NORTHWESTERN UNIVERSITY, INC., and BEN A. NICOLAS, complainants, vs. Atty. MACARIO D. ARQUILLO, respondent.

Representing conflicting interests is prohibited by the Code of Professional Responsibility. Unless all the affected clients’ written consent is given after a full disclosure of all relevant facts, attorneys guilty of representing conflicting interests shall as a rule be sanctioned with suspension from the practice of law. The Case and the Facts This administrative case stems from a sworn Letter-Complaint[1] filed with the Integrated Bar of the Philippines-Commission on Bar Discipline (IBP-CBD) by Ben A. Nicolas, acting for himself and on behalf of Northwestern University, Inc. In that Letter-Complaint, Atty. Macario D. Arquillo was charged with deceit, malpractice, gross misconduct and/or violation of his oath as attorney by representing conflicting interests. The material averments of the Complaint are summarized by the IBP-CBD as follows: “Herein [c]omplainants, Northwestern University, Inc. and Mr. Ben A. Nicolas, accuses (sic) herein [r]espondent, Atty. Macario D. Arquillo, of engaging in conflicting interest in a case before the National Labor Relations Commission, Regional Arbitration Branch No. 1, San Fernando, La Union. “Complainant alleges that in a consolidated case, herein [r]espondent appeared and acted as counsels for both complainants (eight out of the eighteen complainants therein) and respondent (one out of the ten respondents therein). “In a consolidation of NLRC Cases [Nos.] 1-05-1086-97, 1-05-1087-97, 1-05-1088-97, 1-051091-97, 1-05-1092-97, 1-05-1097-97, 1-05-1109-97, 1-05-1096-97 (“consolidated cases”), herein [r]espondent appeared as counsel for complainants therein, Teresita A. Velasco, Gervacio A. Velasco, Mariel S. Hernando, Virginio C. Rasos, Bonifacio S. Blas, Ronald A. Daoang, Luzviminda T. Urcio and Araceli Quimoyog. In the very same consolidated case, [r]espondent was also the counsel of one of the respondents therein, Jose G. Castro. “Complainants, as their evidence, submitted the Motion to Dismiss dated August 12, 1997 filed by Jose G. Castro, represented by his counsel, herein [r]espondent filed before the NLRC of San Fernando, La Union. Sixteen (16) days later or on August 28, 1997, [r]espondent filed a Complainant’s Consolidated Position Paper, this time representing some of the complainants in the very same consolidated case.”[2] (Citations omitted) Respondent failed to file his Answer to the Complaint despite a June 24 1998 Order[3] of the IBP-CBD directing him to do so. Even after receiving five notices, he failed to appear in any of the scheduled hearings. Consequently, he was deemed to have waived his right to participate in the proceedings. Thereafter, the complainants were ordered to submit their verified position paper with supporting documents, after which the case was to be deemed submitted for decision.[4] In their Manifestation[5] dated August 30, 2004, they said that they would no longer file a position paper. They agreed to submit the case for decision on the basis of their Letter-Affidavit dated March 16, 1998, together with all the accompanying documents. Report and Recommendation of the IBP

In his Report,[6] Commissioner Dennis B. Funa found respondent guilty of violating the conflict-of-interests rule under the Code of Professional Responsibility. Thus, the former recommended the latter’s suspension from the practice of law for a period of six (6) months. In Resolution No. XVI-2004-415 dated October 7, 2004, the Board of Governors of the IBP adopted the Report and Recommendation of Commissioner Funa, with the modification that the period of suspension was increased to two (2) years. On December 12, 2004, the Resolution and the records of the case were transmitted to this Court for final action, pursuant to Section 12(b) of Rule 139-B of the Rules of Court. On January 20, 2005, respondent filed a Motion for Reconsideration to set aside Resolution No. XVI-2004-415. The IBP denied the Motion. The Court’s Ruling We agree with the findings of the IBP Board of Governors, but reduce the recommended period of suspension to one year. Administrative Liability of Respondent The Code of Professional Responsibility requires lawyers to observe candor, fairness and loyalty in all their dealings and transactions with their clients.[7] Corollary to this duty, lawyers shall not represent conflicting interests, except with all the concerned clients’ written consent, given after a full disclosure of the facts.[8] When a lawyer represents two or more opposing parties, there is a conflict of interests, the existence of which is determined by three separate tests: (1) when, in representation of one client, a lawyer is required to fight for an issue or claim, but is also duty-bound to oppose it for another client; (2) when the acceptance of the new retainer will require an attorney to perform an act that may injuriously affect the first client or, when called upon in a new relation, to use against the first one any knowledge acquired through their professional connection; or (3) when the acceptance of a new relation would prevent the full discharge of an attorney’s duty to give undivided fidelity and loyalty to the client or would invite suspicion of unfaithfulness or double dealing in the performance of that duty.[9] In the present case, Atty. Macario D. Arquillo, as counsel for Respondent Jose C. Castro in NLRC Case Nos. I-05-1083-97 to I-05-1109-97, filed a Motion to Dismiss those cases. Shortly thereafter, a position paper was filed by Atty. Arquillo as counsel for several complainants in consolidated NLRC Case Nos. I-05-1087-97, I-05-1088-97, I-05-1091-97, I05-1092-97, I-05-1096-97, I-05-1097-97, and I-05-1109-97. All the cases in the second set were included in the first one, for which he had filed the subject Motion to Dismiss. Furthermore, in his position paper for the complainants, Atty. Arquillo protected his other client, Respondent Jose C. Castro, in these words: “3. More than lack of valid cause for the dismissal of complainants, respondents, except Atty. Jose C. Castro and Atty. Ernesto B. Asuncion, should be made accountable for not according complainants their right to due process.”[10] In his two-page Motion for Reconsideration, Atty. Arquillo claims that there was no conflict of interest in his representation of both the respondent and the complainants in the same



consolidated cases, because all of them were allegedly on the same side. Attaching to the Motion the Decision of Labor Arbiter Norma C. Olegario on the consolidated NLRC cases, Atty. Arquillo theorizes that her judgment absolved Castro of personal liability for the illegal dismissal of the complainants; this fact allegedly showed that there was no conflict in the interests of all the parties concerned. This Court does not agree. Atty. Arquillo’s acts cannot be justified by the fact that, in the end, Castro was proven to be not personally liable for the claims of the dismissed employees. Having agreed to represent one of the opposing parties first, the lawyer should have known that there was an obvious conflict of interests, regardless of his alleged belief that they were all on the same side. It cannot be denied that the dismissed employees were the complainants in the same cases in which Castro was one of the respondents. Indeed, Commissioner Funa correctly enounced: “As counsel for complainants, [r]espondent had the duty to oppose the Motion to Dismiss filed by Jose G. Castro. But under the circumstance, it would be impossible since [r]espondent is also the counsel of Jose G. Castro. And it appears that it was [r]espondent who prepared the Motion to Dismiss, which he should be opposing [a]s counsel of Jose G. Castro, Respondent had the duty to prove the Complaint wrong. But Respondent cannot do this because he is the counsel for the complainants. Here lies the inconsistency. The inconsistency of interests is very clear. “Thus it has been noted ‘The attorney in that situation will not be able to pursue, with vigor and zeal, the client’s claim against the other and to properly represent the latter in the unrelated action, or, if he can do so, he cannot avoid being suspected by the defeated client of disloyalty or partiality in favor of the successful client. The foregoing considerations will strongly tend to deprive the relation of attorney and client of those special elements which make it one of trust and confidence[.]’ (Legal Ethics, Agpalo, p. 230, 4th ed.; In re De la Rosa, 21 Phil. 258)”[11] An attorney cannot represent adverse interests. It is a hornbook doctrine grounded on public policy that a lawyer’s representation of both sides of an issue is highly improper. The proscription applies when the conflicting interests arise with respect to the same general matter, however slight such conflict may be. It applies even when the attorney acts from honest intentions or in good faith.[12] The IBP Board of Governors recommended that respondent be suspended from the practice of law for two years. Considering, however, prior rulings in cases also involving attorneys representing conflicting interests, we reduce the suspension to one (1) year.[13] WHEREFORE, Atty. Macario D. Arquillo is found GUILTY of misconduct and is hereby SUSPENDED from the practice of law for a period of one (1) year effective upon his receipt of this Decision, with a warning that a similar infraction shall be dealt with more severely in the future. SO ORDERED.

DONALD DEE petitioner, -versus-COURT OF APPEALS and AMELITO MUTUC REGALADO, J.: Petitioner assails the resolution of respondent court, dated February 12,1987, reinstating its decision promulgated on May 9, 1986 in AC-G.R. CV No. 04242 wherein it affirmed the decision of the that court holding that the services rendered by private respondent was on a professional, and not on a gratis et amore basis and ordering petitioner to pay private respondent the sum of P50,000.00 as the balance of the latter's legal fee therefor. The records show that sometime in January, 1981, petitioner and his father went to the residence of private respondent, accompanied by the latter's cousin, to seek his advice regarding the problem of the alleged indebtedness of petitioner's brother, Dewey Dee, to Caesar's Palace, a well-known gambling casino at Las Vegas, Nevada, U.S.A. Petitioner's father was apprehensive over the safety of his son, Dewey, having heard of a link between the mafia and Caesar's Palace and the possibility that his son may be harmed at the instance of the latter. 1 Private respondent assured petitioner and his father that he would inquire into the matter, after which his services were reportedly contracted for P100,000. 00. From his residence, private respondent called up Caesar's Palace and, thereafter, several long distance telephone calls and two trips to Las Vegas by him elicited the information that Dewey Dee's outstanding account was around $1,000,000.00. Further investigations, however, revealed that said account had actually been incurred by Ramon Sy, with Dewey Dee merely signing for the chits. Private respondent communicated said information to petitioner's a father and also assured him that Caesar's Palace was not in any way linked to the mafia. 2 In June, 1981, private respondent personally talked with the president of Caesar's Palace at Las Vegas, Nevada. He advised the president that for the sake and in the interest of the casino it would be better to make Ramon Sy answer for the indebtedness. The president told him that if he could convince Ramon Sy to acknowledge the obligation, Dewey Dee would be exculpated from liability for the account. Upon private respondent's return to Manila, he conferred with Ramon Sy and the latter was convinced to acknowledge the indebtedness. In August, 1981, private respondent brought to Caesar's Palace the letter of Ramon Sy owning the debt and asking for a discount. Thereafter, the account of Dewey Dee was cleared and the casino never bothered him. 3 Having thus settled the account of petitioner's brother, private respondent sent several demand letters to petitioner demanding the balance of P50,000.00 as attorney's fees. Petitioner, however, ignored said letters. On October 4, 1982, private respondent filed a complaint against petitioner in the Regional Trial Court of Makati, Branch CXXXVI, for the collection of attorney's fees and refund of transport fare and other expenses. 4 Private respondent claimed that petitioner formally engaged his services for a fee of P100,000.00 and that the services he rendered were professional services which a lawyer renders to a client. Petitioner, however, denied the existence of any professional relationship of attorney and client between him and private respondent. He admits that he and his father visited private respondent for advice on the matter of Dewey Dee's gambling account. However, he insists that such visit was merely an informal one and that private respondent had not been specifically contracted to handle the problem. On the contrary, respondent Mutuc had allegedly volunteered his services "as a friend of defendant's family" to see what



he could do about the situation. As for the P50,000.00 inceptively given to private respondent, petitioner claims that it was not in the nature of attomey's fees but merely "pocket money" solicited by the former for his trips to Las Vegas and the said amount of P50,000.00 was already sufficient remuneration for his strictly voluntary services. After trial, the court a quo rendered judgment ordering herein petitioner to pay private respondent the sum of P50,000.00 with interest thereon at the legal rate from the filing of the complaint on October 4, 1982 and to pay the costs. All other claims therein of private respondent and the counterclaim of petitioner were dismissed. 5 On appeal, said judgment was affirmed by the then Intermediate Appellate Court on May 9, 1986. 6 Petitioner, in due time, filed a motion for reconsideration contending that the Appellate Court overlooked two important and decisive factors, to wit: (1) At the time private respondent was ostensibly rendering services to petitioner and his father, he was actually working "in the interest" and "to the advantage" of Caesar's Palace of which he was an agent and a consultant, hence the interests of the casino and private respondent were united in their objective to collect from the debtor; and (2) Private respondent is not justified in claiming that he rendered legal services to petitioner and his father in view of the conflicting interests involved. In its resolution of July 31, 1986, respondent court reconsidered its decision and held that the sum of P50,000.00 already paid by petitioner to private respondent was commensurate to the services he rendered, considering that at the time he was acting as counsel for petitioner he was also acting as the collecting agent and consultant of, and receiving compensation from, Caesar's Palace. 7 However, upon a motion for reconsideration thereafter filed by private respondent, the present respondent Court of Appeals issued another resolution, dated February 12, 1987, reinstating the aforesaid decision of May 9, 1986. 8 Petitioner is now before us seeking a writ of certiorari to overturn the latter resolution. It is necessary, however, to first clear the air of the questions arising from the change of stand of the First Civil Cases Division of the former Intermediate Appellate Court when, acting on the representations in petitioner's undated motion for reconsideration supposedly filed on May 28,1986, it promulgated its July 31, 1986 resolution reconsidering the decision it had rendered in AC-G.R. CV No. 04242. Said resolution was, as earlier noted, set aside by the Twelfth Division of the reorganized Court of Appeals which, at the same time, reinstated the aforesaid decision. Because of its clarificatory relevance to some issues belatedly raised by petitioner, which issues should have been disregarded 9 but were nevertheless auspiciously discussed therein, at the risk of seeming prolixity we quote hereunder the salient portions of the assailed resolution which demonstrate that it was not conceived in error. The reason for then IAC's action is that it deemed the P50,000.00 plaintiff-appellee had previously received from defendant-appellant as adequate compensation for the services rendered by am for defendant-appellant, considering that at the time plaintiff-appellee was acting as counsel for defendant-appellant, he was also acting as the collecting agent and consultant of, and receiving compensation from Caesar's Palace in Las Vegas, Nevada, the entity with whom defendant-appellant was having a problem and for which he had engaged

