You are on page 1of 69

THIRD DIVISION

[G.R. No. 141314. November 15, 2002]

REPUBLIC OF THE PHILIPPINES, REPRESENTED BY ENERGY REGULATORY BOARD petitioner, vs. MANILA ELECTRIC COMPANY, respondent.

[G.R. No. 141369. November 15, 2002]

LAWYERS AGAINST MONOPOLY AND POVERTY (LAMP) consisting of CEFERINO PADUA, Chairman, G. FULTON ACOSTA,GALILEO BRION, ANATALIA BUENAVENTURA, PEDRO CASTILLO, NAPOLEON CORONADO, ROMEO ECHAUZ, FERNANDO GAITE, ALFREDO DE GUZMAN, ROGELIO KARAGDAG, JR., MA. LUZ ARZAGA-MENDOZA, ANSBERTO PAREDES, AQUILINO PIMENTEL III, MARIO REYES, EMMANUEL SANTOS, RUDEGELIO TACORDA, members, and ROLANDO ARZAGA, Secretary-General, JUSTICE ABRAHAM SARMIENTO, SENATOR AQUILINO PIMENTEL, JR. and COMMISSIONER BARTOLOME FERNANDEZ, JR., Board of Consultants, and Lawyer GENARO LUALHATI,petitioners, vs. MANILA ELECTRIC COMPANY (MERALCO), respondent. DECISION
PUNO, J.:

In third world countries like the Philippines, equal justice will have a synthetic ring unless the economic rights of the people, especially the poor, are protected with the same resoluteness as their right to liberty. The cases at bar are of utmost significance for they concern the right of our people to electricity and to be reasonably charged for their consumption. In configuring the contours of this economic right to a basic necessity of life, the Court shall define the limits of the power of respondent MERALCO, a giant public utility

and a monopoly, to charge our people for their electric consumption. The question is: should public interest prevail over private profits? The facts are brief and undisputed. On December 23, 1993, MERALCO filed with the ERB an application for the revision of its rate schedules. The application reflected an average increase of 21 centavos per kilowatthour (kwh) in its distribution charge. The application also included a prayer for provisional approval of the increase pursuant to Section 16(c) of the Public Service Act and Section 8 of Executive Order No. 172. On January 28, 1994, the ERB issued an Order granting a provisional increase of P0.184 per kwh, subject to the following condition: In the event, however, that the Board finds, after hearing and submission by the Commission on Audit of an audit report on the books and records of the applicant that the latter is entitled to a lesser increase in rates, all excess amounts collected from the applicants customers as a result of this Order shall either be refunded to them or correspondingly credited in their favor for application to electric bills covering future consumptions.
[1]

In the same Order, the ERB requested the Commission on Audit (COA) to conduct an audit and examination of the books and other records of account of the applicant for such period of time, which in no case shall be less than 12 consecutive months, as it may deem appropriate and to submit a copy thereof to the ERB immediately upon completion.
[2]

On February 11, 1997, the COA submitted its Audit Report SAO No. 95-07 (the COA Report) which contained, among others, the recommendation not to include income taxes paid by MERALCO as part of its operating expenses for purposes of rate determination and the use of the net average investment method for the computation of the proportionate value of the properties used by MERALCO during the test year for the determination of the rate base.
[3]

Subsequently, the ERB rendered its decision adopting the above recommendations and authorized MERALCO to implement a rate adjustment in the average amount of P0.017 per kwh, effective with respect to MERALCOs billing cycles beginning February 1994. The ERB further ordered that the provisional relief in the amount of P0.184 per kilowatthour granted under the Boards Order dated January 28, 1994 is hereby superseded and modified and the excess average amount of P0.167 per kilowatthour starting with [MERALCOs] billing cycles beginning February 1994 until its billing cycles beginning February 1998, be refunded to [MERALCOs] customers or correspondingly credited in their favor for future consumption.
[4]

The ERB held that income tax should not be treated as operating expense as this should be borne by the stockholders who are recipients of the income or profits realized from the operation of their business hence, should not be passed on to the consumers. Further, in applying the net average investment method, the ERB adopted the recommendation of COA that in computing the rate base, only the proportionate value of the property should be included, determined in accordance with the number of months the same was actually used in service during the test year.
[5] [6]

On appeal, the Court of Appeals set aside the ERB decision insofar as it directed the reduction of the MERALCO rates by an average of P0.167 per kwh and the refund of such amount to MERALCOs customers beginning February 1994 and until its billing cycle beginning February 1998. Separate Motions for Reconsideration filed by the petitioners were denied by the Court of Appeals.
[7] [8]

Petitioners are now before the Court seeking a reversal of the decision of the Court of Appeals by arguing primarily that the Court of Appeals erred: a) in ruling that income tax paid by MERALCO should be treated as part of its operating expenses and thus considered in determining the amount of increase in rates imposed by MERALCO and b) in rejecting the net average investment method used by the COA and the ERB and instead adopted the average investment method used by MERALCO. We grant the petition. The regulation of rates to be charged by public utilities is founded upon the police powers of the State and statutes prescribing rules for the control and regulation of public utilities are a valid exercise thereof. When private property is used for a public purpose and is affected with public interest, it ceases to be juris privati only and becomes subject to regulation. The regulation is to promote the common good. Submission to regulation may be withdrawn by the owner by discontinuing use; but as long as use of the property is continued, the same is subject to public regulation.
[9]

In regulating rates charged by public utilities, the State protects the public against arbitrary and excessive rates while maintaining the efficiency and quality of services rendered. However, the power to regulate rates does not give the State the right to prescribe rates which are so low as to deprive the public utility of a reasonable return on investment. Thus, the rates prescribed by the State must be one that yields a fair return on the public utility upon the value of the property performing the service and one that is reasonable to the public for the services rendered. The fixing of just and reasonable rates involves a balancing of the investor and the consumer interests.
[10] [11]

In his famous dissenting opinion in the 1923 case of Southwestern Bell Tel. Co. v. Public Service Commission, Mr. Justice Brandeis wrote:
[12]

The thing devoted by the investor to the public use is not specific property, tangible and intangible, but capital embarked in an enterprise. Upon the capital so invested, the Federal Constitution guarantees to the utility the opportunity to earn a fair return The Constitution does not guarantee to the utility the opportunity to earn a return on the value of all items of property used by the utility, or of any of them. . The investor agrees, by embarking capital in a utility, that its charges to the public shall be reasonable. His company is the substitute for the State in the performance of the public service, thus becoming a public servant. The compensation which the Constitution guarantees an opportunity to earn is the reasonable cost of conducting the business. While the power to fix rates is a legislative function, whether exercised by the legislature itself or delegated through an administrative agency, a determination of whether the rates so fixed are reasonable and just is a purely judicial question and is subject to the review of the courts.
[13]

The ERB was created under Executive Order No. 172 to regulate, among others, the distribution of energy resources and to fix rates to be charged by public utilities involved in the distribution of electricity. In the fixing of rates, the only standard which the legislature is required to prescribe for the guidance of the administrative authority is that the rate be reasonable and just. It has been held that even in the absence of an express requirement as to reasonableness, this standard may be implied. What is a just and reasonable rate is a question of fact calling for the exercise of discretion, good sense, and a fair, enlightened and independent judgment. The requirement of reasonableness comprehends such rates which must not be so low as to be confiscatory, or too high as to be oppressive. In determining whether a rate is confiscatory, it is essential also to consider the given situation, requirements and opportunities of the utility.
[14] [15]

Settled jurisprudence holds that factual findings of administrative bodies on technical matters within their area of expertise should be accorded not only respect but even finality if they are supported by substantial evidence even if not overwhelming or preponderant. In one case, we cautioned that courts should "refrain from substituting their discretion on the weight of the evidence for the discretion of the Public Service Commission on questions of fact and will only reverse or modify such orders of the Public Service Commission
[16] [17]

when it really appears that the evidence is insufficient to support their conclusions."
[18]

In the cases at bar, findings and conclusions of the ERB on the rate that can be charged by MERALCO to the public should be respected. The function of the court, in exercising its power of judicial review, is to determine whether under the facts and circumstances, the final order entered by the administrative agency is unlawful or unreasonable. Thus, to the extent that the administrative agency has not been arbitrary or capricious in the exercise of its power, the time-honored principle is that courts should not interfere. The principle of separation of powers dictates that courts should hesitate to review the acts of administrative officers except in clear cases of grave abuse of discretion.
[19] [20] [21]

In determining the just and reasonable rates to be charged by a public utility, three major factors are considered by the regulating agency: a) rate of return; b) rate base and c) the return itself or the computed revenue to be earned by the public utility based on the rate of return and rate base. The rate of return is a judgment percentage which, if multiplied with the rate base, provides a fair return on the public utility for the use of its property for service to the public. The rate of return of a public utility is not prescribed by statute but by administrative and judicial pronouncements. This Court has consistently adopted a 12% rate of return for public utilities. The rate base, on the other hand, is an evaluation of the property devoted by the utility to the public service or the value of invested capital or property which the utility is entitled to a return.
[22] [23] [24] [25]

In the cases at bar, the resolution of the issues involved hinges on the determination of the kind and the amount of operating expenses that should be allowed to a public utility to generate a fair return and the proper valuation of the rate base or the value of the property entitled to a return. I Income Tax as Operating Expense Cannot be Allowed For RateDetermination Purposes In determining whether or not a rate yields a fair return to the utility, the operating expenses of the utility must be considered. The return allowed to a public utility in accordance with the prescribed rate must be sufficient to provide for the payment of such reasonable operating expenses incurred by the public utility in the provision of its services to the public. Thus, the public

utility is allowed a return on capital over and above operating expenses. However, only such expenses and in such amounts as are reasonable for the efficient operation of the utility should be allowed for determination of the rates to be charged by a public utility. The ERB correctly ruled that income tax should not be included in the computation of operating expenses of a public utility. Income tax paid by a public utility is inconsistent with the nature of operating expenses. In general, operating expenses are those which are reasonably incurred in connection with business operations to yield revenue or income. They are items of expenses which contribute or are attributable to the production of income or revenue. As correctly put by the ERB, operating expenses should be a requisite of or necessary in the operation of a utility, recurring, and that it redounds to the service or benefit of customers.
[26]

Income tax, it should be stressed, is imposed on an individual or entity as a form of excise tax or a tax on the privilege of earning income. In exchange for the protection extended by the State to the taxpayer, the government collects taxes as a source of revenue to finance its activities. Clearly, by its nature, income tax payments of a public utility are not expenses which contribute to or are incurred in connection with the production of profit of a public utility. Income tax should be borne by the taxpayer alone as they are payments made in exchange for benefits received by the taxpayer from the State. No benefit is derived by the customers of a public utility for the taxes paid by such entity and no direct contribution is made by the payment of income tax to the operation of a public utility for purposes of generating revenue or profit. Accordingly, the burden of paying income tax should be Meralcos alone and should not be shifted to the consumers by including the same in the computation of its operating expenses.
[27]

The principle behind the inclusion of operating expenses in the determination of a just and reasonable rate is to allow the public utility to recoup the reasonable amount of expenses it has incurred in connection with the services it provides. It does not give the public utility the license to indiscriminately charge any and all types of expenses incurred without regard to the nature thereof, i.e., whether or not the expense is attributable to the production of services by the public utility. To charge consumers for expenses incurred by a public utility which are not related to the service or benefit derived by the customers from the public utility is unjustified and inequitable. While the public utility is entitled to a reasonable return on the fair value of the property being used for the service of the public, no less than the Federal Supreme Court of the United States emphasized: [t]he public cannot properly

be subjected to unreasonable rates in order simply that stockholders may earn dividends If a corporation cannot maintain such a [facility] and earn dividends for stockholders, it is a misfortune for it and them which the Constitution does not require to be remedied by imposing unjust burdens on the public.
[28]

We are not impressed by the reliance by MERALCO on some American case law allowing the treatment of income tax paid by a public utility as operating expense for rate-making purposes. Suffice to state that with regard to rate-determination, the government is not hidebound to apply any particular method or formula. The question of what constitutes a reasonable return for the public utility is necessarily determined and controlled by its peculiar environmental milieu. Aside from the financial condition of the public utility, there are other critical factors to consider for purposes of rate regulation. Among others, they are: particular reasons involved for the request of the rate increase, the quality of services rendered by the public utility, the existence of competition, the element of risk or hazard involved in the investment, the capacity of consumers, etc. Rate regulation is the art of reaching a result that is good for the public utility and is best for the public.
[29] [30]

For these reasons, the Court cannot give in to the importunings of MERALCO that we blindly apply the rulings of American courts on the treatment of income tax as operating expenses in rate regulation cases. An approach allowing the indiscriminate inclusion of income tax payments as operating expenses may create an undesirable precedent and serve as a blanket authority for public utilities to charge their income tax payments to operating expenses and unjustly shift the tax burden to the customer. To be sure, public utility taxation in the United States is going through the eye of criticism. Some commentators are of the view that by allowing the public utility to collect its income tax payment from its customers, a form of sales tax is, in effect, imposed on the public for consumption of public utility services. By charging their income tax payments to their customers, public utilities virtually become tax collectors rather than taxpayers. In the cases at bar, MERALCO has not justified why its income tax should be treated as an operating expense to enable it to derive a fair return for its services.
[31]

It is also noteworthy that under American laws, public utilities are taxed differently from other types of corporations and thus carry a heavier tax burden. Moreover, different types of taxes, charges, tolls or fees are assessed on a public utility depending on the state or locality where it operates. At a federal level, public utilities are subject to corporate income taxes and Social Security taxesin the same manner as other business corporations. At the state and local levels, public utilities are subject to a wide variety of taxes, not

all of which are imposed on each state. Thus, it is not unusual to find different taxes or combinations of taxes applicable to respective utility industries within a particular state. A significant aspect of state and local taxation of public utilities in the United States is that they have been singled out for special taxation, i.e., they are required to pay one or more taxes that are not levied upon other industries. In contrast, in this jurisdiction, public utilities are subject to the same tax treatment as any other corporation and local taxes paid by it to various local government units are substantially the same. The reason for this is that the power to tax resides in our legislature which may prescribe the limits of both national and local taxation, unlike in the federal system of the United States where state legislature may prescribe taxes to be levied in their respective jurisdictions.
[32]

MERALCO likewise cites decisions of the ERB allowing the application of a tax recovery clause for the imposition of an additional charge on consumers for taxes paid by the public utility. A close look at these decisions will show they are inappropos. In the said cases, the ERB approved the adoption of a formula which will allow the public utility to recover from its customers taxes already paid by it. However, in the cases at bar, the income tax component added to the operating expenses of a public utility is based on an estimate or approximate figure of income tax to be paid by the public utility. It is this estimated amount of income tax to be paid by MERALCO which is included in the amount of operating expenses and used as basis in determining the reasonable rate to be charged to the customers. Accordingly, the varying factual circumstances in the said cases prohibit a square application of the rule under the previous ERB decisions.
[33]

II

Use of Net Average Investment Method is Not Unreasonable In the determination of the rate base, property used in the operation of the public utility must be subject to appraisal and evaluation to determine the fair value thereof entitled to a fair return. With respect to those properties which have not been used by the public utility for the entire duration of the test year, i.e., the year subject to audit examination for rate-making purposes, a valuation method must be adopted to determine the proportionate value of the property. Petitioners maintain that the net average investment method (also known as actual number of months use method) recommended by COA and adopted by the ERB should be used, while MERALCO argues that the

average investment method (also known as the trending method) to determine the proportionate value of properties should be applied. Under the net average investment method, properties and equipment used in the operation of a public utility are entitled to a return only on the actual number of months they are in service during the period. In contrast, the average investment method computes the proportionate value of the property by adding the value of the property at the beginning and at the end of the test year with the resulting sum divided by two.
[34] [35]

The ERB did not abuse its discretion when it applied the net average investment method. The reasonableness of net average investment method is borne by the records of the case. In its report, the COA explained that the computation of the proportionate value of the property and equipment in accordance with the actual number of months such property or equipment is in service for purposes of determining the rate base is favored, as against the trending method employed by MERALCO, to reflect the real status of the property. By using the net average investment method, the ERB and the COA considered for determination of the rate base the value of properties and equipment used by MERALCO in proportion to the period that the same were actually used during the period in question. This treatment is consistent with the settled rule in rate regulation that the determination of the rate base of a public utility entitled to a return must be based on properties and equipment actually being used or are useful to the operations of the public utility.
[36] [37]

MERALCO does not seriously contest this treatment of actual usage of property but opposes the method of computation or valuation thereof adopted by the ERB and the COA on the ground that the net average investment method assumes an ideal situation where a utility, like MERALCO, is able to record in its books within any given month the value of all the properties actually placed in service during that month. MERALCO contends that immediate recordal in its books of the property or equipment is not possible as MERALCOs franchise covers a wide area and that due to the volume of properties and equipment put into service and the amount of paper work required to be accomplished for recording in the books of the company, it takes three to six months (often longer) before an asset placed in service is recorded in the books of MERALCO. Hence, MERALCO adopted the average investment method or the trending method which computes the average value of the property at the beginning and at the end of the test year to compensate for the irregular recording in its books.
[38] [39]

MERALCOS stance is belied by the COA Report which states that the verification of the records, as confirmed by the Management Staff, disclosed

that properties are recorded in the books as these are actually placed in service. Moreover, while the case was pending trial before the ERB, the ERB conducted an ocular inspection to examine the assets in service, records and books of accounts of MERALCO to ascertain the physical existence, ownership, valuation and usefulness of the assets contained in the COA Report. Thus, MERALCOs contention that the date of recordal in the books does not reflect the date when the asset is placed in service is baseless.
[40] [41]

Further, computing the proportionate value of assets used in service in accordance with the actual number of months the same is used during the test year is a more accurate method of determining the value of the properties of a public utility entitled to a return. If, as determined by COA, the date of recordal in the books of MERALCO reflects the actual date the equipment or property is used in service, there is no reason for the ERB to adopt the trending method applied by MERALCO if a more precise method is available for determining the proportionate value of the assets placed in service. If we were to sustain the application of the trending method, the public utility may easily manipulate the valuation of its property entitled to a return (rate base) by simply including a highly capitalized asset in the computation of the rate base even if the same was used for a limited period of time during the test year. With the inexactness of the trending method and the possibility that the valuation of certain properties may be subject to the control of and abuse by the public utility, the Court finds no reasonable basis to overturn the recommendation of COA and the decision of the ERB. MERALCO further insists that the Court should sustain the trending method in view of previous decisions by the Public Service Commission and of this Court which upheld the use of this method. By refusing to adopt the trending method, MERALCO argues that the ERB violated the rule on stare decisis. Again, we are not impressed. It is a settled rule that the goal of ratemaking is to arrive at a just and reasonable rate for both the public utility and the public which avails of the formers products and services. However, what is a just and reasonable rate cannot be fixed by any immutable method or formula. Hence, it has been held that no public utility has a vested right to any particular method of valuation. Accordingly, with respect to a determination of the proper method to be used in the valuation of property and equipment used by a public utility for rate-making purposes, the administrative agency is not bound to apply any one particular formula or method simply because the same method has been previously used and applied. In fact, nowhere in the previous decisions cited by MERALCO which applied the trending method did
[42] [43]

the Court rule that the same should be the only method to be applied in all instances. At any rate, MERALCO has not adequately shown that the rates prescribed by the ERB are unjust or confiscatory as to deprive its stockholders a reasonable return on investment. In the early case of Ynchausti S.S. Co. v. Public Utility Commissioner, this Court held: [t]here is a legal presumption that the rates fixed by an administrative agency are reasonable, and it must be conceded that the fixing of rates by the Government, through its authorized agents, involves the exercise of reasonable discretion and, unless there is an abuse of that discretion, the courts will not interfere. Thus, the burden is upon the oppositor, MERALCO, to prove that the rates fixed by the ERB are unreasonable or otherwise confiscatory as to merit the reversal of the ERB. In the instant cases, MERALCO was unable to discharge this burden.
[44]

WHEREFORE, in view of the foregoing, the instant petitions are GRANTED and the decision of the Court of Appeals in C.A. G.R. SP No. 46888 is REVERSED. Respondent MERALCO is authorized to adopt a rate adjustment in the amount of P0.017 per kilowatthour, effective with respect to MERALCOs billing cycles beginning February 1994. Further, in accordance with the decision of the ERB dated February 16, 1998, the excess average amount of P0.167 per kilwatthour starting with the applicants billing cycles beginning February 1998 is ordered to be refunded to MERALCOs customers or correspondingly credited in their favor for future consumption. SO ORDERED. Panganiban, JJ., concur. Sandoval-Gutierrez, Corona, and Carpio-Morales,

THIRD DIVISION

[G.R. No. 141314. April 9, 2003]

REPUBLIC OF THE PHILIPPINES, REPRESENTED BY ENERGY REGULATORY BOARD, petitioner, vs. MANILA ELECTRIC COMPANY, respondent.

