G.R. No.
L-16704 March 17, 1962 law, whatever prior executive or judicial construction may have been given to the phrase in question
VICTORIAS MILLING COMPANY, INC., petitioner-appellant,
vs.
SOCIAL SECURITY COMMISSION, respondent-appellee.
Ross, Selph and Carrascoso for petitioner-appellant.
Office of the Solicitor General and Ernesto T. Duran for respondent-appellee.
BARRERA, J.:
On October 15, 1958, the Social Security Commission issued its Circular No. 22 of the following
tenor: .
Effective November 1, 1958, all Employers in computing the premiums due the System, will take
into consideration and include in the Employee's remuneration all bonuses and overtime pay, as
well as the cash value of other media of remuneration. All these will comprise the Employee's
remuneration or earnings, upon which the 3-1/2% and 2-1/2% contributions will be based, up to a
maximum of P500 for any one month.
Upon receipt of a copy thereof, petitioner Victorias Milling Company, Inc., through counsel, wrote
the Social Security Commission in effect protesting against the circular as contradictory to a
previous Circular No. 7, dated October 7, 1957 expressly excluding overtime pay and bonus in the
computation of the employers' and employees' respective monthly premium contributions, and
submitting, "In order to assist your System in arriving at a proper interpretation of the term
'compensation' for the purposes of" such computation, their observations on Republic Act 1161 and
its amendment and on the general interpretation of the words "compensation", "remuneration" and
"wages". Counsel further questioned the validity of the circular for lack of authority on the part of
the Social Security Commission to promulgate it without the approval of the President and for lack
of publication in the Official Gazette.
Overruling these objections, the Social Security Commission ruled that Circular No. 22 is not a rule
or regulation that needed the approval of the President and publication in the Official Gazette to be
effective, but a mere administrative interpretation of the statute, a mere statement of general policy
or opinion as to how the law should be construed.
Not satisfied with this ruling, petitioner comes to this Court on appeal.
The single issue involved in this appeal is whether or not Circular No. 22 is a rule or regulation, as
contemplated in Section 4(a) of Republic Act 1161 empowering the Social Security Commission
"to adopt, amend and repeal subject to the approval of the President such rules and regulations as
may be necessary to carry out the provisions and purposes of this Act."
There can be no doubt that there is a distinction between an administrative rule or regulation and
an administrative interpretation of a law whose enforcement is entrusted to an administrative body.
When an administrative agency promulgates rules and regulations, it "makes" a new law with the
force and effect of a valid law, while when it renders an opinion or gives a statement of policy, it
merely interprets a pre-existing law (Parker, Administrative Law, p. 197; Davis, Administrative Law,
p. 194). Rules and regulations when promulgated in pursuance of the procedure or authority
conferred upon the administrative agency by law, partake of the nature of a statute, and compliance
therewith may be enforced by a penal sanction provided in the law. This is so because statutes are
usually couched in general terms, after expressing the policy, purposes, objectives, remedies and
sanctions intended by the legislature. The details and the manner of carrying out the law are often
times left to the administrative agency entrusted with its enforcement. In this sense, it has been
said that rules and regulations are the product of a delegated power to create new or additional
legal provisions that have the effect of law. (Davis, op. cit., p. 194.) .
A rule is binding on the courts so long as the procedure fixed for its promulgation is followed and
its scope is within the statutory authority granted by the legislature, even if the courts are not in
agreement with the policy stated therein or its innate wisdom (Davis, op. cit., 195-197). On the other
hand, administrative interpretation of the law is at best merely advisory, for it is the courts that finally
determine what the law means.
Circular No. 22 in question was issued by the Social Security Commission, in view of the
amendment of the provisions of the Social Security Law defining the term "compensation"
contained in Section 8 (f) of Republic Act No. 1161 which, before its amendment, reads as follows:
. November 3, 1995); and
(f) Compensation — All remuneration for employment include the cash value of any remuneration
paid in any medium other than cash except (1) that part of the remuneration in excess of P500
received during the month; (2) bonuses, allowances or overtime pay; and (3) dismissal and all other
payments which the employer may make, although not legally required to do so.
Republic Act No. 1792 changed the definition of "compensation" to:
(f) Compensation — All remuneration for employment include the cash value of any remuneration
paid in any medium other than cash except that part of the remuneration in excess of P500.00
received during the month.
It will thus be seen that whereas prior to the amendment, bonuses, allowances, and overtime pay
given in addition to the regular or base pay were expressly excluded, or exempted from the
definition of the term "compensation", such exemption or exclusion was deleted by the amendatory
law. It thus became necessary for the Social Security Commission to interpret the effect of such
deletion or elimination. Circular No. 22 was, therefore, issued to apprise those concerned of the
interpretation or understanding of the Commission, of the law as amended, which it was its duty to
enforce. It did not add any duty or detail that was not already in the law as amended. It merely
stated and circularized the opinion of the Commission as to how the law should be
construed. 1äwphï1.ñët
The case of People v. Jolliffe (G.R. No. L-9553, promulgated on May 30, 1959) cited by appellant,
does not support its contention that the circular in question is a rule or regulation. What was there
said was merely that a regulation may be incorporated in the form of a circular. Such statement
simply meant that the substance and not the form of a regulation is decisive in determining its
nature. It does not lay down a general proposition of law that any circular, regardless of its
substance and even if it is only interpretative, constitutes a rule or regulation which must be
published in the Official Gazette before it could take effect.
The case of People v. Que Po Lay (50 O.G. 2850) also cited by appellant is not applicable to the
present case, because the penalty that may be incurred by employers and employees if they refuse
to pay the corresponding premiums on bonus, overtime pay, etc. which the employer pays to his
employees, is not by reason of non-compliance with Circular No. 22, but for violation of the specific
legal provisions contained in Section 27(c) and (f) of Republic Act No. 1161.
We find, therefore, that Circular No. 22 purports merely to advise employers-members of the
System of what, in the light of the amendment of the law, they should include in determining the
monthly compensation of their employees upon which the social security contributions should be
based, and that such circular did not require presidential approval and publication in the Official
Gazette for its effectivity.
It hardly need be said that the Commission's interpretation of the amendment embodied in its
Circular No. 22, is correct. The express elimination among the exemptions excluded in the old law,
of all bonuses, allowances and overtime pay in the determination of the "compensation" paid to
employees makes it imperative that such bonuses and overtime pay must now be included in the
employee's remuneration in pursuance of the amendatory law. It is true that in previous cases, this
Court has held that bonus is not demandable because it is not part of the wage, salary, or
compensation of the employee. But the question in the instant case is not whether bonus is
demandable or not as part of compensation, but whether, after the employer does, in fact, give or
pay bonus to his employees, such bonuses shall be considered compensation under the Social
Security Act after they have been received by the employees. While it is true that terms or words
are to be interpreted in accordance with their well-accepted meaning in law, nevertheless, when
such term or word is specifically defined in a particular law, such interpretation must be adopted in
enforcing that particular law, for it can not be gainsaid that a particular phrase or term may have
one meaning for one purpose and another meaning for some other purpose. Such is the case that
is now before us. Republic Act 1161 specifically defined what "compensation" should mean "For
the purposes of this Act". Republic Act 1792 amended such definition by deleting same exemptions
authorized in the original Act. By virtue of this express substantial change in the phraseology of the
should give way to the clear mandate of the new law.
IN VIEW OF THE FOREGOING, the Resolution appealed from is hereby affirmed, with costs
against appellant. So ordered.
G.R. No. 122156 February 3, 1997
MANILA PRINCE HOTEL petitioner,
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL CORPORATION,
COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT CORPORATE
COUNSEL, respondents.
BELLOSILLO, J.:
The FiIipino First Policy enshrined in the 1987 Constitution, i.e., in the grant of rights, privileges,
and concessions covering the national economy and patrimony, the State shall give preference to
qualified Filipinos,1 is in oked by petitioner in its bid to acquire 51% of the shares of the Manila
Hotel Corporation (MHC) which owns the historic Manila Hotel. Opposing, respondents maintain
that the provision is not self-executing but requires an implementing legislation for its enforcement.
Corollarily, they ask whether the 51% shares form part of the national economy and patrimony
covered by the protective mantle of the Constitution.
The controversy arose when respondent Government Service Insurance System (GSIS), pursuant
to the privatization program of the Philippine Government under Proclamation No. 50 dated 8
December 1986, decided to sell through public bidding 30% to 51% of the issued and outstanding
shares of respondent MHC. The winning bidder, or the eventual "strategic partner," is to provide
management expertise and/or an international marketing/reservation system, and financial support
to strengthen the profitability and performance of the Manila Hotel.2 In a close bidding held on 18
September 1995 only two (2) bidders participated: petitioner Manila Prince Hotel Corporation, a
Filipino corporation, which offered to buy 51% of the MHC or 15,300,000 shares at P41.58 per
share, and Renong Berhad, a Malaysian firm, with ITT-Sheraton as its hotel operator, which bid for
the same number of shares at P44.00 per share, or P2.42 more than the bid of petitioner.
Pertinent provisions of the bidding rules prepared by respondent GSIS state —
I. EXECUTION OF THE NECESSARY CONTRACTS WITH GSIS/MHC —
1. The Highest Bidder must comply with the conditions set forth below by October 23, 1995 (reset
to November 3, 1995) or the Highest Bidder will lose the right to purchase the Block of Shares and
GSIS will instead offer the Block of Shares to the other Qualified Bidders:
a. The Highest Bidder must negotiate and execute with the GSIS/MHC the Management Contract,
International Marketing/Reservation System Contract or other type of contract specified by the
Highest Bidder in its strategic plan for the Manila Hotel. . . .
b. The Highest Bidder must execute the Stock Purchase and Sale Agreement with GSIS . . . .
K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER —
The Highest Bidder will be declared the Winning Bidder/Strategic Partner after the following
conditions are met:
a. Execution of the necessary contracts with GSIS/MHC not later than October 23, 1995 (reset to
b. Requisite approvals from the GSIS/MHC and COP (Committee on Privatization)/OGCC (Office
of the Government Corporate Counsel) are obtained.3
Pending the declaration of Renong Berhad as the winning bidder/strategic partner and the
execution of the necessary contracts, petitioner in a letter to respondent GSIS dated 28 September
1995 matched the bid price of P44.00 per share tendered by Renong Berhad.4 In a subsequent
letter dated 10 October 1995 petitioner sent a manager's check issued by Philtrust Bank for Thirty-
three Million Pesos (P33.000.000.00) as Bid Security to match the bid of the Malaysian Group,
Messrs. Renong Berhad . . .5 which respondent GSIS refused to accept.
On 17 October 1995, perhaps apprehensive that respondent GSIS has disregarded the tender of
the matching bid and that the sale of 51% of the MHC may be hastened by respondent GSIS and
consummated with Renong Berhad, petitioner came to this Court on prohibition and mandamus.
On 18 October 1995 the Court issued a temporary restraining order enjoining respondents from
perfecting and consummating the sale to the Malaysian firm.
On 10 September 1996 the instant case was accepted by the Court En Banc after it was referred
to it by the First Division. The case was then set for oral arguments with former Chief Justice
Enrique M. Fernando and Fr. Joaquin G. Bernas, S.J., as amici curiae.
In the main, petitioner invokes Sec. 10, second par., Art. XII, of the 1987 Constitution and submits
that the Manila Hotel has been identified with the Filipino nation and has practically become a
historical monument which reflects the vibrancy of Philippine heritage and culture. It is a proud
legacy of an earlier generation of Filipinos who believed in the nobility and sacredness of
independence and its power and capacity to release the full potential of the Filipino people. To all
intents and purposes, it has become a part of the national patrimony.6 Petitioner also argues that
since 51% of the shares of the MHC carries with it the ownership of the business of the hotel which
is owned by respondent GSIS, a government-owned and controlled corporation, the hotel business
of respondent GSIS being a part of the tourism industry is unquestionably a part of the national
economy. Thus, any transaction involving 51% of the shares of stock of the MHC is clearly covered
by the term national economy, to which Sec. 10, second par., Art. XII, 1987 Constitution, applies.7
It is also the thesis of petitioner that since Manila Hotel is part of the national patrimony and its
business also unquestionably part of the national economy petitioner should be preferred after it
has matched the bid offer of the Malaysian firm. For the bidding rules mandate that if for any reason,
the Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this to the other
Qualified Bidders that have validly submitted bids provided that these Qualified Bidders are willing
to match the highest bid in terms of price per share.8
Respondents except. They maintain that: First, Sec. 10, second par., Art. XII, of the 1987
Constitution is merely a statement of principle and policy since it is not a self-executing provision
and requires implementing legislation(s) . . . Thus, for the said provision to Operate, there must be
existing laws "to lay down conditions under which business may be done."9
Second, granting that this provision is self-executing, Manila Hotel does not fall under the term
national patrimony which only refers to lands of the public domain, waters, minerals, coal, petroleum
and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and
fauna and all marine wealth in its territorial sea, and exclusive marine zone as cited in the first and
second paragraphs of Sec. 2, Art. XII, 1987 Constitution. According to respondents, while petitioner
speaks of the guests who have slept in the hotel and the events that have transpired therein which
make the hotel historic, these alone do not make the hotel fall under the patrimony of the nation.
What is more, the mandate of the Constitution is addressed to the State, not to respondent GSIS
which possesses a personality of its own separate and distinct from the Philippines as a State.
Third, granting that the Manila Hotel forms part of the national patrimony, the constitutional
provision invoked is still inapplicable since what is being sold is only 51% of the outstanding shares
of the corporation, not the hotel building nor the land upon which the building stands. Certainly,
51% of the equity of the MHC cannot be considered part of the national patrimony. Moreover, if the
disposition of the shares of the MHC is really contrary to the Constitution, petitioner should have
questioned it right from the beginning and not after it had lost in the bidding.