the services of plaintiff-appellee. The crux of the matter, therefore, is whether or not the evidence on record justifies this finding of the IAC. Plaintiff-appellee maintains that his professional services to defendant-appellant were rendered between the months of July and September of 1981, while his employment as collection agent and consultant of Caesar's Palace covered the period from December 1981 to October 1982. This positive testimony of plaintiff-appellee, however, was disregarded by the IAC for the following reasons: 1. In August l983, plaintiff-appellee testified that he was a representative of Caesar's Palace in the Philippines 'about two or three years ago.' From this the IAC concluded that the period covers the time plaintiff-appellee rendered professional services to defendant-appellant. We do not think that IAC's conclusion is necessarily correct. When plaintiff-appellee gave the period 'about two or three years ago,' he was merely stating an approximation. Considering that plaintiff-appellee was testifying in August 1983, and his employment with Caesar's Palace began in December 1981, the stated difference of two years is relatively correct. . . . 2. The plaintiff appellee had testified that he was working for the sake,' 'in the interest,' and 'to the advantage' of Caesar's Palace. x x x "We detect nothing from the above which would support IAC's conclusion that plaintiff-appellee was then in the employ of Caesar's Palace. What is gathered is that plaintiff-appellee was simply fulfilling a condition which plaintiffappellee had proposed to, and was accepted by, Caesar's Palace, for the release of Dewey Dee from his obligation to Caesar's Palace. 3. Caesar's Palace would not have listened to, and acted upon, the advice of plaintiffappellee if he were no longer its consultant and alter ego. Why not? We are witnesses to many successful negotiations between contending parties whose representing lawyers were not and were never in the employ of the opposite party. The art of negotiation is precisely one of the essential tools of a good practitioner, and mastery of the art takes into account the circumstance that one may be negotiating, among others, with a person who may not only be a complete stranger but antagonistic as well. The fact that plaintiff-appellee was able to secure a favorable concession from Caesar's Palace for defendant-appellant does not justify the conclusion that it could have been secured only because of plaintiff-appellee's professional relationship with Caesar's Palace. It could have been attributable more to plaintiff-appellee's stature as a former ambassador of the Philippines to the United States, his personality, and his negotiating technique. Assuming, however, that plaintiff-appellee was employed by Caesar's Palace during the time that he was rendering professional services for defendant-appellant, this would not automatically mean the denial of additional attorney's fees to plaintiff appellee. The main reason why the IAC denied plaintiff-appellee additional compensation was because the latter was allegedly receiving compensation from Caesar's Palace, and, therefore, the amount of P50,000.00 plaintiff-appellee had previously received from defendant-appellant is 'reasonable and commensurate. This conclusion, however, can only be justified if the fact and amount of remuneration had been established. These were not proven at all. No proof was presented as to the nature of plaintiff-appellee's remuneration, and the mode or manner in which it was paid.. . . 10



Both the lower court and the appellate court concur in their findings that there was a lawyerclient relationship between petitioner and private respondent Mutuc. We find no reason to interfere with this factual finding. There may be instances when there is doubt as to whether an attorney-client relationship has been created. The issue may be raised in the trial court, but once the trial court and the Court of Appeals have found that there was such a relationship the Supreme Court cannot disturb such finding of fact, 11 absent cogent reasons therefor. The puerile claim is advanced that there was no attorney-client relationship between petitioner and private respondent for lack of a written contract to that effect. The absence of a written contract will not preclude the finding that there was a professional relationship which merits attorney's fees for professional services rendered. Documentary formalism is not an essential element in the employment of an attorney; the contract may be express or implied. To establish the relation, it is sufficient that the advice and assistance of an attorney is sought and received in any matter pertinent to his profession. An acceptance of the relation is implied on the part of the attorney from his acting on behalf of his client in pursuance of a request from the latter. 12 There is no question that professional services were actually rendered by private respondent to petitioner and his family. Through his efforts, the account of petitioner's brother, Dewey Dee, with Caesar's Palace was assumed by Ramon Sy and petitioner and his family were further freed from the apprehension that Dewey might be harmed or even killed by the socalled mafia. For such services, respondent Mutuc is indubitably entitled to receive a reasonable compensation and this right cannot be concluded by petitioner's pretension that at the time private respondent rendered such services to petitioner and his family, the former was also the Philippine consultant of Caesar's Palace. On the first aspect, the evidence of record shows that the services of respondent Mutuc were engaged by the petitioner for the purposes hereinbefore discussed. The previous partial payments totalling P50,000.00 made by petitioner to respondent Mutuc and the tenor of the demand letters sent by said private respondent to petitioner, the receipt thereof being acknowledged by petitioner, ineluctably prove three facts, viz: that petitioner hired the services of private respondent Mutuc; that there was a prior agreement as to the amount of attorney's fees to be given to the latter; and there was still a balance due and payable on said fees. The duplicate original copy of the initial receipt issued and signed in this connection by private respondent reads: RECEIVED from Mr. Donald Dee, for professional services rendered, the sum of THIRTY THOUSAND PESOS (P30,000.00) as partial payment, leaving a balance of SEVENTY THOUSAND PESOS (P70,000.00), payable on demand. Makati, Metro Manila, July 25,1981. 13 Thereafter, several demand letters for payment of his fees, dated August 6, 1981, December 2, 1981, January 29, 1982, March 7, 1982, and September 7, 1982 were sent by private respondent to petitioner, 14 all to no avail. On the second objection, aside from the facts stated in the aforequoted resolution of respondent Court of Appeals, it is also not completely accurate to judge private respondent's position by petitioner's assumption that the interests of Caesar's Palace were adverse to those of Dewey Dee. True, the casino was a creditor but that fact was not contested or opposed by Dewey Dee, since the latter, as verifications revealed, was not the debtor. Hence, private respondent's representations in behalf of petitioner were not in resistance to

the casino's claim but were actually geared toward proving that fact by establishing the liability of the true debtor, Ramon Sy, from whom payment was ultimately and correctly exacted. 15 Even assuming that the imputed conflict of interests obtained, private respondent's role therein was not ethically or legally indefensible. Generally, an attorney is prohibited from representing parties with contending positions. However, at a certain stage of the controversy before it reaches the court, a lawyer may represent conflicting interests with the consent of the parties. 16 A common representation may work to the advantage of said parties since a mutual lawyer, with honest motivations and impartially cognizant of the parties' disparate positions, may well be better situated to work out an acceptable settlement of their differences, being free of partisan inclinations and acting with the cooperation and confidence of said parties. Here, even indulging petitioner in his theory that private respondent was during the period in question an agent of Caesar's Palace, petitioner was not unaware thereof, hence he actually consented to and cannot now decry the dual representation that he postulates. This knowledge he admits, thus: It is a fair question to ask why, of all the lawyers in the land, it was the private respondent who was singled out by the petitioner's father for consultation in regard to an apparent problem, then pending in Caesar's Palace. The testimony of Arthur Alejandrino, cousin to private respondent, and the admission of the private respondent himself supply the answer. Alejandrino testified that private respondent was the representative of Caesar's Palace in the Philippines (p. 23, t.s.n., Nov. 29, 1983). Private respondent testified that he was such representative tasked by the casino to collect the gambling losses incurred by Filipinos in Las Vegas. (p. 5, t.s.n., Sept. 21, 1983). 17 A lawyer is entitled to have and receive the just and reasonable compensation for services rendered at the special instance and request of his client and as long as he is honestly and in good faith trying to serve and represent the interests of his client, the latter is bound to pay his just fees. 18 WHEREFORE, the resolution of respondent Court of Appeals, dated February 12,1987, reinstating its original decision of May 9, 1986 is hereby AFFIRMED, with costs against l petitioner. SO ORDERED.



THE BOARD OF LIQUIDATORS1 representing THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, -versus-HEIRS OF MAXIMO M. KALAW,2 JUAN BOCAR, ESTATE OF THE DECEASED 3 CASIMIRO GARCIA, and LEONOR MOLL, defendants-appellees. The National Coconut Corporation (NACOCO, for short) was chartered as a non-profit governmental organization on May 7, 1940 by Commonwealth Act 518 avowedly for the protection, preservation and development of the coconut industry in the Philippines. On August 1, 1946, NACOCO's charter was amended [Republic Act 5] to grant that corporation the express power "to buy, sell, barter, export, and in any other manner deal in, coconut, copra, and dessicated coconut, as well as their by-products, and to act as agent, broker or commission merchant of the producers, dealers or merchants" thereof. The charter amendment was enacted to stabilize copra prices, to serve coconut producers by securing advantageous prices for them, to cut down to a minimum, if not altogether eliminate, the margin of middlemen, mostly aliens.4 General manager and board chairman was Maximo M. Kalaw; defendants Juan Bocar and Casimiro Garcia were members of the Board; defendant Leonor Moll became director only on December 22, 1947. NACOCO, after the passage of Republic Act 5, embarked on copra trading activities. Amongst the scores of contracts executed by general manager Kalaw are the disputed contracts, for the delivery of copra, viz: (a) July 30, 1947: Alexander Adamson & Co., for 2,000 long tons, $167.00: per ton, f. o. b., delivery: August and September, 1947. This contract was later assigned to Louis Dreyfus & Co. (Overseas) Ltd. (b) August 14, 1947: Alexander Adamson & Co., for 2,000 long tons $145.00 per long ton, f.o.b., Philippine ports, to be shipped: September-October, 1947. This contract was also assigned to Louis Dreyfus & Co. (Overseas) Ltd. (c) August 22, 1947: Pacific Vegetable Co., for 3,000 tons, $137.50 per ton, delivery: September, 1947. (d) September 5, 1947: Spencer Kellog & Sons, for 1,000 long tons,$160.00 per ton, c.i.f., Los Angeles, California, delivery: November, 1947. (e) September 9, 1947: Franklin Baker Division of General Foods Corporation, for 1,500 long tons, $164,00 per ton, c.i.f., New York, to be shipped in November, 1947. (f) September 12, 1947: Louis Dreyfus & Co. (Overseas) Ltd., for 3,000 long tons, $154.00 per ton, f.o.b., 3 Philippine ports, delivery: November, 1947. (g) September 13, 1947: Juan Cojuangco, for 2,000 tons, $175.00 per ton, delivery: November and December, 1947. This contract was assigned to Pacific Vegetable Co.

(h) October 27, 1947: Fairwood & Co., for 1,000 tons, $210.00 per short ton, c.i.f., Pacific ports, delivery: December, 1947 and January, 1948. This contract was assigned to Pacific Vegetable Co. (i) October 28, 1947: Fairwood & Co., for 1,000 tons, $210.00 per short ton, c.i.f., Pacific ports, delivery: January, 1948. This contract was assigned to Pacific Vegetable Co. An unhappy chain of events conspired to deter NACOCO from fulfilling these contracts. Nature supervened. Four devastating typhoons visited the Philippines: the first in October, the second and third in November, and the fourth in December, 1947. Coconut trees throughout the country suffered extensive damage. Copra production decreased. Prices spiralled. Warehouses were destroyed. Cash requirements doubled. Deprivation of export facilities increased the time necessary to accumulate shiploads of copra. Quick turnovers became impossible, financing a problem. When it became clear that the contracts would be unprofitable, Kalaw submitted them to the board for approval. It was not until December 22, 1947 when the membership was completed. Defendant Moll took her oath on that date. A meeting was then held. Kalaw made a full disclosure of the situation, apprised the board of the impending heavy losses. No action was taken on the contracts. Neither did the board vote thereon at the meeting of January 7, 1948 following. Then, on January 11, 1948, President Roxas made a statement that the NACOCO head did his best to avert the losses, emphasized that government concerns faced the same risks that confronted private companies, that NACOCO was recouping its losses, and that Kalaw was to remain in his post. Not long thereafter, that is, on January 30, 1948, the board met again with Kalaw, Bocar, Garcia and Moll in attendance. They unanimously approved the contracts hereinbefore enumerated. As was to be expected, NACOCO but partially performed the contracts, as follows: Tons Delivered 2,386.45 None 1,000 800

Buyers Pacific Vegetable Oil Spencer Kellog Franklin Baker Louis Dreyfus

Undelivered 4,613.55 1,000 500 2,200 850 245 9,408.55

Louis Dreyfus (Adamson contract of July 30, 1,150 1947) Louis Dreyfus (Adamson Contract of August 14, 1,755 1947) TOTALS 7,091.45

The buyers threatened damage suits. Some of the claims were settled, viz: Pacific Vegetable Oil Co., in copra delivered by NACOCO, P539,000.00; Franklin Baker Corporation, P78,210.00; Spencer Kellog & Sons, P159,040.00.



