REMEDIAL LAW
under Article 1144 of the Civil Code.18
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 197380               October 8, 2014
ELIZA ZUNIGA-SANTOS,* represented by her Attorney-in Fact,
NYMPHA Z. SALES, Petitioners,  succeeded in transferring the subject properties to his daughter, Gran,
vs.
MARIA DIVINA GRACIA SANTOS-GRAN** and REGISTER
OF DEEDS OF MARIKINA CITY, Respondents.
DECISION
PERLAS-BERNABE, J.:
Before the Court is a petition for review on certiorari 1 assailing the
Decision2 dated January 10, 2011 and the Resolution 3 dated June 22,
2011 of the Court of Appeals (CA) in CA-G.R. CV No. 87849 which
affirmed the Order4dated July 6, 2006 of the Regional Trial Court of
San Mateo, Rizal, Branch 76 (RTC) in Civil Case No. 2018-06,
dismissing the Amended Complaint for annulment of sale and
revocation of title on the ground of insufficiency of factual basis.
The Facts
On January 9, 2006, petitioner Eliza Zuñiga-Santos (petitioner),
through her authorized representative, Nympha Z. Sales, 5 filed a
Complaint6 for annulment of sale and revocation of title against
respondents Maria Divina Gracia Santos-Gran (Gran) and the Register
of Deeds of Marikina City before the RTC, docketed asCivil Case No.
2018-06. The said complaint was later amended 7 on March 10, 2006
(Amended Complaint).
In her Amended Complaint, 8 petitioner alleged, among others, that: (a)
she was the registered owner of three (3) parcels of land located in the
Municipality of Montalban, Province of Rizal, covered by Transfer
Certificate of Title (TCT) Nos. N-5500, 9 224174,10 and N-
423411 (subject properties) prior to their transfer in the name of private
respondent Gran; (b) she has a second husband by the name
ofLamberto C. Santos (Lamberto), with whom she did not have any
children; (c) she was forced to take care of Lamberto’s alleged
daughter, Gran, whose birth certificate was forged to make it appear
that the latter was petitioner’s daughter; (d) pursuant to void and
voidable documents, i.e., a Deed of Sale, Lamberto succeeded in
transferring the subject properties in favor of and in the name of Gran;
(e) despite diligent efforts, said Deed of Sale could not be located; and
(f) she discovered that the subject properties were transferred to Gran
sometime in November 2005. Accordingly, petitioner prayed, inter alia,
that Gran surrender to her the subject properties and pay damages,
including costs of suit.12
For her part, Gran filed a Motion to Dismiss, 13 contending, inter alia,
that (a) the action filed by petitioner had prescribed since an action
upon a written contract must be brought within ten (10) years from the
time the cause of action accrues, or in this case, from the time of
registration of the questioned documents before the Registry of
Deeds;14 and (b) the Amended Complaint failed to state a cause of
action as the void and voidable documents sought to be nullified were
not properly identified nor the substance thereof set forth, thus,
precluding the RTC from rendering a valid judgment in accordance
withthe prayer to surrender the subject properties. 15
The RTC Ruling
In an Order16 dated July 6, 2006, the RTC granted Gran’s motion and
dismissed the Amended Complaint for its failure to state a cause of
action, considering that the deed of sale sought to be nullified – an
"essential and indispensable part of [petitioner’s] cause of action" 17 –
was not attached. It likewise held that the certificates oftitle covering
the subject properties cannot be collaterally attacked and that since the
action was based on a written contract, the same had already prescribed
Dissatisfied, petitioner elevated the matter to the CA.
The CA Ruling
In a Decision19 dated January 10, 2011, the CA sustained the dismissal
of petitioner’s Amended Complaint buton the ground of insufficiency
of factual basis. It disagreed with the RTC’s findingthat the said
pleading failed to state a cause of action since it had averred that: (a)
petitioner has a right over the subject properties being the registered
owner thereof prior to their transfer in the name of Gran; (b) Lamberto
through void and voidable documents; and (c) the latter’s refusal and
failure to surrender to her the subject properties despite demands
violated petitioner’s rights over them. 20 The CA likewise ruled that the
action has not yet prescribed since an action for nullity of void deeds of
conveyance is imprescriptible. 21 Nonetheless, it held that since the Deed
of Sale sought to be annulled was not attached to the Amended
Complaint, it was impossible for the court to determine whether
petitioner’s signature therein was a forgery and thus, would have no
basis to order the surrender or reconveyance of the subject properties. 22
Aggrieved, petitioner moved for reconsideration23 and attached, for the
first time, a copy of the questioned Deed of Sale 24 which she claimed to
have recently recovered, praying that the order of dismissal be set aside
and the case be remanded to the RTC for further proceedings.
In a Resolution25 dated June 22, 2011, the CA denied petitioner’s
motion and held that the admission of the contested Deed of Sale at this
late stage would be contrary to Gran’s right to due process.
Hence, the instant petition.
The Issue Before the Court
The primordial issue for the Court’s resolution is whether or not the
dismissal of petitioner’s Amended Complaint should be sustained.
The Court’s Ruling
Failure to state a cause of action and lack of cause of action are distinct
grounds to dismiss a particularaction. The former refers to the
insufficiency of the allegations in the pleading, while the latter to the
insufficiency of the factual basis for the action. Dismissal for failure to
state a cause of action may be raised at the earliest stages of the
proceedings through a motion to dismiss under Rule16 of the Rules of
Court, while dismissal for lack of cause of action may be raised any
time after the questions of fact have been resolved on the basis of
stipulations, admissions or evidence presented by the plaintiff. 26 In
Macaslang v. Zamora,27 the Court, citing the commentary of Justice
Florenz D. Regalado, explained:
Justice Regalado, a recognized commentator on remedial law, has
explained the distinction:
x x x What is contemplated, therefore, is a failure to statea cause of
action which is provided in Sec. 1(g) of Rule 16. This is a matter of
insufficiency of the pleading. Sec. 5 of Rule 10, which was also
included as the last mode for raising the issue to the court, refers to the
situation where the evidence does not provea cause of action. This is,
therefore, a matter of insufficiency of evidence. Failure to state a cause
of action is different from failure to prove a cause of action. The
remedy in the first is to move for dismissal of the pleading, whilethe
remedy in the second is to demur to the evidence, hence reference to
Sec. 5 of Rule 10 has been eliminated in this section. The procedure
would consequently be to require the pleading to state a cause of action,
by timely objection to its deficiency; or, at the trial, to file a demurrer to
evidence, if such motion is warranted.28
In the case at bar, both the RTC and the CA were one in dismissing
petitioner’s Amended Complaint, but varied on the grounds thereof –
that is, the RTC held that there was failure tostate a cause of action
while the CA ruled that there was insufficiency of factual basis.
At once, it is apparent that the CA based its dismissal on an incorrect
ground. From the preceding discussion, it is clear that "insufficiency of
factual basis" is not a ground for a motion to dismiss. Rather, it is a
ground which becomes available only after the questions of fact have
been resolved on the basis of stipulations, admissions or evidence
presented by the plaintiff. The procedural recourse to raise such ground
is a demurrer to evidence taken only after the plaintiff’s presentation of
evidence. This parameter is clear under Rule 33 of the Rules of Court:
RULE 33
Demurrer to Evidence
Section 1. Demurrer to evidence. — After the plaintiff has completed
the presentation of his evidence, the defendant may move for dismissal
on the ground that upon the facts and the law the plaintiff has shown no
right to relief. If his motion isdenied he shall have the right to present
evidence. If the motion is granted but on appeal the order of dismissal is
reversed he shall be deemed to have waived the right to present
evidence.
At the preliminary stages of the proceedings, without any presentation
of evidence even conducted, it is perceptibly impossible to assess the
insufficiency of the factual basis on which the plaintiff asserts his cause
of action, as in this case. Therefore, that ground could not be the basis
for the dismissal of the action.
However, the Amended Complaint is still dismissible but on the ground
of failure to state a cause of action, as correctly held by the RTC. Said
ground was properly raised by Granin a motion to dismiss pursuant to
Section 1, Rule 16 of the Rules of Court:
RULE 16
Motion to Dismiss
Section 1. Grounds. — Within the time for but before filing the answer
to the complaint or pleading asserting a claim, a motion to dismiss may
be made on any of the following grounds:
xxxx
(g) That the pleading asserting the claim states no cause of action;
xxxx
A complaint states a cause of action if it sufficiently avers the existence
of the three (3) essential elements of a cause of action, namely: (a) a
right in favor of the plaintiff by whatever means and under whatever
law it arises or is created; (b) an obligation on the part of the named
defendant to respect or not to violate such right; and (c) an act or
omission on the part of the named defendant violative of the right of the
plaintiff or constituting a breach of the obligation of defendant tothe
plaintiff for which the latter may maintain an action for recovery of
damages.29 If the allegations of the complaint do not state the
concurrence of these elements, the complaint becomes vulnerable to a
motion to dismiss on the ground of failure to state a cause of action. 30
It is well to point out that the plaintiff’s cause of action should not
merely be "stated" but, importantly, the statement thereof should be
"sufficient." This is why the elementarytest in a motion to dismiss on
such ground is whether or not the complaint alleges facts which if true
would justify the relief demanded. 31 As a corollary, it has been held that
only ultimate facts and not legal conclusions or evidentiary facts are
considered for purposes of applying the test. 32 This is consistent with
Section 1, Rule 8 of the Rules of Court which states that the complaint
need only allege the ultimate facts or the essential facts constituting the
plaintiff’s cause of action. A fact is essential if they cannot be stricken
out without leaving the statement of the cause of action
inadequate.33 Since the inquiry is into the sufficiency, not the veracity,
of the material allegations, it follows that the analysis should be
confined to the four corners of the complaint, and no other. 34
A judicious examination of petitioner’s Amended Complaint readily
shows its failure to sufficiently state a cause of action. Contrary to the
findings of the CA, the allegations therein do not proffer ultimate facts
which would warrant an action for nullification of the sale and recovery
of the properties in controversy, hence,rendering the same dismissible.
While the Amended Complaint does allege that petitioner was the
registered owner of the subject properties in dispute, nothing in the said
pleading or its annexes would show the basis of that assertion, either
through statements/documents tracing the rootof petitioner’s title or
copies of previous certificates of title registeredin her name. Instead, the
certificates of title covering the said properties that were attached to the
Amended Complaint are in the name of Gran. At best, the attached
copies of TCT Nos. N-5500 and N-4234 only mention petitioner as the
representative of Gran at the time of the covered property’s registration
when she was a minor. Nothing in the pleading, however, indicates that
the former had become any of the properties’ owner. This leads to the
logical conclusion that her right to the properties in question – at least
through the manner in which it was alleged in the Amended Complaint
– remains ostensibly unfounded. Indeed, while the facts alleged in the
complaint are hypothetically admitted for purposes of the motion, it
must, nevertheless, be remembered that the hypothetical admission
extends only to the relevant and material facts well pleaded in the
complaint as well as toinferences fairly deductible therefrom. 35 Verily,
the filing of the motion to dismiss assailing the sufficiency of the
complaint does not hypothetically admit allegations of which the court
will take judicial notice ofto be not true, nor does the rule of
hypothetical admission apply to legallyimpossible facts, or to facts
inadmissible in evidence, or to facts that appear to be unfounded by
record or document included in the pleadings.36
Aside from the insufficiency of petitioner’s allegations with respect to
her right to the subject properties sought to be recovered, the ultimate
facts supposedly justifying the "annulment of sale," by which the
reconveyance of the subject properties is sought, were also
insufficiently pleaded. The following averments in the Amended
Complaint betray no more than an insufficient narration of facts:
6. That pursuant to a voidable [sic] and void documents, the second
husband of the plaintiff succeed [sic] in transferring the above TITLES
in the name of MARIA DIVINAGRACIA SANTOS, who is (sic)
alleged daughter of LAMBERTO C. SANTOS in violation of Article
1409, Par. 2 of the Civil Code;
7. That the said properties [were] transferred to the said defendant by a
Deed of Sale (DOS) to the said MARIA DIVINA GRACIA SANTOS
through a void documents [sic] considering that the seller is the alleged
mother of defendant is also the buyer of the said properties in favor of
defendant;
8. x x x.
9. That the alleged sale and transfer of the said properties in favor of
defendant was only discovered by [plaintiff’s] daughter CYNTHIA
BELTRAN-LASMARIAS when [plaintiff] has been requesting for
financial assistance, considering that the said mother of plaintiff [sic]
has so many properties which is now the subject of this complaint;
10. That plaintiff then return on [to] the Philippines sometime [in]
November, 2005 and discovered that all [plaintiff’s] properties [had]
been transferred to defendant MARIA DIVINA GRACIA SANTOS
who is not a daughter either by consanguinity or affinity to the plaintiff
mother [sic];
11. That the titles that [were] issued in the name of MARIA
DIVINAGRACIA SANTOS by virtue of the said alleged voidable and
void documents, should be annulled and cancelled as the basis of the
transfer is through void and voidable documents;
x x x x37
Clearly, the claim that the sale was effected through "voidable and void
documents" partakes merely of a conclusion of law that is not supported
by any averment of circumstances that will show why or how such
conclusion was arrived at. In fact, what these "voidable and void
documents" are were not properly stated and/or identified. In Abad v.
Court of First Instance of Pangasinan,38 the Court pronounced that:
A pleading should state the ultimate facts essential to the rights of
action or defense asserted, as distinguished from mere conclusions of
fact, or conclusions of law. General allegations thata contract is valid or
legal, or is just, fair, and reasonable, are mere conclusions of law.
Likewise, allegations that a contract is void, voidable, invalid, illegal,
ultra vires, or against public policy, without stating facts showing its
invalidity, are mere conclusions of law.39 (Emphases supplied)

Hence, by merely stating a legal conclusion, the Amended Complaint

presented no sufficient allegation upon which the Court could grant the
relief petitioner prayed for. Thus, said pleading should be dismissed on
the ground of failure to state cause of action, as correctly held by the
RTC.

That a copy of the Deed of Saleadverted to in the Amended Complaint

was subsequently submitted by petitioner does not warrant a different
course of action.1âwphi1 The submission of that document was made,
as it was purportedly "recently recovered," only on reconsideration
before the CA which, nonetheless, ruled against the remand of the case.
An examination of the present petition, however, reveals no counter-
argument against the foregoing actions; hence, the Court considers any
objection thereto as waived.

In any event, the Court finds the Amended Complaint’s dismissal to be

in order considering that petitioner’s cause of action had already
prescribed.

It is evident that petitioner ultimately seeks for the reconveyance to her

of the subject properties through the nullification of their supposed sale
to Gran. An action for reconveyance is one that seeks to transfer
property, wrongfully registered by another, to its rightful and legal
owner.40 Having alleged the commission of fraud by Gran in the
transfer and registration of the subject properties in her name, there
was, in effect, an implied trust created by operation of law pursuant to
Article 1456 of the Civil Code which provides:

Art. 1456. If property is acquired through mistake or fraud, the person

obtaining it is, by force of law, considered a trustee of an implied trust
for the benefit of the person from whom the property comes.1âwphi1

To determine when the prescriptive period commenced in an action for

reconveyance, the plaintiff’s possession of the disputed property is
material. If there is an actual need to reconvey the property as when the
plaintiff is not in possession, the action for reconveyance based on
implied trust prescribes in ten (10) years, the reference point being the
date of registration of the deed or the issuance of the title. On the other
hand, if the real owner of the property remains in possession of the
property, the prescriptive period to recover titleand possession of the
property does not run against him and in such case,the action for
reconveyance would be in the nature of a suit for quieting of title which
is imprescriptible.41

In the case at bar, a reading ofthe allegations of the Amended

Complaint failed to show that petitioner remained in possession of the
subject properties in dispute. On the contrary, it can be reasonably
deduced that it was Gran who was in possession ofthe subject
properties, there being an admission by the petitioner that the property
covered by TCT No. 224174 was being used by Gran’s mother-in-
law.42 In fact, petitioner’s relief in the Amended Complaint for the
"surrender" of three (3) properties to her bolsters such stance. 43 And
since the new titles tothe subject properties in the name of Gran were
issued by the Registry of Deeds of Marikina on the following dates:
TCT No. 224174 on July 27, 1992, 44 TCT No. N-5500 on January 29,
1976,45 and TCT No. N-4234 on November 26, 1975,46 the filing of the
petitioner’s complaint beforethe RTC on January 9, 2006 was obviously
beyond the ten-year prescriptive period, warranting the Amended
Complaint’s dismissal all the same.

WHEREFORE, the petition is DENIED. The Decision dated January

10, 2011 and the Resolution dated June 22, 2011 of the Court of
Appeals in CA-G.R. CV No. 87849 are hereby AFFIRMEDwith
MODIFICATION in that the Amended Complaint be dismissed on the
grounds of (a) failure to state a cause of action, and (b) prescription as
herein discussed.

SO ORDERED.
REMEDIAL LAW
2.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 180321               March 20, 2013
EDITHA PADLAN, Petitioner,  Mariveles, Bataan (Stationed in Balanga, Bataan) in Civil Case No.
vs.
ELENITA DINGLASAN and FELICISIMO
DINGLASAN, Respondents.
DECISION
PERALTA, J.:
This is a petition for review on certiorari assailing the Decision 1 dated
June 29, 2007 of the Court of Appeals (CA) in CA-G.R. CV No. 86983,
and the Resolution2 dated October 23, 2007 denying petitioner's Motion
for Reconsideration.3
The factual and procedural antecedents are as follows:
Elenita Dinglasan (Elenita) was the registered owner of a parcel of land
designated as Lot No. 625 of the Limay Cadastre which is covered by
Transfer Certificate of Title (TCT) No. T-105602, with an aggregate
area of 82,972 square meters. While on board a jeepney, Elenita’s
mother, Lilia Baluyot (Lilia), had a conversation with one Maura
Passion (Maura) regarding the sale of the said property. Believing that
Maura was a real estate agent, Lilia borrowed the owner’s copy of the
TCT from Elenita and gave it to Maura. Maura then subdivided the
property into several lots from Lot No. 625-A to Lot No. 625-O, under
the name of Elenita and her husband Felicisimo Dinglasan (Felicisimo).
Through a falsified deed of sale bearing the forged signature of Elenita
and her husband Felicisimo, Maura was able to sell the lots to different
buyers. On April 26, 1990, Maura sold Lot No. 625-K to one Lorna
Ong (Lorna), who later caused the issuance of TCT No. 134932 for the
subject property under her name. A few months later, or sometime in
August 1990, Lorna sold the lot to petitioner Editha Padlan for
₱4,000.00. Thus, TCT No. 134932 was cancelled and TCT No. 137466
was issued in the name of petitioner.
After learning what had happened, respondents demanded petitioner to
surrender possession of Lot No. 625-K, but the latter refused.
Respondents were then forced to file a case before the Regional Trial
Court (RTC) of Balanga, Bataan for the Cancellation of Transfer
Certificate of Title No. 137466, docketed as Civil Case No. 438-ML.
Summons was, thereafter, served to petitioner through her mother,
Anita Padlan.
On December 13, 1999, respondents moved to declare petitioner in
default and prayed that they be allowed to present evidence ex parte. 4
On January 17, 2000, petitioner, through counsel, filed an Opposition to
Declare Defendant in Default with Motion to Dismiss Case for Lack of
Jurisdiction Over the Person of Defendant. 5 Petitioner claimed that the
court did not acquire jurisdiction over her, because the summons was
not validly served upon her person, but only by means of substituted
service through her mother. Petitioner maintained that she has long
been residing in Japan after she married a Japanese national and only
comes to the Philippines for a brief vacation once every two years.
On April 5, 2001, Charlie Padlan, the brother of petitioner, testified that
his sister is still in Japan and submitted a copy of petitioner’s passport
and an envelope of a letter that was allegedly sent by his sister.
Nevertheless, on April 5, 2001, the RTC issued an Order 6 denying
petitioner’s motion to dismiss and declared her in default. Thereafter,
trial ensued.
On July 1, 2005, the RTC rendered a Decision 7 finding petitioner to be
a buyer in good faith and, consequently, dismissed the complaint.
Not satisfied, respondents sought recourse before the CA, docketed as
CA-G.R. No. CV No. 86983.
On June 29, 2007, the CA rendered a Decision 8 in favor of the
respondent. Consequently, the CA reversed and set aside the Decision
of the RTC and ordered the cancellation of the TCT issued in the name
of Lorna and the petitioner, and the revival of respondents’ own title, to
wit:
WHEREFORE, in view of the foregoing, the Decision dated July
1, 2005 of the Regional Trial Court, Third Judicial Region, Branch 4,
438-ML is hereby REVERSED and SET ASIDE.
The Transfer Certificate of Title No. 134932 issued in the name of
Lorna Ong and Transfer Certificate of Title No. 137466 issued in the
name of defendant-appellee Editha Padlan are CANCELLED and
Transfer Certificate of Title No. 134785 in the name of the plaintiffs-
appellants is REVIVED.
SO ORDERED.9
The CA found that petitioner purchased the property in bad faith from
Lorna. The CA opined that although a purchaser is not expected to go
beyond the title, based on the circumstances surrounding the sale,
petitioner should have conducted further inquiry before buying the
disputed property. The fact that Lorna bought a 5,000-square-meter
property for only ₱4,000.00 and selling it after four months for the
same amount should have put petitioner on guard. With the submission
of the Judgment in Criminal Case No. 4326 rendered by the RTC,
Branch 2, Balanga, Bataan, entitled People of the Philippines v. Maura
Passion10 and the testimonies of respondents, the CA concluded that
respondents sufficiently established that TCT No. 134932 issued in the
name of Lorna and TCT No. 137466 issued in the name of petitioner
were fraudulently issued and, therefore, null and void.
Aggrieved, petitioner filed a Motion for Reconsideration. Petitioner
argued that not only did the complaint lacks merit, the lower court
failed to acquire jurisdiction over the subject matter of the case and the
person of the petitioner.
On October 23, 2007, the CA issued a Resolution 11 denying the motion.
The CA concluded that the rationale for the exception made in the
landmark case of Tijam v. Sibonghanoy12 was present in the case. It
reasoned that when the RTC denied petitioner’s motion to dismiss the
case for lack of jurisdiction, petitioner neither moved for a
reconsideration of the order nor did she avail of any remedy provided
by the Rules. Instead, she kept silent and only became interested in the
case again when the CA rendered a decision adverse to her claim.
Hence, the petition assigning the following errors:
I
WHETHER OR NOT THE HONORABLE COURT HAS
JURISDICTION OVER THE PERSON OF THE PETITIONER.
II
WHETHER OR NOT THE HONORABLE COURT HAS
JURISDICTION OVER THE SUBJECT MATTER OF THE CASE.
III
WHETHER OR NOT PETITIONER IS A BUYER IN GOOD FAITH
AND FOR VALUE.13
Petitioner maintains that the case of Tijam v. Sibonghanoy finds no
application in the case at bar, since the said case is not on all fours with
the present case. Unlike in Tijam, wherein the petitioner therein
actively participated in the proceedings, petitioner herein asserts that
she did not participate in any proceedings before the RTC because she
was declared in default.
Petitioner insists that summons was not validly served upon her,
considering that at the time summons was served, she was residing in
Japan. Petitioner contends that pursuant to Section 15, Rule 14 of the
Rules of Civil Procedure, when the defendant does not reside in the
Philippines and the subject of the action is property within the
Philippines of the defendant, service may be effected out of the
Philippines by personal service or by publication in a newspaper of
general circulation. In this case, summons was served only by
substituted service to her mother. Hence, the court did not acquire
jurisdiction over her person.
Also, petitioner posits that the court lacks jurisdiction of the subject
matter, considering that from the complaint, it can be inferred that the
value of the property was only ₱4,000.00, which was the amount
alleged by respondents that the property was sold to petitioner by
Lorna.
Finally, petitioner stresses that she was a buyer in good faith. It was
Maura who defrauded the respondents by selling the property to Lorna
without their authority.
Respondents, on the other hand, argue that the CA was correct in ruling
in their favor.
The petition is meritorious.
Respondents filed the complaint in 1999, at the time Batas Pambansa
Blg. (BP) 129, the Judiciary Reorganization Act of 1980, was already
amended by Republic Act (RA) No. 7691, An Act Expanding the
Jurisdiction of the Metropolitan Trial Courts, Municipal Trial Courts,
and Municipal Circuit Trial Courts, amending for the purpose BP Blg.
129.14
Section 1 of RA 7691, amending BP Blg. 129, provides that the RTC
shall exercise exclusive original jurisdiction on the following actions:
Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as
the "Judiciary Reorganization Act of 1980," is hereby amended to read
as follows:
Sec. 19. Jurisdiction in civil cases. – Regional Trial Courts shall
exercise exclusive original jurisdiction:
(1) In all civil actions in which the subject of the litigation is incapable
of pecuniary estimation;
(2) In all civil actions which involve the title to, or possession of, real
property, or any interest therein, where the assessed value of the
property involved exceeds Twenty Thousand Pesos (₱20,000.00) or for
civil actions in Metro Manila, where such value exceeds Fifty
Thousand Pesos (₱50,000.00), except actions for forcible entry into and
unlawful detainer of lands or buildings, original jurisdiction over which
is conferred upon the Metropolitan Trial Courts, Municipal Trial
Courts, and Municipal Circuit Trial Courts; x x x
Section 3 of RA 7691 expanded the exclusive original jurisdiction of
the first level courts, thus:
Section 3. Section 33 of the same law BP Blg. 129 is hereby amended
to read as follows:
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial
Courts and Municipal Circuit Trial Courts in Civil Cases. –
Metropolitan Trial Courts, Municipal Trial Courts, and Municipal
Circuit Trial Courts shall exercise:
xxxx
(3) Exclusive original jurisdiction in all civil actions which involve title
to, or possession of, real property, or any interest therein where the
assessed value of the property or interest therein does not exceed
Twenty Thousand Pesos (₱20,000.00) or, in civil actions in Metro
Manila, where such assessed value does not exceed Fifty Thousand
Pesos (₱50,000.00) exclusive of interest, damages of whatever kind,
attorney's fees, litigation expenses and costs: Provided, That in cases of
land not declared for taxation purposes, the value of such property shall
be determined by the assessed value of the adjacent lots.
Respondents filed their Complaint with the RTC; hence, before
proceeding any further with any other issues raised by the petitioner, it
is essential to ascertain whether the RTC has jurisdiction over the
subject matter of this case based on the above-quoted provisions.
However, in order to determine which court has jurisdiction over the
action, an examination of the complaint is essential. Basic as a
hornbook principle is that jurisdiction over the subject matter of a case
is conferred by law and determined by the allegations in the complaint
which comprise a concise statement of the ultimate facts constituting
the plaintiff's cause of action. The nature of an action, as well as which
court or body has jurisdiction over it, is determined based on the
allegations contained in the complaint of the plaintiff, irrespective of
whether or not the plaintiff is entitled to recover upon all or some of the
claims asserted therein. The averments in the complaint and the
character of the relief sought are the ones to be consulted. Once vested
by the allegations in the complaint, jurisdiction also remains vested
irrespective of whether or not the plaintiff is entitled to recover upon all
or some of the claims asserted therein.15
What determines the jurisdiction of the court is the nature of the action
pleaded as appearing from the allegations in the complaint. The
averments therein and the character of the relief sought are the ones to
be consulted.16
Respondents’ Complaint17 narrates that they are the duly registered
owners of Lot No. 625 of the Limay Cadastre which was covered by
TCT No. T-105602. Without their knowledge and consent, the land was
divided into several lots under their names through the fraudulent
manipulations of Maura. One of the lots was Lot 625-K, which was
covered by TCT No. 134785. On April 26, 1990, Maura sold the
subject lot to Lorna. By virtue of the fictitious sale, TCT No. 134785
was cancelled and TCT No. 134932 was issued in the name of Lorna.
Sometime in August 1990, Lorna sold the lot to petitioner for a
consideration in the amount of ₱4,000.00. TCT No. 134932 was later
cancelled and TCT No. 137466 was issued in the name of petitioner.
Despite demands from the respondents, petitioner refused to surrender
possession of the subject property. Respondents were thus constrained
to engage the services of a lawyer and incur expenses for litigation.
Respondents prayed for the RTC (a) to declare TCT No. 137466 null
and to revive TCT No. T-105602 which was originally issued and
registered in the name of the respondents; and (b) to order petitioner to
pay attorney’s fees in the sum of ₱50,000.00 and litigation expenses of
₱20,000.00, plus cost of suit.18
An action "involving title to real property" means that the plaintiff's
cause of action is based on a claim that he owns such property or that
he has the legal rights to have exclusive control, possession, enjoyment,
or disposition of the same. Title is the "legal link between (1) a person
who owns property and (2) the property itself." "Title" is different from
a "certificate of title" which is the document of ownership under the
Torrens system of registration issued by the government through the
Register of Deeds. While title is the claim, right or interest in real
property, a certificate of title is the evidence of such claim. 19
In the present controversy, before the relief prayed for by the
respondents in their complaint can be granted, the issue of who between
the two contending parties has the valid title to the subject lot must first
be determined before a determination of who between them is legally
entitled to the certificate of title covering the property in
question.1âwphi1
From the Complaint, the case filed by respondent is not simply a case
for the cancellation of a particular certificate of title and the revival of
another. The determination of such issue merely follows after a court of
competent jurisdiction shall have first resolved the matter of who
between the conflicting parties is the lawful owner of the subject
property and ultimately entitled to its possession and enjoyment. The
action is, therefore, about ascertaining which of these parties is the
lawful owner of the subject lot, jurisdiction over which is determined
by the assessed value of such lot.20
In no uncertain terms, the Court has already held that a complaint must
allege the assessed value of the real property subject of the complaint or
the interest thereon to determine which court has jurisdiction over the
action.21In the case at bar, the only basis of valuation of the subject
property is the value alleged in the complaint that the lot was sold by
Lorna to petitioner in the amount of ₱4,000.00. No tax declaration was
even presented that would show the valuation of the subject property. In
fact, in one of the hearings, respondents’ counsel informed the court
that they will present the tax declaration of the property in the next
hearing since they have not yet obtained a copy from the Provincial
Assessor’s Office.22 However, they did not present such copy.

To reiterate, where the ultimate objective of the plaintiffs is to obtain

title to real property, it should be filed in the proper court having
jurisdiction over the assessed value of the property subject
thereof.23 Since the amount alleged in the Complaint by respondents for
the disputed lot is only ₱4,000.00, the MTC and not the RTC has
jurisdiction over the action. Therefore, all proceedings in the RTC are
null and void.24

Consequently, the remaining issues raised by petitioner need not be

discussed further.

WHEREFORE, the petition is GRANTED. The Decision of the Court

of Appeals in CA-G.R. CV No. 86983, dated June 29, 2007, and its
Resolution dated October 23, 2007, are REVERSED and SET ASIDE.
The Decision of the Regional Trial Court, dated July I, 2005, is
declared NULL and VOID. The complaint in Civil Case No. 438-ML is
dismissed without prejudice.

SO ORDERED.
REMEDIAL LAW
3 The respondents filed their Answer on November 16, 2000.14
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 168979               December 2, 2013
REBECCA PACAÑA-CONTRERAS and ROSALIE
PACAÑA, Petitioners, 
vs.
ROVILA WATER SUPPLY, INC., EARL U KOKSENG, LILIA
TORRES, DALLA P. ROMANILLOS and MARISSA
GABUYA, Respondents.
DECISION
BRION, J.:
Before the Court is a petition for review on certiorari 1 under Rule 4 of
the Rules of Court seeking the reversal of the decision 2 dated January
27, 2005 and the resolution3 dated June 6, 2005 of the Courts of
Appeals (CA) in CA-G.R. SP No. 71551. The CA set aside the orders
dated February 28, 20024 and April 1, 20025 of the Regional Trial Court
(RTC), Branch 8, Cebu City, which denied the motion to dismiss for
reconsideration respectively, of respondents Rovila Water Supply, Inc.
(Rovilla, Inc.), Earl U. Kokseng, Lialia Torres, Dalla P. Romanillos and
Marissa Gabuya.
THE FACTUAL ANTECEDENTS
Petitioners Rebecca Pacaña-Contreras and Rosalie Pacaña, children of
Lourdes Teves Pacaña and Luciano Pacaña, filed the present case
against Rovila Inc., Earl, Lilia, Dalla and Marisa for accounting and
damages.6
The petitioners claimed that their family has long been known in the
community to be engaged in the water supply business; they operated
the "Rovila Water Supply" from their family residence and were
engaged in the distribution of water to customers in Cebu City. The
petitioners alleged that Lilia was a former trusted employee in the
family business who hid business records and burned and ransacked the
family files. Lilia also allegedly posted security guards and barred the
members of the Pacaña family from operating their business. She then
claimed ownership over the family business through a corporation
named "Rovila Water Supply, Inc." (Rovila Inc.) Upon inquiry with the
Securities and Exchange Commission (SEC), the petitioners claimed
that Rovila Inc. was surreptitiously formed with the respondents as the
majority stockholders. The respondents did so by conspiring with one
another and forming the respondent corporation to takeover and
illegally usurp the family business’ registered name. 7
In forming the respondent corporation, the respondents allegedly used
the name of Lourdes as one of the incorporators and made it appear in
the SEC documents that the family business was operated in a place
other than the Pacaña residence. Thereafter, the respondents used the
Pacaña family’s receipts and the deliveries and sales were made to
appear as those of the respondent Rovila Inc. Using this scheme, the
respondents fraudulently appropriated the collections and payments. 8
The petitioners filed the complaint in their own names although Rosalie
was authorized by Lourdes through a sworn declaration and special
power of attorney (SPA). The respondents filed a first motion to
dismiss on the ground that the RTC had no jurisdiction over an intra-
corporate controversy.9
The RTC denied the motion. On September 26, 2000, Lourdes
died10 and the petitioners amended their complaint, with leave of court,
on October 2, 2000 to reflect this development.11
They still attached to their amended complaint the sworn declaration
with SPA, but the caption of the amended complaint remained the
same.12
On October 10, 2000, Luciano also died.13
The petitioners’ sister, Lagrimas Pacaña-Gonzales, filed a motion for
leave to intervene and her answer-in-intervention was granted by the
trial court. At the subsequent pre-trial, the respondents manifested to
the RTC that a substitution of the parties was necessary in light of the
deaths of Lourdes and Luciano. They further stated that they would
seek the dismissal of the complaint because the petitioners are not the
real parties in interest to prosecute the case. The pre-trial pushed
through as scheduled and the RTC directed the respondents to put into
writing their earlier manifestation. The RTC issued a pre-trial order
where one of the issues submitted was whether the complaint should be
dismissed for failure to comply with Section 2, Rule 3 of the Rules of
Court which requires that every action must be prosecuted in the name
of the real party in interest.15
On January 23, 2002,16 the respondents again filed a motion to dismiss
on the grounds, among others, that the petitioners are not the real
parties in interest to institute and prosecute the case and that they have
no valid cause of action against the respondents.
THE RTC RULING
The RTC denied the respondents’ motion to dismiss. It ruled that, save
for the grounds for dismissal which may be raised at any stage of the
proceedings, a motion to dismiss based on the grounds invoked by the
respondents may only be filed within the time for, but before, the filing
of their answer to the amended complaint. Thus, even granting that the
defenses invoked by the respondents are meritorious, their motion was
filed out of time as it was filed only after the conclusion of the pre-trial
conference. Furthermore, the rule on substitution of parties only applies
when the parties to the case die, which is not what happened in the
present case.17
The RTC likewise denied the respondents’ motion for reconsideration. 18
The respondents filed a petition for certiorari under Rule 65 of the
Rules of Court with the CA, invoking grave abuse of discretion in the
denial of their motion to dismiss. They argued that the deceased
spouses Luciano and Lourdes, not the petitioners, were the real parties
in interest. Thus, the petitioners violated Section 16, Rule 3 of the Rules
of Court on the substitution of parties.19
Furthermore, they seasonably moved for the dismissal of the case 20 and
the RTC never acquired jurisdiction over the persons of the petitioners
as heirs of Lourdes and Luciano.21
THE CA RULING
The CA granted the petition and ruled that the RTC committed grave
abuse of discretion as the petitioners filed the complaint and the
amended complaint as attorneys-in-fact of their parents. As such, they
are not the real parties in interest and cannot bring an action in their
own names; thus, the complaint should be dismissed 22 pursuant to the
Court’s ruling in Casimiro v. Roque and Gonzales.23
Neither are the petitioners suing as heirs of their deceased
parents.1awp++i1 Pursuant to jurisprudence,24 the petitioners should
first be declared as heirs before they can be considered as the real
parties in interest. This cannot be done in the present ordinary civil case
but in a special proceeding for that purpose. The CA agreed with the
respondents that they alleged the following issues as affirmative
defenses in their answer: 1) the petitioners are not the real parties in
interest; and 2) that they had no legal right to institute the action in
behalf of their parents.25
That the motion to dismiss was filed after the period to file an answer
has lapsed is of no moment. The RTC judge entertained it and passed
upon its merit. He was correct in doing so because in the pre-trial order,
one of the submitted issues was whether the case must be dismissed for
failure to comply with the requirements of the Rules of Court.
Furthermore, in Dabuco v. Court of Appeals, 26 the Court held that the
ground of lack of cause of action may be raised in a motion to dismiss
at anytime.27
The CA further ruled that, in denying the motion to dismiss, the RTC
judge acted contrary to established rules and jurisprudence which may
be questioned via a petition for certiorari. The phrase "grave abuse of
discretion" which was traditionally confined to "capricious and
whimsical exercise of judgment" has been expanded to include any
action done "contrary to the Constitution, the law or jurisprudence[.]" 28
THE PARTIES’ ARGUMENTS
The petitioners filed the present petition and argued that, first, in
annulling the interlocutory orders, the CA unjustly allowed the motion
to dismiss which did not conform to the rules.29
Specifically, the motion was not filed within the time for, but before the
filing of, the answer to the amended complaint, nor were the grounds
raised in the answer. Citing Section 1, Rule 9 of the Rules of Court, the
respondents are deemed to have waived these grounds, as correctly held
by the RTC.30
Second, even if there is non-joinder and misjoinder of parties or that the
suit is not brought in the name of the real party in interest, the remedy is
not outright dismissal of the complaint, but its amendment to include
the real parties in interest.31
Third, the petitioners sued in their own right because they have actual
and substantial interest in the subject matter of the action as heirs or co-
owners, pursuant to Section 2, Rule 3 of the Rules of Court. 32
Their declaration as heirs in a special proceeding is not necessary,
pursuant to the Court’s ruling in Marabilles, et al. v. Quito. 33
Finally, the sworn declaration is evidentiary in nature which remains to
be appreciated after the trial is completed. 34
The respondents reiterated in their comment that the petitioners are not
the real parties in interest.35
They likewise argued that they moved for the dismissal of the case
during the pre-trial conference due to the petitioners’ procedural lapse
in refusing to comply with a condition precedent, which is, to substitute
the heirs as plaintiffs. Besides, an administrator of the estates of
Luciano and Lourdes has already been appointed. 36
The respondents also argued that the grounds invoked in their motion to
dismiss were timely raised, pursuant to Section 2, paragraphs g and i,
Rule 18 of the Rules of Court. Specifically, the nature and purposes of
the pre-trial include, among others, the dismissal of the action, should a
valid ground therefor be found to exist; and such other matters as may
aid in the prompt disposition of the action. Finally, the special civil
action of certiorari was the proper remedy in assailing the order of the
RTC.37
THE COURT’S RULING
We find the petition meritorious.
Petition for certiorari under Rule 65 is a proper remedy for a denial of a
motion to dismiss attended by grave abuse of discretion
In Barrazona v. RTC, Branch 61, Baguio City, 38 the Court held that
while an order denying a motion to dismiss is interlocutory and non-
appealable, certiorari and prohibition are proper remedies to address an
order of denial made without or in excess of jurisdiction. The writ of
certiorari is granted to keep an inferior court within the bounds of its
jurisdiction or to prevent it from committing grave abuse of discretion
amounting to lack or excess of jurisdiction.
The history and development of the ground "fails to state a cause of
action" in the 1940, 1964 and the present 1997 Rules of Court
Preliminarily, a suit that is not brought in the name of the real party in
interest is dismissible on the ground that the complaint "fails to state a
cause of action."39
Pursuant to jurisprudence,40 this is also the ground invoked when the
respondents alleged that the petitioners are not the real parties in
interest because: 1) the petitioners should not have filed the case in their
own names, being merely attorneys-in-fact of their mother; and 2) the
petitioners should first be declared as heirs. A review of the 1940, 1964
and the present 1997 Rules of Court shows that the fundamentals of the
ground for dismissal based on "failure to state a cause of action" have
drastically changed over time. A historical background of this particular
ground is in order to preclude any confusion or misapplication of
jurisprudence decided prior to the effectivity of the present Rules of
Court. The 1940 Rules of Court provides under Section 10, Rule 9 that:
Section 10. Waiver of defenses- Defenses and objections not pleaded
either in a motion to dismiss or in the answer are deemed waived;
except the defense of failure to state a cause of action, which may be
alleged in a later pleading, if one is permitted, or by motion for
judgment on the pleadings, or at the trial on the merits; but in the last
instance, the motion shall be disposed of as provided in section 5 of
Rule 17 in the light of any evidence which may have been received.
Whenever it appears that the court has no jurisdiction over the subject-
matter, it shall dismiss the action. [underscoring supplied]
This provision was essentially reproduced in Section 2, Rule 9 of the
1964 Rules of Court, and we quote:
Section 2. Defenses and objections not pleaded deemed waived. —
Defenses and objections not pleaded either in a motion to dismiss or in
the answer are deemed waived; except the failure to state a cause of
action which may be alleged in a later pleading, if one is permitted, or
by motion for judgment on the pleadings, or at the trial on the merits;
but in the last instance, the motion shall be disposed of as provided in
section 5 of Rule 10 in the light of any evidence which may have been
received. Whenever it appears that the court has no jurisdiction over the
subject-matter, it shall dismiss the action. [underscoring supplied]
Under the present Rules of Court, this provision was reflected in
Section 1, Rule 9, and we quote:
Section 1. Defenses and objections not pleaded. — Defenses and
objections not pleaded either in a motion to dismiss or in the answer are
deemed waived. However, when it appears from the pleadings or the
evidence on record that the court has no jurisdiction over the subject
matter, that there is another action pending between the same parties for
the same cause, or that the action is barred by a prior judgment or by
statute of limitations, the court shall dismiss the claim. [underscoring
supplied]
Notably, in the present rules, there was a deletion of the ground of
"failure to state a cause of action" from the list of those which may be
waived if not invoked either in a motion to dismiss or in the answer.
Another novelty introduced by the present Rules, which was totally
absent in its two precedents, is the addition of the period of time within
which a motion to dismiss should be filed as provided under Section 1,
Rule 16 and we quote:
Section 1. Grounds. — Within the time for but before filing the answer
to the complaint or pleading asserting a claim, a motion to dismiss may
be made on any of the following grounds: xxx [underscoring supplied]
All these considerations point to the legal reality that the new Rules
effectively restricted the dismissal of complaints in general, especially
when what is being invoked is the ground of "failure to state a cause of
action." Thus, jurisprudence governed by the 1940 and 1964 Rules of
Court to the effect that the ground for dismissal based on failure to state
a cause of action may be raised anytime during the proceedings, is
already inapplicable to cases already governed by the present Rules of
Court which took effect on July 1, 1997. As the rule now stands, the
failure to invoke this ground in a motion to dismiss or in the answer
would result in its waiver. According to Oscar M. Herrera, 41 the reason
for the deletion is that failure to state a cause of action may be cured
under Section 5, Rule 10 and we quote:
Section 5. Amendment to conform to or authorize presentation of
evidence. — When issues not raised by the pleadings are tried with the
express or implied consent of the parties they shall be treated in all
respects as if they had been raised in the pleadings. Such amendment of
the pleadings as may be necessary to cause them to conform to the
evidence and to raise these issues may be made upon motion of any
party at any time, even after judgment; but failure to amend does not
effect the result of the trial of these issues. If evidence is objected to at
the trial on the ground that it is not within the issues made by the
pleadings, the court may allow the pleadings to be amended and shall
do so with liberality if the presentation of the merits of the action and
the ends of substantial justice will be subserved thereby. The court may
grant a continuance to enable the amendment to be made.
With this clarification, we now proceed to the substantial issues of the
petition.1âwphi1
The motion to dismiss in the present case based on failure to state a
cause of action was not timely filed and was thus waived
Applying Rule 16 of the Rules of Court which provides for the grounds
for the dismissal of a civil case, the respondents’ grounds for dismissal
fall under Section 1(g) and (j), Rule 16 of the Rules of Court,
particularly, failure to state a cause of action and failure to comply with
a condition precedent (substitution of parties), respectively. The first
paragraph of Section 1,42
Rule 16 of the Rules of Court provides for the period within which to
file a motion to dismiss under the grounds enumerated. Specifically, the
motion should be filed within the time for, but before the filing of, the
answer to the complaint or pleading asserting a claim. Equally
important to this provision is Section 1,43
Rule 9 of the Rules of Court which states that defenses and objections
not pleaded either in a motion to dismiss or in the answer are deemed
waived, except for the following grounds: 1) the court has no
jurisdiction over the subject matter; 2) litis pendencia; 3) res judicata;
and 4) prescription. Therefore, the grounds not falling under these four
exceptions may be considered as waived in the event that they are not
timely invoked. As the respondents’ motion to dismiss was based on the
grounds which should be timely invoked, material to the resolution of
this case is the period within which they were raised. Both the RTC and
the CA found that the motion to dismiss was only filed after the filing
of the answer and after the pre-trial had been concluded. Because there
was no motion to dismiss before the filing of the answer, the
respondents should then have at least raised these grounds as
affirmative defenses in their answer. The RTC’s assailed orders did not
touch on this particular issue but the CA ruled that the respondents did,
while the petitioners insist that the respondents did not. In the present
petition, the petitioners reiterate that there was a blatant non-observance
of the rules when the respondents did not amend their answer to invoke
the grounds for dismissal which were raised only during the pre-trial
and, subsequently, in the subject motion to dismiss.44
The divergent findings of the CA and the petitioners’ arguments are
essentially factual issues. Time and again, we have held that the
jurisdiction of the Court in a petition for review on certiorari under Rule
45, such as the present case, is limited only to questions of law, save for
certain exceptions. One of these is attendant herein, which is, when the
findings are conclusions without citation of specific evidence on which
they are based.45
In the petition filed with the CA, the respondents made a passing
allegation that, as affirmative defenses in their answer, they raised the
issue that the petitioners are not the real parties in interest. 46
On the other hand, the petitioners consistently argued otherwise in their
opposition47 to the motion to dismiss, and in their comment48 and in
their memorandum49 on the respondents’ petition before the CA. Our
examination of the records shows that the CA had no basis in its finding
that the respondents alleged the grounds as affirmative defenses in their
answer. The respondents merely stated in their petition for certiorari
that they alleged the subject grounds in their answer. However,
nowhere in the petition did they support this allegation; they did not
even attach a copy of their answer to the petition. It is basic that the
respondents had the duty to prove by substantial evidence their positive
assertions. Considering that the petition for certiorari is an original and
not an appellate action, the CA had no records of the RTC’s
proceedings upon which the CA could refer to in order to validate the
respondents’ claim. Clearly, other than the respondents’ bare
allegations, the CA had no basis to rule, without proof, that the
respondents alleged the grounds for dismissal as affirmative defenses in
the answer. The respondents, as the parties with the burden of proving
that they timely raised their grounds for dismissal, could have at least
attached a copy of their answer to the petition. This simple task they
failed to do. That the respondents did not allege in their answer the
subject grounds is made more apparent through their argument, both in
their motion to dismiss50 and in their comment, 51 that it was only during
the pre-trial stage that they verbally manifested and invited the attention
of the lower court on their grounds for dismissal. In order to justify
such late invocation, they heavily relied on Section 2(g) and (i), Rule
1852 of the Rules of Court that the nature and purpose of the pre-trial
include, among others, the propriety of dismissing the action should
there be a valid ground therefor and matters which may aid in the
prompt disposition of the action. The respondents are not correct. The
rules are clear and require no interpretation. Pursuant to Section 1, Rule
9 of the Rules of Court, a motion to dismiss based on the grounds
invoked by the respondents may be waived if not raised in a motion to
dismiss or alleged in their answer. On the other hand, "the pre-trial is
primarily intended to make certain that all issues necessary to the
disposition of a case are properly raised. The purpose is to obviate the
element of surprise, hence, the parties are expected to disclose at the
pre-trial conference all issues of law and fact which they intend to raise
at the trial, except such as may involve privileged or impeaching
matter."53
The issues submitted during the pre-trial are thus the issues that would
govern the trial proper. The dismissal of the case based on the grounds
invoked by the respondents are specifically covered by Rule 16 and
Rule 9 of the Rules of Court which set a period when they should be
raised; otherwise, they are deemed waived.
The Dabuco ruling is inapplicable in the present case; the ground for
dismissal "failure to state a cause of action" distinguished from "lack of
cause of action"
To justify the belated filing of the motion to dismiss, the CA reasoned
out that the ground for dismissal of "lack of cause of action" may be
raised at any time during the proceedings, pursuant to Dabuco v. Court
of Appeals.54
This is an erroneous interpretation and application of Dabuco as will be
explained below.
First, in Dabuco, the grounds for dismissal were raised as affirmative
defenses in the answer which is in stark contrast to the present case.
Second, in Dabuco, the Court distinguished between the dismissal of
the complaint for "failure to state a cause of action" and "lack of cause
of action." The Court emphasized that in a dismissal of action for lack
of cause of action, "questions of fact are involved, [therefore,] courts
hesitate to declare a plaintiff as lacking in cause of action. Such
declaration is postponed until the insufficiency of cause is apparent
from a preponderance of evidence.
Usually, this is done only after the parties have been given the
opportunity to present all relevant evidence on such questions of fact." 55
In fact, in Dabuco, the Court held that even the preliminary hearing on
the propriety of lifting the restraining order was declared insufficient
for purposes of dismissing the complaint for lack of cause of action.
This is so because the issues of fact had not yet been adequately
ventilated at that preliminary stage. For these reasons, the Court
declared in Dabuco that the dismissal by the trial court of the complaint
was premature. In the case of Macaslang v. Zamora, 56 the Court noted
that the incorrect appreciation by both the RTC and the CA of the
distinction between the dismissal of an action, based on "failure to state
a cause of action" and "lack of cause of action," prevented it from
properly deciding the case, and we quote:
Failure to state a cause of action and lack of cause of action are really
different from each other. On the one hand, failure to state a cause of
action refers to the insufficiency of the pleading, and is a ground for
dismissal under Rule 16 of the Rules of Court. On the other hand, lack
of cause [of] action refers to a situation where the evidence does not
prove the cause of action alleged in the pleading. Justice Regalado, a
recognized commentator on remedial law, has explained the distinction:
xxx What is contemplated, therefore, is a failure to state a cause of
action which is provided in Sec. 1(g) of Rule 16. This is a matter of
insufficiency of the pleading. Sec. 5 of Rule 10, which was also
included as the last mode for raising the issue to the court, refers to the
situation where the evidence does not prove a cause of action. This is,
therefore, a matter of insufficiency of evidence. Failure to state a cause
of action is different from failure to prove a cause of action. The
remedy in the first is to move for dismissal of the pleading, while the
remedy in the second is to demur to the evidence, hence reference to
Sec. 5 of Rule 10 has been eliminated in this section. The procedure
would consequently be to require the pleading to state a cause of action,
by timely objection to its deficiency; or, at the trial, to file a demurrer to
evidence, if such motion is warranted. [italics supplied]
Based on this discussion, the Court cannot uphold the dismissal of the
present case based on the grounds invoked by the respondents which
they have waived for failure to invoke them within the period
prescribed by the Rules. The Court cannot also dismiss the case based
on "lack of cause of action" as this would require at least a
preponderance of evidence which is yet to be appreciated by the trial
court. Therefore, the RTC did not commit grave abuse of discretion in
issuing the assailed orders denying the respondents’ motion to dismiss
and motion for reconsideration. The Court shall not resolve the merits
of the respondents’ grounds for dismissal which are considered as
waived.
Other heirs of the spouses Pacaña to be impleaded in the case.
It should be emphasized that insofar as the petitioners are concerned,
the respondents have waived the dismissal of the complaint based on
the ground of failure to state a cause of action because the petitioners
are not the real parties in interest. At this juncture, a distinction between
a real party in interest and an indispensable party is in order. In
Carandang v. Heirs of de Guzman, et al., 57 the Court clarified these two
concepts and held that "[a] real party in interest is the party who stands
to be benefited or injured by the judgment of the suit, or the party
entitled to the avails of the suit. On the other hand, an indispensable
party is a party in interest without whom no final determination can be
had of an action, in contrast to a necessary party, which is one who is
not indispensable but who ought to be joined as a party if complete
relief is to be accorded as to those already parties, or for a complete
determination or settlement of the claim subject of the action. xxx If a
suit is not brought in the name of or against the real party in interest, a
motion to dismiss may be filed on the ground that the complaint states
no cause of action. However, the dismissal on this ground entails an
examination of whether the parties presently pleaded are interested in
the outcome of the litigation, and not whether all persons interested in
such outcome are actually pleaded. The latter query is relevant in
discussions concerning indispensable and necessary parties, but not in
discussions concerning real parties in interest. Both indispensable and
necessary parties are considered as real parties in interest, since both
classes of parties stand to be benefited or injured by the judgment of the
suit."
At the inception of the present case, both the spouses Pacaña were not
impleaded as parties-plaintiffs. The Court notes, however, that they are
indispensable parties to the case as the alleged owners of Rovila Water
Supply. Without their inclusion as parties, there can be no final
determination of the present case. They possess such an interest in the
controversy that a final decree would necessarily affect their rights, so
that the courts cannot proceed without their presence. Their interest in
the subject matter of the suit and in the relief sought is inextricably
intertwined with that of the other parties.58
Jurisprudence on the procedural consequence of the inclusion or non-
inclusion of an indispensable party is divided in our jurisdiction. Due to
the non-inclusion of indispensable parties, the Court dismissed the case
in Lucman v. Malawi, et al. 59 and Go v. Distinction Properties
Development Construction, Inc.,60 while in Casals, et al. v. Tayud Golf
and Country Club et al.,61 the Court annulled the judgment which was
rendered without the inclusion of the indispensable parties. In Arcelona
et al. v. Court of Appeals62 and Bulawan v. Aquende, 63 and
Metropolitan Bank & Trust Company v. Alejo et al. 64 the Court ruled
that the burden to implead or order the impleading of an indispensable
party rests on the plaintiff and on the trial court, respectively. Thus, the
non-inclusion of the indispensable parties, despite notice of this
infirmity, resulted in the annulment of these cases. In Plasabas, et al. v.
Court of Appeals, et al., 65 the Court held that the trial court and the CA
committed reversible error when they summarily dismissed the case,
after both parties had rested their cases following a protracted trial, on
the sole ground of failure to implead indispensable parties. Non-joinder
of indispensable parties is not a ground for the dismissal of an action.
The remedy is to implead the non-party claimed to be indispensable.
However, in the cases of Quilatan, et al. v. Heirs of Quilatan, et
al.66 and Lagunilla, et al. v. Monis, et al., 67 the Court remanded the case
to the RTC for the impleading of indispensable parties. On the other
hand, in Lotte Phil. Co., Inc. v. Dela Cruz, 68PepsiCo, Inc. v. Emerald
Pizza, 69 and Valdez Tallorin, v. Heirs of Tarona, et al., 70 the Court
directly ordered that the indispensable parties be impleaded. Mindful of
the differing views of the Court as regards the legal effects of the non-
inclusion of indispensable parties, the Court clarified in Republic of the
Philippines v. Sandiganbayan, et al.,71that the failure to implead
indispensable parties is a curable error and the foreign origin of our
present rules on indispensable parties permitted this corrective measure.
This cited case held:
Even in those cases where it might reasonably be argued that the failure
of the Government to implead the sequestered corporations as
defendants is indeed a procedural aberration xxx, slight reflection
would nevertheless lead to the conclusion that the defect is not fatal, but
one correctible under applicable adjective rules – e.g., Section 10, Rule
5 of the Rules of Court [specifying the remedy of amendment during
trial to authorize or to conform to the evidence]; Section 1, Rule 20
[governing amendments before trial], in relation to the rule respecting
omission of so-called necessary or indispensable parties, set out in
Section 11, Rule 3 of the Rules of Court. It is relevant in this context to
advert to the old familiar doctrines that the omission to implead such
parties "is a mere technical defect which can be cured at any stage of
the proceedings even after judgment"; and that, particularly in the case
of indispensable parties, since their presence and participation is
essential to the very life of the action, for without them no judgment
may be rendered, amendments of the complaint in order to implead
them should be freely allowed, even on appeal, in fact even after
rendition of judgment by this Court, where it appears that the complaint
otherwise indicates their identity and character as such indispensable
parties." Although there are decided cases wherein the non-joinder of
indispensable parties in fact led to the dismissal of the suit or the
annulment of judgment, such cases do not jibe with the matter at hand.
The better view is that non-joinder is not a ground to dismiss the suit or
annul the judgment. The rule on joinder of indispensable parties is
founded on equity. And the spirit of the law is reflected in Section 11,
Rule 3 of the 1997 Rules of Civil Procedure. It prohibits the dismissal
of a suit on the ground of non-joinder or misjoinder of parties and
allows the amendment of the complaint at any stage of the proceedings,
through motion or on order of the court on its own initiative. Likewise,
jurisprudence on the Federal Rules of Procedure, from which our
Section 7, Rule 3 on indispensable parties was copied, allows the
joinder of indispensable parties even after judgment has been entered if
such is needed to afford the moving party full relief. Mere delay in
filing the joinder motion does not necessarily result in the waiver of the
right as long as the delay is excusable.
In Galicia, et al. v. Vda. De Mindo, et al., 72 the Court ruled that in line
with its policy of promoting a just and inexpensive disposition of a
case, it allowed the intervention of the indispensable parties instead of
dismissing the complaint. Furthermore, in Commissioner Domingo v.
Scheer,73 the Court cited Salvador, et al. v. Court of Appeals, et al. 74 and
held that the Court has full powers, apart from that power and authority
which are inherent, to amend the processes, pleadings, proceedings and
decisions by substituting as party-plaintiff the real party in interest. The
Court has the power to avoid delay in the disposition of this case, and to
order its amendment in order to implead an indispensable party. With
these discussions as premises, the Court is of the view that the proper
remedy in the present case is to implead the indispensable parties
especially when their non-inclusion is merely a technical defect. To do
so would serve proper administration of justice and prevent further
delay and multiplicity of suits. Pursuant to Section 9, Rule 3 of the
Rules of Court, parties may be added by order of the court on motion of
the party or on its own initiative at any stage of the action. If the
plaintiff refuses to implead an indispensable party despite the order of
the court, then the court may dismiss the complaint for the plaintiff’s
failure to comply with a lawful court order.75
The operative act that would lead to the dismissal of the case would be
the refusal to comply with the directive of the court for the joinder of an
indispensable party to the case.76

Obviously, in the present case, the deceased Pacañas can no longer be

included in the complaint as indispensable parties because of their death
during the pendency of the case. Upon their death, however, their
ownership and rights over their properties were transmitted to their
heirs, including herein petitioners, pursuant to Article 774 77 in relation
with Article 77778 of the Civil Code.

In Orbeta, et al. v. Sendiong, 79 the Court acknowledged that the heirs,

whose hereditary rights are to be affected by the case, are deemed
indispensable parties who should have been impleaded by the trial
court. Therefore, to obviate further delay in the proceedings of the
present case and given the Court’s authority to order the inclusion of an
indispensable party at any stage of the proceedings, the heirs of the
spouses Pacaña, except the petirioners who are already parties to the
case are Lagrimas Pacaña-Gonzalez who intervened in the case, are
hereby ordered impleaded as parties-plaintiffs.

WHEREFORE, the petition is GRANTED. The decision dated January

27, 2005 and the resolution date June 6, 2005 of the Court of Appeals in
CA-G.R. SP No. 71551 are REVERSED and SET ASIDE. The heirs of
the spouses Luciano and Lourdes Pacaña, except herein petitioner and
Lagrimas Pacaña-Gonzalez, are ORDERED IMPLEADED as parties
plaintiffs and the RTC is directed tp proceed with the trial of the case
with DISPATCH.

SO ORDERED.

SECOND DIVISION

January 27, 2016

G.R. No. 217694

FAIRLAND KNITCRAFT CORPORATION, Petitioner,  where a defendant failed to file his answer, there was no need for a
vs.
ARTURO LOO PO, Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari1 seeking to reverse and set
aside the October 31, 2014 Decision 2 and the March 6, 2015
Resolution3 of the Court of Appeals (CA), in CA-G.R. SP No. 134701
which affirmed the September 16, 2013 Decision4 of the Regional Trial
Court of Pasig City, Branch 67 (RTC) in SCA Case No. 3831. The RTC
decision, in turn, sustained the March 21, 2013 Decision 5 of the
Metropolitan Trial Court, Branch 72, Pasig City (MeTC), which
dismissed the unlawful detainer case filed by petitioner Fairland
Knitcraft Corporation (Fairland) against respondent Arturo Loo
Po (Po) for failure to prove its case by preponderance of evidence.
The Antecedents
In a complaint6 for unlawful detainer, docketed as Civil Case No.
19429, filed before the MeTC, Fairland alleged that it was the owner of
Condominium Unit No. 205 in Cedar Mansion II on Ma. Escriba Street,
Pasig City. The said unit was leased by Fairland to Po by verbal
agreement, with a rental fee of P20,000.00 a month, to be paid by Po at
the beginning of each month. From March 2011, Po had continuously
failed to pay rent. For said reason, Fairland opted not to renew the lease
agreement anymore.
On January 30, 2012, Fairland sent a formal letter 7 to Po demanding
that he pay the amount of P220,000.00, representing the rental arrears,
and that he vacate the leased premises within fifteen (15) days from the
receipt of the letter. Despite receipt of the demand letter and the lapse
of the said 15-day period to comply, Po neither tendered payment for
the unpaid rent nor vacated the premises. Thus, on December 12, 2012,
Fairland was constrained to file the complaint for unlawful detainer
before the MeTC. Po had until January 7, 2013 to file his answer but he
failed to do so. Hence, on February 6, 2013, Fairland filed a motion to
render judgment.8
In its February 21, 2013 Order, 9 the MeTC considered the case
submitted for decision.
On March 1, 2013, Po’s counsel filed his Entry of Appearance with
Motion for Leave of Court to file Comment/Opposition to Motion to
Render Judgment.10 In the attached Comment/Opposition, Po denied the
allegations against him and commented that there was no supporting
document that would show that Fairland owned the property; that there
was no lease contract between them; that there were no documents
attached to the complaint which would show that previous demands had
been made and received by him; that the alleged unpaid rental was
P220,000.00, but the amount of damages being prayed for was
P440,000.00; that the issue in the case was one of ownership; and that it
was the RTC which had jurisdiction over the case.
The MeTC treated the comment/opposition as Po’s answer to the
complaint. Considering, however, that the case fell under the Rules of
Summary Procedure, the same was deemed filed out of time. Hence, the
motion was denied.11
The Ruling of the Metropolitan Trial Court
In its March 21, 2013 Decision, the MeTC dismissed the complaint for
lack of merit due to Fairland’s failure to prove its claim by
preponderance of evidence. The MeTC explained that although the
complaint sufficiently alleged a cause of action, Fairland failed to prove
that it was entitled to the possession of the subject property. There was
no evidence presented to support its claim against Po either.
Aggrieved, Fairland seasonably filed its appeal before the RTC under
Rule 40 of the Rules of Court. Being an appealed case, the RTC
required the parties to submit their respective memoranda.
In its memorandum,12 Fairland argued that an unlawful detainer case
was a special civil action governed by summary procedure. In cases
declaration of default. Fairland claimed that the Rules stated that in
such cases, judgment should be based on the “facts alleged in the
complaint,”13 and that there was no requirement that judgment must be
based on facts proved by preponderance of evidence. Considering that
the presentation of evidence was not required when a defendant in an
ejectment case failed to appear in a preliminary conference, the same
should be applied when no answer had been filed.
Fairland continued that the failure to file an answer in an ejectment case
was tantamount to an admission by the defendant of all the ultimate
facts alleged in the complaint. There was no more need for evidence in
such a situation as every allegation of ultimate facts in the complaint
was deemed established by the defendant’s acquiescence.
On July 18, 2013, Po filed his memorandum14 and countered that there
was no merit in Fairland’s insistence that evidence was unnecessary
when no answer had been filed. The facts stated in the complaint did
not warrant a rendition of judgment in the plaintiff’s favor. The court
had the discretion to rule on the pleadings based on its evaluation of the
allegation of facts.
Further, all the statements in the complaint were mere allegations which
were not substantiated by any competent evidence. Po asserted that
there was no proof presented to show that the subject property was
indeed owned by Fairland; that there was no lease contract between the
parties; that he never received the demand letter, dated January 30,
2012; and that the amount stated in the prayer of the complaint did not
coincide with the amount of unpaid rent. Po also reiterated that the case
involved an issue of ownership over the condominium unit he was
occupying.
The Ruling of the Regional Trial Court
On September 16, 2013, the RTC affirmed the MeTC ruling and agreed
that Fairland failed to establish its case by preponderance of evidence.
There was nothing on record that would establish Fairland’s right over
the property subject of the complaint. Though it had been consistently
ruled that the only issue for resolution in an ejectment case was the
physical or material possession of the property involved, independent of
any claim of ownership by any of the party-litigants, the court may go
beyond the question of physical possession provisionally. The RTC
concluded that even assuming that Po was not the lawful owner, his
actual physical possession of the subject property created the
presumption that he was entitled to its possession thereof.
Fairland filed a motion for reconsideration 15 attaching its condominium
certificate of title16 over the subject property, but it was denied by the
RTC in its Order,17 dated February 24, 2014.
Undaunted, Fairland filed a petition for review 18 under Rule 42 of the
Rules of Court before the CA.
The Ruling of the Court of Appeals
In the assailed Decision, dated October 31, 2014, the CA dismissed the
petition and ruled that an action for unlawful detainer would not lie
against Po. Notwithstanding the abbreviated proceeding it ordained and
the limited pleadings it allowed, the Rules on Summary Procedure did
not relax the rules on evidence. In order for an action for recovery of
possession to prosper, it was indispensable that he who brought the
action should prove not only his ownership but also the identity of the
property claimed. The CA concluded, however, that Fairland failed to
discharge such bounden duty.
Fairland filed its motion for reconsideration, but it was denied by the
CA in its assailed Resolution, dated March 6, 2015.
Hence, this petition.
ARGUMENTS/DISCUSSIONS
I
IN AN EJECTMENT CASE WHEREIN NO ANSWER WAS
SEASONABLY FILED, IT IS AN ERROR OF LAW TO BASE
JUDGMENT ON PREPONDERANCE OF EVIDENCE
II
HOLDING THAT EVIDENCE IN AN EJECTMENT CASE
SHOULD HAVE BEEN ATTACHED TO THE COMPLAINT IS
AN ERROR OF LAW.19
Fairland argues that in ejectment cases, presentation of evidence was
undertaken through the submission of position papers but the same was
dispensed with when the defendant failed to file an answer or when
either party failed to appear during the preliminary conference. In an
ejectment case, the scope of inquiry should be limited to the sufficiency
of the cause of action stated in the complaint when no seasonable
answer was filed. The attachment of documentary evidence to the
Complaint was not a requirement and was even proscribed by law.
20
In his Comment,  Po countered that the present petition raised a
question of fact. Although couched in different words, the issues raised
here were substantially the same as the issues raised before the CA.
There was no legal basis in Fairland’s assertion that evidence was
dispensed with when no answer to the complaint had been filed. Such
argument would undermine the inherent authority of the courts to
resolve legal issues based on the facts of the case and on the rules on
evidence. Contrary to Fairland’s position, the court decided the case on
the basis of the complaint which was found wanting in preponderance
of evidence.
In its Reply,21 Fairland posited that the petition did not raise mere
questions of fact but one of law as what was being sought for review
was the erroneous dismissal of the ejectment case for lack of
preponderance of evidence. Since no answer was filed and the
complaint sufficiently alleged a cause of action for unlawful detainer, it
became the duty of the MeTC to decide the case in its favor.
The Court’s Ruling
The petition is meritorious.
Complaint has a valid cause of action for Unlawful Detainer
Section 1 of Rule 70 of the Rules of Court lays down the requirements
for filing a complaint for unlawful detainer, to wit:
Section 1. – Who may institute proceedings, and when. – Subject to the
provision of the next succeeding section, a person deprived of the
possession of any land or building by force, intimidation, threat,
strategy, or stealth, or a lessor, vendor, vendee, or other person against
whom the possession of any land or building is unlawfully withheld
after the expiration or termination of the right to hold possession, by
virtue of any contract, express or implied, or the legal representatives or
assigns of any such lessor, vendor, vendee, or other person, may, at any
time within one (1) year after such unlawful deprivation or withholding
of possession, bring an action in the proper Municipal Trial Court
against the person or persons unlawfully withholding or depriving of
possession, or any person or persons claiming under them, for the
restitution of such possession, together with damages and
costs.1âwphi1
Stated differently, unlawful detainer is a summary action for the
recovery of possession of real property. This action may be filed by a
lessor, vendor, vendee, or other person from whom the possession of
any land or building is unlawfully withheld after the expiration or
termination of the right to hold possession by virtue of any contract,
express or implied. The possession of the defendant was originally
legal, as his possession was permitted by the plaintiff on account of an
express or implied contract between them. The defendant’s possession,
however, became illegal when the plaintiff demanded that the defendant
vacate the subject property due to the expiration or termination of the
right to possess under the contract, and the defendant refused to heed
such demand. A case for unlawful detainer must be instituted one year
from the unlawful withholding of possession.22
A complaint sufficiently alleges a cause of action for unlawful detainer
if it recites the following: (1) initially, possession of the property by the
defendant was by contract with or by tolerance of the plaintiff; (2)
eventually, such possession became illegal upon notice by the plaintiff
to the defendant of the termination of the latter’s right of possession; (3)
thereafter, the defendant remained in possession of the property, and
deprived the plaintiff of the enjoyment thereof; and (4) within one (1)
year from the last demand on defendant to vacate the property, the
plaintiff instituted the complaint for ejectment. 23
There is no question that the complaint filed by Fairland adequately
alleged a cause of action for unlawful detainer. The pertinent portion of
the said complaint reads:
xxx
3. Plaintiff is the owner of, and had been leasing to the defendant, the
premises mentioned above as the residence of the latter;
4. There is no current written lease contract between plaintiff and the
defendant, but the latter agreed to pay the former the amount of
Php20,000.00 as rent at the beginning of each month. Thus, the term of
the lease agreement is renewable on a month-to-month basis;
5. Since March 2011, defendant has not been paying the aforesaid rent
despite plaintiff’s repeated demands;
6. Due to defendant’s continuous failure to pay rent, plaintiff reached a
decision not to renew the lease agreement. It sent a formal letter, x x x
demanding defendant to pay the amount of Php220,000.00,
representing defendant’s twelve month rental arrears beginning January
2011, and to vacate the leased premises, both within fifteen (15) days
from receipt of said letter;
7. Despite receipt of the aforesaid demand letter and lapse of the fifteen
day period given to comply with plaintiff’s demand, defendant neither
tendered payment for the unpaid rent nor vacated the leased premises.
Worse, defendant has not been paying rent up to now;
x x x24
The above-cited portions of the complaint sufficiently alleged that
Fairland was the owner of the subject property being leased to Po by
virtue of an oral agreement. There was a demand by Fairland for Po to
pay rent and vacate before the complaint for unlawful detainer was
instituted. The complaint was seasonably filed within the one-year
period prescribed by law. With all the elements present, there was
clearly a cause of action in the complaint for unlawful detainer.
Under the Rules of Summary Procedure, the weight of evidence is not
considered when a judgment is rendered based on the complaint
The question now is whether the MeTC correctly dismissed the case for
lack of preponderance of evidence. Fairland posits that judgment should
have been rendered in its favor on the basis of the complaint itself and
not on its failure to adduce proof of ownership over the subject
property.
The Court agrees with Fairland’s position.
The summons, together with the complaint and its annexes, was served
upon Po on December 28, 2012. This presupposes that the MeTC found
no ground to dismiss the action for unlawful detainer. 25 Nevertheless,
Po failed to file his answer on time and the MeTC had the option to
render judgment motu proprio or on motion of the plaintiff. In relation
thereto, Sections 5 and 6 of the Rules on Summary Procedure provide:
Sec. 5. Answer. – Within ten (10) days from service of summons, the
defendant shall file his answer to the complaint and serve a copy
thereof on the plaintiff. Affirmative and negative defenses not pleaded
therein shall be deemed waived, except for lack of jurisdiction over the
subject matter. Cross-claims and compulsory counterclaims not asserted
in the answer shall be considered barred. The answer to counterclaims
or cross-claims shall be filed and served within ten (10) days from
service of the answer in which they are pleaded.
Sec. 6. Effect of failure to answer. – Should the defendant fail to answer
the complaint within the period above provided, the court, motu proprio
or on motion of the plaintiff, shall render judgment as may be
warranted by the facts alleged in the complaint and limited to what
is prayed for therein. The court may in its discretion reduce the
amount of damages and attorney’s fees claimed for being excessive or
otherwise unconscionable, without prejudice to the applicability of
Section 4, Rule 18 of the Rules of Court, if there are two or more
defendants.
[Emphasis Supplied]
Section 6 is clear that in case the defendant failed to file his answer, the
court shall render judgment, either motu proprio or upon plaintiff’s
motion, based solely on the facts alleged in the complaint and
limited to what is prayed for. The failure of the defendant to timely
file his answer and to controvert the claim against him constitutes his
acquiescence to every allegation stated in the complaint. Logically,
there is nothing to be done in this situation26except to render judgment
as may be warranted by the facts alleged in the complaint. 27
Similarly, under Section 7, Rule 70 of the Rules of Court, which
governs the rules for forcible entry and unlawful detainer, if the
defendant fails to answer the complaint within the period provided, the
court has no authority to declare the defendant in default. Instead, the
court, motu proprio or on motion of the plaintiff, shall render judgment
as may be warranted by the facts alleged in the complaint and limited
to what is prayed for.28
This has been enunciated in the case of Don Tino Realty and
Development Corporation v. Florentino,29 citing Bayog v.
30
Natino,  where the Court held that there was no provision for an entry
of default under the Rules of Summary Procedure if the defendant
failed to file his answer.
In this case, Po failed to file his answer to the complaint despite proper
service of summons. He also failed to provide a sufficient justification
to excuse his lapses.1âwphi1 Thus, as no answer was filed, judgment
must be rendered by the court as may be warranted by the facts alleged
in the complaint.
Failure to attach annexes is not fatal if the complaint alleges a
sufficient cause of action; evidence need not be attached to the
complaint
The lower courts erroneously dismissed the complaint of Fairland
simply on the ground that it failed to establish by preponderance of
evidence its ownership over the subject property. As can be gleaned
above, the rules do not compel the plaintiff to attach his evidence to the
complaint because, at this inception stage, he only has to file his
complaint to establish his cause of action. Here, the court was only
tasked to determine whether the complaint of Fairland alleged a
sufficient cause of action and to render judgment thereon.
Also, there was no need to attach proof of ownership in the complaint
because the allegations therein constituted a sufficient cause of action
for unlawful detainer. Only when the allegations in the complaint are
insufficient to form a cause of action shall the attachment become
material in the determination thereof. Even under Section 4 of the Rules
of Summary Procedure,31 it is not mandatory to attach annexes to the
complaint.
In the case of Lazaro v. Brewmaster32 (Lazaro), where judgment was
rendered based on the complaint due to the failure of the defendant to
file an answer under the Rules of Summary Procedure, it was written
that:
xxx To determine whether the complaint states a cause of action, all
documents attached thereto may, in fact, be considered, particularly
when referred to in the complaint. We emphasize, however, that the
inquiry is into the sufficiency, not the veracity of the material
allegations in the complaint. Thus, consideration of the annexed
documents should only be taken in the context of ascertaining the
sufficiency of the allegations in the complaint.
[Emphasis Supplied]
In Lazaro, the assailed invalid invoices attached to the complaint were
not considered because the complaint already alleged a sufficient cause
of action for collection of sum of money. Those assailed documents
were not the bases of the plaintiff’s action for sum of money, but were
only attached to the complaint to provide evidentiary details on the
alleged transactions.
Similarly, in the case at bench, there was no need for documentary
attachments to prove Fairland’s ownership over the subject
property. First, the present action is an action for unlawful detainer
wherein only de facto or material possession is required to be alleged.
Evidently, the attachment of any deed of ownership to the complaint is
not indispensable because an action for unlawful detainer does not
entirely depend on ownership.
Second, Fairland sufficiently alleged ownership and superior right of
possession over the subject property. These allegations were evidently
manifest in the complaint as Fairland claimed to have orally agreed to
lease the property to Po. The Court is of the view that these allegations
were clear and unequivocal and did not need supporting attachments to
be considered as having sufficiently established its cause of action.
Even the MeTC conceded that the complaint of Fairland stated a valid
cause of action for unlawful detainer. 33 It must be stressed that inquiry
into the attached documents in the complaint is for the sufficiency, not
the veracity, of the material allegations in the complaint.
Third, considering that Po failed to file an answer within the prescribed
period, he was deemed to have admitted all the allegations in the
complaint including Fairland’s claim of ownership. To reiterate, the
failure of the defendant to timely file his answer and controvert the
claim against him constituted his acquiescence to every allegation
stated in the complaint.
In the Entry of Appearance with Motion for Leave of Court to file
Comment/Opposition to Motion to Render Judgment, which was
belatedly filed and so was denied by the MeTC, Po merely denied the
allegations against him without even bothering to aver why he claimed
to have a superior right of possession of the subject property. 34
Fourth, it is only at the later stage of the summary procedure when the
affidavits of witnesses and other evidence on factual issues shall be
presented before the court. Sections 8 and 9 of the Rules on Summary
Procedure state:
Sec. 8. Record of preliminary conference. – Within five (5) days after
the termination of the preliminary conference, the court shall issue an
order stating the matters taken up therein, x x x
Sec. 9. Submission of affidavits and position papers. – Within ten (10)
days from receipt of the order mentioned in the next preceding section,
the parties shall submit the affidavits of their witnesses and other
evidence on the factual issues defined in the order, together with their
position papers setting forth the law and the facts relied upon by them.
[Emphasis Supplied]
Again, it is worth stressing that these provisions are exactly Sections 9
and 10 under Rule 70 of the Rules of Court.
Accordingly, it is only at this part of the proceedings that the parties
will be required to present and offer their evidence before the court to
establish their causes and defenses. Before the issuance of the record of
preliminary conference, the parties are not yet required to present their
respective evidence.
These specific provisions under the Rules of Summary Procedure
which are also reflected in Rule 70 of the Rules of Court, serve their
purpose to immediately settle ejectment proceedings. “Forcible entry
and unlawful detainer cases are summary proceedings designed to
provide for an expeditious means of protecting actual possession or the
right to possession of the property involved. It does not admit of a delay
in the determination thereof. It is a ‘time procedure’ designed to remedy
the situation.35 Thus, as a consequence of the defendant’s failure to file
an answer, the court is simply tasked to render judgment as may be
warranted by the facts alleged in the complaint and limited to what is
prayed for therein.
As the complaint contains a valid cause of action, a judgment can
already be rendered
In order to achieve an expeditious and inexpensive determination of property. The unpaid rentals shall incur a legal interest of six percent
unlawful detainer cases, a remand of this case to the lower courts is no (6%) per annum from January 30, 2012, when the demand to pay and to
longer necessary and the case can be determined on its merits by the vacate was made, up to the finality of this decision. Thereafter, an
Court. interest of six percent (6%) per annum shall be imposed on the total
amount due until full payment is made.
To recapitulate, as Po failed to file his answer on time, judgment shall
be rendered based only on the complaint of Fairland without the need to SO ORDERED.
consider the weight of evidence. As discussed above, the complaint of
Fairland had a valid cause of action for unlawful detainer. JOSE CATRAL MENDOZA
Associate Justice
Consequently, there is no more need to present evidence to establish the
allegation of Fairland of its ownership and superior right of possession WE CONCUR:
over the subject property. Po’s failure to file an answer constitutes an
admission of his illegal occupation due to his non-payment of rentals, ANTONIO T. CARPIO
and of Fairland’s rightful claim of material possession. Thus, judgment Associate Justice
must be rendered finding that Fairland has the right to eject Po from the Chairperson
subject property.
MARIANO C. DEL
ARTURO D. BRION
The Judicial Affidavit Rule CASTILLO
Associate Justice
Associate Justice
On a final note, the Court deems it proper to discuss the relevance of
the Judicial Affidavit Rule or A.M. No. 12-8-8-SC, where documentary MARVIC M.V.F. LEONEN
or object evidence are required to be attached. To begin with, the rule is Associate Justice
not applicable because such evidence are required to be attached to a
judicial affidavit, not to a complaint. Moreover, as the rule took effect
only on January 1, 2013, it cannot be required in this case because this
was earlier filed on December 12, 2012.

Granting that it can be applied retroactively, the rule being essentially

remedial, still it has no bearing on the ruling of this Court.

In the Judicial Affidavit Rule, the attachments of documentary or object

evidence to the affidavits is required when there would be a pre-trial
or preliminary conference or the scheduled hearing. As stated
earlier, where a defendant fails to file an answer, the court shall render
judgment, either motu proprio or upon plaintiff’s motion, based solely
on the facts alleged in the complaint and limited to what is prayed for.
Thus, where there is no answer, there is no need for a pre-trial,
preliminary conference or hearing. Section 2 of the Judicial Affidavit
Rule reads:

Section 2. Submission of Judicial Affidavits and Exhibits in lieu of

direct testimonies. - (a) The parties shall file with the court and serve on
the adverse party, personally or by licensed courier service, not later
than five days before pre-trial or preliminary conference or the
scheduled hearing with respect to motions and incidents, the following:

(1) The judicial affidavits of their witnesses, which shall take the place
of such witnesses' direct testimonies; and

(2) The parties' docun1entary or object evidence, if any, which shall be

attached to the judicial affidavits and marked as Exhibits A, B, C, and
so on in the case of the complainant or the plaintiff, and as Exhibits 1,
2, 3, and so on in the case of the respondent or the defendant.

(b) Should a party or a witness desire to keep the original document or

object evidence in his possession, he may, after the same has been
identified, marked as exhibit, and authenticated, warrant in his judicial
affidavit that the copy or reproduction attached to such affidavit is a
faithful copy or reproduction of that original. In addition, the party or
witness shall bring the original document or object evidence for
comparison during the preliminary conference with the attached copy,
reproduction, or pictures, failing which the latter shall not be admitted.

This is without prejudice to the introduction of secondary evidence in

place of the original when allowed by existing rules.

WHEREFORE, the petition is GRANTED. The October 31, 2014 CIVIL LAW

Decision and the March 6, 2015 Resolution of the Court of Appeals in
CAG. R. SP No. 134701 are hereby REVERSED and SET 1.
ASIDE. Respondent Arturo Loo Po is ORDERED TO
VACATE Condominium Unit No. 205 located in Cedar Mansion II on SECOND DIVISION
Ma. Escriba Street, Pasig City.
July 8, 2015
Respondent Po is further ORDERED TO PAY the rentals-in-arrears,
as well as the rentals accruing in the interim until he vacates the G.R. No. 195166
SPOUSES SALVADOR ABELLA AND ALMA
ABELLA, Petitioners,  Decision reads:
vs.
SPOUSES ROMEO ABELLA AND ANNIE
ABELLA, Respondents.
DECISION
LEONEN, J.:
This resolves a Petition for Review on Certiorari under Rule 45 of the
Rules of Court praying that judgment be rendered reversing and setting
aside the September 30, 2010 Decision 1 and the January 4, 2011
Resolution2 of the Court of Appeals Nineteenth Division in CA-G.R.
CV No. 01388. The Petition also prays that respondents Spouses
Romeo and Annie Abella be ordered to pay petitioners Spouses
Salvador and Alma Abella 2.5% monthly interest plus the remaining
balance of the amount loaned.
The assailed September 30, 2010 Decision of the Court of Appeals
reversed and set aside the December 28, 2005 Decision3 of the
Regional Trial Court, Branch 8, Kalibo, Aklan in Civil Case No. 6627.
It directed petitioners to pay respondents P148,500.00 (plus interest),
which was the amount respondents supposedly overpaid. The assailed
January 4, 2011 Resolution of the Court of Appeals denied petitioners’
Motion for Reconsideration.
The Regional Trial Court’s December 28, 2005 Decision ordered
respondents to pay petitioners the supposedly unpaid loan balance of
P300,000.00 plus the allegedly stipulated interest rate of 30% per
annum, as well as litigation expenses and attorney’s fees. 4
On July 31, 2002, petitioners Spouses Salvador and Alma Abella filed a
Complaint5 for sum of money and damages with prayer for preliminary
attachment against respondents Spouses Romeo and Annie Abella
before the Regional Trial Court, Branch 8, Kalibo, Aklan. The case was
docketed as Civil Case No. 6627.6
In their Complaint, petitioners alleged that respondents obtained a loan
from them in the amount of P500,000.00. The loan was evidenced by
an acknowledgment receipt dated March 22, 1999 and was payable
within one (1) year. Petitioners added that respondents were able to pay
a total of P200,000.00— P100,000.00 paid on two separate occasions—
leaving an unpaid balance of P300,000.00.7
In their Answer8 (with counterclaim and motion to dismiss),
respondents alleged that the amount involved did not pertain to a loan
they obtained from petitioners but was part of the capital for a joint
venture involving the lending of money.9
Specifically, respondents claimed that they were approached by
petitioners, who proposed that if respondents were to "undertake the
management of whatever money [petitioners] would give them,
[petitioners] would get 2.5% a month with a 2.5% service fee to
[respondents]."10 The 2.5% that each party would be receiving
represented their sharing of the 5% interest that the joint venture was
supposedly going to charge against its debtors. Respondents further
alleged that the one year averred by petitioners was not a deadline for
payment but the term within which they were to return the money
placed by petitioners should the joint venture prove to be not lucrative.
Moreover, they claimed that the entire amount of P500,000.00 was
disposed of in accordance with their agreed terms and conditions and
that petitioners terminated the joint venture, prompting them to collect
from the joint venture’s borrowers. They were, however, able to collect
only to the extent of P200,000.00; hence, the P300,000.00 balance
remained unpaid.11
In the Decision12 dated December 28, 2005, the Regional Trial Court
ruled in favor of petitioners. It noted that the terms of the
acknowledgment receipt executed by respondents clearly showed that:
(a) respondents were indebted to the extent of P500,000.00; (b) this
indebtedness was to be paid within one (1) year; and (c) the
indebtedness was subject to interest. Thus, the trial court concluded that
respondents obtained a simple loan, although they later invested its
proceeds in a lending enterprise. 13 The Regional Trial Court adjudged
respondents solidarily liable to petitioners. The dispositive portion of its
WHEREFORE, premises considered, judgment is hereby rendered:
1. Ordering the defendants jointly and severally to pay the plaintiffs the
sum of P300,000.00 with interest at the rate of 30% per annum from the
time the complaint was filed on July 31, 2002 until fully paid;
2. Ordering the defendants to pay the plaintiffs the sum of P2,227.50 as
reimbursement for litigation expenses, and another sum of P5,000.00 as
attorney’s fees.
For lack of legal basis, plaintiffs’ claim for moral and exemplary
damages has to be denied, and for lack of merit the counter-claim is
ordered dismissed.14
In the Order dated March 13, 2006,15 the Regional Trial Court denied
respondents’ Motion for Reconsideration.
On respondents’ appeal, the Court of Appeals ruled that while
respondents had indeed entered into a simple loan with petitioners,
respondents were no longer liable to pay the outstanding amount of
P300,000.00.16
The Court of Appeals reasoned that the loan could not have earned
interest, whether as contractually stipulated interest or as interest in the
concept of actual or compensatory damages. As to the loan’s not having
earned stipulated interest, the Court of Appeals anchored its ruling on
Article 1956 of the Civil Code, which requires interest to be stipulated
in writing for it to be due. 17 The Court of Appeals noted that while the
acknowledgement receipt showed that interest was to be charged, no
particular interest rate was specified. 18 Thus, at the time respondents
were making interest payments of 2.5% per month, these interest
payments were invalid for not being properly stipulated by the parties.
As to the loan’s not having earned interest in the concept of actual or
compensatory damages, the Court of Appeals, citing Eusebio-Calderon
v. People,19 noted that interest in the concept of actual or compensatory
damages accrues only from the time that demand (whether judicial or
extrajudicial) is made. It reasoned that since respondents received
petitioners’ demand letter only on July 12, 2002, any interest in the
concept of actual or compensatory damages due should be reckoned
only from then. Thus, the payments for the 2.5% monthly interest made
after the perfection of the loan in 1999 but before the demand was made
in 2002 were invalid.20
Since petitioners’ charging of interest was invalid, the Court of Appeals
reasoned that all payments respondents made by way of interest should
be deemed payments for the principal amount of P500,000.00. 21
The Court of Appeals further noted that respondents made a total
payment of P648,500.00, which, as against the principal amount of
P500,000.00, entailed an overpayment of P148,500.00. Applying the
principle of solutio indebiti, the Court of Appeals concluded that
petitioners were liable to reimburse respondents for the overpaid
amount of P148,500.00.22 The dispositive portion of the assailed Court
of Appeals Decision reads:
WHEREFORE, the Decision of the Regional Trial Court is
hereby REVERSED and SET ASIDE, and a new one issued, finding
that the Spouses Salvador and Alma Abella are DIRECTED to jointly
and severally pay Spouses Romeo and Annie Abella the amount of
P148,500.00, with interest of 6% interest (sic) per annum to be
computed upon receipt of this decision, until full satisfaction thereof.
Upon finality of this judgment, an interest as the rate of 12% per
annum, instead of 6%, shall be imposed on the amount due, until full
payment thereof.23
In the Resolution24 dated January 4, 2011, the Court of Appeals denied
petitioners’ Motion for Reconsideration.
Aggrieved, petitioners filed the present appeal 25 where they claim that
the Court of Appeals erred in completely striking off interest despite the
parties’ written agreement stipulating it, as well as in ordering them to
reimburse and pay interest to respondents.
In support of their contentions, petitioners cite Article 1371 of the Civil
Code,26 which calls for the consideration of the contracting parties’
contemporaneous and subsequent acts in determining their true
intention. Petitioners insist that respondents’ consistent payment of
interest in the year following the perfection of the loan showed that
interest at 2.5% per month was properly agreed upon despite its not
having been expressly stated in the acknowledgment receipt. They add
that during the proceedings before the Regional Trial Court,
respondents admitted that interest was due on the loan. 27
In their Comment,28 respondents reiterate the Court of Appeals’
findings that no interest rate was ever stipulated by the parties and that
interest was not due and demandable at the time they were making
interest payments.29
In their Reply,30 petitioners argue that even though no interest rate was
stipulated in the acknowledgment receipt, the case fell under the
exception to the Parol Evidence Rule. They also argue that there exists
convincing and sufficiently credible evidence to supplement the
imperfection of the acknowledgment receipt. 31
For resolution are the following issues:
First, whether interest accrued on respondents’ loan from petitioners. If
so, at what rate?
Second, whether petitioners are liable to reimburse respondents for the
latter’s supposed excess payments and for interest.
I loan or forbearance of money, according to the Civil Code, the interest
As noted by the Court of Appeals and the Regional Trial Court,
respondents entered into a simple loan or mutuum, rather than a joint
venture, with petitioners.
Respondents’ claims, as articulated in their testimonies before the trial
court, cannot prevail over the clear terms of the document attesting to
the relation of the parties. "If the terms of a contract are clear and leave
no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control."32
Articles 1933 and 1953 of the Civil Code provide the guideposts that
determine if a contractual relation is one of simple loan or mutuum:
Art. 1933. By the contract of loan, one of the parties delivers to
another, either something not consumable so that the latter may use the
same for a certain time and return it, in which case the contract is called
a commodatum; or money or other consumable thing, upon the
condition that the same amount of the same kind and quality shall be
paid, in which case the contract is simply called a loan or mutuum.
Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to pay interest.
In commodatum the bailor retains the ownership of the thing loaned,
while in simple loan, ownership passes to the borrower.
....
Art. 1953. A person who receives a loan of money or any other fungible
thing acquires the ownership thereof, and is bound to pay to the creditor
an equal amount of the same kind and quality. (Emphasis supplied)
On March 22, 1999, respondents executed an acknowledgment receipt
to petitioners, which states:
Batan, Aklan
March 22, 1999
This is to acknowledge receipt of the Amount of Five Hundred
Thousand (P500,000.00) Pesos from Mrs. Alma R. Abella, payable
within one (1) year from date hereof with interest.
Annie C. Abella (sgd.) Romeo M. Abella (sgd.)33 (Emphasis supplied)
The text of the acknowledgment receipt is uncomplicated and
straightforward. It attests to: first, respondents’ receipt of the sum of
P500,000.00 from petitioner Alma Abella; second, respondents’ duty to
pay back this amount within one (1) year from March 22, 1999; and
third, respondents’ duty to pay interest. Consistent with what typifies a
simple loan, petitioners delivered to respondents with the corresponding
condition that respondents shall pay the same amount to petitioners
within one (1) year.
II
Although we have settled the nature of the contractual relation between
petitioners and respondents, controversy persists over respondents’ duty
to pay conventional interest, i.e., interest as the cost of borrowing
money.34
Article 1956 of the Civil Code spells out the basic rule that "[n]o
interest shall be due unless it has been expressly stipulated in writing."
On the matter of interest, the text of the acknowledgment receipt is
simple, plain, and unequivocal. It attests to the contracting parties’
intent to subject to interest the loan extended by petitioners to
respondents. The controversy, however, stems from the
acknowledgment receipt’s failure to state the exact rate of interest.
Jurisprudence is clear about the applicable interest rate if a written
instrument fails to specify a rate. In Spouses Toring v. Spouses
Olan,35 this court clarified the effect of Article 1956 of the Civil Code
and noted that the legal rate of interest (then at 12%) is to apply: "In a
due should be that stipulated in writing, and in the absence thereof, the
rate shall be 12% per annum."36
Spouses Toring cites and restates (practically verbatim) what this court
settled in Security Bank and Trust Company v. Regional Trial Court of
Makati, Branch 61: "In a loan or forbearance of money, the interest due
should be that stipulated in writing, and in the absence thereof, the
rate shall be 12% per annum."37
Security Bank also refers to Eastern Shipping Lines, Inc. v. Court of
Appeals, which, in turn, stated:38
1. When the obligation is breached, and it consists in the payment of a
sum of money, i.e., a loan or forbearance of money, the interest due
should be that which may have been stipulated in writing. Furthermore,
the interest due shall itself earn legal interest from the time it is
judicially demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.39 (Emphasis supplied)
The rule is not only definite; it is cast in mandatory language.
From Eastern Shipping to Security Bank to Spouses
Toring, jurisprudence has repeatedly used the word "shall," a term that
has long been settled to denote something imperative or operating to
impose a duty.40 Thus, the rule leaves no room for alternatives or
otherwise does not allow for discretion. It requires the application of
the legal rate of interest.
Our intervening Decision in Nacar v. Gallery Frames41 recognized that
the legal rate of interest has been reduced to 6% per annum:
Recently, however, the Bangko Sentral ng Pilipinas Monetary Board
(BSP-MB), in its Resolution No. 796 dated May 16, 2013, approved the
amendment of Section 2 of Circular No. 905, Series of 1982 and,
accordingly, issued Circular No. 799, Series of 2013, effective July 1,
2013, the pertinent portion of which reads:
The Monetary Board, in its Resolution No. 796 dated 16 May 2013,
approved the following revisions governing the rate of interest in the
absence of stipulation in loan contracts, thereby amending Section 2 of
Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or forbearance of any money,
goods or credits and the rate allowed in judgments, in the absence of an
express contract as to such rate of interest, shall be six percent (6%)
per annum.
Section 2. In view of the above, Subsection X305.1 of the Manual of
Regulations for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of
the Manual of Regulations for
Non-Bank Financial Institutions are hereby amended accordingly.
This Circular shall take effect on 1 July 2013.
Thus, from the foregoing, in the absence of an express stipulation as to
the rate of interest that would govern the parties, the rate of legal
interest for loans or forbearance of any money, goods or credits and
the rate allowed in judgments shall no longer be twelve percent (12%)
per annum — as reflected in the case of Eastern Shipping Lines and
Subsection X305.1 of the Manual of Regulations for Banks and
Sections 4305Q.1,= 4305S.3 and 4303P.1 of the Manual of Regulations
for Non- Bank Financial Institutions, before its amendment by BSP-MB
Circular No. 799 — but will now be six percent (6%) per annum
effective July 1, 2013. It should be noted, nonetheless, that the new rate
could only be applied prospectively and not retroactively.
Consequently, the twelve percent (12%) per annum legal interest shall
apply only until June 30, 2013. Come July 1, 2013 the new rate of six
percent (6%) per annum shall be the prevailing rate of interest when
applicable.42 (Emphasis supplied, citations omitted)
Nevertheless, both Bangko Sentral ng Pilipinas Circular No. 799, Series
of 2013 and Nacar retain the definite and mandatory framing of the
rule articulated in Eastern Shipping, Security Bank, and Spouses
Toring. Nacar even restates Eastern Shipping:
To recapitulate and for future guidance, the guidelines laid down in the
case of Eastern Shipping Lines are accordingly modified to embody
BSP-MB Circular No. 799, as follows:
....
1. When the obligation is breached, and it consists in the payment of a
sum of money, i.e., a loan or forbearance of money, the interest due
should be that which may have been stipulated in writing. Furthermore,
the interest due shall itself earn legal interest from the time it is
judicially demanded. In the absence of stipulation, the rate of
interest shall be 6% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of
Article 1169 of the Civil Code.43 (Emphasis supplied, citations omitted)
Thus, it remains that where interest was stipulated in writing by the
debtor and creditor in a simple loan or mutuum, but no exact interest
rate was mentioned, the legal rate of interest shall apply. At present,
this is 6% per annum, subject to Nacar’s qualification on prospective
application.
Applying this, the loan obtained by respondents from petitioners is
deemed subjected to conventional interest at the rate of 12% per
annum, the legal rate of interest at the time the parties executed their
agreement. Moreover, should conventional interest still be due as of
July 1, 2013, the rate of 12% per annum shall persist as the rate
of conventional interest.
This is so because interest in this respect is used as a surrogate for the
parties’ intent, as expressed as of the time of the execution of their
contract. In this sense, the legal rate of interest is an affirmation of the
contracting parties’ intent; that is, by their contract’s silence on a
specific rate, the then prevailing legal rate of interest shall be the cost of
borrowing money. This rate, which by their contract the parties have
settled on, is deemed to persist regardless of shifts in the legal rate of
interest. Stated otherwise, the legal rate of interest, when applied as
conventional interest, shall always be the legal rate at the time the
agreement was executed and shall not be susceptible to shifts in rate.
Petitioners, however, insist on conventional interest at the rate of 2.5%
per month or 30% per annum. They argue that the acknowledgment
receipt fails to show the complete and accurate intention of the
contracting parties. They rely on Article 1371 of the Civil Code, which
provides that the contemporaneous and subsequent acts of the
contracting parties shall be considered should there be a need to
ascertain their intent.44 In addition, they claim that this case falls under
the exceptions to the Parol Evidence Rule, as spelled out in Rule 130,
Section 9 of the Revised Rules on Evidence.45
It is a basic precept in legal interpretation and construction that a rule or
provision that treats a subject with specificity prevails over a rule or
provision that treats a subject in general terms. 46
The rule spelled out in Security Bank and Spouses Toring is anchored
on Article 1956 of the Civil Code and specifically governs simple loans
or mutuum. Mutuum is a type of nominate contract that is specifically
recognized by the Civil Code and for which the Civil Code provides a
specific set of governing rules: Articles 1953 to 1961. In contrast,
Article 1371 is among the Civil Code provisions generally dealing with
contracts. As this case particularly involves a simple loan, the specific
rule spelled out in Security Bank and Spouses Toring finds preferential
application as against Article 1371.
Contrary to petitioners’ assertions, there is no room for entertaining
extraneous (or parol) evidence. In Spouses Bonifacio and Lucia Paras
v. Kimwa Construction and Development Corporation,47 we spelled out
the requisites for the admission of parol evidence:
In sum, two (2) things must be established for parol evidence to be
admitted: first, that the existence of any of the four (4) exceptions has
been put in issue in a party’s pleading or has not been objected to by the
adverse party; and second, that the parol evidence sought to be
presented serves to form the basis of the conclusion proposed by the
presenting party.48
The issue of admitting parol evidence is a matter that is proper to the
trial, not the appellate, stage of a case. Petitioners raised the issue of
applying the exceptions to the Parol Evidence Rule only in the Reply
they filed before this court. This is the last pleading that either of the
parties has filed in the entire string of proceedings culminating in this
Decision. It is, therefore, too late for petitioners to harp on this rule. In
any case, what is at issue is not admission of evidence per se, but the
appreciation given to the evidence adduced by the parties. In the
Petition they filed before this court, petitioners themselves
acknowledged that checks supposedly attesting to payment of monthly
interest at the rate of 2.5% were admitted by the trial court (and marked
as Exhibits "2," "3," "4," "5," "6," "7," and "8"). 49 What petitioners have
an issue with is not the admission of these pieces of evidence but how
these have not been appreciated in a manner consistent with the
conclusions they advance.
Even if it can be shown that the parties have agreed to monthly interest
at the rate of 2.5%, this is unconscionable. As emphasized in Castro v.
Tan,50 the willingness of the parties to enter into a relation involving an
unconscionable interest rate is inconsequential to the validity of the
stipulated rate:
The imposition of an unconscionable rate of interest on a money debt,
even if knowingly and voluntarily assumed, is immoral and unjust. It is
tantamount to a repugnant spoliation and an iniquitous deprivation of
property, repulsive to the common sense of man. It has no support in
law, in principles of justice, or in the human conscience nor is there any
reason whatsoever which may justify such imposition as righteous and
as one that may be sustained within the sphere of public or private
morals.51
The imposition of an unconscionable interest rate is void ab initio for
being "contrary to morals, and the law."52
In determining whether the rate of interest is unconscionable, the
mechanical application of pre-established floors would be wanting. The
lowest rates that have previously been considered unconscionable need
not be an impenetrable minimum. What is more crucial is a
consideration of the parties’ contexts. Moreover, interest rates must be
appreciated in light of the fundamental nature of interest as
compensation to the creditor for money lent to another, which he or she
could otherwise have used for his or her own purposes at the time it was
lent. It is not the default vehicle for predatory gain. As such, interest
need only be reasonable. It ought not be a supine mechanism for the
creditor’s unjust enrichment at the expense of another.
Petitioners here insist upon the imposition of 2.5% monthly or 30%
annual interest. Compounded at this rate, respondents’ obligation would
have more than doubled—increased to 219.7% of the principal—by the
end of the third year after which the loan was contracted if the entire
principal remained unpaid. By the end of the ninth year, it would have
multiplied more than tenfold (or increased to 1,060.45%). In 2015, this
would have multiplied by more than 66 times (or increased to
6,654.17%). Thus, from an initial loan of only P500,000.00,
respondents would be obliged to pay more than P33 million. This is
grossly unfair, especially since up to the fourth year from when the loan
was obtained, respondents had been assiduously delivering payment.
This reduces their best efforts to satisfy their obligation into a
protracted servicing of a rapacious loan.
The legal rate of interest is the presumptive reasonable compensation
for borrowed money. While parties are free to deviate from this, any
deviation must be reasonable and fair. Any deviation that is far-
removed is suspect. Thus, in cases where stipulated interest is more
than twice the prevailing legal rate of interest, it is for the creditor to
prove that this rate is required by prevailing market conditions. Here,
petitioners have articulated no such justification.
In sum, Article 1956 of the Civil Code, read in light of established
jurisprudence, prevents the application of any interest rate other than
that specifically provided for by the parties in their loan document or, in
lieu of it, the legal rate. Here, as the contracting parties failed to make a
specific stipulation, the legal rate must apply. Moreover, the rate that
petitioners adverted to is unconscionable. The conventional interest due
on the principal amount loaned by respondents from petitioners is held
to be 12% per annum.
III
Apart from respondents’ liability for conventional interest at the rate of
12% per annum, outstanding conventional interest—if any is due from
respondents—shall itself earn legal interest from the time judicial
demand was made by petitioners, i.e., on July 31, 2002, when they filed
their Complaint. This is consistent with Article 2212 of the Civil Code,
which provides:
Art. 2212. Interest due shall earn legal interest from the time it is
judicially demanded, although the obligation may be silent upon this
point.
So, too, Nacar states that "the interest due shall itself earn legal interest
from the time it is judicially demanded."53
Consistent with Nacar, as well as with our ruling in Rivera v. Spouses
Chua,54 the interest due on conventional interest shall be at the rate of
12% per annum from July 31, 2002 to June 30, 2013. Thereafter, or
starting July 1, 2013, this shall be at the rate of 6% per annum.
IV
Proceeding from these premises, we find that respondents made an
overpayment in the amount of P3,379.17.
As acknowledged by petitioner Salvador Abella, respondents paid a
total of P200,000.00, which was charged against the principal amount
of P500,000.00. The first payment of P100,000.00 was made on June
30, 2001,55 while the second payment of P100,000.00 was made on
December 30, 2001.56
The Court of Appeals’ September 30, 2010 Decision stated that
respondents paid P6,000.00 in March 1999.57
The Pre-Trial Order dated December 2, 2002,58 stated that the parties
admitted that "from the time the principal sum of P500,000.00 was
borrowed from [petitioners], [respondents] ha[d] been religiously
paying"59 what was supposedly interest "at the rate of 2.5% per
month."60
From March 22, 1999 (after the loan was perfected) to June 22, 2001
(before respondents’ payment of P100,000.00 on June 30, 2001, which
was deducted from the principal amount of P500,000.00), the 2.5%
monthly "interest" was pegged to the principal amount of P500,000.00.
These monthly interests, thus, amounted to P12,500.00 per month.
Considering that the period from March 1999 to June 2001 spanned
twenty seven (27) months, respondents paid a total of P337,500.00. 61
From June 22, 2001 up to December 22, 2001 (before respondents’
payment of another P100,000.00 on December 30, 2001, which was
deducted from the remaining principal amount of P400,000.00), the
2.5% monthly "interest" was pegged to the remaining principal amount
of P400,000.00. These monthly interests, thus, amounted to P10,000.00
per month. Considering that this period spanned six (6) months,
respondents paid a total of P60,000.00.62
From after December 22, 2001 up to June 2002 (when petitioners filed
their Complaint), the 2.5% monthly "interest" was pegged to the
remaining principal amount of P300,000.00. These monthly interests,
thus, amounted to P7,500.00 per month. Considering that this period
spanned six (6) months, respondents paid a total of P45,000.00.63
Applying these facts and the properly applicable interest rate (for
conventional interest, 12% per annum; for interest on conventional
interest, 12% per annum from July 31, 2002 up to June 30, 2013 and
6% per annum henceforth), the following conclusions may be drawn:
By the end of the first year following the perfection of the loan, or as of
March 21, 2000, P560,000.00 was due from respondents. This consisted
of the principal of P500,000.00 and conventional interest of
P60,000.00.
Within this first year, respondents made twelve (12) monthly payments
totalling P150,000.00 (P12,500.00 each from April 1999 to March
2000). This was in addition to their initial payment of P6,000.00 in
March 1999.
Application of payments must be in accordance with Article 1253 of
the Civil Code, which reads:
Art. 1253. If the debt produces interest, payment of the principal shall
not be deemed to have been made until the interests have been covered.
Thus, the payments respondents made must first be reckoned as interest
payments. Thereafter, any excess payments shall be charged against the
principal. As respondents paid a total of P156,000.00 within the first
year, the conventional interest of P60,000.00 must be deemed fully paid
and the remaining amount that respondents paid (i.e., P96,000.00) is to
be charged against the principal. This yields a balance of P404,000.00.
By the end of the second year following the perfection of the loan, or as
of March 21, 2001, P452,480.00 was due from respondents. This
consisted of the outstanding principal of P404,000.00 and conventional
interest of P48,480.00.
Within this second year, respondents completed another round of
twelve (12) monthly payments totaling P150,000.00.
Consistent with Article 1253 of the Civil Code, as respondents paid a
total of P156,000.00 within the second year, the conventional interest of
P48,480.00 must be deemed fully paid and the remaining amount that
respondents paid (i.e., P101,520.00) is to be charged against the
principal. This yields a balance of P302,480.00.
By the end of the third year following the perfection of the loan, or as
of March 21, 2002, P338,777.60 was due from respondents. This
consists of the outstanding principal of P302,480.00 and conventional
interest of P36,297.60.
Within this third year, respondents paid a total of P320,000.00, as
follows:
(a) Between March 22, 2001 and June 30, 2001, respondents completed
three (3) monthly payments of P12,500.00 each, totaling P37,500.00.
(b) On June 30, 2001, respondents paid P100,000.00, which was
charged as principal payment.
(c) Between June 30, 2001 and December 30, 2001, respondents
delivered monthly payments of P10,000.00 each. At this point, the
monthly payments no longer amounted to P12,500.00 each because the
supposed monthly interest payments were pegged to the supposedly
remaining principal of P400,000.00. Thus, during this period, they paid
a total of six (6) monthly payments totaling P60,000.00.
(d) On December 30, 2001, respondents paid P100,000.00, which, like
the June 30, 2001 payment, was charged against the principal.
(e) From the end of December 2002 to the end of February 2002,
respondents delivered monthly payments of P7,500.00 each. At this
point, the supposed monthly interest payments were now pegged to the
supposedly remaining principal of P300,000.00. Thus, during this
period, they delivered three (3) monthly payments totaling P22,500.00.
Consistent with Article 1253 of the Civil Code, as respondents paid a
total of P320,000.00 within the third year, the conventional interest of
P36,927.50 must be deemed fully paid and the remaining amount that
respondents paid (i.e., P283,702.40) is to be charged against the
principal. This yields a balance of P18,777.60.
By the end of the fourth year following the perfection of the loan, or as
of March 21, 2003, P21,203.51 would have been due from respondents.
This consists of: (a) the outstanding principal of P18,777.60, (b)
conventional interest of P2,253.31, and (c) interest due on conventional
interest starting from July 31, 2002, the date of judicial demand, in the
amount of P172.60. The last (i.e., interest on interest) must be pro-
rated. There were only 233 days from July 31, 2002 (the date of judicial
demand) to March 21, 2003 (the end of the fourth year); this left
63.83% of the fourth year, within which interest on interest might have
accrued. Thus, the full annual interest on interest of 12% per annum
could not have been completed, and only the proportional amount of
7.66% per annum may be properly imposed for the remainder of the
fourth year.
From the end of March 2002 to June 2002, respondents delivered three
(3) more monthly payments of P7,500.00 each. Thus, during this
period, they delivered three (3) monthly payments totalling P22,500.00.
At this rate, however, payment would have been completed by
respondents even before the end of the fourth year. Thus, for
precision, it is more appropriate to reckon the amounts due as against
payments made on a monthly, rather than an annual, basis.
By April 21, 2002, _18,965.38 (i.e., remaining principal of P18,777.60
plus pro-rated monthly conventional interest at 1%, amounting to
P187.78) would have been due from respondents. Deducting the
monthly payment of P7,500.00 for the preceding month in a manner
consistent with Article 1253 of the Civil Code would yield a balance of
P11,465.38.
By May 21, 2002, _11,580.03 (i.e., remaining principal of P11,465.38
plus pro-rated monthly conventional interest at 1%, amounting to
P114.65) would have been due from respondents. Deducting the
monthly payment of P7,500.00 for the preceding month in a manner
consistent with Article 1253 of the Civil Code would yield a balance of
P4,080.03.
By June 21, 2002, P4,120.83 (i.e., remaining principal of P4,080.03
plus pro-rated monthly conventional interest at 1%, amounting to
P40.80) would have been due from respondents. Deducting the monthly
payment of P7,500.00 for the preceding month in a manner consistent
with Article 1253 of the Civil Code would yield a negative balance of
P3,379.17.
Thus, by June 21, 2002, respondents had not only fully paid the
principal and all the conventional interest that had accrued on their
loan. By this date, they also overpaid P3,379.17. Moreover, while
hypothetically, interest on conventional interest would not have run
from July 31, 2002, no such interest accrued since there was no longer
any conventional interest due from respondents by then.
V Republic
As respondents made an overpayment, the principle of solutio
indebiti as provided by Article 2154 of the Civil Code 64 applies. Article
2154 reads:
Article 2154. If something is received when there is no right to demand
it, and it was unduly delivered through mistake, the obligation to return
it arises.
In Moreno-Lentfer v. Wolff,65 this court explained the application
of solutio indebiti:
The quasi-contract of solutio indebiti harks back to the ancient
principle that no one shall enrich himself unjustly at the expense of
another. It applies where (1) a payment is made when there exists no
binding relation between the payor, who has no duty to pay, and the
person who received the payment, and (2) the payment is made through
mistake, and not through liberality or some other cause. 66
As respondents had already fully paid the principal and all conventional
interest that had accrued, they were no longer obliged to make further
payments.1awp++i1 Any further payment they made was only because
of a mistaken impression that they were still due. Accordingly,
petitioners are now bound by a quasi-contractual obligation to return
any and all excess payments delivered by respondents.
Nacar provides that "[w]hen an obligation, not constituting a loan or
forbearance of money, is breached, an interest on the amount of
damages awarded may be imposed at the discretion of the court at the
rate of 6% per annum." 67This applies to obligations arising from quasi-
contracts such as solutio indebiti.
Further, Article 2159 of the Civil Code provides:
Art. 2159. Whoever in bad faith accepts an undue payment, shall pay
legal interest if a sum of money is involved, or shall be liable for fruits
received or which should have been received if the thing produces
fruits.
He shall furthermore be answerable for any loss or impairment of the
thing from any cause, and for damages to the person who delivered the
thing, until it is recovered.
Consistent however, with our finding that the excess payment made by
respondents were borne out of a mere mistake that it was due, we find it
in the better interest of equity to no longer hold petitioners liable for
interest arising from their quasi-contractual obligation.
Nevertheless, Nacar also provides:
3. When the judgment of the court awarding a sum of money becomes
final and executory, the rate of legal interest, whether the case falls
under paragraph 1 or paragraph 2, above, shall be 6% per annum from
such finality until its satisfaction, this interim period being deemed to
be by then an equivalent to a forbearance of credit. 68
Thus, interest at the rate of 6% per annum may be properly imposed on
the total judgment award. This shall be reckoned from the finality of
this Decision until its full satisfaction.
WHEREFORE, the assailed September 30, 2010 Decision and the
January 4, 2011 Resolution of the Court of Appeals Nineteenth
Division in CA-G.R. CV No. 01388 are SET ASIDE. Petitioners
Spouses Salvador and Alma Abella are DIRECTED to jointly and
severally reimburse respondents Spouses Romeo and Annie Abella the
amount of P3,379.17, which respondents have overpaid.
A legal interest of 6% per annum shall likewise be imposed on the total
judgment award from the finality of this Decision until its full
satisfaction.
SO ORDERED.
CIVIL LAW
2.
of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 195668               June 25, 2014
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, 
vs.
MA. HARLETA VELASCO y BRIONES, MARICAR B.
INOVERO, MARISSA DIALA, and BERNA M.
PAULINO,Accused,
MARICAR B. INOVERO, Accused-Appellant.
DECISION
BERSAMIN, J.:
The several accused in illegal recruitment committed in large scale
against whom the State establishes a conspiracy are each equally
criminally and civilly liable. It follows, therefore, that as far as civil
liability is concerned each is solidarily liable to the victims of the illegal
recruitment for the reimbursement of the sums collected from them,
regardless of the extent of the participation of the accused in the illegal
recruitment.
The Case
Accused-appellant Maricar B. Inovero seeks the review and reversal of
the decision promulgated on August 26, 2010, 1 whereby the Court of
Appeals (CA) affirmed her conviction for illegal recruitment committed
in large scale amounting to economic sabotage under the judgment
rendered on January 14, 2008 by the Regional Trial Court (RTC),
Branch 133, in Makati City.2
Antecedents
On March 17, 2004, the Office of the City Prosecutor of Makati City
filed in the RTC two informations3 charging Inovero, Ma. Harleta
Velasco y Briones, Marissa Diala and Berna Paulino with illegal
recruitment as defined and penalized under Section 6 of Republic Act
No. 8042 (Migrant Worker’s Act of 1995), and 11
informations4 charging the same accused with estafa as defined and
penalized under Article315, paragraph 2(a) of the Revised Penal Code.
Only Inovero was arrested and prosecuted, the other accused having
remained at large.
Six cases charging estafa (Criminal Case No. 04-1565, Criminal Case
No. 1568, Criminal Case No. 1570, Criminal Case No. 1571 and
Criminal Case No. 1572 and Criminal Case No. 1573) and one of the
two charging illegal recruitment (Criminal Case No. 04-1563) were
provisionally dismissed because of the failure of the complainants to
prosecute.5 The seven cases were later permanently dismissed after the
complainants did not revive them within two years, as provided in
Section 8,6 Rule 117 of the Rules of Court.
Trial on the merits ensued as to the remaining cases (Criminal Case No.
04-1562, for illegal recruitment; and Criminal Case No. 04-1564;
Criminal Case No. 04-1566; Criminal Case No. 04-1567; Criminal
Case No. 1569 and Criminal Case No. 04-1574, for estafa). 7
The CA recounted the transactions between the complainants and the
accused, including Inovero, in the following manner:
Regarding Criminal Case No. 04-1562, the prosecution presented the
five (5) private complainants as witnesses to prove the crime of Illegal
Recruitment, namely: Novesa Baful ("Baful"), Danilo Brizuela
("Brizuela"), Rosanna Aguirre ("Aguirre"), Annaliza Amoyo
("Amoyo"), and Teresa Marbella ("Marbella"), and Mildred Versoza
("Versoza") from the Philippine Overseas Employment Administration
("POEA").
Baful testified that on May 20, 2003 she, together with her sister-in-
law, went to Harvel International Talent Management and Promotion
("HARVEL") at Unit 509 Cityland Condominium, Makati City upon
learning that recruitment for caregivers to Japan was on-going there. On
said date, she allegedly met Inovero; Velasco, and Diala, and saw
Inovero conducting a briefing on the applicants. She also testified that
Diala, the alleged talent manager, directed her to submit certain
documents, and to pay Two Thousand Five Hundred Pesos (₱2,500.00)
as training fee, as well as Thirty Thousand Pesos (₱30,000.00) as
placement and processing fees. Diala also advised her to undergo
physical examination.
On June 6, 2003, after complying with the aforesaid requirements and
after paying Diala the amounts of Eighteen Thousand Pesos
(₱18,000.00) and Ten Thousand pesos (₱10,000.00), Baful was
promised deployment within two (2) to three (3) months. She likewise
testified that Inovero briefed her and her co-applicants on what to wear
on the day of their departure. However, she was never deployed.
Finally, she testified that she found out that HARVEL was not licensed
to deploy workers for overseas employment.
Brizuela, another complainant, testified that he went to HARVEL’s
office in Makati on February 7, 2003 to inquire on the requirements and
hiring procedure for a caregiver in Japan. There, Diala told him the
amount required as processing fee and the documents to be submitted.
And when he submitted on March 7, 2003 the required documents and
payments, it was, this time, Paulino who received them. He claimed
that he underwent training and medical examination; he likewise
attended an orientation conducted by Inovero at which time, he and his
batchmates were advised what clothes to wear on the day of their
departure; he was assured of deployment on the first week of June
2003, however, on the eve of his supposed "pre-departure orientation
seminar," Paulino texted him that the seminar was cancelled because
Inovero, who had the applicants’ money, did not show up. He testified
that he was not deployed. Neither was his money returned, as promised.
On cross-examination, Brizuela testified that Inovero was the one who
conducted the orientation, and represented to all the applicants that
most of the time, she was in the Japanese Embassy expediting the
applicants’ visa.
Aguirre, the third complainant to testify, alleged that she went to
HARVEL on May 22, 2003, to apply as caregiver in Japan; there, Diala
informed her that Inovero was oneof the owners of HARVEL and
Velasco was its President; she paid Thirty Five Thousand Pesos
(₱35,000.00), and submitted her documents, receipt of which was
acknowledged by Diala; despite her undergoing medical examination
and several training seminars, she was however not deployed to Japan.
Worse, she found out that HARVEL was not licensed to recruit
workers.
Amoyo, the fourth complainant, testified that she went to HARVEL’s
office on May 28, 2003 to apply as caregiver in Japan, and Diala
required her to submit certain documents, to undergo training and
medical examination, and to pay Thirty Five Thousand Pesos
(₱35,000.00) as placement and processing fees. However, after
complying with said requirements, she was never deployed as
promised.
Marbella was the last complainant to testify. She alleged that she
applied for the position of janitress at HARVEL sometime in December
2002; just like the rest of the complainants, she was required to submit
certain documents and to pay a total amount of Twenty Thousand pesos
(₱20,000.00) as processing fee; after paying said fee, Diala and Inovero
promised her and the other applicants that they will be deployed in
three (3) months or in June 2003; however, the promised deployment
never materialized; she later found out that HARVEL was not even
licensed to recruit workers.
[Mildred] Versoza, on the other hand, is a Labor and Employment
Officer at the POEA Licensing Branch. She testified that she prepared a
Certification certifying that neither HARVEL nor Inovero was
authorized to recruit workers for overseas employment as per records at
their office.
In her defense, Inovero denied the allegations hurled against her. As
summarized in the assailed Decision, she claimed that she is the niece
of accused Velasco, the owner of HARVEL, but denied working there.
Explaining her presence in HARVEL, she alleged that she worked for
her uncle, Velasco’s husband, as an office assistant, hence, for at least
two or three times a week, she had to go to HARVEL on alleged
errands for her uncle. She also testified that her alleged errands mainly
consisted of serving food and refreshments during orientations at
HARVEL. Inovero likewise denied receiving any money from the
complainants, nor issuing receipts therefor.8
Judgment of the RTC
On January 14, 2008, the RTC rendered judgment acquitting Inovero of
five counts of estafabut convicting her in Criminal Case No. 04-1562 of
illegal recruitment committed in large scale as defined and penalized by
Section 6 and Section 7 of Republic Act No. 8042 (Migrant Workers
and Overseas Filipinos Act of 1995), disposing thusly:
WHEREFORE, judgment is hereby rendered in the aforestated cases as
follows:
In Criminal Case No. 04-1562, accused Maricar Inovero is found guilty
beyond reasonable doubt of the crime of Illegal Recruitment in large
scale defined and penalized under Sections 6 and 7, II, of Republic Act
No. 8042 otherwise known as the ‘Migrant Workers and Overseas
Filipinos Act of 1995’, and is hereby sentenced to suffer the penalty of
life imprisonment. She is likewise ordered to pay a fine of Five
Hundred Thousand Pesos (₱500,000.00).
Criminal Case No. 04-1563 also for illegal recruitment in large scale is
hereby ordered dismissed to its finality for failure of complainants
Alvin De Leon, Roderick Acuna, Agosto Vale and Marina Viernes to
revive said case despite the lapse of two years from its provisional
dismissal.
Criminal Cases No. 04-1564, 1566, 1567, 1569, 1571 and 1574 are
hereby ordered DISMISSED for failure of the prosecution to adduce
sufficient evidence to prove all the elements of the said offense.
Criminal Cases Nos. 1565, 1568, 1570, 1572 and 1573 also for estafa
[are] hereby ordered dismissed to its finality for failure of complainants
Agosto Vale, Alvin De Leon, Roselyn Saruyda, Roderick Acuna and
Marina Viernes to revive said cases despite the lapse of two (2) years
from its provisional dismissal.
Considering that the accused is a detention prisoner, she shall be
credited in the service of her sentence with the full time during which
she has undergone preventive imprisonment if she agrees voluntarily to
abide by the same disciplinary rules imposed upon convicted prisoners,
otherwise, with four-fifths thereof.
Meanwhile, considering that the accused Ma. Harleta B. Velasco,
Marissa Diala and Berna Paulino are still at large, let alias warrants of
arrest be issued against them. In the meantime, let the cases filed
against them be archived, which shall be revived upon their
apprehension.
SO ORDERED.9
Decision of the CA
Inovero appealed, contending that:
THE TRIAL COURT GRAVELY ERRED IN FINDING
ACCUSEDAPPELLANT GUILTY OF THE CRIME CHARGED
DESPITE THE PROSECUTION’S FAILURE TO ESTABLISH [HER]
GUILT BEYOND REASONABLE DOUBT.10
On August 26, 2010, the CA affirmed the conviction, viz:
WHEREFORE, the instant appeal is DISMISSED. The January 14,
2008 Decision of the RTC is AFFIRMED.
SO ORDERED.11
Issue
In this appeal, Inovero insists that the CA erred in affirming her
conviction by the RTC because she had not been an employee of Harvel
at any time; that she could be faulted only for her association with the
supposed illegal recruiters; that in all stages of the complainants’
recruitment for overseas employment by Harvel, they had transacted
only and directly with Diala; and that the certification from the POEA
to the effect she was not a licensed recruiter was not a positive proof
that she engaged in illegal recruitment.
Ruling of the Court
The appeal lacks merit.
In its assailed decision, the CA affirmed the entire findings of fact of
the RTC, stating:
The essential elements of illegal recruitment committed in large scale
are: (1) that the accused engaged in acts of recruitment and placement
of workers as defined under Article 13(b) of the Labor Code, or in any
prohibited activities under Article 34 of the same Code; (2) that the
accused had not complied with the guidelines issued by the Secretary of
Labor and Employment with respect to the requirement to secure a
license or authority to recruit and deploy workers; and (3) that the
accused committed the unlawful acts against 3 or more persons. In
simplest terms, illegal recruitment is committed by persons who,
without authority from the government, give the impression that they
have the power to send workers abroad for employment purposes. In
Our view, despite Inovero’s protestations that she did not commit
illegal recruitment, the following circumstances contrarily convince Us
that she was into illegal recruitment.
First, private complainants Baful and Brizuela commonly testified that
Inovero was the one who conducted orientations/briefings on them;
informed them, among others, on how much their salary would be as
caregivers in Japan; and what to wear when they finally will be
deployed. Second, when Diala introduced her (Inovero) to private
complainant Amoyo as one of the owners of HARVEL, Inovero did not
bother to correct said representation. Inovero’s silence is clearly an
implied acquiescence to said representation.
Third, Inovero, while conducting orientation on private complainant
Brizuela, represented herself as the one expediting the release of
applicants’ working visa for Japan.
Fourth, in a Certification issued and attested to by POEA’s Versoza –
Inovero had no license nor authority to recruit for overseas
employment.
Based on the foregoing, there is therefore no doubt that the RTC
correctly found that Inovero committed illegal recruitment in large
scale by giving private complainants the impression that she can send
them abroad for employment purposes, despite the fact that she had no
license or authority to do so.12
It is basic that the Court, not being a trier of facts, must of necessity
rely on the findings of fact by the trial court which are conclusive and
binding once affirmed by the CA on intermediate review. The
bindingness of the trial court’s factual findings is by virtue of its direct
access to the evidence. The direct access affords the trial court the
unique advantage to observe the witnesses’ demeanor while testifying,
and the personal opportunity to test the accuracy and reliability of their
recollections of past events, both of which are very decisive in a
litigation like this criminal prosecution for the serious crime of illegal
recruitment committed in large scale where the parties have disagreed
on the material facts. The Court leaves its confined precinct of dealing
only with legal issues in order to deal with factual ones only when the
appellant persuasively demonstrates a clear error in the appreciation of
the evidence by both the trial and the appellate courts. This
demonstration was not done herein by the appellant. Hence, the Court
upholds the CA’s affirmance of the factual findings by the trial court.
All that Inovero’s appeal has offered was her denial of complicity in the
illegal recruitment of the complainants. But the complainants credibly
described and affirmed her specific acts during the commission of the
crime of illegal recruitment. Their positive assertions were far
trustworthier than her mere denial.
Denial, essentially a negation of a fact, does not prevail over an
affirmative assertion of the fact.1âwphi1 Thus, courts – both trial and
appellate – have generally viewed the defense of denial in criminal
cases with considerable caution, if not with outright rejection. Such
judicial attitude comes from the recognition that denial is inherently
weak and unreliable by virtue of its being an excuse too easy and too
convenient for the guilty to make. To be worthy of consideration at all,
denial should be substantiated by clear and convincing evidence. The
accused cannot solely rely on her negative and self-serving negations,
for denial carries no weight in law and has no greater evidentiary value
than the testimony of credible witnesses who testify on affirmative
matters.13 It is no different here.
We concur with the RTC and the CA that Inovero was criminally liable
for the illegal recruitment charged against her. Strong and positive
evidence demonstrated beyond reasonable doubt her having conspired
with her co-accused in the recruitment of the complainants. The
decision of the CA amply recounted her overt part in the conspiracy.
Under the law, there is a conspiracy when two or more persons come to
an agreement concerning the commission of a felony, and decide to
commit it.14
The complainants paid varying sums for placement, training and
processing fees, respectively as follows: (a) Baful – ₱28,500.00; (b)
Brizuela – ₱38,600.00; (c) Aguirre – ₱38,600.00; (d) Amoyo –
₱39,000.00; and (e) Marbella – ₱20,250.00. However, the RTC and the
CA did not adjudicate Inovero’s personal liability for them in their
judgments. Their omission needs to be corrected, notwithstanding that
the complainants did not appeal, for not doing so would be patently
unjust and contrary to law. The Court, being the ultimate reviewing
tribunal, has not only the authority but also the duty to correct at any
time a matter of law and justice. It is, indeed, a basic tenet of our
criminal law that every person criminally liable is also civilly
liable.15 Civil liability includes restitution, reparation of the damage
caused, and indemnification for consequential damages. 16 To enforce
the civil liability, the Rules of Court has deemed to be instituted with
the criminal action the civil action for the recovery of civil liability
arising from the offense charged unless the offended party waives the
civil action, or reserves the right to institute the civil action separately,
or institutes the civil action prior to the criminal action. 17 Considering
that the crime of illegal recruitment, when it involves the transfer of
funds from the victims to the accused, is inherently in fraud of the
former, civil liability should include the return of the amounts paid as
placement, training and processing fees. 18 Hence, Inovero and her co-
accused were liable to indemnify the complainants for all the sums
paid.
That the civil liability should be made part of the judgment by the RTC
and the CA was not disputable. The Court pointed out in Bacolod v.
People19 that it was "imperative that the courts prescribe the proper
penalties when convicting the accused, and determine the civil liability
to be imposed on the accused, unless there has been a reservation of the
action to recover civil liability or a waiver of its recovery," because:
It is not amiss to stress that both the RTC and the CA disregarded their
express mandate under Section 2, Rule 120 of the Rules of Court to
have the judgment, if it was of conviction, state: "(1) the legal
qualification of the offense constituted by the acts committed by the
accused and the aggravating or mitigating circumstances which
attended its commission; (2) the participation of the accused in the
offense, whether as principal, accomplice, or accessory after the fact;
(3) the penalty imposed upon the accused; and (4) the civil liability or
damages caused by his wrongful act or omission to be recovered from
the accused by the offended party, if there is any, unless the
enforcement of the civil liability by a separate civil action has been
reserved or waived." Their disregard compels us to act as we now do
lest the Court be unreasonably seen as tolerant of their omission. That
the Spouses Cogtas did not themselves seek the correction of the
omission by an appeal is no hindrance to this action because the Court,
as the final reviewing tribunal, has not only the authority but also the
duty to correct at any time a matter of law and justice.
We also pointedly remind all trial and appellate courts to avoid omitting
reliefs that the parties are properly entitled to by law or in equity under
the established facts. Their judgments will not be worthy of the name
unless they thereby fully determine the rights and obligations of the
litigants. It cannot be otherwise, for only by a full determination of such
rights and obligations would they be true to the judicial office of
administering justice and equity for all. Courts should then be alert and
cautious in their rendition of judgments of conviction in criminal cases.
They should prescribe the legal penalties, which is what the
Constitution and the law require and expect them to do. Their
prescription of the wrong penalties will be invalid and ineffectual for
being done without jurisdiction or in manifest grave abuse of discretion
amounting to lack of jurisdiction. They should also determine and set
the civil liability ex delicto of the accused, in order to do justice to the
complaining victims who are always entitled to them. The Rules of
Court mandates them to do so unless the enforcement of the civil
liability by separate actions has been reserved or waived. 20
What was the extent of Inovero’s civil liability?
The nature of the obligation of the co-conspirators in the commission of
the crime requires solidarity, and each debtor may be compelled to pay
the entire obligation.21 As a co-conspirator, then, Inovero’s civil
liability was similar to that of a joint tortfeasor under the rules of the
civil law. Joint tortfeasors are those who command, instigate, promote,
encourage, advise, countenance, cooperate in, aid or abet the
commission of a tort, or who approve of it after it is done, if done for
their benefit.22 They are also referred to as those who act together in
committing wrong or whose acts, if independent of each other, unite in
causing a single injury.23 Under Article 2194 of the Civil Code, joint
tortfeasors are solidarily liable for the resulting damage. In other words,
joint tortfeasors are each liable as principals, to the same extent and in
the same manner as if they had performed the wrongful act themselves.
As regards the extent of their respective liabilities, the Court expressed
in Far Eastern Shipping Company v. Court of Appeals:24
x x x. Where several causes producing an injury are concurrent and
each is an efficient cause without which the injury would not have
happened, the injury may be attributed to all or any of the causes and
recovery may be had against any or all of the responsible persons
although under the circumstances of the case, it may appear that one of
them was more culpable, and that the duty owed by them to the injured
person was not same. No actor’s negligence ceases to be a proximate
cause merely because it does not exceed the negligence of other acts.
Each wrongdoer is responsible for the entire result and is liable as
though his acts were the sole cause of the injury.
There is no contribution between joint tort-feasors whose liability is
solidary since both of them are liable for the total damage. Where the
concurrent or successive negligent acts or omissions of two or more
persons, although acting independently, are in combination the direct
and proximate cause of a single injury to a third person, it is impossible
to determine in what proportion each contributed to the injury and
either of them is responsible for the whole injury. x x x
It would not be an excuse for any of the joint tortfeasors to assert that
her individual participation in the wrong was insignificant as compared
to those of the others.25 Joint tortfeasors are not liable pro rata. The
damages cannot be apportioned among them, except by themselves.
They cannot insist upon an apportionment, for the purpose of each
paying an aliquot part. They are jointly and severally liable for the
whole amount.26 Hence, Inovero’s liability towards the victims of their
illegal recruitment was solidary, regardless of whether she actually
received the amounts paid or not, and notwithstanding that her co-
accused, having escaped arrest until now, have remained untried.
Under Article 2211 of the Civil Code, interest as part of the damages
may be adjudicated in criminal proceedings in the discretion of the
court. The Court believes and holds that such liability for interest
attached to Inovero as a measure of fairness to the complainants. Thus,
Inovero should pay interest of 6% per annum on the sums paid by the
complainants to be reckoned from the finality of this judgment until full
payment.27
WHEREFORE, the Court AFFIRMS the decision promulgated on
August 26, 2010, subject to the MODIFICATION that appellant
Maricar B. Inovero is ordered to pay by way of actual damages to each
of the complainants the amounts paid by them for placement, training
and processing fees, respectively as follows:
(a) Noveza Baful - ₱28,500.00;
(b) Danilo Brizuela - ₱38,600.00;
(c) Rosanna Aguirre - ₱38,600.00;
(d) Annaliza Amoyo - ₱39,000.00; and
(e) Teresa Marbella - ₱20,250.00.
plus interest on such amounts at the rate of six percent (6%) per annum
from the finality of this judgment until fully paid.