[G.R. No. 141369. April 9, 2003]

LAWYERS AGAINST MONOPOLY AND POVERTY (LAMP) consisting of CEFERINO PADUA, Chairman, G. FULTON ACOSTA, GALILEO BRION, ANATALIA BUENAVENTURA, PEDRO CASTILLO, NAPOLEON CORONADO, ROMEO ECHAUZ, FERNANDO GAITE, ALFREDO DE GUZMAN, ROGELIO KARAGDAG, JR., MA. LUZ ARZAGA-MENDOZA, ANSBERTO PAREDES, AQUILINO PIMENTEL III, MARIO REYES, EMMANUEL SANTOS, RUDEGELIO TACORDA, members, and ROLANDO ARZAGA, Secretary-General, JUSTICE ABRAHAM SARMIENTO, SENATOR AQUILINO PIMENTEL, JR. and COMMISSIONER BARTOLOME FERNANDEZ, JR., Board of Consultants, and Lawyer GENARO LUALHATI,petitioners, vs. MANILA ELECTRIC COMPANY (MERALCO), respondent. RESOLUTION
PUNO, J.:

The business and operations of a public utility are imbued with public interest. In a very real sense, a public utility is engaged in public service-providing basic commodities and services indispensable to the interest of the general public. For this reason, a public utility submits to the regulation of government authorities and surrenders certain business prerogatives, including the amount of rates that may be charged by it. It is the imperative

duty of the State to interpose its protective power whenever too much profits become the priority of public utilities. For resolution is the Motion for Reconsideration filed by respondent Manila Electric Company (MERALCO) on December 5, 2002 from the decision of this Court dated November 15, 2002 reducing MERALCOs rate adjustment in the amount of P0.017 per kilowatthour (kwh) for its billing cycles beginning 1994 and further directing MERALCO to credit the excess average amount ofP0.167 per kwh to its customers starting with MERALCOs billing cycles beginning February 1994.
[1]

First, we leapfrog through the facts. On December 23, 1993, MERALCO filed with the Energy Regulatory Board (ERB) an application for revised rates, with an average increase of P0.21 per kwh in its distribution charge. On January 28, 1994 the ERB granted a provisional increase of P0.184 per kwh subject to the condition that in the event the ERB determines that MERALCO is entitled to a lesser increase in rates, all excess amounts collected by MERALCO shall be refunded to its customers or credited in their favor. The Commission on Audit (COA) conducted an examination of the books of accounts and records of MERALCO and thereafter recommended, among others, that: (1) income taxes paid by MERALCO should not be included as part of MERALCOs operating expenses and (2) the net average investment method or the number of months use method should be applied in determining the proportionate value of the properties used by MERALCO during the test year. In its decision dated February 16, 1998, the ERB adopted the recommendations of the COA and authorized MERALCO to adopt a rate adjustment of P0.017 per kilowatthour (kwh)for its billing cycles beginning 1994. The ERB further directed MERALCO to credit the excess average amount of P0.167 per kwh to its customers starting with MERALCOs billing cycles beginning February 1994. The said ruling of the ERB was affirmed by this Court in its decision dated November 15, 2002. In its Motion for Reconsideration, respondent MERALCO contends that: (1) the deduction of income tax from revenues allowed for rate determination of public utilities is part of its constitutional right to property; (2) it correctly used the average investment method or the simple average in computing the value of its properties entitled to a return instead of the net average investment method or the number of months use method; and (3) the decision of the ERB ordering the refund of P0.167 per kwh to its customers should not be given retroactive effect.
[2]

The Republic of the Philippines through the ERB, now Energy Regulatory Commission (ERC), represented by the Office of the Solicitor General, filed its Comment on March 7, 2003. Surprisingly, in its Comment, the ERC proffered a divergent view from the Office of the Solicitor General. The ERC submits that income taxes are not operating expenses but are reasonable costs that may be recoverable from the consuming public. While the ERC admits that there is still no categorical determination on whether income tax should indeed be deducted from revenues of a public utility, it agrees with MERALCO that to disallow public utilities from recovering its income tax payments will effectively lower the return on rate base enjoyed by a public utility to 8%. The ERC, however, agrees with this Courts ruling that the use of the net average investment method or the number of months use method is not unreasonable.
[3]

The Office of the Solicitor General, under its solemn duty to protect the interests of the people, defended the thesis that income tax payments by a public utility should not be recovered as costs from the consuming public. It contended that: (1) the foreign jurisprudence cited by MERALCO in support of its position is not applicable in this jurisdiction; (2) MERALCO was given a fair rate of return; (3) the COA and the ERB followed the National Accounting and Auditing Manual which expressly disallows the treatment of income tax as operating expense; (4) Executive Order No. 72 does not grant electric utilities the privilege of treating income tax as operating expense; (5) the COA and the ERB have been consistent in not allowing income tax as part of operating expenses; (6) ERB decisions allowing the application of a tax recovery clause are inapropos; (7) allowing MERALCO to treat income tax as an operating expense would set a dangerous precedent; (8) assuming that the disallowance of income tax as operating expense would discourage foreign investors and lenders, the government is not precluded from enacting laws and instituting measures to lure them back; and (9) the findings and conclusions of the ERB carry great weight and should be binding on the courts in the absence of grave abuse of discretion. The Solicitor General agrees with the ERC that the net average investment method is a reasonable method for property valuation. Finally, the Solicitor General argues that the ERB decision may be applied retroactively and the use of a test period to determine the rate base and allowable rates to be collected by a public utility is an accepted practice.
[4]

We shall discuss the main issues in seriatim.


I

MERALCO argues that deduction of all kinds of taxes, including income tax, from the gross revenues of a public utility is firmly entrenched in American

jurisprudence. It contends that the Public Service Act (Commonwealth Act No. 146) was patterned after Act 2306 of the Philippine Commission, which, in turn, was borrowed from American state public utility laws such as the New Jersey Public Utility Act. Hence, it maintains that American jurisprudence on the inclusion of income taxes as a lawful charge to operating expenses should be controlling. It cites the rule on statutory construction that a statute adopted from a foreign country will be presumed to be adopted with the construction placed upon it by the courts of that country before its adoption.
[5]

We are not persuaded. American decisions and authorities are not per se controlling in this jurisdiction. At best, they are persuasive for no court holds a patent on correct decisions. Our laws must be construed in accordance with the intention of our own lawmakers and such intent may be deduced from the language of each law and the context of other local legislation related thereto. More importantly, they must be construed to serve our own public interest which is the be-all and the end-all of all our laws. And it need not be stressed that our public interest is distinct and different from others. Rate regulation calls for a careful consideration of the totality of facts and circumstances material to each application for an upward rate revision. Rate regulators should strain to strike a balance between the clashing interests of the public utility and the consuming public and the balance must assure a reasonable rate of return to public utilities without being unreasonable to the consuming public. What is reasonable or unreasonable depends on a calculus of changing circumstances that ebb and flow with time. Yesterday cannot govern today, no more than today can determine tomorrow. Prescinding from these premises, we reject MERALCOs insistence that the non-inclusion of income tax payments as a legitimate operating expense will deny public utilities a fair return of their investment. This stubborn stance is belied by the report submitted by the COA on the audit conducted on MERALCOs books of accounts and the findings of the ERB.
[6]

Upon the instructions of the ERB, the COA conducted an audit of the operations of MERALCO covering the period from February 1, 1994 to January 31, 1995, or the period immediately after the implementation of the provisional rate increase. Hence, amounts culled by the COA from its examination of the books of MERALCO already included the provisional rate increase of P0.184 granted by the ERB.
[7]

From the figures submitted by the COA, the ERB was able to determine that MERALCO derived excess revenue during the test year in the amount

of P2,448,378,000. This means that during the test year, and after the rates were increased by P0.184, MERALCO earned P2,448,378,000 or 8.15% more than the amount it should have earned at a 12% rate of return on rate base. Accordingly, based on this amount of excess revenue, the ERB determined that the provisional rate granted by it to MERALCO was P0.167 per kwh more than the amount MERALCO ought to charge its customers to obtain the prescribed 12% rate of return on rate base. Thus, the ERB correspondingly lowered the provisional increase by P0.167 per kwhand ordered MERALCO to increase its rates at a reduced amount of P0.017 per kwh, computed as follows:
[8] [9]

At appraised value Total Invested Capital Entitled to Return 12% return thereon Add: Total Operating expenses for Rate Determination Purposes Computed Revenue Actual Revenue Excess Revenue Percent of Excess Revenue to Invested Capital Authorized Rate of Return Actual Rate of Return Total kwh sold Ratio of Excess Revenue to Total kwh Sold P P P 30,059,614,000 3,607,154,000 P 38,260,420,000
[11] [10]

41,867,573,000

P 44,315,951,000 2,448,378,000 8.15% 12.00% 20.15% 14,640,094,000 P 0.167

In fact, even if MERALCOs income tax liability would be included as an operating expense, MERALCO would still enjoy excess revenue of P312,738,000.00 or 1.04% above the authorized rate of return of

12%. Based on its audit, the COA determined that the provision for income tax liability of MERALCO amounted to P2,135,639,000.00. Thus, even if such amount of income tax liability would be included as operating expense, the amount of excess revenue earned by MERALCO during the test year would be more than sufficient to cover the additional income tax expense. Thus:
[12]

At appraised value Total Invested Capital Entitled to Return 12% return thereon Add: Total Operating expenses for Rate Determination Purposes Computed Revenue Actual Revenue Excess Revenue Percent of Excess Revenue to Invested Capital Authorized Rate of Return Actual Rate of Return 12.00% 13.04% P P P 30,059,614,000 3,607,154,000 P 40,396,059,000
[13]

P 44,003,213,000 P 44,315,951,000 312,738,000 1.04%

It is crystal clear, therefore, that even if income tax is to be included as an operating expense and hence, recoverable from the consuming public, MERALCO would still enjoy a rate of return that is above the authorized rate of 12%. Public utilities cannot be allowed to overcharge at the expense of the public and worse, they cannot complain that they are not overcharging enough. Be that as it may, MERALCO contends that considering income tax payments of public utilities constitute one-third of their net income, public utilities will effectively get, not the 12% rate of return on rate base allowed them, but only about 8%. Again, we are not persuaded.
[14]

The foregoing argument assumes that the 12% return allowed to public utilities is equivalent to its taxable income which will be subject to income tax. The 12% rate of return is computedonly for the purpose of fixing the allowable rates to be charged by a public utility and is in no way determinative of the income subject to income tax of the public utility. The computation of a corporations income tax liability is an altogether different matter, with the corporations taxable income derived by taking into account the corporations gross revenues less allowable deductions.
[15]

At any rate, even on the assumption that in the test year involved (February 1, 1994 to January 31, 1995), MERALCOs computed revenue of P 41,867,573,000 or the amount that it is allowed to earn based on a 12% rate of return is its taxable income, after payment of its income tax liability of P2,135,639,000.00, MERALCO would still obtain an 11.38% rate of return or a return that is well within the 12% rate allowed to public utilities.
[16]

MERALCO also contends that even the successor of the ERB or the ERC created under the Electric Power Industry Reform Act of 2001 (EPIRA) adheres to the principle that income tax is part of operating expense. To bolster its argument, MERALCO cites Article 36 of the EPIRA which charges the ERC with the responsibility of unbundling the rates of the National Power Corporation (NPC) and each distribution utility coming within the coverage of the law. MERALCO alleges that pursuant to said provision, the ERC issued a set of Uniform Rate Filing Requirements (UFR) containing guidelines to be followed with respect to rate unbundling applications to be filed. MERALCO asserts that under the UFR, the enumeration of the expenses which are to be recovered through the rates, and which are to be separated or allocated for the purpose of unbundling of these rates include income tax expenses.
[17] [18] [19]

Under Section 36 of the EPIRA, the NPC and every distribution facility covered by the law is mandated to unbundle, segregate or itemize its rates according to the various sectors of the electric power industry identified in the law, namely: generation, transmission, distribution and supply. The law further directs the ERC to regulate and facilitate the unbundling of rates prescribed by Section 36. Thus, on October 30, 2001, the ERC issued guidelines prescribing the uniform rate filing requirements to be followed by distribution facilities for the purposes of unbundling rates.
[20] [21]

A proper appreciation of the UFR shows that it simply specifies a uniform accounting system to be complied with by a distribution facility when filing an application for revised rates under the EPIRA. As the EPIRA requires the unbundling or segregation of rates according to the different sectors of the

electric power industry, the UFR seeks to facilitate this process by properly identifying the accounts or information required for proper evaluation by the ERB. Thus, the introductory statements of the UFR provide: These uniform rate filing requirements are intended to promote consistency and completeness in the rate filings required by Republic Act No. 9136 (RA 9136), Section 36. To that end, the filing requirements only specify minimum form and content. A rate application in all its aspects continues to be subject to subsequent Commission review and deliberation.
[22]

At the onset, it is clear that the UFR does not seek to determine which accounting method will be used by the ERC for determination of rate base or the items of expenses that may be recovered by a public utility from its customers. The UFR only seeks to prescribe a uniform system or format to standardize or facilitate the process of unbundling of rates mandated by the EPIRA. At best, the UFR prescribes the set of raw data or figures to be disclosed by a distribution facility that the ERC will need to determine the authorized rates that a distribution facility may charge. The UFR does not, in any way, determine the manner by which the set of data or figures indicated in the rate application will be evaluated by the ERC for rate determination purposes.
II

MERALCO also challenges the use of the net average investment method or the number of months use method on the ground that MERALCO and the Public Service Commission (PSC) have been consistently applying the average investment method or simple average, which it alleged was also affirmed by this Court in the case of MERALCO v. PSC and Republic v. Medina.
[23] [24]

It is true that in MERALCO v. PSC, the issue of the proper valuation method to be used in determining the value of MERALCOs utility plants for rate fixing purposes was brought to fore. In the said case, MERALCO applied the average investment method or simple average by obtaining the average value of the utility plants, using its values at the beginning and at the end of the test year. In contrast, the General Auditing Office used the appraisal method which fixes the value of the utility plants by ascertaining the cost of production per kilowatt and multiplying the same by the total capacity of said plants, less the corresponding depreciation. In upholding the average investment method used by MERALCO, this Court adopted the findings of the PSC for being by and large, supported by the records of the case. This Court did not make an independent assessment of the validity or
[25] [26] [27]

applicability of the average investment method but simply did not disturb the findings of the PSC for being supported by substantial evidence. To conclude that the said decision affirmed the use of the average investment method thereby implying that the said method is the only method to be applied in all instances, is a strained reading of the decision. In fact, in the case of Republic v. Medina, also cited by MERALCO to have affirmed the use of the average investment method, this Court ruled:
[28]

The decided weight of authority, however, is to the effect that property valuation is not to be solved by formula but depends upon the particular circumstances and relevant facts affecting each utility as to what constitutes a just rate base and what would be a fair return, just to both the utility and the public.
[29]

Further, Mr. Justice Castro in his concurring opinion in the same case elucidated: A regulatory commissions field of inquiry, however, is not confined to the computation of the cost of service or capital nor to a mere prognostication of the future behavior of the money and capital markets. It must also balance investor and consumer expectations in such a way that broad requirements of public interest may be meaningfully realized. It would hence appear in keeping with its public duty if a regulatory body is allowed wide discretion in the choice of methods rationally related to the achievement of this end.
[30]

Thus, the rule then as it is now, is that rate regulating authorities are not hidebound to use any single formula or combination of formulas for property valuation purposes because the rate-making process involves the balancing of investor and consumer interests which takes into account various factors that may be unique or peculiar to a particular rate revision application. We again stress the long established doctrine that findings of administrative or regulatory agencies on matters which are within their technical area of expertise are generally accorded not only respect but at times even finality if such findings and conclusions are supported by substantial evidence. Rate fixing calls for a technical examination and a specialized review of specific details which the courts are ill-equipped to enter, hence, such matters are primarily entrusted to the administrative or regulating authority.
[31] [32]

Thus, this Court finds no reversible error on the part of the COA and the ERB in adopting the net average investment method or the number of months use method for property valuation purposes in the cases at bar.

III

MERALCO also rants against the retroactive application of the rate adjustment ordered by the ERB and affirmed by this Court. In its decision, the ERB, after authorizing MERALCO to adopt a rate adjustment in the amount of P0.017 per kwh, directed MERALCO to refund or credit to its customers future consumption the excess average amount of P0.167 per kwh from its billing cycles beginning February 1994 until its billing cycles beginning February 1998. In the decision appealed from, this Court likewise ordered that the refund in the average amount of P0.167 per kwh be made to retroact from MERALCOs billing cycles beginning February 1994.
[33] [34]

MERALCO contends that the refund cannot be given retroactive effect as the figures determined by the ERB only apply to the test year or the period subject of the COA Audit, i.e., February 1, 1994 to January 31, 1995. It reasoned that the amounts used to determine the proper rates to be charged by MERALCO would vary from year to year and thus the computation of the excess average charge of P0.167 would hold true only for the test year. Thus, MERALCO argues that if a refund of P0.167 would be uniformly applied to its billing cycles beginning 1994, with respect to periods after January 31, 1995, there will be instances wherein its operating revenues would fall below the 12% authorized rate of return. MERALCO therefore suggests that the dispositive portion be modified and order that the refund applicable to the periods after January 31, 1995 is to be computed on the basis of the excess collection in proportion to the excess over the 12% return.
[35]

The purpose of the audit procedures conducted in a rate application proceeding is to determine whether the rate applied for will generate a reasonable return for the public utility, which, in accordance with settled laws and jurisprudence, is 12% on rate base or the present value of the assets used in the operations of a public utility. For audit purposes, however, there is a need to obtain a sample set of data-- usually derived from figures within a designated period of time-- to determine the amount of returns obtained by a public utility during such period. In the cases at bar, the COA conducted an audit for the test year beginning February 1, 1994 and ending January 31, 1995 or a 12-month period immediately after the order of the ERB granting a provisional increase in the amount of P0.184 per kwh was issued. Thus, the ultimate issue resolved by the COA when it conducted its audit was whether the provisional increase granted by the ERB generated an amount of return well within the rates authorized by law. As stated earlier, based on the findings of the ERB, with the increase of P0.184 per kwh, MERALCO obtained a rate of return which was 8.15% more than the authorized rate of return of

12%. Thus, a refund in the amount of P0.167 was determined and ordered by ERB.
[36]

The essence of the use of a test year for auditing purposes is to obtain a sample or representative set of figures to enable the examining authority to arrive at a conclusion or finding based on the gathered data. The use of a test year does not mean that the information and conclusions so derived would only be correct for that year and would be incorrect on the succeeding years. The use of a test year assumes that within a reasonable period after such test year, figures used to determine the amount of return would only vary slightly from the figures culled during the test year such that the impact on the utilitys rate of return would not be very significant. Thus, in the event that there is a substantial change in circumstances significantly affecting the variable amounts that would determine the reasonableness of a return, an event which would normally occur after a certain period of time has elapsed, the public utility may subsequently apply for a rate revision. We agree with the Solicitor General that following MERALCOs reasoning that the figures culled from a test year would only be relevant during such year, there would be a need for public utilities to apply for a rate adjustment every year and perform an audit examination on a public utilitys books of accounts every year as the amount of a utilitys revenue may fall above or below the authorized rates at any given year. Needless to say, the trajectory of MERALCOs arguments will lead to an absurdity. From the time the order granting a provisional increase was issued by the ERB, nowhere in the records does it appear that the subsequent refund of P0.167 per kwh ordered by the ERB was ever implemented or executed by MERALCO. Accordingly, from January 28, 1994 MERALCO imposed on its customers a charge that is P0.167 in excess of the proper amount. In fact, any application for rate adjustment that may have been applied for and/or granted to MERALCO during the intervening period would have to be reckoned from rates increased by P0.184 per kwh as these were the rates prevailing at the time any application for rate adjustment was made by MERALCO.
[37]

While we agree that the amounts used to determine the utilitys rate of return would vary from year to year, we are unable to subscribe to the view that the refund applicable to the periods after January 31, 1995 should be computed on the basis of the excess collection in proportion to the excess over the 12% return. MERALCOs contention that the refund for periods after January 31, 1995 should be computed on the basis of revenue of each year in excess of the 12% authorized rate of return calls for a year-by-year computation of MERALCOs revenues and assets which would be contrary to

the essence of an audit examination of a public utility based on a test year. To grant MERALCOs prayer would, in effect, allow MERALCO the benefit of a year-by-year adjustment of rates not normally enjoyed by any other public utility required to adopt a subsequent rate modification. Indeed, had the ERB ordered an increase in the provisional rates it previously granted, said increase in rates would apply retroactively and would not have varied from year to year, depending on the variable amounts used to determine the authorized rates that may be charged by MERALCO. We find no significant circumstance prevailing in the cases at bar that would justify the application of a yearly adjustment as requested by MERALCO. WHEREFORE, in view of the foregoing, the petitioners Motion for Reconsideration is DENIED WITH FINALITY. SO ORDERED. Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur. Panganiban, J., please see separate opinion.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-49774 February 24, 1981 SAN MIGUEL CORPORATION (CAGAYAN COCA-COLA PLANT), petitioner, vs. Hon. AMADO G. INCIONG, Deputy Minister of Labor and CAGAYAN COCA-COLA FREE WORKERS UNION,respondents.

