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1. Mendoza vs.

Comelec (March 25,2010)


2. Bolos vs. Bolos ( Oct. 10, 2010)
3. Villafuerte vs. Comelec ( Feb. 25, 2014)
4. Sps. Pascual vs. Sps. Ballesteros ( Feb. 15,2012)
5. Corpuz vs. People ( April 29, 2014)
6. CIR vs. Mindanao II Geotermal partnership ( Jan.15, 2014)
7. Atty. Risos-Vidal vs. Comelec ( Jan. 21, 2015)
8. AT&T vs. Commissioner ( Nov. 19,2014)
9. Team Energy vs. CIR ( Jan. 13,2014)
10.Visayas Geothermal vs. CIR( June 4, 2014)
11.Hacienda Luisita vs. PARC ( July 5,2011)
12.Taguinod vs. Dalupang ( Nov. 23,2005)
13.San Miguel Corp. Employees Union vc. San Miguel Packaging Products
Employees Union ( Sept. 12,2007)
14.Maritime Industry vs. COA ( Jan. 13, 2015 )
JOSELITO R. MENDOZA, G.R. No. 191084
Petitioner,
-versus-
Promulgated:

March 25, 2010

COMMISSION ON ELECTIONS AND


ROBERTO M. PAGDANGANAN,
Respondents.

x----------------------------------------------------------------------------------------------- x

DECISION

PEREZ, J.:

When the language of the law is clear and explicit, there is no room for interpretation, only application. And if statutory
construction be necessary, the statute should be interpreted to assure its being in consonance with, rather than repugnant to,
any constitutional command or prescription.[1] It is upon these basic principles that the petition must be granted.

The factual and procedural antecedents are not in dispute.

Petitioner Joselito R. Mendoza was proclaimed the winner of the 2007 gubernatorial election for the province of Bulacan, besting
respondent Roberto M. Pagdanganan by a margin of 15,732 votes. On 1 June 2007, respondent filed the Election Protest which,
anchored on the massive electoral fraud allegedly perpetrated by petitioner, was raffled to the Second Division of the Commission
on Elections (COMELEC) as EPC No. 2007-44. With petitioners filing of his Answer with Counter-Protest on 18 June 2007, the
COMELEC proceeded to conduct the preliminary conference and to order a revision of the ballots from the contested precincts
indicated in said pleadings.

Upon the evidence adduced and the memoranda subsequently filed by the parties, the COMELEC Second Division went
on to render the 1 December 2009 Resolution, which annulled and set aside petitioners proclamation as governor of Bulacan and
proclaimed respondent duly elected to said position by a winning margin of 4,321 votes. Coupled with a directive to the
Department of Interior and Local Government to implement the same, the resolution ordered petitioner to immediately vacate said
office, to cease and desist from discharging the functions pertaining thereto and to cause a peaceful turn-over thereof to
respondent.

Dissatisfied, petitioner filed a Motion for Reconsideration of the foregoing resolution with the COMELEC En
Banc. Against respondents Motion for Execution of Judgment Pending Motion for Reconsideration, petitioner also filed
an Opposition to the Motion for Execution before the COMELEC Second Division. On 8 February 2010, however, the
COMELEC En Banc issued a Resolution, effectively disposing of the foregoing motions/incidents in this wise:
WHEREFORE, in view of the foregoing, the Commission En Banc DENIES the Motion for
Reconsideration for lack of merit.The Resolution of the Commission (Second Division) promulgated on
December 1, 2009 ANNULLING the proclamation of JOSELITO R. MENDOZA as the duly elected
Governor of Bulacan and DECLARING ROBERTO M. PAGDANGANAN as duly elected to said Office
is AFFIRMED with modification.

Considering the proximity of the end of the term of office involved, this Resolution is declared
immediately executory.

ACCORDINGLY, the Commission En Banc hereby ISSUES a WRIT OF EXECUTION directing


the Provincial Election Supervisor of Bulacan, in coordination with the DILG Provincial Operations Officer to
implement the Resolution of the Commission (Second Division) dated December 1, 2009 and this Resolution of
the Commission En Banc by ordering JOSELITO R. MENDOZA toCEASE and DESIST from performing
the functions of Governor of the Province of Bulacan and to VACATE said office in favor ofROBERTO M.
PAGDANGANAN.

Let a copy of this Resolution be furnished the Secretary of the Department of Interior and Local
Government, the Provincial Election Supervisor of Bulacan, and the DILG Provincial Operations Officer of the
Province of Bulacan. (Underscoring supplied)

On 11 February 2010, petitioner filed before the COMELEC an Urgent Motion to Recall the Resolution Promulgated
on February 8, 2010 on the following grounds: (a) lack of concurrence of the majority of the members of the Commission
pursuant to Section 5, Rule 3 of the COMELEC Rules of Procedure; (b) lack of re-hearing pursuant to Section 6, Rule 18 of the
Rules; and (c) lack of notice for the promulgation of the resolution pursuant to Section 5, Rule 18 of said Rules. Invoking Section
13, Rule 18 of the same Rules, petitioner additionally argued that the resolution pertained to an ordinary action and, as such, can
only become final and executory after 30 days from its promulgation.

On 12 February 2010, petitioner filed the instant Petition for Certiorari with an Urgent Prayer for the Issuance of a
Temporary Restraining Order and/or a Status Quo Order and Writ of Preliminary Injunction. Directed against the 8 February
2010 Resolution of the COMELEC En Banc, the petition is noticeably anchored on the same grounds raised in petitioners urgent
motion to recall the same resolution before the COMELEC. In addition, the petitioner disputes the appreciation and result of the
revision of the contested ballots.

In the meantime, it appears that the COMELEC En Banc issued a 10 February 2010 Order, scheduling the case for re-
hearing on 15 February 2010, on the ground that there was no majority vote of the members obtained in the Resolution of the
Commission En Banc promulgated on February 8, 2010. At said scheduled re-hearing, it further appears that the parties agreed
to submit the matter for resolution by the COMELEC En Banc upon submission of their respective memoranda, without further
argument. As it turned out, the deliberations which ensued again failed to muster the required majority vote since, with three (3)
Commissioners not taking part in the voting, and only one dissent therefrom, the assailed 1 December 2009 Resolution of the
COMELEC Second Division only garnered three concurrences.

In their respective Comments thereto, both respondent and the Office of the Solicitor General argue that, in addition to its
premature filing, the petition at bench violated the rule against forum shopping. Claiming that he received the 10 February 2010
Order of the COMELEC En Banc late in the morning of 12 February 2010 or when the filing of the petition was already
underway, petitioner argued that: (a) he apprised the Court of the pendency of his Urgent Motion to Recall the Resolution
Promulgated on 8 February 2010; and, (b) that the writ of execution ensconced in said resolution compelled him to resort to the
petition for certioraribefore us.

On 4 March 2010, the COMELEC En Banc issued an Order for the issuance of a Writ of Execution directing the
implementation of the 1 December 2009 Resolution of the COMELEC Second Division. While the COMELEC Electoral Contests
Adjudication Department (ECAD) issued the corresponding Writ of Execution on 5 March 2010, the record shows that
COMELECEn Banc issued an Order on the same date, directing the ECAD to deliver said 4 March 2010 Order and 5 March 2010
Writ of Execution by personal service to the parties. Aggrieved, petitioner filed the following motions with the COMELEC En
Banc on 5 March 2010, viz.: (a) Urgent Motion to Declare Null and Void and Recall Latest En Banc Resolution Dated March
4, 2010; and, (b) Urgent Motion to Set Aside 4 March 2010 En Banc Resolution Granting Protestants Motion for Execution
Pending Motion for Reconsideration.

On 8 March 2010, petitioner filed before us a Supplement to the Petition with a Most Urgent Reiterating Motion for the
Issuance of a Temporary Restraining Order or a Status Quo Order. Contending that respondents protest should have been
dismissed when no majority vote was obtained after the re-hearing in the case, petitioner argues that: (a) the 4 March 2010 Order
and 5 March 2010 Writ of Execution are null and void; (b) no valid decision can be rendered by the COMELEC En Banc without
the appreciation of the original ballots; (c) the COMELEC ignored the Courts ruling in the recent case of Corral v. Commission
on Elections;[2] and (d) the foregoing circumstances are indicative of the irregularities which attended the adjudication of the case
before the Division and En Banc levels of the COMELEC.

Despite receipt of respondents Most Respectful Urgent Manifestation which once again called attention to petitioners
supposed forum shopping, the Court issued a Resolution dated 9 March 2010 granting the Status Quo Ante Order sought in the
petition. With respondents filing of a Manifestation and Comment to said supplemental pleading on 10 March 2010, petitioner
filed a Manifestation with Motion to Appreciate Ballots Invalidated as Written by One Person and Marked Ballot on 12 March
2010.

The submissions, as measured by the election rules, dictate that we grant the petition, set aside and nullify the assailed
resolutions and orders, and order the dismissal of respondents election protest.
The Preliminaries

More than the justifications petitioner proffers for the filing of the petition at bench, the public interest involved in the case
militates against the dismissal of the pleading on technical grounds like forum shopping. On the other hand, to rule that petitioner
should have filed a new petition to challenge the 4 March 2010 Order of the COMELEC En Banc is to disregard the liberality
traditionally accorded amended and supplemental pleadings and the very purpose for which supplemental pleadings are allowed
under Section 6, Rule 10 of the 1997 Rules of Civil Procedure.[3] More importantly, such a course of action would clearly be
violative of the injunction against multiplicity of suits enunciated in a long catena of decisions handed down by this Court.

The Main Matter

Acting on petitioners motion for reconsideration of the 1 December 2009 Resolution issued by the COMELEC Second Division,
the COMELEC En Banc, as stated, initially issued the Resolution dated 8 February 2010, denying the motion for lack of merit and
declaring the same resolution immediately executory. However, even before petitioners filing of his Urgent Motion to Recall the
Resolution Promulgated on 8 February 2010 and the instant Petition for Certiorari with an Urgent Prayer for the Issuance of a
Temporary Restraining Order and/or a Status Quo Order and Writ of Preliminary Injunction, the record shows that the
COMELEC En Banc issued the 10 February 2010 Resolution, ordering the re-hearing of the case on the ground that there was no
majority vote of the members obtained in the Resolution of the Commission En Banc promulgated on February 8,
2010. Having conceded one of the grounds subsequently raised in petitioners Urgent Motion to Recall the Resolution
Promulgated on February 8, 2010, the COMELEC En Banc significantly failed to obtain the votes required under Section 5(a),
Rule 3 of its own Rules of Procedure[4] for a second time.

The failure of the COMELEC En Banc to muster the required majority vote even after the 15 February 2010 re-hearing
should have caused the dismissal of respondents Election Protest. Promulgated on 15 February 1993 pursuant to Section 6, Article
IX-A and Section 3, Article IX-C of the Constitution, the COMELEC Rules of Procedure is clear on this matter. Without any
trace of ambiguity, Section 6, Rule 18 of said Rule categorically provides as follows:

Sec. 6. Procedure if Opinion is Equally Divided. When the Commission en banc is equally divided in
opinion, or the necessary majority cannot be had, the case shall be reheard, and if on rehearing no decision is
reached, the action or proceeding shall be dismissed if originally commenced in the Commission; in appealed
cases, the judgment or order appealed from shall stand affirmed; and in all incidental matters, the petition or
motion shall be denied.

The propriety of applying the foregoing provision according to its literal tenor cannot be gainsaid. As one pertaining to
the election of the provincial governor of Bulacan, respondents Election Protest was originally commenced in the COMELEC,
pursuant to its exclusive original jurisdiction over the case. Although initially raffled to the COMELEC Second Division, the
elevation of said election protest on motion for reconsideration before the Commission En Banc cannot, by any stretch of the
imagination, be considered an appeal. Tersely put, there is no appeal within the COMELEC itself. As aptly observed in the lone
dissent penned by COMELEC Commissioner Rene V. Sarmiento, respondents Election Protest was filed with the Commission at
the first instance and should be, accordingly, considered an action or proceeding originally commenced in the Commission.

The dissent reads Section 6 of COMELEC Rule 18 to mean exactly the opposite of what it expressly states. Thus was made the
conclusion to the effect that since no decision was reached by the COMELEC En Banc, then the decision of the Second Division
should stand, which is squarely in the face of the Rule that when the Commission En Banc is equally divided in opinion, or the
necessary majority cannot be had, the case shall be re-heard, and if on re-hearing, no decision is reached, the action or proceeding
shall be dismissed if originally commenced in the Commission. The reliance is on Section 3, Article IX(C) of the Constitution
which provides:

Section 3. The Commission on Elections may sit En Banc or in two divisions, and shall promulgate its rules of
procedure in order to expedite disposition of election cases, including pre-proclamation controversies. All such
election cases shall be heard and decided in division, provided that motions for reconsideration of decisions
shall be decided by the Commission En Banc.

The dissent reasons that it would be absurd that for a lack of the necessary majority in the motion for reconsideration before the
COMELEC En Banc, the original protest action should be dismissed as this would render nugatory the constitutional mandate to
authorize and empower a division of the COMELEC to decide election cases.
We cannot, in this case, get out of the square cover of Section 6, Rule 18 of the COMELEC Rules. The provision is not violative
of the Constitution.

The Rule, in fact, was promulgated obviously pursuant to the Constitutional mandate in the first sentence of Section 3 of
Article IX(C). Clearly too, the Rule was issued in order to expedite disposition of election cases such that even the absence of a
majority in a Commission En Banc opinion on a case under reconsideration does not result in a non-decision. Either the judgment
or order appealed from shall stand affirmed or the action originally commenced in the Commission shall be dismissed.

It is easily evident in the second sentence of Section 3 of Article IX(C) that all election cases before the COMELEC are
passed upon in one integrated procedure that consists of a hearing and a decision in division and when necessitated by a motion
for reconsideration, a decision by the Commission En Banc.

What is included in the phrase all such election cases may be seen in Section 2(2) of Article IX(C) of the Constitution which
states:

Section 2. The Commission on Elections shall exercise the following powers and functions:

xxxx

(2) Exercise exclusive original jurisdiction over all contests relating to the elections, returns,
and qualifications of all elective regional, provincial, and city officials, and appellate
jurisdiction over all contests involving elective municipal of officials decided by trial courts of
general jurisdiction, or involving elective barangay officials decided by trial courts of limited
jurisdiction.
Section 2(2) read in relation to Section 3 shows that however the jurisdiction of the COMELEC is involved, either in the exercise
of exclusive original jurisdiction or an appellate jurisdiction, the COMELEC will act on the case in one whole and single
process: to repeat, in division, and if impelled by a motion for reconsideration, en banc.

There is a difference in the result of the exercise of jurisdiction by the COMELEC over election contests. The difference
inheres in the kind of jurisdiction invoked, which in turn, is determined by the case brought before the COMELEC. When a
decision of a trial court is brought before the COMELEC for it to exercise appellate jurisdiction, the division decides the appeal
but, if there is a motion for reconsideration, the appeal proceeds to the banc where a majority is needed for a decision. If the
process ends without the required majority at the banc, the appealed decision stands affirmed. Upon the other hand, and this is
what happened in the instant case, if what is brought before the COMELEC is an original protest invoking the original jurisdiction
of the Commission, the protest, as one whole process, is first decided by the division, which process is continued in the banc if
there is a motion for reconsideration of the division ruling. If no majority decision is reached in the banc, the protest, which is an
original action, shall be dismissed. There is no first instance decision that can be deemed affirmed.

It is easy to understand the reason for the difference in the result of the two protests, one as original action and the other
as an appeal, if and when the protest process reaches the COMELEC En Banc. In a protest originally brought before the
COMELEC, no completed process comes to the banc. It is the banc which will complete the process. If, at that completion, no
conclusive result in the form of a majority vote is reached, the COMELEC has no other choice except to dismiss the protest. In a
protest placed before the Commission as an appeal, there has been a completed proceeding that has resulted in a decision. So that
when the COMELEC, as an appellate body, and after the appellate process is completed, reaches an inconclusive result, the appeal
is in effect dismissed and resultingly, the decision appealed from is affirmed.

To repeat, Rule 18, Section 6 of the COMELEC Rules of Procedure follows, is in conformity with, and is in
implementation of Section 3 of Article IX(C) of the Constitution.

Indeed, the grave abuse of discretion of the COMELEC is patent in the fact that despite the existence in its books of the
clearly worded Section 6 of Rule 18, which incidentally has been acknowledged by this Court in the recent case of Marcoleta v.
COMELEC,[5] it completely ignored and disregarded its very own decree and proceeded with the questioned Resolution of 8
February 2010 and Order of 4 March 2010, in all, annulling the proclamation of petitioner Joselito R. Mendoza as the duly elected
governor of Bulacan, declaring respondent Roberto M. Pagdanganan as the duly elected governor, and ordering petitioner Joselito
R. Mendoza to cease and desist from performing the functions of the Governor of Bulacan and to vacate said office in favor of
respondent Roberto M. Pagdanganan.

The grave abuse of discretion of the COMELEC is underscored by the fact that the protest that petitioner Pagdanganan
filed on 1 June 2007 overstayed with the COMELEC until the present election year when the end of the term of the contested
office is at hand and there was hardly enough time for the re-hearing that was conducted only on 15 February 2010. As the hearing
time at the division had run out, and the re-hearing time at the banc was fast running out, the unwanted result came about:
incomplete appreciation of ballots; invalidation of ballots on general and unspecific grounds; unrebutted presumption of validity
of ballots.

WHEREFORE, the petition is GRANTED. The questioned Resolution of the COMELEC promulgated on 8 February
2010 in EPC No. 2007-44 entitled Roberto M. Pagdanganan v. Joselito R. Mendoza, the Order issued on 4 March 2010, and the
consequent Writ of Execution dated 5 March 2010 are NULLIFIED and SET ASIDE. The election protest of respondent Roberto
M. Pagdanganan is hereby DISMISSED.

SO ORDERED.
CYNTHIA S. BOLOS, G.R. No. 186400
Petitioner,
Promulgated:
- versus - October 20, 2010

DANILO T. BOLOS,
Respondent.
x -----------------------------------------------------------------------------------------------------x

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking a review of the December 10, 2008
Decision[1] of the Court of Appeals (CA) in an original action for certiorari under Rule 65 entitled Danilo T. Bolos v. Hon. Lorifel
Lacap Pahimna and Cynthia S. Bolos, docketed as CA-G.R. SP. No. 97872, reversing the January 16, 2007 Order of the Regional
Trial Court of Pasig City, Branch 69 (RTC), declaring its decision pronouncing the nullity of marriage between petitioner and
respondent final and executory.
On July 10, 2003, petitioner Cynthia Bolos (Cynthia) filed a petition for the declaration of nullity of her marriage to
respondent Danilo Bolos (Danilo) under Article 36 of the Family Code, docketed as JDRC No. 6211.

After trial on the merits, the RTC granted the petition for annulment in a Decision, dated August 2, 2006, with the
following disposition:

WHEREFORE, judgment is hereby rendered declaring the marriage between petitioner CYNTHIA S.
BOLOS and respondent DANILO T. BOLOS celebrated on February 14, 1980 as null and void ab initio on the
ground of psychological incapacity on the part of both petitioner and respondent under Article 36 of the Family
Code with all the legal consequences provided by law.

Furnish the Local Civil Registrar of San Juan as well as the National Statistics Office (NSO) copy of
this decision.

SO ORDERED.[2]

A copy of said decision was received by Danilo on August 25, 2006. He timely filed the Notice of Appeal on September 11, 2006.

In an order dated September 19, 2006, the RTC denied due course to the appeal for Danilos failure to file the required motion for
reconsideration or new trial, in violation of Section 20 of the Rule on Declaration of Absolute Nullity of Void Marriages and
Annulment of Voidable Marriages.

On November 23, 2006, a motion to reconsider the denial of Danilos appeal was likewise denied.

On January 16, 2007, the RTC issued the order declaring its August 2, 2006 decision final and executory and granting the Motion
for Entry of Judgment filed by Cynthia.
Not in conformity, Danilo filed with the CA a petition for certiorari under Rule 65 seeking to annul the orders of the RTC
as they were rendered with grave abuse of discretion amounting to lack or in excess of jurisdiction, to wit: 1) the September 19,
2006 Order which denied due course to Danilos appeal; 2) the November 23, 2006 Order which denied the motion to reconsider
the September 19, 2006 Order; and 3) the January 16, 2007 Order which declared the August 2, 2006 decision as final and
executory.Danilo also prayed that he be declared psychologically capacitated to render the essential marital obligations to Cynthia,
who should be declared guilty of abandoning him, the family home and their children.

As earlier stated, the CA granted the petition and reversed and set aside the assailed orders of the RTC. The appellate court stated
that the requirement of a motion for reconsideration as a prerequisite to appeal under A.M. No. 02-11-10-SC did not apply in this
case as the marriage between Cynthia and Danilo was solemnized on February 14, 1980 before the Family Code took effect. It
relied on the ruling of this Court in Enrico v. Heirs of Sps. Medinaceli [3] to the effect that the coverage [of A.M. No. 02-11-10-SC]
extends only to those marriages entered into during the effectivity of the Family Code which took effect on August 3, 1988.

Cynthia sought reconsideration of the ruling by filing her Manifestation with Motion for Extension of Time to File Motion for
Reconsideration and Motion for Partial Reconsideration [of the Honorable Courts Decision dated December 10, 2008]. The CA,
however, in its February 11, 2009 Resolution, [4] denied the motion for extension of time considering that the 15-day reglementary
period to file a motion for reconsideration is non-extendible, pursuant to Section 2, Rule 40, 1997 Rules on Civil Procedure
citingHabaluyas v. Japson, 142 SCRA 208. The motion for partial reconsideration was likewise denied.
Hence, Cynthia interposes the present petition via Rule 45 of the Rules of Court raising the following

ISSUES
I
THE COURT OF APPEALS GRAVELY ERRED IN ISSUING THE QUESTIONED DECISION
DATED DECEMBER 10, 2008CONSIDERING THAT:

A. THE PRONOUNCEMENT OF THE HONORABLE COURT IN ENRICO V. SPS.


MEDINACELI IS NOT APPLICABLE TO THE INSTANT CASE CONSIDERING
THAT THE FACTS AND THE ISSUE THEREIN ARE NOT SIMILAR TO THE
INSTANT CASE.

B. ASSUMING ARGUENDO THAT THE PRONOUNCEMENT OF THE


HONORABLE COURT IS APLLICABLE TO THE INSTANT CASE, ITS RULING
IN ENRICO V. SPS. MEDINACELI IS PATENTLY ERRONEOUS BECAUSE THE
PHRASE UNDER THE FAMILY CODE IN A.M. NO. 02-11-10-SC PERTAINS TO
THE WORD PETITIONS RATHER THAN TO THE WORD MARRIAGES.

C. FROM THE FOREGOING, A.M. NO. 02-11-10-SC ENTITLED RULE ON


DECLARATION OF ABSOLUTE NULLITY OF VOID MARRIAGES AND
ANNULMENT OF VOIDABLE MARRIAGES IS APPLICABLE TO MARRIAGES
SOLEMNIZED BEFORE THE EFFECTIVITY OF THE FAMILY CODE. HENCE,
A MOTION FOR RECONSIDERATION IS A PRECONDITION FOR AN APPEAL
BY HEREIN RESPONDENT.

D. CONSIDERING THAT HEREIN RESPONDENT REFUSED TO COMPLY WITH


A PRECONDITION FOR APPEAL, A RELAXATION OF THE RULES ON
APPEAL IS NOT PROPER IN HIS CASE.

II
THE COURT OF APPEALS GRAVELY ERRED IN ISSUING THE QUESTIONED RESOLUTION
DATED FEBRUARY 11, 2009 CONSIDERING THE FOREGOING AND THE FACTUAL
CIRCUMSTANCES OF THIS CASE.

III
THE TENETS OF JUSTICE AND FAIR PLAY, THE NOVELTY AND IMPORTANCE OF THE ISSUE
AND THE SPECIAL CIRCUMSTANCES IN THIS CASE JUSTIFY AND WARRANT A LIBERAL
VIEW OF THE RULES IN FAVOR OF THE PETITIONER. MOREOVER, THE INSTANT PETITION
IS MERITORIOUS AND NOT INTENDED FOR DELAY.[5]

From the arguments advanced by Cynthia, the principal question to be resolved is whether or not A.M. No. 02-11-10-SC
entitled Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of Voidable Marriages, is applicable to the case
at bench.

Petitioner argues that A.M. No. 02-11-10-SC is also applicable to marriages solemnized before the effectivity of the
Family Code. According to Cynthia, the CA erroneously anchored its decision to an obiter dictum in the aforecited Enrico case,
which did not even involve a marriage solemnized before the effectivity of the Family Code.

She added that, even assuming arguendo that the pronouncement in the said case constituted a decision on its merits, still
the same cannot be applied because of the substantial disparity in the factual milieu of the Enrico case from this case. In the
said case, both the marriages sought to be declared null were solemnized, and the action for declaration of nullity was filed, after
the effectivity of both the Family Code in 1988 and of A.M. No. 02-11-10-SC in 2003. In this case, the marriage was solemnized
before the effectivity of the Family Code and A.M. No. 02-11-10-SC while the action was filed and decided after the effectivity of
both.

Danilo, in his Comment,[6] counters that A.M. No. 02-11-10-SC is not applicable because his marriage with Cynthia was
solemnized on February 14, 1980, years before its effectivity. He further stresses the meritorious nature of his appeal from the
decision of the RTC declaring their marriage as null and void due to his purported psychological incapacity and citing the mere
failure of the parties who were supposedly remiss, but not incapacitated, to render marital obligations as required under Article 36
of the Family Code.

The Court finds the petition devoid of merit.


Petitioner insists that A.M. No. 02-11-10-SC governs this case. Her stance is unavailing. The Rule on Declaration of Absolute
Nullity of Void Marriages and Annulment of Voidable Marriages as contained in A.M. No. 02-11-10-SC which the Court
promulgated on March 15, 2003, is explicit in its scope. Section 1 of the Rule, in fact, reads:

Section 1. Scope This Rule shall govern petitions for declaration of absolute nullity of void marriages and
annulment of voidable marriages under the Family Code of the Philippines.
The Rules of Court shall apply suppletorily.
The categorical language of A.M. No. 02-11-10-SC leaves no room for doubt. The coverage extends only to those marriages
entered into during the effectivity of the Family Code which took effect on August 3, 1988.[7] The rule sets a demarcation line
between marriages covered by the Family Code and those solemnized under the Civil Code. [8]

The Court finds Itself unable to subscribe to petitioners interpretation that the phrase under the Family Code in A.M. No. 02-11-
10-SC refers to the word petitions rather than to the word marriages.

A cardinal rule in statutory construction is that when the law is clear and free from any doubt or ambiguity, there is no
room for construction or interpretation. There is only room for application.[9] As the statute is clear, plain, and free from ambiguity,
it must be given its literal meaning and applied without attempted interpretation. This is what is known as the plain-meaning rule
orverba legis. It is expressed in the maxim, index animi sermo, or speech is the index of intention. Furthermore, there is the
maximverba legis non est recedendum, or from the words of a statute there should be no departure.[10]

There is no basis for petitioners assertion either that the tenets of substantial justice, the novelty and importance of the
issue and the meritorious nature of this case warrant a relaxation of the Rules in her favor. Time and again the Court has stressed
that therules of procedure must be faithfully complied with and should not be discarded with the mere expediency of claiming
substantial merit.[11] As a corollary, rules prescribing the time for doing specific acts or for taking certain proceedings are
consideredabsolutely indispensable to prevent needless delays and to orderly and promptly discharge judicial business. By their
very nature, these rules are regarded as mandatory.[12]

The appellate court was correct in denying petitioners motion for extension of time to file a motion for reconsideration
considering that the reglementary period for filing the said motion for reconsideration is non-extendible. As pronounced in Apex
Mining Co., Inc. v. Commissioner of Internal Revenue, [13]

The rule is and has been that the period for filing a motion for reconsideration is non-extendible. The
Court has made this clear as early as 1986 in Habaluyas Enterprises vs. Japzon. Since then, the Court has
consistently and strictly adhered thereto.

Given the above, we rule without hesitation that the appellate courts denial of petitioners motion for
reconsideration is justified, precisely because petitioners earlier motion for extension of time did not
suspend/toll the running of the 15-day reglementary period for filing a motion for reconsideration. Under the
circumstances, the CA decision has already attained finality when petitioner filed its motion for reconsideration.
It follows that the same decision was already beyond the review jurisdiction of this Court.

In fine, the CA committed no reversible error in setting aside the RTC decision which denied due course to respondents appeal and
denying petitioners motion for extension of time to file a motion for reconsideration.

Appeal is an essential part of our judicial system. Its purpose is to bring up for review a final judgment of the lower court. The
courts should, thus, proceed with caution so as not to deprive a party of his right to appeal. [14] In the recent case of Almelor v. RTC
of Las Pinas City, Br. 254,[15] the Court reiterated: While the right to appeal is a statutory, not a natural right, nonetheless it is an
essential part of our judicial system and courts should proceed with caution so as not to deprive a party of the right to appeal, but
rather, ensure that every party-litigant has the amplest opportunity for the proper and just disposition of his cause, free from the
constraints of technicalities.
In the case at bench, the respondent should be given the fullest opportunity to establish the merits of his appeal
considering that what is at stake is the sacrosanct institution of marriage.
No less than the 1987 Constitution recognizes marriage as an inviolable social institution. This constitutional policy is echoed in
our Family Code. Article 1 thereof emphasizes its permanence and inviolability, thus:

Article 1. Marriage is a special contract of permanent union between a man and a woman entered into in accordance with law for
the establishment of conjugal and family life. It is the foundation of the family and an inviolable social institution whose nature,
consequences, and incidents are governed by law and not subject to stipulation, except that marriage settlements may fix the
property relations during the marriage within the limits provided by this Code.
This Court is not unmindful of the constitutional policy to protect and strengthen the family as the basic autonomous social
institution and marriage as the foundation of the family.[16]

Our family law is based on the policy that marriage is not a mere contract, but a social institution in which the State is
vitally interested. The State finds no stronger anchor than on good, solid and happy families. The break up of families weakens
our social and moral fabric and, hence, their preservation is not the concern alone of the family members. [17]
WHEREFORE, the petition is DENIED.

SO ORDERED.

G.R. No. 206698, February 25, 2014


LUIS R. VILLAFUERTE , Petitioner, v. COMMISSION ON ELECTIONS AND MIGUEL R.
VILLAFUERTE, Respondents.
DECISION
PERALTA, J.:
Assailed via petition for certiorari and prohibition with prayer for the issuance of a writ of preliminary injunction and/or
temporary restraining order is the Resolution1 dated April 1, 2013 issued by the Commission on Elections (COMELEC) En Banc,
which affirmed the Resolution2 dated January 15, 2013 of its First Division dismissing petitioner Luis R. Villafuertes verified
petition to deny due course to or cancel the certificate of candidacy of Miguel R. Villafuerte (respondent).

Petitioner and respondent were both candidates for the Gubernatorial position of the Province of Camarines Sur in the May 13,
2013 local and national elections. On October 25, 2012, petitioner filed with the COMELEC a Verified Petition 3 to deny due
course to or cancel the certificate of candidacy (COC) of respondent, alleging that respondent intentionally and materially
misrepresented a false and deceptive name/nickname that would mislead the voters when he declared under oath in his COC that
LRAY JR.MIGZ was his nickname or stagename and that the name he intended to appear on the official ballot was
VILLAFUERTE, LRAY JR.MIGZ NP; that respondent deliberately omitted his first name MIGUEL and inserted, instead
LRAY JR., which is the nickname of his father, the incumbent Governor of Camarines Sur, LRay Villafuerte, Jr.

In his Answer with Special and Affirmative Defenses,4 respondent denied the commission of any material misrepresentation and
asserted, among others, that he had been using the nickname LRAY JR. MIGZ and not only MIGZ; that the choice of
name/word to appear on the ballot was solely his choice or preference; and that the presumption that the voters would be confused
on the simple fact that his name would be placed first in the ballot was misplaced.

On January 15, 2013, the COMELECs First Division denied the petition for lack of merit and disposed as
follows:chanRoblesvirtualLawlibrary
x x x no compelling reason why the COC of respondent should be denied due course to or cancelled on the sole basis of an alleged
irregularity in his name/nickname. Laws and jurisprudence on the matter are clear that material misrepresentation in the COC
pertains only to qualifications of a candidate, such as citizenship, residency, registration as a voter, age, etc. Nothing has been
mentioned about a candidates name/nickname as a ground to deny due course or cancel his/her COC. When the language of the
law is clear and explicit, there is no room for interpretation, only application.5ChanRoblesVirtualawlibrary
Petitioner filed a motion for reconsideration with the COMELEC En Banc, which denied the same in a Resolution dated April 1,
2013.

The COMELEC found that its First Division did not err in denying the petition as existing law and jurisprudence are clear in
providing that a misrepresentation in a certificate of candidacy is material when it refers to a qualification for elective office and
affects the candidates eligibility; and that a misrepresentation of a nonmaterial fact is not a ground to deny due course to or
cancel a certificate of candidacy under Section 78 of the Omnibus Election Code. It found that petitioners allegations did not
pertain to respondents qualifications or eligibility for the office to which he sought to be elected. The candidates use of a name or
nickname is a not a ground to deny due course to or cancel a certificate of candidacy.

Dissatisfied, petitioner filed the instant petition for certiorari and prohibition alleging the following
issues:chanRoblesvirtualLawlibrary
I

Respondent COMELEC palpably and seriously committed grave abuse of discretion amounting to lack and/or in excess of
jurisdiction when it whimsically and capriciously limited the grounds provided in Section 78 in relation to Section 74 of the
Omnibus Election Code to a candidates qualifications only and excluding as a ground a candidates material representation that is
false on his identity which renders him ineligible to be voted for as a candidate, because a false representation of ones true
name/nickname as a candidate is a deliberate attempt to misinform, mislead, and deceive the electorate and notwithstanding that
Section 78 of the Omnibus Election Code expressly states that any material misrepresentation in violation of Section 74 of the
same Code is a ground for cancellation of a Certificate of Candidacy.
II

Respondent COMELEC committed serious errors and patent grave abuse of discretion amounting to lack and/or in excess of
jurisdiction in failing or refusing to apply prevailing jurisprudence and law, wherein it was held: that cancellation of COC is not
based on the lack of qualification although it may relate to qualification based on a finding that a candidate made a material
representation that is false; thereby disregarding the wellentrenched rulings of this Honorable Court that material
misrepresentation may also include ineligibilities to run for office or to assume office and is not limited to qualifications; utterly
ignoring the ruling of this Honorable Court that votes cast in favor of a candidate using a nickname in violation of Section 74 are
stray votes, and in turning a blind eye to its constitutional and statutory duty and responsibility to protect the rights of the voters
and the integrity of the electoral processes in our country, among others.
III

Respondent COMELEC whimsically, capriciously and despotically allowed herein respondent MIGUEL to use LRAY JR.
MIGZ and thereby illegally disregarded the effects of R.A. 8436 as amended by R.A. 9369 or the Automation Law and the
requirement therein for the alphabetical arrangement of the names of the candidates and for allowing respondent Miguel to
deliberately and misleadingly omit his baptismal first name MIGUEL which is mandatorily required by Section 74 to be included
in his COC and for respondent Miguel to use more than one nickname for which he is not generally or popularly known in
Camarines Sur.
IV

Material misrepresentation as contemplated by law is not to protect respondent as a candidate, but MORESO, to protect the right
of other candidates under the Automation Law, and more importantly to protect the electorate from being misinformed, misled and
deceived.6ChanRoblesVirtualawlibrary
The main issue for resolution is whether respondent committed a material misrepresentation under Section 78 of the Omnibus
Election Code so as to justify the cancellation of his COC.

Petitioner filed the petition under Section 78 of the Omnibus Election Code claiming that respondent committed material
misrepresentation when the latter declared in his COC that his name/nickname to be printed in the official ballot was
VILLAFUERTE, LRAY JR.MIGZ instead of his baptismal name, VILLAFUERTE, MIGUELMIGZ; that such declaration
made under oath constitutes material misrepresentation even if the material misrepresentation did not refer to his qualifications but
referred to his eligibility to be validly voted for as a candidate and, consequently, to his eligibility to assume office.

We find no merit in the argument.

Section 73 of the Omnibus Election Code states that n o person shall be eligible for any elective public office unless he files a
sworn COC within the period fixed herein. Section 74 thereof enumerates the contents of the COC, to
wit:chanRoblesvirtualLawlibrary
Sec. 74. Contents of certificate of candidacy. The certificate of candidacy shall state that the person filing it is announcing his
candidacy for the office stated therein and that he is eligible for said office; if for Member of the Batasang Pambansa, the
province, including its component cities, highly urbanized city or district or sector which he seeks to represent; the political party
to which he belongs; civil status; his date of birth; residence; his post office address for all election purposes; his profession or
occupation; that he will support and defend the Constitution of the Philippines and will maintain true faith and allegiance thereto;
that he will obey the laws, legal orders, and decrees promulgated by the duly constituted authorities; that he is not a permanent
resident or immigrant to a foreign country; that the obligation imposed by his oath is assumed voluntarily, without mental
reservation or purpose of evasion; and that the facts stated in the certificate of candidacy are true to the best of his knowledge.

Unless a candidate has officially changed his name through a court approved proceeding, a certificate shall use in a certificate of
candidacy the name by which he has been baptized, or if has not been baptized in any church or religion, the name registered in
the office of the local civil registrar or any other name allowed under the provisions of existing law or, in the case of a Muslim, his
Hadji name after performing the prescribed religious pilgrimage: Provided, That when there are two or more candidates for an
office with the same name and surname, each candidate, upon being made aware or such fact, shall state his paternal and maternal
surname, except the incumbent who may continue to use the name and surname stated in his certificate of candidacy when he was
elected. He may also include one nickname or stage name by which he is generally or popularly known in the locality.

The person filing a certificate of candidacy shall also affix his latest photograph, passport size; a statement in duplicate containing
his biodata and program of government not exceeding one hundred words, if he so desires.
And the proper procedure to be taken if a misrepresentation is committed by a candidate in his COC is to question the same by
filing a verified petition pursuant to Section 78, thus:chanRoblesvirtualLawlibrary
Sec. 78. Petition to deny due course to or cancel a certificate of candidacy. A verified petition seeking to deny due course or to
cancel a certificate of candidacy may be filed by any person exclusively on the ground that any material representation contained
therein as required under Section 74 hereof is false. The petition may be filed at any time not later than twentyfive days from the
time of the filing of the certificate of candidacy and shall be decided, after due notice and hearing, not later than fifteen days
before the election.
Clearly, Section 78 states that the false representation in the contents of the COC required under Section 74 must refer to material
matters in order to justify the cancellation of the COC. What then constitutes a material misrepresentation?

In Salcedo II v. Commission on Elections,7 petitioner Victorino Salcedo II filed with the COMELEC a petition seeking
cancellation of respondent Ermelita Salcedos (Ermelita) COC on the ground that she had made material misrepresentation by
stating her surname as Salcedo. Petitioner claimed that Ermelita had no right to use the surname Salcedo, since her marriage to
Neptali Salcedo was void. The COMELEC En Banc found that Ermelita did not commit any misrepresentation nor usurp
anothers name since she had the right to use her husbands surname for being married to him, and thus, validated her
proclamation as Mayor of Sara, Iloilo. Salcedo appealed the COMELECs resolution, and we held:

In case there is a material misrepresentation in the certificate of candidacy, the Comelec is authorized to deny due course to or
cancel such certificate upon the filing of a petition by any person pursuant to Section 78 x x x
As stated in the law, in order to justify the cancellation of the certificate of candidacy under Section 78, it is essential that the false
representation mentioned therein pertain[s] to a material matter for the sanction imposed by this provision would affect the
substantive rights of a candidate the right to run for the elective post for which he filed the certificate of candidacy. Although
the law does not specify what would be considered as a material representation, the Court has interpreted this phrase in a line of
decisions applying Section 78 of the Code.8cralawlawlibrary
xxx
Therefore, it may be concluded that the material misrepresentation contemplated by Section 78 of the Code refer to qualifications
for elective office. This conclusion is strengthened by the fact that the consequences imposed upon a candidate guilty of having
made a false representation in his certificate of candidacy are grave to prevent the candidate from running or, if elected, from
serving, or to prosecute him for violation of the election laws. It could not have been the intention of the law to deprive a person
of such a basic and substantive political right to be voted for a public office upon just any innocuous mistake.
xxx
Aside from the requirement of materiality, a false representation under Section 78 must consist of a deliberate attempt to mislead,
misinform, or hide a fact which would otherwise render a candidate ineligible. In other words, it must be made with an intention
to deceive the electorate as to ones qualifications for public office. The use of surname, when not intended to mislead, or deceive
the public as to ones identity is not within the scope of the provision.9ChanRoblesVirtualawlibrary
In Aratea v. Commission on Elections,10 we proclaimed Estela D. Antipolo, the alleged second placer, as Mayor of San Antonio,
Zambales, being the one who remained as the sole qualified candidate for the mayoralty post and obtained the highest number of
votes, since the COC of Romeo D. Lonzanida, the first placer, was declared void ab initio. We find that violation of the threeterm
limit is an eligibility affecting the qualification of a candidate to elective office and the misrepresentation of such is a ground to
grant the petition to deny due course or cancel a COC. We said that:chanRoblesvirtualLawlibrary
Section 74 requires the candidate to certify that he is eligible for the public office he seeks election. Thus, Section 74 states that
the certificate of candidacy shall state that the person filing x x x is eligible for said office. The threeterm limit rule, enacted to
prevent the establishment of political dynasties and to enhance the electorates freedom of choice, is found both in the Constitution
and the law. After being elected and serving for three consecutive terms, an elective local official cannot seek immediate
reelection for the same office in the next regular election because he is ineligible. One who has an ineligibility to run for elective
public office is not eligible for [the] office. As used in Section 74, the word eligible means having the right to run for elective
public office, that is, having all the qualifications and none of the ineligibilities to run for the public office. 11cralawred
xxx
In a certificate of candidacy, the candidate is asked to certify under oath his eligibility, and thus qualification, to the office he seeks
election. Even though the certificate of candidacy does not specifically ask the candidate for the number of terms elected and
served in an elective position, such fact is material in determining a candidates eligibility, and thus qualification for the office.
Election to and service of the same local elective position for three consecutive terms renders a candidate ineligible from running
for the same position in the succeeding elections. Lonzanida misrepresented his eligibility because he knew full well that he had
been elected, and had served, as mayor of San Antonio, Zambales for more than three consecutive terms yet he still certified that
he was eligible to run for mayor for the next succeeding term. Thus, Lonzanidas representation that he was eligible for the office
that he sought election constitutes false material representation as to his qualification or eligibility for the
office.12ChanRoblesVirtualawlibrary
In Justimbaste v. Commission on Elections,13 where petitioner therein claimed that respondent committed material
misrepresentation when he stated his name in the COC as Rustico Besa Balderian instead of Chu Teck Siao, we found that it had
been established that in all of respondents school records, he had been using Rustico Besa Balderian, the name under which he
was baptized and known since he can remember. He never used the name Chu Teck Siao by which he was registered. It was also
established that he had filed a petition for change of name to avoid any confusion and which the RTC had granted. We then said,
that
AT ALL EVENTS, the use of a name other than that stated in the certificate of birth is not a material misrepresentation, as
material misrepresentation under the earlierquoted Section 78 of the Omnibus Election Code refers to qualifications for
elective office. It need not be emphasized that there is no showing that there was an intent to deceive the electorate as to private
respondents identity, nor that by using his Filipino name the voting public was thereby deceived. 14ChanRoblesVirtualawlibrary
Clearly, from the foregoing, for the petition to deny due course or cancel the COC of one candidate to prosper, the candidate must
have made a material misrepresentation involving his eligibility or qualification for the office to which he seeks election, such as
the requisite residency, age, citizenship or any other legal qualification necessary to run for local elective office as provided in the
Local Government Code.15 Hence, petitioners allegation that respondents nickname LRAY JR. MIGZ written in his COC is a
material misrepresentation is devoid of merit. Respondents nickname written in the COC cannot be considered a material fact
which pertains to his eligibility and thus qualification to run for public office.

Moreover, the false representation under Section 78 must consist of a deliberate attempt to mislead, misinform, or hide a fact
which would otherwise render a candidate ineligible. As we said, respondents nickname is not considered a material fact, and
there is no substantial evidence showing that in writing the nickname LRAY JR. MIGZ in his COC, respondent had the
intention to deceive the voters as to his identity which has an effect on his eligibility or qualification for the office he seeks to
assume.

Notably, respondent is known to the voters of the Province of Camarines Sur as the son of the then incumbent Governor of the
province, popularly known as LRay. Their relationship is shown by the posters, streamers and billboards displayed in the
province with the faces of both the father and son on them. Thus, the voters of the Province of Camarines Sur know who
respondent is. Moreover, it was established by the affidavits of respondents witnesses that as the father and son have striking
similarities, such as their looks and mannerisms, which remained unrebutted, the appellation of LRAY JR. has been used to refer
to respondent. Hence, the appellation LRAY JR., accompanied by the name MIGZ 16 written as respondents nickname in his COC,
is not at all misleading to the voters, as in fact, such name distinguishes respondent from his father, the then incumbent Governor
LRAY, who was running for a Congressional seat in the 2nd District of Camarines Sur. As we ruled in Salcedo II v.
COMELEC,17 the use of a surname, when not intended to mislead or deceive the public as to ones identity, is not within the scope
of Section 78 of the Omnibus Election Code. Thus, respondents nickname written in his COC, without intending to mislead the
voters as to his identity, cannot be canceled. We find no grave abuse of discretion committed by the COMELEC En Banc in
finding that respondent did not commit material misrepresentation in his COC.
Petitioner relies on Villarosa v. House of Representatives Electoral Tribunal18 to justify the annulment of respondents COC.
In Villarosa, which involves the counting of ballots under the manual elections, respondent Quintos filed an election protest
relating to the proclamation of Amelita Villarosa (Villarosa) alleging that the JTV votes should not be counted in the latters
favor. We then held that Villarosas use of JTV as her nickname was a clever ploy to make a mockery of the election process;
thus, votes of JTV were considered stray votes. In so ruling, we found that JTV is the nickname of Villarosas husband, who
was then the incumbent representative of Occidental Mindoro; that when Villarosas husband ran and campaigned for as
representative in both the 1992 and 1995 elections in the same legislative district where Villarosa ran in the May 1998 elections,
he was generally known as JTV. We thus ruled that the voters who wrote JTV in the ballots had no other person in mind
except then incumbent representative Jose Tapales Villarosa, or the same person whom they have known for a long time as JTV.
We also took into consideration Villarosas statement in her affidavit admitting that she was generally and popularly known in
every barangay in Occidental Mindoro as GIRLIE before and after she filed her COC; and even her counsel asserted during the
oral argument that her other nickname before she filed her COC was Mrs. JTV and not JTV. We also found that since the
name GIRLIE written on the space for representative was in fact claimed by petitioner Villarosa and credited in her favor, then
the JTV votes under the idem sonansrule cannot be counted for Villarosa, because only one nickname or stagename is allowed;
and that Rule 13 of Section 211 of the Omnibus Election Code, which allows the use of a nickname and appellation of affection
and friendship, provided that it is accompanied by the first name or surname of the candidate, was not applied since the JTV
votes were unaccompanied by her first name or surname. Thus, we found that malice and bad faith on the part of Villarosa was
evident when, in her COC and campaign materials, she appropriated the initials or nickname of her husband, the incumbent
representative of the district in question.

Villarosa is not on all fours with this case. This case is a petition to deny due course and to cancel COC on the ground of a
statement of a material representation that is false; to be material, such must refer to an eligibility or qualification for the elective
office the candidate seeks to hold. Here, respondents nickname is not a qualification for a public office which affects his
eligibility. Notably, respondents father, who won 3 consecutive terms as Governor of the Province of Camarines Norte, is
popularly known as LRAY, so when respondent wrote in his COC, LRAY JR. MIGZ as his nickname, he differentiated
himself from Governor LRAY, which negates any intention to mislead or misinform or hide a fact which would otherwise
render him ineligible. Also, the appellation LRAY JR. was accompanied by the name MIGZ which was not so in
the Villarosa case.

It bears stressing that Section 74 requires, among others, that a candidate shall use in a COC the name by which he has been
baptized, unless the candidate has changed his name through courtapproved proceedings, and that he may include one nickname
or stagename by which he is generally or popularly known in the locality, which respondent did. As we have discussed, the name
which respondent wrote in his COC to appear in the ballot, is not considered a material misrepresentation under Section 78 of the
Omnibus Election Code, as it does not pertain to his qualification or eligibility to run for an elective public office. By invoking the
case of Villarosa which is in the nature of an election protest relating to the proclamation of Villarosa, petitioner should have
instead filed an election protest and prayed that the votes for respondent be declared as stray votes, and not a petition to deny due
course or cancel the COC.

Finally, petitioner claims that the false representation of respondents nickname written on the COC is meant to undermine the
statutory requirement regarding the alphabetical listing/arrangement of names of the candidate as provided under Section 13 19 of
Republic Act No. (RA) 9369 amending RA 8436, the automated election system; that he would be put to a great and undue
disadvantage as he became no. 5, while respondent was in no. 4 in the list of candidates for Governor of Camarines Sur.

We are not persuaded.

Considering that respondents name is VILLAFUERTE, LRAY JR. MIGZ, his name would indeed be ahead of petitioners
name, VILLAFUERTE, LUIS, in the official ballot which contains the alphabetical listing of the candidates for the gubernatorial
position of the Province of Camarines Sur. However, petitioners claim that such listing would lead to confusion as to put him to
undue disadvantage is merely speculative and without basis as the voters can identify the candidate they want to vote for.

WHEREFORE, the petition is DENIED. The Resolution dated April 1, 2013, of the Commission on Elections En Banc, is
hereby AFFIRMED.

SO ORDERED.

Republic of the Philippines


Supreme Court
Manila

SECOND DIVISION

SPOUSES ROMAN A. PASCUAL and MERCEDITA G.R. No. 186269


R. PASCUAL, FRANCISCO A. PASCUAL,
MARGARITA CORAZON D. MARIANO, EDWIN
D. MARIANO and DANNY R. MARIANO Present:
Petitioners,
CARPIO, J.,
Chairperson,
- versus - VILLARAMA, JR.,*
PEREZ,
SERENO, and
SPOUSES ANTONIO BALLESTEROS and REYES, JJ.
LORENZA MELCHOR-BALLESTEROS,
Respondents.

Promulgated:

February 15, 2012

x-------------------------------------------------------------------------------------------x

RESOLUTION

REYES, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by the spouses Roman A. Pascual and
Mercedita R. Pascual (Spouses Pascual), Francisco A. Pascual (Francisco), Margarita Corazon D. Mariano (Margarita), Edwin D.
Mariano and Danny R. Mariano (petitioners) assailing the Decision[1] dated July 29, 2008 and Resolution [2] dated January 30, 2009
issued by the Court of Appeals (CA) in CA-G.R. CV No. 89111.

The instant case involves a 1,539 square meter parcel of land (subject property) situated in Barangay Sta.
Maria, Laoag Cityand covered by Transfer Certificate of Title (TCT) No. T-30375 [3] of the Laoag City registry. The subject
property is owned by the following persons, with the extent of their respective shares over the same: (1) the spouses Albino and
Margarita Corazon Mariano, 330 square meters; (2) Angela Melchor (Angela), 466.5 square meters; and (3) the spouses Melecio
and Victoria Melchor (Spouses Melchor), 796.5 square meters.

Upon the death of the Spouses Melchor, their share in the subject property was inherited by their daughter Lorenza
Melchor Ballesteros (Lorenza). Subsequently, Lorenza and her husband Antonio Ballesteros (respondents) acquired the share of
Angela in the subject property by virtue of an Affidavit of Extrajudicial Settlement with Absolute Sale [4] dated October 1, 1986.

On August 11, 2000, Margarita, then already widowed, together with her children, sold their share in the subject property
to Spouses Pascual and Francisco.[5] Subsequently, Spouses Pascual and Francisco caused the cancellation of TCT No. 30375 and,
thus, TCT No. T-32522[6] was then issued in their names together with Angela and Spouses Melchor.

Consequently, the respondents, claiming that they did not receive any written notice of the said sale in favor of Spouses
Pascual and Francisco, filed with the Regional Trial Court (RTC) of Laoag City a Complaint[7] for legal redemption against the
petitioners. The respondents claimed that they are entitled to redeem the portion of the subject property sold to Spouses Pascual
and Francisco being co-owners of the same.

For their part, the petitioners claimed that there was no co-ownership over the subject property considering that the
shares of the registered owners thereof had been particularized, specified and subdivided and, hence, the respondents has no right
to redeem the portion of the subject property that was sold to them.[8]

On January 31, 2007, the RTC rendered a decision [9] dismissing the complaint for legal redemption filed by the
respondents. In disposing of the said complaint, the RTC summed up the issues raised therein as follows: (1) whether the
respondents herein and the predecessors-in-interest of the petitioners are co-owners of the subject property who have the right of
redemption under Article 1620 of the Civil Code; and (2) if so, whether that right was seasonably exercised by the respondents
within the 30-day redemption period under Article 1623 of the Civil Code.
On the first issue, the RTC held that the respondents and the predecessors-in-interest of the petitioners are co-owners of
the subject property considering that the petitioners failed to adduce any evidence showing that the respective shares of each of the
registered owners thereof were indeed particularized, specified and subdivided.

On the second issue, the RTC ruled that the respondents failed to seasonably exercise their right of redemption within the
30-day period pursuant to Article 1623 of the Civil Code. Notwithstanding the lack of a written notice of the sale of a portion of
the subject property to Spouses Pascual and Francisco, the RTC asserted that the respondents had actual notice of the said sale.
Failing to exercise their right of redemption within 30 days from actual notice of the said sale, the RTC opined that the
respondents can no longer seek for the redemption of the property as against the petitioners.

Thereupon, the respondents appealed from the January 31, 2007 decision of the RTC of Laoag City with the CA. On July
29, 2008, the CA rendered the herein assailed Decision[10] the decretal portion of which reads:

WHEREFORE, the appeal is GRANTED and the appealed January 31, 2007 Decision is,
accordingly, REVERSED and SET ASIDE. In lieu thereof, another is entered approving [respondents] legal
redemption of the portion in litigation. The rest of their monetary claims are, however, DENIED for lack of
factual and/or legal bases.

SO ORDERED.[11]

In allowing the respondents to exercise their right of redemption, the CA held that the 30-day period within which to
exercise the said right had not yet lapsed considering the absence of a written notice of the said sale. Thus, the CA stated that [t]he
mandatory nature of the written notice requirement is such that, notwithstanding the actual knowledge of the sale, written notice
from the seller is still necessary in order to remove all uncertainties about the sale, its terms and conditions, as well as its efficacy
and status.[12]

The petitioners sought for a reconsideration of the said July 29, 2008 Decision, but it was denied by the CA in its
Resolution[13] dated January 30, 2009.

Undaunted, the petitioners instituted the instant petition for review on certiorari before this Court essentially asserting
the following arguments: (1) their predecessors-in-interest and the respondents are not co-owners of the subject property since
their respective shares therein had already been particularized, specified and subdivided; and (2) even if such co-ownership exists,
the respondents could no longer exercise their right of redemption having failed to exercise the same within 30 days from actual
knowledge of the said sale.

The petition is denied.

Primarily, Section 1, Rule 45 of the Rules of Court categorically states that the petition filed shall raise only questions of
law, which must be distinctly set forth. A question of law arises when there is doubt as to what the law is on a certain state of facts,
while there is a question of fact when the doubt arises as to the truth or falsity of the alleged facts. For a question to be one of law,
the same must not involve an examination of the probative value of the evidence presented by the litigants or any of them. The
resolution of the issue must rest solely on what the law provides on the given set of circumstances. Once it is clear that the issue
invites a review of the evidence presented, the question posed is one of fact.[14]

The first issue raised by the petitioners is a factual question as it entails a determination of whether the subject property
was indeed co-owned by the respondents and the predecessors-in-interest of the petitioners. Such determination would inevitably
necessitate a review of the probative value of the evidence adduced in the case below.

In any case, it ought to be stressed that both the RTC and the CA found that the subject property was indeed co-owned by
the respondents and the predecessors-in-interest of the petitioners. Thus, in the absence of any exceptional circumstances to
warrant the contrary, this Court must abide by
the prevailing rule that findings of fact of the trial court, more so when affirmed by the CA, are binding and conclusive upon it. [15]

Anent the second issue asserted by the petitioners, we find no reversible error on the part of the CA in ruling that the 30-
day period given to the respondents within which to exercise their right of redemption has not commenced in view of the absence
of a written notice. Verily, despite the respondents actual knowledge of the sale to the respondents, a written notice is still
mandatory and indispensable for purposes of the commencement of the 30-day period within which to exercise the right of
redemption.

Article 1623 of the Civil Code succinctly provides that:

Article 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty
days from the notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of
sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he
has given written notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners. (emphasis supplied)

The indispensability of the written notice requirement for purposes of the exercise of the right of redemption was
explained by this Court in Barcellano v. Baas,[16] thus:

Nothing in the records and pleadings submitted by the parties shows that there was a written notice sent
to the respondents. Without a written notice, the period of thirty days within which the right of legal pre-emption
may be exercised, does not start.

The indispensability of a written notice had long been discussed in the early case of Conejero v. Court
of Appeals, penned by Justice J.B.L. Reyes:

With regard to the written notice, we agree with petitioners that such notice is
indispensable, and that, in view of the terms in which Article of the Philippine Civil Code is
couched, mere knowledge of the sale, acquired in some other manner by the redemptioner,
does not satisfy the statute. The written notice was obviously exacted by the Code to remove
all uncertainty as to the sale, its terms and its validity, and to quiet any doubts that the
alienation is not definitive. The statute not having provided for any alternative, the method of
notification prescribed remains exclusive.

This is the same ruling in Verdad v. Court of Appeals:

The written notice of sale is mandatory. This Court has long established the rule that notwithstanding
actual knowledge of a co-owner, the latter is still entitled to a written notice from the selling co-owner in order
to remove all uncertainties about the sale, its terms and conditions, as well as its efficacy and status.

Lately, in Gosiengfiao Guillen v. The Court of Appeals, this Court again emphasized the mandatory
character of a written notice in legal redemption:

From these premises, we ruled that [P]etitioner-heirs have not lost their right to
redeem, for in the absence of a written notification of the sale by the vendors, the 30-day
period has not even begun to run. These premises and conclusion leave no doubt about the
thrust of Mariano: The right of the petitioner-heirs to exercise their right of legal
redemption exists, and the running of the period for its exercise has not even been
triggered because they have not been notified in writing of the fact of sale.

xxxx

Justice Edgardo Paras, referring to the origins of the requirement, would explain in his commentaries
on the New Civil Code that despite actual knowledge, the person having the right to redeem is STILL entitled
to the written notice. Both the letter and the spirit of the New Civil Code argue against any attempt to widen the
scope of the written notice by including therein any other kind of notice such as an oral one, or by
registration. If the intent of the law has been to include verbal notice or any other means of information as
sufficient to give the effect of this notice, there would have been no necessity or reason to specify in the article
that said notice be in writing, for under the old law, a verbal notice or mere information was already deemed
sufficient.