Inovero shall further pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice

TERESITA J. LEONARDO- MARTIN S. VILLARAMA,

DE CASTRO JR.
Associate Justice Associate Justice

BIENVENIDO L. REYES
Associate Justice

CIVIL LAW

3.

SECOND DIVISION

January 27, 2016

G.R. No. 217694

FAIRLAND KNITCRAFT CORPORATION, Petitioner,  where a defendant failed to file his answer, there was no need for a
vs.
ARTURO LOO PO, Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari1 seeking to reverse and set
aside the October 31, 2014 Decision 2 and the March 6, 2015
Resolution3 of the Court of Appeals (CA), in CA-G.R. SP No. 134701
which affirmed the September 16, 2013 Decision4 of the Regional Trial
Court of Pasig City, Branch 67 (RTC) in SCA Case No. 3831. The RTC
decision, in turn, sustained the March 21, 2013 Decision 5 of the
Metropolitan Trial Court, Branch 72, Pasig City (MeTC), which
dismissed the unlawful detainer case filed by petitioner Fairland
Knitcraft Corporation (Fairland) against respondent Arturo Loo
Po (Po) for failure to prove its case by preponderance of evidence.
The Antecedents
In a complaint6 for unlawful detainer, docketed as Civil Case No.
19429, filed before the MeTC, Fairland alleged that it was the owner of
Condominium Unit No. 205 in Cedar Mansion II on Ma. Escriba Street,
Pasig City. The said unit was leased by Fairland to Po by verbal
agreement, with a rental fee of P20,000.00 a month, to be paid by Po at
the beginning of each month. From March 2011, Po had continuously
failed to pay rent. For said reason, Fairland opted not to renew the lease
agreement anymore.
On January 30, 2012, Fairland sent a formal letter 7 to Po demanding
that he pay the amount of P220,000.00, representing the rental arrears,
and that he vacate the leased premises within fifteen (15) days from the
receipt of the letter. Despite receipt of the demand letter and the lapse
of the said 15-day period to comply, Po neither tendered payment for
the unpaid rent nor vacated the premises. Thus, on December 12, 2012,
Fairland was constrained to file the complaint for unlawful detainer
before the MeTC. Po had until January 7, 2013 to file his answer but he
failed to do so. Hence, on February 6, 2013, Fairland filed a motion to
render judgment.8
In its February 21, 2013 Order, 9 the MeTC considered the case
submitted for decision.
On March 1, 2013, Po’s counsel filed his Entry of Appearance with
Motion for Leave of Court to file Comment/Opposition to Motion to
Render Judgment.10 In the attached Comment/Opposition, Po denied the
allegations against him and commented that there was no supporting
document that would show that Fairland owned the property; that there
was no lease contract between them; that there were no documents
attached to the complaint which would show that previous demands had
been made and received by him; that the alleged unpaid rental was
P220,000.00, but the amount of damages being prayed for was
P440,000.00; that the issue in the case was one of ownership; and that it
was the RTC which had jurisdiction over the case.
The MeTC treated the comment/opposition as Po’s answer to the
complaint. Considering, however, that the case fell under the Rules of
Summary Procedure, the same was deemed filed out of time. Hence, the
motion was denied.11
The Ruling of the Metropolitan Trial Court
In its March 21, 2013 Decision, the MeTC dismissed the complaint for
lack of merit due to Fairland’s failure to prove its claim by
preponderance of evidence. The MeTC explained that although the
complaint sufficiently alleged a cause of action, Fairland failed to prove
that it was entitled to the possession of the subject property. There was
no evidence presented to support its claim against Po either.
Aggrieved, Fairland seasonably filed its appeal before the RTC under
Rule 40 of the Rules of Court. Being an appealed case, the RTC
required the parties to submit their respective memoranda.
In its memorandum,12 Fairland argued that an unlawful detainer case
was a special civil action governed by summary procedure. In cases
declaration of default. Fairland claimed that the Rules stated that in
such cases, judgment should be based on the “facts alleged in the
complaint,”13 and that there was no requirement that judgment must be
based on facts proved by preponderance of evidence. Considering that
the presentation of evidence was not required when a defendant in an
ejectment case failed to appear in a preliminary conference, the same
should be applied when no answer had been filed.
Fairland continued that the failure to file an answer in an ejectment case
was tantamount to an admission by the defendant of all the ultimate
facts alleged in the complaint. There was no more need for evidence in
such a situation as every allegation of ultimate facts in the complaint
was deemed established by the defendant’s acquiescence.
On July 18, 2013, Po filed his memorandum14 and countered that there
was no merit in Fairland’s insistence that evidence was unnecessary
when no answer had been filed. The facts stated in the complaint did
not warrant a rendition of judgment in the plaintiff’s favor. The court
had the discretion to rule on the pleadings based on its evaluation of the
allegation of facts.
Further, all the statements in the complaint were mere allegations which
were not substantiated by any competent evidence. Po asserted that
there was no proof presented to show that the subject property was
indeed owned by Fairland; that there was no lease contract between the
parties; that he never received the demand letter, dated January 30,
2012; and that the amount stated in the prayer of the complaint did not
coincide with the amount of unpaid rent. Po also reiterated that the case
involved an issue of ownership over the condominium unit he was
occupying.
The Ruling of the Regional Trial Court
On September 16, 2013, the RTC affirmed the MeTC ruling and agreed
that Fairland failed to establish its case by preponderance of evidence.
There was nothing on record that would establish Fairland’s right over
the property subject of the complaint. Though it had been consistently
ruled that the only issue for resolution in an ejectment case was the
physical or material possession of the property involved, independent of
any claim of ownership by any of the party-litigants, the court may go
beyond the question of physical possession provisionally. The RTC
concluded that even assuming that Po was not the lawful owner, his
actual physical possession of the subject property created the
presumption that he was entitled to its possession thereof.
Fairland filed a motion for reconsideration 15 attaching its condominium
certificate of title16 over the subject property, but it was denied by the
RTC in its Order,17 dated February 24, 2014.
Undaunted, Fairland filed a petition for review 18 under Rule 42 of the
Rules of Court before the CA.
The Ruling of the Court of Appeals
In the assailed Decision, dated October 31, 2014, the CA dismissed the
petition and ruled that an action for unlawful detainer would not lie
against Po. Notwithstanding the abbreviated proceeding it ordained and
the limited pleadings it allowed, the Rules on Summary Procedure did
not relax the rules on evidence. In order for an action for recovery of
possession to prosper, it was indispensable that he who brought the
action should prove not only his ownership but also the identity of the
property claimed. The CA concluded, however, that Fairland failed to
discharge such bounden duty.
Fairland filed its motion for reconsideration, but it was denied by the
CA in its assailed Resolution, dated March 6, 2015.
Hence, this petition.
ARGUMENTS/DISCUSSIONS
I
IN AN EJECTMENT CASE WHEREIN NO ANSWER WAS
SEASONABLY FILED, IT IS AN ERROR OF LAW TO BASE
JUDGMENT ON PREPONDERANCE OF EVIDENCE
II
HOLDING THAT EVIDENCE IN AN EJECTMENT CASE
SHOULD HAVE BEEN ATTACHED TO THE COMPLAINT IS
AN ERROR OF LAW.19
Fairland argues that in ejectment cases, presentation of evidence was
undertaken through the submission of position papers but the same was
dispensed with when the defendant failed to file an answer or when
either party failed to appear during the preliminary conference. In an
ejectment case, the scope of inquiry should be limited to the sufficiency
of the cause of action stated in the complaint when no seasonable
answer was filed. The attachment of documentary evidence to the
Complaint was not a requirement and was even proscribed by law.
20
In his Comment,  Po countered that the present petition raised a
question of fact. Although couched in different words, the issues raised
here were substantially the same as the issues raised before the CA.
There was no legal basis in Fairland’s assertion that evidence was
dispensed with when no answer to the complaint had been filed. Such
argument would undermine the inherent authority of the courts to
resolve legal issues based on the facts of the case and on the rules on
evidence. Contrary to Fairland’s position, the court decided the case on
the basis of the complaint which was found wanting in preponderance
of evidence.
In its Reply,21 Fairland posited that the petition did not raise mere
questions of fact but one of law as what was being sought for review
was the erroneous dismissal of the ejectment case for lack of
preponderance of evidence. Since no answer was filed and the
complaint sufficiently alleged a cause of action for unlawful detainer, it
became the duty of the MeTC to decide the case in its favor.
The Court’s Ruling
The petition is meritorious.
Complaint has a valid cause of action for Unlawful Detainer
Section 1 of Rule 70 of the Rules of Court lays down the requirements
for filing a complaint for unlawful detainer, to wit:
Section 1. – Who may institute proceedings, and when. – Subject to the
provision of the next succeeding section, a person deprived of the
possession of any land or building by force, intimidation, threat,
strategy, or stealth, or a lessor, vendor, vendee, or other person against
whom the possession of any land or building is unlawfully withheld
after the expiration or termination of the right to hold possession, by
virtue of any contract, express or implied, or the legal representatives or
assigns of any such lessor, vendor, vendee, or other person, may, at any
time within one (1) year after such unlawful deprivation or withholding
of possession, bring an action in the proper Municipal Trial Court
against the person or persons unlawfully withholding or depriving of
possession, or any person or persons claiming under them, for the
restitution of such possession, together with damages and
costs.1âwphi1
Stated differently, unlawful detainer is a summary action for the
recovery of possession of real property. This action may be filed by a
lessor, vendor, vendee, or other person from whom the possession of
any land or building is unlawfully withheld after the expiration or
termination of the right to hold possession by virtue of any contract,
express or implied. The possession of the defendant was originally
legal, as his possession was permitted by the plaintiff on account of an
express or implied contract between them. The defendant’s possession,
however, became illegal when the plaintiff demanded that the defendant
vacate the subject property due to the expiration or termination of the
right to possess under the contract, and the defendant refused to heed
such demand. A case for unlawful detainer must be instituted one year
from the unlawful withholding of possession.22
A complaint sufficiently alleges a cause of action for unlawful detainer
if it recites the following: (1) initially, possession of the property by the
defendant was by contract with or by tolerance of the plaintiff; (2)
eventually, such possession became illegal upon notice by the plaintiff
to the defendant of the termination of the latter’s right of possession; (3)
thereafter, the defendant remained in possession of the property, and
deprived the plaintiff of the enjoyment thereof; and (4) within one (1)
year from the last demand on defendant to vacate the property, the
plaintiff instituted the complaint for ejectment. 23
There is no question that the complaint filed by Fairland adequately
alleged a cause of action for unlawful detainer. The pertinent portion of
the said complaint reads:
xxx
3. Plaintiff is the owner of, and had been leasing to the defendant, the
premises mentioned above as the residence of the latter;
4. There is no current written lease contract between plaintiff and the
defendant, but the latter agreed to pay the former the amount of
Php20,000.00 as rent at the beginning of each month. Thus, the term of
the lease agreement is renewable on a month-to-month basis;
5. Since March 2011, defendant has not been paying the aforesaid rent
despite plaintiff’s repeated demands;
6. Due to defendant’s continuous failure to pay rent, plaintiff reached a
decision not to renew the lease agreement. It sent a formal letter, x x x
demanding defendant to pay the amount of Php220,000.00,
representing defendant’s twelve month rental arrears beginning January
2011, and to vacate the leased premises, both within fifteen (15) days
from receipt of said letter;
7. Despite receipt of the aforesaid demand letter and lapse of the fifteen
day period given to comply with plaintiff’s demand, defendant neither
tendered payment for the unpaid rent nor vacated the leased premises.
Worse, defendant has not been paying rent up to now;
x x x24
The above-cited portions of the complaint sufficiently alleged that
Fairland was the owner of the subject property being leased to Po by
virtue of an oral agreement. There was a demand by Fairland for Po to
pay rent and vacate before the complaint for unlawful detainer was
instituted. The complaint was seasonably filed within the one-year
period prescribed by law. With all the elements present, there was
clearly a cause of action in the complaint for unlawful detainer.
Under the Rules of Summary Procedure, the weight of evidence is not
considered when a judgment is rendered based on the complaint
The question now is whether the MeTC correctly dismissed the case for
lack of preponderance of evidence. Fairland posits that judgment should
have been rendered in its favor on the basis of the complaint itself and
not on its failure to adduce proof of ownership over the subject
property.
The Court agrees with Fairland’s position.
The summons, together with the complaint and its annexes, was served
upon Po on December 28, 2012. This presupposes that the MeTC found
no ground to dismiss the action for unlawful detainer. 25 Nevertheless,
Po failed to file his answer on time and the MeTC had the option to
render judgment motu proprio or on motion of the plaintiff. In relation
thereto, Sections 5 and 6 of the Rules on Summary Procedure provide:
Sec. 5. Answer. – Within ten (10) days from service of summons, the
defendant shall file his answer to the complaint and serve a copy
thereof on the plaintiff. Affirmative and negative defenses not pleaded
therein shall be deemed waived, except for lack of jurisdiction over the
subject matter. Cross-claims and compulsory counterclaims not asserted
in the answer shall be considered barred. The answer to counterclaims
or cross-claims shall be filed and served within ten (10) days from
service of the answer in which they are pleaded.
Sec. 6. Effect of failure to answer. – Should the defendant fail to answer
the complaint within the period above provided, the court, motu proprio
or on motion of the plaintiff, shall render judgment as may be
warranted by the facts alleged in the complaint and limited to what
is prayed for therein. The court may in its discretion reduce the
amount of damages and attorney’s fees claimed for being excessive or
otherwise unconscionable, without prejudice to the applicability of
Section 4, Rule 18 of the Rules of Court, if there are two or more
defendants.
[Emphasis Supplied]
Section 6 is clear that in case the defendant failed to file his answer, the
court shall render judgment, either motu proprio or upon plaintiff’s
motion, based solely on the facts alleged in the complaint and
limited to what is prayed for. The failure of the defendant to timely
file his answer and to controvert the claim against him constitutes his
acquiescence to every allegation stated in the complaint. Logically,
there is nothing to be done in this situation26except to render judgment
as may be warranted by the facts alleged in the complaint. 27
Similarly, under Section 7, Rule 70 of the Rules of Court, which
governs the rules for forcible entry and unlawful detainer, if the
defendant fails to answer the complaint within the period provided, the
court has no authority to declare the defendant in default. Instead, the
court, motu proprio or on motion of the plaintiff, shall render judgment
as may be warranted by the facts alleged in the complaint and limited
to what is prayed for.28
This has been enunciated in the case of Don Tino Realty and
Development Corporation v. Florentino,29 citing Bayog v.
30
Natino,  where the Court held that there was no provision for an entry
of default under the Rules of Summary Procedure if the defendant
failed to file his answer.
In this case, Po failed to file his answer to the complaint despite proper
service of summons. He also failed to provide a sufficient justification
to excuse his lapses.1âwphi1 Thus, as no answer was filed, judgment
must be rendered by the court as may be warranted by the facts alleged
in the complaint.
Failure to attach annexes is not fatal if the complaint alleges a
sufficient cause of action; evidence need not be attached to the
complaint
The lower courts erroneously dismissed the complaint of Fairland
simply on the ground that it failed to establish by preponderance of
evidence its ownership over the subject property. As can be gleaned
above, the rules do not compel the plaintiff to attach his evidence to the
complaint because, at this inception stage, he only has to file his
complaint to establish his cause of action. Here, the court was only
tasked to determine whether the complaint of Fairland alleged a
sufficient cause of action and to render judgment thereon.
Also, there was no need to attach proof of ownership in the complaint
because the allegations therein constituted a sufficient cause of action
for unlawful detainer. Only when the allegations in the complaint are
insufficient to form a cause of action shall the attachment become
material in the determination thereof. Even under Section 4 of the Rules
of Summary Procedure,31 it is not mandatory to attach annexes to the
complaint.
In the case of Lazaro v. Brewmaster32 (Lazaro), where judgment was
rendered based on the complaint due to the failure of the defendant to
file an answer under the Rules of Summary Procedure, it was written
that:
xxx To determine whether the complaint states a cause of action, all
documents attached thereto may, in fact, be considered, particularly
when referred to in the complaint. We emphasize, however, that the
inquiry is into the sufficiency, not the veracity of the material
allegations in the complaint. Thus, consideration of the annexed
documents should only be taken in the context of ascertaining the
sufficiency of the allegations in the complaint.
[Emphasis Supplied]
In Lazaro, the assailed invalid invoices attached to the complaint were
not considered because the complaint already alleged a sufficient cause
of action for collection of sum of money. Those assailed documents
were not the bases of the plaintiff’s action for sum of money, but were
only attached to the complaint to provide evidentiary details on the
alleged transactions.
Similarly, in the case at bench, there was no need for documentary
attachments to prove Fairland’s ownership over the subject
property. First, the present action is an action for unlawful detainer
wherein only de facto or material possession is required to be alleged.
Evidently, the attachment of any deed of ownership to the complaint is
not indispensable because an action for unlawful detainer does not
entirely depend on ownership.
Second, Fairland sufficiently alleged ownership and superior right of
possession over the subject property. These allegations were evidently
manifest in the complaint as Fairland claimed to have orally agreed to
lease the property to Po. The Court is of the view that these allegations
were clear and unequivocal and did not need supporting attachments to
be considered as having sufficiently established its cause of action.
Even the MeTC conceded that the complaint of Fairland stated a valid
cause of action for unlawful detainer. 33 It must be stressed that inquiry
into the attached documents in the complaint is for the sufficiency, not
the veracity, of the material allegations in the complaint.
Third, considering that Po failed to file an answer within the prescribed
period, he was deemed to have admitted all the allegations in the
complaint including Fairland’s claim of ownership. To reiterate, the
failure of the defendant to timely file his answer and controvert the
claim against him constituted his acquiescence to every allegation
stated in the complaint.
In the Entry of Appearance with Motion for Leave of Court to file
Comment/Opposition to Motion to Render Judgment, which was
belatedly filed and so was denied by the MeTC, Po merely denied the
allegations against him without even bothering to aver why he claimed
to have a superior right of possession of the subject property. 34
Fourth, it is only at the later stage of the summary procedure when the
affidavits of witnesses and other evidence on factual issues shall be
presented before the court. Sections 8 and 9 of the Rules on Summary
Procedure state:
Sec. 8. Record of preliminary conference. – Within five (5) days after
the termination of the preliminary conference, the court shall issue an
order stating the matters taken up therein, x x x
Sec. 9. Submission of affidavits and position papers. – Within ten (10)
days from receipt of the order mentioned in the next preceding section,
the parties shall submit the affidavits of their witnesses and other
evidence on the factual issues defined in the order, together with their
position papers setting forth the law and the facts relied upon by them.
[Emphasis Supplied]
Again, it is worth stressing that these provisions are exactly Sections 9
and 10 under Rule 70 of the Rules of Court.
Accordingly, it is only at this part of the proceedings that the parties
will be required to present and offer their evidence before the court to
establish their causes and defenses. Before the issuance of the record of
preliminary conference, the parties are not yet required to present their
respective evidence.
These specific provisions under the Rules of Summary Procedure
which are also reflected in Rule 70 of the Rules of Court, serve their
purpose to immediately settle ejectment proceedings. “Forcible entry
and unlawful detainer cases are summary proceedings designed to
provide for an expeditious means of protecting actual possession or the
right to possession of the property involved. It does not admit of a delay
in the determination thereof. It is a ‘time procedure’ designed to remedy
the situation.35 Thus, as a consequence of the defendant’s failure to file
an answer, the court is simply tasked to render judgment as may be
warranted by the facts alleged in the complaint and limited to what is
prayed for therein.
As the complaint contains a valid cause of action, a judgment can
already be rendered
In order to achieve an expeditious and inexpensive determination of property. The unpaid rentals shall incur a legal interest of six percent
unlawful detainer cases, a remand of this case to the lower courts is no (6%) per annum from January 30, 2012, when the demand to pay and to
longer necessary and the case can be determined on its merits by the vacate was made, up to the finality of this decision. Thereafter, an
Court. interest of six percent (6%) per annum shall be imposed on the total
amount due until full payment is made.
To recapitulate, as Po failed to file his answer on time, judgment shall
be rendered based only on the complaint of Fairland without the need to SO ORDERED.
consider the weight of evidence. As discussed above, the complaint of
Fairland had a valid cause of action for unlawful detainer. JOSE CATRAL MENDOZA
Associate Justice
Consequently, there is no more need to present evidence to establish the
allegation of Fairland of its ownership and superior right of possession WE CONCUR:
over the subject property. Po’s failure to file an answer constitutes an
admission of his illegal occupation due to his non-payment of rentals, ANTONIO T. CARPIO
and of Fairland’s rightful claim of material possession. Thus, judgment Associate Justice
must be rendered finding that Fairland has the right to eject Po from the Chairperson
subject property.
MARIANO C. DEL
ARTURO D. BRION
The Judicial Affidavit Rule CASTILLO
Associate Justice
Associate Justice
On a final note, the Court deems it proper to discuss the relevance of
the Judicial Affidavit Rule or A.M. No. 12-8-8-SC, where documentary MARVIC M.V.F. LEONEN
or object evidence are required to be attached. To begin with, the rule is Associate Justice
not applicable because such evidence are required to be attached to a
judicial affidavit, not to a complaint. Moreover, as the rule took effect
only on January 1, 2013, it cannot be required in this case because this
was earlier filed on December 12, 2012.

Granting that it can be applied retroactively, the rule being essentially

remedial, still it has no bearing on the ruling of this Court.

In the Judicial Affidavit Rule, the attachments of documentary or object

evidence to the affidavits is required when there would be a pre-trial
or preliminary conference or the scheduled hearing. As stated
earlier, where a defendant fails to file an answer, the court shall render
judgment, either motu proprio or upon plaintiff’s motion, based solely
on the facts alleged in the complaint and limited to what is prayed for.
Thus, where there is no answer, there is no need for a pre-trial,
preliminary conference or hearing. Section 2 of the Judicial Affidavit
Rule reads:

Section 2. Submission of Judicial Affidavits and Exhibits in lieu of

direct testimonies. - (a) The parties shall file with the court and serve on
the adverse party, personally or by licensed courier service, not later
than five days before pre-trial or preliminary conference or the
scheduled hearing with respect to motions and incidents, the following:

(1) The judicial affidavits of their witnesses, which shall take the place
of such witnesses' direct testimonies; and

(2) The parties' docun1entary or object evidence, if any, which shall be

attached to the judicial affidavits and marked as Exhibits A, B, C, and
so on in the case of the complainant or the plaintiff, and as Exhibits 1,
2, 3, and so on in the case of the respondent or the defendant.

(b) Should a party or a witness desire to keep the original document or

object evidence in his possession, he may, after the same has been
identified, marked as exhibit, and authenticated, warrant in his judicial
affidavit that the copy or reproduction attached to such affidavit is a
faithful copy or reproduction of that original. In addition, the party or
witness shall bring the original document or object evidence for
comparison during the preliminary conference with the attached copy,
reproduction, or pictures, failing which the latter shall not be admitted.

This is without prejudice to the introduction of secondary evidence in

place of the original when allowed by existing rules.

WHEREFORE, the petition is GRANTED. The October 31, 2014 CIVIL LAW

Decision and the March 6, 2015 Resolution of the Court of Appeals in
CAG. R. SP No. 134701 are hereby REVERSED and SET 4.
ASIDE. Respondent Arturo Loo Po is ORDERED TO
VACATE Condominium Unit No. 205 located in Cedar Mansion II on FIRST DIVISION
Ma. Escriba Street, Pasig City.
February 20, 2017
Respondent Po is further ORDERED TO PAY the rentals-in-arrears,
as well as the rentals accruing in the interim until he vacates the G.R. No. 212690*
SPOUSES ROMEO PAJARES and IDA T. PAJARES, Petitioners  award of ₱200,000.00 as incidental and consequential damages; the
vs.
REMARKABLE LAUNDRY AND DRY CLEANING, represented
by ARCHEMEDES G. SOLIS, Respondent
DECISION
DEL CASTILLO, J.:
Breach of contract may give rise to an action for specific performance
or rescission of contract. 1 It may also be the cause of action in a
complaint for damages filed pursuant to Art. 1170 of the Civil Code. 2 In
the specific performance and rescission of contract cases, the subject
matter is incapable of pecuniary estimation, hence jurisdiction belongs
to the Regional Trial Court (RTC). In the case for damages, however,
the court that has jurisdiction depends upon the total amount of the
damages claimed.
Assailed in this Petition for Review on Certiorari3 is the December 11,
2013 Decision4 of the Court of Appeals (CA) in CA-G.R. CEB SP No.
07711 that set aside the February 19, 2013 Order 5 of the RTC, Branch
17, Cebu City dismissing Civil Case No. CEB-39025 for lack of
jurisdiction.
Factual Antecedents
On September 3, 2012, Remarkable Laundry and Dry Cleaning
(respondent) filed a Complaint denominated as "Breach of Contract and
Damages"6 against spouses Romeo and Ida Pajares (petitioners) before
the RTC of Cebu City, which was docketed as Civil Case No. CEB-
39025 and assigned to Branch 17 of said court. Respondent alleged that
it entered into a Remarkable Dealer Outlet Contract 7 with petitioners
whereby the latter, acting as a dealer outlet, shall accept and receive
items or materials for laundry which are then picked up and processed
by the former in its main plant or laundry outlet; that petitioners
violated Article IV (Standard Required Quota & Penalties) of said
contract, which required them to produce at least 200 kilos of laundry
items each week, when, on April 30, 2012, they ceased dealer outlet
operations on account of lack of personnel; that respondent made
written demands upon petitioners for the payment of penalties imposed
and provided for in the contract, but the latter failed to pay; and, that
petitioners' violation constitutes breach of contract. Respondent thus
prayed, as fol1ows:
WHEREFORE, premises considered, by reason of the above-mentioned
breach of the subject dealer contract agreement made by the defendant,
it is most respectfully prayed of the Honorable Court to order the said
defendant to pay the following incidental and consequential damages
to the plaintiff, to wit:
a) TWO HUNDRED THOUSAND PESOS (PHP200,000.00) plus legal
interest as incidental and consequential [sic] for violating Articles IV
and XVI of the Remarkable Laundry Dealer Contract dated 08
September 2011.
b) Thirty Thousand Pesos (₱30,000.00) as legal expenses.
c) Thirty Thousand Pesos (₱30,000.00) as exemplary damages.
d) Twenty Thousand Pesos (₱20,000.00) as cost of suit.
e) Such other reliefs that the Honorable Court deems as just and
equitable.8 (Italics in the original)
Petitioners submitted their Answer,9 to which respondent filed its
Reply.10
During pre-trial, the issue of jurisdiction was raised, and the parties
were required to submit their respective position papers.
Ruling of the Regional Trial Court
On February 19, 2013, the RTC issued an Order dismissing Civil Case
No. CEB-39025 for lack of jurisdiction, stating:
In the instant case, the plaintiffs complaint is for the recovery of
damages for the alleged breach of contract. The complaint sought the
amount of ₱30,000.00 as legal expenses; the amount of ₱30,000.00 as
exemplary damages; and the amount of ₱20,000.00 as cost of the
suit, or for the total amount of ₱280,000.00 as damages.
Under the provisions of Batas Pambansa Blg. 129 as amended by
Republic Act No. 7691, the amount of demand or claim in the
complaint for the Regional Trial Courts (RTCs) to exercise exclusive
original jurisdiction shall exceed ₱300,000.00; otherwise, the action
shall fall under the jurisdiction of the Municipal Trial Courts. In this
case, the total amount of demand in the complaint is only ₱280,000.00,
which is less than the jurisdictional amount of the RTCs. Hence, this
Court (RTC) has no jurisdiction over the instant case.1âwphi1
WHEREFORE, premises considered, the instant case is hereby
DISMISSED for lack of jurisdiction.
Notify the counsels.
SO ORDERED.11 (Emphasis in the original)
Respondent filed its Motion for Reconsideration, 12 arguing that as Civil
Case No. CEB-39025 is for breach of contract, or one whose subject is
incapable of pecuniary estimation, jurisdiction thus falls with the RTC.
However, in an April 29, 2013 Order,13 the RTC held its ground.
Ruling of the Court of Appeals
Respondent filed CA-G.R. CEB SP No. 07711, a Petition
for Certiorari14 seeking to nullify the RTC's February 19, 2013 and
April 29, 2013 Orders. It argued that the RTC acted with grave abuse of
discretion in dismissing Civil Case No. CEB-39025. According to
respondent, said case is one whose subject matter is incapable of
pecuniary estimation and that the damages prayed for therein are
merely incidental thereto. Hence, Civil Case No. CEB-39025 falls
within the jurisdiction of the RTC pursuant to Section 19 of Batas
Pambansa Blg. 129, as amended (BP 129).
On December 11, 2013, the CA rendered the assailed Decision setting
aside the February 19, 2013 Order of the RTC and remanding the case
to the court a quo for further proceedings. It held as follows:
In determining the jurisdiction of an action whose subject is incapable
of pecuniary estimation, the nature of the principal action or remedy
sought must first be ascertained. If it is primarily for the recovery of a
sum of money, the claim is considered capable of pecuniary estimation
and the jurisdiction of the court depends on the amount of the claim.
But, where the primary issue is something other than the right to
recover a sum of money, where the money claim is purely incidental to,
or a consequence of the principal relief sought, such are actions whose
subjects are incapable of pecuniary estimation, hence cognizable by the
RTCs.15
x x xx
Verily, what determines the nature of the action and which court has
jurisdiction over it are the allegations of the complaint and the character
of the relief sought.16
In our considered view, the complaint, is one incapable of pecuniary
estimation; thus, one within the RTC's jurisdiction. x x x
x x xx
A case for breach of contract [sic] is a cause of action either for specific
performance or rescission of contracts. An action for rescission of
contract, as a counterpart of an action for specific performance, is
incapable of pecuniary estimation, and therefore falls under the
jurisdiction of the RTC.17
Thus, the totality of damages principle finds no application in the
instant case since the same applies only when damages is principally
and primarily demanded in accordance with the specification in
Administrative Circular No. 09-94 which reads: 'in cases where the
claim for damages is the main cause of action ... the amount of such
claim shall be considered in determining the jurisdiction of the court.'
Thus, the court a quo should not have dismissed the instant case.
WHEREFORE, in view of the foregoing, the Order dated February 19,
2013 of the Regional Trial Court, 7th Judicial Region, Branch 17, Cebu
City in Civil Case No. CEB-39025 for Breach of Contract and Damages
is hereby REVERSED and SET ASCDE. This case is hereby
REMANDED to the RTC which is ORDERED to PROCEED with the
trial on the merits with dispatch.
SO ORDERED.18
Petitioners sought to reconsider, but were denied. Hence, the present
Petition.
Issue
In a June 29, 2015 Resolution, 19 this Court resolved to give due course
to the Petition, which claims that the CA erred in declaring that the
RTC had jurisdiction over respondent's Complaint which, although
denominated as one for breach of contract, is essentially one for simple
payment of damages.
Petitioners' Arguments
In praying that the assailed CA dispositions be set aside and that the
RTC's February 19, 2013 Order dismissing Civil Case No. CEB-39025
be reinstated, petitioners in their Petition and Reply 20 espouse the
original findings of the RTC that Civil Case No. CEB-39025 is for the
recovery of a sum of money in the form of damages. They asserted that
in determining jurisdiction over the subject matter, the allegations in the
Complaint and the principal relief in the prayer thereof must be
considered; that since respondent merely prayed for the payment of
damages in its Complaint and not a judgment on the claim of breach of
contract, then jurisdiction should be determined based solely on the
total amount of the claim or demand as alleged in the prayer; that while
breach of contract may involve a claim for specific performance or
rescission, neither relief was sought in respondent's Complaint; and,
that respondent "chose to focus his [sic] primary relief on the payment
of damages,"21 which is "the true, actual, and principal relief sought,
and is not merely incidental to or a consequence of the alleged breach
of contract."22Petitioners conclude that, applying the totality of claims
rule, respondent's Complaint should be dismissed as the claim stated
therein is below the jurisdictional amount of the RTC.
Respondent's Arguments
Respondent, on the other hand, counters in its Comment 23 that the CA is
correct in declaring that Civil Case No. CEB-39025 is primarily based
on breach of contract, and the damages prayed for are merely incidental
to the principal action; that the Complaint itself made reference to the
Remarkable Dealer Outlet Contract and the breach committed by
petitioners, which gave rise to a cause of action against the latter; and,
that with the filing of the case, the trial court was thus called upon to
determine whether petitioners violated the dealer outlet contract, and if
so, the amount of damages that may be adjudged in respondent's favor.
Our Ruling
The Court grants the Petition. The RTC was correct in categorizing
Civil Case No. CEB-39025 as an action for damages seeking to recover
an amount below its jurisdictional limit.
Respondent's complaint denominated
as one for "'Breach of Contract & Cortes St., Mandaue City.
Damages" is neither an action for
specific performance nor a complaint
for rescission of contract.
In ruling that respondent's Complaint is incapable of pecuniary
estimation and that the RTC has jurisdiction, the CA comported itself
with the following ratiocination:
A case for breach of contract [sic] is a cause of action either for specific
performance or rescission of contracts. An action for rescission of
contract, as a counterpart of an action for specific performance, is
incapable of pecuniary estimation, and therefore falls under the
jurisdiction of the RTC.24
without, however, determining whether, from the four corners of the
Complaint, respondent actually intended to initiate an action for
specific performance or an action for rescission of contract. Specific
performance is ''[t]he remedy of requiring exact performance of a
contract in the specific form in which it was made, or according to the
precise terms agreed upon. [It is t]he actual accomplishment of a
contract by a party bound to fulfill it." 25 Rescission of contract under
Article 1191 of the Civil Code, on the other hand, is a remedy available
to the obligee when the obligor cannot comply with what is incumbent
upon him.26 It is predicated on a breach of faith by the other party who
violates the reciprocity between them. Rescission may also refer to a
remedy granted by law to the contracting parties and sometimes even to
third persons in order to secure reparation of damages caused them by a
valid contract; by means of restoration of things to their condition in
which they were prior to the celebration of the contract. 27
In a line of cases, this Court held that –
In determining whether an action is one the subject matter of which is
not capable of pecuniary estimation this Court has adopted the criterion
of first ascertaining the nature of the principal action or remedy sought.
If it is primarily for the recovery of a sum of money, the claim is
considered capable of pecuniary estimation, and whether jurisdiction is
in the municipal trial courts or in the courts of first instance would
depend on the amount of the claim. However, where the basic issue is
something other than the right to recover a sum of money, where the
money claim is purely incidental to, or a consequence of, the principal
relief sought, this Court has considered such actions as cases where the
subject of the litigation may not be estimated in terms of money, and
are cognizable exclusively by courts 1of first instance (now Regional
Trial Courts).28
To write finis to this controversy, therefore, it is imperative that we first
determine the real nature of respondent's principal action, as well as the
relief sought in its Complaint, which we 1quote in haec verba:
REPUBLIC OF THE PHILIPPNES
REGIONAL TRIAL COURT
BRANCH ______
CEBU CITY
Remarkable Laundry and Dry Cleaning herein represented by Civil
Archemedes G. Solis, Plaintiff, For:
& Damages
vs.  
Spouses Romeo Pajares and Ida T. Pajares,
Defendants.
--------------------------------------------------------------------------------------
--------------------
COMPLAINT
Plaintiff, by counsels, to the Honorable Court most respectfully states
THAT:
1. Plaintiff Remarkable Laundry and Dry Cleaning Services, is a sole
proprietorship business owned by Archemedes Solis with principal
office address at PREDECO CMPD AS-Ostechi Bldg. Banilad, Heman
2. Defendant Ida Pajares is of legal age, Filipino, married with address
at Hermag Village, Basak Mandaue City where she can be served with
summons and other processes of the Honorable Court.
3. On 08 SEP 2011, parties entered and signed a Remarkable Laundry
Dealer Outlet Contract for the processing of laundry materials, plaintiff
being the owner of Remarkable Laundry and the defendant being the
authorized dealer of the said business. (Attached and marked as Annex
"A" is a copy of the Remarkable Laundry Dealer Outlet Contract.)
CAUSES OF ACTION:
4. Sometime on [sic] the second (2nd) quarter of 2012, defendant failed
to follow the required standard purchase quota mentioned in article IV
of the subject dealership agreement.
5. Defendant through a letter dated April 24, 2012 said it [sic] would
CEASE OPERATION. It [sic] further stated that they [sic] would just
notify or advise the office when they are [sic] ready for the business
again making the whole business endeavor totally dependent upon their
[sic] whims and caprices. (Attached and marked as Annex "B'' is a copy
of letter of the defendant dated April 24, 2012.)
6. The aforementioned act of unilateral cessation of operation by the
defendant constitutes a serious breach to [sic] the contract because it
totally, whimsically and grossly disregarded the Remarkable Laundry
Dealer Outlet Contract, which resulted to [sic] failure on its part in
obtaining the minimum purchase or delivery of 200 kilos per week for
the entire duration of its cessation of operations.
7. Under the aforementioned Dealer Contract, specifically in Article
XV of the same are classified as BREACH BY THE OUTLETS:
'The parties agree that the happening of any of the stipulation and
events by the dealer outlet is otherwise [sic] in default of any of its
obligations or violate any of the terms and condition under this
agreement.
Any violation of the above-mentioned provisions shall result in the
immediate termination of this agreement, without prejudice to any of
the RL Main Operators rights or remedies granted to it by law.
THE DEALER OUTLET SHALL ALSO BE LIABLE TO PAY A
FINE OF TWENTY FIVE THOUSAND PESOS, (₱25,000), FOR
EVERY VIOLATION AND PHP 50,000 IF PRE-TERMINATION BY
THE RL MAIN OPERATOR DUE TO BREACH OF THIS
AGREEMENT.'
8. Likewise it is provided in the said contract that:
' ... The DEALER OUTLET must have a minimum 200 kilos on a six-
day or per week pick-up for the entire duration of the contract to free
the dealer outlet from being charge[d] Php 200/week on falling below
required minimum kilos per week of laundry materials. Automatic
charging shall become part of the billing on the services of the dealer
outlet on cases where the minimum requirements on required kilos are
not met.[']
9. The cessation of operation by the defendant, which is tantamount to
gross infraction to [sic] the subject contract, resulted to [sic] incidental
damages amounting to Two Hundred Thousand Pesos
(PHP200,000.00). Defendant should have opted to comply with the Pre-
termination clause in the subject contract other than its [sic] unilateral
and whimsical cessation of operations.
10. The plaintiff formally reminded the defendant of her obligations
under the subject contract through demand letters, but to no avail. The
defendant purposely ignored the letters by [sic] the plaintiff. (Attached
and marked as Annex "C" to "C-2" are the Demand Letters dated May
2, 2012, June 2, 2012 and June 19, 2012 respectively.)
11. To reiterate, the defendant temporarily stopped its business
operation prior to the two-year contract duration had elapsed to the
prejudice of the plaintiff, which is a clear disregard of its two-year
obligation to operate the business unless a pre-termination is called.
12. Under Article 1159 of the Civil Code of the Philippines provides
[sic]:
'Obligations arising .from contracts have the force of law between the
contracting parties and should be complied with in good faith. '
13. Likewise, Article 1170 of the Civil Code of the Philippines
[provides] that:
'Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the
tenor thereof are liable for damages. '
14. That the above-mentioned violations by the defendant to the
Remarkable Laundry Dealer Contract, specifically Articles IV and XVI
thereof constitute gross breach of contract which are unlawful and
malicious under the Civil Code of the Philippines, which caused the
plaintiff to incur incidental and consequential damages as found in the
subject dealer contract in the total amount of Two Hundred Thousand
Pesos (PHP200,000.00) and incidental legal expenses to protect its
rights in the amount of ₱30,000.00.
PRAYER:
WHEREFORE, premises considered, by reason of the above-mentioned
breach of the subject dealer contract agreement made by the defendant,
it is most respectfully prayed of the Honorable Court to order the said
defendant to pay the following incidental and consequential damages
to the plaintiff, to wit:
a) TWO HUNDRED THOUSAND PESOS (PHP200,000.00) plus legal
interest as incidental and consequential [damages] for violating
Articles IV and XVI of the Remarkable Laundry Dealer Contract
dated 08 SEP 2011;
b) Thirty Thousand Pesos (₱30,000.00) as legal expenses;
c) Thirty Thousand Pesos (₱30,000.00) as exemplary damages;
d) Twenty Thousand Pesos (₱20,000.00) as cost of suit;
e) Such other reliefs that the Honorable Court deems as just and
equitable.
August 31, 2012, Cebu City, Philippines.29
An analysis of the factual and material allegations in the Complaint
shows that there is nothing therein which would support a conclusion
that respondent's Complaint is one for specific performance or
rescission of contract. It should be recalled that the principal obligation
of petitioners under the Remarkable Laundry Dealership Contract is to
act as respondent's dealer outlet. Respondent, however, neither asked
the RTC to compel petitioners to perfom1 such obligation as
contemplated in said contract nor sought the rescission thereof. The
Complaint's body, heading, and relief are bereft of such allegation. In
fact, neither phrase appeared on or was used in the Complaint when, for
purposes of clarity, respondent's counsels, who are presumed to be
learned in law, could and should have used any of those phrases to
indicate the proper designation of the Complaint. To the contrary,
respondent's counsels designated the Complaint as one for "Breach of
Contract & Damages," which is a misnomer and inaccurate. This
erroneous notion was reiterated in respondent's Memorandum 30 wherein
it was stated that "the main action of CEB 39025 is one for a breach of
contract."31 There is no such thing as an "action for breach of contract."
Rather, "[b]reach of contract is a cause of action, 32 but not the action or
relief itself"33 Breach of contract may be the cause of action in a
complaint for specific performance or rescission of contract, both of
which are incapable of pecuniary estimation and, therefore, cognizable
by the RTC. However, as will be discussed below, breach of contract
may also be the cause of action in a complaint for damages.
A complaint primarily seeking to
enforce the accessory obligation
contained in the penal clause is actually
an action for damages capable of
pecuniary estimation.
Neither can we sustain respondent's contention that its Complaint is
incapable of pecuniary estimation since it primarily seeks to enforce the
penal clause contained in Article IV of the Remarkable Dealer Outlet
Contract, which reads:
Article IV: STANDARD REQUIRED QUOTA & PENALTIES
In consideration [sic] for such renewal of franchise-dealership rights,
the dealer outlet must have a minimum 200 kilos on a six-day or per
week pick-up for the entire duration of the contract to FREE the dealer
outlet from being charge [sic] Php200/week on falling below required
minimum kilos per week of laundry materials. Automatic charging shall
become part of the billing on the services of the dealer outlet on cases lodged with the RTC. Otherwise, jurisdiction belongs to the Municipal
where the minimum requirements on required kilos are not met. Trial Court.40

The RL Main Operator has the option to cancel, terminate this The above jurisdictional amount had been increased to ₱200,000.00 on
dealership outlet contract, at its option should [sic] in the event that March 20, 1999 and further raised to ₱300,000.00 on February 22, 2004
there are unpaid services equivalent to a two-week minimum required pursuant to Section 5 of RA 7691.41
number of kilos of laundry materials but not ₱8,000 worth of
collectibles, for services performed by the RL Main Operator or its Then in Administrative Circular No. 09-94 42 this Court declared that
assigned Franchise Outlet, unpaid bills on ordered and delivered "where the claim for damages is the main cause of action, or one of the
support products, falling below required monthly minimum number of causes of action, the amount of such claim shall be considered in
kilos. determining the jurisdiction of the court." In other words, where the
complaint primarily seeks to recover damages, all claims for damages
Ten [percent] (10%) interest charge per month will be collected on all should be considered in determining which court has jurisdiction over
unpaid obligations but should not be more than 45 days or an additional the subject matter of the case regardless of whether they arose from a
10% on top of uncollected amount shall be imposed and shall earn single cause of action or several causes of action.1âwphi1
additional 10% on the next succeeding months if it still remains unpaid.
However, if the cause of default is due to issuance of a bouncing check Since the total amount of the damages claimed by the respondent in its
the amount of such check shall earn same penalty charge with Complaint filed with the RTC on September 3, 2012 amounted only to
additional 5% for the first two weeks and 10% for the next two weeks ₱280,000.00, said court was correct in refusing to take cognizance of
and its succeeding two weeks thereafter from the date of dishonor until the case.
fully paid without prejudice to the filling of appropriate cases before the
courts of justice. Violation of this provision if remained unsettled for WHEREFORE, the Petition is GRANTED and the December 11,
two months shall be considered as violation [wherein] Article XV of 2013 Decision and March 19, 2014 Resolution of the Court of Appeals
this agreement shall be applied.34 in CA-G.R. CEB SP No. 07711 are REVERSED and SET ASIDE.
The February 19, 2013 Order of the Regional Trial Court, Branch 17,
To Our mind, petitioners' responsibility under the above penal clause Cebu City dismissing Civil Case No. CEB-39025 for lack of
involves the payment of liquidated damages because under Article jurisdiction is REINSTATED.
222635 of the Civil Code the amount the parties stipulated to pay in
case of breach are liquidated damages. "It is attached to an obligation SO ORDERED.
in order to ensure performance and has a double function: (1) to provide
MARIANO C. DEL CASTILLO
for liquidated damages, and (2) to strengthen the coercive force of the
Associate Justice
obligation by the threat of greater responsibility in the event of
breach."36 WE CONCUR:
Concomitantly, what respondent primarily seeks in its Complaint is to MARIA LOURDES P.A. SERENO
recover aforesaid liquidated damages (which it termed as "incidental Chief Justice
and consequential damages") premised on the alleged breach of Chairperson
contract committed by the petitioners when they unilaterally ceased
business operations. Breach of contract may also be the cause of action TERESITA J. LEONARDO- ESTELA M. PERLAS-
in a complaint for damages filed pursuant to Article 1170 of the Civil DE CASTRO BERNABE
Code. It provides: Associate Justice Associate Justice

Art. 1170. Those who in the performance of their obligations are guilty ALFREDO BENJAMIN S. CAGUIOA
of fraud, negligence, or delay, and those who in any manner contravene Associate Justice
the tenor thereof; are liable for damages. (Emphasis supplied)

In Pacmac, Inc. v. Intermediate Appellate Court, 37 this Court held that

the party who unilaterally terminated the exclusive distributorship
contract without any legal justification can be held liable for damages
by reason of the breach committed pursuant to Article 1170.

In sum, after juxtaposing Article IV of the Remarkable Dealer Outlet

Contract vis-a-vis the prayer sought in respondent's Complaint, this
Court is convinced that said Complaint is one for damages. True,
breach of contract may give rise to a complaint for specific
performance or rescission of contract. In which case, the subject matter
is incapable of pecuniary estimation and, therefore, jurisdiction is
lodged with the RTC. However, breach of contract may also be the
cause of action in a complaint for damages. Thus, it is not correct to
immediately conclude, as the CA erroneously did, that since the cause
of action is breach of contract, the case would only either be specific
pe1formance or rescission of contract because it may happen, as in this
case, that the complaint is one for damages.

In an action for damages, the court LABOR LAW

which has jurisdiction is determined by
the total amount of damages claimed. 1

Having thus determined the nature of respondent's principal action, the SECOND DIVISION
next question brought to fore is whether it is the RTC which has
G.R. No. 194884               October 22, 2014
jurisdiction over the subject matter of Civil Case No. CEB-39025.
IMASEN PHILIPPINE MANUFACTURING
Paragraph 8, Section 1938 of BP 129, as amended by Republic Act No.
CORPORATION, Petitioner, 
7691,39 provides that where the amount of the demand exceeds
vs.
₱100,000.00, exclusive of interest, damages of whatever kind,
RAMONCHITO T. ALCON and JOANN S. PAPA, Respondents.
attorney's fees, litigation expenses, and costs, exclusive jurisdiction is
DECISION
BRION, J.:
We resolve in this petition for review on certiorari 1 the challenge to the
June 9, 2010 decision2 and the December 22, 2010 resolution3 of the
Court of Appeals (CA) in CA-G.R. SP No. 110327. This CA decision
nullified the December 24, 2008 decision4 of the National Labor
Relations Commission (NLRC) in NLRC CA No. 043915-05 (NLRC
CASE No. RAB IV-12-1661-02-L). The NLRC ruling, in turn, affirmed
the December 10, 2004 decision5 of the Labor Arbiter (LA), dismissing
the illegal dismissal complaint filed by respondents Ramonchito T.
Alcon and Joann S. Papa (collectively referred to as respondents).
The Factual Antecedents
Petitioner Imasen Philippine Manufacturing Corporation is a domestic
corporation engaged in the manufacture of auto seat-recliners and slide-
adjusters. It hired the respondents as manual welders in 2001.
On October 5, 2002, the respondents reported for work on the second
shift – from 8:00 pm to 5:00 am of the following day. At around 12:40
am, Cyrus A. Altiche, Imasen’s security guard on duty, went to patrol
and inspect the production plant’s premises. When Altiche reached
Imasen’s Press Area, he heard the sound of a running industrial fan.
Intending to turn the fan off, he followed the sound that led him to the
plant’s "Tool and Die" section.
At the "Tool and Die" section, Altiche saw the respondents having
sexual intercourse on the floor, using a piece of carton as mattress.
Altiche immediately went back to the guard house and relayed what he
saw to Danilo S. Ogana, another security guard on duty.
On Altiche’s request, Ogana madea follow-up inspection. Ogana went
to the "Tool and Die" section and saw several employees, including the
respondents, already leaving the area. He noticed, however, that Alcon
picked up the carton that Altiche claimed the respondents used as
mattress during their sexual act, and returned it to the place where the
cartons were kept. Altiche then submitted a handwritten report 6 of the
incident to Imasen’s Finance and Administration Manager.
On October 14, 2002, Imasen issued the respondents separate
interoffice memoranda7 informing them of Altiche’sreport on the
October 5, 2002 incident and directing them to submit their individual
explanation. The respondents complied with the directive; they claimed
that they were merely sleeping in the "Tool and Die" section at the time
of the incident. They also claimed that other employees were near the
area, making the commission of the act charged impossible.
On October 22, 2002, Imasen issued the respondents another interoffice
memorandum8 directing them to appear atthe formal hearing of the
administrative charge against them. The hearing was conducted on
October 30, 2002,9presided by a mediator and attended by the
representatives of Imasen, the respondents, Altiche and Ogana. Altiche
and Ogana reiterated the narrations in Altiche’s handwritten report.
On December 4, 2002, Imasen issued the respondents separate
interoffice memoranda10 terminating their services. It found the
respondents guilty of the act charged which it considered as "gross
misconduct contrary to the existing policies, rules and regulations of the
company."
On December 5, 2002, the respondents filed before the LA the
Complaint11 for illegal dismissal. The respondents maintained their
version of the incident.
In the December 10, 2004 decision,12 the LA dismissed the
respondents’ complaint for lack of merit. The LA found the
respondents’ dismissal valid, i.e., for the just cause of gross misconduct
and with due process. The LA gave weight to Altiche’s account of the
incident, which Ogana corroborated, over the respondents’mere denial
of the incident and the unsubstantiated explanation that other
employees were present near the "Tool and Die" section, making the
sexual act impossible. The LA additionally pointed out that the
respondents did not show any ill motive or intent on the part of Altiche
and Ogano sufficient to render their accounts of the incident suspicious.
The NLRC’s ruling
In its December 24, 2008 decision, 13 the NLRC dismissed the
respondents’ appeal14 for lack of merit. In affirming the LA’s ruling, the
NLRC declared that Imasen substantially and convincingly proved just
cause for dismissing the respondents and complied with the required
due process.
The respondents filed before the CA a petition for certiorari 15 after the
NLRC denied their motion for reconsideration 16 in its May 29, 2009
resolution.17
The CA’s ruling
In its June 9, 2010 decision, 18 the CA nullified the NLRC’s ruling. The
CA agreed with the labor tribunals’ findings regarding the infraction
charged – engaging in sexual intercourse on October 5, 2002 inside
company premises – and Imasen’s observance of due process in
dismissing the respondents from employment.
The CA, however, disagreed with the conclusion that the respondents’
sexual intercourse inside company premises constituted serious
misconduct that the Labor Code considers sufficient tojustify the
penalty of dismissal. The CA pointed out that the respondents’ act,
while provoked by "reckless passion in an inviting environment and
time," was not done with wrongful intent or with the grave or
aggravated character that the law requires. To the CA, the penalty of
dismissal is not commensurate to the respondents’ act, considering
especially that the respondents had not committed any infraction in the
past.
Accordingly, the CA reduced the respondents’ penalty to a threemonth
suspension and ordered Imasen to: (1) reinstate the respondents to their
former position without loss of seniority rights and other privileges; and
(2) pay the respondents backwages from December 4, 2002 until actual
reinstatement, less the wages corresponding to the three-month
suspension.
Imasen filed the present petition after the CA denied its motion for
Reconsideration19 in the CA’s December 22, 2010 resolution.20
The Petition
Imasen argues in this petition that the act of engaging in sexual
intercourse inside company premises during work hours is serious
misconduct by whatever standard it is measured. According to Imasen,
the respondents’ infraction is an affront to its core values and high
ethical work standards, and justifies the dismissal. When the CA
reduced the penalty from dismissal to three-month suspension, Imasen
points out that the CA, in effect, substituted its own judgment with its
(Imasen’s) own legally protected management prerogative.
Lastly, Imasen questions the CA’s award of backwages in the
respondents’ favor. Imasen argues that the respondents would virtually
gain from their infraction as they would be paid eight years worth of
wages without having rendered any service; eight (8) years, in fact, far
exceeds their actual period of service prior to their dismissal.
The Case for the Respondents
The respondents argue in their comment 21 that the elements of serious
misconduct that justifies an employee’s dismissal are absent in this
case, adopting thereby the CA’s ruling. Hence, to the respondents, the
CA correctly reversed the NLRC’s ruling; the CA, in deciding the case,
took a wholistic consideration of all the attendant facts, i.e., the time,
the place, the persons involved, and the surrounding circumstances
before, during, and after the sexual intercourse, and not merely the
infraction committed.
The Issue
The sole issue for this Court’s resolution is whether the respondents’
infraction – engaging in sexual intercourse inside company premises
during work hours – amounts to serious misconduct within the terms of
Article 282 (now Article 296) of the Labor Code justifying their
dismissal.
The Court’s Ruling
We GRANT the petition.
We find that the CA reversibly erred when it nullified the NLRC’s
decision for grave abuse of discretion the NLRC’s decision.
Preliminary considerations: tenurial security vis-à-vis management
prerogative
The law and jurisprudence guaranteeto every employee security of
tenure. This textual and the ensuing jurisprudential commitment to the
cause and welfare of the working class proceed from the social justice
principles of the Constitution that the Court zealously implements out
of its concern for those with less in life. Thus, the Court will not
hesitate to strike down as invalid any employer act that attempts to
undermine workers’ tenurial security. All these the State undertakes
under Article 279 (now Article 293)22 of the Labor Code which bar an
employer from terminating the services of an employee, except for just
or authorized cause and upon observance of due process.
In protecting the rights of the workers, the law, however, does not
authorize the oppression or self-destruction of the employer. 23 The
constitutional commitment to the policy of social justice cannot be
understood to mean that every labor dispute shall automatically be
decided in favor of labor.24 The constitutional and legal protection
equally recognize the employer’s right and prerogative to manage its
operation according to reasonable standards and norms of fair play.
Accordingly, except as limited by special law, an employer is free to
regulate, according to his own judgment and discretion, all aspects of
employment, including hiring, work assignments, working methods,
time, place and manner of work, tools to beused, processes to be
followed, supervision of workers, working regulations, transfer of
employees, worker supervision, layoff of workers and the discipline,
dismissal and recall of workers.25 As a general proposition, an employer
has free reign over every aspect of its business, including the dismissal
of his employees as long as the exercise of its management
prerogativeis done reasonably, in good faith, and in a manner not
otherwise intended to defeat or circumvent the rights of workers.
In these lights, the Court’s task inthe present petition is to balance the
conflicting rights of the respondents to security of tenure, on one hand,
and of Imasen to dismiss erring employees pursuant to the legitimate
exercise of its management prerogative, on the other.
Management’s right to dismiss an employee; serious misconduct as just
cause for the dismissal
The just causes for dismissing an employee are provided under Article
28226 (now Article 296)27 of the Labor Code. Under Article 282(a),
serious misconduct by the employee justifies the employer in
terminating his or her employment.
Misconduct is defined as an improper or wrong conduct. It is a
transgression of some established and definite rule of action, a
forbidden act, a dereliction of duty, willful in character, and implies
wrongful intent and not mere error in judgment. 28 To constitute a valid
cause for the dismissal within the text and meaning of Article 282 of
the Labor Code, the employee’s misconduct must be serious, i.e., of
such grave and aggravated character and not merely trivial or
unimportant.29
Additionally, the misconduct must be related to the performance of the
employee’s duties showing him tobe unfit to continue working for the
employer.30 Further, and equally important and required, the act or
conduct must have been performed with wrongful intent. 31
To summarize, for misconduct or improper behavior to be a just cause
for dismissal, the following elements must concur: (a) the misconduct
must be serious; (b) it must relate to the performance of the employee’s
duties showing that the employee has become unfit to continue working
for the employer;32 and (c) it must have been performed with wrongful
intent.
The respondents’ infraction amounts to serious misconduct within the
terms of Article 282 (now Article296) of the Labor Code justifying
their dismissal
Dismissal situations (on the ground of serious misconduct) involving
sexual acts, particularly sexual intercourse committed by employees
inside company premises and during workhours, are not usual
violations33 and are not found in abundance under jurisprudence. Thus,
in resolving the present petition, we are largely guided by the principles
we discussed above, as applied to the totality of the circumstances that
surrounded the petitioners’ dismissal.
In other words, we view the petitioners’ act from the prism of the
elements that must concur for an act to constitute serious misconduct,
analyzed and understood within the context of the overall
circumstances of the case. In taking this approach, weare guided, too,
by the jurisdictional limitations that a Rule 45 review of the CA’s Rule
65 decision in labor cases imposes on our discretion.34
In addressing the situation that we are faced with in this petition, we
determine whether Imasen validly exercised its prerogative as employer
to dismiss the respondents-employees who, within company premises
and during work hours, engaged in sexual intercourse. As framed
within our limited Rule 45 jurisdiction, the question that we ask is:
whether the NLRC committed grave abuse of discretion in finding that
the respondents’ act amounted to what Article 282 of the Labor Code
textually considers as serious misconduct to warrant their dismissal.
After due consideration, we find the NLRC legally correct and well
within its jurisdiction when it affirmed the validity of the respondents’
dismissal on the ground of serious misconduct.
Sexual acts and intimacies between two consenting adults belong, as a
principled ideal, to the realm of purely private
relations.1âwphi1 Whether aroused by lust or inflamed by sincere
affection, sexual acts should be carried out at such place, time and
circumstance that, by the generally accepted norms of conduct, will not
offend public decency nor disturb the generally held or accepted social
morals. Under these parameters, sexual acts between two consenting
adults do not have a place in the work environment.
Indisputably, the respondents engaged in sexual intercourse inside
company premisesand during work hours. These circumstances, by
themselves, are already punishablemisconduct. Added to these
considerations, however, is the implication that the respondents did not
only disregard company rules but flaunted their disregard in a manner
that could reflect adversely on the status of ethics and morality in the
company.
Additionally, the respondents engaged in sexual intercourse in an area
where co-employees or other company personnel have ready and
available access. The respondents likewise committed their act at a time
when the employees were expected to be and had, in fact, been at their
respective posts, and when they themselves were supposed to be, as all
other employees had in fact been, working.
Under these factual premises and inthe context of legal parameters we
discussed, we cannot help but consider the respondents’ misconduct to
be of grave and aggravated character so that the company was justified
in imposing the highest penalty available ― dismissal. Their infraction
transgressed the bounds of sociallyand morally accepted human public
behavior, and at the same time showedbrazen disregard for the respect
that their employer expected of them as employees. By their
misconduct, the respondents, in effect, issued an open invitation for
othersto commit the same infraction, with like disregard for their
employer’s rules, for the respect owed to their employer, and for their
co-employees’ sensitivities. Taken together, these considerations reveal
a depraved disposition that the Court cannot but consider as a valid
cause for dismissal. In ruling as we do now, we considered the
balancing between the respondents’ tenurial rights and the petitioner’s
interests – the need to defend their management prerogative and to
maintain as well a high standard of ethics and morality in the
workplace. Unfortunately for the respondents, in this balancing under
the circumstances ofthe case, we have to rule against their tenurial
rights in favor of the employer’s management rights.
All told, the respondents’ misconduct,under the circumstances of this
case, fell within the terms of Article 282 (now Article 296) of the Labor
Code. Consequently, we reverse the CA’s decision for its failure to
recognize that no grave abuse of discretion attended the NLRC’s
decision to support the respondents’ dismissal for serious misconduct.

WHEREFORE, in light of these considerations, we hereby GRANT the

petition. We REVERSE the decision dated June 9, 2010 and the
resolution dated December 22, 2010 of the Court of Appeals in CA-
G.R. SP No. 110327 and REINSTATE the decision dated December
24, 2008 of the National Labor Relations Commission in NLRC CA
No. 043915-05 (NLRC Case No. RAB IV-12-1661-02-L).

SO ORDERED.

ARTURO D. BRION
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

JOSE CATRAL MENODZA BIENVENIDO L. REYES*

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE**
Associate Justice

ATTESTATION

LABOR LAW

FIRST DIVISION

January 23, 2017

G.R. No. 207971

ASIAN INSTITUTE OF MANAGEMENT, Petitioner, 

vs.
ASIAN INSTITUTE OF MANAGEMENT FACULTY
ASSOCIATION, Respondent.

DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1assails the January 8, 2013
Decision2 of the Court of Appeals (CA) which dismissed the Petition
for Certiorari3in CA-G.R. SP No. 114122, and its subsequent June 27,
2013 Resolution 4denying herein petitioner's Motion for
Reconsideration. 5
Factual Antecedents
Petitioner Asian Institute of Management (AIM) is a duly registered
non-stock, non-profit educational institution. Respondent Asian
Institute of Management Faculty Association (AFA) is a labor
organization composed of members of the AIM faculty, duly registered
under Certificate of Registration No. NCR-UR-12-4076-2004.
On May 16, 2007, respondent filed a petition for certification
election6 seeking to represent a bargaining unit in AIM consisting of
forty (40) faculty members. The case was docketed as DOLE Case
No. NCR-OD-M-0705-007. Petitioner opposed the petition, claiming
that respondent's members are neither rank-and-file nor supervisory, but
rather, managerial employees.7
On July 11, 2007, petitioner filed a petition for cancellation of
respondent's certificate of registration8 - docketed as DOLE Case
No. NCROD-0707-001-LRD - on the grounds of misrepresentation in
registration and that respondent is composed of managerial employees
who are prohibited from organizing as a union.
On August 30, 2007, the Med-Arbiter in DOLE Case No. NCR-OD-M-
0705-007 issued an Order9 denying the petition for certification election
on the ground that AIM' s faculty members are managerial employees.
This Order was appealed by respondent before the Secretary of the
Department of Labor and Employment (DOLE), 10 who reversed foe
same via a February 20, 2009 Decision 11 and May 4, 2009
Resolution, 12 decreeing thus:
WHEREFORE, the appeal filed by the Asian Institute of Management
Faculty Association (AIMFA) is GRANTED. The Order dated 30
August 2007 of DOLE-NCR Mediator-Arbiter Michael T. Parado is
hereby REVERSED and SET ASIDE.
Accordingly, let the entire records of the case be remanded to DOLEN
CR for the conduct of a certification election among the faculty
members of the Asian Institute of Management (AIM), with the
following choices:
1. ASIAN INSTITUTE OF MANAGEMENT FACULTY
ASSOCIATION (AIMFA); and
2. No Union.
SO ORDERED.13
Meanwhile, in DOLE Case No. NCR-OD-0707-001-LRD, an
Order14 dated February 16, 2009 was issued by DOLE-NCR Regional
Director Raymundo G. Agravante granting AIM's petition for
cancellation of respondent's certificate of registration and ordering its
delisting from the roster of legitimate labor organizations. 1bis Order
was appealed by respondent before the Bureau labor Relations 15 (BLR),
which, in a December 29, 2009 Decision, 16 reversed the same and
ordered respondent's retention in the roster of legitimate labor
organizations. The BLR held that the grounds relied upon in the petition
for cancellation are not among the grounds authorized under Article
239 of the Labor Code, 17 and that respondent's members are not
managerial employees. Petitioner moved to reconsider, but was
rebuffed in a March 18, 2010 Resolution. 18
CA-G.R. SP No.109487 and G.R. No.197089
Petitioner filed a Petition for Certiorari before the CA, questioning the
DOLE Secretary's February 20, 2009 Decision and May 4, 2009
Resolution relative to DOLE Case No. NCR-OD-M-0705-007, or
respondent's petition for certification election. Docketed as CA-G.R. SP
No. 109487, the petition is based on the arguments that 1) the
bargaining unit within AIM sought to be represented is composed of
managerial employees who are not eligible to join, assist, or form any
labor organization, and 2) respondent is not a legitimate labor
organization that may conduct a certification election.
On October 22, 2010, the CA rendered its Decision 19 containing the
following pronouncement:
AIM insists that the members of its tenure-track faculty are managerial
employees, and therefore, ineligible to join, assist or form a labor
organization. It ascribes grave abuse of discretion on SOLE 20 for its
rash conclusion that the members of said tenure-track faculty are not
managerial employees solely because the faculty's actions are still
subject to evaluation, review or final approval by the board of trustees
("BOT'). AIM argues that the BOT does not manage the day-to-day
affairs, nor the making and implementing of policies of the Institute, as
such functions are vested with the tenure-track faculty.
We agree.
Article 212(m) of the Labor Code defines managerial employees as:
'ART. 212. Definitions. – x x x
(m) 'Managerial employee' is one who is vested with powers or
prerogatives to lay down and execute management policies and/or to
hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees. Supervisory employees are those who, in the interest of the
employer, effectively recommend such managerial actions if the
exercise of such authority is not merely routinary or clerical in nature
but requires the use of independent judgment. All employees not falling
within any of the above definitions are considered rank-and-file
employees for purposes of this Book.'
There are, therefore, two (2) kinds of managerial employees under Art.
212(m) of the Labor Code. Those who 'lay down x x x management
policies', such as the Board of Trustees, and those who 'execute
management policies and/or hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees'.
xxxx
On its face, the SOLE's opinion is already erroneous because in
claiming that the 'test of 'supervisory' or 'managerial status' depends on
whether a person possesses authority to act in the interest of his
employer in the matter specified in Article 212(m) of the Labor Code
and Section l(m) of its Implementing Rules', he obviously was referring
to the old definition of a managerial employee. Such is evident in his
use of 'supervisory or managerial status', and reference to 'Section
l(m) of its Implementing Rules'. For presently, as aforequoted in Article
212(m) of the Labor Code and as amended by Republic Act 6715 which
took effect on March 21, 1989, a managerial employee is already
different from a supervisory employee. x x x
xxxx
In further opining that a managerial employee is one whose 'authority
is not merely routinary or clerical in nature but requires the use of
independent judgment', a description which fits now a supervisory
employee under Section l(t), Rule I, Book V of the Omnibus Rules
Implementing the Labor Code, it then follows that the SOLE was not
aware of the change in the law and thus gravely abused its discretion
amounting to lack of jurisdiction in concluding that AIM's 'tenure-
track' faculty are not managerial employees.
SOLE further committed grave abuse of discretion when it concluded
that said tenure-track faculty members are not managerial employees on
the basis of a 'footnote' in AIM's Policy Manual, which provides that
'the policy[-] making authority of the faculty members is merely
recommendatory in nature considering that the faculty standards they
formulate are still subject to evaluation, review or final approval by
the [AIM]'s Board of Trustees'. x x x
xxxx
Clearly, AIM's tenure-track faculty do not merely recommend faculty
standards.1âwphi1 They 'determine all faculty standards', and are
thus managerial employees. The standards' being subjected to the
approval of the Board of Trustees would not make AIM's tenure-track
faculty non-managerial because as earlier mentioned, managerial
employees are now of two categories: (1) those who 'lay down policies',
such as the members of the Board of Trustees, and (2) those
who 'execute management policies (etc.)’, such as AIM's tenure-track
faculty.
xxxx
It was also grave abuse of discretion on the part of the SOLE when he
opined that AIM' s tenure-track faculty members are not managerial
employees, relying on an impression that they were subjected to rigid
observance of regular hours of work as professors. x x x
xxxx
More importantly, it behooves the SOLE to deny AFA's appeal in
light of the February 16, 2009 Order of Regional Director
Agravante delisting AFA from the roster of legitimate labor
organizations. For, only legitimate labor organizations are given
the right to be certified as sole and exclusive bargaining agent in an
establishment.
xxxx
Here, the SOLE committed grave abuse of discretion by giving due
course to AFA's petition for certification election, despite the fact that:
(1) AFA's members are managerial employees; and (2) AFA is not a
legitimate labor organization. 'These facts rendered AFA ineligible, and
without any right to file a petition for certification election, the object
of which is to determine the sole and exclusive bargaining
representative of qualified AIM employees.
WHEREFORE, the instant petition is GRANTED. The assailed
Decision dated February 20, 2009 and Resolution dated May 4, 2009
are hereby REVERSED and SET ASIDE. The Order dated August
30, 2007 of Mediator-Arbiter Parado is hereby REINSTATED.
SO ORDERED.21 (Emphasis in the original)
Respondent sought reconsideration, but was denied. It thus instituted a
Petition for Review on Certiorari before this Court on July 4, 2011.
The Petition, docketed as G.R. No. 197089, remains pending to date.
The Assailed Ruling of the Court of Appeals
Meanwhile, relative to DOLE Case No. NCR-OD-0707-001-LRD or
petitioner AIM's petition for cancellation of respondent's certificate of
registration, petitioner filed on May 24, 20 l 0 a Petition
for Certiorari22before the CA, questioning the BLR's December 29,
2009 decision and March 18, 2010 resolution. The petition, docketed as
CA-G.R. SP No. 114122, alleged that the BLR committed grave abuse
of discretion in granting respondent's appeal and affirming its certificate
of registration notwithstanding that its members are managerial
employees who may not join, assist, or form a labor union or
organization.
On January 8, 2013, the CA rendered the assailed Decision, stating as
follows:
The petition lacks merit
xxxx
It is therefore incumbent upon the Institute to prove that the BLR
committed grave abuse of discretion in issuing the questioned
Decision.1âwphi1 Towards this end, AIM must lay the basis by
showing that any of the grounds provided under Article 239 of the
Labor Code, exists, to wit:
Article 239. Grounds for cancellation of union registration. - The
following may constitute grounds for cancellation of union registration:
(a) Misrepresentation, false statement or fraud in connection with the
adoption or ratification of the constitution and by-laws or amendments
thereto, the minutes of ratification, and the list of members who took
part in the ratification;
(b) Misrepresentation, false statements or fraud in connection with the
election of officers, minutes of the election of officers, and the list of
voters;
(c) Voluntary dissolution by the members.
Article 238 of the Labor Code provides that the enumeration of the
grounds for cancellation of union registration, is exclusive; in other
words, no other grow1ds for cancellation is acceptable, except for the
three (3) grounds stated in Article 239. The scope of the grounds for
cancellation has been explained-
For the purpose of de-certifying a union such as respondent, it must be
shown that there was misrepresentation, false statement or fraud in
connection with the adoption or ratification of the constitution and by-
laws or amendments thereto; the minutes of ratification; or, in
connection with the election of officers, the minutes of the election of
officers, the list of voters, or failure to submit these documents together
with the list of the newly elected-appointed officers and their postal
addresses to the BLR.
The bare fact that two signatures appeared twice on the list of those
who participated in the organizational meeting would not, to our mind,
provide a valid reason to cancel respondent's certificate of registration.
The cancellation of a union's registration doubtless has an impairing
dimension on the right of labor to self-organization. For fraud and
misrepresentation to be grounds for cancellation of union registration
under the Labor Code, the nature of the fraud andmisrepresentation
must be grave and compelling enough to
vitiate the consent of a majority of union members. 23
In this regard, it has also been held that:
Another factor which militates against the veracity of the allegations in
the Sinumpaang Petisyon is the lack of particularities on how, when
and where respondent union perpetrated the alleged fraud on each
member. Such details are crucial for, in the proceedings for cancellation
of union registration on the ground of fraud or misrepresentation, what
needs to be established is that the specific act or omission of the union
deprived the complaining employees-members of their right to
choose.24
A cursory reading of the Petition shows that AIM did NOT allege any
specific act of fraud or misrepresentation committed by AFA. What is
clear is that the Institute seeks the cancellation of the registration of
AFA based on Article 245 of the Labor Code on the ineligibility of
managerial employees to form or join labor unions. Unfortunately for
the petitioner, even assuming that there is a violation of Article 245,
such violation will not result in the cancellation of the certificate of
registration of a labor organization.
It should be stressed that a Decision had already been issued by the
DOLE in the Certification Election case; and the Decision ordered the
conduct of a certification election among the faculty members of the
Institute, basing its directive on the finding that the members of AFA
were not managerial employees and are therefore eligible to form, assist
and join a labor union. As a matter of fact, the certification election had
already been held on October 16, 2009, albeit the results have not yet
been resolved as inclusion/exclusion proceedings are still pending
before the DOLE. The remedy available to the Institute is not the
instant Petition, but to question the status of the individual union
members of the AFA in the inclusion/exclusion proceedings pursuant to
Article 245-A of the Labor Code, which reads:
Article 245-A. Effect of inclusion as members of employees outside the
bargaining unit. - The inclusion as union members of employees
outside the bargaining unit shall not be a ground for the cancellation of
the registration of the union. Said employees are automatically deemed
removed from the list of membership of said union.
Petitioner insists that Article 245-A is not applicable to this case as all
AF A members are managerial employees. We are not persuaded.
The determination of whether any or all of the members of AFA should
be considered as managerial employees is better left to the DOLE
because,
It has also been established that in the determination of whether or not
certain employees are managerial employees, this Court accords due
respect and therefore sustains the findings of fact made by quasi-
judicial agencies which are supported by substantial evidence
considering their expertise in their respective fields. 25
From the discussion, it is manifestly clear that the petitioner foiled to
prove that the BLR committed grave abuse of discretion; consequently,
the Petition must fail.
WHEREFORE, the Petition is hereby DENIED. The Decision and
Resolution of public respondent Bureau of Labor Relations in BLR-A-
C-19-3-6-09 (NCR-OD-0707-001) are hereby AFFIRMED.
SO ORDERED.26 (Emphasis in the original)
Petitioner filed its Motion for Reconsideration, which was denied by
the CA via its June 27, 2013 Resolution. Hence, the instant Petition.
In a November 10, 2014 Resolution, 27 the Court resolved to give due
course to the Petition.
Issue
Petitioner claims that the CA seriously erred in affirming the
dispositions of the BLR and thus validating the respondent's certificate
of registration notwithstanding the fact that its members are all
managerial employees who are disqualified from joining, assisting, or
forming a labor organization.
seeking cancellation of respondent's certificate of registration - that its
members are managerial employees and for this reason, its registration
is thus a patent nullity for being an absolute violation of Article 245 of
the Labor Code which declares that managerial employees are
ineligible to join any labor organization --- is, in a sense, an accusation
that respondent is guilty of misrepresentation for registering under the
claim that its members are not managerial employees.
However, the issue of whether respondent's members are managerial
employees is still pending resolution by way of petition for review
on certiorari in G.R. No. 197089, which is the culmination of all
proceedings in DOLE Case No. NCR-OD-M-0705-007 -- where the
issue relative to the nature of respondent's membership was first raised
by petitioner itself and is there fiercely contested. The resolution of this
issue cannot be pre-empted; until it is determined with finality in G.R.
No. l 97089, the petition for cancellation of respondent's certificate of
registration on the grounds alleged by petitioner cannot be resolved. As
a matter of courtesy and in order to avoid conflicting decisions, We
must await the resolution of the petition in G.R. No. 197089.
x x x If a particular point or question is in issue in the second action,
and the judgment will depend on the determination of that particular
point or question, a former judgment between the same parties or their
privies will be final and conclusive in the second if that same point or
question was in issue and adjudicated in the first suit. x x x Identity of
cause of action is not required, but merely identity of issues. 31 (Citation
omitted)
WHEREFORE, considering that the outcome of this case depends on
the resolution of the issue relative to the nature of respondent's
membership pending in G.R. No. 197089, this case is
ordered CONSOLIDATED with G.R. No. 197089.

Petitioner's Arguments SO ORDERED.

Praying that the assailed CA dispositions be set aside and that the MARIANO C. DEL CASTILLO
DOLE-NCR Regional Director's February 16, 2009 Order granting Associate Justice
AIM's petition for cancellation of respondent's certificate of registration
and ordering its delisting from the roster of legitimate labor WE CONCUR:
organizations be reinstated instead, petitioner maintains in its Petition
MARIA LOURDES P.A. SERENO
and Reply28that respondent's members are all managerial employees;
Chief Justice
that the CA erred in declaring that even if respondent's members are all
Chairperson
managerial employees, this alone is not a ground for cancellation of its
certificate of registration; that precisely, the finding in DOLE Case No.
NCR-ODM- 0705-007, which the CA affirmed in CA-G.R. SP No. TERESITA J.
ESTELA M. PERLAS-
109487, is that respondent's members are managerial employees; that LEONARDO-DE
BERNABE 
respondent's declaration that its members are eligible to join, assist, or CASTRO 
Associate Justice
form a labor organization is an act of misrepresentation, given the Associate Justice
finding in CA-G.R. SP No. 109487 that they are managerial employees;
and that the grounds for cancellation of union registration enumerated ALFREDO BENJAMIN S. CAGUIOA
in Article 239 of the Labor Code are not exclusive. Associate Justice

Respondent's Arguments

In its Comment,29 respondent maintains that the CA was right to treat

petitioner’s case for cancellation of its union registration with
circumspection; that petitioner's ground for filing the petition for
cancellation is not recognized under Article 239; that petitioner's
accusation of misrepresentation is unsubstantiated, and is being raised
for the first time at this stage; that its members are not managerial
employees; and that petitioner's opposition to respondent's attempts at LABOR LAW
self-organization constitutes harassment, oppression, and violates the
latter's rights under the Labor Code and the Constitution. 3.

Our Ruling FIRST DIVISION

In Holy Child Catholic School v. Hon. Sto. Tomas, 30this Court declared February 10, 2016
that "[i]n case of alleged inclusion of disqualified employees in a union,
G.R. No. 190534
the proper procedure for an employer like petitioner is to directly file a
petition for cancellation of the union's certificate of registration due to C.F. SHARP CREW MANAGEMENT,INC., RONALD AUSTRIA,
misrepresentation, false statement or fraud under the circumstances and ABU DHABI NATIONAL TANKER CO.,Petitioners, 
enumerated in Article 239 of the Labor Code, as amended." vs.
LEGAL HEIRS OF THE LATE GODOFREDO REPISO,
On the basis of the ruling in the above-cited case, it can be said that
represented by his wife LUZVIMINDA REPISO,Respondents.
petitioner was correct in filing a petition for cancellation of
respondent's certificate of registration. Petitioner's sole ground for
DECISION
LEONARDO-DE CASTRO, J.:
Assailed in this Petition for Review on Certiorari filed by petitioners
C.F. Sharp Crew Management, Inc. (C.F. Sharp), Ronald Austria
(Austria), and Abu Dhabi National Tanker Company (ADNATCO) are:
(1) the Decision1 dated September 9, 2009 of the Court of Appeals in
CA-G.R. SP No. 98857, which reversed and set aside the
Decision2dated August 24, 2006 and Resolution3 dated February 27,
2007 of the National Labor Relations Commission (NLRC) in NLRC
OFW CN 04-04-00916-00 and reinstated the Decision4 dated
September 23, 2005 of the Labor Arbiter in NLRC-NCR Case No.
(M)04-04-00916-00; and (2) the Resolution5 dated December 9, 2009
of the appellate court in the same case which denied the Motion for
Reconsideration of petitioners.
On April 24, 2002, Godofredo Repiso (Godofredo) was hired as a
Messman on board M/T Umm Al Lulu by petitioner C.F. Sharp, a local
manning agency, on behalf of its principal, petitioner ADNATCO, a
marine transportation company based in the United Arab Emirates.
Godofredo and petitioner Austria, as representative of petitioners C.F.
Sharp and ADNATCO, signed a Contract of Employment, 6 which was
approved by the Philippine Overseas Employment Administration
(POEA) on May 9, 2002.
Prior to embarkation, Godofredo underwent a pre-employment medical
examination (PEME) and was declared physically fit to work.
Godofredo boarded M/T Umm Al Lulu on May 20, 2002. Godofredo
was repatriated in Manila on March 16, 2003. The next day, March 17,
2003, Godofredo went to a medical clinic in Kawit, Cavite where he
was examined by Doctor Cayetano G. Reyes, Jr. (Dr. Reyes). Dr. Reyes
diagnosed Godofredo with "Essential Hypertension" and advised
Godofredo to take the prescribed medication and rest for a week. 7
At about 10:00 in the morning on March 19, 2003, Godofredo was
waiting for a ride when he suddenly lost consciousness and fell to the
ground. Good samaritans brought Godofredo to Del Pilar Hospital
where he was pronounced dead on arrival. 8 Based on Godofredo’s
Certificate of Death,9 the causes for his death were as follows:
Immediate cause : Irreversible Shock
Antecedent cause : Acute Myocardial Infarction
Underlying cause : Hypertensive Heart Disease
Godofredo died leaving behind respondents as his legal heirs, namely,
his wife, Luzviminda,10 and three children, Marie Grace (20 years old),
Gerald (17 years old), and Gretchen (13 years old).11
On September 17, 2003, respondent Luzviminda, through her lawyer,
sent a letter12 notifying petitioner C.F. Sharp of Godofredo’s death and
demanding the payment of the following amounts:
Death compensation --- US$ 60,000.00
Children Allowance --- US$ 45,000.00
(3 minors x $15,000.00)
Burial Allowance --- US$ 1,000.00
TOTAL --- US$106,000.00
Respondent Luzviminda sent another letter13 dated February 3, 2004 to
petitioner C.F. Sharp conveying her willingness to accept the amount of
US$65,000.00 as compromise settlement. However, respondent
Luzviminda’s demand remained unheeded.
Thus, respondents filed with the NLRC a Complaint against petitioners
for recovery of death compensation benefits, burial and children’s
allowances, moral and exemplary damages, and attorney’s fees. The
Complaint was docketed as NLRC-NCR Case No. (M)04-04-00916-00.
The parties exchanged Position Papers and other pleadings.
Respondents’ Arguments
Respondents alleged that during the last weeks of Godofredo’s 10-
month contract as Messman on board M/T Umm Al Lulu, he was
already experiencing continuous headaches and body pains, more
pronounced in the nape area. From that moment, Godofredo became
entitled to disability benefits from petitioners. Godofredo was
repatriated in Manila on March 16, 2003 for medical reasons. When
Godofredo died on March 19, 2003 due to his illness, his right to
disability benefits was converted to the right to death benefits.
Respondents also posited that although Godofredo’s Contract of
Employment was executed on April 24, 2002, it was governed by the
1996 POEA-Standard Employment Contract (SEC) 14 rather than the
2000 POEASEC15because the implementation of the latter was enjoined
by a temporary restraining order (TRO) issued by the Court. 16To be
compensable under the 1996 POEA-SEC, it was not necessary to prove
that the illness or death was work-related, it being sufficient that the
same occurred during the term of the seafarer’s employment. According
to respondents, the following facts established that Godofredo died of
an illness which he acquired on board M/T Umm Al Lulu and, thus,
entitled respondents to recover death benefits: (1) Godofredo was
declared fit to work by petitioners’ designated physician prior to
embarkation; (2) Godofredo served on board M/T Umm Al Lulu until
his repatriation; and (3) Godofredo died within 72 hours upon arrival in
the Philippines.
Respondents additionally averred that petitioners were estopped from
alleging that Godofredo was already sick prior to his embarkation on
M/T Umm Al Lulu. Petitioners had all the opportunity to determine
Godofredo’s medical and mental fitness during the PEME, but at the
end of such examination, petitioners found Godofredo fit to work.
Moreover, the 1996 POEA-SEC did not contain any provision on a
seafarer’s concealment of a pre-existing illness, such provision was
only introduced by the 2000 POEA-SEC.
Respondents further reasoned that there was no need for Godofredo to
submit himself to a mandatory post-employment medical examination
within 72 hours from his arrival in Manila as said requirement only
applied to claims for sickness allowance. Besides, Godofredo could
already be deemed exempt from complying with said requirement on
the ground of physical impossibility as even before the expiration of the
72-hour period for compliance, he lost consciousness and was declared
dead on arrival at the hospital.
Lastly, respondents invoked Article 417 of the Labor Code of the
Philippines, Article 170218 of the Civil Code of the Philippines,
and Nicario v. National Labor Relations Commission,19 and asserted
that doubts in the interpretation of labor laws and regulations, as well as
doubts reasonably arising from conflicting evidence of the parties,
should be resolved in favor of labor.
Accordingly, respondents prayed for death benefits in the amount of
US$60,000.00; burial allowance in the amount of US$1,000.00;
allowances for their three children below the age of 21 in the total
amount of US$21,000.00;20 and moral and exemplary damages. Also,
respondents prayed for the award of attorney’s fees, alleging that
petitioners, in gross and evident bad faith, refused to satisfy their just
and demandable claim, and forced them to litigate to protect their
interests.
Petitioners’ Arguments
Petitioners countered that Godofredo never complained of any illness to
the master or any officer of M/T Umm Al Lulu while on board said
vessel, and that Godofredo was able to perform his functions as a
Messman throughout the duration of his employment. Petitioners only
came to know about Godofredo’s illness when after more than six
months from his repatriation, petitioners received a letter from
respondent Luzviminda’s counsel demanding compensation and
allowance benefits on account of Godofredo’s death in the aggregate
amount of US$106,000.00.
Petitioners contended that Godofredo’s death is not compensable as it
did not occur during the term of his employment. A seafarer’s term of
employment commenced from his actual departure from the airport or
seaport in the point of hire and ceased upon completion of his period of
contractual service, signing-off, and arrival at the point of hire.
Godofredo’s 10-month contract was about to expire on March 20, 2003
when he was safely repatriated without any medical condition a few
days earlier, on March 16, 2003, as he was already in a convenient port.
Godofredo finished his employment contract upon signing off from
M/T Umm Al Lulu and arriving in Manila, his point of hire, on March
16, 2003. Clearly, Godofredo’s death on March 19, 2003 was not
compensable because it happened beyond the term of his contract.
In addition, petitioners maintained that Godofredo’s death was not
work-related. As a Messman, Godofredo’s duties were limited to
assisting the Chief Cook in the preparation of food and could not have
contributed to his demise or increased the risk of acquiring the illness
which caused his death. Godofredo was not subjected to any unusual
strain or required to perform any strenuous activity that could trigger a
heart attack.
Petitioners also argued that a hypertensive heart disease takes years to
develop and most probably Godofredo was already suffering from said
disease even before the start of his employment contract. However,
Godofredo failed to disclose his ailment during his PEME, thus, barring
respondents from receiving death benefits on the ground of
concealment of a pre-existing illness. Godofredo likewise failed to
submit himself to a mandatory post-employment medical examination
within three working days from his disembarkation, another ground for
the denial of respondents’ claim for death benefits.
Finally, petitioners maintained that there was no basis to award
attorney’s fees to respondents because petitioners only acted within
their legal right in denying respondents’ claim for death benefits, and
no bad faith or malice can be imputed against them.
Ruling of the Labor Arbiter
Labor Arbiter Arden S. Anni (Anni) rendered a Decision on September
23, 2005 in respondents’ favor.
Labor Arbiter Anni found that Godofredo’s 10-month employment
contract commenced on May 20, 2002, upon his departure from Manila
on board M/T Umm Al Lulu, and remained effective until March 20,
2003, when such contract should have expired/ended, so his death on
March 19, 2003 occurred within the term of his employment. Labor
Arbiter Anni further found that Godofredo was repatriated for medical
reasons on March 16, 2003, a few days prior to the expiration/end of his
contract:
As earlier mentioned, [Godofredo]’s contract was supposed to expire on
March 20, 2003, but then he was repatriated on March 16, 2003, i.e.,
four (4) days before the expiration of his contract. Seemingly, we can
assume, ipso facto, that [Godofredo] was quickly repatriated on March
16, 2003 because of his continuous headaches and body pains, more
pronounced in the nape area. And, rightly so, because on March 17,
2003 [Godofredo] was treated at the clinic of Dr. Cayetano Reyes in
Cavite and was diagnosed as suffering from "Essential Hypertension."
The ship captain must have been informed of [Godofredo]’s illness on
board; Otherwise, who will issue the discharge and repatriation Order?
This explains why the sudden discharge of [Godofredo] on March 16,
2003. Thus, to our (sic) mind, [Godofredo]’s repatriation was due to
medical reason, and not due to finish contract as claimed by
[petitioners]. Lamentably, none of the parties adduced evidence to
prove their respective averments in this regard, not even the ship’s
logbook or the Master’s order of discharge. Assuming arguendo, that
[Godofredo] was not medically repatriated, would he be entitled to
compensation benefits? YES, [Godofredo] would still be entitled to
compensation benefits under Section 20(A) of the POEA Contract
because he died due to work-related illness x x x.
Indeed, the circumstances surrounding the repatriation of [Godofredo]
were shrouded with doubts and ambiguities, ergo. We are constrained
to resolve such doubts and ambiguities in favor of labor. "It is a well-
settled doctrine that if doubts exist between the evidence presented by
the employer and the employee, the scales of justice must be tilted in
favor of the latter. It is a time-honored rule that in controversies
between a laborer and his master, doubts reasonably arising from the
evidence or, in the interpretation of agreements and writings, should be
resolved in the former’s favor." (Nicario vs. NLRC, G.R. No. 125340,
September 17, 1998).21
Labor Arbiter Anni concluded that Godofredo’s illness was work-
related, thus, rendering the latter’s subsequent death compensable:
As borne out by the records, [Godofredo] disembarked from the vessel
on March 16, 2003. The following day (March 17), he was treated at
the clinic of Dr. Cayetano G. Reyes who diagnosed him as suffering
from "Essential Hypertension" and required to rest for one (1) week
with medication (Annex "D", [respondents’] position paper). On March
19, 2003, [Godofredo] lost his life. Cause of death indicates:
Immediate Cause - Irreversible Shock
Antecedent Cause - Acute Myocardial Infarction
Underlying Cause - Hypertensive Heart Disease
(Annex "E", Suppra. [sic])
It must be stressed, at this point, that [Godofredo]’s treatment happened
in one day (24-Hour) interval from his arrival in Manila and his death
occurred within two days (48-Hour) from his treatment by Dr.
Cayetano G. Reyes. In a span of only three days (72-hour) from
[Godofredo]’s repatriation, a loss of a father – the only breadwinner in
the family, suddenly struck the Repiso family like a lightning from the
sky.
The sequence of events led us to conclude that [Godofredo]’s illness
(Hypertension) was work-related as it was caused and/or aggravated by
the nature of his work as Messman on board the vessel "M/T Umm Al
Lulu."
In compensation benefits, the rules of the Employee’s Compensation
Commission (PD 626) are similar to the rules of the POEA Contract
insofar as the principle of work-related illness and theory of
aggravation are concerned. The rule is: "For the sickness and the
resulting disability or death to be compensable, the sickness must be the
result of an occupational disease listed in Section 32-A of the POEA
Contract with the conditions set therein satisfied; Otherwise, proof must
be shown that the risk of contracting the disease is increased by the
working conditions (Vda. De Inquillo vs. ECC, G.R. No. 51543, June 6,
1989)." Another case, "if the illnesses are not occupational diseases, the
claimant must present proof that he contracted them in the course of his
employment. x x x (Galanida vs. ECC, et al., GR No. 70660, September
24, 1987)." (See Azucena’s Labor Code, Vol. 1, 5th Ed. p. 387).
Noteworthy mentioning here is the fact that [Godofredo]’s illness
(Essential Hypertension) is an Occupational Disease and listed No. 20
in Section 32-A of the POEA Contract. On this score alone, we find
[Godofredo]’s death compensable in accordance with Section 20(A) of
the POEA Standard Contract. Probability, not certainty, is the
touchstone. x x x.22
Petitioners’ arguments that respondents’ claim for death benefits was
barred by Godofredo’s concealment of a pre-existing illness and
noncompliance with the mandatory post-employment medical
examination within 72-hours from his arrival were rejected by Labor
Arbiter Anni in this wise:
Did [Godofredo conceal] his hypertension (essential) during the pre-
employment medical examination? The answer is NO. "Hypertension
can be easily detected by a simple blood pressure check up using blood
pressure apparatus. Hypertension, also called High Blood Pressure,
condition in which the blood pressure in either arteries or veins is
abnormally high. Blood pressure is the force exerted by the blood
against the walls of the blood vessels. x x x Known as the "silent killer"
because it may be present for years with no perceptible symptoms,
hypertension is usually detected by a routine blood pressure test. x x x
Hypertension is usually classified by cause as either essential (of
unknown origin) or secondary (the result of a specific disease or
disorder)." (p. 202, Vol. 6, the New Encyclopedia Britannica).
[Godofredo] underwent this kind of routine blood pressure test every
time he was on contract with [petitioners] to board an ocean-going
vessel. This Pre-employment Medical Examination is done by the
company-designated physician before the signing of employment
contract. Once the seaman-applicant passed this examination, he is, for
all intents and purposes, considered fit to work on board the vessel. And
[Godofredo] was subjected to this kind of medical examination for
several times in the long years of his employment with CF Sharp since
1990. For [petitioners] to claim that [Godofredo] hid his illness during
the pre-employment medical examination is, to us (sic), preposterous-if
not, absurd. x x x
xxxx
As to the Fourth Issue, we rule likewise in favor of [respondents]. There
is no credence to [petitioners’] argument that [Godofredo]’s failure to
report to CF Sharp within three (3) days from his return is fatal to
[respondents’] claim for compensation benefit. The reasons are
obvious: how can [Godofredo] report to CF Sharp when on the second
day of his arrival in Manila he was being treated by Dr. Cayetano
Reyes? And on the third day, while about to report to CF Sharp office,
he collapsed and eventually died on March 19, 2003? We need not
elaborate the obvious. Besides, the three-day mandatory reporting
requirement applies only to the forfeiture of sickness allowance on the
assumption that the seafarer signed off from the vessel for medical
treatment. It does not apply to death benefit compensation under
Section 20 (A) of the POEA Contract. Under these circumstances, we
find it not only unnecessary, but also impossible for [Godofredo] to
comply with the three-day mandatory reporting requirement. 23
And because respondents were compelled to litigate and incurred
expenses to protect their rights and interests, Labor Arbiter Anni
granted respondents’ prayer for attorney’s fees.
In the end, Labor Arbiter Anni decreed:
WHEREFORE, PREMISES CONSIDERED, judgment is rendered, as
follows:
1. Declaring that the death of seaman Godofredo Repiso occurred
during the term of his employment contract and the same was work-
related;
2. Ordering [petitioners] jointly and severally, to pay [respondents] the
amount of FIFTY THOUSAND US DOLLARS (US$50,000.00) as
death benefit;
3. Ordering [petitioners], jointly and severally, to pay [respondents] the
amount of TWENTY-ONE THOUSAND US DOLLARS
(US$21,000.00) as additional benefits due each child of Luzviminda
Repiso and the late Godofredo Repiso, at US$7,000.00 per child
(US$7,000.00 x 3 = US$21,000.00);
4. Ordering [petitioners], jointly and severally, to pay [respondents]
burial expenses in the amount of ONE THOUSAND US DOLLARS
(US$1,000.00); and
5. Ordering [petitioners], jointly and severally, to pay [respondents] ten
percent (10%) of the total monetary award as and by way of attorney’s
fees.
Claims for moral and exemplary damages are dismissed for lack of
merit.
Payment can be made in US DOLLARS or in PHILIPPINE PESOS
[equivalent] at the time of payment.24
Ruling of the NLRC
Petitioners filed with the NLRC a Notice of Appeal with Memorandum
of Appeal,25 docketed as NLRC OFW CN 04-04-00916-00, essentially
reiterating their allegations and arguments before the Labor Arbiter.
In its Decision dated August 24, 2006, the NLRC found merit in
petitioners’ appeal.
At the outset of its Decision, the NLRC established that the 1996
POEA-SEC governed the case given that the implementation of the
2000 POEA-SEC was suspended by a TRO issued by the Court.
The NLRC then proceeded to rule that Godofredo’s death on March 19,
2003 already occurred outside the term of his employment contract:
We believe that the Labor Arbiter over-extended the meaning of the
phrase "term of his contract" as used in the above provision. We do not
have to go beyond the provisions of the standard contract to understand
what it actually refers to:
"Section 2. Commencement/Duration of Contract
A. The employment contract between the employer and seafarer shall
commence upon actual departure of the seafarer from the airport [or
seaport] in the point of hire and with a POEA-approved contract. It
shall be effective until the seafarer’s date of arrival at the point of hire
upon termination of his employment pursuant to Section 18 of this
Contract.
xxxx
and,
Section 18. Termination of Employment.
A. The employment of the seafarer shall cease when the seafarer
completes his period of contractual service aboard the vessel, signs off
from the vessel and arrives at the point of hire.
It is not an uncommon practice in the shipping industry that seafarers
get off at the nearest and convenient port before the expiration of their
contracts. Yet, this does not mean that they have not completed their
services. The provisions on termination would not have found their way
to the standard contract if their purpose were not to clarify how term of
employment or term of contract should be interpreted. On this basis,
We hold that when [Godofredo] disembarked on March 16, 2003, he
did so for no other reason but that he already finished his contract of 10
months. We cannot accept the claim that he was repatriated for medical
reasons because no evidence was ever adduced to prove it so. Even the
Labor Arbiter noted that there was no ship logbook or Master’s report,
to indicate that [Godofredo] was suffering from any illness before he
was repatriated. His death three (3) days after arrival, unfortunate it
may seem, is merely circumstantial.
Moreover, We find that support from jurisprudence that "term of
contract" refers to the actual existence of employer-employee relations.
In the most recent case of Gau Sheng Phils. vs. Estella Joaquin (G.R.
No. 144665, September 8, 2004), the Supreme Court denied the claim
for death benefits on the ground that seaman Joaquin’s employment had
been terminated on the date he was repatriated, upon mutual consent,
which was merely 28 days after he was deployed. Thus, there is here a
categorical recognition that term of employment is not necessarily the
duration of the contract. On this criterion alone, the claim for death and
burial benefits must fail.26
The NLRC also held that respondents failed to prove that Godofredo’s
illness and death were work-related:
Even under the old contract, We find the issue of work relation
applicable. In the same Gau Sheng case (infra), the high court ruled that
death compensation cannot be awarded unless there is substantial
evidence showing that (a) the cause of death was reasonably connected
with his work; or (b) the sickness for which he died is an accepted
occupational disease; or (c) his working conditions increased the risk of
contracting the disease for which he died.
In the instant case, [respondents were] unsuccessful in proving that
[Godofredo]’s death was brought about by his recent work on board.
[Godofredo] never complained of or reported any illness to [petitioners]
before, during and after his disembarkation from M/T Umm Al Lulu.
Based on the records, [petitioners] came to know of [Godofredo]’s
death only months after his repatriation on March 16, 2003, or in
September 2003 when they received the first letter of demand from
[respondents] for payment of death benefits. The only documents they
presented to support their claims were the doctor’s certificate showing
that [Godofredo] was diagnosed on March 17, 2003 as having essential
hypertension and the death certificate showing the cause of death as
hypertensive heart disease. But these do not prove that he contracted or
suffered from the illness while on board during the term of his
employment from May 20, 2002 to March 16, 2003. In fact, he was not
even repatriated for medical reasons but for a finished contract.
On the other hand, [petitioners] substantially established that
[Godofredo]’s death was not a factor. [Respondents] did not deny that
as a messman, [Godofredo]’s duties were largely limited to the
preparation of food in an assisting capacity to the Chief Cook. To our
mind, there is thus nothing in his duties that could increase the risk of
contracting a hypertensive heart disease.
Although hypertension and heart disease are admittedly work-related
illnesses, they being included in the list of occupational diseases under
the standard contract, [respondents] failed to meet the requisite
conditions for compensability. Section 32-A of the contract provides
that: "hypertension classified as primary or essentials is considered
compensable if it causes impairment of function of body organs like
kidneys, heart, eyes and brain, resulting in permanent disability;
Provided, that, the following documents substantiate it: (a) chest x-ray
report, (b) ECG report, (c) blood chemistry, (d) funduscopy report, and
(e) C-T scan." And for cardiovascular diseases (or heart diseases), it is
required that: "Any of the following conditions must be met: (a) If the
heart disease was known to have been present during employment,
there must be proof that an acute exacerbation was clearly precipitated
by the unusual strain by reasons of the nature of his work. (b) The strain
of work that brings about an acute attack must be [of] sufficient severity
and must be followed within 24 hours by the clinical signs of a cardiac
insult to constitute causal relationship. (c) If a person who was
apparently asymptomatic before being subjected to strain at work
showed signs and symptoms of cardiac injury during the performance
of his work and such symptoms and signs persisted, it is reasonable to
claim a causal relationship."
Records show that these conditions have not been satisfied. As earlier
stated, it was not shown that [Godofredo] contracted or suffered from
the illness while on board. Neither did the nature of [Godofredo]’s work
as messman involve severe strain.
At this juncture, We must stress that award of compensation under the
POEA standard contract can not rest on speculations or presumptions.
As held by the Supreme Court in the case of Rosario vs. Denklav
Marine (G.R. No. 166906, March 16, 2005):
x x x. It would be too presumptive for this Court to contemplate even
the probability that Romeo contracted this illness while on board M/T
Endurance. The burden is on the beneficiaries to show a reasonable
connection between the causative circumstances in the employment of
the deceased employee and his death or permanent total disability. x x
x.
To reiterate, the [respondents] failed to discharge this burden. Thus, the
Labor Arbiter should have denied both claims for death and burial
benefits.27
The NLRC finally adjudged:
WHEREFORE, premises considered, [petitioners’] appeal is
GRANTED.
The appealed decision is REVERSED and SET- ASIDE and a new one
is hereby entered DISMISSING the complaint [for] lack of merit. 28
Respondents filed a Motion for Reconsideration, which was denied by
the NLRC in a Resolution dated February 27, 2007.
Ruling of the Court of Appeals
In their Petition for Certiorari29 before the Court of Appeals, docketed
as CA-G.R. SP No. 98857, respondents ascribed grave abuse of
discretion on the part of the NLRC in denying their claims for death
benefits and attorney’s fees; and prayed for the reversal of the "anti-
labor and anti-social justice" Decision of the NLRC and reinstatement
of Labor Arbiter Anni’s Decision.
The Court of Appeals, in its Decision dated September 9, 2009, granted
respondents’ Petition.
The Court of Appeals disagreed with the NLRC ruling that Godofredo
already finished his contract of 10 months when he disembarked from
M/T Umm Al Lulu on March 16, 2003 and concurred in Labor Arbiter
Anni’s finding that Godofredo was repatriated on said date for medical
reasons. The appellate court rationalized that:
The above observations of the Labor Arbiter are more in consonance
with the principle that strict rules of evidence are not applicable in
claims for compensation. In the case of NFD International Manning
Agencies, Inc. vs. NLRC, the Supreme Court held:
"Strict rules of evidence, it must be remembered, are not applicable in
claims for compensation and disability benefits. Private respondent
having substantially established the causative circumstances leading to
his permanent total disability to have transpired during his employment,
we find the NLRC to have acted in the exercise of its sound discretion
in awarding permanent total disability benefits to private respondent.
Probability and not the ultimate degree of certainty is the test of proof
in compensation proceedings."
Contrary to the finding of the NLRC, records do not show that
Godofredo disembarked from the vessel at the nearest and convenient
port due to "end of contract." Neither was it shown or proven by
[petitioners] that Godofredo’s contractual service aboard the vessel
"M/T UMM AL LULU" was completed or that he signed-off from the
vessel. On the contrary, We find by preponderance of evidence that
Godofredo was repatriated on 16 March 2003 for medical reasons
before his contract was to end on 20 March 2003. In fact, as also found
by the Labor Arbiter, Godofredo immediately sought medical treatment
at the Clinic of Dr. Cayetano G. Reyes on 17 March 2003, where he
was required to rest for one (1) week with medication.
Conversely, this Court is at a [loss] why [petitioners], having easy
access over the ship’s logbook or master’s report, failed to present the
same before the NLRC or the Labor Arbiter to disprove [respondents’]
claim that [Godofredo] was repatriated for medical reasons and to prove
the latter’s end of contract. Their failure to do so only constrains us
more to believe that indeed, Godofredo was repatriated for medical
reasons on 16 March 2003, or three (3) days before his untimely death
on 19 March 2003.30 (Citation omitted.)
The Court of Appeals thus determined that the NLRC Decision was
indeed rendered with grave abuse of discretion, being capricious and
whimsical as it was contrary to the present facts and existing
jurisprudence. Before ending, the appellate court deemed it worthy to
stress:
On a final note, the doctrine annunciated in the case of Wallem
Maritime Services, Inc. vs. NLRC, wherein the High Court held that the
POEA Standard Employment Contract for Seamen is designed
primarily for the protection and benefit of Filipino seamen in the
pursuit of their employment on board ocean-going vessels, need not be
emphasized. The provisions of the POEA Standard Employment
Contract for Seamen must, therefore, be construed and applied fairly,
reasonably and liberally in favor of the Seamen. Only then can its
beneficent provisions be fully carried into effect. 31
Accordingly, the dispositive portion of the Court of Appeals Decision
reads:
WHEREFORE, premises considered, the petition is GRANTED. The
assailed Decision and Resolution of the NLRC, Third Division, dated
24 August 2006 and 27 February 2007, respectively, are hereby
REVERSED and SET ASIDE for having been issued with grave abuse
of discretion. The 23 September 2005 Decision of the labor arbiter is
REINSTATED. No costs.32
Petitioners filed a Motion for Reconsideration, 33 but the same was
denied in the assailed Resolution dated December 9, 2009.
The Ruling of the Court
Aggrieved, petitioners filed the instant Petition for Review
on Certiorari34 raising the following legal and factual issues:
1. Whether the Court of Appeals committed serious, reversible error of
law in failing to consider that the contract of employment of Mr.
Godofredo Repiso was terminated upon his arrival in the Philippines
(the point of hire) as provided in POEA-SEC.
Memorandum Circular No. 09, both Series of 2000, shall be strictly and
faithfully observed.
3. Any alterations or changes, in any part of this Contract shall be
evaluated, verified, processed, and approved by the Philippine Overseas
Employment Administration (POEA). Upon approval, the same shall be
deemed an integral part of the Standard Terms and Conditions
Governing the Employment of Filipino Seafarers On Board Ocean-
Going Vessels.