DE CASTRO, J.: Petition for certiorari and prohibition, with preliminary injunction to review the Order 1 dated December 19, 1978 rendered by the Deputy Minister of Labor in STF ROX Case No. 009-77 docketed as "Cagayan Coca-Cola Free Workers Union vs. Cagayan Coca-Cola Plant, San Miguel Corporation, " which denied herein petitioner's motion for reconsideration and ordered the immediate execution of a prior Order 2 dated June 7, 1978. On January 3, 1977, Cagayan Coca-Cola Free Workers Union, private respondent herein, filed a complaint against San Miguel Corporation (Cagayan Coca-Cola Plant), petitioner herein, alleging failure or refusal of the latter to include in the computation of 13th- month pay such items as sick, vacation or maternity leaves, premium for work done on rest days and special holidays, including pay for regular holidays and night differentials. An Order 3 dated February 15, 1977 was issued by Regional Office No. X where the complaint was filed requiring herein petitioner San Miguel Corporation (Cagayan Coca-Cola Plant) "to pay the difference of whatever earnings and the amount actually received as 13th month pay excluding overtime premium and emergency cost of living allowance. " Herein petitioner appealed from that Order to the Minister of Labor in whose behalf the Deputy Minister of Labor Amado G. Inciong issued an Order 4 dated June 7, 1978 affirming the Order of Regional Office No. X and dismissing the appeal for lack of merit. Petitioner's motion for reconsideration having been denied, it filed the instant petition. On February 14, 1979, this Court issued a Temporary Restraining Order 5 enjoining respondents from enforcing the Order dated December 19, 1978. The crux of the present controversy is whether or not in the computation of the 13th-month pay under Presidential Decree 851, payments for sick, vacation or maternity leaves, premium for work done on rest days and special holidays, including pay for regular holidays and night differentials should be considered. Public respondent's consistent stand on the matter since the effectivity of Presidential Decree 851 is that "payments for sick leave, vacation leave, and maternity benefits, as well as salaries paid to employees for work performed on rest days, special and regular holidays are included in the computation of the 13th-month pay. 6 On its part, private respondent cited innumerable past rulings, opinions and decisions rendered by then Acting Labor Secretary Amado G. Inciong to the effect that, "in computing the mandatory bonus, the basis is the total gross basic salary paid by the employer during the calendar year. Such gross basic salary includes: (1) regular salary or wage; (2) payments for sick, vacation and maternity leaves; (3) premium for work performed on rest days or holidays: (4) holiday pay for worked or unworked regular holiday; and (5) emergency allowance if given in the form of a wage adjustment." 7 Petitioner, on the other hand, assails as erroneous the aforesaid order, ruling and opinions, vigorously contends that Presidential Decree 851 speaks only of basic salary as basis for the determination of the 13th-month pay; submits

that payments for sick, vacation, or maternity leaves, night differential pay, as well as premium paid for work performed on rest days, special and regular holidays do not form part of the basic salary; and concludes that the inclusion of those payments in the computation of the 13th-month pay is clearly not sanctioned by Presidential Decree 851. The Court finds petitioner's contention meritorious. The provision in dispute is Section 1 of Presidential Decree 851 and provides: All employers are hereby required to pay all their employees receiving a basic salary of not more than Pl,000 a month, regardless of the nature of the employment, a 13th-month pay not later than December 24 of every year. Section 2 of the Rules and Regulations for the implementation of Presidential Decree 851 provides: a) Thirteenth-month pay shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year b) Basic salary shall include all remunerations on earnings paid by an employer to an employee for services rendered but may not include cost-of-living allowances granted pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profit sharing payments and all allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975. Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used as the basis in the determination of his 13th-month pay. Any compensations or remunerations which are deemed not part of the basic pay is excluded as basis in the computation of the mandatory bonus. Under the Rules and Regulations Implementing Presidential Decree 851, the following compensations are deemed not part of the basic salary: a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instructions No. 174; b) Profit sharing payments; c) All allowances and monetary benefits which are not considered or integrated as part of the regular basic salary of tile employee at the time of the promulgation of the Decree on December 16, 1975. Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851 issued by the then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are excluded as part of the basic salary and in the computation of the 13th-month pay. The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of Instructions No. 174, and profit sharing payments indicate the intention to strip basic salary of other payments which are properly considered as "fringe" benefits. Likewise, the catch-all exclusionary phrase "all allowances and monetary benefits which are not considered or integrated as part of the basic salary" shows also the intention to strip basic salary of any and all additions which may be in the form of allowances or "fringe" benefits. Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even more emphatic in declaring that earnings and other remunerations which are not part of the basic salary shall not be included in the computation of the 13th-month pay. While doubt may have been created by the prior Rules and Regulations Implementing Presidential Decree 851 which defines basic salary to include all remunerations or earnings paid by an employer to an employee, this cloud is dissipated in the later and more controlling Supplementary Rules and Regulations which categorically, exclude from

the definition of basic salary earnings and other remunerations paid by employer to an employee. A cursory perusal of the two sets of Rules indicates that what has hitherto been the subject of a broad inclusion is now a subject of broad exclusion. The Supplementary rules and Regulations cure the seeming tendency of the former rules to include all remunerations and earnings within the definition of basic salary. The all-embracing phrase "earnings and other renumeration" which are deemed not part of the basic salary includes within its meaning payments for sick, vacation, or maternity leaves. Maternity premium for works performed on rest days and special holidays pays for regular holidays and night differentials. As such they are deemed not part of the basic salary and shall not be considered in the computation of the 13th-month they, were not so excluded, it is hard to find any "earnings and other remunerations" expressly excluded in the computation of the 13th-month pay. Then the exclusionary provision would prove to be Idle and with no purpose. This conclusion finds strong support under the Labor Code of the Philippines. To cite a few provisions: Art. 87. overtime work. Work may be performed beyond eight hours a day provided what the employee is paid for the overtime work, additional compensation equivalent to his regular wage plus at least twenty-five (25%) percent thereof. It is clear that overtime pay is an additional compensation other than and added to the regular wage or basic salary, for reason of which such is categorically excluded from the definition of basic salary under the Supplementary Rules and Regulations Implementing Presidential Decree 851. In Article 93 of the same Code, paragraph c) work performed on any special holiday shall be paid an additional compensation of at least thirty percent (30%) of the regular wage of the employee. It is likewise clear that prernium for special holiday which is at least 30% of the regular wage is an additional compensation other than and added to the regular wage or basic salary. For similar reason it shall not be considered in the computation of the 13th- month pay. WHEREFORE, the Orders of the Deputy Labor Minister dated June 7, 1978 and December 19, 1978 are hereby set aside and a new one entered as above indicated. The Temporary Restraining Order issued by this Court on February 14, 1979 is hereby made permanent. No pronouncement as to costs. SO ORDERED. Teehankee (Chairman), Makasiar, Fernandez, Guerrero and Melencio-Herrera, JJ., concur. Mr. Justice de Castro was designated to sit with the First Division under Special Order No. 225.

THIRD DIVISION

[G.R. No. 121075. July 24, 1997]

DELTA MOTORS CORPORATION, petitioner, vs. COURT OF APPEALS, HON. ROBERTO M. LAGMAN, and STATE INVESTMENT HOUSE, INC.,respondents. DECISION
DAVIDE, JR., J.:

This is a Petition for Certiorari[1] under Rule 65 of the Revised Rules of Court seeking the reversal of the Resolutions of the Court of Appeals in CA-G.R. SP No. 29147 dated 5 January 1995[2] and 14 July 1995.[3] The former denied the Omnibus Motion filed by petitioner Delta Motors Corporation (hereinafter DELTA), while the latter amended the earlier Resolution. The pleadings and annexes in the record of CA-G.R. SP No. 29147 disclose the following material operative facts:

Private respondent State Investment House, Inc. (hereinafter, SIHI) brought an action for a sum of money against DELTA in the Regional Trial Court (RTC) of Manila, Branch VI. The case was docketed as Civil Case No. 84-23019. DELTA was declared in default, and on 5 December 1984, the RTC, per Judge Ernesto Tengco, rendered a decision the dispositive portion of which reads as follows:
[4]

WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered ordering the defendant to pay unto plaintiff the amount of P20,061,898.97 as its total outstanding obligation and to pay 25% of the total obligation as and for attorney's fees, plus cost of suit.
The decision could not be served on DELTA, either personally or by registered mail, due to its earlier dissolution. However, Delta had been taken over by the Philippine National Bank (PNB) in the meantime. This notwithstanding, SIHI moved, on 4 November 1986, for service of the decision by way of publication, which the trial court allowed in its order of 6 December 1986. The decision was published in the Thunderer, a weekly newspaper published in Manila. After publication, SIHI moved for execution of the judgment, which the trial court granted in its order of 11 March 1987 on the ground that no appeal had been taken by DELTA despite publication of the decision. The writ

of execution was issued and pursuant thereto certain properties of DELTA in Iloilo and Bacolod City were levied upon and sold. The sheriff likewise levied on some other properties of DELTA. DELTA then commenced a special civil action for certiorari with the Court of Appeals, which was docketed as CA-G.R. SP No. 23068, wherein DELTA insisted that: (a) the trial court did not acquire jurisdiction over the person of the defendant (DELTA) since there was no valid/proper service of summons, thus rendering the decision null and void; and (b) the void decision never became final and executory. In its decision of 22 January 1991[5] the Court of Appeals ruled against DELTA on the first ground, but found that the record before it "is bereft of any showing that a copy of the assailed judgment had been properly served on P.N.B. which assumed DELTA's operation upon the latter's dissolution." Accordingly the Court of Appeals ruled that:

[T]he [decision] did not become executory (Vda. de Espiritu v. CFI, L-30486, Oct. 31, 1972; Tuazon v. Molina, L-55697, Feb. 26, 1981).
It further opined that service by publication did not cure the fatal defect and thus decreed as follows:

WHEREFORE, while the assailed decision was validly rendered by the respondent court, nonetheless it has not attained finality pending service of a copy thereof on petitioner DELTA, which may appeal therefore within the reglementary period.
[6]

In a motion for reconsideration, DELTA insisted that there was no valid service of summons and the decision of the RTC was not in accordance with the Rules, hence, void.[7] SIHI also filed a motion for reconsideration claiming that DELTA was not dissolved, and even if it were, its corporate personality to receive service of processes subsisted; moreover, its right to appeal had been lost. [8] These motions were denied by the Court of Appeals in its resolution of 27 May 1991.[9] Unsatisfied, DELTA filed with this Court a petition for review on certiorari (G.R. No. 100366) which was denied in the resolution of 16 September 1991 for non-compliance with Circular No. 1-88. A motion for reconsideration was denied in the resolution of 9 October 1991, a copy of which was received by DELTA on 31 October 1991.[10] On 12 November 1991, DELTA filed a Notice of Appeal[11] with the RTC in Civil Case No. 84-23019, indicating therein that it was appealing from the 5 December 1984 decision, and prayed as follows:

WHEREFORE, it is most respectfully prayed of this Honorable Court that this Notice of Appeal be noted and the records of this case be elevated to the Court of Appeals.
SIHI filed on 2 December 1991 a motion to dismiss DELTA's appeal[12] on the ground that it was filed out of time, since DELTA obtained a certified true copy of the decision from the RTC on 21 September 1990, hence it had only fifteen days therefrom within which to appeal from the decision. Despite DELTA's opposition,[13] the trial court

dismissed the Notice of Appeal.[14] DELTA moved to reconsider,[15] which SIHI opposed.[16] In its order[17] of 14 September 1992 the trial court denied Deltas motion. DELTA then filed with the Court of Appeals a petition for certiorari under Rule 65 of the Rules of Court. The case was docketed as CA-G.R. SP NO. 29147.[18] In its petition, Delta prayed for the: (a) annulment of the order of the trial court dated 3 June 1992 dismissing the Notice of Appeal dated 6 November 1991; (b) annulment of the order of the trial court dated 14 September 1992 denying the motion for reconsideration of the former; and (c) elevation of the original records of Civil Case No. 84-23019 to the Court of Appeals. On 30 October 1992 the Court of Appeals issued in CA-G.R. SP No. 29147 a restraining order enjoining respondents and any and all other persons acting on their behalf "from enforcing or directing the enforcement of the Decision, subject of the petition."[19] Thereafter, in its resolution promulgated on 22 December 1992,[20] the Court of Appeals gave due course to the petition in said case, considered the comments of private respondents therein as its answer and required the parties to submit their respective memoranda. On 17 June 1993 the Court of Appeals promulgated its decision [21] in CA-G.R. SP No. 29147, the dispositive portion providing:

WHEREFORE, the questioned order of the respondent court dated June 3, 1992, dismissing the notice of appeal dated November 6, 1991; and the order dated September 14, 1992 of the same court denying the motion for reconsideration filed by the petitioner, through counsel, are hereby SET ASIDE; and respondent court hereby ordered to ELEVATE the records of the case to the Court of Appeals, on appeal.
On 18 January 1993, the RTC elevated the record of Civil Case No. 84-23019 to the Court of Appeals. SIHI appealed to this Court from the decision by way of a petition for review. [22] It contended that DELTA had lost the right to appeal in view of the lapse of more than 15 days from DELTAs receipt of a certified true copy of the RTC decision in Civil Case No. 84-23019. This petition for review was docketed as G.R. No. 110677.[23] While SIHI's petition in G.R. No. 110677 was pending before this Court, DELTA filed on 14 February 1994, in CA G.R. SP No. 29147 of the Court of Appeals, an Omnibus Motion[24] to:
1) DECLARE AS NULL AND VOID AB INITIO AND WITHOUT ANY FORCE AND EFFECT THE ORDER OF RESPONDENT COURT DATED MARCH 11, 1987 ORDERING THE ISSUANCE OF THE WRIT OF EXECUTION; 2) DECLARE AS NULL AND VOID AB INITIO AND WITHOUT ANY FORCE AND EFFECT THE WRIT OF EXECUTION ISSUED PURSUANT TO THE ORDER DATED MARCH 11, 1987;

3) ALL OTHER PROCEEDINGS HELD, CONDUCTED AND EXECUTED BY RESPONDENT SHERIFF IMPLEMENTING THE AFORESAID WRIT OF EXECUTION.

SIHI opposed the motion[25] on grounds that: a) there was a pending appeal by certiorari with this Court, thus the Court of Appeals was without jurisdiction to entertain the Omnibus Motion; b) the Omnibus Motion was barred by res judicata; and c) the filing of the Omnibus Motion was a clear act of forum-shopping and should then be denied outright. In its resolution of 7 June 1994, the Court of Appeals merely noted the Omnibus Motion and stated:

It appearing that there is a pending petition for review with the Supreme Court of this Court's Decision dated June 17, 1993, it would be improper for this Court to act on the Omnibus Motion filed by petitioner Delta Motor Corporation x x x.
[26]

On 18 July 1994 this Courts Second Division issued a resolution [27] in G.R. No. 110677 denying the petition therein for failure to sufficiently show that the Court of Appeals committed reversible error in the questioned judgment. SIHI's motion for reconsideration was denied in the resolution of this Court of 21 September 1994.[28] On 26 October 1994 DELTA filed a manifestation and motion [29] to resolve its Omnibus Motion of February 10, 1994. In its resolution of 5 January 1995,[30] the Court of Appeals denied DELTA's Omnibus Motion, holding:

[T]he matters prayed for in the Omnibus Motion of petitioner Delta Motor Corporation dated February 10, 1994 and abovequoted are matters which were not raised as issues by petitioner in the instant petition and, therefore, not within the jurisdiction and power of this Court in the instant petition to decide.
[31]

On 27 January 1995 DELTA filed a motion for reconsideration and/or clarification[32] wherein it alleged that: (a) while it was true that the matters prayed for in the Omnibus Motion of petitioner were not raised in the instant petition, they were, nevertheless, included in the general prayer in the petition for such other reliefs and remedies just and equitable in the premises; (b) it could not file the Omnibus Motion with the RTC since the records of Civil Case No. 84-23019 had already been elevated to the Court of Appeals and upon the perfection of the appeal, the trial court lost jurisdiction over the case; and (c) the matters raised in the Omnibus Motion were incidental to and included in the appellate jurisdiction of the Court of Appeals. On the other hand, on 2 February 1995, SIHI filed a motion for clarification[33] wherein it asked for the deletion, for being mere obiter dictum, the following paragraph in the Resolution of 5 January 1995, to wit:

While it is true that as a necessary consequence the decision of the Court of Appeals dated January 22, 1991 ruling that the decision in Civil Case No. 8423019 "has not attained finality pending service of a copy thereof on petitioner Delta, which may appeal therefrom within the reglementary period", all proceedings and/or orders arising from the trial court's decision in Civil Case No. 84-23019 are null and void x x x .
SIHI argued that this paragraph was not necessary to the decision of the case before it[34] and cannot be considered binding for the purpose of establishing precedent; [35] likewise, the Resolution itself did not decide the incident on its merits or consider and dispose of the issues, nor determine the respective rights of the parties concerned. In its resolution of 14 July 1995,[36] the Court of Appeals granted SIHI's motion for clarification and denied DELTA's motion for reconsideration. As to the latter, it ruled that:

[P]etitioner DELTA is not without remedy, especially considering the ruling of the Court of Appeals in the first petition for certiorari (CA-G.R. SP No. 23068) which ruled thus: "WHEREFORE, while the assailed decision was validly rendered by the respondent court, nonetheless it has not attained finality pending service of a copy thereof on petitioner DELTA, which may appeal therefrom within the reglementary period." Clearly, the only issue in this petition (CA-G.R. SP No. 29147) is as to the validity of the questioned orders of respondent court dated June 3, 1992 (dismissing the notice of appeal dated November 6, 1991) and the Order dated September 14, 1992 of the same court (denying the motion for reconsideration filed by the petitioner through counsel).
[37]