Fourth, the reliance by petitioner on par. V., subpar. J. 1., of the bidding rules which provides that
if for any reason, the Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this
to the other Qualified Bidders that have validly submitted bids provided that these Qualified Bidders
are willing to match the highest bid in terms of price per share, is misplaced. Respondents postulate
that the privilege of submitting a matching bid has not yet arisen since it only takes place if for any
reason, the Highest Bidder cannot be awarded the Block of Shares. Thus the submission by
petitioner of a matching bid is premature since Renong Berhad could still very well be awarded the
block of shares and the condition giving rise to the exercise of the privilege to submit a matching
bid had not yet taken place.
Finally, the prayer for prohibition grounded on grave abuse of discretion should fail since
respondent GSIS did not exercise its discretion in a capricious, whimsical manner, and if ever it did
abuse its discretion it was not so patent and gross as to amount to an evasion of a positive duty or
a virtual refusal to perform a duty enjoined by law. Similarly, the petition for mandamus should fail
as petitioner has no clear legal right to what it demands and respondents do not have an imperative
duty to perform the act required of them by petitioner.
We now resolve. A constitution is a system of fundamental laws for the governance and
administration of a nation. It is supreme, imperious, absolute and unalterable except by the
authority from which it emanates. It has been defined as the fundamental and paramount law of
the nation. 10 It prescribes the permanent framework of a system of government, assigns to the
different departments their respective powers and duties, and establishes certain fixed principles
on which government is founded. The fundamental conception in other words is that it is a supreme
law to which all other laws must conform and in accordance with which all private rights must be
determined and all public authority administered. 11 Under the doctrine of constitutional
supremacy, if a law or contract violates any norm of the constitution that law or contract whether
promulgated by the legislative or by the executive branch or entered into by private persons for
private purposes is null and void and without any force and effect. Thus, since the Constitution is
the fundamental, paramount and supreme law of the nation, it is deemed written in every statute
and contract.
Admittedly, some constitutions are merely declarations of policies and principles. Their provisions
command the legislature to enact laws and carry out the purposes of the framers who merely
establish an outline of government providing for the different departments of the governmental
machinery and securing certain fundamental and inalienable rights of citizens. 12 A provision which
lays down a general principle, such as those found in Art. II of the 1987 Constitution, is usually not
self-executing. But a provision which is complete in itself and becomes operative without the aid of
supplementary or enabling legislation, or that which supplies sufficient rule by means of which the
right it grants may be enjoyed or protected, is self-executing. Thus a constitutional provision is self-
executing if the nature and extent of the right conferred and the liability imposed are fixed by the
constitution itself, so that they can be determined by an examination and construction of its terms,
and there is no language indicating that the subject is referred to the legislature for action. 13
As against constitutions of the past, modern constitutions have been generally drafted upon a
different principle and have often become in effect extensive codes of laws intended to operate
directly upon the people in a manner similar to that of statutory enactments, and the function of
constitutional conventions has evolved into one more like that of a legislative body. Hence, unless
it is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the
presumption now is that all provisions of the constitution are self-executing If the constitutional
provisions are treated as requiring legislation instead of self-executing, the legislature would have
the power to ignore and practically nullify the mandate of the fundamental law.14 This can be
cataclysmic. That is why the prevailing view is, as it has always been, that —
. . . in case of doubt, the Constitution should be considered self-executing rather than non-self-
executing . . . . Unless the contrary is clearly intended, the provisions of the Constitution should be
considered self-executing, as a contrary rule would give the legislature discretion to determine
when, or whether, they shall be effective. These provisions would be subordinated to the will of the
lawmaking body, which could make them entirely meaningless by simply refusing to pass the
needed implementing statute. 15
Respondents argue that Sec. 10, second par., Art. XII, of the 1987 Constitution is clearly not self-
executing, as they quote from discussions on the floor of the 1986 Constitutional Commission —
MR. RODRIGO. Madam President, I am asking this question as the Chairman of the Committee
on Style. If the wording of "PREFERENCE" is given to QUALIFIED FILIPINOS," can it be
understood as a preference to qualified Filipinos vis-a-vis Filipinos who are not qualified. So, why
do we not make it clear? To qualified Filipinos as against aliens?
THE PRESIDENT. What is the question of Commissioner Rodrigo? Is it to remove the word
"QUALIFIED?".
MR. RODRIGO. No, no, but say definitely "TO QUALIFIED FILIPINOS" as against whom? As
against aliens or over aliens?
MR. NOLLEDO. Madam President, I think that is understood. We use the word "QUALIFIED"
because the existing laws or prospective laws will always lay down conditions under which business
may be done. For example, qualifications on the setting up of other financial structures, et cetera
(emphasis supplied by respondents)
MR. RODRIGO. It is just a matter of style.
MR. NOLLEDO Yes, 16
Quite apparently, Sec. 10, second par., of Art XII is couched in such a way as not to make it appear
that it is non-self-executing but simply for purposes of style. But, certainly, the legislature is not
precluded from enacting other further laws to enforce the constitutional provision so long as the
contemplated statute squares with the Constitution. Minor details may be left to the legislature
without impairing the self-executing nature of constitutional provisions.
In self-executing constitutional provisions, the legislature may still enact legislation to facilitate the
exercise of powers directly granted by the constitution, further the operation of such a provision,
prescribe a practice to be used for its enforcement, provide a convenient remedy for the protection
of the rights secured or the determination thereof, or place reasonable safeguards around the
exercise of the right. The mere fact that legislation may supplement and add to or prescribe a
penalty for the violation of a self-executing constitutional provision does not render such a provision
ineffective in the absence of such legislation. The omission from a constitution of any express
provision for a remedy for enforcing a right or liability is not necessarily an indication that it was not
intended to be self-executing. The rule is that a self-executing provision of the constitution does not
necessarily exhaust legislative power on the subject, but any legislation must be in harmony with
the constitution, further the exercise of constitutional right and make it more available. 17
Subsequent legislation however does not necessarily mean that the subject constitutional provision
is not, by itself, fully enforceable.
Respondents also argue that the non-self-executing nature of Sec. 10, second par., of Art. XII is
implied from the tenor of the first and third paragraphs of the same section which undoubtedly are
not self-executing. 18 The argument is flawed. If the first and third paragraphs are not self-executing
because Congress is still to enact measures to encourage the formation and operation of
enterprises fully owned by Filipinos, as in the first paragraph, and the State still needs legislation
to regulate and exercise authority over foreign investments within its national jurisdiction, as in the
third paragraph, then a fortiori, by the same logic, the second paragraph can only be self-executing
as it does not by its language require any legislation in order to give preference to qualified Filipinos
in the grant of rights, privileges and concessions covering the national economy and patrimony. A
constitutional provision may be self-executing in one part and non-self-executing in another. 19
Even the cases cited by respondents holding that certain constitutional provisions are merely
statements of principles and policies, which are basically not self-executing and only placed in the
Constitution as moral incentives to legislation, not as judicially enforceable rights — are simply not
in point. Basco v. Philippine Amusements and Gaming Corporation 20 speaks of constitutional
provisions on personal dignity, 21 the sanctity of family life, 22 the vital role of the youth in nation-
building 23 the promotion of social justice, 24 and the values of education. 25 Tolentino v. Secretary
of Finance 26 refers to the constitutional provisions on social justice and human rights 27 and on
education. 28 Lastly, Kilosbayan, Inc. v. Morato 29 cites provisions on the promotion of general
welfare, 30 the sanctity of family life, 31 the vital role of the youth in nation-building 32 and the
promotion of total human liberation and development. 33 A reading of these provisions indeed
clearly shows that they are not judicially enforceable constitutional rights but merely guidelines for
legislation. The very terms of the provisions manifest that they are only principles upon which the
legislations must be based. Res ipsa loquitur.
On the other hand, Sec. 10, second par., Art. XII of the of the 1987 Constitution is a mandatory,
positive command which is complete in itself and which needs no further guidelines or implementing
laws or rules for its enforcement. From its very words the provision does not require any legislation
to put it in operation. It is per se judicially enforceable When our Constitution mandates that [i]n the
grant of rights, privileges, and concessions covering national economy and patrimony, the State
shall give preference to qualified Filipinos, it means just that — qualified Filipinos shall be preferred.
And when our Constitution declares that a right exists in certain specified circumstances an action
may be maintained to enforce such right notwithstanding the absence of any legislation on the
subject; consequently, if there is no statute especially enacted to enforce such constitutional right,
such right enforces itself by its own inherent potency and puissance, and from which all legislations
must take their bearings. Where there is a right there is a remedy. Ubi jus ibi remedium.
As regards our national patrimony, a member of the 1986 Constitutional Commission 34 explains
—
The patrimony of the Nation that should be conserved and developed refers not only to out rich
natural resources but also to the cultural heritage of out race. It also refers to our intelligence in
arts, sciences and letters. Therefore, we should develop not only our lands, forests, mines and
other natural resources but also the mental ability or faculty of our people.
We agree. In its plain and ordinary meaning, the term patrimony pertains to heritage. 35 When the
Constitution speaks of national patrimony, it refers not only to the natural resources of the
Philippines, as the Constitution could have very well used the term natural resources, but also to
the cultural heritage of the Filipinos.
Manila Hotel has become a landmark — a living testimonial of Philippine heritage. While it was
restrictively an American hotel when it first opened in 1912, it immediately evolved to be truly
Filipino, Formerly a concourse for the elite, it has since then become the venue of various significant
events which have shaped Philippine history. It was called the Cultural Center of the 1930's. It was
the site of the festivities during the inauguration of the Philippine Commonwealth. Dubbed as the
Official Guest House of the Philippine Government. it plays host to dignitaries and official visitors
who are accorded the traditional Philippine hospitality. 36
The history of the hotel has been chronicled in the book The Manila Hotel: The Heart and Memory
of a City. 37 During World War II the hotel was converted by the Japanese Military Administration
into a military headquarters. When the American forces returned to recapture Manila the hotel was
selected by the Japanese together with Intramuros as the two (2) places fro their final stand.
Thereafter, in the 1950's and 1960's, the hotel became the center of political activities, playing host
to almost every political convention. In 1970 the hotel reopened after a renovation and reaped
numerous international recognitions, an acknowledgment of the Filipino talent and ingenuity. In
1986 the hotel was the site of a failed coup d' etat where an aspirant for vice-president was
"proclaimed" President of the Philippine Republic.
For more than eight (8) decades Manila Hotel has bore mute witness to the triumphs and failures,
loves and frustrations of the Filipinos; its existence is impressed with public interest; its own
historicity associated with our struggle for sovereignty, independence and nationhood. Verily,
Manila Hotel has become part of our national economy and patrimony. For sure, 51% of the equity
of the MHC comes within the purview of the constitutional shelter for it comprises the majority and
controlling stock, so that anyone who acquires or owns the 51% will have actual control and
management of the hotel. In this instance, 51% of the MHC cannot be disassociated from the hotel
and the land on which the hotel edifice stands. Consequently, we cannot sustain respondents' claim
that the Filipino First Policy provision is not applicable since what is being sold is only 51% of the
outstanding shares of the corporation, not the Hotel building nor the land upon which the building
stands. 38
The argument is pure sophistry. The term qualified Filipinos as used in Our Constitution also
includes corporations at least 60% of which is owned by Filipinos. This is very clear from the
proceedings of the 1986 Constitutional Commission
THE PRESIDENT. Commissioner Davide is recognized.
MR. DAVIDE. I would like to introduce an amendment to the Nolledo amendment. And the
amendment would consist in substituting the words "QUALIFIED FILIPINOS" with the following:
"CITIZENS OF THE PHILIPPINES OR CORPORATIONS OR ASSOCIATIONS WHOSE CAPITAL
OR CONTROLLING STOCK IS WHOLLY OWNED BY SUCH CITIZENS.
xxx xxx xxx
MR. MONSOD. Madam President, apparently the proponent is agreeable, but we have to raise a
question. Suppose it is a corporation that is 80-percent Filipino, do we not give it preference?
MR. DAVIDE. The Nolledo amendment would refer to an individual Filipino. What about a
corporation wholly owned by Filipino citizens?
MR. MONSOD. At least 60 percent, Madam President.
MR. DAVIDE. Is that the intention?
MR. MONSOD. Yes, because, in fact, we would be limiting it if we say that the preference should
only be 100-percent Filipino.
MR: DAVIDE. I want to get that meaning clear because "QUALIFIED FILIPINOS" may refer only to
individuals and not to juridical personalities or entities.
MR. MONSOD. We agree, Madam President. 39
xxx xxx xxx
MR. RODRIGO. Before we vote, may I request that the amendment be read again.
MR. NOLLEDO. The amendment will read: "IN THE GRANT OF RIGHTS, PRIVILEGES AND
CONCESSIONS COVERING THE NATIONAL ECONOMY AND PATRIMONY, THE STATE
SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS." And the word "Filipinos" here, as
intended by the proponents, will include not only individual Filipinos but also Filipino-controlled
entities or entities fully-controlled by Filipinos. 40
The phrase preference to qualified Filipinos was explained thus —
MR. FOZ. Madam President, I would like to request Commissioner Nolledo to please restate his
amendment so that I can ask a question.
MR. NOLLEDO. "IN THE GRANT OF RIGHTS, PRIVILEGES AND CONCESSIONS COVERING
THE NATIONAL ECONOMY AND PATRIMONY, THE STATE SHALL GIVE PREFERENCE TO
QUALIFIED FILIPINOS."
MR FOZ. In connection with that amendment, if a foreign enterprise is qualified and a Filipino
enterprise is also qualified, will the Filipino enterprise still be given a preference?
MR. NOLLEDO. Obviously.
MR. FOZ. If the foreigner is more qualified in some aspects than the Filipino enterprise, will the
Filipino still be preferred?
MR. NOLLEDO. The answer is "yes."