2. Whether the Court of Appeals committed serious, reversible error of
law in failing to consider that Mr. Godofredo Repiso never died of an
illness suffered on board as there was no evidence showing any medical
discomfort or incidents on board leading to such conclusion.
3. Whether the Court of Appeals committed serious, reversible error of
law in failing to consider that respondents’ failure to submit evidence of
any incident on board is not equivalent to substantial evidence required
in any quasi-judicial proceedings, such as the NLRC, to prove an illness
suffered on board.35
There is no merit in the present Petition.
It must be stressed that issues of facts may not be raised under Rule 45
of the Rules of Court because this Court is not a trier of facts. It is not
to reexamine and assess the evidence on record, whether testimonial
and documentary.36 There are, however, recognized exceptions, 37 such
as the instant case, where the factual findings of the Labor Arbiter and
the Court of Appeals are inconsistent with that of the NLRC.
Whether or not Godofredo’s death is compensable depends on the terms
and conditions of his Contract of Employment. The employment of
seafarers, including claims for death benefits, is governed by the
contracts they sign at the time of their engagement. As long as the
stipulations in said contracts are not contrary to law, morals, public
order, or public policy, they have the force of law between the parties.
Nonetheless, while the seafarer and his employer are governed by their
mutual agreement, the POEA Rules and Regulations require that the
POEA-SEC be integrated in every seafarer’s contract. 38
4. Violations of the terms and conditions of this Contract with its
approved addendum shall be ground for disciplinary action against the
erring party.39
DOLE Department Order No. 04 and POEA Memorandum Circular
No. 09, both series of 2000, referred to in Paragraph No. 2 of the afore-
quoted Contract, put into effect the 2000 POEA-SEC. However, by
reason of a TRO issued by this Court enjoining the implementation of
certain provisions of the 2000 POEA-SEC, the POEA issued
Memorandum Circular No. 11, series of 2000, on September 12, 2000,
which advised that (a) Section 20, Paragraphs (A), (B), and (D) of the
1996 POEA-SEC should be applied in lieu of Section 20, Paragraphs
(A), (B), and (D) of the 2000 POEA-SEC; and (b) Implementation of
Section 20, Paragraphs (E) and (G) of the 2000 POEA-SEC was
suspended. Section 20 of both the 1996 and 2000 POEA-SEC governed
the Compensation and Benefits of Filipino seafarers. POEA rescinded
its Memorandum Circular No. 11, series of 2000, and gave effect to the
full text of the 2000 POEA-SEC, in its Memorandum Circular No. 02,
series of 2002, issued on June 5, 2002. Consequently, at the time
Godofredo and petitioners executed the subject Contract of
Employment on April 24, 2002, Section 20 of the 1996 POEASEC
applied.
Respondents’ claims for benefits are based on Section 20(A) of the
1996 POEA-SEC, which provided:
SECTION 20. COMPENSATION AND BENEFITS
A. COMPENSATION AND BENEFITS FOR DEATH

Pertinent provisions of Godofredo’s Contract of Employment are 1. In case of death of the seafarer during the term of his contract,
reproduced below: the employer shall pay his beneficiaries the Philippine Currency
equivalent to the amount of Fifty Thousand US dollars (US$50,000)
1. That the employee shall be employed on board under the following and an additional amount of Seven Thousand US dollars (US$7,000) to
terms and conditions each child under the age of twenty-one (21) but not exceeding four (4)
children, at the exchange rate prevailing during the time of payment.
1.1 Duration of
10.00 months
Contract xxxx

4. The other liabilities of the employer when the seafarer dies as a

1.2 Position MESSMAN/GP
result of injury or illness during the term of employment are as
follows:
1.3 Basic Monthly
$ 560.21 per month
Salary a. The employer shall pay the deceased’s beneficiary all outstanding
obligations due the seafarer under this Contract.
1.4 Living
$ 0.00 per month b. The employer shall transport the remains and personal effects of the
Allowance
seafarer to the Philippines at employer’s expense except if the death
occurred in a port where local government laws or regulations do not
1.5 Hours of Work 44.00 per week permit the transport of such remains. In case death occurs at sea, the
disposition of the remains shall be handled or dealt with in accordance
1.6 Overtime Rate $224.08 per month for the first with the master’s best judgment. In all cases, the employer/master shall
90.00 OT hours communicate with the manning agency to advise for disposition of
$3.50 in excess of 90.00 OT seafarer’s remains.
Hours
c. The employer shall pay the beneficiaries of the seafarer the
Philippine currency equivalent to the amount of One Thousand US
1.7 Vacation leave dollars (US$1,000) for burial expenses at the exchange rate prevailing
6.00 days per month
with pay during the time of payment. (Emphasis supplied.)

1.8 POINT OF As a rule, stipulations in an employment contract not contrary to

MANILA statutes, public policy, public order or morals have the force of law
HIRE
between the contracting parties. In controversies between a laborer and
2. The herein terms and conditions in accordance with [Department of his master, doubts reasonably arising from the evidence or in the
Labor and Employment (DOLE)] Department Order No. 4 and [POEA] interpretation of agreements and writing should be resolved in the
former’s favor. The policy is to extend the doctrine to a greater number
of employees who can avail of the benefits under the law, in
consonance with the avowed policy of the State, under Article XIII,
Section 3 of the 1987 Constitution, to give maximum aid and protection
to labor.40 Consistent with this policy, the POEA-SEC was designed
primarily for the protection and benefit of Filipino seafarers in the
pursuit of their employment on board ocean-going vessels. As such, it
is a standing principle that its provisions are to be construed and applied
fairly, reasonably, and liberally in their favor. 41
For a seafarer’s death to be compensable under the 1996 POEA-SEC,
the Court explicitly ruled in Inter-Orient Maritime, Inc. v.
Candava42 that:
The prevailing rule under the 1996 POEA-SEC was that the illness
leading to the eventual death of seafarer need not be shown to be
work-related in order to be compensable, but must be proven to have
been contracted during the term of the contract. Neither is it
required that there be proof that the working conditions increased the
risk of contracting the disease or illness. An injury or accident is said to
arise "in the course of employment" when it takes place within the
period of employment, at a place where the employee reasonably may
be, and while he is fulfilling his duties or is engaged in doing something
incidental thereto. (Emphases supplied, citations omitted.)
Based on the foregoing, herein respondents are entitled to the benefits
they are claiming as it can be logically and reasonably concluded from
the particular circumstances in the case at bar that Godofredo
contracted the illness which eventually caused his death during the term
of his contract or in the course of his employment.
Respondents alleged, and petitioners did not refute, that Godofredo’s
employment with petitioner C.F. Sharp started way back in 1990. From
then until his last employment with petitioner C.F. Sharp in 2002-2003,
there was no record of him suffering from hypertension and/or heart
disease. Before Godofredo boarded M/T Umm Al Lulu on May 20,
2002, he underwent PEME and was declared fit to work. This negates
petitioners’ claim that Godofredo concealed a pre-existing illness. It is
true that the Court had previously declared that the PEME could not be
relied upon to inform the employer/s of a seafarer’s true state of health,
and there were instances when the PEME could not have divulged the
seafarer’s illness considering that the examinations were not
exploratory.43 Even so, as Labor Arbiter Anni and the Court of Appeals
observed in the instant case, Godofredo’s hypertension and/or heart
disease could have been easily detected by standard/routine tests
included in the PEME, i.e., blood pressure test, electrocardiogram,
chest x-ray, and/or blood chemistry.
Godofredo had no previous record of hypertension and/or heart disease
before he boarded M/T Umm Al Lulu on May 20, 2002; but when he
was repatriated at a port in Manila on March 16, 2003 and examined by
Dr. Reyes on March 17, 2003, he was already diagnosed to be suffering
from "Essential Hypertension." On March 19, 2003, just three days
after his repatriation, Godofredo died and the underlying cause for his
death was identified as "Hypertensive Heart Disease." Taking into
account these circumstances, the Court is convinced that Godofredo
contracted hypertension and/or heart disease during his term of
employment with petitioners beginning May 20, 2002 until his
repatriation on March 16, 2003. In contrast, the Court is not swayed by
petitioners’ contention that the 10-month period was too short for
Godofredo to have developed his illness, which was totally
unsubstantiated.
Worth reiterating herein are the following pronouncements of the Court
in Wallem Maritime Services, Inc. v. National Labor Relations
Commission44:
[B]efore Faustino Inductivo was made to sign the employment contract
with petitioners he was required to undergo, as a matter of procedure,
medical examinations and was declared fit to work by no less than
petitioners' doctors. Petitioners cannot now be heard to claim that at the
time Faustino Inductivo was employed by them he was afflicted with a
serious disease, and that the medical examination conducted on the
deceased seaman was not exploratory in nature such that his disease
was not detected in the first instance. Being the employer, petitioners
had all the opportunity to pre-qualify, screen and choose their
applicants and determine whether they were medically, psychologically
and mentally fit for the job upon employment. The moment they have
chosen an applicant they are deemed to have subjected him to the
required pre-qualification standards.
But even assuming that the ailment of Faustino Inductivo was
contracted prior to his employment on board "MT Rowan," this is not a
drawback to the compensability of the disease. It is not required that the
employment be the sole factor in the growth, development or
acceleration of the illness to entitle the claimant to the benefits provided
therefor. It is enough that the employment had contributed, even in a
small degree, to the development of the disease and in bringing about
his death.
xxxx
Neither is it necessary, in order to recover compensation, that the
employee must have been in perfect condition or health at the time he
contracted the disease. Every workingman brings with him to his
employment certain infirmities, and while the employer is not the
insurer of the health of the employees, he takes them as he finds them
and assumes the risk of liability. If the disease is the proximate cause of
the employee's death for which compensation is sought, the previous
physical condition of the employee is unimportant and recovery may be
had therefor independent of any pre-existing disease. (Citation omitted.)
Besides, it bears to point out that the implementation of Section 20(E)
of the 2000 POEA-SEC, disqualifying a seafarer from any
compensation and benefits because of concealment of a pre-existing
condition,45 was explicitly suspended by Memorandum Circular No. 11,
series of 2000, and the 1996 POEA-SEC contained no such provision.
Godofredo’s 10-month Contract of Employment was to end on March
20, 2003. Yet, Godofredo was already repatriated on March 16, 2003 in
Manila.1âwphi1 Respondents allege that Godofredo was repatriated for
medical reasons because he was already experiencing continuous
headaches and body pains on board M/T Umm Al Lulu. Petitioners aver
that Godofredo was merely repatriated at a convenient port, allowed
under Section 19(B) of the 2000 POEA-SEC46 which stated:
SECTION 19. REPATRIATION
xxxx
(B) If the vessel arrives at a convenient port before the expiration of the
contract, the master/employer may repatriate the seafarer from such
port, provided the unserved portion of his contract is not more than one
(1) month. The seafarer shall be entitled only to his earned wages and
earned leave pay and to his basic wages corresponding to the unserved
portion of the contract, unless within 60 days from disembarkation, the
seafarer is rehired at the same rate and position, in which case the
seafarer shall be entitled only to his earned wages and earned leave pay.
"Convenient port" was defined as "any port where it is practicable,
economical, safe and convenient to repatriate the seafarer." 47
Between the two claims as to the reason for Godofredo’s repatriation,
that of the respondents is more persuasive, especially considering that
Godofredo, the very next day following his repatriation, did not rest or
spend time with his family, but immediately went to a medical clinic to
see a doctor. This could only mean that Godofredo was already not
feeling well. In fact, Dr. Reyes, who examined Godofredo on March 17,
2003, diagnosed him with "Essential Hypertension" and advised him to
take the prescribed medication and rest for a week; but only two days
after, on March 19, 2003, Godofredo already collapsed and died from
his heart ailment. This sequence of events establishes Godofredo’s ill
state of health upon his repatriation in Manila on March 16, 2003.
The burden was thus shifted to petitioners to prove that Godofredo was
only repatriated at a convenient port. However, aside from their bare
allegations, petitioners did not present any other proof of their
purported reason for Godofredo’s repatriation. Petitioners explain that
they no longer presented in evidence the ship’s logbook or master’s
report since Godofredo did not complain of or suffer any illness on
board M/T Umm Al Lulu, hence, there was no such entry in the ship’s
logbook or any master’s report of such incident. The Court notes
though that petitioners had possession of and access to all logbooks and
records of M/T Umm Al Lulu, and presentation of the said logbooks and
records would have been material to prove the actual absence of any
entry or report regarding Godofredo’s health while he was on board.
Moreover, it is difficult to believe that petitioners had absolutely no log
entry or record regarding Godofredo’s repatriation, whether for medical
or any other reason. Godofredo could not have disembarked from
M/T Umm Al Lulu without express authority or consent from the
master of the ship or petitioners as Godofredo’s employers, and such
authority or consent would have most likely stated the justifying cause
for the same. That petitioners did not present such logbooks and records
even gives rise to the presumption that something in said logbooks and
records is actually adverse to petitioners’ case.
It is important to determine definitively that Godofredo was repatriated
for medical reasons because Section 20(A)(1) of the 1996 POEASEC
covered cases wherein the seafarer’s death occurred "during the term of
his contract." The same phrase could be found in Section 20(A)(1) of
the 2000 POEA-SEC, only this more recent version of the provision
additionally required that the death be "work-related." 48 Strictly,
medical repatriation of the seafarer at the point of hire meant the
termination of his employment. 49 Nevertheless, in Canuel v. Magsaysay
Maritime Corporation,50 the Court adjudged that the heirs of a seafarer
who died after his medical repatriation could still recover the
compensation and benefits provided in Section 20(A) of the 2000
POEA-SEC, reasoning as follows:
Applying the rule on liberal construction, the Court is thus brought to
the recognition that medical repatriation cases should be considered
as an exception to Section 20 of the 2000 POEA-SEC. Accordingly,
the phrase "work-related death of the seafarer, during the term of his
employment contract" under Part A (1) of the said provision should
not be strictly and literally construed to mean that the seafarer’s
work-related death should have precisely occurred during the term
of his employment. Rather, it is enough that the seafarer’s work-
related injury or illness which eventually causes his death should
have occurred during the term of his employment. Taking all things
into account, the Court reckons that it is by this method of construction
that undue prejudice to the laborer and his heirs may be obviated and
the State policy on labor protection be championed. For if the laborer’s
death was brought about (whether fully or partially) by the work he had
harbored for his master’s profit, then it is but proper that his demise be
compensated. (Emphases supplied.)
As the following survey of cases in Canuel will show, the Court had
previously granted claims for death benefits (some under the 1984 and
1996 POEA-SEC) even though the seafarers’ death occurred after their
repatriation:
Meanwhile, on the opposite end of the jurisprudential spectrum, the
Court, in a number of cases, granted claims for death benefits although
the seafarers’ death therein had occurred after their repatriation
primarily because of the causal connection between their work and the
illness which had eventually resulted in their death.
In the 1999 case of Wallem Maritime Service, Inc. v. NLRC, the death
benefit claims of the heirs of the seafarer who had died after having
been repatriated on account of "mutual consent" between him and his
employer was allowed by the Court because of the "reasonable
connection" between his job and his illness. As pertinently stated in that
case:
It is not required that the employment be the sole factor in the growth,
development or acceleration of the illness to entitle the claimant to the
benefits provided therefor. It is enough that the employment had
contributed, even in a small degree, to the development of the
disease and in bringing about his death.
It is indeed safe to presume that, at the very least, the nature of Faustino
Inductivo’s employment had contributed to the aggravation of his
illness – if indeed it was pre-existing at the time of his employment –
and therefore it is but just that he be duly compensated for it.  It cannot
be denied that there was at least a reasonable connection between
his job and his lung infection, which eventually developed
into septicemia  and ultimately caused his death.  As a [utility man]
on board the vessel, he was exposed to harsh sea weather, chemical
irritants, dusts, etc., all of which invariably contributed to his
illness.
Neither is it necessary, in order to recover compensation, that the
employee must have been in perfect condition or health at the time he
contracted the disease. Every workingman brings with him to his
employment certain infirmities, and while the employer is not the
insurer of the health of the employees, he takes them as he finds them
and assumes the risk of liability. If the disease is the proximate cause of
the employee’s death for which compensation is sought, the previous
physical condition of the employee is unimportant and recovery may be
had therefor independent of any pre-existing disease.
Later, the Court, in Seagull Shipmanagement and Transport, Inc. v.
NLRC – a sickness and permanent disability claims case decided under
the auspices of the 1984 version of the POEA-SEC (which, unlike the
present standard contract, only requires that the illness of death occur
during the term of the employment whether work-related or not) –
significantly observed that:
Even assuming that the ailment of the worker was contracted prior to
his employment, this still would not deprive him of compensation
benefits.1avvphi1 For what matters is that his work had
contributed, even in a small degree, to the development of the
disease and in bringing about his eventual death.Neither is it
necessary, in order to recover compensation, that the employee must
have been in perfect health at the time he contracted the disease. A
worker brings with him possible infirmities in the course of his
employment, and while the employer is not the insurer of the health of
the employees, he takes them as he finds them and assumes the risk of
liability. If the disease is the proximate cause of the employee’s
death for which compensation is sought, the previous physical
condition of the employee is unimportant, and recovery may be had
for said death, independently of any pre-existing disease.
The Court similarly took into account the work-relatedness element in
granting the death benefits claim in Interorient Maritime Enterprises,
Inc. v. Remo, a 2010 case decided under the 1996 POEA-SEC which
operated under parameters identical to the 1984 POEA-SEC. Quoted
hereunder are the pertinent portions of that ruling:
It was established on record that before the late Lutero Remo signed his
last contract with private respondents as Cook-Steward of the vessel
"M/T Captain Mitsos L," he was required to undergo a series of
medical examinations. Yet, he was declared "fit to work" by private
respondents’ company designated-physician. On April 19, 1999, Remo
was discharged from his vessel after he was hospitalized in Fujairah for
atrial fibrillation and congestive heart failure. His death on August 28,
2000, even if it occurred months after his repatriation, due to
hypertensive cardio-vascular disease, could clearly have been work
related. Declared as "fit to work" at the time of hiring, and hospitalized
while on service on account of "atrial fibrillation and congestive heart
failure," his eventual death due to "hypertensive cardio-vascular
disease" could only be work related. The death due to "hypertensive
cardio-vascular disease" could in fact be traced to Lutero Remo’s being
the "Cook-Steward." As Cook-Steward of an ocean going vessel,
Remo had no choice but to prepare and eat hypertension inducing
food, a kind of food that eventually caused his "hypertensive
cardio-vascular disease," a disease which in turn admittedly caused
his death.
Private respondents cannot deny liability for the subiect death by
claiming that the seafarer’s death occurred beyond the term of his
employment and worsely, that there has been misrepresentation on
the part of the seafarer. For, as employer, the private respondents had
all the opportunity to pre-qualify, thoroughly screen and choose their
applicants to determine if they are medically, psychologically and
mentally fit for employment. That the seafarer here was subjected to the
required pre-qualification standards before he was admitted as Cook-
Steward, it thus has to be safely presumed that the late Remo was in a
good state of health when he boarded the vessel.
More recently, in the 2013 case of Inter-Orient Maritime, Incorporated
v. Candava, also decided under the framework of the 1996 POEA-SEC,
the Court pronounced that the seafarer's death therein, despite occurring
after his repatriation, remains "compensable for having been caused by
an illness duly established to have been contracted in the course of his
employment."51 (Citations omitted.)
The Court highlighted at the end of Canuel that:
[C]onsidering the constitutional mandate on labor as well as relative
jurisprudential context, the rule, restated for a final time, should be as
follows: if the seafarer's work-related injury or illness (that
eventually causes his medical repatriation and, thereafter, his
death, as in this case) occurs during the term of his
employment, then the employer becomes liable for death
compensation benefits under Section 20 (A) of the 2000 POEA-
SEC. The provision cannot be construed otherwise for to do so would
not only transgress prevailing constitutional policy and deride the
bearings of relevant case law but also result in a travesty of fairness and
an indifference to social justice.52
Therefore, the Court herein likewise considers medical repatriation an
exceptional circumstance and allows the heirs of the seafarer who died
after he had been medically repatriated to recover the compensation and
benefits provided in Section 20(A) of the 1996 POEA-SEC. The phrase
"death of the seafarer during the term of his contract" in Section 20(A)
(1) of the 1996 POEA-SEC should not be strictly and literally construed
to mean that the seafarer’s death should have occurred during the term
of his employment; it is enough that the seafarer’s work-related injury
or illness which eventually caused his death occurred during the term of
his employment.
The insistence of petitioners on the post-employment medical
examination of the seafarer by a company-designated physician within
three days from arrival at the point of hire is misplaced. Said post-
employment medical examination was required under Section 20(B)(3)
of the 1996 POEA-SEC for compensation and benefits for a seafarer’s
injury or illness; it was not a requisite under Section 20(A) of the 1996
POEA-SEC for compensation and benefits for a seafarer’s death. In
addition, Section 20(B)(3) of the 1996 POEA-SEC itself allowed as an
exception from said requirement a seafarer who is physically
incapacitated from complying with same. 53 Apparently, in the case at
bar, Godofredo was already of poor health and weak physical condition
upon his repatriation on March 16, 2003, which necessitated his
immediate visit to a nearby clinic the very next day, on March 17, 2003.
In any case, Godofredo still had until March 19, 2003 to see a
company-designated physician but he died on the same day of a cause
("Hypertensive Heart Disease") directly linked to the illness ("Essential
Hypertension") he developed during his term of employment on
M/T Umm Al Lulu and for which he was medically repatriated. Again,
the observation of the Court in Wallem Maritime Services, Inc., quoted
below, is of particular significance to Godofredo’s case:
Admittedly, Faustino Inductivo did not subject himself to post-
employment medical examination within three (3) days from his return
to the Philippines, as required by the above provision of the POEA
standard employment contract. But such requirement is not absolute
and admits of an exception, i.e., when the seaman is physically
incapacitated from complying with the requirement. Indeed, for a man
who was terminally ill and in need of urgent medical attention one
could not reasonably expect that he would immediately resort to and
avail of the required medical examination, assuming that he was still
capable of submitting himself to such examination at that time. It is
quite understandable that his immediate desire was to be with his
family in Nueva Ecija whom he knew would take care of him. Surely,
under the circumstances, we cannot deny him, or his surviving heirs
after his death, the right to claim benefits under the law. 54
Equally unavailing in this case are the references made by the NLRC to
the requirements for compensable death from occupational diseases,
listed under Section 32-A of the 2000 POEA-SEC. However, Section
32 (Schedule of Disability or Impediment for Injuries Suffered and
Diseases Including Occupational Diseases or Illness Contracted) and
Section 32-A (Occupational Diseases) of the 2000 POEA-SEC could
only be applied in relation to Section 20 (Compensation and Benefits)
of the same POEA-SEC, and as the Court previously declared herein,
the use or implementation of Section 20 of the 2000 POEA-SEC was
suspended by POEA Memorandum Circular No. 11, series of 2000. In
the meantime, Section 20 of the 1996 POEA-SEC applied to
Godofredo’s case; and the 1996 POEA-SEC did not contain a provision
corresponding to Section 32-A of the 2000 POEA-SEC. To apply
Section 32-A of the 2000 POEA-SEC to Godofredo’s case would be to
impose additional conditions on the claim for compensation and
benefits for his death based on Section 20(A) of the 1996 POEA-SEC,
which would be contrary to the rule on liberal construction of the laws
and contracts in favor of labor.
Finally, the cases cited by petitioners, in which the Court denied the
claims for compensation and benefits for seafarers’ death occurring
after their repatriation, are not on all fours with this case.
In Hermogenes v. Osco Shipping Services, Inc.,55 the claim for
compensation and benefits was not granted because there was no clear
reason why the seafarer’s contract of employment was terminated just
two months after it started; his death occurred more than three years
after such termination of contract; and there was no medical proof that
his death was due to an illness contracted during his last term of
employment. The seafarer in Prudential Shipping Management
Corporation v. Sta. Rita56 was medically repatriated and his contract of
employment was deemed terminated on March 8, 2000. He underwent
surgery to repair his umbilical hernia and for which he was already paid
sickness allowance. He died more than a year later on March 18, 2001
of "cardiopulmonary arrest secondary to metabolic acidosis, acute renal
failure and hepatocellular carcinoma." The claim for compensation and
benefits was denied in said case since the seafarer’s death was not
shown to be connected to the umbilical hernia for which he was
repatriated in March 2000. Klaveness Maritime Agency, Inc. v.
Beneficiaries of Anthony Allas,57 already involved the 2000 POEA-SEC
which not only required that the seafarer’s death occurred or the illness
causing the seafarer’s death was contracted during the term of
employment, but also that said death/illness was work-related. Therein
seafarer died one and a half years after the termination of his
employment and there was no substantial evidence linking his urinary
bladder cancer to his work, thus, barring his heirs’ claim for
compensation and benefits for his death. Estate of Posedio Ortega v.
Court of Appeals58 also concerned the 2000 POEA-SEC. In less than a
month from boarding the ship, therein seafarer fell ill, and was
diagnosed with lung cancer and repatriated to the Philippines, where he
underwent chemotherapy and medication. Barely three months after his
repatriation, the seafarer succumbed to lung cancer. The Court did not
allow the claim for compensation and benefits for the seafarer’s death
as there was no showing that his lung cancer was brought about by his
short stint on board the employer’s vessel.
WHEREFORE, premises considered, the instant Petition for Review
on Certiorari is DENIED. The assailed Decision dated September 9,
2009 and Resolution dated December 9, 2009 of the Court of Appeals
in CA-G.R. SP No. 98857 are AFFIRMED.
SO ORDERED.
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
WE CONCUR:
LABOR LAW
4.
FIRST DIVISION
January 30, 2017 G.R. No. 206390
JACK C. VALENCIA, Petitioner, 
vs.
CLASSIQUE VINYL PRODUCTS CORPORATION, JOHNNY
CHANG (Owner) and/or CANTINGAS MANPOWER
SERVICES, Respondents.
DEL CASTILLO, J.:
This Petition for Review on Certiorari assails the December 5, 2012
Decision1 and March 18, 2013 Resolution2 of the Court of Appeals
(CA) in CA-G.R. SP No. 120999, which respectively denied the
Petition for Certiorari filed therewith by petitioner Jack C. Valencia
(Valencia) and the motion for reconsideration thereto.
Factual Antecedents
On March 24, 2010, Valencia filed with the Labor Arbiter a
Complaint3 for Underpayment of Salary and Overtime Pay; Non-
Payment of Holiday Pay, Service Incentive Leave Pay, 13 th Month Pay;
Regularization; Moral and Exemplary Damages; and, Attorney's Fees
against respondents Classique Vinyl Products Corporation (Classique
Vinyl) and its owner Johnny Chang (Chang) and/or respondent
Cantingas Manpower Services (CMS). When Valencia, however, asked
permission from Chang to attend the hearing in connection the said
complaint on April 17, 2010, the latter allegedly scolded him and told
him not to report for work anymore. Hence, Valencia amended his
complaint to include illegal dismissal.4
5
In his Sinumpaang Salaysay,   Valencia alleged that he applied for
work with Classique Vinyl but was told by the latter's personnel office
to proceed to CMS, a local manpower agency, and therein submit the
requirements for employment. Upon submission thereof, CMS made
him sign a contract of employment 6 but no copy of the same was given
to him. He then proceeded to Classique Vinyl for interview and
thereafter started working for the company in June 2005 as felitizer
operator. Valencia claimed that he worked 12 hours a day from Monday
to Saturday and was receiving ₱187.52 for the first eight hours and an
overtime pay of ₱117.20 for the next four hours, or beyond the then
minimum wage mandated by law. Five months later, he was made to
serve as extruder operator but without the corresponding increase in
sa1aiy. He was neither paid his holiday pay, service incentive leave
pay, and 13th month pay. Worse, premiums for Philhealth and Pag-IBIG
Fund were not paid and his monthly deductions for Social Security
System (SSS) premiums were not properly remitted. He was also being
deducted the amounts of ₱100.00 and ₱60.00 a week for Cash Bond
and Agency Fee, respectively. Valencia averred that his salary was paid
on a weekly basis but his pay slips neither bore the name of Classique
Vinyl nor of CMS; that all the machineries that he was using/operating
in connection with his work were all owned by Classique Vinyl; and
that his work was regularly supervised by Classique Vinyl. He further
averred that he worked for Classique Vinyl for four years until his
dismissal. Hence, by operation of law, he had already attained the status
of a regular employee of his true employer, Classique Vinyl, since
according to him, CMS is a mere labor-only contractor. Valencia,
therefore, argued that Classique Vinyl should be held guilty of illegal
dismissal for failing to comply with the twin-notice requirement when it
dismissed him from the service and be made to pay for his monetary
claims.
Classique Vinyl, for its part, denied having hired Valencia and instead
pointed to CMS as the one who actually selected, engaged, and
contracted out Valencia's services. It averred that CMS would only
deploy Valencia to Classique Vinyl whenever there was an urgent
specific task or temporary work and these occasions took place
sometime in the years 2005, 2007, 2009 and 2010. It stressed that
Valencia's deployment to Classique Vinyl was intermittent and limited
to three to four months only in each specific year. Classique Vinyl
further contended that Valencia's performance was exclusively and
directly supervised by CMS and that his wages and other benefits were
also paid by the said agency. It likewise denied dismissing Valencia
from work and instead averred that on April 16, 2010, while deployed
with Classique Vinyl, Valencia went on a prolonged absence from work
for reasons only known to him. In sum, Classique Vinyl asserted that
there was no employer-employee relationship between it and Valencia,
hence, it could not have illegally dismissed the latter nor can it be held
liable for Valencia's monetary claims. Even assuming that Valencia is
entitled to monetary benefits, Classique Vinyl averred that it cannot be
made to pay the same since it is an establishment regularly employing
less than 10 workers. As such, it is exempted from paying the
prescribed wage orders in its area and other benefits under the Labor
Code. At any rate, Classique Vinyl insisted that Valencia's true
employer was CMS, the latter being an independent contractor as
shown by the fact that it was duly incorporated and registered not only
with the Securities and Exhange Commission but also with the
Department of Labor and Employment; and, that it has substantial
capital or investment in connection with the work performed and
services rendered by its employees to clients.
CMS, on the other hand, denied any employer-employee relationship
between it and Valencia. It contended that after it deployed Valencia to
Classique Vinyl, it was already the latter which exercised full control
and supervision over him. Also, Valencia's wages were paid by
Classique Vinyl only that it was CMS which physically handed the
same to Valencia.
Ruling of the Labor Arbiter
On September 13, 2010, the Labor Arbiter issued a Decision, 7 the
pertinent portions of which read:
Is [Valencia] a regular employee of respondent (Classique Vinyl]?
The Certificate of Business Name Registration issued by the
Department of Trade and Industry dated 17 August 2007 and the
Renewal of PRP A License No. M-08-03-269 for the period 29 August
2008 to 28 August 2010 issued by the Regional Director of the National
Capital Region of the Department of Labor and Employment [on the]
1st day of September 2008 are pieces of evidence to prove that
respondent [CMS] is a legitimate Private Recruitment and Placement
Agency.
Pursuant to its business objective, respondent CMS entered into several
Employment Contracts with complainant Valencia as Contractual
Employee for deployment to respondent [Classique Vinyl], the last of
which was signed by [Valencia] on 06 February 2010.
The foregoing Employment Contract for a definite period supports
respondent [Classique Vinyl's] assertion that [Valencia] was not hired
continuously but intermittently ranging from 3 months to 4 months for
the years 2005, 2007, 2009 and 2010. Notably, no controverting
evidence was offered to dispute respondent [Classique Vinyl's]
assertion.
Obviously, [Valencia] was deployed by CMS to [Classique Vinyl] for a
fixed period.
In Pangilinan v. General Milling Corporation, G.R. No. 149329, July
12, 2004, the Supreme Court ruled that it does not necessarily follow
that where the duties of the employee consist of activities usually
necessary or desirable in the usual business of the employer, the parties
are forbidden from agreeing on a period of time for the performance of
such activities. There is thus nothing essentially contradictory between
a definite period of employment and the nature of the employee's
duties.
Thus, even if respondent [Classique Vinyl] exercises full control and
supervision over the activities perfom1ed by [Valencia], the latter's
employment cannot be considered as regular.
Likewise, even if [Valencia] is considered the regular employee of
respondent CMS, the complaint for illegal dismissal cannot prosper as
[the] employment was not terminated by respondent CMS.
On the other hand, there is no substantial evidence to support
[Valencia's] view that he was actually dismissed from his employment
by respondent [Classique Vinyl]. After all, it is elementary that he who
makes an affirmative allegation has the burden of proof. On this score,
[Valencia] failed to establish that he was actually dismissed from his
job by respondent [Classique Vinyl], aside from his bare allegation.
With regard to underpayment of salary, respondent CMS admitted that
it received from respondent [Classique Vinyl] the salary for
[Valencia's] deployment. Respondent CMS never contested that the
amount received was sufficient for the payment of [Valencia's] salary.
Furthermore, respondent [Classique Vinyl] cannot be obliged to pay
[Valencia's] overtime pay, holiday pay, service incentive leave and
13th month pay as well as the alleged illegal deduction on the following
grounds:
a) [Valencia] is not a rank-and-file employee of [Classique Vinyl];
b) No proof was offered to establish that [Valencia] actually rendered
overtime services;
c) [Valencia had] not [worked] continuously or even intermittently for
[one whole] (1) year[-]period during the specific year of his deployment
with respondent [Classique Vinyl] to be entitled to service incentive
leave pay.
d) [Valencia] failed to offer substantial evidence to prove that
respondent [Classique Vinyl] illegally deducted from his sala. 7 the
alleged agency and cash bond.
Moreover, as against respondent CMS[,] the record is bereft of factual
basis for the exact computation of [Valencia's] money claims as it has
remained uncontroverted that [Valencia] was not deployed
continuously neither with respondent [Classique Vinyl] and/or to such
other clientele.
WHEREFORE, premises considered, judgment is hereby rendered
[d]ismissing the above-entitled case for lack of merit and/or factual
basis
SO ORDERED,8
Ruling of the National Labor Relations Commission
Valencia promptly appealed to the National Labor Relations
Commission (NLRC). Applying the four-fold test, the NLRC, however,
declared CMS as Valencia's employer in its Resolution 9 dated April 14,
2011, viz.:
In Order to determine the existence of an employer-employee
relationship, the following yardstick had been consistently applied: (l)
the selection and engagement; (2) payment of wages; (3) power of
dismissal and; (4) the power to control the employee[']s conduct.
In this case, [Valencia] admitted that he applied for work with
respondent [CMS] x x x. Upon the acceptance of his application, he
was made to sign an employment contract x x x. [Valencia] also
admitted that he received his wages from respondent [CMS] x x x. As a
matter of fact, respondent [CMS] argued that [Valencia] was given a
non-cash wage in the approximate amount of Php3,000.00 x x x.
Notably, it is explicitly stated in the employment contract of [Valencia]
that he is required to observe all the rules and regulations of the
company as well as [the] lawful instructions of the management during
his employment. That failure to do so would cause the termination of
his employment contract. The pertinent provision of the contract reads:
2. The employee shall observe all the rules and regulations of the
company during the period of employment and [the] lawful instructions
of the management or its representatives. Failure to do so or if
performance is below company standards, management [has] the right
to immediatelycancel this contract. x x x
The fact that [Vale1icia] was subjected to such restriction is an evident
exercise of the power of control over [Valencia].
The power of control of respondent [CMS] over Valencia was further
bolstered by the declaration of the former that they will not take against
[Valencia] his numerous tardiness and absences at work and[;] his
nonobservance of the company rules,· The statement of [CMS] reads:
Needless to say that [Valencia] in the course of his employment has
incurred many infractions like tardiness and absences, non-observance
of company rules, but respondent [CMS], in reiteration will not take
this up as leverage against [Valencia]. x x x
Though [Valencia] worked in the premises of Classique Vinyl x x x and
that the [equipment] he used in the performance of his work was
provided by the between [Valencia] and Classique Vinyl x x x in view
of the foregoing circumstances earlier reflected. Besides, as articulated
by jurisprudence, the power of control does not require actual exercise
of the power but the power to wield that power x x x.
With the foregoing chain of events, it is evident that [Valencia] is an
employee of respondent [CMS].
x x x x10
Accordingly, the NLRC held that there is no basis for Valencia to hold
Classique Vinyl liable for his alleged illegal dismissal as well as for his
money claims. Hence, the NLRC dismissed Valencia's appeal and
affirmed the decision of the Labor Arbiter.
Valencia's motion for reconsideration thereto was likewise denied for
lack of merit in the Resolution11 dated June 8, 2011.
Ruling of the Court of Appeals
When Valencia sought recourse from the CA, the said court rendered a
Decision12 dated December 5, 2012 denying his Petition
for Certiorari and affirming the ruling of the NLRC.
Valencia's motion for reconsideration was likewise denied in a
Resolution 13 dated March 18, 2013.
Hence, this Petition for Review on Certiorari imputing upon the CA
the following errors:
WITH DUE RESPECT, IT IS A SERIOUS ERROR WHICH
CONSTITUTE[S] GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OR IN EXCESS OF JURISDICTION ON THE PART OF
THE HONORABLE COURT OF APPEALS TO HAVE RULED
THAT PETITIONER IS AN EMPLOYEE OF CMS AND FURTHER
RULED THAT HE IS NOT ENTITLED TO HIS MONETARY
CLAIMS.
WITH DUE RESPECT, THE HONORABLE COURT OF
APPEALS['] DECISION AND RESOLUTION ARE CONTRARY TO
LAW AND WELL-SETTLED RULE.14
Valencia points out that the CA, in ruling that he was an employee of
CMS, relied heavily on the employment contract which the latter
caused him to sign. He argues, however, that the said contract deserves
scant consideration since aside from being improperly filled up (there
were many portions without entries), the same was not notarized.
Valencia likewise stresses that ti.11e burden of proving that CMS is a
legitimate job contractor lies with respondents. Here, neither Classique
Vinyl nor CMS was able to present proof that the latter has substantial
capital to do business as to be considered a legitimate independent
contractor. Hence, CMS is presumed to be a mere labor-only contractor
and Classique Vinyl, as CMS' principal, was Valencia's true employer.
As to his alleged dismissal, Valencia argues that respondents failed to
establish just or authorized cause, thus, his dismissal was illegal. Anent
his monetary claims, Valencia invokes the principle that he who pleads
payment has the burden of proving it. Since respondents failed to
present even a single piece of evidence that he has been paid his labor
standards benefits, he believes that he is entitled to recover them from
respondents who must be held jointly and severally liable for the same.
Further, Valencia contends that respondents should be assessed moral
and exemplary damages for circumventing pertinent labor laws by
preventing him from attaining regular employment status. Lastly, for
having been compelled to engage the services of counsel, Valencia
claims that he is likewise entitled to attorney's fees.
For their part, respondents Classique Vinyl and Chang point out that the
issues raised by Valencia involve questions of fact which are not within
the ambit of a petition for review on certiorari. Besides, findings of
facts of the labor tribunals when affirmed by the CA are generally
binding on this Court. At any rate, the said respondents reiterate the
argun1ents they raised before the labor tribunals and the CA.
With respect to respondent CMS, the Court dispensed with the filing of
its comment15 when the resolution requiring it to file one was returned
to the Court unserved 16 and after Valencia informed the Court that per
Certification 17 of the Office of the Treasurer of Valenzuela City where
CMS's office was located, the latter had already closed down its
business on March 21, 2012.
Our Ruling
There is no merit in the Petition.
The core issue here is whether there exists an employer-employee
relationship between Classique Vinyl and Valencia. Needless to state, it
is from the said detennination that the other issues raised, i.e., whether
Valencia was illegally dismissed by Classique Vinyl and whether the
latter is liable for his monetary claims, hinge. However, as correctly
pointed out by Classique Vinyl, "[t]he issue of whether or not an
employer-employee relationship existed between [Valencia] and
[Classique Vinyl] is essentially a question of fact." 18 "The Court is not
a trier of facts and will not review the factual findings of the lower
tribunals as these are generally binding and conclusive."' 19 While there
are recognized exceptions,20 none of them applies in this case.
Even if otherwise, the Court is not inclined to depart from the uniform
findings of the Labor Arbiter, the NLRC and the CA.
"It is an oft-repeated rule that in labor cases, as in other administrative
and quasi-judicial proceedings, 'the quantum of proof necessary is
substantial evidence, or such amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion.’ ‘The
burden of proof rests upon the party who asserts the affirmative of an
issue’."21 Since it is Valencia here who is claiming to be an employee of
Classique Vinyl, it is thus incumbent upon him to proffer evidence to
prove the existence of employer-employee relationship between them.
He "needs to show by substantial evidence that he was indeed an
employee of the company against which he claims illegal
dismissal."22 Corollary, the burden to prove the elements of an
employer-employee relationship, viz.: (1) the selection and engagement
of the employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the power of control, lies upon Valencia.
Indeed, there is no hard and fast rule designed to establish the
aforementioned elements of employer-employee relationship. 23 "Any
competent and relevant evidence to prove the relationship may be
admitted."24 In this case, however, Valencia failed to present competent
evidence, documentary or otherwise, to support his claimed employer-
employee relationship between him and Classique Vinyl. All he
advanced were mere factual assertions unsupported by proof.
In fact, most of Valencia's allegations even militate against his claim
that Classique Vinyl was his true employer. For one, Valencia stated in
his Sinumpaang Salaysay that his application was actually received and
processed by CMS which required him to submit the necessary
requirements for employment. Upon submission thereof, it was CMS
that caused him to sign an employment contract, which upon perusal, is
actually a contract between him and CMS. It was only after he was
engaged as a contractual employee of CMS that he was deployed to
Classique Vinyl. Clearly, Valencia's selection and engagement was
undertaken by CMS and conversely, this negates the existence of such
element insofar as Classique Vinyl is concerned. It bears to state, in
addition, that as opposed to Valencia's argument, the lack of
notarization of the said employment contract did not adversely affect its
veracity and effectiveness since significantly, Valencia does not deny
having signed the same. 25 The CA, therefore, did not err in relying on
the said employment contract in its determination of the merits of this
case. For another, Valencia himself acknowledged that the pay
slips26 he submitted do not bear the name of Classique Vinyl. While the
Court in Vinoya v. National Labor Relations Commission27took judicial
notice of the practice of employer to course through the purported
contractor the act of paying wages to evade liabilities under the Labor
Code, hence, the non-appearance of employer's name in the pay slip,
the Court is not inclined to rule that such is the case here. This is
conside1ing that although CMS claimed in its supplemental Position
Paper/Comment that the money it used to pay Valencia's wages came
from Classique Vinyl,28 the same is a mere allegation without proof
Moreover, such allegation is inconsistent with CMS's earlier assertion
in its Position Paper29 that Valencia received from it non-cash wages in
an approximate amount of ₱3,000.00. A clear showing of the element
of payment of wages by Classique Vinyl is therefore absent.
Aside from the afore-mentioned inconsistent allegations of Valencia,
his claim that his work was supervised by Classique Vinyl does not
hold water. Again, the Court finds the same as a self-serving assertion
unworthy of credence. On the other hand, the employment contract
which Valencia signed with CMS categorically states that the latter
possessed not only the power of control but also of dismissal over
him, viz.:
xxxx
2. That the employee shall observe all rules and regulations of the
company during the period of employment and [the] lawful instructions
of the management or its representatives. Failure to do so or if
performance is below company standards, management [has] the right
to immediately cancel this contract.
x x x x30
Clearly, therefore, no error can be attributed on the part of the labor
tribunals and the CA in ruling out the existence of employer-employee
relationship between Valencia and Classique Vinyl.
Further, the Court finds untenable Valencia's argument that neither
Classique Vinyl nor CMS was able to present proof that the latter is a
legitimate independent contractor and therefore, unable to rebut the
presumption that a contractor is presumed to be a labor-only contractor.
"Genera1ly, the presumption is that the contractor is a labor-only
[contractor] unless such contractor overcomes the burden of proving
that it has the substantial capital, investment, tools and the
lik.e."31 Here, to prove that CMS was a legitimate contractor, Classique
Vinyl presented the former's Certificate of Registration 32 with the
Department of Trade and Industry and, License 33 as private recruitment
and placement agency from the Department of Labor and Employment.
Indeed, these documents are not conclusive evidence of the status of
CMS as a contractor. However, such fact of registration of CMS
prevented the legal presumption of it being a mere labor-only contractor
from arising.34 In any event, it must be stressed that "in labor-only
contracting, the statute creates an employer-employee relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The
contractor is considered merely an agent of the principal employer and
the latter is responsible to the employees of the labor-only contractor as
if such employees had been directly employed by the principal
employer. The principal employer therefore becomes solidarily liable
with the labor-only contractor for all the rightful claims of the
employees."35 The facts of this case, however, failed to establish that
there is any circumvention of labor laws as to call for the creation by
the statute of an employer-employee relationship between Classique
Vinyl and Valencia. In fact, even as against CMS, Valencia's money
claims has been debunked by the labor tribunals and the CA. Again, the
Court is not inclined to disturb the same.
In view of the above disquisition, the Court finds no necessity to dwell
on the issue of whether Valencia was illegally dismissed by Classique
Vinyl and whether the latter is liable for Valencia's money claims.
WHEREFORE, the Petition for Review
on Certiorari is DENIED. 'The assailed December 5, 2012 Decision
and March 18, 2013 Resolution of the Court of Appeals in CA-G.R. SP
No. 120999 are AFFIRMED.
SO ORDERED.
Crim law
SECOND DIVISION
March 18, 2015
G.R. No. 175842
NILO MACAYAN, JR. y MALANA, Petitioner, 
vs.
PEOPLE OF THE PHILIPPINES, Respondent.
DECISION
LEONEN, J.:
This resolves a Petition for Review on Certiorari praying that the
assailed Decision1 dated June 31, 2006 of the Court of Appeals be
reversed and set aside and that a new one be rendered acquitting
petitioner Nilo Macayan, Jr.
The assailed Decision of the Court of Appeals affirmed with
modification (by increasing the duration of the penalty) the
Decision2 dated November 15, 2002 of the Regional Trial Court,
Quezon City, which found Nilo Macayan, Jr. (Macayan) guilty beyond
reasonable doubt of the crime of robbery.
In the Information dated February 20, 2001, Macayan was charged with
robbery as follows:
That on or about the 16th day of February 2001, in Quezon City,
Philippines, the said accused, with intent to gain and by means of force
and intimidation, did then and there willfully, unlawfully and
feloniously rob / divest one ANNIE UY JAO of the amount of
P4,000.00 in cash in the manner as follows: on the date and in the place
afore-mentioned, said accused threatened complainant that he would
destroy her and her entire family and that he will have her and members
of her family kidnapped unless she gives to him the amount of
P200,000.00, Philippine Currency and thereafter negotiated with said
Annie Uy Jao at McDonald’s located at Quezon Avenue, this City, thus
creating fear in the mind of said complainant who was compelled to
give as in fact she gave and delivered to the accused the amount of
P4,000.00, Philippine Currency, to the damage and prejudice of said
Annie Uy Jao in the amount aforementioned.
CONTRARY TO LAW.3
The case was docketed as Criminal Case No. Q-01-98670 and raffled to
Branch 101 of the Regional Trial Court, Quezon City. 4
During trial, the prosecution presented as it witnesses: Annie Uy Jao,
the private complainant; Rodrigo Mapoy, team leader of the NBI
operatives who conducted the supposed entrapment operation that led
to Macayan’s arrest; and Resurreccion R. Bajado, a forensic chemist.
Macayan was the sole witness for the defense. 5
Annie Uy Jao (Jao) is the owner of Lanero Garments Ext (Lanero). In
1995, she hired Macayan as a sample cutter and to undertake materials
purchasing for her garments business.6
In her testimony, Jao acknowledged that in 2000, when her business
was doing poorly, she allowed her employees to accept engagements
elsewhere to augment their income, provided they prioritize their work
at Lanero. It came to her attention that Macayan and his wife (also an
employee at Lanero) accepted work for a rival company. Thus, Jao
confronted Macayan to impress upon him the need to prioritize work at
Lanero. Macayan still took his work at Lanero for granted, so Jao
confronted him again. In this confrontation, Macayan allegedly
responded, "Kung gusto mo, bayaran mo na lang ako at aalis ako."
Macayan then stopped reporting for work.7
Following this, Jao was surprised to find out that Macayan had filed a
Complaint for illegal dismissal against her (docketed as NLRC-NCR
Case No. 00-09-05057-00). Several conferences were set for this illegal
dismissal case. Immediately after the postponement of the conference
on February 12, 2001, Macayan allegedly threatened Jao that her family
would be harmed and/or kidnapped if she did not give him 200,000.00.
Marjorie Angel (Angel), Jao’s secretary, was supposedly present when
she was threatened. The following day, Macayan allegedly called Jao to
reiterate his threat and to specify the time and place — February 16,
2001, sometime between 6:00 and 7:00 p.m. at McDonald’s Banawe
Branch — in which the 200,000.00 should be handed to him. Jao
claimed that she was sure it was Macayan speaking to her, as the person
on the phone addressed her as "Madam," which was how he
customarily called her.8
Fearing for her family’s safety, Jao sought assistance from the National
Bureau of Investigation (NBI). She asked that an entrapment operation
be set up. The NBI operatives asked her to prepare bills totalling
4,000.00 to be marked and used in the operation.9
On February 16, 2001, Jao, Angel, and the NBI operatives arrived at
McDonald’s Banawe. They stayed there for about 30 minutes before
Macayan called Angel and told her that they were to meet at
McDonald’s Quezon Avenue instead. They arrived there at about 7:30
p.m. Macayan called Angel again and told her that he was moving the
venue to McDonald’s EDSA. They then proceeded to McDonald’s
EDSA and waited for Macayan, while the NBI operatives waited
outside. Macayan arrived and proceeded to where Jao and Angel were
seated. Jao handed him an envelope containing the marked bills.
Macayan pulled the bills halfway out of the envelope, and the NBI
operatives accosted him.10
Prosecution witness Rodrigo Mapoy, team leader of the NBI operatives
who arrested Macayan, testified to the circumstances before and the
conduct of the entrapment operation. The testimony of forensic chemist
Resurreccion R. Bajado regarding the marked bills handed to Macayan
was subject of a joint stipulation by the prosecution and the defense. 11
Macayan, testifying for himself, emphasized that he enjoyed a
relatively trouble-free employment with Lanero. However, sometime in
1999, after his wife gave birth to their first child, he discovered that Jao
had not been remitting required premiums to the Social Security
System.12
On August 18, 2000, as his child was confined in a hospital, Macayan
inquired with Jao regarding his Medicare benefits. This displeased Jao.
The following day, she prevented him from performing his tasks at
work. Construing this as harassment, he stopped reporting for work. 13
Thereafter, Macayan filed a Complaint for illegal dismissal against Jao.
In the course of the proceedings for this illegal dismissal case, no less
than 11 conferences/hearings were set. As evidenced by these
conferences’ minutes or constancias, at no instance did Jao ever attend,
as it was either her legal counsel or Angel who did so. Macayan
recalled that in one of these conferences, he expressed to Angel his
willingness to settle the case for 40,000.00.14
On February 16, 2001, at about 9:00 a.m., Angel called Macayan. She
told him that Jao was ready to settle the illegal dismissal case. She
added that Jao wanted to pay him already, as Jao was leaving for Hong
Kong. Angel set a rendezvous later in the day at McDonald’s Banawe.
At about 11:00 a.m., Angel called him again, resetting the rendezvous
to McDonald’s EDSA. She even reasoned that this venue was more
convenient for her since she was going home to Zambales. 15
Macayan arrived at the agreed venue at about 9:00 p.m. He saw Angel
standing outside McDonald’s. He approached Angel, who then
accompanied him inside and led him to a four-seat corner table. He was
surprised to see Jao present. Jao then brought out of her bag a piece of
paper indicating that Macayan received the settlement amount for the
illegal dismissal case. Macayan signed this as he was of the
understanding that this was necessary to the settlement. Jao then pulled
out a white envelope, handed it to Macayan, and told him to count its
contents. While counting the contents, a flash bulb went on somewhere
to his right. Then, a man who claimed to be an NBI operative struck a
blow on the right side of Macayan’s face and told him, "Tatanga-tanga
ka. Pupunta ka rito ng walang kasama, ikaw ngayon ang me [sic]
kaso."16
Handcuffed, he was taken aboard a minivan and physically abused. He
was taken to several police stations in the hope that an inquest fiscal
was available. It was only at 10:00 a.m. of the following day that an
inquest fiscal, Prosecutor Hilda Ibuyan, became available. 17
The Information charging him with robbery dated February 20, 2001
was then prepared, and the criminal case (docketed as Criminal Case
No. Q-01-98670) was filed and raffled to Branch 101 of the Regional
Trial Court, Quezon City.
In the meantime, on October 31, 2001, the illegal dismissal case was
decided in Macayan’s favor by Labor Arbiter Daisy G. Cauton-
Barcelona. A total of 186,632.00 was awarded to him. 18 On appeal, the
National Labor Relations Commission would find that Macayan was
entitled to unpaid benefits though he was legally dismissed. The
Decision of the National Labor Relations Commission was
subsequently affirmed by the Court of Appeals with modification as to
the applicable rate of interest.19
After trial, the Regional Trial Court, Quezon City rendered the
Decision20 convicting Macayan of robbery. The trial court found the
prosecution’s version of events "from the time of the telephone
overtures of the Accused which is consistent with the elements of
intimidation and/or extortion, up to complainant Annie Uy Jao’s
reporting the matter to the NBI, to the time of the NBI entrapment" as
"ring[ing] a loud bell of truth and consistency, not to say
credibility."21 It accorded the presumption of regularity to the
entrapment operation and held that the forensic findings connecting the
marked money to Macayan militated against his defense. 22
The dispositive portion of the trial court’s Decision reads:
PREMISES CONSIDERED, this Court, therefore, finds the Accused
GUILTY BEYOND REASONABLE DOUBT of the crime of robbery
and hereby sentences him to suffer the indeterminate penalty (there
being no mitigating/aggravating circumstance) of FOUR (4) MONTHS
and ONE (1) DAY of ARRESTO MAYOR as minimum to FOUR (4)
YEARS, TWO (2) MONTHS and ONE (1) DAY of PRISION
CORRECCIONAL as maximum.
Lastly the P4,000.00 marked money exhibit, which has been claimed to
be owned by the private complainant, is ORDERED RELEASED to her
after the finality of this Decision.
SO ORDERED.23 (Emphasis and underscoring in the original)
Macayan then appealed to the Court of Appeals. He filed his
Appellant’s Brief24 on August 25, 2004.
The Office of the Solicitor General, representing the People of the
Philippines at the appellate stage, did not file an appellee’s brief.
Instead, it filed a Manifestation and Motion in Lieu of Appellee’s
Brief25 recommending that Macayan be acquitted. It asserted that his
guilt was not established beyond reasonable doubt.
Noting that Jao was never present in any of the conferences for the
illegal dismissal case and that the sole witness who could confirm if she
was indeed threatened or intimidated on or immediately after such an
occasion (i.e., Angel) was never presented, the Office of the Solicitor
General asserted that the fourth requisite of the offense of robbery (i.e.,
violence against or intimidation of a person) could not have been made
by Macayan on the occasion of a conference for the illegal dismissal
case. It added that the other occasion when Macayan was supposed to
have threatened Jao was equally dubious since Jao’s sole reason for
claiming that it was Macayan speaking to her (i.e., her having been
addressed as "Madam") was insufficient to ascertain that person’s
identity.26
On July 31, 2006, the Court of Appeals Tenth Division rendered the
assailed Decision27 affirming Macayan’s conviction and increasing the
duration of the penalty imposed. It reasoned that Jao’s sole,
uncorroborated testimony was nevertheless positive and credible. As
regards Jao’s having been threatened after the postponement of the
February 12, 2001 conference in the illegal dismissal case, the Court of
Appeals reasoned that constancias are "not the best evidence of
attendance"28 and that, in any case, Jao was threatened after and not
during the conference.
The dispositive portion of this Decision reads:
WHEREFORE, premises considered, the decision of the Regional Trial
Court of Quezon City, Branch 101, in Criminal Case No. Q-01- 98670
is hereby AFFIRMED with the MODIFICATION that the accused-
appellant is hereby sentenced to an indeterminate sentence of one (1)
year, seven (7) months and eleven (11) days of prision correccional as
MINIMUM, to six (6) years, one (1) month and eleven (11) days of
prision mayor as MAXIMUM.
SO ORDERED.29 (Emphasis in the original)
On December 18, 2006, the Court of Appeals Tenth Division rendered
the Resolution30 denying Macayan’s Motion for Reconsideration.31
Hence, this Petition was filed.32
Asked by this court to file a Comment, the Office of the Solicitor
General instead filed a Manifestation and Motion33to adopt as its
Comment the same Manifestation and Motion in Lieu of Appellee’s
Brief that it filed with the Court of Appeals. Thus, the Office of the
Solicitor General reiterated its position that Macayan’s guilt beyond
reasonable doubt has not been established and that he must be
acquitted.
On September 11, 2007, Macayan filed the Manifestation in Lieu of
Reply34 in view of the Office of the Solicitor General’s earlier
Manifestation and Motion.
For resolution is the sole issue of whether Macayan’s guilt beyond
reasonable doubt has been established.
We reverse the Decision of the Court of Appeals and acquit petitioner
Nilo Macayan, Jr. of the charge of robbery.
I
Rule 133, Section 2 of the Revised Rules on Evidence specifies the
requisite quantum of evidence in criminal cases:
Section 2. Proof beyond reasonable doubt. — In a criminal case, the
accused is entitled to an acquittal, unless his guilt is shown beyond
reasonable doubt. Proof beyond reasonable doubt does not mean such a
degree of proof, excluding possibility of error, produces absolute
certainly. Moral certainly only is required, or that degree of proof
which produces conviction in an unprejudiced mind.
This rule places upon the prosecution the task of establishing the guilt
of an accused, relying on the strength of its own evidence, and not
banking on the weakness of the defense of an accused. Requiring proof
beyond reasonable doubt finds basis not only in the due process
clause35 of the Constitution, but similarly, in the right of an accused to
be "presumed innocent until the contrary is proved."36 "Undoubtedly, it
is the constitutional presumption of innocence that lays such burden
upon the prosecution."37 Should the prosecution fail to discharge its
burden, it follows, as a matter of course, that an accused must be
acquitted. As explained in Basilio v. People of the Philippines: 38
We ruled in People v. Ganguso:
An accused has in his favor the presumption of innocence which the
Bill of Rights guarantees. Unless his guilt is shown beyond reasonable
doubt, he must be acquitted. This reasonable doubt standard is
demanded by the due process clause of the Constitution which protects
the accused from conviction except upon proof beyond reasonable
doubt of every fact necessary to constitute the crime with which he is
charged. The burden of proof is on the prosecution, and unless it
discharges that burden the accused need not even offer evidence in his
behalf, and he would be entitled to an acquittal. Proof beyond
reasonable doubt does not, of course, mean such degree of proof as,
excluding the possibility of error, produce absolute certainty. Moral
certainty only is required, or that degree of proof which produces
conviction in an unprejudiced mind. The conscience must be satisfied
that the accused is responsible for the offense charged.
Well-entrenched in jurisprudence is the rule that the conviction of the
accused must rest, not on the weakness of the defense, but on the
strength of the prosecution. The burden is on the prosecution to prove
guilt beyond reasonable doubt, not on the accused to prove his
innocence.39 (Citations omitted)
II
The determination of the guilt of an accused hinges on how a court
appreciates evidentiary matters in relation to the requisites of an
offense. Determination of guilt is, thus, a fundamentally factual issue.
This court, however, is not a trier of facts. Consistent with Rule 45 of
the Rules of Court, "[a]s a rule, only questions of law, not questions of
fact, may be raised in a petition for review on certiorari under Rule
45."40 More specifically, "in a criminal case, factual findings of the trial
court are generally accorded great weight and respect on appeal,
especially when such findings are supported by substantial evidence on
record."41
Nevertheless, there are exceptions allowing this court to overturn the
factual findings with which it is confronted. Speaking specifically of
criminal cases, this court stated in People of the Philippines v.
Esteban42 that "in exceptional circumstances, such as when the trial
court overlooked material and relevant matters . . . this Court will re-
calibrate and evaluate the factual findings of the [lower
courts]."43 Below are the recognized exceptions to the general rule
binding this court to the factual findings of lower courts:
(1) When the conclusion is a finding grounded entirely on
speculation, surmises, and conjectures;
(2) When the inference made is manifestly mistaken, absurd
or impossible;
(3) Where there is a grave abuse of discretion;
 (4) When the judgment is based on a misapprehension of
facts;
(5) When the findings of fact are conflicting;
(6) When the Court of Appeals, in making its findings, went
beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee;
(7) When the findings are contrary to those of the trial court;
(8) When the findings of fact are conclusions without citation
of specific evidence on which they are based;
(9) When the facts set forth in the petition as well as in the
petitioners' main and reply briefs are not disputed by the
respondents; and
(10) When the findings of fact of the Court of Appeals are
premised on the supposed absence of evidence and
contradicted by the evidence on record.44 (Emphasis supplied)
Here, Macayan asserts that the lower courts committed a serious
misapprehension of facts, thereby wrongly concluding that he is guilty
beyond reasonable doubt. He argues that the evidence adduced by the
prosecution falls seriously short of the quantum of evidence required to
convict him. He specifically draws attention to the following:
First, Jao’s claim that, immediately after the postponement of the
February 12, 2001 conference in the illegal dismissal case and in the
presence of Angel, Macayan threatened to harm and/or kidnap the
members of her family, despite the records in the same case showing
that Jao never attended any of the 11 conferences that were set or
conducted;
Second, the prosecution’s unjustified failure to present Angel as a
witness and its sole reliance on Jao’s testimony, considering that it was
Angel who can confirm if, indeed, Macayan threatened Jao’s family
immediately after the postponement of the February 12, 2001
conference;
Third, Jao’s reliance on nothing more than how she was addressed as
"Madam" by the person speaking to her on the phone as basis for
concluding that it must have been Macayan who was supposedly calling
and threatening her and her family;
Fourth, the inconsistency and absurdity of Jao’s conduct in considering
Macayan’s threats of such serious nature that she needed to report it to
the National Bureau of Investigation for the prospective conduct of an
entrapment operation, and yet not telling her husband about the threats
simply because he would easily get annoyed; and
Lastly, the inconsistent claims of Jao and prosecution witness Rodrigo
Mapoy, the NBI operations team leader, as to who Macayan called on
the evening of February 16, 2001 to reset the rendezvous to
McDonald’s EDSA. Jao claimed that Macayan called Angel, while
Rodrigo Mapoy claimed that Macayan called Jao herself.
Macayan’s position is buttressed by the Office of the Solicitor General,
the public institution otherwise charged with the task of pursuing the
prosecution’s case on appeal. As the Office of the Solicitor General
stated:
In the instant case, however, clues of untruthfulness in the testimony of
Annie Uy Jao are abundant while incentives for fabrication of a story
[are] not wanting. The only way to eliminate any doubt in Annie Uy
Jao’s assertions would have been to find independent confirmation
from the other sources, as by way of unambiguous testimony of a
competent and credible witness. Sadly, no such confirmation could be
had as the prosecution’s evidence on the most crucial elements of the
crime was limited to that testified on by Annie Uy Jao.
It is respectfully submitted that had the trial court seen and understood
these realities laid on clearly in the records of this case, it would have
concluded reasonable doubt as to acquit appellant. 45 (Underscoring in
the original)
The position taken by the Office of the Solicitor General has resulted in
the peculiar situation where it is not the prosecution but, effectively, the
trial court and the Court of Appeals arguing for Macayan’s guilt beyond
reasonable doubt.
With the backdrop of these assertions, we deem it proper to reevaluate
the factual findings and the conclusions reached by both the trial court
and the Court of Appeals.
III
Article 293 of the Revised Penal Code provides for who are guilty of
robbery:
ARTICLE 293. Who are Guilty of Robbery. — Any person who, with
intent to gain, shall take any personal property belonging to another, by
means of violence against or intimidation of any person, or using force
upon anything, shall be guilty of robbery.
Accordingly, the following elements must be established to sustain a
conviction for robbery:
1)there is a taking of personal property [i.e., unlawful taking]; 2) the
personal property belongs to another; 3) the taking is with animus
lucrandi [i.e., intent to gain]; and 4) the taking is with violence against
or intimidation of persons or with force upon things.46
As pointed out by the Office of the Solicitor General, the "bone of
contention"47 centers on the elements of unlawful taking and of violence
against or intimidation of persons. This is precisely Macayan’s
contention: that he neither intimidated nor threatened Jao, and that he
could not have unlawfully taken money from her on account of any act
of intimidation and/or threats made by him.
Consistent with the rule on burden of proof, the requisite quantum of
evidence in criminal cases, and in light of the points highlighted by
both Macayan and the Office of the Solicitor General, we find that the
prosecution failed to establish Macayan’s guilt beyond reasonable
doubt. Thus, a reversal of the rulings of the trial court and Court of
Appeals is in order. Macayan must be acquitted.
As correctly pointed out by the Office of the Solicitor General, the
resolution of this case hinges on whether Jao was indeed threatened
and/or intimidated by Macayan into giving him money, that is, whether
he extorted money from Jao. Per Jao’s own testimony, there were two
(2) instances in which she was threatened and/or intimidated: first,
immediately after the postponement of the February 12, 2001
conference in the illegal dismissal case; and second, when Macayan
called her on February 13, 2001 and set a rendezvous for handing over
the extorted money.
Contrary to the conclusions of the trial court and the Court of Appeals,
we find Jao’s testimony regarding these occasions (and ultimately, the
presence of the requisite of violence against or intimidation of a person)
dubious and unreliable.
Macayan and the Office of the Solicitor General are one in pointing out
that the records of NLRC-NCR Case No. 00-09-05057-00 are bereft of
any indication that Jao was present in any of the 11 conferences held or
set (only to be postponed even if both parties were represented). The
defense introduced as its Exhibits "2" to "12" the minutes and/or
constancias of these conferences. Exhibit "2" was the
minutes/constancia of the February 12, 2001 conference. During his
testimony, Macayan specifically referred to this document as proof that
he never saw, met, or spoke to Jao on the occasion of or immediately
after the conference set on that date:
Q:Mr. Witness, you were present when complaining witness Annie Uy
Jao told this Honorable Court that sometime on February 12, 2001,
during the hearing of the labor case in the NLRC, at Banawe, Quezon
City, you threatened her that you will kidnap her and her family if she
will not give P200,000.00. What can you say about this?
A: That is not true, Sir.
Q: Why did you say there is no truth in it?
A: Because we did not meet on February 12.
Q: Do you mean to tell this Honorable Court that Annie Uy Jao was not
present during the hearing of that case?
A: She was not there.
Q: Has she an [sic] representative?
A: Yes, Sir.
Q: Who is that?
A: Marjorie Angel, the secretary.
Q: Do you have any proof that she was not present?
A: Yes, Sir.
Q:I am showing to you constancia, date of hearing 2/12/03. Will you
please examine this document. Does it have anything to do with what
you said?
A: This is the Minutes of Hearing on February 12, 2001.
Atty. Oliva: We would like to request that this constancia be marked as
Exhibit "2."
Court: Mark it. On its face, this is a form by the NLRC containing the
caption, the name of the parties and the case number, date of hearing
and the time.
Atty. Oliva: Mr. Witness, there are signature [sic] below this
constancia, complaining witness, there is a signature above the
complainant.
A:This is my signature and this is the signature of Marjorie Angel.
Q: How do you know that this is her signature[?]
A: Because I was with her for five (5) months.48
Jao’s absence in the intended conference (though subsequently
postponed despite both parties to the illegal dismissal case being
represented) places serious doubt on the occurrence of the supposed
first instance of intimidation on February 12, 2001.
The Court of Appeals reasoned that a constancia "would not be the best
evidence of attendance in any of the National Labor Relations
Commission hearings."49 It added that, in any case, the act of
intimidation happened after, and not during, the conference. This is a
strained consideration of the facts of this case.
First, consistent with the presumption "[t]hat official duty has been
regularly performed"50 and "[t]hat a person takes ordinary care of his
concerns,"51 both the personnel of the Labor Arbiter’s office who
prepared the minutes of the February 12, 2001 conference and the
persons who signed it must be considered as having taken the necessary
care to make it a faithful and accurate record of what transpired and of
who were present in the conference. Thus, the minutes’ indication that
only Angel was present should be taken as accurate and reliable absent
any proof to the contrary. If the principal, Jao, were present, there
would not have been a need for Angel, her representative, to sign in
such capacity.
Second, much is made of how the threats were delivered after and not
during the conference. To recall the prosecution’s allegation, the
intimidation took place immediately after the conference, outside the
Labor Arbiter’s office, along the corridor of the National Labor
Relations Commission Building.52 As there was neither an appreciable
duration of time between the conference and the subsequent threatening
exchange nor a significant distance between where the conference was
held and where the subsequent threatening exchange took place, it may
be deduced that whatever exchange, if any, that transpired must have
been between those who were present at the conference. Conversely,
those who were absent from the conference must have been equally
unavailable to engage in an exchange with Macayan.
Apart from these, that the rest of the minutes of the illegal dismissal
case shows that Jao never attended any conference gives rise to the
question of why she chose to be personally present in, of all
conferences, the postponed February 12 conference. If, indeed, she was
present in this despite her absence in all others, some particular
significance must have characterized this conference, something that
Jao has not accounted for. In any case, if there was any particular
significance to this February 12 conference, then, all the more, her
presence or attendance should have been indicated in the records.
Of course, many explanations — well within the realm of possibility —
could be offered for why Jao’s attendance was not indicated in the
minutes. For instance, Jao could have simply chosen to wait outside the
Labor Arbiter’s office, or she could have declined from having her
attendance specified in the minutes. What is crucial, however, this
being a criminal case, is for the prosecution to establish the guilt of an
accused on the strength of its own evidence. Its case must rise on its
own merits. The prosecution carries the burden of establishing guilt
beyond reasonable doubt; it cannot merely rest on the relative
likelihood of its claims. Any lacunae in its case gives rise to doubt as
regards the "fact[s] necessary to constitute the crime with which [an
accused] is charged."53
Here, there is serious doubt on whether Jao was actually threatened or
intimidated at the time she specified. Thus, there is serious doubt on the
existence of the fourth requisite for robbery — violence against or
intimidation of a person — in relation to the alleged February 12, 2001
incident.
The prosecution could have addressed the deficiency in Jao’s allegation
that she was threatened on February 12, 2001 by presenting as witness
the other person who was supposedly present in the incident: Angel,
Jao’s secretary. However, she was never presented as a witness.
The Court of Appeals noted that corroborative testimony is dispensable;
"the lack of it does not necessarily condemn a lone witness’ recital of
the crime for as long as that single witness’ testimony is credible." 54
People of the Philippines v. Cleopas,55 which the Court of Appeals
cited, states that the testimony of a lone witness "may suffice for
conviction if found trustworthy and reliable."56
Precisely, conviction resting on a singular testimony is warranted if this
is, in the words of Cleopas, "trustworthy and reliable,"57 or, in the
words of the Court of Appeals, "credible."58 This could not be said of
Jao’s testimony. As previously discussed, her very presence in the
February 12, 2001 conference that she claimed to have been
immediately followed by Macayan’s threats, is in serious doubt.
Nothing casts greater doubt on the reliability of Jao’s claim than her
having not been at the time and place of the supposed intimidation.
With the first alleged instance of intimidation being discredited, the
prosecution is left to rely on the second supposed instance of
intimidation: the phone call made by Macayan to Jao on February 13,
2001, during which he not only reiterated his threats but also set a
rendezvous for the handover of the extorted money. Even this,
however, is doubtful.
The prosecution itself acknowledged that there is no basis for
ascertaining the identity of Macayan as the caller other than the caller’s
use of "Madam" in addressing Jao. The following excerpt is taken from
Jao’s direct examination:
Atty. Garena: Madam Witness, you said you received another call after
February 12, 2001. Is that from the accused or from another person?
A: From the accused.
Q: What was the call about?
A:He repeated the threat again that I have to give him P200,000.00 or
else, he will harm y [sic] family; and he set a place to give the money.
....
Court: The first word uttered by him. You narrated, more or less.
Did he introduce himself?
A: He never stated his name because he knew I know his name.
Court: That is your presumption, but what was the first word uttered by
him and what was your reply, line by line[?]
A: He always calls me madam.
Court: You answer the question of the Court now. How did the
conversation go?
A:He said, Madam, Kung hindi mo ibibigay sa akin ang P200,000.00,
ipapakidnap ko ang pamilya mo. (Madam, if you don’t give me that
P200,000.00, I am going to ask somebody to kidnap you and your
family.)
Court: That was the first line. Was that the end of the first line of the
accused?
A:Those were the only words that he told me. I cannot say anything. I
just put down the phone.
Court: After he said those lines, you put down the telephone?
A: After he said the date and time.
Court: The Court is asking you to narrate line by line. What he said.
What you said.
A:If you will not give me P200,000.00, I will ask somebody to kidnap
you, your child and your husband.
Court: That was the first line. Did you reply to him?
A:No, sir. I did not ask. The next line, he said he was going to wait for
me at McDo Banawe at around 6:00 [to] 7:00 in the evening.
Court: Did he state the date?
A: February 16.
Court: You are impressing to this Court that the accused had said two
lines already without you uttering any word. How did the accused knew
[sic] that it is Annie Uy Jao on the other line?
A:Because the first word [sic] that I said, Hello, then he replied,
Madam.
Court: You uttered the hello, that is why the accused recognized you on
the line.
A:Yes, your Honor. Because he knew that only two persons are
answering [sic] the phone, my secretary and me.59(Emphasis supplied)
The prosecution should have offered more convincing proof of the
identity of the supposed caller. Even if it were true that Macayan
customarily addressed Jao as "Madam," merely being called this way
by a caller does not ascertain that he is the alleged caller. The
prosecution never made an effort to establish how addressing Jao as
"Madam" is a unique trait of Macayan’s and Jao’s relationship. Other
persons may be equally accustomed to calling her as such; for instance,
"Madam" may be Jao’s preferred manner of being addressed by her
subordinates or employees. Likewise, it was established that Macayan
and Jao have known each other since 1995. Their relation was more
than that of employer and employee, as Jao was Macayan’s godmother
in his wedding.60
Certainly, Jao could have offered other, more reliable means of
ascertaining that it was, indeed, Macayan with whom she was
conversing. The second alleged instance of intimidation is likewise cast
in serious doubt. Left with no other act of intimidation to rely on, the
prosecution fails in establishing the fourth requisite of the crime of
robbery.
Apart from these, another point underscores the unreliability of Jao’s
allegations. As pointed out by Macayan and acknowledged by the
prosecution, Jao never saw it proper to warn her family, more
specifically, her husband, of the threat of being kidnapped.
Nevertheless, she supposedly perceived Macayan’s alleged threat as
being of such a serious nature that she must not only report the matter
to the National Bureau of Investigation, but also entreat its officers to
conduct an entrapment operation.
Jurisprudence has established the standard for appreciating the
credibility of a witness’ claim:
[F]or evidence to be believed, however, it must not only proceed from
the mouth of a credible witness but must be credible in itself such as the
common experience and observation of mankind can approve under the
circumstances. The test to determine the value of the testimony of a
witness is whether such is in conformity with knowledge and consistent
with the experience of mankind. Whatever is repugnant to these
standards becomes incredible and lies outside of judicial cognizance. 61
Jao’s inconsistent conduct, coupled with flimsy justifications for acting
as she did, betrays the absurdity and unreliability of her claims and
ultimately, of her as a witness:
Court: You did not inform anybody about that call?
A: Only my secretary. She was beside me.
Court: What about your husband? At that time, where was he?
A: He was outside.
Court: Does he have a cellular phone at that time?
A: Only a pager.
Court: Did it not occur to you to inform your husband about the call?
A: No, your Honor.
Court: How about the words uttered to you in the Labor hearing, did
you inform you [sic] husband?
A: No, your Honor.
Court: What was the reason?
A:I was afraid because he might accused (sic) me of what happened?
Court: This is a very private question. That date of hearing in the
NLRC, you slept together [with] your husband?
A: Yes, your Honor.
Court: That night, you did not inform him?
A: He knows about the labor case.
Court: You did not inform him about the extortion threat of the
Accused?
A: No, sir.62
On cross examination, Jao explained:
Q: During the direct examination, the Honorable Court asked you
whether you told this matter to your husband and you said you did not?
A: I am not [the] type of person who don’t usually tell [sic] everything
to my husband specially [sic] regarding things like this because he is
medyo makulit and I don’t want him asking same questions again and
again (sic).
Q: Instead of telling your husband, you went to the NBI to report the
matter?
A: Yes, sir.63 (Emphasis supplied)
The Court of Appeals stated that "the subsequent and contemporaneous
actions of the private complainant from the time the threat was made
bolsters the veracity of her story."64 This cannot be farther from the
truth. On the contrary, inconsistencies and absurdities in Jao’s actions
cast serious doubt on the veracity of her claims.
Finally, the trial court made much of how Macayan is supposedly
estopped by the joint stipulation that the prosecution and the defense
made as regards the "existence, authenticity, due execution and contents
of [the] NBI Physics Report on the powder dusting/ positive results." 65

The defense’s accession to these is inconsequential. These only prove

that Macayan handled the bills used in the alleged entrapment
operation, a fact that he does not dispute. It remains, however, that they
do not establish any certainty as to the circumstances surrounding his
handling of the bills, among these: whether there was, indeed, unlawful
taking by Macayan, and whether Jao did hand him the bills because he
extorted them from her.

In sum, the prosecution failed to establish the elements of unlawful

taking and of violence against or intimidation of a person. Reasonable
doubt persists.1âwphi1 As is settled in jurisprudence, where the basis of
conviction is flawed, this court must acquit an accused:

In criminal cases, the prosecution has the onus probandi of establishing

the guilt of the accused. Ei incumbit probatio non qui negat. He who
asserts - not he who denies - must prove. The burden must be
discharged by the prosecution on the strength of its own evidence, not
on the weakness of that for the defense. Hence, circumstantial evidence
that has not been adequately established, much less corroborated,
cannot be the basis of conviction. Suspicion alone is insufficient, the
required quantum of evidence being proof beyond reasonable doubt.
Indeed, "the sea of suspicion has no shore, and the court that embarks
upon it is without rudder or compass."

It must be stressed that in our criminal justice system, the overriding

consideration is not whether the court doubts the innocence of the
accused, but whether it entertains a reasonable doubt as to their guilt.
Where there is no moral certainty as to their guilt, they must be
acquitted even though their innocence may be questionable. The
constitutional right to be presumed innocent until proven guilty can be
overthrown only by proof beyond reasonable doubt.66 (Emphasis in the
original, citations omitted)

With the prosecution having failed to discharge its burden of

establishing Macayan's guilt beyond reasonable doubt, this court is
constrained, as is its bounden duty when reasonable doubt persists, to
acquit him.

WHEREFORE, the Petition is GRANTED. The Decision of the Court

of Appeals in CA G.R. CR No. 28380 is REVERSED and SET ASIDE.
Petitioner Nilo Macayan, Jr. y Malana is hereby ACQUITTED for
failure of the prosecution to prove his guilt beyond reasonable doubt. If
detained, he is ordered immediately RELEASED, unless he is confined
for any other lawful cause. Any amount paid by way of a bailbond is
ordered RETURNED.

SO ORDERED.

MARVIC M.V.F. LEONEN

Associate Justice

WE CONCUR: Republic of the Philippines

SUPREME COURT
Manila
ANTONIO T. CARPIO
Associate Justice
Chairperson FIRST DIVISION

G.R. No. 166441               October 8, 2014

PRESBITERO J. VELASCO, MARIANO C. DEL
JR.* CASTILLO
Associate Justice Associate Justice NORBERTO CRUZ y BARTOLOME, Petitioner, 
vs.
PEOPLE OF THE PHILIPPINES, Respondent.

JOSE CATRAL MENDOZA

Associate Justice DECISION

CERTIFICATION BERSAMIN, J.:

Pursuant to Section 13, Article VIII of the Constitution, I certify that
the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court's
Division.
ANTONIO T. CARPIO
Acting Chief Justice
The intent of the offender to lie with the female defines the distinction
between attempted rape and acts of lasciviousness. The felony of
attempted rape requires such intent; the felony of acts of lasciviousness
does not. Only the direct overt acts of the offender establish the intent
to lie with the female. However, merely climbing on top of a naked
female does not constitute attempted rape without proof of his erectile
penis being in a position to penetrate the female's vagina.
 The Case
This appeal examines the decision promulgated on July 26,
2004,1 whereby the Court of Appeals (CA) affirmed the conviction for
attempted rape of the petitioner by the Regional Trial Court, Branch 34,
in Balaoan, La Union (RTC), and imposing on him the indeterminate
penalty of imprisonment of four (4) years and two (2) months of prision
correccional, as minimum, to ten (10) years of prision mayor, as
maximum, and ordering him to pay moral damages of ₱20,000.00 to
AAA,2 the victim.
Antecedents
The petitioner was charged in the RTC with attempted rape and acts of
lasciviousness involving different victims. At arraignment, he pleaded
not guiltyto the respective informations, to wit: Criminal Case No. 2388
Attempted Rape
That on or about the 21st day of December 1993, at about 2:00 o'clock
in the morning, along the Bangar-Luna Road, Barangay Central West
No. 2, Municipality of Bangar,Province of La Union, Philippines and
within the jurisdiction of this Honorable Court, said accused, did then
and there willfully, unlawfully and feloniously and by means of force
and intimidation commenced the commission ofrape directly byovert
acts, to wit: While private complainant AAA, an unmarried woman,
fifteen (15) yearsold, was sleeping inside the tentalong Bangar-Luna
Road, the said accused remove her panty and underwear and lay on top
of said AAA embracing and touching her vagina and breast with intent
of having carnal knowledge of her by means of force, and if the accused
did not accomplish his purpose that is to have carnal knowledge of the
said AAA it was not because of his voluntary desistance but because
the said offended party succeeded in resisting the criminal attempt of
said accused to the damage and prejudice of said offended party.
CONTRARY TO LAW.3
Criminal Case No. 2389
Acts of Lasciviousness
That on or about the 21st day of December 1993, at about 3:00 o’clock
in the morning, along the Bangar-Luna Road, Barangay Central West
No. 2, Municipality of Bangar, Province of La Union, Philippines and
within the jurisdiction of this Honorable Court, the above-named
accused with lewd design, did then and there willfully, unlawfully and
feloniously touch the vagina of [BBB]4 against the latter’s will and with
no other purpose but to satisfy his lascivious desire to the damage and
prejudice of said offended party.
CONTRARY TO LAW.5
Version of the Prosecution
The CA summarized the version of the Prosecution as follows:6
x x x [Petitioner] Norberto Bartolome and [his wife] Belinda Cruz were
engaged in the selling of plastic wares and glass wares in different
municipalities around the country. On December 20, 1993, Norberto
and Belinda employed AAA and BBB to help them in selling their
wares in Bangar, La Union which was then celebrating its fiesta. From
Libsong East, Lingayen, Pangasinan to Bangar, La Union, AAA and
BBB boarded a passenger jeepney owned by Norberto. The young girls
were accompanied by Norberto, Belinda, Ruben Rodriguez (driver) and
a sales boy by the name of "Jess".
Upon reaching Bangar, La Union, at around 8:00 in the evening of
December 20, 1993, they parked in front of Maroon enterprises. They
brought out all the goods and wares for display. Two tents were fixed in
order that they will have a place to sleep. Belinda and the driver
proceeded to Manila in order to get more goods to be sold.
On December 21, 1993, at around 1:00 o’clock in the morning, AAA
and BBB went to sleep. Less thanan hour later, AAA was awakened
when she felt that somebody was on top of her. Norberto was mashing
her breast and touching her private part. AAA realized that she was
divested of her clothing and that she was totally naked. Norberto
ordered her not to scream or she’ll be killed. AAA tried to push
Norberto away and pleaded to have pity on her but her pleas fell on
deaf ears. She fought back and kicked Norberto twice.
Norberto was not able to pursue his lustful desires. Norberto offered her
money and told her not totell the incident to her mother otherwise, she
will be killed. AAA went out of the tent to seek help from Jess (the
house boy) but she failed to wake him up.
Thirty minutes later, when AAA returned to their tent, she saw
Norberto touching the private parts of BBB. AAA saw her companion
awake but her hands wereshaking. When she finally entered the tent,
Norberto left and went outside.
Later that day, AAA and BBB narrated to Jess the incident that took
place that early morning. Later still, while they were on their way to
fetch water, AAA and BBB asked the people around where they can
find the municipal building. An old woman pointed to them the place.
In the evening of December 21, 1993, AAA and BBB went straight to
the municipal hall where they met a policeman by the name of "Sabas".
They told Sabas the sexual advances made to them by Norberto.
Norberto was summoned to the police station where he personally
confronted his accusers. When Norberto’s wife, Belinda, arrived at the
police station, an argument ensued between them.
On December 22, 1993, at around 2:20 o’clock in the morning, the
police investigator ordered the complainants to return at6:00 o’clock in
the morning. Norberto and Belinda were still able to bring AAA and
BBB home with them and worked for them until December 30, 1994,
after which they were sent back to Lingayen, Pangasinan.
On January 10, 1994, AAA and BBB went back to La Union and
executed their respective sworn statements against Norberto.
Version of the Defense
The petitioner denied the criminal acts imputed to him. His version was
presented in the assailed decision of the CA, 7 as follows:
In a bid to exculpate himself, accused-appellant presents a totally
different version of the story. The accused maintains that it was not
possible for him to commit the crimes hurled against him. On the date
of the alleged incident, there were many people around who were
preparing for the "simbang gabi". Considering the location of the tents,
which were near the road and the municipal hall, he could not possibly
do the dastardly acts out in the open, not to mention the fact that once
AAA and BBB would scream, the policemen in the municipal hall
could hear them. He believes that the reason why the complainants filed
these cases against him was solely for the purpose of extorting money
from him.
Judgment of the RTC
After the joint trial of the two criminal cases, the RTC rendered its
judgment on April 6, 2000 finding the petitioner guilty beyond
reasonable doubt of attempted rape in Criminal Case No. 2388 and acts
of lasciviousness in Criminal Case No. 2389,8 to wit:
WHEREFORE, in the light of the foregoing, the Court hereby renders
judgment declaring the accused NORBERTO CRUZ Y BARTOLOME
guilty beyond reasonable doubt of the crimes of ATTEMPTED RAPE
and ACTS OF LASCIVIOUSNESS as defined and penalized in Article
335 in relation with (sic) Article 6, par. 3 and Article 336 of the
Revised Penal Code respectively. With respect to the crime of
ATTEMPTED RAPE, the Court hereby sentences the accused to suffer
an indeterminate penalty of imprisonment from FOUR (4) YEARS and
TWO (2) MONTHS PRISION CORRECCIONAL as Minimum to
TEN (10) YEARS PRISION MAYOR as Maximum and the accessory
penalties provided for by law and to pay the victim AAA the amount of
₱20,000.00 as moral damages.
With regard to the crime ofACTS OF LASCIVIOUSNESS, the Court
hereby sentences the accused to suffer an indeterminate penalty of
imprisonment from FOUR (4) MONTHS ARRESTO MAYOR as
Minimum to FOUR (4) YEARS and TWO (2) MONTHS PRISION
CORRECCIONAL as Maximum and the accessory penalties provided
for by law, and to pay the victim BBBthe amount of ₱10,000.00 as
moral damages.
The preventive imprisonment suffered by the accused by reason of the
two cases is counted in his favor.
SO ORDERED.9
Decision of the CA
On appeal, the petitioner contended that the RTC gravely erred in
convicting him of attempted rape despite the dubious credibility of
AAA, and of acts of lasciviousness despite the fact that BBB did not
testify.
On July 26, 2004, the CA promulgated its decision affirming the
conviction of the petitioner for attempted rape in Criminal Case No.
2388, but acquitting him of the acts of lasciviousness charged in
Criminal Case No. 2389 due to the insufficiency of the
evidence,10 holding thusly:
In sum, the arguments of the accused-appellant are too puerile and
inconsequential as to dent, even slightly, the overall integrity and
probative value of the prosecution's evidence insofar as AAA is
concerned.
Under Article 51 of the Revised Penal Code, the penalty for an
attempted felony is the "penalty lower by two (2) degrees" prescribed
by law for the consummated felony. In this case, the penalty for rape if
it had been consummated would have been reclusion perpetuapursuant
to Article 335 of the Revised Penalty Code, as amended by Republic
Act No. 7659. The penalty two degrees lower than reclusion perpetuais
prision mayor.
Applying the Indeterminate Sentence Law, the maximum term of the
penalty shall be the medium period of prision mayorin the absence of
any mitigating or aggravating circumstance and the minimum shall be
within the range of the penalty nextlower to that prescribed for the
offense which in this case is prision correccionalin any of its periods.
We also find that the trial court correctly assessed the amount of
₱20,000.00 by way of moral damages against the accused-appellant. In
a rape case, moral damages may be awarded without the need of proof
or pleading since it is assumed that the private complainant suffered
moral injuries, more so, when the victim is aged 13 to 19.
Insofar as the crime of acts of lasciviousness committed against BBB,
the accused argues that there is not enough evidence to support such
accusation. BBB did not testify and neither her sworn statement was
formally offered in evidence to support the charge for acts of
lasciviousness.
In this case, the evidence adducedby the prosecution is insufficient to
substantiate the charge of acts of lasciviousness against the
accusedappellant. The basis of the complaint for acts of lasciviousness
is the sworn statement of BBB to the effectthat the accused-appellant
likewise molested her by mashing her breast and touching her private
part. However, she was not presented to testify. While AAA claims that
she personally saw the accused touching the private parts of BBB, there
was no testimony to the effect that suchlascivious acts were without the
consent or against the will of BBB.11
Issues
In this appeal, the petitioner posits that the CA’s decision was not in
accord with law or with jurisprudence, particularly:
I. In giving credence to the incredulous and unbelievable
testimony of the alleged victim; and
II. In convicting the accused notwithstanding the failure of
the prosecution to prove the guilt of the petitioner beyond
reasonable doubt.
Anent the first issue, the petitioner assails the behavior and credibility
of AAA. He argues that AAA still continued working for him and his
wife until December 30, 1994 despite the alleged attempted rape in the
early morning of December 21, 1994, thereby belying his commission
of the crime against her; that he could not have undressed her without
rousing her if she had gone to sleep only an hour before, because her
bra was locked at her back; that her testimony about his having been on
top of her for nearly an hour while they struggled was also
inconceivable unless she either consented to his act and yielded to his
lust, or the incident did not happen at all, being the product only of her
fertileimagination; that the record does not indicate if he himself was
also naked, or that his penis was poised to penetrate her; and that she
and her mother demanded from him ₱80,000.00 as settlement, under
threat that she would file a case against him. 12
On the second issue, the petitioner assails the glaring inconsistencies in
the testimony of AAA that cast doubt on her veracity.
Ruling of the Court
The appeal is partly meritorious.
In an appeal under Rule 45 of the Rules of Court,13 the Court reviews
only questions of law. No review of the findings of fact by the CA is
involved. As a consequence of thisrule, the Court accords the highest
respect for the factual findings of the trial court, its assessment of the
credibility of witnesses and the probative weight of their testimonies
and the conclusions drawn from its factual findings, particularly when
they are affirmed by the CA. Judicial experience has shown, indeed,
that the trial courts are in the best position to decideissues of credibility
of witnesses, having themselves heard and seen the witnesses and
observed firsthand their demeanor and deportment and the manner of
testifying under exacting examination. As such, the contentionsof the
petitioner on the credibility of AAA as a witness for the State cannot
beentertained. He thereby raises questions of fact that are outside the
scope of this appeal. Moreover, he thereby proposes to have the Court,
which is not a trier of facts, review the entire evidence adduced by the
Prosecution and the Defense.
Conformably with this limitation, our review focuses only on
determining the question of law of whether or not the petitioner’s
climbing on top of the undressed AAA such thatthey faced each other,
with him mashing her breasts and touching her genitalia with his hands,
constituted attempted rape, the crime for which the RTC and the CA
convicted and punished him. Based on the information, supra, he
committed such acts "with intent of having carnal knowledge ofher by
means of force, and if the accused did not accomplish his purpose that
is to have carnal knowledge of the said AAA it was not because of his
voluntary desistance but because the said offended party succeeded in
resisting the criminal attempt of said accused to the damage and
prejudice of said offended party."
There is an attempt, according to Article 6 of the Revised Penal Code,
when the offender commences the commission of a felony directly by
overt acts, and does not perform all the acts of execution which should
produce the felony by reason of some cause or accident other than this
own spontaneous desistance. In People v. Lamahang,14 the Court,
speaking through the eminent Justice Claro M.Recto, eruditely
expounded on what overt acts would constitute anattempted felony, to
wit:
It is our opinion that the attempt to commit an offense which the Penal
Code punishes is that which has a logical relation to a particular,
concrete offense; that, which is the beginning of the execution of the
offense by overt acts of the perpetrator, leading directly to its
realization and consummation. The attempt to commit an indeterminate
offense, inasmuch as its nature in relation to its objective is ambiguous,
is not a juridical fact from the standpoint of the Penal Code. xxxx But it
is not sufficient, for the purpose of imposing penal sanction, that an act
objectively performed constitute a mere beginning of execution; it is
necessary to establish its unavoidable connection, like the logical and
natural relation of the cause and its effect, with the deed which, upon its
consummation, will develop into one of the offenses defined and
punished by the Code; it is necessary to prove that said beginning of
execution, if carried to its complete termination following its natural
course, without being frustrated by external obstacles nor by the
voluntary desistance of the perpetrator, will logically and necessarily
ripen into a concrete offense. x x x x.
"It must be borne in mind (I Groizard, p. 99) that in offenses not
consummated, as the material damage iswanting, the nature of the
action intended (accion fin) cannot exactly be ascertained, but the same
must be inferred from the nature of the acts of execution (accion
medio). Hence, the necessity that these acts be such that by their very
nature, by the facts to which they are related, by the circumstances of
the persons performing the same, and by the things connected
therewith, they must show without any doubt, that they are aimed at the
consummation of a crime. Acts susceptible of double interpretation,
that is, in favor as well as against the culprit, and which show an
innocent aswell as a punishable act, must not and cannot furnish
grounds by themselves for attempted or frustrated crimes. The relation
existing between the facts submitted for appreciation and the offense of
which said facts are supposed to produce must be direct; the intention
must be ascertainedfrom the facts and therefore it is necessary, in order
to avoid regrettable instance of injustice, that the mind be able to
directly infer from them the intention of the perpetrator to cause a
particular injury. This must have been the intention of the legislator in
requiring that in order for an attempt to exist, the offender must
commence the commission of the felony directly by overt acts, that is to
say, that the acts performed must be such that, withoutthe intent to
commit an offense, they would be meaningless."15
To ascertain whether the acts performed by the petitioner constituted
attempted rape, we have to determine the law on rape in effect on
December 21, 1993, when the petitioner committed the crime he was
convicted of. That law was Article 335 of the Revised Penal Code,
which pertinently provided as follows:
Article335. When and how rape is committed. — Rape is committed by
having carnal knowledge of a woman under any of the following
circumstances:
1. By using force or intimidation;
2. When the woman is deprived ofreason or otherwise
unconscious; and
3. When the woman is under twelve years of age, even
though neither of the circumstances mentioned in the two
next preceding paragraphs shall be present.
xxxx
The basic element of rape then and now is carnal knowledge of a
female. Carnal knowledge isdefined simply as "theact of a man having
sexual bodily connections with a woman,"16 which explains why the
slightest penetration of the female genitalia consummates the rape. In
other words, rape is consummated once the peniscapable of
consummating the sexual act touches the external genitalia of the
female.17 In People v. Campuhan,18 the Court has defined the extent of
"touching" by the penis in rape in the following terms:
[T]ouching when applied to rape cases does not simply mean mere
epidermal contact, stroking or grazing of organs, a slight brush or a
scrape of the penis on the external layer of the victim’s vagina, or the
mons pubis, as in this case. There must be sufficient and convincing
proof that the penis indeedtouched the labias or slid into the female
organ, and not merely stroked the external surface thereof, for an
accused to be convicted of consummated rape. As the labias, which are
required to be "touched" bythe penis, are by their natural situsor
location beneath the mons pubisor the vaginal surface, to touch them
with the penis is to attain some degree of penetration beneath the
surface, hence, the conclusion that touching the labia majora or the
labia minora of the pudendum constitutes consummated rape.
The pudendumor vulvais the collective term for the female genital
organs that are visible in the perineal area, e.g., mons pubis, labia
majora, labia minora, the hymen, the clitoris, the vaginal orifice, etc.
The mons pubisis the rounded eminence that becomes hairy after
puberty, and is instantly visible within the surface. The next layer is the
labia majoraor the outer lips of the female organ composed of the outer
convex surface and the inner surface. The skin of the outer convex
surface is covered with hair follicles and is pigmented, while the inner
surface is a thin skin which does not have any hair but has many
sebaceous glands. Directly beneath the labia majorais the labia minora.
Jurisprudence dictates that the labia majoramust be entered for rape to
be consummated, and not merely for the penis to stroke the surface of
the female organ. xxxx Thus, a grazing of the surface of the female
organ or touching the mons pubisof the pudendum is not sufficient to
constitute consummated rape. Absent any showing of the slightest
penetration of the female organ, i.e., touching of either labia of the
pudendumby the penis, there can be no consummated rape; at most, it
can only be attempted rape, if not acts of lasciviousness. [Bold
emphasis supplied]
It is noteworthy that in People v. Orita,19 the Court clarified that the
ruling in People v. Eriñia20 whereby the offender was declared guilty of
frustrated rapebecause of lack of conclusive evidence of penetration of
the genital organ of the offended party, was a stray decisionfor not
having been reiterated in subsequent cases. As the evolving case law on
rape stands, therefore, rape in its frustrated stage is a physical
impossibility, considering that the requisites of a frustrated felony under
Article 6 of the Revised Penal Codeare that: (1) the offender has
performed all the acts of execution which would produce the felony;
and (2) that the felony is not produced due to causes independent of the
perpetrator’s will. Obviously, the offender attains his purpose from the
moment he has carnal knowledge of his victim, because from that
moment all the essential elements of the offense have been
accomplished, leaving nothing more to be done by him. 21
Nonetheless, rape admits of an attempted stage. In this connection, the
character of the overt actsfor purposes of the attempted stage has been
explained in People v. Lizada:22
An overt or external act is defined as some physical activity or deed,
indicating the intention to commit a particular crime, more than a mere
planning or preparation, which if carried out to its complete termination
following its natural course, without being frustrated by external
obstacles nor by the spontaneous desistance of the perpetrator, will
logically and necessarily ripen into a concrete offense. The raison
d’etrefor the law requiring a direct overtact is that, in a majority of
cases, the conduct of the accused consisting merely of acts of
preparation has never ceased to be equivocal; and this is necessarily so,
irrespective of his declared intent. It is that quality of being equivocal
that must be lacking before the act becomes one which may be said to
be a commencement of the commission of the crime, or an overt act or
before any fragment of the crime itself has been committed, and this is
so for the reason that so long as the equivocal quality remains, no one
can say with certainty what the intent of the accused is.It is necessary
that the overt act should have been the ultimate step towards the
consummation of the design. It is sufficient if it was the "first or some
subsequent step in a direct movement towards the commission of the
offense after the preparations are made." The act done need not
constitute the last proximate one for completion. It is necessary,
however, that the attempt must have a causal relation to the intended
crime. In the words of Viada, the overt acts must have an immediate
and necessary relation to the offense. (Bold emphasis supplied)
In attempted rape, therefore, the concrete felony is rape, but the
offender does not perform all the acts of execution of having carnal
knowledge. If the slightest penetration of the female genitalia
consummates rape, and rape in its attempted stage requires the
commencement of the commission of the felony directly by overt
actswithout the offender performing all the acts of execution that should
produce the felony, the only means by which the overt acts performed
by the accused can be shown to have a causal relation to rape as the
intended crime is to make a clear showing of his intent to lie with the
female. Accepting that intent, being a mental act, is beyond the sphere
of criminal law,23 that showing must be through his overt acts directly
connected with rape. He cannot be held liable for attempted rape
withoutsuch overt acts demonstrating the intent to lie with the female.
In short, the State, to establish attempted rape, must show that his overt
acts, should his criminalintent be carried to its complete termination
without being thwarted by extraneous matters, would ripen into
rape,24 for, as succinctly put in People v. Dominguez, Jr.:25 "The gauge
in determining whether the crime of attempted rape had been
committed is the commencement of the act of sexual intercourse, i.e.,
penetration of the penis into the vagina, before the interruption."
The petitioner climbed on top of the naked victim, and was already
touching her genitalia with his hands and mashing her breasts when she
freed herself from his clutches and effectively ended his designs on her.
Yet, inferring from such circumstances thatrape, and no other,was his
intended felony would be highly unwarranted. This was so, despite his
lust for and lewd designs towards her being fully manifest. Such
circumstances remained equivocal, or "susceptible of double
interpretation," as Justice Recto put in People v. Lamahang, supra, such
that it was not permissible to directly infer from them the intention to
cause rape as the particular injury. Verily, his felony would not
exclusively be rapehad he been allowed by her to continue, and to have
sexual congress with her, for some other felony like simple seduction
(if he should employ deceit to have her yield to him)26 could also be
ultimate felony.
We clarify that the direct overt acts of the petitioner that would have
produced attempted rape did not include equivocal preparatory acts.
The former would have related to his acts directly connected to rape as
the intended crime, but the latter, whether external or internal, had no
connection with rape as the intended crime. Perforce, his perpetration of
the preparatory acts would not render him guilty of an attempt to
commit such felony.27 His preparatory acts could include his putting up
of the separate tents, with one being for the use of AAA and BBB, and
the other for himself and his assistant, and his allowing his wife to leave
for Manila earlier that evening to buy more wares. Such acts, being
equivocal, had no direct connection to rape. As a rule, preparatory acts
are not punishable under the Revised Penal Codefor as long as they
remained equivocal or of uncertain significance, because by their
equivocality no one could determine with certainty what the
perpetrator’s intent really was.28
If the acts of the petitioner did not constitute attempted rape, did they interest of 6% per annum reckoned from the finality of this decision
constitute acts of lasciviousness? until full payment.40

It is obvious that the fundamental difference between attempted rape WHEREFORE, the Court FINDS and PRONOUNCES petitioner
and acts of lasciviousness is the offender’sintent to lie with the female. NORBERTO CRUZ y BARTOLOME guilty of ACTS OF
In rape, intent to lie with the female is indispensable, but this element is LASCIVIOUSNESS, and, ACCORDINGLY, PENALIZES him with
not required in acts of lasciviousness.29 Attempted rape is committed, the indeterminate sentence of three (3) months of arresto mayor, as the
therefore, when the "touching" of the vagina by the penis is coupled minimum, to two (2) years, four (4) months and one day of prision
with the intent to penetrate. The intent to penetrate is manifest only correccional, as the maximum; ORDERS him to pay moral damages of
through the showing of the penis capable of consummating the sexual ₱30,000.00 and civil indemnity of ₱20,000.00 to the complainant, with
act touching the external genitalia of the female. 30 Without such interest of 6% per annum on such awards reckoned from the finality of
showing, only the felony of acts of lasciviousness is committed. 31 this decision until full payment; and DIRECTS him to pay the costs of
suit.
Based on Article 336 of the Revised Penal Code, the felony of acts of
lasciviousness is consummated whenthe following essential elements SO ORDERED.
concur, namely: (a) the offender commits any act of lasciviousness or
lewdness upon another person of either sex; and (b) the act of LUCAS P. BERSAMIN
lasciviousness or lewdness is committed either (i) by using force or Associate Justice
intimidation; or (ii) when the offended party is deprived ofreason or is
otherwise unconscious; or (iii) when the offended party is under 12
years of age.32 In that regard, lewdis defined as obscene, lustful, WE CONCUR:
indecent, lecherous; it signifies that form of immorality that has relation
to moral impurity; or that which is carried on a wanton manner. 33 MARIA LOURDES P. A. SERENO
Chief Justice
The information charged that the petitioner "remove[d] her panty and
underwear and la[id] on top of said AAA embracing and touching her TERESITA J. LEONARDO-
vagina and breast." With such allegation of the information being JOSE PORTUGAL PEREZ
DE CASTRO
competently and satisfactorily proven beyond a reasonable doubt, he Associate Justice
Associate Justice
was guilty only of acts of lasciviousness, not attempted rape. His
embracing her and touching her vagina and breasts did not directly
manifest his intent to lie with her. The lack of evidence showing his
erectile penis being in the position to penetrate her when he was on top ESTELA M. PERLAS-BERNABE
of her deterred any inference about his intent to lie with her. At most, Associate Justice
his acts reflected lewdness and lust for her.
CERTIFICATION
The intent to commit rape should not easily be inferred against the
petitioner, even from his own declaration of it, if any, unless he Pursuant to Section 13, Article VIII of the Constitution, I certify that
committed overt acts directly leading to rape. A good illustration of this the conclusions in the above Decision had been reached in consultation
can be seen in People v. Bugarin,34 where the accused was charged with before the case was assigned to the writer of the opinion of the Court's
attempted rape through an information alleging that he, by means of Division.
force and intimidation, "did then and there willfully, unlawfully and
feloniously commence the commission of the crime of Rape directly by
MARIA LOURDES P. A. SERENO
overt acts, by then and there kissing the nipples and the vagina of the
Chief Justice
undersigned [complainant], a minor, and about to lay on top of her, all
against her will, however, [he] did not perform all the acts of execution
which would have produced the crime of Rape by reason of some
causes other than his own spontaneous desistance, that is, undersigned
complainant push[ed] him away." The accused was held liable only for
acts of lasciviousness because the intent to commit rape "is not apparent
from the actdescribed," and the intent to have sexual intercourse with
her was not inferable from the act of licking her genitalia. The Court
also pointed out that the "act imputed to him cannot be considered a
preparatory act to sexual intercourse."35