It then decreed to amend its Resolution of 5 January 1995 by deleting the assailed paragraph. DELTA then filed the instant petition, insisting that the matters raised in the Omnibus Motion were incidental to and included in the appellate jurisdiction of the Court of Appeals; hence, it had jurisdiction to rule on said motion. As regards the grant of SIHI's motion to strike out a paragraph in the resolution of 5 January 1995 for being obiter dictum, DELTA submitted that the latter contained a finding or affirmation of fact, thus could not have constituted obiter dictum. After SIHI filed its comment, we gave due course to the petition and required the parties to submit their respective memoranda. DELTA and SIHI did so on 16 April 1996 and on 13 May 1996, respectively. After a painstaking review of the record in CA-G.R. SP No. 29147, we are more than convinced that respondent Court of Appeals committed no reversible error in denying DELTAs Omnibus Motion. The decision of the Court of Appeals of 17 June

1993 in CA-G.R. SP No. 29147 had long become final insofar as DELTA was concerned, and it very well knew that the only issues raised therein concerned the trial courts orders of 3 June 1992 and 14 September 1992. As a matter of fact, at the time Delta filed the petition in CA-G.R. SP No. 29147, the orders sought to be declared null and void in the Omnibus Motion had already been issued, they having been so issued at the commencement of CA-G.R. SP No. 23068. In short, if DELTA intended such orders to be challenged in CA-G.R. SP No. 29147, it could have explicitly alleged them as sources of additional causes of action and prayed for the corresponding affirmative relief therefrom, and if this course of action initially proved unavailing then DELTA could and should have moved for reconsideration on that aspect. After the finality of the decision in said case, any attempt to introduce or revive the issue had become procedurally impermissible. Plainly, the issues raised in the Omnibus Motion could have been allowed during the pendency of said case by way of amendments to the petition. Moreover, the Court of Appeals correctly denied petitioner's Omnibus Motion in keeping with jurisprudence[38] concerning Section 7 of Rule 51 of the Rules of Court on the Procedure in the Court of Appeals, which mandates that:

Sec. 7. Questions that may be decided. -- No error which does not affect the jurisdiction over the subject matter will be considered unless stated in the assignment of errors and properly argued in the brief, save as the court, at its option, may notice plain errors not specified, and also clerical errors.
Clearly then, the Court of Appeals could only consider errors raised by petitioner in CA-G.R. SP No. 29147, which were limited to the trial court's orders of 3 June 1992 and 14 September 1992. These were the only errors Delta argued extensively in its brief. To allow DELTA's Omnibus Motion which it filed more than eight months from promulgation of the decision in CA-G.R. SP No. 29147, or long after finality of said case, would result in abandonment of sound judicial process. In light of the dispositive portions of the Court of Appeals decisions of 22 January 1991 in CA-G.R. SP No. 23068, and of 17 June 1993 in CA-G.R. SP No. 29147, we cannot agree with SIHI that DELTA is barred by res judicata. This conclusion is further fortified by the unequivocal statements of the Court of Appeals in its challenged resolution of 14 July 1995 that:

[P]etitioner DELTA is not without remedy, especially considering the ruling of the Court of Appeals in the first petition for certiorari (CA-G.R. SP No. 23068) ...
xxx

Clearly, the only issue in this petition (CA-G.R. SP No. 29147) is as to the validity of the questioned orders of respondent court dated June 3, 1992 (dismissing the notice of appeal dated November 6, 1991) and the Order dated September 14, 1992 of the same court (denying the motion for reconsideration filed by the petitioner through counsel).

The Court of Appeals likewise did not commit reversible error in deleting the phrase SIHI protested as obiter dictum. An obiter dictum has been defined as an opinion expressed by a court upon some question of law which is not necessary to the decision of the case before it. [39] It is a remark made, or opinion expressed, by a judge, in his decision upon a cause, "by the way," that is, incidentally or collaterally, and not directly upon the question before him, or upon a point not necessarily involved in the determination of the cause, or introduced by way of illustration, or analogy or argument. Such are not binding as precedent.[40] The assailed phrase was indeed obiter dictum as it touched upon a matter not raised by petitioner expressly in its petition assailing the dismissal of its notice of appeal. It was not a prerequisite in disposing of the aforementioned issue. The body of the resolution did not contain any discussion on such matter nor mention any principle of law to support such statement. WHEREFORE, the instant petition is DISMISSED and the challenged resolutions of 5 January 1995 and 14 July 1995 in C.A. G.R.-SP. NO. 29147 are AFFIRMED. Costs against petitioner. SO ORDERED. Narvasa, (Chairman,) Francisco, and Panganiban, JJ., concur. Melo, J., no part.

EN BANC

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

KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father and Natural Guardian, and Spouses FEDERICO N. SALVACION, JR., and EVELINA E. SALVACION, petitioners, vs. CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING CORPORATION and GREG BARTELLI y NORTHCOTT, respondents. DECISION
TORRES, JR., J.:

In our predisposition to discover the original intent of a statute, courts become the unfeeling pillars of the status quo. Little do we realize that statutes or even constitutions are bundles of compromises thrown our way by their framers. Unless we exercise vigilance, the statute may already be out of tune and irrelevant to our day. The petition is for declaratory relief. It prays for the following reliefs:

a.) Immediately upon the filing of this petition, an Order be issued restraining the respondents from applying and enforcing Section 113 of Central Bank Circular No. 960; b.) After hearing, judgment be rendered: 1.) Declaring the respective rights and duties of petitioners and respondents; 2.) Adjudging Section 113 of Central Bank Circular No. 960 as contrary to the provision of the Constitution, hence void; because its provision that Foreign currency deposits shall be exempt from attachment, garnishment, or any other order to process of any court, legislative body, government agency or any administrative body whatsoever i.) has taken away the right of petitioners to have the bank deposit of defendant Greg Bartelli y Northcott garnished to satisfy the judgment rendered in petitioners favor in violation of substantive due process guaranteed by the Constitution;

ii.) has given foreign currency depositors an undue favor or a class privilege in violation of the equal protection clause of the Constitution; iii.) has provided a safe haven for criminals like the herein respondent Greg Bartelli y Northcott since criminals could escape civil liability for their wrongful acts by merely converting their money to a foreign currency and depositing it in a foreign currency deposit account with an authorized bank.
The antecedents facts: On February 4, 1989, Greg Bartelli y Northcott, an American tourist, coaxed and lured petitioner Karen Salvacion, then 12 years old to go with him to his apartment. Therein, Greg Bartelli detained Karen Salvacion for four days, or up to February 7, 1989 and was able to rape the child once on February 4, and three times each day on February 5, 6, and 7, 1989. On February 7, 1989, after policemen and people living nearby, rescued Karen, Greg Bartelli was arrested and detained at the Makati Municipal Jail. The policemen recovered from Bartelli the following items: 1.) Dollar Check No. 368, Control No. 021000678-1166111303, US 3,903.20; 2.) COCOBANK Bank Book No. 104-108758-8 (Peso Acct.); 3.) Dollar Account China Banking Corp., US $/A#54105028-2; 4.) ID-122-308877; 5.) Philippine Money (P234.00) cash; 6.) Door Keys 6 pieces; 7.) Stuffed Doll (Teddy Bear) used in seducing the complainant. On February 16, 1989, Makati Investigating Fiscal Edwin G. Condaya filed against Greg Bartelli, Criminal Case No. 801 for Serious Illegal Detention and Criminal Cases Nos. 802, 803, 804, and 805 for four (4) counts of Rape. On the same day, petitioners filed with the Regional Trial Court of Makati Civil Case No. 89-3214 for damages with preliminary attachment against Greg Bartelli. On February 24, 1989, the day there was a scheduled hearing for Bartellis petition for bail the latter escaped from jail. On February 28, 1989, the court granted the fiscals Urgent Ex-Parte Motion for the Issuance of Warrant of Arrest and Hold Departure Order. Pending the arrest of the accused Greg Bartelli y Northcott, the criminal cases were archived in an Order dated February 28, 1989. Meanwhile, in Civil Case No. 89-3214, the Judge issued an Order dated February 22, 1989 granting the application of herein petitioners, for the issuance of the writ of preliminary attachment. After petitioners gave Bond No. JCL (4) 1981 by FGU Insurance Corporation in the amount P100,000.00, a Writ of Preliminary Attachment was issued by the trial court on February 28, 1989. On March 1, 1989, the Deputy Sheriff of Makati served a Notice of Garnishment on China Banking Corporation. In a letter dated March 13, 1989 to the Deputy Sheriff of Makati, China Banking Corporation invoked Republic Act No. 1405 as its answer to the notice of garnishment served on it. On March 15, 1989, Deputy Sheriff of Makati Armando de Guzman sent his reply to China Banking Corporation saying that the garnishment did not violate the secrecy of bank deposits since the disclosure is merely

incidental to a garnishment properly and legally made by virtue of a court order which has placed the subject deposits in custodia legis. In answer to this letter of the Deputy Sheriff of Makati, China Banking Corporation, in a letter dated March 20, 1989, invoked Section 113 of Central Bank Circular No. 960 to the effect that the dollar deposits of defendant Greg Bartelli are exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body, whatsoever. This prompted the counsel for petitioners to make an inquiry with the Central Bank in a letter dated April 25, 1989 on whether Section 113 of CB Circular No. 960 has any exception or whether said section has been repealed or amended since said section has rendered nugatory the substantive right of the plaintiff to have the claim sought to be enforced by the civil action secured by way of the writ of preliminary attachment as granted to the plaintiff under Rule 57 of the Revised Rules of Court. The Central Bank responded as follows:

May 26, 1989 Ms. Erlinda S. Carolino 12 Pres. Osmea Avenue South Admiral Village Paranaque, Metro Manila Dear Ms. Carolino: This is in reply to your letter dated April 25, 1989 regarding your inquiry on Section 113, CB Circular No. 960 (1983). The cited provision is absolute in application. It does not admit of any exception, nor has the same been repealed nor amended. The purpose of the law is to encourage dollar accounts within the countrys banking system which would help in the development of the economy. There is no intention to render futile the basic rights of a person as was suggested in your subject letter. The law may be harsh as some perceive it, but it is still the law. Compliance is, therefore, enjoined. Very truly yours, (SGD) AGAPITO S. FAJARDO Director
[1]

Meanwhile, on April 10, 1989, the trial court granted petitioners motion for leave to serve summons by publication in the Civil Case No. 89-3214 entitled Karen Salvacion. et al. vs. Greg Bartelli y Northcott. Summons with the complaint was published in the Manila Times once a week for three consecutive weeks. Greg Bartelli

failed to file his answer to the complaint and was declared in default on August 7, 1989. After hearing the case ex-parte, the court rendered judgment in favor of petitioners on March 29, 1990, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against defendant, ordering the latter: 1. To pay plaintiff Karen E. Salvacion the amount of P500,000.00 as moral damages; 2. To pay her parents, plaintiffs spouses Federico N. Salvacion, Jr., and Evelina E. Salvacion the amount of P150,000.00 each or a total of P300,000.00 for both of them; 3. To pay plaintiffs exemplary damages of P100,000.00; and 4. To pay attorneys fees in an amount equivalent to 25% of the total amount of damages herein awarded; 5. To pay litigation expenses of P10,000.00; plus 6. Costs of the suit. SO ORDERED.
The heinous acts of respondents Greg Bartelli which gave rise to the award were related in graphic detail by the trial court in its decision as follows:

The defendant in this case was originally detained in the municipal jail of Makati but was able to escape therefrom on February 24, 1989 as per report of the Jail Warden of Makati to the Presiding Judge, Honorable Manuel M. Cosico of the Regional Trial Court of Makati, Branch 136, where he was charged with four counts of Rape and Serious Illegal Detention (Crim. Cases Nos. 802 to 805). Accordingly, upon motion of plaintiffs, through counsel, summons was served upon defendant by publication in the Manila Times, a newspaper of general circulation as attested by the Advertising Manager of the Metro Media Times, Inc., the publisher of the said newspaper. Defendant, however, failed to file his answer to the complaint despite the lapse of the period of sixty (60) days from the last publication; hence, upon motion of the plaintiffs through counsel, defendant was declared in default and plaintiffs were authorized to present their evidence ex parte. In support of the complaint, plaintiffs presented as witness the minor Karen E. Salvacion, her father, Federico N. Salacion, Jr., a certain Joseph Aguilar and a certain Liberato Mandulio, who gave the following testimony: Karen took her first year high school in St. Marys Academy in Pasay City but has recently transferred to Arellano University for her second year.

In the afternoon of February 4, 1989, Karen was at the Plaza Fair Makati Cinema Square, with her friend Edna Tangile whiling away her free time. At about 3:30 p.m. while she was finishing her snack on a concrete bench in front of Plaza Fair, an American approached her. She was then alone because Edna Tangile had already left, and she was about to go home. (TSN, Aug. 15, 1989, pp. 2 to 5) The American asked her name and introduced himself as Greg Bartelli. He sat beside her when he talked to her. He said he was a Math teacher and told her that he has a sister who is a nurse in New York. His sister allegedly has a daughter who is about Karens age and who was with him in his house along Kalayaan Avenue. (TSN, Aug. 15, 1989, pp. 4-5). The American asked Karen what was her favorite subject and she told him its Pilipino. He then invited her to go with him to his house where she could teach Pilipino to his niece. He even gave her a stuffed toy to persuade her to teach his niece. (Id., pp.5-6) They walked from Plaza Fair along Pasong Tamo, turning right to reach the defendants house along Kalayaan Avenue. (Id., p.6) When they reached the apartment house, Karen notices that defendants alleged niece was not outside the house but defendant told her maybe his niece was inside. When Karen did not see the alleged niece inside the house, defendant told her maybe his niece was upstairs, and invited Karen to go upstairs. (Id., p. 7) Upon entering the bedroom defendant suddenly locked the door. Karen became nervous because his niece was not there. Defendant got a piece of cotton cord and tied Karens hands with it, and then he undressed her. Karen cried for help but defendant strangled her. He took a packing tape and he covered her mouth with it and he circled it around her head. (Id., p. 7) Then, defendant suddenly pushed Karen towards the bed which was just near the door. He tied her feet and hands spread apart to the bed posts. He knelt in front of her and inserted his finger in her sex organ. She felt severe pain. She tried to shout but no sound could come out because there were tapes on her mouth. When defendant withdrew his finger it was full of blood and Karen felt more pain after the withdrawal of the finger. (Id., p.8) He then got a Johnsons Baby Oil and he applied it to his sex organ as well as to her sex organ. After that he forced his sex organ into her but he was not able to do so. While he was doing it, Karen found it difficult to breathe and she perspired a lot while feeling severe pain. She merely presumed that he was able to insert his sex

organ a little, because she could not see. Karen could not recall how long the defendant was in that position. (Id., pp. 8-9) After that, he stood up and went to the bathroom to wash. He also told Karen to take a shower and he untied her hands. Karen could only hear the sound of the water while the defendant, she presumed, was in the bathroom washing his sex organ. When she took a shower more blood came out from her. In the meantime, defendant changed the mattress because it was full of blood. After the shower, Karen was allowed by defendant to sleep. She fell asleep because she got tired crying. The incident happened at about 4:00 p.m. Karen had no way of determining the exact time because defendant removed her watch. Defendant did not care to give her food before she went to sleep. Karen woke up at about 8:00 oclock the following morning. (Id., pp. 9-10) The following day, February 5, 1989, a Sunday, after breakfast of biscuit and coke at about 8:30 to 9:00 a.m. defendant raped Karen while she was still bleeding. For lunch, they also took biscuit and coke. She was raped for the second time at about 12:00 to 2:00 p.m. In the evening, they had rice for dinner which defendant had stored downstairs; it was he who cooked the rice that is why it looks like lugaw. For the third time, Karen was raped again during the night. During those three times defendant succeeded in inserting his sex organ but she could not say whether the organ was inserted wholly. Karen did not see any firearm or any bladed weapon. The defendant did not tie her hands and feet nor put a tape on her mouth anymore but she did not cry for help for fear that she might be killed; besides, all those windows and doors were closed. And even if she shouted for help, nobody would hear her. She was so afraid that if somebody would hear her and would be able to call a police, it was still possible that as she was still inside the house, defendant might kill her. Besides, the defendant did not leave that Sunday, ruling out her chance to call for help. At nighttime he slept with her again. (TSN, Aug. 15, 1989, pp. 12-14) On February 6, 1989, Monday, Karen was raped three times, once in the morning for thirty minutes after breakfast of biscuits; again in the afternoon; and again in the evening. At first, Karen did not know that there was a window because everything was covered by a carpet, until defendant opened the window for around fifteen minutes or less to let some air in, and she found that the window was covered by styrofoam and plywood. After that, he again closed the window with a hammer and he put the styrofoam, plywood, and carpet back. (Id., pp. 14-15) That Monday evening, Karen had a chance to call for help, although defendant left but kept the door closed. She went to the bathroom and saw a small window covered

by styrofoam and she also spotted a small hole. She stepped on the bowl and she cried for help through the hole. She cried: Maawa na po kayo sa akin. Tulungan nyo akong makalabas dito. Kinidnap ako! Somebody heard her. It was a woman, probably a neighbor, but she got angry and said she was istorbo. Karen pleaded for help and the woman told her to sleep and she will call the police. She finally fell asleep but no policeman came. (TSN, Aug. 15, 1989, pp. 15-16) She woke up at 6:00 oclock the following morning, and she saw defendant in bed, this time sleeping. She waited for him to wake up. When he woke up, he again got some food but he always kept the door locked. As usual, she was merely fed with biscuit and coke. On that day, February 7, 1989, she was again raped three times. The first at about 6:30 to 7:00 a.m., the second at about 8:30 9:00, and the third was after lunch at 12:00 noon. After he had raped her for the second time he left but only for a short while. Upon his return, he caught her shouting for help but he did not understand what she was shouting about. After she was raped the third time, he left the house. (TSN, Aug. 15, 1989, pp. 16-17) She again went to the bathroom and shouted for help. After shouting for about five minutes, she heard many voices. The voices were asking for her name and she gave her name as Karen Salvacion. After a while, she heard a voice of a woman saying they will just call the police. They were also telling her to change her clothes. She went from the bathroom to the room but she did not change her clothes being afraid that should the neighbors call the police and the defendant see her in different clothes, he might kill her. At that time she was wearing a T-shirt of the American bacause the latter washed her dress. (Id., p. 16) Afterwards, defendant arrived and opened the door. He asked her if she had asked for help because there were many policemen outside and she denied it. He told her to change her clothes, and she did change to the one she was wearing on Saturday. He instructed her to tell the police that she left home and willingly; then he went downstairs but he locked the door. She could hear people conversing but she could not understand what they were saying. (Id., p. 19) When she heard the voices of many people who were conversing downstairs, she knocked repeatedly at the door as hard as she could. She heard somebody going upstairs and when the door was opened, she saw a policeman. The policeman asked her name and the reason why she was there. She told him she was kidnapped. Downstairs, he saw about five policemen in uniform and the defendant was talking to them. Nakikipag-areglo po sa mga pulis, Karen added. The policeman told him to just explain at the precinct. (Id., p. 20) They went out of the house and she saw some of her neighbors in front of the house. They rode the car of a certain person she called Kuya Boy together with defendant, the policeman, and two of her neighbors whom she called Kuya Bong