MR. FOZ. Thank you, 41
Expounding further on the Filipino First Policy provision Commissioner Nolledo continues —
MR. NOLLEDO. Yes, Madam President. Instead of "MUST," it will be "SHALL — THE STATE
SHALL GlVE PREFERENCE TO QUALIFIED FILIPINOS. This embodies the so-called "Filipino
First" policy. That means that Filipinos should be given preference in the grant of concessions,
privileges and rights covering the national patrimony. 42
The exchange of views in the sessions of the Constitutional Commission regarding the subject
provision was still further clarified by Commissioner Nolledo 43 —
Paragraph 2 of Section 10 explicitly mandates the "Pro-Filipino" bias in all economic concerns. It is
better known as the FILIPINO FIRST Policy . . . This provision was never found in previous
Constitutions . . . .
The term "qualified Filipinos" simply means that preference shall be given to those citizens who
can make a viable contribution to the common good, because of credible competence and
efficiency. It certainly does NOT mandate the pampering and preferential treatment to Filipino
citizens or organizations that are incompetent or inefficient, since such an indiscriminate preference
would be counter productive and inimical to the common good.
In the granting of economic rights, privileges, and concessions, when a choice has to be made
between a "qualified foreigner" end a "qualified Filipino," the latter shall be chosen over the former."
Lastly, the word qualified is also determinable. Petitioner was so considered by respondent GSIS
and selected as one of the qualified bidders. It was pre-qualified by respondent GSIS in accordance
with its own guidelines so that the sole inference here is that petitioner has been found to be
possessed of proven management expertise in the hotel industry, or it has significant equity
ownership in another hotel company, or it has an overall management and marketing proficiency
to successfully operate the Manila Hotel. 44
The penchant to try to whittle away the mandate of the Constitution by arguing that the subject
provision is not self-executory and requires implementing legislation is quite disturbing. The attempt
to violate a clear constitutional provision — by the government itself — is only too distressing. To
adopt such a line of reasoning is to renounce the duty to ensure faithfulness to the Constitution.
For, even some of the provisions of the Constitution which evidently need implementing legislation
have juridical life of their own and can be the source of a judicial remedy. We cannot simply afford
the government a defense that arises out of the failure to enact further enabling, implementing or
guiding legislation. In fine, the discourse of Fr. Joaquin G. Bernas, S.J., on constitutional
government is apt —
The executive department has a constitutional duty to implement laws, including the Constitution,
even before Congress acts — provided that there are discoverable legal standards for executive
action. When the executive acts, it must be guided by its own understanding of the constitutional
command and of applicable laws. The responsibility for reading and understanding the Constitution
and the laws is not the sole prerogative of Congress. If it were, the executive would have to ask
Congress, or perhaps the Court, for an interpretation every time the executive is confronted by a
constitutional command. That is not how constitutional government operates. 45
Respondents further argue that the constitutional provision is addressed to the State, not to
respondent GSIS which by itself possesses a separate and distinct personality. This argument
again is at best specious. It is undisputed that the sale of 51% of the MHC could only be carried
out with the prior approval of the State acting through respondent Committee on Privatization. As
correctly pointed out by Fr. Joaquin G. Bernas, S.J., this fact alone makes the sale of the assets of
respondents GSIS and MHC a "state action." In constitutional jurisprudence, the acts of persons
distinct from the government are considered "state action" covered by the Constitution (1) when
the activity it engages in is a "public function;" (2) when the government is so significantly involved
with the private actor as to make the government responsible for his action; and, (3) when the
government has approved or authorized the action. It is evident that the act of respondent GSIS in
selling 51% of its share in respondent MHC comes under the second and third categories of "state
action." Without doubt therefore the transaction. although entered into by respondent GSIS, is in
fact a transaction of the State and therefore subject to the constitutional command. 46
When the Constitution addresses the State it refers not only to the people but also to the
government as elements of the State. After all, government is composed of three (3) divisions of
power — legislative, executive and judicial. Accordingly, a constitutional mandate directed to the
State is correspondingly directed to the three(3) branches of government. It is undeniable that in
this case the subject constitutional injunction is addressed among others to the Executive
Department and respondent GSIS, a government instrumentality deriving its authority from the
State.
It should be stressed that while the Malaysian firm offered the higher bid it is not yet the winning
bidder. The bidding rules expressly provide that the highest bidder shall only be declared the
winning bidder after it has negotiated and executed the necessary contracts, and secured the
requisite approvals. Since the "Filipino First Policy provision of the Constitution bestows preference
on qualified Filipinos the mere tending of the highest bid is not an assurance that the highest bidder
will be declared the winning bidder. Resultantly, respondents are not bound to make the award yet,
nor are they under obligation to enter into one with the highest bidder. For in choosing the awardee
respondents are mandated to abide by the dictates of the 1987 Constitution the provisions of which
are presumed to be known to all the bidders and other interested parties.
Adhering to the doctrine of constitutional supremacy, the subject constitutional provision is, as it
should be, impliedly written in the bidding rules issued by respondent GSIS, lest the bidding rules
be nullified for being violative of the Constitution. It is a basic principle in constitutional law that all
laws and contracts must conform with the fundamental law of the land. Those which violate the
Constitution lose their reason for being.
Paragraph V. J. 1 of the bidding rules provides that [if] for any reason the Highest Bidder cannot be
awarded the Block of Shares, GSIS may offer this to other Qualified Bidders that have validly
submitted bids provided that these Qualified Bidders are willing to match the highest bid in terms
of price per
share. 47 Certainly, the constitutional mandate itself is reason enough not to award the block of
shares immediately to the foreign bidder notwithstanding its submission of a higher, or even the
highest, bid. In fact, we cannot conceive of a stronger reason than the constitutional injunction itself.
In the instant case, where a foreign firm submits the highest bid in a public bidding concerning the
grant of rights, privileges and concessions covering the national economy and patrimony, thereby
exceeding the bid of a Filipino, there is no question that the Filipino will have to be allowed to match
the bid of the foreign entity. And if the Filipino matches the bid of a foreign firm the award should
go to the Filipino. It must be so if we are to give life and meaning to the Filipino First Policy provision
of the 1987 Constitution. For, while this may neither be expressly stated nor contemplated in the
bidding rules, the constitutional fiat is, omnipresent to be simply disregarded. To ignore it would be
to sanction a perilous skirting of the basic law.
This Court does not discount the apprehension that this policy may discourage foreign investors.
But the Constitution and laws of the Philippines are understood to be always open to public scrutiny.
These are given factors which investors must consider when venturing into business in a foreign
jurisdiction. Any person therefore desiring to do business in the Philippines or with any of its
agencies or instrumentalities is presumed to know his rights and obligations under the Constitution
and the laws of the forum.
The argument of respondents that petitioner is now estopped from questioning the sale to Renong
Berhad since petitioner was well aware from the beginning that a foreigner could participate in the
bidding is meritless. Undoubtedly, Filipinos and foreigners alike were invited to the bidding. But
foreigners may be awarded the sale only if no Filipino qualifies, or if the qualified Filipino fails to
match the highest bid tendered by the foreign entity. In the case before us, while petitioner was
already preferred at the inception of the bidding because of the constitutional mandate, petitioner
had not yet matched the bid offered by Renong Berhad. Thus it did not have the right or personality
then to compel respondent GSIS to accept its earlier bid. Rightly, only after it had matched the bid
of the foreign firm and the apparent disregard by respondent GSIS of petitioner's matching bid did
the latter have a cause of action.
Besides, there is no time frame for invoking the constitutional safeguard unless perhaps the award
has been finally made. To insist on selling the Manila Hotel to foreigners when there is a Filipino
group willing to match the bid of the foreign group is to insist that government be treated as any
other ordinary market player, and bound by its mistakes or gross errors of judgment, regardless of
the consequences to the Filipino people. The miscomprehension of the Constitution is regrettable.
Thus we would rather remedy the indiscretion while there is still an opportunity to do so than let the
government develop the habit of forgetting that the Constitution lays down the basic conditions and
parameters for its actions.
Since petitioner has already matched the bid price tendered by Renong Berhad pursuant to the
bidding rules, respondent GSIS is left with no alternative but to award to petitioner the block of
shares of MHC and to execute the necessary agreements and documents to effect the sale in
accordance not only with the bidding guidelines and procedures but with the Constitution as well.
The refusal of respondent GSIS to execute the corresponding documents with petitioner as
provided in the bidding rules after the latter has matched the bid of the Malaysian firm clearly
constitutes grave abuse of discretion.
The Filipino First Policy is a product of Philippine nationalism. It is embodied in the 1987
Constitution not merely to be used as a guideline for future legislation but primarily to be enforced;
so must it be enforced. This Court as the ultimate guardian of the Constitution will never shun,
under any reasonable circumstance, the duty of upholding the majesty of the Constitution which it
is tasked to defend. It is worth emphasizing that it is not the intention of this Court to impede and
diminish, much less undermine, the influx of foreign investments. Far from it, the Court encourages
and welcomes more business opportunities but avowedly sanctions the preference for Filipinos
whenever such preference is ordained by the Constitution. The position of the Court on this matter
could have not been more appropriately articulated by Chief Justice Narvasa —
As scrupulously as it has tried to observe that it is not its function to substitute its judgment for that
of the legislature or the executive about the wisdom and feasibility of legislation economic in nature,
the Supreme Court has not been spared criticism for decisions perceived as obstacles to economic
progress and development . . . in connection with a temporary injunction issued by the Court's First
Division against the sale of the Manila Hotel to a Malaysian Firm and its partner, certain statements
were published in a major daily to the effect that injunction "again demonstrates that the Philippine
legal system can be a major obstacle to doing business here.
Let it be stated for the record once again that while it is no business of the Court to intervene in
contracts of the kind referred to or set itself up as the judge of whether they are viable or attainable,
it is its bounden duty to make sure that they do not violate the Constitution or the laws, or are not
adopted or implemented with grave abuse of discretion amounting to lack or excess of jurisdiction.
It will never shirk that duty, no matter how buffeted by winds of unfair and ill-informed criticism. 48
Privatization of a business asset for purposes of enhancing its business viability and preventing
further losses, regardless of the character of the asset, should not take precedence over non-
material values. A commercial, nay even a budgetary, objective should not be pursued at the
expense of national pride and dignity. For the Constitution enshrines higher and nobler non-material
values. Indeed, the Court will always defer to the Constitution in the proper governance of a free
society; after all, there is nothing so sacrosanct in any economic policy as to draw itself beyond
judicial review when the Constitution is involved. 49
Nationalism is inherent, in the very concept of the Philippines being a democratic and republican
state, with sovereignty residing in the Filipino people and from whom all government authority
emanates. In nationalism, the happiness and welfare of the people must be the goal. The nation-
state can have no higher purpose. Any interpretation of any constitutional provision must adhere to
such basic concept. Protection of foreign investments, while laudible, is merely a policy. It cannot
override the demands of nationalism. 50
The Manila Hotel or, for that matter, 51% of the MHC, is not just any commodity to be sold to the
highest bidder solely for the sake of privatization. We are not talking about an ordinary piece of
property in a commercial district. We are talking about a historic relic that has hosted many of the
most important events in the short history of the Philippines as a nation. We are talking about a
hotel where heads of states would prefer to be housed as a strong manifestation of their desire to
cloak the dignity of the highest state function to their official visits to the Philippines. Thus the Manila
Hotel has played and continues to play a significant role as an authentic repository of twentieth
century Philippine history and culture. In this sense, it has become truly a reflection of the Filipino
soul — a place with a history of grandeur; a most historical setting that has played a part in the
shaping of a country. 51
This Court cannot extract rhyme nor reason from the determined efforts of respondents to sell the
historical landmark — this Grand Old Dame of hotels in Asia — to a total stranger. For, indeed, the
conveyance of this epic exponent of the Filipino psyche to alien hands cannot be less than
mephistophelian for it is, in whatever manner viewed, a veritable alienation of a nation's soul for
some pieces of foreign silver. And so we ask: What advantage, which cannot be equally drawn
from a qualified Filipino, can be gained by the Filipinos Manila Hotel — and all that it stands for —
is sold to a non-Filipino? How much of national pride will vanish if the nation's cultural heritage is
entrusted to a foreign entity? On the other hand, how much dignity will be preserved and realized
if the national patrimony is safekept in the hands of a qualified, zealous and well-meaning Filipino?
This is the plain and simple meaning of the Filipino First Policy provision of the Philippine
Constitution. And this Court, heeding the clarion call of the Constitution and accepting the duty of
being the elderly watchman of the nation, will continue to respect and protect the sanctity of the
Constitution.
WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL
CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT
CORPORATE COUNSEL are directed to CEASE and DESIST from selling 51% of the shares of
the Manila Hotel Corporation to RENONG BERHAD, and to ACCEPT the matching bid of petitioner
MANILA PRINCE HOTEL CORPORATION to purchase the subject 51% of the shares of the Manila
Hotel Corporation at P44.00 per share and thereafter to execute the necessary clearances and to
do such other acts and deeds as may be necessary for purpose.
SO ORDERED.
G.R. No. 169899 February 06, 2013
PHILACOR CREDIT CORPORATION, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
DECISION
BRION, J.:
Before us is a petition for review on certiorari1under Rule 45 of the Rules of Court seeking the
reversal of the decision2 dated September 23, 2005 of the Court of Tax Appeals (CTA) en bane in
C.T.A, E.B. No. 19 (C.T.A. Case No. 5674). In the assailed decision, the CTA en banc affirmed the
CTA Division’s resolution3 of April 6, 2004. Both courts held that petitioner Philacor Credit
Corporation (Philacor), as an assignee of promissory notes, is liable for deficiency documentary
stamp tax (DST) on (1) the issuance of promissory notes; and (2) the assignment of promissory
notes for the fiscal year ended 1993.
The facts are not disputed.
