JOURNAL
date the CDA issues a certificate of registration under its official seal
49
and this is
conclusive evidence that the cooperative therein mentioned is duly registered unless
proven cancelled.
50
Cooperatives may only be formed for purposes enumerated under
the Cooperative Code, which purposes must also be lawful and not in restraint of
trade.
51
In contrast, incorporating an LLC is relatively simple. Only one person is
needed to organize an LLC.
52
Articles of organization must be drafted and filed with
the administrative agency designated by law. The articles must provide the following:
a) the name of the company; b) the address of the initial designated office; c) the
name and street address of the initial agent for service of process; d) the name and
address of each organizer; e) whether the company is to be a term company and, if
so, the term specified; f) whether the company is to be manager-managed, and, if so,
the name and address of each initial manager; and g) whether one or more of the
members are to be personally liable for the LLCs debts and obligations.
53
The
organizers must pay filing fees required by the administrative agency and ensure
that the articles of organization are in a medium permitted by agency and are
compliant with the form required by the ULLCA.
54
The articles must be acknowledged
before a notary public.
55
The existence of an LLC begins when the articles of
organization are accepted for filing by the designated administrative agency designated
by law, unless a delayed effective date is specified.
56
The filing of the articles of
organization by the designated administrative agency is conclusive proof that the
organizers satisfied all conditions precedent to the creation of a limited liability
company
57
while no similar guarantee exists for corporations.
58
Moreover, LLCs
may be formed for any lawful purpose,
59
compared to the limited purposes for which
a cooperative may be formed.
60
Flexibility
The sole proprietorship and general partnership are relatively flexible entities.
The former attributes its litheness to the relatively sparse amount of regulatory
legislation governing it; the latter, to its civil law genealogy. A number of provisions
in the Civil Code on general partnerships may be overridden by agreement, such as:
51 Republic Act No. 6938, Article 6, 8 (1990).
52 ULLCA, Section 202(a).
55 Id.
56 ULLCA, Section 202(b).
57 ULLCA, Section 202(c).
59 1A Fletcher, Cyclopedia of the Law of Private Corporations 93 (2004).
a) amount of capital to be contributed to the partnership;
61
b) fiduciary duty owed by
a partner to the other partners;
62
c) amount of participation of a partner in partnership
profits and losses;
63
d) right to possess partnership property;
64
e) rights in the
management and conduct of partnership business;
65
and f) events causing dissolution
and winding up of partnership business.
66
Partnership records are required to be
maintained by law
67
and both sole proprietorships and partners must maintain books
of accounts for tax purposes.
68
The latter requirement is common to all juridical
entities discussed in this article.
Comparatively, limited partnerships, open and close corporations, and
cooperatives are subject to greater regulation. Limited partnerships must follow
certain formalities where amendments are made to the contract of partnership. Copies
thereof signed and sworn to by all the partners must be filed with the SEC.
69
The
amendments shall only take effect upon compliance with the foregoing requirements.
70
A limited partner may not act in a manner that may be construed as taking part in
the control of the business without losing his limited liability status
71
and this provision
cannot overridden by agreement of the partners.
72
Also, a limited partner may not
contribute services to a limited partnership.
73
Similarly, corporations are subject to a number of formalities. Open
corporations are subject to voting requirements for meetings of the board of directors
and shareholders in such areas as a) amendments to the articles of incorporation
7
4
or by-laws;
75
b) extend or shorten the corporate term;
76
c) increase or decrease capital
stock;
77
d) incur or increase bonded indebtedness;
78
e) sale of all or substantially all
of the corporate property;
79
f) investment of corporate funds for a secondary
62 Republic Act No. 386, Article 1789 and 1808 (1949).
68 Republic Act No. 8424, Section 232 (1997).
70 Id.
72 Id.
78 Id.
124 IBP JOURNAL
purpose;
80
and g) other corporate transactions.
81
Except for ordinary corporate
transactions whose voting and quorum requirements may be increased or
decreased,82 the voting and quorum requirements of other corporate transactions
may only be increased by the articles of incorporation or by-laws.
83
However, voting
and quorum requirements for election of directors
84
and changes in capital stock
and increase of bonded indebtedness
85
may not be altered.
86
Likewise, common shares
cannot be deprived of voting rights by stipulation, articles of incorporation, or by-
laws.
87
Votes of the board of directors and shareholders may not be cast by mail
88
and directors cannot vote by proxy.89 Directors may only hold office for a year.
90
Amendments of articles of incorporation and by-laws as well as the adoption of the
latter are subject to formal and procedural requirements of the Corporation Code
and SEC, and only become effective upon approval of the SEC or its failure to act
within six months.
91
Records of business transactions, minutes of meetings, and
stock and transfer books are required to be maintained,
92
and financial statements
must be provided to stockholders at regular meetings or upon request.
93
Close
corporations are likewise subject to the formalities of open corporations with the
exception of relaxed restrictions on quorum and voting requirements,
94
participation
of members in management,
95
and pre-emptive rights.
96
However, the stocks of close
corporations are subject to restrictions on transferability and the number of
shareholders.
97
Cooperatives are equally restricted by their enabling law. Open membership
is required by law.
98
Each member is entitled to cast only one vote regardless of
share capital contributed
99
and may only receive a rate of interest on share capital
81 Batas Pambansa Blg. 68, Section 23, 25 (1980).
83 Batas Pambansa Blg. 68, Section 14, 47, 97 (1980); I Campos, The Corporation Code: Comments, Notes and
Selected Cases, pp. 419-420 (1990).
86 I Campos, The Corporation Code: Comments, Notes and Selected Cases, p. 420 (1990).
88 Batas Pambansa Blg. 68, Section 25, 58, 89 (1980).
91 Batas Pambansa Blg. 68, Section 15-16, 46-48, 143 (1980).
95 Id.
99 Republic Act No. 6938, Article 4(2) and 37 (1990).
limited by the CDA.
100
Notably, vote pooling agreements, voting trusts, and similar
arrangements which circumvent the one member-one vote policy are void ab initio.
101
This is a significant issue for entrepreneurs. More often than not, entrepreneurs
desire control over the investments in the entity in direct proportion to the amounts
they contribute due to the greater risk and extent of loss. In addition, a member
may only own or hold 20% of the cooperatives share capital.
102
Cooperatives are
also subject to voting requirements for meetings of the board of directors and
shareholders in such areas as a) amendments of articles of cooperation and by-laws;
103
b) merger and consolidation of cooperatives;
104
and c) removal of officers, directors,
or committee members.
105
These meeting and voting requirements may not be
overridden by agreement, articles of cooperation, or by-laws.
106
Amendments of
articles of cooperation and by-laws as well as the adoption of the latter are subject to
formal and procedural requirements of the Cooperative Code and CDA, and are
only effective upon approval of the CDA or after its failure to act within 30 days.
107
108
and
directors may not vote by proxy.
109
Directors may only serve for a maximum of two
years.
110
Changes of postal address must be registered with the CDA
111
and records
are required to be kept by the enabling law.
112
Conversely, the LLC is a model of contractual freedom. The ULLCA states
that it governs the relations among members, managers, and company to the extent
that the articles of organization
113
or operating agreement does not provide.
114
It also
provides certain instances where the operating agreement may not vary the terms of
the ULLCA.
115
Therefore, to the extent not otherwise mentioned in Section 103(b)
of the ULLCA, every section of thereof is simply a default rule, regardless of whether
the language of the section appears to be otherwise mandatory.
116
This gives
entrepreneurs a vast amount of flexibility in setting up the investment vehicle and
specifying the relations between the organizers, as well as present and future
106 Republic Act No. 386, Article 1306 (1949); Republic Act No. 6938, Article 14-15 (1990).
113 ULLCA, Sec. 203(b) and (c).
114 ULLCA, Sec. 103(a).
115 ULLCA, Sec. 103(b).
116 Report of the National Conference of Commissioners on Uniform State Laws, p. 11.
126 IBP JOURNAL
stakeholders. Moreover, the operating agreement need not be in writing.
117
This
caters to the needs of SMEs, which conduct business in a relatively informal manner
compared to larger enterprises. However, as a practical matter, prudence dictates
that the operating agreement be reduced into writing and acknowledged before a
notary public to prevent costly inter-corporate disputes as well as obviate the necessity
of proving authenticity and due execution in court proceedings.
118
Amendments to
the articles of organization are subject to requirements set by the designated
administrative agency as to form and filing fees
119
and become effective upon
acceptance for filing by the latter unless the document otherwise specifies.
120
Annual
reports must be filed with the designated administrative agency.
121
An LLC must
likewise maintain an office and a resident agent for service of process.
122
LLCs are
not required to maintain records under the ULLCA. However, as earlier stated,
LLCs must maintain books of accounts for tax purposes.
123
Management
The sole proprietor is the despots equivalent in commercial law. Consensus is
not a prerequisite for a sole proprietors management decisions. A sole proprietor
may do acts of administration and disposition as to property solely owned by him
except where limited by law or stipulation.
124
Also, a sole proprietor may delegate
the management of his enterprise to another without changing his status to a
partnership.
125
In a general partnership, all partners have equal rights in the management and
conduct of the partnership business
126
unless otherwise stipulated by agreement
127
or where a partner registers his opposition to an act done in the exercise of the said
power.
128
However, such powers are limited to acts of administration and do not
encompass acts of disposition or acts not apparently for carrying on the partnership
business in the usual manner; nor does it extend to acts that have the effect of
modifying the articles of partnership.
129
Acts that are not apparently for carrying on
the usual business of the partnership do not bind the partnership unless authorized
117 ULLCA, Sec. 103(a).
118 Rules of Court, Rule 132, Section 19-20 (1997).
119 ULLCA, Sec. 206(a).
120 ULLCA, Sec. 206(c).
121 ULLCA, Sec. 211.
127 Republic Act No. 386, Article 1800-1803 (1949).
129 Republic Act No. 386, Article 1803(2), 1818 (1949); V Tolentino, Commentaries and Jurisprudence on the
Civil Code of the Philippines, pp. 342-343 (1992); Bautista, Treatise on Philippine Partnership Law, p. 198
(1995).
by the other partners.
130
Moreover, certain acts require the consent of all the partners
such as: a) assignment of partnership property in trust for creditors; b) disposition
of the partnerships goodwill; c) acts that would render impossible the carrying on of
the partnership business; and d) confession of judgment.
131
With regard to limited partnerships, only general partners shall have the power
to manage the business thereof,
132
but written consent by all limited partners is
required in areas stated by the Civil Code.
133
The scope of these powers only includes
acts of administration or for carrying on the partnership business, unless otherwise
stipulated.
134
Should limited partners take part in management, they shall be subject
to the same liabilities as a general partner
135
and the general partner may dissolve
the partnership.
136
The corporate powers and business of open corporations are generally exercised
and conducted through the board of directors, which is composed of five to fifteen
members.
137
The exercise of certain corporate powers, however, requires
stockholders approval.
138
Most powers of the board of directors may be delegated
to an executive committee,
139
or to other agents or corporate officers.
140
Open
corporations are subject to voting requirements for meetings of the board of directors
and shareholders in such areas as a) amendments to the articles of incorporation
141
or by-laws;
142
b) extending or shortening the corporate term;
143
c) increasing or
decreasing capital stock;
144
d) incurring or increasing bonded indebtedness;
145
e) sale
of all or substantially all of the corporate property;
146
f) investment of corporate
funds for a secondary purpose;
147
and g) other corporate transactions.
148
Except for
ordinary corporate transactions whose voting and quorum requirements may be
131 Id.
134 Republic Act No. 386, Article 1803(2), 1818, 1850 (1949); V Tolentino, Commentaries and Jurisprudence on
the Civil Code of the Philippines, pp. 342-343 (1992); Bautista, Treatise on Philippine Partnership Law, pp.
198, 346 (1995).
136 Bautista, Treatise on Philippine Partnership Law, p. 346 (1995).
138 Batas Pambansa Blg. 68, Section 16, 37-44, 46, 48 (1980).
140 Batas Pambansa Blg. 68, Section 25 (1980); Republic Act No. 386, Article 1868 (1949); I Campos, The
Corporation Code: Comments, Notes and Selected Cases, pp. 383-389.
145 Id.
128 IBP JOURNAL
increased or decreased,
149
the voting and quorum requirements of other corporate
transactions may only be increased by the articles of incorporation or by-laws.
150
However, voting and quorum requirements for the election of directors
151
and changes
in capital stock and increase of bonded indebtedness
152
may not be varied.
153
Although
common shares may be classified so as to provide unique privileges, rights, and
restrictions, common shares cannot be deprived of voting rights.
154
Directors and
shareholders may not cast votes by mail
155
and directors cannot vote by proxy.
156
Directors may only hold office for a year.
157
Close corporations conduct business in
the same manner as open corporations, but have the option to provide in the articles
of incorporation that the corporation shall be managed by its stockholders.
158
Most of the powers and business of cooperatives are likewise exercised and
conducted by a board of directors, which is composed of five to fifteen members.
159
As earlier stated, approval by the general assembly is required in certain cases
160
and these meeting and voting requirements may not be overridden by agreement,
articles of cooperation, or by-laws.
161
For the disposition of the usual business of the
cooperative, the quorum and voting requirements of the board of directors and
general assembly may be modified by the articles of cooperation or by-laws.
162
Each
member is entitled to cast only oneg vote regardless of share capital contributed.
163
Notably, vote pooling agreements, voting trusts, and the like are void ab initio.
164
165
or by
proxy.
166
However, members may vote by proxy if provided in the by-laws.
167
Directors
may only serve for a maximum of two years.
168
155 Batas Pambansa Blg. 68, Section 25, 58, 89 (1980).
160 Republic Act No. 6938, Article 18, 21, 51 (1990).
161 Republic Act No. 386, Article 1306 (1949); Republic Act No. 6938, Article 14-15 (1990).
In contrast, an LLC may approximate a sole proprietorship in that in can be
incorporated by only one person.
169
It may be member-managed
170
or manager-
managed,
171
with the former being the choice by default.
172
Each of the members of
a member-managed LLC have equal rights in the management and conduct of the
companys business, and any matter relating to the business of the company may be
decided by a majority of the members.
173
Each member is an agent of the LLC for
the purpose of its business, and an act of a member binds the LLC if it was done in
the ordinary course of the companys business, unless the member had no authority
for the LLC in the matter and the person had notice thereof.
174
If the act was not
done in the ordinary course of the LLCs business, the members acts do not bind
the LLC unless he was authorized by other members.
175
In a manager-managed LLC, each of the managers has equal rights in the
management and conduct of the companys business, and any matter relating to the
business of the company may be decided by the manager or a majority of the
managers.
176
Every manager is an agent of the company for the purpose of its business,
and an act of a manager binds the company if it was done in the ordinary course of
the companys business, unless the manager had no authority to act for the LLC in
the matter and the person had notice thereof.
177
If the act was not done in the ordinary
course of the LLCs business, the managers acts do not bind the LLC unless he was
authorized by other members.
178
A member in a manager-managed LLC is not an agent of the company for the
purpose of its business solely by reason of being a member.
179
However, where
dispositions of interest in real property are involved, any member of a member-
managed company or manager of a manager-managed company may sign and deliver
any instrument transferring or affecting the companys interest in real property to a
purchaser in good faith and for value, unless the articles of organization limit their
authority.
180
The only matters of a member or manager-managed companys business
requiring the consent of all of the members are: 1) amendments to the operating
agreement; 2) authorization or ratification of acts that which violate the duty of
loyalty; 3) amendments to the articles of organization; 4) compromise of obligations
to contribute; 5) compromise, as among members, of a members obligation to make
169 ULLCA, Sec. 202(a).
170 ULLCA, Sec. 101(12), 404(a).
171 ULLCA, Sec. 101(11), 404(b).
172 ULLCA, Sec. 101(11), 404(b)(3).
173 ULLCA, Sec. 404(a).
174 ULLCA, Sec. 301(a).
175 ULLCA, Sec. 301(b).
176 ULLCA, Sec. 404(b)(2).
177 ULLCA, Sec. 301(b).
178 ULLCA, Sec. 301(b)(2).
179 ULLCA, Sec. 301(b)(1).
180 ULLCA, Sec. 301(c).
130 IBP JOURNAL
contributions or return property distributed in violation of the ULLCA; 6) making
of interim distributions; 7) admission of new members; 8) use of companys property
to redeem interest subject to charging order; 9) dissolution of the company; 10)
waiver of the right to have the company business wound up and the company
terminated; 11) merger with another entity; and 12) disposal of substantially all the
companys property.
181
Actions of members or managers may be taken without a
meeting
182
and votes may be made by proxy, mail, teleconference, or otherwise.
183
Notably, all the foregoing rules may be amended by the articles of organization or
operating agreement, except for matters that: 1) unreasonably restrict a right to
information or access to records; 2) eliminate the duty of loyalty; 3) unreasonably
reduce the duty of care; 4) eliminate the obligation of good faith and fair dealing; 5)
vary the right to expel a member in specified events; 6) vary the requirement to
wind up the limited liability companys business in specified events; and 7) restrict
the rights of a person, other than a manager, member, and transferee of a members
distributional interest.
184
As business transactions take infinite forms, an entitys
organizational flexibility is often indispensable to consummate an agreement among
parties. In this regard, the LLC has the requisite litheness to adapt and satisfy the
needs of all parties. Moreover, unlike limited partners, members of a LLC who take
part in management do not ipso facto lose their limited liability protection.
185
Transferability of interests
Both acts of administration and disposition may be done by the sole proprietor
as to property solely owned by him, except where limited by law or stipulation.
186
On the other hand, owing to the personal character of the partnership contract,
consent of the all partners is necessary to admit another into a general partnership.
187
However, a general partner may freely assign his own partnership interest
188
except
where otherwise stipulated by the partners.
189
This only entitles the assignee to
receive profits to which the assigning partner may otherwise be entitled, as well as
secure remedies against fraudulent acts.
190
The assignee cannot interfere in the
181 ULLCA, Sec. 404(c).
182 ULLCA, Sec. 404(d).
183 ULLCA, Sec. 404(d) and (e).
184 ULLCA, Sec. 103(a) and (b).
185 ULLCA, Sec. 303(a) and (b).
188 Republic Act No. 386, Article 428 (1949); Republic Act No. 386, Article 1813 (1949).
189 Bautista, Treatise on Philippine Partnership Law, p. 177 (1995) citing Pokrzywnicki vs. Kozak, 47 A.2d 144
(1946); Chaiken vs. Employment Security Commission, 274 A.2d 707 (1971).
management or administration of the partnership business, nor require an accounting
or provision of information regarding the partnership business.
191
A partner cannot
assign his rights in specific partnership property due to the partnerships status as a
separate juridical entity.
192
Similarly, third parties may only be admitted to the limited partnership with
the consent of all the partners.
193
As an exception to the rule, a general partner may
be delegated the authority to admit limited partners where provided in the certificate
of limited partnership.
194
General and limited partners may freely assign their
partnership interests to third parties without the consent of the other partners.
195
The assignment of partnership interest only entitles the assignee to receive profits
to which the assigning partner may otherwise be entitled, as well as to remedies
against fraudulent acts.
196
Moreover, assignees of general and limited partners cannot
interfere in the management or administration of the partnership business, nor
require an accounting or provision of information regarding the partnership
business.
197
The partners cannot assign their rights in specific partnership property
as only they have the right to possess and use the property for partnership
purposes.
198
The shares of open corporations are freely transferable by delivery of the
certificates endorsed by the shareholder.
199
No restrictions on transferability may
be imposed except those made in compliance with nationality requirements.
200
Shareholders do not have the right to specific corporate property due to the separate
juridical personality thereof, but merely have an expectancy or inchoate right to the
same should any remain upon dissolution of the corporation after all corporate
creditors have been paid.
201
Shareholders may likewise do other acts of ownership
with their shares, such as using the same as collateral in a contract of pledge.
202
On
the other hand, the shares in close corporations may be subject to restrictions on
transferability.
203
The close corporation may refuse to register transfers of stock
194 Id.
198 Republic Act No. 386, Article 1811, 1850-1851 (1949); Bautista, Treatise on Philippine Partnership Law, p. 162
(1995).
202 Republic Act No. 386, Article 428 (1949); Batas Pambansa Blg. 68, Section 55 (1980).
203 Batas Pambansa Blg. 68, Section 98 (1980); I Campos, The Corporation Code: Comments, Notes and Selected
Cases, pp. 322-324 (1990).
132 IBP JOURNAL
done in violation of the said restrictions.
204
Like shareholders of open corporations,
those of close corporations do not have rights to specific corporate property.
205
Conversely, members of cooperatives cannot transfer their interests or share
capital as easily as corporate shareholders. Members may only assign their interests
inter vivos when a) the member has held such share capital contribution or interest
for not less than one (1) year; b) the assignee is the cooperative, a member of the
cooperative or a person who falls within the cooperatives field of membership; and
c) the board of directors has approved such assignment.
206
Assignments of share
capital, however, may be made mortis causa regardless of the said restrictions.
207
Only
natural persons may be members of a primary cooperative.
208
On the other hand, consent of all the members in an LLC is required to admit
other members as a default rule.