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

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

Bank Circular No. 960 and Section 8 of R.A. 6426, as amended by P.D. 1246, otherwise known as the Foreign Currency Deposit Act be made applicable to a foreign transient? Petitioners aver as heretofore stated that Section 113 of Central Bank Circular No. 960 providing that Foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. should be adjudged as unconstitutional on the grounds that: 1.) it has taken away the right of petitioners to have the bank deposit of defendant Greg Bartelli y Northcott garnished to satisfy the judgment rendered in petitioners favor in violation of substantive due process guaranteed by the Constitution; 2.) it has given foreign currency depositors an undue favor or a class privilege n violation of the equal protection clause of the Constitution; 3.) it has provided a safe haven for criminals like the herein respondent Greg Bartelli y Northcott since criminal could escape civil liability for their wrongful acts by merely converting their money to a foreign currency and depositing it in a foreign currency deposit account with an authorized bank; and 4.) The Monetary Board, in issuing Section 113 of Central Bank Circular No. 960 has exceeded its delegated quasi- legislative power when it took away: a.) the plaintiffs substantive right to have the claim sought to be enforced by the civil action secured by way of the writ of preliminary attachment as granted by Rule 57 of the Revised Rules of Court; b.) the plaintiffs substantive right to have the judgment credit satisfied by way of the writ of execution out of the bank deposit of the judgment debtor as granted to the judgment creditor by Rule 39 of the Revised Rules of Court, which is beyond its power to do so. On the other hand, respondent Central Bank, in its Comment alleges that the Monetary Board in issuing Section 113 of CB Circular No. 960 did not exceed its power or authority because the subject Section is copied verbatim from a portion of R.A. No. 6426 as amended by P.D. 1246. Hence, it was not the Monetary Board that grants exemption from attachment or garnishment to foreign currency deposits, but the law (R.A. 6426 as amended) itself; that it does not violate the substantive due process guaranteed by the Constitution because a.) it was based on a law; b.) the law seems to be reasonable; c.) it is enforced according to regular methods of procedure; and d.) it applies to all members of a class. Expanding, the Central Bank said; that one reason for exempting the foreign currency deposits from attachment, garnishment or any other order process of any court, is to assure the development and speedy growth of the Foreign Currency Deposit System and the Offshore Banking System in the Philippines; that another reason is to encourage the inflow of foreign currency deposits into the banking institutions thereby placing such institutions more in a position to properly channel the same to loans and investments in the Philippines, thus directly contributing to the economic development of the country; that the subject section is being enforced according to the regular methods of procedure; and that it applies to all currency deposits made by any person and therefore does not violate the equal protection clause of the Constitution. Respondent Central Bank further avers that the questioned provision is needed to promote the public interest and the general welfare; that the State cannot just stand idly by while a considerable segment of the society suffers from economic distress; that the

State had to take some measures to encourage economic development; and that in so doing persons and property may be subjected to some kinds of restraints or burdens to secure the general welfare or public interest. Respondent Central Bank also alleges that Rule 39 and Rule 57 of the Revised Rules of Court provide that some properties are exempted from execution/attachment especially provided by law and R.A. No. 6426 as amended is such a law, in that it specifically provides, among others, that foreign currency deposits shall be exempted from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. For its part, respondent China Banking Corporation, aside from giving reasons similar to that of respondent Central Bank, also stated that respondent China Bank is not unmindful of the inhuman sufferings experienced by the minor Karen E. Salvacion from the beastly hands of Greg Bartelli; that it is not only too willing to release the dollar deposit of Bartelli which may perhaps partly mitigate the sufferings petitioner has undergone; but it is restrained from doing so in view of R.A. No. 6426 and Section 113 of Central Bank Circular No. 960; and that despite the harsh effect to these laws on petitioners, CBC has no other alternative but to follow the same. This court finds the petition to be partly meritorious. Petitioner deserves to receive the damages awarded to her by the court. But this petition for declaratory relief can only be entertained and treated as a petition for mandamus to require respondents to honor and comply with the writ of execution in Civil Case No. 89-3214. The Court has no original and exclusive jurisdiction over a petition for declatory relief.[2] However, exceptions to this rule have been recognized. Thus, where the petition has far-reaching implications and raises questions that should be resolved, it may be treated as one for mandamus.[3] Here is a child, a 12-year old girl, who in her belief that all Americans are good and in her gesture of kindness by teaching his alleged niece the Filipino language as requested by the American, trustingly went with said stranger to his apartment, and there she was raped by said American tourist Greg Bartelli. Not once, but ten times. She was detained therein for four (4) days. This American tourist was able to escape from the jail and avoid punishment. On the other hand, the child, having received a favorable judgment in the Civil Case for damages in the amount of more than P1,000,000.00, which amount could alleviate the humiliation, anxiety, and besmirched reputation she had suffered and may continue to suffer for a long, long time; and knowing that this person who had wronged her has the money, could not, however get the award of damages because of this unreasonable law. This questioned law, therefore makes futile the favorable judgment and award of damages that she and her parents fully deserve. As stated by the trial court in its decision,

Indeed, after hearing the testimony of Karen, the Court believes that it was indoubtedly a shocking and traumatic experience she had undergone which could haunt her mind for a long, long time, the mere recall of which could make her feel so humiliated, as in fact she had been actually humiliated once

when she was refused admission at the Abad Santos High School, Arellano University, where she sought to transfer from another school, simply because the school authorities of the said High School learned about what happened to her and allegedly feared that they might be implicated in the case.
xxx

The reason for imposing exemplary or corrective damages is due to the wanton and bestial manner defendant had committed the acts of rape during a period of serious illegal detention of his hapless victim, the minor Karen Salvacion whose only fault was in her being so naive and credulous to believe easily that defendant, an American national, could not have such a bestial desire on her nor capable of committing such heinous crime. Being only 12 years old when that unfortunate incident happened, she has never heard of an old Filipino adage that in every forest there is a snake, xxx.
[4]

If Karens sad fate had happened to anybodys own kin, it would be difficult for him to fathom how the incentive for foreign currency deposit could be more important than his childs right to said award of damages; in this case, the victims claim for damages from this alien who had the gall to wrong a child of tender years of a country where he is mere visitor. This further illustrates the flaw in the questioned provisions. It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time when the countrys economy was in a shambles; when foreign investments were minimal and presumably, this was the reason why said statute was enacted. But the realities of the present times show that the country has recovered economically; and even if not, the questioned law still denies those entitled to due process of law for being unreasonable and oppressive. The intention of the questioned law may be good when enacted. The law failed to anticipate the inquitous effects producing outright injustice and inequality such as as the case before us. It has thus been said that-

But I also know, that laws and institutions must go hand in hand with the progress of the human mind. As that becomes more developed, more enlightened, as new discoveries are made, new truths are disclosed and manners and opinions change with the change of circumstances, institutions must advance also, and keep pace with the times We might as well require a man to wear still the coat which fitted him when a boy, as civilized society to remain ever under the regimen of their barbarous ancestors.
[5]

In his comment, the Solicitor General correctly opined, thus:

"The present petition has far-reaching implications on the right of a national to obtain redress for a wrong committed by an alien who takes refuge under a law and regulation promulgated for a purpose which does not contemplate the application thereof envisaged by the allien. More specifically, the petition

raises the question whether the protection against attachment, garnishment or other court process accorded to foreign currency deposits PD No. 1246 and CB Circular No. 960 applies when the deposit does not come from a lender or investor but from a mere transient who is not expected to maintain the deposit in the bank for long. The resolution of this question is important for the protection of nationals who are victimized in the forum by foreigners who are merely passing through.
xxx

xxx Respondents China Banking Corporation and Central Bank of the Philippines refused to honor the writ of execution issued in Civil Case No. 893214 on the strength of the following provision of Central Bank Circular No. 960: Sec. 113 Exemption from attachment. Foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. Central Bank Circular No. 960 was issued pursuant to Section 7 of Republic Act No. 6426: Sec. 7. Rules and Regulations. The Monetary Board of the Central Bank shall promulgate such rules and regulations as may be necessary to carry out the provisions of this Act which shall take effect after the publication of such rules and regulations in the Official Gazette and in a newspaper of national circulation for at least once a week for three consecutive weeks. In case the Central Bank promulgates new rules and regulations decreasing the rights of depositors, the rules and regulations at the time the deposit was made shall govern. The aforecited Section 113 was copied from Section 8 of Republic Act No. 6426. As amended by P.D. 1246, thus: Sec. 8. Secrecy of Foreign Currency Deposits. -- All foreign currency deposits authorized under this Act, as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034, are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall such foreign currency deposits be examined, inquired or looked into by

any person, government official, bureau or office whether judicial or administrative or legislative or any other entity whether public or private: Provided, however, that said foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. The purpose of PD 1246 in according protection against attachment, garnishment and other court process to foreign currency deposits is stated in its whereases, viz.: WHEREAS, under Republic Act No. 6426, as amended by Presidential Decree No. 1035, certain Philippine banking institutions and branches of foreign banks are authorized to accept deposits in foreign currency; WHEREAS, under provisions of Presidential Decree No. 1034 authorizing the establishment of an offshore banking system in the Philippines, offshore banking units are also authorized to receive foreign currency deposits in certain cases; WHEREAS, in order to assure the development and speedy growth of the Foreign Currency Deposit System and the Offshore Banking System in the Philippines, certain incentives were provided for under the two Systems such as confidentiality subject to certain exceptions and tax exemptions on the interest income of depositors who are nonresidents and are not engaged in trade or business in the Philippines; WHEREAS, making absolute the protective cloak of confidentiality over such foreign currency deposits, exempting such deposits from tax, and guaranteeing the vested right of depositors would better encourage the inflow of foreign currency deposits into the banking institutions authorized to accept such deposits in the Philippines thereby placing such institutions more in a position to properly channel the same to loans and investments in the Philippines, thus directly contributing to the economic development of the country; Thus, one of the principal purposes of the protection accorded to foreign currency deposits is to assure the development and speedy growth of the Foreign Currency Deposit system and the Offshore Banking in the Philippines (3 Whereas).
rd

The Offshore Banking System was established by PD No. 1034. In turn, the purposes of PD No. 1034 are as follows:

WHEREAS, conditions conducive to the establishment of an offshore banking system, such as political stability, a growing economy and adequate communication facilities, among others, exist in the Philippines; WHEREAS, it is in the interest of developing countries to have as wide access as possible to the sources of capital funds for economic development; WHEREAS, an offshore banking system based in the Philippines will be advantageous and beneficial to the country by increasing our links with foreign lenders, facilitating the flow of desired investments into the Philippines, creating employment opportunities and expertise in international finance, and contributing to the national development effort. WHEREAS, the geographical location, physical and human resources, and other positive factors provide the Philippines with the clear potential to develop as another financial center in Asia; On the other hand, the Foreign Currency Deposit system was created by PD No. 1035. Its purpose are as follows: WHEREAS, the establishment of an offshore banking system in the Philippines has been authorized under a separate decree; WHEREAS, a number of local commercial banks, as depository bank under the Foreign Currency Deposit Act (RA No. 6426), have the resources and managerial competence to more actively engage in foreign exchange transactions and participate in the grant of foreign currency loans to resident corporations and firms; WHEREAS, it is timely to expand the foreign currency lending authority of the said depository banks under RA 6426 and apply to their transactions the same taxes as would be applicable to transaction of the proposed offshore banking units; It is evident from the above [Whereas clauses] that the Offshore Banking System and the Foreign Currency Deposit System were designed to draw deposits from foreign lenders and investors (Vide second Whereas of PD No. 1034; third Whereas of PD No. 1035). It is these depositors that are induced by the two laws and given protection and incentives by them. Obviously, the foreign currency deposit made by a transient or a tourist is not the kind of deposit encourage by PD Nos. 1034 and 1035 and given incentives and protection by said laws because such depositor stays only for a few days in

the country and, therefore, will maintain his deposit in the bank only for a short time. Respondent Greg Bartelli, as stated, is just a tourist or a transient. He deposited his dollars with respondent China Banking Corporation only for safekeeping during his temporary stay in the Philippines. For the reasons stated above, the Solicitor General thus submits that the dollar deposit of respondent Greg Bartelli is not entitled to the protection of Section 113 of Central Bank Circular No. 960 and PD No. 1246 against attachment, garnishment or other court processes.
[6]

In fine, the application of the law depends on the extent of its justice. Eventually, if we rule that the questioned Section 113 of Central Bank Circular No. 960 which exempts from attachment, garnishment, or any other order or process of any court. Legislative body, government agency or any administrative body whatsoever, is applicable to a foreign transient, injustice would result especially to a citizen aggrieved by a foreign guest like accused Greg Bartelli. This would negate Article 10 of the New Civil Code which provides that in case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail. Ninguno non deue enriquecerse tortizerzmente con damo de otro. Simply stated, when the statute is silent or ambiguous, this is one of those fundamental solutions that would respond to the vehement urge of conscience. (Padilla vs. Padilla, 74 Phil. 377) It would be unthinkable, that the questioned Section 113 of Central Bank No. 960 would be used as a device by accused Greg Bartelli for wrongdoing, and in so doing, acquitting the guilty at the expense of the innocent. Call it what it may but is there no conflict of legal policy here? Dollar against Peso? Upholding the final and executory judgment of the lower court against the Central Bank Circular protecting the foreign depositor? Shielding or protecting the dollar deposit of a transient alien depositor against injustice to a national and victim of a crime? This situation calls for fairness legal tyranny. We definitely cannot have both ways and rest in the belief that we have served the ends of justice. IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No. 960 and PD No. 1246, insofar as it amends Section 8 of R.A. 6426 are hereby held to be INAPPLICABLE to this case because of its peculiar circumstances. Respondents are hereby REQUIRED to COMPLY with the writ of execution issued in Civil Case No. 89-3214, Karen Salvacion, et al. vs. Greg Bartelli y Northcott, by Branch CXLIV, RTC Makati and to RELEASE to petitioners the dollar deposit of respondent Greg Bartelli y Northcott in such amount as would satisfy the judgment. SO ORDERED. Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Francisco, and Panganiban, JJ., concur.

Padilla, J., no part. Mendoza, and Hermosisima, Jr., JJ., on leave.

[1]

Annex R, Petition. Alliance of Government Workers (AGW) v. Ministry of Labor and Employment, 124 SCRA 1. Nationalista Party vs. Angelo Bautista, 85 Phil. 101; Aquino vs. Comelec, 62 SCRA 275; and Alliance of Government Workers vs. Minister of Labor and Employment, supra. Decision, Regional Trial Court, Civil Case No. 89-3214, pp. 9 &12; Rollo, pp. 66 & 69. Thomas Jefferson, Democracy, ed. Saul K. Padover. (New York, Penguin, 1946) p. 171. Comment of the Solicitor General, Rollo, pp. 128 129; 135-136.

[2]

[3]

[4]

[5]

[6]

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. Nos. L-32282-83 November 26, 1970 PEOPLE OF THE PHILIPPINES, petitioner, vs. HON. MARIO J. GUTIERREZ, Judge of the Court of First Instance of Ilocos Sur, CAMILO PILOTIN, FRANCISCO PIANO, DELFIN PIANO PEDRO PATAO, VINCENT CRISOLOGO, CAMILO PIANO, CAMILO PATAO, PEDRING PIANO, ISIDRO PUGAL, ANTONIO TABULDO, LORENZO PERALTA, VENANCIO PACLEB ANTONIO PIANO, FERMIN PUGAL, CARLITO PUGAL, FLOR PIANO, ERNING ABANO and EIGHTY-TWO (82) JOHN DOES, respondents. Office of the Solicitor General Felix Q. Antonio, Assistant Solicitor General Conrado T. Limcaoco, Solicitor Eduardo C. Abaya and Special Attorney Juan A. Sison for petitioners. Adaza, Adaza and Adaza for respondent Erning Abano. Crisologo Law Office and Pedro Quadra for respondent Camilo Pilotin. Juan T. David for respondent Vincent Crisologo. Augusto Kalaw as private prosecutor.

REYES, J.B.L., J.: Petition for writs of certiorari and mandamus, with preliminary injunction, filed by the Solicitor General and State Prosecutors, to annul and set aside the order of Judge Mario J. Gutierrez of the Court of First Instance of Ilocos Sur (respondent herein), dated 20 July 1970, denying the prosecution's urgent motion to transfer Criminal Case Nos. 47V and 48-V of said Court of First Instance, entitled "People vs. Pilotin, et al.," to the Circuit Criminal Court of the Second Judicial District; to direct the respondent Judge to effectuate such transfer; and to restrain the trial of the cases aforesaid in the Court of First Instance of Ilocos Sur, sitting in Vigan, capital of the province. In the morning of 22 May 1970, a group of armed persons descended on barrio Ora Centro, municipality of Bantay, Province of Ilocos Sur, and set fire to various inhabited houses therein. On the afternoon of the same day, in barrio Ora Este of the same municipality and province, several residential houses were likewise burned by the group, resulting in the destruction of various houses and in the death of an old woman named Vicenta Balboa. After investigation by the authorities, the provincial fiscal, with several state prosecutors assigned by the Department of Justice to collaborate with him, on 10 June 1970 filed in the Court of First Instance of Vigan, Ilocos Sur, two informations (Criminal Cases 47-V for arson with homicide and 48-V for arson) charging that the seventeen private respondents herein, together with 82 other unidentified persons, "confederating, conspiring, confabulating and helping one another, did then and there willfully, unlawfully and feloniously burn or cause to be burned several residential houses, knowing the said houses to be occupied" and belonging to certain persons named in the filed informations in barrios Ora Este and Ora Centro, Bantay, Ilocos Sur (Petition, Annexes B and B-1). Accused Camilo Pilotin and Vincent Crisologo furnished bail, and on 15 June 1970 voluntarily appeared before respondent Judge Gutierrez, were arraigned and pleaded not guilty. Trial was then set for 27, 28 and 29 July 1970. It appears that on the same day, 15 June, the Secretary of Justice issued Administrative Order No. 221, authorizing Judge Lino Anover, of the Circuit Criminal Court of the Second Judicial District, with official station at San Fernando, La Union, to hold a special term in Ilocos Sur, from and after 1 July 1970. Three days thereafter, on 18 June 1970,