But one buyer, Louis Dreyfus & Go. (Overseas) Ltd., did in fact sue before the Court of First Instance of Manila, upon claims as follows: For the undelivered copra under the July 30 contract (Civil Case 4459); P287,028.00; for the balance on the August 14 contract (Civil Case 4398), P75,098.63; for that per the September 12 contract reduced to judgment (Civil Case 4322, appealed to this Court in L-2829), P447,908.40. These cases culminated in an out-of-court amicable settlement when the Kalaw management was already out. The corporation thereunder paid Dreyfus P567,024.52 representing 70% of the total claims. With particular reference to the Dreyfus claims, NACOCO put up the defenses that: (1) the contracts were void because Louis Dreyfus & Co. (Overseas) Ltd. did not have license to do business here; and (2) failure to deliver was due to force majeure, the typhoons. To project the utter unreasonableness of this compromise, we reproduce in haec verba this finding below: x x x However, in similar cases brought by the same claimant [Louis Dreyfus & Co. (Overseas) Ltd.] against Santiago Syjuco for non-delivery of copra also involving a claim of P345,654.68 wherein defendant set up same defenses as above, plaintiff accepted a promise of P5,000.00 only (Exhs. 31 & 32 Heirs.) Following the same proportion, the claim of Dreyfus against NACOCO should have been compromised for only P10,000.00, if at all. Now, why should defendants be held liable for the large sum paid as compromise by the Board of Liquidators? This is just a sample to show how unjust it would be to hold defendants liable for the readiness with which the Board of Liquidators disposed of the NACOCO funds, although there was much possibility of successfully resisting the claims, or at least settlement for nominal sums like what happened in the Syjuco case.5 All the settlements sum up to P1,343,274.52. In this suit started in February, 1949, NACOCO seeks to recover the above sum of P1,343,274.52 from general manager and board chairman Maximo M. Kalaw, and directors Juan Bocar, Casimiro Garcia and Leonor Moll. It charges Kalaw with negligence under Article 1902 of the old Civil Code (now Article 2176, new Civil Code); and defendant board members, including Kalaw, with bad faith and/or breach of trust for having approved the contracts. The fifth amended complaint, on which this case was tried, was filed on July 2, 1959. Defendants resisted the action upon defenses hereinafter in this opinion to be discussed. The lower court came out with a judgment dismissing the complaint without costs as well as defendants' counterclaims, except that plaintiff was ordered to pay the heirs of Maximo Kalaw the sum of P2,601.94 for unpaid salaries and cash deposit due the deceased Kalaw from NACOCO. Plaintiff appealed direct to this Court. Plaintiff's brief did not, question the judgment on Kalaw's counterclaim for the sum of P2,601.94. Right at the outset, two preliminary questions raised before, but adversely decided by, the court below, arrest our attention. On appeal, defendants renew their bid. And this, upon established jurisprudence that an appellate court may base its decision of affirmance of the judgment below on a point or points ignored by the trial court or in which said court was in error.6

1. First of the threshold questions is that advanced by defendants that plaintiff Board of Liquidators has lost its legal personality to continue with this suit. Accepted in this jurisdiction are three methods by which a corporation may wind up its affairs: (1) under Section 3, Rule 104, of the Rules of Court [which superseded Section 66 of the Corporation Law]7 whereby, upon voluntary dissolution of a corporation, the court may direct "such disposition of its assets as justice requires, and may appoint a receiver to collect such assets and pay the debts of the corporation;" (2) under Section 77 of the Corporation Law, whereby a corporation whose corporate existence is terminated, "shall nevertheless be continued as a body corporate for three years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and of enabling it gradually to settle and close its affairs, to dispose of and convey its property and to divide its capital stock, but not for the purpose of continuing the business for which it was established;" and (3) under Section 78 of the Corporation Law, by virtue of which the corporation, within the three year period just mentioned, "is authorized and empowered to convey all of its property to trustees for the benefit of members, stockholders, creditors, and others interested."8 It is defendants' pose that their case comes within the coverage of the second method. They reason out that suit was commenced in February, 1949; that by Executive Order 372, dated November 24, 1950, NACOCO, together with other government-owned corporations, was abolished, and the Board of Liquidators was entrusted with the function of settling and closing its affairs; and that, since the three year period has elapsed, the Board of Liquidators may not now continue with, and prosecute, the present case to its conclusion, because Executive Order 372 provides in Section 1 thereof that — Sec.1. The National Abaca and Other Fibers Corporation, the National Coconut Corporation, the National Tobacco Corporation, the National Food Producer Corporation and the former enemy-owned or controlled corporations or associations, . . . are hereby abolished. The said corporations shall be liquidated in accordance with law, the provisions of this Order, and/or in such manner as the President of the Philippines may direct; Provided, however, That each of the said corporations shall nevertheless be continued as a body corporate for a period of three (3) years from the effective date of this Executive Order for the purpose of prosecuting and defending suits by or against it and of enabling the Board of Liquidators gradually to settle and close its affairs, to dispose of and, convey its property in the manner hereinafter provided. Citing Mr. Justice Fisher, defendants proceed to argue that even where it may be found impossible within the 3 year period to reduce disputed claims to judgment, nonetheless, "suits by or against a corporation abate when it ceases to be an entity capable of suing or being sued" (Fisher, The Philippine Law of Stock Corporations, pp. 390-391). Corpus Juris Secundum likewise is authority for the statement that "[t]he dissolution of a corporation ends its existence so that there must be statutory authority for prolongation of its life even for purposes of pending litigation"9 and that suit "cannot be continued or revived; nor can a valid judgment be rendered therein, and a judgment, if rendered, is not only erroneous, but void and subject to collateral attack." 10 So it is, that abatement of pending actions follows as a matter of course upon the expiration of the legal period for liquidation, 11 unless the statute merely requires a commencement of suit within the added time. 12 For, the court cannot extend the time alloted by statute. 13 We, however, express the view that the executive order abolishing NACOCO and creating the Board of Liquidators should be examined in context. The proviso in Section 1 of



Executive Order 372, whereby the corporate existence of NACOCO was continued for a period of three years from the effectivity of the order for "the purpose of prosecuting and defending suits by or against it and of enabling the Board of Liquidators gradually to settle and close its affairs, to dispose of and convey its property in the manner hereinafter provided", is to be read not as an isolated provision but in conjunction with the whole. So reading, it will be readily observed that no time limit has been tacked to the existence of the Board of Liquidators and its function of closing the affairs of the various government owned corporations, including NACOCO. By Section 2 of the executive order, while the boards of directors of the various corporations were abolished, their powers and functions and duties under existing laws were to be assumed and exercised by the Board of Liquidators. The President thought it best to do away with the boards of directors of the defunct corporations; at the same time, however, the President had chosen to see to it that the Board of Liquidators step into the vacuum. And nowhere in the executive order was there any mention of the lifespan of the Board of Liquidators. A glance at the other provisions of the executive order buttresses our conclusion. Thus, liquidation by the Board of Liquidators may, under section 1, proceed in accordance with law, the provisions of the executive order, "and/or in such manner as the President of the Philippines may direct." By Section 4, when any property, fund, or project is transferred to any governmental instrumentality "for administration or continuance of any project," the necessary funds therefor shall be taken from the corresponding special fund created in Section 5. Section 5, in turn, talks of special funds established from the "net proceeds of the liquidation" of the various corporations abolished. And by Section, 7, fifty per centum of the fees collected from the copra standardization and inspection service shall accrue "to the special fund created in section 5 hereof for the rehabilitation and development of the coconut industry." Implicit in all these, is that the term of life of the Board of Liquidators is without time limit. Contemporary history gives us the fact that the Board of Liquidators still exists as an office with officials and numerous employees continuing the job of liquidation and prosecution of several court actions. Not that our views on the power of the Board of Liquidators to proceed to the final determination of the present case is without jurisprudential support. The first judicial test before this Court is National Abaca and Other Fibers Corporation vs. Pore, L-16779, August 16, 1961. In that case, the corporation, already dissolved, commenced suit within the threeyear extended period for liquidation. That suit was for recovery of money advanced to defendant for the purchase of hemp in behalf of the corporation. She failed to account for that money. Defendant moved to dismiss, questioned the corporation's capacity to sue. The lower court ordered plaintiff to include as co-party plaintiff, The Board of Liquidators, to which the corporation's liquidation was entrusted by Executive Order 372. Plaintiff failed to effect inclusion. The lower court dismissed the suit. Plaintiff moved to reconsider. Ground: excusable negligence, in that its counsel prepared the amended complaint, as directed, and instructed the board's incoming and outgoing correspondence clerk, Mrs. Receda Vda. de Ocampo, to mail the original thereof to the court and a copy of the same to defendant's counsel. She mailed the copy to the latter but failed to send the original to the court. This motion was rejected below. Plaintiff came to this Court on appeal. We there said that "the rule appears to be well settled that, in the absence of statutory provision to the contrary, pending actions by or against a corporation are abated upon expiration of the period allowed by law for the liquidation of its affairs." We there said that "[o]ur Corporation Law contains no provision authorizing a corporation, after three (3) years from the expiration of its lifetime, to continue in its corporate name actions instituted by it within said period of three (3) years." 14 However, these precepts notwithstanding, we, in effect, held in that case that the Board of Liquidators escapes from the operation thereof for the reason that "[o]bviously, the complete loss of plaintiff's corporate existence after the expiration of the period of three (3) years for the settlement of its affairs is what impelled the President to create a Board of Liquidators, to

continue the management of such matters as may then be pending." 15 We accordingly directed the record of said case to be returned to the lower court, with instructions to admit plaintiff's amended complaint to include, as party plaintiff, the Board of Liquidators. Defendants' position is vulnerable to attack from another direction. By Executive Order 372, the government, the sole stockholder, abolished NACOCO, and placed its assets in the hands of the Board of Liquidators. The Board of Liquidators thus became the trustee on behalf of the government. It was an express trust. The legal interest became vested in the trustee — the Board of Liquidators. The beneficial interest remained with the sole stockholder — the government. At no time had the government withdrawn the property, or the authority to continue the present suit, from the Board of Liquidators. If for this reason alone, we cannot stay the hand of the Board of Liquidators from prosecuting this case to its final conclusion. 16 The provisions of Section 78 of the Corporation Law — the third method of winding up corporate affairs — find application. We, accordingly, rule that the Board of Liquidators has personality to proceed as: partyplaintiff in this case. 2. Defendants' second poser is that the action is unenforceable against the heirs of Kalaw. Appellee heirs of Kalaw raised in their motion to dismiss, 17 which was overruled, and in their nineteenth special defense, that plaintiff's action is personal to the deceased Maximo M. Kalaw, and may not be deemed to have survived after his death.18 They say that the controlling statute is Section 5, Rule 87, of the 1940 Rules of Court.19 which provides that "[a]ll claims for money against the decedent, arising from contract, express or implied", must be filed in the estate proceedings of the deceased. We disagree. The suit here revolves around the alleged negligent acts of Kalaw for having entered into the questioned contracts without prior approval of the board of directors, to the damage and prejudice of plaintiff; and is against Kalaw and the other directors for having subsequently approved the said contracts in bad faith and/or breach of trust." Clearly then, the present case is not a mere action for the recovery of money nor a claim for money arising from contract. The suit involves alleged tortious acts. And the action is embraced in suits filed "to recover damages for an injury to person or property, real or personal", which survive. 20 The leading expositor of the law on this point is Aguas vs. Llemos, L-18107, August 30, 1962. There, plaintiffs sought to recover damages from defendant Llemos. The complaint averred that Llemos had served plaintiff by registered mail with a copy of a petition for a writ of possession in Civil Case 4824 of the Court of First Instance at Catbalogan, Samar, with notice that the same would be submitted to the Samar court on February 23, 1960 at 8:00 a.m.; that in view of the copy and notice served, plaintiffs proceeded to the said court of Samar from their residence in Manila accompanied by their lawyers, only to discover that no such petition had been filed; and that defendant Llemos maliciously failed to appear in court, so that plaintiffs' expenditure and trouble turned out to be in vain, causing them mental anguish and undue embarrassment. Defendant died before he could answer the complaint. Upon leave of court, plaintiffs amended their complaint to include the heirs of the deceased. The heirs moved to dismiss. The court dismissed the complaint on the ground that the legal representative, and not the heirs, should have been made the party defendant; and that, anyway, the action being for recovery of money, testate or intestate proceedings should be



initiated and the claim filed therein. This Court, thru Mr. Justice Jose B. L. Reyes, there declared: Plaintiffs argue with considerable cogency that contrasting the correlated provisions of the Rules of Court, those concerning claims that are barred if not filed in the estate settlement proceedings (Rule 87, sec. 5) and those defining actions that survive and may be prosecuted against the executor or administrator (Rule 88, sec. 1), it is apparent that actions for damages caused by tortious conduct of a defendant (as in the case at bar) survive the death of the latter. Under Rule 87, section 5, the actions that are abated by death are: (1) claims for funeral expenses and those for the last sickness of the decedent; (2) judgments for money; and (3) "all claims for money against the decedent, arising from contract express or implied." None of these includes that of the plaintiffsappellants; for it is not enough that the claim against the deceased party be for money, but it must arise from "contract express or implied", and these words (also used by the Rules in connection with attachments and derived from the common law) were construed in Leung Ben vs. O'Brien, 38 Phil. 182, 189-194, "to include all purely personal obligations other than those which have their source in delict or tort." Upon the other hand, Rule 88, section 1, enumerates actions that survive against a decedent's executors or administrators, and they are: (1) actions to recover real and personal property from the estate; (2) actions to enforce a lien thereon; and (3) actions to recover damages for an injury to person or property. The present suit is one for damages under the last class, it having been held that "injury to property" is not limited to injuries to specific property, but extends to other wrongs by which personal estate is injured or diminished (Baker vs. Crandall, 47 Am. Rep. 126; also 171 A.L.R., 1395). To maliciously cause a party to incur unnecessary expenses, as charged in this case, is certainly injury to that party's property (Javier vs. Araneta, L-4369, Aug. 31, 1953). The ruling in the preceding case was hammered out of facts comparable to those of the present. No cogent reason exists why we should break away from the views just expressed. And, the conclusion remains: Action against the Kalaw heirs and, for the matter, against the Estate of Casimiro Garcia survives. The preliminaries out of the way, we now go to the core of the controversy. 3. Plaintiff levelled a major attack on the lower court's holding that Kalaw justifiedly entered into the controverted contracts without the prior approval of the corporation's directorate. Plaintiff leans heavily on NACOCO's corporate by-laws. Article IV (b), Chapter III thereof, recites, as amongst the duties of the general manager, the obligation: "(b) To perform or execute on behalf of the Corporation upon prior approval of the Board, all contracts necessary and essential to the proper accomplishment for which the Corporation was organized." Not of de minimis importance in a proper approach to the problem at hand, is the nature of a general manager's position in the corporate structure. A rule that has gained acceptance through the years is that a corporate officer "intrusted with the general management and control of its business, has implied authority to make any contract or do any other act which