Pursuant to Article 336 of the Revised Penal Code, the petitioner, being
guilty of acts of lasciviousness, is punished with prision correccional. In
the absence of modifying circumstances, prision correccional is
imposed in its medium period, which ranges from two (2) years, four
(4) months and one day to four (4) years and two (2) months. Applying
the Indeterminate Sentence Law, the minimum of the penalty should
come from arresto mayor, the penalty next lower than prision
correccionalwhich ranges from one (1) month to six (6) months. Republic of the Philippines
Accordingly, the Court fixes the indeterminate sentence of three (3) SUPREME COURT
months of arresto mayor, as the minimum, to two (2) years, four (4) Manila
months and one day of prision correccional, as the maximum.
FIRST DIVISION
In acts of lasciviousness, the victim suffers moral injuries because the
offender violates her chastity by his lewdness.1âwphi1 "Moral damages G.R. No. 192123               March 10, 2014
include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Though incapable of pecuniary DR. FERNANDO P. SOLIDUM, Petitioner, 
computation, moral damages may be recovered if they are the vs.
proximate result of the defendant's wrongful act for PEOPLE OF THE PHILIPPINES, Respondent.
omission."36 Indeed, Article 2219, (3), of the Civil Code expressly
recognizes the right of the victim in acts of lasciviousness to recover DECISION
moral damages.37 Towards that end, the Court, upon its appreciation of
the record, decrees that ₱30,000.00 is a reasonable award of moral BERSAMIN, J.:
damages.38 In addition, AAA was entitled to recover civil indemnity of
₱20,000.00.39
This appeal is taken by a physician-anesthesiologist who has been
pronounced guilty of reckless imprudence resulting in serious physical
Under Article 2211 of the Civil Code, the courts are vested with the injuries by the Regional Trial Court (RTC) and the Court of Appeals
discretion to impose interest as a part of the damages in crimes and (CA). He had been part of the team of anesthesiologists during the
quasidelicts. In that regard, the moral damages of ₱20,000.00 shall earn
surgical pull-through operation conducted on a three-year old patient
born with an imperforate anus.1
The antecedents are as follows:
Gerald Albert Gercayo (Gerald) was born on June 2, 19922 with an
imperforate anus. Two days after his birth, Gerald underwent
colostomy, a surgical procedure to bring one end of the large intestine
out through the abdominal wall,3 enabling him to excrete through a
colostomy bag attached to the side of his body.4
On May 17, 1995, Gerald, then three years old, was admitted at the
Ospital ng Maynila for a pull-through operation.5Dr. Leandro
Resurreccion headed the surgical team, and was assisted by Dr. Joselito
Luceño, Dr. Donatella Valeña and Dr. Joseph Tibio. The
anesthesiologists included Dr. Marichu Abella, Dr. Arnel Razon and
petitioner Dr. Fernando Solidum (Dr. Solidum).6 During the operation,
Gerald experienced bradycardia,7 and went into a coma.8His coma
lasted for two weeks,9 but he regained consciousness only after a
month.10 He could no longer see, hear or move.11
Agitated by her son’s helpless and unexpected condition, Ma. Luz
Gercayo (Luz) lodged a complaint for reckless imprudence resulting in
serious physical injuries with the City Prosecutor’s Office of Manila
against the attending physicians.12
Upon a finding of probable cause, the City Prosecutor’s Office filed an
information solely against Dr. Solidum,13alleging: –
That on or about May 17, 1995, in the City of Manila, Philippines, the
said accused, being then an anesthesiologist at the Ospital ng Maynila,
Malate, this City, and as such was tasked to administer the anesthesia
on three-year old baby boy GERALD ALBERT GERCAYO,
represented by his mother, MA. LUZ GERCAYO, the former having
been born with an imperforate anus [no anal opening] and was to
undergo an operation for anal opening [pull through operation], did
then and there willfully, unlawfully and feloniously fail and neglect to
use the care and diligence as the best of his judgment would dictate
under said circumstance, by failing to monitor and regulate properly the
levels of anesthesia administered to said GERALD ALBERT
GERCAYO and using 100% halothane and other anesthetic
medications, causing as a consequence of his said carelessness and
negligence, said GERALD ALBERT GERCAYO suffered a cardiac
arrest and consequently a defect called hypoxic encephalopathy
meaning insufficient oxygen supply in the brain, thereby rendering said
GERALD ALBERT GERCAYO incapable of moving his body, seeing,
speaking or hearing, to his damage and prejudice.
Contrary to law.14
The case was initially filed in the Metropolitan Trial Court of Manila,
but was transferred to the RTC pursuant to Section 5 of Republic Act
No. 8369 (The Family Courts Act of 1997),15 where it was docketed as
Criminal Case No. 01-190889.
Judgment of the RTC
On July 19, 2004, the RTC rendered its judgment finding Dr. Solidum
guilty beyond reasonable doubt of reckless imprudence resulting to
serious physical injuries,16 decreeing:
WHEREFORE, premises considered, the Court finds accused DR.
FERNANDO P. SOLIDUM GUILTY beyond reasonable doubt as
principal of the crime charged and is hereby sentenced to suffer the
indeterminate penalty of TWO (2) MONTHS and ONE (1) DAY of
arresto mayor as minimum to ONE (1) YEAR, ONE (1) MONTH and
TEN (10) DAYS of prision correccional as maximum and to indemnify,
jointly and severally with the Ospital ng Maynila, Dr. Anita So and Dr.
Marichu Abella, private complainant Luz Gercayo, the amount of
₱500,000.00 as moral damages and ₱100,000.00 as exemplary damages
and to pay the costs.
Accordingly, the bond posted by the accused for his provisional liberty
is hereby CANCELLED.
SO ORDERED.17
Upon motion of Dr. Anita So and Dr. Marichu Abella to reconsider
their solidary liability,18 the RTC excluded them from solidary liability
as to the damages, modifying its decision as follows:
WHEREFORE, premises considered, the Court finds accused Dr.
Fernando Solidum, guilty beyond reasonable doubt as principal of the
crime charged and is hereby sentenced to suffer the indeterminate
penalty of two (2) months and one (1) day of arresto mayor as
minimum to one (1) year, one (1) month and ten (10) days of prision
correccional as maximum and to indemnify jointly and severally with
Ospital ng Maynila, private complainant Luz Gercayo the amount of
₱500,000.00 as moral damages and ₱100,000 as exemplary damages
and to pay the costs.
Accordingly, the bond posted by the accused for his provisional liberty
is hereby cancelled.19
Decision of the CA
On January 20, 2010, the CA affirmed the conviction of Dr.
Solidum,20 pertinently stating and ruling:
The case appears to be a textbook example of res ipsa loquitur.
xxxx
x x x [P]rior to the operation, the child was evaluated and found fit to
undergo a major operation. As noted by the OSG, the accused himself
testified that pre-operation tests were conducted to ensure that the child
could withstand the surgery. Except for his imperforate anus, the child
was healthy. The tests and other procedures failed to reveal that he was
suffering from any known ailment or disability that could turn into a
significant risk. There was not a hint that the nature of the operation
itself was a causative factor in the events that finally led to hypoxia.
In short, the lower court has been left with no reasonable hypothesis
except to attribute the accident to a failure in the proper administration
of anesthesia, the gravamen of the charge in this case. The High Court
elucidates in Ramos vs. Court of Appeals 321 SCRA 584 –
In cases where the res ipsa loquitur is applicable, the court is permitted
to find a physician negligent upon proper proof of injury to the patient,
without the aid of expert testimony, where the court from its fund of
common knowledge can determine the proper standard of care.
Where common knowledge and experience teach that a resulting injury
would not have occurred to the patient if due care had been exercised,
an inference of negligence may be drawn giving rise to an application
of the doctrine of res ipsa loquitur without medical evidence, which is
ordinarily required to show not only what occurred but how and why it
occurred. When the doctrine is appropriate, all that the patient must do
is prove a nexus between the particular act or omission complained of
and the injury sustained while under the custody and management of
the defendant without need to produce expert medical testimony to
establish the standard of care. Resort to res ipsa loquitur is allowed
because there is no other way, under usual and ordinary conditions, by
which the patient can obtain redress for injury suffered by him.
The lower court has found that such a nexus exists between the act
complained of and the injury sustained, and in line with the hornbook
rules on evidence, we will afford the factual findings of a trial court the
respect they deserve in the absence of a showing of arbitrariness or
disregard of material facts that might affect the disposition of the case.
People v. Paraiso 349 SCRA 335.
The res ipsa loquitur test has been known to be applied in criminal
cases. Although it creates a presumption of negligence, it need not
offend due process, as long as the accused is afforded the opportunity to
go forward with his own evidence and prove that he has no criminal
intent. It is in this light not inconsistent with the constitutional
presumption of innocence of an accused.
IN VIEW OF THE FOREGOING, the modified decision of the lower
court is affirmed.
SO ORDERED.21
Dr. Solidum filed a motion for reconsideration, but the CA denied his
motion on May 7, 2010.22
Hence, this appeal.
Issues
Dr. Solidum avers that:
I.
THE HONORABLE COURT OF APPEALS ERRED IN
AFFIRMING THE DECISION OF THE LOWER COURT
IN UPHOLDING THE PETITIONER’S CONVICTION
FOR THE CRIME CHARGED BASED ON THE TRIAL
COURT’S OPINION, AND NOT ON THE BASIS OF THE
FACTS ESTABLISHED DURING THE TRIAL. ALSO,
THERE IS A CLEAR MISAPPREHENSION OF FACTS
WHICH IF CORRECTED, WILL RESULT TO THE
ACQUITTAL OF THE PETITIONER. FURTHER, THE
HONORABLE COURT ERRED IN AFFIRMING THE
SAID DECISION OF THE LOWER COURT, AS THIS
BREACHES THE CRIMINAL LAW PRINCIPLE THAT
THE PROSECUTION MUST PROVE THE
ALLEGATIONS OF THE INFORMATION BEYOND
REASONABLE DOUBT, AND NOT ON THE BASIS OF
ITS PRESUMPTIVE CONCLUSION.
II.
THE HONORABLE COURT OF APPEALS ERRED IN
APPLYING THE PRINCIPLE OF RES IPSA LOQUITOR
(sic) WHEN THE DEFENSE WAS ABLE TO PROVE
THAT THERE IS NO NEGLIGENCE ON THE PART OF
THE PETITIONER, AND NO OVERDOSING IN THE
APPLICATION OF THE ANESTHETIC AGENT
BECAUSE THERE WAS NO 100% HALOTHANE
ADMINISTERED TO THE CHILD, BUT ONLY ONE (1%)
PERCENT AND THE APPLICATION THEREOF, WAS
REGULATED BY AN ANESTHESIA MACHINE. THUS,
THE APPLICATION OF THE PRINCIPLE OF RES IPSA
LOQUITOR (sic) CONTRADICTED THE ESTABLISHED
FACTS AND THE LAW APPLICABLE IN THE CASE.
III.
THE AWARD OF MORAL DAMAGES AND
EXEMPLARY DAMAGES IS NOT JUSTIFIED THERE
BEING NO NEGLIGENCE ON THE PART OF THE
PETITIONER. ASSUMING THAT THE CHILD IS
ENTITLED TO FINANCIAL CONSIDERATION, IT
SHOULD BE ONLY AS A FINANCIAL ASSISTANCE,
BECAUSE THERE WAS NO NEGLIGENCE, AND NO
OVERDOSING OF ANESTHETIC AGENT AND AS
SUCH, THE AWARD IS SO EXCESSIVE, AND NO
FACTUAL AND LEGAL BASIS.23
To simplify, the following are the issues for resolution, namely: (a)
whether or not the doctrine of res ipsa loquitur was applicable herein;
and (b) whether or not Dr. Solidum was liable for criminal negligence.
Ruling
The appeal is meritorious.
Applicability of the Doctrine of Res Ipsa Loquitur
Res ipsa loquitur is literally translated as "the thing or the transaction
speaks for itself." The doctrine res ipsa loquitur means that "where the
thing which causes injury is shown to be under the management of the
defendant, and the accident is such as in the ordinary course of things
does not happen if those who have the management use proper care, it
affords reasonable evidence, in the absence of an explanation by the
defendant, that the accident arose from want of care." 24 It is simply "a
recognition of the postulate that, as a matter of common knowledge and
experience, the very nature of certain types of occurrences may justify
an inference of negligence on the part of the person who controls the
instrumentality causing the injury in the absence of some explanation
by the defendant who is charged with negligence. It is grounded in the
superior logic of ordinary human experience and on the basis of such
experience or common knowledge, negligence may be deduced from
the mere occurrence of the accident itself.
Hence, res ipsa loquitur is applied in conjunction with the doctrine of
common knowledge."25
Jarcia, Jr. v. People26 has underscored that the doctrine is not a rule of
substantive law, but merely a mode of proof or a mere procedural
convenience. The doctrine, when applicable to the facts and
circumstances of a given case, is not meant to and does not dispense
with the requirement of proof of culpable negligence against the party
charged. It merely determines and regulates what shall be prima facie
evidence thereof, and helps the plaintiff in proving a breach of the duty.
The doctrine can be invoked when and only when, under the
circumstances involved, direct evidence is absent and not readily
available.27
The applicability of the doctrine of res ipsa loquitur in medical
negligence cases was significantly and exhaustively explained in
Ramos v. Court of Appeals,28 where the Court said –
Medical malpractice cases do not escape the application of this
doctrine. Thus, res ipsa loquitur has been applied when the
circumstances attendant upon the harm are themselves of such a
character as to justify an inference of negligence as the cause of that
harm. The application of res ipsa loquitur in medical negligence cases
presents a question of law since it is a judicial function to determine
whether a certain set of circumstances does, as a matter of law, permit a
given inference.
Although generally, expert medical testimony is relied upon in
malpractice suits to prove that a physician has done a negligent act or
that he has deviated from the standard medical procedure, when the
doctrine of res ipsa loquitur is availed by the plaintiff, the need for
expert medical testimony is dispensed with because the injury itself
provides the proof of negligence. The reason is that the general rule on
the necessity of expert testimony applies only to such matters clearly
within the domain of medical science, and not to matters that are within
the common knowledge of mankind which may be testified to by
anyone familiar with the facts. Ordinarily, only physicians and surgeons
of skill and experience are competent to testify as to whether a patient
has been treated or operated upon with a reasonable degree of skill and
care. However, testimony as to the statements and acts of physicians
and surgeons, external appearances, and manifest conditions which are
observable by any one may be given by non-expert witnesses. Hence, in
cases where the res ipsa loquitur is applicable, the court is permitted to
find a physician negligent upon proper proof of injury to the patient,
without the aid of expert testimony, where the court from its fund of
common knowledge can determine the proper standard of care. Where
common knowledge and experience teach that a resulting injury would
not have occurred to the patient if due care had been exercised, an
inference of negligence may be drawn giving rise to an application of
the doctrine of res ipsa loquitur without medical evidence, which is
ordinarily required to show not only what occurred but how and why it
occurred. When the doctrine is appropriate, all that the patient must do
is prove a nexus between the particular act or omission complained of
and the injury sustained while under the custody and management of
the defendant without need to produce expert medical testimony to
establish the standard of care. Resort to res ipsa loquitur is allowed
because there is no other way, under usual and ordinary conditions, by
which the patient can obtain redress for injury suffered by him.
Thus, courts of other jurisdictions have applied the doctrine in the
following situations: leaving of a foreign object in the body of the
patient after an operation, injuries sustained on a healthy part of the
body which was not under, or in the area, of treatment, removal of the
wrong part of the body when another part was intended, knocking out a
tooth while a patient’s jaw was under anesthetic for the removal of his
tonsils, and loss of an eye while the patient plaintiff was under the
influence of anesthetic, during or following an operation for
appendicitis, among others.
Nevertheless, despite the fact that the scope of res ipsa loquitur has
been measurably enlarged, it does not automatically apply to all cases
of medical negligence as to mechanically shift the burden of proof to
the defendant to show that he is not guilty of the ascribed negligence.
Res ipsa loquitur is not a rigid or ordinary doctrine to be perfunctorily
used but a rule to be cautiously applied, depending upon the
circumstances of each case. It is generally restricted to situations in
malpractice cases where a layman is able to say, as a matter of common
knowledge and observation, that the consequences of professional care
were not as such as would ordinarily have followed if due care had
been exercised. A distinction must be made between the failure to
secure results, and the occurrence of something more unusual and not
ordinarily found if the service or treatment rendered followed the usual
procedure of those skilled in that particular practice. It must be
conceded that the doctrine of res ipsa loquitur can have no application
in a suit against a physician or surgeon which involves the merits of a
diagnosis or of a scientific treatment. The physician or surgeon is not
required at his peril to explain why any particular diagnosis was not
correct, or why any particular scientific treatment did not produce the
desired result. Thus, res ipsa loquitur is not available in a malpractice
suit if the only showing is that the desired result of an operation or
treatment was not accomplished. The real question, therefore, is
whether or not in the process of the operation any extraordinary
incident or unusual event outside of the routine performance occurred
which is beyond the regular scope of customary professional activity in
such operations, which, if unexplained would themselves reasonably
speak to the average man as the negligent cause or causes of the
untoward consequence. If there was such extraneous intervention, the
doctrine of res ipsa loquitur may be utilized and the defendant is called
upon to explain the matter, by evidence of exculpation, if he could.
In order to allow resort to the doctrine, therefore, the following
essential requisites must first be satisfied, to wit: (1) the accident was of
a kind that does not ordinarily occur unless someone is negligent; (2)
the instrumentality or agency that caused the injury was under the
exclusive control of the person charged; and (3) the injury suffered
must not have been due to any voluntary action or contribution of the
person injured.29
The Court considers the application here of the doctrine of res ipsa
loquitur inappropriate. Although it should be conceded without
difficulty that the second and third elements were present, considering
that the anesthetic agent and the instruments were exclusively within
the control of Dr. Solidum, and that the patient, being then unconscious
during the operation, could not have been guilty of contributory
negligence, the first element was undeniably wanting. Luz delivered
Gerald to the care, custody and control of his physicians for a pull-
through operation. Except for the imperforate anus, Gerald was then of
sound body and mind at the time of his submission to the physicians.
Yet, he experienced bradycardia during the operation, causing loss of
his senses and rendering him immobile. Hypoxia, or the insufficiency
of oxygen supply to the brain that caused the slowing of the heart rate,
scientifically termed as bradycardia, would not ordinarily occur in the
process of a pull-through operation, or during the administration of
anesthesia to the patient, but such fact alone did not prove that the
negligence of any of his attending physicians, including the
anesthesiologists, had caused the injury. In fact, the anesthesiologists
attending to him had sensed in the course of the operation that the lack
of oxygen could have been triggered by the vago-vagal reflex,
prompting them to administer atropine to the patient. 30
This conclusion is not unprecedented. It was similarly reached in
Swanson v. Brigham,31 relevant portions of the decision therein being
as follows:
On January 7, 1973, Dr. Brigham admitted 15-year-old Randall
Swanson to a hospital for the treatment of infectious mononucleosis.
The patient's symptoms had included a swollen throat and some
breathing difficulty. Early in the morning of January 9 the patient was
restless, and at 1:30 a.m. Dr. Brigham examined the patient. His
inspection of the patient's air passage revealed that it was in satisfactory
condition. At 4:15 a.m. Dr. Brigham received a telephone call from the
hospital, advising him that the patient was having respiratory difficulty.
The doctor ordered that oxygen be administered and he prepared to
leave for the hospital. Ten minutes later, 4:25 a.m., the hospital called a
second time to advise the doctor that the patient was not responding.
The doctor ordered that a medicine be administered, and he departed for
the hospital. When he arrived, the physician who had been on call at the
hospital had begun attempts to revive the patient. Dr. Brigham joined
him in the effort, but the patient died.
The doctor who performed the autopsy concluded that the patient died
between 4:25 a.m. and 4:30 a.m. of asphyxia, as a result of a sudden,
acute closing of the air passage. He also found that the air passage had
been adequate to maintain life up to 2 or 3 minutes prior to death. He
did not know what caused the air passage to suddenly close.
xxxx
It is a rare occurrence when someone admitted to a hospital for the
treatment of infectious mononucleosis dies of asphyxiation. But that is
not sufficient to invoke res ipsa loquitur. The fact that the injury rarely
occurs does not in itself prove that the injury was probably caused by
someone's negligence. Mason v. Ellsworth, 3 Wn. App. 298, 474 P.2d
909 (1970). Nor is a bad result by itself enough to warrant the
application of the doctrine. Nelson v. Murphy, 42 Wn.2d 737, 258 P.2d
472 (1953). See 2 S. Speiser, The Negligence Case – Res Ipsa Loquitur
§ 24:10 (1972). The evidence presented is insufficient to establish the
first element necessary for application of res ipsa loquitur doctrine. The
acute closing of the patient’s air passage and his resultant asphyxiation
took place over a very short period of time. Under these circumstances
it would not be reasonable to infer that the physician was negligent.
There was no palpably negligent act. The common experience of
mankind does not suggest that death would not be expected without
negligence. And there is no expert medical testimony to create an
inference that negligence caused the injury.
Negligence of Dr. Solidum
In view of the inapplicability of the doctrine of res ipsa loquitur, the
Court next determines whether the CA correctly affirmed the
conviction of Dr. Solidum for criminal negligence.
Negligence is defined as the failure to observe for the protection of the
interests of another person that degree of care, precaution, and vigilance
that the circumstances justly demand, whereby such other person
suffers injury.32Reckless imprudence, on the other hand, consists of
voluntarily doing or failing to do, without malice, an act from which
material damage results by reason of an inexcusable lack of precaution
on the part of the person performing or failing to perform such act. 33
Dr. Solidum’s conviction by the RTC was primarily based on his failure
to monitor and properly regulate the level of anesthetic agent
administered on Gerald by overdosing at 100% halothane. In affirming
the conviction, the CA observed:
On the witness stand, Dr. Vertido made a significant turnaround. He
affirmed the findings and conclusions in his report except for an
observation which, to all intents and purposes, has become the storm
center of this dispute. He wanted to correct one piece of information
regarding the dosage of the anesthetic agent administered to the child.
He declared that he made a mistake in reporting a 100% halothane and
said that based on the records it should have been 100% oxygen.
The records he was relying on, as he explains, are the following:
(a) the anesthesia record – A portion of the chart in the record
was marked as Exhibit 1-A and 1-B to indicate the
administration at intervals of the anesthetic agent.
(b) the clinical abstract – A portion of this record that reads as
follows was marked Exhibit 3A. 3B – Approximately 1 hour
and 45 minutes through the operation, patient was noted to
have bradycardia (CR = 70) and ATSO4 0.2 mg was
immediately administered. However, the bradycardia
persisted, the inhalational agent was shut off, and the patient
was ventilated with 100% oxygen and another dose of
ATSO4 0.2 mg was given. However, the patient did not
respond until no cardiac rate can be auscultated and the
surgeons were immediately told to stop the operation. The
patient was put on a supine position and CPR was initiated.
Patient was given 1 amp of epinephrine initially while
continuously doing cardiac massage – still with no cardiac
rate appreciated; another ampule of epinephrine was given
and after 45 secs, patient’s vital signs returned to normal. The
entire resuscitation lasted approximately 3-5 mins. The
surgeons were then told to proceed to the closure and the
child’s vital signs throughout and until the end of surgery
were: BP = 110/70; CR = 116/min and RR = 20-22
cycles/min (on assisted ventilation).
Dr. Vertido points to the crucial passage in the clinical abstract that the
patient was ventilated with 100% oxygen and another dose of ATSO4
when the bradycardia persisted, but for one reason or another, he read it
as 100% halothane. He was asked to read the anesthesia record on the
percentage of the dosage indicated, but he could only sheepishly note I
can’t understand the number. There are no clues in the clinical abstract
on the quantity of the anesthetic agent used. It only contains the
information that the anesthetic plan was to put the patient under general
anesthesia using a nonrebreathing system with halothane as the sole
anesthetic agent and that 1 hour and 45 minutes after the operation
began, bradycardia occurred after which the inhalational agent was shut
off and the patient administered with 100% oxygen. It would be
apparent that the 100% oxygen that Dr. Vertido said should be read in
lieu of 100% halothane was the pure oxygen introduced after something
went amiss in the operation and the halothane itself was reduced or shut
off.
The key question remains – what was the quantity of halothane used
before bradycardia set in?
The implication of Dr. Vertido’s admission is that there was no
overdose of the anesthetic agent, and the accused Dr. Solidum stakes
his liberty and reputation on this conclusion. He made the assurance
that he gave his patient the utmost medical care, never leaving the
operating room except for a few minutes to answer the call of nature
but leaving behind the other members of his team Drs. Abella and
Razon to monitor the operation. He insisted that he administered only a
point 1% not 100% halothane, receiving corroboration from Dr. Abella
whose initial MA in the record should be enough to show that she
assisted in the operation and was therefore conversant of the things that
happened. She revealed that they were using a machine that closely
monitored the concentration of the agent during the operation.
But most compelling is Dr. Solidum’s interpretation of the anesthesia
record itself, as he takes the bull by the horns, so to speak. In his
affidavit, he says, reading from the record, that the quantity of
halothane used in the operation is one percent (1%) delivered at time
intervals of 15 minutes. He studiedly mentions – the concentration of
halothane as reflected in the anesthesia record (Annex D of the
complaint-affidavit) is only one percent (1%) – The numbers indicated
in 15 minute increments for halothane is an indication that only 1%
halothane is being delivered to the patient Gerard Gercayo for his entire
operation; The amount of halothane delivered in this case which is only
one percent cannot be summated because halothane is constantly being
rapidly eliminated by the body during the entire operation.
xxxx
In finding the accused guilty, despite these explanations, the RTC
argued that the volte-face of Dr. Vertido on the question of the dosage
of the anesthetic used on the child would not really validate the non-
guilt of the anesthesiologist. Led to agree that the halothane used was
not 100% as initially believed, he was nonetheless unaware of the
implications of the change in his testimony. The court observed that Dr.
Vertido had described the condition of the child as hypoxia which is
deprivation of oxygen, a diagnosis supported by the results of the CT
Scan. All the symptoms attributed to a failing central nervous system
such as stupor, loss of consciousness, decrease in heart rate, loss of
usual acuity and abnormal motor function, are manifestations of this
condition or syndrome. But why would there be deprivation of oxygen
if 100% oxygen to 1% halothane was used? Ultimately, to the court,
whether oxygen or halothane was the object of mistake, the detrimental
effects of the operation are incontestable, and they can only be led to
one conclusion – if the application of anesthesia was really closely
monitored, the event could not have happened.34
The Prosecution did not prove the elements of reckless imprudence
beyond reasonable doubt because the circumstances cited by the CA
were insufficient to establish that Dr. Solidum had been guilty of
inexcusable lack of precaution in monitoring the administration of the
anesthetic agent to Gerald. The Court aptly explained in Cruz v. Court
of Appeals35 that:
Whether or not a physician has committed an "inexcusable lack of
precaution" in the treatment of his patient is to be determined according
to the standard of care observed by other members of the profession in
good standing under similar circumstances bearing in mind the
advanced state of the profession at the time of treatment or the present
state of medical science. In the recent case of Leonila Garcia-Rueda v.
Wilfred L. Pacasio, et. al., this Court stated that in accepting a case, a
doctor in effect represents that, having the needed training and skill
possessed by physicians and surgeons practicing in the same field, he
will employ such training, care and skill in the treatment of his patients.
He therefore has a duty to use at least the same level of care that any
other reasonably competent doctor would use to treat a condition under
the same circumstances. It is in this aspect of medical malpractice that
expert testimony is essential to establish not only the standard of care of
the profession but also that the physician's conduct in the treatment and
care falls below such standard. Further, inasmuch as the causes of the
injuries involved in malpractice actions are determinable only in the
light of scientific knowledge, it has been recognized that expert
testimony is usually necessary to support the conclusion as to causation.
xxxx
In litigations involving medical negligence, the plaintiff has the burden
of establishing appellant's negligence and for a reasonable conclusion
of negligence, there must be proof of breach of duty on the part of the
surgeon as well as a causal connection of such breach and the resulting
death of his patient. In Chan Lugay v. St Luke's Hospital, Inc., where
the attending physician was absolved of liability for the death of the
complainant’s wife and newborn baby, this Court held that:
"In order that there may be a recovery for an injury, however, it must be
shown that the ‘injury for which recovery is sought must be the
legitimate consequence of the wrong done; the connection between the
negligence and the injury must be a direct and natural sequence of
events, unbroken by intervening efficient causes.’ In other words, the
negligence must be the proximate cause of the injury. For, ‘negligence,
no matter in what it consists, cannot create a right of action unless it is
the proximate cause of the injury complained of.’ And ‘the proximate
cause of an injury is that cause, which, in natural and continuous
sequence, unbroken by any efficient intervening cause, produces the
injury, and without which the result would not have occurred.’"
An action upon medical negligence – whether criminal, civil or
administrative – calls for the plaintiff to prove by competent evidence
each of the following four elements, namely: (a) the duty owed by the
physician to the patient, as created by the physician-patient relationship,
to act in accordance with the specific norms or standards established by
his profession; (b) the breach of the duty by the physician’s failing to
act in accordance with the applicable standard of care; (3) the causation,
i.e., there must be a reasonably close and causal connection between the
negligent act or omission and the resulting injury; and (4) the damages
suffered by the patient.36
In the medical profession, specific norms or standards to protect the
patient against unreasonable risk, commonly referred to as standards of
care, set the duty of the physician to act in respect of the patient.
Unfortunately, no clear definition of the duty of a particular physician
in a particular case exists. Because most medical malpractice cases are
highly technical, witnesses with special medical qualifications must
provide guidance by giving the knowledge necessary to render a fair
and just verdict. As a result, the standard of medical care of a prudent
physician must be determined from expert testimony in most cases; and
in the case of a specialist (like an anesthesiologist), the standard of care
by which the specialist is judged is the care and skill commonly
possessed and exercised by similar specialists under similar
circumstances. The specialty standard of care may be higher than that
required of the general practitioner.37
The standard of care is an objective standard by which the conduct of a
physician sued for negligence or malpractice may be measured, and it
does not depend, therefore, on any individual physician’s own
knowledge either. In attempting to fix a standard by which a court may
determine whether the physician has properly performed the requisite
duty toward the patient, expert medical testimony from both plaintiff
and defense experts is required. The judge, as the trier of fact,
ultimately determines the standard of care, after listening to the
testimony of all medical experts.38
Here, the Prosecution presented no witnesses with special medical
qualifications in anesthesia to provide guidance to the trial court on
what standard of care was applicable. It would consequently be truly
difficult, if not impossible, to determine whether the first three elements
of a negligence and malpractice action were attendant.
Although the Prosecution presented Dr. Benigno Sulit, Jr., an
anesthesiologist himself who served as the Chairman of the Committee
on Ethics and Malpractice of the Philippine Society of
Anesthesiologists that investigated the complaint against Dr. Solidum,
his testimony mainly focused on how his Committee had conducted the
investigation.39 Even then, the report of his Committee was favorable to
Dr. Solidum,40 to wit:
Presented for review by this committee is the case of a 3 year old male
who underwent a pull-thru operation and was administered general
anesthesia by a team of anesthesia residents. The patient, at the time
when the surgeons was manipulating the recto-sigmoid and pulling it
down in preparation for the anastomosis, had bradycardia. The
anesthesiologists, sensing that the cause thereof was the triggering of
the vago-vagal reflex, administered atropine to block it but despite the
administration of the drug in two doses, cardiac arrest ensued. As the
records show, prompt resuscitative measures were administered and
spontaneous cardiac function re-established in less than five (5) minutes
and that oxygen was continuously being administered throughout,
unfortunately, as later become manifest, patient suffered permanent
irreversible brain damage.
In view of the actuations of the anaesthesiologists and the
administration of anaesthesia, the committee find that the same were all
in accordance with the universally accepted standards of medical care
and there is no evidence of any fault or negligence on the part of the
anaesthesiologists.
Dr. Antonio Vertido, a Senior Medico-Legal Officer of the National
Bureau of Investigation, was also presented as a Prosecution witness,
but his testimony concentrated on the results of the physical
examination he had conducted on Gerald, as borne out by the following
portions of his direct examination, to wit:
FISCAL CABARON Doctor, what do you mean by General Anesthetic
Agent?
WITNESS General Anesthetic Agent is a substance used in the
conduction of Anesthesia and in this case, halothane was used as a sole
anesthetic agent.
xxxx
Q Now under paragraph two of page 1 of your report you mentioned
that after one hour and 45 minutes after the operation, the patient
experienced a bradycardia or slowing of heart rate, now as a doctor,
would you be able to tell this Honorable Court as to what cause of the
slowing of heart rate as to Gerald Gercayo?
WITNESS Well honestly sir, I cannot give you the reason why there
was a bradycardia of time because is some reason one way or another
that might caused bradycardia.
FISCAL CABARON What could be the possible reason?
A Well bradycardia can be caused by anesthetic agent itself and that is
a possibility, we’re talking about possibility here.
Q What other possibility do you have in mind, doctor?
A Well, because it was an operation, anything can happen within that
situation.
FISCAL CABARON Now, this representation would like to ask you
about the slowing of heart rate, now what is the immediate cause of the
slowing of the heart rate of a person?
WITNESS Well, one of the more practical reason why there is slowing
of the heart rate is when you do a vagal reflex in the neck wherein the
vagal receptors are located at the lateral part of the neck, when you
press that, you produce the slowing of the heart rate that produce
bradycardia.
Q I am pro[p]ounding to you another question doctor, what about the
deficiency in the supply of oxygen by the patient, would that also cause
the slowing of the heart rate?
A Well that is a possibility sir, I mean not as slowing of the heart rate, if
there is a hypoxia or there is a low oxygen level in the blood, the
normal thing for the heart is to pump or to do not a bradycardia but a …
to counter act the Hypoxia that is being experienced by the patient
(sic).
xxxx
Q Now, you made mention also doctor that the use of general
anesthesia using 100% halothane and other anesthetic medications
probably were contributory to the production of hypoxia.
A Yes, sir in general sir.41
On cross-examination, Dr. Vertido expounded more specifically on his
interpretation of the anesthesia record and the factors that could have
caused Gerald to experience bradycardia, viz:
ATTY. COMIA I noticed in, may I see your report Doctor, page 3, will
you kindly read to this Honorable court your last paragraph and if you
will affirm that as if it is correct?
A "The use of General Anesthesia, that is using 100% Halothane
probably will be contributory to the production of Hypoxia and - - - -"
ATTY COMIA And do you affirm the figure you mentioned in this
Court Doctor?
WITNESS Based on the records, I know the - - -
Q 100%?
A 100% based on the records.
Q I will show you doctor a clinical record. I am a lawyer I am not a
doctor but will you kindly look at this and tell me where is 100%, the
word "one hundred" or 1-0-0, will you kindly look at this Doctor, this
Xerox copy if you can show to this Honorable Court and even to this
representation the word "one hundred" or 1-0-0 and then call me.
xxxx
ATTY. COMIA Doctor tell this Honorable Court where is that 100, 1-
0-0 and if there is, you just call me and even the attention of the
Presiding Judge of this Court. Okay, you read one by one.
WITNESS Well, are you only asking 100%, sir?
ATTY. COMIA I’m asking you, just answer my question, did you see
there 100% and 100 figures, tell me, yes or no?
WITNESS I’m trying to look at the 100%, there is no 100% there sir.
ATTY. COMIA Okay, that was good, so you Honor please, may we
request also temporarily, because this is just a xerox copy presented by
the fiscal, that the percentage here that the Halothane administered by
Dr. Solidum to the patient is 1% only so may we request that this
portion, temporarily your Honor, we are marking this anesthesia record
as our Exhibit 1 and then this 1% Halothane also be bracketed and the
same be marked as our Exhibit "1-A".
xxxx
ATTY. COMIA Doctor, my attention was called also when you said
that there are so many factors that contributed to Hypoxia is that
correct?
WITNESS Yes, sir.
Q I remember doctor, according to you there are so many factors that
contributed to what you call hypoxia and according to you, when this
Gerald suffered hypoxia, there are other factors that might lead to this
Hypoxia at the time of this operation is that correct?
WITNESS The possibility is there, sir.
Q And according to you, it might also be the result of such other, some
or it might be due to operations being conducted by the doctor at the
time when the operation is being done might also contribute to that
hypoxia is that correct?
A That is a possibility also.
xxxx
ATTY. COMIA How will you classify now the operation conducted to
this Gerald, Doctor?
WITNESS Well, that is a major operation sir.
Q In other words, when you say major operation conducted to this
Gerald, there is a possibility that this Gerald might [be] exposed to
some risk is that correct?
A That is a possibility sir.
Q And which according to you that Gerald suffered hypoxia is that
correct?
A Yes, sir.
Q And that is one of the risk of that major operation is that correct?
A That is the risk sir.42
At the continuation of his cross-examination, Dr. Vertido maintained
that Gerald’s operation for his imperforate anus, considered a major
operation, had exposed him to the risk of suffering the same
condition.43 He then corrected his earlier finding that 100% halothane
had been administered on Gerald by saying that it should be 100%
oxygen.44
Dr. Solidum was criminally charged for "failing to monitor and regulate
properly the levels of anesthesia administered to said Gerald Albert
Gercayo and using 100% halothane and other anesthetic
medications."45However, the foregoing circumstances, taken together,
did not prove beyond reasonable doubt that Dr. Solidum had been
recklessly imprudent in administering the anesthetic agent to Gerald.
Indeed, Dr. Vertido’s findings did not preclude the probability that
other factors related to Gerald’s major operation, which could or could
not necessarily be attributed to the administration of the anesthesia, had
caused the hypoxia and had then led Gerald to experience bradycardia.
Dr. Vertido revealingly concluded in his report, instead, that "although
the anesthesiologist followed the normal routine and precautionary
procedures, still hypoxia and its corresponding side effects did occur." 46
The existence of the probability about other factors causing the hypoxia
has engendered in the mind of the Court a reasonable doubt as to Dr.
Solidum’s guilt, and moves us to acquit him of the crime of reckless
imprudence resulting to serious physical injuries. "A reasonable doubt
of guilt," according to United States v. Youthsey:47
x x x is a doubt growing reasonably out of evidence or the lack of it. It
is not a captious doubt; not a doubt engendered merely by sympathy for
the unfortunate position of the defendant, or a dislike to accept the
responsibility of convicting a fellow man. If, having weighed the
evidence on both sides, you reach the conclusion that the defendant is
guilty, to that degree of certainty as would lead you to act on the faith
of it in the most important and crucial affairs of your life, you may
properly convict him. Proof beyond reasonable doubt is not proof to a
mathematical demonstration. It is not proof beyond the possibility of
mistake.
We have to clarify that the acquittal of Dr. Solidum would not
immediately exempt him from civil liability.1âwphi1 But we cannot
now find and declare him civilly liable because the circumstances that
have been established here do not present the factual and legal bases for
validly doing so. His acquittal did not derive only from reasonable
doubt. There was really no firm and competent showing how the injury
to Gerard had been caused. That meant that the manner of
administration of the anesthesia by Dr. Solidum was not necessarily the
cause of the hypoxia that caused the bradycardia experienced by
Gerard. Consequently, to adjudge Dr. Solidum civilly liable would be
to speculate on the cause of the hypoxia. We are not allowed to do so,
for civil liability must not rest on speculation but on competent
evidence.
Liability of Ospital ng Maynila
Although the result now reached has resolved the issue of civil liability,
we have to address the unusual decree of the RTC, as affirmed by the
CA, of expressly holding Ospital ng Maynila civilly liable jointly and
severally with Dr. Solidum. The decree was flawed in logic and in law.
In criminal prosecutions, the civil action for the recovery of civil
liability that is deemed instituted with the criminal action refers only to
that arising from the offense charged.48 It is puzzling, therefore, how the
RTC and the CA could have adjudged Ospital ng Maynila jointly and
severally liable with Dr. Solidum for the damages despite the obvious
fact that Ospital ng Maynila, being an artificial entity, had not been
charged along with Dr. Solidum. The lower courts thereby acted
capriciously and whimsically, which rendered their judgment against
Ospital ng Maynila void as the product of grave abuse of discretion
amounting to lack of jurisdiction.
Not surprisingly, the flawed decree raises other material concerns that
the RTC and the CA overlooked. We deem it important, then, to
express the following observations for the instruction of the Bench and
Bar.
For one, Ospital ng Maynila was not at all a party in the proceedings.
Hence, its fundamental right to be heard was not respected from the
outset. The R TC and the CA should have been alert to this fundamental
defect. Verily, no person can be prejudiced by a ruling rendered in an
action or proceeding in which he was not made a party. Such a rule
would enforce the constitutional guarantee of due process of law.
Moreover, Ospital ng Maynila could be held civilly liable only when
subsidiary liability would be properly enforceable pursuant to Article
103 of the Revised Penal Code. But the subsidiary liability seems far-
fetched here. The conditions for subsidiary liability to attach to Ospital
ng Maynila should first be complied with. Firstly, pursuant to Article
103 of the Revised Penal Code, Ospital ng Maynila must be shown to
be a corporation "engaged in any kind of industry." The term industry
means any department or branch of art, occupation or business,
especially one that employs labor and capital, and is engaged in
industry.49 However, Ospital ng Maynila, being a public hospital, was
not engaged in industry conducted for profit but purely in charitable
and humanitarian work.50 Secondly, assuming that Ospital ng Maynila
was engaged in industry for profit, Dr. Solidum must be shown to be an
employee of Ospital ng Maynila acting in the discharge of his duties
during the operation on Gerald. Yet, he definitely was not such
employee but a consultant of the hospital. And, thirdly, assuming that
civil liability was adjudged against Dr. Solidum as an employee (which
did not happen here), the execution against him was unsatisfied due to
his being insolvent.
WHEREFORE, the Court GRANTS the petition for review on
certiorari; REVERSES AND SETS ASIDE the decision promulgated
on January 20, 2010; ACQUITS Dr. Fernando P. Solidum of the crime
of reckless imprudence resulting to serious physical injuries; and
MAKES no pronouncement on costs of suit.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice
WE CONCUR:
MARIA LOURDES P. A. SERENO
Chief Justice
TERESITA J. LEONARDO- MARTIN S. VILLARAMA,
DE CASTRO JR.
Associate Justice Associate Justice
BIENVENIDO L. REYES
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that
the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court's
Division.
MARIA LOURDES P. A. SERENO
Chief Justice
FIRST DIVISION
February 20, 2017
G.R. No. 208093
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee 
vs.
SALIM ISMAEL y RADANG, Accused-Appellant
DECISION
DEL CASTILLO, J.:
This is an appeal from the June 14, 2013 Decision1 of the Court of
Appeals (CA) in CA-G.R. CR H.C. No. 00902, which affirmed the
August 31, 2010 Judgment2 of Branch 12, Regional Trial Court (RTC)
of Zamboanga City in Criminal Case Nos. 5021 (19952) and 5022
(19953), finding appellant Salim Ismael y Radang (Salim) guilty
beyond reasonable doubt of violating Sections 5 and 11, Article II of
Republic Act No. 9165 (RA 9165), otherwise known as the
Comprehensive Dangerous Drugs Act of 2002. In Criminal Case No.
5021 (19952), Salim was sentenced to suffer the penalty of life
imprisonment and to pay a fine of ₱500,000.00 for illegal sale
of shabu under Section 5, Article II of RA 9165; and in Criminal Case
No. 5022 (19953), he was sentenced to suffer the penalty of
imprisonment of twelve (12) years and one (1) day to fifteen (15) years
and pay a fine of ₱300,000.00 for illegal possession of shabu under
Section 11 of the said law.
Factual Antecedents
Salim was charged with violation of Sections 5 and 11, Article II of RA
9165 for selling and possessing methamphetamine
hydrochloride (shabu). The twin Informations3 instituted therefor
alleged:
In Criminal Case No. 5021 (19952)
That on or about August 25, 2003, in the City of Zamboanga,
Philippines, and within the jurisdiction of this Honorable Court, the
above-named accused, not being authorized by law to sell, deliver,
transport, distribute or give away to another any dangerous drug, did
then and there willfully, unlawfully and feloniously, sell and deliver to
SPO1 Roberto Alberto Santiago, PNP, Culianan Police Station, who
acted as poseur buyer, one (1) small size transparent plastic pack
containing white crystalline substance as certified to by PO1 Rodolfo
Dagalea Tan as METHAMPHETAMINE HYDROCHLORIDE
(SHABU), said accused knowing the same to be a dangerous drug.
CONTRARY TO LAW.
In Criminal Case No. 5022 (19953)
That on or about August 25, 2003, in the City of Zamboanga,
Philippines, and within the jurisdiction of this Honorable Court, the
above-named accused, not being authorized by law, did then and there
willfully, unlawfully and feloniously have in his possession and under
his custody and control, two (2) small size heat-sealed transparent
plastic packs each containing white crystalline substance as certified to
by PO1 Rodolfo Dagalea Tan asMETHAMPHETAMINE
HYDROCHLORIDE (SHABU), said accused knowing the same to be a
dangerous drug.
CONTRARY TO LAW.
Arraigned on July 6, 2004, Salim, assisted by counsel, pleaded not
guilty to both charges. Upon termination of the joint pre-trial
conference, trial on the merits followed.
Version of the Prosecution
Culled from the records4 were the following operative facts:
On August 25, 2003, at around 1:00 o'clock in the afternoon, a
confidential informant reported to SPO4 Menardo Araneta [SPO4
Araneta], Chief of the Intelligence Division of the Culianan Police
Station4 [at Zamboanga City], that a certain "Ismael Salim" was
engaged in selling shabu at Barangay Talabaan near the Muslim
[c]emetery [in that city.
To verify the report, SPO4 Araneta instructed the said informant to
[monitor] the area. After the informant confim1ed that the said Ismael
Salim was indeed selling illegal drugs in the reported area, SPO4
Araneta formed a buy-bust team composed of SPO1 Enriquez, SPO1
Eduardo N. Rodriguez (SPO1 Rodriguez), SPO1 Roberto A. Santiago
(SPO1 Santiago) and PO2 Rodolfo Dagalea Tan (PO2 Tan). It was then
agreed that SPO1 Santiago would act as poseur buyer with SPO1
Rodriguez as back-up. For the purpose, SPO4 Araneta gave SPO1
Santiago a [₱100] bill bearing Serial No. M419145 as marked money
[to be used] in the buy-bust operation.
Upon arrival at Barangay Talabaan, the team parked their service
vehicle along the road. SPO1 Santiago, the confidential informant and
SPO1 Rodriguez alighted from the vehicle and walked towards the
[area fronting] the Muslim cemetery. As they approached the area, the
informant pointed to a man wearing a brown T-shirt and black short
pants with white towel around his neck [whom he identified] as
appellant Ismael Salim, the target of the operation.
SPO1 Santiago then [walked] towards appellant and [told] the latter that
he [wanted] to buy shabu; to this appellant replied "how much?" SPO1
Santiago answered that he [wanted to buy ₱100.00 worth of
the shabu, and gave appellant] the ₱100.00 marked money; [whereupon
appellant] took from his left pocket one plastic sachet containing a
white crystalline substance [which he] handed over to SPO1 Santiago.
Upon seeing the exchange, SPO1 Rodriguez, who was positioned
[some 10] meters away, rushed in and arrested appellant[.] SPO1
Rodriguez made a precautionary search of appellant's body for any
concealed weapon[, and found none]. Instead, SPO1 Rodriguez found,
tucked inside [appellant's left front pocket the ₱100.00] marked money
and two (2) more plastic sachets containing white crystalline substance
wrapped in a golden cigarette paper.
The police officers then brought appellant to the Culianan Police
Station [in Zamboanga City] with SPO1 Santiago keeping personal
custody of the items confiscated from [him]. At the [police] station, the
plastic sachet containing white crystalline substance subject of the buy-
bust operation, the two (2) plastic sachets also containing white
crystalline substance[, and the ₱100.00] marked money bearing Serial
No. M419145 recovered from appellant's left pocket, were respectively
turned over by SPO1 Santiago and SPO1 Rodriguez to the Desk
Officer, PO3 Floro Napalcruz [PO3 Napalcruz], who likewise turned
[these over] to the Duty Investigator, [PO2 Tan]. PO2 Tan then placed
his initial "RDT" on the items recovered from appellant.
PO2 Tan also prepared a request to the PNP Regional Crime
Laboratory 9, [at] Zamboanga City for laboratory examination of the
plastic sachet containing the white crystalline substance subject of the
sale between appellant and SPO1 Santiago, and the other two (2) plastic
sachet[s] found inside appellant's pocket by SPO1 Rodriguez.
After conducting qualitative examination on the said specimens, Police
Chief Inspector [PCI] Mercedes D. Diestro, Forensic Chemist [Forensic
Chemist Diestro], issued Chemistry Report No. D-367-2003 dated
August 25, 2003, finding [the above-mentioned] plastic sachets positive
for Methamphetamine Hydrochloride (shabu) a dangerous drug.
Version of the Defense
The defense presented appellant as its lone witness. Appellant denied
both charges; he denied selling shabu to SPO1 Santiago, just as he
denied having shabu in his possession when he was arrested on August
25, 2003.
According to appellant, on August 25, 2003, he went to a store to buy
cellphone load so that he could call his wife. After buying the cellphone
load, he went back to his house on board a sikad-sikad, a bicycle-driven
vehicle with a sidecar. When he was about 160 meters away from the
Muslim cemetery in Barangay Talabaan, he was arrested by five
persons in civilian attire who introduced themselves as police officers.
The police officers conducted a search on his person but did not find
any dangerous dn1gs. Thereafter, he was brought to Culianan Police
Station where he was detained for two days. Appellant insisted that he
never sold shabu to the police officers who arrested him. He said that
the first time he saw the alleged shabu was when it was presented
before the trial court. He denied that the police officers had confiscated
a cellular phone from him. He also asserted that all these police officers
took away from him was his money and that he had never met the said
police officers prior to his arrest.
Ruling of the Regional Trial Court
On August 31, 2010, the RTC of Zamboanga City, Branch 12 rendered
its Judgment finding appellant guilty beyond reasonable doubt of
having violated Sections 5 and 11,Article II of RA 9165.
The RTC gave full credence to the testimonies of SPO1 Santiago and
SPO1 Rodriguez who conducted the buy-bust operation against
appellant; it rejected appellant's defense of denial and frame-up. The
RTC noted that the defense of frame-up is easily concocted and is
commonly used as a standard line of defense in most prosecutions
arising from violations of the comprehensive dangerous drugs
act.5 Moreover, other than the self-serving statements of appellant, no
clear and convincing exculpatory evidence was presented in the present
case.
The dispositive part of the Judgment of the RTC reads:
WHEREFORE, IN VIEW OF ALL THE FOREGOING; this Court
hereby finds the accused herein, SALIM ISMAEL y RADANG guilty
beyond reasonable doubt in both cases, for violation of Sections 5 and
11, Article II of Republic Act No. 9165 otherwise known as the
Comprehensive Dangerous Drugs Act of 2002 and hereby sentences the
said accused, in Criminal Case No. 5021 (19952) for Violation of
Section 5, Article II of Republic Act No. 9165, to suffer the penalty of
LIFE IMPRISONMENT and to pay a fine of Five Hundred Thousand
Pesos (₱500,000.00), and in Criminal Case No. 5022 (19953) for
Violation of Section 11, Article II of Republic Act No. 9165, to suffer
the penalty of Imprisonment of TWELVE (12) YEARS and ONE (1)
DAY to FIFTEEN (15) YEARS and to pay a fine of Three Hundred
Thousand Pesos (₱300,000.00).
The dangerous drugs seized and recovered from the accused in these
cases are hereby ordered confiscated and forfeited in favor of the
government to be disposed in accordance with the pertinent provisions
of Republic Act No. 9165 and its in1plementing rules and guidelines.
Cost against the accused.
SO ORDERED.6
Ruling of the Court of Appeals
Dissatisfied with the RTC's verdict, appellant appealed to the CA, but
on June 14, 2013, the CA affirmed in toto the RTC's Judgment. The CA
held that the elements of both illegal sale and illegal possession of
dangerous drugs had been duly proven in the instant case. The CA
joined the RTC in giving full credence to the testimonies of the
aforementioned police officers, as they are presumed to have performed
their duties in a regular manner, no evidence to the contrary having
been adduced in the twin cases. Moreover, the CA found that in these
cases, the integrity and evidentiary value of the seized drugs had not at
all been compromised, but were in fact duly preserved.
The CA disposed as fol1ows:
WHEREFORE, the assailed Judgment of the Regional Trial Court,
9th Judicial Region, Branch 12, Zamboanga City finding accused-
appellant Salim Ismael y Radang guilty beyond reasonable doubt of
Sections 5 and 11, Article II of Republic Act No. 9165, otherwise
known as the Comprehensive Dangerous Drugs Act of 2002 is
AFFIRMED in toto.
SO ORDERED.7
Taking exception to the CA's Decision, appellant instituted the present
appeal before this Court and in his Appellant's Brief8 argues that:
THE COURT A QUO GRAVELY ERRED IN CONVICTING THE
ACCUSED-APPELLANT WHEN [HIS] GUILT WAS NOT PROVEN
BEYOND REASONABLE DOUBT.9
It is appellant's contention that his guilt had not been proven beyond
reasonable doubt because the prosecution: (1) failed to establish the
identity of the prohibited drugs allegedly seized from him and; (2)
likewise failed to comply with the strict requirements of Section 21 of
RA 9165.
Our Ruling
The appeal is meritorious.
To secure a conviction for illegal sale of dangerous drugs under Section
5, Article II of RA 9165, 1he prosecution must establish the following
elements: (1) the identity of the buyer and the seller, the object of the
sale and its consideration; and (2) the delivery of the thing sold and the
payment therefor.10 What is important is that the sale transaction of
drugs actually took place and that the object of the transaction is
properly presented as evidence in court and is shown to be the same
drugs seized from the accused.
On the other hand, for illegal possession of dangerous drugs, the
following elements must be established: "[1] the accused was in
possession of dangerous drugs; [2] such possession was not authorized
by law; and [3] the accused was freely and consciously aware of being
in possession of dangerous drugs."11
In cases of illegal sale and illegal possession of dangerous drugs, the
dangerous drug seized from the accused constitutes the corpus
delicti of the offense. Thus, it is of utmost importance that the integrity
and identity of the seized drugs must be shown to have been duly
preserved. "The chain of custody rule performs this function as it
ensures that unnecessary doubts concerning the identity of the evidence
are removed."12
After a careful examination of the records of the case, we find that the
prosecution failed to establish an unbroken chain of custody of the
seized drugs in violation of Section 21, Article II of RA 9165.
The pertinent provisions of Section 21 state:
Section 21. Custody and Disposition of Confiscated, Seized, and/or
Surrendered Dangerous Drugs, Plant Sources of Dangerous Drugs.
Controlled Precursors and Essential Chemicals,
Instruments/Paraphernalia and/or Laboratory Equipment-The PDEA
shall take charge and have custody of all dangerous drugs, plant sources
of dangerous drugs, controlled precursors and essential chemicals, as
well as instruments/paraphernalia and/or laboratory equipment so
confiscated, seized and/or surrendered, for proper disposition in the
following manner:
(1) The apprehending team having initial custody and control of the
drugs shall, immediately after seizure and confiscation, physically
inventory and photograph the same in the presence of the accused or the
person/s from whom such items were confiscated and/or seized, or
his/her representative or counsel, a representative from the media and
the Department of Justice (DOJ), and any elected public official who
shall be required to sign the copies of the inventory and be given a copy
thereof;
Similarly, the Implementing Rules and Regulations (IRR) further
elaborate on the proper procedure to be followed in Section 21(a) of RA
9165. It states:
(a) The apprehending office/team having initial custody and control of
the drugs shall, inm1ediately after seizure and confiscation, physically
inventory and photograph the same in the presence of the accused or the
person/s from whom such items were confiscated and/or seized, or
his/her representative or counsel, a representative from the media and
the Department of Justice (DOJ), and any elected public official who
shall be required to sign the copies of the inventory and be given a copy
thereof: Provided, that the physical inventory and photograph shall be
conducted at the place where the search warrant is served; or at the
nearest police station or at the nearest office of the apprehending
officer/team, whichever is practicable, in case of warrantless seizures;
Provided, further that non-compliance with these requirement" under
justifiable grounds, as long as the integrity and the evidentiary value of
the seized items are properly preserved by the apprehending
officer/team, shall not render void and invalid such seizures of and
custody over said items;
In Mallillin v. People,13 the Court explained the chain of custody rule as
follows:
As a method of authenticating evidence, the chain of custody rule
requires that the admission of an exhibit be preceded by evidence
sufficient to support a finding that the matter in question is what the
proponent clain1s it to be. It would include testimony about every
link in the chain, from the moment the item was picked up to the
time it is offered into evidence, in such a way that every person who
touched the exhibit would describe how and from whom it was
received, where it was and what happened to it while in the witness'
possession, the condition in which it was received and the condition
in which it was delivered to the next link in the chain. These
witnesses would then describe the precautions taken to ensure that there
had been no change in the condition of the item and no opportunity for
someone not in the chain to have possession of the same. (Emphasis
supplied)
The first link in the chain is the marking of the seized drug. We have
previously held that:
x x x Marking after seizure is the starting point in the custodial link,
thus it is vital that the seized contraband are immediately marked
because succeeding handlers of the specimen will use the markings as
reference. The marking of the evidence serves to separate the marked
evidence from the corpus of all other similar or related evidence from
the time they are seized from the accused until they are disposed of at
the end of the criminal proceedings, obviating switching, 'planting,' or
contamination of evidence.14
It is important that the seized drugs be immediately marked, if possible,
as soon as they are seized from the accused.
Furthermore, in People v. Gonzales,15 the Court explained that:
The first stage in the chain of custody rule is the marking of the
dangerous drugs or related items. Marking, which is the affixing on
the dangerous drugs or related items by the apprehending officer
or the poseur-buyer of his initials or signature or other identifying
signs, should be made in the presence of the apprehended violator
immediately upon arrest. The importance of the prompt marking
cannot be denied, because succeeding handlers of dangerous drugs or
related items will use the marking as reference. Also, the marking
operates to set apart as evidence the dangerous drugs or related items
from other material from the moment they are confiscated until they are
disposed of at the close of the criminal proceedings, thereby forestalling
switching, planting or contamination of evidence. In short, the
marking immediately upon confiscation or recovery of the
dangerous drugs or related items is indispensable in the
preservation of their integrity and evidentiary value. (Emphasis
supplied)
In this case, SPO1 Rodriguez testified on the seizure of the sachets
of shabu he found in appellant's possession alter the latter was arrested.
SPO1 Rodriguez shared the details of how the seized drugs were
handled following its confiscation as follows:
RSP II Ivan C. Mendoza, Jr.:
Q: You are telling the Honorable Court that instead of finding
concealed weapon, yon x x x found two small sized heat-sealed
transparent plastic bag[s]?
A: Yes, sir.
Q: Where [were] these two small[-]sized heat-sealed transparent plastic
[packs] found?
A: [In] his left-front pocket.
Q: Were they wrapped further in another piece of paper or were they
just found in that pocket?
A: [They were] wrapped in a [golden-colored] cigarette paper.
Q: Would you x x x be able to remember that [golden- colored]
cigarette paper? The wrapper of plastic pack?
A: Yes, sir.
Q: Why will you be able to remember it?
A: Because I turned it over to the desk officer and the desk officer
turned it over to the investigator, the investigator marked it.
Q: Who is the investigator?
A: PO2 Rodolfo Tan.
Q: So did you see anything that the investigator Rodolfo Tan do in that
golden paper?
A: He marked his initial [sic].
Q: Ah, you saw him [mark] an initial?
A: Yes, sir.
Q: What did you see him [mark] on the paper?
A: RDT.
Q: And do you know the meaning of RDT?
A: Yes, Rodolfo Dagalea Tan. 16
The testimony of SPO l Rodriguez on the chain of custody of the seized
drugs leaves much to be desired. It is evident that there was a break in
the very first link of the chain when he failed to mark the sachet'3
of shabu immediately upon seizing them from the appellant. According
to SPO1 Rodriguez, after finding sachets of shabu in appellant's
possession, he turned the drugs over to the desk officer. SPO1
Rodriguez did not even explain why he failed to mark or why he could
not have marked the seized items immediately upon confiscation.
Allegedly, the desk officer, after receiving the seized items from SPO1
Rodriguez, in turn handed them over to PO2 Tan. Notably, this desk
officer was not presented in court thereby creating another break in the
chain of custody. Again, no explanation was offered for the non-
presentation of the desk officer or why he himself did not mark the
seized items. It was only upon receipt by PO2 Tan, allegedly from the
desk officer, of the seized chugs that the same were marked at the
police station. This means that from the time the drugs were seized
from appellant until the time PO2 Tan marked the same, there was
already a significant gap in the chain of custody. Because of this gap,
there is no certainty that the sachets of drugs presented as evidence in
the trial court were the same drugs found in appellant's possession.
SPO1 Santiago, the poseur-buyer in the buy-bust operation, was
presented to corroborate the testimony of SPO1 Rodriguez. However,
his testimony likewise showed that the arresting officers did not mark
the seized drugs immediately after the arrest and in the presence of the
appellant. Similarly, no explanation was given for the lapse. SPO1
Santiago testified as follows:
Q: So what did you do with the small transparent sachet after police
officer Rodriguez came to assist you?
A: After the arrest of a certain Ismael we proceeded to our police
station when we arrived there I turnover [sic] the transparent
sachet to our desk officer.
Q: Who was the desk officer?
A: At that time it was PO3 Floro Napalcruz.
Q: Did you notice anything that he did with the specimen that you
turnover [sic] to him, if any?
COURT: You are referring to the desk officer?
RSPII IVAN C. MENDOZA, JR.: Yes, Your Honor.
A: During that time, Your Honor, I gave to him the, [sic] which I buy
from him [sic] the one (1) piece of transparent small sachet
of shabu then after that I get [sic] out from the office. 17
During cross-examination, SPO1 Santiago reiterated that he did not
mark the seized drugs. The sachets were marked after they were
received by PO2 Tan.
Q: Now, you said that this plastic sachet taken from the suspect, you
turned it over to the desk officer of the police station?
A: Yes, sir.
Q: After turning it over, you left?
A: Yes, sir.
Q: You do not know what happened to the sachet?
A: Yes, sir.
Q: You did not place your markings there?
A: None, sir.18
It is clear from the above that SPO1 Rodriguez and SPO1 Santiago did
not mark the seized drugs immediately after they were confiscated from
appellant. No explanations were given why markings were not
immediately made. At this stage in the chain, there was already a
significant break such that there can be no assurance against switching,
planting, or contamination. The Court has previously held that, "failure
to mark the drugs immediately after they were seized from the accused
casts doubt on the prosecution evidence warranting an acquittal on
reasonable doubt."19
Both arresting officers testified that they turned over the sachets
of shabu to a desk officer in the person of PO3 Napalcruz at the police
station. Notably, PO3 Napalcruz was not presented in court to testify on
the circumstances surrounding the alleged receipt of the seized drugs.
This failure to present PO3 Napalcruz is another fatal defect in an
already broken chain of custody. Every person who takes possession of
seized drugs must show how it was handled and preserved while in his
or her custody to prevent any switching or replacement.
After PO3 Napalcruz, the seized drugs were then turned over to PO2
Tan. It was only at this point that marking was done on the seized
drugs. He revealed in his testimony the following:
4th ACP RAY Z. BONGABONG:
Q: [After the apprehension] of the accused in this case, what happened?
A: SPO1 Roberto Santiago turned over to the Desk Officer one (1)
small size heat-sealed transparent plastic pack
containing shabu, allegedly a buy[-]bust stuff confiscated from the
subject person and marked money while SPO1 Eduardo Rodriguez
turned over two (2) small size heat[-]sealed transparent plastic packs
allegedly confiscated from the possession of the subject person during a
body search conducted and one (1) Nokia cellphone 3310 and cash
money of ₱710.00.
x x xx
Q: You as investigator of the case what did you do, if any, upon the
turn over of those items?
A: I prepared a request for laboratory examination addressed to the
Chief PNP Crime Laboratory 9, R. T. Lim Boulevard, this City.
Q: This small heat[-]sealed transparent plastic sachet if you can see this
again, will you be able to identify the same?
A: Yes, Sir.
Q: How?
A: Through my initial, Sir.
Q: What initial?
A: RDT
Q: What does RDT stands [sic] for?
A: It stands for my name Rodolfo Dagalea Tan.20
In fine, PO2 Tan claimed during his direct examination that he received
the seized items from the desk officer.
During cross-examination, however, PO2 Tan contradicted his previous
statement on who turned over the sachets of shabu to him, viz.:
ATTY. EDGARDO D. GONZALES:
Q: Santiago told you that he was the poseur buyer?
A: Yes, Sir.
Q: He turned over to you, what?
A: He turned over to me small size heat[-]sealed transparent plastic
pack containing white crystalline substance, containing shabu.
x x xx
Q: You also identified two other pieces of sachet, correct, Sir?
A: Yes, Sir.
Q: Who turned over to you?
A: SPO1 Eduardo Rodriguez.21
Due to the apparent breaks in the chain of custody, it was possible that
the seized item subject of the sale transaction was switched with the
seized items subject of the illegal possession case. This is material
considering that the imposable penalty for illegal possession
of shabu depends on the quantity or weight of the seized drug.
Aside from the failure to mark the seized drugs immediately upon
arrest, the arresting officers also failed to show that the marking of the
seized drugs was done in the presence of the appellant. This
requirement must not be brushed aside as a mere technicality. It must
be shown that the marking was done in the presence of the accused to
assure that the identity and integrity of the drugs were properly
preserved. Failure to comply with this requirement is fatal to the
prosecution's case.
The requirements of making an inventory and taking of photographs of
the seized drugs were likewise omitted without offering an explanation
for its non-compliance. This break in the chain tainted the integrity of
the seized drugs presented in court; the very identity of the seized drugs
became highly questionable.
To recap, based on the evidence of the prosecution, it is clear that no
markings were made immediately after the arrest of the
appellant.1âwphi1 The seized drugs were allegedly turned over to desk
officer PO3 Napalcruz but the prosecution did not bother to present him
to testify on the identity of the items he received from SPO1 Rodriguez
and SPO1 Santiago. PO3 Napalcruz supposedly turned over the drugs
to PO2 Tan who marked the same at the police station. During his
direct testimony, PO2 Tan claimed that he received the drugs from PO3
Napalcruz. However, during his cross-examination, PO2 Tan
contradicted himself when he admitted receipt of the seized drugs from
SPO1 Santiago and SPO1 Rodriguez. Aside from these glaring
infirmities, there was no inventory made, or photographs taken, of the
seized drugs in the presence of the accused or his representative, or in
the presence of any representative from the media, Department of
Justice or any elected official, who must sign the inventory, or be given
a copy of the inventory as required by RA 9165 and its IRR.
Lastly, we note that the trial court, in its November 12, 2007 Order,
already denied the admission of Exhibits ''B-1" and "B-2" or the dn1gs
subject of the illegal possession case. The relevant portions of the Order
are as follows:
Plaintiff's Exhibits "B-1" and "B-2" however are DENIED admission
on the grounds that Exhibit "B-1" submitted by the prosecution in
evidence is merely a cigarette foil, whereas Exhibit "B-2" is a heat
sealed transparent plastic sachet containing 0.0135 gram of
methamphetamine hydrochloride which are inconsistent with its offer
that Exhibits "B-1" and "B-2" are two (2) plastic heat sealed transparent
plastic sachets containing shabu with a total weight of 0.0310 gram.22
Surprisingly, however, the trial court rendered a verdict convicting the
appellant of violating Section 11, RA 9165 on illegal possession of
dangerous drugs based on the same pieces of evidence it previously
denied.
In sum, we find that the prosecution failed to: (1) overcome the
presumption of innocence which appellai1t enjoys; (2) prove
the corpus delicti of the crime; (3) establish an unbroken chain of
custody of the seized drugs; and (3) offer any explanation why the
provisions of Section 21, RA 9165 were not complied with. This Court
is thus constrained to acquit the appellant based on reasonable doubt.
WHEREFORE, the appeal is GRANTED. The assailed June 14, 2013
Decision of the Court of Appeals in CA-GR. CR HC No. 00902, which
affirmed the August 31, 2010 Judgment of Branch 12, Regional Trial
Court of Zamboanga City in Criminal Case Nos. 5021 (19952) and
5022 (19953) is REVERSED and SET ASIDE.
Accordingly, appellant Salim R. Ismael is ACQUITTED based on
reasonable doubt.
The Director of the Bureau of Corrections is directed to cause the
immediate release of appellant, unless the latter is being lawfully held
for another cause, and to inform the Court of the date of his release or
reason for his continued confinement within five days from notice.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice
Chairperson

TERESITA J. LEONARDO- ESTELA M. PERLAS-

DE CASTRO BERNABE
Associate Justice Associate Justice

ALFREDO BENJAMIN S. caguioa

Associate Justice

CERTIFICATION

Pursuant to the Section 13, Article VIII of the Constitution, I certify

that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of
the Court’s Division.

MARIA LOURDES P.A. SERENO

Chief Justice

Merchatile Law

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 193108               December 10, 2014

MARILYN VICTORIO-AQUINO, Petitioner, 
vs.
PACIFIC PLANS, INC. and MAMERTO A. MARCELO, JR.
(Court-Appointed Rehabilitation Receiver of Pacific Plans,
Inc.), Respondents.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of

the Revised Rules of Court which seeks to annul and set aside the
Decision1 of the Special First Division of the Court of Appeals (CA),
dated February 26, 2010, and its Resolution2 dated July 21, 2010
denying petitioner's Motion for Reconsideration in the case entitled
Marilyn Victoria-Aquino v. Pacific Plans, Inc. and Mamerto A.
Marcelo, Jr., docketed as CA-G.R. SP No. 105237.
Respondent Pacific Plans, Inc. (now Abundance Providers and
Entrepreneurs Corporation or "APEC")3 is engaged in the business of
selling pre-need plans and educational plans, including traditional open-
ended educational plans (PEPTrads). PEPTrads are educational plans
where respondent guarantees to pay the planholder, without regard to
the actual cost at the time of enrolment, the full amount of tuition and
other school fees of a designated beneficiary. 4Petitioner is a holder of
two (2) units of respondent’s PEPTrads.5
On April 7, 2005, foreseeing the impossibility of meeting its obligations
to the availing planholders as they fall due, respondent filed a Petition
for Corporate Rehabilitation with the Regional Trial Court
(Rehabilitation Court), praying that it be placed under rehabilitation and
suspension of payments pursuant to Presidential Decree (P.D.) No. 902-
A, as amended, in relation to the Interim Rules of Procedure on
Corporate Rehabilitation (Interim Rules).6 At the time of filing of the
Petition for Corporate Rehabilitation, respondent had more or less thirty
four thousand (34,000) outstanding PEPTrads.7
On April 12, 2005, the Rehabilitation Court issued a Stay Order,
directing the suspension of payments of the obligations of respondent
and ordering all creditors and interested parties to file their
comments/oppositions, respectively, to the Petition for Corporate
Rehabilitation.8 The same Order also appointed respondent Mamerto A.
Marcelo (Rehabilitation Receiver) as the rehabilitation receiver and set
the initial hearing of the case on May 25, 2005.9
Pursuant to the prevailing rules on corporate rehabilitation, respondent
submitted to the Rehabilitation Court its proposed rehabilitation plan.
Under the terms thereof, respondent proposed the implementation of a
"Swap,"10 which will essentially give the planholder a means to exit
from the PEPTrads at terms and conditions relative to a termination
value that is more advantageous than those provided under the
educational plan in case of voluntary termination. 11
On February 16, 2006, the Rehabilitation Receiver submitted an
Alternative Rehabilitation Plan (ARP) for the approval of the
Rehabilitation Court. Under the ARP, the benefits under the PEP Trads
shall be translated into fixed-value benefits as of December 31, 2004,
which will be termed as Base Year-end 2004 Entitlement, and shall be
computed as follows: (i) for availing plan holders, based on fifty-
percent (50%) of Average School Fee of SY 2005-2006 for every
remaining year of availment; (ii) for nonavailing (Group 1) plan
holders,12 based on the higher of Base Year-end 2004 Entitlement under
the Rehabilitation Proposal or fifty-percent (50%) of Average School
Fee of SY 2005-2006 for every year of availment; and (iii) for non-
availing (Group 2) plan holders,13 based on the planholders’
contributions with seven percent (7%) net interest per annum from date
of full payment on record to December 31, 2004.14 The Base Year-end
Entitlement will be covered by a Rehabilitation Plan Agreement in lieu
of a fixed-value plan.15
For petitioner, she is entitled toreceive an aggregate amount consisting
of: (a) the value of her total contributions plus interest at the rate of
seven percent (7%) from the date of full payment until December 31,
2005 (Net Translated Value); and (b) interest on the Net Translated
Value at the annual rate of seven percent (7%) from January 1, 2006
until 2010.16
The ARP also provided for tuition support for each enrolment period
until SY 2009-2010 depending on the prevailing market rate of the
NAPOCOR Bonds and Peso-Dollar exchange rate.17 The tuition support
is computed as the lesser of the remaining balance of Base Year-end
2004 Entitlement, the last-term tuition or reimbursement on record and
the following tuition support ceiling:
Availment Mode Ceiling (in Php)
Annual ₱20,000.00
Semester ₱10,000.00
Trimester ₱6,000.0018
These tuition support payments are considered advances from the Base
Year-end 2004 Entitlement.19
As to the funding for the tuition support, the same shall be sourced from
either two (2) ways:
(1) Outright sale of the NAPOCOR bonds and conversion of Dollar
proceeds to Peso, up to the equivalent of the tuition support
requirements. The payment of the tuition support will be dependent on
the terms and exchange rate under which the bonds are liquidated; or
(2) Forward sale of the underlying Dollars to a financial institution,
which then issues notes credit linked with NAPOCOR Bonds. The
notes can then be sold to interested financial institution to provide for
liquidity to fund the requirements for tuition support.20
The creditors/oppositors did not oppose/comment on the Rehabilitation
Receiver’s ARP, although the Parents Enabling Parents Coalition, Inc.
(PEPCI) filed with the CA, a Petition for Certiorari with Application
for a TRO/Writ of Preliminary Injunction dated February 10, 2006. As
no TRO/Writ of Preliminary Injunction has been issued against the
conduct of further proceedings, on April 27, 2006, the Court issued a
Decision21 approving the ARP, which cradled several appeals filed with
the CA, and later on, to this Court that are still pending resolution. 22
Nevertheless, respondent commenced with the implementation of its
ARP in coordination with, and with clearance from, the Rehabilitation
Receiver.23
In the meantime, the value of the Philippine Peso strengthened and
appreciated. In view of this development, and considering that the trust
fund of respondent is mainly composed of NAPOCOR bonds that are
denominated in US Dollars, respondent submitted a manifestation with
the Rehabilitation Court on February 29, 2008, stating that the
continued appreciation of the Philippine Peso has grossly affected the
value of the U.S. Dollar-denominated NAPOCOR bonds, which stood
as security for the payment of the Net TranslatedValues of the
PEPTrads.24
Thereafter, the Rehabilitation Receiver filed a Manifestation with
Motion to Admit dated March 7, 2008, echoing the earlier tenor and
substance of respondent’s manifestation, and praying that the Modified
Rehabilitation Plan (MRP) be approved by the Rehabilitation Court.
Under the MRP, the ARP previously approved by the Rehabilitation
Court is modified as follows: (a) suspension of the tuition support; (b)
converting the Philippine Peso liabilities to U.S. Dollar liabilities by
assigning to each planholder a share of the remaining asset in
proportion to the share of liabilities in 2010; and (c) payments of the
trust fund assets in U.S. Dollars at maturity.25
After the submission of comments/opposition by the concerned parties,
the Rehabilitation Court issued a Resolution26 dated July 28, 2008
approving the MRP. In approving the same, the Rehabilitation Court
reasoned that in view of the "cram down" power of the rehabilitation
court under Section 23 of the Interim Rules, courts have the power to
approve a rehabilitation plan over the objection of creditors and even
when such proposed rehabilitation plan involvesthe impairment of
contractual obligations.27
Petitioner questioned the approval of the MRP before the CA on
September 26, 2008. It likewise prayed for the issuance of a TRO and a
writ of preliminary injunction to stay the execution of the Resolution
dated July 28, 2008.28
In dismissing or denying the Petition for Review, the CA held that: (a)
petitioner did not pay the proper amount of docket fees; (b) a Petition
for Review under Rule 43 is an improper remedy to question the
approval of a modified rehabilitation plan; (c) contrary to petitioner’s
claim, the alterations in the MRP are consistent with the goalsof the
ARP; and (d) the approval of the MRP did not amount to an impairment
of the contract between petitioner and respondent. The falloof the
assailed Decision29 states:
WHEREFORE, in view of the foregoing premises, judgment is hereby
rendered by us DENYING or DISMISSING the petition for review
filed in this case and AFFIRMING the corporate rehabilitation Court’s
Resolution dated July 28, 2008 in Special Proceeding No. M-
6059.30 Unfortunately for petitioner, despite its motion for
reconsideration, the CA denied the same on July 21, 2010. 31
Hence, this Petition for Review on Certiorariraising the following
grounds:
I
The Court of Appeals rendered a decision contrary to law and not in
accord with the applicable decisions of the Supreme Court when it
sustained the Rehabilitation Court’s approval of the Modified
Rehabilitation Plan.
II
The Court of Appeals rendered a decision contrary to law when it ruled
that a Petition for Review was an improper remedy to question a final
order of the Rehabilitation Court approving the Modified Rehabilitation
Plan.
III
The Court of Appeals rendered a decision not in accord with the
issuances of the Supreme Court and the usual course of judicial
proceedings when it declared that Petitioner had not paid the proper
amount of filing and docket fees, despite the fact that, as clearly shown
in the receipts presented by petitioner, the proper amount of filing fees
were paid.32
In its Comment dated October 23, 2006, respondent raised various
procedural infirmities on the petition warranting its dismissal, to wit:
(1) the assailed decision has become final and executory for failure of
petitioner to timely serve a copy of the Petition for Time upon the CA
in violation of Section 3, Rule 45 of the Rules of Court; (2) petitioner’s
motion for reconsideration on the questioned decision raises no new
arguments; thus, is merely pro formaand did not toll the running of the
reglementary period; (3) a petition for review under Rule 43 of the
Rules of Court is an improper mode to question the MRP; and (4)
petitioner failed to pay the appropriate amount of docket fees when she
filed the Petition for Review with the CA.33
On procedural grounds, this Court finds for the petitioner.
First. Respondent asseverates that the CA correctly held that the
Petition for Review under Rule 43 of the Rules of Court is an improper
mode to question the Resolution approving the MRP, since the same
constitutes merely as an interlocutory order and, therefore, a proper
subject of a certiorari case under Rule 65 of the Rules of Court. On the
other hand, petitioner counters that such Resolution isa final order with
respect to the approval of the MRP; hence, her recourse to a Petition for
Review under Rule 43 of the Rules of Court was proper. Petitioner
further argues that such remedy is clearly in line with the directive of
AM No. 04-9-07-SC,34 which took effect on October 15, 2004 and,
therefore, was the correct rule on appeals prevailing at the time
petitioner filed her petition with the CA.35
Petitioner’s contention is impressed with merit.
It bears emphasis that the governing rule at the time respondent filed its
petition for rehabilitation was the Interim Rules, which does not
expressly state the mode of appeal from the decisions, orders and
resolutions of the Rehabilitation Court, either prior or after the approval
of the rehabilitation plan. Accordingly, this Court issued a Resolution,
A.M. No. 04-9-07-SC,36 which lays down the proper mode of appeal in
cases involving corporate rehabilitation and intra-corporate
controversies in order to prevent cluttering the dockets of the courts
with appeals and/or petitions for certiorari. The first paragraph thereof
provides:
1. All decisions and final orders in cases falling under the Interim Rules
of Corporate Rehabilitation and the Interim Rules of Procedure
Governing Intra-Corporate Controversies under Republic Act No. 8799
shall be appealable to the Court of Appeals through a petition for
review under Rule 43 of the Rules of Court.37
Under the said Resolution, all decisions and final orders of the
rehabilitation court, regardless of whether they are issued before or
after the approval of the rehabilitation court, shall be brought on appeal
to the CA via a petition for review under Rule 43 of the Rules of Court.
Subsequently, the Supreme Court issued A.M. No. 00-8-10-
SC38 (Rehabilitation Rules), which took effect on January 16, 2009,
embodying the rehabilitation rules applicable to petitions for
rehabilitation of corporations, partnerships and associations pursuant to
P.D. No. 902-A, as amended. Section 1, Rule 8 thereof unequivocally
states:
SEC. 1. Motion for Reconsideration. — A party may file a motion for
reconsideration of any order issuedby the court prior to the approval of
the rehabilitation plan. No relief can be extended to the party aggrieved
by the court’s order on the motion through a special civil action for
certiorari under Rule 65 of the Rules of Court. Such order can only be
elevated to the Court of Appeals as an assigned error in the petition for
review of the decision or order approving or disapproving the
rehabilitation plan.
An order issued after the approval of the rehabilitation plan can be
reviewed only through a special civil action for certiorari under Rule 65
of the Rules of Court.39
While We agree with respondent that the later rule states that orders
issued after the approval of the rehabilitation plan can be reviewed only
through a special civil action for certiorari under Rule 65 of the Rules
of Court, such rule does not apply to the instant case as the same was
not yet in effect at the time petitioner filed her Petition for Review with
the CA. Stated otherwise, the prevailing law at the time petitioner filed
said petition with the CA is the Interim Rules as well as A.M. No. 04-9-
07-SC. As such, the proper remedy of appeal from all decisions and
final orders of the RTC was Rule 43 of the Rules of Court, and not Rule
65 thereof.
In any case, We cannot also subscribe to respondent’s view that the
approval of the MRP is merely an interlocutory order. In Alma Jose v.
Javellana,40 We have already defined a final order as one that puts an
end to the particular matter involved, or settles definitely the matter
therein disposed of, as to leave nothing for the trial court to do other
than to execute the order.41 Here, it cannot be gainsaid that the
Resolution approving the MRP is a final order with respect to the
validity thereof, specifically on the following issues: (1) the suspension
of the tuition support; (2) conversion of Philippine Peso entitlements to
U.S. Dollar entitlements; and (3) the payments in U.S. Dollars upon
maturity in 2010. In this regard, the issue as to its alleged infringement
on the non-impairment clause under the Constitution has likewise been
settled. The doctrine laid down in New Frontier Sugar Corp. v.
Regional Trial Court Branch 39, Iloilo City,42 cannot be used to counter
the foregoing because in that case, the Court merely stressed that an
original action for certiorarimay be directed against an interlocutory
order of the lower court prior to an appeal from the judgment; or where
there is no appeal or any plain, speedy or adequate remedy. 43 New
Frontier does not categorically preclude the filing of a petition for
review under Rule43 for decisions or orders issued after the approval of
the rehabilitation plan such as a modification thereof.
Second. We find respondent’s contention on the non-payment of the
docket fees devoid of merit because the records rather show that
petitioner had, in fact, paid the appropriate amount of docket fees for
her Petition with the CA and her application for a TRO on September
12, 2008. To support this allegation, petitioner attached copies of
official receipts, representing the fees she has paid in the aggregate
amount of Four Thousand Six Hundred Eighty Pesos (₱4,680.00).
Third. With respect to respondent’s allegation that petitioner violated
Section 2,44 in relation to Section 3,45 Rule 45 of the Rules of Court, in
particular the failure of petitioner to serve a copy ofits petition for time
with the CA within the prescribed period, the same is mislaid.
A careful examination of the records will show that said petition was
personally served on the CA on August 17, 2010, within the prescribed
period pursuant to Sections 2 and 3, Rule 45 of the Rules of Court. This
is the most logical explanation since the Manifestation regarding such
service, together with the attached Petition for Time, was filed on
August 18, 2010. Thus, the date "August 27, 2010" on the stamp of the
CA is clearly a clerical error and respondent’s assertion that the CA was
not timely served the Petition for Time is erroneous.
Similarly, owing to the significance of the issues raised in the instant
case, We rule that any lapse on the filing of the motion for
reconsideration with the CA is not grave enough to dismiss the instant
petition on technical grounds. Moreover, it is settled that although a
motion for reconsideration may merely reiterate issues already passed
upon by the court, that, by itself, does not make it pro forma. In fact, the
CA did not declare said motion for reconsideration as pro forma when it
denied the same. Hence, considering that the motion for reconsideration
is not pro forma and a mere scrap of paper, its filing tolled the running
period of appeal pursuant to Section 2,46 Rule 37 of the Rules of Court.
Fourth. Anent the Verification and Certification against Forum
Shopping of the instant petition, we recognize that petitioner failed to
comply with Section 6, Rule II of A.M. No. 02-8-13-SC, otherwise
known as the Rules on Notarial Practice of 2004 (Notarial Rules),
which provides that in order for a jurat to be valid, the following
requirements should be present:
SEC. 6. Jurat. - "Jurat" refers to an act in which an individual on a
single occasion:
(a) appears in person before the notary public and presents an
instrument or document;
(b) is personally known to the notary public or identified by
the notary public through competent evidence of identityas
defined by these Rules;
(c) signs the instrument ordocument in the presence of the
notary; and
(d) takes an oath or affirmation before the notary public as to
such instrument or document.47 as well as Section 12, Rule II
of the Notarial Rules, which defines what constitutes
competent evidence of identity, to wit –
SEC. 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; or
(b) the oath or affirmation of one credible witness not privy to
the instrument, document or transaction who is personally
known to the notary public and who personally knows the
individual, or of two credible witnesses neither of whom is
privy to the instrument, document or transaction who each
personally knows the individual and shows to the notary
public documentary identification.
While we agree with the observation of respondent that in the instant
Petition, the Verification and Certification against Forum Shopping
attached thereto is defective because the jurat thereof does not contain
the required competent evidence of identity of the affiant, petitioner
herein, such omission may be overlooked in the name of judicial
leniency, in order to give this Court an avenue to dispose of the
substantive issues of this case.
As to respondent’s allegation that the instant petition contained a false
Certification of Non-Forum Shopping since the same failed to disclose
the pendency of a related petition pending before the CA, the same
warrants scant consideration.
While it would appear that there is substantial identity ofparties, since
both petitioner and PEPCI are creditors of respondent and both are
questioning the Rehabilitation Court’s approval of the MRP, the
identity of cause of action is absent in the present case. An assiduous
scrutiny of the respondent’s Petition for Review with the CA and
PEPCI’s Petition for Review dated September 3, 2008, also filed with
the CA, will show that they raised different causes of action. In
Majority Stockholders of Ruby Industrial Corporation v. Lim, 48 we
have reiterated that no forum shopping exists when two (2) groups of
oppositors in a rehabilitation case act independently of each other, even
when they have sought relief from the same appellate court, thus:
On the charge of forum shopping, we have already ruled on the matter
in G.R. Nos. 124185-87. Thus:
We hold that private respondents are not guilty of forum shopping. In
Ramos, Sr. v. Court of Appeals, we ruled:
"The private respondents can be considered to have engaged in forum
shopping if all of them, acting as one group, filed identical special civil
actions in the Court of Appeals and in this Court. There must be
identity of parties or interests represented, rights asserted and relief
sought in different tribunals. In the case at bar, two groups of private
respondents appear to have acted independently of each other when
they sought relief from the appellate court. Both groups sought relief
from the same tribunal.
"It would not matter even if there are several divisions in the Court of
Appeals. The adverse party can always ask for the consolidation of the
two cases. x xx"
In the case at bar, private respondents represent different groups with
different interests - the minority stockholders' group, represented by
private respondent Lim; the unsecured creditors group, Allied Leasing
& Finance Corporation; and the old management group. Each group has
distinct rights to protect. In line with our ruling in Ramos, the cases
filed by private respondents should be consolidated. In fact, BENHAR
and RUBY did just that - in their urgent motions filed on December 1,
1993 and December 6, 1993, respectively, they prayed for the
consolidation of the cases before the Court of Appeals. 49
In any case, this Court resolves tocondone any procedural lapse in the
interest of substantial justice given the nature of business of respondent
and its overreaching implication to society.To deny this Court of its
duty to resolve the substantive issues would be tantamount to judicial
tragedy as planholders, like petitioner herein, would be placed in a state
of limbo as to its remedies under existing laws and jurisprudence.
Indeed, where strong considerations of substantive justice are manifest
in the petition, the strict application of the rules of procedure may be
relaxed, in the exercise of its equity jurisdiction. 50 Thus, a rigid
application of the rules of procedure will not be entertained if it will
only obstruct rather than serve the broader interests of justice in the
light of the prevailing circumstances in the case under
consideration.51 It is a prerogative duly embedded in jurisprudence, as
in Alcantara v. Philippine Commercial and International Bank, 52 where
the Court had the occasion to reiterate that:
x x x In appropriate cases, the courts may liberally construe procedural
rules in order to meet and advance the cause of substantial justice.
Lapses in the literal observation of a procedural rule will be overlooked
when they do not involve public policy, when they arose from an
honest mistake or unforeseen accident, and when they have not
prejudiced the adverse party or deprived the court of its authority. The
aforementioned conditions are present in the case at bar. x x x x
There is ample jurisprudence holding that the subsequent and
substantial compliance of an appellant may call for the relaxation of the
rules of procedure. In these cases, weruled that the subsequent
submission of the missing documents with the motion for
reconsideration amounts to substantial compliance. The reasons behind
the failure of the petitioners in these two cases to comply with the
required attachments were no longer scrutinized. What we found
noteworthy in each case was the fact that the petitioners therein
substantially complied with the formal requirements. We ordered the
remand of the petitions in these cases to the Court of Appeals, stressing
the ruling that by precipitately dismissing the petitions "the appellate
court clearly put a premium on technicalities at the expense of a just
resolution of the case."
While it is true that the rules of procedure are intended to promote
rather than frustrate the ends of justice, and the swift unclogging of
court docket is a laudable objective, it nevertheless must not be met at
the expense of substantial justice. This Court has time and again
reiterated the doctrine that the rules of procedure are mere tools aimed
at facilitating the attainment of justice, rather thanits frustration. A strict
and rigid application of the rules must alwaysbe eschewed when it
would subvert the primary objective of the rules, that is, to enhance fair
trials and expedite justice. Technicalities should never beused to defeat
the substantive rights of the other party. Every party-litigant must be
afforded the amplest opportunity for the proper and just determination
of his cause, free from the constraints of technicalities. Considering that
there was substantial compliance, a liberal interpretation of procedural
rules in this labor case is more in keeping with the constitutional
mandate to secure social justice.53
Notwithstanding our liberal interpretation of the rules, the instant
petition must fail on substantive grounds.
Petitioner contends that the MRP is ultra vires insofar as it reduces the
original claim and even the original amount that petitioner was to
receive under the ARP.54 She also claims that it was beyond the
authority of the Rehabilitation Court to sanction a rehabilitation plan, or
the modification thereof, when the essential feature of the plan involves
forcing creditors to reduce their claims against respondent. 55
Petitioner’s argument is misplaced. The "cram-down" power of the
Rehabilitation Court has long been established and even codified under
Section 23, Rule 4 of the Interim Rules, to wit: Section 23. Approval of
the Rehabilitation Plan. – The court may approve a rehabilitation plan
over the opposition of creditors, holding a majority of the total
liabilities of the debtor if, in its judgment, the rehabilitation of the
debtor is feasible and the opposition of the creditors is manifestly
unreasonable.
Such prerogative was carried over inthe Rehabilitation Rules, which
maintains that the court may approve a rehabilitation plan over the
objection of the creditors if, in its judgment, the rehabilitation of the
debtors is feasible and the opposition of the creditors is manifestly
unreasonable. The required number of creditors opposing such plan
under the Interim Rules (i.e.,those holding the majority of the total
liabilities of the debtor) was, in fact, removed. Moreover, the criteria
for manifest unreasonableness is spelled out, to wit:
SEC. 11. Approval of Rehabilitation Plan. — The court may approve a
rehabilitation plan even over the opposition of creditors of the debtor if,
in its judgment, the rehabilitation of the debtor is feasible and the
opposition of the creditors is manifestly unreasonable. The opposition
of the creditors is manifestly unreasonable if the following are present:
(a) The rehabilitation plan complies with the requirements
specified in Section 18 of Rule 3;56 (b) The rehabilitation plan
would provide the objecting class of creditors with payments
whose present value projected in the plan would be greater
than that which they would have received if the assets of the
debtor were sold by a liquidator within a six (6)month period
from the date of filing of the petition; and
(c) The rehabilitation receiver has recommended approval of
the plan.
In approving the rehabilitation plan, the court shall ensure that the
rights of the secured creditors are not impaired. The court shall also
issue the necessary orders or processes for its immediate and successful
implementation. It may impose such terms, conditions, or restrictions as
the effective implementation and monitoring thereof may reasonably
require, or for the protection and preservation of the interests of the
creditors should the plan fail.57
This legal precept is not novel and has, in fact, been reinforced in recent
decisions such as in Bank of the Philippine Islands v. Sarabia Manor
Hotel Corporation,58 where the Court elucidated the rationale behind
Section 23, Rule 4 of the Interim Rules, thus:
Among other rules that foster the foregoing policies, Section 23, Rule 4
of the Interim Rules of Procedure on Corporate Rehabilitation (Interim
Rules) states that a rehabilitation plan may be approved even over the
opposition of the creditors holding a majority of the corporation’s total
liabilities if there is a showing that rehabilitation is feasible and the
opposition of the creditors is manifestly unreasonable. Also known as
the "cram-down" clause, this provision, which is currently incorporated
in the FRIA, is necessary to curb the majority creditors’ natural
tendency to dictate their own terms and conditions to the rehabilitation,
absent due regard to the greater long-term benefit of all stakeholders.
Otherwise stated, it forces the creditors toaccept the terms and
conditions of the rehabilitation plan, preferring long-term viability over
immediate but incomplete recovery.59
as well as in Pryce Corporation v. China Banking Corporation, 60 to wit:
In any case, the Interim Rules or the rules in effect at the time the
petition for corporate rehabilitation was filed in 2004 adopts the
cramdown principle which "consists of two things: (i) approval despite
opposition and (ii) binding effect of the approved plan x x x."
First, the Interim Rules allows the rehabilitation court to "approve a
rehabilitation plan even over the opposition of creditors holding a
majority of the total liabilities of the debtor if, in its judgment, the
rehabilitation of the debtor is feasible and the opposition of the
creditors is manifestly unreasonable."
Second, it also provides that upon approval by the court, the
rehabilitation plan and its provisions "shall be binding upon the debtor
and all persons who may be affected by it, including the creditors,
whether or not such persons have participated inthe proceedings or
opposed the plan or whether or not their claims have been scheduled."
Thus, the January 17, 2005 order approving the amended rehabilitation
plan, now final and executory resulting from the resolution of BPI v.
Pryce Corporation docketed as G.R. No. 180316, binds all creditors
including respondent China Banking Corporation.61
Based on the aforequoted doctrines, petitioner’s outright censure of the
concept of the cram-down power of the rehabilitation court cannot be
countenanced. To adhere to the reasoning of petitioner would be a step
backward — a futile attempt to address an outdated set of challenges. It
is undeniable that there is a need to move to a regime of modern
restructuring, cram-down and court supervision in the matter of
corporation rehabilitation in order to address the greater interest of the
public. This is clearly manifested in Section 64 of Republic Act (R.A.)
No. 10142, otherwise known as Financial Rehabilitation and Insolvency
Act of 2010 (FRIA), the latest law on corporate rehabilitation and
insolvency, thus:
Section 64. Creditor Approval of Rehabilitation Plan. – The
rehabilitation receiver shall notify the creditors and stakeholders that
the Plan is ready for their examination. Within twenty (2Q) days from
the said notification, the rehabilitation receiver shall convene the
creditors, either as a whole or per class, for purposes of voting on the
approval of the Plan. The Plan shall be deemed rejected unless
approved by all classes of creditors w hose rights are adversely
modified or affected by the Plan. For purposes of this section,the Plan is
deemed tohave been approved by a class of creditors if members of the
said class holding more than fifty percent (50%) of the total claims of
the said class vote in favor of the Plan. The votes of the creditors shall
be based solely on the amount of their respective claims based on the
registry of claims submitted by the rehabilitation receiver pursuant to
Section 44 hereof.
Notwithstanding the rejection of the Rehabilitation Plan, the court may
confirm the Rehabilitation Plan if all of the following circumstances are
present:
(a)The Rehabilitation Plan complies with the requirements
specified in this Act;
(b) The rehabilitation receiver recommends the confirmation
of the Rehabilitation Plan;
(c) The shareholders, owners or partners of the juridical
debtor lose at least their controlling interestas a result of the
Rehabilitation Plan; and
(d) The Rehabilitation Plan would likely provide the
objecting class of creditors with compensation which has a
net present value greater than that which they would have
received if the debtor were under liquidation. 62
While the voice and participation of the creditors is crucial in the
determination of the viability of the rehabilitation plan, as they stand to
benefit or suffer in the implementation thereof, the interests of all
stakeholders is the ultimate and prime consideration. Thus, while we
recognize the predisposition of the planholders in vacillating on the
enforcement of the MRP, since the terms and conditions stated therein
have been fundamentally changed from those stated in the Original and
Amended Rehabilitation Plan, the MRP cannot be considered an
abrogation of rights to the planholders/creditors.
First. An examination of the changes proposed in the MRP would
confirm that the same is, in fact, an effective risk management tool
intended to serve both the interests of respondent and its
planholders/creditors.
It is a matter of fact and record that the Philippine Peso unexpectedly
and uncharacteristically strengthened and appreciated from Fifty-Two
and 02/100 Pesos (Php52.02) to One U.S. Dollar (USD1.00) at the time
of the approval of the ARP to Forty and (63)/100 Pesos (Php40.63) to
One U.S. Dollar (USD1.00) as of March 7, 2008, the day the
Rehabilitation Receiver filed his Manifestation with Motion to Admit
praying for the approval of the MRP.63 There is no gainsaying that
during this period, the value of the U.S. Dollar-denominated
NAPOCOR bonds — the assets covering the trust fund subject of the
traditional education plan — has already been substantially diluted
because of the stronger value of the Philippine Peso vis-à-visthe U.S.
Dollar from the time of the approval of the ARP. 64 As succinctly held
by the RTC in its Resolution dated July 28, 2008, to wit:
First, there is in tr[u]th no quibble that the Philippine Peso has behaved
in an uncharacteristic mannerby appreciating significantly vis-àvis the
United States Dollar. This fact is not disputed by any of the parties.
Further, the Court takes cognizance that at the time the Alternative
Rehabilitation Plan was approved on 27 April 2006, the exchange rate
was Php52.02/US$1.00. As of 15 July 2008, the exchange rate was
Php45.35/US$1.00, or an appreciation of atleast fourteen percent
(14%). Since the NAPOCOR Bonds are denominated in United States
dollars, it means that the NAPOCOR Bonds have losttheir original
value by at least fourteen percent (14%) since the approval of the
Alternative Rehabilitation Plan on 27 April 2006. Ergo, the continued
payment of tuition support in Philippine Pesos will lead to the certainty
of the trust fund being substantially diluted when the planholders avail
of the same upon maturity of the NAPOCOR Bonds in 2010.65
This defense mechanism is reasonable because sustaining the current
terms of the ARP would render the trust fund of no value given the high
probability of its dilution. Resultantly, the very foundation of the
rehabilitation plan, which is to minimize the loss of all stakeholders,
would be rendered in futile since the trust funds may no longer be
sufficient to meet the basic terms of the ARP.
In addition, the MRP merely establishes the planholders’ claim on a
percentage/pro rata share of the assets of the trust fund. It does not, in
any way, diminish the value of their claims or their share in the
proverbial pie. The propriety of this theory was recognized by the
Rehabilitation Court, to wit:
Second, the conversion of the Philippine Peso entitlements into United
States Dollar entitlements would not diminish the pro rata share of the
planholders. Each planholder would still receive his proportionate share
of the pie, so to speak, albeitin United States Dollars. The said
conversion would merely ensure that regardless of the performance of
the Philippine Pesos, planholders of petitioner PPI are guaranteed
payment upon maturity of the NAPOCOR Bonds, without fear that
their share will be substantially diluted. In fact, the planholders may
even benefit from this modification in the rehabilitation plan if the
United States dollars appreciates in 2010.66
As can be gleaned from the foregoing, the modification guarantees that
each planholder has an adequate return on his/her investment regardless
of changes in the surge of the Philippine economy.67
We, therefore, agree with respondent that the proposed modification
seeks to establish a balance between adequate returns to the
planholders/creditors, while ensuring that respondent shall be an on-
going concern that can eventually undergo normal operations after the
implementation of the MRP.68
Second. The recommendation of the Rehabilitation Receiver cannot
simply be unsung without violating the basic tenet of Section 14, Rule 4
of the Interim Rules, which provides the powers and functions of the
Rehabilitation Receiver, thus:
Sec. 14. Powers and Functions of the Rehabilitation Receiver. - The
Rehabilitation Receiver shall nottake over the management and control
of the debtor but shall closely oversee and monitor the operations of the
debtor during the pendency of the proceedings, and for this purpose
shall have the powers, duties and functions of a receiver under
Presidential Decree No. 902-A, as amended, and the Rules of Court.
x x x Accordingly, he shall have the following powers and functions:
xxxx
(j) To monitor the operations of the debtor and to immediately report to
the court any material adverse change in the debtor's business;
xxxx
(l) To determine and recommend to the court the best way to salvage
and protect the interests of the creditors, stockholders, and the general
public;
xxxx
(v) To recommend any modification of an approved rehabilitation plan
as he may deem appropriate;
(w) To bring to the attention of the court any material change affecting
the debtor's ability to meet the obligations under the rehabilitation plan;
x x x.69
As correctly recognized by the Rehabilitation Court in its Resolution
dated July 28, 2008, the Rehabilitation Receiver has the duty and
authority to recommend any modification of an approved rehabilitation
plan as he may deem appropriate and for the purpose of achieving the
desired targets or goals set forth therein, thus:
It is the strenuous proposition of the CARR that under the Interim
Rules, he has the duty to recommend any modification of an approved
rehabilitation plan as he may been appropriate. Ex concesso, the Court
recognizes that under Rule 4, Section 26 of the Interim Rules, an
approved rehabilitation plan may be modified if, in the judgment of the
Court, such modification is necessary to achieve the desired targets or
goals set forth therein.70
The Rehabilitation Rules allow the modification and alteration of the
rehabilitation plan precisely because ofconditions that may supervene
or affect the implementation thereof subsequent to its approval. In the
case at bar, to force through with the tuition support would surely
jeopardize the implementation of the ARP in the long-run since it
would not be feasible to keep on liquidating the NAPOCOR Bonds.
Third. We confirm that there is a substantial likelihood for respondent
to be successfully rehabilitated considering that its business remains
viable and is operating on a going-concern premise.
A careful reading of the records will show that respondent’s liquidity
problems were mostly caused by the deregulation of the education
sector, which triggered sharp increases in tuition fees of schools and
universities beyond what was projected by pre-need companies dealing
with traditional educational plans. Surely, we are mindful of the
financial distress in 1997, which has destroyed various institutions not
only in the Philippines but across Asia, further compromising the pre-
need industry’s ability to meet its obligations under the PEPTrads. The
surrounding circumstances of the time was peculiar and may no longer
be pertinent at present.
Thus, pointing fingers to respondent at this point for its alleged
mismanagement of assets would be irrational, and even counter-
productive, because the feasibility of respondent’s rehabilitation has
already been duly established by the Rehabilitation Court. A subsequent
allegation to the contrary has no leg to stand on. Conversely, by virtue
of the corporate rehabilitation, respondentwill have enough breathing
room to improve its operations in order to sustain its business
operations and at the same time, settle all its outstanding obligations in
a just and fair manner, in accordance with the MRP. In this regard, We
find reason in respondent’s contention that the MRP will not only be
beneficial to itself, but also to its planholders and creditors as well.
Anent petitioner’s argument that the approval of the MRP is offensive
to the non-impairment clause of the Constitution, the same fails to
persuade.
Petitioner’s interpretation of Section 37 of the Rehabilitation Rules vis-
à-vis the means within which a rehabilitation plan may be pursued, is
misplaced. As held in a plethora of cases, a rehabilitation plan may
involve a reduction of liability. On this score, the principle enunciated
in Pacific Wide Realty and Development Corporation v. Puerto Azul
Land, Inc.,71 is instructive, thus –
The restructuring of the debts of PALI is part and parcel of its
rehabilitation. Moreover, per findings of fact of the RTC and as
affirmed by the CA, the restructuring of the debts of PALI would not be
prejudicial to the interest of PWRDC as a secured creditor.
Enlightening is the observation of the CA in this regard, viz.:
There is nothing unreasonable or onerous about the 50% reduction of
the principal amount when, as found by the court a quo, a Special
Purpose Vehicle (SPV) acquired the credits of PALI from its creditors
at deep discounts of as much as 85%. Meaning, PALI’s creditors
accepted only 15% of their credit’s value. Stated otherwise, if PALI’s
creditors are in a position to accept 15% of their credit’s value, with
more reason that they should be able to accept 50% thereof as full
settlement by their debtor. x x x.72
Here, petitioner’s claim is not cancelled or obliterated all
together.1awp++i1 Contrary to her view, petitioner’s claim isin fact
restructured in a way that would allow respondent to revive its financial
health while offering the optimal returns to its clients.
It is undisputable that the corporation is in the process of corporate
rehabilitation precisely because it is undergoing financial distress.
Petitioner cannot expect to receive the contracted amount owed by
respondent because a modification of the terms and conditions of the
contract is certainly foreseeable and reasonable in a corporate
rehabilitation case, as correctly held by the Rehabilitation Court, to wit:
x x x It is an established principle in rehabilitation proceedings that
rehabilitation courts have the cram down power to approve
rehabilitation plans even over the objections of creditors, which cram
down power shall nonetheless bind the latter. In fact, the CARR is
given the authority to "notify counterparties and the court asto contracts
that the debtor has decided to continue to perform or breach." A
fortiori, the mere impairment of contracts is not a justification to
question the modification of a rehabilitation plan because the very
nature of rehabilitation proceedings sometimes necessitates such a
course of action.73
Indeed, the rights of petitioner arising from the contracts it entered with
respondent are not in any way weakened by the approval of the ARP,
and then the MRP, despiteany reduction in the amount of the obligation
due to petitioner. As enunciated in Pacific Wide, 74 the reduction of the
debt of the debtor is one of the essential features of a rehabilitation
case, and is not considered prejudicial to the interest of a secured
creditor, thus:
We find nothing onerous in the terms of PALI's rehabilitation plan. The
Interim Rules on Corporate Rehabilitation provides for means of
execution of the rehabilitation plan, which may include, among others,
the conversion of the debts or any portion thereof to equity,
restructuring of the debts, dacion en pago, or sale of assets or of the
controlling interest.
The restructuring of the debts of PALI is part and parcel of its
rehabilitation. Moreover, per findings offact of the RTC and as affirmed
by the CA, the restructuring of the debts of PALI would notbe
prejudicial to the interest of PWRDC as a secured creditor.
Enlightening is the observation of the CA in this regard, viz.:
There is nothing unreasonable or onerous about the 50% reduction of
the principal amount when, as found by the court a quo, a Special
Purpose Vehicle (SPV) acquired the credits of PALI from its creditors
at deep discounts of as much as 85%. Meaning, PALI's creditors
accepted only 15% of their credit's value. Stated otherwise, if PALI's
creditors are in a position to accept 15% of their credit's value, with
more reason that they should be able to accept 50% thereof as full
settlement by their debtor. x x x.
We also find no merit in PWRDC’s contention that there is a violation
of the impairment clause. Section 10, Article III of the Constitution
mandates that no law impairing the obligations of contract shall be
passed. This case does not involve a law or an executive issuance
declaring the modification of the contract among debtor PALI, its
creditors and its accommodation mortgagors. Thus, the non-impairment
clause may not be invoked. Furthermore, as held in Oposa v. Factoran,
Jr.even assuming that the same may be invoked, the non-impairment
clause must yield to the police power of the State. Property rights and
contractual rights are not absolute. The constitutional guaranty of
nonimpairment of obligations is limited by the exercise of the police
power of the State for the common good of the general public.
Successful rehabilitation of a distressed corporation will benefit its
debtors, creditors, employees, and the economy in general.1âwphi1 The
court may approve a rehabilitation plan evenover the opposition of
creditors holding a majority of the total liabilities of the debtor if, in its
judgment, the rehabilitation of the debtor isfeasible and the opposition
of the creditors is manifestly unreasonable. The rehabilitation plan,
once approved, is binding upon the debtor and all persons who may be
affected by it, including the creditors, whether or not such persons have
participated in the proceedings or have opposed the plan or whether or
not their claims have been scheduled.75
Accordingly, the prayer for the issuance of a TRO and/or a writ of
preliminary injunction must necessarily fail.
A final note. The evolving times of corporate rehabilitation, owing to
the rise and fall of economic activity over time, calls on the Judiciary to
take an active role in filling in the gaps of the law pertaining to this
issue as the inimitable factual milieu of each case would require a
different approach in the application of prevailing laws, rules and
regulations on corporate rehabilitation. In the case at bar, we hold that
the modification of the rehabilitation plan is a risk management tool to
address the volatility of the exchange rate of the Philippine Peso vis-à-
vis the U.S. Dollars, with the goal of ensuring that all planholders or
creditors receive adequate returns regardless of the tides of the
Philippine market by making payment in U.S. Dollars. This plan would
prevent the trust fund of respondent from being diluted due to the
appreciation of the Philippine Peso and assure that all planholders and
creditors shall receive payment upon maturity of the NAPOCOR bonds
in the most equitable manner.
WHEREFORE, the petition is DENIED. The February 26, 2010
Decision and July 21, 2010 Resolution of the Court of Appeals in CA-
G.R. SP No. 105237 are hereby AFFIRMED.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice
WE CONCUR:
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson
MARTIN S. VILLARAMA, JOSE CATRAL
JR. MENDOZA*
Associate Justice Associate Justice
BIENVENIDO L. REYES
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of
the Court's Division.
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairperson's Attestation, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Court's Division.
MARIA LOURDES P.A. SERENO
Chief Justice

Similarly, the reasoning laid down by the CA for the application of the
cram-down power of the Rehabilitation Court is enlightening, thus:

This Court likewise rejects petitioner Aquino’s claims that the Modified
Rehabilitation Plan constitutes an impairment of contracts. The non-
impairment clause under the Constitution applies only to the exercise of
legislative power. It does not apply to the Rehabilitation Court which SECOND DIVISION
exercises judicial power over the rehabilitation proceedings. As held by
the Supreme Court in Bank of the Philippine Islands vs. Securities and July 8, 2015
Exchange Commission, [G.R. No. 164641, December 20, 2007:
G.R. No. 198436
"The Court reiterates that the SEC’s approval of the Rehabilitation Plan
did not impair BPI’s right to contract. As correctly contended by private
respondents, the nonimpairment clause is a limit on the exercise of PIONEER INSURANCE SURETY CORPORATION, Petitioner, 
legislative power and not of judicial or quasi-judicial power. The SEC, vs.
through the hearing panel that heard the petition for approval of the MORNING STAR TRAVEL & TOURS, INC., ESTELITA CO
Rehabilitation Plan, was acting as a quasi judicial body and thus, its WONG, BENNY H. WONG, ARSENIO CHUA, SONNY CHUA,
order approving the plan cannot constitute an impairment of the right AND WONG YAN TAK, Respondents.
and the freedom to contract."76
DECISION
In view of all of the foregoing, We find no basis to overturn the
findings of the CA with respect to the substantive issues in this case. LEONEN, J.:
As a general rule, a corporation has a separate and distinct personality
from those who represent it.1 Its officers are solidarily liable only when
exceptional circumstances exist, such as cases enumerated in Section 31
of the Corporation Code.2The liability of the officers must be proven by
evidence sufficient to overcome the burden of proof borne by the
plaintiff.
This case originated from a Complaint3 for Collection of Sum of Money
and Damages filed by Pioneer Insurance & Surety Corporation
(Pioneer) against Morning Star Travel & Tours, Inc. (Morning Star) for
the amounts Pioneer paid the International Air Transport Association
under its credit insurance policy. The amounts of P100,479,171.59 and
US$457,834.14 represent Morning Star’s overdue remittances to the
International Air Transport Association.4
Pioneer filed this Petition for Review5 assailing the Court of Appeals’
February 28, 2011 Decision6 "only insofar as it absolved the individual
respondents of their joint and solidary liability to petitioner[,]" 7 and
August 31, 2011 Resolution8 denying reconsideration.
Morning Star is a travel and tours agency with Benny Wong, Estelita
Wong, Arsenio Chua, Sonny Chua, and Wong Yan Tak as shareholders
and members of the board of directors.9
International Air Transport Association is a Canadian corporation
licensed to do business in the Philippines "to promote safe, regular and
economical air transport for all people, among others." 10
International Air Transport Association appointed Morning Star as an
accredited travel agent.11 Morning Star "avail[ed] of the privilege of
getting on credit . . . air transport tickets from various airline companies
[to be sold] to passengers at prices fixed by the airline companies[.]" 12
Morning Star and International Air Transport Association entered a
Passenger Sales Agency Agreement such that Morning Star must report
all air transport ticket sales to International Air Transport Association
and account all payments received through the centralized system
called Billing and Settlement Plan.13 Morning Star only holds in trust all
monies collected as these belong to the airline companies. 14
International Air Transport Association obtained a Credit Insurance
Policy from Pioneer to assure itself of payments by accredited travel
agents for ticket sales and monies due to the airline companies under
the Billing and Settlement Plan.15 The policy was for the period from
November 1, 2001 to December 31, 2002, renewed for the period from
January 1, 2003 to December 31, 2003.16
The policy was made known to the accredited travel agents. Morning
Star, through its President, Benny Wong, was among those that
declared itself liable to indemnify Pioneer for any and all claims under
the policy. He executed a registration form under the Credit Insurance
Program for BSP-Philippines Agents.17
Morning Star had an accrued billing of P49,051,641.80 and
US$325,865.35 for the period from December 16, 2002 to December
31, 2002. It failed to remit these amounts through the Billing and
Settlement Plan, prompting the International Air Transport Association
to send a letter dated January 17, 2003 advising on the overdue
remittance.18
International Air Transport Association again declared Morning Star in
default by a letter dated January 20, 2003 for its overdue account
covering the period from January 1, 2003 to January 20, 2003.19
Pursuant to the credit insurance policies, International Air Transport
Association demanded from Pioneer the sums of P109,728,051.00 and
US$457,834.14 representing Morning Star’s overdue account as of
April 30, 2003. Pioneer investigated, ascertained, and validated the
claims, then paid International Air Transport Association the amounts
of P100,479,171.59 and US$457,834.14.20
Consequently, Pioneer demanded these amounts from Morning Star
through a letter dated September 23, 2003.21International Air Transport
Association executed in Pioneer’s favor a Release of Claim and
Subrogation Receipt on December 23, 2003.22
On November 10, 2005, Pioneer filed a Complaint for Collection of
Sum of Money and Damages against Morning Star and its shareholders
and directors.23
Morning Star, Benny Wong, and Estelita Wong were served with
summons and a copy of the Complaint on November 22, 2005, while
Arsenio Chua, Sonny Chua, and Wong Yan Tak were unserved.24
The trial court granted Pioneer’s Motion to Declare Respondents in
Default for failure to file an Answer within the period. 25 Pioneer
presented its evidence ex-parte.26
Meanwhile, Pioneer filed an Ex-Parte Motion for Issuance of Alias
Summons since Morning Star was previously served through
substituted service. The trial court granted the Motion, and alias
summons was served on February 5, 2007. Upon motion, Morning Star
was declared in default for failure to file an Answer within the period. 27
On June 28, 2007, Morning Star filed a Motion for Leave of Court to
File Attached Answer explaining that it only received a copy of the
Complaint on February 5, 2007.28 Its counsel also alleged that he was
retained only on June 22, 2007.29 The trial court denied the Motion on
July 23, 2007, and also denied reconsideration.30
The Regional Trial Court in its Decision31 dated November 9, 2007
ruled in favor of Pioneer and ordered respondents to jointly and
severally pay Pioneer:
WHEREFORE PREMISES CONSIDERED, judgment is hereby
rendered in favor of the plaintiff as against the defendants ordering the
latter to jointly and severally pay the following amount:
1. One Hundred Million Four Hundred Seventy Nine
Thousand One Hundred Seventy One Pesos and Fifty Nine
(Php100,479,171.59) and Four Hundred Fifty Seven
Thousand Eight Hundred Thirty Four Dollars and 14/100
(US$457,834.14), with interest at 12% per annum from
September 23, 2003 until the sum is fully paid;
2. Php100,000.00 as attorney’s fees;
3. Php100,000.00 as exemplary damages;
4. Php200,000.00 as litigation expenses[;]
5. costs of suit.
SO ORDERED.32
The Court of Appeals, in its Decision dated February 28, 2011,
affirmed the trial court with modification in that only Morning Star was
liable to pay petitioner:
WHEREFORE, premises considered, the instant Appeal is DENIED.
Accordingly, the assailed 9 November 2007 Decision of the Regional
Trial Court of Makati City, Branch 143 in Civil Case No. 05-993
is AFFIRMED with MODIFICATION. Insofar as the trial court
ordered Defendants-Appellants Estelita Co Wong, Benny H. Wong,
Arsenio Chua, Sonny Chua and Wong Yan Tak to jointly and severally
pay the amounts awarded to Plaintiff-Appellee, the same is deleted.
Only Morning Star is held personally liable for the payment thereof.
Further, exemplary damages and attorney’s fees are likewise deleted for
lack of basis.
SO ORDERED.33
The Court of Appeals denied Pioneer’s Motion for Partial
Reconsideration.34 Thus, Pioneer filed this Petition.
Pioneer submits that its Petition falls under the exceptions to the
general rule that petitions for review may raise only questions of
law.35 Pioneer raises conflicting findings and conclusions by the lower
courts regarding solidary liability, and misapprehension of facts by the
Court of Appeals.36
Pioneer argues that "the individual respondents were, at the very least,
grossly negligent in running the affairs of respondent Morning Star by
knowingly allowing it to amass huge debts to [International Air
Transport Association] despite its financial distress, thus, giving
sufficient ground for the court to pierce the corporate veil and hold said
individual respondents personally liable."37 It cites Section 31 of the
Corporation Code on the liability of directors "guilty of gross
negligence or bad faith in directing the affairs of the corporation[.]" 38
Pioneer also cites jurisprudence39 on the requisites for the doctrine of
piercing the corporate veil to apply.40 It submits that all requisites are
present, thus, the individual respondents should be held solidarily liable
with Morning Star.41 It cites at length the testimony of its witness Atty.
Vincenzo Nonato M. Taggueg (Atty. Taggueg)42 that based on Morning
Star’s General Information Sheet and financial statements, Morning
Star "has been accumulating losses as early as 1998 continuing to 1999
and 2000 resulting to a deficit of Php26,168,1768.00 [sic] as of
December 31, 2000[.]"43
Pioneer contends that the abnormally large indebtedness to
International Air Transport Association was incurred in fraud and bad
faith, with Morning Star having no intention to pay its debt. 44 It
cites Oria v. McMicking45 on the badges of fraud.46 Pioneer then
enumerates "the unmistakable badges of fraud and deceit committed by
individual respondents"47 such as the fact that Morning Star had no
assets,48 but the two corporations also "controlled and managed by the
individual respondents were doing relatively well [at] the time . . .
Morning Star was incurring huge losses[.]"49 Moreover, a new travel
agency called Morning Star Tour Planners, Inc. now operates at the
Morning Star’s former principal place of business in Pedro Gil, Manila,
with the children of individual respondents as its stockholders,
directors, and officers.50
Respondents counter with the general rule clothing corporations with
personality separate and distinct from their officers and
stockholders.51 They submit that "[m]ere sweeping allegations that
officers acted in bad faith because it incurred obligations it cannot pay
will not hold any water."52 Respondents argue that Pioneer failed to
prove bad faith, relying only on Atty. Taggueg’s testimony, but "Mr.
Taggueg admitted that his knowledge about the defendant Morning Star
was merely based on his assumptions and his examination of the
[Securities and Exchange Commission] documents."53
The issues for resolution are:
First, whether this case involves an exception to the general rule that
petitions for review are limited to questions of law; and
Second, whether the doctrine of piercing the corporate veil applies to
hold the individual respondents solidarily liable with respondent
Morning Star Travel and Tours, Inc. to pay the award in favor of
petitioner Pioneer Insurance & Surety Corporation.
I such directors or trustees shall be liable jointly and severally for all
Only questions of law may be raised in a petition for review. 54 Factual
findings of the Court of Appeals are generally "final and conclusive,
and cannot be reviewed on appeal by [this court], provided they are
borne out by the record or based on substantial evidence." 55
Issues such as whether the separate and distinct personality of a
corporation was used for fraudulent ends, or whether the evidence
warrants a piercing of the corporate veil, involve questions of fact. 56
Jurisprudence established exceptions from the general rule against a
factual review by this court. These exceptions include cases when the
judgment appears to be based on a "patent misappreciation of facts." 57
Petitioner invokes this exception in alleging that "the conflicting
findings and conclusions between the Court of Appeals and the trial
court insofar as the solidary liability of respondents to pay petitioner
and the misapprehensions of facts by the Court of Appeals constrains
petitioner to raise both questions of fact and law in the Petition." 58
In ruling against the solidary liability of the individual respondents with
respondent Morning Star, the Court of Appeals discussed that "the trial
court merely stated in the dispositive portion thereof that Defendants-
Appellants are ordered to pay Plaintiff-Appellee jointly and severally
the judgment award without discussing in the body of the decision the
reason for such conclusion."59
The Court of Appeals then enumerated the exceptional circumstances
warranting solidary liabilities by corporate agents based on
jurisprudence, and found none to be present in this case. 60
We affirm the Court of Appeals.
II
The law vests corporations with a separate and distinct personality from
those that represent these corporations.61
The corporate legal structure draws its "economic superiority" 62 from
key features such as a separate corporate personality. Unlike other
business associations such as partnerships, the corporate framework
encourages investment by allowing even small capital contributors to
be part of a big business endeavor made possible by the aggregation of
their capital funds.63 The consequent limited liability feature, since
corporate assets will answer for corporate debts, also proves attractive
for investors. However, this legal structure should not be abused.
A separate corporate personality shields corporate officers acting in
good faith and within their scope of authority from personal liability
except for situations enumerated by law and jurisprudence, 64 thus:
Personal liability of a corporate director, trustee or officer along
(although not necessarily) with the corporation may so validly attach, as
a rule, only when —
‘1. He assents (a) to a patently unlawful act of the
corporation, or (b) for bad faith or gross negligence in
directing its affairs, or (c) for conflict of interest, resulting in
damages to the corporation, its stockholders or other persons;
‘2. He consents to the issuance of watered stocks or who,
having knowledge thereof, does not forthwith file with the
corporate secretary his written objection thereto;
‘3. He agrees to hold himself personally and solidarily liable
with the corporation; or
‘4. He is made, by a specific provision of law, to personally
answer for his corporate action.’65
The first exception comes from Section 31 of the Corporation Code:
SECTION 31. Liability of Directors, Trustees or Officers. —
Directors or trustees who wilfully and knowingly vote for or assent to
patently unlawful acts of the corporation or who are guilty of gross
negligence or bad faith in directing the affairs of the corporation or
acquire any personal or pecuniary interest in conflict with their duty as
damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons. (Emphasis supplied)
Petitioner imputes gross negligence and bad faith on the part of the
individual respondents for incurring the huge indebtedness to
International Air Transport Association.66
Bad faith "imports a dishonest purpose or some moral obliquity and
conscious doing of a wrong, not simply bad judgment or
negligence."67 "[I]t means breach of a known duty through some motive
or interest or ill will; it partakes of the nature of fraud." 68
The trial court gave weight to its finding that respondent Morning Star
still availed itself of loans and/or obligations with International Air
Transport Association despite its financial standing of operating at a
loss:
Based on the plaintiff’s examination of the financial statements
submitted by the defendant Morning Star with the Securities and
Exchange Commission (SEC) for the years 2000 and 2001 with
comparative figures for the years ending 1998, 1999 and 2000, herein
defendant corporation has been accumulating losses as early as 1998
continuing to 1999 and 2000 resulting to a deficit of Php26, 168,176.80
as of December 31, 2000. It was also shown that for the prior years of
1998 and 1999, defendant Morning Star incurred a deficit of
Php3,910,763.00 as of December 31, 1998 and Php2,841,626.00 as of
December 31, 1999 and in the Balance Sheet, it indicated therein the
defendants’ total assets of Php150,579,421.00 while the total liabilities
amounted to Php160,222,966.00, thereby making the defendant
Morning Star insolvent. Despite the fact that defendant Morning Star
was already incurring losses as early as 1998 up to the year 2000, the
latter still contracted loans and/or obligations with IATA sometime in
2002 and which indebtedness ballooned to the huge amount of
Php109,728,051.00 andUS$496,403.21 as of April 30, 2003, which
obviously it could not pay considering its financial standing.
Further investigation by the plaintiff shows that it could not find any
assets or properties in the name of defendant Morning Star because
even the land and the building where it held office was registered in the
name of "Morning Star Management Ventures Corporation", as
evidenced by the certified true copies of the transfer certificates of title
(TCT) nos. 192243 and 192244 in the name of Morning Star
Management Ventures Corporation and unlike the defendant Morning
Star, which has practically the same officers and members of the Board,
has only an asset of Php125,392,960.00 and liabilities of
Php4,306,702[.]00 and an income deficit of Php26,922,598.00 as of
December 31, 2001. Similarly, the Pic [‘]N Pac Mart, Inc., which has
the same set of officers, said corporation has shown a total assets of
Php5,423,201.30 and liabilities/stockholders equity of Php5,423,201.30
but with a retained earnings of Php194,412[.]74 as of December 31,
1999. Plaintiff contends that in such a case, defendant Morning Star
has used the separate and distinct corporate personality accorded to it
under the Corporation Code to commit said fraudulent transaction of
incurring corporate debts and allow the herein individual defendants
to escape personal liability and placing the assets beyond the reach of
the creditors.69 (Emphasis supplied, citations omitted)
On the other hand, the Court of Appeals ruled that the general rule on
separate corporate personality and against personal liability by
corporate officers applies since petitioner failed to prove bad faith
amounting to fraud by the corporate officers:
The mere fact that Morning Star has been incurring huge losses and that
it has no assets at the time it contracted large financial obligations to
IATA, cannot be considered that its officers, Defendants-Appellants
Estelita Co Wong, Benny H. Wong, Arsenio Chua, Sonny Chua and
Wong Yan Tak, acted in bad faith or such circumstance would amount
to fraud, warranting personal and solidary liability of its corporate
officers. The same is also true with the fact that Morning Star
Management Ventures Corporation and Pic ‘N Pac Mart, Inc.,
corporations having the same set of officers as Morning Star, were
doing relatively well during the time that the former incurred huge
losses. Thus, only Morning Star should be held personally liable to
Plaintiff- Appellee, and not its corporate officers. 70
Piercing the corporate veil in order to hold corporate officers personally
liable for the corporation’s debts requires that "the bad faith or
wrongdoing of the director must be established clearly and
convincingly [as] [b]ad faith is never presumed."71
III
Oria v. McMicking72 enumerates several badges of fraud. Petitioner
argues the existence of the fourth to sixth badges:73
1. The fact that the consideration of the conveyance is
fictitious or is inadequate.
2. A transfer made by a debtor after suit has been begun and
while it is pending against him.
3. A sale upon credit by an insolvent debtor.
4. Evidence of large indebtedness or complete insolvency.
5. The transfer of all or nearly all of his property by a
debtor, especially when he is insolvent or greatly
embarrassed financially.
6. The fact that the transfer is made between father and
son, when there are present other of the above
circumstances.
7. The failure of the vendee to take exclusive possession of all
the property.74 (Emphasis supplied)
Petitioner listed the following circumstances as constituting badges of
fraud by the individual respondents:
Attention is drawn to the following badges of fraud by individual
respondents to use the corporate fiction of respondent Morning Star as a
veil or cloak to insulate themselves from any liability to pay its
indebtedness to [sic], to wit:
a. As members of the Board of Directors and at the same
time, officers of respondent Morning Star, individual
respondents Estelita Co Wong (President and Member of the
Board), Benny H. Wong (Chairman of the Board), Arsenio
Chua (Member of the Board), Sonny Chua (Secretary and
Member of the Board) and Wong Yan Tak (Treasurer and
Member of the Board) undoubtedly exercised complete
control and direction of the financial management and
business operations of respondent Morning Star;
b. Similarly, the individual respondents are likewise in direct
control of the management of two other corporations,
Morning Star Management Ventures Corp. and Pic ‘N Pac
Mart[,] Inc., being the shareholders, members of the Board
and officers of the said corporations, as evidenced by the
General Information Sheets (GIS) of the said corporations
filed with the Securities and Exchange Commission (Exhibits
"O" to "O-4" and "P" to "P-3" of petitioner’s Formal Offer of
Evidence dated August 15, 2007);
c. Respondent Morning Star has no assets or property in its
name that may be levied upon for attachment and execution
to secure and to satisfy any judgment debt, as in fact the land
and building where its offices can be found and situated at J.
Bocobo Street cor. Pedro Gil Street, Ermita Manila is not
even registered in its name but in the name of another
corporation "Morning Star Management Ventures
Corporation" which is similarly owned and controlled by the
individual respondents (Exhibits "S" to "S-2" and "T" to "T-
2" of petitioner’s Formal Offer of Evidence dated August 15,
2007);
d. As early as 1998, respondent Morning Star had already
been incurring huge losses which clearly show the inability to
pay its obligations to IATA but the individual respondents
contracted its huge financial obligations from IATA knowing
fully well that respondent Morning Star will be unable to pay
such obligations;
e. Strangely, on the other hand, Pic ‘N Pac Mart, Inc. and
Morning Star Management Ventures Corp., the other two (2)
corporations similarly controlled and managed by the
individual respondents, were doing relatively well during the
time that respondent Morning Star was incurring huge losses
(Exhibits "U" to "U-7" and "V" to "V-9" of petitioner’s
Formal Offer of Evidence dated August 15, 2007);
f. Individual respondents allowed the indebtedness of
respondent Morning Star to balloon to a staggering amount of
Php100,479,171.59 and US$457,834.14[.]75 (Citations
omitted)
This court finds that petitioner was not able to clearly and convincingly
establish bad faith by the individual respondents, nor substantiate the
alleged badges of fraud.1avvphi1
IV
First, petitioner failed to substantiate the fourth badge of fraud on
"[e]vidence of large indebtedness or complete insolvency." 76
In 1993, International Air Transport Association appointed respondent
Morning Star as an accredited travel agent with the privilege of getting
air tickets on credit, and they entered a Passenger Sales Agency
Agreement.77 None of the parties made allegations on the financial
status or business standing of respondent Morning Star during the first
five years from its accreditation in 1993.
Petitioner relies on Atty. Taggueg’s testimony regarding respondent
Morning Star’s financial statements with the Securities and Exchange
Commission.
Atty. Taggueg testified on the comparative figures for the years ended
1998, 1999, and 2000 and how the company was "accumulating losses
as early as 1998 continuing to 1999 and 2000 resulting to a deficit of
Php26,168,1768.00 [sic] as of December 31, 2000 . . . deficit of
Php3,910,763.00 as of December 31, 1998 and another deficit of
Php2,841,626.00 as of December 31, 1999[.]"78 He testified that as of
December 31, 2000, respondent Morning Star had total assets of
Php150,579,421.00 and total liabilities of Php160,222,966.00.79
Atty. Taggueg then testified that despite this insolvency, "Morning Star
Travel still contracted loans and/or obligations from the IATA
sometime in December 2002 which indebtedness with IATA ballooned
to the huge amount of Php109,728,051.00 and US$496,403.21 as of
April 30, 2003[.]"80
Petitioner did not present Securities and Exchange Commission
documents on respondent Morning Star’s total assets as of December
2002.1a\^/phi1 It did not present respondent Morning Star’s financial
statements for December 2002, the year it incurred obligations from
International Air Transport Association.81
The financial statements for years 1998 to 1999 and 1999 to 2000
testified on by Atty. Taggueg are not representative of the financial
status of respondent Morning Star’s business. Year 2000 reflected total
assets of P150,579,421.00 and total liabilities of P160,222,966.00.82 On
the other hand, year 1999 showed total assets of P134,361,353.00 and
total liabilities of P120,678,345.00.83 Businesses may earn profits in
some years and operate at a loss in others as a result of changing
economic conditions. These two financial statements do not show that
respondent Morning Star was operating at a loss in 2002. Deficits in the
years 1998 to 2000 do not necessarily mean deficits in 2002. It is
unclear if these figures included previous obligations to International
Air Transport Association, or whether some or all of such obligations
were paid in subsequent years as an indication of respondent Morning
Star’s credit history.
In any event, it is in the nature of businesses to take risks when making
business judgments, and this includes taking loans and incurring
liabilities.
Atty. Taggueg’s association with respondent Morning Star, or this case,
is also unclear. Respondents submit in their memorandum that "[i]n his
testimony[,] Mr. Taggueg admitted that his knowledge about . . .
Morning Star was merely based on his assumptions and his examination
of the [Securities and Exchange Commission] documents." 84
Petitioner’s reliance on Atty. Taggueg’s testimony on
respondentMorning Star’s financial statements for previous years fails
to clearly and convincingly establish bad faith by the individual
respondents.
V Finally, pursuant to this court's pronouncement in Nacar v. Gallery
Second, petitioner failed to substantiate the fifth badge of fraud on the
"transfer of all or nearly all of his property by a debtor, especially when
he is insolvent or greatly embarrassed financially." 85
Mere allegations that Morning Star Management Ventures Corporation
and Pic ‘N Pac Mart, Inc. "were doing relatively well during the time
that respondent Morning Star was incurring huge losses"86 do not
establish bad faith or fraud by the individual respondents. Such
allegations alone do not prove that the individual respondents were
transferring respondent Morning Star’s properties in fraud of its
creditors.
Neither does the allegation that Morning Star Management Ventures
Corporation has title over the land and building where the offices can
be found establish bad faith or fraud. Petitioner did not show that this
title was originally in respondent Morning Star’s name and was later
transferred to respondent Morning Star.
This court has held that the "existence of interlocking directors,
corporate officers and shareholders is not enough justification to pierce
the veil of corporate fiction in the absence of fraud or other public
policy considerations."87
VI
Third, petitioner also failed to substantiate the sixth badge of fraud that
"the transfer is made between father and son, when there are present
other of the above circumstances."88
Petitioner submits that:
It would be the height of injustice to allow individual respondents to get
away with their gross negligence to the prejudice of petitioner,
especially since there is now another travel agency in the name of
Morning Star Tour Planners, Inc. operating at the respondent Morning
Star’s former principal place of business at 1600 J. Bocobo St. corner
Pedro Gil Malate, Manila. . . .
....
Curiously, among the stockholders, directors and officers of Morning
Star Tour Planners, Inc., are the following: Belinda Wong, Billy Wong,
Barbara C. Wong and Benny C. Wong, Jr., who all have the same
address as individual respondents Estelita Co Wong and Benny H.
Wong.
Given, these vital pieces of information, it is at once indubitable that
respondents have established another travel agency in the name of their
children in order to escape their solidary liability to petitioner!
89
 (Citation omitted)
This court has held that "compliance with the recognized modes of
acquisition of jurisdiction cannot be dispensed with even in piercing the
veil of corporate fiction[.]"90 Morning Star Tour Planners, Inc. is not a
party in this case. It would offend due process rights if what petitioner
ultimately seeks in its allegation is to hold Morning Star Tour Planners,
Inc. responsible for respondent Morning Star’s liability.
In any event, petitioner failed to plead and prove the circumstances that
would pass the following control test for the operation of the alter ego
doctrine:
(1) Control, not mere majority or complete stock control, but
complete domination, not only of finances but of policy and
business practice in respect to the transaction attacked so that
the corporate entity as to this transaction had at the time no
separate mind, will or existence of its own;
(2) Such control must have been used by the defendant to
commit fraud or wrong, to perpetuate the violation of a
statutory or other positive legal duty, or dishonest and unjust
act in contravention of plaintiff’s legal right; and
(3) The aforesaid control and breach of duty must [have]
proximately caused the injury or unjust loss complained of. 91
The records do not show that the individual respondents controlled
Morning Star Tour Planners, Inc. and that such control was used to
commit fraud against petitioner. Neither does this suspicion support
petitioner’s position that the individual respondents were in bad faith or
gross negligence in directing the affairs of respondent Morning Star.
Frames,92 the interest rate should be 6% per annum on the amount
owing to petitioner representing respondent Morning Star's unpaid air
transport tickets availed on credit.
WHEREFORE, the Petition is DENIED. The Court of Appeals
Decision is AFFIRMED with MODIFICATION in that legal interest
is 6% per annum from September 23, 2003 until fully paid.
SO ORDERED.
MARVIC M.V.F. LEONEN
Associate Justice
FIRST DIVISION
April 19, 2017
G.R. No. 201530
ASIATRUST DEVELOPMENT BANK, INC., Petitioners, 
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondents
DECISION
DEL CASTILLO, J.:
An application for tax abatement is deemed approved only upon the
issuance of a termination letter by the Bureau of Internal Revenue
(BIR).
trust, and fringe benefits tax assessments for the fiscal years ended June
30, 1997 & 1998 are hereby ordered CANCELLED and
WITHDRAWN. Moreover, [Asiatrust's] deficiency documentary stamp
tax - IBCL assessment for the fiscal year ended June 30, 1997 is
ordered CANCELLED and WITHDRAWN.