the Secretary further issued Administrative Order No. 226, authorizing Judge Mario Gutierrez to transfer Criminal Cases Nos. 47-V and 48-V to the Circuit Criminal Court, "in the interest of justice and pursuant to Republic Act No. 5179, as implemented by Administrative Order Nos. 258 and 274" of the Department of Justice. On 22 June 1970, the prosecution moved the respondent judge for a transfer of cases 47-V and 48-V to the Circuit Criminal Court, invoking the Administrative Orders just mentioned and calling attention to the circumstance that they were issued at the instance of the witnesses seeking transfer of the hearing from Vigan to either San Fernando, La Union, or Baguio City, for reasons of security and personal safety, as shown in their affidavits. The accused vigorously opposed such transfer, and on 20 July 1970, the respondent judge declined the transfer sought, on the ground that Administrative Order No. 258 only provided for transfer of cases to the Circuit Criminal Court where the interest of justice required it for the more expeditious disposal of the cases, and in the cases involved the accused had already pleaded; that if the objective of the proposed transfer was to subsequently obtain a change of venue from the Supreme Court under Section 4 of Republic Act No. 5179 the same should have been done right at the very inception of these cases. In view of the lower court's denial of the motion to transfer the cases to the Circuit Criminal Court, the prosecution resorted to Us for writs of certiorari and mandamus, charging abuse of discretion and praying this Court to set aside the order of denial of the transfer and to compel the respondent Court of First Instance to remand the cases to the Circuit Criminal Court of the Second Judicial District, as well as to authorize the latter to try the cases (47-V and 48-V) at either San Fernando, La Union, or Baguio City. Respondents in their answer denied any abuse of discretion in view of the fact that the Administrative Order No. 226 merely authorized the court below, but did not require or command it, to transfer the cases in question to the Circuit Criminal Court, and likewise denied that the circumstances justified any such transfer. At petitioners' request this Court enjoined the respondent Judge Gutierrez from proceeding with the trial of the cases until further orders. We agree with respondents that the present laws do not confer upon the Secretary of Justice power to determine what court should hear specific cases. Any such power, even in the guise of administrative regulation of executive affairs, trenches upon the time-honored separation of the Executive and the Judiciary; and while not directly depriving the courts of their independence, it would endanger the rights and immunities of the accused or civil party. It could be much too easily transformed into a means of predetermining the outcome of individual cases, so as to produce a result in harmony with the Administration's preferences. The creation by Republic Act No. 5179 of the Circuit Criminal Courts for the purpose of alleviating the burden of the regular Courts of First Instance, and to accelerate the disposition of criminal cases pending or to be filed therein, nowhere indicates an intent to permit the transfer of preselected individual cases to the circuit courts. Neither do Administrative Orders Nos. 258 and 274 evidence any such intention; particularly since Administrative Order No. 258, Series of 1968, in Section 2 of its Part V, as confirmed by Administrative Order No. 274 of the same year, in Section 3 of Part III thereof, provides that the transfer to Circuit Criminal Courts of cases pending in the regular Courts of First Instance should be effected by raffle, chance here operating to nullify any executive arbitration of what particular cases should be apportioned to either tribunal. The very terms of Administrative Order No. 226, issued on 18 June 1970 by Secretary of Justice Makasiar, relied upon by the petitioners, in merely authorizing, and not directing, Judges Arciaga and Gutierrez of the Court of First Instance of Ilocos Sur to transfer Criminal Cases Nos. 44-V and 47-V (People vs. Pilotin, et al.) to the Circuit Criminal Court of the Second Judicial District, reveals that the Secretary himself was aware of the impropriety of imperatively directing transfer of specified cases. Respondent Judge Gutierrez, therefore in construing Administrative Order No. 226 as permissive and not mandatory, acted within the limits of his discretion and violated neither the law nor the Executive Orders heretofore mentioned. It is unfortunate, however, that in refusing to consider Department Administrative Order No. 226 of the Secretary of Justice as mandatory respondent Judge Gutierrez failed to act upon the contention of the prosecuting officers that the cases against private respondents herein should be transferred to the Circuit Criminal Court of the Second Judicial District because a miscarriage of justice was impending, in view of the refusal of the prosecution witnesses to testify in the court sitting in Vigan, Ilocos Sur, where they felt their lives would be endangered. This claim was buttressed by the affidavits of the injured parties and prosecution witnesses, reaffirming their fear to appear in Vigan to testify in cases 47-V and 48-V and expressing their willingness to testify if the cases are heard outside of Ilocos Sur, where they can be free from tension and terrorism (Petition, Annex J). The fear thus expressed can not be considered fanciful and unfounded when account is taken of the circumstances that the informations filed in the Court of First Instance of Ilocos Sur show that of the one hundred armed participants in the burning of the houses at barrios Ora Este and Ora Centro, Municipality of Bantay, some eighty-two (82) are still unidentified and at large; that one of the

accused, private respondent Vincent Crisologo, belongs to an influential family in the province, being concededly the son of the Congressman for the first district of Ilocos Sur and of the lady Governor that the reluctant witnesses are themselves the complainants in the criminal cases, and, therefore, have reasons to fear that attempts will be made to silence them; that it is not shown that the Executive branch is able or willing to give these witnesses full security during the trial and for a reasonable time thereafter, that even if armed security escorts were to be provided, the same would be no guarantee against the possibility of murderous assault against the affiant witnesses, as recent events have proved; that Constabulary reports (Annex H) show that between 1 January and 31 May 1970 no less than 78 murders have been reported committed in said province, of which number only 21 were solved; and, finally, that the promotion and confirmation of respondent Judge Mario Gutierrez from Clerk of Court to Judge of the Court of First Instance of the Second Judicial District, Branch III, was actively supported by Congressman and Governor Crisologo, parents of accused Vincent Crisologo (Annexes H, H-1, and K to N-2 to petitioner's supplemental memorandum). This just refusal to testify in Ilocos Sur manifested by the complaining witnesses, who had on a previous occasion freely given evidence before the investigators in Manila, renders manifest the imperious necessity of transferring the place of trial to a site outside of Ilocos Sur, if the cases are to be judicially inquired into conformably to the interest of truth and justice and the State is to be given a fair chance to present its side of the case. The respondents vigorously contend that a transfer of the trial site can not be made, because it is a long standing rule of criminal procedure in these Islands that one who commits a crime is amenable therefor only in the jurisdiction where the crime is committed, for the reason pointed out in U.S. vs. Cunanan, 26 Phil. 376, and People vs. Mercado, 65 Phil. 665, that the jurisdiction of a Court of First Instance in the Philippines is limited to certain well-defined territory and they can not take jurisdiction of persons charged with one offense committed outside of that limited territory, and they invoke Rule 110, Section 14 (a), of the Revised Rules of Court providing that "in all criminal prosecutions the action shall be instituted and tried in the court of the municipality or province wherein the offense was committed or any one of the essential ingredient thereof took place." It is well to note that this Court has explained in Beltran vs. Ramos, 96 Phil. 149, 150, that the purpose of the rule invoked by accused respondents herein was "not to compel the defendant to move to and appear in a different court from that of the province where the crime was committed, as it would cause him great inconvenience in looking for his witnesses and other evidence in another place." Where the convenience of the accused is opposed by that of the prosecution, as in the case at bar, it is but logical that the court should have power to decide where the balance of convenience or inconvenience lies, and to determine the most suitable place of the trial according to the exigencies of truth and impartial justice. In the particular case before Us, to compel the prosecution to proceed to trial in a locality where its witnesses will not be at liberty to reveal what they know is to make a mockery of the judicial process, and to betray the very purpose for which courts have been established. Since the rigorous application of the general principle of Rule 110, Section 14 (a), would result here in preventing a fair and impartial inquiry into the actual facts of the case, it must be admitted that the exigencies of justice demand that the general rule relied upon by accused respondents should yield to occasional exceptions wherever there are weighty reasons therefor. Otherwise, the rigor of the law would become the highest injustice "summum jus, summa in juria." The respondents accused can not complain that to transfer the trial to a site where the prosecution's witnesses can feel free to reveal what they know would be equivalent to railroading them into a conviction. Because regardless of the place where its evidence is to be heard, the prosecution will be always obligated to prove the guilt of the accused beyond reasonable doubt. The scales of justice clearly lean in favor of the prosecution being given full opportunity to lay its case before a proper arbiter: for a dismissal of the charges for lack of evidence is a verdict that the prosecution can neither challenge nor appeal. We must thus reject the idea that our courts, faced by an impasse of the kind now before Us, are to confess themselves impotent to further the cause of justice. The Constitution has vested the Judicial Power in the Supreme Court and such inferior courts as may be established by law (Article VIII, Section 13), and such judicial power connotes certain incidental and inherent attributes reasonably necessary for an effective administration of justice. The courts "can by appropriate means do all things necessary to preserve and maintain every quality needful to make the judiciary an effective institution of government" (Borromeo vs. Mariano, 41 Phil. 322). One of these incidental and inherent powers of courts is that of transferring the trial of cases from one court to another of equal rank in a neighboring site, whenever the imperative of securing a fair and impartial trial, or of preventing a miscarriage of justice, so demands. This authority was early recognized in England as inhering in the

courts of justice even prior to the eighteenth century. The opinion in Crocker vs. Justices of the Superior Court,208 Mass. 162, 21 Ann. Cases 1067, has shown how the eminent Lord Chief Justice Mansfield, in Rex vs. Cowle(Eng.) 2 Burr 834, decided in 1759, said that, in this respect, "the law is clear and uniform as far back as it can be traced." And in Reg. vs. Conway, 7 Jr. C. J. 507, the question was fully discussed, and all the judges appear to have agreed as to the power of the court, Cramption, Jr., saying at page 525: There is another common-law right, equally open to defendants and prosecutors, ... that where it appears that either party cannot obtain a fair and impartial trial in the proper county, then this court ... has jurisdiction to take the case out of the proper county, as it is called, and to bring it into an indifferent county ... This jurisdiction to change the venue ... has been exercised by this court from a very early period. We have reported cases, where the doctrine is laid down in emphatic language; we have the practice of the Court of Queen's Bench in England independently of any practice of our own court ... The general jurisdiction of the court, in a proper case, to change the venue from one county to any other, cannot be the subject of doubt. This power to transfer trial of criminal cases in furtherance of justice, exercised through writs of certiorari, has, according to the weight of authority, passed to the State Supreme Courts of the American Union. 1 In Cochecho R. Co. vs. Farrington, 26 N.H. 428, at page 436, it was held that the power to transfer the place of holding trials became thoroughly engrafted upon the common law, long before the independence of this country; and from that time forth, not only has the practice prevailed in the courts of England, but the power is now exercised by the Courts of very many if not all of our states, either by force of express statute or the adoption of the common law in the jurisprudence of the same. That such inherent powers are likewise possessed by the Philippine courts admits of no doubt, because they were organized on the American pattern with the enactment of the first judicial organic law, Act 136, on 11 June 1901, by the Philippine Commission, then composed by a majority of able American lawyers, fully familiar with the institutions and traditions of the common law. In Alzua and Arnalot vs. Johnson, 21 Phil. 300, 333, this Court stated: And it is safe to say that in every volume of the Philippine Reports, numbers of cases might be cited wherein recourse has been had to the rules, principles and doctrines of the common law in ascertaining the true meaning and scope of the legislation enacted in and for the Philippine Islands since they passed under American sovereignty. Among the earliest measures of the Philippine Commission, after the establishment of Civil Government under American sovereignty, was the enactment on June 11, 1901, of Act No. 136, "An Act providing for the organization of courts in the Philippine Islands." This Act in express terms abolished the then existing Audiencia or Supreme Court and Courts of First Instance, and substituted in their place the courts provided therein. It sets out in general terms the jurisdiction, duties, privileges, and powers of the new courts and their judges. The majority of the members of the body which enacted it were able American lawyers. The spirit with which it is informed, and indeed its very language and terminology would be unintelligible without some knowledge of the judicial systems of England and the United States. Its manifest purpose and object was to replace the old judicial system, with its incidents and traditions drawn from Spanish sources, with a new system modeled in all its essential characteristics upon the judicial systems of the United States. It cannot be doubted, therefore, that any incident of the former system which conflicts with the essential principles and settled doctrines on which the new system rests, must be held to be abrogated by the law organizing the new system. While not expressly conferred by Act 136, We find it difficult to believe that the framers' intent was to deny, by silence, to the Philippine Courts, and particularly upon this Supreme Court, the inherent jurisdiction possessed by the English and American courts under their common law heritage to transfer the place of trial of cases in order to secure and promote the ends of justice, by providing fair and impartial inquiry and adjudication.

Like the exemption of judges of courts of superior or general authority from liability in a civil action for acts done by them in the exercise of their judicial functions, upheld in the Alzua case as essentially inherent in the courts established by Act 136, even if not expressly provided for, the power to transfer the place of trials when so demanded by the interest of justice is equally essential and possesses no inferior rank. To it apply, mutatis mutandis, the words of this Court in the Alzua case just cited: The grounds of public policy and the reasoning upon which the doctrine is based are not less forceful and imperative in these Islands than in the countries from which the new judicial system was borrowed; and an examination of the reasons assigned ... leaves no room for doubt that a failure to recognize it as an incident to the new judicial system would materially impair its usefulness and tend very strongly to defeat the ends for which it was established. (21 Phil. 333334) Not only has there been since then no proof of any specific pronouncement, by Constitution or Congress, against the exercise by our Courts of the power discussed heretofore: on the contrary, the law establishing the Circuit Criminal Courts, Republic Act No. 5179, in its Section 4, provides express legislative recognition of its existence: SEC. 4. The Circuit Criminal Courts may hold sessions anywhere within their respective districts:Provided, however, that cases shall be heard within the province where the crime subject of the offense was committed. And provided further, that when the interest of justice so demands, with prior approval of the Supreme Court, cases may be heard in a neighboring province within the district ... (Emphasis supplied) Since the requirements for proper jurisdiction have been satisfied by the filing of the criminal case in question with the Court of First Instance of Ilocos Sur, in which province the offenses charged were committed, according to the informations; since the holding of the trial in a particular place is more a matter of venue, rather than jurisdiction; since the interests of truth and justice can not be subserved by compelling the prosecution to proceed to trial in the respondent court in Ilocos Sur, because its witnesses, for just and weighty reasons, are unwilling to testify therein, and the respondent court, ignoring their safety, has abusively denied the motion to have the case transferred to another court, this Supreme Court, in the exercise of judicial power possessed by it under the Constitution and the statutes, should decree that the trial of cases 47-V and 48-V should be heard and decided by the Circuit Criminal Court of the Second Judicial District, either in San Fernando, La Union, or in Baguio City, at the earlier available date. This arrangement would have the advantage that the same trial judge could later be authorized to hear the defense witnesses in Vigan, if circumstances so demanded. Furthermore, the adjudication of the case by a judge other than respondent Gutierrez, if resulting in acquittal, would remove any doubt or suspicion that the same was in any way influenced by the trial Judge's being beholden to the Crisologo family. The solution thus adopted is in harmony with the ideals set by this Court in Manila Railroad Co. vs. Attorney General, 20 Phil. 523, where We said: ... The most perfect procedure that can be devised is that which gives opportunity for the most complete and perfect exercise of the powers of the court within the limitations set by natural justice. It is that one which, in other words, gives the most perfect opportunity for the powers of the court to transmute themselves into concrete acts of justice between the parties before it. The purpose of such a procedure is not to restrict the jurisdiction of the court over the subject matter but to give it effective facility in righteous action. It may be said in passing that the most salient objection which can be urged against procedure today is that it so restricts the exercise of the court's power by technicalities that part of its authority effective for justice between the parties is many times in inconsiderable portion of the whole. The purpose of procedure is not to thwart justice. Its proper aim is to facilitate the application of justice to the rival claims of contending parties. It was created not to hinder and delay but to facilitate and promote the administration of justice. It does not constitute the thing itself which courts are always striving to secure to litigants. It is designed as the means best adapted to obtain that thing. In other words, it is a means to an end. It is the means by which the powers of the court are made effective in just judgments. When it loses the character of the one and takes on that of the other the administration of justice becomes incomplete and unsatisfactory and lays itself open to grave criticism. (Manila Railroad Co. v. Attorney-General, 20 Phil. 523, 529 [1911]. Emphasis and paragraphing supplied.)

In resume, this Court holds, and so rules: (1) That Republic Act No. 5179 creating the Circuit Criminal Courts did not, and does not, authorize the Secretary of Justice to transfer thereto specified and individual cases; (2) That this Supreme Court, in the exercise of the Judicial Power vested by the Constitution upon it and other statutory Courts, possesses inherent power and jurisdiction to decree that the trial and disposition of a case pending in a Court of First Instance be transferred to another Court of First Instance within the same district whenever the interest of justice and truth so demand, and there are serious and weighty reasons to believe that a trial by the court that originally had jurisdiction over the case would not result in a fair and impartial trial and lead to a miscarriage of justice. (3) That in the present case there are sufficient and adequate reasons for the transfer of the hearing of Criminal Cases Nos. 47-V and 48-V of the Court of First Instance of Ilocos Sur to the Circuit Criminal Court of the Second Judicial District, in the interest of truth and justice. IN VIEW OF THE FOREGOING, the writs of certiorari and mandamus prayed for are granted; the order of the respondent Court of First Instance of Ilocos Sur, dated 20 July 1970, is sustained in so far as it holds that the Administrative Order No. 221 of the Department of Justice is not mandatory, but only directory; nevertheless, said order is declared in grave abuse of discretion and set aside in so far as it declines to transfer the trial of its cases Nos. 47-V and 48-V to another court within the district; and said respondent Court is accordingly directed and ordered to remand the two criminal cases aforesaid to the Circuit Criminal Court of the Second Judicial District for hearing of the evidence for the prosecution either in Baguio or San Fernando, La Union, at the earliest available date, and such other proceedings as the Circuit Criminal Court may determine in the interest of justice. The accused are required to file bail bonds to answer for their appearance at the trial and sentence by the Circuit Criminal Court for the Second Judicial District, in the same amount, and under the same terms and conditions as their present bail bonds, which will be replaced by those herein ordered, all within fifteen (15) days from finality of this decision. No special pronouncement as to costs. Makalintal, Zaldivar, Castro and Teehankee, JJ., concur. Concepcion, C.J., took no part. Villamor, J., reserves his vote. Dizon and Makasiar, JJ., are on leave.

Separate Opinions

FERNANDO, J., concurring: The learned and scholarly opinion of Justice J.B.L. Reyes renders crystal-clear why the decision reached by this Court should be what it is. It is a manifestation of the jurist's art at its most exemplary. It belies the belief not

infrequently given utterance that hard cases make bad law. The problem before us is unique and unprecedented as far as our previous decisions go. It calls for a resolution far-reaching in its consequences and far-flung in its implications. Fortunately for the administration of justice according to law, there is the recognition of power vested in this Court, in the past perhaps only imperfectly discerned but nonetheless in existence, to be utilized whenever there is need to do so. This is one such occasion. Even without resort then to precedents coming from jurisdictions after which our judicial system was patterned, the same result would have been reached. For only thus, to paraphrase Cardozo, would the flexibility and the creativeness of the judicial process assert themselves. The opinion of Justice J.B.L., Reyes therefore calls for assent, which I readily yield. Nor does it seem inappropriate if it be stressed that the conclusion reached by the Court is solidly buttressed not only in law as history but likewise in law as logic and as social control. Hence this brief concurring opinion, which likewise will afford me the opportunity to give expression to the view that the Constitution and the proceedings in the Constitutional Convention of 1934-1935 point unerringly to the conclusion that this Court as the sole body vested with judicial power by the fundamental law itself is not devoid of supervisory authority over inferior courts. Necessarily the prerogative to transfer the venue of criminal prosecutions whenever there is a persuasive showing that there would be a failure of justice is therein included. On such an assumption, I do not feel called upon to inquire into any asserted authority, even if denominated administrative, of an alter ego of the Executive, the Secretary of Justice, over the lower courts. For my belief gets stronger with the years that it would be difficult to assert that such a competence, even as thus limited, is warranted under a Constitution based on the doctrine of separation of powers and necessarily committed to the principle of judicial independence. 1. We start with the grant by the Constitution of Judicial power to this Court and to such inferior courts as may be established by law. 1 Thus is conferred the authority to decide cases through the ascertainment of facts and the application of the law, involving many a time its interpretation. 2It connotes, in the language of the decision, "the imperative of securing a fair and impartial trial, or of preventing a miscarriage of justice. ...." 3Where, as this did develop in this case, there is more than a probability of an impasse with the witnesses for the prosecution displaying the utmost reluctance to testify if the trial would be held in Vigan, entailing the risk that there be, again in the language of the opinion, "a mockery of the judicial process." 4it would appear undeniable, and we have so held today, that this Court is not to be denied the necessary competence to set matters right. It is not to fold its hands as if in helpless submission to a binding decree of Providence but must meet the problem squarely, possessed of power adequate to cope with such an exigency. In the same way that the two other coordinate departments, the Executive and Congress, being constitutional organs, can rely on the fundamental law to justify the exercise of certain prerogatives, 5 so may this Court, the only constitutional court, exercise supervision over all other judicial agencies thereafter legislatively created, appropriately termed by the Constitution as inferior courts. There would be a void in the framework of government thus established if there is no official body of a higher rank that can take the necessary steps to avoid a frustration of the exercise of judicial power. It is my firm conviction that neither the Presidency nor Congress can rightfully be entrusted with such a task. If it were thus, then the doctrine of separation of powers becomes a myth. Such an approach necessarily and logically compel the conclusion that the so called administrative supervision exercised by the Secretary of Justice is, to put it at its mildest, infected with the gravest doubts as to its constitutionality. There is no need to go that far to reach a decision in this case as is so aptly demonstrated in the opinion of the Court. What appears to me undisputed is that where the question partakes of a judicial character, only this Court can perform that function and trace its source to the Constitution itself. That is to free the Constitution from the reproach that a situation is left unprovided for. What is more, it assures the utmost respect for the principle that like the other two coordinate and co-equal branches, Court is likewise the recipient of power conferred by the Constitution itself. 6 2. So much for law from the standpoint of analytical jurisprudence of law as logic. If the matter be viewed from the approach found congenial by sociological jurists, law as one of the most effective forms of social control, the same conclusion appears to be inescapable. This is to examine legal institutions in terms of how they function. It certainly would be a blot on the administration of justice if by the reluctance of witnesses to testify, based on what they consider to be a feeling that cannot be stigmatized under the circumstances as having no basis in reason, no trial could be had of a criminal case. It is a matter of great public interest that crime should not go unpunished. Of course, it is equally important that the rights of whoever is accused are duly safeguarded. Where as in this case an impasse is likely to occur, in itself an alarming symptom of a breakdown in the orderly legal processes, the loss of public confidence in the rule of law itself is incalculable. That is an eventuality which at all pains must be avoided. The only question is how. If the legal doctrine and principles, which under the system of legal norms followed must be grounded in the Constitution itself do not recognize such a competence in this Court, then for some all may well be lost.