is necessary or appropriate to the conduct of the ordinary business of the corporation. 21 As such officer, "he may, without any special authority from the Board of Directors perform all acts of an ordinary nature, which by usage or necessity are incident to his office, and may bind the corporation by contracts in matters arising in the usual course of business. 22 The problem, therefore, is whether the case at bar is to be taken out of the general concept of the powers of a general manager, given the cited provision of the NACOCO by-laws requiring prior directorate approval of NACOCO contracts. The peculiar nature of copra trading, at this point, deserves express articulation. Ordinary in this enterprise are copra sales for future delivery. The movement of the market requires that sales agreements be entered into, even though the goods are not yet in the hands of the seller. Known in business parlance as forward sales, it is concededly the practice of the trade. A certain amount of speculation is inherent in the undertaking. NACOCO was much more conservative than the exporters with big capital. This short-selling was inevitable at the time in the light of other factors such as availability of vessels, the quantity required before being accepted for loading, the labor needed to prepare and sack the copra for market. To NACOCO, forward sales were a necessity. Copra could not stay long in its hands; it would lose weight, its value decrease. Above all, NACOCO's limited funds necessitated a quick turnover. Copra contracts then had to be executed on short notice — at times within twentyfour hours. To be appreciated then is the difficulty of calling a formal meeting of the board. Such were the environmental circumstances when Kalaw went into copra trading. Long before the disputed contracts came into being, Kalaw contracted — by himself alone as general manager — for forward sales of copra. For the fiscal year ending June 30, 1947, Kalaw signed some 60 such contracts for the sale of copra to divers parties. During that period, from those copra sales, NACOCO reaped a gross profit of P3,631,181.48. So pleased was NACOCO's board of directors that, on December 5, 1946, in Kalaw's absence, it voted to grant him a special bonus "in recognition of the signal achievement rendered by him in putting the Corporation's business on a self-sufficient basis within a few months after assuming office, despite numerous handicaps and difficulties." These previous contract it should be stressed, were signed by Kalaw without prior authority from the board. Said contracts were known all along to the board members. Nothing was said by them. The aforesaid contracts stand to prove one thing: Obviously, NACOCO board met the difficulties attendant to forward sales by leaving the adoption of means to end, to the sound discretion of NACOCO's general manager Maximo M. Kalaw. Liberally spread on the record are instances of contracts executed by NACOCO's general manager and submitted to the board after their consummation, not before. These agreements were not Kalaw's alone. One at least was executed by a predecessor way back in 1940, soon after NACOCO was chartered. It was a contract of lease executed on November 16, 1940 by the then general manager and board chairman, Maximo Rodriguez, and A. Soriano y Cia., for the lease of a space in Soriano Building On November 14, 1946, NACOCO, thru its general manager Kalaw, sold 3,000 tons of copra to the Food Ministry, London, thru Sebastian Palanca. On December 22, 1947, when the controversy over the present contract cropped up, the board voted to approve a lease contract previously executed between Kalaw and Fidel Isberto and Ulpiana Isberto covering a warehouse of the latter. On the same date, the board gave its nod to a contract for renewal of the services of Dr. Manuel L. Roxas. In fact, also on that date, the board requested Kalaw to report for action all copra contracts signed by him "at the meeting immediately following the signing of



the contracts." This practice was observed in a later instance when, on January 7, 1948, the board approved two previous contracts for the sale of 1,000 tons of copra each to a certain "SCAP" and a certain "GNAPO". And more. On December 19, 1946, the board resolved to ratify the brokerage commission of 2% of Smith, Bell and Co., Ltd., in the sale of 4,300 long tons of copra to the French Government. Such ratification was necessary because, as stated by Kalaw in that same meeting, "under an existing resolution he is authorized to give a brokerage fee of only 1% on sales of copra made through brokers." On January 15, 1947, the brokerage fee agreements of 1-1/2% on three export contracts, and 2% on three others, for the sale of copra were approved by the board with a proviso authorizing the general manager to pay a commission up to the amount of 1-1/2% "without further action by the Board." On February 5, 1947, the brokerage fee of 2% of J. Cojuangco & Co. on the sale of 2,000 tons of copra was favorably acted upon by the board. On March 19, 1947, a 2% brokerage commission was similarly approved by the board for Pacific Trading Corporation on the sale of 2,000 tons of copra. It is to be noted in the foregoing cases that only the brokerage fee agreements were passed upon by the board, not the sales contracts themselves. And even those fee agreements were submitted only when the commission exceeded the ceiling fixed by the board. Knowledge by the board is also discernible from other recorded instances. When the board met on May 10, 1947, the directors discussed the copra situation: There was a slow downward trend but belief was entertained that the nadir might have already been reached and an improvement in prices was expected. In view thereof, Kalaw informed the board that "he intends to wait until he has signed contracts to sell before starting to buy copra."23 In the board meeting of July 29, 1947, Kalaw reported on the copra price conditions then current: The copra market appeared to have become fairly steady; it was not expected that copra prices would again rise very high as in the unprecedented boom during January-April, 1947; the prices seemed to oscillate between $140 to $150 per ton; a radical rise or decrease was not indicated by the trends. Kalaw continued to say that "the Corporation has been closing contracts for the sale of copra generally with a margin of P5.00 to P7.00 per hundred kilos." 24 We now lift the following excerpts from the minutes of that same board meeting of July 29, 1947: 521. In connection with the buying and selling of copra the Board inquired whether it is the practice of the management to close contracts of sale first before buying. The General Manager replied that this practice is generally followed but that it is not always possible to do so for two reasons: (1) The role of the Nacoco to stabilize the prices of copra requires that it should not cease buying even when it does not have actual contracts of sale since the suspension of buying by the Nacoco will result in middlemen taking advantage of the temporary inactivity of the Corporation to lower the prices to the detriment of the producers.

(2) The movement of the market is such that it may not be practical always to wait for the consummation of contracts of sale before beginning to buy copra. The General Manager explained that in this connection a certain amount of speculation is unavoidable. However, he said that the Nacoco is much more conservative than the other big exporters in this respect.25 Settled jurisprudence has it that where similar acts have been approved by the directors as a matter of general practice, custom, and policy, the general manager may bind the company without formal authorization of the board of directors. 26 In varying language, existence of such authority is established, by proof of the course of business, the usage and practices of the company and by the knowledge which the board of directors has, or must be presumed to have, of acts and doings of its subordinates in and about the affairs of the corporation. 27 So also, x x x authority to act for and bind a corporation may be presumed from acts of recognition in other instances where the power was in fact exercised. 28 x x x Thus, when, in the usual course of business of a corporation, an officer has been allowed in his official capacity to manage its affairs, his authority to represent the corporation may be implied from the manner in which he has been permitted by the directors to manage its business.29 In the case at bar, the practice of the corporation has been to allow its general manager to negotiate and execute contracts in its copra trading activities for and in NACOCO's behalf without prior board approval. If the by-laws were to be literally followed, the board should give its stamp of prior approval on all corporate contracts. But that board itself, by its acts and through acquiescence, practically laid aside the by-law requirement of prior approval. Under the given circumstances, the Kalaw contracts are valid corporate acts. 4. But if more were required, we need but turn to the board's ratification of the contracts in dispute on January 30, 1948, though it is our (and the lower court's) belief that ratification here is nothing more than a mere formality. Authorities, great in number, are one in the idea that "ratification by a corporation of an unauthorized act or contract by its officers or others relates back to the time of the act or contract ratified, and is equivalent to original authority;" and that " [t]he corporation and the other party to the transaction are in precisely the same position as if the act or contract had been authorized at the time." 30 The language of one case is expressive: "The adoption or ratification of a contract by a corporation is nothing more or less than the making of an original contract. The theory of corporate ratification is predicated on the right of a corporation to contract, and any ratification or adoption is equivalent to a grant of prior authority." 31 Indeed, our law pronounces that "[r]atification cleanses the contract from all its defects from the moment it was constituted." 32 By corporate confirmation, the contracts executed by Kalaw are thus purged of whatever vice or defect they may have. 33



In sum, a case is here presented whereunder, even in the face of an express by-law requirement of prior approval, the law on corporations is not to be held so rigid and inflexible as to fail to recognize equitable considerations. And, the conclusion inevitably is that the embattled contracts remain valid. 5. It would be difficult, even with hostile eyes, to read the record in terms of "bad faith and/or breach of trust" in the board's ratification of the contracts without prior approval of the board. For, in reality, all that we have on the government's side of the scale is that the board knew that the contracts so confirmed would cause heavy losses. As we have earlier expressed, Kalaw had authority to execute the contracts without need of prior approval. Everybody, including Kalaw himself, thought so, and for a long time. Doubts were first thrown on the way only when the contracts turned out to be unprofitable for NACOCO. Rightfully had it been said that bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty thru some motive or interest or ill will; it partakes of the nature of fraud.34 Applying this precept to the given facts herein, we find that there was no "dishonest purpose," or "some moral obliquity," or "conscious doing of wrong," or "breach of a known duty," or "Some motive or interest or ill will" that "partakes of the nature of fraud." Nor was it even intimated here that the NACOCO directors acted for personal reasons, or to serve their own private interests, or to pocket money at the expense of the corporation. 35 We have had occasion to affirm that bad faith contemplates a "state of mind affirmatively operating with furtive design or with some motive of self-interest or ill will or for ulterior purposes." 36 Briggs vs. Spaulding, 141 U.S. 132, 148-149, 35 L. ed. 662, 669, quotes with approval from Judge Sharswood (in Spering's App., 71 Pa. 11), the following: "Upon a close examination of all the reported cases, although there are many dicta not easily reconcilable, yet I have found no judgment or decree which has held directors to account, except when they have themselves been personally guilty of some fraud on the corporation, or have known and connived at some fraud in others, or where such fraud might have been prevented had they given ordinary attention to their duties. . . ." Plaintiff did not even dare charge its defendant-directors with any of these malevolent acts. Obviously, the board thought that to jettison Kalaw's contracts would contravene basic dictates of fairness. They did not think of raising their voice in protest against past contracts which brought in enormous profits to the corporation. By the same token, fair dealing disagrees with the idea that similar contracts, when unprofitable, should not merit the same treatment. Profit or loss resulting from business ventures is no justification for turning one's back on contracts entered into. The truth, then, of the matter is that — in the words of the trial court — the ratification of the contracts was "an act of simple justice and fairness to the general manager and the best interest of the corporation whose prestige would have been seriously impaired by a rejection by the board of those contracts which proved disadvantageous." 37 The directors are not liable." 38 6. To what then may we trace the damage suffered by NACOCO.

The facts yield the answer. Four typhoons wreaked havoc then on our copra-producing regions. Result: Copra production was impaired, prices spiralled, warehouses destroyed. Quick turnovers could not be expected. NACOCO was not alone in this misfortune. The record discloses that private traders, old, experienced, with bigger facilities, were not spared; also suffered tremendous losses. Roughly estimated, eleven principal trading concerns did run losses to about P10,300,000.00. Plaintiff's witness Sisenando Barretto, head of the copra marketing department of NACOCO, observed that from late 1947 to early 1948 "there were many who lost money in the trade." 39 NACOCO was not immune from such usual business risk. The typhoons were known to plaintiff. In fact, NACOCO resisted the suits filed by Louis Dreyfus & Co. by pleading in its answers force majeure as an affirmative defense and there vehemently asserted that "as a result of the said typhoons, extensive damage was caused to the coconut trees in the copra producing regions of the Philippines and according to estimates of competent authorities, it will take about one year until the coconut producing regions will be able to produce their normal coconut yield and it will take some time until the price of copra will reach normal levels;" and that "it had never been the intention of the contracting parties in entering into the contract in question that, in the event of a sharp rise in the price of copra in the Philippine market produce by force majeure or by caused beyond defendant's control, the defendant should buy the copra contracted for at exorbitant prices far beyond the buying price of the plaintiff under the contract." 40 A high regard for formal judicial admissions made in court pleadings would suffice to deter us from permitting plaintiff to stray away therefrom, to charge now that the damage suffered was because of Kalaw's negligence, or for that matter, by reason of the board's ratification of the contracts. 41 Indeed, were it not for the typhoons, 42 NACOCO could have, with ease, met its contractual obligations. Stock accessibility was no problem. NACOCO had 90 buying agencies spread throughout the islands. It could purchase 2,000 tons of copra a day. The various contracts involved delivery of but 16,500 tons over a five-month period. Despite the typhoons, NACOCO was still able to deliver a little short of 50% of the tonnage required under the contracts. As the trial court correctly observed, this is a case of damnum absque injuria. Conjunction of damage and wrong is here absent. There cannot be an actionable wrong if either one or the other is wanting. 43 7. On top of all these, is that no assertion is made and no proof is presented which would link Kalaw's acts — ratified by the board — to a matrix for defraudation of the government. Kalaw is clear of the stigma of bad faith. Plaintiff's corporate counsel 44 concedes that Kalaw all along thought that he had authority to enter into the contracts, that he did so in the best interests of the corporation; that he entered into the contracts in pursuance of an overall policy to stabilize prices, to free the producers from the clutches of the middlemen. The prices for which NACOCO contracted in the disputed agreements, were at a level calculated to produce profits and higher than those prevailing in the local market. Plaintiff's witness, Barretto, categorically stated that "it would be foolish to think that one would sign (a) contract when you are going to lose money" and that no contract was executed "at a price unsafe for the Nacoco." 45 Really, on the basis of prices then prevailing, NACOCO envisioned a profit of around P752,440.00. 46



Kalaw's acts were not the result of haphazard decisions either. Kalaw invariably consulted with NACOCO's Chief Buyer, Sisenando Barretto, or the Assistant General Manager. The dailies and quotations from abroad were guideposts to him. Of course, Kalaw could not have been an insurer of profits. He could not be expected to predict the coming of unpredictable typhoons. And even as typhoons supervened Kalaw was not remissed in his duty. He exerted efforts to stave off losses. He asked the Philippine National Bank to implement its commitment to extend a P400,000.00 loan. The bank did not release the loan, not even the sum of P200,000.00, which, in October, 1947, was approved by the bank's board of directors. In frustration, on December 12, 1947, Kalaw turned to the President, complained about the bank's short-sighted policy. In the end, nothing came out of the negotiations with the bank. NACOCO eventually faltered in its contractual obligations. That Kalaw cannot be tagged with crassa negligentia or as much as simple negligence, would seem to be supported by the fact that even as the contracts were being questioned in Congress and in the NACOCO board itself, President Roxas defended the actuations of Kalaw. On December 27, 1947, President Roxas expressed his desire "that the Board of Directors should reelect Hon. Maximo M. Kalaw as General Manager of the National Coconut Corporation." 47 And, on January 7, 1948, at a time when the contracts had already been openly disputed, the board, at its regular meeting, appointed Maximo M. Kalaw as acting general manager of the corporation. Well may we profit from the following passage from Montelibano vs. Bacolod-Murcia Milling Co., Inc., L-15092, May 18, 1962: "They (the directors) hold such office charged with the duty to act for the corporation according to their best judgment, and in so doing they cannot be controlled in the reasonable exercise and performance of such duty. Whether the business of a corporation should be operated at a loss during a business depression, or closed down at a smaller loss, is a purely business and economic problem to be determined by the directors of the corporation, and not by the court. It is a well known rule of law that questions of policy of management are left solely to the honest decision of officers and directors of a corporation, and the court is without authority to substitute its judgment for the judgment of the board of directors; the board is the business manager of the corporation, and so long as it acts in good faith its orders are not reviewable by the courts." (Fletcher on Corporations, Vol. 2, p. 390.) 48 Kalaw's good faith, and that of the other directors, clinch the case for defendants. 49 Viewed in the light of the entire record, the judgment under review must be, as it is hereby, affirmed. Without costs. So ordered.