Philacor is a domestic corporation organized under Philippine laws and is engaged in the business
of retail financing. Through retail financing, a prospective buyer of a home appliance – with neither
cash nor any credit card – may purchase appliances on installment basis from an appliance dealer.
After Philacor conducts a credit investigation and approves the buyer’s application, the buyer
executes a unilateral promissory note in favor of the appliance dealer. The same promissory note
is subsequently assigned by the appliance dealer to Philacor.4
Pursuant to Letter of Authority No. 17107 dated July 6, 1974, Revenue Officer Celestino Mejia
examined Philacor’s books of accounts and other accounting records for the fiscal year August 1,
1992 to July 31, 1993. Philacor received tentative computations of deficiency taxes for this year.
Philacor’s Finance Manager, Leticia Pangan, contested the tentative computations of deficiency
taxes (totaling P20,037,013.83) through a letter dated April 17, 1995.5
On May 16, 1995, Mr. Mejia sent a letter to Philacor revising the preliminary assessments as
follows:
Deficiency Income Tax P 9,832,098.22
Deficiency Percentage Tax 866,287.60
Deficiency Documentary Stamp Tax 3,368,169. 45
Total ==============
P14,066,555.276
==============
Philacor then received Pre-Assessment Notices (PANs), all dated July 18, 1996, covering the
alleged deficiency income, percentage and DSTs, including increments.7
On February 3, 1998, Philacor received demand letters and the corresponding assessment notices,
all dated January 28, 1998. The assessments, inclusive of increments, cover the following:
Deficiency Income Tax P12, 888,085.09
Deficiency Percentage Tax 1,185,977.07
Deficiency DST Tax 3,368,196. 45
Total ==============
P17,442,231.618
==============
On March 4, 1998, Philacor protested the PANs, with a request for reconsideration and
reinvestigation. It alleged that the assessed deficiency income tax was erroneously computed when
it failed to take into account the reversing entries of the revenue accounts and income adjustments,
such as repossessions, write-offs and legal accounts. Similarly, the Bureau of Internal Revenue
(BIR) failed to take into account the reversing entries of repossessions, legal accounts, and write-
offs when it computed the percentage tax; thus, the total income reported, that the BIR arrived at,
was not equal to the actual receipts of payment from the customers. As for the deficiency DST,
Philacor claims that the accredited appliance dealers were required by law to affix the documentary
stamps on all promissory notes purchased until the enactment of Republic Act No. 7660, otherwise
known as An Act Rationalizing Further the Structure and Administration of the Documentary Stamp
Tax,9 which took effect on January 15, 1994. In addition, Philacor filed, on the following day, a
supplemental protest, arguing that the assessments were void for failure to state the law and the
facts on which they were based.10
On September 30, 1998, Philacor filed a petition for review before the CTA Division, docketed as
C.T.A. Case No. 5674. 11
The CTA Division rendered its decision on August 14, 2003.12 After examining the documents
submitted by the parties, it concluded that Philacor failed to declare part of its income, making it
liable for deficiency income tax and percentage tax. However, it also found that the Commissioner
of Internal Revenue (CIR) erred in his analysis of the entries in Philacor’s books thereby
considerably reducing Philacor’s liability to a deficiency income tax of P1,757,262.47 and a
deficiency percentage tax of P613,987.86. The CTA also ruled that Philacor is liable for the DST
on the issuance of the promissory notes and their subsequent transfer or assignment. Noting that
Philacor failed to prove that the DST on its promissory notes had been paid for these two
transactions, the CTA held Philacor liable for deficiency DST of P673,633.88, which is computed
as follows:
Total Notes purchased during the taxable year P 269,453,556.94
Divided by rate under Section 180 200.00
Basis of DST P 1,347,267.78
Multiply by DST rate (Section 180, 1993Tax Code .20
DST on notes purchased P 269,453.55
Add: Total DST on Notes assigned (Section 180) 269,453.55
P 538,907.10
Deficiency Documentary Stamp Tax
Add: 25% surcharge 134,726.78
Total Deficiency Documentary Stamp Tax
P 673,633.8813
===============
All sums for deficiency taxes included surcharge and interest.
Both parties filed their motions for reconsideration. The CIR’s motion was denied for having been
filed out of time.14 On the other hand, the CTA partially granted Philacor’s motion in the resolution
of April 6, 2004,15 wherein it cancelled the assessment for deficiency income tax and deficiency
percentage tax. These assessments were withdrawn because the CTA found that Philacor had
correctly declared its income; the discrepancy of P2,180,564.00 had been properly accounted for
as proper adjustments to Philacor’s net revenues. Nevertheless, the CTA Division sustained the
assessment for deficiency DST in the amount of P673,633.88.
Philacor filed a petition for review before the CTA en banc.16
In its decision17 dated September 23, 2005, the CTA en banc affirmed the resolution of April 6,
2004 of the CTA Division. It reiterated that Philacor is liable for the DST due on two transactions –
the issuance of promissory notes and their subsequent assignment in favor of Philacor. With
respect to the issuance of the promissory notes, Philacor is liable as the transferee which
"accepted" the promissory notes from the appliance dealer in accordance with Section 180 of
Presidential Decree No. 1158, as amended (1986 Tax Code).18 Further citing Section 4219 of
Regulations No. 26,20 the CTA en banc held that a person "using" a promissory note is one of the
persons who can be held liable to pay the DST. Since the subject promissory notes do not bear
documentary stamps, Philacor can be held liable for DST. As for the assignment of the promissory
notes, the CTA en banc held that each and every transaction involving promissory notes is subject
to the DST under Section 173 of the 1986 Tax Code; Philacor is liable as the transferee and
assignee of the promissory notes.
On November 18, 2005, Philacor filed the present petition, raising the following assignment of
errors:
I
"USING" IN REGULATIONS NO. 26 DOES NOT APPEAR IN SECTIONS [SIC] 173 NOR 180 OF
THE TAX CODE; AND, THEREFORE WENT BEYOND THE LAW [SIC]
II
"ACCEPTING" IN SECTION 173 OF THE TAX CODE DOES NOT APPLY TO PROMISSORY
NOTES
III
THE CTA EN BANC DECISION EXTENDED THE WORDS "ASSIGNMENT" AND
"TRANSFERRING" IN SECTION 173 TO THE PROMISSORY NOTES; SUCH THAT, THE
"ASSIGNMENT" OR "TRANSFERRING" OF PROMISSORY NOTES IS SUBJECT TO DST.
HOWEVER SECTIONS 176, 178, AND 198 OF TITLE VII OF THE TAX CODE EXPRESSLY
IMPOSES [SIC] DST ON THE TRANSFER/ASSIGNMENT OF CERTAIN DOCUMENTS WHICH
REVEALS THE LEGISLATIVE INTENT THAT ONLY THE ASSIGNMENT/TRANSFER OF
CERTAIN DOCUMENTS IN SECTIONS 176, 178, AND 198 ARE SUBJECT TO DST
IV
BIR RULING 139-97 RULED THAT THE ASSIGNMENT OF A LOAN, WHICH IN SECTION 180 IS
TREATED IN THE SAME BREATH AS A PROMISSORY NOTE, IS NOT SUBJECT TO DST21
We find the petition meritorious.
Philacor is not liable for the DST on the issuance of the promissory notes.
Neither party questions that the issuances of promissory notes are transactions which are taxable
under the DST. The 1986 Tax Code clearly states that:
Section 180. Stamp tax on promissory notes, bills of exchange, drafts, certificates of deposit, debt
instruments used for deposit substitutes and others not payable on sight or demand.—On all bills
of exchange (between points within the Philippines), drafts, or certificates of deposits, debt
instruments used for deposit substitutes or orders for the payment of any sum of money otherwise
than at sight or on demand, on all promissory notes, whether negotiable or non-negotiable except
bank notes issued for circulation, and on each renewal of any such note, there shall be collected a
documentary stamp tax of twenty centavos on each two hundred pesos, or fractional part thereof,
of the face value of any such bill of exchange, draft certificate of deposit, debt instrument, or note.
[emphasis supplied; underscores ours]
Under the undisputed facts and the above law, the issue that emerges is: who is liable for the tax?
Section 173 of the 1997 National Internal Revenue Code (1997 NIRC) names those who are
primarily liable for the DST and those who would be secondarily liable:
Section 173. Stamp taxes upon documents, instruments, and papers. – Upon documents,
instruments, and papers, and upon acceptances, assignments, sales, and transfers of the
obligation, right, or property incident thereto, there shall be levied, collected and paid for, and in
respect of the transaction so had or accomplished, the corresponding documentary stamp taxes
prescribed in the following sections of this Title, by the person making, signing, issuing, accepting,
or transferring the same, and at the same time such act is done or transaction had: Provided, that
wherever one party to the taxable document enjoys exemption from the tax herein imposed, the
other party thereto who is not exempt shall be the one directly liable for the tax. [emphases supplied;
underscores ours]
The persons primarily liable for the payment of the DST are the person (1) making; (2) signing; (3)
issuing; (4) accepting; or (5) transferring the taxable documents, instruments or papers. Should
these parties be exempted from paying tax, the other party who is not exempt would then be liable.
Philacor did not make, sign, issue, accept or transfer the promissory notes. The acts of making,
signing, issuing and transferring are unambiguous. The buyers of the appliances made, signed and
issued the documents subject to tax, while the appliance dealer transferred these documents to
Philacor which likewise indisputably received or "accepted" them. "Acceptance," however, is an act
that is not even applicable to promissory notes, but only to bills of exchange.22 Under Section
13223 of the Negotiable Instruments Law (which provides for how acceptance should be made),
the act of acceptance refers solely to bills of exchange. Its object is to bind the drawee of a bill and
make him an actual and bound party to the instrument.24 Further, in a ruling adopted by the BIR
as early as 1955, acceptance has already been given a narrow definition with respect to incoming
foreign bills of exchange, not the common usage of the word "accepting" as in receiving:
The word "accepting" appearing in Section 210 of the National Internal Revenue Code has
reference to incoming foreign bills of exchange which are accepted in the Philippines by the
drawees thereof. Accordingly, the documentary stamp tax on freight receipts is due at the time the
receipts are issued and from the transportation company issuing the same. The fact that the
transportation contractor issuing the freight receipts shifts the burden of the tax to the shipper does
not make the latter primarily liable to the payment of the tax.25 (underscore ours)
This ruling, to our mind, further clarifies that a party to a taxable transaction who "accepts" any
documents or instruments in the plain and ordinary meaning of the act (such as the shipper in the
cited case) does not become primarily liable for the tax. In the same way, Philacor cannot be made
primarily liable for the DST on the issuance of the subject promissory notes, just because it had
"accepted" the promissory notes in the plain and ordinary meaning. In this regard, Section 173 of
the 1997 NIRC assumes materiality as it determines liability should the parties who are primarily
liable turn out to be exempted from paying tax; the other party to the transaction then becomes
liable.
Revenue Regulations No. 9-200026 interprets the law more widely so that all parties to a
transaction are primarily liable for the DST, and not only the person making, signing, issuing,
accepting or transferring the same becomes liable as the law provides. It provides:
SEC. 2. Nature of the Documentary Stamp Tax and Persons Liable for the Tax. –
(a) In General. - The documentary stamp taxes under Title VII of the Code is a tax on certain
transactions. It is imposed against "the person making, signing, issuing, accepting, or transferring"
the document or facility evidencing the aforesaid transactions. Thus, in general, it may be imposed
on the transaction itself or upon the document underlying such act. Any of the parties thereto shall
be liable for the full amount of the tax due: Provided, however, that as between themselves, the
said parties may agree on who shall be liable or how they may share on the cost of the tax.
(b) Exception. - Whenever one of the parties to the taxable transaction is exempt from the tax
imposed under Title VII of the Code, the other party thereto who is not exempt shall be the one
directly liable for the tax. [emphasis ours]
But even under these terms, the liability of Philacor is not a foregone conclusion as from the face
of the promissory note itself, Philacor is not a party to the issuance of the promissory notes, but
merely to their assignment. On the face of the documents, the parties to the issuance of the
promissory notes would be the buyer of the appliance, as the maker, and the appliance dealer, as
the payee.
We are aware that while Philacor denies being a party to the issuance of the promissory notes,27
the appliance buyer is made to sign a promissory note only after Philacor has approved its credit
application. Moreover, the note Philacor marked as Annex "J" of its petition for review28 is the
standard pro forma promissory note that Philacor uses in all similar transactions;29 the same
document contains the issuance of the notes in favor of the appliance dealer and their assignments
to Philacor. The promissory notes are also transferred to Philacor by the appliance dealer on the
same date that the appliance buyer issues the promissory note in favor of the appliance buyer.
Thus, it would seem that Philacor is the person who ultimately benefits from the issuance of the
notes, if not the intended payee of these notes.
These observations, however, pertain to facts and implications that are found outside the terms of
the documents under discussion and are contradictory to their outright terms. To consider these
externalities would go against the doctrine that the liability for the DST and the amount due are
determined from the document itself – examined through its form and face – and cannot be affected
by proof of facts outside it.30
Nor can the CIR justify his position that Philacor is liable for the tax by citing Section 42 of
Regulations No. 26, which was issued by the Department of Finance on March 26, 1924:
Section 42. Responsibility for payment of tax on promissory notes. - The person who signs or issues
a promissory note and any person transferring or using a promissory note can be held responsible
for the payment of the documentary stamp tax. [emphasis ours; italics supplied]
The rule uses the word "can" which is permissive, rather than the word "shall," which would make
the liability of the persons named definite and unconditional. In this sense, a person using a
promissory note can be made liable for the DST if he or she is: (1) among those persons
enumerated under the law - i.e., the person who makes, issues, signs, accepts or transfers the
document or instrument; or (2) if these persons are exempt, a non-exempt party to the transaction.