These consolidated Petitions for Review on Certiorari1 under Rule 45
of the Rules of Court assail the November 16, 2011 Decision2 and the
April 16, 2016 Resolution3 of the Court of Tax Appeals (CTA) En Banc
in CTA EB Case Nos. 614 and 677.
Factual Antecedents
However, [Asiatrust's] deficiency documentary stamp tax - Special
Savings Account assessments for the fiscal years ended June 30, 1997
& 1998, and deficiency documentary sta..111p tax - IBCL and
deficiency final withholding tax - trust assessments for the fiscal year
ended June 30, 1998, in the aggregate amount of ?142,777,785.91 are
hereby i\FFIRMED. The said an1ount is broken down as follows:

On separate dates in February 2000, Asiatrust Development Bank, Inc. Fiscal Year 1997
(Asiatrust) received from the Commissioner of Internal Revenue (CIR)
three Formal Letters of Demand (FLD) with Assessment Notices 4 for
deficiency internal revenue taxes in the amounts of P131,909,161.85, Documentary Stamp Tax - Industry
₱39,163,539.57
P83,012,265.78, and Issue

₱l44,012,918.42 for fiscal years ending June 30, 1996, 1997, and 1998, Fiscal Year 1998
respectively.5

Final Withholding Tax – Trust 10,183,367.80

On March 17, 2000, Asiatrust timely protested the assessment notices. 6

Due to the inaction of the CIR on the protest, Asiatrust filed before the Documentary Stamp Tax - Industry
93,430,878.54
CTA a Petition for Review7 docketed as CTA Case No. 6209 praying Issue
for the cancellation of the tax assessments for deficiency income tax,
documentary stamp tax (DST) - regular, DST - industry issue, final
withholding tax, expanded withholding tax, and fringe benefits tax
issued against it by the CIR.
Total Deficiency Tax
₱142,777,785.91
On December 28, 2001, the CIR issued against Asiatrust new ===============
Assessment Notices for deficiency taxes in the amounts of ₱l
12,816,258.73, ₱53,314,512.72, and ₱133,013,458.73, covering the
fiscal years ending June 30, 1996, 1997, and 1998, respectively. 8
SO ORDERED. 16

On the same day, Asiatrust partially paid said deficiency tax

assessments thus leaving the following balances: Asiatrust filed a Motion for Reconsideration 17 attaching photocopies of
its Application for Abatement Program, BIR Payment Form, BIR Tax
Payment Deposit Slip, Improved Voluntary Assessment Program
1awp++i1
Fiscal Year 1996
On April 19, 2005, the CIR approved Asiatrust's Offer of Compromise Documentary Stamp Tax ₱13,497,227.80
of DST - regular assessments for the fiscal years ending June 30, 1996,
1997, and 1998. 10
Final Withholding Tax – Trust 8,770,265.07
During the trial, Asiatrust manifested that it availed of the Tax
Abatement Program for its deficiency final withholding tax - trust Documentary Stamp Tax - Industry Issue 88,584,931.39
assessments for fiscal years ending June 30, 1996 and 1998; and that on
June 29, 2007, it paid the basic taxes in the amounts of P4,187,683.27
and P6,097,825.03 for the said fiscal years, respectively. 11 Asiatrust
also claimed that on March 6, 2008, it availed of the provisions of
Republic Act (RA) No. 9480, otherwise known as the Tax Amnesty
TOTAL ₱110,852,424.26
Law of 2007. 12

Ruling of the Court of Tax Appeals Division Fiscal Year 1997

Documentary Stamp Tax ₱10,156,408.63
On January 20, 2009, the CTA Division rendered a Decision13 partially
granting the Petition. The CTA Division declared void the tax
39,163,539.57
assessments for fiscal year ending June 30, 1996 for having been issued
beyond the three-year prescriptive period. 14 However, due to the failure Documentary Stamp Tax - Industry Issue
of Asiatrust to present

documentary and testimonial evidence to prove its availment of the Tax TOTAL 49,319,948.20
Abatement Program and the Tax Amnesty Law, the CTA Division
affirmed the deficiency DST- Special Savings Account (SSA)
assessments for the fiscal years ending June 30, 1997 and 1998 and the Fiscal year 1998
deficiency DST - Interbank Call Loans (IBCL) and deficiency final Documentary Stamp Tax ₱20,425,770.07
withholding tax - trust assessments for fiscal year ending June 30, 1998,
in the total amount of ₱142,777,785.91.15Thus:
Final Withholding Tax – Trust ₱10,183,367.80
WHEREFORE, premises considered, the instant Petition for Review is
hereby PARTIALLY GRANTED. Accordingly, Assessment Notices
issued against [ Asiatrust] for deficiency documentary stamp, final Documentary Stamp Tax - Industry Issue 93,430,878.54
withholding, expanded withholding, and fringe benefits tax assessments
for the fiscal year ended June 30, 1996 are VOID for being [issued]
beyond the prescriptive period allowed by law.

9
The Assessment Notices issued by [CIR] against [Asiatrust] for TOTAL ₱124,040,016.41
deficiency income, documentary stamp - regular, documentary stamp -
Application Forms, Tax Amnesty Return, Tax Amnesty Payment Form,
Notice of Availment of Tax Amnesty and Statement of Assets and
Liabilities and Networth (SALN) as of June 30, 2005.
The CIR, on the other hand, filed a Motion for Partial Reconsideration
of the assessments assailing the CTA Division's finding of prescription
and cancellation of assessment notices for deficiency income, DST -
regular, DST - trust, and fringe benefit tax for fiscal years ending June
30, 1997 and 1998. 18
On July 6, 2009, the CTA Division issued a Resolution 19 denying the
motion of the CIR while partially granting the motion of Asiatrust. The
CTA Division refused to consider Asiatrust's availment of the Tax
Abatement Program due to its failure to submit a termination letter
from the BIR. 20 However, as to Asiatrust's availment of the Tax
Amnesty Law, the CTA Division resolved to set the case for hearing for
the presentation of the originals of the documents attached to Asiatrust'
s motion for reconsideration. 21
Meanwhile, the CIR appealed the January 20, 2009 Decision and the
July 6, 2009 Resolution before the CTA En Banc via a Petition for
Review22 docketed as CTA EB No. 508. The CTA En Banc however
dismissed the Petition for being premature considering that the
proceedings before the CT A Division was still pending. 23
On December 7, 2009, Asiatrust filed a Manifestation24 informing the
CTA Division that the BIR issued a Certification25 dated August 20,
2009 certifying that Asiatrust paid the amounts of ₱4,187,683.27 and
₱6,097,825.03 at the Development Bank of the Philippines in
connection with the One-Time Administrative Abatement under
Revenue Regulations (RR) No. 15-2006. 26
On March 16, 20l0, the CTA Division rendered an Amended
Decision 27 finding that Asiatrust is entitled to the immunities and
privileges granted in the Tax Amnesty Law. 28 However, it reiterated its
ruling that in the absence of a termination letter from the BIR, it cannot
consider Asiatrust's availment of the Tax Abatement Program. 29 Thus,
the CTA Division disposed of the case in this wise:
WHEREFORE, premises considered, [Asiatrust's] Motion for
Reconsideration is hereby PARTIALLY GRANTED and this Court's
Decision dated January 20, 2009 is hereby MODIFIED. Accordingly,
the above-captioned case as regards [Asiatrust's] liability for deficiency
documentaly stamp tax is CLOSED and TERMINATED, subject to the
provisions of R.A. No. 9480. However, (Asiatmst's] liability for
deficiency final withholding tax assessment for fiscal year ended June
30, 1998, subject of this litigation, in the amount of ₱l0,183,367.80, is
hereby REAFFIRMED.
SO ORDERED.30
Still unsatisfied, Asiatrust moved for partial reconsideration 31 insisting
that the Certification issued by the BIR is sufficient proof of its
availment of the Tax Abatement Program considering that the CIR,
despite Asiatrust's request, has not yet issued a termination letter.
Asiatrust attached to the motion photocopies of its letter'' dated March
17, 2009 requesting the BIR to issue a termination letter, Payment
Form 33 BIR Tax Payment Deposit Slips, 34 Improved Voluntary
Assessment Program (IV AP) Payment Fonn,35 and a letter36 dated
October 17, 2007 issued by Revenue District Officer (RDO) Ms.
Clavelina S. Nacar.
On July 28, 2010, the CTA Division issued a Resolution 37 denying
Asiatrust's motion. The CTA Division maintained that it cannot
consider Asiatrust's availment of the Tax Abatement Program in the
absence of a termination letter from the BIR. 38 As to the Certification
issued by BIR, the CTA Division noted that it pertains to fiscal period
July 1, 1995 to June 30, 1996. 39
Both parties appealed to CTA En Banc.
Ruling of the Court of Tax Appeals En Banc
On November 16, 2011, the CTA En Banc denied both appeals. It
denied the CIR' s appeal for failure to file a prior motion for
reconsideration of the Amended Decision,40 while it denied Asiatrust's
appeal for lack of merit.41 The CTA En Banc sustained the ruling of the
CT A Division that in the absence of a termination letter, it cannot be
established that Asiatrust validly availed of the Tax Abatement
Program. 42 As to the Certification issued by the BIR, the CTA En
Banc noted that it only covers the fiscal year ending June 30,
1996.43 As to the letter issued by RDO Nacar and the various BIR Tax
Payment Deposit Slips, the CTA En Banc pointed out that these have
no probative value because these were not authenticated nor formally
offered in evidence and are mere photocopies of the purported
documents. 44
On April 16, 2012, the CTA En Banc denied the motions for partial
reconsideration of the CIR and Asiatrust.45
Issues Hence, the instant consolidated Petitions under Rule 45 of the
Rules of Court, with the following issues.
G.R. No. 201530
WHETHER XX X THE [CTA] EN BANC ERRED IN FINDING
THAT [ASIATRUST] IS LIABLE FOR DEFICIENCY FINAL
WITHHOLDING TAX FOR FISCAL YEAR ENDING JUNE 30,
1998.
II.
WHETHER X X X THE ORDER OF THE [CTA] EN BANC FOR
PETITIONER TO PAY AGAIN THE FINAL WITIIBOLDING TAX
FOR FISCAL YEAR ENDING JUNE 30, 1998 WOULD AMOUNT
TO DOUBLE TAXATION.
III.
WHETHER XX X THE [CTA] EN BANC ERRED IN RESOLVING
THE ISSUE OF ALLEGED DEFICIENCY FINAL WrI1ffiOLDING
TAX FOR FISCAL YEAR ENDING JUNE 30, 1998 BASED ON
MERE TECHNICALITIES.46
G.R. Nos. 201680-81
I.
WHETHER XX X THE [CTA] EN BANC COMMITTED
REVERSIBLE ERROR WHEN IT DISMISSED [THE CIR'S]
PETITION FOR REVIEW ON THE GROUND THAT THE LATTER
ALLEGEDLY FAILED TO COMPLY WITH SECTION 1, RULE 8
OF THE REVISED RULES OF THE [CTA].
II.
WHETHER X X X THE [CTA] EN BANC COMMITTED
REVERSIBLE ERROR WHEN IT SUSTAINED THE AMENDED
DECISION DATED 16 MARCH 2010 OF THE FIRST DIVISION
DECLARING CLOSED AND TERMINATED RESPONDENT'S
LIABILITY FOR DEFICIENCY DOCUMENTARY STAMP TAX
FOR TAXABLE YEARS 1997 AND 1998.47
G.R. No. 201530
Asiatrust's Arguments
Asiatrust contends that the CTA En Banc erred in affirming the
assessment for deficiency final withholding tax for fiscal year ending
June 30, 1998 considering that it already availed of the Tax Abatement
Program as evidenced by the Ce1tification issued by the BIR, the letter
issued by RDO Nacar, and the BIR Tax Payment Deposit
Slips.48Asiatrust maintains that the BIR Certification is sufficient proof
of its availment of the Tax Abatement Program considering the CIR's
unjustifiable refusal to issue a termination letter. 49 And although the
letter and the BIR Tax Payment Deposit Slips were not formally offered
in evidence, Asiatrust insists that the CTA En Banc should have relaxed
the rules as the Supreme Court in several cases has relaxed procedural
rules in the interest of substantial justice.50 Moreover, Asiatrust posits
that since it already paid the basic taxes, the affirmance of the
deficiency final withholding tax assessment for fiscal year ending June
30, 1998 would constitute double taxation as Asiatrust would be made
to pay the basic tax twice.51
The CIR’s Arguments
The CIR, however, points out that the BIR Certification relied upon by
Asiatrust does not cover fiscal year ending June 30, 1998. 52 And even if
the letter issued by RDO Nacar and the BIR Tax Payment Deposit Slips
were admitted in evidence, the result would still be the same as these
are not sufficient to prove that Asiatrust validly availed of the Tax
Abatement Program. 53
G.R. Nos. 201680-81
The CIR's Arguments
The CIR contends that the CT A En Banc erred in dismissing his
appeal for failing to file a motion for reconsideration on the Amended
Decision as a perusal of the Amended Decision shows that it is a mere
resolution, modifying the original Decision. 54
Furthermore, the CIR claims that Asiatrust is not entitled to a tax
amnesty because it failed to submit its income tax returns (ITR’s). 55
The CIR likewise imputes bad faith on the part of Asiatrust in belatedly
submitting the documents before the CTA Division. 56
Asiatrust's Arguments
Asiatrust on the other hand argues that the CTA En Banc correctly
dismissed the CIR's appeal for failure to file a motion for
reconsideration on the Amended Decision.57 It asserts that an amended
decision is not a mere resolution but a new decision. 58
Asiatrust insists that the CIR can no longer assail the Amended
Decision of the CTA Division before the Court 9onsidering the
dismissal of his appeal for failing to file a motion for reconsideration on
the Amended Decision59 . In any case, Asiatrust claims that the
submission of its IIRs is not required as the Tax Amnesty Law only
requires the submission of a SALN- as of December 31, 2005.60 As to
its belated submission of the documents, Asiatrust contends that recent
jurisprudence aJl9ws the presentation of evidence before the (.TA En
Banc even after trial. 61Thus, it follows that the presentation of evidence
before the CTA Division should likewise be allowed. 62
Our Ruling
The Petitions lack merit.
G.R. No. 201530
An application for tax abatement is
considered approved only upon the
issuance of a termination letter.
Section 204(B) 63 of the 1997 National lnten1al Revenue Code (NIRC)
empowers the CIR to abate or cancel a tax liability.
On September 27, 2006, the BIR issued .RR No. 15-06 prescribing the
guidelines on the implementation of the one-time administrative
abatement of all penalties/surcharges and interest on delinquent
accounts and assessments (preliminary or final, disputed or not) as of
.June 30, 2006. Section 4 of RR No. 15-06 provides:
SECTION 4. Who May Avail, - Any person/ taxpayer, natural or
juridical, may settle thru this abatement program any delinquent
account or assessment which has been released as of June 30, 2006, by
paying an
Amount equal to One Hundred Percent (100%) of the Basic Tax
assessed with the Accredited Agent Bank (AAB) of the Revenue
District Office (RDO)/Large Taxpayers Service (LTS)/Large Taxpayers
District Office (LTDO) that has jurisdiction over the taxpayer. In the
absence of an AAB, payment may be made with the Revenue
Collection Officer/Deputized Treasurer of the RDO that has jurisdiction
over the taxpayer. After payment of the basic tax, the assessment for
penalties/surcharge and interest shall be cancelled by the concerned
BIR Office following existing rules and procedures. Thereafter, the
docket of the case shall be forwarded to the Office of the
Commissioner, thru the Deputy Commissioner for Operations Group,
for issuance of Termination Letter.1âwphi1
Based on the guidelines, the last step in the tax abatement process is the
issuance of the termination letter. The presentation of the termination
letter is essential as it proves that the taxpayer's application for tax
abatement has been approved. Thus, without a termination letter, a tax
assessment cannot be considered closed and terminated.
In this case, Asiatrust failed to present a termination letter from the
BIR. Instead, it presented a Certification issued by the BIR to prove that
it availed of the Tax Abatement Program and paid the basic tax. It also
attached copies of its BIR Tax Payment Deposit Slips and a Jetter
issued by RDO Nacar. These documents, however, do not prove that
Asiatrust's application for tax abatement has been approved. If at all,
these documents only prove Asiatrust's payment of basic taxes, which is
not a ground to consider its deficiency tax assessment closed and
terminated.
Since no tennination letter has been issued by the BIR, there is no
reason for the Court to consider as closed and terminated the tax
assessment on Asiatrust's final withholding tax for fiscal year ending
June 30, 1998. Asiatrust's application for tax abatement will be deemed
approved only upon the issuance of a tem1ination letter, and only then
will the deficiency tax assessment be considered closed and terminated.
However, in case Asiatrust's application for tax abatement is denied,
any payment made by it would be applied to its outstanding tax
liability. For this reason, Asiatrust's allegation of double taxation must
also fail.
Thus, the Court finds no error on the part of the CTA En Banc in
affirming the said tax assessment.
G.R. Nos. 201680-81
An appeal to the CTA En Banc
must be preceded by the filing of a
timely motion for reconsideration or
new trial with the CTA Division.
Section 1, Rule 8 of the Revised Rules of the CTA states:
SECTION 1. Review of cases in the Court en bane. - In cases falling
under the exclusive appellate jurisdiction of the Court en bane, the
petition for review of a decision or resolution of the Court in Division
must be preceded by the filing of a timely motion for reconsideration or
new trial with the Division.
Thus, in order for the CTA En Banc to take cognizance of an
appeal via a petition for review, a timely motion for reconsideration or
new trial must first be filed with the CTA Division that issued the
assailed decision or resolution. Failure to do so is a ground for the
dismissal of the appeal as the word "must" indicates that the filing of a
prior motion is mandatory, and not merely directory. 64
The same is true in the case of an amended decision. Section 3, Rule 14
of the same rules defines an amended decision as "[a]ny action
modifying or reversing a decision of the Court en bane or in Division."
As explained in CE Luzon Geothermal Power Company, Inc. v.
Commissioner of Internal Revenue,  65 an amended decision is a
different decision, and thus, is a· proper subject of a motion for
reconsideration.
In this case, the CIR's failure to move for a reconsideration of the
Amended Decision of the CTA Division is a ground for the dismissal of
its Petition for Review before the CTA En Banc. Thus, the CTA En
.Banc did not err in denying the CIR's appeal on procedural grounds.
Due to this procedural lapse, the Amended Decision has attained
finality insofar as the CIR is concerned. The CIR, therefore, may no
longer question the merits of the case before this Court. Accordingly,
there is no reason for the Court to discuss the other issues raised by the
CIR.
As the Court has often held, procedural rules exist to be followed, not
to be trifled with, and thus, may be relaxed only for the most persuasive
reasons. 66
WHEREFORE, the Petitions are hereby DENIED. The assailed
November 16, 2011 Decision and the April 16, 2012 Resolution of the
Court of Tax Appeals En .Banc in CTA EB Case Nos. 614 and 677 are
hereby AFFIRMED, without prejudice to the action of the Bureau of
Internal Revenue on Asiatrust Development Bank, Inc.'s application for
abatement. The Bureau of Internal Revenue is DIRECTED to act on
Asiatrust Development Bank, Inc.'s application for abatement in view
of Section 5, Revenue Regulations No. 13-2001.
SO ORDERED.
MARIANO C. DEL CASTILLO,
Associate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice
Chairperson

TERESITA J. LEONARDO- ESTELA M. PERLAS-

DE CASTRO BERNABE
Associate Justice Associate Justice

ALFREDO BENJAMIN S. CAGUIOA

Associate Justice

CERTIFICATION

Pursuant to the Section 13, Article VIII of the Constitution and the
Division Chairperson’s Attestation, I certify that the conclusions in the
above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.

MARIA LOURDES P.A. SERENO

Chief Justice

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 208462               December 10, 2014

SPOUSES CARLOS J. SUNTAY and ROSARIO R.

SUNTAY, Petitioners, 
vs.
KEYSER MERCANTILE, INC., Respondent.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari seeking to reverse and set

aside the September 7, 2012 Decision1 and the August 8, 2013
Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 94677,
entitled Keyser Mercantile, Inc., v. Spouses Carlos and Rosario Suntay"
involving the ownership of Unit G and two (2) parking slots in
Bayfront's Tmver Condominium.

The Facts

On October 20, 1989, Eugenia Gocolay, chairperson and president of

respondent Keyser Mercantile, Inc. (Keyser), entered into a contract to
sell with Bayfront Development Corporation (Baxfront) for the
purchase on installment basis of a condominium unit in Bayfront Tower
Condominium located at A. Mabini Street, Malate, Manila. The subject
of the sale was Unit G of the said condominium project consisting of
163.59 square meters with the privilege to use two (2) parking slots
covered by Condominium Certificate of Title (CCT)No. 15802. This
Contract to Sell3 was not registered with the Register of Deeds
ofManila. Thus, the subject unit remained in the name of Bayfront with
a clean title.

On July 7, 1990, petitioner spouses Carlos and Rosario Suntay (Spouses

Suntay) also purchased several condominium units on the 4th floor of
Bayfront Tower Condominium through another contract to sell. Despite
payment of the full purchase price, however, Bayfront failed to deliver
the condominium units. When Bayfront failed to reimburse the full
purchase price, Spouses Suntay filed an action against it before the
Housing and Land Use Regulatory Board (HLURB) for violation of
Presidential Decree (P.D.) No. 957 and P.D. No. 1344, rescission of
contract, sum of money, and damages.
In its decision, dated April 23 1994, the HLURB rescinded the Contract
to Sell between Bayfront and Spouses Suntay and ordered Bayfront to
pay Spouses Suntay the total amount of 2,752,068.60 as purchase price
with interest. Consequently, on November 16, 1994, the HLURB issued
a writ of execution.4
Upon the application of Spouses Suntay, the Sheriffs of the Regional
Trial Court (RTC) of Manila levied Bayfront’s titled properties,
including the subject condominium Unit G and the two parking slots.
Considering that CCT No. 15802 was still registered under Bayfront
with a clean title, the sheriffs deemed it proper to be levied. The levy on
execution5 in favor of Spouses Suntay was duly recorded in the Register
of Deeds of Manila on January 18, 1995.
The auction sale was conducted on February 23, 1995, and Spouses
Suntay were the highest bidder. Consequently, on March 1, 1995, the
Certificate of Sale6 in favor of Spouses Suntay was issued. This was
duly annotated at the back of CCT No. 15802 on April 7, 1995.
Meanwhile, the Deed of Absolute Sale7 between Bayfront and Keyser
involving the subject property was finally executed on November 9,
1995. The latter allegedly paid the full purchase price sometime in
1991. When Keyser was about to register the said deed of absolute sale
in February 1996, it discovered the Notice of Levy and the Certificate
of Sale annotated at the back of CCT No. 15802 in favor of Spouses
Suntay. Nevertheless, on March 12, 1996, the Register of Deeds
cancelled the title of Bayfront and issued CCT No. 264748 in the name
of Keyser but carried over the annotation of the Suntays. 9
Subsequently, the sheriff’s Final Deed of Sale10 was executed on April
16, 1996 in favor of the Suntays upon the expiration of the one (1) year
period of redemption from the earlier auction sale. CCT No. 26474 of
Keyser was cancelled and, thereafter, CCT No. 34250-A 11 was issued in
the name of Spouses Suntay.
Keyser then filed a complaint for annulment of auction sale and
cancellation of notice of levy before the HLURB, docketed as HLURB
Case No. REM 032196-9152. In its decision, dated November 18,
1996, the HLURB ruled in favor of Keyser. Spouses Suntay appealed
the decision to the Office of the Presidentand later to the CA but both
affirmed the HLURB judgment.
On appeal before this Court, however, the HLURB decision was set
aside. In its September 23, 2005 Decision, the Court ruled that the
HLURB had no jurisdiction over controversies between condominium
unit owners and the issue of ownership, possession or interest in the
disputed condominium units could not be adjudicated by the HLURB
due to its limited jurisdiction under P.D. No. 957 and P.D. No. 1344.
RTC Ruling
Undaunted, on March 24, 2006, Keyser filed before the RTC of Manila
a new complaint for annulment of auction sale, writ of execution,
declaration of nullity of title, and reconveyance of property with
damages against Spouses Suntay, docketed asCivil Case No. 06-
114716. In their answer, Spouses Suntay denied the material allegations
of the complaint and interposed special and affirmative defenses of res
judicata, forum shopping, prescription, and lack of cause of action.
On October 19, 2009, the RTC rendered a Decision12 in favor of
Keyser. It explained that when Spouses Suntay registered the
Certificate of Sale, the condominium unit was already registered in the
name of Keyser. It also held that the auction sale was irregular due to
lack of posting and publication of notices. The RTC thus disposed:
WHEREFORE, premises considered, the Court hereby declares the
auction sale as null and void, orders the Registry of Deeds to reinstate
the title of Keyser Mercantile Inc. and to pay the costs.
SO ORDERED.13
CA Ruling
Spouses Suntay elevated the decision to the CA. In its September 7,
2012 Decision, the CA denied the appealas it found that Spouses
Suntay did not acquire the subject property because at the time it was
levied, Bayfront had already sold the condominium unit to Keyser.
Considering that the judgment debtor had no interest in the property,
Spouses Suntay, as purchasers at the auction sale, also acquired no
interest. The decretal portion of the CA decision reads:
WHEREFORE,in view of the foregoing considerations, the Decision
dated October 19, 2009 of the Regional Trial Court (RTC) of Manila,
Branch 21, in Civil Case No. 06-114716, is AFFIRMED.
SO ORDERED.14
Spouses Suntay filed a motion for reconsideration, but it was denied in
the August 8, 2013 Resolution of the CA.
Hence, this petition, anchored on the following
STATEMENT OF ISSUES
I
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR IN SUSTAINING THE TRIAL COURT’S
DECISION BY NOT DISMISSINGTHE COMPLAINT CASE OF
HEREIN RESPONDENT ON GROUND OF PRESCRIPTION OF
ACTIONS UNDER ARTICLE 1146 OFTHE CIVIL CODE OF THE
PHILIPPINES, AS WELL AS, DUE TO ESTOPPEL BY LACHES;
II
WHETHER OR NOT THE COURT OFAPPEALS IN SUSTAINING
THE DECISION OF THE COURT A QUO COMMITTED A
SERIOUS REVERSIBLE ERROR IN NOT APPLYING SECTION 52
OF P.D. 1529 AND ARTICLE 1544 OF THE CIVIL CODE OF THE
PHILIPPINES BY FINDING THAT HEREIN PETITIONERS HAVE
BETTER RIGHTS OF OWNERSHIP OVER THE SUBJECT
CONDOMINIUM PROPERTY IN LITIGATION;
III
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR IN SUSTAINING THE TRIAL COURT’S
DECISION BY NOT DISMISSINGTHE COMPLAINT FOR LACK
OF VALID AND LEGITIMATE CAUSEOF ACTION OF HEREIN
RESPONDENT AGAINST HEREIN PETITIONERS;
IV
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR IN SUSTAINING THE TRIAL COURT’S
DECISION BY NOT DISMISSING THE COMPLAINT ON
GROUND OF FORUM SHOPPING;
V
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR IN SUSTAINING THE TRIAL COURT’S
DECISION BY NOT DISMISSING THE COMPLAINT [ON]
GROUND OF RES JUDICATA;
VI
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR IN SUSTAINING THE TRIAL COURT’S
DECISION BY NOT AWARDING DAMAGES AND ATTORNEY’S
FEES IN FAVOR OF HEREIN PETITIONERS.15
Spouses Suntay contend that res judicata existed. They assert that
HLURB Case No. REM-032196-9152 involved the same cause of
action, parties and subject matter with Civil Case No. 06-114716 before
the RTC. Considering that the former case had been decided on appeal
by this Court, then there was already res judicata in the RTC case. They
likewise claim the existence of forum shopping in the refiling of the
case with the RTC for the second time on March 24, 2006.
Spouses Suntay also raise the issue of prescription because Article 1146
of the New Civil Code16 provides that actions resulting in injury
prescribe after four (4) years. The resulting injury started on January
18, 1995. They argue that the correct reckoning period was March 24,
2006 when Civil Case No. 06-114716 was filed in the RTC; and that a
period of more or less twelve (12) years had lapsed and the action had
already prescribed. HLURB Case No. REM-032196-9152 filed on
March 21, 1996 should not have been considered to have tolled the
prescriptive period because it had a null and void judgment due to lack
of jurisdiction.
Spouses Suntay argue that the CA erred in not applying Section 52 of
P.D. No. 1529 and Article 1544 of the New Civil Code. Their right as
purchasers in a public action should havebeen preferred because their
right acquired thereunder retroacts to the date of registration of the
Notice of Levy on January 18, 1995 and the subsequent auction sale on
February 23, 1995. They claim that their right over the subject property
is superior over that of Keyser because they purchased the subject
property in a legitimate auction sale prior to Keyser’s registration of the
deed of absolute sale.
Spouses Suntay also pray for moral, exemplary damages and attorney’s
fees. They allegedly experienced mental anguish, besmirched
reputation, sleepless nights, and wounded feelings warranting moral
damages. They contend that exemplary damages should also be
awarded in view of the reckless and wanton attitude of Keyser in
instituting a groundless action against them. Furthermore, Spouses
Suntay were constrained to hire the services of counsel to defend their
right against a baseless action.
The Court’s Ruling
The petition is meritorious.
No res judicata, forum
shopping and prescription in
this case
As to the procedural matters, the Court finds that the grounds invoked
by Spouses Suntay are inapplicable. First, the defense of res judicata
must fail. The doctrine of res judicatais a fundamental principle of law
which precludes parties from re-litigating issues actually litigated and
determined by a prior and final judgment.17 Res judicata constituting
bar by prior judgment occurs when the following requisites concur: (1)
the former judgment is final; (2) it is rendered by a court having
jurisdiction over the subject matter and the parties; (3) it isa judgment
or an order on the merits; and (4) there is identity of parties, of subject
matter, and of causes of action.18
The previous case instituted by Keyser in the HLURB was denied on
appeal by this Court based on lack of jurisdiction. Thus, the third
requisite of res judicata is not present because the previous case was not
adjudicated on the merits as it was denied on jurisdictional grounds.
There is no forum shopping either in this case. To determine whether a
party violated the rule against forum shopping, the elements of litis
pendentiamust be present, or the final judgment in one case amounts to
res judicata in another.19 Since there is no res judicata in this case, then
there is no forum shopping either.
The defense of prescription is likewise unavailing. In Fulton Insurance
Company v. Manila Railroad Company,20 this Court ruled that the filing
of the first action interrupted the running of the period, and then
declared that, at any rate, the second action was filed within the balance
of the remaining period. Applying Article 1155 of the New Civil Code
in that case,21 the interruption took place when the first action was filed
in the Court of First Instance of Manila. The interruption lasted during
the pendency of the action until the order of dismissal for alleged lack
of jurisdiction became final.
In the present case, the prescriptive period was interrupted when
HLURB Case No. REM-032196-9152 was filed on March 21, 1996.
The interruption lasted during the pendency of the action and until the
judgment of dismissal due to lack of jurisdiction was rendered on the
September 23, 2005. Thus, the filing of Civil Case No. 06-114716 on
March 24, 2006 was squarely within the prescriptive period of four (4)
years.
Spouses Suntay properly relied
on the Certificate of Title of
Bayfront
Now, the Court proceeds to the substantial issues. This Court finds that
the petition is meritorious applying the Torrens System of Land
Registration. The main purpose of the Torrens system is to avoid
possible conflicts of title to real estate and to facilitate transactions
relative thereto by giving the public the right to rely upon the face of a
Torrens certificate of title and to dispense with the need of inquiring
further, except when the party concerned has actual knowledge of facts
and circumstances that should impel a reasonably cautious man to
makesuch further inquiry. Every person dealing with a registered land
may safely rely on the correctness of the certificate of title issued
therefor and the law will in no way oblige him to go beyond the
certificate to determine the condition of the property. 22
Again to stress, any buyer or mortgagee of realty covered by a Torrens
certificate of title, in the absence of any suspicion, is not obligated to
look beyond the certificate to investigate the title of the seller appearing
on the face of the certificate. And, heis charged with notice only of such
burdens and claims as are annotated on the title. 23
In the case at bench, the subject property was registered land under the
Torrens System covered by CCT No. 15802 with Bayfront as the
registered owner. At the time that the Notice of Levy was annotated on
January 18, 1995, the title had no previous encumbrances and liens.
Evidently, it was a clean title. The Certificate of Sale, pursuant to an
auction sale, was also annotated on April 7,1995, with Bayfront still as
the registered owner.
It was only on March 12, 1996, almosta year later, that Keyser was able
to register its Deed of Absolute Sale with Bayfront. Prior to such date,
Spouses Suntay appropriately relied on the Torrens title of Bayfront to
enforce the latter’s judgment debt.
Because "the act of registration is the operative act to convey or affect
the land insofar as third persons are concerned,"24 it follows that where
there is nothing in the certificate of title toindicate any cloud or vice in
the ownership of the property, or any encumbrance thereon, the
purchaser is not required to explore farther than what the Torrens title
upon its face indicates in quest for any hidden defect or inchoate right
thatmay subsequently defeat his right thereto. If the rule were
otherwise, the efficacy and conclusiveness of the certificate of title
which the Torrens system seeks to insure would entirely be futile and
nugatory. The public shall then be denied of its foremost motivation for
respecting and observing the Torrens system of registration. 25
When the notice of levy and certificate of sale were annotated on the
title, the subject property was unoccupied and no circumstance existed
that might suggest to Spouses Suntay that it was owned by another
individual.26 Records reveal that it was only later, on January 6, 1999,
that the subject property was discovered by the sheriffs to be
padlocked.27 The administrator of the condominium did not even
knowthe whereabouts of the alleged owner.28 To reiterate, absent any
peculiar circumstance, Spouses Suntay could not be required to
disregard the clean title of Bayfront and invest their time, effort and
resources to scrutinize every square feet of the subject property. This
Court is convinced that Spouses Suntay properly relied on the
genuineness and legitimacy of Bayfront’s Torrens certificate of title
when they had their liens annotated thereon.
Levy on execution is superior to
the subsequent registration of
the deed of absolute sale.
The CA stated in its decision that when the subject property was levied
and subjected to an execution sale, Bayfront had already sold it to
Keyser. As such, Spouses Suntay no longer acquired the right over the
subject property from Bayfront because the latter, as judgment debtor,
had nothing more to pass.29 Earlier, the RTC held that at the time
Spouses Suntay were to register the auction sale, the subject property
was already registered in Keyser’s name and, thus, they were fully
aware of the earlier sale. It was too late for Spouses Suntayto deny their
knowledge of Keyser’s title. The RTC also found the auction sale
questionable due to the lack of posting and publication of notice. 30
The Court disagrees with the lower courts. They had completely
overlooked the significance of a levy on execution. The doctrine is
wellsettled that a levy on execution duly registered takes preference
over a prior unregistered sale. Even if the prior salewas subsequently
registered before the sale in execution but after the levy was duly made,
the validity of the execution sale should be maintained because it
retroacts to the date of the levy. Otherwise, the preference created by
the levy would be meaningless and illusory.31
In this case, the contract to sell between Keyser and Bayfront was
executed on October 20, 1989, but the deed of absolute sale was only
made on November 9, 1995 and registered on March 12, 1996. The
Notice of Levy in favor of Spouses Suntay was registered on January
18, 1995, while the Certificate of Sale on April 7, 1995, both dates
clearly ahead of Keyser’s registration of its Deed of Absolute Sale.
Evidently, applying the doctrine of primus tempore, potior jure(first in
time, stronger in right), Spouses Suntay have a better right than Keyser.
In the case of Uy v. Spouses Medina32 which dealt with essentially the ANTONIO T. CARPIO
same issues, the Court wrote: Associate Justice
Chairperson
Considering that the sale was not registered earlier, the right of
petitioner over the land became subordinate and subject to the MARIANO C. DEL MARTIN S. VILLARAMA,
preference created over the earlier annotated levy in favor of Swift. The CASTILLO JR.*
levy of execution registered and annotated on September 1, 1998 takes Associate Justice Associate Justice
precedence over the sale of the land to petitioner on February 16, 1997,
despite the subsequent registration on September 14, 1998 of the prior
sale. Such preference in favor of the levy on execution retroacts to the
date of levy for to hold otherwise will render the preference nugatory MARVIC M.V.F. LEONEN
and meaningless. Associate Justice

xxx ATTESTATION

The settled rule is that levyon attachment, duly registered, takes I attest that the conclusions in the above Decision had been reached in
preference over a prior unregistered sale. This result is a necessary consultation before the case was assigned to the writer of the opinion or
consequence of the fact that the property involved was duly covered by the Court's Division.
the Torrens system which works under the fundamental principle that
registration is the operative act which gives validity to the transfer or ANTONIO T. CARPIO
creates a lien upon the land. The preference created by the levy on Associate Justice
attachment is not diminished even by the subsequent registration of the Chairperson, Second Division
prior sale. This is so because an attachment is a proceeding in rem. It is
against the particular property, enforceable against the whole world.
CERTIFICATION
The attaching creditor acquires a specific lien on the attached property
which nothing can subsequently destroy except the very dissolution of
the attachment or levy itself. Such a proceeding, in effect, means that Pursuant to Section 13, Article VIII of the Constitution and the Division
the property attached is an indebted thing and a virtual condemnation of Chairperson's Attestation, I certify that the conclusions in the above
it to pay the owner’s debt. The lien continues until the debt is paid, or Decision had been reached in consultation before the case was assigned
sale is had under execution issued on the judgment, or until the to the writer of the opinion of the Court's Division.
judgment is satisfied, or the attachment discharged or vacated in some
manner provided by law. MARIA LOURDES P.A. SERENO
Chief Justice
[Emphases supplied]

The Court does not agree with the RTC either that the auction sale had
glaring irregularities. Assisting Sheriff Rufo Bernardo Jr., testifying as Taxation
Keyser’s witness, categorically stated that they had posted notices of
the auction sale and had conducted the bidding.33 The documentary
Republic of the Philippines
evidence of S pouses Suntay also shows that publication of the auction
SUPREME COURT
sale was indeed complied with.34
Manila

No award of actual, moral and

FIRST DIVISION
exemplary damages

G.R. No. 180651               July 30, 2014

Finally, the Court cannot grant the claim for damages by Spouses
Suntay. The filing alone of a civil action should not be a ground for an
award of moral damages in the same way that a clearly unfounded civil
action is not among the grounds for moral damages.35 Spouses Suntay
failed to show a compelling reason to warrant the award of moral
damages aside from their bare allegations.
As to the award of exemplary damages, Article 2229 of the New Civil
Code provides that exemplary damages may be imposed by way of
example or correction for the public good, in addition to the moral,
temperate, liquidated or compensatory damages. 36 The claimant,
however, must first establish his right to moral, temperate, liquidated or
compensatory damages. In this case, because Spouses Suntay failed to
prove their entitlement to moral or compensatory damages, there could
be no award of exemplary damages.
Spouses Suntay are not entitled to attorney's fees either.1âwphi1 The
settled rule is that no premium should be placed on the right to litigate
and that not every winning party is entitled to an automatic grant of
attorney's fees.37
NURSERY CARE CORPORATION; SHOEMART, INC.; STAR
APPLIANCE CENTER, INC.; H&B, INC.; SUPPLIES STATION,
INC.; and HARDWARE WORKSHOP, INC., Petitioners, 
vs.
ANTHONY ACEVEDO, in his capacity as THE TREASURER OF
MANILA; and THE CITY OF MANILA,Respondents.
DECISION
BERSAMIN, J.:
The issue here concerns double taxation. There is double taxation when
the same taxpayer is taxed twice when he should be taxed only once for
the same purpose by the same taxing authority within the same
jurisdiction during the same taxing period, and the taxes are of the same
kind or character. Double taxation is obnoxious.
The Case

WHEREFORE, the petition is GRANTED. The September 7, 2012

Decision and the August 8, 2013 Resolution of the Court of Appeals
(CA) in CA-G.R. CV No. 94677 are REVERSED and SET ASIDE.
Accordingly, the Court hereby declares the auction sale as valid and
binding on Keyser Mercantile, Inc. and all other subsequent registrants.
Under review are the resolution promulgated in CA-G.R. SP No. 72191
on June 18, 2007,1 whereby the Court of Appeals (CA) denied
petitioners' appeal for lack of jurisdiction; and the resolution
promulgated on November 14, 2007,2 whereby the CA denied their
motion for reconsideration for its lack of merit.

SO ORDERED.
Antecedents

JOSE CATRAL MENDOZA

Associate Justice The City of Manila assessed and collected taxes from the individual
petitioners pursuant to Section 15 (Tax on Wholesalers, Distributors, or
Dealers) and Section 17 (Tax on Retailers) of the Revenue Code of
WE CONCUR: Manila.3 At the same time, the City of Manila imposed additional taxes
upon the petitioners pursuant to Section 21 ofthe Revenue Code of
Manila,4 as amended, as a condition for the renewal of their respective
business licenses for the year 1999. Section 21 of the Revenue Code of
Manila stated:
Section 21. Tax on Business Subject to the Excise, Value-Added or
Percentage Taxes under the NIRC - On any of the following businesses
and articles of commerce subject to the excise, value-added or
percentage taxes under the National Internal Revenue Code, hereinafter
referred to as NIRC, as amended, a tax of FIFTY PERCENT (50%) OF
ONE PERCENT (1%) per annum on the gross sales or receipts of the
preceding calendar year is hereby imposed:
A) On person who sells goods and services in the course of trade or
businesses; x x x PROVIDED, that all registered businesses in the City
of Manila already paying the aforementioned tax shall be exempted
from payment thereof.
To comply with the City of Manila’s assessmentof taxes under Section
21, supra, the petitioners paid under protest the following amounts
corresponding to the first quarter of 1999,5 to wit:
(a) Nursery Care Corporation ₱595,190.25
(b) Shoemart Incorporated ₱3,283,520.14
(c) Star Appliance Center ₱236,084.03
(d) H & B, Inc. ₱1,271,118.74
(e) Supplies Station, Inc. ₱239,501.25
(f) Hardware Work Shop, Inc. ₱609,953.24
By letter dated March 1, 1999, the petitioners formally requested the
Office of the City Treasurer for the tax credit or refund of the local
business taxes paid under protest.6 However, then City Treasurer
Anthony Acevedo (Acevedo) denied the request through his letter of
March 10, 1999.7
On April 8, 1999, the petitioners, through their representative, Cecilia
R. Patricio, sought the reconsideration of the denial of their
request.8 Still, the City Treasurer did not reconsider.9 In the meanwhile,
Liberty Toledo succeeded Acevedo as the City Treasurer of Manila. 10
On April 29, 1999, the petitioners filed their respective petitions for
certiorariin the Regional Trial Court (RTC) in Manila. The petitions,
docketed as Civil Cases Nos. 99-93668 to 99-93673,11 were initially
raffled to different branches, but were soon consolidated in Branch
34.12 After the presiding judge of Branch 34 voluntarily inhibited
himself, the consolidated cases were transferred to Branch 23, 13 but
were again re-raffled to Branch 19 upon the designation of Branch 23
as a special drugs court.14
The parties agreed on and jointly submitted the following issues for the
consideration and resolution of the RTC, namely:
(a) Whether or not the collection of taxes under Section 21 of
Ordinance No. 7794, as amended, constitutes double taxation.
(b) Whether or not the failure of the petitioners to avail of the
statutorily provided remedy for their tax protest on the ground
of unconstitutionality, illegality and oppressiveness under
Section 187 of the Local Government Code renders the
present action dismissible for non-exhaustion of
administrative remedy.15
Decision of the RTC
On April 26, 2002, the RTC rendered its decision, holding thusly:
The Court perceives of no instance of the constitutionally proscribed
double taxation, in the strict, narrow or obnoxious sense, imposed upon
the petitioners under Section 15 and 17, on the one hand, and under
Section 21, on the other, of the questioned Ordinance. The tax imposed
under Section 15 and 17, as against that imposed under Section 21, are
levied against different tax objects or subject matter. The tax under
Section 15 is imposed upon wholesalers, distributors or dealers, while
that under Section 17 is imposedupon retailers. In short, taxes imposed
under Section 15 and 17 is a tax on the business of wholesalers,
distributors, dealers and retailers. On the other hand, the tax imposed
upon herein petitioners under Section 21 is not a tax against the
business of the petitioners (as wholesalers, distributors, dealers or
retailers)but is rather a tax against consumers or end-users of the
articles sold by petitioners. This is plain from a reading of the
modifying paragraph of Section 21 which says:
"The tax shall be payable by the person paying for the services rendered
and shall be paid to the person rendering the services who is required to
collect and pay the tax within twenty (20) days after the end of each
quarter." (Underscoring supplied)
In effect, the petitioners only act as the collection or withholding agent
of the City while the ones actually paying the tax are the consumers or
end-users of the articles being sold by petitioners. The taxes imposed
under Sec. 21 represent additional amounts added by the business
establishment to the basic prices of its goods and services which are
paid by the end-users to the businesses. It is actually not taxes on the
business of petitioners but on the consumers. Hence, there is no double
taxation in the narrow, strict or obnoxious sense,involved in the
imposition of taxes by the City of Manila under Sections 15, 17 and 21
of the questioned Ordinance. This in effect resolves infavor of the
constitutionality of the assailed sections of Ordinance No. 7807 of the
City of Manila.
Petitioners, likewise, pray the Court to direct respondents
to cease and desist from implementing Section 21 of the
questioned Ordinance. That the Court cannot do, without
doing away with the mandatory provisions of Section 187
of the Local Government Code which distinctly commands
that an appeal questioning the constitutionality or legality
of a tax ordinance shall not have the effectof suspending
the effectivity of the ordinance and the accrual and
payment of the tax, fee or charge levied therein. This is so
because an ordinance carries with it the presumption of
validity.
xxx
With the foregoing findings, petitioners’ prayer for the refund of the
amounts paid by them under protest must, likewise, fail.
Wherefore, the petitions are dismissed. Without pronouncement as to
costs.
SO ORDERED.16
The petitioners appealed to the CA.17
Ruling of the CA
On June 18, 2007, the CA deniedthe petitioners’ appeal, ruling as
follows:
The six (6) cases were consolidated on a common question of fact and
law, that is, whether the act ofthe City Treasurer of Manila of assessing
and collecting business taxes under Section 21of Ordinance 7807, on
top of other business taxes alsoassessed and collected under the
previous sections of the same ordinance is a violation of the provisions
of Section 143 of the Local Government Code.
Clearly, the disposition of the present appeal in these consolidated cases
does not necessitate the calibration of the whole evidence as there is no
question or doubt as to the truth or the falsehood of the facts obtaining
herein, as both parties agree thereon. The present case involves a
question of law that would not lend itself to an examination or
evaluation by this Court of the probative value of the evidence
presented.
Thus the Court is constrained todismiss the instant petition for lack of
jurisdiction under Section 2,Rule 50 of the 1997 Rules on Civil
Procedure which states:
"Sec. 2. Dismissal of improper appeal to the Court of Appeals. – An
appeal under Rule 41 taken from the Regional Trial Court to the Court
of Appeals raising only questions of law shall be dismissed, issues
purely of law not being reviewable by said court. similarly, an appeal
by notice of appeal instead of by petition for review from the appellate
judgment of a Regional Trial Court shall be dismissed.
An appeal erroneously taken tothe Court of Appeals shall not be
transferred to the appropriate court but shall be dismissed outright.
WHEREFORE, the foregoing considered, the appeal is DISMISSED.
SO ORDERED.18
The petitioners moved for reconsideration, but the CA denied their
motion through the resolution promulgated on November 14, 2007.19
Issues
The petitioners now appeal, raising the following grounds, to wit:
A.
THE COURT OF APPEALS, IN DISMISSING THE APPEAL OF
THE PETITIONERS AND DENYING THEIR MOTION FOR
RECONSIDERATION, ERRED INRULING THAT THE ISSUE
INVOLVED IS A PURELY LEGAL QUESTION.
B.
THE COURT OF APPEALS ERRED IN NOT REVERSING THE
DECISION OF BRANCH 19 OF THE REGIONAL TRIAL COURT
OF MANILA DATED 26 APRIL 2002 DENYING PETITIONERS’
PRAYER FOR REFUND OF THE AMOUNTS PAID BY THEM
UNDER PROTEST AND DISMISSING THE PETITION FOR
CERTIORARI FILED BY THE PETITIONERS.
C.
THE COURT OF APPEALS ERRED IN NOT RULING THAT THE
ACT OF THE CITY TREASURER OF MANILA IN IMPOSING,
ASSESSING AND COLLECTING THE ADDITIONAL BUSINESS
TAX UNDER SECTION 21 OFORDINANCE NO. 7794, AS
AMENDED BY ORDINANCE NO. 7807, ALSO KNOWN AS THE
REVENUE CODE OF THE CITY OFMANILA, IS CONSTITUTIVE
OF DOUBLE TAXATION AND VIOLATIVE OF THE LOCAL
GOVERNMENT CODE OF 1991.20
The main issues for resolution are, therefore, (1) whether or not the CA
properly denied due course to the appeal for raising pure questions of
law; and (2) whether or not the petitioners were entitled to the tax credit
or tax refund for the taxes paid under Section 21, supra.
Ruling
The appeal is meritorious.
1.The CA did not err in dismissing the appeal;
but the rules should be liberally applied
for the sake of justice and equity
The Rules of Courtprovides three modes of appeal from the decisions
and final orders of the RTC, namely: (1) ordinary appeal or appeal by
writ of error under Rule 41, where the decisionsand final orders were
rendered in civil or criminal actions by the RTC in the exercise of
original jurisdiction; (2) petition for review under Rule 42, where the
decisions and final orders were rendered by the RTC in the exerciseof
appellate jurisdiction; and (3) petition for review on certiorarito the
Supreme Court under Rule 45.21 The first mode of appeal is taken to the
CA on questions of fact, or mixed questions of fact and law. The
second mode of appeal is brought to the CA on questions of fact, of
law, or mixed questions of fact and law.22 The third mode of appeal is
elevated to the Supreme Court only on questions of law. 23
The distinction between a question oflaw and a question of fact is well
established. On the one hand, a question of law ariseswhen there is
doubt as to what the law is on a certain state of facts; on the other, there
is a question of fact when the doubt arises asto the truth or falsity of the
alleged facts.24 According to Leoncio v. De Vera:25
x x x For a question to beone of law, the same must not involve an
examination of the probative value ofthe evidence presented by the
litigants or any of them. The resolution of the issue must restsolely on
what the law provides on the given set of circumstances. Once it is clear
that the issue invites a review of the evidence presented, the question
posed is one of fact. Thus, the test of whether a question isone of law or
offact is not the appellation given to such question by the party raising
the same; rather, it is whether the appellate court can determine the
issue raised without reviewing or evaluating the evidence, in which
case, it is a question oflaw; otherwise it is a question of fact. 26
The nature of the issues to be raised on appeal can be gleaned from the
appellant’s notice of appeal filed in the trial court, and from the
appellant’s brief submitted to the appellate court. 27 In this case, the
petitioners filed a notice of appeal in which they contended that the
April 26, 2002 decision and the order of July 17, 2002 issued by the
RTC denying their consolidated motion for reconsideration were
contrary to the facts and law obtaining in the consolidated cases. 28 In
their consolidated memorandum filed in the CA, they essentially
assailed the RTC’s ruling that the taxes imposed on and collected from
the petitioners under Section 21 of the Revenue Code of Manila
constituted double taxation in the strict, narrow or obnoxious sense.
Considered together, therefore, the notice of appeal and consolidated
memorandum evidently did notraise issues that required the
reevaluation of evidence or the relevance of surrounding circumstances.
The CA rightly concluded that the petitioners thereby raised only a
question of law. The dismissal of their appeal was proper, strictly
speaking, because Section 2, Rule 50 of the Rules of Court provides
that an appeal from the RTC to the CA raising only questions of law
shall be dismissed;
and that an appeal erroneously taken to the CA shall be outrightly
dismissed.29
2.Collection of taxes pursuant to Section 21 of the
Revenue Code of Manila constituted double taxation
The foregoing notwithstanding, the Court, given the circumstances
obtaining herein and in light of jurisprudence promulgated subsequent
to the filing of the petition, deems it fitting and proper to adopt a liberal
approach in order to render a justand speedy disposition of the
substantive issue at hand. Hence, we resolve, bearing inmind the
following pronouncement in Go v. Chaves:30
Our rules of procedure are designed to facilitate the orderly disposition
of cases and permit the prompt disposition of unmeritorious cases
which clog the court dockets and do little more than waste the courts’
time. These technical and procedural rules, however, are intended to
ensure, rather than suppress, substantial justice. A deviation from their
rigid enforcement may thus be allowed, as petitioners should be given
the fullest opportunity to establish the merits of their case, rather than
lose their property on mere technicalities. We held in Ong Lim Sing, Jr.
v. FEB Leasing and Finance Corporation that:
Courts have the prerogative to relax procedural rules of even the most
mandatory character, mindful of the duty to reconcile both the need to
speedily put an end to litigation and the parties' right to due process.In
numerous cases, this Court has allowed liberal construction of the rules
when to do so would serve the demands of substantial justice and
equity.
The petitioners point out that although Section 21 of the Revenue Code
of Manila was not itself unconstitutional or invalid, its enforcement
against the petitioners constituted double taxation because the local
business taxes under Section 15 and Section 17 of the Revenue Code of
Manila were already being paid by them.31 They contend that the
proviso in Section 21 exempted all registered businesses in the City of
Manila from paying the tax imposed under Section 21;32 and that the
exemption was more in accord with Section 143 of the Local
Government Code,33 the law that vested in the municipal and city
governments the power to impose business taxes.
The respondents counter, however, that double taxation did not occur
from the imposition and collection of the tax pursuant to Section 21 of
the Revenue Code of Manila;34 that the taxes imposed pursuant to
Section 21 were in the concept of indirect taxes upon the consumers of
the goods and services sold by a business establishment;35 and that the
petitioners did not exhaust their administrative remedies by first
appealing to the Secretary of Justice to challenge the constitutionalityor
legality of the tax ordinance.36
In resolving the issue of double taxation involving Section 21 of the
Revenue Code of Manila, the Court is mindful of the ruling in City of
Manila v. Coca-Cola Bottlers Philippines, Inc.,37 which has been
reiterated in Swedish Match Philippines, Inc. v. The Treasurer of the
City of Manila.38 In the latter, the Court has held:
x x x [T]he issue of double taxation is not novel, as it has already been
settled by this Court in The City of Manila v. Coca-Cola Bottlers
Philippines, Inc.,in this wise:
Petitioners obstinately ignore the exempting proviso in Section 21 of
Tax Ordinance No. 7794, to their own detriment.1âwphi1 Said
exempting proviso was precisely included in said section so as to avoid
double taxation.
Double taxation means taxingthe same property twice when it should be
taxed only once; that is, "taxing the same person twice by the same
jurisdictionfor the same thing." It is obnoxious when the taxpayer is
taxed twice, when it should be but once. Otherwise described as "direct
duplicate taxation," the two taxes must be imposed on the same subject
matter, for the same purpose, by the same taxing authority, within the
same jurisdiction, during the same taxing period; and the taxes must be
of the same kind or character.
Using the aforementioned test, the Court finds that there is indeed
double taxation if respondent is subjected to the taxes under both
Sections 14 and 21 of Tax Ordinance No. 7794, since these are being
imposed: (1) on the same subject matter – the privilege of doing
business in the City of Manila; (2) for the same purpose – to make
persons conducting business within the City of Manila contribute tocity
revenues; (3) by the same taxing authority – petitioner Cityof Manila;
(4) within the same taxing jurisdiction – within the territorial
jurisdiction of the City of Manila; (5) for the same taxing periods – per
calendar year; and (6) of the same kind or character – a local business
tax imposed on gross sales or receipts of the business.
The distinction petitioners attempt to make between the taxes under
Sections 14 and 21 of Tax Ordinance No. 7794 is specious. The Court
revisits Section 143 of the LGC, the very source of the power of
municipalities and cities to impose a local business tax, and to which
any local business tax imposed by petitioner City of Manila must
conform. It is apparent from a perusal thereof that when a municipality
or city has already imposed a business tax on manufacturers, etc.of
liquors, distilled spirits, wines, and any other article of commerce,
pursuant to Section 143(a) of the LGC, said municipality or city may no
longer subject the same manufacturers, etc.to a business tax under
Section 143(h) of the same Code. Section 143(h) may be imposed only
on businesses that are subject to excise tax, VAT, or percentagetax
under the NIRC, and that are "not otherwise specified in preceding
paragraphs." In the same way, businesses such as respondent’s, already
subject to a local business tax under Section 14 of Tax Ordinance No.
7794 [which is based on Section 143(a) of the LGC], can no longer be
made liable for local business tax under Section 21 of the same Tax
Ordinance [which is based on Section 143(h) of the LGC].
Based on the foregoing reasons, petitioner should not have been
subjected to taxes under Section 21 of the ManilaRevenue Code for the
fourth quarter of 2001, considering thatit had already been paying local
business tax under Section 14 of the same ordinance.
xxxx
Accordingly, respondent’s assessment under both Sections 14 and 21
had no basis. Petitioner is indeed liable to pay business taxes to the City
of Manila; nevertheless, considering that the former has already paid
these taxes under Section 14 of the Manila Revenue Code, it is exempt
from the same payments under Section 21 of the same code. Hence,
payments made under Section 21 must be refunded in favor of
petitioner.
It is undisputed thatpetitioner paid business taxes based on Sections 14
and 21 for the fourth quarter of 2001 in the total amount of
₱470,932.21. Therefore, it is entitled to a refund of ₱164,552.04
corresponding to the payment under Section 21 of the Manila Revenue
Code.
On the basis of the rulings in Coca-Cola Bottlers Philippines, Inc. and
Swedish Match Philippines, Inc., the Court now holds that all the
elements of double taxation concurred upon the Cityof Manila’s
assessment on and collection from the petitioners of taxes for the first
quarter of 1999 pursuant to Section 21 of the Revenue Code of Manila.
Firstly, because Section 21 of the Revenue Code of Manila imposed the
tax on a person who sold goods and services in the course of trade or
business based on a certain percentage ofhis gross sales or receipts in
the preceding calendar year, while Section 15 and Section 17 likewise
imposed the tax on a person who sold goods and services in the course
of trade or business but only identified such person with particularity,
namely, the wholesaler, distributor or dealer (Section 15), and the
retailer (Section 17), all the taxes – being imposed on the privilege of
doing business in the City of Manila in order to make the taxpayers
contributeto the city’s revenues – were imposed on the same subject
matter and for the same purpose.
Secondly, the taxes were imposed by the same taxing authority (the
City of Manila) and within the same jurisdiction in the same taxing
period (i.e., per calendar year).
Thirdly, the taxes were all in the nature of local business taxes.
We note that although Coca-Cola Bottlers Philippines, Inc. and
Swedish Match Philippines, Inc. involved Section 21 vis-à-vis Section
14 (Tax on Manufacturers, Assemblers and Other Processors)39 of the
Revenue Code of Manila, the legal principlesenunciated therein should
similarly apply because Section 15 (Tax on Wholesalers, Distributors,
or Dealers)and Section 17 (Tax on Retailers) of the Revenue Code of
Manila imposed the same nature of tax as that imposed under Section
14, i.e., local business tax, albeit on a different subject matter or group
of taxpayers.
In fine, the imposition of the tax under Section 21 of the Revenue Code
of Manila constituted double taxation, and the taxes collected pursuant
thereto must be refunded.
WHEREFORE, the Court GRANTS the petition for review on
certiorari; REVERSES and SETS ASIDE the resolutions promulgated
on June 18, 2007 and November 14, 2007 in CA-G.R. SP No. 72191;
and DIRECTS the City of Manila to refund the payments made by the
petitioners of the taxes assessed and collected for the first quarter of
1999 pursuant to Section 21 of the Revenue Code of Manila.
No pronouncement on costs of suit.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice
WE CONCUR:
MARIA LOURDES P. A. SERENO
Chief Justice
TERESITA J. LEONARDO- MARTIN S. VILLARAMA,
DE CASTRO JR.
Associate Justice Associate Justice
BIENVENIDO L. REYES
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that
the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court's
Division.
MARIA LOURDES P. A. SERENO
Chief Justice
EN BANC
September 1, 2015
G.R. No. 210836
CHEVRON PHILIPPINES INC., Petitioner, 
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
RESOLUTION
BERSAMIN, J.:
Excise tax on petroleum products is essentially a tax on property, the
direct liability for which pertains to the statutory taxpayer (i.e.,
manufacturer, producer or importer). Any excise tax paid by the
statutory taxpayer on petroleum products sold to any of the entities or
agencies named in Section 135 of the National Internal Revenue Code
(NIRC) exempt from excise tax is deemed illegal or erroneous, and
should be credited or refunded to the ayor pursuant to Section 204 of
the NIRC. This is because the exemption granted under Section 135 of
the NIRC must be construed in favor of the property itself, that is, the
petroleum products.
The Case
Before the Court is the Motion for Reconsideration filed by petitioner
Chevron Philippines, Inc. (Chevron)1 vis-a-vis the resolution
promulgated on March 19, 2014,2 whereby the Court’s Second Division
denied its petition for review on certiorari for failure to show any
reversible error on the part of the Court of Tax Appeals (CTA) En
Banc. The CTA En Banc had denied Chevron’s claim for tax refund or
tax credit for the excise taxes paid on its importation of petroleum
products that it had sold to the Clark Development Corporation (CDC),
an entity exempt from direct and indirect taxes.
The Motion for Reconsideration was later on referred to the Court En
Banc after the Second Division noted that the CTA En Banc had denied
Chevron’s claim for the tax refund or tax credit based on the ruling
promulgated in Commissioner of Internal Revenue v. Pilipinas Shell
Petroleum Corporation (Pilipinas Shell) on April 25, 2012,3 but which
ruling was meanwhile reversed upon reconsideration by the First
Division through the resolution promulgated on February 19,
2014.4 The Court En Banc accepted the referral last June 16, 2015.
Antecedents
Chevron sold and delivered petroleum products to CDC in the period
from August 2007 to December 2007.5Chevron did not pass on to CDC
the excise taxes paid on the importation of the petroleum products sold
to CDC in taxable year 2007;6 hence, on June 26, 2009, it filed an
administrative claim for tax refund or issuance of tax credit certificate
in the amount of P6,542,400.00.7Considering that respondent
Commissioner of
Internal Revenue (CIR) did not act on the administrative claim for tax
refund or tax credit, Chevron elevated its claim to the CTA by petition
for review on June 29, 2009.8 The case, docketed as CTA Case No.
7939, was raffled to the CTA’s First Division.
The CTA First Division denied Chevron’s judicial claim for tax refund
or tax credit through its decision dated July 31, 2012,9 and later on also
denied Chevron’s Motion for Reconsideration on November 20, 2012. 10
In due course, Chevron appealed to the CTA En Banc (CTA EB No.
964), which, in the decision dated September 30, 2013,11 affirmed the
ruling of the CTA First Division, stating that there was nothing in
Section 135(c) of the NIRC that explicitly exempted Chevron as the
seller of the imported petroleum products from the payment of the
excise taxes; and holding that because it did not fall under any of the
categories exempted from paying excise tax, Chevron was not entitled
to the tax refund or tax credit.
The CTA En Banc noted that:
Considering that an excise tax is in the nature of an indirect tax where
the tax burden can be shifted, Section 135(c) of the NIRC of 1997, as
amended, should be construed as prohibiting the shifting of the burden
of the excise tax to tax-exempt entities who buys petroleum products
from the manufacturer/seller by incorporating the excise tax component
as an added cost in the price fixed by the manufacturer/seller.
xxxx
The above discussion is in line with the pronouncement made by the
Supreme Court in the case of Commissioner of Internal Revenue v.
Pilipinas Shell Petroleum Corporation (Shell case), involving Shell’s
claim for excise tax refund for petroleum products sold to international
carriers. The Supreme Court held that the exemption from excise tax
payment on petroleum products under Section 135(a) of the NIRC of
1997, as amended, is conferred on international carriers who purchased
the same for their use or consumption outside the Philippines. The oil
companies which sold such petroleum products to international carriers
are not entitled to a refund of excise taxes previously paid on the
petroleum products sold. x x x
xxxx
Accordingly, petitioner is not entitled to any refund or issuance of tax
credit certificate on excise taxes paid on its importation of petroleum
products sold to CDC pursuant to the doctrine laid down by the
Supreme Court in the Shell case.12
Chevron sought reconsideration, but the CTA En Banc denied its
motion for that purpose in the resolution dated January 7, 2014. 13
Chevron appealed to the Court,14 but the Court (Second Division)
denied the petition for review on certiorari through the resolution
promulgated on March 19, 2014 for failure to show any reversible error
on the part of the CTA En Banc.
Hence, Chevron has filed the Motion for Reconsideration, submitting
that it was entitled to the tax refund or tax credit because ruling
promulgated on April 25, 2012 in Pilipinas Shell,15 on which the CTA
En Banc had based its denial of the claim of Chevron, was meanwhile
reconsidered by the Court’s First Division on February 19, 2014.16
Issue
The lone issue for resolution is whether Chevron was entitled to the tax
refund or the tax credit for the excise taxes paid on the importation of
petroleum products that it had sold to CDC in 2007.
Ruling of the Court
Chevron’s Motion for Reconsideration is meritorious.
Pilipinas Shell concerns the manufacturer’s entitlement to refund or
credit of the excise taxes paid on the petroleum products sold to
international carriers exempt from excise taxes under Section 135(a) of
the NIRC.
However, the issue raised here is whether the importer (i.e., Chevron)
was entitled to the refund or credit of the excise taxes it paid on
petroleum products sold to CDC, a tax-exempt entity under Section
135(c) of the NIRC.
Notwithstanding that the claims for refund or credit of excise taxes
were premised on different subsections of Section 135 of the NIRC, the
basic tax principle applicable was the same in both cases – that excise
tax is a tax on property; hence, the exemption from the excise tax
expressly granted under Section 135 of the NIRC must be construed in
favor of the petroleum products on which the excise tax was initially
imposed.
Accordingly, the excise taxes that Chevron paid on its importation of
petroleum products subsequently sold to CDC were illegal and
erroneous, and should be credited or refunded to Chevron in accordance
with Section 204 of the NIRC.
We explain.
Under Section 12917 of the NIRC, as amended, excise taxes are imposed
on two kinds of goods, namely: (a) goods manufactured or produced in
the Philippines for domestic sales or consumption or for any other
disposition; and (b) things imported. Undoubtedly, the excise tax
imposed under Section 129 of the NIRC is a tax on property. 18
With respect to imported things, Section 131 of the NIRC declares that
excise taxes on imported things shall be paid by the owner or importer
to the Customs officers, conformably with the regulations of the
Department of Finance and before the release of such articles from the
customs house, unless the imported things are exempt from excise taxes
and the person found to be in possession of the same is other than those
legally entitled to such tax exemption. For this purpose, the statutory
taxpayer is the importer of the things subject to excise tax.
Chevron, being the statutory taxpayer, paid the excise taxes on its
importation of the petroleum products.19
Section 135 of the NIRC states:
SEC. 135. Petroleum Products Sold to International Carriers
and Exempt Entities or Agencies. – Petroleum products sold to
the following are exempt from excise tax:
(a) International carriers of Philippine or foreign registry on
their use or consumption outside the Philippines: Provided, That
the petroleum products sold to these international carriers shall be
stored in a bonded storage tank and may be disposed of only in
accordance with the rules and regulations to be prescribed by the
Secretary of Finance, upon recommendation of the
Commissioner;
(b) Exempt entities or agencies covered by tax treaties,
conventions and other international agreement for their use or
consumption: Provided, however, That the country of said foreign
international carrier or exempt entities or agencies exempts from
similar taxes petroleum products sold to Philippine carriers,
entities or agencies; and
(c) Entities which are by law exempt from direct and
indirect taxes. (Emphasis supplied.)
Pursuant to Section 135(c), supra, petroleum products sold to entities
that are by law exempt from direct and indirect taxes are exempt from
excise tax. The phrase which are by law exempt from direct and
indirect taxes describes the entities to whom the petroleum products
must be sold in order to render the exemption operative. Section 135(c)
should thus be construed as an exemption in favor of the petroleum
products on which the excise tax was levied in the first place. The
exemption cannot be granted to the buyers – that is, the entities that are
by law exempt from direct and indirect taxes – because they are not
under any legal duty to pay the excise tax.
CDC was created to be the implementing and operating arm of the
Bases Conversion and Development Authority to manage the Clark
Special Economic Zone (CSEZ).20 As a duly-registered enterprise in the
CSEZ, CDC has been exempt from paying direct and indirect taxes WE CONCUR:
pursuant to Section 2421 of Republic Act No. 7916 (The Special MARIA LOURDES P. A. SERENO
Economic Zone Act of 1995), in relation to Section 15 of Republic Act Chief Justice
No. 9400 (Amending Republic Act No. 7227, otherwise known as the
Bases Conversion Development Act of 1992).22 PRESBITERO J.
ANTONIO T. CARPIO
VELASCO, JR.
Associate Justice
Associate Justice
Inasmuch as its liability for the payment of the excise taxes accrued
immediately upon importation and prior to the removal of the
petroleum products from the customshouse, Chevron was bound to pay, TERESITA J.
and actually paid such taxes. But the status of the petroleum products as LEONARDO-DE ARTURO D. BRION
exempt from the excise taxes would be confirmed only upon their sale CASTRO Associate Justice
to CDC in 2007 (or, for that matter, to any of the other entities or Associate Justice
agencies listed in Section 135 of the NIRC). Before then, Chevron did
not have any legal basis to claim the tax refund or the tax credit as to DIOSDADO M. MARIANO C. DEL
the petroleum products. PERALTA CASTILLO
Associate Justice Associate Justice
Consequently, the payment of the excise taxes by Chevron upon its
importation of petroleum products was deemed illegal and erroneous MARTIN S. JOSE PORTUGAL
upon the sale of the petroleum products to CDC. Section 204 of the VILLARAMA, JR. PEREZ
NIRC explicitly allowed Chevron as the statutory taxpayer to claim the Associate Justice Associate Justice
refund or the credit of the excise taxes thereby paid, viz.:

(On Leave)
SEC 204. Authority of the Commissioner to Compromise, Abate and JOSE CATRAL
BIENVENIDO L.
Refund or Credit Taxes. – The Commissioner may – MENDOZA
REYES*
Associate Justice
Associate Justice
xxxx
ESTELA M. PERLAS- MARIVIC M.V.F
(C) Credit or refund taxes erroneously or illegally received or penalties BERNABE LEONEN
imposed without authority, refund the value of internal revenue stamps Associate Justice Associate Justice
when they are returned in good condition by the purchaser, and, in his
discretion, redeem or change unused stamps that have been rendered (No Part)
unfit for use and refund their value upon proof of destruction. No credit FRANCIS H. JARDELEZA**
or refund of taxes or penalties shall be allowed unless the taxpayer files Associate Justice
in writing with the Commissioner a claim for credit or refund within CERTIFICATION
two (2) years after payment of the tax or penalty: Provided, however, I certify that the conclusions in the above Resolution had been reached
That a return filed showing an overpayment shall be considered as a in consultation before the case was assigned to the writer of the opinion
written claim for credit or refund. of the Court.
MARIA LOURDES P.A. SERENO
It is noteworthy that excise taxes are considered as a kind of indirect Chief Justice
tax, the liability for the payment of which may fall on a person other
than whoever actually bears the burden of the tax. 23 Simply put, the
statutory taxpayer may shift the economic burden of the excise tax
payment to another – usually the buyer.

SECOND DIVISION
In cases involving excise tax exemptions on petroleum products under
Section 135 of the NIRC, the Court has consistently held that it is the
statutory taxpayer, not the party who only bears the economic burden, November 9, 2016
who is entitled to claim the tax refund or tax credit. 24 But the Court has
also made clear that this rule does not apply where the law grants the G.R. No. 196596
party to whom the economic burden of the tax is shifted by virtue of an
exemption from both direct and indirect taxes. In which case, such
party must be allowed to claim the tax refund or tax credit even if it is COMMISSIONER OF INTERNAL REVENUE, Petitioner 
not considered as the statutory taxpayer under the law. 25 vs.
DE LA SALLE UNIVERSITY, INC., Respondent
The general rule applies here because Chevron did not pass on to CDC
the excise taxes paid on the importation of the petroleum products, the x-----------------------x
latter being exempt from indirect taxes by virtue of Section 24 of
Republic G.R. No. 198841

Act No. 7916, in relation to Section 15 of Republic Act No. 9400, not DE LA SALLE UNIVERSITY INC., Petitioner, 
because Section 135(c) of the NIRC exempted CDC from the payment vs.
of excise tax.1âwphi1 COMMISSIONER OF INTERNAL REVENUE, Respondent.

Accordingly, conformably with Section 204(C) of the NIRC, supra, and x-----------------------x
pertinent jurisprudence, Chevron was entitled to the refund or credit of
the excise taxes erroneously paid on the importation of the petroleum G.R. No. 198941
products sold to CDC.
COMMISSIONER OF INTERNAL REVENUE, Petitioner, 
WHEREFORE, the Court GRANTS petitioner Chevron Philippines, vs.
Inc. 's Motion for Reconsideration; DIRECTS respondent DE LA SALLE UNIVERSITY, INC., Respondent.
Commissioner of Internal Revenue to refund the excise taxes in the
amount of P6,542,400.00 paid ·on the petroleum products sold to Clark
Development Corporation in the period from August 2007 to December DECISION
2007, or to issue a tax credit certificate of that amount to Chevron
Philippines, Inc. BRION, J.:

No pronouncement on costs of suit. Before the Court are consolidated petitions for review on certiorari:1

LUCAS P. BERSAMIN 1. G.R. No. 196596 filed by the Commissioner of Internal

Associate Justice Revenue (Commissioner) to assail the December 10, 2010 decision and
March 29, 2011 resolution of the Court of Tax Appeals (CTA) in En
Banc Case No. 622;2
2. G.R. No. 198841 filed by De La Salle University, Inc. (DLSU) to
assail the June 8, 2011 decision and October 4, 2011 resolution in
CTA En Banc Case No. 671;3 and
3. G.R. No. 198941 filed by the Commissioner to assail the June 8,
2011 decision and October 4, 2011 resolution in CTA En Banc Case
No. 671.4
G.R. Nos. 196596, 198841 and 198941 all originated from CTA Special
First Division (CTA Division) Case No. 7303. G.R. No. 196596
stemmed from CTA En Banc Case No. 622 filed by the Commissioner
to challenge CTA Case No. 7303. G.R. No. 198841 and 198941 both
stemmed from CTA En Banc Case No. 671 filed by DLSU to also
challenge CTA Case No. 7303.
The Factual Antecedents
Sometime in 2004, the Bureau of Internal Revenue (BIR) issued to
DLSU Letter of Authority (LOA) No. 2794 authorizing its revenue
officers to examine the latter's books of accounts and other accounting
records for all internal revenue taxes for the period Fiscal Year Ending
2003 and Unverified Prior Years.5
On May 19, 2004, BIR issued a Preliminary Assessment Notice to
DLSU.6
Subsequently on August 18, 2004, the BIR through a Formal Letter of
Demand assessed DLSU the following deficiency taxes: (1) income
tax on rental earnings from restaurants/canteens and bookstores
operating within the campus; (2) value-added tax (VAI) on business
income; and (3) documentary stamp tax (DSI) on loans and lease
contracts. The BIR demanded the payment of ₱17,303,001.12,
inclusive of surcharge, interest and penalty for taxable years 2001,
2002 and 2003.7
DLSU protested the assessment. The Commissioner failed to act on the
protest; thus, DLSU filed on August 3, 2005 a petition for review with
the CTA Division.8
DLSU, a non-stock, non-profit educational institution, principally
anchored its petition on Article XIV, Section 4 (3)of the Constitution,
which reads:
(3) All revenues and assets of non-stock, non-profit educational
institutions used actually, directly, and exclusively for educational
purposes shall be exempt from taxes and duties. xxx.
On January 5, 2010, the CTA Division partially granted DLSU's
petition for review. The dispositive portion of the decision reads:
WHEREFORE, the Petition for Review is PARTIALLY
GRANTED. The DST assessment on the loan transactions of [DLSU]
in the amount of ₱1,1681,774.00 is hereby CANCELLED. However,
[DLSU] is ORDERED TO PAY deficiency income tax, VAT and
DST on its lease contracts, plus 25% surcharge for the fiscal years
2001, 2002 and 2003 in the total amount of ₱18,421,363.53 ... xxx.
In addition, [DLSU] is hereby held liable to pay 20% delinquency
interest on the total amount due computed from September 30, 2004
until full payment thereof pursuant to Section 249(C)(3) of the
[National Internal Revenue Code]. Further, the compromise penalties
imposed by [the Commissioner] were excluded, there being no
compromise agreement between the parties.
SO ORDERED.9
Both the Commissioner and DLSU moved for the reconsideration of the
January 5, 2010 decision.10 On April 6, 2010, the CTA Division denied
the Commissioner's motion for reconsideration while it held in
abeyance the resolution on DLSU's motion for reconsideration. 11
On May 13, 2010, the Commissioner appealed to the CTA En
Banc (CTA En Banc Case No. 622) arguing that DLSU's use of its
revenues and assets for non-educational or commercial purposes
removed these items from the exemption coverage under the
Constitution.12
On May 18, 2010, DLSU formally offered to the CTA Division
supplemental pieces of documentary evidence to prove that its rental
income was used actually, directly and exclusively for educational
purposes.13 The Commissioner did not promptly object to the formal
offer of supplemental evidence despite notice. 14
On July 29, 2010, the CTA Division, in view of the supplemental
evidence submitted, reduced the amount of DLSU's tax deficiencies.
The dispositive portion of the amended decision reads:
WHEREFORE, [DLSU]'s Motion for Partial Reconsideration is
hereby PARTIALLY GRANTED. [DLSU] is hereby ORDERED TO
PAY for deficiency income tax, VAT and DST plus 25% surcharge for
the fiscal years 2001, 2002 and 2003 in the total adjusted amount
of ₱5,506,456.71 ... xxx.
In addition, [DLSU] is hereby held liable to pay 20% per
annum deficiency interest on the ... basic deficiency taxes ... until full
payment thereof pursuant to Section 249(B) of the [National Internal
Revenue Code] ... xxx.
Further, [DLSU] is hereby held liable to pay 20% per
annum delinquency interest on the deficiency taxes, surcharge and
deficiency interest which have accrued ... from September 30, 2004
until fully paid.15
Consequently, the Commissioner supplemented its petition with the
CTA En Banc and argued that the CTA Division erred in admitting
DLSU's additional evidence.16
Dissatisfied with the partial reduction of its tax liabilities, DLSU filed
a separate petition for review with the CTA En Banc (CTA En
Banc Case No. 671) on the following grounds: (1) the entire assessment
should have been cancelled because it was based on an invalid LOA;
(2) assuming the LOA was valid, the CTA Division should still have
cancelled the entire assessment because DLSU submitted evidence
similar to those submitted by Ateneo De Manila University (Ateneo) in
a separate case where the CTA cancelled Ateneo's tax
assessment;17 and (3) the CTA Division erred in finding that
a portion of DLSU's rental income was not proved to have been used
actually, directly and exclusively for educational purposes. 18
The CTA En Banc Rulings
CTA En Banc Case No. 622
The CTA En Banc dismissed the Commissioner's petition for review
and sustained the findings of the CTA Division.19
Tax on rental income
Relying on the findings of the court-commissioned Independent
Certified Public Accountant (Independent CPA), the CTA En
Banc found that DLSU was able to prove that a portion of the assessed
rental income was used actually, directly and exclusively for
educational purposes; hence, exempt from tax. 20 The CTA En Banc was
satisfied with DLSU's supporting evidence confirming that part of its
rental income had indeed been used to pay the loan it obtained to build
the university's Physical Education – Sports Complex.21
Parenthetically, DLSU's unsubstantiated claim for exemption, i.e., the
part of its income that was not shown by supporting documents to have
been actually, directly and exclusively used for educational purposes,
must be subjected to income tax and VAT.22
DST on loan and mortgage transactions
Contrary to the Commissioner's contention,
DLSU froved its remittance of the DST due on its loan and mortgage
documents.23 The CTA En Banc found that DLSU's DST payments had
been remitted to the BIR, evidenced by the stamp on the documents
made by a DST imprinting machine, which is allowed under Section
200 (D) of the National Internal Revenue Code (Tax Code)24 and
Section 2 of Revenue Regulations (RR) No. 15-2001.25
Admissibility of DLSU's supplemental evidence
The CTA En Banc held that the supplemental pieces of documentary
evidence were admissible even if DLSU formally offered them only
when it moved for reconsideration of the CTA Division's original
decision. Notably, the law creating the CTA provides that proceedings
before it shall not be governed strictly by the technical rules of
evidence.26

The Commissioner moved but failed to obtain a reconsideration of the

CTA En Banc's December 10, 2010 decision.27 Thus, she came to this
court for relief through a petition for review on certiorari (G.R. No.
196596).

CTA En Banc Case No. 671

The CTA En Banc partially granted DLSU's petition for review and

further reduced its tax liabilities to ₱2,554,825.47inclusive of
surcharge.28

On the validity of the Letter of Authority

The issue of the LOA' s validity was raised during trial;29 hence, the
issue was deemed properly submitted for decision and reviewable on
appeal.

Citing jurisprudence, the CTA En Banc held that a LOA should cover

only one taxable period and that the practice of issuing a LOA covering
audit of unverified prior years is prohibited.30 The prohibition is
consistent with Revenue Memorandum Order (RMO) No. 43-90, which
provides that if the audit includes more than one taxable period, the
other periods or years shall be specifically indicated in the LOA. 31

In the present case, the LOA issued to DLSU is for Fiscal Year Ending
2003 and Unverified Prior Years. Hence, the assessments for
deficiency income tax, VAT and DST for taxable years 2001 and
2002 are void, but the assessment for taxable year 2003 is valid.32

On the applicability of the Ateneo case

The CTA En Banc held that the Ateneo case is not a valid precedent

FIRST DIVISION
because it involved different parties, factual settings, bases of
assessments, sets of evidence, and defenses.33
February 13, 2017
On the CTA Division's appreciation of the evidence
G.R. No. 203514
The CTA En Banc affirmed the CTA Division's appreciation of DLSU'
s evidence. It held that while DLSU successfully proved that a portion COMMISSIONER OF INTERNAL REVENUE, Petitioner 
of its rental income was transmitted and used to pay the loan obtained vs.
to fund the construction of the Sports Complex, the rental income ST. LUKE’S MEDICAL CENTER, INC., Respondent
from other sources were not shown to have been actually, directly and
exclusively used for educational purposes.34 DECISION

Not pleased with the CTA En Banc's ruling, both DLSU (G.R. No.
198841) and the Commissioner (G.R. No. 198941) came to this Court
for relief.
The Consolidated Petitions
G.R. No. 196596
The Commissioner submits the following arguments:
DEL CASTILLO, J.:
The doctrine of stare decisis dictates that "absent any powerful
countervailing considerations, like cases ought to be decided alike." 1
This Petition for Review on Certiorari2 under Rule 45 of the Rules of
Court assails the May 9, 2012 Decision3 and the September 17, 2012
Resolution4 of the Court of Tax Appeals (CTA) in CTA EB Case No.
716.

First, DLSU's rental income is taxable regardless of how such income
is derived, used or disposed of.35 DLSU's operations of canteens and
bookstores within its campus even though exclusively serving the
university community do not negate income tax liability. 36
The Commissioner contends that Article XIV, Section 4 (3) of the
Constitution must be harmonized with Section 30 (H) of the Tax Code,
Factual Antecedents
On December 14, 2007, respondent St. Luke’s Medical Center, Inc.
(SLMC) received from the Large Taxpayers Service-Documents
Processing and Quality Assurance Division of the Bureau of Internal
Revenue (BIR) Audit Results/Assessment Notice Nos. QA-07-
0000965 and QA-07-000097,6 assessing respondent SLMC deficiency
income tax under Section 27(B)7 of the 1997 National Internal Revenue
Code (NIRC), as amended, for taxable year 2005 in the amount of
₱78,617,434.54 and for taxable year 2006 in the amount of
₱57,119,867.33.

On January 14, 2008, SLMC filed with petitioner Commissioner of

Internal Revenue (CIR) an administrative protest8assailing the
assessments. SLMC claimed that as a non-stock, non-profit charitable
and social welfare organization under Section 30(E) and (G) 9 of the
1997 NIRC, as amended, it is exempt from paying income tax.

On April 25, 2008, SLMC received petitioner CIR's Final Decision on

the Disputed Assessment10 dated April 9, 2008 increasing the
deficiency income for the taxable year 2005 tax to ₱82,419,522.21 and
for the taxable year 2006 to ₱60,259,885.94, computed as follows:
For Taxable Year 2005:
ASSESSMENT NO. QA-07-000096
Ruling of the Court of Tax Appeals Division
On August 26, 2010, the CTA Division rendered a Decision13 finding
SLMC not liable for deficiency income tax under Section 27(B) of the
1997 NIRC, as amended, since it is exempt from paying income tax
under Section 30(E) and (G) of the same Code. Thus:

WHEREFORE, premises considered, the Petition for Review is hereby

PARTICULARS AMOUNT GRANTED. Accordingly, Audit Results/Assessment Notice Nos. QA-
07-000096 and QA-07-000097, assessing petitioner for alleged
Sales/Revenues/Receipts/Fees ?3,623,511,616.00 deficiency income taxes for the taxable years 2005 and 2006,
respectively, are hereby CANCELLED and SET ASIDE.
Less: Cost of Sales/Services 2,643,049, 769.00
SO ORDERED.14
Gross Income From Operation 980,461,847.00
Add: Non-Operating & Other CIR moved for reconsideration but the CTA Division denied the same
-
Income in its December 28, 2010 Resolution.15
Total Gross Income 980,461,847.00
This prompted CIR to file a Petition for Review16 before the CTA En
Less: Deductions 481,266,883 .00 Banc.
Net Income Subject to Tax 499, 194,964.00
Ruling of the Court of Tax Appeals En Banc
XTaxRate 10%
On May 9, 2012, the CTA En Banc affirmed the cancellation and
Tax Due 49,919,496.40
setting aside of the Audit Results/Assessment Notices issued against
Less: Tax Credits - SLMC. It sustained the findings of the CTA Division that SLMC
complies with all the requisites under Section 30(E) and (G) of the 1997
Deficiency Income Tax 49,919,496.40 NIRC and thus, entitled to the tax exemption provided therein. 17
Add: Increments  
On September 17, 2012, the CTA En Banc denied CIR's Motion for
25% Surcharge 12,479,874.10 Reconsideration.
20% Interest Per Annum
19,995,151.71 Issue
(4115/06-4/15/08)
Compromise Penalty for Late Hence, CIR filed the instant Petition under Rule 45 of the Rules of
25,000.00
Payment Court contending that the CTA erred in exempting SLMC from the
payment of income tax.
Total increments 32,500,025.81
Total Amount Due ?82,419,522.21 Meanwhile, on September 26, 2012, the Court rendered a Decision in
G.R. Nos. 195909 and 195960, entitled Commissioner of Internal
Revenue v. St. Luke's Medical Center, Inc., 18 finding SLMC not entitled
For Taxable Year 2006:
to the tax exemption under Section 30(E) and (G) of the NIRC of 1997
as it does not operate exclusively for charitable or social welfare
ASSESSMENT NO. QA-07-000097 purposes insofar as its revenues from paying patients are concerned.
PARTICULARS [AMOUNT] Thus, the Court disposed of the case in this manner:

Sales/Revenues/Receipts/Fees ?3,8 l 5,922,240.00 WHEREFORE, the petition of the Commissioner of Internal Revenue
Less: Cost of Sales/Services 2,760,518,437.00 in G.R. No. 195909is PARTLY GRANTED. The Decision of the Court
of Tax Appeals En Banc dated 19 November 2010 and its Resolution
Gross Income From Operation 1,055,403,803.00 dated 1 March 2011 in CTA Case No. 6746 are MODIFIED. St. Luke's
Medical Center, Inc. is ORDERED TO PAY the deficiency income tax
Add: Non-Operating & Other in 1998 based on the 10% preferential income tax rate under Section
-
Income 27(B) of the National Internal Revenue Code. However, it is not liable
for surcharges and interest on such deficiency income tax under
Total Gross Income 1,055,403,803.00
Sections 248 and 249 of the National Internal Revenue Code. All other
Less: Deductions 640,147,719.00 parts of the Decision and Resolution of the Court of Tax Appeals are
AFFIRMED.
Net Income Subject to Tax 415,256,084.00
XTaxRate 10% The petition of St. Luke's Medical Center, Inc. in G.R. No. 195960 is
DENIED for violating Section I, Rule 45 of the Rules of Court.
Tax.Due 41,525,608.40
SO ORDERED.19
Less: Tax Credits -
Deficiency Income Tax 41,525,608.40 Considering the foregoing, SLMC then filed a Manifestation and
Motion20 informing the Court that on April 30, 2013, it paid the BIR the
Add: Increments -
amount of basic taxes due for taxable years 1998, 2000-2002, and
25% Surcharge 10,381,402.10 2004-2007, as evidenced by the payment confirmation21 from the BIR,
and that it did not pay any surcharge, interest, and compromise penalty
20% Interest Per Annum (4/15/07- in accordance with the above-mentioned Decision of the Court. In view
8,327,875.44
4/15/08) of the payment it made, SLMC moved for the dismissal of the instant
case on the ground of mootness.
Compromise Penalty for Late
25,000.00
Payment
CIR opposed the motion claiming that the payment confirmation
Total increments 18,734,277.54 submitted by SLMC is not a competent proof of payment as it is a mere
photocopy and does not even indicate the quarter/sand/or year/s said
Total Amount Due ?60,259,885.9411 payment covers.22

Aggrieved, SLMC elevated the matter to the CTA via a Petition for In reply,23 SLMC submitted a copy of the Certification24 issued by the
Review,12 docketed as CTA Case No. 7789. Large Taxpayers Service of the BIR dated May 27, 2013, certifying
that, "[a]s far as the basic deficiency income tax for taxable years 2000,
2001, 2002, 2004, 2005, 2006, 2007 are concen1ed, this Office
considers the cases closed due to the payment made on April 30, 2013."
SLMC likewise submitted a letter25 from the BIR dated November 26,
2013 with attached Certification of Payment26and application for
abatement,27 which it earlier submitted to the Court in a related case,
G.R. No. 200688, entitled Commissioner of Internal Revenue v. St.
Luke's Medical Center, Inc.28
Thereafter, the parties submitted their respective memorandum.
CIR 's Arguments
CIR argues that under the doctrine of stare decisis SLMC is subject to
10% income tax under Section 27(B) of the 1997 NIRC.29 It likewise
asserts that SLMC is liable to pay compromise penalty pursuant to
Section 248(A)30 of the 1997 NIRC for failing to file its quarterly
income tax returns.31
As to the alleged payment of the basic tax, CIR contends that this does
not render the instant case moot as the payment confirmation submitted
by SLMC is not a competent proof of payment of its tax liabilities. 32
SLMC's Arguments
SLMC, on the other hand, begs the indulgence of the Court to revisit its
ruling in G.R. Nos. 195909 and 195960 (Commissioner of Internal
Revenue v. St. Luke's Medical Center, Inc.)33 positing that earning a
profit by a charitable, benevolent hospital or educational institution
does not result in the withdrawal of its tax exempt privilege. 34 SLMC
further claims that the income it derives from operating a hospital is not
income from "activities conducted for profit."35 Also, it maintains that
in accordance with the ruling of the Court in G.R. Nos. 195909 and
195960 (Commissioner of Internal Revenue v. St. Luke's Medical
Center, Inc.),36 it is not liable for compromise penalties.37
In any case, SLMC insists that the instant case should be dismissed in
view of its payment of the basic taxes due for taxable years 1998, 2000-
2002, and 2004-2007 to the BIR on April 30, 2013.38
Our Ruling
SLMC is liable for income tax under
Section 27(B) of the 1997 NIRC insofar
as its revenues from paying patients are
concerned
The issue of whether SLMC is liable for income tax under Section
27(B) of the 1997 NIRC insofar as its revenues from paying patients are
concerned has been settled in G.R. Nos. 195909 and
195960 (Commissioner of Internal Revenue v. St. Luke's Medical
Center, Inc.),39 where the Court ruled that:
x x x We hold that Section 27(B) of the NIRC does not remove the
income tax exemption of proprietary non-profit hospitals under Section
30(E) and (G). Section 27(B) on one hand, and Section 30(E) and (G)
on the other hand, can be construed together without the removal of
such tax exemption. The effect of the introduction of Section 27(B) is
to subject the taxable income of two specific institutions, namely,
proprietary non-profit educational institutions and proprietary non-
profit hospitals, among the institutions covered by Section 30, to the
10% preferential rate under Section 27(B) instead of the ordinary 30%
corporate rate under the last paragraph of Section 30 in relation to
Section 27(A)(l).
Section 27(B) of the NIRC imposes a 10% preferential tax rate on the
income of (1) proprietary non-profit educational institutions and (2)
proprietary non-profit hospitals. The only qualifications for hospitals
are that they must be proprietary and non-profit. 'Proprietary' means
private, following the definition of a 'proprietary educational institution'
as 'any private school maintained and administered by private
individuals or groups' with a government permit. 'Non-profit' means no
net income or asset accrues to or benefits any member or specific
person, with all the net income or asset devoted to the institution's
purposes and all its activities conducted not for profit.
'Non-profit' does not necessarily mean 'charitable.' In Collector of
Internal Revenue v. Club Filipino, Inc. de Cebu, this Court considered
as non-profit a sports club organized for recreation and entertainment of
its stockholders and members. The club was primarily funded by
membership fees and dues. If it had profits, they were used for
overhead expenses and improving its golf course. The club was non-
profit because of its purpose and there was no evidence that it was
engaged in a profit-making enterprise.
The sports club in Club Filipino, Inc. de Cebu may be non-profit, but it
was not charitable. Tue Court defined 'charity' in Lung Center of the
Philippines v. Quezon City as 'a gift, to be applied consistently with
existing laws, for the benefit of an indefinite number of persons, either
by bringing their minds and hearts under the influence of education or
religion, by assisting them to establish themselves in life or [by]
otherwise lessening the burden of government.' A nonprofit club for the
benefit of its members fails this test. An organization may be
considered as non-profit if it does not distribute any part of its income
to stockholders or members. However, despite its being a tax exempt
institution, any income such institution earns from activities conducted
for profit is taxable, as expressly provided in the last paragraph of
Section 30.
To be a charitable institution, however, an organization must meet the
substantive test of charity in Lung Center. The issue in Lung
Center concerns exemption from real property tax and not income tax.
However, it provides for the test of charity in our jurisdiction. Charity is
essentially a gift to an indefinite number of persons which lessens the
burden of government. In other words, charitable institutions provide
for free goods and services to the public which would otherwise fall on
the shoulders of government. Thus, as a matter of efficiency, the
government forgoes taxes which should have been spent to address
public needs, because certain private entities already assume a part of
the burden. This is the rationale for the tax exemption of charitable
institutions. The loss of taxes by the government is compensated by its
relief from doing public works which would have been funded by
appropriations from the Treasury.
Charitable institutions, however, are not ipso facto entitled to a tax
exemption. The requirements for a tax exemption are specified by the
law granting it. The power of Congress to tax implies the power to
exempt from tax. Congress can create tax exemptions, subject to the
constitutional provision that '[n]o law granting any tax exemption shall
be passed without the concurrence of a majority of all the Members of
Congress.' The requirements for a tax exemption are strictly construed
against the taxpayer because an exemption restricts the collection of
taxes necessary for the existence of the government.
The Court in Lung Center declared that the Lung Center of the
Philippines is a charitable institution for the purpose of exemption from
real property taxes. This ruling uses the same premise as Hospital de
San Juan and Jesus Sacred Heart College which says that receiving
income from paying patients does not destroy the charitable nature of a
hospital.
As a general principle, a charitable institution does not lose its character
as such and its exemption from taxes simply because it derives income
from paying patients, whether outpatient, or confined in the hospital, or
receives subsidies from the government, so long as the money received
is devoted or used altogether to the charitable object which it is
intended to achieve; and no money inures to the private benefit of the
persons managing or operating the institution.
For real property taxes, the incidental generation of income is
permissible because the test of exemption is the use of the property.
The Constitution provides that '[c]haritable institutions, churches and
personages or convents appurtenant thereto, mosques, non-profit
cemeteries, and all lands, buildings, and improvements, actually,
directly, and exclusively used for religious, charitable, or educational
purposes shall be exempt from taxation.' The test of exemption is not
strictly a requirement on the intrinsic nature or character of the
institution. The test requires that the institution use property in a certain
way, i.e., for a charitable purpose. Thus, the Court held that the Lung
Center of the Philippines did not lose its charitable character when it
used a portion of its lot for commercial purposes. The effect of failing
to meet the use requirement is simply to remove from the tax exemption
that portion of the property not devoted to charity.
The Constitution exempts charitable institutions only from real property
taxes. In the NIRC, Congress decided to extend the exemption to
income taxes. However, the way Congress crafted Section 30(E) of the
NIRC is materially different from Section 28(3), Article VI of the
Constitution. Section 30(E) of the NIRC defines the corporation or
association that is exempt from income tax. On the other hand, Section
28(3), Article VI of the Constitution does not define a charitable
institution, but requires that the institution 'actually, directly and
exclusively' use the property for a charitable purpose.
Section 30(E) of the NIRC provides that a charitable institution must
be:
(1) A non-stock corporation or association;
(2) Organized exclusively for charitable purposes;
(3) Operated exclusively for charitable purposes; and
(4) No part of its net income or asset shall belong to or inure to the
benefit of any member, organizer, officer or any specific person.
Thus, both the organization and operations of the charitable institution
must be devoted 'exclusively' for charitable purposes. The organization
of the institution refers to its corporate form, as shown by its articles of
incorporation, by-laws and other constitutive documents. Section 30(E)
of the NIRC specifically requires that the corporation or association be
non-stock, which is defined by the Corporation Code as 'one where no
part of its income is distributable as dividends to its members, trustees,
or officers' and that any profit 'obtain[ed] as an incident to its operations
shall, whenever necessary or proper, be used for the furtherance of the
purpose or purposes for which the corporation was organized.'
However, under Lung Center, any profit by a charitable institution must
not only be plowed back 'whenever necessary or proper,' but must be
'devoted or used altogether to the charitable object which it is intended
to achieve.'
The operations of the charitable institution generally refer to its regular
activities. Section 30(E) of the NIRC requires that these operations be
exclusive to charity. There is also a specific requirement that 'no part of
[the] net income or asset shall belong to or inure to the benefit of any
member, organizer, officer or any specific person.' The use of lands,
buildings and improvements of the institution is but a part of its
operations.
There is no dispute that St. Luke's is organized as a non-stock and non-
profit charitable institution. However, this does not automatically
exempt St. Luke's from paying taxes. This only refers to the
organization of St. Luke's. Even if St. Luke's meets the test of charity, a
charitable institution is not ipso facto tax exempt. To be exempt from
real property taxes, Section 28(3), Article VI of the Constitution
requires that a charitable institution use the property 'actually, directly
and exclusively' for charitable purposes. To be exempt from income
taxes, Section 30(E) of the NIRC requires that a charitable institution
must be 'organized and operated exclusively' for charitable purposes.
Likewise, to be exempt from income taxes, Section 30(G) of the NIRC
requires that the institution be 'operated exclusively' for social welfare.
However, the last paragraph of Section 30 of the NIRC qualifies the
words 'organized and operated exclusively' by providing that:
Notwithstanding the provisions in the preceding paragraphs, the income
of whatever kind and character of the foregoing organizations from any
of their properties, real or personal, or from any of their activities
conducted for profit regardless of the disposition made of such income,
shall be subject to tax imposed under this Code.
In short, the last paragraph of Section 30 provides that if a tax exempt
charitable institution conducts 'any' activity for profit, such activity is
not tax exempt even as its not-for-profit activities remain tax exempt.
This paragraph qualifies the requirements in Section 30(E) that the
'[n]on-stock corporation or association [must be] organized and
operated exclusively for . . . charitable . . . purposes . . . . ' It likewise
qualifies the requirement in Section 30(G) that the civic organization
must be 'operated exclusively' for the promotion of social welfare.
Thus, even if the charitable institution must be 'organized and operated
exclusively' for charitable purposes, it is nevertheless allowed to engage
in 'activities conducted for profit' without losing its tax exempt status
for its not-for-profit activities. The only consequence is that the 'income
of whatever kind and character' of a charitable institution 'from any of
its activities conducted for profit, regardless of the disposition made of
such income, shall be subject to tax.' Prior to the introduction of Section
27(B), the tax rate on such income from for-profit activities was the
ordinary corporate rate under Section 27(A). With the introduction of
Section 27(B), the tax rate is now 10%.
In 1998, St. Luke's had total revenues of ₱l,730,367,965 from services
to paying patients. It cannot be disputed that a hospital which receives
approximately ₱l.73 billion from paying patients is not an institution
'operated exclusively' for charitable purposes. Clearly, revenues from
paying patients are income received from 'activities conducted for
profit.' Indeed, St. Luke's admits that it derived profits from its paying
patients. St. Luke's declared ₱l,730,367,965 as 'Revenues from Services
to Patients' in contrast to its 'Free Services' expenditure of
₱218,187,498. In its Comment in G.R. No. 195909, St. Luke's showed
the following 'calculation' to support its claim that 65.20% of its
'income after expenses was allocated to free or charitable services' in
1998.
x x xx
In Lung Center, this Court declared:
'[e]xclusive' is defined as possessed and enjoyed to the exclusion of
others; debarred from participation or enjoyment; and 'exclusively' is
defined, 'in a manner to exclude; as enjoying a privilege
exclusively.' . . . The words 'dominant use' or 'principal use' cannot be
substituted for the words 'used exclusively' without doing violence to
the Constitution and thelaw. Solely is synonymous with exclusively.
The Court cannot expand the meaning of the words 'operated
exclusively' without violating the NIRC. Services to paying patients are
activities conducted for profit. They cannot be considered any other
way. There is a 'purpose to make profit over and above the cost' of
services. The ₱l.73 billion total revenues from paying patients is not
even incidental to St. Luke's charity expenditure of ₱2l8,187,498 for
non-paying patients.
St. Luke's claims that its charity expenditure of ₱218,187,498 is
65.20% of its operating income in 1998. However, if a part of the
remaining 34.80% of the operating income is reinvested in property,
equipment or facilities used for services to paying and non-paying
patients, then it cannot be said that the income is 'devoted or used
altogether to the charitable object which it is intended to achieve.' The
income is plowed back to the corporation not entirely for charitable
purposes, but for profit as well. In any case, the last paragraph of
Section 30 of the NIRC expressly qualifies that income from activities
for profit is taxable 'regardless of the disposition made of such income.'
Jesus Sacred Heart College declared that there is no official legislative
record explaining the phrase 'any activity conducted for profit.'
However, it quoted a deposition of Senator Mariano Jesus Cuenco, who
was a member of the Committee of Conference for the Senate, which
introduced the phrase 'or from any activity conducted for profit.'
P. Cuando ha hablado de la Universidad de Santo Tomas que tiene un
hospital, no cree V d que es una actividad esencial dicho hospital para
el funcionamiento def colegio de medicina
de dicha universidad?
x x x x x x xxx
R. Si el hospital se limita a recibir enformos pobres, mi contestacion
seria afirmativa; pero considerando que el hospital tiene cuartos de
pago, y a los mismos generalmente van enfermos de buena posicion
social economica, lo que se paga por estos enfermos debe estar sujeto
a 'income tax', y es una de las razones que hemos tenido para insertar
las palabras o frase 'or from any activity conducted for profit.'
The question was whether having a hospital is essential to an
educational institution like the College of Medicine of the University of
Santo Tomas.1awp++i1 Senator Cuenco answered that if the hospital
has paid rooms generally occupied by people of good economic
standing, then it should be subject to income tax. He said that this was
one of the reasons Congress inserted the phrase 'or any activity
conducted for profit.'
The question in Jesus Sacred Heart College involves an educational
institution. However, it is applicable to charitable institutions because
Senator Cuenco's response shows an intent to focus on the activities of
charitable institutions. Activities for profit should not escape the reach
of taxation. Being a non-stock and non-profit corporation does not, by
this reason alone, completely exempt an institution from tax. An
institution cannot use its corporate form to prevent its profitable
activities from being taxed.
The Court finds that St. Luke's is a corporation that is not 'operated
exclusively' for charitable or social welfare purposes insofar as its
revenues from paying patients are concerned. This ruling is based not
only on a strict interpretation of a provision granting tax exemption, but
also on the clear and plain text of Section 30(E) and (G). Section 30(E)
and (G) of the NIRC requires that an institution be 'operated
exclusively' for charitable or social welfare purposes to be completely
exempt from income tax. An institution under Section 30(E) or (G)
does not lose its tax exemption if it earns income from its for-profit by CIR confirming SLMC's payment of taxes, which is the same letter
activities. Such income from for-profit activities, under the last submitted by SLMC in the instant case.
paragraph of Section 30, is merely subject to income tax, previously at
the ordinary corporate rate but now at the preferential 10% rate In fine, the Court resolves to dismiss the instant Petition as the same has
pursuant to Section 27(B). been rendered moot by the payment made by SLMC of the basic taxes
for the taxable years 2005 and 2006, in the amounts of ₱49,919,496.40
A tax exemption is effectively a social subsidy granted by the State and ₱4 l,525,608.40, respectively.46
because an exempt institution is spared from sharing in the expenses of
government and yet benefits from them. Tax exemptions for charitable WHEREFORE, the Petition is hereby DISMISSED.
institutions should therefore be lin1ited to institutions beneficial to the SO ORDERED.
public and those which improve social welfare. A profit-making entity MARIANO C. DEL CASTILLO
should not be allowed to exploit this subsidy to the detriment of the Associate Justice
government and other taxpayers. WE CONCUR:
MARIA LOURDES P.A. SERENO
St. Luke's fails to meet the requirements under Section 30(E) and (G) of Chief Justice
the NIRC to be completely tax exempt from all its income. However, it Chairperson
remains a proprietary non-profit hospital under Section 27(B) of the TERESITA J. LEONARDO- ESTELA M. PERLAS-
NIRC as long as it does not distribute any of its profits to its members DE CASTRO BERNABE
and such profits are reinvested pursuant to its corporate purposes. St. Associate Justice Associate Justice
Luke's, as a proprietary non-profit hospital, is entitled to the preferential ALFREDO BENJAMIN S. CAGUIOA
tax rate of 10% on its net income from its for-profit activities. Associate Justice
CERTIFICATION
St. Luke's is therefore liable for deficiency income tax in 1998 under Pursuant to the Section 13, Article VIII of the Constitution, I certify
Section 27(B) of the NIRC. However, St. Luke's has good reasons to that the conclusions in the above Decision had been reached in
rely on the letter dated 6 June 1990 by the BIR, which opined that St. consultation before the case was assigned to the writer of the opinion of
Luke's is 'a corporation for purely charitable and social welfare the Court’s Division.
purposes' and thus exempt from income tax. In Michael J Lhuillier, Inc. MARIA LOURDES P.A. SERENO
v. Commissioner of Internal Revenue, the Court said that 'good faith Chief Justice
and honest belief that one is not subject to tax on the basis of previous
interpretation of government agencies tasked to implement the tax law, Legal Ethics
are sufficient justification to delete the imposition of surcharges and
interest.'40 Republic of the Philippines
SUPREME COURT
A careful review of the pleadings reveals that there is no countervailing Manila
consideration for the Court to revisit its aforequoted ruling in G.R. Nos.
195909 and 195960 (Commissioner of Internal Revenue v. St. Luke's SECOND DIVISION
Medical Center, Inc.). Thus, under the doctrine of stare decisis, which
states that "[o]nce a case has been decided in one way, any other case
A.C. No. 10583               February 18, 2015
involving exactly the same point at issue x x x should be decided in the
[Formerly CBD 09-2555]
same manner,"41 the Court finds that SLMC is subject to 10% income
tax insofar as its revenues from paying patients are concerned.
ROBERTO BERNARDINO, Complainant, 
vs.
To be clear, for an institution to be completely exempt from income tax,
ATTY. VICTOR REY SANTOS, Respondent.
Section 30(E) and (G) of the 1997 NIRC requires said institution to
operate exclusively for charitable or social welfare purpose. But in case
an exempt institution under Section 30(E) or (G) of the said Code earns x-----------------------x
income from its for-profit activities, it will not lose its tax exemption.
However, its income from for-profit activities will be subject to income A.C. No. 10584
tax at the preferential 10% rate pursuant to Section 27(B) thereof. [Formerly CBD 10-2827]