209
This requirement, however, may be overridden
by the articles of organization or the operating agreement.
210
Consequently,
membership to an LLC may be as restricted as a close corporation, partnership, or
cooperative or as unregulated as an open corporation. Members may also freely
assign their distributional interest.
211
A transfer of distributional interest does not
entitle the transferee to become or to exercise any rights of a member, but merely
entitles the transferee to receive, to the extent transferred, the distributions to which
the transferor would be entitled.
212
The transferee may also seek a judicial
determination that it is equitable to dissolve and wind up the companys business.
213
Owing to the separate juridical entity of the LLC, members are not co-owners of the
LLCs property
214
and may not assign rights to the LLCs property.
215
Tax treatment
Under the present internal revenue code, a sole proprietor is subject to taxes
on income derived from the conduct of a trade or business within the taxable year.
216
These taxes are computed at a graduated rate, which is directly proportional to the
204 Batas Pambansa Blg. 68, Section 99(4), 99(5) (1980).
207 Republic Act No. 6938, Article 74(1990).
209 ULLCA, Sec. 404(c).
210 ULLCA, Sec. 103, 203(b), 203(c).
211 ULLCA, Sec. 501(b).
212 ULLCA, Sec. 502, 503(d), 503(e).
213 ULLCA, Sec. 503(e)(3).
214 ULLCA, Sec. 501(a).
216 Republic Act No. 8424, Section 32(A)(2) (1997).
income earned.
217
A sole proprietor is not subject to dividends tax on income derived
from the conduct of the business.
218
General and limited partnerships as well as open and close corporations are
likewise subject to taxes on income within the taxable year.
219
Notably, in lieu of the
graduated tax rate used for individuals, a flat rate of 32% is applied against the
taxable income of partnerships and corporations.
220
Moreover, the partners and
shareholders must pay a final tax of 10% on dividends actually or constructively
received from the partnership or corporation.
221
However, general professional
partnerships are not taxed separately and the partners thereof are liable for income
taxes on their distributive shares actually or constructively received from the
partnership.
222
Cooperatives are a favored class with regard to taxation law. Registered
cooperatives that do not transact any business with nonmembers or the general
public are not subject to any government taxes or fees imposed under the internal
revenue laws and other tax laws.
223
Cooperatives are subject to indirect taxes since
the Cooperative Code does not expressly exempt them,
224
but some classes of
cooperatives are not subject to value-added taxes.
225
Cooperatives transacting business
with both members and nonmembers are exempt from taxes on all transactions
where their accumulated reserves and undivided net savings are not more than
Php10,000,000.00.
226
These cooperatives are likewise exempt from all national and
local government taxes of whatever nature, as well as customs duties on their
importation of machineries, equipment, and spare parts used by them that are not
available locally as certified by the Department of Trade and Industry.
227
Generally,
where the cooperative transacting business with members and non-members has
accumulated reserves and undivided net savings of more than Php10,000,000.00, it
shall only pay taxes on transactions with non-members. Sales by agricultural and
electric cooperatives to non-members are an exception to the general rule as they
are exempt from value-added tax.
228
On the other hand, sales by non-agricultural,
217 Republic Act No. 8424, Section 24(A) (1997).
218 Republic Act No. 8424, Section 24(B)(2) (1997).
219 Republic Act No. 8424, Section 22(B), 27(A) (1997).
220 Id.
221 Republic Act No. 8424, Section 24(B)(2) (1997).
222 Republic Act No. 8424, Section 26 (1997).
223 Republic Act No. 6938, Article 61 (1990); Revenue Regulations No. 20-01, Section 3 (2001)
224 Philippine Acetylene Co., Inc. vs. Commissioner of Internal Revenue, 20 SCRA 1056 (1967); Revenue
Regulations No. 20-01, Section 3 (2001)
225 Republic Act No. 8424, Section 109(r)-109(u) (1997); Revenue Regulations No. 20-01, Section 3 (2001)
226 Republic Act No. 6938, Article 62(1) (1990); Revenue Regulations No. 20-01, Section 3 (2001)
228 Republic Act No. 8424, Section 109(r)-109(s) (1997).
134 IBP JOURNAL
non-electric and non-credit cooperatives where the capital contribution of any member
exceeds Php15,000.00 are subject to value-added tax.
229
However, individual
members are liable for income taxes on net surplus received.
230
On the other hand, based on current U.S. income tax law, LLCs may structure
themselves to be treated as non-corporate or corporate entities. The treatment of
non-corporate entities in the U.S. is similar to the sole proprietorship and general
professional partnership in our jurisdiction. The earnings of these entities are deemed
constructively received by the sole proprietor or partner and taxed accordingly.
231
Corporate entities are treated like our partnerships and corporations and are taxed
separately with separate dividends taxes imposed on distributions of profit to partners
or shareholders.
232
U.S. courts have identified certain factors that are considered in
determining whether an entity is a corporate or non-corporate entity.
233
These include
joint profit intent, continuity of life, centralization of management, limited liability,
and free transferability of interests.
234
Due to the flexibility afforded LLCs by their
enabling law, an entity may be purposely structured to fail any of the tests for corporate
tax treatment. Therefore, depending on the circumstances, an entrepreneur may
elect non-corporate tax treatment due to the advantages thereof at present and
subsequently elect to change to corporate tax treatment when the situation so merits.
The advantages of this flexibility in tax treatment may be illustrated by the following
example. An entrepreneur may expect his venture to incur a net loss in the first few
years using tax accounting standards. This net loss may be used to offset taxable
income of the individual to reduce his tax obligations. However, where the entity
begins to earn income, the pass-through tax treatment is no longer advantageous
due to the increased taxes that an individual must shoulder based on the graduated
tax system. The entrepreneur may be better served by electing corporate tax
treatment and accessing corporate income through means that would avoid dividends
taxes, like conversion to compensation and other similar devices. Although our
taxation law regime does not make the same clear-cut distinction between corporate
and non-corporate entities since partnerships are taxed in the same manner as
corporations, this writer submits that this tax scheme is worth considering at this
time where there is renewed interest in amending the internal revenue code and
promoting entrepreneurship. Another alternative would be to provide for exemptions
from the dividends taxes for distributions of an LLC to its members where a certain
gross income and total asset value is met. This would ensure that only individuals
that may be classified as budding entrepreneurs are qualified to avail of the
exemptions. The amendment of these statutory income and asset levels may then be
delegated to the Philippine Bureau of Internal Revenue in order to ensure that they
are reflective of current economic policy and conditions. It goes without saying that
229 Republic Act No. 8424, Section 109(u) (1997).
230 Revenue Regulations No. 20-01, Section 5 (2001).
231 14A Fletcher Cyclopedia of the Law of Private Corporations 6970.08 (2004).
232 14A Fletcher Cyclopedia of the Law of Private Corporations 6970.03 (2004).
233 Id.
234 Id.
the delegation of authority should be subject to proper standards laid out in the
enabling law.
235
The enabling LLC law must also be self-executing to preclude the
difficulties encountered with the Special Purpose Vehicle Act when pertinent
government agencies failed to immediately promulgate its implementing rules.
Asset protection
As sole proprietors contract on their own behalf and not on behalf of a juridical
person, they are personally liable for any and all obligations incurred by them in the
course of trade or business, whether through contract, tort, or otherwise.
236
Moreover,
the extent of the sole proprietors liability extends to both present and future
property.
237
Even community and conjugal property may be liable for the obligations
of the sole proprietor considering that business transactions redound to the benefit
of the family.
238
The property of the sole proprietor used in the business or otherwise
is also liable for obligations not incurred in the course of trade or business of the
sole proprietorship.
239
Similarly, general partners are liable pro rata with all their property, after all
the partnership assets have been exhausted, for contracts that may be entered into
in the name of the partnership.
240
Any stipulation to the contrary is void against
third persons but is binding among the partners.
241
All partners are solidarily liable
with the partnership for torts and delicts committed by a partner against third persons
in the ordinary course of the partnership business.
242
As earlier stated, community
and conjugal property may be liable for the personal obligations of the general partner
since business transactions redound to the benefit of the family.
243
In a limited
partnership, only the general partners thereof are subject to the aforesaid liabilities.
244
Limited partners are not personally liable for partnership obligations to third
parties.
245
Their liability is limited to the extent of their contributions made to the
partnership.
246
However, should the limited partner take part in the control of the
partnership business, he shall be subject to the same liabilities as a general partner
235 Edu vs. Ericta, 35 SCRA 481 (1970).
238 Executive Order No. 209, Article 94, 122 (1987); I Tolentino, Commentaries and Jurisprudence on the Civil
Code of the Philippines, pp. 458-459 (1990).
242 Republic Act No. 386, Article 1822-1824 (1949); Bautista, Treatise on Philippine Partnership Law, pp. 259-262
(1995).
243 Executive Order No. 209, Article 94, 122 (1987); I Tolentino, Commentaries and Jurisprudence on the Civil
Code of the Philippines, pp. 458-459 (1990).
244 Republic Act No. 386, Article 1850 (1949); Bautista, Treatise on Philippine Partnership Law, p. 355 (1995)
citing Kitchell Corporation vs. Hermansen, 446 P.2d 934 (1968).
246 V Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, pp. 382 (1992).
136 IBP JOURNAL
to third persons.
247
One unique and interesting feature of both partnerships is the
charging order procedure. Judgment creditors of general or limited partners may
not execute against the partners right in specific partnership property.
248
The proper
remedy of judgment creditors is to apply for an order with a competent court a)
charging the interest of the debtor partner with the payment of the unsatisfied
judgment debt; b) appointing a receiver of the profits or other amounts due; c)
directing the sale of the interest; or d) directing other matters as the circumstances
may require.
249
This provides some measure of protection from the disruption of
partnership business.
Conversely, members of open and close corporations are not personally liable
for corporate obligations.
250
This is due to the separate and distinct juridical
personality of the corporation from its stockholders.
251
Should the corporation become
bankrupt, the extent of the shareholders loss would be limited to the loss of value
of the shares of stock. Although limited liability applies as a general rule, where the
corporate entity is used to defeat public convenience, justify wrong, protect fraud,
or defend crime, the law will regard the corporation as an association of persons and
hold pertinent stockholders personally liable.
252
With regard to obligations of
stockholders, their personal creditors may attach and execute on the formers shares
of stock to satisfy the judgment obligation.
253
However, they cannot proceed against
property owned by the corporation due to its separate juridical personality.
254
The
asset protection provided by the charging order procedure in partnerships has no
exact equivalent in corporations. Although a judgment debtor has the option to
choose which property may be levied upon by the court officer, failure to immediately
do so allows the officer to levy on personal and real properties of the judgment
debtor in that order.
255
Therefore, should the shareholder seek to place all his
properties in a holding corporation, leaving shares of stock in his possession, the
court officer would simply levy on the shares of stock, which would most likely be
sold to the judgment creditor due to their non-marketability.
256
Upon transfer of
ownership, the judgment creditor may then proceed to dissolve the corporation and
liquidate its assets as he may see fit.
257
248 Republic Act No. 386, Article 1811(3), 1862 (1949); Bautista, Treatise on Philippine Partnership Law, pp. 164,
377 (1995); V Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, p. 352 (1992).
251 Republic Act No. 386, Article 44(3) (1949); Batas Pambansa Blg. 68, Section 19 (1980); I Campos, The
Corporation Code: Comments, Notes and Selected Cases, p. 137 (1990).
252 Laguna Transportation Co., Inc. vs. Social Security System, 107 Phil. 833 (1960); I Campos, The Corporation
Code: Comments, Notes and Selected Cases, pp. 149-150 (1990).
253 Rules of Court, Rule 39, Section 9(b) (1997).
254 Batas Pambansa Blg. 68, Section 19 (1980); Rules of Court, Rule 39, Section 8 (1997); I Campos, The
Corporation Code: Comments, Notes and Selected Cases, p. 137 (1990).
255 Rules of Court, Rule 39, Section 9(b) (1997).
256 Rules of Court, Rule 39, Section 21 (1997).
257 Batas Pambansa Blg. 68, Section 117-120 (1980).

By comparison, members of a cooperative are not subject to personal liability
for the obligations of the cooperative.
258
Cooperative members are only liable for
the debts of the cooperative to the extent of their contribution to the cooperatives
share capital.
259
Though this may be the general rule, this writer submits that
corporate rules with regard to piercing the corporate veil also apply to cooperatives.
With regard to personal debts of cooperative members, judgment creditors of
cooperative members cannot attach or execute upon specific properties of the
cooperative due its separate juridical personality.
260
There are no provisions in the
Cooperative Code or other laws exempting a members share capital and interest to
attachment and execution. Therefore, a cooperative members share capital and
interest are not exempt from attachment and execution.
261
In like manner, a member or manager of an LLC is not personally liable for a
debt, obligation, or liability of the company solely by reason of being or acting as a
member or manager; the debts, obligations, and liabilities of a LLC, whether arising
in contract, tort, or otherwise, are solely the debts, obligations, and liabilities of the
LLC.
262
However, members of a LLC may be liable for debts, obligations, or liabilities
of the company if a provision to that effect is contained in the articles of organization
and the member so liable has consented in writing to the adoption of the provision
or to be bound by the provision.
263
Failure to strictly follow the formalities observed
by bigger enterprises does not result in the loss of limited liability protection.
264
Though this may be the general rule, this writer submits that corporate rules with
regard to piercing the corporate veil are applicable to LLCs as well. This is supported
by the equitable nature of the remedy of piercing the corporate veil
265
and the inclusion
of a provision in the ULLCA stating that other principles of law and equity are
applicable suppletorily.
266
With regard to personal debts of LLC members, judgment
creditors of LLC members cannot attach or execute upon specific properties of the
LLC due to its separate juridical personality,
267
nor can the creditor of a member
attach and sell the members LLC interest.
268
The exclusive remedy available to the
judgment creditor is to apply for a charging order with a court of competent
jurisdiction.
269
This provides superior asset protection to any person who uses the
LLC as an investment vehicle.
259 Id.
260 Republic Act No. 6938, Article 16 (1990); Rules of Court, Rule 39, Section 8 (1997).
261 Rules of Court, Rule 39, Section 13 (1997)
262 ULLCA, Sec. 303(a).
263 ULLCA, Sec. 303(c).
264 ULLCA, Sec. 303(b).
265 1 Fletcher, Cyclopedia of the Law of Private Corporations, 41.25 (2004) citing Intergen N.V. vs. Grina, 344
F3d 134 (CA1 2003); In re Cambridge Biotech Corp., 186 F3d 1356 (CA Fed 1999); Internal Revenue Service
vs. State of Kansas, 151 F3d 1295 (CA10 1998) and other cases.
266 ULLCA, Sec. 104(a).
267 ULLCA, Sec. 201; Rules of Court, Rule 39, Section 8 (1997).
268 ULLCA, Sec. 504(e).
269 ULLCA, Sec. 504(a), 504(e).
138 IBP JOURNAL
Continuity of life.
Since a sole proprietorship does not have a separate juridical personality from
the sole proprietor, its existence is dependent on the latter. Thus, the existence of
the sole proprietorship terminates upon the death of the sole proprietor. The sole
proprietors insolvency, insanity, and other vices of consent necessarily cripple the
sole proprietorships business.
In general partnerships, the enabling law provides for numerous events of
dissolution. These include: a) termination of the term or particular undertaking
specified in the agreement; b) express will of any or all of the partners; c) expulsion
of any partner from the business bona fide in accordance with partnership agreement;
d) events which make it unlawful to carry on the business of the partnership; e) the
loss of the specific thing that the partner promised to contribute to the partnership,
before delivery; f) the loss of the specific thing after delivery to the partnership,
where its usufruct was contributed; g) death of any partner; h) insolvency of any
partner or of the partnership; i) civil interdiction of any partner; or j) decree of court
upon application of a partner or a purchaser of a partners interest in specified
cases.
270
A general partnerships juridical existence is extremely volatile due to the
number of involuntary events of dissolution and each event is potentially disruptive
to the maintenance of the partnership business as a going concern.
In limited partnerships, the partnership is dissolved by the retirement, death,
insolvency, insanity, or civil interdiction of a general partner.
271
However, the business
may continued by the remaining general partners under a right to do so stated in the
limited partnership certificate, or with the consent of all members.
272
A limited
partner may have the partnership dissolved when he a) rightfully but unsuccessfully
demands the return of his contribution, or b) the liabilities of the partnership have
not been paid and the limited partner would otherwise be entitled to the return of
his contribution.
273
The retirement, death, insolvency, insanity, or civil interdiction
of a limited partner does not affect the existence of the partnership.
274
A limited
partnerships juridical existence is similarly evanescent due to the number of
involuntary events of dissolution associated with the general partner. This issue
may be remedied, however, by making a corporation the sole general partner of the
limited partnership.
275
Realistically though, the solution may not be within the grasp
of an SME that lacks access to expert legal advisers.
On the other hand, corporations may have a term of existence not exceeding
fifty years, subject to extension through amendment of the articles of incorporation
272 Id.
275 Bautista, Treatise on Philippine Partnership Law, pp. 6-11 (1995).
Recent Decision of the Philippine Supreme court and Property Law
by periods not exceeding fifty years in any single instance.
276
Amendments of the
articles of incorporation to extend the corporate term, however, are subject to the
discretion of the SEC.
277
A corporation may be dissolved through a) voluntary
dissolution by securing a majority vote of the board of directors and the votes of
stockholders holding 2/3 of the outstanding capital stock;
278
b) involuntary dissolution
after notice and hearing held by the SEC;
279
or c) amendment of the articles of
incorporation to shorten the corporate term.
280
The non-use of corporate charter
and continuous inoperation of a corporation
281
do not cause its automatic dissolution,
since the Corporation Code itself provides for defenses that may be raised by
management
282
and Presidential Decree 902-A states that the SEC may only revoke
a corporations certificate of registration after notice and hearing.
283
The retirement,
death, insolvency, insanity, or civil interdiction of the directors or other shareholders
does not affect the existence of the corporation,
284
nor can the corporation be
dissolved at the will of a particular stockholder per se.
285
Similarly, cooperatives may have a term of existence not exceeding fifty years,
subject to extension through amendment of the articles of cooperation by periods
not exceeding fifty years in any single instance.
286
Amendments of the articles of
cooperation, however, are subject to the discretion of the CDA.
287
A cooperative
may be dissolved through a) voluntary dissolution by securing a majority vote of the
board of directors and the votes of 2/3 of all members where no creditors are
affected;
288
b) voluntary dissolution by securing a majority vote of the board of
directors where creditors are affected;
289
c) involuntary dissolution after notice and
hearing held by a competent court;
290
d) involuntary dissolution after notice and
hearing held by the CDA;
291
or e) amendment of the articles of incorporation to
shorten the corporate term.
292
The failure to commence business or continuous
inoperation of a cooperative
293
does not cause its automatic dissolution since the
278 Batas Pambansa Blg. 68, Section 117-119 (1980).
279 Batas Pambansa Blg. 68, Section 121 (1980); Presidential Decree No. 902-A, Section 6 (1976).
282 Id.
283 Presidential Decree No. 902-A, Section 6 (1976).
284 Batas Pambansa Blg. 68, Section 2, 22, 117-121 (1980); Presidential Decree No. 902-A, Section 6 (1976).
285 Id.
293 Id.
140 IBP JOURNAL
Cooperative Code itself provides for defenses that may be raised by management.
294
The retirement, death, insolvency, insanity, or civil interdiction of the directors or
other members does not affect the existence of the cooperative,
295
nor can the
cooperative be dissolved at the will of a particular member per se.
296
On this point, LLCs are extremely versatile. A LLC may be an at-will or term
company with the former as the default choice.
297
LLCs are term companies where
the articles of organization so provide.
298
No term limits are provided in the enabling
law.
299
The common events of dissolution for both types of LLCs are the occurrence
of a) an event specified in the operating agreement; b) illegality of continuing the
LLC business; or c) entry of judicial decree upon application by either a current or
disassociated member or a transferee of a members interest.
300
Dissolution through
judicial decree may be sought by a current or dissociated member for the following
reasons: a) the LLCs economic purpose is likely to be unreasonably frustrated; b)
another member engaging in conduct related to the LLCs business making it
impracticable to carry on business with that member; c) impracticability of carrying
on the LLCs business in conformity with the articles of organization and the operating
agreement; d) failure of the LLC to purchase petitioners distributional interest
when required by the ULLCA; or e) where managers or members in control of the
LLC have acted, are acting, or will act in a manner that is illegal, oppressive,
fraudulent, or unfairly prejudicial to the petitioner. A transferee of a members
distributional interest may seek the issuance of a judicial decree for LLC dissolution
where it is equitable to wind up the LLC business a) after the expiration of term, for
a term LLC;
301
b) at any time, for an at-will LLC.
302
For an at-will LLC, dissolution
may also be effected through the consent of members, the number of which is specified
in the operating agreement.
303
In a term LLC, dissolution also occurs upon the
expiration of the term specified in the articles of organization.
304
Notably, the
members
305
may unanimously waive the right to have the companys business wound
up and the company terminated.