Such interpretation would avoid any conflict between Section 173 of the 1997 NIRC and Section
42 of Regulations No. 26 and would make it unnecessary for us to strike down the latter as having
gone beyond the law it seeks to interpret.
However, we cannot interpret Section 42 of Regulations No. 26 to mean that anyone who "uses"
the document, regardless of whether such person is a party to the transaction, should be liable, as
this reading would go beyond Section 173 of the 1986 Tax Code – the law that the rule seeks to
implement. Implementing rules and regulations cannot amend a law for they are intended to carry
out, not supplant or modify, the law.31 To allow Regulations No. 26 to extend the liability for DST
to persons who are not even mentioned in the relevant provisions of any of our Tax Codes,
particularly the 1986 Tax Code (the relevant law at the time of the subject transactions) would be
a clear breach of the rule that a statute must always be superior to its implementing regulations.
This expansive interpretation of Regulations No. 26 becomes even more untenable when we look
at the difference between the way our law has been phrased and the way the Internal Revenue
Law of the United States (US) identified the persons liable for its stamp tax. We also note that
despite the subsequent amendments to our DST provisions, our Congress never saw it fit to phrase
our laws using the US phraseologies.
In Section 110 of our Internal Revenue Code of 1904, the persons liable for the stamp tax are the
"persons who shall make, sign or issue the same[.]" Although our 1904 Tax Code was patterned
after the then existing US Internal Revenue Code, also known as the Act of Congress of July 13,
1866,32 the US provisions on the stamp tax provide for a wider set of taxpayers: Section 158
thereof places the burden on "persons who shall make, sign or issue, or who shall cause to be
made, signed or issued any instrument, document, or paper of any kind or description whatsoever,
or shall accept, negotiate or pay or cause to be accepted, negotiated and paid, any bill of exchange,
draft, or order, or promissory note for the payment of money." It goes on further by extending the
liability not only to the parties mentioned but also to "any party having an interest therein." Another
US law, the War Revenue Act of June 13, 1898, provides in Section 6 thereof a more succinct
phrase whose coverage is just as extensive: "any persons or party who shall make, sign or issue
the same, or for whose use or benefit the same shall be made, signed or issued." These provisions
have been adopted by various states such as Florida, South Carolina, New Jersey and
Pennsylvania.33
Under US laws, liability for the DST is placed on any person who has an interest in the transaction
or document and whoever may benefit from it. A person who would use it or benefit from it, including
parties who are not named in the instrument, would be liable for the tax. In comparison, our
legislators chose to limit the DST liability only to "persons who shall make, sign or issue [the
document or instrument]."
Notably, our revenue laws regarding persons liable for the DST have been repeatedly amended.
In subsequent amendments, the coverage of the liability for DST included persons who "accept"
and "transfer" the instrument, document or paper of the taxable transaction. Thereafter, we included
the proviso that should any of the parties be exempt, the other party to the transaction would
become liable. However, none of these amendments had ever extended the liability to persons who
have any interest in or who would benefit from the document or instrument subject to tax. Thus, we
cannot allow Regulations No. 26 to be interpreted in such a way as to extend the DST liability to
persons who are not the parties named in the taxable document or instrument and are merely using
or benefiting from it, against the clear intention of our legislature.
In our view, it makes more sense to include persons who benefit from or have an interest in the
taxable document, instrument or transaction. There appears no reason for distinguishing between
the persons who make, sign, issue, transfer or accept these documents and the persons who have
an interest in these and/or have caused them to be made, signed or issued. This also limits the
opportunities for avoiding tax. Moreover, there are cases when making all relevant parties taxable
could help our administrative officers collect tax more efficiently. In this case, the BIR could simply
collect from the financing companies, rather than go after each and every appliance buyer or
appliance seller. However, these are matters that are within the prerogatives of Congress so that
any interference from the Court, no matter how well-meaning, would constitute judicial legislation.
At best, we can only air our views in the hope that Congress would take notice.
Philacor is not liable for the DST on the assignment of promissory notes.
Philacor, as an assignee or transferee of the promissory notes, is not liable for the assignment or
transfer of promissory notes as this transaction is not taxed under the law.
The CIR argues that the DST is levied on the exercise of privileges through the execution of specific
instruments, or the privilege to enter into a transaction. Therefore, the DST should be imposed on
every exercise of the privilege to enter into a transaction.34 There is nothing in Section 180 of the
1986 Tax Code that supports this argument; the argument is even contradicted by the way the
provisions on DST were drafted.1âwphi1
As Philacor correctly points out, there are provisions in the 1997 NIRC that specifically impose the
DST on the transfer and/or assignment of documents evidencing particular transactions. Section
176 imposes a DST on the transfer of due bills, certificates of obligation, or shares or certificates
of stock in a corporation, apart from Section 175 which imposes the DST on the issuance of shares
of stock in a corporation. Section 178 imposes the DST on certificates of profits, or any certificate
or memorandum showing interest in a property or accumulations of any corporation, and on all
transfers of such certificate or memoranda. Section 198 imposes the DST on the assignment or
transfer of any mortgage, lease or policy of insurance, apart from Sections 183, 184, 185, 194 and
195 which impose it on the issuances of mortgages, leases and policies of insurance. Indeed, the
law has set a pattern of expressly providing for the imposition of DST on the transfer and/or
assignment of documents evidencing certain transactions. Thus, we can safely conclude that where
the law did not specify that such transfer and/or assignment is to be taxed, there would be no basis
to recognize an imposition.
A good illustrative example is Section 198 of the 1986 Tax Code which provides that:
Section 198. Stamp tax on assignments and renewals of certain instruments. – Upon each and
every assignment or transfer of any mortgage, lease or policy of insurance, or the renewal or
continuance of any agreement, contract, charter, or any evidence of obligation or indebtedness by
altering or otherwise, there shall be levied, collected and paid a documentary stamp tax, at the
same rate as that imposed on the original instrument.
If we look closely at this provision, we would find that an assignment or transfer becomes taxable
only in connection with mortgages, leases and policies of insurance. The list does not include the
assignment or transfer of evidences of indebtedness; rather, it is the renewal of these that is
taxable. The present case does not involve a renewal, but a mere transfer or assignment of the
evidences of indebtedness or promissory notes. A renewal would involve an increase in the amount
of indebtedness or an extension of a period, and not the mere change in person of the payee.35
In BIR Ruling No. 139-97 issued on December 29, 1997, then CIR Liwayway Vinzons-Chato
pronounced that the assignment of a loan that is not for a renewal or a continuance does not result
in a liability for DST. Revenue Regulations No. 13-2004, issued on December 23, 2004, states that
"[t]he DST on all debt instruments shall be imposed only on every original issue and the tax shall
be based on the issue price thereof. Hence, the sale of a debt instrument in the secondary market
will not be subject to the DST." Included in the enumeration of debt instruments is a promissory
note.
The BIR Ruling and Revenue Regulation cited are still applicable to this case, even if they were
issued after the transactions in question had already taken place. They apply because they are
issuances interpreting the same rule imposing a DST on promissory notes. At the time BIR Ruling
No. 139-97 was issued, the law in effect was the 1986 Tax Code; the 1997 NIRC took effect only
on January 1, 1998. Moreover, the BIR Ruling referred to a transaction entered into in 1992, when
the 1986 Tax Code had been in effect. On the other hand, the BIR issued Revenue Regulations
No. 13-2004 when Section 180 of the 1986 Tax Code had already been amended. Nevertheless,
the rule would still apply to this case because the pertinent part of Section 180 – the part dealing
with promissory notes – remained the same; it imposed the DST on the promissory notes’
issuances and renewals, but not on their assignment or transfer:
Section 180 of the 1986 Tax Code, as
amended
Section 180 of the 1997 NIRC, as
amended by Republic Act No. 9243
Section 180. Stamp tax on promissory notes, bills of exchange, drafts, certificates of deposit, debt
instruments used for deposit substitutes and others not payable on sight or demand on all
promissory notes, whether negotiable or nonnegotiable except bank notes issued for circulation,
and on each renewal of any such note, there shall be collected a documentary stamp tax of twenty
centavos on each two hundred pesos, or fractional part thereof, of the face value of any such bill
of exchange, draft certificate of deposit, debt instrument, or note.
– On all bills of exchange (between points within the Philippines), drafts, or certificates of deposits,
debt instruments used for deposit substitutes or orders for the payment of any sum of money
otherwise than at sight or on demand,
Section 180. Stamp Tax on All Bonds, Loan Agreements, Promissory Notes, Bills of Exchange,
Drafts, Instruments and Securities Issued by the Government or Any of its Instrumentalities,
Deposit Substitute Debt Instruments, Certificates of Deposits Bearing Interest and Others Not
Payable on Sight or Demand. - On all bonds, loan agreements, including those signed abroad,
wherein the object of the contract is located or used in the Philippines, bills of exchange (between
points within the Philippines), drafts, instruments and securities issued by the Government or any
of its instrumentalities, deposit substitute debt instruments, certificates of deposits drawing interest,
orders for the payment of any sum of money otherwise than at sight or on demand, on all promissory
notes, whether negotiable or non-negotiable, except bank notes issued for circulation, and on each
renewal of any such note, there shall be collected a documentary stamp tax of Thirty centavos
(P0.30) on each Two hundred pesos (P200), or fractional part thereof, of the face value of any such
agreement, bill of exchange, draft, certificate of deposit, or note: Provided, That only one
documentary stamp tax shall be imposed on either loan agreement, or promissory notes issued to
secure such loan, whichever will yield a higher tax. Provided, however, That loan agreements or
promissory notes the aggregate of which does not exceed Two hundred fifty thousand pesos
(P250,000) executed by individual for his purchase on installment for his personal use or that of his
family and not for business resale, barter or hire of a house, lot, motor vehicle, appliance or furniture
shall be exempt from the payment of the documentary stamp tax provided under this Section.
The settled rule is that in case of doubt, tax laws must be construed strictly against the State and
liberally in favor of the taxpayer. The reason for this ruling is not hard to grasp taxes, as burdens
which must be endured by the taxpayer, should not be presumed to go beyond what the law
expressly and clearly declares. That such strict construction is necessary in this case is evidenced
by the change in the subject provision as presently worded, which now expressly levies the tax on
shares of stock as against the previlege of issuing certificates of stock as formerly provided.36
WHEREFORE, premises considered, we GRANT the petition. The September 23, 2005 Decision
of the Court of Tax Appeals en banc in C.T.A. E.B. No. 19 (C.T.A. Case No. 5674), ordering Philacor
Credit Corporation to pay a deficiency documentary stamp tax in connection with the issuances
and transfers or assignments of promissory notes for the fiscal year ended July 31, 1993, is SET
ASIDE. No costs.
SO ORDERED.
G.R. No. 192280 January 25, 2011
SERGIO G. AMORA, JR., Petitioner,
vs.
COMMISSION ON ELECTIONS and ARNIELO S. OLANDRIA, Respondents.
DECISION
NACHURA, J.:
Before us is a petition for certiorari under Rule 64, in relation to Rule 65, of the Rules of Court,
seeking to annul and set aside the Resolutions dated April 29, 20101 and May 17,
2010,2 respectively, of the Commission on Elections (COMELEC) in SPA No. 10-046 (DC).
First, the undisputed facts.
On December 1, 2009, petitioner Sergio G. Amora, Jr. (Amora) filed his Certificate of Candidacy
(COC) for Mayor of Candijay, Bohol. At that time, Amora was the incumbent Mayor of Candijay and
had been twice elected to the post, in the years 2004 and 2007.
To oppose Amora, the Nationalist People’s Coalition (NPC) fielded Trygve L. Olaivar (Olaivar) for
the mayoralty post. Respondent Arnielo S. Olandria (Olandria) was one of the candidates for
councilor of the NPC in the same municipality.
On March 5, 2010, Olandria filed before the COMELEC a Petition for Disqualification against
Amora. Olandria alleged that Amora’s COC was not properly sworn contrary to the requirements
of the Omnibus Election Code (OEC) and the 2004 Rules on Notarial Practice. Olandria pointed
out that, in executing his COC, Amora merely presented his Community Tax Certificate (CTC) to
the notary public, Atty. Oriculo Granada (Atty. Granada), instead of presenting competent evidence
of his identity. Consequently, Amora’s COC had no force and effect and should be considered as
not filed.
Amora traversed Olandria’s allegations in his Answer cum Position Paper.3 He countered that:
1. The Petition for Disqualification is actually a Petition to Deny Due Course or cancel a certificate
of candidacy. Effectively, the petition of Olandria is filed out of time;
2. Olandria’s claim does not constitute a proper ground for the cancellation of the COC;
3. The COC is valid and effective because he (Amora) is personally known to the notary public,
Atty. Granada, before whom he took his oath in filing the document;
4. Atty. Granada is, in fact, a close acquaintance since they have been members of the League of
Muncipal Mayors, Bohol Chapter, for several years; and
5. Ultimately, he (Amora) sufficiently complied with the requirement that the COC be under oath.
As previously adverted to, the Second Division of the COMELEC granted the petition and
disqualified Amora from running for Mayor of Candijay, Bohol.
Posthaste, Amora filed a Motion for Reconsideration4 before the COMELEC en banc. Amora
reiterated his previous arguments and emphasized the asseverations of the notary public, Atty.
Granada, in the latter’s affidavit,5 to wit:
1. The COMELEC’s (Second Division’s) ruling is contrary to the objectives and basic principles of
election laws which uphold the primacy of the popular will;
2. Atty. Granada states that while he normally requires the affiant to show competent evidence of
identity, in Amora’s case, however, he accepted Amora’s CTC since he personally knows him;
3. Apart from the fact that Amora and Atty. Granada were both members of the League of Municipal
Mayors, Bohol Chapter, the two consider each other as distant relatives because Amora’s mother
is a Granada;
4. It is a matter of judicial notice that practically everybody knows the Mayor, most especially
lawyers and notaries public, who keep themselves abreast of developments in local politics and
have frequent dealings with the local government; and
5. In all, the COC filed by Amora does not lack the required formality of an oath, and thus, there is
no reason to nullify his COC.
Meanwhile, on May 10, 2010, national and local elections were held. Amora obtained 8,688 votes,
equivalent to 58.94% of the total votes cast, compared to Olaivar’s 6,053 votes, equivalent to only
41.06% thereof. Subsequently, the Muncipal Board of Canvassers of Candijay, Bohol, proclaimed
Amora as the winner for the position of Municipal Mayor of Candijay, Bohol.6
A week thereafter, or on May 17, 2010, in another turn of events, the COMELEC en banc denied
Amora’s motion for reconsideration and affirmed the resolution of the COMELEC (Second Division).
Notably, three (3) of the seven (7) commissioners dissented from the majority ruling. Commissioner
Gregorio Larrazabal (Commissioner Larrazabal) wrote a dissenting opinion, which was concurred
in by then Chairman Jose A.R. Melo and Commissioner Rene V. Sarmiento.
In denying Amora’s motion for reconsideration and upholding Olandria’s petition for disqualification
of Amora, the COMELEC ratiocinated, thus:
[Amora] himself admitted in his Motion that the Second Division was correct in pointing out that the
CTC is no longer a competent evidence of identity for purposes of notarization.
The COC therefore is rendered invalid when [petitioner] only presented his CTC to the notary public.
His defense that he is personally known to the notary cannot be given recognition because the best
proof [of] his contention could have been the COC itself. However, careful examination of the jurat
portion of the COC reveals no assertion by the notary public that he personally knew the affiant,
[petitioner] herein. Belated production of an Affidavit by the Notary Public cannot be given weight
because such evidence could and should have been produced at the earliest possible opportunity.
The rules are absolute. Section 73 of the Election Code states:
"Section 73. Certificate of Candidacy. – No person shall be eligible for any elective public office
unless he files a sworn certificate of candidacy within the period fixed herein."
Under the 2004 Rules on Notarial Practice of 2004 (Rules), the requirements of notarization of an
oath are:
"Section 2. Affirmation or Oath. – The term ‘Affirmation’ or ‘Oath’ refers to an act in which an
individual on a single occasion:
(a) appears in person before the notary public;
(b) is personally known to the notary public or identified by the notary public through competent
evidence of identity as defined by these Rules; and
(c) avows under penalty of law to the whole truth of the contents of the instrument or document."
The required form of identification is prescribed in [S]ection 12 of the same Rules, to wit:
"Section 12. Competent Evidence of Identity. – The phrase ‘competent evidence of identity’ refers
to the identification of an individual based on:
(a) at least one current identification document issued by an official agency bearing the
photograph and signature of the individual. x x x."
It is apparent that a CTC, which bears no photograph, is no longer a valid form of identification for
purposes of Notarization of Legal Documents. No less than the Supreme Court itself, when it
revoked the Notarial Commission of a member of the Bar in Baylon v. Almo, reiterated this when it
said:
"As a matter of fact, recognizing the established unreliability of a community tax certificate in
proving the identity of a person who wishes to have his document notarized, we did not include it
in the list of competent evidence of identity that notaries public should use in ascertaining the
identity of persons appearing before them to have their documents notarized."
Seeking other remedies, [Amora] maintained that Section 78 of the Election Code governs the
Petition. Said section provides that:
"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 the 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 twenty-five 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."
[Amora] however failed to note that the Petition relies upon an entirely different ground. The Petition
has clearly stated that it was invoking Section 73 of the Election Code, which prescribes the
mandatory requirement of filing a sworn certificate of candidacy. As properly pointed out by
[Olandria], he filed a Petition to Disqualify for Possessing Some Grounds for Disqualification, which,
is governed by COMELEC Resolution No. 8696, to wit:
"B. PETITION TO DISQUALIFY A CANDIDATE PURSUANT TO SECTION 68 OF THE OMNIBUS
ELECTION CODE AND PETITION TO DISQUALIFY FOR LACK OF QUALIFICATIONS
OR POSSESSING SOME GROUNDS FOR DISQUALIFICATION
1. A verified petition to disqualify a candidate pursuant to Section 68 of the OEC and the verified
petition to disqualify a candidate for lack of qualifications or possessing some grounds for
disqualification may be filed on any day after the last day for filing of certificates of candidacy but
not later than the date of proclamation;
xxxx
3. The petition to disqualify a candidate for lack of qualification or possessing some grounds for
disqualification, shall be filed in ten (10) legible copies, personally or through a duly authorized
representative, by any person of voting age, or duly registered political party, organization or
coalition of political parties on the ground that the candidate does not possess all the qualifications
as provided for by the Constitution or by existing law or who possesses some grounds for
disqualification as provided for by the Constitution or by existing law."
xxxx
Finally, we do not agree with [Amora] when he stated that the Second Division’s Resolution
"practically supplanted congress by adding another ground for disqualification, not provided in the
omnibus election code or the local government code. The constitution is very clear that it is
congress that shall prescribe the qualifications (and disqualifications) of candidates for local
government positions." These grounds for disqualification were laid down in both laws mentioned
by [Amora] and COMELEC Resolution 8696.7
Hence, this petition for certiorari imputing grave abuse of discretion to the COMELEC. On June 15,
2010, we issued a Status Quo Ante Order and directed respondents to comment on the petition.
As directed, Olandria and the COMELEC filed their respective Comments8 which uniformly
opposed the petition. Thereafter, Amora filed his Reply.9
Amora insists that the Petition for Disqualification filed by Olandria is actually a Petition to Deny
Due Course since the purported ground for disqualification simply refers to the defective
notarization of the COC. Amora is adamant that Section 73 of the OEC pertains to the substantive
qualifications of a candidate or the lack thereof as grounds for disqualification, specifically, the
qualifications and disqualifications of elective local officials under the Local Government Code
(LGC) and the OEC. Thus, Olandria’s petition was filed way beyond the reglementary period of
twenty-five (25) days from the date of the filing of the disputed COC.
Moreover, Amora maintains that his COC is properly notarized and not defective, and the
presentation of his CTC to the notary public to whom he was personally known sufficiently complied
with the requirement that the COC be under oath. Amora further alleges that: (1) Olaivar, his
opponent in the mayoralty post, and likewise a member of the NPC, is purportedly a fraternity
brother and close associate of Nicodemo T. Ferrer (Commissioner Ferrer), one of the
commissioners of the COMELEC who disqualified him; and (2) Olaivar served as Consultant for
the COMELEC, assigned to the Office of Commissioner Ferrer.
Olandria and the COMELEC reiterated the arguments contained in the COMELEC en banc
resolution of May 17, 2010.
Amora’s petition is meritorious.
We find that the COMELEC ruling smacks of grave abuse of discretion, a capricious and whimsical
exercise of judgment equivalent to lack of jurisdiction. Certiorari lies where a court or any tribunal,
board, or officer exercising judicial or quasi-judicial functions has acted without or in excess of
jurisdiction or with grave abuse of discretion.10
In this case, it was grave abuse of discretion to uphold Olandria’s claim that an improperly sworn
COC is equivalent to possession of a ground for disqualification. Not by any stretch of the
imagination can we infer this as an additional ground for disqualification from the specific wording
of the OEC in Section 68, which reads:
SEC. 68. Disqualifications. – Any candidate who, in an action or protest in which he is party is
declared by final decision of a competent court guilty of, or found by the Commission of having: (a)
given money or other material consideration to influence, induce or corrupt the voters or public
officials performing electoral functions; (b) committed acts of terrorism to enhance his candidacy;
(c) spent in his election campaign an amount in excess of that allowed by this Code; (d) solicited,
received or made any contribution prohibited under Sections 89, 95, 96, 97 and 104; or (e) violated
any of Sections 80, 83, 85, 86, and 261, paragraphs d, e, k, v, and cc, sub-paragraph 6, shall be
disqualified from continuing as a candidate, or if he has been elected, from holding the office. Any
person who is a permanent resident of or an immigrant to a foreign country shall not be qualified to
run for any elective office under this Code, unless said person has waived his status as a permanent
resident or immigrant of a foreign country in accordance with the residence requirement provided
for in the elections laws.
and of Section 40 of the LGC, which provides:
SEC. 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.
It is quite obvious that the Olandria petition is not based on any of the grounds for disqualification
as enumerated in the foregoing statutory provisions. Nowhere therein does it specify that a
defective notarization is a ground for the disqualification of a candidate. Yet, the COMELEC would
uphold that petition upon the outlandish claim that it is a petition to disqualify a candidate "for lack
of qualifications or possessing some grounds for disqualification."
The proper characterization of a petition as one for disqualification under the pertinent provisions
of laws cannot be made dependent on the designation, correctly or incorrectly, of a petitioner. The
absurd interpretation of Olandria, respondent herein, is not controlling; the COMELEC should have
dismissed his petition outright.
A petition for disqualification relates to the declaration of a candidate as ineligible or lacking in
quality or accomplishment fit for the position of mayor. The distinction between a petition for
disqualification and the formal requirement in Section 73 of the OEC that a COC be under oath is
not simply a question of semantics as the statutes list the grounds for the disqualification of a
candidate.
Recently, we have had occasion to distinguish the various petitions for disqualification and clarify
the grounds therefor as provided in the OEC and the LGC. We declared, thus:
To emphasize, a petition for disqualification on the one hand, can be premised on Section 12 or 68
of the OEC, or Section 40 of the LGC. On the other hand, a petition to deny due course to or cancel
a CoC can only be grounded on a statement of a material representation in the said certificate that
is false. The petitions also have different effects. While a person who is disqualified under Section
68 is merely prohibited to continue as a candidate, the person whose certificate is cancelled or
denied due course under Section 78 is not treated as a candidate at all, as if he/she never filed a
CoC. Thus, in Miranda v. Abaya, this Court made the distinction that a candidate who is disqualified
under Section 68 can validly be substituted under Section 77 of the OEC because he/she remains
a candidate until disqualified; but a person whose CoC has been denied due course or cancelled
under Section 78 cannot be substituted because he/she is never considered a candidate.11
Apart from the qualifications provided for in the Constitution, the power to prescribe additional
qualifications for elective office and grounds for disqualification therefrom, consistent with the
constitutional provisions, is vested in Congress.12 However, laws prescribing qualifications for and
disqualifications from office are liberally construed in favor of eligibility since the privilege of holding
an office is a valuable one.13 We cannot overemphasize the principle that where a candidate has
received popular mandate, all possible doubts should be resolved in favor of the candidate’s
eligibility, for to rule otherwise is to defeat the will of the people.14
In stark contrast to the foregoing, the COMELEC allowed and confirmed the disqualification of
Amora although the latter won, and was forthwith proclaimed, as Mayor of Candijay, Bohol.
Another red flag for the COMELEC to dismiss Olandria’s petition is the fact that Amora claims to
personally know the notary public, Atty. Granada, before whom his COC was sworn. In this regard,
the dissenting opinion of Commissioner Larrazabal aptly disposes of the core issue:
With all due respect to the well-written Ponencia, I respectfully voice my dissent. The primary issue
herein is whether it is proper to disqualify a candidate who, in executing his Certificate of Candidacy
(COC), merely presented to the Notary Public his Community Tax Certificate.
The majority opinion strictly construed the 2004 Rules on Notarial Practice (the "2004 Notarial
Rules") when it provided that valid and competent evidence of identification must be presented to
render Sergio G. Amora, Jr.’s [petitioner’s] COC valid. The very wording of the 2004 Notarial Rules
supports my view that the instant motion for reconsideration ought to be granted, to wit:
Section 2. Affirmation or Oath . – The term "Affirmation" or "Oath" refers to an act in which an
individual on a single occasion:
(a) appears in person before the notary public;
(b) is personally known to the notary public or identified by the notary public through competent
evidence of identity as defined by these Rules; and
(c) avows under penalty of law to the whole truth of the contents of the instrument or document.
As quoted supra, competent evidence of identity is not required in cases where the affiant is
personally known to the Notary Public, which is the case herein. The records reveal that [petitioner]
submitted to this Commission a sworn affidavit executed by Notary Public Oriculo A. Granada
(Granada), who notarized [petitioner’s] COC, affirming in his affidavit that he personally knows
[petitioner].
[Respondent], on the other hand, presented no evidence to counter Granada’s declarations. Hence,
Granada[’s] affidavit, which narrates in detail his personal relation with [petitioner], should be
deemed sufficient.
The purpose of election laws is to give effect to, rather than frustrate, the will of the
voters.1âwphi1 The people of Candijay, Bohol has already exercised their right to suffrage on May
10, 2010 where [petitioner] was one of the candidates for municipal mayor. To disqualify [petitioner]
at this late stage simply due to an overly strict reading of the 2004 Notarial Rules will effectively
deprive the people who voted for him their rights to vote.
The Supreme Court’s declaration in Petronila S. Rulloda v. COMELEC et al. must not be taken
lightly:
Technicalities and procedural niceties in election cases should not be made to stand in the way of
the true will of the electorate. Laws governing election contests must be liberally construed to the
end that the will of the people in the choice of public officials may not be defeated by mere technical
objections.
Election contests involve public interest, and technicalities and procedural barriers must yield if they
constitute an obstacle to the determination of the true will of the electorate in the choice of their
elective officials. The Court frowns upon any interpretation of the law that would hinder in any way
not only the free and intelligent casting of the votes in an election but also the correct ascertainment
of the results.15
Our ruling herein does not do away with the formal requirement that a COC be sworn. In fact, we
emphasize that the filing of a COC is mandatory and must comply with the requirements set forth
by law.16
Section 2 of the 2004 Rules on Notarial Practice lists the act to which an affirmation or oath refers:
Sec. 2. Affirmation or Oath. — The term "Affirmation" or "Oath" refers to an act in which an individual
on a single occasion:
(a) appears in person before the notary public;
(b) is personally known to the notary public or identified by the notary public through competent
evidence of identity as defined by these Rules; and
(c) avows under penalty of law to the whole truth of the contents of the instrument or document.
In this case, however, contrary to the declarations of the COMELEC, Amora complied with the
requirement of a sworn COC. He readily explained that he and Atty. Granada personally knew each
other; they were not just colleagues at the League of Municipal Mayors, Bohol Chapter, but they
consider each other as distant relatives. Thus, the alleged defect in the oath was not proven by
Olandria since the presentation of a CTC turned out to be sufficient in this instance. On the whole,
the COMELEC should not have brushed aside the affidavit of Atty. Granada and remained inflexible
in the face of Amora’s victory and proclamation as Mayor of Candijay, Bohol.
WHEREFORE, the petition is GRANTED. The Resolutions of the Commission on Elections in SPA
No. 10-046 (DC) dated April 29, 2010 and May 17, 2010, respectively, are ANULLED and SET
ASIDE.
SO ORDERED.
G.R. No. 187021 January 25, 2012
DOUGLAS F. ANAMA, Petitioner,
vs.
PHILIPPINE SAVINGS BANK, SPOUSES SATURNINA BARIA &TOMAS CO and THE
REGISTER OF DEEDS, METRO MANILA, DISTRICT II, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review under Rule 45 assailing the March 31, 2008 Decision1 of the Court of
Appeals (CA) and its February 27, 2009 Resolution,2 in CA G.R. No. SP-94771, which affirmed the
November 25, 2005 Order of the Regional Trial Court, Branch 167, Pasig City (RTC), granting the
motion for issuance of a writ of execution of respondents.
The Facts
The factual and procedural backgrounds of this case were succinctly recited by the CA in its
decision as follows:
Sometime in 1973, the Petitioner, Douglas F. Anama (Anama), and the Respondent, Philippine
Savings Bank (PSB), entered into a "Contract to Buy," on installment basis, the real property owned
and covered by Transfer Certificate of Title (TCT) No. 301276 in the latter’s name. However, Anama
defaulted in paying his obligations thereunder, thus, PSB rescinded the said contract and title to
the property remained with the latter. Subsequently, the property was sold by PSB to the Spouses
Saturnina Baria and Tomas Co (Co Spouses) who, after paying the purchase price in full, caused
the registration of the same in their names and were, thus, issued TCT No. 14239.
Resultantly, Anama filed before the Respondent Court a complaint for declaration of nullity of the
deed of sale, cancellation of transfer certificate of title, and specific performance with damages
against PSB, the Co Spouses, and the Register of Deeds of Metro Manila, District II.
On August 21, 1991 and after trial on the merits, the Respondent Court dismissed Anama’s
complaint and upheld the validity of the sale between PSB and the Co Spouses. Undaunted, Anama
appealed, at first, to this Court, and after failing to obtain a favorable decision, to the Supreme
Court.
On January 29, 2004, the Supreme Court rendered judgment denying Anama’s petition and
sustaining the validity of the sale between PSB and the Co Spouses. Its decision became final and
executory on July 12, 2004. Pursuant thereto, the Co Spouses moved for execution, which was
granted by the Respondent Court per its Order, dated November 25, 2005.
Aggrieved, Anama twice moved for the reconsideration of the Respondent Court’s November 25,
2005 Order arguing that the Co Spouses’ motion for execution is fatally defective. He averred that
the Spouses’ motion was pro forma because it lacked the required affidavit of service and has a
defective notice of hearing, hence, a mere scrap of paper. The Respondent Court, however, denied
Anama’s motion(s) for reconsideration.
Dissatisfied, the petitioner questioned the RTC Order before the CA for taking judicial cognizance
of the motion for execution filed by spouses Tomas Co and Saturnina Baria (Spouses Co) which
was (1) not in accord with Section 4 and Section 15 of the Rules of Court because it was without a
notice of hearing addressed to the parties; and (2) not in accord with Section 6, Rule 15 in
conjunction with Section 13, Rule 13 of the Rules of Court because it lacks the mandatory affidavit
of service.
On March 31, 2008, the CA rendered a decision dismissing the petition. It reasoned out, among
others, that the issue on the validity of the deed of sale between respondents, Philippine Savings
Bank (PSB) and the Spouses Co, had long been laid to rest considering that the January 29, 2004
Decision of this Court became final and executory on July 12, 2004. Hence, execution was already
a matter of right on the part of the respondents and the RTC had the ministerial duty to issue a writ
of execution enforcing a final and executory decision.
The CA also stated that although a notice of hearing and affidavit of service in a motion are
mandatory requirements, the Spouses Co’s motion for execution of a final and executory judgment
could be acted upon by the RTC ex parte, and therefore, excused from the mandatory requirements
of Sections 4, 5 and 6 of Rule 15 of the Rules of Court.
The CA was of the view that petitioner was not denied due process because he was properly
notified of the motion for execution of the Spouses Co. It stated that the act of the Spouses Co in
resorting to personal delivery in serving their motion for execution did not render the motion pro
forma. It refused to apply a rigid application of the rules because it would result in a manifest failure
of justice considering that petitioner’s position was nothing but an obvious dilatory tactic designed
to prevent the final disposition of Civil Case No. 44940.
Not satisfied with the CA’s unfavorable disposition, petitioner filed this petition praying for the
reversal thereof presenting the following
ARGUMENTS:
THE RESPONDENT APPELLATE COURT DID NOT TAKE INTO CONSIDERATION THE CLEAR
TEACHING OF THE HONORABLE COURT WITH REGARD TO THE REQUISITE NOTICE OF
HEARING – IT SHOULD BE ADDRESSED TO THE PARTIES NOT TO THE CLERK OF COURT,
THE LATEST (THEN) BEING GARCIA V. SANDIGANBAYAN, G.R. NO. 167103, AUGUST 31,
2006, 500 SCRA 361; DE JESUS V. JUDGE DILAG, A.M. NO. RTJ-05-1921, SEPTEMBER 30,
2005, 471 SCRA 176; LAND BANK OF THE PHILIPPINES V. NATIVIDAD, G.R. NO. 127198, MAY
16, 2005, 458 SCRA 441; ATTY. JULIUS NERI V. JUDGE JESUS S. DE LA PEÑA, A.M NO. RTJ-
05-1896, APRIL 29, 2005, 457 SCRA 538; AND ALVAREZ V. DIAZ, A.M. NO. MTJ-00-1283,
MARCH 3, 2004, 424 SCRA 213;
THE RESPONDENT APPELLATE COURT DID NOT TAKE INTO CONSIDERATION THE CLEAR
TEACHING OF THE HONORABLE COURT WITH REGARD TO THE REQUISITE AFFIDAVIT OF
SERVICE – IT SHOULD BE IN THE PROPER FORM AS PRESCRIBED IN THE RULES AND IT
SHOULD BE ATTACHED TO THE MOTION, THE LATEST (THEN) BEING ELLO V. COURT OF
APPEALS, G.R. NO. 141255, JUNE 21, 2005, 460 SCRA 406; LOPEZ DELA ROSA
DEVELOPMENT CORPORATION V. COURT OF APPEALS, G.R. NO. 148470, APRIL 29, 2005,
457 SCRA 614; ALVAREZ V. DIAZ, A.M. NO. MTJ-00-1283, MARCH 3, 2004, 424 SCRA 213; EL
REYNO HOMES, INC. V. ERNESTO ONG, 397 SCRA 563; CRUZ V. COURT OF APPEALS, 388
SCRA 72, 80-81; AND MERIS V. OFILADA, 293 SCRA 606;
THE RESPONDENT APPELLATE COURT DID NOT TAKE APPROPRIATE ACTION ON THE
"FRAUD PERPETRATED UPON THE COURT" BY RESPONDENT-SPOUSES AND THEIR LEAD
COUNSEL.
SINCE THE RESPONDENT APPELLATE COURT REFUSED TO TAKE INTO CONSIDERATION
THE RESPONDENT BANK’S ACTION – THAT OF:
ENGAGING IN A DAGDAG-BAWAS (LEGALLY "INTERCALATION") OPERATION OF A
PORTION OF THE TRANSCRIPT OF STENOGRAPHIC NOTES (TSN), OCTOBER 12, 1984, OF
THE REGIONAL TRIAL COURT, BRANCH 167, PASIG CITY, IN CIVIL CASE NO. 44940, PAGES
54-55, AND
PRESENTING IT IN ITS APPELLEE’S BRIEF (IN THE OWNERSHIP CASE, CA-G.R. NO. CV-
42663, LIKEWISE, BEFORE THE RESPONDENT APPELLATE COURT) BY CITING IT ON PAGE
14 OF SAID BRIEF, AS IMPLIEDLY COMING FROM THE TSN OF THE TRIAL COURT.
THINKING THAT THEIR FALSIFIED APPELLEE’S BRIEF WAS MATERIAL IN SAID CA-G.R. NO.
CV-42663.
IT COULD NOT RULE THAT THE SAME HAS BROUGHT ABOUT A CRUCIAL MATERIAL
CHANGE IN THE SITUATION OF THE PARTIES WHICH MAKES EXECUTION INEQUITABLE
(PUNCIA V. GERONA, 252 SCRA 424, 430-431), OR, IN THE WORDS OF DEVELOPMENT
BANK OF RIZAL V. CA, G.R. NO. 75964, DECEMBER 1, 1987, 156 SCRA 84, 90, "THERE
EXISTS A COMPELLING REASON FOR STAYING THE EXECUTION OF JUDGMENT."
Basically, petitioner argues that the respondents failed to substantially comply with the rule on
notice and hearing when they filed their motion for the issuance of a writ of execution with the RTC.
He claims that the notice of hearing in the motion for execution filed by the Spouses Co was a mere
scrap of paper because it was addressed to the Clerk of Court and not to the parties. Thus, the
motion for execution did not contain the required proof of service to the adverse party. He adds that
the Spouses Co and their counsel deliberately "misserved" the copy of their motion for execution,
thus, committing fraud upon the trial court.
Additionally, he claims that PSB falsified its appellee’s brief by engaging in a "dagdag-bawas"
("intercalation") operation in pages 54 to 55 of the TSN, dated October 12, 1984.
Position of the Spouses Co
The Spouses Co counter that the petition should be dismissed outright for raising both questions
of facts and law in violation of Section 1, Rule 45 of the Rules of Court. The Spouses Co aver that
petitioner attempts to resurrect the issue that PSB cheated him in their transaction and that the
RTC committed a "dagdag-bawas." According to the Spouses Co, these issues had long been
threshed out by this Court.
At any rate, they assert that they have substantially complied with the requirements of notice and
hearing provided under Sections 4 and 5 of Rule 15 and Section 13, Rule 13 of the Rules of Court.
Contrary to petitioner’s allegations, a copy of the motion for the issuance of a writ of execution was
given to petitioner through his principal counsel, the Quasha Law Offices. At that time, the said law
office had not formally withdrawn its appearance as counsel for petitioner. Spouses Co argue that
what they sought to be executed was the final judgment of the RTC duly affirmed by the CA and
this Court, thus, putting the issues on the merits to rest. The issuance of a writ of execution then
becomes a matter of right and the court’s duty to issue the writ becomes ministerial.
Position of respondent PSB
PSB argues that the decision rendered by the RTC in Civil Case No. 44940 entitled "Douglas F.
Anama v. Philippine Savings Bank, et. al."3 had long become final and executory as shown by the
Entry of Judgment made by the Court on July 12, 2004. The finality of the said decision entitles the
respondents, by law, to the issuance of a writ of execution. PSB laments that petitioner relies more
on technicalities to frustrate the ends of justice and to delay the enforcement of a final and executory
decision.
As to the principal issue, PSB points out that the notice of hearing appended to the motion for
execution filed by the Spouses Co substantially complied with the requirements of the Rules since
petitioner’s then counsel of record was duly notified and furnished a copy of the questioned motion
for execution. Also, the motion for execution filed by the Spouses Co was served upon and
personally received by said counsel.
The Court’s Ruling
The Court agrees with the Spouses Co that petitioner’s allegations on the "dagdag-bawas operation
of the Transcript of Stenographic Notes," the "fraud perpetuated upon the Court by said spouses
and their lead counsel," the "ownership," and "falsification" had long been laid to rest in the case
of "Douglas F. Anama v. Philippine Savings Bank, et. al."4 For said reason, the Court cannot review
those final pronouncements. To do so would violate the rules as it would open a final judgment to
another reconsideration which is a prohibited procedure.
On the subject procedural question, the Court finds no compelling reason to stay the execution of
the judgment because the Spouses Co complied with the notice and hearing requirements under
Sections 4, 5 and 6 of Rule 15. Said sections, as amended, provide:
SECTION 4. Hearing of motion. – Except for motions which the court may act upon without
prejudicing the rights of the adverse party, every written motion shall be set for hearing by the
applicant.
Every written motion required to be heard and the notice of the hearing thereof shall be served in
such a manner as to ensure its receipt by the other party at least three (3) days before the date of
hearing, unless the court for good cause sets the hearing on shorter notice.
SECTION 5. Notice of hearing. – The notice of hearing shall be addressed to all parties concerned,
and shall specify the time and date of the hearing which must not be later than ten (10) days after
the filing of the motion.
SECTION 6. Proof of service necessary. – No written motion set for hearing shall be acted upon
by the court without proof of service thereof.
Pertinently, Section 13 of Rule 13 of the 1997 Rules of Civil Procedure, as amended, provides:
SEC. 13. Proof of service. – Proof of personal service shall consist of a written admission of the
party served, or the official return of the server, or the affidavit of the party serving, containing a full
statement of the date, place, and manner of service. If the service is by ordinary mail, proof thereof
shall consist of an affidavit of the person mailing of facts showing compliance with section 7 of this
Rule. If service is made by registered mail, proof shall be made by such affidavit and the registry
receipt issued by the mailing office. The registry return card shall be filed immediately upon its
receipt by the sender, or in lieu thereof the unclaimed letter together with the certified or sworn copy
of the notice given by the postmaster to the addressee.
Elementary is the rule that every motion must contain the mandatory requirements of notice and
hearing and that there must be proof of service thereof. The Court has consistently held that a
motion that fails to comply with the above requirements is considered a worthless piece of paper
which should not be acted upon. The rule, however, is not absolute. There are motions that can be
acted upon by the court ex parte if these would not cause prejudice to the other party. They are not
strictly covered by the rigid requirement of the rules on notice and hearing of motions.
The motion for execution of the Spouses Co is such kind of motion. It cannot be denied that the
judgment sought to be executed in this case had already become final and executory. As such, the
Spouses Co have every right to the issuance of a writ of execution and the RTC has the ministerial
duty to enforce the same. This right on the part of the Spouses Co and duty on the part of the RTC
are based on Section 1 and Section 2 of Rule 39 of the 1997 Revised Rules of Civil Procedure
provides, as follows:
Section 1. Execution upon judgments or final orders. – Execution shall issue as a matter of right,
on motion, upon a judgment or order that disposes of the action or proceeding upon the expiration
of the period to appeal therefrom if no appeal has been duly perfected.
If the appeal has been duly perfected and finally resolved, the execution may forthwith be applied
for in the court of origin, on motion of the judgment obligee, submitting therewith certified true copies
of the judgment or judgments or final order or orders sought to be enforced and of the entry
thereof, with notice to the adverse party.
The appellate court may, on motion in the same case, when the interest of justice so requires, direct
the court of origin to issue the writ of execution.
SEC. 2. Discretionary execution.—
(a) Execution of a judgment or final order pending appeal.— On motion of the prevailing party with
notice to the adverse party filed in the trial court while it has jurisdiction over the case and is in
possession of either the original record or the record on appeal, as the case may be, at the time of
the filing of such motion, said court may, in its discretion, order execution of a judgment or final
order even before the expiration of the period to appeal.
After the trial court has lost jurisdiction, the motion for execution pending appeal may be filed in the
appellate court.
Discretionary execution may only issue upon good reasons to be stated in a special order after due
hearing.
(b) Execution of several, separate or partial judgments.—A several, separate or partial judgment
may be executed under the same terms and conditions as execution of a judgment or final order
pending appeal. (2a) [Emphases and underscoring supplied]
As can be gleaned therefrom, under Paragraph 1 of Section 1 of Rule 39 of the 1997 Revised Rules
of Civil Procedure, the Spouses Co can have their motion for execution executed as a matter of
right without the needed notice and hearing requirement to petitioner. This is in contrast to the
provision of Paragraph 2 of Section 1 and Section 2 where there must be notice to the adverse
party. In the case of Far Eastern Surety and Insurance Company, Inc. v. Virginia D. Vda. De
Hernandez,5 it was written:
It is evident that Section 1 of Rule 39 of the Revised Rules of Court does not prescribe that
a copy of the motion for the execution of a final and executory judgment be served on the
defeated party, like litigated motions such as a motion to dismiss (Section 3, Rule 16), or motion
for new trial (Section 2, Rule 37), or a motion for execution of judgment pending appeal (Section 2,
Rule 39), in all of which instances a written notice thereof is required to be served by the movant
on the adverse party in order to afford the latter an opportunity to resist the application.
It is not disputed that the judgment sought to be executed in the case at bar had already become
final and executory. It is fundamental that the prevailing party in a litigation may, at any time within
five (5) years after the entry thereof, have a writ of execution issued for its enforcement and the
court not only has the power and authority to order its execution but it is its ministerial duty to do
so. It has also been held that the court cannot refuse to issue a writ of execution upon a final and
executory judgment, or quash it, or order its stay, for, as a general rule, the parties will not be
allowed, after final judgment, to object to the execution by raising new issues of fact or of law,
except when there had been a change in the situation of the parties which makes such execution
inequitable or when it appears that the controversy has ever been submitted to the judgment of the
court; or when it appears that the writ of execution has been improvidently issued, or that it is
defective in substance, or is issued against the wrong party, or that judgment debt has been paid
or otherwise satisfied; or when the writ has been issued without authority. Defendant-appellant has
not shown that she falls in any of the situations afore-mentioned. Ordinarily, an order of execution
of a final judgment is not appealable. Otherwise, as was said by this Court in Molina v. de la Riva, a
case could never end. Once a court renders a final judgment, all the issues between or among the
parties before it are deemed resolved and its judicial function as regards any matter related to the
controversy litigated comes to an end. The execution of its judgment is purely a ministerial phase
of adjudication. The nature of its duty to see to it that the claim of the prevailing party is fully satisfied
from the properties of the loser is generally ministerial.
In Pamintuan v. Muñoz, We ruled that once a judgment becomes final and executory, the
prevailing party can have it executed as a matter of right, and the judgment debtor need not
be given advance notice of the application for execution.
Also of the same stature is the rule that once a judgment becomes final and executory, the
prevailing party can have it executed as a matter of right and the granting of execution becomes
a ministerial duty of the court. Otherwise stated, once sought by the prevailing party, execution of
a final judgment will just follow as a matter of course. Hence, the judgment debtor need not be
given advance notice of the application for execution nor he afforded prior hearing.
Absence of such advance notice to the judgment debtor does not constitute an infringement of the
constitutional guarantee of due process.
However, the established rules of our system of jurisprudence do not require that a defendant who
has been granted an opportunity to be heard and has had his day in court should, after a judgment
has been rendered against him, have a further notice and hearing before supplemental proceedings
are taken to reach his property in satisfaction of the judgment. Thus, in the absence of a statutory
requirement, it is not essential that he be given notice before the issuance of an execution against
his tangible property; after the rendition of the judgment he must take "notice of what will follow," no
further notice being "necessary to advance justice." [Emphases and underscoring supplied]
Likewise, in the case of Leonardo Lim De Mesa v. Hon. Court of Appeals,6 it was stated:
In the present case, the decision ordering partition and the rendition of accounting had already
become final and executory. The execution thereof thus became a matter of right on the part of the
plaintiffs, herein private respondents, and is a mandatory and ministerial duty on the part of the
court. Once a judgment becomes final and executory, the prevailing party can have it
executed as a matter of right, and the judgment debtor need not be given advance notice of
the application for execution nor be afforded prior hearings thereon.
On the bases of the foregoing considerations, therefore, the Court of Appeals acted correctly in
holding that the failure to serve a copy of the motion for execution on petitioner is not a fatal defect.
In fact, there was no necessity for such service. [Emphases and underscoring supplied]
At any rate, it is not true that the petitioner was not notified of the motion for execution of the
Spouses Co. The records clearly show that the motion for execution was duly served upon, and
received by, petitioner’s counsel-of-record, the Quasha Ancheta Pena Nolasco Law Offices, as
evidenced by a "signed stamped received mark" appearing on said pleading.7 The records are
bereft of proof showing any written denial from petitioner’s counsel of its valid receipt on behalf of
its client. Neither is there proof that the Quasha Ancheta Pena Nolasco Law Offices has formally
withdrawn its appearance as petitioner’s counsel-of-record. Considering that there is enough proof
shown on record of personal delivery in serving the subject motion for execution, there was a valid
compliance with the Rules, thus, no persuasive reason to stay the execution of the subject final
and executory judgment.
Moreover, this Court takes note that petitioner was particularly silent on the ruling of the CA that he
was notified, through his counsel, of the motion for execution of the Spouses Co when he filed a
motion for reconsideration of the RTC’s order dated June 28, 2005, holding in abeyance said motion
pending the resolution of petitioner’s pleading filed before this Court. He did not dispute the ruling
of the CA either that the alleged defect in the Spouses Co’s motion was cured when his new counsel
was served a copy of said motion for reconsideration of the RTC’s June 28, 2005 Order.8
The three-day notice rule is not absolute. A liberal construction of the procedural rules is proper
where the lapse in the literal observance of a rule of procedure has not prejudiced the adverse
party and has not deprived the court of its authority. Indeed, Section 6, Rule 1 of the Rules of Court
provides that the Rules should be liberally construed in order to promote their objective of securing
a just, speedy and inexpensive disposition of every action and proceeding. Rules of procedure are
tools designed to facilitate the attainment of justice, and courts must avoid their strict and rigid
application which would result in technicalities that tend to frustrate rather than promote substantial
justice.
In Somera Vda. De Navarro v. Navarro, the Court held that there was substantial compliance of
the rule on notice of motions even if the first notice was irregular because no prejudice was caused
the adverse party since the motion was not considered and resolved until after several
postponements of which the parties were duly notified.
Likewise, in Jehan Shipping Corporation v. National Food Authority, the Court held that despite the
lack of notice of hearing in a Motion for Reconsideration, there was substantial compliance with the
requirements of due process where the adverse party actually had the opportunity to be heard and
had filed pleadings in opposition to the motion. The Court held:
This Court has indeed held time and again, that under Sections 4 and 5 of Rule 15 of the Rules of
Court, mandatory is the requirement in a motion, which is rendered defective by failure to comply
with the requirement. As a rule, a motion without a notice of hearing is considered pro forma and
does not affect the reglementary period for the appeal or the filing of the requisite pleading.
As an integral component of the procedural due process, the three-day notice required by the Rules
is not intended for the benefit of the movant. Rather, the requirement is for the purpose of avoiding
surprises that may be sprung upon the adverse party, who must be given time to study and meet
the arguments in the motion before a resolution of the court. Principles of natural justice demand
that the right of a party should not be affected without giving it an opportunity to be heard.
The test is the presence of opportunity to be heard, as well as to have time to study the
motion and meaningfully oppose or controvert the grounds upon which it is
based.9 [Emphases and underscoring supplied]
Likewise, in the case of KKK Foundation, Inc. v. Hon. Adelina Calderon-Bargas,10 this Court stated:
Anent the second issue, we have consistently held that a motion which does not meet the
requirements of Sections 4 and 5 of Rule 15 of the Rules of Court is considered a worthless piece
of paper, which the Clerk of Court has no right to receive and the trial court has no authority to act
upon. Service of a copy of a motion containing a notice of the time and the place of hearing of that
motion is a mandatory requirement, and the failure of movants to comply with these requirements
renders their motions fatally defective. However, there are exceptions to the strict application
of this rule. These exceptions are: (1) where a rigid application will result in a manifest failure or
miscarriage of justice especially if a party successfully shows that the alleged defect in the
questioned final and executory judgment is not apparent on its face or from the recitals contained
therein; (2) where the interest of substantial justice will be served; (3) where the resolution of the
motion is addressed solely to the sound and judicious discretion of the court; and (4) where the
injustice to the adverse party is not commensurate with the degree of his thoughtlessness in not
complying with the procedure prescribed.
A notice of hearing is an integral component of procedural due process to afford the adverse parties
a chance to be heard before a motion is resolved by the court. Through such notice, the adverse
party is given time to study and answer the arguments in the motion. Records show that while
Angeles’s Motion for Issuance of Writ of Execution contained a notice of hearing, it did not
particularly state the date and time of the hearing. However, we still find that petitioner was not
denied procedural due process. Upon receiving the Motion for Issuance of Writ of Execution, the
trial court issued an Order dated September 9, 2002 giving petitioner ten (10) days to file its
comment. The trial court ruled on the motion only after the reglementary period to file comment
lapsed. Clearly, petitioner was given time to study and comment on the motion for which reason,
the very purpose of a notice of hearing had been achieved.
The notice requirement is not a ritual to be followed blindly.1âwphi1 Procedural due process is not
based solely on a mechanical and literal application that renders any deviation inexorably fatal.
Instead, procedural rules are liberally construed to promote their objective and to assist in obtaining
a just, speedy and inexpensive determination of any action and proceeding. [Emphases supplied]
At any rate, it is undisputed that the August 21, 1991 RTC Decision11 in Civil Case No. 44940 is
already final and executory. Once a judgment becomes final and executory, all the issues between
the parties are deemed resolved and laid to rest. All that remains is the execution of the decision
which is a matter of right. The prevailing party is entitled to a writ of execution, the issuance of
which is the trial court’s ministerial duty.12
The Court agrees with the respondents that petitioner mainly relies on mere technicalities to
frustrate the ends of justice and further delay the execution process and enforcement of the RTC
Decision that has been affirmed by the CA and this Court. The record shows that the case has
been dragging on for almost 30 years since petitioner filed an action for annulment of sale in 1982.
From the time the Spouses Co bought the house from PSB in 1978, they have yet to set foot on
the subject house and lot.
To remand the case back to the lower court would further prolong the agony of the Spouses Co.
The Court should not allow this to happen. The Spouses Co should not be prevented from enjoying
the fruits of the final judgment in their favor. In another protracted case, the Court wrote:
As a final note, it bears to point out that this case has been dragging for more than 15 years and
the execution of this Court’s judgment in PEA v. CA has been delayed for almost ten years now
simply because De Leon filed a frivolous appeal against the RTC’s order of execution based on
arguments that cannot hold water. As a consequence, PEA is prevented from enjoying the fruits of
the final judgment in its favor. The Court agrees with the Office of the Solicitor General in its
contention that every litigation must come to an end once a judgment becomes final, executory and
unappealable. Just as a losing party has the right to file an appeal within the prescribed period, the
winning party also has the correlative right to enjoy the finality of the resolution of his case by the
execution and satisfaction of the judgment, which is the "life of the law." To frustrate it by dilatory
schemes on the part of the losing party is to frustrate all the efforts, time and expenditure of the
courts. It is in the interest of justice that this Court should write finis to this litigation.13
WHEREFORE, the petition is DENIED.
SO ORDERED.