SLMC is not liable for Compromise ATTY. JOSE MANGASER CARINGAL, Complainant, 

Penalty.
As to whether SLMC is liable for compromise penalty under Section
248(A) of the 1997 NIRC for its alleged failure to file its quarterly
income tax returns, this has also been resolved in G.R Nos. 195909 and
195960 (Commissioner of Internal Revenue v. St. Luke's Medical
Center, Inc.),42 where the imposition of surcharges and interest under
Sections 24843 and 24944 of the 1997 NIRC were deleted on the basis of
good faith and honest belief on the part of SLMC that it is not subject to
tax. Thus, following the ruling of the Court in the said case, SLMC is
not liable to pay compromise penalty under Section 248(A) of the 1997
NIRC.
The Petition is rendered moot by the
payment made by SLMC on April 30,
2013.
vs.
ATTY. VICTOR REY SANTOS, Respondent.
RESOLUTION
LEONEN, J.:
These cases involve administrative Complaints1 against Atty. Victor
Rey Santos for violation of Canon 10, Rule 10.012 and Canon 15, Rule
15 .033 of the Code of Professional Responsibility.
In A.C. No. 10583, complainant Roberto C. Bernardino (Bernardino)
filed a Letter-Complaint4 against Atty. Victor Rey Santos (Atty. Santos)
before the Integrated Bar of the Philippines, praying that Atty. Santos
be investigated and subjected to disciplinary action. 5

However, in view of the payment of the basic taxes made by SLMC on
April 30, 2013, the instant Petition has become moot.1avvphi1
While the Court agrees with the CIR that the payment confirmation
from the BIR presented by SLMC is not a competent proof of payment
as it does not indicate the specific taxable period the said payment
covers, the Court finds that the Certification issued by the Large
Taxpayers Service of the BIR dated May 27, 2013, and the letter from
the BIR dated November 26, 2013 with attached Certification of
Payment and application for abatement are sufficient to prove payment
especially since CIR never questioned the authenticity of these
documents. In fact, in a related case, G.R. No. 200688,
entitled Commissioner of Internal Revenue v. St. Luke's Medical
Center, lnc.,45 the Court dismissed the petition based on a letter issued
Bernardino alleged that the death certificate of his aunt, Rufina de
Castro Turla, was falsified by Atty. Santos. Atty. Santos made it appear
that Rufina Turla died in 1992, when in fact, she died in 1990. 6
Atty. Santos used the falsified death certificate to -support the Affidavit
of Self-Adjudication7 executed by Mariano Turla, husband of Rufina
Turla.8 Paragraph 6 of the Affidavit of Self-Adjudication prepared by
Atty. Santos states:
Being her surviving spouse, I am. the sole legal heir entitled to succeed
to and inherit the estate of said deceased who did not leave any
descendant or any other heir entitled to her estate. 9 (Emphasis in the
original underscoring supplied)
Years later, Atty. Santos, on behalf of Marilu Turla, daughter of Rufina
and Mariano Turla,10 filed a Complaint11 for sum of money with prayer
for Writ of Preliminary Injunction and temporary restraining order
against Bernardino, docketed as Civil Case No. 09-269. 12
The Complaint in Civil Case No. 09-269 alleged that Marilu Turla is an
heir of Mariano Turla,13 which allegedly contradicts the Affidavit of
Self-Adjudication that Atty. Santos drafted.14 Hence, Atty. Santos
represented clients with conflicting interests. 15
In Civil Case No. 09-269, Atty. Santos testified during cross-
examination:
CROSS-EXAMINATION BY:
ATTY. CARINGAL
....
Q : In your Judicial Affidavit[,] you mentioned that you know Marilu
C. Turla[,] the plaintiff[,] since she was about four years old.
A : Yes, sir.
Q : As a matter of fact[,] you know her very well[,] considering that
you are a Ninong of the plaintiff, isn’t it?
A : I was not a Ninong when I first knew Marilu Turla, I was just
recently married to
Q : And of course, being the daughter of Rufina Turla one of her
cousins.
....
Q : Now, the parents of Marilu Turla are Mariano C. Turla and Rufina
C. Turla?
THE WITNESS
: Yes, sir. As per my study and as per my knowledge of her
relationship[s].
THE COURT
: What’s the name of the mother?
ATTY. CARINGAL
: Rufina, your Honor. Rufina Turla.
Q : And wife died ahead of Mariano, isn’t it?
THE WITNESS
: Yes, sir.
, Marilu is also an heir of Rufina Turla, isn’t it?
A : Of course.
Q : Now, we go by the ethics of the profession, Mr. Witness.
You recall[,] of course[,] and admitted [sic] in court that you drafted
this document which you requested to be marked as Exhibit B.
THE COURT
: Exhibit?
ATTY. CARINGAL
: "B", your Honor, in particular reference to the Affidavit of
Adjudication for the extra judicial settlement of the intestate estate of
the late Rufina De Castro Turla[,] and I have just learned from you as
you just testified. Rufina is the mother of the plaintiff here[,] Marilu
Turla.
THE WITNESS
: Yes, sir.
Q : And as you admitted, you prepared you drafted [sic] this Extra
Judicial.
A : Yes, sir.
Q : Or this Affidavit of Adjudication.
ATTY. REY SANTOS
: At this point in time, your Honor, I would object to the question
regarding my legal ethics because it is not the issue in this case.
....
ATTY. CARINGAL
....
Q : . . . In this document consisting of one, two, three, four and
appearing to have been duly notarized on or about 29th [of] June 1994
with document number 28, page number 7, book
number 23, series of 1994 before Notary Public Hernando P. Angara. I
call your attention to the document[,] more particularly[,] paragraph 6
thereof and marked as Exhibit 7-A for the defendants[.] I read into the
record and I quote, "Being her surviving spouse, I am the sole legal heir
entitled to succeed to and inherit the estate of the said deceased who did
not leave any descendant, ascendant or any other heir entitled to her
estate."16 Mr. Witness, is this particular provision that you have drafted
into this document . . . true or false?
ATTY. REY SANTOS
: Your Honor, I would like to reiterate that any question regarding the
matter that would impugn the legitimacy of the plaintiff, Marilu
Turla[,]is impertinent and immaterial in this case[.] [I]t was only the
wife Rufina Turla [who] ha[s] the right to impugn the legitimacy of the
plaintiff[,] and that has been the subject of my continuing objection
from the very beginning.
THE COURT
: But then again[,] you have presented this document as your Exhibit
B[.] [Y]ou have practically opened the floodgate to . . . questions on
this document.
ATTY. REY SANTOS
: Only for the purposes [sic] of showing one or two . . . properties
owned by the late Mariano Turla, your Honor. That is why that’s only
[sic] portion I have referred to in marking the said documents, your
Honor.
THE COURT
: So, you now refused [sic] to answer the question?
ATTY. REY SANTOS
: No, I am not refusing to answer, I am just making a manifestation.
ATTY. CARINGAL
: What is the answer, is it true or false, your Honor[?]
ATTY. REY SANTOS
: My answer regarding the same would be subject to my objection on
the materiality and impertinency and relevancy of this question, your
Honor[,] to this case.
THE COURT
: So anyway, the court has observed the continuing objection before[,]
and to be consistent with the ruling of the court[,] I will allow you to
answer the question[.] [I]s it true or false?
THE WITNESS
: No, that is not true.
ATTY. CARINGAL
: That is not true. Mr. Witness, being a lawyer[,] you admit before this
court that you have drafted a document that caused the transfer of the
estate of the decease[d] Rufina Turla.
THE WITNESS
: Yes, sir.
....
ATTY. CARINGAL
Q : This document, this particular provision that you said was false, you
did not tell anybody[,] ten or five years later[,] that this is false, is it
not?
THE WITNESS
: I called the attention of Mr. Mariano Turla[.] I . . . asked him what
about Lulu17 she is entitled [sic] to a share of properties and he . . . told
me, "Ako na ang bahala kay Lulu[,] hindi ko pababayaan yan". So, he
asked me to proceed with the Affidavit of Adjudication wherein he
claimed the whole [sic]properties for himself. 18 (Emphasis supplied)
Another Complaint19 was filed against Atty. Santos by Atty. Jose
Mangaser Caringal (Atty. Caringal). This was docketed as A.C. No.
10584.20 Similar to Bernardino’s Complaint, Atty. Caringal alleged that
Atty. Santos represented clients with conflicting interests. 21 He also
alleged that in representing Marilu Turla, Atty. Santos would
necessarily go against the claims of Mariano Turla. 22
Also, in representing Marilu Turla, Atty. Santos was allegedly violating
the so-called "Dead Man’s Statute"23 because "he [would] be utilizing
information or matters of fact occurring before the death of his
deceased client. Similarly, he . . . [would] be unscrupulously utilizing
information acquired during his professional relation with his said
client . . . that [would] constitute a breach of trust . . . or of privileged
communication[.]"24
Atty. Caringal further alleged that Atty. Santos violated Canon 12 25 of
the Code of Professional Responsibility when he filed several cases
against the other claimants of Mariano Turla’s estate. 26 In other words,
he engaged in forum shopping.27
In addition, Atty. Santos allegedly violated Canon 10, Rule 10.01 28 of
the Code of Professional Responsibility when he drafted Mariano
Turla’s Affidavit of Self-Adjudication. The Affidavit states that
Mariano Turla is the sole heir of Rufina Turla, but Atty. Santos knew
this to be false.29 Atty. Santos’ wife, Lynn Batac, is Mariano Turla’s
niece.30 As part of the family, Atty. Santos knew that Rufina Turla had
other heirs.31 Atty. Caringal further alleged:
14.4 Being the lawyer of Mariano Turla in the drafting of the document
some fifteen years ago, he is fully aware of all the circumstances
therein recited. Moreover at that time, the [sic] Lynn Batac Santos was
then employed at the BIR[sic] who arranged for the payment of the
taxes due. There is some peculiarity in the neat set up [sic] of a husband
and wife team where the lawyer makes the document while the wife
who is a BIIR [sic] employee arranges for the payment of the taxes due
the government;
14.5 Respondent attorney could not have been mistaken about the fact
recited in the Affidavit of Adjudication, etc. that said deceased (Rufina
de Castro Turla) "did not leave any descendant, xxx, or any other heir
entitled to her estate’ [sic] . . . [.]32 (Emphasis in the original)
Atty. Caringal argued that Atty. Santos was bound by the statement in
Mariano Turla’s affidavit that Rufina Turla had no other heir. 33
Moreover, Atty. Santos allegedly converted funds belonging to the
heirs of Mariano Turla for his own benefit. The funds involved were
rental income from Mariano Turla’s properties that were supposed to be
distributed to the heirs. Instead, Atty. Santos received the rental
income.34 Lastly, Atty. Caringal alleged that Atty. Santos cited the
repealed Article 262 of the Civil Code in his arguments. 35
In his Answer,36 Atty. Santos denied having falsified the death
certificate.37 He explained that the death certificate and the Affidavit of
Self-Adjudication were given to him by Mariano Turla and that he was
not aware that there was a falsified entry in the death certificate. 38
As regards the issue on conflict of interest, Atty. Santos argued that he
did not represent and was not representing conflicting interests since
Mariano Turla was already dead.39 Further, "he [was] representing
Marilu Turla against those who ha[d] an interest in her father’s
estate."40 Mariano Turla’s Affidavit of Self-Adjudication never stated
that there was no other legal heir but only "that Mariano Turla was the
sole heir of Rufina Turla."41
Regarding the allegations of Atty. Caringal, Atty. Santos insisted that
he did not commit forum shopping because the various cases filed had
different issues.42
As to the conversion of funds, Atty. Santos explained that the funds
used were being held by his client as the special administratrix of the
estate of Mariano Turla.43 According to Atty. Santos, payment of
attorney’s fees out of the estate’s funds could be considered as
"expenses of administration."44 Also, payment of Atty. Santos’ legal
services was a matter which Atty. Caringal had no standing to
question.45
On the allegation that Atty. Santos cited a repealed provision of law, he
discussed that Article 262 of the Civil Code is applicable because it was
in force when Marilu Turla’s birth certificate was registered. 46
The Commission on Bar Discipline of the Integrated Bar of the
Philippines recommended that Atty. Santos be suspended for three (3)
months.47
It found that Bernardino failed to prove his allegation that Atty. Santos
knew that the death certificate was falsified and used it to support
Mariano Turla’s Affidavit of Self-Adjudication.48 Likewise, Atty.
Caringal failed to prove that Atty. Santos converted funds from
Mariano Turla’s estate.49
With regard to the citation of a repealed provision, the Commission on
Bar Discipline stated that the evidence presented did not prove that
Atty. Santos "knowingly cited a repealed law."50 Further, Atty. Santos
did not engage in forum shopping. The various cases filed involved
different parties and prayed for different reliefs. 51
However, the Commission on Bar Discipline agreed with Bernardino
and Atty. Caringal that Atty. Santos represented clients with conflicting
interests.52 The Report and Recommendation53 of the Commission on
Bar Discipline stated:
. . . Canon 15 of the Code of Professional Responsibility particularly
Rule 15.03 specifically proscribes members of the bar from
representing conflicting interests. The Supreme Court has explained
that "the proscription against representation of conflicting interest finds
application where the conflicting interests arise with respect to the same
general matter and is applicable however slight such adverse interest
may be; the fact that the conflict of interests is remote or merely
probable does not make the prohibition inoperative."
....
. . . In the case at bar, the fact that the respondent represented Mariano
Turla is no secret. The respondent has in a number of
pleadings/motions/documents and evenon the witness stand admitted
that he drafted Mariano Turla’s Affidavit of Adjudication which
expressly states that he was the sole heir of Rufina Turla.
And then he afterwards agreed to represent Marilu Turla who claimed
to be Mariano Turla’s daughter. To substantiate her claim that she is
Mariano Turla’s daughter, the respondent admitted that he relied on the
birth certificate presented by Marilu Turla[,] which indicates that she is
not only the daughter of Mariano Turla but also of Rufina Turla as
evidenced by the Birth Certificate presented stating that Rufina Turla is
Marilu Turla’s mother. This means that Marilu Turla was also a rightful
heir to Rufina Turla’s inheritance and was deprived of the same
because of the Affidavit of Adjudication which he drafted for Mariano
Turla[,] stating that he is his wife’s sole heir.
. . . To further explain, the respondent[,] in agreeing to represent Marilu
Turla[,] placed himself in a position where he is to refute the claim in
Mariano Turla’s Affidavit of Adjudication that he is the only heir of
Rufina Turla.54 (Citations omitted)
In the Resolution55 dated May 10, 2013, the Board of Governors of the
Integrated Bar of the Philippines (IBP Board of Governors) adopted and
approved the findings and recommendations of the Commission on Bar
Discipline.
Atty. Santos filed a Motion for Partial Reconsideration, 56 which was
denied by the IBP Board of Governors in the Resolution57 dated March
22, 2014.
This administrative case was forwarded to this court through a letter of
transmittal dated July 15, 2014,58 pursuant to Rule 139-B, Section 12(b)
of the Rules of Court which provides:
RULE 139-B
DISBARMENT AND DISCIPLINE OF ATTORNEYS
SEC. 12. Review and decision by the Board of Governors.—
....
(b) If the Board, by the vote of a majority of its total membership,
determines that the respondent should be suspended from the practice
of law or disbarred, it shall issue a resolution setting forth its findings
and recommendations which, together with the whole record of the
case, shall forthwith be transmitted to the Supreme Court for final
action.
The issues in this case are: (1) whether respondent Atty. Santos violated
the Code of Professional Responsibility; and (2) whether the penalty of
suspension of three (3) months from the practice of law is proper.
This court accepts and adopts the findings of fact of the IBP Board of
Governors’ Resolution. However, this court modifies the recommended
penalty of suspension from the practice of law from three (3) months to
one (1) year.
Canon 15, Rule 15.03 of the Code of Professional Responsibility states:
CANON 15 — A lawyer shall observe candor, fairness and loyalty in
all his dealings and transactions with his client.
....
Rule 15.03 — A lawyer shall not represent conflicting interests except
by written consent of all concerned given after a full disclosure of the
facts.
The rule on conflict of interest is based on the fiduciary obligation in a
lawyer-client relationship. Lawyers must treat all information received
from their clients with utmost confidentiality in order to encourage
clients to fully inform their counsels of the facts of their case. 59 In
Hornilla v. Atty. Salunat,60 this court explained what conflict of interest
means:
There is conflict of interest when a lawyer represents inconsistent
interests of two or more opposing parties. The test is "whether or not in
behalf of one client, it is the lawyer’s duty to fight for an issue or claim,
but it is his duty to oppose it for the other client. In brief, if he argues
for one client, this argument will be opposed by him when he argues for
the other client." This rule covers not only cases in which confidential
communications have been confided, but also those in which no
confidence has been bestowed or will be used. Also, there is conflict of
interests if the acceptance of the new retainer will require the attorney
to perform an act which will injuriously affect his first client in any
matter in which he represents him and also whether he will be called
upon in his new relation to use against his first client any knowledge
acquired through their connection. Another test of the inconsistency of
interests is whether the acceptance of a new relation will prevent an
attorney from the full discharge of his duty of undivided fidelity and
loyalty to his client or invite suspicion of unfaithfulness or double
dealing in the performance thereof.61 (Emphasis supplied, citations
omitted)
Applying the test to determine whether conflict of interest exists,
respondent would necessarily refute Mariano Turla’s claim that he is
Rufina Turla’s sole heir when he agreed to represent Marilu Turla.
Worse, he knew that Mariano Turla was not the only heir. As stated in
the Report of the Commission on Bar Discipline:
Worse[,] the respondent himself on the witness stand during his April
14, 2009 testimony in the Civil Case for Sum of Money with Prayer of
Writ of Preliminary Injunction and Temporary Restraining Order
docketed as Civil Case No. 09-269 filed with the RTC of Makati City
admitted as follows: "I called the attention of Mr. Mariano Turla[.] I . . .
asked him what about Lulu she is entitled [sic] to a share of properties
and he . . . told me, ‘Ako na ang bahala kay Lulu[,] hindi ko
pababayaan yan.’ So he asked me to proceed with the Affidavit of
Adjudication wherein he claimed the whole [sic] properties for
himself." This very admission proves that the respondent was privy to
Marilu Turla’s standing as a legal and rightful heir to Rufina Turla’s
estate.62 (Citation omitted)
However, Rule 15.03 provides for an exception, specifically, "by
written consent of all concerned given after a full disclosure of the
facts."63 Respondent had the duty to inform Mariano Turla and Marilu
Turla that there is a conflict of interest and to obtain their written
consent.
Mariano Turla died on February 5, 2009,64 while respondent
represented Marilu Turla in March 2009.65 It is understandable why
respondent was unable to obtain Mariano Turla’s consent. Still,
respondent did not present evidence showing that he disclosed to
Marilu Turla that he previously represented Mariano Turla and assisted
him in executing the Affidavit of Self-Adjudication. Thus, the
allegation of conflict of interest against respondent was sufficiently
proven.
Likewise, we accept and adopt the IBP Board of Governors’ finding
that respondent violated Canon 10, Rule10.01 of the Code of
Professional Responsibility, which states:
CANON 10 — A lawyer owes candor, fairness and good faith to the
court.
Rule 10.01 — A lawyer shall not do any falsehood, nor consent to the
doing of any in court; nor shall he mislead or allow the court to be
mislead by any artifice.
In the Report, the Commission on Bar Discipline explained:
Corollary to the foregoing, the Commission by virtue of the doctrine res
ipsa loquitor[sic] finds that the respondent’s act of failing to thwart his
client Mariano Turla from filing the Affidavit of Adjudication
despite . . . his knowledge of the existence of Marilu Turla as a possible
heir to the estate of Rufina Turla, the respondent failed to uphold his
obligation as a member of the bar to be the stewards of justice and
protectors of what is just, legal and proper. Thus in failing to do his
duty and acting dishonestly[,] not only was he in contravention of the
Lawyer’s Oath but was also in violation of Canon 10, Rule 10.01 of the
Code of Professional Responsibility.66 (Emphasis in the original)
As officers of the court, lawyers have the duty to uphold the rule of law.
In doing so, lawyers are expected to be honest in all their
dealings.67 Unfortunately, respondent was far from being honest. With
full knowledge that Rufina Turla had another heir, he acceded to
Mariano Turla’s request to prepare the Affidavit of Self-Adjudication. 68
This court notes that the wording of the IBP Board of Governors’
Resolutions dated May 10, 2013 and March 22, 2014 seems to imply
that it is the Integrated Bar of the Philippines that has the authority to
impose sanctions on lawyers. This is wrong.
The authority to discipline members of the Bar is vested in this court
under the 1987 Constitution: ARTICLE VIII
JUDICIAL DEPARTMENT
Section 5. The Supreme Court shall have the following powers:
(5) Promulgate rules concerning the protection and enforcement of
constitutional rights, pleading, practice, and procedure in all courts, the
admission to the practice of law, the integrated bar, and legal assistance
to the underprivileged. . . . (Emphasis supplied)
Zaldivar v. Sandiganbayan69 elucidated on this court’s "plenary
disciplinary authority over attorneys"70 and discussed:
We begin by referring to the authority of the Supreme Court to
discipline officers of the court and members of the court and members
of the Bar. The Supreme Court, as regular and guardian of the legal
profession, has plenary disciplinary authority over attorneys. The
authority to discipline lawyers stems from the Court’s constitutional
mandate to regulate admission to the practice of law, which includes as
well authority to regulate the practice itself of law. Quite apart from this
constitutional mandate, the disciplinary authority of the Supreme Court
over members of the Bar is an inherent power incidental to the proper
administration of justice and essential to an orderly discharge of judicial
functions. . . .
. . . The disciplinary authority of the Court over members of the Bar is
but corollary to the Court’s exclusive power of admission to the Bar. A
lawyers [sic] is not merely a professional but also an officer of the court
and as such, he is called upon to share in the task and responsibility of
dispensing justice and resolving disputes in society.71 (Citations
omitted)
This court’s authority is restated under Rule 138 of the Rules of Court,
specifically:
RULE 138
ATTORNEYS AND ADMISSION TO BAR
....
SEC. 27. Disbarment or suspension of attorneys by Supreme Court,
grounds therefor.—A member of the bar may be disbarred or suspended
from his office as attorney by the Supreme Court for any deceit,
malpractice, or other gross misconduct in such office, grossly immoral
conduct, or by reason of his conviction of a crime involving moral
turpitude, or for any violation of the oath which he is required to take
before admission to practice, or for a wilful disobedience appearing as
an attorney for a party to a case without authority so to do. The practice
of soliciting cases at law for the purpose of gain, either personally or
through paid agents or brokers, constitutes malpractice. (Emphasis
supplied)
In Ramirez v. Buhayang-Margallo,72 this court emphasized the
authority of this court to impose disciplinary action on those admitted
to the practice of law.
Parenthetically, it is this court that has the constitutionally mandated
duty to discipline lawyers.73 Under the current rules, the duty to assist
fact finding can be delegated to the Integrated Bar of the Philippines.
The findings of the Integrated Bar, however, can only be
recommendatory, consistent with the constitutional powers of this
court.
Its recommended penalties are also, by its nature, recommendatory. 74
The authority given to the Integrated Bar of the Philippines is based on
Rule 139-B, Section 1 of the Rules of Court, which provides that
"[p]roceedings for the disbarment, suspension or discipline of attorneys
may be taken by the Supreme Court motu proprio, or by the Integrated
Bar of the Philippines . . . upon the verified complaint of any person."
However, this authority is only to assist this court with the investigation
of the case, to determine factual findings, and to recommend, at best,
the penalty that may be imposed on the erring lawyer.
We reiterate the discussion in Tenoso v. Atty. Echanez: 75
Time and again, this Court emphasizes that the practice of law is
imbued with public interest and that "a lawyer owes substantial duties
not only to his client, but also to his brethren in the profession, to the
courts, and to the nation, and takes part in one of the most important
functions of the State—the administration of justice—as an officer of
the court." Accordingly, "[l]awyers are bound to maintain not only a
high standard of legal proficiency, but also of morality, honesty,
integrity and fair dealing."76 (Citations omitted)

Only this court can impose sanctions on members of the

Bar.1âwphi1 This disciplinary authority is granted by the Constitution
and cannot be relinquished by this court.77 The Resolutions of the
Integrated Bar of the Philippines are, at best, recommendatory, and its
findings and recommendations should not be equated with Decisions
and Resolutions rendered by this court. WHEREFORE, we find
respondent Atty. Victor Rey Santos guilty of violating Canon 15, Rule
15.03 and Canon 10, Rule 10.01 of the Code of Professional
Responsibility. The findings of fact and recommendations of the Board
of Governors of the Integrated Bar of the Philippines dated May 10,
2013 and March 22, 2014 are ACCEPTED and ADOPTED with the
MODIFICATION that the penalty of suspension from the practice of
law for one (1) year is imposed upon Atty. Victor Rey Santos. He is
warned that a repetition of the same or similar act shall be dealt with
more severely.

Let a copy of this Resolution be furnished the Office of the Bar

Confidant, to be appended to respondent’s personal record as attorney,
to the Integrated Bar of the Philippines, and to the Office of the Court
Administrator for dissemination to all courts throughout the country for
their

information and guidance.

SO ORDERED. Legal Ethics

MARVIC M.V.F. LEONEN Republic of the Philippines

Associate Justice SUPREME COURT
Manila
WE CONCUR:
SECOND DIVISION
ANTONIO T. CARPIO
Associate Justice G.R. No. 173188               January 15, 2014
Chairperson
THE CONJUGAL PARTNERSHIP OF THE SPOUSES
PRESBITERO J. VELASCO, MARIANO C. DEL VICENTE CADAVEDO AND BENITA ARCOY-CADAVEDO
JR.* CASTILLO (both deceased), substituted by their heirs, namely: HERMINA,
PASTORA, Heirs of FRUCTUOSA, Heirs of RAQUEL,
Associate Justice Associate Justice
EVANGELINE, VICENTE, JR., and ARMANDO, all surnamed
CADAVEDO, Petitioners, 
vs.
JOSE CATRAL MENDOZA VICTORINO (VIC) T. LACAYA, married to Rosa
Associate Justice Legados, Respondents.

DECISION

BRION, J.:

We solve in this Rule 45 petition for review on certiorari 1 the challenge

to the October 11, 2005 decision2 and the May 9, 2006 resolution3 of
the Court of Appeals (CA) inPetitioners, CA-G.R. CV No. 56948. The
CA reversed and set aside the September 17, 1996 decision 4 of the
Regional Trial Court (RTC), Branch 10, of Dipolog City in Civil Case
No. 4038, granting in part the complaint for recovery of possession of
property filed by the petitioners, the Conjugal Partnership of the
Spouses Vicente Cadavedo and Benita Arcoy-Cadavedo against Atty.
Victorino (Vic) T. Lacaya, married to Rosa Legados (collectively, the
respondents).

The Factual Antecedents

The Spouses Vicente Cadavedo and Benita Arcoy-Cadavedo

(collectively, the spouses Cadavedo) acquired a homestead grant over a
230,765-square meter parcel of land known as Lot 5415 (subject lot)
located in Gumay, Piñan, Zamboanga del Norte. They were issued
Homestead Patent No. V-15414 on March 13, 1953andOriginal
Certificate of Title No. P-376 on July 2, 1953.On April30, 1955, the
spouses Cadavedo sold the subject lot to the spouses Vicente Ames and
Martha Fernandez (the spouses Ames) Transfer Certificate of Title
(TCT) No. T-4792 was subsequently issued in the name of the spouses
Ames.

The present controversy arose when the spouses Cadavedo filed an

action5 before the RTC(then Court of First Instance) of Zamboanga
City against the spouses Ames for sum of money and/or voiding of
contract of sale of homestead after the latter failed to pay the balance of
the purchase price. The spouses Cadavedo initially engaged the services
of Atty. Rosendo Bandal who, for health reasons, later withdrew from
the case; he was substituted by Atty. Lacaya.
On February 24, 1969, Atty. Lacaya amended the complaint to assert
the nullity of the sale and the issuance of TCT No. T-4792 in the names
of the spouses Ames as gross violation of the public land law. The
amended complaint stated that the spouses Cadavedo hired Atty.
Lacaya on a contingency fee basis. The contingency fee stipulation
specifically reads:
10. That due to the above circumstances, the plaintiffs were forced to
hire a lawyer on contingent basis and if they become the prevailing
parties in the case at bar, they will pay the sum of ₱2,000.00 for
attorney’s fees.6
In a decision dated February 1, 1972, the RTC upheld the sale of the
subject lot to the spouses Ames. The spouses Cadavedo, thru Atty.
Lacaya, appealed the case to the CA.
On September 18, 1975, and while the appeal before the CAin Civil
Case No. 1721was pending, the spouses Ames sold the subject lot to
their children. The spouses Ames’ TCT No. T-4792 was subsequently
cancelled and TCT No. T-25984was issued in their children’s names.
On October 11, 1976, the spouses Ames mortgaged the subject lot with
the Development Bank of the Philippines (DBP) in the names of their
children.
On August 13, 1980, the CA issued itsdecision in Civil Case No.
1721,reversing the decision of the RTC and declaring the deed of sale,
transfer of rights, claims and interest to the spouses Ames null and void
ab initio. It directed the spouses Cadavedo to return the initial payment
and ordered the Register of Deeds to cancel the spouses Ames’ TCT
No. T-4792 and to reissue another title in the name of the spouses
Cadavedo. The case eventually reached this Court via the spouses
Ames’ petition for review on certiorari which this Court dismissed for
lack of merit.
Meanwhile, the spouses Ames defaulted in their obligation with the
DBP. Thus, the DBP caused the publication of a notice of foreclosure
sale of the subject lot as covered by TCT No. T-25984(under the name
of the spouses Ames’ children). Atty. Lacaya immediately informed the
spouses Cadavedo of the foreclosure sale and filed an Affidavit of
Third Party Claim with the Office of the Provincial Sheriff on
September 14, 1981.
With the finality of the judgment in Civil Case No. 1721,Atty. Lacaya
filed on September 21, 1981 a motion for the issuance of a writ of
execution.
On September 23, 1981,and pending the RTC’s resolution of the
motion for the issuance of a writ of execution, the spouses Ames filed a
complaint7 before the RTC against the spouses Cadavedo for Quieting
of Title or Enforcement of Civil Rights due Planters in Good Faith with
prayer for Preliminary Injunction. The spouses Cadavedo, thru Atty.
Lacaya, filed a motion to dismiss on the ground of res judicata and to
cancel TCT No. T-25984 (under the name of the spouses Ames’
children).
On October 16, 1981, the RTC granted the motion for the issuance of a
writ of execution in Civil Case No. 1721,andthe spouses Cadavedo
were placed in possession of the subject lot on October 24, 1981. Atty.
Lacaya asked for one-half of the subject lot as attorney’s fees. He
caused the subdivision of the subject lot into two equal portions, based
on area, and selected the more valuable and productive half for himself;
and assigned the other half to the spouses Cadavedo.
Unsatisfied with the division, Vicente and his sons-in-law entered the
portion assigned to the respondents and ejected them. The latter
responded by filing a counter-suit for forcible entry before the
Municipal Trial Court (MTC); the ejectment case was docketed as Civil
Case No. 215. This incident occurred while Civil Case No. 3352was
pending.
On May 13, 1982, Vicente andAtty. Lacaya entered into an amicable
settlement (compromise agreement)8 in Civil Case No. 215 (the
ejectment case), re-adjusting the area and portion obtained by each.
Atty. Lacaya acquired 10.5383 hectares pursuant to the agreement. The
MTC approved the compromise agreementin a decision dated June 10,
1982.
Meanwhile, on May 21, 1982, the spouses Cadavedo filed before the
RTC an action against the DBP for Injunction; it was docketed as Civil
Case No. 3443 (Cadavedo v. DBP).The RTC subsequently denied the
petition, prompting the spouses Cadavedo to elevate the case to the
CAvia a petition for certiorari. The CA dismissed the petition in its
decision of January 31, 1984.
The records do not clearly disclose the proceedings subsequent to the
CA decision in Civil Case No. 3443. However, on August 18, 1988,
TCT No. 41051was issued in the name of the spouses Cadavedo
concerning the subject lot.
On August 9, 1988, the spouses Cadavedo filed before the RTC an
action9 against the respondents, assailing the MTC-approved
compromise agreement. The case was docketed as Civil Case No. 4038
and is the root of the present case. The spouses Cadavedo prayed,
among others, that the respondents be ejected from their one-half
portion of the subject lot; that they be ordered to render an accounting
of the produce of this one-half portion from 1981;and that the RTC fix
the attorney’s fees on a quantum meruit basis, with due consideration of
the expenses that Atty. Lacaya incurred while handling the civil cases.
During the pendency of Civil Case No. 4038, the spouses Cadavedo
executed a Deed of Partition of Estate in favor of their eight children.
Consequently, TCT No. 41051 was cancelled and TCT No. 41690 was
issued in the names of the latter. The records are not clear on the
proceedings and status of Civil Case No. 3352.
The Ruling of the RTC
In the September 17, 1996 decision10 in Civil Case No. 4038, the RTC
declared the contingent fee of 10.5383 hectares as excessive and
unconscionable. The RTC reduced the land area to 5.2691 hectares and
ordered the respondents to vacate and restore the remaining
5.2692hectares to the spouses Cadavedo.
The RTC noted that, as stated in the amended complaint filed by Atty.
Lacaya, the agreed attorney’s fee on contingent basis was ₱2,000.00.
Nevertheless, the RTC also pointed out that the parties novated this
agreement when they executed the compromise agreement in Civil
Case No. 215 (ejectment case), thereby giving Atty. Lacaya one-half of
the subject lot. The RTC added that Vicente’s decision to give Atty.
Lacaya one-half of the subject lot, sans approval of Benita, was a valid
act of administration and binds the conjugal partnership. The RTC
reasoned out that the disposition redounded to the benefit of the
conjugal partnership as it was done precisely to remunerate Atty.
Lacaya for his services to recover the property itself.
These considerations notwithstanding, the RTC considered the one-half
portion of the subject lot, as Atty. Lacaya’s contingent fee,excessive,
unreasonable and unconscionable. The RTC was convinced that the
issues involved in Civil Case No. 1721were not sufficiently difficult
and complicated to command such an excessive award; neither did it
require Atty. Lacaya to devote much of his time or skill, or to perform
extensive research.
Finally, the RTC deemed the respondents’ possession, prior to the
judgment, of the excess portion of their share in the subject lot to be in
good faith. The respondents were thus entitled to receive its fruits.
On the spouses Cadavedo’s motion for reconsideration, the RTC
modified the decision in its resolution11 dated December 27, 1996. The
RTC ordered the respondents to account for and deliver the produce
and income, valued at ₱7,500.00 per annum, of the 5.2692hectares that
the RTC ordered the spouses Amesto restore to the spouses Cadavedo,
from October 10, 1988 until final restoration of the premises.
The respondents appealed the case before the CA.
The Ruling of the CA
In its decision12 dated October 11, 2005, the CA reversed and set aside
the RTC’s September 17, 1996 decision and maintained the partition
and distribution of the subject lot under the compromise agreement. In
so ruling, the CA noted the following facts: (1) Atty. Lacaya served as
the spouses Cadavedo’s counsel from 1969 until 1988,when the latter
filed the present case against Atty. Lacaya; (2) during the nineteen (19)
years of their attorney-client relationship, Atty. Lacaya represented the
spouses Cadavedo in three civil cases –Civil Case No. 1721, Civil Case
No. 3352, and Civil Case No. 3443; (3) the first civil case lasted for
twelve years and even reached this Court, the second civil case lasted
for seven years, while the third civil case lasted for six years and went
all the way to the CA;(4) the spouses Cadavedo and Atty. Lacaya
entered into a compromise agreement concerning the division of the
subject lot where Atty. Lacaya ultimately agreed to acquire a smaller
portion; (5) the MTC approved the compromise agreement; (6) Atty.
Lacaya defrayed all of the litigation expenses in Civil Case No. 1721;
and (7) the spouses Cadavedo expressly recognized that Atty. Lacaya
served them in several cases.
Considering these established facts and consistent with Canon 20.01 of
the Code of Professional Responsibility (enumerating the factors that
should guide the determination of the lawyer’s fees), the CA ruled that
the time spent and the extent of the services Atty. Lacaya rendered for
the spouses Cadavedo in the three cases, the probability of him losing
other employment resulting from his engagement, the benefits resulting
to the spouses Cadavedo, and the contingency of his fees justified the
compromise agreement and rendered the agreed fee under the
compromise agreement reasonable.
The Petition
In the present petition, the petitioners essentially argue that the CA
erred in: (1) granting the attorney’s fee consisting of one-half or
10.5383 hectares of the subject lot to Atty. Lacaya, instead of
confirming the agreed contingent attorney’s fees of ₱2,000.00; (2) not
holding the respondents accountable for the produce, harvests and
income of the 10.5383-hectare portion (that they obtained from the
spouses Cadavedo) from 1988 up to the present; and (3) upholding the
validity of the purported oral contract between the spouses Cadavedo
and Atty. Lacaya when it was champertous and dealt with property then
still subject of Civil Case No. 1721.13
The petitioners argue that stipulations on a lawyer’s compensation for
professional services, especially those contained in the pleadings filed
in courts, control the amount of the attorney’s fees to which the lawyer
shall be entitled and should prevail over oral agreements. In this case,
the spouses Cadavedo and Atty. Lacaya agreed that the latter’s
contingent attorney’s fee was ₱2,000.00 in cash, not one-half of the
subject lot. This agreement was clearly stipulated in the amended
complaint filed in Civil Case No. 1721. Thus, Atty. Lacaya is bound by
the expressly stipulated fee and cannot insist on unilaterally changing
its terms without violating their contract.
The petitioners add that the one-half portion of the subject lot as Atty.
Lacaya’s contingent attorney’s fee is excessive and unreasonable. They
highlight the RTC’s observations and argue that the issues involved in
Civil Case No. 1721, pursuant to which the alleged contingent fee of
one-half of the subject lot was agreed by the parties, were not novel and
did not involve difficult questions of law; neither did the case require
much of Atty. Lacaya’s time, skill and effort in research. They point out
that the two subsequent civil cases should not be considered in
determining the reasonable contingent fee to which Atty. Lacaya should
be entitled for his services in Civil Case No. 1721,as those cases had
not yet been instituted at that time. Thus, these cases should not be
considered in fixing the attorney’s fees. The petitioners also claim that
the spouses Cadavedo concluded separate agreements on the expenses
and costs for each of these subsequent cases, and that Atty. Lacaya did
not even record any attorney’s lien in the spouses Cadavedo’s TCT
covering the subject lot.
The petitioners further direct the Court’s attention to the fact that Atty.
Lacaya,in taking over the case from Atty. Bandal, agreed to defray all
of the litigation expenses in exchange for one-half of the subject lot
should they win the case. They insist that this agreement is a
champertous contract that is contrary to public policy, prohibited by
law for violation of the fiduciary relationship between a lawyer and a
client.
Finally, the petitioners maintain that the compromise agreement in Civil
Case No. 215 (ejectment case) did not novate their original stipulated
agreement on the attorney’s fees. They reason that Civil Case No. 215
did not decide the issue of attorney’s fees between the spouses
Cadavedo and Atty. Lacaya for the latter’s services in Civil Case No.
1721.
The Case for the Respondents
In their defense,14 the respondents counter that the attorney’s fee
stipulated in the amended complaint was not the agreed fee of Atty.
Lacaya for his legal services. They argue that the questioned stipulation
for attorney’s fees was in the nature of a penalty that, if granted, would
inure to the spouses Cadavedo and not to Atty. Lacaya.
The respondents point out that: (1) both Vicente and Atty. Lacaya
caused the survey and subdivision of the subject lot immediately after
the spouses Cadavedo reacquired its possession with the RTC’s
approval of their motion for execution of judgment in Civil Case No.
1721; (2) Vicente expressly ratified and confirmed the agreement on the
contingent attorney’s fee consisting of one-half of the subject lot; (3)
the MTC in Civil Case No. 215 (ejectment case) approved the
compromise agreement; (4) Vicente is the legally designated
administrator of the conjugal partnership, hence the compromise
agreement ratifying the transfer bound the partnership and could not
have been invalidated by the absence of Benita’s acquiescence; and (5)
the compromise agreement merely inscribed and ratified the earlier oral
agreement between the spouses Cadavedo and Atty. Lacaya which is
not contrary to law, morals, good customs, public order and public
policy.
While the case is pending before this Court, Atty. Lacaya died. 15 He
was substituted by his wife -Rosa -and their children –Victoriano D.L.
Lacaya, Jr., Rosevic Lacaya-Ocampo, Reymar L. Lacaya, Marcelito L.
Lacaya, Raymundito L. Lacaya, Laila Lacaya-Matabalan, Marivic
Lacaya-Barba, Rosalie L. Lacaya and Ma. Vic-Vic Lacaya-
Camaongay.16
The Court’s Ruling
We resolve to GRANT the petition.
The subject lot was the core of four successive and overlapping cases
prior to the present controversy. In three of these cases, Atty. Lacaya
stood as the spouses Cadavedo’s counsel. For ease of discussion, we
summarize these cases (including the dates and proceedings pertinent to
each) as follows:
Civil Case No. 1721 – Cadavedo v. Ames (Sum of money and/or
voiding of contract of sale of homestead), filed on January 10, 1967.
The writ of execution was granted on October 16, 1981.
Civil Case No. 3352 – Ames v. Cadavedo (Quieting of Title and/or
Enforcement of Civil Rights due Planters in Good Faith with
Application for Preliminary injunction), filed on September 23, 1981.
Civil Case No. 3443 – Cadavedo v. DBP (Action for Injunction with
Preliminary Injunction), filed on May 21, 1982.
Civil Case No. 215 –Atty. Lacaya v. Vicente Cadavedo, et. al.
(Ejectment Case), filed between the latter part of 1981 and early part of
1982. The parties executed the compromise agreement on May 13,
1982.
Civil Case No. 4038 –petitioners v. respondents (the present case).
The agreement on attorney’s fee
consisting of one-half of the subject
lot is void; the petitioners are entitled
to recover possession
The core issue for our resolution is whether the attorney’s fee
consisting of one-half of the subject lot is valid and reasonable, and
binds the petitioners. We rule in the NEGATIVE for the reasons
discussed below.
A. The written agreement providing for
a contingent fee of ₱2,000.00 should prevail
over the oral agreement providing for one-
half of the subject lot
The spouses Cadavedo and Atty. Lacaya agreed on a contingent fee of
₱2,000.00 and not, as asserted by the latter, one-half of the subject lot.
The stipulation contained in the amended complaint filed by Atty.
Lacaya clearly stated that the spouses Cadavedo hired the former on a
contingency basis; the Spouses Cadavedo undertook to pay their lawyer
₱2,000.00 as attorney’s fees should the case be decided in their favor.
Contrary to the respondents’ contention, this stipulation is not in the
nature of a penalty that the court would award the winning party, to be
paid by the losing party. The stipulation is a representation to the court
concerning the agreement between the spouses Cadavedo and Atty.
Lacaya, on the latter’s compensation for his services in the case; it is
not the attorney’s fees in the nature of damages which the former prays
from the court as an incident to the main action.
At this point, we highlight that as observed by both the RTC and the
CA and agreed as well by both parties, the alleged contingent fee
agreement consisting of one-half of the subject lot was not reduced to
writing prior to or, at most, at the start of Atty. Lacaya’s engagement as
the spouses Cadavedo’s counsel in Civil Case No. 1721.An agreement
between the lawyer and his client, providing for the former’s
compensation, is subject to the ordinary rules governing contracts in
general. As the rules stand, controversies involving written and oral
agreements on attorney’s fees shall be resolved in favor of the
former.17 Hence, the contingency fee of ₱2,000.00 stipulated in the
amended complaint prevails over the alleged oral contingency fee
agreement of one-half of the subject lot.
B. The contingent fee agreement between
the spouses Cadavedo and Atty. Lacaya,
awarding the latter one-half of the subject
lot, is champertous
Granting arguendo that the spouses Cadavedo and Atty. Lacaya indeed
entered into an oral contingent fee agreement securing to the latter one-
half of the subject lot, the agreement is nevertheless void.
In their account, the respondents insist that Atty. Lacaya agreed to
represent the spouses Cadavedo in Civil Case No. 1721 and assumed
the litigation expenses, without providing for reimbursement, in
exchange for a contingency fee consisting of one-half of the subject lot.
This agreement is champertous and is contrary to public policy. 18
Champerty, along with maintenance (of which champerty is an
aggravated form), is a common law doctrine that traces its origin to the
medieval period.19 The doctrine of maintenance was directed "against
wanton and in officious intermeddling in the disputes of others in which
the intermeddler has no interest whatever, and where the assistance
rendered is without justification or excuse."20 Champerty, on the other
hand, is characterized by "the receipt of a share of the proceeds of the
litigation by the intermeddler."21 Some common law court decisions,
however, add a second factor in determining champertous contracts,
namely, that the lawyer must also, "at his own expense maintain, and
take all the risks of, the litigation."22
The doctrines of champerty and maintenance were created in response
"to medieval practice of assigning doubtful or fraudulent claims to
persons of wealth and influence in the expectation that such individuals
would enjoy greater success in prosecuting those claims in court, in
exchange for which they would receive an entitlement to the spoils of
the litigation."23 "In order to safeguard the administration of justice,
instances of champerty and maintenance were made subject to criminal
and tortuous liability and a common law rule was developed, striking
down champertous agreements and contracts of maintenance as being
unenforceable on the grounds of public policy."24
In this jurisdiction, we maintain the rules on champerty, as adopted
from American decisions, for public policy considerations. 25 As matters
currently stand, any agreement by a lawyer to "conduct the litigation in
his own account, to pay the expenses thereof or to save his client
therefrom and to receive as his fee a portion of the proceeds of the
judgment is obnoxious to the law."26 The rule of the profession that
forbids a lawyer from contracting with his client for part of the thing in
litigation in exchange for conducting the case at the lawyer’s expense is
designed to prevent the lawyer from acquiring an interest between him
and his client. To permit these arrangements is to enable the lawyer to
"acquire additional stake in the outcome of the action which might lead
him to consider his own recovery rather than that of his client or to
accept a settlement which might take care of his interest in the verdict
to the sacrifice of that of his client in violation of his duty of undivided
fidelity to his client’s cause."27
In Bautista v. Atty. Gonzales,28 the Court struck down the contingent
fee agreement between therein respondent Atty. Ramon A. Gonzales
and his client for being contrary to public policy. There, the Court held
that an reimbursement of litigation expenses paid by the former is
against public policy, especially if the lawyer has agreed to carry on the
action at his expense in consideration of some bargain to have a part of
the thing in dispute. It violates the fiduciary relationship between the
lawyer and his client.29
In addition to its champertous character, the contingent fee arrangement
in this case expressly transgresses the Canons of Professional Ethics
and, impliedly, the Code of Professional Responsibility. 30 Under Rule
42 of the Canons of Professional Ethics, a lawyer may not properly
agree with a client that the lawyer shall pay or beat the expense of
litigation.31 The same reasons discussed above underlie this rule.
C. The attorney’s fee consisting of
one-half of the subject lot is excessive
and unconscionable
We likewise strike down the questioned attorney’s fee and declare it
void for being excessive and unconscionable.1âwphi1The contingent
fee of one-half of the subject lot was allegedly agreed to secure the
services of Atty. Lacaya in Civil Case No. 1721.Plainly, it was intended
for only one action as the two other civil cases had not yet been
instituted at that time. While Civil Case No. 1721 took twelve years to
be finally resolved, that period of time, as matters then stood, was not a
sufficient reason to justify a large fee in the absence of any showing
that special skills and additional work had been involved. The issue
involved in that case, as observed by the RTC(and with which we
agree), was simple and did not require of Atty. Lacaya extensive skill,
effort and research. The issue simply dealt with the prohibition against
the sale of a homestead lot within five years from its acquisition.
That Atty. Lacaya also served as the spouses Cadavedo’s counsel in the
two subsequent cases did not and could not otherwise justify an
attorney’s fee of one-half of the subject lot. As assertedby the
petitioners, the spouses Cadavedo and Atty. Lacaya made separate
arrangements for the costs and expenses foreach of these two cases.
Thus, the expenses for the two subsequent cases had been considered
and taken cared of Based on these considerations, we therefore find
one-half of the subject lot as attorney’s fee excessive and unreasonable.
D. Atty. Lacaya’s acquisition of
the one-half portion contravenes
Article 1491 (5) of the Civil Code
Article 1491 (5) of the Civil Code forbids lawyers from acquiring, by
purchase or assignment, the property that has been the subject of
litigation in which they have taken part by virtue of their
profession.32 The same proscription is provided under Rule 10 of the
Canons of Professional Ethics.33
A thing is in litigation if there is a contest or litigation over it in court or
when it is subject of the judicial action. 34Following this definition, we
find that the subject lot was still in litigation when Atty. Lacaya
acquired the disputed one-half portion. We note in this regard the
following established facts:(1)on September 21, 1981, Atty. Lacaya
filed a motion for the issuance of a writ of execution in Civil Case No.
1721; (2) on September 23, 1981, the spouses Ames filed Civil Case
No. 3352 against the spouses Cadavedo; (3)on October 16, 1981, the
RTC granted the motion filed for the issuance of a writ of execution in
Civil Case No. 1721 and the spouses Cadavedo took possession of the
subject lot on October 24, 1981; (4) soon after, the subject lot was
surveyed and subdivided into two equal portions, and Atty. Lacaya took
possession of one of the subdivided portions; and (5) on May 13, 1982,
Vicente and Atty. Lacaya executed the compromise agreement.
From these timelines, whether by virtue of the alleged oral contingent
fee agreement or an agreement subsequently entered into, Atty. Lacaya
acquired the disputed one-half portion (which was after October 24,
1981) while Civil Case No. 3352 and the motion for the issuance of a
writ of execution in Civil Case No. 1721were already pending before
the lower courts. Similarly, the compromise agreement, including the
subsequent judicial approval, was effected during the pendency of Civil
Case No. 3352. In all of these, the relationship of a lawyer and a client
still existed between Atty. Lacaya and the spouses Cadavedo.
Thus, whether we consider these transactions –the transfer of the
disputed one-half portion and the compromise agreement –
independently of each other or resulting from one another, we find them
to be prohibited and void35 by reason of public policy.36 Under Article
1409 of the Civil Code, contracts which are contrary to public policy
and those expressly prohibited or declared void by law are considered
in existent and void from the beginning.37
What did not escape this Court’s attention is the CA’s failure to note
that the transfer violated the provisions of Article 1491(5) of the Civil
Code, although it recognized the concurrence of the transfer and the
execution of the compromise agreement with the pendency of the two
civil cases subsequent to Civil Case No. 1721.38 In reversing the RTC
ruling, the CA gave weight to the compromise agreement and in so
doing, found justification in the unproved oral contingent fee
agreement.
While contingent fee agreements are indeed recognized in this
jurisdiction as a valid exception to the prohibitions under Article
1491(5) of the Civil Code,39 contrary to the CA’s position, however,
this recognition does not apply to the present case. A contingent fee
contract is an agreement in writing where the fee, often a fixed
percentage of what may be recovered in the action, is made to depend
upon the success of the litigation.40 The payment of the contingent fee is
not made during the pendency of the litigation involving the client’s
property but only after the judgment has been rendered in the case
handled by the lawyer.41
In the present case, we reiterate that the transfer or assignment of the
disputed one-half portion to Atty. Lacaya took place while the subject
lot was still under litigation and the lawyer-client relationship still
existed between him and the spouses Cadavedo. Thus, the general
prohibition provided under Article 1491 of the Civil Code, rather than
the exception provided in jurisprudence, applies. The CA seriously
erred in upholding the compromise agreement on the basis of the
unproved oral contingent fee agreement.
Notably, Atty. Lacaya, in undertaking the spouses Cadavedo’s cause
pursuant to the terms of the alleged oral contingent fee agreement, in
effect, became a co-proprietor having an equal, if not more, stake as the
spouses Cadavedo. Again, this is void by reason of public policy; it
undermines the fiduciary relationship between him and his clients. 42
E.The compromise agreement could not
validate the void oral contingent fee
agreement; neither did it supersede the
written contingent fee agreement
The compromise agreement entered into between Vicente and Atty.
Lacaya in Civil Case No. 215 (ejectment case) was intended to ratify
and confirm Atty. Lacaya’s acquisition and possession of the disputed
one-half portion which were made in violation of Article 1491 (5) of
the Civil Code. As earlier discussed, such acquisition is void; the
compromise agreement, which had for its object a void transaction,
should be void.
A contract whose cause, object or purpose is contrary to law, morals,
good customs, public order or public policy is in existent and void from
the beginning.43 It can never be ratified44 nor the action or defense for
the declaration of the in existence of the contract prescribe; 45 and any
contract directly resulting from such illegal contract is likewise void
and in existent.46
Consequently, the compromise agreement did not supersede the written
contingent fee agreement providing for attorney’s fee of ₱2,000.00;
neither did it preclude the petitioners from questioning its validity even
though Vicente might have knowingly and voluntarily acquiesced
thereto and although the MTC approved it in its June 10, 1982 decision
in the ejectment case. The MTC could not have acquired jurisdiction
over the subject matter of the void compromise agreement; its judgment
in the ejectment case could not have attained finality and can thus be
attacked at any time. Moreover, an ejectment case concerns itself only
with the issue of possession de facto; it will not preclude the filing of a
separate action for recovery of possession founded on ownership.
Hence, contrary to the CA’s position, the petitioners–in filing the
present action and praying for, among others, the recovery of
possession of the disputed one-half portion and for judicial
determination of the reasonable fees due Atty. Lacaya for his services –
were not barred by the compromise agreement.
Atty. Lacaya is entitled to receive attorney’s fees on a quantum meruit
basis
In view of their respective assertions and defenses, the parties, in effect,
impliedly set aside any express stipulation on the attorney’s fees, and
the petitioners, by express contention, submit the reasonableness of
such fees to the court’s discretion. We thus have to fix the attorney’s
fees on a quantum meruit basis.
"Quantum meruit—meaning ‘as much as he deserves’—is used as basis
for determining a lawyer’s professional fees in the absence of a contract
x x x taking into account certain factors in fixing the amount of legal
fees."47 "Its essential requisite is the acceptance of the benefits by one
sought to be charged for the services rendered under circumstances as
reasonably to notify him that the lawyer performing the task was
expecting to be paid compensation"48 for it. The doctrine of quantum
meruit is a device to prevent undue enrichment based on the equitable
postulate that it is unjust for a person to retain benefit without paying
for it.49
Under Section 24, Rule 138 of the Rules of Court50 and Canon 20 of the
Code of Professional Responsibility,51factors such as the importance of
the subject matter of the controversy, the time spent and the extent of
the services rendered, the customary charges for similar services, the
amount involved in the controversy and the benefits resulting to the
client from the service, to name a few, are considered in determining
the reasonableness of the fees to which a lawyer is entitled.
In the present case, the following considerations guide this Court in
considering and setting Atty. Lacaya’s fees based on quantum meruit:
(1) the questions involved in these civil cases were not novel and did
not require of Atty. Lacaya considerable effort in terms of time, skill or
the performance of extensive research; (2) Atty. Lacaya rendered legal
services for the Spouses Cadavedo in three civil cases beginning in
1969 until 1988 when the petitioners filed the instant case; (3) the first
of these civil cases (Cadavedo v. Ames) lasted for twelve years and
reaching up to this Court; the second (Ames v. Cadavedo) lasted for
seven years; and the third (Cadavedo and Lacaya v. DBP) lasted for six
years, reaching up to the CA; and (4) the property subject of these civil
cases is of a considerable size of 230,765 square meters or 23.0765
hectares.
All things considered, we hold as fair and equitable the RTC’s
considerations in appreciating the character of the services that Atty.
Lacaya rendered in the three cases, subject to modification on
valuation. We believe and so hold that the respondents are entitled to
two (2) hectares (or approximately one-tenth [1/10] of the subject lot),
with the fruits previously received from the disputed one-half portion,
as attorney’s fees. They shall return to the petitioners the remainder of
the disputed one-half portion.
The allotted portion of the subject lot properly recognizes that litigation
should be for the benefit of the client, not the lawyer, particularly in a
legal situation when the law itself holds clear and express protection to
the rights of the client to the disputed property (a homestead lot).
Premium consideration, in other words, is on the rights of the owner,
not on the lawyer who only helped the owner protect his rights. Matters
cannot be the other way around; otherwise, the lawyer does indeed
effectively acquire a property right over the disputed property. If at all,
due recognition of parity between a lawyer and a client should be on the
fruits of the disputed property, which in this case, the Court properly
accords.
WHEREFORE, in view of these considerations, we hereby GRANT the
petition. We AFFIRM the decision dated September 17, 1996 and the
resolution dated December 27, 1996of the Regional Trial Court of
Dipolog City, Branch 10,in Civil Case No. 4038, with the
MODIFICATION that the respondents, the spouses Victorino (Vic) T.
Lacaya and Rosa Legados, are entitled to two (2) hectares (or
approximately one-tenth [1/10] of the subject lot) as attorney’s fees.
The fruits that the respondents previously received from the disputed
one-half portion shall also form part of the attorney’s fees. We hereby
ORDER the respondents to return to the petitioners the remainder of the
10.5383-hectare portion of the subject lot that Atty. Vicente Lacaya
acquired pursuant to the compromise agreement.
SO ORDERED.
ARTURO D. BRION
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
MARIANO C. DEL
JOSE PORTUGAL PEREZ
CASTILLO
Associate Justice
Associate Justice
ESTELA M. PERLAS-BERNABE
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of
the Court's Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the

Division's Chairperson's Attestation, I certify that the conclusions in the
above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

A.C. No. 10548               December 10, 2014

CAROLINE CASTANEDA JIMENEZ, Complainant, 

vs.
ATTY. EDGAR B. FRANCISCO, Respondent.

DECISION

MENDOZA, J.:

This refers to the Resolutions of the Integrated Bar of the Philippines,

Board of Governors (IBP-BOG), dated January 3, 20131 and March 22,
2014,2 adopting and approving the findings of the Commission on Bar
Discipline (CBD) which found Atty. Edgar 8. Francisco (Alty
Francisco) administratively liable for multiple violations of the Code of
Professional Responsibility (CPR) and recommended the penalty of
suspension of one (1) year from the practice of law.

On September 6, 2007, the CBD received a complaint, dated July 14,

2007,3 filed by Caroline Castañeda Jimenez (complainant)against Atty.
Francisco for multiple violations of the CPR. On October 24, 2007,
Atty. Francisco filed his Answer.4 On June 26, 2009, the mandatory
conference was held and terminated. Only the counsel for Atty.
Francisco appeared. The notice of the said conference addressed to
complainant was returned with the notation "unknown at the given
address." No new address was provided by the complainant. Both
parties wererequired to submit their respective position papers. For this
purpose, Atty. Francisco adopted his Answer. The Antecedents

Mario Crespo, otherwise known as Mark Jimenez (Jimenez), filed a

complaint for estafa against complainant, her sister Rosemarie
Flaminiano, Marcel Crespo, Geraldine Antonio, Brenda Heffron,
Magdalena Cunanan, and Isabel Gonzalez.5 The said complaint was
docketed as IS No. 074314 with the Office of the City Prosecutor of
Makati City. Jimenez alleged that he was the true and beneficial owner
of the shares of stock in Clarion Realty and Development Corporation
(Clarion), which was incorporated specifically for the purpose of
purchasing a residential house located in Forbes Park, Makati City
(Forbes property). The incorporators and original stockholders of
Clarion were as follows:

Thomas K. Chua - ₱500,000.00

Teresita C. Alsua - ₱500,000.00

Myla Villanueva - ₱249,998.00

 Edgar B. Francisco - ₱1.00
Soledad Gamat - ₱1.00
Simultaneous with the drafting of Clarion’s Articles of Incorporation,
the above-named stockholders, except for Myla Villanueva (Myla),
executed a deed of assignment of their respective shares in favor of
complainant, who was then Jimenez’s common-law partner.Clarion’s
total capitalization was only ₱5,000,000.00. Thus, in order to achieve
its purpose of purchasing the Forbes property, Clarion simulated a loan
from the complainant in the amount of ₱80,750,000.00. Thereafter,
Clarion purchased the Forbes property in the amount of
₱117,000,000.00 from Gerardo Contreras. To effect the sale, Myla
handed a check in the said amount which was funded entirely by
Jimenez. The sale, however, was undervalued. In the deed of sale, it
was made to appear that the Forbes property was purchased for
₱78,000,000.00 only. Further, the money used as the purchase price
was not reflected in the books of Clarion.
On July 19, 2001, Thomas Chua and Teresita Alsua assigned their
shares in Clarion to Jimenez by virtue of a deed of trust. On the other
hand, Myla’s 249,997 shares were transferred to complainant based on
a deed of assignment. The remaining one (1) share was transferred to
Ma. Carolina C. Crespo. These transactions appeared in Clarion’s
General Information Sheet (GIS)filed with the Securities and Exchange
Commission (SEC). Resultantly, the subscribed shares of Clarion were
as follows:
Mark Jimenez - P 500,000.00
Caroline Jimenez - P 749,997.00
Ma. Carolina C. Crespo - P 1.00
Edgar B. Francisco - P 1.00
Soledad Gamat - P 1.00
On November 5, 2002, Jimenez transferred all his shares to
complainant by another deed of assignment, making her the holder of
Clarion shares amounting to ₱1,249,997.00.
According to Jimenez’s complaint, while he was in prison in the United
States in 2004, he learned from Atty. Francisco that his son, Marcel
Crespo (Marcel), approached the complainant and threatened her,
claiming that the United States Internal Revenue Service (IRS)was
about to go after their properties. Marcel succeeded in persuading
complainant to transfer her nominal shares in Clarion to Geraldine
Antonio, through another deed of assignment. Again, this was reflected
in Clarion’s GIS for the year 2004.
Thereafter, Jimenez was informed by Atty. Francisco that, through
fraudulent means, complainant and her co-respondents in the estafa
case, put the Forbes property for sale sometimein August 2004. The
said property was eventually sold to Philmetro Southwest Enterprise
Inc. (Philmetro)for the amount of ₱118,000,000.00 without Jimenez’s
knowledge. This sale was again undervalued at ₱78,000.000.00 per the
deed of sale. Atty. Francisco relayed to Jimenez that he was the one
who received the payment for the sale of the Forbes property and that
he handed all the proceeds thereof to Rosemarie Flaminiano in the
presence of complainant.
Jimenez’s complaint for estafa was based on complainant’s alleged
participation in the fraudulent means in selling the Forbes property
which was acquired by Clarion with Jimenez’s money. Complainant
was duty bound to remit all the proceeds of the sale to Jimenez as the
true and beneficial owner. Complainant and her co-respondents,
however, misappropriated and converted the fundsfor their personal use
and benefit.
In support of Jimenez’s complaint for estafa, Atty. Francisco executed
an affidavit reiterating its factual averments. 6A perusal of this affidavit
likewise would show the following claims and admissions, among other
things, of Atty. Francisco:
1. Sometime in August 2004, complainant called him, asking
for assistance in the documentation of the sale of the Forbes
property owned by Clarion. Atty. Francisco asked her if she
had secured permission from Mark Jimenez and complainant
answered in the affirmative.
2. The Board of Directors of Clarion issued a resolution
authorizing him to negotiate the sale of the property.
3. For purposes of the sale, he opened an account with
Security Bank, San Francisco Del Monte branch. When the
cash payment was deposited, he withdrew the amount and
handed the same to Rosemarie Flaminiano in the presence of
complainant.
4. All transfers of shares were caused without any
consideration. The transfer taxes, however, were paid.
5. When Mark Jimenez returned to the Philippines, he was
able to confirm that the sale of the Forbes property was
without his knowledge and approval. The proceeds of the sale
had already been farmed out to different corporations
established by complainant and her sister.
6. The frequent changes in stockholdings were premeditated
in order to steal the money of Mark Jimenez.
The Complaint
Complainant was shocked upon reading the allegations in the complaint
for estafa filed by Jimenez against her. She felt even more betrayed
when she read the affidavit of Atty. Francisco, on whom she relied as
her personal lawyer and Clarion’s corporate counsel and secretary of
Clarion. This prompted her to file a disciplinary case against Atty.
Francisco for representing conflicting interests. According to her, she
usually conferred with Atty. Francisco regarding the legal implications
of Clarion’s transactions. More significantly, the principal documents
relative to the sale and transfer of Clarion’s property were all prepared
and drafted by Atty. Francisco or the members of his law office. 7 Atty.
Francisco was the one who actively participated in the transactions
involving the sale of the Forbes property. Without admitting the truth of
the allegations in his affidavit, complainant argued that its execution
clearly betrayed the trust and confidence she reposed on him as a
lawyer. For this reason, complainant prayed for the disbarment of Atty.
Francisco.
The Respondent’s Position
In his Answer,8 Atty. Francisco replied that Jimenez initially engaged
his services in 1998 for the incorporation of Clarion for the purpose of
purchasing a residential house in Forbes Park, where he intended to live
with his long-time partner, the complainant; that the original
incorporators and stockholders of Clarion held their respective shares in
trust for Jimenez; that the subsequent changes in the ownership of
Clarion shareholdings were also pursuant to Jimenez’s orders; and that
as the corporate secretary and legal counsel of Clarion, he prepared all
the legal documentation togive effect to the said transfers and,
ultimately, to the purchase of the Forbes property.
Atty. Francisco further stated that sometime in 2004, Jimenez was
imprisoned in the United States for excessive contributions to the
Democratic Party; that during this time, Jimenez’s son, Marcel, and the
complainant, asked him again to changethe ownership of Clarion shares
in order to avoid the attachment of Jimenez’s properties in a tax evasion
case; that he acceded to the request on the belief that this was in
accordance with Jimenez’s wishes; and that as a result, almost 100% of
Clarion’s ownership was transferred in the name of Geraldine Antonio.
Atty. Francisco also claimed that, thereafter, complainant tasked him to
talk to prospective buyers and to negotiate the sale of the Forbes
property until it was sold for ₱118,000,000.00; that Marcel and
complainant led him to believe that Jimenez had knowledge of the sale
as they were in constant communication with him; that all these
representations, however, turned out to be false when Jimenez returned
tothe Philippines and discovered that the proceeds of the sale were
coursed through other corporations set up by complainant and her
sister; that Jimenez likewise learned of the successive sale of his other
properties, including Meridian Telekoms Inc., by the members of his
family; and that this led to the filing of the estafa case against the
complainant and the others. As a witness to the fraud committed against
Jimenez, Atty. Francisco executed the affidavit narrating the facts and
circumstances surrounding the said transactions.
Atty. Francisco mainly argued thathe violated neither the rule on
disclosures of privileged communication nor the proscription against
representing conflicting interests, on the ground that complainant was
not his client. He was the lawyer of Jimenez and the legal counsel of
Clarion, but never of the complainant. He might have assisted her in
some matters, but these were all under the notion that Jimenez had
given him authority to do so. Further, though he acted as legal counsel
for Clarion, no attorney-client relationship between him and
complainant was formed, as a corporation has a separate and distinct
personality from its shareholders. While he admitted that the legal
documentation for the transfer of shares and the sale of the Forbes
property were prepared by him and notarized by the members of his law
firm, he averred that these acts were performed in his capacity as the
corporate secretary and legal counsel ofClarion, and not as a lawyer of
complainant. Therefore, he served no conflicting interests because it
was not a "former client" and a "subsequent client" who were the
opposing parties in litigation.
He opined that assuming that complainant was indeed his client, the
rule on privileged communication does not apply to his case. Here,
complainant failed to allege, muchless prove, the requisites for the
application of the privilege. When Atty. Francisco denied being her
lawyer, the complainant should have established, by clear and
convincing evidence, that a lawyer-client relationship indeed existed
between them. Complainant failed to do this.
Arguing that the execution of his affidavit in the estafa case was but a
truthful narration of facts by a witness, Atty. Francisco cited Gonzaga
v. Cañete,9 where the Court ruled that "the fact that one of the witnesses
for the defendant had been formerly the lawyer for the defendant in this
suit was no ground for rejecting his testimony." In this case, he merely
attested to the fraudulent acts of complainant, in the course of which, he
defended and served Jimenez as a client. This was likewise pursuant to
the rule that unlawful and illegal motives and purposes were not
covered by the privilege. It was just unfortunate that he fell for the ploy
of complainant.
The Findings of the Investigating Commissioner
In the Commissioner’s Report,10 dated November 7, 2011, the
Investigating Commissioner, Atty. Jose I. dela Rama, Jr. (Investigating
Commissioner),found Atty. Francisco guilty of violations of the CPR
and recommended that he be suspended for one (1) year from the
practice of law. Initially, the Investigating Commissioner noted that the
subsequent affidavit of desistance executed by Jimenez in the estafa
case did not affect the investigation conducted by the CBD as it was not
an ordinary court which accepted compromises or withdrawals of cases.
After weighing on the claims of the parties, the Investigating
Commissioner concluded that nothing in the records would show that a
lawyer-client relationship existed between Atty. Francisco and
Jimenez.11 The circumstances would show that Atty. Francisco was an
original incorporator and shareholder of Clarion. He was also the legal
counsel and corporate secretary of the said corporation, the articles of
incorporation of which did not include Jimenez as an original
incorporator. He became a stockholder only in 2001, when Jimenez
acquired shares from Thomas Chua and Teresita Alsua. Jimenez’s
participation in Clarion affairs again stopped when he assigned the
entirety of his shares in favor of complainant.
Granting that Jimenez really owned 100% of Clarion as alluded to by
Atty. Francisco, the report stated that it would appear that the latter
permitted misrepresentations as to Clarion’s ownership to be reported
to the SEC through its GIS. The Investigating Commissioner also
pointed out Atty. Francisco’s clear admission that the transfer of shares
within Clarion were "without any consideration," ran counter to the
deeds of assignment that he again admittedly executed as corporate
counsel. Worse, Atty. Francisco admitted to have simulated the loan
and undervalued the consideration of the effected sale of the Forbes
property, which displayed his unlawful, dishonest, immoral, and
deceitful conduct in violation of Canon 1 of the CPR. Further, when he
executed the affidavit containing allegations against the interest of
Clarion and complainant, the Investigating Commissioner held that
Atty. Francisco violated the rule on privileged communication and
engaged in an act that constituted representation of conflicting interests
in violation of Canons 15 and 21 of the CPR.
In its January 3, 2013 Resolution,12 the IBP-BOG adopted and
approved, in toto, the findings and recommendation of the CBD against
Atty. Francisco.
The respondent received a copy of the said resolution on March 26,
2013 and moved for its reconsideration.13
Atty. Francisco appealed to the compassion of the IBP-BOG, reasoning
out that the penalty of suspension of one (1) year is too severe
considering that in his more than three decades of practice, he had
never been involved in any act that would warrant the imposition of
disciplinary action upon him. It was only in 2007, when his client,
Jimenez, experienced a difficult crisis involving his children and
common-law partner that he experienced a major upheaval in his
professional life. He apologized for his not being too circumspect in
dealing with the relatives of Jimenez.
As to the charges against him, Atty. Francisco reiterated that his
participation in the execution of the documents pertaining to the sale of
the Forbes property were all connected to his capacity as Clarion’s
corporate secretary and legal counsel, not to mention his ties with his
client and friend, Jimenez. He admitted that he owed fidelity to Clarion
and Jimenez, but denied that this duty extended to the incorporators and
shareholders of Clarion. Thus, when complainant sought advice in her
capacity as a shareholder in Clarion, no fiduciary duty arose on his part.
In his own words, Atty. Francisco insisted that "Carol is not Clarion
and vice versa."14
Attached to Atty. Francisco’s motion for reconsideration was an
affidavit executed by Jimenez, stating that he had retained the legal
services of Atty. Francisco since 1999. Espousing Atty. Francisco’s
defenses, Jimenez asserted that Atty. Francisco’s law firm was in
charge of all the companies he owned in the Philippines.He directed
Atty. Francisco to execute all the documentation to show his ownership
of these companies, including Clarion. These documents were in the
possession of complainant for safekeeping. When Jimenez ran for
Congress in 2001,Atty. Francisco personally assisted him in the filing
ofhis certificate of candidacy and the proceedings before the electoral
tribunals. While he was in prison in the United States, it was Atty.
Francisco who visited and told him that his children, Myla and Marcel,
were then facilitating the sale of one of his companies, Meridian
Telekoms, Inc., without his knowledge. He asked Atty. Francisco to
keep quiet about his children’s betrayal and to wait until he could go
home. When he filed the criminal cases against his children and
complainant, the latter even filed a frivolous kidnapping case against
Atty. Francisco. According to Jimenez, the people who committed
crimes against him were now exhausting all possible means to keep
Atty. Francisco silent and to prevent the latter from performing his
duties as a lawyer.
In its March 22, 2014 Resolution,15 the IBP-BOG denied the
respondent’s motion for reconsideration.
No petition for review was filed with the Court.
The Court’s Ruling
Violations of Canons 1 and 10
of the CPR and the Lawyer’s Oath
Canon 1 and Rule 1.01 of the CPR provide:
CANON 1 – A LAWYER SHALL UPHOLD THE CONSTITUTION,
OBEY THE LAWS OF THE LAND AND PROMOTE RESPECT
FOR LAW AND LEGAL PROCESSES.
Rule 1.0 – A lawyer shall not engage in unlawful, dishonest, immoral
or deceitful conduct.
Canon 1 clearly mandates the obedience of every lawyer to laws and
legal processes. To the best of his ability, a lawyer is expected to
respect and abide by the law and, thus, avoid any act or omission that is
contrary thereto. A lawyer’s personal deference to the law not only
speaks of his character but it also inspires respect and obedience tothe
law, on the part of the public.
Rule 1.0, on the other hand, states the norm of conduct to be observed
by all lawyers.
Any act or omission that is contraryto, or prohibited or unauthorized by,
or in defiance of, disobedient to, or disregards the law is "unlawful."
"Unlawful" conduct does not necessarily imply the element of
criminality although the concept is broad enough to include such
element.16 To be "dishonest" means the disposition to lie, cheat,
deceive, defraud or betray; be unworthy; lacking in integrity, honesty,
probity, integrity in principle, fairness and straight forwardness 17 while
conduct that is "deceitful" means the proclivity for fraudulent and
deceptive misrepresentation, artifice or device that is used upon another
who is ignorant of the true facts, to the prejudice and damage of the
party imposed upon.18
Membership in the legal profession is bestowed upon individuals who
are not only learned in law, but also known to possess good moral
character. Lawyers should act and comport themselves with honesty
and integrity in a manner beyond reproach, inorder to promote the
public’s faith in the legal profession.19 "To say that lawyers must at all
times uphold and respect the law is to state the obvious, but such
statement can never be over emphasized. Considering that, of all classes
and professions, [lawyers are] most sacredly bound to uphold the law, it
is imperative that they live by the law."20
When Atty. Francisco was admitted to the Bar, he also took an oath to
"obey the laws," "do no falsehood," and conduct himself as a lawyer
according to the best of his knowledge and discretion. 21
In the facts obtaining in this case, Atty. Francisco clearly violated the
canons and his sworn duty. He is guilty of engaging in dishonest and
deceitful conduct when he admitted to having allowed his corporate
client, Clarion, to actively misrepresent to the SEC, the significant
matters regarding its corporate purpose and subsequently, its corporate
shareholdings. In the documents submitted to the SEC, such as the
deeds of assignment and the GIS, Atty. Francisco, in his professional
capacity, feigned the validity of these transfers of shares, making it
appear that these were done for consideration when, in fact, the said
transactions were fictitious, albeit upon the alleged orders of Jimenez.
The Investigating Commissioner was correct in pointing out that this
ran counter to the deeds of assignment which he executed as corporate
counsel. In his long practice as corporate counsel, it is indeed safe to
assume that Atty. Francisco is knowledgeable in the law on contracts,
corporation law and the rules enforced by the SEC. As corporate
secretary of Clarion, it was his duty and obligation to register valid
transfers of stocks. Nonetheless, he chose to advance the interests of his
clientele with patent disregard of his duties as a lawyer. Worse, Atty.
Francisco admitted to have simulated the loan entered into by Clarion
and to have undervalued the consideration of the effected sale of the
Forbes property. He permitted this fraudulent ruse to cheat the
government of taxes. Unquestionably, therefore, Atty. Francisco
participated in a series of grave legal infractions and was content to
have granted the requests of the persons involved.
Despite assertions that these were in accordance to Jimenez’s wishes, or
pursuant to complainant’s misrepresentations, the Court cannot turn a
blind eye on Atty. Francisco’s act of drafting, or at the very least,
permitting untruthful statements to be embodied in public documents. If
the Court allows this highly irregular practice for the specious reason
that lawyers are constrained to obey their clients’ flawed scheming and
machinations, the Court would, in effect, sanction wrongdoing and
falsity. This would undermine the role of lawyers as officers of the
court.
Time and again, the Court has reminded lawyers that their support for
the cause of their clients should never be attained at the expense of truth
and justice. While a lawyer owes absolute fidelity to the cause of his
client, full devotion to his genuine interest, and warm zeal in the
maintenance and defense of his rights, as well as the exertion of his
utmost learning and ability, he must do so only within the bounds of the
law. It needs to be emphasized that the lawyer's fidelity to his client
must not be pursued at the expense of truth and justice, and mustbe held
within the bounds of reason and common sense. His responsibility to
protect and advance the interests of his client does not warranta course
of action propelled by ill motives and malicious intentions. 22
In the same vein, Atty. Francisco’s admissions show that he lacks
candor regarding his dealings. Canon 10 of the CPR provides that, "[a]
lawyer owes candor, fairness and good faith to the court." Corollary
thereto, Rule 10.0 of the CPR provides that "a lawyer shall do no
falsehood, nor consent to the doing of any in Court, nor shall he
mislead or allow the Court to be misled by an artifice." Lawyers are
officers of the court, called upon to assist in the administration of
justice. They act as vanguards of our legal system, protecting and
upholding truth and the rule oflaw. They are expected to act with
honesty in all their dealings, especially with the court. 23
From the foregoing, Atty. Francisco clearly violated his duties as a
lawyer embodied in the CPR, namely, to avoid dishonest and deceitful
conduct, (Rule 1.01, Canon 1) and to actwith candor, fairness and good
faith (Rule 10.01, Canon 10). Also, Atty. Franciso desecrated his
solemn oath not to do any falsehood nor consent to the doing of the
same.
Rule on Conflicting Interests and
Disclosure of Privileged
Communication
With respect to Atty. Francisco’s alleged representation of conflicting
interests and disclosure of privileged communication, the Court
deviates from the findings of the IBP-BOG.
Rule 15.03, Canon 15 of the CPR provides that, "[a] lawyer shall not
represent conflicting interests except by written consent of all
concerned given after a full disclosure of the facts." 24 "The relationship
between a lawyer and his/her client should ideallybe imbued with the
highest level of trust and confidence. This is the standard of
confidentiality that must prevail to promote a full disclosure of the
client’s most confidential information to his/her lawyer for an
unhampered exchange of information between them. Needless to state,
a client can only entrust confidential information to his/her lawyer
based on an expectation from the lawyer of utmost secrecy and
discretion; the lawyer, for his part, is duty-bound to observe candor,
fairness and loyalty in all his dealings and transactions withthe client.
Part of the lawyer’s duty in this regard isto avoid representing
conflicting interests…"25 Thus, even if lucrative fees offered by
prospective clients are at stake, a lawyer must decline professional
employment if the same would trigger a violation of the prohibition
against conflict of interest.
In Quiambao v. Bamba,26 the Court discussed the application of the rule
on conflict of interest in this wise:
In broad terms, lawyers are deemed to represent conflicting interests
when, in behalf of one client, it is their duty to contend for that which
duty to another client requires them to oppose. Developments in
jurisprudence have particularized various tests to determine whether a
lawyer’s conduct lies within this proscription. One test is whether a
lawyer is duty-bound to fight for an issue or claim in behalf of one
client and, at the same time, to oppose that claim for the other client.
Thus, if a lawyer’s argument for one client has to be opposed by that
same lawyer in arguing for the other client, there is a violation of the
rule.
Another test of inconsistency of interests is whether the acceptance of a
new relation would prevent the full discharge of the lawyer’s duty of
undivided fidelity and loyalty to the client or invite suspicion of
unfaithfulness or double-dealing in the performance of that duty. Still
another test is whether the lawyer would be called upon in the new
relation to use against a former client any confidential information
acquired through their connection or previous employment.
The proscription against representation of conflicting interest applies to
a situation where the opposing parties are present clients in the same
actionor in an unrelated action. It is of no moment that the lawyer
would not be called upon to contend for one client that which the
lawyer has to oppose for the other client, or that there would be no
occasion to use the confidential information acquired from one to the
disadvantage of the other as the two actions are wholly unrelated. It is
enough that the opposing parties in one case, one of whom would lose
the suit, are present clients and the nature or conditions of the lawyer’s
respective retainers with each of them would affect the performance of
the duty of undivided fidelity to both clients.
From the foregoing, it is obvious that the rule on conflict of interests
presupposes a lawyer-client relationship. The purpose of the rule is
precisely to protect the fiduciary nature of the ties between an attorney
and his client. Conversely, a lawyer may not be precluded from
accepting and representing other clients on the ground of conflict of
interests, if the lawyer-client relationship does not exist in favor of a
party in the first place.
In determining whether or not Atty. Francisco violated the rule on
conflict of interests, a scrutiny of the parties’ submissions with the IBP
reveals that the complainant failed to establish that she was a client of
Atty. Francisco.
First, complainant’s claim of being Atty. Francisco’s client remains
unsubstantiated, considering its detailed refutation. All that the
complaint alleged was that Atty. Francisco was Clarion’s legal counsel
and that complainant sought advice and requested documentation of
several transfers of shares and the sale of the Forbes property. This was
only successful in showing that Atty. Francisco, indeed, drafted the
documents pertaining to the transaction and that he was retained as
legal counsel of Clarion. There was no detailed explanation as to how
she supposedly engaged the services of Atty. Francisco as her personal
counsel and as to what and how she communicated with the latter anent
the dealings she had entered into. With the complaint lacking in this
regard, the unrebutted answer made by Atty. Francisco, accompanied
with a detailed narrative of his engagement as counsel of Jimenez and
Clarion, would have to prevail.
Second, there is a stark disparity inthe amount of narrative details
presented by the parties. Atty. Francisco’s claim thathe was the counsel
of Clarion and Jimenez, and not of the complainant, was clearly
established in a sworn statement executed by Jimenez himself.
Complainant’s evidence pales in comparison with her claims of being
the client of Atty. Francisco couched in general terms that lacked
particularity of circumstances.
Third, noteworthy is the fact that complainant opted not to file a reply
to Atty. Francisco’s answer. This could have given her opportunity to
present evidence showing their professional relationship. She also
failed to appear during the mandatory conference with the IBP-CBD
without even updating her residential address on record. Her
participation in the investigation of the case apparently ended at its
filing.
In suspension or disbarment proceedings, lawyers enjoy the
presumption of innocence, and the burden of proof rests upon the
complainant to clearly prove the allegations in the complaint by
preponderant evidence. Preponderance of evidence means that the
evidence adduced by one side is, as a whole, superior to or has greater
weight than that of the other. It means evidence which is more
convincing to the court as worthy of belief than that which is offered in
opposition thereto. Under Section 1 of Rule 133, in determining
whether or not there is preponderance of evidence, the court may
consider the following: (a) all the facts and circumstances of the case;
(b) the witnesses’ manner of testifying, their intelligence, their means
and opportunity of knowing the facts to which they are testifying, the
nature of the facts towhich they testify, the probability or improbability
of their testimony; (c) the witnesses’ interest or want of interest, and
also their personal credibility so far as the same may ultimately appear
in the trial; and (d) the number of witnesses, although it does not mean
that preponderance is necessarily with the greater number. 27
Markedly, Atty. Francisco could have prevented his entanglement with
this fiasco among the members of Jimenez’s family by taking an
upfront and candid stance in dealing with Jimenez’s children and
complainant. He could have been staunch in reminding the latter that
his tasks were performed in his capacity as legal counsel for Clarion
and Jimenez. Be that as it may, Atty. Francisco’s indiscretion does not
detract the Court from finding that the totality of evidence presented by
the complainant miserably failed to discharge the burden of proving
that Atty. Francisco was her lawyer. At most, he served as the legal
counsel of Clarion and, based on the affirmation presented, of Jimenez.
Suffice it to say, complainant failed to establish that Atty. Francisco
committed a violation of the rule on conflict of interests.
Consequently, the rule on lawyer-client privilege does not apply. In
Mercado v. Vitriolo,28 the Court elucidated on the factors essential to
establish the existence of the said privilege, viz:
In fine, the factors are as follows:
(1) There exists an attorney-client relationship, or a prospective
attorney-client relationship, and it is by reason of this relationship that
the client made the communication.
Matters disclosed by a prospective client to a lawyer are protected by
the rule on privileged communication even if the prospective client
does not thereafter retain the lawyer or the latter declines the
employment. The reason for this is to make the prospective client free
to discuss whatever he wishes with the lawyer without fear that what he
tells the lawyer will be divulged or used against him, and for the lawyer
to be equally free to obtain information from the prospective client. xxx
(2) The client made the communication in confidence.
The mere relation of attorney and client does not raise a presumption of
confidentiality. The client must intend the communication to be
confidential.
A confidential communication refers to information transmitted by
voluntary act of disclosure between attorney and client in confidence
and by means which, so far as the client is aware, discloses the
information to no third person other than one reasonably necessary for
the transmission of the information or the accomplishment of the
purpose for which it was given.
Our jurisprudence on the matter rests on quiescent ground. Thus, a
compromise agreement prepared by a lawyer pursuant to the instruction
of his client and delivered to the opposing party, an offer and counter-
offer for settlement, or a document given by a client to his counsel not
in his professional capacity, are not privileged communications, the
element of confidentiality not being present.
(3) The legal advice must be sought from the attorney in his
professional capacity.
The communication made by a client to his attorney must not be
intended for mere information, but for the purpose of seeking legal
advice from his attorney as to his rights or obligations. The
communication must have been transmitted by a client to his attorney
for the purpose of seeking legal advice.
If the client seeks an accounting service, or business or personal
assistance, and not legal advice, the privilege does not attach to a
communication disclosed for such purpose.
[Emphases supplied]
Considering these factors in the case at bench, the Court holds that the
evidence on record fails to demonstrate the claims of complainant. As
discussed, the complainant failed to establish the professional
relationship between her and Atty. Francisco. The records are further
bereft of any indication that the "advice" regarding the sale of the
Forbes property was given to Atty. Francisco in confidence. Neither
was there a demonstration of what she had communicated to Atty.
Francisco nor a recital of circumstances under which the confidential
communication was relayed. All that complaint alleged in her
complainant was that "she sought legal advice from respondent in
various occasions."29 Considering that complainant failed to attend the
hearings at the IBP, there was no testimony as to the specific
confidential information allegedly divulged by Atty. Francisco without
her consent. It is, therefore, difficult, if not impossible, to determine if
there was any violation of the rule on privileged communication. As
held in Mercado, such confidential information is a crucial link in
establishing a breach of the rule on privileged communication between
attorney and client. It is not enough to merely assert the attorney-client
privilege.30 It cannot be gainsaid then that complainant, who has the
burden of proving that the privilege applies, failed in this regard.
The Penalty
A member of the Bar may be penalized, even disbarred or suspended
from his office as an attorney, for violating of the lawyer’s oath and/or
for breaching the ethics of the legal profession as embodied in the
CPR,31 for the practice of law is a profession, a form of public trust, the
performance of which is entrusted to those who are qualified and who
possess good moral character.32 The appropriate penalty on an errant
lawyer depends on the exercise of sound judicial discretion based on
the surrounding facts.33
Under Section 27, Rule 138 of the Revised Rules of Court, a member of
the Bar may be disbarred or suspended on any of the following
grounds: (1) deceit; (2) malpractice or other gross misconduct in office;
(3) grossly immoral conduct; (4) conviction of a crime involving moral
turpitude; (5) violation of the lawyer's oath; (6) willful disobedience of
any lawful order of a superior court; and (7) willful appearance as an
attorney for a party without authority. A lawyer may be disbarred or
suspended for misconduct, whether in his professional or private
capacity, which shows him to be wanting in moral character, honesty,
probity and good demeanor, or unworthy to continue as an officer of
the court.
While the Court finds no violation of the rule on conflict of interests
and disclosure of privileged communication, the acts of Atty. Francisco,
in actively and passively allowing Clarion tomake untruthful
representations to the SEC and in other public documents, still
constitute malpractice and gross misconduct in his office as attorney,
for which a suspension from the practice of law for six (6) months is
warranted.
WHEREFORE, the Court finds Atty. Edgar B. Francisco GUILTY of
violation of Canons 1 and 10 of the Code of Professional Responsibility
for which he is SUSPENDED from the practice of law for a period of
six (6) months, effective upon receipt of this Decision, with a STERN
WARNING that a commission of the same or similar offense in the
future will result in the imposition of a more severe penalty.

Let a copy of this Decision be entered into the records of Atty. Edgar B.
Francisco and furnished to the Office of the Clerk of Court, the Office
of the Bar Confidant, the Integrated Bar of the Philippines, and all
courts in the Philippines, for their information and guidance.

Atty. Francisco is DIRECTED to inform the Court of the date of his

receipt of this Decision so that the Court can determine the reckoning
point when his suspension shall take effect.

SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

WE CONCUR:

DIOSDADO M. PERALTA*
Associate Justice G B Republic of the Philippines
SUPREME COURT
Manila
MARIANO C. DEL MARTIN S. VILLARAMA,
CASTILLO JR.**
SECOND DIVISION
Associate Justice Associate Justice

A.M. No. RTJ-13-2366               February 4, 2015

[Formerly OCA IPI No. 11-3740-RTJ]
MARVIC M.V.F. LEONEN
Associate Justice
JILL M. TORMIS, Complainant, 
vs.
JUDGE MEINRADO P. PAREDES, Respondent.

DECISION

MENDOZA, J.:

For consideration is the Report and Recommendation1 of Justice Maria

Elisa Sempio Diy (Justice Diy), Court of Appeals, Cebu City, submitted
to this Court pursuant to its January 14, 2013 Resolution,2 referring the
complaint filed by Jill M. Tormis (Jill) against respondent Judge
Meinrado P. Paredes (Judge Paredes), Presiding Judge, Branch 13,
Regional Trial Court (RTC), Cebu City, for investigation, report and
recommendation.

The Facts

In her Affidavit/Complaint,3 dated September 5, 2011, Jill charged

Judge Paredes with grave misconduct. Jill was a student of Judge
Paredes in Political Law Review during the first semester of school
year 2010-2011 at the Southwestern University, Cebu City. She averred
that sometime in August 2010, in his class discussions, Judge Paredes
named her mother, Judge Rosabella Tormis (Judge Tormis),then
Presiding Judge of Branch 4, Municipal Trial Court in Cities
(MTCC),Cebu City, as one of the judges involved in the marriage
scams in Cebu City. Judge Paredes also mentioned in his class that
Judge Tormis was abusive of her position as a judge, corrupt, and
ignorant of the law.

Jill added that Judge Paredes included Judge Tormis in his discussions
not only once but several times. In one session, Judge Paredes was even
said to have included in his discussion Francis Mondragon Tormis
(Francis),son of Judge Tormis, stating that he was a "court-noted
addict."4 She was absent from class at that time, but one of her
classmates who was present, Rhoda L. Litang (Rhoda), informed her
about the inclusion of her brother. To avoid humiliation in school, Jill
decided to drop the class under Judge Paredes and transfer to another
law school in Tacloban City.

Jill also disclosed thatin the case entitled "Trinidad O. Lachica v. Judge
Tormis"5 (Lachica v. Tormis), her mother was suspended from the
service for six (6) months for allegedly receiving payment of a cash bail
bond for the temporary release of an accused for the warrant she had
issued in a case then pending before her sala. Judge Paredes was the
one who reviewed the findings conducted therein and he recommended
that the penalty be reduced to severe reprimand.
Jill, however, claimed that Judge Paredes committed an offense worse
than that committed by her mother. She averred that on March 13,
2011, Judge Paredes accepted a cash bail bond in the amount of Six
Thousand Pesos (₱6,000.00) for the temporary release of one Lita
Guioguio in a case entitled, "People of the Philippines v. Lita
Guioguio,"docketed as Criminal Case No. 148434-R,6 then pending
before Branch 8, MTCC, Cebu City (Guioguio case).
Thus, she prayed that Judge Paredes be administratively sanctioned for
his actuations.
Comment of Judge Paredes
In his Comment,7 dated October 28, 2011, Judge Paredes denied the
accusations of Jill. He stated thatJudge Tormis had several
administrative cases, some of which he had investigated; that as a result
of the investigations, he recommended sanctionsagainst Judge Tormis;
that Judge Tormis used Jill, her daughter, to get back at him; that he
discussed in his class the case of Lachica v. Tormis, but never Judge
Tormis’ involvement in the marriage scams nor her sanctions as a result
of the investigation conducted by the Court; that he never personally
attacked Judge Tormis’ dignity and credibility; that the marriage scams
in Cebu City constituted a negative experience for all the judges and
should be discussed so that other judges, court employees and aspiring
lawyers would not emulate such misdeeds; that the marriage scams
werealso discussed during meetings of RTC judges and in schools
where remediallaw and legal ethics were taught; that he talked about
past and resolvedcases, but not the negative tendencies of Judge
Tormis; that there was nothing wrong in discussing the administrative
cases involving Judge Tormis because these cases were known to the
legal community and some were even published in the Supreme Court
Reports Annotated (SCRA) and other legal publications; and that when
he was the executive judge tasked to investigate Judge Tormis, he told
her to mend her ways, butshe resented his advice.
Judge Paredes further stated that when Jill was still his student, she did
not complain about or dispute his discussions in class regarding the
administrative liabilities of her mother; that the matter was not also
brought to the attention of the Dean of Southwestern University or of
the local authorities; that he admitted saying that Judge Tormis had a
son named Francis who was a drug addict and thatdrug dependents had
no place in the judiciary; and that he suggested thatFrancis should be
removed from the judiciary.
He denied, however, having stated that Francis was appointed as court
employee as a result of the influence of Judge Tormis. She is not an
influential person and it is the Supreme Court who determines the
persons to be appointed as court employees. JudgeTormis, however,
allowed her drug dependent son to apply for a position in the judiciary.
Regarding the specific act being complained of, Judge Paredes admitted
that he personally accepted a cash bail bond of 6,000.00 for the
temporary release of Lita Guioguio onMarch 13, 2011. He claimed
though that the approval of the bail bond was in accordance with
Section 14, Chapter 5 of A.M. No. 03-8-62-SC which allowed
executive judges to act on petitions for bail and other urgent matters on
weekends, official holidays and special days. Judge Paredes explained
that he merely followed the procedure. As Executive Judge, he issued a
temporary receipt and on the following business day, a Monday, he
instructed the Branch Clerk of Court to remit the cash bond to the Clerk
of Court. The Clerk of Court acknowledged the receipt of the cash bond
and issued an official receipt. It was not his fault that the Clerk of Court
acknowledged the receipt of the cash bond only in the afternoon of
March 21, 2011.
Lastly, Judge Paredes averred thatthe discussions relative to the
administrative cases of Judge Tormiscould not be the subject of an
administrative complaint because it was not done in the performance of
his judicial duties.
Reply of the Complainant
In her Verified-Reply,8 dated November 23, 2011, Jill countered that
her mother had nothing to do with the filing of the present complaint;
that she was forced to leave her family in Cebu City to continue her law
studies elsewhere because she could no longer bear the discriminating
and judgmental eyes of her classmates brought about by Judge Paredes’
frequent discussions in class of her mother’s administrative cases; that
her mother was indeed one of the judges implicated in the marriage
scams, but when Judge Paredes discussed the matter in his classes, the
case of her mother was not yet resolved by the Court and, thus, in 2010,
it was still premature; and that Judge Paredes was aware that
administrative cases were confidential in nature.
Jill claimed that the intention to humiliate her family was evident when
Judge Paredes branded her brother, Francis, as a "drug addict."
Rejoinder of Judge Paredes
In his Rejoinder,9 dated December 2, 2011, Judge Paredes asserted that
it was not premature to discuss the marriage scams in class because the
scandal was already disclosed by Atty. Rullyn Garcia and was also
written in many legal publications, and that the drug addiction of
Francis was known in the Palace of Justice of Cebu City.
In its Report,10 dated September 12, 2012, the Office of the Court
Administrator (OCA) stated that the conflicting allegations by the
parties presented factual issues that could not be resolved based on the
evidence on record then. Considering the gravity and the sensitive
natureof the charges, a full-blown investigation should be conducted by
the CA.
On January 14, 2013, pursuant tothe recommendation of the OCA, the
Court referred the administrative complaint to the Executive Justice of
the CA, Cebu Station, for investigation, report and recommendation
within sixty (60) days from receipt of the records.11
On March 26, 2013, the case was raffled to, and the records were
received by, Justice Diy. Thereafter, the appropriate notices were issued
and the confidential hearings were conducted. Afterwards, Justice Diy
received the respective memoranda of the parties.
In her memorandum,12 Jill contended that Judge Paredes’ act of
discussing Judge Tormis’ cases in class where she was present was an
open display of insensitivity, impropriety and lack of
delicadezabordering on oppressive and abusive conduct, which fell
short of the exacting standards of behavior demanded of magistrates.
She asserted that the defense of Judge Paredes that he could not be
made administratively liable as the act was not made in the
performance of his official duties did not hold water because a judge
should be the embodiment of whatwas just and fair not only in the
performance of his official duties but also in his everyday life.
Jill also averred that Judge Paredes violated the subjudicerule when he
discussed the marriage scam involving Judge Tormis in 2010 because at
that time, the case was still being investigated; that the administrative
case relative to the marriage scam was decided only on April 2, 2013;
that Judge Paredes was not the Executive Judge ofthe MTCC when he
received the cash bail bond in the Guiguiocase; that he could not prove
that the executive judge of the MTCC was unavailable before accepting
the cash bail bond; and that the assertion of Judge Paredes of his being
an anti-corruption judge and a lone nominee of the IBP Cebu City
Chapter to the Foundation of Judicial Excellence did not exculpate him
from committing the acts complained of. In his Reply-
Memorandum,13 Judge Paredes reiterated the allegations contained in
his previous pleadings. He added that the marriage scams scandalized
the Judiciary and became public knowledge when Atty. Rullyn Garcia
of the OCA held a press conference on the matter; that, hence, every
citizen, including him, may comment thereon; that in the hierarchy of
rights, freedom of speech and expression ranked high; that Judge
Tormis never intervened in the present case; that ifhe indeed made
derogatory remarks against Judge Tormis, she should havefiled a
criminal action for oral defamation; and that calling for the ouster of
drug addicts could not be considered an abuse, but was meant for the
protection of the Judiciary.14
In her Report and Recommendation, Justice Diy found Judge Paredes
guilty of conduct unbecoming of a judge. She opined that his use of
intemperate language during class discussions was inappropriate. His
statements in class, tending to project Judge Tormis as corrupt and
ignorant of the laws and procedure, were obviously and clearly
insensitive and inexcusable.
Justice Diy disregarded the defense of Judge Paredes that his
discussions of the administrative case of Judge Tormis in class was an
exercise of his right to freedom of expression. She cited the New Code
of Judicial Conduct for the Philippine Judiciary15 which urged members
of the Judiciary to be models of propriety at all times. She quoted with
emphasis Section 6 which stated that "Judges, like any other citizen, are
entitled to freedom of expression, belief, association and assembly, but
in exercising such rights, they shall always conduct themselves in such
a manner as to preserve the dignity of the judicial office and the
impartiality and independence of the judiciary." 16
Justice Diy likewise rejected Judge Paredes’ position that he could not
be held administratively liable for his comments against Judge Tormis
and Francis as these were uttered while he was not in the exercise of his
judicial functions. Jurisprudence,17 as well as the New Code of Judicial
Conduct, required that he conduct himself beyond reproach, not only in
the discharge of his judicial functions, but also inhis other professional
endeavors and everyday activities.
Justice Diy found merit in Jill’s allegation that Judge Paredes violated
the subjudicerule when the latter discussed the marriage scams
involving Judge Tormis in 2010 when the said issue was still being
investigated. She cited, as basis for JudgeParedes’ liability, Section 4,
Canon 3 of the New Code of Judicial Conduct.
As regards Judge Paredes’ receipt of the cash bail bond in relation to
the Guioguiocase, Justice Diy absolved him ofany liability as the
charge of grave misconduct was not supported by sufficient evidence.
She accepted Judge Paredes’ explanation that he merely followed the
procedure laid down in Section 14, Chapter 5 of A.M. No. 03-8-02-SC
when he approved the bail bond.
Based on these findings, Justice Diy came up with the following
recommendations, thus:
The undersigned Investigating Justice finds that indeed Judge Paredes
is guilty of conduct unbecoming of a judge. Conduct unbecoming of a
judge is classified as a light offense under Section 10, Rule 140 of the
Revised Rules of Court, penalized under Section 11 (c) thereof by any
of the following: (1) a Fine of not less than ₱1,000.00 but not exceeding
₱10,000.00; (2) Censure; (3) Reprimand; and (4) Admonition with
warning.
Inasmuch as this is Judge Paredes’ first offense and considering the
factual milieu and the peculiar circumstances attendant thereto, it is
respectfully recommended that Judge Paredes be meted out with the
penalty of REPRIMAND with a warning that a repetition of the same or
a similar offense will be dealt with more severely. 18
The Court’s Ruling
The Court adopts the findings and recommendations of Justice Diy
except as to the penalty.
Misconduct is defined as a transgression of some established and
definite rule of action, more particularly, unlawful behavior or gross
negligence by a public officer. The misconduct is grave if it involves
any of the additional elements of corruption, willful intent to violate the
law, or to disregard established rules, which must be established by
substantial evidence. As distinguished from simple misconduct, the
elements of corruption, clear intent to violate the law, or flagrant
disregard of established rule, must be manifest in a charge of grave
misconduct. Corruption, as an element of grave misconduct, consists in
the act of an official or fiduciary person who unlawfully and wrongfully
uses his station or character to procure some benefit for himself or for
another person, contrary to duty and the rights of others. 19
To constitute misconduct, the act or acts must have a direct relation to
and be connected with the performance of his official
duties.20 Considering that the acts complained of, the remarks against
Judge Tormis and Francis, were made by Judge Paredes in his class
discussions, they cannot be considered as "misconduct." They are
simply not related to the discharge of his official functions as a judge.
Thus, Judge Paredes cannot be held liable for misconduct, much less
for grave misconduct.
Discussion of a subjudicematter, however, is another thing.
On subjudice matters, Section 4, Canon 3 ofthe New Code of Judicial
Conduct provides: CANON 3
IMPARTIALITY
SEC. 4. Judges shall not knowingly, while a proceeding is before or
could come before them, make any comment that might reasonably be
expected to affect the outcome of such proceeding or impair the
manifest fairness of the process. Nor shall judges make any comment in
public or otherwise that might affect the fair trial of any person or issue.
(Emphasis supplied)
The subjudice rule restricts comments and disclosures pertaining to the
judicial proceedings in order to avoid prejudging the issue, influencing
the court, or obstructing the administration of justice. 21 The rationale for
the rule was spelled out in Nestle Philippines, Inc. v. Sanchez, 22 where
it was stated that it is a traditional conviction of civilized society
everywhere that courts and juries, in the decision of issues of fact and
law should be immune from every extraneous influence; thatfacts
should be decided upon evidence produced in court; and that the
determination of such facts should be uninfluenced by bias, prejudice or
sympathies.23 Notably, when Judge Paredes discussed the marriage
scams involving Judge Tormis in 2010, the investigation relative to the
said case had not yet been concluded. In fact, the decision on the case
was promulgated by the Court only on April 2, 2013.24In 2010, he still
could not make comments on the administrative case to prevent any
undue influence in its resolution. Commenting on the marriage scams,
where Judge Tormis was one of the judges involved, was in
contravention of the subjudicerule. Justice Diy was, therefore, correct in
finding that Judge Paredes violated Section 4, Canon 3 of the New
Code of Judicial Conduct.
The Court shares the view of Justice Diy that although the reasons of
Judge Paredes for discussing the marriage scams in his classes seemed
noble, his objectives were carried out insensitively and in bad taste. The
pendency of the administrative case of Judge Tormis and the publicity
of the marriage scams did not give Judge Paredes unrestrained license
to criticize Judge Tormis in his class discussions. The publicity given to
the investigation of the said scams and the fact that it was widely
discussed in legal circles let people expressed critical opinions on the
issue. There was no need for Judge Paredes to "rub salt to the
wound,"25 as Justice Diy put it.
Judge Paredes in using intemperate language and unnecessary
comments tending to project Judge Tormisas a corrupt and ignorant
judge in his class discussions, was correctly found guilty of conduct
unbecoming of a judge by Justice Dy.
Indeed, the New Code of Judicial Conduct for the Philippine Judiciary
requires judges to exemplify propriety at all times. Canon 4 instructs:
CANON 4
PROPRIETY
SEC. 1. Judges shall avoid impropriety and the appearance of
impropriety in all of their activities.
SEC. 2. As a subject of constant public scrutiny, judges must accept
personal restrictions that might be viewed as burdensome by the
ordinary citizen and should do so freely and willingly. In particular,
judges shall conduct themselves in a way that is consistent with the
dignity of the judicial office.
A judge should always conduct himself in a manner that would
preserve the dignity, independence and respect for himself, the Court
and the Judiciary as a whole. He must exhibit the hallmark judicial
temperament of utmost sobriety and self-restraint. Heshould choose his
words and exercise more caution and control inexpressing himself. In
other words, a judge should possess the virtue of gravitas. Furthermore,
a magistrate should not descend to the level of a sharp-tongued, ill-
mannered petty tyrant by uttering harsh words, snide remarks and
sarcastic comments. He is required to always be temperate, patient and
courteous, both in conduct and in language.26
In this case, records show that Judge Paredes failed to observe the
propriety required by the Code and to use temperate and courteous
language befitting a magistrate. Indeed, Judge Paredes demonstrated
conduct unbecoming of a judge.
When Judge Paredes failed to restrain himself and included Francis,
whose condition and personal circumstances, as properly observed by
Justice Diy, had no relevance to the topic that was then being discussed
in class, it strongly indicated his intention to taint their reputations.
The inclusion of Judge Tormis and Francis in his class discussions was
never denied by Judge Paredes who merely justified his action by
invoking his right to freedom of expression. Section 6, Canon 4 of the
New Code of Judicial Conduct recognizes that judges, like any other
citizen, are entitled to freedom of expression. Such right, however, is
not without limitation. Section 6, Canon 4 of the Code also imposes a
correlative restriction on judges: in the exercise of their freedom of
expression, they should always conduct themselves in a manner that
preserves the dignity of the judicial office and the impartiality and
independence of the Judiciary. In the exercise of his right to freedomof
expression, Judge Paredes should uphold the good image of the
Judiciary ofwhich he is a part. He should have avoided unnecessary and
uncalled for remarks in his discussions and should have been more
circumspect inhis language. Beinga judge, he is expected to act with
greater circumspection and to speak with self-restraint. Verily, Judge
Paredes fell short of this standard.
The Court cannot sustain the assertion of Judge Paredes that he cannot
be held administratively liable for his negative portrayal of Judge
Tormis and Francis in his class discussions. Judge Paredes should be
reminded of the ethical conduct expected of him asa judge not only in
the performance of his judicial duties, but in his professional and
private activities as well. Sections 1 and 2, Canon 2 of the Code
mandates:
CANON 2
INTEGRITY
Integrity is essential not only to the proper discharge of the judicial
office but also to the personal demeanor of judges.
SECTION 1. Judges shall ensure thatnot only is their conduct above
reproach, but that it is perceived to be so in the view of a reasonable
observer.
where the Guioguio case was then pending and the executive judge of
the MTCC, Cebu City were not available to receive the bail bond.
Judge Paredes was the only judge available since the practice was for
one judge to be present on Saturdays. However, there was no judge
assigned for duty during Sundays.
Relative to the matter above-discussed, the insinuation made by
complainant Jill of any irregularity reflected in the issuance of the two
(2) orders of release of different dates is not backed up by sufficient
evidence.28
Conduct unbecoming of a judge is classified as a light offense under
Section 10, Rule 140 of the Rules of Court and penalized under Section
11(C) thereof by any of the following: (1) A fine of not less than
₱1,000.00 but not exceeding ₱10,000.00; (2) Censure; (3) Reprimand;
and (4) Admonition with warning.
Considering that this is the first offense of Judge Paredes, the
appropriate penalty under the circumstances is admonition.
WHEREFORE, the Court finds Judge Meinrado P. Paredes, Presiding
Judge of Branch 13 of the Regional Trial Court of Cebu City,
administratively liable for conduct unbecoming of a judge and
ADMONISHES him therefor.