ZAMBOANGA TRANSPORTATION CO., INC., petitioner, vs.THE PUBLIC UTILITY COMMISSION, respondent. This is a proceeding instituted by the Zamboanga Transportation Co., Inc., against the Public Utility Commission in which, for the reasons stated therein, it prays for the reversal of the decision of the Auxiliary Commissioner of Public Utilities, Hon. Manuel V. del Rosario, approving a chattel mortgage executed by the petitioner in favor of the Bachrach Motor Co., Inc., and the sale to the latter of said property by virtue of the foreclosure of said mortgage, as well as the ruling of said Auxiliary Commissioner of July 17, 1926, denying the motion for a new trial. In support of its petition the petitioner makes eleven assignments of error in its brief alleged to have been committed by the said Auxiliary Commissioner of Public Utilities in his decision and ruling. The only question to be decided in the present proceeding is whether or not the Public Utility Commission had the power to approve the chattel mortgage in question and the sale, by virtue of its foreclosure, of the mortgaged property. That part of section 16 of Act No. 3108 which is pertinent to the point in question, reads as follows: SEC. 16. No public utility as herein defined shall: x x x xxx xxx

(h) Without the approval of the Public Utility Commission first had, sell, alienate, mortgage, encumber, or lease its property franchises, privileges or rights, or any part thereof; nor merge or consolidate its property, franchises, privileges or rights, or any part thereof, with that of any other public utility as herein defined. The approval herein required shall be given, after notice to the public and after hearing the persons interested at a public hearing, if it be shown that there are just and reasonable grounds for making the sale, alienation, mortgage, or encumbrance for liabilities of more than one year maturity, lease, merger, or consolidation to be approved, and that the same are not detrimental to the public interest, and in case of a sale, the date on which the same is to be consummated shall be fixed in the order of approval: Provided, however, That the sale, alienation, mortgage or encumbrance, and lease of the property of public utilities which, on account of the nature and conditions of their business, are, in the judgment of the Commission, of little importance to the public interest, shall be exempt from the requisite of the approval of the Commission; but the public utilities shall in every case give notice of these transactions to the Commission. Any sale, alienation, mortgage or encumbrance, lease, fusion or consolidation made without the approval herein required shall be null and void: Provided, further, That nothing herein contained shall be construed to prevent the sale, alienation, or lease by any public utility of any of its property in the ordinary course of its business. It will be seen that the legal provision above quoted prohibits a public utility, as defined by said law, from mortgaging its properties, franchises or rights, or any part thereof, without first obtaining the approval of the Public Utility Commission and provides that any mortgage or lien created without said approval, shall be null and void. Inasmuch as a public utility has for its object public service in general, the law, in order to prevent the public from being unjustly exploited, requires that every enterprise of such nature, before commencing operations, shall obtain a certificate of public convenience from



the Public Utility Commission. After the public utility has obtained said certificate and commenced operations, the Public Utility Commission is under obligation to see that said public utility complies with its duty to the public and is not prejudicial to it. As a mortgage or a lien on the property of a public utility may prejudice the public interests, the law also requires that before public utilities mortgage their properties they must obtain the necessary approval of the Public Utility Commission for the purpose of determining if the mortgage is injurious or beneficial to the public interests. If this is the purpose of the law the approval may be given before or after the creation of the lien, since without said approval said lien cannot have the desired effect, being null and void. In view of the state of the commercial relations then existing between the Zamboanga Transportation Co., Inc., and the Bachrach Motor Co., Inc., due to the difficulties which the former encountered in complying with the promises made to the latter in the payment of the price of the trucks which it had purchased from the former on credit and which the Zamboanga Transportation Co., Inc., had mortgaged to the Bachrach Motor Co., Inc., to secure said payment, it was more convenient and beneficial to the public interests for the Zamboanga Transportation Co., Inc., to execute the chattel mortgage here in question in favor of the Bachrach Motor Co., Inc., to prevent the foreclosure of the original mortgage. Inasmuch as the Zamboanga Transportation Co., Inc., upon which it was incumbent to petition the Public Utility Commission to authorize said mortgage, or, if already executed to secure its approval, failed to do so, the Bachrach Motor Co., Inc., in order to protect its interest, requested said approval. The fact that the law imposes upon the Zamboanga Transportation Co., Inc., the duty to request such approval, does not deprive the Bachrach Motor Co., Inc., as mortgagee, of the right to request such approval when the mortgagor has been negligent in complying with its duty or did not want to comply with it for reasons prejudicial to the good name of the company and its directors. The approval of the Public Utility Commission required by law before the execution of a mortgage on the property of a public utility or the sale thereof, has no more effect than an authorization to mortgage or sell and does not affect the essential formalities of a contract, but its efficacy. The Public Utility Commission's approval gives effect of the mortgage or sale of the properties of a public utility which complies with all of the essential requisites prescribed by law, but cannot give validity or efficacy to a contract of that nature which is not executed with all the intrinsic and extrinsic formalities required by law. The public utility auxiliary commissioner, Hon. Manuel V. del Rosario, therefore, did not commit an error in approving the mortgage referred to herein, believing it to be convenient and not prejudicial to the public interests. In regard to the approval of the sale of the mortgaged property by virtue of the foreclosure of the mortgage, it may be considered superfluous and not prejudicial, because the validity of said sale depends upon the intrinsic contractual validity of the mortgage, the approval or disapproval of which is not important. By virtue of the foregoing and finding no error in the decision and ruling appealed from, the same are affirmed in their entirety, with the costs against the appellant. Street, Malcolm, Villamor, Ostrand and Romualdez, JJ., concur.

THE PEOPLE OF THE PHILIPPINES, petitioner, -versus-HONORABLE JUDGE AMANTE P. PURISIMA MUÑOZ PALMA, J.: These twenty-six (26) Petitions for Review filed by the People of the Philippines represented, respectively, by the Office of the City Fiscal of Manila, the Office of the Provincial Fiscal of Samar, and joined by the Solicitor General, are consolidated in this one Decision as they involve one basic question of law. These Petitions or appeals involve three Courts of First Instance, namely: the Court of First Instance of Manila, Branch VII, presided by Hon. Amante P. Purisima (17 Petitions), the Court of First Instance of Manila, Branch XVIII, presided by Hon. Maximo A. Maceren (8 Petitions) and, the Court of First Instance of Samar, with Hon. Wenceslao M. Polo, presiding, (1 Petition). Before those courts, Informations were filed charging the respective accused with "illegal possession of deadly weapon" in violation of Presidential Decree No. 9. On a motion to quash filed by the accused, the three Judges mentioned above issued in the respective cases filed before them — the details of which will be recounted below — an Order quashing or dismissing the Informations, on a common ground, viz, that the Information did not allege facts which constitute the offense penalized by Presidential Decree No. 9 because it failed to state one essential element of the crime. Thus, are the Informations filed by the People sufficient in form and substance to constitute the offense of "illegal possession of deadly weapon" penalized under Presidential Decree (PD for short) No. 9? This is the central issue which we shall resolve and dispose of, all other corollary matters not being indispensable for the moment. A — The Information filed by the People — 1. In L-42050-66, one typical Information filed with the Court presided by Judge Purisima follows: THE PEOPLE OF THE PHILIPPINES, plaintiff, versus PORFIRIO CANDELOSAS Y DURAN, accused. Crim. Case No. 19639 VIOLATION OF PAR. 3, PRES. DECREE No. 9 OF PROCLAMATION 1081 INFORMATION The undersigned accuses PORFIRIO CANDELOSAS Y DURAN of a violation of paragraph 3, Presidential Decree No. 9 of Proclamation 1081, committed as follows: That on or about the 14 th day of December, 1974, in the City of Manila, Philippines, the said accused did then and there wilfully, unlawfully, feloniously and knowingly have in his possession and under his custody and control one (1) carving knife with a blade of 6-½ inches and a wooden handle of 5-1/4 inches, or an overall length of 11-¾ inches, which the said accused carried outside of his residence, the said weapon not being used as a tool or implement necessary to earn his livelihood nor being used in connection therewith.



Contrary to law. (p. 32, rollo of L-42050-66) The other Informations are similarly worded except for the name of the accused, the date and place of the commission of the crime, and the kind of weapon involved. 2. In L-46229-32 and L-46313-16, the Information filed with the Court presided by Judge Maceren follows: THE PEOPLE OF THE PHILIPPINES, plaintiff, versus REYNALDO LAQUI Y AQUINO, accused.

PEOPLE OF THE PHILIPPINES, complainant, versus PANCHITO REFUNCION, accused. INFORMATION The undersigned First Assistant Provincial Fiscal of Samar, accuses PANCHITO REFUNCION of the crime of ILLEGAL POSSESSION OF DEADLY WEAPON or VIOLATION OF PD NO. 9 issued by the President of the Philippines on Oct. 2, 1972, pursuant to Proclamation No. 1081 dated Sept. 21 and 23, 1972, committed as follows:

That on or about the 6th day of October, 1976, in the evening at Barangay Barruz, Municipality of Matuginao, Province of Samar Philippines, and within the jurisdiction of this Honorabe Court, the abovenamed accused, knowingly, wilfully, unlawfully and feloniously CRIM. CASE. 29677 carried with him outside of his residence a deadly weapon called socyatan, an instrument which from its very nature is no such as could be used as a necessary tool or instrument to earn 3, VIOL. OF PAR. a livelihood, which act committed by the accused is a Violation of Presidential Decree No. 9. CONTRARY TO LAW. (p. 8, rollo of L-46997) PD 9 IN REL. TO LOI B. — The Orders of dismissal — No. 266 of the Chief In dismissing or quashing the Informations the trial courts concurred with the submittal of the defense that one essential element of the offense charged is missing from the Information, ExecutThe undersigned viz: that the carrying outside of the accused's residence of a bladed, pointed or blunt accuses REYNALDOinLAQUI weapon is furtherance or on the occasion of, connected with or related to subversion, Y AQUINO of a VIOLATION insurrection, or rebellion, organized lawlessness or public disorder. OF PARAGRAPH 3, PRESIDENTIAL DECREE NO. 9 in 1. Judge to LetThat relation Purisima reasoned out, inter alia, in this manner: on or about the 28 th day of January, 1977, in the City of ... the Court is of the opinion that in order that possession of bladed weapon or the like Manila, Philippines, the said outside residence may be prosecuted and tried under P.D. No. 9, the information must accused did then and there specifically allege that the possession of bladed weapon charged was for the purpose of wilfully, unlawfully and abetting, or in furtherance of the conditions of rampant criminality, organized lawlessness, knowingly carry outside of his public disorder, etc. as are contemplated and recited in Proclamation No. 1081, as residence a bladed and justification therefor. Devoid of this specific allegation, not necessarily in the same words, pointed weapon, to wit: an ice the information is not complete, as it does not allege sufficient facts to constitute the offense pick with an overall length of contemplated in P.D. No. 9. The information in these cases under consideration suffer from about 8½ inches, the same this defect. not being used as a necessary tool or implement to earn xxx livelihood nor his xxx xxx being used in connection therContrary to lThe other And while there is no proof of it before the Court, it is not difficult to believe the murmurings Informations are likewise of detained persons brought to Court upon a charge of possession of bladed weapons under similarly worded except for P.D. No. 9, that more than ever before, policemen - of course not all can be so heartless — the name of the accused, the now have in their hands P.D. No. 9 as a most convenient tool for extortion, what with the date and place of the terrifying risk of being sentenced to imprisonment of five to ten years for a rusted kitchen commission of the crime, and knife or a pair of scissors, which only God knows where it came from. Whereas before the kind of weapon martial law an extortion-minded peace officer had to have a stock of the cheapest paltik, and involved.3. even that could only convey the coercive message of one year in jail, now anything that has Information before the Court the semblance of a sharp edge or pointed object, available even in trash cans, may already of First Instance of Samar is serve the same purpose, and yet five to ten times more incriminating than the infamous quoted hereunder: paltik.