Time and time again, it has been repeatedly declared by this Court that where the law speaks in clear
and categorical language, there is no room for interpretation. There is only room for application. Where the
language of a statute is clear and unambiguous, the law is applied according to its express terms, and
interpretation should be resorted to only where a literal interpretation would be either impossible or absurd or
would lead to an injustice. x x x (citations omitted)

Here, it is undisputed that the respondents did not receive a written notice of the sale in favor of the petitioners.
Accordingly, the 30-day period stated under Article 1623 of the Civil Code within which to exercise their right of redemption has
not begun to run. Consequently, the respondents may still redeem from the petitioners the portion of the subject property that was
sold to the latter.

WHEREFORE, in consideration of the foregoing disquisitions, the petition is DENIED. The assailed Decision dated
July 29, 2008 and Resolution dated January 30, 2009 issued by the Court of Appeals in CA-G.R. CV No. 89111 are AFFIRMED.

SO ORDERED.
G.R. No. 180016, April 29, 2014
LITO CORPUZ, Petitioner, v. PEOPLE OF THE PHILIPPINES, Respondent.
DECISION
PERALTA, J.:
This is to resolve the Petition for Review on Certiorari, under Rule 45 of the Rules of Court, dated November 5, 2007, of
petitioner Lito Corpuz (petitioner), seeking to reverse and set aside the Decision1 dated March 22, 2007 and Resolution2 dated
September 5, 2007 of the Court of Appeals (CA), which affirmed with modification the Decision3 dated July 30, 2004 of the
Regional Trial Court (RTC), Branch 46, San Fernando City, finding the petitioner guilty beyond reasonable doubt of the crime of
Estafa under Article 315, paragraph (1), subparagraph (b) of the Revised Penal Code.

The antecedent facts follow.

Private complainant Danilo Tangcoy and petitioner met at the Admiral Royale Casino in Olongapo City sometime in 1990.
Private complainant was then engaged in the business of lending money to casino players and, upon hearing that the former had
some pieces of jewelry for sale, petitioner approached him on May 2, 1991 at the same casino and offered to sell the said pieces of
jewelry on commission basis. Private complainant agreed, and as a consequence, he turned over to petitioner the following items:
an 18k diamond ring for men; a womans bracelet; one (1) mens necklace and another mens bracelet, with an aggregate value of
P98,000.00, as evidenced by a receipt of even date. They both agreed that petitioner shall remit the proceeds of the sale, and/or, if
unsold, to return the same items, within a period of 60 days. The period expired without petitioner remitting the proceeds of the
sale or returning the pieces of jewelry. When private complainant was able to meet petitioner, the latter promised the former that
he will pay the value of the said items entrusted to him, but to no avail.

Thus, an Information was filed against petitioner for the crime of estafa, which reads as follows:chanRoblesvirtualLawlibrary
That on or about the fifth (5th) day of July 1991, in the City of Olongapo, Philippines, and within the jurisdiction of this
Honorable Court, the abovenamed accused, after having received from one Danilo Tangcoy, one (1) mens diamond ring, 18k,
worth P45,000.00; one (1) threebaht mens bracelet, 22k, worth P25,000.00; one (1) twobaht ladies' bracelet, 22k, worth
P12,000.00, or in the total amount of NinetyEight Thousand Pesos (P98,000.00), Philippine currency, under expressed obligation
on the part of said accused to remit the proceeds of the sale of the said items or to return the same, if not sold, said accused, once
in possession of the said items, with intent to defraud, and with unfaithfulness and abuse of confidence, and far from complying
with his aforestated obligation, did then and there wilfully, unlawfully and feloniously misappropriate, misapply and convert to his
own personal use and benefit the aforesaid jewelries (sic) or the proceeds of the sale thereof, and despite repeated demands, the
accused failed and refused to return the said items or to remit the amount of Ninety Eight Thousand Pesos (P98,000.00),
Philippine currency, to the damage and prejudice of said Danilo Tangcoy in the aforementioned amount.

CONTRARY TO LAW.

On January 28, 1992, petitioner, with the assistance of his counsel, entered a plea of not guilty. Thereafter, trial on the merits
ensued.

The prosecution, to prove the abovestated facts, presented the lone testimony of Danilo Tangcoy. On the other hand, the defense
presented the lone testimony of petitioner, which can be summarized, as follows:chanRoblesvirtualLawlibrary

Petitioner and private complainant were collecting agents of Antonio Balajadia, who is engaged in the financing business of
extending loans to Base employees. For every collection made, they earn a commission. Petitioner denied having transacted any
business with private complainant. However, he admitted obtaining a loan from Balajadia sometime in 1989 for which he was
made to sign a blank receipt. He claimed that the same receipt was then dated May 2, 1991 and used as evidence against him for
the supposed agreement to sell the subject pieces of jewelry, which he did not even see.

After trial, the RTC found petitioner guilty beyond reasonable doubt of the crime charged in the Information. The dispositive
portion of the decision states:chanRoblesvirtualLawlibrary
WHEREFORE, finding accused LITO CORPUZ GUILTY beyond reasonable doubt of the felony of Estafa under Article 315,
paragraph one (1), subparagraph (b) of the Revised Penal Code;

there being no offsetting generic aggravating nor ordinary mitigating circumstance/s to vary the penalty imposable;

accordingly, the accused is hereby sentenced to suffer the penalty of deprivation of liberty consisting of an imprisonment under
the Indeterminate Sentence Law of FOUR (4) YEARS AND TWO (2) MONTHS of Prision Correccional in its medium period
AS MINIMUM, to FOURTEEN (14) YEARS AND EIGHT (8) MONTHS of Reclusion Temporal in its minimum period AS
MAXIMUM; to indemnify private complainant Danilo Tangcoy the amount of P98,000.00 as actual damages, and to pay the costs
of suit.

SO ORDERED.

The case was elevated to the CA, however, the latter denied the appeal of petitioner and affirmed the decision of the RTC,
thus:chanRoblesvirtualLawlibrary
WHEREFORE, the instant appeal is DENIED. The assailed Judgment dated July 30, 2004 of the RTC of San Fernando City (P),
Branch 46, is hereby AFFIRMED with MODIFICATION on the imposable prison term, such that accusedappellant shall suffer
the indeterminate penalty of 4 years and 2 months of prision correccional, as minimum, to 8 years of prision mayor, as maximum,
plus 1 year for each additional P10,000.00, or a total of 7 years. The rest of the decision stands.

SO ORDERED.

Petitioner, after the CA denied his motion for reconsideration, filed with this Court the present petition stating the following
grounds:chanRoblesvirtualLawlibrary
A. THE HONORABLE COURT OF APPEALS ERRED IN CONFIRMING THE ADMISSION AND APPRECIATION BY THE
LOWER COURT OF PROSECUTION EVIDENCE, INCLUDING ITS EXHIBITS, WHICH ARE MERE MACHINE COPIES,
AS THIS VIOLATES THE BEST EVIDENCE RULE;

B. THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE LOWER COURT'S FINDING THAT THE
CRIMINAL INFORMATION FOR ESTAFA WAS NOT FATALLY DEFECTIVE ALTHOUGH THE SAME DID NOT CHARGE
THE OFFENSE UNDER ARTICLE 315 (1) (B) OF THE REVISED PENAL CODE IN THAT
1. THE INFORMATION DID NOT FIX A PERIOD WITHIN WHICH THE SUBJECT [PIECES OF] JEWELRY SHOULD BE
RETURNED, IF UNSOLD, OR THE MONEY TO BE REMITTED, IF SOLD;

2. THE DATE OF THE OCCURRENCE OF THE CRIME ALLEGED IN THE INFORMATION AS OF 05 JULY 1991 WAS
MATERIALLY DIFFERENT FROM THE ONE TESTIFIED TO BY THE PRIVATE COMPLAINANT WHICH WAS 02 MAY
1991;

C. THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE LOWER COURT'S FINDING THAT DEMAND
TO RETURN THE SUBJECT [PIECES OF] JEWELRY, IF UNSOLD, OR REMIT THE PROCEEDS, IF SOLD AN
ELEMENT OF THE OFFENSE WAS PROVED;

D. THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE LOWER COURT'S FINDING THAT THE
PROSECUTION'S CASE WAS PROVEN BEYOND REASONABLE DOUBT ALTHOUGH
1. THE PRIVATE COMPLAINANT TESTIFIED ON TWO (2) VERSIONS OF THE INCIDENT;

2. THE VERSION OF THE PETITIONER ACCUSED IS MORE STRAIGHTFORWARD AND LOGICAL, CONSISTENT
WITH HUMAN EXPERIENCE;

3. THE EQUIPOISE RULE WAS NOT APPRECIATED IN AND APPLIED TO THIS CASE;

4. PENAL STATUTES ARE STRICTLY CONSTRUED AGAINST THE STATE.

In its Comment dated May 5, 2008, the Office of the Solicitor General (OSG) stated the following counter
arguments:chanRoblesvirtualLawlibrary
The exhibits were properly admitted inasmuch as petitioner failed to object to their admissibility.

The information was not defective inasmuch as it sufficiently established the designation of the offense and the acts complained
of.

The prosecution sufficiently established all the elements of the crime charged.

This Court finds the present petition devoid of any merit.

The factual findings of the appellate court generally are conclusive, and carry even more weight when said court affirms the
findings of the trial court, absent any showing that the findings are totally devoid of support in the records, or that they are so
glaringly erroneous as to constitute grave abuse of discretion.4 Petitioner is of the opinion that the CA erred in affirming the
factual findings of the trial court. He now comes to this Court raising both procedural and substantive issues.

According to petitioner, the CA erred in affirming the ruling of the trial court, admitting in evidence a receipt dated May 2, 1991
marked as Exhibit A and its submarkings, although the same was merely a photocopy, thus, violating the best evidence rule.
However, the records show that petitioner never objected to the admissibility of the said evidence at the time it was identified,
marked and testified upon in court by private complainant. The CA also correctly pointed out that petitioner also failed to raise an
objection in his Comment to the prosecutions formal offer of evidence and even admitted having signed the said receipt. The
established doctrine is that when a party failed to interpose a timely objection to evidence at the time they were offered in
evidence, such objection shall be considered as waived.5

Another procedural issue raised is, as claimed by petitioner, the formally defective Information filed against him. He contends
that the Information does not contain the period when the pieces of jewelry were supposed to be returned and that the date when
the crime occurred was different from the one testified to by private complainant. This argument is untenable. The CA did not err
in finding that the Information was substantially complete and in reiterating that objections as to the matters of form and substance
in the Information cannot be made for the first time on appeal. It is true that the gravamen of the crime of estafa under Article
315, paragraph 1, subparagraph (b) of the RPC is the appropriation or conversion of money or property received to the prejudice
of the owner6 and that the time of occurrence is not a material ingredient of the crime, hence, the exclusion of the period and the
wrong date of the occurrence of the crime, as reflected in the Information, do not make the latter fatally defective. The CA
ruled:chanRoblesvirtualLawlibrary
x x x An information is legally viable as long as it distinctly states the statutory designation of the offense and the acts or
omissions constitutive thereof. Then Section 6, Rule 110 of the Rules of Court provides that a complaint or information is
sufficient if it states the name of the accused; the designation of the offense by the statute; the acts or omissions complained of as
constituting the offense; the name of the offended party; the approximate time of the commission of the offense, and the place
wherein the offense was committed. In the case at bar, a reading of the subject Information shows compliance with the foregoing
rule. That the time of the commission of the offense was stated as on or about the fifth (5th) day of July, 1991 is not likewise
fatal to the prosecutions cause considering that Section 11 of the same Rule requires a statement of the precise time only when the
same is a material ingredient of the offense. The gravamen of the crime of estafa under Article 315, paragraph 1 (b) of the
Revised Penal Code (RPC) is the appropriation or conversion of money or property received to the prejudice of the offender.
Thus, aside from the fact that the date of the commission thereof is not an essential element of the crime herein charged, the
failure of the prosecution to specify the exact date does not render the Information ipso facto defective. Moreover, the said date is
also near the due date within which accusedappellant should have delivered the proceeds or returned the said [pieces of jewelry]
as testified upon by Tangkoy, hence, there was sufficient compliance with the rules. Accusedappellant, therefore, cannot now be
allowed to claim that he was not properly apprised of the charges proferred against him.7

It must be remembered that petitioner was convicted of the crime of Estafa under Article 315, paragraph 1 (b) of the RPC, which
reads:chanRoblesvirtualLawlibrary
ART. 315. Swindling (estafa). Any person who shall defraud another by any of the means mentioned hereinbelow.

1. With unfaithfulness or abuse of confidence, namely:


xxxx

(b) By misappropriating or converting, to the prejudice of another, money, goods, or any other personal property received by the
offender in trust or on commission, or for administration, or under any other obligation involving the duty to make delivery of or
to return the same, even though such obligation be totally or partially guaranteed by a bond; or by denying having received such
money, goods, or other property; x x x

The elements of estafa with abuse of confidence are as follows: (a) that money, goods or other personal property is received by the
offender in trust, or on commission, or for administration, or under any other obligation involving the duty to make delivery of, or
to return the same; (b) that there be misappropriation or conversion of such money or property by the offender or denial on his
part of such receipt; (c) that such misappropriation or conversion or denial is to the prejudice of another; and (d) that there is a
demand made by the offended party on the offender.8

Petitioner argues that the last element, which is, that there is a demand by the offended party on the offender, was not proved.
This Court disagrees. In his testimony, private complainant narrated how he was able to locate petitioner after almost two (2)
months from the time he gave the pieces of jewelry and asked petitioner about the same items with the latter promising to pay
them. Thus:chanRoblesvirtualLawlibrary
PROS. MARTINEZ

q Now, Mr. Witness, this was executed on 2 May 1991, and this transaction could have been finished on 5 July 1991, the question
is what happens (sic) when the deadline came?
a I went looking for him, sir.

q For whom?
a Lito Corpuz, sir.

q Were you able to look (sic) for him?


a I looked for him for a week, sir.

q Did you know his residence?


a Yes, sir.

q Did you go there?


a Yes, sir.

q Did you find him?


a No, sir.

q Were you able to talk to him since 5 July 1991?


a I talked to him, sir.
q How many times?
a Two times, sir.

q What did you talk (sic) to him?


a About the items I gave to (sic) him, sir.

q Referring to Exhibit A2?


a Yes, sir, and according to him he will take his obligation and I asked him where the items are and he promised me that
he will pay these amount, sir.

q Up to this time that you were here, were you able to collect from him partially or full?
a No, sir. 9

No specific type of proof is required to show that there was demand.10 Demand need not even be formal; it may be verbal.11 The
specific word demand need not even be used to show that it has indeed been made upon the person charged, since even a mere
query as to the whereabouts of the money [in this case, property], would be tantamount to a demand.12 As expounded in Asejo v.
People:13
With regard to the necessity of demand, we agree with the CA that demand under this kind of estafa need not be formal or written.
The appellate court observed that the law is silent with regard to the form of demand in estafa under Art. 315 1(b), thus:
When the law does not qualify, We should not qualify. Should a written demand be necessary, the law would have stated so.
Otherwise, the word demand should be interpreted in its general meaning as to include both written and oral demand. Thus, the
failure of the prosecution to present a written demand as evidence is not fatal.
In Tubb v. People, where the complainant merely verbally inquired about the money entrusted to the accused, we held that the
query was tantamount to a demand, thus:
x x x [T]he law does not require a demand as a condition precedent to the existence of the crime of embezzlement. It so happens
only that failure to account, upon demand for funds or property held in trust, is circumstantial evidence of misappropriation. The
same way, however, be established by other proof, such as that introduced in the case at bar. 14

In view of the foregoing and based on the records, the prosecution was able to prove the existence of all the elements of the
crime. Private complainant gave petitioner the pieces of jewelry in trust, or on commission basis, as shown in the receipt dated
May 2, 1991 with an obligation to sell or return the same within sixty (60) days, if unsold. There was misappropriation when
petitioner failed to remit the proceeds of those pieces of jewelry sold, or if no sale took place, failed to return the same pieces of
jewelry within or after the agreed period despite demand from the private complainant, to the prejudice of the latter.

Anent the credibility of the prosecutions sole witness, which is questioned by petitioner, the same is unmeritorious. Settled is the
rule that in assessing the credibility of witnesses, this Court gives great respect to the evaluation of the trial court for it had the
unique opportunity to observe the demeanor of witnesses and their deportment on the witness stand, an opportunity denied the
appellate courts, which merely rely on the records of the case.15 The assessment by the trial court is even conclusive and binding
if not tainted with arbitrariness or oversight of some fact or circumstance of weight and influence, especially when such finding is
affirmed by the CA.16 Truth is established not by the number of witnesses, but by the quality of their testimonies, for in
determining the value and credibility of evidence, the witnesses are to be weighed not numbered. 17

As regards the penalty, while this Courts Third Division was deliberating on this case, the question of the continued validity of
imposing on persons convicted of crimes involving property came up. The legislature apparently pegged these penalties to the
value of the money and property in 1930 when it enacted the Revised Penal Code. Since the members of the division reached no
unanimity on this question and since the issues are of first impression, they decided to refer the case to the Court en banc for
consideration and resolution. Thus, several amici curiae were invited at the behest of the Court to give their academic opinions on
the matter. Among those that graciously complied were Dean Jose Manuel Diokno, Dean Sedfrey M. Candelaria, Professor
Alfredo F. Tadiar, the Senate President, and the Speaker of the House of Representatives. The parties were later heard on oral
arguments before the Court en banc, with Atty. Mario L. Bautista appearing as counsel of the petitioner.

After a thorough consideration of the arguments presented on the matter, this Court finds the
following:chanRoblesvirtualLawlibrary

There seems to be a perceived injustice brought about by the range of penalties that the courts continue to impose on crimes
against property committed today, based on the amount of damage measured by the value of money eighty years ago in 1932.
However, this Court cannot modify the said range of penalties because that would constitute judicial legislation. What the
legislatures perceived failure in amending the penalties provided for in the said crimes cannot be remedied through this Courts
decisions, as that would be encroaching upon the power of another branch of the government. This, however, does not render the
whole situation without any remedy. It can be appropriately presumed that the framers of the Revised Penal Code (RPC) had
anticipated this matter by including Article 5, which reads:chanRoblesvirtualLawlibrary
ART. 5. Duty of the court in connection with acts which should be repressed but which are not covered by the law, and in cases of
excessive penalties. Whenever a court has knowledge of any act which it may deem proper to repress and which is not
punishable by law, it shall render the proper decision, and shall report to the Chief Executive, through the Department of
Justice, the reasons which induce the court to believe that said act should be made the subject of penal legislation.
In the same way, the court shall submit to the Chief Executive, through the Department of Justice, such statement as may
be deemed proper, without suspending the execution of the sentence, when a strict enforcement of the provisions of this
Code would result in the imposition of a clearly excessive penalty, taking into consideration the degree of malice and the
injury caused by the offense.18

The first paragraph of the above provision clearly states that for acts bourne out of a case which is not punishable by law and the
court finds it proper to repress, the remedy is to render the proper decision and thereafter, report to the Chief Executive, through
the Department of Justice, the reasons why the same act should be the subject of penal legislation. The premise here is that a
deplorable act is present but is not the subject of any penal legislation, thus, the court is tasked to inform the Chief Executive of
the need to make that act punishable by law through legislation. The second paragraph is similar to the first except for the situation
wherein the act is already punishable by law but the corresponding penalty is deemed by the court as excessive. The remedy
therefore, as in the first paragraph is not to suspend the execution of the sentence but to submit to the Chief Executive the reasons
why the court considers the said penalty to be noncommensurate with the act committed. Again, the court is tasked to inform the
Chief Executive, this time, of the need for a legislation to provide the proper penalty.

In his book, Commentaries on the Revised Penal Code,19 Guillermo B. Guevara opined that in Article 5, the duty of the court is
merely to report to the Chief Executive, with a recommendation for an amendment or modification of the legal provisions which it
believes to be harsh. Thus:chanRoblesvirtualLawlibrary
This provision is based under the legal maxim nullum crimen, nulla poena sige lege, that is, that there can exist no punishable
act except those previously and specifically provided for by penal statute.

No matter how reprehensible an act is, if the lawmaking body does not deem it necessary to prohibit its perpetration with penal
sanction, the Court of justice will be entirely powerless to punish such act.

Under the provisions of this article the Court cannot suspend the execution of a sentence on the ground that the strict
enforcement of the provisions of this Code would cause excessive or harsh penalty. All that the Court could do in such
eventuality is to report the matter to the Chief Executive with a recommendation for an amendment or modification of the
legal provisions which it believes to be harsh.20

Anent the nonsuspension of the execution of the sentence, retired Chief Justice Ramon C. Aquino and retired Associate Justice
Carolina C. GrioAquino, in their book, The Revised Penal Code,21 echoed the abovecited commentary,
thus:chanRoblesvirtualLawlibrary
The second paragraph of Art. 5 is an application of the humanitarian principle that justice must be tempered with
mercy. Generally, the courts have nothing to do with the wisdom or justness of the penalties fixed by law. Whether or not
the penalties prescribed by law upon conviction of violations of particular statutes are too severe or are not severe enough, are
questions as to which commentators on the law may fairly differ; but it is the duty of the courts to enforce the will of the
legislator in all cases unless it clearly appears that a given penalty falls within the prohibited class of excessive fines or
cruel and unusual punishment. A petition for clemency should be addressed to the Chief Executive.22

There is an opinion that the penalties provided for in crimes against property be based on the current inflation rate or at the ratio
of P1.00 is equal to P100.00 . However, it would be dangerous as this would result in uncertainties, as opposed to the definite
imposition of the penalties. It must be remembered that the economy fluctuates and if the proposed imposition of the penalties in
crimes against property be adopted, the penalties will not cease to change, thus, making the RPC, a selfamending law. Had the
framers of the RPC intended that to be so, it should have provided the same, instead, it included the earlier cited Article 5 as a
remedy. It is also improper to presume why the present legislature has not made any moves to amend the subject penalties in order
to conform with the present times. For all we know, the legislature intends to retain the same penalties in order to deter the further
commission of those punishable acts which have increased tremendously through the years. In fact, in recent moves of the
legislature, it is apparent that it aims to broaden the coverage of those who violate penal laws. In the crime of Plunder, from its
original minimum amount of P100,000,000.00 plundered, the legislature lowered it to P50,000,000.00. In the same way, the
legislature lowered the threshold amount upon which the AntiMoney Laundering Act may apply, from P1,000,000.00 to
P500,000.00.

It is also worth noting that in the crimes of Theft and Estafa, the present penalties do not seem to be excessive compared to the
proposed imposition of their corresponding penalties. In Theft, the provisions state that:chanRoblesvirtualLawlibrary
Art. 309. Penalties. Any person guilty of theft shall be punished by:
1. The penalty of prision mayor in its minimum and medium periods, if the value of the thing stolen is more than 12,000 pesos but
does not exceed 22,000 pesos, but if the value of the thing stolen exceeds the latter amount the penalty shall be the maximum
period of the one prescribed in this paragraph, and one year for each additional ten thousand pesos, but the total of the penalty
which may be imposed shall not exceed twenty years. In such cases, and in connection with the accessory penalties which may be
imposed and for the purpose of the other provisions of this Code, the penalty shall be termed prision mayor or reclusion temporal,
as the case may be.

2. The penalty of prision correccional in its medium and maximum periods, if the value of the thing stolen is more than 6,000
pesos but does not exceed 12,000 pesos.
3. The penalty of prision correccional in its minimum and medium periods, if the value of the property stolen is more than 200
pesos but does not exceed 6,000 pesos.

4. Arresto mayor in its medium period to prision correccional in its minimum period, if the value of the property stolen is over 50
pesos but does not exceed 200 pesos.

5. Arresto mayor to its full extent, if such value is over 5 pesos but does not exceed 50 pesos.

6. Arresto mayor in its minimum and medium periods, if such value does not exceed 5 pesos.

7. Arresto menor or a fine not exceeding 200 pesos, if the theft is committed under the circumstances enumerated in paragraph 3
of the next preceding article and the value of the thing stolen does not exceed 5 pesos. If such value exceeds said amount, the
provision of any of the five preceding subdivisions shall be made applicable.

8. Arresto menor in its minimum period or a fine not exceeding 50 pesos, when the value of the thing stolen is not over 5 pesos,
and the offender shall have acted under the impulse of hunger, poverty, or the difficulty of earning a livelihood for the support of
himself or his family.

In a case wherein the value of the thing stolen is P6,000.00, the aboveprovision states that the penalty isprision correccional in
its minimum and medium periods (6 months and 1 day to 4 years and 2 months). Applying the proposal, if the value of the thing
stolen is P6,000.00, the penalty is imprisonment of arresto mayorin its medium period to prision correccional minimum period (2
months and 1 day to 2 years and 4 months). It would seem that under the present law, the penalty imposed is almost the same as
the penalty proposed. In fact, after the application of the Indeterminate Sentence Law under the existing law, the minimum
penalty is still lowered by one degree; hence, the minimum penalty is arresto mayor in its medium period to maximum period (2
months and 1 day to 6 months), making the offender qualified for pardon or parole after serving the said minimum period and may
even apply for probation. Moreover, under the proposal, the minimum penalty after applying the Indeterminate Sentence Law
is arresto menor in its maximum period to arresto mayor in its minimum period (21 days to 2 months) is not too far from the
minimum period under the existing law. Thus, it would seem that the present penalty imposed under the law is not at all
excessive. The same is also true in the crime of Estafa.23

Moreover, if we apply the ratio of 1:100, as suggested to the value of the thing stolen in the crime of Theft and the damage caused
in the crime of Estafa, the gap between the minimum and the maximum amounts, which is the basis of determining the proper
penalty to be imposed, would be too wide and the penalty imposable would no longer be commensurate to the act committed and
the value of the thing stolen or the damage caused:chanRoblesvirtualLawlibrary
I. Article 309, or the penalties for the crime of Theft, the value would be modified but the penalties are not
changed:chanRoblesvirtualLawlibrary

1. P12,000.00 to P22,000.00 will become P1,200,000.00 to P2,200,000.00, punished byprision mayor minimum to prision
mayor medium (6 years and 1 day to 10 years).

2. P6,000.00 to P12,000.00 will become P600,000.00 to P1,200,000.00, punished by prision correccional medium and to prision
correccional maximum (2 years, 4 months and 1 day to 6 years).24

3. P200.00 to P6,000.00 will become P20,000.00 to P600,000.00, punishable by prision correccional minimum to prision
correccional medium (6 months and 1 day to 4 years and 2 months).

4. P50.00 to P200.00 will become P5,000.00 to P20,000.00, punishable by arresto mayormedium to prision
correccional minimum (2 months and 1 day to 2 years and 4 months).

5. P5.00 to P50.00 will become P500.00 to P5,000.00, punishable by arresto mayor (1 month and 1 day to 6 months).

6. P5.00 will become P500.00, punishable by arresto mayor minimum to arresto mayor medium.

x x x x.

II. Article 315, or the penalties for the crime of Estafa, the value would also be modified but the penalties are not changed, as
follows:
1st. P12,000.00 to P22,000.00, will become P1,200,000.00 to P2,200,000.00,punishable by prision correccional maximum
to prision mayor minimum (4 years, 2 months and 1 day to 8 years).25

2nd. P6,000.00 to P12,000.00 will become P600,000.00 to P1,200,000.00, punishable by prision correccional minimum
to prision correccional medium (6 months and 1 day to 4 years and 2 months).26

3rd. P200.00 to P6,000.00 will become P20,000.00 to P600,000.00, punishable by arresto mayor maximum to prision
correccional minimum (4 months and 1 day to 2 years and 4 months).
4th. P200.00 will become P20,000.00, punishable by arresto mayor maximum (4 months and 1 day to 6 months)
An argument raised by Dean Jose Manuel I. Diokno, one of our esteemed amici curiae, is that the incremental penalty provided
under Article 315 of the RPC violates the Equal Protection Clause.

The equal protection clause requires equality among equals, which is determined according to a valid classification. The test
developed by jurisprudence here and yonder is that of reasonableness,27 which has four requisites:chanRoblesvirtualLawlibrary
(1) The classification rests on substantial distinctions;
(2) It is germane to the purposes of the law;
(3) It is not limited to existing conditions only; and
(4) It applies equally to all members of the same class.28

According to Dean Diokno, the Incremental Penalty Rule (IPR) does not rest on substantial distinctions as P10,000.00 may have
been substantial in the past, but it is not so today, which violates the first requisite; the IPR was devised so that those who
commit estafa involving higher amounts would receive heavier penalties; however, this is no longer achieved, because a person
who steals P142,000.00 would receive the same penalty as someone who steals hundreds of millions, which violates the second
requisite; and, the IPR violates requisite no. 3, considering that the IPR is limited to existing conditions at the time the law was
promulgated, conditions that no longer exist today.

Assuming that the Court submits to the argument of Dean Diokno and declares the incremental penalty in Article 315
unconstitutional for violating the equal protection clause, what then is the penalty that should be applied in case the amount of the
thing subject matter of the crime exceeds P22,000.00? It seems that the proposition poses more questions than answers, which
leads us even more to conclude that the appropriate remedy is to refer these matters to Congress for them to exercise their inherent
power to legislate laws.

Even Dean Diokno was of the opinion that if the Court declares the IPR unconstitutional, the remedy is to go to Congress.
Thus:chanRoblesvirtualLawlibrary
xxxx

JUSTICE PERALTA:
Now, your position is to declare that the incremental penalty should be struck down as unconstitutional because it is absurd.

DEAN DIOKNO:
Absurd, it violates equal protection, Your Honor, and cruel and unusual punishment.

JUSTICE PERALTA:
Then what will be the penalty that we are going to impose if the amount is more than TwentyTwo Thousand (P22,000.00) Pesos.

DEAN DIOKNO:
Well, that would be for Congress to ... if this Court will declare the incremental penalty rule unconstitutional, then that would ...
the void should be filled by Congress.

JUSTICE PERALTA:
But in your presentation, you were fixing the amount at One Hundred Thousand (P100,000.00) Pesos ...

DEAN DIOKNO:
Well, my presen ... (interrupted)

JUSTICE PERALTA:
For every One Hundred Thousand (P100,000.00) Pesos in excess of TwentyTwo Thousand (P22,000.00) Pesos you were
suggesting an additional penalty of one (1) year, did I get you right?

DEAN DIOKNO:
Yes, Your Honor, that is, if the court will take the route of statutory interpretation.

JUSTICE PERALTA:
Ah ...

DEAN DIOKNO:
If the Court will say that they can go beyond the literal wording of the law...

JUSTICE PERALTA:
But if we de ... (interrupted)

DEAN DIOKNO:
....then....
JUSTICE PERALTA:
Ah, yeah. But if we declare the incremental penalty as unsconstitutional, the court cannot fix the amount ...

DEAN DIOKNO:
No, Your Honor.

JUSTICE PERALTA:
... as the equivalent of one, as an incremental penalty in excess of TwentyTwo Thousand (P22,000.00) Pesos.

DEAN DIOKNO:
No, Your Honor.

JUSTICE PERALTA:
The Court cannot do that.

DEAN DIOKNO:
Could not be.

JUSTICE PERALTA:
The only remedy is to go to Congress...

DEAN DIOKNO:
Yes, Your Honor.

JUSTICE PERALTA:
... and determine the value or the amount.

DEAN DIOKNO:
Yes, Your Honor.

JUSTICE PERALTA:
That will be equivalent to the incremental penalty of one (1) year in excess of TwentyTwo Thousand (P22,000.00) Pesos.

DEAN DIOKNO:
Yes, Your Honor.

JUSTICE PERALTA:
The amount in excess of TwentyTwo Thousand (P22,000.00) Pesos.
Thank you, Dean.

DEAN DIOKNO:
Thank you.

x x x x29

Dean Diokno also contends that Article 315 of the Revised Penal Code constitutes cruel and unusual punishment. Citing Solem v.
Helm,30 Dean Diokno avers that the United States Federal Supreme Court has expanded the application of a similar Constitutional
provision prohibiting cruel and unusual punishment, to the duration of the penalty, and not just its form. The court therein ruled
that three things must be done to decide whether a sentence is proportional to a specific crime, viz.; (1) Compare the nature and
gravity of the offense, and the harshness of the penalty; (2) Compare the sentences imposed on other criminals in the same
jurisdiction, i.e., whether more serious crimes are subject to the same penalty or to less serious penalties; and (3) Compare the
sentences imposed for commission of the same crime in other jurisdictions.

However, the case of Solem v. Helm cannot be applied in the present case, because in Solem what respondent therein deemed cruel
was the penalty imposed by the state court of South Dakota after it took into account the latters recidivist statute and not the
original penalty for uttering a no account check. Normally, the maximum punishment for the crime would have been five years
imprisonment and a $5,000.00 fine. Nonetheless, respondent was sentenced to life imprisonment without the possibility of parole
under South Dakotas recidivist statute because of his six prior felony convictions. Surely, the factual antecedents of Solem are
different from the present controversy.

With respect to the crime of Qualified Theft, however, it is true that the imposable penalty for the offense is high. Nevertheless,
the rationale for the imposition of a higher penalty against a domestic servant is the fact that in the commission of the crime, the
helper will essentially gravely abuse the trust and confidence reposed upon her by her employer. After accepting and allowing the
helper to be a member of the household, thus entrusting upon such person the protection and safekeeping of the employers loved
ones and properties, a subsequent betrayal of that trust is so repulsive as to warrant the necessity of imposing a higher penalty to
deter the commission of such wrongful acts.

There are other crimes where the penalty of fine and/or imprisonment are dependent on the subject matter of the crime and which,
by adopting the proposal, may create serious implications. For example, in the crime of Malversation, the penalty imposed
depends on the amount of the money malversed by the public official, thus:chanRoblesvirtualLawlibrary
Art. 217. Malversation of public funds or property; Presumption of malversation. Any public officer who, by reason of the
duties of his office, is accountable for public funds or property, shall appropriate the same or shall take or misappropriate or shall
consent, through abandonment or negligence, shall permit any other person to take such public funds, or property, wholly or
partially, or shall otherwise be guilty of the misappropriation or malversation of such funds or property, shall
suffer:chanRoblesvirtualLawlibrary
1. The penalty of prision correccional in its medium and maximum periods, if the amount involved in the misappropriation or
malversation does not exceed two hundred pesos.

2. The penalty of prision mayor in its minimum and medium periods, if the amount involved is more than two hundred pesos but
does not exceed six thousand pesos.

3. The penalty of prision mayor in its maximum period to reclusion temporal in its minimum period, if the amount involved is
more than six thousand pesos but is less than twelve thousand pesos.

4. The penalty of reclusion temporal, in its medium and maximum periods, if the amount involved is more than twelve thousand
pesos but is less than twentytwo thousand pesos. If the amount exceeds the latter, the penalty shall be reclusion temporal in its
maximum period to reclusion perpetua.

In all cases, persons guilty of malversation shall also suffer the penalty of perpetual special disqualification and a fine equal to the
amount of the funds malversed or equal to the total value of the property embezzled.

The failure of a public officer to have duly forthcoming any public funds or property with which he is chargeable, upon demand
by any duly authorized officer, shall be prima facie evidence that he has put such missing funds or property to personal use.

The aboveprovisions contemplate a situation wherein the Government loses money due to the unlawful acts of the offender.
Thus, following the proposal, if the amount malversed is P200.00 (under the existing law), the amount now
becomes P20,000.00 and the penalty is prision correccional in its medium and maximum periods (2 years 4 months and 1 day to 6
years). The penalty may not be commensurate to the act of embezzlement ofP20,000.00 compared to the acts committed by public
officials punishable by a special law, i.e., Republic Act No. 3019 or the AntiGraft and Corrupt Practices Act, specifically Section
3,31 wherein the injury caused to the government is not generally defined by any monetary amount, the penalty (6 years and 1
month to 15 years)32under the AntiGraft Law will now become higher. This should not be the case, because in the crime of
malversation, the public official takes advantage of his public position to embezzle the fund or property of the government
entrusted to him.

The said inequity is also apparent in the crime of Robbery with force upon things (inhabited or uninhabited) where the value of the
thing unlawfully taken and the act of unlawful entry are the bases of the penalty imposable, and also, in Malicious Mischief,
where the penalty of imprisonment or fine is dependent on the cost of the damage caused.

In Robbery with force upon things (inhabited or uninhabited), if we increase the value of the thing unlawfully taken, as proposed
in the ponencia, the sole basis of the penalty will now be the value of the thing unlawfully taken and no longer the element of
force employed in entering the premises. It may likewise cause an inequity between the crime of Qualified Trespass to Dwelling
under Article 280, and this kind of robbery because the former is punishable by prision correccional in its medium and maximum
periods (2 years, 4 months and 1 day to 6 years) and a fine not exceeding P1,000.00 (P100,000.00 now if the ratio is 1:100)
where entrance to the premises is with violence or intimidation, which is the main justification of the penalty. Whereas in the
crime of Robbery with force upon things, it is punished with a penalty of prision mayor (6 years and 1 day to 12 years) if the
intruder is unarmed without the penalty of Fine despite the fact that it is not merely the illegal entry that is the basis of the penalty
but likewise the unlawful taking.

Furthermore, in the crime of Other Mischiefs under Article 329, the highest penalty that can be imposed isarresto mayor in its
medium and maximum periods (2 months and 1 day to 6 months) if the value of the damage caused exceeds P1,000.00, but under
the proposal, the value of the damage will now becomeP100,000.00 (1:100), and still punishable by arresto mayor (1 month and 1
day to 6 months). And, if the value of the damaged property does not exceed P200.00, the penalty is arresto menor or a fine of
not less than the value of the damage caused and not more than P200.00, if the amount involved does not exceed P200.00or
cannot be estimated. Under the proposal, P200.00 will now become P20,000.00, which simply means that the fine
of P200.00 under the existing law will now become P20,000.00. The amount of Fine under this situation will now become
excessive and afflictive in nature despite the fact that the offense is categorized as a light felony penalized with a light penalty
under Article 26 of the RPC.33 Unless we also amend Article 26 of the RPC, there will be grave implications on the penalty of
Fine, but changing the same through Court decision, either expressly or impliedly, may not be legally and constitutionally feasible.

There are other crimes against property and swindling in the RPC that may also be affected by the proposal, such as those that
impose imprisonment and/or Fine as a penalty based on the value of the damage caused, to wit: Article 311 (Theft of the property
of the National Library and National Museum), Article 312 (Occupation of real property or usurpation of real rights in
property), Article 313 (Altering boundaries or landmarks), Article 316 (Other forms of swindling), Article 317 (Swindling a
minor), Article 318 (Other deceits), Article 328(Special cases of malicious mischief) and Article 331 (Destroying or damaging
statues, public monuments or paintings). Other crimes that impose Fine as a penalty will also be affected, such as: Article
213 (Frauds against the public treasury and similar offenses), Article 215 (Prohibited Transactions), Article 216(Possession of
prohibited interest by a public officer), Article 218 (Failure of accountable officer to render accounts), Article 219 (Failure of a
responsible public officer to render accounts before leaving the country).

In addition, the proposal will not only affect crimes under the RPC. It will also affect crimes which are punishable by special
penal laws, such as Illegal Logging or Violation of Section 68 of Presidential Decree No. 705, as amended. 34 The law treats
cutting, gathering, collecting and possessing timber or other forest products without license as an offense as grave as and
equivalent to the felony of qualified theft.35 Under the law, the offender shall be punished with the penalties imposed
under Articles 309 and 31036 of the Revised Penal Code, which means that the penalty imposable for the offense is, again, based
on the value of the timber or forest products involved in the offense. Now, if we accept the said proposal in the crime of Theft,
will this particular crime of Illegal Logging be amended also in so far as the penalty is concerned because the penalty is dependent
on Articles 309 and 310 of the RPC? The answer is in the negative because the soundness of this particular law is not in question.

With the numerous crimes defined and penalized under the Revised Penal Code and Special Laws, and other related provisions of
these laws affected by the proposal, a thorough study is needed to determine its effectivity and necessity. There may be some
provisions of the law that should be amended; nevertheless, this Court is in no position to conclude as to the intentions of the
framers of the Revised Penal Code by merely making a study of the applicability of the penalties imposable in the present times.
Such is not within the competence of the Court but of the Legislature which is empowered to conduct public hearings on the
matter, consult legal luminaries and who, after due proceedings, can decide whether or not to amend or to revise the questioned
law or other laws, or even create a new legislation which will adopt to the times.

Admittedly, Congress is aware that there is an urgent need to amend the Revised Penal Code. During the oral arguments, counsel
for the Senate informed the Court that at present, fiftysix (56) bills are now pending in the Senate seeking to amend the Revised
Penal Code,37 each one proposing much needed change and updates to archaic laws that were promulgated decades ago when the
political, socioeconomic, and cultural settings were far different from todays conditions.

Verily, the primordial duty of the Court is merely to apply the law in such a way that it shall not usurp legislative powers
by judicial legislation and that in the course of such application or construction, it should not make or supervise legislation, or
under the guise of interpretation, modify, revise, amend, distort, remodel, or rewrite the law, or give the law a construction which
is repugnant to its terms.38 The Court should apply the law in a manner that would give effect to their letter and spirit, especially
when the law is clear as to its intent and purpose. Succinctly put, the Court should shy away from encroaching upon the primary
function of a coequal branch of the Government; otherwise, this would lead to an inexcusable breach of the doctrine of
separation of powers by means of judicial legislation.

Moreover, it is to be noted that civil indemnity is, technically, not a penalty or a Fine; hence, it can be increased by the Court when
appropriate. Article 2206 of the Civil Code provides:chanRoblesvirtualLawlibrary
Art. 2206. The amount of damages for death caused by a crime or quasidelict shall be at least three thousand pesos, even though
there may have been mitigating circumstances. In addition:chanRoblesvirtualLawlibrary

(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of
the latter; such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent
physical disability not caused by the defendant, had no earning capacity at the time of his death;

(2) If the deceased was obliged to give support according to the provisions of Article 291, the recipient who is not an heir called to
the decedents inheritance by the law of testate or intestate succession, may demand support from the person causing the death, for
a period not exceeding five years, the exact duration to be fixed by the court;

(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental
anguish by reason of the death of the deceased.

In our jurisdiction, civil indemnity is awarded to the offended party as a kind of monetary restitution or compensation to the
victim for the damage or infraction that was done to the latter by the accused, which in a sense only covers the civil aspect.
Precisely, it is civil indemnity. Thus, in a crime where a person dies, in addition to the penalty of imprisonment imposed to the
offender, the accused is also ordered to pay the victim a sum of money as restitution. Clearly, this award of civil indemnity due to
the death of the victim could not be contemplated as akin to the value of a thing that is unlawfully taken which is the basis in the
imposition of the proper penalty in certain crimes. Thus, the reasoning in increasing the value of civil indemnity awarded in some
offense cannot be the same reasoning that would sustain the adoption of the suggested ratio. Also, it is apparent from Article 2206
that the law only imposes a minimum amount for awards of civil indemnity, which is P3,000.00. The law did not provide for a
ceiling. Thus, although the minimum amount for the award cannot be changed, increasing the amount awarded as civil indemnity
can be validly modified and increased when the present circumstance warrants it. Corollarily, moral damages under Article
222039 of the Civil Code also does not fix the amount of damages that can be awarded. It is discretionary upon the court,
depending on the mental anguish or the suffering of the private offended party. The amount of moral damages can, in relation to
civil indemnity, be adjusted so long as it does not exceed the award of civil indemnity.

In addition, some may view the penalty provided by law for the offense committed as tantamount to cruel punishment. However,
all penalties are generally harsh, being punitive in nature. Whether or not they are excessive or amount to cruel punishment is a
matter that should be left to lawmakers. It is the prerogative of the courts to apply the law, especially when they are clear and not
subject to any other interpretation than that which is plainly written.

Similar to the argument of Dean Diokno, one of Justice Antonio Carpios opinions is that the incremental penalty provision should
be declared unconstitutional and that the courts should only impose the penalty corresponding to the amount of P22,000.00,
regardless if the actual amount involved exceeds P22,000.00. As suggested, however, from now until the law is properly amended
by Congress, all crimes of Estafa will no longer be punished by the appropriate penalty. A conundrum in the regular course of
criminal justice would occur when every accused convicted of the crime of estafa will be meted penalties different from the proper
penalty that should be imposed. Such drastic twist in the application of the law has no legal basis and directly runs counter to
what the law provides.

It should be noted that the death penalty was reintroduced in the dispensation of criminal justice by the Ramos Administration by
virtue of Republic Act No. 765940 in December 1993. The said law has been questioned before this Court. There is, arguably, no
punishment more cruel than that of death. Yet still, from the time the death penalty was reimposed until its lifting in June 2006 by
Republic Act No. 9346,41 the Court did not impede the imposition of the death penalty on the ground that it is a cruel
punishment within the purview of Section 19 (1),42 Article III of the Constitution. Ultimately, it was through an act of Congress
suspending the imposition of the death penalty that led to its nonimposition and not via the intervention of the Court.

Even if the imposable penalty amounts to cruel punishment, the Court cannot declare the provision of the law from which the
proper penalty emanates unconstitutional in the present action. Not only is it violative of due process, considering that the State
and the concerned parties were not given the opportunity to comment on the subject matter, it is settled that the constitutionality of
a statute cannot be attacked collaterally because constitutionality issues must be pleaded directly and not collaterally, 43 more so in
the present controversy wherein the issues never touched upon the constitutionality of any of the provisions of the Revised Penal
Code.

Besides, it has long been held that the prohibition of cruel and unusual punishments is generally aimed at the form or character of
the punishment rather than its severity in respect of duration or amount, and applies to punishments which public sentiment has
regarded as cruel or obsolete, for instance, those inflicted at the whipping post, or in the pillory, burning at the stake, breaking on
the wheel, disemboweling, and the like. Fine and imprisonment would not thus be within the prohibition. 44

It takes more than merely being harsh, excessive, out of proportion, or severe for a penalty to be obnoxious to the Constitution.
The fact that the punishment authorized by the statute is severe does not make it cruel and unusual. Expressed in other terms, it
has been held that to come under the ban, the punishment must be flagrantly and plainly oppressive, wholly disproportionate to
the nature of the offense as to shock the moral sense of the community. 45

Cruel as it may be, as discussed above, it is for the Congress to amend the law and adapt it to our modern time.

The solution to the present controversy could not be solved by merely adjusting the questioned monetary values to the present
value of money based only on the current inflation rate. There are other factors and variables that need to be taken into
consideration, researched, and deliberated upon before the said values could be accurately and properly adjusted. The effects on
the society, the injured party, the accused, its socioeconomic impact, and the likes must be painstakingly evaluated and weighed
upon in order to arrive at a wholistic change that all of us believe should be made to our existing law. Dejectedly, the Court is ill
equipped, has no resources, and lacks sufficient personnel to conduct public hearings and sponsor studies and surveys to validly
effect these changes in our Revised Penal Code. This function clearly and appropriately belongs to Congress. Even Professor
Tadiar concedes to this conclusion, to wit:chanRoblesvirtualLawlibrary
xxxx

JUSTICE PERALTA:
Yeah, Just one question. You are suggesting that in order to determine the value of Peso you have to take into consideration
several factors.

PROFESSOR TADIAR:
Yes.

JUSTICE PERALTA:
Per capita income.

PROFESSOR TADIAR:
Per capita income.

JUSTICE PERALTA:
Consumer price index.
PROFESSOR TADIAR:
Yeah.

JUSTICE PERALTA:
Inflation ...

PROFESSOR TADIAR:
Yes.

JUSTICE PERALTA:
... and so on. Is the Supreme Court equipped to determine those factors?

PROFESSOR TADIAR:
There are many ways by which the value of the Philippine Peso can be determined utilizing all of those economic terms.

JUSTICE PERALTA:
Yeah, but ...

PROFESSOR TADIAR:
And I dont think it is within the power of the Supreme Court to pass upon and peg the value to One Hundred (P100.00) Pesos
to ...

JUSTICE PERALTA:
Yeah.

PROFESSOR TADIAR:
... One (P1.00.00) Peso in 1930.

JUSTICE PERALTA:
That is legislative in nature.

PROFESSOR TADIAR:
That is my position that the Supreme Court ...

JUSTICE PERALTA:
Yeah, okay.

PROFESSOR TADIAR:
... has no power to utilize the power of judicial review to in order to adjust, to make the adjustment that is a power that belongs to
the legislature.

JUSTICE PERALTA:
Thank you, Professor.

PROFESSOR TADIAR:
Thank you.46

Finally, the opinion advanced by Chief Justice Maria Lourdes P. A. Sereno echoes the view that the role of the Court is not merely
to dispense justice, but also the active duty to prevent injustice. Thus, in order to prevent injustice in the present controversy, the
Court should not impose an obsolete penalty pegged eighty three years ago, but consider the proposed ratio of 1:100 as simply
compensating for inflation. Furthermore, the Court has in the past taken into consideration changed conditions or significant
changes in circumstances in its decisions.

Similarly, the Chief Justice is of the view that the Court is not delving into the validity of the substance of a statute. The issue is
no different from the Courts adjustment of indemnity in crimes against persons, which the Court had previously adjusted in light
of current times, like in the case of People v. Pantoja.47 Besides, Article 10 of the Civil Code mandates a presumption that the
lawmaking body intended right and justice to prevail.

With due respect to the opinions and proposals advanced by the Chief Justice and my Colleagues, all the proposals ultimately lead
to prohibited judicial legislation. Short of being repetitious and as extensively discussed above, it is truly beyond the powers of
the Court to legislate laws, such immense power belongs to Congress and the Court should refrain from crossing this clearcut
divide. With regard to civil indemnity, as elucidated before, this refers to civil liability which is awarded to the offended party as a
kind of monetary restitution. It is truly based on the value of money. The same cannot be said on penalties because, as earlier
stated, penalties are not only based on the value of money, but on several other factors. Further, since the law is silent as to the
maximum amount that can be awarded and only pegged the minimum sum, increasing the amount granted as civil indemnity is
not proscribed. Thus, it can be adjusted in light of current conditions.

Now, with regard to the penalty imposed in the present case, the CA modified the ruling of the RTC. The RTC imposed the
indeterminate penalty of four (4) years and two (2) months of prision correccional in its medium period, as minimum, to fourteen
(14) years and eight (8) months of reclusion temporal in its minimum period, as maximum. However, the CA imposed the
indeterminate penalty of four (4) years and two (2) months ofprision correccional, as minimum, to eight (8) years of prision
mayor, as maximum, plus one (1) year for each additional P10,000.00, or a total of seven (7) years.

In computing the penalty for this type of estafa, this Courts ruling in Cosme, Jr. v. People48 is highly instructive,
thus:chanRoblesvirtualLawlibrary
With respect to the imposable penalty, Article 315 of the Revised Penal Code provides:
ART. 315 Swindling (estafa). Any person who shall defraud another by any of the means mentioned hereinbelow shall be
punished by:chanRoblesvirtualLawlibrary

1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum period, if the amount of the fraud
is over 12,000 but does not exceed 22,000 pesos, and if such amount exceeds the latter sum, the penalty provided in this paragraph
shall be imposed in its maximum period, adding one year for each additional 10,000 pesos; but the total penalty which may be
imposed shall not exceed twenty years. In such case, and in connection with the accessory penalties which may be imposed and
for the purpose of the other provisions of this Code, the penalty shall be termed prision mayor or reclusion temporal, as the case
may be.
The penalty prescribed by Article 315 is composed of only two, not three, periods, in which case, Article 65 of the same Code
requires the division of the time included in the penalty into three equal portions of time included in the penalty prescribed,
forming one period of each of the three portions. Applying the latter provisions, the maximum, medium and minimum periods of
the penalty prescribed are:
Maximum 6 years, 8 months, 21 days to 8 years
Medium 5 years, 5 months, 11 days to 6 years, 8 months,
20 days
Minimum 4 years, 2 months, 1 day to 5 years, 5 months,
10 days49

To compute the maximum period of the prescribed penalty, prisin correccional maximum to prisin mayorminimum should be
divided into three equal portions of time each of which portion shall be deemed to form one period in accordance with Article
6550 of the RPC.51 In the present case, the amount involved is P98,000.00, which exceeds P22,000.00, thus, the maximum penalty
imposable should be within the maximum period of 6 years, 8 months and 21 days to 8 years of prision mayor. Article 315 also
states that a period of one year shall be added to the penalty for every additional P10,000.00 defrauded in excess of P22,000.00,
but in no case shall the total penalty which may be imposed exceed 20 years.

Considering that the amount of P98,000.00 is P76,000.00 more than the P22,000.00 ceiling set by law, then, adding one year for
each additional P10,000.00, the maximum period of 6 years, 8 months and 21 days to 8 years of prision mayor minimum would be
increased by 7 years. Taking the maximum of the prescribed penalty, which is 8 years, plus an additional 7 years, the maximum of
the indeterminate penalty is 15 years.

Applying the Indeterminate Sentence Law, since the penalty prescribed by law for the estafa charge against petitioner is prision
correccional maximum to prision mayor minimum, the penalty next lower would then beprision correccional in its minimum and
medium periods. Thus, the minimum term of the indeterminate sentence should be anywhere from 6 months and 1 day to 4 years
and 2 months.

One final note, the Court should give Congress a chance to perform its primordial duty of lawmaking. The Court should not pre
empt Congress and usurp its inherent powers of making and enacting laws. While it may be the most expeditious approach, a
short cut by judicial fiat is a dangerous proposition, lest the Court dare trespass on prohibited judicial legislation.

WHEREFORE, the Petition for Review on Certiorari dated November 5, 2007 of petitioner Lito Corpuz is herebyDENIED.
Consequently, the Decision dated March 22, 2007 and Resolution dated September 5, 2007 of the Court of Appeals, which
affirmed with modification the Decision dated July 30, 2004 of the Regional Trial Court, Branch 46, San Fernando City, finding
petitioner guilty beyond reasonable doubt of the crime of Estafa under Article 315, paragraph (1), subparagraph (b) of the
Revised Penal Code, are hereby AFFIRMED withMODIFICATION that the penalty imposed is the indeterminate penalty of
imprisonment ranging from THREE (3) YEARS, TWO (2) MONTHS and ELEVEN DAYS of prision correccional, as minimum,
to FIFTEEN (15) YEARS ofreclusion temporal as maximum.

Pursuant to Article 5 of the Revised Penal Code, let a Copy of this Decision be furnished the President of the Republic of the
Philippines, through the Department of Justice.