SECTION 2. The behavior and conduct of judges must reaffirm the SO ORDERED.
people’s faith in the integrity of the judiciary.1âwphi1Justice must not
merely be done but must also be seen to be done. (Emphases supplied) JOSE CATRAL MENDOZA
Associate Justice
Any impropriety on the part of Judge Paredes, whether committed in or
out of the court, should not be tolerated for he is not a judge only WE CONCUR:
occasionally. It should be emphasized that the Code of Judicial Ethics
mandates that the conduct of a judge mustbe free of a whiff of
impropriety not only with respect to his performance of his judicial ANTONIO T. CARPIO
duties, but also to his behavior outside his salaand as a private Associate Justice
individual. There is no dichotomy of morality, a public official is also Chairperson
judged by his private morals. The Code dictates that a judge, in order to
promote public confidence in the integrity and impartiality of the PRESBITERO J. VELASCO, MARIANO C. DEL
judiciary, must behave with propriety at all times. A judge’s official life JR.* CASTILLO
cannot simply be detached or separated from his personal existence. Associate Justice Associate Justice
Thus, being a subject of constant public scrutiny, a judge should freely
and willingly accept restrictions on conduct that might be viewed as
burdensome by the ordinary citizen. He should personify judicial
integrity and exemplify honest public service. The personal behavior of MARVIC MARIO VICTOR F. LEONEN
a judge, both in the performance of official duties and in private life Associate Justice
should be above suspicion.27

Regarding the act of receiving the cash bail bond in the Guioguio
case,Justice Diy correctly found that it cannot be regarded as grave
misconduct. The Court findsmerit in the position of Judge Paredes that
the approval, as well as the receipt, ofthe cash bail bond, was in
accordance with the rules. Thus:
Finally, the Investigating Officer disagrees with Jill’s allegation that
Judge Paredes committed grave misconduct when he personally
received cash bailbond in relation to the Guioguio case. Judge Paredes
justified his action by stating that he was merely following the
procedure set forth in Section 14, Chapter 5 of A.M. No. 03-02-SC,
which authorizes executive judges to act on petitions for bail on
Saturdays after 1:00 o’clock in the afternoon, Sundays, official
holidays, and special days. Said rule also provides that should the
accused deposit cash bail, the executive judge shall acknowledge
receipt of the cash bail bond in writing and issue a temporary receipt
therefor. Considering that Judge Paredes merely followed said
procedure, he cannot beheld administratively liable for his act of
receiving the cash bail bond in the Guioguio case.
Moreover, respondent judge is authorized to receive the cash bail bond
under Section 17 (a), Rule 114 of the Revised Rules on Criminal
Procedure. Under said provision, the bail bond may be filed either with
the court where the case is pending, or with any Regional Trial Court
(RTC) of the place of arrest, or with any judge of the Metropolitan Trial
Court or the Municipal Trial Court of the place of arrest.
Lastly, Section 1 (h), Chapter 4 of A.M. No. 03-8-02-SC provides that
executive judges are authorized to exercise other powers and
prerogatives which are necessary or incidental to the performance of
their functions in relation to court administration. In the instant case,
Judge Paredes was merely exercising powers incidental to his functions
as anExecutive Judge since he was the only judge available when Lita
Guioguio posted bail. Notably, Lita Guioguio’s payment for cash bail
bond was made on a Sunday. In addition, the judge assignedto the court
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 198755               June 5, 2013
ALBERTO PAT-OG, SR., Petitioner, 
vs.
CIVIL SERVICE COMMISSION, Respondent.
DECISION
MENDOZA, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45
of the Rules of Court, which seeks to set aside the April 6, 2011
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 101700,
affirming the April 11, 2007 Decision2 of the Civil Service Commission
(CSC), which ordered the dismissal of petitioner Alberto Pat-og, Sr.
(Pat-og) from the service for grave misconduct.
The Facts
On September 13, 2003, Robert Bang-on (Bang-on), then a 14-year old
second year high school student of the Antadao National High School
in Sagada, Mountain Province, tiled an affidavit-complaint against Pat-
og, a third year high school teacher of the same school, before the Civil
Service Commission-Cordillera Administrative Region (CSC-CAR).
Bang-on alleged that on the morning of August 26, 2003, he attended
his class at the basketball court of the school, where Pat-og and his third
year students were also holding a separate class; that he and some of his
classmates joined Pat-og’s third year students who were practicing
basketball shots; that Pat-og later instructed them to form two lines; that
thinking that three lines were to be formed, he stayed in between the
two lines; that Pat-og then held his right arm and punched his stomach
without warning for failing to follow instructions; and that as a result,
he suffered stomach pain for several days and was confined in a
hospital from September 10-12, 2003, as evidenced by a medico-legal
certificate, which stated that he sustained a contusion hematoma in the
hypogastric area.
Regarding the same incident, Bang-on filed a criminal case against Pat-
og for the crime of Less Serious Physical Injury with the Regional Trial
Court (RTC) of Bontoc, Mountain Province.
Taking cognizance of the administrative case, the CSC-CAR directed
Pat-og to file his counter-affidavit. He denied the charges hurled against
him and claimed that when he was conducting his Music, Arts, Physical
Education and Health (MAPEH) class, composed of third year students,
he instructed the girls to play volleyball and the boys to play basketball;
that he later directed the boys to form two lines; that after the boys
failed to follow his repeated instructions, he scolded them in a loud
voice and wrested the ball from them; that while approaching them, he
noticed that there were male students who were not members of his
class who had joined the shooting practice; that one of those male
students was Bang-on, who was supposed to be having his own
MAPEH class under another teacher; that he then glared at them,
continued scolding them and dismissed the class for their failure to
follow instructions; and that he offered the sworn statement of other
students to prove that he did not box Bang-on.
On June 1, 2004, the CSC-CAR found the existence of a prima
faciecase for misconduct and formally charged Pat-og.
While the proceedings of the administrative case were ongoing, the
RTC rendered its judgment in the criminal case and found Pat-og guilty
of the offense of slight physical injury. He was meted the penalty of
imprisonment from eleven (11) to twenty (20) days. Following his
application for probation, the decision became final and executory and
judgment was entered.
Meanwhile, in the administrative case, a pre-hearing conference was
conducted after repeated postponement by Pat-og. With the approval of
the CSC-CAR, the prosecution submitted its position paper in lieu of a
formal presentation of evidence and formally offered its evidence,
which included the decision in the criminal case. It offered the
affidavits of Raymund Atuban, a classmate of Bang-on; and James
Domanog, a third year high school student, who both witnessed Pat-og
hit Bang-on in the stomach.
For his defense, Pat-og offered the testimonies of his witnesses -
Emiliano Dontongan (Dontongan), a teacher in another school, who
alleged that he was a member of the Municipal Council for the
Protection of Children, and that, in such capacity, he investigated the
incident and came to the conclusion that it did not happen at all; and
Ernest Kimmot, who testified that he was in the basketball court at the
time but did not see such incident. Pat-og also presented the affidavits
of thirteen other witnesses to prove that he did not punch Bang-on.
Ruling of the CSC-CAR
3
In its Decision,  dated September 19, 2006, the CSC-CAR found Pat-og
guilty and disposed as follows:
WHEREFORE, all premises told, respondent Alberto Pat-og, Sr.,
Teacher Antadao National High School, is hereby found guilty of
Simple Misconduct.
Under the Uniform Rules on Administrative Cases in the Civil Service,
the imposable penalty on the first offense of Simple Misconduct is
suspension of one (1) month and one (1) day to six (6) months.
Due to seriousness of the resulting injury to the fragile body of the
minor victim, the CSC-CAR hereby imposed upon respondent the
maximum penalty attached to the offense which is six months
suspension without pay.
The CSC-CAR gave greater weight to the version posited by the
prosecution, finding that a blow was indeed inflicted by Pat-og on
Bang-on. It found that Pat-og had a motive for doing so - his students’
failure to follow his repeated instructions which angered him.
Nevertheless, the CSCCAR ruled that a motive was not necessary to
establish guilt if the perpetrator of the offense was positively identified.
The positive identification of Pat-og was duly proven by the
corroborative testimonies of the prosecution witnesses, who were found
to be credible and disinterested. The testimony of defense witness,
Dontongan, was not given credence considering that the students he
interviewed for his investigation claimed that Pat-og was not even
angry at the time of the incident, contrary to the latter’s own admission.
The CSC-CAR held that the actions of Pat-og clearly transgressed the
proper norms of conduct required of a public official, and the gravity of
the offense was further magnified by the seriousness of the injury of
Bang-on which required a healing period of more than ten (10) days. It
pointed out that, being his teacher, Pat-og’s substitute parental authority
did not give him license to physically chastise a misbehaving student.
The CSC-CAR added that the fact that Pat-og applied for probation in
the criminal case, instead of filing an appeal, further convinced it of his
guilt.
The CSC-CAR believed that the act committed by Pat-og was sufficient
to find him guilty of Grave Misconduct. It, however, found the
corresponding penalty of dismissal from the service too harsh under the
circumstances. Thus, it adjudged petitioner guilty of Simple
Misconduct and imposed the maximum penalty of suspension for six
(6) months.
On December 11, 2006, the motion for reconsideration filed by Pat-og
was denied for lack of merit.4
The Ruling of the CSC
In its Resolution,5 dated April 11, 2007, the CSC dismissed Pat-og’s
appeal and affirmed with modification the decision of the CSC-CAR as
follows:
WHEREFORE, foregoing premises considered, the instant appeal is
hereby DISMISSED. The decision of the CSC-CAR is affirmed with
the modification that Alberto Pat-og, Sr., is adjudged guilty of grave
misconduct, for which he is meted out the penalty of dismissal from the
service with all its accessory penalties of cancellation of eligibilities,
perpetual disqualification from reemployment in the government
service, and forfeiture of retirement benefits. 6
After evaluating the records, the CSC sustained the CSC-CAR’s
conclusion that there existed substantial evidence to sustain the finding
that Pat-og did punch Bang-on in the stomach. It gave greater weight to
the positive statements of Bang-on and his witnesses over the bare
denial of Patog. It also highlighted the fact that Pat-og failed to adduce
evidence of any ill motive on the part of Bang-on in filing the
administrative case against him. It likewise gave credence to the
medico-legal certificate showing that Bang-on suffered a hematoma
contusion in his hypogastric area.
The CSC ruled that the affidavits of Bang-on’s witnesses were not
bereft of evidentiary value even if Pat-og was not afforded a chance to
cross-examine the witnesses of Bang-on. It is of no moment because the
cross- examination of witnesses is not an indispensable requirement of
administrative due process.
The CSC noted that Pat-og did not question but, instead, fully
acquiesced in his conviction in the criminal case for slight physical
injury, which was based on the same set of facts and circumstances, and
involved the same parties and issues. It, thus, considered his prior
criminal conviction as evidence against him in the administrative case.
Finding that his act of punching his student displayed a flagrant and
wanton disregard of the dignity of a person, reminiscent of corporal
punishment that had since been outlawed for being harsh, unjust, and
cruel, the CSC upgraded Pat-og’s offense from Simple Misconduct to
Grave Misconduct and ordered his dismissal from the service.
Pat-og filed a motion for reconsideration, questioning for the first time
the jurisdiction of CSC over the case. He contended that administrative
charges against a public school teacher should have been initially heard
by a committee to be constituted pursuant to the Magna Carta for Public
School Teachers.
On November 5, 2007, the CSC denied his motion for
reconsideration.7 It ruled that Pat-og was estopped from challenging its
jurisdiction considering that he actively participated in the
administrative proceedings against him, raising the issue of jurisdiction
only after his appeal was dismissed by the CSC.
Ruling of the Court of Appeals
In its assailed April 6, 2011 Decision,8 the CA affirmed the resolutions
of the CSC. It agreed that Pat-og was estopped from questioning the
jurisdiction of the CSC as the records clearly showed that he actively
participated in the proceedings. It was of the view that Pat-og was not
denied due process when he failed to cross-examine Bang-on and his
witnesses because he was given the opportunity to be heard and present
his evidence before the CSC-CAR and the CSC.
The CA also held that the CSC committed no error in taking into
account the conviction of Pat-og in the criminal case. It stated that his
conviction was not the sole basis of the CSC for his dismissal from the
service because there was substantial evidence proving that Pat-og had
indeed hit Bang-on.
In its assailed Resolution,9 dated September 13, 2011, the CA denied
the motion for reconsideration filed by Pat-og.
Hence, the present petition with the following
Assignment of Errors
WHETHER OR NOT RESPONDENT COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT
AFFIRMED THE SUPREME PENALTY OF DISMISSAL FROM
SERVICE WITH FORFEITURE OF RETIREMENT BENEFITS
AGAINST THE PETITIONER WITHOUT CONSIDERING
PETITIONER’S LONG YEARS OF GOVERNMENT SERVICE?
WHETHER OR NOT RESPONDENT COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT
RULED THAT PETITIONER IS ESTOPPED FROM QUESTIONING
THE JURISDICTION OF THE CIVIL SERVICE COMMISSION TO
HEAR AND DECIDE THE ADMINISTRATIVE CASE AGAINST
HIM?
WHETHER OR NOT RESPONDENT COURT OF APPEALS
SERIOUSLY ERRED AND COMMITTED GRAVE ABUSE OF
DISCRETION IN DISMISSING THE APPEAL DESPITE LACK OF
SUBSTANTIAL EVIDENCE?
On Jurisdiction
Pat-og contends that Section 9 of Republic Act (R.A.) No. 4670,
otherwise known as the Magna Carta for Public School Teachers,
provides that administrative charges against a public school teacher
shall be heard initially by a committee constituted under said section.
As no committee was ever formed, the petitioner posits that he was
denied due process and that the CSC did not have the jurisdiction to
hear and decide his administrative case. He further argues that
notwithstanding the fact that the issue of jurisdiction was raised for the
first time on appeal, the rule remains that estoppel does not confer
jurisdiction on a tribunal that has no jurisdiction over the cause of
action or subject matter of the case.
The Court cannot sustain his position.
The petitioner’s argument that the administrative case against him can
only proceed under R.A. No. 4670 is misplaced.
In Puse v. Santos-Puse,10 it was held that the CSC, the Department of
Education (DepEd) and the Board of Professional Teachers-
Professional Regulatory Commission (PRC) have concurrent
jurisdiction over administrative cases against public school teachers.
Under Article IX-B of the 1987 Constitution, the CSC is the body
charged with the establishment and administration of a career civil
service which embraces all branches and agencies of the
government.11 Executive Order (E.O.) No. 292 (the Administrative
Code of 1987)12 and Presidential Decree (P.D.) No. 807 (the Civil
Service Decree of the Philippines)13 expressly provide that the CSC has
the power to hear and decide administrative disciplinary cases instituted
with it or brought to it on appeal. Thus, the CSC, as the central
personnel agency of the government, has the inherent power to
supervise and discipline all members of the civil service, including
public school teachers.
Indeed, under Section 9 of R.A. No. 4670, the jurisdiction over
administrative cases of public school teachers is lodged with the
investigating committee constituted therein. 14 Also, under Section 23 of
R.A. No. 7836 (the Philippine Teachers Professionalization Act of
1994), the Board of Professional Teachers is given the power, after due
notice and hearing, to suspend or revoke the certificate of registration of
a professional teacher for causes enumerated therein. 15
Concurrent jurisdiction is that which is possessed over the same parties
or subject matter at the same time by two or more separate tribunals.
When the law bestows upon a government body the jurisdiction to hear
and decide cases involving specific matters, it is to be presumed that
such jurisdiction is exclusive unless it be proved that another body is
likewise vested with the same jurisdiction, in which case, both bodies
have concurrent jurisdiction over the matter. 16
Where concurrent jurisdiction exists in several tribunals, the body that
first takes cognizance of the complaint shall exercise jurisdiction to the
exclusion of the others. In this case, it was CSC which first acquired
jurisdiction over the case because the complaint was filed before it.
Thus, it had the authority to proceed and decide the case to the
exclusion of the DepEd and the Board of Professional Teachers. 17
In CSC v. Alfonso,18 it was held that special laws, such as R.A. No.
4670, do not divest the CSC of its inherent power to supervise and
discipline all members of the civil service, including public school
teachers. Pat-og, as a public school teacher, is first and foremost, a civil
servant accountable to the people and answerable to the CSC for
complaints lodged against him as a public servant. To hold that R.A.
No. 4670 divests the CSC of its power to discipline public school
teachers would negate the very purpose for which the CSC was
established and would impliedly amend the Constitution itself.
To further drive home the point, it was ruled in CSC v. Macud19 that
R.A. No. 4670, in imposing a separate set of procedural requirements in
connection with administrative proceedings against public school
teachers, should be construed to refer only to the specific procedure to
be followed in administrative investigations conducted by the DepEd.
By no means, then, did R.A. No. 4670 confer an exclusive disciplinary
authority over public school teachers on the DepEd.
At any rate, granting that the CSC was without jurisdiction, the
petitioner is indeed estopped from raising the issue. Although the rule
states that a jurisdictional question may be raised at any time, such rule
admits of the exception where, as in this case, estoppel has
supervened.20 Here, instead of opposing the CSC’s exercise of
jurisdiction, the petitioner invoked the same by actively participating in
the proceedings before the CSC-CAR and by even filing his appeal
before the CSC itself; only raising the issue of jurisdiction later in his
motion for reconsideration after the CSC denied his appeal. This Court
has time and again frowned upon the undesirable practice of a party
submitting his case for decision and then accepting the judgment only if
favorable, but attacking it for lack of jurisdiction when adverse. 21
On Administrative Due Process
On due process, Pat-og asserts that the affidavits of the complainant and
his witnesses are of questionable veracity having been subscribed in
Bontoc, which is nearly 30 kilometers from the residences of the
parties. Furthermore, he claimed that considering that the said affiants
never testified, he was never afforded the opportunity to cross-examine
them. Therefore, their affidavits were mere hearsay and insufficient to
prove his guilt.
The petitioner does not persuade.
The essence of due process is simply to be heard, or as applied to
administrative proceedings, a fair and reasonable opportunity to explain
one’s side, or an opportunity to seek a reconsideration of the action or
ruling complained of.22 Administrative due process cannot be fully
equated with due process in its strict judicial sense. In administrative
proceedings, a formal or trial-type hearing is not always necessary 23 and
technical rules of procedure are not strictly applied. Hence, the right to
cross-examine is not an indispensable aspect of administrative due
process.24 The petitioner cannot, therefore, argue that the affidavit of
Bang-on and his witnesses are hearsay and insufficient to prove his
guilt.
At any rate, having actively participated in the proceedings before the
CSC-CAR, the CSC, and the CA, the petitioner was apparently
afforded every opportunity to explain his side and seek reconsideration
of the ruling against him.1âwphi1
As to the issue of the veracity of the affidavits, such is a question of fact
which cannot now be raised before the Court under Rule 45 of the
Rules of Court. The CSC-CAR, the CSC and the CA did not, therefore,
err in giving credence to the affidavits of the complainants and his
witnesses, and in consequently ruling that there was substantial
evidence to support the finding of misconduct on the part of the
petitioner.
On the Penalty
Assuming that he did box Bang-on, Pat-og argues that there is no
substantial evidence to prove that he did so with a clear intent to violate
the law or in flagrant disregard of the established rule, as required for a
finding of grave misconduct. He insists that he was not motivated by
bad faith or ill will because he acted in the belief that, as a teacher, he
was exercising authority over Bang-on in loco parentis, and was,
accordingly, within his rights to discipline his student. Citing his 33
years in the government service without any adverse record against him
and the fact that he is at the edge of retirement, being already 62 years
old, the petitioner prays that, in the name of substantial and
compassionate justice, the CSC-CAR’s finding of simple misconduct
and the concomitant penalty of suspension should be upheld, instead of
dismissal.
The Court agrees in part.
Misconduct means intentional wrongdoing or deliberate violation of a
rule of law or standard of behavior. To constitute an administrative
offense, misconduct should relate to or be connected with the
performance of the official functions and duties of a public officer. In
grave misconduct, as distinguished from simple misconduct, the
elements of corruption, clear intent to violate the law or t1agrant
disregard of an established rule must be manifest. 25
Teachers are duly licensed professionals who must not only be
competent in the practice of their noble profession, but must also
possess dignity and a reputation with high moral values. They must
strictly adhere to, observe, and practice the set of ethical and moral
principles, standards, and values laid down in the Code of Ethics of
Professional Teachers, which apply to all teachers in schools in the
Philippines, whether public or private, as provided in the preamble of
the said Code.26 Section 8 of Article VIII of the same Code expressly
provides that "a teacher shall not inflict corporal punishment on
offending learners."
Clearly then, petitioner cannot argue that in punching Bang-on, he was
exercising his right as a teacher in loco parentis to discipline his
student. It is beyond cavil that the petitioner, as a public school teacher,
deliberately violated his Code of Ethics. Such violation is a flagrant
disregard for the established rule contained in the said Code tantamount
to grave misconduct.
Under Section 52(A)(2) of Rule IV of the Uniform Rules on
Administrative Cases in the Civil Service, the penalty for grave
misconduct is dismissal from the service, which carries with it the
cancellation of eligibility, forfeiture of retirement benefits and perpetual
disqualification from reemployment in the government service. 27 This
penalty must, however, be tempered with compassion as there was
sut1icient provocation on the part of Bang-on. Considering further the
mitigating circumstances that the petitioner has been in the government
service for 33 years, that this is his first offense and that he is at the
cusp of retirement, the Court finds the penalty of suspension for six
months as appropriate under the circumstances.
WHEREFORE, the Court PARTIALLY GRANTS the petition and
MODIFIES the April 6, 2011 Decision of the Court of Appeals in CA-
G.R. SP No. 101700. Accordingly, Alberto Pat-og, Sr. is found
GUlLTY of Grave Misconduct, but the penalty is reduced from
dismissal from the service to SUSPENSION for SIX MONTHS.
SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice
WE CONCUR:
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson
DIOSDADO M. PERALTA ROBERTO A. ABAD
Associate Justice Associate Justice
MARVIC MARIO VICTOR F. LEONEN
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of
the Court's Division.
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairperson's Attestation, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Court's Division.
MARIA LOURDES P. A. SERENO
Chief Justice
Political Law
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 206666               January 21, 2015
ATTY. ALICIA RISOS-VIDAL, Petitioner,
ALFREDO S. LIM Petitioner-Intervenor, 
vs.
COMMISSION ON ELECTIONS and JOSEPH EJERCITO
ESTRADA, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
Before the Court are (1) a Petition for Certiorari filed under Rule 64, in
relation to Rule 65, both of the Revised Rules of Court, by Atty. Alicia
Risos-Vidal (Risos-Vidal), which essentially prays for the issuance of
the writ of certiorari annulling and setting aside the April 1, 2013 1 and
April 23, 20132 Resolutions of the Commission on Elections
(COMELEC), Second Division and En bane, respectively, in SPA No.
13-211 (DC), entitled "Atty. Alicia Risos-Vidal v. Joseph Ejercito
Estrada" for having been rendered with grave abuse of discretion
amounting to lack or excess of jurisdiction; and (2) a Petition-in-
Intervention3 filed by Alfredo S. Lim (Lim), wherein he prays to be
declared the 2013 winning candidate for Mayor of the City of Manila in
view of private respondent former President Joseph Ejercito Estrada’s
(former President Estrada) disqualification to run for and hold public
office.
The Facts
The salient facts of the case are as follows:
On September 12, 2007, the Sandiganbayan convicted former President
Estrada, a former President of the Republic of the Philippines, for the
crime of plunder in Criminal Case No. 26558, entitled "People of the
Philippines v. Joseph Ejercito Estrada, et al." The dispositive part of the
graft court’s decision reads:
WHEREFORE, in view of all the foregoing, judgment is hereby
rendered in Criminal Case No. 26558 finding the accused, Former
President Joseph Ejercito Estrada, GUILTY beyond reasonable doubt
of the crime of PLUNDER, defined in and penalized by Republic Act
No. 7080, as amended. On the other hand, for failure of the prosecution
to prove and establish their guilt beyond reasonable doubt, the Court
finds the accused Jose "Jinggoy" Estrada and Atty. Edward S. Serapio
NOT GUILTY of the crime of plunder, and accordingly, the Court
hereby orders their ACQUITTAL.
The penalty imposable for the crime of plunder under Republic Act No.
7080, as amended by Republic Act No. 7659, is Reclusion Perpetua to
Death. There being no aggravating or mitigating circumstances,
however, the lesser penalty shall be applied in accordance with Article
63 of the Revised Penal Code. Accordingly, the accused Former
President Joseph Ejercito Estrada is hereby sentenced to suffer the
penalty of Reclusion Perpetua and the accessory penalties of civil
interdiction during the period of sentence and perpetual absolute
disqualification.
The period within which accused Former President Joseph Ejercito
Estrada has been under detention shall be credited to him in full as long
as he agrees voluntarily in writing to abide by the same disciplinary
rules imposed upon convicted prisoners.
Moreover, in accordance with Section 2 of Republic Act No. 7080, as
amended by Republic Act No. 7659, the Court hereby declares the
forfeiture in favor of the government of the following:
(1) The total amount of Five Hundred Forty[-]Two Million
Seven Hundred Ninety[-]One Thousand Pesos
(₱545,291,000.00), with interest and income earned, inclusive
of the amount of Two Hundred Million Pesos
(₱200,000,000.00), deposited in the name and account of the
Erap Muslim Youth Foundation.
(2) The amount of One Hundred Eighty[-]Nine Million Pesos
(₱189,000,000.00), inclusive of interests and income earned,
deposited in the Jose Velarde account.
(3) The real property consisting of a house and lot dubbed as
"Boracay Mansion" located at #100 11th Street, New Manila,
Quezon City.
The cash bonds posted by accused Jose "Jinggoy" Estrada and Atty.
Edward S. Serapio are hereby ordered cancelled and released to the said
accused or their duly authorized representatives upon presentation of
the original receipt evidencing payment thereof and subject to the usual
accounting and auditing procedures. Likewise, the hold-departure
orders issued against the said accused are hereby recalled and declared
functus oficio.4
On October 25, 2007, however, former President Gloria Macapagal
Arroyo (former President Arroyo) extended executive clemency, by
way of pardon, to former President Estrada. The full text of said pardon
states:
MALACAÑAN PALACE
MANILA
By the President of the Philippines
PARDON
WHEREAS, this Administration has a policy of releasing inmates who
have reached the age of seventy (70),
WHEREAS, Joseph Ejercito Estrada has been under detention for six
and a half years,
WHEREAS, Joseph Ejercito Estrada has publicly committed to no
longer seek any elective position or office,
IN VIEW HEREOF and pursuant to the authority conferred upon me by
the Constitution, I hereby grant executive clemency to JOSEPH
EJERCITO ESTRADA, convicted by the Sandiganbayan of Plunder
and imposed a penalty of Reclusion Perpetua. He is hereby restored to
his civil and political rights.
The forfeitures imposed by the Sandiganbayan remain in force and in
full, including all writs and processes issued by the Sandiganbayan in
pursuance hereof, except for the bank account(s) he owned before his
tenure as President.
Upon acceptance of this pardon by JOSEPH EJERCITO ESTRADA,
this pardon shall take effect.
Given under my hand at the City of Manila, this 25th Day of October,
in the year of Our Lord, two thousand and seven.
Gloria M. Arroyo (sgd.)
By the President:
IGNACIO R. BUNYE (sgd.)
Acting Executive Secretary5
On October 26, 2007, at 3:35 p.m., former President Estrada "received
and accepted"6 the pardon by affixing his signature beside his
handwritten notation thereon.
On November 30, 2009, former President Estrada filed a Certificate of
Candidacy7 for the position of President. During that time, his
candidacy earned three oppositions in the COMELEC: (1) SPA No. 09-
024 (DC), a "Petition to Deny Due Course and Cancel Certificate of
Candidacy" filed by Rev. Elly Velez B. Lao Pamatong, ESQ; (2) SPA
No. 09-028 (DC), a petition for "Disqualification as Presidential
Candidate" filed by Evilio C. Pormento (Pormento); and (3) SPA No.
09-104 (DC), a "Petition to Disqualify Estrada Ejercito, Joseph M.from
Running as President due to Constitutional Disqualification and
Creating Confusion to the Prejudice of Estrada, Mary Lou B" filed by
Mary Lou Estrada. In separate Resolutions8 dated January 20, 2010 by
the COMELEC, Second Division, however, all three petitions were
effectively dismissed on the uniform grounds that (i) the Constitutional
proscription on reelection applies to a sitting president; and (ii) the
pardon granted to former President Estrada by former President Arroyo
restored the former’s right to vote and be voted for a public office. The
subsequent motions for reconsideration thereto were denied by the
COMELEC En banc.
After the conduct of the May 10, 2010 synchronized elections,
however, former President Estrada only managed to garner the second
highest number of votes.
Of the three petitioners above-mentioned, only Pormento sought
recourse to this Court and filed a petition for certiorari, which was
docketed as G.R. No. 191988, entitled "Atty. Evilio C. Pormento v.
Joseph ‘ERAP’ Ejercito Estrada and Commission on Elections." But in
a Resolution9 dated August 31, 2010, the Court dismissed the
aforementioned petition on the ground of mootness considering that
former President Estrada lost his presidential bid.
On October 2, 2012, former President Estrada once more ventured into
the political arena, and filed a Certificate of Candidacy, 10 this time
vying for a local elective post, that ofthe Mayor of the City of Manila.
On January 24, 2013, Risos-Vidal, the petitioner in this case, filed a
Petition for Disqualification against former President Estrada before the
COMELEC. The petition was docketed as SPA No. 13-211 (DC). Risos
Vidal anchored her petition on the theory that "[Former President
Estrada] is Disqualified to Run for Public Office because of his
Conviction for Plunder by the Sandiganbayan in Criminal Case No.
26558 entitled ‘People of the Philippines vs. Joseph Ejercito Estrada’
Sentencing Him to Suffer the Penalty of Reclusion Perpetuawith
Perpetual Absolute Disqualification."11 She relied on Section 40 of the
Local Government Code (LGC), in relation to Section 12 of the
Omnibus Election Code (OEC), which state respectively, that:
Sec. 40, Local Government Code:
SECTION 40. Disqualifications.- The following persons are
disqualified from running for any elective local position:
(a) Those sentenced by final judgment for an offense involving
moral turpitude or for an offense punishable by one (1) year or
more of imprisonment, within two (2) years after serving
sentence;
(b) Those removed from office as a result of an administrative
case;
(c) Those convicted by final judgment for violating the oath of
allegiance to the Republic;
(d) Those with dual citizenship;
(e) Fugitives from justice in criminal or nonpolitical cases here
or abroad;
(f) Permanent residents in a foreign country or those who have
acquired the right to reside abroad and continue to avail of the
same right after the effectivity of this Code; and
(g) The insane or feeble minded. (Emphasis supplied.)
Sec. 12, Omnibus Election Code:
Section 12. Disqualifications. - Any person who has been declared by
competent authority insane or incompetent, or has been sentenced by
final judgmentfor subversion, insurrection, rebellion, or for any offense
for which he has been sentenced to a penalty of more than eighteen
months or for a crime involving moral turpitude, shall be disqualified to
be a candidate and to hold any public office, unless he has been given
plenary pardon or granted amnesty. (Emphases supplied.)
In a Resolution dated April 1, 2013,the COMELEC, Second Division,
dismissed the petition for disqualification, the fallo of which reads:
WHEREFORE, premises considered, the instant petition is hereby
DISMISSED for utter lack of merit.12
The COMELEC, Second Division, opined that "[h]aving taken judicial
cognizance of the consolidated resolution for SPA No. 09-028 (DC)
and SPA No. 09-104 (DC) and the 10 May 2010 En Banc resolution
affirming it, this Commission will not be labor the controversy further.
Moreso, [Risos-Vidal] failed to present cogent proof sufficient to
reverse the standing pronouncement of this Commission declaring
categorically that [former President Estrada’s] right to seek public
office has been effectively restored by the pardon vested upon him by
former President Gloria M. Arroyo. Since this Commission has already
spoken, it will no longer engage in disquisitions of a settled matter lest
indulged in wastage of government resources."13
The subsequent motion for reconsideration filed by Risos-Vidal was
denied in a Resolution dated April 23, 2013.
On April 30, 2013, Risos-Vidal invoked the Court’s jurisdiction by
filing the present petition. She presented five issues for the Court’s
resolution, to wit:
I. RESPONDENT COMELEC COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN HOLDING THAT
RESPONDENT ESTRADA’S PARDON WAS NOT
CONDITIONAL;
II. RESPONDENT COMELEC COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN NOT FINDING THAT
RESPONDENT ESTRADA IS DISQUALIFIED TO RUN
AS MAYOR OF MANILA UNDER SEC. 40 OF THE
LOCAL GOVERNMENTCODE OF 1991 FOR HAVING
BEEN CONVICTED OF PLUNDER, AN OFFENSE
INVOLVING MORAL TURPITUDE;
III. RESPONDENT COMELEC COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN DISMISSING THE
PETITION FOR DISQUALIFICATION ON THE GROUND
THAT THE CASE INVOLVES THE SAME OR SIMILAR
ISSUES IT ALREADY RESOLVED IN THE CASES OF
"PORMENTO VS. ESTRADA", SPA NO. 09-028 (DC)
AND IN "RE: PETITION TO DISQUALIFY ESTRADA
EJERCITO, JOSEPH M. FROM RUNNING AS
PRESIDENT, ETC.," SPA NO. 09-104 (DC);
IV. RESPONDENT COMELEC COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN NOT RULING THAT
RESPONDENT ESTRADA’S PARDON NEITHER
RESTORED HIS RIGHT OF SUFFRAGE NOR
REMITTED HIS PERPETUAL ABSOLUTE
DISQUALIFICATION FROM SEEKING PUBLIC OFFICE;
and
V. RESPONDENT COMELEC COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN NOT HAVING
EXERCISED ITS POWER TO MOTU PROPRIO
DISQUALIFY RESPONDENT ESTRADA IN THE FACE
OF HIS PATENT DISQUALIFICATION TO RUN FOR
PUBLIC OFFICE BECAUSE OF HIS PERPETUAL AND
ABSOLUTE DISQUALIFICATION TO SEEK PUBLIC
OFFICE AND TO VOTE RESULTING FROM HIS
CRIMINAL CONVICTION FOR PLUNDER.14
While this case was pending beforethe Court, or on May 13, 2013, the
elections were conducted as scheduled and former President Estrada
was voted into office with 349,770 votes cast in his favor. The next day,
the local board of canvassers proclaimed him as the duly elected Mayor
of the City of Manila.
On June 7, 2013, Lim, one of former President Estrada’s opponents for
the position of Mayor, moved for leave to intervene in this case. His
motion was granted by the Court in a Resolution15 dated June 25, 2013.
Lim subscribed to Risos-Vidal’s theory that former President Estrada is
disqualified to run for and hold public office as the pardon granted to
the latter failed to expressly remit his perpetual disqualification.
Further, given that former President Estrada is disqualified to run for
and hold public office, all the votes obtained by the latter should be
declared stray, and, being the second placer with 313,764 votes to his
name, he (Lim) should be declared the rightful winning candidate for
the position of Mayor of the City of Manila.
The Issue
Though raising five seemingly separate issues for resolution, the
petition filed by Risos-Vidal actually presents only one essential
question for resolution by the Court, that is, whether or not the
COMELEC committed grave abuse of discretion amounting to lack or
excess of jurisdiction in ruling that former President Estrada is qualified
to vote and be voted for in public office as a result of the pardon
granted to him by former President Arroyo.
In her petition, Risos-Vidal starts her discussion by pointing out that the
pardon granted to former President Estrada was conditional as
evidenced by the latter’s express acceptance thereof. The "acceptance,"
she claims, is an indication of the conditional natureof the pardon, with
the condition being embodied in the third Whereas Clause of the
pardon, i.e., "WHEREAS, Joseph Ejercito Estrada has publicly
committed to no longer seek any elective position or office." She
explains that the aforementioned commitment was what impelled
former President Arroyo to pardon former President Estrada, without it,
the clemency would not have been extended. And any breach thereof,
that is, whenformer President Estrada filed his Certificate of Candidacy
for President and Mayor of the City of Manila, he breached the
condition of the pardon; hence, "he ought to be recommitted to prison
to serve the unexpired portion of his sentence x x x and disqualifies him
as a candidate for the mayoralty [position] of Manila." 16
Nonetheless, Risos-Vidal clarifies that the fundamental basis upon
which former President Estrada mustbe disqualified from running for
and holding public elective office is actually the proscription found in
Section 40 of the LGC, in relation to Section 12 ofthe OEC. She argues
that the crime of plunder is both an offense punishable by imprisonment
of one year or more and involving moral turpitude; such that former
President Estrada must be disqualified to run for and hold public
elective office.
Even with the pardon granted to former President Estrada, however,
Risos-Vidal insists that the same did not operate to make available to
former President Estrada the exception provided under Section 12 of
the OEC, the pardon being merely conditional and not absolute or
plenary. Moreover, Risos-Vidal puts a premium on the ostensible
requirements provided under Articles 36 and 41 of the Revised Penal
Code, to wit:
ART. 36. Pardon; its effects.– A pardon shall not work the restoration
of the right to hold publicoffice, or the right of suffrage, unless such
rights be expressly restored by the terms of the pardon.
A pardon shall in no case exempt the culprit from the payment of the
civil indemnity imposed upon him by the sentence.
ART. 41. Reclusion perpetua and reclusion temporal – Their accessory
penalties.– The penalties of reclusion perpetua and reclusion temporal
shall carry with them that of civil interdiction for life or during the
period of the sentence as the case may be, and that of perpetual absolute
disqualification which the offender shall suffer even though pardoned
as to the principal penalty, unless the same shall have been expressly
remitted in the pardon. (Emphases supplied.)
She avers that in view of the foregoing provisions of law, it is not
enough that a pardon makes a general statement that such pardon
carries with it the restoration of civil and political rights. By virtue of
Articles 36 and 41, a pardon restoring civil and political rights without
categorically making mention what specific civil and political rights are
restored "shall not work to restore the right to hold public office, or the
right of suffrage; nor shall it remit the accessory penalties of civil
interdiction and perpetual absolute disqualification for the principal
penalties of reclusion perpetua and reclusion temporal." 17 In other
words, she considers the above constraints as mandatory requirements
that shun a general or implied restoration of civil and political rights in
pardons.
Risos-Vidal cites the concurring opinions of Associate Justices Teodoro
R. Padilla and Florentino P. Feliciano in Monsanto v. Factoran, Jr. 18 to
endorse her position that "[t]he restoration of the right to hold public
office to one who has lost such right by reason of conviction in a
criminal case, but subsequently pardoned, cannot be left to inference,
no matter how intensely arguable, but must be statedin express, explicit,
positive and specific language."
Applying Monsantoto former President Estrada’s case, Risos-Vidal
reckons that "such express restoration is further demanded by the
existence of the condition in the [third] [W]hereas [C]lause of the
pardon x x x indubitably indicating that the privilege to hold public
office was not restored to him."19
On the other hand, the Office ofthe Solicitor General (OSG) for public
respondent COMELEC, maintains that "the issue of whether or not the
pardon extended to [former President Estrada] restored his right to run
for public office had already been passed upon by public respondent
COMELEC way back in 2010 via its rulings in SPA Nos. 09-024, 09-
028 and 09-104, there is no cogent reason for it to reverse its standing
pronouncement and declare [former President Estrada] disqualified to
run and be voted as mayor of the City of Manila in the absence of any
new argument that would warrant its reversal. To be sure, public
respondent COMELEC correctly exercised its discretion in taking
judicial cognizance of the aforesaid rulings which are known toit and
which can be verified from its own records, in accordance with Section
2, Rule 129 of the Rules of Court on the courts’ discretionary power to
take judicial notice of matters which are of public knowledge, orare
capable of unquestionable demonstration, or ought to be known to them
because of their judicial functions."20
Further, the OSG contends that "[w]hile at first glance, it is apparent
that [former President Estrada’s] conviction for plunder disqualifies
him from running as mayor of Manila under Section 40 of the [LGC],
the subsequent grant of pardon to him, however, effectively restored his
right to run for any public office."21 The restoration of his right to run
for any public office is the exception to the prohibition under Section
40 of the LGC, as provided under Section 12 of the OEC. As to the
seeming requirement of Articles 36 and 41 of the Revised Penal Code,
i.e., the express restoration/remission of a particular right to be stated in
the pardon, the OSG asserts that "an airtight and rigid interpretation of
Article 36 and Article 41 of the [RPC] x x x would be stretching too
much the clear and plain meaning of the aforesaid provisions." 22 Lastly,
taking into consideration the third Whereas Clause of the pardon
granted to former President Estrada, the OSG supports the position that
it "is not an integral part of the decree of the pardon and cannot
therefore serve to restrict its effectivity." 23
Thus, the OSG concludes that the "COMELEC did not commit grave
abuse of discretion amounting to lack or excess of jurisdiction in
issuing the assailed Resolutions."24
For his part, former President Estrada presents the following significant
arguments to defend his stay in office: that "the factual findings of
public respondent COMELEC, the Constitutional body mandated to
administer and enforce all laws relative to the conduct of the elections,
[relative to the absoluteness of the pardon, the effects thereof, and the
eligibility of former President Estrada to seek public elective office] are
binding [and conclusive] on this Honorable Supreme Court;" that he
"was granted an absolute pardon and thereby restored to his full civil
and political rights, including the right to seek public elective office
such as the mayoral (sic) position in the City of Manila;" that "the
majority decision in the case of Salvacion A. Monsanto v. Fulgencio S.
Factoran, Jr.,which was erroneously cited by both Vidal and Lim as
authority for their respective claims, x x x reveal that there was no
discussion whatsoever in the ratio decidendi of the Monsanto case as to
the alleged necessity for an expressed restoration of the ‘right to hold
public office in the pardon’ as a legal prerequisite to remove the subject
perpetual special disqualification;" that moreover, the "principal
question raised in this Monsanto case is whether or not a public officer,
who has been granted an absolute pardon by the Chief Executive, is
entitled to reinstatement toher former position without need of a new
appointment;" that his "expressed acceptance [of the pardon] is not
proof that the pardon extended to [him] is conditional and not
absolute;" that this case is a mere rehash of the casesfiled against him
during his candidacy for President back in 2009-2010; that Articles 36
and 41 of the Revised Penal Code "cannot abridge or diminish the
pardoning power of the President expressly granted by the
Constitution;" that the text of the pardon granted to him substantially, if
not fully, complied with the requirement posed by Article 36 of the
Revised Penal Code as it was categorically stated in the said document
that he was "restored to his civil and political rights;" that since pardon
is an act of grace, it must be construed favorably in favor of the
grantee;25 and that his disqualification will result in massive
disenfranchisement of the hundreds of thousands of Manileños who
voted for him.26
The Court's Ruling
The petition for certiorari lacks merit.
Former President Estrada was granted an absolute pardon that fully
restored allhis civil and political rights, which naturally includes the
right to seek public elective office, the focal point of this controversy.
The wording of the pardon extended to former President Estrada is
complete, unambiguous, and unqualified. It is likewise unfettered by
Articles 36 and 41 of the Revised Penal Code. The only reasonable,
objective, and constitutional interpretation of the language of the
pardon is that the same in fact conforms to Articles 36 and 41 of the
Revised Penal Code. Recall that the petition for disqualification filed by
Risos-Vidal against former President Estrada, docketed as SPA No. 13-
211 (DC), was anchored on Section 40 of the LGC, in relation to
Section 12 of the OEC, that is, having been convicted of a crime
punishable by imprisonment of one year or more, and involving moral
turpitude, former President Estrada must be disqualified to run for and
hold public elective office notwithstanding the fact that he is a grantee
of a pardon that includes a statement expressing "[h]e is hereby restored
to his civil and political rights." Risos-Vidal theorizes that former
President Estrada is disqualified from running for Mayor of Manila
inthe May 13, 2013 Elections, and remains disqualified to hold any
local elective post despite the presidential pardon extended to him in
2007 by former President Arroyo for the reason that it (pardon) did not
expressly provide for the remission of the penalty of perpetual absolute
disqualification, particularly the restoration of his (former President
Estrada) right to vote and bevoted upon for public office. She invokes
Articles 36 and 41 of the Revised Penal Code as the foundations of her
theory.
It is insisted that, since a textual examination of the pardon given to and
accepted by former President Estrada does not actually specify which
political right is restored, it could be inferred that former President
Arroyo did not deliberately intend to restore former President Estrada’s
rights of suffrage and to hold public office, orto otherwise remit the
penalty of perpetual absolute disqualification. Even if her intention was
the contrary, the same cannot be upheld based on the pardon’s text.
The pardoning power of the President cannot be limited by legislative
action.
The 1987 Constitution, specifically Section 19 of Article VII and
Section 5 of Article IX-C, provides that the President of the Philippines
possesses the power to grant pardons, along with other acts of executive
clemency, to wit:
Section 19. Except in cases of impeachment, or as otherwise provided
in this Constitution, the President may grant reprieves, commutations,
and pardons, and remit fines and forfeitures, after conviction by final
judgment.
He shall also have the power to grant amnesty with the concurrence of a
majority of all the Members of the Congress.
Section 5. No pardon, amnesty, parole, or suspension of sentence for
violation of election laws, rules, and regulations shall be granted by the
President without the favorable recommendation of the Commission.
It is apparent from the foregoing constitutional provisions that the only
instances in which the President may not extend pardon remain to be in:
(1) impeachment cases; (2) cases that have not yet resulted in a final
conviction; and (3) cases involving violations of election laws, rules
and regulations in which there was no favorable recommendation
coming from the COMELEC. Therefore, it can be argued that any act
of Congress by way of statute cannot operate to delimit the pardoning
power of the President.
In Cristobal v. Labrador27 and Pelobello v. Palatino,28 which were
decided under the 1935 Constitution,wherein the provision granting
pardoning power to the President shared similar phraseology with what
is found in the present 1987 Constitution, the Court then unequivocally
declared that "subject to the limitations imposed by the Constitution,
the pardoning power cannot be restricted or controlled by legislative
action." The Court reiterated this pronouncement in Monsanto v.
Factoran, Jr.29 thereby establishing that, under the present Constitution,
"a pardon, being a presidential prerogative, should not be circumscribed
by legislative action." Thus, it is unmistakably the long-standing
position of this Court that the exercise of the pardoning power is
discretionary in the President and may not be interfered with by
Congress or the Court, except only when it exceeds the limits provided
for by the Constitution.
This doctrine of non-diminution or non-impairment of the President’s
power of pardon by acts of Congress, specifically through legislation,
was strongly adhered to by an overwhelming majority of the framers of
the 1987 Constitution when they flatly rejected a proposal to carve out
an exception from the pardoning power of the President in the form of
"offenses involving graft and corruption" that would be enumerated and
defined by Congress through the enactment of a law. The following is
the pertinent portion lifted from the Record of the Commission (Vol.
II):
MR. ROMULO. I ask that Commissioner Tan be recognized to
introduce an amendment on the same section.
THE PRESIDENT. Commissioner Tan is recognized.
SR. TAN. Madam President, lines 7 to 9 state:
However, the power to grant executive clemency for violations of
corrupt practices laws may be limited by legislation.
I suggest that this be deletedon the grounds that, first, violations of
corrupt practices may include a very little offense like stealing ₱10;
second, which I think is more important, I get the impression, rightly or
wrongly, that subconsciously we are drafting a constitution on the
premise that all our future Presidents will bebad and dishonest and,
consequently, their acts will be lacking in wisdom. Therefore, this
Article seems to contribute towards the creation of an anti-President
Constitution or a President with vast responsibilities but no
corresponding power except to declare martial law. Therefore, I request
that these lines be deleted.
MR. REGALADO. Madam President,may the Committee react to that?
THE PRESIDENT. Yes, please.
MR. REGALADO. This was inserted here on the resolution of
Commissioner Davide because of the fact that similar to the provisions
on the Commission on Elections, the recommendation of that
Commission is required before executive clemency isgranted because
violations of the election laws go into the very political life of the
country.
With respect to violations of our Corrupt Practices Law, we felt that it
is also necessary to have that subjected to the same condition because
violation of our Corrupt Practices Law may be of such magnitude as to
affect the very economic systemof the country. Nevertheless, as a
compromise, we provided here that it will be the Congress that will
provide for the classification as to which convictions will still require
prior recommendation; after all, the Congress could take into account
whether or not the violation of the Corrupt Practices Law is of such
magnitude as to affect the economic life of the country, if it is in the
millions or billions of dollars. But I assume the Congress in its
collective wisdom will exclude those petty crimes of corruption as not
to require any further stricture on the exercise of executive clemency
because, of course, there is a whale of a difference if we consider a
lowly clerk committing malversation of government property or funds
involving one hundred pesos. But then, we also anticipate the
possibility that the corrupt practice of a public officer is of such
magnitude as to have virtually drained a substantial portion of the
treasury, and then he goes through all the judicial processes and later
on, a President who may have close connections with him or out of
improvident compassion may grant clemency under such conditions.
That is why we left it to Congress to provide and make a classification
based on substantial distinctions between a minor act of corruption or
an act of substantial proportions. SR. TAN. So, why do we not just
insert the word GROSS or GRAVE before the word "violations"?
MR. REGALADO. We feel that Congress can make a better distinction
because "GRAVE" or "GROSS" can be misconstrued by putting it
purely as a policy.
MR. RODRIGO. Madam President.
THE PRESIDENT. Commissioner Rodrigo is recognized.
MR. RODRIGO. May I speak in favor of the proposed amendment?
THE PRESIDENT. Please proceed.
MR. RODRIGO. The power to grant executive clemency is essentially
an executive power, and that is precisely why it is called executive
clemency. In this sentence, which the amendment seeks to delete, an
exception is being made. Congress, which is the legislative arm, is
allowed to intrude into this prerogative of the executive. Then it limits
the power of Congress to subtract from this prerogative of the President
to grant executive clemency by limiting the power of Congress to only
corrupt practices laws. There are many other crimes more serious than
these. Under this amendment, Congress cannot limit the power of
executive clemency in cases of drug addiction and drug pushing which
are very, very serious crimes that can endanger the State; also, rape
with murder, kidnapping and treason. Aside from the fact that it is a
derogation of the power of the President to grant executive clemency, it
is also defective in that it singles out just one kind of crime. There are
far more serious crimes which are not included.
MR. REGALADO. I will just make one observation on that. We admit
that the pardoning power is anexecutive power. But even in the
provisions on the COMELEC, one will notice that constitutionally, it is
required that there be a favorable recommendation by the Commission
on Elections for any violation of election laws.
At any rate, Commissioner Davide, as the principal proponent of that
and as a member of the Committee, has explained in the committee
meetings we had why he sought the inclusion of this particular
provision. May we call on Commissioner Davide to state his position.
MR. DAVIDE. Madam President.
THE PRESIDENT. Commissioner Davide is recognized.
MR. DAVIDE. I am constrained to rise to object to the proposal. We
have just approved the Article on Accountability of Public Officers.
Under it, it is mandated that a public office is a public trust, and all
government officers are under obligation to observe the utmost of
responsibility, integrity, loyalty and efficiency, to lead modest lives and
to act with patriotism and justice.
In all cases, therefore, which would go into the verycore of the concept
that a public office is a public trust, the violation is itself a violation not
only of the economy but the moral fabric of public officials. And that is
the reason we now want that if there is any conviction for the violation
of the Anti-Graft and Corrupt Practices Act, which, in effect, is a
violation of the public trust character of the public office, no pardon
shall be extended to the offender, unless some limitations are imposed.
Originally, my limitation was, it should be with the concurrence of the
convicting court, but the Committee left it entirely to the legislature to
formulate the mechanics at trying, probably, to distinguish between
grave and less grave or serious cases of violation of the Anti-Graft and
Corrupt Practices Act. Perhaps this is now the best time, since we have
strengthened the Article on Accountability of Public Officers, to
accompany it with a mandate that the President’s right to grant
executive clemency for offenders or violators of laws relating to the
concept of a public office may be limited by Congress itself.
MR. SARMIENTO. Madam President.
THE PRESIDENT. Commissioner Sarmiento is recognized.
MR. SARMIENTO. May I briefly speak in favor of the amendment by
deletion.
Madam President, over and over again, we have been saying and
arguing before this Constitutional Commission that we are
emasculating the powers of the presidency, and this provision to me is
another clear example of that. So, I speak against this provision. Even
the 1935 and the 1973 Constitutions do not provide for this kind of
provision.
I am supporting the amendment by deletion of Commissioner Tan.
MR. ROMULO. Commissioner Tingson would like to be recognized.
THE PRESIDENT. Commissioner Tingson is recognized.
MR. TINGSON. Madam President, I am also in favor of the
amendment by deletion because I am in sympathy with the stand of
Commissioner Francisco "Soc" Rodrigo. I do believe and we should
remember that above all the elected or appointed officers of our
Republic, the leader is the President. I believe that the country will be
as the President is, and if we systematically emasculate the power of
this presidency, the time may come whenhe will be also handcuffed that
he will no longer be able to act like he should be acting.
So, Madam President, I am in favor of the deletion of this particular
line.
MR. ROMULO. Commissioner Colayco would like to be recognized.
THE PRESIDENT. Commissioner Colayco is recognized.
MR. COLAYCO. Thank you very much, Madam President.
I seldom rise here to object to or to commend or to recommend the
approval of proposals, but now I find that the proposal of
Commissioner Tan is worthy of approval of this body.
Why are we singling out this particular offense? There are other crimes
which cast a bigger blot on the moral character of the public officials.
Finally, this body should not be the first one to limit the almost absolute
power of our Chief Executive in deciding whether to pardon, to
reprieve or to commute the sentence rendered by the court.
I thank you.
THE PRESIDENT. Are we ready to vote now?
MR. ROMULO. Commissioner Padilla would like to be recognized,
and after him will be Commissioner Natividad.
THE PRESIDENT. Commissioner Padilla is recognized.
MR. PADILLA. Only one sentence, Madam President. The
Sandiganbayan has been called the Anti-Graft Court, so if this is
allowed to stay, it would mean that the President’s power togrant
pardon or reprieve will be limited to the cases decided by the Anti-Graft
Court, when as already stated, there are many provisions inthe Revised
Penal Code that penalize more serious offenses.
Moreover, when there is a judgment of conviction and the case merits
the consideration of the exercise of executive clemency, usually under
Article V of the Revised Penal Code the judge will recommend such
exercise of clemency. And so, I am in favor of the amendment proposed
by Commissioner Tan for the deletion of this last sentence in Section
17.
THE PRESIDENT. Are we ready to vote now, Mr. Floor Leader?
MR. NATIVIDAD. Just one more.
THE PRESIDENT. Commissioner Natividad is recognized.
MR. NATIVIDAD. I am also against this provision which will again
chip more powers from the President. In case of other criminals
convicted in our society, we extend probation to them while in this
case, they have already been convicted and we offer mercy. The only
way we can offer mercy to them is through this executive clemency
extended to them by the President. If we still close this avenue to them,
they would be prejudiced even worse than the murderers and the more
vicious killers in our society. I do not think they deserve this
opprobrium and punishment under the new Constitution.
I am in favor of the proposed amendment of Commissioner Tan.
MR. ROMULO. We are ready tovote, Madam President.
THE PRESIDENT. Is this accepted by the Committee?
MR. REGALADO. The Committee, Madam President, prefers to
submit this to the floor and also because of the objection of the main
proponent, Commissioner Davide. So we feel that the Commissioners
should vote on this question.
VOTING
THE PRESIDENT. As many as are in favor of the proposed
amendment of Commissioner Tan to delete the last sentence of Section
17 appearing on lines 7, 8 and 9, please raise their hand. (Several
Members raised their hand.)
As many as are against, please raise their hand. (Few Members raised
their hand.)
The results show 34 votes in favor and 4 votes against; the amendment
is approved.30 (Emphases supplied.)
The proper interpretation of Articles
36 and 41 of the Revised Penal Code.
The foregoing pronouncements solidify the thesis that Articles 36 and
41 of the Revised Penal Code cannot, in any way, serve to abridge or
diminish the exclusive power and prerogative of the President to pardon
persons convicted of violating penal statutes.
The Court cannot subscribe to Risos-Vidal’s interpretation that the said
Articles contain specific textual commands which must be strictly
followed in order to free the beneficiary of presidential grace from the
disqualifications specifically prescribed by them.
Again, Articles 36 and 41 of the Revised Penal Code provides:
ART. 36. Pardon; its effects.– A pardon shall not work the restoration
of the right to hold publicoffice, or the right of suffrage, unless such
rights be expressly restored by the terms of the pardon.
A pardon shall in no case exempt the culprit from the payment of the
civil indemnity imposed upon him by the sentence.
ART. 41. Reclusion perpetua and reclusion temporal – Their accessory
penalties.– The penalties of reclusion perpetua and reclusion temporal
shall carry with them that of civil interdiction for life or during the
period of the sentence as the case may be, and that of perpetual absolute
disqualification which the offender shall suffer even though pardoned
as to the principal penalty, unless the same shall have been expressly
remitted in the pardon. (Emphases supplied.)
A rigid and inflexible reading of the above provisions of law, as
proposed by Risos-Vidal, is unwarranted, especially so if it will defeat
or unduly restrict the power of the President to grant executive
clemency.
It is well-entrenched in this jurisdiction that where the words of a
statute are clear, plain, and free from ambiguity, it must be given its
literal meaning and applied without attempted interpretation. Verba
legis non est recedendum. From the words of a statute there should be
no departure.31 It is this Court’s firm view that the phrase in the
presidential pardon at issue which declares that former President
Estrada "is hereby restored to his civil and political rights" substantially
complies with the requirement of express restoration.
The Dissent of Justice Marvic M.V.F. Leonen agreed with Risos Vidal
that there was no express remission and/or restoration of the rights of
suffrage and/or to hold public office in the pardon granted to former
President Estrada, as required by Articles 36 and 41 of the Revised
Penal Code.
Justice Leonen posits in his Dissent that the aforementioned codal
provisions must be followed by the President, as they do not abridge or
diminish the President’s power to extend clemency. He opines that they
do not reduce the coverage of the President’s pardoning power.
Particularly, he states:
Articles 36 and 41 refer only to requirements of convention or form.
They only provide a procedural prescription. They are not concerned
with areas where or the instances when the President may grant pardon;
they are only concerned with how he or she is to exercise such power so
that no other governmental instrumentality needs to intervene to give it
full effect.
All that Articles 36 and 41 do is prescribe that, if the President wishes
to include in the pardon the restoration of the rights of suffrage and to
hold public office, or the remission of the accessory penalty of
perpetual absolute disqualification,he or she should do so expressly.
Articles 36 and 41 only ask that the President state his or her intentions
clearly, directly, firmly, precisely, and unmistakably. To belabor the
point, the President retains the power to make such restoration or
remission, subject to a prescription on the manner by which he or she is
to state it.32
With due respect, I disagree with the overbroad statement that Congress
may dictate as to how the President may exercise his/her power of
executive clemency. The form or manner by which the President, or
Congress for that matter, should exercise their respective Constitutional
powers or prerogatives cannot be interfered with unless it is so provided
in the Constitution. This is the essence of the principle of separation of
powers deeply ingrained in our system of government which "ordains
that each of the three great branches of government has exclusive
cognizance of and is supreme in matters falling within its own
constitutionally allocated sphere."33 Moreso, this fundamental principle
must be observed if noncompliance with the form imposed by one
branch on a co-equal and coordinate branch will result into the
diminution of an exclusive Constitutional prerogative.
For this reason, Articles 36 and 41 of the Revised Penal Code should be
construed in a way that will give full effect to the executive clemency
granted by the President, instead of indulging in an overly strict
interpretation that may serve to impair or diminish the import of the
pardon which emanated from the Office of the President and duly
signed by the Chief Executive himself/herself. The said codal
provisions must be construed to harmonize the power of Congress to
define crimes and prescribe the penalties for such crimes and the power
of the President to grant executive clemency. All that the said
provisions impart is that the pardon of the principal penalty does
notcarry with it the remission of the accessory penalties unless the
President expressly includes said accessory penalties in the pardon. It
still recognizes the Presidential prerogative to grant executive clemency
and, specifically, to decide to pardon the principal penalty while
excluding its accessory penalties or to pardon both. Thus, Articles 36
and 41 only clarify the effect of the pardon so decided upon by the
President on the penalties imposedin accordance with law.
A close scrutiny of the text of the pardon extended to former President
Estrada shows that both the principal penalty of reclusion perpetua and
its accessory penalties are included in the pardon. The first sentence
refers to the executive clemency extended to former President Estrada
who was convicted by the Sandiganbayan of plunder and imposed a
penalty of reclusion perpetua. The latter is the principal penalty
pardoned which relieved him of imprisonment. The sentence that
followed, which states that "(h)e is hereby restored to his civil and
political rights," expressly remitted the accessory penalties that attached
to the principal penalty of reclusion perpetua. Hence, even if we apply
Articles 36 and 41 of the Revised Penal Code, it is indubitable from the
textof the pardon that the accessory penalties of civil interdiction and
perpetual absolute disqualification were expressly remitted together
with the principal penalty of reclusion perpetua.
In this jurisdiction, the right toseek public elective office is recognized
by law as falling under the whole gamut of civil and political rights.
Section 5 of Republic Act No. 9225,34 otherwise known as the
"Citizenship Retention and Reacquisition Act of 2003," reads as
follows:
Section 5. Civil and Political Rights and Liabilities.– Those who retain
or reacquire Philippine citizenship under this Act shall enjoy full civil
and political rights and be subject to all attendant liabilities and
responsibilities under existing laws of the Philippines and the following
conditions: (1) Those intending to exercise their right of suffrage must
meet the requirements under Section 1, Article V of the Constitution,
Republic Act No. 9189, otherwise known as "The Overseas Absentee
Voting Act of 2003" and other existing laws;
(2) Those seeking elective public office in the Philippines
shall meet the qualifications for holding such public office as
required by the Constitution and existing laws and, at the time
of the filing of the certificate of candidacy, make a personal
and sworn renunciation of any and all foreign citizenship
before any public officer authorized to administer an oath;
(3) Those appointed to any public office shall subscribe and
swear an oath of allegiance to the Republic of the Philippines
and its duly constituted authorities prior to their assumption
of office: Provided, That they renounce their oath of
allegiance to the country where they took that oath; (4) Those
intending to practice their profession in the Philippines shall
apply with the proper authority for a license or permit to
engage in such practice; and
(5) That right to vote or be elected or appointed to any public
office in the Philippines cannot be exercised by, or extended
to, those who:
(a) are candidates for or are occupying any public
office in the country of which theyare naturalized
citizens; and/or
(b) are in active service as commissioned or non
commissioned officers in the armed forces of the
country which they are naturalized citizens.
(Emphases supplied.)
No less than the International Covenant on Civil and Political Rights, to
which the Philippines is a signatory, acknowledges the existence of said
right. Article 25(b) of the Convention states: Article 25
Every citizen shall have the right and the opportunity, without any of
the distinctions mentioned in Article 2 and without unreasonable
restrictions:
(b) To vote and to be electedat genuine periodic elections which shall
be by universal and equal suffrage and shall be held by secret ballot,
guaranteeing the free expression of the will of the electors[.] (Emphasis
supplied.)
Recently, in Sobejana-Condon v. Commission on Elections, 35 the Court
unequivocally referred to the right to seek public elective office as a
political right, to wit:
Stated differently, it is an additional qualification for elective office
specific only to Filipino citizens who re-acquire their citizenship under
Section 3 of R.A. No. 9225. It is the operative act that restores their
right to run for public office. The petitioner’s failure to comply there
with in accordance with the exact tenor of the law, rendered ineffectual
the Declaration of Renunciation of Australian Citizenship she executed
on September 18, 2006. As such, she is yet to regain her political right
to seek elective office. Unless she executes a sworn renunciation of her
Australian citizenship, she is ineligible to run for and hold any elective
office in the Philippines. (Emphasis supplied.)
Thus, from both law and jurisprudence, the right to seek public elective
office is unequivocally considered as a political right. Hence, the Court
reiterates its earlier statement that the pardon granted to former
President Estrada admits no other interpretation other than to mean that,
upon acceptance of the pardon granted tohim, he regained his FULL
civil and political rights – including the right to seek elective office.
On the other hand, the theory of Risos-Vidal goes beyond the plain
meaning of said penal provisions; and prescribes a formal requirement
that is not only unnecessary but, if insisted upon, could be in derogation
of the constitutional prohibition relative to the principle that the
exercise of presidential pardon cannot be affected by legislative action.
Risos-Vidal relied heavily on the separate concurring opinions in
Monsanto v. Factoran, Jr.36 to justify her argument that an absolute
pardon must expressly state that the right to hold public office has been
restored, and that the penalty of perpetual absolute disqualification has
been remitted.
This is incorrect.
Her reliance on said opinions is utterly misplaced. Although the learned
views of Justices Teodoro R. Padilla and Florentino P. Feliciano are to
be respected, they do not form partof the controlling doctrine nor to be
considered part of the law of the land. On the contrary, a careful
reading of the majority opinion in Monsanto, penned by no less than
Chief Justice Marcelo B. Fernan, reveals no statement that denotes
adherence to a stringent and overly nuanced application of Articles 36
and 41 of the Revised Penal Code that will in effect require the
President to use a statutorily prescribed language in extending
executive clemency, even if the intent of the President can otherwise be
deduced from the text or words used in the pardon. Furthermore, as
explained above, the pardon here is consistent with, and not contrary to,
the provisions of Articles 36 and 41.
The disqualification of former President Estrada under Section 40 of the
LGC in relation to Section 12 of the OEC was removed by his
acceptance of the absolute pardon granted to him.
Section 40 of the LGC identifies who are disqualified from running for
any elective local position. Risos-Vidal argues that former President
Estrada is disqualified under item (a), to wit:
(a) Those sentenced by final judgment for an offense involving moral
turpitude or for an offense punishable by one (1) year or more of
imprisonment, within two (2) years after serving sentence[.] (Emphasis
supplied.)
Likewise, Section 12 of the OEC provides for similar prohibitions, but
it provides for an exception, to wit:
Section 12. Disqualifications. – x x x unless he has been given plenary
pardon or granted amnesty. (Emphasis supplied.)
As earlier stated, Risos-Vidal maintains that former President Estrada’s
conviction for plunder disqualifies him from running for the elective
local position of Mayor of the City of Manila under Section 40(a) of the
LGC. However, the subsequent absolute pardon granted to former
President Estrada effectively restored his right to seek public elective
office. This is made possible by reading Section 40(a) of the LGC in
relation to Section 12 of the OEC.
While it may be apparent that the proscription in Section 40(a) of the
LGC is worded in absolute terms, Section 12 of the OEC provides a
legal escape from the prohibition – a plenary pardon or amnesty. In
other words, the latter provision allows any person who has been
granted plenary pardon or amnesty after conviction by final judgment
of an offense involving moral turpitude, inter alia, to run for and hold
any public office, whether local or national position.
Take notice that the applicability of Section 12 of the OEC to
candidates running for local elective positions is not unprecedented. In
Jalosjos, Jr. v. Commission on Elections,37 the Court acknowledged the
aforementioned provision as one of the legal remedies that may be
availed of to disqualify a candidate in a local election filed any day
after the last day for filing of certificates of candidacy, but not later than
the date of proclamation.38 The pertinent ruling in the Jalosjos case is
quoted as follows:
What is indisputably clear is that false material representation of
Jalosjos is a ground for a petition under Section 78. However, since the
false material representation arises from a crime penalized by prision
mayor, a petition under Section 12 ofthe Omnibus Election Code or
Section 40 of the Local Government Code can also be properly filed.
The petitioner has a choice whether to anchor his petition on Section 12
or Section 78 of the Omnibus Election Code, or on Section 40 of the
Local Government Code. The law expressly provides multiple remedies
and the choice of which remedy to adopt belongs to
petitioner.39 (Emphasis supplied.)
The third preambular clause of the pardon did not operate to make the
pardon conditional.
Contrary to Risos-Vidal’s declaration, the third preambular clause of
the pardon, i.e., "[w]hereas, Joseph Ejercito Estrada has publicly
committed to no longer seek any elective position or office," neither
makes the pardon conditional, nor militate against the conclusion that
former President Estrada’s rights to suffrage and to seek public elective
office have been restored.
This is especially true as the pardon itself does not explicitly impose a
condition or limitation, considering the unqualified use of the term
"civil and political rights"as being restored. Jurisprudence educates that
a preamble is not an essential part of an act as it is an introductory or
preparatory clause that explains the reasons for the enactment, usually
introduced by the word "whereas."40 Whereas clauses do not form part
of a statute because, strictly speaking, they are not part of the operative
language of the statute.41 In this case, the whereas clause at issue is not
an integral part of the decree of the pardon, and therefore, does not by
itself alone operate to make the pardon conditional or to make its
effectivity contingent upon the fulfilment of the aforementioned
commitment nor to limit the scope of the pardon.
On this matter, the Court quotes with approval a relevant excerpt of
COMELEC Commissioner Maria Gracia Padaca’s separate concurring
opinion in the assailed April 1, 2013 Resolution of the COMELEC in
SPA No. 13-211 (DC), which captured the essence of the legal effect of
preambular paragraphs/whereas clauses, viz:
The present dispute does not raise anything which the 20 January 2010
Resolution did not conclude upon. Here, Petitioner Risos-Vidal raised
the same argument with respect to the 3rd "whereas clause" or
preambular paragraph of the decree of pardon. It states that "Joseph
Ejercito Estrada has publicly committed to no longer seek any elective
position or office." On this contention, the undersigned reiterates the
ruling of the Commission that the 3rd preambular paragraph does not
have any legal or binding effect on the absolute nature of the pardon
extended by former President Arroyo to herein Respondent. This ruling
is consistent with the traditional and customary usage of preambular
paragraphs. In the case of Echegaray v. Secretary of Justice, the
Supreme Court ruled on the legal effect of preambular paragraphs or
whereas clauses on statutes. The Court stated, viz.:
Besides, a preamble is really not an integral part of a law. It is merely
an introduction to show its intent or purposes. It cannot be the origin of
rights and obligations. Where the meaning of a statute is clear and
unambiguous, the preamble can neither expand nor restrict its operation
much less prevail over its text.
If former President Arroyo intended for the pardon to be conditional on
Respondent’s promise never to seek a public office again, the former
ought to have explicitly stated the same in the text of the pardon itself.
Since former President Arroyo did not make this an integral part of the
decree of pardon, the Commission is constrained to rule that the 3rd
preambular clause cannot be interpreted as a condition to the pardon
extended to former President Estrada.42 (Emphasis supplied.)
Absent any contrary evidence, former President Arroyo’s silence on
former President Estrada’s decision torun for President in the May 2010
elections against, among others, the candidate of the political party of
former President Arroyo, after the latter’s receipt and acceptance of the
pardon speaks volume of her intention to restore him to his rights to
suffrage and to hold public office.
Where the scope and import of the executive clemency extended by the
President is in issue, the Court must turn to the only evidence available
to it, and that is the pardon itself. From a detailed review ofthe four
corners of said document, nothing therein gives an iota of intimation
that the third Whereas Clause is actually a limitation, proviso,
stipulation or condition on the grant of the pardon, such that the breach
of the mentioned commitment not to seek public office will result ina
revocation or cancellation of said pardon. To the Court, what it is
simply is a statement of fact or the prevailing situation at the time the
executive clemency was granted. It was not used as a condition to the
efficacy orto delimit the scope of the pardon.
Even if the Court were to subscribe to the view that the third Whereas
Clausewas one of the reasons to grant the pardon, the pardon itself does
not provide for the attendant consequence of the breach thereof. This
Court will be hard put to discern the resultant effect of an eventual
infringement. Just like it will be hard put to determine which civil or
political rights were restored if the Court were to take the road
suggested by Risos-Vidal that the statement "[h]e is hereby restored to
his civil and political rights" excludes the restoration of former
President Estrada’s rights to suffrage and to hold public office. The
aforequoted text ofthe executive clemency granted does not provide the
Court with any guide asto how and where to draw the line between the
included and excluded political rights.
Justice Leonen emphasizes the point that the ultimate issue for
resolution is not whether the pardon is contingent on the condition that
former President Estrada will not seek janother elective public office,
but it actually concerns the coverage of the pardon – whether the
pardon granted to former President Estrada was so expansive as to have
restored all his political rights, inclusive of the rights of suffrage and to
hold public office. Justice Leonen is of the view that the pardon in
question is not absolute nor plenary in scope despite the statement that
former President Estrada is "hereby restored to his civil and political
rights," that is, the foregoing statement restored to former President
Estrada all his civil and political rights except the rights denied to him
by the unremitted penalty of perpetual absolute disqualification made
up of, among others, the rights of suffrage and to hold public office. He
adds that had the President chosen to be so expansive as to include the
rights of suffrage and to hold public office, she should have been more
clear on her intentions.
However, the statement "[h]e is hereby restored to his civil and political
rights," to the mind of the Court, iscrystal clear – the pardon granted to
former President Estrada was absolute, meaning, it was not only
unconditional, it was unrestricted in scope, complete and plenary in Associate Justice
character, as the term "political rights"adverted to has a settled meaning
in law and jurisprudence. MARIANO C. DEL
LUCAS P. BERSAMIN
CASTILLO
Associate Justice
With due respect, I disagree too with Justice Leonen that the omission Associate Justice
of the qualifying word "full" can be construed as excluding the
restoration of the rights of suffrage and to hold public office. There MARTIN S.
appears to be no distinction as to the coverage of the term "full political JOSE PORTUGAL PEREZ
VILLARAMA, JR.
rights" and the term "political rights" used alone without any Associate Justice
Associate Justice
qualification. How to ascribe to the latter term the meaning that it is
"partial" and not "full" defies one’s understanding. More so, it will be
extremely difficult to identify which of the political rights are restored JOSE CATRAL
BIENVENIDO L. REYES
by the pardon, when the text of the latter is silent on this matter. MENDOZA
Associate Justice
Exceptions to the grant of pardon cannot be presumed from the absence Associate Justice
of the qualifying word "full" when the pardon restored the "political
rights" of former President Estrada without any exclusion or ESTELA M. PERLAS- MARVIC M.V.F.
reservation. BERNABE LEONEN
Associate Justice Associate Justice
Therefore, there can be no other conclusion but to say that the pardon
FRANCIS H. JARDELEZA**
granted to former President Estrada was absolute in the absence of a
Associate Justice
clear, unequivocal and concrete factual basis upon which to anchor or
support the Presidential intent to grant a limited pardon.
Republic of the Philippines
SUPREME COURT
To reiterate, insofar as its coverageis concerned, the text of the pardon
Manila
can withstand close scrutiny even under the provisions of Articles 36
and 41 of the Revised Penal Code.
EN BANC
The COMELEC did not commit grave abuse of discretion amounting to
lack or excess of jurisdiction in issuing the assailed Resolutions. G.R. No. 203974               April 22, 2014

In light of the foregoing, contrary to the assertions of Risos-Vidal, the AURELIO M. UMALI, Petitioner, 
COMELEC did not commit grave abuse of discretion amounting to lack vs.
or excess of jurisdiction in issuing the assailed Resolutions. COMMISSION ON ELECTIONS, JULIUS CESAR V.
VERGARA, and THE CITY GOVERNMENT OF
CABANATUAN, Respondents.
The Court has consistently held that a petition for certiorariagainst
actions of the COMELEC is confined only to instances of grave abuse
of discretion amounting to patentand substantial denial of due process, x-----------------------x
because the COMELEC is presumed to be most competent in matters
falling within its domain.43 G.R. No. 204371

As settled in jurisprudence, grave abuse of discretion is the arbitrary J.V. BAUTISTA, Petitioner, 

exercise of power due to passion, prejudice or personal hostility; or the
whimsical, arbitrary, or capricious exercise of power that amounts to an
evasion or refusal to perform a positive duty enjoined by law or to act at
all in contemplation of law. For an act to be condemned as having been
done with grave abuse of discretion, such an abuse must be patent and
gross.44
The arguments forwarded by Risos-Vidal fail to adequately
demonstrate any factual or legal bases to prove that the assailed
COMELEC Resolutions were issued in a "whimsical, arbitrary or
capricious exercise of power that amounts to an evasion orrefusal to
perform a positive duty enjoined by law" or were so "patent and gross"
as to constitute grave abuse of discretion.
On the foregoing premises and conclusions, this Court finds it
unnecessary to separately discuss Lim's petition-in-intervention, which
substantially presented the same arguments as Risos-Vidal's petition.
WHEREFORE, the petition for certiorari and petition-inintervention are
DISMISSED. The Resolution dated April 1, 2013 of the Commission
on Elections, Second Division, and the Resolution dated April 23, 2013
of the Commission on Elections, En bane, both in SPA No. 13-211
(DC), are AFFIRMED.
SO ORDERED.
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
WE CONCUR:
MARIA LOURDES P. A. SERENO
Chief Justice
PRESBITERO J.
ANTONIO T. CARPIO
VELASCO, JR.
Associate Justice
Associate Justice
ARTURO D. BRION* DIOSDADO M.
Associate Justice PERALTA
vs.
COMMISSION ON ELECTIONS, Respondent.
DECISION
VELASCO, JR., J.:
Before the Court is the consolidated case for Petition for Certiorari and
Prohibition with prayer for injunctive relief, docket as G.R. No.
203974, assailing Minute Resolution No. 12-07971 and Minute
Resolution No. 12-09252 dated September 11, 2012 and October 16,
2012, respectively, both promulgated by public respondent Commission
on Elections (COMELEC), and Petition for Mandamus, docketed G.R.
No. 204371, seeking to compel public respondent to implement the
same.
The Facts
On July 11, 2011, the Sangguniang Panglungsod of Cabanatuan City
passed Resolution No. 183-2011, requesting the President to declare the
conversion of Cabanatuan City from a component city of the province
of Nueva Ecija into a highly urbanized city (HUC). Acceding to the
request, the President issued Presidential Proclamation No. 418, Series
of 2012, proclaiming the City of Cabanatuan as an HUC subject to
"ratification in a plebiscite by the qualified voters therein, as provided
for in Section 453 of the Local Government Code of 1991."
Respondent COMELEC, acting on the proclamation, issued the assailed
Minute Resolution No. 12-0797 which reads:
WHEREFORE, the Commission RESOLVED, as it hereby
RESOLVES, that for purposes of the plebiscite for the conversion of
Cabanatuan City from component city to highly-urbanized city, only
those registered residents of Cabanatuan City should participate in the
said plebiscite.
The COMELEC based this resolution on Sec. 453 of the Local
Government Code of 1991 (LGC), citing conversion cases involving
Puerto Princesa City in Palawan, Tacloban City in Southern Leyte, and
Lapu-Lapu City in Cebu, where only the residents of the city proposed
to be converted were allowed to vote in the corresponding plebiscite.
In due time, petitioner Aurelio M. Umali, Governor of Nueva Ecija,
filed a Verified Motion for Reconsideration, maintaining that the
proposed conversion in question will necessarily and directly affect the
mother province of Nueva Ecija. His main argument is that Section 453
of the LGC should be interpreted in conjunction with Sec. 10, Art. X of
the Constitution. He argues that while the conversion in question does
not involve the creation of a new or the dissolution of an existing city,
the spirit of the Constitutional provision calls for the people of the local
government unit (LGU) directly affected to vote in a plebiscite
whenever there is a material change in their rights and responsibilities.
The phrase "qualified voters therein" used in Sec. 453 of the LGC
should then be interpreted to refer to the qualified voters of the units
directly affected by the conversion and not just those in the component
city proposed to be upgraded. Petitioner Umali justified his position by
enumerating the various adverse effects of the Cabanatuan City’s
conversion and how it will cause material change not only in the
political and economic rights of the city and its residents but also of the
province as a whole.
To the Verified Motion for Reconsideration, private respondent Julius
Cesar Vergara, city mayor of Cabanatuan, interposed an opposition on
the ground that Sec. 10, Art. X does not apply to conversions, which is
the meat of the matter. He likewise argues that a specific provision of
the LGC, Sec. 453, as couched, allows only the qualified voters of
Cabanatuan City to vote in the plebiscite. Lastly, private respondent
pointed out that when Santiago City was converted in 1994 from a
municipality to an independent component city pursuant to Republic
Act No. (RA) 7720, the plebiscite held was limited to the registered
voters of the then municipality of Santiago.
Following a hearing conducted on October 4, 2012,3 the COMELEC En
Banc on October 16, 2012, in E.M No. 12-045 (PLEB), by a vote of 5-
24 ruled in favor of respondent Vergara through the assailed Minute
Resolution 12-0925. The dispositive portion reads:
The Commission, taking into consideration the arguments of counsels
including the Reply-memorandum of Oppositor, after due deliberation,
RESOLVED, as it hereby RESOLVES, as follows:
1) To DENY the Motion for Reconsideration of oppositor
Governor Aurelio M. Umali; and
2) To SCHEDULE the conduct of Plebiscite for the
conversion of Cabanatuan City from component city into
highly-urbanized city with registered residents only of
Cabanatuan City to participate in said plebiscite.
Let the Deputy Executive Director for Operations implement this
resolution.
SO ORDERED.
Hence, the Petition for Certiorari with prayer for injunctive relief,
docketed as G.R. No. 203974, on substantially the same arguments
earlier taken by petitioner Umali before the poll body. On the other
hand, public respondent COMELEC, through the Office of the Solicitor
General, maintained in its Comment that Cabanatuan City is merely
being converted from a component city into an HUC and that the
political unit directly affected by the conversion will only be the city
itself. It argues that in this instance, no political unit will be created,
merged with another, or will be removed from another LGU, and that
no boundaries will be altered. The conversion would merely reinforce
the powers and prerogatives already being exercised by the city, with
the political unit’s probable elevation to that of an HUC as demanded
by its compliance with the criteria established under the LGC. Thus, the
participation of the voters of the entire province in the plebiscite will
not be necessary.
Private respondent will later manifest that it is adopting the Comment
of the COMELEC.
Meanwhile, on October 25, 2012, respondent COMELEC promulgated
Resolution No. 9543, which adopted a calendar of activities and periods
of prohibited acts in connection with the conversion of Cabanatuan City
into an HUC. The Resolution set the conduct of the plebiscite on
December 1, 2012. Thereafter, a certain Dr. Rodolfo B. Punzalan filed a
Petition for Declaratory Relief which was raffled to the Regional Trial
Court (RTC), Branch 40 in Palayan City. In the said case, Punzalan
prayed that Minute Resolution No. 12-0797 be declared
unconstitutional, that the trial court decree that all qualified voters of
the province of Nueva Ecija be included in the plebiscite, and that a
Temporary Restraining Order (TRO) be issued enjoining public
respondent from implementing the questioned resolution. On October
19, 2012, the RTC granted the prayer for a TRO.
On November 6, 2012, public respondent through Minute Resolution
No. 12-0989 suspended the preparations for the event in view of the
TRO issued by the RTC. On November 27, 2012, the plebiscite was
once again rescheduled to give way to the May 13, 2013 national, local
and ARMM regional elections as per Resolution No. 9563.
After this development, petitioner J.V. Bautista, on December 3, 2012,
filed a case before this Court for Mandamus, docketed as G.R. No.
204371, praying that public respondent be ordered to schedule the
plebiscite either on December 15 or 22, 2012. Petitioner Bautista
argued that since the TRO issued by the RTC has already expired, the
duty of the public respondent to hold the plebiscite has become
mandatory and ministerial. Petitioner Bautista also alleged that the
delay in holding the plebiscite is inexcusable given the requirement that
it should be held within a period of 120 days form the date of the
President’s declaration.
In its Comment to the Bautista petition, public respondent justified its
position by arguing that mandamus will not issue to enforce a right
which is in substantial dispute. With all the legal conflicts surrounding
the case, it cannot be said that there is a clear showing of petitioner
Bautista’s entitlement to the relief sought. Respondent COMELEC
likewise relied on Sec. 5 of the Omnibus Election Code to justify the
postponements, citing incidents of violence that ensued in the locality
during the plebiscite period.
After the conclusion of the 2013 elections, public respondent issued
Resolution No. 1353 scheduling the plebiscite to January 25, 2014.
However, a TRO was issued by this Court on January 15, 2014 in G.R.
No. 203974 to suspend the conduct of the plebiscite for Cabanatuan
City’s conversion. Given the intertwining factual milieu of the two
petitions before the Court, both cases were consolidated on March 18,
2014.
The Issue
The bone of contention in the present controversy boils down to
whether the qualified registered voters of the entire province of Nueva
Ecija or only those in Cabanatuan City can participate in the plebiscite
called for the conversion of Cabanatuan City from a component city
into an HUC.
Resolving the Petition for Certiorari either way will necessarily render
the Petition for Mandamus moot and academic for ultimately, the
public respondent will be ordered to hold the plebiscite. The only
variation will be as regards its participants.
The Court’s Ruling
The Petition for Certiorari is meritorious.
Sec. 453 of the LGC should be interpreted in accordance with Sec. 10,
Art. X of the Constitution
Petitioner Umali asseverates that Sec. 10, Art. X of the Constitution
should be the basis for determining the qualified voters who will
participate in the plebiscite to resolve the issue. Sec. 10, Art. X reads:
Section 10, Article X. – No province, city, municipality, or barangay
may be created, divided, merged, abolished, or its boundary
substantially altered, except in accordance with the criteria established
in the local government code and subject to approval by a majority of
the votes cast in a plebiscite in the political units directly affected.
(emphasis supplied)
Petitioner Umali elucidates that the phrase "political units directly
affected" necessarily encompasses not only Cabanatuan City but the
entire province of Nueva Ecija. Hence, all the registered voters in the
province are qualified to cast their votes in resolving the proposed
conversion of Cabanatuan City.
On the other hand, respondents invoke Sec. 453 of the LGC to support
their claim that only the City of Cabanatuan should be allowed to take
part in the voting. Sec. 453 states:
Section 453. Duty to Declare Highly Urbanized Status. – It shall be the
duty of the President to declare a city as highly urbanized within thirty
(30) days after it shall have met the minimum requirements prescribed
in the immediately preceding Section, upon proper application therefor
and ratification in a plebiscite by the qualified voters therein. (emphasis
supplied)
Respondents take the phrase "registered voters therein" in Sec. 453 as
referring only to the registered voters in the city being converted,
excluding in the process the voters in the remaining towns and cities of
Nueva Ecija.
Before proceeding to unravel the seeming conflict between the two
provisions, it is but proper that we ascertain first the relationship
between Sec. 10, Art. X of the Constitution and Sec. 453 of the LGC.
First of all, we have to restate the general principle that legislative
power cannot be delegated. Nonetheless, the general rule barring
delegation is subject to certain exceptions allowed in the Constitution,
namely:
(1) Delegation by Congress to the President of the power to
fix "tariff rates, import and export quotas, tonnage and
wharfage dues, and other duties or imposts within the
framework of the national development program of the
Government" under Section 28(2) of Article VI of the
Constitution; and
(2) Delegation of emergency powers by Congress to the
President "to exercise powers necessary and proper to carry
out a declared national policy" in times of war and other
national emergency under Section 23(2) of Article VI of the
Constitution.
The power to create, divide, merge, abolish or substantially alter
boundaries of provinces, cities, municipalities or barangays, which is
pertinent in the case at bar, is essentially legislative in nature. 5 The
framers of the Constitution have, however, allowed for the delegation
of such power in Sec. 10, Art. X of the Constitution as long as (1) the
criteria prescribed in the LGC is met and (2) the creation, division,
merger, abolition or the substantial alteration of the boundaries is
subject to the approval by a majority vote in a plebiscite.
True enough, Congress delegated such power to the Sangguniang
Panlalawigan or Sangguniang Panlungsod to create barangays pursuant
to Sec. 6 of the LGC, which provides:
Section 6. Authority to Create Local Government Units. - A local
government unit may be created, divided, merged, abolished, or its
boundaries substantially altered either by law enacted by Congress in
the case of a province, city, municipality, or any other political
subdivision, or by ordinance passed by the sangguniang panlalawigan
or sangguniang panlungsod concerned in the case of a barangay located
within its territorial jurisdiction, subject to such limitations and
requirements prescribed in this Code." (emphasis supplied)
The guidelines for the exercise of this authority have sufficiently been
outlined by the various LGC provisions detailing the requirements for
the creation of barangays6, municipalities7, cities8, and provinces9.
Moreover, compliance with the plebiscite requirement under the
Constitution has also been directed by the LGC under its Sec. 10, which
reads:
Section 10. Plebiscite Requirement. – No creation, division, merger,
abolition, or substantial alteration of boundaries of local government
units shall take effect unless approved by a majority of the votes cast in
a plebiscite called for the purpose in the political unit or units directly
affected." (emphasis supplied)
With the twin criteria of standard and plebiscite satisfied, the delegation
to LGUs of the power to create, divide, merge, abolish or substantially
alter boundaries has become a recognized exception to the doctrine of
non-delegation of legislative powers.
Likewise, legislative power was delegated to the President under Sec.
453 of the LGC quoted earlier, which states:
Section 453. Duty to Declare Highly Urbanized Status. – It shall be the
duty of the President to declare a city as highly urbanized within thirty
(30) days after it shall have met the minimum requirements prescribed
in the immediately preceding Section, upon proper application therefor
and ratification in a plebiscite by the qualified voters therein.
In this case, the provision merely authorized the President to make a
determination on whether or not the requirements under Sec. 452 10 of
the LGC are complied with. The provision makes it ministerial for the
President, upon proper application, to declare a component city as
highly urbanized once the minimum requirements, which are based on
certifiable and measurable indices under Sec. 452, are satisfied. The
mandatory language "shall" used in the provision leaves the President
with no room for discretion.
In so doing, Sec. 453, in effect, automatically calls for the conduct of a
plebiscite for purposes of conversions once the requirements are met.
No further legislation is necessary before the city proposed to be
converted becomes eligible to become an HUC through ratification, as
the basis for the delegation of the legislative authority is the very LGC.
In view of the foregoing considerations, the Court concludes that the
source of the delegation of power to the LGUs under Sec. 6 of the LGC
and to the President under Sec. 453 of the same code is none other than
Sec. 10, Art. X of the Constitution.
Respondents, however, posit that Sec. 453 of the LGC is actually
outside the ambit of Sec. 10, Art. X of the Constitution, considering that
the conversion of a component city to an HUC is not "creation,
division, merge, abolition or substantial alternation of boundaries"
encompassed by the said constitutional provision.
This proposition is bereft of merit.
First, the Court’s pronouncement in Miranda vs. Aguirre11 is apropos
and may be applied by analogy. While Miranda involves the
downgrading, instead of upgrading, as here, of an independent
component city into a component city, its application to the case at bar
is nonetheless material in ascertaining the proper treatment of
conversions. In that seminal case, the Court held that the downgrading
of an independent component city into a component city comes within
the purview of Sec. 10, Art. X of the Constitution.
In Miranda, the rationale behind the afore-quoted constitutional
provision and its application to cases of conversion were discussed
thusly:
A close analysis of the said constitutional provision will reveal that the
creation, division, merger, abolition or substantial alteration of
boundaries of local government units involve a common denominator -
- - material change in the political and economic rights of the local
government units directly affected as well as the people therein. It is
precisely for this reason that the Constitution requires the approval of
the people "in the political units directly affected." It is not difficult to
appreciate the rationale of this constitutional requirement. The 1987
Constitution, more than any of our previous Constitutions, gave more
reality to the sovereignty of our people for it was borne out of the
people power in the 1986 EDSA revolution. Its Section 10, Article X
addressed the undesirable practice in the past whereby local
government units were created, abolished, merged or divided on the
basis of the vagaries of politics and not of the welfare of the people.
Thus, the consent of the people of the local government unit directly
affected was required to serve as a checking mechanism to any exercise
of legislative power creating, dividing, abolishing, merging or altering
the boundaries of local government units. It is one instance where the
people in their sovereign capacity decide on a matter that affects them -
- - direct democracy of the people as opposed to democracy thru
people’s representatives. This plebiscite requirement is also in accord
with the philosophy of the Constitution granting more autonomy to
local government units.12
It was determined in the case that the changes that will result from the
conversion are too substantial that there is a necessity for the plurality
of those that will be affected to approve it. Similar to the enumerated
acts in the constitutional provision, conversions were found to result in
material changes in the economic and political rights of the people and
LGUs affected. Given the far-reaching ramifications of converting the
status of a city, we held that the plebiscite requirement under the
constitutional provision should equally apply to conversions as well.
Thus, RA 852813 was declared unconstitutional in Miranda on the
ground that the law downgraded Santiago City in Isabela without
submitting it for ratification in a plebiscite, in contravention of Sec. 10,
Art. X of the Constitution.
Second, while conversion to an HUC is not explicitly provided in Sec.
10, Art. X of the Constitution we nevertheless observe that the
conversion of a component city into an HUC is substantial alteration of
boundaries.
As the phrase implies, "substantial alteration of boundaries" involves
and necessarily entails a change in the geographical configuration of a
local government unit or units. However, the phrase "boundaries"
should not be limited to the mere physical one, referring to the metes
and bounds of the LGU, but also to its political boundaries. It also
connotes a modification of the demarcation lines between political
subdivisions, where the LGU’s exercise of corporate power ends and
that of the other begins. And as a qualifier, the alteration must be
"substantial" for it to be within the ambit of the constitutional provision.
Pertinent is Art. 12(c) of the LGC’s Implementing Rules and
Regulations, which reads:
Art. 12. Conversion of a Component City into a Highly Urbanized City.
– language used.17
xxxx
(c) Effect of Conversion – The conversion of a component city into a
highly-urbanized city shall make it independent of the province where it
is geographically located. (emphasis added)
Verily, the upward conversion of a component city, in this case
Cabanatuan City, into an HUC will come at a steep price. It can be
gleaned from the above-cited rule that the province will inevitably
suffer a corresponding decrease in territory brought about by
Cabanatuan City’s gain of independence. With the city’s newfound
autonomy, it will be free from the oversight powers of the province,
which, in effect, reduces the territorial jurisdiction of the latter. What
once formed part of Nueva Ecija will no longer be subject to
supervision by the province. In more concrete terms, Nueva Ecija
stands to lose 282.75 sq. km. of its territorial jurisdiction with
Cabanatuan City’s severance from its mother province. This is
equivalent to carving out almost 5% of Nueva Ecija’s 5,751.3 sq. km.
area. This sufficiently satisfies the requirement that the alteration be
"substantial."
Needless to stress, the alteration of boundaries would necessarily follow
Cabanatuan City’s conversion in the same way that creations, divisions,
mergers, and abolitions generally cannot take place without entailing
the alteration. The enumerated acts, after all, are not mutually
exclusive, and more often than not, a combination of these acts attends
the reconfiguration of LGUs.
In light of the foregoing disquisitions, the Court rules that conversion to
an HUC is substantial alternation of boundaries governed by Sec. 10,
Art. X and resultantly, said provision applies, governs and prevails over
Sec. 453 of the LGC.
Moreover, the rules of statutory construction dictate that a particular
provision should be interpreted with the other relevant provisions in the
law The Court finds that it is actually Sec. 10 of the LGC which is
undeniably the applicable provision on the conduct of plebiscites. The
title of the provision itself, "Plebiscite Requirement", makes this
obvious. It requires a majority of the votes cast in a plebiscite called for
the purpose in the political unit or units directly affected. On the other
hand, Sec. 453 of the LGC, entitled "Duty to Declare Highly Urbanized
Status", is only on the duty to declare a city as highly urbanized. It
mandates the Office of the President to make the declaration after the
city has met the requirements under Sec. 452, and upon proper
application and ratification in a plebiscite. The conduct of a plebiscite is
then a requirement before a declaration can be made. Thus, the Court
finds that Sec. 10 of the LGC prevails over Sec. 453 of the LGC on the
plebiscite requirement.
We now take the bull by the horns and resolve the issue whether Sec.
453 of the LGC trenches on Sec. 10, Art. X of the Constitution.
Hornbook doctrine is that neither the legislative, the executive, nor the
judiciary has the power to act beyond the Constitution’s mandate. The
Constitution is supreme; any exercise of power beyond what is
circumscribed by the Constitution is ultra vires and a nullity. As
elucidated by former Chief Justice Enrique Fernando in Fernandez v.
Cuerva:14
Where the assailed legislative or executive act is found by the judiciary
to be contrary to the Constitution, it is null and void. As the new Civil
Code puts it: "When the courts declare a law to be inconsistent with the
Constitution, the former shall be void and the latter shall govern."
Administrative or executive acts, orders and regulations shall be valid
only when they are not contrary to the laws or the Constitution. The
above provision of the civil Code reflects the orthodox view that an
unconstitutional act, whether legislative or executive, is not a law,
confers no rights, imposes no duties, and affords no protection. x x x
Applying this orthodox view, a law should be construed in harmony
with and not in violation of the Constitution.15 In a long line of cases,
the cardinal principle of construction established is that a statute should
be interpreted to assure its being in consonance with, rather than
repugnant to, any constitutional command or prescription. 16 If there is
doubt or uncertainty as to the meaning of the legislative, if the words or
provisions are obscure or if the enactment is fairly susceptible of two or
more constitution, that interpretation which will avoid the effect of
unconstitutionality will be adopted, even though it may be necessary,
for this purpose, to disregard the more usual or apparent import of the
Pursuant to established jurisprudence, the phrase "by the qualified
voters therein" in Sec. 453 should be construed in a manner that will
avoid conflict with the Constitution. If one takes the plain meaning of
the phrase in relation to the declaration by the President that a city is an
HUC, then, Sec. 453 of the LGC will clash with the explicit provision
under Sec. 10, Art. X that the voters in the "political units directly
affected" shall participate in the plebiscite. Such construction should be
avoided in view of the supremacy of the Constitution. Thus, the Court
treats the phrase "by the qualified voters therein" in Sec. 453 to mean
the qualified voters not only in the city proposed to be converted to an
HUC but also the voters of the political units directly affected by such
conversion in order to harmonize Sec. 453 with Sec. 10, Art. X of the
Constitution.
The Court finds that respondents are mistaken in construing Sec. 453 in
a vacuum. Their interpretation of Sec. 453 of the LGC runs afoul of
Sec. 10, Art. X of the Constitution which explicitly requires that all
residents in the "political units directly affected" should be made to
vote.
Respondents make much of the plebiscites conducted in connection
with the conversion of Puerto Princesa City, Tacloban City and Lapu-
Lapu City where the ratification was made by the registered voters in
said cities alone. It is clear, however, that the issue of who are entitled
to vote in said plebiscites was not properly raised or brought up in an
actual controversy. The issue on who will vote in a plebiscite involving
a conversion into an HUC is a novel issue, and this is the first time that
the Court is asked to resolve the question. As such, the past plebiscites
in the aforementioned cities have no materiality or relevance to the
instant petition. Suffice it to say that conversion of said cities prior to
this judicial declaration will not be affected or prejudiced in any
manner following the operative fact doctrine―that “the actual existence
of a statute prior to such a determination is an operative fact and may
have consequences which cannot always be erased by a new judicial
declaration.”18
The entire province of Nueva Ecija will be directly
affected by Cabanatuan City’s conversion
After the Court has resolved the seeming irreconcilability of Sec. 10,
Art. X of the Constitution and Sec. 453 of the LGC, it is now time to
elucidate the meaning of the phrase "political units directly affected"
under Sec. 10, Art. X.
a. "Political units directly affected" defined
In identifying the LGU or LGUs that should be allowed to take part in
the plebiscite, what should primarily be determined is whether or not
the unit or units that desire to participate will be "directly affected" by
the change. To interpret the phrase, Tan v. COMELEC19 and Padilla v.
COMELEC20 are worth revisiting.
We have ruled in Tan, involving the division of Negros Occidental for
the creation of the new province of Negros del Norte, that the LGUs
whose boundaries are to be altered and whose economy would be
affected are entitled to participate in the plebiscite. As held:
It can be plainly seen that the aforecited constitutional provision makes
it imperative that there be first obtained "the approval of a majority of
votes in the plebiscite in the unit or units affected" whenever a province
is created, divided or merged and there is substantial alteration of the
boundaries. It is thus inescapable to conclude that the boundaries of the
existing province of Negros Occidental would necessarily be
substantially altered by the division of its existing boundaries in order
that there can be created the proposed new province of Negros del
Norte. Plain and simple logic will demonstrate than that two political
units would be affected.
The first would be the parent province of Negros Occidental because its
boundaries would be substantially altered. The other affected entity
would be composed of those in the area subtracted from the mother
province to constitute the proposed province of Negros del Norte. 21
xxxx
To form the new province of Negros del Norte no less than three cities
and eight municipalities will be subtracted from the parent province of
Negros Occidental. This will result in the removal of approximately
2,768.4 square kilometers from the land area of an existing province
whose boundaries will be consequently substantially altered. It becomes
easy to realize that the consequent effects of the division of the parent
province necessarily will affect all the people living in the separate
areas of Negros Occidental and the proposed province of Negros del
Norte. The economy of the parent province as well as that of the new
province will be inevitably affected, either for the better or for the
worse. Whatever be the case, either or both of these political groups
will be affected and they are, therefore, the unit or units referred to in
Section 3 of Article XI of the Constitution which must be included in
the plebiscite contemplated therein. 22 (emphasis added)
Sec. 3, Art. XI of the 1973 Constitution, as invoked in Tan, states:
SEC. 3. No province, city, municipality or barrio may be created,
divided, merged abolished, or its boundary substantially altered, except
in accordance with the criteria established in the local government
code, and subject to the approval by a majority of the votes in a
plebiscite in the unit or units affected. (emphasis added)
Despite the change in phraseology compared to what is now Sec. 10,
Art. X, we affirmed our ruling in Tan in the latter case of Padilla. As
held, the removal of the phrase "unit or" only served to sustain the
earlier finding that what is contemplated by the phase "political units
directly affected" is the plurality of political units which would
participate in the plebiscite. As reflected in the journal of the
Constitutional Commission:23
Mr. Maambong: While we have already approved the deletion of "unit
or," I would like to inform the Committee that under the formulation in
the present Local Government Code, the words used are actually
"political unit or units." However, I do not know the implication of the
use of these words. Maybe there will be no substantial difference, but I
just want to inform the Committee about this.
Mr. Nolledo: Can we not adhere to the original "unit or units"? Will
there be no objection on the part of the two Gentlemen from the floor?
Mr. Davide: I would object. I precisely asked for the deletion of the
words "unit or" because in the plebiscite to be conducted, it must
involve all the units affected. If it is the creation of a barangay
plebiscite because it is affected. It would mean a loss of a territory.
(emphasis added)
The same sentiment was shared by the Senate during its deliberations
on Senate Bill No. 155––the predecessor of the LGC––thus:
Senator Guingona. Can we make that clearer by example? Let us
assume that a province has municipalities and there is a merger of two
municipalities. Would this therefore mean that the plebiscite will be
conducted within the two merged municipalities and not in the eight
other municipalities?
Senator Pimentel. The whole province, Mr. President, will be affected,
and that is the reason we probably have to involve the entire province.
Senator Guingona. So the plebiscite will not be held only in the two
municipalities which are being merged, but the entire province will now
have to undergo.
Senator Pimentel. I suppose that was the ruling in the Negros del Norte
case.
Senator Guingona. Supposing it refers to barangays, will the entire
municipality have to vote? There are two barangays being merged, say,
out of 100 barangays. Would the entire municipality have to participate
in the plebiscite?
Senator Pimentel. Yes, Mr. President, because the municipality is
affected directly by the merger of two of its barangay.
Senator Guingona. And, if, out of 100 barangay, 51 are being merged,
abolished, whatever, would the rest of the municipality not participate
in the plebiscite?
Senator Pimentel. Do all the 51 barangay that the Gentleman
mentioned, Mr. President, belong to one municipality?
Senator Guingona. Yes.
Senator Pimentel. Then it will only involve the municipality where the
51 barangays belong.
Senator Guingona. Yes. So, the entire municipality will now have to
undergo a plebiscite.
Senator Pimentel. That is correct, Mr. President.
Senator Guingona. In the earlier example, if it is only a merger of two
municipalities, let us say, in a province with 10 municipalities – the
entire province – will the other municipalities although not affected also
have to participate in the plebiscite?
Senator Pimentel. Yes. The reason is that the municipalities are within
the territorial boundaries of the province itself, it will have to be altered
as a result of the two municipalities that the Gentleman mentioned. 24
In the more recent case of Miranda, the interpretation in Tan and
Padilla was modified to include not only changes in economic but also
political rights in the criteria for determining whether or not an LGU
shall be considered "directly affected." Nevertheless, the requirement
that the plebiscite be participated in by the plurality of political units
directly affected remained.
b. Impact on Economic Rights
To recall, it was held in Miranda that the changes that will result in the
downgrading of an LGU from an independent component city to a
component city cannot be categorized as insubstantial, thereby
necessitating the conduct of a plebiscite for its ratification. In a similar
fashion, herein petitioner Umali itemized the adverse effects of
Cabanatuan City’s conversion to the province of Nueva Ecija to justify
the province’s participation in the plebiscite to be conducted.
Often raised is that Cabanatuan City’s conversion into an HUC and its
severance from Nueva Ecija will result in the reduction of the Internal
Revenue Allotment (IRA) to the province based on Sec. 285 of the
LGC. The law states:
Section 285. Allocation to Local Government Units. - The share of
local government units in the internal revenue allotment shall be
collected in the following manner:
(a) Provinces - Twenty-three percent (23%);
(b) Cities - Twenty-three percent (23%);
(c) Municipalities - Thirty-four percent (34%); and
(d) Barangays - Twenty percent (20%)
Provided, however, That the share of each province, city, and
municipality shall be determined on the basis of the following formula:
(a) Population - Fifty percent (50%);
(b) Land Area - Twenty-five percent (25%); and
 (c) Equal sharing - Twenty-five percent (25%)
In our earlier disquisitions, we have explained that the conversion into
an HUC carries the accessory of substantial alteration of boundaries and
that the province of Nueva Ecija will, without a doubt, suffer a
reduction in territory because of the severance of Cabanatuan City. The
residents of the city will cease to be political constituencies of the
province, effectively reducing the latter’s population. Taking this
decrease in territory and population in connection with the above
formula, it is conceded that Nueva Ecija will indeed suffer a reduction
in IRA given the decrease of its multipliers’ values. As assessed by the
Regional Director of the Department of Budget and Management
(DBM) for Region III:25
(a) Cities with a minimum population of two hundred
thousand (200,000) inhabitants as certified by the National
Statistics Office, and within the latest annual income of at
least Fifty Million Pesos (₱50,000,000.00) based on 1991
constant prices, as certified by the city treasurer, shall be
classified as highly urbanized cities.
Section 461. Requisites for Creation.
(a) A province may be created if it has an average annual income, as
certified by the Department of Finance, of not less than Twenty million
pesos (₱20,000,000.00) based on 1991 constant prices and either of the
following requisites:

Basis for IRA Province of Cabanatuan Province of (i) a contiguous territory of at least two thousand (2,000)
Computation Nueva Ecija City Nueva Ecija Net square kilometers, as certified by the Lands Management
of Cabanatuan Bureau; or
City
(ii) a population of not less than two hundred fifty thousand
(250,000) inhabitants as certified by the National Statistics
No. of 1,843,853 259,267 259,267 Office:
Population
CY 2007 Census
Provided, That, the creation thereof shall not reduce the land area,
Land Area 5,751.33 282.75 5,468.58 population, and income of the original unit or units at the time of said
(sq. km.) creation to less than the minimum requirements prescribed herein.

A component city’s conversion into an HUC and its resultant autonomy

from the province is a threat to the latter’s economic viability.
Noteworthy is that the income criterion for a component city to be
IRA Share of Actual IRA Estimated IRA Reduction converted into an HUC is higher than the income requirement for the
Nueva Ecija Share share excluding creation of a province. The ensuing reduction in income upon
Cabanatuan separation would clearly leave a crippling effect on the province’s
City operations as there would be less funding to finance infrastructure
projects and to defray overhead costs. Moreover, the quality of services
being offered by the province may suffer because of looming austerity
Based on ₱800,772,618.45 ₱688,174,751.66 ₱112,597,866.79 measures. These are but a few of the social costs of the decline in the
Population province’s economic performance, which Nueva Ecija is bound to
experience once its most progressive city of Cabanatuan attains
independence.
Based on Land ₱263,470,472.62 ₱250,517,594.56 P 12,952,878.06
Area
c. Impact on Political Rights

Total ₱125,550,744.85
Clear as crystal is that the province of Nueva Ecija will suffer a
substantial reduction of its share in IRA once Cabanatuan City attains
autonomy. In view of the economic impact of Cabanatuan City’s
conversion, petitioner Umali’s contention, that its effect on the province
is not only direct but also adverse, deserves merit.
Moreover, his claim that the province will lose shares in provincial
taxes imposed in Cabanatuan City is well-founded. This is based on
Sec. 151 of the LGC, which states:
Aside from the alteration of economic rights, the political rights of
Nueva Ecija and those of its residents will also be affected by
Cabanatuan’s conversion into an HUC. Notably, the administrative
supervision of the province over the city will effectively be revoked
upon conversion. Secs. 4 and 12, Art. X of the Constitution read:
Sec. 4. The President of the Philippines shall exercise general
supervision over local governments. Provinces with respect to
component cities and municipalities, and cities and municipalities with
respect to component barangays shall ensure that the acts of their
component units are within the scope of their prescribed powers and
functions.

SECTION 151. Scope of Taxing Powers. – Except as otherwise
provided in this Code, the city, may levy the taxes, fees, and charges
which the province or municipality may impose: Provided, however,
That the taxes, fees and charges levied and collected by highly
urbanized and independent component cities shall accrue to them and
distributed in accordance with the provisions of this Code. (emphasis
added)
Once converted, the taxes imposed by the HUC will accrue to itself.
Prior to this, the province enjoys the prerogative to impose and collect
taxes such as those on sand, gravel and other quarry
resources,26 professional taxes,27 and amusement taxes28 over the
component city. While, it may be argued that this is not a derogation of
the province’s taxing power because it is in no way deprived of its right
to collect the mentioned taxes from the rest of its territory, the
conversion will still reduce the province’s taxing jurisdiction, and
corollary to this, it will experience a corresponding decrease in shares
in local tax collections. This reduction in both taxing jurisdiction and
shares poses a material and substantial change to the province’s
economic rights, warranting its participation in the plebiscite.
To further exemplify the impact of these changes, a perusal of Secs.
452(a) and 461(a) of the LGC is in order, viz:
Sec 12. Cities that are highly urbanized, as determined by law, and
component cities whose charters prohibit their voters from voting for
provincial elective officials, shall be independent of the province. The
voters of component cities within a province, whose charters contain no
such prohibition, shall not be deprived of their right to vote for elective
provincial officials.
Duties, privileges and obligations appertaining to HUCs will attach to
Cabanatuan City if it is converted into an HUC. This includes the right
to be outside the general supervision of the province and be under the
direct supervision of the President. An HUC is not subject to provincial
oversight because the complex and varied problems in an HUC due to a
bigger population and greater economic activity require greater
autonomy.29 The provincial government stands to lose the power to
ensure that the local government officials of Cabanatuan City act within
the scope of its prescribed powers and functions,30 to review executive
orders issued by the city mayor, and to approve resolutions and
ordinances enacted by the city council.31 The province will also be
divested of jurisdiction over disciplinary cases concerning the elected
city officials of the new HUC, and the appeal process for administrative
case decisions against barangay officials of the city will also be
modified accordingly.32 Likewise, the registered voters of the city will
no longer be entitled to vote for and be voted upon as provincial
officials.33

Section 452. Highly Urbanized Cities.

In cutting the umbilical cord between Cabanatuan City and the province
of Nueva Ecija, the city will be separated from the territorial ESTELA M. PERLAS-
BIENVENIDO L. REYES
jurisdiction of the province, as earlier explained. The provincial BERNABE
Associate Justice
government will no longer be responsible for delivering basic services Associate Justice
for the city residents’ benefit. Ordinances and resolutions passed by the
I dissent. See Separate Opinion
provincial council will no longer cover the city. Projects queued by the
MARVIC MARIO VICTOR F. LEONEN
provincial government to be executed in the city will also be suspended
Associate Justice
if not scrapped to prevent the LGU from performing functions outside
CERTIFICATION
the bounds of its territorial jurisdiction, and from expending its limited
Pursuant to Section 13, Article VIII of the Constitution, it is hereby
resources for ventures that do not cater to its constituents.1âwphi1
certified that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of
In view of these changes in the economic and political rights of the the Court.
province of Nueva Ecija and its residents, the entire province certainly MA. LOURDES P. A. SERENO
stands to be directly affected by the conversion of Cabanatuan City into Chief Justice
an HUC. Following the doctrines in Tan and Padilla, all the qualified CERTIFIED TRUE COPY
registered voters of Nueva Ecija should then be allowed to participate ENRIQUE ESGUERRA-VIDAL
in the plebiscite called for that purpose. Clerk of Court
OCC-En Banc
Respondents’ apprehension that requiring the entire province to Supreme Court
participate in the plebiscite will set a dangerous precedent leading to the
failure of cities to convert is unfounded. Their fear that provinces will
always be expected to oppose the conversion in order to retain the city’s
dependence is speculative at best. In any event, any vote of disapproval
cast by those directly affected by the conversion is a valid exercise of Republic of the Philippines
their right to suffrage, and our democratic processes are designed to SUPREME COURT
uphold the decision of the majority, regardless of the motive behind the Manila
vote. It is unfathomable how the province can be deprived of the
opportunity to exercise the right of suffrage in a matter that is
SECOND DIVISION
potentially deleterious to its economic viability and could diminish the
rights of its constituents. To limit the plebiscite to only the voters of the
areas to be partitioned and seceded from the province is as absurd and G.R. No. 191667               April 17, 2013
illogical as allowing only the secessionists to vote for the secession that
they demanded against the wishes of the majority and to nullify the LAND BANK OF THE PHILIPPINES, Petitioner, 
basic principle of majority rule.34 vs.
EDUARDO M. CACAYURAN, Respondent.
WHEREFORE, premises considered, the Petition for Certiorari,
docketed as G.R. No. 203974, is hereby GRANTED. COMELEC DECISION
Minute Resolution No. 12-0797 dated September 11, 2012 and Minute
Resolution No. 12-0925 dated October 16, 2012 are hereby declared
PERLAS-BERNABE, J.:
NULL and VOID. Public respondent COMELEC is hereby enjoined
from implementing the said Resolutions. Additionally, COMELEC is
hereby ordered to conduct a plebiscite for the purpose of converting Assailed in this Petition for Review on Certiorari1 is the March 26,
Cabanatuan City into a Highly Urbanized City to be participated in by 2010 Decision2 of the Court of Appeals (CA) in CA-G.R. CV. No.
the qualified registered voters of Nueva Ecij a within 120 days from the 89732 which affirmed with modification the April 10, 2007
finality of this Decision. The Petition for Mandamus, docketed as G.R. Decision3 of the Regional Trial Court (RTC) of Agoo, La Union,
No. 204371, is hereby DISMISSED. Branch 31, declaring inter alia the nullity of the loan agreements
entered into by petitioner Land Bank of the Philippines (Land Bank)
and the Municipality of Agoo, La Union (Municipality).
SO ORDERED.