For sure, P.D. No. 9 was conceived with the best of intentions and wisely applied, its necessity can never be assailed. But it seems it is back-firing, because it is too hot in the hands of policemen who are inclined to backsliding. The checkvalves against abuse of P.D. No. 9 are to be found in the heart of the Fiscal and the conscience of the Court, and hence this resolution, let alone technical legal basis, is prompted by the desire of this Court to apply said checkvalves. (pp. 55-57, rollo of L-4205066) 2. Judge Maceren in turn gave his grounds for dismissing the charges as follows: xxx xxx xxx As earlier noted the "desired result" sought to be attained by Proclamation No. 1081 is the maintenance of law and order throughout the Philippines and the prevention and suppression of all forms of lawless violence as well as any act of insurrection or rebellion. It is therefore reasonable to conclude from the foregoing premises that the carrying of bladed, pointed or blunt weapons outside of one's residence which is made unlawful and punishable by said par. 3 of P.D. No. 9 is one that abets subversion, insurrection or rebellion, lawless violence, criminality, chaos and public disorder or is intended to bring about these conditions. This conclusion is further strengthened by the fact that all previously existing laws that also made the carrying of similar weapons punishable have not been repealed, whether expressly or impliedly. It is noteworthy that Presidential Decree No. 9 does not contain any repealing clause or provisions. xxx xxx xxx The mere carrying outside of one's residence of these deadly weapons if not concealed in one's person and if not carried in any of the aforesaid specified places, would appear to be not unlawful and punishable by law. With the promulgation of Presidential Decree No. 9, however, the prosecution, through Assistant Fiscal Hilario H. Laqui, contends in his opposition to the motion to quash, that this act is now made unlawful and punishable, particularly by paragraph 3 thereof, regardless of the intention of the person carrying such weapon because the law makes it "mala prohibita". If the contention of the prosecution is correct, then if a person happens to be caught while on his way home by law enforcement officers carrying a kitchen knife that said person had just bought from a store in order that the same may be used by one's cook for preparing the meals in one's home, such person will be liable for punishment with such a severe penalty as imprisonment from five to ten years under the decree. Such person cannot claim that said knife is going to be used by him to earn a livelihood because he intended it merely for use by his cook in preparing his meals. This possibility cannot be discounted if Presidential Decree No. 9 were to be interpreted and applied in the manner that that the prosecution wants it to be done. The good intentions of the President in promulgating this decree may thus be perverted by some unscrupulous law enforcement officers. It may be used as a tool of oppression and tyranny or of extortion. xxx xxx xxx

It is therefore the considered and humble view of this Court that the act which the President intended to make unlawful and punishable by Presidential Decree No. 9, particularly by paragraph 3 thereof, is one that abets or is intended to abet subversion, rebellion, insurrection, lawless violence, criminality, chaos and public disorder. (pp. 28-30, rollo of L46229-32) 3. Judge Polo of the Court of First Instance of Samar expounded his order dismissing the Information filed before him, thus: ... We believe that to constitute an offense under the aforcited Presidential decree, the same should be or there should be an allegation that a felony was committed in connection or in furtherance of subversion, rebellion, insurrection, lawless violence and public disorder. Precisely Proclamation No. 1081 declaring a state of martial law throughout the country was issued because of wanton destruction to lives and properties widespread lawlessness and anarchy. And in order to restore the tranquility and stability of the country and to secure the people from violence anti loss of lives in the quickest possible manner and time, carrying firearms, explosives and deadly weapons without a permit unless the same would fall under the exception is prohibited. This conclusion becomes more compelling when we consider the penalty imposable, which is from five years to ten years. A strict enforcement of the provision of the said law would mean the imposition of the Draconian penalty upon the accused. xxx xxx xxx It is public knowledge that in rural areas, even before and during martial law, as a matter of status symbol, carrying deadly weapons is very common, not necessarily for committing a crime nor as their farm implement but for self-preservation or self-defense if necessity would arise specially in going to and from their farm. (pp. 18-19, rollo of L-46997) In most if not all of the cases, the orders of dismissal were given before arraignment of the accused. In the criminal case before the Court of (First Instance of Samar the accused was arraigned but at the same time moved to quash the Information. In all the cases where the accused were under arrest, the three Judges ordered their immediate release unless held on other charges. C. — The law under which the Informations in question were filed by the People. As seen from the Informations quoted above, the accused are charged with illegal possession of deadly weapon in violation of Presidential Decree No. 9, Paragraph 3. We quote in full Presidential Decree No. 9, to wit: PRESIDENTIAL DECREE NO. 9 DECLARING VIOLATIONS OF GENERAL ORDERS NO. 6 and NO. 7 DATED SEPTEMBER 22, 1972, AND SEPTEMBER 23, 1972, RESPECTIVELY, TO BE UNLAWFUL AND PROVIDING PENALTIES THEREFORE.



WHEREAS, pursuant to Proclamation No. 1081 dated September 21, 1972, the Philippines has been placed under a state of martial law; WHEREAS, by virtue of said Proclamation No. 1081, General Order No. 6 dated September 22, 1972 and General Order No. 7 dated September 23, 1972, have been promulgated by me; WHEREAS, subversion, rebellion, insurrection, lawless violence, criminality, chaos and public disorder mentioned in the aforesaid Proclamation No. 1081 are committed and abetted by the use of firearms, explosives and other deadly weapons; NOW, THEREFORE, I, FERDINAND E. MARCOS, Commander-in-Chief of all the Armed Forces of the Philippines, in older to attain the desired result of the aforesaid Proclamation No. 1081 and General Orders Nos. 6 and 7, do hereby order and decree that: 1. Any violation of the aforesaid General Orders Nos. 6 and 7 is unlawful and the violator shall, upon conviction suffer: (a) The mandatory penalty of death by a firing squad or electrocution as a Military, Court/Tribunal/Commission may direct, it the firearm involved in the violation is unlicensed and is attended by assault upon, or resistance to persons in authority or their agents in the performance of their official functions resulting in death to said persons in authority or their agent; or if such unlicensed firearm is used in the commission of crimes against persons, property or chastity causing the death of the victim used in violation of any other General Orders and/or Letters of Instructions promulgated under said Proclamation No. 1081: (b) The penalty of imprisonment ranging from twenty years to life imprisonment as a Military Court/Tribunal/commission may direct, when the violation is not attended by any of the circumstances enumerated under the preceding paragraph; (c) The penalty provided for in the preceding paragraphs shall be imposed upon the owner, president, manager, members of the board of directors or other responsible officers of any public or private firms, companies, corporations or entities who shall willfully or knowingly allow any of the firearms owned by such firm, company, corporation or entity concerned to be used in violation of said General Orders Nos. 6 and 7. 2. It is unlawful to posses deadly weapons, including hand grenades, rifle grenades and other explosives, including, but not limited to, "pill box bombs," "molotov cocktail bombs," "fire bombs," or other incendiary device consisting of any chemical, chemical compound, or detonating agents containing combustible units or other ingredients in such proportion, quantity, packing, or bottling that ignites by fire, by friction, by concussion, by percussion, or by detonation of all or part of the compound or mixture which may cause such a sudden generation of highly heated gases that the resultant gaseous pressures are capable of producing destructive effects on continguous objects or of causing injury or death of a person; and any person convicted thereof shall be punished by imprisonment ranging from ten to fifteen years as a Military Court/Tribunal/Commission may direct. 3. It is unlawful to carry outside of residence any bladed, pointed or blunt weapon such as "fan knife," "spear," "dagger," "bolo," "balisong," "barong," "kris," or club, except where such articles are being used as necessary tools or implements to earn a livelihood and while

being used in connection therewith; and any person found guilty thereof shall suffer the penalty of imprisonment ranging from five to ten years as a Military Court/Tribunal/Commission may direct. 4. When the violation penalized in the preceding paragraphs 2 and 3 is committed during the commission of or for the purpose of committing, any other crime, the penalty shall be imposed upon the offender in its maximum extent, in addition to the penalty provided for the particular offenses committed or intended to be committed. Done in the City of Manila, this 2nd day of October in the year of Our Lord, nineteen hundred and seventy-two. D. — The arguments of the People — In the Comment filed in these cases by the Solicitor General who as stated earlier joins the City Fiscal of Manila and the Provincial Fiscal of Samar in seeking the setting aside of the questioned orders of dismissal, the main argument advanced on the issue now under consideration is that a perusal of paragraph 3 of P.D. 9 'shows that the prohibited acts need not be related to subversive activities; that the act proscribed is essentially a malum prohibitum penalized for reasons of public policy. 1 The City Fiscal of Manila in his brief adds further that in statutory offenses the intention of the accused who commits the act is immaterial; that it is enough if the prohibited act is voluntarily perpetuated; that P.D. 9 provides and condemns not only the carrying of said weapon in connection with the commission of the crime of subversion or the like, but also that of criminality in general, that is, to eradicate lawless violence which characterized premartial law days. It is also argued that the real nature of the criminal charge is determined not from the caption or preamble of the information nor from the specification of the provision of law alleged to have been violated but by the actual recital of facts in the complaint or information. 2 E. — Our Ruling on the matter — 1. It is a constitutional right of any person who stands charged in a criminal prosecution to be informed of the nature and cause of the accusation against him. 3 Pursuant to the above, Section 5, Rule 110 of the Rules of Court, expressly requires that for a complaint or information to be sufficient it must, inter alia state the designation of the offense by the statute, and the acts or omissions complained of as constituting the offense. This is essential to avoid surprise on the accused and to afford him the opportunity to prepare his defense accordingly. 4 To comply with these fundamental requirements of the Constitution and the Rules on Criminal Procedure, it is imperative for the specific statute violated to be designated or mentioned 4 in the charge. In fact, another compelling reason exists why a specification of the statute violated is essential in these cases. As stated in the order of respondent Judge Maceren the carrying of so-called "deadly weapons" is the subject of another penal statute and a Manila city ordinance. Thus, Section 26 of Act No. 1780 provides:



Section 26. It should be unlawful for any person to carry concealed about his person any bowie knife, dirk dagger, kris, or other deadly weapon: ... Any person violating the provisions of this section shall, upon conviction in a court of competent jurisdiction, be punished by a fine not exceeding five hundred pesos, or by imprisonment for a period not exceeding six months, or both such fine and imprisonment, in the discretion of the court. Ordinance No. 3820 of the City of Manila as amended by Ordinance No. 3928 which took effect on December 4, 1957, in turn penalizes with a fine of not more than P200.00 or imprisonment for not more than one months, or both, at the discretion of the court, anyone who shall carry concealed in his person in any manner that would disguise its deadly character any kind of firearm, bowie knife, or other deadly weapon ... in any public place. Consequently, it is necessary that the particular law violated be specified as there exists a substantial difference between the statute and city ordinance on the one hand and P.D. 9 (3) on the other regarding the circumstances of the commission of the crime and the penalty imposed for the offense. We do not agree with petitioner that the above-mentioned statute and the city ordinance are deemed repealed by P.D. 9 (3). 5 P. D. 9(3) does not contain any repealing clause or provision, and repeal by implication is not favored. 6 This principle holds true with greater force with regards to penal statutes which as a rule are to be construed strictly against the state and liberally in favor of the accused. 7 In fact, Article 7 of the New Civil Code provides that laws are repealed only by subsequent ones and their violation or non- observance shall not be excused by disuse, or custom or practice to the contrary. Thus we are faced with the situation where a particular act may be made to fall, at the discretion of a police officer or a prosecuting fiscal, under the statute, or the city ordinance, or the presidential decree. That being the case, the right becomes more compelling for an accused to be confronted with the facts constituting the essential elements of the offense charged against him, if he is not to become an easy pawn of oppression and harassment, or of negligent or misguided official action — a fear understandably shared by respondent Judges who by the nature of their judicial functions are daily exposed to such dangers. 2. In all the Informations filed by petitioner the accused are charged in the caption as well as in the body of the Information with a violation of paragraph 3, P.D. 9. What then are the elements of the offense treated in the presidential decree in question? We hold that the offense carries two elements: first, the carrying outside one's residence of any bladed, blunt, or pointed weapon, etc. not used as a necessary tool or implement for a livelihood; and second, that the act of carrying the weapon was either in furtherance of, or to abet, or in connection with subversion, rebellion, insurrection, lawless violence, criminality, chaos, or public disorder. It is the second element which removes the act of carrying a deadly weapon, if concealed, outside of the scope of the statute or the city ordinance mentioned above. In other words, a simple act of carrying any of the weapons described in the presidential decree is not a criminal offense in itself. What makes the act criminal or punishable under the decree is the motivation behind it. Without that motivation, the act falls within the purview of the city ordinance or some statute when the circumstances so warrant. Respondent Judges correctly ruled that this can be the only reasonably, logical, and valid construction given to P.D. 9(3).

3. The position taken by petitioner that P.D. 9(3) covers one and all situations where a person carries outside his residence any of the weapons mentioned or described in the decree irrespective of motivation, intent, or purpose, converts these cases into one of "statutory construction." That there is ambiguity in the presidential decree is manifest from the conflicting views which arise from its implementation. When ambiguity exists, it becomes a judicial task to construe and interpret the true meaning and scope of the measure, guided by the basic principle that penal statutes are to be construed and applied liberally in favor of the accused and strictly against the state. 4. In the construction or interpretation of a legislative measure — a presidential decree in these cases — the primary rule is to search for and determine the intent and spirit of the law. Legislative intent is the controlling factor, for in the words of this Court in Hidalgo v. Hidalgo, per Mr. Justice Claudio Teehankee, whatever is within the spirit of a statute is within the statute, and this has to be so if strict adherence to the letter would result in absurdity, injustice and contradictions. 8 There are certain aids available to Us to ascertain the intent or reason for P.D. 9(3). First, the presence of events which led to or precipitated the enactment of P.D. 9. These events are clearly spelled out in the "Whereas" clauses of the presidential decree, thus: (1) the state of martial law in the country pursuant to Proclamation 1081 dated September 21, 1972; (2) the desired result of Proclamation 1081 as well as General Orders Nos. 6 and 7 which are particularly mentioned in P.D. 9; and (3) the alleged fact that subversion, rebellion, insurrection, lawless violence, criminality, chaos, aid public disorder mentioned in Proclamation 1081 are committed and abetted by the use of firearms and explosives and other deadly weapons. The Solicitor General however contends that a preamble of a statute usually introduced by the word "whereas", is not an essential part of an act and cannot enlarge or confer powers, or cure inherent defects in the statute (p. 120, rollo of L-42050-66); that the explanatory note or enacting clause of the decree, if it indeed limits the violation of the decree, cannot prevail over the text itself inasmuch as such explanatory note merely states or explains the reason which prompted the issuance of the decree. (pp. 114-115, rollo of 46997) We disagree with these contentions. Because of the problem of determining what acts fall within the purview of P.D. 9, it becomes necessary to inquire into the intent and spirit of the decree and this can be found among others in the preamble or, whereas" clauses which enumerate the facts or events which justify the promulgation of the decree and the stiff sanctions stated therein. A "preamble" is the key of the statute, to open the minds of the makers as to the mischiefs which are to be remedied, and objects which are to be accomplished, by the provisions of the statute." (West NormanTimber v. State, 224 P. 2d 635, 639, cited in Words and Phrases, "Preamble"; emphasis supplied) While the preamble of a statute is not strictly a part thereof, it may, when the statute is in itself ambiguous and difficult of interpretation, be resorted to, but not to create a doubt or uncertainty which otherwise does not exist." (James v. Du Bois, 16 N.J.L. (1 Har.) 285, 294, cited in Words and Phrases, "Preamble")



In Aboitiz Shipping Corporation, et al. v. The City of Cebu, et al. this Court had occasion to state that '(L)egislative intent must be ascertained from a consideration of the statute as a whole, and not of an isolated part or a particular provision alone. This is a cardinal rule of statutory construction. For taken in the abstract, a word or phrase might easily convey a meaning quite different from the one actually intended and evident when the word or phrase is considered with those with which it is associated. Thus, an apparently general provision may have a limited application if read together with other provisions. 9 Second, the result or effects of the presidential decree must be within its reason or intent. In the paragraph immediately following the last "Whereas" clause, the presidential decree states: NOW, THEREFORE, I , FERDINAND E. MARCOS, Commander-in-Chief of an the Armed Forces of the Philippines, in order to attain the desired result of the aforesaid Proclamation No. 1081 and General Orders Nos. 6 and 7, do hereby order and decree that: xxx xxx xxx From the above it is clear that the acts penalized in P.D. 9 are those related to the desired result of Proclamation 1081 and General Orders Nos. 6 and 7. General Orders Nos. 6 and 7 refer to firearms and therefore have no relevance to P.D. 9(3) which refers to blunt or bladed weapons. With respect to Proclamation 1081 some of the underlying reasons for its issuance are quoted hereunder: WHEREAS, these lawless elements having taken up arms against our duly constituted government and against our people, and having committed and are still committing acts of armed insurrection and rebellion consisting of armed raids, forays, sorties, ambushes, wanton acts of murders, spoilage, plunder, looting, arsons, destruction of public and private buildings, and attacks against innocent and defenseless civilian lives and property, all of which activities have seriously endangered and continue to endanger public order and safety and the security of the nation, ... xxx xxx xxx WHEREAS, it is evident that there is throughout the land a state of anarchy and lawlessness, chaos and disorder, turmoil and destruction of a magnitude equivalent to an actual war between the forces of our duly constituted government and the New People's Army and their satellite organizations because of the unmitigated forays, raids, ambuscades, assaults, violence, murders, assassinations, acts of terror, deceits, coercions, threats, intimidations, treachery, machinations, arsons, plunders and depredations committed and being committed by the aforesaid lawless elements who have pledged to the whole nation that they will not stop their dastardly effort and scheme until and unless they have fully attained their primary and ultimate purpose of forcibly seizing political and state power in this country by overthrowing our present duly constituted government, ... (See Book I, Vital Documents on the Declaration of Martial Law in the Philippines by the Supreme Court of the Philippines, pp. 13-39)

It follows that it is only that act of carrying a blunt or bladed weapon with a motivation connected with or related to the afore-quoted desired result of Proclamation 1081 that is within the intent of P.D. 9(3), and nothing else. Statutes are to be construed in the light of purposes to be achieved and the evils sought to be remedied. (U.S. v. American Tracking Association, 310 U.S. 534, cited in LVN Pictures v. Philippine Musicians Guild, 110 Phil. 725, 731; emphasis supplied) When construing a statute, the reason for its enactment should be kept in mind, and the statute should be construed with reference to its intended scope and purpose. (Statutory Construction by E.T. Crawford, pp. 604-605, cited in Commissioner of Internal Revenue v. Filipinas Compania de Seguros, 107 Phil. 1055, 1060; emphasis supplied) 5. In the construction of P.D. 9(3) it becomes relevant to inquire into the consequences of the measure if a strict adherence to the letter of the paragraph is followed. It is a salutary principle in statutory construction that there exists a valid presumption that undesirable consequences were never intended by a legislative measure, and that a construction of which the statute is fairly susceptible is favored, which will avoid all objectionable, mischievous, indefensible, wrongful, evil, and injurious consequences. 9-a It is to be presumed that when P.D. 9 was promulgated by the President of the Republic there was no intent to work a hardship or an oppressive result, a possible abuse of authority or act of oppression, arming one person with a weapon to impose hardship on another, and so on. 10 At this instance We quote from the order of Judge Purisima the following: And while there is no proof of it before the Court, it is not difficult to believe the murmurings of detained persons brought to Court upon a charge of possession of bladed weapons under P.D. No. 9, that more than ever before, policemen - of course not all can be so heartless — now have in their hands P.D. No. 9 as a most convenient tool for extortion, what with the terrifying risk of being sentenced to imprisonment of five to ten years for a rusted kitchen knife or a pair of scissors, which only God knows where it came from. Whereas before martial law an extortion-minded peace officer had to have a stock of the cheapest paltik, and even that could only convey the coercive message of one year in jail, now anything that has the semblance of a sharp edge or pointed object, available even in trash cans, may already serve the same purpose, and yet five to ten times more incriminating than the infamous paltik. (pp. 72-73, rollo L-42050-66) And as respondent Judge Maceren points out, the people's interpretation of P.D. 9(3) results in absurdity at times. To his example We may add a situation where a law-abiding citizen, a lawyer by profession, after gardening in his house remembers to return the bolo used by him to his neighbor who lives about 30 meters or so away and while crossing the street meets a policeman. The latter upon seeing the bolo being carried by that citizen places him under arrest and books him for a violation of P.D. 9(3). Could the presidential decree have been conceived to produce such absurd, unreasonable, and insensible results? 6. Penal statutes are to be construed strictly against the state and liberally in favor of an accused.



American jurisprudence sets down the reason for this rule to be "the tenderness of the law of the rights of individuals; the object is to establish a certain rule by conformity to which mankind would be safe, and the discretion of the court limited." 11 The purpose is not to enable a guilty person to escape punishment through a technicality but to provide a precise definition of forbidden acts. 12 Our own decisions have set down the same guidelines in this manner, viz: Criminal statutes are to be construed strictly. No person should be brought within their terms who is not clearly within them, nor should any act be pronounced criminal which is not made clearly so by the statute. (U.S. v. Abad Santos, 36 Phil. 243, 246) The rule that penal statutes are given a strict construction is not the only factor controlling the interpretation of such laws, instead, the rule merely serves as an additional, single factor to be considered as an aid in determining the meaning of penal laws. (People v. Manantan, 5 SCRA 684, 692) F. The Informations filed by petitioner are fatally defective. The two elements of the offense covered by P.D. 9(3) must be alleged in the Information in order that the latter may constitute a sufficiently valid charged. The sufficiency of an Information is determined solely by the facts alleged therein. 13 Where the facts are incomplete and do not convey the elements of the crime, the quashing of the accusation is in order. Section 2(a), Rule 117 of the Rules of Court provides that the defendant may move to quash the complaint or information when the facts charged do not constitute an offense. In U.S.U. Gacutan, 1914, it was held that where an accused is charged with knowingly rendering an unjust judgment under Article 204 of the Revised Penal Code, failure to allege in the Information that the judgment was rendered knowing it to be unjust, is fatal. 14 In People v. Yadao, 1954, this Court through then Justice Cesar Bengzon who later became Chief Justice of the Court affirmed an order of the trial court which quashed an Information wherein the facts recited did not constitute a public offense as defined in Section 1, Republic Act 145. 15 G. The filing of these Petitions was unnecessary because the People could have availed itself of other available remedies below. Pertinent provisions of the Rules of Court follow: Rule 117, Section 7. Effect of sustaining the motion to quash. — If the motion to quash is sustained the court may order that another information be filed. If such order is made the defendant, if in custody, shall remain so unless he shall be admitted to bail. If such order is not made or if having been made another information is not filed withuntime to be specified in the order, or within such further time as the court may allow for good cause shown, the defendant, if in custody, shall be discharged therefrom, unless he is in custody on some other charge.

Rule 110, Section 13. Amendment. — The information or complaint may be amended, in substance or form, without leave of court, at any time before the defendant pleads; and thereafter and during the trial as to all matters of form, by leave and at the discretion of the court, when the same can be done without prejudice to the rights of the defendant. xxx xxx xxx Two courses of action were open to Petitioner upon the quashing of the Informations in these cases, viz: First, if the evidence on hand so warranted, the People could have filed an amended Information to include the second element of the offense as defined in the disputed orders of respondent Judges. We have ruled that if the facts alleged in the Information do not constitute a punishable offense, the case should not be dismissed but the prosecution should be given an opportunity to amend the Information. 16 Second, if the facts so justified, the People could have filed a complaint either under Section 26 of Act No. 1780, quoted earlier, or Manila City Ordinance No. 3820, as amended by Ordinance No. 3928, especially since in most if not all of the cases, the dismissal was made prior to arraignment of the accused and on a motion to quash. Section 8. Rule 117 states that: An order sustaining the motion to quash is not a bar to another prosecution for the same offense unless the motion was based on the grounds specified in section 2, subsections (f) and (h) of this rule. Under the foregoing, the filing of another complaint or Information is barred only when the criminal action or liability had been extinguished (Section 2[f]) or when the motion to quash was granted for reasons of double jeopardy. (ibid., [h]) As to whether or not a plea of double jeopardy may be successfully invoked by the accused in all these cases should new complaints be filed against them, is a matter We need not resolve for the present. H. — We conclude with high expectations that police authorities and the prosecuting arm of the government true to the oath of office they have taken will exercise utmost circumspection and good faith in evaluating the particular circumstances of a case so as to reach a fair and just conclusion if a situation falls within the purview of P.D. 9(3) and the prosecution under said decree is warranted and justified. This obligation becomes a sacred duty in the face of the severe penalty imposed for the offense. On this point, We commend the Chief State Prosecutor Rodolfo A. Nocon on his letter to the City Fiscal of Manila on October 15, 1975, written for the Secretary, now Minister of Justice, where he stated the following: In any case, please study well each and every case of this nature so that persons accused of carrying bladed weapons, specially those whose purpose is not to subvert the duly constituted authorities, may



not be unduly indicted for the serious offenses falling under P.D. No. 9.

The records show that the statement of the case and the facts, as recited in the brief of plaintiff-appellant, is complete and accurate. The same is, consequently, here adopted, to wit: In an information filed by the Provincial Fiscal of Pangasinan in the Court of First Instance of that Province, defendant Guillermo Manantan was charged with a violation Section 54 of the Revised Election Code. A preliminary investigation conducted by said court resulted in the finding a probable cause that the crime charged as committed by defendant. Thereafter, the trial started upon defendant's plea of not guilty, the defense moved to dismiss the information on the ground that as justice of the peace the defendant is one of the officers enumerated in Section 54 of the Revised Election Code. The lower court denied the motion to dismiss holding that a justice of the peace is within the purview Section 54. A second motion was filed by defense counsel who cited in support thereof the decision of the Court of Appeals in People vs. Macaraeg, (CA-G.R. No. 15613-R, 54 Off. Gaz., pp. 1873-76) where it was held that a justice of the peace is excluded from the prohibition of Section 54 of the Revised Election Code. Acting on this second motion to dismiss, the answer of the prosecution, the reply of the defense, and the opposition of the prosecution, the lower court dismissed the information against the accused upon the authority of the ruling in the case cited by the defense. Both parties are submitting this case upon the determination of this single question of law: Is a justice the peace included in the prohibition of Section 54 of the Revised Election Code? Section 54 of the said Code reads: No justice, judge, fiscal, treasurer, or assessor of any province, no officer or employee of the Army, no member of the national, provincial, city, municipal or rural police force and no classified civil service officer or employee shall aid any candidate, or exert any influence in any manner in a election or take part therein, except to vote, if entitled thereto, or to preserve public peace, if he is a peace officer. Defendant-appellee argues that a justice of the peace is not comprehended among the officers enumerated in Section 54 of the Revised Election Code. He submits the aforecited section was taken from Section 449 of the Revised Administrative Code, which provided the following: SEC. 449. Persons prohibited from influencing elections. — No judge of the First Instance, justice of the peace, or treasurer, fiscal or assessor of any province and no officer or employee of the Philippine Constabulary, or any Bureau or employee of the classified civil service, shall aid any candidate or exert influence in any manner in any election or take part therein otherwise than exercising the right to vote. When, therefore, section 54 of the Revised Election Code omitted the words "justice of the peace," the omission revealed the intention of the Legislature to exclude justices of the peace from its operation. The above argument overlooks one fundamental fact. It is to be noted that under Section 449 of the Revised Administrative Code, the word "judge" was modified or qualified by the phrase "of First instance", while under Section 54 of the Revised Election Code, no such modification exists. In other words, justices of the peace were expressly included in Section 449 of the Revised Administrative Code because the kinds of judges therein were specified,

Yes, while it is not within the power of courts of justice to inquire into the wisdom of a law, it is however a judicial task and prerogative to determine if official action is within the spirit and letter of the law and if basic fundamental rights of an individual guaranteed by the Constitution are not violated in the process of its implementation. We have to face the fact that it is an unwise and unjust application of a law, necessary and justified under prevailing circumstances, which renders the measure an instrument of oppression and evil and leads the citizenry to lose their faith in their government. WHEREFORE, We DENY these 26 Petitions for Review and We AFFIRM the Orders of respondent Judges dismissing or quashing the Information concerned, subject however to Our observations made in the preceding pages 23 to 25 of this Decision regarding the right of the State or Petitioner herein to file either an amended Information under Presidential Decree No. 9, paragraph 3, or a new one under other existing statute or city ordinance as the facts may warrant. Without costs. SO ORDERED.

PEOPLE OF THE PHILIPPINES, plaintiff-appellant, -versus-GUILLERMO MANANTAN, defendant-appellee. This is an appeal of the Solicitor General from the order of the Court of First Instance of Pangasinan dismissing the information against the defendant.



i.e., judge of the First Instance and justice of the peace. In Section 54, however, there was no necessity therefore to include justices of the peace in the enumeration because the legislature had availed itself of the more generic and broader term, "judge." It was a term not modified by any word or phrase and was intended to comprehend all kinds of judges, like judges of the courts of First Instance, Judges of the courts of Agrarian Relations, judges of the courts of Industrial Relations, and justices of the peace. It is a well known fact that a justice of the peace is sometimes addressed as "judge" in this jurisdiction. It is because a justice of the peace is indeed a judge. A "judge" is a public officer, who, by virtue of his office, is clothed with judicial authority (U.S. v. Clark, 25 Fed. Cas. 441, 422). According to Bouvier Law Dictionary, "a judge is a public officer lawfully appointed to decide litigated questions according to law. In its most extensive sense the term includes all officers appointed to decide litigated questions while acting in that capacity, including justices of the peace, and even jurors, it is said, who are judges of facts." A review of the history of the Revised Election Code will help to justify and clarify the above conclusion. The first election law in the Philippines was Act 1582 enacted by the Philippine Commission in 1907, and which was later amended by Act. Nos. 1669, 1709, 1726 and 1768. (Of these 4 amendments, however, only Act No. 1709 has a relation to the discussion of the instant case as shall be shown later.) Act No. 1582, with its subsequent 4 amendments were later on incorporated Chapter 18 of the Administrative Code. Under the Philippine Legislature, several amendments were made through the passage of Acts Nos. 2310, 3336 and 3387. (Again, of these last 3 amendments, only Act No. 3587 has pertinent to the case at bar as shall be seen later.) During the time of the Commonwealth, the National Assembly passed Commonwealth Act No. 23 and later on enacted Commonwealth Act No. 357, which was the law enforced until June 1947, when the Revised Election Code was approved. Included as its basic provisions are the provisions of Commonwealth Acts Nos. 233, 357, 605, 666, 657. The present Code was further amended by Republic Acts Nos. 599, 867, 2242 and again, during the session of Congress in 1960, amended by Rep. Acts Nos. 3036 and 3038. In the history of our election law, the following should be noted: Under Act 1582, Section 29, it was provided: No public officer shall offer himself as a candidate for elections, nor shall he be eligible during the time that he holds said public office to election at any municipal, provincial or Assembly election, except for reelection to the position which he may be holding, and no judge of the First Instance, justice of the peace, provincial fiscal, or officer or employee of the Philippine Constabulary or of the Bureau of Education shall aid any candidate or influence in any manner or take part in any municipal, provincial, or Assembly election under the penalty of being deprived of his office and being disqualified to hold any public office whatsoever for a term of 5 year: Provide, however, That the foregoing provisions shall not be construe to deprive any person otherwise qualified of the right to vote it any election." (Enacted January 9, 1907; Took effect on January 15, 1907.) Then, in Act 1709, Sec. 6, it was likewise provided: . . . No judge of the First Instance, Justice of the peace provincial fiscal or officer or employee of the Bureau of Constabulary or of the Bureau of Education shall aid any candidate or influence in any manner to take part in any municipal provincial or Assembly

election. Any person violating the provisions of this section shall be deprived of his office or employment and shall be disqualified to hold any public office or employment whatever for a term of 5 years, Provided, however, that the foregoing provisions shall not be construed to deprive any person otherwise qualified of the right to vote at any election. (Enacted on August 31, 1907; Took effect on September 15, 1907.) Again, when the existing election laws were incorporated in the Administrative Code on March 10, 1917, the provisions in question read: SEC. 449. Persons prohibited from influencing elections. — No judge of the First Instance, justice of the peace, or treasurer, fiscal or assessor of any province and no officer or employee of the Philippine Constabulary or any Bureau or employee of the classified civil service, shall aid any candidate or exert influence in any manner in any election or take part therein otherwise than exercising the right to vote. (Emphasis supplied) After the Administrative Code, the next pertinent legislation was Act No. 3387. This Act reads: SEC. 2636. Officers and employees meddling with the election. — Any judge of the First Instance, justice of the peace, treasurer, fiscal or assessor of any province, any officer or employee of the Philippine Constabulary or of the police of any municipality, or any officer or employee of any Bureau of the classified civil service, who aids any candidate or violated in any manner the provisions of this section or takes part in any election otherwise by exercising the right to vote, shall be punished by a fine of not less than P100.00 nor more than P2,000.00, or by imprisonment for not less than 2 months nor more than 2 years, and in all cases by disqualification from public office and deprivation of the right of suffrage for a period of 5 years. (Approved December 3, 1927.) (Emphasis supplied.) Subsequently, however, Commonwealth Act No. 357 was enacted on August 22, 1938. This law provided in Section 48: SEC. 48. Active Interventation of Public Officers and Employees. — No justice, judge, fiscal, treasurer or assessor of any province, no officer or employee of the Army, the Constabulary of the national, provincial, municipal or rural police, and no classified civil service officer or employee shall aid any candidate, nor exert influence in any manner in any election nor take part therein, except to vote, if entitled thereto, or to preserve public peace, if he is a peace officer. This last law was the legislation from which Section 54 of the Revised Election Code was taken. It will thus be observed from the foregoing narration of the legislative development or history of Section 54 of the Revised Election Code that the first omission of the word "justice of the peace" was effected in Section 48 of Commonwealth Act No. 357 and not in the present code as averred by defendant-appellee. Note carefully, however, that in the two instances when the words "justice of the peace" were omitted (in Com. Act No. 357 and Rep. Act No. 180), the word "judge" which preceded in the enumeration did not carry the qualification "of the First Instance." In other words, whenever the word "judge" was qualified by the phrase "of the First Instance", the words "justice of the peace" would follow; however, if the law simply said "judge," the words "justice of the peace" were omitted.



The above-mentioned pattern of congressional phraseology would seem to justify the conclusion that when the legislature omitted the words "justice of the peace" in Rep. Act No. 180, it did not intend to exempt the said officer from its operation. Rather, it had considered the said officer as already comprehended in the broader term "judge". It is unfortunate and regrettable that the last World War had destroyed congressional records which might have offered some explanation of the discussion of Com. Act No. 357 which legislation, as indicated above, has eliminated for the first time the words "justice of the peace." Having been completely destroyed, all efforts to seek deeper and additional clarifications from these records proved futile. Nevertheless, the conclusions drawn from the historical background of Rep. Act No. 180 is sufficiently borne out by reason hid equity. Defendant further argues that he cannot possibly be among the officers enumerated in Section 54 inasmuch as under that said section, the word "judge" is modified or qualified by the phrase "of any province." The last mentioned phrase, defendant submits, cannot then refer to a justice of the peace since the latter is not an officer of a province but of a municipality. Defendant's argument in that respect is too strained. If it is true that the phrase "of any province" necessarily removes justices of the peace from the enumeration for the reason that they are municipal and not provincial officials, then the same thing may be said of the Justices of the Supreme Court and of the Court of Appeals. They are national officials. Yet, can there be any doubt that Justices of the Supreme Court and of the Court of Appeals are not included in the prohibition? The more sensible and logical interpretation of the said phrase is that it qualifies fiscals, treasurers and assessors who are generally known as provincial officers. The rule of "casus omisus pro omisso habendus est" is likewise invoked by the defendantappellee. Under the said rule, a person, object or thing omitted from an enumeration must be held to have been omitted intentionally. If that rule is applicable to the present, then indeed, justices of the peace must be held to have been intentionally and deliberately exempted from the operation of Section 54 of the Revised Election Code. The rule has no applicability to the case at bar. The maxim "casus omisus" can operate and apply only if and when the omission has been clearly established. In the case under consideration, it has already been shown that the legislature did not exclude or omit justices of the peace from the enumeration of officers precluded from engaging in partisan political activities. Rather, they were merely called by another term. In the new law, or Section 54 of the Revised Election Code, justices of the peace were just called "judges." In insisting on the application of the rule of "casus omisus" to this case, defendant-appellee cites authorities to the effect that the said rule, being restrictive in nature, has more particular application to statutes that should be strictly construed. It is pointed out that Section 54 must be strictly construed against the government since proceedings under it are criminal in nature and the jurisprudence is settled that penal statutes should be strictly interpreted against the state. Amplifying on the above argument regarding strict interpretation of penal statutes, defendant asserts that the spirit of fair play and due process demand such strict construction in order to give "fair warning of what the law intends to do, if a certain line is passed, in language that

the common world will understand." (Justice Holmes, in McBoyle v. U.S., 283 U.S. 25, L. Ed. 816). The application of the rule of "casus omisus" does not proceed from the mere fact that a case is criminal in nature, but rather from a reasonable certainty that a particular person, object or thing has been omitted from a legislative enumeration. In the present case, and for reasons already mentioned, there has been no such omission. There has only been a substitution of terms. The rule that penal statutes are given a strict construction is not the only factor controlling the interpretation of such laws; instead, the rule merely serves as an additional, single factor to be considered as an aid in determining the meaning of penal laws. This has been recognized time and again by decisions of various courts. (3 Sutherland, Statutory Construction, p. 56.) Thus, cases will frequently be found enunciating the principle that the intent of the legislature will govern (U.S. vs. Corbet, 215 U.S. 233). It is to be noted that a strict construction should not be permitted to defeat the policy and purposes of the statute (Ash Sheep Co. v. U.S., 252 U.S. 159). The court may consider the spirit and reason of a statute, as in this particular instance, where a literal meaning would lead to absurdity, contradiction, injustice, or would defeat the clear purpose of the law makers (Crawford, Interpretation of Laws, Sec. 78, p. 294). A Federal District court in the U.S. has well said: The strict construction of a criminal statute does not mean such construction of it as to deprive it of the meaning intended. Penal statutes must be construed in the sense which best harmonizes with their intent and purpose. (U.S. v. Betteridge 43 F. Supp. 53, 56, cited in 3 Sutherland Statutory Construction 56.) As well stated by the Supreme Court of the United States, the language of criminal statutes, frequently, has been narrowed where the letter includes situations inconsistent with the legislative plan (U.S. v. Katz, 271 U.S. 354; See also Ernest Brunchen, Interpretation of the Written Law (1915) 25 Yale L.J. 129.) Another reason in support of the conclusion reached herein is the fact that the purpose of the statute is to enlarge the officers within its purview. Justices of the Supreme Court, the Court of Appeals, and various judges, such as the judges of the Court of Industrial Relations, judges of the Court of Agrarian Relations, etc., who were not included in the prohibition under the old statute, are now within its encompass. If such were the evident purpose, can the legislature intend to eliminate the justice of the peace within its orbit? Certainly not. This point is fully explained in the brief of the Solicitor General, to wit: On the other hand, when the legislature eliminated the phrases "Judge of First Instance" and justice of the peace", found in Section 449 of the Revised Administrative Code, and used "judge" in lieu thereof, the obvious intention was to include in the scope of the term not just one class of judges but all judges, whether of first Instance justices of the peace or special courts, such as judges of the Court of Industrial Relations. . . . . The weakest link in our judicial system is the justice of the peace court, and to so construe the law as to allow a judge thereof to engage in partisan political activities would weaken rather than strengthen the judiciary. On the other hand, there are cogent reasons found in the Revised Election Code itself why justices of the peace should be prohibited from electioneering. Along with Justices of the appellate courts and judges of the Court of First



Instance, they are given authority and jurisdiction over certain election cases (See Secs. 103, 104, 117-123). Justices of the peace are authorized to hear and decided inclusion and exclusion cases, and if they are permitted to campaign for candidates for an elective office the impartiality of their decisions in election cases would be open to serious doubt. We do not believe that the legislature had, in Section 54 of the Revised Election Code, intended to create such an unfortunate situation. (pp. 708, Appellant's Brief.) Another factor which fortifies the conclusion reached herein is the fact that the administrative or executive department has regarded justices of the peace within the purview of Section 54 of the Revised Election Code. In Tranquilino O. Calo, Jr. v. The Executive Secretary, the Secretary of Justice, etc. (G.R. No. L-12601), this Court did not give due course to the petition for certiorari and prohibition with preliminary injunction against the respondents, for not setting aside, among others, Administrative Order No. 237, dated March 31, 1957, of the President of the Philippines, dismissing the petitioner as justice of the peace of Carmen, Agusan. It is worthy of note that one of the causes of the separation of the petitioner was the fact that he was found guilty in engaging in electioneering, contrary to the provisions of the Election Code. Defendant-appellee calls the attention of this Court to House Bill No. 2676, which was filed on January 25, 1955. In that proposed legislation, under Section 56, justices of the peace are already expressly included among the officers enjoined from active political participation. The argument is that with the filing of the said House Bill, Congress impliedly acknowledged that existing laws do not prohibit justices of the peace from partisan political activities. The argument is unacceptable. To begin with, House Bill No. 2676 was a proposed amendment to Rep. Act No. 180 as a whole and not merely to section 54 of said Rep. Act No. 180. In other words, House Bill No. 2676 was a proposed re-codification of the existing election laws at the time that it was filed. Besides, the proposed amendment, until it has become a law, cannot be considered to contain or manifest any legislative intent. If the motives, opinions, and the reasons expressed by the individual members of the legislature even in debates, cannot be properly taken into consideration in ascertaining the meaning of a statute (Crawford, Statutory Construction, Sec. 213, pp. 375-376), a fortiori what weight can We give to a mere draft of a bill. On law reason and public policy, defendant-appellee's contention that justices of the peace are not covered by the injunction of Section 54 must be rejected. To accept it is to render ineffective a policy so clearly and emphatically laid down by the legislature. Our law-making body has consistently prohibited justices of the peace from participating in partisan politics. They were prohibited under the old Election Law since 1907 (Act No. 1582 and Act No. 1709). Likewise, they were so enjoined by the Revised Administrative Code. Another which expressed the prohibition to them was Act No. 3387, and later, Com. Act No. 357. Lastly, it is observed that both the Court of Appeals and the trial court applied the rule of "expressio unius, est exclusion alterius" in arriving at the conclusion that justices of the peace are not covered by Section 54. Said the Court of Appeals: "Anyway, guided by the rule of exclusion, otherwise known as expressio unius est exclusion alterius, it would not be beyond reason to infer that there was an intention of omitting the term "justice of the peace from Section 54 of the Revised Election Code. . . ."

The rule has no application. If the legislature had intended to exclude a justice of the peace from the purview of Section 54, neither the trial court nor the Court of Appeals has given the reason for the exclusion. Indeed, there appears no reason for the alleged change. Hence, the rule of expressio unius est exclusion alterius has been erroneously applied. (Appellant's Brief, p. 6.) Where a statute appears on its face to limit the operation of its provisions to particular persons or things by enumerating them, but no reason exists why other persons or things not so enumerated should not have been included, and manifest injustice will follow by not so including them, the maxim expressio unius est exclusion alterius, should not be invoked. (Blevins v. Mullally 135 p. 307, 22 Cal. App. 519.) . FOR THE ABOVE REASONS, the order of dismissal entered by the trial court should be set aside and this case is remanded for trial on the merits.