Also, let a copy of this Decision be furnished the President of the Senate and the Speaker of the House of Representatives.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 191498 January 15, 2014
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
MINDANAO II GEOTHERMAL PARTNERSHIP, Respondent.
DECISION
SERENO, CJ:
This Rule 45 Petition1 requires this Court to address the question of timeliness with respect to petitioner's administrative and
judicial claims for refund and credit of accumulated unutilized input Value Added Tax (VAT) under Section 112(A) and Section
112(D) of the 1997 Tax Code. Petitioner Mindanao II Geothermal Partnership (Mindanao II) assails the Decision 2 and
Resolution3 of the Court of Tax Appeals En Banc (CTA En Banc) in CTA En Banc Case No. 448, affirming the Decision in CTA
Case No. 7507 of the CTA Second Division.4 The latter ordered the refund or issuance of a tax credit certificate in the amount
of P6,791,845.24 representing unutilized input VAT incurred for the second, third, and fourth quarters of taxable year 2004 in
favor of herein respondent, Mindanao II.
FACTS
Mindanao II is a partnership registered with the Securities and Exchange Commission.5 It is engaged in the business of power
generation and sale of electricity to the National Power Corporation (NAPOCOR)6 and is accredited by the Department of
Energy.7
Mindanao II filed its Quarterly VAT Returns for the second, third and fourth quarters of taxable year 2004 on the following dates: 8
Date filed
Quarter Taxable Year
Original Amended

26 July 2004 12 July 2005 2nd 2004

22 October 2004 12 July 2005 3rd 2004

25 January 2005 12 July 2005 4th 2004


On 6 October 2005, Mindanao II filed with the Bureau of Internal Revenue (BIR) an application for the refund or credit of
accumulated unutilized creditable input taxes.9 In support of the administrative claim for refund or credit, Mindanao II alleged,
among others, that it is registered with the BIR as a value-added taxpayer 10 and all its sales are zero-rated under the EPIRA
law.11 It further stated that for the second, third, and fourth quarters of taxable year 2004, it paid input VAT in the aggregate
amount of P7,167,005.84, which were directly attributable to the zero-rated sales. The input taxes had not been applied against
output tax.
Pursuant to Section 112(D) of the 1997 Tax Code, the Commissioner of Internal Revenue (CIR) had a period of 120 days, or until
3 February 2006, to act on the claim. The administrative claim, however, remained unresolved on 3 February 2006.
Under the same provision, Mindanao II could treat the inaction of the CIR as a denial of its claim, in which case, the former would
have 30 days to file an appeal to the CTA, that is, on 5 March 2006. Mindanao II, however, did not file an appeal within the 30-
day period.
Apparently, Mindanao II believed that a judicial claim must be filed within the two-year prescriptive period provided under
Section 112(A) and that such time frame was to be reckoned from the filing of its Quarterly VAT Returns for the second, third, and
fourth quarters of taxable year 2004, that is, from 26 July 2004, 22 October 2004, and 25 January 2005, respectively. Thus, on 21
July 2006, Mindanao II, claiming inaction on the part of the CIR and that the two-year prescriptive period was about to expire,
filed a Petition for Review with the CTA docketed as CTA Case No. 6133.12
On 8 June 2007, while the application for refund or credit of unutilized input VAT of Mindanao II was pending before the CTA
Second Division, this Court promulgated Atlas Consolidated Mining and Development Corporation v. CIR 13 (Atlas). Atlas held
that the two-year prescriptive period for the filing of a claim for an input VAT refund or credit is to be reckoned from the date of
filing of the corresponding quarterly VAT return and payment of the tax.
On 12 August 2008, the CTA Second Division rendered a Decision14 ordering the CIR to grant a refund or a tax credit certificate,
but only in the reduced amount of P6,791,845.24, representing unutilized input VAT incurred for the second, third and fourth
quarters of taxable year 2004.15
In support of its ruling, the CTA Second Division held that Mindanao II complied with the twin requisites for VAT zero-rating
under the EPIRA law: first, it is a generation company, and second, it derived sales from power generation. It also ruled that
Mindanao II satisfied the requirements for the grant of a refund/credit under Section 112 of the Tax Code: (1) there must be zero-
rated or effectively zero-rated sales; (2) input taxes must have been incurred or paid; (3) the creditable input tax due or paid must
be attributable to zero-rated sales or effectively zero-rated sales; (4) the input VAT payments must not have been applied against
any output liability; and (5) the claim must be filed within the two-year prescriptive period. 16
As to the second requisite, however, the input tax claim to the extent of P375,160.60 corresponding to purchases of services from
Mitsubishi Corporation was disallowed, since it was not substantiated by official receipts. 17
As regards to the fifth requirement in section 112 of the Tax Code, the tax court, citing Atlas, counted from 26 July 2004, 22
October 2004, and 25 January 2005 the dates when Mindanao II filed its Quarterly VAT Returns for the second, third, and fourth
quarters of taxable year 2004, respectively and determined that both the administrative claim filed on 6 October 2005 and the
judicial claim filed on 21 July 2006 fell within the two-year prescriptive period.18
On 1 September 2008, the CIR filed a Motion for Partial Reconsideration,19 pointing out that prescription had already set in, since
the appeal to the CTA was filed only on 21 July 2006, which was way beyond the last day to appeal 5 March 2006.20 As legal
basis for this argument, the CIR relied on Section 112(D) of the 1997 Tax Code.21
Meanwhile, on 12 September 2008, this Court promulgated CIR v. Mirant Pagbilao Corporation (Mirant). 22 Mirant fixed the
reckoning date of the two-year prescriptive period for the application for refund or credit of unutilized input VAT at the close of
the taxable quarter when the relevant sales were made , as stated in Section 112(A).23
On 3 December 2008, the CTA Second Division denied the CIRs Motion for Partial Reconsideration.24 The tax court stood by its
reliance on Atlas25 and on its finding that both the administrative and judicial claims of Mindanao II were timely filed. 26
On 7 January 2009, the CIR elevated the matter to the CTA En Banc via a Petition for Review.27 Apart from the contention that the
judicial claim of Mindanao II was filed beyond the 30-day period fixed by Section 112(D) of the 1997 Tax Code,28 the CIR argued
that Mindanao II erroneously fixed 26 July 2004, the date when the return for the second quarter was filed, as the date from which
to reckon the two-year prescriptive period for filing an application for refund or credit of unutilized input VAT under Section
112(A). As the two-year prescriptive period ended on 30 June 2006, the Petition for Review of Mindanao II was filed out of time
on 21 July 2006.29 The CIR invoked the recently promulgated Mirant to support this theory.
On 11 November 2009, the CTA En Banc rendered its Decision denying the CIRs Petition for Review.30 On the question whether
the application for refund was timely filed, it held that the CTA Second Division correctly applied the Atlas ruling. 31 It reasoned
that Atlas remained to be the controlling doctrine. Mirant was a new doctrine and, as such, the latter should not apply retroactively
to Mindanao II who had relied on the old doctrine of Atlas and had acted on the faith thereof.32
As to the issue of compliance with the 30-day period for appeal to the CTA, the CTA En Banc held that this was a requirement
only when the CIR actually denies the taxpayers claim. But in cases of CIR inaction, the 30-day period is not a mandatory
requirement; the judicial claim is seasonably filed as long as it is filed after the lapse of the 120-day waiting period but within two
years from the date of filing of the return.33
The CIR filed a Motion for Partial Reconsideration34 of the Decision, but it was denied for lack of merit.35
Dissatisfied, the CIR filed this Rule 45 Petition, raising the following arguments in support of its appeal:
I.
THE CTA 2ND DIVISION LACKED JURISDICTION TO TAKE COGNIZANCE OF THE CASE.
II.
THE COURT A QUOS RELIANCE ON THE RULING IN ATLAS IS MISPLACED.36
ISSUES
The resolution of this case hinges on the question of compliance with the following time requirements for the grant of a claim for
refund or credit of unutilized input VAT: (1) the two-year prescriptive period for filing an application for refund or credit of
unutilized input VAT; and (2) the 120+30 day period for filing an appeal with the CTA.
THE COURTS RULING
We deny Mindanao IIs claim for refund or credit of unutilized input VAT on the ground that its judicial claims were filed out of
time, even as we hold that its application for refund was filed on time.
I.
MINDANAO IIS APPLICATION FOR
REFUND WAS FILED ON TIME
We find no error in the conclusion of the tax courts that the application for refund or credit of unutilized input VAT was timely
filed. The problem lies with their bases for the conclusion as to: (1) what should be filed within the prescriptive period; and (2) the
date from which to reckon the prescriptive period.
We thus take a different route to reach the same conclusion, initially focusing our discussion on what should be filed within the
two-year prescriptive period.
A. The Judicial Claim Need Not Be Filed Within the Two-Year Prescriptive Period
Section 112(A) provides:
SEC. 112. Refunds or Tax Credits of Input Tax.
(A) Zero-rated or Effectively Zero-rated Sales Any VAT-registered person, whose sales are zero-rated or effectively zero-rated
may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that
such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section
106(A)(2)(a)(1), (2) and (B) and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been
duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That
where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties
or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the
transactions, it shall be allocated proportionately on the basis of the volume of sales.
Both the CTA Second Division and CTA En Banc decisions held that the phrase "apply for the issuance of a tax credit certificate
or refund" in Section 112(A) is construed to refer to both the administrative claim filed with the CIR and the judicial claim filed
with the CTA. This view, however, has no legal basis.
In Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. (Aichi), we dispelled the misconception that both
the administrative and judicial claims must be filed within the two-year prescriptive period: 37
There is nothing in Section 112 of the NIRC to support respondents view. Subsection (A) of the said provision states that "any
VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two years after the close of the taxable
quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid
attributable to such sales." The phrase "within two (2) years x x x apply for the issuance of a tax credit certificate or refund" refers
to applications for refund/credit filed with the CIR and not to appeals made to the CTA. This is apparent in the first paragraph of
subsection (D) of the same provision, which states that the CIR has "120 days from the submission of complete documents in
support of the application filed in accordance with Subsections (A) and (B)" within which to decide on the claim.
In fact, applying the two-year period to judicial claims would render nugatory Section 112 (D) of the NIRC, which already
provides for a specific period within which a taxpayer should appeal the decision or inaction of the CIR. The second paragraph of
Section 112 (D) of the NIRC envisions two scenarios: (1) when a decision is issued by the CIR before the lapse of the 120-day
period; and (2) when no decision is made after the 120-day period. In both instances, the taxpayer has 30 days within which to file
an appeal with the CTA. As we see it then, the 120-day period is crucial in filing an appeal with the CTA. (Emphasis supplied)
The message of Aichi is clear: it is only the administrative claim that must be filed within the two-year prescriptive period; the
judicial claim need not fall within the two-year prescriptive period.
Having disposed of this question, we proceed to the date for reckoning the prescriptive period under Section 112(A).
B. Reckoning Date is the Close of the Taxable Quarter When the Relevant Sales Were Made.
The other flaw in the reasoning of the tax courts is their reliance on the Atlas ruling, which fixed the reckoning point to the date of
filing the return and payment of the tax.
The CIRs Stand
The CIRs stand is that Atlas is not applicable to the case at hand as it involves Section 230 of the 1977 Tax Code, which
contemplates recovery of tax payments erroneously or illegally collected. On the other hand, this case deals with claims for tax
refund or credit of unutilized input VAT for the second, third, and fourth quarters of 2004, which are covered by Section 112 of the
1977 Tax Code.38
The CIR further contends that Mindanao II cannot claim good faith reliance on the Atlas doctrine since the case was decided only
on 8 June 2007, two years after Mindanao II filed its claim for refund or credit with the CIR and one year after it filed a Petition
for Review with the CTA on 21 July 2006.39
In lieu of Atlas, the CIR proposes that it is the Court's ruling in Mirant that should apply to this case despite the fact that the latter
was promulgated on 12 September 2008, after Mindanao II had filed its administrative claim in 2005.40 It argues that Mirant can
be applied retroactively to this case, since the decision merely interprets Section 112, a provision that was already effective when
Mindanao II filed its claims for tax refund or credit.
The Taxpayers Defense
On the other hand, Mindanao II counters that Atlas, decided by the Third Division of this Court, could not have been superseded
by Mirant, a Second Division Decision of this Court. A doctrine laid down by the Supreme Court in a Division may be modified
or reversed only through a decision of the Court sitting en banc.41
Mindanao II further contends that when it filed its Petition for Review, the prevailing rule in the CTA reckons the two-year
prescriptive period from the date of the filing of the VAT return.42 Finally, after building its case on Atlas, Mindanao II assails the
CIRs reliance on the Mirant doctrine stating that it cannot be applied retroactively to this case, lest it violate the rock-solid rule
that a judicial ruling cannot be given retroactive effect if it will impair vested rights. 43
Section 112(A) is the Applicable Rule
The issue posed is not novel. In the recent case of Commissioner of Internal Revenue v. San Roque Power Corporation 44 (San
Roque), this Court resolved the threshold question of when to reckon the two-year prescriptive period for filing an administrative
claim for refund or credit of unutilized input VAT under the 1997 Tax Code in view of our pronouncements in Atlas and Mirant. In
that case, we delineated the scope and effectivity of the Atlas and Mirant doctrines as follows:
The Atlas doctrine, which held that claims for refund or credit of input VAT must comply with the two-year prescriptive period
under Section 229, should be effective only from its promulgation on 8 June 2007 until its abandonment on 12 September 2008 in
Mirant. The Atlas doctrine was limited to the reckoning of the two-year prescriptive period from the date of payment of the output
VAT. Prior to the Atlas doctrine, the two-year prescriptive period for claiming refund or credit of input VAT should be governed by
Section 112(A) following the verba legis rule. The Mirant ruling, which abandoned the Atlas doctrine, adopted the verba legis
rule, thus applying Section 112(A) in computing the two-year prescriptive period in claiming refund or credit of input VAT.
(Emphases supplied)
Furthermore, San Roque distinguished between Section 112 and Section 229 of the 1997 Tax Code:
The input VAT is not "excessively" collected as understood under Section 229 because at the time the input VAT is collected the
amount paid is correct and proper. The input VAT is a tax liability of, and legally paid by, a VAT-registered seller of goods,
properties or services used as input by another VAT-registered person in the sale of his own goods, properties, or services. This tax
liability is true even if the seller passes on the input VAT to the buyer as part of the purchase price. The second VAT-registered
person, who is not legally liable for the input VAT, is the one who applies the input VAT as credit for his own output VAT. If the
input VAT is in fact "excessively" collected as understood under Section 229, then it is the first VAT-registered person the
taxpayer who is legally liable and who is deemed to have legally paid for the input VAT who can ask for a tax refund or credit
under Section 229 as an ordinary refund or credit outside of the VAT System. In such event, the second VAT-registered taxpayer
will have no input VAT to offset against his own output VAT.
In a claim for refund or credit of "excess" input VAT under Section 110(B) and Section 112(A), the input VAT is not "excessively"
collected as understood under Section 229. At the time of payment of the input VAT the amount paid is the correct and proper
amount. Under the VAT System, there is no claim or issue that the input VAT is "excessively" collected, that is, that the input VAT
paid is more than what is legally due. The person legally liable for the input VAT cannot claim that he overpaid the input VAT by
the mere existence of an "excess" input VAT. The term "excess" input VAT simply means that the input VAT available as credit
exceeds the output VAT, not that the input VAT is excessively collected because it is more than what is legally due. Thus, the
taxpayer who legally paid the input VAT cannot claim for refund or credit of the input VAT as "excessively" collected under
Section 229.
Under Section 229, the prescriptive period for filing a judicial claim for refund is two years from the date of payment of the tax
"erroneously, . . . illegally, . . . excessively or in any manner wrongfully collected." The prescriptive period is reckoned from the
date the person liable for the tax pays the tax. Thus, if the input VAT is in fact "excessively" collected, that is, the person liable for
the tax actually pays more than what is legally due, the taxpayer must file a judicial claim for refund within two years from his
date of payment. Only the person legally liable to pay the tax can file the judicial claim for refund. The person to whom the tax is
passed on as part of the purchase price has no personality to file the judicial claim under Section 229.
Under Section 110(B) and Section 112(A), the prescriptive period for filing a judicial claim for "excess" input VAT is two years
from the close of the taxable quarter when the sale was made by the person legally liable to pay the output VAT. This prescriptive
period has no relation to the date of payment of the "excess" input VAT. The "excess" input VAT may have been paid for more
than two years but this does not bar the filing of a judicial claim for "excess" VAT under Section 112(A), which has a different
reckoning period from Section 229. Moreover, the person claiming the refund or credit of the input VAT is not the person who
legally paid the input VAT. Such person seeking the VAT refund or credit does not claim that the input VAT was "excessively"
collected from him, or that he paid an input VAT that is more than what is legally due. He is not the taxpayer who legally paid the
input VAT.
As its name implies, the Value-Added Tax system is a tax on the value added by the taxpayer in the chain of transactions. For
simplicity and efficiency in tax collection, the VAT is imposed not just on the value added by the taxpayer, but on the entire selling
price of his goods, properties or services. However, the taxpayer is allowed a refund or credit on the VAT previously paid by those
who sold him the inputs for his goods, properties, or services. The net effect is that the taxpayer pays the VAT only on the value
that he adds to the goods, properties, or services that he actually sells.
Under Section 110(B), a taxpayer can apply his input VAT only against his output VAT. The only exception is when the taxpayer is
expressly "zero-rated or effectively zero-rated" under the law, like companies generating power through renewable sources of
energy. Thus, a non zero-rated VAT-registered taxpayer who has no output VAT because he has no sales cannot claim a tax refund
or credit of his unused input VAT under the VAT System. Even if the taxpayer has sales but his input VAT exceeds his output VAT,
he cannot seek a tax refund or credit of his "excess" input VAT under the VAT System. He can only carry-over and apply his
"excess" input VAT against his future output VAT. If such "excess" input VAT is an "excessively" collected tax, the taxpayer
should be able to seek a refund or credit for such "excess" input VAT whether or not he has output VAT. The VAT System does not
allow such refund or credit. Such "excess" input VAT is not an "excessively" collected tax under Section 229. The "excess" input
VAT is a correctly and properly collected tax. However, such "excess" input VAT can be applied against the output VAT because
the VAT is a tax imposed only on the value added by the taxpayer. If the input VAT is in fact "excessively" collected under Section
229, then it is the person legally liable to pay the input VAT, not the person to whom the tax was passed on as part of the purchase
price and claiming credit for the input VAT under the VAT System, who can file the judicial claim under Section 229.
Any suggestion that the "excess" input VAT under the VAT System is an "excessively" collected tax under Section 229 may lead
taxpayers to file a claim for refund or credit for such "excess" input VAT under Section 229 as an ordinary tax refund or credit
outside of the VAT System. Under Section 229, mere payment of a tax beyond what is legally due can be claimed as a refund or
credit. There is no requirement under Section 229 for an output VAT or subsequent sale of goods, properties, or services using
materials subject to input VAT.
From the plain text of Section 229, it is clear that what can be refunded or credited is a tax that is "erroneously . . . illegally, . . .
excessively or in any manner wrongfully collected." In short, there must be a wrongful payment because what is paid, or part of it,
is not legally due. As the Court held in Mirant, Section 229 should "apply only to instances of erroneous payment or illegal
collection of internal revenue taxes." Erroneous or wrongful payment includes excessive payment because they all refer to
payment of taxes not legally due. Under the VAT System, there is no claim or issue that the "excess" input VAT is "excessively or
in any manner wrongfully collected." In fact, if the "excess" input VAT is an "excessively" collected tax under Section 229, then
the taxpayer claiming to apply such "excessively" collected input VAT to offset his output VAT may have no legal basis to make
such offsetting. The person legally liable to pay the input VAT can claim a refund or credit for such "excessively" collected tax,
and thus there will no longer be any "excess" input VAT. This will upend the present VAT System as we know it. 45
Two things are clear from the above quoted San Roque disquisitions. First, when it comes to recovery of unutilized input VAT,
Section 112, and not Section 229 of the 1997 Tax Code, is the governing law. Second, prior to 8 June 2007, the applicable rule is
neither Atlas nor Mirant, but Section 112(A).
We present the rules laid down by San Roque in determining the proper reckoning date of the two-year prescriptive period through
the following timeline:

Thus, the task at hand is to determine the applicable period for this case.
In this case, Mindanao II filed its administrative claims for refund or credit for the second, third and fourth quarters of 2004 on 6
October 2005. The case thus falls within the first period as indicated in the above timeline. In other words, it is covered by the rule
prior to the advent of either Atlas or Mirant.
Accordingly, the proper reckoning date in this case, as provided by Section 112(A) of the 1997 Tax Code, is the close of the
taxable quarter when the relevant sales were made.
C. The Administrative Claims Were Timely Filed
We sum up our conclusions so far: (1) it is only the administrative claim that must be filed within the two-year prescriptive period;
and (2) the two-year prescriptive period begins to run from the close of the taxable quarter when the relevant sales were made.
Bearing these in mind, we now proceed to determine whether Mindanao II's administrative claims for the second, third, and fourth
quarters of 2004 were timely filed.
Second Quarter
Since the zero-rated sales were made in the second quarter of 2004, the date of reckoning the two-year prescriptive period is the
close of the second quarter, which is on 30 June 2004. Applying Section 112(A), Mindanao II had two years from 30 June 2004,
or until 30 June 2006 to file an administrative claim with the CIR. Mindanao II filed its administrative claim on 6 October 2005,
which is within the two-year prescriptive period. The administrative claim for the second quarter of 2004 was thus timely filed.
For clarity, we present the rules laid down by San Roque in determining the proper reckoning date of the two-year prescriptive
period through the following timeline:

Third Quarter
As regards the claim for the third quarter of 2004, the two-year prescriptive period started to run on 30 September 2004, the close
of the taxable quarter. It ended on 30 September 2006, pursuant to Section 112(A) of the 1997 Tax Code. Mindanao II filed its
administrative claim on 6 October 2005. Thus, since the administrative claim was filed well within the two-year prescriptive
period, the administrative claim for the third quarter of 2004 was timely filed. (See timeline below)

Fourth Quarter
Here, the two-year prescriptive period is counted starting from the close of the fourth quarter which is on 31 December 2004. The
last day of the prescriptive period for filing an application for tax refund/credit with the CIR was on 31 December 2006. Mindanao
II filed its administrative claim with the CIR on 6 October 2005. Hence, the claims were filed on time, pursuant to Section 112(A)
of the 1997 Tax Code. (See timeline below)

II.
MINDANAO IIS JUDICIAL CLAIMS WERE FILED OUT OF TIME
Notwithstanding the timely filing of the administrative claims, we find that the CTA En Banc erred in holding that Mindanao IIs
judicial claims were timely filed.
A. 30-Day Period Also Applies to Appeals from Inaction
Section 112(D) of the 1997 Tax Code states the time requirements for filing a judicial claim for refund or tax credit of input VAT:
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. In proper cases, the Commissioner shall grant a
refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of
submission of complete documents in support of the application filed in accordance with Subsection (A) and (B) hereof. In case of
full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the
application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision
denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the
Court of Tax Appeals. (Emphases supplied)
Section 112(D) speaks of two periods: the period of 120 days, which serves as a waiting period to give time for the CIR to act on
the administrative claim for refund or credit, and the period of 30 days, which refers to the period for interposing an appeal with
the CTA. It is with the 30-day period that there is an issue in this case.
The CTA En Bancs holding is that, since the word "or" a disjunctive term that signifies dissociation and independence of one
thing from another is used in Section 112(D), the taxpayer is given two options: 1) file an appeal within 30 days from the CIRs
denial of the administrative claim; or 2) file an appeal with the CTA after expiration of the 120-day period, in which case the 30-
day appeal period does not apply. The judicial claim is seasonably filed so long as it is filed after the lapse of the 120-day waiting
period but before the lapse of the two-year prescriptive period under Section 112(A).46
We do not agree.
The 30-day period applies not only to instances of actual denial by the CIR of the claim for refund or tax credit, but to cases of
inaction by the CIR as well. This is the correct interpretation of the law, as held in San Roque: 47
Section 112(C)48 also expressly grants the taxpayer a 30-day period to appeal to the CTA the decision or inaction of the
Commissioner, thus:
x x x the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of
the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals.
This law is clear, plain, and unequivocal. Following the well-settled verba legis doctrine, this law should be applied exactly as
worded since it is clear, plain, and unequivocal. As this law states, the taxpayer may, if he wishes, appeal the decision of the
Commissioner to the CTA within 30 days from receipt of the Commissioner's decision, or if the Commissioner does not act on the
taxpayer's claim within the 120-day period, the taxpayer may appeal to the CTA within 30 days from the expiration of the 120-day
period. (Emphasis supplied)
The San Roque pronouncement is clear. The taxpayer can file the appeal in one of two ways: (1) file the judicial claim within
thirty days after the Commissioner denies the claim within the 120-day period, or (2) file the judicial claim within thirty days from
the expiration of the 120-day period if the Commissioner does not act within the 120-day period.
B. The Judicial Claim Was Belatedly Filed
In this case, the facts are not up for debate. Mindanao II filed its administrative claim for refund or credit for the second, third, and
fourth quarters of 2004 on 6 October 2005. The CIR, therefore, had a period of 120 days, or until 3 February 2006, to act on the
claim. The CIR, however, failed to do so. Mindanao II then could treat the inaction as a denial and appeal it to the CTA within 30
days from 3 February 2006, or until 5 March 2006.
Mindanao II, however, filed a Petition for Review only on 21 July 2006, 138 days after the lapse of the 30-day period on 5 March
2006. The judicial claim was therefore filed late. (See timeline below.)

C. The 30-Day Period to Appeal is Mandatory and Jurisdictional


However, what is up for debate is the nature of the 30-day time requirement. The CIR posits that it is mandatory. Mindanao II
contends that the requirement of judicial recourse within 30 days is only directory and permissive, as indicated by the use of the
word "may" in Section 112(D).49
The answer is found in San Roque. There, we declared that the 30-day period to appeal is both mandatory and jurisdictional:
Section 112(C) also expressly grants the taxpayer a 30-day period to appeal to the CTA the decision or inaction of the
Commissioner, thus:
x x x the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of
the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals. (Emphasis supplied)
This law is clear, plain, and unequivocal. Following the well-settled verba legis doctrine, this law should be applied exactly as
worded since it is clear, plain, and unequivocal. As this law states, the taxpayer may, if he wishes, appeal the decision of the
Commissioner to the CTA within 30 days from receipt of the Commissioner's decision, or if the Commissioner does not act on the
taxpayer's claim within the 120-day period, the taxpayer may appeal to the CTA within 30 days from the expiration of the 120-day
period.
xxxx
Section 112(A) and (C) must be interpreted according to its clear, plain, and unequivocal language. The taxpayer can file his
administrative claim for refund or credit at anytime within the two-year prescriptive period. If he files his claim on the last day of
the two-year prescriptive period, his claim is still filed on time. The Commissioner will have 120 days from such filing to decide
the claim. If the Commissioner decides the claim on the 120th day, or does not decide it on that day, the taxpayer still has 30 days
to file his judicial claim with the CTA. This is not only the plain meaning but also the only logical interpretation of Section 112(A)
and (C).
xxxx
When Section 112(C) states that "the taxpayer affected may, within thirty (30) days from receipt of the decision denying the claim
or after the expiration of the one hundred twenty-day period, appeal the decision or the unacted claim with the Court of Tax
Appeals," the law does not make the 120+30 day periods optional just because the law uses the word " may." The word "may"
simply means that the taxpayer may or may not appeal the decision of the Commissioner within 30 days from receipt of the
decision, or within 30 days from the expiration of the 120-day period. x x x.50
D. Exception to the mandatory and jurisdictional nature of the 120+30 day period not applicable
Nevertheless, San Roque provides an exception to the mandatory and jurisdictional nature of the 120+30 day period BIR Ruling
No. DA-489-03 dated 10 December 2003. The BIR ruling declares that the "taxpayer-claimant need not wait for the lapse of the
120-day period before it could seek judicial relief with the CTA by way of Petition for Review."
Although Mindanao II has not invoked the BIR ruling, we deem it prudent as well as necessary to dwell on this issue to determine
whether this case falls under the exception.
For this question, we come back to San Roque, which provides that BIR Ruling No. DA-489-03 is a general interpretative rule;
thus, taxpayers can rely on it from the time of its issuance on 10 December 2003 until its reversal by this Court in Aichi on 6
October 2010, when the 120+30 day periods were held to be mandatory and jurisdictional. The Court reasoned as follows:
Taxpayers should not be prejudiced by an erroneous interpretation by the Commissioner, particularly on a difficult question of
law. The abandonment of the Atlas doctrine by Mirant and Aichi is proof that the reckoning of the prescriptive periods for input
VAT tax refund or credit is a difficult question of law. The abandonment of the Atlas doctrine did not result in Atlas, or other
taxpayers similarly situated, being made to return the tax refund or credit they received or could have received under Atlas prior to
its abandonment. This Court is applying Mirant and Aichi prospectively. Absent fraud, bad faith or misrepresentation, the reversal
by this Court of a general interpretative rule issued by the Commissioner, like the reversal of a specific BIR ruling under Section
246, should also apply prospectively. x x x.
xxxx
Thus, the only issue is whether BIR Ruling No. DA-489-03 is a general interpretative rule applicable to all taxpayers or a specific
ruling applicable only to a particular taxpayer.
BIR Ruling No. DA-489-03 is a general interpretative rule because it was a response to a query made, not by a particular taxpayer,
but by a government agency tasked with processing tax refunds and credits, that is, the One Stop Shop Inter-Agency Tax Credit
and Drawback Center of the Department of Finance . This government agency is also the addressee, or the entity responded to, in
BIR Ruling No. DA-489-03. Thus, while this government agency mentions in its query to the Commissioner the administrative
claim of Lazi Bay Resources Development, Inc., the agency was in fact asking the Commissioner what to do in cases like the tax
claim of Lazi Bay Resources Development, Inc., where the taxpayer did not wait for the lapse of the 120-day period.
Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on BIR Ruling No. DA-489-03
from the time of its issuance on 10 December 2003 up to its reversal by this Court in Aichi on 6 October 2010, where this Court
held that the 120+30 day periods are mandatory and jurisdictional.51
Thus, in San Roque, the Court applied this exception to Taganito Mining Corporation (Taganito), one of the taxpayers in San
Roque. Taganito filed its judicial claim on 14 February 2007, after the BIR ruling took effect on 10 December 2003 and before the
promulgation of Mirant. The Court stated:
Taganito, however, filed its judicial claim with the CTA on 14 February 2007, after the issuance of BIR Ruling No. DA-489-03 on
10 December 2003. Truly, Taganito can claim that in filing its judicial claim prematurely without waiting for the 120-day period to
expire, it was misled by BIR Ruling No. DA-489-03. Thus, Taganito can claim the benefit of BIR Ruling No. DA-489-03, which
shields the filing of its judicial claim from the vice of prematurity. 52
San Roque was also careful to point out that the BIR ruling does not retroactively apply to premature judicial claims filed before
the issuance of the BIR ruling:
However, BIR Ruling No. DA-489-03 cannot be given retroactive effect for four reasons: first, it is admittedly an erroneous
interpretation of the law; second, prior to its issuance, the BIR held that the 120-day period was mandatory and jurisdictional,
which is the correct interpretation of the law; third, prior to its issuance, no taxpayer can claim that it was misled by the BIR into
filing a judicial claim prematurely; and fourth, a claim for tax refund or credit, like a claim for tax exemption, is strictly construed
against the taxpayer.53
Thus, San Roque held that taxpayer San Roque Power Corporation, could not seek refuge in the BIR ruling as it jumped the gun
when it filed its judicial claim on 10 April 2003, prior to the issuance of the BIR ruling on 10 December 2003.1wphi1 The Court
stated:
San Roque, therefore, cannot benefit from BIR Ruling No. DA-489-03 because it filed its judicial claim prematurely on 10 April
2003, before the issuance of BIR Ruling No. DA-489-03 on 10 December 2003. To repeat, San Roque cannot claim that it was
misled by the BIR into filing its judicial claim prematurely because BIR Ruling No. DA-489-03 was issued only after San Roque
filed its judicial claim. At the time San Roque filed its judicial claim, the law as applied and administered by the BIR was that the
Commissioner had 120 days to act on administrative claims. This was in fact the position of the BIR prior to the issuance of BIR
Ruling No. DA-489-03. Indeed, San Roque never claimed the benefit of BIR Ruling No. DA-489-03 or RMC 49-03, whether in
this Court, the CTA, or before the Commissioner.54
San Roque likewise ruled out the application of the BIR ruling to cases of late filing. The Court held that the BIR ruling, as an
exception to the mandatory and jurisdictional nature of the 120+30 day periods, is limited to premature filing and does not extend
to late filing of a judicial claim. Thus, the Court found that since Philex Mining Corporation, the other party in the consolidated
case San Roque, filed its claim 426 days after the lapse of the 30-day period, it could not avail itself of the benefit of the BIR
ruling:
Philexs situation is not a case of premature filing of its judicial claim but of late filing, indeed
Very late filing. BIR Ruling No. DA-489-03 allowed premature filing of a judicial claim, which means non-exhaustion of the 120-
day period for the Commissioner to act on an administrative claim. Philex cannot claim the benefit of BIR Ruling No. DA-489-03
because Philex did not file its judicial claim prematurely but filed it long after the lapse of the 30-day period following the
expiration of the 120-day period. In fact, Philex filed its judicial claim 426 days after the lapse of the 30-day period. 55
We sum up the rules established by San Roque on the mandatory and jurisdictional nature of the 30-day period to appeal through
the following timeline:

Bearing in mind the foregoing rules for the timely filing of a judicial claim for refund or credit of unutilized input VAT, we rule on
the present case of Mindanao II as follows:
We find that Mindanao IIs situation is similar to that of Philex in San Roque.
As mentioned above, Mindanao II filed its judicial claim with the CTA on 21 July 2006. This was after the issuance of BIR Ruling
No. DA-489-03 on 10 December 2003, but before its reversal on 5 October 2010. However, while the BIR ruling was in effect
when Mindanao II filed its judicial claim, the rule cannot be properly invoked. The BIR ruling, as discussed earlier, contemplates
premature filing. The situation of Mindanao II is one of late filing. To repeat, its judicial claim was filed on 21 July 2006 long
after 5 March 2006, the last day of the 30-day period for appeal. In fact, it filed its judicial claim 138 days after the lapse of the
30-day period. (See timeline below)

E. Undersigned dissented in San Roque to the retroactive application of the mandatory and jurisdictional nature of the 120+30 day
period.
It is worthy to note that in San Roque, this ponente registered her dissent to the retroactive application of the mandatory and
jurisdictional nature of the 120+30 day period provided under Section 112(D) of the Tax Code which, in her view, is unfair to
taxpayers. It has been the view of this ponente that the mandatory nature of 120+30 day period must be completely applied
prospectively or, at the earliest, only upon the finality of Aichi in order to create stability and consistency in our tax laws.
Nevertheless, this ponente is mindful of the fact that judicial precedents cannot be ignored. Hence, the majority view expressed in
San Roque must be applied.
SUMMARY OF RULES ON PRESCRIPTIVE PERIODS FOR CLAIMING REFUND OR CREDIT OF INPUT VAT
The lessons of this case may be summed up as follows:
A. Two-Year Prescriptive Period
1. It is only the administrative claim that must be filed within the two-year prescriptive period. (Aichi) 2. The proper
reckoning date for the two-year prescriptive period is the close of the taxable quarter when the relevant sales were made.
(San Roque)
3. The only other rule is the Atlas ruling, which applied only from 8 June 2007 to 12 September 2008. Atlas states that
the two-year prescriptive period for filing a claim for tax refund or credit of unutilized input VAT payments should be
counted from the date of filing of the VAT return and payment of the tax. (San Roque)
B. 120+30 Day Period
1. The taxpayer can file an appeal in one of two ways: (1) file the judicial claim within thirty days after the
Commissioner denies the claim within the 120-day period, or (2) file the judicial claim within thirty days from the
expiration of the 120-day period if the Commissioner does not act within the 120-day period.
2. The 30-day period always applies, whether there is a denial or inaction on the part of the CIR.
3. As a general rule, the 3 0-day period to appeal is both mandatory and jurisdictional. (Aichi and San Roque)
4. As an exception to the general rule, premature filing is allowed only if filed between 10 December 2003 and 5 October
2010, when BIR Ruling No. DA-489-03 was still in force. (San Roque)
5. Late filing is absolutely prohibited, even during the time when BIR Ruling No. DA-489-03 was in force. (San Roque)
SUMMARY AND CONCLUSION
In sum, our finding is that the three administrative claims for the refund or credit of unutilized input VAT were all timely filed,
while the corresponding judicial claims were belatedly filed.
The foregoing considered, the CT A lost jurisdiction over Mindanao Ils claims for refund or credit.1wphi1 The CTA EB erred in
granting these claims.
WHEREFORE, we GRANT the Petition. The assailed Court of Tax Appeals En Banc Decision dated 11 November 2009 and
Resolution dated 3 March 2010 of the in CTA EB Case No. 448 (CTA Case No. 7507) are hereby REVERSED and SET ASIDE. A
new ruling is entered DENYING respondent s claim for a tax refund or credit ofP6,791,845.24.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 206666 January 21, 2015
ATTY. ALICIA RISOS-VIDAL, Petitioner,
ALFREDO S. LIM Petitioner-Intervenor,
vs.
COMMISSION ON ELECTIONS and JOSEPH EJERCITO ESTRADA, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
Before the Court are (1) a Petition for Certiorari filed under Rule 64, in relation to Rule 65, both of the Revised Rules of Court, by
Atty. Alicia Risos-Vidal (Risos-Vidal), which essentially prays for the issuance of the writ of certiorari annulling and setting aside
the April 1, 20131 and April 23, 20132 Resolutions of the Commission on Elections (COMELEC), Second Division and En bane,
respectively, in SPA No. 13-211 (DC), entitled "Atty. Alicia Risos-Vidal v. Joseph Ejercito Estrada" for having been rendered with
grave abuse of discretion amounting to lack or excess of jurisdiction; and (2) a Petition-in-Intervention 3 filed by Alfredo S. Lim
(Lim), wherein he prays to be declared the 2013 winning candidate for Mayor of the City of Manila in view of private respondent
former President Joseph Ejercito Estradas (former President Estrada) disqualification to run for and hold public office.
The Facts
The salient facts of the case are as follows:
On September 12, 2007, the Sandiganbayan convicted former President Estrada, a former President of the Republic of the
Philippines, for the crime of plunder in Criminal Case No. 26558, entitled "People of the Philippines v. Joseph Ejercito Estrada, et
al." The dispositive part of the graft courts decision reads:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered in Criminal Case No. 26558 finding the accused,
Former President Joseph Ejercito Estrada, GUILTY beyond reasonable doubt of the crime of PLUNDER, defined in and penalized
by Republic Act No. 7080, as amended. On the other hand, for failure of the prosecution to prove and establish their guilt beyond
reasonable doubt, the Court finds the accused Jose "Jinggoy" Estrada and Atty. Edward S. Serapio NOT GUILTY of the crime of
plunder, and accordingly, the Court hereby orders their ACQUITTAL.
The penalty imposable for the crime of plunder under Republic Act No. 7080, as amended by Republic Act No. 7659, is Reclusion
Perpetua to Death. There being no aggravating or mitigating circumstances, however, the lesser penalty shall be applied in
accordance with Article 63 of the Revised Penal Code. Accordingly, the accused Former President Joseph Ejercito Estrada is
hereby sentenced to suffer the penalty of Reclusion Perpetua and the accessory penalties of civil interdiction during the period of
sentence and perpetual absolute disqualification.
The period within which accused Former President Joseph Ejercito Estrada has been under detention shall be credited to him in
full as long as he agrees voluntarily in writing to abide by the same disciplinary rules imposed upon convicted prisoners.
Moreover, in accordance with Section 2 of Republic Act No. 7080, as amended by Republic Act No. 7659, the Court hereby
declares the forfeiture in favor of the government of the following:
(1) The total amount of Five Hundred Forty[-]Two Million Seven Hundred Ninety[-]One Thousand Pesos
(P545,291,000.00), with interest and income earned, inclusive of the amount of Two Hundred Million Pesos
(P200,000,000.00), deposited in the name and account of the Erap Muslim Youth Foundation.
(2) The amount of One Hundred Eighty[-]Nine Million Pesos (P189,000,000.00), inclusive of interests and income
earned, deposited in the Jose Velarde account.
(3) The real property consisting of a house and lot dubbed as "Boracay Mansion" located at #100 11th Street, New
Manila, Quezon City.
The cash bonds posted by accused Jose "Jinggoy" Estrada and Atty. Edward S. Serapio are hereby ordered cancelled and released
to the said accused or their duly authorized representatives upon presentation of the original receipt evidencing payment thereof
and subject to the usual accounting and auditing procedures. Likewise, the hold-departure orders issued against the said accused
are hereby recalled and declared functus oficio.4
On October 25, 2007, however, former President Gloria Macapagal Arroyo (former President Arroyo) extended executive
clemency, by way of pardon, to former President Estrada. The full text of said pardon states:
MALACAAN PALACE
MANILA
By the President of the Philippines
PARDON
WHEREAS, this Administration has a policy of releasing inmates who have reached the age of seventy (70),
WHEREAS, Joseph Ejercito Estrada has been under detention for six and a half years,
WHEREAS, Joseph Ejercito Estrada has publicly committed to no longer seek any elective position or office,
IN VIEW HEREOF and pursuant to the authority conferred upon me by the Constitution, I hereby grant executive clemency to
JOSEPH EJERCITO ESTRADA, convicted by the Sandiganbayan of Plunder and imposed a penalty of Reclusion Perpetua. He is
hereby restored to his civil and political rights.
The forfeitures imposed by the Sandiganbayan remain in force and in full, including all writs and processes issued by the
Sandiganbayan in pursuance hereof, except for the bank account(s) he owned before his tenure as President.
Upon acceptance of this pardon by JOSEPH EJERCITO ESTRADA, this pardon shall take effect.
Given under my hand at the City of Manila, this 25th Day of October, in the year of Our Lord, two thousand and seven.
Gloria M. Arroyo (sgd.)
By the President:
IGNACIO R. BUNYE (sgd.)
Acting Executive Secretary5
On October 26, 2007, at 3:35 p.m., former President Estrada "received and accepted"6 the pardon by affixing his signature beside
his handwritten notation thereon.
On November 30, 2009, former President Estrada filed a Certificate of Candidacy 7 for the position of President. During that time,
his candidacy earned three oppositions in the COMELEC: (1) SPA No. 09-024 (DC), a "Petition to Deny Due Course and Cancel
Certificate of Candidacy" filed by Rev. Elly Velez B. Lao Pamatong, ESQ; (2) SPA No. 09-028 (DC), a petition for
"Disqualification as Presidential Candidate" filed by Evilio C. Pormento (Pormento); and (3) SPA No. 09-104 (DC), a "Petition to
Disqualify Estrada Ejercito, Joseph M.from Running as President due to Constitutional Disqualification and Creating Confusion
to the Prejudice of Estrada, Mary Lou B" filed by Mary Lou Estrada. In separate Resolutions8 dated January 20, 2010 by the
COMELEC, Second Division, however, all three petitions were effectively dismissed on the uniform grounds that (i) the
Constitutional proscription on reelection applies to a sitting president; and (ii) the pardon granted to former President Estrada by
former President Arroyo restored the formers right to vote and be voted for a public office. The subsequent motions for
reconsideration thereto were denied by the COMELEC En banc.
After the conduct of the May 10, 2010 synchronized elections, however, former President Estrada only managed to garner the
second highest number of votes.
Of the three petitioners above-mentioned, only Pormento sought recourse to this Court and filed a petition for certiorari, which
was docketed as G.R. No. 191988, entitled "Atty. Evilio C. Pormento v. Joseph ERAP Ejercito Estrada and Commission on
Elections." But in a Resolution9 dated August 31, 2010, the Court dismissed the aforementioned petition on the ground of
mootness considering that former President Estrada lost his presidential bid.
On October 2, 2012, former President Estrada once more ventured into the political arena, and filed a Certificate of
Candidacy,10 this time vying for a local elective post, that ofthe Mayor of the City of Manila.
On January 24, 2013, Risos-Vidal, the petitioner in this case, filed a Petition for Disqualification against former President Estrada
before the COMELEC. The petition was docketed as SPA No. 13-211 (DC). Risos Vidal anchored her petition on the theory that
"[Former President Estrada] is Disqualified to Run for Public Office because of his Conviction for Plunder by the Sandiganbayan
in Criminal Case No. 26558 entitled People of the Philippines vs. Joseph Ejercito Estrada Sentencing Him to Suffer the Penalty
of Reclusion Perpetuawith Perpetual Absolute Disqualification."11 She relied on Section 40 of the Local Government Code (LGC),
in relation to Section 12 of the Omnibus Election Code (OEC), which state respectively, that:
Sec. 40, Local Government Code:
SECTION 40. Disqualifications.- The following persons are disqualified from running for any elective local position:
(a) Those sentenced by final judgment for an offense involving moral turpitude or for an offense punishable by one (1)
year or more of imprisonment, within two (2) years after serving sentence; (b) Those removed from office as a result of
an administrative case;
(c) Those convicted by final judgment for violating the oath of allegiance to the Republic;
(d) Those with dual citizenship;
(e) Fugitives from justice in criminal or nonpolitical cases here or abroad;
(f) Permanent residents in a foreign country or those who have acquired the right to reside abroad and continue to avail of
the same right after the effectivity of this Code; and
(g) The insane or feeble minded. (Emphasis supplied.)
Sec. 12, Omnibus Election Code:
Section 12. Disqualifications. - Any person who has been declared by competent authority insane or incompetent, or has been
sentenced by final judgmentfor subversion, insurrection, rebellion, or for any offense for which he has been sentenced to a penalty
of more than eighteen months or for a crime involving moral turpitude, shall be disqualified to be a candidate and to hold any
public office, unless he has been given plenary pardon or granted amnesty. (Emphases supplied.)
In a Resolution dated April 1, 2013,the COMELEC, Second Division, dismissed the petition for disqualification, the fallo of
which reads:
WHEREFORE, premises considered, the instant petition is hereby DISMISSED for utter lack of merit. 12
The COMELEC, Second Division, opined that "[h]aving taken judicial cognizance of the consolidated resolution for SPA No. 09-
028 (DC) and SPA No. 09-104 (DC) and the 10 May 2010 En Banc resolution affirming it, this Commission will not be labor the
controversy further. Moreso, [Risos-Vidal] failed to present cogent proof sufficient to reverse the standing pronouncement of this
Commission declaring categorically that [former President Estradas] right to seek public office has been effectively restored by
the pardon vested upon him by former President Gloria M. Arroyo. Since this Commission has already spoken, it will no longer
engage in disquisitions of a settled matter lest indulged in wastage of government resources." 13
The subsequent motion for reconsideration filed by Risos-Vidal was denied in a Resolution dated April 23, 2013.
On April 30, 2013, Risos-Vidal invoked the Courts jurisdiction by filing the present petition. She presented five issues for the
Courts resolution, to wit:
I. RESPONDENT COMELEC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN HOLDING THAT RESPONDENT ESTRADAS PARDON WAS NOT
CONDITIONAL;
II. RESPONDENT COMELEC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN NOT FINDING THAT RESPONDENT ESTRADA IS DISQUALIFIED TO RUN AS
MAYOR OF MANILA UNDER SEC. 40 OF THE LOCAL GOVERNMENTCODE OF 1991 FOR HAVING BEEN
CONVICTED OF PLUNDER, AN OFFENSE INVOLVING MORAL TURPITUDE;
III. RESPONDENT COMELEC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN DISMISSING THE PETITION FOR DISQUALIFICATION ON THE GROUND
THAT THE CASE INVOLVES THE SAME OR SIMILAR ISSUES IT ALREADY RESOLVED IN THE CASES OF
"PORMENTO VS. ESTRADA", SPA NO. 09-028 (DC) AND IN "RE: PETITION TO DISQUALIFY ESTRADA
EJERCITO, JOSEPH M. FROM RUNNING AS PRESIDENT, ETC.," SPA NO. 09-104 (DC);
IV. RESPONDENT COMELEC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN NOT RULING THAT RESPONDENT ESTRADAS PARDON NEITHER
RESTORED HIS RIGHT OF SUFFRAGE NOR REMITTED HIS PERPETUAL ABSOLUTE DISQUALIFICATION
FROM SEEKING PUBLIC OFFICE; and
V. RESPONDENT COMELEC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN NOT HAVING EXERCISED ITS POWER TO MOTU PROPRIO DISQUALIFY
RESPONDENT ESTRADA IN THE FACE OF HIS PATENT DISQUALIFICATION TO RUN FOR PUBLIC OFFICE
BECAUSE OF HIS PERPETUAL AND ABSOLUTE DISQUALIFICATION TO SEEK PUBLIC OFFICE AND TO
VOTE RESULTING FROM HIS CRIMINAL CONVICTION FOR PLUNDER.14
While this case was pending beforethe Court, or on May 13, 2013, the elections were conducted as scheduled and former
President Estrada was voted into office with 349,770 votes cast in his favor. The next day, the local board of canvassers
proclaimed him as the duly elected Mayor of the City of Manila.
On June 7, 2013, Lim, one of former President Estradas opponents for the position of Mayor, moved for leave to intervene in this
case. His motion was granted by the Court in a Resolution15 dated June 25, 2013. Lim subscribed to Risos-Vidals theory that
former President Estrada is disqualified to run for and hold public office as the pardon granted to the latter failed to expressly
remit his perpetual disqualification. Further, given that former President Estrada is disqualified to run for and hold public office,
all the votes obtained by the latter should be declared stray, and, being the second placer with 313,764 votes to his name, he (Lim)
should be declared the rightful winning candidate for the position of Mayor of the City of Manila.
The Issue
Though raising five seemingly separate issues for resolution, the petition filed by Risos-Vidal actually presents only one essential
question for resolution by the Court, that is, whether or not the COMELEC committed grave abuse of discretion amounting to lack
or excess of jurisdiction in ruling that former President Estrada is qualified to vote and be voted for in public office as a result of
the pardon granted to him by former President Arroyo.
In her petition, Risos-Vidal starts her discussion by pointing out that the pardon granted to former President Estrada was
conditional as evidenced by the latters express acceptance thereof. The "acceptance," she claims, is an indication of the
conditional natureof the pardon, with the condition being embodied in the third Whereas Clause of the pardon, i.e., "WHEREAS,
Joseph Ejercito Estrada has publicly committed to no longer seek any elective position or office." She explains that the
aforementioned commitment was what impelled former President Arroyo to pardon former President Estrada, without it, the
clemency would not have been extended. And any breach thereof, that is, whenformer President Estrada filed his Certificate of
Candidacy for President and Mayor of the City of Manila, he breached the condition of the pardon; hence, "he ought to be
recommitted to prison to serve the unexpired portion of his sentence x x x and disqualifies him as a candidate for the mayoralty
[position] of Manila."16
Nonetheless, Risos-Vidal clarifies that the fundamental basis upon which former President Estrada mustbe disqualified from
running for and holding public elective office is actually the proscription found in Section 40 of the LGC, in relation to Section 12
ofthe OEC. She argues that the crime of plunder is both an offense punishable by imprisonment of one year or more and involving
moral turpitude; such that former President Estrada must be disqualified to run for and hold public elective office.
Even with the pardon granted to former President Estrada, however, Risos-Vidal insists that the same did not operate to make
available to former President Estrada the exception provided under Section 12 of the OEC, the pardon being merely conditional
and not absolute or plenary. Moreover, Risos-Vidal puts a premium on the ostensible requirements provided under Articles 36 and
41 of the Revised Penal Code, to wit:
ART. 36. Pardon; its effects. A pardon shall not work the restoration of the right to hold publicoffice, or the right of suffrage,
unless such rights be expressly restored by the terms of the pardon.
A pardon shall in no case exempt the culprit from the payment of the civil indemnity imposed upon him by the sentence.
xxxx
ART. 41. Reclusion perpetua and reclusion temporal Their accessory penalties. The penalties of reclusion perpetua and
reclusion temporal shall carry with them that of civil interdiction for life or during the period of the sentence as the case may be,
and that of perpetual absolute disqualification which the offender shall suffer even though pardoned as to the principal penalty,
unless the same shall have been expressly remitted in the pardon. (Emphases supplied.)
She avers that in view of the foregoing provisions of law, it is not enough that a pardon makes a general statement that such
pardon carries with it the restoration of civil and political rights. By virtue of Articles 36 and 41, a pardon restoring civil and
political rights without categorically making mention what specific civil and political rights are restored "shall not work to restore
the right to hold public office, or the right of suffrage; nor shall it remit the accessory penalties of civil interdiction and perpetual
absolute disqualification for the principal penalties of reclusion perpetua and reclusion temporal." 17 In other words, she considers
the above constraints as mandatory requirements that shun a general or implied restoration of civil and political rights in pardons.
Risos-Vidal cites the concurring opinions of Associate Justices Teodoro R. Padilla and Florentino P. Feliciano in Monsanto v.
Factoran, Jr.18 to endorse her position that "[t]he restoration of the right to hold public office to one who has lost such right by
reason of conviction in a criminal case, but subsequently pardoned, cannot be left to inference, no matter how intensely arguable,
but must be statedin express, explicit, positive and specific language."
Applying Monsantoto former President Estradas case, Risos-Vidal reckons that "such express restoration is further demanded by
the existence of the condition in the [third] [W]hereas [C]lause of the pardon x x x indubitably indicating that the privilege to hold
public office was not restored to him."19
On the other hand, the Office ofthe Solicitor General (OSG) for public respondent COMELEC, maintains that "the issue of
whether or not the pardon extended to [former President Estrada] restored his right to run for public office had already been
passed upon by public respondent COMELEC way back in 2010 via its rulings in SPA Nos. 09-024, 09-028 and 09-104, there is
no cogent reason for it to reverse its standing pronouncement and declare [former President Estrada] disqualified to run and be
voted as mayor of the City of Manila in the absence of any new argument that would warrant its reversal. To be sure, public
respondent COMELEC correctly exercised its discretion in taking judicial cognizance of the aforesaid rulings which are known
toit and which can be verified from its own records, in accordance with Section 2, Rule 129 of the Rules of Court on the courts
discretionary power to take judicial notice of matters which are of public knowledge, orare capable of unquestionable
demonstration, or ought to be known to them because of their judicial functions."20
Further, the OSG contends that "[w]hile at first glance, it is apparent that [former President Estradas] conviction for plunder
disqualifies him from running as mayor of Manila under Section 40 of the [LGC], the subsequent grant of pardon to him,
however, effectively restored his right to run for any public office."21 The restoration of his right to run for any public office is the
exception to the prohibition under Section 40 of the LGC, as provided under Section 12 of the OEC. As to the seeming
requirement of Articles 36 and 41 of the Revised Penal Code, i.e., the express restoration/remission of a particular right to be
stated in the pardon, the OSG asserts that "an airtight and rigid interpretation of Article 36 and Article 41 of the [RPC] x x x would
be stretching too much the clear and plain meaning of the aforesaid provisions."22 Lastly, taking into consideration the third
Whereas Clause of the pardon granted to former President Estrada, the OSG supports the position that it "is not an integral part of
the decree of the pardon and cannot therefore serve to restrict its effectivity."23
Thus, the OSG concludes that the "COMELEC did not commit grave abuse of discretion amounting to lack or excess of
jurisdiction in issuing the assailed Resolutions."24
For his part, former President Estrada presents the following significant arguments to defend his stay in office: that "the factual
findings of public respondent COMELEC, the Constitutional body mandated to administer and enforce all laws relative to the
conduct of the elections, [relative to the absoluteness of the pardon, the effects thereof, and the eligibility of former President
Estrada to seek public elective office] are binding [and conclusive] on this Honorable Supreme Court;" that he "was granted an
absolute pardon and thereby restored to his full civil and political rights, including the right to seek public elective office such as
the mayoral (sic) position in the City of Manila;" that "the majority decision in the case of Salvacion A. Monsanto v. Fulgencio S.
Factoran, Jr.,which was erroneously cited by both Vidal and Lim as authority for their respective claims, x x x reveal that there
was no discussion whatsoever in the ratio decidendi of the Monsanto case as to the alleged necessity for an expressed restoration
of the right to hold public office in the pardon as a legal prerequisite to remove the subject perpetual special disqualification;"
that moreover, the "principal question raised in this Monsanto case is whether or not a public officer, who has been granted an
absolute pardon by the Chief Executive, is entitled to reinstatement toher former position without need of a new appointment;"
that his "expressed acceptance [of the pardon] is not proof that the pardon extended to [him] is conditional and not absolute;" that
this case is a mere rehash of the casesfiled against him during his candidacy for President back in 2009-2010; that Articles 36 and
41 of the Revised Penal Code "cannot abridge or diminish the pardoning power of the President expressly granted by the
Constitution;" that the text of the pardon granted to him substantially, if not fully, complied with the requirement posed by Article
36 of the Revised Penal Code as it was categorically stated in the said document that he was "restored to his civil and political
rights;" that since pardon is an act of grace, it must be construed favorably in favor of the grantee; 25 and that his disqualification
will result in massive disenfranchisement of the hundreds of thousands of Manileos who voted for him. 26
The Court's Ruling
The petition for certiorari lacks merit.
Former President Estrada was granted an absolute pardon that fully restored allhis civil and political rights, which naturally
includes the right to seek public elective office, the focal point of this controversy. The wording of the pardon extended to former
President Estrada is complete, unambiguous, and unqualified. It is likewise unfettered by Articles 36 and 41 of the Revised Penal
Code. The only reasonable, objective, and constitutional interpretation of the language of the pardon is that the same in fact
conforms to Articles 36 and 41 of the Revised Penal Code. Recall that the petition for disqualification filed by Risos-Vidal against
former President Estrada, docketed as SPA No. 13-211 (DC), was anchored on Section 40 of the LGC, in relation to Section 12 of
the OEC, that is, having been convicted of a crime punishable by imprisonment of one year or more, and involving moral
turpitude, former President Estrada must be disqualified to run for and hold public elective office notwithstanding the fact that he
is a grantee of a pardon that includes a statement expressing "[h]e is hereby restored to his civil and political rights." Risos-Vidal
theorizes that former President Estrada is disqualified from running for Mayor of Manila inthe May 13, 2013 Elections, and
remains disqualified to hold any local elective post despite the presidential pardon extended to him in 2007 by former President
Arroyo for the reason that it (pardon) did not expressly provide for the remission of the penalty of perpetual absolute
disqualification, particularly the restoration of his (former President Estrada) right to vote and bevoted upon for public office. She
invokes Articles 36 and 41 of the Revised Penal Code as the foundations of her theory.
It is insisted that, since a textual examination of the pardon given to and accepted by former President Estrada does not actually
specify which political right is restored, it could be inferred that former President Arroyo did not deliberately intend to restore
former President Estradas rights of suffrage and to hold public office, orto otherwise remit the penalty of perpetual absolute
disqualification. Even if her intention was the contrary, the same cannot be upheld based on the pardons text.
The pardoning power of the President cannot be limited by legislative action.
The 1987 Constitution, specifically Section 19 of Article VII and Section 5 of Article IX-C, provides that the President of the
Philippines possesses the power to grant pardons, along with other acts of executive clemency, to wit:
Section 19. Except in cases of impeachment, or as otherwise provided in this Constitution, the President may grant reprieves,
commutations, and pardons, and remit fines and forfeitures, after conviction by final judgment.
He shall also have the power to grant amnesty with the concurrence of a majority of all the Members of the Congress.
xxxx
Section 5. No pardon, amnesty, parole, or suspension of sentence for violation of election laws, rules, and regulations shall be
granted by the President without the favorable recommendation of the Commission.
It is apparent from the foregoing constitutional provisions that the only instances in which the President may not extend pardon
remain to be in: (1) impeachment cases; (2) cases that have not yet resulted in a final conviction; and (3) cases involving
violations of election laws, rules and regulations in which there was no favorable recommendation coming from the COMELEC.
Therefore, it can be argued that any act of Congress by way of statute cannot operate to delimit the pardoning power of the
President.
In Cristobal v. Labrador27 and Pelobello v. Palatino,28 which were decided under the 1935 Constitution,wherein the provision
granting pardoning power to the President shared similar phraseology with what is found in the present 1987 Constitution, the
Court then unequivocally declared that "subject to the limitations imposed by the Constitution, the pardoning power cannot be
restricted or controlled by legislative action." The Court reiterated this pronouncement in Monsanto v. Factoran, Jr. 29 thereby
establishing that, under the present Constitution, "a pardon, being a presidential prerogative, should not be circumscribed by
legislative action." Thus, it is unmistakably the long-standing position of this Court that the exercise of the pardoning power is
discretionary in the President and may not be interfered with by Congress or the Court, except only when it exceeds the limits
provided for by the Constitution.
This doctrine of non-diminution or non-impairment of the Presidents power of pardon by acts of Congress, specifically through
legislation, was strongly adhered to by an overwhelming majority of the framers of the 1987 Constitution when they flatly rejected
a proposal to carve out an exception from the pardoning power of the President in the form of "offenses involving graft and
corruption" that would be enumerated and defined by Congress through the enactment of a law. The following is the pertinent
portion lifted from the Record of the Commission (Vol. II):
MR. ROMULO. I ask that Commissioner Tan be recognized to introduce an amendment on the same section.
THE PRESIDENT. Commissioner Tan is recognized.
SR. TAN. Madam President, lines 7 to 9 state:
However, the power to grant executive clemency for violations of corrupt practices laws may be limited by legislation.
I suggest that this be deletedon the grounds that, first, violations of corrupt practices may include a very little offense like
stealing P10; second, which I think is more important, I get the impression, rightly or wrongly, that subconsciously we are drafting
a constitution on the premise that all our future Presidents will bebad and dishonest and, consequently, their acts will be lacking in
wisdom. Therefore, this Article seems to contribute towards the creation of an anti-President Constitution or a President with vast
responsibilities but no corresponding power except to declare martial law. Therefore, I request that these lines be deleted.
MR. REGALADO. Madam President,may the Committee react to that?
THE PRESIDENT. Yes, please.
MR. REGALADO. This was inserted here on the resolution of Commissioner Davide because of the fact that similar to the
provisions on the Commission on Elections, the recommendation of that Commission is required before executive clemency
isgranted because violations of the election laws go into the very political life of the country.
With respect to violations of our Corrupt Practices Law, we felt that it is also necessary to have that subjected to the same
condition because violation of our Corrupt Practices Law may be of such magnitude as to affect the very economic systemof the
country. Nevertheless, as a compromise, we provided here that it will be the Congress that will provide for the classification as to
which convictions will still require prior recommendation; after all, the Congress could take into account whether or not the
violation of the Corrupt Practices Law is of such magnitude as to affect the economic life of the country, if it is in the millions or
billions of dollars. But I assume the Congress in its collective wisdom will exclude those petty crimes of corruption as not to
require any further stricture on the exercise of executive clemency because, of course, there is a whale of a difference if we
consider a lowly clerk committing malversation of government property or funds involving one hundred pesos. But then, we also
anticipate the possibility that the corrupt practice of a public officer is of such magnitude as to have virtually drained a substantial
portion of the treasury, and then he goes through all the judicial processes and later on, a President who may have close
connections with him or out of improvident compassion may grant clemency under such conditions. That is why we left it to
Congress to provide and make a classification based on substantial distinctions between a minor act of corruption or an act of
substantial proportions. SR. TAN. So, why do we not just insert the word GROSS or GRAVE before the word "violations"?
MR. REGALADO. We feel that Congress can make a better distinction because "GRAVE" or "GROSS" can be misconstrued by
putting it purely as a policy.
MR. RODRIGO. Madam President.
THE PRESIDENT. Commissioner Rodrigo is recognized.
MR. RODRIGO. May I speak in favor of the proposed amendment?
THE PRESIDENT. Please proceed.
MR. RODRIGO. The power to grant executive clemency is essentially an executive power, and that is precisely why it is called
executive clemency. In this sentence, which the amendment seeks to delete, an exception is being made. Congress, which is the
legislative arm, is allowed to intrude into this prerogative of the executive. Then it limits the power of Congress to subtract from
this prerogative of the President to grant executive clemency by limiting the power of Congress to only corrupt practices laws.
There are many other crimes more serious than these. Under this amendment, Congress cannot limit the power of executive
clemency in cases of drug addiction and drug pushing which are very, very serious crimes that can endanger the State; also, rape
with murder, kidnapping and treason. Aside from the fact that it is a derogation of the power of the President to grant executive
clemency, it is also defective in that it singles out just one kind of crime. There are far more serious crimes which are not included.
MR. REGALADO. I will just make one observation on that. We admit that the pardoning power is anexecutive power. But even in
the provisions on the COMELEC, one will notice that constitutionally, it is required that there be a favorable recommendation by
the Commission on Elections for any violation of election laws.
At any rate, Commissioner Davide, as the principal proponent of that and as a member of the Committee, has explained in the
committee meetings we had why he sought the inclusion of this particular provision. May we call on Commissioner Davide to
state his position.
MR. DAVIDE. Madam President.
THE PRESIDENT. Commissioner Davide is recognized.
MR. DAVIDE. I am constrained to rise to object to the proposal. We have just approved the Article on Accountability of Public
Officers. Under it, it is mandated that a public office is a public trust, and all government officers are under obligation to observe
the utmost of responsibility, integrity, loyalty and efficiency, to lead modest lives and to act with patriotism and justice.
In all cases, therefore, which would go into the verycore of the concept that a public office is a public trust, the violation is itself a
violation not only of the economy but the moral fabric of public officials. And that is the reason we now want that if there is any
conviction for the violation of the Anti-Graft and Corrupt Practices Act, which, in effect, is a violation of the public trust character
of the public office, no pardon shall be extended to the offender, unless some limitations are imposed.
Originally, my limitation was, it should be with the concurrence of the convicting court, but the Committee left it entirely to the
legislature to formulate the mechanics at trying, probably, to distinguish between grave and less grave or serious cases of violation
of the Anti-Graft and Corrupt Practices Act. Perhaps this is now the best time, since we have strengthened the Article on
Accountability of Public Officers, to accompany it with a mandate that the Presidents right to grant executive clemency for
offenders or violators of laws relating to the concept of a public office may be limited by Congress itself.
MR. SARMIENTO. Madam President.
THE PRESIDENT. Commissioner Sarmiento is recognized.
MR. SARMIENTO. May I briefly speak in favor of the amendment by deletion.
Madam President, over and over again, we have been saying and arguing before this Constitutional Commission that we are
emasculating the powers of the presidency, and this provision to me is another clear example of that. So, I speak against this
provision. Even the 1935 and the 1973 Constitutions do not provide for this kind of provision.
I am supporting the amendment by deletion of Commissioner Tan.
MR. ROMULO. Commissioner Tingson would like to be recognized.
THE PRESIDENT. Commissioner Tingson is recognized.
MR. TINGSON. Madam President, I am also in favor of the amendment by deletion because I am in sympathy with the stand of
Commissioner Francisco "Soc" Rodrigo. I do believe and we should remember that above all the elected or appointed officers of
our Republic, the leader is the President. I believe that the country will be as the President is, and if we systematically emasculate
the power of this presidency, the time may come whenhe will be also handcuffed that he will no longer be able to act like he
should be acting.
So, Madam President, I am in favor of the deletion of this particular line.
MR. ROMULO. Commissioner Colayco would like to be recognized.
THE PRESIDENT. Commissioner Colayco is recognized.
MR. COLAYCO. Thank you very much, Madam President.
I seldom rise here to object to or to commend or to recommend the approval of proposals, but now I find that the proposal of
Commissioner Tan is worthy of approval of this body.
Why are we singling out this particular offense? There are other crimes which cast a bigger blot on the moral character of the
public officials.
Finally, this body should not be the first one to limit the almost absolute power of our Chief Executive in deciding whether to
pardon, to reprieve or to commute the sentence rendered by the court.
I thank you.
THE PRESIDENT. Are we ready to vote now?
MR. ROMULO. Commissioner Padilla would like to be recognized, and after him will be Commissioner Natividad.
THE PRESIDENT. Commissioner Padilla is recognized.
MR. PADILLA. Only one sentence, Madam President. The Sandiganbayan has been called the Anti-Graft Court, so if this is
allowed to stay, it would mean that the Presidents power togrant pardon or reprieve will be limited to the cases decided by the
Anti-Graft Court, when as already stated, there are many provisions inthe Revised Penal Code that penalize more serious offenses.
Moreover, when there is a judgment of conviction and the case merits the consideration of the exercise of executive clemency,
usually under Article V of the Revised Penal Code the judge will recommend such exercise of clemency. And so, I am in favor of
the amendment proposed by Commissioner Tan for the deletion of this last sentence in Section 17.
THE PRESIDENT. Are we ready to vote now, Mr. Floor Leader?
MR. NATIVIDAD. Just one more.
THE PRESIDENT. Commissioner Natividad is recognized.
MR. NATIVIDAD. I am also against this provision which will again chip more powers from the President. In case of other
criminals convicted in our society, we extend probation to them while in this case, they have already been convicted and we offer
mercy. The only way we can offer mercy to them is through this executive clemency extended to them by the President. If we still
close this avenue to them, they would be prejudiced even worse than the murderers and the more vicious killers in our society. I
do not think they deserve this opprobrium and punishment under the new Constitution.
I am in favor of the proposed amendment of Commissioner Tan.
MR. ROMULO. We are ready tovote, Madam President.
THE PRESIDENT. Is this accepted by the Committee?
MR. REGALADO. The Committee, Madam President, prefers to submit this to the floor and also because of the objection of the
main proponent, Commissioner Davide. So we feel that the Commissioners should vote on this question.
VOTING
THE PRESIDENT. As many as are in favor of the proposed amendment of Commissioner Tan to delete the last sentence of
Section 17 appearing on lines 7, 8 and 9, please raise their hand. (Several Members raised their hand.)
As many as are against, please raise their hand. (Few Members raised their hand.)
The results show 34 votes in favor and 4 votes against; the amendment is approved. 30 (Emphases supplied.)
The proper interpretation of Articles
36 and 41 of the Revised Penal Code.
The foregoing pronouncements solidify the thesis that Articles 36 and 41 of the Revised Penal Code cannot, in any way, serve to
abridge or diminish the exclusive power and prerogative of the President to pardon persons convicted of violating penal statutes.
The Court cannot subscribe to Risos-Vidals interpretation that the said Articles contain specific textual commands which must be
strictly followed in order to free the beneficiary of presidential grace from the disqualifications specifically prescribed by them.
Again, Articles 36 and 41 of the Revised Penal Code provides:
ART. 36. Pardon; its effects. A pardon shall not work the restoration of the right to hold publicoffice, or the right of suffrage,
unless such rights be expressly restored by the terms of the pardon.
A pardon shall in no case exempt the culprit from the payment of the civil indemnity imposed upon him by the sentence.
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ART. 41. Reclusion perpetua and reclusion temporal Their accessory penalties. The penalties of reclusion perpetua and
reclusion temporal shall carry with them that of civil interdiction for life or during the period of the sentence as the case may be,
and that of perpetual absolute disqualification which the offender shall suffer even though pardoned as to the principal penalty,
unless the same shall have been expressly remitted in the pardon. (Emphases supplied.)
A rigid and inflexible reading of the above provisions of law, as proposed by Risos-Vidal, is unwarranted, especially so if it will
defeat or unduly restrict the power of the President to grant executive clemency.
It is well-entrenched in this jurisdiction that where the words of a statute are clear, plain, and free from ambiguity, it must be given
its literal meaning and applied without attempted interpretation. Verba legis non est recedendum. From the words of a statute there
should be no departure.31 It is this Courts firm view that the phrase in the presidential pardon at issue which declares that former
President Estrada "is hereby restored to his civil and political rights" substantially complies with the requirement of express
restoration.
The Dissent of Justice Marvic M.V.F. Leonen agreed with Risos Vidal that there was no express remission and/or restoration of
the rights of suffrage and/or to hold public office in the pardon granted to former President Estrada, as required by Articles 36 and
41 of the Revised Penal Code.
Justice Leonen posits in his Dissent that the aforementioned codal provisions must be followed by the President, as they do not
abridge or diminish the Presidents power to extend clemency. He opines that they do not reduce the coverage of the Presidents
pardoning power. Particularly, he states:
Articles 36 and 41 refer only to requirements of convention or form. They only provide a procedural prescription. They are not
concerned with areas where or the instances when the President may grant pardon; they are only concerned with how he or she is
to exercise such power so that no other governmental instrumentality needs to intervene to give it full effect.
All that Articles 36 and 41 do is prescribe that, if the President wishes to include in the pardon the restoration of the rights of
suffrage and to hold public office, or the remission of the accessory penalty of perpetual absolute disqualification,he or she should
do so expressly. Articles 36 and 41 only ask that the President state his or her intentions clearly, directly, firmly, precisely, and
unmistakably. To belabor the point, the President retains the power to make such restoration or remission, subject to a prescription
on the manner by which he or she is to state it.32
With due respect, I disagree with the overbroad statement that Congress may dictate as to how the President may exercise his/her
power of executive clemency. The form or manner by which the President, or Congress for that matter, should exercise their
respective Constitutional powers or prerogatives cannot be interfered with unless it is so provided in the Constitution. This is the
essence of the principle of separation of powers deeply ingrained in our system of government which "ordains that each of the
three great branches of government has exclusive cognizance of and is supreme in matters falling within its own constitutionally
allocated sphere."33Moreso, this fundamental principle must be observed if noncompliance with the form imposed by one branch
on a co-equal and coordinate branch will result into the diminution of an exclusive Constitutional prerogative.
For this reason, Articles 36 and 41 of the Revised Penal Code should be construed in a way that will give full effect to the
executive clemency granted by the President, instead of indulging in an overly strict interpretation that may serve to impair or
diminish the import of the pardon which emanated from the Office of the President and duly signed by the Chief Executive
himself/herself. The said codal provisions must be construed to harmonize the power of Congress to define crimes and prescribe
the penalties for such crimes and the power of the President to grant executive clemency. All that the said provisions impart is that
the pardon of the principal penalty does notcarry with it the remission of the accessory penalties unless the President expressly
includes said accessory penalties in the pardon. It still recognizes the Presidential prerogative to grant executive clemency and,
specifically, to decide to pardon the principal penalty while excluding its accessory penalties or to pardon both. Thus, Articles 36
and 41 only clarify the effect of the pardon so decided upon by the President on the penalties imposedin accordance with law.
A close scrutiny of the text of the pardon extended to former President Estrada shows that both the principal penalty of reclusion
perpetua and its accessory penalties are included in the pardon. The first sentence refers to the executive clemency extended to
former President Estrada who was convicted by the Sandiganbayan of plunder and imposed a penalty of reclusion perpetua. The
latter is the principal penalty pardoned which relieved him of imprisonment. The sentence that followed, which states that "(h)e is
hereby restored to his civil and political rights," expressly remitted the accessory penalties that attached to the principal penalty of
reclusion perpetua. Hence, even if we apply Articles 36 and 41 of the Revised Penal Code, it is indubitable from the textof the
pardon that the accessory penalties of civil interdiction and perpetual absolute disqualification were expressly remitted together
with the principal penalty of reclusion perpetua.
In this jurisdiction, the right toseek public elective office is recognized by law as falling under the whole gamut of civil and
political rights.
Section 5 of Republic Act No. 9225,34 otherwise known as the "Citizenship Retention and Reacquisition Act of 2003," reads as
follows:
Section 5. Civil and Political Rights and Liabilities. Those who retain or reacquire Philippine citizenship under this Act shall
enjoy full civil and political rights and be subject to all attendant liabilities and responsibilities under existing laws of the
Philippines and the following conditions: (1) Those intending to exercise their right of suffrage must meet the requirements under
Section 1, Article V of the Constitution, Republic Act No. 9189, otherwise known as "The Overseas Absentee Voting Act of 2003"
and other existing laws;
(2) Those seeking elective public office in the Philippines shall meet the qualifications for holding such public office as
required by the Constitution and existing laws and, at the time of the filing of the certificate of candidacy, make a
personal and sworn renunciation of any and all foreign citizenship before any public officer authorized to administer an
oath;
(3) Those appointed to any public office shall subscribe and swear an oath of allegiance to the Republic of the Philippines
and its duly constituted authorities prior to their assumption of office: Provided, That they renounce their oath of
allegiance to the country where they took that oath; (4) Those intending to practice their profession in the Philippines
shall apply with the proper authority for a license or permit to engage in such practice; and
(5) That right to vote or be elected or appointed to any public office in the Philippines cannot be exercised by, or
extended to, those who:
(a) are candidates for or are occupying any public office in the country of which theyare naturalized citizens;
and/or
(b) are in active service as commissioned or non commissioned officers in the armed forces of the country
which they are naturalized citizens. (Emphases supplied.)
No less than the International Covenant on Civil and Political Rights, to which the Philippines is a signatory, acknowledges the
existence of said right. Article 25(b) of the Convention states: Article 25
Every citizen shall have the right and the opportunity, without any of the distinctions mentioned in Article 2 and without
unreasonable restrictions:
xxxx
(b) To vote and to be electedat genuine periodic elections which shall be by universal and equal suffrage and shall be held by
secret ballot, guaranteeing the free expression of the will of the electors[.] (Emphasis supplied.)
Recently, in Sobejana-Condon v. Commission on Elections,35 the Court unequivocally referred to the right to seek public elective
office as a political right, to wit:
Stated differently, it is an additional qualification for elective office specific only to Filipino citizens who re-acquire their
citizenship under Section 3 of R.A. No. 9225. It is the operative act that restores their right to run for public office. The
petitioners failure to comply there with in accordance with the exact tenor of the law, rendered ineffectual the Declaration of
Renunciation of Australian Citizenship she executed on September 18, 2006. As such, she is yet to regain her political right to
seek elective office. Unless she executes a sworn renunciation of her Australian citizenship, she is ineligible to run for and hold
any elective office in the Philippines. (Emphasis supplied.)
Thus, from both law and jurisprudence, the right to seek public elective office is unequivocally considered as a political right.
Hence, the Court reiterates its earlier statement that the pardon granted to former President Estrada admits no other interpretation
other than to mean that, upon acceptance of the pardon granted tohim, he regained his FULL civil and political rights including
the right to seek elective office.
On the other hand, the theory of Risos-Vidal goes beyond the plain meaning of said penal provisions; and prescribes a formal
requirement that is not only unnecessary but, if insisted upon, could be in derogation of the constitutional prohibition relative to
the principle that the exercise of presidential pardon cannot be affected by legislative action.
Risos-Vidal relied heavily on the separate concurring opinions in Monsanto v. Factoran, Jr. 36 to justify her argument that an
absolute pardon must expressly state that the right to hold public office has been restored, and that the penalty of perpetual
absolute disqualification has been remitted.
This is incorrect.
Her reliance on said opinions is utterly misplaced. Although the learned views of Justices Teodoro R. Padilla and Florentino P.
Feliciano are to be respected, they do not form partof the controlling doctrine nor to be considered part of the law of the land. On
the contrary, a careful reading of the majority opinion in Monsanto, penned by no less than Chief Justice Marcelo B. Fernan,
reveals no statement that denotes adherence to a stringent and overly nuanced application of Articles 36 and 41 of the Revised
Penal Code that will in effect require the President to use a statutorily prescribed language in extending executive clemency, even
if the intent of the President can otherwise be deduced from the text or words used in the pardon. Furthermore, as explained
above, the pardon here is consistent with, and not contrary to, the provisions of Articles 36 and 41.
The disqualification of former President Estrada under Section 40 of the LGC in relation to Section 12 of the OEC was removed
by his acceptance of the absolute pardon granted to him.
Section 40 of the LGC identifies who are disqualified from running for any elective local position. Risos-Vidal argues that former
President Estrada is disqualified under item (a), to wit:
(a) Those sentenced by final judgment for an offense involving moral turpitude or for an offense punishable by one (1) year or
more of imprisonment, within two (2) years after serving sentence[.] (Emphasis supplied.)
Likewise, Section 12 of the OEC provides for similar prohibitions, but it provides for an exception, to wit:
Section 12. Disqualifications. x x x unless he has been given plenary pardon or granted amnesty. (Emphasis supplied.)
As earlier stated, Risos-Vidal maintains that former President Estradas conviction for plunder disqualifies him from running for
the elective local position of Mayor of the City of Manila under Section 40(a) of the LGC. However, the subsequent absolute
pardon granted to former President Estrada effectively restored his right to seek public elective office. This is made possible by
reading Section 40(a) of the LGC in relation to Section 12 of the OEC.
While it may be apparent that the proscription in Section 40(a) of the LGC is worded in absolute terms, Section 12 of the OEC
provides a legal escape from the prohibition a plenary pardon or amnesty. In other words, the latter provision allows any person
who has been granted plenary pardon or amnesty after conviction by final judgment of an offense involving moral turpitude, inter
alia, to run for and hold any public office, whether local or national position.
Take notice that the applicability of Section 12 of the OEC to candidates running for local elective positions is not unprecedented.
In Jalosjos, Jr. v. Commission on Elections,37 the Court acknowledged the aforementioned provision as one of the legal remedies
that may be availed of to disqualify a candidate in a local election filed any day after the last day for filing of certificates of
candidacy, but not later than the date of proclamation.38 The pertinent ruling in the Jalosjos case is quoted as follows:
What is indisputably clear is that false material representation of Jalosjos is a ground for a petition under Section 78. However,
since the false material representation arises from a crime penalized by prision mayor, a petition under Section 12 ofthe Omnibus
Election Code or Section 40 of the Local Government Code can also be properly filed. The petitioner has a choice whether to
anchor his petition on Section 12 or Section 78 of the Omnibus Election Code, or on Section 40 of the Local Government Code.
The law expressly provides multiple remedies and the choice of which remedy to adopt belongs to petitioner. 39 (Emphasis
supplied.)
The third preambular clause of the pardon did not operate to make the pardon conditional.
Contrary to Risos-Vidals declaration, the third preambular clause of the pardon, i.e., "[w]hereas, Joseph Ejercito Estrada has
publicly committed to no longer seek any elective position or office," neither makes the pardon conditional, nor militate against
the conclusion that former President Estradas rights to suffrage and to seek public elective office have been restored.
This is especially true as the pardon itself does not explicitly impose a condition or limitation, considering the unqualified use of
the term "civil and political rights"as being restored. Jurisprudence educates that a preamble is not an essential part of an act as it
is an introductory or preparatory clause that explains the reasons for the enactment, usually introduced by the word
"whereas."40 Whereas clauses do not form part of a statute because, strictly speaking, they are not part of the operative language of
the statute.41 In this case, the whereas clause at issue is not an integral part of the decree of the pardon, and therefore, does not by
itself alone operate to make the pardon conditional or to make its effectivity contingent upon the fulfilment of the aforementioned
commitment nor to limit the scope of the pardon.
On this matter, the Court quotes with approval a relevant excerpt of COMELEC Commissioner Maria Gracia Padacas separate
concurring opinion in the assailed April 1, 2013 Resolution of the COMELEC in SPA No. 13-211 (DC), which captured the
essence of the legal effect of preambular paragraphs/whereas clauses, viz:
The present dispute does not raise anything which the 20 January 2010 Resolution did not conclude upon. Here, Petitioner Risos-
Vidal raised the same argument with respect to the 3rd "whereas clause" or preambular paragraph of the decree of pardon. It states
that "Joseph Ejercito Estrada has publicly committed to no longer seek any elective position or office." On this contention, the
undersigned reiterates the ruling of the Commission that the 3rd preambular paragraph does not have any legal or binding effect
on the absolute nature of the pardon extended by former President Arroyo to herein Respondent. This ruling is consistent with the
traditional and customary usage of preambular paragraphs. In the case of Echegaray v. Secretary of Justice, the Supreme Court
ruled on the legal effect of preambular paragraphs or whereas clauses on statutes. The Court stated, viz.:
Besides, a preamble is really not an integral part of a law. It is merely an introduction to show its intent or purposes. It cannot be
the origin of rights and obligations. Where the meaning of a statute is clear and unambiguous, the preamble can neither expand nor
restrict its operation much less prevail over its text.
If former President Arroyo intended for the pardon to be conditional on Respondents promise never to seek a public office again,
the former ought to have explicitly stated the same in the text of the pardon itself. Since former President Arroyo did not make this
an integral part of the decree of pardon, the Commission is constrained to rule that the 3rd preambular clause cannot be interpreted
as a condition to the pardon extended to former President Estrada.42 (Emphasis supplied.)
Absent any contrary evidence, former President Arroyos silence on former President Estradas decision torun for President in the
May 2010 elections against, among others, the candidate of the political party of former President Arroyo, after the latters receipt
and acceptance of the pardon speaks volume of her intention to restore him to his rights to suffrage and to hold public office.
Where the scope and import of the executive clemency extended by the President is in issue, the Court must turn to the only
evidence available to it, and that is the pardon itself. From a detailed review ofthe four corners of said document, nothing therein
gives an iota of intimation that the third Whereas Clause is actually a limitation, proviso, stipulation or condition on the grant of
the pardon, such that the breach of the mentioned commitment not to seek public office will result ina revocation or cancellation
of said pardon. To the Court, what it is simply is a statement of fact or the prevailing situation at the time the executive clemency
was granted. It was not used as a condition to the efficacy orto delimit the scope of the pardon.
Even if the Court were to subscribe to the view that the third Whereas Clausewas one of the reasons to grant the pardon, the
pardon itself does not provide for the attendant consequence of the breach thereof. This Court will be hard put to discern the
resultant effect of an eventual infringement. Just like it will be hard put to determine which civil or political rights were restored if
the Court were to take the road suggested by Risos-Vidal that the statement "[h]e is hereby restored to his civil and political
rights" excludes the restoration of former President Estradas rights to suffrage and to hold public office. The aforequoted text
ofthe executive clemency granted does not provide the Court with any guide asto how and where to draw the line between the
included and excluded political rights.
Justice Leonen emphasizes the point that the ultimate issue for resolution is not whether the pardon is contingent on the condition
that former President Estrada will not seek janother elective public office, but it actually concerns the coverage of the pardon
whether the pardon granted to former President Estrada was so expansive as to have restored all his political rights, inclusive of
the rights of suffrage and to hold public office. Justice Leonen is of the view that the pardon in question is not absolute nor plenary
in scope despite the statement that former President Estrada is "hereby restored to his civil and political rights," that is, the
foregoing statement restored to former President Estrada all his civil and political rights except the rights denied to him by the
unremitted penalty of perpetual absolute disqualification made up of, among others, the rights of suffrage and to hold public
office. He adds that had the President chosen to be so expansive as to include the rights of suffrage and to hold public office, she
should have been more clear on her intentions.
However, the statement "[h]e is hereby restored to his civil and political rights," to the mind of the Court, iscrystal clear the
pardon granted to former President Estrada was absolute, meaning, it was not only unconditional, it was unrestricted in scope,
complete and plenary in character, as the term "political rights"adverted to has a settled meaning in law and jurisprudence.
With due respect, I disagree too with Justice Leonen that the omission of the qualifying word "full" can be construed as excluding
the restoration of the rights of suffrage and to hold public office. There appears to be no distinction as to the coverage of the term
"full political rights" and the term "political rights" used alone without any qualification. How to ascribe to the latter term the
meaning that it is "partial" and not "full" defies ones understanding. More so, it will be extremely difficult to identify which of the
political rights are restored by the pardon, when the text of the latter is silent on this matter. Exceptions to the grant of pardon
cannot be presumed from the absence of the qualifying word "full" when the pardon restored the "political rights" of former
President Estrada without any exclusion or reservation.
Therefore, there can be no other conclusion but to say that the pardon granted to former President Estrada was absolute in the
absence of a clear, unequivocal and concrete factual basis upon which to anchor or support the Presidential intent to grant a
limited pardon.
To reiterate, insofar as its coverageis concerned, the text of the pardon can withstand close scrutiny even under the provisions of
Articles 36 and 41 of the Revised Penal Code.
The COMELEC did not commit grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the assailed
Resolutions.
In light of the foregoing, contrary to the assertions of Risos-Vidal, the COMELEC did not commit grave abuse of discretion
amounting to lack or excess of jurisdiction in issuing the assailed Resolutions.
The Court has consistently held that a petition for certiorariagainst actions of the COMELEC is confined only to instances of
grave abuse of discretion amounting to patentand substantial denial of due process, because the COMELEC is presumed to be
most competent in matters falling within its domain.43
As settled in jurisprudence, grave abuse of discretion is the arbitrary exercise of power due to passion, prejudice or personal
hostility; or the whimsical, arbitrary, or capricious exercise of power that amounts to an evasion or refusal to perform a positive
duty enjoined by law or to act at all in contemplation of law. For an act to be condemned as having been done with grave abuse of
discretion, such an abuse must be patent and gross.44
The arguments forwarded by Risos-Vidal fail to adequately demonstrate any factual or legal bases to prove that the assailed
COMELEC Resolutions were issued in a "whimsical, arbitrary or capricious exercise of power that amounts to an evasion
orrefusal to perform a positive duty enjoined by law" or were so "patent and gross" as to constitute grave abuse of discretion.
On the foregoing premises and conclusions, this Court finds it unnecessary to separately discuss Lim's petition-in-intervention,
which substantially presented the same arguments as Risos-Vidal's petition.
WHEREFORE, the petition for certiorari and petition-inintervention are DISMISSED. The Resolution dated April 1, 2013 of the
Commission on Elections, Second Division, and the Resolution dated April 23, 2013 of the Commission on Elections, En bane,
both in SPA No. 13-211 (DC), are AFFIRMED.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 185969 November 19, 2014
AT&T COMMUNICATIONS SERVICES PHILIPPINES, INC., Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
DECISION
PEREZ, J.:
Before the Court is a Petition for Review on Certiorari seeking to reverse and set aside the 24 September 2008 Decision 1 and the
13 January 2009 Resolution2 of the Court of Tax Appeals (CTA) En Banc in C.T.A. EB No. 381 which affirmed the Decision and
Resolution dated 12 December 2007 and 12 March 2008, respectively, of the First Division of the CTA (CTA in Division) 3 in
C.T.A. Case No. 7221, dismissing the petition for lack of merit; and accordingly, denied petitioner's claim for the refund or
issuance of a tax credit certificate (TCC) in the amount ofP3,003,265.14 allegedly representing excess or unutilized input Value-
Added Tax (VAT) attributable to its zero-rated sales ofservices for the period covering 1 January 2003 to 31 December 2003.
The Facts
The factual antecedents of this case reveal that petitioner AT&T Communications Services Philippines, Inc. (petitioner), being a
domestic corporation principally engaged in the business of rendering information, promotional, supportive and liaison service,
entered into a Service Agreement with AT&T Communications Services International, Inc. (AT&T-CSI), a non-resident foreign
corporation, on 1 January 1999, whereby compensation for such services is paid in US Dollars.4
Petitioner has an Assignment Agreement with AT&T Solutions, Inc. (AT&T-SI) where the latter assigned to petitioner the
performance of services AT&T-SI was supposed to provide Mastercard International, Inc. (a non-resident foreign corporation)
under a Virtual Private Network Service Agreement. Likewise, the compensation for such services is paid in US Dollars to be
inwardly remitted to the Philippines by AT&T-SI, which acts as the collecting agent of petitioner. 5
Thereafter, a second Assignment Agreement was executed and entered into by petitioner with AT&T-SI for the purpose of
performing the latters obligation to Lexmark International, Inc. (also a non-resident foreign corporation) by providing services to
its affiliates in the Philippines, namely: Lexmark Research and Development Corporation and Lexmark International
(Philippines), Inc. (both Philippine Economic Zone Authority [PEZA]-registered enterprises). Payment of petitioners aforesaid
services is as well paid in US Dollars through telegraphic transfer.6
Consequently, petitioner filed its Quarterly VAT Returns with the Bureau of Internal Revenue (BIR) for the taxable year period
covering 1 January 2003 to 31 December 2003,detailed hereunder as follows:
Date of Filing Period Covered

22 April 2003 1st Quarter

23 July 2003 2nd Quarter

22 October 2003 3rd Quarter

26 January 2004 4th Quarter7


On 5 February 2004, petitioner filed its first Amended Quarterly VAT Return for the Fourth Quarter of taxable year 2003; while on
26 April 2004, petitioner filed its Amended Quarterly VAT Returns for the First to Fourth Quarters of the taxable year 2003. 8
Petitioner filed on 13 April 2005 with the BIR an application for refund and/or tax credit of its unutilized VAT input taxes for the
aforesaid taxable period amounting to P3,003,265.14. However, there being no action on said administrative claim, petitioner filed
a Petition for Review before the CTA in Division on 20 April 2005 (or exactly seven [7] days from the time it filed its
administrative claim) in order to suspend the running of the prescriptive period provided under Section 229 of the National
Internal Revenue Code (NIRC) of 1997, as amended.9
The Ruling of the CTA in Division
In C.T.A. Case No. 7221, the CTA in Division rendered a Decision dated 12 December 200710 dismissing petitioners claim for the
refund or issuance of a TCC. It ruled that in order to be entitled to its refund claim, petitioner must show proof of compliance with
the substantiation requirements as mandated bylaw and regulations. Therefore, considering that the subject revenues pertain to
gross receipts from services rendered by petitioner, valid official receipts and not mere sales invoices should have been presented
and submitted in evidence in support thereof. Without proper VAT official receipts, the foreign currency payment received by
petitioner from services rendered for the four (4) quarters of taxable year 2003 cannot qualify for zero-rating for VAT purposes.
Since it is clear from the provisions of Section 112(A) ofthe NIRC of 1997, as amended, that there must be zero-rated sales or
effectively zero-rated sales in order for a refund claim of input VAT could prosper, the claimed input VAT payments allegedly
attributable thereto in the amount of P3,003,265.14 cannot be granted.11
On 12 March 2008, the CTA in Division denied petitioners Motion for Reconsideration for lack of merit considering that no new
matter was raised which were not taken into consideration in arriving at the subject Decision that would warrant its reversal or
modification.12
Unsatisfied, petitioner filed a Petition for Review before the CTA En Bancpursuant to Section 18 of RepublicAct (R.A.) No. 1125,
as amended by Section 11 of R.A. No. 9282, docketed as C.T.A. EB No. 381.13
The Ruling of the CTA En Banc
Finding no merit in petitioners contentions, the CTA En Banc rendered the assailed 24 September 2008 Decision which affirmed
both the Decision and Resolution rendered by the CTA in Division in C.T.A. Case No. 7221. It categorically pronounced that
official receipt cannot be interchanged with sales invoice.14 It further emphasized that proof of inward remittances like bank credit
advices cannot be used in lieu of VAT official receipts to demonstrate petitioners zero-rated transactions. Under Section 113 of
the NIRC of 1997, as amended, irrespective of the nature of transaction, be it taxable, exempt orzero-rated sale, the law mandates
that the taxpayer "for every sale, issue an invoice or receipt." Thus, the enumerated zero-rated transactions under Sections 106and
108 are those which are duly covered by VAT invoices (in the case of sales of goods), and VAT official receipts (in the case of
sales of services).15 In other words, the law itself clearly specified that an official receipt shall cover sales of services, and did not
provide for any other document which can be used as an alternative to or in lieu thereof.
Upon denial of petitioners Motion for Reconsideration thereof, it filed the instant Petition for Review on Certiorari before this
Court seeking the reversal of the aforementioned Decision and the 13 January 2009 Resolution16rendered in C.T.A. EB No. 381.
In support thereof, petitioner raises the following grounds: (1) the NIRC of 1997, as amended, does not limit the proof of input or
output VAT to a single document. There is no distinction of the evidentiary value of the supporting documents. Hence, it is clear
that invoices or receipts may be used interchangeably to substantiate VAT; (2) the use of the VAT official receipt as proof of
payment of the sale of service loses its significance due to the requirement that petitioner must prove the validity of its inward
remittances; (3) petitioner presented substantial evidence that unequivocally proved its zero-rated transactions for the taxable year
2003; and (4) in civil cases, such as claims for refund or issuance of a TCC, a mere preponderance of evidence will suffice to
justify the grant of the claim.17
The Issue
The sole issue for this Courts consideration is whether or not petitioner is entitled to a refund or issuance of a TCC in its favor
amounting to P3,003,265.14 allegedly representing unutilized input VAT attributable to petitioners zero-rated sales for the period
of 1 January 2003 to 31 December 2003, in accordance with the provisions of the NIRC of 1997, as amended, other pertinent
laws, and applicable jurisprudential proclamations.
Our Ruling
At this juncture, it bears emphasis that jurisdiction over the subject matter or nature of an action is fundamental for a court to act
on a given controversy,18 and is conferred only by law and not by the consent or waiver upon a court which, otherwise, would
have no jurisdiction over the subject matter or nature of an action. Lack of jurisdiction of the court over an action or the subject
matter of an action cannot be cured by the silence, acquiescence, or even by express consent of the parties.19 If the court has no
jurisdiction over the nature of an action,its only jurisdiction is to dismiss the case. The court could not decide the case on the
merits.20 Needless to state, to obviate the possibility that its decision may be rendered void, the Court can, by its own initiative,
raise the question of jurisdiction, although not raised by the parties.21 As a corollary thereto, to inquire into the existence of
jurisdiction over the subject matter is the primary concern of a court, for thereon would depend the validityof its entire
proceedings.22 Therefore, even if there was no jurisdictional issue raised by any party, the Court may look into it at anytime of the
proceedings, even during this appeal.
It has long been established thatthe CTA is a court of special jurisdiction. As such, it can only take cognizance of such matters as
are clearly within its jurisdiction.23 Hence, when it appears from the pleadings or the evidence on record that the court has no
jurisdiction over the subject matter, the court shall dismiss the claim. 24
Relevant thereto, the Court sitting En Banchas finally settled the issue on proper observance of the prescriptive periods in
claiming for refund of creditable input tax due or paid attributable to any zero-rated or effectively zero-rates sales. Thus, in view
of the jurisprudential pronouncements rendered in Commissioner of Internal Revenue v. San Roque Power Corporation, Taganito
Mining Corporation v. Commissioner of Internal Revenue, and Philex Mining Corporation v. Commissioner of Internal Revenue
(San Roquecase),25 this Court finds it imperative to first look into the factual findings of the CTA for the purpose of achieving a
complete determination of the issue presented, particularly as to the timeliness of its administrative and judicial claims.
In C.T.A. Case No. 7221, the CTA in Division solely ruled on petitioners non-compliance with the substantiation requirements,
expressing that the evidence submitted by petitioner to prove its zero-rated sales were insufficient so as to entitle it to the claim for
refund or issuance of a TCC. Similar declaration was made by the CTA En Bancin the assailed 24 September 2008 Decision and
13 January 2009 Resolution in C.T.A. EB No. 381.
Nonetheless, although it is true thatthe substantiation requirements in establishing a refund claim is a valid issue for this Court to
rule upon, the prior determination of whether or notthe CTA properly acquired jurisdiction over petitioners claim covering the
four (4) quarters of taxable year 2003, taking into consideration the timeliness of the filing of the administrative and judicial
claims pursuant to Section 112 of the NIRC of 1997, as amended, and consistent with the pronouncements made in the San Roque
case, is still our primary concern. Clearly, petitioners claim can only proceed upon compliance with the aforesaid jurisdictional
requirement.
Section 112 of the NIRC of 1997, as amended, reads:
SEC. 112. Refunds or Tax Credits of Input Tax. -
(A) Zero-rated or Effectively Zero-rated Sales. Any VAT registered person, whose sales are zero-rated or effectively zero-rated
may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that
such input tax has not been applied against output tax: x x x
xxxx
(D)26 Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a
refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of
submission of complete documents in support of the application filed in accordance with Subsection (A) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the
application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision
denying the claim or after the expiration of the one hundred twentyday period, appeal the decision orthe unacted claim with the
Court of Tax Appeals.
x x x x (Emphases and underscoring supplied)
As mentioned earlier, the proper interpretation of the afore-quoted provision was finally settled in the San Roquecase 27 by this
Court sitting En Banc. The relevant portions of the discussion pertinent to the focal issue presented in this case are quoted
hereunder, to wit:
First, Section 112(A) clearly, plainly, and unequivocally provides that the taxpayer "may, within two (2) years after the close of
the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of the creditable input tax
due or paid to such sales." In short, the law statesthat the taxpayer may apply with the Commissioner for a refund or credit "within
two (2) years," which means at anytime within two years. Thus, the application for refund or credit may be filed by the taxpayer
with the Commissioner on the last day of the two-year prescriptive period and it will still strictly comply with the law. The two-
year prescriptive period is a grace period in favor of the taxpayer and he can avail ofthe full period before his right to apply for a
tax refund or credit is barred by prescription.
Second, Section 112(C) provides that the Commissioner shall decide the application for refund orcredit "within one hundred
twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with
Subsection (A)." The reference in Section 112(C) of the submission of documents "in support of the application filed in
accordance with Subsection A" means that the application in Section 112(A) is the administrative claim that the Commissioner
must decide within the 120-day period. In short, the two year prescriptive period in Section 112(A) refers to the period within
which the taxpayer can file an administrative claim for tax refund or credit. Stated otherwise, the two-year prescriptive period
does not refer to the filing of the judicial claim with the CTA but to the filing of the administrative claim with the Commissioner.
As held in Aichi, the "phrase within two years x x x apply for the issuance of a tax credit or refund refers to applications for
refund/credit with the CIR and not to appeals made to the CTA."
xxxx
Section 112(A) and (C) must be interpreted according to its clear, plain, and unequivocal language. The taxpayer can file his
administrative claim for refund or credit at anytime within the twoyear prescriptive period. If he files his claim on the last day of
the two-year prescriptive period, his claim is still filed on time. The Commissioner will have 120 days from such filing to decide
the claim. If the Commissioner decides the claim on the 120th day, or does not decide it on that day, the taxpayer still has 30 days
to file his judicial claim with the CTA. This is not only the plain meaning but also the only logical interpretation of Section 112(A)
and (C).28 (Emphases supplied)
It was moreover pronounced:
The Atlas doctrine, which held that claims for refund or credit of input VAT must comply with the two-year prescriptive period
under Section 229, should be effective only from its promulgation on 8 June 2007 until its abandonment on 12 September 2008 in
Mirant. The Atlas doctrine was limited to the reckoning of the two-year prescriptive period from the date of payment of the output
VAT. Prior to the Atlas doctrine, the two-year prescriptive period for claiming refund or credit of input VAT should be governed by
Section 112(A) following the verba legis rule.The Mirant ruling, which abandoned the Atlas doctrine, adopted the verba legis rule,
thus applying Section 112(A) in computing the two-year prescriptive period in claiming refund or credit of input VAT. 29(Emphasis
and underlining supplied)
Applying the foregoing pronouncements, and considering that petitioners administrative claim was filed before the promulgation
of the Atlas case,30 it is clear that petitioner only had a period of two (2) years from the close of the taxable quarter when the zero-
rated or effectively zero-rated sales were made, to file an administrative claim for refund or issuance of a TCC in its favor. As
aptly found by the CTA in Division and the CTA En Banc, the administrative claim covering all four (4) quarters of taxable year
2003, was filed by petitioner on 13 April 2005. However, although petitioners administrative claim was filed within the
prescribed 2-year period under Section 112(A) of the NIRC of 1997, as amended, insofar as to the Second, Third, and Fourth
Quartersof taxable year 2003 are concerned, it appears that its claim covering the First Quarter of taxable year 2003 was belatedly
filed, detailed hereunder as follows:
Taxable year 2003 (close of taxable Last day of filing Filing date of the administ
quarters) administrative claims (within rative claim
the 2-year period from the
close of the taxable quarters)
1st Quarter (31 March 2003) 30 March 200531 13 April
2005
2nd Quarter (30 June 2003) 29 June 2005
3rd Quarter (30 September 2003) 29 September 2005
4th Quarter (31 December 2003) 30 December 2005
Clearly, the CTA had no jurisdiction to rule on petitioners refund claim covering the First Quarter of taxable year 2003 since its
administrative claim was filed beyond the 2-year prescriptive periodas mandated by law, or exactly fourteen (14) days after the
last day to file the same.
On the other hand, as to petitioners claims covering the remaining quarters of taxable year 2003, the Court finds that petitioner
has indeed properly filed its judicial claim beforethe CTA, even without waiting for the expiration of the one hundred twenty
(120)-day period, since at the time petitioner filed its petition, BIR Ruling No. DA-489-03 issued on 10 December 2003 was
already in effect. This ruling is not without any legal basis. Thus:
Like San Roque, Taganito also filed its petition for review with the CTA without waiting for the 120-day period to
lapse.1wphi1 Also, like San Roque, Taganito filed its judicial claim before the promulgation of the Atlas doctrine. Taganito filed
a Petition for Review on 14 February 2007 with the CTA. This is almost fourmonths before the adoption of the Atlas doctrine on 8
June 2007. Taganito is similarly situated as San Roque - both cannot claim being misled, misguided, or confused by the Atlas
doctrine.
However, Taganito can invoke BIR Ruling No. DA-489-03 dated 10 December 2003, which expressly ruled that the "taxpayer
claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA by way of Petition for
Review."Taganito filed its judicial claim after the issuance of BIR Ruling No. DA-489-03 but before the adoption of the
Aichidoctrine. Thus, xxx Taganito is deemed to have filed its judicial claim with the CTA on time. 32 (Emphasis supplied)
xxxx
To repeat, a claim for tax refund or credit, like a claim for tax refund exemption, is construed strictly against the taxpayer. One of
the conditions for a judicial claim of refund or credit under the VAT System is compliance with the 120+30 day mandatory and
jurisdictional periods. Thus, strict compliance with the 120+30 day periods is necessary for such a claim to prosper, whether
before, during, or after the effectivity of the Atlas doctrine, except for the period from the issuance of BIR Ruling No. DA-489-03
on 10 December 2003 to 6 October 2010 when the Aichi doctrine was adopted, which again reinstated the 120+30 day periods as
mandatory and jurisdictional.33(Emphasis supplied)
Without doubt, it is evident from the foregoing jurisprudential pronouncements that as a general rule, a taxpayer-claimant needs to
wait for the expiration of the one hundred twenty(120)-day period before it may be considered as "inaction" on the partof the
Commissioner of Internal Revenue (CIR). Thereafter, the taxpayer-claimant is given only a limited period of thirty (30) days from
said expiration tofile its corresponding judicial claim with the CTA. However, with the exception of claims made during the
effectivity of BIR Ruling No. DA-489-03 (from 10 December 2003 to 5 October 2010),34 petitioner has indeed properly and
timely filed its judicial claim covering the Second, Third, and Fourth Quarters of taxable year 2003, within the bounds of the law
and existing jurisprudence.
Now, the significance of the difference between a sales invoice and an official receipt as evidence for zero-rated transactions.
This is not novel.
For emphasis, even prior to the enactment of R.A. No. 9337,35 which clearly delineates the invoice and official receipt, our Tax
Code has already made the distinction.
Section 113 of the NIRC of 1997, as amended is the focal provision, to wit:
SEC. 113. Invoicing and Accounting Requirements for VATregistered Persons.-
(A) Invoicing Requirements.- A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to the
information required under Section 237, the following information shall be indicated in the invoice or receipt:(Emphasis supplied)
xxxx
Although it appears under the above-quoted provision that there is no clear distinction on the evidentiary value of an invoice or
official receipt, it is worthy to note that the said provision is a general provision which covers all sales of a VAT registered person,
whether sale of goods or services. It does not necessarily follow that the legislature intended to use the same interchangeably. The
Court therefore cannot conclude that the general provision of Section 113 of the NIRC of 1997, as amended, intended that the
invoice and official receipt can beused for either sale of goods or services, because there are specific provisions of the Tax Code
which clearly delineates the difference between the two transactions.
In this instance, Section 108 of the NIRC of 1997, as amended, provides:
SEC. 108. Value-added Tax on Sale of Servicesand Use or Lease of Properties.-
xxxx
(C) Determination of the Tax -The tax shall be computed by multiplying the total amount indicated in the official receiptby
oneeleventh (1/11). (Emphasis supplied)
Comparatively, Section 106 of the same Code covers sale of goods, thus:
SEC. 106. Value-added Tax on Sale of Goods or Properties,-
xxxx
(D) Determination of the Tax. The tax shall be computed by multiplying the total amount indicated in the invoiceby one-
eleventh (1/11). (Emphasis supplied)
Apparently, the construction of the statute shows that the legislature intended to distinguish the use of an invoice from an official
receipt. It is more logical therefore to conclude that subsections of a statute under the same heading should be construed as having
relevance to its heading. The legislature separately categorized VAT on sale of goods from VAT on sale of services, not only by its
treatment with regard to tax but also with respect to substantiation requirements. Having been grouped under Section 108, its
subparagraphs, (A) to (C),and Section 106, its subparagraphs (A) to (D), have significant relations with each other.
Legislative intent must be ascertained from a consideration of the statute as a whole and not of an isolatedpart or a particular
provision alone. This is a cardinal rule in 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 viewed together with the other provisions. 36
Settled is the rule that every part of the statute must be considered with the other parts. 37 Accordingly, the whole of Section 108
should be read in conjunction with Sections 113 and 237 so as to give life to all the provisions intended for the sale of services.
There is no conflict between the provisions of the law that cover sale of services that are subject to zero rated sales; thus, it should
be read altogether to reveal the true legislative intent.
To finally settle this matter, this Court declared in KEPCO Philippines Corporation v. Commissioner of Internal Revenue, 38 that
the VAT invoice is the seller's best proof of the sale of the goods or services to the buyer while the VAT receipt is the buyer's best
evidence of the payment of goods or services received from the seller. Thus, the High Court concluded that VAT invoice and VAT
receipt should not be confused as referring to one and the same thing. Certainly, neither does the law intend the two to be used
interchangeably. Accordingly, we agree with the ruling of the CTA in Division, as well as that of the CTA En Banc, insofar as to
its discussion on the relevancy of the aforesaid substantiation requirements.
WHEREFORE, the petition is DENIED. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 190928 January 13, 2014
TEAM ENERGY CORPORATION (formerly MIRANT PAGBILAO CORP.), Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
DECISION
PERALTA, J.:
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court which seeks to reverse and set aside the
Decision1 dated August 14, 2009 and Resolution2 dated January 5 2010 of the Court of Tax Appeals CTA) En Banc in CTA EB
No. 422 which modified the Decision3 dated May 16 2008 and Resolution4 dated September 8, 2008 of the CT A First Division
insofar as it reduced the amount of refund granted from P69 618 971.19 to P51 134 951.40.
The facts follow.
On the following dates, petitioner filed with the Bureau of Internal Revenue (BIR) its first to fourth quarterly value-added tax
(VAT) returns for the calendar year 2002:
Quarter Date Filed
First April 25, 2002
Second July 23, 2002
Third October 25, 2002
Fourth January 27, 2003
Subsequently, on December 22, 2003, petitioner filed an administrative claim for refund of unutilized input VAT with Revenue
District Office No. 60, Lucena City, in the total amount of P79,918,002.95 for calendar year 2002.
However, due to respondents inaction, petitioner elevated its claim before the CTA First Division on April 22, 2004. In his
Answer, respondent interposed the following special and affirmative defenses:
5. Petitioners alleged claim for refund is subject to administrative investigation/examination by the respondent;
6. To support its claim, it is imperative for petitioner to prove the following, viz.:
a. The registration requirements of a value-added taxpayer in compliance with Section 6 (a) and (b) of Revenue
Regulations No. 6-97 in relation to Section 4.107-1 (a) of Revenue Regulations No. 7-95, and Section 236 of the
Tax Code, as amended;
b. The invoicing and accounting requirements for VAT-registered persons, as well as the filing and payment of
VAT in compliance with the provisions of Sections 113 and 114 of the Tax Code, as amended;
c. Proof of compliance with the prescribed checklist of requirements to be submitted involving claim for VAT
refund in pursuance to Revenue Memorandum Order No. 53-98, otherwise there would be no sufficient
compliance with the filing of administrative claim for refund which is a condition sine qua non prior to the filing
of judicial claim in accordance with the provision of Section 229 of the Tax Code, as amended. It is worthy of
emphasis that Section 112 (D) of the Tax Code, as amended, requires the submission of complete documents in
support of the application filed with the Bureau of Internal Revenue before the 120-day audit period shall apply,
and before the taxpayer could avail of judicial remedies as provided for in the law. Hence, petitioners failure to
submit proof of compliance with the above-stated requirements warrants immediate dismissal of the petition for
review.
d. That the input taxes of P79,918,002.95 allegedly paid by the petitioner on its purchases of goods and services
for the four (4) quarters of the year 2002 were attributable to its zero-rated sales and such have not been applied
against any output tax and were not carried over in the succeeding taxable quarter or quarters;
e. That petitioners administrative and judicial claims for tax credit or refund of unutilized input tax (VAT) was
filed within two (2) years after the close of the taxable quarter when the sales were made in accordance with
Sections 112 (A) and (D) and 229 of the TAX Code, as amended;
f. That petitioners domestic purchases of goods and services were made in the course of its trade and business,
properly supported by VAT invoices and/or official receipts and other documents, such as subsidiary purchase
Journal, showing that it actually paid VAT in accordance with Sections 110 (A) (2) and 113 of the Tax Code as
amended, and in pursuance to Section 4.104-5 (a) & (b) of Revenue Regulations No. 7-95 (Re: Substantiation of
Claims for Input Tax Credit);
g. The requirements as enumerated under Section 4.104-2 of Revenue Regulations 7-95. (Re: Persons who can
avail of the Input Tax Credits);
7. Furthermore, in an action for refund the burden of proof is on the taxpayer to establish its right to refund and failure to
sustain the burden is fatal to the claim for refund/credit. This is so because exemptions from taxation are highly
disfavored in law and he who claims exemption must be able to justify his claim by the clearest grant of organic or
statutory law. An exemption from common burden cannot be permitted to exist upon vague implications;
8. Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from
taxation and, as such, they are looked upon with disfavor.5
After trial on the merits, the CTA First Division rendered judgment as follows:
WHEREFORE, IN VIEW OF ALL THE FOREGOING, the instant Petition for Review is hereby PARTIALLY GRANTED. Thus,
Respondent is hereby ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE to petitioner in the reduced amount
of SIXTY NINE MILLION SIX HUNDRED EIGHTEEN THOUSAND NINE HUNDRED SEVENTY-ONE AND 19/100
PESOS (P69,618,971.19), representing unutilized input value-added taxes paid by petitioner on its domestic purchases of goods
and services and importation of goods attributable to its effectively zero-rated sales of power generation services to the National
Power Corporation for the taxable year 2002.
SO ORDERED.6
Not satisfied, respondent filed his Motion for Partial Reconsideration against said decision, which the CTA First Division denied
in a Resolution dated September 8, 2008.
On October 10, 2007, respondent filed a Petition for Review with the CTA En Banc.
In a Decision dated August 14, 2009, the CTA En Banc affirmed the CTA First Divisions decision with the modification that the
refundable amount be reduced to P51,134,951.40. The fallo reads:
WHEREFORE, premises considered, the petition is hereby PARTLY GRANTED. The assailed Decision dated May 16, 2008 and
Resolution dated September 8, 2008 are hereby AFFIRMED, with modification that onlyP51,134,951.40 is the refundable amount
to respondent for taxable year 2002. Accordingly, the Commissioner of Internal Revenue is hereby ORDERED to REFUND or
ISSUE a TAX CREDIT CERTIFICATE in favor of Team Energy Corporation the reduced amount of FIFTY-ONE MILLION
ONE HUNDRED THIRTY- FOUR THOUSAND NINE HUNDRED FIFTY-ONE AND 40/100 (P51,134,951.40), representing
the latters excess and unutilized input VAT for the period covering calendar year 2002.
SO ORDERED.7
Unfazed, petitioner filed a motion for reconsideration against said Decision, but the same was denied in a Resolution dated
January 5, 2010.
Hence, the present petition wherein petitioner raises the following issues for our resolution:
THE CTA EN BANC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT DISALLOWED PETITIONERS INPUT VAT FOR THE FIRST QUARTER AMOUNTING
TO P18,484,019.79 BASED ON PRESCRIPTION BECAUSE:
A. PETITIONER FILED ITS JUDICIAL CLAIM FOR REFUND WELL WITHIN THE TWO-YEAR
PRESCRIPTIVE PERIOD RECKONED FROM THE DATE OF FILING OF THE QUARTERLY VAT
RETURN PURSUANT TO LONG STANDING JURISPRUDENCE, WHICH THE HONORABLE COURT
EXPRESSLY RECOGNIZED IN ATLAS CONSOLIDATED MINING AND DEVELOPMENT
CORPORATION V. COMMISSIONER OF INTERNAL REVENUE, G.R. NOS. 141104 & [148763], JUNE 8,
2007 ("ATLAS CASE").
B. THE CTA EN BANC SHOULD NOT HAVE HASTILY RELIED ON THE CONTRARY RULING OF THE
HONORABLE COURT IN COMMISSIONER OF INTERNAL REVENUE V. MIRANT PAGBILAO
CORPORATION, G.R. NO. 172129, SEPTEMBER 12, 2008 ("MIRANT PAGBILAO CASE") AS THE
HONORABLE COURT COULD NOT HAVE INTENDED TO REVERSE THE DOCTRINE IN THE ATLAS
CASE IN THE LIGHT OF ARTICLE VIII, SECTION 4 (3) OF THE CONSTITUTION.
C. ASSUMING, BUT WITHOUT CONCEDING, THAT THE MIRANT PAGBILAO CASE REVERSED THE
DOCTRINE IN THE ATLAS CASE, THE SAME SHOULD BE APPLIED PROSPECTIVELY AND NOT
RETROACTIVELY TO THE PREJUDICE OF PETITIONER WHO RELIED IN GOOD FAITH ON
PREVAILING JURISPRUDENCE AT THE TIME OF FILING OF ITS JUDICIAL CLAIM FOR REFUND. 8
Simply, the sole issue for our resolution is whether or not petitioner timely filed its judicial claim for refund of input VAT for the
first quarter of 2002.
To appropriately address this issue, it is relevant to quote Sections 112 (A) and (C) of the Tax Code, viz.:
SEC. 112. Refund or Tax Credits of Input Tax.
(A) Zero-rated or Effectively Zero-rated Sales. Any VAT-registered person, whose sales are zero-rated or effectively zero-rated
may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that
such input tax has not been applied against output tax; Provided, however, That in the case of zero-rated sales under Section 106
(A)(2)(a)(1), (2) and (B) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly
accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That
where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of good of properties
or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the
transactions, it shall be allocated proportionately on the basis of the volume of sales.
xxxx
(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. In proper cases, the Commissioner shall grant a
refund or issue a tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission
of complete documents in support of the application filed in accordance with Subsection (A) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the
application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision
denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the
Court of Tax Appeals.
In its assailed decision, the CTA En Banc reduced petitioners claim for refund of its excess or unutilized input VAT
to P51,134,951.40 on the ground that petitioners judicial claim for the first quarter of 2002 was filed beyond the two-year period
prescribed under Section 112 (A) of the Tax Code, to wit:
As regards the fifth requisite, Section 112 (A) of the NIRC of 1997, as amended, provides that a VAT-registered taxpayer whose
sale is zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were
made, apply for refund or issuance of a TCC of its creditable input tax or paid attributable to such sales.
In the recent case of Commissioner of Internal Revenue v. Mirant Pagbilao (Formerly Southern Energy Quezon, Inc.), 565 SCRA
154 (hereafter referred to as the "Mirant Case"), the Supreme Court definitely settled the issue on the reckoning of the prescriptive
period on claims for refund of input VAT attributable to zero-rated or effectively zero-rated sales, as follows:
xxxx
Pursuant to the above ruling of the Supreme Court, it is clear that the two-year prescriptive period provided in Section 112 (A) of
the NIRC of 1997, as amended, should be counted not from the payment of the tax, but from the close of the taxable quarter when
the sales were made. Pursuant to the above ruling of the Supreme Court, the following are the pertinent dates relevant to
petitioners claim for refund:
Period (2002) Close of Taxable Last Day for Filing of
Quarter The Claim
1st Quarter March 31, 2002 March 31, 2004
2nd Quarter June 30, 2002 June 30, 2004
3rd Quarter September 30, 2002 September 30, 2004
4th Quarter December 31, 2002 December 31, 2004
Record shows that respondent filed its administrative claim for refund or issuance of a TCC on December 22, 2003, while the
judicial claim for refund was filed on April 22, 2004. Since respondent filed its judicial claim for refund for the four quarters of
2002, only on April 22, 2004, twenty-two (22) days from March 31, 2004, the last day prescribed by the Mirant Case, respondent
is barred from claiming refund of its unutilized input taxes for the first quarter of 2002. Therefore, the claim for refund granted by
the First Division of this Court in the amount ofP69,618,971.19 should be reduced by deducting the portion of the claim
corresponding to the first quarter that had already prescribed, x x x.
xxxx
In sum, the Court En Banc finds that the total substantiated input tax filed within the two-year prescriptive period of respondent
TeaM Energy amounts to P51,134,951.40 only.9
Recently, however, in the consolidated cases of Commissioner of Internal Revenue v. San Roque Power Corporation 10 (San Roque
ponencia), this Court emphasized that Section 112 (A) and (C) of the Tax Code must be interpreted according to its clear, plain
and unequivocal language.
In said case, we held that the taxpayer can file his administrative claim for refund or issuance of tax credit certificate anytime
within the two-year prescriptive period. If he files his claim on the last day of the two-year prescriptive period, his claim is still
filed on time. The Commissioner will then have 120 days from such filing to decide the claim. If the Commissioner decides the
claim on the 120th day or does not decide it on that day, the taxpayer still has 30 days to file his judicial claim with the CTA.
Thus, the Court expounded:
Section 112 (C) also expressly grants the taxpayer a 30-day period to appeal to the CTA the decision or inaction of the
Commissioner, thus:
x x x the taxpayer affected may, within thirty (30) days from receipt of the decision denying the claim or after the expiration of the
one hundred twenty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals. (Emphasis supplied)
This law is clear, plain and unequivocal. Following the well-settled verba legis doctrine, this law should be applied exactly as
worded since it is clear, plain and unequivocal. As this law states, the taxpayer may, if he wishes, appeal the decision of the
Commissioner to the CTA within 30 days from receipt of the Commissioners decision, or if the Commissioner does not act on the
taxpayers claim within the 120-day period, the taxpayer may appeal to the CTA within 30 days from the expiration of the 120-day
period.
xxxx
There are three compelling reasons why the 30-day period need not necessarily fall within the two-year prescriptive period, as
long as the administrative claim is filed within the two-year prescriptive period.
First, Section 112 (A) clearly, plainly and unequivocally provides that the taxpayer "may, within two (2) years after the close of
the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of the creditable input tax
due or paid to such sales." In short, the law states that the taxpayer may apply with the Commissioner for a refund or credit
"within two (2) years," which means at anytime within two years. Thus, the application for refund or credit may be filed by the
taxpayer with the Commissioner on the last day of the two-year prescriptive period and it will still strictly comply with the law.
The two-year prescriptive period is a grace period in favor of the taxpayer and he can avail of the full period before his right to
apply for a tax refund or credit is barred by prescription.
Second, Section 112 (C) provides that the Commissioner shall decide the application for refund or credit "within one hundred
twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with
Subsection (A)." The reference in Section 112 (C) of the submission of documents "in support of the application filed in
accordance with Subsection (A)" means that the application in Section 112 (A) is the administrative claim that the Commissioner
must decide within the 120-day period. In short, the two-year prescriptive period in Section 112 (A) refers to the period within
which the taxpayer can file an administrative claim for tax refund or credit. Stated otherwise, the two-year prescriptive period
does not refer to the filing of the judicial claim with the CTA but to the filing of the administrative claim with the Commissioner.
As held in Aichi, the "phrase within two years x x x apply for the issuance of a tax credit or refund" refers to applications for
refund/credit with the CIR and not to appeals made to the CTA."
Third, if the 30-day period, or any part of it, is required to fall within the two-year prescriptive period (equivalent to 730 days),
then the taxpayer must file his administrative claim for refund or credit within the first 610 days of the two-year prescriptive
period. Otherwise, the filing of the administrative claim beyond the first 610 days will result in the appeal to the CTA being filed
beyond the two-year prescriptive period. Thus, if the taxpayer files his administrative claim on the 611th day, the Commissioner,
with his 120-day period, will have until the 731st day to decide the claim. If the Commissioner decides only on the 731st day, or
does not decide at all, the taxpayer can no longer file his judicial claim with the CTA because the two-year prescriptive period
(equivalent to 730 days) has lapsed. The 30-day period granted by law to the taxpayer to file an appeal before the CTA becomes
utterly useless, even if the taxpayer complied with the law by filing his administrative claim within the two-year prescriptive
period.
The theory that the 30-day period must fall within the two-year prescriptive period adds a condition that is not found in the law. It
results in truncating 120 days from the 730 days that the law grants the taxpayer for filing his administrative claim with the
Commissioner. This Court cannot interpret a law to defeat, wholly or even partly, a remedy that the law expressly grants in clear,
plain and unequivocal language.
Section 112 (A) and (C) must be interpreted according to its clear, plain and unequivocal language.1wphi1 The taxpayer can file
his administrative claim for refund or credit at any time within the two-year prescriptive period. If he files his claim on the last day
of the two-year prescriptive period, his claim is still filed on time. The Commissioner will have 120 days from such filing to
decide the claim. If the Commissioner decides the claim on the 120th day, or does not decide it on that day, the taxpayer still has
30 days to file his judicial claim with the CTA. This is not only the plain meaning but also the only logical interpretation of
Section 112 (A) and (C).11 (Emphasis supplied)
Based on the aforequoted discussions, we therefore disagree with the CTA En Bancs finding that petitioners judicial claim for
the first quarter of 2002 was not timely filed.
The San Roque ponencia firmly enunciates that the taxpayer can file his administrative claim for refund or credit at any time
within the two-year prescriptive period. What is only required of him is to file his judicial claim within thirty (30) days after denial
of his claim by respondent or after the expiration of the 120-day period within which respondent can decide on its claim.
Here, there is no question that petitioner timely filed its administrative claim with the Bureau of Internal Revenue within the
required period. However, since its administrative claim was filed within the two-year prescriptive period and its judicial claim
was filed on the first day after the expiration of the 120-day period granted to respondent, to decide on its claim, we rule that
petitioners claim for refund for the first quarter of 2002 should be granted.
All told, we revert to the CTA First Division s finding that petitioner s total refundable amount should beP69,618,971.19,
representing petitioner s unutilized input VAT paid on its domestic purchases of goods and services and importation of goods
attributable to its effectively zero-rated sales of power generation services to the National Power Corporation for the taxable year
2002. WHEREFORE, in view of the foregoing, the Decision dated August 14, 2009 and Resolution dated January 5, 2010 of the
Court of Tax Appeals En Banc, in CTA EB No. 422 are hereby AFFIRMED with MODIFICATION that petitioner s total
refundable amount shall beP69,618,971.19.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 197525 June 4, 2014
VISAYAS GEOTHERMAL POWER COMPANY, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
DECISION
MENDOZA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the February 7, 2011
Decision1 and the June 27, 2011 Resolution2 of the Court of Tax Appeals En Banc (CTA En Banc) in CTA EB Case Nos. 561 and
562, which reversed and set aside the April 17, 2009 Decision of the CT A Second Division in CTA Case No. 7559.
The Facts:
Petitioner Visayas Geothermal Power Company (VGPC) is a special limited partnership duly organized and existing under
Philippine Laws with its principal office at Milagro, Ormoc City, Province of Leyte. It is principally engaged in the business of
power generation through geothermal energy and the sale of generated power to the Philippine National Oil Company
(PNOC),pursuant to the Energy Conversion Agreement.
VGPC filed with the Bureau of Internal Revenue (BIR)its Original Quarterly VAT Returns for the first to fourth quarters of taxable
year 2005 on April 25, 2005, July 25, 2005, October 25, 2006, and January 20, 2006, respectively.
On December 6, 2006, it filed an administrative claim for refund for the amount of 14,160,807.95 with the BIR District Office No.
89 of Ormoc City on the ground that it was entitled to recover excess and unutilized input VAT payments for the four quarters of
taxable year 2005, pursuant to Republic Act (R.A.) No. 9136,3 which treated sales of generated power subject to VAT to a zero
percent (0%) rate starting June 26, 2001.
Nearly one month later, on January3, 2007, while its administrative claim was pending, VGPC filed its judicial claim via a petition
for review with the CTA praying for a refund or the issuance of a tax credit certificate in the amount of 14,160,807.95, covering
the four quarters of taxable year 2005.
In its April 17, 2009 Decision, the CTA Second Division partially granted the petition as follows:
WHEREFORE, in view of the foregoing considerations, the Petition for Review is hereby PARTIALLY GRANTED. Accordingly,
respondent is ORDERED TO REFUND or, in the alternative, TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner
the reduced amount of SEVEN MILLION SIX HUNDRED NINENTY NINE THOUSAND THREE HUNDRED SIXTY SIX
PESOS AND 37/100 (P7,699,366.37) representing unutilized input VAT paid on domestic purchases of non-capital goods and
services, services rendered by non-residents, and importations of non-capital goods for the first to fourth quarters of taxable year
2005.
SO ORDERED.4
The CTA Second Division found that only the amount of 7,699,366.37 was duly substantiated by the required evidence. As to the
timeliness of the filing of the judicial claim, the Court ruled that following the case of Commissioner of Internal Revenue (CIR) v.
Mirant Pagbilao Corporation (Mirant),5 both the administrative and judicial claims were filed within the two-year prescriptive
period provided in Section 112(A) of the National Internal Revenue Code of 1997 (NIRC),the reckoning point of the period being
the close of the taxable quarter when the sales were made.
In its October 29, 2009 Resolution,6 the CTA Second Division denied the separate motions for partial reconsideration filed by
VGPC and the CIR. Thus, both VGPC and the CIR appealed to the CTA En Banc.
In the assailed February 7, 2011 Decision,7 the CTA En Banc reversed and set aside the decision and resolution of the CTA Second
Division, and dismissed the original petition for review for having been filed prematurely, to wit:
WHEREFORE, premises considered:
i. As regards CTA EB Case No. 562, the Petition for Review is hereby DISMISSED; and
ii. As regards CTA EB Case No. 561, the Petition for Review is hereby GRANTED.
Accordingly, the Decision, dated April 17, 2009, and the Resolution, dated October 29, 2009, of the CTA Former Second Division
are hereby REVERSED and SET ASIDE, and another one is hereby entered DISMISSING the Petition for Review filed in CTA
Case No. 7559 for having been filed prematurely.
SO ORDERED.8
The CTA En Banc explained that although VGPC seasonably filed its administrative claim within the two-year prescriptive
period, its judicial claim filed with the CTA Second Division was prematurely filed under Section 112(D) of the National Internal
Revenue Code (NIRC).Citing the case of CIR v. Aichi Forging Company of Asia, Inc. (Aichi), 9 the CTA En Banc held that the
judicial claim filed 28 days after the petitioner filed its administrative claim, without waiting for the expiration of the 120-day
period, was premature and, thus, the CTA acquired no jurisdiction over the case.
The VGPC filed a motion for reconsideration, but the CTA En Banc denied it in the assailed June 27, 2011 Resolution for lack of
merit. It stated that the case of Atlas Consolidated Mining v. CIR (Atlas) 10 relied upon by the petitioner had long been abandoned.
Hence, this petition.

ASSIGNMENT OF ERRORS
I
The CTA En Banc erred in finding that the 120-day and 30-day periods prescribed under Section 112(D) of the 1997 Tax Code are
jurisdictional and mandatory in the filing of the judicial claim for refund. The CTA-Division should take cognizance of the
judicial appeal as long as it is filed with the two-year prescriptive period under Section 229 of the 1997 Tax Code.
II
The CTA En Banc erred in finding that Aichi prevails over and/or overturned the doctrine in Atlas, which upheld the primacy of
the two-year period under Section 229 of the Tax Code. The law and jurisprudence have long established the doctrine that the
taxpayer is duty-bound to observe the two-year period under Section 229 of the Tax Code when filing its claim for refund of
excess and unutilized VAT.
III
The CTA En Banc erred in finding that Respondent CIR is not estopped from questioning the jurisdiction of the CTA. Respondent
CIR, by her actions and pronouncements, should have been precluded from questioning the jurisdiction of the CTA-Division.
IV
The CTA En Banc erred in applying Aichi to Petitioner VGPCs claim for refund. The novel interpretation of the law in Aichi
should not be made to apply to the present case for being contrary to existing jurisprudence at the time Petitioner VGPC filed its
administrative and judicial claims for refund.11
Petitioner VGPC argues that (1) the law and jurisprudence have long established the rule regarding compliance with the two-year
prescriptive period under Section 112(D) in relation to Section 229 of the 1997 Tax Code; (2) Aichi did not overturn the doctrine
in Atlas, which upheld the primacy of the two-year period under Section 229; (3) respondent CIR is estopped from questioning the
jurisdiction of the CTA and Aichi cannot be indiscriminately applied to all VAT refund cases; (4) applying Aichi invariably to all
VAT refund cases would effectively grant respondent CIR unbridled discretion to deprive a taxpayer of the right to effectively
seek judicial recourse, which clearly violates the standards of fairness and equity; and (5) the novel interpretation of the law in
Aichi should not be made to apply to the present case for being contrary to existing jurisprudence at the time VGPC filed its
administrative and judicial claims for refund. Aichi should be applied prospectively.
Ruling of the Court
Judicial claim not premature
The assignment of errors is rooted in the core issue of whether the petitioners judicial claim for refund was prematurely filed.
Two sections of the NIRC are pertinent to the issue at hand, namely Section 112 (A) and (D) and Section 229, to wit:
SEC. 112. Refunds or Tax Credits of Input Tax.
(A) Zero-rated or Effectively Zero-rated Sales.- Any VAT-registered person, whose sales are zero-rated or effectively
zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the
issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except
transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in
the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section 108 (B)(1) and (2), the acceptable
foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of
the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively
zero-rated sale and also in taxable or exempt sale of goods of properties or services, and the amount of creditable input
tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated
proportionately on the basis of the volume of sales.
xxx
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made.- In proper cases, the Commissioner shall
grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the
date of submission of complete documents in support of the application filed in accordance with Subsections (A) and (B)
hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the
application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision
denying the claim or after the expiration of the one hundred twenty day period, appeal the decision or the unacted claim with the
Court of Tax Appeals.
SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be maintained in any court for the
recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of
any penalty claimed to have been collected without authority, of any sum alleged to have been excessively or in any manner
wrongfully collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected,
until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained,
whether or not such tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or
penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even
without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such
payment appears clearly to have been erroneously paid.
[Emphases supplied]
It has been definitively settled in the recent En Banc case of CIR v. San Roque Power Corporation (San Roque), 12that it is Section
112 of the NIRC which applies to claims for tax credit certificates and tax refunds arising from sales of VAT-registered persons
that are zero-rated or effectively zero-rated, which are, simply put, claims for unutilized creditable input VAT.
Thus, under Section 112(A), the taxpayer may, within 2 years after the close of the taxable quarter when the sales were made, via
an administrative claim with the CIR, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid
attributable to such sales. Under Section 112(D), the CIR must then act on the claim within 120 days from the submission of the
taxpayers complete documents. In case of (a) a full or partial denial by the CIR of the claim, or (b) the CIRs failure to act on the
claim within 120 days, the taxpayer may file a judicial claim via an appeal with the CTA of the CIR decision or unacted claim,
within 30 days (a) from receipt of the decision; or (b) after the expiration of the 120-day period.
The 2-year period under Section 229 does not apply to appeals before the CTA in relation to claims for a refund or tax credit for
unutilized creditable input VAT.Section 229 pertains to the recovery of taxes erroneously, illegally, or excessively collected. 13 San
Roque stressed that "input VAT is not excessively collected as understood under Section 229 because, at the time the input VAT
is collected, the amount paid is correct and proper."14 It is, therefore, Section 112 which applies specifically with regard to
claiming a refund or tax credit for unutilized creditable input VAT.15
Upholding the ruling in Aichi,16 San Roque held that the 120+30 day period prescribed under Section 112(D) mandatory and
jurisdictional.17 The jurisdiction of the CTA over decisions or inaction of the CIR is only appellate in nature and, thus, necessarily
requires the prior filing of an administrative case before the CIR under Section 112.18 The CTA can only acquire jurisdiction over
a case after the CIR has rendered its decision, or after the lapse of the period for the CIR to act, in which case such inaction is
considered a denial.19 A petition filed prior to the lapse of the 120-day period prescribed under said Section would be premature
for violating the doctrine on the exhaustion of administrative remedies.20
There is, however, an exception to the mandatory and jurisdictional nature of the 120+30 day period. The Court in San Roque
noted that BIR Ruling No. DA-489-03, dated December 10, 2003, expressly stated that the "taxpayer-claimant need not wait for
the lapse of the 120-day period before it could seek judicial relief with the CTA by way of Petition for Review." 21 This BIR Ruling
was recognized as a general interpretative rule issued by the CIR under Section 422 of the NIRC and, thus, applicable to all
taxpayers. Since the CIR has exclusive and original jurisdiction to interpret tax laws, it was held that taxpayers acting in good
faith should not be made to suffer for adhering to such interpretations. Section 24623 of the Tax Code, in consonance with
equitable estoppel, expressly provides that a reversal of a BIR regulation or ruling cannot adversely prejudice a taxpayer who in
good faith relied on the BIR regulation or ruling prior to its reversal. Hence, taxpayers can rely on BIR Ruling No. DA-489-03
from the time of its issuance on December 10, 2003 up to its reversal by this Court in Aichion October 6, 2010, where it was held
that the 120+30 day period was mandatory and jurisdictional.
Accordingly, the general rule is that the 120+30 day period is mandatory and jurisdictional from the effectivity of the 1997 NIRC
on January 1, 1998, up to the present. As an exception, judicial claims filed from December 10, 2003 to October 6, 201024 need
not wait for the exhaustion of the 120-day period.
A review of the facts of the present case reveals that petitioner VGPC timely filed its administrative claim with the CIR on
December 6, 2006, and later, its judicial claim with the CTA on January 3, 2007. The judicial claim was clearly filed within the
period of exception and was, therefore, not premature and should not have been dismissed by the CTA En Banc.
In the present petition, VGPC prays that the Court grant its claim for refund or the issuance of a tax credit certificate for its
unutilized input VAT in the amount of P14,160,807.95. The CTA Second Division, however, only awarded the amount
of P7,699,366.37. The petitioner has failed to present any argument to support its entitlement to the former amount.
In any case, the Court would have been precluded from considering the same as such would require a review of the evidence,
which would constitute a question of fact outside the Courts purview under Rule 45 of the Rules of Court. The Court, thus, finds
that the petitioner is entitled to the refund awarded to it by the CTA Second Division in the amount of P7,699,366.37.
Atlas doctrine has no relevance
to the 120+30 day period for
filing judicial claim
Although the core issue of prematurity of filing has already been resolved, the Court deems it proper to discuss the petitioners
argument that the doctrine in Atlas, which allegedly upheld the primacy of the 2-year prescriptive period under Section 229,should
prevail over the ruling in Aichi regarding the mandatory and jurisdictional nature of the 120+30 day period in Section 112.
In this regard, it was thoroughly explained in San Roque that the Atlas doctrine only pertains to the reckoning point of the 2-year
prescriptive period from the date of payment of the output VAT under Section 229, and has no relevance to the 120+30 day period
under Section 112, to wit:
The Atlas doctrine, which held that claims for refund or credit of input VAT must comply with the two-year prescriptive period
under Section 229, should be effective only from its promulgation on 8 June 2007 until its abandonment on 12 September 2008 in
Mirant. The Atlas doctrine was limited to the reckoning of the two-year prescriptive period from the date of payment of the output
VAT. Prior to the Atlas doctrine, the two-year prescriptive period for claiming refund or credit of input VAT should be governed by
Section 112(A) following the verba legis rule. The Mirant ruling, which abandoned the Atlas doctrine, adopted the verba legis
rule, thus applying Section 112(A) in computing the two year prescriptive period in claiming refund or credit of input VAT.
The Atlas doctrine has no relevance to the 120+30 day periods under Section 112(C) because the application of the 120+30 day
periods was not in issue in Atlas. The application of the 120+30 day periods was first raised in Aichi, which adopted the verba
legis rule in holding that the 120+30 day periods are mandatory and jurisdictional. The language of Section 112(C) is plain, clear,
and unambiguous. When Section 112(C) states that "the Commissioner shall grant a refund or issue the tax credit within one
hundred twenty (120) days from the date of submission of complete documents," the law clearly gives the Commissioner 120 days
within which to decide the taxpayers claim. Resort to the courts prior to the expiration of the 120-day period is a patent violation
of the doctrine of exhaustion of administrative remedies, a ground for dismissing the judicial suit due to prematurity. Philippine
jurisprudence is awash with cases affirming and reiterating the doctrine of exhaustion of administrative remedies. Such doctrine is
basic and elementary.25
[Underscoring supplied]
Thus, Atlas is only relevant in determining when to file an administrative claim with the CIR for refund or credit of unutilized
creditable input VAT, and not for determining when to file a judicial claim with the CTA. From June 8, 2007 to September 12,
2008, the 2-year prescriptive period to file administrative claims should be counted from the date of payment of the output VAT
tax. Before and after said period, the 2-year prescriptive period is counted from the close of the taxable quarter when the sales
were made, in accordance with Section 112(A). In either case, the mandatory and jurisdictional 120+30 day period must be
complied with for the filing of the judicial claim with the CTA, except for the period provided under BIR Ruling No. DA-489-03,
as previously discussed.
The Court further noted that Atlas was decided in relation to the 1977 Tax Code which had not yet provided for the 30-day period
for the taxpayer to appeal to the CTA from the decision or inaction of the CIR over claims for unutilized input VAT. Clearly then,
the Atlas doctrine cannot be invoked to disregard compliance with the 120+30 day mandatory and jurisdictional period. 26 In San
Roque, it was written:
The old rule that the taxpayer may file the judicial claim, without waiting for the Commissioners decision if the two-year
prescriptive period is about to expire, cannot apply because that rule was adopted before the enactment of the 30-day period. The
30-day period was adopted precisely to do away with the old rule, so that under the VAT System the taxpayer will always have 30
days to file the judicial claim even if the Commissioner acts only on the 120th day, or does not act at all during the 120-day
period. With the 30-day period always available to the taxpayer, the taxpayer can no longer file a judicial claim for refund or credit
of input VAT without waiting for the Commissioner to decide until the expiration of the 120-day period.27
At any rate, even assuming that the Atlas doctrine was relevant to the present case, it could not be applied since it was held to be
effective only from its promulgation on June 8, 2007 until its abandonment on September 12, 2008 when Mirant was promulgated.
The petitioner in this case filed both its administrative and judicial claims outside the said period of effectivity.
Aichi not applied prospectively
Petitioner VGPC also argues that Aichi should be applied prospectively and, therefore, should not be applied to the present case.
This position cannot be given consideration.
Article 8 of the Civil Code provides that judicial decisions applying or interpreting the law shall form part of the legal system of
the Philippines and shall have the force of law. The interpretation placed upon a law by a competent court establishes the
contemporaneous legislative intent of the law. Thus, such interpretation constitutes a part of the law as of the date the statute is
enacted. It is only when a prior ruling of the Court is overruled, and a different view adopted, that the new doctrine may have to be
applied prospectively in favor of parties who have relied on the old doctrine and have acted in good faith.28
Considering that the nature of the 120+30 day period was first settled in Aichi, the interpretation by the Court of its being
mandatory and jurisdictional in nature retro acts to the date the NIRC was enacted. It cannot be applied prospectively as no old
doctrine was overturned.
The petitioner cannot rely either on the alleged jurisprudence prevailing at the time it filed its judicial claim. The Court notes that
the jurisprudence relied upon by the petitioner consists of CTA cases. It is elementary that CTA decisions do not constitute
precedent and do not bind this Court or the public. Only decisions of this Court constitute binding precedents, forming part of the
Philippine legal system.29
As regards the cases30 which were later decided allegedly in contravention of Aichi, it is of note that all of them were decided by
Divisions of this Court, and not by the Court En Banc.1wphi1 Any doctrine or principle of law laid down by the Court, either
rendered En Bancor in Division, may be overturned or reversed only by the Court sitting En Banc.31 Thus, the cases cited by the
petitioner could not have overturned the doctrine laid down in Aichi.
CIR not estopped
The petitioners argument that the CIR should have been estopped from questioning the jurisdiction of the CTA after actively
participating in the proceedings before the CTA Second Division deserves scant consideration.
It is a well-settled rule that the government cannot be estopped by the mistakes, errors or omissions of its agents. 32 It has been
specifically held that estoppel does not apply to the government, especially on matters of taxation. Taxes are the nations lifeblood
through which government agencies continue to operate and with which the State discharges its functions for the welfare of its
constituents.33 Thus, the government cannot be estopped from collecting taxes by the mistake, negligence, or omission of its
agents. Upon taxation depends the ability of the government to serve the people for whose benefit taxes are collected. To
safeguard such interest, neglect or omission of government officials entrusted with the collection of taxes should not be allowed to
bring harm or detriment to the people.34
Rules on claims for refund or tax credit of unutilized input VAT
For clarity and guidance, the Court deems it proper to outline the rules laid down in San Roque with regard to claims for refund or
tax credit of unutilized creditable input VAT. They are as follows:
1. When to file an administrative claim with the CIR:
a. General rule Section 112(A) and Mirant Within 2 years from the close of the taxable quarter when the sales were
made.
b. Exception Atlas
Within 2 years from the date of payment of the output VAT, if the administrative claim was filed from June 8, 2007 (promulgation
of Atlas) to September 12, 2008 (promulgation of Mirant).
2. When to file a judicial claim with the CTA:
a. General rule Section 112(D); not Section 229
i. Within 30 days from the full or partial denial of the administrative claim by the CIR; or
ii. Within 30 days from the expiration of the 120-day period provided to the CIR to decide on the claim. This is
mandatory and jurisdictional beginning January L 1998 ( effectivity of 1997 NI RC).
b. Exception - BIR Ruling No. DA-489-03
The judicial claim need not await the expiration of the 120-day period, if such was filed from December 10, 2003 (issuance of
BIR Ruling No. DA-489-03) to October 6, 2010 (promulgation of Aichi).
WHEREFORE, the petition is PARTIALLY GRANTED. The February 7, 2011 Decision and the June 27, 2011 Resolution of the
Court of Tax Appeals En Banc, in CT A EB Case Nos. 561 and 562 are REVERSED and SET ASIDE. The April 17, 2009
Decision and the October 29, 2009 Resolution of the CTA Former Second Division in CTA Case No. 7559 are REINSTATED.
Public respondent is hereby ORDERED TO REFUND or, in the alternative, TO ISSUE A TAX CREDIT CERTIFICATE, in favor
or the petitioner the amount of SEVEN MILLION SIX HUNDRED NINETY NINE THOUSAND THREE HUNDRED SIXTY
SIX PESOS AND 37/100 (P7,699,366.37) representing unutilized input VAT paid on domestic purchases of non-capital goods and
services, services rendered by nonresidents, and importations of non-capital goods for the first to fourth quarters of taxable year
2005.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 171101 July 5, 2011
HACIENDA LUISITA, INCORPORATED, Petitioner,
LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL BANKING CORPORATION,Petitioners-
in-Intervention,
vs.
PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER PANGANDAMAN OF THE
DEPARTMENT OF AGRARIAN REFORM; ALYANSA NG MGA MANGGAGAWANG BUKID NG HACIENDA
LUISITA, RENE GALANG, NOEL MALLARI, and JULIO SUNIGA1 and his SUPERVISORY GROUP OF THE
HACIENDA LUISITA, INC. and WINDSOR ANDAYA, Respondents.
DECISION
VELASCO, JR., J.:
"Land for the landless," a shibboleth the landed gentry doubtless has received with much misgiving, if not resistance, even if only
the number of agrarian suits filed serves to be the norm. Through the years, this battle cry and root of discord continues to reflect
the seemingly ceaseless discourse on, and great disparity in, the distribution of land among the people, "dramatizing the
increasingly urgent demand of the dispossessed x x x for a plot of earth as their place in the sun." 2 As administrations and political
alignments change, policies advanced, and agrarian reform laws enacted, the latest being what is considered a comprehensive
piece, the face of land reform varies and is masked in myriads of ways. The stated goal, however, remains the same: clear the way
for the true freedom of the farmer.3
Land reform, or the broader term "agrarian reform," has been a government policy even before the Commonwealth era. In fact, at
the onset of the American regime, initial steps toward land reform were already taken to address social unrest. 4 Then, under the
1935 Constitution, specific provisions on social justice and expropriation of landed estates for distribution to tenants as a solution
to land ownership and tenancy issues were incorporated.
In 1955, the Land Reform Act (Republic Act No. [RA] 1400) was passed, setting in motion the expropriation of all tenanted
estates.5
On August 8, 1963, the Agricultural Land Reform Code (RA 3844) was enacted,6 abolishing share tenancy and converting all
instances of share tenancy into leasehold tenancy.7 RA 3844 created the Land Bank of the Philippines (LBP) to provide support in
all phases of agrarian reform.
As its major thrust, RA 3844 aimed to create a system of owner-cultivatorship in rice and corn, supposedly to be accomplished by
expropriating lands in excess of 75 hectares for their eventual resale to tenants. The law, however, had this restricting feature: its
operations were confined mainly to areas in Central Luzon, and its implementation at any level of intensity limited to the pilot
project in Nueva Ecija.8
Subsequently, Congress passed the Code of Agrarian Reform (RA 6389) declaring the entire country a land reform area, and
providing for the automatic conversion of tenancy to leasehold tenancy in all areas. From 75 hectares, the retention limit was cut
down to seven hectares.9
Barely a month after declaring martial law in September 1972, then President Ferdinand Marcos issued Presidential Decree No. 27
(PD 27) for the "emancipation of the tiller from the bondage of the soil."10 Based on this issuance, tenant-farmers, depending on
the size of the landholding worked on, can either purchase the land they tilled or shift from share to fixed-rent leasehold
tenancy.11 While touted as "revolutionary," the scope of the agrarian reform program PD 27 enunciated covered only tenanted,
privately-owned rice and corn lands.12
Then came the revolutionary government of then President Corazon C. Aquino and the drafting and eventual ratification of the
1987 Constitution. Its provisions foreshadowed the establishment of a legal framework for the formulation of an expansive
approach to land reform, affecting all agricultural lands and covering both tenant-farmers and regular farmworkers. 13
So it was that Proclamation No. 131, Series of 1987, was issued instituting a comprehensive agrarian reform program (CARP) to
cover all agricultural lands, regardless of tenurial arrangement and commodity produced, as provided in the Constitution.
On July 22, 1987, Executive Order No. 229 (EO 229) was issued providing, as its title14 indicates, the mechanisms for CARP
implementation. It created the Presidential Agrarian Reform Council (PARC) as the highest policy-making body that formulates
all policies, rules, and regulations necessary for the implementation of CARP.
On June 15, 1988, RA 6657 or the Comprehensive Agrarian Reform Law of 1988, also known as CARL or the CARP Law, took
effect, ushering in a new process of land classification, acquisition, and distribution. As to be expected, RA 6657 met stiff
opposition, its validity or some of its provisions challenged at every possible turn.Association of Small Landowners in the
Philippines, Inc. v. Secretary of Agrarian Reform 15 stated the observation that the assault was inevitable, the CARP being an
untried and untested project, "an experiment [even], as all life is an experiment," the Court said, borrowing from Justice Holmes.
The Case
In this Petition for Certiorari and Prohibition under Rule 65 with prayer for preliminary injunctive relief, petitioner Hacienda
Luisita, Inc. (HLI) assails and seeks to set aside PARC Resolution No. 2005-32-0116 and Resolution No. 2006-34-0117 issued on
December 22, 2005 and May 3, 2006, respectively, as well as the implementing Notice of Coverage dated January 2, 2006 (Notice
of Coverage).18
The Facts
At the core of the case is Hacienda Luisita de Tarlac (Hacienda Luisita), once a 6,443-hectare mixed agricultural-industrial-
residential expanse straddling several municipalities of Tarlac and owned by Compaia General de Tabacos de Filipinas
(Tabacalera). In 1957, the Spanish owners of Tabacalera offered to sell Hacienda Luisita as well as their controlling interest in the
sugar mill within the hacienda, the Central Azucarera de Tarlac (CAT), as an indivisible transaction. The Tarlac Development
Corporation (Tadeco), then owned and/or controlled by the Jose Cojuangco, Sr. Group, was willing to buy. As agreed upon,
Tadeco undertook to pay the purchase price for Hacienda Luisita in pesos, while that for the controlling interest in CAT, in US
dollars.19
To facilitate the adverted sale-and-purchase package, the Philippine government, through the then Central Bank of the Philippines,
assisted the buyer to obtain a dollar loan from a US bank.20 Also, the Government Service Insurance System (GSIS) Board of
Trustees extended on November 27, 1957 a PhP 5.911 million loan in favor of Tadeco to pay the peso price component of the sale.
One of the conditions contained in the approving GSIS Resolution No. 3203, as later amended by Resolution No. 356, Series of
1958, reads as follows:
That the lots comprising the Hacienda Luisita shall be subdivided by the applicant-corporation and sold at cost to the tenants,
should there be any, and whenever conditions should exist warranting such action under the provisions of the Land Tenure Act; 21
As of March 31, 1958, Tadeco had fully paid the purchase price for the acquisition of Hacienda Luisita and Tabacaleras interest in
CAT.22
The details of the events that happened next involving the hacienda and the political color some of the parties embossed are of
minimal significance to this narration and need no belaboring. Suffice it to state that on May 7, 1980, the martial law
administration filed a suit before the Manila Regional Trial Court (RTC) against Tadeco, et al., for them to surrender Hacienda
Luisita to the then Ministry of Agrarian Reform (MAR, now the Department of Agrarian Reform [DAR]) so that the land can be
distributed to farmers at cost. Responding, Tadeco or its owners alleged that Hacienda Luisita does not have tenants, besides
which sugar landsof which the hacienda consistedare not covered by existing agrarian reform legislations. As perceived then,
the government commenced the case against Tadeco as a political message to the family of the late Benigno Aquino, Jr. 23
Eventually, the Manila RTC rendered judgment ordering Tadeco to surrender Hacienda Luisita to the MAR. Therefrom, Tadeco
appealed to the Court of Appeals (CA).
On March 17, 1988, the Office of the Solicitor General (OSG) moved to withdraw the governments case against Tadeco, et al. By
Resolution of May 18, 1988, the CA dismissed the case the Marcos government initially instituted and won against Tadeco, et al.
The dismissal action was, however, made subject to the obtention by Tadeco of the PARCs approval of a stock distribution plan
(SDP) that must initially be implemented after such approval shall have been secured. 24 The appellate court wrote:
The defendants-appellants x x x filed a motion on April 13, 1988 joining the x x x governmental agencies concerned in moving for
the dismissal of the case subject, however, to the following conditions embodied in the letter dated April 8, 1988 (Annex 2) of the
Secretary of the [DAR] quoted, as follows:
1. Should TADECO fail to obtain approval of the stock distribution plan for failure to comply with all the requirements
for corporate landowners set forth in the guidelines issued by the [PARC]: or
2. If such stock distribution plan is approved by PARC, but TADECO fails to initially implement it.
xxxx
WHEREFORE, the present case on appeal is hereby dismissed without prejudice, and should be revived if any of the conditions as
above set forth is not duly complied with by the TADECO.25
Markedly, Section 10 of EO 22926 allows corporate landowners, as an alternative to the actual land transfer scheme of CARP, to
give qualified beneficiaries the right to purchase shares of stocks of the corporation under a stock ownership arrangement and/or
land-to-share ratio.
Like EO 229, RA 6657, under the latters Sec. 31, also provides two (2) alternative modalities, i.e., land or stock transfer, pursuant
to either of which the corporate landowner can comply with CARP, but subject to well-defined conditions and timeline
requirements. Sec. 31 of RA 6657 provides:
SEC. 31. Corporate Landowners.Corporate landowners may voluntarily transfer ownership over their agricultural landholdings
to the Republic of the Philippines pursuant to Section 20 hereof or to qualified beneficiaries x x x.
Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to
purchase such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural
activities, bears in relation to the companys total assets, under such terms and conditions as may be agreed upon by them. In
no case shall the compensation received by the workers at the time the shares of stocks are distributed be reduced. x x x
Corporations or associations which voluntarily divest a proportion of their capital stock, equity or participation in favor of their
workers or other qualified beneficiaries under this section shall be deemed to have complied with the provisions of this Act:
Provided, That the following conditions are complied with:
(a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and other financial benefits, the
books of the corporation or association shall be subject to periodic audit by certified public accountants chosen by the
beneficiaries;
(b) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall be assured of at least
one (1) representative in the board of directors, or in a management or executive committee, if one exists, of the
corporation or association;
(c) Any shares acquired by such workers and beneficiaries shall have the same rights and features as all other shares; and
(d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said transaction is in favor
of a qualified and registered beneficiary within the same corporation.
If within two (2) years from the approval of this Act, the [voluntary] land or stock transfer envisioned above is not made or
realized or the plan for such stock distribution approved by the PARC within the same period, the agricultural land of the
corporate owners or corporation shall be subject to the compulsory coverage of this Act. (Emphasis added.)
Vis--vis the stock distribution aspect of the aforequoted Sec. 31, DAR issued Administrative Order No. 10, Series of 1988 (DAO
10),27 entitled Guidelines and Procedures for Corporate Landowners Desiring to Avail Themselves of the Stock Distribution Plan
under Section 31 of RA 6657.
From the start, the stock distribution scheme appeared to be Tadecos preferred option, for, on August 23, 1988,28 it organized a
spin-off corporation, HLI, as vehicle to facilitate stock acquisition by the farmworkers. For this purpose, Tadeco assigned and
conveyed to HLI the agricultural land portion (4,915.75 hectares) and other farm-related properties of Hacienda Luisita in
exchange for HLI shares of stock.29
Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose Cojuangco, Jr., and Paz C. Teopaco were the incorporators of HLI. 30
To accommodate the assets transfer from Tadeco to HLI, the latter, with the Securities and Exchange Commissions (SECs)
approval, increased its capital stock on May 10, 1989 from PhP 1,500,000 divided into 1,500,000 shares with a par value of PhP
1/share to PhP 400,000,000 divided into 400,000,000 shares also with par value of PhP 1/share, 150,000,000 of which were to be
issued only to qualified and registered beneficiaries of the CARP, and the remaining 250,000,000 to any stockholder of the
corporation.31
As appearing in its proposed SDP, the properties and assets of Tadeco contributed to the capital stock of HLI, as appraised and
approved by the SEC, have an aggregate value of PhP 590,554,220, or after deducting the total liabilities of the farm amounting to
PhP 235,422,758, a net value of PhP 355,531,462. This translated to 355,531,462 shares with a par value of PhP 1/share.32
On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs) complement of Hacienda Luisita signified in a
referendum their acceptance of the proposed HLIs Stock Distribution Option Plan. On May 11, 1989, the Stock Distribution
Option Agreement (SDOA), styled as a Memorandum of Agreement (MOA),33 was entered into by Tadeco, HLI, and the 5,848
qualified FWBs34 and attested to by then DAR Secretary Philip Juico. The SDOA embodied the basis and mechanics of the SDP,
which would eventually be submitted to the PARC for approval. In the SDOA, the parties agreed to the following:
1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00) in relation to the total
assets (P590,554,220.00) transferred and conveyed to the SECOND PARTY [HLI] is 33.296% that, under the law, is the
proportion of the outstanding capital stock of the SECOND PARTY, which is P355,531,462.00 or 355,531,462 shares
with a par value of P1.00 per share, that has to be distributed to the THIRD PARTY [FWBs] under the stock distribution
plan, the said 33.296% thereof being P118,391,976.85 or 118,391,976.85 shares.
2. The qualified beneficiaries of the stock distribution plan shall be the farmworkers who appear in the annual payroll,
inclusive of the permanent and seasonal employees, who are regularly or periodically employed by the SECOND
PARTY.
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY shall arrange with the FIRST PARTY
[Tadeco] the acquisition and distribution to the THIRD PARTY on the basis of number of days worked and at no cost
to them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the SECOND PARTY that are presently
owned and held by the FIRST PARTY, until such time as the entire block of 118,391,976.85 shares shall have been
completely acquired and distributed to the THIRD PARTY.
4.The SECOND PARTY shall guarantee to the qualified beneficiaries of the [SDP] that every year they will receive on
top of their regular compensation, an amount that approximates the equivalent of three (3%) of the total gross sales from
the production of the agricultural land, whether it be in the form of cash dividends or incentive bonuses or both.
5. Even if only a part or fraction of the shares earmarked for distribution will have been acquired from the FIRST PARTY
and distributed to the THIRD PARTY, FIRST PARTY shall execute at the beginning of each fiscal year an irrevocable
proxy, valid and effective for one (1) year, in favor of the farmworkers appearing as shareholders of the SECOND
PARTY at the start of said year which will empower the THIRD PARTY or their representative to vote in stockholders
and board of directors meetings of the SECOND PARTY convened during the year the entire 33.296% of the
outstanding capital stock of the SECOND PARTY earmarked for distribution and thus be able to gain such number of
seats in the board of directors of the SECOND PARTY that the whole 33.296% of the shares subject to distribution will
be entitled to.
6. In addition, the SECOND PARTY shall within a reasonable time subdivide and allocate for free and without charge
among the qualified family-beneficiaries residing in the place where the agricultural land is situated, residential or
homelots of not more than 240 sq.m. each, with each family-beneficiary being assured of receiving and owning a
homelot in the barangay where it actually resides on the date of the execution of this Agreement.
7. This Agreement is entered into by the parties in the spirit of the (C.A.R.P.) of the government and with the supervision
of the [DAR], with the end in view of improving the lot of the qualified beneficiaries of the [SDP] and obtaining for them
greater benefits. (Emphasis added.)
As may be gleaned from the SDOA, included as part of the distribution plan are: (a) production-sharing equivalent to three
percent (3%) of gross sales from the production of the agricultural land payable to the FWBs in cash dividends or incentive bonus;
and (b) distribution of free homelots of not more than 240 square meters each to family-beneficiaries. The production-sharing, as
the SDP indicated, is payable "irrespective of whether [HLI] makes money or not," implying that the benefits do not partake the
nature of dividends, as the term is ordinarily understood under corporation law.
While a little bit hard to follow, given that, during the period material, the assigned value of the agricultural land in the hacienda
was PhP 196.63 million, while the total assets of HLI was PhP 590.55 million with net assets of PhP 355.53 million, Tadeco/HLI
would admit that the ratio of the land-to-shares of stock corresponds to 33.3% of the outstanding capital stock of the HLI
equivalent to 118,391,976.85 shares of stock with a par value of PhP 1/share.
Subsequently, HLI submitted to DAR its SDP, designated as "Proposal for Stock Distribution under C.A.R.P.," 35which was
substantially based on the SDOA.
Notably, in a follow-up referendum the DAR conducted on October 14, 1989, 5,117 FWBs, out of 5,315 who participated, opted
to receive shares in HLI.36 One hundred thirty-two (132) chose actual land distribution.37
After a review of the SDP, then DAR Secretary Miriam Defensor-Santiago (Sec. Defensor-Santiago) addressed a letter dated
November 6, 198938 to Pedro S. Cojuangco (Cojuangco), then Tadeco president, proposing that the SDP be revised, along the
following lines:
1. That over the implementation period of the [SDP], [Tadeco]/HLI shall ensure that there will be no dilution in the
shares of stocks of individual [FWBs];
2. That a safeguard shall be provided by [Tadeco]/HLI against the dilution of the percentage shareholdings of the
[FWBs], i.e., that the 33% shareholdings of the [FWBs] will be maintained at any given time;
3. That the mechanics for distributing the stocks be explicitly stated in the [MOA] signed between the [Tadeco], HLI and
its [FWBs] prior to the implementation of the stock plan;
4. That the stock distribution plan provide for clear and definite terms for determining the actual number of seats to be
allocated for the [FWBs] in the HLI Board;
5. That HLI provide guidelines and a timetable for the distribution of homelots to qualified [FWBs]; and
6. That the 3% cash dividends mentioned in the [SDP] be expressly provided for [in] the MOA.
In a letter-reply of November 14, 1989 to Sec. Defensor-Santiago, Tadeco/HLI explained that the proposed revisions of the SDP
are already embodied in both the SDP and MOA.39 Following that exchange, the PARC, under then Sec. Defensor-Santiago,
by Resolution No. 89-12-240 dated November 21, 1989, approved the SDP of Tadeco/HLI.41
At the time of the SDP approval, HLI had a pool of farmworkers, numbering 6,296, more or less, composed of permanent,
seasonal and casual master list/payroll and non-master list members.
From 1989 to 2005, HLI claimed to have extended the following benefits to the FWBs:
(a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and fringe benefits
(b) 59 million shares of stock distributed for free to the FWBs;
(c) 150 million pesos (P150,000,000) representing 3% of the gross produce;
(d) 37.5 million pesos (P37,500,000) representing 3% from the sale of 500 hectares of converted agricultural land of
Hacienda Luisita;
(e) 240-square meter homelots distributed for free;
(f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80 hectares at 80 million pesos (P80,000,000) for the
SCTEX;
(g) Social service benefits, such as but not limited to free hospitalization/medical/maternity services, old age/death
benefits and no interest bearing salary/educational loans and rice sugar accounts. 42
Two separate groups subsequently contested this claim of HLI.
On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the hacienda from agricultural to industrial
use,43 pursuant to Sec. 65 of RA 6657, providing:
SEC. 65. Conversion of Lands.After the lapse of five (5) years from its award, when the land ceases to be economically feasible
and sound for agricultural purposes, or the locality has become urbanized and the land will have a greater economic value for
residential, commercial or industrial purposes, the DAR, upon application of the beneficiary or the landowner, with due notice to
the affected parties, and subject to existing laws, may authorize the reclassification, or conversion of the land and its disposition:
Provided, That the beneficiary shall have fully paid its obligation.
The application, according to HLI, had the backing of 5,000 or so FWBs, including respondent Rene Galang, and Jose Julio
Suniga, as evidenced by the Manifesto of Support they signed and which was submitted to the DAR. 44After the usual processing,
the DAR, thru then Sec. Ernesto Garilao, approved the application on August 14, 1996, per DAR Conversion Order No.
030601074-764-(95), Series of 1996,45 subject to payment of three percent (3%) of the gross selling price to the FWBs and to
HLIs continued compliance with its undertakings under the SDP, among other conditions.
On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of stocks of Centennary Holdings, Inc.
(Centennary), ceded 300 hectares of the converted area to the latter.46 Consequently, HLIs Transfer Certificate of Title (TCT) No.
28791047 was canceled and TCT No. 29209148 was issued in the name of Centennary. HLI transferred the remaining 200 hectares
covered by TCT No. 287909 to Luisita Realty Corporation (LRC)49 in two separate transactions in 1997 and 1998, both uniformly
involving 100 hectares for PhP 250 million each.50
Centennary, a corporation with an authorized capital stock of PhP 12,100,000 divided into 12,100,000 shares and wholly-owned
by HLI, had the following incorporators: Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Ernesto G. Teopaco, and
Bernardo R. Lahoz.
Subsequently, Centennary sold51 the entire 300 hectares to Luisita Industrial Park Corporation (LIPCO) for PhP 750 million. The
latter acquired it for the purpose of developing an industrial complex.52 As a result, Centennarys TCT No. 292091 was canceled
to be replaced by TCT No. 31098653 in the name of LIPCO.
From the area covered by TCT No. 310986 was carved out two (2) parcels, for which two (2) separate titles were issued in the
name of LIPCO, specifically: (a) TCT No. 36580054 and (b) TCT No. 365801,55 covering 180 and four hectares, respectively. TCT
No. 310986 was, accordingly, partially canceled.
Later on, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO transferred the parcels covered by its TCT Nos.
365800 and 365801 to the Rizal Commercial Banking Corporation (RCBC) by way of dacion en pagoin payment of LIPCOs PhP
431,695,732.10 loan obligations. LIPCOs titles were canceled and new ones, TCT Nos. 391051 and 391052, were issued to
RCBC.
Apart from the 500 hectares alluded to, another 80.51 hectares were later detached from the area coverage of Hacienda Luisita
which had been acquired by the government as part of the Subic-Clark-Tarlac Expressway (SCTEX) complex. In absolute terms,
4,335.75 hectares remained of the original 4,915 hectares Tadeco ceded to HLI.56
Such, in short, was the state of things when two separate petitions, both undated, reached the DAR in the latter part of 2003. In the
first, denominated as Petition/Protest,57 respondents Jose Julio Suniga and Windsor Andaya, identifying themselves as head of the
Supervisory Group of HLI (Supervisory Group), and 60 other supervisors sought to revoke the SDOA, alleging that HLI had
failed to give them their dividends and the one percent (1%) share in gross sales, as well as the thirty-three percent (33%) share in
the proceeds of the sale of the converted 500 hectares of land. They further claimed that their lives have not improved contrary to
the promise and rationale for the adoption of the SDOA. They also cited violations by HLI of the SDOAs terms. 58 They prayed
for a renegotiation of the SDOA, or, in the alternative, its revocation.
Revocation and nullification of the SDOA and the distribution of the lands in the hacienda were the call in the second petition,
styled as Petisyon (Petition).59 The Petisyon was ostensibly filed on December 4, 2003 by Alyansa ng mga Manggagawang Bukid
ng Hacienda Luisita (AMBALA), where the handwritten name of respondents Rene Galang as "Pangulo AMBALA" and Noel
Mallari as "Sec-Gen. AMBALA"60 appeared. As alleged, the petition was filed on behalf of AMBALAs members purportedly
composing about 80% of the 5,339 FWBs of Hacienda Luisita.
HLI would eventually answer61 the petition/protest of the Supervisory Group. On the other hand, HLIs answer62to the AMBALA
petition was contained in its letter dated January 21, 2005 also filed with DAR.
Meanwhile, the DAR constituted a Special Task Force to attend to issues relating to the SDP of HLI. Among other duties, the
Special Task Force was mandated to review the terms and conditions of the SDOA and PARC Resolution No. 89-12-2 relative to
HLIs SDP; evaluate HLIs compliance reports; evaluate the merits of the petitions for the revocation of the SDP; conduct ocular
inspections or field investigations; and recommend appropriate remedial measures for approval of the Secretary. 63
After investigation and evaluation, the Special Task Force submitted its "Terminal Report: Hacienda Luisita, Incorporated (HLI)
Stock Distribution Plan (SDP) Conflict"64 dated September 22, 2005 (Terminal Report), finding that HLI has not complied with its
obligations under RA 6657 despite the implementation of the SDP.65 The Terminal Report and the Special Task Forces
recommendations were adopted by then DAR Sec. Nasser Pangandaman (Sec. Pangandaman).66
Subsequently, Sec. Pangandaman recommended to the PARC Executive Committee (Excom) (a) the recall/revocation of PARC
Resolution No. 89-12-2 dated November 21, 1989 approving HLIs SDP; and (b) the acquisition of Hacienda Luisita through the
compulsory acquisition scheme. Following review, the PARC Validation Committee favorably endorsed the DAR Secretarys
recommendation afore-stated.67
On December 22, 2005, the PARC issued the assailed Resolution No. 2005-32-01, disposing as follows:
NOW, THEREFORE, on motion duly seconded, RESOLVED, as it is HEREBY RESOLVED, to approve and confirm the
recommendation of the PARC Executive Committee adopting in toto the report of the PARC ExCom Validation Committee
affirming the recommendation of the DAR to recall/revoke the SDO plan of Tarlac Development Corporation/Hacienda Luisita
Incorporated.
RESOLVED, further, that the lands subject of the recalled/revoked TDC/HLI SDO plan be forthwith placed under the compulsory
coverage or mandated land acquisition scheme of the [CARP].
APPROVED.68
A copy of Resolution No. 2005-32-01 was served on HLI the following day, December 23, without any copy of the documents
adverted to in the resolution attached. A letter-request dated December 28, 200569 for certified copies of said documents was sent
to, but was not acted upon by, the PARC secretariat.
Therefrom, HLI, on January 2, 2006, sought reconsideration.70 On the same day, the DAR Tarlac provincial office issued the
Notice of Coverage71 which HLI received on January 4, 2006.
Its motion notwithstanding, HLI has filed the instant recourse in light of what it considers as the DARs hasty placing of Hacienda
Luisita under CARP even before PARC could rule or even read the motion for reconsideration.72 As HLI later rued, it "can not
know from the above-quoted resolution the facts and the law upon which it is based." 73
PARC would eventually deny HLIs motion for reconsideration via Resolution No. 2006-34-01 dated May 3, 2006.
By Resolution of June 14, 2006,74 the Court, acting on HLIs motion, issued a temporary restraining order, 75enjoining the
implementation of Resolution No. 2005-32-01 and the notice of coverage.
On July 13, 2006, the OSG, for public respondents PARC and the DAR, filed its Comment76 on the petition.
On December 2, 2006, Noel Mallari, impleaded by HLI as respondent in his capacity as "Sec-Gen. AMBALA," filed his
Manifestation and Motion with Comment Attached dated December 4, 2006 (Manifestation and Motion). 77 In it, Mallari stated
that he has broken away from AMBALA with other AMBALA ex-members and formed Farmworkers Agrarian Reform
Movement, Inc. (FARM).78 Should this shift in alliance deny him standing, Mallari also prayed that FARM be allowed to
intervene.
As events would later develop, Mallari had a parting of ways with other FARM members, particularly would-be intervenors
Renato Lalic, et al. As things stand, Mallari returned to the AMBALA fold, creating the AMBALA-Noel Mallari faction and
leaving Renato Lalic, et al. as the remaining members of FARM who sought to intervene.
On January 10, 2007, the Supervisory Group79 and the AMBALA-Rene Galang faction submitted their Comment/Opposition
dated December 17, 2006.80
On October 30, 2007, RCBC filed a Motion for Leave to Intervene and to File and Admit Attached Petition-In-Intervention dated
October 18, 2007.81 LIPCO later followed with a similar motion.82 In both motions, RCBC and LIPCO contended that the assailed
resolution effectively nullified the TCTs under their respective names as the properties covered in the TCTs were veritably
included in the January 2, 2006 notice of coverage. In the main, they claimed that the revocation of the SDP cannot legally affect
their rights as innocent purchasers for value. Both motions for leave to intervene were granted and the corresponding petitions-in-
intervention admitted.
On August 18, 2010, the Court heard the main and intervening petitioners on oral arguments. On the other hand, the Court, on
August 24, 2010, heard public respondents as well as the respective counsels of the AMBALA-Mallari-Supervisory Group, the
AMBALA-Galang faction, and the FARM and its 27 members83 argue their case.
Prior to the oral arguments, however, HLI; AMBALA, represented by Mallari; the Supervisory Group, represented by Suniga and
Andaya; and the United Luisita Workers Union, represented by Eldifonso Pingol, filed with the Court a joint submission and
motion for approval of a Compromise Agreement (English and Tagalog versions)dated August 6, 2010.
On August 31, 2010, the Court, in a bid to resolve the dispute through an amicable settlement, issued a Resolution 84 creating a
Mediation Panel composed of then Associate Justice Ma. Alicia Austria-Martinez, as chairperson, and former CA Justices Hector
Hofilea and Teresita Dy-Liacco Flores, as members. Meetings on five (5) separate dates, i.e., September 8, 9, 14, 20, and 27,
2010, were conducted. Despite persevering and painstaking efforts on the part of the panel, mediation had to be discontinued
when no acceptable agreement could be reached.
The Issues
HLI raises the following issues for our consideration:
I.
WHETHER OR NOT PUBLIC RESPONDENTS PARC AND SECRETARY PANGANDAMAN HAVE
JURISDICTION, POWER AND/OR AUTHORITY TO NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA.
II.
[IF SO], x x x CAN THEY STILL EXERCISE SUCH JURISDICTION, POWER AND/OR AUTHORITY AT THIS
TIME, I.E., AFTER SIXTEEN (16) YEARS FROM THE EXECUTION OF THE SDOA AND ITS
IMPLEMENTATION WITHOUT VIOLATING SECTIONS 1 AND 10 OF ARTICLE III (BILL OF RIGHTS) OF THE
CONSTITUTION AGAINST DEPRIVATION OF PROPERTY WITHOUT DUE PROCESS OF LAW AND THE
IMPAIRMENT OF CONTRACTUAL RIGHTS AND OBLIGATIONS? MOREOVER, ARE THERE LEGAL
GROUNDS UNDER THE CIVIL CODE, viz, ARTICLE 1191 x x x, ARTICLES 1380, 1381 AND 1382 x x x ARTICLE
1390 x x x AND ARTICLE 1409 x x x THAT CAN BE INVOKED TO NULLIFY, RECALL, REVOKE, OR RESCIND
THE SDOA?
III.
WHETHER THE PETITIONS TO NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA HAVE ANY LEGAL
BASIS OR GROUNDS AND WHETHER THE PETITIONERS THEREIN ARE THE REAL PARTIES-IN-INTEREST
TO FILE SAID PETITIONS.
IV.
WHETHER THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES TO THE SDOA ARE NOW
GOVERNED BY THE CORPORATION CODE (BATAS PAMBANSA BLG. 68) AND NOT BY THE x x x
[CARL] x x x.
On the other hand, RCBC submits the following issues:
I.
RESPONDENT PARC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT DID NOT EXCLUDE THE SUBJECT PROPERTY FROM THE COVERAGE OF THE
CARP DESPITE THE FACT THAT PETITIONER-INTERVENOR RCBC HAS ACQUIRED VESTED RIGHTS AND
INDEFEASIBLE TITLE OVER THE SUBJECT PROPERTY AS AN INNOCENT PURCHASER FOR VALUE.
A. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF COVERAGE DATED 02
JANUARY 2006 HAVE THE EFFECT OF NULLIFYING TCT NOS. 391051 AND 391052 IN THE NAME
OF PETITIONER-INTERVENOR RCBC.
B. AS AN INNOCENT PURCHASER FOR VALUE, PETITIONER-INTERVENOR RCBC CANNOT BE
PREJUDICED BY A SUBSEQUENT REVOCATION OR RESCISSION OF THE SDOA.
II.
THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF COVERAGE DATED 02 JANUARY 2006
WERE ISSUED WITHOUT AFFORDING PETITIONER-INTERVENOR RCBC ITS RIGHT TO DUE PROCESS AS
AN INNOCENT PURCHASER FOR VALUE.
LIPCO, like RCBC, asserts having acquired vested and indefeasible rights over certain portions of the converted property, and,
hence, would ascribe on PARC the commission of grave abuse of discretion when it included those portions in the notice of
coverage. And apart from raising issues identical with those of HLI, such as but not limited to the absence of valid grounds to
warrant the rescission and/or revocation of the SDP, LIPCO would allege that the assailed resolution and the notice of coverage
were issued without affording it the right to due process as an innocent purchaser for value. The government, LIPCO also argues,
is estopped from recovering properties which have since passed to innocent parties.
Simply formulated, the principal determinative issues tendered in the main petition and to which all other related questions must
yield boil down to the following: (1) matters of standing; (2) the constitutionality of Sec. 31 of RA 6657; (3) the jurisdiction of
PARC to recall or revoke HLIs SDP; (4) the validity or propriety of such recall or revocatory action; and (5) corollary to (4), the
validity of the terms and conditions of the SDP, as embodied in the SDOA.
Our Ruling
I.
We first proceed to the examination of the preliminary issues before delving on the more serious challenges bearing on the validity
of PARCs assailed issuance and the grounds for it.
Supervisory Group, AMBALA and their
respective leaders are real parties-in-interest
HLI would deny real party-in-interest status to the purported leaders of the Supervisory Group and AMBALA, i.e., Julio Suniga,
Windsor Andaya, and Rene Galang, who filed the revocatory petitions before the DAR. As HLI would have it, Galang, the self-
styled head of AMBALA, gained HLI employment in June 1990 and, thus, could not have been a party to the SDOA executed a
year earlier.85 As regards the Supervisory Group, HLI alleges that supervisors are not regular farmworkers, but the company
nonetheless considered them FWBs under the SDOA as a mere concession to enable them to enjoy the same benefits given
qualified regular farmworkers. However, if the SDOA would be canceled and land distribution effected, so HLI claims, citing
Fortich v. Corona,86 the supervisors would be excluded from receiving lands as farmworkers other than the regular farmworkers
who are merely entitled to the "fruits of the land."87
The SDOA no less identifies "the SDP qualified beneficiaries" as "the farmworkers who appear in the annual payroll, inclusive of
the permanent and seasonal employees, who are regularly or periodically employed by [HLI]."88 Galang, per HLIs own
admission, is employed by HLI, and is, thus, a qualified beneficiary of the SDP; he comes within the definition of a real party-in-
interest under Sec. 2, Rule 3 of the Rules of Court, meaning, one who stands to be benefited or injured by the judgment in the suit
or is the party entitled to the avails of the suit.
The same holds true with respect to the Supervisory Group whose members were admittedly employed by HLI and whose names
and signatures even appeared in the annex of the SDOA. Being qualified beneficiaries of the SDP, Suniga and the other 61
supervisors are certainly parties who would benefit or be prejudiced by the judgment recalling the SDP or replacing it with some
other modality to comply with RA 6657.
Even assuming that members of the Supervisory Group are not regular farmworkers, but are in the category of "other
farmworkers" mentioned in Sec. 4, Article XIII of the Constitution,89 thus only entitled to a share of the fruits of the land, as
indeed Fortich teaches, this does not detract from the fact that they are still identified as being among the "SDP qualified
beneficiaries." As such, they are, thus, entitled to bring an action upon the SDP. 90 At any rate, the following admission made by
Atty. Gener Asuncion, counsel of HLI, during the oral arguments should put to rest any lingering doubt as to the status of
protesters Galang, Suniga, and Andaya:
Justice Bersamin: x x x I heard you a while ago that you were conceding the qualified farmer beneficiaries of Hacienda Luisita
were real parties in interest?
Atty. Asuncion: Yes, Your Honor please, real party in interest which that question refers to the complaints of protest initiated
before the DAR and the real party in interest there be considered as possessed by the farmer beneficiaries who initiated the
protest.91
Further, under Sec. 50, paragraph 4 of RA 6657, farmer-leaders are expressly allowed to represent themselves, their fellow
farmers or their organizations in any proceedings before the DAR. Specifically:
SEC. 50. Quasi-Judicial Powers of the DAR.x x x
xxxx
Responsible farmer leaders shall be allowed to represent themselves, their fellow farmers or their organizations in any
proceedings before the DAR: Provided, however, that when there are two or more representatives for any individual or group,
the representatives should choose only one among themselves to represent such party or group before any DAR proceedings.
(Emphasis supplied.)
Clearly, the respective leaders of the Supervisory Group and AMBALA are contextually real parties-in-interest allowed by law to
file a petition before the DAR or PARC.
This is not necessarily to say, however, that Galang represents AMBALA, for as records show and as HLI aptly noted, 92 his
"petisyon" filed with DAR did not carry the usual authorization of the individuals in whose behalf it was supposed to have been
instituted. To date, such authorization document, which would logically include a list of the names of the authorizing FWBs, has
yet to be submitted to be part of the records.
PARCs Authority to Revoke a Stock Distribution Plan
On the postulate that the subject jurisdiction is conferred by law, HLI maintains that PARC is without authority to revoke an SDP,
for neither RA 6657 nor EO 229 expressly vests PARC with such authority. While, as HLI argued, EO 229 empowers PARC to
approve the plan for stock distribution in appropriate cases, the empowerment only includes the power to disapprove, but not to
recall its previous approval of the SDP after it has been implemented by the parties.93 To HLI, it is the court which has jurisdiction
and authority to order the revocation or rescission of the PARC-approved SDP.
We disagree.
Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve the plan for stock distribution of the corporate
landowner belongs to PARC. However, contrary to petitioner HLIs posture, PARC also has the power to revoke the SDP which it
previously approved. It may be, as urged, that RA 6657 or other executive issuances on agrarian reform do not explicitly vest the
PARC with the power to revoke/recall an approved SDP. Such power or authority, however, is deemed possessed by PARC under
the principle of necessary implication, a basic postulate that what is implied in a statute is as much a part of it as that which is
expressed.94
We have explained that "every statute is understood, by implication, to contain all such provisions as may be necessary to
effectuate its object and purpose, or to make effective rights, powers, privileges or jurisdiction which it grants, including all such
collateral and subsidiary consequences as may be fairly and logically inferred from its terms." 95 Further, "every statutory grant of
power, right or privilege is deemed to include all incidental power, right or privilege.96
Gordon v. Veridiano II is instructive:
The power to approve a license includes by implication, even if not expressly granted, the power to revoke it. By extension, the
power to revoke is limited by the authority to grant the license, from which it is derived in the first place. Thus, if the FDA grants
a license upon its finding that the applicant drug store has complied with the requirements of the general laws and the
implementing administrative rules and regulations, it is only for their violation that the FDA may revoke the said license. By the
same token, having granted the permit upon his ascertainment that the conditions thereof as applied x x x have been complied
with, it is only for the violation of such conditions that the mayor may revoke the said permit. 97 (Emphasis supplied.)
Following the doctrine of necessary implication, it may be stated that the conferment of express power to approve a plan for stock
distribution of the agricultural land of corporate owners necessarily includes the power to revoke or recall the approval of the plan.
As public respondents aptly observe, to deny PARC such revocatory power would reduce it into a toothless agency of CARP,
because the very same agency tasked to ensure compliance by the corporate landowner with the approved SDP would be without
authority to impose sanctions for non-compliance with it.98 With the view We take of the case, only PARC can effect such
revocation. The DAR Secretary, by his own authority as such, cannot plausibly do so, as the acceptance and/or approval of the
SDP sought to be taken back or undone is the act of PARC whose official composition includes, no less, the President as chair, the
DAR Secretary as vice-chair, and at least eleven (11) other department heads.99
On another but related issue, the HLI foists on the Court the argument that subjecting its landholdings to compulsory distribution
after its approved SDP has been implemented would impair the contractual obligations created under the SDOA.
The broad sweep of HLIs argument ignores certain established legal precepts and must, therefore, be rejected.
A law authorizing interference, when appropriate, in the contractual relations between or among parties is deemed read into the
contract and its implementation cannot successfully be resisted by force of the non-impairment guarantee. There is, in that
instance, no impingement of the impairment clause, the non-impairment protection being applicable only to laws that derogate
prior acts or contracts by enlarging, abridging or in any manner changing the intention of the parties. Impairment, in fine, obtains
if a subsequent law changes the terms of a contract between the parties, imposes new conditions, dispenses with those agreed upon
or withdraws existing remedies for the enforcement of the rights of the parties.100 Necessarily, the constitutional proscription
would not apply to laws already in effect at the time of contract execution, as in the case of RA 6657, in relation to DAO 10, vis--
vis HLIs SDOA. As held in Serrano v. Gallant Maritime Services, Inc.:
The prohibition [against impairment of the obligation of contracts] is aligned with the general principle that laws newly enacted
have only a prospective operation, and cannot affect acts or contracts already perfected; however, as to laws already in existence,
their provisions are read into contracts and deemed a part thereof. Thus, the non-impairment clause under Section 10, Article II [of
the Constitution] is limited in application to laws about to be enacted that would in any way derogate from existing acts or
contracts by enlarging, abridging or in any manner changing the intention of the parties thereto. 101 (Emphasis supplied.)
Needless to stress, the assailed Resolution No. 2005-32-01 is not the kind of issuance within the ambit of Sec. 10, Art. III of the
Constitution providing that "[n]o law impairing the obligation of contracts shall be passed."
Parenthetically, HLI tags the SDOA as an ordinary civil law contract and, as such, a breach of its terms and conditions is not a
PARC administrative matter, but one that gives rise to a cause of action cognizable by regular courts. 102 This contention has little
to commend itself. The SDOA is a special contract imbued with public interest, entered into and crafted pursuant to the provisions
of RA 6657. It embodies the SDP, which requires for its validity, or at least its enforceability, PARCs approval. And the fact that
the certificate of compliance103to be issued by agrarian authorities upon completion of the distribution of stocksis revocable
by the same issuing authority supports the idea that everything about the implementation of the SDP is, at the first instance,
subject to administrative adjudication.
HLI also parlays the notion that the parties to the SDOA should now look to the Corporation Code, instead of to RA 6657, in
determining their rights, obligations and remedies. The Code, it adds, should be the applicable law on the disposition of the
agricultural land of HLI.
Contrary to the view of HLI, the rights, obligations and remedies of the parties to the SDOA embodying the SDP are primarily
governed by RA 6657. It should abundantly be made clear that HLI was precisely created in order to comply with RA 6657, which
the OSG aptly described as the "mother law" of the SDOA and the SDP.104 It is, thus, paradoxical for HLI to shield itself from the
coverage of CARP by invoking exclusive applicability of the Corporation Code under the guise of being a corporate entity.
Without in any way minimizing the relevance of the Corporation Code since the FWBs of HLI are also stockholders, its
applicability is limited as the rights of the parties arising from the SDP should not be made to supplant or circumvent the agrarian
reform program.
Without doubt, the Corporation Code is the general law providing for the formation, organization and regulation of private
corporations. On the other hand, RA 6657 is the special law on agrarian reform. As between a general and special law, the latter
shall prevailgeneralia specialibus non derogant.105 Besides, the present impasse between HLI and the private respondents is not
an intra-corporate dispute which necessitates the application of the Corporation Code. What private respondents questioned before
the DAR is the proper implementation of the SDP and HLIs compliance with RA 6657. Evidently, RA 6657 should be the
applicable law to the instant case.
HLI further contends that the inclusion of the agricultural land of Hacienda Luisita under the coverage of CARP and the eventual
distribution of the land to the FWBs would amount to a disposition of all or practically all of the corporate assets of HLI. HLI
would add that this contingency, if ever it comes to pass, requires the applicability of the Corporation Code provisions on
corporate dissolution.
We are not persuaded.
Indeed, the provisions of the Corporation Code on corporate dissolution would apply insofar as the winding up of HLIs affairs or
liquidation of the assets is concerned. However, the mere inclusion of the agricultural land of Hacienda Luisita under the coverage
of CARP and the lands eventual distribution to the FWBs will not, without more, automatically trigger the dissolution of HLI. As
stated in the SDOA itself, the percentage of the value of the agricultural land of Hacienda Luisita in relation to the total assets
transferred and conveyed by Tadeco to HLI comprises only 33.296%, following this equation: value of the agricultural lands
divided by total corporate assets. By no stretch of imagination would said percentage amount to a disposition of all or practically
all of HLIs corporate assets should compulsory land acquisition and distribution ensue.
This brings us to the validity of the revocation of the approval of the SDP sixteen (16) years after its execution pursuant to Sec. 31
of RA 6657 for the reasons set forth in the Terminal Report of the Special Task Force, as endorsed by PARC Excom. But first, the
matter of the constitutionality of said section.
Constitutional Issue
FARM asks for the invalidation of Sec. 31 of RA 6657, insofar as it affords the corporation, as a mode of CARP compliance, to
resort to stock distribution, an arrangement which, to FARM, impairs the fundamental right of farmers and farmworkers under
Sec. 4, Art. XIII of the Constitution.106
To a more specific, but direct point, FARM argues that Sec. 31 of RA 6657 permits stock transfer in lieu of outright agricultural
land transfer; in fine, there is stock certificate ownership of the farmers or farmworkers instead of them owning the land, as
envisaged in the Constitution. For FARM, this modality of distribution is an anomaly to be annulled for being inconsistent with
the basic concept of agrarian reform ingrained in Sec. 4, Art. XIII of the Constitution.107
Reacting, HLI insists that agrarian reform is not only about transfer of land ownership to farmers and other qualified beneficiaries.
It draws attention in this regard to Sec. 3(a) of RA 6657 on the concept and scope of the term "agrarian reform." The
constitutionality of a law, HLI added, cannot, as here, be attacked collaterally.
The instant challenge on the constitutionality of Sec. 31 of RA 6657 and necessarily its counterpart provision in EO 229 must fail
as explained below.
When the Court is called upon to exercise its power of judicial review over, and pass upon the constitutionality of, acts of the
executive or legislative departments, it does so only when the following essential requirements are first met, to wit:
(1) there is an actual case or controversy;
(2) that the constitutional question is raised at the earliest possible opportunity by a proper party or one with locus standi;
and
(3) the issue of constitutionality must be the very lis mota of the case. 108
Not all the foregoing requirements are satisfied in the case at bar.
While there is indeed an actual case or controversy, intervenor FARM, composed of a small minority of 27 farmers, has yet to
explain its failure to challenge the constitutionality of Sec. 3l of RA 6657, since as early as November 21, l989 when PARC
approved the SDP of Hacienda Luisita or at least within a reasonable time thereafter and why its members received benefits from
the SDP without so much of a protest. It was only on December 4, 2003 or 14 years after approval of the SDP via PARC
Resolution No. 89-12-2 dated November 21, 1989 that said plan and approving resolution were sought to be revoked, but not, to
stress, by FARM or any of its members, but by petitioner AMBALA. Furthermore, the AMBALA petition did NOT question the
constitutionality of Sec. 31 of RA 6657, but concentrated on the purported flaws and gaps in the subsequent implementation of the
SDP. Even the public respondents, as represented by the Solicitor General, did not question the constitutionality of the provision.
On the other hand, FARM, whose 27 members formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only on
May 3, 2007 when it filed its Supplemental Comment with the Court. Thus, it took FARM some eighteen (18) years from
November 21, 1989 before it challenged the constitutionality of Sec. 31 of RA 6657 which is quite too late in the day. The FARM
members slept on their rights and even accepted benefits from the SDP with nary a complaint on the alleged unconstitutionality of
Sec. 31 upon which the benefits were derived. The Court cannot now be goaded into resolving a constitutional issue that FARM
failed to assail after the lapse of a long period of time and the occurrence of numerous events and activities which resulted from
the application of an alleged unconstitutional legal provision.
It has been emphasized in a number of cases that the question of constitutionality will not be passed upon by the Court unless it is
properly raised and presented in an appropriate case at the first opportunity. 109 FARM is, therefore, remiss in belatedly questioning
the constitutionality of Sec. 31 of RA 6657. The second requirement that the constitutional question should be raised at the earliest
possible opportunity is clearly wanting.
The last but the most important requisite that the constitutional issue must be the very lis mota of the case does not likewise
obtain. The lis mota aspect is not present, the constitutional issue tendered not being critical to the resolution of the case. The
unyielding rule has been to avoid, whenever plausible, an issue assailing the constitutionality of a statute or governmental act. 110 If
some other grounds exist by which judgment can be made without touching the constitutionality of a law, such recourse is
favored.111 Garcia v. Executive Secretary explains why:
Lis Mota the fourth requirement to satisfy before this Court will undertake judicial review means that the Court will not
pass upon a question of unconstitutionality, although properly presented, if the case can be disposed of on some other ground,
such as the application of the statute or the general law. The petitioner must be able to show that the case cannot be legally
resolved unless the constitutional question raised is determined. This requirement is based on the rule that every law has in its
favor the presumption of constitutionality; to justify its nullification, there must be a clear and unequivocal breach of the
Constitution, and not one that is doubtful, speculative, or argumentative.112 (Italics in the original.)
The lis mota in this case, proceeding from the basic positions originally taken by AMBALA (to which the FARM members
previously belonged) and the Supervisory Group, is the alleged non-compliance by HLI with the conditions of the SDP to support
a plea for its revocation. And before the Court, the lis mota is whether or not PARC acted in grave abuse of discretion when it
ordered the recall of the SDP for such non-compliance and the fact that the SDP, as couched and implemented, offends certain
constitutional and statutory provisions. To be sure, any of these key issues may be resolved without plunging into the
constitutionality of Sec. 31 of RA 6657. Moreover, looking deeply into the underlying petitions of AMBALA, et al., it is not the
said section per se that is invalid, but rather it is the alleged application of the said provision in the SDP that is flawed.
It may be well to note at this juncture that Sec. 5 of RA 9700,113 amending Sec. 7 of RA 6657, has all but superseded Sec. 31 of
RA 6657 vis--vis the stock distribution component of said Sec. 31. In its pertinent part, Sec. 5 of RA 9700 provides: "[T]hat
after June 30, 2009, the modes of acquisition shall be limited to voluntary offer to sell and compulsory acquisition." Thus, for
all intents and purposes, the stock distribution scheme under Sec. 31 of RA 6657 is no longer an available option under existing
law. The question of whether or not it is unconstitutional should be a moot issue.
It is true that the Court, in some cases, has proceeded to resolve constitutional issues otherwise already moot and
academic114 provided the following requisites are present:
x x x first, there is a grave violation of the Constitution; second, the exceptional character of the situation and the paramount
public interest is involved; third, when the constitutional issue raised requires formulation of controlling principles to guide the
bench, the bar, and the public; fourth, the case is capable of repetition yet evading review.
These requisites do not obtain in the case at bar.
For one, there appears to be no breach of the fundamental law. Sec. 4, Article XIII of the Constitution reads:
The State shall, by law, undertake an agrarian reform program founded on the right of the farmers and regular farmworkers, who
are landless, to OWN directly or COLLECTIVELY THE LANDS THEY TILL or, in the case of other farmworkers, to receive a
just share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands,
subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological,
developmental, or equity considerations, and subject to the payment of just compensation. In determining retention limits, the
State shall respect the right of small landowners. The State shall further provide incentives for voluntary land-sharing. (Emphasis
supplied.)
The wording of the provision is unequivocalthe farmers and regular farmworkers have a right TO OWN DIRECTLY OR
COLLECTIVELY THE LANDS THEY TILL. The basic law allows two (2) modes of land distributiondirect and indirect
ownership. Direct transfer to individual farmers is the most commonly used method by DAR and widely accepted. Indirect
transfer through collective ownership of the agricultural land is the alternative to direct ownership of agricultural land by
individual farmers. The aforequoted Sec. 4 EXPRESSLY authorizes collective ownership by farmers. No language can be found
in the 1987 Constitution that disqualifies or prohibits corporations or cooperatives of farmers from being the legal entity through
which collective ownership can be exercised. The word "collective" is defined as "indicating a number of persons or things
considered as constituting one group or aggregate,"115 while "collectively" is defined as "in a collective sense or manner; in a mass
or body."116 By using the word "collectively," the Constitution allows for indirect ownership of land and not just outright
agricultural land transfer. This is in recognition of the fact that land reform may become successful even if it is done through the
medium of juridical entities composed of farmers.
Collective ownership is permitted in two (2) provisions of RA 6657. Its Sec. 29 allows workers cooperatives or associations to
collectively own the land, while the second paragraph of Sec. 31 allows corporations or associations to own agricultural land with
the farmers becoming stockholders or members. Said provisions read:
SEC. 29. Farms owned or operated by corporations or other business associations.In the case of farms owned or operated by
corporations or other business associations, the following rules shall be observed by the PARC.
In general, lands shall be distributed directly to the individual worker-beneficiaries.
In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the worker beneficiaries
who shall form a workers cooperative or association which will deal with the corporation or business association. x x x
(Emphasis supplied.)
SEC. 31. Corporate Landowners. x x x
xxxx
Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to purchase
such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in
relation to the companys total assets, under such terms and conditions as may be agreed upon by them. In no case shall the
compensation received by the workers at the time the shares of stocks are distributed be reduced. The same principle shall be
applied to associations, with respect to their equity or participation. x x x (Emphasis supplied.)
Clearly, workers cooperatives or associations under Sec. 29 of RA 6657 and corporations or associations under the succeeding
Sec. 31, as differentiated from individual farmers, are authorized vehicles for the collective ownership of agricultural land.
Cooperatives can be registered with the Cooperative Development Authority and acquire legal personality of their own, while
corporations are juridical persons under the Corporation Code. Thus, Sec. 31 is constitutional as it simply implements Sec. 4 of
Art. XIII of the Constitution that land can be owned COLLECTIVELY by farmers. Even the framers of the l987 Constitution are
in unison with respect to the two (2) modes of ownership of agricultural lands tilled by farmersDIRECT and COLLECTIVE,
thus:
MR. NOLLEDO. And when we talk of the phrase "to own directly," we mean the principle of direct ownership by the tiller?
MR. MONSOD. Yes.
MR. NOLLEDO. And when we talk of "collectively," we mean communal ownership, stewardship or State ownership?
MS. NIEVA. In this section, we conceive of cooperatives; that is farmers cooperatives owning the land, not the State.
MR. NOLLEDO. And when we talk of "collectively," referring to farmers cooperatives, do the farmers own specific areas of land
where they only unite in their efforts?
MS. NIEVA. That is one way.
MR. NOLLEDO. Because I understand that there are two basic systems involved: the "moshave" type of agriculture and the
"kibbutz." So are both contemplated in the report?
MR. TADEO. Ang dalawa kasing pamamaraan ng pagpapatupad ng tunay na reporma sa lupa ay ang pagmamay-ari ng lupa na
hahatiin sa individual na pagmamay-ari directly at ang tinatawag na sama-samang gagawin ng mga magbubukid. Tulad sa
Negros, ang gusto ng mga magbubukid ay gawin nila itong "cooperative or collective farm." Ang ibig sabihin ay sama-sama
nilang sasakahin.
xxxx
MR. TINGSON. x x x When we speak here of "to own directly or collectively the lands they till," is this land for the tillers rather
than land for the landless? Before, we used to hear "land for the landless," but now the slogan is "land for the tillers." Is that right?
MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the tillers. Ang ibig sabihin ng "directly" ay tulad sa
implementasyon sa rice and corn lands kung saan inaari na ng mga magsasaka ang lupang binubungkal nila. Ang ibig sabihin
naman ng "collectively" ay sama-samang paggawa sa isang lupain o isang bukid, katulad ng sitwasyon sa Negros. 117 (Emphasis
supplied.)
As Commissioner Tadeo explained, the farmers will work on the agricultural land "sama-sama" or collectively. Thus, the main
requisite for collective ownership of land is collective or group work by farmers of the agricultural land. Irrespective of whether
the landowner is a cooperative, association or corporation composed of farmers, as long as concerted group work by the farmers
on the land is present, then it falls within the ambit of collective ownership scheme.
Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a commitment on the part of the State to pursue,by law, an
agrarian reform program founded on the policy of land for the landless, but subject to such priorities as Congress may prescribe,
taking into account such abstract variable as "equity considerations." The textual reference to a law and Congress necessarily
implies that the above constitutional provision is not self-executoryand that legislation is needed to implement the urgently
needed program of agrarian reform. And RA 6657 has been enacted precisely pursuant to and as a mechanism to carry out the
constitutional directives. This piece of legislation, in fact, restates 118 the agrarian reform policy established in the aforementioned
provision of the Constitution of promoting the welfare of landless farmers and farmworkers. RA 6657 thus defines "agrarian
reform" as "the redistribution of lands to farmers and regular farmworkers who are landless to lift the economic status of the
beneficiaries and all other arrangements alternative to the physical redistribution of lands, such as production or profit
sharing, labor administration and the distribution of shares of stock which will allow beneficiaries to receive a just share of the
fruits of the lands they work."
With the view We take of this case, the stock distribution option devised under Sec. 31 of RA 6657 hews with the agrarian reform
policy, as instrument of social justice under Sec. 4 of Article XIII of the Constitution. Albeit land ownership for the landless
appears to be the dominant theme of that policy, We emphasize that Sec. 4, Article XIII of the Constitution, as couched, does not
constrict Congress to passing an agrarian reform law planted on direct land transfer to and ownership by farmers and no other, or
else the enactment suffers from the vice of unconstitutionality. If the intention were otherwise, the framers of the Constitution
would have worded said section in a manner mandatory in character.
For this Court, Sec. 31 of RA 6657, with its direct and indirect transfer features, is not inconsistent with the States commitment to
farmers and farmworkers to advance their interests under the policy of social justice. The legislature, thru Sec. 31 of RA 6657, has
chosen a modality for collective ownership by which the imperatives of social justice may, in its estimation, be approximated, if
not achieved. The Court should be bound by such policy choice.
FARM contends that the farmers in the stock distribution scheme under Sec. 31 do not own the agricultural land but are merely
given stock certificates. Thus, the farmers lose control over the land to the board of directors and executive officials of the
corporation who actually manage the land. They conclude that such arrangement runs counter to the mandate of the Constitution
that any agrarian reform must preserve the control over the land in the hands of the tiller.
This contention has no merit.
While it is true that the farmer is issued stock certificates and does not directly own the land, still, the Corporation Code is clear
that the FWB becomes a stockholder who acquires an equitable interest in the assets of the corporation, which include the
agricultural lands. It was explained that the "equitable interest of the shareholder in the property of the corporation is represented
by the term stock, and the extent of his interest is described by the term shares. The expression shares of stock when qualified by
words indicating number and ownership expresses the extent of the owners interest in the corporate property." 119 A share of stock
typifies an aliquot part of the corporations property, or the right to share in its proceeds to that extent when distributed according
to law and equity and that its holder is not the owner of any part of the capital of the corporation.120 However, the FWBs will
ultimately own the agricultural lands owned by the corporation when the corporation is eventually dissolved and liquidated.
Anent the alleged loss of control of the farmers over the agricultural land operated and managed by the corporation, a reading of
the second paragraph of Sec. 31 shows otherwise. Said provision provides that qualified beneficiaries have "the right to purchase
such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in
relation to the companys total assets." The wording of the formula in the computation of the number of shares that can be bought
by the farmers does not mean loss of control on the part of the farmers. It must be remembered that the determination of the
percentage of the capital stock that can be bought by the farmers depends on the value of the agricultural land and the value of the
total assets of the corporation.
There is, thus, nothing unconstitutional in the formula prescribed by RA 6657. The policy on agrarian reform is that control over
the agricultural land must always be in the hands of the farmers. Then it falls on the shoulders of DAR and PARC to see to it the
farmers should always own majority of the common shares entitled to elect the members of the board of directors to ensure that
the farmers will have a clear majority in the board. Before the SDP is approved, strict scrutiny of the proposed SDP must always
be undertaken by the DAR and PARC, such that the value of the agricultural land contributed to the corporation must always be
more than 50% of the total assets of the corporation to ensure that the majority of the members of the board of directors are
composed of the farmers. The PARC composed of the President of the Philippines and cabinet secretaries must see to it that
control over the board of directors rests with the farmers by rejecting the inclusion of non-agricultural assets which will yield the
majority in the board of directors to non-farmers. Any deviation, however, by PARC or DAR from the correct application of the
formula prescribed by the second paragraph of Sec. 31 of RA 6675 does not make said provision constitutionally infirm. Rather, it
is the application of said provision that can be challenged. Ergo, Sec. 31 of RA 6657 does not trench on the constitutional policy
of ensuring control by the farmers.
A view has been advanced that there can be no agrarian reform unless there is land distribution and that actual land distribution is
the essential characteristic of a constitutional agrarian reform program. On the contrary, there have been so many instances where,
despite actual land distribution, the implementation of agrarian reform was still unsuccessful. As a matter of fact, this Court may
take judicial notice of cases where FWBs sold the awarded land even to non-qualified persons and in violation of the prohibition
period provided under the law. This only proves to show that the mere fact that there is land distribution does not guarantee a
successful implementation of agrarian reform.
As it were, the principle of "land to the tiller" and the old pastoral model of land ownership where non-human juridical persons,
such as corporations, were prohibited from owning agricultural lands are no longer realistic under existing conditions. Practically,
an individual farmer will often face greater disadvantages and difficulties than those who exercise ownership in a collective
manner through a cooperative or corporation. The former is too often left to his own devices when faced with failing crops and
bad weather, or compelled to obtain usurious loans in order to purchase costly fertilizers or farming equipment. The experiences
learned from failed land reform activities in various parts of the country are lack of financing, lack of farm equipment, lack of
fertilizers, lack of guaranteed buyers of produce, lack of farm-to-market roads, among others. Thus, at the end of the day, there is
still no successful implementation of agrarian reform to speak of in such a case.
Although success is not guaranteed, a cooperative or a corporation stands in a better position to secure funding and competently
maintain the agri-business than the individual farmer. While direct singular ownership over farmland does offer advantages, such
as the ability to make quick decisions unhampered by interference from others, yet at best, these advantages only but offset the
disadvantages that are often associated with such ownership arrangement. Thus, government must be flexible and creative in its
mode of implementation to better its chances of success. One such option is collective ownership through juridical persons
composed of farmers.
Aside from the fact that there appears to be no violation of the Constitution, the requirement that the instant case be capable of
repetition yet evading review is also wanting. It would be speculative for this Court to assume that the legislature will enact
another law providing for a similar stock option.
As a matter of sound practice, the Court will not interfere inordinately with the exercise by Congress of its official functions, the
heavy presumption being that a law is the product of earnest studies by Congress to ensure that no constitutional prescription or
concept is infringed.121 Corollarily, courts will not pass upon questions of wisdom, expediency and justice of legislation or its
provisions. Towards this end, all reasonable doubts should be resolved in favor of the constitutionality of a law and the validity of
the acts and processes taken pursuant thereof.122
Consequently, before a statute or its provisions duly challenged are voided, an unequivocal breach of, or a clear conflict with the
Constitution, not merely a doubtful or argumentative one, must be demonstrated in such a manner as to leave no doubt in the mind
of the Court. In other words, the grounds for nullity must be beyond reasonable doubt.123 FARM has not presented compelling
arguments to overcome the presumption of constitutionality of Sec. 31 of RA 6657.
The wisdom of Congress in allowing an SDP through a corporation as an alternative mode of implementing agrarian reform is not
for judicial determination. Established jurisprudence tells us that it is not within the province of the Court to inquire into the
wisdom of the law, for, indeed, We are bound by words of the statute.124
II.
The stage is now set for the determination of the propriety under the premises of the revocation or recall of HLIs SDP. Or to be
more precise, the inquiry should be: whether or not PARC gravely abused its discretion in revoking or recalling the subject SDP
and placing the hacienda under CARPs compulsory acquisition and distribution scheme.
The findings, analysis and recommendation of the DARs Special Task Force contained and summarized in its Terminal Report
provided the bases for the assailed PARC revocatory/recalling Resolution. The findings may be grouped into two: (1) the SDP is
contrary to either the policy on agrarian reform, Sec. 31 of RA 6657, or DAO 10; and (2) the alleged violation by HLI of the
conditions/terms of the SDP. In more particular terms, the following are essentially the reasons underpinning PARCs revocatory
or recall action:
(1) Despite the lapse of 16 years from the approval of HLIs SDP, the lives of the FWBs have hardly improved and the
promised increased income has not materialized;
(2) HLI has failed to keep Hacienda Luisita intact and unfragmented;
(3) The issuance of HLI shares of stock on the basis of number of hours workedor the so-called "man days"is
grossly onerous to the FWBs, as HLI, in the guise of rotation, can unilaterally deny work to anyone. In elaboration of this
ground, PARCs Resolution No. 2006-34-01, denying HLIs motion for reconsideration of Resolution No. 2005-32-01,
stated that the man days criterion worked to dilute the entitlement of the original share beneficiaries; 125
(4) The distribution/transfer of shares was not in accordance with the timelines fixed by law;
(5) HLI has failed to comply with its obligations to grant 3% of the gross sales every year as production-sharing benefit
on top of the workers salary; and
(6) Several homelot awardees have yet to receive their individual titles.
Petitioner HLI claims having complied with, at least substantially, all its obligations under the SDP, as approved by PARC itself,
and tags the reasons given for the revocation of the SDP as unfounded.
Public respondents, on the other hand, aver that the assailed resolution rests on solid grounds set forth in the Terminal Report, a
position shared by AMBALA, which, in some pleadings, is represented by the same counsel as that appearing for the Supervisory
Group.
FARM, for its part, posits the view that legal bases obtain for the revocation of the SDP, because it does not conform to Sec. 31 of
RA 6657 and DAO 10. And training its sight on the resulting dilution of the equity of the FWBs appearing in HLIs masterlist,
FARM would state that the SDP, as couched and implemented, spawned disparity when there should be none; parity when there
should have been differentiation.126
The petition is not impressed with merit.
In the Terminal Report adopted by PARC, it is stated that the SDP violates the agrarian reform policy under Sec. 2 of RA 6657, as
the said plan failed to enhance the dignity and improve the quality of lives of the FWBs through greater productivity of
agricultural lands. We disagree.
Sec. 2 of RA 6657 states:
SECTION 2. Declaration of Principles and Policies.It is the policy of the State to pursue a Comprehensive Agrarian Reform
Program (CARP). The welfare of the landless farmers and farm workers will receive the highest consideration to promote social
justice and to move the nation towards sound rural development and industrialization, and the establishment of owner
cultivatorship of economic-sized farms as the basis of Philippine agriculture.
To this end, a more equitable distribution and ownership of land, with due regard to the rights of landowners to just compensation
and to the ecological needs of the nation, shall be undertaken to provide farmers and farm workers with the opportunity to enhance
their dignity and improve the quality of their lives through greater productivity of agricultural lands.
The agrarian reform program is founded on the right of farmers and regular farm workers, who are landless, to own directly or
collectively the lands they till or, in the case of other farm workers, to receive a share of the fruits thereof. To this end, the State
shall encourage the just distribution of all agricultural lands, subject to the priorities and retention limits set forth in this Act,
having taken into account ecological, developmental, and equity considerations, and subject to the payment of just compensation.
The State shall respect the right of small landowners and shall provide incentives for voluntary land-sharing. (Emphasis supplied.)
Paragraph 2 of the above-quoted provision specifically mentions that "a more equitable distribution and ownership of land x x x
shall be undertaken to provide farmers and farm workers with the opportunity to enhance their dignity and improve the quality of
their lives through greater productivity of agricultural lands." Of note is the term "opportunity" which is defined as a favorable
chance or opening offered by circumstances.127 Considering this, by no stretch of imagination can said provision be construed as a
guarantee in improving the lives of the FWBs. At best, it merely provides for a possibility or favorable chance of uplifting the
economic status of the FWBs, which may or may not be attained.
Pertinently, improving the economic status of the FWBs is neither among the legal obligations of HLI under the SDP nor an
imperative imposition by RA 6657 and DAO 10, a violation of which would justify discarding the stock distribution option.
Nothing in that option agreement, law or department order indicates otherwise.
Significantly, HLI draws particular attention to its having paid its FWBs, during the regime of the SDP (1989-2005), some PhP 3
billion by way of salaries/wages and higher benefits exclusive of free hospital and medical benefits to their immediate family. And
attached as Annex "G" to HLIs Memorandum is the certified true report of the finance manager of Jose Cojuangco & Sons
Organizations-Tarlac Operations, captioned as "HACIENDA LUISITA, INC. Salaries, Benefits and Credit Privileges (in
Thousand Pesos) Since the Stock Option was Approved by PARC/CARP," detailing what HLI gave their workers from 1989 to
2005. The sum total, as added up by the Court, yields the following numbers: Total Direct Cash Out (Salaries/Wages & Cash
Benefits) = PhP 2,927,848; Total Non-Direct Cash Out (Hospital/Medical Benefits) = PhP 303,040. The cash out figures, as stated
in the report, include the cost of homelots; the PhP 150 million or so representing 3% of the gross produce of the hacienda; and the
PhP 37.5 million representing 3% from the proceeds of the sale of the 500-hectare converted lands. While not included in the
report, HLI manifests having given the FWBs 3% of the PhP 80 million paid for the 80 hectares of land traversed by the
SCTEX.128 On top of these, it is worth remembering that the shares of stocks were given by HLI to the FWBs for free. Verily, the
FWBs have benefited from the SDP.
To address urgings that the FWBs be allowed to disengage from the SDP as HLI has not anyway earned profits through the years,
it cannot be over-emphasized that, as a matter of common business sense, no corporation could guarantee a profitable run all the
time. As has been suggested, one of the key features of an SDP of a corporate landowner is the likelihood of the corporate vehicle
not earning, or, worse still, losing money.129
The Court is fully aware that one of the criteria under DAO 10 for the PARC to consider the advisability of approving a stock
distribution plan is the likelihood that the plan "would result in increased income and greater benefits to [qualified beneficiaries]
than if the lands were divided and distributed to them individually."130 But as aptly noted during the oral arguments, DAO 10
ought to have not, as it cannot, actually exact assurance of success on something that is subject to the will of man, the forces of
nature or the inherent risky nature of business.131 Just like in actual land distribution, an SDP cannot guarantee, as indeed the
SDOA does not guarantee, a comfortable life for the FWBs. The Court can take judicial notice of the fact that there were many
instances wherein after a farmworker beneficiary has been awarded with an agricultural land, he just subsequently sells it and is
eventually left with nothing in the end.
In all then, the onerous condition of the FWBs economic status, their life of hardship, if that really be the case, can hardly be
attributed to HLI and its SDP and provide a valid ground for the plans revocation.
Neither does HLIs SDP, whence the DAR-attested SDOA/MOA is based, infringe Sec. 31 of RA 6657, albeit public respondents
erroneously submit otherwise.
The provisions of the first paragraph of the adverted Sec. 31 are without relevance to the issue on the propriety of the assailed
order revoking HLIs SDP, for the paragraph deals with the transfer of agricultural lands to the government, as a mode of CARP
compliance, thus:
SEC. 31. Corporate Landowners.Corporate landowners may voluntarily transfer ownership over their agricultural landholdings
to the Republic of the Philippines pursuant to Section 20 hereof or to qualified beneficiaries under such terms and conditions,
consistent with this Act, as they may agree, subject to confirmation by the DAR.
The second and third paragraphs, with their sub-paragraphs, of Sec. 31 provide as follows:
Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to
purchase such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural
activities, bears in relation to the companys total assets, under such terms and conditions as may be agreed upon by them. In
no case shall the compensation received by the workers at the time the shares of stocks are distributed be reduced. x x x
Corporations or associations which voluntarily divest a proportion of their capital stock, equity or participation in favor of their
workers or other qualified beneficiaries under this section shall be deemed to have complied with the provisions of this Act:
Provided, That the following conditions are complied with:
(a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and other financial benefits, the
books of the corporation or association shall be subject to periodic audit by certified public accountants chosen by the
beneficiaries;
(b) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall be assured of at least
one (1) representative in the board of directors, or in a management or executive committee, if one exists, of the
corporation or association;
(c) Any shares acquired by such workers and beneficiaries shall have the same rights and features as all other shares; and
(d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said transaction is in favor
of a qualified and registered beneficiary within the same corporation.
The mandatory minimum ratio of land-to-shares of stock supposed to be distributed or allocated to qualified beneficiaries,
adverting to what Sec. 31 of RA 6657 refers to as that "proportion of the capital stock of the corporation that the agricultural land,
actually devoted to agricultural activities, bears in relation to the companys total assets" had been observed.
Paragraph one (1) of the SDOA, which was based on the SDP, conforms to Sec. 31 of RA 6657. The stipulation reads:
1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00) in relation to the total assets
(P590,554,220.00) transferred and conveyed to the SECOND PARTY is 33.296% that, under the law, is the proportion of the
outstanding capital stock of the SECOND PARTY, which is P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per
share, that has to be distributed to the THIRD PARTY under the stock distribution plan, the said 33.296% thereof
being P118,391,976.85 or 118,391,976.85 shares.
The appraised value of the agricultural land is PhP 196,630,000 and of HLIs other assets is PhP 393,924,220. The total value of
HLIs assets is, therefore, PhP 590,554,220.132 The percentage of the value of the agricultural lands (PhP 196,630,000) in relation
to the total assets (PhP 590,554,220) is 33.296%, which represents the stockholdings of the 6,296 original qualified farmworker-
beneficiaries (FWBs) in HLI. The total number of shares to be distributed to said qualified FWBs is 118,391,976.85 HLI shares.
This was arrived at by getting 33.296% of the 355,531,462 shares which is the outstanding capital stock of HLI with a value of
PhP 355,531,462. Thus, if we divide the 118,391,976.85 HLI shares by 6,296 FWBs, then each FWB is entitled to 18,804.32 HLI
shares. These shares under the SDP are to be given to FWBs for free.
The Court finds that the determination of the shares to be distributed to the 6,296 FWBs strictly adheres to the formula prescribed
by Sec. 31(b) of RA 6657.
Anent the requirement under Sec. 31(b) of the third paragraph, that the FWBs shall be assured of at least one (1) representative in
the board of directors or in a management or executive committee irrespective of the value of the equity of the FWBs in HLI, the
Court finds that the SDOA contained provisions making certain the FWBs representation in HLIs governing board, thus:
5. Even if only a part or fraction of the shares earmarked for distribution will have been acquired from the FIRST PARTY and
distributed to the THIRD PARTY, FIRST PARTY shall execute at the beginning of each fiscal year an irrevocable proxy, valid and
effective for one (1) year, in favor of the farmworkers appearing as shareholders of the SECOND PARTY at the start of said year
which will empower the THIRD PARTY or their representative to vote in stockholders and board of directors meetings of the
SECOND PARTY convened during the year the entire 33.296% of the outstanding capital stock of the SECOND PARTY
earmarked for distribution and thus be able to gain such number of seats in the board of directors of the SECOND PARTY that the
whole 33.296% of the shares subject to distribution will be entitled to.
Also, no allegations have been made against HLI restricting the inspection of its books by accountants chosen by the FWBs;
hence, the assumption may be made that there has been no violation of the statutory prescription under sub-paragraph (a) on the
auditing of HLIs accounts.
Public respondents, however, submit that the distribution of the mandatory minimum ratio of land-to-shares of stock, referring to
the 118,391,976.85 shares with par value of PhP 1 each, should have been made in full within two (2) years from the approval of
RA 6657, in line with the last paragraph of Sec. 31 of said law.133
Public respondents submission is palpably erroneous. We have closely examined the last paragraph alluded to, with particular
focus on the two-year period mentioned, and nothing in it remotely supports the public respondents posture. In its pertinent part,
said Sec. 31 provides:
SEC. 31. Corporate Landowners x x x
If within two (2) years from the approval of this Act, the [voluntary] land or stock transfer envisioned above is not made or
realized or the plan for such stock distribution approved by the PARC within the same period, the agricultural land of the
corporate owners or corporation shall be subject to the compulsory coverage of this Act. (Word in bracket and emphasis added.)
Properly viewed, the words "two (2) years" clearly refer to the period within which the corporate landowner, to avoid land transfer
as a mode of CARP coverage under RA 6657, is to avail of the stock distribution option or to have the SDP approved. The HLI
secured approval of its SDP in November 1989, well within the two-year period reckoned from June 1988 when RA 6657 took
effect.
Having hurdled the alleged breach of the agrarian reform policy under Sec. 2 of RA 6657 as well as the statutory issues, We shall
now delve into what PARC and respondents deem to be other instances of violation of DAO 10 and the SDP.
On the Conversion of Lands
Contrary to the almost parallel stance of the respondents, keeping Hacienda Luisita unfragmented is also not among the
imperative impositions by the SDP, RA 6657, and DAO 10.
The Terminal Report states that the proposed distribution plan submitted in 1989 to the PARC effectively assured the intended
stock beneficiaries that the physical integrity of the farm shall remain inviolate. Accordingly, the Terminal Report and the PARC-
assailed resolution would take HLI to task for securing approval of the conversion to non-agricultural uses of 500 hectares of the
hacienda. In not too many words, the Report and the resolution view the conversion as an infringement of Sec. 5(a) of DAO 10
which reads: "a. that the continued operation of the corporation with its agricultural land intact and unfragmented is viable with
potential for growth and increased profitability."
The PARC is wrong.
In the first place, Sec. 5(a)just like the succeeding Sec. 5(b) of DAO 10 on increased income and greater benefits to qualified
beneficiariesis but one of the stated criteria to guide PARC in deciding on whether or not to accept an SDP. Said Sec. 5(a) does
not exact from the corporate landowner-applicant the undertaking to keep the farm intact and unfragmented ad infinitum. And
there is logic to HLIs stated observation that the key phrase in the provision of Sec. 5(a) is "viability of corporate operations":
"[w]hat is thus required is not the agricultural land remaining intact x x x but the viability of the corporate operations with its
agricultural land being intact and unfragmented. Corporate operation may be viable even if the corporate agricultural land does
not remain intact or [un]fragmented."134
It is, of course, anti-climactic to mention that DAR viewed the conversion as not violative of any issuance, let alone undermining
the viability of Hacienda Luisitas operation, as the DAR Secretary approved the land conversion applied for and its disposition
via his Conversion Order dated August 14, 1996 pursuant to Sec. 65 of RA 6657 which reads:
Sec. 65. Conversion of Lands.After the lapse of five years from its award when the land ceases to be economically feasible and
sound for agricultural purposes, or the locality has become urbanized and the land will have a greater economic value for
residential, commercial or industrial purposes, the DAR upon application of the beneficiary or landowner with due notice to the
affected parties, and subject to existing laws, may authorize the x x x conversion of the land and its dispositions. x x x
On the 3% Production Share
On the matter of the alleged failure of HLI to comply with sharing the 3% of the gross production sales of the hacienda and pay
dividends from profit, the entries in its financial books tend to indicate compliance by HLI of the profit-sharing equivalent to 3%
of the gross sales from the production of the agricultural land on top of (a) the salaries and wages due FWBs as employees of the
company and (b) the 3% of the gross selling price of the converted land and that portion used for the SCTEX. A plausible
evidence of compliance or non-compliance, as the case may be, could be the books of account of HLI. Evidently, the cry of some
groups of not having received their share from the gross production sales has not adequately been validated on the ground by the
Special Task Force.
Indeed, factual findings of administrative agencies are conclusive when supported by substantial evidence and are accorded due
respect and weight, especially when they are affirmed by the CA.135 However, such rule is not absolute. One such exception is
when the findings of an administrative agency are conclusions without citation of specific evidence on which they are
based,136 such as in this particular instance. As culled from its Terminal Report, it would appear that the Special Task Force
rejected HLIs claim of compliance on the basis of this ratiocination:
The Task Force position: Though, allegedly, the Supervisory Group receives the 3% gross production share and that
others alleged that they received 30 million pesos still others maintain that they have not received anything yet. Item No.
4 of the MOA is clear and must be followed. There is a distinction between the total gross sales from the production of
the land and the proceeds from the sale of the land. The former refers to the fruits/yield of the agricultural land while the
latter is the land itself. The phrase "the beneficiaries are entitled every year to an amount approximately equivalent to 3%
would only be feasible if the subject is the produce since there is at least one harvest per year, while such is not the case
in the sale of the agricultural land. This negates then the claim of HLI that, all that the FWBs can be entitled to, if any, is
only 3% of the purchase price of the converted land.
Besides, the Conversion Order dated 14 August 1996 provides that "the benefits, wages and the like, presently received
by the FWBs shall not in any way be reduced or adversely affected. Three percent of the gross selling price of the sale of
the converted land shall be awarded to the beneficiaries of the SDO." The 3% gross production share then is different
from the 3% proceeds of the sale of the converted land and, with more reason, the 33% share being claimed by the FWBs
as part owners of the Hacienda, should have been given the FWBs, as stockholders, and to which they could have been
entitled if only the land were acquired and redistributed to them under the CARP.
xxxx
The FWBs do not receive any other benefits under the MOA except the aforementioned [(viz: shares of stocks (partial),
3% gross production sale (not all) and homelots (not all)].
Judging from the above statements, the Special Task Force is at best silent on whether HLI has failed to comply with the 3%
production-sharing obligation or the 3% of the gross selling price of the converted land and the SCTEX lot. In fact, it admits that
the FWBs, though not all, have received their share of the gross production sales and in the sale of the lot to SCTEX. At most,
then, HLI had complied substantially with this SDP undertaking and the conversion order. To be sure, this slight breach would not
justify the setting to naught by PARC of the approval action of the earlier PARC. Even in contract law, rescission, predicated on
violation of reciprocity, will not be permitted for a slight or casual breach of contract; rescission may be had only for such
breaches that are substantial and fundamental as to defeat the object of the parties in making the agreement. 137
Despite the foregoing findings, the revocation of the approval of the SDP is not without basis as shown below.
On Titles to Homelots
Under RA 6657, the distribution of homelots is required only for corporations or business associations owning or operating farms
which opted for land distribution. Sec. 30 of RA 6657 states:
SEC. 30. Homelots and Farmlots for Members of Cooperatives.The individual members of the cooperatives or corporations
mentioned in the preceding section shall be provided with homelots and small farmlots for their family use, to be taken from the
land owned by the cooperative or corporation.
The "preceding section" referred to in the above-quoted provision is as follows:
SEC. 29. Farms Owned or Operated by Corporations or Other Business Associations.In the case of farms owned or operated by
corporations or other business associations, the following rules shall be observed by the PARC.
In general, lands shall be distributed directly to the individual worker-beneficiaries.
In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the worker-beneficiaries
who shall form a workers cooperative or association which will deal with the corporation or business association. Until a new
agreement is entered into by and between the workers cooperative or association and the corporation or business association, any
agreement existing at the time this Act takes effect between the former and the previous landowner shall be respected by both the
workers cooperative or association and the corporation or business association.
Noticeably, the foregoing provisions do not make reference to corporations which opted for stock distribution under Sec. 31 of RA
6657. Concomitantly, said corporations are not obliged to provide for it except by stipulation, as in this case.
Under the SDP, HLI undertook to "subdivide and allocate for free and without charge among the qualified family-beneficiaries x x
x residential or homelots of not more than 240 sq. m. each, with each family beneficiary being assured of receiving and owning a
homelot in the barrio or barangay where it actually resides," "within a reasonable time."
More than sixteen (16) years have elapsed from the time the SDP was approved by PARC, and yet, it is still the contention of the
FWBs that not all was given the 240-square meter homelots and, of those who were already given, some still do not have the
corresponding titles.
During the oral arguments, HLI was afforded the chance to refute the foregoing allegation by submitting proof that the FWBs
were already given the said homelots:
Justice Velasco: x x x There is also an allegation that the farmer beneficiaries, the qualified family beneficiaries were not given the
240 square meters each. So, can you also [prove] that the qualified family beneficiaries were already provided the 240 square
meter homelots.
Atty. Asuncion: We will, your Honor please.138
Other than the financial report, however, no other substantial proof showing that all the qualified beneficiaries have received
homelots was submitted by HLI. Hence, this Court is constrained to rule that HLI has not yet fully complied with its undertaking
to distribute homelots to the FWBs under the SDP.
On "Man Days" and the Mechanics of Stock Distribution
In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of stock distribution, We find that it violates two
(2) provisions of DAO 10. Par. 3 of the SDOA states:
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI] shall arrange with the FIRST PARTY
[TDC] the acquisition and distribution to the THIRD PARTY [FWBs] on the basis of number of days worked and at no cost to
them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the SECOND PARTY that are presently owned and
held by the FIRST PARTY, until such time as the entire block of 118,391,976.85 shares shall have been completely acquired and
distributed to the THIRD PARTY.
Based on the above-quoted provision, the distribution of the shares of stock to the FWBs, albeit not entailing a cash out from
them, is contingent on the number of "man days," that is, the number of days that the FWBs have worked during the year. This
formula deviates from Sec. 1 of DAO 10, which decrees the distribution of equal number of shares to the FWBs as the minimum
ratio of shares of stock for purposes of compliance with Sec. 31 of RA 6657. As stated in Sec. 4 of DAO 10:
Section 4. Stock Distribution Plan.The [SDP] submitted by the corporate landowner-applicant shall provide for the distribution
of an equal number of shares of the same class and value, with the same rights and features as all other shares, to each of the
qualified beneficiaries. This distribution plan in all cases, shall be at least the minimum ratio for purposes of compliance with
Section 31 of R.A. No. 6657.
On top of the minimum ratio provided under Section 3 of this Implementing Guideline, the corporate landowner-applicant may
adopt additional stock distribution schemes taking into account factors such as rank, seniority, salary, position and other
circumstances which may be deemed desirable as a matter of sound company policy. (Emphasis supplied.)
The above proviso gives two (2) sets or categories of shares of stock which a qualified beneficiary can acquire from the
corporation under the SDP. The first pertains, as earlier explained, to the mandatory minimum ratio of shares of stock to be
distributed to the FWBs in compliance with Sec. 31 of RA 6657. This minimum ratio contemplates of that "proportion of the
capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the
companys total assets."139 It is this set of shares of stock which, in line with Sec. 4 of DAO 10, is supposed to be allocated "for the
distribution of an equal number of shares of stock of the same class and value, with the same rights and features as all other
shares, to each of the qualified beneficiaries."
On the other hand, the second set or category of shares partakes of a gratuitous extra grant, meaning that this set or category
constitutes an augmentation share/s that the corporate landowner may give under an additional stock distribution scheme, taking
into account such variables as rank, seniority, salary, position and like factors which the management, in the exercise of its sound
discretion, may deem desirable.140
Before anything else, it should be stressed that, at the time PARC approved HLIs SDP, HLI recognized 6,296individuals as
qualified FWBs. And under the 30-year stock distribution program envisaged under the plan, FWBs who came in after 1989, new
FWBs in fine, may be accommodated, as they appear to have in fact been accommodated as evidenced by their receipt of HLI
shares.
Now then, by providing that the number of shares of the original 1989 FWBs shall depend on the number of "man days," HLI
violated the afore-quoted rule on stock distribution and effectively deprived the FWBs of equal shares of stock in the corporation,
for, in net effect, these 6,296 qualified FWBs, who theoretically had given up their rights to the land that could have been
distributed to them, suffered a dilution of their due share entitlement. As has been observed during the oral arguments, HLI has
chosen to use the shares earmarked for farmworkers as reward system chips to water down the shares of the original 6,296
FWBs.141 Particularly:
Justice Abad: If the SDOA did not take place, the other thing that would have happened is that there would be CARP?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Thats the only point I want to know x x x. Now, but they chose to enter SDOA instead of placing the land under
CARP. And for that reason those who would have gotten their shares of the land actually gave up their rights to this land in place
of the shares of the stock, is that correct?
Atty. Dela Merced: It would be that way, Your Honor.
Justice Abad: Right now, also the government, in a way, gave up its right to own the land because that way the government takes
own [sic] the land and distribute it to the farmers and pay for the land, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI to the farmers at that time that numbered x x x
those who signed five thousand four hundred ninety eight (5,498) beneficiaries, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: But later on, after assigning them their shares, some workers came in from 1989, 1990, 1991, 1992 and the rest of
the years that you gave additional shares who were not in the original list of owners?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Did those new workers give up any right that would have belong to them in 1989 when the land was supposed to
have been placed under CARP?
Atty. Dela Merced: If you are talking or referring (interrupted)
Justice Abad: None! You tell me. None. They gave up no rights to land?
Atty. Dela Merced: They did not do the same thing as we did in 1989, Your Honor.
Justice Abad: No, if they were not workers in 1989 what land did they give up? None, if they become workers later on.
Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the original (interrupted)
Justice Abad: So why is it that the rights of those who gave up their lands would be diluted, because the company has chosen to
use the shares as reward system for new workers who come in? It is not that the new workers, in effect, become just workers of
the corporation whose stockholders were already fixed. The TADECO who has shares there about sixty six percent (66%) and the
five thousand four hundred ninety eight (5,498) farmers at the time of the SDOA? Explain to me. Why, why will you x x x what
right or where did you get that right to use this shares, to water down the shares of those who should have been benefited, and to
use it as a reward system decided by the company?142
From the above discourse, it is clear as day that the original 6,296 FWBs, who were qualified beneficiaries at the time of the
approval of the SDP, suffered from watering down of shares. As determined earlier, each original FWB is entitled to 18,804.32
HLI shares. The original FWBs got less than the guaranteed 18,804.32 HLI shares per beneficiary, because the acquisition and
distribution of the HLI shares were based on "man days" or "number of days worked" by the FWB in a years time. As explained
by HLI, a beneficiary needs to work for at least 37 days in a fiscal year before he or she becomes entitled to HLI shares. If it falls
below 37 days, the FWB, unfortunately, does not get any share at year end. The number of HLI shares distributed varies
depending on the number of days the FWBs were allowed to work in one year. Worse, HLI hired farmworkers in addition to the
original 6,296 FWBs, such that, as indicated in the Compliance dated August 2, 2010 submitted by HLI to the Court, the total
number of farmworkers of HLI as of said date stood at 10,502. All these farmworkers, which include the original 6,296 FWBs,
were given shares out of the 118,931,976.85 HLI shares representing the 33.296% of the total outstanding capital stock of HLI.
Clearly, the minimum individual allocation of each original FWB of 18,804.32 shares was diluted as a result of the use of "man
days" and the hiring of additional farmworkers.
Going into another but related matter, par. 3 of the SDOA expressly providing for a 30-year timeframe for HLI-to-FWBs stock
transfer is an arrangement contrary to what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the implementation of the
approved stock distribution plan within three (3) months from receipt by the corporate landowner of the approval of the plan by
PARC. In fact, based on the said provision, the transfer of the shares of stock in the names of the qualified FWBs should be
recorded in the stock and transfer books and must be submitted to the SEC within sixty (60) days from implementation. As stated:
Section 11. Implementation/Monitoring of Plan.The approved stock distribution plan shall be implemented within three (3)
months from receipt by the corporate landowner-applicant of the approval thereof by the PARC, and the transfer of the shares of
stocks in the names of the qualified beneficiaries shall be recorded in stock and transfer books and submitted to the Securities and
Exchange Commission (SEC) within sixty (60) days from the said implementation of the stock distribution plan. (Emphasis
supplied.)
It is evident from the foregoing provision that the implementation, that is, the distribution of the shares of stock to the FWBs, must
be made within three (3) months from receipt by HLI of the approval of the stock distribution plan by PARC. While neither of the
clashing parties has made a compelling case of the thrust of this provision, the Court is of the view and so holds that the intent is
to compel the corporate landowner to complete, not merely initiate, the transfer process of shares within that three-month
timeframe. Reinforcing this conclusion is the 60-day stock transfer recording (with the SEC) requirement reckoned from the
implementation of the SDP.
To the Court, there is a purpose, which is at once discernible as it is practical, for the three-month threshold. Remove this timeline
and the corporate landowner can veritably evade compliance with agrarian reform by simply deferring to absurd limits the
implementation of the stock distribution scheme.
The argument is urged that the thirty (30)-year distribution program is justified by the fact that, under Sec. 26 of RA 6657,
payment by beneficiaries of land distribution under CARP shall be made in thirty (30) annual amortizations. To HLI, said section
provides a justifying dimension to its 30-year stock distribution program.
HLIs reliance on Sec. 26 of RA 6657, quoted in part below, is obviously misplaced as the said provision clearly deals with land
distribution.
SEC. 26. Payment by Beneficiaries.Lands awarded pursuant to this Act shall be paid for by the beneficiaries to the LBP in thirty
(30) annual amortizations x x x.
Then, too, the ones obliged to pay the LBP under the said provision are the beneficiaries. On the other hand, in the instant case,
aside from the fact that what is involved is stock distribution, it is the corporate landowner who has the obligation to distribute the
shares of stock among the FWBs.
Evidently, the land transfer beneficiaries are given thirty (30) years within which to pay the cost of the land thus awarded them to
make it less cumbersome for them to pay the government. To be sure, the reason underpinning the 30-year accommodation does
not apply to corporate landowners in distributing shares of stock to the qualified beneficiaries, as the shares may be issued in a
much shorter period of time.
Taking into account the above discussion, the revocation of the SDP by PARC should be upheld for violating DAO 10. It bears
stressing that under Sec. 49 of RA 6657, the PARC and the DAR have the power to issue rules and regulations, substantive or
procedural. Being a product of such rule-making power, DAO 10 has the force and effect of law and must be duly complied
with.143 The PARC is, therefore, correct in revoking the SDP. Consequently, the PARC Resolution No. 89-12-2 dated November
21, l989 approving the HLIs SDP is nullified and voided.
III.
We now resolve the petitions-in-intervention which, at bottom, uniformly pray for the exclusion from the coverage of the assailed
PARC resolution those portions of the converted land within Hacienda Luisita which RCBC and LIPCO acquired by purchase.
Both contend that they are innocent purchasers for value of portions of the converted farm land. Thus, their plea for the exclusion
of that portion from PARC Resolution 2005-32-01, as implemented by a DAR-issued Notice of Coverage dated January 2, 2006,
which called for mandatory CARP acquisition coverage of lands subject of the SDP.
To restate the antecedents, after the conversion of the 500 hectares of land in Hacienda Luisita, HLI transferred the 300 hectares to
Centennary, while ceding the remaining 200-hectare portion to LRC. Subsequently, LIPCO purchased the entire three hundred
(300) hectares of land from Centennary for the purpose of developing the land into an industrial complex.144 Accordingly, the TCT
in Centennarys name was canceled and a new one issued in LIPCOs name. Thereafter, said land was subdivided into two (2)
more parcels of land. Later on, LIPCO transferred about 184 hectares to RCBC by way of dacion en pago, by virtue of which
TCTs in the name of RCBC were subsequently issued.
Under Sec. 44 of PD 1529 or the Property Registration Decree, "every registered owner receiving a certificate of title in pursuance
of a decree of registration and every subsequent purchaser of registered land taking a certificate of title for value and in good faith
shall hold the same free from all encumbrances except those noted on the certificate and enumerated therein." 145
It is settled doctrine that one who deals with property registered under the Torrens system need not go beyond the four corners of,
but can rely on what appears on, the title. He is charged with notice only of such burdens and claims as are annotated on the title.
This principle admits of certain exceptions, such as when the party has actual knowledge of facts and circumstances that would
impel a reasonably cautious man to make such inquiry, or when the purchaser has knowledge of a defect or the lack of title in his
vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in
litigation.146 A higher level of care and diligence is of course expected from banks, their business being impressed with public
interest.147
Millena v. Court of Appeals describes a purchaser in good faith in this wise:
x x x A purchaser in good faith is one who buys property of another, without notice that some other person has a right to, or
interest in, such property at the time of such purchase, or before he has notice of the claim or interest of some other persons in the
property. Good faith, or the lack of it, is in the final analysis a question of intention; but in ascertaining the intention by which one
is actuated on a given occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by which alone
the inward motive may, with safety, be determined. Truly, good faith is not a visible, tangible fact that can be seen or touched, but
rather a state or condition of mind which can only be judged by actual or fancied tokens or signs. Otherwise stated, good faith x x
x refers to the state of mind which is manifested by the acts of the individual concerned.148 (Emphasis supplied.)
In fine, there are two (2) requirements before one may be considered a purchaser in good faith, namely: (1) that the purchaser buys
the property of another without notice that some other person has a right to or interest in such property; and (2) that the purchaser
pays a full and fair price for the property at the time of such purchase or before he or she has notice of the claim of another.
It can rightfully be said that both LIPCO and RCBC arebased on the above requirements and with respect to the adverted
transactions of the converted land in questionpurchasers in good faith for value entitled to the benefits arising from such status.
First, at the time LIPCO purchased the entire three hundred (300) hectares of industrial land, there was no notice of any supposed
defect in the title of its transferor, Centennary, or that any other person has a right to or interest in such property. In fact, at the
time LIPCO acquired said parcels of land, only the following annotations appeared on the TCT in the name of Centennary: the
Secretarys Certificate in favor of Teresita Lopa, the Secretarys Certificate in favor of Shintaro Murai, and the conversion of the
property from agricultural to industrial and residential use.149
The same is true with respect to RCBC. At the time it acquired portions of Hacienda Luisita, only the following general
annotations appeared on the TCTs of LIPCO: the Deed of Restrictions, limiting its use solely as an industrial estate; the
Secretarys Certificate in favor of Koji Komai and Kyosuke Hori; and the Real Estate Mortgage in favor of RCBC to guarantee
the payment of PhP 300 million.
It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the lots that were previously covered by the SDP. Good
faith "consists in the possessors belief that the person from whom he received it was the owner of the same and could convey his
title. Good faith requires a well-founded belief that the person from whom title was received was himself the owner of the land,
with the right to convey it. There is good faith where there is an honest intention to abstain from taking any unconscientious
advantage from another."150 It is the opposite of fraud.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were subjected to CARP coverage by means of a stock
distribution plan, as the DAR conversion order was annotated at the back of the titles of the lots they acquired. However, they are
of the honest belief that the subject lots were validly converted to commercial or industrial purposes and for which said lots were
taken out of the CARP coverage subject of PARC Resolution No. 89-12-2 and, hence, can be legally and validly acquired by
them. After all, Sec. 65 of RA 6657 explicitly allows conversion and disposition of agricultural lands previously covered by CARP
land acquisition "after the lapse of five (5) years from its award when the land ceases to be economically feasible and sound for
agricultural purposes or the locality has become urbanized and the land will have a greater economic value for residential,
commercial or industrial purposes." Moreover, DAR notified all the affected parties, more particularly the FWBs, and gave them
the opportunity to comment or oppose the proposed conversion. DAR, after going through the necessary processes, granted the
conversion of 500 hectares of Hacienda Luisita pursuant to its primary jurisdiction under Sec. 50 of RA 6657 to determine and
adjudicate agrarian reform matters and its original exclusive jurisdiction over all matters involving the implementation of agrarian
reform. The DAR conversion order became final and executory after none of the FWBs interposed an appeal to the CA. In this
factual setting, RCBC and LIPCO purchased the lots in question on their honest and well-founded belief that the previous
registered owners could legally sell and convey the lots though these were previously subject of CARP coverage. Ergo, RCBC and
LIPCO acted in good faith in acquiring the subject lots.
And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for value. Undeniably, LIPCO acquired 300 hectares
of land from Centennary for the amount of PhP 750 million pursuant to a Deed of Sale dated July 30, 1998.151 On the other hand,
in a Deed of Absolute Assignment dated November 25, 2004, LIPCO conveyed portions of Hacienda Luisita in favor of RCBC by
way of dacion en pago to pay for a loan of PhP 431,695,732.10.
As bona fide purchasers for value, both LIPCO and RCBC have acquired rights which cannot just be disregarded by DAR, PARC
or even by this Court. As held in Spouses Chua v. Soriano:
With the property in question having already passed to the hands of purchasers in good faith, it is now of no moment that some
irregularity attended the issuance of the SPA, consistent with our pronouncement in Heirs of Spouses Benito Gavino and Juana
Euste v. Court of Appeals, to wit:
x x x the general rule that the direct result of a previous void contract cannot be valid, is inapplicable in this case as it will directly
contravene the Torrens system of registration. Where innocent third persons, relying on the correctness of the certificate of
title thus issued, acquire rights over the property, the court cannot disregard such rights and order the cancellation of the
certificate. The effect of such outright cancellation will be to impair public confidence in the certificate of title. The sanctity of
the Torrens system must be preserved; otherwise, everyone dealing with the property registered under the system will have to
inquire in every instance as to whether the title had been regularly or irregularly issued, contrary to the evident purpose of the law.
Being purchasers in good faith, the Chuas already acquired valid title to the property. A purchaser in good faith holds an
indefeasible title to the property and he is entitled to the protection of the law. 152 x x x (Emphasis supplied.)
To be sure, the practicalities of the situation have to a point influenced Our disposition on the fate of RCBC and LIPCO. After all,
the Court, to borrow from Association of Small Landowners in the Philippines, Inc.,153 is not a "cloistered institution removed"
from the realities on the ground. To note, the approval and issuances of both the national and local governments showing that
certain portions of Hacienda Luisita have effectively ceased, legally and physically, to be agricultural and, therefore, no longer
CARPable are a matter of fact which cannot just be ignored by the Court and the DAR. Among the approving/endorsing
issuances:154
(a) Resolution No. 392 dated 11 December 1996 of the Sangguniang Bayan of Tarlac favorably endorsing the 300-
hectare industrial estate project of LIPCO;
(b) BOI Certificate of Registration No. 96-020 dated 20 December 1996 issued in accordance with the Omnibus
Investments Code of 1987;
(c) PEZA Certificate of Board Resolution No. 97-202 dated 27 June 1997, approving LIPCOs application for a mixed
ecozone and proclaiming the three hundred (300) hectares of the industrial land as a Special Economic Zone;
(d) Resolution No. 234 dated 08 August 1997 of the Sangguniang Bayan of Tarlac, approving the Final Development
Permit for the Luisita Industrial Park II Project;
(e) Development Permit dated 13 August 1997 for the proposed Luisita Industrial Park II Project issued by the Office of
the Sangguniang Bayan of Tarlac;155
(f) DENR Environmental Compliance Certificate dated 01 October 1997 issued for the proposed project of building an
industrial complex on three hundred (300) hectares of industrial land;156
(g) Certificate of Registration No. 00794 dated 26 December 1997 issued by the HLURB on the project of Luisita
Industrial Park II with an area of three million (3,000,000) square meters;157
(h) License to Sell No. 0076 dated 26 December 1997 issued by the HLURB authorizing the sale of lots in the Luisita
Industrial Park II;
(i) Proclamation No. 1207 dated 22 April 1998 entitled "Declaring Certain Parcels of Private Land in Barangay San
Miguel, Municipality of Tarlac, Province of Tarlac, as a Special Economic Zone pursuant to Republic Act No. 7916,"
designating the Luisita Industrial Park II consisting of three hundred hectares (300 has.) of industrial land as a Special
Economic Zone; and
(j) Certificate of Registration No. EZ-98-05 dated 07 May 1998 issued by the PEZA, stating that pursuant to Presidential
Proclamation No. 1207 dated 22 April 1998 and Republic Act No. 7916, LIPCO has been registered as an Ecozone
Developer/Operator of Luisita Industrial Park II located in San Miguel, Tarlac, Tarlac.
While a mere reclassification of a covered agricultural land or its inclusion in an economic zone does not automatically allow the
corporate or individual landowner to change its use,158 the reclassification process is a prima facie indicium that the land has
ceased to be economically feasible and sound for agricultural uses. And if only to stress, DAR Conversion Order No. 030601074-
764-(95) issued in 1996 by then DAR Secretary Garilao had effectively converted 500 hectares of hacienda land from agricultural
to industrial/commercial use and authorized their disposition.
In relying upon the above-mentioned approvals, proclamation and conversion order, both RCBC and LIPCO cannot be considered
at fault for believing that certain portions of Hacienda Luisita are industrial/commercial lands and are, thus, outside the ambit of
CARP. The PARC, and consequently DAR, gravely abused its discretion when it placed LIPCOs and RCBCs property which
once formed part of Hacienda Luisita under the CARP compulsory acquisition scheme via the assailed Notice of Coverage.
As regards the 80.51-hectare land transferred to the government for use as part of the SCTEX, this should also be excluded from
the compulsory agrarian reform coverage considering that the transfer was consistent with the governments exercise of the power
of eminent domain159 and none of the parties actually questioned the transfer.
While We affirm the revocation of the SDP on Hacienda Luisita subject of PARC Resolution Nos. 2005-32-01 and 2006-34-01,
the Court cannot close its eyes to certain "operative facts" that had occurred in the interim. Pertinently, the "operative fact"
doctrine realizes that, in declaring a law or executive action null and void, or, by extension, no longer without force and effect,
undue harshness and resulting unfairness must be avoided. This is as it should realistically be, since rights might have accrued in
favor of natural or juridical persons and obligations justly incurred in the meantime. 160 The actual existence of a statute or
executive act is, prior to such a determination, an operative fact and may have consequences which cannot justly be ignored; the
past cannot always be erased by a new judicial declaration.161
The oft-cited De Agbayani v. Philippine National Bank162 discussed the effect to be given to a legislative or executive act
subsequently declared invalid:
x x x It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been
in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is
entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more
fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act was in
operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as
a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the government organ
which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it
can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of
fairness and justice then, if there be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination of
[unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various
aspects,with respect to particular relations, individual and corporate, and particular conduct, private and official." x x x
Given the above perspective and considering that more than two decades had passed since the PARCs approval of the HLIs SDP,
in conjunction with numerous activities performed in good faith by HLI, and the reliance by the FWBs on the legality and validity
of the PARC-approved SDP, perforce, certain rights of the parties, more particularly the FWBs, have to be respected pursuant to
the application in a general way of the operative fact doctrine.
A view, however, has been advanced that the operative fact doctrine is of minimal or altogether without relevance to the instant
case as it applies only in considering the effects of a declaration of unconstitutionality of a statute, and not of a declaration of
nullity of a contract. This is incorrect, for this view failed to consider is that it is NOT the SDOA dated May 11, 1989 which was
revoked in the instant case. Rather, it is PARCs approval of the HLIs Proposal for Stock Distribution under CARP which
embodied the SDP that was nullified.
A recall of the antecedent events would show that on May 11, 1989, Tadeco, HLI, and the qualified FWBs executed the SDOA.
This agreement provided the basis and mechanics of the SDP that was subsequently proposed and submitted to DAR for approval.
It was only after its review that the PARC, through then Sec. Defensor-Santiago, issued the assailed Resolution No. 89-12-2
approving the SDP. Considerably, it is not the SDOA which gave legal force and effect to the stock distribution scheme but
instead, it is the approval of the SDP under the PARC Resolution No. 89-12-2 that gave it its validity.
The above conclusion is bolstered by the fact that in Sec. Pangandamans recommendation to the PARC Excom, what he proposed
is the recall/revocation of PARC Resolution No. 89-12-2 approving HLIs SDP, and not the revocation of the SDOA. Sec.
Pangandamans recommendation was favorably endorsed by the PARC Validation Committee to the PARC Excom, and these
recommendations were referred to in the assailed Resolution No. 2005-32-01. Clearly, it is not the SDOA which was made the
basis for the implementation of the stock distribution scheme.
That the operative fact doctrine squarely applies to executive actsin this case, the approval by PARC of the HLI proposal for
stock distributionis well-settled in our jurisprudence. In Chavez v. National Housing Authority, 163We held:
Petitioner postulates that the "operative fact" doctrine is inapplicable to the present case because it is an equitable doctrine which
could not be used to countenance an inequitable result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that the existence of the various agreements implementing the SMDRP
is an operative fact that can no longer be disturbed or simply ignored, citing Rieta v. People of the Philippines.
The argument of the Solicitor General is meritorious.
The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated that a legislative or executive
act, prior to its being declared as unconstitutional by the courts, is valid and must be complied with, thus:
xxx xxx xxx
This doctrine was reiterated in the more recent case of City of Makati v. Civil Service Commission, wherein we ruled that:
Moreover, we certainly cannot nullify the City Government's order of suspension, as we have no reason to do so, much less
retroactively apply such nullification to deprive private respondent of a compelling and valid reason for not filing the leave
application. For as we have held, a void act though in law a mere scrap of paper nonetheless confers legitimacy upon past acts or
omissions done in reliance thereof. Consequently, the existence of a statute or executive order prior to its being adjudged void is
an operative fact to which legal consequences are attached. It would indeed be ghastly unfair to prevent private respondent from
relying upon the order of suspension in lieu of a formal leave application. (Citations omitted; Emphasis supplied.)
The applicability of the operative fact doctrine to executive acts was further explicated by this Court in Rieta v. People, 164 thus:
Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order (ASSO) No. 4754 was invalid, as the law upon
which it was predicated General Order No. 60, issued by then President Ferdinand E. Marcos was subsequently declared by
the Court, in Taada v. Tuvera, 33 to have no force and effect. Thus, he asserts, any evidence obtained pursuant thereto is
inadmissible in evidence.
We do not agree. In Taada, the Court addressed the possible effects of its declaration of the invalidity of various presidential
issuances. Discussing therein how such a declaration might affect acts done on a presumption of their validity, the Court said:
". . .. In similar situations in the past this Court had taken the pragmatic and realistic course set forth in Chicot County Drainage
District vs. Baxter Bank to wit:
The courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional, was not a law;
that it was inoperative, conferring no rights and imposing no duties, and hence affording no basis for the challenged decree. . . . It
is quite clear, however, that such broad statements as to the effect of a determination of unconstitutionality must be taken with
qualifications. The actual existence of a statute, prior to [the determination of its invalidity], is an operative fact and may have
consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be considered in various aspects with respect to particular conduct, private and
official. Questions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and acted
upon accordingly, of public policy in the light of the nature both of the statute and of its previous application, demand
examination. These questions are among the most difficult of those which have engaged the attention of courts, state and federal,
and it is manifest from numerous decisions that an all-inclusive statement of a principle of absolute retroactive invalidity cannot
be justified.
xxx xxx xxx
"Similarly, the implementation/enforcement of presidential decrees prior to their publication in the Official Gazette is an
operative fact which may have consequences which cannot be justly ignored. The past cannot always be erased by a new judicial
declaration . . . that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified."
The Chicot doctrine cited in Taada advocates that, prior to the nullification of a statute, there is an imperative necessity of taking
into account its actual existence as an operative fact negating the acceptance of "a principle of absolute retroactive invalidity."
Whatever was done while the legislative or the executive act was in operation should be duly recognized and presumed to be valid
in all respects. The ASSO that was issued in 1979 under General Order No. 60 long before our Decision in Taada and the
arrest of petitioner is an operative fact that can no longer be disturbed or simply ignored. (Citations omitted; Emphasis
supplied.)
To reiterate, although the assailed Resolution No. 2005-32-01 states that it revokes or recalls the SDP, what it actually revoked or
recalled was the PARCs approval of the SDP embodied in Resolution No. 89-12-2. Consequently, what was actually declared null
and void was an executive act, PARC Resolution No. 89-12-2,165and not a contract (SDOA). It is, therefore, wrong to say that it
was the SDOA which was annulled in the instant case. Evidently, the operative fact doctrine is applicable.
IV.
While the assailed PARC resolutions effectively nullifying the Hacienda Luisita SDP are upheld, the revocation must, by
application of the operative fact principle, give way to the right of the original 6,296 qualified FWBs to choose whether they want
to remain as HLI stockholders or not. The Court cannot turn a blind eye to the fact that in 1989, 93% of the FWBs agreed to the
SDOA (or the MOA), which became the basis of the SDP approved by PARC per its Resolution No. 89-12-2 dated November 21,
1989. From 1989 to 2005, the FWBs were said to have received from HLI salaries and cash benefits, hospital and medical
benefits, 240-square meter homelots, 3% of the gross produce from agricultural lands, and 3% of the proceeds of the sale of the
500-hectare converted land and the 80.51-hectare lot sold to SCTEX. HLI shares totaling 118,391,976.85 were distributed as of
April 22, 2005.166 On August 6, 20l0, HLI and private respondents submitted a Compromise Agreement, in which HLI gave the
FWBs the option of acquiring a piece of agricultural land or remain as HLI stockholders, and as a matter of fact, most FWBs
indicated their choice of remaining as stockholders. These facts and circumstances tend to indicate that some, if not all, of the
FWBs may actually desire to continue as HLI shareholders. A matter best left to their own discretion.
With respect to the other FWBs who were not listed as qualified beneficiaries as of November 21, 1989 when the SDP was
approved, they are not accorded the right to acquire land but shall, however, continue as HLI stockholders. All the benefits and
homelots167 received by the 10,502 FWBs (6,296 original FWBs and 4,206 non-qualified FWBs) listed as HLI stockholders as of
August 2, 2010 shall be respected with no obligation to refund or return them since the benefits (except the homelots) were
received by the FWBs as farmhands in the agricultural enterprise of HLI and other fringe benefits were granted to them pursuant
to the existing collective bargaining agreement with Tadeco. If the number of HLI shares in the names of the original FWBs who
opt to remain as HLI stockholders falls below the guaranteed allocation of 18,804.32 HLI shares per FWB, the HLI shall assign
additional shares to said FWBs to complete said minimum number of shares at no cost to said FWBs.
With regard to the homelots already awarded or earmarked, the FWBs are not obliged to return the same to HLI or pay for its
value since this is a benefit granted under the SDP. The homelots do not form part of the 4,915.75 hectares covered by the SDP but
were taken from the 120.9234 hectare residential lot owned by Tadeco. Those who did not receive the homelots as of the
revocation of the SDP on December 22, 2005 when PARC Resolution No. 2005-32-01 was issued, will no longer be entitled to
homelots. Thus, in the determination of the ultimate agricultural land that will be subjected to land distribution, the aggregate area
of the homelots will no longer be deducted.
There is a claim that, since the sale and transfer of the 500 hectares of land subject of the August 14, 1996 Conversion Order and
the 80.51-hectare SCTEX lot came after compulsory coverage has taken place, the FWBs should have their corresponding share
of the lands value. There is merit in the claim. Since the SDP approved by PARC Resolution No. 89-12-2 has been nullified, then
all the lands subject of the SDP will automatically be subject of compulsory coverage under Sec. 31 of RA 6657. Since the Court
excluded the 500-hectare lot subject of the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot acquired by the
government from the area covered by SDP, then HLI and its subsidiary, Centennary, shall be liable to the FWBs for the price
received for said lots. HLI shall be liable for the value received for the sale of the 200-hectare land to LRC in the amount of PhP
500,000,000 and the equivalent value of the 12,000,000 shares of its subsidiary, Centennary, for the 300-hectare lot sold to LIPCO
for the consideration of PhP 750,000,000. Likewise, HLI shall be liable for PhP 80,511,500 as consideration for the sale of the
80.51-hectare SCTEX lot.
We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of the 500-hectare land and 80.51-hectare SCTEX
lot to the FWBs. We also take into account the payment of taxes and expenses relating to the transfer of the land and HLIs
statement that most, if not all, of the proceeds were used for legitimate corporate purposes. In order to determine once and for all
whether or not all the proceeds were properly utilized by HLI and its subsidiary, Centennary, DAR will engage the services of a
reputable accounting firm to be approved by the parties to audit the books of HLI to determine if the proceeds of the sale of the
500-hectare land and the 80.51-hectare SCTEX lot were actually used for legitimate corporate purposes, titling expenses and in
compliance with the August 14, 1996 Conversion Order. The cost of the audit will be shouldered by HLI. If after such audit, it is
determined that there remains a balance from the proceeds of the sale, then the balance shall be distributed to the qualified FWBs.
A view has been advanced that HLI must pay the FWBs yearly rent for use of the land from 1989. We disagree. It should not be
forgotten that the FWBs are also stockholders of HLI, and the benefits acquired by the corporation from its possession and use of
the land ultimately redounded to the FWBs benefit based on its business operations in the form of salaries, and other fringe
benefits under the CBA. To still require HLI to pay rent to the FWBs will result in double compensation.
For sure, HLI will still exist as a corporation even after the revocation of the SDP although it will no longer be operating under the
SDP, but pursuant to the Corporation Code as a private stock corporation. The non-agricultural assets amounting to PhP
393,924,220 shall remain with HLI, while the agricultural lands valued at PhP 196,630,000 with an original area of 4,915.75
hectares shall be turned over to DAR for distribution to the FWBs. To be deducted from said area are the 500-hectare lot subject
of the August 14, 1996 Conversion Order, the 80.51-hectare SCTEX lot, and the total area of 6,886.5 square meters of individual
lots that should have been distributed to FWBs by DAR had they not opted to stay in HLI.
HLI shall be paid just compensation for the remaining agricultural land that will be transferred to DAR for land distribution to the
FWBs. We find that the date of the "taking" is November 21, 1989, when PARC approved HLIs SDP per PARC Resolution No.
89-12-2. DAR shall coordinate with LBP for the determination of just compensation. We cannot use May 11, 1989 when the
SDOA was executed, since it was the SDP, not the SDOA, that was approved by PARC.
The instant petition is treated pro hac vice in view of the peculiar facts and circumstances of the case.
WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-01 dated December 22, 2005 and Resolution No.
2006-34-01 dated May 3, 2006, placing the lands subject of HLIs SDP under compulsory coverage on mandated land acquisition
scheme of the CARP, are hereby AFFIRMED with the MODIFICATION that the original 6,296 qualified FWBs shall have the
option to remain as stockholders of HLI. DAR shall immediately schedule meetings with the said 6,296 FWBs and explain to
them the effects, consequences and legal or practical implications of their choice, after which the FWBs will be asked to manifest,
in secret voting, their choices in the ballot, signing their signatures or placing their thumbmarks, as the case may be, over their
printed names.
Of the 6,296 FWBs, he or she who wishes to continue as an HLI stockholder is entitled to 18,804.32 HLI shares, and, in case the
HLI shares already given to him or her is less than 18,804.32 shares, the HLI is ordered to issue or distribute additional shares to
complete said prescribed number of shares at no cost to the FWB within thirty (30) days from finality of this Decision. Other
FWBs who do not belong to the original 6,296 qualified beneficiaries are not entitled to land distribution and shall remain as HLI
shareholders. All salaries, benefits, 3% production share and 3% share in the proceeds of the sale of the 500-hectare converted
land and the 80.51-hectare SCTEX lot and homelots already received by the 10,502 FWBs, composed of 6,296 original FWBs and
4,206 non-qualified FWBs, shall be respected with no obligation to refund or return them.
Within thirty (30) days after determining who from among the original FWBs will stay as stockholders, DAR shall segregate from
the HLI agricultural land with an area of 4,915.75 hectares subject of PARCs SDP-approving Resolution No. 89-12-2 the
following: (a) the 500-hectare lot subject of the August 14, l996 Conversion Order; (b) the 80.51-hectare lot sold to, or acquired
by, the government as part of the SCTEX complex; and (c) the aggregate area of 6,886.5 square meters of individual lots that each
FWB is entitled to under the CARP had he or she not opted to stay in HLI as a stockholder. After the segregation process, as
indicated, is done, the remaining area shall be turned over to DAR for immediate land distribution to the original qualified FWBs
who opted not to remain as HLI stockholders.
The aforementioned area composed of 6,886.5-square meter lots allotted to the FWBs who stayed with the corporation shall form
part of the HLI assets.
HLI is directed to pay the 6,296 FWBs the consideration of PhP 500,000,000 received by it from Luisita Realty, Inc. for the sale to
the latter of 200 hectares out of the 500 hectares covered by the August 14, 1996 Conversion Order, the consideration of PhP
750,000,000 received by its owned subsidiary, Centennary Holdings, Inc. for the sale of the remaining 300 hectares of the
aforementioned 500-hectare lot to Luisita Industrial Park Corporation, and the price of PhP 80,511,500 paid by the government
through the Bases Conversion Development Authority for the sale of the 80.51-hectare lot used for the construction of the SCTEX
road network. From the total amount of PhP 1,330,511,500 (PhP 500,000,000 + PhP 750,000,000 + PhP 80,511,500 = PhP
1,330,511,500) shall be deducted the 3% of the total gross sales from the production of the agricultural land and the 3% of the
proceeds of said transfers that were paid to the FWBs, the taxes and expenses relating to the transfer of titles to the transferees,
and the expenditures incurred by HLI and Centennary Holdings, Inc. for legitimate corporate purposes. For this purpose, DAR is
ordered to engage the services of a reputable accounting firm approved by the parties to audit the books of HLI and Centennary
Holdings, Inc. to determine if the PhP 1,330,511,500 proceeds of the sale of the three (3) aforementioned lots were used or spent
for legitimate corporate purposes. Any unspent or unused balance as determined by the audit shall be distributed to the 6,296
original FWBs.
HLI is entitled to just compensation for the agricultural land that will be transferred to DAR to be reckoned from November 21,
1989 per PARC Resolution No. 89-12-2. DAR and LBP are ordered to determine the compensation due to HLI.
DAR shall submit a compliance report after six (6) months from finality of this judgment. It shall also submit, after submission of
the compliance report, quarterly reports on the execution of this judgment to be submitted within the first 15 days at the end of
each quarter, until fully implemented.
The temporary restraining order is lifted.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
FIRST DIVISION
G.R. No. 166883 November 23, 2005
ANGELA TAGUINOD and RODOLFO G. TAGUINOD, Petitioners,
vs.
MAXIMINO DALUPANG and COURT OF APPEALS, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court assails the October 14, 2004 Decision 1 of the Court of
Appeals in CA-G.R. SP No. 84953 which affirmed the June 30, 2003 Decision2 of the Office of the President in O.P. Case No. 99-
F-8759; and its January 27, 2005 Resolution3 denying petitioners motion for reconsideration.
On October 16, 1987, former President Corazon C. Aquino issued Proclamation No. 1724 which declared thebarangays of Lower
Bicutan, Upper Bicutan, Western Bicutan and Signal Village situated in the Municipality of Taguig, open for disposition under the
provisions of Republic Act (RA) No. 2745 and RA No. 730.6
By virtue of Proclamation No. 172, a parcel of land located in Block 131, Signal Village, Taguig, with an area of 570-square
meters and subdivided into Lots 6 and 11 became open for purchase. Consequently, Maximino Dalupang filed a sales
application7 covering Lot 11. Thereafter, petitioner Angela G. Taguinod also filed her own application8 over the same Lot 11.
Upon learning of Dalupangs application, petitioner filed a protest9 with the Land Management Sector of the Department of
Environment and Natural Resources (DENR), claiming that she is the actual occupant, owner, claimant and applicant over Lot 11
and that Dalupang is only the caretaker of Lot 11 whom she allowed to stay in a portion of the property where the latter built a hut
and put up a store.
Afterwards, petitioner Rodolfo G. Taguinod, the son of Angela Taguinod, filed a separate application over Lot 6.
Subsequently, Lot 11 was subjected to two ocular inspections which resulted into the submission of two conflicting findings and
recommendations. Land Investigator Danilo G. Lim concluded that Dalupang is disqualified to own the lot based on the following
findings:
1. On ocular inspection conducted, it was found out, that subject area, Lot 11, is but a portion of a whole compound fenced by an
old concrete wall;
2. That the compound has an area of 570 sq. meters and is more than 300 sq. meters the maximum area for residential purposes
under Pres. Proc. No. 172, hence the subdivision of the lot into Lot 6, and Lot 11, Blk-13, Psd-15-002057;
3. That an old concrete house owned by the Taguinod stands in the middle of Lot 6 and Lot 11, Blk-13, and is declared under Tax
Declaration No. 1303 in the name of Eusebio Taguinod. (Xerox copy of Tax Declaration is hereto attached);
4. Also existing in Lot 11 is a small house of light materials owned by Maximino Dalupang more or less 20 sq. meters;
5. That in early part of 1975, Capt. Eusebio Taguinod (Ret.) husband of Angela Taguinod, built a semi-concrete house in a parcel
of land that later on be know (sic) as Lot 6, and Lot 11, Blk-13, Psd-15-002057;
6. That also later in the same year Mr. Maximino Dalupang a townmate of the Taguinods and a fire victim in Paraaque asked for
a permission from the Taguinods to temporarily stay in their newly built house;
7. The Taguinods being busy and are industriously tending their livelihood, did not only allowed the Dalupang (sic) to stay
temporarily, but even took them as caretaker;
8. That for privacy reasons, the Dalupangs were even allowed to construct their own dwelling unit;
9. But in early part of 1988 Mr. Dalupang tried to improve and widen his occupation but was restrained to pursue the said
construction by Mrs. Taguinod, as can be gleamed there in the pictures attached by Mr. Dalupang in this IGPS Application and
was marked as Exhibits "1" and "2";
10. Attached herewith is a sworn statement of Lt. Manuel B. Binag (Ret) former Barrio Captain of Signal Village to further boost
the claim of Angela Taguinod;
11. That Maximino Dalupang is a recipient of a government award under the National Housing Authority over Lot 6, Blk-36, Area
H, Psd-13-001949, Sapang Palay Resettlement Project, San Jose del Monte, Bulacan. 10
On the other hand, Land Investigator Jose Exequiel Vale, Jr. recommended that the application of respondent Dalupang be given
due course on account of the following reasons:
1. That per ocular inspection the family of Mr. Maximino Dalupang is the actual occupant of Lot 6, Blk-131, Signal Village,
Taguig, MM.
2. That on said lot exists a residential house made of mixed materials owned by Mr. Dalupang;
3. That per list of claimant, Ms. Angela Taguinod appears a claimant over said lot;
4. That immediately adjoining said lot exists a concrete house owned by a certain Ms. Angela Taguinod;
5. That on the date of ocular inspection said Ms. Taguinod was not around and only visits said area oftentimes;
6. That in actuality the house allegedly owned by Ms. Taguinod is being taken cared of by the family of Mr. Dalupang aside from
the residential house owned by Mr. Dalupang;
In view hereof it is hereby recommended that the application of Mr. Maximino Dalupang which is herein attached be accepted and
given the necessary due course.11
In his supplementary report,12 Vale, Jr. corrected the lot assignment in Dalupangs application on the basis of his findings that he is
actually occupying Lot 6 and not Lot 11 as stated in the sales application.
Based on the conflicting reports, the DENR Regional Executive Director rendered a Decision13 disposing thus:
WHEREFORE, in the light of the foregoing facts and conclusions, the instant case should be dropped from the records. The sales
application of Maximino Dalupang covering Lot 6, Blk. 131, shall now be given further due course, while that of Angela
Taguinod, shall only include Lot 11, Blk 131.
SO ORDERED.14
Petitioner Angela Taquinod filed an appeal15 with the Office of the DENR Secretary on March 22, 1990. On even date, petitioner
Rodolfo Taguinod filed, also with the Office of the DENR Secretary, a Motion to Intervene and Appeal in Intervention. 16
While the appeals of the petitioners were still pending, the application of Angela Taguinod for Lot 11 was approved.
Consequently, Transfer Certificate of Title (TCT) No. 1443117 was issued by the Registry of Deeds for the Province of Rizal in the
name of petitioner Angela Taguinod.
On February 26, 1996, the DENR Secretary rendered a Decision18 affirming the decision of the DENR Regional Executive
Director. The DENR Secretary held that respondent Dalupang had clearly established his actual occupation and residence on Lot 6
while Angela Taguinod, on the other hand, only makes monthly visits on the property.
Acting on petitioners motion for reconsideration, the DENR Secretary reversed the earlier decision and declared Rodolfo
Taguinod as the qualified applicant over Lot 6. The decision further disqualified Dalupang on account of a previous award of a lot
to him by the National Housing Authority (NHA).19
Dalupang moved to reconsider20 the above decision but the same was denied. Dalupang appealed21 to the Office of the President
where it was docketed as O.P. Case No. 99-F-8759. On June 30, 2003, the Office of the President rendered a Decision22 upholding
the appeal of Dalupang ratiocinating that:
There can be no quibbling that Dalupang and his family have been in actual occupation of the subject lot. Angela admitted that,
sometime in 1976, she allowed Dalupang and his family to stay on what is now Lot No. 6. Since then, the Dalupang family has
remained in actual occupation of the lot. Section 3 of RA No. 274 provides "that in the sale of the lands, first priority shall be
given to bonafide occupants of such lands". Similarly, RA No. 730 and MO 119, s. 1987, require that the applicant must be
a bonafide resident of the parcel of public land being applied for.
On the other hand, Rodolfo failed to establish by independent evidence his occupation of the subject lot because he merely
adopted the substantive allegations of, including the pieces of evidence submitted by, his mother. But such evidence only
established Angelas entitlement to purchase Lot 11 and not Lot 6. In fact, the title to Lot 11 had already been transferred in May
1991 to her name. She thus effectively lost her legal personality to participate in the appellate proceedings before the DENR and
this Office. Under this circumstance, Rodolfo cannot claim a right over Lot 6 better than his mother, who, as stated earlier, was
legally disqualified to purchase said lot having already been awarded Lot 11. As the clich goes, the spring cannot rise higher than
its source.
....
Compared to Rodolfo who has not adduced evidence to show his entitlement to the lot in question, Dalupang presented substantial
evidence to prove that he and his family were, during the period material, in physical occupation of the subject lot and have
constructed a house thereon as early as 1977. Among these are documents cited by the DENR Secretary no less in his decision of
February 26, 1996, viz.: (1) official receipt dated May 16, 1977 issued by the Municipality of Taguig for electrical wiring permit
fee paid by Dalupang; (2) certificate of electrical inspection dated May 17, 1977 issued by the Office of the Mayor of Taguig in
connection with the electrical wiring work of Dalupang; and (3) permit dated May 16, 1977 issued by the Office of the Mayor of
Taguig for the installation by Dalupang of electrical wiring apparatus.
....
WHEREFORE, premises considered, the appealed Decisions dated February 17, 1998 and March 19, 1999 of the DENR
Secretary are hereby SET ASIDE and a new one entered declaring appellant Maximino Dalupang as rightfully entitled to purchase
Lot 6, Blk. 131, Psd-13-002057 containing an area of 291 square meters, situated at Signal Village, Taguig, Metro Manila.
Accordingly, the DENR officials concerned are hereby directed to give further due course to Dalupangs IGPSA over Lot 6.
Petitioners filed a petition for review before the Court of Appeals, which affirmed the decision of the Office of the President.
Hence, this petition raising the following issues:
WAS THERE A VALID SALES APPLICATION AS TO CONFER AUTHORITY TO PUBLIC RESPONDENT TO GRANT LOT
6 IN FAVOR OF MAXIMINO DALUPANG?
CAN A DISQUALIFIED VENDEE OF A LOT SOLD BY THE NATIONAL HOUSING AUTHORITY REVIVE HIS
PRIVELEGE AND BE AN AWARDEE OF ANOTHER AS THAT OF LOT 6?23
Petitioners contend that Dalupangs sales application did not comply with the requirements of Proclamation No. 172. They also
assert that Dalupang cannot validly be an awardee of Lot 6 since he was a previous awardee of a home lot in Sapang Palay
Resettlement Project, San Jose Del Monte, Bulacan, given by the NHA.
The petition lacks merit.
We find the sales application filed by the respondent as valid. Memorandum Order No. 11924 provided the guidelines in evaluating
the application to purchase the land which have been declared open for disposition, thus:
(1) He/She must be a bona fide resident of the proclaimed areas. To be considered a bona fide resident, the applicant must have the
following qualifications:
a) A Filipino citizen of legal age and/or a head of the family;
b) Must have constructed a house in the area proclaimed for disposition on or before January 6, 1986 and actually residing therein;
c) Must not own any other residential or commercial lot in Metro Manila;
d) Must not have been a registered awardee of any lot under the administration of the NHA, MHS, or any other government
agency, nor the AFP Officers village;
e) Must not be a professional squatter. A professional squatter, for purposes of this Order, is one who engages in selling lots in the
areas proclaimed for disposition; and
f) Has filed the proper application to purchase.
Petitioners claim that respondents application was invalid because he never applied for Lot 6 but for Lot 11 which was already
awarded to petitioner Angela Taguinod. Petitioners allege that respondent submitted the same application he used in applying for
Lot 11 when he applied for Lot 6 since in the second application, the figures "11" appeared to have been erased and the figure "6"
was written over the space where figure "11" was written.
In his defense, respondent countered that he originally placed "11" in his application because Lot 11 which was originally 570
square meters was subsequently subdivided into two lots, Lots 6 (291 sq. m.) and 11 (279 sq. m.). Respondent added that he
cannot be faulted for believing that the lot on which his house was erected was Lot 11 and not Lot 6 because he only relied on the
lot designation given to him by the land investigator from the DENR who conducted the ocular inspection of the premises.
We find the reasoning of the respondent to be more in accord with the records of this case. In the report submitted by Land
Investigator Vale, Jr., it was mentioned that respondent and his family were the actual occupants of Lot 6, Blk-131, Signal Village,
Taguig, Metro Manila. More importantly, it was expressly stated in the supplementary report that:
With reference to the abovenoted subject, it is respectfully requested that the previous report of the undersigned be amended to
underscore the error on lot assignment for applicant Maximino Dalupang and thereafter to state as follows:
"That instead of lot 11, Blk-131, Signal Village, Taguig, MM., spouses Maximino and Gloria Dalupang are actually in occupation
of lot 6, Blk 131, Signal Village, Taguig, MM."25
This factual finding of Land Investigator Vale, Jr. was duly considered by the DENR Regional Executive Director when he upheld
the sales application of the respondent over Lot 6. The Court of Appeals also recognized the oversight made by the respondent in
his sales application when it declared that:
It appears that Land Investigator Vale, Jr. corrected the lot assignment in Dalupangs application on the basis of his finding that
said applicant is actually occupying Lot 6 and not Lot 11 as stated therein, considering the same as merely an oversight.... 26
All told, no ill will or bad faith attended the correction by the respondent of the lot number in the sales application. Respondent
could not be faulted if he relied on the representations of the land investigators concerning the lot number of the land he was
occupying and applying for. It was natural for respondent to defer to the findings of the land investigators because by the nature of
their position, it is presumed that they have the technical expertise to determine the lot number of the property in question. Such
correction was merely the product of an oversight which would not invalidate respondents application nor make it improper.
Moreover, the fact that respondent was a previous awardee of an NHA lot will not disqualify him from filing a sales application
for Lot 6. As pointed out by the Court of Appeals in the assailed decision:
The more substantial challenge to Dalupangs qualification lies in his being a previous registered awardee of an NHA lot. As
correctly held by the OP, however, the previous NHA lot award is no longer decisive because of the NHA Administrators
certification that Dalupang, after transferring his rights to his nephew, was "permanently disqualified" from acquiring any other lot
administered by the NHA. This only means that Dalupang had ceased to be a registered NHA lot awardee. To our mind, moreover,
the exclusion of Dalupang from any NHA property did not result in a permanent disqualification for him to acquire any
government home lot. To construe the disqualification as attaching to any claimant who became a registered NHA awardee at
sometime in the past without actually acquiring the lot and despite its subsequent transfer for the purpose of acquiring another
government lot for which the applicant fully complied with the requirements of the law will certainly lead to harsh and unjust
consequences. Clearly, this was never intended by the executive branch when it issued MO No. 119.
On the basis of the entire evidence on record, We find the interpretation of MO No. 119 by the OP more in keeping with the policy
and objective of Proclamation No. 172 in relation to RA No. 730. Between two statutory interpretations, that which better serves
the purpose of the law should prevail. It must also be underscored that it is the provisions of MO No. 119 and not RA No. 730
which are the subject of dispute, the former was issued to implement Proclamation No. 172 in accordance with RA No. 730. MO
No. 119 should be interpreted and applied to every case in a manner that is consistent with the objective of Proclamation No. 172
and RA No. 730....27
WHEREFORE, the petition is DENIED. The October 14, 2004 Decision of the Court of Appeals in CA-G.R. SP No. 84953
which affirmed the June 30, 2003 Decision of the Office of the President in O.P. Case No. 99-F-8759; and its January 27, 2005
Resolution, are AFFIRMED.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 171153 September 12, 2007
SAN MIGUEL CORPORATION EMPLOYEES UNIONPHILIPPINE TRANSPORT AND GENERAL WORKERS
ORGANIZATION (SMCEUPTGWO), petitioner,
vs.
SAN MIGUEL PACKAGING PRODUCTS EMPLOYEES UNIONPAMBANSANG DIWA NG MANGGAGAWANG
PILIPINO (SMPPEUPDMP), respondent1.
DECISION
CHICO-NAZARIO, J.:
In this Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, petitioner SAN MIGUEL CORPORATION
EMPLOYEES UNION-PHILIPPINE TRANSPORT AND GENERAL WORKERS ORGANIZATION (SMCEU-PTGWO) prays
that this Court reverse and set aside the (a) Decision2 dated 9 March 2005 of the Court of Appeals in CA-G.R. SP No. 66200,
affirming the Decision3 dated 19 February 2001 of the Bureau of Labor Relations (BLR) of the Department of Labor and
Employment (DOLE) which upheld the Certificate of Registration of respondent SAN MIGUEL PACKAGING PRODUCTS
EMPLOYEES UNIONPAMBANSANG DIWA NG MANGGAGAWANG PILIPINO (SMPPEUPDMP); and (b) the
Resolution4 dated 16 January 2006 of the Court of Appeals in the same case, denying petitioner's Motion for Reconsideration of
the aforementioned Decision.
The following are the antecedent facts:
Petitioner is the incumbent bargaining agent for the bargaining unit comprised of the regular monthly-paid rank and file
employees of the three divisions of San Miguel Corporation (SMC), namely, the San Miguel Corporate Staff Unit (SMCSU), San
Miguel Brewing Philippines (SMBP), and the San Miguel Packaging Products (SMPP), in all offices and plants of SMC,
including the Metal Closure and Lithography Plant in Laguna. It had been the certified bargaining agent for 20 years from 1987
to 1997.
Respondent is registered as a chapter of Pambansang Diwa ng Manggagawang Pilipino (PDMP). PDMP issued Charter Certificate
No. 112 to respondent on 15 June 1999.5 In compliance with registration requirements, respondent submitted the requisite
documents to the BLR for the purpose of acquiring legal personality.6 Upon submission of its charter certificate and other
documents, respondent was issued Certificate of Creation of Local or Chapter PDMP-01 by the BLR on 6 July 1999. 7 Thereafter,
respondent filed with the Med-Arbiter of the DOLE Regional Officer in the National Capital Region (DOLE-NCR), three separate
petitions for certification election to represent SMPP, SMCSU, and SMBP. 8 All three petitions were dismissed, on the ground that
the separate petitions fragmented a single bargaining unit.9
On 17 August 1999, petitioner filed with the DOLE-NCR a petition seeking the cancellation of respondent's registration and its
dropping from the rolls of legitimate labor organizations. In its petition, petitioner accused respondent of committing fraud and
falsification, and non-compliance with registration requirements in obtaining its certificate of registration. It raised allegations that
respondent violated Articles 239(a), (b) and (c)10 and 234(c)11 of the Labor Code. Moreover, petitioner claimed that PDMP is not a
legitimate labor organization, but a trade union center, hence, it cannot directly create a local or chapter. The petition was docketed
as Case No. NCR-OD-9908-007-IRD.12
On 14 July 2000, DOLE-NCR Regional Director Maximo B. Lim issued an Order dismissing the allegations of fraud and
misrepresentation, and irregularity in the submission of documents by respondent. Regional Director Lim further ruled that
respondent is allowed to directly create a local or chapter. However, he found that respondent did not comply with the 20%
membership requirement and, thus, ordered the cancellation of its certificate of registration and removal from the rolls of
legitimate labor organizations.13 Respondent appealed to the BLR. In a Decision dated 19 February 2001, it declared:
As a chartered local union, appellant is not required to submit the number of employees and names of all its members
comprising at least 20% of the employees in the bargaining unit where it seeks to operate. Thus, the revocation of its
registration based on non-compliance with the 20% membership requirement does not have any basis in the rules.
Further, although PDMP is considered as a trade union center, it is a holder of Registration Certificate No. FED-11558-
LC issued by the BLR on 14 February 1991, which bestowed upon it the status of a legitimate labor organization with all
the rights and privileges to act as representative of its members for purposes of collective bargaining agreement. On this
basis, PDMP can charter or create a local, in accordance with the provisions of Department Order No. 9.
WHEREFORE, the appeal is hereby GRANTED. Accordingly, the decision of the Regional Director dated July 14, 2000,
canceling the registration of appellant San Miguel Packaging Products Employees Union-Pambansang Diwa ng
Manggagawang Pilipino (SMPPEU-PDMP) is REVERSED and SET ASIDE. Appellant shall hereby remain in the roster
of legitimate labor organizations.14
While the BLR agreed with the findings of the DOLE Regional Director dismissing the allegations of fraud and
misrepresentation, and in upholding that PDMP can directly create a local or a chapter, it reversed the Regional Director's ruling
that the 20% membership is a requirement for respondent to attain legal personality as a labor organization. Petitioner thereafter
filed a Motion for Reconsideration with the BLR. In a Resolution rendered on 19 June 2001 in BLR-A-C-64-05-9-00 (NCR-OD-
9908-007-IRD), the BLR denied the Motion for Reconsideration and affirmed its Decision dated 19 February 2001.15
Invoking the power of the appellate court to review decisions of quasi-judicial agencies, petitioner filed with the Court of Appeals
a Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure docketed as CA-G.R. SP No. 66200. The Court of
Appeals, in a Decision dated 9 March 2005, dismissed the petition and affirmed the Decision of the BLR, ruling as follows:
In Department Order No. 9, a registered federation or national union may directly create a local by submitting to the BLR
copies of the charter certificate, the local's constitution and by-laws, the principal office address of the local, and the
names of its officers and their addresses. Upon complying with the documentary requirements, the local shall be issued a
certificate and included in the roster of legitimate labor organizations. The [herein respondent] is an affiliate of a
registered federation PDMP, having been issued a charter certificate. Under the rules we have reviewed, there is no need
for SMPPEU to show a membership of 20% of the employees of the bargaining unit in order to be recognized as a
legitimate labor union.
xxxx
In view of the foregoing, the assailed decision and resolution of the BLR are AFFIRMED, and the petition is
DISMISSED.16
Subsequently, in a Resolution dated 16 January 2006, the Court of Appeals denied petitioner's Motion for Reconsideration of the
aforementioned Decision.
Hence, this Petition for Certiorari under Rule 45 of the Revised Rules of Court where petitioner raises the sole issue of:
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING
THAT PRIVATE RESPONDENT IS NOT REQUIRED TO SUBMIT THE NUMBER OF EMPLOYEES AND NAMES
OF ALL ITS MEMBERS COMPRISING AT LEAST 20% OF THE EMPLOYEES IN THE BARGAINING UNIT
WHERE IT SEEKS TO OPERATE.
The present petition questions the legal personality of respondent as a legitimate labor organization.
Petitioner posits that respondent is required to submit a list of members comprising at least 20% of the employees in the
bargaining unit before it may acquire legitimacy, citing Article 234(c) of the Labor Code which stipulates that any applicant labor
organization, association or group of unions or workers shall acquire legal personality and shall be entitled to the rights and
privileges granted by law to legitimate labor organizations upon issuance of the certificate of registration based on the following
requirements:
a. Fifty pesos (P50.00) registration fee;
b. The names of its officers, their addresses, the principal address of the labor organization, the minutes of the
organizational meetings and the list of the workers who participated in such meetings;
c. The names of all its members comprising at least twenty percent (20%) of all the employees in the bargaining unit
where it seeks to operate;
d. If the applicant union has been in existence for one or more years, copies of its annual financial reports; and
e. Four (4) copies of the constitution and by-laws of the applicant union, minutes of its adoption or ratification and the
list of the members who participated in it.17
Petitioner also insists that the 20% requirement for registration of respondent must be based not on the number of employees of a
single division, but in all three divisions of the company in all the offices and plants of SMC since they are all part of one
bargaining unit. Petitioner refers to Section 1, Article 1 of the Collective Bargaining Agreement (CBA), 18 quoted hereunder:
ARTICLE 1
SCOPE
Section 1. Appropriate Bargaining Unit. The appropriate bargaining unit covered by this Agreement consists of all
regular rank and file employees paid on the basis of fixed salary per month and employed by the COMPANY in its
Corporate Staff Units (CSU), San Miguel Brewing Products (SMBP) and San Miguel Packaging Products (SMPP) and in
different operations existing in the City of Manila and suburbs, including Metal Closure and Lithography Plant located at
Canlubang, Laguna subject to the provisions of Article XV of this Agreement provided however, that if during the term
of this Agreement, a plant within the territory covered by this Agreement is transferred outside but within a radius of fifty
(50) kilometers from the Rizal Monument, Rizal Park, Metro Manila, the employees in the transferred plant shall remain
in the bargaining unit covered by this Agreement. (Emphasis supplied.)
Petitioner thus maintains that respondent, in any case, failed to meet this 20% membership requirement since it based its
membership on the number of employees of a single division only, namely, the SMPP.
There is merit in petitioner's contentions.
A legitimate labor organization19 is defined as "any labor organization duly registered with the Department of Labor and
Employment, and includes any branch or local thereof."20 The mandate of the Labor Code is to ensure strict compliance with the
requirements on registration because a legitimate labor organization is entitled to specific rights under the Labor Code, 21 and are
involved in activities directly affecting matters of public interest. Registration requirements are intended to afford a measure of
protection to unsuspecting employees who may be lured into joining unscrupulous or fly-by-night unions whose sole purpose is to
control union funds or use the labor organization for illegitimate ends.22 Legitimate labor organizations have exclusive rights
under the law which cannot be exercised by non-legitimate unions, one of which is the right to be certified as the exclusive
representative23 of all the employees in an appropriate collective bargaining unit for purposes of collective bargaining. 24 The
acquisition of rights by any union or labor organization, particularly the right to file a petition for certification election, first and
foremost, depends on whether or not the labor organization has attained the status of a legitimate labor organization. 25
A perusal of the records reveals that respondent is registered with the BLR as a "local" or "chapter" of PDMP and was issued
Charter Certificate No. 112 on 15 June 1999. Hence, respondent was directly chartered by PDMP.
The procedure for registration of a local or chapter of a labor organization is provided in Book V of the Implementing Rules of the
Labor Code, as amended by Department Order No. 9 which took effect on 21 June 1997, and again by Department Order No. 40
dated 17 February 2003. The Implementing Rules as amended by D.O. No. 9 should govern the resolution of the petition at bar
since respondent's petition for certification election was filed with the BLR in 1999; and that of petitioner on 17 August 1999. 26
The applicable Implementing Rules enunciates a two-fold procedure for the creation of a chapter or a local. The first involves the
affiliation of an independent union with a federation or national union or industry union. The second, finding application in the
instant petition, involves the direct creation of a local or a chapter through the process of chartering. 27
A duly registered federation or national union may directly create a local or chapter by submitting to the DOLE Regional Office or
to the BLR two copies of the following:
(a) A charter certificate issued by the federation or national union indicating the creation or establishment of the
local/chapter;
(b) The names of the local/chapter's officers, their addresses, and the principal office of the local/chapter; and
(c) The local/chapter's constitution and by-laws; Provided, That where the local/chapter's constitution and by-laws is the
same as that of the federation or national union, this fact shall be indicated accordingly.
All the foregoing supporting requirements shall be certified under oath by the Secretary or the Treasurer of the
local/chapter and attested to by its President.28
The Implementing Rules stipulate that a local or chapter may be directly created by a federation or national union. A duly
constituted local or chapter created in accordance with the foregoing shall acquire legal personality from the date of filing of the
complete documents with the BLR.29 The issuance of the certificate of registration by the BLR or the DOLE Regional Office is
not the operative act that vests legal personality upon a local or a chapter under Department Order No. 9. Such legal personality is
acquired from the filing of the complete documentary requirements enumerated in Section 1, Rule VI. 30
Petitioner insists that Section 3 of the Implementing Rules, as amended by Department Order No. 9, violated Article 234 of the
Labor Code when it provided for less stringent requirements for the creation of a chapter or local. This Court disagrees.
Article 234 of the Labor Code provides that an independent labor organization acquires legitimacy only upon its registration with
the BLR:
Any applicant labor organization, association or group of unions or workers shall acquire legal personality and shall be
entitled to the rights and privileges granted by law to legitimate labor organizations upon issuance of the certificate of
registration based on the following requirements:
(a) Fifty pesos (P50.00) registration fee;
(b) The names of its officers, their addresses, the principal address of the labor organization, the minutes of the
organizational meetings and the list of the workers who participated in such meetings;
(c) The names of all its members comprising at least twenty percent (20%) of all the employees in the bargaining unit
where it seeks to operate;
(d) If the applicant union has been in existence for one or more years, copies of its annual financial reports; and
(e) Four (4) copies of the constitution and by-laws of the applicant union, minutes of its adoption or ratification, and the
list of the members who participated in it. (Italics supplied.)
It is emphasized that the foregoing pertains to the registration of an independent labor organization, association or group of unions
or workers.
However, the creation of a branch, local or chapter is treated differently. This Court, in the landmark case ofProgressive
Development Corporation v. Secretary, Department of Labor and Employment,31 declared that when an unregistered union
becomes a branch, local or chapter, some of the aforementioned requirements for registration are no longer necessary or
compulsory. Whereas an applicant for registration of an independent union is mandated to submit, among other things, the number
of employees and names of all its members comprising at least 20% of the employees in the bargaining unit where it seeks to
operate, as provided under Article 234 of the Labor Code and Section 2 of Rule III, Book V of the Implementing Rules, the same
is no longer required of a branch, local or chapter.32 The intent of the law in imposing less requirements in the case of a branch or
local of a registered federation or national union is to encourage the affiliation of a local union with a federation or national union
in order to increase the local union's bargaining powers respecting terms and conditions of labor. 33
Subsequently, in Pagpalain Haulers, Inc. v. Trajano34 where the validity of Department Order No. 9 was directly put in issue, this
Court was unequivocal in finding that there is no inconsistency between the Labor Code and Department Order No. 9.
As to petitioner's claims that respondent obtained its Certificate of Registration through fraud and misrepresentation, this Court
finds that the imputations are not impressed with merit. In the instant case, proof to declare that respondent committed fraud and
misrepresentation remains wanting. This Court had, indeed, on several occasions, pronounced that registration based on false and
fraudulent statements and documents confer no legitimacy upon a labor organization irregularly recognized, which, at best, holds
on to a mere scrap of paper. Under such circumstances, the labor organization, not being a legitimate labor organization, acquires
no rights.35
This Court emphasizes, however, that a direct challenge to the legitimacy of a labor organization based on fraud and
misrepresentation in securing its certificate of registration is a serious allegation which deserves careful scrutiny. Allegations
thereof should be compounded with supporting circumstances and evidence. The records of the case are devoid of such evidence.
Furthermore, this Court is not a trier of facts, and this doctrine applies with greater force in labor cases. Findings of fact of
administrative agencies and quasi-judicial bodies, such as the BLR, which have acquired expertise because their jurisdiction is
confined to specific matters, are generally accorded not only great respect but even finality. 36
Still, petitioner postulates that respondent was not validly and legitimately created, for PDMP cannot create a local or chapter as it
is not a legitimate labor organization, it being a trade union center.
Petitioner's argument creates a predicament as it hinges on the legitimacy of PDMP as a labor organization. Firstly, this line of
reasoning attempts to predicate that a trade union center is not a legitimate labor organization. In the process, the legitimacy of
PDMP is being impugned, albeit indirectly. Secondly, the same contention premises that a trade union center cannot directly create
a local or chapter through the process of chartering.
Anent the foregoing, as has been held in a long line of cases, the legal personality of a legitimate labor organization, such as
PDMP, cannot be subject to a collateral attack. The law is very clear on this matter. Article 212 (h) of the Labor Code, as amended,
defines a legitimate labor organization37 as "any labor organization duly registered with the DOLE, and includes any branch or
local thereof."38 On the other hand, a trade union center is any group of registered national unions or federations organized for the
mutual aid and protection of its members; for assisting such members in collective bargaining; or for participating in the
formulation of social and employment policies, standards, and programs, and is duly registered with the DOLE in accordance with
Rule III, Section 2 of the Implementing Rules.39
The Implementing Rules stipulate that a labor organization shall be deemed registered and vested with legal personality on the
date of issuance of its certificate of registration. Once a certificate of registration is issued to a union, its legal personality cannot
be subject to collateral attack.40 It may be questioned only in an independent petition for cancellation in accordance with Section 5
of Rule V, Book V of the Implementing Rules. The aforementioned provision is enunciated in the following:
Sec. 5. Effect of registration. The labor organization or workers' association shall be deemed registered and vested with
legal personality on the date of issuance of its certificate of registration. Such legal personality cannot thereafter be
subject to collateral attack, but may be questioned only in an independent petition for cancellation in accordance with
these Rules.
PDMP was registered as a trade union center and issued Registration Certificate No. FED-11558-LC by the BLR on 14 February
1991. Until the certificate of registration of PDMP is cancelled, its legal personality as a legitimate labor organization subsists.
Once a union acquires legitimate status as a labor organization, it continues to be recognized as such until its certificate of
registration is cancelled or revoked in an independent action for cancellation.41 It bears to emphasize that what is being directly
challenged is the personality of respondent as a legitimate labor organization and not that of PDMP. This being a collateral attack,
this Court is without jurisdiction to entertain questions indirectly impugning the legitimacy of PDMP.
Corollarily, PDMP is granted all the rights and privileges appurtenant to a legitimate labor organization, 42 and continues to be
recognized as such until its certificate of registration is successfully impugned and thereafter cancelled or revoked in an
independent action for cancellation.
We now proceed to the contention that PDMP cannot directly create a local or a chapter, it being a trade union center.
This Court reverses the finding of the appellate court and BLR on this ground, and rules that PDMP cannot directly create a local
or chapter.
After an exhaustive study of the governing labor law provisions, both statutory and regulatory,43 we find no legal justification to
support the conclusion that a trade union center is allowed to directly create a local or chapter through chartering. Apropos, we
take this occasion to reiterate the first and fundamental duty of this Court, which is to apply the law. The solemn power and duty
of the Court to interpret and apply the law does not include the power to correct by reading into the law what is not written
therein.44
Presidential Decree No. 442, better known as the Labor Code, was enacted in 1972. Being a legislation on social justice, 45 the
provisions of the Labor Code and the Implementing Rules have been subject to several amendments, and they continue to evolve,
considering that labor plays a major role as a socio-economic force. The Labor Code was first amended by Republic Act No.
6715, and recently, by Republic Act No. 9481. Incidentally, the term trade union center was never mentioned under Presidential
Decree No. 442, even as it was amended by Republic Act No. 6715. The term trade union center was first adopted in the
Implementing Rules, under Department Order No. 9.
Culling from its definition as provided by Department Order No. 9, a trade union center is any group of registered national unions
or federations organized for the mutual aid and protection of its members; for assisting such members in collective bargaining; or
for participating in the formulation of social and employment policies, standards, and programs, and is duly registered with the
DOLE in accordance with Rule III, Section 2 of the Implementing Rules.46 The same rule provides that the application for
registration of an industry or trade union center shall be supported by the following:
(a) The list of its member organizations and their respective presidents and, in the case of an industry union, the industry
where the union seeks to operate;
(b) The resolution of membership of each member organization, approved by the Board of Directors of such union;
(c) The name and principal address of the applicant, the names of its officers and their addresses, the minutes of its
organizational meeting/s, and the list of member organizations and their representatives who attended such meeting/s;
and
(d) A copy of its constitution and by-laws and minutes of its ratification by a majority of the presidents of the member
organizations, provided that where the ratification was done simultaneously with the organizational meeting, it shall be
sufficient that the fact of ratification be included in the minutes of the organizational meeting. 47
Evidently, while a "national union" or "federation" is a labor organization with at least ten locals or chapters or affiliates, each of
which must be a duly certified or recognized collective bargaining agent;48 a trade union center, on the other hand, is composed of
a group of registered national unions or federations.49
The Implementing Rules, as amended by Department Order No. 9, provide that "a duly registered federation or national union"
may directly create a local or chapter. The provision reads:
Section 1. Chartering and creation of a local/chapter. A duly registered federation or national union may directly
create a local/chapter by submitting to the Regional Office or to the Bureau two (2) copies of the following:
(a) A charter certificate issued by the federation or national union indicating the creation or establishment of the
local/chapter;
(b) The names of the local/chapter's officers, their addresses, and the principal office of the local/chapter; and
(c) The local/chapter's constitution and by-laws; provided that where the local/chapter's constitution and by-laws is the
same as that of the federation or national union, this fact shall be indicated accordingly.
All the foregoing supporting requirements shall be certified under oath by the Secretary or the Treasurer of the
local/chapter and attested to by its President.50
Department Order No. 9 mentions two labor organizations either of which is allowed to directly create a local or chapter through
chartering a duly registered federation or a national union. Department Order No. 9 defines a "chartered local" as a labor
organization in the private sector operating at the enterprise level that acquired legal personality through a charter certificate,
issued by a duly registered federation or national union and reported to the Regional Office in accordance with Rule III, Section
2-E of these Rules.51
Republic Act No. 9481 or "An Act Strengthening the Workers' Constitutional Right to Self-Organization, Amending for the
Purpose Presidential Decree No. 442, As Amended, Otherwise Known as the Labor Code of the Philippines" lapsed 52 into law on
25 May 2007 and became effective on 14 June 2007.53 This law further amends the Labor Code provisions on Labor Relations.
Pertinent amendments read as follows:
SECTION 1. Article 234 of Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the
Philippines, is hereby further amended to read as follows:
ART. 234. Requirements of Registration. A federation, national union or industry or trade union center or an
independent union shall acquire legal personality and shall be entitled to the rights and privileges granted by law
to legitimate labor organizations upon issuance of the certificate of registration based on the following
requirements:
(a) Fifty pesos (P50.00) registration fee;
(b) The names of its officers, their addresses, the principal address of the labor organization, the minutes of the
organizational meetings and the list of the workers who participated in such meetings;
(c) In case the applicant is an independent union, the names of all its members comprising at least twenty
percent (20%) of all the employees in the bargaining unit where it seeks to operate;
(d) If the applicant union has been in existence for one or more years, copies of its annual financial reports; and
(e) Four copies of the constitution and by-laws of the applicant union, minutes of its adoption or ratification, and
the list of the members who participated in it.
SECTION 2. A new provision is hereby inserted into the Labor Code as Article 234-A to read as follows:
ART. 234-A. Chartering and Creation of a Local Chapter. A duly registered federation or national union may
directly create a local chapter by issuing a charter certificate indicating the establishment of the local chapter.
The chapter shall acquire legal personality only for purposes of filing a petition for certification election from
the date it was issued a charter certificate.
The chapter shall be entitled to all other rights and privileges of a legitimate labor organization only upon the
submission of the following documents in addition to its charter certificate:
(a) The names of the chapter's officers, their addresses, and the principal office of the chapter; and
(b) The chapter's constitution and by-laws: Provided, That where the chapter's constitution and by-laws are the
same as that of the federation or the national union, this fact shall be indicated accordingly.
The additional supporting requirements shall be certified under oath by the secretary or treasurer of the chapter and
attested by its president. (Emphasis ours.)
Article 234 now includes the term trade union center, but interestingly, the provision indicating the procedure for chartering or
creating a local or chapter, namely Article 234-A, still makes no mention of a "trade union center."
Also worth emphasizing is that even in the most recent amendment of the implementing rules, 54 there was no mention of a trade
union center as being among the labor organizations allowed to charter.
This Court deems it proper to apply the Latin maxim expressio unius est exclusio alterius. Under this maxim of statutory
interpretation, the expression of one thing is the exclusion of another. When certain persons or things are specified in a law,
contract, or will, an intention to exclude all others from its operation may be inferred. If a statute specifies one exception to a
general rule or assumes to specify the effects of a certain provision, other exceptions or effects are excluded. 55 Where the terms are
expressly limited to certain matters, it may not, by interpretation or construction, be extended to other matters. 56 Such is the case
here. If its intent were otherwise, the law could have so easily and conveniently included "trade union centers" in identifying the
labor organizations allowed to charter a chapter or local. Anything that is not included in the enumeration is excluded therefrom,
and a meaning that does not appear nor is intended or reflected in the very language of the statute cannot be placed therein. 57 The
rule is restrictive in the sense that it proceeds from the premise that the legislating body would not have made specific
enumerations in a statute if it had the intention not to restrict its meaning and confine its terms to those expressly
mentioned.58 Expressium facit cessare tacitum.59 What is expressed puts an end to what is implied. Casus omissus pro omisso
habendus est. A person, object or thing omitted must have been omitted intentionally.
Therefore, since under the pertinent status and applicable implementing rules, the power granted to labor organizations to directly
create a chapter or local through chartering is given to a federation or national union, then a trade union center is without authority
to charter directly.
The ruling of this Court in the instant case is not a departure from the policy of the law to foster the free and voluntary
organization of a strong and united labor movement,60 and thus assure the rights of workers to self-organization.61 The mandate of
the Labor Code in ensuring strict compliance with the procedural requirements for registration is not without reason. It has been
observed that the formation of a local or chapter becomes a handy tool for the circumvention of union registration requirements.
Absent the institution of safeguards, it becomes a convenient device for a small group of employees to foist a not-so-desirable
federation or union on unsuspecting co-workers and pare the need for wholehearted voluntariness, which is basic to free
unionism.62 As a legitimate labor organization is entitled to specific rights under the Labor Code and involved in activities directly
affecting public interest, it is necessary that the law afford utmost protection to the parties affected. 63 However, as this Court has
enunciated in Progressive Development Corporation v. Secretary of Department of Labor and Employment, it is not this Court's
function to augment the requirements prescribed by law. Our only recourse, as previously discussed, is to exact strict compliance
with what the law provides as requisites for local or chapter formation.64
In sum, although PDMP as a trade union center is a legitimate labor organization, it has no power to directly create a local or
chapter. Thus, SMPPEU-PDMP cannot be created under the more lenient requirements for chartering, but must have complied
with the more stringent rules for creation and registration of an independent union, including the 20% membership requirement.
WHEREFORE, the instant Petition is GRANTED. The Decision dated 09 March 2005 of the Court of Appeals in CA-GR SP
No. 66200 is REVERSED and SET ASIDE. The Certificate of Registration of San Miguel Packaging Products Employees
UnionPambansang Diwa ng Manggagawang Pilipino is ORDERED CANCELLED, and SMPPEU-PDMP DROPPED from
the rolls of legitimate labor organizations.
Costs against petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 185812 January 13, 2015
MARITIME INDUSTRY AUTHORITY, Petitioner,
vs.
COMMISSION ON AUDIT, Respondent.
DECISION
LEONEN, J.:
This case involves the validity of the grant of allowance and incentives to the officers and employees of petitioner Maritime
Industry Authority. We revisit the interpretation and application of Section 12 of the Compensation and Position Classification Act
of 1989.1
The Resident Auditor issued notices of disallowance on the allowances and incentives received by the officers and employees of
Maritime Industry Authority.2 The Legal and Adjudication Office of the Commission on Audit upheld the notices of disallowance
issued.3 The Commission on Audit affirmed the notices of disallowance. 4 Thus, this petition for certiorari was filed by Maritime
Industry Authority.
Maritime Industry Authority is an attached agency of the Department of Transportation and Communication and created under
Presidential Decree No. 474.5
On July 1, 1989, Republic Act No. 6758, otherwise known as "An Act Prescribing a Revised Compensation and Position
Classification System in the Government and For Other Purposes" took effect. The law standardizes the salary rates of
government officials and employees. Section 12 of Republic Act No. 6758 provides:
Section 12. Consolidation of Allowances and Compensation.- All allowances, except for representation and transportation
allowances; clothing and laundry allowances; subsistence allowance of marine officers and crew on board government vessels and
hospital personnel; hazard pay; allowances of foreign service personnel stationed abroad; and such other additional compensation
not otherwise specified herein as may be determined by the DBM, shall be deemed included in the standardized salary rates herein
prescribed. Such other additional compensation, whether in cash or in kind, being received by incumbents only as of July 1, 1989
not integrated into the standardized salary rates shall continue to be authorized.
Existing additional compensation of any national government official or employee paid from local funds of a local government
unit shall be absorbed into the basic salary of said official or employee and shall be paid by the National Government.
On September 30, 1989, the Department of Budget and Management issued National Compensation Circular Nos. 56 6 and
597 implementing Republic Act No. 6758.
Maritime Industry Authority discontinued the grant of several allowances and incentives to its officials and employees allegedly
due to the issuance of National Compensation Circular Nos. 56 and 59.8
In the memorandum dated February 10, 2000, the Administrator of Maritime Industry Authority recommended to then President
Joseph Ejercito Estrada the approval and/or restoration of financial incentives, benefits, or allowances to the officers and
employees of Maritime Industry Authority.9
The allowances and incentives received by the employees and officers of Maritime Industry Authority as of the date of the
memorandum and needing approval of the President are the following:10
(1) Per diems and commutable allowance received by the members of the Board of Maritime Industry Authority; 11
(2) Rice subsidy allowance;12 and
(3) Medical allowance.13
The allowances and incentives sought to be restored are the following:14
(1) Reimbursable representation allowance for members of the Board of Maritime Industry Authority; 15
(2) Performance incentives allowance;16
(3) Economic/efficiency/financial assistance/benefit;17
(4) Hearing allowance;18 and
(5) Birthday month/off month/employment date anniversary allowances. 19
The request to restore these benefits or allowances was premised on "inflation-caused difficulties resulting to [sic] the exodus of
technically/specially trained personnel into the private sector or abroad who shall carry on the delicate and unique functions of the
agency and in consideration of the additional functions of the agency."20 The request to restore was also made to "further
enhance/provide/promote employees welfare/productivity and deter graft and corruption activities." 21
The memorandum was then allegedly stamped with "approved" on October 16, 2000 with the signature of the President of the
Philippines below the stamp.22 Relying on the alleged approval of the President of the Philippines, Maritime Industry Authority
granted the allowances and incentives to its officers and employees starting January 2001.23
The Resident Auditor24 of Maritime Industry Authority then issued the following notices of disallowance with a total amount of
5,565,445.02 for the allowances or benefits received by the officers or employees from January to May 2001:25
Notice of Date Amount Allowance/Benefit
Disallowance Disallowed Disallowed
No.
2002-002-101(01)26 April 9, 2002 P586,500.00 Rice and Medical Allowance
Allowances of Board
Members and Secretary
2002-005-101(01)27 April 9, 2002 P30,800.00 Rice and Medical Allowance
Representation Allowance of
Board Members and
Secretary
2002-006-101(01)28 August 7, 2002 P1,635,376.08 Rice and Medical Allowance
Performance Incentive Allowance for February
Birthday and Employment
Anniversary Bonus
Representation Allowance of
Board Members and
Secretary
2002-007-101(01)29 August 8, 2002 P1,694,008.14 Rice and Medical Allowance
Performance Incentive
Allowance
Birthday and Employment
Anniversary Bonus
2002-008-101(01)30 August 8, 2002 P1,618,760.80 Rice and Medical Allowance
Performance Incentive
Allowance
Birthday and Employment
Anniversary Bonus
Anniversary Allowance
The Resident Auditor disallowed the grant of the allowances on the ground that it constituted double compensation to public
officers and employees proscribed by Article IX(b) of the 1987 Constitution, in relation to Section 229 of the Government
Accounting and Auditing Manual or GAAM Volume 1.31 Further, the Presidents approval of the memorandum was not the law
contemplated by the Constitution as an exception to the prohibition on double compensation.32
On October 25, 2002, Maritime Industry Authority filed a request for reconsideration on the notices of disallowance before the
Commission on Audit Director of the Legal and Adjudication Office. 33
The request for reconsideration was denied in the decision dated June 23, 2003.34 It was ruled that the incentives/allowances,
except for medical allowance and per diems of the members of the Board, were integrated in the basic salary pursuant to the
Salary Standardization Law and National Compensation Circular No. 59.35 On the other hand, the grant of medical allowance and
per diems to the members of the Board is proscribed by Article VII, Section 13 of the 1987 Constitution on double
compensation.36
Maritime Industry Authority filed a petition for review before the Commission on Audit.37
In the decision38 dated March 3, 2005, the Commission on Audit denied the petition for review except as to the per diem and
monthly commutable allowance of the members of the Board of Maritime Industry Authority at the rate of 500.00 for each
member per month.39
The Commission on Audit held that the disallowed allowances are integrated in the standardized salary rates under Section 12 of
Republic Act No. 6758.40
Further, the alleged approval of the President for the restoration or grant of benefits falls short of a law, as required by the
Constitution for the grant of additional allowance or incentive.41 Even assuming that the approval of the President is sufficient to
grant additional allowance to officers and employees of Maritime Industry Authority, the authenticity of the memorandum bearing
the alleged approval of the President presented by Maritime Industry Authority was not established. 42 Only a photocopy of the
memorandum was presented. A copy of the memorandum was also not on file in the Malacaang Records Office. 43
Maritime Industry Authoritys motion for reconsideration was denied in COA Resolution No. 2008-117 dated December 9, 2008. 44
Thus, this petition for certiorari was filed by Maritime Industry Authority assailing the Commission on Audit's decision and
resolution affirming the notices of disallowance.
In compliance with the orders45 of this court, the Commission on Audit filed a comment on the petition for certiorari on June 22,
2009.46 Maritime Industry Authority filed a reply to the comment on August 24, 2009.47
The sole issue in this case is whether the allowance or incentives granted to the officers and employees of Maritime Industry
Authority have legal basis.
We deny the petition.
I
Commission on Audit did not
commit grave abuse of
discretion
The aggrieved party can assail the decision of the Commission on Audit through a petition for certiorari under Rule 64 before this
court. A petition under Rule 64 may prosper only after a finding that the administrative agency committed grave abuse of
discretion amounting to lack or excess of jurisdiction. Not all errors of the Commission on Audit is reviewable by this court. Thus,
A Rule 65 petition is a unique and special rule because it commands limited review of the question raised. As an extraordinary
remedy, its purpose is simply to keep the public respondent within the bounds of its jurisdiction or to relieve the petitioner from
the public respondents arbitrary acts. In this review, the Court is confined solely to questions of jurisdiction whenever a tribunal,
board or officer exercising judicial or quasi-judicial function acts without jurisdiction or in excess of jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction. . . .
The limitation of the Courts power of review over COA rulings merely complements its nature as an independent constitutional
body that is tasked to safeguard the proper use of the government and, ultimately, the peoples property by vesting it with power to
(i) determine whether the government entities comply with the law and the rules in disbursing public funds; and (ii) disallow legal
disbursements of these funds.48 (Emphasis in the original)
Reviewing the rationale for this standard of judicial review:
[t]his court has consistently held that findings of administrative agencies are generally respected, unless found to have been
tainted with unfairness that amounted to grave abuse of discretion:
It is the general policy of the Court to sustain the decisions of administrative authorities, especially one which is constitutionally-
created not only on the basis of the doctrine of separation of powers but also for their presumed expertise in the laws that they are
entrusted to enforce. Findings of administrative agencies are accorded not only respect but also finality when the decision and
order are not tainted with unfairness or arbitrariness that would amount to grave abuse of discretion. It is only when the COA has
acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, that this
Court entertains a petition questioning its rulings. There is grave abuse of discretion when there is an evasion of a positive duty or
a virtual refusal to perform a duty enjoined by law or to act in contemplation of law as when the judgment rendered is not based
on law and evidence but on caprice, whim and despotism.49
We find that no grave abuse of discretion amounting to lack or excess of jurisdiction may be attributed to the Commission on
Audit in this case.
II
Position of the parties
Petitioner Maritime Industry Authority argues that the allowances and incentives granted to its officers and employees are not
integrated in the standardized salary.50 It relies on the last clause of the first sentence of Section 12 of Republic Act No. 6758:51
Section 12. Consolidation of Allowances and Compensation.- All allowances, except for representation and transportation
allowances; clothing and laundry allowances; subsistence allowance of marine officers and crew on board government vessels and
hospital personnel; hazard pay; allowances of foreign service personnel stationed abroad; and such other additional compensation
not otherwise specified herein as may be determined by the DBM, shall be deemed included in the standardized salary rates herein
prescribed. Such other additional compensation, whether in cash or in kind, being received by incumbents only as of July 1, 1989
not integrated into the standardized salary rates shall continue to be authorized.
Existing additional compensation of any national government official or employee paid from local funds of a local government
unit shall be absorbed into the basic salary of said official or employee and shall be paid by the National Government. (Emphasis
supplied)
Petitioner Maritime Industry Authority understands the clause as requiring a subsequent issuance by the Department of Budget
and Management so that other allowances or benefits not specifically enumerated in the provision will be excluded. It insists that a
circular must be issued by the Department of Budget and Management for a specific allowance to be deemed integrated in the
standardized salary pursuant to Section 12 of Republic Act No. 6758.
Since the National Compensation Circular No. 59, the circular issued by the Department of Budget and Management
implementing Section 12, was not published, there can be no allowance deemed integrated in the standardized salary rates. 52 It
relies on Philippine Ports Authority hired after July 1, 1989 v. Commission on Audit53where this court held the following:
However, because of its lack of publication in either the Official Gazette or in a newspaper of general circulation, DBM-CCC No.
10 was declared in effective on August 12, 1998, in De Jesus v. COA, which we quote:
In the present case under scrutiny, it is decisively clear that D[B]M-CCC No. 10, which completely disallows payment of
allowances and other additional compensation to government officials and employees, starting November 1, 1989, is not a mere
interpretative or internal regulation.
It is something more than that. And why not, when it tends to deprive government workers of their allowances and additional
compensation sorely needed to keep body and soul together. At the very least, before the said circular under attack may be
permitted to substantially reduce their income, the government officials and employees concerned should be apprised and alerted
by the publication of the subject circular in the Official Gazette or in a newspaper of general circulation in the Philippines to the
end that they be given amplest opportunity to voice out whatever opposition they may have, and to ventilate their stance on the
subject matter. This approach is more in keeping with democratic precepts and rudiments of fairness and transparency.
In other words, during the period that DBM-CCC No. 10 was in legal limbo, the COLA and the amelioration allowance were not
effectively integrated into the standardized salaries.
Hence, it would be incorrect to contend that because those allowances were not effectively integrated under the first sentence, then
they were "non-integrated benefits" falling under the second sentence of Section 12 of RA 6758. Their characterization must be
deemed to have also been in legal limbo, pending the effectivity of DBM-CCC No. 10. Consequently, contrary to the ruling of the
COA, the second sentence does not apply to the present case. By the same token, the policy embodied in the provision the non-
diminution of benefits in favour of incumbents as of July 1, 1989 is also inapplicable.
The parties fail to cite any law barring the continuation of the grant of the COLA and the amelioration allowance during the period
when DBM-CCC No. 10 was in legal limbo.54
On the other hand, respondent Commission on Audit interprets Section 12 of Republic Act No. 6758 differently. It considers all
allowances as deemed included in the standardized salary except those specifically enumerated in Section 12 of Republic Act No.
6758.55 The issuance of a circular by the Department of Budget and Management is necessary only for the grant of allowance
other than those enumerated under Section 12 of Republic Act No. 6758 in addition to the standardized salary. 56 Respondent
Commission on Audit relies on PPA Employees Hired After 01 July 1989 v. COA57 and NAPOCOR Employees Consolidated
Union v. National Power Corporation.58
In PPA Employees Hired After 01 July 1989 v. COA, et al.,59 this court held that the Department of Budget and Managements
issuance is only for the purpose of identifying additional non-integrated benefits, over and above the standardized salary rates.
Then in NAPOCOR Employees Consolidated Union v. National Power Corporation,60 this court stated:
Section 12 of Rep. Act No. 6758 lays down the general rule that all allowances of state workers are to be included in their
standardized salary rates. Exempted from integration to the standardized salary rates, as specified in the aforequoted provision of
Section 12 of Rep. Act No. 6758, are only the following allowances:
(1) representation and transportation allowances (RATA);
(2) clothing and laundry allowances;
(3) subsistence allowances of marine officers and crew on board government vessels;
(4) subsistence allowance of hospital personnel;
(5) hazard pay;
(6) allowance of foreign service personnel stationed abroad; and
(7) such other additional compensation not otherwise specified herein as may be determined by the DBM.
Otherwise stated, the foregoing are the only allowances which government employees can continue to receive in addition to their
standardized salary rates. The employee welfare allowance of NPC personnel is clearly not among the allowances listed above
which State workers can continue to receive under Rep. Act No. 6758 over and above their standardized salary rates. We must
emphasize that Rep. Act No. 6758 does not require that DBM should first define those allowances that are to be integrated with
the standardized salary rates of government employees before NPC could integrate the employee welfare allowance into its
employees salaries. Thus, despite our ruling in De Jesus which thwarted the attempt of DBM in DBM-CCC No. 10 to complete
the list of allowances exempted from integration, NPC is allowed under Rep. Act No. 6758 to integrate employee welfare
allowance into the employees standardized salary rates.61
Respondent Commission on Audit argues that the alleged lack of publication of National Compensation Circular No. 59 does not
affect the integration of allowances into the standardized salary. 62 Section 12 of Republic Act No. 6758 is in itself executory in that
allowances and benefits are deemed integrated in the standardized salary except those specifically exempted. Further, the nature of
the allowances and incentives in this case is not similar to that of the enumerated exceptions in Section 12 of Republic Act No.
6758.63 As held in Bureau of Fisheries and Aquatic Resources Employees Union v. Commission on Audit, 64 the "benefits excluded
from the standardized salary rates are the allowances or those which are usually granted to officials and employees of the
government to defray or reimburse the expenses incurred in the performance of their official functions." 65
Finally, respondent Commission on Audit points out that there is no law that authorizes the grant of the allowances and incentives
in addition to the salaries of the officers and employees of petitioner Maritime Industry Authority. 66
Respondent Commission on Audit points out that the alleged approval of the President was contained in a mere photocopy of the
memorandum dated February 10, 2000. It purportedly bears the approval and signature of the President for the grant of the
allowances and incentives.67 The original was not presented during the proceedings.
III
The concept of integration of allowances
The consolidation of allowances in the standardized salary in Section 12 of Republic Act No. 6758 is a new rule in the Philippine
position classification and compensation system. The previous laws68 on standardization of compensation of government officials
and employees do not have this provision.
Presidential Decree No. 985,69 as amended by Presidential Decree No. 1597,70 the law prior to Republic Act No. 6758, repealed all
laws, decrees, executive orders, and other issuances or parts thereof that authorize the grant of allowances of certain positions and
employees.71 Under Presidential Decree No. 985, allowances, honoraria, and other fringe benefits may only be granted to
government employees upon approval of the President with the recommendation of the Commissioner of the Budget
Commission.72
Being a new rule, Section 12 of Republic Act No. 6758 raised several questions among government employees. Petitions were
filed before this court involving the Commission on Audits disallowance of the grant of allowances and incentives to government
employees. This court already settled the issues and matters raised by petitioner Maritime Industry Authority. The clear policy of
Section 12 is "to standardize salary rates among government personnel and do away with multiple allowances and other incentive
packages and the resulting differences in compensation among them."73 Thus, the general rule is that all allowances are deemed
included in the standardized salary.74 However, there are allowances that may be given in addition to the standardized salary.
These non-integrated allowances are specifically identified in Section 12, to wit:
1. representation and transportation allowances;
2. clothing and laundry allowances;
3. subsistence allowance of marine officers and crew on board government vessels;
4. subsistence allowance of hospital personnel;
5. hazard pay; and
6. allowances of foreign service personnel stationed abroad.75
In addition to the non-integrated allowances specified in Section 12, the Department of Budget and Management is delegated the
authority to identify other allowances that may be given to government employees in addition to the standardized salary. 76
Action by the Department of Budget and Management is not required to implement Section 12 integrating allowances into the
standardized salary.77 Rather, an issuance by the Department of Budget and Management is required only if additional non-
integrated allowances will be identified. Without this issuance from the Department of Budget and Management, the enumerated
non-integrated allowances in Section 12 remain exclusive.78
This court has repeatedly clarified the last clause of the first sentence of Section 12: "and such other additional compensation not
otherwise specified herein as may be determined by the DBM."
In Abellanosa v. Commission on Audit,79 this court held that:
R.A. 6758 further reinforced this policy by expressly decreeing that all allowances not specifically mentioned therein, or as may
be determined by the DBM, shall be deemed included in the standardized salary rates prescribed. 80
In Napocor Employees Consolidation Union v. The National Power Corporation,81 this court held that Section 12 of Republic Act
No. 6758 is self-executing. It is not required that allowances must be listed for these to be considered integrated in the
standardized salary. This court said: Otherwise stated, the foregoing are the only allowances which government employees can
continue to receive in addition to their standardized salary rates. The employee welfare allowance of NPC personnel is clearly not
among the allowances listed above which State workers can continue to receive under Rep. Act No. 6758 over and above their
standardized salary rates. We must emphasize that Rep. Act No. 6758 does not require that DBM should first define those
allowances that are to be integrated in the standardized salary rates of government employees before NPC could integrate the
employee welfare allowance into its employees' salaries. Thus, despite our ruling in De Jesus which thwarted the attempt of
DBM-CCC No. 10 to complete the list of allowances exempted from integration, NPC is allowed under Rep. Act No. 6758 to
integrate the employee welfare allowance into the employees' standardized salary rates. 82(Emphasis supplied)
In Benguet State University v. Commission on Audit,83 this court held that the rice subsidy and health care allowance "were not
among the allowances listed in Section 12 which State workers can continue to receive under R.A. No. 6758 over and above their
standardized salary rates."84
We cannot subscribe to petitioner Maritime Industry Authoritys contention that due to the non-publication of the Department of
Budget and Managements National Compensation Circular No. 59, it is considered invalid that results in the non-integration of
allowances in the standardized salary.
The Department of Budget and Managements National Compensation Circular No. 59 issued on September 30, 1989 enumerates
the allowances/additional compensation of government employees that are deemed integrated into the basic salary. It does not
identify an allowance that should not be deemed as integrated in the basic salary of government employees.
As held in Philippine International Trading Corporation v. Commission on Audit,85 the non-publication of the Department of
Budget and Managements issuance enumerating allowances that are deemed integrated in the standardized salary will not affect
the execution of Section 12 of Republic Act No. 6758. Thus:
There is no merit in the claim of PITC that R.A. No. 6758, particularly Section 12 thereof is void because DBM-Corporate
Compensation Circular No. 10, its implementing rules, was nullified in the case of De Jesus v. Commission on Audit, for lack of
publication. The basis of COA in disallowing the grant of SFI was Section 12 of R.A. No. 6758 and not DBM-CCC No. 10.
Moreover, the nullity of DBM-CCC No. 10 will not affect the validity of R.A. No. 6758. It is a cardinal rule in statutory
construction that statutory provisions control the rules and regulations which may be issued pursuant thereto. Such rules and
regulations must be consistent with and must not defeat the purpose of the statute. The validity of R.A. No. 6758 should not be
made to depend on the validity of its implementing rules.86
In Gutierrez v. Department of Budget and Management,87 this court held that:
"all allowances" were deemed integrated into the standardized salary rates except the following:
(1) representation and transportation allowances;
(2) clothing and laundry allowances;
(3) subsistence allowances of marine officers and crew on board government vessels;
(4) subsistence allowances of hospital personnel;
(5) hazard pay;
(6) allowances of foreign service personnel stationed abroad; and
(7) such other additional compensation not otherwise specified in Section 12 as may be determined by the DBM.
But, while the provision enumerated certain exclusions, it also authorized the DBM to identify such other additional compensation
that may be granted over and above the standardized salary rates. In Philippine Ports Authority Employees Hired After July 1,
1989 v. Commission on Audit, the Court has ruled that while Section 12 could be considered self-executing in regard to items (1)
to (6), it was not so in regard to item (7). The DBM still needed to amplify item (7) since one cannot simply assume what other
allowances were excluded from the standardized salary rates. It was only upon the issuance and effectivity of the corresponding
implementing rules and regulations that item (7) could be deemed legally completed.
....
In this case, the DBM promulgated NCC 59 [and CCC 10]. But, instead of identifying some of the additional exclusions that
Section 12 of R.A. 6758 permits it to make, the DBM made a list of what allowances and benefits are deemed integrated into the
standardized salary rates. More specifically, NCC 59 identified the following allowances/additional compensation that are deemed
integrated:
....
The drawing up of the above list is consistent with Section 12 above. R.A. 6758 did not prohibit the DBM from identifying for the
purpose of implementation what fell into the class of "all allowances." With respect to what employees benefits fell outside the
term apart from those that the law specified, the DBM, said this Court in a case, needed to promulgate rules and regulations
identifying those excluded benefits. This leads to the inevitable conclusion that until and unless the DBM issues such rules and
regulations, the enumerated exclusions in items (1) to (6) remain exclusive. Thus so, not being an enumerated exclusion, COLA is
deemed already incorporated in the standardized salary rates of government employees under the general rule of integration. 88
Petitioner Maritime Industry Authoritys reliance on Philippine Ports Authority Employees Hired After July 1, 1989 v.
Commission on Auditis misplaced. As this court clarified in Napocor Employees Consolidated Union v. National Power
Corporation,89 the ruling in Philippine Ports Authority Employees Hired After July 1, 1989 was limited to distinguishing the
benefits that may be received by government employees who were hired before and after the effectivity of Republic Act No. 6758.
Thus:
[t]he Court has, to be sure, taken stock of its recent ruling in Philippine Ports Authority (PPA) Employees Hired After July 1, 1989
vs. Commission on Audit. Sadly, however, our pronouncement therein is not on all fours applicable owing to the differing factual
milieu. There, the Commission on Audit allowed the payment of back cost of living allowance (COLA) and amelioration
allowance previously withheld from PPA employees pursuant to the heretofore ineffective DBM CCC No. 10, but limited the
back payment only to incumbents as of July 1, 1989 who were already then receiving both allowances. COA considered the
COLA and amelioration allowance of PPA employees as "not integrated" within the purview of the second sentence of Section 12
of Rep. Act No. 6758, which, according to COA confines the payment of "not integrated" benefits only to July 1, 1989 incumbents
already enjoying the allowances.
In setting aside COAs ruling, we held in PPA Employees that there was no basis to use the elements of incumbency and prior
receipt as standards to discriminate against the petitioners therein. For, DBM-CCC No. 10, upon which the incumbency and prior
receipt requirements are contextually predicated, was in legal limbo from July 1, 1989 (effective date of the unpublished DBM-
CCC No. 10) to March 16, 1999 (date of effectivity of the heretofore unpublished DBM circular). And being in legal limbo, the
benefits otherwise covered by the circular, if properly published, were likewise in legal limbo as they cannot be classified either as
effectively integrated or not integrated benefits.90
Similar to what was stated in Napocor Employees Consolidated Union, the "element of discrimination between incumbents as of
July 1, 1989 and those joining the force thereafter is not obtaining in this case." The second sentence of the first paragraph of
Section 12, Republic Act No. 6758 is not in issue.
V
Additional allowances that
may be identified and granted
to government employees
Other than those specifically enumerated in Section 12, non-integrated allowances, incentives, or benefits, may still be identified
and granted to government employees. This is categorically allowed in Republic Act No. 6758. This is also in line with the
Presidents power of control over executive departments, bureaus, and offices.
These allowances, however, cannot be granted indiscriminately.
Otherwise, the purpose and mandate of Republic Act No. 6758 will be defeated.
Republic Act No. 6758 was enacted to promote "the policy of the State to provide equal pay for substantially equal work and to
base differences in pay upon substantive differences in duties and responsibilities, and qualification requirements of the
positions."91 The law lists down the factors that should guide the Department of Budget and Management in preparing the index of
occupational services, to wit:
1. the education and excellence required to perform the duties and responsibilities of the position;
2. the nature and complexity of the work to be performed;
3. the kind of supervision received;
4. mental and/or physical strain required in the completion of the work;
5. nature and extent of internal and external relationships;
6. kind of supervision exercised;
7. decision-making responsibility;
8. responsibility for accuracy of records and reports;
9. accountability for funds, properties, and equipment; and
10. hardship, hazard, and personal risk involved in the job.92
The factors to determine the salary grades corresponding to each position of a government employee do not take into
consideration the peculiar characteristics of each government office where performance of the same work may entail different
necessary expenses for the employee. For instance, some employees in the Bureau of Customs may require expenses pertaining to
security to properly execute their duties as compared to employees in the Department of Trade and Industry. Republic Act No.
6758 recognizes this when it allowed certain allowances in addition to the standardized salary due to the nature of the office.
Section 12 of the law excludes from the standardized salary allowances to be given to marine officers and crew on board
government vessels and hospital personnel, and foreign service personnel stationed abroad. 93
Thus, it must be shown that additional non-integrated allowances are given to government employees of certain offices due to the
unique nature of the office and of the work performed by the employee.
Further, the non-integrated allowances that may be granted in addition to those specifically enumerated in Section 12 of Republic
Act No. 6758 should be in the nature similar to those enumerated in the provision, that is, they are amounts needed by the
employee in the performance of his or her duties.94
[T]he benefits excluded from the standardized salary rates are the "allowances" or those which are usually granted to officials and
employees of the government to defray or reimburse the expenses incurred in the performance of their official functions.
....
In Philippine Ports Authority v. Commission on Audit, we explained that if these allowances were consolidated with the
standardized salary rates, then government officials or employees would be compelled to spend their personal funds in attending
to their duties.95
In National Tobacco Administration v. Commission on Audit,96 this court held that educational assistance is not an allowance that
may be granted in addition to the standardized salary. Analyzing No. 7, which is the last clause of the first sentence of Section 12,
in relation to the other benefits therein enumerated, it can be gleaned unerringly that it is a "catch-all proviso." Further reflection
on the nature of subject fringe benefits indicates that all of them have one thing in common - they belong to one category of
privilege called allowances which are usually granted to officials and employees of the government to defray or reimburse the
expenses incurred in the performance of their official functions. In Philippine Ports Authority vs. Commission on Audit, this Court
rationalized that "if these allowances are consolidated with the standardized rate, then the government official or employee will be
compelled to spend his personal funds in attending to his duties."
The conclusion - that the enumerated fringe benefits are in the nature of allowance - finds support in sub-paragraphs 5.4 and 5.5 of
CCC No. 10.
Sub-paragraph 5.4 enumerates the allowance/fringe benefits which are not integrated into the basic salary and which may be
continued after June 30, 1989 subject to the condition that the grant of such benefit is covered by statutory authority, to wit:
(1) RATA;
(2) Uniform and Clothing allowances;
(3) Hazard pay;
(4) Honoraria/additional compensation for employees on detail with special projects or inter-agency undertakings;
(5) Honoraria for services rendered by researchers, experts and specialists who are of acknowledged authorities in their
fields of specialization;
(6) Honoraria for lectures and resource persons or speakers;
(7) Overtime pay in accordance to Memorandum Order No. 228;
(8) Clothing/laundry allowances and subsistence allowance of marine officers and crew on board GOCCs/GF Is owned
vessels and used in their operations, and of hospital personnel who attend directly to patients and who by nature of their
duties are required to wear uniforms;
(9)Quarters Allowance of officials and employees who are presently entitled to the same;
(10)Overseas, Living Quarters and other allowances presently authorized for personnel stationed abroad;
(11) Night differential of personnel on night duty;
(12)Per Diems of members of the governing Boards of GOCCs/GFIs at the rate as prescribed in their respective Charters;
(13)Flying pay of personnel undertaking aerial flights;
(14) Per Diems/Allowances of Chairman and Members or Staff of collegial bodies and Committees; and
(15) Per Diems/Allowances of officials and employees on official foreign and local travel outside of their official station.
In addition, sub-paragraph 5.5 of the same Implementing Rules provides for the other allowances/fringe benefits not likewise
integrated into the basic salary and allowed to be continued only for incumbents as of June 30, 1989 subject to the condition that
the grant of the same is with appropriate authorization either from the DBM, Office of the President or legislative issuances, as
follows:
(1) Rice Subsidy;
(2) Sugar Subsidy;
(3) Death Benefits other than those granted by the GSIS;
(4) Medical/Dental/Optical Allowances/Benefits;
(5) Childrens Allowances;
(6) Special Duty Pay/Allowance;
(7) Meal Subsidy;
(8) Longevity Pay; and
(9) Tellers Allowance.
On the other hand, the challenged financial incentive is awarded by the government in order to encourage the beneficiaries to
pursue further studies and to help them underwrite the expenses for the education of their children and dependents. In other words,
subject benefit is in the nature of financial assistance and not of an allowance. For the former, reimbursement is not necessary
while for the latter, reimbursement is required. Not only that, the former is basically an incentive wage which is defined as "a
bonus or other payment made to employees in addition to guaranteed hourly wages" while the latter cannot be reckoned with as a
bonus or additional income, strictly speaking.
It is indeed decisively clear that the benefits mentioned in the first sentence of Section 12 and sub-paragraphs 5.4 and 5.5 of CCC
No. 10 are entirely different from the benefit in dispute, denominated as Educational Assistance. The distinction elucidated upon is
material in arriving at the correct interpretation of the two seemingly contradictory provisions of Section 12.
Cardinal is the rule in statutory construction "that the particular words, clauses and phrases should not be studied as detached and
isolated expressions, but the whole and every part of the statute must be considered in fixing the meaning of any of its parts and in
order to produce a harmonious whole. A statute must so construed as to harmonize and give effect to all its provisions whenever
possible." And the rule - that statute must be construed as a whole - requires that apparently conflicting provisions should be
reconciled and harmonized, if at all possible. It is likewise a basic precept in statutory construction that the intent of the legislature
is the controlling factor in the interpretation of the subject statute. With these rules and the foregoing distinction elaborated upon,
it is evident that the two seemingly irreconcilable propositions are susceptible to perfect harmony. Accordingly, the Court
concludes that under the aforesaid "catch-all proviso," the legislative intent is just to include the fringe benefits which are in the
nature of allowances and since the benefit under controversy is not in the same category, it is safe to hold that subject educational
assistance is not one of the fringe benefits within the contemplation of the first sentence of Section 12 but rather, of the second
sentence of Section 12, in relation to Section 17 of R.A. No. 6758, considering that (1)the recipients were incumbents when R.A.
No. 6758 took effect on July 1, 1989, (2) were, in fact, receiving the same, at the time, and (3) such additional compensation is
distinct and separate from the specific allowances above-listed, as the former is not integrated into the standardized salary rate.
Simply stated, the challenged benefit is covered by the second sentence of Section 12 of R.A. No. 6758, the application of sub-
paragraphs 5.4and 5.5 of CCC No. 10 being only confined to the first sentence of Section 12, particularly the last clause thereof
which amplifies the "catch-all proviso."97 (Citations omitted)
In Bureau of Fisheries and Aquatic Resources Employees Union v. Commission on Audit,98 this court affirmed the disallowance of
the grant of the food basket allowance in the amount of P10,000.00 to employees of the Bureau of Fisheries and Aquatic
Resources. This court held:
In the instant case, the Food Basket Allowance is definitely not in the nature of an allowance to reimburse expenses incurred by
officials and employees of the government in the performance of their official functions. It is not payment in consideration of the
fulfilment of official duty. It is a form of financial assistance to all officials and employees of BFAR. Petitioner itself stated that
the Food Basket Allowance has the purpose of alleviating the economic condition of BFAR employees. 99
VI
Who identifies and grants
Respondent Commission on Audit argues that the alleged approval by the President is not a law that would allow the grant of
allowances and benefits to the employees of petitioner Maritime Industry Authority.
Section 12 of Republic Act No. 6758 does not require the enactment of a law to exclude benefits or allowances from the
standardized salary. What is required is a determination by the Department of Budget and Management of the non-integrated
benefits or allowances. In Abakada Guro Party List v. Purisima:100
Congress has two options when enacting legislation to define national policy within the broad horizons of its legislative
competence. It can itself formulate the details or it can assign to the executive branch the responsibility for making necessary
marginal decisions in conformity with those standards. In the latter case, the law must be complete in all its essential terms and
conditions when it leaves the hands of the legislature. Thus, what is left for the executive branch or the concerned administrative
agency when it formulates rules and regulations implementing the law is to fill up details (supplementary rule-making) or
ascertain facts necessary to bring the law into actual operation (contingent rule-making).101 (Citations omitted)
The law delegated to the executive branch the filling in of other allowances and benefits that should be excluded from the
standardized salary. It specifically identifies the Department of Budget and Management to carry out the task. However, this does
not exclude the President from identifying the excluded allowances or benefits himself, the Secretary of the Department of Budget
and Management being an alter ego of the President. Of course, the performance of this task must still be in accordance with the
parameters laid down in Republic Act No. 6758.102 As this court held in Chavez v. Romulo:103
at the apex of the entire executive officialdom is the President. Section 17, Article VII of the Constitution specifies his power as
Chief Executive, thus: "The President shall have control of all the executive departments, bureaus and offices. He shall ensure that
the laws be faithfully executed." As Chief Executive, President Arroyo holds the steering wheel that controls the course of her
government. She lays down policies in the execution of her plans and programs. Whatever policy she chooses, she has her
subordinates to implement them. In short, she has the power of control. Whenever a specific function is entrusted by law or
regulation to her subordinate, she may act directly or merely direct the performance of a duty. Thus, when President Arroyo
directed respondent Ebdane to suspend the issuance of PTCFOR, she was just directing a subordinate to perform an assigned duty.
Such act is well within the prerogative of her office.104 (Emphasis in the original)
VII
Constitutional and Fiscal
Autonomy Group
We must, however, differentiate the guidelines for the grant of allowances and benefits to officials and employees of members of
the Constitutional and Fiscal Autonomy Group. The judiciary, Civil Service Commission, Commission on Audit, Commission on
Elections, and the Office of the Ombudsman are granted fiscal autonomy by the Constitution.105 The fiscal autonomy enjoyed by
the Constitutional and Fiscal Autonomy Group is an aspect of the members independence guaranteed by the Constitution. 106 Their
independence is a necessary component for their existence and survival in our form of government.
In Bengzon v. Drilon,107 this court said:
As envisioned in the Constitution, the fiscal autonomy enjoyed by the Judiciary, the Civil Service Commission, the Commission
on Audit, the Commission on Elections, and the Office of the Ombudsman contemplates a guarantee of full flexibility to allocate
and utilize their resources with the wisdom and dispatch that their needs require. It recognizes the power and authority to levy,
assess and collect fees, fix rates of compensation not exceeding the highest rates authorized by law for compensation and pay
loans of the government and allocate and disburse such sums as may be provided by law or prescribed by them in the course of the
discharge of their functions.108
As this court held in Re: COA Opinion on the Computation of the Appraised Value of the Properties Purchased by the Retired
Chief/Associate Justices of the Supreme Court,109 "real fiscal autonomy covers the grant to the Judiciary of the authority to use
and dispose of its funds and properties at will, free from any outside control or interference."110 This includes the judgment to use
its funds to provide additional allowances and benefits to its officials and employees deemed to be necessary and relevant in the
performance of their functions in the office. Due to the nature of the functions of the Constitutional and Fiscal Autonomy Group
and the constitutional grant of fiscal autonomy, an issuance by the Department of Budget and Management or any other agency of
the government is not necessary to exclude an allowance or benefit from the standardized salary.
The entity entrusted by Republic Act No. 6758 to determine the benefits and allowances that are not deemed integrated is the
Department of Budget and Management. It studies the necessity and reasonableness of the grant of the allowance and, more
importantly, its practicability, that is, whether the government has enough budget to grant the allowance. This is in line with our
form of government where the "sound management and effective utilization of financial resources of government are basically
executive functions."111 On the other hand, the budget of the Constitutional and Fiscal Autonomy Group is constitutionally
mandated to be released regularly. How these constitutional bodies manage and utilize their budget is within their prerogative and
authority to determine. The officials of the Constitutional and Fiscal Autonomy Group can determine whether the budget allocated
and released by the government to them can deliver the allowances and benefits its employees will receive. The executive cannot
interfere with how funds will be used or disbursed without violating the separation of powers.
Allowing the President or his or her alter ego to dictate the allowances or benefits that may be received by the officers and
employees of the Constitutional and Fiscal Autonomy Group will undermine their independence. This arrangement is repugnant to
their autonomy enshrined by the Constitution. As said in Velasco v. Commission on Audit, 112 the grant or regulation of the grant of
productivity incentive allowance or similar benefits are in the exercise of the Presidents power of control over these entities. Not
being under the Presidents power of control, the Constitutional and Fiscal Autonomy Group should be able to determine the
allowances or benefits that suit the functions of the office.
Nonetheless, expenditures of government funds by the Constitutional and Fiscal Autonomy Group are still audited by the
Commission on Audit on a post-audit basis.113
VIII
No proof of grant of
allowance by the President or
the Department of Budget
and Management
Petitioner Maritime Industry Authority relies on the alleged approval by then President Estrada of its memorandum dated
February 10, 2000. Respondent Commission on Audit counters that the original memorandum was not presented by petitioner
Maritime Industry Authority. Further, the alleged approval is not a law authorizing the grant of additional compensation or
benefits to government employees.
Article VI, Section 29 of the 1987 Constitution provides, "[n]o money shall be paid out of the Treasury except in pursuance of an
appropriation made by law."
Further, before public funds may be disbursed for salaries and benefits to government officers and employees, it must be shown
that these are commensurate to the services rendered and necessary or relevant to the functions of the office. "Additional
allowances and benefits must be shown to be necessary or relevant to the fulfillment of the official duties and functions of the
government officers and employees."114
In Yap v. Commission on Audit,115 this court laid down two general requisites before a benefit may be granted to government
officials or employees. First is that the allowances and benefits were authorized by law and second, that there was a direct and
substantial relationship between the performance of public functions and the grant of the disputed allowances. Thus:
[t]o reiterate, the public purpose requirement for the disbursement of public funds is a valid limitation on the types of allowances
and benefits that may be granted to public officers. It was incumbent upon petitioner to show that his allowances and benefits
were authorized by law and that there was a direct and substantial relationship between the performance of his public functions
and the grant of the disputed allowances to him.116
The burden of proving the validity or legality of the grant of allowance or benefits is with the government agency or entity
granting the allowance or benefit, or the employee claiming the same. After the Resident Auditor issues a notice of disallowance,
the aggrieved party may appeal the disallowance to the Director within six (6) months from receipt of the decision. 117 At this point,
the government agency or employee has the chance to prove the validity of the grant of allowance or benefit. If the appeal is
denied, a petition for review may be filed before the Commission on Audit Commission Proper. 118 Finally, the aggrieved party may
file a petition for certiorari before this court to assail the decision of the Commission on Audit Commission Proper. 119
Our laws and procedure have provided the aggrieved party several chances to prove the validity of the grant of the allowance or
benefit.
To prove the validity of the allowances granted, petitioner Maritime Industry Authority presented a photocopy of the
memorandum with an "approved" stamped on the memorandum. Below the stamp is the signature of then President Estrada.
We cannot rule on the validity of the alleged approval by the then President Estrada of the grant of additional allowances and
benefits. Petitioner Maritime Industry Authority failed to prove its existence. The alleged approval of the President was contained
in a mere photocopy of the memorandum dated February 10, 2000. The original was not presented during the proceedings. A copy
of the document is not in the Malacaang Records Office.
IX
The grant of allowances and
benefits amounts to double
compensation proscribed by
Article IX(B), Section 8 of the
1987 Constitution
Article IX(B), Section 8 of the 1987 Constitution provides:
Section 8. No elective or appointive public officer or employee shall receive additional, double, or indirect compensation, unless
specifically authorized by law, nor accept without the consent of the Congress, any present, emolument, office, or title of any kind
from any foreign government.
Pensions or gratuities shall not be considered as additional, double, or indirect compensation.1awp++i1
Petitioner Maritime Industry Authority argues that the rule against double compensation does not apply because National
Compensation Circular No. 59 is ineffectual due to its non-publication.120
Respondent Commission on Audit counters that the disallowed allowances is tantamount to additional compensation proscribed
by Article IX(B), Section 8 of the 1987 Constitution.121 This is because these allowances are not authorized by law.
Republic Act No. 6758 deems all allowances and benefits received by government officials and employees as incorporated in the
standardized salary, unless excluded by law or an issuance by the Department of Budget and Management. The integration of the
benefits and allowances is by legal fiction.122
The disallowed benefits and allowances of petitioner Maritime Industry Authoritys officials and employees were not excluded by
law or an issuance by the Department of Budget and Management. Thus, these were deemed already given to the officials and
employees when they received their basic salaries. Their receipt of the disallowed benefits and allowances was tantamount to
double compensation.
X
Petitioner Maritime Industry
Authority was not denied due
process in the disallowance of
the allowances and benefits
Petitioner Maritime Industry Authority argues that it was denied administrative due process. 123 Respondent Commission on Audit
affirmed the notices of disallowance on the basis of provisions of law that are different from the bases cited in the notices of
disallowance.124
Respondent Commission on Audit does not deny that other grounds were relied upon to affirm the disallowance of the allowances
given to the officers and employees of petitioner Maritime Industry Authority. However, it argues that this is pursuant to its
mandate under Article IX(D), Section 2 of the 1987 Constitution125 and is a necessary incident of its appellate jurisdiction as
provided in Rule II, Section 4 of the 1997 COA Revised Rules of Procedure.126
This court already settled that:
[the Commission on Audit] is not required to limit its review only to the grounds relied upon by a government agency's auditor
with respect to disallowing certain disbursements of public funds. In consonance with its general audit power, respondent
Commission on Audit is not merely legally permitted, but is also duty-bound to make its own assessment of the merits of the
disallowed disbursement and not simply restrict itself to reviewing the validity of the ground relied upon by the auditor of the
government agency concerned. To hold otherwise would render COA's vital constitutional power unduly limited and thereby
useless and ineffective.127
The disallowance of the grant of benefits and allowances by respondent Commission on Audit is proper. We proceed to determine
whether officers and employees of petitioner Maritime Industry Authority are liable and/or should refund the disallowed
allowances.
XII
Refund of the amounts
received and liability of
approving officers
Presidential Decree No. 1445 provides for a general liability for unlawful expenditures:
Section 103. General liability for unlawful expenditures. Expenditures of government funds or uses of government property in
violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible therefor. 128
Section 19 of the Manual of Certificate of Settlement and Balances, Commission on Audit Circular No. 94-001 provides:
19.1. The liability of public officers and other persons for audit disallowances shall be determined on the basis of: (a) the nature of
the disallowance; (b) the duties, responsibilities or obligations of the officers/persons concerned; (c) the extent of their
participation or involvement in the disallowed transaction; and (d) the amount of losses or damages suffered by the government
thereby. The following are illustrative examples:
....
19.1.3. Public officers who approve or authorize transactions involving the expenditure of government funds and uses of
government properties shall be liable for all losses arising out of their negligence or failure to exercise the diligence of a good
father of a family.
Generally, the public officers good faith does not excuse his or her personal liability over the unauthorized disbursement. This
court said:
Section 103 of P.D. 1445 declares that expenditures of government funds or uses of government property in violation of law or
regulations shall be a personal liability of the official or employee found to be directly responsible therefor. The public officials
personal liability arises only if the expenditure of government funds was made in violation of law. In this case, petitioners act of
entering into a contract on behalf of the local government unit without the requisite authority therefor was in violation of the Local
Government Code. While petitioner may have relied on the opinion of the City Legal Officer, such reliance only serves to buttress
his good faith. It does not, however, exculpate him from his personal liability under P.D. 1445.129
However, with regard to the disallowance of salaries, emoluments, benefits, and allowances of government employees, prevailing
jurisprudence130 provides that recipients or payees need not refund these disallowed amounts when they received these in good
faith.131 Government officials and employees who received benefits or allowances, which were disallowed, may keep the amounts
received if there is no finding of bad faith and the disbursement was made in good faith.132
On the other hand, officers who participated in the approval of the disallowed allowances or benefits are required to refund only
the amounts received when they are found to be in bad faith or grossly negligent amounting to bad faith.133
In Philippine Economic Zone Authority v. Commission on Audit,134 this court defined good faith relative to the requirement of
refund of disallowed benefits or allowances.
In common usage, the term "good faith" is ordinarily used to describe that state of mind denoting "honesty of intention, and
freedom from knowledge of circumstances which ought to put the holder upon inquiry; an honest intention to abstain from taking
any unconscientious advantage of another, even through technicalities of law, together with absence of all information, notice, or
benefit or belief of facts which render transaction unconscientious."135
The assailed notices of disallowance enumerate the following persons as liable for the disallowed disbursements:
Elenita Delgado Approving Officer136
Oscar Sevilla- Approving Officer137
Yolanda Quiones Chief Accountant138
Agrifina Lacson Certifying Officer139
Erlinda Baltazar Cashier140
Myrna Colag Alternative Approving Officer141
Miriam Dimayuga Alternate Approving Officer142
The recipients of the disallowed allowances under the assailed notices of disallowance are the following:
1awp++i1
Payee Position Amount Allowance/Benefit
Disallowed Disallowed
Notice of Disallowance No. 2002-002-101(01)143
Erlinda Baltazar Cashier 550,000.00 Rice and Medical Allowance
and Allowances of Board
Oscar Sevilla Administrator 5,000.00 Members and Secretary (net of
Pedro Mendoza Director 5,700.00 allowable allowance
of P500.00/mo pursuant to Sec.
Marietto Enecio Director 5,700.00 7 of P.D. 474) for January 2001.
Juan Pea Director 5,700.00
Gloria Baas [not indicated in rollo] 3,000.00
G. Mendoza Director 5,700.00
Ruben Ciron Director 5,700.00
Notice of Disallowance No. 2002-005-101(01)144
Oscar Sevilla Administrator 5,000.00 Rice and Medical Allowance,
Representation Allowance of
Pedro Mendoza Director 5,700.00 Board Members and Secretary
Marietto Enecio Director 5,700.00 (net of allowable allowance
of P500.00/mo pursuant to Sec.
Alfonso Cusi Director 5,700.00 7 of P.D. 474) for February
2001.
Ruben Ciron Director 5,700.00
Gloria Baas [not indicated in rollo] 3,000.00
Notice of Disallowance No. 2002-006-101(01)145
Erlinda Baltazar Cashier 565,400.00 Rice and Medical Allowance
Chona [illegible] [not indicated in rollo] 1,591.50 Performance Incentive
Allowance for Feb. 2001
[illegible] [not indicated in rollo] 2,508.25
Erlinda Baltazar Cashier 139,000.00 Birthday and Employment
Anniversary Bonus for February
2001
Erlinda Baltazar Cashier 835,376.33 Performance Incentive
Allowance for March 2001
Jovino G. Tamayo [not indicated in rollo] 5,000.00 Employment Anniversary Bonus
Oscar M. Sevilla Administrator 5,000.00 Representation Allowance of
Board Members and Secretary
Jose T. Tale Director 5,700.00 (net of allowable allowance
Pedro V. Mendoza Director 5,700.00 of P500.00/mo pursuant to Sec.
7 of P.D. 474) for March 2001.
Marietto A. Enecio Director 5,700.00
Ruben Ciron Director 5,700.00
Alfonso Cusi Director 5,700.00
Gloria Baas [not indicated in rollo] 3,000.00
Notice of Disallowance No. 2002-007-101(01)146
Erlinda Baltazar Cashier 561,000.00 Rice and Medical Allowance for
April 2001
Renita Bautista [not indicated in rollo] 30,800.00 Rice/Med for March 2001
Chona Verceles [not indicated in rollo] 2,200.00 Rice/Med for March 2001
Alfonso Rulloda [not indicated in rollo] 4,698.00 Performance Incentive
Allowance for Feb. 2001
Renita Bautista [not indicated in rollo] 15,400.00 Rice[/][M]ed for April 2001
Erlinda Baltazar Cashier 893,910.14 Performance Incentive
Allowance for April 2001
Erlinda Baltazar Cashier 186,000.00 Birthday and Employment
Anniversary Bonus for April
2001
Notice of Disallowance No. 2002-008-101(01)147
Erlinda Baltazar Cashier 552,200.00 Rice and Medical Allowance for
May 2001
Renita Bautista [not indicated in rollo] 30,669.50 Performance Incentive
Allowance for April 2001
Liberato [illegible] [not indicated in rollo] 2,200.00 Rice/Med for April 2001
Emperatriz Aquino [not indicated in rollo] 1,098.75 Performance Incentive
Allowance for Feb. 2001
Alfonso Rulloda [not indicated in rollo] 4,698.00 Performance Incentive
Allowance for March 2001
Chona Verceles [not indicated in rollo] 1,591.50 Performance Incentive
Allowance for March 2001
Emperatriz Aquino [not indicated in rollo] 2,232.75 Performance Incentive
Allowance for March 2001
Jesus Manongdo [not indicated in rollo] 2,200.00 Rice[/][M]ed for May 2001
Erlinda Baltazar Cashier 124,000.00 Birthday and Employment
Anniversary Bonus for May
2001
Roberto [illegible] [not indicated in rollo] 3,000.00 Anniversary Allowance
Renita Bautista [not indicated in rollo] 11,600.00 Rice/Med for May 2001
Erlinda Baltazar Cashier 877,270.30 Performance Incentive
Allowance for May 2001
Feliciano Tira, Jr. [not indicated in rollo] 4,400.00 Rice/Med For April and May
2001
The records do not show the reason why Erlinda Baltazar, petitioner Maritime Industry Authoritys cashier, received high amounts
for the allowances as shown in the notices of disallowance.
The amount given to Erlinda Baltazar is exorbitant especially when contrasted with the other officers and employees of petitioner
Maritime Industry Authority receiving the same allowance. The disparity in the amounts given to Erlinda Baltazar compared to the
other officers and employees is too substantial to consider her and the approving officers to be in good faith when Erlinda Baltazar
received the amounts. Thus, Erlinda Baltazar and the approving officers are solidarily liable to refund all amounts received by
Erlinda Baltazar based on what was disallowed by respondent Commission on Audit. This solidary liability is in accordance with
Book VI, Chapter V, Section 43 of the Administrative Code, which provides:
Liability for Illegal Expenditures. Every expenditure or obligation authorized or incurred in violation of the provisions of this
Code or of the general and special provisions contained in the annual General or other Appropriations Act shall be void. Every
payment made in violation of said provisions shall be illegal and every official or employee authorizing or making such payment,
or taking part therein, and every person receiving such payment shall be jointly and severally liable to the Government for the full
amount so paid or received.
The amount Erlinda Baltazar received as allowance for one month should have alerted her and the approving officers on the
validity and legality of the grant of the allowance. Good faith dictates that the approving officers deny the grant and Erlinda
Baltazar refrain from receiving the amount that is clearly and on its face invalid. Erlinda Baltazar and the approving officers
positions dictate that they are familiar and knowledgeable of the usual amounts allowed for allowances and benefits.
As to the directors, officers, and other employees of petitioner Maritime Industry Authority who received the disallowed benefits,
they are presumed to have acted in good faith when they allowed and/or received them. 148
Respondent Commission on Audit failed to show bad faith on the part of the approving officers in disbursing the disallowed
benefits and allowances. Further, the officers of petitioner Maritime Industry Authority relied on the alleged approval of the
President of the Philippines in granting the benefits and allowances.
Respondent Commission on Audit said that there were "exchanges of communications between the auditor and Atty. Oscar M.
Sevilla, [Maritime Industry Authority]s Administrator, pointing out to the latter, in letter of April 4, 2001, that continuous grant of
the allowances in question would not only contradict the provisions of Administrative Order no. 5 issued by the Office of the
President and Budget Circular No. 2001-1 but would likewise negate the objective of generating savings."
However, the checks for the disallowed benefits and allowances were issued prior to April 4, 2001.1wphi1 It does not appear that
petitioner Maritime Industry Authority's directors and officers were informed prior to the disbursement of the amounts disallowed
that these allowances and benefits were in violation of existing law, and rules and regulations.
WHEREFORE, the decision of respondent Commission on Audit dated March 3, 2005 and resolution dated December 9, 2008 are
AFFIRMED with MODIFICATION. The approving officers and Erlinda Baltazar are solidarily liable to refund the disallowed
amounts received by Erlinda Baltazar. The other payees need not refund the amounts received.
SO ORDERED.