It would be unthinkable, again given the assumption, not entirely without basis, that the two other branches of the government cannot escape political considerations, to assume that either Congress or the Executive can be trusted to take care of such a situation. Nor would it do to leave such matters in the hands of the lower courts, unless whatever is decided by them is subject to correction and review by the only constitutional court, certainly vested with the needed supervisory authority. It would thus appear, if a breakdown in the legal system is to be averted, that the power of this Court is undeniable. There would seem to be no other way to avoid a serious disruption in the legal order. The above considerations necessarily lead me to yield a full concurrence with what has been so persuasively and ably put forth in the masterly opinion of Justice J.B.L. Reyes. December 5, 1970 BARREDO, J., concurring: The accuracy of the technical bases as well as the unerring logic of the resolution of the various facets of this case evidence in the main opinion written by our erudite colleague Mr. Justice J.B.L. Reyes could not but impel the unanimous assent given thereto by the members of this Court. Indeed, I could give the best evidence of my full concurrence therein by merely signing the same without this separate opinion. I feel, however, that the impact of this decision is of such transcendental importance to the administration of justice in this country, particularly now when some sectors of our people make no secret of lingering doubts as to the fairness and impartiality by judicial actuations and decisions, that my duty as a member of this highest tribunal of the land calls for more than just the giving of my vote in favor thereof. I consider it incumbent upon me, since none of my brethren seems to be minded to do it, to project more emphatically certain relevant matters, the significance of which should go hand in hand with the resolution of the case itself. I can neither control nor conceal the feeling of full satisfaction that overwhelms me now, because I consider this decision as probably the first one of national importance, in a long time, that will receive universal and unqualified approval throughout the length and breath of this Republic. I am sure it will yield for our constitutional government as a whole and for the judiciary in particular a rich harvest of regained trust and confidence in the administration of justice. This decision is a great leap forward. We are shaking away from a long standing jurisprudential rule; We are casting aside technical procedural roadblocks; We are here and now proclaiming to all and sundry the plenitude, under the Constitution, of Our power and authority to "insure to (our people) and their posterity, the blessings of independence under a regime of justice" (Preamble of the Constitution) by holding that the "judicial power ... vested in ... (the) Supreme Court" necessarily carries with it the power to lay down procedures that will effectively and fully guarantee, as far as it is humanly possible to do so, that substantial justice shall not be defeated thru technicalities of procedure; and what is most important today, as I view it, is that this is one decision the essence of which spells simple justice that will be plainly understood by the common man. In the clearest terms, this Court holds in effect in this decision that inspite of the traditional rule that a person charged with an offense may not be tried in a province outside of the one ill which the alleged offense or any essential ingredient thereof has been committed, it is the duty of the corresponding trial court, with the approval of the Supreme Court, to see to it that when the demands of justice require it, the venue is moved to another province wherein the circumstantial environment will insure a full disclosure of all material facts essential in the pursuit of truth and justice. Surely, the common man would not understand why the Supreme Court in whom the totality of judicial power is vested by the Constitution would not have the authority and the right, nay the duty, to prevent a trial from being held in a place where it would be nothing more than a farce and an empty show, the final chapter of which may have already been prewritten, even independently of the honesty and integrity of the presiding judge, because of external factors and forces that impede the witnesses from making a free and fearless exposition of what they know. I am exceedingly happy that by this decision, the common man will understand that neither the Constitution nor this Court will ever be found wanting in what is needed top render justice in its truest sense. Now, for some views of my own on the specific legal issues raised by the parties in their pleadings. The problem revolves around the power of the Secretary of the Department of Justice vis-a-vis the operation of the Circuit Criminal Courts created by Republic Act 5179. The People contends that by Administrative Order 258 and 271, Series of 1968 and Administrative Order No. 226, Series of 1970, of the Secretary of Justice, issued pursuant allegedly to Republic Act 5179, (presumably Section 8 thereof) the transfer of the criminal cases herein involved, Criminal Cases Nos. 47-V and 48-V of the Court of First Instance of Ilocos Sur to the Circuit Criminal Court of the Second Judicial District is legally justifiable. On the other hand, the defense submits that under the uniformly announced doctrine of this Court regarding the jurisdictional nature of the venue of criminal cases and principally because to give effect to the administrative orders aforementioned would be impairing the independence of the judiciary, the accused in aforesaid

cases must be tried in Vigan, Ilocos Sur, by the Court of First Instance in which, it is a fact, the case was filed on June 15, 1970, the very day Administrative Order No. 221 of the Secretary of Justice authorizing Judge Lino Anover of the Circuit Criminal Court to hold sessions in Vigan beginning July 1, 1970 was issued. It is my considered view that the less said about the intervention of the Department of Justice with the Circuit Criminal Courts by the issuance of Administrative Orders 258 and 274, Series of 1968 and worse Administrative Order No. 226, Series of 1970 the better, for I find absolutely no legal authority for the issuance of said Orders. The first two purportedly direct and instruct the judges of the various judicial districts of the Philippines as to how to apportion among themselves, together with the corresponding circuit criminal court judges, the cases falling within their concurrent jurisdiction. I feel very strongly that the distribution of the powers of government by the Constitution places, even in its broadest sense, everything that judges have to do that might in one way or another affect or be related to the ultimate disposition of the controversies and cases to be tried by them, including the distribution of the cases to be tried by them, entirely and exclusively with the judges themselves by common agreement among them, and so I hold that whatever be the import of Section 8 of Republic Act 5179 providing that "for administrative purposes, the Circuit Criminal Courts shall be under the supervision of the Department of Justice," the same cannot be considered as contemplating any intervention of the Secretary of Justice in the distribution of cases among judges. That the common impression and long standing practice on the matter are otherwise, cannot alter what, in my humble view, the Constitution ordains. I take it that under Republic Act 5179, Circuit Criminal Courts are nothing but additional branches of the regular Courts of First Instance in their respective districts with the limited concurrent jurisdiction to take cognizance of, try and decide only those cases enumerated in Section 1 of the Act. This is readily implied from Section 3 of the Act which says: SEC. 3. The provisions of all laws and the Rules of Court relative to the judges of the Courts of First Instance and the trial, disposition and appeal of criminal cases therein shall be applicable to the circuit judge and the cases cognizable by them insofar as they are not inconsistent with the provisions of this Act. It is also my conviction that when Congress enacted Republic Act 5179, it was conscious of the existing doctrinal rule laid down by this Court, in Cunanan 1 that in criminal cases, venue is equivalent to territorial jurisdiction and precisely because of this consciousness and the knowledge that the nature of the crimes placed within the jurisdiction of the Circuit Criminal Courts is such that their successful prosecution might be impaired or obstructed by the doctrinal rule aforementioned that in Section 4 of the Act, Congress expressly provided that as a rule, "cases shall be heard within the province where the crime subject of the offense (sic) was committed" but "when the interest of justice so demands, with the prior approval of the Supreme Court, cases may be heard in a neighboring province of the district." It is contended that these quoted provisions of Section 4 contemplate only those cases already in the Circuit Criminal Court. That may be so, but my view is that by the said provisions, Congress has precisely opened the door for the regular courts trying cases of the nature enumerated in the Act to shift those cases to the circuit criminal court in instances like the present wherein it appears quite evident that to maintain Vigan as the venue of the trials in question will defeat the ends of justice, for, after all, the circuit court is just another branch of the Court of First Instance, and once it is in the former court, then Section 4 may be easily applied. Moving of cases from one branch of a Court of First Instance to another branch thereof is neither new nor unusual when the judges concerned are agreed that such a step would best promote the interests of justice. In the light of this practice, commendable in its motivation, why cannot the transfer be made from the Court of First Instance to circuit criminal court? Indeed, this should not be treated as merely a matter of discretion; judges should feel bound to act accordingly, as a matter of duty, hence a negative action in the appropriate cases is ground for certiorari ormandamus. In this connection, however, I must hasten to advert, that the interested parties should be duly heard on the matter and, in accordance with the spirit, if not the letter of the law, approval of the Supreme Court be secured. Apropos of all this discussion, I would like to make it clear that the rule invoked by the defense to the effect that venue in criminal cases is jurisdictional in character has no foundation in any act of the legislature. There can be no question that jurisdiction is conferred only by law and that it is only venue that may be fixed by the Rules of Court because jurisdiction is substantive and venue is merely procedural. The rule the defense invokes is found only in a decision of this Court rendered way back in 1913. In Cunanan, supra, this Court held: "The jurisdiction of the Courts of First Instance of the Philippine Islands, in criminal cases, is limited to certain well-defined territory. They cannot take jurisdiction of persons charged with an offense alleged to have been committed outside of that limited territory."

As can be noted, no provision of law is cited in support of the ruling. The reason is simple. There is no such law. In other words, whatever force such invoked ruling may have is no more than that of a construction given by this Court. I dare say that when a previous construction by this Court runs counter to fundamental principles now separating the rule making power of the courts from the legislative faculty to define and apportion jurisdiction, it is best to lean in favor of recognizing the constitutional boundaries of our prerogatives when they are plain and the contrary cannot be implied. And since it was this Court that made the construction, there is nothing to stop Us from modifying the same, and inasmuch as Section 14, par. (a) of Rule 110 is purely a rule of venue, not legislated upon by Congress as a jurisdictional matter, Our power to change the same is unquestionable. I, therefore, reiterate my concurrence in the resolution of this point in the main opinion. Accordingly, I agree that the respondent judge gravely abused his discretion in not yielding to the suggested transfer of the cases in question to the circuit criminal court. Court trials and proceedings mean nothing unless the pronouncement and decisions of the courts merit the faith and trust of the parties in particular and the people in general. To the common man specially, the imperatives of justice administered by our courts are: (1) judge who can be trusted and (2) procedures that insulate the proceedings from all factors that may taint the ultimate outcome of litigations with doubt and skepticism. To my mind, it is not enough that a judge trusts himself or can be trusted as capable of acting in good faith, it is equally important that no circumstance attendant to the proceedings should mar that quality of trustworthiness. It is thus clear that by Our decision in this case, We are not expressing any distrust as to the impartiality of respondent judge; it should be clearly understood, however, that it is possible for his decision to be unfair not because he has made it so, but because under the circumstances, the adulterated evidence before him leaves him no other alternative. May I say as I close that what is most striking in this decision is that it is a unanimous one, in spite of the fact that at first blush it appeared that there were formidable adverse precedents on our way. After long and careful deliberation and after viewing all its angles, factual and legal, when the time for voting came, there was no hesitation in the assent that all of us gave to the rationalizations and conclusions contained in the scholarly main opinion of Mr. Justice Reyes and the dispositive part of the decision, but by no means and in absolutely no degree did the public discussion generated by the peculiary circumstances and personages involved in this case ever influence any of Us, as such things, indeed, never will.

# Separate Opinions

FERNANDO, J., concurring: The learned and scholarly opinion of Justice J.B.L. Reyes renders crystal-clear why the decision reached by this Court should be what it is. It is a manifestation of the jurist's art at its most exemplary. It belies the belief not infrequently given utterance that hard cases make bad law. The problem before us is unique and unprecedented as far as our previous decisions go. It calls for a resolution far-reaching in its consequences and far-flung in its implications. Fortunately for the administration of justice according to law, there is the recognition of power vested in this Court, in the past perhaps only imperfectly discerned but nonetheless in existence, to be utilized whenever there is need to do so. This is one such occasion. Even without resort then to precedents coming from jurisdictions after which our judicial system was patterned, the same result would have been reached. For only thus, to paraphrase Cardozo, would the flexibility and the creativeness of the judicial process assert themselves. The opinion of Justice J.B.L., Reyes therefore calls for assent, which I readily yield. Nor does it seem inappropriate if it be stressed that the conclusion reached by the Court is solidly buttressed not only in law as history but likewise in law as logic and as social control. Hence this brief concurring opinion, which likewise will afford me the opportunity to give expression to the view that the Constitution and the proceedings in the Constitutional Convention of 1934-1935 point unerringly to the conclusion that this Court as the sole body vested with judicial power by the fundamental law itself is not devoid of supervisory authority over inferior courts. Necessarily the prerogative to transfer the venue of criminal prosecutions whenever there is a persuasive showing that there would be a failure of justice is therein included. On such an assumption, I do not feel called upon to inquire into any asserted authority, even if denominated administrative, of an alter ego of the Executive, the Secretary of Justice, over the lower courts. For my belief gets stronger with the years that it would be difficult to assert that such a competence, even as thus limited, is warranted

under a Constitution based on the doctrine of separation of powers and necessarily committed to the principle of judicial independence. 1. We start with the grant by the Constitution of Judicial power to this Court and to such inferior courts as may be established by law. 1 Thus is conferred the authority to decide cases through the ascertainment of facts and the application of the law, involving many a time its interpretation. 2It connotes, in the language of the decision, "the imperative of securing a fair and impartial trial, or of preventing a miscarriage of justice. ...." 3Where, as this did develop in this case, there is more than a probability of an impasse with the witnesses for the prosecution displaying the utmost reluctance to testify if the trial would be held in Vigan, entailing the risk that there be, again in the language of the opinion, "a mockery of the judicial process." 4it would appear undeniable, and we have so held today, that this Court is not to be denied the necessary competence to set matters right. It is not to fold its hands as if in helpless submission to a binding decree of Providence but must meet the problem squarely, possessed of power adequate to cope with such an exigency. In the same way that the two other coordinate departments, the Executive and Congress, being constitutional organs, can rely on the fundamental law to justify the exercise of certain prerogatives, 5 so may this Court, the only constitutional court, exercise supervision over all other judicial agencies thereafter legislatively created, appropriately termed by the Constitution as inferior courts. There would be a void in the framework of government thus established if there is no official body of a higher rank that can take the necessary steps to avoid a frustration of the exercise of judicial power. It is my firm conviction that neither the Presidency nor Congress can rightfully be entrusted with such a task. If it were thus, then the doctrine of separation of powers becomes a myth. Such an approach necessarily and logically compel the conclusion that the so called administrative supervision exercised by the Secretary of Justice is, to put it at its mildest, infected with the gravest doubts as to its constitutionality. There is no need to go that far to reach a decision in this case as is so aptly demonstrated in the opinion of the Court. What appears to me undisputed is that where the question partakes of a judicial character, only this Court can perform that function and trace its source to the Constitution itself. That is to free the Constitution from the reproach that a situation is left unprovided for. What is more, it assures the utmost respect for the principle that like the other two coordinate and co-equal branches, Court is likewise the recipient of power conferred by the Constitution itself. 6 2. So much for law from the standpoint of analytical jurisprudence of law as logic. If the matter be viewed from the approach found congenial by sociological jurists, law as one of the most effective forms of social control, the same conclusion appears to be inescapable. This is to examine legal institutions in terms of how they function. It certainly would be a blot on the administration of justice if by the reluctance of witnesses to testify, based on what they consider to be a feeling that cannot be stigmatized under the circumstances as having no basis in reason, no trial could be had of a criminal case. It is a matter of great public interest that crime should not go unpunished. Of course, it is equally important that the rights of whoever is accused are duly safeguarded. Where as in this case an impasse is likely to occur, in itself an alarming symptom of a breakdown in the orderly legal processes, the loss of public confidence in the rule of law itself is incalculable. That is an eventuality which at all pains must be avoided. The only question is how. If the legal doctrine and principles, which under the system of legal norms followed must be grounded in the Constitution itself do not recognize such a competence in this Court, then for some all may well be lost. It would be unthinkable, again given the assumption, not entirely without basis, that the two other branches of the government cannot escape political considerations, to assume that either Congress or the Executive can be trusted to take care of such a situation. Nor would it do to leave such matters in the hands of the lower courts, unless whatever is decided by them is subject to correction and review by the only constitutional court, certainly vested with the needed supervisory authority. It would thus appear, if a breakdown in the legal system is to be averted, that the power of this Court is undeniable. There would seem to be no other way to avoid a serious disruption in the legal order. The above considerations necessarily lead me to yield a full concurrence with what has been so persuasively and ably put forth in the masterly opinion of Justice J.B.L. Reyes. December 5, 1970 BARREDO, J., concurring:

The accuracy of the technical bases as well as the unerring logic of the resolution of the various facets of this case evidence in the main opinion written by our erudite colleague Mr. Justice J.B.L. Reyes could not but impel the unanimous assent given thereto by the members of this Court. Indeed, I could give the best evidence of my full concurrence therein by merely signing the same without this separate opinion. I feel, however, that the impact of this decision is of such transcendental importance to the administration of justice in this country, particularly now when some sectors of our people make no secret of lingering doubts as to the fairness and impartiality by judicial actuations and decisions, that my duty as a member of this highest tribunal of the land calls for more than just the giving of my vote in favor thereof. I consider it incumbent upon me, since none of my brethren seems to be minded to do it, to project more emphatically certain relevant matters, the significance of which should go hand in hand with the resolution of the case itself. I can neither control nor conceal the feeling of full satisfaction that overwhelms me now, because I consider this decision as probably the first one of national importance, in a long time, that will receive universal and unqualified approval throughout the length and breath of this Republic. I am sure it will yield for our constitutional government as a whole and for the judiciary in particular a rich harvest of regained trust and confidence in the administration of justice. This decision is a great leap forward. We are shaking away from a long standing jurisprudential rule; We are casting aside technical procedural roadblocks; We are here and now proclaiming to all and sundry the plenitude, under the Constitution, of Our power and authority to "insure to (our people) and their posterity, the blessings of independence under a regime of justice" (Preamble of the Constitution) by holding that the "judicial power ... vested in ... (the) Supreme Court" necessarily carries with it the power to lay down procedures that will effectively and fully guarantee, as far as it is humanly possible to do so, that substantial justice shall not be defeated thru technicalities of procedure; and what is most important today, as I view it, is that this is one decision the essence of which spells simple justice that will be plainly understood by the common man. In the clearest terms, this Court holds in effect in this decision that inspite of the traditional rule that a person charged with an offense may not be tried in a province outside of the one ill which the alleged offense or any essential ingredient thereof has been committed, it is the duty of the corresponding trial court, with the approval of the Supreme Court, to see to it that when the demands of justice require it, the venue is moved to another province wherein the circumstantial environment will insure a full disclosure of all material facts essential in the pursuit of truth and justice. Surely, the common man would not understand why the Supreme Court in whom the totality of judicial power is vested by the Constitution would not have the authority and the right, nay the duty, to prevent a trial from being held in a place where it would be nothing more than a farce and an empty show, the final chapter of which may have already been prewritten, even independently of the honesty and integrity of the presiding judge, because of external factors and forces that impede the witnesses from making a free and fearless exposition of what they know. I am exceedingly happy that by this decision, the common man will understand that neither the Constitution nor this Court will ever be found wanting in what is needed top render justice in its truest sense. Now, for some views of my own on the specific legal issues raised by the parties in their pleadings. The problem revolves around the power of the Secretary of the Department of Justice vis-a-vis the operation of the Circuit Criminal Courts created by Republic Act 5179. The People contends that by Administrative Order 258 and 271, Series of 1968 and Administrative Order No. 226, Series of 1970, of the Secretary of Justice, issued pursuant allegedly to Republic Act 5179, (presumably Section 8 thereof) the transfer of the criminal cases herein involved, Criminal Cases Nos. 47-V and 48-V of the Court of First Instance of Ilocos Sur to the Circuit Criminal Court of the Second Judicial District is legally justifiable. On the other hand, the defense submits that under the uniformly announced doctrine of this Court regarding the jurisdictional nature of the venue of criminal cases and principally because to give effect to the administrative orders aforementioned would be impairing the independence of the judiciary, the accused in aforesaid cases must be tried in Vigan, Ilocos Sur, by the Court of First Instance in which, it is a fact, the case was filed on June 15, 1970, the very day Administrative Order No. 221 of the Secretary of Justice authorizing Judge Lino Anover of the Circuit Criminal Court to hold sessions in Vigan beginning July 1, 1970 was issued. It is my considered view that the less said about the intervention of the Department of Justice with the Circuit Criminal Courts by the issuance of Administrative Orders 258 and 274, Series of 1968 and worse Administrative Order No. 226, Series of 1970 the better, for I find absolutely no legal authority for the issuance of said Orders. The first two purportedly direct and instruct the judges of the various judicial districts of the Philippines as to how to apportion among themselves, together with the corresponding circuit criminal court judges, the cases falling within their concurrent jurisdiction. I feel very strongly that the distribution of the powers of government by the Constitution places, even in its broadest sense, everything that judges have to do that might in one way or another affect or be related to the ultimate disposition of the controversies and cases to be tried by them, including the distribution of the cases to be tried by them, entirely and exclusively with the judges themselves by common agreement among them, and so I hold that whatever be the import of Section 8 of Republic Act 5179 providing that "for administrative purposes, the Circuit Criminal Courts shall be under the supervision of the Department of Justice," the same cannot be considered as contemplating any intervention of the Secretary of Justice in the distribution of cases among judges.