306
The dissolution rules of this section are mostly
default rules and may be modified by an operating agreement.
307
However, an
294 Id.
296 Id.
297 ULLCA, Sec. 101(2), 101(19).
298 ULLCA, Sec. 101(19).
299 Id.
300 ULLCA, Sec. 801(1), 801(3)-801(5).
301 ULLCA, Sec. 801(5)(i).
302 ULLCA, Sec. 801(5)(ii).
303 ULLCA, Sec. 801(2).
304 ULLCA, Sec. 801(6).
305 Members include former members whose dissociation caused the dissolution.
306 ULLCA, Sec. 802(b).
307 ULLCA, Sec. 103(a).
operating agreement may not modify or eliminate a) the illegality of the LLC business
and b) the entry of judicial decree after member application as dissolution events.
308
Weaknesses of the LLC
There appear to be three weaknesses to the LLC form based on the ULLCA.
Firstly, due to the default selection of restrictive membership by law and its flexibility
of organizational form, capital infusion through securities trading markets may not
be achievable as a practical matter unless the LLC is converted to an open corporation.
However, the present ULLCA does not provide for conversion from the LLC form
to a corporate form. This oversight may be rectified by adopting some of the
provisions of the Delaware or California LLC Act which provide for conversion
between the LLC and corporate forms and vice versa.
309
Secondly, the lack of
jurisprudential precedents in both the U.S. and our jurisdiction may be a cause of
concern as stability and predictability in jural relations is vital to business transactions.
The National Conference of Commissioners on Uniform State Laws sought to correct
this lacuna by inserting a provision providing that other principles of law and equity
apply suppletorily.
310
This may be further improved on by codifying other principles
of law that may apply analogously to the LLC to obviate the possibility of the judiciary
introducing an unfavorable precedent. Lastly, the ULLCA provides that where
dispositions of interest in real property are involved, any member of a member-
managed company or manager of a manager-managed company may sign and deliver
any instrument transferring or affecting the companys interest in real property to a
purchaser in good faith and for value, unless the articles of organization limit their
authority.
311
This is the converse of the rules provided in the Civil Code and may
cause confusion in the conduct of LLC business.
312
This may be resolved by deleting
the pertinent portion of the ULLCA.
313
Conclusion
There are significant issues as regards the ULLCA that must to be addressed
prior to use in the Philippines. Despite these concerns, this writer submits that LLCs
are generally superior to presently available entities for a majority of business
transactions. Moreover, due to the popularity of LLCs in a number of jurisdictions,
providing an LLC investment option will help promote foreign direct investment.
308 ULLCA, Sec. 103(b)(6); Report of the National Conference of Commissioners on Uniform State Laws, p. 77.
309 See Cal Code 17540.1 et seq.; Del Code Ann 18-216.
311 ULLCA, Sec. 301(c).
312 Republic Act No. 386, Article 1818, 1877-1878 (1949).
313 ULLCA, Sec. 301(c).
142 IBP JOURNAL
This writer recommends that this juridical entity be incorporated into the Philippine
commercial law regime using the ULLCA with modifications.

Survey of 2005 Cases
in Property and Land Registration
Eduardo A. Labitag*
PROPERTY
I. CLASSIFICATION OF PROPERTY
USERO vs. COURT OF APPEALS
G.R. No. 152115. January 26, 2005 Corona, J.
FACTS:
Petitioners Lutgarda R. Samela and Nimfa Usero are the respectively owners
of Lots 1 and 2, Block 5, Golden Acres Subdivision, Barrio Almanza, Las Pias City.
Private respondent spouses Polinar are the registered owners of a parcel of land at
No. 18 Anahaw St., Pilar Village, Las Pias City, behind the lots of petitioners Samela
and Usero. Situated between the lots of the parties is a low-level strip of land, with a
stagnant body of water filled with floating water lilies. Abutting and perpendicular
to the lot of petitioner Samela, the lot of the Polinars and the low-level strip of land,
is the perimeter wall of Pilar Village Subdivision.
Apparently, every time a storm or heavy rains occur, the water in said strip of
land rises and the strong current passing through it causes considerable damage to
the house of respondent Polinars. Frustrated by their predicament, private respondent
spouses, on July 30, 1998, erected a concrete wall on the bank of the low-level strip
of land about three meters from their house and rip-rapped the soil on that portion
of the strip of land.
Petitioners Samela and Usero, believing themselves to be the owners of the
strip of land, demanded that respondent Polinars stop their construction. The Polinars,
however, offered to pay for the strip of land. Despite the offer, the parties failed to
settle their differences. Petitioners filed their separate complaints before the MTC.
They presented, as evidence, TCTs covering their respective properties. The MTC
sustained the petitioners and held that the subject strip of land was part of their
property. However, upon appeal, to the RTC, held that the said strip of land was a
creek and was thus, part of the public dominion. Petitioners appealed to the CA,
which dismissed both their petitions.
* Professor of Law, University of the Philippines College of Law
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ISSUE: Whether the strip of land belongs to the public dominion
HELD: Yes. That the subject strip of land is a creek is evidenced by: (1) a barangay
certification that a creek exists in the disputed strip of land; (2) a certification from
the Second Manila Engineering District, NCR-DPWH, that the western portion of
Pilar Village, where the subject strip of land is located, is bounded by a tributary of
Talon Creek; and (3) photographs showing the abundance of water lilies in the subject
strip of land. The Court of Appeals was correct: the fact that water lilies thrive in
that strip of land can only mean that there is a permanent stream of water or creek
there.
In contrast, petitioners failed to present sufficient proof to support their
claim. Petitioners presented the TCTs of their respective lots to prove that there is
no creek between their properties and that of the Polinars. However, an examination
of the said TCTs reveals that the descriptions thereon are incomplete. In petitioner
Samelas TCT No. T-30088, there is no boundary description relative to the
northwest portion of the property pertaining to the site of the creek. Likewise in
TCT No. T-22329-A of the spouses Polinar, the southeast portion, which pertains
to the site of the creek has no described boundary. Moreover, the tax declaration
presented by petitioner is devoid of any entry on the west boundary, vis-a-vis the
location of the creek.
Taking all the pieces of evidence together, the Court can only conclude that
the adjoining portion of these boundaries is in fact a creek and belongs to no one
but the State.
Property is either of public dominion or of private ownership. Concomitantly,
Article 420 of the Civil Code provides:
ART. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks, shores, roadsteads,
and others of similar character;
The phrase, others of similar character, includes a creek which is
a recess or an arm of a river. It is property belonging to the public domain
which is not susceptible to private ownership. Being public water, a creek cannot be
registered under the Torrens System in the name of any individual.
Accordingly, the Polinar spouses may utilize the rip-rapped portion of the creek
to prevent the erosion of their property.
II. OWNERSHIP
A. Accion Reivindicatoria/Accion Publiciana
HILARIO vs. SALVADOR
G.R. No. 160384. April 29, 2005, CALLEJO, SR., J.
FACTS:
Petitioners herein are co-owners of a parcel of land located in Romblon. In
1996, they filed a complaint with the RTC of Romblon against herein, respondent,
alleging that as co-owners, they are entitled to possession of the lot, and that
respondent constructed his house thereon without their knowledge and refused to
vacate the property despite demands to do so. They prayed for the private respondent
to vacate the property and restore possession thereof to them. The complaint,
however, failed to allege the assessed value of the land. Nevertheless, petitioners
were able to present during the trial the most recent tax declaration, which shows
that the assessed value of the property was Php 5,950.00.
The respondent filed a Motion to Dismiss on the ground of lack of jurisdiction
because of the failure to allege the value of the land. The motion was denied.
Respondent then filed an Answer, traversing the material allegations of the complaint,
contending that petitioners had no cause of action against him since the property in
dispute was the conjugal property of his grandparents, the spouses Salustiano
Salvador and Concepcion Mazo-Salvador.
The RTC ruled in favor of the petitioners. On appeal, the CA reversed the
decision, holding that the action was one for the recovery of ownership and possession of
real property, and that absent any allegation in the complaint of the assessed value
of the property, the MTC had exclusive jurisdiction over the action (citing Sec. 33
of R.A. No. 7691). The CA then ordered the refiling of the case in the proper court.
ISSUES: Whether the RTC has jurisdiction over the action
HELD: NO. Petitioner argues that the RTC has jurisdiction since their action is an
accion reivindicatoria, an action incapable of pecuniary estimation. Thus, regardless of
the assessed value of the subject property, exclusive jurisdiction falls within the said
court.
This argument is without merit.
The jurisdiction of the court over an action involving title to or possession of
land is now determined by the assessed value of the said property and not the market value
thereof. [] In the case at bar, the complaint does not contain an allegation stating the
assessed value of the property subject of the complaint. The court cannot take judicial
notice of the assessed or market value of lands.
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The Court noted that during the trial, the petitioners adduced in evidence a
tax declaration, showing that the assessed value of the property in 1991 was
Php5,950.00. The petitioners, however, did not bother to adduce in evidence the
tax declaration containing the assessed value of the property when they filed their
complaint in 1996. Even assuming that the assessed value of the property in 1991
was the same in 1995 or 1996, the MTC, and not the RTC had jurisdiction over the
action of the petitioners, since the case involved title to or possession of real property with an
assessed value of less than Php20,000.00. As the Court of Appeals had held:
The determining jurisdictional element for the accion reinvindicatoria
[sic] is, as RA 7691 discloses, the assessed value of the property in question.
For properties in the provinces, the RTC has jurisdiction if the assessed
value exceeds Php20,000.00, and the MTC, if the value is Php20,000.00
or below. An assessed value can have reference only to the tax rolls in the
municipality where the property is located, and is contained in the tax
declaration. In the case at bench, the most recent tax declaration secured
and presented by the plaintiffs-appellees is Exhibit B. The loose remark
made by them that the property was worth 3.5 million pesos, not to
mention that there is absolutely no evidence for this, is irrelevant in the
light of the fact that there is an assessed value. It is the amount in the tax
declaration that should be consulted and no other kind of value, and as
appearing in Exhibit B, this is Php5,950.00. The case, therefore, falls
within the exclusive original jurisdiction of the Municipal Trial Court of
Romblon which has jurisdiction over the territory where the property is
located, and not the court a quo. 24
In an obiter, the Court discussed the nature of an accion publiciana, thus:
The action of the petitioners was an accion publiciana, or one for the
recovery of possession of the real property subject matter thereof. It does
not involve a claim of ownership over the property. An accion reinvindicatoria is a
suit which has for its object the recovery of possession over the real
property as owner. It involves recovery of ownership and possession
based on the said ownership. On the other hand, an accion publiciana
is one for the recovery of possession of the right to possess. It
is also referred to as an ejectment suit filed after the expiration of one year
after the occurrence of the cause of action or from the unlawful withholding
of possession of the realty. []
The Supreme Court finally held that all proceedings before the RTC, including
the RTC decision, are null and void, since the RTC had no jurisdiction over the
action of the petitioners.
Criticism of the ponencia: The discussion about the distinction between an
accion reivindicatoria and an accion publiciana is inappropriate. The issue to be resolved
by the court is: which court has jurisdiction, the MTC or the RTC? It is immaterial
whether the case is one for accion reivindicatoria or accion publiciana; only one
court will have exclusive jurisdiction. I submit that what should have been discussed
in the obiter is that if the claim of co-ownership by the defendant is true, may a
plaintiff co-owner then file an action in ejectment against another co-owner?
Dr. Tolentino is of the opinion that a co-owner may bring such an action against
another co-owner who takes exclusive possession of and asset ownership in himself
alone. The effect of the action will be to obtain recognition of the co-ownership.
The defendant co-owner, however, cannot be excluded from possession because as
co-owner, he also has the right to possess.
PERALTA-LABRADOR vs. BUGARIN
G.R. No. 165177. August 25, 2005 YNARES-SANTIAGO, J.
FACTS:
Petitioner Peralta-Labrador was the owner of a 400 sq. m. parcel of land,
purchased in 1976 from the spouses Pronto. In 1990, the DPWH constructed a
road which traversed her lot and separated 108 sq. m. from it. She was subsequently
issued Tax Declaration No. 02-2460R for the separated lot. Sometime in 1994,
respondent Silverio Bugarin forcibly took possession of the 108 sq. m. lot and refused
to vacate the same despite the pleas of petitioner. Hence, on January 18, 1996, she
instituted a complaint for recovery of possession and ownership against respondent
before the MTC.
In his Answer with Counterclaims, respondent Bugarin contended that the area
claimed by petitioner is included in the 4,473 square-meter lot, covered by the Original
Certificate of Title (OCT) No. P-13011, and that he has been in continuous possession
and occupation thereof since 1955. In his Amended Answer with Counterclaim, respondent
failed to allege that the questioned lot is covered by the OCT No. P-13011 and
instead asserted that he planted fruit-bearing trees in the property. Respondent
further pleaded the defenses of lack of cause of action and prescription.
The MTC decided in favor of respondent declaring him as the owner of the
controverted lot on the basis of the OCT No. P-13011. The complaint was dismissed
for failure of petitioner to prove prior physical possession and ownership thereof.
The decision was affirmed by the RTC. Petitioner further filed a petition for review
before the CA, but the same was denied for insufficiency of evidence and petitioners
failure to adduce evidence to prove either ownership or prior physical possession.
ISSUE: Whether petitioner has a cause of action for forcible entry against respondent
HELD: NO. In Lopez vs. David Jr., it was held that an action for forcible entry is a
quieting process and the one year time bar for filing a suit is in pursuance of the
summary nature of the action. Thus, the Court has nullified proceedings in the
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MTCs when it improperly assumed jurisdiction of a case in which the unlawful
deprivation or withholding of possession had exceeded one year. After the lapse of
the one year period, the suit must be commenced in the RTC via an accion publiciana,
a suit for recovery of the right to possess. It is an ordinary civil proceeding to
determine the better right of possession of realty independently of title. It also
refers to an ejectment suit filed after the expiration of one year from the accrual of
the cause of action or from the unlawful withholding of possession of the realty
independently of title. Likewise, the case may be instituted before the same court as
an accion reivindicatoria, which is an action to recover ownership as well as possession.
It is clear that petitioners averment make out a case for forcible entry because
she alleged prior physical possession of the subject lot way back in 1976, and the
forcible entry thereon by respondent. Considering her allegation that the unlawful
possession of respondent occurred two years prior to the filing of the complaint on
January 18, 1996, the cause of action for forcible entry has prescribed and the MTC
had no jurisdiction to entertain the case. Therefore petitioners complaint should
have been filed with the proper RTC.
On this point, the Court held in Bongato vs. Malvar that:
It is wise to be reminded that forcible entry is a quieting process,
and that the restrictive time-bar is prescribed to complement the summary
nature of such process. Indeed, the one-year period within which to bring
an action for forcible entry is generally counted from the date of actual
entry to the land. However, when entry is made through stealth, then the
one-year period is counted from the time the plaintiff learned about it.
After the lapse of the one-year period, the party dispossessed of a parcel
of land may file either an accion publiciana, which is a plenary action to
recover the right of possession; or an accion reivindicatoria, which is an
action to recover ownership as well as possession.
B. Forcible Entry/Unlawful Detainer
SAMPAYAN vs. COURT OF APPEALS
G.R. No. 156360. January 14, 2005 GARCIA, J.
FACTS:
On July 8, 1992, in the MCTC of Bayugan and Sibagat, Agusan del Sur, the
siblings Crispulo Vasquez and Florencia Vasquez-Gilsano filed complaint for forcible
entry against Cesar Sampayan for allegedly having entered and occupied a parcel of
land, identified as Lot No. 1959, PLS-225, and built a house thereon without their
knowledge, consent or authority, the entry having been supposedly effected through
strategy and stealth. In their complaint, Crispulo and Florencia asserted that they
were co-owners pro-indiviso of the said lot, their mother Cristita Quita being the owner
and actual possessor thereof. Upon the latters death and while they were absent
from the said lot, Cesar Sampayan, through strategy and stealth, allegedly built a
house on the lot, to their exclusion. After repeated demands, Cesar Sampayan
allegedly refused to vacate the said lot. Thus, they filed an action for unlawful detainer.
In his defense, Cesar Sampayan asserted that his occupation of the lot was by
tolerance of the lots true owners, Mr. and Mrs. Terrado, who were then residing in
Cebu. The permission was given by the lots overseer, Maria Ybanez. Sampayan
further asserted that Crispulo and Valencias action had long prescribed, inasmuch
as the said lot had already been owned and possessed by the spouses Oriol since
1960, as evidenced by the latters payment of taxes. The Oriols, in turn, sold half
the land to the Terrados. Together, they maintained possession of their respective
portions.
Both the plaintiff siblings and defendant Sampayan submitted their respective
evidence consisting of affidavits and tax declarations. Meanwhile, the MCTC judge
also conducted an ocular inspection of the premises, where he found improvements.
The findings in the ocular inspection have confirmed the allegation of the defendant
that his predecessors-in-interest have introduced improvements by planting caimito
trees, coconut trees, and others on the land in question. The MCTC dismissed the
complaint. It held that it is clear that defendants have been in possession for more
than one year and that the appropriate remedy would have been accion publiciana or
plenaria de possession. Upon appeal to the RTC, it reversed the decision, relying on the
involvement of Cristita Quita, plaintiffs mother, in a cadastral case involving the lot
in 1957.
Sampayan then appealed to the CA, which denied the same. Thus this petition
for certiorari.
ISSUE: Whether or not the complaint for forcible entry would prosper
HELD: YES. In Sarmiento vs. CA, the Court held:
[t]o give the court jurisdiction to effect the ejectment of an occupant or
deforciant on the land, it is necessary that the complaint should embody such a
statement of facts as brings the party clearly within the class of cases for which the
statutes provide a remedy, as these proceedings are summary in nature. The complaint
must show enough on its face to give the court jurisdiction without resort to parol
testimony. The jurisdictional facts must appear on the face of the complaint. . . .
It is clear it is from the above that for the MCTC to acquire jurisdiction over
a forcible entry case, it is enough that the complaint avers the jurisdictional facts, i.e.
that the plaintiff had prior physical possession and that he was deprived thereof by
the defendant through force, intimidation, threats, strategy and stealth. The complaint
in this case makes such an averment. Hence, the irrelevant circumstance that the
evidence adduced during the hearing rendered improper an action for forcible entry
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is of no moment and cannot deprive the MCTC of its jurisdiction over the case. The
MCTC continues to have that jurisdiction.
ISSUE: Whether or not the petitioner had prior physical possession
HELD: YES. To begin with, the Court is at once confronted by the uncontested
findings of the MCTC judge himself during his ocular inspection of the premises in
dispute that what he saw thereat confirmed the allegations of the defendant [now
petitioner Sampayan] that his predecessors-in-interest have introduced improvements
by planting caimito trees, coconut trees, and others on the land in question, adding
that [N]othing can be seen on the land that plaintiff had once upon a time been in
possession of the land, and categorically stating that [T]he allegation that Cristita
Quita, the predecessor-in-interest of the plaintiffs had been in possession of the said
property since 1957, openly, exclusively, continuously, adversely and in the concept
of an owner is a naked claim, unsupported by any evidence.
x x x
The Court noted that in the assailed decision herein, the Court of Appeals
attached much significance to the fact that private respondents mother, Cristita
Quita, was an oppositor in Cadastral Case No. 149. The Court ruled and held that
the mothers being an oppositor in said cadastral case does not, by itself, establish
prior physical possession because not all oppositors in cadastral cases are actual
possessors of the lots or lands subject thereof.
SANTOS vs. AYON
G.R. No. 137013, May 6, 2005, SANDOVAL-GUTIERREZ, J.
FACTS:
In 1996, the petitioner, Santos, filed with the Municipal Trial Court in Cities
(MTCC) in Davao City a complaint for illegal detainer against the respondents, spouses
Ayon. In his complaint, he averred that a building used by the respondents as a
warehouse, encroached on a portion of his land. As early as 1985, he had allegedly
already informed respondents that the said building occupies a portion of his land,
but allowed them to continue using the building. In 1996, needing the entire portion
of his lot, he demanded that respondents remove the part of the building encroaching
on his property, but respondents refused and continued to occupy the contested
portion.
The MTCC ruled in favor of petitioner and ordered the respondents to vacate
and surrender possession of the property. On appeal, the RTC affirmed in toto the
MTCC judgment, and upheld the finding that respondents occupation of the
contested portion was by mere tolerance. On petition for review however, the CA held
that petitioners proper remedy should have been an accion publiciana before the RTC and not an
action for unlawful detainer, and thus dismissing the complaint.
ISSUE: Whether the MTCC properly exercised jurisdiction over the complaint.
HELD: YES.
All actions for forcible entry or unlawful detainer shall be filed with the proper
Metropolitan Trial Courts, the Municipal Trial Courts and the Municipal Circuit Trial Courts,
which actions shall include not only the plea for restoration of possession but also
all claims for damages and costs arising therefrom. The said courts are not divested
of jurisdiction over such cases even if the defendants therein raises the question of ownership
over the litigated property in his pleadings and the question of possession cannot be resolved without
deciding the issue of ownership.
The Court found no error in the MTCC assuming jurisdiction over petitioners
complaint. A complaint for unlawful detainer is sufficient if it alleges that the withholding
of the possession or the refusal to vacate is unlawful, without necessarily employing the
terminology of the law. Here, there is an allegation in petitioners complaint that
respondents occupancy on the portion of his property is by virtue of his tolerance.
Petitioners cause of action for unlawful detainer springs from respondents failure
to vacate the questioned premises upon his demand sometime in 1996.
It bears stressing that possession by tolerance is lawful, but such possession
becomes unlawful when the possessor by tolerance refuses to vacate upon demand
made by the owner. Our ruling in Roxas vs. Court of Appeals 391 SCRA 351 is applicable
in this case: A person who occupies the land of another at the latters tolerance or
permission, without any contract between them, is necessarily bound by an implied
promise that he will vacate upon demand, failing which, a summary action for
ejectment is the proper remedy against him.
RUDY LAO vs. JAIME LAO
G.R. No. 149599. May 16, 2000, CALLEJO, SR., J.
FACTS:
Alava was the owner of a parcel of land in Iloilo. As early as 1956, he allowed
the spouses Julian and Anita Lao to construct a building on a portion of the property,
and to occupy and lease the same without a written agreement. In 1982, a Contract of
Lease was executed by Alava (as lessor) and Anita Lao (as lessee), which stipulated
that the lease was to be for a period of 35 years, for a fee Php120.00 per year. This
lease agreement was however not filed with the Register of Deeds, and hence, not
annotated on Alavas TCT.
Petitioner Rudy Lao, a lessee of another portion of the same property,
eventually purchased the entire property from Alava. In 1997, he filed a complaint
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for unlawful detainer against respondent Jaime Lao (son of the Lao spouses), alleging
that latter had occupied a portion of his property without any lease agreement and without
paying any rentals, and prayed that an order be rendered directing respondent to
vacate the premises.
In his Answer to the complaint, the respondent alleged that the petitioner had
no cause of action against him, the truth being that the lessee of the property was his
mother, Anita Lao, as evidenced by a Contract of Lease executed by Alava, the
former owner thereof. He further alleged that she had been paying the annual rentals
therefor, and that she had designated him as manager to maintain the building, pay
rentals and operate the business.
The MCTC rendered a judgment in favor of the petitioner. On appeal, the
RTC affirmed the MCTC and ruled that under Article 1676 of the New Civil Code,
the petitioner was the purchaser of the property and had the right to terminate the lease between
Alava and Anita Lao, it appearing that the lease contract was not registered with the Office of the
Register of Deeds. The trial court also held that the respondent, not his mother, was
the real party as defendant in the MCTC, since it was he who was in actual possession
of the property. The RTC maintained that if Anita Lao was sued as defendant and
was ordered evicted, the decision would not be binding on the respondent since he
was not impleaded as defendant.
The CA reversed the RTC and ruled that the real party-in-interest as defendant in
the MCTC was Anita Lao, the lessee of the property, and not the respondent who was
merely the administrator/manager of Anita Laos building and the occupant of the property. Hence,
the CA dismissed the complaint.
ISSUE: (1) Whether the CA properly dismissed the complaint; (2) Who is the real
party-in-interest as defendant in this action for unlawful detainer?
HELD: (1) YES; (2) Respondents mother, Anita Lao (party to the lease agreement).
The records in this case show that the respondent has been in possession of
the property in question, not by mere tolerance or generosity of the petitioner, but
as the manager of his mother, Anita Lao, who conducted her business in the building/
warehouse which stood on a portion of the property leased from Alava, the former
owner. Contrary to the petitioners claim, the respondents possession of the property
was in behalf of his mother, the lessee thereof, and not in his own right, independently
of that of his mother.
The petitioner cannot feign ignorance of the existence of the lease of the subject
property by Anita Lao, the existence of the building and her business thereon, and
the fact that the respondent managed his mothers building and business. It must be
stressed that during the preliminary conference of the parties before the MCTC,
the petitioner admitted his knowledge of the foregoing facts.
It is true that the Contract of Lease between Alava and Anita Lao was not
filed in the Office of the Register of Deeds and annotated at the dorsal portion of
the petitioners title over the property; nevertheless, the petitioner was bound by
the terms and conditions of the said Contract of Lease. The lease, in effect, became a part
of the Contract of Sale.
Under Section 2, Rule 70 of the Rules of Court, the petitioner, as the vendee
of the property, had the right to file an action for unlawful detainer against Anita
Lao upon demand, but for breach of the contract of lease. If the petitioner had done so
and judgment was rendered in his favor, ordering Anita Lao to vacate the property,
the respondent herein, who is in possession of the property for and in her behalf,
would then have to abide by the decision and vacate the same.
Apparently, the petitioner believed that it was unfair for Anita Lao to be paying
an annual rental of only Php120.00 for the portion of the property leased by her,
considering that the said lot had already been classified as commercial property.
Moreover, it was not Anita Lao who stayed in the leased premises, but her
son. However, the petitioner had no cause of action for unlawful detainer against
Anita Lao because of the subsisting Contract of Lease; hence, he could not file the
complaint against her.
GANILA vs. COURT OF APPEALS
G.R. No. 150755, 06/28/2005 QUISUMBING, J.
FACTS:
Private respondent, Violeta Herrera, filed 21 ejectment complaints in the
MCTC, which ordered the 21 defendants, now petitioners, to vacate the property
in question (Lot 1227). The RTC sustained the decision as to 19 defendants but
dismissed the case against 2. The 19 defendants who were ordered to vacate Lot
1227 filed a petition for review with the CA based on two arguments, namely: first,
that they possessed lot 1227 in good faith for more than 30 years in the concept of
owners, and second, that there was no withholding of possession since private
respondent was not in prior possession of the lot.
ISSUES/HELD:
Whether prior physical possession by the plaintiff is necessary for a
complaint for unlawful detainer to prosper NO
While petitioners assert that this case involves only deprivation of possession,
they confuse the remedy of an action for forcible entry with that of unlawful detainer.
In unlawful detainer, prior physical possession by the plaintiff is not necessary. It is
enough that plaintiff has a better right of possession. Actual and prior physical
possession of a property by a party is indispensable only in forcible entry cases.
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In unlawful detainer cases, the defendant is necessarily in prior lawful
possession of the property but his possession eventually becomes unlawful upon
termination or expiration of his right to possess. Thus, the fact that petitioners are
in possession of the lot does not automatically entitle them to remain in possession.
And the issue of prior lawful possession by the defendants does not arise at all in a
suit for unlawful detainer simply because prior lawful possession by virtue of contract
or other reasons is given or admitted. Unlike in a forcible entry where defendants,
by force, intimidation, threat, strategy or stealth, deprive the palintiff or the prior
physical possessor of possession, here there is no evidence to show that petitioners
entered the lot by any of these acts.
Whether private respondent properly filed complaints for unlawful
detainer YES
If only to stress the fundamental principles related to the present controversy,
jurisdiction over unlawful detainer suits is vested in Municipal Trial Courts. And in
ejectment cases, the jurisdiction of the court is determined by the allegations of the
complaint. In the case for ejectment, private respondents allegations sufficiently
present a case of unlawful detainer.
She alleged that (1) she owns Lot 1227, (2) she tolerated petitioners to construct
their houses thereon; (3) she withdrew her tolerance; and (4) petitioners refused to
heed her demand to vacate the lot. The Complaints were also filed within one year
from the date of her demand. The cause of action for unlawful detainer between the
parties springs from the failure of petitioners to vacate the lot upon lawful demand
of the private respondent. When they refused to vacate the lot after her demand,
petitioners continued possession became unlawful. Her complaint for ejectment
against respondent, to put it simply, is not without sufficient basis.
Whether private respondent should have filed an action to recover
possession de jure, as argued by petitioners on appeal NO
Petitioners contention that private respondent should have filed an action to
recover possession de jure with the TC is not supported by law or jurisprudence. The
distinction between a summary action of ejectment and a plenary action for recovery
of possession and/or ownership of the land is settled in our jurisprudence. Petitioners
present contention was first raised only in their appeal to the RTC. Raising it before
the appellate tribunal is barred by estoppel. They should have raised it in the
proceedings before the MCTC. In our view, this issue is a mere afterthought, when
the MCTC decided against them. Basic rules of fair play, justice and due process
require that as a rule an issue cannot be raised by the petitioners for the first time
on appeal.
The Court noted with dismay petitioners insistence that it must order the
MCTC to conduct the requisite preliminary conference. The summary character
of ejectment suits will be disregarded if the Court would allow petitioners to further
delay this case by allowing a second preliminary conference. Ejectment by way of
forcible entry and unlawful detainer cases are summary proceedings, designed to
provide an expeditious means of protecting actual possession or the right to
possession over the property involved. It is a timely procedure designed to remedy
the delay in the resolution of such cases.
In sum, the Court found no reversible error much less any grave abuse of
discretion committed by the Court of Appeals. A person who occupies the land of
another at the latters tolerance or permission, without any contract between them,
is necessarily bound by an implied promise that he will vacate upon demand, failing
which a summary action for ejectment is the proper remedy against him. His status
is analogous to that of a lessee or tenant whose term of lease has expired but whose
occupancy continued by tolerance of the owner. In such a case, the date of unlawful
deprivation or withholding of possession is to be counted from the date of the demand
to vacate.
ROSS RICA SALES CENTER vs. SPS. ONG
G.R. No. 132197. 08/16/2005, TINGA, J.
FACTS:
The spouses Ong are the original owners of 3 parcels of land which they occupy.
They sold it to Mandaue Prime Estate Realty, which then sold it to Ross Rica Sales
Center, Inc. The spouses Ong filed an action to annul the sale and transfer of property
to Mandaue Prime Estate Realty and at present, the case is still pending. In the
meantime, an ejectment case was filed against spouses Ong in the MTC, which
ruled against the latter. On appeal to the RTC, the judgment was affirmed by a
decision dated March 1, 1997. The spouses Ong received a copy of the decision on
April 28, 1997.
The spouses Ong first filed a Notice of Appeal with the RTC (May 8, 1997)
but on the very next day filed a Motion for Reconsideration, which was denied on
June 23, 1997. The spouses Ong received a copy of the order on July 9, 1997. On
July 24, 1997 respondents filed with the CA a motion for an additional 10 days to
file their Petition for Review, which they would eventually file on July 30, 1997.
The CA gave their petition for review due course and reversed the decision of the
RTC on the finding that the action filed was not one for unlawful detainer based on
two grounds: that the allegations fail to show that petitioners were deprived of
possession by force, intimidation, threat, strategy or stealth; and that there is no
contract, express or implied, between the parties that would qualify the case as one
of unlawful detainer.
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ISSUES/HELD
Whether the complaint satisfies the jurisdictional requirements for a
case of unlawful detainer properly cognizable by the MTC - YES
Well-settled is the rule that what determines the nature of an action as well as
which court has jurisdiction over it are the allegations of the complaint and the
character of the relief sought. In Javelosa vs. Court of the Appeals, it was held that the
allegation in the complaint that there was unlawful withholding of possession is
sufficient to make out a case for unlawful detainer. It is equally settled that in an
action for unlawful detainer, an allegation that the defendant is unlawfully withholding
possession from the plaintiff is deemed sufficient, without necessarily employing
the terminology of the law.
Hence, the phrase unlawful withholding has been held to imply possession
on the part of defendant, which was legal in the beginning, having no other source
than a contract, express or implied, and which later expired as a right and is being
withheld by defendant. In Rosanna B. Barba vs. Court of Appeals, the Supreme Court
held that a simple allegation that the defendant is unlawfully withholding possession
from plaintiff is sufficient. Based on this premise, the allegation in the Complaint
that:
. . . . despite demand to vacate, the defendants have refused and still
refuse to vacate said lots, thus, unlawfully withholding possession of said
lots from plaintiffs and depriving plaintiffs of the use of their lots;
is already sufficient to constitute an unlawful detainer case.
Likewise, the case of Co Tiamco vs. Diaz provides for a liberal approach in
considering the sufficiency of a complaint for unlawful detainer, thus:
. . . The principle underlying the brevity and simplicity of pleadings in
forcible entry and unlawful detainer cases rests upon considerations of
public policy. Cases of forcible entry and detainer are summary in nature,
for they involve perturbation of social order which must be restored as
promptly as possible and, accordingly, technicalities or details of procedure
should be carefully avoided.
Whether the case should be considered as one for accion reivindicatoria,
and thus the jurisdiction would lie with the RTC - NO
The issue involved in accion reivindicatoria is the recovery of ownership of real
property. This differs from accion publiciana where the issue is the better right of
possession or possession de jure, and accion interdictal where the issue is material
possession or possession de facto. In an action for unlawful detainer, the question of
possession is primordial, while the issue of ownership is generally unessential.
Petitioners, in all their pleadings, only sought to recover physical possession
of the subject property. The mere fact that they claim ownership over the parcels of
land as well did not deprive the MTC of jurisdiction to try the ejectment case. Even
if respondents claim ownership as a defense to the complaint for ejectment, the
conclusion would be the same, for mere assertion of ownership by the defendant in
an ejectment case will not oust the municipal court of its summary jurisdiction.
This Court in Ganadin vs. Ramos stated that if what is prayed for is ejectment or
recovery of possession, it does not matter if ownership is claimed by either party.
Therefore, the pending actions for Declaration of Nullity of Deed of Sale and Transfer
Certificates of Title and quieting of title in Civil Case No. MAN-2356 will not abate
the ejectment case.
In Drilon vs. Gaurana, this Court ruled that the filing of an action for
reconveyance of title over the same property or for annulment of the deed of sale
over the land does not divest the MTC of its jurisdiction to try the forcible entry or
unlawful detainer case before it, the rationale being that, while there may be identity
of parties and subject matter in the forcible entry case and the suit for annulment of
title and/or reconveyance, the rights asserted and the relief prayed for are not the
same.
The long settled rule is that the issue of ownership cannot be the subject of a
collateral attack. In Apostol vs. Court of Appeals, this Court had the occasion to clarify
this:
. . . Under Section 48 of Presidential Decree No. 1529, a certificate
of title shall not be subject to collateral attack. It cannot be altered,
modified or cancelled, except in a direct proceeding for that purpose in
accordance with law. The issue of the validity of the title of the respondents
can only be assailed in an action expressly instituted for that purpose.
Whether or not the petitioners have the right to claim ownership over
the property is beyond the power of the court a quo to determine in an
action for unlawful detainer.
C. Builder, Planter, Sower
SPOUSES NUGUID vs. COURT OF APPEALS
G.R. No.151815. 02/23/2005 QUISUMBING, J.
FACTS:
Pedro P. Pecson owned a commercial lot located at 27 Kamias Road, Quezon
City, on which he built a four-door two-storey apartment building. For failure to pay
realty taxes, the lot was sold at public auction by the City Treasurer of Quezon City
to Mamerto Nepomuceno, who in turn sold it for Php103,000.00 to the spouses,
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Juan and Erlinda Nuguid. Pecson challenged the validity of the sale before the RTC
of Quezon City. The RTC upheld the validity of the sale but also held that the two-
storey, 4-door apartment building was not included in the sale. This ruling was
subsequently affirmed by the Court of Appeals and the Supreme Court. By virtue of
the said ruling, the spouses became the uncontested owners of the lot. The spouses
subsequently moved for the delivery of possession of the said lot and apartment. In
its order, the trial court held that Pecson was entitled to a reimbursement of
Php53,000.00 for the apartment building, following which the possession of said
lot and apartment shall be transferred to the spouses Nuguid.
Pecson moved for a reconsideration of the said order. The same was denied.
He then brought a special civil action for certiorari and prohibition before the CA.
The latter held that Pecson was entitled to indemnity for the apartment but held
that the issue of possession has been rendered moot. Pecson filed a petition for
review before the SC, which ordered the remand of the case to the trial court for
determination of the fair market value of the apartment. The Supreme Court held
further that:
(1) Article 448 of the Civil Code is not apposite to the case at bar
where the owner of the land is the builder, sower, or planter, who then
later lost ownership of the land by sale, but may, however, be applied by
analogy; (2) the current market value of the improvements should be
made as the basis of reimbursement; (3) Pecson was entitled to retain
ownership of the building and necessarily, the income therefrom; (4) the
Court of Appeals erred not only in upholding the trial courts
determination of the indemnity, but also in ordering Pecson to account
for the rentals of the apartment building from June 23, 1993 to September
23, 1993.
Pecson filed a motion to restore possession pending determination of the value
of the apartment but the same was denied. The parties eventually arrived at a
compromise agreement, where the spouses Nuguid would pay Pecson Php400,000.00;
of this amount Php300,000.00 was already paid to Pecson when he moved before
the RTC that the Spouses should pay him rentals. The trial court eventually ordered
the spouses Nuguid to pay Pecson Php1,344,000.00. The amount was based on the
trial courts finding that Pecson was entitled to the rentals from the time of his
dispossession of the property via writ of possession in November 1993 to the time
of full payment in December 1997, a total of 48 months. The rate was computed on
the basis that each of the apartment units could be rented at Php7,000.00 per month,
multiplied by the number of units, which is four. The Spouses moved for a
reconsideration of the said order but the same was denied. Upon appeal to the CA,
the CA modified the judgment, reducing the rentals to Php288,000.00. Thus, this
appeal.
ISSUE: Whether Pecson is entitled to the rentals.
HELD: YES. It is not disputed that the construction of the four-door two-storey
apartment, subject of this dispute, was undertaken at the time when Pecson was still
the owner of the lot. When the Nuguids became the uncontested owner of the lot on
June 23, 1993 by virtue of entry of judgment of the Courts decision, dated May 25,
1993, in G.R. No. 105360, the apartment building was already in existence and
occupied by tenants. In its decision dated May 26, 1995 in G.R. No. 115814, the
Court declared the rights and obligations of the litigants in accordance with Articles
448 and 546 of the Civil Code. These provisions of the Code are directly applicable
to the instant case:
Under Article 448, the landowner is given the option, either to
appropriate the improvement as his own upon payment of the proper
amount of indemnity or to sell the land to the possessor in good faith.
Relatedly, Article 546 provides that a builder in good faith is entitled to
full reimbursement for all the necessary and useful expenses incurred; it
also gives him right of retention until full reimbursement is made.
While the law aims to concentrate in one person the ownership of the land and
the improvements thereon in view of the impracticability of creating a state of forced
co-ownership, it guards against unjust enrichment insofar as the good-faith builders
improvements are concerned. The right of retention is considered as one of the
measures devised by the law for the protection of builders in good faith. Its object is
to guarantee full and prompt reimbursement as it permits the actual possessor to
remain in possession while he has not been reimbursed (by the person who defeated
him in the case for possession of the property) for those necessary expenses and
useful improvements made by him on the thing possessed. Accordingly, a builder in
good faith cannot be compelled to pay rentals during the period of retention nor be
disturbed in his possession by ordering him to vacate. In addition, as in this case, the
owner of the land is prohibited from offsetting or compensating the necessary and
useful expenses with the fruits received by the builder-possessor in good faith.
Otherwise, the security provided by law would be impaired. This is so because the
right to the expenses and the right to the fruits both pertain to the possessor, making
compensation juridically impossible, and one cannot be used to reduce the other.
As the Court held earlier, since petitioners opted to appropriate the
improvement for themselves as early as June 1993, when they applied for a writ of
execution despite knowledge that the auction sale did not include the apartment
building, they could not benefit from the lots improvement until they reimbursed
the improver in full, based on the current market value of the property.
Despite the Courts recognition of Pecsons right of ownership over the
apartment building, the petitioners still insisted on dispossessing Pecson by filing
for a writ of possession to cover both the lot and the building. Clearly, this resulted
in a violation of respondents right of retention. Worse, petitioners took advantage
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of the situation to benefit from the highly-valued, income-yielding, four-unit apartment
building by collecting rentals thereon before they paid for the cost of the apartment
building. It was only four years later that they finally paid its full value to the
respondent.
Petitioners interpretation of our holding in G.R. No. 115814 has neither factual
nor legal basis. The decision of May 26, 1995, should be construed in connection
with the legal principles which form the basis of the decision, guided by the precept
that judgments are to have a reasonable intendment to do justice and avoid wrong.
The text of the decision in G.R. No. 115814 expressly exempted Pecson from
liability to pay rentals, for the Supreme Court found that the Court of Appeals
erred not only in upholding the trial courts determination of the indemnity, but
also in ordering him to account for the rentals of the apartment building from June
23, 1993 to September 23, 1993, the period from entry of judgment until Pecsons
dispossession. As pointed out by Pecson, the dispositive portion of our decision in
G.R. No. 115814 need not specifically include the income derived from the
improvement in order to entitle him, as a builder in good faith, to such income. The
right of retention, which entitles the builder in good faith to the possession as well
as the income derived therefrom, is already provided for under Article 546 of the
Civil Code.
Given the circumstances of the instant case, where the builder in good faith
has been clearly denied his right of retention for almost half a decade, the Court
held that the increased award of rentals by the RTC was reasonable and equitable.
The petitioners had reaped all the benefits from the improvement introduced by
the respondent during said period, without paying any amount to the latter as
reimbursement for his construction costs and expenses. They should account and
pay for such benefits.
Comment:
This case was spawned by a tax delinquency sale of a parcel of land back in
1982. Pecson, the owner-delinquent taxpayer tried to annul the tax delinquency sale
of the land. Pecson appealed this issue to the Supreme Court but he lost. The RTC
of Quezon City dismissed the complaint and ruled the auction sale valid but upheld
Pecsons contention that the sale did not include the 4-door apartment building erected
thereon. This ruling became the subject matter of another appeal before the Court
of Appeals and was the subject of a ponencia by Justice Davide in 1995 (G.R. No.
115814 May 26, 1995), which remanded the case to the trial court for the
determination of the current market value of the apartment building on the lot:
The value so determined shall be forthwith paid to the petitioner [Pecson]; otherwise,
the petitioner shall be restored to the possession of the apartment building until
payment of the required indemnity.
If the Davide ponencia did not use the indemnity provision of Article 448 of the
Civil Code by analogy, the case would not have spawned another petition for review
on certiorari in 2005.
The Court was correct in adverting to the rule that of the one who built,
planted or sowed is the owner of the land himself, Article 448 cannot be used. Then
it could have determined what should be done about the building without reference
to Article 448, because the obligation of paying indemnity is corollary to the option
of acquiring the building, planting and sowing. This option carries with it the right
of the builder, etc. to the right of retention. This right of retention allows the builder,
planter or sower to remain in possession ob both the land and improvement without
need of paying any rentals, but with no more right to the fruits, because the builder
is no longer in good faith at the time of retention; he was already in bad faith. A
retentioner is essentially analogous to the antichretic creditorit is a means for the
builder, planter or sower to compel the payment of a debt and to subsequently
extinguish the obligation. [Ortiz vs. Kayanan G.R. No. L-32974. July 30, 1979]
D. Expropriation
REPUBLIC vs. CA
G.R. No. 147245. March 31, 2005 CARPIO, J.
Manuel Diaz owned approximately 172 hectares of tenanted agricultural land
in Nueva Ecija devoted to the planting of palay. After Manuel Diazs death, his son,
Franciso Diaz (respondent), was appointed administrator of the Property.
In 1972, the National Irrigation Administration (NIA) bulldozed about ten
(10) hectares of the property to build two irrigation canals. Although the canals
when finished occupied only a portion of the 10 hectares, the entire area became
prone to flooding two months out of every year because of the side-burrow method
NIA used in the construction of the canals. NIA completed the canals without
instituting expropriation proceedings or indemnifying the propertys owners.
Respondent sought compensation from NIA for the land affected by the canals,
as well as for losses due to unrealized profits.
In 1980, NIA belatedly offered to buy the portions of the property occupied
by the canals. Respondent and then NIA Acting Administrator Gamad, Jr. signed
three deeds of sale to convey a total of 22,073 square meters of the property to
NIA. For reasons that neither party has adequately explained, NIA and respondent
did not push through with the sale.
On 20 August 1993, respondent, as administrator of the property, filed an
action for damages and just compensation against NIA. NIA countered that
respondents right to bring the action had prescribed in accordance with RA 3601,
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as amended by PD 552. NIA also argued that respondents failure to pursue the
implementation of the 1980 deeds of sale amounted to laches.
The RTC (which was later upheld by the CA) held that the respondent was
entitled to compensation in the sum of four million pesos.
ISSUE (1): WHETHER NIA was deprived of due process when the trial court
determined the compensation due to respondent without the assistance of
commissioners
HELD: NO.
NIA invokes Section 5, Rule 67 of the 1964 Rules of Court:
SEC. 5. Ascertainment of compensation. Upon the entry of the order
of condemnation, the court shall appoint not more than three (3)
competent and disinterested persons as commissioners to ascertain
and report to the court the just compensation for the property sought
to be taken. The order of appointment shall designate the time
and place of the first session of the hearing to be held by the
commissioners and specify the time within which their report is to
be filed with the court.
Rule 67, however, presupposes that NIA exercised its right of eminent domain
by filing a complaint for that purpose before the appropriate court. Judicial
determination of the propriety of the exercise of the power of eminent domain and
the just compensation for the subject property then follows The proceedings give
the property owner the chance to object to the taking of his property and to present
evidence on its value and on the consequential damage to other parts of his property.
Respondent was not given these opportunities, as NIA did not observe the procedure
in Rule 67. Worse, NIA refused to pay respondent just compensation. The seizure
of ones property without payment, even though intended for public use, is a taking
without due process of law and a denial of the equal protection of the laws NIA, not
respondent, transgressed the requirements of due process.
When a government agency itself violates procedural requirements, it waives
the usual procedure prescribed in Rule 67.
ISSUE (2): WHETHER the award (of P4M as just compensation) made by the
trial court is correct
HELD: NO.
Just compensation is the fair value of the property as between one who receives,
and one who desires to sell, fixed at the time of the actual taking by the government.
This rule holds true when the property is taken before the filing of an expropriation
suit, and even if it is the property owner who brings the action for compensation.
In affirming the trial courts award, the Court of Appeals cited Garcia vs. Court
of Appeals [G.R. No. L-47553 (1981)] which provides an exception to the rule. In
Garcia, the Court held that when the government takes property, not for the purpose
of eminent domain, and the government does not initiate condemnation proceedings
or other attempts to acquire such property, just compensation should be reckoned
not at the time of taking but at the time the trial court made its order of expropriation.
However, the Garcia ruling does not apply to the present case. The 22,073
square meters of the Property identified in the 1980 deeds of sale are occupied by
irrigation canals. There is no dispute that the Canal Sites serve a public purpose
because the canals provide much-needed irrigation to farms in the locality. There is
also no dispute that when NIA actually took over the Canal Sites, the purpose was
to exercise NIAs delegated power of eminent domain.
Just compensation for the Canal Sites must thus be computed as of the time of
taking. [] The concept of just compensation, however, does not imply fairness to
the property owner alone. Compensation must be just not only to the property
owner, but also to the public which ultimately bears the cost of expropriation. The
property owner is entitled to compensation only for what he actually loses, and what
he loses is only the actual value of the property at the time of the taking.
ATO and MCIAA vs GAPUCO
G.R. No.158563, 6/30/2005 CHICO-NAZARIO, J.
FACTS:
In 1947 lots surrounding the Lahug Airport were purchased by the government
on the assurance that lot owners could repurchase their properties once the airport
was abandoned. Gopuco refused to enter in such an arrangement but was finally
forced to convey his property by virtue of a 1961 decision of the CFI, which he did
not appeal.
In 1987 Lahug airport was ordered closed by then President Aquino as the
Mactan International Airport had commenced operations. Thereafter, in 1992
Gopuco filed an amended complaint for the recovery of his property against the Air
Transportation Office (ATO) and the Mactan-Cebu International Airport Authority
(MCIAA), which held title over the disputed lot. The trial court dismissed the
complaint but on appeal the CA ordered the return of the property to Gopuco. The
motion for reconsideration was denied.
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Issues/Held:
WHETHER cessation of public purpose warrants recovery of property
IT DEPENDS
The character of the title acquired by the expropriator determines the answer
to this question. Where the expropriation is explicitly for a particular purpose and
that alone, with the condition that when that purpose is ended or abandoned the
property shall return to its former owner, then of course when the purpose is ended
or abandoned the former owner reacquires the property so expropriated. If on the
contrary the decree of expropriation gives to the entity a fee simple title then the
land becomes the absolute property of the expropriator, and in that case non-usage
does not have the effect of defeating title acquired through expropriation.
WHETHER Gopuco may validly recover his expropriated property
NO
The SC has already stated that the title of the MCIAA is of a fee simple
character in the case of Chiongbian, which involves similar facts. Respondent argues
that the Fery case indicated that the expropriation was subject to the abandonment
of Lahug airport (as at that time the Mactan International Airport was already in
construction) and that the existence of repurchase agreements (by which some
landowners had successfully recovered their properties) further bolstered such
argument. However, Gopuco failed to adduce evidence showing that he and the
expropriator actually entered into any such compromise agreement. Indeed, his
similarly unfounded claim that there is an implied contract betrays the fact that
there was no express one.
In sum, the fact of abandonment or closure of the Lahug Airport as admitted
by the petitioners cannot by itself result in the reversion of the subject property
back to the Gopuco. Nor did it vest in the latter the right to demand reconveyance of
the said property. When real property has been acquired for public use unconditionally,
either by eminent domain or by purchase, the abandonment or non-use of the real
property does not ipso facto give to the previous owners of said property any right
to recover the same.
REPUBLIC vs. LIM
G.R. No. 161656, 6/29/2005, SANDOVAL-GUTIERREZ, J.
FACTS:
In 1938, the petitioner Republic of the Philippines instituted a special civil
action for expropriation with the CFI of Cebu and, after depositing Php9,500.00 as
ordered by the latter court, took possession of the lots in question. In 1940 the CFI
rendered its decision which ordered the Republic to pay the Denzons (the lot owners)
Php4,500.00. The Denzons filed an appeal with the CA but the latter court eventually
dismissed it on 1948. Years later however, the compensation remained unpaid so
the Denzons successors-in-interest, Valdehueza and Panerio, filed for the recovery
of the lots in question. In 1966 the SC ruled that indeed they are still the registered
owners of the lots but they can only demand payment of (adjusted) just compensation
and not the recovery of the property, pursuant to the prevailing doctrine.
It appears that in 1964 Valdehueza and Panerio had mortgaged one of the lots
to herein respondent Vicente Lim and for failure to pay the latter had the mortgage
foreclosed in 1976. After securing a new TCT in his name, respondent Lim filed a
complaint for quieting of title against the Republic in 1992. In 2001, the RTC decided
in his favor and declared that Lim was the absolute and exclusive owner of the lot in
question (lot 932) and was entitled to its possession. The CA sustained this decision
in 2003 and likewise the SC denied the petition for certiorari in its Resolution dated
March 1, 2004. Petitioners filed an urgent motion for reconsideration which the SC
also denied with finality in its Resolution dated May 17, 2004. Still, the petitioners
filed an urgent motion for clarification which is actually a second motion for
reconsideration, which is prohibited and therefore was effectively denied with the
SC Resolution dated September 6, 2004.
ISSUES/HELD:
WHETHER title to the lot in question vested with the petitioner Republic
NO
While the prevailing doctrine is that the non-payment of just compensation
does not entitle the private landowner to recover possession of the expropriated
lots, in cases where the government failed to pay just compensation within five years
from the finality of the judgment in the expropriation proceedings, the owners
concerned shall have the right to recover possession of their property. This is in
consonance with the principle that the government cannot keep the property and
dishonor the judgment and thus will encourage the government to pay just
compensation punctually. Just compensation, it should be noted, not only connotes
a reasonable amount of payment but also a reasonable time for it.
WHETHER respondent Lim has a right of possession over the property
- YES
A mortgage is merely an accessory contract intended to secure the performance
of the principal obligation. It is inseparable from the property and adheres to it no
matter who may be the owner. The Republic and its military arm has no better right
to it as in fact it has not title over it. Lot 932 is no longer used as an airport and so
there is no irreparable damage as claimed by the petitioners if possession is given to
Lim.
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D. Co-Ownership
BORBAJO vs. HIDDEN VIEW HOMEOWNERS
G.R. No. 152440. January 31, 2005 TINGA, J.
FACTS:
Jose C. Bontuyan, Lucy Solon, Georgina Solon, Helen Solon and Vicente Solon,
Jr. were the registered owners of a parcel of agricultural land, covering an area of
13,910 square meters situated at Barangay Bacayan, Cebu City. At the instance of
Bontuyan, the property was surveyed on 19 May 1991 to convert it into a subdivision.
The corresponding subdivision plan included 3 road lots. Bontuyan, with the consent
of the Solons, subsequently sold the lots included in the subdivision plan, including
the 3 road lots. The 3 road lots were sold to Felicitacion Borbajo. Bontuyan used the
money to develop the property, then named as the Hidden View Subdivision I.
Meanwhile, Borbajo also decided to develop into a subdivision the other
properties adjacent to Hidden View Subdivision I which she acquired. The residents
of Hidden View Subdivision I, however, heard reports to the effect that Borbajo had
purchased the entire subdivision from Bontuyan through an oral agreement. They
also heard that they have no right to use the road lots, since the lots have already
been registered in Borbajos name. As a consequence, the Hidden View Homeowners,
Inc. invited Borbajo to a meeting. When confronted by the homeowners about her
claim that she had bought the subdivision from Bontuyan, Borbajo confirmed her
claim of ownership over the subdivision and the road lots. She also told them that
they have no right regarding the road right-of-way.
In retaliation, the homeowners caused the construction of a guardhouse at the
entrance of Hidden View Subdivision I and hired the services of a security guard to
prevent unauthorized persons and construction vehicles from passing through their
subdivision. The measures adversely affected the residents of the subdivisions at
the back, as well as Borbajo herself since her delivery trucks and heavy equipment
used in the construction of her on-going housing projects had been effectively
prevented from passing through the road lots.
Borbajo brought an action in the RTC for injuction and damages against the
Hidden View Homeowners, Inc. and its officers. The RTC ruled in favor of Borbajo
and enjoined the respondent homeowners from closing the road lots. The court
further ordered Borbajo to donate the said road lots to the City of Cebu. On appeal,
the CA reversed the RTCs decision and dismissed the complaint. Thus this appeal
by Borbajo.
ISSUE: Whether Borbajo is entitled to the use of the lots
HELD: Yes. As a registered co-owner of the road lots, Borbajo is entitled to avail of
all the attributes of ownership under the Civil Code jus utendi, fruendi, abutendi,
disponendi et vindicandi. Article 428 of the New Civil Code is explicit that the owner
has the right to enjoy and dispose of a thing, without other limitations than those
established by law. A co-owner, such as Borbajo, is entitled to use the property owned
in common under Article 486 of the Civil Code. Therefore, respondents cannot
close the road lots to prevent Borbajo from using the same.
RESUENA vs. COURT OF APPEALS
G.R. No. 128338. March 28, 2005
FACTS: Private respondent, the late Juanito Borromeo, Sr., is the co-owner and
overseer of certain parcels of land located in Pooc, Talisay, Cebu, designated as Lots
Nos. 2587 and 2592 of the Talisay-Manglanilla Estate. Respondent owns six-eighths
(6/8) of Lot No. 2587 while the late spouses Inocencio Bascon and Basilisa Maneja
(Spouses Bascon) own two-eighths (2/8) thereof. On the other hand, Lot No. 2592 is
owned in common by respondent and the heirs of one Nicolas Maneja. However, the
proportion of their undivided shares was not determined a quo.
Prior to the institution of the present action, petitioners Tining Resuena,
Alejandra Garay, Lorna Resuena, Eleuterio Resuena, and Unisima Resuena resided
in the upper portion of Lot No. 2587, allegedly under the acquiescence of the Spouses
Bascon and their heir, Andres Bascon. On the other hand, petitioner Eutiquia Rosario
occupied a portion of Lot No. 2592, allegedly with the permission of the heirs of
Nicolas Maneja, one of the original co-owners of Lot No. 2587. Respondent claims
that all petitioners have occupied portions of the subject property by virtue of his
own liberality.
Respondent developed portions of Lots Nos. 2587 and 2592 occupied by him
into a resort known as the Borromeo Beach Resort. In his desire to expand and
extend the facilities of the resort that he established on the subject properties,
respondent demanded that petitioners vacate the property. Petitioners, however,
refused to vacate their homes.
Respondent filed a complaint for ejectment before the MTC. After a summary
proceeding, the MTC ruled against respondent and held that respondent did not
have a preferential right of possession over the portions occupied by petitioners,
since Lots Nos. 2587 and 2592 were not yet partitioned nor the disputed portions
assigned to respondent as his determinate share. Thus, the MTC held that respondent
had no right to evict petitioners therefrom. Consequently, respondents Complaint
was dismissed. On appeal to the RTC, the latter held that under Article 487 of the
Civil Code, which allows any one of the co-owners to bring an action in ejectment,
may successfully be invoked by the respondent because, in a sense, a co-owner is the
owner and possessor of the whole, and that the suit for ejectment is deemed to be
instituted for the benefit of all co-owners. The RTC thus reversed the MTC. The
CA affirmed the decision of the RTC.
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ISSUE: Whether or not respondent is entitled to eject petitioners from the property
HELD: YES. Article 487 of the Civil Code, which provides simply that [a]ny one of
the co-owners may bring an action in ejectment, is a categorical and an unqualified
authority in favor of respondent to evict petitioners from the portions of Lot No.
2587.
This provision is a departure from Palarca vs. Baguisi, which held that an action
for ejectment must be brought by all the co-owners. Thus, a co-owner may bring an
action to exercise and protect the rights of all. When the action is brought by one co-
owner for the benefit of all, a favorable decision will benefit them; but an adverse
decision cannot prejudice their rights.
Respondents action for ejectment against petitioners is deemed to be instituted
for the benefit of all co-owners of the property since petitioners were not able to
prove that they are authorized to occupy the same.
Petitioners lack of authority to occupy the properties, coupled with
respondents right under Article 487, clearly settles respondents prerogative to
eject petitioners from Lot No. 2587. Time and again, this Court has ruled that persons
who occupy the land of another at the latters tolerance or permission, without any
contract between them, are necessarily bound by an implied promise that they will
vacate the same upon demand, failing in which a summary action for ejectment is
the proper remedy against them.
x x x
Thus, in order that the petition may acquire any whiff of merit, petitioners are
obliged to establish a legal basis for their continued occupancy of the properties.
The mere tolerance of one of the co-owners, assuming that there was such, does not
suffice to establish such right. Tolerance in itself does not bear any legal fruit, and it
can easily be supplanted by a sudden change of heart on the part of the owner.
ISSUE: Whether petitioners are entitled to reimbursement for necessary expenses
HELD: NO. All six (6) petitioners claim the right to be reimbursed necessary
expenses for the cost of constructing their houses in accordance with Article 546 of
the Civil Code. It is well-settled that while the Article allows full reimbursement of
useful improvements and retention of the premises until reimbursement is made,
applies only to a possessor in good faith, i.e., one who builds on land with the belief
that he is the owner thereof. Verily, persons whose occupation of a realty is by sheer
tolerance of its owners are not possessors in good faith.
The lower courts have made a common factual finding that petitioners are
occupying portions of Lots No. 2587 and 2592 by mere tolerance. Thus, petitioners
have no right to get reimbursed for the expenses they incurred in erecting their
houses thereon.
ACABAL vs. ACABAL
G.R. No. 148376. March 31, 2005, CARPIO MORALES, J
RULING:
While Villaner owns five-ninths (5/9) of the disputed property, he could not
claim title to any definite portion of the community property until its actual partition
by agreement or judicial decree. Prior to partition, all that he has is an ideal or
abstract quota or proportionate share in the property. 85 Villaner, however, as a co-
owner of the property has the right to sell his undivided share thereof. The Civil
Code provides so:
ART. 493. Each co-owner shall have the full ownership of his part
and of the fruits and benefits pertaining thereto, and he may
therefore alienate, assign or mortgage it, and even substitute another
person in its enjoyment, except when personal rights are involved.
But the effect of the alienation or the mortgage, with respect to the
co-owners, shall be limited to the portion which may be allotted to
him in the division upon the termination of the co-ownership.
Thus, every co-owner has absolute ownership of his undivided interest in the
co-owned property and is free to alienate, assign or mortgage his interest except as
to purely personal rights. While a co-owner has the right to freely sell and dispose of
his undivided interest, nevertheless, as a co-owner, he cannot alienate the shares of
his other co-owners nemo dat qui non habet.
Villaner, however, sold the entire property without obtaining the consent of
the other co-owners. Following the well-established principle that the binding force
of a contract must be recognized as far as it is legally possible to do so quando res
non valet ut ago, valeat quantum valere potest the disposition affects only Villaners
share pro indiviso, and the transferee gets only what corresponds to his grantors
share in the partition of the property owned in common.
As early as 1923, the Court has ruled that even if a co-owner sells the whole
property as his, the sale will affect only his own share but not those of the other co-
owners who did not consent to the sale. This is because under the aforementioned
codal provision, the sale or other disposition affects only his undivided share and
the transferee gets only what would correspond to this grantor in the partition of
the thing owned in common. Consequently, by virtue of the sales made by Rosalia
and Gaudencio Bailon which are valid with respect to their proportionate shares,
and the subsequent transfers which culminated in the sale to private respondent
Celestino Afable, the said Afable thereby became a co-owner of the disputed parcel
170 IBP JOURNAL
Eduardo A. Labitag
of land as correctly held by the lower court since the sales produced the effect of
substituting the buyers in the enjoyment thereof.
From the foregoing, it may be deduced that since a co-owner is entitled to sell
his undivided share, a sale of the entire property by one co-owner without the consent
of the other co-owners is not null and void. However, only the rights of the co-owner-
seller are transferred, thereby making the buyer a co-owner of the property.
The proper action in cases like this is not for the nullification of the sale or the
recovery of possession of the thing owned in common from the third person who
substituted the co-owner or co-owners who alienated their shares, but the DIVISION
of the common property as if it continued to remain in the possession of the co-
owners who possessed and administered it.
Thus, it is now settled that the appropriate recourse of co-owners in cases
where their consent were not secured in a sale of the entire property as well as in a
sale merely of the undivided shares of some of the co-owners is an action for
PARTITION under Rule 69 of the Revised Rules of Court. Neither recovery of
possession nor restitution can be granted since the defendant buyers are legitimate
proprietors and possessors in joint ownership of the common property claimed.
CRUZ vs. COURT OF APPEALS
G.R. No. 122904. April 15, 2005, TINGA, J
FACTS:
Petitioners Adoracion, Gerry, Thelma, Gerry and Nerissa, all surnamed Cruz
are co-owners of a parcel of land, together with Arnel Cruz. The property was covered
by a TCT No. 495225 which was in the name of Arnel Cruz alone. The petitioners
and Arnel Cruz executed a deed of partial partition, which distributed to each of the
co-owners their share in the property. Arnel Cruz received a portion of the property
covered by TCT No. 495225. The petitioners and Arnel Cruz subsequently executed
a memorandum of agreement providing that they shall share in the proceeds of the
sale of the properties even though the same had been individually titled in their
names.
Petitioner Thelma Cruz discovered that TCT No. 495225 had been cancelled
and that a new TCT has been executed in favor of Summit Realty, private respondent
herein. Apparently, Arnel Cruz mortgaged the property covered by TCT No. 495225
to Summit Realty and was unable to pay the loan secured by the mortgage. Summit
Realty foreclosed the mortgage. Petitioners filed a complaint before the RTC, alleging
that the mortgage was void because the memorandum of agreement that they had
executed maintained a state of co-ownership between them. The RTC sustained this
position and held that with the execution of the memorandum of agreement,
petitioners and Arnel Cruz intended to maintain the co-ownership and that Summit
Realty was negligent in failing to ascertain the title of its mortgagee Arnel Cruz. On
appeal, the Court of Appeals held that there was nothing in the memorandum of
agreement prohibiting the mortgage of the property , although it provided that the
co-owners would share in the proceeds of the sale in case the property is sold. Thus,
the CA reversed the RTC. Hence, this appeal by petitioners.
ISSUE: Whether the mortgage was valid
HELD: YES. Co-ownership is terminated upon judicial or extra-judicial partition
of the properties owned in common. Partition, in general, is the separation, division
and assignment of a thing held in common among those to whom it may belong.
Every act which is intended to put an end to indivision among co-heirs and legatees
or devisees is deemed to be a partition, although it should purport to be a sale, an
exchange, a compromise, or any other transaction. From a reading of the Deed of
Partial Partition, no other meaning can be gathered other than that petitioners and
Arnel Cruz had put an end to the co-ownership.
Since a partition legally made confers upon each heir the exclusive ownership
of the property adjudicated to him, it follows that Arnel Cruz acquired absolute
ownership over the specific parcels of land assigned to him in the Deed of Partial
Partition, including the property subject of this case. As the absolute owner thereof
then, Arnel Cruz had the right to enjoy and dispose of the property, as well as the
right to constitute a real estate mortgage over the same without securing the consent
of petitioners.
There is absolutely nothing in the Memorandum of Agreement which diminishes
the right of Arnel Cruz to alienate or encumber the properties allotted to him in the
deed of partition. The following provisions of the agreement, which recognize the
effects of partition, negate petitioners claim that their consent is required to make
the mortgage in favor of respondent Summit valid. Among the provisions are:
That despite the execution of this Deed of Partial Partition and
the eventual disposal or sale of their respective shares, the contracting
parties herein covenanted and agreed among themselves and by these
presents do hereby bind themselves to one another that they shall share
alike and receive equal shares from the proceeds of the sale of any lot or
lots allotted to and adjudicated in their individual names by virtue of this
deed of partial partition
The agreement does not direct reconveyance of the properties to reinstate the
common ownership of the parties. To insist that the parties also intended to re-
establish co-ownership after the properties had been partitioned is to read beyond
the clear import of the agreement and to render nugatory the effects of partition,
which is not the obvious or implied intent of the parties.
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VDA. DE APE vs. CA
[G.R. No. 133638, April 15, 2005, CHICO-NAZARIO, J.]
FACTS:
Cleofas Ape was the registered owner of a parcel of land (Lot No. 2319 ) in
Negros Occidental. When he died, the property passed on to his wife and eleven (11)
children, one of whom is Fortunato Ape (deceased). Respondent Lumayno, in a
complaint for specific performance for execution of a deed of sale, alleges that
Fortunato entered into a contract of sale of his share in the said lot, evidenced by a
receipt. Lumayno also avers that the Fortunatos co-heirs have been previously sold
their shares in the lot to her.
Petitioner Vda. de Ape, wife of the deceased Fortunato, on the other hand,
contends that Fortunato never sold his 1/11 share to the respondent, that his signature
in the receipt was forged, and that she had the right of redemption over the shares
previously sold to respondent because the co-owners have not formally subdivided
the property. The petitioner also claims she was not furnished of any written notice
of the said sales by the co-heirs.
ISSUE: Whether or not the petitioner may exercise right of redemption
HELD: NO.
Article 1623 of the Civil Code provides:
The right of legal pre-emption or redemption shall not be exercised except
within thirty days from the notice in writing by the prospective vendor,
or by the vendor, 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 this case, the records are bereft of any indication that Fortunato was given
any written notice of prospective or consummated sale of the portions of Lot No.
2319 by the vendors or would-be vendors. The thirty (30)-day redemption period
under the law, therefore, has not commenced to run.
Despite this, however, the Court still ruled that petitioner could no longer
invoke her right to redeem from private respondent for the exercise of this right
presupposes the existence of a co-ownership at the time the conveyance is made by a co-owner and
when it is demanded by the other co-owner or co-owners. The regime of co-ownership exists
when ownership of an undivided thing or right belongs to different persons. By the
nature of a co-ownership, a co-owner cannot point to specific portion of the property
owned in common as his own because his share therein remains intangible. As legal
redemption is intended to minimize co-ownership, once the property is subdivided
and distributed among the co-owners, the community ceases to exist and there is no
more reason to sustain any right of legal redemption.
In this case, records reveal that although Lot No. 2319 had not yet been formally
subdivided, still, the particular portions belonging to the heirs of Cleofas Ape had
already been ascertained and they in fact took possession of their respective parts.
This can be deduced from the testimony of petitioner herself.
Similarly telling of the partition is the stipulation of the parties during the pre-
trial wherein it was admitted that Lot No. 2319 had not been subdivided. Yet despite
this, Fortunato Ape had possessed a specific portion of the land ostensibly
corresponding to his share.
From the foregoing, it is evident that the partition of Lot No. 2319 had already
been effected by the heirs of Cleopas Ape. Although the partition might have been
informal, it is of no moment for even an oral agreement of partition is valid and
binding upon the parties. Likewise, the fact that the respective shares of Cleopas
Apes heirs are still embraced in one and the same certificate of title and have not
been technically apportioned does not make said portions less determinable and
identifiable from one another nor does it, in any way, diminish the dominion of their
respective owners.
HEIRS OF FLORES RESTAR vs. HEIRS OF DOLORES CICHON
G.R. No. 161720, November 22, 2005, CARPIO-MORALES, J.
In 1935, Emilio Restar died intestate, leaving eight (8) children. In 1960,
Restars eldest child, Flores caused the cancellation of Tax Declaration No. 6696 in
Restars name covering a parcel of land in Aklan (the lot), which was among the
properties left by Restar, and the issuance of Tax Declaration No. 11134 in his name.
In 1998, the co-heirs of Flores discovered the cancellation of Restars Tax
Declaration. In 1999, herein respondents (the heirs of Flores sisters together with
Flores surviving sisters) filed a complaint against heirs of Flores (Flores died in
1989) for partition of the lot and declaration of nullity of the documents before the RTC of
Aklan.
After trial, the RTC ruled that Flores share in Restars estate was not the lot.
Nevertheless, the RTC, holding that Flores and his heirs had performed acts sufficient
to constitute repudiation of the co-ownership, concluded that they had acquired the lot by
prescription. The complaint for partition was thus dismissed.
The CA, on appeal, reversed the decision of the trial court, finding that the
Heirs of Flores, herein petitioners, failed to prove that their possession of the lot
excluded their co-owners or that they derived title to it from a separate conveyance
to them by Restar. The CA further found that there was no adequate notice by
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Eduardo A. Labitag
Flores to his other co-heirs/co-owners of the repudiation of the co-ownership and
neither was there a categorical assertion by the petitioners of their exclusive right to
the entire lot that barred the respondents claim of ownership.

ISSUE: WHETHER the petitioners (as Heirs of Flores) acquired ownership over
the lot by extraordinary acquisitive prescription
HELD: YES.
While the action to demand partition of a co-owned property does not prescribe,
a co-owner may acquire ownership thereof by prescription, where there exists a
clear repudiation of the co-ownership, and the co-owners are apprised of the claim
of adverse and exclusive ownership.
In the case at bar, the records amply support petitioners claim that the
requirements for extraordinary prescription have been duly met.
When Restar died in 1935, his eight children became pro indiviso co-owners of
the lot by intestate succession. However, respondents never possessed the lot, much
less asserted their claim thereto until 1999 when they filed the complaint for partition
subject of the present petition. In contrast, Flores took possession of the lot after
Restars death and exercised acts of dominion thereon tilling and cultivating the
land, introducing improvements, and enjoying the produce thereof.

The statutory period of prescription, however, commenced not in 1935 but in
1960 when Flores, who had neither title nor good faith, secured a tax declaration in
his name and may, therefore, be said to have adversely claimed ownership of the
lot. On said date, respondents were also deemed to have become aware of the
adverse claim. Flores possession thus ripened into ownership through acquisitive
prescription after the lapse of thirty years in accordance with the earlier quoted
Article 1137 of the New Civil Code.
II. EASEMENTS
SPS. DE LA CRUZ vs. RAMISCAL
G.R. No. 137882. February 4, 2005
FACTS:
Respondent Ramiscal is the registered owner of a parcel of land located at
the corner of 18th Avenue and Boni Serrano Avenue, Murphy, Quezon City. Petitioners
Spouses de la Cruz are occupants of a parcel of land, with an area of eighty-five (85)
square meters, located at the back of Ramiscals property. The subject matter of this
case is a 1.10-meter wide by 12.60-meter long strip of land owned by respondent
which is being used by petitioners as their pathway to and from 18th Avenue, the
nearest public highway from their property. Petitioners had enclosed the same with
a gate, fence, and roof. Respondent demanded that petitioners demolish the same.
The latter refused such that a case was filed with the RTC seeking the demolition of
the said structure. Respondent Ramiscal asserted in her petition before the RTC
that an existing right of way existed for the Spouses De la Cruz, adducing in evidence
a subdivision plan issued in favor of Concepcion de la Cruz, mother of Alfredo de la
Cruz, petitioner in this case. Ramiscal further adduced evidence that the isolation of
de la Cruzs property was due to their own acts which consisted of constructing
portions of their house on the easement and allowing a lessee to occupy another
portion.
Petitioner Spouses de la Cruz, for their part, asserted that when respondent
Ramiscal initiated the construction of a motor shop on her lot in 1976, Ramiscal
herself offered them the easement towards 18
th
Avenue in lieu of an easement towards
Boni, through her foreman, a certain Mang Puling. They allegedly accepted the
offer.
The RTC ruled in favor of respondent. Petitioner Spouses failed to file their
brief on time with the Court of Appeals and the latter dismissed their appeal. Thus
this petition before the Supreme Court.
ISSUE: WHETHER respondent voluntarily accord the petitioners a right of way
HELD: NO. An easement or servitude is a real right, constituted on the corporeal
immovable property of another, by virtue of which the owner has to refrain from
doing, or must allow someone to do, something on his property, for the benefit of
another thing or person. The statutory basis for this right is Article 613, in connection
with Article 619, of the Civil Code, which states:
Art. 613. An easement or servitude is an encumbrance imposed upon an
immovable for the benefit of another immovable belonging to a different
owner.
The immovable in favor of which the easement is established is called the
dominant estate; that which is subject thereto, the servient estate.
Art. 619. Easements are established either by law or by the will of the
owners. The former are called legal and the latter voluntary easements.
Petitioners herein (failed to show by competent evidence) that they and their
tenants, spouses Manuel and Cecilia Bondoc and Carmelino Masangkay, entered
into an agreement with respondent, through her foreman, Mang Puling, to use the
pathway to 18th Avenue, which would be reciprocated with an equivalent 1.50-meter
wide easement by the owner of another adjacent estate. A bare claim made without
evidence is insufficient.
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Eduardo A. Labitag
x x x
Likewise futile are petitioners attempts to show that they are legally entitled
to the aforesaid pathway under Article 649 of the Civil Code, to wit:
Art. 649. The owner, or any person who by virtue of a real right may
cultivate or use any immovable, which is surrounded by other immovables
pertaining to other persons, and without adequate outlet to a public
highway, is entitled to demand a right of way through the neighboring
estates, after payment of the proper indemnity.
The conferment of a legal easement of right of way under Article 649 is subject
to proof of the following requisites: (1) it is surrounded by other immovables and
has no adequate outlet to a public highway; (2) payment of proper indemnity; (3) the
isolation is not the result of its own acts; (4) the right of way claimed is at the point
least prejudicial to the servient estate; and (5) to the extent consistent with the
foregoing rule, where the distance from the dominant estate to a public highway
may be the shortest. The first three requisites present in the instant case.
The trial court found from the records that Concepcion de la Pea had provided
petitioners with an adequate ingress and egress towards Boni Serrano Avenue. The
trial court, gave weight to TCT No. RT-56958 (100547) covering the property
denominated as Lot 1-B in the name of Concepcion de la Pea, mother of petitioner
herein Alfredo de la Cruz. Said TCT indicates that a portion of Lot 1-B, consisting
of 85 square meters and denominated as Lot 1-B-2, is the one being occupied by
petitioners. In this connection, a copy of the plan of a subdivision survey for
Concepcion de la Pea and Felicidad Manalo prepared in 1965 and subdivision plan
for Concepcion de la Pea prepared in 1990 revealed an existing 1.50-meter wide
alley, identified as Lot 1-B-1, on the lot of Concepcion de la Pea, which serves as
passageway from the lot being occupied by petitioners (Lot 1-B-2) to Boni Serrano
Avenue.
In the trial courts rationale:
. . . Article 649 of the Civil Code provides that the easement of right of
way is not compulsory if the isolation of the immovable is due to the
proprietors own acts. To allow defendants access to plaintiffs property
towards 18th Avenue simply because it is a shorter route to a public
highway, despite the fact that a road right of way, which is even wider,
although longer, was in fact provided for them by Concepcion de la Pea
towards Boni Serrano Avenue would ignore what jurisprudence has
consistently maintained through the years regarding an easement of right
of way, that mere convenience for the dominant estate is not enough to
serve as its basis. To justify the imposition of this servitude, there must
be a real, not a fictitious or artificial necessity for it. . . . In Francisco vs.
Intermediate Appellate Court, 177 SCRA 527, it was likewise held that a
person who had been granted an access to the public highway through an
adjacent estate cannot claim a similar easement in an alternative location
if such existing easement was rendered unusable by the owners own act
of isolating his property from a public highway, such as what Concepcion
de la Pea allegedly did to her property by constructing houses on the
1.50 meter wide alley leading to Boni Serrano Avenue. And, if it were
true that defendants had already bought Lot 1-B-2, the portion occupied
by them, from Concepcion de la Pea, then the latter is obliged to grant
defendants a right of way without indemnity.
The Court hastened to add that under the above-quoted Article 649 of the
Civil Code, it is the owner, or any person who by virtue of a real right may cultivate
or use any immovable surrounded by other immovable pertaining to other persons,
who is entitled to demand a right of way through the neighboring estates. In this
case, petitioners fell short of proving that they are the owners of the supposed
dominant estate. Petitioners have not proven such inasmuch as the TCT to the land
is still under the name of Concepcion de la Pena.
III. USUFRUCT
NATIONAL HOUSING AUTHORITY vs. COURT OF APPEALS,
BULACAN GARDEN CORPORATION and MANILA SEEDLING
BANK FOUNDATION, INC.
G.R. No. 148830. April 13, 2005, CARPIO, J.
FACTS:
On 24 October 1968, Proclamation No. 481 issued by then President Ferdinand
Marcos set aside a 120-hectare portion of land in Quezon City owned by the NHA 4
as reserved property for the site of the National Government Center (NGC). On
19 September 1977, President Marcos issued Proclamation No. 1670 which removed
a seven-hectare portion from the coverage of the NGC. Proclamation No. 1670 gave
MSBF (Manila Seedling Bank Foundation) usufructuary rights over this segregated
portion. The same proclamation left the determination of the 7-hectare area to a
future survey.
MSBF occupied the area but its occupancy eventually exceeded the 7 hectares
allocated to it. MSBF leased a portion of the area to BGC (Bulacan Garden
Foundation).
On 11 November 1987, President Corazon Aquino issued Memorandum Order
No. 127 (MO 127) which revoked the reserved status of the 50 hectares, more or
less, remaining out of the 120 hectares of the NHA property reserved as site of the
National Government Center. MO 127 also authorized the NHA to commercialize
178 IBP JOURNAL
Eduardo A. Labitag
the area and to sell it to the public. On 15 August 1988, acting on the power granted
under MO 127, the NHA gave BGC ten days to vacate its occupied area. Any structure
left behind after the expiration of the ten-day period would be demolished by NHA.
BGC filed a complaint for injunction before the trial court, asserting that
Proclamation No. 1670 gave MSBF the right to conduct the survey, which would
establish that the seven-hectare area was covered by MSBFs usufructuary rights.
However, the trial court held that MSBF failed to act seasonably on this right to
conduct the survey. The trial court ruled that the previous surveys conducted by
MSBF covered 16 hectares, and were thus inappropriate to determine the seven-
hectare area. The trial court concluded that to allow MSBF to determine the seven-
hectare area now would be grossly unfair to the grantor of the usufruct.. The
complaint was dismissed. As a result, the NHA demolished BGCs structures in the
area.
BGC appealed to the CA which reversed the ruling of the trial court and
held that MSBF had conducted two surveys and that BGCs structures were located
in the allocated 7 hectares. Thus this appeal by NHA.
ISSUE: Whether BGCs structures are within the 7 hectare usufruct area
HELD: The Court remanded the petition to the trial court for a joint
survey to determine finally the metes and bounds of the seven-hectare
area subject to MSBFs usufructuary rights.
x x x
A usufruct may be constituted for a specified term and under such conditions
as the parties may deem convenient subject to the legal provisions on usufruct. A
usufructuary may lease the object held in usufruct. Thus, the NHA may not evict
BGC if the 4,590 square meter portion MSBF leased to BGC is within the seven-
hectare area held in usufruct by MSBF. The owner of the property must respect the
lease entered into by the usufructuary so long as the usufruct exists. However, the
NHA has the right to evict BGC if BGC occupied a portion outside of the seven-
hectare area covered by MSBFs usufructuary rights
x x x
Article 565 of the Civil Code states:
ART. 565. The rights and obligations of the usufructuary shall be those
provided in the title constituting the usufruct; in default of such title, or
in case it is deficient, the provisions contained in the two following
Chapters shall be observed.
In the present case, Proclamation No. 1670 is the title constituting the usufruct.
Proclamation No. 1670 categorically states that the seven-hectare area shall be
determined by future survey under the administration of the Foundation subject to
private rights if there be any. The appellate court and the trial court agree that
MSBF has the latitude to determine the location of its seven-hectare usufruct portion
within the 16-hectare area. The appellate court and the trial court disagree, however,
whether MSBF seasonably exercised this right.
It is clear that MSBF conducted at least two surveys. Although both surveys
covered a total of 16 hectares, the second survey specifically indicated a seven-hectare
area shaded in yellow. MSBF made the first survey in 1984 and the second in 1986,
way before the present controversy started. MSBF conducted the two surveys before
the lease to BGC. The trial court ruled that MSBF did not act seasonably in exercising
its right to conduct the survey. Confronted with evidence that MSBF did in fact
conduct two surveys, the trial court dismissed the two surveys as self-serving. This is
clearly an error on the part of the trial court. Proclamation No. 1670 authorized
MSBF to determine the location of the seven-hectare area. This authority, coupled
with the fact that Proclamation No. 1670 did not state the location of the seven-
hectare area, leaves no room for doubt that Proclamation No. 1670 left it to MSBF
to choose the location of the seven-hectare area under its usufruct.
x x x
To prefer the NHAs survey to MSBFs survey will strip MSBF of most of its
main facilities. Only the main building of MSBF will remain with MSBF since the
main building is near the corner of EDSA and Quezon Avenue. The rest of MSBFs
main facilities will be outside the seven-hectare area.
On the other hand, this Court cannot countenance MSBFs act of exceeding
the seven-hectare portion granted to it by Proclamation No. 1670. A usufruct is not
simply about rights and privileges. A usufructuary has the duty to protect the owners
interests. One such duty is found in Article 601 of the Civil Code which states:
ART. 601. The usufructuary shall be obliged to notify the owner of any
act of a third person, of which he may have knowledge, that may be
prejudicial to the rights of ownership, and he shall be liable should he not
do so, for damages, as if they had been caused through his own fault.
A usufruct gives a right to enjoy the property of another with the obligation of
preserving its form and substance, unless the title constituting it or the law otherwise
provides. This controversy would not have arisen had MSBF respected the limit of
the beneficial use given to it. MSBFs encroachment of its benefactors property
gave birth to the confusion that attended this case. To put this matter entirely to
rest, it is not enough to remind the NHA to respect MSBFs choice of the location of
its seven-hectare area. MSBF, for its part, must vacate the area that is not part of its
usufruct. MSBFs rights begin and end within the seven-hectare portion of its usufruct.
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Eduardo A. Labitag
This Court agrees with the trial court that MSBF has abused the privilege given it
under Proclamation No. 1670. The direct corollary of enforcing MSBFs rights within
the seven-hectare area is the negation of any of MSBFs acts beyond it.
The seven-hectare portion of MSBF is no longer easily determinable considering
the varied structures erected within and surrounding the area. Both parties advance
different reasons why their own surveys should be preferred. At this point, the
determination of the seven-hectare portion cannot be made to rely on a choice
between the NHAs and MSBFs survey. There is a need for a new survey, one
conducted jointly by the NHA and MSBF, to remove all doubts on the exact location
of the seven-hectare area and thus avoid future controversies. This new survey should
consider existing structures of MSBF. It should as much as possible include all of
the facilities of MSBF within the seven-hectare portion without sacrificing contiguity.
A final point. Article 605 of the Civil Code states:
ART. 605. Usufruct cannot be constituted in favor of a town, corporation,
or association for more than fifty years. If it has been constituted, and
before the expiration of such period the town is abandoned, or the
corporation or association is dissolved, the usufruct shall be extinguished
by reason thereof.
The law clearly limits any usufruct constituted in favor of a corporation or
association to 50 years. A usufruct is meant only as a lifetime grant. Unlike a natural
person, a corporation or associations lifetime may be extended indefinitely. The
usufruct would then be perpetual. This is especially invidious in cases where the
usufruct given to a corporation or association covers public land. Proclamation No.
1670 was issued 19 September 1977, or 28 years ago. Hence, under Article 605, the
usufruct in favor of MSBF has 22 years left.
IV. DONATION
CJ YULO AND SONS vs. ROMAN CATHOLIC
BISHOP OF SAN PABLO
G.R. No. 133705. March 31, 2005 GARCIA, J.
FACTS:
Petitioner CJ Yulo and Sons, Inc. donated to respondent Roman Catholic Bishop
of San Pablo on September 24, 1977 a parcel of land with a total area of 41, 117
square meters. Among the conditions stipulated in the deed of donation was that
the respondent would construct on the said land a home for the aged and the infirm.
The deed further stipulated that any other use or conveyance of the property may
only be done with the consent of the donor.
Sometime in 1980, the respondent entered into a lease contract with one Martin
Gomez, for which the latter was to plant the land with sugar cane. The funds generated
from such lease were to be used to construct a fence on the said land. In 1986, after
the termination of the lease with Gomez, the respondent again entered into a lease
agreement with Jose Bostre, who used the land as a ranch. At this stage, a building,
named Casa de la Merced was already erected and the proceeds of the lease with
Bostre were used for the electrification of the building. After the termination of this
lease, respondent entered into a third lease with one Rudy Caballes, who used the
land for fattening cattle. The proceeds of this lease, according to respondent, were
to be used to complete the building Casa de la Merced.
In all three leases, respondent did not notify nor obtain the consent of the
donor.
In 1990, the donor CJ Yulo and Sons Inc., with the concurrence of its board,
wrote a letter to respondent asking for the revocation of the donation and the turn-
over of the donated property. The respondent denied any material breach of the
conditions of the donation, manifested its compliance with the conditions and refused
the turn-over of the property. The donor filed a complaint before the RTC of Calamba,
Laguna for revocation of the donation on account of non-comliance with the donations
condition that a home for aged and infirm would be constructed on the property.
The complaint further alleged that the consent of the donor was not obtained for
the use of the property.
The RTC decided in favor of the donor and ordered the revocation of the
donation and the return of the TCT in the donors name. On appeal, however, the
CA reversed the decision of the RTC and held that the donation was onerous and
was governed by the law on contracts. It held that the acts of the donee were merely
casual breaches which did not detract from the purpose for which the donation was
made.
ISSUE: Whether or not the donation should be revoked
HELD: NO. Petitioner contends that the case at bar is similar to the 1995 case of
Central Philippine University vs. Court of Appeals, where the donee failed for more than
50 years to establish, as required, a medical school on the land donated, and where
this Court declared the donation to have been validly revoked.
To the mind of the Court, what is applicable to this case is the more recent
[2001] case of Republic vs. Silim, where respondent Silim donated a 5,600-square
meter parcel of land in favor of the Bureau of Public Schools, Municipality of
Malangas, Zamboanga del Sur with the condition that the said property should be
used exclusively and forever for school purposes only. Although a school building
was constructed on the property through the efforts of the Parent-Teachers Association
of Barangay Kauswagan, the funds for a Bagong Lipunan school building could not
be released because the government required that it be built on a one-hectare parcel
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of land. This led the donee therein to exchange the donated property for a bigger
one.
In Silim, the Court distinguished the four (4) types of donations:
Donations, according to its purpose or cause, may be categorized as: (1)
pure or simple; (2) remuneratory or compensatory; (3) conditional or
modal; and (4) onerous. A pure or simple donation is one where the
underlying cause is plain gratuity. This is donation in its truest form. On
the other hand, a remuneratory or compensatory donation is one made
for the purpose of rewarding the donee for past services, which services
do not amount to a demandable debt. A conditional or modal donation is
one where the donation is made in consideration of future services or
where the donor imposes certain conditions, limitations or charges upon
the donee, the value of which is inferior than that of the donation given.
Finally, an onerous donation is that which imposes upon the donee a
reciprocal obligation or, to be more precise, this is the kind of donation
made for a valuable consideration, the cost of which is equal to or more
than the thing donated.
Of all the foregoing classifications, donations of the onerous type are the most
distinct. This is because, unlike the other forms of donation, the validity of and the
rights and obligations of the parties involved in an onerous donation is completely
governed not by the law on donations but by the law on contracts. In this regard,
Article 733 of the New Civil Code provides:
ARTICLE 733 Donations with onerous cause shall be governed by the
rules on contracts, and remuneratory donations by the provisions of the
present Title as regards that portion which exceeds the value of the burden
imposed.
The donation involved in the present controversy is one which is onerous
since there is a burden imposed upon the donee to build a school on the donated
property.
Here, the Court of Appeals correctly applied the law on contracts instead of
the law on donations because the donation involved in this case is onerous, saddled
as it is by a burden imposed upon the donee to put up and operate a home for the
aged and the infirm.
BAUTISTA et al. vs. POBLETE
G.R. No. 141007, 09/13/2005 CORONA, J.
FACTS:
This petition was made to assail a decision of the CA which allowed the
registration of a parcel of land, lot 1243. The registration of the said parcel of land
was initially denied by the trial court as the applicants failed to produce the deed of
donation, as the latter was lost in a fire which consumed the applicants house.
However, on appeal the CA allowed the registration.
The petitioners appear to be engaged in a fishing expedition. On one hand
they claim that the original owner of the property, their father, Marcelo Sr., had a
practice of giving land to all of his children from each of his 3 wives, but they fail to
produce proof that lot 1243 was given to them. On the other hand, they allege co-
ownership by pointing to the fact that theyve received shares of the harvest from
lot 1243. Private respondent, on the other hand, was consistent in her assertion that
she had possessed the land and exercised dominion over it since it was donated to
her in 1934.
ISSUE: Whether the respondent acquired the land through prescription
HELD: YES. The fact that petitioner Dominador Sino allegedly received share of
the harvest twice does not disprove that the entire harvest belongs to Socorro. At
most, these two occasions only proved Socorros generosity to him, considering that
he was an illegitimate child and received almost nothing by way of inheritance. Marcelo
Sr., died in 1932 under the regime of the old Civil Code which granted no successional
rights to illegitimate children. Corollarily, the inheritance rights established by the
new Civil Code in favor of illegitimate children could be claimed only by those
whose parents died after the effectivity of the law on August 30, 1950. Thus,
petitioners Jose, Leonila and Dominador never really had any cause of action against
private respondents.
Quite telling too was the admission of Felino Quiambao, petitioners attorney-
in-fact, that neither he nor any of the petitioners (except Jose Sino) had ever been to
the disputed land despite the fact that they lived only 150 meters away from the
residence of Socorro in Carmona, Cavite. Another telling fact it that they never
filed any answer or objection to the claim of Socorro in the cadastral proceedings
over Lot 1243.
There is a close parallelism between this case and Pensader vs. Pensader wherein
the Court held that:
It was not shown that such possession was in common with the plaintiffs.
As above stated, the origin of said possession is adverse to such
community, namely, the donation, which although it is not established by
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Eduardo A. Labitag
a sufficient documentary evidence, stands in this case as a circumstance
explaining the exclusive character of the possession of Maria Revelar
and Alejandra Pensader and that of their common successor in interest
Silverio P. Revelar.
The ruling was reiterated in Espique vs. Espique where the Court made the
following pronouncement:
There is no question that the donation in question is invalid because it
involves an immovable property and the donation was not made in a
public document as required by Article 633 of the old Civil Code, in
connection with Article 1328 of the same Code (concerning gifts propter
nuptias), but it does not follow that said donation may not serve as basis
of acquisitive prescription when on the strength thereof the donee has
taken possession of the property adversely and in the concept of owner.
The appellate court, upon meticulous review of the records, found that private
respondents possession of Lot 1243 since 1934 was adverse, continuous, open,
public, peaceful and uninterrupted, and in the concept of an owner. This case was
filed only in 1991. All this time, Socorro was exercising acts of dominion over the
land such as enjoying its fruits to the exclusion of all others, having the land
cadastrally surveyed in her name and faithfully paying realty taxes on Lot 1243 in
her name. Assuming but not conceding that there existed an implied trust between
the parties, Socorros aforementioned acts of dominion clearly repudiated such trust.
It is the essence of the statute of limitations that, whether the party had the
right to the possession or not, if he entered under the claim of such right and remained
in possession for the period required for acquisitive prescription, the right of action
of a party claiming title is barred by that adverse possession. The right given by the
statute of limitations does not depend on and has no necessary connection to the
validity of the claim under which the possession is held.
The donation of Lot 1243 to Socorro was made in 1932. She took possession
of the land immediately thereafter. Under the Code of Civil Procedure which was
then in force, ten years of adverse possession by the person claiming to be the
owner, in whatever way such occupancy may have commenced, shall vest in the actual
possessor of the land a full and complete title.
V. LEASE
DULA vs. MARAVILLA
G.R. No. 134267. May 9, 2005, GARCIA, J.
FACTS:
In 1993, herein respondents purchased a 5-door apartment building in Makati,
Unit A of which is occupied by herein petitioner since 1968 at a monthly rental of
Php2,112.00 under an oral month-to-month contract of lease with the former owner. In January
1994, respondents addressed a notice to petitioner formally informing the latter of
the termination of his lease and giving him three (3) months within which to vacate.
Petitioner refused. Hence, respondents filed a complaint for ejectment against
petitioner with the Metropolitan Trial Court (MeTC) of Makati.
Two (2) grounds are relied upon by the respondents in seeking petitioners
ejectment from the premises in question, namely: (a) respondents need of the leased premises
for their own personal use; and (b) expiration of the lease contract with the termination of the
month-to-month lease effective January 31, 1994. These grounds for judicial ejectment are
expressly provided for in B.P. Blg. 877, entitled An Act Providing for the Stabilization
and Regulation of Rentals of Certain Residential Units and for other Purposes.
ISSUE (1): Determination of the period of lease
HELD: Applying Art. 1687, the period of lease is to be considered from month-to-
month.
It is acknowledged that there was neither any written nor verbal agreement as
to a fixed period of lease between the respondents and the petitioner. There was,
however, a verbal agreement for the payment of rental at Php2,112.00 on a monthly
basis. By express provision of Article 1687 of the Civil Code, the term of the lease in
the case at bar is from month-to-month. Admittedly, there was a written notice served
by the respondents on January 10, 1994 upon petitioner for the termination of the
lease effective January 31, 1994. Citing this Courts ruling in De Vera vs. Court of
Appeals [260 SCRA 396 (1996)], the CA held that the period of lease thereby expired
by the end of the month of January, 1994.
Petitioner, however, contends otherwise. He argues that the operation of Article
1687 was suspended with the suspension of Article 1673 by Section 6 of B.P. Blg.
877, which states:
Section 6. Application of the Civil Code and Rules of Court of the Philippines.
Except when the lease is for a definite period, the provisions of paragraph
(1) of Article 1673 of the Civil Code of the Philippines, insofar as they
refer to residential units covered by this Act, shall be suspended during
the effectivity of this Act, but other provisions of the Civil Code and the
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Rules of Court on lease contracts, insofar as they are not in conflict with
the provisions of this Act shall apply.
The Court disagrees.
In the case of De Vera vs. Court of Appeals (supra) and Rivera vs. Florendo [227
SCRA 258 (1986)], the Court held that Art. 1687 of the Civil Code, which provides:
Art. 1687. If the period for the lease has not been fixed, it is understood
to be from year to year, if the rent agreed upon is annual; from month to
month, if it is monthly; from week to week, if the rent is weekly; and
from day to day, if the rent is to be paid daily. However, even though a
monthly rent is paid, and no period for the lease has been set, the Courts
may fix a longer term for the lease after the lessee has occupied the
premises for over one year. If the rent is weekly, the Courts may likewise
determine a longer period after the lessee has been in possession for
over six months. In case of daily rent, the courts may also fix a longer
period after the lessee has stayed in the place for over one month.
has not been affected by the suspension in 6 of B.P. Blg. 877, and that was
been suspended is Art. 1673 of the Civil Code.
The effect of said suspension is that independently of the grounds for
ejectment enumerated in B.P. Blg. 25, the owner/lessor cannot eject the
tenant by reason of the expiration of the period of lease as fixed or
determined under Article 1687. It does not mean that the provisions of
Article 1687 itself had been suspended. Thus, the determination of the
period of a lease agreement can still be made in accordance with said
Article 1687.
Similar to the case at bar, in Rivera, there was admittedly no definite period of
lease agreed upon by the parties. However, it was established that the rent was paid
on a monthly basis. The Courts conclusion in Rivera that the period of lease is
considered to be from month to month in accordance with Article 1687 is, therefore,
applicable to the present case as well.
When the respondent spouses gave petitioner notice on January 10, 1994 of
their personal need to use the property, demanding that petitioner vacate the same,
the contract of lease is deemed to have expired as of the end of that month or on
January 31, 1994 as indicated in the said notice to vacate.
ISSUE (2): WHETHER the lease contract has expired
HELD: YES.
Recapitulating, the Court stresses that Article 1687 of the Civil Code has not
been suspended by Section 6 of Blg. 877, such that the period of the lease contract may be
made deemed to expire in accordance with Article 1687. Accordingly, a lease agreement
though not having a fixed period, but rentals are paid monthly, is deemed to be
from month to month, thereby considered to be for a definite period, nonetheless.
Such a lease contract expires after the last day of any given 30-day period repeating
the same cycle of the 30-day period until either party expresses his intention to
terminate the month-to-month lease agreement.
LIMITLESS POTENTIALS, INC. vs. QUILALA
G.R. No. 157391, 07/15/2005 CALLEJO Sr., J.
FACTS:
Limitless Potentials, Inc. (LPI) leased certain areas of the property of the Roman
Catholic Archbishop of Manila (RCAM) for the purpose of setting up billboards.
Later on LPI granted a sublease on some of the areas to another firm, ASTRO,
which put up its own billboards. When the sublease expired, however, the areas
were leased by RCAM to another firm, MCIC. LPI demanded that it be given
possession over the subject areas but it was ignored.
RCAM alleged that not only did LPI fail to pay rentals for the areas it occupied
but it also failed to remit the payments of ASTRO, and as such RCAM sought to
rescind the lease contract. LPI contested RCAMs allegations and in order to protect
its interests filed a complaint against RCAM for consignation of Php300,000.00 as
rentals with a plea for a writ of preliminary injunction and temporary restraining
order. Although the RTC issued an order enjoining RCAM to maintain the status
quo, and thus allowing LPI to use the advertising spaces, it eventually dismissed the
case.
Meanwhile, RCAM filed a complaint for unlawful detainer against LPI with
the MTC. In its decision, the MTC declared that LPI had lawful possession but
found that it had deficiencies in payments. LPI appealed the decision to the RTC,
which affirmed it with modification in that LPI was found to have overpaid RCAM.
LPI filed a motion for partial reconsideration and thus the RTC issued an amended
decision which ordered RCAM to return the amount overpaid by LPI as well as to
restore possession of the leased property to the latter. Thereafter, LPI filed a motion
to execute the amended judgment but such was denied. LPI filed a motion for
reconsideration but it too was denied. Thus LPI filed this petition for certiorari and
mandamus.
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ISSUES/HELD:
WHETHER the amended decision may be validly executed by LPI pending
appeal - NO
The execution of the judgment pending appeal is proper only if the judgment
is in favor of the plaintiff and against the defendant, and not vice versa. This is in
accordance with Section 19, Rule 70 of the Rules of Court. What LPI should have
done when RCAM dismantle its billboards on October 5, 1996 while the ejectment
case was still pending in the MTC was to file a motion with the said court to compel
RCAM to restore the possession of the property to it pending the resolution of the
ejectment case. However, LPI failed to do so.
WHETHER LPI has a right to the possession of the property - YES
As lessor, RCAM was obliged to maintain LPIs peaceful and adequate
possession and enjoyment of the lease for the entire duration of the contract. Indeed,
it is the duty of the lessor to place the lessee in the legal possession of the premises
and to maintain the peaceful possession thereof during the entire term of the lease.
The lessee has the right to be respected in his possession and should he be disturbed
therein, he shall be restored to said possession by the means established by the law
or by the Rules of Court.
Every possessor, under the law, includes all kinds of possession, including that
of a mere holder. Possession is not protection against a right but against the exercise
of a right by ones own authority. If the owner/lessor forcibly dispossesses a lessee,
the lessor would be acting illegally, and the lessee shall be entitled to be restored to
his possession via an action for forcible entry with a plea for a writ of preliminary
mandatory injunction within five (5) days from the filing of the complaint to restore
him to his possession, by an accion publiciana or by an action to compel the lessor to
comply with his obligation under the contract of lease.
WHETHER LPI may possess the property for the unused period of the
lease - YES
The lessee may ask for the rescission of the lease contract and indemnification
for damages, or only the latter, allowing the contract to remain in force. A lessee
unlawfully evicted by the lessor is entitled to be restored to the possession of the
property leased for the unused period of the lease contract, counted from his
eviction; such unexpired portion of the contract cannot be affected by the lapse of
the period pending the final resolution of the complaint for ejectment filed by the lessor.
It bears stressing that in a reciprocal contract, like a lease, the period of the
lease must be deemed to have been agreed upon for the benefit of both parties,
absent any language therein showing that the term was deliberately fixed for the
benefit of either the lessor or the lessee alone. Its continuance, effectivity or fulfillment
cannot be made to depend exclusively upon the free and uncontrolled choice of just
one party to a lease contract.
Thus, LPI is entitled to remain in the property, as lessee, for the unused portion
of the four-year period provided for in the MOA. By so ruling, the Court would not
be extending the period of the lease contrary to the MOA; the Court would thereby
be merely enforcing the same. As covenanted, LPI must remain in possession of the
property, as lessee, for a period of four (4) years - not a day less. For the Court to do
otherwise would be to enrich RCAM at the expense of LPI, allowing the former to
profit by its misdeeds.
WHETHER RCAM is party to the sublease agreement between LPI and
ASTRO - NO
The contention of LPI that RCAM is a party to the sublease agreement is
belied by the records. As gleaned from the agreement, RCAM was merely a witness
to the deed. It bears stressing that in a sublease agreement, there are two distinct
leases involved: the principal lease and the sublease. In a contract of sublease, the
lessor is not a party. Except in those cases provided by the New Civil Code, the
lessor is a stranger to the relationship between the lessee and sublessee. The latter
has no right or authority to pay the sublease rentals to the lessor, the said rentals
being due and payable to the lessee. However, the lessor may demand the payment
by the sublessee of the rentals due from the lessee if the latter fails to pay the same.
WHETHER the sublease agreement between LPI and ASRO contained a
stipulation pour autrui in favor of RCAM - YES
Central to the issue is the second paragraph of Article 1311 of the New Civil
Code, which provides:
Art. 1311. Contracts
If a contract should contain some stipulation in favor of a third person,
he may demand its fulfillment provided he communicated his acceptance
to the obligor before its revocation. A mere incidental benefit or interest
of a person is not sufficient. The contracting parties must have clearly
and deliberately conferred a favor upon a third person.
The requisites for such stipulation are the following: (a) the stipulation in favor
of a third person, the third-party beneficiary which should be a part, not the whole,
of the contract; (b) the contracting parties must have clearly and deliberately conferred
a favor upon a third person, not a mere incidental benefit or interest; (c) the favorable
stipulations should not be conditioned or compensated by any kind of obligation
whatsoever; (d) the third person must have communicated his acceptance to the
obligor before its revocation; and (e) neither of the contracting parties bear the legal
representation or authorization of the third party.
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The intent of the promisee to benefit a third person as a primary party-in-
interest is generally said to be controlling. It is not enough that the contract may
operate to the benefit of a third-party. It must appear that the parties intent to
recognize him as the primary party-in-interest and privy to the promise. Such intent
may be gleaned from the construction of the contract in the light of the surrounding
circumstances. Intent, in a legal sense, is defined as the purpose to use a particular
manner to effect a certain result. As for the manner of acceptance, in Florentino vs.
Encarnacion, Sr., the Court ruled that:
The acceptance does not have to be in any particular form, even when
the stipulation is for the third person an act of liberality or generosity on
the part of the promisor or promisee. It need not be made expressly and
formally. Notification of acceptance, other than such as is involved in the
making of demand, is unnecessary.
LPI remitted its rentals to RCAM periodically during the said period without
any preconditions. Not only that LPI likewise failed to demand from RCAM that
it be credited for the rental payments of ASTRO. LPI continued to remit its rental
payments to RCAM as provided for in no less than the lease agreement. It is true
that, after the execution of the MOA, the rental payments of ASTRO during the
second period (February 1995 to October 1995) were credited to the LPI; this does
not mean, however, that the rental payments of ASTRO during the first period
should, likewise, be similarly credited. Based on the pleadings of the parties, RCAM
and LPI had agreed to revoke the stipulation pour autrui in the sublease agreement
during the second period.
VI. MISCELLANEOUS
SPs. VALDERAMA vs. MACALDE
G.R. No. 165005. September 16, 2005, CALLEJO, SR., J.

FACTS:
On June 11, 1978, then President Marcos issued P.D. No. 1517 proclaiming
specific parcels of urban lands as Urban Zones. Section 6 of the decree provides
that,
[L]egitimate tenants within the urban zones who had been residing on
the land for ten years or more, who have built their homes on the land,
and residents who have legally occupied the lands by contract continuously
for the last ten years, shall not be dispossessed of the land and shall be
allowed the right of first refusal to purchase the same within a reasonable
time and at reasonable prices, under terms and conditions to be
determined by the Urban Zone Expropriation and Land Management
Committee created by Section 8 of this Decree.
On May 14, 1980, former President Marcos issued Proc. No. 1967, declaring
the Metropolitan Manila area as an Urban Zone.

Sometime in November 1990, Albano, owner of a parcel of land in Tondo,
offered to sell the 2/3 portion of the property to Macalde and her siblings, who had
been leasing the lot from Albano since 1977 (their predecessors began renting the
lot years before the war). Macalde informed Albano of her desire and readiness to
buy 2/3s portion of the property, where their ancestral house was constructed;
however, Albano did not respond to this offer.
In 1991, Macalde learned that Albano had already sold the property to the
spouses Valderama (lessees of the other 1/3 portion of the lot). When Albano and
Valderama refused to accept Macaldes offer to buy the two-thirds portion, the
Macaldes filed a complaint against Albano and the spouses Valderama for annulment
of sale, cancellation of title, reconveyance and damages with the RTC of Manila.
ISSUE (1): WHETHER the sale to the petitioners (Sps. Valderama) is invalid for
violation of P.D. 1517
HELD: YES.
The respondents (Macaldes) had the right of first refusal under Sec. 6 of P.D.
No. 1517, which they never waived. They were deprived of this right when, without
their knowledge, Albano sold the property to the petitioners. Under P.D. No. 1517,
Albano was also mandated to declare to the Land Management Committee her
proposal to sell the property. However, Albano failed to comply with the law, and
instead executed a deed of absolute sale over the property in favor of the petitioners.
ISSUE (2): WHETHER the petitioners are entitled to monthly rentals and interest
on the purchase price on equitable grounds
HELD: NO.

First. Contrary to their contention, the respondents paid rentals for the
property to Albano up to March 5, 1991.
Second. Even if the petitioners filed a complaint for ejectment against the
respondents, the same would not have prospered because Section 6 of P.D. No. 1517
prohibits the latters eviction from the property.
Third. The petitioners and Albano violated P.D. No. 1517 when they
clandestinely consummated the sale of the entire property. Worse, they undervalued
the property to enable the petitioners to evade the payment of the lawful capital
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Eduardo A. Labitag
gains tax, registration, and other fees/charges of the sale. The petitioners should
not be rewarded by obliging the respondents to pay 12% per annum interest on the
aforesaid amount of Php500,000.00. It is a well-established principle in law that as
between two parties, he who, by his acts, caused the loss shall bear the same. He who
comes to court for equity must do so with clean hands.
LAND REGISTRATION
Suits to Quiet Title Characterized as Proceedings Quasi in Rem
Spouses Portic vs. Cristobal
(G.R. No. 156171, 04/22/2005)
Technically, Suits to quiet title are neither in rem nor in personam and as such,
they are characterized as proceedings quasi in rem. In an action quasi in rem, an individual
is named as defendant. However, unlike suits in rem, a quasi in rem judgment is
conclusive only between the parties. Generally, the registered owner of a property is
the proper party to bring an action to quiet title. However, it has been held that this
remedy may also be availed of by a person other than the registered owner because,
in the Article reproduced above, title does not necessarily refer to the original or
transfer certificate of title. Thus, lack of an actual certificate of title to a property
does not necessarily bar an action to quiet title.
Homestead Patent Registration Grants Indefeasibility
Spouses Garingan vs. Garingan, et al.
(G.R. No. 144095, 04/12/2005)
A homestead patent, once registered, becomes as indefeasible as a Torrens
title. A person deprived of the land, estate, or interest therein by virtue of a decree
of registration may avail of the remedy provided under Section 38 of Act 496. The
fraud contemplated in Section 38 of Act 496 refers to extrinsic or collateral fraud.
The fraud being attributed to Andaang is not extrinsic and collateral. In Libudan,
the Court ruled that the allegation that neither the applicant nor his alleged successor
- in - interest has ever been in actual possession of the property in question since
time immemorial does not constitute extrinsic fraud. Granting that Andaang
committed extrinsic and collateral fraud, Hadji Munib, et al. failed to avail of the
remedy provided under Section 38 of Act 496 within the prescribed period.
In Nelayan, et al. vs. Nelayan, et al., this Court ruled that in the case of public land
grants (patents), the one year period under Section 38 is counted from the issuance
of the patent by the government. The Letters of Patent were issued on 17 February
1955. The brothers and sisters of Saupi Moro filed Civil Case No. 41 for annulment
of title only in July 1956, more than a year after the issuance of the Letters of
Patent. Hadji Munib, et al. did not do anything to protect their interest, not even
after the records of Civil Case No. 41 were burned. Instead of availing of the remedy
under Section 38 of Act 496, Hadji Munib, et al. filed an action for partition on 23
February 1993, which must fail because a Torrens title is not susceptible to collateral
attack.
Homestead Patent Application does not defeat Torrens Title
Heirs of Conahap vs. Heirs of Regana
(G.R. No. 152021, 05/17/2005)
Since the property is titled to the respondents, they are entitled to possess the
same. It bears stressing that a certificate of title serves as evidence of an indefeasible
and incontrovertible title to the property in favor of the person whose name appears
therein. The ruling of this Court in Government of the Philippine Islands vs. Franco does
not apply in this case. In the said case, the Court awarded the property to a certain
Franco who took possession of property on the erroneous belief that it was public
land, with the intention of holding and claiming it under the homestead law; he
acquired title over the property by actual possession as against the owner.
In this case, however, when Ponciano filed his application for a homestead
patent over the property in 1982, the property was already private land. Moreover,
his application was not acted upon, much less approved by the Bureau of Lands;
hence, Ponciano never acquired any rights over the property. By the time the complaint
of the respondents was filed in the RTC, Ponciano had already died.
Indefeasibility of Torrens Title Direct Attack vs. Collateral Attack
Teoville Homeowners Association, Inc. vs. Ferreira, et al.
(G.R. No. 140086, 06/08/2005)
Once a decree of registration is made under the Torrens system, and the
reglementary period has passed within which the decree may be questioned, the title
is perfected and cannot be collaterally questioned later on. To permit a collateral
attack on his title, such as what petitioner now attempts, would reduce the vaunted
legal indeafeasibility of Torrens Title to meaningless verbiage. A Torrens Title cannot
be collaterally attacked. A direct attack against a judgment is made through an action
or proceeding the main object of which is to annul, set aside, or enjoin the
enforcement of such judgment, if not yet carried into effect; or, if the property has
been disposed of, the aggrieved party may sue for recovery. A collateral attack is
made when, in another action to obtain a different relief, an attack on the judgment
is made as an incident in said action. It has, therefore, become an ancient rule that
the issue on the validity of title, i.e., whether or not it was fraudulently issued, can
only be raised in an action expressly instituted for that purpose.
194 IBP JOURNAL
Eduardo A. Labitag
Action to Recover Ownership - Requirements
Sps. Hutchison, et al. vs. Buscas,
(G.R. No. 158554, 05/26/2005)
Article 434 of the New Civil Code provides that to successfully maintain an
action to recover the ownership of a real property, the person who claims a better
right to it must prove two (2) things: first, the identity of the land claimed, and;
second, his title thereto. In the case at bar, the Court finds that respondent failed to
establish these two (2) legal requirements.
The first requisite: the identity of the land. In an accion reinvindicatoria, the
person who claims that he has a better right to the property must first fix the identity
of the land he is claiming by describing the location, area and boundaries thereof.
Anent the second requisite, i.e., the claimants title over the disputed area, the rule
is that a party can claim a right of ownership only over the parcel of land that was
the object of the deed. Respondent sought to prove these legal requisites by anchoring
his claim on the Quitclaim Deed over a portion of land which was executed by Arrastia
in his favor.
However, the Quitclaim Deed specified only the extent of the area sold, i.e.,
7,581 sq. m. of Arrastias land. Annex A of the Deed, where the entire lot of
Arrastia was particularly described and where the specific portion of the property
sold to respondent was marked, was not presented by respondent at the trial. As the
Deed itself failed to mention the metes and bounds of the land subject of the sale, it
cannot be successfully used by respondent to identify the area he was claiming and
prove his ownership thereof. Indeed, the presentation of the Annex A is essential
as what defines a piece of land is not the size mentioned in the instrument but the
boundaries thereof which enclose the land and indicate its exact limits.
Moreover, the rules on evidence provide that where the contents of the
document are the facts in issue, the best evidence is the instrument itself. In the case
at bar, the identity of the land claimed and respondents ownership thereof are the
very facts in issue. The best evidence to prove these facts is the Quitclaim Deed and
its Annex A where respondent derives his title and where the land from which he
purchased a part was described with particularity, indicating the metes and bounds
thereof. Respondents failure to adduce in evidence Annex A of the Quitclaim
Deed or produce secondary evidence, after proof of its loss, destruction or
unavailability, is fatal to his cause.
Finally, it bears stress that in an action to recover real property, the settled
rule is that the plaintiff must rely on the strength of his title, not on the weakness of
the defendants title. This requirement is based on two (2) reasons: first, it is possible
that neither the plaintiff nor the defendant is the true owner of the property in
dispute and second, the burden of proof lies on the party who substantially asserts
the affirmative of an issue for he who relies upon the existence of a fact should be
called upon to prove that fact. In the case at bar, as respondent failed to prove his
title to and identity of the contested land, there exists no legal ground upon which to
turn over the possession of the disputed area to him.
Indefeasibility of Torrens Title Not a Bar to Investigation by the
Director of Lands
Sherwill Development Corporation vs. Sitio Sto. Nino
Residents Association, Inc,
(G.R. No. 158455, 06/28/2005)
The Court in Republic vs. Court of Appeals stated that a Torrens title issued on
the basis of a free patent or a homestead patent is as indefeasible as one judicially
secured. And in repeated previous decisions of this Court that indefeasibility has
been emphasized by our holding that not even the Government can file an action for
annulment, but at the same time, it has been made clear that an action for reversion
may be instituted by the Solicitor General, in the name of the Republic of the
Philippines. It is also to the public interest that one who succeeds in fraudulently
acquiring title to a public land should not be allowed to benefit therefrom, and the
State should, therefore, have an even existing authority, thru its duly-authorized
officers, to inquire into the circumstances surrounding the issuance of any such title.
In other words, the indefeasibility of a title over land previously public is not
a bar to an investigation by the Director of Lands as to how such title has been
acquired, if the purpose of such investigation is to determine whether or not fraud
had been committed in securing such title in order that the appropriate action for
reversion may be filed by the Government.
Indefeasibility of Torrens Title Collateral Attack Unavailing
Vda. de Gualberto, et al., vs. Go, et al.
(G.R. No. 139843, 07/21/2005)
In Trinidad vs. Intermediate Appellate Court, the Supreme Court reiterated the
doctrine on the indefeasibility of a torrens title in this wise:
Under the Land Registration Act, title to the property covered by a
Torrens certificate becomes indefeasible after the expiration of one year
from the entry of the decree of registration. Such decree of registration is
incontrovertible and is binding on all persons whether or not they were
notified of or participated in the registration proceedings.
If such title is to be challenged, it may not be done collaterally, as in the present
case, because the judicial action required is a direct attack. Section 48 of the Property
Registration Decree expressly provides that a certificate of title cannot be subject to
collateral attack and can be altered, modified or cancelled only in a direct proceeding
196 IBP JOURNAL
Eduardo A. Labitag
in accordance with law. This was the same rule under Act 496. To stress, the action
filed by petitioners is one for Conveyance, Accion Publiciana, and Quieting of Title
With Damages, and not an action for annulment of OCT No. 1388 issued to Rosa
Javier Go. The Supreme Court, therefore, cannot entertain the issue in the present
petition for review on certiorari.
Indefeasibility of Torrens Title A Certificate of Title Does Not Create
Instead Merely Confirms a Valid and Existing Title
Spouses De Pedro vs. Romasan Development Corporation, et al.,
(G.R. No. 158002, 02/28/2005)
It has been held that a certificate of title, once registered, should not thereafter
be impugned, altered, changed, modified, enlarged or diminished except in a direct
proceeding permitted by law. The action of the petitioners against the respondents,
based on the material allegations of the complaint, is one for recovery of possession
of the subject property and damages. However, such action is not a direct, but a
collateral attack of TCT No. 236044.
The petitioners anchor their claim of lawful possession of the subject property
on their allegation that said property is a portion of the property covered by OCT
No. P-691 in the name of petitioner Aurora de Pedro. The petitioners were burdened
to prove not only their ownership over the property covered by OCT No. P-691 but
also that the subject property is a portion of the property covered by the said title
and, if they fail to do so, the complaint must be dismissed.
The Supreme Court agrees with the petitioners that, generally, a certificate of
title shall be conclusive as to all matters contained therein and conclusive evidence
of the ownership of the land referred to therein. However, it bears stressing that
while certificates of title are indefeasible, unassailable and binding against the whole
world, including the government itself, they do not create or vest title. They merely
confirm or record title already existing and vested. They cannot be used to protect
a usurper from the true owner, nor can they be sued as a shield for the commission
of fraud; neither do they permit one to enrich himself at the expense of others.
Indefeasibility of Torrens Title Multiple Certificates of Titles Over
the Same Land
Sanches vs. Quinio, et al.
(G.R. No. 133545, 07/15/2005)
Santiago sold the subject land in July 1979 to respondents, who lost no time in
registering the conveying deed of sale and securing title in their names. From that
time on, ownership and other rights flowing therefrom over the land in question
pertained to respondents. In other words, Santiago was no longer possessed of
transmissible rights over such property when she executed on 22 February 1993 a
deed of sale in favor of Renato Sanding. And although the records do not provide
clear answer on how the second vendee, Renato Sanding, was able to secure a certificate
of title despite the existence of an outstanding valid certificate of title in the hands
and name of the first vendee, herein respondents, the later deed could not have
conveyed valid title over the land.
It is a settled rule that when two certificates of title are issued to different
persons covering the same land in whole or in part, the earlier in date must prevail,
and, in case of successive registrations where more than one certificate is issued
over the land, the person holding a prior certificate is entitled to the land as against
a person who relies on a subsequent certificate. As the saying goes, the spring cannot
rise higher than its source.
Even if petitioner and Romeo S. Abel, the formers immediate predecessor-in-
interest, are to be accorded the status of innocent purchasers for value, as the term
is juridically understood, the superior right of respondents will still have to be posited
and recognized. Baltazar vs. Court of Appeals explains why:
We might assume for the moment and for purposes of argument only
that Baltazars vendees had successfully proven they were purchasers in
good faith and for value. Even so, as between two persons both of whom
are in good faith and both innocent of any negligence, the law must protect
and prefer the lawful holder of registered title over the transferee of a
vendor bereft of any transmissible rights.
It may be that one dealing with property brought under the Torrens system of
land registration may rely, as petitioner did with respect to the land in question, on
what appears on the face of the covering certificate without inquiring further as to
the title of the seller or mortgagor. But the guarantee generally accorded a Torrens
title holder to be secured in his ownership as long as he has not voluntarily disposed
of any right over the covered property admits of a couple of exceptions. One such
exception is that the claim of indefeasibility of a Torrens Title would be defeated if
a previous valid title to the same parcel of land existed, as held in C.N. Hodges vs. Dy
Buncio & Co., Inc.
Land Titles Mirror Principle
Navotas Industrian Corp. vs. Cruz
G.R. No. 159212, September 12, 2005
The general rule is that a person dealing with registered land is not required
to go behind the register to determine the condition of the property. However, such
person is charged with notice of the burden on the property which is noted on the
face of the register or certificate of title. A person who deals with registered land is
198 IBP JOURNAL
Eduardo A. Labitag
bound by the liens and encumbrances including adverse claim annotated therein.
In the present action, the petitioner caused the annotation of the July 30,
1977 Supplementary Lease Agreement and Contract of Sale only on September 14,
1977, long after the annotation of the respondents adverse claim at the dorsal portion
of TCT No. 81574 on June 30, 1977. Thus, as of that date, the petitioner had
constructive knowledge of the Deed of Sale with Assumption of Mortgage Carmen
Cruz executed on December 31, 1974 in favor of her children. Even before July 30,
1977, the petitioner had knowledge that Carmen Cruz was no longer the owner of
the property, and had no more right to execute the July 30, 1977 Supplementary
Lease Agreement and Contract of Lease. The registration of the said lease contracts
was of no moment, since it is understood to be without prejudice to the better rights
of third parties.

ABELARDO C. ESTRADA
OIC for Northern Luzon
JOSE AMOR M. AMORADO
Governor for Southern Luzon
ALICIA A. RISOS-VIDAL
Governor for Greater Manila
FELIMON C. ABELITA III
Governor for Bicolandia
MANUEL P. LEGASPI
Governor for Eastern Visayas
J.B. JOVY C. BERNABE
Governor for Western Visayas
BERNARD L. DAGCUTA
Governor for Eastern Mindanao
ROGELIO V. GARCIA
Governor for Western Mindanao
NATIONAL OFFICERS
(July 2006 - June 2007)
JOSE VICENTE B. SALAZAR
National President
FELICIANO M. BAUTISTA
Executive Vice President
ANTONIO A. OPOSA, JR.
Chairman, National Environmental Action Team
ESTER SISON CRUZ
National Treasurer
LLEWELLYN L. LLANILLO
Executive Director-Planning
MARIA TERESITA C. SISON GO
Assistant National Treasurer
ROGELIO A. VINLUAN
National Director for Bar Discipline
BRIAN KEITH F. HOSAKA
Deputy General Counsel
ELPIDIO G. SORIANO III
Managing Editor, IBP Journal
MA. TERESA M. TRINIDAD
National Secretary
JAIME M. VIBAR
Executive Director-Operations
TOMAS N. PRADO
Assistant National Secretary
ROSARIO T. SETIAS-REYES
National Director for Legal Aid
JUSTICE HECTOR L. HOFILEA
General Counsel
Editor-in-Chief, IBP Journal
15 J. Vargas Avenue, Ortigas Center, Pasig City 1600
Telephone: (632) 631-3014/18 Fax: (632) 634-4697
Website: www.ibp.org.ph Email: tech@ibp.org.ph
BOARD OF GOVERNORS
(2005-2007)
JOSE VICENTE B. SALAZAR (July 2006 - June 2007)
JOSE ANSELMO I. CADIZ (July 2005 - June 2006)
Chairman
FELICIANO M. BAUTISTA
Vice Chairman & Governor for Central Luzon

Vol.32 No.1 2006

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The IBP Journal

137 VOLUME 32 NUMBER 1 ( JANUARY - MARCH 2006)

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