The Facts
PRESBITERO J. VELASCO, JR.
Associate Justice
From 2005 to 2006, the Municipality’s Sangguniang Bayan (SB) passed
certain resolutions to implement a multi-phased plan (Redevelopment
WE CONCUR:
Plan) to redevelop the Agoo Public Plaza (Agoo Plaza) where the
I join Dissent of J. Leonen
Imelda Garden and Jose Rizal Monument were situated.
MA. LOURDES P. A. SERENO
Chief Justice
To finance phase 1 of the said plan, the SB initially passed Resolution
TERESITA J. No. 68-20054 on April 19, 2005, authorizing then Mayor Eufranio
ANTONIO T. CARPIO LEONARDO-DE Eriguel (Mayor Eriguel) to obtain a loan from Land Bank and
Associate Justice CASTRO incidental thereto, mortgage a 2,323.75 square meter lot situated at the
Associate Justice southeastern portion of the Agoo Plaza (Plaza Lot) as collateral. To
serve as additional security, it further authorized the assignment of a
DIOSDADO M. portion of its internal revenue allotment (IRA) and the monthly income
ARTURO D. BRION from the proposed project in favor of Land Bank.5 The foregoing terms
PERALTA
Associate Justice were confirmed, approved and ratified on October 4, 2005 through
Associate Justice
Resolution No. 139-2005.6 Consequently, on November 21, 2005, Land
Bank extended a ₱4,000,000.00 loan in favor of the Municipality (First
MARIANO C. DEL Loan),7 the proceeds of which were used to construct ten (10) kiosks at
LUCAS P. BERSAMIN
CASTILLO the northern and southern portions of the Imelda Garden. After
Associate Justice
Associate Justice completion, these kiosks were rented out.8

I join the Dissent of J. On March 7, 2006, the SB passed Resolution No. 58-2006,9 approving
Took no part. Leonen the construction of a commercial center on the Plaza Lot as part of
ROBERTO A. ABAD MARTIN S. phase II of the Redevelopment Plan. To finance the project, Mayor
Associate Justice VILLARAMA, JR. Eriguel was again authorized to obtain a loan from Land Bank, posting
Associate Justice as well the same securities as that of the First Loan. All previous
representations and warranties of Mayor Eriguel related to the
I join the dissent of J. negotiation and obtention of the new loan10were ratified on September
JOSE PORTUGAL Leonen 5, 2006 through Resolution No. 128-2006.11 In consequence, Land
PEREZ JOSE CATRAL Bank granted a second loan in favor of the Municipality on October 20,
Associate Justice MENDOZA 2006 in the principal amount of ₱28,000,000.00 (Second Loan).12
Associate Justice
Unlike phase 1 of the Redevelopment Plan, the construction of the
commercial center at the Agoo Plaza was vehemently objected to by
some residents of the Municipality. Led by respondent Eduardo
Cacayuran (Cacayuran), these residents claimed that the conversion of
the Agoo Plaza into a commercial center, as funded by the proceeds
from the First and Second Loans (Subject Loans), were "highly
irregular, violative of the law, and detrimental to public interests, and
will result to wanton desecration of the said historical and public
park."13 The foregoing was embodied in a Manifesto,14 launched
through a signature campaign conducted by the residents and
Cacayuran.
In addition, Cacayuran wrote a letter15 dated December 8, 2006
addressed to Mayor Eriguel, Vice Mayor Antonio Eslao (Vice Mayor
Eslao), and the members of the SB namely, Violeta Laroya-Balbin,
Jaime Boado, Jr., Rogelio De Vera, James Dy, Crisogono Colubong,
Ricardo Fronda, Josephus Komiya, Erwina Eriguel, Felizardo
Villanueva, and Gerard Mamuyac (Implicated Officers), expressing the
growing public clamor against the conversion of the Agoo Plaza into a
commercial center. He then requested the foregoing officers to furnish
him certified copies of various documents related to the aforementioned
conversion including, among others, the resolutions approving the
Redevelopment Plan as well as the loan agreements for the sake of
public information and transparency.
Unable to get any response, Cacayuran, invoking his right as a
taxpayer, filed a Complaint16 against the Implicated Officers and Land
Bank, assailing, among others, the validity of the Subject Loans on the
ground that the Plaza Lot used as collateral thereof is property of public
dominion and therefore, beyond the commerce of man. 17
Upon denial of the Motion to Dismiss dated December 27, 2006, 18 the
Implicated Officers and Land Bank filed their respective Answers.
For its part, Land Bank claimed that it is not privy to the Implicated
Officers’ acts of destroying the Agoo Plaza. It further asserted that
Cacayuran did not have a cause of action against it since he was not
privy to any of the Subject Loans.19
During the pendency of the proceedings, the construction of the
commercial center was completed and the said structure later became
known as the Agoo’s People Center (APC).
On May 8, 2007, the SB passed Municipal Ordinance No. 02-
2007,20 declaring the area where the APC stood as patrimonial property
of the Municipality.
The Ruling of the RTC
In its Decision dated April 10, 2007,21 the RTC ruled in favor of
Cacayuran, declaring the nullity of the Subject Loans. 22 It found that the
resolutions approving the said loans were passed in a highly irregular
manner and thus, ultra vires; as such, the Municipality is not bound by
the same.23 Moreover, it found that the Plaza Lot is proscribed from
collateralization given its nature as property for public use. 24
Aggrieved, Land Bank filed its Notice of Appeal on April 23,
2007.25 On the other hand, the Implicated Officers’ appeal was deemed
abandoned and dismissed for their failure to file an appellants’ brief
despite due notice.26 In this regard, only Land Bank’s appeal was given
due course by the CA.
Ruling of the CA
In its Decision dated March 26, 2010,27 the CA affirmed with
modification the RTC’s ruling, excluding Vice Mayor Eslao from any
personal liability arising from the Subject Loans. 28
It held, among others, that: (1) Cacayuran had locus standi to file his
complaint, considering that (a) he was born, raised and a bona fide
resident of the Municipality; and (b) the issue at hand involved public
interest of transcendental importance;29 (2) Resolution Nos. 68-2005,
139-2005, 58-2006, 128-2006 and all other related resolutions (Subject
Resolutions) were invalidly passed due to the SB’s non-compliance
with certain sections of Republic Act No. 7160, otherwise known as the
"Local Government Code of 1991" (LGC); (3) the Plaza Lot, which
served as collateral for the Subject Loans, is property of public
dominion and thus, cannot be appropriated either by the State or by
private persons;30 and (4) the Subject Loans are ultra vires because they
were transacted without proper authority and their collateralization
constituted improper disbursement of public funds.
Dissatisfied, Land Bank filed the instant petition.
Issues Before the Court
The following issues have been raised for the Court’s resolution: (1)
whether Cacayuran has standing to sue; (2) whether the Subject
Resolutions were validly passed; and (3) whether the Subject Loans are
ultra vires.
The Court’s Ruling
The petition lacks merit.
A. Cacayuran’s standing to sue
Land Bank claims that Cacayuran did not have any standing to contest
the construction of the APC as it was funded through the proceeds
coming from the Subject Loans and not from public funds. Besides,
Cacayuran was not even a party to any of the Subject Loans and is thus,
precluded from questioning the same.
The argument is untenable.
It is hornbook principle that a taxpayer is allowed to sue where there is
a claim that public funds are illegally disbursed, or that public money is
being deflected to any improper purpose, or that there is wastage of
public funds through the enforcement of an invalid or unconstitutional
law. A person suing as a taxpayer, however, must show that the act
complained of directly involves the illegal disbursement of public funds
derived from taxation. In other words, for a taxpayer’s suit to prosper,
two requisites must be met namely, (1) public funds derived from
taxation are disbursed by a political subdivision or instrumentality and
in doing so, a law is violated or some irregularity is committed; and (2)
the petitioner is directly affected by the alleged act. 31
Records reveal that the foregoing requisites are present in the instant
case.
First, although the construction of the APC would be primarily sourced
from the proceeds of the Subject Loans, which Land Bank insists are
not taxpayer’s money, there is no denying that public funds derived
from taxation are bound to be expended as the Municipality assigned a
portion of its IRA as a security for the foregoing loans. Needless to
state, the Municipality’s IRA, which serves as the local government
unit’s just share in the national taxes,32 is in the nature of public funds
derived from taxation. The Court believes, however, that although these
funds may be posted as a security, its collateralization should only be
deemed effective during the incumbency of the public officers who
approved the same, else those who succeed them be effectively
deprived of its use.
In any event, it is observed that the proceeds from the Subject Loans
had already been converted into public funds by the Municipality’s
receipt thereof. Funds coming from private sources become impressed
with the characteristics of public funds when they are under official
custody.33
Accordingly, the first requisite has been clearly met.
Second, as a resident-taxpayer of the Municipality, Cacayuran is
directly affected by the conversion of the Agoo Plaza which was funded
by the proceeds of the Subject Loans. It is well-settled that public
plazas are properties for public use34 and therefore, belongs to the
public dominion.35 As such, it can be used by anybody and no one can
exercise over it the rights of a private owner. 36 In this light, Cacayuran
had a direct interest in ensuring that the Agoo Plaza would not be
exploited for commercial purposes through the APC’s construction.
Moreover, Cacayuran need not be privy to the Subject Loans in order to
proffer his objections thereto. In Mamba v. Lara, it has been held that a
taxpayer need not be a party to the contract to challenge its validity; as
long as taxes are involved, people have a right to question contracts
entered into by the government.37
Therefore, as the above-stated requisites obtain in this case, Cacayuran
has standing to file the instant suit.
B. Validity of the Subject Resolutions
Land Bank avers that the Subject Resolutions provided ample authority
for Mayor Eriguel to contract the Subject Loans. It posits that Section
444(b)(1)(vi) of the LGC merely requires that the municipal mayor be
authorized by the SB concerned and that such authorization need not be
embodied in an ordinance.38
A careful perusal of Section 444(b)(1)(vi) of the LGC shows that while
the authorization of the municipal mayor need not be in the form of an
ordinance, the obligation which the said local executive is authorized to
enter into must be made pursuant to a law or ordinance, viz:
Sec. 444. The Chief Executive: Powers, Duties, Functions and
Compensation. -
xxxx
(b) For efficient, effective and economical governance the purpose of
which is the general welfare of the municipality and its inhabitants
pursuant to Section 16 of this Code, the municipal mayor shall:
xxxx
(vi) Upon authorization by the sangguniang bayan, represent the
municipality in all its business transactions and sign on its behalf all
bonds, contracts, and obligations, and such other documents made
pursuant to law or ordinance; (Emphasis and underscoring supplied)
In the present case, while Mayor Eriguel’s authorization to contract the
Subject Loans was not contained – as it need not be contained – in the
form of an ordinance, the said loans and even the Redevelopment Plan
itself were not approved pursuant to any law or ordinance but through
mere resolutions. The distinction between ordinances and resolutions is
well-perceived. While ordinances are laws and possess a general and
permanent character, resolutions are merely declarations of the
sentiment or opinion of a lawmaking body on a specific matter and are
temporary in nature.39 As opposed to ordinances, "no rights can be
conferred by and be inferred from a resolution."40 In this accord, it
cannot be denied that the SB violated Section 444(b)(1)(vi) of the LGC
altogether.
Noticeably, the passage of the Subject Resolutions was also tainted
with other irregularities, such as (1) the SB’s failure to submit the
Subject Resolutions to the Sangguniang Panlalawigan of La Union for
its review contrary to Section 56 of the LGC;41 and (2) the lack of
publication and posting in contravention of Section 59 of the LGC. 42
In fine, Land Bank cannot rely on the Subject Resolutions as basis to
validate the Subject Loans.
C. Ultra vires nature of the Subject
Loans
Neither can Land Bank claim that the Subject Loans do not constitute
ultra vires acts of the officers who approved the same.
Generally, an ultra vires act is one committed outside the object for
which a corporation is created as defined by the law of its organization
and therefore beyond the powers conferred upon it by law. 43 There are
two (2) types of ultra vires acts. As held in Middletown Policemen's
Benevolent Association v. Township of Middletown:44
There is a distinction between an act utterly beyond the jurisdiction of a
municipal corporation and the irregular exercise of a basic power under
the legislative grant in matters not in themselves jurisdictional. The
former are ultra vires in the primary sense and void; the latter, ultra
vires only in a secondary sense which does not preclude ratification or
the application of the doctrine of estoppel in the interest of equity and
essential justice. (Emphasis and underscoring supplied)
In other words, an act which is outside of the municipality’s jurisdiction
is considered as a void ultra vires act, while an act attended only by an
irregularity but remains within the municipality’s power is considered
as an ultra vires act subject to ratification and/or validation. To the
former belongs municipal contracts which (a) are entered into beyond
the express, implied or inherent powers of the local government unit;
and (b) do not comply with the substantive requirements of law e.g.,
when expenditure of public funds is to be made, there must be an actual
appropriation and certificate of availability of funds; while to the latter
belongs those which (a) are entered into by the improper department,
board, officer of agent; and (b)do not comply with the formal
requirements of a written contract e.g., the Statute of Frauds. 45
Applying these principles to the case at bar, it is clear that the Subject
Loans belong to the first class of ultra vires acts deemed as void.
Records disclose that the said loans were executed by the Municipality
for the purpose of funding the conversion of the Agoo Plaza into a
commercial center pursuant to the Redevelopment Plan. However, the
conversion of the said plaza is beyond the Municipality’s jurisdiction
considering the property’s nature as one for public use and thereby,
forming part of the public dominion. Accordingly, it cannot be the
object of appropriation either by the State or by private persons. 46 Nor
can it be the subject of lease or any other contractual undertaking. 47 In
Villanueva v. Castañeda, Jr.,48 citing Espiritu v. Municipal Council of
Pozorrubio,49 the Court pronounced that:
x x x Town plazas are properties of public dominion, to be devoted to
public use and to be made available to the public in general. They are
outside the commerce of man and cannot be disposed of or even leased
by the municipality to private parties.1âwphi1
In this relation, Article 1409(1) of the Civil Code provides that a
contract whose purpose is contrary to law, morals, good customs,
public order or public policy is considered void50 and as such, creates
no rights or obligations or any juridical relations.51 Consequently, given
the unlawful purpose behind the Subject Loans which is to fund the
commercialization of the Agoo Plaza pursuant to the Redevelopment
Plan, they are considered as ultra vires in the primary sense thus,
rendering them void and in effect, non-binding on the Municipality.
At this juncture, it is equally observed that the land on which the Agoo
Plaza is situated cannot be converted into patrimonial property – as the
SB tried to when it passed Municipal Ordinance No. 02-200752 – absent
any express grant by the national government.53 As public land used for
public use, the foregoing lot rightfully belongs to and is subject to the
administration and control of the Republic of the Philippines. 54 Hence,
without the said grant, the Municipality has no right to claim it as
patrimonial property.
Nevertheless, while the Subject Loans cannot bind the Municipality for
being ultra vires, the officers who authorized the passage of the Subject
Resolutions are personally liable. Case law states that public officials
can be held personally accountable for acts claimed to have been
performed in connection with official duties where they have acted ultra
vires,55 as in this case.
WHEREFORE, the petition is DENIED. Accordingly, the March 26,
2010 Decision of the Court of Appeals in CA-G.R. CV. No. 89732 is
hereby AFFIRMED.
SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
MARIANO C. DEL
ARTURO D. BRION
CASTILLO
Associate Justice
Associate Justice
JOSE PORTUGAL PEREZ
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of
the Court's Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the
Division Chairperson's Attestation, I certify that the conclusions in the
above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

EN BANC  

October 10, 2017

G.R. No. 229781

SENATOR LEILA M. DE LIMA, Petitioner 

vs.
HON. JUANITA GUERRERO, in her capacity as Presiding Judge,
Regional Trial Court of Muntinlupa City, Branch 204, PEOPLE
OF THE PHILIPPINES, P/DIR. GEN. RONALD M. DELA ROSA,
in his capacity as Chief of the Philippine National Police, PSUPT.
PHILIP GIL M. PHILIPPS, in his capacity as Director,
Headquarters Support Service, SUPT. ARNEL JAMANDRON
APUD, in his capacity as Chief, PNP Custodial Service Unit, and
ALL PERSONS ACTING UNDER THEIR CONTROL,
SUPERVISION, INSTRUCTION OR DIRECTION IN
RELATION TO THE ORDERS THAT MAY BE ISSUED BY
THE COURT, Respondents

DECISION

VELASCO, JR., J.:

For consideration is the Petition for Certiorari and Prohibition with

Application for a Writ of Preliminary Injunction, and Urgent Prayer for
Temporary Restraining Order and Status Quo Ante Order1 under Rule
65 of the Rules of Court filed by petitioner Senator Leila De Lima. In it,
petitioner assails the following orders and warrant issued by respondent
judge Hon. Juanita Guerrero of the Regional Trial Court (RTC) of
Muntinlupa City, Branch 204, in Criminal Case No. 17-165,
entitled "People vs. Leila De Lima, et al.:" (1) the Order dated
February 23, 2017 finding probable cause for the issuance of warrant of
arrest against petitioner De Lima; (2) the Warrant of Arrest against De
Lima also dated February 23, 2017; (3) the Order dated February 24,
2017 committing the petitioner to the custody of the PNP Custodial
Center; and finally, (4) the supposed omission of the respondent judge
to act on petitioner's Motion to Quash, through which she questioned
the jurisdiction of the RTC.2

Antecedents

The facts are undisputed. The Senate and the House of Representatives
conducted several inquiries on the proliferation of dangerous drugs
syndicated at the New Bilibid Prison (NBP), inviting inmates who
executed affidavits in support of their testimonies. 3 These legislative
inquiries led to the filing of the following complaints with the
Department of Justice:

a) NPS No. XVI-INV-16J-00313, entitled "Volunteers

against Crime and Corruption (VACC), represented by Dante
Jimenez vs. Senator Leila M. De Lima, et al.;"

b) NPS No. XVI-INV-16J-00315, entitled "Reynaldo

Esmeralda and Ruel Lasala vs. Senator Leila De Lima, et
al.;"
 c) NPS No. XVI-INV-16K-00331, entitled "Jaybee Nifio
Sebastian, represented by his wife Roxanne Sebastian, vs.
Senator Leila M De Lima, et al.;" and
d) NPS No. XVI-INV-16K-00336, entitled "National Bureau
of Investigation (NBI) vs. Senator Leila M. De Lima, et al. "4
Pursuant to DOJ Department Order No. 790, the four cases were
consolidated and the DOJ Panel of Prosecutors (DOJ Panel), 5 headed by
Senior Assistant State Prosecutor Peter Ong, was directed to conduct
the requisite preliminary investigation.6
The DOJ Panel conducted a preliminary hearing on December 2,
2016,7 wherein the petitioner, through her counsel, filed an Omnibus
Motion to Immediately Endorse the Cases to the Office of the
Ombudsman and for the Inhibition of the Panel of Prosecutors and the
Secretary of Justice ("Omnibus Motion").8 In the main, the petitioner
argued that the Office of the Ombudsman has the exclusive authority
and jurisdiction to hear the four complaints against her. Further,
alleging evident partiality on the part of the DOJ Panel, the petitioner
contended that the DOJ prosecutors should inhibit themselves and refer
the complaints to the Office of the Ombudsman.
A hearing on the Omnibus Motion was conducted on December 9,
2016,9 wherein the complainants, YACC, Reynaldo Esmeralda
(Esmeralda) and Ruel Lasala (Lasala), filed a Joint
Comment/Opposition to the Omnibus Motion. 10
On December 12, 2016, petitioner, in turn, interposed a Reply to the
Joint Comment/Opposition filed by complainants VACC, Esmeralda
and Lasala. In addition, petitioner submitted a Manifestation with
Motion to First Resolve Pending Incident and to Defer Further
Proceedings. 11
During the hearing conducted on December 21, 2016, petitioner
manifested that she has decided not to submit her counter-affidavit
citing the pendency of her two motions.12 The DOJ Panel, however,
ruled that it will not entertain belatedly filed counter-affidavits, and
declared all pending incidents and the cases as submitted for resolution.
Petitioner moved for but was denied reconsideration by the DOJ
Panel.13
On January 13, 2017, petitioner filed before the Court of Appeals
a Petition for Prohibition and Certiorari14assailing the jurisdiction of
the DOJ Panel over the complaints against her. The petitions, docketed
as CA-G.R. No. 149097 and CA-G.R. No. SP No. 149385, are currently
pending with the Special 6th Division of the appellate
court.15Meanwhile, in the absence of a restraining order issued by the
Court of Appeals, the DOJ Panel proceeded with the conduct of the
preliminary investigation16 and, in its Joint Resolution dated February
14, 2017,17 recommended the filing of Informations against petitioner
De Lima. Accordingly, on February 17, 2017, three Informations were
filed against petitioner De Lima and several co-accused before the RTC
ofMuntinlupa City. One of the Infonnations was docketed as Criminal
Case No. 17-16518 and raffled off to Branch 204, presided by
respondent judge. This Information charging petitioner for violation of
Section 5 in relation to Section (jj), Section 26(b), and Section 28 of
Republic Act No. (RA) 9165, contained the following averments:
That within the period from November 2012 to March 2013, in the City
of Muntinlupa, Philippines, and within the jurisdiction of this
Honorable Court, accused Leila M. De Lima, being then the Secretary
of the Department of Justice, and accused Rafael Marcos Z. Rages,
being then the Officer-in-Charge of the Bureau of Corrections, by
taking advantage of their public office, conspiring and confederating
with accused Ronnie P. Dayan, being then an employee of the
Department of Justice detailed to De Lima, all of them having moral
ascendancy or influence over inmates in the New Bilibid Prison, did
then and there commit illegal drug trading, in the following manner: De
Lima and Ragos, with the use of their power, position, and authority,
demand, solicit and extort money from the high profile inmates in the
New Bilibid Prison to support the senatorial bid of De Lima in the May
2016 election; by reason of which, the inmates, not being lawfully
authorized by law and through the use of mobile phones and other
electronic devices, did then and there willfully and unlawfully trade and
traffic dangerous drugs, and thereafter give and deliver to De Lima,
through Ragos and Dayan, the proceeds of illegal drug trading
amounting to Five Million (₱5,000,000.00) Pesos on 24 November
2012, Five Million (₱5,000,000.00) Pesos on 15 December 2012, and
One Hundred Thousand (₱100,000.00) Pesos weekly "tara" each from
the high profile inmates in the New Bilibid Prison. 19
On February 20, 2017, petitioner filed a Motion to Quash,20mainly
raising the following: the RTC lacks jurisdiction over the offense
charged against petitioner; the DOJ Panel lacks authority to file the
Information; the Information charges more than one offense; the
allegations and the recitals of facts do not allege the corpus delicti of
the charge; the Information is based on testimonies of witnesses who
are not qualified to be discharged as state witnesses; and the testimonies
of these witnesses are hearsay.21
On February 23, 2017, respondent judge issued the presently
assailed Order 22finding probable cause for the issuance of warrants of
arrest against De Lima and her co-accused. The Order stated, viz.:
After a careful evaluation of the herein Information and all the evidence
presented during the preliminary investigation conducted in this case by
the Department of Justice, Manila, the Court finds sufficient probable
cause for the issuance of Warrants of Arrest against all the accused
LEILA M. DE LIMA, RAFAEL MARCOS Z. RAGOS and RONNIE P
ALISOC DAYAN.
WHEREFORE, let Warrants of Arrest be issued against the
abovementioned accused.
SO ORDERED.23
Accordingly, the questioned Warrant of Arrest dated February 23, 2017
,24 which contained no recommendation for bail, was issued against
petitioner.
On February 24, 2017, the PNP Investigation and Detection Group
served the Warrant of Arrest on petitioner and the respondent judge
issued the assailed February 24, 2017 Order,25 committing petitioner to
the custody of the PNP Custodial Center.
On February 27, 2017, petitioner repaired to this court via the present
petition, praying for the following reliefs:
a. Granting a writ of certiorari annulling and setting aside
the Order dated 23 February 2017, the Warrant of Arrest dated the
same date, and the Order dated 24 February 2017 of the Regional Trial
Court - Branch 204, Muntinlupa City, in Criminal Case No. 17-165
entitled People of the Philippines versus Leila M De Lima, et al.;
b. Granting a writ of prohibition enjoining and prohibiting respondent
judge from conducting further proceedings until and unless the Motion
to Quash is resolved with finality;
c. Issuing an order granting the application for the issuance of
temporary restraining order (TRO) and a writ of preliminary injunction
to the proceedings; and
d. Issuing a Status Quo Ante Order restoring the parties to the status
prior to the issuance of the Order and Warrant of Arrest, both dated
February 23, 201 7, thereby recalling both processes and restoring
petitioner to her liberty and freedom.26
On March 9, 2017, the Office of the Solicitor General (OSG), on behalf
of the respondents, interposed its Comment to the petition. 27 The OSG
argued that the petition should be dismissed as De Lima failed to show
that she has no other plain, speedy, and adequate remedy. Further, the
OSG posited that the petitioner did not observe the hierarchy of courts
and violated the rule against forum shopping. On substantive grounds,
the OSG asserted inter alia that the RTC has jurisdiction over the
offense charged against the petitioner, that the respondent judge
observed the constitutional and procedural rules, and so did not commit
grave abuse of discretion, in the issuance of the assailed orders and
warrant.28
On petitioner's motion, the Court directed the holding of oral arguments
on the significant issues raised. The Court then heard the parties in oral
arguments on March 14, 21, and 28, 2017.29
In the meantime, the OSG filed a Manifestation dated March 13,
2017,30 claiming that petitioner falsified the juratsappearing in the: (1)
Verification and Certification against Forum Shopping page of her
petition; and (2) Affidavit of Merit in support of her prayer for
injunctive relief. The OSG alleged that while
the advertedjurats appeared to be notarized by a certain Atty. Maria
Cecille C. Tresvalles-Cabalo on February 24, 2017, the guest
logbook31 in the PNP Custodial Center Unit in Camp Crame for
February 24, 2017 does not bear the name of Atty. Tresvalles-Cabalo.
Thus, so the OSG maintained, petitioner De Lima did not actually
appear and swear before the notary public on such date in Quezon City,
contrary to the allegations in the jurats. For the OSG, the petition
should therefore be dismissed outright for the falsity committed by
petitioner De Lima.
In compliance with an Order of this Court, petitioner filed
the Affidavit of Atty. Maria Cecille C. Tresvalles-Cabalo dated March
20, 201732 to shed light on the allegations of falsity in petitioner'sjurats.
The parties simultaneously filed their respective Memoranda on April
17, 2017.33
The Issues
From the pleadings and as delineated in this Court's Advisory dated
March 10, 201734 and discussed by the parties during the oral
arguments, the issues for resolution by this Court are:
Procedural Issues:
A Whether or not petitioner is excused from compliance with the
doctrine on hierarchy of courts considering that the petition should first
be filed with the Court of Appeals.
B. Whether or not the pendency of the Motion to Quash the Information
before the trial court renders the instant petition premature.
C. Whether or not petitioner, in filing the present petition, violated the
rule against forum shopping given the pendency of the Motion to Quash
the Information before the Regional Trial Court of Muntinlupa City in
Criminal Case No. 17-165 and the Petition for Certiorari filed before
the Court of Appeals in C.A. G.R. SP No. 149097, assailing the
preliminary investigation conducted by the DOJ Panel.
Substantive Issues:
A. Whether the Regional Trial Court or the Sandiganbayan has the
jurisdiction over the violation of Republic Act No. 9165 averred in the
assailed Information.
B. Whether or not the respondent gravely abused her discretion in
finding probable cause to issue the Warrant of Arrest against petitioner.
C. Whether or not petitioner is entitled to a Temporary Restraining
Order and/or Status Quo Ante Order in the interim until the instant
petition is resolved or until the trial court rules on the Motion to Quash.
OUR RULING
Before proceeding to a discussion on the outlined issues, We shall first
confront the issue of the alleged falsification committed by petitioner in
the jurats of her Verification and Certification against Forum Shopping
and Affidavit of Merit in support of her prayer for injunctive relief.
In her Affidavit, Atty. Tresvalles-Cabalo disproves the OSG's
allegation that she did not notarize the petitioner's Verification and
Certification against Forum Shopping and Affidavit of Merit in this
wise:
4. On February 24, 2017 at or around nine in the morning (9:00 AM), I
went to PNP, CIDG, Camp Crame, Quezon City to notarize the Petition
as discussed the previous night.
5. I met Senator De Lima when she was brought to the CIDG at Camp
Crame and I was informed that the Petition was already signed and
ready for notarization.
6. I was then provided the Petition by her staff. I examined the
signature of Senator De Lima and confirmed that it was signed by her. I
have known the signature of the senator given our personal relationship.
Nonetheless, I still requested from her staff a photocopy of any of her
government-issued valid Identification Cards (ID) bearing her
signature. A photocopy of her passport was presented to me. I
compared the signatures on the Petition and the Passport and I was able
to verify that the Petition was in fact signed by her. Afterwards, I
attached the photocopy of her Passport to the Petition which I appended
to my Notarial Report/Record.
7. Since I already know that Sen. De Lima caused the preparation of the
Petition and that it was her who signed the same, I stamped and signed
the same.
8. To confirm with Senator De Lima that I have already notarized the
Petition, I sought entry to the detention facility at or around three in the
afternoon (3:00 PM). x x x
xxxx
11. Since I was never cleared after hours of waiting, I was not able to
talk again to Senator De Lima to confirm the notarization of the
Petition. I then decided to leave Camp Crame. 35
At first glance, it is curious that Atty. Tresvalles-Cabalo who claims to
have "stamped and signed the [Verification and Certification and
Affidavit of Merit]" inside Camp Crame, presumably in De Lima's
presence, still found it necessary to, hours later, "confirm with Senator
De Lima that [she had] already notarized the Petition." Nonetheless,
assuming the veracity of the allegations narrated in the Affidavit, it is
immediately clear that petitioner De Lima did not sign the Verification
and Certification against Forum Shopping and Affidavit of Merit in
front of the notary public. This is contrary to the jurats (i.e., the
certifications of the notary public at the end of the instruments) signed
by Atty. Tresvalles-Cabalo that the documents were "SUBSCRIBED
AND SWORN to before me."
Such clear breach of notarial protocol is highly censurable 36 as Section
6, Rule II of the 2004 Rules on Notarial Practice requires the affiant,
petitioner De Lima in this case, to sign the instrument or document in
the presence of the notary, viz.:
SECTION 6. Jurat. - "Jurat" refers to an act in which an individual on a
single occasion:
(a) appears in person before the notary public and presents an
instrument or document;
(b) is personally known to the notary public or identified by the notary
public through competent evidence of identity as defined by these
Rules;
(c) signs the instrument or document in the presence of the notary; and
(d) takes an oath or affirmation before the notary public as to such
instrument or document.(Emphasis and underscoring supplied.)
While there is jurisprudence to the effect that "an irregular notarization
merely reduces the evidentiary value of a document to that of a private
document, which requires /roof of its due execution and authenticity to
be admissible as evidence,"37 the same cannot be considered controlling
in determining compliance with the requirements of Sections 1 and 2,
Rule 65 of the Rules of Court. Both Sections 1 and 2 of Rule
6538 require that the petitions for certiorari and prohibition must be
verified and accompanied by a "sworn certificate of non-forum
shopping."
In this regard, Section 4, Rule 7 of the Rules of Civil Procedure states
that "[a] pleading is verified by an affidavit that the affiant has read the
pleading and that the allegations therein are true and correct of his
personal knowledge or based on authentic records." "A pleading
required to be verified which x x x lacks a proper verification, shall be
treated as an unsigned pleading." Meanwhile, Section 5, Rule 7 of the
Rules of Civil Procedure provides that "[t]he plaintiff or principal party
shall certify under oath in the complaint or other initiatory pleading
asserting a claim for relief, or in a sworn certification annexed thereto
and simultaneously filed therewith: (a) that he has not theretofore
commenced any action or filed any claim involving the same issues in
any court, tribunal or quasi-judicial agency and, to the best of his
knowledge, no such other action or claim is pending therein; (b) if there
is such other pending action or claim, a complete statement of the
present status thereof; and (c) if he should thereafter learn that the same
or similar action or claim has been filed or is pending, he shall report
that fact within five (5) days therefrom to the court wherein his
aforesaid complaint or initiatory pleading has been filed." "Failure to
comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be
cause for the dismissal of the case without prejudice, unless otherwise
provided x x x."
In this case, when petitioner De Lima failed to sign the Verification and
Certification against Forum Shopping in the presence of the notary, she
has likewise failed to properly swear under oath the contents thereof,
thereby rendering false and null the jurat and invalidating the
Verification and Certification against Forum Shopping. The
significance of a proper jurat and the effect of its invalidity was
elucidated in William Go Que Construction v. Court of Appeals,39where
this Court held that:
In .this case, it is undisputed that the Verification/Certification against
Forum Shopping attached to the petition for certiorari in CA-G.R. SP
No. 109427 was not accompanied with a valid affidavit/properly
certified under oath. This was because the jurat thereof was defective in
that it did not indicate the pertinent details regarding the
affiants' (i.e., private respondents) competent evidence of identities.
Under Section 6, Rule II of AM. No. 02-8-13-SC 63 dated July 6, 2004,
entitled the "2004 Rules on Notarial Practice" (2004 Rules on Notarial
Practice), ajurat refers to an act in which an individual on a single
occasion:
xxxx
In Fernandez v. Villegas (Fernandez), the Court pronounced that
noncompliance with the verification requirement or a defect therein
"does not necessarily render the pleading fatally defective. The court
may order its submission or correction or act on the pleading if the
attending circumstances are such that strict compliance with the Rule
may be dispensed with in order that the ends of justice may be served
thereby." "Verification is deemed substantially complied with when one
who has ample knowledge to swear to the truth of the allegations in the
complaint or petition signs the verification, and when matters alleged in
the petition have been made in good faith or are true and correct." Here,
there was no substantial compliance with the verification requirement
as it cannot be ascertained that any of the private respondents actually
swore to the truth of the allegations in the petition for certiorari in CA-
G.R. SP No. 109427 given the lack of competent evidence of any of
their identities. Because of this, the fact that even one of the private
respondents swore that the allegations in the pleading are true and
correct of his knowledge and belief is shrouded in doubt.
For the same reason, neither was there substantial compliance with the
certification against forum shopping requirement. In Fernandez, the
Court explained that "non-compliance therewith or a defect therein,
unlike in verification, is generally not curable by its subsequent
submission or correction thereof, unless there is a need to relax the Rule
on the ground of 'substantial compliance' or presence of 'special
circumstances or compelling reasons."' Here, the CA did not mention -
nor does there exist - any perceivable special circumstance or
compelling reason which justifies the rules' relaxation. At all events, it
is uncertain if any of the private respondents certified under oath that no
similar action has been filed or is pending in another forum.
xxxx
Case law states that "[v]erification is required to secure an assurance
that the allegations in the petition have been made in good faith or are
true and correct, and not merely speculative." On the other hand, "[t]he
certification against forum shopping is required based on the principle
that a party-litigant should not be allowed to pursue simultaneous
remedies in different fora." The important purposes behind these
requirements cannot be simply brushed aside absent any sustainable
explanation justifying their relaxation. In this case, proper justification
is especially called for in light of the serious allegations of forgery as to
the signatures of the remaining private respondents, i.e., Lominiqui and
Andales. Thus, by simply treating the insufficient submissions before it
as compliance with its Resolution dated August 13, 2009 requiring
anew the submission of a proper verification/certification against forum
shopping, the CA patently and grossly ignored settled procedural rules
and, hence, gravely abused its discretion. All things considered, the
proper course of action was for it to dismiss the petition. 40 (Emphasis
and underscoring supplied.)
Without the presence of the notary upon the signing of the Verification
and Certification against Forum Shopping, there is no assurance that the
petitioner swore under oath that the allegations in the petition have been
made in good faith or are true and correct, and not merely speculative.
It must be noted that verification is not an empty ritual or a meaningless
formality. Its import must never be sacrificed in the name of mere
expedience or sheer caprice,41as what apparently happened in the
present case. Similarly, the absence of the notary public when petitioner
allegedly affixed her signature also negates a proper attestation that
forum shopping has not been committed by the filing of the petition.
Thus, the petition is, for all intents and purposes, an unsigned pleading
that does not deserve the cognizance of this Court. 42 In Salum bides, Jr.
v. Office of the Ombudsman,43the Court held thus:
The Court has distinguished the effects of non-compliance with the
requirement of verification and that of certification against forum
shopping. A defective verification shall be treated as an unsigned
pleading and thus produces no legal effect, subject to the discretion of
the court to allow the deficiency to be remedied, while the failure to
certifv against forum shopping shall be cause for dismissal without
prejudice, unless otherwise provided, and is not curable by amendment
of the initiatory pleading. (Emphasis and italicization from the
original.)
Notably, petitioner has not proffered any reason to justify her failure to
sign the Verification and Certification Against Forum Shopping in the
presence of the notary. There is, therefore, no justification to relax the
rules and excuse the petitioner's non-compliance therewith. This Court
had reminded parties seeking the ultimate relief of certiorari to observe
the rules, since nonobservance thereof cannot be brushed aside as a
"mere technicality."44 Procedural rules are not to be belittled or simply
disregarded, for these prescribed procedures ensure an orderly and
speedy administration of justice.45 Thus, as in William Go Que
Construction, the proper course of action is to dismiss outright the
present petition.
Even if We set aside this procedural infirmity, the petition just the same
merits denial on several other grounds.
PETITIONER DISREGARDED THE HIERARCHY OF COURTS
Trifling with the rule on hierarchy of courts is looked upon with
disfavor by this Court.46 It will not entertain direct resort to it when
relief can be obtained in the lower courts.47 The Court has repeatedly
emphasized that the rule on hierarchy of courts is an important
component of the orderly administration of justice and not imposed
merely for whimsical and arbitrary reasons.48 In The Diocese of
Bacolod v. Commission on Elections,49the Court explained the reason
for the doctrine thusly:
The Court must enjoin the observance of the policy on the hierarchy of
courts, and now affirms that the policy is not to be ignored without
serious consequences. The strictness of the policy is designed to shield
the Court from having to deal with causes that are also well within the
competence of the lower courts, and thus leave time for the Court to
deal with the more fundamental and more essential tasks that the
Constitution has assigned to it. The Court may act on petitions for the
extraordinary writs of certiorari, prohibition and mandamus only when
absolutely necessary or when serious and important reasons exist to
justify an exception to the policy.
xxxx
The doctrine that requires respect for the hierarchy of courts was
created by this court to ensure that every level of the judiciary performs
its designated roles in an effective and efficient manner. Trial courts do
not only determine the facts from the evaluation of the evidence
presented before them. They are likewise competent to determine issues
of law which may include the validity of an ordinance, statute, or even
an executive issuance in relation to the Constitution. To effectively
perform these functions, they are territorially organized into regions and
then into branches. Their writs generally reach within those territorial
boundaries. Necessarily, they mostly perform the all-important task of
inferring the facts from the evidence as these are physically presented
before them. In many instances, the facts occur within their territorial
jurisdiction, which properly present the "actual case" that makes ripe a
determination of the constitutionality of such action. The consequences,
of course, would be national in scope. There are, however, some cases
where resort to courts at their level would not be practical considering
their decisions could still be appealed before the higher courts, such as
the Court of Appeals.
The Court of Appeals is primarily designed as an appellate court that
reviews the determination of facts and law made by the trial courts. It is
collegiate in nature. This nature ensures more standpoints in the review
of the actions of the trial court. But the Court of Appeals also has
original jurisdiction over most special civil actions. Unlike the trial
courts, its writs can have a nationwide scope. It is competent to
determine facts and, ideally, should act on constitutional issues that
may not necessarily be novel unless there are factual questions to
determine.
This court, on the other hand, leads the judiciary by breaking new
ground or further reiterating - in the light of new circumstances or in
the light of some confusion of bench or bar - existing precedents.
Rather than a court of first instance or as a repetition of the actions of
the Court of Appeals, this court promulgates these doctrinal devices in
order that it truly performs that role.50 (Emphasis supplied.)
Nonetheless, there are recognized exceptions to this rule and direct
resort to this Court were allowed in some instances. These exceptions
were summarized in a case of recent vintage, Aala v. Uy, as follows:
In a fairly recent case, we summarized other well-defined exceptions to
the doctrine on hierarchy of courts. Immediate resort to this Court may
be allowed when any of the following grounds are present: (1) when
genuine issues of constitutionality are raised that must be addressed
immediately; (2) when the case involves transcendental importance; (3)
when the case is novel; (4) when the constitutional issues raised are
better decided by this Court; (5) when time is of the essence; (6) when
the subject of review involves acts of a constitutional organ; (7) when
there is no other plain, speedy, adequate remedy in the ordinary course
of law; (8) when the petition includes questions that may affect public
welfare, public policy, or demanded by the broader interest of justice;
(9) when the order complained of was a patent nullity; and (10) when
the appeal was considered as an inappropriate remedy. 51
Unfortunately, none of these exceptions were sufficiently established in
the present petition so as to convince this court to brush aside the rules
on the hierarchy of courts.
Petitioner's allegation that her case has sparked national and
international interest is obviously not covered by the exceptions to the
rules on hierarchy of courts. The notoriety of a case, without more, is
not and will not be a reason for this Court's decisions. Neither will this
Court be swayed to relax its rules on the bare fact that the petitioner
belongs to the minority party in the present administration. A primary
hallmark of an independent judiciary is its political neutrality. This
Court is thus loath to perceive and consider the issues before it through
the warped prisms of political partisanships.
That the petitioner is a senator of the republic does not also merit a
special treatment of her case. The right to equal treatment before the
law accorded to every Filipino also forbids the elevation of petitioner's
cause on account of her position and status in the government.
Further, contrary to her position, the matter presented before the Court
is not of first impression. Petitioner is not the first public official
accused of violating RA 9165 nor is she the first defendant to question
the finding of probable cause for her arrest. In fact, stripped of all
political complexions, the controversy involves run-of-the mill matters
that could have been resolved with ease by the lower court had it been
given a chance to do so in the first place.
In like manner, petitioner's argument that the rule on the hierarchy of
court should be disregarded as her case involves pure questions of law
does not obtain. One of the grounds upon which petitioner anchors her
case is that the respondent judge erred and committed grave abuse of
discretion in finding probable cause to issue her arrest. By itself, this
ground removes the case from the ambit of cases involving pure
questions of law. It is established that the issue of whether or not
probable cause exists for the issuance of warrants for the arrest of the
accused is a question of fact, determinable as it is from a review of the
allegations in the Information, the Resolution of the Investigating
Prosecutor, including other documents and/ or evidence appended to the
Information.52 This matter, therefore, should have first been brought
before the appellate court, which is in the better position to review and
determine factual matters.
Yet, petitioner harps on the supposed judicial efficiency and economy
of abandoning the rule on the hierarchy of courts in the present case.
Indeed, the Court has considered the practical aspects of the
administration of justice in deciding to apply the exceptions rather than
the rule. However, it is all the more for these practical considerations
that the Court must insist on the application of the rule and not the
exceptions in this case. As petitioner herself alleges, with the President
having declared the fight against illegal drugs and corruption as central
to his platform of government, there will be a spike of cases brought
before the courts involving drugs and public officers.53 As it now
stands, there are 232,557 criminal cases involving drugs, and around
260,796 criminal cases involving other offenses pending before the R
TCs.54 This Court cannot thus allow a precedent allowing public
officers assailing the finding of probable cause for the issuance of arrest
warrants to be brought directly to this Court, bypassing the appellate
court, without any compelling reason.
THE PRESENT PETITION IS PREMATURE
The prematurity of the present petition is at once betrayed in the reliefs
sought by petitioner's Prayer, which to restate for added emphasis,
provides:
WHEREFORE, premises considered, and in the interest of substantial
justice and fair play, Petitioner respectfully prays the Honorable Court
that judgment be rendered:
a. Granting a writ of certiorari annulling and setting aside
the Order dated 23 February 2017, the Warrant of Arrest dated the
same date, and the Order dated 24 February 2017 of the Regional Trial
CourtBranch 204, Muntinlupa City, in Criminal Case No. 17-165
entitled People of the Philippines versus Leila M De Lima et al.;
b. Granting a writ of prohibition enjoining and prohibiting respondent
judge from conducting further proceedings until and unless the Motion
to Quash is resolved with finality;
c. Issuing an order granting the application for the issuance of
temporary restraining order (TRO) and a writ of preliminary injunction
to the proceedings; and
d. Issuing a Status Quo Ante Order restoring the parties to the status
prior to the issuance of the Order and Warrant of Arrest, both dated
February 23, 201 7, thereby recalling both processes and restoring
petitioner to her liberty and freedom.55 (Emphasis supplied)
Under paragraph (a), petitioner asks for a writ of certiorari annulling
the Order dated February 23, 2017 finding probable cause, the warrant
of arrest and the Order dated February 24, 2017 committing petitioner
to the custody of the PNP Custodial Center. Clearly petitioner seeks the
recall of said orders to effectuate her release from detention and restore
her liberty. She did not ask for the dismissal of the subject criminal
case.
More importantly, her request for the issuance of a writ of prohibition
under paragraph (b) of the prayer "until and unless the Motion to Quash
is resolved with finality," is an unmistakable admission that the RTC
has yet to rule on her Motion to Quash and the existence of the RTC's
authority to rule on the said motion. This admission against interest
binds the petitioner; an admission against interest being the best
evidence that affords the greatest certainty of the facts in dispute. 56 It is
based on the presumption that "no man would declare anything against
himself unless such declaration is true. "57 It can be presumed then that
the declaration corresponds with the truth, and it is her fault if it does
not.58
Moreover, petitioner under paragraphs (c) and (d) prayed for a TRO
and writ of preliminary injunction and a status quo ante order which
easily reveal her real motive in filing the instant petition-to restore to
"petitioner her liberty and freedom."
Nowhere in the prayer did petitioner explicitly ask for the dismissal of
Criminal Case No. 17-165. What is clear is she merely asked the
respondent judge to rule on her Motion to Quash before issuing the
warrant of arrest.
In view of the foregoing, there is no other course of action to take than
to dismiss the petition on the ground of prematurity and allow
respondent Judge to rule on the Motion to Quash according to the desire
of petitioner.
This Court, in Solid Builders Inc. v. China Banking Corp., explained
why a party should not pre-empt the action of a trial court:
Even Article 1229 of the Civil Code, which SBI and MFII invoke,
works against them. Under that provision, the equitable reduction of the
penalty stipulated by the parties in their contract will be based on a
finding by the court that such penalty is iniquitous or unconscionable.
Here, the trial court has not yet made a ruling as to whether the penalty
agreed upon by CBC with SBI and MFII is unconscionable. Such
finding will be made by the trial court only after it has heard both
parties and weighed their respective evidence in light of all relevant
circumstances. Hence, for SBI and MFII to claim any right or benefit
under that provision at this point is premature.59 (Emphasis supplied)
In State of Investment House, Inc. v. Court of Appeals, 60the Court
likewise held that a petition for certiorari can be resorted to only after
the court a quo has already and actually rendered its decision. It
held, viz.:
We note, however, that the appellate court never actually ruled on
whether or not petitioner's right had prescribed. It merely declared that
it was in a position to so rule and thereafter required the parties to
submit memoranda. In making such a declaration, did the CA commit
grave abuse of discretion amounting to lack of jurisdiction? It did not.
xxxx
All things considered, this petition is premature. The CA has decided
nothing and whatever petitioner's vehement objections may be (to any
eventual ruling on the issue of prescription) should be raised only after
such ruling shall have actually been promulgated.
The situation evidently does not yet call for a recourse to a petition
for certiorari under Rule 65.61(Italicization from the original. Emphasis
supplied.)
An analogous ruling was made by this Court in Diaz v. Nora, where it
ruled in this wise:
x x x In the case of the respondent labor arbiter, he has not denied the
motion for execution filed by the petitioner. He merely did not act on
the same. Neither had petitioner urged the immediate resolution of his
motion for execution by said arbiter. In the case of the respondent
NLRC, it was not even given the opportunity to pass upon the question
raised by petitioner as to whether or not it has jurisdiction over the
appeal, so the records of the case can be remanded to the respondent
labor arbiter for execution of the decision.
Obviously, petitioner had a plain, speedy and adequate remedy to seek
relief from public respondents but he failed to avail himself of the same
before coming to this Court. To say the least, the petition is premature
and must be struck down.62 (Emphasis supplied.)
The dissents would deny the applicability of the foregoing on the
ground that these were not criminal cases that involved a pending
motion to quash. However, it should be obvious from the afore-quoted
excerpts that the nature of the cases had nothing to do with this Court's
finding of prematurity in those cases. Instead, what was stressed therein
was that the lower courts had not yet made, nor was not given the
opportunity to make, a ruling before the parties came before this forum.
Indeed, the prematurity of the present petition cannot be over-
emphasized considering that petitioner is actually asking the Court to
rule on some of the grounds subject of her Motion to Quash. The Court,
if it rules positively in favor of petitioner regarding the grounds of the
Motion to Quash, will be preempting the respondent Judge from doing
her duty to resolve the said motion and even prejudge the case. This is
clearly outside of the ambit of orderly and expeditious rules of
procedure. This, without a doubt, causes an inevitable delay in the
proceedings in the trial court, as the latter abstains from resolving the
incidents until this Court rules with finality on the instant petition.
Without such order, the present petition cannot satisfy the requirements
set before this Court can exercise its review powers. Section 5 (2)(C) of
Article VIII of the 1987 Constitution explicitly requires the existence of
"final judgments and orders of lower courts" before the Court can
exercise its power to "review, revise, reverse, modify, or affirm on
appeal or certiorari" in "all cases in which the jurisdiction of any lower
court is in issue," viz.:
SECTION 5. The Supreme Court shall have the following powers:
(1) Exercise original jurisdiction over cases affecting ambassadors,
other public ministers and consuls, and over petitions for certiorari,
prohibition, mandamus, quo warranto, and habeas corpus.
(2) Review, revise, reverse, modify, or affirm on appeal or certiorari, as
the law or the Rules of Court may provide, final judgments and orders
of lower courts in:
(a) All cases in which the constitutionality or validity of any treaty,
international or executive agreement, law, presidential decree,
proclamation, order, instruction, ordinance, or regulation is in question.
(b) All cases involving the legality of any tax, impost, assessment, or
toll, or any penalty imposed in relation thereto.
(c) All cases in which the jurisdiction of any lower court is in issue.
(d) All criminal cases in which the penalty imposed is reclusion
perpetua or higher.
(e) All cases in which only an error or question of law is involved.
(Emphasis supplied.)
In the palpable absence of a ruling on the Motion to Quash -- which
puts the jurisdiction of the lower court in issue -- there is no
controversy for this Court to resolve; there is simply no final judgment
or order of the lower court to review, revise, reverse, modify, or affirm.
As per the block letter provision of the Constitution, this Court cannot
exercise its jurisdiction in a vacuum nor issue a definitive ruling on
mere suppositions.
Succinctly, the present petition is immediately dismissible for this
Court lacks jurisdiction to review a non-existent court action. It can
only act to protect a party from a real and actual ruling by a lower
tribunal. Surely, it is not for this Court to negate "uncertain contingent
future event that may not occur as anticipated, or indeed may not occur
at all," as the lower court's feared denial of the subject Motion to
Quash.63
The established rule is that courts of justice will take cognizance only
of controversies "wherein actual and not merely hypothetical issues are
involved."64 The reason underlying the rule is "to prevent the courts
through avoidance of premature adjudication from entangling
themselves in abstract disagreements, and for us to be satisfied that the
case does not present a hypothetical injury or a claim contingent upon
some event that has not and indeed may never transpire." 65
Even granting arguendo that what is invoked is the original jurisdiction
of this Court under Section 5 (1) of Article VIII, the petition
nonetheless falls short of the Constitutional requirements and of Rule
65 of the Rules of Court. In the absence of a final judgment, order, or
ruling on the Motion to Quash challenging the jurisdiction of the lower
court, there is no occasion for this Court to issue the extraordinary writ
of certiorari. Without a judgment or ruling, there is nothing for this
Court to declare as having been issued without jurisdiction or in grave
abuse of discretion.
Furthermore, it is a basic requirement under Rule 65 that there be "[no]
other plain, speedy and adequate remedy found in law." 66 Thus, the
failure to exhaust all other remedies, as will be later discussed, before a
premature resort to this Court is fatal to the petitioner's cause of action.
Petitioner even failed to move for the reconsideration of the February
23 and 24, 2017 Orders she is currently assailing in this Petition. As
this Court held in Estrada v. Office of the Ombudsman, "[a] motion for
reconsideration allows the public respondent an opportunity to correct
its factual and legal errors x x x [it] is mandatory before the filing of a
petition for certiorari."67The reasons proffered by petitioner fail to
justify her present premature recourse.
Various policies and rules have been issued to curb the tendencies of
litigants to disregard, nay violate, the rule enunciated in Section 5 of
Article VIII of the Constitution to allow the Court to devote its time and
attention to matters within its jurisdiction and prevent the overcrowding
of its docket. There is no reason to consider the proceedings at bar as an
exception.
PETITIONER VIOLATED THE RULE AGAINST FORUM
SHOPPING
It is settled that forum shopping exists when a party repetitively avails
himself of several judicial remedies in different courts, simultaneously
or successively, all substantially founded on the same transactions and
the same essential facts and circumstances, and all raising substantially
the same issues either pending in, or already resolved adversely by,
some other court. It is considered an act of malpractice as it trifles with
the courts and abuses their processes.68 Thus, as elucidated in Luzon
Iron Development Group Corporation v. Bridgestone Mining and
Development Corporation,69forum shopping warrants the immediate
dismissal of the suits filed:
Forum shopping is the act of litigants who repetitively avail themselves
of multiple judicial remedies in different fora, simultaneously or
successively, all substantially founded on the same transactions and the
same essential facts and circumstances; and raising substantially similar
issues either pending in or already resolved adversely by some other
court; or for the purpose of increasing their chances of obtaining a
favorable decision, if not in one court, then in another. The rationale
against forum-shopping is that a party should not be allowed to pursue
simultaneous remedies in two different courts, for to do so would
constitute abuse of court processes which tends to degrade the
administration of justice, wreaks havoc upon orderly judicial procedure,
and adds to the congestion of the heavily burdened dockets of the
courts.
xxxx
What is essential in determining the existence of forum-shopping is the
vexation caused the courts and litigants by a party who asks different
courts and/or administrative agencies to rule on similar or related
causes and/or grant the same or substantially similar reliefs, in the
process creating the possibility of conflicting decisions being rendered
upon the same issues.
xxxx
We emphasize that the grave evil sought to be avoided by the rule
against forum-shopping is the rendition by two competent tribunals of
two separate and contradictory decisions. To avoid any confusion, this
Court adheres strictly to the rules against forum shopping, and any
violation of these rules results in the dismissal of a case. The acts
committed and described herein can possibly constitute direct
contempt.70
This policy echoes the last sentence of Section 5, Rule 7 of the Rules of
Court, which states that "[i]f the acts of the party or his counsel clearly
constitute willful and deliberate forum shopping, the same shall be
ground for summary dismissal with prejudice and shall constitute direct
contempt as well as a cause for administrative sanctions."
The test to determine the existence of forum shopping is whether the
elements of litis pendentia, or whether a final judgment in one case
amounts to res judicata in the other. Forum shopping therefore exists
when the following elements are present: (a) identity of parties, or at
least such parties representing the same interests in both actions; (b)
identity of rights asserted and reliefs prayed for, the relief being
founded on the same facts; and (c) the identity of the two preceding
particulars, such that any judgment rendered in the other action will,
regardless of which party is successful, amount to res judicata in the
action under consideration.71
Anent the first requisite, there is an identity of parties when the parties
in both actions are the same, or there is privity between them, or they
are successors-in-interest by title subsequent to the commencement of
the action litigating for the same thing and under the same title and in
the same capacity.72
Meanwhile, the second and third requisites obtain where the same
evidence necessary to sustain the second cause of action is sufficient to
authorize a recovery in the first, even if the forms or the nature of the
two (2) actions are different from each other. If the same facts or
evidence would sustain both, the two (2) actions are considered the
same within the rule that the judgment in the former is a bar to the
subsequent action; otherwise, it is not.73
All these requisites are present in this case.
The presence of the first requisite is at once apparent. The petitioner is
an accused in the criminal case below, while the respondents in this
case, all represented by the Solicitor General, have substantial identity
with the complainant in the criminal case still pending before the trial
court.
As for the second requisite, even a cursory reading of the petition and
the Motion to Quash will reveal that the arguments and the reliefs
prayed for are essentially the same. In both, petitioner advances the
RTC's supposed lack of jurisdiction over the offense, the alleged
multiplicity of offenses included in the Information; the purported lack
of the corpus delicti of the charge, and, basically, the non-existence of
probable cause to indict her. And, removed of all non-essentials, she
essentially prays for the same thing in both the present petition and
the Motion to Quash: the nullification of the Information and her
restoration to liberty and freedom. Thus, our ruling in Jent v. Tullet
Prebon (Philippines), Inc. 74 does not apply in the present case as the
petition at bar and the motion to quash pending before the court a
quo involve similar if not the same reliefs. What is more, while Justice
Caguioa highlights our pronouncement in Jent excepting an "appeal or
special civil action for certiorari" from the rule against the violation of
forum shopping, the good justice overlooks that the phrase had been
used with respect to forum shopping committed
through successive actions by a "party, against whom an adverse
judgment or order has [already] been rendered in one forum." 75 The
exception with respect to an "appeal or special civil action
for certiorari" does not apply where the forum shopping is committed
by simultaneous actions where no judgment or order has yet been
rendered by either forum. To restate for emphasis, the RTC has yet to
rule on the Motion to Quash. Thus, the present petition and the motion
to quash before the R TC are simultaneous actions that do not exempt
petitions for certiorari from the rule against forum shopping.
With the presence of the first two requisites, the third one necessarily
obtains in the present case. Should we grant the petition and declare the
RTC without jurisdiction over the offense, the RTC is bound to grant
De Lima's Motion to Quash in deference to this Court's authority. In the
alternative, if the trial court rules on the Motion to Quash in the interim,
the instant petition will be rendered moot and academic.
In situations like the factual milieu of this instant petition, while nobody
can restrain a party to a case before the trial court to institute a petition
for certiorari under Rule 65 of the Rules of Court, still such petition
must be rejected outright because petitions that cover simultaneous
actions are anathema to the orderly and expeditious processing and
adjudication of cases.
On the ground of forum shopping alone, the petition merits immediate
dismissal.
THE REGIONAL TRIAL COURT HAS JURISDICTION
Even discounting the petitioner's procedural lapses, this Court is still
wont to deny the instant petition on substantive grounds.
Petitioner argues that, based on the allegations of the Information in
Criminal Case No. 17-165, the Sandiganbayan has the jurisdiction to try
and hear the case against her. She posits that the Information charges
her not with violation of RA 9165 but with Direct Bribery-a felony
within the exclusive jurisdiction of the Sandiganbayan given her rank as
the former Secretary of Justice with Salary Grade 31. For the petitioner,
even assuming that the crime described in the Information is a violation
of RA 9165, the Sandiganbayan still has the exclusive jurisdiction to try
the case considering that the acts described in the Information were
intimately related to her position as the Secretary of Justice. Some
justices of this Court would even adopt the petitioner's view, declaring
that the Information charged against the petitioner is Direct Bribery.
The respondents, on the other hand, maintain that the R TC has
exclusive jurisdiction to try violations of RA 9165, including the acts
described in the Information against the petitioner. The Sandiganbayan,
so the respondents contend, was specifically created as an anti-graft
court. It was never conferred with the power to try drug-related cases
even those committed by public officials. In fact, respondents point out
that the history of the laws enabling and governing the Sandiganbayan
will reveal that its jurisdiction was streamlined to address specific cases
of graft and corruption, plunder, and acquisition of ill-gotten wealth.
Before discussing the issue on jurisdiction over the subject matter, it is
necessary to clarify the crime with which the petitioner is being
charged. For ease of reference, the Information filed with the R TC is
restated below:
PEOPLE OF THE PHILIPPINES,  
Plaintiff,
Versus Criminal Case No
(NPS No. XVI-IN
LEILA M. DE LIMA 16K-00336) For: 
Dangerous Drugs
(66 Laguna de Bay corner Subic Bay Drive, South Bay Section 3(jj), Sect
Village, Paraiiaque City and/or Room 502, GSIS No. 9165 (lllegal
Building, Financial Center, Roxas Boulevard, Pasay
City), RAFAEL MARCOS Z. RAGOS (c/o National
Bureau of Investigation, Taft Avenue, Manila) and

RONNIE P ALISOC DAY AN, (Barangay Galarin,
Urbiztondo, Pangasinan), Accused
x-------------------------------------x
INFORMATION
The undersigned Prosecutors, constituted as a Panel pursuant to
Department Orders 706 and 790 dated October 14, 2016 and November
11, 2016, respectively, accuse LEILA M. DE LIMA, RAFAEL
MARCOS Z. RAGOS and RONNIE P ALISOC DAY AN, for
violation of Section 5, in relation to Section 3 (jj), Section 26 (b) and
Section 28, Republic Act No. 9165, otherwise known as
the Comprehensive Dangerous Act of 2002, committed as follows:
That within the period from November 2012 to March 2013, in the City
of Muntinlupa, Philippines, and within the jurisdiction of this
Honorable Court, accused Leila M. De Lima, being then the Secretary
of the Department of Justice, and accused Rafael Marcos Z. Ragos,
being then the Officer-in-Charge of the Bureau of Corrections, by
taking advantage of their public office, conspiring and confederating
with accused Ronnie P. Dayan, being then the employee of the
Department of Justice detailed to De Lima, all of them having moral
ascendancy or influence over inmates in the New Bilibid Prison, did
then and there commit illegal drug trading, in the following manner: De
Lima and Ragos, with the use of their power, position, and authority
demand, solicit and extort money from the high profile inmates in the
New Bilibid Prison to support the Senatorial bid of De Lima in the May
2016 election; by reason of which, the inmates, not being lawfully
authorized by law and through the use of mobile phones and other
electronic devices, did then and there willfully and unlawfully trade and
traffic dangerous drugs, and thereafter give and deliver to De Lima,
through Ragos and Dayan, the proceeds of illegal drug trading
amounting to Five Million (₱5,000,000.00) Pesos on 24 November
2012, Five Million (₱5,000,000.00) Pesos on 15 December 2012, and
One Hundred Thousand (₱l00,000.00) Pesos weekly "tara" each from
the high profile inmates in the New Bilibid Prison.
CONTRARY TO LAW.76
Notably, the designation, the prefatory statements and the accusatory
portions of the Information repeatedly provide that the petitioner is
charged with "Violation of the Comprehensive Dangerous Drugs Act of
2002, Section 5, in relation to Section 3(jj), Section 26(b), and Section
28, Republic Act No. 9165." From the very designation of the crime in
the Information itself, it should be plain that the crime with which the
petitioner is charged is a violation of RA 9165. As this Court clarified
in Quimvel v. People, 77 the designation of the offense in the
Information is a critical element required under Section 6, Rule 110 of
the Rules of Court in apprising the accused of the offense being
charged, viz.:
The offense charged can also be elucidated by consulting the
designation of the offense as appearing in the Information. The
designation of the offense is a critical element required under Sec. 6,
Rule 110 of the Rules of Court for it assists in apprising the accused of
the offense being charged. Its inclusion in the Information is imperative
to avoid surprise on the accused and to afford him of the opportunity to
prepare his defense accordingly. Its import is underscored in this case
where the preamble states that the crime charged is of "Acts of
Lasciviousness in relation to Section 5(b) of R.A. No.7610."78(Emphasis
supplied.)
Further, a reading of the provisions of RA 9165 under which the
petitioner is prosecuted would convey that De Lima is being charged as
a conspirator in the crime of Illegal Drug Trading. The pertinent
provisions of RA 9165 read:
SECTION 3. Definitions. - As used in this Act, the following terms
shall mean:
xxxx
(jj) Trading. - Transactions involving the illegal trafficking of
dangerous drugs and/or controlled precursors and essential chemicals
using electronic devices such as, but not limited to, text messages, e-
mail, mobile or landlines, two-way radios, internet, instant messengers
and chat rooms or acting as a broker in any of such transactions
whether for money or any other consideration in violation of this Act.
xxxx
SECTION 5. Sale, Trading, Administration, Dispensation, Delivery,
Distribution and Transportation of Dangerous Drugs and/or
Controlled Precursors and Essential Chemicals. - The penalty of life
imprisonment to death and a fine ranging from Five hundred thousand
pesos (₱500,000.00) to Ten million pesos (₱10,000,000.00) shall be
imposed upon any person, who, unless authorized by law, shall sell,
trade, administer, dispense, deliver, give away to another, distribute,
dispatch in transit or transport any dangerous drug, including any and
all species of opium poppy regardless of the quantity and purity
involved, or shall act as a broker in any of such transactions.
xxxx
SECTION 26. Attempt or Conspiracy. - Any attempt or conspiracy to
commit the following unlawful acts shall be penalized by the same
penalty prescribed for the commission of the same as provided under
this Act:
xxxx
(b) Sale, trading, administration, dispensation, delivery, distribution and
transportation of any dangerous drug and/or controlled precursor and
essential chemical;
xxxx
SECTION 28. Criminal Liability of Government Officials and
Employees. - The maximum penalties of the unlawful acts provided for
in this Act shall be imposed, in addition to absolute perpetual
disqualification from any public office, if those found guilty of such
unlawful acts are government officials and employees.
While it may be argued that some facts may be taken as constitutive of
some elements of Direct Bribery under the Revised Penal Code (RPC),
these facts taken together with the other allegations in the Information
portray a much bigger picture, Illegal Drug Trading. The latter crime,
described by the United Nations Office on Drugs and Crime (UNODC)
as "a global illicit trade involving the cultivation, manufacture,
distribution and sale of substances,"79necessarily involves various
component crimes, not the least of which is the bribery and corruption
of government officials. An example would be reports of recent vintage
regarding billions of pesos' worth of illegal drugs allowed to enter
Philippine ports without the scrutiny of Customs officials. Any money
and bribery that may have changed hands to allow the importation of
the confiscated drugs are certainly but trivial contributions in the
furtherance of the transnational illegal drug trading - the offense for
which the persons involved should be penalized.
Read as a whole, and not picked apart with each word or phrase
construed separately, the Information against De Lima goes beyond an
indictment for Direct Bribery under Article 210 of the RPC. 80 As
Justice Martires articulately explained, the averments on solicitation of
money in the Information, which may be taken as constitutive of
bribery, form "part of the description on how illegal drug trading took
place at the NBP." The averments on how petitioner asked for and
received money from the NBP inmates simply complete the links of
conspiracy between her, Ragos, Dayan and the NBP inmates in
willfully and unlawfully trading dangerous drugs through the use of
mobile phones and other electronic devices under Section 5, in relation
to Section 3(jj), Section 26(b), and Section 28, of RA 9165.
On this score, that it has not been alleged that petitioner actually
participated in the actual trafficking of dangerous drugs and had simply
allowed the NBP inmates to do so is non sequitur given that the
allegation of conspiracymakes her liable for the acts of her co-
conspirators. As this Court elucidated, it is not indispensable for a co-
conspirator to take a direct part in every act of the crime. A conspirator
need not even know of all the parts which the others have to
perform,81 as conspiracy is the common design to commit a felony; it is
not participation in all the details of the execution of the
crime. 82 As long as the accused, in one way or another, helped and
cooperated in the consummation of a felony, she is liable as a co-
principal.83 As the Information provides, De Lima's participation and
cooperation was instrumental in the trading of dangerous drugs by the
NBP inmates. The minute details of this participation and cooperation
are matters of evidence that need not be specified in the Information but
presented and threshed out during trial.
Yet, some justices remain adamant in their position that the Information
fails to allege the necessary elements of Illegal Drug Trading. Justice
Carpio, in particular, would cite cases supposedly enumerating the
elements necessary for a valid Information for Illegal Drug Trading.
However, it should be noted that the subject of these cases was
"Illegal Sale" of dangerous drugs -- a crime separate and distinct from
"Illegal Trading" averred in the Information against De Lima. The
elements of "Illegal Sale" will necessary differ from the elements of
Illegal Trading under Section 5, in relation to Section 3(jj), of RA 9165.
The definitions of these two separate acts are reproduced below for
easy reference:
SECTION 3. Definitions. - As used in this Act, the following terms
shall mean:
xxxx
(ii) Sell. - Any act of giving away any dangerous drug and/or controlled
precursor and essential chemical whether for money or any other
consideration.
(jj) Trading. - Transactions involving the illegal trafficking of
dangerous drugs and/or controlled precursors and essential chemicals
using electronic devices such as, but not limited to, text messages, e-
mail, mobile or landlines, two-way radios, internet, instant messengers
and chat rooms or acting as a broker in any of such transactions
whether for money or any other consideration in violation of this Act.
It is obvious from the foregoing that the crime of illegal trading has
been written in strokes much broader than that for illegal sale. In fact,
an illegal sale of drugs may be considered as only one of the possible
component acts of illegal trading which may be committed through two
modes: (1) illegal trafficking using electronic devices; or (2) acting as a
broker in any transactions involved in the illegal trafficking of
dangerous drugs.
On this score, the crime of "illegal trafficking" embraces various other
offenses punishable by RA 9165. Section 3(r) of RA 9165 provides:
(r) Illegal Trafficking. - The illegal cultivation, culture, delivery,
administration, dispensation, manufacture, sale, trading, transportation,
distribution, importation, exportation and possession of any dangerous
drug and/or controlled precursor and essential chemical.
In turn, the crimes included in the definition of Illegal Trafficking of
drugs are defined as follows:
(a) Administer. - Any act of introducing any dangerous drug into the
body of any person, with or without his/her knowledge, by injection,
inhalation, ingestion or other means, or of committing any act of
indispensable assistance to a person in administering a dangerous drug
to himself/herself unless administered by a duly licensed practitioner
for purposes of medication.
xxxx
(d) Chemical Diversion. - The sale, distribution, supply or transport of
legitimately imported, in-transit, manufactured or procured controlled
precursors and essential chemicals, in diluted, mixtures or in
concentrated form, to any person or entity engaged in the manufacture
of any dangerous drug, and shall include packaging, repackaging,
labeling, relabeling or concealment of such transaction through fraud,
destruction of documents, fraudulent use of permits, misdeclaration, use
of front companies or mail fraud.
xxxx
(i) Cultivate or Culture. - Any act of knowingly planting, growing,
raising, or permitting the planting, growing or raising of any plant
which is the source of a dangerous drug.
xxxx
(k) Deliver. - Any act of knowingly passing a dangerous drug to
another, personally or otherwise, and by any means, with or without
consideration.
xxxx
(m) Dispense. - Any act of giving away, selling or distributing medicine
or any dangerous drug with or without the use of prescription.
xxxx
(u) Manufacture. - The production, preparation, compounding or
processing of any dangerous drug and/or controlled precursor and
essential chemical, either directly or indirectly or by extraction from
substances of natural origin, or independently by means of chemical
synthesis or by a combination of extraction and chemical synthesis, and
shall include any packaging or repackaging of such substances, design
or configuration of its form, or labeling or relabeling of its container;
except that such terms do not include the preparation, compounding,
packaging or labeling of a drug or other substances by a duly authorized
practitioner as an incident to his/her administration or dispensation of
such drug or substance in the course of his/her professional practice
including research, teaching and chemical analysis of dangerous drugs
or such substances that are not intended for sale or for any other
purpose.
xxxx
(kk) Use. - Any act of injecting, intravenously or intramuscularly, of
consuming, either by chewing, smoking, sniffing, eating, swallowing,
drinking or otherwise introducing into the physiological system of the
body, any of the dangerous drugs.
With the complexity of the operations involved in Illegal Trading of
drugs, as recognized and defined in RA 9165, it will be quite myopic
and restrictive to require the elements of Illegal Sale-a mere component
act-in the prosecution for Illegal Trading.
More so, that which qualifies the crime of Illegal Trafficking to Illegal
Trading may make it impossible to provide the details of the elements
of Illegal Sale. By "using electronic devices such as, but not limited to,
text messages, email, mobile or landlines, two-way radios, internet,
instant messengers and chat rooms," the Illegal Trading can be
remotely perpetrated away from where the drugs are actually being
sold; away from the subject of the illegal sale. With the proliferation of
digital technology coupled with ride sharing and delivery services,
Illegal Trading under RA 9165 can be committed without getting one's
hand on the substances or knowing and meeting the seller or buyer. To
require the elements of Illegal Sale (the identities of the buyer, seller,
the object and consideration, in Illegal Trade) would be impractical.
The same may be said of the second mode for committing Illegal
Trading, or trading by "acting as a broker" in transactions involved in
Illegal Trafficking. In this instance, the accused may neither have
physical possession of the drugs nor meet the buyer and seller and yet
violate RA 9165. As pointed out by Justice Perlas-Bernabe, as early as
1916, jurisprudence has defined a broker as one who is simply a
middleman, negotiating contracts relative to property with which he has
no custody, viz.:
A broker is generally defined as one who is engaged, for others, on a
commission, negotiating contracts relative to property with the custody
of which he has no concern; the negotiator between other parties, never
acting in his own name, but in the name of those who employed him; he
is strictly a middleman and for some purposes the agent of both
parties.84 (Emphasis and underscoring supplied.)
In some cases, this Court even acknowledged persons as brokers even
"where they actually took no part in the negotiations, never saw the
customer."85 For the Court, the primary occupation of a broker is simply
bringing "the buyer and the seller together, even if no sale is eventually
made. "86 Hence, in indictments for Illegal Trading, it is illogical to
require the elements of Illegal Sale of drugs, such as the identities of the
buyer and the seller, the object and consideration. 87 For the prosecution
of Illegal Trading of drugs to prosper, proof that the accused "act[ed] as
a broker" or brought together the buyer and seller of illegal drugs
"using electronic devices such as, but not limited to, text messages, e-
mail, mobile or landlines, two-way radios, internet, instant messengers
and chat rooms" is sufficient.
The DOJ' s designation of the charge as one for Illegal Drug Trading
thus holds sway. After all, the prosecution is vested with a wide range
of discretion-including the discretion of whether, what, and whom to
charge.88 The exercise of this discretion depends on a smorgasboard of
factors, which are best appreciated by the prosecutors. 89
As such, with the designation of the offense, the recital of facts in the
Information, there can be no other conclusion than that petitioner is
being charged not with Direct Bribery but with violation of RA 9165.
Granting without conceding that the information contains averments
which constitute the elements of Direct Bribery or that more than one
offence is charged or as ill this case, possibly bribery and violation of
RA 9165, still the prosecution has the authority to amend the
information at any time before arraignment. Since petitioner has not yet
been arraigned, then the information subject of Criminal Case No. 17-
165 can still be amended pursuant to Section 14, Rule 110 of the Rules
of Court which reads:
SECTION 14. Amendment or Substitution. - A complaint or
information may be amended, in form or in substance, without leave of
court, at any time before the accused enters his plea. After the plea and
during the trial, a formal amendment may only be made with leave of
court and when it can be done without causing prejudice to the rights of
the accused.
Now the question that irresistibly demands an answer is whether it is
the Sandiganbayan or the RTC that has jurisdiction over the subject
matter of Criminal Case No. 17-165, i.e., violation of RA 9165.
It is basic that jurisdiction over the subject matter in a criminal case is
given only by law in the manner and form prescribed by law. 90 It is
determined by the statute in force at the time of the commencement of
the action.91 Indeed, Congress has the plenary power to define,
prescribe and apportion the jurisdiction of various courts. It follows
then that Congress may also, by law, provide that a certain class of
cases should be exclusively heard and determined by one court. Such
would be a special law that is construed as an exception to the general
law on jurisdiction of courts.92
The pertinent special law governing drug-related cases is RA 9165,
which updated the rules provided in RA 6425, otherwise known as the
Dangerous Drugs Act of 1972. A plain reading of RA 9165, as of RA
6425, will reveal that jurisdiction over drug-related cases is exclusively
vested with the Regional Trial Court and no other. The designation of
the RTC as the court with the exclusive jurisdiction over drug-related
cases is apparent in the following provisions where it was expressly
mentioned and recognized as the only court with the authority to hear
drug-related cases:
Section 20. Confiscation and Forfeiture of the Proceeds or Instruments
of the Unlawful Act, Including the Properties or Proceeds Derived
from the Illegal Trafficking of Dangerous Drugs and/or Precursors and
Essential Chemicals. - x x x x
After conviction in the Regional Trial Court in the appropriate criminal
case filed, the Court shall immediately schedule a hearing for the
confiscation and forfeiture of all the proceeds of the offense and all the
assets and properties of the accused either owned or held by him or in
the name of some other persons if the same shall be found to be
manifestly out of proportion to his/her lawful income:
xxxx
During the pendency of the case in the Regional Trial Court, no
property, or income derived therefrom, which may be confiscated and
forfeited, shall be disposed, alienated or transferred and the same shall
be in custodia legis and no bond shall be admitted for the release of the
same.
xxxx
Section 61. Compulsory Confinement of a Drug Dependent Who
Refuses to Apply Under the Voluntary Submission Program. - x x x
A petition for the confinement of a person alleged to be dependent on
dangerous drugs to a Center may be filed by any person authorized by
the Board with the Regional Trial Court of the province or city where
such person is found.
xxxx
Section 62. Compulsory Submission of a Drug Dependent Charged
with an Offense to Treatment and Rehabilitation. - If a person charged
with an offense where the imposable penalty is imprisonment of less
than six (6) years and one (1) day, and is found by the prosecutor or by
the court, at any stage of the proceedings, to be a drug dependent, the
prosecutor or the court as the case may be, shall suspend all further
proceedings and transmit copies of the record of the case to the Board.
In the event the Board determines, after medical examination, that
public interest requires that such drug dependent be committed to a
center for treatment and rehabilitation, it shall file a petition for his/her
commitment with the regional trial court of the province or city where
he/she is being investigated or tried: x x x
xxxx
Section 90. Jurisdiction. - The Supreme Court shall designate special
courts from among the existing Regional Trial Courts in each judicial
region to exclusively try and hear cases involving violations of this Act.
The number of courts designated in each judicial region shall be based
on the population and the number of cases pending in their respective
jurisdiction.
The DOJ shall designate special prosecutors to exclusively handle cases
involving violations of this Act.
Notably, no other trial court was mentioned in RA 9165 as having the
authority to take cognizance of drug-related cases. Thus, in Morales v.
Court of Appeals,93this Court categorically named the RTC as the court
with jurisdiction over drug related-cases, as follows:
Applying by analogy the ruling in People v. Simon, People v. De Lara,
People v. Santos, and Ordonez v. Vinarao, the imposable penalty in this
case which involves 0.4587 grams of shabu should not exceed prision
correccional. We say by analogy because these cases involved
marijuana, not methamphetamine hydrochloride (shabu). In Section 20
of RA. No. 6425, as amended by Section 17 of RA No. 7659, the
maximum quantities of marijuana and methamphetamine hydrochloride
for purposes of imposing the maximum penalties are not the same. For
the latter, if the quantity involved is 200 grams or more, the penalty
of reclusion perpetua to death and a fine ranging from ₱500,000 to PIO
million shall be imposed. Accordingly, if the quantity involved is below
200 grams, the imposable penalties should be as follows:
xxxx
Clearly, the penalty which may be imposed for the offense charged in
Criminal Case No. 96-8443 would at most be only prision
correccional duration is from six (6) months and one (1) day to six (6)
years. Does it follow then that, as the petitioner insists, the RTC has no
jurisdiction thereon in view of the amendment of Section 32 of B.P.
Big. 129 by R.A. No. 7691, which vested upon Metropolitan Trial
Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts
exclusive original jurisdiction over all offenses punishable with
imprisonment not exceeding six (6) years irrespective of the amount of
fine and regardless of other imposable accessory or other penalties?
This Section 32 as thus amended now reads:
xxxx
The exception in the opening sentence is of special significance which
we cannot disregard. x xx The aforementioned exception refers not only
to Section 20 of B.P. Blg. 129 providing for the jurisdiction of Regional
Trial Courts in criminal cases, but also to other laws which specifically
lodge in Regional Trial Courts exclusive jurisdiction over specific
criminal cases, e. g., (a) Article 360 of the Revised Penal Code, as
amended by R.A. Nos. 1289 and 4363 on written defamation or libel;
(b) Decree on Intellectual Property (P. D. No. 49, as amended), which
vests upon Courts of First Instance exclusive jurisdiction over the cases
therein mentioned regardless of the imposable penalty; and (c) more
appropriately for the case at bar, Section 39 of RA No. 6425, as
amended by P.D. No. 44, which vests on Courts of First Instance,
Circuit Criminal Courts, and the Juvenile and Domestic Relations
Courts concurrent exclusive original jurisdiction over all cases
involving violations of said Act.
xxxx
That Congress indeed did not intend to repeal these special laws vesting
exclusive jurisdiction in the Regional Trial Courts over certain cases is
clearly evident from the exception provided for in the opening sentence
of Section 32 of B.P. Blg. 129, as amended by RA No. 7691. These
special laws are not, therefore, covered by the repealing clause (Section
6) of RA No. 7691.
Neither can it be successfully argued that Section 39 of RA. No. 6425,
as amended by P.D. No. 44, is no longer operative because Section 44
of B.P. Big. 129 abolished the Courts of First Instance, Circuit Criminal
Courts, and Juvenile and Domestic Relations Courts. While, indeed,
Section 44 provides that these courts were to be "deemed automatically
abolished" upon the declaration by the President that the reorganization
provided in B.P. Blg. 129 had been completed, this Court should not
lose sight of the fact that the Regional Trial Courts merely replaced the
Courts of First Instance as clearly borne out by the last two sentences of
Section 44, to wit:
xxxx
Consequently, it is not accurate to state that the "abolition" of the
Courts of First Instance carried with it the abolition of their exclusive
original jurisdiction in drug cases vested by Section 39 of R.A. No.
6425, as amended by P. D. No. 44. If that were so, then so must it be
with respect to Article 360 of the Revised Penal Code and Section 57 of
the Decree on Intellectual Property. On the contrary, in the resolution of
19 June 1996 in Caro v. Court of Appeals and in the resolution of 26
February 1997 in Villalon v. Ba/dado, this Court expressly ruled that
Regional Trial Courts have the exclusive original jurisdiction over libel
cases pursuant to Article 360 of the Revised Penal Code. In
Administrative Order No. 104-96 this Court mandates that:
xxxx
The same Administrative Order recognizes that violations of RA. No.
6425, as amended, regardless of the quantity involved, are to be tried
and decided by the Regional Trial Courts therein designated as special
courts.94 (Emphasis and underscoring supplied)
Yet, much has been made of the terminology used in Section 90 of RA
9165. The dissents would highlight the provision's departure from
Section 39 of RA 6425 - the erstwhile drugs law, which provides:
SECTION 39. Jurisdiction of the Circuit Criminal Court. - The Circuit
Criminal Court shall have exclusive original jurisdiction over all cases
involving offenses punishable under this Act.
For those in the dissent, the failure to reproduce the phrase "exclusive
original jurisdiction" is a clear indication that no court, least of all the
RTC, has been vested with such "exclusive original jurisdiction" so that
even the Sandiganbayan can take cognizance and resolve a criminal
prosecution for violation of RA 9165.
As thoroughly discussed by Justice Peralta in his Concurring Opinion,
such deduction is unwarranted given the clear intent of the legislature
not only to retain the "exclusive original jurisdiction" of the RTCs over
violations of the drugs law but to segregate from among the several
RTCs of each judicial region some RTCs that will "exclusively try and
hear cases involving violations of [RA 9165)." If at all, the change
introduced by the new phraseology of Section 90, RA 9165 is not the
deprivation of the RTCs' "exclusive original jurisdiction" but the further
restriction of this "exclusive original jurisdiction" to select RTCs of
each judicial region. This intent can be clearly gleaned from the
interpellation on House Bill No. 4433, entitled "An Act Instituting the
Dangerous Drugs Act of 2002, repealing Republic Act No. 6425, as
amended:"
Initially, Rep. Dilangalen referred to the fact sheet attached to the Bill
which states that the measure will undertake a comprehensive
amendment to the existing law on dangerous drugs -- RA No. 6425, as
amended. Adverting to Section 64 of the Bill on the repealing clause, he
then asked whether the Committee is in effect amending or repealing
the aforecited law. Rep. Cuenco replied that any provision of law which
is in conflict with the provisions of the Bill is repealed and/or modified
accordingly.
In this regard, Rep. Dilangalen suggested that if the Committee's
intention was only to amend RA No. 6425, then the wording used
should be "to amend" and not "to repeal" with regard to the provisions
that are contrary to the provisions of the Bill.
Adverting to Article VIII, Section 60, on Jurisdiction Over Dangerous
Drugs Case, which provides that "the Supreme Court shall designate
regional trial courts to have original jurisdiction over all offenses
punishable by this Act," Rep. Dilangalen inquired whether it is the
Committee's intention that certain RTC salas will be designated by the
Supreme Court to try drug-related offenses, although all RTCs have
original jurisdiction over those offenses.
Rep. Cuenco replied in the affirmative. He pointed that at present, the
Supreme Court's assignment of drug cases to certain judges is not
exclusive because the latter can still handle cases other than drug-
related cases. He added that the Committee's intention is to assign drug-
related cases to judges who will handle exclusively these cases assigned
to them.
In this regard, Rep. Dilangalen stated that, at the appropriate time, he
would like to propose the following amendment; "The Supreme Court
shall designate specific salas of the RTC to try exclusively offenses
related to drugs."
Rep. Cuenca agreed therewith, adding that the Body is proposing the
creation of exclusive drug courts because at present, almost all of the
judges are besieged by a lot of drug cases some of which have been
pending for almost 20 years.95 (Emphasis and underscoring supplied.)
Per the "Records of the Bilateral Conference Committee on the
Disagreeing Provisions of Senate Bill No. 1858 and House Bill No.
4433," the term "designation" of R TCs that will exclusively handle
drug-related offenses was used to skirt the budgetary requirements that
might accrue by the "creation" of exclusive drugs courts. It was never
intended to divest the R TCs of their exclusive original jurisdiction over
drug-related cases. The Records are clear:
THE CHAIRMAN (REP. CUENCO). x x x [W]e would like to propose
the creation of drug courts to handle exclusively drug cases; the
imposition of a 60-day deadline on courts within which to decide drug
cases; and No. 3, provide penalties on officers of the law and
government prosecutors for mishandling and delaying drugs cases.
We will address these concerns one by one.
1. The possible creation of drugs courts to handle exclusively drug
cases. Any comments?
xxxx
THE CHAIRMAN (SEN. BARBERS). We have no objection to this
proposal, Mr. Chairman. As a matter of fact, this is one of the areas
where we come into an agreement when we were in Japan. However, I
just would like to add a paragraph after the word "Act" in Section 86 of
the Senate versions, Mr. Chairman. And this is in connection with the
designation of special courts by "The Supreme Court shall designate
special courts from among the existing Regional Trial Courts in each
judicial region to exclusively try and hear cases involving violations of
this Act. The number of court designated in each judicial region shall
be based on the population and the number of pending cases in their
respective jurisdiction." That is my proposal, Mr. Chairman.
THE CHAIRMAN (REP. CUENCO). We adopt the same proposal.
xxxx
THE CHAIRMAN (SEN. BARBERS). I have no problem with that,
Mr. Chairman, but I'd like to call your attention to the fact that my
proposal is only for designation because if it is for a creation that would
entail another budget, Mr. Chairman. And almost always, the
Department of Budget would tell us at the budget hearing that we lack
funds, we do not have money. So that might delay the very purpose
why we want the RTC or the municipal courts to handle exclusively the
drug cases. That's why my proposal is designation not creation.
THE CHAIRMAN (REP. CUENCO). Areglado. No problem,
designation. Approved.96
The exclusive original jurisdiction over violations of RA 9165 is not
transferred to the Sandiganbayan whenever the accused occupies a
position classified as Grade 27 or higher, regardless of whether the
violation is alleged as committed in relation to office. The power of the
Sandiganbayan to sit in judgment of high-ranking government officials
is not omnipotent. The Sandiganbayan's jurisdiction is circumscribed by
law and its limits are currently defined and prescribed by RA
10660,97 which amended Presidential Decree No. (PD) 1606. 98 As it
now stands, the Sandiganbayan has jurisdiction over the following:
SEC. 4. Jurisdiction. - The Sandiganbayan shall exercise exclusive
original jurisdiction in all cases involving:
a. Violations of Republic Act No. 3019, as amended, otherwise known
as the Anti-Graft and Corrupt Practices Act, Republic Act No. 1379,
and Chapter II, Section 2, Title VII, Book II of the Revised Penal Code,
where one or more of the accused are officials occupying the following
positions in the government, whether in a permanent, acting or interim
capacity, at the time of the commission of the offense:
(1) Officials of the executive branch occupying the positions of regional
director and higher, otherwise classified as Grade '27' and higher, of the
Compensation and Position Classification Act of 1989 (Republic Act
No. 6758), specifically including:
xxxx
(2) Members of Congress and officials thereof classified as Grade '27'
and higher under the Compensation and Position Classification Act of
1989;
(3) Members of the judiciary without prejudice to the provisions of the
Constitution;
(4) Chairmen and members of the Constitutional Commissions, without
prejudice to the provisions of the Constitution; and
(5) All other national and local officials classified as Grade '27' and
higher under the Compensation and Position Classification Act of 1989.
b. Other offenses or felonies whether simple or complexed with other
crimes committed by the public officials and employees mentioned in
subsection a. of this section in relation to their office.
c. Civil and criminal cases filed pursuant to and in connection with
Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986. Provided, That
the Regional Trial Court shall have exclusive original jurisdiction
where the information: (a) does not allege any damage to the
government or any bribery; or (b) alleges damage to the government or
bribery arising from the same or closely related transactions or acts in
an amount not exceeding One Million pesos (₱l,000,000.00).
The foregoing immediately betrays that the Sandiganbayan primarily
sits as a special anti-graft court pursuant to a specific injunction in the
1973 Constitution.99 Its characterization and continuation as such was
expressly given a constitutional fiat under Section 4, Article XI of the
1987 Constitution, which states:
SECTION 4. The present anti-graft court known as the
Sandiganbayan shall continue to function and exercise its jurisdiction as
now or hereafter may be provided by law.
It should occasion no surprise, therefore, that the Sandiganbayan is
without jurisdiction to hear drug-related cases. Even Section 4(b) of PD
1606, as amended by RA 10660, touted by the petitioner and the
dissents as a catchall provision, does not operate to strip the R TCs of
its exclusive original jurisdiction over violations of RA 9165. As
pointed out by Justices Tijam and Martires, a perusal of the drugs law
will reveal that public officials were never considered excluded from its
scope. Hence, Section 27 of RA 9165 punishes government officials
found to have benefited from the trafficking of dangerous drugs, while
Section 28 of the law imposes the maximum penalty on such
government officials and employees. The adverted sections read:
SECTION 27. Criminal Liability of a Public Officer or Employee for
Misappropriation, Misapplication or Failure to Account for the
Confiscated, Seized and/or Surrendered Dangerous Drugs, Plant
Sources of Dangerous Drugs, Controlled Precursors and Essential
Chemicals, Instruments/Paraphernalia and/or Laborat01y Equipment
Including the Proceeds or Properties Obtained from the Unlawful Act
Committed - The penalty of life imprisonment to death and a fine
ranging from Five hundred thousand pesos (P500,000.00) to Ten
million pesos (Pl0,000,000.00), in addition to absolute perpetual
disqualification from any public office, shall be imposed upon any
public officer or employee who misappropriates, misapplies or fails to
account for confiscated, seized or surrendered dangerous drugs, plant
sources of dangerous drugs, controlled precursors and essential
chemicals, instruments/paraphernalia and/or laboratory equipment
including the proceeds or properties obtained from the unlawful acts as
provided for in this Act.
Any elective local or national official found to have benefited from the
proceeds of the trafficking of dangerous drugs as prescribed in this Act,
or have received any financial or material contributions or donations
from natural or juridical persons found guilty of trafficking dangerous
drugs as prescribed in this Act, shall be removed from office and
perpetually disqualified from holding any elective or appointive
positions in the government, its divisions, subdivisions, and
intermediaries, including government-owned or -controlled
corporations.
SECTION 28. Criminal Liability of Government Officials and
Employees. - The maximum penalties of the unlawful acts provided for
in this Act shall be imposed, in addition to absolute perpetual
disqualification from any public office, if those found guilty of such
unlawful acts are government officials and employees. (Emphasis
supplied)
Section 4(b) of PD 1606, as amended by RA 10660, provides but
the general rule, couched in a "broad and general phraseology.
"100 Exceptions abound. Besides the jurisdiction on written defamations
and libel, as illustrated in Morales 101and People v. Benipayo, 102 the
RTC is likewise given "exclusive original jurisdiction to try and decide
any criminal action or proceedings for violation of the Omnibus
Election Code,"103 regardless of whether such violation was committed
by public officers occupying positions classified as Grade 27 or higher
in relation to their offices. In fact, offenses committed by members of
the Armed Forces in relation to their office, i.e., in the words of RA
7055,104"service-connected crimes or offenses," are not cognizable by
the Sandiganbayan but by court-martial.
Certainly, jurisdiction over offenses and felonies committed by public
officers is not determined solely by the pay scale or by the fact that they
were committed "in relation to their office." In determining the forum
vested with the jurisdiction to try and decide criminal actions, the laws
governing the subject matter of the criminal prosecution must likewise
be considered.
In this case, RA 9165 specifies the RTC as the court with the
jurisdiction to "exclusively try and hear cases involving violations of
[RA 9165)." This is an exception, couched in the special law on
dangerous drugs, to the general rule under Section 4(b) of PD 1606,
as amended by RA 10660. It is a canon of statutory construction that a
special law prevails over a general law and the latter is to be considered
as an exception to the general.105
Parenthetically, it has been advanced that RA 10660 has repealed
Section 90 of RA 9165. However, a closer look at the repealing clause
of RA 10660 will show that there is no express repeal of Section 90 of
RA 9165 and well-entrenched is the rule that an implied repeal is
disfavored. It is only accepted upon the clearest proof of inconsistency
so repugnant that the two laws cannot be enforced. 106 The presumption
against implied repeal is stronger when of two laws involved one is
special and the other general.107 The mentioned rule in statutory
construction that a special law prevails over a general law applies
regardless of the laws' respective dates of passage. Thus, this Court
ruled:
x x x [I]t is a canon of statutory construction that a special law prevails
over a general law - regardless of their dates of passage - and the
special is to be considered as remaining an exception to the general.
So also, every effort must be exerted to avoid a conflict between
statutes. If reasonable construction is possible, the laws must be
reconciled in that manner.
Repeals of laws by implication moreover are not favored, and the mere
repugnancy between two statutes should be very clear to warrant the
court in holding that the later in time repeals the other. 108
To reiterate for emphasis, Section 4(b) of PD 1606, as amended by
RA 10660, is the general law on jurisdiction of the Sandiganbayan
over crimes and offenses committed by high-ranking public officers in
relation to their office; Section 90, RA 9165 is the special
law excluding from the Sandiganbayan's jurisdiction violations of RA
9165 committed by such public officers. In the latter case, jurisdiction
is vested upon the RTCs designated by the Supreme Court as drugs
court, regardless of whether the violation of RA 9165 was committed in
relation to the public officials' office.
The exceptional rule provided under Section 90, RA 9165 relegating
original exclusive jurisdiction to RTCs specially designated by the
Supreme Court logically follows given the technical aspect of drug-
related cases. With the proliferation of cases involving violation of RA
9165, it is easy to dismiss them as common and untechnical. However,
narcotic substances possess unique characteristics that render them not
readily identifiable.109 In fact, they must first be subjected to scientific
analysis by forensic chemists to determine their composition and
nature.110Thus, judges presiding over designated drugs courts are
specially trained by the Philippine Judicial Academy (PhilJa) and given
scientific instructions to equip them with the proper tools to appreciate
pharmacological evidence and give analytical insight upon this esoteric
subject. After all, the primary consideration of RA 9165 is the fact that
the substances involved are, in fact, dangerous drugs, their plant
sources, or their controlled precursors and essential chemicals. Without
a doubt, not one of the Sandiganbayan justices were provided with
knowledge and technical expertise on matters relating to prohibited
substances.
Hard figures likewise support the original and exclusive jurisdiction of
the RTCs over violations of RA 9165. As previously stated, as of June
30, 2017, there are 232,557 drugs cases pending before the RTCs. On
the other hand, not even a single case filed before the Sandiganbayan
from February 1979 to June 30, 2017 dealt with violations of the drugs
law. Instead, true to its designation as an anti-graft court, the bulk of the
cases filed before the Sandiganbayan involve violations of RA 3019,
entitled the "Anti-Graft and Corrupt Practices Act" and
malversation.111 With these, it would not only be unwise but reckless to
allow the tribunal uninstructed and inexperienced with the intricacies of
drugs cases to hear and decide violations of RA 9165 solely on account
of the pay scale of the accused.
Likewise of special significance is the proviso introduced by RA 10660
which, to reiterate for emphasis, states:
Provided, That the Regional Trial Court shall have exclusive original
jurisdiction where the information: (a) does not allege any damage to
the government or any bribery; or (b) alleges damage to the government
or bribery arising from the same or closely related transactions or acts
in an amount not exceeding One million pesos (₱l,000,000.00).
The clear import of the new paragraph introduced by RA 10660 is to
streamline the cases handled by the Sandiganbayan by delegating to the
RTCs some cases involving high-ranking public officials. With the
dissents' proposition, opening the Sandiganbayan to the influx of drug-
related cases, RA 10660 which was intended to unclog the dockets of
the Sandiganbayan would all be for naught. Hence, sustaining the
RTC's jurisdiction over drug-related cases despite the accused's high-
ranking position, as in this case, is all the more proper.
Even granting arguendo that the Court declares the Sandiganbayan has
jurisdiction over the information subject of Criminal Case No. 17-165,
still it will not automatically result in the release from detention and
restore the liberty and freedom of petitioner. The R TC has several
options if it dismisses the criminal case based on the grounds raised by
petitioner in her Motion to Quash.
Under Rule 117 of the Rules of Court, the trial court has three (3)
possible alternative actions when confronted with a Motion to Quash:
 1. Order the amendment of the Infonnation;
2. Sustain the Motion to Quash; or
3. Deny the Motion to Quash.
The first two options are available to the trial court where the motion to
quash is meritorious. Specifically, as to the first option, this court had
held that should the Information be deficient or lacking in any material
allegation, the trial court can order the amendment of the Information
under Section 4, Rule 117 of the Rules of Court, which states:
SECTION 4. Amendment of Complaint or Information. - If the motion
to quash is based on an alleged defect of the complaint or information
which can be cured by amendment, the court shall order that an
amendment be made.
If it is based on the ground that the facts charged do not constitute an
offense, the prosecution shall be given by the court an opportunity to
correct the defect by amendment. The motion shall be granted if the
prosecution fails to make the amendment, or the complaint or
information still suffers from the same defect despite the amendment.
The failure of the trial court to order the correction of a defect in the
Information curable by an amendment amounts to an arbitrary exercise
of power. So, this Court held in Dio v. People:
This Court has held that failure to provide the prosecution with the
opportunity to amend is an arbitrary exercise of power. In People v.
Sandiganbayan (Fourth Division): When a motion to quash is filed
challenging the validity and sufficiency of an Information, and the
defect may be cured by amendment, courts must deny the motion to
quash and order the prosecution to file an amended Information.
Generally, a defect pertaining to the failure of an Information to charge
facts constituting an offense is one that may be corrected by an
amendment. In such instances, courts are mandated not to automatically
quash the Information; rather, it should grant the prosecution the
opportunity to cure the defect through an amendment. This rule allows
a case to proceed without undue delay. By allowing the defect to be
cured by simple amendment, unnecessary appeals based on technical
grounds, which only result to prolonging the proceedings, are avoided.
More than this practical consideration, however, is the due process
underpinnings of this rule. As explained by this Court in People v.
Andrade, the State, just like any other litigant, is entitled to its day in
court. Thus, a court's refusal to grant the prosecution the opportunity to
amend an Information, where such right is expressly granted under the
Rules of Court and affirmed time and again in a string of Supreme
Court decisions, effectively curtails the State's right to due process. 112
Notably, the defect involved in Dio was the Information's failure to
establish the venue - a matter of jurisdiction in criminal cases. Thus, in
the case at bar where petitioner has not yet been arraigned, the court a
quo has the power to order the amendment of the February 17, 2017
Information filed against the petitioner. This power to order the
amendment is not reposed with this Court in the exercise of
its certiorari powers.
Nevertheless, should the trial court sustain the motion by actually
ordering the quashal of the Infonnation, the prosecution is not
precluded from filing another information. An order sustaining the
motion to quash the information would neither bar another
prosecution113 or require the release of the accused from custody.
Instead, under Section 5, Rule 117 of the Rules of Court, the trial court
can simply order that another complaint or information be filed without
discharging the accused from custody. Section 5, Rule 117 states, thus:
Section 5. Effect of sustaining the motion to quash. - If the motion to
quash is sustained, the court may order that another complaint or
information be filed except as provided in Section 6 of this rule. If the
order is made, the accused, if in custody, shall not be discharged unless
admitted to bail. If no order is made or if having been made, no new
information is filed within the time specified in the order or within such
further time as the court may allow for good cause, the accused, if in
custody, shall be discharged unless he is also in custody for another
charge.
Section 6, Rule 117, adverted to in the foregoing provision, prevents the
re-filing of an information on only two grounds: that the criminal action
or liability has already been extinguished, and that of double jeopardy.
Neither was invoked in petitioner's Motion to Quash filed before the
court a quo.
The third option available to the trial court is the denial of the motion to
quash. Even granting, for the nonce, the petitioner's position that the
trial court's issuance of the warrant for her arrest is an implied denial of
her Motion to Quash, the proper remedy against this court action is to
proceed to trial, not to file the present petition for certiorari. This Court
in Galzote v. Briones reiterated this established doctrine:
A preliminary consideration in this case relates to the propriety of the
chosen legal remedies availed of by the petitioner in the lower courts to
question the denial of his motion to quash. In the usual course of
procedure, a denial of a motion to quash filed by the accused results in
the continuation of the trial and the determination of the guilt or
innocence of the accused. If a judgment of conviction is rendered and
the lower court's decision of conviction is appealed, the accused can
then raise the denial of his motion to quash not only as an error
committed by the trial court but as an added ground to overturn the
latter's ruling.
In this case, the petitioner did not proceed to trial but opted to
immediately question the denial of his motion to quash via a special
civil action for certiorari under Rule 65 of the Rules of Court.
As a rule, the denial of a motion to quash is an interlocutory order and
is not appealable; an appeal from an interlocutory order is not allowed
under Section 1 (b), Rule 41 of the Rules of Court. Neither can it be a
proper subject of a petition for certiorari which can be used only in the
absence of an appeal or any other adequate, plain and speedy remedy.
The plain and speedy remedy upon denial of an interlocutory order is to
proceed to trial as discussed above.114 (Emphasis and underscoring
supplied)
At this juncture, it must be stressed yet again that the trial court has
been denied the opportunity to act and rule on petitioner's motion when
the latter jumped the gun and prematurely repaired posthaste to this
Court, thereby immobilizing the trial court in its tracks. Verily, De
Lima should have waited for the decision on her motion to quash
instead of prematurely filing the instant recourse.
In the light of the foregoing, the best course of action for the Court to
take is to dismiss the petition and direct the trial court to rule on the
Motion to Quash and undertake all the necessary proceedings to
expedite the adjudication of the subject criminal case.
RESPONDENT JUDGE DID NOT ABUSE HER DISCRETION IN
FINDING PROBABLE CAUSE TO ORDER THE PETITIONER'S
ARREST
The basis for petitioner's contention that respondent judge committed
grave abuse of discretion in issuing the February 23, 2017
Order115 finding probable cause to arrest the petitioner is two-pronged:
respondent judge should have first resolved the pending Motion to
Quash before ordering the petitioner's arrest; and there is no probable
cause to justify the petitioner's arrest.
Grave abuse of discretion is the capricious and whimsical exercise of
judgment equivalent to an evasion of positive duty or a virtual refusal to
act at all in contemplation of the law. 116
In the present case, the respondent judge had no positive duty to first
resolve the Motion to Quash before issuing a warrant of arrest. There is
no rule of procedure, statute, or jurisprudence to support the petitioner's
claim. Rather, Sec.5(a), Rule 112 of the Rules of Court 117 required the
respondent judge to evaluate the prosecutor's resolution and its
supporting evidence within a limited period of only ten (10) days, viz.:
SEC. 5. When warrant of arrest may issue. -
(a) By the Regional Trial Court. - Within ten (10) days from the filing
of the complaint or information, the judge shall personally evaluate the
resolution of the prosecutor and its supporting evidence. He may
immediately dismiss the case if the evidence on record clearly fails to
establish probable cause. If he finds probable cause, he shall issue a
warrant of arrest, or a commitment order when the complaint or
information was filed pursuant to Section 6 of this Rule. In case of
doubt on the existence of probable cause, the judge may order the
prosecutor to present additional evidence within five (5) days from
notice and the issue must be resolved by the court within thirty (30)
days from the filing of the complaint or information.
It is not far-fetched to conclude, therefore, that had the respondent
judge waited longer and first attended to the petitioner's Motion to
Quash, she would have exposed herself to a possible administrative
liability for failure to observe Sec. 5(a), Rule 112 of the Rules of Court.
Her exercise of discretion was sound and in conformity with the
provisions of the Rules of Court considering that a Motion to
Quash may be filed and, thus resolved by a trial court judge, at any time
before the accused petitioner enters her plea. 118 What is more, it is in
accord with this Court's ruling in Marcos v. Cabrera-Faller119that "[a]s
the presiding judge, it was her task, upon the filing of the Information,
to first and foremost determine the existence or non-existence of
probable cause for the arrest of the accused."
This Court's ruling in Miranda v. Tuliao 120does not support the
petitioner's position. Miranda does not prevent a trial court from
ordering the arrest of an accused even pending a motion to quash the
infonnation. At most, it simply explains that an accused can seek
judicial relief even if he has not yet been taken in the custody of law.
Undoubtedly, contrary to petitioner's postulation, there is no rule or
basic principle requiring a trial judge to first resolve a motion to quash,
whether grounded on lack of jurisdiction or not, before issuing a
warrant of arrest. As such, respondent judge committed no grave abuse
of discretion in issuing the assailed February 23, 2017 Order even
before resolving petitioner's Motion to Quash. There is certainly no
indication that respondent judge deviated from the usual procedure in
finding probable cause to issue the petitioner's arrest.
And yet, petitioner further contends that the language of the February
23, 2017 Order violated her constitutional rights and is contrary to the
doctrine in Soliven v. Makasiar. 121Petitioner maintains that respondent
judge failed to personally determine the probable cause for the issuance
of the warrant of arrest since, as stated in the assailed Order, respondent
judge based her findings on the evidence presented during the
preliminary investigation and not on the report and supporting
documents submitted by the prosecutor.122 This hardly deserves serious
consideration.
Personal determination of the existence of probable cause by the judge
is required before a warrant of arrest may issue. The Constitution 123 and
the Revised Rules of Criminal Procedure124 command the judge "to
refrain from making a mindless acquiescence to the prosecutor's
findings and to conduct his own examination of the facts and
circumstances presented by both parties. "125 This much is clear from
this Court's n1ling in Soliven cited by the petitioner, viz.:
What the Constitution underscores is the exclusive and personal
responsibility of the issuing judge to satisfy himself the existence of
probable cause. In satisfying himself of the existence of probable cause
for the issuance of a warrant of arrest, the judge is not required to
personally examine the complainant and his witnesses. Following
established doctrine and procedure, he shall: (1) personally evaluate the
report and the supporting documents submitted by the fiscal regarding
the existence of probable cause and, on the basis thereof, issue a
warrant of arrest; or (2) if on the basis thereof he finds no probable
cause, he may disregard the fiscal's report and require the submission of
supporting affidavits of witnesses to aid him in arriving at a conclusion
as to the existence of probable cause.126
It must be emphasized, however, that in determining the probable cause
to issue the warrant of arrest against the petitioner, respondent judge
evaluated the Information and "all the evidence presented during the
preliminary investigation conducted in this case." The assailed February
23, 2017 Order is here restated for easy reference and provides, thusly:
After a careful evaluation of the herein Information and all the evidence
presented during the preliminary investigation conducted in this case by
the Department of Justice, Manila, the Court finds sufficient probable
cause for the issuance of Warrants of Arrest against all the accused
LEILA M. DE LIMA x x x.127 (Emphasis supplied.)
As the prosecutor's report/resolution precisely finds support from the
evidence presented during the preliminary investigation, this Court
cannot consider the respondent judge to have evaded her duty or
refused to perform her obligation to satisfy herself that substantial basis
exists for the petitioner's arrest. "All the evidence presented during the
preliminary investigation" encompasses a broader category than the
"supporting evidence" required to be evaluated in Soliven. It may
perhaps even be stated that respondent judge performed her duty in a
manner that far exceeds what is required of her by the rules when she
reviewed all the evidence, not just the supporting documents. At the
very least, she certainly discharged a judge's duty in finding probable
cause for the issuance of a warrant, as described in Ho v. People:
The above rulings in Soliven, Inting and Lim, Sr. were iterated
in Allado v. Diokno, where we explained again what probable cause
means. Probable cause for the issuance of a warrant of arrest is the
existence of such facts and circumstances that would lead a reasonably
discreet and prudent person to believe that an offense has been
committed by the person sought to be arrested. Hence, the judge, before
issuing a warrant of arrest, 'must satisfy himself that based on the
evidence submitted, there is sufficient proof that a crime has been
committed and that the person to be arrested is probably guilty thereof'
At this stage of the criminal proceeding, the judge is not yet tasked to
review in detail the evidence submitted during the preliminary
investigation. It is sufficient that he personally evaluates such evidence
in determining probable cause. In Webb v. De Leon we stressed that the
judge merely determines the probability, not the certainty, of guilt of
the accused and, in doing so, he need not conduct a de novo hearing. He
simply personally reviews the prosecutor's initial determination finding
probable cause to see if it is supported by substantial evidence."
xxxx
x x x [T]he judge cannot rely solely on the report of the prosecutor in
finding probable cause to justify the issuance of a warrant of arrest.
Obviously and understandably, the contents of the prosecutor's report
will support his own conclusion that there is reason to charge the
accused for an offense and hold him for trial. However, the judge must
decide independently. Hence, he must have supporting evidence, other
than the prosecutor's bare report, upon which to legally sustain his own
findings on the existence (or non-existence) of probable cause to issue
an arrest order. This responsibility of determining personally and
independently the existence or nonexistence of probable cause is lodged
in him by no less than the most basic law of the land. Parenthetically,
the prosecutor could ease the burden of the judge and speed up the
litigation process by forwarding to the latter not only the information
and his bare resolution finding probable cause, but also so much of the
records and the evidence on hand as to enable His Honor to make his
personal and separate judicial finding on whether to issue a warrant of
arrest.
Lastly, it is not required that the complete or entire records of the case
during the preliminary investigation be submitted to and examined by
the judge. We do not intend to unduly burden trial courts by obliging
them to examine the complete records of every case all the time simply
for the purpose of ordering the arrest of an accused. What is required,
rather, is that the judge must have sufficient supporting documents
(such as the complaint, affidavits, counter-affidavits, sworn statements
of witnesses or transcript of stenographic notes, if any) upon which to
make his independent judgment or, at the very least, upon which to
verify the findings of the prosecutor as to the existence of probable
cause. The point is: he cannot rely solely and entirely on the
prosecutor's recommendation, as Respondent Court did in this case.
Although the prosecutor enjoys the legal presumption of regularity in
the performance of his official duties and functions, which in turn gives
his report the presumption of accuracy, the Constitution, we repeat,
commands the judge to personally determine probable cause in the
issuance of warrants of arrest. This Court has consistently held that a
judge fails in his bounden duty if he relies merely on the certification or
the report of the investigating officer.128 (Emphasis supplied.)
Notably, for purposes of determining the propriety of the issuance of a
warrant of arrest, the judge is tasked to merely determine the
probability, not the certainty, of the guilt of the accused. 129 She is given
wide latitude of discretion in the determination of probable cause for
the issuance of warrants of arrest.130 A finding of probable cause to
order the accused's arrest does not require an inquiry into whether there
is sufficient evidence to procure a conviction. 131 It is enough that it is
believed that the act or omission complained of constitutes the offense
charged.132
Again, per the February 23, 2017 Order, respondent judge evaluated all
the evidence presented during the preliminary investigation and on the
basis thereof found probable cause to issue the warrant of arrest against
the petitioner. This is not surprising given that the only evidence
available on record are those provided by the complainants and the
petitioner, in fact, did not present any counter-affidavit or evidence to
controvert this. Thus, there is nothing to disprove the following
preliminary findings of the DOJ prosecutors relative to the allegations
in the Information filed in Criminal Case No. 17-165:
Thus, from November 2012 to March 2013, De Lima[,] Ragos and
Dayan should be indicted for violation of Section 5, in relation to
Section 3Gj), Section 26(b) and Section 28, of R.A. 9165, owing to the
delivery of PS million in two (2) occasions, on 24 November 2012 and
15 December 2012, to Dayan and De Lima. The monies came inmate
Peter Co [were] proceeds from illicit drug trade, which were given to
support the senatorial bid of De Lima.
Also in the same period, Dayan demanded from Ragos money to
support the senatorial bid of De Lima. Ragos demanded and received
₱100,000 tara from each of the high-profile inmates in exchange for
privileges, including their illicit drug trade. Ablen collected the money
for Ragos who, in turn, delivered them to Dayan at De Lima's
residence.133
The foregoing findings of the DOJ find support in the affidavits and
testimonies of several persons. For instance, in his Affidavit dated
September 3, 2016, NBI agent Jovencio P. Ablen, Jr. narrated, viz.:
21. On the morning of 24 November 2012, I received a call from Dep.
Dir. Ragos asking where I was. I told him I was at home. He replied
that he will fetch me to accompany him on a very important task.
22. Approximately an hour later, he arrived at my house. I boarded his
vehicle, a Hyundai Tucson, with plate no. RGU910. He then told me
that he will deliver something to the then Secretary of Justice, Sen.
Leila De Lima. He continued and said "Nior confidential 'to. Tayong
dalawa lang ang nakakaalam nito. Dadalhin natin yung quota kay
Lola. SM 'yang nasa bag. Tingnan mo."
23. The black bag he was referring to was in front of my feet. It [was a]
black handbag. When I opened the bag, I saw bundles of One Thousand
Peso bills.1âwphi1
24. At about 10 o'clock in the morning, we arrived at the house located
at Laguna Bay corner Subic Bay Drive, South Bay Village, Paranaque
City.
25. Dep. Dir. Ragos parked his vehicle in front of the house. We both
alighted the vehicle but he told me to stay. He then proceeded to the
house.
26. From our parked vehicle, I saw Mr. Ronnie Dayan open the gate.
Dep. Dir. Ragos then handed the black handbag containing bundles of
one thousand peso bills to Mr. Dayan.
27. At that time, I also saw the then DOJ Sec. De Lima at the main door
of the house. She was wearing plain clothes which is commonly known
referred to as "duster."
28. The house was elevated from the road and the fence was not high
that is why I was able to clearly see the person at the main door, that is,
Sen. De Lima.
29. When Dep. Dir. Ragos and Mr. Dayan reached the main door, I saw
Mr. Dayan hand the black handbag to Sen. De Lima, which she
received. The three of them then entered the house.
30. After about thirty (30) minutes, Dep. Dir. Ragos went out of the
house. He no longer has the black handbag with him.
31. We then drove to the BuCor Director's Quarters in Muntinlupa City.
While cruising, Dep. Dir. Ragos told me "Nior 'wag kang maingay
kahit kanino at wala kang nakita ha," to which I replied "Sabi mo e. e
di wala akong nakita."
32. On the morning of 15 December 2012, Dep. Dir. Ragos again
fetched me from my house and we proceeded to the same house located
at Laguna Bay comer Subic Bay Drive, South Bay Village, Paranaque
City.
33. That time, I saw a plastic bag in front of my feet. I asked Dep. Dir.
Ragos "Quota na naman Sir?"Dep. Dir. Ragos replied "Ano pa nga ba,
'tang ina sila lang meron. "134
Petitioner's co-accused, Rafael Ragos, recounted in his own Affidavit
dated September 26, 2016 a similar scenario:
8. One morning on the latter part of November 2012, I saw a black
handbag containing a huge sum of money on my bed inside the
Director's Quarters of the BuCor. I looked inside the black handbag and
saw that it contains bundles of one thousand peso bills.
9. I then received a call asking me to deliver the black handbag to Mr.
Ronnie Dayan. The caller said the black handbag came from Peter Co
and it contains "Limang Manoi<' which means Five Million Pesos
(Php5,000,000.00) as a "manoR' refers to One Million Pesos (Php
1,000,000.00) in the vernacular inside the New Bilibid Prison.
10. As I personally know Mr. Dayan and knows that he stays in the
house of the then DOJ Sec. Leila M. De Lima located at Laguna Bay
corner Subic Bay Drive, South Bay Village, Paranaque City, I knew I
had to deliver the black handbag to Sen. De Lima at the said address.
11. Before proceeding to the house of Sen. De Lima at the
above[-]mentioned address, I called Mr. Ablen to accompany me in
delivering the money. I told him we were going to do an important task.
12. Mr. Ablen agreed to accompany me so I fetched him from his house
and we proceeded to the house of Sen. De Lima at the above-mentioned
address.
13. While we were in the car, I told Mr. Ablen that the important task
we will do is deliver Five Million Pesos (Php5,000,000.00) "Quota" to
Sen. De Lima. I also told him that the money was in the black handbag
that was on the floor of the passenger seat (in front of him) and he
could check it, to which Mr. Ablen complied.
14. Before noon, we arrived at the house of Sen. De Lima located at
Laguna Bay corner Subic Bay Drive, South Bay Village, Paranaque
City.
15. I parked my vehicle in front of the house. Both Mr. Ablen and I
alighted from the vehicle but I went to the gate alone carrying the black
handbag containing the Five Million Pesos (Php5,000,000.00).
16. At the gate, Mr. Ronnie Dayan greeted me and opened the gate for
me. I then handed the handbag containing the money to Mr. Dayan.
17. We then proceeded to the main door of the house where Sen. De
Lima was waiting for us. At the main door, Mr. Dayan handed the black
handbag to Sen. De Lima, who received the same. We then entered the
house.
18. About thirty minutes after, I went out of the house and proceeded to
my quarters at the BuCor, Muntinlupa City.
19. One morning in the middle part of December 2012, I received a call
to again deliver the plastic bag containing money from Peter Co to Mr.
Ronnie Dayan. This time the money was packed in a plastic bag left on
my bed inside my quarters at the BuCor, Muntinlupa City. From the
outside of the bag, I could easily perceive that it contains money
because the bag is translucent.
20. Just like before, I fetched Mr. Ablen from his house before
proceeding to the house of Sen. De Lima located at Laguna Bay corner
Subic Bay Drive, South Bay Village, Paranaque City, where I know I
could find Mr. Dayan.
21. In the car, Mr. Ablen asked me if we are going to deliver "quota." I
answered yes.
22. We arrived at the house of Sen. De Lima at the above[-]mentioned
address at noontime. I again parked in front of the house.
23. I carried the plastic bag containing money to the house. At the gate,
I was greeted by Mr. Ronnie Dayan. At that point, I handed the bag to
Mr. Dayan. He received the bag and we proceeded inside the house. 135
The source of the monies delivered to petitioner De Lima was expressly
bared by several felons incarcerated inside the NBP. Among them is
Peter Co, who testified in the following manner:
6. Noong huling bahagi ng 2012, sinabi sa akin ni Hans Tanna
nanghihingi ng kontribusyon sa mgaChinese sa Maximum Security
Compound ng NBP si dating DOJ Sec. De Lima para sa kanyang
planong pagtakbo sa senado sa 2013 Elections. Dalawang beses akong
nagbigay ng tig-P5 Million para tugunan ang hiling ni Sen. De Lima,
na dating DOJ Secretary;
7. Binigay ko ang mga halagang ito kay Hans Tan para maibigay
kay Sen. Leila De Lima na datingDOJ Secretary. Sa parehong
pagkakataon, sinabihan na lang ako ni Hans Tan na naibigay na ang
pera kay Ronnie Dayan na siyang tumatanggap ng pera para kay
dating DOJ Sec. De Lima Sinabi rin niHans Tanna ang nagdeliver ng
pera ay si dating OIC ng BuCor na si Rafael Ragos.

8. Sa kabuuan, nakapagbigay ang mga Chinese sa loob

ng Maximum ng PIO Million sa mga huling bahagi ng taong 2012 kay
dating DOJ Sec. De Lima para sa kanyang planong pagtakbo sa
senado sa2013 Elections. Ang mga perang ito ay mula sa
pinagbentahan ng illegal na droga.136

All these, at least preliminarily, outline a case for illegal drug trading
committed in conspiracy by the petitioner and her co-accused. Thus, the
Court cannot sustain the allegation that respondent judge committed
grave abuse of discretion in issuing the assailed Order for petitioner's
arrest.

Petitioner would later confine herself to the contention that the

prosecution's evidence is inadmissible, provided as they were by
petitioner's co-accused who are convicted felons and whose testimonies
are but hearsay evidence.

Nowhere in Ramos v. Sandiganbayan 137 - the case relied upon by

petitioner - did this Court rule that testimonies given by a co-accused
are of no value. The Court simply held that said testimonies should be
received with great caution, but not that they would not be considered.
The testimony of Ramos' co-accused was, in fact, admitted in the cited
case. Furthermore, this Court explicitly ruled in Estrada v. Office of the
Ombudsman138that hearsay evidence is admissible during preliminary
investigation. The Court held thusly:

Thus, probable cause can be established with hearsay evidence, as long

as there is substantial basis for crediting the hearsay. Hearsay evidence
is admissible in determining probable cause in a preliminary
investigation because such investigation is merely preliminary, and
does not finally adjudicate rights and obligations of
parties.139 (Emphasis supplied.)

Verily, the admissibility of evidence,140 their evidentiary weight,

probative value, and the credibility of the witness are matters that are
best left to be resolved in a full-blown trial, 141 not during a preliminary
investigation where the technical rules of evidence are not
applied142 nor at the stage of the determination of probable cause for the
issuance of a warrant of arrest. Thus, the better alternative is to proceed
to the conduct of trial on the merits for the petitioner and the
prosecution to present their respective evidence in support of their
allegations.

With the foregoing disquisitions, the provisional reliefs prayed for, as a

consequence, have to be rejected.

WHEREFORE, the instant petition for prohibition and certiorari is

DISMISSED for lack of merit. The Regional Trial Court of Muntinlupa
City, Branch 204 is ordered to proceed with dispatch with Criminal
Case N6.17-165.

SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice