NANCY GO AND ALEX GO, petitioners, vs.

THE HONORABLE COURT

OF
APPEALS,
HERMOGENES
ONG
and
JANE
C.
ONG, respondents.
DECISION
ROMERO, J.:

No less than the Constitution commands us to protect marriage as an

inviolable social institution and the foundation of the family. In our society, the
importance of a wedding ceremony cannot be underestimated as it is the
matrix of the family and, therefore, an occasion worth reliving in the
succeeding years.
[1]

It is in this light that we narrate the following undisputed facts:

Private respondents spouses Hermogenes and Jane Ong were married on
June 7, 1981, in Dumaguete City. The video coverage of the wedding was
provided by petitioners at a contract price of P1,650.00. Three times
thereafter, the newlyweds tried to claim the video tape of their wedding, which
they planned to show to their relatives in the United States where they were to
spend their honeymoon, and thrice they failed because the tape was
apparently not yet processed. The parties then agreed that the tape would be
ready upon private respondents return.
When private respondents came home from their honeymoon, however,
they found out that the tape had been erased by petitioners and therefore,
could no longer be delivered.
Furious at the loss of the tape which was supposed to be the only record
of their wedding, private respondents filed on September 23, 1981 a complaint
for specific performance and damages against petitioners before the Regional
Trial Court, 7 Judicial District, Branch 33, Dumaguete City. After a protracted
trial, the court a quo rendered a decision, to wit:
th

WHEREFORE, judgment is hereby granted:

1.
Ordering the rescission of the agreement entered into between plaintiff
Hermogenes Ong and defendant Nancy Go;
2.
Declaring defendants Alex Go and Nancy Go jointly and severally liable to
plaintiffs Hermogenes Ong and Jane C. Ong for the following sums:
a)

P450.00, the down payment made at contract time;

b)

P75,000.00, as moral damages;

c)

P20,000.00, as exemplary damages;

d)

P5,000.00, as attorneys fees; and

e)

P2,000.00, as litigation expenses;

Defendants are also ordered to pay the costs.

SO ORDERED.
Dissatisfied with the decision, petitioners elevated the case to the Court of
Appeals which, on September 14, 1993, dismissed the appeal and affirmed
the trial courts decision.
Hence, this petition.
Petitioners contend that the Court of Appeals erred in not appreciating the
evidence they presented to prove that they acted only as agents of a certain
Pablo Lim and, as such, should not have been held liable. In addition, they
aver that there is no evidence to show that the erasure of the tape was done
in bad faith so as to justify the award of damages.
[2]

The petition is not meritorious.

Petitioners claim that for the video coverage, the cameraman was
employed by Pablo Lim who also owned the video equipment used. They
further assert that they merely get a commission for all customers solicited for
their principal.
[3]

This contention is primarily premised on Article 1883 of the Civil Code

which states thus:
ART. 1883. If an agent acts in his own name, the principal has no right of action
against the persons with whom the agent has contracted; neither have such persons
against the principal.
In such case the agent is the one directly bound in favor of the person with whom he
has contracted, as if the transaction were his own, except when the contract involves
things belonging to the principal.
xxx

xxx
xxx

Petitioners argument that since the video equipment used belonged to

Lim and thus the contract was actually entered into between private
respondents and Lim is not deserving of any serious consideration. In the
instant case, the contract entered into is one of service, that is, for the video
coverage of the wedding. Consequently, it can hardly be said that the object
of the contract was the video equipment used. The use by petitioners of the
video equipment of another person is of no consequence.
It must also be noted that in the course of the protracted trial below,
petitioners did not even present Lim to corroborate their contention that they
were mere agents of the latter. It would not be unwarranted to assume that
their failure to present such a vital witness would have had an adverse result
on the case.
[4]

As regards the award of damages, petitioners would impress upon this

Court their lack of malice or fraudulent intent in the erasure of the tape. They
insist that since private respondents did not claim the tape after the lapse of
thirty days, as agreed upon in their contract, the erasure was done in
consonance with consistent business practice to minimize losses.
[5]

We are not persuaded.

As correctly observed by the Court of Appeals, it is contrary to human
nature for any newlywed couple to neglect to claim the video coverage of their

wedding; the fact that private respondents filed a case against petitioners
belies such assertion. Clearly, petitioners are guilty of actionable delay for
having failed to process the video tape. Considering that private respondents
were about to leave for the United States, they took care to inform petitioners
that they would just claim the tape upon their return two months later. Thus,
the erasure of the tape after the lapse of thirty days was unjustified.
In this regard, Article 1170 of the Civil Code provides that those who in the
performance of their obligations are guilty of fraud, negligence or delay, and
those who is any manner contravene the tenor thereof, are liable for
damages.
In the instant case, petitioners and private respondents entered into a
contract whereby, for a fee, the former undertook to cover the latters wedding
and deliver to them a video copy of said event. For whatever reason,
petitioners failed to provide private respondents with their tape. Clearly,
petitioners are guilty of contravening their obligation to said private
respondents and are thus liable for damages.
The grant of actual or compensatory damages in the amount of P450.00 is
justified, as reimbursement of the downpayment paid by private respondents
to petitioners.
[6]

Generally, moral damages cannot be recovered in an action for breach of

contract because this case is not among those enumerated in Article 2219 of
the Civil Code. However, it is also accepted in this jurisdiction that liability for
a quasi-delict may still exist despite the presence of contractual relations, that
is, the act which violates the contract may also constitute a quasi-delict.
Consequently, moral damages are recoverable for the breach of contract
which was palpably wanton, reckless, malicious or in bad faith, oppresive or
abusive.
[7]

[8]

Petitioners act or omission in recklessly erasing the video coverage of

private respondents wedding was precisely the cause of the suffering private
respondents had to undergo.
As the appellate court aptly observed:

Considering the sentimental value of the tapes and the fact that the event therein
recorded a wedding which in our culture is a significant milestone to be cherished
and remembered could no longer be reenacted and was lost forever, the trial court
was correct in awarding the appellees moral damages albeit in the amount
of P75,000.00, which was a great reduction from plaintiffs demand in the complaint,
in compensation for the mental anguish, tortured feelings, sleepless nights and
humiliation that the appellees suffered and which under the circumstances could be
awarded as allowed under Articles 2217 and 2218 of the Civil Code.
[9]

Considering the attendant wanton negligence committed by petitioners in

the case at bar, the award of exemplary damages by the trial court is
justified to serve as a warning to all entities engaged in the same business to
observe due diligence in the conduct of their affairs.
[10]

The award of attorneys fees and litigation expenses are likewise proper,
consistent with Article 2208 of the Civil Code.
[11]

Finally, petitioner Alex Go questions the finding of the trial and appellate
courts holding him jointly and severally liable with his wife Nancy regarding
the pecuniary liabilities imposed. He argues that when his wife entered into
the contract with private respondent, she was acting alone for her sole
interest.
[12]

We find merit in this contention. Under Article 117 of the Civil Code (now
Article 73 of the Family Code), the wife may exercise any profession,
occupation or engage in business without the consent of the husband. In the
instant case, we are convinced that it was only petitioner Nancy Go who
entered into the contract with private respondent. Consequently, we rule that
she is solely liable to private respondents for the damages awarded below,
pursuant to the principle that contracts produce effect only as between the
parties who execute them.
[13]

WHEREFORE, the assailed decision dated September 14, 1993 is hereby

AFFIRMED with the MODIFICATION that petitioner Alex Go is absolved from
any liability to private respondents and that petitioner Nancy Go is solely liable
to said private respondents for the judgment award. Costs against petitioners.

SO ORDERED.
A.M. No. 133-J May 31, 1982
BERNARDITA R. MACARIOLA, complainant,
vs.
HONORABLE ELIAS B. ASUNCION, Judge of the Court of First Instance of Leyte, respondent.

MAKASIAR, J:
In a verified complaint dated August 6, 1968 Bernardita R. Macariola charged respondent Judge
Elias B. Asuncion of the Court of First Instance of Leyte, now Associate Justice of the Court of
Appeals, with "acts unbecoming a judge."
The factual setting of the case is stated in the report dated May 27, 1971 of then Associate Justice
Cecilia Muoz Palma of the Court of Appeals now retired Associate Justice of the Supreme Court, to
whom this case was referred on October 28, 1968 for investigation, thus:
Civil Case No. 3010 of the Court of First Instance of Leyte was a complaint for
partition filed by Sinforosa R. Bales, Luz R. Bakunawa, Anacorita Reyes, Ruperto
Reyes, Adela Reyes, and Priscilla Reyes, plaintiffs, against Bernardita R. Macariola,
defendant, concerning the properties left by the deceased Francisco Reyes, the
common father of the plaintiff and defendant.
In her defenses to the complaint for partition, Mrs. Macariola alleged among other
things that; a) plaintiff Sinforosa R. Bales was not a daughter of the deceased
Francisco Reyes; b) the only legal heirs of the deceased were defendant Macariola,
she being the only offspring of the first marriage of Francisco Reyes with Felisa
Espiras, and the remaining plaintiffs who were the children of the deceased by his
second marriage with Irene Ondez; c) the properties left by the deceased were all the
conjugal properties of the latter and his first wife, Felisa Espiras, and no properties
were acquired by the deceased during his second marriage; d) if there was any
partition to be made, those conjugal properties should first be partitioned into two
parts, and one part is to be adjudicated solely to defendant it being the share of the
latter's deceased mother, Felisa Espiras, and the other half which is the share of the
deceased Francisco Reyes was to be divided equally among his children by his two
marriages.
On June 8, 1963, a decision was rendered by respondent Judge Asuncion in Civil
Case 3010, the dispositive portion of which reads:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court, upon
a preponderance of evidence, finds and so holds, and hereby renders
judgment (1) Declaring the plaintiffs Luz R. Bakunawa, Anacorita

Reyes, Ruperto Reyes, Adela Reyes and Priscilla Reyes as the only
children legitimated by the subsequent marriage of Francisco Reyes
Diaz to Irene Ondez; (2) Declaring the plaintiff Sinforosa R. Bales to
have been an illegitimate child of Francisco Reyes Diaz; (3) Declaring
Lots Nos. 4474, 4475, 4892, 5265, 4803, 4581, 4506 and 1/4 of Lot
1145 as belonging to the conjugal partnership of the spouses
Francisco Reyes Diaz and Felisa Espiras; (4) Declaring Lot No. 2304
and 1/4 of Lot No. 3416 as belonging to the spouses Francisco
Reyes Diaz and Irene Ondez in common partnership; (5) Declaring
that 1/2 of Lot No. 1184 as belonging exclusively to the deceased
Francisco Reyes Diaz; (6) Declaring the defendant Bernardita R.
Macariola, being the only legal and forced heir of her mother Felisa
Espiras, as the exclusive owner of one-half of each of Lots Nos.
4474, 4475, 4892, 5265, 4803, 4581, 4506; and the remaining onehalf (1/2) of each of said Lots Nos. 4474, 4475, 4892, 5265, 4803,
4581, 4506 and one-half (1/2) of one-fourth (1/4) of Lot No. 1154 as
belonging to the estate of Francisco Reyes Diaz; (7) Declaring Irene
Ondez to be the exclusive owner of one-half (1/2) of Lot No. 2304
and one-half (1/2) of one-fourth (1/4) of Lot No. 3416; the remaining
one-half (1/2) of Lot 2304 and the remaining one-half (1/2) of onefourth (1/4) of Lot No. 3416 as belonging to the estate of Francisco
Reyes Diaz; (8) Directing the division or partition of the estate of
Francisco Reyes Diaz in such a manner as to give or grant to Irene
Ondez, as surviving widow of Francisco Reyes Diaz, a hereditary
share of. one-twelfth (1/12) of the whole estate of Francisco Reyes
Diaz (Art. 996 in relation to Art. 892, par 2, New Civil Code), and the
remaining portion of the estate to be divided among the plaintiffs
Sinforosa R. Bales, Luz R. Bakunawa, Anacorita Reyes, Ruperto
Reyes, Adela Reyes, Priscilla Reyes and defendant Bernardita R.
Macariola, in such a way that the extent of the total share of plaintiff
Sinforosa R. Bales in the hereditary estate shall not exceed the
equivalent of two-fifth (2/5) of the total share of any or each of the
other plaintiffs and the defendant (Art. 983, New Civil Code), each of
the latter to receive equal shares from the hereditary estate, (Ramirez
vs. Bautista, 14 Phil. 528; Diancin vs. Bishop of Jaro, O.G. [3rd Ed.]
p. 33); (9) Directing the parties, within thirty days after this judgment
shall have become final to submit to this court, for approval a project
of partition of the hereditary estate in the proportion above indicated,
and in such manner as the parties may, by agreement, deemed
convenient and equitable to them taking into consideration the
location, kind, quality, nature and value of the properties involved;
(10) Directing the plaintiff Sinforosa R. Bales and defendant
Bernardita R. Macariola to pay the costs of this suit, in the proportion
of one-third (1/3) by the first named and two-thirds (2/3) by the
second named; and (I 1) Dismissing all other claims of the parties [pp
27-29 of Exh. C].

The decision in civil case 3010 became final for lack of an appeal, and on October
16, 1963, a project of partition was submitted to Judge Asuncion which is marked
Exh. A. Notwithstanding the fact that the project of partition was not signed by the
parties themselves but only by the respective counsel of plaintiffs and defendant,
Judge Asuncion approved it in his Order dated October 23, 1963, which for
convenience is quoted hereunder in full:
The parties, through their respective counsels, presented to this
Court for approval the following project of partition:
COMES NOW, the plaintiffs and the defendant in the above-entitled
case, to this Honorable Court respectfully submit the following Project
of Partition:
l. The whole of Lots Nos. 1154, 2304 and 4506 shall belong
exclusively to Bernardita Reyes Macariola;
2. A portion of Lot No. 3416 consisting of 2,373.49 square meters
along the eastern part of the lot shall be awarded likewise to
Bernardita R. Macariola;
3. Lots Nos. 4803, 4892 and 5265 shall be awarded to Sinforosa
Reyes Bales;
4. A portion of Lot No. 3416 consisting of 1,834.55 square meters
along the western part of the lot shall likewise be awarded to
Sinforosa Reyes-Bales;
5. Lots Nos. 4474 and 4475 shall be divided equally among Luz
Reyes Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes
and Priscilla Reyes in equal shares;
6. Lot No. 1184 and the remaining portion of Lot No. 3416 after taking
the portions awarded under item (2) and (4) above shall be awarded
to Luz Reyes Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela
Reyes and Priscilla Reyes in equal shares, provided, however that
the remaining portion of Lot No. 3416 shall belong exclusively to
Priscilla Reyes.
WHEREFORE, it is respectfully prayed that the Project of Partition
indicated above which is made in accordance with the decision of the
Honorable Court be approved.
Tacloban City, October 16, 1963.
(SGD) BONIFACIO RAMO Atty. for the Defendant Tacloban City

(SGD) ZOTICO A. TOLETE Atty. for the Plaintiff Tacloban City

While the Court thought it more desirable for all the parties to have
signed this Project of Partition, nevertheless, upon assurance of both
counsels of the respective parties to this Court that the Project of
Partition, as above- quoted, had been made after a conference and
agreement of the plaintiffs and the defendant approving the above
Project of Partition, and that both lawyers had represented to the
Court that they are given full authority to sign by themselves the
Project of Partition, the Court, therefore, finding the above-quoted
Project of Partition to be in accordance with law, hereby approves the
same. The parties, therefore, are directed to execute such papers,
documents or instrument sufficient in form and substance for the
vesting of the rights, interests and participations which were
adjudicated to the respective parties, as outlined in the Project of
Partition and the delivery of the respective properties adjudicated to
each one in view of said Project of Partition, and to perform such
other acts as are legal and necessary to effectuate the said Project of
Partition.
SO ORDERED.
Given in Tacloban City, this 23rd day of October, 1963.
(SGD) ELIAS B. ASUNCION Judge
EXH. B.
The above Order of October 23, 1963, was amended on November 11, 1963, only for
the purpose of giving authority to the Register of Deeds of the Province of Leyte to
issue the corresponding transfer certificates of title to the respective adjudicatees in
conformity with the project of partition (see Exh. U).
One of the properties mentioned in the project of partition was Lot 1184 or rather
one-half thereof with an area of 15,162.5 sq. meters. This lot, which according to the
decision was the exclusive property of the deceased Francisco Reyes, was
adjudicated in said project of partition to the plaintiffs Luz, Anacorita Ruperto, Adela,
and Priscilla all surnamed Reyes in equal shares, and when the project of partition
was approved by the trial court the adjudicatees caused Lot 1184 to be subdivided
into five lots denominated as Lot 1184-A to 1184-E inclusive (Exh. V).
Lot 1184-D was conveyed to Enriqueta D. Anota, a stenographer in Judge Asuncion's
court (Exhs. F, F-1 and V-1), while Lot 1184-E which had an area of 2,172.5556 sq.
meters was sold on July 31, 1964 to Dr. Arcadio Galapon (Exh. 2) who was issued
transfer certificate of title No. 2338 of the Register of Deeds of the city of Tacloban
(Exh. 12).

On March 6, 1965, Dr. Arcadio Galapon and his wife Sold a portion of Lot 1184-E
with an area of around 1,306 sq. meters to Judge Asuncion and his wife, Victoria S.
Asuncion (Exh. 11), which particular portion was declared by the latter for taxation
purposes (Exh. F).
On August 31, 1966, spouses Asuncion and spouses Galapon conveyed their
respective shares and interest in Lot 1184-E to "The Traders Manufacturing and
Fishing Industries Inc." (Exit 15 & 16). At the time of said sale the stockholders of the
corporation were Dominador Arigpa Tan, Humilia Jalandoni Tan, Jaime Arigpa Tan,
Judge Asuncion, and the latter's wife, Victoria S. Asuncion, with Judge Asuncion as
the President and Mrs. Asuncion as the secretary (Exhs. E-4 to E-7). The Articles of
Incorporation of "The Traders Manufacturing and Fishing Industries, Inc." which we
shall henceforth refer to as "TRADERS" were registered with the Securities and
Exchange Commission only on January 9, 1967 (Exh. E) [pp. 378-385, rec.].
Complainant Bernardita R. Macariola filed on August 9, 1968 the instant complaint dated August 6,
1968 alleging four causes of action, to wit: [1] that respondent Judge Asuncion violated Article 1491,
paragraph 5, of the New Civil Code in acquiring by purchase a portion of Lot No. 1184-E which was
one of those properties involved in Civil Case No. 3010 decided by him; [2] that he likewise violated
Article 14, paragraphs I and 5 of the Code of Commerce, Section 3, paragraph H, of R.A. 3019,
otherwise known as the Anti-Graft and Corrupt Practices Act, Section 12, Rule XVIII of the Civil
Service Rules, and Canon 25 of the Canons of Judicial Ethics, by associating himself with the
Traders Manufacturing and Fishing Industries, Inc., as a stockholder and a ranking officer while he
was a judge of the Court of First Instance of Leyte; [3] that respondent was guilty of coddling an
impostor and acted in disregard of judicial decorum by closely fraternizing with a certain Dominador
Arigpa Tan who openly and publicly advertised himself as a practising attorney when in truth and in
fact his name does not appear in the Rolls of Attorneys and is not a member of the Philippine Bar;
and [4] that there was a culpable defiance of the law and utter disregard for ethics by respondent
Judge (pp. 1-7, rec.).
Respondent Judge Asuncion filed on September 24, 1968 his answer to which a reply was filed on
October 16, 1968 by herein complainant. In Our resolution of October 28, 1968, We referred this
case to then Justice Cecilia Muoz Palma of the Court of Appeals, for investigation, report and
recommendation. After hearing, the said Investigating Justice submitted her report dated May 27,
1971 recommending that respondent Judge should be reprimanded or warned in connection with the
first cause of action alleged in the complaint, and for the second cause of action, respondent should
be warned in case of a finding that he is prohibited under the law to engage in business. On the third
and fourth causes of action, Justice Palma recommended that respondent Judge be exonerated.
The records also reveal that on or about November 9 or 11, 1968 (pp. 481, 477, rec.), complainant
herein instituted an action before the Court of First Instance of Leyte, entitled "Bernardita R.
Macariola, plaintiff, versus Sinforosa R. Bales, et al., defendants," which was docketed as Civil Case
No. 4235, seeking the annulment of the project of partition made pursuant to the decision in Civil
Case No. 3010 and the two orders issued by respondent Judge approving the same, as well as the
partition of the estate and the subsequent conveyances with damages. It appears, however, that
some defendants were dropped from the civil case. For one, the case against Dr. Arcadio Galapon

was dismissed because he was no longer a real party in interest when Civil Case No. 4234 was
filed, having already conveyed on March 6, 1965 a portion of lot 1184-E to respondent Judge and on
August 31, 1966 the remainder was sold to the Traders Manufacturing and Fishing Industries, Inc.
Similarly, the case against defendant Victoria Asuncion was dismissed on the ground that she was
no longer a real party in interest at the time the aforesaid Civil Case No. 4234 was filed as the
portion of Lot 1184 acquired by her and respondent Judge from Dr. Arcadio Galapon was already
sold on August 31, 1966 to the Traders Manufacturing and Fishing industries, Inc. Likewise, the
cases against defendants Serafin P. Ramento, Catalina Cabus, Ben Barraza Go, Jesus Perez,
Traders Manufacturing and Fishing Industries, Inc., Alfredo R. Celestial and Pilar P. Celestial,
Leopoldo Petilla and Remedios Petilla, Salvador Anota and Enriqueta Anota and Atty. Zotico A.
Tolete were dismissed with the conformity of complainant herein, plaintiff therein, and her counsel.
On November 2, 1970, Judge Jose D. Nepomuceno of the Court of First Instance of Leyte, who was
directed and authorized on June 2, 1969 by the then Secretary (now Minister) of Justice and now
Minister of National Defense Juan Ponce Enrile to hear and decide Civil Case No. 4234, rendered a
decision, the dispositive portion of which reads as follows:
A. IN THE CASE AGAINST JUDGE ELIAS B. ASUNCION
(1) declaring that only Branch IV of the Court of First Instance of Leyte has
jurisdiction to take cognizance of the issue of the legality and validity of the Project of
Partition [Exhibit "B"] and the two Orders [Exhibits "C" and "C- 3"] approving the
partition;
(2) dismissing the complaint against Judge Elias B. Asuncion;
(3) adjudging the plaintiff, Mrs. Bernardita R. Macariola to pay defendant Judge Elias
B. Asuncion,
(a) the sum of FOUR HUNDRED THOUSAND PESOS [P400,000.00]
for moral damages;
(b) the sum of TWO HUNDRED THOUSAND PESOS [P200,000.001
for exemplary damages;
(c) the sum of FIFTY THOUSAND PESOS [P50,000.00] for nominal
damages; and
(d) he sum of TEN THOUSAND PESOS [PI0,000.00] for Attorney's
Fees.
B. IN THE CASE AGAINST THE DEFENDANT MARIQUITA
VILLASIN, FOR HERSELF AND FOR THE HEIRS OF THE
DECEASED GERARDO VILLASIN

(1) Dismissing the complaint against the defendants Mariquita Villasin and the heirs
of the deceased Gerardo Villasin;
(2) Directing the plaintiff to pay the defendants Mariquita Villasin and the heirs of
Gerardo Villasin the cost of the suit.
C. IN THE CASE AGAINST THE DEFENDANT SINFOROSA R.
BALES, ET AL., WHO WERE PLAINTIFFS IN CIVIL CASE NO. 3010

(1) Dismissing the complaint against defendants Sinforosa R. Bales, Adela R. Herrer,
Priscilla R. Solis, Luz R. Bakunawa, Anacorita R. Eng and Ruperto O. Reyes.
D. IN THE CASE AGAINST DEFENDANT BONIFACIO RAMO
(1) Dismissing the complaint against Bonifacio Ramo;
(2) Directing the plaintiff to pay the defendant Bonifacio Ramo the cost of the suit.
SO ORDERED [pp. 531-533, rec.]
It is further disclosed by the record that the aforesaid decision was elevated to the Court of Appeals
upon perfection of the appeal on February 22, 1971.
I
WE find that there is no merit in the contention of complainant Bernardita R. Macariola, under her
first cause of action, that respondent Judge Elias B. Asuncion violated Article 1491, paragraph 5, of
the New Civil Code in acquiring by purchase a portion of Lot No. 1184-E which was one of those
properties involved in Civil Case No. 3010. 'That Article provides:
Article 1491. The following persons cannot acquire by purchase, even at a public or
judicial action, either in person or through the mediation of another:
xxx xxx xxx
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and
other officers and employees connected with the administration of justice, the
property and rights in litigation or levied upon an execution before the court within
whose jurisdiction or territory they exercise their respective functions; this prohibition
includes the act of acquiring by assignment and shall apply to lawyers, with respect
to the property and rights which may be the object of any litigation in which they may
take part by virtue of their profession [emphasis supplied].
The prohibition in the aforesaid Article applies only to the sale or assignment of the property which is
the subject of litigation to the persons disqualified therein. WE have already ruled that "... for the

prohibition to operate, the sale or assignment of the property must take place during the pendency of
the litigation involving the property" (The Director of Lands vs. Ababa et al., 88 SCRA 513, 519
[1979], Rosario vda. de Laig vs. Court of Appeals, 86 SCRA 641, 646 [1978]).
In the case at bar, when the respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E,
the decision in Civil Case No. 3010 which he rendered on June 8, 1963 was already final because
none of the parties therein filed an appeal within the reglementary period; hence, the lot in question
was no longer subject of the litigation. Moreover, at the time of the sale on March 6, 1965,
respondent's order dated October 23, 1963 and the amended order dated November 11,
1963 approving the October 16, 1963 project of partition made pursuant to the June 8, 1963
decision, had long become final for there was no appeal from said orders.
Furthermore, respondent Judge did not buy the lot in question on March 6, 1965 directly from the
plaintiffs in Civil Case No. 3010 but from Dr. Arcadio Galapon who earlier purchased on July 31,
1964 Lot 1184-E from three of the plaintiffs, namely, Priscilla Reyes, Adela Reyes, and Luz R.
Bakunawa after the finality of the decision in Civil Case No. 3010. It may be recalled that Lot 1184 or
more specifically one-half thereof was adjudicated in equal shares to Priscilla Reyes, Adela Reyes,
Luz Bakunawa, Ruperto Reyes and Anacorita Reyes in the project of partition, and the same was
subdivided into five lots denominated as Lot 1184-A to 1184-E. As aforestated, Lot 1184-E was sold
on July 31, 1964 to Dr. Galapon for which he was issued TCT No. 2338 by the Register of Deeds of
Tacloban City, and on March 6, 1965 he sold a portion of said lot to respondent Judge and his wife
who declared the same for taxation purposes only. The subsequent sale on August 31, 1966 by
spouses Asuncion and spouses Galapon of their respective shares and interest in said Lot 1184-E to
the Traders Manufacturing and Fishing Industries, Inc., in which respondent was the president and
his wife was the secretary, took place long after the finality of the decision in Civil Case No. 3010 and
of the subsequent two aforesaid orders therein approving the project of partition.
While it appears that complainant herein filed on or about November 9 or 11, 1968 an action before
the Court of First Instance of Leyte docketed as Civil Case No. 4234, seeking to annul the project of
partition and the two orders approving the same, as well as the partition of the estate and the
subsequent conveyances, the same, however, is of no moment.
The fact remains that respondent Judge purchased on March 6, 1965 a portion of Lot 1184-E from
Dr. Arcadio Galapon; hence, after the finality of the decision which he rendered on June 8, 1963 in
Civil Case No. 3010 and his two questioned orders dated October 23, 1963 and November 11, 1963.
Therefore, the property was no longer subject of litigation.
The subsequent filing on November 9, or 11, 1968 of Civil Case No. 4234 can no longer alter,
change or affect the aforesaid facts that the questioned sale to respondent Judge, now Court of
Appeals Justice, was effected and consummated long after the finality of the aforesaid decision or
orders.
Consequently, the sale of a portion of Lot 1184-E to respondent Judge having taken place over one
year after the finality of the decision in Civil Case No. 3010 as well as the two orders approving the
project of partition, and not during the pendency of the litigation, there was no violation of paragraph
5, Article 1491 of the New Civil Code.

It is also argued by complainant herein that the sale on July 31, 1964 of Lot 1184-E to Dr. Arcadio
Galapon by Priscilla Reyes, Adela Reyes and Luz R. Bakunawa was only a mere scheme to conceal
the illegal and unethical transfer of said lot to respondent Judge as a consideration for the approval
of the project of partition. In this connection, We agree with the findings of the Investigating Justice
thus:
And so we are now confronted with this all-important question whether or not the
acquisition by respondent of a portion of Lot 1184-E and the subsequent transfer of
the whole lot to "TRADERS" of which respondent was the President and his wife the
Secretary, was intimately related to the Order of respondent approving the project of
partition, Exh. A.
Respondent vehemently denies any interest or participation in the transactions
between the Reyeses and the Galapons concerning Lot 1184-E, and he insists that
there is no evidence whatsoever to show that Dr. Galapon had acted, in the purchase
of Lot 1184-E, in mediation for him and his wife. (See p. 14 of Respondent's
Memorandum).
xxx xxx xxx
On this point, I agree with respondent that there is no evidence in the record showing
that Dr. Arcadio Galapon acted as a mere "dummy" of respondent in acquiring Lot
1184-E from the Reyeses. Dr. Galapon appeared to this investigator as a respectable
citizen, credible and sincere, and I believe him when he testified that he bought Lot
1184-E in good faith and for valuable consideration from the Reyeses without any
intervention of, or previous understanding with Judge Asuncion (pp. 391- 394, rec.).
On the contention of complainant herein that respondent Judge acted illegally in approving the
project of partition although it was not signed by the parties, We quote with approval the findings of
the Investigating Justice, as follows:
1. I agree with complainant that respondent should have required the signature of the
parties more particularly that of Mrs. Macariola on the project of partition submitted to
him for approval; however, whatever error was committed by respondent in that
respect was done in good faith as according to Judge Asuncion he was assured by
Atty. Bonifacio Ramo, the counsel of record of Mrs. Macariola, That he was
authorized by his client to submit said project of partition, (See Exh. B and tsn p. 24,
January 20, 1969). While it is true that such written authority if there was any, was
not presented by respondent in evidence, nor did Atty. Ramo appear to corroborate
the statement of respondent, his affidavit being the only one that was presented as
respondent's Exh. 10, certain actuations of Mrs. Macariola lead this investigator to
believe that she knew the contents of the project of partition, Exh. A, and that she
gave her conformity thereto. I refer to the following documents:
1) Exh. 9 Certified true copy of OCT No. 19520 covering Lot 1154 of the Tacloban
Cadastral Survey in which the deceased Francisco Reyes holds a "1/4 share" (Exh.

9-a). On tills certificate of title the Order dated November 11, 1963, (Exh. U)
approving the project of partition was duly entered and registered on November 26,
1963 (Exh. 9-D);
2) Exh. 7 Certified copy of a deed of absolute sale executed by Bernardita Reyes
Macariola onOctober 22, 1963, conveying to Dr. Hector Decena the one-fourth share
of the late Francisco Reyes-Diaz in Lot 1154. In this deed of sale the vendee stated
that she was the absolute owner of said one-fourth share, the same having been
adjudicated to her as her share in the estate of her father Francisco Reyes Diaz as
per decision of the Court of First Instance of Leyte under case No. 3010 (Exh. 7-A).
The deed of sale was duly registered and annotated at the back of OCT 19520 on
December 3, 1963 (see Exh. 9-e).
In connection with the abovementioned documents it is to be noted that in the project
of partition dated October 16, 1963, which was approved by respondent on October
23, 1963, followed by an amending Order on November 11, 1963, Lot 1154 or rather
1/4 thereof was adjudicated to Mrs. Macariola. It is this 1/4 share in Lot 1154 which
complainant sold to Dr. Decena on October 22, 1963, several days after the
preparation of the project of partition.
Counsel for complainant stresses the view, however, that the latter sold her onefourth share in Lot 1154 by virtue of the decision in Civil Case 3010 and not because
of the project of partition, Exh. A. Such contention is absurd because from the
decision, Exh. C, it is clear that one-half of one- fourth of Lot 1154 belonged to the
estate of Francisco Reyes Diaz while the other half of said one-fourth was the share
of complainant's mother, Felisa Espiras; in other words, the decision did not
adjudicate the whole of the one-fourth of Lot 1154 to the herein complainant (see
Exhs. C-3 & C-4). Complainant became the owner of the entire one-fourth of Lot
1154 only by means of the project of partition, Exh. A. Therefore, if Mrs. Macariola
sold Lot 1154 on October 22, 1963, it was for no other reason than that she was wen
aware of the distribution of the properties of her deceased father as per Exhs. A and
B. It is also significant at this point to state that Mrs. Macariola admitted during the
cross-examination that she went to Tacloban City in connection with the sale of Lot
1154 to Dr. Decena (tsn p. 92, November 28, 1968) from which we can deduce that
she could not have been kept ignorant of the proceedings in civil case 3010 relative
to the project of partition.
Complainant also assails the project of partition because according to her the
properties adjudicated to her were insignificant lots and the least valuable.
Complainant, however, did not present any direct and positive evidence to prove the
alleged gross inequalities in the choice and distribution of the real properties when
she could have easily done so by presenting evidence on the area, location, kind, the
assessed and market value of said properties. Without such evidence there is
nothing in the record to show that there were inequalities in the distribution of the
properties of complainant's father (pp. 386389, rec.).

Finally, while it is. true that respondent Judge did not violate paragraph 5, Article 1491 of the New
Civil Code in acquiring by purchase a portion of Lot 1184-E which was in litigation in his court, it was,
however, improper for him to have acquired the same. He should be reminded of Canon 3 of the
Canons of Judicial Ethics which requires that: "A judge's official conduct should be free from the
appearance of impropriety, and his personal behavior, not only upon the bench and in the
performance of judicial duties, but also in his everyday life, should be beyond reproach." And as
aptly observed by the Investigating Justice: "... it was unwise and indiscreet on the part of
respondent to have purchased or acquired a portion of a piece of property that was or had been in
litigation in his court and caused it to be transferred to a corporation of which he and his wife were
ranking officers at the time of such transfer. One who occupies an exalted position in the judiciary
has the duty and responsibility of maintaining the faith and trust of the citizenry in the courts of
justice, so that not only must he be truly honest and just, but his actuations must be such as not give
cause for doubt and mistrust in the uprightness of his administration of justice. In this particular case
of respondent, he cannot deny that the transactions over Lot 1184-E are damaging and render his
actuations open to suspicion and distrust. Even if respondent honestly believed that Lot 1184-E was
no longer in litigation in his court and that he was purchasing it from a third person and not from the
parties to the litigation, he should nonetheless have refrained from buying it for himself and
transferring it to a corporation in which he and his wife were financially involved, to avoid possible
suspicion that his acquisition was related in one way or another to his official actuations in civil case
3010. The conduct of respondent gave cause for the litigants in civil case 3010, the lawyers
practising in his court, and the public in general to doubt the honesty and fairness of his actuations
and the integrity of our courts of justice" (pp. 395396, rec.).
II
With respect to the second cause of action, the complainant alleged that respondent Judge violated
paragraphs 1 and 5, Article 14 of the Code of Commerce when he associated himself with the
Traders Manufacturing and Fishing Industries, Inc. as a stockholder and a ranking officer, said
corporation having been organized to engage in business. Said Article provides that:
Article 14 The following cannot engage in commerce, either in person or by proxy,
nor can they hold any office or have any direct, administrative, or financial
intervention in commercial or industrial companies within the limits of the districts,
provinces, or towns in which they discharge their duties:
1. Justices of the Supreme Court, judges and officials of the department of public
prosecution in active service. This provision shall not be applicable to mayors,
municipal judges, and municipal prosecuting attorneys nor to those who by chance
are temporarily discharging the functions of judge or prosecuting attorney.
xxx xxx xxx
5. Those who by virtue of laws or special provisions may not engage in commerce in
a determinate territory.

It is Our considered view that although the aforestated provision is incorporated in the Code of
Commerce which is part of the commercial laws of the Philippines, it, however, partakes of the
nature of a political law as it regulates the relationship between the government and certain public
officers and employees, like justices and judges.
Political Law has been defined as that branch of public law which deals with the organization and
operation of the governmental organs of the State and define the relations of the state with the
inhabitants of its territory (People vs. Perfecto, 43 Phil. 887, 897 [1922]). It may be recalled that
political law embraces constitutional law, law of public corporations, administrative law including the
law on public officers and elections. Specifically, Article 14 of the Code of Commerce partakes more
of the nature of an administrative law because it regulates the conduct of certain public officers and
employees with respect to engaging in business: hence, political in essence.
It is significant to note that the present Code of Commerce is the Spanish Code of Commerce of
1885, with some modifications made by the "Commission de Codificacion de las Provincias de
Ultramar," which was extended to the Philippines by the Royal Decree of August 6, 1888, and took
effect as law in this jurisdiction on December 1, 1888.
Upon the transfer of sovereignty from Spain to the United States and later on from the United States
to the Republic of the Philippines, Article 14 of this Code of Commerce must be deemed to have
been abrogated because where there is change of sovereignty, the political laws of the former
sovereign, whether compatible or not with those of the new sovereign, are automatically abrogated,
unless they are expressly re-enacted by affirmative act of the new sovereign.
Thus, We held in Roa vs. Collector of Customs (23 Phil. 315, 330, 311 [1912]) that:
By well-settled public law, upon the cession of territory by one nation to another,
either following a conquest or otherwise, ... those laws which are political in their
nature and pertain to the prerogatives of the former government immediately cease
upon the transfer of sovereignty. (Opinion, Atty. Gen., July 10, 1899).
While municipal laws of the newly acquired territory not in conflict with the, laws of
the new sovereign continue in force without the express assent or affirmative act of
the conqueror, the political laws do not. (Halleck's Int. Law, chap. 34, par. 14).
However, such political laws of the prior sovereignty as are not in conflict with the
constitution or institutions of the new sovereign, may be continued in force if the
conqueror shall so declare by affirmative act of the commander-in-chief during the
war, or by Congress in time of peace. (Ely's Administrator vs. United States, 171 U.S.
220, 43 L. Ed. 142). In the case of American and Ocean Ins. Cos. vs. 356 Bales of
Cotton (1 Pet. [26 U.S.] 511, 542, 7 L. Ed. 242), Chief Justice Marshall said:
On such transfer (by cession) of territory, it has never been held that
the relations of the inhabitants with each other undergo any change.
Their relations with their former sovereign are dissolved, and new
relations are created between them and the government which has
acquired their territory. The same act which transfers their country,

transfers the allegiance of those who remain in it; and the law which
may be denominated political, is necessarily changed, although that
which regulates the intercourse and general conduct of individuals,
remains in force, until altered by the newly- created power of the
State.
Likewise, in People vs. Perfecto (43 Phil. 887, 897 [1922]), this Court stated that: "It is a general
principle of the public law that on acquisition of territory the previous political relations of the ceded
region are totally abrogated. "
There appears no enabling or affirmative act that continued the effectivity of the aforestated
provision of the Code of Commerce after the change of sovereignty from Spain to the United States
and then to the Republic of the Philippines. Consequently, Article 14 of the Code of Commerce has
no legal and binding effect and cannot apply to the respondent, then Judge of the Court of First
Instance, now Associate Justice of the Court of Appeals.
It is also argued by complainant herein that respondent Judge violated paragraph H, Section 3 of
Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, which provides
that:
Sec. 3. Corrupt practices of public officers. In addition to acts or omissions of
public officers already penalized by existing law, the following shall constitute corrupt
practices of any public officer and are hereby declared to be unlawful:
xxx xxx xxx
(h) Directly or indirectly having financial or pecuniary interest in any
business, contract or transaction in connection with which he
intervenes or takes part in his official capacity, or in which he is
prohibited by the Constitution or by any Iaw from having any interest.
Respondent Judge cannot be held liable under the aforestated paragraph because there is no
showing that respondent participated or intervened in his official capacity in the business or
transactions of the Traders Manufacturing and Fishing Industries, Inc. In the case at bar, the
business of the corporation in which respondent participated has obviously no relation or connection
with his judicial office. The business of said corporation is not that kind where respondent intervenes
or takes part in his capacity as Judge of the Court of First Instance. As was held in one case
involving the application of Article 216 of the Revised Penal Code which has a similar prohibition on
public officers against directly or indirectly becoming interested in any contract or business in which it
is his official duty to intervene, "(I)t is not enough to be a public official to be subject to this crime; it is
necessary that by reason of his office, he has to intervene in said contracts or transactions; and,
hence, the official who intervenes in contracts or transactions which have no relation to his office
cannot commit this crime.' (People vs. Meneses, C.A. 40 O.G. 11th Supp. 134, cited by Justice
Ramon C. Aquino; Revised Penal Code, p. 1174, Vol. 11 [1976]).

It does not appear also from the records that the aforesaid corporation gained any undue advantage
in its business operations by reason of respondent's financial involvement in it, or that the
corporation benefited in one way or another in any case filed by or against it in court. It is undisputed
that there was no case filed in the different branches of the Court of First Instance of Leyte in which
the corporation was either party plaintiff or defendant except Civil Case No. 4234 entitled "Bernardita
R. Macariola, plaintiff, versus Sinforosa O. Bales, et al.,"wherein the complainant herein sought to
recover Lot 1184-E from the aforesaid corporation. It must be noted, however, that Civil Case No.
4234 was filed only on November 9 or 11, 1968 and decided on November 2, 1970 by CFI Judge
Jose D. Nepomuceno when respondent Judge was no longer connected with the corporation, having
disposed of his interest therein on January 31, 1967.
Furthermore, respondent is not liable under the same paragraph because there is no provision in
both the 1935 and 1973 Constitutions of the Philippines, nor is there an existing law expressly
prohibiting members of the Judiciary from engaging or having interest in any lawful business.
It may be pointed out that Republic Act No. 296, as amended, also known as the Judiciary Act of
1948, does not contain any prohibition to that effect. As a matter of fact, under Section 77 of said
law, municipal judges may engage in teaching or other vocation not involving the practice of law after
office hours but with the permission of the district judge concerned.
Likewise, Article 14 of the Code of Commerce which prohibits judges from engaging in commerce is,
as heretofore stated, deemed abrogated automatically upon the transfer of sovereignty from Spain to
America, because it is political in nature.
Moreover, the prohibition in paragraph 5, Article 1491 of the New Civil Code against the purchase by
judges of a property in litigation before the court within whose jurisdiction they perform their duties,
cannot apply to respondent Judge because the sale of the lot in question to him took place after the
finality of his decision in Civil Case No. 3010 as well as his two orders approving the project of
partition; hence, the property was no longer subject of litigation.
In addition, although Section 12, Rule XVIII of the Civil Service Rules made pursuant to the Civil
Service Act of 1959 prohibits an officer or employee in the civil service from engaging in any private
business, vocation, or profession or be connected with any commercial, credit, agricultural or
industrial undertaking without a written permission from the head of department, the same, however,
may not fall within the purview of paragraph h, Section 3 of the Anti-Graft and Corrupt Practices Act
because the last portion of said paragraph speaks of a prohibition by the Constitution or law on any
public officer from having any interest in any business and not by a mere administrative rule or
regulation. Thus, a violation of the aforesaid rule by any officer or employee in the civil service, that
is, engaging in private business without a written permission from the Department Head may not
constitute graft and corrupt practice as defined by law.
On the contention of complainant that respondent Judge violated Section 12, Rule XVIII of the Civil
Service Rules, We hold that the Civil Service Act of 1959 (R.A. No. 2260) and the Civil Service Rules
promulgated thereunder, particularly Section 12 of Rule XVIII, do not apply to the members of the
Judiciary. Under said Section 12: "No officer or employee shall engage directly in any private

business, vocation, or profession or be connected with any commercial, credit, agricultural or

industrial undertaking without a written permission from the Head of Department ..."
It must be emphasized at the outset that respondent, being a member of the Judiciary, is covered by
Republic Act No. 296, as amended, otherwise known as the Judiciary Act of 1948 and by Section 7,
Article X, 1973 Constitution.
Under Section 67 of said law, the power to remove or dismiss judges was then vested in the
President of the Philippines, not in the Commissioner of Civil Service, and only on two grounds,
namely, serious misconduct and inefficiency, and upon the recommendation of the Supreme Court,
which alone is authorized, upon its own motion, or upon information of the Secretary (now Minister)
of Justice to conduct the corresponding investigation. Clearly, the aforesaid section defines the
grounds and prescribes the special procedure for the discipline of judges.
And under Sections 5, 6 and 7, Article X of the 1973 Constitution, only the Supreme Court can
discipline judges of inferior courts as well as other personnel of the Judiciary.
It is true that under Section 33 of the Civil Service Act of 1959: "The Commissioner may, for ...
violation of the existing Civil Service Law and rules or of reasonable office regulations, or in the
interest of the service, remove any subordinate officer or employee from the service, demote him in
rank, suspend him for not more than one year without pay or fine him in an amount not exceeding
six months' salary." Thus, a violation of Section 12 of Rule XVIII is a ground for disciplinary action
against civil service officers and employees.
However, judges cannot be considered as subordinate civil service officers or employees subject to
the disciplinary authority of the Commissioner of Civil Service; for, certainly, the Commissioner is not
the head of the Judicial Department to which they belong. The Revised Administrative Code (Section
89) and the Civil Service Law itself state that the Chief Justice is the department head of the
Supreme Court (Sec. 20, R.A. No. 2260) [1959]); and under the 1973 Constitution, the Judiciary is
the only other or second branch of the government (Sec. 1, Art. X, 1973 Constitution). Besides, a
violation of Section 12, Rule XVIII cannot be considered as a ground for disciplinary action against
judges because to recognize the same as applicable to them, would be adding another ground for
the discipline of judges and, as aforestated, Section 67 of the Judiciary Act recognizes only two
grounds for their removal, namely, serious misconduct and inefficiency.
Moreover, under Section 16(i) of the Civil Service Act of 1959, it is the Commissioner of Civil Service
who has original and exclusive jurisdiction "(T)o decide, within one hundred twenty days, after
submission to it, all administrative cases against permanent officers and employees in the
competitive service, and, except as provided by law, to have final authority to pass upon their
removal, separation, and suspension and upon all matters relating to the conduct, discipline, and
efficiency of such officers and employees; and prescribe standards, guidelines and regulations
governing the administration of discipline" (emphasis supplied). There is no question that a judge
belong to the non-competitive or unclassified service of the government as a Presidential appointee
and is therefore not covered by the aforesaid provision. WE have already ruled that "... in interpreting
Section 16(i) of Republic Act No. 2260, we emphasized that only permanent officers and employees
who belong to the classified service come under the exclusive jurisdiction of the Commissioner of

Civil Service" (Villaluz vs. Zaldivar, 15 SCRA 710,713 [1965], Ang-Angco vs. Castillo, 9 SCRA 619
[1963]).
Although the actuation of respondent Judge in engaging in private business by joining the Traders
Manufacturing and Fishing Industries, Inc. as a stockholder and a ranking officer, is not violative of
the provissions of Article 14 of the Code of Commerce and Section 3(h) of the Anti-Graft and Corrupt
Practices Act as well as Section 12, Rule XVIII of the Civil Service Rules promulgated pursuant to
the Civil Service Act of 1959, the impropriety of the same is clearly unquestionable because Canon
25 of the Canons of Judicial Ethics expressly declares that:
A judge should abstain from making personal investments in enterprises which are
apt to be involved in litigation in his court; and, after his accession to the bench, he
should not retain such investments previously made, longer than a period sufficient
to enable him to dispose of them without serious loss. It is desirable that he should,
so far as reasonably possible, refrain from all relations which would normally tend to
arouse the suspicion that such relations warp or bias his judgment, or prevent his
impartial attitude of mind in the administration of his judicial duties. ...
WE are not, however, unmindful of the fact that respondent Judge and his wife had withdrawn on
January 31, 1967 from the aforesaid corporation and sold their respective shares to third parties,
and it appears also that the aforesaid corporation did not in anyway benefit in any case filed by or
against it in court as there was no case filed in the different branches of the Court of First Instance of
Leyte from the time of the drafting of the Articles of Incorporation of the corporation on March 12,
1966, up to its incorporation on January 9, 1967, and the eventual withdrawal of respondent on
January 31, 1967 from said corporation. Such disposal or sale by respondent and his wife of their
shares in the corporation only 22 days after the incorporation of the corporation, indicates that
respondent realized that early that their interest in the corporation contravenes the aforesaid Canon
25. Respondent Judge and his wife therefore deserve the commendation for their immediate
withdrawal from the firm after its incorporation and before it became involved in any court litigation
III
With respect to the third and fourth causes of action, complainant alleged that respondent was guilty
of coddling an impostor and acted in disregard of judicial decorum, and that there was culpable
defiance of the law and utter disregard for ethics. WE agree, however, with the recommendation of
the Investigating Justice that respondent Judge be exonerated because the aforesaid causes of
action are groundless, and WE quote the pertinent portion of her report which reads as follows:
The basis for complainant's third cause of action is the claim that respondent
associated and closely fraternized with Dominador Arigpa Tan who openly and
publicly advertised himself as a practising attorney (see Exhs. I, I-1 and J) when in
truth and in fact said Dominador Arigpa Tan does not appear in the Roll of Attorneys
and is not a member of the Philippine Bar as certified to in Exh. K.
The "respondent denies knowing that Dominador Arigpa Tan was an "impostor" and
claims that all the time he believed that the latter was a bona fide member of the bar.

I see no reason for disbelieving this assertion of respondent. It has been shown by
complainant that Dominador Arigpa Tan represented himself publicly as an attorneyat-law to the extent of putting up a signboard with his name and the words "Attorneyat Law" (Exh. I and 1- 1) to indicate his office, and it was but natural for respondent
and any person for that matter to have accepted that statement on its face value.
"Now with respect to the allegation of complainant that respondent is guilty of
fraternizing with Dominador Arigpa Tan to the extent of permitting his wife to be a
godmother of Mr. Tan's child at baptism (Exh. M & M-1), that fact even if true did not
render respondent guilty of violating any canon of judicial ethics as long as his
friendly relations with Dominador A. Tan and family did not influence his official
actuations as a judge where said persons were concerned. There is no tangible
convincing proof that herein respondent gave any undue privileges in his court to
Dominador Arigpa Tan or that the latter benefitted in his practice of law from his
personal relations with respondent, or that he used his influence, if he had any, on
the Judges of the other branches of the Court to favor said Dominador Tan.
Of course it is highly desirable for a member of the judiciary to refrain as much as
possible from maintaining close friendly relations with practising attorneys and
litigants in his court so as to avoid suspicion 'that his social or business relations or
friendship constitute an element in determining his judicial course" (par. 30, Canons
of Judicial Ethics), but if a Judge does have social relations, that in itself would not
constitute a ground for disciplinary action unless it be clearly shown that his social
relations be clouded his official actuations with bias and partiality in favor of his
friends (pp. 403-405, rec.).
In conclusion, while respondent Judge Asuncion, now Associate Justice of the Court of Appeals, did
not violate any law in acquiring by purchase a parcel of land which was in litigation in his court and in
engaging in business by joining a private corporation during his incumbency as judge of the Court of
First Instance of Leyte, he should be reminded to be more discreet in his private and business
activities, because his conduct as a member of the Judiciary must not only be characterized with
propriety but must always be above suspicion.
WHEREFORE, THE RESPONDENT ASSOCIATE JUSTICE OF THE COURT OF APPEALS IS
HEREBY REMINDED TO BE MORE DISCREET IN HIS PRIVATE AND BUSINESS ACTIVITIES.
SO ORDERED.

[G.R. No. 149454. May 28, 2004]

BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. CASA

MONTESSORI
INTERNATIONALE
and
LEONARDO
T.
YABUT, respondents.

[G.R. No. 149507. May 28, 2004]

CASA MONTESSORI INTERNATIONALE, petitioner, vs. BANK OF THE

PHILIPPINE ISLANDS, respondent.
DECISION
PANGANIBAN, J.:

By the nature of its functions, a bank is required to take meticulous care of

the deposits of its clients, who have the right to expect high standards of
integrity and performance from it. Among its obligations in furtherance
thereof is knowing the signatures of its clients. Depositors are not estopped
from questioning wrongful withdrawals, even if they have failed to question
those errors in the statements sent by the bank to them for verification.
The Case
Before us are two Petitions for Review under Rule 45 of the Rules of
Court, assailing the March 23, 2001 Decision and the August 17,
2001 Resolution of the Court of Appeals (CA) in CA-GR CV No. 63561. The
decretal portion of the assailed Decision reads as follows:
[1]

[2]

[3]

WHEREFORE, upon the premises, the decision appealed from is AFFIRMED with
the modification that defendant bank [Bank of the Philippine Islands (BPI)] is held
liable only for one-half of the value of the forged checks in the amount
of P547,115.00 after deductions subject to REIMBURSEMENT from third party
defendant Yabut who is likewise ORDERED to pay the other half to plaintiff
corporation [Casa Montessori Internationale (CASA)].
[4]

The assailed
Reconsideration.

Resolution

denied

all

the

parties

The Facts
The facts of the case are narrated by the CA as follows:

Motions

for

On November 8, 1982, plaintiff CASA Montessori International opened Current

Account No. 0291-0081-01 with defendant BPI[,] with CASAs President Ms. Ma.
Carina C. Lebron as one of its authorized signatories.
[5]

In 1991, after conducting an investigation, plaintiff discovered that nine (9) of its
checks had been encashed by a certain Sonny D. Santos since 1990 in the total amount
of P782,000.00, on the following dates and amounts:
Check No.

Date

Amount

1. 839700

April 24, 1990

2. 839459

Nov. 2, 1990

110,500.00

3. 839609

Oct. 17, 1990

47,723.00

4. 839549

April 7, 1990

5. 839569

Sept. 23, 1990

52,277.00

6. 729149

Mar. 22, 1990

148,000.00

7. 729129

Mar. 16, 1990

51,015.00

8. 839684

Dec. 1, 1990

140,000.00

9. 729034

Mar. 2, 1990

98,985.00

Total --

43,400.00

90,700.00

782,600.00

[6]

It turned out that Sonny D. Santos with account at BPIs Greenbelt Branch
[was] a fictitious name used by third party defendant Leonardo T. Yabut who
worked as external auditor of CASA. Third party defendant voluntarily
admitted that he forged the signature of Ms. Lebron and encashed the checks.
The PNP Crime Laboratory conducted an examination of the nine (9)
checks and concluded that the handwritings thereon compared to the
standard signature of Ms. Lebron were not written by the latter.
On March 4, 1991, plaintiff filed the herein Complaint for Collection with
Damages against defendant bank praying that the latter be ordered to
reinstate the amount of P782,500.00 in the current and savings accounts of
the plaintiff with interest at 6% per annum.
[7]

On February 16, 1999, the RTC rendered the appealed decision in favor
of the plaintiff.
[8]

Ruling of the Court of Appeals

Modifying the Decision of the Regional Trial Court (RTC), the CA
apportioned the loss between BPI and CASA. The appellate court took into
account CASAs contributory negligence that resulted in the undetected
forgery. It then ordered Leonardo T. Yabut to reimburse BPI half the total
amount claimed; and CASA, the other half. It also disallowed attorneys fees
and moral and exemplary damages.
Hence, these Petitions.

[9]

Issues
In GR No. 149454, Petitioner BPI submits the following issues for our
consideration:
I. The Honorable Court of Appeals erred in deciding this case NOT in accord with
the applicable decisions of this Honorable Court to the effect that forgery cannot be
presumed; that it must be proved by clear, positive and convincing evidence; and that
the burden of proof lies on the party alleging the forgery.
II. The Honorable Court of Appeals erred in deciding this case not in accord with
applicable laws, in particular the Negotiable Instruments Law (NIL) which precludes
CASA, on account of its own negligence, from asserting its forgery claim against BPI,
specially taking into account the absence of any negligence on the part of BPI.
[10]

In GR No. 149507, Petitioner CASA submits the following issues:

1. The Honorable Court of Appeals erred when it ruled that there is no showing that
[BPI], although negligent, acted in bad faith x x x thus denying the prayer for the
award of attorneys fees, moral damages and exemplary damages to [CASA]. The
Honorable Court also erred when it did not order [BPI] to pay interest on the amounts
due to [CASA].
2. The Honorable Court of Appeals erred when it declared that [CASA] was likewise
negligent in the case at bar, thus warranting its conclusion that the loss in the amount
of P547,115.00 be apportioned between [CASA] and [BPI] x x x.
[11]

These issues can be narrowed down to three. First, was there forgery
under the Negotiable Instruments Law (NIL)? Second, were any of the parties
negligent and therefore precluded from setting up forgery as a
defense? Third, should moral and exemplary damages, attorneys fees, and
interest be awarded?
The Courts Ruling
The Petition in GR No. 149454 has no merit, while that in GR No. 149507
is partly meritorious.
First Issue:
Forged Signature Wholly Inoperative
Section 23 of the NIL provides:
Section 23. Forged signature; effect of. -- When a signature is forged or made
without the authority of the person whose signature it purports to be, it is wholly
inoperative, and no right x x x to enforce payment thereof against any party thereto,
can be acquired through or under such signature, unless the party against whom it is
sought to enforce such right is precluded from setting up the forgery or want of
authority.
[12]

Under this provision, a forged signature is a real or absolute defense,

and a person whose signature on a negotiable instrument is forged is
deemed to have never become a party thereto and to have never consented
to the contract that allegedly gave rise to it.
[13]

[14]

[15]

The counterfeiting of any writing, consisting in the signing of anothers

name with intent to defraud, is forgery.
[16]

In the present case, we hold that there was forgery of the drawers
signature on the check.
First, both the CA and the RTC found that Respondent Yabut himself
had voluntarily admitted, through an Affidavit, that he had forged the drawers
signature and encashed the checks. He never refuted these findings. That
he had been coerced into admission was not corroborated by any evidence on
record.
[17]

[18]

[19]

[21]

[20]

Second, the appellate and the trial courts also ruled that the PNP Crime
Laboratory, after its examination of the said checks, had concluded that the
handwritings thereon -- compared to the standard signature of the drawer -were not hers. This conclusion was the same as that in the Report that the
PNP Crime Laboratory had earlier issued to BPI -- the drawee bank -- upon
the latters request.
[22]

[23]

[24]

Indeed, we respect and affirm the RTCs factual findings, especially when
affirmed by the CA, since these are supported by substantial evidence on
record.
[25]

Voluntary Admission Not

Violative of Constitutional Rights
The voluntary admission of Yabut did not violate his constitutional rights
(1) on custodial investigation, and (2) against self-incrimination.
In the first place, he was not under custodial investigation. His Affidavit
was executed in private and before private individuals. The mantle of
protection under Section 12 of Article III of the 1987 Constitution covers only
the period from the time a person is taken into custody for investigation of his
possible participation in the commission of a crime or from the time he is
singled out as a suspect in the commission of a crime although not yet in
custody.
[26]

[27]

[28]

[29]

Therefore, to fall within the ambit of Section 12, quoted above, there must
be an arrest or a deprivation of freedom, with questions propounded on him
by the police authorities for the purpose of eliciting admissions, confessions,
or any information. The said constitutional provision does not apply to
spontaneous statements made in a voluntary manner whereby an individual
orally admits to authorship of a crime. What the Constitution proscribes is
the compulsory or coercive disclosure of incriminating facts.
[30]

[31]

[32]

[33]

Moreover, the right against self-incrimination under Section 17 of Article

III of the Constitution, which is ordinarily available only in criminal
prosecutions, extends to all other government proceedings -- including civil
actions, legislative investigations, and administrative proceedings that
possess a criminal or penal aspect -- but not to private investigations done
by private individuals. Even in such government proceedings, this right may
be waived, provided the waiver is certain; unequivocal; and intelligently,
understandingly and willingly made.
[34]

[35]

[36]

[37]

[38]

[39]

If in these government proceedings waiver is allowed, all the more is it so

in private investigations. It is of no moment that no criminal case has yet been
filed against Yabut. The filing thereof is entirely up to the appropriate
authorities or to the private individuals upon whom damage has been
caused. As we shall also explain later, it is not mandatory for CASA -- the
plaintiff below -- to implead Yabut in the civil case before the lower court.
Under these two constitutional provisions, [t]he Bill of Rights does not
concern itself with the relation between a private individual and another
individual. It governs the relationship between the individual and the
State. Moreover, the Bill of Rights is a charter of liberties for the individual
and a limitation upon the power of the [S]tate. These rights are guaranteed
to preclude the slightest coercion by the State that may lead the accused to
admit something false, not prevent him from freely and voluntarily telling the
truth.
[40]

[41]

[42]

[43]

[44]

Yabut is not an accused here. Besides, his mere invocation of the

aforesaid rights does not automatically entitle him to the constitutional
protection. When he freely and voluntarily executed his Affidavit, the State
was not even involved. Such Affidavit may therefore be admitted without
violating his constitutional rights while under custodial investigation and
against self-incrimination.
[45]

[46]

Clear, Positive and Convincing

Examination and Evidence
The examination by the PNP, though inconclusive, was nevertheless clear,
positive and convincing.
Forgery cannot be presumed. It must be established by clear, positive
and convincing evidence. Under the best evidence rule as applied to
documentary evidence like the checks in question, no secondary or
substitutionary evidence may inceptively be introduced, as the original writing
itself must be produced in court. But when, without bad faith on the part of
the offeror, the original checks have already been destroyed or cannot be
produced in court, secondary evidence may be produced. Without bad faith
on its part, CASA proved the loss or destruction of the original checks through
the Affidavit of the one person who knew of that fact -- Yabut. He clearly
admitted to discarding the paid checks to cover up his misdeed. In such a
situation, secondary evidence like microfilm copies may be introduced in
court.
[47]

[48]

[49]

[50]

[51]

[52]

The drawers signatures on the microfilm copies were compared with the
standard signature. PNP Document Examiner II Josefina de la Cruz testified
on cross-examination that two different persons had written them. Although
no conclusive report could be issued in the absence of the original checks,
she affirmed that her findings were 90 percent conclusive. According to
her, even if the microfilm copies were the only basis of comparison, the
differences were evident. Besides, the RTC explained that although the
Report was inconclusive, no conclusive report could have been given by the
PNP, anyway, in the absence of the original checks. This explanation is
valid; otherwise, no such report can ever be relied upon in court.
[53]

[54]

[55]

[56]

[57]

Even with respect to documentary evidence, the best evidence rule

applies only when the contents of a document -- such as the drawers
signature on a check -- is the subject of inquiry. As to whether the document
has been actually executed, this rule does not apply; and testimonial as well
as any other secondary evidence is admissible. Carina Lebron herself, the
drawers authorized signatory, testified many times that she had never signed
those checks. Her testimonial evidence is admissible; the checks have not
been actually executed. The genuineness of her handwriting is proved, not
only through the courts comparison of the questioned handwritings and
admittedly genuine specimens thereof, but above all by her.
[58]

[59]

[60]

The failure of CASA to produce the original checks neither gives rise to the
presumption of suppression of evidence nor creates an unfavorable
inference against it. Such failure merely authorizes the introduction of
secondary evidence in the form of microfilm copies. Of no consequence is
the fact that CASA did not present the signature card containing the
signatures with which those on the checks were compared. Specimens of
standard signatures are not limited to such a card. Considering that it was not
produced in evidence, other documents that bear the drawers authentic
signature may be resorted to. Besides, that card was in the possession of
BPI -- the adverse party.
[61]

[62]

[63]

[64]

[65]

We have held that without the original document containing the allegedly
forged signature, one cannot make a definitive comparison that would
establish forgery; and that a comparison based on a mere reproduction of
the document under controversy cannot produce reliable results. We have
also said, however, that a judge cannot merely rely on a handwriting experts
testimony, but should also exercise independent judgment in evaluating the
authenticity of a signature under scrutiny. In the present case, both the RTC
and the CA conducted independent examinations of the evidence presented
and arrived at reasonable and similar conclusions. Not only did they admit
[66]

[67]

[68]

[69]

secondary evidence; they also appositely considered testimonial and other

documentary evidence in the form of the Affidavit.
The best evidence rule admits of exceptions and, as we have discussed
earlier, the first of these has been met. The result of examining a questioned
handwriting, even with the aid of experts and scientific instruments, may be
inconclusive; but it is a non sequitur to say that such result is not clear,
positive and convincing. The preponderance of evidence required in this case
has been satisfied.
[70]

[71]

[72]

Second Issue:
Negligence Attributable to BPI Alone
Having established the forgery of the drawers signature, BPI -- the drawee -erred in making payments by virtue thereof. The forged signatures are wholly
inoperative, and CASA -- the drawer whose authorized signatures do not
appear on the negotiable instruments -- cannot be held liable thereon. Neither
is the latter precluded from setting up forgery as a real defense.
Clear Negligence
in Allowing Payment
Under a Forged Signature
We have repeatedly emphasized that, since the banking business is
impressed with public interest, of paramount importance thereto is the trust
and confidence of the public in general. Consequently, the highest degree of
diligence is expected, and high standards of integrity and performance are
even required, of it. By the nature of its functions, a bank is under obligation
to treat the accounts of its depositors with meticulous care, always having in
mind the fiduciary nature of their relationship.
[73]

[74]

[75]

[76]

[77]

BPI contends that it has a signature verification procedure, in which

checks are honored only when the signatures therein are verified to be the
same with or similar to the specimen signatures on the signature
cards. Nonetheless, it still failed to detect the eight instances of forgery. Its
negligence consisted in the omission of that degree of diligence required of a
bank. It cannot now feign ignorance, for very early on we have already ruled
that a bank is bound to know the signatures of its customers; and if it pays a
forged check, it must be considered as making the payment out of its own
funds, and cannot ordinarily charge the amount so paid to the account of the
[78]

depositor whose name was forged. In fact, BPI was the same bank involved
when we issued this ruling seventy years ago.
[79]

Neither Waiver nor Estoppel

Results from Failure to
Report Error in Bank Statement
The monthly statements issued by BPI to its clients contain a notice
worded as follows: If no error is reported in ten (10) days, account will be
correct. Such notice cannot be considered a waiver, even if CASA failed to
report the error. Neither is it estopped from questioning the mistake after the
lapse of the ten-day period.
[80]

This notice is a simple confirmation or circularization -- in accounting

parlance -- that requests client-depositors to affirm the accuracy of items
recorded by the banks. Its purpose is to obtain from the depositors a direct
corroboration of the correctness of their account balances with their respective
banks. Internal or external auditors of a bank use it as a basic audit
procedure -- the results of which its client-depositors are neither interested in
nor privy to -- to test the details of transactions and balances in the banks
records. Evidential matter obtained from independent sources outside a bank
only serves to provide greater assurance of reliability than that obtained
solely within it for purposes of an audit of its own financial statements, not
those of its client-depositors.
[81]

[82]

[83]

[84]

[85]

[86]

Furthermore, there is always the audit risk that errors would not be
detected for various reasons. One, materiality is a consideration in audit
planning; and two, the information obtained from such a substantive test is
merely presumptive and cannot be the basis of a valid waiver. BPI has no
right to impose a condition unilaterally and thereafter consider failure to meet
such condition a waiver. Neither may CASA renounce a right it has never
possessed.
[87]

[88]

[89]

[90]

[91]

Every right has subjects -- active and passive. While the active subject is
entitled to demand its enforcement, the passive one is duty-bound to suffer
such enforcement.
[92]

On the one hand, BPI could not have been an active subject, because it
could not have demanded from CASA a response to its notice. Besides, the
notice was a measly request worded as follows: Please examine x x x and
report x x x. CASA, on the other hand, could not have been a passive
[93]

subject, either, because it had no obligation to respond. It could -- as it did -choose not to respond.
Estoppel precludes individuals from denying or asserting, by their own
deed or representation, anything contrary to that established as the truth, in
legal contemplation. Our rules on evidence even make a juris et de
jure presumption that whenever one has, by ones own act or omission,
intentionally and deliberately led another to believe a particular thing to be true
and to act upon that belief, one cannot -- in any litigation arising from such act
or omission -- be permitted to falsify that supposed truth.
[94]

[95]

[96]

In the instant case, CASA never made any deed or representation that
misled BPI. The formers omission, if any, may only be deemed an innocent
mistake oblivious to the procedures and consequences of periodic
audits. Since its conduct was due to such ignorance founded upon an
innocent mistake, estoppel will not arise. A person who has no knowledge of
or consent to a transaction may not be estopped by it. Estoppel cannot be
sustained by mere argument or doubtful inference x x x. CASA is not barred
from questioning BPIs error even after the lapse of the period given in the
notice.
[97]

[98]

[99]

Loss Borne by
Proximate Source
of Negligence
For allowing payment on the checks to a wrongful and fictitious payee,
BPI -- the drawee bank -- becomes liable to its depositor-drawer. Since the
encashing bank is one of its branches, BPI can easily go after it and hold it
liable for reimbursement. It may not debit the drawers account and is not
entitled to indemnification from the drawer. In both law and equity, when
one of two innocent persons must suffer by the wrongful act of a third person,
the loss must be borne by the one whose negligence was the proximate
cause of the loss or who put it into the power of the third person to perpetrate
the wrong.
[100]

[101]

[102]

[103]

[104]

[105]

Proximate cause is determined by the facts of the case. It is that cause

which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which the result would not
have occurred.
[106]

[107]

Pursuant to its prime duty to ascertain well the genuineness of the

signatures of its client-depositors on checks being encashed, BPI is expected

to use reasonable business prudence. In the performance of that obligation,

it is bound by its internal banking rules and regulations that form part of the
contract it enters into with its depositors.
[108]

[109]

Unfortunately, it failed in that regard. First, Yabut was able to open a bank
account in one of its branches without privity; that is, without the proper
verification of his corresponding identification papers. Second, BPI was
unable to discover early on not only this irregularity, but also the marked
differences in the signatures on the checks and those on the signature
card. Third, despite the examination procedures it conducted, the Central
Verification Unit of the bank even passed off these evidently different
signatures as genuine. Without exercising the required prudence on its part,
BPI accepted and encashed the eight checks presented to it. As a result, it
proximately contributed to the fraud and should be held primarily liable for
the negligence of its officers or agents when acting within the course and
scope of their employment. It must bear the loss.
[110]

[111]

[112]

[113]

CASA Not Negligent

in Its Financial Affairs
In this jurisdiction, the negligence of the party invoking forgery is
recognized as an exception to the general rule that a forged signature is
wholly inoperative. Contrary to BPIs claim, however, we do not find CASA
negligent in handling its financial affairs. CASA, we stress, is not precluded
from setting up forgery as a real defense.
[114]

[115]

Role of Independent Auditor

The major purpose of an independent audit is to investigate and determine
objectively if the financial statements submitted for audit by a corporation have
been prepared in accordance with the appropriate financial reporting
practices of private entities. The relationship that arises therefrom is both
legal and moral. It begins with the execution of the engagement letter that
embodies the terms and conditions of the audit and ends with the fulfilled
expectation of the auditors ethical and competent performance in all
aspects of the audit.
[116]

[117]

[118]

[119]

[120]

The financial statements are representations of the client; but it is the

auditor who has the responsibility for the accuracy in the recording of data that
underlies their preparation, their form of presentation, and the

opinion expressed therein. The auditor does not assume the role of
employee or of management in the clients conduct of operations and is
never under the control or supervision of the client.
[121]

[122]

[123]

[124]

Yabut was an independent auditor hired by CASA. He handled its

monthly bank reconciliations and had access to all relevant documents and
checkbooks. In him was reposed the clients trust and confidence that he
would perform precisely those functions and apply the appropriate procedures
in accordance with generally accepted auditing standards. Yet he did not
meet these expectations. Nothing could be more horrible to a client than to
discover later on that the person tasked to detect fraud was the same one
who perpetrated it.
[125]

[126]

[127]

[128]

[129]

Cash Balances
Open to Manipulation
It is a non sequitur to say that the person who receives the monthly bank
statements, together with the cancelled checks and other debit/credit
memoranda, shall examine the contents and give notice of any discrepancies
within a reasonable time. Awareness is not equipollent with discernment.
Besides, in the internal accounting control system prudently installed by
CASA, it was Yabut who should examine those documents in order to
prepare the bank reconciliations. He owned his working papers, and his
output consisted of his opinion as well as the clients financial statements and
accompanying notes thereto. CASA had every right to rely solely upon his
output -- based on the terms of the audit engagement -- and could thus be
unwittingly duped into believing that everything was in order. Besides, [g]ood
faith is always presumed and it is the burden of the party claiming otherwise to
adduce clear and convincing evidence to the contrary.
[130]

[131]

[132]

[133]

Moreover, there was a time gap between the period covered by the bank
statement and the date of its actual receipt. Lebron personally received the
December 1990 bank statement only in January 1991 -- when she was also
informed of the forgery for the first time, after which she immediately
requested a stop payment order. She cannot be faulted for the late
detection of the forged December check. After all, the bank account with BPI
was not personal but corporate, and she could not be expected to monitor
closely all its finances. A preschool teacher charged with molding the minds
of the youth cannot be burdened with the intricacies or complexities of
corporate existence.
[134]

There is also a cutoff period such that checks issued during a given
month, but not presented for payment within that period, will not be reflected
therein. An experienced auditor with intent to defraud can easily conceal any
devious scheme from a client unwary of the accounting processes involved by
manipulating the cash balances on record -- especially when bank
transactions are numerous, large and frequent. CASA could only be blamed,
if at all, for its unintelligent choice in the selection and appointment of an
auditor -- a fault that is not tantamount to negligence.
[135]

Negligence is not presumed, but proven by whoever alleges it. Its mere
existence is not sufficient without proof that it, and no other cause, has
given rise to damages. In addition, this fault is common to, if not prevalent
among, small and medium-sized business entities, thus leading the
Professional Regulation Commission (PRC), through the Board of
Accountancy (BOA), to require today not only accreditation for the practice of
public accountancy, but also the registration of firms in the practice
thereof. In fact, among the attachments now required upon registration are
the code of good governance and a sworn statement on adequate and
effective training.
[136]

[137]

[138]

[139]

[140]

[141]

The missing checks were certainly reported by the bookkeeper to the

accountant -- her immediate supervisor -- and by the latter to the
auditor. However, both the accountant and the auditor, for reasons known
only to them, assured the bookkeeper that there were no irregularities.
[142]

[143]

The bookkeeper who had exclusive custody of the checkbooks did not
have to go directly to CASAs president or to BPI. Although she rightfully
reported the matter, neither an investigation was conducted nor a resolution of
it was arrived at, precisely because the person at the top of the helm was the
culprit. The vouchers, invoices and check stubs in support of all check
disbursements could be concealed or fabricated -- even in collusion -- and
management would still have no way to verify its cash accountabilities.
[144]

[145]

Clearly then, Yabut was able to perpetrate the wrongful act through no
fault of CASA. If auditors may be held liable for breach of contract and
negligence, with all the more reason may they be charged with the
perpetration of fraud upon an unsuspecting client. CASA had the discretion to
pursue BPI alone under the NIL, by reason of expediency or munificence or
both. Money paid under a mistake may rightfully be recovered, and under
such terms as the injured party may choose.
[146]

[147]

Third Issue:

Award of Monetary Claims

Moral Damages Denied
We deny CASAs claim for moral damages.
In the absence of a wrongful act or omission, or of fraud or bad faith,
moral damages cannot be awarded. The adverse result of an action does
not per se make the action wrongful, or the party liable for it. One may err, but
error alone is not a ground for granting such damages. While no proof of
pecuniary loss is necessary therefor -- with the amount to be awarded left to
the courts discretion -- the claimant must nonetheless satisfactorily prove
the existence of its factual basis and causal relation to the claimants act or
omission.
[148]

[149]

[150]

[151]

[152]

[153]

[154]

[155]

Regrettably, in this case CASA was unable to identify the particular

instance -- enumerated in the Civil Code -- upon which its claim for moral
damages is predicated. Neither bad faith nor negligence so gross that it
amounts to malice can be imputed to BPI. Bad faith, under the law, does
not simply connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong, a breach of
a known duty through some motive or interest or ill will that partakes of the
nature of fraud.
[156]

[157]

[158]

[159]

As a general rule, a corporation -- being an artificial person without

feelings, emotions and senses, and having existence only in legal
contemplation -- is not entitled to moral damages, because it cannot
experience physical suffering and mental anguish. However, for breach of
the fiduciary duty required of a bank, a corporate client may claim such
damages when its good reputation is besmirched by such breach, and social
humiliation results therefrom. CASA was unable to prove that BPI had
debased the good reputation of, and consequently caused incalculable
embarrassment to, the former. CASAs mere allegation or supposition thereof,
without any sufficient evidence on record, is not enough.
[160]

[161]

[162]

[163]

[164]

Exemplary Damages Also Denied

We also deny CASAs claim for exemplary damages.
Imposed by way of correction for the public good, exemplary damages
cannot be recovered as a matter of right. As we have said earlier, there is no
[165]

[166]

[167]

bad faith on the part of BPI for paying the checks of CASA upon forged
signatures. Therefore, the former cannot be said to have acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner. The latter, having no
right to moral damages, cannot demand exemplary damages.
[168]

[169]

Attorneys Fees Granted

Although it is a sound policy not to set a premium on the right to litigate,
we find that CASA is entitled to reasonable attorneys fees based on
factual, legal, and equitable justification.
[170]

[171]

When the act or omission of the defendant has compelled the plaintiff to
incur expenses to protect the latters interest, or where the court deems it
just and equitable, attorneys fees may be recovered. In the present case,
BPI persistently denied the claim of CASA under the NIL to recredit the latters
account for the value of the forged checks. This denial constrained CASA to
incur expenses and exert effort for more than ten years in order to protect its
corporate interest in its bank account. Besides, we have already cautioned
BPI on a similar act of negligence it had committed seventy years ago, but it
has remained unrelenting. Therefore, the Court deems it just and equitable to
grant ten percent (10%) of the total value adjudged to CASA as attorneys
fees.
[172]

[173]

[174]

Interest Allowed
For the failure of BPI to pay CASA upon demand and for compelling the
latter to resort to the courts to obtain payment, legal interest may be
adjudicated at the discretion of the Court, the same to run from the filing of
the Complaint. Since a court judgment is not a loan or a forbearance of
recovery, the legal interest shall be at six percent (6%) per annum. If the
obligation consists in the payment of a sum of money, and the debtor incurs in
delay, the indemnity for damages, there being no stipulation to the contrary,
shall be the payment of x x x legal interest, which is six percent per
annum. The actual base for its computation shall be on the amount finally
adjudged, compounded annually to make up for the cost of
money already lost to CASA.
[175]

[176]

[177]

[178]

[179]

[180]

[181]

Moreover, the failure of the CA to award interest does not prevent us from
granting it upon damages awarded for breach of contract. Because BPI
evidently breached its contract of deposit with CASA, we award interest in
[182]

addition to the total amount adjudged. Under Section 196 of the NIL, any
case not provided for shall be governed by the provisions of existing
legislation or, in default thereof, by the rules of the law merchant. Damages
are not provided for in the NIL. Thus, we resort to the Code of Commerce and
the Civil Code. Under Article 2 of the Code of Commerce, acts of commerce
shall be governed by its provisions and, in their absence, by the usages of
commerce generally observed in each place; and in the absence of both rules,
by those of the civil law. This law being silent, we look at Article 18 of the
Civil Code, which states: In matters which are governed by the Code of
Commerce and special laws, their deficiency shall be supplied by its
provisions. A perusal of these three statutes unmistakably shows that the
award of interest under our civil law is justified.
[183]

[184]

WHEREFORE, the Petition in GR No. 149454 is hereby DENIED, and that

in GR No. 149507 PARTLY GRANTED. The assailed Decision of the Court of
Appeals is AFFIRMED with modification: BPI is held liable for P547,115, the
total value of the forged checks less the amount already recovered by CASA
from Leonardo T. Yabut, plus interest at the legal rate of six percent (6%) per
annum -- compounded annually, from the filing of the complaint until paid in
full; and attorneys fees of ten percent (10%) thereof, subject to
reimbursement from Respondent Yabut for the entire amount, excepting
attorneys fees. Let a copy of this Decision be furnished the Board of
Accountancy of the Professional Regulation Commission for such action as it
may deem appropriate against Respondent Yabut. No costs.
SO ORDERED.
G.R. No. L-7995

May 31, 1957

LAO H. ICHONG, in his own behalf and in behalf of other alien residents, corporations and
partnerships adversely affected. by Republic Act No. 1180, petitioner,
vs.
JAIME HERNANDEZ, Secretary of Finance, and MARCELINO SARMIENTO, City Treasurer of
Manila,respondents.
Ozaeta, Lichauco and Picazo and Sycip, Quisumbing, Salazar and Associates for petitioner.
Office of the Solicitor General Ambrosio Padilla and Solicitor Pacifico P. de Castro for respondent
Secretary of Finance.
City Fiscal Eugenio Angeles and Assistant City Fiscal Eulogio S. Serrano for respondent City
Treasurer.
Dionisio Reyes as Amicus Curiae.
Marcial G. Mendiola as Amicus Curiae.
Emiliano R. Navarro as Amicus Curiae.
LABRADOR, J.:

I. The case and issue, in general

This Court has before it the delicate task of passing upon the validity and constitutionality of a
legislative enactment, fundamental and far-reaching in significance. The enactment poses questions
of due process, police power and equal protection of the laws. It also poses an important issue of
fact, that is whether the conditions which the disputed law purports to remedy really or actually exist.
Admittedly springing from a deep, militant, and positive nationalistic impulse, the law purports to
protect citizen and country from the alien retailer. Through it, and within the field of economy it
regulates, Congress attempts to translate national aspirations for economic independence and
national security, rooted in the drive and urge for national survival and welfare, into a concrete and
tangible measures designed to free the national retailer from the competing dominance of the alien,
so that the country and the nation may be free from a supposed economic dependence and
bondage. Do the facts and circumstances justify the enactment?
II. Pertinent provisions of Republic Act No. 1180
Republic Act No. 1180 is entitled "An Act to Regulate the Retail Business." In effect it nationalizes the
retail trade business. The main provisions of the Act are: (1) a prohibition against persons, not
citizens of the Philippines, and against associations, partnerships, or corporations the capital of
which are not wholly owned by citizens of the Philippines, from engaging directly or indirectly in the
retail trade; (2) an exception from the above prohibition in favor of aliens actually engaged in said
business on May 15, 1954, who are allowed to continue to engaged therein, unless their licenses are
forfeited in accordance with the law, until their death or voluntary retirement in case of natural
persons, and for ten years after the approval of the Act or until the expiration of term in case of
juridical persons; (3) an exception therefrom in favor of citizens and juridical entities of the United
States; (4) a provision for the forfeiture of licenses (to engage in the retail business) for violation of
the laws on nationalization, control weights and measures and labor and other laws relating to trade,
commerce and industry; (5) a prohibition against the establishment or opening by aliens actually
engaged in the retail business of additional stores or branches of retail business, (6) a provision
requiring aliens actually engaged in the retail business to present for registration with the proper
authorities a verified statement concerning their businesses, giving, among other matters, the nature
of the business, their assets and liabilities and their offices and principal offices of judicial entities;
and (7) a provision allowing the heirs of aliens now engaged in the retail business who die, to
continue such business for a period of six months for purposes of liquidation.
III. Grounds upon which petition is based-Answer thereto
Petitioner, for and in his own behalf and on behalf of other alien residents corporations and
partnerships adversely affected by the provisions of Republic Act. No. 1180, brought this action to
obtain a judicial declaration that said Act is unconstitutional, and to enjoin the Secretary of Finance
and all other persons acting under him, particularly city and municipal treasurers, from enforcing its
provisions. Petitioner attacks the constitutionality of the Act, contending that: (1) it denies to alien
residents the equal protection of the laws and deprives of their liberty and property without due
process of law ; (2) the subject of the Act is not expressed or comprehended in the title thereof; (3)
the Act violates international and treaty obligations of the Republic of the Philippines; (4) the
provisions of the Act against the transmission by aliens of their retail business thru hereditary
succession, and those requiring 100% Filipino capitalization for a corporation or entity to entitle it to
engage in the retail business, violate the spirit of Sections 1 and 5, Article XIII and Section 8 of
Article XIV of the Constitution.
In answer, the Solicitor-General and the Fiscal of the City of Manila contend that: (1) the Act was
passed in the valid exercise of the police power of the State, which exercise is authorized in the

Constitution in the interest of national economic survival; (2) the Act has only one subject embraced
in the title; (3) no treaty or international obligations are infringed; (4) as regards hereditary
succession, only the form is affected but the value of the property is not impaired, and the institution
of inheritance is only of statutory origin.
IV. Preliminary consideration of legal principles involved
a. The police power.
There is no question that the Act was approved in the exercise of the police power, but petitioner
claims that its exercise in this instance is attended by a violation of the constitutional requirements of
due process and equal protection of the laws. But before proceeding to the consideration and
resolution of the ultimate issue involved, it would be well to bear in mind certain basic and
fundamental, albeit preliminary, considerations in the determination of the ever recurrent conflict
between police power and the guarantees of due process and equal protection of the laws. What is
the scope of police power, and how are the due process and equal protection clauses related to it?
What is the province and power of the legislature, and what is the function and duty of the courts?
These consideration must be clearly and correctly understood that their application to the facts of the
case may be brought forth with clarity and the issue accordingly resolved.
It has been said the police power is so far - reaching in scope, that it has become almost impossible
to limit its sweep. As it derives its existence from the very existence of the State itself, it does not
need to be expressed or defined in its scope; it is said to be co-extensive with self-protection and
survival, and as such it is the most positive and active of all governmental processes, the most
essential, insistent and illimitable. Especially is it so under a modern democratic framework where
the demands of society and of nations have multiplied to almost unimaginable proportions; the field
and scope of police power has become almost boundless, just as the fields of public interest and
public welfare have become almost all-embracing and have transcended human foresight.
Otherwise stated, as we cannot foresee the needs and demands of public interest and welfare in this
constantly changing and progressive world, so we cannot delimit beforehand the extent or scope of
police power by which and through which the State seeks to attain or achieve interest or welfare. So
it is that Constitutions do not define the scope or extent of the police power of the State; what they
do is to set forth the limitations thereof. The most important of these are the due process clause and
the equal protection clause.
b. Limitations on police power.
The basic limitations of due process and equal protection are found in the following provisions of our
Constitution:
SECTION 1.(1) No person shall be deprived of life, liberty or property without due process of
law, nor any person be denied the equal protection of the laws. (Article III, Phil. Constitution)
These constitutional guarantees which embody the essence of individual liberty and freedom in
democracies, are not limited to citizens alone but are admittedly universal in their application, without
regard to any differences of race, of color, or of nationality. (Yick Wo vs. Hopkins, 30, L. ed. 220,
226.)
c. The, equal protection clause.

The equal protection of the law clause is against undue favor and individual or class privilege, as
well as hostile discrimination or the oppression of inequality. It is not intended to prohibit legislation,
which is limited either in the object to which it is directed or by territory within which is to operate. It
does not demand absolute equality among residents; it merely requires that all persons shall be
treated alike, under like circumstances and conditions both as to privileges conferred and liabilities
enforced. The equal protection clause is not infringed by legislation which applies only to those
persons falling within a specified class, if it applies alike to all persons within such class, and
reasonable grounds exists for making a distinction between those who fall within such class and
those who do not. (2 Cooley, Constitutional Limitations, 824-825.)
d. The due process clause.
The due process clause has to do with the reasonableness of legislation enacted in pursuance of the
police power. Is there public interest, a public purpose; is public welfare involved? Is the Act
reasonably necessary for the accomplishment of the legislature's purpose; is it not unreasonable,
arbitrary or oppressive? Is there sufficient foundation or reason in connection with the matter
involved; or has there not been a capricious use of the legislative power? Can the aims conceived
be achieved by the means used, or is it not merely an unjustified interference with private interest?
These are the questions that we ask when the due process test is applied.
The conflict, therefore, between police power and the guarantees of due process and equal
protection of the laws is more apparent than real. Properly related, the power and the guarantees
are supposed to coexist. The balancing is the essence or, shall it be said, the indispensable means
for the attainment of legitimate aspirations of any democratic society. There can be no absolute
power, whoever exercise it, for that would be tyranny. Yet there can neither be absolute liberty, for
that would mean license and anarchy. So the State can deprive persons of life, liberty and property,
provided there is due process of law; and persons may be classified into classes and groups,
provided everyone is given the equal protection of the law. The test or standard, as always, is
reason. The police power legislation must be firmly grounded on public interest and welfare, and a
reasonable relation must exist between purposes and means. And if distinction and classification has
been made, there must be a reasonable basis for said distinction.
e. Legislative discretion not subject to judicial review.
Now, in this matter of equitable balancing, what is the proper place and role of the courts? It must
not be overlooked, in the first place, that the legislature, which is the constitutional repository of
police power and exercises the prerogative of determining the policy of the State, is by force of
circumstances primarily the judge of necessity, adequacy or reasonableness and wisdom, of any law
promulgated in the exercise of the police power, or of the measures adopted to implement the public
policy or to achieve public interest. On the other hand, courts, although zealous guardians of
individual liberty and right, have nevertheless evinced a reluctance to interfere with the exercise of
the legislative prerogative. They have done so early where there has been a clear, patent or
palpable arbitrary and unreasonable abuse of the legislative prerogative. Moreover, courts are not
supposed to override legitimate policy, and courts never inquire into the wisdom of the law.
V. Economic problems sought to be remedied
With the above considerations in mind, we will now proceed to delve directly into the issue involved.
If the disputed legislation were merely a regulation, as its title indicates, there would be no question
that it falls within the legitimate scope of legislative power. But it goes further and prohibits a group of
residents, the aliens, from engaging therein. The problem becomes more complex because its

subject is a common, trade or occupation, as old as society itself, which from the immemorial has
always been open to residents, irrespective of race, color or citizenship.
a. Importance of retail trade in the economy of the nation.
In a primitive economy where families produce all that they consume and consume all that they
produce, the dealer, of course, is unknown. But as group life develops and families begin to live in
communities producing more than what they consume and needing an infinite number of things they
do not produce, the dealer comes into existence. As villages develop into big communities and
specialization in production begins, the dealer's importance is enhanced. Under modern conditions
and standards of living, in which man's needs have multiplied and diversified to unlimited extents
and proportions, the retailer comes as essential as the producer, because thru him the infinite variety
of articles, goods and needed for daily life are placed within the easy reach of consumers. Retail
dealers perform the functions of capillaries in the human body, thru which all the needed food and
supplies are ministered to members of the communities comprising the nation.
There cannot be any question about the importance of the retailer in the life of the community. He
ministers to the resident's daily needs, food in all its increasing forms, and the various little gadgets
and things needed for home and daily life. He provides his customers around his store with the rice
or corn, the fish, the salt, the vinegar, the spices needed for the daily cooking. He has cloths to sell,
even the needle and the thread to sew them or darn the clothes that wear out. The retailer, therefore,
from the lowly peddler, the owner of a small sari-sari store, to the operator of a department store or,
a supermarket is so much a part of day-to-day existence.
b. The alien retailer's trait.
The alien retailer must have started plying his trades in this country in the bigger centers of
population (Time there was when he was unknown in provincial towns and villages). Slowly but
gradually be invaded towns and villages; now he predominates in the cities and big centers of
population. He even pioneers, in far away nooks where the beginnings of community life appear,
ministering to the daily needs of the residents and purchasing their agricultural produce for sale in
the towns. It is an undeniable fact that in many communities the alien has replaced the native
retailer. He has shown in this trade, industry without limit, and the patience and forbearance of a
slave.
Derogatory epithets are hurled at him, but he laughs these off without murmur; insults of ill-bred and
insolent neighbors and customers are made in his face, but he heeds them not, and he forgets and
forgives. The community takes note of him, as he appears to be harmless and extremely useful.
c. Alleged alien control and dominance.
There is a general feeling on the part of the public, which appears to be true to fact, about the
controlling and dominant position that the alien retailer holds in the nation's economy. Food and
other essentials, clothing, almost all articles of daily life reach the residents mostly through him. In
big cities and centers of population he has acquired not only predominance, but apparent control
over distribution of almost all kinds of goods, such as lumber, hardware, textiles, groceries, drugs,
sugar, flour, garlic, and scores of other goods and articles. And were it not for some national
corporations like the Naric, the Namarco, the Facomas and the Acefa, his control over principal
foods and products would easily become full and complete.
Petitioner denies that there is alien predominance and control in the retail trade. In one breath it is
said that the fear is unfounded and the threat is imagined; in another, it is charged that the law is

merely the result of radicalism and pure and unabashed nationalism. Alienage, it is said, is not an
element of control; also so many unmanageable factors in the retail business make control virtually
impossible. The first argument which brings up an issue of fact merits serious consideration. The
others are matters of opinion within the exclusive competence of the legislature and beyond our
prerogative to pass upon and decide.
The best evidence are the statistics on the retail trade, which put down the figures in black and
white. Between the constitutional convention year (1935), when the fear of alien domination and
control of the retail trade already filled the minds of our leaders with fears and misgivings, and the
year of the enactment of the nationalization of the retail trade act (1954), official statistics
unmistakably point out to the ever-increasing dominance and control by the alien of the retail trade,
as witness the following tables:

Assets

Year and
Retailers
Nationality

No.Establishment
s

Pesos

Gross Sales

Per cent
Distributio
n

Pesos

Per cent
Distribution

1941
:

Filipino ..
........

106,671 200,323,13
8

55.82 174,181,92
4

51.74

Chinese
...........

15,356 118,348,692

32.98 148,813,23
9

44.21

Others ..
..........

1,646 40,187,090

11.20 13,630,239

4.05

Filipino ..
........

111,107 208,658,94
6

65.05 279,583,33
3

57.03

Chinese

13,774 106,156,21

33.56 205,701,13

41.96

1947
:

...........

Others ..
.........

354

8,761,260

.49

4,927,168

1.01

1948 (Census
:
)

Filipino ..
........

113,631 213,342,26
4

67.30 467,161,66
7

60.51

Chinese
..........

12,087 93,155,459

29.38 294,894,22
7

38.20

Others ..
........

422 10,514,675

Filipino ..
........

3.32

9,995,402

1.29

113,659 213,451,60
2

60.89 462,532,90
1

53.47

Chinese
..........

16,248 125,223,33
6

35.72 392,414,87
5

45.36

Others ..
........

486 12,056,365

3.39 10,078,364

1.17

Filipino ..

119,352 224,053,62

61.09 466,058,05

53.07

1949
:

1951
:

.......

Chinese
..........

Others ..
........

17,429 134,325,30
3

36.60 404,481,38
4

347

8,614,025

2.31

7,645,327

AVERAGE
ASSETS AND GROSS SALES PER ESTABLISHMENT

Year and Retailer's

Nationality

Item
Assets
(Pesos)

Gross
Sales
(Pesos)

1941:

1947:

Filipino .............................................

1,878

1,633

Chinese ............................................
..

7,707

9,691

Others ..............................................
.

24,415

8,281

46.06

87

1948:

Filipino .............................................

1,878

2,516

Chinese ...........................................

7,707

14,934

Others ..............................................

24,749

13,919

Filipino .............................................

1,878

4,111

Chinese ............................................
.

7,707

24,398

Others ..............................................

24,916

23,686

Filipino .............................................

1,878

4,069

Chinese ............................................
..

7,707

24,152

Others ..............................................

24,807

20,737

(Census)

1949:

1951:

Filipino .............................................

1,877

3,905

Chinese ............................................
.

7,707

33,207

Others ..............................................
.

24,824

22,033

(Estimated Assets and Gross Sales of Retail Establishments, By Year and Nationality of
Owners, Benchmark: 1948 Census, issued by the Bureau of Census and Statistics,
Department of Commerce and Industry; pp. 18-19 of Answer.)
The above statistics do not include corporations and partnerships, while the figures on Filipino
establishments already include mere market vendors, whose capital is necessarily small..
The above figures reveal that in percentage distribution of assests and gross sales, alien
participation has steadily increased during the years. It is true, of course, that Filipinos have the
edge in the number of retailers, but aliens more than make up for the numerical gap through their
assests and gross sales which average between six and seven times those of the very many Filipino
retailers. Numbers in retailers, here, do not imply superiority; the alien invests more capital, buys and
sells six to seven times more, and gains much more. The same official report, pointing out to the
known predominance of foreign elements in the retail trade, remarks that the Filipino retailers were
largely engaged in minor retailer enterprises. As observed by respondents, the native investment is
thinly spread, and the Filipino retailer is practically helpless in matters of capital, credit, price and
supply.
d. Alien control and threat, subject of apprehension in Constitutional convention.
It is this domination and control, which we believe has been sufficiently shown to exist, that is the
legislature's target in the enactment of the disputed nationalization would never have been adopted.
The framers of our Constitution also believed in the existence of this alien dominance and control
when they approved a resolution categorically declaring among other things, that "it is the sense of
the Convention that the public interest requires the nationalization of the retail trade; . . . ." (II Aruego,
The Framing of the Philippine Constitution, 662-663, quoted on page 67 of Petitioner.) That was
twenty-two years ago; and the events since then have not been either pleasant or comforting. Dean
Sinco of the University of the Philippines College of Law, commenting on the patrimony clause of the
Preamble opines that the fathers of our Constitution were merely translating the general
preoccupation of Filipinos "of the dangers from alien interests that had already brought under their
control the commercial and other economic activities of the country" (Sinco, Phil. Political Law, 10th
ed., p. 114); and analyzing the concern of the members of the constitutional convention for the
economic life of the citizens, in connection with the nationalistic provisions of the Constitution, he
says:
But there has been a general feeling that alien dominance over the economic life of the
country is not desirable and that if such a situation should remain, political independence

alone is no guarantee to national stability and strength. Filipino private capital is not big
enough to wrest from alien hands the control of the national economy. Moreover, it is but of
recent formation and hence, largely inexperienced, timid and hesitant. Under such
conditions, the government as the instrumentality of the national will, has to step in and
assume the initiative, if not the leadership, in the struggle for the economic freedom of the
nation in somewhat the same way that it did in the crusade for political freedom. Thus . . . it
(the Constitution) envisages an organized movement for the protection of the nation not only
against the possibilities of armed invasion but also against its economic subjugation by alien
interests in the economic field. (Phil. Political Law by Sinco, 10th ed., p. 476.)
Belief in the existence of alien control and predominance is felt in other quarters. Filipino
businessmen, manufacturers and producers believe so; they fear the dangers coming from alien
control, and they express sentiments of economic independence. Witness thereto is Resolution No.
1, approved on July 18, 1953, of the Fifth National convention of Filipino Businessmen, and a similar
resolution, approved on March 20, 1954, of the Second National Convention of Manufacturers and
Producers. The man in the street also believes, and fears, alien predominance and control; so our
newspapers, which have editorially pointed out not only to control but to alien stranglehold. We,
therefore, find alien domination and control to be a fact, a reality proved by official statistics, and felt
by all the sections and groups that compose the Filipino community.
e. Dangers of alien control and dominance in retail.
But the dangers arising from alien participation in the retail trade does not seem to lie in the
predominance alone; there is a prevailing feeling that such predominance may truly endanger the
national interest. With ample capital, unity of purpose and action and thorough organization, alien
retailers and merchants can act in such complete unison and concert on such vital matters as the
fixing of prices, the determination of the amount of goods or articles to be made available in the
market, and even the choice of the goods or articles they would or would not patronize or distribute,
that fears of dislocation of the national economy and of the complete subservience of national
economy and of the consuming public are not entirely unfounded. Nationals, producers and
consumers alike can be placed completely at their mercy. This is easily illustrated. Suppose an
article of daily use is desired to be prescribed by the aliens, because the producer or importer does
not offer them sufficient profits, or because a new competing article offers bigger profits for its
introduction. All that aliens would do is to agree to refuse to sell the first article, eliminating it from
their stocks, offering the new one as a substitute. Hence, the producers or importers of the
prescribed article, or its consumers, find the article suddenly out of the prescribed article, or its
consumers, find the article suddenly out of circulation. Freedom of trade is thus curtailed and free
enterprise correspondingly suppressed.
We can even go farther than theoretical illustrations to show the pernicious influences of alien
domination. Grave abuses have characterized the exercise of the retail trade by aliens. It is a fact
within judicial notice, which courts of justice may not properly overlook or ignore in the interests of
truth and justice, that there exists a general feeling on the part of the public that alien participation in
the retail trade has been attended by a pernicious and intolerable practices, the mention of a few of
which would suffice for our purposes; that at some time or other they have cornered the market of
essential commodities, like corn and rice, creating artificial scarcities to justify and enhance profits to
unreasonable proportions; that they have hoarded essential foods to the inconvenience and
prejudice of the consuming public, so much so that the Government has had to establish the
National Rice and Corn Corporation to save the public from their continuous hoarding practices and
tendencies; that they have violated price control laws, especially on foods and essential
commodities, such that the legislature had to enact a law (Sec. 9, Republic Act No. 1168),
authorizing their immediate and automatic deportation for price control convictions; that they have

secret combinations among themselves to control prices, cheating the operation of the law of supply
and demand; that they have connived to boycott honest merchants and traders who would not cater
or yield to their demands, in unlawful restraint of freedom of trade and enterprise. They are believed
by the public to have evaded tax laws, smuggled goods and money into and out of the land, violated
import and export prohibitions, control laws and the like, in derision and contempt of lawful authority.
It is also believed that they have engaged in corrupting public officials with fabulous bribes, indirectly
causing the prevalence of graft and corruption in the Government. As a matter of fact appeals to
unscrupulous aliens have been made both by the Government and by their own lawful diplomatic
representatives, action which impliedly admits a prevailing feeling about the existence of many of the
above practices.
The circumstances above set forth create well founded fears that worse things may come in the
future. The present dominance of the alien retailer, especially in the big centers of population,
therefore, becomes a potential source of danger on occasions of war or other calamity. We do not
have here in this country isolated groups of harmless aliens retailing goods among nationals; what
we have are well organized and powerful groups that dominate the distribution of goods and
commodities in the communities and big centers of population. They owe no allegiance or loyalty to
the State, and the State cannot rely upon them in times of crisis or emergency. While the national
holds his life, his person and his property subject to the needs of his country, the alien may even
become the potential enemy of the State.
f. Law enacted in interest of national economic survival and security.
We are fully satisfied upon a consideration of all the facts and circumstances that the disputed law is
not the product of racial hostility, prejudice or discrimination, but the expression of the legitimate
desire and determination of the people, thru their authorized representatives, to free the nation from
the economic situation that has unfortunately been saddled upon it rightly or wrongly, to its
disadvantage. The law is clearly in the interest of the public, nay of the national security itself, and
indisputably falls within the scope of police power, thru which and by which the State insures its
existence and security and the supreme welfare of its citizens.
VI. The Equal Protection Limitation
a. Objections to alien participation in retail trade. The next question that now poses solution is,
Does the law deny the equal protection of the laws? As pointed out above, the mere fact of alienage
is the root and cause of the distinction between the alien and the national as a trader. The alien
resident owes allegiance to the country of his birth or his adopted country; his stay here is for
personal convenience; he is attracted by the lure of gain and profit. His aim or purpose of stay, we
admit, is neither illegitimate nor immoral, but he is naturally lacking in that spirit of loyalty and
enthusiasm for this country where he temporarily stays and makes his living, or of that spirit of
regard, sympathy and consideration for his Filipino customers as would prevent him from taking
advantage of their weakness and exploiting them. The faster he makes his pile, the earlier can the
alien go back to his beloved country and his beloved kin and countrymen. The experience of the
country is that the alien retailer has shown such utter disregard for his customers and the people on
whom he makes his profit, that it has been found necessary to adopt the legislation, radical as it may
seem.
Another objection to the alien retailer in this country is that he never really makes a genuine
contribution to national income and wealth. He undoubtedly contributes to general distribution, but
the gains and profits he makes are not invested in industries that would help the country's economy
and increase national wealth. The alien's interest in this country being merely transient and

temporary, it would indeed be ill-advised to continue entrusting the very important function of retail
distribution to his hands.
The practices resorted to by aliens in the control of distribution, as already pointed out above, their
secret manipulations of stocks of commodities and prices, their utter disregard of the welfare of their
customers and of the ultimate happiness of the people of the nation of which they are mere guests,
which practices, manipulations and disregard do not attend the exercise of the trade by the
nationals, show the existence of real and actual, positive and fundamental differences between an
alien and a national which fully justify the legislative classification adopted in the retail trade
measure. These differences are certainly a valid reason for the State to prefer the national over the
alien in the retail trade. We would be doing violence to fact and reality were we to hold that no
reason or ground for a legitimate distinction can be found between one and the other.
b. Difference in alien aims and purposes sufficient basis for distinction.
The above objectionable characteristics of the exercise of the retail trade by the aliens, which are
actual and real, furnish sufficient grounds for legislative classification of retail traders into nationals
and aliens. Some may disagree with the wisdom of the legislature's classification. To this we answer,
that this is the prerogative of the law-making power. Since the Court finds that the classification is
actual, real and reasonable, and all persons of one class are treated alike, and as it cannot be said
that the classification is patently unreasonable and unfounded, it is in duty bound to declare that the
legislature acted within its legitimate prerogative and it can not declare that the act transcends the
limit of equal protection established by the Constitution.
Broadly speaking, the power of the legislature to make distinctions and classifications among
persons is not curtailed or denied by the equal protection of the laws clause. The legislative power
admits of a wide scope of discretion, and a law can be violative of the constitutional limitation only
when the classification is without reasonable basis. In addition to the authorities we have earlier
cited, we can also refer to the case of Linsey vs. Natural Carbonic Fas Co. (1911), 55 L. ed., 369,
which clearly and succinctly defined the application of equal protection clause to a law sought to be
voided as contrary thereto:
. . . . "1. The equal protection clause of the Fourteenth Amendment does not take from the
state the power to classify in the adoption of police laws, but admits of the exercise of the
wide scope of discretion in that regard, and avoids what is done only when it is without any
reasonable basis, and therefore is purely arbitrary. 2. A classification having some
reasonable basis does not offend against that clause merely because it is not made with
mathematical nicety, or because in practice it results in some inequality. 3. When the
classification in such a law is called in question, if any state of facts reasonably can be
conceived that would sustain it, the existence of that state of facts at the time the law was
enacted must be assumed. 4. One who assails the classification in such a law must carry the
burden of showing that it does not rest upon any reasonable basis but is essentially
arbitrary."
c. Authorities recognizing citizenship as basis for classification.
The question as to whether or not citizenship is a legal and valid ground for classification has
already been affirmatively decided in this jurisdiction as well as in various courts in the United States.
In the case of Smith Bell & Co. vs. Natividad, 40 Phil. 136, where the validity of Act No. 2761 of the
Philippine Legislature was in issue, because of a condition therein limiting the ownership of vessels
engaged in coastwise trade to corporations formed by citizens of the Philippine Islands or the United
States, thus denying the right to aliens, it was held that the Philippine Legislature did not violate the

equal protection clause of the Philippine Bill of Rights. The legislature in enacting the law had as
ultimate purpose the encouragement of Philippine shipbuilding and the safety for these Islands from
foreign interlopers. We held that this was a valid exercise of the police power, and all presumptions
are in favor of its constitutionality. In substance, we held that the limitation of domestic ownership of
vessels engaged in coastwise trade to citizens of the Philippines does not violate the equal
protection of the law and due process or law clauses of the Philippine Bill of Rights. In rendering said
decision we quoted with approval the concurring opinion of Justice Johnson in the case of Gibbons
vs. Ogden, 9 Wheat., I, as follows:
"Licensing acts, in fact, in legislation, are universally restraining acts; as, for example, acts
licensing gaming houses, retailers of spirituous liquors, etc. The act, in this instance, is
distinctly of that character, and forms part of an extensive system, the object of which is to
encourage American shipping, and place them on an equal footing with the shipping of other
nations. Almost every commercial nation reserves to its own subjects a monopoly of its
coasting trade; and a countervailing privilege in favor of American shipping is contemplated,
in the whole legislation of the United States on this subject. It is not to give the vessel an
American character, that the license is granted; that effect has been correctly attributed to
the act of her enrollment. But it is to confer on her American privileges, as contra
distinguished from foreign; and to preserve the Government from fraud by foreigners; in
surreptitiously intruding themselves into the American commercial marine, as well as frauds
upon the revenue in the trade coastwise, that this whole system is projected."
The rule in general is as follows:
Aliens are under no special constitutional protection which forbids a classification otherwise
justified simply because the limitation of the class falls along the lines of nationality. That
would be requiring a higher degree of protection for aliens as a class than for similar classes
than for similar classes of American citizens. Broadly speaking, the difference in status
between citizens and aliens constitutes a basis for reasonable classification in the exercise
of police power. (2 Am., Jur. 468-469.)
In Commonwealth vs. Hana, 81 N. E. 149 (Massachusetts, 1907), a statute on the licensing of
hawkers and peddlers, which provided that no one can obtain a license unless he is, or has declared
his intention, to become a citizen of the United States, was held valid, for the following reason: It
may seem wise to the legislature to limit the business of those who are supposed to have regard for
the welfare, good order and happiness of the community, and the court cannot question this
judgment and conclusion. In Bloomfield vs. State, 99 N. E. 309 (Ohio, 1912), a statute which
prevented certain persons, among them aliens, from engaging in the traffic of liquors, was found not
to be the result of race hatred, or in hospitality, or a deliberate purpose to discriminate, but was
based on the belief that an alien cannot be sufficiently acquainted with "our institutions and our life
as to enable him to appreciate the relation of this particular business to our entire social fabric", and
was not, therefore, invalid. In Ohio ex rel. Clarke vs. Deckebach, 274 U. S. 392, 71 L. ed. 115
(1926), the U.S. Supreme Court had under consideration an ordinance of the city of Cincinnati
prohibiting the issuance of licenses (pools and billiard rooms) to aliens. It held that plainly irrational
discrimination against aliens is prohibited, but it does not follow that alien race and allegiance may
not bear in some instances such a relation to a legitimate object of legislation as to be made the
basis of permitted classification, and that it could not state that the legislation is clearly wrong; and
that latitude must be allowed for the legislative appraisement of local conditions and for the
legislative choice of methods for controlling an apprehended evil. The case of State vs. Carrol, 124
N. E. 129 (Ohio, 1919) is a parallel case to the one at bar. In Asakura vs. City of Seattle, 210 P. 30
(Washington, 1922), the business of pawn brooking was considered as having tendencies injuring
public interest, and limiting it to citizens is within the scope of police power. A similar statute denying

aliens the right to engage in auctioneering was also sustained in Wright vs. May, L.R.A., 1915 P. 151
(Minnesota, 1914). So also in Anton vs. Van Winkle, 297 F. 340 (Oregon, 1924), the court said that
aliens are judicially known to have different interests, knowledge, attitude, psychology and loyalty,
hence the prohibitions of issuance of licenses to them for the business of pawnbroker, pool, billiard,
card room, dance hall, is not an infringement of constitutional rights. In Templar vs. Michigan State
Board of Examiners, 90 N.W. 1058 (Michigan, 1902), a law prohibiting the licensing of aliens as
barbers was held void, but the reason for the decision was the court's findings that the exercise of
the business by the aliens does not in any way affect the morals, the health, or even the
convenience of the community. In Takahashi vs. Fish and Game Commission, 92 L. ed. 1479 (1947),
a California statute banning the issuance of commercial fishing licenses to person ineligible to
citizenship was held void, because the law conflicts with Federal power over immigration, and
because there is no public interest in the mere claim of ownership of the waters and the fish in them,
so there was no adequate justification for the discrimination. It further added that the law was the
outgrowth of antagonism toward the persons of Japanese ancestry. However, two Justices dissented
on the theory that fishing rights have been treated traditionally as natural resources. In Fraser vs.
McConway & Tarley Co., 82 Fed. 257 (Pennsylvania, 1897), a state law which imposed a tax on
every employer of foreign-born unnaturalized male persons over 21 years of age, was declared void
because the court found that there was no reason for the classification and the tax was an arbitrary
deduction from the daily wage of an employee.
d. Authorities contra explained.
It is true that some decisions of the Federal court and of the State courts in the United States hold
that the distinction between aliens and citizens is not a valid ground for classification. But in this
decision the laws declared invalid were found to be either arbitrary, unreasonable or capricious, or
were the result or product of racial antagonism and hostility, and there was no question of public
interest involved or pursued. In Yu Cong Eng vs. Trinidad, 70 L. ed. 1059 (1925), the United States
Supreme Court declared invalid a Philippine law making unlawful the keeping of books of account in
any language other than English, Spanish or any other local dialect, but the main reasons for the
decisions are: (1) that if Chinese were driven out of business there would be no other system of
distribution, and (2) that the Chinese would fall prey to all kinds of fraud, because they would be
deprived of their right to be advised of their business and to direct its conduct. The real reason for
the decision, therefore, is the court's belief that no public benefit would be derived from the
operations of the law and on the other hand it would deprive Chinese of something indispensable for
carrying on their business. In Yick Wo vs. Hopkins, 30 L. ed 220 (1885) an ordinance conferring
powers on officials to withhold consent in the operation of laundries both as to persons and place,
was declared invalid, but the court said that the power granted was arbitrary, that there was no
reason for the discrimination which attended the administration and implementation of the law, and
that the motive thereof was mere racial hostility. In State vs. Montgomery, 47 A. 165 (Maine, 1900), a
law prohibiting aliens to engage as hawkers and peddlers was declared void, because the
discrimination bore no reasonable and just relation to the act in respect to which the classification
was proposed.
The case at bar is radically different, and the facts make them so. As we already have said, aliens do
not naturally possess the sympathetic consideration and regard for the customers with whom they
come in daily contact, nor the patriotic desire to help bolster the nation's economy, except in so far
as it enhances their profit, nor the loyalty and allegiance which the national owes to the land. These
limitations on the qualifications of the aliens have been shown on many occasions and instances,
especially in times of crisis and emergency. We can do no better than borrow the language of Anton
vs. Van Winkle, 297 F. 340, 342, to drive home the reality and significance of the distinction between
the alien and the national, thus:

. . . . It may be judicially known, however, that alien coming into this country are without the
intimate knowledge of our laws, customs, and usages that our own people have. So it is
likewise known that certain classes of aliens are of different psychology from our fellow
countrymen. Furthermore, it is natural and reasonable to suppose that the foreign born,
whose allegiance is first to their own country, and whose ideals of governmental environment
and control have been engendered and formed under entirely different regimes and political
systems, have not the same inspiration for the public weal, nor are they as well disposed
toward the United States, as those who by citizenship, are a part of the government itself.
Further enlargement, is unnecessary. I have said enough so that obviously it cannot be
affirmed with absolute confidence that the Legislature was without plausible reason for
making the classification, and therefore appropriate discriminations against aliens as it
relates to the subject of legislation. . . . .
VII. The Due Process of Law Limitation.
a. Reasonability, the test of the limitation; determination by legislature decisive.
We now come to due process as a limitation on the exercise of the police power. It has been stated
by the highest authority in the United States that:
. . . . And the guaranty of due process, as has often been held, demands only that the law
shall not be unreasonable, arbitrary or capricious, and that the means selected shall have a
real and substantial relation to the subject sought to be attained. . . . .
xxx

xxx

xxx

So far as the requirement of due process is concerned and in the absence of other
constitutional restriction a state is free to adopt whatever economic policy may reasonably be
deemed to promote public welfare, and to enforce that policy by legislation adapted to its
purpose. The courts are without authority either to declare such policy, or, when it is declared
by the legislature, to override it. If the laws passed are seen to have a reasonable relation to
a proper legislative purpose, and are neither arbitrary nor discriminatory, the requirements of
due process are satisfied, and judicial determination to that effect renders a court functus
officio. . . . (Nebbia vs. New York, 78 L. ed. 940, 950, 957.)
Another authority states the principle thus:
. . . . Too much significance cannot be given to the word "reasonable" in considering the
scope of the police power in a constitutional sense, for the test used to determine the
constitutionality of the means employed by the legislature is to inquire whether the restriction
it imposes on rights secured to individuals by the Bill of Rights are unreasonable, and not
whether it imposes any restrictions on such rights. . . .
xxx

xxx

xxx

. . . . A statute to be within this power must also be reasonable in its operation upon the
persons whom it affects, must not be for the annoyance of a particular class, and must not
be unduly oppressive. (11 Am. Jur. Sec. 302., 1:1)- 1074-1075.)
In the case of Lawton vs. Steele, 38 L. ed. 385, 388. it was also held:

. . . . To justify the state in thus interposing its authority in behalf of the public, it must appear,
first, that the interests of the public generally, as distinguished from those of a particular
class, require such interference; and second, that the means are reasonably necessary for
the accomplishment of the purpose, and not unduly oppressive upon individuals. . . .
Prata Undertaking Co. vs. State Board of Embalming, 104 ALR, 389, 395, fixes this test of
constitutionality:
In determining whether a given act of the Legislature, passed in the exercise of the police
power to regulate the operation of a business, is or is not constitutional, one of the first
questions to be considered by the court is whether the power as exercised has a sufficient
foundation in reason in connection with the matter involved, or is an arbitrary, oppressive,
and capricious use of that power, without substantial relation to the health, safety, morals,
comfort, and general welfare of the public.
b. Petitioner's argument considered.
Petitioner's main argument is that retail is a common, ordinary occupation, one of those privileges
long ago recognized as essential to the orderly pursuant of happiness by free men; that it is a gainful
and honest occupation and therefore beyond the power of the legislature to prohibit and penalized.
This arguments overlooks fact and reality and rests on an incorrect assumption and premise, i.e.,
that in this country where the occupation is engaged in by petitioner, it has been so engaged by him,
by the alien in an honest creditable and unimpeachable manner, without harm or injury to the
citizens and without ultimate danger to their economic peace, tranquility and welfare. But the
Legislature has found, as we have also found and indicated, that the privilege has been so grossly
abused by the alien, thru the illegitimate use of pernicious designs and practices, that he now enjoys
a monopolistic control of the occupation and threatens a deadly stranglehold on the nation's
economy endangering the national security in times of crisis and emergency.
The real question at issue, therefore, is not that posed by petitioner, which overlooks and ignores the
facts and circumstances, but this, Is the exclusion in the future of aliens from the retail trade
unreasonable. Arbitrary capricious, taking into account the illegitimate and pernicious form and
manner in which the aliens have heretofore engaged therein? As thus correctly stated the answer is
clear. The law in question is deemed absolutely necessary to bring about the desired legislative
objective, i.e., to free national economy from alien control and dominance. It is not necessarily
unreasonable because it affects private rights and privileges (11 Am. Jur. pp. 1080-1081.) The test of
reasonableness of a law is the appropriateness or adequacy under all circumstances of the means
adopted to carry out its purpose into effect (Id.) Judged by this test, disputed legislation, which is not
merely reasonable but actually necessary, must be considered not to have infringed the
constitutional limitation of reasonableness.
The necessity of the law in question is explained in the explanatory note that accompanied the bill,
which later was enacted into law:
This bill proposes to regulate the retail business. Its purpose is to prevent persons who are
not citizens of the Philippines from having a strangle hold upon our economic life. If the
persons who control this vital artery of our economic life are the ones who owe no allegiance
to this Republic, who have no profound devotion to our free institutions, and who have no
permanent stake in our people's welfare, we are not really the masters of our destiny. All
aspects of our life, even our national security, will be at the mercy of other people.

In seeking to accomplish the foregoing purpose, we do not propose to deprive persons who
are not citizens of the Philippines of their means of livelihood. While this bill seeks to take
away from the hands of persons who are not citizens of the Philippines a power that can be
wielded to paralyze all aspects of our national life and endanger our national security it
respects existing rights.
The approval of this bill is necessary for our national survival.
If political independence is a legitimate aspiration of a people, then economic independence is none
the less legitimate. Freedom and liberty are not real and positive if the people are subject to the
economic control and domination of others, especially if not of their own race or country. The
removal and eradication of the shackles of foreign economic control and domination, is one of the
noblest motives that a national legislature may pursue. It is impossible to conceive that legislation
that seeks to bring it about can infringe the constitutional limitation of due process. The attainment of
a legitimate aspiration of a people can never be beyond the limits of legislative authority.
c. Law expressly held by Constitutional Convention to be within the sphere of legislative action.
The framers of the Constitution could not have intended to impose the constitutional restrictions of
due process on the attainment of such a noble motive as freedom from economic control and
domination, thru the exercise of the police power. The fathers of the Constitution must have given to
the legislature full authority and power to enact legislation that would promote the supreme
happiness of the people, their freedom and liberty. On the precise issue now before us, they
expressly made their voice clear; they adopted a resolution expressing their belief that the legislation
in question is within the scope of the legislative power. Thus they declared the their Resolution:
That it is the sense of the Convention that the public interest requires the nationalization of
retail trade; but it abstain from approving the amendment introduced by the Delegate for
Manila, Mr. Araneta, and others on this matter because it is convinced that the National
Assembly is authorized to promulgate a law which limits to Filipino and American citizens the
privilege to engage in the retail trade. (11 Aruego, The Framing of the Philippine Constitution,
quoted on pages 66 and 67 of the Memorandum for the Petitioner.)
It would do well to refer to the nationalistic tendency manifested in various provisions of the
Constitution. Thus in the preamble, a principle objective is the conservation of the patrimony of the
nation and as corollary the provision limiting to citizens of the Philippines the exploitation,
development and utilization of its natural resources. And in Section 8 of Article XIV, it is provided that
"no franchise, certificate, or any other form of authorization for the operation of the public utility shall
be granted except to citizens of the Philippines." The nationalization of the retail trade is only a
continuance of the nationalistic protective policy laid down as a primary objective of the Constitution.
Can it be said that a law imbued with the same purpose and spirit underlying many of the provisions
of the Constitution is unreasonable, invalid and unconstitutional?
The seriousness of the Legislature's concern for the plight of the nationals as manifested in the
approval of the radical measures is, therefore, fully justified. It would have been recreant to its duties
towards the country and its people would it view the sorry plight of the nationals with the
complacency and refuse or neglect to adopt a remedy commensurate with the demands of public
interest and national survival. As the repository of the sovereign power of legislation, the Legislature
was in duty bound to face the problem and meet, through adequate measures, the danger and threat
that alien domination of retail trade poses to national economy.
d. Provisions of law not unreasonable.

A cursory study of the provisions of the law immediately reveals how tolerant, how reasonable the
Legislature has been. The law is made prospective and recognizes the right and privilege of those
already engaged in the occupation to continue therein during the rest of their lives; and similar
recognition of the right to continue is accorded associations of aliens. The right or privilege is denied
to those only upon conviction of certain offenses. In the deliberations of the Court on this case,
attention was called to the fact that the privilege should not have been denied to children and heirs
of aliens now engaged in the retail trade. Such provision would defeat the law itself, its aims and
purposes. Besides, the exercise of legislative discretion is not subject to judicial review. It is well
settled that the Court will not inquire into the motives of the Legislature, nor pass upon general
matters of legislative judgment. The Legislature is primarily the judge of the necessity of an
enactment or of any of its provisions, and every presumption is in favor of its validity, and though the
Court may hold views inconsistent with the wisdom of the law, it may not annul the legislation if not
palpably in excess of the legislative power. Furthermore, the test of the validity of a law attacked as a
violation of due process, is not its reasonableness, but its unreasonableness, and we find the
provisions are not unreasonable. These principles also answer various other arguments raised
against the law, some of which are: that the law does not promote general welfare; that thousands of
aliens would be thrown out of employment; that prices will increase because of the elimination of
competition; that there is no need for the legislation; that adequate replacement is problematical; that
there may be general breakdown; that there would be repercussions from foreigners; etc. Many of
these arguments are directed against the supposed wisdom of the law which lies solely within the
legislative prerogative; they do not import invalidity.
VIII. Alleged defect in the title of the law
A subordinate ground or reason for the alleged invalidity of the law is the claim that the title thereof is
misleading or deceptive, as it conceals the real purpose of the bill which is to nationalize the retail
business and prohibit aliens from engaging therein. The constitutional provision which is claimed to
be violated in Section 21 (1) of Article VI, which reads:
No bill which may be enacted in the law shall embrace more than one subject which shall be
expressed in the title of the bill.
What the above provision prohibits is duplicity, that is, if its title completely fails to appraise the
legislators or the public of the nature, scope and consequences of the law or its operation (I
Sutherland, Statutory Construction, Sec. 1707, p. 297.) A cursory consideration of the title and the
provisions of the bill fails to show the presence of duplicity. It is true that the term "regulate" does not
and may not readily and at first glance convey the idea of "nationalization" and "prohibition", which
terms express the two main purposes and objectives of the law. But "regulate" is a broader term than
either prohibition or nationalization. Both of these have always been included within the term
regulation.
Under the title of an act to "regulate", the sale of intoxicating liquors, the Legislature may
prohibit the sale of intoxicating liquors. (Sweet vs. City of Wabash, 41 Ind., 7; quoted in page
41 of Answer.)
Within the meaning of the Constitution requiring that the subject of every act of the
Legislature shall be stated in the tale, the title to regulate the sale of intoxicating liquors, etc."
sufficiently expresses the subject of an act prohibiting the sale of such liquors to minors and
to persons in the habit of getting intoxicated; such matters being properly included within the
subject of regulating the sale. (Williams vs. State, 48 Ind. 306, 308, quoted in p. 42 of
Answer.)

The word "regulate" is of broad import, and necessarily implies some degree of restraint and
prohibition of acts usually done in connection with the thing to be regulated. While word
regulate does not ordinarily convey meaning of prohibit, there is no absolute reason why it
should not have such meaning when used in delegating police power in connection with a
thing the best or only efficacious regulation of which involves suppression. (State vs. Morton,
162 So. 718, 182 La. 887, quoted in p. 42 of Answer.)
The general rule is for the use of general terms in the title of a bill; it has also been said that the title
need not be an index to the entire contents of the law (I Sutherland, Statutory Construction, See.
4803, p. 345.) The above rule was followed the title of the Act in question adopted the more general
term "regulate" instead of "nationalize" or "prohibit". Furthermore, the law also contains other rules
for the regulation of the retail trade which may not be included in the terms "nationalization" or
"prohibition"; so were the title changed from "regulate" to "nationalize" or "prohibit", there would have
been many provisions not falling within the scope of the title which would have made the Act invalid.
The use of the term "regulate", therefore, is in accord with the principle governing the drafting of
statutes, under which a simple or general term should be adopted in the title, which would include all
other provisions found in the body of the Act.
One purpose of the constitutional directive that the subject of a bill should be embraced in its title is
to apprise the legislators of the purposes, the nature and scope of its provisions, and prevent the
enactment into law of matters which have received the notice, action and study of the legislators or
of the public. In the case at bar it cannot be claimed that the legislators have been appraised of the
nature of the law, especially the nationalization and the prohibition provisions. The legislators took
active interest in the discussion of the law, and a great many of the persons affected by the
prohibitions in the law conducted a campaign against its approval. It cannot be claimed, therefore,
that the reasons for declaring the law invalid ever existed. The objection must therefore, be
overruled.
IX. Alleged violation of international treaties and obligations
Another subordinate argument against the validity of the law is the supposed violation thereby of the
Charter of the United Nations and of the Declaration of the Human Rights adopted by the United
Nations General Assembly. We find no merit in the Nations Charter imposes no strict or legal
obligations regarding the rights and freedom of their subjects (Hans Kelsen, The Law of the United
Nations, 1951 ed. pp. 29-32), and the Declaration of Human Rights contains nothing more than a
mere recommendation or a common standard of achievement for all peoples and all nations (Id. p.
39.) That such is the import of the United Nations Charter aid of the Declaration of Human Rights
can be inferred the fact that members of the United Nations Organizations, such as Norway and
Denmark, prohibit foreigners from engaging in retail trade, and in most nations of the world laws
against foreigners engaged in domestic trade are adopted.
The Treaty of Amity between the Republic of the Philippines and the Republic of China of April 18,
1947 is also claimed to be violated by the law in question. All that the treaty guarantees is equality of
treatment to the Chinese nationals "upon the same terms as the nationals of any other country." But
the nationals of China are not discriminating against because nationals of all other countries, except
those of the United States, who are granted special rights by the Constitution, are all prohibited from
engaging in the retail trade. But even supposing that the law infringes upon the said treaty, the treaty
is always subject to qualification or amendment by a subsequent law (U. S. vs. Thompson, 258, Fed.
257, 260), and the same may never curtail or restrict the scope of the police power of the State
(plaston vs. Pennsylvania, 58 L. ed. 539.)
X. Conclusion

Resuming what we have set forth above we hold that the disputed law was enacted to remedy a real
actual threat and danger to national economy posed by alien dominance and control of the retail
business and free citizens and country from dominance and control; that the enactment clearly falls
within the scope of the police power of the State, thru which and by which it protects its own
personality and insures its security and future; that the law does not violate the equal protection
clause of the Constitution because sufficient grounds exist for the distinction between alien and
citizen in the exercise of the occupation regulated, nor the due process of law clause, because the
law is prospective in operation and recognizes the privilege of aliens already engaged in the
occupation and reasonably protects their privilege; that the wisdom and efficacy of the law to carry
out its objectives appear to us to be plainly evident as a matter of fact it seems not only
appropriate but actually necessary and that in any case such matter falls within the prerogative of
the Legislature, with whose power and discretion the Judicial department of the Government may
not interfere; that the provisions of the law are clearly embraced in the title, and this suffers from no
duplicity and has not misled the legislators or the segment of the population affected; and that it
cannot be said to be void for supposed conflict with treaty obligations because no treaty has actually
been entered into on the subject and the police power may not be curtailed or surrendered by any
treaty or any other conventional agreement.
Some members of the Court are of the opinion that the radical effects of the law could have been
made less harsh in its impact on the aliens. Thus it is stated that the more time should have been
given in the law for the liquidation of existing businesses when the time comes for them to close. Our
legal duty, however, is merely to determine if the law falls within the scope of legislative authority and
does not transcend the limitations of due process and equal protection guaranteed in the
Constitution. Remedies against the harshness of the law should be addressed to the Legislature;
they are beyond our power and jurisdiction.
The petition is hereby denied, with costs against petitioner.
Paras, C.J., Bengzon, Reyes, A., Bautista Angelo, Concepcion, Reyes, J.B.L., Endencia and Felix,
JJ., concur.

Separate Opinions
PADILLA, J., concurring and dissenting:
I agree to the proposition, principle or rule that courts may not inquire into the wisdom of an the Act
passed by the Congress and duly approved by the President of the Republic. But the rule does not
preclude courts from inquiring and determining whether the Act offends against a provision or
provisions of the Constitution. I am satisfied that the Act assailed as violative of the due process of
law and the equal protection of the laws clauses of the Constitution does not infringe upon them,
insofar as it affects associations, partnership or corporations, the capital of which is not wholly
owned by the citizens of the Philippines, and aliens, who are not and have not been engaged in the
retail business. I am, however, unable to persuade myself that it does not violate said clauses insofar
as the Act applies to associations and partnerships referred to in the Act and to aliens, who are and
have heretofore been engaged in said business. When they did engage in the retail business there
was no prohibition on or against them to engage in it. They assumed and believed in good faith they
were entitled to engaged in the business. The Act allows aliens to continue in business until their
death or voluntary retirement from the business or forfeiture of their license; and corporations,
associations or partnership, the capital of which is not wholly owned by the citizens of the Philippines

to continue in the business for a period of ten years from the date of the approval of the Act (19 June
1954) or until the expiry of term of the existence of the association or partnership or corporation,
whichever event comes first. The prohibition on corporations, the capital of which is not wholly
owned by citizens of the Philippines, to engage in the retail business for a period of more than ten
years from the date of the approval of the Act or beyond the term of their corporate existence,
whichever event comes first, is valid and lawful, because the continuance of the existence of such
corporations is subject to whatever the Congress may impose reasonably upon them by subsequent
legislation.1 But the prohibition to engage in the retail business by associations and partnerships, the
capital of which is not wholly owned by citizen of the Philippines, after ten years from the date of the
approval of the Act, even before the end of the term of their existence as agreed upon by the
associates and partners, and by alien heirs to whom the retail business is transmitted by the death of
an alien engaged in the business, or by his executor or administrator, amounts to a deprivation of
their property without due process of law. To my mind, the ten-year period from the date of the
approval of the Act or until the expiration of the term of the existence of the association and
partnership, whichever event comes first, and the six-month period granted to alien heirs of a
deceased alien, his executor or administrator, to liquidate the business, do not cure the defect of the
law, because the effect of the prohibition is to compel them to sell or dispose of their business. The
price obtainable at such forced sale of the business would be inadequate to reimburse and
compensate the associates or partners of the associations or partnership, and the alien heirs of a
deceased alien, engaged in the retail business for the capital invested in it. The stock of
merchandise bought and sold at retail does not alone constitute the business. The goodwill that the
association, partnership and the alien had built up during a long period of effort, patience and
perseverance forms part of such business. The constitutional provisions that no person shall be
deprived of his property without due process of law2 and that no person shall be denied the equal
protection of the laws3 would have no meaning as applied to associations or partnership and alien
heirs of an alien engaged in the retail business if they were to be compelled to sell or dispose of their
business within ten years from the date of the approval of the Act and before the end of the term of
the existence of the associations and partnership as agreed upon by the associations and partners
and within six months after the death of their predecessor-in-interest.
The authors of the Constitution were vigilant, careful and zealous in the safeguard of the ownership
of private agricultural lands which together with the lands of the public domain constitute the
priceless patrimony and mainstay of the nation; yet, they did not deem it wise and prudent to deprive
aliens and their heirs of such lands.4
For these reasons, I am of the opinion that section 1 of the Act, insofar as it compels associations
and partnership referred to therein to wind up their retail business within ten years from the date of
the approval of the Act even before the expiry of the term of their existence as agreed upon by the
associates and partners and section 3 of the Act, insofar as it compels the aliens engaged in the
retail business in his lifetime his executor or administrator, to liquidate the business, are invalid, for
they violate the due process of law and the equal protection of the laws clauses of the Constitution.
G.R. No. L-30442 September 30, 1983
HONORABLE CORNELIO BALMACEDA, now LEONIDES VIRATA, in his capacity as
Secretrary of Commerce and Industry, petitioner,
vs.
UNION CARBIDE PHILIPPINES, INC., HONORABLE FEDERICO C. ALIKPALA, Presiding
Judge, Branch XXII, Court of First Instance of Manila, respondents.
G.R. No. L-30409 September 30, 1983

HONORABLE MARCELO BALATBAT, in his capacity as Secretary of Commerce and

Industry, petitioner,
vs.
UNION CARBIDE PHILIPPINES, INC., respondent.
The Solicitor General for petitioner.
Gil R. Carlos for respondents.

FERNANDO, C.J.:
The question raised in this petition filed by the Solicitor General to review the decision of then
respondent Judge, the late Federico C. Alikpala declaring that private respondent Union Carbide of
the Philippines is not engaged in the retail business does not pose any difficulty. The answer is
supplied by the case of B. F. Goodrich Philippines, Inc. v. Teofilo Reyes, Sr., 1 Goodyear Tire and
Rubber Co. v. Teofilo Reyes, Sr., 2 and Mobil Oil Philippines, Inc. v. Teofilo Reyes, Sr. 3 The doctrine
therein announced applying the Presidential Decree 4 amending the Retail Trade Act 5 is directly in point.
The decision calls for affirmance.
The amendatory Presidential Decree added two more paragraphs, the first of which was the basis
for the three previous decisions of this Court. The entire section 4 was reproduced. The Section
starts with an opening statement as to what the term "retail business" shall mean,
namely, 6 "occupation or calling of habitually selling direct to the general public merchandise,
commodities or goods for consumption." 6 It excludes, according to the amendment, "(c) a manufacturer
or processor selling to the industrial and commercial users or consumers who use the products bought by
them to render service to the general public and/or produce or manufacture goods which are in turn sold
to them;... " 7 The appealed decision, which is quite comprehensive and scholarly, could be commended
for in the main anticipating that the above category should be excluded from "retail business." Thus: "In
the field of economics, in the area of marketing, the interpretation given by Government agencies, and by
common acceptation the term 'retail', is associated with and limited to goods for personal, family or
household use, consumption and utilization. This is also in accord with the ruling of the Supreme Court in
the Ichong case regarding the nature and kind of goods a retailer handles. Under the situation, the Court
is persuaded to hold that the goods for consumption mentioned in Republic Act No. 1180 should be
construed to refer to the final and end [uses] of a product which directly satisfy human wants and desires
and are needed for home and daily life. Accordingly, the goods which petitioner's Industrial Products
Division handle (commonly referred to as intermediate goods), do not fall and cannot be classified as
consumption goods." 8
There was a need for such clarification. Private respondent has two divisions, the Consumer
Products Division and the Industrial Products Division. As to the former, it effected its sales through
retail outlets, dealers and distributors. Thus there was no question as to the character of its
business. It was not embraced in the category of retail. As to the Industrial Products Division, its
Agricultural Chemicals Department sold its products through exclusive distributors. Again, it could be
concluded that such Department was not covered by the Act even before its amendment. The
products handled by the five other departments of the Industrial Products Division, namely, the

Metals and Carbide; Plastics; Industrial Chemicals; Linde, Haynes Stellite and Carbon Products and
Polyethylene Bags were generally sold to producers, processors, fabricators and to industries. While
these departments had a limited fixed clientele, still there was no prohibition as to the general public
malting similar purchases from them. What removed these departments from the operation of the
Retail Trade Act was pointed out in the appealed decision in these words: "The goods handled by
the five remaining departments of petitioner's Industrial Products Division are generally raw materials
used in the manufacture of other goods, or if not, as one of the component raw materials, or at the
least as elements utilized in the process of production or manufacturing." 9After considering the
statutory definition in the Retail Trade Act itself, its definition by economists, and in judicial opinions, as
well as the view of former Central Bank Governor Cuaderno as to the adverse consequences in terms of
increased cost to consumers, loss of official assistance from producers, elimination of much needed
foreign capital and loss of technical assistance, the lower court held it was not engaged in the retail
business. The amendatory Decree removes whatever doubt there could have been as to the correctness
of the conclusion reached by the lower court.
WHEREFORE, the Court affirms the lower court decision holding that Union Carbide Philippines,
Inc. is not engaged in the "retail business" as this term is defined in Section 4 of Republic Act No.
1180 and malting permanent the restraining order of June 22, 1964 issued in this case. No costs.
G.R. No. L-30067 April 19, 1983
B. F. GOODRICH PHILIPPINES, INC., petitioner,
vs.
HON. TEOFILO REYES, SR., in his capacity as Secretary of Commerce and
Industry, respondent.

FERNANDO, C.J.:
Relying on the equal protection clause 1 as interpreted in the leading case of Inchong v.
Hernandez, 2 petitioner B.F. Goodrich Philippines, Inc. contends in this declaratory relief proceeding, with
the then Secretary of Commerce and Industry Teofilo Reyes, Sr. as respondent, that it does not fall within
the ban. It is engaged in the business of manufacturing and selling rubber products, principally automotive
tires and tubes, batteries, conveyor belts, heels and soles for shoes and tiles to dealers who in turn sells it
to others. 3 Under the statute, it cannot engage in retail business, namely to sell direct to the general
public, merchandise, commodities or goods for consumption. 4 It admitted that it sold directly to the
government and all its instrumentalities and/or agencies; public utilities; agricultural enterprises; logging,
mining, and natural resources exploration firms; automotive assembly plants who buy its products in large
bulk; industrial enterprises; and employees and officers of its company. 5
There was a plea for a preliminary injunction. It was set for hearing. Upon its being heard, the Office
of the Solicitor General manifested that it was not ready to formulate its stand on the matter in view
of the fact that the question involved was of great importance. Accordingly, a restraining order was
issued. Subsequently, the answer was duly filed, the principal affirmative defenses being that the
petitioner should not be considered exempt as it is not a corporation wholly owned by citizens of the
Philippines and that even on the assumption that such was the case, it being alleged in the petition

that only 1.46% of its capital stock was owned by aliens, non-Filipinos or non-Americans, the Parity
Amendment being still in force and effect at the time of the filing of this petition, still Republic Act
1180 is quite clear as to its not being applicable to petitioner considering the allegations of the
petition. The plea was for dismissal.
In the stipulation of facts, the allegations set forth above were admitted as to its selling to dealers
and distributors primarily but likewise selling directly to certain entities and individuals named.
Paragraph XX of the stipulation of facts made mention of the opinion of the then Secretary of
Justice, Pedro Tuason, who ruled that a corporation whose capital stock was 99.99% Filipino and
0.01% alien was exempt from the provisions of Republic Act No. 1180, based on the doctrine of "de
minimis non curat lex"; hence, the said corporation could retail. 6
On such stipulation of facts, the lower court rendered its decision making permanent the restraining
order issued although holding that petitioner is not exempt from the provisions of Republic Act No.
1180. The reason for such a decision was set forth thus: "It has been stipulated that the rubber
products of the petitioner desired to be sold in bulk to automotive assembly plants will be resold by
the latter to their own customers at a profit without changing the form of said rubber products,
together with assembled units which are being sold; that the rubber products desired to be sold by
the petitioner to public utilities, power and communication companies, agricultural enterprises,
proprietary planters, agricultural processing plants, agricultural cooperatives, industrial and
commercial enterprises, logging, mining and persons engaged in the exploitation of natural
resources are to be used by the latter in their operations to produce and to render goods and
services to third parties and to the general public: and that the other products desired to be sold to
the Government and all its instrumentalities and/or agencies, public utilities, agricultural enterprises,
proprietary planters, agricultural processing plants, agricultural cooperatives, logging, mining, and
other entities and persons engaged in the exploitation of natural resources, and industrial and
commercial enterprises are to be sold at prices lower than at which they are sold to the general
consuming public by dealers and distributors of said rubber products. An examination of the types or
classes of customers to which the petitioner desires to sell its rubber products will reveal that in the
great majority of such customers, the sale to them may not be classified as the sale of consumer
goods or merchandise for the satisfaction of human, personal or household wants so as to be
considered as retail in the sense already discussed above. Nonetheless, it is observed that some of
the listed customers would easily fall within the purview of a final consumer of the product who buys
the same for the satisfaction of a personal want. Among these customers are 'proprietary planters,'
'persons engaged in the exploitation of natural resources,' and 'employees and officers of the
petitioner.' 7
Both petitioner and respondent appealed to this Court. A ruling on the question raised as to the
precise meaning of retail business is obviated by the issuance of Presidential Decree No.
714 8 amending Republic Act No. 1180. Under the former, which took effect without presidential approval
on June 19, 1954, the term "retail business" covers "any act, occupation or calling of habitually selling
direct to the general public merchandise, commodities or goods for consumption, but shall not include: (a)
a manufacturer, processor, laborer or worker selling to the general public the products manufactured,
processed or produced by him if his capital does not exceed five thousand pesos, or (b) a farmer or
agriculturist selling the product of his farm." 9 Under the aforesaid Presidential Decree, which took effect
on May 28, 1975, two more paragraphs were included. They are: "(c) a manufacturer or processor selling
to the industrial and commercial users or consumers who use the products bought by them to render

service to the general public and/or to produce or manufacture goods which are in turn sold to them; (d) a
hotel- owner or keeper operating a restaurant irrespective of the amount of capital, provided that the
restaurant is necessarily included in, or incidental to, the hotel business." 10 It is clear from the above that
proprietary planters and persons engaged in the exploration of natural resources are included within the
aforesaid amendment. The lower court decision, however, is in accordance with law insofar as employees
and officers of petitioners are concerned. As thus modified, the decision calls for affirmance.

In view of the above, there is no need to pass upon the allegation that there is a denial of equal
protection. At any rate, the ponencia of the late Justice Labrador in Ichong v. Hernandez, 11 upholding
the validity of Republic Act No. 1180, both scholarly and comprehensive, leaves no room for doubt as to
the futility of relying on the equal protection guarantee. This Act was conceived and is being implemented
conformably to the nationalistic spirit which underlies both the 1935 and the present Constitutions.
WHEREFORE, the lower court decision is affirmed declaring that petitioner is not engaged in retail
business within the purview of Section 4 of Republic Act No. 1180 in accordance with Presidential
Decree No. 714, except as to its sales to its employees and offices. The restraining order issued is
likewise made permanent but subject to the above modification. No costs.

July 2, 1983
G.R. No. L-30063
THE GOODYEAR TIRE AND RUBBER CO. OF THE PHILIPPINES,
LTD., petitioner-appellant,
vs.
THE HONORABLE TEOFILO REYES, SR., in his capacity as
Acting Secretary of Commerce and Industry, respondentappellee, FIRESTONE TIRE & RUBBER CO. OF THE
PHILIPPINES, intervenor-appellant.
Siguion Reyna, Montecillo, Belo & Ongria Law Office for petitionerappellant. The Solicitor General for Acting Secretary of Commerce
and Industry.
, J.:
In this appeal by both petitioners Goodyear Tire and Rubber Co. of the Philippines
and intervenor Firestone Tire and Rubber Co. of the Philippines, 1 the lower court
holding that as to certain customers, "proprietory planters, persons engaged in the
exploitation of natural resources," and "employees and officers of the petitioner," they

are engaged in retail business, the legal question raised was set at rest
by Presidential Decree No. 714 2 amending the Retail Trade Nationalization
Law which took effect without presidential approval. 3 As originally worded, the term
"retail business" covers "any act, occupation or calling of habitually selling direct to
the general public merchandise, commodities or goods for consumption, but shall not
include: (a) a manufacturer, processor, laborer or worker selling to the general public
the products manufactured, processed or produced by him if his capital does not
exceed five thousand pesos, or (b) a farmer or agriculturist selling the product of his
farm." 4 Under the aforesaid Presidential Decree, which took effect on May 28, 1975,
two more paragraphs were included. They are: "(c) a manufacturer or processor
selling to the industrial and commercial users or consumers who use the products
bought by them to render service to the general public and/or to produce or
manufacture goods which are in turn sold to them; (d) a hotel-owner or keeper
operating a restaurant irrespective of the amount of capital, provided that the
restaurant is necessarily included in, or incidental to, the hotel business." 5
Petitioner Goodyear Tire and Rubber Company of the Philippines as well as
intervenor Firestone Tire and Rubber Company of the Philippines, as noted in the
decision now on appeal, sold their rubber products to certain types or class of
customers as follows: "(a) The Government of the Republic of the Philippines and all
its instrumentalities and/or agencies, who use the Rubber Products to render essential
services to the country and to the general public. (b) Public utilities, such as bus fleets,
taxi fleets, jeepney fleets, freight lines, etc., and power and communications
companies, who use Rubber Products to render essential services to third parties and
the general public for compensation. (c) Agricultural enterprises, proprietary planters,
agricultural processing plants, and agricultural cooperatives, who use the Rubber
Products to perform essential services to third parties and to the general public for
valuable consideration and profit. (d) Logging, mining, and other entities and persons
engaged in the exploitation of natural resources. (e) Automotive assembly plants, who
buy the Rubber Products in bulk for use in the assembly of automotive equipment,
and who resell the same to third parties and to the general public without alteration or
change at a profit as the assembled automotive equipment and vehicles are sold. (f)
Industrial and Commercial enterprises, engaged in manufacturing and sales of prime

and essential commodities to third parties and the general public for a profit, who buy
the Rubber Products for use in their manufacturing and sales operations. (g)
Employees and officers of the petitioner-intervenor." 6
To repeat as to the above-named customers, the court a quo held that petitioner and
intervenor were not exempt from the provisions of Republic Act No. 1180,
although ruling in their favor insofar as the other customers were concerned, thus
making permanent the preliminary injunction issued. Respondent Acting Secretary of
Commerce and Industry likewise appealed.
As the facts in Goodrich are not dissimilar both as to the nature of the business and
the customers, a similar conclusion is indicated. This Court in that decision
categorically stated: "It is clear from the above that proprietary planters and persons
engaged in the exploration of natural resources are included within the aforesaid
amendment. The lower court decision, however, is in accordance with law insofar as
employees and officers of petitioner are concerned. As thus modified, the decision
calls for affirmance." 7 We do so again.
WHEREFORE, the lower court decision is affirmed declaring that petitioner and
intervenor are not engaged in retail business within the purview of Section 4
ofRepublic Act No. 1180 and Presidential Decree No. 714, except as to its
sales to its employees and officers. The injunction issued is likewise made permanent
but subject to the above qualification. No costs.