That the common impression and long standing practice on the matter are otherwise, cannot alter what, in my humble view, the Constitution ordains. I take it that under Republic Act 5179, Circuit Criminal Courts are nothing but additional branches of the regular Courts of First Instance in their respective districts with the limited concurrent jurisdiction to take cognizance of, try and decide only those cases enumerated in Section 1 of the Act. This is readily implied from Section 3 of the Act which says: SEC. 3. The provisions of all laws and the Rules of Court relative to the judges of the Courts of First Instance and the trial, disposition and appeal of criminal cases therein shall be applicable to the circuit judge and the cases cognizable by them insofar as they are not inconsistent with the provisions of this Act. It is also my conviction that when Congress enacted Republic Act 5179, it was conscious of the existing doctrinal rule laid down by this Court, in Cunanan 1 that in criminal cases, venue is equivalent to territorial jurisdiction and precisely because of this consciousness and the knowledge that the nature of the crimes placed within the jurisdiction of the Circuit Criminal Courts is such that their successful prosecution might be impaired or obstructed by the doctrinal rule aforementioned that in Section 4 of the Act, Congress expressly provided that as a rule, "cases shall be heard within the province where the crime subject of the offense (sic) was committed" but "when the interest of justice so demands, with the prior approval of the Supreme Court, cases may be heard in a neighboring province of the district." It is contended that these quoted provisions of Section 4 contemplate only those cases already in the Circuit Criminal Court. That may be so, but my view is that by the said provisions, Congress has precisely opened the door for the regular courts trying cases of the nature enumerated in the Act to shift those cases to the circuit criminal court in instances like the present wherein it appears quite evident that to maintain Vigan as the venue of the trials in question will defeat the ends of justice, for, after all, the circuit court is just another branch of the Court of First Instance, and once it is in the former court, then Section 4 may be easily applied. Moving of cases from one branch of a Court of First Instance to another branch thereof is neither new nor unusual when the judges concerned are agreed that such a step would best promote the interests of justice. In the light of this practice, commendable in its motivation, why cannot the transfer be made from the Court of First Instance to circuit criminal court? Indeed, this should not be treated as merely a matter of discretion; judges should feel bound to act accordingly, as a matter of duty, hence a negative action in the appropriate cases is ground for certiorari ormandamus. In this connection, however, I must hasten to advert, that the interested parties should be duly heard on the matter and, in accordance with the spirit, if not the letter of the law, approval of the Supreme Court be secured. Apropos of all this discussion, I would like to make it clear that the rule invoked by the defense to the effect that venue in criminal cases is jurisdictional in character has no foundation in any act of the legislature. There can be no question that jurisdiction is conferred only by law and that it is only venue that may be fixed by the Rules of Court because jurisdiction is substantive and venue is merely procedural. The rule the defense invokes is found only in a decision of this Court rendered way back in 1913. In Cunanan, supra, this Court held: "The jurisdiction of the Courts of First Instance of the Philippine Islands, in criminal cases, is limited to certain well-defined territory. They cannot take jurisdiction of persons charged with an offense alleged to have been committed outside of that limited territory." As can be noted, no provision of law is cited in support of the ruling. The reason is simple. There is no such law. In other words, whatever force such invoked ruling may have is no more than that of a construction given by this Court. I dare say that when a previous construction by this Court runs counter to fundamental principles now separating the rule making power of the courts from the legislative faculty to define and apportion jurisdiction, it is best to lean in favor of recognizing the constitutional boundaries of our prerogatives when they are plain and the contrary cannot be implied. And since it was this Court that made the construction, there is nothing to stop Us from modifying the same, and inasmuch as Section 14, par. (a) of Rule 110 is purely a rule of venue, not legislated upon by Congress as a jurisdictional matter, Our power to change the same is unquestionable. I, therefore, reiterate my concurrence in the resolution of this point in the main opinion. Accordingly, I agree that the respondent judge gravely abused his discretion in not yielding to the suggested transfer of the cases in question to the circuit criminal court. Court trials and proceedings mean nothing unless the pronouncement and decisions of the courts merit the faith and trust of the parties in particular and the people in general. To the common man specially, the imperatives of justice administered by our courts are: (1) judge who can be trusted and (2) procedures that insulate the proceedings from all factors that may taint the ultimate outcome of litigations with doubt and skepticism. To my mind, it is not enough that a judge trusts himself or can be trusted as capable of acting in good faith, it is equally important that no circumstance attendant to the proceedings should mar

that quality of trustworthiness. It is thus clear that by Our decision in this case, We are not expressing any distrust as to the impartiality of respondent judge; it should be clearly understood, however, that it is possible for his decision to be unfair not because he has made it so, but because under the circumstances, the adulterated evidence before him leaves him no other alternative. May I say as I close that what is most striking in this decision is that it is a unanimous one, in spite of the fact that at first blush it appeared that there were formidable adverse precedents on our way. After long and careful deliberation and after viewing all its angles, factual and legal, when the time for voting came, there was no hesitation in the assent that all of us gave to the rationalizations and conclusions contained in the scholarly main opinion of Mr. Justice Reyes and the dispositive part of the decision, but by no means and in absolutely no degree did the public discussion generated by the peculiary circumstances and personages involved in this case ever influence any of Us, as such things, indeed, never will.

EN BANC
[G.R. No. 137004. July 26, 2000]

ARNOLD V. GUERRERO, petitioner, vs. THE COMMISSION ON ELECTIONS, HON. MANUEL B. VILLAR, JR., as the Speaker of the House of Representatives, 11th Congress, HON. ROBERTO P. NAZARENO, as the Secretary General of the House of Representatives, 11th Congress, RODOLFO C. FARIAS and GUILLERMO R. RUIZ, respondents. DECISION
QUISUMBING, J.: Before the Court is a petition for certiorari, prohibition, and mandamus, with prayer for a temporary restraining order and/or preliminary injunction, under Rule 65 of the Rules of Court. It assails the Order of the Commission on Elections, Second Division, dated May 10, 1998, in COMELEC Case No. SPA 98-227, which dismissed the petition filed by herein respondent Guillermo C. Ruiz to disqualify respondent Rodolfo C. Farias as a candidate for the elective office of Congressman in the first district of Ilocos Norte during the May 11, 1998 elections. It also assails the Resolution dated May 16, 1998, of the COMELEC En Banc, denying the motion for reconsideration filed by respondent Ruiz and dismissing the petition-in-intervention filed by herein petitioner Arnold V. Guerrero. In the Second Division of the COMELEC, Ruiz sought to perpetually disqualify respondent Farias as a candidate for the position of Congressman.[1] Ruiz alleged that Farias had been campaigning as a candidate for Congressman in the May 11, 1998 polls, despite his failure to file a Certificate of Candidacy for said office. Ruiz averred that Farias failure to file said Certificate violated Section 73 of the Omnibus Election Code[2] in relation to COMELEC Resolution No. 2577, dated January 15, 1998. Ruiz asked the COMELEC to declare Farias as a "nuisance candidate" pursuant to Section 69 of the Omnibus Election

Code[3] and to disqualify him from running in the May 11, 1998 elections, as well as in all future polls. On May 8, 1998, Farias filed his Certificate of Candidacy with the COMELEC, substituting candidate Chevylle V. Farias who withdrew on April 3, 1998. On May 9, 1998, Ruiz filed an "Urgent Ex-Parte Motion To Resolve Petition" with the COMELEC, attaching thereto a copy of the Certificate of Candidacy of Farias. On May 10, 1998, the Second Division of the COMELEC decided Case No. SPA 98-227, disposing as follows: "WHEREFORE, premises considered, the Commission (Second Division) RESOLVES to DISMISS the instant petition for utter lack of merit. "SO ORDERED."[4] In dismissing Ruizs petition, the Second Division of the COMELEC stated, "[T]here is none (sic) in the records to consider respondent an official candidate to speak of without the filing of said certificate. Hence, there is no certificate of candidacy to be cancelled, consequently, no candidate to be disqualified." [5] On May 11, 1998, the elections pushed through as scheduled. The post-election tally of votes in Ilocos Norte showed that Farias got a total of 56,369 votes representing the highest number of votes received in the first district. Farias was duly proclaimed winner. On May 16, 1998, Ruiz filed a motion for reconsideration, contending that Farias could not validly substitute for Chevylle V. Farias, since the latter was not the official candidate of theLakas ng Makabayan Masang Pilipino (LAMMP), but was an independent candidate. Another person cannot substitute for an independent candidate. Thus, Farias certificate of candidacy claiming to be the official candidate of LAMMP in lieu of Chevylle V. Farias was fatally defective, according to Ruiz. On June 3, 1998, Farias took his oath of office as a member of the House of Representatives. On June 10, 1998, petitioner herein filed his "Petition-In-Intervention" in COMELEC Case No. SPA 98-227. Petitioner averred that he was the official candidate of the Liberal Party (LP) in said elections for Congressman, and stood to be adversely affected by Case No. SPA 98-227. Guerrero contended that Farias, having failed to file his Certificate of Candidacy on or before the last day therefor, being midnight of March 27, 1998, Farias illegally resorted to the remedy of substitution provided for under Section 77 of the Omnibus Election

Code[6] and thus, Farias disqualification was in order. Guerrero then asked that the position of Representative of the first district of Ilocos Norte be declared vacant and special elections called for, but disallowing the candidacy of Farias. On January 6, 1999, the COMELEC En Banc dismissed Ruizs motion for reconsideration and Guerreros petition-in-intervention in Case No. SPA 98-227. The decretal portion of its Resolution reads: "PRESCINDING FROM THE FOREGOING PREMISES, this Commission (En Banc) RESOLVED, as it hereby RESOLVES, to AFFIRM the Order of the Commission (Second Division) and thereafter, DISMISS this instant motion for reconsideration for lack of jurisdiction (italics in the original) without prejudice to the filing of a quo warranto case, if he so desires. "SO ORDERED."[7] Hence, the instant petition, anchored on the following grounds: A.....THE RESPONDENT COMELEC GRAVELY ABUSED ITS DISCRETION AND ACTED IN EXCESS AND/OR WITHOUT JURISDICTION IN REFUSING TO RULE ON THE VALIDITY OR INVALIDITY OF THE CANDIDACY OR PURPORTED CERTIFICATE OF CANDIDACY OF PRIVATE RESPONDENT FARIAS. B.....THE RESPONDENT COMELEC GRAVELY ABUSED ITS DISCRETION AND ACTED IN EXCESS AND/OR WITHOUT JURISDICTION IN TOSSING THE DUTY TO RULE ON THE VALIDITY OR INVALIDITY OF THE CANDIDACY OR PURPORTED CERTIFICATE OF CANDIDACY OF PRIVATE RESPONDENT FARIAS TO THE HOUSE OF REPRESENTATIVES ELECTORAL TRIBUNAL (HRET) CONSIDERING THAT THE LATTER (HRET) OBVIOUSLY LACKS JURISDICTION TO RULE ON THE ISSUE THEREBY UNDULY CREATING A VACUUM AND RENDERING PETITIONER WITHOUT A REMEDY. C.....THE RESPONDENT COMELEC GRAVELY ABUSED ITS DISCRETION AND ACTED IN EXCESS AND/OR WITHOUT JURISDICTION IN NOT RENDERING A RULING, BASED ON THE FACTS AS STATED IN ITS ASSAILED RESOLUTION DATED JANUARY 6, 1999 (Annex "B" hereof) DISQUALIFYING PRIVATE RESPONDENT FARIAS AS A CANDIDATE FOR CONGRESSMAN OF THE FIRST LEGISLATIVE DISTRICT OF ILOCOS NORTE DURING THE MAY 11, 1998 ELECTIONS, PREMISED ON ITS FINDINGS THAT "THERE IS NONE IN THE RECORDS TO CONSIDER RESPONDENT (FARIAS) AN OFFICIAL CANDIDATE TO SPEAK OF WITHOUT THE FILING OF SAID CERTIFICATE, HENCE, THERE IS NO CERTIFICATE OF CANDIDACY TO BE CANCELLED, CONSEQUENTLY, NO CANDIDATE TO BE DISQUALIFIED."

D.....THE RESPONDENT COMELEC GRAVELY ABUSED ITS DISCRETION AND ACTED IN EXCESS AND/OR WITHOUT JURISDICTION IN NOT CALLING A SPECIAL ELECTION TO FILL-UP THE VACANT POSITION OF CONGRESSMAN OF THE FIRST LEGISLATIVE DISTRICT OF ILOCOS NORTE DUE TO THE DISQUALIFICATION OF RESPONDENT FARIAS AS A CANDIDATE THERETO AND WHO APPEARS TO HAVE OBTAINED THE HIGHEST NUMBER OF VOTES CAST IN THE MAY 11, 1998 ELECTIONS. We find pertinent for our resolution this issue: Did the COMELEC commit grave abuse of discretion in holding that the determination of the validity of the certificate of candidacy of respondent Farias is already within the exclusive jurisdiction of the Electoral Tribunal of the House of Representatives? In its assailed resolution, the COMELEC had noted that respondent Farias had taken his oath and assumed office as a Member of the 11th Congress and by express mandate of the Constitution,[8] it had lost jurisdiction over the case. Petitioner Guerrero argues that the refusal of the COMELEC to rule on the validity or invalidity of the certificate of candidacy of Farias amounted to grave abuse of discretion on its part. He claims that COMELEC failed in its Constitutional duty to uphold and enforce all laws relative to elections.[9] He relies on Gallardo v. Judge Tabamo, Jr., 218 SCRA 253 (1993), which reiterated the doctrine laid down in Zaldivar v. Estenzo, 23 SCRA 533 (1968), that the COMELEC has exclusive charge of the enforcement and administration of all laws relative to the conduct of an electoral exercise. A special civil action for certiorari may be availed of when the tribunal, board, or officer exercising judicial or quasi-judicial functions has acted without or in excess of jurisdiction and there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law for the purpose of annulling the proceeding.[10] It is the proper remedy to question any final order, ruling and decision of the COMELEC rendered in the exercise of its adjudicatory or quasijudicial powers.[11] But for an action for certiorari to prosper, there must be a showing that the COMELEC acted with grave abuse of discretion. This means such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction or excess thereof, as where the power is exercised in an arbitrary and despotic manner by reason of passion or personal hostility, and it must be so patent as to amount to an evasion of positive duty or a virtual refusal to perform the duty enjoined by law.[12] In the present case, we find no grave abuse of discretion on the part of the COMELEC when it held that its jurisdiction over Case No. SPA 98-277 had ceased with the assumption of office of respondent Farias as Representative for the first district of Ilocos Norte. While the COMELEC is vested with the power to

declare valid or invalid a certificate of candidacy, its refusal to exercise that power following the proclamation and assumption of the position by Farias is a recognition of the jurisdictional boundaries separating the COMELEC and the Electoral Tribunal of the House of Representatives (HRET). Under Article VI, Section 17 of the Constitution, the HRET has sole and exclusive jurisdiction over all contests relative to the election, returns, and qualifications of members of the House of Representatives. Thus, once a winning candidate has been proclaimed, taken his oath, and assumed office as a member of the House of Representatives, COMELECs jurisdiction over election contests relating to his election, returns, and qualifications ends, and the HRETs own jurisdiction begins.[13] Thus, the COMELECs decision to discontinue exercising jurisdiction over the case is justifiable, in deference to the HRETs own jurisdiction and functions. However, petitioner contends that the jurisdiction of the HRET as defined under Article VI, Section 17 of the Constitution is limited only to the qualifications prescribed under Article VI, Section 6 of the Constitution.[14] Consequently, he claims that any issue which does not involve these constitutional qualifications is beyond the realm of the HRET. The filing of a certificate of candidacy being a statutory qualification under the Omnibus Election Code is outside the pale of the HRET, according to him. This contention lacks cogency and is far from persuasive. Article VI, Section 17 of the Constitution cannot be circumscribed lexically. The word "qualifications" cannot be read as qualified by the term "constitutional." Ubi lex non distinguit noc nos distinguire debemos. Basic is the rule in statutory construction that where the law does not distinguish, the courts should not distinguish.[15] There should be no distinction in the application of a law where none is indicated. For firstly, the drafters of the fundamental law, in making no qualification in the use of a general word or expression, must have intended no distinction at all. Secondly, the courts could only distinguish where there are facts or circumstances showing that the lawgiver intended a distinction or qualification. In such a case, the courts would merely give effect to the lawgivers intent.[16] Petitioner further argues that the HRET assumes jurisdiction only if there is a valid proclamation of the winning candidate. He contends that if a candidate fails to satisfy the statutory requirements to qualify him as a candidate, his subsequent proclamation is void ab initio. Where the proclamation is null and void, there is no proclamation at all and the mere assumption of office by the proclaimed candidate does not deprive the COMELEC at all of its power to declare such nullity, according to petitioner. But as we already held, in an electoral contest where the validity of the proclamation of a winning candidate who has taken his oath of office and assumed his post as Congressman is raised, that issue is best addressed to the HRET.[17] The reason for this ruling is self-evident, for it avoids duplicity of proceedings and a clash of jurisdiction between constitutional bodies, with due regard to the peoples mandate.

Whether respondent Farias validly substituted Chevylle V. Farias and whether respondent became a legitimate candidate, in our view, must likewise be addressed to the sound judgment of the Electoral Tribunal. Only thus can we demonstrate fealty to the Constitutional provision that the Electoral Tribunal of each House of Congress shall be the "sole judge of all contests relating to the election, returns, and qualifications of their respective members".[18] WHEREFORE, the petition is hereby DISMISSED for lack of merit. Costs against petitioner. SO ORDERED. Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Purisima, Pardo, Buena, Gonzaga-Reyes, Ynares-Santiago, and De Leon, Jr., JJ., concur.

You might also like